McKinseyPaper: The Emerging Equity Gap: Growth and Stability in the New Investor Lansdscape

December, 2011

McKinsey's paper:

http://www.mckinsey.com/Insights/MGI/Research/Financial_Markets/Emerging_equity_gap

is consistent with Spectrum's view that asset allocations are shifting from equity to fixed income/ credit.

 " ...... demand for listed equities in developed economies is likely to fall due to aging, shifting pension regimes, growth of alternative investments, and new financial regulations. "

Moody's Predicts Lower Default Rates

Friday, February 19, 2010

A record-high 261 Moody's-rated corporate issuers world-wide defaulted on $328.9 billion of debt in 2009, up from $280.6 billion in 2008.

In contrast to 2008, when bank and financial institution defaults accounted for 80% of total default volume, non-financial defaulters drove default volume in 2009—accounting for roughly 75% of volume and 80% of defaulted issuers.

Moody's forecasting model, under its baseline scenario, now projects that the speculative-grade default rate will fall to 3.3% by the fourth quarter of 2010 after ending 2009 at 13%. This assumes an ongoing economic recovery and stable credit spreads. Under a more pessimistic scenario, Moody's indicate that the default rate would fall to only 7.2%.

McKinseyPaper: Debt and Deleveraging: The Global Credit Bubble and its Economic Consequences

Wednesday, February 3, 2010

McKinsey have published a paper:

"Debt and Deleveraging: The Global Credit Bubble and its Economic Consequences". The report is timely, informative and sobering. While most anlaysis of the latest crisis has centred on the role of US mortgage lending and financial sector leverage McKinsey suggests the cause was a broader one enabled by globalisation of banking and a period of unusually low interest rates and risk spreads.

The report notes that leverage levels are still very high and are concentrated in some sectors in certain countries; household sectors in the UK, US, Spain and to a lesser extent Canada and South Korea, commercial real estate in the UK, US and Spain and the corporate sector and parts of the financial sector in Spain.

They observe that empirically, a long period of deleveraging nearlly always follows a major financial crisis and on average lasting 6 to 7 years and reducing debt/GDP by 25% and resulting in a contraction in GDP for several years. The process of deleveraging has only just begun, suggesting a period of fragile and potentially unstable economic outlook over the next 5 to 10 years, as deleveraging runs its course.

Interesting Australia doesn't make the list of 10 mature economies and 4 emerging economies included in the study.