Comments on: Thirteen Aspects to our Current Economic Situation http://alephblog.com/2009/05/27/thirteen-aspects-to-our-current-economic-situation/ Helping Institutions and Ordinary People Invest Better by Focusing on Risk Control Mon, 13 Feb 2012 14:34:49 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: pwmhttp://alephblog.com/2009/05/27/thirteen-aspects-to-our-current-economic-situation/comment-page-1/#comment-21855 pwm Wed, 27 May 2009 19:51:36 +0000 http://alephblog.com/?p=1749#comment-21855 The family office I work for is located in California, and we have a large part of our portfolio in munis, spread across multiple managers. Maybe they are talking their book, but every muni manager we speak to is not concerned about the inability to enforce the contractual agreement. Their view is that the states are absolutely dependent on the credit markets, so they would not dare default willingly. Historically, a muni "default" typically means a handful of payments are missed. Loss given default is very low. Barring a constitutional crisis, the payments on California state debt comes before all other expenditures save education. The family office I work for is located in California, and we have a large part of our portfolio in munis, spread across multiple managers. Maybe they are talking their book, but every muni manager we speak to is not concerned about the inability to enforce the contractual agreement. Their view is that the states are absolutely dependent on the credit markets, so they would not dare default willingly. Historically, a muni “default” typically means a handful of payments are missed. Loss given default is very low. Barring a constitutional crisis, the payments on California state debt comes before all other expenditures save education.

]]> By: qhttp://alephblog.com/2009/05/27/thirteen-aspects-to-our-current-economic-situation/comment-page-1/#comment-21852 q Wed, 27 May 2009 18:28:37 +0000 http://alephblog.com/?p=1749#comment-21852 i noticed that debt-deflation is nowhere on your list. do you think it's never been a real issue, is not one any more -- what is your pov about that? i noticed that debt-deflation is nowhere on your list. do you think it’s never been a real issue, is not one any more — what is your pov about that?

]]> By: livingstonhttp://alephblog.com/2009/05/27/thirteen-aspects-to-our-current-economic-situation/comment-page-1/#comment-21851 livingston Wed, 27 May 2009 14:17:06 +0000 http://alephblog.com/?p=1749#comment-21851 On Point number 3: "Given the fall in global trade, export-driven nations are getting hit hard. Maybe that can help explain why Treasuries are selling off on the long end — aside from excess supply due to the humongous deficit, there is less need to recycle excess dollars by buying Treasuries" It depends -- if exporters are getting hit hard means importers are not importing and consuming as much..thus increasing the savings rate..if that gets plowed into TSYs, it should not have any impact of TSY rates -- as was the case before March low However, if those newly created domestic savings get deployed in risky assets, as is the case now, TSYs have a problem... On Point number 3:

“Given the fall in global trade, export-driven nations are getting hit hard. Maybe that can help explain why Treasuries are selling off on the long end — aside from excess supply due to the humongous deficit, there is less need to recycle excess dollars by buying Treasuries”

It depends — if exporters are getting hit hard means importers are not importing and consuming as much..thus increasing the savings rate..if that gets plowed into TSYs, it should not have any impact of TSY rates — as was the case before March low

However, if those newly created domestic savings get deployed in risky assets, as is the case now, TSYs have a problem…

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