Dida
YHWH
- Joined
- Sep 11, 2003
- Messages
- 3,434
If you look at financial data leading up to and following the credit crunch, you will see something very odd. For a while prior to market crash, risk premium overall for debt, especially for junk bonds drooped precipitately despite rising treasury rate, by June of 2007, an investor will only earn 2% more on junk bonds as compared to US treasury notes. And then in the last two quarters of 2007, market risk premium registered a 3-4 fold increase to a level no seen since the early 1990's.
It is as if a light bulb went on in everyone's head simultaneously, that made everyone realized instantly that these junk bonds and securities backed by garbage assets are actually a lot riskier than they thought. But these lending behavior had been going on for a while, and private equity firms, etc had been doing LBO using junk debts for decades, why did the music stop in June 2007?
How likely it is that a global financial crisis can be started by a borrower with bad credit somewhere in California defaulting on his home loan? It is as if we have been underwriting ridiculously risky loans at silly low rates for 2 decades, and then, all of a sudden in summer 2007 everyone collectively realized all at the same time that this type of leverage just won't work. I meant in the past decade who put up the money at such low rate, investing in such highly risky investments? You see this pattern repeated in many sectors of our economy. Look at a go-private by KKR or Blackstone, you will see that the private equity firm itself put up about 2% of the money, with the rest, often $10 billion or larger raised using junk bond (again at rate barely above risk free rate). Where did the money come from? (Obviously people who supplied the fund weren't trying to make a profit, otherwise they would have charged a higher interest, given how risky these deals were).
Put differently, it is as if someone was surreptitious dumping liquidity into the market, fueling a credit boom and encouraging crazy borrowing behavior, and then withdrew the money suddenly, once our economy is sufficiently leveraged, creating a credit crisis. We know of only one entity capable of this, and you know it: the Communist and evil government of China. They are on a quest to destroy us and subject the whole world to their barbaric rule.
The Communists are resourceful and cunning, and expert at covering their own trail, but they cannot hide the devious deeds from a patriotic American paying close attention to their every move. Look at how China tactically bought into Blackstone group and withdrew their bid for Bear Sterns just prior to its collapse (as if they knew this is coming). This should be a wake up call to all Americans: China was behind it all, the current financial crisis was plotted against us by the Chinese decades ago.
It is as if a light bulb went on in everyone's head simultaneously, that made everyone realized instantly that these junk bonds and securities backed by garbage assets are actually a lot riskier than they thought. But these lending behavior had been going on for a while, and private equity firms, etc had been doing LBO using junk debts for decades, why did the music stop in June 2007?
How likely it is that a global financial crisis can be started by a borrower with bad credit somewhere in California defaulting on his home loan? It is as if we have been underwriting ridiculously risky loans at silly low rates for 2 decades, and then, all of a sudden in summer 2007 everyone collectively realized all at the same time that this type of leverage just won't work. I meant in the past decade who put up the money at such low rate, investing in such highly risky investments? You see this pattern repeated in many sectors of our economy. Look at a go-private by KKR or Blackstone, you will see that the private equity firm itself put up about 2% of the money, with the rest, often $10 billion or larger raised using junk bond (again at rate barely above risk free rate). Where did the money come from? (Obviously people who supplied the fund weren't trying to make a profit, otherwise they would have charged a higher interest, given how risky these deals were).
Put differently, it is as if someone was surreptitious dumping liquidity into the market, fueling a credit boom and encouraging crazy borrowing behavior, and then withdrew the money suddenly, once our economy is sufficiently leveraged, creating a credit crisis. We know of only one entity capable of this, and you know it: the Communist and evil government of China. They are on a quest to destroy us and subject the whole world to their barbaric rule.
The Communists are resourceful and cunning, and expert at covering their own trail, but they cannot hide the devious deeds from a patriotic American paying close attention to their every move. Look at how China tactically bought into Blackstone group and withdrew their bid for Bear Sterns just prior to its collapse (as if they knew this is coming). This should be a wake up call to all Americans: China was behind it all, the current financial crisis was plotted against us by the Chinese decades ago.
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