Posts Tagged ‘credit system’

Credit Storm in Europe

Credit Storm in Europe

By MIKE WHITNEY writing at CounterPunch 

Munich Oktoberfest Preparations

Credit market turmoil in the Eurozone has ignited frenzied trading on global markets. On Tuesday, shares tumbled nearly 300 points on the Dow Jones before launching an unconvincing 257-point late-day comeback. Wednesday the mayhem continued; all the major indexes seesawed wildly as positive news on durable goods was nixed by  reports on wobbly EU banks. Erratic selling pushed the S&P down to 1,067 while the Dow slipped below 10,000 for the first time since February 7.  The rise in Libor (the London Interbank Offered Rate) is increasing volatility, a red flag indicating trouble in interbank lending. Banks are wary of each other’s collateral as Greece and other underwater Club Med members appear to be headed for debt-restructuring. Libor is not yet at pre-Lehman levels, but the rate that banks charge each other for short-term loans has rocketed to a 10-month high. Improving economic data have not eased fears of another meltdown or removed the rot at the heart of the system. The banks are still loaded with loans and assets that are losing value. The credit system is breaking down. 

When banks post collateral overnight for short-term loans, the collateral is effectively downgraded, limiting the banks’ access to capital. This is what triggered the financial crisis two years ago, a run on repo. Regulated "depository" institutions now rely on a funding system that operates beyond government oversight, a shadow banking system.  The banks exchange collateral, in the form of bundled securities and  bonds with institutional investors (aka—"shadow banks"; investment banks, hedge funds, insurers) via repurchase agreements (repo) for short-term loans. The repo market now rivals the  traditional banking system in terms of size but lacks the guard rails and stop signs that make the regulated system safe. The system is inherently unstable and crisis-prone as a recently released paper by the Federal Reserve Bank of New York  (FRBNY) admits. Moody’s rating agency summarized the paper’s findings like this: the tri-party repo market “will remain a major source of systemic risk, especially given the current market volatility and the fact that the Federal Reserve’s primary dealer emergency lending facilities are no longer in place…… the market remains structurally vulnerable to a repo run…… If cash investors pulled away in a stressed environment, the clearing banks would be faced with a choice (as they were several times in 2008)…
continue reading


Tags: , , , , , , , , , , , , , , , , , , , , ,




Is The Credit System Broken?

Is The Credit System Broken?

Courtesy of Tom Lindmark at But Then What

credit system broken?

Cash strapped American consumers are increasingly walking away from their obligations. It started with houses that they couldn’t afford and now it’s spreading to other types of debt.

From the NYT:

Those on the front lines of the debt industry say there is a small but increasingly noticeable group of strapped consumers who, like Ms. Birks, are deciding they will simply stop paying. After loading up on debt eagerly provided by the card companies during the boom times, these people now find themselves trapped in an endless cycle where they are charged interest on interest and fees upon fees while the lenders get government bailouts.

They are upset — at the unyielding banks and often at their free-spending selves — and are pre-emptively defaulting. They could continue to pay for a while longer but instead are walking away. “You reach a point where you embrace the darkness of default,” said Adam Levin, chairman of the financial products Web site Credit.com.

The lending industry term for these people is “ruthless defaulters.” In a miserable economy where paychecks, savings and expectations are all diminished, their numbers will surely grow.

“They’ve done the math on their account and they’re very angry,” said Corey Calabrese, a Fordham Law student who is an administrator of the school’s walk-in clinic for debtors at Manhattan Civil Court. Public sentiment is on their side, she added: “For the first time, Americans are no longer blaming the borrower but are looking at the credit card companies.”

I shouldn’t think that this comes as a surprise to anyone. Americans have shown a willingness to walk away from their homes and the associated debt that most never believed existed. It was only a matter of time until that attitude spread to other forms of debt. The concept that one had a moral obligation to repay borrowed money vanished somewhere along the way and it’s taken a severe recession to bring that fact to light.

As they watch the banks they believe induced them to take on unreasonable debt receive serial bailouts and then argue about how many millions of dollars they should be allowed to pay their employees the cynicism grows. If them why not me becomes the rationale for default. Those pesky unintended consequences once again rear their…
continue reading


Tags: , , ,




 
 
 

Phil's Favorites

What Doug Jones's win means for Mitch McConnell, Steve Bannon and the Democrats

 

What Doug Jones's win means for Mitch McConnell, Steve Bannon and the Democrats

Courtesy of David C. BarkerAmerican University

Senate Majority Leader Mitch McConnell calls for Roy Moore to step aside. He later said “let the voters decide.” AP Photo/J. Scott Applewhite

Here’s the thing about selling your soul: The devil had better deliver. It’s one thing to be damned; it’s another to be a damned loser.

This is the difficult lesson that the Republican National Committee and much of the GOP are learning right now, in the wake of Ro...



more from Ilene

Zero Hedge

Alibaba Launches Giant Car Vending Machines In China

Courtesy of Zero Hedge

Shares of Alibaba fell on Thursday morning, despite an exciting news story involving the Chinese e-commerce juggernaut, which is rushing to shake up the way people buy cars in China. Alibaba seems to be taking a page from Amazon’s acquisition of Whole Foods, with the continued push into physical retail. The plan outlined by Alibaba, is to open two giant car vending machines in early 2018, shaped like a futuristic tubular building with a giant cat’s head on top.

Having monopolized the online world, Alibaba continues to push offline with investments in Chinese bricks and mortar retailers.

Alibaba CEO Daniel Zhang said back in November, “physical store...



more from Tyler

Chart School

Tape Reading - Dow Jones Price Waves

Courtesy of Read the Ticker.

This is a continuation of price wave analysis.

More from RTT Tv

RTT Volume wave analysis like this helps the retail investor find price action that is true. The reference to 'tape reading' is by the definition of Richard Wyckoff (section 5M of the Wyckoff Course), you can learn more about RTT Volume Wave here.





NOTE: readtheticker.com does allow users to load objects and text on charts, however some annotations are by a free third party image tool named Paint.net ...

more from Chart School

Insider Scoop

Attention Contrarians: This Analyst Says JD.com Set Up Could Be In Your Favor

Courtesy of Benzinga.

Related JD Want Some Exposure To China's Growth? Stifel Says Buy JD Or Alibaba Q3 13F Roundup: How Buffett...

http://www.insidercow.com/ more from Insider

Biotech

Designer proteins that package genetic material could help deliver gene therapy

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

 

Designer proteins that package genetic material could help deliver gene therapy

Courtesy of Ian HaydonUniversity of Washington

Delivering genetic material is a key challenge in gene therapy. Invitation image created by Kstudio, CC BY

If you’ve ever bought a new iPhone, you’ve experienced good packaging.

The way the lid slowly separates from the box. The pull...



more from Biotech

Digital Currencies

Not A Bubble?

Courtesy of ZeroHedge. View original post here.

Meet The Crypto Company - up almost 20,000% since inception in September...

To a market cap of over $12.6 billion...

Grant's Interest Rate Observer drew the world's attention to this 'company' yesterday.....



more from Bitcoin

ValueWalk

Tax Bill May Spark Exodus From High-Tax States

Courtesy of FinancialSense.com via ValueWalk.com

The following is a summary of our recent podcast, “Exodus – The Major Wealth Migration,” which can be listened to on our site here on on iTunes here.

It’s looking increasingl...



more from ValueWalk

Members' Corner

An Interview with David Brin

Our guest David Brin is an astrophysicist, technology consultant, and best-selling author who speaks, writes, and advises on a range of topics including national defense, creativity, and space exploration. He is also a well-known and influential futurist (one of four “World's Best Futurists,” according to The Urban Developer), and it is his ideas on the future, specifically the future of civilization, that I hope to learn about here.   

Ilene: David, you base many of your predictions of the future on a theory of historica...



more from Our Members

Mapping The Market

Puts things in perspective

Courtesy of Jean-Luc

Puts things in perspective:

The circles don't look to be to scale much!

...

more from M.T.M.

OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



more from OpTrader

Promotions

NewsWare: Watch Today's Webinar!

 

We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

Join our webinar, free, it's open to all. 

Just click here at 1 pm est and join in!

[For more information on NewsWare, click here. For a list of prices: NewsWar...



more from Promotions

Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.

CLICK ON CHART TO ENLARGE

EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...



more from Kimble C.S.

All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

more from David



FeedTheBull - Top Stock market and Finance Sites



About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

Learn more About Phil >>


As Seen On:




About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

Market Shadows >>