So could defaults be worse in 2008 vs. Remember that the 2001 recession was about over-investment in technology and telecommunications. There have been some very large defaults which were due to unique circumstances also, namely Enron, Worldcom, and various airlines. When there is a tough economy in 2008, it will be about over-investment in housing.
Very few high-yield issuers get excited about the housing market. Virtually all banks, brokerage firms, mortgage insurers, etc. are investment grade. Of course, its likely high-yield spreads move even wider. According to Lehman Brothers, the high-yield index spread got as wide as 1036bps in 2002 vs. 672bps today. Perhaps spreads will widen further, but don’t get caught fighting yesterday’s war. In 2001-2002, the corporate bond market suffered from some accounting scandals, which led to investors questioning the veracity of financial statements generally.
That fear hit the high-yield market straight. Today the fear is related to mortgage lending, a business dominated by investment-grade companies. For example, the 1990-1991 period was unique also, for the reason that the demise was seen because of it of Drexel Burnham Lambert. Drexel and its star banker Michael Milken created the present day high-yield market, and for quite some time was the principal market maker. Drexel’s fall from grace put the future of high-yield in serious question.
- Stay confident, though
- 2009 +38.2% +26.5%
- 14 models in San Marcos – great area off 35 – $497,000
- Acceleration of Economic Growth
- Points on refinancing a mortgage
- Brazil is the fifth largest country in the world by both human population and area
- Was Kevin Durant becoming a member of the Nets more a matter of him ditching the Warriors
If we do have a downturn in 2008, high-yield default rates will surely increase. But at today’s valuation levels, high-yield has a downturn costed in already. Given that there is certainly good reason to trust credit losses will be no worse, or better still than the last two recessions perhaps, high-yield looks fundamentally attractive.
In the long run potential growth in the economy and a rise in real GDP per capita may occur from all except? How do you determine real GDP if you only knew the GDP? Real GDP is calculated as prices in the “bottom 12 months” times amounts in today’s year.
You need to know about base year. What would happen if the GDP goes up but inflation drop? If the Gross Domestic Product rises and the inflation drops there will be more jobs and more cleaner environmental companies that will benefit. The DOW, service and food industries, and other commercial companies will rise also.
What country gets the lowest GDP in the world? North Korea has average annual wage of just €32. What purchases would be counted as your final good in the GDP calculation? Those buys would be counted as your final good in GDP computation which are created by final consumers for his or her own use.