Global financial system implosion begins

[yield]

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

All the old tricks have been present – companies funding special dividends to private equity owners by issuing debt, others issuing more debt just to pay for existing debt service payments, and commission-hungry investment bankers cynically selling the stuff to hapless investors while simultaneously shorting it themselves in anticipation of trouble to come. Many companies that don’t deserve to exist have found it easy to get finance in the one-time scramble for yield.

As every student of recent economic history will know, the first rumble of thunder in the Global Financial Crisis came with the collapse in the summer of 2007 of two large Bear Stearns hedge funds. Investors demanded their money back, but managers were unable to liquidate their positions fast enough to deliver.

Stone Lion Capital is run by two former Bear Stearns managers.

Stone Lion, founded in 2008 by Bear Stearns & Co. Inc. veterans Gregory Hanley and Alan Mintz, is in a similar malaise, facing heavy losses on so-called distressed investments including junk bonds, post reorganization equities and other special situations, people familiar with the matter said.

 

[hipipol]

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

Interesting article, pretty much a direct lift from Bloomberg earlier in the week, Monday I think, with just a little hysteria spin to keep the Torygraph readership nicely rattled
Personally I suspect that emerging market USD denominated debt is the real worry
Yank rate up tick will strengthen the dollar with the net result that the issuers will have big stress meeting coupon payments - especially hard for those whose economies are dominated by commodity exports and whose currencies have already lost a lot of ground

 

[teqniq]

Well I never.

Indebted UK households are heading towards a new economic crash

British families are on course to spend £40bn more than they earn this year, fuelling fears that the country’s economic growth is based on soaring levels of debt and could easily collapse.

The forecast by the independent Office for Budget Responsibility (OBR) led to warnings that the UK could be heading towards a credit crunch similar to that of 2008 because of unsustainable levels of borrowing and household spending....

 

[hipipol]

Interesting article, pretty much a direct lift from Bloomberg earlier in the week, Monday I think, with just a little hysteria spin to keep the Torygraph readership nicely rattled
Personally I suspect that emerging market USD denominated debt is the real worry
Yank rate up tick will strengthen the dollar with the net result that the issuers will have big stress meeting coupon payments - especially hard for those whose economies are dominated by commodity exports and whose currencies have already lost a lot of ground

Oh dear....
"Dollar bond issuance by Chinese companies increased every year since 2008, jumping to a record $94 billion in 2015 from $2.4 billion seven years ago." - Chief Strategist Hao Hong at Bocom International
Man Who Called China's Boom and Bust Now Warns of Crisis Risks
Its worse for some of the aggressive ASEAN economies

 

[hammerntongues]

The UK ( not the world granted ) economy has held up surprisingly well since this thread started don`t you think ? Whats the timescale on this implosion just so I can check back in later . Do the majority of posters here feel disappointed ( I think so ) or is this good news ?

 

[yield]

The UK ( not the world granted ) economy has held up surprisingly well since this thread started don`t you think ? Whats the timescale on this implosion just so I can check back in later . Do the majority of posters here feel disappointed ( I think so ) or is this good news ?

In theory the FTSE 100 should be a reliable indicator of the global economy as it's weighted to mining, oil & gas and banking multinationals. The FTSE 250 is more UK centric.

Although a lot of people have an indirect stake through pension funds, state owned companies like RBS and implicit taxpayer backed guarantees there's no necessary link between the stock market and the health of the underlying economy.

Given that the temporary emergency measure brought in due to the financial crisis of 2008, including part nationalisation of some banks, near zero interest rates and quantitative easing, are still in affect, I am not surprised that the stock market recovered.

Unfortunately many of the companies have spent more on share buybacks and dividends than they've invested in research and development.

I've said before the outcome of financial crisis of 2008 was postponed rather than resolved. This credit cycle is ending and as the central banks have already massively increased their balance sheets I'm wondering what they'll do when the next recession comes.

 

[hammerntongues]

I see what you mean but even across a broader set of examples , again all UK , GDP , Employment figures , House prices ( another that most bears out there seem disappointed to see so firm ) there is no evidence that I see that we are about to enter another recession , far less a depression . The thread in general seems far happier picking out the gloom and doom articles rather than the friendlier more positive ones . It`s the name of the thread I suppose but its seems that most posters on this thread would actually be far happier if some of the bad news became true rather than the other way around . May be i am interpreting it wrong .

 

[hammerntongues]

The banks have money again , the problem is getting them to lend it , with negative rates in the EU at least the incentive or rather disincentive is there to get investment money back out there in the market . Oil prices at $40 a barrel cannot be dismissed either , outlook from many , including the big houses , is that this could even move lower and for an extended period . China and to a lesser degree India`s slow down has been off set somewhat .

 

[teqniq]

Yes, the banks have money again, a lot of it was ours once.

I see what you mean about the tone of the thread. If there was a massive financial collapse however it would be dire in the extreme for ordinary people amongst whom I count myself. A lot of the stuff I post on here is because I see the same old mistakes being repeated over and over again; the endless cycle of boom and bust. This is imo because Capitalism doesn't really work, not in the long-term anyway. You can only outsource you manufacturing to impoverished countries in an effort to sell as cheaply as possible for the maximum profit for a finite time. Sooner or later the options will no longer be there.

My hopes are, before it's too late (and maybe it already is) that we find a new way of doing things which does not rely on profit being the main motive. But there again I'm a bit of an idealist.

 

[yield]

I see what you mean but even across a broader set of examples , again all UK , GDP , Employment figures , House prices ( another that most bears out there seem disappointed to see so firm ) there is no evidence that I see that we are about to enter another recession , far less a depression . The thread in general seems far happier picking out the gloom and doom articles rather than the friendlier more positive ones . It`s the name of the thread I suppose but its seems that most posters on this thread would actually be far happier if some of the bad news became true rather than the other way around . May be i am interpreting it wrong .

UK economy weaker than expected
Guardian 23/12/15

Nearly 8 years later, UK GDP per head is finally back above pre-crisis levels.

GDP growth has been very weak. Employment is higher for sure but wages haven't kept up and personal credit or indebtedness has exploded.

House prices are up but that is down to supply & demand as not enough have been built to match population growth.

Another recession is a given. It's impossible to predict when a recession will come though. And it needn't be a depression.

The thread title was in response to the worst recession since the great depression in 1929.

If you'd like to post more bullish optimistic articles you're always welcome.

I know I have confirmation bias but I like to think the contributors to this thread are more pragmatic or realistic than negative.

 

[Bernie Gunther]

I suspect there is also a certain amount of pardonable cynicism on Urban about the generally sunny optimism of journalists (along with most economists and regulators) who are in effect employed by capital to boost investor profits via PR rather than accurately monitoring it in the public interest.

 

[hammerntongues]

Pretty much everything or even everything , in a capitalist society is supply demand lead ? Its not restricted to houses , jobs certainly . I am not questioning the integrity or opinions of any poster just really an observation that there is a certain amount of glee attached to bad news . 2008 was the catalyst of a long run of a boom economy and like most bull runs they get overrun as both greed and ignorance as those that have the least knowledge get sucked into the " this time it will be different syndrome " . More and more as the world becomes smaller I really dont think it is possible to separate any one major nations economy from the world economy . Is there a country that has bucked the trend over the 2008 - 2015 ? Australia maybe ? but then thats just geography and they are now most effected by the slow down in China .

 

[teqniq]

For my part it's not glee, it's weary cynicism tinged with black humour.

 

[hammerntongues]

Five of the world’s biggest investment banks paid no corporation tax in Britain last year despite making billions of pounds in profits. According to an analysis of the banks’ corporate filings by Reuters, JP Morgan, Bank of America Merrill Lynch, Deutsche Bank AG, Nomura Holding and Morgan Stanley all said their main UK arms paid no corporation tax.

According to an analysis of the banks’ corporate filings by Reuters, JP Morgan, Bank of America Merrill Lynch, Deutsche Bank AG, Nomura Holding and Morgan Stanley all said their main UK arms paid no corporation tax.

No humour in this , black or otherwise .

 

[teqniq]

I never said I thought all aspects were humorous. The above is an open and shut case of lamp-post and rope imo.

 

[yield]

Pretty much everything or even everything , in a capitalist society is supply demand lead ? Its not restricted to houses , jobs certainly . I am not questioning the integrity or opinions of any poster just really an observation that there is a certain amount of glee attached to bad news . 2008 was the catalyst of a long run of a boom economy and like most bull runs they get overrun as both greed and ignorance as those that have the least knowledge get sucked into the " this time it will be different syndrome ".

Definitely. The difference this time is that central banks tried some unconventional monetary policy. No one knows what the results of that will be.

Over the last few years there has been lots of fear of hyperinflation or deflation.

More and more as the world becomes smaller I really dont think it is possible to separate any one major nations economy from the world economy

Singapore Stock Losses Set to Rival Greece in 2015
Bloomberg December 21, 2015

Foreign investors have pulled $6.7 billion from Thai, Philippine and Indonesian equity markets this year amid concerns the first U.S. interest-rate increase in almost a decade and a weakening Chinese economy will further curb the region’s economic growth. While Singapore averted recession in the third quarter, the Monetary Authority of Singapore has warned weaker corporate balance sheets and currency market volatility pose risks to the nation’s lenders.

Is there a country that has bucked the trend over the 2008 - 2015 ? Australia maybe ? but then thats just geography and they are now most effected by the slow down in China .

The BRIC economies: Brazil, Russia, India and China initially seemed to weather the financial crisis quite well.

Out of those only India is still doing well. Boosted by the crash in the price of oil.

Of the four India is also the least integrated into the US led global economy.

Australia's economy is tanking.

 

[Bernie Gunther]

Tangentially related, along the lines of 'the global economy is being run to a significant degree by crooks' or something but I thought it might as well go here.

Earlier this week, we told a fascinating story about an unprecedented, multi-year smuggling ring involving Turkey, Iran, and Dubai (as well as China, Russia and countless other nations) which saw corruption reaching to the very top of the political and financial establishment <snip>

In other words, the company which was used as a cover for billions in gold transactions over the last several years in the Turkey-Iran gold smuggling trade, was suddenly not only insolvent but had been thoroughly plundered of all its holdings, including a thorough plundering of client accounts.

The Mystery Of Dubai's Vaporized Gold: The Plot Thickens | Zero Hedge

 

[Bernie Gunther]

I know the site is a bit dodgy (as far as I can make out, the main man is a Hayek / libertarian nutcase), but the story is more or less sourced and pretty entertaining.

 

[not-bono-ever]

um. I said I want going to comment on this thtread anymore, but ZH is usually well referenced, even with its armageddon meme thing going on.Best not to take it as writ, but cross reference stuff for a better view

ps I didnt realsie who Bernie Gunther was until a chance charity shop find this week

 

[Bernie Gunther]

I was reading the early books when I joined here, figured they were too obscure for pinching the name to be meaningful.

 

[teqniq]

More than £34bn was wiped off the FTSE 100 on the first day of 2016 trading

 

[ska invita]

More than £34bn was wiped off the FTSE 100 on the first day of 2016 trading

numbers like 34 billion are meaningless though - that could be a percentage point FTSE is still over 6100 which is really high historically

 

[ska invita]

That said what happens next in China is interesting...from what Ive seen Chinese wages, although still tiny, are going up and are now relatively high compared to sweatshops in the likes of Bangladesh.... if/when Chinese manufacturing stalls..........

 

[J Ed]

Predictions for 2016

As I write, global stock markets kicked off 2016 by plunging, so much so in the case of China that stock market exchange was closed to stop selling. The fall was prompted by all-round disappointing surveys of business activity in China, India, the US and parts of Europe.

Indeed, by the end of 2015, most stock markets had their worst yearly results since the Great Recession in 2009 Clearly, rich investors and financial institutions are getting worried that the global economy, far from picking up pace, is slowing even further.

 

[bimble]

if/when Chinese manufacturing stalls..........

But that's what it's been doing for the last two years already (not just stalling but properly falling)?

 

[ska invita]

But that's what it's been doing for the last two years already (not just stalling but properly falling)?

well yeah, its stalling but the plane is still flying...all these stock market closures arent the most confidence inspiring though...if it starts properly dive bombing we'll know about it....

 

[bimble]

Maybe this will help.



Chinese villagers build giant golden Chairman Mao

 

[gosub]

But that's what it's been doing for the last two years already (not just stalling but properly falling)?

reducing airspeed but not stalling. Still growth of sorts. They had massive stock piling of commodities, and a liquidity crunch. Were getting through it. 7% index fall in a day may give them another liquidity crunch.

 

[ItWillNeverWork]

View attachment 81637
Chinese villagers build giant cheese Chairman Mao

Fixed it for you.

 

[bimble]

reducing airspeed but not stalling. Still growth of sorts. They had massive stock piling of commodities, and a liquidity crunch. Were getting through it. 7% index fall in a day may give them another liquidity crunch.

I get very confused when I try to think about this stuff. For example, China's growth rate at the moment is still about 4 times higher than say US, Europe, japan etc, is that right? And yet somehow the world economy depends on them not just maintaining this relatively spectacular rate which 'developed' economies can only dream of else we're all buggered?