Posts Tagged credit
The Fallible Mr. Buffett
Posted by Tetyana Matychak in Investing on June 10th, 2010
For years, we’ve become accustomed to hearing how no one could have seen the unfolding subprime crisis… not even, according to Warren Buffett, the credit rating agencies.
The very companies that paid millions to do efficient research could not foresee a problem of this magnitude?
What is Buffett thinking?
This is the guy that once stood up for the little guy, defending him from corporate madness.
And now he’s defending credit rating agencies — some of the very companies that took us to the edge of financial ruin, all while holding stock?
Why is he now catering to the corporate elitists that helped foster the subprime meltdown?
Why is he defending Goldman Sachs and its CEO Lloyd Blankfein — accused on fraud charges from the SEC and undergoing an alleged Justice Department investigation of criminal wrongdoing surrounding the structuring of ridiculous derivative contracts? Read the rest of this entry »
What Lies Behind ‘Disappointing’ US Economic Data?
Posted by Tetyana Matychak in Trading Markets on June 9th, 2010
Larry Summers, Director of the White House National Economic Council, has called for a new ‘mini-stimulus’ of $200 billion to attempt to pull the US economy out what he terms its ‘very deep valley’. Summers’ was clearly a response to ‘disappointing’ trends revealed in the the latest US economic data. Similar concerns lay behind the call of US Treasury Secretary Geithner, in the run up to the G20 summit, for Europe and Japan to do more to boost demand.
Certainly recent US data confirms the limited character of US economic recovery from the Great Recession. As widely reported, the overwhelming majority of new US jobs created in May were temporary ones for conducting the census – private sector job creation fell to its lowest level since January. US housing sales in key regions have fallen by 25-30% following the expiry of the government tax credit scheme. House prices, on the S&P Case-Schiller index, have been declining since last September. The revised 1st quarter 2010 US GDP figures lowered the estimate of economic growth in that quarter from an annualised 3.2% in the first estimate to 3.0% in the latest – both are a major deceleration from the 5.6% recorded in the 4th quarter of 2009.
Summers and Geithner’s concern is therefore clearly justified. US economic growth is losing momentum at a point in the business cycle, that of an early stage of recovery, when acceleration might have been anticipated. Overall US GDP is still 1.2% below its peak level of the 2nd quarter of 2008 – meaning that not only is this recession the deepest in post-World War II US economic history but recovery is also the slowest. Read the rest of this entry »
Mortgage Data Leaves Bankers Uncertain of Trend
Posted by Tetyana Matychak in Banks on May 24th, 2010
Any way you look at it, extraordinary numbers of people are having trouble paying their mortgage. What is less clear is the extent to which the problem is getting worse, better or is simply holding its own.
Data released Wednesday by the Mortgage Bankers Association showed the mortgage delinquency rate rose in the first quarter to 9.38 percent of all loans outstanding, from 8.22 percent in same period last year.
When adjusted for seasonal variations, the default rate rose over 10 percent for the first time.
Seasonal adjustments are used to smooth out data in ordinary times, but in these extraordinary times the bankers’ group said it was not sure how much they could be trusted. In the first quarter the seasonal adjustments showed the delinquency rate worsened considerably. The raw data, on the other hand, indicated a marked improvement.
Warning that “fundamental market factors” might be exercising undue influence over the seasonal numbers, the mortgage bankers said they did not know whether the optimistic or pessimistic sequence was more accurate.
“We may be at a point where the market is changing for the better, but we can’t be sure because of the confounding effect of seasonal differences,” said Jay Brinkmann, the group’s chief economist. Read the rest of this entry »
Hedge funds, private equity expect tax hike
Posted by Tetyana Matychak in Budget on May 19th, 2010
Private equity, real estate and hedge fund managers are increasingly resigned to a tax increase on their profits as U.S. lawmakers get set to vote next week on a long-delayed measure.
At issue is a change in the tax treatment of profits earned by partnership fund managers, known as “carried interest.” The measure would treat the profits as ordinary income subject to a 35 percent rate, more the double the 15 percent rate they are currently taxed at as capital gains.
The tax change, which lobbyists have managed to beat back for three years, has gained steam as lawmakers hunt for revenue to fund other popular tax breaks for business that have expired. Many lobbyists and former opponents now see passage of an increase as inevitable.
“Many people are resigned because it is round four,” said Francois Hechinger, a partner at BDO Seidman advising private equity and venture capital clients..
He added that they are still putting up a fight to try to soften the impact. “If it was really their choice they wouldn’t give up on it at all.”
The $20 billion or so of revenue that the tax change could raise over a decade would help pay for a politically popular group of tax breaks for individuals and business, including a corporate research and development tax credit. Read the rest of this entry »
What If Your Tax Refund is Wrong?
Posted by Tetyana Matychak in Budget, Favourites on May 12th, 2010
Most of us get refund checks at tax time. And most of the time, those refunds are just what we had been eagerly awaiting. But occasionally, the amount on an IRS check is not what we expected. In some cases, it’s less than we figured on our 1040s. Every now and then, it’s more.
Regardless of whether the refund discrepancy goes against you or favors you, some steps can be taken to resolve the matter. That way, even if you and the tax collector aren’t necessarily satisfied with the eventual amount, you’ll at least understand the mathematical misinterpretation.
Explanation en route
First, don’t panic. There’s usually a logical explanation for why you and the Internal Revenue Service came up with different numbers.
The IRS will send you a written explanation for the unexpected amount. The only problem is that the explanation doesn’t always accompany the check. Such coordination of cash and comment is particularly difficult with directly deposited refunds, which are likely to show up unexplained in your account first.
Why your refund might be an unexpected amount: Read the rest of this entry »
Energy Efficient Home Improvement
Posted by Tetyana Matychak in Budget on May 4th, 2010
Tax breaks for energy efficient home improvement purchases are set to expire in 2010, leaving taxpayers with just enough time to take advantage and save money.
This year is a good time to make green home improvements. This is because — unless Congress extends the tax breaks again — the advantages offered by green home improvements will be disappearing. 2010 is the year they expire, so if you want to get an advantage for upgrading your home with green improvements, now is the time to do it.
Available Tax Breaks Related to Home Improvement
You can get a tax credit for 30% of the cost of making small upgrades to your home, up to $1,500. This is a credit that will reduce the amount of money you owe on your 2010 tax return (to be filed in 2011), kind of like a gift card. These small upgrades include the following:
High efficiency heating and cooling systems.
Better insulation.
Energy efficient windows.
Energy efficient doors.
New water heater.
Duct seals. Read the rest of this entry »
S&P Downgrades Spain
Posted by Tetyana Matychak in Favourites, Trading Markets on April 30th, 2010
Standard & Poor’s Corp. on Wednesday downgraded Spain’s long-term credit-rating by one notch, in a new sign of a deepening euro-zone sovereign debt crisis.
Spain become the third euro-zone nation to be hit with a S&P downgrade in just two days, following steeper cuts on Portugal and Greece. On Tuesday, S&P slashed its ratings on those nations, even junking Greece, amid concerns that nation’s policy options are narrowing because of weak economic growth prospects.
The ratings actions underscore mounting concerns that Greece could default on its debt and that European Union authorities are failing to halt contagion of its financial problems to other highly indebted euro-zone sovereigns. Spain, the euro zone’s fourth largest economy, is grappling with a double-digit budget deficit and faces years of weak growth following the collapse of a decade-long construction boom.
“Spain is the 800 pound gorilla in the room. Greece and Portugal are small countries, but Spain is about five times their size with regards gross domestic product,” Win Thin, senior currency strategist at Brown Brothers Harriman & Co, said in a note to investors.
The news of the Spanish downgrade sent equities in Spain broadly lower. S&P said it reflects a downward revision of its medium-term macroeconomic projections. Read the rest of this entry »
10 reasons why this is not a bull market
Posted by Tetyana Matychak in Fund Markets on March 26th, 2010
Kevin Cassidy, a senior credit analyst at Moody’s, recently referenced the $700 billion in risky high-yield corporate debt on the horizon and offered, “An avalanche is brewing in 2012 and beyond if companies don’t get out in front of this.”
Minyanville offered a similar assessment entering September 2008 as $871 billion of corporate debt was set to mature into year-end. We opined there were two plausible scenarios; a credit cancer that would chew through the financial body, or a car crash that would crack the system under the weight of an indebted world. Read Minyanville’s “Pirate’s Booty.”
I agree that another avalanche is building atop Credit Mountain; while risk transferred from corporate coffers to sovereign strongboxes, the magnitude is cumulative in cause and effect. And despite scary parallels between the 2008 financial crisis and our modern day sequel, savvy investors continue to monitor corporate credit as a timing mechanism for an equity downturn.
As stocks grind to fresh 18-month highs, we’re left to wonder if the upside window of opportunity will remain open until corporations are again forced to pay their bar tab. Credit markets are exhibiting surreal strength and through that lens and that lens alone, the equity market has plenty of room to run.
The question is therefore begged– will this singular proxy again ring the bell when a crimson tide is about to turn? Read the rest of this entry »
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Consumer Spending in U.S. Rises More Than Forecast
30 August 2010
Monetary Policy Gets No Respect
19 July 2010
Stocks May Surprise By Year-End
5 July 2010
Is A Global Reserve Currency A Necessity?
28 June 2010
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