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ANALYSIS
March 2, 2009
Sagging Index no longer reflects what’s going on in the market, some say, Replacements? Google it, to start.
March 2, 2009
Downward price spiral will actually boost the cost of capital for most companies. CFOS, take note.
March 2, 2009
The latest bailout at AIG could be a preview of how the president will deal with Wall Street.
March 2, 2009
No corporate defaults. Big debt offerings. Percolating CP issuance. Things may be looking up in the capital markets.
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December 13, 2007 2:32 PM ET
Growth in the U.S. and Europe will slow next year—and the coming weeks will be key to determining whether a U.S. recession can be avoided, according to Barclays Capital’s 2008 outlook, released today. “Recession risk is real,” said Larry Kantor, managing director and co-head of research at Barclay’s, “and if it does happen, it will be in the next three to five months.” The growth of the U.S. economy in the last two quarters has actually been the strongest seen in four years, but that merely delays the inevitable slwoing, Mr. Kantor said. “We were expecting a slowdown this year,” he explained. “It didn’t happen. Now we push the slowdown into next year.” One reason Barclays’ economic team believes the economy could avoid a recession: The Federal Reserve has cut interest rates by 100 basis points so far this year. “It’s a significant response to a potential slowdown,” said Dean Maki, managing director and chief U.S. economist at Barclays. “In our view, the Fed has signaled it will do what it takes.” As for the rest of the world, Barclays’ economy-watchers reckon that growth in Europe will slow as well, especially in countries whose economies are driven by credit, such as the United Kingdom, Spain and Ireland. But global growth should remain good, they said, thanks mostly to emerging markets whose economies have been driven largely by high commodity prices. Recent credit market problems have been related to liquidity rather than to deteriorating underlying credit fundamentals, except in real estate credit, said Mark Howard, managing director and co-head of research at Barclays. That could soon change. “There are going to be weakening trends in credit,” he said, warning of a rising default rate, which has been low by historical standards. “We don’t see it spiking, though.” In the securitized market, such as the asset-backed securities market, stress in real estate-related securities is expected to continue. Mr. Howard thinks other types of ABS, such as auto loans, credit cards and student loans, will also experience weakness in 2008, “but not a dramatic erosion.” The stalled market for structured debt such as collateralized debt obligations and collateralized loan obligations, should continue seeing little activity in 2008, Mr. Howard added, but the new-issuance market for solid companies willing to borrow should remain strong. “Companies can raise capital,” Mr. Howard said. “There is no credit crunch for good companies.” But there is, he noted, a liquidity crunch for some companies, which have to pay higher risk premiums as a result.
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