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Is Glencore The Next Lehman? The World’s Largest Commodities Trading Company Is Toast
Is Glencore The Next Lehman? The World’s Largest Commodities Trading Company Is Toast
Are we about to witness the most important global financial event since the collapse of Lehman Brothers in 2008? Glencore has been known as the largest commodities trading company on the entire planet, and at one time it was ranked as the 10th biggest company in the world. It is linked to trillions of dollars of derivatives trades globally, and if the firm were to implode it would be a financial disaster unlike anything that we have seen in Europe since the end of World War II. Unfortunately, all signs are pointing to an inescapable death spiral for Glencore at this point. The stock price was down nearly 30 percent on Monday, and overall Glencore stock has plunged nearly 80 percent since May. There are certainly other candidates for “the next Lehman” (Petrobras and Deutsche Bank being two perfect examples), but Glencore has definitely surged to the front of the pack. Right now many analysts are openly wondering if the firm will even be able to survive to the end of next month.
If you are not familiar with Glencore, the following is a pretty good summary of the commodity trading giant from Wikipedia…
Glencore plc is an Anglo–Swiss multinational commodity trading and mining company headquartered in Baar, Switzerland, with its registered office in Saint Helier, Jersey. The company was created through a merger of Glencore with Xstrata on 2 May 2013. As of 2014, it ranked tenth in the Fortune Global 500 list of the world’s largest companies. It is the world’s third-largest family business.
As Glencore International, the company was already one of the world’s leading integrated producers and marketers of commodities. It was the largest company in Switzerland and the world’s largest commodities trading company, with a 2010 global market share of 60 percent in the internationally tradeable zinc market, 50 percent in the internationally tradeable copper market, 9 percent in the internationally tradeable grain market and 3 percent in the internationally tradeable oil market.
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The Fed Can’t Fix It: “All That’s Left is a Reset, Shutdown of the System”
The Fed Can’t Fix It: “All That’s Left is a Reset, Shutdown of the System”
Did Janet Yellen make the right decision in delaying a Federal Reserve rate hike? Did the United States dodge a bullet? Of course not.
And the system is on course for a dangerous, hard landing.
As far as many experts can tell, there is no right way or good way out of this crisis under Fed control, and the exit isn’t likely to be smooth or pretty.
Not raising rates means yet another round of QE – QE Round 4 – which will lead to a further strain on the real economy as those on top get continued easy free, while interest rates on investments, pensions, insurance and savings sit at zero, or even go negative, destroying wealth. Derivatives continue to rule the day, and everything remains in jeopardy.
That’s why the Fed will eventually raise rates, at least just a little bit. But it will be too little way too late. The Fed has, in fact, lost control, according to many experts.
USA Watchdog reports:
Financial writer Bill Holter contends the recent announcement of the Federal Reserve not to raise rates means the “Fed Has Lost Control.” Holter explains, “Whatever the Fed does is wrong. The reason I say that is because no matter what they do, they can’t fix what they have already done. There is no policy at this point that can repair where we are at this point as far as debt ratios, derivative outstanding and the money supply exploding. Nothing that they do now can fix it. The only thing that remains is a reset.”
…click on the above link to read the rest of the article…
The Unwind
The Unwind
It’s my overarching thesis that the world is in the waning days of a historic multi-decade experiment in unfettered finance. As I have posited over the years, international finance has for too long been effectively operating without constraints on either the quantity or the quality of Credit issued. From the perspective of unsound finance on a globalized basis, this period has been unique. History, however, is replete with isolated episodes of booms fueled by bouts of unsound money and Credit – monetary fiascos inevitably ending in disaster. I see discomforting confirmation that the current historic global monetary fiasco’s disaster phase is now unfolding. It is within this context that readers should view recent market instability.
It’s been 25 years of analyzing U.S. finance and the great U.S. Credit Bubble. When it comes to sustaining the Credit boom, at this point we’ve seen the most extraordinary measures along with about every trick in the book. When the banking system was left severely impaired from late-eighties excess, the Greenspan Fed surreptitiously nurtured non-bank Credit expansion. There was the unprecedented GSE boom, recklessly fomented by explicit and implied Washington backing. We’ve witnessed unprecedented growth in “Wall Street finance” – securitizations and sophisticated financial instruments and vehicles. There was the explosion in hedge funds and leveraged speculation. And, of course, there’s the tangled derivatives world that ballooned to an unfathomable hundreds of Trillions. Our central bank has championed it all.
Importantly, the promotion of “market-based” finance dictated a subtle yet profound change in policymaking. A functioning New Age financial structure required that the Federal Reserve backstop the securities markets.
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Lies You Will Hear As The Economic Collapse Progresses
Lies You Will Hear As The Economic Collapse Progresses
It is undeniable; the final collapse triggers are upon us, triggers alternative economists have been warning about since the initial implosion of 2008. In the years since the derivatives disaster, there has been no end to the absurd and ludicrous propaganda coming out of mainstream financial outlets and as the situation in markets becomes worse, the propaganda will only increase. This might seem counter-intuitive to many. You would think that the more obvious the economic collapse becomes, the more alternative analysts will be vindicated and the more awake and aware the average person will be. Not necessarily…
In fact, the mainstream spin machine is going into high speed the more negative data is exposed and absorbed into the markets. If you know your history, then you know that this is a common tactic by the establishment elite to string the public along with false hopes so that they do not prepare or take alternative measures while the system crumbles around their ears. At the onset of the Great Depression the same strategies were used. Consider if you’ve heard similar quotes to these in the mainstream news over the past couple months:
John Maynard Keynes in 1927: “We will not have any more crashes in our time.”
H.H. Simmons, president of the New York Stock Exchange, Jan. 12, 1928: “I cannot help but raise a dissenting voice to statements that we are living in a fool’s paradise, and that prosperity in this country must necessarily diminish and recede in the near future.”
Irving Fisher, leading U.S. economist, The New York Times, Sept. 5, 1929: “There may be a recession in stock prices, but not anything in the nature of a crash.” And on 17, 1929:“Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months.”
Deutsche Bank Sums It Up “The Fragility Of This Artificially Manipulated Financial System Was Finally Exposed”
Deutsche Bank Sums It Up “The Fragility Of This Artificially Manipulated Financial System Was Finally Exposed”
Today’s dose of vile tinfoil hattery magick comes straight from the bank with the cool $55 trillion or so in derivatives, Deutsche Bank:
The fragility of this artificially manipulated financial system was exposed over the last couple of days of last week. It all ended with the S&P 500 falling -3.19% on Friday – its worst day since November 9th 2011.* * *
We’ve long felt that the only thing preventing another financial crisis has been extraordinary central bank liquidity and general interventions from the global authorities which we still expect to continue for a long while yet. So when policy changes, risks arise. The genesis of this recent sell-off has been the threat of the Fed raising rates next month, but China’s confrontational move two weeks ago and the subsequent knock-on through EM have accelerated us towards something more serious. We always thought something would get in the way of the Fed raising rates in September and we’re perhaps seeing this now. With 24 days to go until we find out, the probability of a hike has gone down to 34% from a 54% recent peak on August 9th. Having said we always thought something would come along to derail a Fed rate hike we probably should have gone underweight credit.However with trading liquidity poor and with a reasonably high desire to be long amongst investors there has to be a big move to justify the change in stance. Also with a strong possibility that the Fed will relent and that China could add more stimulus soon, there may be a small window to be short European credit. So at the moment this could be a dangerous time to sell.However if it wasn’t for expected intervention and extraordinary central bank policy we would be very bearish as the global financial system remains an artificial construct reliant on the largesse of the authorities.
So 6 years after we first said what at the time was seen as heretical “tinfoil” conspiracy theory, now everyone admits it. Almost time to take a vacation maybe…
Central Banks Ready To Panic — Again
Central Banks Ready To Panic — Again
Less than a decade after a housing/derivatives bubble nearly wiped out the global financial system, a new and much bigger commodities/derivatives bubble is threatening to finish the job. Raw materials are tanking as capital pours out of the most heavily-impacted countries and into anything that looks like a reasonable hiding place. So the dollar is up, Swiss and German bond yields are negative, and fine art is through the roof.
Now emerging-market turmoil is spreading to the developed world and the conventional wisdom is shifting from a future of gradual interest rate normalization amid a return to steady growth, to zero or negative rates as far as the eye can see. Here’s a representative take from Bloomberg:
Cheap Money Is Here to Stay
For decades, central banks lorded over markets. Traders quivered at the omnipotence of monetary authorities — their every move, utterance and wink a reason to scurry for safe havens or an opportunity to score huge profits. Now, though, markets are the ones doing the bullying.The Fed’s Countdown
Take New Zealand and Australia. Yesterday, the Reserve Bank of New Zealand slashed borrowing costs for the second time in six weeks even as housing prices continue to skyrocket. A day earlier, its counterpart across the Tasman Sea (already wrestling with an even bigger property bubble of its own) said a third cut this year is “on the table.”Just one year ago, it seemed unthinkable that officials in Wellington and Sydney, more typically known for their hawkishness and stubborn independence, would join the global race toward zero. But with commodity prices sliding, China slowing and governments reluctant to adopt bold reforms, jittery markets are demanding ever-bigger gestures from central banks.
…click on the above link to read the rest of the article…
In A World Of Artificial Liquidity – Cash Is King
In A World Of Artificial Liquidity – Cash Is King
Global central banks are afraid. Before Greece tried to stand up to the Troika, they were merely worried. Now it’s clear that no matter what they tell themselves and the world about the necessity or even righteousness of their monetary policies, liquidity can still disappear in an instant. Or at least, that’s what they should be thinking.
The Federal Reserve and US government led policy of injecting liquidity into the US and then into the worldwide financial system has resulted in the issuance of trillions of dollars of debt, recycling it through the largest private banks, and driving rates to 0% — or below. The combined book of debt that the Fed and European Central Bank (ECB) hold is $7 trillion. None of that has gone remotely into fixing the real global economy. Nor have the banks that have ben aided by this cheap money increased lending to the real economy. Instead, they have hoarded their bounty of cash. It’s not so much whether this game can continue for the near future on an international scale. It can. It is. The bigger problem is that central banks have no plan B in the event of a massive liquidity event.
Some central bank entity leaders have admitted this. IMF chief, Christine Lagarde for instance, warned Federal Reserve Chair, Janet Yellen that potential US rate hikes implemented too soon, would incite greater systemic calamity. She’s not wrong. That’s what we’ve come to: a financial system reliant on external stimulus to survive.
These “emergency” measures were supposed to have healed the problems that caused the financial crisis of 2008 — the excessive leverage, the toxic assets wrapped in complex derivatives, the resultant credit and liquidity crunch that occurred when banks lost faith in each other. Meanwhile, the infusion of cheap money and liquidity into banks gave a select few of them more power over a greater pool of capital than ever.
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The Economic Collapse Blog Has Issued A RED ALERT For The Last Six Months Of 2015
The Economic Collapse Blog Has Issued A RED ALERT For The Last Six Months Of 2015
I have never done anything like this before. Ever since I started The Economic Collapse Blog in late 2009, I have never issued any kind of “red alert” for any specific period of time. As an attorney, I was trained to be level-headed and to only come to conclusions that were warranted by the evidence. So this is not something that I am doing lightly. Based on information that I have received, things that I have been told, and thousands of hours of research that have gone into the publication of more than 1,300 articles about our ongoing economic collapse, I have come to the conclusion that a major financial collapse is imminent. Therefore, I am issuing a RED ALERT for the last six months of 2015.
To clarify, when I say “imminent” I do not mean that it will happen within the next 48 hours. And I am not saying that our problems will be “over” once we get to the end of 2015. In fact, I believe that the truth is that our problems will only be just beginning as we enter 2016.
What I am attempting to communicate is that we are right at the door of a major turning point. About this time of the year back in 2008, my wife and I went to visit her parents. As we sat in their living room, I explained to them that we were on the verge of a major financial crisis, and of course the events that happened a few months later showed that I was right on the money.
This time around, I wish that I could visit the living rooms of all of my readers and explain to them why we are on the verge of another major financial crisis. Unfortunately, that is not possible, but hopefully this article will suffice. Please share it with your friends, your family and anyone else that you want to warn about what is coming.
…click on the above link to read the rest of the article…
Warren Buffett: Derivatives Are Still Weapons Of Mass Destruction And ‘Are Likely To Cause Big Trouble’
Warren Buffett: Derivatives Are Still Weapons Of Mass Destruction And ‘Are Likely To Cause Big Trouble’
After all these years, the most famous investor in the world still believes that derivatives are financial weapons of mass destruction. And you know what? He is exactly right. The next great global financial collapse that so many are warning about is nearly upon us, and when it arrives derivatives are going to play a starring role. When many people hear the word “derivatives”, they tend to tune out because it is a word that sounds very complicated. And without a doubt, derivatives can be enormously complex. But what I try to do is to take complex subjects and break them down into simple terms. At their core, derivatives represent nothing more than a legalized form of gambling. A derivative is essentially a bet that something either will or will not happen in the future. Ultimately, someone will win money and someone will lose money. There are hundreds of trillions of dollars worth of these bets floating around out there, and one of these days this gigantic time bomb is going to go off and absolutely cripple the entire global financial system.
Back in 2002, legendary investor Warren Buffett shared the following thoughts about derivatives with shareholders of Berkshire Hathaway…
The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear. Central banks and governments have so
far found no effective way to control, or even monitor, the risks posed by these contracts. In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.
…click on the above link to read the rest of the article…
Something Smells Fishy
SOMETHING SMELLS FISHY
It’s always interesting to see a long term chart that reflects your real life experiences. I bought my first home in 1990. It was a small townhouse and I paid $100k, put 10% down, and obtained a 9.875% mortgage. I was thrilled to get under 10%. Those were different times, when you bought a home as a place to live. We had our first kid in 1993 and started looking for a single family home. We stopped because our townhouse had declined in value to $85k, so I couldn’t afford to sell. In 1995 I convinced my employer to rent my townhouse, as they were already renting multiple townhouses for all the foreigners doing short term assignments in the U.S. We bought a single family home in 1995 with the sole purpose of having a decent place to raise a family that was within 20 minutes of my job.
Considering home prices on an inflation adjusted basis were lower than they were in 1980, I was certainly not looking at it as some sort of investment vehicle. But, as you can see from the chart, nationally prices soared by about 55% between 1995 and 2005. My home supposedly doubled in value over 10 years. I was ecstatic when I was eventually able to sell my townhouse in 2004 for $134k. I felt so smart, until I saw a notice in the paper one year later showing my old townhouse had been sold again for $176k. Who knew there were so many greater fools.
This was utterly ridiculous, as home prices over the last 100 years have gone up at the rate of inflation. Robert Shiller and a few other rational thinking people called it a bubble. They were scorned and ridiculed by the whores at the NAR and the bimbo cheerleaders on CNBC. Something smelled rotten in the state of housing.
…click on the above link to read the rest of the article…
Is The 505 Trillion Dollar Interest Rate Derivatives Bubble In Imminent Jeopardy?
Is The 505 Trillion Dollar Interest Rate Derivatives Bubble In Imminent Jeopardy?
All over the planet, large banks are massively overexposed to derivatives contracts. Interest rate derivatives account for the biggest chunk of these derivatives contracts. According to the Bank for International Settlements, the notional value of all interest rate derivatives contracts outstanding around the globe is a staggering 505 trillion dollars. Considering the fact that the U.S. national debt is only 18 trillion dollars, that is an amount of money that is almost incomprehensible. When this derivatives bubblefinally bursts, there won’t be enough money in the entire world to bail everyone out. The key to making sure that all of these interest rate bets do not start going bad is for interest rates to remain stable. That is why what is going on in Greece right now is so important. The Greek government has announced that it will default on a loan payment that it owes to the IMF on June 5th. If that default does indeed happen, Greek bond yields will soar into the stratosphere as panicked investors flee for the exits. But it won’t just be Greece. If Greece defaults despite years of intervention by the EU and the IMF, that will be a clear signal to the financial world that no nation in Europe is truly safe. Bond yields will start spiking in Italy, Spain, Portugal, Ireland and all over the rest of the continent. By the end of it, we could be faced with the greatest interest rate derivatives crisis that any of us have ever seen.
The number one thing that bond investors want is to get their money back. If a nation like Greece is actually allowed to default after so much time and so much effort has been expended to prop them up, that is really going to spook those that invest in bonds.
…click on the above link to read the rest of the article…
Huge Trouble Is Percolating Just Under The Surface Of The Global Economy
Huge Trouble Is Percolating Just Under The Surface Of The Global Economy
Did you know that the number of publicly traded companies declaring bankruptcy has reached a five year high? And did you know that Chinese exports are absolutely collapsing and that Chinese economic growth in 2014 was the weakest in over 20 years? Even though things may seem to be okay on the surface for the global economy at the moment, that does not mean that big trouble is not percolating just under the surface. On Wednesday, investors cheered as stocks soared to new highs, but almost all of the economic news coming in from around the planet has been bad. The credit rating on Greek debt has been slashed again, global economic trade is really slowing down, and many of the exact same financial patterns that we saw just before the crash of 2008 are repeating once again. All of this reminds me of the months leading up to the implosion of Lehman Brothers. Most people were feeling really good about things, but huge trouble was brewing just underneath the surface. Finally, one day we learned that Lehman Brothers had “suddenly” collapsed, and then all hell broke loose.
If the economy is actually “getting better” like we are being told by the establishment media, then why are so many big companies declaring bankruptcy? According to CNBC, the number of publicly traded companies declaring bankruptcy has hit a five year high…
…click on the above link to read the rest of the article…
The Six Too Big To Fail Banks In The U.S. Have 278 TRILLION Dollars Of Exposure To Derivatives
The Six Too Big To Fail Banks In The U.S. Have 278 TRILLION Dollars Of Exposure To Derivatives
The very same people that caused the last economic crisis have created a 278 TRILLION dollar derivatives time bomb that could go off at any moment. When this absolutely colossal bubble does implode, we are going to be faced with the worst economic crash in the history of the United States. During the last financial crisis, our politicians promised us that they would make sure that “too big to fail” would never be a problem again. Instead, as you will see below, those banks have actually gotten far larger since then. So now we really can’t afford for them to fail. The six banks that I am talking about are JPMorgan Chase, Citibank, Goldman Sachs, Bank of America, Morgan Stanley and Wells Fargo. When you add up all of their exposure to derivatives, it comes to a grand total of more than 278 trillion dollars. But when you add up all of the assets of all six banks combined, it only comes to a grand total of about 9.8 trillion dollars. In other words, these “too big to fail” banks have exposure to derivatives that is more than 28 times greater than their total assets. This is complete and utter insanity, and yet nobody seems too alarmed about it. For the moment, those banks are still making lots of money and funding the campaigns of our most prominent politicians. Right now there is no incentive for them to stop their incredibly reckless gambling so they are just going to keep on doing it.
…click on the above link to read the rest of the article…
“Bad Bank” Mania Spreads in Europe
“Bad Bank” Mania Spreads in Europe
One thing that the world is not in short supply of these days is bad banks. They are everywhere, it seems. But there are bad banks, and there are Bad Banks. This article is about the latter, the officially dubbed “Bad Banks” launched by governments and central banks to conceal the rising tide of triple-F toxic junk (derivatives, securitized debt, non-performing loans…) that threatens to engulf the world’s financial system.
As Bad Banks go, few are as bad as Spain’s SAREB, the public-private company responsible for managing assets transferred from the four nationalized financial institutions BFA-Bankia, Catalunya Banc, NGC Banco-Banco Gallego, and Banco de Valencia.
In theory, SAREB was never meant to exist: “There will be no Bad Bank in Spain, and we will establish procedures that will not be burdensome for taxpayers.” Those were the famous words of Spanish PM Mariano Rajoy during the first few months of 2012. The promise was made on numerous occasions, and not just by Rajoy but also by his Minister of Economy (and former Lehman advisor) Luis de Guindos.
But in politics, promises are not made to last; they are there to be broken. By December of that same year, Sareb was born and Spanish taxpayers were left holding the tab for the biggest bank bailout in Spanish history.
Fast forward to today. Sareb is hemorrhaging. In 2014 the firm’s total losses were €585 million, more than double the amount registered in 2013, its first full year of operations (€260.53 million). It’s a stark contrast from the rosy picture painted by KPMG, the firm hired by the government to draw up Sareb’s original business plan. According to KPMG, investor returns, based on “conservative estimates,” would be in the order of around 15%!
…click on the above link to read the rest of the article…
