Tuesday 9 February 2016

Are the bank about to collapse 2008 stylee?

In short, no.

I feel compelled to write this again as the media is full of dark thoughts about the banks and the world as a whole.

I personally blame the constant storms in the real weather as having a zen like influence on the traders of the world markets.

In the UK for example, Barclays, Lloyds and RBS have more or less closed their investment banking groups.

The remainder have Tier One equity of 10%+. They have been lending little real money except on mortgages and credit cards; of this, little has been securitised, let alone put into CDO's.

The current issue really is that with all the secy stuff gone, the Banks are making no money and the regulators continue to find new crimes for which they get fined. I have little sympathy with the Banks or their shareholders on this.

But we are a long way off 2008. What wold be more troubling at this time would be a huge run on Government bonds, as that is where the real debt expansion has been. However, the threat of QE means that even the top hedge funds of the world are unlikely to try and fight that war in the West.

Instead we have a profit problem - itself predictable in world of a zombie economy and commodity induced deflation.

On the plus side, it means banks look cheap at the moment and he medium term benefits of oil prices are yet to work themselves out (i.e. a boost to the consumer economy) - so the economic future is brighter than it appears right now potentially.



Steven_L said...

Even at the next land price / pound sterling crash in the mid 2020's the banks won't all go bust again. But some lenders - such as BTL specialist Paragon for instance - might end up in a bad way.

But for now, load up on the dips I say! A lot of shares are starting to look cheap again. BMW is down under E67 again for instance.

Anonymous said...

At what point do enough posties, cabbies and tube drivers decide "Hey. My Streatham hovel is worf nine 'undred fasand pand. I kin eff orf to da sticks 'n retoire !" ?

And decide to sell up for as much as they can.

A property slump would bugger the banks.

Thud said...

I'm still steadily buying and will continue for the rest of the year I hope...what else to do? Will probably take some money out in U.S. to buy a property over there but for now steady as she goes.

My2008Name said...

I'd contend on point there CU - "itself predictable in world of a zombie economy and commodity induced deflation. " - and argue that a commodity induced deflation is the result of production contracting which in turn is a result of demand collapsing.
Being that the West is highly invested in markets, a market fall will result in further demand contraction, thus lower production and in a hellish spiral back to commodity induced deflation.

I thought it interesting that many media outlets are focusing on Deutsche Banks 'share value' being less than its 'book value' while noting that its book value comprises, in no small measure, its 'assets'. No recognition or implication that the value of its assets might be in question; personally I'd like to know the makeup of those 'assets' and when they were last marked to market. I suspect many market makers are looking closely at these too and this is the reason for DBs fall.

As with anything, you know youre on solid ground when a politician (German Finance Minister) comes out to tell you DB is solid; Its Gordon Braun all over again.

Run for the fucking hills.

Nick Drew said...

Yes, DB is a worry

when I was livng in the Ruhr in the '70s I noticed everyone drank bottled water, I'd never met that before

then I noticed the water utility ran TV ads saying how clean the water was, which didn't seem like a good sign

"guaranteed to be completely free of bacteria & microbes" - yeah, the cadmium has killed 'em all

CityUnslicker said...

My2008name - good points. DB is a basket case of regulatory arbitrage running from the FSA in favour of the German Regulator who treated its as a national treasure.

I have a feeling the issue with DB now is that new CEO Cryan will attempt to clean up the augean stables and this will be a painful process indeed for the reasons you mention.

As to the production slow down. This is mainly in CHINA, this is a local issue for me. China is fucked, well so what? In the west the consumer economies should be net beneficiaries of this for the next 10 years. Yes BP, Rio Tinot et all are all goosed and that burns the indexes - but much like the oil price crash, long term this is good news for us little people in the West.