BloggingStocks

Ray of Light: Risk Appetite Has Increased

Joseph Lazzaro — Thu, 29 Jul 2010 14:00:00 EST

Experienced investors know that even the most-sobering economic reports can contain 'gems' or small-but-significant, positive data points.

The U.S. Federal Reserve's latest Beige Book report on the economy is a classic example. The Fed confirmed that the U.S. economic recovery had slowed in the second quarter, with regions reporting uneven levels of growth.

The gem? The recovery, although in low gear, nevertheless remains fast enough for commercial borrowers to service their debt, and this is helping to stabilize the commercial debt market.

Continue reading Ray of Light: Risk Appetite Has Increased

Ray of Light: Risk Appetite Has Increased originally appeared on BloggingStocks on Thu, 29 Jul 2010 14:00:00 EST. Please see our terms for use of feeds.

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Pakistan: Best bond investment this year

Tom Johansmeyer — Thu, 18 Jun 2009 11:20:00 EST

Filed under: International Markets, Next Big Thing, Politics

Looking for a new emerging market? Try Pakistan! Despite a continued sense of tension with India and open hostility along the Afghan border, the country's bond market is the best in the world, according to data from JPMorgan Chase & Co. (NYSE: JPM). Debt sold by Pakistan has surged 88% this year -- topping the 45 emerging markets that JPMorgan watches and the 19 that Merrill Lynch & Co. (NYSE: BAC) follows.

And, the stock market may be next.

Money managers, according to a report by Bloomberg, believe that the Pakistani equity market could become the next global superstar. The Karachi Stock Exchange 100 Index is only trading at 9.6X earnings, making it the lowest in Asia (excluding Japan) . . . and this follows a 21% increase year-to-date.

Continue reading Pakistan: Best bond investment this year

Pakistan: Best bond investment this year originally appeared on BloggingStocks on Thu, 18 Jun 2009 11:20:00 EST. Please see our terms for use of feeds.

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NYT's David Brooks: It's the start of a different kind of economic 'cycle'

Joseph Lazzaro — Wed, 05 Nov 2008 17:45:00 EST

Filed under: Economic Data, Politics, Recession, Financial Crisis

New York Times (NYSE: NYT) Columnist David Brooks draws attention to a U.S. economic discussion and reality that's been all-but-sidelined in the past three decades, particularly among younger investors and others who believe that history began in 1981. Namely, that there's been a distinct cyclicality to the nation's economic / public policy history.

Is a new progressive era ahead?

That may come as a surprise to market absolutists and others who see economic history and their view of economic progress as a straight line towards privatization. In fact, periods of economic conservatism and liberalism -- the latter also known as progressive reform -- have cycled for much of the nation's history.

For Brooks, those economic blinders help explain both the market absolutists' befuddlement at the financial crisis around them and their inability to adapt to the electoral demands brought on by the crisis. Market absolutists are in a straightjacket of a party that is ailing and part of a conservatism that is behind the times, he says.

On the cycle's timing, economist David H. Wang argues that the old era ends and the new era begins not when social pressures build from the bottom-up, but when institutions -- like investment banks, mortgage lenders and credit default swap issuers -- fail from the top-down.

Continue reading NYT's David Brooks: It's the start of a different kind of economic 'cycle'

NYT's David Brooks: It's the start of a different kind of economic 'cycle' originally appeared on BloggingStocks on Wed, 05 Nov 2008 17:45:00 EST. Please see our terms for use of feeds.

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Short-term interest rates drop on U.S. bank rescue plan

Joseph Lazzaro — Tue, 14 Oct 2008 11:09:00 EST

Filed under: Forecasts, Federal Reserve, Recession, Financial Crisis

The thaw in credit markets continues.

Interest rates for one-week loans in dollars fell considerably early Tuesday, after the United States Government announced it would invest $250 billion in banks, in a recapitalization plan that mirrors those announced by Europe's major powers on Monday.

The London one-week rate for dollar loans decreased 50 basis points to 4.08%, Bloomberg News reported Tuesday. Meanwhile, the LIBOR-OIS spread, a gauge of cash demand, fell 14 basis points to 340 basis points. The TED spread, the difference between what banks and the U.S. Treasury pay to borrow money for three months, fell 12 basis points to 445.

Short-term rates, including overnight rates, are key sources of cash for corporations and other large institutions, which use the cash to pay suppliers, make payroll, roll over debt etc. Hence, very high overnight and short-term rates will discourage corporations from conducting business, restricting commerce and slowing the economy, economists say.

Action seen further reducing banks' anxiety

Economist Peter Dawson told BloggingStocks Tuesday the actions taken this weekend and over the past two days by industrialized nations and their respective central banks will continue to loosen credit markets and decrease anxiety that's tightened the flow of money, globally.

Continue reading Short-term interest rates drop on U.S. bank rescue plan

Short-term interest rates drop on U.S. bank rescue plan originally appeared on BloggingStocks on Tue, 14 Oct 2008 11:09:00 EST. Please see our terms for use of feeds.

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Massachusetts postpones $750 million short-term debt sale due to credit crunch

Joseph Lazzaro — Tue, 07 Oct 2008 14:45:00 EST

Filed under: Federal Reserve, Recession, Financial Crisis

To see the impact of credit market strain in the United States one need not travel farther west than The Bay State.

On Tuesday, Massachusetts, which would rank in the top 100 countries in the world in terms of GDP if ranked as a nation, postponed the sale of $750 million in short-term notes for the second time in two weeks, due to a lack of demand.

However, it should be pointed out that Massachusetts's decision occurred before the U.S. Federal Reserve's decision, announced Tuesday at 9 a.m. EDT, to buy all corporate commercial paper to ease tight credit markets.

Further, although the municipal market differs from the corporate commercial paper market, the Fed's action aimed at easing conditions in the credit market overall, via both guaranteeing debt payment and by moral suasion. Many economists see this as the Fed's attempt to change market psychology via the central bank's enormous financial resources, monetary policy stance, and regulatory powers.

Still, economists caution that the Fed's commercial paper guarantee does not end counterparty risk; it simply eliminates a segment of that counterparty risk. According to economist David H. Wang, more actions by the Fed and U.S. Treasury undoubtedly will be needed to get credit flowing more freely and also reduce perhaps the biggest systemic problem: fear. Commercial paper is about a $1.5 trillion market, while states and local governments borrow about $2.8 trillion, Wang said.

Continue reading Massachusetts postpones $750 million short-term debt sale due to credit crunch

Massachusetts postpones $750 million short-term debt sale due to credit crunch originally appeared on BloggingStocks on Tue, 07 Oct 2008 14:45:00 EST. Please see our terms for use of feeds.

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Oil leaps above $100 as traders sense re-inflation cycle

Joseph Lazzaro — Fri, 19 Sep 2008 11:25:00 EST

Filed under: Commodities, Oil, Housing, Federal Reserve

Oil surged back over $100 Friday after traders sensed the U.S. Treasury / U.S. Federal Reserve's plan to stabilize the financial markets by buying-up distressed / bad mortgage debt could very well boost inflation, increasing the attractiveness of oil as an inflation hedge.

Oil rocketed up $4.91 to $102.79 per barrel Friday morning. The other major energy commodities also jumped Friday. Unleaded gasoline rose 9 cents to $2.57 per gallon, heating oil climbed about 10 cents to $2.88 per gallon, and natural gas gained 11 cents to $7.72 per million BTUs.

Energy Trader Jim Dietz told BloggingStocks Friday slowing global economic growth that's likely to slow the increase in global oil demand is the oil market's long-term concern, but short-term the focus is on inflation.

"I haven't seen the details of the [U.S.] Government's plan yet but there's three ways we can pay for it. We can increase government spending, print money, or sell government bonds," Dietz said. "The first two can increase inflation quickly, the last one, not as quick, but either way, there will be some increase in inflation, which is why traders are buying oil. Inflation now will jockey with global growth concerns to determine the direction of oil's price."

Continue reading Oil leaps above $100 as traders sense re-inflation cycle

Oil leaps above $100 as traders sense re-inflation cycle originally appeared on BloggingStocks on Fri, 19 Sep 2008 11:25:00 EST. Please see our terms for use of feeds.

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As Dow rebounds somewhat off lows, caution is advised

Joseph Lazzaro — Mon, 15 Sep 2008 11:41:00 EST

Filed under: International Markets, Other Issues, Market Matters, DJIA, Housing, Recession

As of midday Monday, the Dow had rebounded off early-session lows, but if investors / readers are thinking about entering this market now, caution is advised, for several reasons.

First, those familiar with technical analysis know that the Dow's rebound to a loss of 180 points to a level of about 11,233, up from a loss of more than 300 points, could be just short-covering.

Second, major unknowns exist regarding the financial system. And I mean major.

The fate of American Interational Group (NYSE: AIG) remains an enormous question mark. The largest insurer of assets, AIG may face a downgrade that would trigger a collateral call from debt investors who bought credit default swaps, a form of insurance for bonds. Further, if hedge and other institutional investors sense those swaps are not in force, they may seek swaps elsewhere and/or sell assets to reduce market risk / raise capital. That could spark a new round of stock selling. AIG's shares fell $5.33 to $6.81 in late Monday morning trading.

Continue reading As Dow rebounds somewhat off lows, caution is advised

As Dow rebounds somewhat off lows, caution is advised originally appeared on BloggingStocks on Mon, 15 Sep 2008 11:41:00 EST. Please see our terms for use of feeds.

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Oil plunges $8 to $136 on fear of deeper U.S. recession

Joseph Lazzaro — Tue, 15 Jul 2008 13:50:00 EST

Filed under: International Markets, Forecasts, Commodities, Oil, Federal Reserve, Recession

Oil plunged more than $8 to about $136 Tuesday at mid-day after Fed Chairman Ben Bernanke's indicated the risks to U.S. growth have increased as a result of credit market losses, Bloomberg News reported Tuesday.

Oil fell $9.26 to $135.92 per barrel before recovery slightly. Oil hit a record of $147.27 per barrel on July 11.

The other major energy commodities, likewise, plummeted on the news. Heating oil plunged almost 15 cents to $3.91 per gallon, unleaded gasoline sank almost 17 cents to $3.39 per gallon, and natural gas plunged 44 cents to $11.51 per million BTUs.

"Oil in free-fall"

Energy trader Jim Dietz said "a mini selling frenzy" hit the oil market after Bernanke indicated the U.S. economy was likely to slow further.

"We did have some support for an oil-long trade earlier as an investment when few other investments are working, but that sentiment was quickly wiped out by Bernanke's comments," Dietz said. "We had oil in free-fall for about an hour. The market put 'two and two together.' We had the Fannie Mae and Freddie Mac bailout news yesterday [Monday] and Bernanke's bearish comments today. That led a lot of people to conclude we're going to see a slowdown in oil demand growth, which means lower prices."

Continue reading Oil plunges $8 to $136 on fear of deeper U.S. recession

Oil plunges $8 to $136 on fear of deeper U.S. recession originally appeared on BloggingStocks on Tue, 15 Jul 2008 13:50:00 EST. Please see our terms for use of feeds.

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In Europe, Fannie, Freddie status spark concern of recession

Joseph Lazzaro — Tue, 08 Jul 2008 11:11:00 EST

Filed under: International Markets, Bad News, Federal Natl Mtge (FNM), Lehman Br Holdings (LEH), Housing

"It's like that wave approaching the shoreline that you see in the distance and don't think is big, and then it's 100 feet in front of you and you realize it is."

That's how London-based economist Mark Chandler described Europe's perspective on the potential 'latest wave' of the housing crisis -- the research report by Lehman Brothers (NYSE: LEH) that Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) may have to raise up to $46 billion and $29 billion in additional capital, Bloomberg News reported.

Europe is concerned that the pair's announcement "signals another round of write-downs here in England and Europe as well as in America" Chandler told BloggingStocks Tuesday, with negative consequences for the stock market, and, equally significant, for business and consumer confidence, he said.

Europe's major stock markets decline

Indeed, Europe's major stock markets did not react favorably Tuesday to the Lehman report. London's FTSE fell 66.70 points to 5446.00, Germany's DAX declined 104.49.35 to 6,291.71, and France's CAC 40 fell 78.22 to 4,263.37 in Tuesday afternoon trading.

Continue reading In Europe, Fannie, Freddie status spark concern of recession

In Europe, Fannie, Freddie status spark concern of recession originally appeared on BloggingStocks on Tue, 08 Jul 2008 11:11:00 EST. Please see our terms for use of feeds.

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U.S. home foreclosures hit another record high in Q4

Joseph Lazzaro — Thu, 06 Mar 2008 13:25:00 EST

Filed under: Bad News, Economic Data, Housing

U.S. home foreclosures reached another record high in Q4 2007, the Mortgage Bankers Association announced.

A record 0.83% of mortgages were entering the foreclosure process in the last three months of 2007, compared to 0.54% for the same period in 2006, the MBA announced.

In addition, the delinquency rate reached 5.82% in Q4 2007 -- the highest level since 1985 -- up from 4.95% in Q4 2006.

Continue reading U.S. home foreclosures hit another record high in Q4

U.S. home foreclosures hit another record high in Q4 originally appeared on BloggingStocks on Thu, 06 Mar 2008 13:25:00 EST. Please see our terms for use of feeds.

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S&P looks to fix credit rating problems -- too little, too late?

Zac Bissonnette — Fri, 08 Feb 2008 09:50:00 EST

Filed under: Other Issues, Scandals, McGraw-Hill Companies (MHP), Recession

Standard & Poors, a division of McGraw-Hill (NYSE: MHP), has joined Moody's (NYSE: MCO) and Fitch in announcing reforms in the wake of the criticism for their role in the subprime fiasco.

S&P says it will hire an ombudsman to investigate conflicts of interest and bring in an outside firm to look at compliance and ethics-related issues. Lead analysts will be rotated from time to time and the company will consider a slew of new factors: liquidity, volatility, correlation and recovery, and "worst-case scenarios."

But New York Attorney General Andrew Cuomo isn't buying it: "The supposed reforms announced today by Standard & Poor's and by Moody's on Tuesday are too little, too late. Both S.&P. and Moody's are attempting to make piecemeal change that seem more like public relations window-dressing than systemic reform."

From an investor's standpoint, I'm inclined to agree with Mr. Cuomo. Moody's carries a market cap of nearly $10 billion, but its entire business depends on the willingness of investors to take its ratings and analysis seriously.

But over the past year or so, the "work" of the ratings agencies has been exposed as pretty much a joke. It will take a lot more than this to recover the company's reputation.

S&P looks to fix credit rating problems -- too little, too late? originally appeared on BloggingStocks on Fri, 08 Feb 2008 09:50:00 EST. Please see our terms for use of feeds.

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Proposed Super SIV continues to evolve

Joseph Lazzaro — Mon, 10 Dec 2007 18:02:00 EST

Filed under: Citigroup Inc. (C), JPMorgan Chase (JPM), Bank of America (BAC), Housing

The proposed Super SIV may end up being considerably smaller than the original outline, as banks and other SIV-owning institutions either write-down or find other ways to dispose of problematic SIV assets, The New York Times reported Monday.

Conceptualized following a request from the U.S. Treasury, the Super SIV is designed to facilitate the orderly sale of high-risk packaged mortgage loans and assets held by SIVs, but not to rescue those SIVs.

As presently configured, beginning in January/February 2008 the Super SIV will lead a coordinated, gradual purchase-and-resale of these assets, which, officials say, will avoid a "mad rush to the door" of SIV asset sales. The latter would further depress prices, and create another round of credit market turmoil, with negative consequences for the U.S. economy. The Super SIV will raise money from financial institutions to fund itself.

Continue reading Proposed Super SIV continues to evolve

Proposed Super SIV continues to evolve originally appeared on BloggingStocks on Mon, 10 Dec 2007 18:02:00 EST. Please see our terms for use of feeds.

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U.S. November job gains seen easing pressure on Fed

Joseph Lazzaro — Fri, 07 Dec 2007 12:55:00 EST

Filed under: Other Issues, Employees, Economic Data, Housing, Federal Reserve

November's 94,000 added jobs statistic is likely to tip the scales in favor of a quarter-point cut in short-term interest rates instead of a half-point cut, economists and analysts say.

"The November job creation number, while not outstanding, is more than enough to quell the half-point hawks," economist Steve Affinito told BloggingStocks Friday. "The Fed will cut interest rates by one-quarter point next week."

Affinito said the November 2007 jobs report was "the sole bright spot" after a string of negative economic data recently reported for the U.S. economy. That data points to a slow-growing U.S. economy (or possibly worse) through Q1 2008, many economists agree.

"If we can register 2% GDP growth in the first quarter of next year, that would be acceptable at this point, and I would take it," Affinito said, adding that Q1 could conceivably show a contraction. For Q4 2007 Affinito estimates that the economy will have slowed to 2.3-2.6% growth.

Continue reading U.S. November job gains seen easing pressure on Fed

U.S. November job gains seen easing pressure on Fed originally appeared on BloggingStocks on Fri, 07 Dec 2007 12:55:00 EST. Please see our terms for use of feeds.

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Fed's Yellen joins economy-too-slow chorus

Joseph Lazzaro — Tue, 04 Dec 2007 11:23:00 EST

Filed under: Housing, Federal Reserve

San Francisco Federal Reserve Bank President Janet Yellen is on the wires again, becoming the latest Fed governor to note that the U.S.'s economic slowdown is bigger than she expected, Bloomberg News reported Tuesday.

Last week Fed Chairman Ben Bernanke and Vice Chairman Donald Kohn also noted that credit market woes fed by subprime mortgage and related asset defaults tipped the scales toward 'the downside risks to growth.'

Yellen said recent data on retail sales and consumer spending were not that encouraging, Bloomberg News reported.

Continue reading Fed's Yellen joins economy-too-slow chorus

Fed's Yellen joins economy-too-slow chorus originally appeared on BloggingStocks on Tue, 04 Dec 2007 11:23:00 EST. Please see our terms for use of feeds.

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Early holiday present: Subprime package seen likely

Joseph Lazzaro — Fri, 30 Nov 2007 14:22:00 EST

Filed under: Good news, Citigroup Inc. (C), Washington Mutual (WM), Wells Fargo (WFC), Housing, Federal Reserve

U.S. Treasury Secretary Henry Paulson is negotiating an agreement with banks and other lenders to limit the surge in foreclosures by fixing interest rates on loans to subprime borrowers, people familiar with the Thursday meeting said, Bloomberg News reported.

"We've all agreed that there should be some sort of standardized approach to reaching more homeowners faster," U.S. Treasury Department spokeswoman Jennifer Zuccarelli told The Associated Press.

Subprime mortgages worth about $362 billion are expected to reset to higher interest rates in 2008, according to BusinessWeek magazine.

Market chatter Friday speculated on the plan's form, with no consensus readily emerging so far. Some Wall Street analysts expect Paulson's plan to focus on middle-income loans, excluding higher-income borrowers on the belief that they will able to obtain better terms themselves, and excluding lower-income borrowers who would not be able to afford their mortgage, even after a refinancing. Other analysts suggested that the plan may be more encompassing -- "capping" or limiting interest resets to predetermined rates.

Continue reading Early holiday present: Subprime package seen likely

Early holiday present: Subprime package seen likely originally appeared on BloggingStocks on Fri, 30 Nov 2007 14:22:00 EST. Please see our terms for use of feeds.

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Super-size questions remain for Super SIV

Joseph Lazzaro — Mon, 26 Nov 2007 16:45:00 EST

Filed under: Other Issues, Citigroup Inc. (C), JPMorgan Chase (JPM), Bank of New York (BK), Housing, Federal Reserve

It looks like the Super SIV roadshow is about ready to start, with the Bank of America apparently taking the lead.

Left unanswered -- at least for the immediate future -- are compelling questions related to the fund's transparency, effectiveness, and cost.

The Bank of America (NYSE: BAC) announced Monday that it will lead efforts by Citigroup (NYSE: C) and JPMorgan Chase (NYSE: JPM) to convince smaller competitors to help finance an $80 billion bailout of the short-term debt market, Bloomberg News reported Monday, citing two sources with knowledge of the matter.

Continue reading Super-size questions remain for Super SIV

Super-size questions remain for Super SIV originally appeared on BloggingStocks on Mon, 26 Nov 2007 16:45:00 EST. Please see our terms for use of feeds.

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Persian Gulf oil wealth: $44 trillion, and rising

Joseph Lazzaro — Tue, 20 Nov 2007 17:20:00 EST

Filed under: International Markets, Other Issues, Deals, Middle East, Commodities, Oil

Most investors and readers are aware of the subprime mortgage-driven credit market slump. Lending to potential customers has declined substantially, from typical homebuyers to large corporations.

To be sure, the credit markets are not frozen, as they appeared to be during the August 2007 credit crunch and accompanying equity market sell-off, but lending requirements are much more rigorous today, following large subprime investment losses.

Speculative deals -- be it a large debt offering backed by mortgages, or a mortgage for a condominium project -- are not being approved. Two years or so ago, flush with cash and eager to take advantage of the yield spread, these type of deals undoubtedly would have received multiple funding offers from banks, mortgage companies, and other investment firms.

Continue reading Persian Gulf oil wealth: $44 trillion, and rising

Persian Gulf oil wealth: $44 trillion, and rising originally appeared on BloggingStocks on Tue, 20 Nov 2007 17:20:00 EST. Please see our terms for use of feeds.

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Stocks slide on worse-than-expected retail sales

Jonathan Berr — Fri, 14 Sep 2007 09:45:00 EST

Filed under: Wal-Mart (WMT), Harley-Davidson (HOG), Economic Data, S and P 500, DJIA, Federal Reserve

In yet another sign of the growing pressure on consumers, retail sales rose 0.3% in August, less than the 0.5% economists have expected. Excluding autos, sales fell 0.4%. This data will likely pressure stocks and underscore the call from Wall Street for the Federal Reserve to cut interest rates at the September 18 meeting of the Federal Open Market Committee. (Update: Consumer confidence remained low in September, further bolstering the case for a rate cut).

There are plenty of economic signs for investors to ponder. The Wall Street Journal is reporting that the amount of borrowing by banks under the Fed's primary credit program surged to $7 billion, the highest level since just after 9-11. Prices for imported goods unexpectedly fell in August because of declines in oil and natural gas prices, providing a temporary check on inflation, according to Bloomberg News.

Continue reading Stocks slide on worse-than-expected retail sales

Stocks slide on worse-than-expected retail sales originally appeared on BloggingStocks on Fri, 14 Sep 2007 09:45:00 EST. Please see our terms for use of feeds.

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Merrill Lynch (MER) issues a string of bank downgrades

Michael Fowlkes — Thu, 23 Aug 2007 12:33:00 EST

Filed under: Major Movement, Analyst Upgrades and Downgrades, Forecasts, Bad News, Competitive Strategy, Merrill Lynch (MER), Economic Data, Housing

There are several financial stocks that are taking a beating today after a rash of downgrades by Merrill Lynch (NYSE: MER) this morning.

It has definitely been a couple of tough months for the financials as investors worried about what impact the declining housing market would have on their bottom lines. In the past week or so things have seemed to at least level off,, but according to Merrill Lynch there may still be some troubles ahead for a handful of Mid-Cap banks out there.

The banks that Merrill discussed today are those that the company views as being vulnerable to margin deterioration in the face of lowered earnings expectations and the possibility of future rate cuts by the Federal Reserve. Banks that Merrill views as possessing "asset sensitive" balance sheets (meaning their assets reprice quicker than their liabilities) were on the top of the list of downgrades.

Here are a couple of the banks to Merrill lowered today:

City National Corp (NYSE: CYN) - downgraded to a sell from a neutral; stock is down 1.5%
Cullen/Frost Bankers Inc. (NYSE: CFR) - downgraded to a sell from a neutral; stock is down 3.3%
First Midwest Bancorp (NASDAQ: FMBI) - downgraded to a sell from a neutral; stock is down 3.1%
Texas Capital Bancshares (NASDAQ: TCBI) - downgraded to a sell from a neutral; stock is down 6.7%

Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor's Observer.

Merrill Lynch (MER) issues a string of bank downgrades originally appeared on BloggingStocks on Thu, 23 Aug 2007 12:33:00 EST. Please see our terms for use of feeds.

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The credit market hasn't turned?

Kevin Kelly — Fri, 17 Aug 2007 13:00:00 EST

Filed under: Good news, Private Equity, Economic Data

According to TheDeal.com, Private Equity Intelligence is arguing that "the conditions for the long-term growth of the buyout industry are still very much in place." PEI is justifying this point of view, it seems, with the amount of capital still being raised by large private equity firms, despite the recent string of unfavorable news for borrowers and potential borrowers.

PEI goes on to argue that private equity funds are going to continue taking in huge sums of money as institutions raise their "target allocations" towards private equity funds -- a seemingly rational assumption.

But there are several problems with this thesis. Most importantly, I'd bet that the target allocations for private equity funds are going to decrease if the funds' returns suffer due to a more difficult borrowing environment. I'd also argue that recent fundraising success by private equity funds doesn't represent the health of the credit market -- I'd bet that many investors are simply chasing incredible past performance at these funds without recognizing that it was much cheaper to finance these transactions just one quarter ago.

While there's plenty of talent in the private equity space, I tend to believe that the difficult credit situation is going to hurt private equity performance over the next few years.

The credit market hasn't turned? originally appeared on BloggingStocks on Fri, 17 Aug 2007 13:00:00 EST. Please see our terms for use of feeds.

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