• Tag Archives Financial Crisis
  • Deutsche Bank: “The Fed’s ‘Transparency’ Killed Long-Term Investing”

    Two weeks ago, one of our favorite derivatives strategists, BofA Barnaby Martin wrote something we have said for years: “QE has been the most effective way for CBs to ‘sell vol’”, arguing that accommodative monetary policies across the globe amid QE have “clearly supported a strong rebound in fixed income markets.” This should not be a surprise: as Martin calculated, there is now some $51 trillion at risk should rates vol spike, not to mention countless housing bubbles that have been created since the financial crisis where the bulk of middle class wealth has been parked, which in turn have trapped central banks, preventing them from undoing nearly a decade of unprecedented monetary largesse that has pumped over $15 trillion in central bank liquidity.

    The BofA strategist showed that every time the Fed embarked on the different phases of its QE program, credit implied vols declined significantly, while during periods of no monetary easing or when the market started pricing the possibility of easing policy removal (tapering tantrum and the subsequent tapering phase) implied vols advanced.

    This post was published at Zero Hedge on Sep 23, 2017.


  • The forthcoming global crisis

    The global economy is now in an expansionary phase, with bank credit being increasingly available for non-financial borrowers. This is always the prelude to the crisis phase of the credit cycle. Most national economies are directly boosted by China, the important exception being America. This is confirmed by dollar weakness, which is expected to continue. The likely trigger for the crisis will be from the Eurozone, where the shift in monetary policy and the collapse in bond prices will be greatest. Importantly, we can put a tentative date on the crisis phase in the middle to second half of 2018, or early 2019 at the latest.
    Introduction
    Ever since the last credit crisis in 2007/8, the next crisis has been anticipated by investors. First, it was the inflationary consequences of zero interest rates and quantitative easing, morphing into negative rates in the Eurozone and Japan. Extreme monetary policies surely indicated an economic and financial crisis was just waiting to happen. Then the Eurozone started a series of crises, the first of several Greek ones, the Cyprus bail-in, then Spain, Portugal and Italy. Any of these could have collapsed the world’s financial order.

    This post was published at GoldMoney on September 21, 2017.


  • What the Fed’s New $4.5 Trillion Balance Sheet Plan Means for the Stock Market Today

    This is a syndicated repost courtesy of Money Morning. To view original, click here. Reposted with permission.
    The Federal Reserve is set to announce more details about unwinding its massive $4.5 trillion balance sheet at today’s FOMC meeting. That will officially signal the end of the Fed’s stimulus program, going all the way back to 2007.
    The Five Top Stock Market Stories for Wednesday
    This afternoon, the U. S. Federal Reserve will conclude its two-day meeting on monetary policy. Fed Chair Janet Yellen will hold a press conference to announce the central bank’s plans on how it will unwind its massive balance sheet. This will be considered the official announcement by the Fed that it is ending its stimulus program that began after the financial crisis. Investors should remain cautious, as this truly is the great unknown regarding market risk. In fact, investors should read Lee Adler’s latest commentary on how the central bank’s stimulus programs work and what it means for your investments. Be sure to read Sure Money Investor.

    This post was published at Wall Street Examiner by Garrett Baldwin ‘ September 20, 2017.


  • Today the music stops

    Today’s the day.
    After months of preparing financial markets for this news, the Federal Reserve is widely expected to announce that it will finally begin shrinking its $4.5 trillion balance sheet.
    I know, that probably sound reeeeally boring. A bunch of central bankers talking about their balance sheet.
    But it’s phenomenally important. And I’ll explain why-
    When the Global Financial Crisis started in 2008, the Federal Reserve (along with just about every central bank in the world) took the unprecedented step of conjuring trillions of dollars out of thin air.
    In the Fed’s case, it was roughly $3.5 trillion, about 25% of the size of the entire US economy at the time.

    This post was published at Sovereign Man on September 20, 2017.


  • Answers Emerge from Harvey-Hit Houston

    Even before Hurricane Harvey, Houston’s economy was struggling.
    Auto sales collapse but will surge. Auto sales in the Houston metro, first battered by the oil bust and now by Hurricane Harvey, plunged to levels not seen since the depth of the Financial Crisis. New vehicle sales were already at Financial Crisis level in the 12 months before the hurricane hit, with dealers selling 284,000 units in the 12-month period, down 25% from the levels in late 2015 and early 2016.
    This was already an ugly reality. Then, just when people thought that sales might finally pick up a little in August, Hurricane Harvey approached. During the week before landfall, new vehicle sales plunged as potential car buyers had other things to worry about. And for the last week of August, when Harvey was pummeling the area, sales dropped to essentially zero.
    So for all of August, new vehicle sales plunged 45.5% from the already beaten down levels last year to just 15,473 vehicles, according to TexAuto Facts, published by InfoNation, and cited by the Greater Houston Partnership.

    This post was published at Wolf Street on Sep 20, 2017.


  • Icelandic Government Collapses After Plot To Pardon Pedophile Rapist Exposed

    Iceland’s justice system has received praise in recent years for its successful prosecution of multiple bankers who helped bring on the 2008 financial crisis. Though some of those bankers have been released early from prison, the latest controversy in the country stems from an entirely different miscarriage of justice.
    ***
    Last week, it emerged that Prime Minister Bjarni Benediktsson knew of attempts by his father, Benedikt Sveinsson, to have the Ministry of Justice grant ‘restored honor’ to a convicted child rapist.
    Benediktsson kept this secret as the rapist, a friend of his father’s was essentially exonerated.

    This post was published at Zero Hedge on Sep 20, 2017.


  • Meanwhile, The “Next Big Short” Is Quietly Blowing Up

    Back in March, when we detailed the ongoing catastrophic deterioration in the US retail sector, manifesting itself in empty malls, mass store closures, soaring layoffs and growing bankruptcies – demonstrated most vividly by the overnight bankruptcy of Toys “R” Us, the second largest retail bankruptcy in US history after K-Mart – we said that “just like 10 years ago, when the “big short” was putting on the RMBX trade, and to a smaller extent, its cousin the CMBX, so now too some are starting to short CMBS through the CMBX, a CDS index which tracks the values of bonds backed by various commercial properties. They are betting against securities backed by malls in weaker locations where stores could close in quick succession, triggering debt defaults.”
    We dubbed this retail short via CMBX the next “Big Short” trade, and others promptly followed.
    In a subsequent post just a few days later, we underscored why the correct way to short the great retail collapse was not so much through stocks, but CMBX:
    The trade, as we discussed before, is not so much shorting the equities where a persistent threat of a short squeeze has burned the bears on more than one occasion, but going long default risk via CMBX or otherwise shorting the CMBS complex. Based on fundamentals, the trade indeed appears justified: Sold in 2012, the mortgage bonds have a higher concentration of loans to regional malls and shopping centers than similar securities issued since the financial crisis. And because of the way CMBS are structured, the BBB- and BB rated notes are the first to suffer losses when underlying loans go belly up.

    This post was published at Zero Hedge on Sep 19, 2017.


  • Bill Blain: “One Fund I Met Is Convinced Bond Markets Are On The Edge Of A Precipice”

    Blain’s Morning Porridge – September 19th 2017
    ‘I had to phone someone so I picked on you. Hey, that far out so you heard him too..’
    There is a veritable hurricane of new issues hitting the market. Like the new Ukraine deal they are being priced to sell – perhaps racing to get down before the rains come. There is the sure and certain knowledge this feeding frenzy is going to stop. With a thumping great crunch.
    But the new issue bond market is always feast/famine. There is bigger stuff happening. I managed to spend some time yesterday in the West End of London, speaking with a number of clients about where they think markets are going. Three big themes emerged:
    Much of the current ‘noise’ is utter distraction – including what’s really going on in Washington, the nuances of the Brexit negotiations, Korea and all the other political rumour and sigh hitting markets. Some of stories emanating from Whitehall, Brussels, Berlin and Washington are tremendous – I’d love to share them, but… Strip out the political flummery and noise, and the prospects for global stock markets should be positive. Every major economy that matters is now in positive growth, after 10-years we finally seem to have shaken off the Global Financial Crisis, and stock markets (which high) are not impossibly overvalued. The reflation trade is on. The fly in the ointment is the bond market. One fund I met is convinced Global bond markets and credit are on the edge of precipice and about to take that terminal step forward. Others fear the unintended consequences of taper and the ‘End of QE’ triggering a reset across global financial asset values – especially across the bond markets.

    This post was published at Zero Hedge on Sep 19, 2017.


  • Global Debt Bubble Understated By $13 Trillion Warn BIS

    – Global debt bubble may be understated by $13 trillion: BIS
    – ‘Central banks central bank’ warns enormous liabilities have accrued in FX swaps, currency swaps & ‘forwards’
    – Risk of new liquidity crunch and global debt crisis
    – ‘The debt remains obscured from view…’ warn BIS
    ***
    Global debt may be under-reported by around $13 trillion because traditional accounting practices exclude foreign exchange derivatives used to hedge international trade and foreign currency bonds, the BIS said on Sunday.
    Bank for International Settlements researchers said it was hard to assess the risk this ‘missing’ debt poses, but that the main worry was a liquidity crunch like the one that seized FX swap and forwards markets during the financial crisis.
    The $13 trillion unaccounted-for exposure exceeds the on-balance-sheet debt of $10.7 trillion that data shows was owed by firms and governments outside the United States at end-March.

    This post was published at Gold Core on September 19, 2017.


  • “This Is Where The Next Financial Crisis Will Come From”

    In an extensive, must-read report published on Monday by Deutsche Bank’s Jim Reid, the credit strategist unveiled an extensive analysis of the “Next Financial Crisis”, and specifically what may cause it, when it may happen, and how the world could respond assuming it still has means to counteract the next economic and financial crash. In our first take on the report yesterday, we showed one key aspect of the “crash” calculus: between bonds and stocks, global asset prices are the most elevated they have ever been.
    ***
    With that baseline in mind, what happens next should be obvious: unless one assumes that the laws of economics and finance are irreparably broken, a deep recession and a market crash are inevitable, especially after the third biggest and second longest central bank-sponsored bull market in history.
    But what will cause it, and when will it happen?
    Needless to say, these are the questions that everyone in capital markets today wants answered. And while nobody can claim to know the right answer, here are some excerpts from what DB’s Jim Reid, one of the best strategists on Wall Street, thinks will take place.

    This post was published at Zero Hedge on Sep 19, 2017.


  • Mother of All Bubbles: Global Debt May Be Understated By $13 Trillion

    The US national debt was in the news last week as Pres. Trump signed a spending bill that raised the debt ceiling limit for the next three months and added approximately $318 billion to the national debt. Officially, the US debt surged to to $20.16 trillion. Of course, the actual figure for government unfunded liabilities runs even higher. And Trump wants to do away with the debt ceiling altogether.
    The US debt makes up just one part of a rapidly growing worldwide debt problem. Earlier this summer, US Global Investors CEO Frank Holmes called global debt ‘the mother of all bubbles.’ Now we have a report from the Bank of International Settlements saying worldwide debt may actually be understated by $13 trillion. Reuters reports the understatement is because ‘traditional accounting practices exclude foreign exchange derivatives used to hedge international trade and foreign currency bonds.’
    Bank for International Settlements researchers said it was hard to assess the risk this ‘missing’ debt poses, but that the main worry was a liquidity crunch like the one that seized FX swap and forwards markets during the financial crisis. The $13 trillion unaccounted-for exposure exceeds the on-balance-sheet debt of $10.7 trillion that data shows was owed by firms and governments outside the United States at end-March.’

    This post was published at Schiffgold on SEPTEMBER 18, 2017.


  • Top Financial Expert Warns Stocks Need To Drop ‘Between 30 And 40 Percent’ As Bankruptcy Looms For Toys R Us

    Will there be a major stock market crash before the end of 2017? To many of us, it seems like we have been waiting for this ridiculous stock market bubble to burst for a very long time. The experts have been warning us over and over again that stocks cannot keep going up like this indefinitely, and yet this market has seemed absolutely determined to defy the laws of economics. But most people don’t remember that we went through a similar thing before the financial crisis of 2008 as well. I recently spoke to an investor that shorted the market three years ahead of that crash. In the end his long-term analysis was right on the money, but his timing was just a bit off, and the same thing will be true with many of the experts this time around.
    On Monday, I was quite stunned to learn what Brad McMillan had just said about the market. He is considered to be one of the brightest minds in the financial world, and he told CNBC that stocks would need to fall ‘somewhere between 30 and 40 percent just to get to fair value’…
    Brad McMillan – who counsels independent financial advisors representing $114 billion in assets under management – told CNBC on Monday that the stock market is way overvalued.
    ‘The market probably would have to drop somewhere between 30 and 40 percent to get to fair value, based on historical standards,’ said McMillan, chief investment officer at Massachusetts-based Commonwealth Financial Network.

    This post was published at The Economic Collapse Blog on September 18, 2017.


  • Deutsche Bank: “Global Asset Prices Are The Most Elevated In History”

    In an extensive report published this morning by Deutsche Bank’s Jim Reid, the credit strategist looks at the “Next Financial Crisis”, and specifically what may cause it, when it may happen, and how the world could respond assuming it still has means to counteract the next economic and financial crash. While we will have much more to say on this study in upcoming posts, we wanted to bring readers’ attention to one observation made by Reid, namely that “we’re in a period of very elevated global asset prices – possibly the most elevated in aggregate through history.”
    Here are the details on what appears to be the biggest asset bubble ever observed, courtesy of Deutsche Bank:
    Figure 57 updates our analysis looking at an equal weighted index of 15 DM government bond and 15 DM equity markets back to 1800. For bonds we simply look at where nominal yields are relative to history and arrange the data in percentiles. So a 100% reading would mean a bond market was at its lowest yield ever and 0% the highest it had ever been. For equities valuations are more challenging to calculate, especially back as far as we want to go. In the 2015 study (‘Scaling the Peaks’) we set out our current methodology but in short we create a long-term proxy for P/E ratios by looking at P/Nominal GDP and then look at the results relative to the long-term trend and again order in percentiles. Nominal GDP data extends back much further through history than earnings data. When we have tracked the two series where the data overlaps we have found it to be an excellent proxy. Not all the data in Figure 57 starts at 1800 but we have substantial history for most of the countries (especially for bonds).

    This post was published at Zero Hedge on Sep 18, 2017.


  • Visualizing America’s Rampant Racial Wealth Inequality

    Even though the United States is on course to become “majority minority” by 2044, Statista’s Niall McCarthy notes that the country still has a huge and growing racial wealth gap.
    A new study by Prosperity Now and the Institute for Policy Studies has found that white households in the middle-income quintile own nearly eight times as much wealth as middle-income black earners and ten times as much as middle-income latino earners.
    Last year, the same research claimed that if current trends continue, it will take 228 years for the average black family to reach the same level of wealth white families have today. For latino families, it would take 84 years.
    Since 1983, black and latino families have seen their real wealth fall considerably from $6,800 and $4,000 to just $1,700 and $2,000 respectively in 2013. Even though white households took a hit during the financial crisis, they still boasted a median wealth of $116,800 in 2013.
    The research projects that the gap will widen even further in the years ahead with black household wealth declining 30 percent from today by 2024. The median latino household will see their wealth fall 20 percent while white households will experience a five percent increase by that point.
    In addition, while policy-makers are crowing about the fact that aggregate American real incomes are finaly back above 1989 levels, the truth is slightly more awkward… It’s all the 1%…

    This post was published at Zero Hedge on Sep 17, 2017.


  • Anti-Gold Puppet Now Hints Gold Will Soar

    Several representatives of the elitists have been warning about a major global financial crisis. Recently the former Head of the Monetary and Economics Department at the Bank of International Settlements, the Central Bank of Central Banks, warned that there are ‘more dangers now than in 2007.’
    Goldman Sachs commodities analyst, Jeff Currie, who is infamous for incorrectly predicting gold would drop to $800 about three years ago, recently advised anyone listening to own physical gold: ‘don’t buy futures or ETFs…buy the real thing. . .the lesson learned was that if gold liquidity dries up along with the broader market, so does your hedge, unless it’s physical gold in a vault, the true hedge of last resort.’

    This post was published at Investment Research Dynamics on Dave Kranzler.


  • Wall Street Flacks Have an Increasingly Murky Presence in U.S. Media

    Yesterday, one of our readers sent us a link to an article at Real Clear Politics by Allan Golombek which makes the same error-filled assertions as those of Andrew Ross Sorkin at the New York Times: that the repeal of the Glass-Steagall Act did not lead to the U. S. financial crisis of 2007-2010.
    Golombek’s bio at the end of the article says only that he is ‘a Senior Director at the White House Writers Group.’ A check at the firm’s website shows it to be an organization that freely admits to being paid by corporations and other special interests to advance their position in the media. The firm states: ‘Whether in a campaign or a crisis, we help our clients determine how best to define their messages for media acceptance and then disseminate those messages for maximum exposure and impact.’
    There are two key problems here. Not every reader will take the time to ferret out what the White House Writers Group is all about and, more importantly, neither Golombek nor Real Clear Politics discloses who the ultimate client is behind Golombek’s message. If Golombek had disclosed in his bio that his firm was being paid by a major Wall Street bank or trade association to push this position on Glass-Steagall, would Real Clear Politics have run the article? By withholding this information, isn’t the reader left badly misinformed as to motive.

    This post was published at Wall Street On Parade on September 14, 2017.


  • #FedGibberish!

    Recently on our Twitter feed, @michaellebowitz, we introduced the hashtag #fedgibberish.

    The purpose was to tag Federal Reserve members’ comments that highlight desperate efforts to rationalize their inane monetary policy in the post-financial crisis era. This past week there were two quotes by Fed members and one by the head of the European Central Bank (ECB) which were highly deserving of the tag. We present them below, with commentary, to help you understand the predicament the Fed and other central banks face.
    Lael Brainard
    On September 5, 2017 Fed Governor Lael Brainard stated the following in a speech at the Economic Club of New York:
    ‘We should be cautious about tightening policy further until we are confident inflation is on track to achieve our target.’ – ‘There is a high premium on guiding inflation back up to target so as to retain space to buffer adverse shocks with conventional policy.’

    This post was published at Zero Hedge on Sep 13, 2017.


  • NFIB Small Business Survey: Index Maintains Momentum in August

    The latest issue of the NFIB Small Business Economic Trends came out this morning. The headline number for August came in at 105.3, up 0.1 from the previous month. The index is at the 97th percentile in this series. Today’s number came in above the Investing.com forecast of 105.0.
    Here is an excerpt from the opening summary of the news release.
    The NFIB Index rose 0.1 points to 105.3. Five of the components increased, while five declined. The lofty reading keeps intact a string of historically high performances extending back to last November.
    The first chart below highlights the 1986 baseline level of 100 and includes some labels to help us visualize that dramatic change in small-business sentiment that accompanied the Great Financial Crisis. Compare, for example, the relative resilience of the index during the 2000-2003 collapse of the Tech Bubble with the far weaker readings following the Great Recession that ended in June 2009.

    This post was published at FinancialSense on 09/13/2017.


  • Tick-Tock, Northern Rock

    Ermine for idiots, profits for bankers. And for savers? Risk…
    EVEN a stopped clock tells the right time twice a day, writes Adrian Ash at BullionVault.
    And 10 years ago this week, the minute-hand slowly turned towards a dark midnight which gloomy gold bugs like us had long predicted. We like to flatter ourselves that we saw it coming. Mostly because we did.
    But we take very little pride in it today. Because of the coming of the 2007 credit crunch…and the global financial crisis it announced…was plain to see. If only you looked.
    Such trends and risk form the ultimate fundamentals of the bullion price, most especially gold. From the lows of 1999-2001 – hit just as the Tech Stock Bubble signed off the late-20th Century’s historic hubris – gold had already tripled versus the Dollar, even before the subprime crash began to make headlines. Gold’s gains came despite no major shift in supply or consumer demand, let alone European central-bank selling. Instead, investment demand had returned after two long decades…a clear sniff of trouble then brewing.
    Of course, central bankers and regulators would later claim in the aftermath of the financial crash that no one could predict it. But they couldn’t even see the crisis when it was upon them. The buffoons who then mismanaged the bust are still struggling to understand it today, 10 years later. The most startling example? Blaming the US subprime crash for September 2007’s banking run on Northern Rock.

    This post was published at FinancialSense on 09/13/2017.