Towards the end of a credit bubble, ideas that might have seemed crazy in more boring times are not just accepted but embraced by investors desperate to keep the high that comes from effortless bull-market profits. In the junk bond bubble of the late 1980s, for instance, there was the “PIK preferred,” a kind of […]
I know it’s bad form to express sympathy for the people running the world’s central banks. But come on, they’re human beings in an impossible spot with no idea how to escape. The pain they feel is both intense and legitimate, and we should respond with at least a bit of empathy. Just kidding. It’s […]
Deutsche Bank, Commerzbank, the Italian banks…it’s getting ugly across the pond, and the worst is yet to come. Here’s a brief look at the reasons why, including derivatives, ridiculous capital rules, dumb lending practices and, of course, negative interest rates. If you’re looking for short sale candidates, Europe’s banks should be on the list.
These are great times for financial assets — and by implication for finance companies that make and sell them, right? Alas, no. Just the opposite. Each part of the FIRE (finance, insurance, real estate) economy is imploding as “modern” finance hits the wall. Interest rates, for instance, have fallen for three decades… Stock prices are […]
Calling Wall Street’s banks stupid and dangerous is like calling the sun “big and warm.” It’s a clear understatement of an obvious fact. The same goes for calling Japan and China economically clueless. Their actions pretty much guarantee that they’ll ultimately enter some sort of death spiral. Germany, meanwhile, is many things, but clueless and […]
Japan and Europe have been operating with negative interest rates for going on a year now, and this is what they have to show for it: For readers who aren’t completely clear about the GDP charts, they’re measuring the annual rate of change, so 0.4% means an economy is growing at a rate of less […]
Two short months ago it was generally expected that US interest rates would rise for the balance of the year — a move made possible by steady economic growth and general global stability. Here’s a representative piece of reporting from early April: WSJ Survey: Most Economists Expect Next Fed Rate Increase in June Most private […]
The following tables illustrate one of the dilemmas of mainstream money management: The vast majority of financial advisers and portfolio managers are big fans of bank stocks because finance is, in their minds, a crucial if not the crucial form of wealth-creating activity in the modern world. So the big names in the field — […]
This is a tale of changing environments and the organisms that are, as a result, dying off. First, consider the bricks and mortar retailers. Amazon, the dominant online seller of virtually everything, reports a spectacular quarter with soaring sales and (fairly new for them) strong profits. But in a world of flat consumer spending, where […]
These are shockingly bad times for big banks, especially when you consider that the overall economy is supposed to be fairly healthy. The latest example is Germany’s Deutsche Bank: Deutsche Bank Q1 ‘most challenging in several decades’: CFO (CNBC) – Deutsche Bank posted a 58 percent drop in net profit in the first quarter, to […]
Goldman, Morgan Stanley and IBM release numbers that look, well, depression-like. Housing starts plunge, gold and silver spike, China’s bond market seizes up, and Deutsche Bank prepares to name names in its gold manipulation scandal. And US stocks keep rising…what’s wrong with this picture?
For years now, the easiest way to finesse a debate over whether precious metals markets are manipulated has been to say, “well, if they’re not manipulated they’re the only market that isn’t.” That was unsatisfying, though, because as the big banks got caught scamming their customers on interest rates, mortgage bonds, forex and commodities trades, those […]
Corporate profitability is one of the canaries in today’s financial coal mine. If companies are making more money each year they tend to hire more people, pay more taxes and generally make life easier for everyone else. But when earnings decline, everything from government budgeting to personal financial planning gets much harder. Viewed through this […]
Over the weekend, the following happened: China’s exports and imports fell by 11.2% and 18.8%, respectively, numbers which, for a trading power, are nothing short of apocalyptic. Japan’s Q4 GDP shrank at an annualized rate of 1.4% which, for a country that had spent the previous three years borrowing and printing record amounts of new […]
So far, each financial crisis in the series that began with the junk bond bubble of 1989 has been noticeably different from its predecessors. New instruments, new malefactors, new monetary policy experiments in response. But the one that’s now emerging feels strikingly similar to what just happened a few years ago: Banks overexposed to assets […]