Economic Collapse and Financial Apocolypse



Apr 24, 2015

Asia

How Analysts Think Deutsche Bank Should Restructure

Reuters

FRANKFURT — Deutsche Bank AG’s supervisory and executive boards are meeting Friday in a move that might result in a decision on the future strategy, which the bank has been promising for months.

As reported by The Wall Street Journal, most members of the executive board are leaning towards an option involving a sale of the retail unit Postbank. Another, more radical option, would be parting with the entire retail operations that include Postbank and Deutsche Bank’s own retail activities.

This is what analysts are recommending.

J.P. Morgan Cazenove recommends a six step plan:

1. A Sale of the 19.99% stake in Chinese lender Hua Xia, which J.P. says is worth €3.3 billion. Deutsche started to build a stake in HuaXia in 2006 to increase its footprint in the country.

2. Reducing stake in Postbank from 94% to 44% and splitting the unit from Deutsche’s accounts

3. Strategic sale of the European retail businesses in countries including Italy, Spain, Belgium and Poland

4. Reduction of exposure leverage in the investment bank by €115 billion, or 14%, from 2014 level of estimated €841billion.

5. Achieve “True” Cost Savings of €3.2 billion by 2017 in remaining businesses

UBS in a report a couple of weeks ago said that scenario 3 – bundling all retail activities into one entity and then floating – has the highest probability for three reasons:

1) Risk-weighted assets inflation — caused by new regulations that will likely force Deutsche Bank to be more conservative in calculating risk-weighted assets — is continuing and will particularly be relevant for Deutsche Bank.

2) Following the Liikanen Report of October 2012, the discussion about separating investment banking and commercial banking operations is continuing, particularly in Germany. Scenario 3 could satisfy this.

3) Deutsche Bank management would not have to undergo another multi-year deep restructuring of the PBC [Private and Business Clients] business but could “delegate” this job to the new management of the listed entity acting under direct  pressure from the entity’s shareholders, say UBS’s analysts.

Citigroup‘s central scenario assumes some form of break-up between the bank’s retail and wholesale businesses to support a better-capitalized investment bank, which would be well-placed to benefit from higher volatility, combined with a significant asset and wealth management franchise. “While near-term returns are likely to be weighed down by litigation & Non-Core drag, DBK offers restructuring potential.”

Jefferies thinks Deutsche Bank has two key long term issues: leverage and expenses.

“We think a sale of [the entire retail operation] would go a long way to addressing both. Retail is the problem at Deutsche Bank, which should take Goldman Sachs as an example that a high quality investment bank can stand on its own and achieve a premium valuation.” Jefferies notes that one of the key concerns around Deutsche selling its retail franchise is that it would negatively impact the remaining bank’s net stable funding ratio.

Nomura thinks a sale of Postbank could be done close to the purchase price and generate roughly 1% of CET1 capital — a measure of equity capital compared with risk-weighted assets — but the double-digit earnings-per-share dilution would make this an unattractive option. A sale of the entire retail bank would likely increase Deutsche Bank’s funding costs for the investment banking rump. That and the systematic surcharges for big investment banks would also make this an unattractive option.

Yet, some retail disposals would make more sense, Nomura adds. It advises a sale of the stake in HuaXia. Like other analysts, Nomura says a deeper restructuring of the investment bank will be unavoidable.

Credit Suisse thinks a Postbank IPO and sale of Hua Xia would be well received. The resulting benefits to Deutsche Bank’s own retail operations and the capital freed-up would be material (€7.7 billion, $8.3 billion), they say. This should alleviate capital concerns although “we would not expect this ‘excess’ to be fully redistributed” to shareholders. Longer term, an increase in profitability for the group would be more muted, as the profit contribution of the remaining retail banking operations would be diluted. Liquidity and the risk profile would deteriorate leading to higher costs of equity, Credit Suisse thinks.

Bottom line? “A disposal of the entire retail operations might sound like a compelling and relatively straightforward option. But this would be a very complex and time-consuming process with very little visibility on the potential returns for shareholders, in our view,” say the Credit Suisse analysts.

Morgan Stanley says whilst the option to divest Postbank is intriguing, a sale of Postbank has a good chance to not be hugely value-enhancing. That is because Deutsche Bank has legacy issues like a large, risky non-core portfolio and pending litigations. Morgan Stanley also says that Deutsche Bank’s investment bank roughly uses twice the leverage exposure of Goldman Sachs to extract the same profit. The analysts therefore warn that cutting assets at the investment bank will curb revenues.

http://blogs.wsj.com/moneybeat/2015/04/24/how-analysts-think-deutsche-bank-should-restructure/

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THERE'S A NEW WORLD ATTITUDE TOWARDS THE USA. THEY ARE NOW AWARE OF THE ILLUMINATI'S SCHEME TO CONTROL THE WORLDS MONEY SYSTEM AND ALSO
THE USA'S SHADOW GOVERNMENT THAT USED BRIBERY AND EXTORTION TO CONTROL  INDUSTRY, FOREIGN POLITICAL ENTITIES AND SO ON. THE BRICS AND
ASSOCIATED COUNTRIES ARE NOT TAKING IT ANYMORE AND IN SEVERAL MOVES TOWARDS COMBATING THE DEVILS PUPPET NATION THE UNITED STATES OF
SATAN, THINGS ARE CHANGING.

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Legend Who Oversees $170 Billion Issues Dire Warning About Global Financial

Markets!

March 10, 2015
Legend Who Oversees $170 Billion Issues Dire Warning About Global Financial Markets!

On the heels of the Dow plunging more than 330 points and the U.S. dollar surging, a legendary chairman & CEO

overseeing more than $170 billion, who is one of the most respected men in the financial world, issued a dire warning

to King World News about global financial markets.

Rob Arnott:  "The faster earnings have risen the more vulnerable they've become.  So when you have a crash in oil prices

and a crash in energy earnings as a result, you're going to get a crash in capital goods expenditures and it ripples across

the economy….

Continue reading the Rob Arnott interview below…


"So what we're likely to see is that 2015 earnings will disappoint and that earnings expectations will ratchet lower.  Now,

is the market priced to absorb disappointments in earnings?  I'm not so sure."

Eric King:  "Rob, Is this another mania?"

Rob Arnott:  "Well it is and it isn't.  Basically deficit spending and monetary stimulus create false earnings…It's bad for the

macroeconomy but it's good for those who provide goods and services to the government and the financial services

sector.

King World News -Gerald Celente - This Will Cause Panic In Global Markets and Cause Gold To Skyrocket!

Entitlement for the 1%

So has the fed created an entitlement for the 1%?  Has ramped up government spending created an entitlement for

the 1%?  Perhaps.  Are the affluent entitled to Fed intervention to prevent markets from correcting?  Well, that's a weird

entitlement but they're certainly expecting it — that if the markets correct, the Fed will jump in with QE4.

Are we entitled to government bail-outs and Fed intervention to prevent over-leveraged companies from bearing the

consequences of their mistakes?  That's what we seem to have and that's why Main Street is so annoyed with us.

King World News - Imitation Of Capitalism

Warped Imitation Of Capitalism

So what we have is a rather warped imitation of capitalism that doesn't allow those who make mistakes to fail.  That's

kind of sad, because effective capitalism has to allow those who make really dumb blunders to clear the landscape. 

To allow those with good ideas, good products, and well run businesses, to thrive, to prosper and to build new businesses,

innovations, inventions and to employ people in new jobs that are effective that bring something beneficial to the

economy.

I'm a capitalist, I love profits but I want profits based on a booming economy, not profits based on a transfer from a stalled

economy into shareholder pockets based on deficit spending and monetary ease.  So, if this has been a profits bubble,

how long can profits stall?  It turns out they can stall for a long, long time.

It's fascinating, if you go back historically and you look at the real earnings — earnings adjusted for inflation — for the

broad stock market, the 1916 peak in earnings wasn't exceeded until 1955…I'm saying that it can take a while for peak

earnings to be exceeded.  It took 15 years to convincingly beat the 1980 earnings peak for the S&P 500.  It took 20 years

for the 1929 earnings peak to be exceeded.  It took 19 years for the 1880 peak to be exceeded.  So when you have a

profits bubble, it can take a while for earnings peaks to be exceeded.  We need to be aware of that risk."

Eric King:  "Rob, I also want to ask you about a piece that we put out, Insiders Now Dumping Massive Amounts Of Stock.  

We have the chart there showing insiders are selling their stock as fast as they can — almost in record numbers.  What do

you make of that?"

Robert Arnott:  "… Are you (company insiders) going to use the free money, the very low interest rates to borrow money

and buy back stock?  And what are you going to do with your own stock?  Sell your (company insiders) own stock, and

use the borrowed (company) funds to buy back stock.

King World News - Just Buy The Fucking Dip Setting Up The Mother Of All Stock Market Crashes

Phony Stock Buybacks

And one of the things I think is fascinating about stock buybacks is some of them are phony.  If you look at stock buybacks,

the announced stock buybacks are prodigious, big, and a lot of them are real buybacks.  How do I distinguish a real

buyback from a phony buyback?  Look at the aggregate float of a company.  Is it going down?  

What's a phony buyback?  Company announces a buyback and then pairs it with management stock option redemption's

so that the management redeems stock options, sells their stock, the company buys back stock and the float hasn't

changed.




King World News - Spade Quote

Let's Call A Spade A Spade

If the float hasn't changed it's not a buyback, it's management compensation. Let's call it compensation, let's not call it

buybacks.

I have no problems with management earning oodles of money if they're making oodles of money for their shareholders. 

I do have a problem calling it a buyback, when all it is back-door compensation for management.

But actual stock buybacks that reduce the float, that's about half of the total.  The other half is actually just management

compensation.  And that's a lot of what you are talking about — management actually liquidating their ownership.

Eric King:  "Rob, we still don't have the massive participation by the public (in the stock market).  We do see margin debt

at all-time highs but we don't necessarily see the public completely in this market.  Are you watching indicators like that?"

Rob Arnott:  "Yes … Anyone buying stocks in the US at these levels is making one of two bets:  They're either saying,

'I believe this market is cheap, I believe this market is priced to offer better long-term returns than other markets I could

invest in.'  Well, I don't believe that.

King World News - Mark Twain - Quote

The Greater Fool

Or they're saying, 'I believe I have a sell discipline and the market may be expensive but I believe I'll find a greater fool

to sell to.  I will use my sell discipline to sell to that greater fool at a higher price.  I'll hear the bell chime before the

merry-go-round stops and I'll hear the chime before others hear it chime.'  I don't believe I have that special expertise. 

So this is a game I just choose not to play." Rob Arnott's remarkable audio interview has now been released and you

can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.   The legend who oversees $170 billion discusses exacty

what investors need to be focused on and what surprises to expect in 2015.

http://kingworldnews.com/legend-who-oversees-170-billion-issues-dire-warning-about-global-financial-markets/

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Insights & Publications

Report| McKinsey Global Institute

Debt and (not much) deleveraging

February 2015 | byRichard Dobbs, Susan Lund, Jonathan Woetzel, and Mina Mutafchieva

Download

Full Report also attached for download at the bottom of the page!

Seven years after the bursting of a global credit bubble resulted in the worst financial crisis since the Great Depression, debt continues to grow. In fact, rather than reducing

indebtedness, or deleveraging, all major economies today have higher levels of borrowing relative to GDP than they did in 2007. Global debt in these years has grown by $57 trillion,

raising the ratio of debt to GDP by 17 percentage points (Exhibit 1). That poses new risks to financial stability and may undermine global economic growth.

Exhibit 1

Since the Great Recession, global debt has increased by $57 trillion, outpacing world GDP growth.

A new McKinsey Global Institute (MGI) report, Debt and (not much) deleveraging, examines the evolution of debt across 47 countries—22 advanced and 25 developing—and assesses

the implications of higher leverage in the global economy and in specific sectors and countries. The analysis, which follows our July 2011 report Debt and deleveraging:

The global credit bubble and its economic consequences and our January 2012 report Debt and deleveraging: Uneven progress on the path to growth, focuses on the debt of the

“real economy”: governments, nonfinancial corporations, and households. It finds that debt-to-GDP ratios have risen in all 22 advanced economies in the sample, by more than 50

percentage points in many cases (Exhibit 2).

Exhibit 2

The ratio of debt to GDP has increased in all advanced economies since 2007.

In our study, we pinpoint three areas of emerging risk: the rise of government debt, which in some countries has reached such high levels that new ways will be needed to reduce it;

the continued rise in household debt—and housing prices—to new peaks in Northern Europe and some Asian countries; and the quadrupling of China’s debt, fueled by real estate and

shadow banking, in just seven years.

Podcast

Global economy has more debt after financial crisis, not less

MGI’s Richard Dobbs and Susan Lund discuss the implications of higher leverage in the global economy, as well as innovations that could help countries avoid future crises.

Here’s a closer look at those challenges, as well as some innovations that could help global economies to live safely with their current levels of debt and to avoid future crises:

Government debt is unsustainably high in some countries. Since 2007, government debt has grown by $25 trillion. It will continue to rise in many countries, given current economic

fundamentals. Some of this debt, incurred with the encouragement of world leaders to finance bailouts and stimulus programs, stems from the crisis. Debt also rose as a result of the

recession and the weak recovery. For six of the most highly indebted countries, starting the process of deleveraging would require implausibly large increases in real-GDP growth or

extremely deep fiscal adjustments. To reduce government debt, countries may need to consider new approaches, such as more extensive asset sales, one-time taxes on wealth, and

more efficient debt-restructuring programs.

Household debt is reaching new peaks. Only in the core crisis countries—Ireland, Spain, the United Kingdom, and the United States—have households deleveraged. In many others,

household debt-to-income ratios have continued to rise. They exceed the peak levels in the crisis countries before 2008 in some cases, including such advanced economies as Australia,

Canada, Denmark, Sweden, and the Netherlands, as well as Malaysia, South Korea, and Thailand. These countries want to avoid property-related debt crises like those of 2008.

To manage high levels of household debt safely, they need more flexible mortgage contracts, clearer personal-bankruptcy rules, and tighter lending standards and macroprudential rules.

China’s debt has quadrupled since 2007. Fueled by real estate and shadow banking, China’s total debt has nearly quadrupled, rising to $28 trillion by mid-2014, from $7 trillion in

2007. At 282 percent of GDP, China’s debt as a share of GDP, while manageable, is larger than that of the United States or Germany. Three developments are potentially worrisome:

half of all loans are linked, directly or indirectly, to China’s overheated real-estate market; unregulated shadow banking accounts for nearly half of new lending; and the debt of many

local governments is probably unsustainable. However, MGI calculates that China’s government has the capacity to bail out the financial sector should a property-related debt crisis

develop. The challenge will be to contain future debt increases and reduce the risks of such a crisis, without putting the brakes on economic growth.

These challenges need to be addressed. Yet if, as it appears, economies need ever-larger amounts of debt to grow, and deleveraging is rare and increasingly difficult, they may also

need to learn to live more safely with high debt. That will require new approaches to manage and monitor it, to reduce the risk of crises, and to resolve private-sector defaults efficiently.

Policy makers will need to consider more ways to reduce government debt, and it may be time to reevaluate how incentives in the tax system encourage the amassing of debt. When

there are signs of credit bubbles, regulators can seek to cool markets with countercyclical measures, such as tighter loan-to-value rules and higher capital requirements for banks. Debt

undoubtedly remains an essential tool for financing economic growth. But how it is created, used, monitored, and (when necessary) discharged still needs improvement.

This is the third of three McKinsey Global Institute reports on this issue. The others are Debt and deleveraging: The global credit bubble and its economic consequences (July 2011)

and Debt and deleveraging: Uneven progress on the path to growth (January 2012).

About the authors

Richard Dobbs and Jonathan Woetzel are directors of the McKinsey Global Institute, where Susan Lund is a partner; Mina Mutafchieva is a consultant in McKinsey’s Antwerp

office.

Correction:

A previous version of this report included incorrect data for Sweden’s government and corporate debt. The report was updated on February 5 and now correctly shows Sweden’s

government debt as 42 percent of GDP and corporate debt as 165 percent of GDP as of Q2 2014.

http://www.mckinsey.com/insights/economic_studies/debt_and_not_much_deleveraging?AID=7236

Download Executive Summary (PDF–763KB)

Download Full Report (PDF–3MB)

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World record debt of $199trn could drag economies into another crisis - study

Published time: February 06, 2015 10:53
Edited time: February 06, 2015 16:28
Reuters/Yves Herman

Reuters/Yves Herman

Global debt has soared by $57 trillion since the outbreak of the financial crisis in 2007, with the debt to GDP ratio jumping to above 500 percent in Japan. This raises questions about

financial stability and poses a threat of another crisis.

“After the 2008 financial crisis and the longest and deepest global recession since World War II, it was widely expected that the world’s economies would deleverage. It has not

happened. Instead, debt continues to grow in nearly all countries, in both absolute terms and relative to GDP. This creates fresh risks in some countries and limits growth prospects

in many,” according to new research carried out by consultants McKinsey in 47 countries.

The amount of world debt reached $199 trillion at the end of 2014, with the growth rate exceeding the pace of global economic expansion and the debt to GDP ratio increased from 269

to 286 percent.

“Higher levels of debt pose questions about financial stability and whether some countries face the risk of a crisis.”

Source: Debt and (not much) deleveraging, McKinsey Global Institute

Source: Debt and (not much) deleveraging, McKinsey Global Institute

“We conclude that, absent additional steps and new approaches, business leaders should expect that debt will be a drag on GDP growth and continue to create volatility and fragility

in financial markets,”the McKinsey report says.

Deleveraging remains limited to a handful of sectors in some countries. The only countries that managed to cut their debt were Argentina, Romania, Egypt, Saudi Arabia and Israel.

Geographically, Ireland was the country where the debt to GDP ratio saw a record increase – of 172 percent. The ratio in Japan added 64 percent and remains the world’s highest at

400 percent. In Russia, the debt to GDP ratio saw a moderate growth by 19 percent, remaining relatively low at 65 percent.

Source: Debt and (not much) deleveraging, McKinsey Global Institute

Source: Debt and (not much) deleveraging, McKinsey Global Institute

China is one of the key concerns as debt there has skyrocketed almost quadrupling, from $7.4 trillion in 2007 to $28.2 trillion in mid-2014. The debt-to-GDP ratio reached 282 percent

comparing to 269 percent of the US. Although total Chinese debt is still manageable, experts are concerned with worrisome levels of debt in the property sector and the rapid expansion

of shadow banking.

“China’s total debt, as a percentage of GDP, now exceeds that of the United States.”

Falling debt in the financial sector and a retreat in many of the riskiest forms of shadow banking are the only bright spots in the report. But the overall global debt burden “has reached

new levels despite the pain of the financial crisis,” the report said.

Households across the world have also significantly increased their debt, with their debt relative to income having decreased in only five advanced economies - the United States, Ireland,

the United Kingdom, Spain, and Germany. In such developed countries as Australia, Canada, Denmark, Sweden and the Netherlands, as well as Malaysia, South Korea and Thailand,

the debt exceeds the pre-crisis level.

To avoid another crisis, the governments might take recourse to new ways of reducing the national debt such as larger sales of assets, non-recurrent wealth taxes and more effective

programs of debt restructuring, the report said.

“Policy makers will need to consider a full range of responses to reduce debt as well as innovations to make debt less risky and make the impact of a future crisis less catastrophic.”

http://on.rt.com/s6gs0k
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Economy

Iran bans the dollar in foreign trade

8
Iran bans the dollar in foreign trade

25-01-2015 11:44 AM

The Governor of the Central Bank of Iran, Gholam Ali Kamiyab, his decision not to deal in US currency in terms of trade with the
outside world, both in imports or exports.

The news agency 'Tasneem' Iranian news Kamiyab Ali as saying that his country had decided 'not to use the US dollar from now on
in its foreign trade.'

The Iranian official said that Tehran will replace the dollar and other foreign currencies such as the euro and the Turkish lira and
Chinese yuan and the Russian ruble.

Iran and tend to conclude currency swaps with several countries agreements, according to Ali Kamiyab, without mentioning the countries involved in these agreements and the date
signed.

Iran used Chinese yuan instead of the dollar to sell oil to Beijing, which is the largest trading partner of Tehran.

http://translate.google.com/translate?depth=2&hl=en&rurl=translate.google.com&sandbox=0&sl=ar&tl=en&u=http://www.ahraraliraq.com/index.php%3Fpage%3Darticle%26id%3D39170
___________________________________________________________________________________________________________________________________________________

Collapse Of Financial System Will Come In August, Maybe September:

Market-Watchers

Did the Mayans Get The Timing Wrong

By Eleazar David Meléndez: Subscribe to Eleazar's RSS feed

June 29, 2012 10:33 AM EDT

Who said the dog days are over?

Disappointed by the lack of aggressive action by the U.S. Federal Reserve at the meeting of its powerful rate-setting committee last week, and assuming a wait-and-see posture on results from

this week's European summit, pessimistic market-watchers are turning once again to guessing when the clock atop the euro zone time-bomb will finally run to 0.

The consensus? The world economy has entered a final countdown with three months left, and investors should pencil in a collapse in either August or September.

Citing a theory he has been espousing since 2010 that predicts "a future lack of policy flexibility from the monetary and fiscal side," Jim Reid, a strategist at Deutsche Bank, wrote a note

Tuesday that gloated "it feels like Europe has proved us right."

"The U.S. has the ability to disprove the universal nature of our theory," Reid wrote, but "if this U.S. cycle is of completely average length as seen using the last 158 years of history (33 cycles),

then the next recession should start by the end of August."

Reid is not the only one on Wall Street invoking history to predict a late-summer crisis. Since the employment data starting looking pear-shaped in April, economists and strategists have been

quick to point out that 2012 is, in economic terms, a deja vú to 2011, when unexpectedly strong gains in manufacturing and employment during the first three months of the year fizzled coming

in the summer.

Those holding on to the "mirror image" theory point out that, if the pattern continues, things will turn sour very quickly sometime in August or September. To wit, August 2011 was the month that

brought the Standard and Poor's downgrade of the U.S. sovereign credit rating and accompanying volatility in the equity markets. It was also the month the European Central Bank acknowledged

just how badly the situation was going in Europe, stepping in to buy sovereign bonds.

Last September was not much kinder to the global economy, bringing an intensification of the crisis that prompted the Fed to begin its "Operation Twist" program of monetary accommodation.

This year, pessimists are pointing to the next meeting of the Fed's rate-setting body, on Aug. 1; the next "progress report" on Greece by the institutions providing bailout monies to that country,

also in August; or the September release of the results by auditors currently combing through the Spanish banking system, scheduled for September, as possible catalysts for the next crisis.

"Historically, August is a good month for a big European crisis," Simon Johnson, a prominent MIT economist, wrote in the New York Times' Economix blog on June 21.

Pundits and experts had been putting a deadline on the current crisis for weeks now. Earlier in June, for example, billionaire financier George Soros noted European leaders had a

"three months' window" to resolve the political factors underlying the economic crisis in the Continent.

However, the last week has seen a lot more calendar-marking, sparked by an IMF working paper on the frequency of banking crises that showed September as a huge outlier, with 24 of the

147 worldwide occurences since 1970 that the paper's authors took into account happening that month. Those results were heavily influenced by including data from the disastrous year

2008, but that did not stop doomsayers from using the very scary chart in the report to prove a point.

Frequency of Banking Crises, as Shown in IMF Working Paper
Frequency of Banking Crises, as Shown in IMF Working Paper

"The frequency with which the world goes to hell in September seems hardly random," Greg Ip, a blogger at The Economist, wrote in response to the paper. "Maybe it's because policymakers

and bankers don't confront their problems until they get back from vacation, the macro equivalent of doctors scheduling c-sections during office hours."

Not everyone is buying the theory that this year will follow history. For example, Bill McBride, who runs the notable economics blog Calculated Risk, recently penned an entry explaining why he

believes housing will cross a significant milestone in the late summer, with the year-on-year Case-Schiller Index of prices turning positive for the first time in more than six years.

"At the current pace of improvement, it looks like the YoY change will turn positive in either the August or September reports."

Year-on-Year Changes to Case-Schiller Index
Year-on-Year Changes to Case-Schiller Index

Others have adopted a more flippant attitude in the face of doom-and-gloom forecasts. A note to clients earlier this week by Art Cashin, a trading director at Swiss banking group UBS,

reported on the IMF working paper and the interpretation by The Economist.

Cashin's advice on how clients should take those news: "Try to enjoy your summer."

Follow @EleazarMelendez

To report problems or to leave feedback about this article, e-mail: e.melendez@ibtimes.com
To contact the editor, e-mail: editor@ibtimes.com



Fannie Mae loss widens, asks taxpayers for $7.8B

November 9, 2011 12:00 AM ET

By DEREK KRAVITZ

TICKERS IN THIS ARTICLE

NAMELASTCHNG% CHNG
#FNMA0.22-0.01-2.86
FNMA

WASHINGTON (AP) - Mortgage giant Fannie Mae is asking the federal government for $7.8 billion in aid to cover its losses in the July-September quarter.

The government-controlled company said Tuesday that it lost $7.6 billion in the third quarter. Low mortgage rates reduced profits and declining home prices caused more defaults

on loans it had guaranteed.

The government rescued Fannie Mae and sibling company Freddie Mac in September 2008 to cover their losses on soured mortgage loans. Since then, a federal regulator has

controlled their financial decisions.

Taxpayers have spent about $169 billion to rescue Fannie and Freddie, the most expensive bailout of the 2008 financial crisis. The government estimates that figure could reach

up $220 billion to support the companies through 2014 after subtracting dividend payments.

Fannie has received $112.6 billion so far from the Treasury Department, the most expensive bailout of a single company.

Michael Williams, Fannie's president and CEO, said Fannie's losses are increasing for two reasons: Some homeowners are paying less interest after refinancing at historically low

mortgage rates; others are defaulting on their mortgages.

"Despite these challenges, we are making solid progress," he said. For example, Fannie's rate of homeowners who are late on their monthly mortgage payments by 90 days or

more has decreased each quarter since the beginning of 2010, he said.

When property values drop, homeowners default, either because they are unable to afford the payments or because they owe more than the property is worth. Because of the

guarantees, Fannie and Freddie must pay for the losses.

Fannie said lower mortgage rates contributed to $4.5 billion in quarterly losses. While those losses are large, they are temporary and should ease in future earnings reports,

said Mahesh Swaminathan, mortgage strategist at Credit Suisse.

"They are accounting losses on their books rather than economic losses," he said.

Fannie's July-September loss attributable to common shareholders works out to $1.32 per share. It takes into account $2.5 billion in dividend payments to the government.

That compares with a loss of $3.5 billion, or 61 cents per share, in the third quarter of 2010.

Last week, Freddie requested $6 billion in extra aid — the largest request since April 2010 — after it reported losing $6 billion in the third quarter.

Washington-based Fannie and McLean, Va.-based Freddie own or guarantee about half of all mortgages in the U.S., or nearly 31 million home loans. Along with other federal

agencies, they backed nearly 90 percent of new mortgages over the past year.

Fannie and Freddie buy home loans from banks and other lenders, package them with bonds with a guarantee against default and sell them to investors around the world.

The companies nearly folded three years ago because of big losses on risky mortgages they purchased.

The Obama administration unveiled a plan earlier this year to slowly dissolve the two mortgage giants. The aim is to shrink the government's role in the mortgage system, remaking

decades of federal policy aimed at getting Americans to buy homes. It would also probably make home loans more expensive.

Exactly how far the government's role in mortgage lending would be reduced was left to Congress to decide. But all three options the administration presented would create a

housing finance system that relies far more on private money.

Copyright 2011 The Associated Press. All rights reserved.

In Less than a Minute Alan Grayson Explains Occupy Wall

Street to the 1%

October 8, 2011
By Jason Easley


While on Real Time with Bill Maher former congressman, and future 2012 House candidate, Alan Grayson explained to the panel the 1% what Occupy Wall Street is all about.

Here is the video:  http://www.politicususa.com/en/alan-grayson-occupy-wall-street

The latest edition of Real Time featured one of Bill Maher’s patented balance things out with three Republicans and a Democrat panels, but the Democrat was Alan Grayson.

While P.J. fellow panelist P.J. O’Rourke broke out his bathing and hippie jokes, former Rep. Grayson schooled him on Occupy Wall Street.

O’Rourke claimed that the Occupy Wall Street people flunked econ, and Grayson said, “No, listen Bill, I have no trouble understanding what they are talking about.” O’Rourke

asked Grayson, “You passed econ?” Grayson answered, “I was an economist for more than three years, so I think so…Now let me tell you about what they’re talking about.

They’re complaining that Wall Street wrecked the economy three years ago and nobody’s held responsible for that. Not a single person’s been indicted or convicted for destroying

twenty percent of our national net worth accumulated over two centuries. They’re upset about the fact that Wall Street has iron control over the economic policies of this country,

and that one party is a wholly owned subsidiary of Wall Street, and the other party caters to them as well.”

O’Rourke joked that Occupy Wall Street has found their spokesman, then Grayson continued, “Listen, if I am spokesman for all the people who think that we should not have

24 million people in this country who can’t find a full time job, that we should not have 50 million people in this country who can’t see a doctor when they’re sick, that we shouldn’t

have 47 million people in this country who need government help to feed themselves, and we shouldn’t have 15 million families who owe more on their mortgage than the value of

their home, okay, I’ll be that spokesman.”

Alan Grayson demonstrated why all the media complaint’s about the unclear message behind Occupy Wall Street is nonsense. It took former Rep. Grayson 37 seconds to explain

what Occupy Wall Street is about. He almost delivered the perfect 30 second sound bite, but he ran a tiny bit over. It isn’t that the one percent and the Republicans who support

them can’t understand Occupy Wall Street. It’s that they don’t want to. The message isn’t complicated.

The right has been trying to play on the fears of some who support Occupy Wall Street by claiming that the left is hijacking the movement, but the support and media sophistication

of people like Alan Grayson and Bernie Sanders can only help these protests grow. Grayson demonstrated the value of having someone speak on the movement’s behalf that

understands and is comfortable with television.

The right and many in the media will continue to make jokes and play dumb, but while they are laughing it up, a movement is growing. They may intentionally not understand

the message of Occupy Wall Street, but millions of Americans do, and these people want their democracy back.


USA Economic meltdown video's Pt 1 - 4

http://topdocumentaryfilms.com/meltdown/
_________________________________________________________________________________________________________________________
05 Oct 2011

 

Global recession: What the analysts say

Global recession: What the analysts say
05 October 2011

While the average investor was piling funds into the global markets over the summer, seasoned hands such as George Soros were pulling out and getting into cash as early as July.

"I find the current situation much more baffling and much less predictable than I did at the time of the height of the financial crisis," Soros, who runs the Quantum Fund, said as early as April.

Now the man who recently became the tenth richest American according to Forbes, says that the Euro needs three fundamental changes in policy to avoid a Great Depression.

"First, the governments of the eurozone must agree in principle on a new treaty creating a common treasury for the eurozone."

Second, the major banks must be put under European Central Bank direction in return for a temporary guarantee and permanent recapitalisation," says Soros.
"The ECB would direct the banks to maintain their credit lines and outstanding loans, while closely monitoring risks taken for their own accounts."

"Third, the ECB would enable countries such as Italy and Spain to temporarily refinance their debt at a very low cost. These steps would calm the markets and give Europe time to
 develop a growth strategy, without which the debt problem cannot be solved." 

PIMCO co-chief investment officer, Mohammed El-Erian, wonders whether markets have over-reacted to the negative news that's coming out by the bucketfuls.

"Are markets stuck in an irrational cycle of self-feeding fear? Is the volatility, including eye-popping intra-day swings, just a head fake?

"As much as I would like to say yes -- after all, the balance sheets and income statements of multinational companies are still rock solid -- the answer is no. The system is sending signals rather than making noise. It is warning about the highly uncertain and rapidly deteriorating outlook for the global economy; also, it is lamenting astonishingly inept

policy-making in far too many western economies."

Even Federal Reserve Chairman Ben Bernanke, can't avoid talking of gloom:
"Recent indicators, including new claims for unemployment insurance and surveys of hiring plans, point to the likelihood of more sluggish job growth in the period ahead," says Bernanke, adding that the "pattern of sluggish growth" in the economy "was particularly evident in the first half."

HSBC Chief economist Stephen King notes that a euro break-up could be a 'disaster threatening another Great Depression.'

"The costs involved in fixing the euro's manifest weaknesses are far lower than the costs of failure. That message now has to be rammed home loud and clear."

In King's grim scenario, disentangling the cross-border assets and liabilities which have risen so rapidly since the euro's inception in 1999 would be a Herculean task that would surely threaten the fabric of the European financial system.

"Uncertainty over the value of assets and liabilities would soar, reflecting both the re-introduction of national currencies and sudden legal ambiguity. Doubts over the viability of both government finances and financial institutions would increase. Hyperinflation in parts of the periphery could become a reality while, in the core, massive currency revaluations alongside impaired balance sheets could threaten economic meltdown."

Christine Lagarde, the new head of the International Monetary Fund, also cites a sombre note in her latest blog:
"The risks are piling up--propelled by a negative feedback loop between weak growth, weak balance sheets--of governments, banks, and households--and weak political commitment

to do what is required.

"This, in turn, has fuelled a crisis of confidence that imposes not only economic but also social costs. While the clouds may be darkest over Europe, there remains huge uncertainty
in the United States. And what makes the situation all the more urgent is that it has implications for every country.
"In our interconnected world, what happens in the advanced economies affects everyone--the Kenyan farmer, the Brazilian designer, the Chinese entrepreneur."

Robert Zoellick, president of the World Bank, also noted that his belief that a double-dip recession is unlikely is 'eroding daily'.

"Falling exports were already a worry, now falling markets and declining confidence could prompt slippage in developing countries' investment and a possible pullback by their
consumers too... Some are walking a monetary policy tightrope, balancing price pressures and these new dangers. Add in volatile and high food prices...and the threat of rising protectionism, and you can see that developing countries face increasing headwinds."

Meanwhile, Goldman Sachs analysts see a recession in two of the EU's strongest economies.

"The further deterioration in the economic and financial situation in the euro area has led us to downgrade our global GDP forecast significantly. Over the next few quarters we
now expect a mild recession in Germany and France, and a deeper downturn in the euro periphery."

Apart from that, the influential bank warned there is a 40% chance of a US recession.
"The increase in spillovers from the euro area, primarily via tighter financial conditions, is the primary reason we have also downgraded our forecasts for the US further."

_______________________________________________________________________________________________________________________________________

                                 Adding to last night’s BBC spot of Mr. Rastani’s truth-telling, we have yet another experienced market trader telling the full-monty of truth:

Here is a piece from ZeroHedge.com that hopefully will make you all understand, once and for all, that this ain’t the 1930′s, and that there is absolutely no way in hell that this Republic is going to make it to November 2012.

Five Banks Account For 96% Of The $250 Trillion In Outstanding US Derivative Exposure; Is Morgan Stanley Sitting On An FX Derivative Time Bomb?

  (see added article at the bottom of page)

Summary: The five largest banks in the U.S. (JP Morgan Chase, Citibank, Bank of America, Goldman Sachs and HSBC) are carrying $238 TRILLION dollars in derivative exposure. JP Morgan alone is carrying $78 TRILLION in derivative exposure BY ITSELF.

Okay, what the hell is derivative exposure? What this is referring to are over-the-counter non-exchange traded forward delivery (or “futures”) contracts of various kinds. I am a futures broker, but I only execute futures contracts on the futures exchanges, namely the Chicago Mercantile Exchange and the New York Mercantile Exchange. About ten years ago a new “novelty” emerged in the futures business – the so-called “over-the-counter” contracts. There was a kid in the office I worked in who got wind of this and had all kinds of stars in his eyes about making a killing off of these “OTC” contracts because the brokers’ commissions were not a flat fee but a percent of the contract value. Here’s the problem with OTC contracts: there is no exchange standing between the buyer and seller as a guarantor.

In my business, when a customer executes a trade on a futures or options contract, it makes no difference who the other guy is on the other side of the trade, be it executed electronically or in the pit. None of us have to worry for a second about the counterparty on our executions because the EXCHANGE ITSELF stands between ALL transactions as the ultimate guarantor. The exchange then enforces the financial requirement rules with the Clearing Houses, the Clearing Houses enforce the financial requirement rules with the brokers, and the brokers enforce the financial requirement rules with the customers. That is the chain of financial responsibility. So, even if a customer bugs out and fails to financially perform on a contract, the contract WILL BE MADE GOOD by extracting the money from the broker, then the Clearing House and finally the Exchange.  This massive enforcement buffering is what gives the system integrity.

OTC contracts have no exchange. They are a flipping free-for-all. If someone bugs out on a contract, the poop hits the fan. The counterparty has their pants around their ankles and the broker is caught in the middle. That’s why when that kid in my office years ago got all starry-eyed, I thought to myself, “I wouldn’t do that OTC crap if you put a gun to my head – no matter what the commissions were. It would be Russian Roulette. Eventually someone would default and it would financially destroy the broker instantly, and perhaps the counterparty as well.”

Let’s take my business – cattle futures. One contract is 40,000 pounds of live cattle. The spot contract settled at $119.725 per hundred pounds today. So, 40,000 pounds X $1.19725 (shift the decimal) = $47,890 total value of the contract. Since this is an exchange traded instrument, the customer doesn’t really don’t have to worry about default and can go ahead and book that $47,890 today, and it will be offset at a later time, and the net of the entry and exit will be the P&L. The contract isn’t going to default, so the derivative exposure is limited.

Okay. These banks are carrying these OTC futures contracts with NO exchange to guarantee anything. And they are carrying these contracts largely WITH EACH OTHER. So JP Morgan might be the long and Goldman Sachs, or some insolvent bank in Europe is the short on the other side. If these banks default, which is now a mathematical certainty because they are not only insolvent, but insolvent multiple times over and there isn’t enough money in the world to bail them out, there is going to be a cascading default on all of these OTC contracts.

Now look at the value and exposure of these OTC derivatives again: the top 5 banks in the US alone have exposure of $238 TRILLION dollars.

The total GDP of the United States is $14.5 Trillion.

The total GDP of China is $6 Trillion.

The total land mass on earth is 36.8 billion acres. If every acre of land on earth was “sold” for $6467 per acre, that would total $238 Trillion.

JP Morgan BY ITSELF has derivative exposure equal to over FIVE TIMES the value of the entire US GDP.

And no, there will not be a 1:1 offsetting in a collapse, because the collapse will be asymmetrical, and the bankrupt party will first pursue FULL payment on its “longs” (think of these as accounts receivables) while its “shorts” (accounts payable) will only pay out 20 cents on the dollar OR LESS. In other words, these entities will tear each other apart in a mad dogfight and this dogfight will take the entire world down with it.

TWO HUNDRED AND THIRTY-EIGHT TRILLION DOLLARS.

AND THAT IS JUST FIVE BANKS.

AND THE MASSIVELY CORRUPT AND INCOMPETENT SECURITIES REGULATORS, BOTH GOVERNMENTAL AND PRIVATE, SAT BY AND WATCHED THIS HAPPEN. That is what happens when you let a group of criminals run a bureaucracy of affirmative action hires to “audit” the financial industry. Scroll down and read my post titled “There Must Be A Reckoning.”

It’s over. There is no coming back from this. The only thing that can happen is a total and complete collapse of EVERYTHING we now know, and humanity starts from scratch. And if you think that this collapse is going to play out without one hell of a big hot war, you are sadly, sadly mistaken.

Ann Barnhardt – Barnhardt Capital Management, Inc.

 

I’m going to add to what Ann has explained so well:

By the end of 2007, all the Too-Big-to-Fail (TBTF) banks were writing these things hand-over-fist because they already knew they were in doo-doo.  All this did was put massive leverage into the system…..debt, leveraged upon debt, with no asset value behind much of it.   And here is where it gets truly ugly for my conservative friends who refuse to look at Wall Street as the criminals they are:  THEY DID THIS KNOWING FULL WELL THE MAJORITY OF THE DERIVATIVES THEY WERE CREATING WERE FRAUDULENT AND BACKED BY NOTHING.   How do I know this?  A myriad of lawsuits filed all over the country with a literal shitton of depositions on discovery.  These are not lawsuits filed by merely disgruntled foreclosure victims; these are lawsuits filed by large insurance companies like Allstate and MetLife, and even The Federal Housing Finance Agency (FHFH) because they all realized far too late that they’d been sold worthless crap.  This is not to mention how adamantly the TBTFs have lobbied against any whiff of the idea of forcing these things onto an exchange where they would be made transparent.  That’s pretty much a tipoff that they’re hiding something very bad.  If the used car salesman won’t let you look under the hood, you can be pretty sure there’s something there you won’t like much.

The idea Wall Street had here with creating these fraudulent pieces of toxic waste was that if even a fraction of these ‘paid out’ for them, they could ‘save themselves.’  Unfortunately this doesn’t work when Wall Street runs out of suckers; you know, pension plans, insurance companies, retail investors and other places they could sell these things to without anyone understanding what they were buying.  Most importantly, when they ran out of suckers they could put into home loans they couldn’t afford, this was the beginning of the end and the whole scheme began to unravel.

Even better, our government not only looked the other way when they were made aware of what was going on, they began to aid and abet the criminal activity….because the TBTFs convinced the government that ‘economic meltdown could be avoided’ if they were just given time for the ‘asset values to come back.’  THIS whole game was facilitated by none-other than Hank Paulson.  You know, ‘Mr-I-Have-A-Bazooka.’

Our entire global economy is a giant Ponzi Scheme.  Makes Social Security look like a rounding error.  This also gives one a better perspective on the stock market movements.  (Yeah, 400 point Dow Jones Industrial ranges in a day is a ‘stable market’.)  What the market is now is merely the TBTF banks chasing government cheese.  Where is the next bailout coming from?  Wherever they THINK it is (and since they push for it, they have a good idea), they front run it and pile in, using HFT to try to position better than the next TBTF.  Who is going to get the next ‘exemption from the law’?  Wherever they think THAT is coming next, again, they go ‘all-in’ – thus providing the massive swings in the market with both bonds (treasuries and corporate debt) and stocks.   Any idea that there is ANYTHING left of a ‘free-market’ is a LIE.  Wake up and smell the Ponzi conservatives, and stop defending the criminals with your cries of ‘it’s anti-capitalist to protest against Wall Street.’  It’s not about your neighbor getting a free house, it’s about massive, global, legalized financial rape.

Wall Street a/k/a the Too-Big-To-Fails are chasing corruption.  They’re chasing legalized theft sanctioned by our government and you can watch it in real-time every day….just pull up a stock chart.  Any stock chart.

Have a nice day.

Perhaps now you will start screaming STOP THE LOOTING & START PROSECUTING!


Sept. 27, 2011http://beforeitsnews.com/story/1152/460/There_s_No_Way_In_Hell_We_re_Making_It_To_Nov_2012.html






_______________________________________________________________

Five Banks Account For 96% Of The $250 Trillion In Outstanding US Derivative Exposure; Is Morgan Stanley Sitting On An FX Derivative Time Bomb?

Tyler Durden's picture
Submitted by Tyler Durden on 09/24/2011 06:23 -0400



The latest quarterly report from the Office Of the Currency Comptroller is out and as usual it presents in a crisp, clear and very much glaring format the fact that the top 4 banks in the US now account for a massively disproportionate amount of the derivative risk in the financial system. Specifically, of the $250 trillion in gross notional amount of derivative contracts outstanding (consisting of Interest Rate, FX, Equity Contracts, Commodity and CDS) among the Top 25 commercial banks (a number that swells to $333 trillion when looking at the Top 25 Bank Holding Companies), a mere 5 banks (and really 4) account for 95.9% of all derivative exposure (HSBC replaced Wells as the Top 5th bank, which at $3.9 trillion in derivative exposure is a distant place from #4 Goldman with $47.7 trillion). The top 4 banks: JPM with $78.1 trillion in exposure, Citi with $56 trillion, Bank of America with $53 trillion and Goldman with $48 trillion, account for 94.4% of total exposure. As historically has been the case, the bulk of consolidated exposure is in Interest Rate swaps ($204.6 trillion), followed by FX ($26.5TR), CDS ($15.2 trillion), and Equity and Commodity with $1.6 and $1.4 trillion, respectively. And that's your definition of Too Big To Fail right there: the biggest banks are not only getting bigger, but their risk exposure is now at a new all time high and up $5.3 trillion from Q1 as they have to risk ever more in the derivatives market to generate that incremental penny of return.

At this point the economist PhD readers will scream: "this is total BS - after all you have bilateral netting which eliminates net bank exposure almost entirely." True: that is precisely what the OCC will say too. As the chart below shows, according to the chief regulator of the derivative space in Q2 netting benefits amounted to an almost record 90.8% of gross exposure, so while seemingly massive, those XXX trillion numbers are really quite, quite small... Right?

...Wrong. The problem with bilateral netting is that it is based on one massively flawed assumption, namely that in an orderly collapse all derivative contracts will be honored by the issuing bank (in this case the company that has sold the protection, and which the buyer of protection hopes will offset the protection it in turn has sold). The best example of how the flaw behind bilateral netting almost destroyed the system is AIG: the insurance company was hours away from making trillions of derivative contracts worthless if it were to implode, leaving all those who had bought protection from the firm worthless, a contingency only Goldman hedged by buying protection on AIG. And while the argument can further be extended that in bankruptcy a perfectly netted bankrupt entity would make someone else whole on claims they have written, this is not true, as the bankrupt estate will pursue 100 cent recovery on its claims even under Chapter 11, while claims the estate had written end up as General Unsecured Claims which as Lehman has demonstrated will collect 20 cents on the dollar if they are lucky.

The point of this detour being that if any of these four banks fails, the repercussions would be disastrous. And no, Frank Dodd's bank "resolution" provision would do absolutely nothing to prevent an epic systemic collapse. 

...

Lastly, and tangentially on a topic that recently has gotten much prominent attention in the media, we present the exposure by product for the biggest commercial banks. Of particular note is that while virtually every single bank has a preponderance of its derivative exposure in the form of plain vanilla IR swaps (on average accounting for more than 80% of total), Morgan Stanley, and specifically its Utah-based commercial bank Morgan Stanley Bank NA, has almost exclusively all of its exposure tied in with the far riskier FX contracts, or 98.3% of the total $1.793 trillion. For a bank with no deposit buffer, and which has massive exposure to European banks regardless of how hard management and various other banks scramble to defend Morgan Stanley, the fact that it has such an abnormal amount of exposure (but, but, it is "bilaterally netted" we can just hear Dick Bove screaming on Monday) to the ridiculously volatile FX space should perhaps raise some further eyebrows...

Average:
4.97143
_______________________________________________________________________________________________________________________________________

October 3rd, 2011 01:55 pm · Posted in CHATS & POSTS (Iraqi Dinar Info) 

Adding to last night’s BBC spot of Mr. Rastani’s truth-telling, we have yet another experienced market trader telling the full-monty of truth:

Here is a piece from ZeroHedge.com that hopefully will make you all understand, once and for all, that this ain’t the 1930′s, and that there is absolutely no way in hell that this Republic is going to make it to November 2012.

Five Banks Account For 96% Of The $250 Trillion In Outstanding US Derivative Exposure; Is Morgan Stanley Sitting On An FX Derivative Time Bomb?

Summary: The five largest banks in the U.S. (JP Morgan Chase, Citibank, Bank of America, Goldman Sachs and HSBC) are carrying $238 TRILLION dollars in derivative exposure. JP Morgan alone is carrying $78 TRILLION in derivative exposure BY ITSELF.

Okay, what the hell is derivative exposure? What this is referring to are over-the-counter non-exchange traded forward delivery (or “futures”) contracts of various kinds. I am a futures broker, but I only execute futures contracts on the futures exchanges, namely the Chicago Mercantile Exchange and the New York Mercantile Exchange. About ten years ago a new “novelty” emerged in the futures business – the so-called “over-the-counter” contracts. There was a kid in the office I worked in who got wind of this and had all kinds of stars in his eyes about making a killing off of these “OTC” contracts because the brokers’ commissions were not a flat fee but a percent of the contract value. Here’s the problem with OTC contracts: there is no exchange standing between the buyer and seller as a guarantor.

In my business, when a customer executes a trade on a futures or options contract, it makes no difference who the other guy is on the other side of the trade, be it executed electronically or in the pit. None of us have to worry for a second about the counterparty on our executions because the EXCHANGE ITSELF stands between ALL transactions as the ultimate guarantor. The exchange then enforces the financial requirement rules with the Clearing Houses, the Clearing Houses enforce the financial requirement rules with the brokers, and the brokers enforce the financial requirement rules with the customers. That is the chain of financial responsibility. So, even if a customer bugs out and fails to financially perform on a contract, the contract WILL BE MADE GOOD by extracting the money from the broker, then the Clearing House and finally the Exchange. This massive enforcement buffering is what gives the system integrity.

OTC contracts have no exchange. They are a flipping free-for-all. If someone bugs out on a contract, the poop hits the fan. The counterparty has their pants around their ankles and the broker is caught in the middle. That’s why when that kid in my office years ago got all starry-eyed, I thought to myself, “I wouldn’t do that OTC crap if you put a gun to my head – no matter what the commissions were. It would be Russian Roulette. Eventually someone would default and it would financially destroy the broker instantly, and perhaps the counterparty as well.”

Let’s take my business – cattle futures. One contract is 40,000 pounds of live cattle. The spot contract settled at $119.725 per hundred pounds today. So, 40,000 pounds X $1.19725 (shift the decimal) = $47,890 total value of the contract. Since this is an exchange traded instrument, the customer doesn’t really don’t have to worry about default and can go ahead and book that $47,890 today, and it will be offset at a later time, and the net of the entry and exit will be the P&L. The contract isn’t going to default, so the derivative exposure is limited.

Okay. These banks are carrying these OTC futures contracts with NO exchange to guarantee anything. And they are carrying these contracts largely WITH EACH OTHER. So JP Morgan might be the long and Goldman Sachs, or some insolvent bank in Europe is the short on the other side. If these banks default, which is now a mathematical certainty because they are not only insolvent, but insolvent multiple times over and there isn’t enough money in the world to bail them out, there is going to be a cascading default on all of these OTC contracts.

Now look at the value and exposure of these OTC derivatives again: the top 5 banks in the US alone have exposure of $238 TRILLION dollars.

The total GDP of the United States is $14.5 Trillion.

The total GDP of China is $6 Trillion.

The total land mass on earth is 36.8 billion acres. If every acre of land on earth was “sold” for $6467 per acre, that would total $238 Trillion.

JP Morgan BY ITSELF has derivative exposure equal to over FIVE TIMES the value of the entire US GDP.

And no, there will not be a 1:1 offsetting in a collapse, because the collapse will be asymmetrical, and the bankrupt party will first pursue FULL payment on its “longs” (think of these as accounts receivables) while its “shorts” (accounts payable) will only pay out 20 cents on the dollar OR LESS. In other words, these entities will tear each other apart in a mad dogfight and this dogfight will take the entire world down with it.

TWO HUNDRED AND THIRTY-EIGHT TRILLION DOLLARS.

AND THAT IS JUST FIVE BANKS.

AND THE MASSIVELY CORRUPT AND INCOMPETENT SECURITIES REGULATORS, BOTH GOVERNMENTAL AND PRIVATE, SAT BY AND WATCHED THIS HAPPEN. That is what happens when you let a group of criminals run a bureaucracy of affirmative action hires to “audit” the financial industry. Scroll down and read my post titled “There Must Be A Reckoning.”

It’s over. There is no coming back from this. The only thing that can happen is a total and complete collapse of EVERYTHING we now know, and humanity starts from scratch. And if you think that this collapse is going to play out without one hell of a big hot war, you are sadly, sadly mistaken.

Ann Barnhardt – Barnhardt Capital Management, Inc.

I’m going to add to what Ann has explained so well:

By the end of 2007, all the Too-Big-to-Fail (TBTF) banks were writing these things hand-over-fist because they already knew they were in doo-doo. All this did was put massive leverage into the system…..debt, leveraged upon debt, with no asset value behind much of it. And here is where it gets truly ugly for my conservative friends who refuse to look at Wall Street as the criminals they are: THEY DID THIS KNOWING FULL WELL THE MAJORITY OF THE DERIVATIVES THEY WERE CREATING WERE FRAUDULENT AND BACKED BY NOTHING. How do I know this? A myriad of lawsuits filed all over the country with a literal shitton of depositions on discovery. These are not lawsuits filed by merely disgruntled foreclosure victims; these are lawsuits filed by large insurance companies like Allstate and MetLife, and even The Federal Housing Finance Agency (FHFH) because they all realized far too late that they’d been sold worthless crap. This is not to mention how adamantly the TBTFs have lobbied against any whiff of the idea of forcing these things onto an exchange where they would be made transparent. That’s pretty much a tipoff that they’re hiding something very bad. If the used car salesman won’t let you look under the hood, you can be pretty sure there’s something there you won’t like much.

The idea Wall Street had here with creating these fraudulent pieces of toxic waste was that if even a fraction of these ‘paid out’ for them, they could ‘save themselves.’ Unfortunately this doesn’t work when Wall Street runs out of suckers; you know, pension plans, insurance companies, retail investors and other places they could sell these things to without anyone understanding what they were buying. Most importantly, when they ran out of suckers they could put into home loans they couldn’t afford, this was the beginning of the end and the whole scheme began to unravel.

Even better, our government not only looked the other way when they were made aware of what was going on, they began to aid and abet the criminal activity….because the TBTFs convinced the government that ‘economic meltdown could be avoided’ if they were just given time for the ‘asset values to come back.’ THIS whole game was facilitated by none-other than Hank Paulson. You know, ‘Mr-I-Have-A-Bazooka.’

Our entire global economy is a giant Ponzi Scheme. Makes Social Security look like a rounding error. This also gives one a better perspective on the stock market movements. (Yeah, 400 point Dow Jones Industrial ranges in a day is a ‘stable market’.) What the market is now is merely the TBTF banks chasing government cheese. Where is the next bailout coming from? Wherever they THINK it is (and since they push for it, they have a good idea), they front run it and pile in, using HFT to try to position better than the next TBTF. Who is going to get the next ‘exemption from the law’? Wherever they think THAT is coming next, again, they go ‘all-in’ – thus providing the massive swings in the market with both bonds (treasuries and corporate debt) and stocks. Any idea that there is ANYTHING left of a ‘free-market’ is a LIE. Wake up and smell the Ponzi conservatives, and stop defending the criminals with your cries of ‘it’s anti-capitalist to protest against Wall Street.’ It’s not about your neighbor getting a free house, it’s about massive, global, legalized financial rape.

Wall Street a/k/a the Too-Big-To-Fails are chasing corruption. They’re chasing legalized theft sanctioned by our government and you can watch it in real-time every day….just pull up a stock chart. Any stock chart.

Have a nice day.

Perhaps now you will start screaming STOP THE LOOTING & START PROSECUTING!
_______________________________________________________________________________________________________________________________________


Ċ
Mark Aldrich,
Feb 8, 2015, 9:14 AM
Comments