Amongst the real horrors perpetrated during the subprime disaster, such as the many outright frauds practised on US homebuyers who should never have been re-mortgaging their homes in the first place, the testimony of real estate appraiser Karen Mann to the Financial Crisis Inquiry Commission (FCIC) sounds a barely heard note but it is an eloquent account of the law of unintended consequences in full cry.
While global liquidity imbalances were, at bedrock, responsible for generating the hunt for yield that pumped up the global asset bubble, subprime residential mortgage securitizations were undoubtedly the vehicle that gave us the 2008 global financial meltdown. The mechanics of this have been gone into at great length elsewhere, but what is now emerging bears further scrutiny.
The Great Recession of last year took its toll on the alcoholic beverages industry. Traffic at bars and restaurants was down, shifting some consumption to the less profitable at-home channel, while weak consumer spending led to trading down in most categories.
The old exhortation to ambitious youth, “Go East, young man!” has lost none of its potency over the century or so since it was first uttered. Asia now has global growth by the scruff and is running away with it while the West keeps on digging itself into a deeper hole.
With near zero returns for prime sovereign debt, wealth managers and fixed income managers have been pouring money into high yield corporate bonds for more than a year in a search for better rewards.
QFINANCE brings to you its top 5 financial news stories of the week, along with relevant QFINANCE articles and definitions to fill you in on background details. Stories this week include protests across France against pension reforms, the UK spending review, and G20 reactions to the currency wars.
The past several weeks have seen new revelations about the complexity of the mortgage industry and the astonishing level of sloppy work done to document that complexity. We are on the verge of massive lawsuits and a good deal of wailing and gnashing of teeth on the part of the banks that issued the loans and the entities that processed, repackaged and sold them as securities.
Watergate seems to have permanently disfigured US English by requiring a mandatory suffix, “gate”, to be appended to every fresh scandal, “just so’s we knows its big”. However, US market commentators and financial bloggers are revving their engines big time on foreclosure-gate, and since I dropped an un-elucidated mention of this into a previous blog, now might be a good time to give the topic an airing.
Speaking at the Canadian Consulate’s “Invest in Canada” luncheon on 6 October, the Nobel Prize winning economist Joseph Stiglitz in effect threw in the towel over the ongoing currency wars. As reported by Reuters Stiglitz said that what the US was involved in amounted to a competitive devaluation of the dollar against other currencies that were also deliberately devaluing.
Hedge funds continue to bear the brunt of blame for the 2008 credit seizure, market collapse and ensuing Great Recession. Whether part of the problem (securitization), an exacerbation of the problem (short-selling) or the problem itself (Madoff), the weight of public opinion continues to be stacked against them.