Thursday, April 22, 2010

Jim Bianco

I first met Jim Bianco a few years here in Atlanta. He was a guest at the monthly Atlanta Society of Financial Analysts of which I was a member for many years. Jim Biance calls it like he sees it. Smart guy, no bullshit. No sugarcoat, no fluff.

He was one of 3 speakers I had an opportunity to meet at ASFA meetings who I still follow closely. In all the time I was a member of the ASFA I never met another member of the Atlanta Society who was actively trading their own personal money or had ever made any serious money in the market. Do as I say, not as I do seemed to be the mantra there. Eating their own cooking wasn't part of the equation. Ugly.

Anyway, the Bianco commentary is too good not to share. It's no bullshit from the get-go.

Jim Bianco President of Bianco Research in Chicago thinks this might be the eye of the storm rather than the dawn of a new day. "My fear is, history shows, we might have a second leg to the financial crisis in [the form of] a sovereign debt crisis."

The crisis is of course already visible in Greece where yields on their 10-year government bonds just hit a record high as Europe works out a bailout package for the heavily indebted nation. Meanwhile, in Portugal - another one of Europe's so-called PIIGS - bond yields are also spiking, fueling suspicion the debt crisis may spread.

With huge federal deficits, this is something the U.S. also needs to worry about. "I'm not suggesting the U.S. is on the verge of defaulting," Bianco says, but the market is already signaling it's hesitation to lend to the government. Two-year notes sold by Berkshire Hathaway Inc. in February yielded less than U.S. Treasuries of similar maturity; the same is true of paper issued by Procter & Gamble, Johnson & Johnson and Lowe's, Blooomberg reports.

As growing budget crises in states and municipalities from California to New York come to a head, Bianco fears it will be too much for the Treasury to bear. "If one of these municipalities has to borrow from [the federal government] they're all going to have to borrow from them, pretty much on the same day," he speculates.

If that happens, Bianco is confident you can bet on "very high, punishingly high interest rates for the economy." And that storm may cause even more damage than the first.

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