Commodity Trade Mantra

Posts Tagged ‘Shadow Banking’

The Fed Admits Economy Can't Function Without Bubbles

Wild swings in asset prices over the past 20 years and the associated boom-bust cycles have sparked considerable debate about how monetary policy might play a stabilizing role. In other words, thanks to Alan Greenspan, the US economy cannot function under a normalized monetary policy regime, “roughly speaking.”

The Debt To GDP Ratio For The Entire World: 286%

Seven years after the bursting of a global credit bubble resulted in the worst financial crisis since the Great Depression, debt continues to grow. In fact, rather than reducing indebtedness, or deleveraging, all major economies today have higher levels of borrowing relative to GDP than they did in 2007.

Here Is Why The Fed Can't Hike Rates By Even 0.25%

The US Treasury and the Federal Reserve (where Zoltan Poszar previously worked) understand and grasp the momentuous implications of even the smallest quantum of interest rate increase. What the Fed doesn’t want, is not one but one thousand LTCMs going off at exactly the same time in what is now the world’s most levered trade.

NIRP Officially Arrives In The US As JPM Starts Charging Fees On Deposits

NIRP is now officially in the US, which means that one after another US commercial banks will join what has already become a NIRP free-for-all across most of continental Europe where NIRP now reigns supreme & where trillions in government bonds yield negative rates. JPM is preparing to charge large institutional customers for deposits.

China's Shadow Banking Grinds To A Halt As Bad Debt Surges Most In A Decade

Shadow Banking is being tamed because changing structure of TSF suggests that Beijing’s efforts in controlling some types of shadow banking have made some achievements. If shadow banking collapse virus has finally jumped to China, there is no saying how far Chinese GDP can drop if it is now constrained on the top side by surge in bad debt.

China Wealth Management Products Will Cause the Next Financial Crisis

In China, shadow banking has quadrupled in size since 2008. Lending is not a business that grows that fast without doing reckless things. There is plenty of evidence of recklessness in China. It is difficult to predict the ripples a financial crisis in China would create. Stay away from firms lending money in China.

Alan Greenspan's Nine Reasons "Why The Economy Stinks"

Alan Greenspan listed 9 specific reasons why the “economy stinks”, although surprisingly, nowhere did he mention the fact that the current and future economic disaster is all a direct result of his “great moderation” ruinous reign at helm of the Fed and its catastrophic monetary policies.

Fed Prepares For Bond-Fund Runs, Looking At Imposing "Exit Fee" Gates

Since the Fed has failed to incite the mass reallocation of funds from bonds to stocks, it is willing to use every trick in the book to achieve its goal. Fed may impose exit fees on bond funds to avert a potential run by investors, underlining regulators’ concern about the vulnerability of the $10tn corporate bond market.

Goldman Explains How The China Commodity Unwind Will Happen

If foreign banks try to reduce their broad exposure to Chinese commodity financing business via cutting commodity clients’ loan quotas and/or raising funding costs, this could reduce CCFDs’ ability to access cheap foreign funding and could potentially raise FX financing costs in future, thus affecting the profitability of CCFDs.

Why The Chinese Must Buy Gold To Survive

Property in China is transforming from a wealth creator to a wealth destroyer.A rising percentage of China’s $26 trillion in bank assets are going bad. While property loses its luster, Gold is a natural, logical candidate, unlike land – a mobile & liquid asset. As Chinese QE proceeds, the desire to own gold will increase.

China may have 1,000 tonnes of Gold tied in Financing - WGC

Chinese firms could have locked up as much as 1,000 tonnes of gold in financing deals, indicating a big slice of imports has been used to raise funds due to tight credit, rather than on consumer demand. Gold prices could come under pressure if imports are hit by a broader crackdown on using commodities for finance.

Commodity Financed Shadow Banking in China

A commodity financed deal requires an offshore bank to issue a letter of credit against physical commodity stocks either in transit or held in bonded warehouses, which can be cashed onshore into local currency, which is then invested for a significant yield pick-up over the cost of owning the commodity

Goldman Explains What Must Happen For The "5 Year Bull Market" To Continue

S&P 500 celebrated the 5 year anniversary of the current bull market by slipping almost 2% this week. We identify key drivers of the 178% or 1200 point market rally since the bottom at 677 on March 9, 2009 & also consider how the 3 drivers might change in the future. Our 2014 target remains 1900.

Copper Collapses Most Since Dec 2011 On China Credit Fears

The first domestic Chinese corporate bond default has retail investors running scared as surprise spreads that government did not come to the rescue. Deleveraging is now spreading to copper prices as borrowers are forced to sell to meet cash calls which in turn drops copper prices.

China On The Verge Of First Corporate Bond Default Once More

In China, where corporate bankruptcies are taboo, a default would immediately reprice the entire bond market lower and have adverse follow through consequences to all other financial products. And so in the past two months, China was forced to bail out two Trusts with exposure to the coal industry.

China Currency Yuan Plunges Most In Over 5 Years, Biggest Weekly Loss Ever

Yuan has gone from being most attractive carry trade bet in EM to worst as PBOC efforts to weaken currency cause volatility to surge. Is PBOC’s engineering this CNY weakness a strategy to increase volatility & deter carry-trade malevolence or is it a more aggressive entry into the currency wars?

How China Fooled The World With Fiat

China is the second largest economy in the world & for the last 30 years it’s economy has grown at an astonishing rate, as spending and investment has been undertaken on a scale never seen before in human history. And now they’ve had two technical defaults over the last couple of weeks.

The Problem With Credit Booms Is That They Are Followed by Busts

Research on private sector credit booms over the last 20 years show that whenever credit to the private sector expanded by 30% or more within a 10-year period, a banking crisis & recession resulted without any exception. Credit booms always end badly & last longer than rational minds expect.

How Dangerous Is The Credit Bubble In China For The World?

On any list of banking accidents waiting to happen, China is assured a place at the very top. But could a crash there take the entire global economy down with it? There’s no doubt that there are going to be massive problems in China. What’s more, China could trigger a huge global meltdown.

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