A Few Market Risks I’ve Been Looking At Recently

risk-register

TEDrate went above VIX for 3 months consecutively. Last time it did this was 2006… During August – December.
Last time initial jobless claims were this low in the US (43 years ago) the economy went into recession straight after.
Equity risk premium compression means stock markets are so highly levered based on nothing. 127% of SP500 rallies during 2002-2008 were due to earnings. 92% of Rallies during 09-15 were due to ERP compression (yield seeking behaviour due to low interest rates (risk free rate)).
The BoE has quietly asked its U.K. banks to check its exposure to Deutsche Bank at the end of October.
Italy’s non performing loans continue to rise. Monte dei Paschi’s stock price continues to fall.
Banks are doing a load of accounting off book called ‘customer accommodations’ (Wells Fargo for example said they didn’t own any specific derivatives, but they do and call them customer accommodations which don’t have to be accounted for in a specific way on their balance sheet… To the tune of $1.2tn).
LIBOR is steadily rising still, the same as it did just before 08.
A proposed rate hike could deleverage the US economy with a reintroduction of a risk free rate.
Further unrest in the Middle East.
LATAM issues could easily spread through region further.
China’s credit bubble – shadowy investments, huge household debt, asset bubbles forming in equities, iron ore. Depreciating Yuan. PBoC have been dumping 2-3 yards of USD per day on their FX swap lines. They hold USD reserves in US treasuries and they have been heavily dumping these reserves to support the Yuan. Also dumping US equities to finance other spending behaviours.