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Last week, we discovered precisely which bank got hammered by the violent divergence between the spot and future price of gold. As we reported, “HSBC had 15 “back-testing exceptions” in January and March, when the firm was caught out by moves in the prices of precious metals. Europe’s biggest bank said … problems were caused in part by “delivery disruptions in the gold market” which means that we now know which bank was on the other side of the gold spot-future trade.”

Today we also learned just how much these unexpected moves cost Europe’s largest bank: according to Bloomberg, HSBC lost around $200 million in one day in March because of the previously discussed disruptions to the gold market that caused prices to diverge dramatically in key trading hubs.

The one-day loss, which far exceeded the maximum loss anticipated by HSBC’s value-at-risk models, was unusually large for a market in which the leading banks – HSBC and JPMorgan – typically make around $200 million in an entire year. In other words, in one day, HSBC lost an entire year’s worth of revenue.

HSBC’s loss highlights the extreme nature of the disruption to the gold market in late March, as lockdowns closed refineries and grounded planes, strangling the supply routes that allow physical gold to move around the globe. As we discussed at the time, the price of gold futures in New York and spot gold in London, which usually trade within a few dollars an ounce of one another, diverged by as much as $70, the most on record.

…click on the above link to read the rest of the article…

Hong Kong Riots Reveal A Looming Crisis At The World’s 6th Largest Bank

August 5, 2019

Hong Kong Riots Reveal A Looming Crisis At The World’s 6th Largest Bank

Earlier today, in addition to the chaos surrounding the escalation of the US-China trade and currency war, we also got news which slipped under the radar that the CEO of HSBC, one which with $2.6 trillion in assets is the largest UK bank and the 6th largest bank in the world by assets, was unexpectedly quitting and his departure would also lead to mass layoffs, with the bank set to fire 4,000 workers, or about 2% of its workforce.

And while today’s market massacre succeeded in sweeping the HSBC news under the rug, one can’t help but wonder: is HSBC, which has had almost as many run-ins with the law as one particular infamous German bank, going to be the next Deutsche Bank?

For the answer we went to one of our blogging friends who runs the Strategic Macro blog, and who conveniently took a look at some of the cockroaches in HSBC’s basement. What he found was troubling, especially in light of the ongoing turmoil in Hong Kong which at any given moment is just a few minutes away and a false flag provocation away from a Chinese invasion.

Courtesy of the Strategic Macro blog, we present:

HSBC’s exposure to Hong Kong real estate

So conventional wisdom is that post-Basel III the banks hold a lot of capital against loans and are run conservatively. And in a normalised market this is very true I think.

However when you are calculating LTVs and RWAs and PDs against bubble valuation levels, are they still appropriate? If you calculated it against replacement costs, the LTVs would go through the roof, and so would RWAs and the banks would be left with an CET tier 1 equity deficit to be covered by a rights issue. Any losses and higher RWAs on impaired loans would further cost equity.

…click on the above link to read the rest of the article…

Debt is back but this time its corporate

October 31, 2018

Debt is back but this time its corporate

On Wednesday Feb 7th 2007 HSBC issued a profit warning. It was the first in its 142 year history. The bank told its share holders it would have to take an unprecedented charge of $10.5 billion because one of its units, its sub prime lender, was in deep trouble. And so began the sub prime crisis.

Today GE issued a profit warning and cut its dividend to share holders from 12 cents to 1 cent. It is only the third time since the Great Depression that GE has reduced its dividend in this way. It told its share holders it would be taking a $22 Billion charge because one of its units, its power unit, is in deep trouble. GE has about $116 billion in debt.

In 2007 the banks had flooded the global market with sub-prime loans. The banks were also holding many of those same loans themselves or had transferred them to Special Purpose Vehicles (SPVs) they had set up, staffed and lent money to.

Today it is not the banking world which stands at the centre of the storm but the corporate world. In the last years they have flooded the market with junk rated bonds. At the same time they are also burdened with high yielding, leveraged and covenant- lite loans. Taken together they are about $2.4 Trillion of debt.

2007 sub prime loans. 2018 corporate junk bonds and leveraged loans. 2007 banks and SPVs funded by the banks. 2018?

Where is this sub-prime corporate debt sitting today?

Nearly half sits in Insurance Companies and Pension funds.

Given the close ties between insurance and pensions this is not a happy picture.

…click on the above link to read the rest of the article…

Mafia Expert Calls Great Britain the “Most Corrupt Place on Earth”

June 4, 2016

Mafia Expert Calls Great Britain the “Most Corrupt Place on Earth”

The City is a semi-offshore state, a bit like the UK’s crown dependencies and overseas territories, tax havens legitimized by the Privy Council. Britain’s financial secrecy undermines the tax base while providing a conduit into the legal economy for gangsters, kleptocrats and drug barons.

Even the more orthodox financial institutions deploy a succession of scandalous practices: pension mis-selling, endowment mortgage fraud, the payment protection insurance con, Libor rigging. A former minister in the last government, Lord Green, ran HSBC while it engaged in money laundering for drug gangs, systematic tax evasion and the provision of services to Saudi and Bangladeshi banks linked to the financing of terrorists. Sometimes the UK looks to me like an ever so civilised mafia state.

– From last year’s post: Guardian Op-Ed – The City of London Has Turned Britain Into a “Civilized Mafia State”

This shouldn’t come as any surprise to Liberty Blitzkrieg readers, but it’s a provocative statement nonetheless.

From The Independent:

Britain is the most corrupt country in the world, according to journalist Roberto Saviano, who spent more than a decade exposing the criminal dealings of the Italian Mafia.

Mr Saviano, who wrote the best-selling exposés Gomorrah and ZeroZeroZero, made the comments at the Hay Literary Festival. The 36-year-old has been living under police protection since publishing revelations about members of the Camorra, a powerful Neapolitan branch of the mafia, in 2006.

He told an audience at Hay-on-Wye: “If I asked you what is the most corrupt place on Earth you might tell me well it’s Afghanistan, maybe Greece, Nigeria, the South of Italy and I will tell you it’s the UK.

…click on the above link to read the rest of the article…

Mobs of Angry Investors Fight Market Rigging, Maul Deutsche Bank in Class-Action Lawsuit, other Banks Next

April 18, 2016

Mobs of Angry Investors Fight Market Rigging, Maul Deutsche Bank in Class-Action Lawsuit, other Banks Next

Since none of the criminal bankers responsible end up in prison…

Prior to last week, Deutsche Bank made headlines for a string of huge losses and massive exposure to risky derivatives. The last time the firm’s shares traded at prices this low, the world was in the midst of 2008’s financial apocalypse.

Deutsche Bank didn’t need more bad news, but a group of investors who brought suit against the massive German bank for cheating them by rigging the London “fix” price for gold and silver certainly must be smiling. Last week, the bank offered to settle their class action suit for an undisclosed amount.

Perhaps more importantly, DB promises to provide evidence to help the plaintiffs in their suit against the other banks who participated in manipulating the fix: Bank of Nova Scotia, Barclays, HSBC and SocGen. In a letter to U.S. District Court Judge Valerie Caproni, the plaintiff’s attorney said, “In addition to valuable monetary consideration, Deutsche Bank has also agreed to provide cooperation to the Plaintiffs, including the production of instant messages and other electronic communications, as part of the settlement.”

If the information DB provides is incriminating, as the plaintiff’s expect, it won’t be the only recent example of bankers getting caught talking smugly amongst themselves about swindling investors and clients. A year ago Citigroup, JPMorgan Chase, Barclays, and RBS pled guilty to criminally rigging the foreign exchange markets following the leak of some embarrassing communiques.

That case rested, in large part, on logs from an exclusive chat group participants dubbed “The Cartel.”

Here is a good example of the type of conversations contained in those logs. The banker representing Barclays “mentors” another member:

…click on the above link to read the rest of the article…

Deutsche Bank Confirms Silver Market Manipulation In Legal Settlement, Agrees To Expose Other Banks

April 14, 2016

Deutsche Bank Confirms Silver Market Manipulation In Legal Settlement, Agrees To Expose Other Banks

Back in July of 2014, we reported that in an attempt to obtain if not compensation, then at least confirmation of bank manipulation in the precious metals industry, a group of silver bullion banks including Deutsche Bank, Bank of Nova Scotia and HSBC (later UBS was also added to the defendants) were accused of manipulating prices in the multi-billion dollar market.

The lawsuit, which was originally filed in a New York district court by veteran litigator J. Scott Nicholson, a resident of Washington DC, alleged that the banks, which oversee the century-old silver fix manipulated the physical and COMEX futures market since January 2007. The lawsuit subsequently received class-action status. It was the first case to target the silver fix.

Many expected that this case would never go anywhere and that the defendant banks would stonewall indefinitely: after all their legal budgets were far greater than the plaintiffs.

Which is why we were surprised to read overnight that not only has this lawsuit against precious metals manipulation not been swept away, but that the lead defendant, troulbed German bank Deutsche Bank agreed to settle the litigation over allegations it illegally conspired with Bank of Nova Scotia and HSBC Holdings Plc to fix silver prices at the expense of investors, Reuters reported citing a court filing by law firm Lowey.

Terms were not disclosed, but the accord will include a monetary payment by the German bank.

It goes without saying, that there would have been neither a settlement nor a payment if the banks had done nothing wrong.

…click on the above link to read the rest of the article…

Panama partners in crime

April 8, 2016

Panama partners in crime

“We have broken no laws and cooperated with the government at all times.”

Variations of that statement seem to be the default defence of everyone from bankers to politicians when their names come up in the Panama Papers.

In the UK the latest to resort to some version of it, was first Downing Street on behalf of the Prime Minister David Cameron, and then HSBC on behalf of it’s notorious Swiss subsidiary. The former because his father who lived in the UK, set up an off-shore company which has never paid any taxes in the UK, and the latter because it turns out HSBC has once again been handling dirty money, this time holding and moving money for off-shore companies owned by relatives of Syrian President Bashar al-Assad.

Now HSBC is a well known money laundering bank. They have been indicted and convicted of money laundering so many times in so many different countries. The best known case was in 2012 when HSBC were found guilty of laundering drug money out of Mexico. HSBC were tried in the US and fined $1.9 billion. They paid and said how sorry they were, and their group Chief Executive Stuart Gulliver accepted responsibility for their past mistakes, but assured everyone they had now put all that behind them and had even,

spent $290m on improving its systems to prevent money laundering,

That was 2012. In 2015 HSBC all that was found to be blather. HSBC were caught laundering – again. This time it was HSBC’s Swiss subsidiary which had laundered

the proceeds of political corruption and accepted deposits from arms dealers while helping wealthy people evade taxes.

…click on the above link to read the rest of the article…

18 Numbers That Scream That A Crippling Global Recession Has Arrived

November 3, 2015

18 Numbers That Scream That A Crippling Global Recession Has Arrived

The stock market has been soaring, but all of the hard economic numbers are telling us that a major global recession is here. This is so reminiscent of what happened back in 2008. Back then, all of the fundamentals were screaming “recession” by the middle of that year, but the equity markets didn’t respond until later. It appears that a similar pattern is playing out right now. The trade numbers, the manufacturing numbers, the inventory numbers and even the GDP numbers are all saying that a very significant economic slowdown is happening, but stock traders haven’t gotten the memo yet. In fact, stocks had an absolutely great month in October. Of course just like in 2008, stocks will eventually catch up with reality. It is just a matter of time. The following are 18 numbers that scream that a crippling global recession has arrived…

#1 According to the biggest bank in the western world, British banking giant HSBC, the world is already in a “dollar recession“. Global GDP expressed in U.S. dollars is down 3.4 percent so far in 2015, and total global trade has fallen 8.4 percent.

#2 In September, Chinese exports were down 3.7 percent compared to one year ago, and Chinese imports were down a whopping 20.4 percent compared to a year ago.

#3 Demand for Chinese steel is down 8.9 percent compared to a year ago.

#4 China’s rail freight volume is down 10.1 percent compared to last year.

#5 In October, South Korean exports were down 15.8 percent from a year ago.

#6 According to the Dutch government index, a year ago global trade in primary commodities was sitting at a reading of 150 but now it has fallen all the way down to 114. What this means is that less commodities are being traded around the world, and that is a very clear sign that global economic activity is really slowing down.

…click on the above link to read the rest of the article…

The US-Russia gas pipeline war in Syria could destabilise Putin

October 31, 2015

The US-Russia gas pipeline war in Syria could destabilise Putin

Military solutions are not the answer to the perfect storm of climate, energy, food, economic and geopolitical crises facing Russia

For the last few years, the Saudi kingdom’s insistence on pumping oil at high capacity has dramatically depressed oil prices. The result has undermined Saudi’s major oil rivals in OPEC – like Iran and Venezuela.

It has also hit Russia, hard.

Rating agency Standard & Poor forecasts that Russia’s budget deficit is set to swell to 4.4 per cent of GDP this year. Russia’s own finance ministry concedes that if expenditures continue at this rate, within sixteen months – by around the end of next year – its oil reserve funds will be exhausted.

Meanwhile, over the last year real incomes have dropped by 9.8 per cent, and food prices have spiked by 17 per cent, heightening the risk of civil unrest.

System failure

Rumbling along beneath the surface of such financial woes are deeper systemic issues.

A report from the Swedish Defence Research Agency notes that “prolonged dry periods in southern Russia are having the effect of reducing the level of food production”.

Most of Russia’s wheat imports come from Kazakhstan, “where climate change is expected to exacerbate droughts. These impacts would make farming harder and food more expensive,” observe Dr. Marina Sharmina and Dr. Christopher Jones of the Tyndall Centre for Climate Change Research.

Russia’s looming energy crisis is the other elephant in the room. In 2013, HSBC forecasted that Russia would hit peak oil between 2018 and 2019, experiencing a brief plateau before declining by 30 per cent from 2020 to 2025.

That year, Fitch Ratings came to pretty much the same conclusion. And last year, Leonid Fedun, vice-president of Russia’s second largest oil producer, Lukoil, predicted that the production could peak earlier due to falling oil prices and US-EU sanctions.

…click on the above link to read the rest of the article…

The Numbers Say That A Major Global Recession Has Already Begun

October 14, 2015

The Numbers Say That A Major Global Recession Has Already Begun

The biggest bank in the western world has just come out and declared that the global economy is “already in a recession”. According to British banking giant HSBC, global trade is down 8.4 percent so far this year, and global GDP expressed in U.S. dollars is down 3.4 percent. So those that are waiting for the next worldwide economic recession to begin can stop waiting. It is officially here. As you will see below, money is fleeing emerging markets at a blistering pace, major global banks are stuck with huge loans that will never be repaid, and it looks like a very significant worldwide credit crunch has begun. Just a few days ago, I explained that the IMF, the UN, the BIS And Citibank were all warning that a major economic crisis could be imminent. They aren’t just making this stuff up out of thin air, but most Americans still seem to believe that everything is going to be just fine. The level of blind faith in the system that most people are demonstrating right now is absolutely astounding.

The numbers say that the global economy has not been in this bad shape since the devastating recession that shook the world in 2008 and 2009. According to HSBC, “we are already in a dollar recession”…

Global trade is also declining at an alarming pace. According to the latest data available in June the year on year change is -8.4%. To find periods of equivalent declines we only really find recessionary periods. This is an interesting point. On one metric we are already in a recession. As can be seen in Chart 3 on the following page, global GDP expressed in US dollars is already negative to the tune of USD 1,37trn or -3.4%. That is, we are already in a dollar recession.

…click on the above link to read the rest of the article…

UBS Is About To Blow The Cover On A Massive Gold-Rigging Scandal

September 28, 2015

UBS Is About To Blow The Cover On A Massive Gold-Rigging Scandal

With countless settlements documenting the rigging of every single asset class, it was only a matter of time before the regulators – some 10 years behind the curve as usual – finally cracked down on gold manipulation as well, even though as we have shown in the past, central banks in general and the Fed in particular are among the biggest gold manipulators.

That said, we are confident by now nobody will be surprised that there was manipulation going on in the gold casino. In fact, ever since Germany’s Bafin launched a probe into Deutsche Bank for gold and silver manipulation, it has been very clear that the only question is how many banks will end up paying billions to settle the rigging of the gold market (with nobody going to prison as usual, of course).

Earlier today, we learned that the Swiss competition watchdog just became the latest to enjoin the ongoing gold manipulation probe when as Reuters reported, it launched an investigation into possible collusion in the precious metals market by several major banks, it said on Monday, the latest in a string of probes into gold, silver, platinum and palladium pricing.

Here are the details that should come as a surprise to nobody:

Global precious metals trading has been under regulatory scrutiny since December 2013, when German banking regulator Bafin demanded documents from Deutsche Bank under an inquiry into suspected manipulation of gold and silver benchmarks by banks. Even though the market has moved to reform the process of deciding on its price benchmarks, accusations of manipulation have refused to go away.

Switzerland’s WEKO said its investigation, the result of a preliminary probe, was looking at whether UBS, Julius Baer, Deutsche Bank, HSBC, Barclays, Morgan Stanley and Mitsui conspired to set bid/ask spreads.

“It (WEKO) has indications that possible prohibited competitive agreements in the trading of precious metals were agreed among the banks mentioned,” WEKO said in a statement.

…click on the above link to read the rest of the article…

Is Brazil About to Drag Down Spain’s Biggest Bank?

September 13, 2015

Is Brazil About to Drag Down Spain’s Biggest Bank?

The timing could not have been worse.

In July last year, an analyst working for Banco Santander Brasil did something he shouldn’t have. He warned the firm’s private banking clients about the economic risks posed by the reelection of Brazil’s scandal-tarnished president, Dilma Rousseff. Those risks included a sharply devalued Brazilian real, rising interest rates, runaway inflation and tumbling shares.

When the analyst’s report went public, it provoked outrage from Rousseff’s party, which saw it as a direct intervention in the country’s general election. Santander’s now-deceased CEO Emilio Botin was given a choice: either he castigated the analyst and rejected his findings, or his bank’s extremely cozy ties with the government of its most profitable market could be in danger.

It was not a difficult decision. Within days the analyst was fired for “making a mistake.” Now, a year and two months later, it’s obvious that the analyst’s warnings were spot-on. Rather than firing him, Santander should have listened to him.

Instead of reducing its exposure to Brazil’s fragile economy over the last year, as HSBC has done (read: Does HSBC Know Something Others Don’t), Santander has doubled down on its bet, forking out €4.7 billion on the acquisition of the remaining 25% of its Brazilian unit.

A Slap in the Face

The timing could not have been worse. Yesterday, Brazil’s already troubled economy was given another long-expected slap in the face when Standard & Poor downgraded the country’s debt from investment-grade to junk status.

The impact was immediate. Brazil’s currency plunged from 3.78 Real to the dollar to 3.9. It’s currently hovering at 3.88. Just a year ago, when news of the government’s Petrobras scandal began hitting and the economy’s biggest threats – a weakening China, the abrupt end of the commodity super cycle, a strengthening dollar, and floundering internal demand – were beginning to surface, the currency was clocking in at 2.35 Real to the dollar.

…click on the above link to read the rest of the article…

Something Just Snapped At The Comex (Updated)

September 9, 2015

Something Just Snapped At The Comex (Updated)

Update: Earlier today, we said that we would “keep a close eye on today’s Comex update to see if JPM reverses this “adjustment” and adds at least a few more tons of deliverable gold to its vault.” Moments ago we got the daily update form the Comex and not only did JPM not reverse its registered to eligible adjustment, but more curiously, the second largest vault, that of Scotia Mocatta (behind only HSBC) saw a comparable adjustment, whereby 16,644 ounces of gold, or about half a ton, and 14% of its vault total, were adjusted away from “registered” and into the “eliglble” category.

This means that the already record low total registered holding across the Comex system, declined once again this time by 8.3% and hit a new all time low of 185,315, or less than 6 tons.

This means that what was already a record dilution factor, with over 200 ounces of paper gold claims for every ounce of deliverable gold, just soared even more, and following today’s 8% drop, there is now a unprecedented 228 ounces of paper claims for every ounce of deliverable “registered” gold.

For those who missed the full story from earlier today, please read on.

* * *

Just over one month ago, when looking at the latest changes in registered gold held at the Comex ,we were stunned not only by the collapse in this series to a record low of just over 350k ounces or barely over 10 tons, but also by the surge in “gold coverage”, or the amount of paper gold claims on physical gold, which exploded to a record high 124 per ounce.

…click on the above link to read the rest of the article…

The Seventh-Largest Economy in the World Spirals Down

August 7, 2015

The Seventh-Largest Economy in the World Spirals Down

HSBC, which knows a thing or two about the world, and about Brazil, is bailing out of Brazil.

It’s unloading its “entire business in Brazil,” it said this week, including retail banking and insurance. It will hand its long list of wealthy clients and over 21,000 employees to Bradesco, one of the largest private banks in Brazil, for $5.2 billion. Too much? Bradesco’s stock has since plunged over 9%.

Once the deal gets regulatory approval and closes, HSBC is out of Brazil. “The transaction represents a significant step in the execution of the actions announced during the Investor Update on 9 June 2015,” it said. After that update, Reuters had described HSBC’s motivations with these choice words:

For shareholders, betting on Brazil was risky as lenders grapple with tax hikes, weak credit demand, rising defaults, and the impact of what looks likely to be the country’s worst recession in over two decades.

The seventh largest economy in the world in 2014, according to the World Bank, is spiraling down, with private sector output, as Markit put it, falling at the “sharpest pace since March 2009.”

This is how Markit titled its Brazil Services PMI report on Wednesday: “Service sector activity drops at joint-fastest rate in survey history.”

The index hit 39.1 in July (50 is the dividing line between contraction and expansion), the fifth month in a row of contraction, with all sub-sectors in the survey “registering substantial falls in business activity.”

To add to the toxic mix, costs soared, with the rate of increase reaching an 81-month high, third fasted in survey history, due to “inflationary pressures, exchange rate factors, and client fee adjustment.” No green shoots in the immediate future: new orders fell for the fifth month in a row. The “deteriorating operating environment” caused the pace of job losses to accelerate “to a survey record.”

…click on the above link to read the rest of the article…

Are Big Banks Using Derivatives To Suppress Bullion Prices?

July 9, 2015

Are Big Banks Using Derivatives To Suppress Bullion Prices?

We have explained on a number of occasions how the Federal Reserves’ agents, the bullion banks (principally JPMorganChase, HSBC, and Scotia) sell uncovered shorts (“naked shorts”) on the Comex (gold futures market) in order to drive down an otherwise rising price of gold. By dumping so many uncovered short contracts into the futures market, an artificial increase in “paper gold” is created, and this increase in supply drives down the price.

This manipulation works because the hedge funds, the main purchasers of the short contracts, do not intend to take delivery of the gold represented by the contracts, settling instead in cash. This means that the banks who sold the uncovered contracts are never at risk from their inability to cover contracts in gold. At any given time, the amount of gold represented by the paper gold contracts (“open interest’) can exceed the actual amount of physical gold available for delivery, a situation that does not occur in other futures markets.

In other words, the gold and silver futures markets are not a place where people buy and sell gold and silver. These markets are places where people speculate on price direction and where hedge funds use gold futures to hedge other bets according to the various mathematical formulas that they use. The fact that bullion prices are determined in this paper, speculative market, and not in real physical markets where people sell and acquire physical bullion, is the reason the bullion banks can drive down the price of gold and silver even though the demand for the physical metal is rising.

…click on the above link to read the rest of the article…

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