Your thoughts on the economy?
- Thread starter funat50
- Start date
911teo
GT Owner
Interesting how it looks now we are out of the woods... in 48 hours 2y treasuries dropped (in price) 30bp (basis points), BoA bought Countrywide and credit spreads are narrowing....
I think we need to separate the current situation in 2. On one side you have the credit crunch were banks do not lend to each other for fear of unkmown credit risk and because of the ballooning balance sheets (coming from the hedge fund deleveraging taking place).
On the other side we have the default of the most important piece of the global economy, the US consumer.
I think the problem with the banks and Libor trading 50bp higher than Fed-Funds will ease in the next 2-3 weeks as confidence returns to the system.
But the bigger problem is the fact that an over leveraged US consumer is now capitulating. I think it will be extremely important to monitor the consumer confidence and jobless claims in the next weeks.
We have just repriced risk higher. Credit is difficult to get (the only willing lender is the Fed right now) for institutions like GS or BoA let alone for the consumer.
I do not think we are out of the woods and this may well spill over to stocks again soon.
I think we need to separate the current situation in 2. On one side you have the credit crunch were banks do not lend to each other for fear of unkmown credit risk and because of the ballooning balance sheets (coming from the hedge fund deleveraging taking place).
On the other side we have the default of the most important piece of the global economy, the US consumer.
I think the problem with the banks and Libor trading 50bp higher than Fed-Funds will ease in the next 2-3 weeks as confidence returns to the system.
But the bigger problem is the fact that an over leveraged US consumer is now capitulating. I think it will be extremely important to monitor the consumer confidence and jobless claims in the next weeks.
We have just repriced risk higher. Credit is difficult to get (the only willing lender is the Fed right now) for institutions like GS or BoA let alone for the consumer.
I do not think we are out of the woods and this may well spill over to stocks again soon.
