Category — Banks
There’s a concept in sales that works like this: if the salesman says something, it might be a lie. If the prospect says it, it’s true. So the trick for the salesman is to find a way to get the prospect to sell themselves.
One way to do that is to use a technique called a tie down.
The tie down is an open-ended question that the prospect will agree to. Something like, ‘Quality is important, isn’t it?’
The question for investors is this: will the Australian governmentuse mainstream economists and industry to sell a budget deficit to the public?
The answer is probably yes. The tie down will be the classic Keynesian response to lower growth – ‘when things are struggling the government should step in to create jobs and support the economy, shouldn’t it?’ [Read more →]
December 18, 2012 Comments Off
2012 has seen an impressive list of global banking scandals.
The problem is that even as they get more outrageous, the market becomes more desensitised.
The real bombshell this year was the LIBOR scandal.
Some of the world’s biggest banks got caught with their pants down,manipulating the LIBOR rate. If you think that sounds boring, then know that it underpins derivatives worth over $300 TRILLION. Tweaking LIBOR a few basis points here and there can pay for more than lunch.
This was a scandal so huge that it involved some of the biggest names in the banking game: Barclays, HSBC, Deutsche Bank, UBS, Credit Suisse, Soc Gen, Citibank, JP Morgan, and Bank of America, amongst many others.
So global banking titans formed a cartel to deceive the world? [Read more →]
November 27, 2012 Comments Off
The bankers have created a whole new language in recent years…
Troubled Asset Relief Program (TARP). Term Asset-Backed Securities Loan Facility. Commercial Paper Funding Facility.
Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility.
Money Market Investor Funding Facility.
Quantitative Easing (QE). Operation Twist. Debt Ceiling.
PIIGS (Portugal, Italy, Ireland, Greece, and Spain).
European Financial Stability Fund (EFSF). European Financial Stabilisation Mechanism (EFSM). European Stability Mechanism (ESM). Outright Monetary Transactions (OMT). [Read more →]
November 12, 2012 Comments Off
With all the evidence showing the overseas banking system is on the edge of collapse, Australia’s banking regulator (APRA) insists on spinning the yarn that Australian banks are just fine, so don’t worry about anything.
Today’s Australian reports:
‘Australia’s biggest banks would survive a global economic disaster that included a disorderly resolution in Europe, a double-dip recession in the US and slump in Chinese growth, under a new scenario modelled by the Australian Prudential Regulation Authority.’
That’s great news. Let’s look at the stress test and the modelling. We wish you could. But you can’t. The only analysis anyone can do of the banking stress test is to read the transcript of John Laker’s (APRA chairman) speech to the AB+F Randstad Leaders Lecture.
The transcript runs to 12 pages. But there’s no real analysis. All you’ll get from the speech is what they tell you…nothing else. APRA refuses to answer any questions regarding the stress tests. [Read more →]
November 10, 2012 Comments Off
Today I want to tell you why I think our system of money is failing us so badly. And what that means for you, me, and everyone else. How it affects every aspect of our lives.
A big topic – but here goes…
Yet when gold and silver were officially used as money, prices were constant. In fact, according to the wholesale price index, prices actually drifted lower through the 19th century at a time when the western world was enjoying great economic growth and prosperity. [Read more →]
October 15, 2012 Comments Off
The four most dangerous words in investing are ‘it’s different this time’.
This piece of financial advice – made famous by Sir John Templeton – is so well-known that it’s a cliché. Everybody knows it.
Yet when push comes to shove, almost nobody pays attention to it. My reading pile is currently full of ‘yes but, it really is different this time’ articles.
That’s a danger sign. It’s a warning that investors are getting caught up in the hype of a bubble.
And so today I’d like to look at how you can keep your head when all about you are losing theirs. [Read more →]
October 12, 2012 Comments Off
‘The American public feels like there was no Old Testament justice. What they saw, banks bailed out and all these people make all that money, and including the banks that failed, people made a lot of money, and there’s some truth to that. There is some truth to that. I can’t make up for what other boards did and didn’t do, but there’s truth to that. There were people who destroyed their companies, virtually brought the United States down to its knees and walked away with $50 million. It pisses me off too.’– Jamie Dimon, CEO JPMorgan Chase & Co.
Mr Dimon was talking to the US Council on Foreign Relations. He says that he too is annoyed at the banking bailouts…that bankers have done a lot of rotten things and gotten away with it.
It seems he’s abandoned the 1%ers and joined the 99%ers.
Well, not really. While it’s true that JPMorgan didn’t directly get a big banking bailout, JPMorgan has benefited just as much as any other big Wall Street bank from the US Federal Reserve’s low interest rates and money printing.
Without both of those, JPMorgan would have gone bust. [Read more →]
October 12, 2012 Comments Off
As you probably know, the Reserve Bank cut interest rates last week. The official rate is now 3.25%. It’s just 25 basis points away from the ‘emergency’ level of 3% reached in 2009.
There’s always a lot of hysteria around interest rate cut time. Much of the commentary is completely uninformed. So I want to ignore the noise and hype and tell you exactly what I think it all means.
The first point to note is that the RBA got it wrong. After spending 2012 being sanguine about China/the commodity boom and telling everyone that we’ve never had it so good, interest rates are now close to levels where we’ve never had it so bad.
With the recent plunge in bulk commodity prices, the RBA is now much more bearish on the outlook for the Aussie economy. It sees downside risks for the international economy. It’s now much more concerned about China than it was a few months ago. It got China badly wrong too. [Read more →]
October 11, 2012 Comments Off
If you’ve read Money Weekend over the past three weeks, you’ll know that soon we’ll launch a new free eletter.
The eletter will cover some of the topics we’d like to write to you about in Money Morning, but can’t.
The reason is that this is supposed to be a mainly financially based newsletter. So when we go off on a tangent, talking about things like press freedom, personal freedom and the expansion of the police state, some readers don’t like it.
In fact, those tend to be the days when we get the most unsubscribe requests. We get that. You may have signed up for Money Morning to read about financial markets, the world economy and a few stock tips. What you may not have signed up for is our take on non-financial matters.
So, we’ve decided to switch the non-financial commentary to a separate free eletter. We’ll make more details available over the next few days, including how you can subscribe to the new eletter. [Read more →]
September 29, 2012 Comments Off
Just five years after they played a primary role in engineering the worst financial crisis since the Great Depression, America’s big banks are quietly setting the world up to do it all over again.
Only this go-round the costs will be far higher and the damage much worse. This time the fall could be $2.6 trillion or more.
Let me explain.
It started back in the mid-2000s. Wall Street was busy packaging low-rated subprime loans into securitized offerings that were somehow worth more than the sum of their parts.
In reality, what they were doing was little more than laundering toxic debt while raking in obscene profits along the way.
You know the rest of the story as well as I do. Not long after, the stuff hit the proverbial fan and it was not evenly distributed.
Well here we go again… [Read more →]
September 21, 2012 Comments Off