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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: William H Huebl who wrote (48285)	8/21/2000 10:23:19 PM
From: pater tenebrarum	Respond to of 94695

yes...in fact i think the short rate is much more important anyway, as there has been a tendency to replace longer dated with shorter dated debt, if one looks at corporate debt structures. the problem is of course that this debt needs to be rolled over every 6 months or so, and any loss of confidence in the credit markets might trip up the most unlikely targets. there was an article in the FT on GE Capital's balance sheet...which is vast, and highly leveraged. if only 4% of its assets (i.e. loans/receivables) were to become unrecoverable, it would wipe out the firm's equity. the size of the enterprise is such that it may actually pose systemic risk in the event of a failure. of course it seems unlikely at this time that the hedge fund in drag as somebody called it once will ever come under such stress. but i take it as representative of the risks being taken on throughout the economy as the private sector debt mountain continues to grow much faster than GDP, or any other metric one can think of. no wonder easy Al and his merry band are printing money as fast as the presses will run so to speak...they've created a monster that needs to be fed more and more paper. an economic downturn would be felt in the credit markets first...corporate bond spreads btw. were making new highs last Friday. they're basically at panic levels, much higher than during the Russian crisis. imo the credit markets are bracing themselves for increasing default risks in the event of an economic slowdown. one always needs to keep a wary eye on the credit markets, as negativity there invariably finds its way into stocks. current conventional wisdom is that the Fed will outprint every conceivable crisis, as it has done several times already. but that type of thinking is akin to a belief in a free lunch...there is no such thing. all that's being done when papering over crises is that the imbalances become ever bigger, and more dangerous and difficult to unwind. the stock market bubble is more of a side effect of this. good night...