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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Crimson Ghost who wrote (29884)	4/2/2005 12:03:46 PM
From: russwinter	Read Replies (1) \| Respond to of 110194

Very good piece describing overdependence of US firms on "finance": yahoo.businessweek.com The most obvious threat to this earnings parade is the sharply narrowing gap between short- and long-term interest rates that market mavens call the spread. Last April the spread between the 2-year and 10-year Treasuries -- used as benchmarks for pricing finance deals -- was an exceptionally high 2.4 percentage points. It's now down to 0.8 point (), making lending much less profitable than before. "Financial institutions will feel that," says James W. Paulsen, chief investment strategist at Wells Capital Management. Of course, financial companies now insulate themselves better from interest-rate changes with derivatives and by quickly packaging loans and selling them to hedge funds and other institutional investors. That way they earn more in fees for arranging the transactions and collect less in interest payments. Financial companies now get about 42% of their revenues from fees () and only 58% from interest, compared with 20% and 80%, respectively, in 1980, according to Bridgewater. () 0.72 at week's close: gcm.com (**) Can't make many new loans to Joe Sixpack? Just ramp it up to Pig Men and speculators: Message 21190976