Yesterday, in a periodic repeat of what he says every 6 or so months, Jamie Dimon - devoid of other things to worry about - warned once again about the dangers hidden within the shadow banking system (the last time he warned about the exact same thing was in April of this year). The throat cancer patient and JPM CEO was speaking at the Institute of International Finance membership meeting in Washington, D.C., and delivered a mostly upbeat message: in fact when he said that the industry was "very close to resolving too big to fail" we couldn't help but wonder if JPM would spin off Chase or Bear Stearns first. However, when he was asked what keeps him up at night, he said non-bank lending poses a danger "because no one is paying attention to it." He said the system is "huge" and "growing." Dimon is right that the problem is huge and growing: according to the IMF which just two days earlier released an exhaustive report on the topic, shadow banking (which does not include the $600 trillion in notional mostly interest rate swap derivatives) amounts to over $70 trillion globally.
Virtually every country in the world spends more money than they collect in taxes, but no group of countries has done a better job at this than those that formed the Euro-zone. This collective group has so much debt, that a recent study by the BIS concluded it would take 20 consecutive years of surpluses to simply bring debt loads back to levels previously reached prior to the current crisis. Considering that this has never happened before, we have little confidence that this type of spending constraint can be accepted and implemented by any of the respective governments. Every market has a release valve, and for Europe it will be the bond market. The beginning of the end, so to speak, really starts when social unrest reaches a new level. It’s at that point confidence rapidly declines and so too will the European bond market.
The dramatic rise in support for Scottish independence is nowhere more evident than in GBPUSD implied volatility, which has soared to 3-year highs as The Guardian reports a further poll showing next week's referendum is on a knife-edge with a gap of just 1 percentage point between yes and no. As one 'Yes Scotland' representative noted, "This new Scotland could be less than a fortnight away. But we must not be complacent. The scaremongering, dissembling and misrepresentation of the no campaign will be ramped up as we approach polling day." Of course, Scotland is not the only EU nation seeking separation, as we illustrate below, and as Goldman Sachs notes, there could be a broader impact on the risk premium across Europe as Scottish independence leads to other calls for more regional autonomy.
Think CDS were the scourge of humanity, think again. As Pension360 reports, several Wall Street firms are selling securities backed by longevity risk - the risk that retirees receiving benefits will live longer than expected (and thus incur a higher cost on their retirement plan). As Ted Ballantine notes, 'no one ever said Wall Street wasn't creative'; but one wonders just how the banks are mitigating this risk...
Simply put, the reason why Mario Draghi's impressively-pitched ABS 'stimulus' QE-lite plan won't help can be summed up in 2 words "unencumbered assets." There is simply a lack of the right quality collateral, that has not already been swapped with the ECB (or delevered off balance sheets), for this to make a difference. However, as Bloomberg reports, the plan will not even get that far.. because the market for these assets is incapable of supporting this size of buying. As one major ABS asset manager notes, it takes him about three months to buy 1 billion euros of these securities, "the number that's circulating the market is 500 billion euros, but where is he going to get it from?" Add to that the report from Die Welt that The ECB lacks sufficient expertise for ABS purchases, and as another major European ABS manager concludes, "I don't see either a capital relief for banks or the banks giving more credit to the real economy." Still, it's fun to believe Draghi's promises, right?
Since the inception of Obamacare, Humana up more than 440% because just as cereal manufacturers decrease their costs by putting less cereal in the same box, health insurers have raised the deductibles and co-insurance.
It was in June of 2011 when we reported that Bank Of America agreed to pay $8.5 billion to settle mortgage (mis)representation suit, where we said the bank was "about to part with more money than it has earned since 2008 in what will soon be the biggest financial settlement in the industry." Fast forward 3 years later when Bank of America once again makes history with its latest, and literally greatest, mortgage settlement with the US government, putting all of its MBS transgressions in the past, and which will cost the bank some $16.65 billion (of which, however, some $7 billion will be "consumer relief" and the remainder likely tax-deductible), a new record, and allow the bank to continue adding back "one-time, non-recurring" litigation charges to its adjusted, non-GAAP bottom line, thus once again "beating expectations".
There is a standard view of energy and the economy that can briefly be summarized as follows: Economic growth can continue forever; we will learn to use less energy supplies; energy prices will rise; and the world will adapt. The following view of how energy and the economy fit together is very different - it is based on the principle of reaching limits in a finite world.
The fundamental mistake is to think in terms of a low yield telling you anything about the economy, as it is price that you should be focusing on.
If structural reform is impossible as a result of lobbying (i.e. the political capture of governance and regulation) by vested interests that profit handsomely from these broken systems, collapse is the only "fix" left.
- Pope Francis calls for action as Iraqi Christians forced to flee (Reuters)
- Richest Russians Deprived of Luxury Foods by Putin’s Ban (BBG)
- Exxon Drilling Russian Arctic Shows Sanction Lack Bite (BBG)
- Israeli Jets Strike Gaza Targets After Rockets Shatter Truce (BBG)
- U.S. starts aid airdrops in Iraq but no strikes yet (Reuters)
- Banks Said to Be Arranging Argentine Debt Buyer Group (BBG)
- Siberia Flight-Ban Threat Forces Airlines to Mull Options (BBG)
- Malaysia Airlines to Be Delisted in $429 Million Buyout (BBG)
- Erdogan poised to win Turkey's first popular presidential vote (Reuters)
- African Bank Fights Collapse in Espirito Santo-Like Drama (BBG)
- China to build lighthouses on five isles in defiance of U.S. call (Reuters)
If you like your disposable income... forget it. Health-care insurance premiums for individuals in California rose between 22% and 88% in 2014 from last year, even after the federal health-care overhaul. This has led, as Bloomberg reports, to Proposition 45 - a bill that would grant regulatory say on proposed premium increases. "Unless Proposition 45 is passed we are going to continue to see dramatic year-over-year increases," warned Insurance Commissioner Dave Jones.
Well the hits just keep on coming. The U.S. Government Accountability Office (GAO), recently conducted a study in which investigators attempted to use fake identities to sign up for subsidized healthcare under ObamaCare. The results are frightening. All but one phony applicant was successful. Moreover, the GAO more broadly notes that “about 2.6 million ‘inconsistencies’ existed among applicants who had chosen a health plan.”... The GAO’s account of fictitious applicants obtaining subsidized coverage goes beyond a related problem that surfaced this spring and that the investigators also cited: The government may be paying incorrect insurance subsidies to a significant share of the 5.4 million Americans who signed up for health plans for this year through the federal marketplace.
The EU and global drive toward bail-ins continues unabated. Bail-ins are coming to financial institutions and banks in the EU, UK, U.S. and much of the western world - with painful consequences for unprepared investors and savers.
Working for the government was always pitched as somehow being better guaranteed than risky private corporations. However, the problem with government pensions has been they promised whatever sounded nice, with zero accountability. The presumption that tax revenue was an endless pit is one of those fallacies that nobody ever investigates. The ramifications of what happens in Detroit will ripple through the entire debt structure nationally for if this will be the new game plan to follow, why should people buy any government debt whatsoever if not even bankruptcy laws apply? As we said – he who makes the laws never goes to jail for breaking them.