NOT MANY DOTS BEING JOINED UP ON THE TRADING FLOORS
‘In non-recessionary periods, the [Junk Bond] default rate averages 2%. During recessionary periods it averages 11%….the energy and metals & mining sectors are getting there: in September, their default rates were 5% and 10% respectively. Fitch: “These sectors experienced three consecutive months with over $4 billion in defaults, a level not seen since 2009 when monthly volume in the entire market exceeded $4 billion for seven straight months.”’
‘Deutsche Bank has $1.5 trillion of declared asset value on top of $67 billion of net worth. But a large portion of its assets are loans and related financing vehicles and trading positions connected to Glencore, VW, the energy sector, emerging market companies, high yield and a highly unreliably valued net derivatives position. It Deutsche Bank has “mismarked” the value of all these assets by just 5% its net worth is wiped out. It’s more likely that the bulk of its assets are overvalued by at least 20-30%….’
UK economy forecast corrections head South
This is from the latest Barclays note to corporate clients:
From 2.5% on 10th August, the estimates lurched shakily until late September when they went down a snake until the real result…1.35%. I understand some forecasters inside Big Blue B think the snake may well be called George Ossssssssborne. But then I’m not a gossip.
The Bank of England has asked banks to investigate their exposure to commodity trading houses. Commodity trading houses are at risk because they rely on huge borrowings to finance small margin achievements. But price unpredictability (as the nature of global depression becomes clear (is forcing such houses to sell at depressed prices. To add to their woes, the credit markets are showing high anxiety levels: the number of deals in the high-yield debt market slumped by 60% in Q3 2015: houses accessing that sort of credit are having to pay far higher interest rates than hitherto. It all has some horrific déjà vu about it. Thinking of late 2007, early 2008 that is.
Arab Moguls head for the Workhouse
The Kuwait Investment Authority allegedly has over $500 billion in assets, but seems in a hurry to cash them in, leading Kuwaiti newspaper Al Anba reported yesterday. This could have something to do with the government running a deficit of 1.094 billion dinars (about $3.4 billion) so far this fiscal year, as the onset of collapsed oil prices starts to take effect. Progressive and peace-loving Saudi Arabia has already begun liquidating assets in similar mode to cover its own spiralling deficits.
So in the blinding light of all this ominously descending darkness, I am delighted to record that all the Chinese stock markets forged ahead at an average gain overnight of 2.8%, while the 60% helicoptered-money economy of Japan was enough to have the Nikkei et al rising at around 2.3%. In recent days, the Dow has left 16,000 way behind and zoomed beyond 17k, while the FTSE 100 is, at 6,400, also easing the worries of the bubble-dwellers…while proving tooth-sucking old Minnies like me totally wrong.
It has often been said by many a wise market watcher that, “When the last Bear goes Bull, the Bear market is just round the corner”.
If I could paraphrase that in terms of general advice (nothing more) I’d say, “Remember Bear Sterns, and ignore the Bullshit”.