Europe heading into recession
Discussion
stongle said:
Quite. Thats why I was asking if anyone could explain why this is a good idea. Genuinely.
They can't think peoples memories are that short, or stupid unless they took the view the collective IQ of 500m people has been sufficiently degraded by BREXIT debate. Maybe someone publoshed a grad intake paper for s
ts and giggles.
It's a weird one. Maybe they are positioning to upsell the economics of a Corbyn government. FTSE250 equity raid, AAA effort, well done lads. Mind you that is a policy that is 90/10 weighted towards Tax raid than the workers (those tricksters).
Half fixed it for you They can't think peoples memories are that short, or stupid unless they took the view the collective IQ of 500m people has been sufficiently degraded by BREXIT debate. Maybe someone publoshed a grad intake paper for s
ts and giggles.It's a weird one. Maybe they are positioning to upsell the economics of a Corbyn government. FTSE250 equity raid, AAA effort, well done lads. Mind you that is a policy that is 90/10 weighted towards Tax raid than the workers (those tricksters).
I think they are banking on the vast majority of laypeople not understanding the role the ratings agencies played. Although why they would be appealing to laypeople I do not know. So maybe not
The industry should have handed them a proper s
t kicking. Moral hazard has kicked in for them. No penalty/sanction for what they did, so guess what they do...with knobs on. And the ECB are hardly going to cry about it.I've felt for ages that someone should be taking issue with the EU's can kicking like this. Maybe Trump's toe in the water on a trade war are the start of it? But I'd have thought something harder and more definitive from both the West and East would have happened by now.
Maybe they're just waiting on Putin's hackers getting bored of making people vote Leave?
Murph7355 said:
Half fixed it for you
I think they are banking on the vast majority of laypeople not understanding the role the ratings agencies played. Although why they would be appealing to laypeople I do not know. So maybe not
The industry should have handed them a proper st kicking. Moral hazard has kicked in for them. No penalty/sanction for what they did, so guess what they do...with knobs on. And the ECB are hardly going to cry about it.
I've felt for ages that someone should be taking issue with the EU's can kicking like this. Maybe Trump's toe in the water on a trade war are the start of it? But I'd have thought something harder and more definitive from both the West and East would have happened by now.
Maybe they're just waiting on Putin's hackers getting bored of making people vote Leave?
Trump for sure. ECB tiering IS a bank subsidy. Mind you, if you've looked at Volcker 2.0 a bigger rodding is coming to an EU Investment Bank soon.I think they are banking on the vast majority of laypeople not understanding the role the ratings agencies played. Although why they would be appealing to laypeople I do not know. So maybe not
The industry should have handed them a proper s
t kicking. Moral hazard has kicked in for them. No penalty/sanction for what they did, so guess what they do...with knobs on. And the ECB are hardly going to cry about it.I've felt for ages that someone should be taking issue with the EU's can kicking like this. Maybe Trump's toe in the water on a trade war are the start of it? But I'd have thought something harder and more definitive from both the West and East would have happened by now.
Maybe they're just waiting on Putin's hackers getting bored of making people vote Leave?
stongle said:
Murph7355 said:
Half fixed it for you
I think they are banking on the vast majority of laypeople not understanding the role the ratings agencies played. Although why they would be appealing to laypeople I do not know. So maybe not
The industry should have handed them a proper st kicking. Moral hazard has kicked in for them. No penalty/sanction for what they did, so guess what they do...with knobs on. And the ECB are hardly going to cry about it.
I've felt for ages that someone should be taking issue with the EU's can kicking like this. Maybe Trump's toe in the water on a trade war are the start of it? But I'd have thought something harder and more definitive from both the West and East would have happened by now.
Maybe they're just waiting on Putin's hackers getting bored of making people vote Leave?
Trump for sure. ECB tiering IS a bank subsidy. Mind you, if you've looked at Volcker 2.0 a bigger rodding is coming to an EU Investment Bank soon.I think they are banking on the vast majority of laypeople not understanding the role the ratings agencies played. Although why they would be appealing to laypeople I do not know. So maybe not
The industry should have handed them a proper s
t kicking. Moral hazard has kicked in for them. No penalty/sanction for what they did, so guess what they do...with knobs on. And the ECB are hardly going to cry about it.I've felt for ages that someone should be taking issue with the EU's can kicking like this. Maybe Trump's toe in the water on a trade war are the start of it? But I'd have thought something harder and more definitive from both the West and East would have happened by now.
Maybe they're just waiting on Putin's hackers getting bored of making people vote Leave?
housen said:
DB?
In general. They are recalibrating (increasing) the amount of prop positions IBs can take or invest in via Hedge Funds. This will suit US primes and non-EU banks unlike EU peers where taking HF risk is viewed the same as catching the clap.Also suits jurisdictions where lots of HFs are located...
stongle said:
housen said:
DB?
In general. They are recalibrating (increasing) the amount of prop positions IBs can take or invest in via Hedge Funds. This will suit US primes and non-EU banks unlike EU peers where taking HF risk is viewed the same as catching the clap.Also suits jurisdictions where lots of HFs are located...
anyway not as if i didn't know this market was toast
housen said:
great .....another nail in my coffin ....im a idb for euro banks in govt bonds lol
anyway not as if i didn't know this market was toast
Safe as houses at the moment! There's only going to more of it (unless the ECB gets it all first - but the liquidity squeeze might not hurt) anyway not as if i didn't know this market was toast
jsf said:
Exactly. USA consumer spending is right on the edge of a downward trend and once Trump has got his phase1 China deal sorted, he is going after the EU and in particular the German manufacturing sector.
Thats going to suppress USA and EU confidence and consumer spend IMHO and hit the German bottom line significantly.
Germany needs to open up the taps on their massive surplus cash and spend it on infrastructure, if they dont they will hit the buffers hard.
Having spent up to 12 hours a day on German autobahns recently, going from UK to Croatia and returning, doing an average of 48 mph ( which I was grateful for as the traffic on the other carriageway was more often stopped than moving) I can honestly say that German motorways are in a worse state than ours. Thats going to suppress USA and EU confidence and consumer spend IMHO and hit the German bottom line significantly.
Germany needs to open up the taps on their massive surplus cash and spend it on infrastructure, if they dont they will hit the buffers hard.
In the past I always used to plan for a motorway average of 80 mph driving through Germany, thats just a pipe dream now.
And yet in Croatia almost all the roads are being upgraded, all of them have a nice sign saying so with the Croatia national flag and the EU flag sharing the honours.
Anyone could think that German priorities may have been a bit skewed in recent years.
Cheers,
Tony
PS French motorways are much better, as my fixed penalty speeding fine I recieved through the post yesterday aptly demonstrates. Merde.
Tony427 said:
jsf said:
Exactly. USA consumer spending is right on the edge of a downward trend and once Trump has got his phase1 China deal sorted, he is going after the EU and in particular the German manufacturing sector.
Thats going to suppress USA and EU confidence and consumer spend IMHO and hit the German bottom line significantly.
Germany needs to open up the taps on their massive surplus cash and spend it on infrastructure, if they dont they will hit the buffers hard.
Having spent up to 12 hours a day on German autobahns recently, going from UK to Croatia and returning, doing an average of 48 mph ( which I was grateful for as the traffic on the other carriageway was more often stopped than moving) I can honestly say that German motorways are in a worse state than ours. Thats going to suppress USA and EU confidence and consumer spend IMHO and hit the German bottom line significantly.
Germany needs to open up the taps on their massive surplus cash and spend it on infrastructure, if they dont they will hit the buffers hard.
In the past I always used to plan for a motorway average of 80 mph driving through Germany, thats just a pipe dream now.
And yet in Croatia almost all the roads are being upgraded, all of them have a nice sign saying so with the Croatia national flag and the EU flag sharing the honours.
Anyone could think that German priorities may have been a bit skewed in recent years.
Cheers,
Tony
PS French motorways are much better, as my fixed penalty speeding fine I recieved through the post yesterday aptly demonstrates. Merde.
stongle said:
Trump for sure. ECB tiering IS a bank subsidy. Mind you, if you've looked at Volcker 2.0 a bigger rodding is coming to an EU Investment Bank soon.
Does the EU still have any? (Investment banks).Deutsche has been a crock in disguise for a couple of decades. The disguise is just getting tatty.
Murph7355 said:
Does the EU still have any? (Investment banks).
Deutsche has been a crock in disguise for a couple of decades. The disguise is just getting tatty.
Guessing game, so an opinion over a multi year timeframe, but I'd say - BNP took on most of DBs Prime Bro. Frenchies still in there, but not really serious contenders. Collapsing Net Interest Margin will ultimately do them in. ABN now has Money Laundering problems (so possible massive fine incoming). ING and Rabo probable pull back, but small anyway. Spanish banks, Santander still out there. Unicredit, definetely looking suspect.Deutsche has been a crock in disguise for a couple of decades. The disguise is just getting tatty.
Germany is an absolute basket case with the Sparkasse and Landesbank model. When they tried to part privatise it - it failed completely. If you have a mittlestand bank model based towards corporates, and they are struggling (so Daimler etc), you may well struggle.
I also wonder if there will be any blowback on the Euro banks in particular Deka, Commerz, DB, Unicredit, SocGen, BNP and Natixis (Maples already gone after the 500m fine); from the Cologne 60bn tax arbitrage scandal. The German tax authorities are kicking in a lot of doors and widened the enquiry to capture Money Laundering to give better access. I think there is a risk that 7bn or so of the 60bn is deemed properly shady, and a hefty fine is met out. The other 53bn, I think is a reputational problem, but ultimately legal.
For a total reversal look at the results coming out of JPM, Citi, Stanleys. Higher capital standards (and cost base), but making significant revenue gains in several sectors. The return in capital employed in a US bank isnear 50-100% more despite holding more of it. NIRP (Negative Interest Rate Policy) kills banks. Given the market and credit risk costs, LLPs (Loan Loss Provisions - holding more reserves in case of a loan going bad) - for the stupid loans they make (e.g to Greek shipping firms, taking physical delivery of financed ships when the firm goes bust is not unknown) and other regulatory costs - I suspect a lot will pull back from traditional IB franchise.
They are on a path to nationalising the banking system - no one will take their banks seriously if Vestager and Co at the EC (European Commission) get their way and introduce zero fractional reserve banking (not that it matters as the ECB (European Central Bank) bails you out anyway - ala Monte Del Paschi - see link few pages ago). Worst case scenario, if country or Eurozone risk starts to weigh in, haircuts get ramped - any leveraged banks go the same way as Lehman.
The deal offered today, looks to support a model where all the brains sit in London and the execution only monkeys in the Euro branch offices. I struggle to reconcike the BRRD (Bank Resolution and Revivery Directive + bank roll uop to single holding company) with US and UK law, so suspect its the lightest possible EU presence.
I think we will also see more mini or boutique primes to support HF (Hedge Fund) business here and whats left in Europe. The Eurozone has a huge problem with its banking sector, and its ringed by London, Zurich and Geneva....
Edited by stongle on Thursday 17th October 20:34
Edited by stongle on Thursday 17th October 20:35
Edited by stongle on Friday 18th October 07:42
DeejRC said:
Bugger me Stongle, I think Cassandra was more optimistic than you!
Well, worst case risk is always more interesting to read than a little of this / little of that.For good reasons the DB and Commerz merger failed. To survive, and not go down (per my OP), they either need to merge OR become nationalised. The regional govts in Germany are legislating to stop NIRP being passed through to customers, so the banks are eating 0.5% PLUS the liability taking costs (estimate around 0.2%). Once the money goes out the door, they’ve got to cover regulatory capital and leverage cost (say another 0.5%). It’s a doom loop.
We’ve seen the ECB allow an exceptionally shady bailout of MDP (Monte Del Paschi) and then gives a subsidy to reduce NIRP impact on some of the excess monies they can’t find takers for. I think they are on exceptionally shaky ground. If the ECB goes for more easing / lower rates the pain increases...
To avoid the defaults, I think the following may play out:
A) they game inflation so they can get into a hiking cycle
B) they break with the G20 BASLE accords / accounting standards
C) mergers
D) Nationalisation / ECB steps in
E) Germany writes off Target2 debts
F) Double down on mortgages
Helicopter money may indirectly help, by taking out NIRP - but that’s highly theoretical and subject to implementation. MMT (Modern Monetary Theory) too, but again probably increases the leverage balloon.
I think B,C & D are strong possibilities - but not without significant issues. Europeans generally struggle with cross border ownership so mergers are problematic. B, may generate cheaper cash and balance sheet - but that may be exported to US or RoW (Rest of World) banks buying up European assets on the cheap (as local sentiment is in the crapper). From 2012; hundreds of billions of cheap money ended up funding US bank’s balance sheets (the Eurobanks lent it out), given the higher reg capital and leverage costs in US / UK firms. They also tend to hold a lot of home state govt debt (numbers for Italy few pages back). If a peripheral goes bang, D & E have to play out.
With the global economy very likely to go into recession, and EU manufacturing economies particularly exposed - there looks to be no positive outlook, we are likely to see an extraordinary intervention to avoid what I suggest in OP (and associated contagion). That’s after the ECB has done bazooka’s & kitchen sinks. Even if Draghi / Lagarde got on their knees and blew Weidmann for some fiscal drop - it’s too little / too late. France and Italy won’t increase tax to do fiscal, it’s political suicide.
Option F, is an outsider - but never underestimate the predictability of stupidity. Monetary expansion has worked in both the US and UK. It sparked asset price inflation - not been that successful in the EU. They may try and engineer a housing boom, using “tried and tested” means - so they start packaging mortgages, ABS ( Asset Backed Security - debt packaging of mortgages) and CDO (Collateralized Debt Obligation, sonetimes we sprinkle in some derivatives to make them leveraged, or super sized - NOT) - predictbly also the ECB will take it in as collateral. This is the full retard option, but I wonder if they might try given % of rental homes in the EU... UK property values up at 8,5trillion. That would eat a lot (all) of the excess cash in their system. I say it’s retarded, as although it might work; it’s a Fugazi and we all know what happened we last tried this (because they'd also do option A thinking it might be a brake - but the asset inflation would be too wode and disparate across the zone with the banks exposed ro properrt bubbles locally - whikst being exposed to each other across the zone). Cheery stuff.
I’m bearish by nature (had to liquidate very large portfolios during Lehman), the tail risk on the leverage balloon going bang is pretty much the apocalypse. Mind you, for those of a sunny disposition and all you glass half full bulls - chip in with sone counter thoughts!
Edited by stongle on Friday 18th October 07:47
Edited by stongle on Friday 18th October 09:09
Earthdweller said:
Stongle
Out of interest how are the Irish banks ?
Funny enough, we had a look at AIB the other day. Unfortunately my minds blank right now, ‘‘tis bedtime. But i’ll take a look tomorrow. As they are not really an IB as such, they are not really in our space (yet). I seem to remember something like 3600+ financial institutions in the EU, or under ESMA scrutiny. Unfortunately we always gravitate towards the GSIBs (Globally Significant Investment Banks). Or too big to fail. That’s not a cheeky statement, just given relative size.Out of interest how are the Irish banks ?
And one more thing, before I forget. In countries with lots of Labour law and employee protection, a downturn is a serious issue for firms. In Germany’s case they have on numerous times had to seek and get help fro the state to cover these liabilities when laying off staff. A prolonged downturn, could eat Germany’s war chest out from under them. This position is worrying as the IMF downgraded global growth to 3%. (2.5% is their global recession line), that 3% supported by consumer activity from high employment. Our latest figures - UK, showed a reduction in vacancies AND those employed...
And to end the night on a lighter note:
Edited by stongle on Friday 18th October 00:00
amusingduck said:
stongle said:
SpeckledJim said:
TM TLAs FM.
I love a acronym mire than most, but I'll struggling here buddy!Too Many Three Letter Acronyms For Me?
Righty-o. Done them across the 2 posts. I've left the bank names shortened. Hopefully covered the rest.
Edited by stongle on Friday 18th October 07:48
stongle said:
Europeans generally struggle with cross border ownership so mergers are problematic.
stongle said:
And one more thing, before I forget. In countries with lots of Labour law and employee protection, a downturn is a serious issue for firms.
Cropped for brevity, the above two lines are extremely salient and form a large part of my overall objection to the UK being within the EU.As Stongle says, there is a reason so many German firms remain German owned, whilst conversely we in the UK appear happy to sell Granny and the family silver to whoever. There is a balance, but in a truly global economy, I think the UK hits it probably better than any other developed nation.
Business red tape, of which German and (even worse) French employee legislation is by no means the only issue, kills business, innovation and efficiency. It is so mind-numbingly hard to set up and run a small business in Greece that I could devote a thread to it, suffice to say, IMHO it is key to why a.) the economy is so sclerotic and inefficient and b.) the black economy has such an enormous share of Greek GDP.
stongle said:
amusingduck said:
stongle said:
SpeckledJim said:
TM TLAs FM.
I love a acronym mire than most, but I'll struggling here buddy!Too Many Three Letter Acronyms For Me?
Righty-o. Done them across the 2 posts. I've left the bank names shortened. Hopefully covered the rest.
Edited by stongle on Friday 18th October 07:48
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