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)…
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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…
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Phil's Favorites

Momentum Monday - Growth Stocks Have COVID and Ivanhoff Lived

 

Momentum Monday – Growth Stocks Have COVID and Ivanhoff Lived

Courtesy of Howard Lindzon

Happy ‘markets closed’ Monday as we pay respects to Martin Luther King Jr.

Last week Ivanhoff had COVID, but the young scrappy man beat it.

We cannot say the same things about growth stocks which continue to struggle from the financial cocktail aftermath of it.

Here is this week’s episode of Momentum Monday. You can watch/listen right here or I have embedded it on my blog below:

Here a I...



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ValueWalk

Trillium Gold Mines (TSXV:TGM): How This Gold Company Might Hedge your Inflation Risk

By Adam Torkildson. Originally published at ValueWalk.

Investors are concerned about inflation and justifiably so. Consumer prices spiked in 2021 to levels not seen in decades in the U.S. and Canada; in fact, for most global economies, 2021 marked a sharp break from what has been an unusually long period of low-to-moderate inflation. Are we headed for a repeat of the 1970s when inflation reached double digits? If your investment does not generate sufficient returns to beat inflation, one thing is certain – inflation can erode the value of your portfolio, even if you maintain positive returns year-over-year. Many younger investors have never faced this invisible drain on their purchasing power.

Historically, gold as an asset class has proved its worth time and time again as an effective hedge against inflation and econ...



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Politics

What Supreme Court's block of vaccine mandate for large businesses will mean for public health: 4 questions answered

 

What Supreme Court’s block of vaccine mandate for large businesses will mean for public health: 4 questions answered

New York City’s vaccine mandates are unaffected by the court ruling. AP Photo/Mary Altaffer

Courtesy of Debbie Kaminer, Baruch College, CUNY

The U.S. Supreme Court on Jan. 13, 2022, blocke...



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Zero Hedge

Ghislaine Maxwell Will No Longer Fight To Keep Epstein 'John Does' Secret; Suspected Of 'Intimate Relationship' With Prince Andrew

Courtesy of ZeroHedge View original post here.

Convicted sex offender and UK socialite Ghislaine Maxwell will no longer appose keeping "vast swaths of information" about her "sex trafficking operation" with Jeffrey Epstein sealed, after accuser Virginia Roberts Giuffre requested they be made public, according to the Daily Mail.

One of Maxwell's lawyer stated in a letter to federal judge Loretta Preska last week that the defense team will no l...



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Chart School

US Dollar Short Term Cycle Peak Near - Update

Courtesy of Read the Ticker

The short term US Dollar cycle peak is upon us, it is time for capital flows to rule the direction of the DXY.



Previous Post: US Dollar Short Term Cycle Peak Near



Capital flows and interest rate differentials move currency around.



If capital flows take over, then they DXY is going into the 80's at least. Of course hiking rates 4 times is easier on the world when the DXY is near 80 rather than 95. A lot if US debt held by emerging markets is at risk otherwise. And yes a lower US dollar in early 2022 helps China out, as it suppo...



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Biotech/COVID-19

What Supreme Court's block of vaccine mandate for large businesses will mean for public health: 4 questions answered

 

What Supreme Court’s block of vaccine mandate for large businesses will mean for public health: 4 questions answered

New York City’s vaccine mandates are unaffected by the court ruling. AP Photo/Mary Altaffer

Courtesy of Debbie Kaminer, Baruch College, CUNY

The U.S. Supreme Court on Jan. 13, 2022, blocke...



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Digital Currencies

The metaverse is money and crypto is king - why you'll be on a blockchain when you're hopping

 

The metaverse is money and crypto is king – why you’ll be on a blockchain when you’re virtual-world hopping

In the metaverse, your avatar, the clothes it wears and the things it carries belong to you thanks to blockchain. Duncan Rawlinson - Duncan.co/Flickr, CC BY-NC

Courtesy of Rabindra Ratan, Michigan State University and Dar Meshi, Michigan State University ...



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Kimble Charting Solutions

Inflation About To Blast Off or Is The Peak In Play?

Courtesy of Chris Kimble

Current data suggests that inflation has been in our everyday lives for several months. And today’s Producer Price Index data was pretty ugly.

BUT… could inflation be peaking?

Today’s chart 2-pack offers a glimpse of why inflation could subside over the near-term.

Here we look at the “monthly” chart of the US Dollar and Euro currencies. It’s pretty easy to see the rising trend channel for the US Dollar and falling trend channel for the Euro. As well, both currencies have formed a wedge pattern, with the US Dollar testing resistance and the Euro testing support.

Shou...



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Promotions

Phil's Interview on Options Trading with TD Bank

TD Bank's host Bryan Rogers interviewed Phil on June 10 as part of TD's Options Education Month. If you missed the program, be sure to watch the video below. It should be required viewing for anyone trading or thinking about trading using options. 

Watch here:

TD's webinar with Phil (link) or right here at PSW

Screenshots of TD's slides illustrating Phil's examples:

 

 

&n...



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Mapping The Market

Suez Canal: Critical Waterway Comes to a Halt

 

Suez Canal: Critical Waterway Comes to a Halt

Courtesy of Marcus Lu, Visual Capitalist

The Suez Canal: A Critical Waterway Comes to a Halt

On March 23, 2021, a massive ship named Ever Given became lodged in the Suez Canal, completely blocking traffic in both directions. According to the Suez Canal Authority, the 1,312 foot long (400 m) container ship ran aground during a sandstorm that caused low visibility, impacting the ship’s navigation. The vessel is owned by Taiwanese shipping firm, Evergreen Marine.

With over 2...



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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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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...

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