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Grant's Interest Rate Observer - Vol.27,No.18
Wall Street was away from its desk when the Securities and Exchange Commission and General Electric Co. came to terms on August 4. To settle charges of book-cooking and earnings manipulation, Thomas A. Edison's corporate brainchild neither admitted nor denied guilt, but paid a $50 million fine and vowed never again to commit the sins to which it had not confessed. A sell-side analyst obliged a reporter at The Wall Street Journal with the comment that, really, the revelations didn't matter. While the accounting practices at issue might have been "frustrating," he claimed, "they were never material."
They were and are material--and entertaining, too, in a shabby kind of way. . .
Hope for housing
In Wall Street lingo, house prices are the "underlying." They are the reference point for mortgage debt (trillions of dollars worth) and a pressure point on financial institutions (especially the too-big-to-fail kind). By falling, the value of American residential real estate put the fright of a lifetime into world finance. By not falling further or even rising (if such a thing could be imagined), it could quicken the pace on the road to recovery.
It's more than notable, therefore, that house prices have apparently. . .
Options on crude
Oil is becoming harder to lift even as money is becoming easier to print (or, rather, to materialize while seated at a computer keyboard). Overlaying the first trend on the second, a speculative thinker can imagine a much higher oil price. . .
Like warm beer
The Cambridge University economist A.C. Pigou was British, not French, as erroneously asserted in the prior issue of Grant's.
Something about the English language
From Canada, a late-summer thunderclap: 27,000 new jobs were gained, not lost, in August. The news "confounded many economist expectations for jobs to shrink," The Wall Street Journal reported, including, evidently, the expectations on file at the Bank of Canada.
Grant's Interest Rate Observer - Vol.27,No.16
'Excess' is the word
Junk bonds, senior bank loans and common stocks are rallying as if the economic patient were going to live, after all. On Monday, Eurodollar deposits outyielded Treasury bills by fewer than 30 basis points, the narrowest margin since March 2007, according to Bloomberg News. Last fall, during the Lehman fright, the so-called TED spread gapped to 434 basis points. That crisis is over, we say. On, then, to the next.
Lift for Lufkin
It's not only we, the people, who are aging. Oil and gas fields, too, are getting gray around the temples. To erase unsightly blemishes and prolong productive life are yearnings that have launched many a profitable business. Following is an analysis of a Just-for-Men-style vendor to the energy industry.
State of credit
A rumored Chinese monetary tightening last Wednesday rocked the Shanghai stock market for 5% and rattled the quoted values of oil, copper, the euro and the New Zealand dollar, among other assets not explicitly Chinese. In a bid to restore calm, the People's Bank of China advised visitors to its Web site to disregard the whispers: Monetary policy would remain "moderately loose." Through the first six months, this "moderately loose" gait of money printing yielded year-over-year loan growth of 34.4% and year-over-year M-2 growth of 28%. What a "very loose" policy might bring forth, the PBOC didn't speculate.
Now unspooling is a wide-angle look at banking in the BRICs. . . .
We all scream for Treasurys
Vacation-time thought experiment: With the knowledge that the U.S. government will be borrowing as much as $3.5 trillion from the public in fiscal years 2009, 2010 and 2011, approximately matching the Treasury's cumulative borrowing between 1789 and 1994, would you have guessed that the yield on the 10-year note would today be hovering in the neighborhood of only 3.7%? If "yes" is your answer, you must not go away on vacation this month. You have too hot a hand to stay away from the office.
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