FedEx Warning / Repo Rate Spikes . . . .

[bucket]

Are there nuclear weapon manufacturers I can invest in? With all the years of continual doom and gloom talk, it sounds like I might make a killing on such an investment.

Dumb question...will you be alive to enjoy it?

[15444]

Dumb question...will you be alive to enjoy it?

Just because they build them, doesn't mean they'll use them.

[FarmJunkie]

Why in phuck does every company believe they have to make record profits every year just to please the shareholder. Just look what that has done to John Deere and in turn affected anyone who runs their Chinese made crap. I used to think they made good equipment now all I do is call the service man to fix computerized electrical glitches a few times a week. When the hell are these companies gonna get back to making stuff that’s reliable and not farm every part out that’s made in a third world toilet then charge a 100 times the price when it gets back to America so the shareholders are happy. What about the stake holders who have to run this shit and try and make a living doing it. They shud have let all these donkeys go broke in 08 and the problem would have fixed itself eventually. GM is another prime example. The CEOs of these companies shud choked for running businesses into the ground and having the nerve to pay themselves a shit ton of money for doing a shitty job. Our system is just buggered. Brutal

[shtferbrains]

Why in phuck does every company believe they have to make record profits every year just to please the shareholder. Just look what that has done to John Deere and in turn affected anyone who runs their Chinese made crap. I used to think they made good equipment now all I do is call the service man to fix computerized electrical glitches a few times a week. When the hell are these companies gonna get back to making stuff that’s reliable and not farm every part out that’s made in a third world toilet then charge a 100 times the price when it gets back to America so the shareholders are happy. What about the stake holders who have to run this shit and try and make a living doing it. They shud have let all these donkeys go broke in 08 and the problem would have fixed itself eventually. GM is another prime example. The CEOs of these companies shud choked for running businesses into the ground and having the nerve to pay themselves a shit ton of money for doing a shitty job. Our system is just buggered. Brutal

It,s the way the huge wages for the CEO's of the work.

Bonus at +1% +2%+3% growth.

Millions over base.

Raise prices, raise returns, Millions in CEO bonus. Bring a new guy in if it slows down and around we go.

[Oliver88]

bucket, yes if the U.S. crop doesn't meet expectations that could certainly turn corn prices higher. Soybeans and wheat, not so much. U.S. continues to lose market share in both these markets. But the U.S. crop is now getting passed the frost-risk stage and USDA claims yields are rising. We'll see . . . .

I thought the I-States needed another 2-3 weeks for corn to be past the frost risk stage?

[errolanderson]

I thought the I-States needed another 2-3 weeks for corn to be past the frost risk stage?

Early stages of harvest have started in southern regions. Yes, another two weeks is needed to get through critical period in north. Analysts stateside now suggesting to U.S. growers to sell forward corn futures to capture the carry.

[errolanderson]

Short-term lending rates to financial institutions spiked as high as 10 percent this week.

Shortage of cash between financial institutions? Investors not lending? Fed has had to make huge injection this week to prop up.. Also, this suggests Fed may be losing control of setting rates. Repo rates are an indication of credit risk.

Credit illiquidity and subprime mortgage mess between banks triggered the 2008 crisis . . . The big short.

[macdon02]

Short-term lending rates to financial institutions spiked as high as 10 percent this week.

Shortage of cash between financial institutions? Investors not lending? Fed has had to make huge injection this week to prop up.. Also, this suggests Fed may be losing control of setting rates. Repo rates are an indication of credit risk.

Credit illiquidity and subprime mortgage mess between banks triggered the 2008 crisis . . . The big short.

To put this bluntly, the govt is losing the ability to fund promises worldwide. It isn't as simple as firing up the printing press. Promise's are funded by bonds and the repo is the shortest term bond. Politicians can't figure it out because they are illiterate in how the system functions, they figure they just pass a law or jack taxes or tweet the feds. The bond market is the grand daddy of all. Now more cuts worldwide in rates and no buyers..... when the sharks move in for the short it'll be absolute carnage. You need an ability to generate income in this situation and preferably in $10's and $20's that can't be tracked. The hunt for tax will increase and if you rely on a govt check for survival, it will end. Our biggest impact will likely be less credit available and it'll be at higher rates.

[FarmJunkie]

Macdon this is what shud have happened in 08. Too many loans to people that shouldn’t have had them. Kids with credit cards that didn’t realize u have to pay it back. Grown adults running Romper room into the ground. Now the rest of us that run our businesses in the black and responsibly pay again. Phuck I hate stupid.

[errolanderson]

To put this bluntly, the govt is losing the ability to fund promises worldwide. It isn't as simple as firing up the printing press. Promise's are funded by bonds and the repo is the shortest term bond. Politicians can't figure it out because they are illiterate in how the system functions, they figure they just pass a law or jack taxes or tweet the feds. The bond market is the grand daddy of all. Now more cuts worldwide in rates and no buyers..... when the sharks move in for the short it'll be absolute carnage. You need an ability to generate income in this situation and preferably in $10's and $20's that can't be tracked. The hunt for tax will increase and if you rely on a govt check for survival, it will end. Our biggest impact will likely be less credit available and it'll be at higher rates.

Thanks macdon02 for your comments . . . . This is a problem far beyond just money printing and tweets to fix.

[macdon02]

Macdon this is what shud have happened in 08. Too many loans to people that shouldn’t have had them. Kids with credit cards that didn’t realize u have to pay it back. Grown adults running Romper room into the ground. Now the rest of us that run our businesses in the black and responsibly pay again. Phuck I hate stupid.

Ummm actually i don't agree, due to the mechanics of the bond market. If the fed wouldn't have stepped in, every single loan in the world would have been called when Lehman went up in smoke. See when money is borrowed, the actual security(ie bond) is handed over overnight as the banks rebalance daily. It's like taking delivery on a futures contract. Absolutely anything borrowed against would have been called due to none of the banks trusting who is secure. Those that have excess funds lend to those over lended. This takes about 5 chapters to explain but is why Errol made mention. If the repo stays high there'll be zero incentive for the banks to lend, " emperor has no clothes" moment with rate cuts and Errol can correct me if im wrong but it would result in an entire unwind of the monetary system. In which youd likely see a banning of physical gold and bit. Some of this turns into hypothetical unless you know the next move taken by the central banks and their attempts to reassure the public that the system is secure....... the Fed has a fit but its turned into a global bank not a domestic.

[macdon02]

The exact cause of the squeeze is a matter of some debate, but most market participants agree that two coincidental events on Monday were at least partly to blame. First, corporations had to withdraw funds from money market accounts to pay for quarterly tax bills, and on the same day the banks and investors who bought the $78 billion of U.S. Treasury notes and bonds sold by Uncle Sam last week had to settle up.
On top of that, the reserves that banks park with the Fed and are often made available to other banks on an overnight basis are at their lowest since 2011 thanks to the central bank’s culling of its vast portfolio of bonds over the past few years.
Added together, these factors are testing the limits of the $2.2 trillion repurchase agreement - or repo - market, a gray but essential component of the U.S. financial system.

https://www.reuters.com/article/us-usa-fed-repo-tools-explainer/explainer-the-fed-has-a-repo-problem-whats-that-idUSKBN1W30EJ

Devaluation in the expected value of the securities has the following aggregate consequences:

1) Banks are less able to borrow because the value of their assets has fallen

2) Banks are less willing to lend to each other because, in the aggregate, the banking system cannot increase the sum total of its collateral assets in a single instant

This is known as a loss spiral, which follows as a result of systemic downward shocks in asset prices. If asset prices fall quickly enough, banks won't be able to borrow and lend at previous rates, causing a contracting of liquidity or a liquidity crisis.

3) Banks raise haircut rates, exacerbating the loss spiral. Banks are simultaneously less willing to borrow and less willing to lend.

Haircuts arise from perceived counterparty risk, which is the perceived risk of default.

...a loss spiral can precipitate a haircut/margin spiral.

It should be noted that the speed at which the money is put back into circulation is variable. In liquidity crunches (aka credit crunches), banks have cash but refuse to make any loans due to the perceived risk of the loans. The perceived risk of default is known as counterparty risk.[2] Normally, the collateral offered in exchange for the loan, plus the interest rate, is sufficient to entice banks to make loans. Problems arise, however, when the value of the collateral is unknown, and the banks (or other lending institutions) suspect that the loans might not be repaid. Under these circumstances, banks hoard cash.

https://sites.google.com/site/sociologysystemsresearch/home/economic-crisis/repo-markets

[biglentil]

Things get even sillier wrapping one's head around negative interest rates. What incentive is there to save if you have to pay interest on savings? And what incentive does the bank have to provide a loan to someone if the bank has to pay interest on that loan? Its a truly bizzare financial universe we are currently in.

[errolanderson]

Things get even sillier wrapping one's head around negative interest rates. What incentive is there to save if you have to pay interest on savings? And what incentive does the bank have to provide a loan to someone if the bank has to pay interest on that loan? Its a truly bizzare financial universe we are currently in.

biglentil . . . negative rates make no sense. There are even negative rate mortgages in Denmark now offered.

But unfortunately, this bizarre and reckless economic activity is just the starting gun of a global financial writedown . . . . it may take several years to sort. A changing-of-the-guard ahead (IMO) . . . .

[Marusko]

Things get even sillier wrapping one's head around negative interest rates. What incentive is there to save if you have to pay interest on savings? And what incentive does the bank have to provide a loan to someone if the bank has to pay interest on that loan? Its a truly bizzare financial universe we are currently in.

For the average Joe, it's not like you would pay interest on your savings account. The bank pays a tiny amount of interest, then charges monthly fees.

$5,000 balance, pay 0.1% interest, or $5/year. Charge $10/mo fees.

No idea on the mortgages though. I've read about zero interest rate mortgages offered in the Netherlands and somewhere else in Europe. Pretty crazy to think that a bank believes its money is safer when lent out at 0% mortgage than anywhere else.