This level of global inter-connected financial risk is hazardous in Mexico, where it’s peppered by high bank concentration risk. No one wants another major financial crisis. Yet, that’s where we are headed absent major reconstructions of the banking framework and the central bank policies that exude extreme power over global economies and markets, in the US, Mexico, and throughout the world. Mexico’s problems could again ripple through Latin America where eroding confidence, volatility, and US dollar strength are already hurting economies and markets. The difference is that now, in contrast to the 1980s and 1990s debt crises, loan and bond amounts have not just been extended by private banks, but subsidized by the Fed and the ECB. The risk platform is elevated. The fall, for both Mexico and its trading partners like the US, likely much harder.
Is September 2015 going to be one of the most important months in modern American history?
Margin Calls Mount On Loans Against Stock Portfolios Used To Buy Homes, Boats, "Pretty Much Everything"Submitted by Tyler Durden on 08/27/2015 14:40 -0500
"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 08:39 -0500
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.
On Friday, ahead of the closing stock rout, we forecast that the biggest risk for anyone staying long over the weekend was a disappointment out of China, where the sellside had gotten so excited that a 50-100bps RRR cut was imminent, that the lack of one would surely send futures sliding. Sure enough, as we noted earlier today, much to everyone's surprise and disappointment, the PBOC did nothing (for reasons we speculated upon earlier). Which bring us to this evening's S&P futures, which opened for trading minutes ago, and as expected, gapped by over 0.6% after the Chinese disappointment, down 13 points to 1958 and looking quite heavy.
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 06:10 -0500
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.
After years of moving lower, the past two quarters have seen a marked increase in Commercial & Industrial Nonperforming Loans.
Over the weekend, when looking carefully at Tesla's cash burn, pardon cash inferno we said that at "the current cash burn rate, TSLA can only fund just two more quarters of cash burn at which point, and most likely well before it, the company will have to aggressively raise new capital." It wasn't 1-2 quarters. It was barely 3 days. Moments ago TSLA announced that, just as we expected, it would dilute its shareholder by just under 2% by issuing $500 million in equity.
What do you do when even wealthy people begin to face an increasingly hard time purchasing a home in a vertical market completely disconnected from income trends? You reduce downpayments and lower credit standards, of course. Where have we seen this story before...
- U.S. stock futures slip amid lukewarm earnings, fall in commodities (Reuters)
- Stressful times for low-polling Republicans who may miss debate stage (Reuters)
- Trump shows staying power with surge ahead of first debate (Reuters)
- China Market Manipulation Probe Targets Spoofers After Crash (BBG)
- Beijing Chosen to Host 2022 Winter Olympics (WSJ)
- Obama Warns Support on Iran Deal ’Getting Squishy’ Amid Pressure (BBG)
- Pacific trade negotiators chase elusive final deal in tough talks (Reuters)
US Middle Class Stays Dead: Homeownership Drops To 48 Year Low; Median Asking Rent Soars To All Time HighSubmitted by Tyler Durden on 07/28/2015 10:17 -0500
Earlier today, the US Census released its latest homeownership data, which confirmed that for what is left of America's middle class, owning a home has become virtually impossible, with the homeownership rate plunging from the lowest level since 1986, or 63.7%, to just 63.4% the lowest reading since the first quarter of 1967. And the punchline, which should come as no surprise to anyone: with housing no longer affordable to most, the median monthly asking rent just rose to a record $803 across the US.
The real reason why retail investors weren't impacted by the NYSE's halt is a hard truth... to retail investors, the NYSE is always dark
Where Do Retail Investor Orders Go? The simple answer: to the highest contracted bidder. Stock "wholesalers" or internalizers like Citadel or Knight pay retail brokers lots of cash to execute retail trades, essentially creating a "third market". Why? Because in a high frequency trading world, where stock prices have never been more fuzzy to the end user, but crystal clear to those that spend enormous sums on colocation and PhD employees, it's never been easier to print money (not unlike Bernie Madoff's scheme in the 90's). But that is the subject of a much, much longer story. Someone should write a book.
"Lenders in general are increasing pressure on oil companies either to raise more equity or do some sort of transaction to pay down their credit lines and free up extra cash."
"There’s another redetermination cycle in the fall, And I’m not going to say likely but it’s possible we’ll be selectively downgrading some clients."
- Tsipras Braves Parliament on Aid as Greek Outlook Worsens (BBG)
- European markets rise before Yellen speech, Greek vote (Reuters)
- China’s Growth Beats Economists’ Forecast as Stimulus Kicks In (BBG)
- China stocks drop again, positive data shrugged off (Reuters)
- Yellen intensifies Republican outreach amid Fed probe, Senate bill (Reuters)
- Iran deal holds both promise and peril for Hillary Clinton (Reuters)
- Iranians Party Into the Night as Khamenei Backs Accord (BBG)
Just when the Chinese plunge protection team (and "arrest shortie" task force) seemed to be finally getting "malicious selling" under control, first we saw a crack yesterday when the composite broke the surge of the past three days as a result of yet another spike in margin debt funded purchases, but it was last night's reminder that "good news is bad news" that really confused the stock trading farmers and grandmas, which goalseeked Chinese economic "data" beat across the board, with Q2 GDP coming solidly above expectations at 7.0%, and retail sales and industrial production both beating, but in the process raising doubts that the PBOC will continue supporting stocks.