Interesting developments to come - See what made the cut...|
Junk Bond Companies Get Hand From Fed
Cheap-money policies by the Federal Reserve, may be extending a helping hand
to companies, struggling to stay afloat. According to Fed flow of funds data,
debt at the rate of 8.75% - majority coming from corporate bonds and companies
rated below investment grade - was added by non-financial companies during Q4,
for the biggest jump since 2007. Compared to $78.3 billion for the same period
in 2012, junk bond volume for 2013 in the U.S. is at $69.2 billion, ahead of any
previous year and more than double what it was at the pre-financial crisis high
in 2007. Spreads between junk bond yields and their benchmark measuring sticks
are at the lowest since 2007. Thanks to investors who are thirsting for yield
and buying risky bonds, low-cost financing is finding its way for borderline
companies, with help from the Fed. Corporate debt is swelling while a potential
positive sign for economy remains corporate cash in hand. Globally, high-yield
bond issuance stands at a historic mark of $108.5 billion, buoyed by central
banks around the world mimicking Fed policy and cutting rates at breakneck pace.
Is the helping hand turn into a slap, when interest rates start to rise?
Dow Jones Industrial Average 10 Day Winning Streak
March 14, 2013 will go down in history as the end of a 10 day winning streak
for the Dow Industrial Average and you, were there. So what does this all mean?
History has been made. The DJIA tied the 10 day streak from November 15, 1996.
Do you know where you were back then?
The DJIA has not had that long of a winning streak since October 2007. The
winning streak to beat; DJIA longest winning streak back on June 14, 1897, with
a 14 day positive trail under its belt. Nothing is out of the question when
we're talking about the financial markets. Anything is possible under the right
set of circumstances.
At the closing bell for Friday, the Dow was off 25 points to close at 14,514.
Standard & Poor's 500 Index was lower by two points to 1,560. The Nasdaq
composite index was down nine points to 3,249.
Where will the markets head from here? Is it correction time or just a bump on
the road toward higher territory? Are we headed for 'irrational exuberance'? As
questioned by former Federal Reserve Chairman Alan Greenspan, "But how do we
know when irrational exuberance has unduly escalated asset values, which then
become subject to unexpected and prolonged contractions as they have in Japan
over the past decade? And how do we factor that assessment into monetary
BP Wants Provisions for Gulf Settlement
London-based oil giant BP plc (BP: NYSE), in a court filing on Friday in New
Orleans, argued that program administrator Patrick Juneau's method of processing
and paying businesses' claims, violates the settlement's terms and requested a
block be granted by a federal judge. Juneau was court-appointed administrator to
process payments to Gulf Coast businesses' claims through a multibillion-dollar
settlement over the 2010 oil spill in the Gulf of Mexico. Because businesses'
claims have been paid at much higher average amounts than the BP anticipated,
the company warned investors that the settlement's price tag will be
"significantly higher" than initially estimated. Following a recent ruling by
U.S District Judge Carl Barbier who rejected BP's interpretation of certain
settlement provisions, reliable estimates of the cost to pay for unresolved
claims, is not available. Investors returns can be affected due to the
questionable settlement costs.
Missile Defense on U.S. West Coast Gets a Boost
The U.S. Pentagon will boost its ground-based missile interceptors by
one-third in Alaska and California and add 14 more systems to the existing 30
already in position. As a precautionary measure to counter increased threats
from North Korea, the U.S. government is preparing to strengthen its missile
defense systems on the West Coast. Increased rhetoric from North Korea against
South Korea has caused the U.S. in recent weeks, to go as far to unilaterally
scrap the 1953 armistice. Increased belligerence from North Korea is seen as a
way to test new South Korean President Park Geun Hye.
March 18, 2013