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Bernard Thomas

 
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  • Forget Green Shoots: These Are the Brown Shoots Turning Black [View article]
    Kudlow is a patriot. Kudlow is a capitalist. Kudlow is a cheerleader. Larry will use enthusiams to encourage people back into the market to create a selfulfilling prophecy. Fundamentals do not matter. It is all about enthusiasm. Perception is reality with Larry.

    Here is some reality. Mortgage delinquencies and defaults continue to rise as even responsible people are finding difficult to make mortgage payments while unemployed. Let's not even discuss credit card and car payments. The extent of the econimc recovert will be determined by productivity. We are not going to lever ourselves out of this one.
    Jul 11 11:15 AM | 14 Likes Like |Link to Comment
  • Celebrating the 'Recovery': I'm Disgusted [View article]
    An guys like Kudlow are begging FASB to not reverse its mark-to-market decision because it will kill the bull market. It is better to feel well than to actually be well. Pay no attention to the toxic assets behind the curtain.


    On Aug 24 12:12 PM conceptwizard wrote:

    > Two nobel prize winning economists Merton and Scholes' state that
    > without a reversal of the "mark to market" accounting rules for the
    > banks, there will be no recovery.
    > Many top economists believe that the economy will not recover unless
    > and until the real state of the banks and their assets are acknowledged
    > and insolvent banks broken up in an orderly fashion.
    >
    > The Financial Accounting Standards Board (seekingalpha.com/symbo...)
    > is, in fact, considering a reversal from its April change in policy
    > which suspended mark-to-market accounting. Specifically, FASB is
    > considering vastly tightening mark-to-market requirements to include
    > virtually all securities on a bank's balance sheet.
    >
    > The Obama administration believe that setting these rules aside and
    > allowing the assets to increase in value after the recovery, that
    > the assets will be worth more.
    >
    > We are not dealing with reality, there is more pain to come.
    >
    Aug 25 08:30 AM | 8 Likes Like |Link to Comment
  • Bloodbath in the Markets: Is Relief Coming? [View article]
    I am for mark to market. An asset is only worth what someone is willing to pay for it. Know what? Most toxic assets will never be worth 100 cents on the dollar. They are bad loans written on overvalued properties. Deal with it.
    Feb 8 10:37 AM | 5 Likes Like |Link to Comment
  • Celebrating the 'Recovery': I'm Disgusted [View article]
    What you are missing is that the soldiers you mention believed in their training, their commanders and their cause. Would these soldiers have had the same degree of confidence if they believed their commanders to be incompetent or questioned their methods of fighting the war. Having confidence in this economy would be like soldiers beimg confident in facing Panzers while being armed with teaspoons. Blind optimism (without considering the real dangers) is as or more harmful than realism.


    On Aug 25 08:57 AM Ferdinand E. Banks wrote:

    > Hmm. Seems to me that with all the bad news people expect, we have
    > only one choice: reelect Obama, and after him make sure that Hilary
    > gets her eight.
    >
    > I wonder what would have happened at Bastogne and the Rhine crossing
    > if American soldiers had the kind of pessimism shown in some of the
    > comments published on this site. Yes, the so-called energy bill is
    > pretty close to bonkers, and I tune out when I hear about the health
    > 'thing', but dont be surprised if the macro-financial medicine works,
    > and sooner rather than later.
    Aug 25 09:10 AM | 5 Likes Like |Link to Comment
  • Oh, So Now There Are No Green Shoots? [View article]
    Every major foreign economy is either directly or indirectly coupld to that of the U.S. Decoupling is as big a myth as the green shoots. Beware Eurpean banks. They are in worse shape than those of the U.S. Ask Deutsche Bank about it's leverage of between 50 and 60 times. Makes Bear and Lehman look responsible.
    Jul 4 09:38 AM | 5 Likes Like |Link to Comment
  • Bank Stress Tests: Tangible Common Equity a Critical Metric [View article]
    The stress test is a joke. Loans make up the majority of toxic assets on bank balance sheets and most have not been marked at all. Level 3 assets are not marked. Goodwill should be taken out of TCE because for some banks, there is no value in their names. PPIP is dead in the water unless the government forces the banks to sell loans at their true values. Banks do not want to do that because they would have to acknowledge true loan values. Anyone who thinks C and BAC are "healthy" by any measure short of fantasyland is either on drugs, insane or stupid.
    Apr 24 11:33 PM | 5 Likes Like |Link to Comment
  • The Fixed Income Landscape: What A Difference A Year Makes [View article]
    What most economists and investors did not foresee was global disinflation and a U.S. economy that, while a little bit better, is still just cruising along. We at b
    Bond Squad (http://bit.ly/1nmyCGq) also believed the 10-year would end the year in the mid-3.00% area, we had a sneaking suspicion that we could see rates dip into the 2s before marching higher. Now te economy looks a little softer and Fed policy has become less inflationary while economic growth has settled in to a nice, but not robust pace. Demographics and a very slack global labor market (one which has not shot at becoming right enough to generate significant wage pressures in the foreseeable future) threaten (promise) to keep rates low. The 10-year could peak in the mid 3s in the next rising cycle. The Fed Funds Rate might not get beyond 3.00% as growth and inflation might not be strong enough to push the Fed to act aggressively and the Fed has other tools (repos, deposit rate) with which it can tighten.

    My fear is with risk assets, even a modest rise in short-term rates without stronger revenue growth could kill junk debt, even the much-loved floating rate loans.

    The Great Asset Allocation Renormalization is under way. The demand for quality income-producing instruments with predictable cash flows and stated maturities will continue to increase during the next decade.
    May 20 10:14 PM | 3 Likes Like |Link to Comment
  • Robert Reich on Jobs, Treasuries in Perspective [View article]
    The French economy is a disaster. It is nearly impossible for young people, even college graduates, to find gainful employment. This was true even before the recession. Looking to France as a social and economic model of efficiency is like looking at the New Jersey Nets as a model of basketball prowess.
    Apr 13 09:39 PM | 3 Likes Like |Link to Comment
  • Roubini Is Right: Recovery Will Be Slow [View article]
    I am noit saying that Roubini is always right or has always been right. I am merely stating that he is right this time around. CNBC pundits criticize by pointing out that he failed to call the bottom of the markets in March. I'll counter by saying the blind bulls failed to call the top a few years ago. I have been trading for 18 years and those who correctly call tops and bottoms are far more lucky than good.

    To address Rick Urban's comments. I think a V-shaped recovery would be more akin to a meteor hitting us than Mr. Roubini's scenario. Someone please tell me how the consumer will pull us upward or what will replace consumer activity. I have been asking this for weeks and all I have heard are crickets.
    Aug 25 09:50 AM | 3 Likes Like |Link to Comment
  • Roubini Is Right: Recovery Will Be Slow [View article]
    You could be correct. This economy was not structured (in recent years) to function with consumers living within their means.
    Aug 25 07:58 AM | 3 Likes Like |Link to Comment
  • Bubbles And Squeak - Why Danger Lurks In High Yield And Preferred Securities [View article]
    Correct!!! This is how play HY. Use common sense, don't extend out too far and stay in HY, not junk. There is a difference.
    Aug 6 10:53 AM | 2 Likes Like |Link to Comment
  • Bubbles And Squeak - Why Danger Lurks In High Yield And Preferred Securities [View article]
    Back to 2008. Yeah that is a long time. 2009 to now has been the golden age for HY! Remember the junk bond scandals of the late 80s / early 90s when companies defaulted left and right. Please, have a little deeper perspective. I have been in the bond market for more than two decades.

    Why don't we just use default rate data for mortages during the housing bubble (when they were at all-time lows) and use that as the norm too. Hence BUBBLE!
    Aug 6 10:52 AM | 2 Likes Like |Link to Comment
  • Bubbles And Squeak - Why Danger Lurks In High Yield And Preferred Securities [View article]
    Hmm, for a company to call a pfd, it usually needs to save at least .75 on the coupon (cost of financing) to cover costs of coming to market and realizing a meaningful savings. Do you really think that preferreds which have been issued in the current low-rate environment will ever be able to be called?

    This is why I say my grandchildren will be trading some of these 50-year or perpetual preferreds. Preferreds are negatively convexed and call features are designed always benefit the issuer. It gives them the right to call when they can refinance at lower rates, but they can leave them out there when rates rise and enjoy realtively cheap financing.

    10-year BBB and A-rated bonds give you better returns when duration and seniority are considered. Preferreds are long-term securities which are called when beneficial for the issuer, as as been the case for the past 30 years.

    How will the investor feel holding a 5.75% pfd valued at $19 when new preferreds are being issued at 8.00% and 10-year corporatre seniro debt is being issued at 6.50%?
    Aug 6 10:47 AM | 2 Likes Like |Link to Comment
  • Bubbles And Squeak - Why Danger Lurks In High Yield And Preferred Securities [View article]
    The situation is this. There is much money in HY that would not be there if rates were normal and attractive yields could be had in investment grade bonds. There is also money in HY from equities. When the economy and rates "normalize, capital shoudl return to their traditional homes. Many curent BBB-rated invetsors wil move to A. Some BB investors will move to BBB, B to BB and CCC to B. Itis at the very bottom of the scale where the pain will be concentrated.

    HY bonds do behave more like stocks, but they are financing sources for corporate issuers with weak credits. They are subject to inetrest rates. If the 10-year Treasury is at 4.00% and A-rated indutrials are at 5.00%, BBB-rated at 5.50%, BB ratd at 6.00%, B-rated at 8.50% then CCC might be at 10.00% or more. Some companies may be un willing to refinance at 10.00% and could defualt or restructure debt at less than par.

    HY has done well because of low rates. There could be an equal and opposite reaction when the rate situation reverses. HY fund wholesalers and marketers (most of whom do not understand HY bonds and are simply regurgitating what they have been told) are painting a scenario that HY bonds do well when the economy is bad and even better when it is good. If that was the case, they would not be very risky, would they.

    HY isusers especially low B, CCC and lower, are very sensitive to financing costs. Many would have already defualted if not for the current rate environment. Wholesalers love HY. Traders are concerned that this is the golden age and it will come to an end within five years. If you are playing with HY, stay five-years (maybe three-years) and less.

    If you would like, I can send you a free trial sucbcription to my service "Bond Squad." We don't ask for credit card info for free trials, it is truly free and with no obligation whatsoever.
    Aug 6 10:42 AM | 2 Likes Like |Link to Comment
  • Lack Of Jobs Creates Tough Decisions For Policymakers [View article]
    muoio; ever hear of comparative advnatage?

    Tariffs and protectionism are counter productive in the long run. We cannot become economic Luddites. Speaking if Luddites, reversing the trend of increased automation and efficiency will not work either.

    Why will no one admit that for 20 years we lived an unsustainable lifestyle in the U.S. and we need wages and asset prices to reset to be globally competitive?
    Sep 5 08:53 AM | 2 Likes Like |Link to Comment
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