A look at US Exports by Country reveals that the United States could be pretty well insulated from emerging markets; “only a very broad emerging market slowdown — one that included China or Mexico, for example — would have much effect on US exports.” In fact, the troubles in emerging markets have so far somewhat bolstered the US economy thanks to a falling 10-year yield. Meanwhile, “European banks have loaned in excess of $3 trillion to emerging markets, more than four times U.S. lenders and putting them at greater risk if financial market turmoil in countries such as Turkey, Brazil, India and South Africa intensifies…European banks’ exposure varies from country to country. BBVA and UniCredit have big exposure to Turkey, Santander is most exposed to Brazil, while Standard Chartered and HSBC would be hurt by problems in India and Indonesia. Barclays, meantime, would be most exposed to South African problems.” Also, the EU commission says “the extent of corruption in Europe is ‘breathtaking’ and it costs the EU economy at least 120bn euros annually,” which is roughly equivalent to the Eurozone’s annual budget. On average, 74% of respondents in the survey said they believed corruption to be widespread. “In Croatia, the Czech Republic, Lithuania, Bulgaria, Romania and Greece, between 6% and 29% of respondents said they had been asked for a bribe, or had been expected to pay one, in the past 12 months.” Meanwhile, Intesa Sanpaolo, Italy’s second biggest bank by market cap, “is working on plans (alt) to become the first Italian lender since the financial crisis to set up an internal “bad bank” by setting aside a chunk of its €55bn of gross non-performing loans ahead of banking stress tests by the European regulator…Analysts have argued that Italy could do with a bad bank worth €9-12bn…Intesa’s new strategy is likely to draw parallels with Royal Bank of Scotland, the state-controlled UK lender that last year established an internal bad bank to house £38bn of its most risky and capital-draining assets.” Finally, people are asking for Z-scores again (“gauge the probability of a borrower defaulting on its debt) and capital flows are hot, hot, hot!
JPMorgan’s Flows & Liquidity team estimates the “current size of the Chinese shadow banking system to be around RMB46tr or 30% of the assets of traditional banks. But as Figure 1 shows, even at 30% of bank assets, the Chinese shadow banking system is small compared to those of other countries…In addition the Chinese shadow banking system is simpler and more domestically owned that that of more advanced DM jurisdictions.” Not only that but shadow banking in China is probably easier to bail out. Also, here’s 4 reasons why a collapse in China’s home prices won’t spell global disaster: 1) “Chinese households save a greater fraction of their incremental wealth than most other countries,” 2) “the government’s ambitious affordable housing program could cushion the blow to the wider construction industry,” 3) “China’s banks can manage bad home loans,” and 4) “policymakers don’t sit idle.” (read: “they are OK with bailouts”)
Wolves v. Target v. Detroit
Banks and retailers are duking it out under the Federal spotlight to see “which industry bears more responsibility for protecting consumers’ personal information?” Both sides are blaming the other for poor technology, more or less, with banks pointing to outdated security breach tech and retailers using words like “fraud-prone cards.” My guess is some tech hero genius from Silicon Valley is just waiting in the wings for his moment to save the Corporate Wall Street Wolves from eating each other (for example). Also, Detroit’s bankruptcy is pitting Main Street vs Wall Street, and it looks like the wolves may only get $0.10 on the dollar for their “certificates of participation.” Thanks for participating!
The New York Fed says that retiring baby boomers are to blame for all this weak labor market nonsense and we should start focusing on the employment-to-population (E/P) ratio, which doesn’t really seem all that different from the participation rate but forget all that and focus on this: the Fed would like us to believe that the labor market is better off than headlines like “74,000 New Jobs in December” would suggest.
“The Department of Commerce has granted two licenses to export U.S. crude to the UK since last year and another two to Italy…These are the first permits for shipments to the UK since at least 2000 and the first to any European country since 2008.” Meanwhile, here’s 10 key numbers in the Keystone XL pipeline report.
Yeah you’ve heard it all before, but this is a great summary of everything you’ve heard about millennials and their changing attitudes towards family, life’s milestones, jobs, housing etc.