NPC Auto races, Rockville Fair, Montgomery County, Maryland 1923
How can Merkel NOT bail out/bail in Deutsche over the weekend?
Shares of Deutsche Bank fell 7% at the start of the European trading session Friday, amid capital concerns following a proposed settlement by the U.S. Department of Justice and a report that some hedge funds were reducing their exposure to the embattled bank. The German lender’s stock has been on wild ride in recent weeks and dipped below 10 euros a share on Friday morning, a new record low for its European-listed shares. By 9.30 a.m. London time the stock had pared some losses to trade around 5.7% lower. The German DAX was down 1.7% and the banking sector as a whole in Europe was down 3%.
Rival German lender Commerzbank saw its shares fall 6.5% after announcing job cuts on Thursday and a plan to cut its dividend. Other European lenders like Unicredit, Barclays and Credit Agricole also saw hefty losses as the session progressed. The cost of insuring Deutsche Bank’s debt against default jumped by 21 basis points on Friday, according to data from Markit, and trading in Deutsche Bank’s so-called “CoCo” bonds – widely-watched contingent convertible bonds – set a new record low, according to Dow Jones. These bonds are converted into equity once a specified event has occurred (if the bank were to undergo a precautionary recapitalization, for instance).
Vigilantes wake up.
With stunned investors reliving memories of the 2008 crisis as Deutsche Bank, a bank that is half the size of its host, Germany, seemingly on the precipice, and with Angela Merkel vowing as recently as this weekend not to bailout the bank, the market felt paralyzed: should it BTFD as it always has every time in the past 7 years, or should it wait for more clarity from the bailouters-in-chief before allocating capital to another riskless transaction, which may well be the next Lehman brothers. Not helping matters was Jeffrey Gundlach, who as part of his weekly chat with Reuters’ Jennifer Ablan said that should tread lightly carefully when trading Deutsche Bank shares because a government bailout is not out of the question. The problem is how does one get to it. “I would just stay away.
It’s un-analyzable,” Gundlach said about Deutsche Bank shares and debt. “It’s too binary.” Gundlach said investors who are betting against shares in Deutsche Bank might find it futile. Maybe, but not if they cover their shorts before the max pain point, something which the market – where equity/CDS pair trades now allow a “go for default” strategy – will actively seek out. “The market is going to push down Deutsche Bank until there is some recognition of support. They will get assistance, if need be.” What happens then? “One day, Deutsche Bank shares will go up 40%. And it will be the day the government bails them out. That jump will happen in a minute,” Gundlach said. “It is about an event which is completely out of your control.”
Amid mounting concern about Deutsche Bank’s ability to withstand pending legal penalties, about 10 hedge funds that do business with the German lender have moved to reduce their financial exposure. The shares slumped. The funds, a small subset of the more than 800 clients in the bank’s hedge fund business, have moved part of their listed derivatives holdings to other firms this week, according to an internal bank document seen by Bloomberg News. Among them are Izzy Englander’s $34 billion Millennium Partners, Chris Rokos’s $4 billion Rokos Capital Management, and the $14 billion Capula Investment Management, said a person familiar with the situation who declined to be identified talking about confidential client matters.
Deutsche Bank’s New York-listed shares fell 6.7% to a record low of $11.48 on Thursday. “In any given week, we experience ebbs and inflows,” said Barry Bausano, the bank’s chairman of hedge funds. “And this week is no different; it goes on all the time.” He declined to comment on net flows. While the vast majority of Deutsche Bank’s more than 200 derivatives-clearing clients have made no changes, the hedge funds’ move highlights concern among some counterparties about doing business with Europe’s largest investment bank. Deutsche Bank’s stock and debt have been under pressure after the U.S. Justice Department this month requested $14 billion to settle an investigation into residential mortgage-backed securities. The bank has said it expects to negotiate that lower, as other Wall Street banks have.
“The 38-company Bloomberg Europe Banks and Financial Services Index has tumbled 24% this year..”
Even before the opening bell in New York, Thursday looked like a grim day for some of the giants of global banking. But few expected the barrage of bad news that soon hit on both sides of the Atlantic – a rat-a-tat-tat of job cuts, scandal and financial worry that sent bank shares tumbling and left many investors wondering just where or when the pain would end. It began in Germany, where long-struggling Commerzbank unveiled yet another plan to regain its footing, this time by cutting one in five of its employees. In Washington, came still more blistering attacks on John Stumpf, whose grip atop embattled Wells Fargo, the largest U.S. mortgage lender, remains tenuous amid the uproar over a scandal involving unauthorized accounts.
And then, back in Germany, came the bombshell: revelations that some hedge funds were moving to reduce their financial exposure to Deutsche Bank, now the biggest worry in global finance. Before Stumpf left the U.S. House chambers after more than four hours of grilling, news broke his bank would be hit with more penalties after improperly repossessing cars owned by U.S. soldiers. “While each has unique challenges, the overwhelming thing that has happened to the banks is they’re forgetting their purpose, while complexity is increasing opportunity for errors,” said Jon Lukomnik at the Investor Responsibility Research Center Institute in New York.
Eight years after the financial crisis, the global banking industry is groping for a way forward. Global regulators have sought to make banks look more like boring utilities, but that road has proven steep. Emboldened by an international populist groundswell, they continue to dole out fines and penalties, and firms are scrambling for ways to make money as trading volumes decline and capital requirements become more stringent. The 38-company Bloomberg Europe Banks and Financial Services Index has tumbled 24% this year, while the KBW Bank Index of 24 U.S. lenders has slid 4.6%, led by Wells Fargo’s 18% decline.
U.S. stocks fell as banks retreated amid growing concern that Deutsche Bank’s woes will spread to the global financial sector. Health-care shares sank on speculation tighter regulations will crimp profits. Financial shares erased gains and tumbled 1.5% after a Bloomberg News report that signaled growing concern among some Deutsche Bank clients roiled markets. A number of funds that clear derivatives trades with Deutsche withdrew some excess cash and positions held at the lender, according to an internal bank document seen by Bloomberg. Johnson & Johnson and Pfizer fell more than 1.7%, pacing declines among drug companies. The S&P 500 Index slid 0.9% to 2,151.13 at 4 p.m. in New York, after falling as low as 2,145, the level that marked the bottom of a selloff on Monday.
The Dow Jones Industrial Average declined 195.79 points, or 1.1%, to 18,143.45, and the Nasdaq Composite Index lost 0.9%. About 7.7 billion shares traded hands on U.S. exchanges, 17% more than the three-month average. “There’s some problems in the financial industry now,” Brian Frank at Frank Capital said. “There’s no fear and no volatility in the stock market so something like Deutsche Bank could make people say, maybe we shouldn’t be trading at such high valuations. It doesn’t make it easier for U.S. banks, especially with what’s going on with Wells Fargo.” The S&P 500 trades at 18.4 times forecast earnings, the highest since 2002. The main U.S. equity benchmark slipped below its average price during the past 50 days on Thursday, while erasing its climb for the month. Stocks fluctuated earlier amid a gain in energy shares sparked by the first output-reduction decision by OPEC in eight years.
Make or break for Merkel’s career?!
German officials could be about to find themselves in an uncomfortable position: Being called on to show they’re ready to rescue a bank in a part of the world where such operations are considered taboo. Deutsche Bank came under intensified market fire Thursday, the latest salvo being a Bloomberg report that a small number of hedge funds are trimming their sails at the German bank. [..] Shares tumbled more than 7% in mid-afternoon trading. The plunge took the broader market down as well. Consequently, market talk intensified that it’s becoming time for the German government step in and assure investors that it will be at the ready to stabilize both Deutsche and the broader system — much along the lines of what U.S. officials had to do during the 2008 financial crisis.
“They’re going to probably have to say that they would be willing to put funds into the bank,” said banking analyst Christopher Whalen at Kroll Bond Rating. “It’s exactly like what (former Treasury Secretary Henry) Paulson did with Citi … It’s a very analogous situation. Hopefully, the German government will take a page from that particular book and look at how the U.S. responded.” In a statement, Deutsche Bank pointed out that it is financially stable: “Our trading clients are amongst the world’s most sophisticated investors. We are confident that the vast majority of them have a full understanding of our stable financial position, the current macro-economic environment, the litigation process in the U.S. and the progress we are making with our strategy”
As Citigroup teetered in late-2008 and early-2009, Paulson’s Treasury stepped in with two cash injections to keep the financial contagion from spreading after Lehman Brothers failed on Sept. 15, 2008. The highly unpopular bailouts kept Citi afloat as fear spread about further implosions in the financial system. However, the European corporate culture is different, particularly when it comes to banking. Bailouts are considered anathema, and German officials in recent days have signaled an unwillingness to step in. “The Germans have to stop talking about this publicly unless they say, ‘Yep, we got ’em, there is no issue here,'” Whalen said. “The concern is that the statements they did make were not helpful.”
Delusional: “From 2009 through 2015, Deutsche Bank paid out about €5 billion in dividends, a significant chunk of the €19 billion in equity it raised. ”
Less than a decade after the financial crisis, Deutsche Bank is in trouble again, with investors speculating about whether the German government will have to rescue one of the world’s largest financial institutions. The sad thing is how easily this predicament could have been avoided. This time around, Deutsche Bank isn’t dealing with an unforeseen market meltdown or sovereign-debt crisis. Rather, the proximate cause of distress is the U.S. Justice Department’s threat to fine the firm $14 billion for decade-old transgressions involving U.S. mortgage-backed securities – more than double what the bank has set aside to cover such legal costs. Concerns about capital adequacy have sent the stock price to record lows, and the German government says it won’t provide a financial safety net.
The episode illustrates Europe’s failure to learn an important lesson from the last crisis: The largest banks must have plenty of loss-absorbing equity capital, so that even after suffering a hit, their balance sheets are strong. Otherwise, governments risk finding themselves choosing between a taxpayer-backed rescue and the potentially devastating repercussions of letting a systemically important financial institution go bust. Instead of using the post-crisis years to build up irreproachable equity capital buffers, however, European banks have given back hundreds of billions of euros to shareholders in the form of dividends and share repurchases. From 2009 through 2015, Deutsche Bank paid out about €5 billion in dividends, a significant chunk of the 19 billion in equity it raised.
Today it is among the most thinly capitalized banks in Europe, with tangible equity amounting to less than 3% of assets – an astonishingly thin layer. Even if Germany genuinely wanted to let Deutsche Bank fail, it couldn’t credibly threaten to do so. The institution is arguably Europe’s most systemically risky, with assets amounting to more than half of Germany’s total annual gross domestic product. Making an example of Deutsche Bank could lead to a devastating contagion. [..] The euro region desperately needs better-capitalized banks, not only to avoid disaster but to help heal its faltering economy. If the near-death experience of one of the world’s largest institutions can’t spur European officials to action, it’s hard to imagine what could.
It’s not just Deutsche…
Commerzbank is to cut nearly 10,000 jobs and suspend its dividend as part of a wide-ranging restructuring plan. Germany’s second biggest lender after Deutsche Bank said on Thursday it expected restructuring costs of €1.1bn as it combined business operations and cut costs to offset the impact of low loan demand and negative ECB interest rates amid a shift to digital banking. The revamp will come at a heavy cost for staff as Commerzbank slashes 9,600 of its 45,000 full-time positions – almost one in five jobs. The move is a more drastic reduction than at Deutsche Bank, which is axing about 10% of staff but suggests deeper cuts may be needed.
Commerzbank plans to merge its business with medium-sized German firms with its corporate and markets operations, while also scaling back trading activities in investment banking. That move is expected to prompt a writedown of about €700m in the third quarter, leading to a quarterly net loss. Commerzbank expects to turn a small net profit in full-year 2016, down from €1.1bn last year. The bank will concentrate on two customer segments in future: private and small business customers and corporate clients, with the restructuring expected to lift net return on tangible equity to at least 6% by the end of 2020 from 4.2% last year. Commerzbank aims to add 2,300 jobs in areas where business was growing, which would ease the net reduction to 7,300.
…and it’s not just German banks either.
ING, the largest Netherlands lender, will announce thousands of job cuts at its investor day on Monday, Dutch newspaper Het Financieele Dagblad reported Friday, citing unidentified people with knowledge of the matter. The reorganization will result in more central management and may generate billions of euros in savings, the paper said. The bank employs about 52,000 people, according to its website. ING sees opportunities in Belgium, the Netherlands, Germany and Poland, Het Financieele Dagblad said. The lender has doubts about its presence in Turkey, where it lacks scale, according to the report. CEO Ralph Hamers has transformed ING into a bank focused on Europe and is seeking to expand lending to consumers and companies outside its home market as record-low interest rates and regulatory demands to bolster capital threaten to erode profit.
How to lose all credibility in just a few words: “”Given the modest acceleration in growth that we forecast and the many downside risks around these forecasts, it seems overly optimistic to suggest that the global economy has reached “escape velocity”,” said Barclays economist David Fernandez.”
China’s factory sector struggled to gain speed in September while Japanese inflation went backwards in August despite the best efforts of policymakers, underscoring the limits of stimulus in reviving world growth. Friday’s unflattering figures bookmarked a week in which the IMF warned it would likely downgrade forecasts for the U.S. economy, and the World Trade Organization slashed its outlook for global trade flows. That was unwelcome news for markets spooked by troubles at Deutsche Bank, whose U.S. shares took a hammering on reports some hedge funds had reduced financial exposure to Germany’s largest lender. The bank said the “vast majority” of its clients remained supportive, but the situation still drew comparisons to the 2008 failure of Lehman and the resulting global financial crisis.
There was at least some evidence that China, the world’s second largest economy, had stabilized, if only because of a burst of government spending and a red-hot housing market. The Caixin measure of manufacturing activity (PMI) edged up a tenth of a%age point to 50.1, led by output and new orders. While the move was marginal, it was only the second time the index had reached positive territory since February 2015. The U.S. economy also looked to have bounced back in the third quarter, while a string of data showed Europe weathered Britain’s Brexit vote better than many had feared. All of which encouraged Barclays to nudge up its 2017 call for global growth to 3.5%, from an expected 3.1% this year. Yet a true lift-off still seems remote.
Getting all giddy about foreigners buying up your country is something I’ll never understand. But it’s not going to happen either. This is simple forward projecting with blinders.
[..] many real-estate agents and property experts in east Asia believe a new wave of investment is just getting under way, as mainland investors develop a taste for international real estate, including postcodes up and down the UK. “Our thesis – and this is supported by quite a lot of evidence – is that in many ways the international Chinese investment journey is probably just starting,” says Charles Pittar, CEO of Juwai.com, a website that aims to pair mainland buyers with property developers in places such as Australia, the US and the UK. Pittar’s company, which lists 2.5 million properties and calls itself China’s largest international real-estate website, estimates that in 2014, Chinese outbound investment into residential and commercial property was more than $50bn.
“I guess the key is: what is it going to become?” Pittar says. “Our view is that … it could be growing to somewhere around $200bn [annually] over the next 10 years.” And Britain, despite its decision to leave the EU, is expected to be one of the key focuses, he adds. “The UK market, particularly post-Brexit, is really picking up.” Pittar traces mainland China’s hunger for overseas property back to the turn of the century, just before China’s entry into the World Trade Organisation signalled the latest phase of its integration into the global economy. But the outflow of money has gathered pace over the past decade, and is set to grow further as middle-class investors from second- and third-tier cities get in on the game.
“It’s a big market now, but it is likely to be anywhere from two to four times the size in 10 years’ time,” Pittar says. “The exciting thing about China is that there are 168 cities with more than a million people. So this is just such a huge market.”
Curious. A good strong damning piece on globalization, but the NYT dare not draw the inevitable conclusions. They leave that to Trump, presumably.
When Dan Simmons started working at the mill 38 years ago, talk centered on how to make steel. These days, he spends his days at a job for which he feels little prepared — de facto social worker. Mr. Simmons is the president of the Steelworkers Local 1899, which represents 1,250 workers at the Granite City plant. On a recent morning, only about 375 of his people are employed. He sits at his desk inside the brick union hall, greeting laid-off workers who arrive seeking help. One man wants guidance scanning online job listings. Another has hit a snag with his unemployment benefits. A night earlier, Mr. Simmons took a call on his cellphone from the niece of a high school classmate, a laid-off millworker. He had shot himself to death, leaving behind two children.
Trade Adjustment Assistance, a government program started in 1962 and expanded significantly a dozen years later, is supposed to support workers whose jobs are casualties of overseas competition. The program pays for job training. But Mr. Simmons rolls his eyes at mention of the program. Training has almost become a joke. Skills often do not translate from old jobs to new. Many workers just draw a check while they attend training and then remain jobless. A 2012 assessment of the program prepared for the Labor Department found that four years after completing training, only 37% of those employed were working in their targeted industries. Many of those enrolled had lower incomes than those who simply signed up for unemployment benefits and looked for other work.
European workers have fared better. In wealthy countries like Germany, the Netherlands, Sweden and Denmark, unemployment benefits, housing subsidies and government-provided health care are far more generous than in the United States. In the five years after a job loss, an American family of four that is eligible for housing assistance receives average benefits equal to 25% of the unemployed person’s previous wages, according to data from the OECD. For a similar family in the Netherlands, benefits reach 70%. Yet in Europe, too, the impacts of trade have been uneven, in part because of the quirks of the EU. Trade deals are cut by Brussels, setting the terms for the 28 member nations. Social programs are left to national governments. “You’re pursuing trade and liberalization agreements at the EU level, and then leaving to the individual member countries how to deal with the damage,” said Andrew Lang at the LSE.
“..the S&P 500 index has gained 699 points since January 2008, and 422 of those points came on the 70 Fed announcement days. The average gain on announcement days was 0.49%, or roughly 50 times higher than the average gain of 0.01% on other days.”
The press spends a lot of energy tracking the many errors in Donald Trump’s loose talk, and during Monday’s presidential debate Hillary Clinton expressed hope that fact checkers were “turning up the volume” on her rival. But when it comes to the Federal Reserve, Mr. Trump isn’t all wrong. In a looping debate rant, Mr. Trump argued that an increasingly “political” Fed is holding interest rates low to help Democrats in November, driving up a “big, fat, ugly bubble” that will pop when the central bank raises rates. This riff has some truth to it. Leave the conspiracy theory aside and look at the facts: Since the Fed began aggressive monetary easing in 2008, my calculations show that nearly 60% of stock market gains have come on those days, once every six weeks, that the Federal Open Market Committee announces its policy decisions.
Put another way, the S&P 500 index has gained 699 points since January 2008, and 422 of those points came on the 70 Fed announcement days. The average gain on announcement days was 0.49%, or roughly 50 times higher than the average gain of 0.01% on other days. This is a sign of dysfunction. The stock market should be a barometer of the economy, but in practice it has become a barometer of Fed policy. My research, dating to 1960, shows that this stock-market partying on Fed announcement days is a relatively new and increasingly powerful feature of the economy. Fed policy proclamations had little influence on the stock market before 1980. Between 1980 and 2007, returns on Fed announcement days averaged 0.24%, about half as much as during the current easing cycle.
The effect of Fed announcements rose sharply after 2008 when the Fed launched the early rounds of QE, its bond purchases intended to inject money into the economy. It might seem that the market effect of the Fed’s easy-money policies has dissipated in the past couple of years. The S&P 500 has been moving sideways since 2014, when the central bank announced it would wind down its QE program. But this is an illusion. Stock prices have held steady even though corporate earnings have been falling since 2014. Valuations—the ratio of price to earnings—continue to rise. With investors searching for yield in the low interest-rate world created by the Fed, the valuations of stocks that pay high dividends are particularly stretched. The markets are as dependent on the Fed as ever.
Interview with Automatic Earth reader Collum: “We should have hung a few in the town square, but instead the Obama Department of Justice punished shareholders and savers.”
I was non-political throughout college and much of my adult life, focusing on chemistry and family. It is probably only in the last 15 years that I’ve started hiking up my pants and bitching about the government. Now I am relatively outspoken because I sense existential risk in the American Experiment. We have an interventionist central bank—a global cartel of interconnected central banks actually—that is determined to use untested (read: flawed) models to try to repair an economy that was hurt by their policies and would fix itself if the Fed would just get out of the way. I think these guys are what Nassim Taleb calls I-Y-I (intellectual-yet-idiot). They will continue with their experiments until the system finally breaks in earnest. They will blame the unforeseeable circumstances.
The social contract on the home front is faltering badly. When the system started to fail in ’09, we stitched up a putrid wound without cleansing it. We needed reform of a highly flawed banking system corrupted by poor incentives. In the 1930s, the Pecora Commission rounded up scoundrels (including the head of the New York Stock Exchange) and threw them in prison. We should have hung a few in the town square, but instead the Obama Department of Justice punished shareholders and savers. A scandal at Wells Fargo emerging just this week, for example, led to a token fine while leaving some wondering if Wells Fargo is too corrupt to exist in its current form. It is not the government’s job to break up these institutions, nor should it save them.
We have stirred up a mess in the Middle East that seems to be washing up on our shores. (This weekend there were a half dozen attacks that appeared highly correlated to all but those in the politicized press.) Our policy in Syria is incomprehensible. The refugee crisis in Europe is our doing, and it is spreading. Fear of Trump seems odd given that the current neocons in liberal garb are stunningly militaristic. I think they are war crimes. Meanwhile, these I-Y-I’s insist on poking Putin in the eye with a stick as part of a policy that appears to be designed to take us to the brink of far greater armed conflict. People are now mad, and it shows in the chaotic election. We are guaranteed to elect a president that half the populace finds repugnant. It’s hard to imagine that the post-election temperament will improve. Change is in the air.
Anything ‘traditional’ in politics is now suspect.
A party that hangs a skull-and-crossbones flag at its HQ, and promises to clean up corruption, grant asylum to Edward Snowden and accept the bitcoin virtual currency, could be on course to form the next Icelandic government. The Pirate Party has found a formula that has eluded many anti-establishment groups across Europe. It has tempered polarizing policies like looser copyright enforcement rules and drug decriminalization with pledges of economic stability that have won confidence among voters. This has allowed it to ride a wave of public anger at perceived corruption among the political elite – the biggest election issue in a country where a 2008 banking collapse hit thousands of savers and government figures have been mired in an offshore tax furor following the Panama Papers leaks.
[..] Opinion polls show support for the party running at over 20%, slightly ahead of the Independence Party, which shares power with the Progressive Party. The left-leaning party is part of a global anti-establishment typified by Britain’s vote to leave the European Union. But their platform is far removed from the anti-immigration policies of UKIP, France’s National Front and Germany’s AfD, or the anti-austerity of Greece’s Syriza. Iceland’s gross income per capita was almost $50,000 in 2015, according to the World Bank, well above the $34,435 EU average – though still 20% below a 2007 peak. Immigration levels are low compared with many other European countries. Helped by a tourism boom, economic growth this year is expected to hit 4.3% and the latest data shows a seasonally adjusted unemployment rate of 3.1%.
There appears little appetite among the public or any party leader for economic radicalism. The Pirate Party has not set out detailed plans, but has made clear that it would not deviate far from current policies in the next government term. “We will not be doing any dramatic things in this regard, we will carry on with the lifting of capital control. We are not going to make any dramatic changes in the financial sector,” said Jonsdottir. There is little sign of business or investor panic. “Regarding the economic stability, looking at the long term, they can’t do any worse than what has been done so far,” said Jon Sigurdsson, CEO of prosthetics maker Ossur, one of Iceland’s biggest companies, referring to the banking crisis.
I’ve said it before, his overconfidence will get him. He now wants to redraw Turkey’s borders. And not just with Greece. Turkey’s borders with Syria hold a mich bigger prize.
Turkish President Recep Tayyip Erdogan caused displeasure in Athens on Thursday by indicating that Ankara “gave away” Aegean islands to Greece under the Treaty of Lausanne in 1923, the pact that defined the borders of modern Turkey following the collapse of the Ottoman Empire. In a speech to regional officials in Ankara, Erdogan appeared to express his regret for the border decisions imposed by the pact. “Some tried to deceive us by presenting Lausanne as victory,” he said. “In Lausanne, we gave away the islands that you could shout across to,” he said, referring to Greek islands located in the Aegean Sea close to the Turkish coastline. Reacting to Erdogan’s comments, a Greek Foreign Ministry source remarked that “everyone should respect the Treaty of Lausanne,” noting that it is “a reality in the civilized world which no one, including Ankara, can ignore.”
The same source indicated that the Turkish leader’s comments were likely geared for domestic consumption. While making clear his displeasure with the Treaty of Lausanne, Erdogan indicated during his speech that those who attempted a coup against Turkey in July would have imposed a far worse state of affairs. “If this coup had succeeded, they would have given us a treaty that would have made us long for Sevres,” he said, referring to the pact that preceded the Treaty of Lausanne in 1920, abolishing the Ottoman Empire. “We are still struggling about what the continental shelf will be, and what will be in the air and the land. The reason for this is those who sat at the table for that treaty. Those who sat there did not do [us] justice, and we are reaping those troubles right now,” he said..