No doubt that eventually we will have a better financial system. But in the meantime you're living a drama and no idea how this could last "now". Until we have dismantled the existing debt on the credit markets, analysts dare. That would be a tragedy. Why cancel a few months in the mountain of debt accumulated over the past 15 years, multiplied enormously from all the issues of paper and synthetic derivatives, to the point that sometimes you can not make what is beneath, it simply means the implosion of the system. Subprime loans originally were and what had been derived and constructed above. Then the storm began to sweep the loans, which were used to finance the euphoria of private equity and LBO. Has affected the consumer credit debts on credit cards, student loans, bonds mucipali. And finally overwhelmed even the mortgages, those are good enough, the Alt-A. It did not spare even the most secure. The binge of 'triple A' has seen prices fall in a market less liquid, from 100 to 60 in the last two sessions. And the "triple B", not exactly junk, falling to 12 cents: practically nothing. Now everything goes down like a house of cards.
The deadly virus Even managers who understood everything, or almost, have failed, such as that of English who had gone Peloton "Long" of triple A (he had bought) and "short" (selling) of triple B. He understood that the mechanism worked and had its own logic. But he did not understand two things: one, that in a market frenzy, when everybody is trying desperately to cash by selling the good stuff, the triple A will ultimately lose more than junk, and two, who continue to buy debt was no longer welcome . Because the debt is the real virus that is turning all the financial markets. Paradigm is the role of debt. A virtue, like the famous singers of leverage in the late 90's, and even more after 2004: forget it instead of demonized after the bursting of the bubble 2000. Now the debt is a deadly virus, as they know at least a dozen hedge funds exposed to the banks to finance their arbitrage activities: those are safer, more peaceful, why do you play on small price differences, covering the one hand and selling other. To the extent that these funds have been set to "low volatility". But as for a decent profit on small price differences must work wholesale, that's all that was amplified by leverage, he could even reach 10 times. At a time when the bank, which already has its problems, it starts asking for money back or reinsertion of margins, there is nothing to be done. Where would the wrong end of the prestigious Carlyle Group that could end up in liquidation? When buying debt and low credit risk as it did? No, he was wrong mainly by borrowing 150 million to buy banks now want it back: in part, at least. It is the "margin spiral", say the analysts to get off the value of securities in the portfolio (and even if it's good stuff comes down simply because there is a rush to cash) and the more bancapretende reinstatement of margin requirements. At the end of this spiral, there is often failure. And at the end of all these processes there is a risk of implosion of the financial system. The
buoy shares The Fed can not do much. It has cut rates aggressively and will continue to do so with equal determination in the next meeting. But the rates for home loans, those of the primary customers, are higher than when the crisis had begun. And so it goes for all other funds. The average wealth of a homeowner Use (the home's value minus debt) has slipped to 47.9%, but for the less fortunate this rate has become negative. 2% of the U.S. is definitely 46milioni borrowers defaulted, and those in serious trouble are 5.82%. If you continue down the price of houses, and fall, those numbers could double. More than the Fed, the much less innocent incolpevolifamiglie and financial institutions are looking to the government: because only the policy can now alleviate the damage. If the credit is the lifeblood of the economy, as emphatically repeated by economists, is that the whole system breaks down, as evidenced by the widespread declines of the Stock Exchange. Surprising, if anything, that they are not down more. There are companies that, judging by the price of their bonds, it seems the bankrupt, but the value of their shares, it seems healthy, though a little underestimated. Apart from government bonds, the bears are the only markets left standing, as investors continue to assign a value to the shares on the exchanges and, above all because is the presence of relatively small debt. Unlike 2000, the actions are the only thing that somehow floats in the sinking of finance. But it all depends on how long this storm yet. Meanwhile, the indices are slipping toward the minimum in January: the S & P has lost IL2, 8%, the Nasdaq 2.6% and 3.4% Stoxx (Paris -3.6%, -3.5% Frankfurt , Milan -4.2%, -3.1% in London).
From: il24ore
I'm A Gangsta
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