A review of things you need to know before you sign off on Thursday; some lower TD rates, Xero survey smells like recession; housing lending strong, households keep cash ready, huge demand for NZGBs, swaps soft, NZD falls, & more

Yet another sign that Japan's lost decades are over: SBI Shinsei has repaid public funds used to bail out its predecessor, the Long-Term Credit Bank, in the 90s.

 LTCB was one of Japan’s three top long-term lenders, deeply involved in financing real estate and major industrial projects, both domestically and internationally. LTCB’s non-performing loans exceeded USD42 billion at the time. The Japanese govt nationalized LTCB in 1998 amid fears of a systemic financial meltdown. 

All 34 banks bailed out following the collapse of the bubble have now repaid in full.

https://www.marketscreener.com/news/sbi-shinsei-bank-finishes-repaying-…

I'm pleased to announce that after seeing a decline of around a million dollars on my CV my rates will be reduced by just over $600 a year.

THE MOACF'S



I had a look at some numbers today to try to gauge where the longer-term market for US debt was heading, as we see that the US fiscal deficit has gone onto steroids, and what on planet Earth would inspire any confidence in the US leadership and economy, based on a past and an present, but never ending trail of intriguing/shocking headlines - the most recent to capture my attention...



(i) The wipeout of $88 billion off Market Cap from the Trump family's meme coin Ponzi.

(ii) Morgan Stanley and other US companies issuing yuan-denominated bonds in the domestic Chinese bond market.



This got me thinking about the market's pricing of risk when you look at how sound the big US banks are in terms of debt-to-equity ratios, and then also their huge derivative positions that also pose a systemic domino effect if any one of them tipped over. 



This is particularly concerning given the extent of Goldman Sachs’ global derivatives and dark pool activities in credit default swaps, interest rate swaps, etc, that are conducted world wide and often through affiliates.



Investigations have shown up all manner of lack of transparency, regulatory failures, and practices that disadvantage retail investors, such as latency arbitrage and order rerouting. There is a strong argument that only 5-10% of retail investors’ orders create actual market demand due to this rampant dark pool routing.



In January 2025, Bloomberg reported that dark pools accounted for 51.8% of U.S. stock trading volume, underscoring their dominance, and in general the deriving of prices from public exchanges without independent price discovery.



IMO, there is a huge risk involved from just one of these banks going under because of the interconnectivity of these TBTF entities, and with many commentators expecting a stock market meltdown of 50-80%, plus Trump 'policy' contribting to what could become a perfect storm, the entire scenario looks decidedly dicey.



Yesterday the estimate of countries, either already at war or being deliberately destabilised by the US with the help of the UK and Israel, grew to a mind-numbing 40, constituting an extraordinary degree of geopolitical risks. I have thrown away 90% of my tracking charts - there are none for the context and number of these concurrent events.



BACK TO THE MEMECOINS



Yes, well – Melania’s and Captain Chao$’s meme coins - could there possibly be a more obscene scam on planet earth, when it comes to the occupier of the Oval Office monetising his position?

July 31 2025, sees more than $88 billion of carnage in the market cap of these Trump Ponzis.

$MELANIA:

Peak Market Cap: $13 billion.

Current Market Cap: $2.15 million.

Decline: $12.785 billion (98.35%).

$TRUMP:

Peak Market Cap: $75.35 billion (fully diluted).

Current Market Cap: $9.43 billion.

Decline: $65.92 billion (87.49%).

Is there a strong case to be made that punters, both domestic and abroad, and including the buyers of federal debt tokens, should have a similar degree of confidence in the Trump Admin’s eCONomic ‘policy’, as they do in these tokens?

Imagine the potential mid-term carnage when the wealth gap widens even more.

The top 10% of the U$ population own ~66% of total wealth.

The next 40% (50th to 90th percentile) own ~31.5%

And the bottom 50% own ~2.5% of total wealth.

Even if things don’t get any worse (fat chance), there is $9.2 trillion of Federal debt to be rolled over for the year ending 2025. By the end of 2028 (Trump's term), the US faces a cumulative total of around $28 trillion in debt refinancing needs.

Trump and his idiotic (Soros-man) Bessent’s, debt refinancing ‘policy’ attempts to diverge from Biden’s serially idiotic (Yellen’s really) short-end strategy.

The plan was to prioritise longer-term securities to try to mitigate refinancing risks driven by a fiscal strategy focused on deficit reduction and economic growth.

PROBLEM – the deficit is blowing out, and real growth will be negative as Trump’s tax cuts and tariffs introduce market uncertainty, and seriously undermine yield reduction goals.

With a combination of shocking real yield (when properly inflation adjusted), serious carnage in capital invested, and currency volatility, risk will have to be priced in, otherwise no one will front up for the auction.

Yellen’s short-term debt focus left the U.S. vulnerable to higher interest costs, and the Trump/Bessent/Lutnick and Miran’s crazy Mar-a-Lago plan will tank the economy even faster than the previous admin.

ANOTHER BOMBSHELL – MORGAN STANLEY RMB DENOMINATED PANDA BONDS

A Panda Bond is a yuan-denominated (RMB) bond issued in mainland China’s domestic bond market by a non-Chinese entity, such as a foreign company, financial institution, or government.

Denominated in Chinese yuan, this allows issuers to raise funds in China’s onshore market.

By definition, the issuers are non-Chinese entities, including multinational corporations such as Morgan Stanley, Apple, and international organisations like the World Bank, and even foreign governments.

Recently issued Morgan Stanley bonds, as I understand it, are 5-year notes issued at 1.98%.

This makes a lot of sense for private US companies, as they can borrow at these cheap rates in China, as opposed to issuing US dollar-denominated bonds and have to pay as high as 7.50-9.5% driven by risk premiums and potential spread widening.

Of course, the talking heads spin this as making sense because MS is a ‘high-quality’ company, which reflects why they can pay these yields and yet still attract buyers.

Morgan Stanley’s debt-to-equity ratio in comparison to the largest four US banks in terms of total assets…

1 Goldman Sachs ~13.17

2 JPMC ~11.76

3 Citigroup ~10.5

4 Bank of America ~9.67

5 Wells Fargo ~9.16

6 Morgan Stanley ~3.11

Below – the first number reflects the estimated (Y/E 2024) derivative book in trillions held by these banks in notional value, and the 2nd figure is their derivative book as a ratio of the company’s equity…

1 Goldman Sachs 41.7 – 347:1

2 Citigroup 39.8 – 185.1:1

3 J P Morgan Chase 57.0 – 159.7:1

4 Morgan Stanley 38.3 – 127.7:1

5 Wells Fargo 8.39 – 43.7:1

6 Bank of America – 36.3 – 9.67

Total Derivatives held by these 5 banks – $221.4 trillion

Morgan Stanley must be viewed as a comparatively safe bet if they can entice buyers into the Chinese domestic bond market at 1.98% – but Col has to ask that uncomfortable question – compared to what?

OK, it has a comparatively low debt-to-equity ratio at 3.11 compared to the other big banks, which are all at least 300% higher, but their derivative book is high at $38.3 trillion and the 4th highest of the 6 banks at 127.7 times equity.

And my point – yes, it took a while - how much longer will the RoW and BRICS continue to finance this idiocy, and their own victimhood, because the U$ 100% can no longer afford to finance their perpetual wars or financial hegemony.



It’s the MOACFs (Mother Of All Cluster F…s)

Col