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Investors Start To Panic As A Global Bond Market Crash Begins
Investors Start To Panic As A Global Bond Market Crash Begins
Is the financial collapse that so many are expecting in the second half of 2015 already starting? Many have believed that we would see bonds crash before the stock market crashes, and that is precisely what is happening right now. Since mid-April, the yield on 10 year German bonds has shot up from 0.05 percent to 0.89 percent. But much of that jump has come this week. Just a couple of days ago, the yield on 10 year German bonds was sitting at just 0.54 percent. And it isn’t just Germany – bond yields are going crazy all over Europe. So far, it is being estimated that global investors have lost more than half a trillion dollars, and there is much more room for these bonds to fall. In the end, the overall losses could be well into the trillionseven before the stock market collapses.
I know that for most average Americans, talk about “bond yields” is rather boring. But it is important to understand these things, because we could very well be looking at the beginning of the next great financial crisis. The following is an excerpt from an article by Wolf Richter in which he details the unprecedented carnage that we have witnessed over the past few days…
On Tuesday, ahead of the ECB’s policy announcement today, German Bunds sagged, and the 10-year yield soared from 0.54% to 0.72%, drawing a squiggly diagonal line across the chart. In just one day, yield increased by one-third!
Makes you wonder to which well-connected hedge funds the ECB had once again leaked its policy statement and the all-important speech by ECB President Mario Draghi that the rest of us got see today.
…click on the above link to read the rest of the article…
Oil Sector May Not Cause Financial Apocalypse After All
Oil Sector May Not Cause Financial Apocalypse After All
Across the oil patch, banks are starting to close off their exposure to some of the riskiest oil drillers.
A new monthly survey from the Federal Reserve finds that banks that have issued loans to oil drillers are projecting some of them to go bad. Over the course of 2015, the Fed says that oil loans could “deteriorate” and that banks “expected delinquency and charge-off rates.” At the same time, the overall exposure to such loans remained small.
Around 80 percent of the banks surveyed by the Fed indicated that their exposure to shaky oil companies accounted for less than 10 percent of their commercial lending. In that sense, a wave of defaults across the oil and gas country would appear unlikely to ripple through the financial industry. Still, over half of the banks who made loans to drillers expect their loan quality to deteriorate.
Related: Is This The Top For Oil Prices For Now?
In recent months, the biggest banks have stated that they have cut lending as they begin to see losses on the horizon. Citigroup and JP Morgan Chase, among others, have set aside around $100 million each in order to cover the losses they expect from oil and gas lending.
To shield themselves, banks are starting to restructure loans, cut credit lines to drillers, require more collateral, and stiffen their terms for new loans, the Fed survey finds. In other words, they are withdrawing somewhat from lending to fossil fuel companies, but for the new and existing loans that are on offer, banks are also exacting a higher price.
…click on the above link to read the rest of the article…
Financial collapse leads to war
Financial collapse leads to war
Scanning the headlines in the western mainstream press, and then peering behind the one-way mirror to compare that to the actual goings-on, one can’t but get the impression that America’s propagandists, and all those who follow in their wake, are struggling with all their might to concoct rationales for military action of one sort or another, be it supplying weapons to the largely defunct Ukrainian military, or staging parades of US military hardware and troops in the almost completely Russian town of Narva, in Estonia, a few hundred meters away from the Russian border, or putting US “advisers” in harm’s way in parts of Iraq mostly controlled by Islamic militants.
The strenuous efforts to whip up Cold War-like hysteria in the face of an otherwise preoccupied and essentially passive Russia seems out of all proportion to the actual military threat Russia poses. (Yes, volunteers and ammo do filter into Ukraine across the Russian border, but that’s about it.) Further south, the efforts to topple the government of Syria by aiding and arming Islamist radicals seem to be backfiring nicely. But that’s the pattern, isn’t it? What US military involvement in recent memory hasn’t resulted in a fiasco? Maybe failure is not just an option, but more of a requirement?
…click on the above link to read the rest of the article…
What will Germany pay for not compromising with Greece?
What will Germany pay for not compromising with Greece?
You could argue that the very public nature of the disagreement between Germany and Greece, over the terms of the latest attempt by Greece to avoid financial collapse, is good for the reputation of the eurozone.
In that at least colossal sums of taxpayer’s money aren’t being committed via murky deals in the kind of hidden-away government rooms that used to be smoke-filled.
That said, confidence that the euro will endure till the end of days is hardly instilled by the conspicuous lack of trust between Germany and Greece.
The point is that Greece swallowed its pride and finally gave up its insistence that it must have a new bridging loan, only to be immediately accused by the German finance ministry of dishonesty – of merely pretending to adhere to bail out terms in requesting an extension of the existing €172bn rescue package (which is due to expire).
So much for famous European communautaire spirit.
There is a paradox in Germany’s financial Puritanism: this theological commitment that all debts must be repaid on the originally specified terms could be much more expensive for it than cutting Greece some slack.
…click on the above link to read the rest of the article…
ECB Threatens Athens With Bank Funding Cutoff If No Deal In One Month: February 28 Is Now D-Day For Greece
ECB Threatens Athens With Bank Funding Cutoff If No Deal In One Month: February 28 Is Now D-Day For Greece
As Deutsche Bank’s George Saravelos politely puts it, “Developments since the Greek election on Sunday have moved very fast.” And indeed, so far the new Tsipras cabinet, and here we focus on the words and deeds of the new finance minister Yanis Varoufakis, has shown that the market’s greatest hope – that the status quo in Greece will continue – has been crushed into a pulp (and so have Greek stock and bond prices) especially following yesterday’s most recent comments by the finmin in which he said that Greece “does not want the $7 billion” from the Troika agreement and that it wants to “rethink the whole program”, culminating with an epic exchange with Eurogroup chief Jeroen Dijsselbloem in which Greece made it clear that the “constructive talks” are over.
And suddenly the Eurozone is stunned, because what had until now been its greatest carrot when it comes to dealing with Greece, has become completely useless when the impoverished, insolvent nation itself says it no longer needs a bailout, seemingly blissfully unaware of the consequences.
So earlier today the ECB’s Erikki Liikanen, tired of pleasantries and dealing with what to Europe is a completely incomprehensible and illogical stance, one which is essentially a massive defection by Greece in the European “prisoner’s dilemma”, and which while leading to a Greek financial collapse and Grexit – both prerequisites to a subsequent Greek economic recovery unburdened by the shackles of the Euro – would also unleash a European depression, came out and directly threatened Greece that it now has 1 month until the end of February to reach a deal with the Troika, or else the ECB would cut off lending to Greek banks, in the process destroying the otherwise insolvent Greek banking sector.
…click on the above link to read the rest of the article…
Oil and Real Estate Bubbles in Canada: What Goes up Won’t so Smoothly Come Down
Oil and Real Estate Bubbles in Canada: What Goes up Won’t so Smoothly Come Down
Five years ago, I noted how unsustainable Canadian economic growth is fuelled by debt, which is leveraged to increase the prices–and ‘profitability’–of assets like oil holdings and real estate. It might as well be called “phantom growth,” because it’s bound to disappear in due course. When prices are high, the debt-based Ponzi scheme functions; when prices sustain lows, the scheme unravels. With Canada’s oil and real estate sectors both apparently slowing down, will it lead to a ‘Minsky moment?’
Economist Hyman Minsky studied financial instability as a result of debt accumulation, and his work was largely ignored by mainstream economists. He noted that debt-heavy capitalist economies exhibit inflations and deflations that tend to spin out of control–inflation feeds inflation and deflation feeds deflation. The ‘Minsky moment’ is the moment where our financial system begins to experience deflationary stress due to price shifts. Historically, government interventions to contain debt spirals were not terribly competent, and–other factors notwithstanding–the sheer volume of debt that has been leveraged makes the global economy poised for contraction. Canada’s recent dependence upon asset inflation makes it particularly vulnerable.
Where has all the Money Come From?
Debt has been leveraged in several investment streams, including derivatives, securities, and ordinary debt. After 2008, international quantitative easing–essentially the creation of money from nothing–has partly facilitated further investment in unconventional and costly oil production methods. As long as international prices and investment levels remain high, it is feasible for unconventional oil to achieve a return on the huge amounts of money and energy required to get it out of the ground. But the longer oil prices remain low, the longer investors will be exposed to defaults.
Investors include ordinary folks by virtue of our holdings in pension funds and RRSPs. Laricina Energyhas defaulted on financing extended by Canada’s largest pension fund, the public Canadian Pension Plan Investment Board. We can likely expect defaults to international investors as well, which should create upward pressure on interest rates as investors try to cover exposure to losses.
…click on the above link to read the rest of the article…
Understanding what propels the World Economy is mandatory to comprehend its Demise
Understanding what propels the World Economy is mandatory to comprehend its Demise
Banking has existed for a long time. The idea of debt dates back to the ancient world, as evidenced for example by ancient Mesopotamian clay tablets recording interest-bearing loans. Far too many people attribute our financial doom to fractional banking etc. They are actually taking the side of the bankers who want money to retain its purchasing power or rise rather than devalue with economic expansion. Indeed, they are in truth arguing for austerity that is tearing Europe apart at the seams. They honestly do not comprehend what they are supporting. They want money to retain its value, yet they expect profits from investment, trading, and their home to rise in value with wages.You cannot have your cake and eat it simultaneously. What these theories tout is the stuff that Euroland was supposed to create and it is now sending the entire global economy into a major economic decline not seen since the 1930s along with the US law FATCA hunting down Americans globally lie dogs.
Here is a picture I took in the Roman Forum. This was the ancient Wall Street of its day known as the Via Sacra (Sacred Road). Cicero (106-43BC) wrote that anytime there was news of a disaster in Asia Minor (modern Turkey), a financial panic would be unleashed in the Roman Forum on this very street. The Via Sacra was the main street of ancient Rome, leading from the top of the Capitoline Hill, through some of the most important religious sites of the Forum (where it is the widest street), to the Colosseum.
Asia Minor was the “emerging market” into which the Romans invested and lent money no different from today. Cicero tells us that the infamous traitor Brutus (85-42BC) who had lent money to the King of Cappadocia (Turkey) and to the city of Salamis at a 48% rate of interest. Brutus was not defending the people and the Republic when he killed Caesar, but his own greedy power. Brutus’ coinage depicts his own image declaring he killed Caesar proudly for the people on the 15th of March (Ides of March – EID MAR). This is why history repeats because human nature and ideas are always the same.
…click on the above link to read the rest of the article…
The PunchLine: “The Oil Crash Is No Small Matter…Repurcussions Will Be Extensive”
The PunchLine: “The Oil Crash Is No Small Matter…Repurcussions Will Be Extensive”
Awkward Beginnings… With all due respect…
What a way to start the year. The crash in oil prices is no small matter. The previous down sweep in energy prices occurred in the midst of the financial crash 0f 2008 and Great Recession. Oil prices soon reversed afterwards and climbed back to dizzying heights, even as world economic and financial recovery remained fragile. This time it would be foolish to bet solely on such a similarly quick snapback. The current bear market for oil may actually be the beginning of a longer and extended period of low commodity prices…
First, the price of oil at $100/bl or above had been an absurdity.Second, many nations simply cannot afford to curtail pumping oil, even at a loss in the short run.
Third, global growth is proving to be woefully inadequate and uncertain. Even as growth in the U.S. economy is becoming more firmly entrenched, the rest of the major economic engines remain mired, as we have argued for some time, in subpar growth trajectories. The Euro area may be facing another soft patch and remains entangled in both economic and geopolitical crises. The recovery in Japan has been slower than expected. And China continues to grow well below its previous super- track; and it obviously faces headwinds from a volatile real estate sector, awkward debt buildups and massive stockpiles of high-priced commodities.
Fourth, the shale gas revolution has transformed America’s energy markets, with profound effects for economic growth, competitiveness, security, and environmental quality. And the extensiveness of the oil rush in America is also playing a big role in pushing the adjustment on prices.
…click on the above link to read the rest of the article…
10 Key Events That Preceded The Last Financial Crisis That Are Happening Again RIGHT NOW
10 Key Events That Preceded The Last Financial Crisis That Are Happening Again RIGHT NOW
If you do not believe that we are heading directly toward another major financial crisis, you need to read this article. So many of the exact same patterns that preceded the great financial collapse of 2008 are happening again right before our very eyes. History literally appears to be repeating, but most Americans seem absolutely oblivious to what is going on. The mainstream media and our politicians are promising them that everything is going to be okay somehow, and that seems to be good enough for most people. But the signs that another massive financial crisis is on the horizon are everywhere. All you have to do is open up your eyes and look at them.
Bill Gross, considered by many to be the number one authority on government bonds on the entire planet, made headlines all over the world on Tuesday when he released hisJanuary Investment Outlook. I don’t know if we have ever seen Gross be more negative about a new year than he is about 2015. For example, just consider this statement…
“When the year is done, there will be minus signs in front of returns for many asset classes. The good times are over.”
And this is how he ended the letter…
…click on the above link to read the rest of the article…
Bild Warns German Govt Fears Greek Bank Runs, Financial System Collapse; Prepares For Grexit
Bild Warns German Govt Fears Greek Bank Runs, Financial System Collapse; Prepares For Grexit
It has been a busy few days for Germany. In the space of a week, they have warned Greece “there will be no blackmail,”adding that a Greek exit from the euro was “manageable,” only to hours later deny (clarify) these comments. This was then followed up with beggars-are-choosers Syriza demanding any ECB QE must buy Greek bonds (or else) – which Germany has flatly ruled out – only to see today that Syriza is practically guaranteed to win a “decisive victory” at the forthcoming snap election. So it with a wry smile that we note Bild reports tonight that the German government is preparing for a possible Greek exit, warning of financial system collapse, bank runs, and huge costs for the rest of the EU.
Germany has been flip-flopping (as Reuters notes)...
Der Spiegel magazine reported on Saturday that Berlin considers a Greek exit almost unavoidable if Syriza wins,
but believes the euro zone would be able to cope.
Vice Chancellor Sigmar Gabriel said on Sunday that Germany wants Greece to stay and there are no contingency
plans to the contrary, while noting the euro zone has become far more stable in recent years.
As the euro zone’s paymaster, Germany is insisting that Greece stick to austerity and not backtrack on its bailout
commitments, especially as it does not want to open the door for other struggling members to relax reform efforts.
But now the rhetoric is heating up…
…click on the above link to read the rest of the article…
Only War, Inflation And Financial Collapse Can End The Global “Plutonomy”, According To Citi | Zero Hedge
The last time the market was as euphoric and as complacent as it is now, was in the happy go lucky days of 2006 when every day stocks surged without a care in the world, when Lehman bankers were looking to a comfortable retirement after cashing out their stock (then trading north of $70), when the only question was which mega M&A and supermega LBO will hit next, and when the then-brand new Fed chairman Ben Bernanke said there is nothing to worry about because subprime was contained and because home prices in the US just can not possibly drop. Not surprisingly, late 2006 was also when Citigroup held its first and only Plutonomy symposium: a joyous celebration of the 0.001%, or as Citi called them, “The Uber-rich, the plutonomists who are likely to see net worth-income ratios surge, driving luxury consumption”, adding “Time to re-commit to plutonomy stocks – Binge on Bling. Equity multiples appear too low, the profit share of GDP is high and likely going higher, stocks look likely to beat housing, and we are bullish on equities.”
Wait what? Was there really a time 8 years before the French economist Piketty bashed (and made millions in the process) class and wealth inequality, when one of the world’s soon to be most insolvent banks had a symposium in which the bank pulled a page right out of pre-revolutionary France and celebrated the world’s mega rich?
Yes, and that’s not all.
A Signal of Coming Collapse | Monetary Metals
A Signal of Coming Collapse | Monetary Metals.
I proposed seven drivers of financial implosion in my dissertation. My recent writing has focused on two of them. One is the falling rate of interest on the 10-year government bond. As interest falls, theburden of debt rises. Since the falling rate incentivized more and more people to borrow, the number of indebted people, businesses, corporations, and of course governments is large. When the rate gets to zero, the burden of debt becomes theoretically infinite.
In the US, the downward trend is still in a deceptively mild phase (though there was a vicious spike down on Oct 15 to 1.87%). The rate on the 10-year Treasury is 2.3% today. In Germany, it is down to 0.82% and in Japan the metastatic cancer is much closer to causing multiple organ failures, with a yield of just 0.46%.
Two is gold backwardation, which has also been quiescent of late. Although it is worth noting that with these lower gold prices, temporary backwardation has returned. The December gold cobasis is over +0.2%).
…click on the above link to read the rest of the article…
