• Tag Archives Europe
  • Goldman Is Allowing Its Clients To Bet On The Next Financial Crisis

    Just over a decade ago, as the S&P was hitting all time highs and there was a line around the block of 30-some year old hedge fund managers, desperate to put other people’s money in various ultra risky investments just so they could pick a few excess bps of yield over Treasurys – a situation painfully familiar to what is going on now – Goldman had an epiphany: create new synthetic products that have huge convexity, i.e., provide little upside (such as a few basis points pick up in yield) versus unlimited downside, link them to the shittiest assets possible and sell them to gullible, yield-chasing idiots (collecting a transaction fee) while taking the other side of the trade (collecting a huge profit once everything crashes). The instruments, of course, were CDOs, and not long after Goldman sold a whole of them, the financial system crashed and needed a multi-trillion bailout from which the world has not recovered since.
    Ten years later, Goldman is doing it again, only instead of targeting subprime mortgages, this time the bank has focused on quasi-insolvent European banks.
    And just like right before the last financial crash, Goldman is once again allowing its clients to profit from the upcoming collapse, or as Bloomberg puts it, “less than a decade after the last major banking crisis, Goldman Sachs and JPMorgan are offering investors a new way to bet on the next one.”
    The trade in question is a total return swap, a highly levered product which is similar or a credit default swap but has some nuanced differences, which targets what are known as Tier 1 , or AT1 or “buffer” notes issued by European banks, and which usually are the first to get wiped out when there is even a modest insolvency event (just ask Banco Popular), let alone a full blown financial crisis.

    This post was published at Zero Hedge on Oct 12, 2017.

  • The European Countries With The Most Psychiatrists

    If Europe is driving you nuts, we have some simple advice… head to Finland!
    As Statista’s Niall McCarthy notes, according to new Eurostat data released to mark World Mental Health Day, the European Union has about 90,000 psychiatrists in total and Finland has the most per 100,000 inhabitants (23.60) followed by Sweden (23.19) and the Netherlands (22.95).

    This post was published at Zero Hedge on Oct 12, 2017.

  • Germans Have Quietly Become the World’s Biggest Buyers of Gold

    When I talk about Indians’ well-known affinity for gold, I tend to focus on Diwali and the wedding season late in the year. Giving gifts of beautiful gold jewelry during these festivals is considered auspicious in India, and historically we’ve been able to count on prices being supported by increased demand.
    Another holiday that triggers gold’s Love Trade is Dussehra, which fell on September 30 this year. Thanks to Dussehra, India’s gold imports rose an incredible 31 percent in September compared to the same month last year, according to GFMS data. The country brought in 48 metric tons, equivalent to $2 billion at today’s prices.
    As I’ve shared with you many times before, Indians have long valued gold not only for its beauty and durability but also as financial security. Indian households have the largest private gold holdings in the world, standing at an estimated 24,000 metric tons. That figure surpasses the combined official gold reserves of the United States, Germany, Italy, France, China and Russia.
    A New Global Leader in Gold Investing?
    But as attracted to gold as Indians are, they weren’t the world’s biggest investors in the yellow metal last year, and neither were the Chinese. According to a new report from theWorld Gold Council (WGC), that title shifted hands to Germany in 2016, with investors there ploughing as much as $8 billion into gold coins, bars and exchange-traded commodities (ETCs). This set a new annual record for the European country.

    This post was published at GoldSeek on Thursday, 12 October 2017.

  • How Much Do Central Banks Cost Us?

    A classic argument for central bank controlled fiat money goes like this: a commodity such as gold is very costly to produce. All the resources, capital, and labor devoted to mining gold for monetary purposes could be employed elsewhere in the economy, to the benefit of society, if only we had a fiat standard.
    This argument is by no means conclusive. We would not stop producing Champagne either, just because sparkling water is cheaper. However, there is an undeniable grain of truth in it. At firrst glance it seems we could save a lot of resources under a fiat standard. But do we really?
    Business Accounting for Central Banks The euro provides a suitable case study to go after this question. How much does it actually cost to produce the euro and to conduct enlightened monetary policy along the way?
    The European Central Bank (ECB) was founded in June 1998. By the end of 1999, it employed 732 fulltime staff, among which 55 held managerial positions. By the end of 2003, these numbers had increased to 1,213 and 84, respectively. All of these employees were hired on permanent contracts. This policy has changed in 2004. At the end of 2016, the ECB employed 3171 fulltime staff and total annual staff costs amounted to some 467 million. Staff costs have grown at an average annual rate of 12.7%. But that is hardly the end of the story.
    Administrative costs have grown from 61 million in 1999 to 414 million in 2016 at an average annual rate of 12%. Another item of expenditure are costs for coin and note production services, which was added to the annual accounts in 2002, the year the euro was introduced in cash. That year it amounted to 118 million. Thereafter it dropped and remained always below 9 million per year.

    This post was published at Ludwig von Mises Institute on Oct 11, 2017.

  • Market Talk- October 10th, 2017

    News today of the Catalan leader Carles Puigdemont putting a delay on this declaration of independence to try and have an amicable solution with the Spanish Government in Madrid. Pushed the EUR/USD rates up 0.54% to 1.18 on the day.
    Few other announcements around the world, the Swiss unemployment rates dropped from 3.2% to 3.1% and the German trade balance was 21.6B compared to a 20B estimate which again helped buoy the CHF and EUR respectfully. The French and Italian Industrial production data for August was mixed, with the French missing expectations but the Italians outperforming.
    Manufacturing production in the UK was good, growing 0.4% for the 2nd month as one would expect with the cheaper pound pre-Brexit decision. This helped the GBP move up to 1.32 against the dollar.
    Asian markets again performing well today, the Hang Seng Index was up 0.58% removing yesterday’s losses. Nikkei opened after the long weekend to close up 0.64% while China’s Shanghai Composite closed up 0.26%.
    European markets finished mixed as of the most recent closing prices. The FTSE 100 gained 0.40%, while the DAX and CAC 40 dropped 0.21% and 0.04% respectively. IBEX 35 was down 0.92%, still with confidence weak with the uncertainty of the Catalan independence looming offsetting yesterday’s gains.

    This post was published at Armstrong Economics on Oct 10, 2017.

  • Turning Point Nations On The Stage

    Many are the turning points with individual nations, once firmly in the Western alliance camp, but no longer. They are flipping eastward or in the case of China cutting the major cords. The Shanghai developments are by far the most important in the financial setting. The Petro-Dollar is seeing its last months after a 43-year reign as defacto standard. Its retirement will begin in the East, then spread to the decaying loyal Western nations. The entire geopolitical chessboard is becoming more aligned with the Eurasian Trade Zone, one nation after another. Its cornerstones are Russia, China, and increasingly Iran. It has gathered some Eastern European countries like Turkey, and will gather more. It has pursued the Middle East oil monarchies, and will succeed in lassoing them into the zone corral. Whether they deploy financial connections, or trade ties, or security links, these nations no longer see the United States and British (who walk the American dog with a monetary leash) as the leading global players any longer. The leaders are China with its financial and industrial might and Russia with its energy and commodity strength.
    As the global structure shifts in alignment, many nations will be involved in the shifts directly. It can be perceived as chess pieces in movement. The many bilateral connections are being altered, so as to fit within the new forces. The power center is moving from West to East, although certainly very slowly. Some call it a giant ship changing course, but the Jackass thinks of it more as a very large baby being formed with numerous umbilical cords, which requires a very long gestation period like that for an elephant. The Eastern centers must remove the vestiges of old colonial power links. It is a very slow process, whereby the East must accept losses from the uprooted stanchions. The Eastern leaders measure their risks, make the changes, and consider the losses as part of a reorganization much like done with the better observed structural changes done by IBM or Chrysler.

    This post was published at GoldSeek

  • Why would anyone buy European bank stocks?

    The European banking crisis is still brewing. The biggest problem rises from the rules that if a bank is in trouble, they just seize the bank and sell it for 1 and all the shareholders lose everything. This is having serious impact upon the European Banking System as a whole as I previously warned. The Italian bank Carige has had difficulty in trying to raise capital to meet requirements. If any bank cannot raise enough capital to meet the requirements, the European supervisory authorities can seize the bank in accordance with the new rules.

    This post was published at Armstrong Economics on Oct 10, 2017.

  • Europe’s Fragile and Bad-debt Ridden Banking System (Happy Columbus Day!

    This is a syndicated repost courtesy of Snake Hole Lounge. To view original, click here. Reposted with permission.
    In honor of Italian explorer Christopher Columbus, here is review of Italian banks (as well as a benchmark, Deutsche Bank).
    Here are two notable Italian banks: Uni Credit (a global systemically important bank – Bucket 1) and Banca Monte dei Paschi di Siena (a domestic systemically important bank). And for comparison, my former employer Deutsche Bank. What do the three of them have in common? Yes, they all peaked in 2007 and all have plummeted since.

    This post was published at Wall Street Examiner by Anthony B Sanders ‘ October 9, 2017.

  • Global Markets Bounce As Germany, China, Spain Lift World Stocks, Turkey Crash Ignored

    With no North Korean nuclear test over the weeknd contrary to a Friday morning rumor, S&P futures rebounded and edged higher as European stocks gain, led by Spanish shares after mass demonstrations in favor of Spanish unity and speculation Catalonia may back down on unilateral independence demands, while Chinese mainland stocks reopened catching up to gains missed during the holiday week following last weekend’s RRR cut.
    World shares rose to start the week, with Chinese stocks hitting 21-month highs and the German index setting a new record, while political uncertainty triggered big moves in sterling, the Turkish lira and Spanish debt. US futures are also pushing higher in anticipation of the start of Q3 earnings season which begins later this week, with a number of Wall Street banks including JPMorgan, BofA and Citi set to report. While equities are open, the US bond market is closed today for the Columbus day holiday, while Asian markets were relatively quiet following holidays in Japan, South Korea and Taiwan.
    European stocks climbed at the start of a week in which investors were closely watching developments in Catalonia as well as U. S. earnings season kicks off. The Stoxx Europe 600 Index adds 0.23%, following four straight weeks of gains. All industry groups except miners climb. The IBEX 35 Index is up 1% as a senior member in the Catalan administration calls for dialogue with Spain, although the gauge is still down 1.2% since Catalans voted for independence in an illegal referendum. After a weekend of mass demonstrations in favor of Spanish unity, Raul Romeva, foreign affairs chief for the separatist government in Barcelona, insisted that the door was open for talks if Prime Minister Mariano Rajoy was willing to grasp the opportunity
    As Bloomberg breaks down local markets, 18 out of 19 Stoxx 600 sectors rise; 407 Stoxx 600 members gain, 171 decline. Top Stoxx 600 outperformers include: CaixaBank +2.6%, Centamin +2.5%, TDC +2.4%, Man Group +2.4%, Metro Bank +2.0%. The Stoxx Euro 600 Index also received a boost from data showing German industrial output rebounded from a summer lull with its best month in six years. The euro nudged higher, while most European bonds rose. Gold climbed and crude oil erased earlier gains.

    This post was published at Zero Hedge on Oct 9, 2017.

  • Isaiahs Job

    Even the most stout-hearted libertarian occasionally despairs of saving freedom. At such times, this essay may afford encouragement.
    One evening last autumn, I sat long hours with a European acquaintance while he expounded a politico-economic doctrine which seemed sound as a nut and in which I could find no defect. At the end, he said with great earnestness: ‘I have a mission to the masses. I feel that I am called to get the ear of the people. I shall devote the rest of my life to spreading my doctrine far and wide among the populace. What do you think?’
    An embarrassing question in any case, and doubly so under the circumstances, because my acquaintance is a very learned man, one of the three or four really first-class minds that Europe produced in his generation; and naturally I, as one of the unlearned, was inclined to regard his lightest word with reverence amounting to awe . . . .
    I referred him to the story of the prophet Isaiah . . . . I shall paraphrase the story in our common speech since it has to be pieced out from various sources . . . .
    740 B. C.
    The prophet’s career began at the end of King Uzziah’s reign, say about 740 B. C. This reign was uncommonly long, almost half a century, and apparently prosperous. It was one of those prosperous reigns, however-like the reign of Marcus Aurelius at Rome, or the administration of Eubulus at Athens, or of Mr. Coolidge at Washington – where at the end the prosperity suddenly peters out and things go by the board with a resounding crash.

    This post was published at Mises Canada on OCTOBER 6, 2017.

  • Schuble: Another Financial Crisis Is Coming Due To Spiraling Global Debt, “New Bubbles”

    Following the disappointing for Angela Merkel and her CDU German election results, which propelled the populist AfD into Germany’s political establishment with 92 members of parliament, the first casualty was Germany’s finance minister, Wolfgang Schuble, who in a few days will relinquish his long-held post and move on to the ceremonial role of Bundestag president. As part of his farewell tour, Schuble – like so many other former members of the establishment- took a parting shot at the system he helped create and warned that “spiraling levels of global debt and liquidity”, as well as “new bubbles” present a major risk to the world economy.
    Speaking to the FT, the Europhile beloved in Germany for successfully steering one of the world’s largest economies for the past eight years, and who nearly led to Grexit in the summer of 2005, said there was a danger of ‘new bubbles’ forming due to the trillions of dollars that central banks have pumped into markets. Confirming another fear widely propagated by the Putin propaganda alternative media, Schuble also warned of risks to stability in the eurozone, particularly those posed by bank balance sheets burdened by the post-crisis legacy of non-performing loans, something we have warned about since 2012, and an issue which remains largely unresolved.
    A strong advocate of fiscal rectitude and debt reduction, Mr Schuble dominated Europe’s policy response to the eurozone debt crisis and has been vilified in countries such as Greece as an architect of austerity. But he will mainly be remembered as the most ardently pro-European politician in German chancellor Angela Merkel’s cabinet, skilled at selling the benefits of the euro and of deeper European integration to an often sceptical German public.

    This post was published at Zero Hedge on Oct 8, 2017.

  • Market Report: Lower in declining volume

    Gold and silver drifted lower in declining volume. On Tuesday, the day of tonight’s Commitment of Traders report, gold’s Comex turnover fell to 211,897 contracts, compared with more normal days of 300,000 to 450,000. When turnover drops like this, it often indicates downside exhaustion and precedes a technical rally.
    Gold fell a further $12 from last Friday’s close to $1268 in early European trade this morning (Friday), and silver by 10 cents to $16.59.
    These are holiday numbers, and probably reflect China’s annual Golden Week holidays, which are this week. Ironically, it is the one week that’s not golden for markets, removing the largest source of physical demand for gold for a whole week. This is likely to be a big part of the reason why precious metal trading has ground to a halt.

    This post was published at GoldMoney on October 06, 2017.

  • “My Watch Is Off”: HSBC Traders Used Code Words To Trigger Front-Running Trades

    According to prosecutor Carol Sipperly, former HSBC currency trader Mark Johnson used just four words to trigger a massive, international front-running operation that netted his firm some $8 million in illicit profits: “my watch is off.”
    The bank’s former global head of foreign exchange alerted the traders around the globe via a phone call in December 2011 that was recorded, a prosecutor said Thursday. The gambit was designed to take advantage of a $3.5 billion client order to buy sterling, the U. S. says.
    After Johnson’s trial recessed for the day, prosecutor Carol Sipperly asked that the jury hear the recordings on Friday, in which Johnson allegedly tipped off a trader in Hong Kong. That signal eventually reached others on both sides of the Atlantic, she said. Johnson was in New York that day, speaking to Stuart Scott, the bank’s former head of currency trading in Europe, who was in London, just before the transaction for its client, Cairn Energy Plc.
    Prosecutors say Johnson and Scott, along with other traders, bought pounds before the transaction. Johnson is on trial in federal court in Brooklyn, New York, accused of a scheme that produced a $8 million profit for his bank.

    This post was published at Zero Hedge on Oct 6, 2017.

  • 6/10/17: CA&G on Ireland’s Tax, Banking Costs & Recovery

    Occasionally, the Irish Comptroller and Auditor General (C&AG) office produces some remarkable, in their honesty, and the extent of their disclosures, reports. Last month gave us one of those moment.
    There are three key findings by CA&G worth highlighting.
    The first one relates to corporate taxation, and the second one to the net cost of banking crisis resolution. The third one comes on foot of tax optimisation-led economy that Ireland has developed since the 1990s, most recently dubbed the Leprechaun Economics by Paul Krugman that resulted in a dramatic increase in Irish contributions to the EU budget (computed as a share of GDP) just as the Irish authorities were forced to admit that MNCs’ chicanery, not real economic activity, accounted for 1/3 of the Irish economy. All three are linked:
    Irish banking crisis was enabled by the combination of a property bubble that was co-founded by tax optimisation running rampant across Irish economic development model since the 1990s; and by loose money / capital flows within the EU, which was part and parcel of our membership in the euro area. The same membership supported our FDI-focused competitive advantage. Irish recovery from the banking crisis was largely down to non-domestic factors, aka – tax optimisation-driven FDI and foreign companies activities, plus the loose money / capital flows within the EU enabled by the ECB. In a way, as Ireland paid a hefty price for European imbalances and own tax-driven economic development model in 2007-2012, so it is paying a price today for the same imbalances and the same development model-led recovery.

    This post was published at True Economics on Friday, October 6, 2017.

  • Spike In Airborne Radioactivity Detected In Europe, Source Located In Southern Urals

    In late February, concerns about a potential nuclear “incident”, reportedly in the vicinity of the Arctic circle, emerged when trace amounts of radioactive Iodine-131 of unknown origin were detected in January over large areas in Europe, according to a report by the Institute for Radiological Protection and Nuclear Safety, the French national public expert in nuclear and radiological risks. And while Norway was the first to measure the radioactivity, France was the first to officially inform the public about it.
    “Iodine-131 a radionuclide of anthropogenic origin, has recently been detected in tiny amounts in the ground-level atmosphere in Europe. The preliminary report states it was first found during week 2 of January 2017 in northern Norway. Iodine-131 was also detected in Finland, Poland, Czech Republic, Germany, France and Spain, until the end of January”, the IRSN wrote in a press release.

    This post was published at Zero Hedge on Oct 6, 2017.

  • Dollar Surge Continues Ahead Of Jobs Report; Europe Dips As Catalan Fears Return

    World stocks eased back from record highs and fell for the first time in eight days, as jitters about Catalonia’s independence push returned while bets on higher U. S. interest rates sent the dollar to its highest since mid August; S&P 500 futures were modestly in the red – as they have been every day this week before levitating to record highs – ahead of hurricane-distorted nonfarm payrolls data (full preview here). U. S. jobs report will also be released Friday with a speech on monetary policy by the New York Fed chief.
    On Thursday the S&P 500 reached its latest all-time high after better-than-forecast American factory orders and hawkish comments by SF Fed President John Williams reinforced optimism in the world’s largest economy, and pushed the dollar higher. Oil fell and the gold price edged higher. The VIX declined to a new record low going back to 1990.

    This post was published at Zero Hedge on Oct 6, 2017.

  • Trader: Investors Should Ignore Payrolls, Focus On Europe

    In his latest Macro View, Bloomberg reporter and macro commentator, David Finnerty, explains why investors are better off ignoring today’s payrolls report – where “any weakness will be attributed to hurricanes, while a beat on payrolls or wages would be seen as supporting a Federal Reserve interest rate increase in December” – and instead focus on Europe, and specifically the next ECB meeting which will set the stage for the next big move in global risk.
    His full note below.

    Looking for the Next Treasury Driver After Payrolls
    While all eyes will be on the U. S. non-farm payrolls data Friday, investors may want to look to Europe for the next major catalyst.
    The ECB’s policy meeting is approaching and with some form of QE adjustment announcement expected, we may see European yields rise taking American ones with them.
    The balance of risks is in favor of yields rising after the U. S. employment report. Any weakness will be attributed to hurricanes, while a beat on payrolls or wages would be seen as supporting a Federal Reserve interest rate increase in December.
    But the ECB could be a more significant driver. President Mario Draghi said in September that the bulk of the decisions on QE will be taken in October.
    The euro has weakened since the previous meeting. Any perceived tightening is likely to push yields higher initially.
    When the Fed formally announced its well-choreographed plan to slow down bond purchases at its December 2013 meeting, the U. S. 10-year yield reacted by rising from about 2.8% to more than 3% two weeks later. Eurozone yields followed.
    This time around the roles could be reversed. So pay attention to payrolls, but after that it’s over to you, President Draghi.

    This post was published at Zero Hedge on Oct 6, 2017.

  • EU is becoming a No-Go-Zone for Business

    The European Union has ordered AMAZON to pay about 250 million euros ($294 million) in taxes to Luxembourg, saying it was given an unfair tax advantage from 2003 because it paid less than they would have paid in France or Germany. The EU is retroactively changing taxes. This is a sure fire way of telling companies to get out of Europe. If no matter where you build your plant, if you would have been paying a higher tax in France or Germany, the EU says that is not fair and you have to pay more in BACK TAXES.

    This post was published at Armstrong Economics on Oct 6, 2017.

  • Defying Spanish Defense Ministry’s Civil War Threat, Catalans To Hold Debate Monday

    Spanish (and European) stocks surged this afternoon as headlines crossed that Catalan separatists were hoping to ‘stall’ proceedings in hope of negotiating with Madrid. That hopeful headline appears to have been crushed now as Bloomberg reports the Catalan regional parliament intends to meet as planned Monday, defying a suspension by Spain’s Constitutional Court.
    As Bloomberg reports, Jordi Sanchez, who heads the Catalan National Assembly, said that lawmakers may need to gather in an alternative venue, but that the debate on an illegal referendum on independence from Spain will take place. Sanchez collaborates closely with Regional President Carles Puigdemont and the speaker in the Catalan legislature, Carme Forcadell. He helped organize the vote on Oct. 1.
    ‘There will be some formula for the Catalan Parliament to convene and hold its meeting as planned,’ Sanchez said in an interview in Barcelona.
    ‘There will be a plenary session.’

    This post was published at Zero Hedge on Oct 5, 2017.