Greenspan Warns About Bond-Market Bubble
: Former Federal Reserve Chairman Alan Greenspan is sounding the alarm about a bubble that he believes is forming in the bond market.
In two television interviews in recent days, Greenspan said interest rates could shoot higher and derail the economy when the bubble bursts.
The former Fed chairman says the current situation in the bond market is comparable to what happens in the stock market during an equity bubble.
Noting that stock-market bubbles are typically characterized by extreme price-to-earnings ratios, Greenspan said extremely low yields are telling a similar tale for bonds.
“If you turn the bond market around and you look at the price of bonds relative to the interest received by those bonds, that looks very much like the usual spread which would concern us if it were equities, and we should be concerned,” Greenspan said in an interview with Fox Business Network.
There are China analysts, and then there is Charlene Chu.
She has been called a rock star of Chinese-debt analysis. Money managers the world over pay tens of thousands of dollars for access to her research at her new firm Autonomous Research. Her reports are rarely leaked, and she rarely gives interviews.
Business Insider got a glimpse at a massive report she wrote at the end of July.
This was when everyone was freaking out about the precipitous fall of China's stock markets, and it predates the Chinese authorities' decision to devalue the yuan.
Her base case in the report was for Chinese authorities to maintain stability of the equity market and forestall contagion.There is also a doomsday scenario, however, in which there is contagion to other domestic and international markets, large capital outflows, and an acceleration of problems associated with financial-sector weakness and corporate indebtedness.
The report said: "This in turn would likely lead to a significant pullback in credit, putting the brakes on GDP growth and bringing an end to China's decades of stellar economic growth. At that point, social and political stability — the critical wild cards in this equation — could come under question."
This is what doom looks like
Growth in OPEC’s biggest exporter will slow to 2.8 percent this year and 2.4 percent in 2016 after oil prices slumped, the Washington-based IMF said in a statement on Monday. If spending isn’t curbed, its fiscal deficit would be “very large” this year and over the medium term, it added.
“Moody’s isn’t the only one predicting that growth will be slow to rebound,” said Ari Santos, a trader at Sao Paulo-based brokerage H.Commcor. “Looking forward, we’ll have a stagnant economy, with no growth and no outlook to grow.”
In the midst of its deepest economic and political crisis in a generation, Brazil is contending with a business climate so punishing that major projects across numerous sectors are being frozen or shrunk, while small businesses slash prices and shift focus.
Singapore-based wealth managers, already under pressure from a global move towards tax information sharing, face a more immediate threat as Asian countries including Indonesia and India look to chase undeclared money in the low-tax city state. A global crackdown on tax evasion launched during the 2008 financial crisis has already forced Switzerland and other European offshore hubs to surrender their prized bank secrecy.
The combined deficit of private sector DB schemes in the UK
now stands at around £900 billion, up from £250 billion
since the start of the millennium, despite companies pouring
in £500 billion towards pension saving over that time.
According to Hymans Robertson, the stark figures highlight
that for too long pension schemes have been taking too
much risks
Originally Published
Investors' Insights
http://pwa2100.blogspot.ca/2015/08/greenspan-warns-exuberant-bond-bubble.html
No comments:
Post a Comment