Bank of America
Margin Calls Mount On Loans Against Stock Portfolios Used To Buy Homes, Boats, "Pretty Much Everything"Submitted by Tyler Durden on 08/27/2015 14:40 -0500
"In a securities-based loan, the customer pledges all or part of a portfolio of stocks, bonds, mutual funds and/or other securities as collateral. But unlike traditional margin loans, in which the client uses the credit to buy more securities, the borrowing is for other purchases such as real estate, a boat or education..." The result was "dangerously high margin balances,' - the products became “the vehicle of choice for investors looking to get cash for anything.” Mr. Sica and others say the products were aggressively marketed to investors by banks and brokerages.
- Virginia TV journalists killed by suspect with 'powder keg' of anger (Reuters)
- Policeman shot to death and three women stabbed, one fatally, in Louisiana (Reuters)
- China Intervened Today to Shore Up Stocks Ahead of Military Parade (Reuters)
- Margin Calls Bite Investors, Banks (WSJ)
- "Computer glitch" is preventing dozens of mutual funds, ETFs from promptly pricing their securities (WSJ)
- Oil prices rise more than 4 percent as equities rally (Reuters)
- Oil Industry Needs Half a Trillion Dollars to Endure Price Slump (BBG)
Flawed Fundamentals, Nasty Macro, Structural Industry Change: For Wall Street Banks It Really Is Different This TimeSubmitted by Reggie Middleton on 08/26/2015 08:39 -0500
This time, it really is different. It's "Structural", not "Cyclical". It's actually a very big difference, and banking will never be the same.
Anyone who listens to a mainstream media pundit, talking head, or spokes bimbo deserves the reaming they are going to receive.
“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” – Ludwig von Mises
On Friday, ahead of the closing stock rout, we forecast that the biggest risk for anyone staying long over the weekend was a disappointment out of China, where the sellside had gotten so excited that a 50-100bps RRR cut was imminent, that the lack of one would surely send futures sliding. Sure enough, as we noted earlier today, much to everyone's surprise and disappointment, the PBOC did nothing (for reasons we speculated upon earlier). Which bring us to this evening's S&P futures, which opened for trading minutes ago, and as expected, gapped by over 0.6% after the Chinese disappointment, down 13 points to 1958 and looking quite heavy.
The $64,000,000,000,000 question: what does the Fed now do? One attempt at an explanation taking into account last week's market plunge comes from Nomura, which provides a "2015 Scenario Analysis" in which it "breaks down various monetary policy (rate hike options) and rates market implications ahead."
The following story is guaranteed to make you sick. Once again, we’re shown that following trillions in taxpayer funded bailouts and backstops, TBTF Wall Street banks immediately went ahead and focused all their attention obtaining loopholes in order to transfer risk and make billions upon billions of dollars in the financial matrix, as opposed to adding any benefit whatsoever to society.
“August’s survey highlights a lack of growth momentum and continued weak price pressures across the U.S. manufacturing sector, which adds some fuel to the dovish argument as policymakers weigh up tightening policy in September. With the headline PMI swiftly losing ground after a modest rebound during July, the latest figure now points to the weakest overall pace of manufacturing growth for almost two years."
"YTD investor performance has been plagued by “non-stop pain trades” as liquidity expectations weaken and investment horizons shorten. For example, July/August saw the S&P 500 media sector lose $100bn of market cap in 15 trading days, as well as significant losses in Asian and Emerging Market currencies following the Chinese yuan devaluation."
"Short-term, markets seem intent on forcing either the Fed to pass in September, or the Chinese to launch a more comprehensive and credible policy package to boost growth expectations. Alternatively, a credit event in commodities (note CDS is widening sharply for resources companies – front page chart) may be necessary to cause policy-makers to panic. Markets stop panicking when central banks start panicking."
"Arguably the only reason to be bullish risk assets right now is there are no reasons to be bullish."
To the utter horror of Ashley Madison's 37 million customers - and to the sheer delight of millions of divorce attorney around the globe - last night the Impact Team did just as it threatened it would, and released a data dump with all the user data in the form of a 9.7GB torrent.
Just two days ago we warned of the dramatic disconnect between equity insurance and credit insurance markets - at levels last seen before Bear Stearns collapse. As the Yuan devaluation shuddered EURCNH carry traders and battered European assets, US equity markets stumbled onwards and upwards, impregnable in their fortitude with The Fed at their back no matter what. However, US corporate bond markets were a bloodbath...
It is what happened in investment grade fund flows in the latest week that is making CEO, especially those whose compensation is a direct function of how much stock they repurchase, very nervous because as Lipper reported overnight IG funds just saw $1.8 billion in outflows, the most in over two years or since June 2013. And without the fund inflow train into IG funds operating smoothly, suddenly stock buybacks appear in jeopardy...
After years of moving lower, the past two quarters have seen a marked increase in Commercial & Industrial Nonperforming Loans.