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Global financial system implosion begins

Discussion in 'world politics, current affairs and news' started by Falcon, Mar 26, 2008.

  1. punters demanding a brand new shiny thing rather than a couple of years old shiny thing could conversely come back and bite the auto manufacturers in the arse down the line.
     
  2. Rimbaud

    Rimbaud Well-Known Member

    Dalian Wanda deal: Why is China's 'Disney rival' being sold? - BBC News

    So, further to those financial investigations being carried out into major Chinese companies, Wanda have sold $9.6bn in assets, 76 hotels and several theme parks.

    Incidentally, on the subway system in the city I live in, every single vending machine in every single station has been out of service for about 2 months. (which is really annoying because it often surpasses 40 degrees at this time of year and I sweat a lot) I don't know for sure, (actually, I might pop down to the nearest subway now to investigate) but I would wager that the vending machines are supplied and stocked by Gate Gourmet, which is owned by HNA, one of the five big companies under investigation. Perhaps they are in the process of finding another company to take on HNAs assets to help sort out its debt problem.

    An interesting thing to note about Wanda is the choice of things that have been sold off. Wanda shopping malls and plazas are very visible in most major (and many not so major) cities in China, and if they went down it would be noticed by millions and taken as a very visible indicator that the economy is not good. Second thing to notice is that all the assets being sold off are within China, and none of the overseas assets are being sold. This seems to be a face saving decision and an attempt to maintain the perception of China's rising economic and political power, and to avoid putting off investors in China. So they have chosen to sell 79 hotels (which are not as noticeable as the Wanda owned commercial districts which have Wanda logos everywhere and are frequented by millions of people every day) and 12 amusement parks, of which only 3 have been completed and open to the public.

    There are party committees within every company above a certain size in China, so they can be made to make decisions for political, rather than economic, reasons. So I wonder if Sunac, who purchased the nearly $10billion worth of assets, have been pushed into making the purchase?
     
    not-bono-ever likes this.
  3. the buyer -Sunac- are spunking loads of their ill gotten property profits in an effort to diversify from their core property development theme- they believe that the Chinese new property market will soon enter a death spiral phase and are looking for toe holds elsewhere. This mega deal has only gone ahead with the explicit approval of central command as chucking cash piles into external rather than domestic projects is increasingly being seen as a not wholly positive (patriotic) action. its a symbiotic arrangement if all goes well
     
    Rimbaud likes this.
  4. Rimbaud

    Rimbaud Well-Known Member

    Do you have a link? (and if so could you copy and paste, in case the site is blocked.)

    Censorship of economy related bad news is tightening here, which is another reliable sign that things are fucked - searching just the keyword "sunac" on Bing does have plenty of results, but also the message that "some results are not displayed due to a notice of local law requirement." Wonder what that is - also searching "China financial crisis 2017" on Bing just brings up endless stories from China Daily and Xinhua about how a financial crisis would never happen in China and how prospects are bright, and it is hard to find anything else, have to go many pages deep to find any stories that aren't state media puff pieces. Wasn't like that only a few weeks back when I first posted about Anbang, so seems like the censors are working hard to control the narrative.

    Only a little over 2 weeks left before my flight home, very much looking forward to getting google and youtube back... the tightening political controls, rising state directed nationalism and Han chauvinism, anti-western campaigns, and likelihood of imminent economic crisis make me feel very pleased I'm not here another year...
     
  5. Sorry Rimbaud its a cobbled together post from shit I hear and read, so no succinct link as such.

    WRT a Financial crisis-as ever, its not easy to find out what is going on but the supplemental little developments all add up of late - Anbang and its stable mates, restrictions of the level of capital flight have been massively tightened- and importantly , is being actively enforced -the go live of HK/PRC securities E-trading systems is dissapating some of the risk to counterparties yet still being under the control of central command. The Sunac/Wanda arrangement is a little strange in the sold off leisure brands remain Wanda and will be run by Wanda ( officially ) but they have been bailed out by Sunac. Not a buy out as convention would allow us to understand


    Central command allows you to be able to execute these actions and temper the extremes that would possibly appear in a *free market* system. Don't think there will be a crash just yet but it is all hands to the pumps to keep things moving along - only a month ago , billions of USD were dumped from the coffers to support the RMB and the rate settling mechanism used by PBOC was tweaked to give a give more control ( and opacity ) over FX things
     
  6. hot air baboon

    hot air baboon Well-Known Member

    The sequel to the global financial crisis is here

    High credit ratings have hidden a structural instability, writes Frank Partnoy

    JULY 31, 2017 by: Frank Partnoy

    Subscribe to read

    The financial scene is familiar, the stuff of films like Inside Job and The Big Short. Rocket-scientist financiers buy up billions of dollars of risky loans and repackage them into complex investments with multiple layers of debt. Credit rating agencies classify the top layers as triple A. Institutional investors, including pension funds and charitable organisations, flock to buy these apparently risk-free yet high-yielding investments. Tension builds.

    But the year is not 2006 or 2007. It is today. While the US administration talks of repealing Dodd-Frank, the reality is that regulators have been flouting that law for years and now the shadow financial markets are frothing. Almost a decade after the global financial crisis, the sequel has arrived.

    The central culprit this time is the collateralised loan obligation. Like its earlier esoteric cousins, a CLO bundles risky low-grade loans into attractive packages and high credit ratings. In May, there were two deals of more than $1bn each, and experts estimate that $75bn worth are coming this year. Antares Capital recently closed a $2.1bn CLO, the largest in the US since 2006 and the third-largest in history. Although most of the loans underlying these deals are of “junk” status, more than half the new debt is rated triple A. Sound familiar?

    During the early 2000s, similar highly rated deals called collateralised debt obligations were popular. At first, they seemed harmless, or at least not so big that their collapse could cause financial contagion. But when regulators ignored their growth, they became more opaque and more profitable, with credit ratings disconnected from reality. Like cracks in a building’s foundation, the risks seemed minor at first. But high ratings hid the instability of the entire structure. Until it was too late.

    Dodd-Frank was supposed to stop these credit-rating ploys. But the Securities and Exchange Commission has permitted the agencies to dodge that law. While Dodd-Frank imposed liability on the agencies for false ratings, the SEC exempted them. Likewise, Congress barred the agencies from getting inside information about issuers they rate, but the SEC permitted that, too. As CLOs grow, the cracks are spreading again.

    Last Christmas Eve, the so-called risk-retention rule of Dodd-Frank took effect, requiring that arrangers of these complex deals keep a slice of the downside. But clever financiers arranged for third parties to take on this risk.

    The credit rating agencies, particularly Moody’s Investors Service and S&P Global Ratings, are the central actors in this story, just as in the original. The computer programs they use to assign triple-A ratings remain flawed. Because loan defaults can come in waves, mathematical models should account for “correlation risk”, the chance that defaults might occur simultaneously. But the models for CLOs assume correlations are low. When defaults occur at the same time, these supposed triple-A investments will be wiped out. CLOs are just CDOs in new wrapping.

    Some experts say this time it is different. Earlier this month, Ashish Shah, a managing director of Madison Capital Funding, a subsidiary of New York Life, told a roundtable of CLO experts they should not worry about defaults in 2017. “The appetite for assets is ferocious,” he said. Pension funds, insurance companies and university endowments are demanding both safety and high returns. CLOs seem to offer both.

    A new Office of Credit Ratings within the SEC is supposed to provide a check on this appetite. But when I sent a Freedom of Information Act request, seeking to identify which credit rating agencies have been found to violate SEC rules, the regulators refused to divulge names. Violators remain anonymous.

    It is hard to police the financial markets. New business school graduates are inevitably one step ahead of their regulator counterparts, and many of the least creditworthy businesses find it easy to borrow, because their loans can be quickly repackaged and sold. During the debates about Dodd-Frank repeal, legislators should keep their eyes on these complex investments and the agencies that facilitate them.

    Some might claim CLOs are different or smaller, or that regulators are better prepared today, or that business loans could not possibly default all at once, as home mortgage loans did. But similar arguments were made about risks during the early 2000s, before they spread to the major banks and AIG, and the markets spiralled out of control.

    To avoid an even bigger crisis, regulators should heed warnings about financial dysfunction and hidden risks now, before the cracks spread.

    The writer is a professor at the University of San Diego and author of ‘Fiasco: Blood in the Water on Wall Street’


    ...and in other news investors are now chowing down on debt issued by Argentina & Greece....what could go wrong
     
    gawkrodger likes this.
  7. No self respecting bank is holding these instruments, just assisting in the design and production- the end users are invariably us , by proxy

    Comments about the regulators are apt and critical-troublesome regulators are taken out of the process by offering them jobs with the banks for 3/4 x their salary. The FCA are left with a hard core of unimaginative drones whilst the truly smart ones are bought off to work around the regulations and undermine them. Working for the enemy covenants are either ignored or worked around.
     
  8. DotCommunist

    DotCommunist my world is fire and blood

    regulatory capture is what I've heard it called, and it goes on in more than just finance ennit
     
    not-bono-ever likes this.
  9. the drips always happened - same with the ratings agencies- but now it is almost like soviet snipers targeting the officers to demoralise the troops and waiting for the next one to pop up and take a head shot. I know of one who was graduate entry to FSA , went to one of the big consultants and thence into a yank bank - 10x his salary in as many years. He is a very dull man and not massively clever but knows his niche inside out. A moral free cunt.
     
  10. Anyway, the crash is 10 years old this week ( ish )

    Looking forward to the next 10 years of shit
     
    Barking_Mad likes this.
  11. Ming

    Ming Massive prawns

    1929 but they're dripping it in to maintain civil order.
     
  12. yield

    yield zero

    Good piece by Aditya Chakrabortty

    Ten years after the crash, there’s barely suppressed civil war in Britain
    Guardian 15/08/17
     
  13. I still think this years will literally be blood on the streets so possiblly a literal civil war on the horizon
     
  14. There’s a Reason People Are Worried About Low Volatility

    something that has reared its head on here a few times - the last was after Dwyer had read a book on it. The volatility index merely reflects sentiment really but like all economy-alchemy things, it can take on a life of its own and become a factor driving sentiment as well. A true Financial ouroboros. Overall it means nothing or is hugely significant. One or the other,. of maybe somewhere inbetween. Things are still fucked whatever.
     
  15. gawkrodger

    gawkrodger Well-Known Member

  16. 1) Wanda have officially pulled their interest in the London 9 Elms project - central command says no more spunking money on speculative overseas projects
    2) re the Credit card issue above- the BoE is shitting about CC being sued to cover shortfalls elsewhere ( see their stability report from June) a c. 10% growth of credit card useage would indicate that there is some tightness in many households
     
    Rimbaud likes this.
  17. I think it is all down hill from here on - I am going to call another credit event by the end of the year . I will invariably be proved wrong, but fuck it.
     
    Rimbaud likes this.
  18. Rimbaud

    Rimbaud Well-Known Member

    Looks very much like it, doesn't it?

    But not until after the Party Conference, so my money is on early to mid 2018. No matter how much more trouble it is storing up for later, they will keep pumping more debt into the economy to delay the inevitable until Xi has secured his position. Mutterings abound that he is planning to abolish effectively abolish term limits by restoring the role of Chairman.
     
    The Boy likes this.
  19. hot air baboon

    hot air baboon Well-Known Member

    isn't that "real wages" chart just another way of saying those countries have deflation ( eurozone & Japan esp. ) - which is invariably written up by economics correspondents as a massive problem aswell ? :confused: ( confused.com )
     
  20. yield

    yield zero

    Capitalism Can’t Save The Planet – It Can Only Destroy It
    Monbiot. 13 September 2017
    The commons have been wrecked. Or in language of Capitalism negative externalities.

    UK's high street banks are accident waiting to happen, says report
    13 September 2017
     
    ska invita likes this.
  21. ffsear

    ffsear Well-Known Member

    Have noticed Lloyd Bank are about to change their overdraft policy.. charging 1p per £7 borrowed, charged daily on a "pay as you borrow".. SO you if live in an overdraft, it basically works out at over 50% APR. Practically puts them in pay day loan territory. Looks like the first squeeze on unsecured debt to me.
     
    ska invita likes this.
  22. back in the good old days, the basel group committee of central bankers reckoned that c. 18% was a reasonable benchmark for Tier 1 Bank capital adequacy cover - we are running at 13% at the minute and there is a raging argument going on as to the efficacy of the current stress tests and whether they are fit for purpose of measuring the real world impact of cobbles and potholes on the financial highway. The big boys was as low as cap ad as possible and the central banks have to temper caution and keep the banking sector happy.For fucks sake, even the Adam Smith institute think the current model for stress testing is gerrymandered self priced shit and not reflective of todays interconnected world.

    One big issue is that they are self pricing some murky shit, which is bad enough, but there is an assumption that there is a final destination market for everything if it goes tits up - which is clearly not the case. Them corporate bonds you are holding with a couple of % haircut for valuation could drop to pennies in minutes or hours and the market will cease to exist. the black swan events of yore are no longer out of scope, they are tangible and closer than ever.

    lolz
     
    yield likes this.
  23. Aleksandar Kocic Presents: The Dark Side Of Liquidity

    I am ahead of the curve- fuck knows that this heisenberg site is about - but it does taken on board the timely Kocic moot that boundary assumptions on liquidity should not be erm.. assumed. Its all about liquidity, and oddly, liquidity is not always a transparent factor. I am shouting at myself here I know, but mrs NBE has had enough and banished me to the guest room with some Diazipam to keep me medically coshed so she can get a good nights sleep.
     
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