tag:blogger.com,1999:blog-6616959642391988608.post3190984081549350084..comments2024-03-28T00:18:25.641-07:00Comments on Calafia Beach Pundit: Swap spreads are still a good leading indicatorScott Grannishttp://www.blogger.com/profile/14028519647946868684noreply@blogger.comBlogger21125tag:blogger.com,1999:blog-6616959642391988608.post-80797796926542949462009-04-09T10:18:00.000-07:002009-04-09T10:18:00.000-07:00did it again...just type in "tml" to the end of th...did it again...just type in "tml" to the end of the link.Donny Baseballhttps://www.blogger.com/profile/08040288585224426073noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-46738280609488360122009-04-09T10:17:00.000-07:002009-04-09T10:17:00.000-07:00Sorry Scott, the ".html" got cut off..http://onlin...Sorry Scott, the ".html" got cut off..<BR/><BR/>http://online.wsj.com/article/SB123929216724105401.htmlDonny Baseballhttps://www.blogger.com/profile/08040288585224426073noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-29424071182103310632009-04-09T10:08:00.000-07:002009-04-09T10:08:00.000-07:00Donny: I am a WSJ subscriber but can't seem to get...Donny: I am a WSJ subscriber but can't seem to get access to the article. But I can guess that it says that since corporate bond spreads are still huge, that means the economy is still in big trouble. Credit spreads have often risen in advance of trouble, but they can easily overshoot, and the market can get overly pessimistic. Case in point: credit spreads peaked in Nov. 2002, but by that time Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-63340394310854596172009-04-09T09:40:00.000-07:002009-04-09T09:40:00.000-07:00Scott-Justin Lahart has a silly article today on w...Scott-<BR/>Justin Lahart has a silly article today on wsj.com saying bonds are signalling worse to come. <BR/><BR/>http://online.wsj.com/article/SB123929216724105401.html<BR/><BR/>Upon further reading though, I can't detect exactly what about bonds today is signalling what. The article talks about an academic study and some historical patterns, but doesn't seem to nail down today's state of Donny Baseballhttps://www.blogger.com/profile/08040288585224426073noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-3066182753519910472009-04-09T09:13:00.000-07:002009-04-09T09:13:00.000-07:00Bernard: believe it or not, consumer lending by al...Bernard: believe it or not, consumer lending by all commercial banks is at a record high and rising. Some people are being cut off, but other people are having no problem getting credit. <BR/><BR/>In any event, it sure wouldn't hurt if we all became a bit more prudent with our finances as a result of this crisis. Unfortunately, while households are learning this painful lesson the hard way, our Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-54237476998477127252009-04-09T09:09:00.000-07:002009-04-09T09:09:00.000-07:00Swaps are just another way to do a transaction. Se...Swaps are just another way to do a transaction. Selling bonds or paying a fixed rate in a swap transaction are effectively equivalent--they have the same economic effect. Swaps are often preferred because of their lower transaction costs and/or the fact that they can be very specifically tailored to meet a particular need of one party in the transaction. <BR/><BR/>Swaps, like buying or selling Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-14606133881319799832009-04-09T08:57:00.000-07:002009-04-09T08:57:00.000-07:00Banks are not lending more money. Is everyone deli...Banks are not lending more money. Is everyone delirious? Banks have slashed revolving credit and jacked up interest rates across the quality spectrum. I know, it happened to me even though I have a high credit rating, exactly zero debt, and been a good customer for 15 years. This is their last attempt to milk the cow before it runs dry. I cancelled my card and will never borrow to finance a Public Libraryhttps://www.blogger.com/profile/00017383928897945054noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-89025411176351492222009-04-09T08:44:00.000-07:002009-04-09T08:44:00.000-07:00Thanks Scott, for the long and short of it - so to...Thanks Scott, for the long and short of it - so to speak.<BR/><BR/>Would it be fair to say then that swaps are a way to bet on the direction of interest rates - to continue your fixed-rate/ floating-rate bond example?<BR/><BR/>Would this be a bet or a hedge? Is this a distinction without a difference?bob wrighthttps://www.blogger.com/profile/09546025277161775062noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-627372560430496822009-04-09T08:10:00.000-07:002009-04-09T08:10:00.000-07:00bob: Here's my quick and dirty summary of swap spr...bob: Here's my quick and dirty summary of swap spreads:<BR/><BR/>Swaps are transactions that allow people to redistribute risk. They are over the counter agreements between any two parties to exchange one cash flow for another. The most basic swap is fixed rate for floating rate payments. If I own bonds (fixed rate instruments) but I worry about the prospect of interest rates rising, I might wantScott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-70908483162380387142009-04-09T08:01:00.000-07:002009-04-09T08:01:00.000-07:00beavis: i think we all think you are a coward.beavis: i think we all think you are a coward.Unknownhttps://www.blogger.com/profile/16384234061897870032noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-84479194452393386992009-04-09T07:44:00.000-07:002009-04-09T07:44:00.000-07:00Though Beavis inferred he might be knowledgeable, ...Though Beavis inferred he might be knowledgeable, important, and well known, he didn't bother to tell us who he is.Gene Prescotthttps://www.blogger.com/profile/01749854994321888028noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-3512626691311489202009-04-09T06:14:00.000-07:002009-04-09T06:14:00.000-07:00Golly, Beavis sure thinks he wears the big boy pan...Golly, Beavis sure thinks he wears the big boy pants, eh? <BR/><BR/>And notice how he refers to Scott's "west coast criminal bretheren" but then accuses him of starting personal attacks.Paulhttps://www.blogger.com/profile/00842065702455026249noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-57573713131512604382009-04-09T05:53:00.000-07:002009-04-09T05:53:00.000-07:00This comment has been removed by a blog administrator.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-6913651327551572792009-04-08T23:51:00.000-07:002009-04-08T23:51:00.000-07:00Beavis and others who share his apocalyptic view: ...Beavis and others who share his apocalyptic view: your most logical course of action at this point would be to liquidate everything you own, then use the proceeds to buy a remote island in the South Pacific, stock it with plenty of guns, ammunition and food, and move there with all your loved ones.Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-64078572014845919952009-04-08T21:26:00.000-07:002009-04-08T21:26:00.000-07:00Thank you Nouriel Roubini.Thank you Nouriel Roubini.Billhttps://www.blogger.com/profile/05145490918994594519noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-46846807199492227102009-04-08T20:15:00.000-07:002009-04-08T20:15:00.000-07:00In 2006 swap spreads were narrow and high yield bo...In 2006 swap spreads were narrow and high yield bonds were pointing to the lowest default rate in recorded history. Yet, upon further investigation, the housing market was already collapsing and your west coast criminal bretheren at Countrywide were already noting internally that sub prime and alt-a loans were defaulting at an incredible rate. ie, Swap spreads were delusional to the reality Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-35048227630714474332009-04-08T19:58:00.000-07:002009-04-08T19:58:00.000-07:00Would you be so kind as to explain what swap sprea...Would you be so kind as to explain what swap spreads are and how they can be predictive?bob wrighthttps://www.blogger.com/profile/09546025277161775062noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-37585756472949465832009-04-08T19:33:00.000-07:002009-04-08T19:33:00.000-07:00Beavis: I beg to differ on the issue of swap sprea...Beavis: I beg to differ on the issue of swap spreads and their ability to predict. Swap spreads widened significantly in the early summer of 2007, well before the onset of the blowout in credit spreads which started almost a year later. Similarly, swap spreads surged in 1997 and 1998, way in advance of the 2001 recession and subsequent credit blowup.<BR/><BR/>Whether the decline in swap spreads Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-50336681477545919972009-04-08T19:18:00.000-07:002009-04-08T19:18:00.000-07:00Nice blog. Thanks for sharing. What I will say i...Nice blog. Thanks for sharing. What I will say is that swap spreads are a very, very useless indicator beyond short to intermediate term. Case in point was right before this crisis started. In fact, the high yield bond market was completely delirious with the lowest anticipated default rates ever recorded. That compares to recently being the highest. <BR/><BR/>Here's the reality. We are inAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-35214389879034753202009-04-08T19:00:00.000-07:002009-04-08T19:00:00.000-07:00Scott,I am long EMD also. I am amazed at the retu...Scott,<BR/>I am long EMD also. I am amazed at the returns from Emerging Mkt Debt over the past 10-15 years. So much so, I have a hard time understanding how the return were so high. <BR/><BR/>Can you explain it? What is your analysis for Emerging Mkt debt gone forward?PD Dennisonhttps://www.blogger.com/profile/10012560806774461700noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-55094243761553769202009-04-08T12:14:00.000-07:002009-04-08T12:14:00.000-07:00I like mci and mpv for high yield well managed sto...I like mci and mpv for high yield well managed stocks; Scott, are you returning from Argentina soon? I will be in your neck of the woods around April 19-20 and it would be fun to meet over coffee if you are available.The Therapist Is Inhttps://www.blogger.com/profile/07340602598063284934noreply@blogger.com