Archive - Oct 5, 2009 - Story

There is no better representation of the ongoing irrational exuberance in capital markets than what has been happening with HY bond issuance. And the number indicates that many fixed income fund managers are staring at a lot of pain in the future: YTD there has been $100 billion issued in HY bonds, more than double the $49 billion issued in all of 2008. The biggest losers in all of this: restructuring shops who have been hiring senior bankers left and right to prepare for an onslaught of bankruptcies. Alas, with the majority of 5x+ leveraged dinosaurs extending maturities yet again compliments of "money that just has to be put to work" expect bankruptcies to be indefinitely delayed once more, never mind that the deteriorating underlying businesses generate less cashflow than ever and actual bond recoveries, when the inevitable bankruptcies finally do come, will be worse than single digits.

What was truly notable in today's ISM disclosure was the collapse in the non-manufacturing Prices Paid index, which tumbled a whopping 14.3% in its current read of 48.8 from August's 63.1. Any spin of this data point that does not highlight it for the bright red deflation warning flag it is, would be naive.

"No, I'm not optimistic about the government getting anything right. And I think that they are very much responsible for the situation which we are in and which, to me, the most damning part of it is the dependence on the Chinese and Japanese lenders for our very existence. And I think it is a tragedy that that is happened to the United States. And I think that has been done by a group of politicians over long period of time, you know, 30 years. And they've encouraged leverage. They thought it was a good idea for everybody to own a great home." - Julian Robertson

Another man wondering why the American people are so eager to be lied to day after day by those in charge. As for how much money (if any) taxpayers are going to see back: expect some truly historic "write offs."

And, as usual, compliments of Government Sachs.

• Eric Dinallo joins the fight: Split the financial supermarkets to make them safe (FT, h/t Miles)
• Report on bailouts says treasury misled public (NYT) and continues doing so every single day
• Lying treasury to announce BlackRock, Wellington and AllianceBernstein have raised $1.9 billion for PPIP (Bloomberg)
• Larry Summers and the White House economic team (New Yorker)
• Government Sachs lets one well run dry (Reuters)
• CIT's Peek about to join Lewis on the unemployment line (Bloomberg)

• Asian stocks mixed as Roubini, US data stoke economic growth concerns.
• Bank failures rise to 98 as three close in Minnesota, Michigan, Colorado.
• BOE's Tucker says largest banks pose 'special' risks to financial system.
• China Central Bank says country's lending heading for 'sustainable level'.
• Euro rises against the U.S. dollar despite attempts to boost the dollar.
• G-7 avoids criticism of Dollar, warns against 'disorderly' currency shifts.
• Global semiconductor sales rose 5% in Aug - 6-straight month of sequential gains.