Looking Ahead – Thoughts on World News

From MindWealth Coach Rohit:

I don’t think the Chinese will wait for much more than a couple of months before quelling the HK uprising. Nearly a million HK residents marched in the rain today. China cannot lose face and they will worry that if this carries on for long it may give the mainland Chinese people ideas… and make them look weak. China may attempt to avoid this by replacing HK police with Chinese police and giving them more power or also by simply bringing in the tanks. The latter would mean that HK’s status as a financial center is under question, which is bad for China. It feels like they may be stuck between a rock and a hard place. But will “saving face” eventually dominate economic sense, I don’t have that answer yet? So post-mid-September I would be careful.

For the UK, October will be a fascinating and exciting month with the Brexit drama reaching its denouement. Elections on November 1 or on October 25-26 look likely. The Conservatives plus Brexit Party (performance depending on whether elections are before or after the actual Brexit) may win a historic majority given that Labor and Liberal Dems are competing for the same votes now. Labour will get wiped out. Problems won’t end. People will call for Brexit to be reversed etc. At the borders, I think things will go much smoother than people expect. The old remain campaign is using no-deal as an excuse to campaign for essentially no Brexit – and get its energy up for an election- a good strategy but with Dominic Cummings batting for the conservatives I would expect all other parties will be outwitted and many will vote for a low tax, fiscal spending Conservative Party that delivers Brexit. While all this is happening, Extinction Rebellion will also be on the streets of London fighting for climate change.

History before our eyes at all levels.

– Rohit

BNP Lowers Targets After Derivatives Loss Jolts Trading Arm

BNP Lowers Targets After Derivatives Loss Jolts Trading Arm

When one of the leading equity derivative banks in the world, makes large losses in trading equity derivatives, it serves as a useful reminder that it is NOT easy to consistently make money trading. Furthermore , derivatives are like electricity – of great value when used to manage risk by corporations and institutions properly but one can get burned with them too. In general, they are not suitable for individual / retail use. One often sees advertisements of 95 percent trading success strategies (in Fx and in equities) using options. Steer away from gimmicky ads which proclaim “95 percent success” . Be wary of any program , model, person or group of people promising 95 percent trading success and marketing themselves online and more so with options based strategies … Ask yourself the question- if it were so easy, wouldn’t the biggest firms in the world with the most qualified traders be consistently making money using these approaches?

BNP Lowers Targets After Derivatives Loss Jolts Trading Arm

BNP Paribas SA cut revenue and profitability targets after the French bank lost money in a fourth-quarter rout that saw stock trading earnings slump the most in at least six years.
France’s biggest lender is planning 600 million euros ($684 million) in additional cost cuts, focusing on the investment bank that Chief Executive Officer Jean-Laurent Bonnafe had targeted as a growth driver. Income from trading shrank 40 percent in the fourth quarter, led by the worst equities performance of the large investment banks reporting so far. The bank cited “extreme market movements at the end of the year,” weak client demand for structured products and a loss on index derivatives hedging as reasons behind the trading slump. The bank lost about $80 million in derivatives trades linked to the U.S. stock market late last year, people with knowledge of the matter said last month. It didn’t give more details on the loss during fourth-quarter results on Wednesday.

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APAC Economist on China’s economy

APAC Economist on China’s economy

Alicia Herrero, chief APAC economist at Natixis, talks on Bloomberg about China’s economy, and the People’s Bank of China’s (their Central Bank) new swap facility. What is interesting about this facility is that it creates CNY liquidity initially via perpetual bonds and eventually allowing these bonds to be swapped for other debt instruments . The aim is to encourage banks’ lending in China, shore up bank capital and keep interest rates low (by setting the bond interest rates at a low rate of 4.50% saving as a broader signal). This is essentially, in spirit, if not in letter, a TARP (troubled assets relief program, USA GFC, 2008) and TLTRO  (Europe, Greece, Spain,Italy crisis, 2011/2012 and continuing) rolled into one.

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