Credit Bubble Update - 06/28/07

Stocks and Bond Bull Markets - The Beginning of the End?

LIKE the often-prophesied end of the world, major correction in global bond and equity markets is a long time in coming - so much so that many investors are tempted to think that it may never happen. But, as two of our eminent investment experts comment in the panel discussion below, the most dangerous words in the English language are: 'This time it is different.'


BANK OF INTERNATIONAL SETTLEMENTS WARNS OF GREAT DEPRESSION

The Bank for International Settlements, the world's most prestigious financial body, has warned that years of loose monetary policy has fuelled a dangerous credit bubble, leaving the global economy more vulnerable to another 1930s-style slump than generally understood.

Boston: State, top lenders will seek remedies to foreclosure woes
State officials and executives from leading mortgage lenders are expected to meet today to discuss possible remedies to Massachusetts' wave of foreclosures.

The meeting was called by Dan O'Connell , the Patrick administration's secretary of housing and economic development , who wrote a letter asking the chief executives of the top 10 mortgage lenders in the state to attend, according to a person who has seen the letter but asked not to be identified. The letter did not spell out an agenda for the session, to be held at in the offices of Daniel Crane , director of the Office of Consumer Affairs and Business Regulation.

Subprime woes led to 50 lender failures: MBA

Nearly 50 mortgage lenders have folded due to the subprime crisis as part of a natural thinning of the industry, the leading trade association for those lenders said on Wednesday.

"About 50 (lenders) have suffered the consequences and many of those would have been our members," said John Robbins, chairman of the Mortgage Bankers Association, addressing the Reuters Global Real Estate Summit via teleconference from Washington.

Axed deals reflect subprime chill

Companies are pulling financing deals across the globe, in one of the clearest signs yet that investors’ worries about rising interest rates and US subprime mortgages could be infecting other areas of the credit world and driving up the cost of corporate borrowing.

MISC, the world’s biggest owner of liquefied gas tankers, day shelved its $750m bond offering.

Opaque Derivatives, Transparent Fed, `Bubblenomics': Timshel

The most stunning aspect of the demise of two hedge funds belonging to Bear Stearns Cos. is the almost total absence of transparency surrounding the bailout.

The debacle may finally provoke regulators, who have long suspected that buying derivatives is akin to running through a fireworks factory with a lighted blowtorch in each hand.

Carry trade threatens a deflationary global collapse

Concerns that the credit cycle may be turning down are growing. But so far, the impact on stock markets has been fairly limited.

Investors take comfort in three misguided beliefs. They believe that equities are not expensive and that there is no sign of any diminution in the flood of global "liquidity". Furthermore, they believe that if the worst happens, the US Federal Reserve will come to the rescue.

Banks 'set to call in a swathe of loans'

The United States faces a severe credit crunch as mounting losses on risky forms of debt catch up with the banks and force them to curb lending and call in existing loans, according to a report by Lombard Street Research.

The group said the fast-moving crisis at two Bear Stearns hedge funds had exposed the underlying rot in the US sub-prime mortgage market, and the vast nexus of collateralised debt obligations known as CDOs.