Monday, Jun 01, 2015

Hmmm property

CNN: Dr. Doom: This 'time bomb' will trigger next financial collapse

this so-called "money printing" has also raised the risk of asset bubbles in various markets, including China, startups, tech stocks, bonds and luxury real estate. All of these investors have poured into these markets, but will they be able to get out?

Posted by mark @ 07:25 PM (6203 views)
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1. icarus said...

"Bond markets are illiquid...but investors can cash out overnight". So, illiquidity is the new liquidity?

According to a link in the article Jamie Dimon says that investment banks are too regulated (i.e. are required to hold too much capital - as head of JPM Chase he would say that wouldn't he?) and therefore don't have the firepower to stabilise faltering bond markets. Is that what the less-regulated TBTF banks would aim to do?

The fact is that the drivers of investment in, and divestment from, vulnerable countries and a series of (mostly non-productive) liquid markets are the shadow banks, which target high-return possibilities based on asset price appreciation and volatility to realise capital gains. Their investments are highly leveraged, their investment targets are highly liquid financial markets worldwide that enable a quick entry and quick short term profits.

Their clients are the global finance capital elite – i.e. the roughly 200,000 worldwide ultra- and very-high-net-worth individuals each with net annual income from investment flows of $20 million or more. Plus of course the investments of the shadow banks themselves. They and their clients have been estimated to have investible assets - short-term, liquid - of well into the $ tens of trillions. They dominate global investment (Carney last year flagged up the impotence of central banks confronted with shadow banks). Their investments in China rose from a few hundred billion in 2008 to $6trillion in 2012 according to a JPM study at the time - some say its now close to S10 trillion. And it's causing volatility and headaches for the government as it tries to suck the air out of bubbles without sucking it out of the economy.

And back to Jamie Dimon - there is a huge amount funnelled back and forth between the regulated investment banks of which he speaks and the unregulated shadow banks.

Tuesday, June 2, 2015 11:24AM Report Comment
 

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