Showing posts with label Credit Bubble. Show all posts
Showing posts with label Credit Bubble. Show all posts
Thursday, September 27
Saturday, December 24
Recapping The PolyCapitalist's 2011 Predictions
For those keeping score three topics I made 2011 forecasts on were:
On Android, the verdict is in:
On Android, the verdict is in:
The U.S. housing market officially double dipped in May and then continued to fall, so that call looks correct as well.
The China prediction is a bit murkier, but here are some points worth noting:
- The Hang Seng and Shanghai stock markets are in a bear market and down roughly 20% for the year, or 30% since May. From its peak in 2008 Shanghai is off 60%.
- Housing prices are softening quickly; in Beijing new home prices dropped 35% in November alone.
- Coastal cities such as Wenzhou and Ordos appear to be experiencing a credit crisis with reports of businessmen leaping off rooftops.
- Hot money appears to be flowing out of the country: China's $3.2 trillion in foreign reserves have been falling for three months despite a trade surplus.
Things aren't shaping up too well for China or trade relations with the U.S. in 2012 either. For more on this see here, here, here and here.
Overall, does 2.5 out of 3 predictions sound about right?
Two more quick ones: bullishness on gold has been a steady theme since starting this blog in May 2010. And how did gold do in 2011? Despite the autumn selloff gold priced in U.S. dollars has returned around 10%. Not too shabby given that the S&P500 is flat YTD. I also managed a correct mid-year bearish call on the euro.
Check back later for The PolyCapitalist's 2012 predictions.
Sunday, October 16
Wednesday, September 21
Monday, September 5
Sunday, July 3
The Greatest Trick Lenders Ever Pulled?
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Not all too long ago, 'debt' was clearly understood as something that, simply put, was bad.
But 'credit'? Oh boy, give me some of that!
There is a lot more to the credit/debt bubble than rebranding. But it's interesting to observe the different terms used for the same or like things, and the effect such differences can have on adoption and/or support. Some other examples:
- 'Orderly resolutions' vs. 'bailouts'
- 'Quantitative easing' vs. 'printing money'
- 'Macroprudential regulation' vs. 'financial repression'
- 'Department of Defense' vs. 'Department of War'
Friday, June 10
In Greece, Locals Rule
Harvard Professor Dani Rodrik clearly spells out the bottom line on Greece:
History suggests...when the demands of financial markets and foreign creditors clash with those of domestic workers, pensioners, and the middle class, it is usually the locals who have the last say.Rodrik's full post here, and video you won't see on most main stream media below.
Sunday, May 29
Wednesday, May 18
Monday, May 16
Video: China's Empty Cities
Pretty rosy view from Bloomberg's Adam Johnson in the below video. For an alternative view, see these videos from Hugh Hendry and Jim Chanos.
Monday, March 7
Mervyn is the Man
Anyone following the ongoing financial crisis (yes, it's not over yet) closely these past few years has probably noted the markedly different rhetoric coming from two central banks on opposites sides of the Atlantic.
Governor Mervyn King is Ben Bernanke's equivalent at the Bank of England. This weekend he again excoriated Too Big to Fail banks, which predictably led to HSBC threatening to leave town (again).
Is Mervyn out of his mind? I mean, however will London's economy and the U.K.'s tax receipts survive if megabanks like HSBC relocate to Singapore?
The oft-repeated threat by Too 'Bigger' to Fail megabanks that they'll leave town for lax regulatory and lower tax enclaves in Switzerland, Asia, etc. shouldn't scare anyone. If in fact they do carry through on this threat I for one would be at the airport to wave them off goodbye.
For starters, many megabanks don't pay much in the way of local taxes. But that's not the main reason we should call the Too Bigger to Fail bankers' bluff.
With respect to megabanks' threatening to leave town, author Michael Lewis recently made the following analogy:
Megabanks pose a risk to the health of the economy, just like the water-poisoning utility poses a risk to the well being of the community. When something goes wrong at the Too Big to Fail banks, like it did in 2007-2008, everyone suffers in the form of bigger deficits, higher taxes and lost jobs.
Meanwhile, it looks to be another record setting year for banker bonuses.
Between Governor King and the Independent Banking Commission's Sir John Vickers it would appear that the U.K., unlike the U.S., has the right people in the right place at the right time.
Bravo, Mervyn! Keep up the good fight!
P.S. Interestingly, Mervyn in his pre-BoE life was Michael Lewis' tutor at the London School of Economics.
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| BoE Governor Mervyn King |
Is Mervyn out of his mind? I mean, however will London's economy and the U.K.'s tax receipts survive if megabanks like HSBC relocate to Singapore?
The oft-repeated threat by Too 'Bigger' to Fail megabanks that they'll leave town for lax regulatory and lower tax enclaves in Switzerland, Asia, etc. shouldn't scare anyone. If in fact they do carry through on this threat I for one would be at the airport to wave them off goodbye.
For starters, many megabanks don't pay much in the way of local taxes. But that's not the main reason we should call the Too Bigger to Fail bankers' bluff.
With respect to megabanks' threatening to leave town, author Michael Lewis recently made the following analogy:
Your local utility is found to be poisoning the community's water supply, which is making people sick. However, in order to continue providing electricity the utility says that it has to be allowed to poison the water. If the community doesn't allow it to keep poisoning the water then it will leave town for another location which is ok with this.
The obvious response to this lunacy is to tell the utility to take a hike -- our community can find someone else to provide non-polluting electricity!Banks are like utilities. They both fulfill important functions. However, Too Big to Fail megabanks are not the only firms capable of providing banking services. If Too Big to Fail firms leave town then other smaller banks, which don't poison the local water, would gladly step into their place. There is nothing so special that Too Big to Fail banks do that can't be easily and quickly replaced. In fact, they are much, much easier to replace than an electricity utility.
Megabanks pose a risk to the health of the economy, just like the water-poisoning utility poses a risk to the well being of the community. When something goes wrong at the Too Big to Fail banks, like it did in 2007-2008, everyone suffers in the form of bigger deficits, higher taxes and lost jobs.
Meanwhile, it looks to be another record setting year for banker bonuses.
Between Governor King and the Independent Banking Commission's Sir John Vickers it would appear that the U.K., unlike the U.S., has the right people in the right place at the right time.
Bravo, Mervyn! Keep up the good fight!
P.S. Interestingly, Mervyn in his pre-BoE life was Michael Lewis' tutor at the London School of Economics.
Wednesday, February 23
Thursday, November 25
Video: Rare David Einhorn Interview on Shorting, Rating Agencies, Apple & Gold
I'm a big fan of David Einhorn's investment strategy, particularly his ability to identify accounting shenanigans at firms such as Lehman Brothers and Allied Capital, both of which he successfully shorted. (He wrote a well received book on his rather disturbing saga with Allied Capital.) He also rarely gives public interviews so the following video caught my attention.
The contribution of the credit rating agencies to the financial crisis have been well documented. Dodd-Frank financial 'reform' failed to make any material changes to rating agency model, which contains an inherent conflict of interest (bond issuers make payments to rating agencies, which incentivizes issuers to 'shop' for better ratings). To address this problem Einhorn simply advocates that credit rating agencies, such as Moody's (which he is short), should be abolished. Of note, famed investor Warren Buffet has been steadily reducing his large Moody's holdings.
The contribution of the credit rating agencies to the financial crisis have been well documented. Dodd-Frank financial 'reform' failed to make any material changes to rating agency model, which contains an inherent conflict of interest (bond issuers make payments to rating agencies, which incentivizes issuers to 'shop' for better ratings). To address this problem Einhorn simply advocates that credit rating agencies, such as Moody's (which he is short), should be abolished. Of note, famed investor Warren Buffet has been steadily reducing his large Moody's holdings.
Wednesday, July 28
Bill Gross to Government: Quit "Flushing Money Down the Toilet"
PIMCO's Bill Gross, often referred to as "The Bond King", today published his August investment outlook which outlines the economic headwinds (past, present and future) due to slowing population growth.
For anyone not familiar with Gross, he and his colleagues at PIMCO run the world's largest private bond fund with over $1 trillion in assets under management. The U.S. Government sells bonds to finance its deficits, and Gross and PIMCO are big (maybe the biggest?) buyers of those bonds. Put simply, when Gross/PIMCO talk government listens. But don't just take my word for it. Ask Clinton campaign manager James Carville, who had the following to say:
Deep Demographic Doo-Doo
Recent demographic forecasts suggest that world population growth will continue to slow and level off around 2050 and then begin to decline.
Should this occur it would be difficult to overstate the implications. As Gross puts it "capitalism itself may be in part dependent on a growing population".
For anyone not familiar with Gross, he and his colleagues at PIMCO run the world's largest private bond fund with over $1 trillion in assets under management. The U.S. Government sells bonds to finance its deficits, and Gross and PIMCO are big (maybe the biggest?) buyers of those bonds. Put simply, when Gross/PIMCO talk government listens. But don't just take my word for it. Ask Clinton campaign manager James Carville, who had the following to say:
"I used to think if there was reincarnation, I wanted to come back as the President or the Pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everyone."
Deep Demographic Doo-Doo
Recent demographic forecasts suggest that world population growth will continue to slow and level off around 2050 and then begin to decline.
Should this occur it would be difficult to overstate the implications. As Gross puts it "capitalism itself may be in part dependent on a growing population".
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