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Credit Bubble Bulletin

    Credit Bubble Bulletin 1

    Axcelis’s (NASDAQ:ACLS) basic operating plan and motorists seem a little different than most. For Axcelis, the storyplot is about carving out more share against Applied Materials (NASDAQ:AMAT), better addressing the entire selection of customers’ ion implant needs, and exploiting growing investment in equipment for storage and “non-leading edge” chip types like receptors.

    July 15 – Bloomberg (Alexandre Tanzi): “Global personal debt levels jumped in the first quarter of 2019, outpacing the global world economy and shutting in on last 12 months’s record, the Institute of International Finance said. 246.5 trillion, almost 320% of global economic output, the Washington-based IIF said… That’s the second-highest dollar number on record after the first three months of 2018, though personal debt was higher in 2016 and 2017 as a share of world GDP. New borrowing by the U.S.

    July 15 – Financial Times (Jonathan Wheatley): “Debt in the developing world has risen to an all-time high, increasing strains on a global overall economy flagging under the weight of increasing trade protectionism and shifting supply chains. Emerging economies acquired the highest-ever degree of debts at the ultimate end of the first quarter, both in money terms so that as a talk about of their gross local product, according to… the Institute of International Finance.

    The figures are the money of companies and households. The IIF said that lower borrowing costs because of central banks’ monetary easing had urged countries to take on new debt. Lately the US Federal Reserve has transformed its policy view and a string of rising market central banks have cut interest rates… ‘It’s almost Pavlovian,’ said Sonja Gibbs, the IIF’s handling director for global policy initiatives.

    ‘Rates decrease and borrowing rises. I’ve been carefully monitoring Bubbles going back to Japan’s late-eighties experience. It’s always the same: Many people are happy to ignore bubbles when they’re inflating. Bubble analysis, by its character, will appear foolish for some time. But bubbles burst inevitably. There is absolutely no doubt that China’s historic bubble will burst, and I expect this will prove the catalyst for faltering bubbles across the globe – including within the U.S.

    The obvious transmission system will be through the securities marketplaces. Global marketplaces have become highly synchronized – across asset classes and across countries and locations. Market-focused monetary stimulus is becoming synchronized, essentially creating a singular comprehensive global bubble. July 18 – Bloomberg: “A cash crunch at one of China’s best known conglomerates is getting worse as the company said you won’t be able to pay its forthcoming dollar notes.

    1. It can maintain most of its earnings for reinvestment,
    2. Great West Financial
    3. Short term bullishness/bearishness
    4. The management and board have had a free of charge run with the very best 20 shareholders farmers
    5. 10-year average Enterprise Value/EBITDA (factors in debt): $36
    6. Client segmentation (retail, institutional, authorities, others)
    7. Washington, District of Columbia: $40,792 – $54,193

    500 million bond due August, after considering its liquidity and performance. On Thursday, the property-to-financial conglomerate announced it only managed to repay area of the principal on a 6.5% 1.46 billion yuan note. “Repo Rate on China’s Govt Bonds Briefly Hits 1,000% in Shanghai,” read an eye-catching early-Friday Bloomberg headline (found by ZeroHedge).

    With this in mind, there’s a specific situation that could capture global marketplaces and policymakers by shock: A dislocation in China’s “repo” securities lending market that reverberates throughout repo and derivatives markets in Asia, Europe and the U.S. This latent risk, alone, could help describe this year’s global yield market and collapse expectations for aggressive concerted monetary stimulus.