Financial topics

Investments, gold, currencies, surviving after a financial meltdown
John
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Location: Cambridge, MA USA
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Re: Financial topics

Post by John »

** 07-Jul-2019 Bear Stearns CDO funds collapse, 7/17/2007
Higgenbotham wrote: > This may be a coming Bear Stearns or Lehman moment but it's very
> unlikely the market will recognize it as such as of yet.

> I remember when the first Bear Stearns CDO funds collapsed on July
> 17, 2007. The boards were all completely brain dead on the issue,
> and the stock market did little to nothing for 2 days. So we'll
> see.

> There will be a very small percentage of people in the world who
> will see this for what it might be as worldwide IQ plummets and we
> descend headlong into the new dark age.
The Generational Dynamics board was definitely NOT brain dead.


** http://www.generationaldynamics.com/pg/ ... tm#e070718


Generational Dynamics Web Log for 18-Jul-07

Bear Stearns announces that its hedge funds are almost worthless.

And that was AFTER all 15 ABX indexes had already collapsed to new
lows.

The defaulting hedge funds that almost caused a broad market meltdown
a few weeks ago are now almost worthless, according to a letter that
the company sent to its investors on Tuesday afternoon.

The hedge funds are based indirectly on money earned from
collateralized debt obligations (CDOs) and other credit derivatives
based on mortgage payments made by individual homeowners across the
company. As mortgage foreclosures have surged across the nations, the
values of the CDOs have been falling, forcing the hedge funds to fall
in value.

According to a faxed copy of the letter, appearing on the Wall Street
Journal web site, one of the hedge funds has "very little value," and
the other has "effectively no value left." Here are some excerpts:
"Let me take this opportunity to provide you with an update on the
status of the High-Grade Structured Credit Strategies and
High-Grade Structured Credit Strategies Enhanced Leveraged Funds
managed by Bear Stearns Asset Management (BSAM). A team at BSAM
has been working diligently to calculate the 2007 month-end
performance for both May and June for the Funds. This process has
been much more time-consuming than in prior months due to
increasingly difficult market conditions.

[[Notice the names of these funds. Imagine what a Very
Important Person you'd have to be to own shares in the High-Grade
Structured Credit Strategies Enhanced Leveraged Funds. Wow! Just
mention that name to a girl and you'd have her in bed before you
reach the word "Funds." Too bad though, 'cause you're getting
screwed in other ways as well.]]


As you know, in early June, the Funds were faced with investor
redemption requests and margin calls that they were unable to
meet. The Funds sold assets in an attempt to raise liquidity, but
were unable to generate sufficient cash to meet the outstanding
margin obligations. As a result, counterparties moved to seize
collateral or otherwise terminate financing arrangements they had
with the Funds. During June, the Funds experienced significant
declines in the value of their assets resulting losses of net
asset value. The Funds' reported performance, in part, reflects
the unprecedented declines in the valuations of a number of
highly-rated (AA and AAA) securities.
Fund managers and account executives have been informing the Funds'
investors of the significant deterioration in performance for May and
June. The preliminary estimates show there is effectively no value
left for the investors in the Enhanced Leverage Fund and very little
value left for the investors in the High-Grade Fund as of June 30,
2007. in light of these returns, we will seek an orderly wind-down of
the Funds over time. This is a difficult development for investors in
these Funds and it is certainly uncharacteristic of BSAM's overall
strong record of performance."

Separately from the letter, Reuters learned that the value of the
High-Grade fund is about 9 cents on the dollar.

This must be a disaster to the investors who had each invested
millions or tens of millions of dollars in the fund. Even after the
Bear Stearns debacle in June, investors were still hoping to get 50
cents on the dollar, but now are learning that they'll get next to
nothing. I wonder how many people learned on Tuesday that they've lost
their life savings?

News of letter came after the market closed on Tuesday, which means
that the results weren't reflected in the ABX index values for the
day.

Image

Index price of low-quality ABX-HE-BBB- 07-1 credit derivatives and
high-quality ABX-HE-AAA 07-1 credit derivatives from Jan 19 to Jul 17,
2007 (Source: Markit.com)

There are 15 ABX indexes, representing mortgages from before 2006
(06-1), before the second half of 2006 (06-2) and before the first
half of 2007 (07-1); for each of those time periods, there are five
quality ratings from the lowest (BBB-), representing the weakest
subprime mortgages, where foreclosures are most likely, to the highest
(AAA), representing the strongest and most creditworthy mortgagees,
for a total of 15 different indexes.

By the time that the market closed on Tuesday, and before the letter
was disclosed, 14 of the 15 ABX indexes has fallen to their lowest
values ever. (The remaining one is very close to its lowest.)

Tuesday's news from Bear Stearns means that the indexes still have a
lot farther to fall.

If you look at the two graphs, you'll see what a "crash" would look
like if they were graphs of a stock market index.

Last week I described three global economic imbalances that could
trigger a major international financial crisis:

* Collapse of the credit derivatives market.
* Collapse of the Shanghai stock market bubble.
* Collapse of the Wall Street stock market bubbles.

The second and third of these situations will not happen until there's
an investor stock market panic. But the first of these is already in
progress, and is continuing to spread to other markets.

From the point of view of Generational Dynamics, a generational stock
market crash is overdue. If you go back through history, there are of
course many small or regional recessions. But since the 1600s there
have been only five major international financial crises: the 1637
Tulipomania bubble, the South Sea bubble of the 1710s-20s, the
bankruptcy of the French monarchy in the 1789, the Panic of 1857, and
the 1929 Wall Street crash. We're now overdue for the next one. It
could happen next week, next month or next year, but it will come with
absolutely certainty, and will come sooner rather than
later. (18-Jul-07)

Higgenbotham
Posts: 7475
Joined: Wed Sep 24, 2008 11:28 pm

Re: Financial topics

Post by Higgenbotham »

John wrote:** 07-Jul-2019 Bear Stearns CDO funds collapse, 7/17/2007
Higgenbotham wrote: > This may be a coming Bear Stearns or Lehman moment but it's very
> unlikely the market will recognize it as such as of yet.

> I remember when the first Bear Stearns CDO funds collapsed on July
> 17, 2007. The boards were all completely brain dead on the issue,
> and the stock market did little to nothing for 2 days. So we'll
> see.

> There will be a very small percentage of people in the world who
> will see this for what it might be as worldwide IQ plummets and we
> descend headlong into the new dark age.
The Generational Dynamics board was definitely NOT brain dead.
This is why I deleted the comment. I recall that this site was on it and didn't want to cause any confusion.

For clarification, I'm talking about message boards, which didn't exist here at the time.

At that time, there were comments on message boards like, "Why are futures down 5 points? Was it Yahoo earnings?"

My point is expect the herd to ignore this news, and for the stock market to march higher as the most likely outcome. Be very cautious about going short up to your eyeballs just based on this.

At the same time, a very serious collapse appears to be brewing under the surface and is close. There was talk about Bear Stearns being in trouble for weeks before those CDO funds collapsed. It was even in mainline publications like the New York Times. This is at least an order of magnitude more serious in my opinion. I think the relative size and scope of Deutsche is probably 100 times that of Bear Stearns.
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.

John
Posts: 11485
Joined: Sat Sep 20, 2008 12:10 pm
Location: Cambridge, MA USA
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Re: Financial topics

Post by John »

** 07-Jul-2019 Bear Stearns CDO funds collapse vs today
Higgenbotham wrote: > This is why I deleted the comment. I recall that this site was on
> it and didn't want to cause any confusion.

> For clarification, I'm talking about message boards, which didn't
> exist here at the time.

> At that time, there were comments on message boards like, "Why are
> futures down 5 points? Was it Yahoo earnings?"

> My point is expect the herd to ignore this news, and for the stock
> market to march higher as the most likely outcome. Be very
> cautious about going short up to your eyeballs just based on this.

> At the same time, a very serious collapse appears to be brewing
> under the surface and is close. There was talk about Bear Stearns
> being in trouble for weeks before those CDO funds collapsed. It
> was even in mainline publications like the New York Times. This is
> at least an order of magnitude more serious in my opinion. I
> think the relative size and scope of Deutsche is probably 100
> times that of Bear Stearns.

Looking back at that time, it's amazing that people like you and me
could see what was happening, but no one else could. That's still
true today, when I hear people on CNBC saying that P/E ratios are
"low," when in fact they're hugely into bubble territory. And, of
course, the same sort of thing is true about China.

Higgenbotham
Posts: 7475
Joined: Wed Sep 24, 2008 11:28 pm

Re: Financial topics

Post by Higgenbotham »

John wrote: Looking back at that time, it's amazing that people like you and me
could see what was happening, but no one else could. That's still
true today, when I hear people on CNBC saying that P/E ratios are
"low," when in fact they're hugely into bubble territory.
I think it's even more true regarding PEs. Here's a recent update showing that the "Crestmont PE" exceeds the 99th percentile of all readings over the past 14 decades, far exceeding 2007 levels. There are various ways of adjusting PE for 10 year earnings and profit margins, etc., that definitely yield extreme bubble territory readings that even exceed 1929.

https://www.advisorperspectives.com/dsh ... -june-2019
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.

John
Posts: 11485
Joined: Sat Sep 20, 2008 12:10 pm
Location: Cambridge, MA USA
Contact:

Re: Financial topics

Post by John »

The headline on Bloomberg TV this evening is "Deutsche Bank culls
senior executives." So it's all about age discrimination. I'm sure
the kids who are left behind will do a much better job. Maybe they
can convert Deutsche Bank to Socialism.

Higgenbotham
Posts: 7475
Joined: Wed Sep 24, 2008 11:28 pm

Re: Financial topics

Post by Higgenbotham »

John wrote: The headline on Bloomberg TV this evening is "Deutsche Bank culls
senior executives." So it's all about age discrimination. I'm sure
the kids who are left behind will do a much better job. Maybe they
can convert Deutsche Bank to Socialism.
The truth is probably closer to: With Germany being the epicenter of negative interest rates, the financial sector is withering away because you can't lend in a negative interest rate environment and make any money. Of course, nobody will say that, so I'm just making a wild guess as to what the real problem is.
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.

John
Posts: 11485
Joined: Sat Sep 20, 2008 12:10 pm
Location: Cambridge, MA USA
Contact:

Re: Financial topics

Post by John »

** 07-Jul-2019 Deutsche Bank
John wrote: > The headline on Bloomberg TV this evening is "Deutsche Bank culls
> senior executives." So it's all about age discrimination. I'm
> sure the kids who are left behind will do a much better job.
> Maybe they can convert Deutsche Bank to Socialism.
Higgenbotham wrote: > The truth is probably closer to: With Germany being the epicenter
> of negative interest rates, the financial sector is withering away
> because you can't lend in a negative interest rate environment and
> make any money. Of course, nobody will say that, so I'm just
> making a wild guess as to what the real problem is.
Your explanation is not inconsistent with mine.

Higgenbotham
Posts: 7475
Joined: Wed Sep 24, 2008 11:28 pm

Re: Financial topics

Post by Higgenbotham »

Actually, they did say it, all the way back in 2016.
Deutsche boss: negative interest rates are 'fatal'

Deutsche Bank's chief executive has warned of the "fatal consequences" of the European Central Bank's negative interest rate policy, which he said punished savers and could even undermine the recovery.

John Cryan said the ECB's decision to cut its deposit rate to a record low of -0.4pc and an escalation of its bond buying programme was “working against the goals of strengthening the economy and making the European banking system safer.”

In an article for German newspaper Handelsblatt, he said: “Monetary policy is thwarting goals to strengthen the economy and to make banks safer by now”.
https://www.telegraph.co.uk/business/20 ... are-fatal/
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.

Higgenbotham
Posts: 7475
Joined: Wed Sep 24, 2008 11:28 pm

Re: Financial topics

Post by Higgenbotham »

Relief for Banks From the ECB’s Negative Rates? Not So Fast

April 5, 2019, 3:40 AM CDT

German and French lenders would likely be the biggest gainers
Measures could end up keeping interest rates lower for longer

The European Central Bank has signaled it may relieve banks in the region of some of the costs arising from negative interest rates. That wouldn’t necessarily boost their earnings, though.

Germany’s Commerzbank AG and Deutsche Bank AG -- as well as lenders in France -- would be the biggest winners if they were no longer charged for some reserves held at the ECB, according to analysts at Goldman Sachs Group Inc. However, those benefits could be offset if the measures keep interest rates lower for longer, Citigroup Inc. says.

The ECB charges banks for overnight deposits to encourage them to lend money to companies and support economic growth. After five years of negative rates, the costs are mounting for cash-rich lenders, and the central bank is looking at ways of mitigating the side effects.

The measure under discussion would be “very supportive of European banks,” according to David Riley, chief investment strategist at BlueBay Asset Management. Negative rates and a flattening of the yield curve are making it harder for banks to expand their balance sheets and lending books, he said on Bloomberg TV. “That needs to be addressed.”

Excess Liquidity

At stake is a chunk of more than 7 billion euros ($7.9 billion) that banks pay the ECB each year to park almost 2 trillion euros of excess liquidity. Since northern European banks are heavy on deposits, they are the hardest hit. Commerzbank alone faced a 277 million-euro gross burden at its two main units in 2016, the last year for which it published the data.

The current policy is essentially a tax that affects the profitability of banks, said Lorenzo Bini Smaghi, chairman of Societe Generale SA and a former ECB executive board member. “We know that European banks are not that profitable compared to the U.S. because of a series of factors, particularly the level of interest rates.”
https://www.bloomberg.com/news/articles ... ot-so-fast
While the periphery breaks down rather slowly at first, the capital cities of the hegemon should collapse suddenly and violently.

aeden
Posts: 12480
Joined: Sat Jul 31, 2010 12:34 pm

Re: Financial topics

Post by aeden »

ioer

learn to code
http://gdxforum.com/forum/download/file.php?id=912
lighter fluid noted ago
https://www.youtube.com/watch?v=_URrAt1ZnGk

Job41-11 Who hath prevented me, that I should repay him? whatsoever is under the whole heaven is mine.

Rom. 11-35 Paul writes that no one can demand of God; perhaps he quotes Job.
God is greater than any of His created creatures; therefore,
He cannot be challenged.
God reminds Job of his ownership of the universe.

Deutsche Bank should be a warning to Americans everywhere.

About ten or twelve years ago, Deutsche Bank became close to American banks with senior management deciding to jump
http://gdxforum.com/forum/viewtopic.php ... bev#p21738 Tue Nov 04, 2008 4:13 pm
into the opaque American derivatives market, both buying and creating zombie derivatives.

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