Archives of “banking system” tag

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Ken Rogoff: "China Property Market Collapse Starting"

  
Analysis, Economy, Education
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Bloomberg TV conducted an interview with Ken Rogoff in Hong Kong (the same way you land in New York before you take off in London via the now defunct Concorde) in which the Harvard professor recently made famous for his words of caution that overlevering sovereigns always eventually leads to economic slow down, financial collapse, and ultimately bankruptcy, warned, when discussing China real estate, that “you’re starting to see that collapse in property and it’s going to hit the banking system.” With this coming days ahead of the massive Agri Bank of China IPO, it is interesting just how much influence the person who has been warning all along that the world is headed on an unsustainable path will finally have, now that the permabullish cackle of the MSM punditry has finally been discredited as futures are about to reenter triple digit reality. Oh yes, and score one for Jim Chanos, and all those who have long been warning about the inevitable Chinese bubble pop. Additionally, in discussing the suddenly prevalent topic of perpetual stimulus, and particularly envisioning Paul Krugman’s thesis that the world will end unless another couple of trillion are thrown into the fire of irresponsible deficit spending, Rogoff says “I couldn’t disagree more… Just to keep drinking bottles of aspirin because you are worried you are going to get a headache, or it is going to turn into a migraine, it’s too much prophylaxis.”

Full clip although none of this is news:

NASA: Civilization will end in 2013

  
Education, Life
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In 2013, the earth will be attacked from space, with one possible outcome being mind-bogglingly severe disruption to our tech-centric way of life.
 
“The sun is waking up from a deep slumber, and in the next few years, we expect to see much higher levels of solar activity,” says Richard Fisher, head of NASA’s Heliophysics Division. “At the same time, our technological society has developed an unprecedented sensitivity to solar storms.”
 
Fisher’s comments came during the run-up to last week’s Space Weather Enterprise Forum 2010, at which scientists gathered to discuss how to prepare for the massive solar storms set to strike the earth in 2013.
 

“We know it is coming but we don’t know how bad it is going to be,” Fischer told The Daily Telegraph. “It will disrupt communication devices such as satellites and car navigations, air travel, the banking system, our computers, everything that is electronic. It will cause major problems for the world.”

The earth has been battered by solar storms before, but never has civilization been so vulnerable, since it’s now so dependent upon both electrical and electronic infrastructure.

In pre-electronic and barely electrical 1859, a “perfect space storm” shorted out telegraph lines in the US and Europe, causing numerous fires. It also made the Northern Lights visible as far south as Rome, Havana, and Hawaii, according to NASA — contemporary accounts relate how a group of campers in the Rocky Mountains were awakened by an “auroral light, so bright that one could easily read common print. Some of the party insisted that it was daylight and began the preparation of breakfast.”

In 1921, a solar storm induced ground currents that crippled the New York transit system. In 1989, another solar storm brought down the entire Quebec power grid due to those pesky ground currents, and plunged six million people into darkness on a cold, cold Canadian night.

Fischer sees serious trouble ahead from the 2013 peak solar activity attacks. “I think the issue is now that modern society is so dependent on electronics, mobile phones and satellites, much more so than the last time this occurred,” he said. “There is a severe economic impact from this. We take it very seriously. The economic impact could be like a large, major hurricane or storm.”

That economic impact could be a “space weather Katrina,” according to a 2008 report from the US National Academies of Sciences’ Space Studies Board entitled “Severe Space Weather Events: Understanding Societal and Economic Impacts”.

“Strong auroral currents, which wreaked havoc with the telegraph networks during the [1859] event,” the report warns, “can disrupt and damage electric power grids and may contribute to the corrosion of oil and gas pipelines.

“Economic and societal costs attributable to impacts of geomagnetic storms could be of unprecedented levels,” the report concludes. The cost of hurricane Katrina, estimated to be between $81 billion to $125 billion, would be piddling when compared to the effect of a “future severe geomagnetic storm scenario,” which the report estimates could run as high as $1 trillion to $2 trillion in the first year. Depending on damage, the report contends, full recovery could take 4 to 10 years.

Scary estimates, indeed, but — as with that other scary eventuality, global climate change — preparation could help mitigate the effects of another “perfect space storm”.

Fisher told the Telegraph that precautions could include, for example, creating power-grid backup systems so that if transformers or giant load-balancing capacitors are fried by a solar outburst, Plan B could go into effect. “If you know that a hazard is coming … and you have time enough to prepare and take precautions, then you can avoid trouble,” he said.

You can keep tabs on what the sun is throwing at us at the US National Oceanic and Atmospheric Administration’s Space Weather Prediction Center. But don’t worry too much — after all, if the Mayan calendar is correct, we need not fret about 2013

RBI data :Can create Tremor in Bank Stocks

  
Analysis, Economy, Education
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 After looking at the number of Indian Banks….it looks “All is not well ” The numbers are reminiscent of the previous rate hike cycle. The overall asset quality of Indian banks has started deteriorating. The Indian entities endured a long and painful exercise of cleaning up their asset quality. However, they are once again facing problems sustaining the same.



The latest RBI data shows that the Indian banking system’s gross and net NPAs have risen by 50% YoY and 25% YoY respectively. This certainly is a cause for concern. Banks can distort their NPA proportion by growing assets aggressively. But unless they check the quality of growth, their profits are sure to get eroded.

China on ‘Treadmill to Hell’ Amid Bubble, Chanos Says

  
Analysis, Economy, Education, Politics
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April 8 (Bloomberg) — China’s property market is a bubble that may burst by as early as this year, according to hedge fund manager James Chanos.

The world’s third-biggest economy may need to keep up the pace of property investment because up to 60 percent of its gross domestic product relies on construction, said Chanos. The bubble may begin to “run its course” in late-2010 or 2011, he said in an interview on “The Charlie Rose Show” that will air on PBS and Bloomberg TV.

China is “on a treadmill to hell,” said Chanos, who said in January the nation is Dubai times a thousand. “They can’t afford to get off this heroin of property development. It is the only thing keeping the economic growth numbers growing.”

Property prices in China rose at the fastest pace in almost two years in February even after officials this year re-imposed a tax on homes sold within five years of their purchase to curb speculation and ordered banks to set aside more funds as reserves to cool lending. The boom in China’s real estate has fueled concern that China may face a collapse seen in Dubai that has hurt the ability of some of its companies to repay debt.

Since his January prediction, Chanos, the founder of Kynikos Associates Ltd, has been joined by Gloom, Doom & Boom publisher Marc Faber and Harvard University professor Kenneth Rogoff in warning of a potential crash in China’s property market. (more…)

Indian bank stress tests expected to provide only superficial reassurance

  
Analysis, Economy, Education
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It seems that bank stress tests are catching on. In the wake of the US tests, whose results were published in May 2009, and the less exacting European ones, whose results came out on July 23, India is poised to embark on stress tests too. However the Indian bank tests are likely to be more opaque than the recent European ones – and their results will have to be taken with a bigger pinch of salt, according to a recent guest blog post in FT Alphaville.

 

On July 27 the Indian Reserve Bank confirmed its intention to carry out stress tests on Indian state-owned and privately-owned banks in the hope of providing reassurance about the resilience of the country’s banking system. On the same day the IRB raised interest rates more sharply than expected – to 4.5%-5.75% – for the fourth time in a year, largely in response to higher inflation and a potentially overheating economy (GDP growth is expected to be 8.5%-8.6% this year and next).

 

Incidentally, as Stephanie Flanders pointed out in a recent BBC blog post, Indians no longer see their nation’s closed financial system as a source of weakness. It is increasingly preferring to cut itself off from internatonal markets.

 

RBI governor Duvvuri Subbarao admitted that India would be “learning on the job” as it seeks to review of capital, liquidity and leverage standards of the nation’s banks, the majority of which remain state-owned.

 

India’s banks emerged remarkably unscathed from the global financial crisis of 2008-09 despite suffering a liquidity squeeze. Only ICICI, India’s largest privately-owned bank, needed explicit liquidity support during the mother of all crises.

 

However, in a that FT Alphaville post mentioned above, Hemindra Hazari, head of research at Hyderabad-headquartered Karvy Stock Broking warned that the government’s proposed tests may end up being more spin than substance.

 

He painted a disturbing picture of the state of Indian banking, adding that New Delhi has good reason to keep both the results and the methodology of the tests under wraps.

 

According to Hazari, India’s banks have widely used accounting jiggery-pokery to disguise their true bad debt position and suggestedthat they are in a far worse state than they are likely to let on to the stress testers.

 

Hazari said that while India’s banks may have the trappings of strength – having avoided the “cancers of subprime lending and investments in dodgy sovereign paper” – hidden dangers lurk beneath the surface.

 

In particular, he noted that the quality of their asset bases is “extremely mixed” and that their non-performing assets surged by 23% in the fiscal year 2009 and by 28% in the subsequent year.

 

Hazari does not regard non-performing assets as a reliable gauge of asset quality. This is because from 2009-10, the RBI allowed Indian banks “to classify dubious assets as restructured standard loans which are not classified as non-performing assets and which require minimal additional provisioning.”

 

Hazari added:

 

 

It is this nebulous category of assets, which bankers insist are of sound quality but are having “temporary” cashflow problems that have suddenly surfaced and rest innocuously in the notes to accounts on bank balance sheets. (more…)

Trading Without Ego

  
  Education
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Make no mistake about it. A trader’s self concept has to be separate from the trading. Who you are as a person began before you ever thought of trading and who you will be as a person will extend beyond your trading. When personal self-worth entwines with trading, it not only damages self esteem, it sabotages the trading.

You hear about it. You read about it. Don’t be misled. Traders tell stories. They write stories. They tell how great they are. Big trades. Big numbers. Big egos. Hubris. And sooner or later, big downfalls. It goes with the territory.

Consider the outsized egos of certain traders who brought themselves and those associated with them to ruin. Nicholas Leeson brought down the Barings Bank. Victor Niederhoffer ran his fund into deficit. John Merriweather threatened the health of our banking system by betting more than fifty times his capital that his strategies were certain to work, that he could forecast with impunity the direction of various bond markets. There’s a pattern here of seeming or real success for a while and then collapse for themselves and for those caught up in blindly following them. (more…)

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