dChan - Q Origins Project Archive

Anonymous ID: 85630d June 30, 2024, 4:32 p.m. No.21117370 🗄️.is 🔗kun

Tyb

Japan Post Bank is likely going to be an even BIGGER problem for the BoJ than Norinchukin Bank

Today, #Norinchukin Bank is starting to be less of an obscure name compared to more than 7 months ago when the #FED quietly added it to the list of counterparts eligible to access the standing Repo Facility the central bank established with the purpose of dealing with emergency liquidity shortfalls in systemically important institutions.

What was Norinchukin’s big mistake? To have heavily invested in long-duration bonds and credit instruments when rates were low across the globe without an effective hedging strategy in place since they were so sure rates would have remained low for such a long time (hence no need to pay for insurance and trim the bottom line). The bank is blaming higher interest rates’ impact on the value of its government bond holdings as the cause of its losses, but why don’t they simply hide them in their “Hold To Maturity” books like everyone else does? The answer is very straightforward because clearly they are being forced to sell those government bonds at a loss. As you can see from the slide below from the bank’s latest financial presentation, CLOs represent 30% of Norinchukin’s total “Credit” investments that alone account for 42% of Norinchukin’s portfolio.

Yes, I know what you are thinking at this moment: “if those AAA CLOs are of such high quality and not bearing losses as Norinchukin claims, why not sell those instead of $63bn of practically risk-free government bonds that will repay at par as long as they are held till maturity?”

This is the answer:

1 – It is an open secret that CLOs and other Credit investments such as MBS and CMBS are carrying even larger losses, so better to keep them “hidden” in the HTM books.

2 – There aren’t many buyers for radioactive assets, especially CLOs, available in the market at the moment.

Now, the BOJ and the Japanese authorities are making sure the MSM narrative treats Norinchukin as an isolated case that is being managed and will be dealt with without contagion to other banks in the local and potentially global system. However, the truth is there are many other “Norinchukins” out there because for many years every major Japanese financial institution was focused on deploying capital abroad (most of that #JPY printed out of thin air by the #BOJ) since it was effectively illogical to invest at rock-bottom rates at home. Among all of them, if Norinchukin was the “queen” then Japan Post Bank could be considered the “king.” As you can see from the latest financial statements, 37% of Japan Post Bank’s assets are invested in “Other Securities”. What are those “other securities”, we don’t find the answer in Japan Post Bank’s financial statements, but in its investors’ presentation and the answer is 29.3 Trillion #JPY of “Foreign Bonds” and 57 Trillion #JPY of “Investment Trusts” that according to the barely readable footnote in light grey at the bottom of the table “are mainly invested in foreign bonds, private equity funds, etc.”. Now tell me, how is it possible that, while Norinchukin Bank is dealing with steep losses in its foreign bond investments, Japan Post Bank is claiming an unrealized capital gain of more than 10% on those? How is it possible that a gain is also being marked for “Investment trusts” mainly invested in foreign bonds and private equity funds? Of course, it’s not possible considering the two banks operate in the same planet Earth, and share a similar balance sheet structure and asset management approach. Since unicorns from a fantasy world populate Japan Post Bank’s accounting department, apparently the bank is also marking a profit on its CLOs and securitized product investments while Norinchukin does not.

To conclude, Japan Post Bank holds 86 trillion #JPY of assets reasonably bearing a significant amount of “paper” (so far) losses against just a little less than 10 trillion #JPY of capital. Yes, they hold double the amount of capital than Norinchukin but they are also carrying double the risk, and overall its balance sheet is double of Norinchukin’s size, so relatively speaking they are roughly in the same situation. How long before the market stops believing in its accounting unicorns and starts realizing there is an even bigger problem here?

https://justdario.com/2024/06/japan-post-bank-is-likely-going-to-be-an-even-bigger-problem-for-the-boj-than-norinchukin-bank/

45in N757AF 757 departed Dulles Intl to Palm Beach Intl

>>21117489

Solidified his wealth with generous warrant grants (Goldman, Harley-Davidson during the 2008 Financial coup.

BH been spending billions on share buybacks too -$2.4B this year (at 1st Q end and that will be updated in a few days for Q2

>>21117493

45in N757AF 757 on final at Palm Beach Intl from Dulles depart

Economic Schedule for Week of June 30-Market News Sunday

The key report scheduled for this week is the June employment report to be released on Friday. Other key reports include the June ISM Manufacturing survey, June Vehicle Sales and the Trade Deficit for May.

To close Q2 The S&P 500 enters Q3 up 14.5% so far this year, while the Nasdaq Composite rallied more than 18%(the short bus never learns there)The Dow Jones Industrial Average gained a more modest 3.8% in the first six months of the Midway through the year, more than two thirds of the S&P 500's gains for the year have come from Nvidia, Apple, Alphabet, Microsoft, Amazon, Meta and Broadcom.Nvidia alone has driven nearly one-third of these gains. year.(Continue to watch muh yenas they replaced the currency lackey on Friday-meet the new “boss”……on the long term chart there is a sharp strengthening in 1986 from about 190 to 163.xx so basically one could say it’s a Yuge gap waiting to be filled and quickly depreciate to that level however you can’t really compare the value of muh Yen back then to nao but nevertheless it does exist on muh chart-Cap #2 yellow highlight https://tradingeconomics.com/japan/currency

>>21117432

If I had to guess when they intervene (if they do as it depends on levels but they also may be doing small ones to take pressure off) it would be right around when the Fed releases the minutes on Weds-so we will see if they torch another $60b in straight cash or sell USTs to do this-muh bet is they have a facility to fund this via NYFED as they don’t want to spike rates going in to muh ‘selection’. Whenever they do eet it will be a fart in space and only serve as a temporary affect-the short bus will just reload…and would be throwing a long on it starting on Friday last week…not financial advice just an opinion based on many years experience-about equal to that 1986 low and “hot air pocket” described above)

This week in Asia: Tokyo picks next governor, Shanghai AI conference, BYD opens Thai factory

https://asia.nikkei.com/Spotlight/Your-Week-in-Asia/Tokyo-picks-next-governor-Shanghai-AI-conference-BYD-opens-Thai-factory

GDPNOW was lowered from 2.7% to 2.2% on Friday and gets another hilarious update on Monday and likely back “up” again since they can’t have ‘down’ for very long hence the update from one biz day to next.

https://www.atlantafed.org/cqer/research/gdpnow

Monday, July 1st -

10:00 AM: ISM Manufacturing Index for June. The consensus is for the ISM to be at 49.0, up from 48.7 in May.

10:00 AM: Construction Spending for May. The consensus is for a 0.3% increase in construction spending.

Tuesday, July 2nd -

9:30 AM: Discussion, Fed Chair Jerome Powell, Policy Panel Discussion, At the European Central Bank (ECB) Forum on Central Banking 2024, Sintra, Portugal

10:00 AM ET: Job Openings and Labor Turnover Survey (JOLTS) for May from the BLS. Jobs openings decreased in April to 8.06 million from 8.36 million in March. The number of job openings (yellow) were down 19% year-over-year and quits were down 3% year-over-year.

Late in the day: Light vehicle sales for June. The consensus is for light vehicle sales to be 15.9 million SAAR in June, unchanged from 15.9 million in May (Seasonally Adjusted Annual Rate)(this is going to be CARnage but smooved over). Wards Auto is forecasting sales of 15.9 million SAAR in June.

Wednesday, July 3rd -

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.(Ded meat here)

8:15 AM: The ADP Employment Report for June. This report is for private payrolls only (no government). The consensus is for 170,000 payroll jobs added in June, up from 152,000 in May.

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 228 thousand initial claims, down from 233 thousand last week.(watch for the ubiquitous revisions lower)

8:30 AM: Trade Balance report for May from the Census Bureau. The consensus is the trade deficit to be $72.2 billion. The U.S. trade deficit was at $74.6 billion the previous month.

10:00 AM: the ISM Services Index for June. The consensus is for a reading of 52.5, down from 53.8.(must keep above 59-below 50 shows contraction)

2:00 PM: FOMC Minutes, Meeting of June 11-12, 2024

US markets will close at 1:00 PM ET prior to the Independence Day Holiday.

Thursday, July 4th -

All US markets will be closed in observance of Independence Day

Friday, July 5th -

8:30 AM: Employment Report for June. The consensus is for 180,000 jobs added, and for the unemployment rate to be unchanged at 4.0%. There were 272,000 jobs “added” in May, and the unemployment rate was at 4.0%.

https://www.calculatedriskblog.com/2024/06/schedule-for-week-of-june-30-2024.html