Signs Of Financial Turmoil Are Brewing In Europe, China And The United States

Submitted by Michael Snyder via The Economic Collapse blog, As we move toward the second half of 2015, signs of financial turmoil are appearing all over the globe.  In Greece, a full blown bank run is happening right now.  Approximately 2 billion euros were pulled out of Greek banks in just the past three days, Barclays says that capital controls are “imminent” unless a debt deal is struck, and there are reports that preparations are being made for a “bank holiday” in Greece.  Meanwhile, Chinese stocks are absolutely crashing.  The Shanghai Composite Index was down more than 13 percent this week alone.  That was the largest one week decline since the collapse of Lehman Brothers.  In the U.S., stocks aren’t crashing yet, but we just witnessed one of the largest one week outflows of capital from the bond markets that we have ever witnessed.  Slowly but surely, we are […] Read More

The End Of Exuberance?

Submitted by Sean Corrigan via True Sinews blog, Back in the halcyon days of summer, it seemed nothing could go wrong. Commodities were still things it was not utterly disreputable to own. Base metals had shaken off a springtime swoon to hit 18 month highs. Though still suffering from that enervating, post-bubble flatness, precious metals had just enjoyed a neat little 10% rally. Energy was threatening to print new 2 ½ year highs as WTI sold for more than $107 at the front and $86 at the back of the curve. Nor were people much interested in paying for downside protection: across the complex, options premia were as low as ever they had been in recent years. Volatility – and risk measures in general – were drifting ever southwards, everywhere you looked. The US equity market’s VXO index was being quoted in single figures, the lowest in its 29-year […] Read More

America’s Poor Have Never Been Deeper In Debt

Ever since the Lehman bankruptcy, one of the main reasons given by the perpetual apologists about why i) the so-called “recovery” has been the worst in US history and ii) the Fed has been “forced” to conduct 6 years of wealth transferring policies, boosting the stock market to all time highs and creating a record wealth split in US society between the super rich and everyone else (one that surpasses even that seen during the roaring 20s) is that the US consumer, scarred by the economic crash, has been rushing to deleverage and dump as much debt as possible. There are two problems with that story: First, as we first pointed out in 2012, US households are not deleveraging, they are defaulting, a huge difference which goes to motive and intent, and shows that instead of actively paying down debt households are instead loading up on as much debt […] Read More

Starting Monday, Billions In ETNs Are No Longer Marginable Collateral

When is marginable collateral not marginable collateral? When it is an ETN, or Exchange Trade Note: the cousin of the Exchange Traded Fund (ETF). The very mutated, and unabashedly evil cousin of the ETF that is. At least such is the view of US brokerage Interactive Brokers (and certainly not of the ECB where as is widely known blocks of feta cheese and olive oil are perfectly acceptable forms of collateral). First, what exactly is an ETN? Here is the IB definition: ETNs are not equity shares but rather a form of unsecured debt whereby the issuing institution promises to pay a return linked to a market index or other benchmark. As ETNs generally do not buy or hold assets like an Exchange Traded Fund (ETF), their returns are realized through holdings of derivative contracts such as options, futures and swaps. While ETNs trade on exchanges in a manner […] Read More

Three Market Factors Which Citi Says Are Worse Now Than In 2007

When it comes to the current state of the market, everyone knows – whether they admit it or not – that it is broken. And we aren’t talking HFT which while rigging price discovery, generally does so on a microburst momentum basis which at most lasts for the duration of the trading day. The real culprit of the broken market is the Fed, a Fed which as we have explained over the years, is simply seeking to compensate for the collapse in stock (and flow) from the unwind of shadow banking which was nearly crushed in the days after Lehman. Citigroup‘s Stephen Antczak admits as much: “QE has obviously created a huge distortion in the marketplace, pushing risk-free rates and risk premiums well through many “fair value” metrics. But that said, doesn’t every credit cycle seem to have distorting factors of some sort? For example, one can easily argue […] Read More

Tim Geithner Admits “Too Big To Fail” Hasn’t Gone Anywhere (And That’s The Way He Likes It)

Submitted by Mike Krieger of Liberty Blitzkrieg blog, But it is now clear that Geithner never believed his own talking points. To him, too-big-to-fail and the so-called moral hazard, or safety net, that it would create can’t really ever be fully taken away. During his lecture to Summers’s class, one student asked a question about “resolution authority,” a provision of the reform laws that is supposed to let the government wind down a complex financial institution without creating a domino effect. The question prompted Geithner onto a tangent about too-big-to-fail. “Does it still exist?” he said. “Yeah, of course it does.” Ending too-big-to-fail was “like Moby-Dick for economists or regulators. It’s not just quixotic, it’s misguided.” – From The New York Times Magazine article, What Timothy Geithner Really Thinks Never in a million years did I think I’d ever use an article by Andrew Ross Sorkin as the basis […] Read More