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Tuesday, 3 May 2016

China Still Displaying Financial Stress Signals

A sharp uptick in the number of corporate defaults, coupled with the increasing number of cancelled or postponed bond issuances, shows that the market is starting to reprice risk although this process could last until the end of 2016. 

China's Financial System 1

Cracks Continue To Appear In China’s Financial System

Cracks Continue To Appear In China’s Financial System
The world’s largest casino, or China’s financial system as it’s more formally known, continues to exhibit irrational and concerning behaviour this year. The latest trend, as highlighted by Bank of America Merrill Lynch’s China: An Equity Strategist’s Diary research report, the is the volume of non-government bond issuances that have been cancelled or postponed so far in 2016.
Specifically, year-to-date 241 non-government bond issuances have been cancelled or postponed, 120 of which occurred in April vs. 315 in total in 2015. 709 bonds worth a total of Rmb1.04 trillion were sold successfully during the first 28 days of April, giving a success rate of more than 85% — so the situation isn’t at crisis levels yet.

Feinstein and Burr’s bill is not based in any technical reality. Companies like Apple, Microsoft and Google would have to entirely re-engineer how they encrypt user data, leaving it vulnerable to attackers in the process. No encryption expert has identified a way to allow law enforcement access to encrypted communications without also jeopardizing the security of the everyday user.

Right now, the housing market seems to be firing on all cylinders if you follow existing-home sales data. March existing sales rose 5.1%. But, then, this is a lagging indicator, pointing toward prior performance.
Leading indicators paint a completely different picture for the housing market, telling us that March’s strength won’t last long. And we can use this leading information to make one simple trade to take advantage of the situation.

The reason debt is needed is because while energy products can indeed produce a large “energy profit,” this energy profit is spread over many years in the future. In order to actually be able to obtain the benefit of this energy profit in a timeframe where the economy can use it, the financial system needs to bring forward some or all of the energy profit to an earlier timeframe. It is only when businesses can do this, that they have money to pay workers. This time shifting also allows businesses to earn a financial profit themselves. Governments indirectly benefit as well, because they can then tax the higher wages of workers and businesses, so that governmental services can be provided, including paved roads and good schools.

U.S. Energy Secretary sees oil supply, demand rebalancing in a year

U.S. Energy Secretary Ernest Moniz said he expects global oil supply and demand to rebalance in about a year’s time.  Benchmark crude oil prices, which hit almost 13-year lows earlier in 2016, surged nearly 20 percent in April on a softer dollar and lower U.S. production. However, market participants remain skeptical about the sustainability of the rally given a persistent global supply overhang.  “The recent rise in prices is not something I think that the companies are willing to reverse their investment trends on,” Moniz told reporters on Monday after the G7 energy ministers’ meeting in Kitakyushu, southwestern Japan.  “Rig counts in the United States are quite low … a rebalancing of global supply and demand looks to be quite credible, roughly speaking on a one-year time scale.  “That may change the dynamic but structurally we clearly continue to have a very very large inventory of oil,” he added.
“We are still unbalanced.”  U.S. oil output is expected to drop by 600,000 barrels per day (bpd) this year from a year ago as producers respond to low crude prices, Moniz said, citing U.S. Department of Energy projections.

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