Category Archives: Financial markets

Is Netflix being run by the United States Congress? by Simon Black

Fiscally, Netflix runs a lot like a government, going deeper in debt every day. From Simon Black at sovereignman.com:

Shares of Netflix soared today on news the company lost a record $859 million in cash in the third quarter.

Why are investors applauding this egregious destruction of capital?

Well, it’s because investors only look at one number when Netflix reports earnings – subscriber growth.

And on that metric, the company outperformed, adding 6.96 million subscribers, bringing the global total to more than 137 million.

At 137 million subscribers, Netflix has about 2% of the global population as customers.

There are still around 90 million traditional TV accounts in the US (and about 36% of those also have a streaming account).

So there’s definitely room for Netflix to grow in the US and abroad (where the majority of growth is coming today).

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Robert Gore Said That? 10/10/18

On Septemeber 30, at Murphy, North Carolina, I addressed the Appalachian Network PATCON, a gathering of very bright people on the cutting edge of preparation for the coming catastrophe. The topic was: “How to Survive an Economic Collapse.”

“Concerned” Bank of England Raises Alarm about Growth of High-Risk Loans, by Don Quijones

The market for high-risk loans that have little or no protections for creditors has ballooned. From Don Quijones at wolfstreet.com:

The power of Collateralized  Loan Obligations.

“The global leveraged loan market is larger than – and growing as quickly as – the US subprime mortgage market was in 2006,” said the Bank of England’s Financial Policy Committee in the statement from its latest meeting. And the committee is “concerned by the rapid growth of leveraged lending.”

In terms of magnitude, the US and EU “leveraged loan” market combined now exceeds $1.3 trillion, up from $50 billion at the turn of the century.

A “leveraged loan” is a loan that is extended to junk-rated (BB+ or lower), over-indebted companies. These loans are considered too risky for banks to keep on their books. Instead, banks sell them to loan funds, or they package them into highly rated Collateralized Loan Obligations (CLOs) and sell them to CLO funds and other institutional investors. In the UK, over £38 billion ($50 billion) of these loans were issued in 2017 — more double the amount in 2016 — and a further £30 billion ($39 billion) has already been issued in 2018.

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Government Tracking of Crypto Is Growing, But There Are Ways to Avoid It, by Simon Chandler

Many cryptocurrencies are not at all “anonymous,” free from the prying eyes of governments. From Simon Chandler at cointelegraph.com:

Much noise has been made about the untraceable qualities of Bitcoin and other cryptocurrencies. Bitcoin “can be used to buy merchandise anonymously” said early primers on crypto, it offers users the kind of financial privacy that was previously available only from a “Swiss bank account,” say more recent commentators. And given its ability to provide people with a layer of anonymity and privacy, it has been smeared by politicians, experts and mainstream journalists alike as a hiding place for almost any hacker, drug dealer, gang member, terrorist or despot you could possibly name (even if cash is still the preferred financial medium of such personae non gratae).

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10 & 30-Year Yields Surge, Yield Curve “Steepens,” Stocks Drop, as Fed Talks Up Rate Hikes in 2019, by Wolf Richter

Interest rates are going up, which is generally not a good thing for heavily indebted economies. That would be most of them. From Wolf Richter at wolfstreet.com:

Ironically, after having lamented the flattening yield curve for a year, soothsayers now lament the steepening yield curve.

On Friday, capping a rough week in the US Treasury market, the 10-year yield closed at 3.23%, the highest since May 10, 2011, and stocks fell for the second day in a row. This is an unnerving experience for pampered equity investors who’ve come to take endless stock-price inflation for granted, who’d figured for years that interest rates would never rise, and as short-term interest rates began rising, figured that long-term interest rates would never rise – and now they’re rising too.

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The Global Distortions of Doom Part 1: Hyper-Indebted Zombie Corporations, by Charles Hugh Smith

Cheap credit keeps alive a lot of corporations who should be dead. From Charles Hugh Smith at oftwominds.com:

The defaults and currency crises in the periphery will then move into the core.
It’s funny how unintended consequences so rarely turn out to be good. The intended consequences of central banks’ unprecedented tsunami of stimulus (quantitative easing, super-low interest rates and easy credit / abundant liquidity) over the past decade were:
1. Save the banks by giving them credit-money at near-zero interest that they could loan out at higher rates. Savers were thrown under the bus by super-low rates (hope you like your $1 in interest on $1,000…) but hey, bankers contribute millions to politicos and savers don’t matter.
2. Bring demand forward by encouraging consumers to buy on credit now. Nothing like 0% financing to incentivize consumers to buy now rather than later. Since a mass-consumption economy depends on “growth,” consumers must be “nudged” to buy more now and do so with credit, since that sluices money to the banks.

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Notice How Quickly Market Psychology Changed? by John Rubino

Two financial market truisms: markets can change on a dime, and they go down quicker than they go up. From John Rubino at dollarcollapse.com:

“How did you go bankrupt?”
“Two ways. Gradually, then suddenly.”
― Ernest Hemingway, The Sun Also Rises

On the surface, nothing much changed last week. The Fed, as expected, raised short-term interest rates very modestly, the US, Canada and Mexico cut a new NAFTA deal (kind of a pleasant surprise), unemployment fell again, Trump continued to tweet while Democrats and Republicans continued to express their mutual disdain via dirty tricks and contrived insults. Business as usual, in other words, in our dysfunctional new normal.

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