Clever Accounting Tricks (GAAP) Hides BIG Banks' Real Leverage Risks

America’s biggest banks aren't ready for next meltdown

When Audited  Leverage And Risks Are Hidden IN GAAP

WASHINGTON  — The main financial risk facing the United States today looks very similar to what caused so much trouble in 2007-2008: big banks with too much debt and too little equity capital on their balance sheets. Uneven global regulations, not to mention regulators who fall asleep at the wheel, compound this structural vulnerability.

We already saw this movie, and it ended badly. Next time could be an even worse horror show.

All booms are different, but every major financial crisis has at its heart the same issue: major banks get into trouble and teeter on the brink of collapse. Disruption at the core of any banking system leads to tight credit, with major negative effects on the real economy. In our modern world, in which finance is interwoven throughout the economy, the consequences can be particularly severe — as we saw in 2008 and 2009. Read More.

REMEMBER 2005!

Famous Accounting Frauds - Evaporating Wealth In Virtual Moments

INVESTORS' INSIGHTS  - "Today's Edge" 

Lets face it, since inception the purpose of Banks was to create liquidity in the economy through leverage of its own balance sheet. The premise for this excessive leverage was the collateral they held on the credits provided to others. But the sensibilities of this premise falls apart when credits are unsecured and leverage ratios climb to new heights by paying corrupt audit firms to create costume accounting practises. In the simple  vernacular - lies.  

Today, as a result, the leverage in the system could be as low as 35:1 or beyond 200:1. The point being, nobody truly knows - and consequently, the street's  sense is that the financial  mathematics is now so shaky that even a slight upward rise in rates will wipe out a substantive portion of the Banks' asset and equity values - leading to a complete systemic collapse. Enron's  chart above for instance is a foreshadowing test case for the whole system that we now have in place. Not a pretty picture.

That's  why everyone  is so worried. That's why CPI needs to be manipulated. That's why the US dollar could lose its reserve  currency status. That's why no one dare raise rates by the slightest percentage. 

That's why one day all the corruption, markets and economies are mathematically boxed into an algebra articulating  the certainty of "The Mother Of All Crashes",

" One day!"

International Offices

April 30, 2015

BAD #IRISH SIGNALS - Nutty Bonds Selling Like Crazy

Even Ireland’s weakest bank can raise money in bond market

The first Irish lender to sell Europe’s riskiest type of bank bond is also the nation’s weakest.

Permanent TSB, which failed European financial stress tests last year, is selling €125 million of so-called additional Tier 1, or AT1, bonds this week.

The undated securities convert into shares should capital drop below a certain threshold and carry coupons that issuers can just decide not to pay.

The sale will nonetheless “will go down extraordinary well,” said Liam Dunne, a fixed-income trader at Merrion Capital in Dublin. “The world has changed. There is huge demand for Irish assets at the moment.” Read More.

Do You Think This Guy Knows Something?

INVESTORS' INSIGHTS  - " Today's Edge" 

Any time Big Bankers come up with quasi debt/equity gimmicks you know one thing is certain-- there are HUGE underlying problems that they are looking to disguise. That means this is a key signal there  is turmoil ahead -  being on the short side of these securities makes much more sense.

All in all , we would  stay away from these marginal Banks anywhere in the World, but particularly the PIGS' afilliatates.

 There is a BIG Bubble out there that could spell utter disaster for these laggards.


International Offices
April 29,2015 

CHINA 2015 CRISIS: State -Run Bond Defaults On Interest

Not Concerned About China’s Financial Crisis? You Should Be

In February, IVN reported on a mostly ignoredstudy claiming that the world, especially China, was at risk of default (and possible economic meltdown) because of skyrocketing debt burdens.

On Tuesday, almost all media outlets worldwide picked up on the first Chinese-state owned business allowed to default.

Struggling in a cooling economy, Baoding Tianwei Baobian Electric missed its $13.8 million interest payment due on April 21 for bonds traded within China. Even though it is a state-owned company, Beijing let them default. Read More

What if rates begin to climb too? Oh my...

NASDAQ Hot Air Deflates

What In The World Is Happening To The NASDAQ?

By Michael Snyder





All of a sudden, the Nasdaq is absolutely tanking.  On Monday, it fell more than 1 percent after dropping 3.6 percent on Thursday and Friday combined.  At this point, the Nasdaq is off to the worst start to a year that we have seen since 2008, and we all remember what happened back then.  So why is this happening? 

In recent years, the Nasdaq has been ground zero for "dotcom bubble 2.0".  The hottest stocks in the entire world are on the Nasdaq - we are talking about stocks like Yahoo, Netflix, Apple, Tesla, Google and Facebook.  Those stocks have gone to absolutely incredible heights, but now they are starting to fall.  Some are blaming insider selling, and without a doubt the "smart money" is starting to flee the stock market.  Just check out this chart.

 Others are blaming low expectations for first-quarter earnings or the tapering of quantitative easing by the Federal Reserve.  But whatever is causing this decline, it is starting to get alarming.  The Nasdaq just experienced its largest three day fall since November 2011.

No stock can resist gravity forever.  What goes up must eventually come down.  This is especially true for stock prices that become grotesquely distorted.

On Wall Street, a price to earnings ratio of 20 to 25 is usually considered fairly normal.  In recent years, the price to earnings ratios for many of these "hot tech stocks" have gone way, way beyond that.  For example, posted below is a screen capture from Bloomberg TV that was featured in a recent Zero Hedge article...

Read More 

How soon we forget!