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Introducing Trafalgar Investment Advisers LLC
Posted by rawfinance on October 28, 2009
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October 2009 Bank Lending Survey Shows Credit Standards Tightening, But At Slower Pace
Posted by rawfinance on November 11, 2009
Although banks are still tightening lending standards (meaning it is more difficult for borrowers to qualify for a loan), fewer are doing so, according to the October 2009 Bank Lending Survey conducted by the Federal Reserve Board. In the October survey, domestic banks indicated that they continued to tighten standards and terms over the past three months on all major types of loans to businesses and households. However, the net percentages of banks that tightened standards and terms for most loan categories continued to decline from the peaks reached late last year. The exceptions were prime residential mortgages and revolving home equity lines of credit, for which there were only small changes in the net fractions of banks that had tightened standards. A small net fraction of branches and agencies of foreign banks eased standards on commercial and industrial (C&I) loans, whereas a significant net fraction continued to tighten standards on commercial real estate (CRE) loans.
Looking at demand for loans, it seems that homeowners and homebuyers are still looking for credit, while business loan demand continues to slacken. Demand for most major categories of loans at domestic banks reportedly continued to weaken, on balance, over the past three months. This weakening was: somewhat less widespread than in the July survey for C&I loans, CRE loans, and nontraditional mortgages; approximately the same for consumer loans; and significantly more widespread for home equity lines of credit. However, banks reported stronger demand, on net, for prime residential real estate loans. Demand for C&I and CRE loans at foreign banks continued to weaken, on balance, but the weakening was somewhat less widespread than that in the July survey.
This news is consistent with at least a couple of emerging economic themes: (1) the economic recovery will be sluggish and job creation will be slow – if businesses are not looking to borrow to grow, they’re not likely looking to hire more workers either; and (2) federal government tax credits are spurring home sales – stronger demand for prime residential real estate loans would suggest this is the case, and now that the Homebuyer Tax Credit has been extended to May 1, 2010 (to sign a contract) and July 1, 2010 (to close on the purchase) and expanded to certain current homeowners, demand for residential real estate loans should remain strong through next spring.
The survey also asked respondents three special questions with regard to: (1) the decline in C&I lending over the first eight months of 2009; (2) the status of CRE loans that were due to mature in September 2009; and (3) the changes in credit card lending practices due to the enactment of the Credit Card Accountability and Responsibility and Disclosure (Credit CARD) Act of 2009.
In response to a special question on the sources of the decline in C&I lending this year, the two sources domestic banks cited most often as being “very” important were decreased originations of term loans and decreased draws on revolving credit lines. In response to a second special question, banks indicated that, of the CRE loans on their books that were scheduled to mature by September of this year, more loans had been extended than refinanced. In response to special questions concerning the Credit CARD legislation passed in May 2009, a majority of banks reported that they had yet to fully comply with the new law. Banks indicated that they expected to tighten many of the terms and conditions of credit card loans as a result of the legislation, with the notable exception of penalty fees and the length of the grace period for payments.
Please click on the following link to view a summary of the report, with links to tables and the full report: The October 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices
Posted in Banking, Commercial Real Estate, Economy, Federal Reserve Board | Tagged: Bank Lending Survey, Banking, Commercial Real Estate, Economy, Federal Reserve Board | Leave a Comment »
G-20: Economic Recovery Depends on Continued Policy Support
Posted by rawfinance on November 10, 2009
The Group of Twenty (G-20) Finance Ministers and Central Bank Governors held a meeting in St. Andrews, Scotland, and on Nov. 7, 2009, announced their intention “to maintain support for the [economic] recovery until it is assured.” Noting the uneven nature of the worldwide economic recovery to date and the high rate of unemployment, the G-20 effectively silenced recent rumor and speculation that fiscal stimulus and other economic support programs would be drastically curtailed if not ended in the near future. Although this will likely put more pressure on the U.S. dollar, stock markets are also likely to continue rallying with the knowledge that government support will continue.
The G-20 also announced the following additional goals and objectives for the coming year:
• to set out our national and regional policy frameworks, programmes and projections by the end of January 2010;
• to conduct the initial phase of our cooperative mutual assessment process, supported by IMF and World Bank analyses, of the collective consistency of our national and regional policies with our shared objectives, taking into account our institutional arrangements, in April 2010;
• to develop a basket of policy options to deliver those objectives, for Leaders to consider at their next Summit in June 2010; and,
• to refine our mutual assessment and develop more specific policy recommendations for Leaders at their Summit in November 2010.
To view the full announcement from the G-20, please click on the following link: 7 November 2009 Communiqué
Posted in Economy | Tagged: Economy, Fiscal Stimulus, G-20 | Leave a Comment »
Hedge Funds, Private Equity Growing in Asia
Posted by rawfinance on November 10, 2009
Investment advisers said investors in Asia and beyond are becoming increasingly prepared to allocate capital directly to hedge funds and private equity. “It’s still early stages in Asia, but we are now in the growth phase as far as the hedge fund industry is concerned,” said Ananth Shenoy, Citi Private Bank’s head of managed investments for Asia. “So from that perspective, there’s more reason for us to look at locally sourced and developed solution sets.”
View the full story at AsianInvestor.com by clicking on the following link: Investors eye Asian hedge funds and private equity.
Posted in China, Economy, India, Investing | Tagged: Economy, China, India, Private Equity, Hedge Funds | Leave a Comment »
Why Tax Cuts Are Preferable to Fiscal Stimulus Programs
Posted by rawfinance on November 9, 2009
In combating the global financial crisis, governments have turned to easy monetary policy and large fiscal stimulus programs. For countries that have run enormous current account surpluses, like China, fiscal stimulus comes easy because they have the money to spend. However, countries that have run enormous current account deficits, like the United States, will find that, even if their fiscal stimulus works, they will have the separate and unpleasant problem of seeking a way to pay for it later. In light of this, it is worth considering whether fiscal stimulus programs are the best way to jumpstart a faltering economy. Harvard Professor of Economics Robert Barro’s research suggests that the expected multiplier effect of fiscal stimulus, that is how many more dollars are created for each dollar of fiscal stimulus spent, may be much lower than government estimates, and therefore, tax cuts would have the greater effect.
Barro and Charles Redlick, in their most recent publication, conclude:
Our bottom line from this research is that a healthy scepticism is warranted when policymakers claim government-spending multipliers in excess of one. Our estimates suggest that the multiplier effect of defence spending falls more in the range of 0.6 to 0.8, and we find it unlikely that non-defence multipliers would be larger. Therefore, our conclusion is that total economic output increases less than one-for-one with increased government purchases. However, we do find evidence to support the view that tax cuts stimulate total output, with a one percentage point decrease in the average marginal tax rate leading to an increase of about 0.6% in the growth rate of real per capita GDP. As such, our preference in the design of fiscal stimulus packages would be for more tax cuts and less reliance on increased government spending.
To view the full column by Barro and Redlick at VOXeu.org, please click the following link: Design and effectiveness of fiscal stimulus programmes
Posted in Economy, Fiscal Stimulus | Tagged: Economy, Fiscal Stimulus | Leave a Comment »
September Consumer Credit Report: Deleveraging in Full Swing
Posted by rawfinance on November 6, 2009
The September 2009 Consumer Credit Report shows that consumers continue to shed debt at an increasing pace. Consumer credit decreased at an annual rate of 6 percent in the third quarter of 2009. Revolving credit decreased at an annual rate of 10 percent, and nonrevolving credit decreased at an annual rate of 3.75 percent. In September, consumer credit decreased at an annual rate of 7.25 percent.
To view the full statistical report, please click on the “Consumer Credit Statistics” page on the menu bar above.
Posted in Consumer Credit, Economy | Tagged: Consumer Credit, Economy | Leave a Comment »
