[Marxism] The mother of all carry trades

S. Artesian 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 
years.
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 
that too.






----- 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
Financial Times
November 1 2009






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