Is the Crystal Ball Clearing? | 148 comments (147 topical, 1 editorial, 0 hidden)

Re: A shift in expectations (none / 0)

A not insignificant fracion of all capital is not in the stock market, but in (generally) far less risky investments like bank accounts, corporate and sovereign bonds, or real estate.

The extent to which it's less risky is basically a function of credit seniority and recovery/collateral values.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman

by Migeru (migeru at eurotrib dot com) on Tue Mar 13th, 2012 at 12:32:45 PM EST
[ Parent ]

Re: A shift in expectations (none / 0)

Creditors always have greater seniority than shareholders, that's why shareholders demand higher returns.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Tue Mar 13th, 2012 at 12:38:25 PM EST
[ Parent ]

Re: A shift in expectations (none / 0)

There are more tiers of seniority than "creditors" and "shareholders" or "debt" and "equity".

Interestingly, in English there's "equity" and "debt" = "fixed income", but in Spanish there's no word for "equity". Rather there's "fixed income" (renta fija) and "variable income" (renta variable).

What makes equity more risky than debt is not the seniority but the discretionality of dividend payments.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman

by Migeru (migeru at eurotrib dot com) on Tue Mar 13th, 2012 at 01:12:55 PM EST
[ Parent ]

Re: A shift in expectations (none / 0)

Well, that too.

But of course, there are differnt kinds of seniority when it comes to bonds as well, and the more junior bonds pay higher interest. That's completely reasonable and not mysterious at all.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Tue Mar 13th, 2012 at 01:27:50 PM EST
[ Parent ]

Is the Crystal Ball Clearing? | 148 comments (147 topical, 1 editorial, 0 hidden)

Top Diaries

Denmark: Solidarity and Trust to Beat the Pandemic

Manufactured outrage

A Bloody War with Only Losers

Will the EU-27 Survive the Biden Years?

The chattering Irish Europhile class

"Rejected Energy" and Heat Mapping the EU

DUP decline continues

Recent Diaries

Media Crime

A Bloody War with Only Losers

Manufactured outrage

Descendants of US slaves alive in Russia

The Big Lie China

Israel and Yom Kippur

Denmark: Solidarity and Trust to Beat the Pandemic

Will the EU-27 Survive the Biden Years?

Wilkerson On the Failed Mission After 9/11

Operation Enduring Freedom Has Ended 2001-2021

The chattering Irish Europhile class

"Rejected Energy" and Heat Mapping the EU

Collapse of An Empire

Texas Taliban Rule

Gap Between Dutch Rightwing Cabinet and Human Rights

Four US Presidents and Lives Lost 2001-2021

DUP decline continues

Louisiana Delta Variant and Ida Storm Surge

Zero Net Energy - August 27, 2021

How The U.S. Becomes A Target of Revanche

Occasional Series