Backdoc: SO AS WE SEE AT THIS LATE HOUR, THE WORLD HAS NOT YET FOUND ITS NEW GLOBAL REALITY YET!
IT APPEARS THERE WILL BE MORE PAIN FOR THE THIRD ROUT ON THIS GLOBAL ECONOMY!
WITH PRESSURE ON COMPANIES TO DOWNSIZE DUE TO REDUCED DEMAND, LAYOFFS ARE STARTING TO HAPPEN!
COMMODITIES APPEAR TO HAVE MORE DOWNSIDE FROM HERE! AS PEOPLE LOOK FOR PROFITS IN A DEFLATIONARY ENVIRONMENT THEY ARE TURNING TO HIGH RISK HIGH YEILD BOND FUNDS TO MAKE A PROFIT!
I’M AFRAID WE WILL SEE THIS BE A DISASTER AS THE IMF WARNS!
I THINK WE ARE ENTERING A WINDOW OF TIME WHEN THE MARKET CHALLENGES COULD BRING SEVERE PAIN TO MOST FOLKS OUT THERE.
THIS COULD BE A MEDIA FRENZY IF AND WHEN THE APPLE CART GETS TURNED OVER.
THIS WOULD BE A WONDERFUL TIME TO ACTIVATE THE NEW IRAQI DINAR ALONG WITH SEVERAL OTHER EM CURRENCIES! DOC
Thunderhawk: Backdoc Alert
I.M.F. Cautions on Concentrated Positions in U.S. Mutual Funds
The International Monetary Fund warned on Tuesday of the large positions that mutual funds in the United States have built in high-yielding bonds issued by risky companies in America and in emerging markets around the world.
The warning comes at a time of increased nervousness about China and other emerging markets like Brazil. And it highlights a growing concern on the part of regulators and economists that mutual funds, in their hunger to load up on high-risk, high-yield securities in an environment of low interest rates, will be hard pressed to sell them during a market reversal.
Thunderhawk: Citi: The Most Important People in Finance Are Concerned About These Four Things
This is what policymakers and investors talked about in Lima.
There was plenty for global policy makers to discuss at the most recent International Monetary Fund-World Bank Meetings in Lima.
From lackluster corporate investment to a Federal Reserve inching toward its first interest rate hike in nearly a decade, central bankers and international finance chiefs could take their pick of topics to digest. Citigroup Chief Economist Willem Buiter was one of the attendees, and he has published a note outlining the four main topics of discussion among policy makers and hist clients. Here they are.
1. China’s economy. The consensus among people Buiter spoke with was for stabilization in China in the near term, with little risk of a drastic turn for the worse before the end of the year. Observers were a little less optimistic when looking farther out.
The perception that policy has been somewhat ineffective and hard to comprehend in some recent episodes has meant that some of our counterparts saw increasing risks that China would at some point in coming years suffer a sharper slowdown as it confronts its many policy challenges.
2. Risk of an emerging-market crisis. Slowing growth in emerging markets has been a big theme lately, and it was no different at the meetings in Lima. The vast majority of people Buiter talked with believed that these countries are looking at a growth crisis, not a financial crisis.
Most agreed that structural reforms are needed in a large number of EM countries to allow them to return [to] anything like the growth rates of previous years. But with the exception of a few countries (most notably India), there was little expectation that meaningful growth-enhancing structural reforms were on the cards in EMs.
3. Effects of an EM crisis on developed markets. Because growth in emerging markets has been a driver of world gross domestic product since the financial crisis, many have expressed concern about the broad impact of slowing growth in EMs. There seemed to be a good sense of optimism at the meetings.
There was an uneasy, but fairly general, sense that developed markets would only be moderately affected by the EM slowdown and that, with the partial exception of the major DM-commodity producers (Australia, Canada, New Zealand, Norway), they would be ‘OK’.
4. Exchange rates and capital flows. As China devalued its currency and talk of so-called currency wars has emerged, exchange rates were bound to come up. Most of the people Buiter talked with were “comfortable” with the moves we have seen so far, though there was concern over capital flows:
There was less concern about the potential negative effects of exchange rate volatility than we would have expected. Somewhat in contrast, there was also a fairly widely shared sense that international capital flows were a source of vulnerability for the world economy and some individual countries. Many participants thought that China would be well advised to prioritize the correction of major domestic imbalances before attempting further capital account liberalization.
And what, you might ask, did Buiter himself think of the discussions?
“Most assessments of the prospect of the world economy were more optimistic than our own expectations,” the economist deadpanned.
Backdoc: WITH ONE EYE ON THE IRANIAN RIAL AND THE OTHER ON THE IRAQI DINAR WE SEE A LITTLE MORE CONFIRMATION THAT THE DEAL IS ALIVE AND WELL!
NO WONDER OPEC COUNTRIES WERE OVERSTATING DEMAND NUMBERS ON BLACK GOLD!
WITH MORE FACTUAL DATA WE CLEARLY SEE NOW THAT A ROUGH ROAD MAY LIE AHEAD IN FINDING THE BOTTOM EVEN THOUGH AGREEMENTS ARE IN PLACE.
IT MAY TAKE A FEW MONTHS TO STABILIZE AN AGREED PRICE ON THE UNIVERSAL CURRENCY!
POLITICAL AGREEMENTS PUT INTO ACTION WILL EVENTUALLY FIND A STABLE VALUE THAT WORKS FOR THE WORLD!
WITH NO NEWS FROM THE U.S. SENATE WE HAVE TO ASSUME THE PROCESS OF SANCTION RELEASE FOR IRAN IS STARTING TO TAKE SHAPE. DOC IMO
Thunderhawk: Thunderhawk: Backdoc Alert
Iran parliament approves nuclear deal bill in victory for Rouhani
Iran’s conservative-dominated parliament passed a bill on Tuesday approving its nuclear deal with world powers, signaling victory for the government over hardline opponents who worry the accord opens a door to wider rapprochement with the West.
Many conservative lawmakers opposed the Joint Comprehensive Plan of Action (JCPOA) that President Hassan Rouhani’s government agreed with the six powers on July 14, and the vote — which followed a bad-tempered, rowdy debate on Sunday — lifts a significant hurdle to putting the deal into effect.
With strong parliamentary backing, the bill is likely to be ratified by a clerical body called the Guardian Council.
The exact stance of Supreme Leader Ayatollah Ali Khamenei, who has the last word on all matters of state, is not known. To date, he has neither approved nor rejected the agreement, but has commended the work of Rouhani’s negotiating team.
Backdoc: YOU HAVE TO WONDER WHY A MAJOR BACKBONE COMPANY LIKE GE IS BACKING AWAY FROM THE CREDIT MARKET?
WE SEE A VERY HEALTHY BANK, WELLS FARGO IS BUYING THE DIVESTITURE. WHY?
WELL, I’M SURE THERE ARE MANY GOOD REASONS AS THEY DESCRIBE BUT I ALSO BELIEVE GE WANTS TO REDUCE ITS EXPOSURE TO THE CREDIT MARKETS AT A TIME WHEN THEY ARE BECOMING RISKIER BY THE DAY! DOC IMO
Thunderhawk: Backdoc Alert
Wells Fargo to Buy $32 Billion GE Assets, Add 3,000 Workers
Wells Fargo & Co. agreed to buy $32 billion in assets from General Electric Co. and take on about 3,000 employees as the industrial giant retreats from financial services.
The sale includes commercial-distribution and vendor-finance units, and a portion of the corporate-finance business, from GE Capital, San Francisco-based Wells Fargo said Tuesday in a statement that didn’t include additional terms. The transaction is expected to be completed in the first quarter of 2016 and would allow the finance unit to return about $4.2 billion of capital to its parent, GE said in a separate statement.
Wells Fargo has been one of the biggest buyers of GE assets. In September, the lender agreed to purchase the bulk of a railcar- and locomotive-leasing unit from the company, and earlier this year, Wells Fargo said it would acquire GE real estate assets.
“This acquisition is an outstanding opportunity for Wells Fargo to deepen relationships and strengthen our presence in key commercial lending markets,” Tim Sloan, head of the wholesale banking division, said in the statement.
About 90 percent of the loan and lease portfolios are based in the U.S. or Canada, Wells Fargo said.
GE said the agreement marks its largest divestiture since it announced a plan in April to unload about $200 billion in financial assets. Chief Executive Officer Jeffrey Immelt is exiting most of the lending operations while expanding units making products such as jet engines and oilfield equipment.
GE has now sold most of its U.S. financial operations, including deals for an $8.7 billion transportation-finance division, an $8.5 billion health-care lender and an online bank with $16 billion of deposits. The one significant piece still to be sold is the franchise-finance unit, which has about $5.5 billion of assets, Keith Sherin, CEO of GE Capital, said in the statement.
“Since our April 10 announcement, we’ve signed more than $126 billion in transactions, which is over 60 percent of our overall plan,” Sherin said. GE will be mostly done with the financial overhaul by the end of next year, he said.
Goldman Sachs Group Inc. and Credit Suisse Group AG were the bankers for GE, which got legal advice from Weil Gotshal & Manges LLP. Wells Fargo Securities served as financial adviser for the acquirer and Mayer Brown offered legal advice.
GE $126 Billion Asset Sales Set Up Too-Big-to-Fail Exit
General Electric Co.’s sweeping plan to divest its U.S. finance operations neared completion Tuesday, putting the industrial giant on the verge of ending its status as a too-big-to-fail lender.
GE intends to apply in the first quarter to drop its federal designation as a systemically important financial institution, said Keith Sherin, chief executive officer of the GE Capital unit. A deal Tuesday with Wells Fargo & Co. to sell $32 billion in assets brings the agreed-upon disposals to $126 billion and leaves just one sizable U.S. division left to unload.
Backdoc: WITH ALL THE EXTERNAL FORCES HITTING THE EURO, AND MARKETS AROUND THE WORLD, IT SEEMS WE ARE RIPE FOR SOME TYPE OF GLOBAL CRISIS THAT WILL LIKELY HAPPEN VERY SOON!
I REALLY THINK THIS COULD BE THE WINDOW WHERE A CRASH, FOLLOWED BY AN EMERGING COUNTRY CURRENCIES RESCUE FOR THE WORLD!
WITH LAWS COMING TO CONCLUSION IN IRAQ AND IMPLEMENTATION IS ABOUT BEGIN, WE SHOULD BE VERY HOPEFUL! VERY INTERESTING TO SEE IRAQ’S BUDGET FINALLY COMING UP FOR AIR! SOON THAT NEW FRESH AIR SHOULD BE BLOWN AROUND THE WORLD.
CREDIT DEFAULTS ARE LOOMING AS THE CURRENT SITUATION WORSENS!
LET’S HOPE THEY DON’T LET A GOOD CRISIS GO TO WASTE! HEE HEE DOC IMO
Thunderhawk: Backdoc Alert
Is EM turmoil the third wave of the financial crisis? Goldman thinks so
Emerging markets aren’t just suffering through another market rout—it’s a third wave of the global financial crisis, Goldman Sachs said.
“Increased uncertainty about the fallout from weaker emerging market economies, lower commodity prices and potentially higher U.S. interest rates are raising fresh concerns about the sustainability of asset price rises, marking a new wave in the Global Financial Crisis,” Goldman said in a note dated last week.
The emerging market wave, coinciding with the collapse in commodity prices, follows the U.S. stage, which marked the fallout from the housing crash, and the European stage, when the U.S. crisis spread to the continent’s sovereign debt, the bank said.
Concerns that the U.S. Federal Reserve would raise interest rates for the first time in nine years spurred a massive outflow of funds from emerging markets, including Asia’s, recently. But the Fed meeting on September 16-17 surprised markets by leaving rates unchanged and many analysts moved their forecasts for the next hike back into next year.
That’s helped to stabilize hard-hit markets and currencies, but some analysts expect that’s just a temporary reprieve.
One of the reasons Goldman is concerned about emerging markets is that lower interest rates globally have fueled credit growth and a debt buildup, especially in China, and that’s likely to impede future economic growth.
Goldman noted that downgrades for emerging market economic and earnings outlooks have spurred fears of a “secular stagnation” of permanently low interest rates and fading equity returns. But it added that those fears are overdone.
“Much of the weakness in emerging markets and China is likely to reflect rebalancing of economic growth, rather than structural impairment,” it said. “While the adjustment is likely to take time (as it did in the U.S. and European Waves), it should lead to an unwinding of economic imbalances in time, providing the platform for ‘normalization’ in economic activity, profits and interest rates.”
But when it comes to equity returns, Goldman doesn’t necessarily expect emerging markets will regain all their lost luster.
“The fundamental shift in relative performance away from emerging-market to developed-market equity markets, and from producers (and capex beneficiaries) to consumers is likely to continue,” it said.
Some aren’t as certain that there will be an economic recovery in emerging markets.
The segment’s trend growth rate has been declining, exacerbated by a lack of structural reforms over the past 10 years, Deutsche Asset and Wealth Management said in its October outlook note.
“The ultra-expansionary monetary policy of the developed economies prompted many investors to invest in emerging markets in part because they offered an interest-rate advantage,” Deutsche said. “In reality, however, this favorable financing environment simply helped emerging markets to veil their growing economic weakness.”
But with the easy-money environment spurring over-investment, emerging market companies face not just higher debt, but also potentially burdensome interest payments amid slim economic growth, Deutsche Asset said.
“The risk of credit defaults and bankruptcy is likely to rise,” it said. “The combination of high investment rates, rising debt and declining growth has made emerging markets much more vulnerable than before.”
Backdoc: THIS NEWS COULD BE A TRIGGER TO PULL THE MARKETS LOWER AND PUT A BOND MARKET IN CRISIS.
WE LOOK FOR PROBLEMS IN LIQUIDITY. WILL THE BOND MARKETS SIEZE UP? DOC IMO
Thunderhawk: Backdoc Alert
China Imports Drop for 11th Month as Export Slump Moderates
China’s imports extended the longest losing streak in six years, underscoring the headwinds to global growth from a re-balancing in the world’s second-largest economy.
Imports plunged 17.7 percent in yuan terms in September from a year earlier, widening from a 14.3 percent decrease in August and posting an 11th straight decline. Exports fell 1.1 percent in September in yuan terms, the customs administration said Tuesday, compared with a 6.1 percent drop in August. The trade surplus was 376.2 billion yuan ($59.4 billion).
“We anticipate further headwinds in the coming months,” said Tao Dong, chief regional economist for Asia excluding Japan at Credit Suisse Group AG in Hong Kong. “Our model suggests that global industrial production will lose further momentum. Not only China but emerging market countries are also struggling with domestic demand.”
A slowdown in emerging markets driven by weak commodity prices forced the International Monetary Fund this month to cut its outlook for global growth this year to 3.1 percent from a July forecast of 3.3 percent. Next year, the world economy will expand 3.6 percent, less than the 3.8 percent projected in July.
The fund left its outlook for China’s growth this year at 6.8 percent and 6.3 percent for next year. Still, the IMF said the “cross-border repercussions” of slowing Chinese growth “appear greater than previously envisaged.”
Backdoc: THE FEDS CONCERN WITH CHINA SEEMS TO BE VALIDATED BY THE PLUNGING PPI NUMBERS AS WELL AS VERY WEAK CPI NUMBERS!
HAVING ZERO INTEREST RATE POLICIES ARE CAUSING DISTORTIONS IN THE MARKETS WILL POTENTIALLY LEAD TO ACCIDENT.
MY GREATEST CONCERN LIES IN THE BOND MARKETS! DOC IMO
Thunderhawk: Backdoc Alert
China’s Lingering Deflation Risks Offer Room For More Easing
China’s consumer inflation moderated and factory gate deflation extended a record stretch of declines, signaling the People’s Bank of China still has room to ease monetary policy further to support a slowing economy.
The consumer-price index increased 1.6 percent in September from a year earlier, slowing from a 2 percent rise in August and compared with a 1.8 percent median estimate in a Bloomberg survey. The producer-price index fell 5.9 percent, extending its streak of negative readings to 43 months, the National Bureau of Statistics said Wednesday.
Backdoc: THE BIGGEST CONCERN HERE IS LIQUIDITY!
FOR EVERY BUYER THERE NEEDS TO BE A SELLER. WITH TOO MANY PEOPLE IN BONDS ALONE THE MARKET IS LIKE OVERLOADING A LIFE BOAT.
THERE ARE TOO MANY AND WHEN SEVERAL WANT OUT AT THE SAME TIME, THERE MIGHT NOT BE ENOUGH LIQUIDITY TO KEEP THE BONDS IN PLAY.
Thunderhawk: Backdoc Alert Black swan risk rises to highest level ever
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Investors fear a “black swan” catastrophic event in the financial markets right now more than ever before.
At least according to the CBOE Skew Index, which measures the prices of far out-of-the-money options on the S&P 500. Its goal is to determine the benchmark’s tail risk or the “risk of outlier returns two or more standard deviations below the mean,” according to the CBOE website.
Put simply, traders are buying options that pay off only if the stock market drops a whole lot.
Backdoc: TONIGHT WE GOT SURPRISING NEWS WITH CHINAS’ ECONOMY WHICH IS A POSSIBLE TRIGGER AS YOU CAN READ IN THIS QUOTE FROM THIS ARTICLE!
We believe we would need to have a systemic shock in order to trigger a liquidity problem in credit such as a further fall in oil, another sharp dollar rally or another negative growth surprise from emerging markets, hence this scenario is a tail risk, but one that in our opinion cannot be ignored.”
Thunderhawk: Backdoc Alert UBS: This is How Troubles in the Bond Market Could Impact Stocks
When would-be bond selling becomes actual stock-selling.
Sell what you can, not what you want, goes the old markets adage.
Analysts at UBS appear to have taken that strategy to heart with a new note detailing the stocks that could come under pressure in the event of a big squeeze in junk-rated bonds issued by companies with weaker balance sheets. The idea here is that the hybrid mutual funds carrying big portfolios of both debt and equities could be hard hit in the event of a long-awaited liquidity crunch that sparks turmoil in the corporate bond market.
In that scenario, such funds might find themselves having to meet redemption requests by selling more liquid assets from their portfolios, such as stocks and U.S. Treasuries, as opposed to harder-to-trade corporate bonds.
Backdoc: AS ASIA BEGINS ANOTHER ROUND OF STIMULUS IT SEEMS THAT CHINA WILL BE SURE TO FOLLOW!
GETTING THROUGH OCTOBER IS USUALLY THE MOST CHALLENGING MONTH! DOC IMO
Thunderhawk: Backdoc Alert
Singapore Set to Ease as Currency Faces Rerun of ’97 Asia Crisis
Singapore’s central bank is poised to ease monetary policy for the second time in 2015 in an effort to revive dwindling growth, economists predict.
The Monetary Authority of Singapore, which manages the economy through guiding the currency rather than setting interest rates, will boost stimulus when it meets Wednesday, according to 16 of 25 economists surveyed by Bloomberg. The remainder predict no move. The MAS eased policy at an unscheduled meeting in January, saying it would seek to slow the pace of the local dollar’s gains versus its trading partners. At the first of this year’s two scheduled meetings in April, it refrained from further action.
Singapore’s economic performance has worsened since the April gathering. Analysts forecast the nation entered a technical recession in the third quarter, while consumer prices dropped for a 10th month in August, the longest streak of declines since the Asian financial crisis. Analysts predict the currency is on course for its worst year since 1997.