Is China on the verge of a "tipping point" or as Deutsche Bank puts it, on the edge of an "uncontrollable liquidity event"? For the answer and much more, here is everything you always wanted to know about the current precarious state of China's financial system.
"I still shake my head at the stupidity. One of the most overindebted countries in the history of modern finance trading with a 0% thirty year bond... But this week the market decided to test the BoJ’s resolve... The market is finally saying the demand for credit is enough to force the Bank of Japan to buy bonds to keep rates down. And that was the signal I was waiting for. I am shorting JGBs with both fists."
Vincent Viola, the billionaire founder of trading firm Virtu Financial, has withdrawn his nomination to be Secretary of the Army after distancing himself from his business ties proved too difficult. He becomes the first Trump nominee to withdraw from nomination.
"Over the past 18 months, we have focused on a particular set of asymmetries, which we are now seeking to exploit. One opportunity in particular has the greatest risk-reward profile we have ever encountered in our decade of being a fiduciary."
As the IMF writes, China urgently needs to tackle its corporate-debt problem before it becomes a major drag on growth in the world’s No. 2 economy. Corporate debt has reached very high levels and continues to grow, as it demonstrates in this chart that keeps it up at night...
China has a window from now to President-elect Donald Trump’s inauguration to halt FX intervention and let yuan depreciate to its equilibrium level, Yu Yongding, a former academic member of PBOC’s monetary policy committee, said, providing one possible explanation for bitcoin's 20% surge in the past week.
"Markets don’t have a purpose any more - they just reflect whatever central planners want them to. Why wouldn’t it lead to the biggest collapse? My strategy doesn’t require that I’m right about the likelihood of that scenario. Logic dictates to me that it’s inevitable..."
"If Chinese foreign reserves continue to fall and the PBOC wants to maintain control of the exchange rate, they will need to face some difficult choices... Investors should be prepared for bigger falls in the Chinese Yuan."
In a recent interview with Macro Voices, Hugh Hendry is asked about the trade he has on in his fund, to which the Scotsman says that his team recently had a “eureka moment” and figured out how to design a trade, which has a negative carry when viewed in simple terms, such that they preserve the asymmetric of risk/reward while converting it to a positive-carry trade by adding another “European sovereign component to the trade”.
"We had a position whereby the other side - the investment banks - they were desperate. They were dying as this thing suddenly came to my strike levels. Blew through my strike levels, started to create this monster of P&L, which was murdered by a monster loss on the other side. That's macro. That's macro."