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The Great Deleveraging Replies |
rffrydr
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HenryTo
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 Posted: Wed Mar 14, 2012 10:07 pm Post subject: |
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Courtesy Bridgewater.
| Quote: | The US Credit Pipes are Open
As explained last week in "A Beautiful Deleveraging", the typical sequence of the deleveraging process is that 1) the debt bubble bursts because the cash flows to service debt fall short of what is required, 2) there is a deflationary "depression" in which private credit growth falls sharply, liquidity dries up, and defaults and austerity occur, 3) that is followed by monetary reflation that causes 4) currency depreciation, improved economic growth, rising equities and commodities prices, nominal growth above nominal interest rates and declining debt/income ratios. That last phase is what we refer to as the "beautiful deleveraging" or "the 1933-37 style phase" of the deleveraging process.
We believe that the US is in that phase and the general recovery of the credit piping in the US will help support this phase. By and large US banks are healthy and in a position to expand their balance sheets, the borrowing costs faced by consumers and corporations are at extremely low levels and financial spreads have improved markedly over the last several months. The credit pipes are well-positioned to allow for sensible new lending. There is still a drag to credit growth from lingering creditworthiness issues (particularly for potential borrowers still burdened by underwater mortgages), but that part of the deleveraging process is by and large healthy (i.e., over-extended debtors paying down the debt). The unhealthy phase, when legitimate creditworthy borrowers have trouble accessing capital, is by and large behind us in the US. |
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HenryTo
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HenryTo
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| Posted: Thu Feb 16, 2012 10:30 pm Post subject: |
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Bridgewater more optimistic.
| Quote: | "Of the various dimensions of US over-indebtedness, the most intractable has been the household mortgage market..."
Of the various dimensions of US over-indebtedness, the most intractable has been the household mortgage market. Household balance sheets are in much worse shape than corporate balance sheets, and the household debt problem is primarily concentrated in the mortgage market, where 30% of mortgages remain underwater relative to home values and 9% of households are either delinquent or in default. While consumer credit growth has accelerated recently, mortgage borrowing remains dormant. But we have recently seen sparks of life: increased traffic in model homes, an uptick in pending home sales, and a notable reduction in the number of homes that need to be sold. Of course, there is a long way to go, particularly as home prices have continued to decline in recent months and households have historically used the equity in their homes as collateral for new borrowing or to finance their down-payments on a new home. The absolute level of conditions remains very depressed, but on a rate of change basis there is some improvement. |
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rffrydr
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rffrydr
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| Posted: Thu Dec 08, 2011 10:45 am Post subject: |
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| rffrydr wrote: |
The platform economy shows more strains. After the cost shocks and tightness of '08 here we find strange reminiscences. "Just-in-Time" can be "never-on-time" very easily. Look for the buy-american theme to build as a new kind of "hedging" is implemented. |
--July 2010
Even Boeing is building in US (South Carolina counts as our own "developing nation") Dollars are not only coming home--but yen and euros too. That crude refuses to budge, having become a financial asset, just presses the case.
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rffrydr
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| Posted: Mon Nov 21, 2011 7:16 am Post subject: |
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--Cept it's been worth 600pts in less than a week's time. To the extent that is a sovereign debt problem it is a problem of confidence. Since, the State is not going away it is always a question of willingness to pay and that puts Politics over numbers.
US "spreads" certainly haven't blown out. This means we are still in the punishment phase. What we may in fact be witnessing is a world starting not to care about markets. EEM is no exception: Private ownership (let alone control) of EEM capital a la Jimbo Rogers has never mattered, nor even made it to 50%.
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HenryTo
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| Posted: Sun Nov 20, 2011 9:07 pm Post subject: |
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Bridgewater on the Supercommittee:
| Quote: | Partisanship is Our Biggest Problem
Attention is now focused on whether or not the Supercommittee will come up with its minimum targeted $1.2 trillion (or a bit more). To us this is another example of how great dramas that are newsworthy can, at the time they are transpiring, be mistaken for matters of great importance. Whether or not the Supercommittee reduces the projected budget deficit by a couple of trillion over the next 10 years is not material to us because the private and public sector debt funding gaps are many times that. For example, we are much more interested in how the supposed €29 trillion of European bank assets (or, if you prefer, the €11 trillion in risk weighted assets) that are being supported by €1 trillion in capital will be deleveraged. However, how policy makers approach dealing with such deleveraging issues is very important to us, so we view the Supercommittee's handling of this issue as another straw in the wind. |
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rffrydr
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| Posted: Fri Nov 18, 2011 12:54 pm Post subject: |
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rffrydr
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| Posted: Fri Nov 18, 2011 12:53 pm Post subject: |
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rffrydr
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rffrydr
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| Posted: Wed Oct 26, 2011 8:30 am Post subject: |
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rffrydr
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| Posted: Tue Oct 25, 2011 8:44 am Post subject: |
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Hey 99%-ers, why don't you try this one?
"Our Father in heaven,
hallowed be your name.
Your kingdom come,
your will be done,
on earth as it is in heaven.
Give us this day our daily bread,
and forgive us our debts,
as we also have forgiven our debtors.
And lead us not into temptation,
but deliver us from evil."
http://en.wikipedia.org/wiki/Lord's_Prayer
That's a message from the Good Book we have all chosen to live .
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rffrydr
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| Posted: Fri Oct 21, 2011 6:52 am Post subject: |
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"Buy-American" marches on:
http://www.bloomberg.com/news/2011-10-20/record-bond-maturities-loom-as-emerging-company-debt-costs-jump.html
| Quote: | | Bharti Airtel, the Indian mobile-phone company with about $10 billion of overseas debt, may report a 5 billion rupee ($103 million) hit to second-quarter earnings after the rupee fell to the lowest level since 2009, according to Goldman Sachs Group Inc. Turk Hava Yollari (THYAO), the carrier known as Turkish Airlines, faces $158 million of losses after the lira’s slide to a record low, Ekspres Invest said. Beijing-based Parkson Retail Group Ltd., which has $200 million of dollar bonds coming due next month, is in talks with banks to increase a loan taken out in 2010 by $150 million, two people familiar with the matter said last week. |
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rffrydr
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| Posted: Mon Mar 21, 2011 8:19 am Post subject: |
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To the mechanism, "voluntary or forced" we should not neglect "free":
http://blogs.wsj.com/developments/2010/06/28/study-nearly-one-in-five-mortgage-defaults-are-strategic/
| Quote: | | Indeed, the report finds that strategic default remains heavily concentrated in California, Florida, and western states that have seen the biggest run-up and decline in home prices. Strategic defaulters in California were nearly 80 times higher in the first two quarters of 2009 versus 2005. |
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