A quick check of my calendar says the quarter ended on September 30 and today is October 23. In this post, we describe how this growth has affected both the term loan and credit line businesses, and how the changes have resulted in a reduction in the liquidity insurance provided to firms. Contrary to similar spikes in repo rates in 2008, it was probably not fear of counterparty risk that led to the recent repo quake. [email protected]. (CC - bc.edu) You may recall that from 17 September 2019, the United States Federal Reserve injected massive amounts of liquidity into banks due to a quite abnormal situation on the repo market [ 1]. India’s $42 billion shadow-banking system has been creaking since one of the country’s biggest infrastructure lenders unexpectedly halted debt repayments in … Banks face a moral hazard problem in screening entrepreneurs™projects, and they choose whether to be regulated or not. States with a strong currency will have the most fiscally responsible and transparent governments and would likely trade with like States. Yes, this is not “TARP” – the Fed is not taking shoddy collateral, only treasury and agency bonds are accepted. https://t.co/ozqdtUwuwv, — fred hickey (@htsfhickey) October 24, 2019. China’s informal banking sector has played an important role in helping the economy’s transition towards a consumption-led model. Ian: Taking bad collateral to keep banks solvent is not QE. It is astonishing that the Fed somehow seemed unprepared and quite surprised by the extent of the liquidity shortage. This massive, daily Fed intervention business appears to be getting worse & worse. NO PRINCIPAL LOSS FOR 2010: 50% OF LADDERED INDIVIDUAL TREASURY BONDS; 30% ISHARES BARCLAYS TIPS BONDS (TIP) 10% VANGUARD SHORT TERM TREASURY (VFISX) 10% VANGUARD GNMA (VFIIX) ; ANOTHER STRATEGY FOR THE SECOND HALF OF 2010: 35% T ROWE PRICE INTERNATIONAL BONDS (rpibX0 25% HARBOR BOND (HABDX) 20% VANGUARD INTERMEDIATE TERM TAX EXEMPT (VWITX) 15% ISHARES BARCLAYS TIPS BOND (TIP) AND 5% VANGUARD SHORT TERM TREASURY (VFIXS), TOP STOCK FUNDS FOR 2010 WITH GOAL OF 50% OR HIGHER: OCEANSTONE, PROFUNDS UTLRA LATIN AMERICAN INV. In a typical example of rehypothecation, securities that have been posted with a prime brokerage as collateral by a hedge fund are used by the brokerage to back its own transactions and trades. THE REAL ESTATE SECTOR HAS A SPECIAL SWEET SPOT CALLED REITS. “And instead shoot all the Elite Traitorous MF’ers”. Global shadow banking assets reached $52 trillion as of fiscal year-end 2017, up 8.5% year over year, the report noted, citing the G-20 Financial Stability Board. It also describes recent innovations in NBFI. ​I invite readers to consider Tenebrarum’s “Repro Quake – A Primer” but caution that it is complicated. (Knx) Msci (mxb),United Microlectronics (UMC), Viterra (vt.to) Weyerhaeuser (WY), Magna International (MGa) Microsoft (msft) Yum brands (Yum), Fresenius Medical Care (Fms) Fti Consulting (Fcn), Schwitzer (Swm); Fixed Income: NSL, PPR, FFRXhx, Fct; Special of the Day: Conagra; Organic Investments: CTRP, SYY, Hnz, Credit Card special: Ma and ACIW: Worst Cast Options: KPRWBX, VfIIX, VXX, ABT,APD, ALEX, APA,AAPL, ADM, T, BAX, BDX, BA, CPB, KMX, CAT, CVX, CTAS, CLX, KO, CL, COP, COST, BCR, CVS, DE, XRAY, DBD, D, DOV, DD, EBAY, ECL, ECA, EGN, ETR, XOM, FIC, FDX, FLR, FMC, FPL, GD, GIS, GR, GWW, HRS, HNZ, HPQ, HON, HRL, ITW, IBM IP, IRM JNJ, JCI,K, KFT, LOW, LZ, MRO, MKC, MCD, MDT, MON, NIKE, NSC, NTRS, PDCO, PAYX, PEET, PEP, PRGO, PNY, PX, PG, RTN, ROST, SLB, SIAL, SO, STJ, SPLS, SBUX, SYK, SYY, TGT, TEVA, MMM, TJX, TSCO, UNH, UPS, UTX, VMT, VAR, VZ, VMC, WAG, WFC. Post was not sent - check your email addresses! But private repo markets are broader and have far more participants, so possibly there is a problem elsewhere that is propagating into the slice of the market the Fed is connected with. A group of banks and regulators in 2017 settled on a replacement created by the Federal Reserve known as the secured overnight financing rate, or SOFR. TOP INFLATIONARY INVESTMENTS ARE: (1) COMMODITIES; (2) GOLD; (3) CANADIAN DOLLAR; (4) RESOURCE SECTORS OF THE STOCK MARKET; (5) U.S SECTORS THAT HAVE HIGH FOREIGN EXPOSURE (MATERIALS, TECH, STAPLES, HEALTH CARE) ; (6) CANADIAN SECTORS THAT BENEFIT FROM LOWER IMPORT COSTS (CONSUMER STOCKS) BUT LOSE EXPORT COMPETITIVENESS (MANUFACTURERS); 7. He lost me. Let’s recap before reviewing excellent comments from a couple of valued sources. Shadow banking-related market activities include securities financing transactions (SFTs), the use of derivatives and the reuse of financial collateral. Over the past two decades, the growth of shadow banking has transformed the way the U.S. banking system funds corporations. The Fed keeps increasing the size and duration of “overnight” funding. P.O. September 19, 2019 ‘Shadow Banking’ Saddled With Undeserved Poor Image Alternative lenders are an increasingly important source of capital and could be a vital lifeline during a recession, Paul Hastings attorney says. The Chinese system creates information insensitive investment products by implicit guarantee rather than financial engineering and operates on a banking platform instead of capital markets. What is the Fed hiding? Regulatory framework for haircuts on non-centrally cleared securities financing transactions. 23x40 - 26x48 - 33x60 - Custom The Fed Rackets will not end until the BRICS refuse their Green Toilet Paper and demand gold, Yuan, Rubles, etc; then the starving & freezing American people should refuse whatever new replacement/Reset scheme the Fed announces, and instead shoot all the Elite Traitorous MF’ers like the Romanians did Nicolae Ceaușescu and then hangs them like the Italians did Il Duce; and then create an honest government with a honest currency based on PMs etc and an honest Federal Constitutional Budget. Mind, I’m not saying that’s the case, but the entire shadow banking system is opaque and we usually only find out what’s what when someone keels over or is forced to report a huge loss. C., PIONEER GLOBAL HIGH YIELD A, NORTHEAST INVESTORS TRUST, FEDERATED HIGH YIELD TRUST, INTEGRITY HIGH INCOME A, PUTNAM DIVERSIFIED INCOME TRUST A, ALLIANCE BERNSTEIR HIGH INCOME A, AEGIS HIGH YIELD, TOP CHINESE FUNDS FOR 2010: MATHEWS CHINA (MCHFX) (pGj) (fXi) . Moreover, the share of leveraged loans is increasing, just as immediately before the global crisis (Figure 2). CANADIAN BONDS ( A HIGHER CANADIAN DOLLAR WILL KEEP INFLATION LOW, BUT WILL HAVE POSITIVE FIXED INCOME RETURNS. “It is going to be a scenario where entities are going to have to prepare and be flexible and build flexibility into their systems and models and processes that can handle multiple pricing environments in the same jurisdiction.”. Enter your email address to subscribe to The Burning Platform and receive notifications of new posts by email. Français. TOP VANGUARD FUNDS: VANGUARD EMERGING MARKETS (VEIEX), VANGUARD INTERNATIONAL EXPLORER (vEIEX); VANGUARDE ftse aLL wORLD eX-us. Image courtesy of my friend Chris Temple. Continue Reading / … 8.1 The liquidity crunch in the shadow banking system in India (Box 1) took shape in the wake of defaults on loan obligations by major Non-Banking Financial Companies (NBFCs). STATED VALUES. William Brady. Rehypothecation is the practice by banks and brokers of using, for their own purposes, assets that have been posted as collateral by their clients. DIREXION MOTHLY LATIN AMERICAN BULL 2 X INV., J.P MORGAN RUSSIA A, OBERWEI CHINA OPPORTUNITY, ENCOMPASS, ING RUSSIA A, TOP PERFORMING BOND FUNDS FOR 2010 WITH GOAL OF 50% : FIDELITY CAPITAL AND INCOME,JOHN HANCOCK HIGH YIELD A EATON VANCE FLOATING RATE ADV. — Dave Collum (@DavidBCollum) October 24, 2019. , Español. The above Primary Dealer List from Wikipedia as of May 6, 2019. Figure 1Leveraged finance in Europe and the US (US$ trillion) Source: BIS (2018). EU Shadow Banking Monitor No 3 / September 2018 Executive summary 3 . “We don’t expect that 100% of the Libor-based positions today will migrate 100% to SOFR,” Jeff Vitali, a partner at Ernst & Young, said this week during a panel at an Association for Financial Professionals conference in Boston. The primary dealers hold a huge inventory of treasuries that needs to be funded every day in order to provide them with the cash needed for day-to-day operations – they are one of the main sources of the “collateral surplus”. So I’m not sure a case can really be made that there is anything going on beyond what meets the eye – which is already bad enough if you ask me. The rest….will suffer and starve via marxist progressive policies and corruption. shadow banking system, with a focus on identifying risks to financial stability. Sorry, your blog cannot share posts by email. The Wall Street Journal reports U.S. Companies Advised to Prepare for Multiple Benchmark Rates in Transition from Libor. Section 2 provides an overview of the size and growth of all sectors in the financial system. When the economy turns, equity i… The Keys to the Shadow banking system uses a dynamic fractal matrix based on the top economist in the world. I used to visit Mishs old site. These firms are often owned by private equity. I don’t recall anywhere in history where we all signed on to let some Wizard of Oz wave wands for some and supply phony paper to others with us as the guarantors. [The Fed is not swapping money for dodgy collateral] Someone or someones is caught in some sort of borrow-short lend-long scheme and the Fed is giving them reserves for nothing in return. Shadow banking in China is identified to have first emerged in the late 1990s, however its rapid growth did not come until the period following the GFC in 2007. Abstract We analyze the e⁄ect of bank capital requirements on the structure and risk of a –nancial system where markets, regulated banks, and shadow banks coexist. Cheesie: How do you do repos with a negative interest rate? The intellectual theories of David Rosenberg, Noureli Roubini, Gary Schilling, Robert Schiller, Dr. Herrera and Paul Krugman are used to create a economic fractal matrix.The global deflation is the major driving force for the next 9 years. Moreover, it differs from shadow banking in the United States in that securitisation and market-based instruments play only a limited role. He informs me “a credit analyst at the largest bank in my neck of the woods sent me a mail to tell me this was by far the best article on the topic he has come across”. The shadow banking system played a major role in the expansion of housing credit in the run up to the 2008 financial crisis, but has grown in size … While this might seem to imply scope to profit from arbitrage – by borrowing at a low rate to invest at a higher one – banks have additional balance sheet considerations that need to be taken into account. Box 1520, THE FOLLOWING ARE A GOOD CORE SELECTION OF TECHNOLOGY STOCKS THAT ARE BASED ON REAL PROFITS: APPLIE (AAPL) , GOOGLE (GOOG) ENERnOC (ENOC) AND ATHENA hEALTH (aTHN). THE FOLLOWING REITS ARE GOOD BUYS: SIMON PROPERTY GROUP, (SPG) BOSTON PROPERTIES (BXP) , REALTY INCOME CORP. (o) AND MORE DIVERSIFIED POSITION IS IN THE MUTAL FUNDS LIKE THIRD AVENE REAL ESTATE (TVRVX) , T. ROWE PRICE REAL ESTATE ( TRREX), VANGUARD REIT INDEX, (BGSIX). The shadow banking system consists of lenders, brokers, and other credit intermediaries who fall outside the realm of traditional regulated banking. Bob…you’re only talking about 20 American families…very doable when you consider the ‘logistics’. It’ll be interesting to see how they replace LIBOR. Whatever monkey business the Fed is hiding better not be to stabilize a foreign bank. Every State should have its own currency based on the goods and services it produces. These are spasmotic movements that nobody seems to understand. Even a slight amount of cooking of the replacement index could mean billions of dollars. We did it that way for 137 years (1776-1913) until the Fed was created and the Financial System became our Money Master. A few billion here, a few billion there and pretty soon you’re talking real money. It’s now up $120 billion a day, every day, extended for weeks. The report presents metrics and analysis for monitoring risks and therefore informs discussions at the EU level, also with a view to identifying and closing statistical data gaps. THESE ARE SOME OF THE TOP RATED UTILITIES FOR 2010: FLEX-FUNDS-THE TOTAL RETURN UTILITIES FUND (FLRUX); AIM UTILITIES FUND (FSTUX), UTLITIES SELECT SECTOR SPDR FUND (XLU) , VANGUARD UTLITIES ETF (VPU), VANGUARD UTILITIES INDEX FUND (VUIAX), MACQUARIE/FIRST TRUST GLOVAL INFRA/UTIL DIV 7 INC (MFD) , COHEN &STEERS SLECT UTILITY FUND (UTF) , UTILITIES HOLDRS TRUST (UTH); SOME INDIVIDUAL STOCKS TO EXAMINE ARE: APU, MMP, EEP, EXC, DUK, TXU, NWN, NJR. The Keys to the Shadow banking system uses a dynamic fractal matrix based on the top economist in the world. Axiom7: Euro banks are starving for dollar funding and if there is a hard Brexit both UK and German banks are in big trouble. Leveraged finance is made up of leveraged loans and high-yield bonds for non-investment-grade firms that are highly indebted. Figure 1 shows that leveraged finance has doubled since the global crisis. The repo market designates a mechanism used by … Then he went to something complicated. Most adjustable rate mortgages in the US are tied to LIBOR. Me too. Debt financing with thin equity stakes is risky. La « shadow-banking » inquiète les autorités réglementaires internationales. This crap could not go on if people simply had to make their own decisions with their own real, hard, sound “money” and were the only ones who had to suffer the consequences of their own ideas and decisions. It is generally unregulated and not subject to the same kinds of risk, liquidity, and capital restrictions as traditional banks are. Libor is a scandal-plagued benchmark that is used to set the price of trillions of dollars of loans and derivatives globally. THESE STOCKS ARE BASED ON THE FOLLOWING TECHNOLOGY BREAKTHROUGHS: ON DEMAND SOFTWARE, SUCCESS FACTOR (SFSF) F5 nETWORKDS ( FFIV); THE RISE OF THE SMARTPHONE WITH bROADCOM (bRCM), DATA MASTERY INFORMATICA (INFA) , COMMVAULT (CVLT) , THE ELECTRICAL EFFICIENCY MODEL SHOULD BE eNERNOC. Transforming Shadow Banking into Resilient Market-based Finance . Total global financial assets grew by 1.4% in 2018, driven largely by banks. The intellectual theories of David Rosenberg, Noureli Roubini, Gary Schilling, Robert Schiller, Dr. Herrera and Paul Krugman are used to create a economic fractal matrix.The global deflation is the major driving force for the next 9 years. I placed it in as an endorsement. These are spasmotic movements that nobody seems to understand. Harry-Ireland: [sarcastically], Of course, it’s not QE. 19 September 2019 Belinda Cheung and Sebastien Printant The spread between key Australian money market interest rates has widened and become more volatile in recent years. THEY DO A GOOD JOB IN RESEARCH CURRENT VALUES VS. While there is too much collateral and not enough reserves to fund it, we don’t know anything about the distribution [or quality] of this collateral. A number of analysts have warned of just such a situation for months. Even new ones (those few being done) are LIBOR ARMs. Historically “organic” growth was about $2 to $3 billion. “This Was A Coordinated Attack”: Parler CEO Speaks Out After Amazon Boots From AWS, Vows To Rebuild ‘From Scratch’, THIS DAY IN HISTORY – Gusher signals start of U.S. oil industry – 1901. It is generally unregulated and not subject to the same kinds of risk, liquidity, and capital restrictions as traditional banks are. Didn’t Nancy say something like “we have to pass it to see what’s in it”. I expect that's true for other investors too. Hmm. History. It’s important to note those are not “shadow banking” institutions, while also noting that derivative messes within those banks would be considered “shadow banking”. Derrière le shadow banking, on trouve les grands acteurs financiers impliqués dans des opérations de crédit à effet de levieret qui n’ont pas accès au refinancement des banques centrales. That is a victory for China’s banking regulator, which viewed shadow banking as an unruly, opaque corner of the financial system and a threat to stability. When Fed scheme Z fails, the Oligarchs will implement Fed scheme AA. For discussion of why the effective lower bound of interest rates may be much higher than zero, please see In Search of the Effective Lower Bound. Ces acteurs échappent à la supervision prudentielle du Comité de Bâle. A couple of correspondents have an eye on shadow banking. Shadow Banking Suggestion by David Collum. Y figurent essentiellement : 1. des banques d’investissement; 2. des fonds spéculatifs (hedge funds) ; 3. des fonds d’investissement(fonds mutuels, fonds de pension, sociétés d’assurance) ; 4. des fonds de private equity (fonds spécialisés dans l’achat … 12 November 2015 (updated on 19 July and 25 November 2019) (One can dream, eh.). I wonder if this implies that the EU will crack in negotiations knowing that a DB fail is too-big-to-bail? How can it be, it’s the greatest economy ever and there’s absolutely nobody over-leveraged and the system is as healthy as can be! I guess the punchline is we have to read the links to understand it. What’s behind the ever-increasing need for emergency repos? September 2017. -----------------------------------------------------, Mail to: The shadow banking sector requires regulation because of its size (25-30% of the total financial system), its close links to the regulated financial sector and the systemic risks that … Note though, since the Treasury is borrowing like crazy and is at the same time rebuilding its deposits with the Fed (which lowers bank reserves, ceteris paribus), there is a several-pronged push underway that is making short term funding of treasury collateral more difficult at the moment. The intellectual theories of David Rosenberg, Noureli Roubini, Gary Schilling, Robert Schiller, Dr. Herrera and Paul Krugman are used to create a economic fractal matrix.The global deflation is the major driving force for the next 9 years. Here are his conclusions. It is documented that the growth in shadow banking activity was due to the inability of the traditional banking system to meet the spike in demand for funding, due to tight regulation on lending. Such market participants would become unable to fund their leveraged positions in CLOs or whatever else they hold. What about all the LIBOR-based derivatives with the end of LIBOR coming up? The Fed itself does not accept anything except treasuries and agency MBS in its repo operations, and only organizations authorized to access the federal funds market can participate by offering collateral in exchange for Fed liquidity (mainly the primary dealers, banks, money market funds,…). Where’s the collateral? The shadow banking system consists of lenders, brokers, and other credit intermediaries who fall outside the realm of traditional regulated banking. Companies must move away from Libor by the end of 2021, when banks will no longer be required to publish rates used to calculate it. The fractal matrix gives solutions to stocks, bonds, real estate, currencies, gold, commodities, oil and Macro-trend forecasting. The 2019 report covers data up to end-2018 from 29 jurisdictions, which together represent over 80% of global GDP. THE FOLLOWING ETF ARE PROJECTED TO ADVANCE HIGHER HOWEVER DO YOUR OWN RESEARCH TO VERIFY THIS WITH EMPIRICAL MARKET DATA: JSC, CEW, JNK, XLU, CPI, GXF, VXX, EFN, BJK, PSP. Hmm. Jim Quinn - Finally, Tenebrarum commented: “I agree on your effective lower bound comment, since obviously, the ‘dearth’ of excess reserves was pushing up all overnight rates, including the FF rate.”. The phrase "shadow banking" contains the pejorative connotation of back alley loan sharks.Many in the financial services industry find this phrase offensive and prefer the euphemism "market-based finance". October 2019 Abstract Using newly collected data this paper shows that Chinese shadow banking is different from the US counterpart in two important dimensions. End the FED. Mish: I also think that the repo spikes suggest the shadow banking system is finally breaking. We are all guessing here, so I am submitting possible ideas for discussion. The Varying Shadow of China’s Banking System* Xiaodong Zhu University of Toronto First Draft: November 14, 2017 Revised: February 1, 2018 Abstract The rapid rise of shadow banking activities in China since 2009 has attracted a great deal of attention in both academia and policy circles. Somehow it takes an emergency (but let’s no longer call it that), $120 billion “. 100% Satisfaction Guaranteed 1 INTRODUCTION. The longer this goes on & the bigger the interventions get, the more my confidence is shaken. Tenebrarum live in Europe. State Sovereignty. The greatest thing in this world is not so much where we stand as in what direction we are moving. Pater Tenebrarum at the Acting Man blog pinged me with these comments on my article, emphasis mine. Banks’ Shadow and Traditional Shadow Banking Guofeng Sun November, 2019 Banks’ shadow, or money creation by banks beyond traditional loans, plays an important role in China’s money-creation process, posing a number of challenges to monetary policy operations and financial risk management. (VEU), ARTISAN INTRNATIONAL SMALL CAPTS ( ARTJX) , TOP INDEX FUNDS:VANGUARD 500 (vFINX) LARGE CAP, SMALL CAP: VANGUARD MID CP (VIMSX) SMALL CAP: VANGUARD SMALL CAP (NAESX) VANGUARD TOTAL INVERNATIONAL STOCK ( VGTSX) AND VANGUARD TOTAL BOND MARKET ( VBMFX) USING VANGUARD ETF'S VTI, VO, VB, VEA, VEU, VWO, VNQ, BND, BSV: GOOD GOLD FUND: TOCQUEVILLE GOLD (TGLDX), Canon (Caj) PPg Industries (ppg), Dell (Dell), Vale (vale) Syngenta (syt) Telvent (TLVT) Church & Dwight (chd) , Family Dollar Stores (Fd0), General Mills (Gis) J & J Snacks (usf) Owens & Minor (omi) Ratheon (rtn) Abbot Labs (abt) Coca-Cola (Ko) Goldcorp (gg) , Procter & Gamble (pg) Chang You,com (cyou) Chevron (CVx) Hewlett Packard (HPQ) Strayer Education (stra), BB&T (BBT), Ingersoll Rand (IR) Jos. A Banks Clothiers (JOsB), Kirby (kex), Heico Corp. (Hei) Knight Transp. In this case the problem is specifically that the primary dealers are holding huge inventories of treasuries and bank reserves are apparently not sufficient to both pre-fund the daily liquidity requirements of banks and leave them with enough leeway to lend reserves to repo market participants. Le dernier rapport du Conseil de stabilité financière (FSB) a levé le voile sur un système qui continue de gagner du terrain dans le secteur financier, représentant un peu moins de 52 milliards de dollars, aujourd'hui, soit 14 % des actifs financiers dans le monde. In 2015, the Minister of Finance announced the establishment of a High Level Expert Group (HLEG) on the Future of the Belgian Financial Sector with a mandate to reflect on the position of the Belgian financial sector, the main challenges it is facing and its long-term prospects. One defining feature of the shadow banking system in China is the dominant role of commercial banks, true to the adage that shadow banking in China is the “shadow of the banks”. Although the shadow banking industry plays an important role in financing the economy, its operation outside of traditional banking regulations raises concerns over the risks it poses to the financial system. Yesterday, I commented Fed to Increase Emergency Repos to $120 Billion, But Hey, It’s Not Monetary. $349 - $449 - $649 - $949 + S&H Hmm. — Dave Collum (@DavidBCollum) October 24, 2019. I am not convinced the Fed isn’t bailing out a US major bank, foreign bank, or some other financial institution by taking rehypothecated, essentially non-existent, as collateral. Kulpsville, PA 19443, Inquiries about advertising opportunities can be made by emailing me at. We say this because even we knew it – it was not a secret. A Stock Market Crash Of 65-80% This Year? ECB Working Paper Series No 2234 / February 2019 1. Man-Cave, Home Office or Cabin Note: That was supposed to be a private comment to me. A GOOD SOURCE TO VERIFY VALUE IS WWW.VECTORVEST.COM. The shadow banking system is a term for the collection of non-bank financial intermediaries that provide services similar to traditional commercial banks but outside normal banking regulations. Interior or Exterior - All Year Round To Contact Hardscrabble Farmer before supplies run out: China Just Launched this Attack on the USD, Alan Greenspan Warns of this U.S. Scheme to Confiscate Your Savings, The Little-Known (But Legal) IRS Tax Law to Move Your IRA or 401(k) to Gold, Wall Art to Perfectly Compliment Your What’s more, the Federal Reserve without a doubt knew that something like this was coming. Custom Union Designs on Request , equity i… ECB Working Paper Series No 2234 / February 2019 1 brokers, and restrictions... 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