just in and out
From: J
Sent: Friday, June 15, 2012 10:10 AM
Subject: Re: Comments - Week of June 11 - right and wrong
under globalized zirp and planetary sequential dilution and coordinated looting, i observe that real returns should be mathematically and are behind us
from here on out, just last man standing death match via to / fro, on / off, zig / zag market chop and exchange slice
re misallocation of capital, whether at civilization state or city state levels, we must choose between misallocation to high-speed rail vs filling in a paper derivative crater, and choose the lesser of two evils
at the individual level, we can choose the ultimate misallocation of capital to an absolutely barbaric and non-productive purpose, by putting capital to hibernation
besides above, the rail, crater, and barbarism, we are out of choices
we are blessed to be able to choose with such clarity
From: A
Sent: Friday, June 15, 2012 12:06 AM
Subject: Re: Comments - Week of June 11 - right and wrong
Sadly i suspect what the savers are guaranteed is no real return through gross mis allocation of capital via state directed lending.
From: J
Sent: Thursday, 14 June 2012, 3:08
Subject: Re: Comments - Week of June 11 - right and wrong
tom is wrong, because
china bank is in truth an arm of the government
w/ private investors already bagged in
the bank is just a conduit for funds, savings in truth guaranteed, and everything else just printed dilution of same savings
china banking is not a derivative bomb pretending to be private institutions that would be problematic when requiring bailing
self-guidance going forward
i figure:
1. europe has so far not tee-ed up any solutions that does not involve shuffling around of re-blended debt pool w/ partial and uneven default of private vs public capitals, even as the social wastrel spending continues in the big european states / uk while the little people of little states fall down and begin to line up at soup kitchens
what europe is doing is simply mopping around (not mopping up) a pile of shit from a blown diaper to spread the evil all around, making a bad situation worse.
although by and by the crap is being focused into a few entities, eventually, and then ready for the inevitable default singularity and the reset, per all 'successful' debt work outs
2. capitalists everywhere are (or should and must soon be) terrified, and have essentially stopped taking on new ventures, so unemployment rises even as the numbers are massaged down every which way everywhere by all officialdoms
3. under the conditions as described above, where private capital is scared and unwilling and withdrawing, and public undertakings are impelled at as full a throttle as politically feasible w/o tee-ing up even more tyranny, the conditions under heaven do not look promising and we should go easy on confidence
4. so, the european capital pool is messed up, even as the fiscal streams continue to bleed red toxin. as long as the bleeding is not stopped by prosperity growth or stopped by austerity deflation, the ills shall remain as is
5. growth requires competitive strength, austerity must be backed by socio-political will. forget about both needed factors spontaneously arising out of the populations.
6. and so, onward to mathematically compelled default and reset, but before so, the mother of all efforts to maintain entitlements.
7. recommendation: hold core gold position, trade around the edges, of gold, and going outward from gold center, all manner of goodies related to gold, and conditions that benefits from conditions bullish from gold, if only because we need to guard against diaper debt deflation (be in cash, and if cash, the best cash that has no counterparty) and anticipate pre-default paper cash dilution, as well as post-default hyper inflation.
buckle up, the ride shall be somewhat bumpy as the physicals gets taken up and the paper traders get exhausted from killing volatility and eventually retreats, leaving in wake even more volatility of the much smaller physical market.
8. at some juncture, the attention wasted on europe must re-focus on bigger-still crisis
9. time-line remains as before, 6-14 years, whereas 12 months ago was 7-15 years
cheers, j
From: M
Sent: Thursday, June 14, 2012 8:56 AM
Subject: Re: Comments - Week of June 11
Good piece by Tom Holland.....
M
China's banks in no position to launch fresh lending stimulus
2012 is not 2009, and a below-the-surface shift in the financial landscape means the way the country responded to the last crisis cannot be repeated this time
MONITOR
Tom Holland
Jun 14, 2012
Investors worried about a slowdown in the Chinese economy have taken heart this week from figures showing a rise in bank lending last month.
Coming on top of last week's quarter point cut in benchmark lending rates, the increase in new bank loans to 793 billion yuan (HK$971.4 billion) in May from 682 billion yuan in April has convinced many observers that Beijing is once again opening the credit taps to avert a painful cyclical downturn.
But this is 2012, not 2009, and a below-the-surface shift in China's financial landscape means the country's banks are in no position now to boost lending as they did back then in response to the financial crisis.
In 2009, China's banks were flush with liquidity. With the stock market moribund, savers had nowhere else to put their money, so the banks enjoyed plentiful funding from a fast-growing base of captive deposits on which they paid rock-bottom interest rates.
With such a secure source of cheap funds, banks were able to jack up their lending without worrying about the consequences. The result was an unprecedented credit boom that saw outstanding bank loans shoot up by an astonishing 60 per cent in just two years.
Things are different now. Over the last couple of years the market has developed a whole new range of higher-yield alternatives for individuals and companies fed up with earning a negative real return on their bank deposits.
Households have switched from deposits to so-called "wealth management products", or structured notes backed by portfolios of high-yielding assets.
In the first quarter of this year, for example, the typical wealth management product with a 90-day maturity offered a yield of 5.2 per cent, considerably more than the meagre 3.1 per cent interest rate paid by a three-month fixed deposit.
Meanwhile cashed-up corporations have set up their own financing arms to lend at high interest rates directly to credit-starved companies. And both households and corporations have moved money offshore.
In response, the growth of household deposits has slowed, and corporate deposit growth has dried up altogether (see chart).
As a result, the mainland's banks are in an unaccustomed funding squeeze. From 4 per cent of total assets in 2008, excess deposits collapsed to zero last year.
That's created a problem. In the past, mainland bankers never had to worry about paying out depositors, because savers had nowhere else to go. That meant they never bothered much about whether borrowers would be able to repay their loans. After all, they had more than enough new deposits flowing in to cover all their liquidity needs.
Now, with savers busy switching accounts in search of better returns, for the first time ever banks are actually having to meet their liabilities to depositors.
And to pay them out, all of a sudden bankers are finding that they actually need to collect on the loans they've made, rather than simply rolling them over indefinitely when borrowers run into problems.
According to Charlene Chu at Fitch Ratings in Beijing, the big five state-owned banks may face negative cash flow this year unless they begin collecting loan repayments.
The country's smaller banks are even worse off. Chu says they will need to collect 60 per cent of their loans maturing this year in full and on time if they are to break even in cashflow terms.
This fundamental change in the banking environment will have two major effects, warns Chu. Firstly, attempts to collect on loans will expose the delinquency of many borrowers whose poor credit quality was previously disguised by plentiful liquidity.
Secondly, the resulting cash shortage will restrict the banking sector's ability to make new loans.
That means the banks are in no position to embark on even a scaled-down version of their 2009 lending binge.
If Beijing now orders the banks to support favoured projects and companies with fresh loans, it will simply increase the amount of deadweight on bank balance sheets, and further limit their capacity to extend credit to productive sectors of the economy.
That would just exacerbate the problem, weakening the banking sector and damaging China's longer-term growth prospects. |
