Goldman has been using the proceeds from the new deposits to directly fund speculative activity such as trading and investments, as well as more conventional activity such as creating looans. Goldman Sachs built up its consumer bank, led by 40-year-old Goldman partner and credit trading veteran Gerald Ouderkirk, whose job is to use consumer deposits and other types of funding for trades, investments and loans.
Price swings in financial markets have become increasingly muted as investors mull the outlook for monetary policy in the world’s biggest economies, but with a little turbulence starting to creep into markets, this record-breaking collapse in risk perceptions (and record levels of leveraged speculation) is a recipe for disaster.
European stocks, Asian shares and U.S. equity index futures decline. Selloff in global stocks and bonds deepened after signs central banks in Europe and Japan are starting to question the benefits of further monetary easing. North Korea nuclear test weakens the won.
"The impact of the BOJ’s stimulus is that the bond markets worldwide are becoming one market. If there’s a reversal of policy, you can’t rule out that it would roil global debt" said SMBC Nikko Securities. "It would definitely see some pain" added Old Mutual Global.
Until recently, home loans generally covered two types of properties: primary residences or investments. That was before services like Airbnb allowed anyone with an extra room to make a bit of extra money by renting it out for short periods of time. This blurred line between “my house” and “my investment” is causing trouble for some homeowners when they go to refinance their mortgages.
"Over the past 2 months the S&P 500 has been trading in a dead zone. Now this is all about to change as a number of important catalysts materialize this month, seasonals push market volatility higher, and leverage in systematic strategies and option positioning provide fuel for volatility. We expect a significant increase in realized volatility, correlations and tail risk in September and October."
The return from summer holidays has started in much the same way as we left off August, with another subdued session that has seen European stocks little changed, Asian shares advance and S&P futures are modestly in the green amid a flurry of M&A. The US dollar weakened, with the Bloomberg Dollar Index down 0.2% for the 2nd day in a row as prospects for a U.S. interest-rate hike this month remained subdued.
"The unthinkable: BB yields about to become negative. Such has been Draghi’s influence across the whole credit market that we are close to seeing our first negative yielding BB-rated bond. But if debt costs for speculative grade companies become “inverted”, then the economics of LBOs will be transformed, and the quality of the assets they are buying will become secondary. We see a growing risk that another private equity cycle emerges in Europe."
As for the incredible realm, one explanation is that the Fed is scared stiff it has nothing left in its toolbox to combat the next recession. Few major downturns have begun with the fed funds rate so perilously close to zero. The ultimate Catch 22 is that the flatness of the yield curve makes any fantasy of a Fed rate hike all too real for a dead breed the world once knew as ‘bond market vigilantes.’ It’s altogether possible that one more hike would be all it takes to invert the yield curve. The rest, as history has never failed to repeat, would be just that – history.
In America today, we are enjoying a standard of living that we do not deserve. We consume far more wealth than we produce. The only way we are able to do that is by going into debt. Debt takes future consumption and brings it into the present. In other words, we are damaging the future in order to make the present a little bit better.
The much anticipated payrolls day, expected to provide at least some more clarity on future Fed policy, has arrived and heading into today's report both price action and newsflow has been muted. U.S. equity index futures were fractionally higher, as European stocks rise 0.6% while Asia was flat. Gold fell as the dollar rose, while comments by Vladimir Putin which endorsed an OPEC oil production freeze while granting Iran an exemption, have pushed oil higher.
As the world awaits tomorrow's "most important jobs data ever" on the basis that it alone will decide the path of The Fed's data-dependent rate decisions and thus the tightening of financial conditions across global markets, there is one chart that everyone has to see...
Increasingly more low wage employees are those with a college education as they are unable to leverage their diploma credentials to get a better paying job, as the only ones hiring are those seeking minimum-paid workers. This means that the share of college grads working minimum wage jobs is now an all time high; jobs which barely cover the cost of living, let along covering interest expense on student loans.