Monthly Archives: December 2015

U.S. Banks to Face $120 Billion Shortfall in Fed Crisis Plan

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“The largest U.S. banks would face a $120 billion total shortfall of long-term debt under a Federal Reserve proposal aimed at ensuring their failure wouldn’t hurt the broader financial system.  Banks such as Wells Fargo & Co. and JPMorgan Chase & Co. will be required to hold enough debt that could be converted into equity if they were to falter, according to a Fed rule that was approved by a unanimous vote on Friday. The Fed’s proposal, which applies to eight of the biggest U.S. banks, requires debt and a capital cushion equal to at least 16 percent of risk-weighted assets by 2019 and 18 percent by 2022.”

http://www.bloomberg.com/news/articles/2015-10-30/u-s-banks-to-face-120-billion-shortfall-under-fed-crisis-plan

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Global Banks Face $1.2 Trillion Shortfall Under Proposed FSB Rules

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“The world’s 30 biggest banks, including HSBC, JPMorgan Chase and Deutsche Bank, would need to raise as much as $1.2 trillion in total loss-absorbing capacity by 2022 under proposed rules published Monday by Europe’s Financial Stability Board (FSB).  Under the proposed rules, which would apply to 30 global banks identified by the FSB as ‘systemically important,’ the lenders will have until January 2019 to create a financial buffer, or Total Loss Absorption Capacity (TLAC), of at least 16 percent of their risk-weighted assets. The minimum TLAC requirement will gradually increase, rising to 18 percent by January 2022.”

http://www.ibtimes.com/global-banks-face-12-trillion-shortfall-under-proposed-fsb-rules-2175047

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U.S. pension backstop faces $76.4B deficit; sharp premium hikes stir opposition

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“Despite the Pension Benefit Guaranty Corp.’s record high deficit, business groups say recent PBGC premium hikes meant to cover those deficits are unjustified and detrimental to the defined benefit pension system itself.  PBGC on Tuesday said its total deficit reached $76.4 billion in fiscal 2015, up nearly 24% from the year before. The deficit for single-employer pension plans accounted for $24.1 billion of that, up from $19.3 billion in fiscal 2014.  The widening deficit was driven by changes in interest factors that increased the value of single-employer program liabilities, PBGC said.”

http://www.businessinsurance.com/article/20151118/NEWS03/151119792/despite-pbgc-deficit-sharp-premium-hikes-stir-opposition

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Who’s the Bear Driving Up the Price of U.S. Stock Options? Banks

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“If you want to buy a put to protect against losses in the Standard & Poor’s 500 Index, often you’ll pay twice as much as you would for a bullish call betting on gains.  New research suggests the divergence is a consequence of financial institutions hoarding insurance against declines in stocks. Deutsche Bank AG says in a Dec. 6 research report that the likeliest explanation may be that demand is being created for downside protection among banks that are subject to stress test evaluations by federal regulators. In short, financial institutions are either hoarding puts or leaving places for them in their models should markets turn turbulent.”

http://www.bloomberg.com/news/articles/2015-12-09/who-s-the-bear-driving-up-the-price-of-u-s-stock-options-banks

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Desperate Finland Set To Unleash Helicopter Money Drop To All Citizens

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“With Citi’s chief economist proclaiming ‘only helicopter money can save the world now,’ and the Bank of England pre-empting paradropping money concerns, it appears that Australia’s largest investment bank’s forecast that money-drops were 12-18 months away was too conservative.  Over the last few months, in a prime example of currency failure and euro-defenders’ narratives, Finland has been sliding deeper into depression. As The Telegraph reports, this is a deeper and more protracted slump than the post-Soviet crash of the early 1990s, or the Great Depression of the 1930s. And so, having tried it all, Finnish authorities are giving every citizen a tax-free payout of around $900 each month!”

http://www.zerohedge.com/news/2015-12-06/it-begins-desperate-finland-set-unleash-helicopter-money-drop-all-citizens

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Suicide rate in Alberta up 30% in wake of mass oilpatch layoffs

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“The suicide rate in Alberta has increased dramatically in the wake of mounting job losses across the province.  The most recent data only goes to June, but according to the chief medical examiner’s office, 30 per cent more Albertans took their lives in the first half of this year compared to the same period last year.  ‘This is staggering,’ said Mara Grunau, who heads the Centre for Suicide Prevention.  ‘It’s far more, far exceeds anything we would ever have expected, and we would never have expected to see this much this soon.'”

https://ca.news.yahoo.com/suicide-rate-alberta-jumps-30-140524274.html

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It’s All Gone Wrong for One of World’s Biggest Mining Companies

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“Anglo American Plc, a conglomerate spanning everything from brewing, publishing and gold mining during its peak in the early 1990s, will shrink beyond recognition after Chief Executive Officer Mark Cutifani on Tuesday announced a package of asset sales, mine closures and job cuts.  Like banks before the financial crisis or energy companies before the collapse of oil prices, Anglo American is the classic tale of over-extending during the good times only to be left with too much debt and too little money when markets take a dive.”

http://www.bloomberg.com/news/articles/2015-12-09/it-s-all-gone-wrong-for-one-of-world-s-biggest-mining-companies

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Morgan Stanley begins layoffs in credit division

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“Morgan Stanley this week cut staff covering short-term credit and regional broker-dealers, after a quarter in which the bank posted a 42 percent drop in bond trading, several sources told Reuters.  The sources blamed the shakeup at the No. 6 U.S. bank by assets on tougher capital rules, mounting competition from faster and cheaper trading on electronic systems and expectations that the Federal Reserve will raise U.S. interest rates next week for the first time in nearly a decade.  The decision to downsize followed one of Morgan Stanley’s slowest quarters for bond trading since the global credit crunch.”

http://finance.yahoo.com/news/morgan-stanley-begins-layoffs-credit-173249440.html

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Junk-Bond Issuance Surges to $26 Billion in the Last Stages of Boom

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“Speculative-grade borrowers raised about $26 billion of debt this month, more than double what was sold in October. That made it the busiest month for the riskier borrowings since May. Issuance was dominated by companies whose credit profile is on the rise and those who were willing to pay up.  Investors are more discerning in a junk-bond market where a rout in commodities may leave them with the first loss since 2008. And even as issuance of the debt picked up this month, this year’s tally of $275.6 billion is down by 21.6 percent from last year’s pace.”

http://www.bloomberg.com/news/articles/2015-11-25/junk-bond-issuance-surges-to-26-billion-in-last-stages-of-boom

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Deja Vu: The Fed’s Real “Policy Error” Was To Encourage Years of Speculation

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“Investors repeatedly forget that reaching for yield in speculative securities only works if capital losses don’t wipe out the ‘pickup’ in yield. Since mid-2014, we’ve emphasized the increasing deterioration in market internals and credit spreads, noting that this deterioration has historically been a reliable signal of a shift from risk-seeking to risk-aversion by investors. This risk-aversion is now accelerating. Last week, a number of high-yield bond funds placed delays on redemptions in order to give them time to liquidate holdings into a collapsing market. When a problem is specific to a particular fund, orderly liquidation can protect investors. But in this case, the need for liquidation isn’t specific.”

http://www.hussmanfunds.com/wmc/wmc151214.htm

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