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Politics : Welcome to Slider's Dugout
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To: jim_p who wrote (6069)8/19/2007 5:55:06 PM
From: rich evans  Read Replies (1) of 50538
 
Two sides to any story.

1. Carry trade unwinding about done. Yen went down Friday.

2. Credit curve has steepened. That is true. So an A rated finance company pays more interest for it CP then in the past versus AA or AAA. But it can still borrow and pass the interest to it corporate borrowers keeping spreads the same. This seems to be what is happening. Plenty of cash around . The problem was freeze up- not being loaned. Commercial loans being funded.

3. Subprime is the problem. 15-20 % of mortgage market. With defaults over 60 days at most 15-20%. Many mortgage companys reporting much less 6-7%. No reason to freeze up the whole home mortgage market or commercial lending market. Check out Countrywide Financials report for business in July just released.

4.This is temporary. Banks still doing CP. They have plenty of cash and did not want more from Feds per news reports. Fed got less then its fund rate when it tried to give them more cash with RPOs.

5. Country wide did draw down. CIT did not. Depends. Countrywide is being prudent but I doubt whether they will need the cash based on July report. Can everything go south in 3 weeks?

6. Corporate balance sheets are very strong historically. Leverage was only with the investment /financial types -hedge funds. They will take the losses. Others like banks , insurance investments, pension funds were not overleveraged and can wait for times.

7.Has been unwinding by the hedge and other leverged investors causing selling in anything that could raise money whether stocks or oil, or futures or whatever. But looks about done. Great buying opportunity presented since overal global economy and US economy doing well. What is Buffett doing? I have been buying.
Differences in opinion is why we have buyers and sellers.
Ricb
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