Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (246720)	5/5/2010 11:48:08 AM
From: Les H	Read Replies (1) \| Respond to of 306849

Too Big To Jail? Executives unscathed as regulators let banks report criminal fraud huffpostfund.org

To: Les H who wrote (246720)	5/5/2010 5:36:00 PM
From: Perspective	Respond to of 306849

<...actual default rates for the first quarter of 2010 have fallen below 1%. "This is just like 2006 and early 2007," "Risk premiums are in decline," says Altman. "We're seeing the real dregs getting refinanced, triple-C-rated companies, just like in 2006."> Boolish! <With interest rates so low, investors are attracted to the yields. Low interest rates are also making it easy for companies below investment grade to issue new bonds. Creditors have little incentive to push for bankruptcies and prefer distressed exchanges for bonds (or taking haircuts on loans), because when credit is hard to get, they can't get debtor or exit financing.> There is no "investing" going on here. It's all risk arbitrage by highly leveraged speculators gambling on the government backstop for everything TBTF. It's all positive feedback, and it works until it breaks. And I think the grind higher by the buck may be indicative that the game has broken. As the rise in the buck trips up the leveraged risk carry trades, the risk arb game probably gets into trouble, too. When I see experienced bond market historians at odds with the stock market or credit speculators, I always side with the historians. We haven't shipped the risk off to Pluto; it's just postponed. Risk premia are mean-reverting as sure as the sun rises every day. BC