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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Lucretius who started this subject4/22/2002 6:18:49 PM
From: Box-By-The-Riviera™  Read Replies (1) of 436258
 
roosell ex urp

Dear Richard,

When GE recently traded 11 billion short term debt for long term debt, the resultant increase in interest cost should have been 500 million dollars. But CEO Jeff Immelt himself made the following statement. "And so while, you know, a move into long-term debt will increase our funding costs slightly....it has nothing to do with the spread between commercial paper and long-term debt because we swap into matching funds. So you know the incremental cost is de minimus." In other words GE immediately swapped it's new long term debt back into short term variable rate debt tied to the Libor. This apparently is being done ad nauseam now by corporate America. The swap market is dwarfing all other debt markets. Another major reason why Greenspan can't let short term rates go up. It would really adversely impact corporate earnings. So why worry about tomorrow? That's somebody else's problem. We have the Great Greenspan to take care of us. He won't let those short rates go up, will he. Will he?

Dan M.

Russell Comment -- Yes, and read Bill Gross on www.pimco.com for more on this. Greenspan will be loathe to let short rates rise. But he's going to have a hard time trying to stop them from rising. The fuel is right next to the fire, but it hasn't started burning -- yet.
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