After forensically analyzing Morgan Stanley's balance sheet (which is very much like the rest of Wall Street's balance sheet) I can draw direct parallels to that of Lehman and Bear Stearns in 2007. It's a party!
Margin Calls Mount On Loans Against Stock Portfolios Used To Buy Homes, Boats, "Pretty Much Everything"Submitted by Tyler Durden on 08/27/2015 15:40 -0400
"In a securities-based loan, the customer pledges all or part of a portfolio of stocks, bonds, mutual funds and/or other securities as collateral. But unlike traditional margin loans, in which the client uses the credit to buy more securities, the borrowing is for other purchases such as real estate, a boat or education..." The result was "dangerously high margin balances,' - the products became “the vehicle of choice for investors looking to get cash for anything.” Mr. Sica and others say the products were aggressively marketed to investors by banks and brokerages.
Flawed Fundamentals, Nasty Macro, Structural Industry Change: For Wall Street Banks It Really Is Different This TimeSubmitted by Reggie Middleton on 08/26/2015 09:39 -0400
This time, it really is different. It's "Structural", not "Cyclical". It's actually a very big difference, and banking will never be the same.
"Given the size of foreign holdings of Asian equity and debt, should foreigners reduce their portfolio holdings by 2-3% over the course of a month, it would broadly offset the region’s current account surpluses, leaving their external balances in a shakier position. During the 'taper tantrum' period, foreigners sold markedly more than 3% of their portfolio holdings through June and July 2013, highlighting the risk that portfolio outflows could cause further Asian currency weakness."
The similarities between the current crisis and that which unfolded in 1997/98 were so readily apparent that many analysts began to draw comparisons and that may have added fuel to fire over the past week. Now, there seems to be a concerted effort to calm the market by explaining that while there are similarities, there are also differences. And while some of the world's imperiled EM economies may be in better shape to defend themselves this time around, when attempting to cope with a meltdown it may be more important to look at where things are similar and on that note, here’s some color from Morgan Stanley and BofAML.
The following story is guaranteed to make you sick. Once again, we’re shown that following trillions in taxpayer funded bailouts and backstops, TBTF Wall Street banks immediately went ahead and focused all their attention obtaining loopholes in order to transfer risk and make billions upon billions of dollars in the financial matrix, as opposed to adding any benefit whatsoever to society.
Turkey Enters Bear Market As Erdogan Calls New Elections, Consumer Confidence Crashes To Six Year LowSubmitted by Tyler Durden on 08/21/2015 09:00 -0400
What began in early June with a surprisingly strong showing at the ballot box for the pro-Kurdish HDP has now ended precisely where many knew it would: with new elections.
Turkey is rapidly descending into chaos on all fronts. With the lira in free fall and the politically-motivated violence escalating, one prominent lawmaker is calling for martial law ahead of new elections which could plunge the country further into civil war.
Even before the latest shot across the bow in the escalating global currency wars, EM FX was beset by falling commodity prices, stumbling Chinese demand, and a looming Fed hike. And while, as Barclays notes, "estimating the global effects China has via the exchange rate and growth remains a rough exercise," more than a few observers believe the effect may be to spark a Asian Financial Crisis redux. For their part, BofAML has endeavored to compare last week’s move to the 1994 renminbi devaluation, on the way to drawing comparisons between what happened in 1997 and what may unfold in the months ahead.
Chinese Intervention Rescues Market From 2-Day Plunge, Futures Red Ahead Of Inflation Data, FOMC MinutesSubmitted by Tyler Durden on 08/19/2015 06:37 -0400
With China's currency devaluation having shifted to the backburner if only for the time being, all attention was once again on the Chinese stock market roller coaster, which did not disappoint: starting off with yesterday's dramatic 6.2% plunge, the Shanghai Composite crashed in early trading, plunging as much as 5% in early trading and bringing the two-day drop to a correction-inducing 11%, and just 51.2 points away from the July 8 low (when China unleashed the biggest ad hoc market bailout in capital markets history) . And then the cavalry came in, and virtually the entire afternoon session was one big BTFD orgy, leading to a 1.2% gain in the Shanghai Composite closing price, while Shenzhen and ChiNext closed up 2.2% and 2.7%, respectively.
The robo machines pushed their snouts through 2100 on the S&P index again yesterday. This was the 13th time since, well, February 13th that this line has been re-penetrated from below. But don’t call it an omen of bad luck; its more like monetary rigor mortis. The bull market is dead, but the robo-machines and talking heads of bubble vision just don’t know it yet.
PBoC Injection Shows China Worries About Outflows- WSJ
What does China's "surprise" move to devalue the yuan mean for "broken" EM currencies? Nothing good, Morgan Stanley says. In short, the path ahead is riddled with exported deflation and decreased trade competitiveness against a backdrop of declining global growth and trade.
MS Boosts TSLA Price Target To $465, Days After Underwriting Stock Offering; Sees Tesla Bigger Than Ford And GMSubmitted by Tyler Durden on 08/17/2015 07:10 -0400
Moments ago, Morgan Stanley did it again just as expected, only this time it at least followed protocol when it announced it is raising its price target on TSLA from $280 to a whopping $465, or just shy of $61 billion in implied market cap. Incidentally at this price TSLA would be the biggest US automaker, surpassing not only GM's $50bn in market capo, but also Ford's $60 billion.
It was a relatively quiet weekend out of China, where FX warfare has taken a back seat to evaluating the full damage from the Tianjin explosion which as we reported on Saturday has prompted the evacuation of a 3 km radius around the blast zone, and instead it was Japan that featured prominently in Sunday's headlines after its Q2 GDP tumbled by 1.6% (a number which would have been far worse had Japan used a correct deflator), and is now halfway to its fifth recession in the past 6 year, underscoring Abenomics complete success in desrtoying Japan's economy just to get a few rich people richer. Of course, economic disintegration is great news for stocks, and courtesy of the latest Yen collapse driven by the bad GDP data which has raised the likelihood of even more Japanese QE, the Nikkei closed 100 points, or 0.5% higher.