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Articles by Don Quijones

All Heck Breaks Loose After Spanish Banks Block Thousands of Accounts with Chinese Names & Folks Can’t Get to Their Money

20 days ago

The banks claim they’re complying with anti-money laundering regulations. 
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Spain’s Association of Financial Users (ASUFIN) has announced it will be representing Chinese residents in Spain in their legal struggle against three of the country’s biggest lenders, BBVA, Caixabank and Bankia, which it accuses of contravening Spain’s data protection and consumer protection laws and even the Spanish constitution.
The three banks in question recently froze the accounts of thousands of Chinese residents in Spain for almost two weeks, in accordance — or so the banks claim — with Spain’s money laundering regulations. On Feb 15, after weeks of being locked out of their accounts, feelings finally boiled over and hundreds of Chinese

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“New Economic or Financial Crisis” in the Eurozone Could Start in Italy: French Government Frets

23 days ago

While contagion is definitely contained, the Eurozone “is not sufficiently armed to face a new economic or financial crisis.” French banks are heavily exposed to Italy.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
“Don’t underestimate the impact of the Italian recession.” This was the stark warning from French Economy Minister Bruno Le Marie in an interview with Bloomberg News. “We talk a lot about Brexit, but we don’t talk much about an Italian recession that will have a significant impact on growth in Europe and can impact France because it’s one of our most important trading partners.”
Italy’s economy as measured in real GDP shrank for two quarters in a row, which puts it into a “technical recession”:

It’s the second time in four months that France’s Economy

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Disorderly Brexit Increasingly Likely, EU Blinks on Derivatives-Clearing in London

24 days ago

No one can afford even the smallest hiccup in derivatives.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
After months of furious lobbying, the City of London Corporation has finally got what it wanted: recognition by the European Securities and Markets Authority (ESMA) of the three biggest clearing houses it hosts, LCH, ICE Clear Europe and LME Clear. This will allow the three to continue providing services throughout the EU even in the event of a no-deal Brexit, which is looking increasingly likely. It will also limit the potential for disruption in central clearing and prevent any negative impact on the financial stability of the EU, says ESMA.
Clearing is where a company acts as a middleman between financial trades, collecting collateral and standing between

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London Housing Meltdown Spreads as Pre-Brexit Angst Batters Market Sentiment

27 days ago

“If you are looking to buy a house in Q1 you will have the market to yourself.”
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
In some places, in particular prime markets in London and the south-east, house prices have been tumbling. According to London-based estate agency LonRes, average “achieved” prices:
In Prime Central London: -6% in Q4 2018; and -14% from their 2014 peak.
In slightly cheaper Prime London districts: -5% in 2018.
In Prime Fringe districts, i.e. prime sectors further removed from the city center: -7% in 2018.
In a survey by LonRes, 63% of the agents said they had seen prices in their market plummet by 10% or more from peak levels as sales ground to a standstill. In London transactions slumped by 9% between 2017-2018 for properties under 1 million,

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Just How Huge Are Mexico’s Auto Export to the US? How Fast Have they Grown?

February 15, 2019

GM’s Mexico vehicles now are 23% of its US sales. And the Japanese have massively discovered Mexico’s cheap labor.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
The total number of new vehicles exported from Mexico to the US in January rose 9.1% from a year ago to 191,072 vehicles, according to figures compiled by the vehicle manufacturers association AIMA and released by Mexico’s National Institute of Statistics and Geography (INEGI). In the year 2018, total new vehicle exports from Mexico to the US leaped by 9.9% to 2.57 million vehicles, after having already jumped by 9.4% in 2017.

Since 2011, vehicle exports to the US have surged by 93%. During that period the number of vehicles exported to the U.S. from Mexico has gone up every single year, sometimes by

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Spanish Grocery Giant Unveils Big Losses, Teeters on Brink of Bankruptcy, after Allegations of Accounting Fraud

February 8, 2019

What could this mean for one of its big creditors, the ECB?
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Spanish supermarket chain Dia, once one of Europe’s largest grocery chains, has just unveiled its results for 2018 and they do not make for pretty reading. In what it describes as “probably its hardest year ever,” the company racked up €352 million in net losses. EBITDA (earnings before interest, tax, depreciation and amortization) of €246 million plunged by 47% from a year ago. Net sales dropped 11% from a year ago to $7.2 billion. And its total debt soared by 50% from the end of 2017 to €1.45 billion.
The firm’s shares, reduced to a penny stock, have slumped almost 90% since Jan 1, 2018. Its credit rating — investment grade until October 2018 — was cut serially

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Mexico’s Cash Cow: Remittances from the US & Other Countries Surge to New Record

February 6, 2019

These workers are a lifeline for Mexico’s economy.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
The total amount Mexico received in “remittances” — transfers of money by workers of Mexican descent mostly in the US but also other countries to individuals in Mexico — surged by 10.5% in 2018 to $33.4 billion, the highest figure registered since records began, back in 1995, and beating the prior records set in 2016 and 2017, according to the Bank of Mexico.
Note the six-year downtrend that kicked off in 2007 with the Financial Crisis, the US housing bust, and the US housing construction downturn:

The cash remittances are a lifeline for Mexico’s economy, accounting for 2.7% of Mexico’s GDP, up from 1.9% in 2009. Most of them get spent very quickly in the Mexican economy.

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Italy Guns For Glass-Steagall-Type Law to Break Up Banks, Cut Bailout Costs for Taxpayers

February 3, 2019

The banking lobby and the ECB will have a cow.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
On Friday, Italy’s coalition government unveiled new banking regulations that it hopes to pass in the coming months, including a rule that would separate banks’ commercial and investment arms. It would be the Italian equivalent of the Glass-Steagall Act, the 1933 U.S. law that separated commercial banks that took deposits, made loans, and processed transaction, from riskier investment banking activities. The law was designed to protect deposits. Its repeal in 1999 led to the consolidation of the U.S. banking sector, unfettered risk-taking by deposit-taking banks, and arguably the Financial Crisis just eight years later.
In Italy investment and commercial banks have been able

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Lloyds Bank Resurrects 0%-Down Adjustable-Rate Mortgages for First-Time Buyers to Prop Up UK’s Housing Market

January 30, 2019

Desperate measures for desperate times?
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
As house prices in the UK continue to slip-slide downwards, compounding fears that the multi-year housing boom has run out of gas, the country’s largest mortgage lender, Lloyds Bank, has unveiled a new mortgage scheme called “Lend a Hand” to help first-time buyers with little or no personal savings inject fresh blood into the souring market. It is an adjustable-rate mortgage with no down-payment and with a teaser-interest rate for the first three years of just 2.99%. It allows buyers in England and Wales to borrow the entire amount of the purchase price of up to £500,000 ($653,000).
These types of mortgages are high-risk instruments that helped fuel madcap property booms and busts,

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“Worst December in 10 Years”: Brick-and-Mortar Retail in the UK Faces Overindebted Consumers

January 26, 2019

But online sales are hot, now at 20% of total retail. 
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
It’s a confusing picture. A monthly survey of retailers published by the Confederation of British Industry (CBI) indicated that just 4% of retailers reported good sales volumes for January, whereas 41% said they were poor, giving a balance of -37%, the lowest since November 2011 (-39%). Sales volumes fell in the majority of retail sub-sectors with clothing (-43%), footwear & leather (-53%) and hardware & DIY (-40%) posting the largest declines.
“Pressures on the retail sector remain high, with consumer spending expected to remain fairly subdued and competition fierce,” said CBI Chief Economist Rain Newton-Smith. This competition is mostly online retailers.
This comes

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Uber, Cabify “Evicted” from Barcelona as Turf War with Taxi Drivers Gets Ugly

January 24, 2019

Will Madrid be next?
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Less than a year has passed since Uber returned to Barcelona, after a three-year leave of absence. But it’s already planning to leave the city again in the wake of renewed conflict with the city’s highly mobilized taxi drivers as well as the passage of unfriendly regulation.
Late last week the Catalan regional government unveiled legislation that would force customers to request the services of ride-sharing firms 15 minutes before travelling. It wasn’t enough to placate the taxi representatives, who wanted the period to be extended to between 12 and 24 hours. Donned in yellow vests reminiscent of recent anti-government protests in Paris, they called a strike on Friday and hundreds of taxis occupied

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Brexit’s Ironic Twists Hit Spain’s Biggest Industry

January 20, 2019

“Peak Tourism” has already set in. Brits account for 22% of tourists in Spain. Now add Brexit.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
In a delectable irony, two of the biggest corporate victims of a disorderly Brexit could turn out to be Spain’s flagship carrier Iberia and low-cost airline Vueling. Both companies are majority owned by British Airways’ parent company International Consolidated Airlines Group (IAG), which is UK-based. And current EU rules require European carriers to be both majority-owned and operated in the bloc.
If the UK leaves the EU on March 29, IAG will no longer meet those requirements. If the current legislation is not changed or a new loophole inserted into it, Iberia and Vueling’s European fleet could find themselves grounded in 70

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Turkey’s Debt Crisis Deepens, Erdogan Bails out Banks His Way

January 16, 2019

Shifting bad consumer & business debts from banks to the public, but the way this bank bailout got packaged is pretty nifty.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Turkish President Recep Tayyip Erdoğan has launched a raft of measures ostensibly designed to reanimate the economy, including offering direct financial support for people with credit-card debt. The plan will enable Turkey’s maxed-out consumers to go to the biggest state-run lender, Ziraat Bank, and apply for debt rescheduling at low rates of interest. “Any retail client from any bank can apply,” Erdogan said.
Credit-card debt is a major problem. Since 2010 consumer credit has increased almost five-fold on the back of low interest rates (at least in certain foreign currencies), government incentives,

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Automakers Prepare for “No-Deal” Brexit

January 12, 2019

They’re already under pressure from the deteriorating market.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Honda, the fourth largest car producer in the UK, has unveiled plans to halt its UK production for the first six days of April in order to stockpile parts in the immediate aftermath of Britain’s exit from the EU. The announcement came on Thursday, the same day that UK Premier Theresa May met her Japanese counterpart Japanese Prime Minister Shinzo Abe to discuss Brexit-related issues, and reads as follows:
“Honda of the UK Manufacturing Ltd has been assessing how best to prepare for any disruption caused by logistics and border issues following the UK leaving the EU on 29 March 2019.
“To ensure Honda is well paced to adjust to all possible outcomes, we are

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Italy’s New Government Eats Its Words, Joins Bank Bailout Club

January 10, 2019

Well, that didn’t take long. And whatever happened to the Eurozone’s new bail-in rule?
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Italy’s government, in its eighth month in power, has already bailed out a bankrupt bank, mid-sized Banca Carige, with public funds. If approved by European Commission and the ECB, it will be the fourth Italian bank rescue in just over two years. As Italian daily Il Sole 24 Ore points out, Italy’s populist government has adopted virtually the exact same playbook to save Carige that was used by its predecessor in the previous three resolutions:
The draft of the new Carige decree is a carbon copy of the one used by the Gentiloni Government for the bailouts of Monte dei Paschi di Siena (MPS), BPVI and Veneto Banca — identical in every

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Brexit Moment in 80 Days, No One Knows What’ll Happen, London’s Finance Industry on Tenterhooks

January 8, 2019

The stakes are enormous.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
With just 80 days remaining until Brexit Day, March 29, nerves are fraying on both sides of the English Channel. Nowhere is this more true than in the City of London where the Square Mile’s dominance of the global financial industry faces its biggest threat in decades. In the City’s worst-case scenario — a crash-out Brexit on March 29 — London-based firms that have not prepped properly for this outcome could be cut off from the continent altogether.
Since moving key operations and staff across the channel is a costly, complex, timely undertaking, many companies have preferred to play a waiting game. But the clock continues to tick down, and as the risk of a disorderly exit grows, inaction is

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Mexico Kicks Off War on its Vast Black Market for Oil

January 1, 2019

“We’re not just talking about the theft of oil, but about a plan involving government insiders and a complex distribution system. It’s not easy to distribute and sell the pilfered contents of 600 pipelines each and every day.”
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Mexico’s new government has launched a multi-pronged offensive against the rampant oil theft that is costing state-owned oil company Petroleos Mexicanos (Pemex) billions of dollars a year and destabilizing entire swaths of the country. Upon its orders, around 4,000 federal police agents, soldiers, and marines will be posted to protect 58 Pemex facilities, six refineries, 39 supply terminals, and 12 pumping stations.
The government will also launch an investigation of civil servants and managers of

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UK Housing Bubble Swoons as Brexit-Day Nears. London Hit Hardest

December 30, 2018

Rampant unaffordability and a slew of other reasons.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
In the fourth quarter of 2018, prices in prime regional housing markets in England and Wales fell by 0.9%, according to global real estate agency Knight Frank. For the whole year, priced dropped by 0.6%, compared to 2017. The rate of annual price growth in the prime country market has averaged less than 1% since mid-2016, compared to almost 3.5% between 2014 and 2016, with peaks as high as 5% in 2014. Something isn’t working anymore:

By a different measure, across the UK as a whole, house price inflation slipped to just 0.9% in the year to November, according to a survey by LSL Property Services/Acadata that is based on every residential property transaction in England

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ECB Ends Corporate Bond Buying, and Look What Happens

December 28, 2018

Companies feel the pain as euro junk-bond yields more than doubled from a year ago.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
To the white-knuckle end, 2018 has been a terrible roller coaster ride for Spanish supermarket chain Dia, once one of Europe’s biggest grocery chains. The firm’s shares, reduced to a penny stock — despite the 22% surge today to €0.44 — have plunged 90% since January. During the same period, the company has issued no fewer than three profit warnings. Its credit rating was slashed to junk in a matter of weeks. To top it all off, two weeks ago, Dia suffered the ultimate ignominy of being ejected from Spain’s benchmark index, the Ibex 35, for being worth too little, to be replaced by a pulp mill called Ence.
As the pressure rises, the company’s

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Amid Brexit Mess, UK Car Production Reels from Worst November since Financial Crisis

December 25, 2018

No one knows what’s going to happen.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Vehicle manufacturing in the UK slumped by 19.6% in November compared to the same month of 2017, amidst rising fears about a no-deal Brexit as well as slowing sales in the world’s largest automotive market, China. With around 30,000 fewer cars produced, it was the biggest year-on-year fall of any November since the financial crisis of 2008, when output shrank by more than 32%.
The industry has now racked up six consecutive months of falling production, according to the industry group, the Society of Motor Manufacturers and Traders (SMMT). Year-to-date, total car production in the UK is more than 8% lower than it was in the first 11 months of 2017. If anything, the trend appears to be

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Multifamily Rentals Were Best Asset Class in 2018 in Spain, But Now Rents Are Heading South

December 20, 2018

Soaring rents outran tenant wages, which can’t last.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Spain’s residential rental market has been on a bit of a roll of late. Over the last 45 months, median rents have risen year-on-year in all but one of them: August 2018. In the hottest markets, such as Barcelona, Madrid and the Balearic Islands, rents are now higher than they were even at the dizzying peak of Spain’s madcap real estate boom. But the boom may be coming to an end.
In November, median rents fell 0.5% from October, according to the real estate agency Fotocasa. On a year-by-year basis, rent increases eased to a meager 0.6%. Note the year-over-year gains of around 10% in 2017 (chart via Fotocasa):

“The Fotocasa Price Index continues to show a clear tendency

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Retail Melts Down Before Christmas in the UK, Spreads to Continent

December 18, 2018

After “the worst-on-record unbelievably bad” November, even e-commerce gets hit, not just brick & mortar, on fears Christmas sales could be terrible. 
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
With just one week left before Christmas, Europe’s fashion retail sector is showing little sign of yuletide cheer. On Monday, the shares of UK-based online fashion and cosmetics retailer Asos Plc plunged 37% to £26.14 after the company warned that Christmas shopping on its web platform had got off to a disastrous start. The stock rout, the company’s worst in almost five years, wiped more than £1.4 billion of its value and raises fears that Europe’s high street malaise may be spreading from bricks-and-mortar stores to e-commerce. Since its peak in January 2018, shares the

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ECB Just Launched “Better Than Blockchain” Instant Payments System

December 3, 2018

But will the big banks play along?
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
On Friday the ECB launched, with minimal fanfare, a brand new system aimed at enabling banks to settle payments instantaneously across Europe, helping them to compete with PayPal and other global tech giants. Developed in little over a year, the ECB’s not-for-profit TARGET Instant Payment Settlement (TIPS) system will let people and businesses in Europe transfer euros to each other almost instantly, at extremely low cost, and irrespective of the opening hours of their local bank.
The first ever payment via TIPS took place on Friday between a customer of Spain’s CaixaBank and one of French bank Natixis. The payment went through in a matter of seconds.
“In launching TIPS, the Eurosystem is

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Troubled Pemex Announces a Big Boost

November 30, 2018

With perfect timing as the new government embarks on restructuring Mexico’s oil industry.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Mexico’s embattled oil giant Pemex has almost tripled its estimate of the potential reserves offered by Ixachi, a recently discovered onshore oil field in Veracruz. The field, located to the south of the major port city of Veracruz, was discovered in November last year, when its 3P reserves (proved, probable and possible) were estimated at 366 million boe (barrels of oil equivalent).
At the time of the discovery the company asserted that the field could hold far more reserves. On Tuesday it revised the figure to over 1 billion boe after drilling two new wells. The new estimated total value of the field is $40 billion. If the estimate

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Wall Street Mega-Landlord Blackstone Turns Screw on Spanish Government & Property Market

November 27, 2018

A lot of money is at stake.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Wall Street mega-landlord Blackstone is once again making its presence felt in Spain, which represents about one-fifth of its global property empire. During the Q&A session of a recent breakfast meeting organized by the American Chamber of Commerce, the senior advisor of the group’s Spanish subsidiary, Claudio Boada, confronted Spain’s Minister of Economy and Business, Nadia Calviño, on the government’s plans to reform Spain’s renting laws in an attempt to slow down the pace of rising rents.
Of particular concern to the private equity colossus is the government’s stated goal of extending the minimum duration of rental contracts from three to five years for private individuals and from three to

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Mining Sector in Mexico Next Target of “AMLO Effect,” Shares Plunge

November 23, 2018

Mexico is #1 silver producer in the world, #2 gold producer in Latin America, and a major copper producer.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
For a president who hasn’t taken office yet and whose government is still in waiting, Mexico’s Andres Manual Lopez Obrador (AMLO) has managed to ruffle a lot of very important feathers. First, he scrapped the country’s most lucrative infrastructure project, a partly built airport for the capital that was expected to generate billions of dollars for many of the country’s richest companies, banks and families. Then, two weeks ago, his National Regeneration Movement (MORENA) party proposed a bill that directly threatens one of the banks’ core businesses: fee gouging. Since then, billions of dollars have been wiped off

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QE Created Dangerous Financial Dependence, Italy Hooked, Withdrawal Next, ECB Warns

November 22, 2018

“Who will purchase the €275 billion of government debt Italy is to issue in 2019?”
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
The ECB, through its army of official mouthpieces, has begun warning of the potentially calamitous consequences for Italian bonds when its QE program comes to an end, which is scheduled to happen at the end of this year.
During a speech in Vienna on Tuesday, Governing Council member Ewald Nowotny pointed out that Italy’s central bank, under the ECB’s guidance, is the biggest buyer of Italian government debt. The Bank of Italy, on behalf of the ECB, has bought up more than €360 billion of multiyear treasury bonds (BTPs) since the QE program was first launched in March 2015.
In fact, the ECB is now virtually the only significant net buyer of

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Resurrected Abengoa & Construction Giant OHL Flirt with Collapse

November 17, 2018

After years of dodgy accounting and mismanagement.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
The past five days have been brutal for two once-emblematic Spanish companies, Abengoa and OHL. Four years ago, the two firms were among the 35 largest listed companies in Spain. OHL was a global construction colossus that was involved in one of the world’s most ambitious and infrastructure projects, the high-speed railway line between the Saudi Arabian cities of Mecca and Medina.
Abengoa was a world leader in the renewable energy sector, with operations across the globe. But it grew so fast and took on so much debt that it needed to hide many of its liabilities. Like Enron, it could not keep the game going on for long, and in 2015 it collapsed under the weight of its own

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France Chases London’s Gold Market Amid Soft-Brexit Hopes

November 15, 2018

In the feverish reshuffling of financial services for a post-Brexit world, London still comes out ahead, but less so.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
As two years of Brexit negotiations finally come to a head and all eyes are on British Prime Minister Theresa May’s frantic efforts to get the draft deal passed, France is making a big move on the City of London’s gold market. As Reuters reported Monday, the Bank of France has partnered with mega-bank JP Morgan Chase, one of the world’s largest bullion trading banks, to offer global central banks and sovereign wealth funds the full gamut of swaps, leases, and gold deposits.
Sylvie Goulard, the Bank of France’s deputy governor, recently wrote in The Alchemist, the in-house journal for the London Bullion

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Is the UK’s “Next Carillion” About to Fall?

November 14, 2018

The company with 70,000 employees is “circling the drain.”
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
When UK construction giant Carillion collapsed in January, it shook the foundations of Britain’s outsourcing industry to its core, casting a harsh light on the high-growth, thinning-margin, poor cash-flow, high-debt business model that has come to dominate the sector. It was the country’s biggest corporate bankruptcy in years. But now another outsourcing firm may be about to follow Carillion’s doomed footsteps.
That firm’s name is Interserve. It employs over 70,000 people worldwide, with around 20,000 employees based in the UK. On Monday its shares plunged over 30% to 30 pence a piece, their lowest level in 30 years, before rebounding somewhat. They’re down 95%

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