STRUCTURED ASSETS IN CHINA – WOE BE THE FUTURE
ABS is a term of Asset Backed Securities. The unregulated market for these assets is global not just in China who is last in at the party. Basically you take assets, of various rankings ratings and classes, and you put them into an omelet pan and you scramble them up at high heat in a structured asset. A type of agreement. The new omelet of crap securities is then served to the market as a better class of security called many things, but ABS is a growing market class for trillions of dollars.
China got into this party late – a couple years back. They are now serving 150 billion of this security to internal and external investors sampling their risk demand tolerances.
For example, although this market just took off several years ago in China a first major default is taking place. These super high risk securities are thought to be beyond defaulting really when in fact the risk of market collapse in ABS is only beat by the ETF markets in general.
One Mongolia securitized by ABS bridge, could not collect enough toll revenue, to pay the investors holding the ABS and defaulted.
I caution the markets that an unknown percentage of securitized projects are based on over amplitudes of optimism in their projections to support the debt levels being achieve in China today. All this including ETF global markets represent an uncontrolled financial experiment, in the new digital age of tools, fully outside any old model of regulation, with no future outcome defined as to how this experiment will go. I have cautioned a world depression credit deleveraging worst than any depression known to civilization may be a reset that is looming.
Mongolia’s default on its bridge may be the canary singing and then falling over dead in the mind shaft.
Meanwhile the miners just increase their speed.
China is going to lower its regulatory oversight for ABS and give a green light signal to expand the shadow banking sector it was once stating it wished to reign in from excessive abuse in risk taking.
Personally I see ABS as a faster growing, new and terrifying digital tool to massive leverage risk and credit spirals that in the end always create collapse of their own weight. The Digital Market Space requires a new FRAME WORK OF G 100 COLLABORATIVE REGULATION and until we get just that nations are hostage to policies they have limited appreciation for real outcome when making.
ABS is one of many examples.
As always the public who will be most harmed by these unregulated new security classes has no clue what is taking place in their space. No clue at all.
Berny Dohrmann – YOUR FRIDAY REPORT KEEPING IT REAL
PS: Janet Yellin the worst Fed Chairperson since 1900 – should have kept interest level – continued quantitive easing – and her cost for not doing so will become the historic pivot of when America failed systemically. It was this week – wait – you’ll forget – but I will not forget.