Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-58976 Thu, 11 Feb 2016 16:39:44 GMT How Low Can Central Banks Go? JPMorgan Reckons Way, Way Lower http://implode-explode.com/viewnews/2016-02-11_HowLowCanCentralBanksGoJPMorganReckonsWayWayLower.html ... in this brave new world, how much lower can rates now go? According to an analysis published late on Tuesday by economists at JPMorgan Chase & Co., way, way lower. Having studied the lack of fallout in Switzerland, where the benchmark rate is minus 0.75 percent, Malcolm Barr, David Mackie and Bruce Kasman reckon the trick lies in a tiered system as already deployed by the Bank of Japan and in some places of Europe, whereby only a portion of reserves are subjected to negative rates.

On that basis, they estimate if the ECB just focused on reserves equivalent to 2 percent of gross domestic product it could slice the rate it charges on bank deposits to minus 4.5 percent. That compares with minus 0.3 percent today and the minus 0.7 percent JPMorgan says it could reach by the middle of this year.

The Bank of Japan's lower bound on a similar basis may be minus 3.45 percent, while Sweden's is likely minus 3.27 percent, the economists said. Should they also go negative, the Fed could cut to minus 1.3 percent and the Bank of England to minus 2.69 percent in JPMorgan's view, reflecting how the ratio of reserves to assets is higher in their economies than elsewhere.

Concentrating on 25 percent of reserves would allow the ECB to cut to minus 4.64 percent and the Fed to minus 0.78 percent. Making no change to the current regime would allow Draghi to lop to minus 1.36 percent, they said.

Easing the fall is that the JPMorgan economists bet that banks are unlikely to be able to pass on the cost of the policy to borrowers, reducing potential repercussions. They also see limited pressure on bank profits or for a need to stash cash.

So basically as long as it is a silly stage show, negative interest rates can "work". But see Fed's Janet Yellen: Not sure we can do negative rate; rate cut unlikely.

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iehi-feed-58975 Thu, 11 Feb 2016 16:32:57 GMT European banks face prolonged energy exposure http://implode-explode.com/viewnews/2016-02-11_Europeanbanksfaceprolongedenergyexposure.html iehi-feed-58974 Thu, 11 Feb 2016 16:31:28 GMT It Was Never About Oil | Alhambra Investment Partners http://implode-explode.com/viewnews/2016-02-11_ItWasNeverAboutOilAlhambraInvestmentPartners.html iehi-feed-58973 Thu, 11 Feb 2016 16:30:29 GMT Notes from the Locked Ward | KUNSTLER http://implode-explode.com/viewnews/2016-02-11_NotesfromtheLockedWardKUNSTLER.html iehi-feed-58972 Thu, 11 Feb 2016 16:25:40 GMT Some Hedge Funds Want to Make Subprime Auto Loans Next Big Short (But Banks Won't Touch The Trade) http://implode-explode.com/viewnews/2016-02-11_SomeHedgeFundsWanttoMakeSubprimeAutoLoansNextBigShortButBanksWon.html iehi-feed-58970 Thu, 11 Feb 2016 14:50:52 GMT Fresh Wave of Selling Slams Global Markets http://implode-explode.com/viewnews/2016-02-11_FreshWaveofSellingSlamsGlobalMarkets.html iehi-feed-58969 Thu, 11 Feb 2016 14:42:13 GMT Gold Roars to One-Year High as Turmoil Drives Safe Haven Demand http://implode-explode.com/viewnews/2016-02-11_GoldRoarstoOneYearHighasTurmoilDrivesSafeHavenDemand.html Dollar, global stocks trampled in stampede to safety and Gold surges to one-year high on fears of financial uncertainty .]]> iehi-feed-58968 Thu, 11 Feb 2016 03:44:07 GMT Gold's Outperformance: This Time, It May Really Be Different http://implode-explode.com/viewnews/2016-02-10_GoldsOutperformanceThisTimeItMayReallyBeDifferent.html iehi-feed-58967 Thu, 11 Feb 2016 00:55:02 GMT Congress Hammers Yellen on Paying Subsidy To Banks http://implode-explode.com/viewnews/2016-02-10_CongressHammersYellenonPayingSubsidyToBanks.html iehi-feed-58966 Wed, 10 Feb 2016 22:57:01 GMT Deutsche Bank "Technically Insolvent"; Bond-buyback Scheme "Legalized Fraud" http://implode-explode.com/viewnews/2016-02-10_DeutscheBankTechnicallyInsolventBondbuybackSchemeLegalizedFraud.html I would conservatively estimate that the 1.53 trillion euros of financial assets + for sale assets + loans + other assets should be written down by at least 20%.   That would imply that, conservatively, DB could write-down its assets 306 billion euros and likely still be overstating the value of its total asset base.  A write-down of that magnitude would imply that DB has negative net worth of 238 billion euros.

...

It's fine with me if DB management wants to puff up its image by taking a few billion of liquidity that it technically does not have and buy back some of its debt... However this is highly misleading because the only "gains" generated are a non-cash generating accounting "gain" that is now permitted. It was an accounting change that was passed after the 2008/2009 collapse which gave banks the ability to fabricate net income for the purposes of padding their retained earnings and therefore their book value. It's nothing more than legalized fraudulent accounting... anyone who is not selling their stock into this rally is a complete moron.

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iehi-feed-58964 Wed, 10 Feb 2016 17:54:34 GMT Yellen: Fed not likely to reverse course on rates despite risks http://implode-explode.com/viewnews/2016-02-10_YellenFednotlikelytoreversecourseonratesdespiterisks.html iehi-feed-58963 Wed, 10 Feb 2016 16:07:23 GMT Europe's 'doom-loop' returns as credit markets seize up http://implode-explode.com/viewnews/2016-02-10_Europesdoomloopreturnsascreditmarketsseizeup.html ``Marc Ostwald, a credit expert at ADM, said the ominous new development is that bank stress has suddenly begun to drive up yields in the former crisis states of southern Europe.

"The doom-loop is rearing its ugly head again," he said, referring to the vicious cycle in 2011 and 2012 when eurozone banks and states engulfed in each other in a destructive vortex.''

...

[The ECB] cannot usefully cut interest rates any deeper into negative territory since the current level of -0.3pc is already burning up the "net interest margin' of lenders and eroding bank profits. "How much further can the ECB go before it becomes outright harmful?" he asked.

...

Mr Guglielmi said the mood is starting to feel like the panic in the summer of 2012, just before Mario Draghi vowed to do "whatever it takes" to save the euro -- a shift made possible when Berlin lifted its veto on emergency action to backstop Italian and Spanish bonds.

...

Mr Draghi is running out of tricks for an encore but there is still scope for "QE2" at the next ECB meeting in March, if he can secure German acquiescence.

...

"We all know that QE2 is not really going to work but the feeling in the market is ‘I'm a smoker, I know it kills me, but so long as I can get cigarettes, I'm happy,'" he said.

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iehi-feed-58962 Wed, 10 Feb 2016 16:01:36 GMT Europe Banks May Face $27 Billion Energy-Loan Losses (+EURO-BANKS CRUMBLING NEWS ROUND-UP) http://implode-explode.com/viewnews/2016-02-10_EuropeBanksMayFace27BillionEnergyLoanLossesEUROBANKSCRUMBLINGNEW.html ``European banks face potential loan losses from energy firms of $27 billion, or about 6 percent of their pretax profit over three years, according to analysts at Bank of America Corp.''

There's too many articles on this topic to post separately; see below:

Here's a choice quote from the Coppola article:

So what will happen next? There are already rumors that Deutsche Bank will need a bail-in, which is no doubt why stock and subordinated debt prices have collapsed and CDS prices have soared. Bail-out is an alternative, given Deutsche Bank's systemic importance, though it would probably break EU state aid rules. But if the alternative were meltdown in the financial system due to the threat of bail-in for other systemically-important banks, those rules would no doubt quickly be ditched. Deutsche Bank is by no means the only European bank on a knife edge, and the Bank of Portugal's recent decision to use the BRRD to justify wiping some senior creditors in a solvent bank has fatally undermined the BRRD. The threat of invoking BRRD now would be likely to spark wholesale bank runs all over Europe.
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iehi-feed-58961 Wed, 10 Feb 2016 15:52:46 GMT Five reasons behind US bank stocks sell-off http://implode-explode.com/viewnews/2016-02-10_FivereasonsbehindUSbankstocksselloff.html Two of the biggest losers, Bank of America and Morgan Stanley, are down 27 per cent and 28 per cent respectively. Citigroup, also down 27 per cent, is now trading at just 6.5 times earnings, not far off its post-crisis trough of 5.9 times, reached during the depths of the European debt crisis five years ago.

...

Analysts offer a lot of different reasons for the big sell-off, but on this they agree. "Lift-off" in December was supposed to usher in an era of higher interest rates -- which are always good news for the banks. In previous rate-raising cycles, assets have always re-priced faster than liabilities, earning banks a bigger spread between the yields on their loans and the cost of their funds.

...

Worsening credit quality: In itself, a lower oil price will not do much direct damage to the big banks' balance sheets, say analysts. Total energy exposures amount to less than 3 per cent of gross loans at the big banks, which have mostly investment-grade assets, and which have already pumped up reserves. Perhaps more worrying are the second-round effects: if weakness in oil-dependent communities begins to spill into commercial real estate loan books, say, or if consumers find they cannot afford repayments on loans for their new gas-guzzling cars.

...

Deutsche Bank: Every sell-off needs a point of focus and in recent days it has been Deutsche Bank. The contortions of the Frankfurt-based lender weighed on the entire banking sector on Monday, as it fought to dispel fears that it could not pay a coupon on a bond. "I think maybe counterparty risk is emerging," says Shannon Stemm, an analyst at Edward Jones in St Louis.

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iehi-feed-58960 Wed, 10 Feb 2016 15:49:21 GMT Banks eye more cost cuts amid global growth concerns http://implode-explode.com/viewnews/2016-02-10_Bankseyemorecostcutsamidglobalgrowthconcerns.html iehi-feed-58957 Wed, 10 Feb 2016 03:21:01 GMT Donald Trump and Bernie Sanders Win the New Hampshire Primaries http://implode-explode.com/viewnews/2016-02-09_DonaldTrumpandBernieSandersWintheNewHampshirePrimaries.html ``Donald J. Trump and Senator Bernie Sanders of Vermont harnessed working-class fury to surge to commanding victories in a New Hampshire primary that drew huge turnout across the state.

The success by two outsider candidates dealt a remarkable rebuke to the political establishment, and left the race deeply unsettled.

...

With close to half the precincts reporting, Mr. Trump had received almost 34 percent of the vote, and Mr. Sanders approached 60 percent.

The win for Mr. Sanders amounted to a powerful and painful rejection of Hillary Clinton, who has deep history with New Hampshire voters and offered policy ideas that seemed to reflect the flinty, moderate politics of the state. But Mr. Sanders, who has proposed an emphatically liberal agenda to raise taxes and impose regulations on Wall Street, drew support from a wide cross-section of voters, even edging her out among women, boosted by his appeal to younger women.

... the wave of support for both men was nonetheless stunning to leaders of both parties who believed that in the end, voters would embrace more experienced candidates like Mrs. Clinton or one of the Republican governors in the race. Yet the two men won significant support from voters who felt betrayed by their parties and were dissatisfied or angry with the federal government.

... Mr. Trump's candidacy, in particular, represents a hostile takeover of a party to which he has scant ties. Leveraging celebrity and a ubiquitous presence across both traditional and social media, Mr. Trump has embraced a style of populism on trade, foreign policy and immigration closer to the European nationalist parties than to American conservatism. He has never held elected office and was not even a registered Republican this time four years ago.

...

The unaffiliated New Hampshire voters who participated in both party primaries, and who supported Mr. Trump and Mr. Sanders in sizable numbers, appear to have found those candidates' anti-establishment messages to be an asset.

... New Hampshire's Republican leaders, who jealously guard their first-in-the-nation status, were as perplexed as they were horrified.

"By name, I only know five people supporting Donald Trump," John H. Sununu, a former governor, said Tuesday. "So I say I cannot understand this electorate."

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iehi-feed-58956 Wed, 10 Feb 2016 02:51:12 GMT A Crash Course on Deflation http://implode-explode.com/viewnews/2016-02-09_ACrashCourseonDeflation.html iehi-feed-58954 Tue, 09 Feb 2016 22:14:30 GMT Quicken Loans Super Bowl Ad Promotes Using Homes As ATMs http://implode-explode.com/viewnews/2016-02-09_QuickenLoansSuperBowlAdPromotesUsingHomesAsATMs.html iehi-feed-58953 Tue, 09 Feb 2016 19:41:49 GMT Nationstar: Servicer's Stock Price (And With New Branding Scheme, It's Dignity) Closes at New Low... | Mandelman Matters http://implode-explode.com/viewnews/2016-02-09_NationstarServicersStockPriceAndWithNewBrandingSchemeItsDignityC.html iehi-feed-58951 Tue, 09 Feb 2016 19:39:18 GMT Deutsche Bank Is ‘Absolutely Rock-Solid,' Cryan Tells Employees http://implode-explode.com/viewnews/2016-02-09_DeutscheBankIsAbsolutelyRockSolidCryanTellsEmployees.html