Showing posts with label securities. Show all posts
Showing posts with label securities. Show all posts
Saturday, May 25, 2013
Monday, August 02, 2010
Is Commercial Real Estate on the Verge of Crashing? (Graphs)
The delinquent unpaid balances for Commercial Mortgage Backed Securities continues to rise.
The delinquency rate has now risen about 7 percent to 7.87 percent. Above 7 percent can be considered the level where a real crash can take place at any time.
Realization of this dire state of affairs could cause the stock market to take a major tumble. It would also be the point to get long term bullish on the stock market.
Having said this, I would expect a significant drop if this occurs. I would expect this drop to last more than a few days, more likely several weeks, as the market unwinds and fear takes over.
The delinquency rate has now risen about 7 percent to 7.87 percent. Above 7 percent can be considered the level where a real crash can take place at any time.
Realization of this dire state of affairs could cause the stock market to take a major tumble. It would also be the point to get long term bullish on the stock market.
Having said this, I would expect a significant drop if this occurs. I would expect this drop to last more than a few days, more likely several weeks, as the market unwinds and fear takes over.
Friday, November 06, 2009
Reserve Bank Credit (Graph) - Securities Held Outright - Federal Agency Debt Securities
Up, Up, and Away.
Note: The current face value of federal agency obligations held by Federal Reserve Banks. These securities are direct obligations of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks.
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Note: The current face value of federal agency obligations held by Federal Reserve Banks. These securities are direct obligations of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks.
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Wireless Reading Device Friday, July 31, 2009
Federal Government Receipts Dropping Uh Oh (Graph)
Investor pay attention. Federal government receipts are dropping. This is a negative especially on the dollar. It also means that shortfalls are likely to lead to bigger auctions of government securities down the road.
Once this series becomes more widely discussed in the media it is likely to create investor uncertainty about the future. This is never a good thing for the market.
With the S and P 500 near 1000, investors should start to assume a more cautious stance.
A short fall in government receipts is a negative on the dollar, will likely lead to higher long term interest rates, and could lead to crowding out in the corporate securities market.
Kindle: Amazon's 6" Wireless Reading Device
Once this series becomes more widely discussed in the media it is likely to create investor uncertainty about the future. This is never a good thing for the market.
With the S and P 500 near 1000, investors should start to assume a more cautious stance.
A short fall in government receipts is a negative on the dollar, will likely lead to higher long term interest rates, and could lead to crowding out in the corporate securities market.
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Wireless Reading Device 
Thursday, June 18, 2009
Economist Samuelson Warns about China Pessimism and a Run on the Dollar
These are sobering words from renowned economist Paul Samuelson.
Some day -- maybe even soon -- China will turn pessimistic on the U.S. dollar.The threat that China and others countries might divest the dollar is starting to cause jitters in the Treasury market. If the countries Samuelson mentioned held on to their dollar assets --but cut back on their purchases of U.S. Treasuries-- interest rates higher immediately.That means lethal troubles for the future U.S. economy.
When a disorderly run against the dollar occurs, I believe a truly global financial panic is to be feared. China, Japan and Korea now hold dollars not because they think dollars will stay safe.
Why then?.....
The given in this equation is that the amounts of Treasuries coming on to the market in the years ahead is enormous.
Growing supply, and the likelihood that U. S. Treasury debt will get downgraded, means that the risk premium for owning longer dated treasuries is likely to rise and rise sharply.
Growing supply, and the likelihood that U. S. Treasury debt will get downgraded, means that the risk premium for owning longer dated treasuries is likely to rise and rise sharply.
During the early 1990s this risk premium rose to more than five percent.
Lets say we find ourselves with a three percent inflation rate in the next 12-18 months. What is the rate we could see in the ten years treasury?
8-11 percent. Inflation, inflation expectation, dollar risk, supply, plus a fair rate of interest all add to the interest rate that investors will demand in order to buy. It is not hard to envision five or more points of risk premium.
Does it make good sense in this environment to be fully invested in stocks?
My guess is that we are going to see a sharp uptick in inflation in the next 12-18 months. Given the enormous expansion in the money supply it is not hard to envision three percent inflation. Add in the necessary risk premium for owning longer dated securities, and it is not hard to envision sharply higher rates.
Right now most analysts continue to mention how inflation is not a problem. In 1980, when inflation was hitting 1.5 percent per month, analysts were forecasting higher inflation and higher interest rates in the future. Inflation peaked right then and right there.
Lets say we find ourselves with a three percent inflation rate in the next 12-18 months. What is the rate we could see in the ten years treasury?
8-11 percent. Inflation, inflation expectation, dollar risk, supply, plus a fair rate of interest all add to the interest rate that investors will demand in order to buy. It is not hard to envision five or more points of risk premium.
Does it make good sense in this environment to be fully invested in stocks?
My guess is that we are going to see a sharp uptick in inflation in the next 12-18 months. Given the enormous expansion in the money supply it is not hard to envision three percent inflation. Add in the necessary risk premium for owning longer dated securities, and it is not hard to envision sharply higher rates.
Right now most analysts continue to mention how inflation is not a problem. In 1980, when inflation was hitting 1.5 percent per month, analysts were forecasting higher inflation and higher interest rates in the future. Inflation peaked right then and right there.
Our we at the trough in inflation now?
Anybody old enough to remember when the ten year treasury yield was above 15 percent? Three month treasury bill at 14 percent?
It is time to be risk adverse. Not the time to be betting the ranch in the stock market.
To read the entire Samuelson article go here.
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Anybody old enough to remember when the ten year treasury yield was above 15 percent? Three month treasury bill at 14 percent?
It is time to be risk adverse. Not the time to be betting the ranch in the stock market.
To read the entire Samuelson article go here.
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 Bob DeMarco is a citizen journalist and twenty year Wall Street veteran. Bob has written more than 700 articles with more than 18,000 links to his work on the Internet. Content from All American Investor has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments. |
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