Black Monday

[skid]

Well skid, all I can do is refer you to this graph that the IMF produced about the most systemic bank Globally.

Attachment 8336

If DB or any of its counter-parties encounter difficulties or bankruptcy, there would be widespread contagion. Even more so than what occurred in 08'

Reports out from Bloomberg yesterday stating that some Hedgies have reduced excess collateral with DB, which signals reduced confidence. SP decline triggered a selloff in Euro/US financial stocks which brought most indicies down with it. Gold and Bonds were bid due to the risk off flight to safety/quality.

Might be time to start increasing the cash holdings (not with Deutsche).

Yep,we have a few safeguards here and in OZ ,but of course they would ,at best delay the carnage here until we had a chance to pull out cash for Gold,Kiwi bonds etc.

Im not sure its possible to just pull out cash--probably has to be traded for another asset.--(just a plan in case of worst case scenario)

[skid]

People have asked a number of times ''whats wrong with low interest rates'' One ,perhaps oversimplified answer, is that all that easy money just encourages large firms to make speculative (sometime high risk)investments with that easy money thus creating a bubble or simply having a situation where it blows up in their faces (or both)---Is this what we are seeing unfold with Duetsche Bank? We dont know yet ,but if bubbles are forming,we may just see it happen from somewhere else ,the next weak link. All of Europe is entwined in the affairs of this mega bank.--theres already a run in the form of hedge funds being pulled out.
Big banks have always been the area of most concern to me

[Mush]

People have asked a number of times ''whats wrong with low interest rates'' One ,perhaps oversimplified answer, is that all that easy money just encourages large firms to make speculative (sometime high risk)investments with that easy money thus creating a bubble or simply having a situation where it blows up in their faces (or both)---Is this what we are seeing unfold with Duetsche Bank? We dont know yet ,but if bubbles are forming,we may just see it happen from somewhere else ,the next weak link. All of Europe is entwined in the affairs of this mega bank.--theres already a run in the form of hedge funds being pulled out.
Big banks have always been the area of most concern to me

Deutsche's problem comes from the fact that there core business is one of trading (derivatives house) and investment banking units, which have been regulated to hell post 08, which means they're significantly less profitable than what they once were. And yes, negative/low global rates have hurt most financial institutions by squeezing net interest margins (making them less profitable), which means even though it's costly in terms of capital to return to trading activities, firms have been willing to sacrifice capital in order to find some profitability (I.e Assume greater risk).

I think it's quite apparent that most asset classes are either approaching or in bubble territory. Negative earnings growth for US stocks, yet S&P trades near all time highs? To me that's not a function of a market trading on fundamentals. And there are many other equity markets around the world that mirror this.

Central bank policy since 08 has been aimed to inflate asset prices (wealth effect to cause consumption, stimulate AD) which hasn't had the effect that was intended. Now they're stuck between a rock and hard place, where they cannot normalize policy as markets are addicted (so to speak) to all the easy money flushing around in the system. So IMO most markets are bubbly in today's environment, now that's not to say you can't make money off them, I'd be adjusting my time horizon for shorter term plays.

[Mush]

Yep,we have a few safeguards here and in OZ ,but of course they would ,at best delay the carnage here until we had a chance to pull out cash for Gold,Kiwi bonds etc.

Im not sure its possible to just pull out cash--probably has to be traded for another asset.--(just a plan in case of worst case scenario)

NZ/Australia were relatively unaffected by the GFC due to our main exposures being China and each other. Our banks were not significantly exposed to either the states or Europe. However this time around, i'm struggling to find anywhere else in the world that doesn't seem to have significant risks to the downside. (IMO Australia, NZ and the US are about the only places)

And unfortunately for us, this time around the Pillars (ANZ/NAB/CBA/WPC) have significant exposures to China, so I'm not convinced that if everything were to go "tits up" we would be as sheltered as previous cycles.

[Baa_Baa]

"Which ultimately means that DB really has four options: raise capital ... approach the ECB for a liquidity bridge ... appeal for a state bailout ...or implement a bail-in ... " [abridged]

http://www.zerohedge.com/news/2016-0...t-happens-next

[Hoop]

NZ/Australia were relatively unaffected by the GFC due to our main exposures being China and each other. Our banks were not significantly exposed to either the states or Europe. However this time around, i'm struggling to find anywhere else in the world that doesn't seem to have significant risks to the downside. (IMO Australia, NZ and the US are about the only places)

And unfortunately for us, this time around the Pillars (ANZ/NAB/CBA/WPC) have significant exposures to China, so I'm not convinced that if everything were to go "tits up" we would be as sheltered as previous cycles.

you forget to mention the big banking risks from the global big cities housing bubbles...Sydney Auckland are big bubbles waiting for a catalyst (pin)

[NeverQuestion]

you forget to mention the big banking risks from the global big cities housing bubbles...Sydney Auckland are big bubbles waiting for a catalyst (pin)

The Other thing you have forgotten is that New Zealanders are not huge on saving

As a result the local banks have to go overseas to secure the funds for things like mortgages

Watch this space if things turn ugly in the global economy or the NZD suffers a downturn

[NeverQuestion]

Given the 2008 and 1987 Market Crash happened around this time of year does anyone go defensive on their investments around this month?

[skid]

Im defensive ,but not because of the month--more because of the fiscal era we are in. But going defensive often means sacrificing profit as there is more profit in risk,as long as it goes well.
Those who absolutely need that profit as income (like retired folk) face much more of a dilemma --they need that income and are being forced to take risks to get it.

[skid]

Meanwhile the American system seems to be breaking new ground in terms of hippocracy--(fining DB for mortgage security issues)while bailing out its own banks in the GFC