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MARKET OUTLOOK - Global & Local, Perspectives & General Market Feeling
nipper
post Posted: Feb 23 2020, 03:40 PM
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In Reply To: mullokintyre's post @ Feb 23 2020, 12:05 PM

QUOTE
...Most of the big Wall Street banks have been culling their customer ranks by kicking smaller accounts out of their investment advisors’ hands and moving them to a manned phone bank. That’s the kind of disdain that Wall Street firms have for those with less than a high net worth....

Similar story in this country. Robo-advice, coded by some 19 year old. I don't think so




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
henrietta
post Posted: Feb 23 2020, 03:18 PM
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In Reply To: mullokintyre's post @ Feb 23 2020, 12:05 PM

QUOTE
$225 Triilion in Derivatives. Its mind boggling


So, will the European banks be buying these shonky derivatives this time round ??

Not going to end well, is it.

Cheers
J


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mullokintyre
post Posted: Feb 23 2020, 12:05 PM
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From WOP

QUOTE
At 10:52 a.m. yesterday, the Dow Jones Industrial Average which was trading at a level of 29,348, began a bungee-style plunge. By 11:32 a.m. the market landed with a thud at a level of 29,013. Then the stock market began an equally inexplicable climb, closing the day down just 128 points. This is what is known as a “Flash Crash,” a sudden plunge in the market with no reliable explanation. No one on Wall Street has yet to offer a convincing explanation for the plunge. An early attempt to pass it off to worries about the coronavirus was easily dispelled because the news report of rising infections from the virus came much earlier than the plunge in the market.

Our chart research also shows that the plunge was not related to the coronavirus because Procter & Gamble, a component of the Dow which is having serious supply chain disruptions from the coronavirus, didn’t participate in the Flash Crash in any material way.

Goldman Sachs, however, also a component of the Dow, not only participated in the Flash Crash but began its own plunge at the market’s open, recovered somewhat, and then began the Flash Crash at the same time as the Dow – but much more sharply.Why was Goldman selling off yesterday? Because one of its major competitors on Wall Street, Morgan Stanley, had brazenly announced before the market opened that it was using its stock to the tune of $13 billion to buy the discount broker, E*Trade, at a premium of 30 percent to its market value. Goldman Sachs, currently under a criminal probe by the Justice Department for its role in the Malaysia 1MDB bribery and embezzlement scandal, is not likely to be given any green light by the U.S. Department of Justice to expand its footprint. Thus, it is likely to far further behind its competitors – or so the thinking goes.

The underlying math of the Morgan Stanley deal tells the whole story: E*Trade has 5.2 million clients but only $360 billion in assets. Morgan Stanley, on the other hand, has just 3 million clients but $2.7 trillion in assets. In other words, Morgan Stanley, like every other major Wall Street firm, caters to the high net worth individual while E*Trade is not so picky.

Most of the big Wall Street banks have been culling their customer ranks by kicking smaller accounts out of their investment advisors’ hands and moving them to a manned phone bank. That’s the kind of disdain that Wall Street firms have for those with less than a high net worth. So why would Morgan Stanley be so desperate that it would buy a discount broker? Because these are desperate times on Wall Street and every major firm is in need of more trades and the ability to show shareholders that its assets under management are increasing – even if they have to overpay to obtain those assets.

Why this Morgan Stanley buyout is of major concern to the average American is that Morgan Stanley is already too big and too dangerous. Morgan Stanley is one of 30 global banks that are known as G-SIBs – Global Systemically Important Banks. That means that they are so big and interconnected to other banks that if they implode they could start a financial contagion like 2008.

In fact, Morgan Stanley would have failed in 2008 except for the secret money feeding tube that the Federal Reserve Bank of New York provided to Morgan Stanley for more than two years. According to the audit performed by the Government Accountability Office, the nonpartisan watchdog of Congress, Morgan Stanley received $2.04 trillion in cumulative loans during the financial crisis, second only to the insolvent Citigroup, which received $2.5 trillion. (See chart below.) The GAO report did not cover all of the loan programs. For a full accounting, see the report from the Levy Economics Institute.

Despite its brush with death during the financial crisis, Morgan Stanley was allowed to buy the retail brokerage firm, Smith Barney, from Citigroup after the financial crash, first structured as a joint-venture in 2009 and then a full buyout at a total cost of $13.5 billion in 2013. As of last October, Morgan Stanley said it had 15,553 financial advisors managing its 3 million clients.

That would be enough for any Wall Street firm to properly manage. But Morgan Stanley is far more than a brokerage firm. According to the Federal Deposit Insurance Corporation (FDIC), Morgan Stanley owns two federally-insured banks. Morgan Stanley Bank, National Association holds $116 billion in deposits while Morgan Stanley Private Bank, N.A. holds another $70 billion in deposits. If Morgan Stanley blows up, the U.S. taxpayer is on the hook for making good on those deposits.

Could Morgan Stanley blow up because it’s already too big to know what all of its far-flung traders are doing? Yes, it could. One of the reasons it needed that $2 trillion cumulative in revolving loans from the Federal Reserve, on top of the $10 billion it received from the Troubled Asset Relief Program (TARP), was because one of its traders, Howie Hubler, lost $9 billion, “More than any single trader has ever lost in the history of Wall Street,” according to author and Wall Street veteran Michael Lewis in a 60 Minutes interview.

What happens to these Wall Street behemoths is critical to the financial health of the U.S. economy and the future viability of the United States. If the U.S. had a functioning U.S. Department of Justice, it would reject this proposed buyout of E*Trade by Morgan Stanley because it is already too big and too interconnected to other Wall Street and global banks via its huge derivatives footprint.

To underscore just how interconnected these banks are, the Office of Financial Research (OFR), wrote the following in a February 2015 report:

“The larger the bank, the greater the potential spillover if it defaults; the higher its leverage, the more prone it is to default under stress; and the greater its connectivity index, the greater is the share of the default that cascades onto the banking system. The product of these three factors provides an overall measure of the contagion risk that the bank poses for the financial system.

“Five of the U.S. banks had particularly high contagion index values — Citigroup, JPMorgan, Morgan Stanley, Bank of America, and Goldman Sachs.”

According to the Office of the Comptroller of the Currency (OCC), the regulator of national banks, the bank holding companies of those same five banks were sitting on unthinkable levels of derivatives as of September 30, 2019 (the most recent OCC report that’s available). In notional (face amount) of derivatives, JPMorgan Chase held $54.9 trillion; Goldman Sachs Group had $50 trillion; Citigroup held $49.4 trillion; Bank of America held $39.3 trillion while Morgan Stanley sat on $36.2 trillion. Just these five bank holding companies represented 85 percent of all derivatives held by the more than 5,000 Federally-insured banks in the U.S.

It’s long past the time for Congress to break up these Wall Street mega banks.


That second last paragraph is a killer.
$225 Triilion in Derivatives. Its mind boggling
Parasites is the only way to describe these mega banks.
They contribute nothing, produce nothing, but pay massive salaries to its top echelons.
I almost wish bernie sanders wins the presidency.
Mick




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early birds
post Posted: Feb 20 2020, 12:38 PM
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In Reply To: early birds's post @ Feb 20 2020, 10:03 AM

stopped out for the longs with HSI.
it's bit hard to trade at moment.



 
early birds
post Posted: Feb 20 2020, 10:03 AM
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https://www.cnbc.com/2020/02/19/goldman-say...e-probable.html


Equity markets are looking increasingly exposed to near-term downward surprises to earnings growth,” Oppenheimer said. “While a sustained bear market does not look likely, a near-term correction is looking much more probabl

====================================
well, we've been warned countless times by now. but market still make new highs???? unsure.gif
thanks all the central bankers---------------------



 
mullokintyre
post Posted: Feb 19 2020, 07:48 AM
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From zero hedge


QUOTE
QUOTE

Foreign central banks have sold US Treasuries for the last 16 months (the last inflow was Aug 2018)

n fact, foreign central banks have only bought Treasurys in 6 in 63 months since Sept 2014.

China was December's biggest seller, followed by Brazil, Luxembourg, and Canada.

China has dumped Treasuries for 9 of the last 10 months with December's $19.3 bn sale the largest since July 2018..
.
Japan remains the largest foreign holder with $1.15 trillion, having added $115.2 billion over the year, but even they sold in December..

Overall, as Bloomberg notes, the pile of U.S. Treasuries held outside the country grew in 2019 to nearly $6.7 trillion from $6.3 trillion at the end of the previous year, as the government’s borrowing picked up to fresh record levels.


That's a fair dip in Chinese held US securities.
If it keeps up, there will be another change in US/China dynamics.

Mick



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mullokintyre
post Posted: Feb 14 2020, 02:53 PM
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Ah, History , such a wonderful teacher. Pity so many in the class don't pay enough attention.


QUOTE
Auto loan and lease balances have surged to a new record of $1.33 trillion. Delinquencies of auto loans to borrowers with prime credit rates hover near historic lows. But subprime loans (borrowers with a credit score below 620) are exploding at a breath-taking rate, and they’re driving up the overall delinquency rates to Financial Crisis levels. Yet, these are the good times, and there is no employment crisis where millions of people have lost their jobs.

All combined, prime and subprime auto-loan delinquencies that are 90 days or more past due – “serious” delinquencies – in the fourth quarter 2019, surged by 15.5% from a year ago to a breath-taking historic high of $66 billion, according to data from the New York Fed released today.
Loan delinquencies are a flow. Fresh delinquencies that hit lenders go into the 30-day basket, then a month later into the 60-day basket, and then into the 90-day basket, and as they move from one stage to the next, more delinquencies come in behind them. When the delinquency cannot be cured, lenders hire a company to repossess the vehicle. Finding the vehicle is generally a breeze with modern technology. The vehicle is then sold at auction, a fluid and routine process.
These delinquent loans hit the lenders’ balance sheet and income statement in stages. In the end, the combined loss for the lender is the amount of the loan balance plus expenses minus the amount obtained at auction. On new vehicles that were financed with a loan-to-value ratio of 120% or perhaps higher, losses can easily reach 40% or more of the loan balance. On a 10-year old vehicle, losses are much smaller.

As these delinquent loans make their way through the system and are written off and disappear from the balance sheet, lenders are making new loans to risky customers, and a portion of those loans will become delinquent in the future. This creates that flow of delinquent loans. But that flow has turned into a torrent.

Seriously delinquent auto loans jumped to 4.94% of the $1.33 trillion in total loans and leases outstanding, above where the delinquency rate had been in Q3 2010 as the auto industry was collapsing, with GM and Chrysler already in bankruptcy, and with the worst unemployment crisis since the Great Depression approaching its peak. But this time, there is no unemployment crisis; these are the good times:

About 22% of the $1.33 trillion in auto loans outstanding are subprime, so about $293 billion are subprime. Of them, $68 billion are 90+ days delinquent. This means that about 23% of all subprime auto loans are seriously delinquent. Nearly a quarter!

Subprime auto loans are often packaged into asset-backed securities (ABS) and shuffled off to institutional investors, such as pension funds. These securities have tranches ranging from low-rated or not-rated tranches that take the first loss to double-A or triple-A rated tranches that are protected by the lower rated tranches and generally don’t take losses unless a major fiasco is happening. Yields vary: the riskiest tranches that take the first lost offer the highest yields and the highest risk; the highest-rated tranches offer the lowest yields.

These subprime auto-loan ABS are now experiencing record delinquency rates. Delinquency rates are highly seasonal, as the chart below shows. In January, the subprime 60+ day delinquency rate for the auto-loan ABS rated by Fitch rose to 5.83%, according to Fitch Ratings, the highest rate for any January ever, the third highest rate for any month, and far higher than any delinquency rate during the Financial Crisis:



Theres more in the Full Article for those interested, but you get the drift.
These sort of delinquincies were the forerunner to the GFC.
Next we will see the Jingke envelopes as mortgages start to go the same way, then the toxic derivatives before the panic steps in.

Mick



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nipper
post Posted: Feb 11 2020, 09:03 AM
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“ business debt levels continue to be elevated compared with either business assets or gross domestic product, with the riskiest firms accounting for most of the increase in debt in recent years.

Although the net issuance of riskier forms of business debt - high-yield bonds and institutional leveraged loans - has slowed since July 2019, it is still solid by historical standards

In addition, about half of investment-grade debt outstanding is currently rated in the lowest category of the investment-grade range (triple-B), a share that is near an all-time high.

The concentration of investment-grade debt at the lower end of the investment-grade spectrum creates the risk that adverse developments, such as a deterioration in economic activity, could lead to a sizable volume of bond downgrades to speculative-grade ratings.

Such conditions could trigger investors to sell the downgraded bonds rapidly, increasing market illiquidity and causing outsized downward price pressures.

The recent emergence of the coronavirus, however, could lead to disruptions in China that spill over to the rest of the global economy.”


https://www.federalreserve.gov/monetarypoli...mpr-summary.htm



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Feb 11 2020, 08:17 AM
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In Reply To: mullokintyre's post @ Feb 11 2020, 06:24 AM

Spot Price... I know it affects valuations, but to get many projects up, and to secure supplies, contracted gas prices are in place.

Beach BPT results are just out, and they talk about how low LNG spot is affecting the East Coast spot price. However, the longer term dynamics are:
• Non-CSG East Coast gas supply is expected to decline in the medium-term in the absence of material new developments
• There are physical (pipeline) constraints on how much QLD gas can flow to southern demand centres, no matter how much is made available long-term
• New sources of southern supply will still be ultimately required
• LNG imports to the East Coast would require domestic prices of >$9/GJ if long-term LNG prices were as low as US$6 / MMBtu

- Guess that's how markets operate



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
mullokintyre
post Posted: Feb 11 2020, 06:24 AM
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Following my last post about Oil slumps, Gas is heading the same way.
Natural Gas prices have hit an all time low in some areas.
From CNBC
QUOTE
“Honestly speaking, if I have one wish for free, please send me an ice blizzard for the gas prices,” Rainer Seele, CEO of OMV, told CNBC’s “Squawk Box Europe” on Thursday.
Natural gas prices are almost 30% below where they traded a year earlier — and down nearly 15% since the start of 2020.
In Asia, the benchmark Japan-Korea-Marker (JKM) spot price for liquefied natural gas (LNG) closed at an all-time low of $3.00 MMBtu for the second consecutive session on Thursday, according to data provided by S&P Global Platts.


This last point is going to have a big negative impact on the levies on LNG exported from OZ. This will put further pressure on both state and federal govt revenues, and add further proof as to why we need to change the 40 year resource rent tax agreements.
From The Australian

QUOTE
A failure to modify outdated gas royalty tax rules means Australia is “giving away for free” the world’s largest supply of liquefied natural gas to multinational corporate giants such as Chevron and Exxon, an expert says.

Australia has been transformed into the world’s largest exporter of LNG, with industry revenues passing $50bn a year.

Despite this boom, the government’s tax take from the industry is set to fall $450m over the four-year budget estimates, from $1.4bn annually today.

The Australian has reported the government is looking at ways to lift taxes on the gas ­industry as it seeks to shore up its commitment to a budget surplus in this and future years.

Josh Frydenberg at the weekend pushed back against “speculation” he was looking at making changes to the 40-year-old tax, noting his department’s review into the PRRT would not be ­finalised before the May budget.

Nationals MP Matt Canavan said: “I don’t think the government would seek to increase taxes on our resources industry because higher taxes are not what our economy needs now.”


Mick



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sent from my Olivetti Typewriter.
 
 


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