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New "... a brutal repricing of risk..." 19 kB img
[link|http://www.theoildrum.com/node/2863|The Oil Drum]:

[image|http://www.eurotrib.com/files/3/070807_face_value_of_bank_loans_02_07.JPG|0|Face value of bank loans|356|253]


Analysts everywhere (those that mocked the Cassandras that have said for a while that markets had gone crazy) have been forced to acknowledge that there is a brutal repricing of risk, and a new, sudden, unwilligness by banks to fuel the buy out craze - the debt-fuelled purchases of corporations by private equity funds at ever rising valuations. However, many are still calling this "healthy": a belated, but reasonable, return to normal after some excesses. (This is also what was said about the housing market before it claimed its first victims in the subprime lending sector this year).


I was suspicious of all of the "private equity" buyout activity over the last few months. It certainly looks like something very unusual is going on in the banking system, and the injections of liquidity by the central banks certainly make it look serious.

IOW, the gyrations of the stock markets may be masking something much more serious - something that started with the sub-prime loan meltdown.

Cheers,
Scott.
New Nobody really knows what will shake out of this
It is the nature of the financial markets that there are always bears and bulls. Knowing which ones are any good is the hard part. What I think a lot of them have not grasped yet about this problem is that this is going to be slow and unpredictable.

Unlike the computer boom and other industry bubbles, which have collapsed in just a few months, this is going to take years to unwind. The unpredictable parts comes from the fact that private equity have much lower reporting rules and multiple layers of sales and derivatives hides the details. A lot of people are going to discover they have indirect exposure to these problems they didn't even know existed.

The drying up of easy loan money will change a lot things. The huge private buyouts of the past few years is just the most visible part, the low cost and low control loans have driven a lot of activity in the past few years.

This will have some good effects in the long run. Right now it is too easy for hedge funds and the super rich to use private equity to leverage their money. And more importantly, moving more of the market into the transparent parts will make it more fair and more honest.

Jay
New Overall, seems easier to comprehend when noticing that -
when you need third-order differential equations to calculate where (if..?) Responsibility lies -- in a plethora of these new so-called "financial instruments" -- the entire Moloch game has reached a new sub-basement of obscurity-by-design.

Methinks such earlier terms as 'velocity of money' and the ludiocrous idea [not original with moi] of there being a Nobel Prize! in Econ (the social-science patina of Moloch) - these regular language atrocities have been eclipsed by this new overlay of Obscurantism: to become the stealth method of white collar crime, whereby the evidence-trail is consistently rolled up behind. Who ya gonna Sue when the pyramid collapses?

(Surely the onset of these scams is conceptually related to the stark fact of that easy-acceptance of a similar obscurantism -- that propaganda which sold the invasions, with nary a peep. From that fait accompli -- the 'market' was (correctly) adjudged incompetent. So why not steal the suspenders, too?)

von K\ufffdrm\ufffdn needed quite less complex math to caculate the probable resonant frequency of the Tacoma Narrows bridge and likely windspeed needed to excite that. Econ formulas have become as disconnected from actual Life as those religio calculations re the 'Seven Seals', done via assigning numerical values to some committee-written text + proper colored smoke.

Surely we can expect more of the same, until Some marks finally notice! the haemorrhage stains, call the loans. Start the dominoes falling. THEN we'll see some "velocity of money".

Gullible species, about specie too - got a half-life calculation?

poTy

Expand Edited by Ashton Aug. 11, 2007, 06:06:39 AM EDT
     "... a brutal repricing of risk..." 19 kB img - (Another Scott) - (2)
         Nobody really knows what will shake out of this - (JayMehaffey)
         Overall, seems easier to comprehend when noticing that - - (Ashton)

Several ICLRPDs in there, but I'll let others pick out their favorites.
65 ms