Comptroller of the Currency
Of all the screwed up, misallocated parts of the U.S. economy, the housing market continues to be one of the biggest potential train wrecks. While the extent of the insanity in residential real estate should be clear following the peak insanity yesterday, there are other potential problems just on the horizon. One of these was written about over the weekend in the LA Times. In a nutshell, the next several years will start to see principal payments added to interest only payments on a large amount of second mortgages taken out during the boom years. The estimate is that $30 billion in home equity lines will reset next year, $53 billion in 2015, and then ultimately soaring to $111 billion in 2018 - a looming “wave of disaster” because large numbers of borrowers will be unable to handle the higher payments. This will force banks to either foreclose, refinance the borrower or modify their loans.
- Desperate Philippine typhoon survivors loot, dig up water pipes (Reuters)
- Fading Japanese market momentum frustrates investors (FT)
- China's meager aid to the Philippines could dent its image (Reuters)
- Headline du jour: Granted 'decisive' role, Chinese markets decide to slide (Reuters)
- Central Banks Risk Asset Bubbles in Battle With Deflation Danger (BBG)
- Navy Ship Plan Faces Pentagon Budget Cutters (WSJ)
- Investors pitch to take over much of Fannie and Freddie (FT)
- To expand Khamenei’s grip on the economy, Iran stretched its laws (Reuters)
- Short sellers bet that gunmaker shares are no long shot (FT)
- Deflation threat in Europe may prompt investment rethink (Reuters)
"We see upside surprise risks on gold and silver in the years ahead," is how UBS commodity strategy team begins a deep dive into a multi-factor valuation perspective of the precious metals. The key to their expectation, intriguingly, that new regulation will put substantial pressure on banks to deleverage – raising the onus on the Fed to reflate much harder in 2014 than markets are pricing in. In this view UBS commodity team is also more cautious on US macro...
- Congress Vote Ends Impasse to Be Revisited in January (BBG); Congress Passes Debt, Budget Deal (WSJ)
- House GOP extracts no concessions (Politico)
- Washington becomes the biggest risk to the U.S. economy (Reuters)
- Debt Deal Seen Boosting U.S. Consumers as Holidays Approach (BBG) - only thing missing: disposable income
- Federal Employees Head Back to Work (WSJ)
- Regulator Suggested Shift for Dimon at J.P. Morgan Unit (WSJ)
- Twitter hires Google ad exec ahead of IPO (CNET)
- Teens can now post publicly, but posts are friends-only by default (WaPo)
- Germany Moves to Finalize Coalition Deal (WSJ)
- Draghi Turns Judge on EU Banks as ECB Studies Accounts (BBG)
- UK nuclear deal with China a ‘new dawn’ (FT)
How Many Constitutional Freedoms Have We Lost?
Still Laundering Terrorism and Drug Money ...
"By late April 2012, JPMorgan senior management knew that the firm's Investment Banking unit used far more conservative prices when valuing the same kind of derivatives held in the CIO portfolio, and that applying the Investment Bank valuations would have led to approximately $750 million in additional losses for the CIO in the first quarter of 2012." Translated: Jamie Dimon lied to Congress.
Almost three years ago we warned of the consequence of the disincentives for the working man in the US at the lower-income level. Then, last November we noted the dismal fact that 'work is punished' in America for a large majority of the non-elites. And now, as the part-time new normal becomes more and more understood in the mainstream, we ask once again... If you could stay home and relax all day and actually make more money than you do at your current job, would you do it?
Liquidated ETF gold holdings are being shipped from the U.K to Switzerland for refining into smaller one kilogramme gold bars, Australian bank Macquarie wrote in a note yesterday. These were then sent to Asia and bought by Asian investors. The note confirmed, what has been known anecdotally for some weeks.
CBS' White House correspondent Mark Knoller noted earlier:
Meeting with POTUS tomorrow are heads of the CFPB, FHFA, the Fed, CFTC, FDIC, NCUA, the SEC & Comptroller of the Currency.
— Mark Knoller (@markknoller) August 19, 2013
And while correlation is not causation (but suggests you are on the right path), remember what happened the last time the President, somewhat unexpectedly, met with the CEOs of all the big banks.
'Larry Summers for Fed Chair' proponents are working hard to reverse his generally poor reputation and seem to have gained some ground. They’ve tempted even Fed skeptics with reports that Summers doesn’t believe much in quantitative easing. But his supporters are also making claims that don’t stand up to the facts. Call us old-fashioned, but we think we should be wary of power-hungry egotists whose personal philosophy is to obscure the truth.
There was a time when Jamie Dimon liked everyone to believe that his JPMorgan had a "fortress balance sheet", that he was disgusted when the US government "forced" a bailout on it, and that no matter what the market threw its way it would be just fine, thanks. Then the London Whale came, saw, and promptly blew up the "fortress" lie. But while JPM's precarious balance sheet was no surprise to anyone (holding over $50 trillion in gross notional derivatives will make fragile fools of the best of us), what has become a bigger problem for Dimon is that slowly but surely JPM has not only become a bigger litigation magnet than Bank of America, but questions are now emerging if all of the firm's recent success wasn't merely due to crime. Crime of the kind that "nobody accept or denies guilt" of course - i.e., completely victimless. Except for all the fines and settlements. Here is a summary of JPM's recent exorbitant and seemingly endless fines.
We are confident the following amusing bill titled grandiosely enough "A 21st Century Glass-Steagall Act" (the Bill text here) by Elizabeth Warren, John McCain et al, to pretend Congress is not a bought and paid for by Wall Street marionette, will have a last minute rider that says "Compliance with any or all of the above provisions is purely voluntary."
- MSM discovers that soaring dollar hurts corporate profits: P&G to Apple Hurt by Strong Dollar Keep S&P 500 Profits in Check (BBG)
- China Posts Surprise Drop in Exports (WSJ) - lol: "surprise"
- Plan Reins In Biggest Banks (WSJ)
- European Commission Seeks Authority to Wind Down Banks (WSJ) - and Germany just says 9
- U.S. Banks Seen Freezing Payouts as Harsher Leverage Rules Loom (BBG)
- Brussels sets up clash with Berlin over banks (FT)
- EU to Toughen Creditor-Loss Rules at Failing Banks From August (BBG) - or September, or October, but definitely November... 2023
- China's crude, iron ore imports falter as demand cools (Reuters)
- Obama pushes economic case for immigration as House eyes next steps (Reuters)
This week's biggest news is not the Non-Farm Payrolls, or the European Central Bank or even Portugal's government falling. No - this week's big deal is the openness with which the Federal Reserve is preparing a major margin call on the too-big-to-fail banks in the US. This has been a long time coming since the introduction of the Dodd-Frank law back in 2010 but it is a game changer. Remember all macro paradigm shifts come from policy impulses, often mistakes. Is the Fed about to given the whole banking industry a major margin call?