Real time market

A New Way For You To Bet On The Next Banking Crisis - Bloomberg

A New Way For You To Bet On The Next Banking Crisis - Bloomberg

Release Date:  Friday, October 13, 2017

“Gold prices rose Friday after the latest tepid reading on the U.S. economy…The precious metal was back above $1,300 for the first time in two weeks and on track to end a four-week losing streak following another weak inflation reading Friday that increased doubts about the Federal Reserve’s interest rate plans.” (“Gold Prices Back At $1,300 After Consumer Price Data.” Wall Street Journal 10.13.17)

“Gold prices climbed…to their highest finish in more than two weeks. Prices got a lift after minutes from the U.S. Federal Reserve's September meeting Wednesday showed that some policy makers questioned the need for another interest-rate hike this year.” (“Gold Prices Settle At Highest In More Than 2 Weeks.” MarketWatch 10.12.17)

Gold ended the week up $27.20, closing at $1,304.30. Silver prices closed at $17.51, up $0.60.

Goldman Has A New Way For You To Bet On The Next Banking Crisis - Bloomberg
With less than a decade after the last major banking crisis, Goldman Sachs Group Inc. and JPMorgan Chase & Co. are offering investors a new way to bet on the next crisis.

“The two financial giants are now making markets in derivatives that allow investors to bet on or against high-risk bank bonds that financial regulators can wipe out if a lender runs into trouble. Others are also planning to start trading the contracts, known as total-return swaps, in the coming weeks, according to Max Ruscher, the London-based director of credit indexes at IHS Markit Ltd., which administers the benchmarks that the swaps are linked to.

“At a time when financial markets are racing from one high to another, and even the new Nobel laureate in economics is wondering aloud about investor behavior, the development is at once a sign of the headlong global race for investment returns and nagging worries that the investors may be getting ahead of themselves.

Credit-Default Swaps
“Wall Street and City of London banks have a long track record of creating derivatives around debt markets as investors grow nervous that they’re becoming too exposed. Before the financial crisis a decade ago, they created credit-default swaps tied to subprime mortgages, enabling the trade that Michael Lewis made famous in his book ‘The Big Short.’ Other swaps created around the same time have since become used to bet against commercial mortgages that are heavily exposed to shopping malls.” (“Goldman Has A New Way For You To Bet On The Next Banking Crisis.” Bloomberg 10.12.17)

Three Reasons The World Could Turn Its Back On The US Dollar – CNBC
According to the head of FX strategy at Saxo Bank, a combination of geopolitical pressures could spark the end of the U.S. dollar as the world’s reserve currency.

“In a quarterly outlook note titled ‘The world is turning its back on the almighty dollar,’ John Hardy claimed the U.S. currency was ‘increasingly dysfunctional’ and there was an urgent need to replace it.

“The currencies analyst highlighted these three geopolitical issues currently putting pressure on the dollar's status:

  • The ongoing rise of China as it assumes a more prominent role in global trade and financial markets and in particular how it will manage policy and unwinding the excesses of its credit bubble in the wake of the 19th Party Congress scheduled for October 2017 without upsetting its domestic economy and the global economy,
  • The North Korean regimes striving to maintain credibility and untouchability as a nuclear power and how this impacts China-U.S. relations, but also how Japan deals with this threat in terms of domestic as well as foreign policy,
  • The loosening of the U.S.-Europe transatlantic alliance and how Europe and the EU finds its feet as a more independent superpower — or not — in its own right after the German elections

"'China is eyeing the benefits of having its own currency play a larger role and to supplant the USD's role in global trade,’ he said. ‘The initial focus is on the global oil trade, where it has announced the intention of buying oil in yuan and allowing trade partners to settle that yuan in gold.’"(“Three Reason The World Could Turn Its Back On The US Dollar.” CNBC 10.11.17)

Nobel Economist Thaler Says He’s Nervous About Stock Market - Bloomberg
Richard H Thaler, University of Chicago professor and this week’s Nobel Prize winner in economics is worried about a buoyant and complacent stock market.

 “'We seem to be living in the riskiest moment of our lives, and yet the stock market seems to be napping,’ Thaler said, speaking by phone on Bloomberg TV. ‘I admit to not understanding it.’

“The S&P 500 index has been reaching repeated records since President Donald Trump's election last November amid steady growth in the U.S. economy and labor market, as well as expectations for lower taxes, though policy action in Washington has been limited. Thaler, who has made a career of studying irrational and temptation-driven actions among economic actors and won the Nobel for such contributions to behavioral economics, expressed misgivings about the low volatility and continued optimism among investors.

“I don’t know about you, but I’m nervous, and it seems like when investors are nervous, they’re prone to being spooked,” Thaler said, “Nothing seems to spook the market” and if the gains are based on tax-reform expectations, “surely investors should have lost confidence that that was going to happen.

“The economist said that he didn’t know “where anyone would get confidence” that tax reform is going to happen.

“’The Republican leadership does not seem to be interested in anything remotely bipartisan, and they need unanimity within their caucus, which they don’t have,’ Thaler said.” (“Nobel Economist Thaler Says He’s Nervous About Stock Market.” Bloomberg 10.10.17)