skip to main |
skip to sidebar
TOP STORIES:
Stocks Fall as Deutsche Bank Leads Rout in Lenders; Bonds Climb
- (www.bloomberg.com) Stocks almost erased their monthly advance as
Deutsche Bank AG sank on speculation it will need to raise capital. Bonds
climbed as traders awaited a U.S. presidential debate tonight. Financial
companies dragged down global equities after a media report said the German
government wouldn’t step in to back the nation’s largest lender, fueling
investor concern about its finances. Treasury yields declined to a two-week
low, and the yen led gains among its Group-of-10 peers as investors sought
safer assets. Emerging-market shares slumped after Turkey’s credit rating was
cut to junk by Moody’s Investors Service. Oil surged as Saudi Arabia’s offer to
cut output opened the door to a future OPEC deal.
In Miami Condo Glut, Preconstruction Resale Market Freezes up - (www.wolfstreet.com) But total existing residential sales fell 3.3%
year-over-year to 2,389 units. Why? Condos! Existing condo sales – not
including the new construction market – plunged 13.6% year-over-year to 1,150
units. Yet the median price, at $215,000, is still up 5.7% from last year. Cash
transactions for all sales plunged by nearly 9 points, from 49.6% a year ago to
40.7% in August (national average = 22%); 25.7% of single-family home sales
were cash, and 56.8% of condo sales. The report: Miami’s high percentage of
cash sales reflects South Florida’s ability to attract a diverse number of
international home buyers, who tend to purchase properties in all cash.
Saudi
Arabia Bails Out Banking System After Interbank Rates Hit 2009 Highs – (www.zerohedge.com) As Bloomberg reports, The Saudi
Arabian Monetary Agency, as the central bank is known, is giving banks
about 20 billion riyals ($5.3 billion) of time deposits “on behalf of
government entities.”It’s also introducing seven-day and 28-day repurchase
agreements, as part of its “supportive monetary policy.” It didn’t provide
further details. The announcement, which comes as the kingdom prepares for its
first international bond sale, is the latest step by the central bank to ease a
cash crunch in the banking system. The Saudi Interbank Offered Rate, a key
benchmark for pricing loans, has surged to the highest in seven years after the
plunge in oil prices forced the government to withdraw money from the country’s
banking system, squeezing liquidity. The cash crunch risk undermining
bank’s ability to lend to businesses, adding to the strain facing economic
growth at a time when the government is cutting spending to shore up its
public finances. The economy will likely expand 1.1 percent in 2016, according
to a Bloomberg survey, the slowest pace since 2009.
Cost
to taxpayers on loan forgiveness could skyrocket – (www.cnbc.com) A program to encourage student-loan borrowers
to go into public service may come with a hefty price tag. If you take out a
federal student loan, you may qualify for public service loan forgiveness.
(If you borrow from a private lender, you are not eligible for the program.)
Some qualified borrowers will be able to use this benefit starting next year.
The ultimate cost of the program is difficult to determine. Since 2012,
borrowers could certify with the Department of Education that their employment
would qualify them for public service loan forgiveness. The number of borrowers
who have been certified by the department has grown rapidly, to 431,853, as of
June 30, 2016 (see chart below).
Deutsche Bank's Pain Is Germany's Too – (www.bloomberg.com) Berlin is trying to distance itself
from Deutsche Bank and the threat of a $14 billion U.S.
fine that would likely force the bank to raise capital. This
makes sense politically ahead of an election year. It also, effectively, calls
the U.S. authorities' bluff: if the fine is too big, German taxpayers won't
step in to help. But the danger is that deepening investor concerns over the
health of the country's No. 1 bank spiral out of control -- and circle
right back to Berlin. As unpalatable as it may be politically, the market sees
Germany and Deutsche as joined at the hip.
TOP STORIES:
Canadian Housing Bubble, Debt Stir Financial Crisis Fears - (www.wolfstreet.com) Everyone is fretting about the Canadian house
price bubble and the mountain of debt it generates – from the IMF on down to the regular Canadian.
Now even the Bank for International Settlement (BIS) and the Organization for
Economic Co-operation and Development (OECD) warn about the risks. Every city
has its own housing market, and some aren’t so hot. But in Vancouver and
Toronto, all heck has broken loose in recent years. In Vancouver, for example,
even as sales volume plunged 45% in August from a year ago – under the impact
of the new 15% transfer tax aimed at Chinese non-resident investors – the “benchmark” price of
a detached house soared by 35.8%, of an apartment by 26.9%, and of an attached
house by 31.1%. Ludicrous price increases!
Deutsche Bank Woes Sparks Concern Among German Lawmakers -
(www.bloomberg.com) Deutsche Bank AG’s finances, weakened by low
profitability and mounting legal costs, are raising concern among German
politicians after the U.S. sought $14 billion to settle claims related to the
sale of mortgage-backed securities. At a closed session of Social Democratic
finance lawmakers this week, Deutsche Bank’s woes came up alongside a debate
over Basel financial rules, according to two people familiar with the
matter. Participants discussed the U.S. fine and the financial reservesat Deutsche Bank’s disposal if it
had to cover the full amount, according to the people, who asked not to be
identified because the meeting on Tuesday was private. While the participants
-- members of the junior party in Chancellor Angela Merkel’s government --
didn’t reach any conclusions on the likely outcome, the discussion signals that
the risks have the attention of Germany’s political establishment. The German
Finance Ministry last week called on the U.S. to ensure a “fair outcome” for
Deutsche Bank, citing cases against other banks where the government settled
for reduced fines. A spokesman for Deutsche Bank declined to comment.
Exclusive:
Regulators Expect Monte Dei Paschi to Ask Italy for Help-Sources - (www.reuters.com) European regulators expect Italian bank Monte
dei Paschi di Siena will have to turn to the government for support, three euro
zone officials with knowledge of the matter said, although Rome would strongly
resist such a move if bondholders suffered losses. Less than two months after
the Tuscan lender announced an emergency plan to raise 5 billion euros of fresh
capital, having come last in a health check of 51 European banks, there is
growing concern among European regulators that the cash bid will fall short. While
the bank is determined to see through the capital raising, if it were to
disappoint, it would be left with a capital hole. Now euro zone authorities are
considering whether state support would have to be tapped after what bankers
have described as slack interest in the bank's share offer.
US-EU
Trade Talks "De Facto Dead" - (www.zerohedge.com)
President Obama was hoping to
get two trade agreements in the waning days of his administration. However,
this week the German Economy Minister stated the US-EU TTIP talks
were “de facto dead”. The US-Asia TPP talks have been dead as a doornob for
some time. Both deals were allegedly about free trade. In fact, neither was. Nonetheless,
that both deals died after years of negotiation is systematic of a bigger
problem: rising protectionism everywhere, led by the US and EU.
The Average
Federal Employee Is Compensated $123,160 – (www.dailycaller.com) The average federal employee compensation is
$123,160 per year, according to a new study by the Cato Institute. The study shows two major trends: the
first being that there is a staggering differential in federal pay and benefits
packages and private sector pay and benefits packages; the second being that
the differential between these two groups is now growing even larger. It uses
Bureau of Economic Analysis data to reach its conclusions. Currently, the
federal government employs around 2.4
million Americans. Since the 1990s, federal employees have
outstripped private sector growth rates in compensation and benefits
packages, the study reports.
Deutsche Bank Woes Sparks Concern Among German
Lawmakers - (www.bloomberg.com) Deutsche
Bank AG’s finances, weakened by low profitability and mounting legal costs, are
raising concern among German politicians after the U.S. sought $14 billion to
settle claims related to the sale of mortgage-backed securities. At a closed
session of Social Democratic finance lawmakers this week, Deutsche Bank’s woes
came up alongside a debate over Basel financial rules, according to two people
familiar with the matter. Participants discussed the U.S. fine and the
financial reservesat
Deutsche Bank’s disposal if it had to cover the full amount, according to the
people, who asked not to be identified because the meeting on Tuesday was
private. While the participants -- members of the junior party in Chancellor
Angela Merkel’s government -- didn’t reach any conclusions on the likely
outcome, the discussion signals that the risks have the attention of Germany’s
political establishment. The German Finance Ministry last week called on the
U.S. to ensure a “fair outcome” for Deutsche Bank, citing cases against other
banks where the government settled for reduced fines. A spokesman for Deutsche
Bank declined to comment.
Exclusive: Regulators Expect Monte Dei Paschi
to Ask Italy for Help-Sources - (www.reuters.com) European
regulators expect Italian bank Monte dei Paschi di Siena will have to turn to
the government for support, three euro zone officials with knowledge of the
matter said, although Rome would strongly resist such a move if bondholders
suffered losses. Less than two months after the Tuscan lender announced an
emergency plan to raise 5 billion euros of fresh capital, having come last in a
health check of 51 European banks, there is growing concern among European
regulators that the cash bid will fall short. While the bank is determined to
see through the capital raising, if it were to disappoint, it would be left
with a capital hole. Now euro zone authorities are considering whether state
support would have to be tapped after what bankers have described as slack
interest in the bank's share offer. "There is clearly an execution risk to
the capital raising," said one official with knowledge of the rescue attempt,
adding that the bank's value, about one ninth the size of the planned 5 billion
euro cash call, would be a turn-off for investors.
In
Dramatic Twist, Wells Fargo Said To Retaliate, Fire Whistleblowers Who Exposed
Bank's Illegal Practices – (www.zerohedge.com)
Wells Fargo admitted to firing 5,300 employees for engaging in illegal,
fraudulent tactics. Now, CNN is reporting that it spoke with numerous former
Wells Fargo workers around the country who tried to put a stop to these illegal
tactics. "Almost half a dozen workers who spoke with us say they paid
dearly for trying to do the right thing: they were fired", CNN says, which
if confirmed would promptly make this a criminal case, which implicate
virtually every senior management member, as such retaliatory practices would
suggest not only awareness of what was happening at the bank, but also an even
more dramatic response by management seeking to keep these practices under
wraps. Some of the named witnesses made it very clear that the narrative spun
by Stumpf in Senate was a lie: "I endured harsh bullying ... defamation of
character, and eventually being pinned for something I didn't do," said
Heather Brock, who was fired earlier this month as a senior business banker at
a Wells Fargo branch in Round Rock, Texas.
Suitcases of Cash: China Travel Data Hint at
Capital Outflow - (www.bloomberg.com) Chinese
tourists seem to be packing more than just sunscreen and cameras on vacation.
The data discrepancy suggests they’re also shifting cash by buying homes while
studying abroad, signing up for life insurance products in Hong Kong, or
opening deposit accounts to squirrel money offshore, Setser said. That’s bad
news for the global economy. "Right now, the world as a whole needs
Chinese demand for its goods and services far more than it needs Chinese demand
for bank deposits and bonds," said Setser, now a senior fellow at the
Council on Foreign Relations in New York. "It helps us understand how the
slowdown in China over the past few years is impacting world growth."
EU Banks May Need Rescue Funds Equaling Twice
ECB Capital - (www.bloomberg.com) The
euro area’s biggest banks will be asked to earmark funds equivalent to more
than twice their minimum capital requirements to make sure a possible emergency
doesn’t cost taxpayers, according to Elke Koenig, head of the Single Resolution Board. The Brussels-based SRB, the resolution
authority for 142 banks including Deutsche Bank AG and BNP
Paribas SA, will use the minimum capital requirement set by the European
Central Bank as a proxy for funds that would be needed to absorb losses
and allow recapitalization in a crisis, Koenig said in an interview this
month. The ECB last year set an average requirement for the
highest-quality capital of 9.9 percent
of risk-weighted assets.
Debt buybacks boom as companies cut borrowing
costs - (www.ft.com) Klépierre, a French commercial real estate
company on Monday joined a growing list of entities taking advantage of low
borrowing costs and buying back their existing debt. Companies are replacing
existing bonds with new debt, offering investors less interest despite holding
on to their money for longer. The practice reflects central bank policies that have pushed down the cost of long-term
borrowing, giving companies the chance to refinance at some of the lowest rates
on offer ever, and the limits of a policy when many businesses do not need
fresh capital. “Companies are taking the view that new issue market conditions
are extremely good and not to be missed,” said Vijay Raman, head of liability
management at Société Générale.
SEC charges hedge fund manager Leon Cooperman,
Omega Advisers with insider trading - (www.cnbc.com) Billionaire
Leon Cooperman and his Omega Advisors hedge fund were charged Wednesday with
insider trading, the Securities and Exchange Commission announced. The
SEC accused Cooperman of buying into Atlas Pipeline Partners ahead of a deal,
using his status as one of its largest shareholders to acquire nonpublic
information about an upcoming transaction. "We allege that hedge fund
manager Cooperman, who as a large APL shareholder obtained access to
confidential corporate information, abused that access by trading on this
information," said Andrew J. Ceresney, director of the SEC's Division of
Enforcement. "By doing so, he allegedly undermined the public confidence
in the securities markets and took advantage of other investors who did not
have this information."
Mexican
Peso Plunges against Dollar, in Toxic Cocktail of Forces - (www.wolfstreet.com) On
Monday morning the world’s tenth most traded currency, the Mexican peso, set a
historic precedent that few Mexicans will welcome. For the first time ever, one
US dollar fetched as many as 20 Mexican pesos in some of the nation’s banks,
including its biggest, Bancomer, following eight consecutive days of losses. Of
all the international currencies tracked by Bloomberg, only the Surinamese
dollar fell more against the U.S. dollar last week. The peso also holds the
dubious distinction of being the worst performing major emerging market
currency of 2016, having lost close to 12% of its value.
$195
Billion Asset Manager: "The Time Has Come To Leave The Dance Floor" - (www.zerohedge.com) "When
the supposed solutions to the Fed’s dilemma are merely new “problems,” you
know you are approaching the cycle’s end... long-term investing is predicated
on not just knowing where the happening parties are during the reflationary
parts of the cycle but more importantly, knowing when the time has come to
leave the dance floor. In our view, that time has already come."
US
election: Are we in for an October Surprise? (opinion) - (www.cnn.com) As
September comes to an end, presidential-election observers are beginning to
wonder if there will be an October Surprise. In a campaign where the unexpected
has become normalized, both parties -- but particularly Democrats -- suspect
that the next month could bring a shocking revelation. The notion of an October
Surprise gained widespread popularity in the 1980 election, when Ronald
Reagan's campaign feared that President Jimmy Carter would announce a
resolution to the Iran hostage crisis only weeks or days before Americans went
to vote. While Carter was in fact working on an end to the crisis, irrespective
of the election, the Iranians did not release the hostages until after Reagan's
inauguration.
Meet the affable bear who expects the S&P
to tumble to 20-year lows - (www.marketwatch.com) If
you’re buying stocks today, says noted permabear Albert Edwards, you need a
psychiatric evaluation. Edwards, global strategist at Société Générale told
MarketWatch in an early September interview that the stock market, bolstered by
easy money, has valuations at “nosebleed” levels even as labor costs are rising
and corporate profits are falling. That, he says, points toward a U.S. economy
on the brink of recession — and an S&P 500 set to plummet to 550, a
level not seen in more than two decades, in response. At the core of his
forecast is the belief that the economy goes in cycles — or, as he says, that
“recessions come along with regular monotony.” “This is the weakest recovery on
record in the U.S.,” said Edwards, who is based in London. “Everything you
expect to see at the end of an [economic] cycle is apparent.”
Deutsche
Bank’s Riskiest Bonds Fall to Lowest Since February - (www.bloomberg.com) Deutsche
Bank AG’s riskiest bonds dropped to the lowest since a marketwide rout in
February as a potential $14 billion bill to settle a U.S. probe into
mortgage-backed securities reignited capital concerns. The lender’s 1.75
billion euros ($2 billion) of 6 percent additional Tier 1 bonds, the first
notes to take losses in a crisis, fell four cents on the euro to 72 cents,
according to data compiled by Bloomberg. That extended the decline since the
U.S. Department of Justice’s initial settlement figure was announced last week
to 11 cents. Deutsche Bank’s bonds and shares have tumbled because of
concerns that settling the Justice Department probe may lead to a capital
shortfall, even if the Frankfurt-based lender is able to negotiate a smaller
bill. A reported plan to securitize billions of dollars of corporate loans
may do little to help.
Credit
Spreads Widen - (www.mishtalk.com) The
present calm in high-yield markets is entirely unwarranted and at odds with
where we are in the US credit cycle. Corporate debt to GDP in the US is at
all-time highs. In the past, whenever corporate debt reached around 42-45% of
GDP, the US approached a recession. Today rates are lower, but corporate debt
is already above 45% of GDP. Some investors prefer to look at net debt minus
liquid assets, but even there, the measure is higher than in 2001 and 2008
(also the top 50 companies hold two thirds of all cash, so aggregate figures
are highly misleading).
Is
This Why Deutsche Bank Is Crashing (Again)? - (www.zerohedge.com) Deutsche's
dead-bank-bounce is over. The last few days have seen shares of the 'most
systemically dangerous bank in the world' plunge almost 20%, back to record
lows as the DoJ fine demands reawoken reality that the €42
trillion-dollar-derivative-book bank is severely under-capitalized no
matter how you spin asset values. However, another question looms - Is
Deutsche Bank cooking its derivatives book to hide huge losses...
China Risks $375 Billion of Shadow Banking
Losses, CLSA Says - (www.bloomberg.com) China’s
shadow banking could lead to losses of $375 billion, according to CLSA Ltd.
estimates of likely levels of bad debt. The brokerage estimated the potential
bad debt ratio for “bank-related shadow financing” at 16.4 percent, or 4.2
trillion yuan, in a report released to the media in Hong Kong on Tuesday.
Assuming a 40 percent recovery rate left a potential loss of 2.5 trillion yuan.
“Shadow financing is banking reform gone wrong given that the key driver of
growth has been the banks circumventing regulations to protect their margins,”
analyst Francis Cheung wrote in the report. “Shadow financing has grown
rapidly, benefiting from implicit government guarantees despite being a channel
for credit to higher-risk industries.”
TOP STORIES:
Why Hanjin’s Zombie Collapse Won’t Be the Last One - (www.wolfstreet.com) Hanjin Shipping Co. filed for the equivalent of
bankruptcy protection in South Korea on August 31 and over the past two weeks
in the US and dozens of other countries. Some of its ships are still idling at
sea, trying to out-wait the uncertainty, and being seized by creditors. Some
have made it to port and are being unloaded. Others have already been sold at
fire-sale prices. When US Bankruptcy Judge John Sherwood asked Hanjin lawyer
Ilana Volkov if the carrier was liquidating, she said: “There is no
clear visibility yet on what will happen with this business.” The seventh
largest container carrier in the world is not the only carrier in financial
trouble. Another huge Korean carrier, HMM, was restructured and bailed out
earlier this year, with creditors, including the Korean taxpayer, taking a big
hit. The state-owned Korean Development Bank is now its largest shareholder.
German Protesters Gather to Oppose Transatlantic Trade Deals
- (www.bloomberg.com) Protesters gathered in seven German
cities on Saturday to oppose transatlantic trade agreements between the
European Union and the U.S. and Canada. More than 320,000 people turned out,
the organizers said in an e-mailed statement. In Munich, thousands met on the
central Odeonsplatz square and adjoining Ludwigsstrasse in heavy rain as the
annual Oktoberfest opened just a few miles away. “There is no bad weather, there are only bad
trade agreements,” Karl Baer of the Munich Environmental Institute said in
opening remarks before a crowd wielding signs and flags of organizations
including the Green party, labor unions, local farmer groups and
non-governmental organizations such as Attac and Greenpeace. Protesters
argue that the trade agreements would favor industrialized agricultural
processes over craft-based food production that’s not genetically engineered.
They say the deals would cost thousands of jobs and lead to lower standards in
employment and food safety.
Warning Indicator for China Banking Stress Climbs to Record
- (www.bloomberg.com) A warning indicator for banking stress rose to
a record in China in the first quarter, underscoring risks to the nation and
the world from a rapid build-up of Chinese corporate debt. China’s
credit-to-gross domestic product “gap” stood at 30.1 percent, the highest for
the nation in data stretching
back to 1995, according to the Basel-based Bank for International Settlements.
Readings above 10 percent signal elevated risks of banking strains, according
to the BIS, which released the latest data on Sunday. The gap is the difference
between the credit-to-GDP ratio and its long-term trend. A blow-out in the
number can signal that credit growth is excessive and a financial bust may be
looming.
Wells
Fargo's Chief Risk Officer Of Scandal-Plagued Group Leaves For "Personal
Reasons" - (www.zerohedge.com) What a difference a week makes. Just days after
it was revealed that Carrie Tolstedt, the supervisor in charge of Wells Fargo's
infamous consumer banking group where employees falsified and fabricated more
than 2 million customer accounts was leaving the bank on "golden parachute"
terms, quietly collecting a $125 million parting gift in
the process, moments ago Bloomberg reported that Wells Fargo's top risk manager
in the same division has taken a leave of absence and was replaced in that
role. As Bloomberg first reported, Claudia Russ
Anderson, who began a six-month leave Monday, was succeeded in August by Vic
Albrecht, who held a similar job in the wealth-management division, Richele
Messick, a spokeswoman for the San Francisco-based company, said in a phone
interview. Anderson’s leave was announced to staff in June, said Messick, who didn’t
elaborate when asked whether it was tied to a U.S. investigation into the bogus
accounts. “Claudia decided to take a personal leave of absence for personal
reasons,” Messick said. The leave takes effect a day before Chief
Executive Officer John Stumpf is scheduled to testify before the Senate Banking
Committee.
Heavy-Equipment Glut Weighs on Machine Makers - (www.wsj.com) Used
machinery is flooding the secondhand market, piling more pain on equipment
makers battling slack demand from any customer that mines, moves or refines
commodities amid a global slump in the value of everything from coal to corn. Instead
of buying a new $500,000 bulldozer or $300,000 excavator, many construction
firms and other equipment users are renting or entering longer-term leases for
machines to expand their fleets or replace worn out equipment, dealers and
analysts say. Dealers, in turn, are keeping smaller inventories of new wheel
loaders, backhoes and other machinery. That is hurting sales for Caterpillar Inc., Volvo
AB, Deere &
Co. and other manufacturers.
