iCharts Discussions

[vinay28]

HNI money have started flowing into equity but we haven't seen yet retail participation.

Though numbers have improved in last six month. If retail investor have not yet participated in equity, it is still not too late for them considering chart below for market cap to gdp ratio.

[vinay28]

Message from a "friend"

One panic had to come and it has come. This was not assigned to anything else but purely for ROLLS. Head wind gone and only 6 sessions remained. It is just impossible to see stocks trade at this low. e. g. Century crashed from 635 to 570 huge fall. Do you think that at 635, if rolls start, then operator will get his cake till 650? No way. Then the only way is to see stock correct to 570 and then he starts rolls till 620 and after that you know the usual game. Those who do not understand this game and use stop losses get crushed. YOUR S L becomes the entry point of operator once again.

Do not get bogged down by by-poll results. It's an eye wash. NAMO to be there for 10 years and India will be the super power soon.

Why DID NAMO approach JAPAN ahead of US....?

CHINA is the big threat to India as well as JAPAN and hence to make CHINA insecure, NAMO triggered JAPAN visit. Even though JAPAN committed small token amount of just 30 bn usd investment, the move was bang on. It hit the roof and CHINA came under pressure. CHINA showed some concern and now announced 100 bn usd investment in India.

NAMO knew it well that smaller Asian countries need to be on Indian side before he unsettles CHINA. He did that. PAK, the only country where I think he will not go soft, as he knows that this country needs to be dealt with IRON hand. SOS solution will be found by NAMO on that issue.

Now he is travelling to USA and post that PUTIN will visit India. Look at the move. 16 industrialist will travel with NAMO to USA this month end and there could be announcement of 500 bn usd investment projects in India.

All what was required to set a right tone for INDIAN manufacturing is reflected from his policies.

This clearly means major announcements will start flowing in from next month and Indian markets will be on fire.

[ragarwal]

wow vinay,too good

[vinay28]

[vinay28]

worth a read

[CONTENT REMOVED BY ADMIN]

[kamal.icharts]

Dear Vinay

The link posted in not allowed as per the rules and regulations of the Forum

We appreciate your understanding in this regard

Kamal

[vinay28]

[vinay28]

a bit too long but worth a read. 6630 will come one day?

Vinay

Anirudh Sethi Report

Think It Over : 5 U.S. Banks Each Have More Than 40 Trillion Dollars In Exposure To Derivatives
26 September 2014 - 11:55 am

When is the U.S. banking system going to crash? I can sum it up in three words. Watch the derivatives. It used to be only four, but now there are five “too big to fail” banks in the United States that each have more than 40 trillion dollars in exposure to derivatives. Today, the U.S. national debt is sitting at a grand total of about 17.7 trillion dollars, so when we are talking about 40 trillion dollars we are talking about an amount of money that is almost unimaginable.

And unlike stocks and bonds, these derivatives do not represent “investments” in anything. They can be incredibly complex, but essentially they are just paper wagers about what will happen in the future. The truth is that derivatives trading is not too different from betting on baseball or football games. Trading in derivatives is basically just a form of legalized gambling, and the “too big to fail” banks have transformed Wall Street into the largest casino in the history of the planet. When this derivatives bubble bursts (and as surely as I am writing this it will), the pain that it will cause the global economy will be greater than words can describe.

If derivatives trading is so risky, then why do our big banks do it?

The answer to that question comes down to just one thing.

Greed.

The “too big to fail” banks run up enormous profits from their derivatives trading. According to the New York Times, U.S. banks “have nearly $280 trillion of derivatives on their books” even though the financial crisis of 2008 demonstrated how dangerous they could be…

American banks have nearly $280 trillion of derivatives on their books, and they earn some of their biggest profits from trading in them. But the 2008 crisis revealed how flaws in the market had allowed for dangerous buildups of risk at large Wall Street firms and worsened the run on the banking system.

The big banks have sophisticated computer models which are supposed to keep the
system stable and help them manage these risks.

But all computer models are based on assumptions.

And all of those assumptions were originally made by flesh and blood people.

When a “black swan event” comes along such as a war, a major pandemic, an apocalyptic natural disaster or a collapse of a very large financial institution, these models can often break down very rapidly.

For example, the following is a brief excerpt from a Forbes article that describes what happened to the derivatives market when Lehman Brothers collapsed back in 2008…

Fast forward to the financial meltdown of 2008 and what do we see? America again was celebrating. The economy was booming. Everyone seemed to be getting wealthier, even though the warning signs were everywhere: too much borrowing, foolish investments, greedy banks, regulators asleep at the wheel, politicians eager to promote home-ownership for those who couldn’t afford it, and distinguished analysts openly predicting this could only end badly. And then, when Lehman Bros fell, the financial system froze and world economy almost collapsed. Why?

The root cause wasn’t just the reckless lending and the excessive risk taking. The problem at the core was a lack of transparency. After Lehman’s collapse, no one could understand any particular bank’s risks from derivative trading and so no bank wanted to lend to or trade with any other bank. Because all the big banks’ had been involved to an unknown degree in risky derivative trading, no one could tell whether any particular financial institution might suddenly implode.

After the last financial crisis, we were promised that this would be fixed.

But instead the problem has become much larger.

When the housing bubble burst back in 2007, the total notional value of derivatives contracts around the world had risen to about 500 trillion dollars.

According to the Bank for International Settlements, today the total notional
value of derivatives contracts around the world has ballooned to a staggering 710 trillion dollars ($710,000,000,000,000).

And of course the heart of this derivatives bubble can be found on Wall Street.

What I am about to share with you is very troubling information.

I have shared similar numbers in the past, but for this article I went and got
the very latest numbers from the OCC’s most recent quarterly report. As I
mentioned above, there are now five “too big to fail” banks that each have more than 40 trillion dollars in exposure to derivatives…

JPMorgan Chase

Total Assets: $2,476,986,000,000 (about 2.5 trillion dollars)

Total Exposure To Derivatives: $67,951,190,000,000 (more than 67 trillion
dollars)

Citibank

Total Assets: $1,894,736,000,000 (almost 1.9 trillion dollars)

Total Exposure To Derivatives: $59,944,502,000,000 (nearly 60 trillion dollars)

Goldman Sachs

Total Assets: $915,705,000,000 (less than a trillion dollars)

Total Exposure To Derivatives: $54,564,516,000,000 (more than 54 trillion
dollars)

Bank Of America

Total Assets: $2,152,533,000,000 (a bit more than 2.1 trillion dollars)

Total Exposure To Derivatives: $54,457,605,000,000 (more than 54 trillion
dollars)

Morgan Stanley

Total Assets: $831,381,000,000 (less than a trillion dollars)

Total Exposure To Derivatives: $44,946,153,000,000 (more than 44 trillion
dollars)

And it isn’t just U.S. banks that are engaged in this type of behavior.

As Zero Hedge recently detailed, German banking giant Deutsche Bank has more exposure to derivatives than any of the American banks listed above…

Deutsche has a total derivative exposure that amounts to €55 trillion or just about $75 trillion. That’s a trillion with a T, and is about 100 times greater than the €522 billion in deposits the bank has. It is also 5x greater than the GDP of Europe and more or less the same as the GDP of the world.

For those looking forward to the day when these mammoth banks will collapse, you need to keep in mind that when they do go down the entire system is going to utterly fall apart.

At this point our economic system is so completely dependent on these banks that there is no way that it can function without them.

It is like a patient with an extremely advanced case of cancer.

Doctors can try to kill the cancer, but it is almost inevitable that the patient will die in the process.

The same thing could be said about our relationship with the “too big to fail” banks. If they fail, so do the rest of us.

We were told that something would be done about the “too big to fail” problem after the last crisis, but it never happened.

In fact, as I have written about previously, the “too big to fail” banks have collectively gotten 37 percent larger since the last recession.

At this point, the five largest banks in the country account for 42 percent of all loans in the United States, and the six largest banks control 67 percent of all banking assets.

If those banks were to disappear tomorrow, we would not have much of an economy left.

But as you have just read about in this article, they are being more reckless than ever before.

We are steamrolling toward the greatest financial disaster in world history, and nobody is doing much of anything to stop it.

Things could have turned out very differently, but now we will reap the consequences for the very foolish decisions that we have made.

[pkholla]

Vinay: No wonder the DJIA today is looking more and more like the DJIA just before the OCTOBER 1929 crash!

I will repeat a cartoon joke: Beatle Bailey is talking with Sgt Cosmo of the army stores facility
BB: What is happening in our country?
SC: Well, Beatle, there is just an awful amount of money sloshing around and no takers!

[vinay28]

[vinay28]

Why crude oil price is falling and upto when...

There are forces at play in the world that could result in a turn for the worse. One of the main reasons behind the crude oil price fall has been the US shale boom. The US is flush with shale oil and gas which have been extracted using modern techniques like fracking. However, there is a minimum level (estimated to be about US$ 75 per barrel) below which the shale business becomes unviable. There is a belief now that the oil producing OPEC cartel is deliberately suppressing prices to crush the US shale industry.

This capital intensive industry has been helped by the ultra low interest rates in the US thanks to the Fed's policies. The sector has raised funds via dubious 'junk bonds' in large quantities. As and when interest rates rise in the US, we could see several bankruptcies among shale players. This would put a strain on supply, resulting in an upward movement in crude prices again. Not good news for the Indian markets and consumers.

[rk_a2003]

Unprecedented events in the history of modern finance



The yields on government bonds in Europe and Japan have dipped into the uncharted waters of negative territory. That means buyers of those bonds are essentially taking a loss just to hold onto those assets. They think their money is better off losing a few cents than putting it elsewhere. Low or negative yields indicate that investors are seeking a very high degree of safety for their money.

Just look at Switzerland, where the yield on bonds fell further into negative territory this week after the country's central bank dropped a bombshell on investors by scrapping a currency cap with euro.

Switzerland isn't alone in going negative. The yield on short-term government bonds of Belgium, Denmark, France, Germany, Japan, and the Netherlands are all sub-zero. Even short duration U.S. bond rates are barely above zero.


In addition to allowing the Swiss franc to trade freely against the euro, the Swiss National Bank lowered a key interest rate further into negative territory, from -0.25% to -0.75%. That's like a bank charging customers to park their money there instead of paying them interest.


The Swiss central bank is trying to get people to spend and invest more instead of putting their money in the bank or in cash-like assets like short-term government bonds, but investors just keeping buying up these safe haven assets, sending yields even lower……in to negative. Look at the chart.

So, investors are ready to pay some fee (instead of seeking an interest) for keeping their money at highly secured places like Swiss bonds. They don’t want to put their money in any stock market including in defensive scrip’s. They don’t want to put the money in any real estate assets, even they don’t want to put the money in any bank .They don’t believe in any of them; Stock markets may nose dive, real estate prices may tumble and banks may bankrupt…. that’s their understanding.


It’s a possible indication of Greece getting separated from EU and consequent cascading affects like bankruptcy of some banks sovereign defaults and economic turmoil…..and so …on

Is this unprecedented event in the history of modern finance is an indication for the beginning of an unprecedented financial crisis?!

[vinay28]

welcome back rk!

have a look at this also

http://www.alpari.com/company-news/posts/2015/january/important-announcement/

http://www.winnersedgetrading.com/swiss-bank-rocks-the-forex-market-5-steps-how-to-protect-yourself/

I hope the admin allow second link

[rk_a2003]

Thanks Vinay,

In addition.....Late Thursday the New York-based firm FXCM a leading foreign-exchange broker in the U.S. said the "unprecedented volatility" wiped out its equity. In fact, FXCM said it has a negative equity balance of $225 million.

[vinay28]

Slightly old article but worth reading

Author unknown

What happens on a hike in federal funds rate

The Federal Open Market Committee (FOMC), which decides on the monetary policy of the United States, had its last meeting for this year scheduled on December 16-17th, 2014. After this meeting, Janet Yellen, the Chairperson of the Federal Reserve spoke to the media.

Everything Yellen spoke about during the course of the press conference was closely analysed by the financial media all over the world. The gist of what Yellen said at the press conference was that she expects that the Federal Reserve will start raising the federal funds rate sometime next year.

The federal funds rate or the interest rate at which one bank lends funds maintained at the Federal Reserve to another bank, on an overnight basis, acts as a benchmark for the short-term interest rates in the United States. The last time the Federal Reserve increased the federal funds rate was in 2006.

In the aftermath of the financial crisis, the Federal Reserve decided to print money and pump it into the financial system by buying government bonds and mortgage backed securities. The Federal Reserve referred to this as the asset purchase programme. The economists called it quantitative easing. And for those who did not want to bother with jargons, this was plain and simple money printing.

This was done to ensure that there was enough money going around in the financial system and interest rates remained low. At low interest rates the hope was that people would buy homes, cars and consumer durables. This would drive business growth, which in turn would drive economic growth, which would create both jobs and some inflation.

While this has happened to some extent, what has also happened is that a lot of money has been borrowed by financial institutions at very low interest rates and has found its way into stock markets and other financial markets all over the world. This has led to bubbles.

The economic theory explaining this phenomenon was put forward by Richard Cantillon, an Irish-French economist who lived during the early eighteenth century. He basically stated that money wasn't really neutral and that it mattered where it was injected into the economy.

Cantillon made this observation on the basis of all the gold and silver coming into Spain from what was then called the New World (now South America). When money supply increased in the form of gold and silver, it would first benefit the people associated with the mining industry, that is, the owners of the mines, the adventurers who went looking for gold and silver, the smelters, the refiners and the workers at the gold and silver mines. These individuals would end up with a greater amount of gold and silver, that is, money. They would spend this money and thus, drive up the prices of meat, wine, wool, wheat, etc.

This rise in prices would impact even people not associated with the mining industry, even though they hadn't seen a rise in their incomes, like the people associated with the mining industry had. This was referred to as the Cantillon effect.

Interestingly, Cantillon was also an associate of John Law. In 1705, John Law published a text titled Money and Trade Considered, with a Proposal for Supplying the Nation with Money. Law was of the opinion that money was only a means of exchange and that a nation could achieve prosperity by increasing the amount of money in circulation.

The problem of course was that when it came to gold and silver coins, only so much currency could be produced. But this disadvantage was not there with paper money. Law firmly believed that by circulating a greater amount of paper currency in the economy, commerce and wealth of a nation could be increased.

His theory was in place. But, like a physicist or a chemist, it could not be tested in a laboratory. Law needed a nation that was willing to let him test his theory. And France proved to be that nation. In 1715, France was the richest and the most powerful country in the world. But at the same time it was also almost bankrupt.

This was primarily because the country did not have a central bank of its own like the Dutch and the British had. Law's idea was to create a central bank which would have the right to issue paper money which would be a legal tender. He also wanted to create a company which would have a monopoly of trade. This would create a monopoly of both finance as well as trade for France and the profits thus generated would help pay off the French debt.

Law went around establishing a bank called the Banque Royale and formed a company called the Mississippi Company, which was given a 25-year-long lease to develop the French territory along the Mississippi River and its tributaries in the United States. The Banque Royalewas allowed to issue paper notes guaranteed by the French Crown.

Cantillon was an associate of John Law and observed the entire thing very closely. As Bill Bonner writes in Hormegeddon-How Too Much of a Good Thing Leads to Disaster: "Cantillon noticed that Law's new paper money backed by the shares of the Mississippi Company-didn't reach everyone at the same rate. The insiders-the rich and the well connected-got the paper first. They competed for goods and services with it as though it were as good as the old money. But by the time it reached the labouring classes, this new money had been greatly discounted-to the point, eventually, where it was worthless."

This was the Cantillon effect. As analyst Dylan Grice told me during the course of an interview: "Cantillon, writing before the days of Adam Smith, was the first to articulate it. I find it very puzzling that this insight has been ignored by the economics profession. Economists generally assume that money is neutral. And Milton Friedman's allegory about the helicopter drop of money raising the general price level completely ignores the question of who is standing under the helicopter."

The money printed by the Federal Reserve in the aftermath of the financial crisis has been unable to meet its goal of trying to create consumer-price inflation and getting consumer spending up and running again. But it has benefited those who are closest to the money creation. This basically means the financial sector and anyone who has access to cheap credit. They were the ones standing under the helicopter when the money was printed and dropped.

Institutional investors have been able to raise money at close to zero percent interest rates and invest it in financial assets all over the world, driving up the prices of those assets and made money in the process.

It has also left these investors wondering what will happen once the Federal Reserve decides to end the era of "easy money" and start raising interest rates. In October 2014, the Federal Reserve brought its asset purchase programme to an end. This did not lead to a panic in the financial markets simply because the Fed made it clear that even though it would stop printing money, it would not start immediately withdrawing the money it had already printed and pumped into the financial system over the years.

But that is going to happen one day. Yellen is trying to get the financial markets ready for interest rate hikes starting next year. At least, that is the impression I got yesterday after watching her press conference.

Once the Fed decides to start withdrawing the money that it has printed and pumped into the financial system, and which in turn has found its way into financial markets all over the world, interest rates will start to go up. That will happen sooner rather than later. Maybe 2015. Maybe 2016. Who knows.

And once interest rates start to rise, the arbitrage of borrowing at low interest rates and investing money in financial markets all over the world, won't be viable any more. It is difficult to predict precisely how exactly the situation will play out.

Nevertheless, Bonner summarizes the situation well when he says: "What exactly will happen, and when it will happen, we will have wait and find out. But it will be bad, that much is certain. We will hit rock bottom."