Re: [OPE-L] fictitious capital and junk bonds?

From: Alejandro Valle Baeza (valle@SERVIDOR.UNAM.MX)
Date: Fri May 06 2005 - 11:05:38 EDT

Gerald_A_Levy@MSN.COM wrote:

>Hi Alejandro:
>What is the significance of this story?
Hi Jerry, this quote from today Financial Times could be useful:

"When the second and third biggest corporate borrower in the world goes
to junk, it is not just they that have a problem, we all have a
problem, said Gary Jenkins, credit strategist at Deutsche Bank."
I think that it is the main issue: Are we facing a new recession in the
US economy?

>What is the relation between
>fictitious capital and junk bonds?
I think huge government deficit is causing problems in credit market.

>What role does S&P (and
>similar organizations) play in determining which is what?  Which bonds
>can be expected to be downgraded to junk next?
I do not know, I need more time to answer this. Sorry.

>Isn't the change in credit rating to junk for GM and Ford largely
>about the trade imbalance?  E.g. at the same time that Ford and
>GM sales plummeted in the US , Toyota had a huge increase
>in sales in the US.   Another issue is how the composition of
>demand for cars has changed as a result of increasing oil and
>gas prices and how this especially has hurt the sales of SUVs --
>which were big money-makes for both Ford and GM.
You are right.There are changes in vehicle market against domestic US

>Another issue: the reference to "enormous health care and post-
>retirement liabilities" suggests to me that the way in which GM and
>Ford will seek to recover is by demanding greater 'concessions' from
>the UAW.  Will the Union, though,  finance the recovery of these
>corporations or will the ranks (especially retired members on
>pension) put enough pressure on the Union and the corps. to prevent
Alejandro Valle

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