Heads up- more bad news
At the start of every year, I do a look back at how my investments did, and a look forward at what I see coming. In January, 2007, I wrote:
"According to analysts, 2007 should be a good year for large cap stocks. It should be good for markets too, as interest rates should stay low. I've noticed a large number of private equity LBOs. These seem to be keeping stock prices high. I think I need to watch those events closely, as, if that money dries up, stocks could tank."
Well, events are unfolding now! According to Bill Gross, of Pimco:
Enough is Enough.
"Several hundred billion dollars of bank loans and high yield debt wait in the wings to take out the private equity and leveraged buyout deals that have helped propel stocks to Dow 14,000. And lenders…mmmmm, how do we say this…don’t seem to have much of an appetite anymore. Six weeks ago the high yield debt market was humming the Campbell’s soup theme and now, it’s begging for a truckload of Rolaids. Yields have risen by 100 to 150 basis points in response" - Bill Gross
This looks to me like an ominous sign of more worries yet to come. It's usually wrong to be to reactionary to news- after all, every day something else unexpected comes along. However, the long-term implications of a slow, long, declining housing market, rising foreclosure rates in the subprime loan market, and increasing interest rates for LBO loans is not looking good.
"According to analysts, 2007 should be a good year for large cap stocks. It should be good for markets too, as interest rates should stay low. I've noticed a large number of private equity LBOs. These seem to be keeping stock prices high. I think I need to watch those events closely, as, if that money dries up, stocks could tank."
Well, events are unfolding now! According to Bill Gross, of Pimco:
Enough is Enough.
"Several hundred billion dollars of bank loans and high yield debt wait in the wings to take out the private equity and leveraged buyout deals that have helped propel stocks to Dow 14,000. And lenders…mmmmm, how do we say this…don’t seem to have much of an appetite anymore. Six weeks ago the high yield debt market was humming the Campbell’s soup theme and now, it’s begging for a truckload of Rolaids. Yields have risen by 100 to 150 basis points in response" - Bill Gross
This looks to me like an ominous sign of more worries yet to come. It's usually wrong to be to reactionary to news- after all, every day something else unexpected comes along. However, the long-term implications of a slow, long, declining housing market, rising foreclosure rates in the subprime loan market, and increasing interest rates for LBO loans is not looking good.
posted by jasonz at
12:56 AM
0 Comments:
Post a Comment
<< Home