What Could Possibly Go Wrong

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

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

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?

HK property developers push HK$1.3 billion in home loans to buyers

"Facing fierce competition amid a tightening of mortgage policies, a growing number of developers have been skirting bank regulations by providing home loans of up to 95 per cent of the purchase price through wholly owned financial institutions to lure buyers. They began offering mortgage loans after the maximum loan-to-value (LTV) ratio for bank mortgages for self-use residential properties with a value below HK$7 million was lowered from 70 per cent to 60 per cent in February last year. That meant home buyers needed to make a 40 per cent initial down payment, up from 30 per cent, when purchasing an apartment." Continue reading →

Continue ReadingHK property developers push HK$1.3 billion in home loans to buyers

Chinese state begins buying stocks after Monday’s rout

"China's stocks rose in volatile trade as state-backed funds were said to intervene after a plunge on Monday wiped out $590 billion of market value. Trading was halted on Monday after the gauge plunged 7 percent, triggering new market circuit breakers that some analysts said exacerbated the sell-off. State-controlled funds bought equities and the securities regulator signaled a selling ban on major investors will remain beyond this week's expiration date, according to people familiar with the matter. The China Securities Regulatory Commission also suggested it's open to tweaking the circuit breakers, while the central bank conducted the biggest reverse-repurchase operations since September." Continue reading →

Continue ReadingChinese state begins buying stocks after Monday’s rout

Puerto Rico Defaults On Bonds: Return Does Not Come Without Risk

"Many American investors bought Puerto Rican bonds over the past five years as we all searched desperately for yield in the face of the Federal Reserve pushing interest rates down to historic lows. Normally, investors understand that higher yields come with greater risks. However, during the past six years of extraordinary interventions by the Fed into all sorts of financial markets, many investors may have decided that those higher yield investments weren’t really all that risky. Puerto Rico’s problems may serve as a much-needed wake up call to investors. As rates rise, capital will move back toward safety and the risk premium demanded of higher risk projects is likely to increase." Continue reading →

Continue ReadingPuerto Rico Defaults On Bonds: Return Does Not Come Without Risk