Recoverygeddon

By Neil Charnock
Feb 9 2010 4:00PM
www.goldoz.com.au

Introduction

This so called recovery is problematic and now it is slowly entering a new dangerous phase. Bank losses have now been eclipsed as the major issue as sovereign debt emerges in a more sinister manner. This is only part of the problem and it will be overcome in the short term leading to resumed market growth. The real problem is the debt cycle and the emerging sovereign default concerns are showing us the future.

I read that the corporate spread between corporate interest rates and sovereign interest rates has widened significantly indicating a close scrutiny on corporate risk in the current environment. To offer a balanced view however I should mention that a J P Morgan analyst also reported that higher risk default rates have been dropping as corporate entities in this speculative grade category have been able to raise $21.6B already in 2010 “due to improved capital marketsâ€