Wednesday, December 12, 2007

Economics news of note - 12 Dec 2007

One of the big questions about the subprime mess (and going all the way back to Enron) is, 'Where are the bond rating agencies?'

Well, here they come. S&P has downgraded hundreds of SIV's [Structured Investment Vehicles]. SIV's are bundled debt packages that frees up capital for other uses. Or at least, that's the idea. SIV's were used by Enron as part of their scheme to keep a bunch of debt off the books. It's also one of the things that makes the subprime mess so dangerous. The subprime loans were packaged up, shipped off and nobody know who holds them now.

As company priorities Shift, fewer get AAA debt rating. As companies take on more risk and put emphasis on meeting quarterly goals instead of long term survivability, only a handful of companies still have AAA bond rating by all the credit agencies. As of this article's publishing, here's the list:
Automatic Data Processing, Berkshire Hathaway, ExxonMobil, General Electric, Johnson & Johnson, Pfizer, Toyota, UPS, Northwestern Mutual Financial Network

Income servicing debt [Chart]. Here's a chart that you can scare people with. Remember, consumer spending by those in this chart is a scarily large part of the global economy.

Alexander Hamilton's America. Skip past the first third or so of the article to get to the good stuff.

Now and Forever. Paying for Iraq. Youngsters who were just starting high school when the U.S. invaded Iraq are in college now. Their children, yet unborn, will be called on to fork over tax money to continue paying for the war. More from Vanity Fair.

Morgan Stanley Issues Report Entitled, "Recession Coming." Blunt and to the point.

No one biting in buyer's market. "In a buyer's market, YOU should be BUYING!!!"

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