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Nick Corbishley

Articles by Nick Corbishley

JP Morgan Chase, BofA, Citi, Barclays, Deutsche Bank, BBVA, Santander Accused of Rigging Government Bond Auctions in Mexico. Bank of Mexico Implicated

3 days ago

Collusion and “absolute monopoly practices.”
By Nick Corbishley, for WOLF STREET:
Mexico’s antitrust agency Cofece has accused the domestic subsidiaries of JP Morgan Chase, Bank of America, Citigroup, Barclays, Deutsche Bank  Santander, and BBVA of colluding to rig Mexican bond prices, in particular treasury notes, over a ten-year period. Following a three-year investigation, Cofece on Monday declared that it had notified “various economic agents” of their likely involvement in a concerted scheme to manipulate Mexican bond prices .
Sergio Lopez, the head of Cofece’s investigative unit, said that the agency’s probe had unearthed evidence that between 2006 and 2016 banks conspired to withhold bond inventories from the market in order to benefit each other. In a summary on its website,

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Just Weeks After the Collapse of Thomas Cook, Spain Launches First Bailout of its Huge Tourism Industry

5 days ago

“An unforeseen crisis.” Other headwinds intensify too.
By Nick Corbishley, for WOLF STREET:
Less than a month after the collapse of Thomas Cook, the global travel & vacation-giant and airline operator, the Spanish government has unveiled an €800 million taxpayer-funded bailout of its all-important tourism industry. During the presentation of the new 13-point royal decree, Spain’s vice-president Carmen Calvo described the measures as a “reasonable response to an unforeseen crisis” — though the term “unforeseen” is ironic because in February we warned about the precarious condition of Thomas Cook and in May we warned that it “verges on collapse.”
Initially, the rescue package was worth €300 million. It included €200 million of cheap credit lines and was intended to help the two

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GM, Ford, BMW, VW, Honda Shift More Production to Mexico. Auto Imports Surge Despite Decline in US Sales

12 days ago

But Mexican exports to other countries plunge, tripped up by global auto slowdown.
By Nick Corbishley, for WOLF STREET:
Automakers continue to shift their production base from the U.S. to Mexico, where labor costs pale in comparison with those in the U.S., despite growing opposition from U.S. auto workers and their unions. U.S. imports of new vehicles from Mexico surged by 8% in the first three quarters of 2019, according to the auto manufacturers association AIMA, released by Mexico’s National Institute of Statistics and Geography (INEGI). This surge has occurred even as total deliveries of vehicles to end-users in the US fell by 1.6%.

Between January and September 2019, 2.03 million new vehicles were dispatched from assembly plants in Mexico to the U.S. market, 158,000 more than

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Low & Negative Interest Rates Get Broadsided by the BIS

15 days ago

They undermine banks. To dodge the fallout, banks chase yield, buying stuff like CLOs, instead of lending. When loans go bad, banks may “evergreen” them. 
By Nick Corbishley, for WOLF STREET:
Prolonged low interest rates are having significant negative effects on banks’ core business and role in the economy, the Bank of International Settlements (BIS) warned in a new paper, just weeks after the ECB reduced its policy rate deeper into the negative after a tumultuous meeting where ECB president Mario Draghi steamrollered a veritable palace revolt.
According to the BIS paper, which is based on a sample of all major international banks over a 22-year period from 1994 to 2015, if the benchmark interest rate falls from 3% to 0%, the average net interest margin declines from 1.42% to 1.31%

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Metro Bank Teeters after Bond Sale Fails. Shares Collapsed 95%

20 days ago

Hedge-fund manager Steven Cohen and Michael Bloomberg are among those ruing the day they bought the crushed shares of the UK bank touted as a “bargain.”
By Nick Corbishley, for WOLF STREET:
Even by its own recent standards, Metro Bank has had a torrid week. On Monday, shares of the British retail bank tumbled 5%, on Tuesday, 25%, on Wednesday, 5%, and on Thursday, 4.5%, before staging a brief comeback in the final hours of trading on Friday, to end the week 35% lower. By Friday morning, it was the second most-shorted stock on the FTSE all shares index, behind the collapsed travel & vacation-giant Thomas Cook.
The main trigger for this week’s rout was the bank’s failure on Monday to raise a much-needed £250 million by issuing non-preferred bonds that deeply skeptical investors

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Thomas Cook Collapses, up to 600,000 Travelers Stranded in Hotel & Airline Chaos, Triggers “Biggest Peacetime Repatriation in UK History”

25 days ago

Rescue deal fell through at the last moment. China’s Fosun and other shareholders are toast. Creditors get to fight over the debris. 
By Nick Corbishley, for WOLF STREET:
Thomas Cook, the global travel & vacation-giant with its own airline and hotels, with 21,000 employees globally — 9,000 of them in the UK — and a 178-year history, ceased operations with immediate effect early Monday morning after failing to raise the £200 million of additional funds being requested by its main creditors to complete its rescue. The British government also refused to step in at the last minute to bail out the company.
The travel group has been placed into compulsory liquidation, as opposed to administration, meaning the business will be wound down. The immediate result has been chaos in holiday

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Use of “Hidden Debt Loophole” Spreads Among Australian Corporations

26 days ago

Situation already so bad that hiding debt becomes a priority?
By Nick Corbishley, for WOLF STREET:
Australian engineering group UGL, which is working on large infrastructure projects such as Brisbane’s Cross River Rail and Melbourne’s Metro Trains, recently sent a letter to suppliers and sub-contractors informing them that as of October 15, they will be paid 65 days after the end of the month in which their invoices are issued. The company’s policy had been, until then, to settle invoices within 30 days.
The letter then mentioned that if the suppliers want to get paid sooner than the new 65-day period, they can get their money from UGL’s new finance partner, Greensill Capital, one of the biggest players in the fast growing supply chain financing industry, in an arrangement known as

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Interest Rate Derivatives Trading Explodes to $6.5 Trillion/Day

29 days ago

A gigantic spike in 3 years. The UK dominates.
By Nick Corbishley, for WOLF STREET:
The volume of over-the-counter (OTC) interest rate derivatives traded globally soared by 141% in three years to $6.5 trillion per day in April 2019, according to the Bank for International Settlements’ new Triennial Survey of Global Derivatives Markets. In the prior survey period, April 2016, $2.7 trillion per day in trades were executed. Since 2001, the magnitude of trading volume has multiplied by a factor of 13, from $490 billion per day to $6.5 trillion per day, with a gigantic spike over the past three years:

OTC derivatives are securities that are generally traded through a dealer network rather than on a centralized exchange such as the London Stock Exchange or the New York Stock Exchange.

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Who’ll Rescue Thomas Cook, the Collapsing Vacation-Travel-Airline Giant with 21,000 Employees?

September 13, 2019

Shareholders are already toast. Would China’s Fosun conglomerate follow the time-honored principle of throwing good money after bad?
By Nick Corbishley, for WOLF STREET:
Following yet another bleak week of trading, the shares of 178-year-old British global travel & vacation-giant and airline Thomas Cook, with 21,000 employees globally — 9,000 of them in the UK — are down to 5 pence, down 96% from 130 pence in May last year. At that time, Thomas Cook Group was worth £2.5 billion. Today, its worth a paltry £75 million.
The company now has just one lifeline left: a proposed £900 million rescue deal that would see its biggest shareholder, Chinese conglomerate and investment giant, Fosun, inject £450 million in return for a 75% stake in the group tour operator and a 25% stake in the

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Contagion from Liquidity Crunch at Junk-Bond Funds to Trigger “Material Second Round Effects”: EU Securities Regulator

September 7, 2019

The costs of dodging negative interest rates.
By Nick Corbishley, for WOLF STREET:
In the event of a market shock, 40% of European funds focused on junk-rated bonds — ironically named “high-yield” funds — would not have enough liquid assets on hand to meet investor withdrawals, even if the withdrawals in one week amount to only 10% of the fund’s net asset value, the European Securities and Markets Authority (ESMA) warned this week, raising yet more concerns about the risks associated with the liquidity mismatch at funds that offer daily redemptions while holding illiquid assets that can take much longer to sell at survivable prices.
In the wake of liquidity problems at H2O Asset Management and the recently gated £3.7 billion Woodford Equity Income Fund, two UK-based firms that

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These Incidents Raise New Questions about the Security & Operability of the Banking System in Mexico

September 5, 2019

For now, it’s deny, deny, deny.
By Nick Corbishley, for WOLF STREET:
For seven hours on Friday, three of Mexico’s four biggest banks, BBVA, Citibanamex and Banorte, suffered payment system failures at exactly the same time, leaving millions of consumers unable to withdraw money from ATMs, make payments with their credit or debit cards, or access their online and mobile accounts.
From noon, many of the banks’ customers vented their anger on social media, complaining that they could not carry out transactions of any kind, whether in physical cash (because there was no way of withdrawing money), with their cards or on mobile platforms. While the mayhem caused by the outage may have been short lived, the timing could not have been worse, coming on the Friday of the second quinzena

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Bank of Mexico Raises Alarm About Mexico’s Economy

September 3, 2019

“Particularly worrisome” is that this slowdown “has taken place in a context where the US economy is growing above potential.”
By Nick Corbishley, for WOLF STREET:
The bad omens are stacking up for Mexico’s faltering economy as both domestic consumption and investment dry up while the challenges facing the country’s heavily indebted state-owned oil giant, Pemex, continue to rise. That’s the broad conclusion in the minutes of the latest meeting of the Bank of Mexico’s governing board.
Mexico’s benchmark index, the BMV IPC, has fallen 15% in the last year. For the first time since December 2018, the Mexican peso is once again below the all-important psychological level of USD$0.05 (or 20.07 pesos to $1), after having fallen by 6% in the last month, due in part to the emerging market

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Woodford’s Shuttered Fund Crushed Further by Plunging Stocks in its Holdings, such as Muddy-Waters Target Burford Capital

August 26, 2019

Hedge funds have field day front-running the liquidation. 300,000 investors left twisting in the wind.
By Nick Corbishley, for WOLF STREET:
Neil Woodford, the manager of shuttered asset management fund, Woodford Equity Income fund, just had one heck of a black Friday. First came news that Link Fund Solutions, which manages the corporate governance of Mr Woodford’s investment vehicles, had slashed the valuation of cold fusion developer Industrial Heat, one of Woodford’s largest unquoted holdings, by around 40%, from £91.3 million to £55 million.
The move will shave 4.3% off the net asset value of the Woodford Patient Capital (WPCT) investment trust. Having plunged since the suspension of Woodford’s flagship Woodford Equity Income fund (WEI), shares in the trust dropped a further

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Liquidity Crunch Mangles UK Equity & Real Estate Funds

August 24, 2019

Exodus from funds with illiquid assets forces more funds to block redemptions.
By Nick Corbishley, for WOLF STREET:
Equity and property funds in the UK saw withdrawals of £2.5 billion in July, taking total outflows in 2019 so far to £12.4 billion, according to Morning Star data. Equity funds, with total assets of £691 billion, were down £1.6 billion in July and £10.6 billion so far this year. In a broad flight to safety, money market funds experienced their sixth consecutive month of inflows while investors poured £428 million into Fixed Income funds.
Morning Star analysts blamed the outflows from equity and property funds on fears over a UK recession and a no-deal Brexit. But there’s also a structural element at work: the mismatch in open-ended equity and property funds that offer

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HSBC Runs into Buzzsaw in Hong Kong & China, its Home Market Generating 75% of its Profits

August 19, 2019

HSBC’s pleas of innocence have won little sympathy in Beijing.
By Nick Corbishley, for WOLF STREET:
Global banking behemoth HSBC has found itself on the back foot in recent months in its most important market, Hong Kong and China. The unexpected departure of three senior executives within a week, including its CEO and the head of key China business, sparked a broad sell-off of its shares, which are down 13% in just three weeks.
The world’s eighth biggest bank by assets, HSBC is also reeling from the after effects of increasingly violent political unrest on its home turf. Protracted demonstrations in Hong Kong, triggered by opposition to an amendment to the region’s extradition law, have become increasingly disruptive. Despite the withdrawal of the proposed bill, the Asian financial

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Argentina Crisis Slaps Foreign Banks & Companies Operating in the Country

August 15, 2019

Peso collapse and inflation force Spanish companies and banks — second largest investors in Argentina, behind US companies — to tally their losses.
By Nick Corbishley, for WOLF STREET:
Having learnt their lesson, most European companies and banks have limited exposure to Argentina’s crisis-prone economy. One exception is Spain’s corporate sector, which, after the U.S.’s, has the most exposure to the South American economy, with almost €6 billion invested by its companies there, down from around €9 billion in 2011 after some divestments.
For many of those companies, Argentina is still an important source of revenues and profits. But those revenues and profits are getting slammed by the double whammy of a rapidly deteriorating economy and rampant inflation. Now, there’s the potential

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One of World’s Construction Giants Admits Using Risky Hidden-Debt Loophole “Across Group.” Australian Subsidiary Crushed

August 9, 2019

This “crack cocaine for CFOs” was also extensively used by Carillion until it collapsed.
By Nick Corbishley, for WOLF STREET:
The world’s seventh largest construction and services company (by sales), with subsidiaries around the globe, Grupo ACS, has revealed it is making extensive use of reverse factoring, a controversial financing technique that played a key role in the collapse of UK construction giant Carillion. In a conference call with analysts, ACS chairman, Florentino Perez, said the firm has been rolling out factoring “across the group,” to “more efficiently manage cash flows and match revenues and costs over the course of the year.”
The admission by ACS that it is using reverse factoring of payables across its vast global empire has spooked investors, given the malign role

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Investor Sentiment Goes to Heck After Draghi’s Easing Promise

August 6, 2019

Bitter irony: As Draghi’s term is about to end, investor expectations plunge to where they’d been when he made his “whatever it takes” speech in 2012.
By Nick Corbishley, for WOLF STREET:
The Sentix economic index, a gauge of investor sentiment in the Euro Area, fell 7.9 points in August 2019 to minus 13.7, its lowest level since October 2014. The index has been on a downward spiral since January 2018 but in recent months the trend line has sharply steepened.
The index of investor confidence is meant to serve as a barometer of the general mood of people and institutions who are invested in bonds, shares, options and other financial instruments. It is run by the Frankfurt-based boutique investment firm Sentix and is based on a regular survey of investors from over 20 countries. It is

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UK Auto Production Plunges to 7-Year Low on Slumping Global Demand & “No Deal” Brexit Fears

August 2, 2019

Investment in the auto sector grinds to a halt.
By Nick Corbishley, for WOLF STREET:
Production of vehicles in the UK plunged 20% in the first half of 2019, compared to the same period last year, as the fallout from sharply declining demand in key export markets such as Europe and China as well as fears of a no-deal Brexit took a heavy toll on the sector, according to the Society of Motor Manufacturers and Traders (SMMT). Engine manufacturing dropped 10% during the same period. And commercial vehicle production, until recently a rare silver lining for the embattled sector, collapsed 57% in June year-over-year, dragging down the first half by 15%.
Britain’s car industry has now racked up 13 straight months of declining vehicle production and ten straight months of declining engine

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ECB’s NIRP-Forever Policy “Destroys Banks’ Profitability Equation”: Bankia CEO. Spanish Banks Reel. Problems Stack Up

July 30, 2019

Spain’s Big Five banks (already down from the Big Six) could soon be four.
By Nick Corbishley, for WOLF STREET:
The ECB’s NIRP forever policy is crushing Eurozone banks’ ability to turn a profit, warned the CEO of Bankia, José Sevilla, on Monday. “It is clear that the current rate scenario is hurting the profitability of the banking business,” he said. “We think low rates are good and perhaps even desirable. But the same cannot be said of negative interest rates since they destroy banks’ profitability equation. Sustained over time — and we have been negative for five or six years now — they hinder and penalize the profitability of Spanish and European banks.”
In February last year, the formerly bailed out lender launched an ambitious three-year plan (2018-2020) that included an

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Hit by Epic Construction Downturn, Mexico Faces Reality: New President Tries to Get Folks to Play by the Rules, and Everything Stalls

July 28, 2019

Construction industry has worst month since 2006, fourth month in a row of declines.
By Nick Corbishley, for WOLF STREET:
Construction activity in Mexico registered its biggest year-on-year fall in May since records began, in 2006, according to a monthly survey of construction companies carried out by the National Institute of Statistics and Geography (INEGI). It was the fourth consecutive month of declining activity.
The total productive value of construction projects under development contracted 3.1% between April and May this year and 10.3% between May 2018 and May 2019. During the same 12-month period, the total hours worked in the sector fell by 5.2% and the total number of (official) workers employed fell by 4.9%, to the lowest level since records began.
The construction

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Another UK Fund Just Slammed its Doors Shut on Investors

July 19, 2019

This time, a fund liquidity crisis traps institutional investors, including pension funds.
By Nick Corbishley, for WOLF STREET:
Less than a week after the Bank of England issued a warning about the systemic risks posed by illiquid investment funds, news has surfaced that another run-on-the-fund caused fund managers to suspend withdrawals: This time, it’s M&G Investments, the fund management arm of UK insurance giant Prudential, that has suspended withdrawals from one of its property funds.
The move come into force last month and was apparently triggered by a rush to the exits from a number of big clients, most of whom are large pension funds.
Restrictions were also placed on certain withdrawals from the Prudential UK Property fund, which feeds into the M&G fund. According to The

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Not Helpful for Crushed European Bank Stocks: Stress Test a Sham, European Court of Auditors Warns

July 15, 2019

Just when European banks need to inspire confidence more than ever.
By Nick Corbishley, for WOLF STREET:
European bank stocks continue to get hammered near multi-decade lows by a slew of problems, including the ECB’s monetary policies, particularly its negative-interest-rate policy (NIRP), festering nonperforming loans, and a well-deserved lack of confidence by investors. This was just exacerbated by a scathing new report from the European Court of Auditors (ECA) highlighting a litany of problems and shortcomings with the European Banking Authority’s latest stress test. Among other things, the test ignored some of the most common factors that cause a bank to fail, excluded many of Europe’s most fragile banks, and used simulations that were a lot more benign than the last financial

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Liquidity Crisis at Woodford Equity Fund Is Symptomatic of Systemic Problem, Bank of England Warns

July 12, 2019

$30 trillion of assets globally are held by similar open-ended funds.
By Nick Corbishley, for WOLF STREET:
The Bank of England warned on Thursday that “financial stability risks are increasing” from giant open-ended funds, which are estimated to hold some $30 trillion in assets globally. These funds are vast sources of financing for the real economy but can pose a systemic risk since the money often goes into assets that are hard to sell quickly, the central bank said in its latest Financial Stability Report.
If investors in an open-ended fund decide to pull their money en masse, which they’re ostensibly allowed to do at just about any time, the fund could struggle to liquidate its assets in time, especially if those assets are not very liquid.
This is exactly what has happened at

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In Escalation of Trade War With Switzerland, EU Risks Balkanizing Europe’s Financial Markets

July 10, 2019

“Weaponizing” Europe’s financial services, with an eye on the UK after Brexit?
By Nick Corbishley, for WOLF STREET:
In recent days, the stock exchanges of Switzerland, the fourth-largest European market by value-traded, were dealt what seemed at first like a hammer blow: Brussels stripped them of financial equivalence with the European Union after a previous trade agreement between the two sides expired, with the result that traders from the EU’s 28 member states are no longer allowed to trade shares in Swiss companies if those shares are also traded in the EU.
That applies to virtually all heavyweight Swiss companies such as Nestlé, Roche and Novartis, whose shares are included in the portfolio of just about every major European investor.
The EU’s long-telegraphed decision to let

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Liquidity Fears Hit Other UK “Equity Funds” as Investors Remain Trapped in Woodford Fund

July 8, 2019

Shares of one fund plunged 22% on Friday. Other funds under pressure, raising serious questions about just how liquid “equity funds” in the UK are.
By Nick Corbishley, for WOLF STREET:
There’s still no sign of relief for the hundreds of thousands of investors whose money is trapped in one of the UK’s biggest equity funds, the Woodford Equity Income Fund. The fund is supposed to offer its shareholders daily liquidity, meaning they can take part or all of their money out any day of the week. But that was before a slow-motion (but accelerating) run on the fund forced its manager, hedge-fund legend Neil Woodford, into taking the last-gasp decision, on June 3, to place a ban on redemptions. Since then, investors have been unable to access their money. And it’s not clear how much longer

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Diesel Death-Spiral Drives UK Auto Sales to Five-Year Low

July 6, 2019

“Decline in buyer confidence,” collapsing sales of diesels & plug-in hybrids. But EV sales soar.
By Nick Corbishley, for WOLF STREET:
Sales of new passenger vehicles, as measured by registrations, fell 4.9% in June from a year earlier in the UK, according to the Society of Motor Manufacturers and Traders (SMMT). The UK is the second largest auto market in the EU, behind Germany. Total sales in the first half of 2019 dropped 3.4% year-over-year, driven by the ongoing collapse in diesel sales. But sales of gasoline vehicles rose 3.5% in the first half, and sales of battery electric vehicles (BEV) soared 60%.
It is the third year in a row of declining first-half sales for the UK’s automotive sector. Since the peak in the first half of 2016, registrations have dropped 10.6%, falling

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