Are we changing our tune, then, about what to expect from markets? Not one bit. But the question now is timing. The collapse of 2008 was so severe because of the sudden reduction in leverage in the financial sector. As assets fell in value, the most highly leveraged firms (or lenders who raised money by selling debt) went out of business.
October 12th, 2009 | Dan Denning | 34 comments | ContinuedAll Posts Tagged With: "capital"
Underlying Demand During a Housing Shortage
That is clever to suggest that when rates rise people will have to find another way to say that houses are affordable. But we reckon when rates rise, as they eventually must, a lot of new home buyers will find out that access to cheap credit does not make a house affordable. It just makes the amount of debt you owe to the bank a lot larger.
September 30th, 2009 | Dan Denning | 41 comments | Continued
The Banks Should Hold More Capital
The US system of capitalism has become a system where the capitalists have no capital. The big banks have too little in savings…not enough ‘buffers’ to protect them from unexpected crises. They made a fortune during the boom years…
September 7th, 2009 | Bill Bonner | 0 comments | Continued
David Murray Says You Become Dependent on Global Banks When Importing Capital
There we were watching Lateline, waiting for the rain to stop at Edgbaston so the cricket could begin, when David Murray, Chairman of Australia’s Future Fund, began making so much sense we could hardly write it down fast enough. And it wasn’t his comments about buying non-government guaranteed corporate debt that got us so excited.
July 31st, 2009 | Dan Denning | 18 comments | Continued
Purpose of Funds Management Industry IS to Put People into Common Stocks
The bad news is that existing shareholders took a hit on their shares when NAB discounted the offering to the current share price. It probably had to do this to incentivise buyers. But that was the hidden cost, and it was born by existing shareholders. And in any event, we’re still not convinced that capital raised to buffer against further loan losses is the kind of event a shareholder would be bullish about.
July 24th, 2009 | Dan Denning | 20 comments | Continued
Saving Money, Not Spending it, is the Key to Getting Wealthier
Saving money gives you capital. And it’s capital accumulation – in the form of factories, roads, ships, buildings, machines…and raw savings – that gives people the ability to produce more. It may take a man with a shovel a whole day to dig a decent grave.
July 13th, 2009 | Bill Bonner | 0 comments | Continued
Hell, Meet Handbasket, Part II
When capital is allocated in a free market, it moves toward the productive, and the economy tends to prosper. By the same token, when it is misallocated, an economy can hit the skids. We’ve had decades of misallocated capital in the U.S. Instead of saving, we’ve been spending… way beyond our means.
November 14th, 2008 | Doug Hornig | 0 comments | Continued
Level 3 Assets Growing in All Five U.S. Investment Banks
The SEC will require Wall Street firms to report on their capital and liquidity levels in, “terms the market can readily understand and digest.” Aha! So we will now know who has more dodgy assets than real capital. Of course, we already do know quite a bit. A new accounting rule last November required banks to report their assets in three categories, from easiest to sell and value (Level 1) to hardest to sell and value (Level 3). Write-downs in level 3 assets directly affect a bank’s capital.
May 8th, 2008 | Dan Denning | 1 comment | Continued