The divergence between bond markets and stock markets is all about what governments are going to do , for whom and when. Neither market, certainly not the stock market, has much to do with the health or otherwise of the companies whose shares and debts are being traded and priced.
Two bits of Bond Market nerws today. Just as European banks are having a hard time borrowing from the bond market so suddenly are Chinese property development companies. At least from banks who lend in dollars. The banks who used to lend to them in dollars, such as Goldman and Credit Suisse are all now downgrading their estimates of profits for Chinese property. The developers will hurt without such borrowing. Especially as funding from the Chinese government is also drying up.
Add to this, that it seems a small property tax is now going to roll out across China and you could see a slump in property prices. So what you might say? I think such a slump will shake out some over indebted developers and much more than that, I wonder how many Chinese people who are sitting on a property as an investment that ‘can’t lose’, will panic. If they do and try to sell, the Chinese government will have to U-turn faster than an olympic ice skater.
Also today, Italian muncipalities revealed they as a group have lost €1.1 billion on derivaitves contracts with the banks. One of whom is Bank of America. I am betting this is part of why the cost of insuring Italian sovereign debt jumped up today. These losses will end up falling on the Treasury.
Of more interest to me,however, is what this portends for Portugal. Portugal too has municipalities who have, over the last years and with help from their banking friends such as Goldman, been trying to be smarter than their national treasury. And we all know how that is going to end. So Portugal too may well have to reveal some hidden losses from its municiplaities. More credit downgrades a-comin’.
(cheating, my comment copied)
Yes, Mr. Golem, the way you describe the end game as it should play out, placing the loss with those to whom it truly belongs, is the way to go. Please develop this in more detail.
I fear we have some fighting to do to see it happen, not least ideologically. The financial class employs a lot of megaphones. "It's the problem wiht living in a parallel reality from the mian media and their experts. Somtimes I think it would be more appropriate if this blog came in on crakly wavering short wave not in digital clarity" (excellent prose, you remember "You are only coming through in waves…."
People must be painted the true picture. We must wake up the comfortably numb. If the people loose, the financial class get to keep their stack while the people looses all their pensions and savings. We say; before any final loss on public purse is taken, bond holders and financial institutions shall be stripped to the bone!
What I mean to is say that your response to comment from frog2 on "I love the smell of Hypocrisy in the Morning" is too important to get lost as comment on comment. Post it as real branded GolemXIV posting for more exposure to a solution tthat needs broad discussion and argument. This is maybe too much of a pet angle, but I tend to say: "Yes, you're right. What do we do?"
Ok Mr Eirik,
I'll expand it and post it tomorrow.
Golem,
Expand and post, and also stick it up somewhere like Guardian Comment, where the wide-page format is easier to read , and can then be shown around to a wider audience ?
XXXX