Global financial system implosion begins

[yield]

Federal Reserve cuts additional $10bn from economic stimulus programme
theguardian.com, Wednesday 29 January 2014

The US Federal Reserve instituted a further cut to its massive economic stimulus programme on Wednesday, in a move that rattled stock markets already worried by recent poor jobs figures.

After a two-day meeting – the last to be headed by outgoing chairman Ben Bernanke – the Fed announced a $10bn cut to its $75bn-a-month bond-buying programme, known as quantitative easing (QE). The decision received the unanimous approval of the federal reserve open markets’ committee, the first time no one has dissented since June 2011.

The cut follows an earlier $10bn reduction to the programme in December. At this rate, the programme, which started in September 2012, could be over by the end of the year.The Fed also repeated its pledge to keep interest rates close to zero, where they have been since 2008.

Still no word on what to do with the $ trillions of debt bought so far.

 

[Dr Jon]

Looks like the jumping season has started.

 

[gosub]

Looks like the jumping season has started.

Bad piece, Gabriel Magee work revolved round fixed assets which are not derivatives. It could be a while for anything he was involved to unravel.

William Broeksmit retired after the regulatory authorities blocked his promotion.

Statistically 11.8 deaths out of every 10,000 are suicide, or million a year - 1 every 40 seconds

Too much faulty inductive reasoning to be a helpful piece.




The Samaritans - There to listen and always looking for volunteers

 

[hipipol]

Federal Reserve cuts additional $10bn from economic stimulus programme
theguardian.com, Wednesday 29 January 2014

Still no word on what to do with the $ trillions of debt bought so far.

The main effect so far has been to cause a great deal of damage to emerging markets and more parochially make sterling decline against ALL currencies yesterday
No one wants to hold those massive reserves of US Treasuries, however they bought them when they were shitting their pants about possible cascade defaults in the corporates and Euro Govies. Last years T-Bill yeild spike on the merest mention of US QE slowing shows no sign as yet of re-appearing in developed markets but I expect the higher rates scenario to reach us in the next 8-12 months.
The danger is that will turn into a pants shitting ride for all but Vol Traders who like that kind of shit

 

[Barking_Mad]

Looks like the jumping season has started.

http://iacknowledge.net/a-closer-look-at-china-and-hsbc-are-they-running-out-of-cash/

 

[yield]

Turkey, India and South Africa have raised interest rates to stop capital outflows. Where are all those nomad dollars going to be parked if not in U$ treasuries? Cash on the assumption that the dollar is appreciating?

hipipol - is Vol traders Volatility Traders?

HSBC shares soar, suspended, then drop back

Brief drama in the stock market there -- shares in banking giant HSBC soared 10%, forcing the stock to be suspended.

But a few minutes later, it's back where it started - leaving traders wondering if someone accidentally botched an order -- known as a 'fat finger trade' in the City.

Fat-finger blunders are embarrassing, and can be pretty expensive for the offender -- unless the stock market regulator decides to cancel the trades.

 

[hipipol]

Turkey, India and South Africa have raised interest rates to stop capital outflows. Where are all those nomad dollars going to be parked if not in U$ treasuries? Cash on the assumption that the dollar is appreciating?

hipipol - is Vol traders Volatility Traders?

HSBC shares soar, suspended, then drop back

yep, Volatility - to get a measure look at the VIX index - tho it is an EQ index so not fully correlated to Macro effects/impacts
Right, the money as such will be parked nowhere
If QE is reduced, assuming the same rate of US Govy issuance, someone has to take up the slack - money gets re[atriated from the E Mkts it has been boosting and returned to the US to buy the Govies. Equally they may choose a pair trade of short end instruments - Commercial paper/T-bills/Govy rates in order to get the FX exposure while still picking up bips in interest - short the EM currency against the US$
The real prob for E Mkt corporates is that for the last 3-4 years the basis swap cost has been V low - what this means is that they could issue in US $, as opposed to local currency, and end up paying lower rates of interest with a very cheap cost on the swap. However, if rates and the US$ both rise the swap will cost more and may even reverse out, leaving them well stichted to cover both repayment and possible margin calls on the swap
Its vest to avoid cash where possible - you aim for a very liquid instrument which will also give some upside in addition to any currency appreciation

ETA The 4.4pc uptick in Turkish rates has not helped, currency still basically flat - ie no impact at all - recall the GBP/black monday scenario

 

[Barking_Mad]

Another one committed suicide.

Russell Investments chief economist found dead

Mike Dueker, the chief economist at Russell Investments, was found dead at the side of a highway that leads to the Tacoma Narrows Bridge in Washington state, according to the Pierce County Sheriff's Department. He was 50.

...

Mr. Dueker worked at Seattle-based Russell for five years and developed a business-cycle index that forecast economic performance. He was previously an assistant vice president and research economist at the Federal Reserve Bank of St. Louis.

He published dozens of research papers over the past two decades, many on monetary policy, according to the St. Louis Fed's website, which ranks him among the top 5% of economists by number of works published. His most-cited work was a 1997 paper titled, “Strengthening the case for the yield curve as a predictor of U.S. recessions,” published by the reserve bank while he was a researcher there.

Mr. Dueker earned a doctorate in economics from the University of Washington, a master's degree in that field from Northwestern University and an undergraduate degree in math from the University of Oregon.

Russell is owned by Northwestern Mutual Life Insurance Co. and manages more than $246 billion.

http://www.pionline.com/article/201...nd-dead?utm_source=dlvr.it&utm_medium=twitter

 

[hipipol]

Another one committed suicide.

Russell Investments chief economist found dead



http://www.pionline.com/article/201...nd-dead?utm_source=dlvr.it&utm_medium=twitter

Another one what?
Index builder?
Been no one at Rueters and FTSE topping themselves afaik

 

[yield]

The $15 trillion shadow over Chinese banks
Telegraph 01 Feb 2014

In a country where the banks, even the largest, are not known for openness, Chu has warned since 2009 about a rapid expansion in lending that has seen something close to $15 trillion (£9.1 trillion) of credit created, fuelling a property and infrastructure boom that has no equal in history.

Warnings have already been raised about the increased use of offshore dollar funding by mainland Chinese borrowers. The Hong Kong Monetary Authority has pointed to the growth of foreign currency funding of China, which is believed to have more than quadrupled in the past three years to in excess of $1 trillion.

Though it does explain a lot of the current concerns regarding HSBC and Standard Chartered.

I'd take this more more seriously were it not for the hint of bitterness.
http://blogs.wsj.com/moneybeat/2014/01/09/fitch-analyst-charlene-chu-resigns/

Ms. Chu, 42 years old, was born in Denver to an American mother and a Chinese immigrant father who rose from a tea merchant’s son in Hunan province to become a general in Chiang Kai-shek’s Nationalist army.

When Mao Zedong’s Communists took over in 1949, her father, who has since died, fled to Hong Kong and later, at age 59, immigrated to America, where he worked as a hospital dishwasher. He met Ms. Chu’s mother, a former Franciscan nun who worked part-time jobs at department stores and as a telemarketer. “My father washed dishes until he was 81. I never met anyone who worked harder,” says Ms. Chu.

See also this a good break down of the economic situation in a number of countries with the tapering of U$ quantitative easing.

Fragile economies under pressure as recovery prompts capital flight
The Observer, Sunday 2 February 2014

So far this year $12bn of foreign money has fled the stock markets of emerging economies, and last week's Fed decision will accelerate that. We look at how further loss of western funds could affect six vulnerable countries

 

[yield]

European banks have $3 trillion of exposure to emerging markets
Reuters. Mon Feb 3, 2014

European banks' exposure varies from country to country. BBVA (BBVA.MC) and UniCredit (CRDI.MI) have big exposure to Turkey, Santander (SAN.MC) is most exposed to Brazil, while Standard Chartered (STAN.L) and HSBC (HSBA.L) would be hurt by problems in India and Indonesia. Barclays (BARC.L), meantime, would be most exposed to South African problems, analysts said.

European banks had $3.4 trillion of loans to developing countries at the end of September, according to data from the Bank for International Settlements.

British banks had a $518 billion exposure to the Asia-Pacific region, Spanish banks had $475 billion of loans to Latin America, and banks in France and Italy each had $200 billion of exposure to developing economies in Europe.

Among the most exposed banks, Standard Chartered makes more than 90 percent of its earnings from Asia, Africa and the Middle East, and warned in December that its 10-year record of earnings growth would likely end.

 

[yield]

Why FDR Did Not End the Great Depression – and Why Obama Won’t End This One
Keynes’s 1933 and 1938 Letters To Roosevelt
Counterpunch January 08, 2014 by Alan Nasser.

I'd not heard of Nasser before. Although he makes a Keynesian argument for full employment it is worth reading.

I thought this quote was telling.

In his landmark study of the economy of the 1920s (3), George Soule spelled out the consequences of that settlement:

“…toward the end of [the decade] large amounts of cash remained in the hands of of the big manufacturing and public-utility corporations that they did not distribute either in dividends or by means of new investment… the large corporations accumulated even more cash than they needed for their own uses… This money eventually spilled over into stock speculation. … [T]he surplus funds of large business corporations were now being lent directly to speculators… A curious commentary on the state of the American economy at the time is the fact that business could make less money by using its surplus funds in production than it could by lending the money to purchasers of stocks, the value of which was supposed to be determined by the profit on that production.”

For big manufacturing and public-utility corporations read financial and technology companies.

The great Google, Facebook and Apple cash pile
FT (via cnbc) Tuesday, 31 Dec 2013

I calculate that the combined cash and liquid investments of Apple, Microsoft, Google, Cisco, Oracle, Qualcomm and Facebook now top $340 billion, a near-fivefold increase since the start of the millennium.

GE-Sponsored "Territorial" Study Promotes Agenda of Tax Avoidance
Tax justice blog. November 8, 2013

More fundamentally, the authors seem to believe that the trillions of dollars that multinational corporations claim they earn in tax havens are floating in baskets in the Caribbean, and are unavailable for use in the United States. But that’s not true. As we’ve learned from the annual reports of companies such as Apple, most of that money is actually invested in the United States, in the stock market, corporate bonds and government bonds. In other words, most of the money is already here. It just hasn’t been taxed.

Why Fantastically Wealthy Apple Is Borrowing Money
Wired. 05.01.13

As Oppenheimer points out, if Apple brought its foreign cash back stateside, it would have to fork over 35% of it in taxes under current U.S. law. The U.S will give Apple credit for taxes it already paid to foreign governments, but by Blouin’s calculation based on Apple’s 2012 10-K, Apple’s estimated foreign tax rate on its hoard of foreign earnings (i.e. its permanently reinvested earnings) is — wait for it — 0.84%.

Let’s be generous and call it a full percentage point, even two. “Apple can either pay the U.S. government 33 or 34 cents on every dollar it repatriates,” Blouin says. “Or it can borrow in the U.S. at 3 percent—maybe not even that much.”

Of that interest, 100 percent is tax deductible, so after taxes, the cost of the interest is 65% of the base rate. That means Apple can pay out a penny or more for every dollar it raises in bonds, or lose about one-third of every foreign dollar it brings back home. “It’s not hard to do the math there,” Blouin says. “I could be off by magnitudes, and it would still make sense.”

Things will change when interest rates start rising.

 

[Barking_Mad]

Another death.

Richard Talley, 57, and the company he founded in 2001 were under investigation by state insurance regulators at the time of his death late Tuesday, an agency spokesman confirmed Thursday.

It was unclear how long the investigation had been ongoing or its primary focus.

A coroner's spokeswoman Thursday said Talley was found in his garage by a family member who called authorities. They said Talley died from seven or eight self-inflicted wounds from a nail gun fired into his torso and head.

Also unclear is whether Talley's suicide was related to the investigation by the Colorado Division of Insurance, which regulates title companies.

...
It would appear, unfortunately, that Mr. Talley was not an entirely honest man...

Talley's 1989 wedding announcement in the Chicago Tribune noted he was "a member of the 1980 U.S. Olympic swimming team."

A spokeswoman for USA Swimming on Thursday said Talley was not on the team

 

[yield]

World's top financial regulator joins global FX probe
Reuters. Fri Feb 14, 2014

The scale of the probe and severity of the allegations were outlined last week by FCA chief executive Martin Wheatley, who told British lawmakers that the investigation would last into next year and the allegations were "every bit as bad" as Libor.

Traders' manipulation of London Interbank Offered Rates (Libor), benchmark global interest rates, has resulted in banks shelling out $6 billion in fines and settlements.

Groups of senior traders are alleged to have shared market-sensitive information relevant for the popular WM/Reuters "fix," or London fix, which is set at 4 p.m. London time, using actual trades.

London is the hub of the global market, accounting for some 40 percent of the $5.3 trillion traded on an average day.

"Light touch regulation"

 

[teqniq]

And another one bites the dust:

Ryan Crane, JPMorgan Equities Trading Executive, Dies at 37

Ryan Crane, a JPMorgan (JPM) Chase & Co. employee who in a 14-year career at the New York-based bank rose to executive director of a unit that trades blocks of stocks for clients, has died. He was 37.

He died on Feb. 3 at his Stamford, Connecticut, home, according to the website of Leo P. Gallagher & Son Funeral Home in Greenwich, Connecticut. The cause of death will be determined when a toxicology report is completed in about six weeks, said a spokeswoman for the state’s chief medical examiner....

 

[Boris Sprinkler]

This thread makes for interesting reading. I am currently being sniffed by a financial instituation and the role would mean moving country. On the other hand they are offering a quarter of million pounds, but if things are desperate as they seem, it may not be wise to leave my stable but lower paying job.

 

[Artaxerxes]

This thread makes for interesting reading. I am currently being sniffed by a financial instituation and the role would mean moving country. On the other hand they are offering a quarter of million pounds, but if things are desperate as they seem, it may not be wise to leave my stable but lower paying job.

Even living short term on that much money would mean you could put away enough to afford to be unemployed for a short while surely?

I've been working at my place for 3 years and have enough atm to live for a year without working and thats well over 200k less than what they are offering you.

 

[Boris Sprinkler]

2 years would pay off my current mortgage, and put aside a sizeable sum for a house here. Ethically reprehensible (depending on your politics) but being further away from my daughter than I would like.

 

[gosub]

http://www.rollingstone.com/politic...the-mega-banks-most-devious-scam-yet-20140212

 

[hipipol]

This thread makes for interesting reading. I am currently being sniffed by a financial instituation and the role would mean moving country. On the other hand they are offering a quarter of million pounds, but if things are desperate as they seem, it may not be wise to leave my stable but lower paying job.

Take the wedge guy
Specially if it moves you to a lower tax rate

 

[Yuwipi Woman]

Dr. Jon recently posted some numbers for "shadow economy" in Spain. Here's some numbers for the US:

Today's better-than-expected jobs numbers are just one outward sign of the economy's continued -- though sluggish -- recovery from the Great Recession. But there may be another explanation for why consumers keep spending more despite higher payroll taxes and more pain at the gas pump.

That reason is a thriving shadow economy, estimated to have reached as much as $2 trillion last year, according to a study (.pdf file) co-written by Edgar Feige, an economist at the University of Wisconsin-Madison, and Richard Cebula, a finance professor at Jacksonville University. ....

As a result, the underground economy has doubled since 2009, according to a study from a professor at Johannes Kepler University that CNBC cited.

http://money.msn.com/now/post.aspx?post=24e98431-1331-4659-920f-d99d868de5c9

 

[hipipol]

Number of points:-
It is unlikely that figures from Chinese companies ref their incomes is accurate in all but the largest and most exposed to international scrutiny, even then, beware.
It has always been so
Emerging market debt in the form of Loan, Credit Securities, Bonds, CBs etc are normally well hedged
Most lenders long since migrated from the directional punt with regard to speculative hole in the ground with a liar standing next to it scenario
Biggest danger for the EM economies is the flight to safety of the cheap capital the QE created US treasury yields actually droopped in Jan remember
Number of players in the Distressed market is growing so even at worse with the CDS payout (assuming anyone admits their has been a "Credit Event") and 15c in the $ back you wont lose the lot

 

[Boris Sprinkler]

Take the wedge guy
Specially if it moves you to a lower tax rate

I think it puts me of course to a higher tax rate overall. Is the high tax rate 50% in the uk? As I would expect and would be happy to pay. Still would be taking home over double what I do now.i think. Numbers suck, I'm not a mathematician. Luckily that's not what they are asking me to do otherwise I would quickly come unstuck.

 

[Boris Sprinkler]

Even living short term on that much money would mean you could put away enough to afford to be unemployed for a short while surely?

I've been working at my place for 3 years and have enough atm to live for a year without working and thats well over 200k less than what they are offering you.

I have never been unemployed. Unless you count two weeks dole when I was 18 and I got fired from my job for attitude problems. It would mean I could get a lower paid more ethical job and still provide for my family for a while.

 

[Barking_Mad]

Take the money and give some of it to an organisation you're keen on supporting?

 

[Boris Sprinkler]

Me?

 

[Barking_Mad]

Yeah, but only if you're struggling with a possible 'morally reprehensible' decision.

 

[Bernie Gunther]

Interesting article in the Financial Times yesterday saying basically,

'Talk of recovery is bullshit, for example look at car workers' wages which are actually falling in real terms'

In other words, the only people enjoying a recovery are the arseholes in the City whose gambling debts got us into this mess.

 

[hammerntongues]

Presidents day in the US meant that all floor trading was closed and as such the afternoon tailed off into a very relaxed session. What we did hear yesterday that was interesting was that George Soros has doubled his bearish bets on the S&P500. According to SEC filings, his fund now has around 11% of it's of its holdings (or $1.3bn) in put options, betting that the index is going to suffer a fall.

Gold prices were on the move again yesterday and overnight, as investors worry that the Chinese credit bubble may be close to bursting. Prices are now up more than 10% from their lows and the net long position in the futures market climbed 17% last week. The metal now sits at $1,320 per ounce, back above the 200 day moving average but a long way from 2011's all-time highs of $1,895.

The sage tends to get it right more often than not .................

 

[Dr Jon]

Just spotted this:
Banks Are Obsolete: The Entire Parasitic Sector Can Be Eliminated

Technology has leapfrogged the banking sector, rendering it as obsolete as buggy whips. So why are we devoting 9% of our economy to an obsolete parasite?