Debt
pile-up in US car market sparks subprime fear - (www.ft.com) Kathy Boluch was in a
bit of a state when she visited her local used-car dealership in Quincy,
Massachusetts. The rear of her Volvo had been hit by a drunk driver and her
insurer was badgering her to buy another vehicle so she could return the rental
car it had given her. But her low credit score and irregular income
disqualified her from every loan available — until the guys out the back called
Santander. Within a couple of hours she was driving off in an $18,000 Chevrolet
sport utility vehicle, financed with a $16,000 loan from Santander Consumer
USA, the auto-loans division of Spain’s biggest bank. To clinch the deal, the
salesman suggested that Ms Boluch, a freelance copywriter, help out the
dealership with promotions. He even listed her as an employee on the loan
application. But the work never came. Five years on, Ms Boluch, 60, is still
paying $350 a month to bring down an outstanding balance of about $10,000.
Meantime, she has spent another $7,000 on repairs to a “terrible” car that
would now fetch about $750 in a sale.
Global
Pension Underfunding Will Grow To $400 Trillion Over Next 30 Years: World
Economic Forum - (www.zerohedge.com) ... turns out that politicians creating massive
ponzi schemes to promise citizens that their government would take care of
their financial needs in perpetuity, while never really bothering to explain
the true costs of such programs, was probably a bad idea. Earlier this week we highlighted "Six Terrifying Graphs That Summarize America's Public Pension Crisis" which ranked state, county and city-level public pensions in the
United States by which are screwed the most. To summarize, the study concluded that public pensions in the U.S. alone are
currently underfunded by nearly $4 trillion and that taxpayers in Illinois,
California and New Jersey should probably be looking to move before getting
drowned in their state's coming pension-induced tax hike tsunami.
Of course, as we've argued before, the current pension
underfunding levels are sure to only get worse over the coming decades as the
world will have to contend with a wave of retiring Baby Boomers and a period of
lackluster, volatile returns. So how bad could the global funding gap
get? Unfortunately, the World Economic Forum (WEF) recently
set out to solve that impossible math equation and it turns out the answer is
about $400 trillion...give or take a couple trillion.
Banco
Popular’s Co-Co Bonds Plunge as Balance Sheet Chaos Revealed in Potential
Forced Sale - (www.wolfstreet.com) Spain’s
sixth largest bank “itself cannot at this point make a rough calculation” of
what its value is, “and if they can’t, neither can we.” The current share price
of Spain’s sixth biggest bank, Banco Popular, at €0.67, is just pennies above
its lowest point ever. According to analysts at 20 different investment banks consulted by
Bloomberg, the “objective” value of those shares could be anything from €1.50
(Oddo & Cie) to €0.25 (Kepler Cheuvreux). There’s good reason for this
uncertainty: Popular’s books are filled with impaired real estate assets that
date back to before the collapse of Spain’s gargantuan real estate bubble. They
are now in varying stages of decomposition. And the prices at which they’ve
been valued on the bank’s books appear to have little relation with today’s
reality. It now turns out that not even Popular’s management knows what’s
really going on on Popular’s books.
Peso Pounded As Political Risk Re-Emerges In Mexico - (www.zerohedge.com) The Mexican peso tumbled more than 1% this morning, more than every
other major emerging-market currency except the South African rand. Bloomberg reports that traders were anticipating
a victory for the opposition Morena party in this weekend’s gubernatorial
elections in the state of Mexico, according to Win Thin, Brown
Brothers Harriman & Co.’s head of emerging markets in New York. And the
peso is back at one-week lows. Peso also hurt by negative sentiment towards
emerging markets, as South African President Jacob Zuma quashed a revolt
in his own party, denting optimism a more
market-friendly leader will take over...
Global
debt woes are building up to a tidal wave - (www.ft.com) Virtually
every class of US debt — sovereign, corporate, unsecured household/personal,
auto loans and student debt — is at record highs. Americans now owe $1tn in
credit card debt, and a roughly equivalent amount of student loans and
auto-loans which, like the subprime mortgage quality that set off the 2008
financial crisis, are of largely low credit quality (and therefore high risk).
US companies have added $7.8tn of debt since 2010 and their ability to cover
interest payments is at its weakest since 2008, according to an April
International Monetary Fund report. With total public and private debt
obligations estimated at 350 per cent of gross domestic product, the US
Congressional Budget Office has recently described the path of US debt (and
deficits) as almost doubling over the next 30 years. But this is not just a US
phenomenon. Globally, the picture is similarly precarious, with debt stubbornly
high in Europe, rising in Asia and surging across broader emerging markets. A
decade on from the beginning of the financial crisis, the world has the makings
of a fresh debt crisis.
Fed
Officials Likely to Raise Rates in June, Finalize Plans to Reduce Portfolio
- (www.wsj.com)
GOP’s Proposed Tax Changes Are No Match for Status Quo - (www.wsj.com)
China’s shadow banking crackdown shakes markets - (www.ft.com)
GOP’s Proposed Tax Changes Are No Match for Status Quo - (www.wsj.com)
China’s shadow banking crackdown shakes markets - (www.ft.com)
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