Tag Archives: Bonds

May 5, 2023 · 22:14

A state of banking

Yes, the banking issues remain and they are seemingly getting worse. This is seen in the BBC (at https://www.bbc.co.uk/news/business-65467019) where we are given ‘Credit Suisse: Asia investors sue Switzerland over bank collapse’, which reads funny, but that is the effect of lawsuits. Yet that article and the BBC article (at https://www.bbc.co.uk/news/business-65370751) named ‘£55bn withdrawn from Credit Suisse before rescue’ gave me reason to pause. This was not some setting of chance. Can you grasp how much £55,000,000,000 is? That is not some account, some people. That is the works of a few titans and someone gave THEM the heads up. So when we are given “The Swiss banking giant said 61.2bn Swiss francs left the bank in the first three months of the year” there I an issue, this is not merely a bank run. Then this many multimillionaires are running for the hills, someone set the watchtower on fire and stated, run for your life. Yes, it is highly speculative, but 55 billion pounds? That is serious cash in any economy. So when we consider the first article and we see “Already a Credit Suisse client for several years, he bought around $500,000 worth of bonds in January despite the bank having been hit by a series of scandals and compliance problems over the past few years” as well as “The type of bonds he bought from Credit Suisse are known as AT1 bonds, or contingent convertibles. They normally carry high yields for investors but are considered among the riskiest bonds that banks issue”, so in January this person decided to take a high risk setting, and in that time, or at least over the next 6 weeks when a staggering amount of billions pulled out, that person sat still? I know there is a sucker born every minute, but this comes across as the emperor of all suckers. Then we get the mother of all issues “Central to their claim is who was given priority when the bank failed. The terms of the bonds, seen by the BBC, show that bondholders are, if possible, supposed to be compensated first, after which come shareholders. But in practice, shareholders were allowed to exchange their Credit Suisse shares for UBS shares, albeit at a vastly reduced value.” There we see two parts. The first is ‘if possible’ which is a dangerous subjective term, the second is the stage of when they were alerted? How reachable were they?

Then the second article gives on tiny sliver. It is “Credit Suisse had been loss-making and had faced a string of problems in recent years, including money laundering charges.” As such, at what moment in delusional time is buying bonds in a loss making company a good idea? That is beside all the legal issues (including money laundering). In which situation (when it is not a government) are you investing in bonds in something that is losing money? Those in March (if they had done their homework) would have seen dozens of billions of pounds leaving that ‘sinking’ vessel. Only those with a peculiar sense of delusion are setting their up their portfolio in such a place. And when we see the end of the article giving us “The deal, when it was announced, valued Credit Suisse at $3.15bn (£2.6bn), whereas on the Friday before the settlement was reached it had been valued at about $8bn.” A place that is a mere 32% of its value in a week and 55 billion went the way of water whilst the bank went the way of the dodo. When a bank is a mere 8 billion and 55 billion left its shores? Even if half leaves the shores, I would be running like Forest Gump and no chocolates would be required. So I ask you are these investors that banked on governments saving their coin (and hide)? Is that what governments do now, all whilst they fail to hold banks to account?

I will let you decide, enjoy the weekend.

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May 2, 2023 · 12:57

Wages of fear

That happens, we at times decide to take a very risky road and US politicians more than most, but now they are about to head into shallows with a cruise liner? You will state that this is no big deal, tugs will pull it into deep water and normally you would be right. Yet in this case the cargo is nitroglycerine, so as it hits the shores the ship goes badaboom, a really big badaboom and it is not a ship we are talking about, it is the US economy. So as we consider what is about to happen, lets give you an example.

Netflix


Netflix at present (and over the last year has had well over 225 million subscribers, giving it an annual payday of well over $27,000,000,000 which is not too shabby, a good setting to work from.  So after the 17 billion in new media it has over 10 billion and change, I reckon that 50% if not more into technology, as such they are doing fine.

US Economy
Now we get into a less good place, the US economy and do not mistake one for the other. The US economy has many. Complexities, but the setting does not change, it needs to pay bills. As such we rely on Forbes giving us “The National Debt Approaches $32 Trillion, Will It Bankrupt America?”  (at https://www.forbes.com/sites/mikepatton/2023/04/25/the-national-debt-approaches-32-trillion-will-it-bankrupt-america/) and this is where two groups are opposing, those in denial claim it will not be so (very wishful thinking). I myself and many others are on the opposing side of the debate. Forbes gives us “The current revenue of the federal government is approximately $4.6 trillion while spending exceeds $6.0 trillion. Thus, the current budget deficit is over $1.4 trillion. It’s clear that members of Congress are spending like drunken sailors and like the Titanic, the U.S. is on a collision course with a financial iceberg” yet this is merely one side of the shallows they are heading for. You see, that we get from another side (the New York Times) who gives us that the US is running out of money somewhere between June and September. Yet that is not the whole enchilada. These two parts should alert you to the US Bonds fiasco, I tried to warn you a few times over. You see whilst everyone is cheering on bonds, there is a downside. These pesky papers mature and even as the interest payday seems small (1.65%) over $20,000,000,000,000 that still ends up being a $330 billion invoice and the budget does not take that in. OK, it is not all due immediately, but a rough estimate gives is that in the next 4 years $2,400,000,000,000 does and that is still a massive amount. Add to this the budget deficit that has been going on for years and you see the problem the US economy is heading for. It might never have been avoided, it could have been delayed by a lot. And with the current deficits, where will the US find $600 billion annual in maturing bonds (2023-2027)

I warned of this 25 years ago when I called for a tax overhaul where companies (Google, Facebook, IBM, Apple, that loser Microsoft and several more) would pay their fair share, merely their fair share.

The point of no return was reached when Barack Obama became president of the United States. Lets be clear, this was NOT his fault, but the point where we cannot avoid what comes next was achieved. If only people had woken up a lot sooner. But there we got past a point where the problems would accelerate and now we are almost at that point. And the banks will be no help. I tried to warn you a few times over. Some of their risk and liquidity is in US bonds and when the US forfeits payment your 401K and many other things will become worth close to nothing. So if you wonder where wealth of middle class incomes is, look towards Mexico. 

And will it get worse? Yes, but how remains an issue for now. Politicians will give way to wealth and rich friends first, so that they an get their slice and these people will go to Monaco, Dubai and the Bahamas. Many of them saw this coming and they already have places there, they have had them for years. So what can be done? Actually nothing, it is too late for that, all the whining and claims will fall flat and merely moves the timeline. The American children will know what true poverty feels like, they will get there at the end of their teens or early adult life. There are a few things that will happen, pushing forward bonds will be the easiest and convincing these owners to sell to appointed people or let it ride for a lot more, but that is a bill that adds a decent amount. Whomever has a billion in bonds and is offered 3.8% instead of 1.65% will consider it and I reckon that this is why we now see 20 years bonds (personal speculation). But after that the options go dark, really dark and that is what banks fear too, because the next bank run will take away a truck load of liquidity. It is like the stowaway that went for the happy shores or America, only to learn that the weather is foul and they suddenly realise that the cargo hold is filled with Nitroglycerine. Would you chance swimming, or hope for the best. Don’t forget that the shallows were YOUR saviour, not that much for a cruise-liner with combustibles.

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February 24, 2022 · 06:29

The stage I cannot see

If you have seen my articles, you see that there is very little, basically almost none on the Bitcoin. I do not know Bitcoin, I do not trust bitcoin and when it collapses you lose everything you invested. It is not secured by Gold, not supported by banks and that list goes on. From November 8th 2021 the price was $91,150, on January 22nd 2022 the price was $48,800. As such over a period of less then 3 months its price was reduced by 46%, optionally wiping out the retirement funds of all these wealth seekers. This is not negatively meant. Some do it because they are desperate, their retirement funds were already diminished, driven by speed marketing on social media, after all the media advertisement making the weak approach “If you bought 10 bitcoin in 2010 you would have made $500K by now, how much could you make over the next 10 years?”, mind you nothing illegal is done here, it is merely the application of imaginary wealth appealing to the desperate. 

Could I be wrong?
Absolutely! That does not mean that I will trust the Bitcoin (ever), and if consultancy is paid in bitcoin, I would transfer it to normal currency immediately. So as Reuters gives us ‘Bitcoin’s true colours shine in stampede to safety’ (at https://www.reuters.com/breakingviews/bitcoins-true-colours-shine-stampede-safety-2022-02-23/) we see “as the Russia-Ukraine crisis deepened on Tuesday read more , the price of bitcoin fell as much as 5% from last week’s close, to around $36,348. The decline marks a notable contrast to the rally triggered in traditional safe havens like U.S. and German government bonds, or gold, whose price on Tuesday hit its highest since June 2021”, this makes sense to me. Gold is something we can touch, German bonds less so, but Germany has a massive manufacturing and resource options. So it makes sense to me. As such the statement “Volatility can therefore bring big rewards when the cryptocurrency rises. It also means outsized losses when it falls”, yes that makes sense, marketing sets the view to the positive whilst trivialising, or not mentioning the dangers and at present I personally believe that dangers are seen that remind me of the great depression (1929-1939), now one event does not make for a nuclear winter, neither does two or three, yet the stag is getting more and more like the stage that drove the great depression. Unfair trade events, connected triggers like we see in “The Eurekahedge Crypto-Currency Hedge Fund Index, for example, which tracks fund managers focused on decentralised digital money, fell about a fifth in January, its biggest decline since November 2018. It was a tough month for hedge funds in general, but a broader industry benchmark declined only about 1% during the same month”, this seems to reflect on events that we saw in the great depression, but you would be wrong, I would be wrong too. In the great depression there was a large shift, but it was based on a few local events. This time around the events are global and they trigger global events, the impact could be a hell of a lot larger and the impact could be felt a lot longer, but that would be pure speculation from my side and a side that has NO ECONOMIC degrees. I create stories and I create IP, the critical mind is required in all three fields as is creativity. It allows me to see past the normal view.

As I always saw it the bitcoin is not a sanctuary, more often it is not even a shelter, or a simple rain shield, that being said, it could be one hell of a ride for thrill seekers and I get that. 5 years ago the Bitcoin was $1,650, today it is $52,260. If you could invest 5 years ago and you are willing to consider 100% loss it would be a thrill ride that made you a winner. But the other way around? It is not out of consideration, what was $90,000 in 2021, will that be higher or lower in 2026? There is no way to tell and some thrill seekers are willing to make that bet and that is their right, but there should be better protection for the desperate. You see, I accept that no one broke laws, the ‘investment seekers’ are allowed to do what they do, I get that. But what is next? Take a chance on being a drug mule? Transporting a box for a party? That is the dangers a lot of places are facing and in this time and age, that is too big a danger. Exploitation is seen everywhere, there is a sucker born every minute. It is their own fault to a larger degree, but does that mean we should remain inactive? 

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