It’s perplexing that analysts are perplexed by the rout.
So from MF Global's "vaporized" commingled client assets to Basel's "evaporated" toughened derivatives rules, the banks are indeed "very happy." And now back to perpetuation the illusion that the system is stable.
Most Buy Side managers have no idea about the disparate business models of the four largest US banks by assets.
Market consensus is that deflation remains the greatest threat to the global economy. But that's ignoring signs of impending inflation, particularly in the US.
"The global financial landscape was evolving. Ever since World War II, US bankers hadn’t worried too much about their supremacy being challenged by other international banks, which were still playing catch-up in terms of deposits, loans, and global customers. But by now the international banks had moved beyond postwar reconstructive pain and gained significant ground by trading with Cold War enemies of the United States. They were, in short, cutting into the global market that the US bankers had dominated by extending themselves into areas in which the US bankers were absent for US policy reasons. There was no such thing as “enough” of a market share in this game. As a result, US bankers had to take a longer, harder look at the “shackles” hampering their growth. To remain globally competitive, among other things, bankers sought to shatter post-Depression legislative barriers like Glass-Steagall. They wielded fear coated in shades of nationalism as a weapon: if US bankers became less competitive, then by extension the United States would become less powerful. The competition argument would remain dominant on Wall Street and in Washington for nearly three decades, until the separation of speculative and commercial banking that had been invoked by the Glass-Steagall Act would be no more."
There is a gloriously simple solution to all the world's TBTF problems, one that could be enacted in a HFT millisecond by pulling the trigger, so to speak. The solution comes from none other than that historic US nemesis, Vietnam, where unscrupulous financiers don't just go to jail. Sometimes, they get death row.
The stock market really was rigged... “It’s 2009,” Katsuyama says. “This had been happening to me for almost two years. There’s no way I’m the first guy to have figured this out. So what happened to everyone else?” The question seemed to answer itself: Anyone who understood the problem was making money off it...
Could the U.S. unleash a flood of oil from the strategic petroleum reserve that would drive down prices in order to punish Russia? While the idea has been kicked around over the last few weeks – most recently by George Soros – it has also been dismissed as not a serious option. Some say the impact of an oil sale, if it actually succeeded in lower prices, would be temporary. Saudi Arabia could cut back on production to keep oil prices at their current levels. Others decried the idea as contrary to the objective of the SPR, which has been setup to be used only in cases of emergency. However, any collusion would be a problem since the Saudi King is convinced the U.S. is “unreliable,” and relations between the two countries hit a low point after Obama’s back and forth over air strikes on Syria last year.
- BOE to Sign Agreement With China on Yuan Clearing Next Week (BBG)
- U.S. law firm plans to bring suit against Boeing, Malaysia Airlines (Reuters)
- Citigroup Fraud Stings Mexico Star as Medina-Mora Chased (BBG)
- Fraternity Chief Feared for Son as Hazings Spurred JPMorgan Snub (BBG)
- UBS suspends six more forex traders (FT)
- Goodbye CSCO Q1 EPS: China to strengthen Internet security after U.S. spying report (Reuters)
- Good luck: Spain Banks With $55 Billion of Property Seek Deals (BBG)
- Citic Pacific Said to Plan About $4 Billion Public Offering (BBG)
- Yahoo Japan to buy eAccess from SoftBank for $3.2 billion (Reuters)
- "Whatever it takes" to talk down the Euro: Euro, peripheral bond yields fall on ECB easing debate (Reuters)
The credit cycle is called a "cycle" because, unlike the business cycle (which the Fed has convinced investors no longer exists), it 'cycles'. At some point the re-leveraging of the balance sheet - remember more cash on the balance sheet but even morerer debt (as we noted here) - requires risk premia that outweigh even the biggest avalanche of yield-chasing free money. It appears, as Bloomberg's James Crombie notes, that point may be approaching as yield premiums for U.S. distressed debt hit a five-year high on March 25, according to Bank of America Merrill Lynch.
In the aftermath in the recent surge in China's renminbi volatility which saw it plunge at the fastest pace in years, many, us included, suggested that the immediate next step in China's "fight with speculators" (not to mention the second biggest trade deficit in history), was for the PBOC to promptly widen the Yuan trading band, something it hasn't done since April 2012, with the stated objective of further liberalizing its monetary system and bringing the currency that much closer to being freely traded and market-set. Overnight it did just that, when it announced it would widen the Yuan's trading band against the dollar from 1% to 2%.
- China premier warns on economic slowdown as data fans stimulus talk (Reuters)
- Li says China defaults ‘unavoidable’ (FT)
- Russia Said to Ready for Iran-Style Sanctions in Worst Case (BBG)
- Rescue the tapes from the Bank of England’s dustbins (FT)
- Obama Warns Putin of Cost to Russia for Annexing Ukraine (BBG)
- The TVIX is back: Credit Suisse VIX Note That Ran Amok in 2012 Back on Top (BBG)
- U.S. Risks National Blackout From Small-Scale Attack (WSJ)
- U.S. Investigators Suspect Missing Airplane Flew On for Hours (WSJ)
- Malaysia says no evidence missing plane flew hours after losing contact (Reuters)
- Missed Alarms and 40 Million Stolen Credit Card Numbers: How Target Blew It (BBG)
- Death Toll in NYC Building Blast Rises to Six; Search Continues (BBG)
Bond Trading Grinds To A Halt: Goldman Set To Report Weakest Q1 Since 2005; Revenues Down As Much As 25% ElsewhereSubmitted by Tyler Durden on 03/12/2014 11:47 -0400
Since Wall Street has been explicitly fighting the Fed (remember: the main reason there is no volume is because nobody is selling) Wall Street has once again lost, and despite its appeals, the time to pay the piper has come. Said payment will be taken out of bank Q1 earnings which as everyone knows, will continue the declining trend seen in recent years (so much for that whole Net Interest Margin fable), but to learn just how bad, we go to the FT which reports that fixed income groups across Wall Street "are set for their worst start to the year since before the financial crisis, with revenue declines of up to 25%." The punchline: "Analysts now expect Goldman Sachs to record its weakest first quarter since 2005 and JPMorgan Chase and Bank of America are forecast to see their lowest revenues since they bought Bear Stearns and Merrill Lynch, respectively, in 2008."
Prem Watsa's 9 Observations Why There Is A "Monstrous Real Estate Bubble In China Which Could Burst Anytime"Submitted by Tyler Durden on 03/09/2014 18:12 -0400
In the last few years we have discussed the huge real estate bubble in China: "Real estate bubbles never end with soft landings. A bubble is inflated by nothing firmer than expectations. The moment people cease to believe that house prices will rise forever, they will notice what a terrible long term investment real estate has become and flee the market, and the market will crash." Amen! As they say, it is better to be wrong, wrong, wrong and then right than the other way around! In case you continue to be a skeptic, here are a few observations...
South Korea stands out as a buying opportunity amid the indiscriminate emerging markets sell-off.