Global financial system implosion begins

[yield]

More bad news everywhere at the moment.

World's biggest pension fund loses $64 Billion amid equity rout
November 30, 2015

The loss was GPIF’s first since doubling its allocation to stocks and reducing debt last October, and highlights the risk of sharp short-term losses that come with the fund’s more aggressive investment style. Fund executives have argued that holding more shares and foreign assets is a better approach as Prime Minister Shinzo Abe seeks to spur inflation that would erode the purchasing power of bonds.

Brazil's recession deepens, worst annual drop on record
Dec 1, 2015

Brazil's economy shrank 1.7 percent in the third quarter, deepening its worst recession in 25 years and starving President Dilma Rousseff's government of taxes as she struggles with a growing fiscal deficit and a vast corruption scandal.

 

[teqniq]

I think this is as good a place to put this as any. Popped up on my FB feed a couple of days ago - it's actually from 2014

This is my favourite bit of the speech

"We live in capitalism, it's power seems inescapable. So did the divine right of kings."

from Ursula K Le Guin calls on fantasy and sci fi writers to envision alternatives to capitalism

 

[not-bono-ever]

standard bank punting that the us economy is so shoddy, the fed will actually cut rates back by the end of next year.

 

[yield]

Corporate debt downgrades hit $1tn worth of issues
FT 04/12/15

More than $1tn in US corporate debt has been downgraded this year as defaults climb to post-crisis highs, underlining investor fears that the credit cycle has entered its final innings.

The figures, which will be lifted by downgrades on Wednesday evening that stripped four of the largest US banks of coveted A level ratings, have unnerved credit investors already skittish from a pop in volatility and sharp swings in bond prices.

Analysts with Standard & Poor’s, Moody’s and Fitch expect default rates to increase over the next 12 months, an inopportune time for Federal Reserve policymakers, who are expected to begin to tighten monetary policy in the coming weeks.

 

[teqniq]

Another crash on the cards soon then eh?

 

[yield]

Another crash on the cards soon then eh?

Impossible to predict how long they can kick the can down the road.

The European Central Bank, Bank of Japan and People's Bank of China are throwing cheap money at the problem.

So many defaults with near zero interest rates and the commodities crash are a concern.

The outcome of financial crisis of 2008 was postponed rather than resolved.

 

[teqniq]

...The outcome of financial crisis of 2008 was postponed rather than resolved.

Well yes, precisely.

 

[yield]

Banks said to face SEC probe into possible credit swap collusion
December 5, 2015

The U.S. Securities and Exchange Commission is probing whether firms acted in unison to distort prices in the $6 trillion market for credit-default swaps indexes, said the person, who asked not to be identified because the investigation is private. The regulator is trying to determine if dealers have misrepresented index prices, the person said. The credit-default swaps benchmarks allow investors to make bets on the likelihood of default by companies, countries or securities backed by mortgages.

The probe comes after successful cases brought against Wall Street’s illegal practices tied to interest rates and foreign currencies. Those cases showed traders misrepresented prices and coordinated their positions to push valuations in their favor, often through chat rooms -- practices that violate antitrust laws. The government has used those prosecutions as a road map to pursue similar conduct in different markets.

Credit-default swaps, which gained notoriety during the financial crisis for amplifying losses and spreading risks from the U.S. housing bust across the globe, have since come under more scrutiny by regulators. Trading in swaps index contracts has increased in recent years as investors look for easy ways to speculate on, say, the health of U.S. companies, or the risk that defaults will increase as seven years of easy-money policies come to an end.

"Everything's fucked up, and nobody goes to jail,"

We are shrinking! The neglected drop in Gross Planet Product
07 December 2015

Presenting the October 2015 IMF World Economic Outlook, Maurice Obstfeld (2015) identified the fall of commodity prices as one of the powerful forces shaping the outlook for the world economy. The strength of this force, however, is underestimated by the official forecasts in the IMF’s flagship publication. As illustrated in Figure 1 the IMF world economic outlook database reports a reduction of Gross Planet Product (GPP) for the year 2015 by -3,8 trillion dollar (-4.9%). A nominal reduction of GPP of this size has occurred only once since 1980 (the starting year of the IMF database), namely at the start of the Great Recession when GPP contracted by -5.3%. Table 1 illustrates that all previous contractions of nominal GPP are associated with major crises in the world economy.

 

[Coolfonz]

The cool CEO reduced his $1mn/yr wage to pay his employees $70,000/yr, what a saint. Or was he? Top top journalism from Karen Weise at Bloomberg.
The CEO Paying Everyone $70,000 Salaries Has Something to Hide

 

[yield]

Lots of "The sky is falling!" articles in the financial press at the moment.

Warning: Half of oil junk bonds could default
December 10, 2015

Opinion: Stocks are more overvalued now than at 2000 and 2007 peaks
Dec 11, 2015

Gundlach says 'never just one cockroach' in any kind of credit meltdown
Fri Dec 11, 2015

Thursday, Martin Whitman's Third Avenue Management said it was barring investor withdrawals while it liquidated its high-yield bond fund, an unusual move that highlights the dangers of loading up on risky assets that are hard to trade even in good times.

"There's never just one cockroach" in any kind of credit meltdown, said Gundlach, who oversees $80 billion at the Los Angeles-based DoubleLine Capital. Investors have been on "credit overload," in a reach for yield, Gundlach said. "People are too long credit and the credit is melting down and the stock market is whistling through the graveyard. It is so similar to 2007, it’s scary."

USA Federal Reserve to meet next week to discuss raising interest rates.

 

[not-bono-ever]

I am retiring from this thread as I have been forecasting doom for years now with no success. I shall spend my newly found free time equipping my freshly dug garden bunker with beans and bottled water. good luck.

 

[hipipol]

Spanish energy giant Abengoa's collapse predicted by 17-year-old

Pepe Baltá, a secondary school student in Barcelona, chose Abengoa as his economics project and noticed flaws in its accounting. “If it does not act soon, there is a strong risk Abengoa will go into bankruptcy,” Baltá wrote last year in his 18-page paper, titled Analytical report on Abengoa, 2012 and 2013.

Spanish energy giant Abengoa's collapse predicted by 17-year-old

Seems he spotted obvious bollocks in the accts that Deloittes missed while Standard and Poors upgraded their credit rating just weeks before its collapse

The Emperor has no kit and neither it seems does much of the empires institutional framework

 

[Lurcio]

I am retiring from this thread as I have been forecasting doom for years now with no success. I shall spend my newly found free time equipping my freshly dug garden bunker with beans and bottled water. good luck.

Don't leave now ... the opportunity to bask in the warmth of self-righteous smugness may be close at hand!

 

[Coolfonz]

Spanish energy giant Abengoa's collapse predicted by 17-year-old

Pepe Baltá, a secondary school student in Barcelona, chose Abengoa as his economics project and noticed flaws in its accounting. “If it does not act soon, there is a strong risk Abengoa will go into bankruptcy,” Baltá wrote last year in his 18-page paper, titled Analytical report on Abengoa, 2012 and 2013.

Spanish energy giant Abengoa's collapse predicted by 17-year-old

Seems he spotted obvious bollocks in the accts that Deloittes missed while Standard and Poors upgraded their credit rating just weeks before its collapse

The Emperor has no kit and neither it seems does much of the empires institutional framework

Was predicted by a lot of people, terrible, terrible company.

 

[Coolfonz]

Don't leave now ... the opportunity to bask in the warmth of self-righteous smugness may be close at hand!

Ambrose EP calling global rebound already.

 

[hipipol]

Was predicted by a lot of people, terrible, terrible company.

Possibly so but such an understanding seems to have bypassed one the worlds largest supposedly "respected" global scale accounting (perhaps I meant "acting") firms , - they were the fucking auditors!!!! - an to have been totally invisible to S&P - admittedly they have form in this area - CDO/CMO/C(add inly capital letter collection here).............. for example......
The point is not what "market insiders" said, its the fact that a 17 year old kid as part of school project, using freely available public data, paid, well whatever a 17 year old Catalan boy gets as pocket money theses days was able to reach such a conclusion AGAINST the official prognosis of a bunch of Harvard and MIT megabrains whose combined salaries could probably relocate and house around 10-15% of Syrian refugees without even having to lay off any of their private jets

 

[hipipol]

Ambrose EP calling global rebound already.

What?
Does this mean that a bottle of Irn Bru is now worth about the same as a barrel of oil???
Hurragh!!
We are all saved..........

 

[mauvais]

There's a long string of fraud-related corporate collapses where the Big Four auditors have missed the obvious and half-arsed financial bloggers have been the ones to pull the trousers down instead.

 

[hipipol]

There's a long string of fraud-related corporate collapses where the Big Four auditors have missed the obvious and half-arsed financial bloggers have been the ones to pull the trousers down instead.

My happiest moment was when Arthur Anderson, wrapped in the coils of the vile demon they had helped create, collapsed after Enron

 

[Lurcio]

What?
Does this mean that a bottle of Irn Bru is now worth about the same as a barrel of oil???
Hurragh!!
We are all saved..........

No, it means you must start stockpiling barrels of a [certain] Scottish soft drink!

Not sure I want to see Scotland have this much power over the global economy, tbh.

We're doooooooooooooomed!

 

[mauvais]

My happiest moment was when Arthur Anderson, wrapped in the coils of the vile demon they had helped create, collapsed after Enron

I'm still waiting for most of the contemporary good ones to result in anything. I might as well be waiting for Godot though.

I wrote about Quindell on here; well they were audited by KPMG before their scandal. Afterwards the wreckage was then audited by PWC, all whilst Quindell did a nonsensical deal to offload it all to as-seen-on-TV ambulance chasers Slater & Gordon, who appear to have Ernst & Young as their auditors, and the latest is that S&G are being investigated by the Australian regulator after everyone else has failed to do their jobs.

 

[Lurcio]

Conflict of interest built into the architecture . . .
revolving door between auditors and the companies they're supposed to be assessing. Plus, the same auditors require the companies to keep coming back in order to pay their huge fees.

And they'll only do that if they get 'favourable' audits!

Its a 'mutual beneficial arrangement' ... not a credible accounting process.

 

[Coolfonz]

Possibly so but such an understanding seems to have bypassed one the worlds largest supposedly "respected" global scale accounting (perhaps I meant "acting") firms , - they were the fucking auditors!!!! - an to have been totally invisible to S&P - admittedly they have form in this area - CDO/CMO/C(add inly capital letter collection here).............. for example......
The point is not what "market insiders" said, its the fact that a 17 year old kid as part of school project, using freely available public data, paid, well whatever a 17 year old Catalan boy gets as pocket money theses days was able to reach such a conclusion AGAINST the official prognosis of a bunch of Harvard and MIT megabrains whose combined salaries could probably relocate and house around 10-15% of Syrian refugees without even having to lay off any of their private jets

Sure thing. But there are companies set up so it doesn't even matter if people have concerns. The investor banks finally had concerns about Abengoa over a year ago now, first share price collapse. There are a lot of companies carrying debt multiple times over their market cap...but they trundle along...Abengoa thought they wd always have access to debt markets to continue their operating structure. Get a job, get a loan to develop it, get another job, get another loan...

May well end up banks will loan them more to get over into 2016 as well...despite it all.

 

[hipipol]

Sure thing. But there are companies set up so it doesn't even matter if people have concerns. The investor banks finally had concerns about Abengoa over a year ago now, first share price collapse. There are a lot of companies carrying debt multiple times over their market cap...but they trundle along...Abengoa thought they wd always have access to debt markets to continue their operating structure. Get a job, get a loan to develop it, get another job, get another loan...

May well end up banks will loan them more to get over into 2016 as well...despite it all.

Sure thing. But there are companies set up so it doesn't even matter if people have concerns. The investor banks finally had concerns about Abengoa over a year ago now, first share price collapse. There are a lot of companies carrying debt multiple times over their market cap...but they trundle along...Abengoa thought they wd always have access to debt markets to continue their operating structure. Get a job, get a loan to develop it, get another job, get another loan...

May well end up banks will loan them more to get over into 2016 as well...despite it all.

I know fuck all about them
So, primary Qs;_
Are their underlying technologies good and deliver as promoted?
Is their difficulty in both finance and execution, ie Executive failure?
Is the whole thing a pile of lies, complete and total fraud

 

[Coolfonz]

its their debt levels. debt to capital was crazy high. 900 subsidiaries. 900? accounting was odd. evasive with media, analysts.

they became a bit enron, a financial co with energy concerns, rather than other way around.

 

[teqniq]

There's a long string of fraud-related corporate collapses where the Big Four auditors have missed the obvious and half-arsed financial bloggers have been the ones to pull the trousers down instead.

Which kinda begs a very big question. Whose interest do they really serve?

 

[hipipol]

its their debt levels. debt to capital was crazy high. 900 subsidiaries. 900? accounting was odd. evasive with media, analysts.

they became a bit enron, a financial co with energy concerns, rather than other way around.

Ace, the Slater-Walker option
Slater Walker - Wikipedia, the free encyclopedia
Jim Slater (accountant) - Wikipedia, the free encyclopedia
Peter Walker, Baron Walker of Worcester - Wikipedia, the free encyclopedia

Sadly the Wiki's been sanitised somewhat - fails to point out that there were warrents issued for the arrest of Walker in Singapore and Malaysia, while he was secretary of state for trade and industry ( if you think we have a load of money grubbing chancers in charge now, check this git out) over the outright theft of monies, the sales of the factories themselves - well after they had ripped out the plant used to make anything - from Haw Par group - makers of Tiger Balm amongst other things. The firm collapsed, thousands put out of work etc . We had the amazing situation where a Member of the UK Cabinet had to stay in the UK as there was the danger of his being cuffed and carried off for being a blatant thief.
Sadly this experience seems almost unknown these days
The shock meant that the revived Haw Par - bailed out in part by SG and HK govts _ HK was a UK Colony at the time so that means that then Tory UK Govt he was a member of (?????) has turned itself into a property company in the main - cant beat em, join em, eh?
Haw Par has been run since 78 by a certain Mr Wee, styled Dr by the firm on account of the "Honorary" degrees he seems to have gained via universities he has given loads of wedge to
Jim Slater was briefly banged up, wrote a book about what a twat he was, then set up a successful accounting firm
Walker glided happily thru the while lot and now dead, was made a Baron !! for his skills, Motto :- Diligentia Cum Humanitate (Diligance with humanity)

You really cant make this shit up, but then you don't need to as its still all on the go today.......

 

[mauvais]

Which kinda begs a very big question. Whose interest do they really serve?

Short answer: they serve themselves, and the second to that, their customers. Certainly the systemic checks & balances are a long way down the list.

Longer answer: their job isn't outright fraud detection & prevention. It's meant to be a cooperative regime whose apparent purpose is standardisation of accounting methods across the system as well as verification of something that's honestly presented. So they're only as good as the info they're given. And then what Lurcio said about conflict of interest - exactly that.

But obviously when junior interns are signing off on accounts, and the auditor is missing things that the casual observer can see, and the other bit of the system, the regulator, has been cut down to nothing because people think auditors do its job, that configuration is not fit even for benevolent environments.

 

[gosub]

Is the next financial crisis nigh? Could closure of Third Avenue Fund finally explode the post-crisis asset bubble?

 

[yield]

Which kinda begs a very big question. Whose interest do they really serve?

It's not a bug, it's a feature.