The Finance Thread

[Stive Pesley]

Deutsch Bank getting desperate to save money

http://www.theregister.co.uk/2015/10/30/deutsche_bank_overhauls_45_operating_systems/

I don't think this is going to really deliver the savings that they hope for. I know from experience that getting rid of legacy IT and consolidating is fraight with difficulty and a complete money pit.

If they don't manage this well, expect major banking problems for DB customers. Could be the straw that breaks the camels back for them?

[Animal is a Ram]

30,000 IT consultants?

That's a lot of people to tell them to turn it off and turn it back on again.

(caveat, I'm an IT professional.)

[SillyBilly]

As I was bored I was looking through the Bank of England's historical interest rate data since to see how we responded to crises and how quickly we normalised.

In doing so it did however bring cycle theory into focus, albeit I invest only in fundamentals not on charts or cycles. On the latter, I do find interesting as it has long been the call of modern central bankers and politicians (like Brown and Bernanke) to proclaim they have defeated the "business cycle" (the approximate time period between recessions), primarily by using the levers of central banks to manipulate the economy in the short to medium term. While you can argue the success of that strategy there is a wider argument for saying you can't defeat the long term trend no matter how much you try to distort or reverse it. Much like say with the Euro, it can of course be propped up for a few decades by sheer political will but eventually it will have to collapse owing to its poor construction - how long would the States survive with 50 independent debt markets with a common currency? Well... just this year alone Illinois would have been Greece and you would have seen people fleeing the bonds of states like Illinois, Ohio, Oregon, Minnesota and buying North Dakota, Wyoming, Alaska, Virginia...in other words absolute chaos in the world reserve currency. Sustainable? That is where the long term cycles come in, ignoring the noise of political actions and political trends and looking at economic realities over a long period of time.

I like Armstrong's work as already discussed in the thread. He suggests an 86 year cycle for international sovereign debt collapses (on the assumption the world is viewed through the prism of a global market, not wholly independent ones).

Britain has NEVER defaulted on its debt (take note Germany). The last time it NEARLY did was 1931 (the peak of the Great Depression), it technically defaulted but in reality left the gold standard the same year and suspended payments. Incidentally 86 years from 1931 is 2017. Interesting to note the base rate in Oct 1929 was 6%. By 1931 it had dropped to 2.5% and it stayed at 2% until 1951 save a couple of attempts to increase it and straight back down. Are we in a similar predicament now? Surely we can't have 20-30 years of 0% interest rates but as the BoE found then, it is almost impossible to raise quickly again after lowering (in short the economy enters a debt binge both public and private it can't afford to pay off). Does that mean the hand has to be forced? Who knows?

So 86 years prior to 1931 was 1847 or the "panic of 1847", a classic credit bubble explosion, in the railroads this time. Interest rates averaged 6% in 1847 and dropped to 2.5% shortly thereafter.

Whether an 86 year cycle comes to pass or not, there is obviously no ammunition considering interest rates have been down at 0.5% since March 09 and that wasn't even "peak debt", its much larger than 08 now. So, we potentially enter another debt crisis but with no "cushion" like in our past to lower and hold? I think it wholly reckless but obviously I'm in the minority..

 

[SillyBilly]

I should add the basis that I find cycles interesting is as much to do with the fact it is so widely pronounced these days that "perpetual growth" is actually achievable globally without the customary depressions that have plagued us in past centuries, it strikes me as a completely irrational view to hold. Much less so that we can grow, experience a decline and then grow again in reasonably regular intervals of time. The phases of growth and decline themselves being fairly repeatable on a time-averaged basis.

Some things I hear I find an affront to common sense. Its like the government surplus and deficit argument, I don't think most understand what it actually means in our current monetary system where money is debt and debt is money. The laws of economics (not the ones we make up ourselves) aren't that to different to physics, for every action there is an equal and opposing counter action.

If the government runs a deficit repeatedly (spending more in taxes than it receives from the private sector) that means the private sector is running a surplus. It must raise taxes or cut spending or it will usher in a sovereign debt crisis as the system has to move to equilibrium eventually. Where are we at now I wonder?

Likewise if the government is running a surplus (redistributing less money back to the economy than it receives from the private sector) then the private sector is running a deficit to pay for this and if this continues for a period the private sector will collapse, resetting the system. You need governments to know how to manage this relationship.

When you follow the models through, Germany can ONLY be sustainable as a result of impoverishing its neighbours. Its surplus obviously has to be the deficit of Greece/Spain/Italy - why doesn't Europe wake up to this after the umpteenth debt crisis? Europe and the euro will always be destined to fail unless the structural imbalances of Germany and the Southern Mediterranean states are accounted for by MASSIVE and PERMANENT capital transfer. It is not going to happen so why do we persist in dragging it out?

[RamNut]

1 hour ago, SillyBilly said:

As I was bored I was looking through the Bank of England's historical interest rate data since to see how we responded to crises and how quickly we normalised.

 

Sorry mate....had to smile at that one.

 

 

[SillyBilly]

10 minutes ago, RamNut said:

Sorry mate....had to smile at that one.

 

 

Should have put the sad b*stard disclaimer at the start of the thread! Spend all week looking at half life graphs then all weekend at financial ones, just can't get enough of them!

[Shang]

Germany are using it's financial might to maintain this farce. The European Union only benefits Germany, every other country is only in it to try get a portion of what Germany is having. I was pro-EU before I read up on Armstrong and his views, and if there was a referendum tomorrow I'd vote to leave. I'm on the left of political views for reference.

[SillyBilly]

Just watching Bloomberg markets now, 30% of government bonds in Europe now have negative yields!!!

It is absolute madness, who in the right mind would pay Germany or Sweden or France or Denmark to lend to them! Give them a loan, you pay them interest and they devalue the currency the loan is in. Seriously if anyone thinks this is sustainable they need their head looking at. The presenter on Bloomberg aptly described it as "there are no words for this", sums it up for me. This is off-the-charts stuff really.

[SillyBilly]

4 hours ago, Shang said:

Germany are using it's financial might to maintain this farce. The European Union only benefits Germany, every other country is only in it to try get a portion of what Germany is having. I was pro-EU before I read up on Armstrong and his views, and if there was a referendum tomorrow I'd vote to leave. I'm on the left of political views for reference.

The EU can only really have a chance if there is German acceptance to underwrite Southern Mediterranean debt in order to create a common debt market with federally issued bonds. Their behavior thus far doesn't suggest like its on the cards any time soon. In the meantime, its just a waiting game for Greece or Italy etc. to deteriorate further.

[Ramarena]

Lombard Street Research reckons everything is rosy in the garden. 

http://www.telegraph.co.uk/finance/economics/11970990/Global-recession-scare-fades-as-stimulus-revives-manufacturing.html

[GboroRam]

On 18/09/2015, 17:20:28, Shang said:

I watched up on Martin Armstrong after seeing the trailer, super interesting and spine tingling since there was a scene showing a PowerPoint slide he designed in 1998, with a bunch of key dates on it.

And every one has happened pretty much on the exact date he predicted. The next big one, is what he calls "The Big Bang" and is meant to happen at 2015.75 or the 1st of October, when the start of the big recession will happen. It won't be immediate but signs of it happening will start to show.

I'm taking this with a pinch of salt, but if it happens then I don't think anyone will doubt him.

Pfff. He was miles off.

[Zag zig]

On 26 October 2015 12:06:29, StivePesley said:

Does anyone have any thoughts on how virtual currencies fit in to all this – or will fit in going forward?

It strikes me that a global economic collapse could easily leave an open playing field for a universal virtual currency to be established.

Bitcoin has come along way in the past 5 years, but there are still barriers to wider adoption. A collapse could remove some of those barriers perhaps?

 

Can't resist biting at this one, my thoughts f.w.i.w sure their are barriers, but whilst not mainstream, it's usage is not yet fully appreciated by the masses either. Waiting for the 2015 figures to show how popular it's become and likely overtake PayPal for starters. http://www.coupofy.com/blog/bitcoin-is-switching-from-investment-commodity-to-everyday-use

IF you accept the figures above, then maybe it is becoming a medium of currency exchange worldwide. I've seen recent viewpoints that the latest surge is Chinese driven; pure speculation at present. BUT imagine if a tiny fraction of that population start to switch just a tiny fraction of their $20 trillion odd deposits to Bitcoin! The last spike up could be dwarfed and turn Bitcoin into the mother of all bubbles.

 

[SillyBilly]

21 hours ago, Ramarena said:

Lombard Street Research reckons everything is rosy in the garden. 

http://www.telegraph.co.uk/finance/economics/11970990/Global-recession-scare-fades-as-stimulus-revives-manufacturing.html

Pretty brave to pick the 1 figure which wasn't bad and say all is fine! The Atlanta Fed has just substantially downgraded growth prediction for the fourth quarter, usually very strong with retail boost so seems to fly in the face of the trajectory.

[Ramarena]

After yesterday's jobs figures it looks like everyone is convinced that the FED is going to put rates up in December. 

[SillyBilly]

On 07/11/2015 11:18:07, Ramarena said:

After yesterday's jobs figures it looks like everyone is convinced that the FED is going to put rates up in December. 

Yes, 0.10% or 0.25%? More what effect it will have on the emerging markets, see if it creates any panic as if markets believe a rate tightening cycle will start...

The perpetual cynic in me thinks it might be a reluctant Fed just wanting to do a rise, any rise in 2015 to avoid total embarrassment with regard to its forward guidance policy and its constant rate hike hints. They say the Fed is "data dependent" and inflation is nowhere near the mark so on that basis it can't hike but perhaps the credibility of the Fed is so bad now it thinks it has to act.

Anyway, I welcome any hike. Pity the BoE and ECB are moving in the opposite direction at the same time.

[Zag zig]

Doug Casey always talks the big picture, as well as his own book eg buy P.m's(leave aside that and storage issues).

From a few days back. Take out the bank debt bubble stuff and the doom on War prospects, there is actually some sound advice ( or dumbing down for the average Jo blo  )

De cluuter, Generate and Speculate, if you dare of course. https://m.youtube.com/watch?v=jGCXywfLehM

[Ramarena]

Not a good day on the markets today, not a good day on the jobs front (UK), big companies starting to issue profit warnings, Greece back on the radar. 

Crude plummeted again today over concerns of a worldwide surplus, same with commodities such as platinum and copper. 

Chinese investors seem to have run for gold after their stock market problems, not sure how that will work out for them. 

Interesting times

[Ramarena]

On the job losses, this is the list of major ones in the North East in the last couple of weeks. 

* 2,200 at SSI Redcar
* 800 at SSI suppliers
* 1,000 SSI contractors laid-off
* 100 at Caparo Hartlepool
* 44 at Tata Steel Long Products with more 700 more threatened by April 2016
* 700 contractors laid-off at Air Products Port Clarence
* 1,300 staff affected by closure of six HMRC offices
* 700 to go at Boulby Potash Mine

That's almost 7000 in one region alone and does not include smaller firms. Staggering really and you have to feel for the people living up there.  

[LesterRam]

I was watching Jeff stelling on sports Saturday and he made a dig at Mr Cameron and his lack of effort on his part, it looks like another coal industry, we need to support heavy industry.

another hammering on the FTSE, time to hide your money

[SillyBilly]

21 hours ago, Ramarena said:

On the job losses, this is the list of major ones in the North East in the last couple of weeks. 

* 2,200 at SSI Redcar
* 800 at SSI suppliers
* 1,000 SSI contractors laid-off
* 100 at Caparo Hartlepool
* 44 at Tata Steel Long Products with more 700 more threatened by April 2016
* 700 contractors laid-off at Air Products Port Clarence
* 1,300 staff affected by closure of six HMRC offices
* 700 to go at Boulby Potash Mine

That's almost 7000 in one region alone and does not include smaller firms. Staggering really and you have to feel for the people living up there.  

Interesting that they are closing smaller HRMC offices and concentrating/increasing the jobs in the bigger cities which are already decent employment areas. This sort of typifies why the SE is overcrowded with creaking infrastructure while we have a million empty or underused homes in the North with no jobs.

Give it 12-18 months and the fallout from the commodities sector and energy production will come to the fore, its not even started yet, there is always the customary time delay. From what I hear its carnage at the moment.

People forget the 2200 at Redcar is just the employed, not the contractors. Same with O&G, lots of these industries use thousands of contractors, they're never recorded on the redundancy figures and are typically well paid. I'd doubt they'd show up at the JC any time soon but not having their wages circulating in the local economy becomes a problem in time.