Global financial system implosion begins

[kabbes]

I don’t know why the FT say that Amazon are boosting, by the way. They lost 8% yesterday and are down over 20% in the last three months. I see that the overnight has them rising 14%, mind. That’s notoriously an unreliable measure but maybe the FT knows it’s based on real volume on this occasion. Even if it plays out, though, they are still heavily down from their peak.



You can see there that Amazon still have a P/E of 54, by the way, even after their recent slide . People are still betting on them doubling in size.

Comparison to Facebook below. You can see that their price had held up compared with Amazon before this drop yesterday. You can also see that they now have a P/E off 17, which actually makes them look cheap. The market is implicitly betting on them shrinking in the future rather than growing!



Some other P/Es post the slump that has knocked typically 25-50% off the value of these companies

Microsoft 32
Google 28
Apple 29
Netflix 36
Tesla 181
Spotify —

So we’re really just seeing a correction back towards more “normal” valuations in the main.

 

[elbows]

Facebooks anticipated revenue has taken a battering because of the likes of Apple have put technology in their users hands which thwarts a chunk of Facebooks ability to track their users for advertising purposes. Facebook dont mind admitting this big issue quite routinely these days, and putting a giant dollar figure on it, but may also be using it to obscure other factors that have also affected their revenue.

 

[gosub]

I think Meta will get a bit cheaper yet, but don't see it as bad news, if anything it marked the first shoots to the end of social restrictions....

 

[Ming]

Mark Blyth. Interesting guy.

 

[Artaxerxes]

Credit Suisse leak naming the odd name we all knew were dodgy bastards so it'll be a week of hand wringing then back to business as usual.

Revealed: Credit Suisse leak unmasks criminals, fraudsters and corrupt politicians

Massive leak reveals Swiss bank’s accounts have been used by an array of high-risk clients over several decades

www.theguardian.com

 

[Ming]

Credit Suisse leak naming the odd name we all knew were dodgy bastards so it'll be a week of hand wringing then back to business as usual.

Revealed: Credit Suisse leak unmasks criminals, fraudsters and corrupt politicians

Massive leak reveals Swiss bank’s accounts have been used by an array of high-risk clients over several decades

www.theguardian.com

Treasure Islands is a great book about this stuff (by Nicholas Shaxson). There’s some good interviews with him on YouTube also.

 

[teqniq]

As with the Paradise papers leak there are no US or UK nationals named (of who I would surmise there are more than a few). Funny, that.

 

[Ming]

As with the Paradise papers leak there are no US or UK nationals named (of who I would surmise there are more than a few). Funny, that.

The thing that makes me laugh is you only get to hear about firms like Mossack Fonseca (Panama papers) when you get these data leaks. I’d never heard of them before and it turns our they’re the fourth largest provider of offshore financial services.

Fourth.

SO THERE’S THREE LARGER ONES!!!!!??!!!

 

[discokermit]

so, if lehmans, one bank, going bust caused a banking crisis, what is the effect of massive russian defaults caused by sanctions gonna be?

 

[Ming]

so, if lehmans, one bank, going bust caused a banking crisis, what is the effect of massive russian defaults caused by sanctions gonna be?

Increased inflation and indirect taxes. Anything which doesn’t directly effect the offshored and the individuals causing the problem.

 

[kabbes]

so, if lehmans, one bank, going bust caused a banking crisis, what is the effect of massive russian defaults caused by sanctions gonna be?

My speculation is not so much. A lot of bits of Russian investment and trade has been sanctioned for years anyway and what’s left has always looked like junk at best, meaning that companies have been very wary of having any of it on their balance sheets (and written it right down where it does exist). As such, I’m not seeing the systemic relationships at the moment that might cause anything similar to 2008.

The thing that might undermine that, though, is the interruption of the energy supply and its knock-on effect to an already troubling inflation. Depends if the world can turn to other suppliers quickly enough.

 

[Artaxerxes]

 

[mx wcfc]

My niece did Russian at uni. Spent a year living there. Got a job as an analyst on the Russian desk of a “big merchant bank”. I guess she’s busy at the moment but may be worrying about her longer term prospects.

 

[Ahlan]

WSJ News Exclusive | Saudi Arabia Considers Accepting Yuan Instead of Dollars for Chinese Oil Sales

Saudi Arabia is in active talks with Beijing to price its oil sales to China in yuan, people familiar with the matter said, a move that would dent the U.S. dollar’s dominance of the global petroleum market and mark another shift by the world’s top crude exporter toward Asia.

www.wsj.com

Saudi Arabia Considers Accepting Yuan Instead of Dollars for Chinese Oil Sales​

Talks between Riyadh and Beijing have accelerated as the Saudi unhappiness grows with Washington​

China turning the screw. End of the petrodollar if this happens.

 

[Pickman's model]

WSJ News Exclusive | Saudi Arabia Considers Accepting Yuan Instead of Dollars for Chinese Oil Sales

Saudi Arabia is in active talks with Beijing to price its oil sales to China in yuan, people familiar with the matter said, a move that would dent the U.S. dollar’s dominance of the global petroleum market and mark another shift by the world’s top crude exporter toward Asia.

www.wsj.com

Saudi Arabia Considers Accepting Yuan Instead of Dollars for Chinese Oil Sales​

Talks between Riyadh and Beijing have accelerated as the Saudi unhappiness grows with Washington​

China turning the screw. End of the petrodollar if this happens.

but will it be the end of american arms to riyadh?

 

[Idaho]

but will it be the end of american arms to riyadh?

I can't see them wanting to give up that lucrative trade to China too.

 

[Ahlan]

but will it be the end of american arms to riyadh?

That'd leave a huge vacuum. I'm sure the Chinese would be more than willing to fill it too.

 

[yield]

This Is Now The Worst Drawdown on Record for Global Fixed Income
23 March 2022

Global bond markets have suffered unprecedented losses since peaking last year, as central banks including the Federal Reserve look to tighten policy to combat surging inflation.

The Bloomberg Global Aggregate Index, a benchmark for government and corporate debt total returns, has fallen 11% from a high in January 2021. That’s the biggest decline from a peak in data stretching back to 1990, surpassing a 10.8% drawdown during the financial crisis in 2008. It equates to a drop in the index market value of about $2.6 trillion, worse than about $2 trillion in 2008

 

[gosub]

This Is Now The Worst Drawdown on Record for Global Fixed Income
23 March 2022

Cheers for that; heard yesterday bonds were taking a clobber in but hadn't found a decent article

 

[yield]

Long piece, worth a read, ruling class view,

Putin and Xi Exposed the Great Illusion of Capitalism
Bloomberg Opinion. 24 March 2022

A book published in 1919 on “The Economic Consequences of the Peace” isn’t the obvious starting place for understanding the economic consequences of the current war in Ukraine. But it’s worth taking a little time to read John Maynard Keynes’s famous description of the leisurely life of an upper-middle-class Londoner in 1913 — just before the Great War changed everything:

The inhabitant of London [in 1913] could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep; he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world, and share, without exertion or even trouble, in their prospective fruits and advantages.

Keynes then describes how this Londoner could speculate on the markets and travel wherever he wanted without a passport or the bother of changing currency (the gold standard meant that his money was good everywhere). And then the famous economist delivers his coup de grace by going inside the privileged Londoner’s head:

[The Londoner] regarded this state of affairs as normal, certain and permanent, except in the direction of further improvement, and any deviation from it as aberrant, scandalous and avoidable. The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions and exclusion, which were to play the serpent to this paradise, were little more than the amusements of his daily newspaper, and appeared to exercise almost no influence at all on the ordinary course of social and economic life, the internationalization of which was nearly complete in practice.

 

[gosub]

Long piece, worth a read, ruling class view,

Putin and Xi Exposed the Great Illusion of Capitalism
Bloomberg Opinion. 24 March 2022

Always thought the confidence and for sight shown in 44 was amazing. I don't share the authors optimism that the globalist can stay on top of things. Curious as your thoughts on the 'great reset" malarkey yield

 

[yield]

Curious as your thoughts on the 'great reset" malarkey yield

I don't know anything about it?

 

[gosub]

I don't know anything about it?

Neither do I really, gets buzz wordeed by 'alternative' media sites and way back machine checks out, but its Davos and World Economic Forum so thems that do know don't spend much time talking publically whilst the internet is full of people who aren't bacward in coming forward to speculate.

In terms of the scope of the thing last Daovs had Xi of China in attendance AND Putin who was hedging his bets with a couple of vague notions on uninended consquests of other things (think he was thinking about Ukraine at the time). Other thing I know WEF seem (for some reason) to boast of influence in Canada...and that Mark Carney is being lined up as Trudeau's sucessor...He of the Central Bank blockchain and carbon bubble theory.

But no, not a scooby

 

[yield]

Supply chain crises force corporate America into a ‘what if’ mindset
31/03/2022 FT. Gillian Tett archive.ph

Four years ago, Peter Navarro, then economic adviser to US president Donald Trump, summoned me to the White House to discuss a report he had initiated with the un-catchy title “Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States”.

My initial (misguided) reaction was to joke that it “seemed very retro”. Navarro was, in essence, arguing that government and companies had to realise the risks of using non-American supply chains — and rapidly co-ordinate to create domestic alternatives. But this type of government meddling — with its anti-globalisation stance — seemed almost quaint then, given the post-cold war ethos of Wall Street capitalism.

No longer. Last week Larry Fink, head of BlackRock, warned that “the Russian invasion of Ukraine has put an end to the globalisation we have experienced over the last three decades”. This week the White House invoked Korean war-era powers to boost supplies of battery minerals such as lithium, nickel and cobalt.

Meanwhile Intel, the US chip group, is touting plans to boost production in Germany and Ohio. Whether or not you espouse Navarro’s mercantilist creed (and I do not), these ideas are now resurfacing in the Biden administration, with a vengeance.

 

[CH1]

Supply chain crises force corporate America into a ‘what if’ mindset
31/03/2022 FT. Gillian Tett archive.ph

I miss Gillian Tett. The doyenne of banking disaster analysts - always on our screens 2007-2010.
Now we have to make do with GB News

 

[ska invita]

Supply chain crises force corporate America into a ‘what if’ mindset
31/03/2022 FT. Gillian Tett archive.ph

really interesting - anti-globalisation forces are coming from a range of directions now, material and ideological, though compared to twenty years ago perhaps the quietest voices are now from the left...and yet is any of it enough to really trump the profit margin? Maybe in some cases but....

 

[kabbes]

I can confirm that I have been modelling these kind of third party risks and scenario planning for their failures for many years. It’s not new.

 

[yield]

US brings foreign banks into intelligence-sharing fold
07/04/2022 archive.ph
Agencies take unusual step of disseminating assessments with overseas lenders to bolster cyber defences

So far, Russian cyber attacks have focused on Ukrainian agencies and infrastructure. Since the invasion began, there have been no significant actions against big banks operating in the US, according to a person who monitors the Financial Services Information Sharing and Analysis Center, or FS-ISAC, an industry wide-alert system for cyber threats.

Global banks have collaborated on cyber security efforts across borders for years using tools like FS-ISAC, but the US government has only recently started taking a more global approach, sources said.

“This is one of those areas where there’s actually really good collaboration, both industry talking to industry [and] industry talking to government,” Jon Pruzan, Morgan Stanley chief operating officer, said at a conference last month.

“To be frank, I think people are surprised that more hasn’t happened and it’s actually been quite quiet, but we are being very diligent.”

 

[yield]

A $5 Trillion ‘Wealth Shock’ Is Cracking Americans’ Nest Eggs
bloomberg.com 21/05/2022

The world’s richest nation is waking up to an unpleasant and unfamiliar sensation: It’s getting poorer.

Americans’ collective net worth had been climbing at a dizzying rate for the past two years, even as families and businesses contended with the ravages of Covid-19. Households piled up an extra $38.5 trillion from early 2020 to the end of last year, bringing their collective net worth to a record $142 trillion, the Federal Reserve estimates.

Just as the US is learning to live with the virus and spending shifts back toward pre-pandemic normal, it faces a new scary threat: A plunge in wealth since the start of 2022 that JPMorgan Chase & Co. estimates totals at least $5 trillion -- and could reach $9 trillion by year-end.

So far, the richest Americans have borne the brunt, with US billionaire fortunes down almost $800 billion since their peak amid the sharp losses in stocks, crypto and other financial assets. But surging interest rates are also starting to rattle the housing market, where middle- and working-class families have the bulk of their wealth.

It all adds up to the sudden removal of a major prop to confidence: ever-bigger nest eggs. And it’s by design. To stamp out the highest inflation in decades, the Fed needs Americans to curb their spending, even if it requires an economic slowdown to get there.

US stocks have tumbled amid recession fears, inflation surge

“It’s painful to get back to normal after really being in a fantasy world last year,” said John Norris, chief economist at Oakworth Capital Bank. “It’s going to feel a lot worse than it actually is.”

Since the start of the year, the S&P 500 Index is down 18%, the Nasdaq 100 has lost 27% and a Bloomberg index of cryptocurrencies has plunged 48%.

That all amounts to “a wealth shock that is set to drag on growth in the coming year,” JPMorgan economists led by Michael Feroli wrote in a note Friday.

Fed Chair Jerome Powell and his colleagues have repeatedly said they’re actively aiming for such a slowdown, leaving it unlikely policy makers will move to address the Great Wealth Drop of 2022.

Billionaires were the biggest winners of 2020 and 2021. Now they’re losing more than almost everyone else. The Bloomberg Billionaires Index, a daily measure of the wealth of the world’s 500 richest people, has dropped $1.6 trillion since its peak in November.

Leading the way are the Americans on the index, who have lost $797 billion since their peak. Perhaps the most humbled by it all is the world’s richest person, Elon Musk. He’s lost $139.1 billion, or 41% of his wealth, since November, when his net worth briefly surpassed $340 billion. Amazon.com Inc. founder Jeff Bezos, the second-richest person, lost $82.7 billion, or 39% of his peak wealth.

Spoiler: more text

Today in America:
- the two richest people own more wealth than the bottom 40%
- the top 1% owns more wealth than the bottom 92%
- 45% of all new income has gone to the top 1% since 2009

Is that the kind of economy any working person ought to be satisfied with?
— Bernie Sanders (@BernieSanders) September 5, 2021

While the wealth losses among the top 0.001% reduce inequality, that won’t be much comfort to most people who worry about the U.S.’s widening disparities.

“In a relative sense, it’s going to make the inequity a little lower -- but in an absolute sense, everyone suffers,” said Reena Aggarwal, director of Georgetown University’s Psaros Center for Financial Markets and Policy.

Like many, Aggarwal is concerned that falling markets will create problems for the broader economy. “Some correction was needed but this is a pretty huge correction, and it’s not stopping.”
All Boats Lifted (sort of)

US household wealth surged during the pandemic but mostly for the top

A downturn in housing -- made likely by a surge in mortgage rates to the highest since 2009 -- threatens wider reverberations. Over the last decade, the robust real estate market added $18 trillion in market value to owner-occupied home valuations.

US spending has been lifted in recent years by owners tapping the enhanced values of their homes for cash. The practice of home equity extraction likely came to a halt this year. More than 40% of refinancings in the final quarter of last year saw homeowners pull cash out of their homes.
Imminent Collapse?

US spending boosted by home equity loans is likely to come to a halt

Real estate is far more evenly distributed than financial wealth. The top 1% owns more than half of U.S. holdings of stocks and mutual funds, and the bottom 90% owns less than 12%, according to Federal Reserve estimates. By contrast, in real estate the bottom 90% owns more than half of the total, while the top 1% holds less than 14%.

“Higher home prices and sharply higher mortgage rates have reduced buyer activity,” Lawrence Yun, National Association of Realtors chief economist, said in a statement Thursday. “It looks like more declines are imminent in the upcoming months.”

What Bloomberg’s Economists Say...

While the plunging stock market will dent consumers’ net worth this year, the residual effect of last year’s surge in asset values -- and the resilience in home prices so far this year -- are major offsetting factors supporting consumption. As a result, personal spending is expected to grow faster this year than before the pandemic, even after the removal of fiscal stimulus.

-- Yelena Shulyatyeva, economist

It could take a while before Americans realize that their pandemic home-price gains have evaporated. Even the stock market selloff could take a while to translate into spending in a way that could tip the U.S. into recession.

“A general selloff in the equity market may have a dampening effect,” said Chris Gaffney, president of world markets at TIAA Bank, but there’s a lag for investors. “They look at their statements on a quarterly basis and all of a sudden they say, ‘Oh my goodness, my stock-market portfolio is down 20%, maybe I shouldn’t take that vacation,’ or ‘Maybe I shouldn’t buy that larger TV or a new car.’”

 

[CH1]

For some reason the Seattle Times keeps sending me stuff.
This article on mortgages was v. interesting.
If anyone wants to know why UK is a sick society based on buy-to-let mortgages check this

Homebuyers face a new shock that’s worse in Washington than in much of the U.S.

Rising mortgage rates are pushing up monthly payments for homebuyers. See how Washington compares to other states.

www.seattletimes.com

Quote: "The average interest rate on a 30-year mortgage stands at 5.1%, according to Freddie Mac. That rate is lower than during much of the past 50 years, but up 2.15 points from this time last year."

Obviously if anything like that ever happened in the UK Rishi would cobble together a £25 billion mortgage rescue package - financed by pensioners not on benefit.

We wouldn't want Rentier Capitalism and Free Choice to collapse here in Blighty would we?