Backdoc: WITH THE FED CLEARLY MENTIONING THE REASON FOR NOT RAISING RATES WAS DUE TO EMERGING MAKET WEAKNESS, AND SPECIFICALLY MENTIONED CHINA ONE HAS TO HAVE GREAT CONCERN.
WE ALL KNOW THAT CHINAS STOCK MARKET MELTDOWN HAS AFFECTED WORLD MARKETS AS WE CONTINUE TO SEEK A NEW GLOBAL REALITY VALUE AS WE TRANSITION INTO A NEW MULTILATERAL SYSTEM!
WE CONTINUE TO SEE BIRTH PAINS OF THE NEW ASSET BACKED SYSTEM ON ITS WAY! THE ONLY QUESTION IS: HOW SMOOTH WITH THAT TRANSITION BE?
AS WE FOLLOW THE YELLOW BRICK ROAD, WE SEE SOME SCARY POTENTIAL IN EURO LAND AND WE STILL AWAIT A BOTTOMING PROCESS IN CHINA AND U.S. MARKETS IN WHICH TO HANG OUR FISCAL HAT! HEE HEE
THE PROBLEM WITH THE BOND MARKET IS IT COULD CAUSE A CONTAGION WORLD WIDE IN LIQUIDITY!! THIS WOULD IS VERY SCARY!
IF CHINA HAS ANOTHER ROUT ON EQUITY PRICES THEY COULD BE FORCED TO SELL U.S. TREASURIES AT A FASTER PACE THAN THE U.S.T. COULD BE COMFORTABLE WITH CAUSING A LIQUIDITY CRISIS! GET MY POINT?
WELL, FOR NOW I'M NOT BORROWING TROUBLE BUT CHINA'S CORPORATIONS CARRY THE HIGHEST DEBT OF ANY COUNTRIES IN THE WORLD.
THEY ALSO SEEM TO HAVE SOME SO CALLED GOHST COMPANIES WHICH SEEM TO BE HOLDING ILLIQUID DEBT. NOT GOOD!
I NEED A SPOT OF TEA AND I HOPE I DON'T DROP MY WIFE'S CHINA WHILST I TAKE A SIP! MMMMM
OOPS! DOC IMO
Thunderhawk: Backdoc Alert VIDEO: If You Thought China's Equity Bubble Was Scary, Check Out Bonds
As a rout in Chinese stocks this year erased $5 trillion of value, investors fled for safety in the nation’s red-hot corporate bond market. They may have just moved from one bubble to another.
So says Commerzbank AG, which puts the chance of a crash by year-end at 20 percent, up from almost zero in June. Industrial Securities Co. and Huachuang Securities Co. are warning of an unsustainable rally after bond prices climbed to six-year highs and issuance jumped to a record.
The boom contrasts with caution elsewhere. A selloff in global corporate notes has pushed yields to a 21-month high, and credit-derivatives traders are demanding near the most in two years to insure against losses on Chinese government securities.
While an imminent collapse isn’t yet the base-case scenario for most forecasters, China’s 42.2 trillion yuan ($6.7 trillion) bond market is flashing the same danger signs that triggered a tumble in stocks four months ago: stretched valuations, a surge in investor leverage and shrinking corporate profits. A reversal would add to challenges facing China’s ruling Communist Party, which has struggled to contain volatility in financial markets amid the deepest economic slowdown since 1990.
“The Chinese government is caught between a rock and hard place," said Zhou Hao, a senior economist in Singapore at Commerzbank, Germany’s second-largest lender. "If it doesn’t intervene, the bond market will actually become a bubble. And if it does, the market could crash the way the equity market did due to fast de-leveraging.”
Backdoc: THIS SEEMS TO BE LITTLE UNDERSTOOD BY THE MASSES. CONGRESS USED TO HAVE THIS EXPORT/IMPORT BANK ACTIVE BUT WAS REMOVED IN THE LAST ROUND OF COMPROMISE WITH BOTH PARTIES!
IT SEEMS TO HAVE BEEN REVIVED AND EXPECTED TO BE RE-INSTATED.
THIS FUNDING SOURCE CAN BE USED TO ASSIST IN TRADING WITH COUNTRIES THAT STRUGGLE FINANCIALLY. THIS CAN BE USED TO ENHANCE TRADE WITH OUR COUNTRY!
DO YOU THINK WE NEED ALL THE HELP WE CAN GET WITH TRADE? AHHH YAAAA WENT IT AFFECTS CURRENCY VALUES!
FRANK, WHERE'S MY COOKIE? SLAP!GET BACK TO WORK DOC! OK, GOSH I WANT A COOKIE! DOC IMO
Thunderhawk: Backdoc Alert Ex-Im Bank Supporters Gain Signatures to Force House Vote
U.S. House members gathered enough signatures Friday to force a floor vote to revive the Export-Import Bank over objections from some Republican leaders.
“This is a Republican bill,” said Tennessee Republican Stephen Fincher, who led the unusual bid to require a floor vote. “It shows we can get something done if we put the country over ideology."
Signing of the petition began Friday, and it gained 218 signatures, enough to require a House vote, by about 1 p.m. Washington time.
The Ex-Im Bank provides loans and other support to overseas customers of U.S. companies such as Boeing Co. and General Electric Co. The 81-year-old institution’s charter expired on June 30. The bank has divided Republican lawmakers, with some calling it corporate welfare and other saying it helps U.S. businesses create jobs.
White House spokeswoman Jen Friedman said, "While it is up to Congress to determine the best path to fully restore Ex-Im’s ability to support American workers and businesses, today’s action is an important step forward."
Backdoc: THERE WILL BE MORE DAMAGE FORTHCOMING TO VW AS WE WATCH THE PAIN UNFOLD!
POLITICAL CONTROL HAS SHIFTED A BIT ALREADY AS THE PORCHE FAMILY HAS INCREASED IT CONTROL OVER VW AS SHARES FELL OUT THE BOTTOM! THEY BOUGHT A SIZABLE AMOUNT FROM SUZUKI CORP. MMMMM DOC IMO
Thunderhawk: Backdoc Alert VIDEO: Texas Sues Volkswagen Claiming Deception, Diesel Pollution
Texas joined the Volkswagen AG litigation bandwagon Thursday, accusing the company’s U.S. unit of violating state consumer protection laws and clean air standards by using rigged software in some of it diesel vehicles.
The state’s claims, in two lawsuits by Texas Attorney General Ken Paxton in state court in Austin, follow similar actions brought by West Virginia on Friday and a separate case by the county that encompasses Houston.
Backdoc: THIS QUOTE IN THIS ARTICLE IS INTERESTING!
As the authors conclude: "The overall effect would be an increase in asset price volatility in stress situations, because leveraged holdings are more susceptible to fire-sale episodes."
THE REAL QUESTION REMAINS HERE IS, ARE THERE GOING TO BE MORE STRESS SITUATIONS THAT WILL SHOW UP DURING THE TRANSITION TO THE NEW MULTILATERAL GLOBAL REALITY? MMMMM
WILL IT CAUSE A FIRE SALE OF ASSETS? MMMMM WE WATCH!! DOC IMO
Thunderhawk: Backdoc Alert Bond Funds Have Been Borrowing to Boost Returns
The objective: equity-like returns on fixed-income investments.
For more than two decade, Bill Gross did the seemingly impossible, according to Bill Gross.
"From the 1980s through the 2000s, Mr Gross achieved returns at or near double digits, which are typically only seen in the far riskier equities markets," says Gross's blockbuster complaint against Pimco.
The erstwhile Bond King is taking aim at his former Pimco colleagues, arguing that a "cabal" of executives conspired to oust him as they sought to pursue riskier investment strategies and grab a bigger slice of the asset manager's bonus pool. They are accused of mounting a push into dicey investments, while Gross himself pursued his basic "bonds and burgers" approach.
Yet drawing out equity-like returns from fixed-income investments is a feat that often relies on its very own special type of risk; it typically involves amplifying returns through the use of leverage, either by deploying derivatives or borrowing money.
A new paper from the Bank for International Settlements underscores the degree to which leverage—a concept more traditionally associated with sell-side banks—has infiltrated into the boring old buy side. While the names of specific funds are not revealed, the conclusions are nevertheless startling.
Here is a story not just of bonuses and burgers but of the extraordinary shifts that have taken place within the bond market in the years since the financial crisis. At its heart is the shriveling of a once-swashbuckling banking system and the rise of an increasingly confident bond-based buy side.
"Leverage in the banking system was an important ingredient in the 2008 global financial crisis," authors Fernando Avalos, Ramon Moreno, and Tania Romero wrote. "Since then, asset managers—the 'buy side'—have quickly increased their footprint in global financing, helped by the sharp retrenchment of banks nursing their balance sheets back to health."
Since 2009, the assets under management at bond funds have soared—partially as a result of ever-increasing debt prices but also thanks to inflows from investors seeking the succor of higher yields.
When it comes to leverage, the paper focuses the degree to which funds have been using short-term borrowings relative to their size.
On that basis, leverage at buy-side bond funds has jumped significantly in the years after the financial crisis, after falling from 3 percent in 2006 to practically zero in 2008. In 2009, the figure jumped back to 3 percent and continued rising until it reached 6 percent in 2013. It dropped in 2014.
"We found that leverage on the buy side is not negligible, although it seems to vary considerably depending on the type of fund," the BIS authors said. "Equity fund portfolios seem to be minimally leveraged, while fixed income funds tend to resort abundantly to borrowed money."
Leverage at funds focused on emerging-market bonds has been especially pronounced, according to the BIS paper, reaching as much as 30 percent at specialized leveraged emerging-market funds in 2013. That arguably ties into a broad theme, which has seen emerging-market governments and companies tap willing and eager investors for trillions of dollars worth of financing.
"Post-crisis, there has been a significant shift in global finance from bank-based to markets-based funding. In this new phase that started around 2010, 'the main stage is the bond market, especially the market for emerging market debt securities that are open to international investors,'" the BIS authors say, quoting a 2013 paper by Hyun Song Shin.
Leverage in the financial system, both through borrowings and the use of derivatives, spurred a dramatic banking collapse in 2008. Here the worries are not necessarily that bond funds will collapse as a group, but that the amplification of their returns through leverage will ripple through to debt prices. As the authors conclude: "The overall effect would be an increase in asset price volatility in stress situations, because leveraged holdings are more susceptible to fire-sale episodes."
Gross argues in his complaint that the forays of former Pimco executives into "riskier equities and leveraged real estate investments" were folly, but the BIS paper suggests that even a pure bond fund is not without hazard.
Backdoc: ALCOA IS THE FIRST COMPANY TO REPORT EARNINGS AND IT WASN'T PRETTY!
BLACK GOLD HAS HAD ITS WAY IN CREATING DEFLATION NOT INFLATION!
THIS COMING WEEK IN THE MOST DANGEROUS MONTH FOR THE MARKET COULD BE INTERESTING! WITH A LITTLE MORE THAN A 50% RETRACEMENT FROM THE AUGUST LOWS ARE WE NOW READY TO RETEST THOSE LOWS AND SEARCH FOR THE NEW GLOBAL REALITY PRICE? MMMM DOC IMO
Thunderhawk: Backdoc Alert Alcoa earnings: 7 cents per share, vs expected 13 cents
Alcoa on Thursday posted quarterly earnings well below Wall Street's expectations, as high-growth aerospace and automotive materials segments could not soften the effects of low commodity prices.
The aluminum maker posted adjusted third-quarter earnings of 7 cents per share on $5.57 billion in revenue. Sales dropped about 11 percent from the previous year.
Analysts expected Alcoa to post earnings of 13 cents per share on $5.65 billion in revenue, according to a consensus estimate from Thomson Reuters. The stock dropped about 5 percent in extended trading.
The metals maker announced late last month it expects to separate into two publicly traded companies by the second half of next year. After the results, Alcoa CEO Klaus Kleinfeld stressed the importance of the split, saying the company needs to focus on cutting costs to mitigate commodity headwinds.
"All in all, we have made the company more competitive, more resilient and in this light I think we need to focus on those things we have in our own control and that's what we are doing," he said on CNBC's "Closing Bell."
Alcoa will split into "upstream" and "value-add" businesses, with one housing its legacy aluminum production and the other materials manufacturing for industries such as automaking and aerospace. The transition comes amid a divergence of the two industries and a big dip in the price of aluminum amid a commodities crunch.
"This is not about short-term optimization. This is really long-term, well thought through and put in place strategy," Kleinfeld said.
He touted progress in the value-add segment, singling out growth in aerospace. Alcoa's aerospace, automotive and alumina sales jumped 10 percent from the previous year.
Kleinfeld stressed his view that the upstream business will be strong after the split, despite the growth disparity between the two segments. He said investors need to understand the company will not be just aluminum production.
Alcoa cut its forecast for the 2015 global aluminum surplus to 551,000 tonnes from a previous estimate of 762,000 tonnes. The company said it expects a deficit in the market in 2016, but did not specify how much.
Kleinfeld also told CNBC that slowing growth in China was not concerning, as Alcoa has already lowered its expectations there.
"You have to put it into perspective. It's not like falling off a cliff," he said.
Alcoa shares have taken a nosedive this year, down more than 30 percent. However, they have climbed about 15 percent since the split announcement.
Backdoc: IT LOOKS AS THOUGH SPAIN IS STRUGGLING FINANCIALLY AS WELL AS POLITICALLY!
WITH PRESSURE ON CATALONIA IN PROCESS TO SECEED FROM SPAIN, QUESTIONS REMAIN AS TO WHETHER THE 4TH LARGEST CITY IN EUROPE WILL REMAIN PART OF THE EURO!
ALSO IF IT SEPARATES WHAT HAPPENS TO THE DEBT? MMMM DEPENDING ON WHO GETS WHAT COULD BECOME A FINANCIAL TRIGGER! WITH FISCAL GUNS POINTING AT THE EURO ITS ONLY A QUESTION AS TO WHO WILL PULL THE TRIGGER FIRST!
CATALONIA AREA WHICH HOLD BARCELONA, WILL BE THE BIG INCOME REVENUE GENERATOR WITH THE PORT THERE! WHY? HEE HEE TRADE AND SHIPPING! SEE I KNEW YOU WERE FOLLOWING ME! SMILE! DOC IMO
Thunderhawk: Backdoc Alert Spain to get European warning on budget
Spanish government urged to come up with revised budget plan to meet euro rules
LUXEMBOURG (AP) -- The European Union's executive arm is to warn Spain over its draft budget plans for this year and next.
Pierre Moscovici, the European Commission's top economy official, said Monday that the plans point to the Spanish government missing fiscal targets by 0.3 percentage point in 2015 and 0.7 percentage points in 2016.
As such, he said the Commission will on Tuesday invite Spain's center-right government to make sure the budget plans comply with euro rules.
The eurozone's top official, Jeroen Dijsselbloem, said it was up to the Spanish government to act on the opinion.
In joining the euro currency, countries signed up to a set of rules to keep their budgets within certain parameters. In theory, countries could face sanctions.
Spain is to hold a general election on Dec. 20.
Backdoc: "TO BE OR NOT TO BE" ,THAT IS THE QUESTION! LOL
WITH OIL BUMPING ITS 200 DAY MOVING AVERAGE AND THEN PULLING BACK, CLEARLY THERE WON'T BE A STRAIGHT PATH TO HIGHER PRICES ON OIL!
WE HAVE TO SEE HOW "THE DEAL" GOES!
1. TWO OTHER FACTORS REMAIN AS WELL. DEMAND NEEDS TO RISE TO HELP PRICES. SO FAR THAT ISSUE IS STILL A QUESTION TO BE ANSWERED!
2. THE OTHER ISSUE IS: THE ONES THAT MADE THE DEAL WILL HAVE TO MAKE ENOUGH CUTS TO IMPACT GLOBAL SUPPLY!
SO, THE DILEMA IS FOR IRAN THEY FEEL LIKE A CAT THAT JUST CAME OUT OF A PAPER BAG ON FIRE!
THEY WANT THEIR MARKET SHARE BACK AND THEY WANT IT NOW! BUT THEY HAVE BILLIONS OF BARRELS OF OIL STORED! RELEASING TOO MUCH AT ONE TIME IS LIKE THE ECONOMIC BOMB I TALKED ABOUT IN THE MATRIX!
SO, CAN ALL THOSE LEVELS BE ACHIEVED QUICKLY WITHOUT CHEATING WHILE ADJUSTING FOR DEMAND? MMMM DOC IMO
Thunderhawk: Backdoc Alert VIDEO: Is the oil rally for real?
Oil prices have rallied off of their August lows, popping above $50 a barrel on Thursday. Is this merely another blip on a harrowing roller coaster of oil prices moves, or does it signal some return to sanity and normalcy?
Trading news certainly influenced Thursday's move: The Federal Reserve released the minutes of the September Open Market Committee session, and these conveyed continued worries about global growth and reservations about near term interest-rate increases. The markets cheered the news, and both equities and oil prices rallied.
But that's not all. The Shanghai Composite Index jumped by 3 percent Thursday, easing fears of a downturn there. For oil, this is of central importance. China has been full of contradictions in recent times. Despite apparent slower GDP growth — by some measures as low as 3.5 percent in July — oil demand has proved astoundingly robust.
Backdoc: MY CONCERN IS CERTAINLY NOT INFLATION PRESENTLY SINCE OIL MAY RISE SOME BUT IT WON'T BE OFF TO THE RACES, THAT'S FOR SURE!
MY CONCERN FOR THE DOLLAR IS LESS DEMAND AS THE YUAN BEGINS TO ASCEND TO A VIABLE ALTERNATIVE TO THE DOLLAR. WITH LESS DEMAND FOR THE DOLLAR COULD CREATE AN ECONOMIC IMPACT TO THE DOLLAR! DOC IMO
Thunderhawk: Backdoc Alert Dollar Braces for Inflation Test After Worst Week Since June
A rough stretch for the dollar may be about to get worse.
Data due Oct. 15 are forecast to show U.S. consumer prices fell for a second straight month in September. A decline may cast further doubt on Federal Reserve plans to raise interest rates this year and undermine the U.S. currency, which fell the most in four months this week, paring a 2015 advance.
Spurring the losses, minutes from the Fed’s latest meeting showed policy makers discussing the damping effect of dollar strength on inflation and exports, while repeating their intention to lift the overnight target.
“Investors have kind of disregarded the jawboning from the Fed and the rhetoric from the Fed and are really looking at the data,” said Chris Gaffney, president at EverBank World Markets in St. Louis. They’re concluding that “they’re not going to raise by the end of the year, unless we really see a change in the inflation data.”
The Bloomberg Dollar Spot Index, which tracks the U.S. currency versus 10 major peers, lost 1.4 percent since Oct. 2, the steepest tumble since the week ended June 12. It’s still up 5.4 percent this year.
The greenback weakened 1.3 percent to $1.1358 per euro, while adding 0.3 percent to 120.27 yen.
Hedge funds and other money managers cut net bullish bets on the dollar to the lowest in more than a year, according to data from the Commodity Futures Trading Commission. Long positions, or wagers the currency will rise, outnumbered short bets by 196,975 contracts in the week to Oct. 6, the lowest since September 2014.
The 2015 rally has stalled as investors push out bets on a Fed interest-rate increase following the central bank’s September decision to hold its target near zero amid market volatility.
The dollar slumped versus 15 of 16 major peers this week as members of the Fed’s policy-setting committee flagged concern that the currency’s strength could hurt the economy. An appreciating dollar makes U.S. products more expensive abroad and damps inflation by making imports less costly.
Consumer prices probably fell 0.2 percent in September from a month earlier and 0.1 percent from a year earlier, according to the median forecast in a Bloomberg survey. The Fed targets inflation of about 2 percent.
“There is no inflationary pressure -- plain and simple,” said Alessio de Longis, a money manager in the global multi-asset group at OppenheimerFunds Inc. in New York. “We have a serious risk of ongoing dollar weakness for the rest of the quarter.”