Thoughts From the Frontline, June 2007

$250 Billion in Subprime Losses?

June 29, 2007

Is the subprime mortgage market collapsing before our eyes, or did we avoid a disaster as Bear Stearns stepped up to the plate with $3.2 billion to help its ailing funds? As we will see from the data, the problems in the subprime world are not over. The Fat Lady has not sung. But will the problems in this market contaminate the rest of the liquidity-driven markets? Is the party over? Not according to the high-yield markets. In this week's letter, we look at what could be the real problem...

Blame It On Stability

June 22, 2007

This week we look at length at an outstanding new book just hitting the bookstores by good friend Paul McCulley (of Pimco fame), called Your Financial Edge . The main themes will give me an opportunity to weave in a few thoughts about some recent data, and a lengthy telephone interview with Paul, done just before writing this week's letter, will bring us up to date on his current thinking. I think readers will take away a few good ideas, so let's jump right in.

Paul McCulley is...

Be Careful What You Wish For

June 15, 2007

Be careful for what you wish, because you may get it, and sometimes as H. L. Mencken wrote, you get it good and hard. The collective brain deficit trust, otherwise known as the US Congress, wish for the Chinese to revalue their currency upwards. Today we look at why they may indeed get their wish and why it is not going to produce their desired results. We look at a possible connection between China and the recent and odd volatility in interest rates, connect the dots on inflation and...

A Little Discretionary Spending, Please

June 1, 2007

Are we on a slippery slope of a recession, or was last quarter's weak GDP a turning point? This week's travel shortened e-letter looks at recent data and re-visits some thoughts on consumer spending from friend Joe Ellis' superb book called Ahead of the Curve. This week I wrote from a rainy Edinburgh, Scotland, although this afternoon was pleasant enough, allowing me to walk around some. But on to important matters.

Yesterday we learned that GDP for the first quarter was revised down...