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

[Alejandro Valle Baeza <valle@xxxxxxxxxxxxxxxx>]

Gerald_A_Levy@xxxxxxx 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
producers.

> 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
> this?
Cordialmente
Alejandro Valle