The Finance Thread

[SillyBilly]

http://www.reuters.com/article/2015/03/18/us-france-security-financing-idUSKBN0ME14720150318

Sounds like mission creep to me in the cashless society motive. So, any payment above 1000 euros in France can't be made in cash, 500 next year?

[SillyBilly]

Spain is down to 2500 euros. Just wondering when the Bank of England joins the party?

[bigbadbob]

As suspected Deutsche Bank announced a big loss today, not surprising. What did surprises me is that I read that DB was holding $75 TRILLION!!! in derivatives. Holy cow, that's more than Germany's entire economy, bit I wasn't sure so did a little digging and found this. 

http://www.zerohedge.com/news/2015-06-12/deutsche-bank-next-lehman

If this is true the next financial crisis could well start in Germany, DB are cutting 25,000 jobs, the VW crisis, recent economic data has been very poor too. 

Could the economic poster-child actually be the epicentre?

and we know what happened last time fritz had a major financial crisis

[Animal is a Ram]

and we know what happened last time fritz had a major financial crisis

They've tried to take over the world twice with brute force..

..now they're trying to do it with economics - and failing, by the sounds.

[Ramarena]

Sadly this Redcar closure looks like it's taken a dodgy turn. According to reports, months worth of pension payments have disappeared having never made it to the company that runs the scheme. 

This needs investigating but I wonder what can be done if it's sitting in a foreign account and the company has gone belly up. Another blow to the workers in the run up to Christmas. 

 

[SillyBilly]

Meanwhile FTSE 100 has its best week since 2011. Seems markets lapping up no interest rate rise for the forseeable, quite a market we're in at the moment!

Martin Armstrong is on the money so far.

 

 

[SillyBilly]

Political highlight from the surplus in "normal times" parliamentary vote:

Caroline Lucas, the Green MP, says borrowing to invest can stabilise the economy, increase jobs and increase tax revenues.

Osborne says that is an argument for continual borrowing. When would she stop borrowing?

Lucas replies: You stop borrowing when you can no longer afford to pay back.

 

Couldn't make it up! Sort of reinforces that the Greens and their voters live in some kind of fantasy land. I never heard a poorer interview than Bennett's car crash interview on housing on LBC before the election. Embarrassing to listen to.

2 more developments in Deutsche Bank's story this month:

1. April 2014 - DB required to raise an additional 1.5 Billion of Tier 1 capital to support it’s capital structure. 
2. May 2014 - DB announced the selling of 8 billion euros worth of stock – at up to a 30% discount.
3. March 2015 - DB fails the banking industry’s “stress tests”
4. April 2015 - DB agrees to joint settlement with the US and UK regarding the manipulation of LIBOR. Required to make $2.1 billion payment to the DOJ. 
5. May 2015 - DB's CEO, Anshu Jain granted extraordinary authority by the board of directors
6. June 2015 - Greece misses it’s payment to the IMF. The risk of default now high.
7. June 2015:  Deutsche Bank’s two CEO’s announce their departure from the company.  (Just one month after 5.)
8. June 2015: S&P lowers the rating of Deutsche Bank to BBB+. Three notches above “junk”.
9. October 2015 - DB to post $7billion loss for Q3
10. October 2015 - DB announce plans to sell U.S. Private-Client Unit

Does this sound like a healthy bank? Desperate for capital, resigning CEOs, record losses, selling off assets.

Germany is an interesting one to watch, the mask seems to be slipping. Car industry and exports taking a beating, shocking demographics and importing a million+ unskilled and frankly un-German like labour to prop the system up (migrant "open arm policy" in Germany is nothing to do with their generosity, rather their demographic cliff). Their biggest bank looks to be in poor shape as well.

Germany f**king up Europe again I'm afraid, throwing open the floodgates then the next week realizing their mistake and then wanting the rest of Europe to take its fair share! Somebody needs to take the Germans down a peg or two, their actions this year in Greece and now in the migrant crisis are shockingly bad and very self-centered.

[SillyBilly]

http://www.illinoispolicy.org/illinois-pension-debt-still-ballooning/

State of Illinois is bankrupt (but states not legally permissible for bankruptcy).

The stories just getting crazier:

http://www.foxnews.com/politics/2015/10/15/unlucky-winners-illinois-lottery-halts-payouts-over-600/

My favourite is that they are now capping the States's lottery win to $600! This following tax increases on just about everything but breathing and selling off every state asset down to parking enforcement!

IIlinois is America's 5th largest state by GDP...

And America technically goes bankrupt 2 days earlier than originally thought (Nov 3rd now) if they can''t agree to raise the debt limit. They should raise but where does it stop?

[Ramarena]

All seems quiet at the moment. The markets seem to be happy that there will be no rate rise for the foreseeable future, the U.S and Germany are declining quarter on quarter but not quick enough to cause panic. U.S debt ceiling could cause problems but the only thing they can really do is increase it again.

A lot of people seem prepared to kick the can down the road a bit, China are mooting a stimulus package. 

Is this the calm before the storm?

[SillyBilly]

All seems quiet at the moment. The markets seem to be happy that there will be no rate rise for the foreseeable future, the U.S and Germany are declining quarter on quarter but not quick enough to cause panic. U.S debt ceiling could cause problems but the only thing they can really do is increase it again.

A lot of people seem prepared to kick the can down the road a bit, China are mooting a stimulus package. 

Is this the calm before the storm?

Looking back, you were right in saying this is a 2016 or 2017 affair I think. We'd have seen a blow up by now and we haven't. All I can see (barely thought it possible) is more monetary easing when we were (allegedly) supposed to be starting the fiscal tightening cycle. Now we have Haldane hinting about negative rates!

Since this thread was started China has cut interest rates twice (again today) and will clearly ease all the way down, wouldn't be surprised to see another cut before year end. Japan since announced "Abenomics 2.0" which effectively is making the Japanese bond market a public market, over 50% owned by BoJ by 2018 at today's rate. How does a market crash or find true value if an ever greater % of the market is owned by 1 holder? Draghi has since announced more massive QE by ECB this month. What this does show is that things are getting more desperate by the day, these aren't things you do when things are going well. The bond markets are being rigged and I''ll be honest and say I haven't got a clue what the implications are but it certainly ain't going to be pretty.

You can tell the markets don't know what to make of it either, I am still intrigued by the theory that "the flight to safety" this time round will be to U.S stocks and the dollar (not the bond market and away from anything euro denominated). Yes, they are overvalued but are they the LEAST bad option in the room? If that loss of confidence comes in the bond market the hot money has to go somewhere (more capitalization in it than the stock market), where will it go? Stocks and bonds don't usually crash together, unless we really are talking 1920's...

Big run up in asset/stock prices as people lose faith in government debt (and more QE) to end of 2016, start of 2017 and then an almighty crash? Be interested to know what everyone else is doing at the moment, whether they own bonds, sitting in cash or going to ride out the next wave of QE in equities?

FWIW I am reasonably sure stealth QE is happening in U.S at the moment.

[Rev]

While I can't answer the big picture, today I received the annual update on the share ISA I hold with the Halifax, 50p/m, 600 p/a. 

This is for my lads 18th Birthday in a years time, over the last year it's showing a £160 loss from the £600 invested, is it time to cash it in and put the monthly cash directly into his 18th Birthday pot?

[GboroRam]

While I can't answer the big picture, today I received the annual update on the share ISA I hold with the Halifax, 50p/m, 600 p/a. 

This is for my lads 18th Birthday in a years time, over the last year it's showing a £160 loss from the £600 invested, is it time to cash it in and put the monthly cash directly into his 18th Birthday pot?

I think I've got the answer. Let the banks invest in you rather than the other way around. 

[GeneralRam]

http://www.illinoispolicy.org/illinois-pension-debt-still-ballooning/

State of Illinois is bankrupt (but states not legally permissible for bankruptcy).

The stories just getting crazier:

http://www.foxnews.com/politics/2015/10/15/unlucky-winners-illinois-lottery-halts-payouts-over-600/

My favourite is that they are now capping the States's lottery win to $600! This following tax increases on just about everything but breathing and selling off every state asset down to parking enforcement!

IIlinois is America's 5th largest state by GDP...

And America technically goes bankrupt 2 days earlier than originally thought (Nov 3rd now) if they can''t agree to raise the debt limit. They should raise but where does it stop?

I'm currently working in the US for a couple of months as there isn't anyone with the required skills available to do my job. It would seem there is a lack of workers (or skills?)  rather there being a lack of jobs over here. I realise it's gearing up to Christmas, but EVERYWHERE is hiring. There are signs up all along the road I go to work and it would seem companies are screaming out for people.

 

[SillyBilly]

I'm currently working in the US for a couple of months as there isn't anyone with the required skills available to do my job. It would seem there is a lack of workers (or skills?)  rather there being a lack of jobs over here. I realise it's gearing up to Christmas, but EVERYWHERE is hiring. There are signs up all along the road I go to work and it would seem companies are screaming out for people.

 

Interesting GeneralRam, I like the anecdotal evidence. However, the jobs figures over the whole of U.S are worsening (local economies like Texas or perhaps where you are clearly not indicative of this). Generally speaking, America should be creating around 200,000 jobs a month otherwise it is indicative of "stall speed" in the wider economy. September was about 140,000 I think (maintaining that rate throughout the year would be a decent enough indicator to expect that annualized GDP growth would be in the order of 1-1.5% GDP). Above or around 200,000 you would expect the U.S economy to be hitting 2.5-3%+ GDP growth. I think we will see the third quarter quite weak in GDP terms looking at the recent numbers, albeit still growing though.

For those interested (how employment figures are skewed), most of the developed world now reports employment on the U3 basis and no longer U6 (copied from wiki):

U1:[44] Percentage of labor force unemployed 15 weeks or longer.
U2: Percentage of labor force who lost jobs or completed temporary work.
U3: Official unemployment rate per the ILO definition occurs when people are without jobs and they have actively looked for work within the past four weeks.[1]
U4: U3 + "discouraged workers", or those who have stopped looking for work because current economic conditions make them believe that no work is available for them.
U5: U4 + other "marginally attached workers", or "loosely attached workers", or those who "would like" and are able to work, but have not looked for work recently.
U6: U5 + Part-time workers who want to work full-time, but cannot due to economic reasons

The "5.1%" of people unemployed in U.S.A is a total joke (as it is in the U.K). Look at the graph below, labour force participation is the best measure for employment in the economy (it has dropped to 62% since, the lowest level since 1977 when a lot of women did not work!). It measures all the people of working age who can work and whether they are participating in the economy. In other words, there are 92 million Americans who can work, who for whatever reason aren't. That means that we should be asking why MILLIONS have opted out of the labour force altogether. Many have given up (all the 50+ year olds canned in the last recession etc.). So with our current unemployment measure we just ignore most of them!

[SillyBilly]

While I can't answer the big picture, today I received the annual update on the share ISA I hold with the Halifax, 50p/m, 600 p/a. 

This is for my lads 18th Birthday in a years time, over the last year it's showing a £160 loss from the £600 invested, is it time to cash it in and put the monthly cash directly into his 18th Birthday pot?

What is it invested in? That is pretty bad, the markets have been pretty flat this year despite all the turbulence (yes, we're off highs but even 10%...).

My own future advice would be that if you're not into following the markets and picking out individual stocks etc. invest in a passive fund tracking an indices (I pay around 0.10% fees for some of my funds tracking FTSE and DOW etc.), active managed funds are an absolute rip off, I've invested in about 3-4 over 20 years that have beaten the market over a few years period. But, passives are just for investing and not looking at every year as you will have periods of hemorrhaging and periods of doubling in 5 years, they should be looked at as 20+ year investments.

On a wider point I got rid of my work pension years ago and convinced them to pay the contributions into my SIPP so I can avoid those charges, typical Standard Charted rip off funds from my work (people don't understand how the compounding effect works and how much these fees can cost you over 30-40 years, about 25% of your pot when you come to cash it in!).

[GeneralRam]

Interesting GeneralRam, I like the anecdotal evidence. However, the jobs figures over the whole of U.S are worsening (local economies like Texas or perhaps where you are clearly not indicative of this). Generally speaking, America should be creating around 200,000 jobs a month otherwise it is indicative of "stall speed" in the wider economy. September was about 140,000 I think (maintaining that rate throughout the year would be a decent enough indicator to expect that annualized GDP growth would be in the order of 1-1.5% GDP). Above or around 200,000 you would expect the U.S economy to be hitting 2.5-3%+ GDP growth. I think we will see the third quarter quite weak in GDP terms looking at the recent numbers, albeit still growing though.

Granted, the US is a big place and there are places like Detroit which have a destroyed economy but I can only speak from experience (Indianapolis, IN).

I also think the problem is from the useless degrees Americans pay through the roof for. I'm currently programming/fixing conveyor belts in a warehouse and there are regular warehouse workers in there that I speak to that have not 1 but 2 degrees which they spent $60-80k for (And that's each!!). So that's around $150k worth of debt before they even start! From the majority of my colleagues over here, all I can say is that they are completely and utterly incompetent - the degrees they have are in unrelated topics compared to IT and they don't have a clue what they're doing.

[SillyBilly]

Granted, the US is a big place and there are places like Detroit which have a destroyed economy but I can only speak from experience (Indianapolis, IN).

I also think the problem is from the useless degrees Americans pay through the roof for. I'm currently programming/fixing conveyor belts in a warehouse and there are regular warehouse workers in there that I speak to that have not 1 but 2 degrees which they spent $60-80k for (And that's each!!). So that's around $150k worth of debt before they even start! From the majority of my colleagues over here, all I can say is that they are completely and utterly incompetent - the degrees they have are in unrelated topics compared to IT and they don't have a clue what they're doing.

Yes, $1.2 trillion in student debt, a lot of which won't get repaid. Its another "bubble". All this debt is deflationary. Not enough good paying jobs, what could go wrong? These people are debt slaves, just like more and more of the Western world, enslaved by the banks and think they are free!

Most of our housing stock has been paid for several times over (think how many mortgages can be paid off against 1 house - its non-productive debt after the initial productive building of the house) and yet people are duped into larger and larger mortgages (benefits noone other than the banks), more and more student debt to get a job and they aren't on the streets about it? A fairly limp generation overall. Total debt slaves. Prices of degrees and mortgages are set principally by the supply of credit, not by demand, something most can't work out. 1980 to 2020 will be looked back on as one of the biggest credit bubbles in history and most of these young punters have written off their lives in servitude to the banks (and consequently will now have a lower standard of living than their parents). If you can't borrow £150,000 to buy a house it doesn't matter how few of them there are none will sell. Same with the costs of a degree, are the prices determined by the competition for places or the fact you can borrow $50,000 at age 18-21?

 

 

[SillyBilly]

Don't supply the excesses of credit then prices drop and natural demand is allowed to determine the price against affordability with a small consideration against future income. It is no secret that pre-1971 society generally bought out of earned income not leveraged or future income, a good basis for prosperity. This shift to credit be it leased cars or student loans or houses or payday loans... it is all signs of a generation for whatever reason has been duped to handing over the future to the creditors who now determine the price. It is only the government who stepped in to limit the multiples of income people could buy a house for (otherwise prices would be higher as people outbid one another in unearned income - the classic credit bubble!). It seems there is no end to the stupidity (or desperation) of people to take on more debt. It also seems there is no end to the stupidity of lenders to provide the credit (only limited by government). What we need to tackle is the damage this personal debt has on the economy, sucking money from the productive economy (people spend money when they don't have a big mortgage to a bank or student loan repayments) to the largely unproductive economy as these debts have to be serviced (I have posted the 2 key graphs on this I think earlier in the thread, return on debt and velocity of money - record lows!). It is a self-reinforcing loop, except currently the world and central banks think the answer is to create more debt in the form of buying their respective government's bonds (through financial institutions) thus encouraging said financial institutions to lend more to stimulate growth in the economy. You can't create growth at will in a debt based monetary system, eventually the debt strangles the economy! It is absolute madness. Problem is they are still using the same Keynesian models of equilibrium economics which failed to predict the 2008/2009 crisis so who has any faith they know what they are creating now?

[Stive Pesley]

I'm currently working in the US for a couple of months as there isn't anyone with the required skills available to do my job. It would seem there is a lack of workers (or skills?)  rather there being a lack of jobs over here. I realise it's gearing up to Christmas, but EVERYWHERE is hiring. There are signs up all along the road I go to work and it would seem companies are screaming out for people.

 

I work (in the UK) for a US outsourcing services company. Over in the US they have started to sack people but offer them a rehire at a 3rd party at 75% of their current wage. They are effectively outsourcing their outsourcing contracts, and in the process reducing their costs, reducing their headcount and improving their margin - all to impress the stock exchange

US employment law being utterly useless means they can do this to their employees. I think (and hope) we have a bit more employment protection over here but I'm sure if they could find a way around it they would do it to us too in a heart beat

[SillyBilly]

http://www.telegraph.co.uk/finance/economics/11949701/AEP-Eurozone-crosses-Rubicon-as-Portugals-anti-euro-Left-banned-from-power.html

Can't be bothered to dig out the old Europe thread but more trouble on the continent. Left wing anti EU majority government denied power by the Portuguese president to prop up the right pro EU minority. More disdain for democracy.

What with the recent Polish elections, British referendum and the rise of anti EU parties such as Fronte Nationale, TrueFinns etc. its looking like we're part way through the collapse of Europe, a story which will take many years to reach its conclusion.

Interesting but every collapse always goes the same way when its time is up, history has a funny habit of repeating itself. Rome also debased its currency massively to try to keep itself from imploding (the clearest admission of desperation), meaning its coinage went from high silver content to bronze and copper very rapidly to create more money to pay off old debts, we do the exact same in the 21st century by QE, it has the same effect. Devaluing the existing money supply by pumping more in to stop the masses revolting (buy them off with worthless currency and asset increases)..well it works for a few years until the people wake up. I genuinely think big questions of going to be asked of the euro in another debt crisis.