Global financial system implosion begins

[mauvais]

FT Alphaville's free. It does require registration though.

The FT proper, I'm not sure how it works but sometimes you can read articles. I don't have a subscription.

 

[Coolfonz]

you can read FT articles via Google news, just find the headline and bingo le pingo

 

[not-bono-ever]

glencore are marc rich. they are like cockroaches. they will survive in one form or another

um

I could be wrong here. looks like there is $100 bn of largely unsecured shite provided by finance houses to glencore , based on glencore flows.much is credit lines.

I can see some of them trying to reign in their exposure before the glencore pot is emptied. this is worth watching.

 

[Coolfonz]

yeah its fairly basic as i see it, not expert on Glencore tho.

but they had big exposure to commodities, mainly copper, obvs. and their credit was based on commodities being expensive for ever and then suddenly they aren't, then China went a bit wonky earlier in the year. double crikey.

basically they don't want the banks/funds to leg it to the exit and if one big one goes they all might go pronto.

same thing happens to small cos with too much debt. gearing goes bonkers and credit heads for the door.

 

[not-bono-ever]

more shit being lined for despatch to the fans. the gold market may not be as open ad it seems. usual suspects implicated in rigging.

Switzerland probes banks over precious metals price fixing

funnily enough , at least one of these us has been trying to get out if the market for a year now without losing face. the others are neck deep in libor rigging pretty much.lots more to come out of this. lots and lots...

and we are off

announced yesterday - Mitsui are shutting down their entire precious metal business globally by the end of the year. (ETA they state they will retain their PM business in HK- which is sorta futile ) They are pretty big and it will take some unwinding- 4 or 5 global offices i think - they will also be taken to the fucking cleaners on the metals they are holding if their competitors have anything to do with it. This is fairly serious for a big Japanese company to lose face and shut down an entire global division. Apparently it has nothing to do with the precious metals fixing case that they have been fingered in .the commodities markets are so fucked and so many big players are getting out, no one wanted to take this business on, even for a nominal $1.

deutsche bank are already in the departure lounge, having pretty mucjhjumped ship in bullion and are still trying to offload their brand spanking new London 1500 MT capacity gold vault to whatever hapless victim comes along with £4.5M cash to spare

Massive 1,500 Ton Gold Vault For Sale In The Heart Of London, One Previous Owner, Asking £4,500,000 O.B.O. | Zero Hedge

 

[teqniq]

 

[mauvais]

As I said on another thread, most mining projects - usually in dubious shitholes - have high fixed costs that eclipse any profit once the commodity costs fall too low. That leads to abandonment of the project, probably faster than we've seen with oil, because it seems to involve a lot more speculation and credit, possibly with lower barriers to entry.

You have to wonder though what Glencore going down the pan would do to supply and therefore the price. It's not like metals demand has gone away completely.

 

[gosub]

As I said on another thread, most mining projects - usually in dubious shitholes - have high fixed costs that eclipse any profit once the commodity costs fall too low. That leads to abandonment of the project, probably faster than we've seen with oil, because it seems to involve a lot more speculation and credit, possibly with lower barriers to entry.

You have to wonder though what Glencore going down the pan would do to supply and therefore the price. It's not like metals demand has gone away completely.

Will be a long lag. China's storage facilities are full.


My brother has dealing will Glencore senior management, one of them anyway. Cashed out his stock months ago, very iffy

 

[yield]

and we are off

announced yesterday - Mitsui are shutting down their entire precious metal business globally by the end of the year. (ETA they state they will retain their PM business in HK- which is sorta futile ) They are pretty big and it will take some unwinding- 4 or 5 global offices i think - they will also be taken to the fucking cleaners on the metals they are holding if their competitors have anything to do with it. This is fairly serious for a big Japanese company to lose face and shut down an entire global division. Apparently it has nothing to do with the precious metals fixing case that they have been fingered in .the commodities markets are so fucked and so many big players are getting out, no one wanted to take this business on, even for a nominal $1.

For a few minutes there I thought you meant Mitsubishi!

So how big are Mitsui Group? I've not heard of them before.

Some of the papers are saying the precious metals price fixing is worse than LIBOR?

Cue lots of goldbugs screaming to audit Fort Knox or the Fed.

 

[not-bono-ever]

massive. but a sleeper to most of us.eons old sogo soshu trading corporation.involved in everything from aircraft to oil production.

were huge in bullion.held the chair of both the lbma and the lppm recently.part of the gold fix lot in london.

the gold fix is more of a headline grabber than libor obvs but would suggest it is if minimal impact. fron what I hear it was moreabout collusion in setting forward rates for lenders and borrowers.

 

[not-bono-ever]

whilst the glencore and kaz boys hunker down in zug and see what they can rescue to ensure their wealth is ringfenced, their partners at the mines have to deal with being dumped as excess baggage.

Zambia Trying to Avoid IMF Runs Out of Options as Kwacha Slumps

zambian prez lungu has requested a national day of fasting and prayers thi weekend to get them through this shitstorm. drought and falling water levels has ensured much of the country is without leccy most days anyway.

thats what is has come to. we are running out of alchemy economic ideas- there is no plan b - revert to hoping for divine intervention as a last resort.

 

[Dandred]

I'm going to invest in LCD lamps, when blade runner happens I will win!

 

[J Ed]

Here Comes the Next Global Recession

 

[not-bono-ever]

dont say that, I have just got another fucking job after my 4th redundancy

 

[hot air baboon]

....despite the view that was taking hold that there was some sort of inevitable count-down underway to the US Federal Reserve raising interest rates that seems difficult to square with ...reality...

....given the vast levels of debt that have built up in the system how can interest rates ever get off the floor without precipitating an almighty explosion....

Global Debt Has Increased By $57 Trillion Since 2007 [Infographic]

....acording to Andrew Haldane at the Bank of England :

Interest rates appear to be lower than at any time in the past 5000 years


.....and this....

Investors on Monday bought $21 billion in three-month Treasury bills at a yield of zero, the lowest yield at a three-month Treasury auction ever recorded.

3-month Treasury bills sold at record low 0% yield

...this is the first time in history this has ever happened....

...iirc treasury bills are sold 3 months out at say $98 and you then get back the face value of $100 in 3 months thus generating $2 interest / yield...people are basically buying them for $100 to get $100 in 3 months as there are absolutely no returns to be had out there.....you are basically accepting nil just to stuff your money in the US Govt's mattress incase the system goes into cardiac arrest again....

 

[gosub]

Deutsche Bank: We can already see how London's insane property bubble will end

 

[laptop]

Deutsche Bank: We can already see how London's insane property bubble will end

Why the Deutsche Bank analyst expects a house-price crash:

A shift in expectations about future supply was much more instrumental in bringing about the downturn [in Hong Kong]. The post-handover government had made it known that it would welcome a decline in property prices and would increase supply by 85,000 units a year. In retrospect, at no point during the next five years did housing completions reach 35,000 annually. Yet because the decision had credibility, it changed expectations and the 85,000 figure is still cited today as a reason for the market decline. The government announcement precipitated a change in psychology that diminished the speculative increment in the market

So. If "the market" forms a belief that the government will do anything at all about homelessness, house prices will tank, swiftly followed by the economy.

Isn't capitalism wonderful?

 

[mauvais]

Why the Deutsche Bank analyst expects a house-price crash:



So. If "the market" forms a belief that the government will do anything at all about homelessness, house prices will tank, swiftly followed by the economy.

Isn't capitalism wonderful?

Well the inflated price (and to a lesser extent the inter/national economic boom) is largely speculative anyway, rather than real demand or tangible value, and what's speculation but market sentiment, so yeah, that is exactly it. Why the surprise?

A housing crash won't necessarily take everything down but it will do some major damage, and that's what happens when you don't diversify both individual portfolios and the national economy, and in the last crash, what happens if you don't manage risk exposure.

 

[mauvais]

UBS were in the news today with basically a photocopy of the same story, by the way, although an analyst consensus doesn't necessarily make it happen.

 

[gosub]

Presumably the foreign investors, have bought with foreign borrowing rules (and foriegn denominated loans), do these have as many hoops to go through and are they in UK terms-debt follows you if house repossessed?

 

[mauvais]

Presumably the foreign investors, have bought with foreign borrowing rules (and foriegn denominated loans), do these have as many hoops to go through and are they in UK terms-debt follows you if house repossessed?

Which investors? Individual foreign citizens buying property on a single or piecemeal basis, or investors in either giant projects or generalised 'UK property' investment vehicles in the form of managed funds etc? Because the answer varies across that spectrum. I think in any case it's wrong to look at most overseas investment as a traditional homeowner problem; it's an investment, equity and debt problem just like buying stocks or commodities, so it doesn't matter. As is domestic BtL to some extent. You can't escape the devaluation either way.

 

[mauvais]

A question I think should be considered is what happens to tenants and the bricks and mortar in this collapse.

The most benevolent and gentle configuration of this thing is that at least for houses, speculative interest declines, the property asset value drops, but is met at some reduced level by pent-up demand from would be homebuyers. So far, not so bad - negative equity for those overexposed but only the speculators really lose their shirts.

But, there are cases where demand is inflexible. For instance I'm regularly spammed with offers to invest in student accommodation projects. The demand for that is constant. If the viability of a return out of this crap goes away, what happens to the properties? They get revalued down and newly bad debt gets written off, but rent rates fall, and ongoing costs don't, so are they now toxic? Ditto for commercial property where demand is influenced by economic growth. So potentially there's a shakeup of at least a good part of the property spectrum.

 

[gosub]

A question I think should be considered is what happens to tenants and the bricks and mortar in this collapse.

The most benevolent and gentle configuration of this thing is that at least for houses, speculative interest declines, the property asset value drops, but is met at some reduced level by pent-up demand from would be homebuyers. So far, not so bad - negative equity for those overexposed but only the speculators really lose their shirts.

But, there are cases where demand is inflexible. For instance I'm regularly spammed with offers to invest in student accommodation projects. The demand for that is constant. If the viability of a return out of this crap goes away, what happens to the properties? They get revalued down and newly bad debt gets written off, but rent rates fall, and ongoing costs don't, so are they now toxic? Ditto for commercial property where demand is influenced by economic growth. So potentially there's a shakeup of at least a good part of the property spectrum.

Agreed. The English and Welsh outlawing of squatting residential property is a very recent thing.

 

[not-bono-ever]

UBS were in the news today with basically a photocopy of the same story, by the way, although an analyst consensus doesn't necessarily make it happen.

yes. analysts hunt in packs - sorry for the macho language - its still just expensive guesswork sprinkled with numbers to add weight

 

[mauvais]

yes. analysts hunt in packs - sorry for the macho language - its still just expensive guesswork sprinkled with numbers to add weight

It is fundamentally true though, just like inevitable death. What's happening is unsustainable, both in market terms and socio-political ones. The questions are only when and how it will fail, not where or if - and thus for some, how much hay they can make whilst the sun is still shining.

 

[not-bono-ever]

I am just ploughing through a yet unreleased outlook for 2015 .pdf.from a bank. Opening para says they have revised global growth downwards for next year. Will report back.

 

[yield]

Foreign banks use US repo deals to ‘window-dress’ risk
FT November 1, 2015

Foreign banks operating in the US short-term debt markets are “window-dressing” their accounts, routinely cutting about $170bn of balances at the end of each quarter to appear safer and more profitable, says a new study.

The study from the Washington, DC-based Office of Financial Research describes a pattern of behaviour that has prevailed since July 2008, and suggests that the banks are carrying more risk than their investors or customers can easily see.

The study examines the vast market for repurchase agreements, or “repos,” where banks lend out assets in return for short-term financing. It finds that dealers sell heavily to customers in the last days of the quarter, and immediately buy assets back once the new quarter starts. By trimming their balance-sheets over that brief period, the foreign banks can report better quarter-end ratios of capital to total assets.

US banks, which have to report average daily balances over the quarter, do not make similar adjustments, the study found.

“This abrupt, seasonal rhythm . . . is consistent with a pattern of ‘window-dressing,’” wrote Greg Feldberg, acting deputy director for research and analysis at the OFR, in a blog post.

Analysts said the behaviour outlined in the study has shades of the notorious “Repo 105” trades that Lehman Brothers used to bring down its reported leverage in the quarters leading up to its collapse. In that programme, the broker accepted a relatively high 5 per cent fee in order to count its repo transactions as true sales, even though it remained under a contractual obligation to buy the assets back.

Joshua Ronen, a professor of accounting at New York University’s Stern School of Business said the OFR’s study — which did not cite individual banks by name — showed that lenders with the lowest capital ratios were making the biggest quarter-end reductions.

Deutsche Bank, Credit Suisse and Barclays — three of the biggest foreign players in the US repo markets — declined to comment on the study.

One bank pointed out that foreign banks will have to adopt US-style daily leverage reporting requirements by January 2018, and that many had already begun to adjust their repo activities to comply with daily averaging — including reducing the absolute amounts and quarter-end adjustments.

For now, though, outsiders should take the banks’ reported ratios with a pinch of salt, said Mayra Rodriguez Valladares of MRV Associates, a former official at the Federal Reserve Bank of New York.

“If they’re moving assets around to look better it is a big problem for us, as we don’t get to see the day-to-day information,” she said.

“If something adverse happens, we could have been lulled into a false sense of security that [the banks] are sufficiently capitalised.”

Worked so well before.

Apocalypse now: has the next giant financial crash already begun?
Paul Mason Sunday 1 November 2015

 

[yield]

Dwindling cash transactions point to an inconvenient truth
FT. November 6, 2015

But it is still hard to read the pattern of cash flows optimistically, even if financial engineering has brought the US stock market close to its all-time highs for now. Companies are getting less cash than they used to, they are not optimistic that they can invest it productively and so they are choosing to deploy it in a way that weakens the chances of sales growth in the future. Not encouraging.

 

[yield]

Japan 's 'quintuple dip' recession delivers a fresh blow to Abenomics
Monday 16 November 2015

Japan has slid back into recession for the fifth time in seven years amid uncertainty about the state of the global economy, putting policymakers under growing pressure to deploy new stimulus measures to support a fragile recovery.

The world’s third-largest economy shrank an annualised 0.8% in July-September, more than a market forecast for a 0.2% contraction, government data showed on Monday.

More stimulus measures. That's what they were already doing?

Debt market distortions go global as nothing makes sense anymore
November 15, 2015

Something very strange is happening in the world of fixed income.

Across developed markets, the conventional relationship between government debt -- long considered the risk-free benchmark -- and other assets has been turned upside-down.

It’s hard to overstate how illogical it is when swap spreads are inverted. That’s because it suggests that governments are less creditworthy than the very financial institutions they bailed out during the credit crisis just seven years ago. And as the Fed prepares to end its near-zero rate policy, those distortions are coming to the fore.

 

[not-bono-ever]

Was in a group the other day with the head of risk for a major financial in London- not published, but his department are working on the basis of the next major credit event in the next 3 years @ 90% likelyhood.