Kommt jetzt das Ende der globalen Geldschwemme?

Mögliche Folgen: Abflauen des Private-Equity-Booms und "Luftablassen" von Blasen aller Art (Hauspreise, Öl, Gold, Aktien, Anleihen, Rohstoffe usw.)

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Columnist Conversation

Michael Comeau
RE: Low Rates
2/12/2007 2:47 PM EST
Thanks for the responses, just wanted to add - maybe we're finally due for that big derivatives blowup at JP Morgan (JPM).


David Merkel
Full Buy-in to the The Low Nominal World
2/12/2007 2:40 PM EST

...as to the Business Week article, I had written about that back in early 2005. Given the nature of the Business Week cover jinx, as Barry pointed out over at his blog, maybe it is time to sell our long bonds. If they have only now figured this out, then the last buyer may have bought into the low rate phenomenon, and maybe it is time for a reversal, if only a temporary one.

Goods price inflation rising in both India and China may be harbingers of a possible shift; another possible driver would be a tighening of monetary conditions in Switzerland, China, or Japan. China is moving that way; the other two are more problematic.

Derivatives can exchange risk between counterparties, but unless there is someone who has the opposite need to take the other side of the trade (a natural counterparty), then risk is not reduced by derivatives, just transferred elsewhere. As I have noted in the recent past, most implied volatilities are low in the market. My suspicion is that many players have written options against their positions to generate income in a low-rate, low-spread world. Fine if there are no surprises, but negative macro surprises usually surface every two years or so. The only question is how big they will be, and who will not have enough financial slack to bear the surprise.

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Hier der Business Week Artikel (Auszug):

FEBRUARY 19, 2007
COVER STORY

It's A Low, Low, Low, Low-Rate World

Money is cheap. And some experts say it could stay that way for years. That's creating opportunity—and brand new risks


Wait a minute—weren't long-term interest rates supposed to be a lot higher by now?

When the rate on the 10-year Treasury bond plunged from 6.5% in early 2000 to an average of 4% or so in 2003, the explanations were easy: tech bust, recession, weak capital spending, low inflation, steep rate cuts by central banks around the world. The low rates seemed perfectly normal—and sure to reverse on a dime when conditions changed.

Since then, plenty has changed. The Fed has hiked short-term rates by more than four percentage points. The global economy grew by 5.1% in 2006, the second-strongest performance in 25 years. Europe and Japan have recovered. Even tech spending seems to be on the rise, judging from Cisco Systems Inc.'s (CSCO ) strong earnings report on Feb. 6. And yetand yet!—10-year Treasury rates have risen only three-quarters of a percentage point. Real rates, which adjust for inflation, have barely budged.

It isn't only a U.S. phenomenon. Ten-year euro bonds are yielding around 4% today, no higher than in 2003, despite much faster growth in the region. Real rates in the euro zone are up only a bit.

Borrowers, of course, are deliriously happy. Even the shakiest companies are seeing their debt costs plunge. The spreads on triple-C rated bonds and lower—the junkiest of junk—are at a record low 4.7 percentage points over ultrasafe Treasuries, compared with the previous record of 5.2 percentage points in 1997, according to Merrill Lynch & Co. (MER)

Most remarkably, the craziness isn't likely to stop anytime soon. The low cost of capital is probably going to last "five to seven years," says Samuel Zell, who as chairman of real estate firm Equity Office Properties Trust (EOP ) watched bidders wield cheap debt in a fight over his company. (Blackstone Group, with a $39 billion bid, won out on Feb. 7.) James W. Paulsen, chief investment strategist at Wells Capital Management (WFC ), sees an even longer horizon: "This could be a prolonged cycle where the cost of capital is low [for] 10 or 20 years."

It is, indeed, a low, low, low-rate world.

Easy money is creating all sorts of economic benefits. Corporations are making capital investments again—and with their borrowing costs so low, profits are still zooming. Private equity firms are using loads of cheap debt to buy companies at jaw-dropping prices. Even the housing market, which boomed for five years on cheap money, hasn't fallen apart. It's gliding to a soft landing rather than a hard crash, allowing consumers to keep spending. "We are in this era where financial innovation and product structuring, particularly in the debt markets, has been very stimulative," says Henry H. McVey, chief U.S. investment strategist at Morgan Stanley (MS ). Zell puts the state of rates in similar terms: "I think that's going to be a growth accelerant around the world."

FUTURE TURBULENCE

But the easy money also brings a slew of unexpected problems. Historically, risky borrowers have had to pay much higher interest rates on their debt. Now there's little penalty—and that means there's less incentive for companies to stay fiscally sound. Low rates aside, other borrowing terms are getting easier, too. Many debt deals being made today have fewer protections for investors in case companies can't pay. "I've never seen issuers have this much power," says Raymond G. Kennedy, a bond fund manager at PIMCO with 26 years' experience under his belt. Kingman D. Penniman, founder of KDP Investment Advisors Inc., a bond research firm, sees a dark side to this: "You're laying the groundwork for future turbulence."

The shift to a low-rate world doesn't mean lower volatility. In fact, excesses, crack-ups, and bad investments are not only possible but guaranteed. "Over the next several years there's likely to be some event that will widen out the spreads," says Zane Brown, director of fixed income at mutual fund manager Lord, Abbett & Co. But when the dust has cleared, he says, the world economy will likely be left with a lower cost of capital than the average over the past 5 to 10 years.

In some ways, it's the 1990s all over again. Back then, the info-tech boom created an unexpected boost in productivity that persists today. Now it looks like something analogous has hit the global financial markets. A combination of globalization, innovation, and good old-fashioned competition among markets has made it easier and cheaper to raise and deploy money. Borrowers now can draw funds from around the globe. And derivatives let financial institutions and traders manage their risks with mind-blowing precision. With Chicago, London, New York, and Frankfurt all jostling to be the world market leader, exchanges and financial institutions have an incentive to be cheaper, faster, more innovative.

At the same time, the low rates reflect major imbalances in the global financial system. The developed countries, led by the U.S., have systems that are good both at raising money and allocating it. Emerging markets such as China have only half of that equation: They can collect the money, but they don't have the financial institutions that can put it to the best use. According to a November, 2006, survey of executives by McKinsey & Co., only 40% of respondents in China and Latin America said their company's access to external funding is good or very good.

Eventually the financial systems in China and India will improve, and a lot more of their capital will be used at home. That won't happen anytime soon, though. In a new book, The Next Great Globalization, Federal Reserve Governor Frederic S. Mishkin writes: "It takes a long time for any nation to achieve strong property rights and an effective financial system."

For now, China and the other emerging markets are serving as key suppliers of capital in increasingly connected markets. "People are more willing to throw their money across borders and across currencies to get the highest yields," says David A. Wyss, chief economist at Standard & Poor's (MHP ). Indeed, in just the past year, the value of outstanding international debt securities—debt raised in foreign countries or foreign currencies—has risen by 20%.

It's a continuation of a long-running trend. Since 1990, cross-border capital flows have been rising at a 10.7% annual rate, adjusted for inflation and exchange rate fluctuations, says a January, 2007, report from the McKinsey Global Institute. That's up from just 4.3% from 1980 to 1990.

An essential part of the globalization story is the adoption of the euro in 1999, which created a huge pool of highly mobile capital from lots of smaller pools. "The euro markets are today much bigger than what they would be if we had not had the euro," says Jerry del Missier, co-president of London-headquartered investment bank Barclays Capital (BCS ).

The second key factor is the development of new trading instruments. Financial innovation isn't new, of course. Mortgage-backed securities date to the 1970s, and junk bonds came to life in the '80s. But innovation seems to have reached a fever pitch with the recent advances in collateralized debt obligations (CDOs), which keep borrowing costs low by dividing risks into big buckets and then reallocating them among hundreds of investors. With nearly half a trillion dollars' worth issued in 2006 alone, and with the risks widely dispersed, investors are willing to put more skin in the game. "Financial innovation in the form of CDOs has changed the risk premium associated with the bond market," says McVey.

MARKET FUEL
Put the two together—bigger markets and innovation—and you have the makings of a global financial revolution. Adding more fuel, exchanges are becoming more entrepreneurial—which, as always, brings down costs. There's bustling competition from online exchanges as well. "When oil prices were very high and airlines needed to hedge the prices of jet fuel with options, they had no idea if investment banks were ripping them off, because there was no transparency in the price," says David Gershon, CEO of SuperDerivatives Inc., an online derivatives and options exchange. Gershon's outfit is among a handful of startups that allow investors to trade sophisticated instruments online. He argues that exchanges like his make markets more transparent and create more liquidity.

These changes have helped reduce the real cost of capital, best measured by the interest rate on low-risk Treasury bonds. Economists don't expect much of a change over the medium term. The Congressional Budget Office projects 10-year rates will average just 5.0% over the next three years, compared with 4.8% today.

Even more important is the decrease in the risk premium on corporate borrowing. Investment-grade bonds, issued by the healthiest companies, might enjoy a quarter-point decline in their spread over the low-risk Treasury rate long term. For junk bonds, says Wyss, "we could get a bigger permanent impact on keeping those spreads lower, maybe 100 basis points"—one full percentage point.

The increased efficiency has been beneficial so far. Companies gain from a lower cost of capital in the form of lower interest payments and higher profits. If rates had not stayed so low, corporate earnings would be about 10% lower than they are today.

Naturally, lower capital costs have made it easier to borrow. Duke Energy Corp. (DUK ), a $16.3 billion electric and gas utility based in Charlotte, N.C., plans to boost capital spending by $1 billion a year over the next three years to build new power plants to keep up with the growing demand. Duke may borrow the money instead of drawing down its cash, says David L. Hauser, chief financial officer, since "interest rates have remained surprisingly low." Robert M. La Forgia, chief financial officer of Hilton Hotels Corp. (HLT ), says low rates were critical to his company's ability to purchase its international hotel operations last February, uniting Hilton brands that had been apart for over 40 years. The company put together a $5.5 billion bank line at just 1.5 percentage points above the rate London bankers charge one another. "It's part of what made this deal possible," he says.

But the downside of the long-term trend is short-term financial market excess. It's here, and it's real. "The economy is robust, [but] we've entered into this new phase where the markets are financing riskier transactions," says Mariarosa Verde, head of the Credit Market Research team at Fitch Ratings Inc. Excess is especially evident in the corporate credit markets, where covenants, which protect investors by requiring companies to maintain healthy financial ratios, are becoming less restrictive. Some companies are jamming investors in other ways. When Pittsburg (Tex.)-based Pilgrim's Pride Corp. raised money to buy another poultry processor in January, it issued bonds that allow it to use projections rather than actual results to meet certain financial tests for borrowing more money. Pilgrim CFO Richard A. Codgill notes that the projections have to be "reasonable." Hospital chain HCA Ltd.'s latest bonds include some with provisions that let the company use debt instead of cash to make interest payments to bondholders. It works essentially like an IOU that increases HCA's debt down the road. Says Kennedy of PIMCO: "The bottom line is that when there's too much money in the market, [investors] lower [their] standards." What's more, many are depending on instruments that are highly leveraged, numbingly complex, and untested by a market downturn.

Then again, derivatives might cushion the blow when the reckoning comes. When hedge fund Amaranth Advisors went under, says Brown of Lord Abbett, part of its losses were covered in the derivatives markets. "It barely caused a ripple." Adds del Missier: "We haven't done away with dislocations in markets, but markets are much more able to deal with dislocations, and their impact will be less."

Over the long term, the big issue is the development of better financial systems in China, India, and other emerging markets. Right now money is pouring into real estate rather than infrastructure, education, and other essential investments. As financial systems improve in these countries, they will likely make better use of their own money. When that happens, the cost of capital around the world will go up.

But that's a long way off. In the meantime, rates are likely to remain low. "Whatever shocks are ahead," says del Missier, "the markets are better positioned to deal with them than they've ever been."


By Michael Mandel and David Henry, with Mara Der Hovanesian in New York, Christopher Palmeri in Los Angeles, and Stanley Reed in London

Ja, ich finde diese Geldschwemme entwickelt sich wie ein Tsunami, sogar die Strassen sind bereits schon überflutet mit dem Zeugs, lol. ;-)))

die in Europa und England ja schon gut im Gange ist, bereits vorwegzunehmen.

Vor Bernankes Halbjahresbericht am Mittwoch haben jedenfalls viele Angst - zumal letzte Woche gleich drei Fed-Vertreter mit den Zins-Zähnen geknirscht hatten.

Bei Hedgefonds, die mit Credit Default Swaps (CDS) Kreditrisiken von Firmenanleihen "absichern", sind jedoch zwei ungleich starke Partner auf den beiden Seiten des Trades. Es fehlt die "Gegenseitigkeit". Wer solch einen CDS von einem Hedgefond kauft (er ähnelt einer "Kreditausfallversicherung"), wünscht sich, dass in dem Fall, dass die Firma, die die Anleihe herausgegeben hat, pleite geht, der Hedgefond einspringt und das Geld für die wertlos gewordene Anleihe hinlegt - wie eine Feuerversicherung, die nach einem Brand die Kosten für das Haus erstattet.

Geht so eine Anleihe "baden", ist der Hedgefond jedoch der Dumme. Durch den Verkauf des CDS (als Stillhalter) hat er nur eine sehr niedrige Prämie von einigen Prozent der "Versicherungssumme" kassiert, muss aber, wenn es brennt, den vollen Betrag für die Anleihe hinlegen. Tritt solch ein Ausfall nur ganz selten mal auf, verdient der Hedgefonds prächtig - wie eine richtige Versicherung, die Tausende Policen laufen hat und nur bei sehr wenigen Schäden bezahlen muss. Das Ganze geht aber schief, wenn sich im Derivate-Markt "systemische" Schieflagen ergeben - etwa weil die Zinsen plötzlich steigen oder Risikoaversion aufkommt. In dem Fall könnten sich die Schadensfälle plötzlich häufen, so dass die Hedgefonds nicht mehr für die vielen aufgetretenen Schäden gerade stehen können. Das kann sich wie eine Lawine fortpflanzen, bei der ein Hedgefond den nächsten in einer Kettenreaktion in den Abgrund reißt. Genau DIES ist der gefürchtete Derivate-Crash.

Er könnte kommen, wenn die zurzeit sehr niedrigen Zinsspreads zwischen Staatsanleihen und Firmenanleihen plötzlich in die Höhe schießen, weil z. b. eine größere Firma (wie GM) pleite geht. Oder weil Japan die Zinsen erhöht und plötzlich zig Carry-Trader Yen kaufen (müssen). Oder aus sonst einem scheinbar nichtigem Anlass...

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aus der Sicht eines professionellen Bedenkenträgers:

jarass.com/Steuer/A/Handelsblatt1106.html

Wirtschafts-Professor Lorenz Jarass zeigt darin den Teufelskreis der Rendite-Jagd auf, der IMHO zu parabolischen Anstiegen samt notwendigem Kollaps führt.

die ersten Kreditderivative der Eurex zu handeln ,nur Societe Generale..... March 30 (Bloomberg) -- JPMorgan Chase & Co. and the banks responsible for 90 percent of credit-default swaps aren't trading the first listed credit derivatives.
Every major securities firm except Societe Generale SA has declined to buy and sell the contracts in the first week they traded. The International Swaps and Derivatives Association, which represents 750 banks and securities firms, says it's concerned the contracts will ``adversely'' influence bond prices.

``The contracts are flawed,'' said Guy America, JPMorgan's European head of credit trading in London. ``It's my understanding that one in 20 futures contracts are successful and this may become one of the 19.''
Eurex, the world's biggest futures exchange, is meeting resistance as it enters a market that about doubled every year since banks invented it a decade ago. Investors are using credit derivatives as an alternative to bonds because they are cheaper and easier to trade. They now own contracts based on at least $26 trillion of debt, according to data compiled by ISDA. Eurex reported 31.6 million euros ($42.1 million) of trades in its credit-default swap contracts since listing them on March 27. An average 15 billion euros of credit-default swaps are bought and sold daily in the over-the-counter market.......
www.bloomberg.com/apps/...d=20601103&sid=aFhY0oUbI2EU&refer=us

Hi,
ich bin kein Volkswirtschaftler. Daher die ganz praktischen Fragen:

1. Wie kann man bei Eintretten der Geldverknappung Geld machen?
2. Aus welchen Märkten wird sich die Geldverknappung am deutlichsten bemerkbar machen?
3. Welche Indikatoren wären Anzeichen für eine beschleunigung des Prozesses?

regards

Fred

ist nicht mein Metier

Was ist das eigentlich konkret?

Die Geldmenge eines Staates oder z.B. einer
Staatengemeinschaft (EU) ist eine von der jeweiligen
Zentralbank kontrollierbare Grösse.
- Haben die nicht ihre Hausarbeiten gemacht?

- Über welchen Geldmengenbegriff reden wir überhaupt
   (M1, M2, M3)?

- Wie läuft eigentlich eine Geldschöpfung ab?

- Wie eine Geldmengenminderung?

- Kann das dann wirklich alles über die Höhe des
  Effektivzinses erfolgen?

-Was passiert eigentlich wenn der monetäre Sektor
  (auch global) stärker expandiert als der reale
   Sektor?

- Ist das wirklich momentan der Fall?

- Welche Rolle spielt dann in relativ freien Märkten
   eigentlich die Inflation?

- Kann das dann wirklich alles über die Höhe des
   Nominalzinses erfolgen?

ob es sich um M3 handelt oder eine andere Definition, ist für die Auswirkungen nicht wichtig. Fakt bleibt: zu viel über Kredite und Yen-Carry-Trades in den Markt gepumptes Geld treibt Assets aller Art hoch. Die "Absicherung" von Risiken über Credit Default Swaps/Derivate wiegt die Marktteilnehmer in falscher Sicherheit. Sobald das Geld knapper wird (im US-Housing-Sektor ist die Aufnahme neuer Kredite durch strengere Auflagen nun viel schwieriger geworden) und Risikoscheu aufkommt (US-Wirtschaftsabschwächung usw.), wird die Luft aus den Blasen entweichen.

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Hier eine interessante Info zu Geldmengen-Defitionen aus der FTD:

... die Geldmenge
07. Februar 2007 16:20 Uhr

Für die Europäische Zentralbank ist die Geldmenge ganz wichtig. Andere kümmern sich weniger drum. Was steckt hinter der Menge Geld?

Dabei könnten sich grundsätzlich einmal alle darin einig sein, dass jeder gerne etwas davon hätte: Die Geldmenge ist zunächst der Bestand an Geld in einer Volkswirtschaft. Eine Menge Geld ist eigentlich eine schöne Sache. Doch Geld, dem keine Waren gegenüber stehen, ist wertlos. Darum, so eine alte Idee, ist Geld gut und wichtig für die Volkswirtschaft, aber es gibt auch ein Zuviel des Guten. So wichtig es ist, wenn die Geldmenge wächst, so problematisch ist es, wenn sie es zu schnell tut.

Leider ist es nun aber gar nicht so einfach, zu definieren, was Geld ist. Darum gibt es auch nicht die eine Definition von Geldmenge. Es gibt statt dessen eine ganze Reihe von Geldmengen-Aggregaten mit unterschiedlich hoher Liquidität. Die wichtigsten drei:

* Eng definiert ist M1. Hier sind Bargeld und die Sichteinlagen, also Girokonten dabei: Geld, über das so gut wie sofort verfügt werden kann.

* Bei M2 kommen zu M1 noch Termineinlagen mit bis zu 4 Jahren Laufzeit hinzu.

* M3, das hierzulande wichtigste Aggregat, besteht aus M2 und Spareinlagen. Vor allem diese Größe spielt für die Strategie der EZB eine wichtige Rolle, wie sie es auch bei der Deutschen Bundesbank einst getan hat. Ganz anderer Meinung ist die US-Notenbank, die seit März 2006 ganz aufgehört hat, die Daten von M3 für die USA zu veröffentlichen. In der Euro-Zone liefen gemessen an M3 im November 2006 rund 7,6 Bio. Euro um. Das waren 9,3 Prozent mehr als im Jahr zu vor - der höchste Zuwachs seit der Geburt des Euro. Nur ein kleiner Teil davon, nämlich 575 Mrd. Euro waren Bargeld.

Warum die Geldmenge für viele Ökonomen so wichtig ist, liegt letzten Endes an einer berühmten Formel, die der US-Ökonom Irving Fisher einmal aufgeschrieben hat: der so genannten Quantitätsgleichung. Demnach ist die Geldmenge, multipliziert mit der Umlaufgeschwindigkeit des Geldes, gleich der zum aktuellen Preisniveau bewerteten Summe der verkauften Güter.

Diese Gleichung stimmt definitionsgemäß immer. Es gibt also einen klaren Zusammenhang von Geldmenge und Preisen bzw. Geldmengenwachstum und Inflation. Das ist der Hintergrund für die heißen Debatten. Allerdings ist über die Kausalität damit noch nichts gesagt und zudem ist die Umlaufgeschwindigkeit des Geldes nicht konstant und kaum zu messen - also wie oft ein 50-Euro-Schein im Laufe etwa eines Jahres den Besitzer wechselt.

Beeindrucken Sie beim nächsten Empfang im Beisein von Volkswirten einfach mal mit der Frage, ob in der Euro-Zone das jährlich erwirtschaftete Bruttoinlandsprodukt größer oder kleiner als die Geldmenge ist. Die Antwort: Die Geldmenge M3 ist mit 7,6 Bio. Euro etwas kleiner als das Bruttoinlandsprodukt mit knapp acht Bio. Euro. Die werden staunen!

Nowandfutures.com schnüffeln jedoch weiter und erstellen aus den verschiedenen FED – Reportings die Geldmenge M3

We did some sleuthing and data extraction and put M3 back together from various weekly Federal Reserve reports that are still available.

1. The formula we're using has five 9s correlation to the original data back to 1980.
2. There is only one missing element that is apparently no longer available (Eurodollars) and an adjustment has been applied to generate it. Its only about 3% of total M3 so should not have a material effect on the total.

Here is our article on M3b, which details our work and notes the sources for the data. Note that as of Nov. 10, 2006 the Eurodollar estimation formula has changed - see the article for details.
John Williams reconstruction of M3 is here.