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Visualizing Central Bank Mal-Investment-Driven Excess

Tyler Durden's picture




 

One of the most egregious aspects of the Great Moderation was the issuance of large amounts of grossly mispriced extremely 'junky' debt at the peak as investors stymied by the lack of spread (return) pushed further and further out the credit risk spectrum. The driver at the time was the liquidity flood triggered by large-scale securitizations (and that ended well eh?); this time it is central banks providing the fuel for investors to seek yield through leverage (either through fundamental leverage in riskier firms or technical leverage through riskier instruments). To wit, the last few weeks have seen a resurgence of issuance of PIK-Toggle bonds.

 

These extreme junk credit-rated bonds with very high default risk offer 'attractive' yields relative to the financially repressed idiocy of the rest of the capital markets but the Pay-In-Kind nature means simply - do not expect coupons and principal return in cash, but we promise to pay that principal back by offering you more 'junky' bonds (extending maturity for example).

 

Issuance of PIKs has re-surged once again

 

The last time we saw a surge like the current one was during the ECB's LTRO fiasco, and once again with QEternity on the table, that excess liquidity 'forces' money to work in these over-leveraged and under-compensated (risk-wise) instruments. With rates held low and IG and HY spreads technically compressed, we suspect we will see more PIK-Toggle, Cov-Lite, Junior-Mezz CLOs - and suspect this won't end well.

and CNBC's Gary Kaminsky pointing out the junkiness of these deals..."This is Junk, This is Bad!"

Chart: Bloomberg Brief

 

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Thu, 10/11/2012 - 11:58 | 2877766 WhiskeyTangoFoxtrot
WhiskeyTangoFoxtrot's picture

WTF is going on with ZH this morning? Server problems? Attack?

Thu, 10/11/2012 - 17:51 | 2878990 MarsInScorpio
MarsInScorpio's picture

The answer to your question is that ZH got linked from DrudgeReport with the article about the bogus claims numbers and the missing state data, and obviously ZH's servers are completely inadequate to handle the volume. They crashed big time. So Drudge went to CNBC, which basically rewrote the ZH article.

 

DEAR TYLER DURDEN:

 

Well, today was your Big Day and you blew it. I don't know who your server company is, but you need to immedaitely fire them and find one that is scalable to demand.

 

Drudge finally gave you a shot, and your servers crashed. This guy gets a BILLION page views per month - second only to the NY Times.This was the biggest opportunity you ever had to break out of the fringe blog niche and hit the mass readership niche.

 

You people kick fanny with your blog. It is so far ahead of any other one out there. You could be the Drudge of finance.

 

But you can't be first tier in readership with third tier server capacity. So it's time to upgrade.

 

In fact, you need to write an article about what happened with Drudge today, and let him know you really appreciate the link, and got the idea about bandwidth.

 

You don't get more than two chances with Drudge. And you blew one of them today.

 

Don't be stupid and wait to blow the last one.

 

Love,

 

MarsInScorpio

 

Thu, 10/11/2012 - 12:24 | 2877788 Element
Element's picture

yup, I'm seeing the same issues WTF, zh is not well today.

--

 

A delightful little pearl of wisdum from the think(w)tank dumb-shitery:

Deploying Troops to Jordan: Asking For It?

 

John Glaser, October 10, 2012

 
" ... And Michael Rubin, an adviser to former Secretary of Defense Donald Rumsfeld from 2002-2004 and now an analyst at the American Enterprise Institute said the exercise was meant to reassure America’s puppet dictators that we have their back. “One of the perceptions we’re trying to reverse is the perception among many of the Gulf monarchs, and the king of Jordan, that we dumped Hosni Mubarak way too quickly.”

 
“What this does is send a signal to many of the GCC states that we’re not simply going to turn our backs on all the monarchs,” Rubin says. Building this kind of military-to-military relationship with allied Middle Eastern dictatorships “is an important check against Iran’s military ambitions, and has been a US goal since the 1980s,” he added. ... "
 
antiwar.com/blog/2012/10/10/deploying-troops-to-jordan-asking-for-it/

--

Nope, nothing wrong with that sort of foreign policy advice.  Back all the dictators against what is a theocratic, but also democratic Iranian state, as you don't want all the US's thugs feeling insecure and unwanted. 

Hillary and Barry's best buddies. 

What's the gig about USSA's superior values and respect for human rights spiel again?

 

Fri, 10/12/2012 - 06:35 | 2880580 jeff montanye
jeff montanye's picture

all u.s. values and strategies, interests and motives pale before those of the likud's zionist enterprise.

Thu, 10/11/2012 - 12:35 | 2877823 Thecomingcollapse
Thecomingcollapse's picture

Question for ZH'ers

I thought last night about ways to get rid of politicians and lobbyists that are ruining the nation.

What if we had a national "selective service" number assigned to every citizen, then every year or two you pulled a random selection of people from Rep., Dem. Indp... whatever and assigned then to Congress and the Senate.  Gave them a one month class on how the government works and let them serve their terms guaranteeing their jobs that they left upon end of service in the government.  I think it would get rid of all lobbying and all career politicians.

What do you think? 

Feedback please

Thu, 10/11/2012 - 12:46 | 2877859 WhiskeyTangoFoxtrot
WhiskeyTangoFoxtrot's picture

Every citizen? While "fair," it's risky to not include some minimum requirements. Not sure what, as they all come with pros and cons. For example, a minimum education requirement might ensure that the people in office actually have some understanding of basic issues like economics, law, etc., but would exclude otherwise willing and able individuals who lack the "proper" educational training. That would just keep feeding the corrupt higher education system.

On the other hand, it would keep people like this out of office: http://www.bing.com/videos/search?q=obama+phone&mid=306B9F87190C01D53E04306B9F87190C01D53E04&view=detail&FORM=VIRE5

I think a lot of ground could be gained by term limits, pay cuts for reps (volunteer or close to volunteer), closing the revolving door, banning lobbying altogether, and a balanced budget amendment, just for starters. But don't hold your breath. These are ideas for the time when your moniker refers to past events.

Thu, 10/11/2012 - 12:53 | 2877885 Thecomingcollapse
Thecomingcollapse's picture

I like it.  I agree with the minimum requirements thing, would have to work that out a bit.  That is why I had a madated education course before serving.  I think if you didn't have an agenda for being there that it would solve a lot of problems.  If you made it a volunteer sort of position..... Then well we all know what you get with volunteers and community organizers!

Thu, 10/11/2012 - 13:07 | 2877925 WhiskeyTangoFoxtrot
WhiskeyTangoFoxtrot's picture

True, but don't forget that people get like $5 a day for jury duty, or something comparably pathetic. Yet, many jurors take their responsibilities very seriously. I like where you're going with this though.

Thu, 10/11/2012 - 12:58 | 2877896 Essential Nexus
Essential Nexus's picture

Who would make sure the selection was "random"?

It would certainly work better than what we have if it worked as you describe. 

but...

It could turn into a "lottery" where anyone who won would be expected to sell the country's soul in exchange for greatly increase their wealth through accepting whatever the lobbyists demand.

Thu, 10/11/2012 - 13:15 | 2877930 THE DORK OF CORK
THE DORK OF CORK's picture

Intersting piece in the Farming section of the Cork examiner.

Wheel goes full circle in Mallow (north Cork) farm.

Back in 2004 2 farmers sold 180 acres to another farmer /developer.

It was sold for 220,000 a acre or 20 million euros.

It may have been bought back by one of the same farmers who sold it /+another  at 12,500 a acre or 2.25 million euro.

Given that its a NAMA deal the public will take the loss.

Stuff like this is happening all over the country.

Its kind of funny in a sick sort of way.

It could make  a good script for a Irish / Hollywood movie.

Thu, 10/11/2012 - 19:56 | 2879198 IMA5U
IMA5U's picture

Bring it on Uncle Ben!!!!

Do NOT follow this link or you will be banned from the site!