Conservative Economics

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Subject: Asset-backed Securities

These are debt instruments, usually backed by receivables other than those arising out of real estate, and issued through special purpose vehicles. [Capital Market Taxonomy]

Deflation Economics

When cash is an investment strategy

Sometimes even cash is not a good idea. "Money to burn" showing Confederate Dollars.

Deflation is said to occur when general price levels fall. The last important example of general deflation in the United States occurred during the Great Depression. Federal Reserve officials and central bankers around the world often regard deflation as a greater risk than inflation. Under the Obama administration, US central bankers are now wary of both deflation and inflation.

Q1 2006

Non-GSE’s rush to mortgage-backed securities

Loans made by Issuers of Asset-Backed Securities

After having the market for mortgage securitization virtually to themselves while Fannie Mae was in the regulatory doghouse, issuers of asset-backed securities again face fierce competition as government-sponsored enterprises returned with a vengeance to the market.

Q1 2006

Trade deficit continues to support bonds

Foreign Purchases of US Fixed Income Securities

In Q1 2006, the excess of US imports over exports continued to provide dollars to the rest of the world, which were invested in the US bond market.

Although foreign central banks reduced flows into US treasuries and agencies after the high point of 2004, the shortfall has been more than covered by flows into bonds from foreign private sources. The driving force behind foreign purchases of US bonds is not so much related to interest rates as to worldwide neo-mercantilist impulses to favor exporters.

Featured articles on inside pages

Stock buybacks

Stock buybacks, refusing to die, live on

In Q1 2009, stock buybacks came back, driving up equity prices and sparking a rally by dominating a thin market. These equity repurchases were financed from depreciation and bond issues. More ...

Securities Analysis

Managing complexity

Modern capital markets have become so complex that security analysis methods of the 1930s are no longer adequate. Complexity goes beyond financial data to collateral issues such as operations, foreign and domestic taxation, and structural risks. More ...

US Politics

President Obama's Lincoln moment

In mid 2009, Barack Obama found that Lincoln's saying, "You can't fool all of the people all of the time," applied to his presidency. Profligate spending and unpopular health reform ended Obama's honeymoon. More ...

US equities

The productivity vs. population debate

The 'Baby Boomer Bomb' refers to the expected effect of the retirement of the Baby Boomer generation on capital markets, particularly equities. Two proposed 'solutions' to the problem are examined: Boomers being 'saved' by productivity and technology; and, alternatively, by selling their financial assets to the next generation..
More ...

US Bonds

The collapse of the dollar and US bonds?

The extreme spending of the Obama government, combined with irresponsible bank lending policies promoted by Barney Frank and Chris Dodd, portend rising interest rates, the collapse of the bond market, and the end of dollar supremacy. More ...

World Economy

What Is ‘International Liquidity’?

It used to be that the term 'international liquidity' meant the relative amount of resources available to a nation's monetary authorities that could be used to settle a balance of payments deficit. In the days of the gold standard, this would mean access to gold that could be used to redeem a nation's currency held by foreigners. More ...

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2010-08-13 13:09