AuthorTopic: Big Slide v2.0 Begins  (Read 132539 times)

Offline g

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Re: Big Slide v2.0 Begins
« Reply #315 on: January 16, 2016, 06:49:48 AM »
When is it time to pile back in GO? 14,000? 12,000? Think we can get a real <10,000 going?

Hi MKing, MY honest feeling is the markets have been totally corrupted and are rigged, so I no longer give specific investment advice to the public, except to buy Gold and Silver at regular intervals with excess fiat at your disposal for savings outside of the bankster credit fiat system. A cost averaging approach.

With regards to a couple of gents shooting the bull in a tavern over a couple of friendly beers however, my retort would be. " Think the Worst, You Shan't be Disappointed "

My gut feeling is also that Mr Stockman is on target, and one would do well to at least listen carefully to his advice.

My problem with not being more specific is that under the current fiat regime we find ourselves in, the Fed can step in at any time and act, as Eddie alluded too in his post. I do think their credibility has probably been damaged however, which is why I present David Stockman.

You see, without Gold, we are in a fantasy land of paper dreams and manipulations, the madness and stupidity of which cannot be imagined by the sane.      :icon_scratch:

 "Newton (the grand architect of the gold standard)... replied:  'Gentlemen, in applied mathematics, you must describe your unit."


« Last Edit: January 16, 2016, 06:51:51 AM by Golden Oxen »

Offline MKing

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Re: Big Slide v2.0 Begins
« Reply #316 on: January 16, 2016, 09:14:29 AM »
The rest of the world should be as fortunate as Canada, what a majestic country.

Yup. It is pretty nice.

Quote from: Golden Oxen
True Bargains are rare in this world, and those with a long term horizon would do well to consider assets in these countries IMO. Canada would be my first choice as I, like MKing remember the prior period of favorable Looney exchange rates, there were fantastic bargains around at the time.

Yeah, but even back then it wasn't a cheap place to live. Gasoline was more expensive, housing, health care was free, but the locals I trained complained about the taxes, which were pretty severe, to pay for the largess otherwise available.

I've been up and down the Cassiar and Alcan a couple times now, I could see retiring to a little B&B somewhere along the route.
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Wealth Redistribution Illustrated: Stealing from the Poor to Give to the Rich
« Reply #317 on: January 20, 2016, 12:14:48 PM »
Best chart to date illustrating the transfer of wealth since 2008.  Crossover point came in 2011.

Harry Reid Urges "Calm" Despite Stock Market Drop
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Offline agelbert

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Congratulations to GO!
« Reply #318 on: January 20, 2016, 03:37:16 PM »
I just dropped by to congratulate GO. Despite my disagreements with his choice of politics, I celebrate the fact that, unlike a certain fossil fueler here  ;), he firmly believes in NOT subsidizing the past, but instead INVESTING in the FUTURE.   

As you all know, or should know, I don't own stocks. GO, however, DOES. And GO began investing in Solarcity some time ago.  :emthup: :icon_sunny:

Today, despite more cratering in the market in general and FOSSIL FUEL STOCKS IN PARTICULAR  , GO's WISDOM and FORESIGHT was amply rewarded.

WELL DONE. Golden Oxen!

SolarCity Corp NASDAQ: SCTY - Jan 20 6:21 PM EST

33.82 Price increase 2.73 (8.78%)

Fossil fuelers: EAT your heart out!

« Last Edit: January 20, 2016, 03:49:44 PM by agelbert »
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Offline RE

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Asia...We've Got a Problem
« Reply #319 on: February 12, 2016, 01:04:16 AM »


Asian shares slip as bank fears add to global gloom
TOKYO | By Hideyuki Sano

People are reflected in a display showing market indices outside a brokerage in Tokyo, Japan, February 10, 2016. REUTERS/Thomas Peter

Asian shares fell for a sixth straight session on Friday as concerns about the health of European banks further threatened a global economy already under strain from falling oil prices and slowdowns in China and other emerging markets.

The prices of yen, gold and liquid government bonds of favoured countries soared as investors rushed to traditional safe-haven assets.

"The markets are clearly starting to price in a sharp slowdown in the world economy and even a recession in the United States," said Tsuyoshi Shimizu, chief strategist at Mizuho Asset Management.

"I do not expect a collapse or major financial crisis like the Lehman crisis but it will take some before market sentiment will improve," he added.

MSCI's index of Asia-Pacific shares outside Japan fell 0.8 percent.

Japan's Nikkei fell 5.4 percent to a 15-month low and posted a weekly loss of 11.1 percent, its biggest since October 2008, as this week's sudden spike in the yen took most investors by surprise.

"It is hard to find a bottom for stocks when the yen is strengthening this much. It is hard to become bullish on the market in the near future," said Masaki Uchida, executive director of equity investment at JPMorgan Asset Management.

"But the valuation of some (Japanese) bank shares is extremely cheap. So for long-term investors, it could be a good level to buy," he added.

European shares are expected to rebound, however, after big falls earlier this week, with spread-betters expecting Britain's FTSE to rise 2.0 percent and German's DAX and France's CAC to gain 1.3 percent.

The FTSEurofirst 300 index of top European shares sank 3.7 percent to its lowest level in 2-1/2 years.

Financial shares led losses in Australia and Hong Kong, falling 1.6 percent and 1.8 percent though their declines are still modest compared to peers in Europe and the US.

"We have been hit by a steady spate of bad news since the year began and I think the markets will remain in a state of flux in the near term until we see global bank shares stabilising," said Francois Perrin, portfolio manager for East Capital Asia in Hong Kong.

MSCI's broadest gauge of stock markets fell 0.6 percent in Asia on Friday, hitting a fresh low since June 2013.

It has fallen fell more than 20 percent below its record high last May, confirming global stocks are in a bear market.

On Wall Street, the U.S. benchmark S&P 500 fell 1.23 percent to 1,829.08, its lowest close in almost two years and down 10.5 percent for the year.

Financial counters led the losses globally as disappointing earnings from Societe Generale added to the gloomy mood brought on by poor results from Deutsche Bank last month.

Banks in Europe ended 6.3 percent lower, while the S&P financial index dropped 3 percent.

Stress in the financial sector is stoking worries that funding conditions for some companies may tighten, even as many of the world's central banks pump in funds through unorthodox measures.

A funding crunch could be a death knell for some firms, especially those in the energy sector which have struggled to make ends meet as oil trades at around a quarter of its value just a few years ago.

In a worrying sign that Europe's debt problems could reappear, the Portuguese 10-year bond yield surged above 4 percent for the first time since 2014.

That is a clear departure from last year when investors, hunting for yield, were buying up debt from Portugal and other indebted countries.

In contrast, investors are now flocking to more liquid, and higher-rated bonds.

The 10-year U.S. Treasuries yield fell to as low as 1.530 percent, a low last seen in August 2012, which is just before the Fed started its third round of quantitative easing. It stood at 1.657 percent in early Asian trade.

Federal funds rate futures almost completely priced out the chance of a rate hike.

As the dollar's relative yield advantage erodes further, the strengthening yen touched 110.985 to the dollar on Thursday, rising almost 10 percent from its six-week low on Jan. 29, when the Bank of Japan introduced negative interest rates.

The currency last stood at 112.10 yen, hardly showing any reaction after Japanese Finance Minister Taro Aso stepped up his verbal intervention on Friday, saying he would take appropriate action as needed.

The euro also attracted some safe-haven flows to trade at $1.1304, having hit a near four-month high of $1.1377 on Thursday.

Gold surged to one-year high of $1,262.90 per ounce on Thursday, rising over four percent in its biggest daily percentage gain since September 2013. It last stood at $1,237.5.

U.S. crude futures rose to $27.44 per barrel, up 4.7 percent from late U.S. levels, helped by comments from an OPEC energy minister sparking hopes of a coordinated production cut.

The futures contract on Thursday hit a near 13-year low of $26.05 on Thursday. [O/R]

International benchmark Brent futures rose 4.5 percent to $31.40.

(Additional Reporting by Hideyuki Sano; Editing by Eric Meijer and Kim Coghill)
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Offline RE

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Stock market panic risks new financial crisis
« Reply #320 on: February 12, 2016, 12:43:27 PM »

Stock market panic risks new financial crisis
By Andre Damon
12 February 2016

Global stock markets formally entered a bear market Wednesday, as the MSCI All-Country World Index fell by 1.3 percent, with the index down 20 percent from its high last May. Yesterday, after further losses in Asia, European markets closed down, with the German DAX falling by nearly 5 percent, the Spanish IBEX down by nearly 5 percent, and the US DOW off by 250 points.

The selloff accelerated in early trading Friday, with the Japanese Nikkei falling by more than 5 percent at the opening bell.

The stock sell-off both reflected and helped catalyze a broader crisis of confidence in financial markets, amid a rapid deceleration of the global economy, a sell-off in emerging market debt, a downward spiral in commodities prices, and the seeming perplexity of central banks as to how to deal with a renewed outbreak of panic eight years after the 2008 financial crisis.

The global selloff continued in the US after congressional testimony by Federal Reserve chairwoman Janet Yellen, who made no explicit statement that the Federal Reserve would change its plans to continue raising the benchmark federal funds rate over the next year.

Yellen did, however, say that the Federal Reserve would not rule out cutting interest rates below zero if economic conditions continued to deteriorate. If this were to happen, the Fed would follow the Bank of Japan, which late last month announced a surprise interest rate cut, and Sweden, which Thursday cut its benchmark interest rate further into negative territory.

These moves, coupled with a generalized flight to safety, have led to a massive jump in the proportion of bonds with a negative yield. According to figures from JPMorgan, the share of government bonds with a negative yield, once only considered a theoretical possibility, have reached 25 percent. All told, negatively-yielding assets have hit $5.5 trillion worldwide.

The deepening sell-off, and the seeming inability of central banks to formulate any coherent response to the panic, have triggered a general crisis of confidence, not only in the health of the financial system, but in the ability of central banks and governments to offset the crisis through radically expansionary monetary policy: their panacea for every economic ill since 2008.

A Citigroup executive summed up the sentiment in a comment to Reuters: “One of the new themes in markets is that (quantitative easing) has damaged the banks and that therefore it exacerbates the risk-off environment.”

In other words, the panicked sell-off expresses growing fears in financial markets that the vast quantities of cash pumped into the financial system since 2008 have done nothing to improve its underlying health, and may have sown the seeds for a crash on an even greater scale.

This time, however, with central banks having expended so much of their “ammunition” on seeking to keep financial assets afloat for years, there are increasing fears that they will be powerless to respond to a new financial panic.

In particular, the explosive growth in negative-yielding financial assets means that banks, whose core business involves borrowing long-term and lending short-term, will be put under even further financial stress if central banks continue to lower interest rates.

These fears have hammered the banking sector. The S&P 500 financials index has dropped by 18 percent since the start of the year, making banking by far the worst-affected sector, facing an even more rapid selloff rate than that of the beleaguered energy and transport industries.

And that is saying something. The energy and materials sectors have seen share value declines of over 31 percent over the past year, with “companies going Chapter 11 or trading at 50 cents on the dollar,” one portfolio manager told Bloomberg.

Meanwhile the global shipping and transport sector is facing business conditions that, in the words of Nils Andersen, the CEO of Maersk, the largest transportation company in the world, are “worse than in 2008.” The company’s share value, which was down by more than 50 percent in the past year, fell a further 8 percent Wednesday.

Meanwhile the prospects that US economic growth would somehow offset the slump in global output receded further this week, as US corporations posted sharply reduced earnings and outlooks. Earnings for S&P 500 companies fell 4.5 percent in the fourth quarter, and are expected to fall 6.3 percent this quarter. “The general feeling is that the U.S. economy is nearing a peak and there is not much left as far as trends to be talked about,” one hedge fund manager told Reuters.

The fall-off in real economic activity can be expected to further dampen oil prices, which have hit 13-year lows of $27 per barrel, and has triggered a further round of sell-offs in commodity related stocks, with “investors ... liquidating because they need the cash,” as one chief investment officer told Reuters.

Eight years since the 2008 financial crash, it is clear that the capitalist governments and central banks have been unable to address any of its underlying causes. Instead, they have poured cash into financial markets, triggering a feedback loop of speculation and parasitism in the form of mergers and consolidations, which have sharply cut back production and led to mass layoffs.

The end result has been only a further acceleration of the growth of social inequality, with the fantastic enrichment of the parasitic financial oligarchy financed by the wholesale destruction of productive activity and the vast impoverishment of the working class.

In other words, the conditions that gave rise to the 2008 financial crisis have been reproduced once again in even sharper form, and risk a similar outcome.
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Offline RE

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Global Economic Crisis Imminent - Signs of the 2016 Crash (RT Video)
« Reply #321 on: February 14, 2016, 10:50:04 PM »
From January and things are a lot worse now.


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Offline RE

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Bert Dohman Capital Research: "It's time to PANIC!"
« Reply #322 on: February 20, 2016, 04:00:11 PM »
You can never Panic too soon.


Bert Dohmen Is Uber-Bearish and Here's Why
FS Staff02/11/2016   

Bert Dohmen, founder of Dohmen Capital Research, is uber-bearish and believes that it is time for investors to panic (before everyone else does) given a potential collapse of the stock market greater than what we saw in 2008.

Here's what he had to say on Thursday's podcast:

"Over a year ago we said that we are now in a transition year from a bull market to a bear market and from a growing economy to a recession—and this could be a very deep recession... now we see that we are finally there and more and more people are starting to realize it. But I raise the question here, 'Is it too late to panic?' Because...the advice given by so many analysts is 'Don't panic, don't sell, don't panic.' And I say, 'Yes, panic!' And it's not too late to panic. Panicking at the right time can save you a lot of money...

I predict in this bear market you will see the majority of stocks—majority meaning over 50% of the stocks—selling at $5 or less. Okay, just put that into your portfolio and see if you should be selling some stocks...

We here other analysts say, 'Oh, this is nothing like 2008' and I agree with that, but I say that because I think it's going to be much worse. 2008 was really a crisis triggered by the subprime mortgage market and the confetti that the Wall Street firms distributed around the world. They took those subprime mortgages, put them into pools, they sold participations in these pools, in these CDOs...they got a triple-AAA rating on all this garbage and sold it around the world and then they started defaulting. That caused ripples throughout the financial system and a global financial crisis, okay; but it was basically a mortgage crisis—that's how it started.

Now, look at what we have currently. We have every major economic zone in the world in financial trouble. You have Japan with a debt-to-GDP ratio of 280%. You have China at 300% debt-to-GDP. China has over $34 trillion of debt and the banking system is flooded with bad loans. The best estimate—and this was two years ago I wrote a book called The Coming China Crisis—and I said the best estimate is that they have $11 trillion of bad loans in the banking system. $11 trillion is the annual GDP of China—this is huge!

You have Europe, you have Latin America in trouble, you have Russia in big trouble, you have Saudi Arabia even thinking about doing an IPO on their big oil company in order to make up for the shortfall of oil revenues. You have every major economic zone in the world in big, big trouble including the US and that is why I say this crisis has the potential of becoming much, much worse than the last one."

Given your outlook, how long do you think this will take to unfold?

"Well, from 1929 to the bottom in 1933 it took four years—probably a little bit less—so that's probably the duration but, you know, you can't forecast those things because the central banks learned something the last time around. They learned how to bail things out, they learned how to change the laws and...they've changed a lot of laws in the meantime. For example, if a bank goes under it's no longer the government that goes to bail it out—they just confiscate the depositors money. If you have a savings account at a bank that goes out of business, they will take part of your savings account to bail the bank out because they now have an interpretation that bank deposits—money that you put in a bank—you actually become an unsecured creditor...

That is the current intrepretation in the West—in Europe and in the United States. It's called a 'bail-in'. So this time around there are a lot of gimmicks that they can use. They've exhausted quantitative easing—it just doesn't work...and now the whole world is going to negative interest rates. In Europe already they have over 30% of the government bonds at zero interest rates or below so if you buy a government bond you are paying for the privelege of owning that bond, of lending the government money. The Federal Reserve just put out a note saying that banks should prepare for negative interest rates...

The world has never seen this and there is no one that knows the eventual consequences of this... This is desperation! The central banks have run out of ammunition and tools...all they have now is just talk.”

Given the risks outlined above and throughout the interview, Bert is quite bullish on US Treasury bonds and thinks we may be seeing a major turn in gold.

Listen to this full interview with Bert Dohmen by logging in and clicking here. Not a subscriber? Click here.
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Offline MKing

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Re: Big Slide v2.0 Begins
« Reply #323 on: February 20, 2016, 05:33:18 PM »
Time for rational perspective.

On the day this thread started, you know, when "the Big Slide" was happening, it happened when the DJIA was about 13,300.

Who else here thinks that all the gnashing of teeth over the crashing and sliding...otherwise known as "market is about the same place as it was back in August, 2015", is thousands of points higher than when people first began discussing the Big Slide 2.0.

The Big Slide 2.0, viewed as from the time this thread started, until now, really means an examination of how much the market has gained, while the spin has been "the big slide".

Just some commentary, knowing that others only want the spin visible, as opposed to the reality of what has been going on, since this thread began pushing the big slide idea. Which was really more of a 20% gain.

Don't ever forget, it isn't just the meat space PTB that push the black is white, good is bad, doubleplusungood double talk when attempting to see the average reader a pig in a poke.
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Offline RE

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The ex-Billionaires Club
« Reply #324 on: March 15, 2016, 09:52:23 AM »
Looks like Bill Ackman is going to join Eike Batista in the ex-Pigman cohort.

Watch for him in the Falling Pigman thread when they repo the yacht and the jet.

45% down in a day!  :o


Ackman Loses $1 Billion, Pershing Square Fund Halted

Submitted by Tyler Durden on 03/15/2016 11:28 -0400

    Pershing Square

Circuit-breakers kicked in as  Pershing Square Holdings, the publicly traded vehicle led by hedge fund billionaire Bill Ackman, has been halted. With the stock down over 11%, Bill Ackman's 30.7mm share personal holding means a paper loss of nearly $1 billion when the stock hit its intraday low of just over $3, down $32 on the day.

The stock trades on Euronext Amsterdam:

But there is a US tracker:

As Valeant is now down over 45% on the day.

Bye bye "tres commas" club?
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Offline K-Dog

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Big Slide Long Fall
« Reply #325 on: March 15, 2016, 01:58:45 PM »
I once worked for a guy who was worth 20 million or so.  That seems like a lot, and is, but he compared to a billionaire is like comparing a guy who ownes a double wide mobile home free and clear and that's all, to him. 

The loss of a billion seems horrible but Bill Ackman still won't have to get a real job for a few centuries if he just banks what he has left.  I hope still having more than all the regular diners put together does not make him jump out a window.  Unless that is, he deserves it.  If he got his billions screwing over other people then I wish him a nice fall.
« Last Edit: March 15, 2016, 02:01:40 PM by K-Dog »
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Offline RE

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Grupo Santander Races Deutchebank for 1st down the Toilet
« Reply #326 on: March 21, 2016, 06:20:08 PM »

Subprime Nightmare on Wall Street for TBTF Grupo Santander
by Don Quijones • March 21, 2016   

SEC gets edgy. Investors get crushed.
By Don Quijones, Spain & Mexico, editor at WOLF STREET.

On January 23, 2014, the shares of Santander Consumer USA Holdings (SCUSA), the U.S. auto-lending unit of Spain’s largest bank, were launched on the New York stock exchange. For the bank’s Spanish owners and management — in particular the firm’s president and undisputed capo of Spanish banking, Emilio Botín — it was a dream come true, the culmination of decades of rampant international growth and consolidation. Finally, Spain’s biggest bank had made it to the top of the global financial heap.

But the plan has gone awry. Auto-lending in the U.S. is no longer the low-risk, high-growth business it was cracked up to be, Emilio Botín has passed to the other side, and Santander’s American dream, now under the supervision of his daughter, Ana Botín, is turning decidedly sour.

Rumors have been circulating for some time that the auto lender was in trouble. Barring a six-month period between February and July 2015, its share price has been on a consistent downward trajectory. In the first quarter of 2015 the company announced that it would be getting rid of numerous portfolios of bad debt as well as ending all personal lending operations that were not directly linked to its core operation, auto-lending, in particular subprime auto-lending.

That core business is now under serious strain, with delinquency rates of close to 5% and default rates of over 12%. Over the last two years, SCUSA’s total exposure to subprime loans has shrunk, according to Bloomberg, but they still represent a whopping 25% of its entire loan portfolio.

Alarm bells began ringing when SCUSA failed to present its financial results for 2015 before the Feb. 29 deadline — a serious no-no for any publicly listed company. Its excuse, according to the Spanish daily El Confidencial, was that it was already under investigation by the SEC for financial irregularities. The SEC reacted by requesting immediate clarification on how the firm calculated the loans and bad-loan provisions on its books. SCUSA asked for 15 extra days to provide the information. It was granted the extension but, once again, it failed to meet the deadline.

Sources close to the Spanish bank insist that at the heart of the matter is a “mere accounting issue” that will have “barely any repercussions” on its U.S. subsidiary’s books. The markets are not convinced, however. On March 15, the day SCUSA failed to meet its second deadline, its shares plummeted 7% to reach their lowest point ever, though they have ticked up since.

At the closing price today of $9.44 a share, the shares remain 61% below their IPO price. And market capitalization has shrunk from $8.3 billion at the IPO to $3.36 billion today.

SCUSA is one of only two banks out of 31 to have failed the Fed’s last stress test, apparently due to governance failings and capital shortfalls. The other was Deutsche Bank. Santander already assumes that its US subsidiary will also fail the Fed’s next stress test. On a more positive note, the ECB has made sure that not a single European bank will be allowed to fail its stress test this year.

Santander is unlikely to enjoy the same regulatory lenience in the U.S, where its problems continue to stack up.

Barring a miraculous last-minute turnaround or reprieve, Grupo Santander will have little choice but to include its American subsidiary’s losses in its financial report for the first quarter of 2016. The timing could not be worse, what with the firm already facing a frightening array of risks in its home market, as well as acute exposure to Latin America’s struggling emerging economies, in particular Brazil, now in the second year of its deepest recession since 1931.

Thankfully, and ever so graciously, in the name of fiduciary responsibility, the ECB has allowed Spain’s largest lender to apply the confidence-inspiring “alternative standardized approach” to its Brazilian subsidiary, Banco Santander (Brasil) SA, which contributes 19% of net profit to the group.

“Investors are overestimating Santander’s capital needs and the threat that Brazil’s economic downturn poses to profit,” executive Chairman Ana Botin said in a letter to shareholders earlier this month. No doubt the new accounting rules approved by the ECB will help the global systemically important institution to provide a clearer portrayal of the genuine state of its Brazilian subsidiary’s financial health.

Meanwhile, in the U.S. its troubles continue to mount. In the last few days, six law firms (Khang & Khang, Goldberg Law, Pomerantz Law, Bronstein, Gewirtz & Grossman, GPM y Rosen Law) have announced that they are considering suing Santander’s American subsidiary over its failure to report its financial results from 2015.

In response, the bank’s senior management has done what senior bankers have always done to ensure that their interests are resolutely defended in key foreign markets: it has greased the wheels of the revolving door.

To try to make its US problems go away, the bank has unveiled a new, improved and – in keeping with the times – digitally focused international advisory board to be headed by, hilariously, Larry Summers, a man who was one of the most influential economic policy makers of his generation but whose credibility has sunk to such lows that the only way for him to get any attention these days is to call for the systemic extermination of the $100 bill. What could possibly go wrong? By Don Quijones, Raging Bull-Shit.

Europe’s banking sector has been hit hard. The new bail-in rules have caused bondholders and stockholders to have second thoughts. So the ECB is trying to prop up confidence by hook or crook. Read…  ECB Unveils Ingenious Strategy to Reduce Banking Stress
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Offline g

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Re: Big Slide v2.0 Begins - Investors Are in Denial About China
« Reply #327 on: March 29, 2016, 04:03:06 AM »


   Investors Are in Denial About China

March 28, 2016 5:00 PM EST
Christopher Balding

As you've no doubt noticed, companies and investors around the world are feeling the pain of China's economic slowdown. They're worried about all the layoffs, cuts to surplus capacity and deleveraging to come on the mainland, which will further depress demand. The natural temptation is to blame China for the world's woes. But outsiders should focus just as much on their own missteps -- starting with the widespread misperception that "this time" would be different.

Back in 2009, as China unleashed a massive fiscal stimulus and investment spree in response to the global financial crisis, the rest of the world was all too willing to believe the impossible. Aided by consultant research predicting decades of explosive growth, companies placed huge bets on China and expected to ride the never-ending boom to riches.

Amid the gold rush, they bulked up to sell China t-shirts or tons of iron ore. They urged their governments to sign free-trade deals with Beijing. Commodity producers heedlessly expanded capacity, believing that 10 percent growth would continue indefinitely. Consumer brands rushed to set up flagships in third-tier Chinese cities. Shipping companies scrambled to build new fleets to meet an expected explosion in global trade.

However, as with so many previous bouts of irrational exuberance, this time wasn't really different. The ruthless rules of supply and demand still applied. And now, the longer that painful decisions are delayed, the harder they'll become.

Commodities firms, in particular, are learning that lesson the hard way. As prices rose with Chinese demand, they made large upfront investments financed by borrowing -- often on a 20-year timeline, in the expectation that growth would last and last. Now, with China's economy slowing and the prices of everything from oil to metals plummeting, the bills are coming due.

Major iron ore firms, which had predicted that Chinese steel demand would keep rising until about 2030, are now looking at substantial overinvestment and deteriorating credit. Dairy farmers, who increased their herds with future Chinese consumer demand in mind, are feeling the pinch as milk prices plunge.

After years of ramping up production to fuel China's expected growth, oil-producing countries from Saudi Arabia to Norway are facing grim decisions about their public finances. Russia is rapidly draining its sovereign wealth fund. Venezuela is pleading with China for loans -- on top of the nearly $60 billion already doled out -- to stave off collapse. Pundits are warning that the large debt load of U.S. shale-gas and oil producers could pose greater risks than sub-prime lending did a decade ago.

No less so than China, the rest of the world needs to face up to some new realities.

First, the golden age of Chinese construction is over. There's now enormous surplus capacity in virtually every industry that requires fixed-asset investment. Companies can no longer rely on the "Beijing put" of new government stimulus to boost growth. Iron ore producers and copper miners all need to begin a painful process of downsizing and deleveraging -- just as China's bloated state-owned enterprises do. Producers around the world haven't faced up to the new normal.

Second, companies of all stripes have to put in the effort to understand China better. Expectations of double-digit growth, regardless of how poor the performance, have vanished. Luxury brands that once hoped their Beijing flagships would smooth the balance sheets at European headquarters need to recognize that different markets require different strategies, and that shops in China won't run on autopilot. They need to compete.

Third, companies and countries alike need to face up to their own irrational exuberance. Whether it's failing to diversify, spending recklessly on the back of high prices, or taking on too much debt, fundamental mistakes can't be blamed on China. Doing so only delays the inevitable.

Few investors seem to fully appreciate the balance-sheet reckoning that is coming. Failing to address the global supply glut only increases the risk of a larger correction. We know that because this time isn't different: The bill always comes due.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners. :icon_study:

Offline RE

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Credit Suisse on the Brink of the Abyss: Traders Run Amok
« Reply #328 on: April 05, 2016, 12:43:23 PM »
Will Credit Suisse beat Deutchbank down the toilet first?



CS on the Brink of the Abyss: Traders Run Amok

  Uploaded - Thursday, March 24, 2016

Noone is watching - while traders do their gymnastics
CS on the Brink of the Abyss
 Lack of Control, Further Losses, $90 Billion of Distressed Debt

 Credit Suisse's ability to survive in its present form is threatened by the latest revelations of past mismanagement, dysfunctional communications and unsupervised trading.
 Follow our Blog which will be continually updated as the drama unfolds.
 CS CEO Tidjane Thiam admitted in a video interview that the bank had followed a Pursuit of Revenue “At All Costs” policy which had facilitated traders secretly holding high risk illiquid positions. Losses may eventually run into billions of dollars. Updates here and here point to fractured internal communications.
 The drama is unfolding of a massive amount of illiquid debt scrip. (Illiquid scrip or illiquidity refers to investments for which there is no market, i.e. no buyers. Forced sales can result in massive price drops.) Credit Suisse wants to unload $90 billion of thinly traded debt scrip in unfavourable conditions.
 CS's weak position is an ironic reversal for a bank which often strove to exploit weaker counterparties. Thousands of those exploited by the bank's greed will regard it as due comeuppance. Lisa Abramowicz's video report on Credit Suisse's woes highlights poor risk management by senior officers.
 The bank's capital ratio was already down to 11.4% - after the $6 billion capital raising. Those investors (including pension funds) lost badly in the massive drop in CS's share price. The bank can hardly expect further capital from that source.
 The bank currently carries $380 billion of leverage. A loss of 10% on the $90 billion it is attempting to divest in the current difficult market would cost $9 billion and drive the bank close to junk territory.
 A loss of 5% on its $380 billion of leverage would take $19 billion off its balance sheet and could have it looking for a bailout.
 Both scenarios are conservative if the uncertainties described below eventuate. Bank of America has just reiterated its “Sell” Rating for Credit Suisse.

 Chairman Rohner Said "No Blind Spots"

 A few days later (31 March), Credit Suisse Group AG Chairman Urs Rohner said: “There were no blind spots” - managers were aware of the trading positions that have forced the bank to take almost $1 billion of writedowns over the past two quarters.
 If Rohner's people knew, but Thiam's people were kept in the dark, it suggests further dysfunction and a split between the Swiss "home team" and the non-Swiss "outsiders".
 It is a worry how pleased Rohner was that his organization was "in control" during this mess. To understand this, meet up with some Swiss-German bankers. For them, it would be unforgiveable to be blind-sided to the tune of multiple billions, and even worse to advertise that fact to the world. (Think: Titanic).

 Rohner is Up for Re-Election as Chairman
 Perhaps Rohner, who is standing for re-election as Chairman on April 29, is nervous that the share price has dropped from $77 in 2007 to the current $12-$15 under his watch. He was General Counsel (2004-09), Chief Operating Officer (2006-09) and Chairman (since then). We formally notified 
the General Counsel Departmentand Rohner of organized crime operating in and through the bank. We sent detailed evidence which the bank declined to refute. We offered further reports and evidence which they declined to accept. I would call that really bad wilful blindness, or a disaster waiting to happen.
 About a year later, the bank was officially criminally convicted of
fraud and conspiracy costing it $2.6 billion. Somehow, they denied knowledge of this criminal activity and blamed a few "rogues", despite the bank being convicted of it in Germany in 2011 - 3 years earlier. The DOJ said it involved thousands of bankers and it went on for decades. Andreas Bachmann was one of those CS bankers - he called it a "massive conspiracy".
 Josef Dörig was another one of the participating CS bankers. His statement emphasized: "In a country leading the vanguard of bank secrecy, there simply is no place for Mr. Dörig, who aggressively encouraged clients to disclose accounts to U.S. authorities". That reads like: "Swiss bankers are expected to enable clients to cheat on their taxes, i.e. to do crime as part of their job."

No Buffer from Credible Uncertainties

The bank has no real buffer from credible uncertainties. The deflation cycle looks set in for a while and resource prices are heading down (again). China's stock market is teetering (again) and The Street is confident a Chinese crash is imminent. ISIS want to explode a dirty nuclear bomb and some respected experts are only surprised it hasn't already happened. Central banks are playing a dangerous game which has the probable outcome that deflation will morph into stagflation - for which there is no known remedy.
 Any significant combination of these would turn Credit Suisse into junk or worse. Thiam now expects further Q1 losses following the bank's massive Q4 loss of $5.75 billion.

 CS's Crazy Creation - It is Taking Out Catastrophe Insurance
 Matt Levine has unpackaged the complexities of CS's drama. Here is a quick paraphrase: CS intends to sell its risk of a catastrophe so that it doesn't need extra capital to cover it. It includes risk of big losses from illiquid investments and rogue-trading. But it is more complex resembling a Möbius strip or a Klein bottle:
 "Credit Suisse packaged that risk into securities, gave some of the securities to its own bankers as part of their bonuses (surprise!), hedged the rest of them by buying yet another derivative from yet another counterparty, and then agreed to fund any amounts that the counterparty owed under the derivative."

It is projected to include rogue-trading risk at the same time it is under criminal investigation for allowing rogue-trading. It is projected to be sold as an Operational Risk insurance policy through Operational Re Ltd. (Bermuda!) claiming it is catastrophe insurance with a relatively remote risk, with the "expected loss said to be just 0.15%". My estimate of the risk is multiples of that and I wouldn't want to litigate any claim in Bermuda.
 To understand it, first read Matt Levine, then this, and this and this and then that and then this post.
 The upshot of this is that the bank's official 11.4% capital adequacy may be an over-estimate. Perhaps the bank is already on the brink of a Liquidity Death Spiral. Note that about 40 percent of the bonds in the $1.4 trillion U.S. junk-debt market didn't trade at all in the first two months of this year, and those that did were "absolutely crushed". An estimated loss of only 10% on the $90 billion fire sale may be over-optimistic.

 The Insider's Version of the Story
 Apart from Thiam's video - the other half is in the confessions of a top ex-Credit Suisse banker - Mr X  - who managed some of its wealthiest billionaire clients. Mr X, who was identified as CS private banker Patrice Lescaudron, got the job because he could speak Russian. Banking experience? He had none before joining the bank. Less than two years after joining Credit Suisse, he said, he was handling the bank’s biggest clients in the region. He reportedly became one of Credit Suisse’s most successful bankers, until he was fired.

Credit Suisse said it suffered a 1.5 billion Swiss franc outflow of client funds. The bank has set aside 250 million Swiss francs in provisions for litigation related to the banker’s case, a person familiar with the matter said.
 Bank Ignored Warnings for Years
 We repeatedly warned the bank of a similar situation in Credit Suisse - but they refused to accept our reports and covered up the illegal activity instead. An account manager who had no relevant experience, but was chosen because he could speak the right language. In our case, his banking ignorance was convenient because there was a huge securities scam going on between various bank people and entities in organized crime (outside the bank). The Swiss accomplice had an arrest warrant out for him for wire fraud and money laundering. However, the Swiss ignored the US arrest warrant.
 CS Private Banker Mr X: Patrice Lescaudron's Inside Information
 Mr X's inside information (courtesy of Matt Levine) is the stuff of a TV sitcom, not a billionaire's finance manager:
 He joined Credit Suisse at age 40 with no prior banking experience, and almost immediately got some big clients, including Georgian politician-tycoon Bidzina Ivanishvili.
 "Around April-May, I told myself that all my clients had to make profits so they would stop annoying me with their criticism about lack of performance,” he told bank investigators.
 Can you imagine? Mr. X is new to banking, he's good at client relationships, he picks up some big clients, he has fun going out to dinner with them or whatever. "Within weeks, he said, he was actively trading without permission, using Ivanishvili’s credit line to buy about $100 million in Russian stocks and bonds." And: "With markets around the world surging, he had soon more than made up the missed gains, he said."
 But: a trade lost money, there were margin calls to clients who weren't aware they were trading on margin, and the whole thing unravelled. He told investigators he could have prevented the margin calls with more unauthorized trading. But he was trying to enjoy the last day of his Italian vacation, he said. “I had had enough of this situation that had upset me so much.”

 Legitimate or Illegal Profit “At All Costs”?

 It is apparent that the bank's criminal convictions, its fractured internal communications and its bloated distressed debt were intimately intertwined. The burning question is:
 Were they all caused by policies designed to protect corporate crime - through ingrained deliberate ignorance and wilful blindness - which had these unexpected consequences?

 Media Snapshots
 Thiam's 7 minute video interview has inspired a multitude of media comments. The real drama is too extended to capture in a single two minute read. This collage of one-liners paints a bleak picture for the bank:

It is going from bad to worse for Credit Suisse.
 Mr. Thiam said the problems in the investment bank were connected to the pursuit of revenue “at all costs.”
 Credit Suisse Chief Says Risky Bets Were a ‘Surprise’
 A Credit Suisse wealth manager made rogue trades for 6 years just to keep his clients off his back
 Liquidity Death Spiral Traps Credit Suisse
 Credit Suisse CEO Blindsided as Bank Added to Risky Positions
 There was clearly an active decision to retain illiquids that CS took which other firms didn’t take
 Thiam said he was blindsided by a buildup of illiquid trading positions that will probably spark a first-quarter loss, and pledged to make deeper cost cuts.
 For him to say he was surprised by the size of the position is clearly not good ..... It highlights, at best, historic control failures and is not good for confidence.
 The shares dropped to the lowest since 1989 last month and are down 33 percent this year.
 Thiam also warned trading revenues are expected to fall by up to 45 percent in the first quarter from a year earlier.
 But investors should know there is no quick fix for a bank the size of Credit Suisse.
 Fixed-income revenue was down 61 percent year-on-year in the fourth quarter
 Thiam says his bank will report a bad first quarter
 CFTC Fines Credit Suisse $665,000 Over Futures Debacle and giving the regulator false information.
 The bank suffered $258 million of writedowns this year through March 11, and $495 million of losses in the fourth quarter, because of its holdings of distressed debt, leveraged loans and securitized products.
 Apparently people at Credit Suisse don't talk to each other? 
 ... if I ever got hired by an investment bank to be its CEO, I would spend my first week or two just sort of wandering around the trading floors, sidling up to people to ask questions like "so do you have any illiquid credit positions that might trigger oh say $1 billion of write-downs?"
 Credit Suisse Confusion on Costly Trades Adds to CEO's Woes 
 Credit Suisse's $90 Billion Bitter Pill
 As any trader knows, when a big player like Credit Suisse exits, it's a shock for everyone involved. That's even more true when the market is highly illiquid.
 How is the bank going to reduce leverage in its global markets unit to $290 billion from $380 billion by the end of 2016? That's $90 billion of assets that may be unloaded at fire-sale prices. If these positions are illiquid, which some of them seem to be, it could have a major impact on several markets.
 Illiquid Positions Add to Credit Suisse Confusion
 China's Stock Market Is About to Crash -- Sell Before It's Too Late
 Many U.S. experts consider the eventual detonation by terrorists of a dirty bomb containing radiological materials to be inevitable, because the mechanics of such a device are simple and widely-known.
 The fuel for a nuclear bomb is in the hands of an unknown black marketeer 
 A distressed credit index touched a level not seen since 2009 in February as oil traded at $30/barrel
 Credit Suisse `A Drag' for Herro Awaiting Overhaul Success
 Marvel At The Derivative On Its Derivatives That Credit Suisse Wrote To Itself
 Mourn For The Derivative On Its Derivatives That Credit Suisse Wrote To Itself
 CS turns to bonds to hedge rogue trader risk
 Don't believe or buy this:  CS Operational Risk insurance policy has a relatively remote risk, with the expected loss said to be just 0.15%.
 If you make money, you're a trader; but if you don't, you're a rogue trader.
 "There were no blind spots. It's not the case that positions suddenly surfaced that were not previously there," Urs Rohner told a Swiss banking conference.
 Fitch hasn't changed the banks ratings yet but warned that the bank's "Accelerated Restructuring Adds to Execution Risks". It made a detailed release outlining possible consequences of the current upheavals which may lead to ratings adjustments.

 The Bank's Solution
 Credit Suisse plans to monitor employee behavior to catch rogue trading through Artificial Intelligence (AI) surveillance, see: Signac - a 50/50 partnership with AI firm Palantir Technologies Inc.
 K.I.S.S.: Why not Read Your Mail?
 Considering that the bank ignored repeated written warnings of rogue activity, is it naive to suggest that the bank's top management should read their mail, rather than create elaborate AI robots to spy on staff?
 Wouldn't it be much better to create elaborate AI robots to spy on top management, who presumably would then read the written warnings of organized crime in their banks?
 And then maybe, just maybe, they would inspire their employees to gain honest profit instead of running after the crooked dollar, with its attendant blindness to billion dollar writedowns.
 (K.I.S.S. is an acronym for "keep it simple, stupid").
 Last updated 1 April 2016 10:40 PM AEST

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Offline g

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Re: Big Slide v2.0 Begins - Carl Icahn Has Gone Massively Net Short
« Reply #329 on: May 11, 2016, 04:05:36 AM »
Think what you wish of him, while sainthood is hardly his future; few consider him a shit head when it comes to money matters.

     With A Historic -150% Net Short Position, Carl Icahn Is Betting On An Imminent Market Collapse

 Over the past year, based on his increasingly more dour media appearances, billionaire Carl Icahn had been getting progressively more bearish. At first, he was mostly pessimistic about junk bonds, saying last May that "what's even more dangerous than the actual stock market is the high yield market." As the year progressed his pessimism become more acute and in December he said that the "meltdown in high yield is just beginning." It culminated in February when he said on CNBC that a "day of reckoning is coming."

Some skeptics thought that Icahn was simply trying to scare investors into selling so he could load up on risk assets at cheaper prices, however that line of thought was quickly squashed two weeks ago when Icahn announced to the shock of ever Apple fanboy that several years after his "no brainer" investment in AAPL, Icahn had officially liquidated his entire stake.

As it turns out, Icahn's AAPL liquidation was just the appetizer of how truly bearish the legendary investor has become.

* * *

Link to entire article with attendant graphs. :icon_study: