The news today is about interest rates and the economy.
First, in the U.S., there has been a huge move to the upside in Treasury yields. The obvious question is whether we are seeing the Treasury bubble burst. There are numerous reasons why this might be the case: China’s reduced appetite, huge increased U.S. government debt, reflation expectations. All of these are bearish for Treasuries. While I think Treasuries are a bubble waiting to burst and a bad risk/reward, I see yields going yet lower over the short-term for two reasons: the economy will surprise to the downside. The Fed will purchase as many Treasury bonds as needed to keep interest rates low. See the articles below for both sides of this debate.
Meanwhile, in the U.K., the BoE has cut interest rates to an all-time low. That’s a 314-year low in fact. Either, they are being incredibly easy or we have one heck of a economic pickle to deal with.
Then, finally, there have been all manner of job cuts, warnings, spending cuts, and bankruptcies mentioned in the news. Take your pick on companies; you’ve got FedEx, EMC, Lyondell Basel, Lenovo, ON Semiconductor, Goody Family Clothing, Mitsubishi Motors, Barclays, Viyella and on and on. I have already reported on Alcoa, Waterford Wedgwood, and Marks and Sparks. This is a recession that is hitting all sectors of the economy.
Well, that’s the news: all bad. But, I wanted to start things off the links on a more positive note. Call these first two links my escape-from-reality links. Below are two articles on some pretty beautiful (and affordable) houses for sale. I especially love the one in Cozumel, Mexico, a place I plan to visit this April.
When two bears fell out – FT Alphaville
Interest rates hit all-time low – BBC News
U.S. Rates to Stay Low as China Cuts Debt Purchases – Bloomberg.com
The Bank of England: a brief history – Guardian
German Bond Auction Fails to Attract Enough Demand – Bloomberg.com (If the Germans cant sell their bonds, then who can?)
Stimulus and deficits
Guest Post: Obama Plan Is Bold, but Not Bold Enough – Real Time Economics
CBO: Seeing Stars? ($1.2 Trillion Deficit Edition) – naked capitalism
US porn industry seeks multi-billion dollar bailout – Telegraph (This is amazing! Everybody wants a handout. Check out the picture that goes with this story. I thought Flynt was in a wheelchair?)
Feldstein and Stiglitz on the Stimulus Package – Economist’s View (very good video)
Germany Seeks EU 100 Billion for Companies, Handelsblatt Says – Bloomberg.com
Karl Rove’s Factually Challenged Housing Revisionism – The Big Picture
Japan: New auto sales plunge 23.3% in December, 6.5% for 2008 – Japan News and Economy Blog (it’s not just in the U.S. and Europe where sales are falling)
Suicide lines struggling to cope in Japan – Telegraph
In Reversal, Fed Now Won’t Release Key Doc On Asset-Buying Program – Talking Points Memo (Hat tip reader Scott)
Deutsche Bank Sees Rise in Late Business Mortgages, WSJ Says – Bloomberg.com
China Datang Eyes Africa as Domestic Power Use Wanes – Bloomberg.com (smart move if your domestic economy is hurting)
Whitney: TARP funds go down the downgrade drain – FT Alphaville (The writedowns are coming)
Merckle’s empire reaches rescue deal – Sydney Morning Herald (It is quite sad that Merckle couldn’t hold on)