Excerpts from Doug Noland

found @ prudentbear.com

March 14 – Bloomberg (Walden Siew): “Companies are selling floating-rate debt in the U.S. at the fastest pace ever as investors seek securities that will keep their value while the Federal Reserve raises interest rates. Borrowers sold $62.9 billion of floating-rate notes this year and are on track to beat the 2005 record of $302 billion, according to data compiled by Bloomberg.”



Investment grade issuers included GE Capital $3.0 billion, Goldman Sachs $1.75 billion, Wells Fargo $1.5 billion, USB Capital $1.25 billion, Tyson Foods $1.0 billion, Shinsei Finance $700 million, World Savings $600 million, Clear Channel $500 million, HRPT Properties $400 million, Archstone Communities $300 million, Genworth Global $300 million, Compass Bank $275 million and Boston Edison $200 million.

March 14 – Financial Times (Jennifer Hughesin): “Inflows into emerging market equities have set an annual record just 11 weeks into the year as investors continue to chase the higher returns seen in developing markets. In the week to March 8, $20.9bn has been poured into emerging market stock funds breaking last year’s record of $20.3bn, according to Emerging Portfolio Fund Research. Brad Durham, a managing director of EPFR, said: ‘While it is natural to assume that such strong inflows into any asset class are a worrisome sign, there are institutional investors just waiting for corrections in equity and bond markets to plough more money into emerging markets.’”

As I believe we witnessed this week, extraordinarily speculative global financial markets took comforted from inferences of a lack of nerve from the Fed and the Bank of Japan. Global bond markets (generally) abruptly retraced some of recent declines, spurring the resurgence of global equity market speculation (and short covering). Currency markets vacillated, the dollar index was hit for 2%, and the energy and metals complexes rallied back smartly. Middle Eastern equity Bubbles lurched toward collapse then retreated. All in all, it has the look and feel of a major topping process, as players assess and reassess the prospects for a continuation of, or destabilizing interruption to, the Global Credit and Asset Bubbles.

I can imagine that the Fed today takes comfort from its amassed war chest of 450 basis points of reflation ammo. But the enemy is often not as anticipated. There’s a critical issue of which I am left unclear. How does “mopping up” – or perhaps better stated, what is to be “mopped up” - in the middle of a currency crisis?