Trying to Predict the Next Blowup

[phil]

http://finance.yahoo.com/real-estat...ke-of-dubai-trying-to-predict-the-next-blowup

We talk about bank failures here, but the worldwide financial crisis has other victims as well. If a lot of places can't get some liquidity, there'll be some trouble soon.

 

[mick504]

I think the next blowup might be when the Saudi terrorists are tried in NY. I hope not!

 

[mick504]

There is also the looming commercial market problem which really has not been discussed that much; and the retail market ARM resetting in 2010 and beyond. It's not over yet!

 

[phil]

I'd rather focus on the economy. There's quite a bit of economic uncertainty. We heard it tonight from President Obama.

 

[alevin]

Next blowup. People are talking about bonds. There was a bond blowup after the stock blowup in the 30s. Here's where it could come from in our not too distant future. Very good analysis of ongoing asset allocation/reallocation trends at national scale and implications for market looking ahead next several years-at the link below

a quick check in on financial asset allocation on the part of a number of meaningful investment constituencies - households, corporations (pension funds) and what’s happening in the foreign community. As a percentage of financial assets, where do these folks stand in terms of equity and bond exposure relative to historical trends and levels? Is there room for these folks to increase allocation to equities with what little cash resources they do have?

what households have been doing lately as opposed to potentially upping equity exposure is to pile into bond funds and bond oriented ETFs in literally record numbers.

The chart below [chart won't post, you'll have to look at the original article at the link] looks at household bond allocation over time. The irony, of course, is that in the early 1980’s when bond yields hit generational highs, household bond investors were nowhere to be found. Why? Simple, they were acting in a manner consistent with what had already happened, not what was about to happen. And now that interest rates broadly have hit generational lows, the public is piling in dramatic antithesis of their behavior almost precisely three decades back. They can’t buy them fast enough, at least for now.

http://www.financialsense.com/Market/daily/friday.htm

 

[phil]

Because of bond re-insurance companies having liquidity problems, see AIG federal bailout, I'm having some real issues about the bond market. The last collapse of the market was the early 90's with Drexel Burnham Lambert.

I wonder what all of this means for the future.

http://en.wikipedia.org/wiki/Private_equity_in_the_1990s

Bond markets are more complicated in the sense that the corporations have to pay off all of their debt before they can pay a single penny to shareholders.

 

[Boghie]

And, who insured the State and Municipal bond issues?

Yup, AIG and companies like them.

What happens when that insurance is no longer valid?
Can no longer be purchased?
Watch Kaleforeea!

:nuts: