Stock market is cascading down 227 points thus far. The VIX is almost at 30. This is a significant turn of events after yesterdays GDP of 3.5%. I smell a buying opportunity. Marriage does actually pay off.
*Now they are worried?
Goldman, JPMorgan economists are cautious about recovery
Economists at JPMorgan Chase and Goldman Sachs were cautious in reaction to news that the U.S. grew at an annual rate of 3.5% in the third quarter. "We're going to get more growth than people expect, but a lot less than we need. The power of a business cycle ... should not be underestimated," said Bruce Kasman of JPMorgan. "I do think there will be some healing on the surface, but I don't think it's enough to offset the loss of the stimulus," said Jan Hatzius of Goldman Sachs. The Wall Street Journal/Real Time Economics blog (29 Oct.)
*see what happens when you threaten to take their lollipops, I mean &*^*$ money away?
Investors fear consequences when Fed ends debt-buying program
The Federal Reserve battled the financial crisis partially by purchasing mortgage debt. Investors are starting to get concerned about what will happen when the Fed ends the program. "Many investors treat the three asset classes that the Fed has been buying -- Treasuries, agency debt and agency mortgage-backed securities -- as very similar," said Ajay Rajadhyaksha, Barclays Capital's head of U.S. fixed-income strategy. "The effectiveness of the Fed's strategy to exit from its purchase program will play a huge role in determining the interest rate environment for the markets next year." Financial Times (tiered subscription model) (10/29)
Investors' rush to high-yield bonds is seen as growing danger
A flow of money into high-yield bonds turned into nothing less than a stampede, prompting worry from industry executives. "It's fairly dangerous right now to be going back in the soup so quickly after where we went," said Richard Handler, CEO of Jefferies Group. With default on high-yield bonds anticipated to peak soon, investor enthusiasm for them has driven the spread over U.S. Treasuries down to 7.5%. For the first time in five years, the default rate is higher than the spread, fixed-income specialists said. Meanwhile, high-yield bonds have delivered a 52% return this year, while the Standard & Poor's 500 stock index turned in 19%. BusinessWeek (29 Oct.)
U.S., China win big concessions from each other in trade talks
U.S. negotiators obtained promises from China to eliminate obstacles blocking the sale of wind-power equipment and pork to China. Responding to a U.S. demand for greater intellectual-property protection, China said it will launch a four-month campaign to stop theft of copyrighted material through the Internet. The U.S. agreed to stop accepting trade-protection cases against China. Both countries pledged to refrain from "abusing" trade-dispute procedures, including submitting complaints to the World Trade Organization. CNN/Financial Times (30 Oct.)