We read about pessimism porn over the weekend. That is, gorging oneself on dire economic forecasts and financial analysis.
Of course, we at FT Alphaville have been doing this for ages, but it’s nice to know there’s a term for it that’s gaining popularity.
Anyway, here is something *really* special – chart porn meets pessimism porn. From Dresdner on Monday.
That’s a chart of actual and forecast bankruptcies – G4 (Japan, Germany, UK, US) and Moody’s corporate default rate.
The most pessimistic part of this chart, I suppose, is not the forecast sharp increase in bankruptcies to come — but the fact that only in the second-half of 2008 have corporate defaults even started to break out of the normal range. Worse is yet to come .
Here’s another one.
That’s 2009 forecast bankruptcies from Euler-Hermes, the world’s largest credit insurer, with the percentage change between 2008 and 2009 in the far-right. You have to admit, it’s nice to see a negative chart where the UK doesn’t take the lead. Nope, this time the UK comes after the US (50 per cent rise) and the Netherlands (38 per cent), but in terms of pessimism porn, we think this still does the trick.
But maybe that’s not enough for you. Maybe you figure bankruptcies, at this point, are pretty much priced into stocks and insurance. Dresdner says there’s been a drop in recovery rates in recent months — and that hasn’t been priced in to spreads, particularly on the CDS side. Here you go:
And here’s one with direct application to FT Alphaville – a count of the word “bankruptcy” in the media against that G4 bankruptcy index. The two follow each other pretty closely — though media coverage, Dresdner notes, tends to lag actual events.
And of course, no chart/pessimism porn would be complete without a mention of equities:
Here’s some commentary:
The current strong negative correlation between bankruptcies and asset prices emphasises the importance of the erosion in the value of assets used as collateral, and shows that bankruptcies and falling asset prices are feeding of each other. Assuming a peak in bankruptcies around Q2 2009 and a lag of 3-6 months, we think the bottom in US stocks is unlikely to be reached before Q4 2009.
Think we’d better stop here.
Related links:
Pessimism porn – NY Mag
Defaults: different this time? – FT Alphaville
Brace yourselves f0r record corporate defaults in 2009 – FT Alphaville