Diamond News Archives

The four most expensive words in the English language are "this time it's different.”

– Sir John Templeton, Investor

It’s different this time, and it's also not different this time.

It's different this time because the credit-driven global U.S. economy is burdened with a monumental level of financial obligations relative to GDP.  According to the Bank of International Settlements ("BIS"), loans and debts outstanding which burden corporations, households, and the government in the United States have reached $48.3 trillion in the United States or 250% of GDP.  Including off-balance sheet items, the effective level of debt outstanding is almost $100 trillion, at $99.6 trillion, or more than 500% of GDP.  It’s different this time because the U.S. economy has never piled on so many financial obligations.

With that said, it's also not at all different this time, because this is not the first time in history that a society's financial obligations have grown to unsustainable levels.  As just one example, students have amassed more than $1.5 trillion of student loans^[1], which have increased at a rate of more than 10% per annum since 2006.  This story has been repeated often through history, and it usually ends in pain for those who hold their savings in cash or bonds.  The downside risk today for investors trying to save for retirement is captured in Charles Bullock’s account of Dionysus of Syracuse, from more than 2000 years ago.

Having borrowed money from citizens of Syracuse and being pressed for repayment, he [Dionysus] ordered all the coin in the city to be brought to him, under penalty of death.  After taking up the collection, he...

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References

1. ^{^} Skip to main content (www.zerohedge.com)

(IDEX Online) – The first PGI Insight report by Platinum Guild International (PGI) reveals a shift in the platinum jewelry industry to a consumer-centric business model in China with pioneering players seeing improvement in business.

PGI Insights offer an in-depth focus on key market trends in the global and regional platinum jewelry industry. Through this first report, PGI understands that a successful business model transition will enable the platinum jewelry industry to further capture new demand among different demographics and segments in order to compete within the existing jewelry market ecosystem.
 
Based on the findings of the recent Platinum Jewelry Business Review (PJBR 2017) survey, a number of retailers in the platinum jewelry industry have made strategic changes to better engage with Chinese consumers and improve retail margins. With enhanced competitiveness, those market players are in a more favorable position to expand their platinum jewelry business to other segments, beyond wedding occasions where platinum is the dominant precious metal. There exists the potential for 350,000 ounces of  incremental demand from bridal jewelry in lower tier cities, and 270,000-ounce incremental demand from capturing just 10% of post-bridal gifting in China. According to the PGI Insight report, based on understanding consumers’ attitudes and desires, platinum jewelry marketing can be more targeted, while also helping the industry to move towards piece-based pricing for more value-added products.
 
Platinum jewelry accounts for approximately 70% of China’s platinum demand, with around 12 million pieces sold each year. Unlike Japan, the US, and Europe, 80% of platinum jewelry in China is still in the form of plain and unbranded products. As China’s new consumers increasingly look for distinctive designs, and retailers demand better margins, this generic...

NEW YORK (Reuters) - A decade on big U.S. banks are still running down and selling off crisis-era mortgages, a process executives point to as weighing on loan growth.

Eager to see a turning point in loan books, analysts count these portfolios as one factor, along with home equity loan runoff and new mortgage demand, to watch for when deciphering the true loan growth picture as U.S. second-quarter bank earnings start on Friday.

Wells Fargo & Co and Bank of America Corp executives have flagged portfolios from prior to the 2008-2009 crisis era where banks are no longer originating similar new products when they are asked to predict a turning point in consumer loans.

“These are portfolios of a bygone era that were very, very painful for the banks,” said Gerard Cassidy, bank analyst with RBC Capital Markets. “They are not plain vanilla portfolios, which means they are more costly to manage. It may just not be worth the headache.”

Analysts have said higher loan growth is critical to driving bank’s stock prices, but they anticipate only a modest acceleration year over year, driven primarily by commercial and industrial loans, not residential.

“Remember that there’s a portion of that book that, again, is pre-crisis,” Chief Executive Tim Sloan said about Wells Fargo’s mortgage book at a May conference. He added the bank continues to examine the older portfolio’s risk-return tradeoff and sells assets when the opportunity arises, factors “that could have some impact” on growth.

Wells Fargo owns around $23 billion of “Pick-A-Pay loans it picked up by...