Tag Archives: Canada

Who’s Debt Are You? – Latest Statistics

There’s been some buzz in the markets lately, concerning the health of America’s sovereign debt. The nation owes other countries about USD 5,7 trillion, and about 3 trillion is due this year. Investors are worried that the US won’t be able to borrow much more, at least not to the same low price,  and that big buyers of US Treasuries, like China and Russia, may start dumping their bonds to put USA in a financial squeeze. Well, I wouldn’t worry too much. You see, most countries who are lending money to the American government are receiving huge loans from US banks. The next victim of the debt crisis is probably not USA, nor the EU.

“Claims on advanced economies contracted by $342 billion between end-December 2012 and end-March 2013, mostly due to reduced claims on banks and related offices. This marked the sixth consecutive quarterly decline in interbank positions on advanced economies and brought the cumulative reduction since end-September 2011 to $1.9 trillion. In contrast, claims on borrowers in emerging economies increased by $265 billion between end-December 2012 and end-March 2013.”

Bank of International Settlements – BIS
vkontakte
The Bank of International Settlements (BIS) recently realised new data and statistics on global debt, an interesting oversight on who-owes-who in a world ridden by fear of economic collapse and social unrest. The numbers reveal a picture slightly different from what most people see.
F.ex: European countries owe foreign nations twice as much as the United Nations owe others. And there seem to be several groups of nations, connected through the same banks, but for some reason it is not the countries with the largest debt who are in most trouble.
We already know the US numbers, and the Americans owe most of the money to themselves, anyway… (Federal Reserve, that is.). The 5,7 trillion debt to foreign countries is a relatively small sum compared to the grand total of about 14 trillion.
Elsewhere, the sovereign debt, with all its derivatives, represent a much higher risk.
Europe’s Fab Four
Consolidated foreign claims of 24 reporting banks – immediate borrower basis.
United Kingdom – USD 3,2 trillion.
Germany – USD 1,8 trillion.
France – USD 1,6 trillion
 Netherlands – USD 1,9 trillion.
european-debt
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And who do they borrow from?
United Kingdom:
  1. Other EU bank: 1,5 trillion.
  2. France: 200.200 million.
  3. Australia: 121.577 million.
  4. Canada: 102.963 million.
Germany:
  1. Other EU banks: 1,1 trillion.
  2. France: 198.000 million.
  3. Austria: 37,914 million.
  4. Canada: 23.838 million.
France:
  1. Other EU banks: 714,235 million.
  2. Canada: 24,612 million.
  3. Belgium: 23,536 million.
  4. Austria: 13,442 million.
Netherlands:
  1. Other EU banks: 577,427 million.
  2. France: 156,857 million.
  3. Belgium: 22,746 million.
  4. Canada: 13,722 million.
man-saw-his-fortune-sink-under-a-massive-pile-of-debt
And who have most money outstanding?
  1. United Kingdom – USD 2,6 trillion.
  2. Germany – USD 1,5 trillion.
  3. France – USD 1,2 trillion.
  4. Netherlands – USD 0,8 trillion.
Is there a pattern here?….somewhere?
The BIS writes:

“The latest international banking statistics show diverging trends in credit to advanced economies and emerging markets. Claims on advanced economies contracted by $342 billion between end-December 2012 and end-March 2013, mostly due to reduced claims on banks and related offices. This marked the sixth consecutive quarterly decline in interbank positions on advanced economies and brought the cumulative reduction since end-September 2011 to $1.9 trillion. In contrast, claims on borrowers in emerging economies increased by $265 billion between end-December 2012 and end-March 2013. The expansion was driven mostly by credit to emerging economies in Asia, especially China. In recent years, BIS reporting banks’ exposure to Asian credit risk has increased even more rapidly than their lending to Asian borrowers because lending has been accompanied by a reduction in net credit risk transfers out of the region.”

That means we now have a USD 30 trillion (+) debt bubble in transit between different parts of the world! (At the same time the richest people in the world has more than 20 trillion stacked away in places like Claman Island to avoid taxes.).

Just great….

b791

The Asians now owe other countries – mostly European – close to USD 2 trillion, with China‘s debt closing in on USD 600,000 million.

The rest is as follows:

South Korea: 309,363 million,

India: 304,920 million.

Chinese Taipei: 161,404

Malaysia: 155,500 million

Thailand: 102,299 million

Indonesia:  100,770 million.

Apocalypse

NOTE:

Statistics at end-March 2013 are preliminary and subject to change.

Data are available on the BIS website, via the BIS WebStats query tool, or in a single PDF indetailed annex tables. Developments in the latest data are highlighted in the Statistical release.

Revised data and an analysis of recent trends will be released in conjunction with the forthcoming BIS Quarterly Review, to be published on 16 September 2013. Data at end-June 2013 will be released no later than 23 October 2013.

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Tech Trouble at the Econotwist’s Blogs

I just have to apologize for not being able to post much lately. It’s all due to some – more or less – unexplainable technological issues that I’m working my ass off to solve. Hopefully, I’ll be up and running as usual in a couple of days.

In the meantime I provide essential information through my Twitters: http://www.twitter.com/fhxx AND http://www.twitter.com/theswapp

To quote a famous US senator; “I’ll be back!

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David Rosenberg: How To Play 2011

Chief economist Dave “Rosie” Rosenberg is one of Wall Streets favorite bearish analysts. Those of you who have followed the Econotwist’s activity for a while will know that I frequently publish his daily newsletter “Breakfast With Dave.” One of the most comprehensive day-to-day analysis available for free. In yesterdays edition Rosenberg gives advise on how to play the markets in 2011 – amongst other things. Well worth studying.

“In 2011, the “event risks” that we expect to generate the volatility and periodic spasms that create significant buying opportunities are even larger in number and more diverse.”

David Rosenberg

Lesson of 2010

“What I do at the start of every year is go back and remind myself that each individual year has its own particular story, in preparation for the 12-month period that lies ahead,” the Gluskin Sheff chief economist writes.

For example, 2007 taught everybody that it never hurts to take profits after the market doubles and that if something is too good to be true, as was the case with the housing and credit bubble, it probably is.

The lesson in 2008 focused on capital preservation strategies and the urgency of managing downside risks.

Then, in 2009 it was vital not to overstay a bearish stance in the face of massive fiscal and monetary stimulus, even if the economy was in a deep recession for half the year.

Last year’s lesson was on how to handle the many post-stimulus market swings that are inherent in a post-bubble credit collapse.

It is very tempting to look back at the past year and conclude that it was a great year for the markets because the S&P 500 rallied 13% point-to-point, but that is about as relevant as the fact that by the end of August, the S&P 500 was off 14% from the nearby peak and the TSX was down 6%. But the year 2010 was most noteworthy for intense financial market volatility — there were no fewer than six mini-bull markets and six mini-bear markets (up or down at least 6%) in what was truly a roller coaster of a year.

And we head into 2011 much the same as 2010 — with plenty of optimism and growth priced into the U.S. equity market and facing a year chock full of “event risks” that will likely produce some very nice trading opportunities.

We must be very well prepared to take advantage of volatility this year. Last year, we concentrated on mitigating downside risks and preserving capital at the expense of capitalizing on all the mood swings that took place.

In 2010, the concerns were over Greece, health care, the end of QE1, and the mid-term elections.

In 2011, the “event risks” that we expect to generate the volatility and periodic spasms that create significant buying opportunities are even larger in number and more diverse.

These range from Ireland, Portugal and Spain, to the U.S. debt ceiling file, to the US state and local government turmoil, to another down-leg in US home prices, to surging food and energy prices, and to heightened inflation pressure.

The threat of policy tightening in the emerging markets (especially China) continues, and with the end of QE2 in June, Fed Chairman Ben Bernanke will again have a tough choice to make between unwinding the bloated balance sheet or reinforcing speculative behaviour in risky assets by embarking on QE3.

In this light, we fully anticipate another roller coaster ride in the markets this year, and we intend to be more pro-active at the intermittent lows with a continued eye towards limiting downside risks to our portfolios.

The heightened volatility means extra reliance on our hedge funds, to mitigate the market volatility by focusing primarily on “relative value” trades.

This means essentially going long on undervalued high quality assets and going short on overvalued, lower quality assets.

While we are still cautious on the overall equity market, we do see a silver lining in the energy sector and in large-cap and mid-cap companies that have lagged the upturn this cycle and are relatively inexpensive.

Here, we focus on large cash-flow generators with strong balance sheets that pay out a reliable dividend stream. So despite our concerns over complacency among US equity investors, there are still needles in the haystack — in oil, in large-cap tech and the defensive dividend paying stocks within health care and consumer staples.

The recent backup in bond yields sets up potential decent returns in fixed income markets, as the hiccup we saw this time last year provided. Corporate balance sheets are in terrific shape on both sides of the border and we see market interest rates trading in a tight range through most of 2011; therefore, credit strategies are going to be an area of focus. The secular bull market in commodities is one reason, though not the only one, why we also remain long term positive on the outlook for Canada relative to the United States, especially with regard to the Canadian dollar.

I think it pays to focus on three interesting market developments here. First, the Canadian dollar towards the end of last year re-attained par against the US dollar and I recall that when we saw this unfold in 2007 and 2008 the oil price was on its way to $145 a barrel, not $90, and this tells you that this latest leg-up in the Canadian dollar is more than just a commodity story.

Second, look at the bond market and you will see that the yield on a 2-year Canada bond trades at a 100 basis points premium relative to U.S. Treasuries, which tells you something about the relative strength of the Canadian economy.
Furthermore, the 30-year Canada bond trades at a 90 basis points discount to long US Treasuries, which is unprecedented. This is a huge anomaly but one that carries a very important message because the further you go out the yield curve the more the market tells you about its view of long-term fiscal and inflation risks, and again, this is being transmitted into growing global confidence in the Canadian dollar relative to the US dollar.

Finally, keep in mind that the Canadian dollar didn’t just rally 5½% against the U.S. dollar last year but also rallied 5½% against the basket of non-U.S. dollars, which is added confirmation that this is as much about a strong Canadian dollar story as it is a weak US dollar story.

Here’s a copy of the full analysis.

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Related by the Econotwist’s:

External reports:

Danske Markets. Research Inflation Scare. 02082011.

DnB NOR Markets. Weekly Update Scandinavia. 07022011.

Markit Economic Research. Economic Overview –growth spurt brings inflation worries. January 2011.

Markit Economic Research. European Union. January 2011.

TrimTabs: Hedge Fund Flow Report January 2011. Topical Study.

IMF: World Economic Outlook Update. January 25. 2011.

Fitch. US securities 2011 Outlook

ChangeValue.com: “Where Are Markets Heading To?” January 2011.

 

 

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