MELT-UPMONITORMeltup Monitor: Euro Pressure Going Critical - 28- Nov 2013 Meltup Monitor: A Regression-to-the-Exponential Mean Required - 25 Nov 2021 NEW SERIES RELEASE Lance Roberts Charles Hugh Smith John Rubino Bert Dohman & Ty Andros NOW SHOWING HELD OVER MONETARY MALPRACTICE MONETARY MALPRACTICE: Deceptions, Distortions and Delusions MONETARY MALPRACTICE: Moral Malady MONETARY MALPRACTICE: Dysfunctional Markets HELD OVER Currency Wars Euro Experiment Sultans of Swap Extend & Pretend Preserve & Protect Innovation Showings Below
|
Tues. Jan. 7th, 2014 |
2014 Themes - Charles Hugh Smith What Are Tipping Poinits? |
![]()
Reading the right books? >> Click to Browse << We have analyzed & included Book Review- Five Thumbs Up
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
"BEST OF THE WEEK " |
Posting Date |
Labels & Tags | TIPPING POINT or 2013 THESIS THEME |
HOTTEST TIPPING POINTS |
Theme Groupings |
||
We post throughout the day as we do our Investment Research for: LONGWave - UnderTheLens - Macro Analytics |
|||
SHADOW BANKING - $71T and Now Bigger than the Global Economy SIZING THE GLOBAL SHADOW BANKING SYSTEM FSB's Global Shadow Banking Monitoring Report 2013 11-14-13 BIS The main findings from the 2013 exercise are as follows :
|
01-07-14 | MACRO MONETARY | GLOBAL MACRO |
SHADOW BANKING: Why the Fed Can't Stop Fueling The Shadow Bank Why the Fed Can't Stop Fueling The Shadow Bank Kiting Machine 06-03-13 Bill Frezza via Menckenism blog Fractional reserve banking is unlike most other businesses. It's not just because its product is money. It's because banks can manufacture their product out of thin air. Traditional commercial banks essentially create money through a well understood and time honored pyramiding of loans. Depositors who understand that their deposits are thereby placed at risk choose their banks accordingly. Under the bygone rules of free market capitalism, only one thing kept banks from creating an infinite amount of money, and that was fear of failure. Failure occurs when depositors come to believe that their bank has lent out too much manufactured money to too many dodgy borrowers and may not be able to cover depositors’ withdrawals. When this happens, depositors rush to reclaim their money while there is still some left, leading to the bank’s collapse. Under free market capitalism, banks compete along a spectrum of risk and reward. Conservative banks offer a higher degree of safety by maintaining larger reserves, thereby manufacturing and lending out less money. Through word and deed they let depositors know that they lend to only the most creditworthy borrowers, who generally must post valuable collateral. These banks remain profitable because they successfully attract prudent depositors willing to accept lower rates of interest. Banks of a more speculative bent offer a lower degree of safety, maintaining smaller reserves to create and lend out more money. Seeking higher returns, they often lend to less creditworthy borrowers who may put up poor quality collateral or none at all. These banks attract risk-taking depositors looking for a higher rate of interest. They can be very profitable during periods of economic expansion but often fall into distress during economic downturns. Periodic bank failures remind depositors of the connection between risk and reward. When caveat emptor rules, smart depositors who pay attention make money and dumb depositors who don't lose theirs. Because the latter outcome is intolerable in a democracy, we have government-provided deposit insurance and other taxpayer-financed backstops that shield most depositors from the risk of loss. In theory banks pay premiums to fund this insurance. In practice these premiums are not risk-based. Banks are not penalized for making riskier loans, in turn often leaving the premiums too low to finance payouts. This creates a huge moral hazard, as it frees depositors to seek the highest return without regard for safety. Worse, it removes conservative banks’ competitive advantage. Under a government-guaranteed deposit insurance regime, conservative bankers who want to stay in business must take on more risk in order to pay the higher interest rates necessary to attract depositors. This often sets off a race to the bottom, which results in periodic banking crises. After each of these crises, politicians promise taxpayers that it will never happen again. And each time it does, the government creates a new set of labyrinthine regulations that attempt to mimic the business judgment of conservative bankers. Minimum reserve requirements are established, which normally become the maximum as there is little advantage in exceeding them. And both depositors and the bankers themselves become complacent about the banks’ investments because it is so easy to privatize gains and socialize losses. Banks also learn that competitive advantage can be obtained by either gaming the regulations or having cronies write them. As regulations get more intrusive and complex, politicians discover that they can be used to advance social policies, such as increasing home ownership among voters with poor credit, thereby increasing the risk on banks’ loan books. This mixed economic system is the one that replaced free market capitalism in hopes that it would prevent bank failures. Despite, and some even say because of, a regulatory regime that discouraged conservative banking and rewarded reckless mortgage lending, the banking system crashed - again - in 2007-2008. What is not widely appreciated is that the ensuing government bailouts allowed an underlying shadow banking system to not only survive but grow even larger. It is called the shadow banking system because it operates outside most government-regulated banking laws. This is primarily because regulations and accounting standards haven’t caught up with the practices of these banks, which are relatively new and poorly understood. It was the seizing up of the commercial paper and repo markets that funds the shadow banking system that abruptly halted the flow of liquidity that kept the mortgage bubble propped up. This revealed the underlying insolvency of Fannie Mae, Freddie Mac, and many commercial banks stuffed with subprime mortgage securities accumulated under the mixed economic system described above. Powered by an exclusive club of primary reserve dealers, a group that once included high flyers like Lehman Brothers, MF Global, and Countrywide Securities, these shadow banks work hand in glove with the Federal Reserve to manufacture money by pyramiding loans atop the base money deposits held in their Federal Reserve accounts. To the frustration of Keynesians, and despite an unprecedented Quantitative Easing (QE) by the Federal Reserve, conventional commercial banks have broken with custom and have amassed almost $2 trillion in excess reserves they are reluctant to lend as they scramble to digest all the bad loans still on their books. So most of the money manufactured today is actually being created by the shadow banks. But shadow banks do not generally make commercial loans. Rather, they use the money they manufacture to fund proprietary trading operations in repos and derivatives. |
01-07-14 | MACRO MONETARY | GLOBAL MACRO |
EMERGING WORLD: COLLATERAL TRANSFORMATIONS, REHYPOTHECATION & SFV's
ABOVE SCHEMATIC FROM : GLOBALIZATION TRAP by GordonTLong.com It is critically important to distinguish the interconnectedness between banks and different types of shadow banking entities. Different shadow banking entities are associated with different risk factors such as credit intermediation, maturity transformation, and leverage. Excerpt below taken from: Why the Fed Can't Stop Fueling The Shadow Bank Kiting Machine Bill Frezza via Menckenism blog
SHADOW BANKING - NEW YORK FEDERAL RESERVE - The Definitive Work on Shadow Banking & The Financial Crisis Shadow banks are best thought along a spectrum. Each of the seven steps involved in the shadow credit intermediation process were performed by many different types of shadow banks, with varying asset mixes, funding strategies, amounts of capital and degrees of leverage. The Post-Crisis Backstop of the Shadow Banking System - Pozsar, Adrian, Ashcraft, Boesky (2010) Once private sector credit and liquidity put providers' ability to make good on their "promised" puts came into question, a run began on the shadow banking system. Central banks generally ignored the impairment of such important pillars of the shadow banking system as mortgage insurers or monoline insurers. Once the crisis gathered momentum, however, central banks became more engaged. The series of 13 liquidity facilities implemented by the Federal Reserve and the guarantee schemes of other government agencies essentially amount to a 360º backstop of the shadow banking system. The 13 facilities can be interpreted as functional backstops of the shadow credit intermediation process. Thus,
Only a few types of entities were not backstopped by the crisis, and some attempts to fix problems might have exacerbated the crisis . Examples include not backstopping the monolines early on in the crisis (this might have tamed the destructiveness of delevera ging) and the failed M-LEC which ultimately led to a demarcation line between bank-affiliated and standalone ABS intermediaries (such as LPFCs or credit hedge funds) as recipients and non-recipients of official liquidity. These entities failed too early on in the crisis to benefit from the liquidity facilities rolled out in the wake of the bankruptcy of Lehman Brothers, and their demise may well have accelerated and deepened the crisis, while also necessitating the creation of TALF to offset the shrinkage in balance sheet capacity for ABS from their demise. These appendixes, which depict graphically the processes described in the article, offer a comprehensive look at the shadow banking system and its many components.
|
01-07-14 | MACRO MONETARY | GLOBAL MACRO |
MOST CRITICAL TIPPING POINT ARTICLES THIS WEEK - December 29th - January 4th |
RISK REVERSAL | 1 | ||
JAPAN - DEBT DEFLATION | 2 | ||
BOND BUBBLE | 3 | ||
EU BANKING CRISIS |
4 |
||
SOVEREIGN DEBT CRISIS [Euope Crisis Tracker] | 5 | ||
CHINA BUBBLE | 6 | ||
GREAT REFLATION ASSET VALUATIONS - Risk And Reality In The US Economy "We're at the end of Asset Inflation and that will dawn on the market very soon." Risk And Reality In The US Economy 12-24-13 Saxo Bank via ZH The US economy is stabilizing, but it's not truly recovering. That's the view of Saxo Bank's Chief Investment Officer, Steen Jakobsen. Following the Fed's tapering news, Steen says the risk is that we trade on perception and not reality. Clearly, the outgoing Fed Chairman, Ben Bernanke, wanted to send a signal to the markets. Global equity markets, notably in the States, have been hitting record highs for weeks; but Steen warns "we're coming to the end of that cycle."
"We're at the end of asset inflation," he says, and that "will dawn on the market very soon."
|
01-06-14 |
US ANALYTICS CANARIES |
19 - US Stock Market Valuations |
GREAT REFLATION HOUSING - The Real Cost of Buying a Home 6.7 X Average Salary Spot The Paradox 12-24-13 Zero Hedge Based on the median real income, home prices have never been more unaffordable at a stunning 6.7x average salary. |
01-06-14 | US CATALYST-HOUSING | 26 - Rising Inflation Pressures & Interest Pressures |
TO TOP | |||
MACRO News Items of Importance - This Week | |||
GLOBAL MACRO REPORTS & ANALYSIS |
|||
US ECONOMIC REPORTS & ANALYSIS |
|||
CENTRAL BANKING MONETARY POLICIES, ACTIONS & ACTIVITIES | |||
Market Analytics | |||
TECHNICALS & MARKET ANALYTICS |
|
||
PATTERNS - Mid Term Election Year Pattern MID TERM ELECTION YEAR PATTERN This follows very closely our 2014 Technical Pattern Outlook SOURCE: Chart of the Day 12-24-13 The chart illustrates how the stock market has performed during the average mid-term election year. Since 1950, the first nine months of the average mid-term election year have tended to be subpar (see thick blue line). That subpar performance was then followed by a significant year-end rally. One theory to support this behavior is that investors abhor uncertainty. To that end, investors tend to pull back prior to an election when the outcome is unknown. Beginning in early October, however, the outcome of the election becomes increasingly apparent and investors respond by positioning their portfolios accordingly. |
01-06-14 | PATTERNS | ANALYTICS |
PATTERNS - Sornette's Log-Periodic Model Prediction Peak Speculation And The Ides Of January 14th 01-05-14 Via John Hussman, Confidence abounds. Last week, Investor’s Intelligence reported a surge in advisory sentiment to the highest bullish percentage since October 19, 2007. John Hussman notes that NAAIM reported that the 3-week average equity exposure among its members increased to the highest level on record. Given the unfortunate resolution of similarly extreme overvalued, overbought, overbullish, rising-yield periods in history, it's almost mind-boggling that investors actually expect the present speculative run to end well. The accelerating pitch and shallowing corrections of the recent advance are worth noting. Based on the fidelity of the recent advance to this price structure, we estimate the “finite-time singularity” of the present log-periodic bubble to occur (or to have occurred) somewhere between December 31, 2021 and January 13, 2014. That does not mean that prices must immediately crash – only that the dynamics will then lend themselves to a great deal of potential instability, if prior log-periodic bubbles in equity and commodity markets across history are any indication. It bears repeating that our own defensiveness is driven by a broad ensemble of evidence, not simply price dynamics, not simply valuations, not simply sentiment, but the “full catastrophe” – which includes the fact that strong economic, speculative and monetary enthusiasm has historically been quite a contrary indicator for stocks. The chart below shows the current position of the S&P 500. The light red line shows the log-periodic price trajectory that most closely approximates the present overvalued, overbought, overbullish, Fed-induced speculative run since 2010. While the initial gains from the 2009 low until about mid-2010 represented what we view as a move from reasonable valuation to full valuation (our stress-testing “miss” was not on valuation grounds), I expect little, if any of the market’s gains since 2010 to be retained by investors over the completion of this market cycle. Despite very short-run uncertainties about market direction, I should note that we now estimate negative prospective total returns for the S&P 500 on every horizon of less than 7 years. And this is what Hussman said in 2007...
Sound familiar?
|
01-06-14 | PATTERNS | ANALYTICS |
COMMODITY CORNER - HARD ASSETS | PORTFOLIO | ||
COMMODITY CORNER - AGRI-COMPLEX | PORTFOLIO | ||
SECURITY-SURVEILANCE COMPLEX | PORTFOLIO | ||
THESIS Themes | |||
2013 - STATISM |
|||
2012 - FINANCIAL REPRESSION |
|||
2011 - BEGGAR-THY-NEIGHBOR -- CURRENCY WARS |
|||
2010 - EXTEND & PRETEND |
|||
THEMES | |||
NATURE OF WORK -PRODUCTIVITY PARADOX | |||
GLOBAL FINANCIAL IMBALANCE - FRAGILITY & INSTABILITY | |||
CENTRAL PLANINNG -SHIFTING ECONOMIC POWER | |||
SECURITY-SURVEILLANCE COMPLEX -STATISM | |||
STANDARD OF LIVING -GLOBAL RE-ALIGNMENT | |||
CORPORATOCRACY -CRONY CAPITALSIM | |||
CORRUPTION & MALFEASANCE -MORAL DECAY - DESPERATION, SHORTAGES.. |
|||
SOCIAL UNREST -INEQUALITY & BROKEN SOCIAL CONTRACT | |||
CATALYSTS -FEAR & GREED | |||
GENERAL INTEREST |
|
||
TO TOP | |||
|
Tipping Points Life Cycle - Explained
Click on image to enlarge
TO TOP
![]() |
YOUR SOURCE FOR THE LATEST THINKING & RESEARCH
|
TO TOP