OPEN THREAD + NoQuarter Radio’s Sense on Cents with Larry Doyle Tonight at 8PM
By Larry Doyle on June 4, 2009 at 7:30 AM in Economy, NoQuarter Radio, Open Thread, Sense on Cents (Larry Doyle blog)
PROGRAM CONCLUDED Sunday night . Click on icon to listen to the archived show.
Please join me Sunday evening from 8-9 p.m. ET for NoQuarter Radio’s Sense on Cents with Larry Doyle. I believe we are now entering the next stage of the Brave New World of the Uncle Sam Economy. As we navigate the trails in this leg of our journey, our primary focus will be on interest rates. We experienced a dramatic spike in global rates over the course of the last few weeks. What do these spikes mean? Will they persist? Do we need to “lighten the weight of our packs” to successfully traverse these hills and valleys? Do the moves in rates indicate that “inflation” is just around the bend?
Listen to NQR’s Sense on Cents with Larry Doyle tonight from 8-9PM as I address all of these angles. Additionally, I am thrilled to have Luke Fry of 12th Street Capital join me to address these topics and developments in and around the world of mortgage-backed securities. Luke is a senior salesman at 12th Street Capital, a leading broker-dealer with untold expertise in the mortgage business. Prior to 12th Street, Mr. Fry was a Managing Director at Knight Libertas, LLC where he was responsible for providing market insight and analysis in mortgage and asset-backed structured products to a wide range of clients that included hedge funds, money managers, insurance companies and banks. Mr. Fry was hired as the first salesperson on the ABS/MBS desk at Libertas Partners and helped expand the group to over 12 salespeople while seeing the company through a merger in July 2008 with Knight Capital Group, the largest U.S. equity market maker.
Mr. Fry began his career in New York City on the buy-side with Sanford C. Bernstein & Co., which at the time managed over $90 billion in assets, and became Associate Portfolio Manager in their Fixed Income Department. His responsibilities included the daily trading of treasury and corporate securities as well as maintaining portfolio duration and allocation targets for institutional clients and mutual funds. Mr. Fry left Sanford C. Bernstein in 2000 to begin his sell side experience with Banc of America Securities. At Banc of America Securities, he provided institutional investors coverage in structured and rates markets products, including CDOs, interest rate swaps and ABS/MBS. Mr. Fry played a key role in expanding the Financial Institutions Group at Banc of America Securities before moving to the Los Angeles area in 2006 to join WaMu Capital Corp as a Director.
These are truly historic times in the global economy. Let’s “navigate the economic landscape” without the pandering or nonsense found elsewhere! What is on your mind? What would you like to address? Please share your questions and thoughts by calling in to (347) 677-0792, and also join our live chat room, which I’ll start up about 10 minutes before the show begins. Many thanks to Larry Johnson and the rest of the team at NoQuarter for providing such a vibrant vehicle as NoQuarter Radio. I look forward to having you join me Sunday evening as we collectively navigate the economic landscape!!
LD
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Inflation would be very interesting to hear about from your guest and you. Last week Krugman said it’s not a concern, but I think he’s wrong. Henry Hazlitt wrote a great piece on what inflation is (here’s an excerpt: http://mises.org/story/2914 )
that lays out the difference between the original and the more oft used definitions:
Between Sept and Dec 2008 alone, the Fed’s balance sheet went from $900 billion to $2.25 trillion. Now add to that the fact that when banks start lending, the fractional reserve system is going to create even more money out of thin air.
So, here’s my take: we already have inflation, it’s just that the secondary effects of it (the ones that make us take notice–higher prices of goods and services) have not fully manifested themselves yet.
Questions for your guest: What is a person on a fixed income to do at this point?
What’s the best strategy for the rest of us to protect our savings?
How much more spending and/or money creation by the government do you see on the horizon?
What turns inflation into hyperinflation and what is the likelihood of that happening to us?
Thanks in advance for sharing your great information LD!!
SNK…Great questions. I will address these this evening. Also wanted to share from my first ever post last October, my thoughts:
1. Global Increase in Long Term Interest Rates –the massive amount of debt that will need to be issued will cause rates worldwide to rise even in the face of a likely significant economic slowdown. …….
10yr U.S. Treasury rate is up 50bps in the last week even with the Fed having cut the fed Funds rate by 50bps…
IBM issued debt last week in the midst of this tsunami….they borrowed for 5yrs at app 6.75% and 10yr money at app 7.75% ( a full 400bps over Treasurys for one of the strongest global companies!!!!!!)
3 mo Libor is only down to 4.63% this morning from 4.75% at the end of last week…hardly a resounding vote of confidence
markets are now appreciating where REAL money will care to invest not the highly levered and speculative money that was the lifeblood of Wall St. and hedge funds for the last 8 yrs.
2. Financial asset deflation while hard goods and asset inflation. Why? I can already hear the printing presses at work churning out currencies worldwide. The rise in interest rates will depress bond values. With slower worldwide economic growth and increasing unemployment GDP prospects are not pretty for the foreseeable future. I think there is a very strong chance that we will see “stagflation”.
While financial assets have limited upside growth potential and significant downside even from here, hard commodities and assets will likely increase in value or perhaps I should write will hold their value as financial currencies and financial assets lose value.
3. Where do you put your money??
take what the market is giving you, and right now they are giving you security and guarantees in deposits in large money center banks,…this also provides flexibility to provide liquidity for those in desperate need and you will see more and more of that occur both at a personal level and a corporate level…. BE PATIENT…..
buy QUALITY…..this market is very quickly separating the wheat from the chaff…well managed institutions will gain market share and it will be reflected in the value of their stocks and bonds….one has to fully understand an entity’s ability to generate cash flow to meet their debt service and to grow their enterprise…..
4. Other Highlights…
if the government accedes to the pressure being applied to suspend the mark to market accounting principle, I would expect that that move would only prolong the underperformance of the economy….I view a suspension of the mark to market as the equivalent of an agreement to officially allow one to “cook their books”…
SELL RALLIES…….while financial institutions have been feeling the pain of overleverage for the last 12 to 18 months that pain is just now coming to bear on the consumer…given that the consumer represents app 70% of our GDP, the expected precipitous drop in consumption across a wide array of products and industries will be very painful….you will see a litany of corporations announcing layoffs on a regular basis…Pepsi did just that this morning…
Govt. Likely Forced Chrysler Deal with Minimal Knowledge of Fiat.
The Obama administration rushed an alliance between Chrysler LLC and Fiat SpA despite Chrysler’s worries about Fiat’s financial health and its willingness to share technology, according to internal company emails.
The emails show Fiat ignoring requests for documents and trying to change contract terms late in the talks. A Chrysler adviser at one point said the deal risked looking as if the U.S. auto maker and the Treasury Department, which helped broker the pact, were “in bed with a shady partner.” In another note, an official referred to the Treasury Department as “God.”
….. On Friday, a federal appeals court upheld Chrysler’s Fiat deal, dismissing a challenge by dissident Chrysler debt holders. But the court also issued a stay until 4 p.m. Monday — leaving a small window for Thomas Lauria, the lawyer pursuing the case, to appeal to the Supreme Court. One judge on the three-judge panel suggested the Supreme Court should have “a swing at this ball.”
Mr. Lauria’s persistence led one government lawyer in the Chrysler case to dub him a “terrorist” in an email to a Chrysler adviser.
HT: Instapundit
OT: Lebanese Forces wins approx. 70 of 128 seats over Hezbollah, essentially status quo
http://news.yahoo.com/s/mcclatchy/20090607/pl_mcclatchy/3247584
http://salsa.democracyinaction.org/o/531/t/6557/campaign.jsp?campaign_KEY=27388
petition to BHO re denouncing the killings of indigenous protesters in Peru who are staging roadblocks in an attempt to deter illegal mining and timbering on their land by transnational companies: (that would be us).
“Please write to President Obama and tell him we are outraged at the massacre of peaceful, indigenous protestors in Peru as a result of the FTA.
At dawn on Friday, June 5th, 600 Peruvian police in helicopters and on foot opened fire on thousands of peaceful indigenous protestors blocking a road near Bagua in the Peruvian Amazon. Conservative estimates indicate that 60 indigenous and police have been killed. Police are accused of burning indigenous bodies, throwing them in the river and removing wounded from the hospital to hide the real number of casualties.
For two months, over 30,000 indigenous have sustained nonviolent protests along the roads and waterways of the Amazon. These protests are in response to a series of Presidential decrees issued under the U.S.-Peru FTA implementation law that violate indigenous rights and open the way for an unprecedented expansion of new transnational petroleum, mining, logging and mono-cropping in the Amazon rainforest…”
OT
http://www.physorg.com/news164037605.html
big step forward in understanding composition of HIV Aids virus, structure of capsid now known