Monday, May 21, 2007
Beck On Bonds
While shareholders are cashing in big during the current buyout boom, investors holding what had long been considered the least-risky corporate bonds are taking a surprising bath.Everything old is new again...
It's all about leverage. These days, most takeovers add lots of debt to acquired companies' balance sheets and the result has been credit-rating downgrades of high-quality corporate securities to junk levels.
This wasn't the way things were supposed to go for investors, many of whom are pension and mutual funds. They thought they were buying safety with investment-grade corporate bonds, which have a low risk of default.
Kuwait depegs from the dollar, citing the inflation problem they have. Tell me again how US inflation is going to slow? Khaleej Times. Less than a month ago, Kuwait had supposedly promised not to do it.
Dollar rises against the yen and Euro - Bloomberg.
Update: This is funny. Yal posted these two Countrywide links over at Calculated Risk:
Chief Executive Angelo Mozilo on Monday said regulation in the subprime mortgage industry will help crooks while hurting lenders and the housing market.While Countrywide REO climbs. If those lovely loans are such good product, why doesn't Countrywide refinance them instead of foreclosing on them? Why doesn't Mozilo put his own money into them? Heh,heh. You can guess the answer. There are, btw, no regulations actually forbidding those loans. All we've got is a strong suggestion that you better make sure your borrower understands them. The only reason anyone forecloses is because the borrower can't make the payments and can't qualify for a workout; Mozilo is really complaining that no one wants to take the dreck off Countrywide's hands.
"...Regulation, in my opinion, has caused part of the problem. When they attacked the pay option and interest- only loans, that really put a dent in a lot of the product, which is perfectly good product."