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Home‘Canaries In Coal Mines’: Copper and Iron Ore Markets Breaking Down
Posted by Larry Doyle on March 12th, 2014 10:23 AM |
Having focused meaningful attention on developments in China in recent commentaries, I am compelled to draw even further focus to the ‘canaries in the coal mines,’ that is, the copper and iron ore markets.
Let’s navigate eastward once again as the FT writes,
Copper continued to take a pummelling, with Shanghai traded futures in the metal falling by their daily limit on Wednesday morning.
That came after a frenzied day of trading on Tuesday, when copper prices sank below $6,500 a tonne to a near four-year low as concerns mounted over the fragility of the Chinese market. (more…)
Greatest Market Risk: China’s Shadow Banking
Posted by Larry Doyle on March 11th, 2014 9:24 AM |
As I navigate the markets and global economy, I am always on the lookout for sectors and regions where leverage has built up to the point where it bubbles over and needs to be reined in. In the process, markets tend to retrace.
On this note, I drew attention to what I deemed our current, greatest market risk when I wrote in mid-January about the shadow banking system in China (What Is Greatest Global Risk Lurking In Shadows? Look East).
Much as the shadow banking system in our country grew to the point where it was lending 40-45% of the total credit that flowed into our economy, the explosive growth in the shadow banking system in China now equates to a not insignificant ~60% of China’s GDP. Why should we be concerned? Did you notice the recent 8% decline in the price of iron ore and a similar decline in the price of copper stemming from concerns over the Chinese economy? A slowing in China presents a challenge for those entities that have borrowed short (paying dearly in the process) and lent long and leveraged up in the process.
Institutional Investor writes a “must read” for anybody who cares about keeping their pulse on risks in the global markets and economy. (more…)
Baupost’s Seth Klarman Warns of Asset Bubble
Posted by Larry Doyle on March 10th, 2014 7:51 AM |
More often than not, I take the wisdom provided by selected talking heads and industry insiders with a pound of salt.
Without being overly cynical strictly for cynicism’s sake, I discount a fair bit of the analysis put forth by many financial sleuths based on the individual ‘talking his own position.’ In fact, I believe that many outlets predominantly look for guests who play the game and toe the industry’s party line.
To that end, I look elsewhere for insights and perspectives that I really appreciate. Who are some of the money managers I truly respect but are rarely seen on major financial outlets? Bob Rodriguez, Jeremy Grantham, and Seth Klarman, who just so happens to offer some pointed insights highlighted today in a commentary in the FT: >>>>>> (more…)
World Justice Project: 2014 Rule of Law Report Recommended
Posted by Larry Doyle on March 7th, 2014 1:51 PM |
Among various reports that I look for on an annual basis, I appreciate the Rule of Law Index produced by the World Justice Project as much as any.
Why do I anticipate reading and reviewing this report so much? Because we are a nation of laws and not of men. At least I think we are . . . although sometimes I wonder. As the WJP highlights:
“Effective rule of law helps reduce corruption, alleviate poverty, improve public health and education, and protect people from injustices and dangers large and small,” said William H. Neukom, WJP Founder and CEO. “Wherever we come from, the rule of law can always be strengthened.” (more…)
Is That Broker Soliciting You an Ex-Con?
Posted by Larry Doyle on March 7th, 2014 10:06 AM |
Not that we needed any more evidence that Wall Street’s primary self-regulator is a challenged organization when it comes to protecting investors, but in a lead commentary in today’s Wall Street Journal we get it:
The Financial Industry Regulatory Authority “routinely” strips out some possible red flags on brokers from its database in the information it makes available to investors, according to a study released Thursday by an organization of lawyers who represent investors in claims against brokers. (more…)
T. Hoenig: ‘TBTF’ Banks Insufficient Equity Capital; The Case for Glass-Steagall
Posted by Larry Doyle on March 7th, 2014 7:05 AM |
I inadvertently overlooked a recent commentary written by a Sense on Cents favorite, Simon Johnson, that ran at Project Syndicate.
Johnson writes a fabulous piece entitled Truth From the Top highlighting the work of former Fed governor Thomas Hoenig about just how fragile our banking system truly is and how the politics of promoting the ‘too big to fail’ model have persisted. Let’s navigate.
It is unusual for a senior government official to produce a short, clear analytical paper. It is even rarer when the official’s argument both cuts to the core of the issue and amounts to a devastating critique of the existing order. (more…)
Making Swiss Cheese of Derivatives Reform
Posted by Larry Doyle on March 6th, 2014 5:02 AM |
Yes, that quadrillion (thousand trillion) sized market with 95% of the concentration in the 5 largest ‘too big to fail’ banks.
Thanks to our friends at POGO for highlighting the following loopholes large enough for a Mack truck: (more…)
Insider Trading at the SEC??
Posted by Larry Doyle on March 5th, 2014 4:07 AM |
The abbreviated definition of insider trading is “the buying or selling of a security by someone who has access to material, nonpublic information about the security.”
Who could possibly be more “inside” than an individual who is in the position to take action against a company, that is employees of the Securities and Exchange Commission?
In another edition of “You Can Not Make This Stuff Up,” a recent paper highlights how employees at the SEC are superb in terms of their stock trading and specifically their stock selling skills. Let’s navigate. (more…)
Deficit Projections Out To 2024
Posted by Larry Doyle on March 4th, 2014 12:51 PM |
The Wall Street Journal addresses that widening gap between how the administration and the CBO view future deficits in writing: (more…)
Geographic and Strategic Importance of Crimea
Posted by Larry Doyle on March 4th, 2014 7:06 AM |
With all eyes in the markets, if not the world, focused on the ongoing crisis developing in the Ukraine and its southern peninsula known as Crimea, let’s navigate and gain a greater understanding as to the geographic, economic, and political importance of this region.
Crimea is a short, 2 hour plus flight from Moscow or perhaps a half day ride given that it is approximately 850 miles/1400 km due south. More importantly than the proximity of Crimea to Moscow is its geographic location. (more…)
