The Carlyle Group, a huge private-equity firm, has hit snag with its purchase of a majority stake in TCW, one of the big bonds finds headquartered in California.
Reuters ran a dense "exclusive" Monday about some financial gyrations that are making potential trouble for private-equity colossus the Carlyle Group's deal to buy a chunk of TCW, one of the biggest bond funds in the world and a part of what I call the Southern California Bond Triangle. It also includes PIMCO and DoubleLine Capital.
PIMCO is the biggest bond fund in the world, with $1.8 trillion under management. TCW has around $135 billion on its books. DoubleLine has been growing at a furious pace since CEO Jeff Gundlach established it after a controversial departure from TCW. It has taken on nearly $50 billion in under three years.
You could also throw Pasadena-based WAMCO in there, creating a Bond Quadrangle. WAMCO has around $450 billion under management and has tried in recent years to regain its competitive mojo versus PIMCO.
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Federal Reserve Chairman Ben Bernanke. Will continued low interest rates lead to inflation? Some money managers don't think so.
The Federal Reserve's Open Market Committee announcement Wednesday wasn't a big surprise on the interest-rate front. The Fed has stated it intends to keep short-term rates low for the foreseeable future, in an effort to stimulate the economy and push investors into riskier assets, like stocks. A continued low-interest rate environment will also continue to bolster the housing market, where mortgage rates are at historic lows.
Fed Chairman Ben Bernanke and the rest of the FOMC annouced that they will keep rates low until unemployment falls to 6.5 percent. It will also continue to buy up mortgage-backed securities, at roughly the same rate it has been (so-called "Quantitive Easing," installment 3, or "QE3").
[UPDATE: I slightly misinterpreted what the Fed is doing on the bond-buying side. It's also worth noting that the Fed is now saying that it will keep interest rates low until unemployment hits a specified level. This is a policy departure from saying that rates will stay low until the economy improves. But anyway, bond-buying: the Fed is going to double what it's doing in the QE front and change "Operation Twist" into an extension of QE3. The older aspect of QE will still involve buying MBS. But the additions to QE3 will entail buying long-term U.S. Treasuries without selling short-term bonds. This is important as it means the Fed will be adding $85 billion per month to its balance sheet — under Operation Twist, it hadn't grown much, which was viewed as an way to "sterilize" against inflation. Former Dallas Fed President Bob McTeer has a good post about the FOMC decision at Forbes.]
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Marking the start of the holiday shopping season, 'Black Friday' is one of American retailers' busiest days of the year.
Now that Black Friday 2012 is in the history books, we can all start arguing over whether it lived up to the hype. Forbes' Tom Van Riper cites a Deutsche Bank analyst who says that the results were basically flat compared with last year. CBS News sees it a little differently.
Regardless of how the big day ultimately works out, there are some inevtiable questions — given our continued sluggish recovery from the Great Recession — about whether the consumer can somehow rescue the economy. That could be too much to ask of the retail sector, which makes up less than 10 percent of U.S. GDP, as I noted on "AirTalk" ahead of Black Friday and its more recent offspring, Black Thursday.
Others disagree. Last week, the L.A. Times ran a macro/microeconomics-mash-up-story about the Black Friday shopping frenzy and what it might mean for the overall economy, beyond the bottom line of retailers. Here are the critical paragraphs:
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A construction worker on the top of a home under construction at a new housing development in Petaluma, California. Sales of new homes have been rising, as have prices. Meanwhile, interest rates are low. But that doesn't mean it's a good time to buy.
The Commerce Department released data on August new homes sales today. Bottom line: sales were flat from July to August, but well up over last year: 18 percent. That sounds great, but there are several other factors to take into account. First, the latest Case-Shiller index provides strong evidence that housing prices in the U.S. are forming a bottom (don't get too excited — we're only back to 2003 levels, even with hard-hit regions like Phoenix posting double-digit price gains).
Second, housing inventory in Southern California is tight. The supply of foreclosures coming to market is being reduced, and during the downturn, homebuilders didn't do much building.
Third, that lack of supply is colliding with a surge in demand, as buyers decide to take advantage of low prices and historically low interest rates. The interest rates are the Federal Reserve's doing; the central bank wants people to buy houses and bid up prices to get the housing market back on its feet and restore equity appreciation to borrowers who now owe more on their mortgages than their homes are (for the time being) worth.
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President Barack Obama speaks on stage as he accepts the nomination for president during the final day of the Democratic National Convention. The August jobs report could be critical for his re-election hopes.
The Labor Department has just released its jobs report for August. This one has been called the most important report of the entire year — and maybe the past four years — as it falls right after the end of the Democratic National Convention and just a few hours after President Obama's nomination acceptance speech.
The number is bad: We added only 96,000 jobs in August. The headline unemployment rate dropped to 8.1 from 8.3 percent. This is far worse that what ADP reported yesterday — 201,000 — and well below expectations. It is, however, in line with an economy that's expanding very weakly, with GDP growth at less than 2 percent currently.
So no beat of expectations, or a surprise to the upside. This pretty well guarantees that the Federal Reserve will pull the trigger on another round of "quantitative easing," injecting money into the U.S. economy to stimulate growth and get the sluggish jobs market moving. We'll get a decision on that next week, when the Fed meets.