It’s happening. As expected, dynastic politics is prevailing in campaign 2016. After a tease about as long as Hillary’s, Jeb Bush (aka Jeb!) officially announced his presidential bid last week. Ultimately, the two of them will fight it out for the White House, while the nation’s wealthiest influencers will back their ludicrously expensive gambit. And here’s a hint: don’t bet on Jeb not to make it through the Republican gauntlet of 12 candidates (so far). After all, the really big money’s behind him.
The fact that Moody's and Fitch are beginning to reevaluate student loan ABS is indicative of an underlying shift in the market. Between the proliferation of IBR and the Department of Education's recent move to open the door for debt forgiveness in the wake of the Corinthian collapse, financial markets are beginning to see the writing on the wall. Perhaps Bill Ackman said it best: "there's no way students are going to pay it all back."
While China is rather proud of the fact that it hasn't yet implemented outright QE, Beijing has now put in place a bewildering hodge-podge of hastily construed easing measures that can't seem to get out of their own way.
In the wake of the Chicago downgrade, state and local governments are moving away from Moody's as the ratings agency questions pension fund return assumptions.
Looking back at the Lehman Brothers collapse of 2008, it’s amazing how quickly it all happened. In hindsight there were a few early-warning signs, but the true scale of the disaster publicly unfolded only in the final moments before it became apparent that Lehman was doomed. Could this happen to Deutsche Bank?
The Question Is Not Is Deutsche Bank the Next Lehman, It's "Is Lehman the Face of Banking in the FutureSubmitted by Reggie Middleton on 06/12/2015 19:56 -0400
Is Deustche Bank the next Lehman is likely the wrong question to be asking. Is Lehman the template for European banking may be more to the point. Take it from the guy that called the Lehman debacle 5 months before the fact.
During “normal times” – an economic growth phase accompanied or generated by rising systemic leverage – central banks have incentive to promote nominal growth and inflation, which make banking systems profitable and their free-spending political overseers happy. In such times, commercial banks have fiduciary responsibilities to shareholders to constantly increase their market values, which they do by expanding their balance sheets. Now that economies are highly leveraged, extinguishing debt would require banks to reduce the sizes of their loan books, which would shrink their market values. Thus, it seems economic policy makers never have incentive to promote debt extinguishment in the banking system, regardless of economic conditions or prospects.
- Greece, creditors exchanging documents to reach deal - Commission (Reuters)
- Greece’s Creditors Reach Consensus on Proposal to Athensa (WSJ)
- Greece calls on lenders to accept 'realistic' plan sent on Monday (Reuters)
- Hundreds missing, many elderly tourists, after ship capsizes on China's Yangtze (Reuters)
- Oil up ahead of OPEC meeting as dollar slips (Reuters)
- U.S. Met Secretly With Yemen Rebels (WSJ)
- Euro zone back to inflation as May prices beat forecast (Reuters)
- Patients Get Extreme to Obtain Hepatitis Drug That's 1% the Cost Outside U.S. (BBG)
Coca-Cola supplier Zhuhai Zhongfu Enterprise Co.will reportedly miss a principal payment on Thursday marking the third onshore default in China and underscoring the growing risks the country faces on a corporate debt pile that now totals some $14 trillion.
China Officially Launches Critical Local Government Debt Swap — But Is The PBoC Really Just Issuing Treasury Bonds?Submitted by Tyler Durden on 05/19/2015 22:30 -0400
China has pitched its local government debt swap program as a way for heavily-indebted provinces to deleverage. Now that the program is officially off the ground, what are the implications for banks and for the PBoC?
"The borrowings of governments, households, companies and financial firms have risen in almost every big country around the world since the year 2000, relative to their GDP," The Economist notes. Here, graphed, is the evolution of the world's debt addiction from 2000 to 2014.
- Tsipras Endgame Nears as Greek Bank Collateral Evaporates (BBG)
- Shi'ite forces ordered to deploy after fall of Iraqi city (Reuters)
- Ratings agency Fitch to downgrade many European banks (Reuters)
- Bubble Blowing to Continue So Long as Yellen Isn’t Raising Rates (BBG)
- Greece's Debt Battle Exposes Deeper Eurozone Flaws (WSJ)
- Obama to set new limits on police use of military equipment (Reuters)
- China April home prices fuel hopes of bottoming out, but long road to recovery (Reuters)
- Hedge Funds Close Doors, Facing Low Returns and Investor Scrutiny (NYT)
- ASIC's Greg Medcraft 'quite worried' about Sydney, Melbourne house prices (Fin Review)
According to Fitch, nearly 40% of credit in China is outside bank loans, meaning that between forced roll-overs, the practice of carrying channel loans as "investments" and "receivables", inconsistent application of loan classification norms, and the dramatic increase in off balance sheet financing, the 'real' ratio of non-performing loans to total loans is likey far higher than the headline number.
As data on non-performing loans at Chinese banks shows the biggest sequential increase on record in Q1, Fitch wonders if perhaps the data actually obscures a far larger problem. Official figures on China's NPLs are obscured by a number of factors and may be grossly understated the ratings agency suggests. Furthermore, Fitch says "a protracted downturn in property markets could threaten the solvency of Chinese banks, given their modest loss-absorption capacity."
If the U.S. economy really is improving, then why are big U.S. retailers permanently shutting down thousands of stores?