The End of the Beginning - GS or BS?

Generali

It looks to me (anecdotally at least) that corporate borrowing is starting to happen again, mostly through the corporate bond market.

If companies can borrow they can invest, if they can invest they can employ. Employees spend money on things made by other employees, safeguarding more jobs.

My guess is that this at least means that some sort of bottom may be in sight, perhaps in 18 months or so as that is typically the lag between investment starting to rise and employment levels increasing.

We're not out of the woods yet but perhaps the very first signs of recovery in debt markets can be seen.

lostinrates

Generali wrote: »

It looks to me (anecdotally at least) that corporate borrowing is starting to happen again, mostly through the corporate bond market.

If companies can borrow they can invest, if they can invest they can employ. Employees spend money on things made by other employees, safeguarding more jobs.

My guess is that this at least means that some sort of bottom may be in sight, perhaps in 18 months or so as that is typically the lag between investment starting to rise and employment levels increasing.

We're not out of the woods yet but perhaps the very first signs of recovery in debt markets can be seen.

I was just wondering how you were:)

Snooze

lostinrates wrote: »

I was just wondering how you were:)

Judging by what's written in his post, not very well by the sounds of it.

Rob

Generali

lostinrates wrote: »

I was just wondering how you were:)

Very well thanks. Had a short holiday about 3 hours south of Sydney here:



It's a lovely spot and very relaxing.

The problems we have at the moment are a direct result of the credit markets seizing up. Any real sign of things easing on that front is good news for the economy in the longer term.

There is clearly a (very) long way to go but it's a start.

Jennifer_Jane

Am thanking you for the optimistic post, Generali, not the vile, cruel photograph of your recent holiday.

Jen
x

bubblesmoney

some whacky economic indices supposedly predicting the state of the economy.

lip stick index and foundation index - i wonder what they are predicting now based on these indices?

another similar one ...
Uptick in Vasectomies Seen as Sign of Recession dont know what this is called. probably the 'Snip index' i guess

bubblesmoney

an extract from the blogs on the FT

History teaches us that systemic financial crises are protracted affairs. A most interesting paper by Carmen M. Reinhart and Kenneth S. Rogoff, “The Aftermath of Financial Crises”, using data on 10 systemic banking crises (the “big five” developed economy crises ................, three famous emerging market crises ............. and two earlier crises (Norway 1899 and the United States 1929) reaches the following conclusions (the next paragraph paraphrases Reinhart and Rogoff).
First, asset market collapses are deep and prolonged. Real housing price declines average 35 percent over six years; real equity price declines average 55 percent over a downturn of about 3.5 years. Second, the aftermath of banking crises is associated with large declines in output and employment. The unemployment rate rises an average of 7 percentage points over the down phase of the cycle which lasts on average over four years. Output falls (from peak to trough) an average of over 9 percent, but the duration of the downturn averages around 2 years.
...........
For both countries there is a material risk that the mind-boggling general government deficits (14% of GDP or over for the US and 12 % of GDP or over for the UK for the coming year) will either have to be monetised permanently, ...............or lead to sovereign default.
Pointing to a non-negligible risk of sovereign default in the US and the UK does not, I fear, qualify me as a madman. The last time things got serious, during the Great Depression of the 1930s, both the US and the UK defaulted de facto, and possibly even de jure, on their sovereign debt.
In the case of the US, the sovereign default took the form of the abrogation of the gold clause when the US went off the gold standard (except for foreign exchange) in 1933. In 1933, Congress passed a joint resolution canceling all gold clauses in public and private contracts (including existing contracts). .........................
In the case of the UK, the de facto sovereign default took the form of the conversion in 1932 of Britain’s 5% War Loan Bonds (callable 1929-1947) into new 3½ % bonds (callable from 1952) on terms that were unambiguously unfavourable to the bond holders.
.......
Similar circumstances could arise again.

chucky

Generali wrote: »

It looks to me (anecdotally at least) that corporate borrowing is starting to happen again, mostly through the corporate bond market.

If companies can borrow they can invest, if they can invest they can employ. Employees spend money on things made by other employees, safeguarding more jobs.

My guess is that this at least means that some sort of bottom may be in sight, perhaps in 18 months or so as that is typically the lag between investment starting to rise and employment levels increasing.

We're not out of the woods yet but perhaps the very first signs of recovery in debt markets can be seen.

careful Gen - some people may call it a dead cat bounce

Generali

chucky wrote: »

careful Gen - some people may call it a dead cat bounce

I'm not saying everything's going to be fine now or even in 18 months but there appear to be signs of life in some of the darker corners of the debt markets.

Of course that's not necessarily great news for people looking at house prices to rise as interest rates will clearly rise rapidly from here if/when debt markets normalise (and by normalise I don't mean like 2005-7).

sabretoothtigger

Im thinking a 'recovery' would kick start inflation so that in real terms we dont see actual growth. So long as its not a collapse then I guess that would still be a positive

Wookster

There maybe signs of a credit flowing again but its a big step to connect that with recovery. GM is still on death's door, there is still a banking crisis looming in Eastern Europe.

At least that means that new ideas can hopefully move from imagination to fruition but for now the cancer is still spreading and given how rickety the fundamentals of the last boom were (house price boom + cheap credit) were its unlikely there will be a return to the previous status quo.

The question is what will the new order be?