Bankocracy

European Central Bank sued by 200 investors over Greek debt deal

"In a case which could pave the way for a raft of legal action from the private sector, a group of Italian retail investors are claiming damages in excess of €12m from the ECB for an alleged violation of its 'equal' creditor status during the biggest private sector debt restructuring in history in 2012. During the episode, the ECB was able to 'swap' its holdings of Greek government debt for protected bonds with no repayment date. The move ensured the ECB did not suffer losses from the deal to stave off a Greek bankruptcy in March 2012. Private sector creditors, however, were forced into accepting a 53.5pc 'haircut' on their holdings." Continue reading →

Continue ReadingEuropean Central Bank sued by 200 investors over Greek debt deal

In Copenhagen, Apartment Prices Jump 60% After Rates Go Negative

"Denmark’s biggest mortgage bank says there’s a 'real risk' Copenhagen is heading into a property bubble. Property prices in Copenhagen have risen 40-60 percent since the middle of 2012, when the central bank first resorted to negative interest rates to defend the krone’s peg to the euro. The benchmark deposit rate has been minus 0.75 percent since February as Denmark’s currency war intensified, and most analysts surveyed by Bloomberg see negative rates lasting at least through 2017. The Danish regulator this month warned Danske Bank against pursuing a growth strategy in Sweden as the housing market there shows signs of imbalances." Continue reading →

Continue ReadingIn Copenhagen, Apartment Prices Jump 60% After Rates Go Negative

Fed ends ‘too big to fail’ lending to collapsing banks, with caveats

"The Fed's new restrictions come from the Dodd-Frank Act of 2010, which brought in a wave of reforms after the financial crisis. Under the new rule, banks that are going bankrupt -- or appear to be going bankrupt -- can no longer receive emergency funds from the Fed under any circumstances. However, it's important to note that the new rule allows the Fed to judge by its own measures whether a firm qualifies for its emergency aid. The idea is the Fed can still lend to banks during times of emergency, but the bank must be able to pay it back. Yet the true health of a bank in turmoil can be very difficult to assess." Continue reading →

Continue ReadingFed ends ‘too big to fail’ lending to collapsing banks, with caveats

Pressure on China central bank for 15% yuan depreciation: sources

"China's central bank is under increasing pressure from policy advisers to let the yuan currency fall quickly and sharply, by as much as 10-15 percent, as its recent gradual softening is thought to be doing more harm than good. The PBOC has spent billions of dollars buying yuan over recent months to defend the exchange rate, but has failed to stabilize market sentiment. The currency has steadily lost another 2.6 percent against the U.S. dollar even after the bank sprung a surprise devaluation of nearly 2 percent in August. China's foreign exchange reserves fell by more than half a trillion dollars last year as the central bank bought yuan to support the exchange rate." Continue reading →

Continue ReadingPressure on China central bank for 15% yuan depreciation: sources

Shanghai Fund Manager Dumps All Holdings in ‘Insane’ Market

"'This is insane,' Chen Gang, chief investment officer at Shanghai Heqi Tongyi Asset Management Co., said in an interview on Thursday. 'We were forced to liquidate all our holdings this morning,' said Chen, whose firm manages about 300 million yuan ($45.5 million). Many private funds and hedge funds in China have agreements with investors spelling out mandatory liquidation levels if their holdings drop below a certain value. The CSRC capped the size of stakes that major investors are allowed to sell at 1 percent of a company’s shares for three months effective Jan. 9, the regulator said in a statement on Thursday. The restriction replaces an existing six-month ban that is due to expire Friday." Continue reading →

Continue ReadingShanghai Fund Manager Dumps All Holdings in ‘Insane’ Market

Households lost from quantitative easing; gov’ts, big business won [2013]

"The big winners, to the tune of $1.6 trillion by the end of 2012, were the governments of the US, the UK and eurozone, from the reduced costs of servicing their debts and from the increased profits made by the their respective central banks (who magically create money to buy government debts which pay them interest). McKinsey believes that households have been significant losers from cheap money. How much have they lost? Well McKinsey says that from 2007 to 2012, the cumulative net loss of interest income for American households was $360bn, compared with a cumulative net loss of $160bn for eurozone citizens and $110bn (£70bn) for British people." Continue reading →

Continue ReadingHouseholds lost from quantitative easing; gov’ts, big business won [2013]

Societé General Strategist: Yellen’s Dithering Fed Is Destined for Infamy

"The Federal Reserve’s failure to recognize its role in driving the third dangerous asset bubble in 15 years will destroy the central bank’s reputation for good, said Albert Edwards, global strategist at Societe Generale. Edwards said it’s too late to avoid another massive collapse in asset prices. 'This time the Fed’s largesse has fueled another corporate debt explosion,' he said. 'The real rate of corporate borrowing is even greater than was seen during the late 1990s tech bubble. This is 100 percent attributable to the Fed’s excessively loose monetary policy.'" Continue reading →

Continue ReadingSocieté General Strategist: Yellen’s Dithering Fed Is Destined for Infamy

‘Big Short’ Genius Thinks Another Financial Crisis Is Looming

"Well, we are right back at it: trying to stimulate growth through easy money. It hasn’t worked, but it’s the only tool the Fed’s got. Meanwhile, the Fed’s policies widen the wealth gap, which feeds political extremism, forcing gridlock in Washington. It seems the world is headed toward negative real interest rates on a global scale. This is toxic. Interest rates are used to price risk, and so in the current environment, the risk-pricing mechanism is broken. That is not healthy for an economy. We are building up terrific stresses in the system, and any fault lines there will certainly harm the outlook." Continue reading →

Continue Reading‘Big Short’ Genius Thinks Another Financial Crisis Is Looming

China halts stock market again after CSI 300 plunges more than 7%

"China's stocks were suspended from all trade on Thursday after theCSI300 tumbled more than 7 percent in early trade, triggering the market's circuit breaker for a second time this week. That drop-kicked stock markets across Asia, which were already wallowing after a weaker open amid concerns over China's swooning currency and economic slowdown as well as falling oil prices. China's securities regulator also issued new rules to restrict the percentage of shares major shareholders in listed companies can sell every three months, in an attempt to stabilize markets. Shareholders are not allowed to sell more than 1 percent of a company's share in that period." Continue reading →

Continue ReadingChina halts stock market again after CSI 300 plunges more than 7%

Is ‘Peak Auto’ the Latest Threat to the Markets?

"More than 19% of today’s loans are going to subprime or 'deep subprime' borrowers — and total volume for lower credit score borrowers is just shy of its 2005 record. Indeed, lenders are basically giving loans to anyone with a pulse. The New York Fed recently found that application rejection rates have dropped to 3.3% from more than 10% a few years ago. The average loan now stretches out to a record 67 months, while 27% of U.S. loans sport terms of six to seven years. That’s because buyers can’t afford their monthly payments any other way. Bottom line: If you own auto stocks or stocks leveraged to the auto industry, sell them." Continue reading →

Continue ReadingIs ‘Peak Auto’ the Latest Threat to the Markets?