Stop me if you've heard this one before.....
a) One man's definition of progress: "This shows that the programs work when they are properly implemented," Jose Barroso former prime minister of Portugal now in its tenth year of a cycle of little if any growth, recession, stagnation, austerity; and current president of the European Commission of the European Union, now entering the sixth year of stagnation, recession, and austerity.
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b) Another definition of progress: Since 1987, the median wage for male workers in the United States has declined 2 percent while that of female workers has increased 16 percent, meaning the median wage for females is now almost 80 percent of the median wage for males.
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c) Go-go: In 2013 bond sales in emerging market countries set a new record of $506 billion. Corporate, non-sovereign debt accounted for 70 percent of the total.
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d) More definitions of progress: Cambodia, home to 800 garment and footwear factories, employing some 600,000 people responded to workers demanding a doubling of the wage to $160 per month by......shooting the workers. A living wage for Cambodia is estimated to require $283 per month.
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e) The glass is half-empty; the glass is half-full: Also in 2013, EU leveraged loan volumes reached their highest level since 2007, which level was about 1/2 the volume of 2007, and less than the amount transacted in 2005.
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f) A new NEP: The appreciation of China's yuan/renminbi (about 18% in recent years) and increased wages for workers has cut into the profit margins of China's exporters. Said an officer of Pacific Group, a maker of power tools with factories in China: "We've spent more on automation in the past year than in the previous 15 years combined."
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g) Shocked and appalled: The "Basel 3" rules for bank risk exposure, capital requirements etc. have been watered down to the degree that they have very little resemblance to the initial proposals.
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h) Mr. Barroso, Madame Lagarde would like a word: The IMF warned of a significant risk of deflation to the global economy due to actions of the United States and the policies of European Union.
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i) Mr. Barroso suspended from position for 162 games after testing negative for performance enhancing drugs: Industrial output in the Eurozone is still 10 percent below its pre-crash peak.
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j) Wait, wait, don't tell me. It's on the tip of my tongue. I know this: "Shadow banking"-- the creation of "investment trusts" offering asset-backed structured investment vehicles which remain "off-balance sheet"-- accounted for 1/3 of the total credit created in China since 2008.
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k) Are you sure we haven't met before?: ICBC (Industrial and Commercial Bank of China, Ltd) refused to "backstop" approximately $500 million in high yield investment trust assets. The trust, called "Credit Equals Gold #1" was created by China Credit Trust and was based on the debt and equity of Shanxi Zenfu Energy Corporation, a coal mining company, that facing bankruptcy, decided to expand by tapping the "investment trust" market.
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l) Going, going: Commenting on the flow of capital away from emerging markets, which has caused the value of the local currencies of Brazil, South Africa, Turkey, Russia, India to decline, the IMF said such flows are confined to a subset of emerging market countries with "idiosyncratic factors."
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m) Who could it be?: ICBC announced the holders of securities in the "Credit Equals Gold #1" investment trust will be able to sell their securities for the principal amounts to an "unidentified third party purchaser."
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n) Let me guess: Your name is Bear, or Stearns, or maybe it's Greenspan? Fuld? Thain? Lehman? Merrill? Lynch? Pierce? Fenner? Smith? Commenting on the risk posed by and to the investment trusts of China's shadow banking, the chief investment officer (Asia) for HSBC said: "It gets called 'shadow banking' and that has negative connotations. It sounds like it's an operation that's not overseen by regulators. And that's just not true. The trusts are overseen. The banks that sell the products are overseen. It's a regulated activity. It's very unlikely to be a worst-case scenario."
n1) Question: How do you regulate activity that is off-balance sheet?
Now I know. You're Andy Fastow, aren't you? When did you get out?
S.Artesian
February 2, 2014
