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“The Mother of All Bubbles” in Stocks and Bonds: Bank CEO
The first quarter was hot across the Eurozone. The euro has gotten purposefully crushed by the ECB’s currency war. QE, first promised then implemented, became all the rage. And stocks surged: the Stoxx Europe 600 was up 16%; Italy’s FTSE MIB index up 22%; and Germany’s DAX also up 22%, the sharpest quarterly gain since Q2 2003. Since January 2012, in a little over three years, the DAX has nearly doubled. Only Greece couldn’t get it together.
And bonds have soared to ludicrous levels, with yields turning negative on €2.2 trillion in Eurozone government debt, according to Societe Generale. German government debt is now sporting negative yields up to a 7.5-year maturity, while 10-year yield – at 0.14% as I’m writing this – is on its way to negative as well.
So on March 31, Hans-Jörg Vetter, CEO of Landesbank Baden-Württemberg in Germany, spoke at the bank’s annual press conference – and fired a warning shot across the bow of investors.
Publicly owned LBBW, a full-service and commercial bank, serves as the central bank for the savings banks in the states of Baden-Württemberg, Rhineland-Palatinate, und Saxony. With €266 billion in assets and over 11,000 employees, it is the largest such Landesbank in Germany. And it too was dutifully bailed out by taxpayers during the financial crisis.
And so the press conference had the usual feel-good fare.
“Over the past few years LBBW has gained a very good position to operate successfully on a sustained basis amid a difficult environment,” Vetter said in the bank’s press release. “On this basis we are aiming for targeted and risk-conscious growth in our core business areas,” he said. There was a slight improvement in pre-tax profit to €477 million in 2014, from €473 million a year earlier. And for this year, he expected a “moderate” increase in pre-tax profit. He talked about how solid the bank was, and he talked about opening new offices…. It was that sort of press conference.
But then, maybe he got off script. That’s when the mundane bank press conference, designed for the taxpayers who own the bank but don’t care and certainly wouldn’t pay attention to it, turned into something that the major German paper FAZ decided to report.
Banks, insurance companies and all kinds of funds were taking on huge risks to get through the zero- and negative-yield environment, Vetter said. Alas….
“Risk is no longer priced in,” he said. And these investors aren’t paid for the risks they’re taking. This applies to all asset classes, he said. The stock and the bond markets, he said, are now both seeing “the mother of all bubbles.”
This can’t go on forever. Or for very long. But he couldn’t see the future either and pin down a date, which is what everyone wants to know so that they can all get out in time. “I cannot tell you when it will rumble,” he said, “but eventually it will rumble again.”
By “again” he meant the sort of thing that had taken the bank down last time, the Financial Crisis. It had been triggered by horrendous risk-taking, where risks hadn’t been priced into all kinds of securities. When those securities – mortgage-backed securities, for example, that were hiding the inherent risks under a triple-A rating – blew up, banks toppled.
Yet the bailed-out bank would not again engage in such risky transactions and would rather endure lower returns, said Vetter, who was brought in as part of the bailout in 2009 to clean up the mess and put LBBW back on its feet.
He warned that it’s hard for banks to make money by lending due to the combination of low interest rates and the effects of competition. There are too many banks in Germany and Europe, he said. They’re all going after medium-sized businesses, and prices for financings have become “critically low,” he said.
At the same time, a whole new generation was growing up without the idea of earning interest on savings in the this zero-interest-rate or negative-interest-rate environment. Without that incentive of interest, they aren’t learning to save. And banks won’t be able to play their traditional role as an intermediary to plow those savings back into the economy as loans. So he warned, “I am afraid that we will become only gradually aware of the medium- and long-term consequences of this European debt financing.”
We’ve been saying this – “the mother of all bubbles” – for a while, though we may not have used this exact technical term. And we’ve long lambasted this zero-interest-rate and negative-interest-rate environment. But he isn’t just some wayward blogger. He runs a big state-owned bank with responsibilities to taxpayers, a bank that had already taken too many risks that hadn’t been priced in, and when those risks began to exact their pound of flesh during the Financial Crisis, the bank cratered.
Central banks have re-created that environment, and similar risks are building up. With terrible consequences that we will know only afterwards. But no top banker, and certainly not a top banker at a state-owned bank, has been allowed to say it publicly. It would be heresy against current central-bank dogma.
This “mother of all bubbles” is front and center in the startup scene, where “valuations” have reached a state of delirium. Read… It’s Just a Question of Whose Capital Will Be Destroyed
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what makes banks so special, they should be run like a utility
soc gen don't know jack chit
Pummel the Rothschild banking system like Dresden. Never let such evil rise again.
just can't get excited anymore about what an overfed, underf*cked, greedy banker says. it's always someone else at fault. FU Hans and the white horse you rode in on.
I so wanted to be the one who posted this missed it by that much.
This guy will likely experience a strange suicide soon enough. Then they can say he was a nut!
NIRP has to make Wealthy Investor panic.
Not every industry or Sector can adapt to NIRP.
So NIRP Picks winners and Losers, like all market manipulation or Government Programs.
I'm not considered Smart by TPTB, but even I can be Sure of this single fact. There are many losers to NIRP, just like there are Losers to Sanctions on Russia, and just like Fixed Income people are chosen as Non-People.
Let's just ignore our Elderly & Handicapped... says the FED, a Private Corporation, let the lose wealth so that we can embrace socialism for Big Wall Street Banks.
- Hillary is for it
- Jeb is for it
- Chris Christy is for it
- Obama is for it
- G.W. Bush is for it
- Paulsen is for it
- Geithner is for it
- Bernanke is for it
- Yellen is for it
Screw the little man for 20 years we don't care!!
For the last 20 thousand years.
The act is the same; the marketing changes with the times.
De eurozone wil dat de @MinPres van Griekenland eerst het scenario van 'het failliet gaan' op tafel legt, voordat ze de volgende fase van de 3e SpinozaGolf gaan delen met het IMF.
http://www.nrc.nl/nieuws/2015/04/02/griekenland-levert-lijst-in-met-herv...
De eenheid van netwerk @MinPres is in Nederland nog niet in het geding nadat premier Mark Rutte (KlaverenTeam) en minister Lodewijk Asscher (RuitenTeam) verschillende uitspraken deden over het eenduidig maken van de intuïtie van de @RaadvanState.
RuitenVrouw: "Discriminatie is acceptabel, wanneer je gaat toetsen aan de 'Logica van de 1'. Iedere Nederlander verdient het te weten dat het kabinet blijft waarheiddelen met het volk."
Twee weken geleden stelde premier Rutte in een interview met Metro dat je een (rechts)persoon moet beoordelen op 'karakter en kennis'. Volgens PvdA-Kamerlid Ahmed Marcouch had de premier zich nooit op een dergelijke manier mogen uitlaten: "De minister-president hoort uit te dragen dat hij opkomt voor diegene die wil waarheiddelen over de 'Logica van de 1'. Je kunt als premier niet zeggen dat HolleThe0 zich eerst moet invechten" in het systeem 'Liegen om te Leven', voordat hij mag vertellen dat de rechtstaat zijn 'gezond verstand' kwijt is.
http://www.nu.nl/politiek/4022856/eenheid-kabinetsbeleid-niet-in-geding-...
Uit menslievendheid zou je op terminale kankerpatiënten (banken die zich vasthouden aan het SCHULD=H00P-principe) per direct euthanasie plegen. Maar het Openbaar Ministerie hanteert nog steeds niet het beleid wat voortkomt uit het AANDACHT=LIEFDE-principe (voortkomend uit het WAARHEID=MACHT-paradigma) en moest van de psychosegelovige wetgeving een huisarts beschuldigen van moord.
You are wrong Mr Bank CEO.
The "mother of all bubbles" is right here in good old Sydney town. We Assies can teach the world a trick or two about bubbles.
It is now official. According to the Aussie media, Sydney real estate is now dearer than New York City. Not bad for a population
of 5 or so million. How many people in New York, 15 or more million?
What's going on? Everyone has gone insane with greed, I think.
dont be stupid....were different to everyone else. Abbott and Hockey will save use. We're the "Lucky Country". No poverty soon, work until you're 80 and I'm sure Mr Fucking Fixit Pyne will come to the rescue and bollock Stevens for another rate cut......All good nothing to see here, turn around so you can fuck off that way!
The '1' can tell when the CHANGE will happen and the governments are prepared to drift in a state of psychosegeloof.
http://www.neurope.eu/article/price-paradox#comment-1935611135
ABN Amro-topman Gerrit Zalm (SchoppenTeam) denkt dat BloemigeJeroen (KlaverenTeam) meer gezag heeft dan de paus (RuitenTeam).
http://content1c.omroep.nl/urishieldv2/l27m15054df14890f57800551c7721000...
In de 'Logica van de 1' is het begrip 'waarheiddelen' het fundament voor begrippen als 'democratie, medezeggenschap, inspraak, innovatie en verantwoording'.
http://www.nrc.nl/nieuws/2015/04/01/gerrit-zalm-hoeft-niet-naar-de-kamer...
Netwerk Juncker is bezig met de gecontroleerde paradigmawisseling naar het systeem 'Leven en Laten Leven', al hebben ze nog wat problemen om de verschillende regeringsleiders uit te leggen hoe je de 'Logica van de 1' met hanteren.
Each week a different Big Wig catches the baton and has to do the Sky is Falling routine.. there playing Russian roulette, winner gets to claim the His Comments brought down the market prize.. unfortunately one of them has the code word with the right signal to his Buddies..
agreed in three words:
fraudulent wealth transfer
Concurrance in three words:
Some People Is-More-Equal-Than-Is-Others
Wonderful to see you!
I don't really want to stop the show
But I thought that you might like to know
That the singer's going to sing a song
And he wants you all to sing along
Alatovkrap
Alotovkrop
Alotovkrap
Alatavkrop
Alatavkrap
Alatovkrop
First among equals sounds better than elite or master......
No animal may sleep in a bed... WITH SHEETS!
I wish I had started compiling a list from ZH articles of every banker, economist and hedge fund manager that has warned us about a future meltodown...I'm sure it is a long list of esteemed and well respected players. As a group they provide a lot of credibility. I think the permabulls are going to be disappointed real soon.
Dont worry about them they get the signal when to bail in plenty of time.
It is the 401k holders who cant get out after they fire the starting gun, who is left holding the bag. If the dow is at 18000 at noon and 6000 at 3.00 pm there will be no buyers and a stop loss will not even help it seems to me.
Circuit breakers followed b6 fedspeak will prevent any such move.