Tag Archives: Bloomberg

The Financial System Is Becoming Increasingly Unstable

Bloomberg posted an article this morning describing the Collateralized Loan Obligation market as “Wall Street’s Billionaire Machine.” But I seem to recall that the CLO market was one of the financial nuclear bombs that blew up and triggered the financial system de facto collapse in 2008. Well, it’s back – with a vengeance. Of course the taxpayers were once again sold a bill of goods never delivered when it was promised that the Dodd-Frank farce legislation would “protect” the system from the re-development of these financial weapons of mass destruction…

Bank stocks are in a bear market now and there’s a reason for that. Many of you have probably seen leveraged loan ETF charts that look like this:

The chart above shows an ETF operated by Blackstone that invests in senior secured leveraged loans. Typically these loans fund private equity leveraged buyouts. But any highly leveraged company with a junk bond credit rating is a Wall Street candidate for this type of loan.

What you’re seeing in the chart above is the beginning of an investor stampede out of this asset class. This asset flourishes in the type of money environment – Central Bank money printing and interest rate intervention – that has existed for the last 10 years. The loans carry a higher rate of interest than an investment grade corporate bank loan. This appeals to pensions and insurance companies, which need to find the highest risk-adjusted interest bearing investments possible. I like to call these: “c’mon in the water is fine” loans. These are the type of loans that get magically transformed in to CLO’s – like lead into gold – at least the for Wall Street scammers who do the transforming.

As I’ve mentioned previously, credit market investors tend to be more risk-averse than equity players. They also scrutinize financial fundamentals more closely. To this end, bank debt investors are the most conservative. They also get to see the non-public financials of the companies to which they lend. That chart above reflects the onset of fear of in the leveraged bank debt market. It means that these investors likely have been seeing negative trends in corporate financials develop.

When I showed that chart to a colleague of mine earlier this week, his response was: “it looks like parts of the stressed financial system are breaking at the same time – dominoes are falling.” He was referencing the leveraged loan, investment grade and high yield debt markets. The latter two had been showing signs of breaking down well before the leveraged loan market started to crater. Investors have been pulling pulling billions out of all three segments of the credit market. The deteriorating financial condition of corporate America is spreading its wings. This is part of the reason the volatility in the stock market has ramped up recently.

Bank stocks are in a bear market and bank liquidity is drying up – There’s a massive liquidity crisis developing and the chart of SRLN reflects that. The sell-off in the housing stocks – down over 30% since the end of January foreshadowed this, just like the sell-off in homebuilders preceded the onset of the last financial crisis. This time it will be worse. This crisis is beyond the banking crisis 10 years ago. It’s everything. You do not want to be a creditor or own stocks going forward.

Looks like the Spanish philosopher, George Santayana, was correct: We did not learn from the past and now we’re condemned to repeat it.

Can We Believe Anything Coming From The U.S. Government?

It’s gotten to the point at which, if Obama got on t.v. and stated that the sun came up in the east today, I would have to search the internet to make sure there was not any evidence that it didn’t.   But of course, the majority of the U.S. population is now nothing more than what I’ll call “television zombies.”  The Government is well aware that if they plant anything on CNN and Fox News or in the NY Times and Washington Post that most Americans will believe it.

On Monday this week, reports started surfacing that Russia was selling gold.  First Soc Gen and then JP Morgan.  The reports cited “sources in Russia.”   When I read these reports I almost fell of my chair with laughter.  This is one of those examples in which American t.v. zombies will believe anything.  This is a “tell ’em 2 plus 2 equals 1 and I bet they swallow it hook, line and sinker” report.

To begin with, Russia has no need to sell gold.  In fact, Russia added 150 tonnes of gold to its Central Bank holdings in August, September and October.   It didn’t make any sense that Russia would then turn around and sell gold.  Why?   Russia runs a current account surplus – LINK.  It has cash on its balance sheet.  Something the U.S. can only dream about, as the U.S. Government has to issue debt every hour to fund itself.  The last time the U.S. sniffed a positive balance of payments was in the 1980’s.

Second, Russia just got through paying down a big chunk of sovereign debt during Q3.   It’s current Debt/GDP ratio is 10%.  The U.S. Treasury Debt to GDP is over 100%.  Note:  this does not include direct obligations like the debt of Fannie Mae and Freddie Mac now guaranteed by the U.S. Government.  The last time the U.S. had Debt/GDP of 10?   I don’t know, the Fed records only go back 1966 and the lowest that ratio got between then and now was about 30% – LINK.

The story planted in the media by the U.S. elitists just did not add up.  And then Russia released its November Central Bank balance sheet which revealed that it had bought another 600,000 ozs/17 tonnes of gold in November (source:  goldchartsrus.com):

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Well, so much for the lie that Russia was selling gold to raise capital.  In fact, if Russia had sourced the gold it bought in November from the Comex – assuming the Comex reports, which are sourced from banks which lie, are valid – the purchase would have wiped out 78% of the gold which is listed as being available for delivery.  Russia did dump $10 billion in Treasuries in October.  Yes, Russia is selling U.S. Government bonds, not gold.

As the U.S. Government and Wall Street become increasingly desperate to hold onto their power – power which enables them to suck all the wealth out of our system – their lies and propaganda become increasingly blatant and absurd.   Of course, they can get away with it because they know that American zombies will believe it as long as  CNN, Fox, Bloomberg or CNBC reported it.

The Natural Life-Cycle Of A Collapsing System

Retired SEC lawyer James Kidney:  “Kidney said his superiors were more focused on getting high-paying jobs after their government service than on bringing difficult cases. The agency’s penalties, Kidney said, have become “at most a tollbooth on the bankster turnpike.”  Bloomberg link

This retired lawyer from the SEC came out and essentially admitted that the SEC does nothing except apply window dressing with respect to enforcement of securities laws.  Of course, it’s not like this guy split the atom for the first time with this revelation.

The SEC has been nothing but a lap-dog for Wall Street for years.  Everybody who gives a rat’s ass about this issue already knows that.  The current head of the SEC, Mary Jo White, was the chief legal defense bull-dog for Jamie Dimon and JP Morgan at Debevoise &  Plimpton.   Putting her in charge of the SEC is the equivalent of putting a serially convicted pedophile in charge of Kindercare.

Does anyone remember when Obama put that 29 yr. old kid from Goldman Sachs  in charge of the enforcement division of the SEC?   Good job Barack.   And then it was revealed that many SEC rank and file spent more time surfing porn than doing their job.  Again, Mr. Kidney there didn’t exactly invent plutonium with his newest revelations.

I was discussing today’s press release with a colleague, who was happy that the issue was getting media attention.  But I had to point out that a Bloomberg news report is only seen by an audience that already knows that the SEC is useless in its enforcement duties.  In fact, the SEC enables Wall Street’s fraud and corruption.

Most of the country probably is aware that our entire system is deeply corrupt.  But the interest in news and truth for the majority does not go beyond missing planes or the marital status of Hollywood starlets.

The truth is our system is rotten to the core and the marriage between Wall Street, corporate America and the Government is nothing more than the natural life-cycle of a collapsing system.

The only lesson we’ve learned from history is that we don’t learn the lessons of history.