[Marxism] The mother of all carry trades
sartesian at earthlink.net
Tue Nov 3 15:00:00 MST 2009
Vintage Roubini-- "One day this bubble will burst...." "This unraveling may
not occur for a while... but the longer... the bigger..." "other
policymakers seem unaware of the monster bubble...."
Sounds a bit biblical doesn't it? As if sooner or later, god is just going
to get tired of all these shenanigans and raindown financial fire and
brimstone on this bubblicious Eden.
All of this "what to read while waiting for the world to end" stuff from
Roubini is a bit tiresome, no?
I mean any and all of us could have said in 2003-- "Sooner or later..." "the
later, the bigger..." "bubble, double-bubble, and bazooka.." but the when
and why then require a bit more specificity.
MORE INTERESTING, however is the article in yesterday's Wall Street Journal
regarding the increasing cash hoards of US corporations:
"Stung by the financial crisis, companies are holding more cash -- and a
greater percentage of assets in cash -- than at any time in the past 40
In the second quarter, the 500 largest nonfinancial U.S. firms, by total
assets, held about $994 billion in cash and short-term investments, or 9.8%
of their assets, according a Wall Street Journal analysis of corporate
filings. That is up from $846 billion, or 7.9% of assets, a year earlier.
The trend appears to have continued in the third quarter, despite an
improving economy. Of those 500 companies, 248 have reported third-quarter
cash holdings of 11.1% of assets"
Now that's what I call interesting-- since 1) in the period from 1989-1999,
the growth rate of cash holdings was much slower than the period 1999-2009.
In fact, for industrial manufacturing, cash holdings as a percent of assets
declined by almost half in the 1989-1999 period as real investment occurred.
2) the current numbers continue the trend of the post-2003 recovery, when
companies amassed cash by strictly controlling costs and refraining from
investment 3) the current growth occurs during a downturn when revenues have
declined significantly. For example, Texas Instruments cash assets reported
grew 42% from Janurary through September 2009 despite a 26% decline in
revenues 4) a portion of the cash hoard is due to corporations taking
advantage of all the liquidity sloshing around in the system to issue $548
billion in corporate bonds, which have been snapped up.
Speaking of liquidity-- despite all the talk about the decline of the
dollar, and the US Treasury being in hock to the Chinese, and dollar
diversification and blah blah blah blah-- in the 3Q of 2009 the US Tsy
issued $392 billion in debt was purchased without any significant
concessions on yield, and the estimate for the 4Q is that 444.5 billion in
new debt will be issued, and I bet China will be first in line to purchase
----- Original Message -----
From: "Marv Gandall" <marvgandall at videotron.ca>
To: "David Schanoes" <sartesian at earthlink.net>
Sent: Tuesday, November 03, 2009 4:33 PM
Subject: [Marxism] The mother of all carry trades
Mother of all carry trades faces an inevitable bust
By Nouriel Roubini
November 1 2009
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