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Global financial system implosion begins

gosub said:
In last couple of months wobbles from 3 European bans alone. Look at the wiki List of banking crises - Wikipedia and we've getting a centuries worth of crises in the last years. And they haven't stopped coming, and it still stems from there behaviour back in the day. More over the can kicks are going less and less far.
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Still, it can be a bit disappointing, expected Deutsch bank to go tits up a few months back, ditto the EURO, but they still scrabble on.
On the whole though, interesting and informative threat for economic illiterates such as mesel.
 
coley said:
Still, it can be a bit disappointing, expected Deutsch bank to go tits up a few months back, ditto the EURO, but they still scrabble on.
On the whole though, interesting and informative threat for economic illiterates such as mesel.
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Didn't think Deutsch had paid the fine yet and genuinely couldn't say whether Trump will be easier / harder. The can kicking on the EUro. What's happening to the oldest Italian bank still isn't old news and would play very differently in German/Italian elections.


Agree as a meltdown it is in some ways glacial, hyperbole in regards we still have the net connections and lecky to access it... But that it's sizeable aftershocks still rumble on, gives an indication how serious things were/are

I'm grateful to the handful of posters that still use it to noticeboard what are on the whole highly informative articles. If it did shut we'd only have start another one.

I see a EU Commission is forecasting growth everywhere with the proviso Trump might impact. So it would suit some to reset start point narrative. But Trump's 'we won't chip in on Greece' is the natural extension of Obama's 'this debt solution is unsustainable'
 
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Still possessed. Investors in America’s housing-finance giants lose in court
An appeals court backs the expropriation of shareholders in Fannie Mae and Freddie Mac
Feb 25th 2017
At issue is the Obama administration’s decision in 2012 to hoover up all of Fannie and Freddie’s profits. Until then, it had received a fixed dividend on its investment. The timing of the shift was striking—just before a surge in the firms’ profitability. Since 2008 the Treasury has sucked in about $250bn from the firms, 30% more than the cost of the bail-out.

The change enraged hedge funds who had bought Fannie and Freddie’s shares and found themselves expropriated. The investors’ lawsuit held that the government overstepped its authority by seizing all profits. A federal court dismissed that claim in 2014; it has taken until now for an appeals court to uphold the most important parts of the decision. An odd aspect of the ruling is that it largely ignored the substantive arguments but concluded the court lacked the authority to curb the government’s actions.
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The firms are hardly robust. The Treasury is running down their capital by $600m a year. By 2018 they will have none left. From then on, should the firms make a loss, they will need to draw on an emergency line of credit from the government. Doing so would be characterised by some as a second bail-out.

That worrying prospect should provide some impetus to the search for an alternative solution. But it will be hard to find an ownership structure for Fannie and Freddie that satisfies everyone. The firms keep mortgages cheap by lumping taxpayers with a staggering amount of risk. (If the housing market collapsed, the cost to the Treasury could be 2-4% of GDP, according to an analysis by The Economist). Few will want investors to make profits on the back of such a taxpayer guarantee.
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'Entering stagflation': The dominant sector of Britain's economy is finally running out of steam after the Brexit vote

'Entering stagflation': The dominant sector of Britain's economy is finally running out of steam after the Brexit vote

Britain's services sector, which accounts for more than 75% of the country's GDP, is starting to run out of steam, following a surge since last June's referendum, according to the latest PMI data from Markit and CIPS.

The services sector — which includes everything from banking to waitressing — drew a reading of 53.3 in the month, significantly lower than the 54.5 reading in January, and below the forecast 54.2 reading.

"UK service sector firms remained in expansion mode during February, but growth momentum eased further from the 17-month peak seen at the end of 2016," a release from Markit said.
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The quest for low-cost hedges against a futures crash

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There are other strategies than Mr Koulajian’s for betting on, or hedging against, the level of risk in markets. One interesting ploy I heard from the commodities market bears was to buy “structured product volatility” from Korean and Japanese banks.

Apparently, yield hungry retail investors in those countries will receive what they think is a single-digit income from a “product” sold by one of their banks. Actually, they are being paid option premiums for taking the risk of puts and calls on the local markets.

So the retail investors are being drawn into a game rigged against them over time, rather like those Italians who bought bank subinvestment-grade debt instruments thinking those were deposits. A lot of these apparently riskless bets will end very badly for the investors and those who misled them.
 
Iceland is having a bit of a crisis ATM - tourism has exploded since the crash and its impacting the other core industry- Fishing - being priced out of the market as the currency appreciates - the fish processing is being outsourced as it is too expensive to run domestically.
 
Brief rerun on the debt ceiling issue and its key dates.
Opinion | ‘The budget from hell’ and raising the debt ceiling: Republicans are not ready for this

But the most important date might be April 18. Tax Day. If the treasury takes in less than expected, those two freight trains could slam into each other sooner than anticipated. And Congress is neither ready to avoid the collision nor prepared for the economic disaster that would follow.
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A day certain will come when the government will run out of money to meet all of its financial obligations. The excellent folks at the Bipartisan Policy Center (BPC) earlier this month projected this could happen sometime between October and November.
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Budget must be passed by Oct 2.
 
‘Deep Subprime’ Auto Loans are Surging
28 March 2017
As Wall Street banks have found it tougher to profit under new regulatory regimes born out of the last subprime crisis, they’ve become more willing to underwrite riskier auto-loan asset-backed security sales. Investors, starved for returns with about $8 trillion of debt globally carrying negative yields, have in turn proven to be insatiable, further facilitating higher levels of risk in the market for the securities.

At least two dozen lenders have tapped the debt market to sell bonds that hold their subprime auto loans over the last few years. They include smaller lenders like Sierra Auto Finance, Skopos Financial and GO Financial. A high percentage of loans bundled into bonds were made to borrowers with no credit score at all.
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"A high percentage of loans bundled into bonds were made to borrowers with no credit score at all."

Student loan defaults jumped by nearly 20% last year
Mar. 14, 2017
As of the end of 2016, 42.4 million Americans owed $1.3 trillion in federal student loans, according to the U.S. Department of Education data. This doesn't include borrowing through private student loans, credit cards, and home equity loans to finance the growing costs of college.

The Federal Reserve System puts the measure slightly higher at $1.4 trillion, as it includes private loans as well.

Defaulting on a federal student loan can be a financial disaster for the borrower. Unlike other types of debts, most federal student loans cannot be discharged in bankruptcy. Those who go into default face serious repercussions including wage garnishment, damaged credit scores and potentially added costs in fees, interest and legal fees.
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Securities-based loans are scaring fiscal experts
NYPost April 17, 2017
Forget subprime mortgages — one of Wall Street’s biggest risks doesn’t even show up on most banks’ balance sheets.

Financial insiders are getting increasingly worried over the popularity of securities-based loans, or SBLs — a risky form of debt marketed to wealthy investors who typically use it to buy big assets like houses.

The loans, which are taken against pools of stocks and bonds, offer borrowers cheap money fast without having to sell their underlying securities — an attractive option when the Dow is rising.
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But if markets crash, brokers can unload their clients’ holdings at fire-sale prices — and go after the house to cover the the vig.

Fears of such ugly scenarios are growing as the Fed hikes interest rates, stocks are hitting all-time highs, and high-net-worth individuals are using this form of “shadow margin” to borrow more against stocks and bonds in their portfolios than ever before.

It’s not clear how much debt has been taken out in the form of SBLs, and a lack of regulatory oversight is partly to blame. Finra, the brokerage regulator, doesn’t track it, nor does the Securities and Exchange Commission — even though both have warned investors about the risks.

However, several advisers surveyed by The Post estimated there is between $100 billion and $250 billion in outstanding SBLs among all brokerages.
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"There are also some restrictions on the loans. Clients aren’t supposed to use them to buy other stocks or pay off outstanding margin, for instance. Still, there are no immediate repercussions for disobeying the rules, and regulators aren’t watching, sources said." :facepalm: :rolleyes:

Protectionism Is More Than a Political Statement
April 20, 2017
A good recap on the European financial crisis.

IMF Warns High Corporate Leverage Could Threaten Financial Stability
WSJ 19/04/17
U.S. corporate debt has ballooned on cheap credit to levels exceeding those prevailing just before the 2008 financial crisis, a potential threat to financial stability, the International Monetary Fund warned in its latest review of the top threats to markets and banks.

High corporate leverage could become problematic as the Federal Reserve raises short-term interest rates, the IMF warned, since higher borrowing costs could hinder the ability of firms to service debts.
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While borrowing costs remain low, debt servicing as a proportion of income has risen to its highest level since 2010, raising questions over firms' ability to service their debts, according to the IMF's study of nearly 4,000 U.S. firms accounting for about half of the economywide corporate sector balance sheet.

Companies have added $7.8 trillion of debt and other liabilities since 2010, while issuing $3 trillion of equity, net of buybacks, according to the IMF.
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Ten years on and still on near zero interest rate life support. Nothing to see here.
 
Mohamed El-Erian: ‘We get signals that the system is under enormous stress’
Leading economist and investor believes world leaders, and global capitalism, have reached fork in road between equality and chaos
Saturday 13 May 2017
This is the nub of El-Erian’s analysis of why the developed world is approaching a fork in the road. The inequality generated by the current low-growth climate has three elements: inequality of wealth, income and opportunity. The last of the three – manifested in high youth unemployment in many eurozone countries, for example – is the most explosive element.

“The minute you to start talking about the inequality of opportunity, you fuel the politics of anger. The politics of anger have a tendency to produce improbable results. The major risk is that we don’t know how much we’ve strained the underlying system. But what we do know is we are getting signals that suggest it’s under enormous stress, which means the probability of either a policy mistake or market accident goes up.”
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The head-scratching part is that financial markets are not reflecting these worries. Measures of volatility stand at their lowest since 1983. “If you talk to investors, they will tell you how worried they are about geopolitics,” says El-Erian. “And, if you ask them how they are positioned, they will tell you ‘almost maximum risk’.”

There is an explanation of sorts, he thinks. Investors have been conditioned to think central banks can suppress volatility. They also see that the low growth appears stable. And they think the piles of cash on some companies’ balance sheets will come their way in the form of dividends and share buybacks. “You need a major shakeout to change that mindset,” he says.
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Political economy or Capitalism with a human face admittedly but still worth a read.

It's not just the VIX - low volatility is everywhere
Wed May 10, 2017
Graphs that I can't quite understand and stuff. Counterintuitively this implies huge risk taking as I linked to here back in 2014.
 
yield said:
Securities-based loans are scaring fiscal experts
NYPost April 17, 2017



"There are also some restrictions on the loans. Clients aren’t supposed to use them to buy other stocks or pay off outstanding margin, for instance. Still, there are no immediate repercussions for disobeying the rules, and regulators aren’t watching, sources said." :facepalm: :rolleyes:

Protectionism Is More Than a Political Statement
April 20, 2017
A good recap on the European financial crisis.

IMF Warns High Corporate Leverage Could Threaten Financial Stability
WSJ 19/04/17



Ten years on and still on near zero interest rate life support. Nothing to see here.
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Can't believe the world copied Japan. I lost my last finance related post at the end of 1997 (Samsung) due to the SE Asian crash. Zombie banks.
 
Low voltility ( esp the VIX) is a funny animal, as is both fear and non fear trapped up in one package, a chicken and egg indicator of whatthefuckisgoingtohappen and caution in pricing that gives the impression that everything is great and stable, whereas it is far from this.Or maybe it isn't. With them volatilities, anything more than a couple of months ahead is guesswork + hope+ alchemy maths. I think dwyer started some discussion of this after reading some book on a plane a year or so ago. I don't care any more. I still find it interesting but have no flesh in the game or whatever the saying is .
 
Banks tighten auto lending as more borrowers fall into default
17 May 2017
Lenders are tightening the spigot on new auto loans, making it harder for U.S. consumers with weak credit to buy a car, data from the Federal Reserve Bank of New York show.
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While caution may be good for banks’ balance sheets, it doesn’t offer much relief for automakers, who relied on cheap credit to fuel a seven-year stretch of booming sales. Now they’re boosting discounts and cutting production to address swelling inventory on dealer lots. Ford Motor Co. said Wednesday it’s cutting 1,400 jobs in North America and Asia to improve profits as the U.S. auto industry recorded a fourth straight drop in monthly sales in April, after eking out a record year in 2016.
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Same problem here in the UK. Lots of people here driving new cars leased. No saying it's the same as subprime mortgages but I worry about due diligence.

Deutsche Bank woes deepen in Monte Paschi fraud case
16 May 2017
Deutsche Bank AG, on trial in Milan for allegedly helping Banca Monte dei Paschi di Siena SpA conceal losses, must face accusations that it was running an international criminal organization at the time.
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One of the largest banks in the world an alleged international criminal organization. Too big to fail.
 
Something in China worth paying attention to, there is something fishy going on with Anbang Insurance. I'm on my phone and my vpn isn't working so I will post links later, but the gist of it is, Anbang is a well dodgy firm dealing in "wealth management products" for corrupt Chinese officials and has been on a big global spending spree in recent years. Assets worth 240bn dollars, and tied deeply to China's shadow banking sector which is riddled with non performing loans. Several exposes, recently blocked in China, have claimed that Anbang does not have enough money for all the overseas assets it is purchasing.

Recently, the company's sales of insurance products have ground to a halt all of a sudden and the executive (married to Deng Xiaoping's daughter apparently, so has some serious connections which might explain the company's meteoric rise) has disappeared, with reports of him being arrested being repressed and the ludicrous Party mouthpiece Global Times has published an op-ed saying his arrest is all baseless rumours, and even if true insignificant anyway. Which suggests something big is happening.

Many analysts have predicted the next crash will be triggered by China's unhealthy financial system. Is Anbang Insurance the trigger? I guess we will find out soon.
 
That is interesting - this has been bubbling away all year. Central command has ordered the big banks to stop dealing with Anbang- and as we know, the big banks are invariably controlled by the party. This will kill it, as the banks flog its products through their outlets.
 
not-bono-ever said:
That is interesting - this has been bubbling away all year. Central command has ordered the big banks to stop dealing with Anbang- and as we know, the big banks are invariably controlled by the party. This will kill it, as the banks flog its products through their outlets.
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Its income plunged 90％ in a month, it is already all over for Anbang - how big the economic shockwaves will be is the big question, there is so much under the table stuff that it is very hard to say, and the CCP will do their best to hide what is going on as much as possible. If Anbang are big enough to cause a systemic crisis, is the state banking system capable of bailing them out again with the debt they have already built up? I guess they will have to, but how long can they keep doing this for?
 
Falcon said:
First Eurozone bank and Spain’s seventh largest just went under after a €3.6bn run, eighth is wobbling. Surprised this isn’t reported more widely. Subscribe to read
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Well the Guardian for one is too busy bigging up Merkel and Macron'splanned golden age. :rolleyes:





*Golden ages may prove to be a Croc of shit, but EUropean grass is clearly green of a magnificent hue.
 
Update on the Anbang case -

China raises heat over foreign investment - BBC News

There is an investigation going on into loans given to Anbang, as well as Wanda, Fosun, HNA and Luosen, causing their share prices to tumble. Is this the point where China's accumulation of debt starts to catch up with it?

These are big companies - Anbang owns the Waldorf Astoria hotel amongst other luxury properties around the world, Wanda owns UCI and Odean UK, Luosen owns AC Milan, Fosun owns Wolverhampton Wanderers and HNA is Deutschbank's largest share holder, owns 25% of Hilton's stock, and owns catering company Gate Gourmet. If there is a Chinese credit crunch and these companies start to go under, it will send shockwaves through the global economy.
 
Knowing what I do about the Chinese setup, heads will literally roll for this.Central command have instructed Chinese banks to pull out ( they own most of them anyway). The western financials will take the majority of the thump for this if it goes into a stage managed bankrupcy. Central command are using this to send a message out ( again )
 
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