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What Policy Makers Are Saying And What This Means For Central Bank Balance Sheets And Asset Prices?
In the past few weeks, China has signaled that it will arrest the currency appreciation, allow the use of leveraged collateral for international investment and finally deal with overheating domestic prices. This means that it should accelerate outbound investment by selling FX to buy USD and Euro assets.  This means a reduction in the RRR, a domestic reduction in deposits and sales of dollar holdings. Reserves in the West are large, but let’s not forget [...]
Paul Schulte
March 20, 2014
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Bank stocks tell us plenty about property stocks
In virtually all cases globally, movements in bank stocks tell us important information about property stocks. The assets of banks are mostly collateralized property. And the liabilities of property companies are mostly collateralized loans. Of course they are tied at the hip. A prime example is the Philippines. The bank stocks and the property stocks have a 98% correlation. They are the same creature. The charts inside show this without a shadow of a doubt. [...]
Paul Schulte
March 12, 2014
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New Rules on Outbound Investment to Cause Failing Asset Price. Property Collateral in Jeopardy. The CNY has Likely Peaked
China wants lower asset prices. It wants fewer reserves. It wants less inflows. The only way to do this is to accelerate capital outflows and encourage international leverage.  This is happening now. How 1) The CNY volatility is intentionally being encouraged. 2) Important new rules have been promulgated to encourage PRC nationals to use domestic asset prices as collateral for FX borrowing. 3) Offshore RMB issuance is being ramped up in a big way.  (Take a [...]
Paul Schulte
March 7, 2014
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Flattening US yield curve, liquid banking systems, safe values.
Property is the collateral of a bank and must be funded by deposits liabilities and capital. We wrote on December 9 that 2013 marked the year when the deposit liabilities of GEMS countries were all spoken for and, therefore, property collateral was in jeopardy.  In layman's terms, the GEMS credit cycle is over and the Western credit cycle is bottoming out. Marginal money is rightly moving away from GEMS property and into western property.  Goodbye Shanghai and [...]
Paul Schulte
February 20, 2014
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Finovate Europe 2014
We continue to pound the pavement looking for companies that are moving into the emerging world with mobile phone banking. That is clearly the future. Branch banking is dead. The real winner so far is Monitise.  Few others are on the horizon.   I am at Finovate Europe 2014 in London now and the companies which are showing off their banking applications this year border on the tedious and, I dare say, "goofy".   There is general disappointment among [...]
Paul Schulte
February 13, 2014
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As GEMS Credit Cycles Poop Out And LDRS Breach 100 – Retail Centers Are In Trouble
China is intensifying its crackdown on lavish spending.  South East Asian LDRs are rising above 100 all over. Investment banks are shrinking, and GEMS commercial banks may FINALLY figure out that mobile phone banking is 98% cheaper than branches.  Think about it -- US banks closed 1,500 branches across the US and branches have been declining since 2010.  GEMS banks will figure this out soon.Dubai is taking market share. Japan is really cheap now. Even Italian [...]
Paul Schulte
February 6, 2014
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About Paul Schulte

Paul Schulte has had a career in equity research which spans 22 years on both the buy and sell sides covering the Asian and emerging markets. He also has 5 years of government policy experience in emerging markets. He has been frequently ranked in top-five…read more

Paul Schulte

Philosophy

The Schulte Research Report focuses on banks, bank credit, liquidity & corporate solvency. Bank credit drives economics, not the…read more