@Soldi said:
AT1 bonds issued in place of reaching out for funding via stock offerings. Seemingly very safe are now being rendered next to zero value when a bank is absorbed. The 5% number was derived from the recent Credit Suisse debalacal, I didn't find for it, repeated it, although the sources are solid.
My opinions are what I write and as such make up part of my reasoning for precious metals accumulation.
No problem having an opinion, but opinions based on fact will carry more weight both for yourself and others. Your sources are not solid and you would probably best be served to find other sources. Very little--bordering on nothing--of your source info is accurate.
How much is 5% of all bonds in Europe?
Apparently, I don't know! So tell me !
As I said; I didn't find for it.
Google AT1 research it yourself!
In conclusion "cohodk DON'T BUY GOLD.
Opinions are a view or judgment formed about something, not necessarily based on fact or knowledge.
"I'm writing to voice my opinion on an issue of great importance"
European high yield bond default rates will rise materially in 2023 and 2024. We re-affirmed our base-case bond default rate forecast for YE 2023 at 2.5% and introduced a 2024 projection that assumes defaults rise to 4.0%. We raised our YE 2023 base-case loan default rate forecast to 4.5%, from 3.5% previously. We expect base-case loan default rates to stabilize around 4% by YE 2024. Fitch
Bloomberg reporting similar.
The rise materially was reported as 5% today. I can't recall who said it. The above reporting is prior to Credit Suisse failure
@Soldi said:
European high yield bond default rates will rise materially in 2023 and 2024. We re-affirmed our base-case bond default rate forecast for YE 2023 at 2.5% and introduced a 2024 projection that assumes defaults rise to 4.0%. We raised our YE 2023 base-case loan default rate forecast to 4.5%, from 3.5% previously. We expect base-case loan default rates to stabilize around 4% by YE 2024. Fitch
Bloomberg reporting similar.
The rise materially was reported as 5% today. I can't recall who said it. The above reporting is prior to Credit Suisse failure
The article discusses high yield bonds, not all bonds. This is an orders of magnitude difference. High yield bonds default even in good times.
The AT1 bond concept came out if the 2008 financial crisis their standing is higher than shareholders in a bank failure. Yet we see the bondholders being given a lower priority than shareholders and losing what they should not. Re: Credit Suisse- UBS.
The Fitch report is before this "merger" "bailout" et al.
In 2008 UBS was bailed out and Credit Suisse was relatively unscathed. I believe there's systemic trouble in banking throughout Europe.
@jmski52 said:
I tend to believe that the Fed is the entity buying bonds and large cap stocks via their trading desk in a back door >attempt to support the markets. Who else would be buying bonds now when there's already a liquidity crisis? Not >me.
The Fed isn't buying bonds, it's institutions jumping the gun on future (?) rate CUTS. Plus, there's the flight-to-quality bid we always see.
@Goldminers said:
The banks just borrowed $150 billion last couple days from the Fed's liquidity backstop. I sold several 1-3 yr. bonds in my Roth as they were way up the past two days, already above their final maturity over 100 par. If I didn't sell and held them to maturity, I would lose money. LOL
Magic bank bailout that we the taxpayers will pay for in fees, inflation, etc. Of course, stocks like free or low-cost debt money so up they went.
"Bailout" is a term that the media uses without defining. Virtually all the large banks in 2008 paid back their TARP assistance -- and equity shareholders suffered dilution (Citibank is 1/10th the price of Summer 2007). If people lose their jobs and money is paid back and shareholders lose, how is that a "bailout" ?
Conversely, certain politically-affiliated pension funds have received TENS of billions of dolllars. Nobody has lost their jobs over their incompetence....no money will be paid out....no systemic importance....a bailout in the classic sense, all in exchange for votes.
You haven't heard a peep about this, for obivous reasons.
@Soldi said:
AT1 bonds issued in place of reaching out for funding via stock offerings. Seemingly very safe are now being >rendered next to zero value when a bank is absorbed. The 5% number was derived from the recent Credit Suisse >debalacal, I didn't find for it, repeated it, although the sources are solid.
This is apparently a Swiss issue. The covenants in the EU are much stronger. It's possible that the 5% figure refers to the percentage of AT bonds compared to total corporate -- have to check. European corporate market even less liquid than the U.S. market.
We've upended the corporate structure here too: Detroit bankruptcy put pensioners over bondholders, and the GM/Chrysler bankruptcies put the UAW ahead of bondholders.
@Soldi said:
Fed moving towards QE. at the latest cuts by June, only 3 months away.
Bailouts for banks? Triggered bond crisis in Europe 5% of all bonds being written off. Biggest ever.
Buy Gold and then buy Gold
I agree that gold will move and maybe this is the time. $2,500 before year-end is feasible, certainly by 2024.
There are no bailouts that I have seen so far. The Fed is NOT moving towards QE.
Pivot. QE, QE, QE, FED ADDED $300,000,000.00 TO THE BALANCE SHEET
After a year of declining balance sheet the SVB banking crisis caused the Fed to add $300 billion dollars this is QE
@Soldi said:
Pivot. QE, QE, QE, FED ADDED $300,000,000.00 TO THE BALANCE SHEET
After a year of declining balance sheet the SVB banking crisis caused the Fed to add $300 billion dollars this is QE
plus the FED is now covering bank deposits in full.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
@Soldi said:
Pivot. QE, QE, QE, FED ADDED $300,000,000.00 TO THE BALANCE SHEET
After a year of declining balance sheet the SVB banking crisis caused the Fed to add $300 billion dollars this is QE
plus the FED is now covering bank deposits in full.
Anyone that does not see the dollar destruction and takes steps to protect themselves deserves what they get.
Many here have sounded the alarm with conspiracy theories that keep proving themselves to be conspiracy reality. It's become obvious who is actually wearing the tin foil hat.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
@derryb said:
Anyone that does not see the dollar destruction and takes steps to protect themselves deserves what they get.
Many here have sounded the alarm with conspiracy theories that keep proving themselves to be conspiracy reality. >It's become obvious who is actually wearing the tin foil hat.
So what are you saying, that gold should be $10,000 an ounce ? I'm not sure what you are saying.
You are right to be bullish on gold -- I think $3,000 is possible within 3 years and $5,000 within a decade -- but it's not going to be because of "dollar destruction" (not happening) or other Fed this, Fed that nonsense.
Gold will go up because long-term supply will decline and demand will increase. When the inflection hits, I don't know.
We know that the price of gold would skyrocket in the 1940's and beyond beacause it was price-controlled. We didn't know when the beachball would burst above the water line (1974).
We are lucky to have Jerome Powell and the Fed as our central bank compared to some of the clowns manning other CBs.
I'd like to see it represent its real value according to a rational economic condition. Be it whatever $$ makes sense accordingly, but I'm sick if JP M Chase spoofing the markets. Listen to Buffet talk about Wells Fargo gives me a case of concern too.
Capitalism never fails. True capitalism is like nature's "survival of the fittest".
But we fail capitalism. Tax-funded bailouts are the antithesis of capitalism and it is akin to feeding wild critters in your back yard. The problem with that is, they learn to come back ... and bring their friends. And then their population numbers artificially increase, like inorganic stimulation of the economy, which eventually leads to a collapse.
Federal Reserve manipulation amounts to central planning of the economy, which is a failed communist ideology.
There should be no banking cartel, with special privileges above all others, running the economy.
A possible plan would be to do away with the Federal Reserve and have the US Treasury implement a digital currency. A small transaction fee when using that digital currency would go the the US Treasury as a "tax" system which would replace income taxes and the burden of annual filing of said income taxes.
Growth in the quantity of digital dollars would increase by a fixed percentage each year (3%, for example). And the interest rate associated with borrowing these digital dollars would be close to the same (3%). The basic interest rate, once determined, would stay the same every year after. So no need for committees or Federal Reserve insiders personally profiting from their information.
@Soldi said:
I'd like to see it represent its real value according to a rational economic condition. Be it whatever $$ makes sense accordingly, but I'm sick if JP M Chase spoofing the markets. Listen to Buffet talk about Wells Fargo gives me a case of concern too.
Spoofing and day marking happen all the time in all markets. They don't affect long-term prices based on value.
@dcarr said:
Capitalism never fails. True capitalism is like nature's "survival of the fittest".
But we fail capitalism. Tax-funded bailouts are the antithesis of capitalism and it is akin to feeding wild critters in your back yard. The problem with that is, they learn to come back ... and bring their friends. And then their population numbers artificially increase, like inorganic stimulation of the economy, which eventually leads to a collapse.
Yet most people read something and take it as gospel. Most people believe that Wall Street was "bailed out" in 2008-09....FALSE !!
Conversely, union pension plans have gotten tens of billions of dollars in $$$ that didn't require any management changes nor paying back of the $$$. What a scam.
Federal Reserve manipulation amounts to central planning of the economy, which is a failed communist ideology.
There should be no banking cartel, with special privileges above all others, running the economy.
There are 5,000 banks. No cartel has that many members.
A possible plan would be to do away with the Federal Reserve and have the US Treasury implement a digital ?>currency. A small transaction fee when using that digital currency would go the the US Treasury as a "tax" system >which would replace income taxes and the burden of annual filing of said income taxes.
No privacy at all. Govt knows where every $$$ you have is saved or was spent.
Growth in the quantity of digital dollars would increase by a fixed percentage each year (3%, for example). And the >interest rate associated with borrowing these digital dollars would be close to the same (3%). The basic interest rate, >once determined, would stay the same every year after. So no need for committees or Federal Reserve insiders >personally profiting from their information.
They don't personally profit from information.
You want price controls on money and credit -- expect rationing.
Any exogenous economic shock would have to be transmitted through internal adjustment processess.....probably mandating a steep recession or depression....falling prices....falling wages....etc.
@GoldFinger1969 said:
Gold will go up because long-term supply will decline, and demand will increase. When the inflection hits, I don't know.
True, but there are thousands of tonnes of gold in vaults worldwide, and annual production will increase if the price of gold goes up. There are mass quantities of gold identified as resources by mining companies that will convert to reserves (profitable to mine) if gold goes up in price significantly. Total long-term gold supply will increase.
Gold will go up because the people and central banks who have the physical supply will want to keep it, creating your "available for sale" supply decline.
Demand will increase as the price rises because everyone will want to get in on the speculative action. In addition, many believe gold provides some longer-term purchasing power protection vs holding fiat, debt-based fractional currencies.
Historically governments and banks, including the Fed, have always increased the money supply and inflated their currencies. This time is not different.
@Soldi said:
I'd like to see it represent its real value according to a rational economic condition. Be it whatever $$ makes sense accordingly, but I'm sick if JP M Chase spoofing the markets. Listen to Buffet talk about Wells Fargo gives me a case of concern too.
Spoofing and day marking happen all the time in all markets. They don't affect long-term prices based on value.
Spoofing is against the NOT enforced law. The level of this behavior is criminal and three traders have received prison sentences. Not to mention JPM chase is anything but stellar lest your consideration is how high up the criminal ladder they climb.
@Goldminers said:
True, but there are thousands of tonnes of gold in vaults worldwide, and annual production will increase if the price of gold goes up. There are mass quantities of gold identified as resources by mining companies that will convert to reserves (profitable to mine) if gold goes up in price significantly. Total long-term gold supply will increase.
Yes, I'm assuming that CBs are not going to unload and given the past that is a reasonable assumption. But if 1 or 2 of the larger CBs decide to be net-sellers, yes, that is a very bearish factor. I don't see it....if ANYTHING I think you are likely to have more net-buyers.
Historically governments and banks, including the Fed, have always increased the money supply and inflated their currencies. This time is not different.
What you have to understand is while this fear might still be present among some countries (notabley corrupt African or South African countries), the Information Revolution and the ability to see things in real-time has mitigated traditional distrust and fear of governments and/or CBs.
As an example, 40 years ago it took WEEKS or MONTHS for information on gold holdings to be revealed country-by-country. 25 years ago, it took a few days or weeks. Today, it takes a few hours or less.
You also have crypto and BitCoin, electronic payment portals like Block or Venmo or PayPal....all of these help give individuals a feeling they are in charge.
I still like gold longer-term and believe that we'll have threads on this and other forums which start out with "Remember when Common Saints used to be $2,000 ?" when they will cost double or triple that amount.
@derryb said:
Anyone that does not see the dollar destruction and takes steps to protect themselves deserves what they get.
Many here have sounded the alarm with conspiracy theories that keep proving themselves to be conspiracy reality. >It's become obvious who is actually wearing the tin foil hat.
So what are you saying, that gold should be $10,000 an ounce ? I'm not sure what you are saying.
You are right to be bullish on gold -- I think $3,000 is possible within 3 years and $5,000 within a decade -- but it's not going to be because of "dollar destruction" (not happening) or other Fed this, Fed that nonsense.
Gold will go up because long-term supply will decline and demand will increase. When the inflection hits, I don't know.
We know that the price of gold would skyrocket in the 1940's and beyond beacause it was price-controlled. We didn't know when the beachball would burst above the water line (1974).
We are lucky to have Jerome Powell and the Fed as our central bank compared to some of the clowns manning other CBs.
It’s never as bad or as good as people make out. If gold rises too high, those in need (central banks) will start selling.
@Soldi said:
AT1 bonds issued in place of reaching out for funding via stock offerings. Seemingly very safe are now being rendered next to zero value when a bank is absorbed. The 5% number was derived from the recent Credit Suisse debalacal, I didn't find for it, repeated it, although the sources are solid.
Looks like this has happened? Money is not safe anywhere anymore; rules are being rewritten. Buy gold!
@Exbrit said:
It’s never as bad or as good as people make out. If gold rises too high, those in need (central banks) will start selling.
It's POSSIBLE they sell, but I don't think it will be because of "need." Depends on how high and how fast a rise.
If gold ran a few hundred dollars in a short period of time, maybe they sell. OTOH, they may think it's like LIFTOFF in the early-1970's and gold they are selling at $2,500 could be $5,000 in a few years.
@Soldi said:
$280,000,000,000 in AT1 TOTAL
DIVIDED INTO $17.2 CREDIT SUISSE WIPE OUT
EQUALS 6% of AT1s dropped below common stock status .>
A bond that was paying
9.75% to people around the world big PIMCO LEGG MASON sales item.
Contagious situation from a former great bank
The Swiss upended the normal capital structure. But it's been done before: Detroit pensioners vs. bondholders.....the UAW getting bailed out in 2008-09 (you won't see that on TV)....no capital structure but the Teamsters got a bailout of their pension plan in 2022.
The CS common stock should have been wiped out. Lawsuits my be happening -- heard a conf call with lawyers had 750 attendees.
Europeans now skittish because of what the Swiss did (Switzerland is NOT part of the EU or Euro). But similar CoCo bonds in Europe have taken a big hit.
@dcarr said:
Capitalism never fails. True capitalism is like nature's "survival of the fittest".
But we fail capitalism. Tax-funded bailouts are the antithesis of capitalism and it is akin to feeding wild critters in your back yard. The problem with that is, they learn to come back ... and bring their friends. And then their population numbers artificially increase, like inorganic stimulation of the economy, which eventually leads to a collapse.
Yet most people read something and take it as gospel. Most people believe that Wall Street was "bailed out" in 2008-09....FALSE !!
Conversely, union pension plans have gotten tens of billions of dollars in $$$ that didn't require any management changes nor paying back of the $$$. What a scam.
Federal Reserve manipulation amounts to central planning of the economy, which is a failed communist ideology.
There should be no banking cartel, with special privileges above all others, running the economy.
There are 5,000 banks. No cartel has that many members.
A possible plan would be to do away with the Federal Reserve and have the US Treasury implement a digital ?>currency. A small transaction fee when using that digital currency would go the the US Treasury as a "tax" system >which would replace income taxes and the burden of annual filing of said income taxes.
No privacy at all. Govt knows where every $$$ you have is saved or was spent.
Growth in the quantity of digital dollars would increase by a fixed percentage each year (3%, for example). And the >interest rate associated with borrowing these digital dollars would be close to the same (3%). The basic interest rate, >once determined, would stay the same every year after. So no need for committees or Federal Reserve insiders >personally profiting from their information.
They don't personally profit from information.
You want price controls on money and credit -- expect rationing.
Any exogenous economic shock would have to be transmitted through internal adjustment processess.....probably mandating a steep recession or depression....falling prices....falling wages....etc.
The "banking cartel" that I refer to are the stockholders of the Federal Reserve Corporation. There are not 5,000 banks that are stockholders. There is a fairly small number of large banks that are stockholders, and they receive dividends (and bailouts) from the Federal Reserve.
If you want "privacy", you could still use gold, silver, coins, etc.
The Federal Reserve already sets interest rates. Are you saying that they are performing price controls on money and credit ?
If there was a digital currency with a static interest rate, banks would still be free to loan at whatever interest rates the free market dictates.
Federal Reserve insiders have resigned after it was alleged that they personally profited from inside information.
@dcarr said:
The "banking cartel" that I refer to are the stockholders of the Federal Reserve Corporation. There are not 5,000 banks that are stockholders. There is a fairly small number of large banks that are stockholders, and they receive dividends (and bailouts) from the Federal Reserve.
Really ? How come these dividends have not been disclosed to the shareholders, the SEC, or Elizabeth Warren ?
All "profits" from The Federal Reserve System are swept back to the Treasury.
Call Lehman Brothers and Bear Stearns, they're on hold waiting for their "bailout." And I am pretty sure SVB's share price is closer to $0 than $105 pre-bailout.
The Federal Reserve already sets interest rates. Are you saying that they are performing price controls on money and credit ?
They control short-rates (usually). Right now, the Fed is saying that rates are likely going higher and will NOT be cut -- yet the market is discounting rate CUTS.
If there was a digital currency with a static interest rate, banks would still be free to loan at whatever interest rates the free market dictates.
And who controls the supply of that currency ? What happens if it is hoarded ? Dumped ? Exported overseas ?
Federal Reserve insiders have resigned after it was alleged that they personally profited from inside information.
No they didn't. They didn't personally "profit" from "inside information." They resigned because their terms were coming up and to avoid any appearances of impropriety, they resigned sooner.
@dcarr said:
The "banking cartel" that I refer to are the stockholders of the Federal Reserve Corporation. There are not 5,000 banks that are stockholders. There is a fairly small number of large banks that are stockholders, and they receive dividends (and bailouts) from the Federal Reserve.
Really ? How come these dividends have not been disclosed to the shareholders, the SEC, or Elizabeth Warren ?
All "profits" from The Federal Reserve System are swept back to the Treasury.
Call Lehman Brothers and Bear Stearns, they're on hold waiting for their "bailout." And I am pretty sure SVB's share price is closer to $0 than $105 pre-bailout.
The Federal Reserve already sets interest rates. Are you saying that they are performing price controls on money and credit ?
They control short-rates (usually). Right now, the Fed is saying that rates are likely going higher and will NOT be cut -- yet the market is discounting rate CUTS.
If there was a digital currency with a static interest rate, banks would still be free to loan at whatever interest rates the free market dictates.
And who controls the supply of that currency ? What happens if it is hoarded ? Dumped ? Exported overseas ?
Federal Reserve insiders have resigned after it was alleged that they personally profited from inside information.
No they didn't. They didn't personally "profit" from "inside information." They resigned because their terms were coming up and to avoid any appearances of impropriety, they resigned sooner.
The Federal Reserve remits 94% of their profits to the US Treasury. The remaining 6%, which is still a huge number, is paid as dividends to the stockholders (CITIbank, Goldman Sachs, JP Morgan Chase, Bank of America, etc.).
Lehman Brothers and Bear Stearns were NEVER stockholders of the Federal Reserve corporation and that is why they didn't get bailouts.
If you want to avoid appearances of impropriety, you don't resign early (unless forced to do so).
Reserve Banks have been buying gold for a few years, and whomever mentioned Glass-Stegall >above< is on the right track for us little guys, i.e. mortgage cars loans etc. Measures put into place >2008< is not stopping the commercial building loans WHICH RUN IN PERPETUITY, that the banks are now dealing with.
Defaults are rising
Point of thread raising interest rates is monetary, AS WELL AS, a fiscal control of the economy.
50 basis points into a positive position, over inflation, is NOT A PIVOT remaining negative is.
@dcarr said:
The Federal Reserve remits 94% of their profits to the US Treasury. The remaining 6%, which is still a huge number, is paid as dividends to the stockholders (CITIbank, Goldman Sachs, JP Morgan Chase, Bank of America, etc.).
Yup.....and their profits are on average about $50-$75 BB in a good year.
6% of that is $4 BB, give or take.
Divided up by a few dozen banks.....it's at most $100 MM per year, if that. It's a ROUNDING ERROR that nobody in their right mind pays attention to. Goldman Sachs and JP Morgan Chase will earn $10 BILLION in a good quarter.
Lehman Brothers and Bear Stearns were NEVER stockholders of the Federal Reserve corporation and that is why they didn't get bailouts.
They were systemically important. The Fed assumed certain liabilities for Bear that they didn't for Lehman -- that's why Lehman imploded without a sale.
WaMu was a Fed stockholder -- they didn't get bailed out. Nor did a few dozen other firms. And a few THOUSAND others going back to 1981.
If you want to avoid appearances of impropriety, you don't resign early (unless forced to do so).
When you earn $177,000 working for the Fed...and you can earn 10-20X that amount in the private sector....you don't stick around if somebody impugns your reputation.
The problem is you don't follow the Fed or the people or policies and just respond to sensationalist headlines. You should have a little faith in people !
@Soldi said:
Reserve Banks have been buying gold for a few years, and whomever mentioned Glass-Stegall >above< is on the right track for us little guys, i.e. mortgage cars loans etc. Measures put into place >2008< is not stopping the commercial building loans WHICH RUN IN PERPETUITY, that the banks are now dealing with.
G-S is a relic of the 1930's. You have G-S here, say goodbye to the U.S. banking system and you can have your credit cards and loans provided by Industrial Bank of China and her friends.
Commercial loans do NOT run in perpetuity, they are often rolled over, but with new covenants. Average duration or maturities for Office REITs I track is about 5-6 years.
Defaults are rising
Marginally, bigger problem is hybrid work.
Point of thread raising interest rates is monetary, AS WELL AS, a fiscal control of the economy.
Higher rates a 5-6% headwind for REITs. Bigger problems is online and hybrid shifts.
Commercial loans do NOT run in perpetuity, they are often rolled over, but with new covenants. Average duration or maturities for Office REITs I track is about 5-6 years.
That's a priggush crass retort and you know it. Oh great OZ
@derryb said:
Anyone that does not see the dollar destruction and takes steps to protect themselves deserves what they get.
Many here have sounded the alarm with conspiracy theories that keep proving themselves to be conspiracy reality. >It's become obvious who is actually wearing the tin foil hat.
Gold will go up because long-term supply will decline and demand will increase. When the inflection hits, I don't know.
And what makes gold demand go up?
Answer: Loss of faith in future of the currency it is priced in. Dollar destruction.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
@dcarr said:
The Federal Reserve remits 94% of their profits to the US Treasury. The remaining 6%, which is still a huge number, is paid as dividends to the stockholders (CITIbank, Goldman Sachs, JP Morgan Chase, Bank of America, etc.).
Yup.....and their profits are on average about $50-$75 BB in a good year.
6% of that is $4 BB, give or take.
Divided up by a few dozen banks.....it's at most $100 MM per year, if that. It's a ROUNDING ERROR that nobody in their right mind pays attention to. Goldman Sachs and JP Morgan Chase will earn $10 BILLION in a good quarter.
Lehman Brothers and Bear Stearns were NEVER stockholders of the Federal Reserve corporation and that is why they didn't get bailouts.
They were systemically important. The Fed assumed certain liabilities for Bear that they didn't for Lehman -- that's why Lehman imploded without a sale.
WaMu was a Fed stockholder -- they didn't get bailed out. Nor did a few dozen other firms. And a few THOUSAND others going back to 1981.
If you want to avoid appearances of impropriety, you don't resign early (unless forced to do so).
When you earn $177,000 working for the Fed...and you can earn 10-20X that amount in the private sector....you don't stick around if somebody impugns your reputation.
The problem is you don't follow the Fed or the people or policies and just respond to sensationalist headlines. You should have a little faith in people !
Why do those big banks make so much ? Where does that money come from ?
Credit default swaps (CDS) lose when rates go down. JP Morgan Chase (JPMC) knew that interest rates would be going down. Still, they advised Denver Public Schools (DPS) to buy them and JPMC put lipstick on the pig and sold it to DPS because JPMC was happy to take the money. After selling them the "pig", JPMC slaughtered it and ate it behind the school system's back. The end result was that the property taxes for Denver residents nearly doubled so as to plug the 200 million dollar hole, and that new tax revenue effectively went from the pockets of Denver residents into those of JPMC.
These big banks are not your friends (unless you work there and receive a large bonus).
@dcarr said:
Credit default swaps (CDS) lose when rates go down. JP Morgan Chase (JPMC) knew that interest rates would be going down. Still, they advised Denver Public Schools (DPS) to buy them and JPMC put lipstick on the pig and sold it to DPS because JPMC was happy to take the money. After selling them the "pig", JPMC slaughtered it and ate it behind the school system's back. The end result was that the property taxes for Denver residents nearly doubled so as to plug the 200 million dollar hole, and that new tax revenue effectively went from the pockets of Denver residents into those of JPMC. These big banks are not your friends (unless you work there and receive a large bonus).
Your statement that JPM "knew that interest rates would be going down" -- uh, they went UP !!! -- is nonsense. CDS have NOTHING to do with interest rates, they are a bet on credit, not rates.
The Denver School people gambled and lost. Why ? Because they didn't want to take on the teacher's union and cut pension costs AND they didn't want to put cold hard cash into the pension fund.
I managed pension funds and I know this game. It's the financial equivalent of not doing homework or studying all semester, then cramming on the bus ride to the Final Exam.
You can't believe everything you read from people who only give you 1/2 the picture. The writer of this piece CLEARLY didn't want to mention the relationship between the School Board and the Teachers Union. That's the elephant in the room.
You either get out of the asinine pension and union contract or you pay up as instructed by the actuaries. Denver tried to cut corners and got burned.
NOTE: I meant "interest rate swaps", not "credit default swaps".
The actions of JPMC were certainly predatory in regards to the deal with DPS.
From the article (concerning the DPS CDS deal):
"If prevailing rates fell, the school system would have to make up the difference to the banks. But if interest rates rose, the swap would protect the school system from having to pay higher debt costs."
The Federal Reserve member banks knew this was going to happen (that the economy was going sour and interest rates would be dropping). In fact, these banks positioned themselves for the recession and then ushered it in.
Also from the article:
"In the end, a deal that JPMorgan said would have an interest rate of around 5 percent spiked to 8.59 percent during its first fiscal year, and has since settled down to an average rate of 7.12 percent today."
"Like a homeowner, Denver essentially started out with the equivalent of a standard, fixed-rate mortgage that allowed it to refinance if interest rates fell. But the 2008 deal gave that up for the equivalent of a 30-year loan with a lower rate but significant penalties and costs if investor interest in the debt declined, as it did once the credit crisis kicked in."
DPS ended up paying a lot in fees to the bank, just to get out of the deal.
In the end, the deal cost Denver taxpayers about 200 million dollars more than traditional financing would have cost.
Dcarr, as I posted, nobody put a gun to the Denver School Board's head. They approached JPM, not the other way around.
Again: the article doesn't mention the reason for this which was to minimize pension contributions (ca$$$$$h) and not change benefits (key voting bloc). In other words, they got GREEDY.
They didn't sue JPM AFAIK so JPM did nothing wrong.
Banks provide useful services to tens of millions of Americans all the time. My bank contacted me about a program to re-finance my mortgage and I saved a few hunded dollars a month.
Getting back to the main point of this thread....right now we have a fascinating split: the market (Fed Funds Futures) is assuming about 125-150 bp. in cuts and a lower Fed Funds rate than the official pronouncements of the Fed by year-end.
@GoldFinger1969 said:
Dcarr, as I posted, nobody put a gun to the Denver School Board's head. They approached JPM, not the other way around.
Again: the article doesn't mention the reason for this which was to minimize pension contributions (ca$$$$$h) and not change benefits (key voting bloc). In other words, they got GREEDY.
They didn't sue JPM AFAIK so JPM did nothing wrong.
Banks provide useful services to tens of millions of Americans all the time. My bank contacted me about a program to re-finance my mortgage and I saved a few hunded dollars a month.
No gun was used. We don't know who first solicited whom.
But when sharks and idiots meet, you can bet the sharks are very eager to get in on it.
Anyway, this illustrates how big banks make a lot of money (at taxpayer's expense in this case).
Comments
Apparently, I don't know! So tell me !
As I said; I didn't find for it.
Google AT1 research it yourself!
In conclusion "cohodk DON'T BUY GOLD.
Opinions are a view or judgment formed about something, not necessarily based on fact or knowledge.
"I'm writing to voice my opinion on an issue of great importance"
"Inflation is only transitory"
Janet Yellen
Go flame Janet.
Nothing wrong with posting info, as long as one is up front on whether fact or opinion or heard elsewhere.
If true, it will be verified soon enough.
European high yield bond default rates will rise materially in 2023 and 2024. We re-affirmed our base-case bond default rate forecast for YE 2023 at 2.5% and introduced a 2024 projection that assumes defaults rise to 4.0%. We raised our YE 2023 base-case loan default rate forecast to 4.5%, from 3.5% previously. We expect base-case loan default rates to stabilize around 4% by YE 2024. Fitch
Bloomberg reporting similar.
The rise materially was reported as 5% today. I can't recall who said it. The above reporting is prior to Credit Suisse failure
The article discusses high yield bonds, not all bonds. This is an orders of magnitude difference. High yield bonds default even in good times.
AT1 bonds are not low risk or "safe" investments.
Knowledge is the enemy of fear
The AT1 bond concept came out if the 2008 financial crisis their standing is higher than shareholders in a bank failure. Yet we see the bondholders being given a lower priority than shareholders and losing what they should not. Re: Credit Suisse- UBS.
The Fitch report is before this "merger" "bailout" et al.
In 2008 UBS was bailed out and Credit Suisse was relatively unscathed. I believe there's systemic trouble in banking throughout Europe.
The Fed isn't buying bonds, it's institutions jumping the gun on future (?) rate CUTS. Plus, there's the flight-to-quality bid we always see.
"Bailout" is a term that the media uses without defining. Virtually all the large banks in 2008 paid back their TARP assistance -- and equity shareholders suffered dilution (Citibank is 1/10th the price of Summer 2007). If people lose their jobs and money is paid back and shareholders lose, how is that a "bailout" ?
Conversely, certain politically-affiliated pension funds have received TENS of billions of dolllars. Nobody has lost their jobs over their incompetence....no money will be paid out....no systemic importance....a bailout in the classic sense, all in exchange for votes.
You haven't heard a peep about this, for obivous reasons.
This is apparently a Swiss issue. The covenants in the EU are much stronger. It's possible that the 5% figure refers to the percentage of AT bonds compared to total corporate -- have to check. European corporate market even less liquid than the U.S. market.
We've upended the corporate structure here too: Detroit bankruptcy put pensioners over bondholders, and the GM/Chrysler bankruptcies put the UAW ahead of bondholders.
I agree that gold will move and maybe this is the time. $2,500 before year-end is feasible, certainly by 2024.
There are no bailouts that I have seen so far. The Fed is NOT moving towards QE.
INTERST RATES PROBABILITY
34% .... 0 b points
66%.....25 b points
0% ......50 b points
Odds tomorrow FOMC
Source eurodollar university
My opinion 50/50 .25 or 0%
My guess is 66/34 for 0 and 0.25.
100% 25bps
Is this fun or what? !!
Hey @Soldi -- my guess isn't that funny, is it? We're both in agreement that 50 bp is unlikely!
(but you recognize that Powell doesn't want to become the next Arthur Burns, so we will reluctant to keep things fixed)
U reversed what I said. No? So I thought ur goofing on me and I laughed.
@Soldi -- I should have just stayed with your original guess! We have a hawk at the helm of the Fed.
Pivot. QE, QE, QE, FED ADDED $300,000,000.00 TO THE BALANCE SHEET
After a year of declining balance sheet the SVB banking crisis caused the Fed to add $300 billion dollars this is QE
plus the FED is now covering bank deposits in full.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
All while funds rate is negative
Anyone that does not see the dollar destruction and takes steps to protect themselves deserves what they get.
Many here have sounded the alarm with conspiracy theories that keep proving themselves to be conspiracy reality. It's become obvious who is actually wearing the tin foil hat.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
So what are you saying, that gold should be $10,000 an ounce ? I'm not sure what you are saying.
You are right to be bullish on gold -- I think $3,000 is possible within 3 years and $5,000 within a decade -- but it's not going to be because of "dollar destruction" (not happening) or other Fed this, Fed that nonsense.
Gold will go up because long-term supply will decline and demand will increase. When the inflection hits, I don't know.
We know that the price of gold would skyrocket in the 1940's and beyond beacause it was price-controlled. We didn't know when the beachball would burst above the water line (1974).
We are lucky to have Jerome Powell and the Fed as our central bank compared to some of the clowns manning other CBs.
I'd like to see it represent its real value according to a rational economic condition. Be it whatever $$ makes sense accordingly, but I'm sick if JP M Chase spoofing the markets. Listen to Buffet talk about Wells Fargo gives me a case of concern too.
Capitalism never fails. True capitalism is like nature's "survival of the fittest".
But we fail capitalism. Tax-funded bailouts are the antithesis of capitalism and it is akin to feeding wild critters in your back yard. The problem with that is, they learn to come back ... and bring their friends. And then their population numbers artificially increase, like inorganic stimulation of the economy, which eventually leads to a collapse.
Federal Reserve manipulation amounts to central planning of the economy, which is a failed communist ideology.
There should be no banking cartel, with special privileges above all others, running the economy.
A possible plan would be to do away with the Federal Reserve and have the US Treasury implement a digital currency. A small transaction fee when using that digital currency would go the the US Treasury as a "tax" system which would replace income taxes and the burden of annual filing of said income taxes.
Growth in the quantity of digital dollars would increase by a fixed percentage each year (3%, for example). And the interest rate associated with borrowing these digital dollars would be close to the same (3%). The basic interest rate, once determined, would stay the same every year after. So no need for committees or Federal Reserve insiders personally profiting from their information.
Spoofing and day marking happen all the time in all markets. They don't affect long-term prices based on value.
Yet most people read something and take it as gospel. Most people believe that Wall Street was "bailed out" in 2008-09....FALSE !!
Conversely, union pension plans have gotten tens of billions of dollars in $$$ that didn't require any management changes nor paying back of the $$$. What a scam.
There are 5,000 banks. No cartel has that many members.
No privacy at all. Govt knows where every $$$ you have is saved or was spent.
They don't personally profit from information.
You want price controls on money and credit -- expect rationing.
Any exogenous economic shock would have to be transmitted through internal adjustment processess.....probably mandating a steep recession or depression....falling prices....falling wages....etc.
True, but there are thousands of tonnes of gold in vaults worldwide, and annual production will increase if the price of gold goes up. There are mass quantities of gold identified as resources by mining companies that will convert to reserves (profitable to mine) if gold goes up in price significantly. Total long-term gold supply will increase.
Gold will go up because the people and central banks who have the physical supply will want to keep it, creating your "available for sale" supply decline.
Demand will increase as the price rises because everyone will want to get in on the speculative action. In addition, many believe gold provides some longer-term purchasing power protection vs holding fiat, debt-based fractional currencies.
Historically governments and banks, including the Fed, have always increased the money supply and inflated their currencies. This time is not different.
My US Mint Commemorative Medal Set
Spoofing is against the NOT enforced law. The level of this behavior is criminal and three traders have received prison sentences. Not to mention JPM chase is anything but stellar lest your consideration is how high up the criminal ladder they climb.
Research it yourself.
Yes, I'm assuming that CBs are not going to unload and given the past that is a reasonable assumption. But if 1 or 2 of the larger CBs decide to be net-sellers, yes, that is a very bearish factor. I don't see it....if ANYTHING I think you are likely to have more net-buyers.
What you have to understand is while this fear might still be present among some countries (notabley corrupt African or South African countries), the Information Revolution and the ability to see things in real-time has mitigated traditional distrust and fear of governments and/or CBs.
As an example, 40 years ago it took WEEKS or MONTHS for information on gold holdings to be revealed country-by-country. 25 years ago, it took a few days or weeks. Today, it takes a few hours or less.
You also have crypto and BitCoin, electronic payment portals like Block or Venmo or PayPal....all of these help give individuals a feeling they are in charge.
I still like gold longer-term and believe that we'll have threads on this and other forums which start out with "Remember when Common Saints used to be $2,000 ?" when they will cost double or triple that amount.
It’s never as bad or as good as people make out. If gold rises too high, those in need (central banks) will start selling.
Looks like this has happened? Money is not safe anywhere anymore; rules are being rewritten. Buy gold!
$280,000,000,000 in AT1 TOTAL
DIVIDED INTO $17.2 CREDIT SUISSE WIPE OUT
EQUALS 6% of AT1s dropped below common stock status .
A bond that was paying
9.75% to people around the world big PIMCO LEGG MASON sales item.
Contagious situation from a former great bank
It's POSSIBLE they sell, but I don't think it will be because of "need." Depends on how high and how fast a rise.
If gold ran a few hundred dollars in a short period of time, maybe they sell. OTOH, they may think it's like LIFTOFF in the early-1970's and gold they are selling at $2,500 could be $5,000 in a few years.
The Swiss upended the normal capital structure. But it's been done before: Detroit pensioners vs. bondholders.....the UAW getting bailed out in 2008-09 (you won't see that on TV)....no capital structure but the Teamsters got a bailout of their pension plan in 2022.
The CS common stock should have been wiped out. Lawsuits my be happening -- heard a conf call with lawyers had 750 attendees.
Europeans now skittish because of what the Swiss did (Switzerland is NOT part of the EU or Euro). But similar CoCo bonds in Europe have taken a big hit.
Bullish at the margins for gold.
AT 1 INVENTED IN RESPONSE TO 2008 CRISIS
So banks don't need to raise capital via a tender offering
ORIGIN OF THREAD
Fed is in a box and there's little way out with interest rates. Look at results so far and rate is still negative.
Research it yourself
The "banking cartel" that I refer to are the stockholders of the Federal Reserve Corporation. There are not 5,000 banks that are stockholders. There is a fairly small number of large banks that are stockholders, and they receive dividends (and bailouts) from the Federal Reserve.
If you want "privacy", you could still use gold, silver, coins, etc.
The Federal Reserve already sets interest rates. Are you saying that they are performing price controls on money and credit ?
If there was a digital currency with a static interest rate, banks would still be free to loan at whatever interest rates the free market dictates.
Federal Reserve insiders have resigned after it was alleged that they personally profited from inside information.
Really ? How come these dividends have not been disclosed to the shareholders, the SEC, or Elizabeth Warren ?
All "profits" from The Federal Reserve System are swept back to the Treasury.
Call Lehman Brothers and Bear Stearns, they're on hold waiting for their "bailout."
And I am pretty sure SVB's share price is closer to $0 than $105 pre-bailout.
They control short-rates (usually). Right now, the Fed is saying that rates are likely going higher and will NOT be cut -- yet the market is discounting rate CUTS.
And who controls the supply of that currency ? What happens if it is hoarded ? Dumped ? Exported overseas ?
No they didn't. They didn't personally "profit" from "inside information." They resigned because their terms were coming up and to avoid any appearances of impropriety, they resigned sooner.
The Federal Reserve remits 94% of their profits to the US Treasury. The remaining 6%, which is still a huge number, is paid as dividends to the stockholders (CITIbank, Goldman Sachs, JP Morgan Chase, Bank of America, etc.).
Lehman Brothers and Bear Stearns were NEVER stockholders of the Federal Reserve corporation and that is why they didn't get bailouts.
If you want to avoid appearances of impropriety, you don't resign early (unless forced to do so).
Reserve Banks have been buying gold for a few years, and whomever mentioned Glass-Stegall >above< is on the right track for us little guys, i.e. mortgage cars loans etc. Measures put into place >2008< is not stopping the commercial building loans WHICH RUN IN PERPETUITY, that the banks are now dealing with.
Defaults are rising
Point of thread raising interest rates is monetary, AS WELL AS, a fiscal control of the economy.
50 basis points into a positive position, over inflation, is NOT A PIVOT remaining negative is.
Point after point after point.
Say ! Anyone got an honest Gold z Silver closing price 🤔
Yup.....and their profits are on average about $50-$75 BB in a good year.
6% of that is $4 BB, give or take.
Divided up by a few dozen banks.....it's at most $100 MM per year, if that. It's a ROUNDING ERROR that nobody in their right mind pays attention to. Goldman Sachs and JP Morgan Chase will earn $10 BILLION in a good quarter.
They were systemically important. The Fed assumed certain liabilities for Bear that they didn't for Lehman -- that's why Lehman imploded without a sale.
WaMu was a Fed stockholder -- they didn't get bailed out. Nor did a few dozen other firms. And a few THOUSAND others going back to 1981.
When you earn $177,000 working for the Fed...and you can earn 10-20X that amount in the private sector....you don't stick around if somebody impugns your reputation.
The problem is you don't follow the Fed or the people or policies and just respond to sensationalist headlines. You should have a little faith in people !
G-S is a relic of the 1930's. You have G-S here, say goodbye to the U.S. banking system and you can have your credit cards and loans provided by Industrial Bank of China and her friends.
Commercial loans do NOT run in perpetuity, they are often rolled over, but with new covenants. Average duration or maturities for Office REITs I track is about 5-6 years.
Marginally, bigger problem is hybrid work.
Higher rates a 5-6% headwind for REITs. Bigger problems is online and hybrid shifts.
Commercial loans do NOT run in perpetuity, they are often rolled over, but with new covenants. Average duration or maturities for Office REITs I track is about 5-6 years.
That's a priggush crass retort and you know it. Oh great OZ
And what makes gold demand go up?
Answer: Loss of faith in future of the currency it is priced in. Dollar destruction.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
Why do those big banks make so much ? Where does that money come from ?
Here is what one Federal Reserve stockholder (JP Morgan Chase) did to the citizens of Denver Colorado:
https://nytimes.com/2010/08/06/business/06denver.html
Credit default swaps (CDS) lose when rates go down. JP Morgan Chase (JPMC) knew that interest rates would be going down. Still, they advised Denver Public Schools (DPS) to buy them and JPMC put lipstick on the pig and sold it to DPS because JPMC was happy to take the money. After selling them the "pig", JPMC slaughtered it and ate it behind the school system's back. The end result was that the property taxes for Denver residents nearly doubled so as to plug the 200 million dollar hole, and that new tax revenue effectively went from the pockets of Denver residents into those of JPMC.
These big banks are not your friends (unless you work there and receive a large bonus).
Your statement that JPM "knew that interest rates would be going down" -- uh, they went UP !!! -- is nonsense. CDS have NOTHING to do with interest rates, they are a bet on credit, not rates.
The Denver School people gambled and lost. Why ? Because they didn't want to take on the teacher's union and cut pension costs AND they didn't want to put cold hard cash into the pension fund.
I managed pension funds and I know this game. It's the financial equivalent of not doing homework or studying all semester, then cramming on the bus ride to the Final Exam.
You can't believe everything you read from people who only give you 1/2 the picture. The writer of this piece CLEARLY didn't want to mention the relationship between the School Board and the Teachers Union. That's the elephant in the room.
You either get out of the asinine pension and union contract or you pay up as instructed by the actuaries. Denver tried to cut corners and got burned.
Yeah, it's JP Morgan's fault.
NOTE: I meant "interest rate swaps", not "credit default swaps".
The actions of JPMC were certainly predatory in regards to the deal with DPS.
From the article (concerning the DPS CDS deal):
"If prevailing rates fell, the school system would have to make up the difference to the banks. But if interest rates rose, the swap would protect the school system from having to pay higher debt costs."
The Federal Reserve member banks knew this was going to happen (that the economy was going sour and interest rates would be dropping). In fact, these banks positioned themselves for the recession and then ushered it in.
Also from the article:
"In the end, a deal that JPMorgan said would have an interest rate of around 5 percent spiked to 8.59 percent during its first fiscal year, and has since settled down to an average rate of 7.12 percent today."
"Like a homeowner, Denver essentially started out with the equivalent of a standard, fixed-rate mortgage that allowed it to refinance if interest rates fell. But the 2008 deal gave that up for the equivalent of a 30-year loan with a lower rate but significant penalties and costs if investor interest in the debt declined, as it did once the credit crisis kicked in."
DPS ended up paying a lot in fees to the bank, just to get out of the deal.
In the end, the deal cost Denver taxpayers about 200 million dollars more than traditional financing would have cost.
Dcarr, as I posted, nobody put a gun to the Denver School Board's head. They approached JPM, not the other way around.
Again: the article doesn't mention the reason for this which was to minimize pension contributions (ca$$$$$h) and not change benefits (key voting bloc). In other words, they got GREEDY.
They didn't sue JPM AFAIK so JPM did nothing wrong.
Banks provide useful services to tens of millions of Americans all the time. My bank contacted me about a program to re-finance my mortgage and I saved a few hunded dollars a month.
Getting back to the main point of this thread....right now we have a fascinating split: the market (Fed Funds Futures) is assuming about 125-150 bp. in cuts and a lower Fed Funds rate than the official pronouncements of the Fed by year-end.
Something has to give.........
No gun was used. We don't know who first solicited whom.
But when sharks and idiots meet, you can bet the sharks are very eager to get in on it.
Anyway, this illustrates how big banks make a lot of money (at taxpayer's expense in this case).