Musing on the Markets : Debt

Beyond the Sound Bite: An Interview with Donald Rissmiller

Vinny Catalano, CFA — Tue, 20 Oct 2009 23:50:00 GMT

My third interview with the Chief Economist at Strategas Research Partners focused on my bifurcated earnings outcome, the US employment situation, the political dynamics of 2010, the dual exit strategies of monetary and fiscal policy, and the inevitability that the deficit bill will come due, among other topics.

The length of the interview is 17 minutes 16 seconds.

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Vinny Catalano, CFA, Global Investment Strategist with Blue Marble Research publishes the "Sectors and Styles Strategy Report" newsletter, which contains the market beating Model Growth Portfolio. To learn about subscribing as well as other benefits, click here.

Unacceptable

Vinny Catalano, CFA — Tue, 23 Sep 2008 12:01:00 GMT

As the world listens to Messrs. Paulson and Bernanke argue for support of their three-page $700 billion manifesto, I wish to focus your attention on a central aspect of the credit crisis – the scale and scope of the credit derivatives octopus.

To illustrate, consider this: If scientists can “identify all the approximately 20,000-25,000 genes in human DNA”, and “determine the sequences of the 3 billion chemical base pairs that make up human DNA,” then why can’t the financial scientists identify the extent of the credit derivatives market?

This is a national, if not global, emergency. In such an emergency, is it acceptable to say, “We don’t know what we don’t know?” Or, “It’s too hard to figure out.” Nonsense. If this emergency were a war, would it be acceptable to say, “We can’t build that tank or missile because we don’t know where the steel is”? Of course not. So, why is it acceptable to say we don’t know the extent of the credit derivatives octopus?

Perhaps certain US government officials do know but they are just not saying so. Perhaps those certain US government officials reside in the US Treasury and Federal Reserve Bank. If so, then their actions these past anxiety-riddled months are about as inept as could be possible as a more comprehensive plan of action should have been constructed (from such knowledge) rather than the firemen Hank and Ben put out the latest financial wildfire this weekend, right now routine we have been treated to.

Investment Strategy Implications Along with the insane decisions to implement FAS 157 and eliminate the uptick rule, the outrageous neglect on the part of those charged with oversight of the entire financial services industry, and the fundamental rationale supporting each (efficient markets and laissez-faire), you can add the unacceptable argument that it’s just too hard to figure out the credit derivatives octopus.

In the process, the world’s markets and economies are now forced to experience a disorderly unwinding of the credit bubble – a disorderly unwinding that could have been mitigated had certain action steps, and the rationales supporting them, been avoided.

Sadly, today’s testimony will almost certainly contain a lot of shoulder shrugging “we don’t know what we don’t know, it’s too hard to figure out” statements. Unacceptable.

Beyond the Sound Bite: An Interview with Dr. Peter Hooper

Vinny Catalano, CFA — Wed, 09 Jul 2008 11:07:00 GMT

My interview with the Managing Director and Chief Economist for Deutsche Bank Securities includes the state of the global economy, prospects for stagflation in the US, the expanded role of the Fed, and the US consumer.

The length of the interview is 13 minutes 21 seconds.

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News Alert: Brazil Government Debt Upgraded

Vinny Catalano, CFA — Wed, 30 Apr 2008 19:28:00 GMT

According to news sources (which have not hit the major newswires as of yet), Brazil's government debt has been upgraded. This had been expected in the second half of this year. So, this announcement caught investors off guard and pleasantly surprised. By raising the rating to investment grade, Brazil's cost of capital will almost certainly decline. Additionally, the upgrade opens the door for more capital that is restricted to investment grade only. Recently, news re the large oil fields off the Sao Paulo coast of Brazil has stimulated much investor excitement. This excitement was tempered with comments re questions as to the size of the fields (as high as 40 billion barrels - Tupi and Sugarloaf/Carioca fields combined) and the complexity extracting the oil (up to six miles deep, among other factors). Investment Strategy Implications One of the investment positions in the Model Growth Portfolio* is ILF - Latin America 40, which is comprised predominantly of Brazilian issues, some Mexican issues (mostly energy), and a smattering of other Latin American companies. More on this story as details become better known.