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Showing posts from February, 2016

7 year of Emergency Policy -- how's it looking now?

Headlines last week -- Japan's stores run out of safes!  Turns out that the Japanese have a simple solution to negative interest rates; buy a safe!  Some have tried to paint the removal of the Euro 500 note and the "rumoured" desire by the Feds to kill the US$ 100 as a way of killing cash (which may be true).  But right now people have decided that the banks are doing a terrible job -- are in precarious position, and that interest rates are so low that you may as well keep cash at hand.  If you are not paid for a risk, why take it.
By the way it reminds me a long long time ago (ok late '90s) I had to purchase a plane ticket with cash (like that would be possible now) the airline insisted that I use cash...this was two round the world tickets -- about S$ 6,000 for the two tickets -- so I go to my bank and ask for $6,000 in cash. The cashier tells me that I can have whatever denomination I want.  So like a smart ass that I am I say, can I have a $5,000 and $1,000 note…

The energy complex

A few weeks ago I said that it was possible that oil had finally found its floor, well the market made a fool out of me, from $30 it fell all the way down to $26 (its back around $29 now).  But it remains that the oil and gas sector are having a difficult time -- really it's bad!

The US non-conventionals have been using the debt high yield market to finance their operations, it was for a long time much cheaper than the equity markets, in fact 2012/14 saw massive issuance in the high yield market -- somewhere between 20% and 30% of all HY instruments are related to the energy sector.

Rumours a few weeks ago emerged that the Feds were encouraging banks to play nice with the borrowers -- as they say that was then, this is now, and now is looking distressed.  M&A bankers buddies have told me that the restructuring of the E&P sector was was long though to go via sale of business has moved to debt reorg.  The equity has been wiped out, and  good chunk of the debt too (watch out…

European banks are not in good shape

So a few months ago, bad vibes started coming out of Italy; the banking sector was on edge, the Italian government has "decided" that it would create a Bad bank in which all the troubled loans, held by Italian banks, will be parked and eventually liquidated -- one small problem, the Italian government doesn't have the cash at hand to capitalise the bad bank...
Stories (and they are just that) that the new bad banks -- so that it doesn't break the new EU rules on bail-outs, would only capture 40% of the bad loans.  This new deal has been in serious discussion (with real details) and the impact is that Italian banks share have resumed their general decline (as can be seen below) [Startfort]
So that's Italy!  What about the rest?  Well DB came out a few days ago with truly mind blowing bad numbers:  7 billion , revenues are down -- in IB which is serious because IB and asset management are the two key core activities of the bank.  Turns out that yesterday total der…