The move towards "bail-ins" and away from government "bailouts" continues to evolve and yesterday credit rating agency, Standard and Poor's (S&P) warned that this could lead to credit ratings for European banks being slashed by one or two notches. It is important that one owns physical coins and bars, legally in your name, outside the banking system. Paper or electronic forms of gold investment should be avoided as they could be subject to bail-ins.
Ocwen Financial, dubbed by Moody's as poised to become the "next generation" of subprime lenders, has come under considerably pressure this morning amid news that NY State regulators are investigating the firm for "conflicts of interest"...
- *NY DEPT FINL SERVICES FINDS POTENTIAL CONFLICTS OF INTEREST
- *NY CITES REVIEW OF OCWEN'S MORTGAGE SERVICING PRACTICES
- *NY SEEKS INFO ON FINL INTEREST OF OCWEN EXECS IN AFFILIATED COS
It is the Mortgage Servicing Rights (MSRs) that has Moody's the most-concerned as the volumes required may force Ocwen (and others) to shift their business model to ever lower quality loans.
Today the lingering problems of the "emerging" world and concerns about the Fed's tapering take a back seat to what the European Central Bank may do, which ranges from nothing, to a rate cut (which sends deposit rates negative), to outright, unsterilized QE - we will find out shortly: with 61 out of the 66 economists polled by Bloomberg looking for no rate changes from the ECB today it virtually assures a surprise . However, despite - or perhaps in spite of - various disappointing news overnight, most notably German factory orders which missed -0.5% on expectations of a +0.2% print, down from 2.4%, the USDJPY has been supported which as everyone knows by now, is all that matters, even if it was unable to push the Nikkei 225 higher for the second day in a row and the Japanese correction persists.
S&P filed a declaration of McGraw yesterday in federal court in Santa Ana, California, as part of a request to force the U.S. to hand over potential evidence the company says will support its claim that the government filed a fraud lawsuit against it last year in retaliation for its downgrade of the U.S. debt two years earlier. In his court statement, McGraw said Geithner called him on Aug. 8, 2011, after S&P was the only credit ratings company to downgrade the U.S. debt. Geithner, McGraw said, told him that S&P would be held accountable for the downgrade. Government officials have said the downgrade was based on an error by S&P. “S&P’s conduct would be looked at very carefully,” Geithner told McGraw according to the filing. “Such behavior would not occur, he said, without a response from the government."
Markets have started the week on the back foot, despite a brief rally following a better-than-expected Q4 GDP print in China. Indeed, Asian equities recorded a small pop following the GDP report, but the gains were shortlived as the general negativity on China’s growth trajectory continues to weigh on Asian markets. In terms of the data itself, China’s Q4 GDP (7.7% YoY) was slightly ahead of expectations of 7.6% but it was slower than Q3’s 7.8%. DB’s China economist Jun Ma maintains his view that economic growth will likely accelerate in 2014 on stronger external demand and the benefits from deregulation. The slight slowdown was also evident in China’s December industrial production (9.7% YoY vs 10% previous), fixed asset investment (19.6% YoY vs 19.9% previous) and retail sales (13.6% vs 13.7% previous) data which were all released overnight. Gains in Chinese growth assets were quickly pared and as we type the Shanghai Composite (-0.8%), HSCEI (-1.1%) and AUDUSD (-0.1%) are all trading weaker on the day. On a more positive note, the stocks of mining companies BHP (+0.29%) and Rio Tinto (+0.26%) are trading flat to slightly firmer and LME copper is up 0.1%. Across the region, equities are generally trading lower paced by the Nikkei (-0.5%) and the Hang Seng (-0.7%). Staying in China, the 7 day repo rate is another 50bp higher to a three month high of 9.0% with many investors continuing to focus on the Chinese shadow banking system following the looming restructuring of a $500m trust product that was sold to ICBC’s customers.
Over the past two weeks, Trust Preferred (or TruPS) CDOs have gained prominent attention as a result of being the first, and so far only, security that the recently implemented and largely watered-down, Volcker Rule has frowned upon, and leading various regional banks, such as Zions, to liquidate the offending asset while booking substantial losses. But... what are TruPS CDOs, and just how big (or small) of an issue is a potential wholesale liquidation in the market? Courtesy of the Philly Fed we now have the extended answer.
We've all read countless explanations of investor psychology in a general sense, but rarely does anyone put their name to a calamity, or at least their nom de plume. We recognise it when exuberance makes charts go vertically up or when stone cold fear pushes them ruthlessly down, but our ego inevitably makes us shy away admitting that we take part in any function of it - "that's those other sheep". We're merely unemotional observers, until we aren't. Is anyone going to admit they were buying in the final moments before the last bitcoin crash? Unfortunately, our brains are hard-wired to get us into investing trouble.
With the Chinese property bubble set to burst, the bust may lead to even greater demand for physical bullion from the gold loving Chinese.
Move Over FX And Libor, As Manipulation And "Banging The Close" Comes To Commodities And Interest Rate SwapsSubmitted by Tyler Durden on 11/06/2013 14:20 -0400
While the public's attention has been focused recently on revelations involving currency manipulation by all the same banks best known until recently for dispensing Bollinger when they got a Libor end of day print from their criminal cartel precisely where they wanted it (for an amusing take, read Matt Taibbi's latest), the truth is that manipulation of FX and Libor is old news. Time to move on to bigger and better markets, such as physical commodities, in this case crude, as well as Interest Rate swaps. And, best of all, the us of our favorite manipulation term of all: "banging the close."
Yes... a rating agency - the same entity that enabled the last housing market crash - just warned of a housing bubble. How the times have changed - maybe it is different this time?
The rest of the world has had enough of the monopoly of the credit-rating agencies that are largely biased towards the US economy and it’s about time that it all came to an end.
A mere 24 hours before the US was going to run out of money and default on its obligations (in what Jack Lew described as a "catastrophe"), Grant Williams notes the S&P 500 was trading exactly 2.30% from its all-time high. Does that sound like anybody was worried about financial Armageddon? Nope, but as Williams detail sin his latest letter, the danger was very real, as a default by the US on its debt obligations would have gone to the very heart of the "plumbing" that underlies financial markets and caused havoc in the repo market and all kinds of problems with collateral... The key clue passed most people by a week ago; but it came from, of all places, Hong Kong...
While 20-year highs for the CNY may be enough for many to question the USD's ongoing reserve status, it is clear that there are many other plans afoot that undermine the dominance of the greenback. On the global financial stage, China is playing chess while the U.S. is playing checkers, and the Chinese are now accelerating their long-term plan to dethrone the U.S. dollar. You see, the truth is that China does not plan to allow the U.S. financial system to dominate the world indefinitely. Unfortunately for us, the U.S. debt spiral cannot go on indefinitely. Our debt is growing far, far more rapidly than our GDP is, and therefore our debt is completely and totally unsustainable. The Chinese understand what is going on, and when the dust settles they plan to be the last ones standing.
But I never thought it wise to sell it, because for central banks this is a reserve of safety, it’s viewed by the country as such. In the case of non-dollar countries it gives you a value-protection against fluctuations against the dollar, so there are several reasons, risk diversification and so on.
While the US economic data reporting machinery slowly starts churning again following the "reactivation" of government, last night it was China 's turn to report a slew of goalseeked economic items. Q3 GDP (+7.8% yoy), Industrial Production (+10.2% yoy), Fixed Asset Investments (+20.2% YTD yoy) and Retail sales (+13.3% yoy) for September all came in broadly in line with market consensus. The economy grew at a faster pace on a sequential basis with Q3 growth being 0.3ppts higher than Q2. Nonetheless, many observers forecast yoy Q4 GDP growth to decline due to the end of inventory restocking and the fade out of a major credit stimulus in the prior quarter, even as total Chinese debt continues to push ever higher into bubble territory.Speaking of China, however, it is worth noting that overnight the Chinese Yuan rose to the highest level against the dollar in 20 years. This happens as the USD tumbles to nearly a year low, which incidentally is the theme of the overnight session: the ongoing dollar poundage is reverberating across the globe, and the resulting unleashing of global funding carry trades looks set to take the S&P (and everything else) to fresh record highs on the back of even more generous Fed Kool Aid expectations.