Sep 232016
 
 September 23, 2016  Posted by at 8:05 am Finance Tagged with: , , , , , , , , ,  


Harris&Ewing “Slaves reunion DC. Ages: 100, 104, 103; Rev. Simon P. Drew, born free.” 1921

World Trade Grinds Lower, Hits 2014 Levels (WS)
‘When I Think Of Central Banks, I Think Of Alchemists’: Marc Faber (CNBC)
Central Bankers Are The Arsonists That Create The Fire: Bill Fleckenstein (ZH)
Bad Debts In Chinese Banking System 10 Times Higher Than Admitted: Fitch (AEP)
The Coming Wave of Defaults Will Be Devastating (CH Smith)
Time to ‘Be Alarmed’ about Emerging Market Debt: UN (DQ)
The Ted Spread Is Dead, Baby. The Ted Spread Is Dead (WSJ)
UK Councils ‘Building Up Dangerous Levels Of Debt And Risk’ (Ind.)
You’re Not as Rich as You Think (Satyajit Das)
Deutsche Bank Woes Sparks Concern Among German Lawmakers (BBG)
Regulators Expect Monte Dei Paschi To Ask Italy For Help (R.)
How Does A 60% Increase In NYC Homelessness Constitute A Recovery? (ZH)
Pope Francis: Journalism Based On Gossip And Lies Is A Form Of Terrorism (G.)
Indigenous Australians The Oldest Living Culture; It’s In Our Dreamtime (G.)

 

 

Rising health care costs prop up US GDP. We all know that’s not a good thing.

World Trade Grinds Lower, Hits 2014 Levels (WS)

World trade in merchandise is a reflection of the global goods-producing economy. And it just can’t catch a break. The CPB Netherlands Bureau for Economic Policy Analysis, a division of the Ministry of Economic Affairs, just released the preliminary data of its Merchandise World Trade Monitor for July. The index fell 1.1% from June to 113.4, the lowest since May 2015 – a level it had first reached on the way up it in September 2014. The chart shows that merchandise world trade isn’t falling off a cliff, as it had done during the financial crisis, when global supply chains suddenly froze up. But it’s on a slow volatile grind lower. And compared to the fanciful growth after the Financial Crisis, it looks outright dismal:

This time – after the big adjustment in values months ago – we have another statistical note. In this data release, the CPB shifted the base year of the series from 2005 to 2010, so the values of the entire index shifted down. Hopefully, the change made the series more representative of reality – because getting a good grip on reality these days is really hard, when entire data systems are carefully designed to conceal more than they reveal (such as the official inflation data). The decline in trade was sharper in the emerging economies than the advanced economies. That makes sense: The US, on whose demand the health of the entire world economy seems to depend, experienced falling imports in July, according to the data.

Data point after data point document that the goods-based economy in the US is in trouble – manufacturing, wholesale, retail… nothing is firing on all or even most cylinders. But the service-based economy is not doing all that badly. Its biggest sector – and the biggest sector overall in the US – healthcare, is doing quite well, actually. Among the health-care companies in the S&P 500, revenues rose 5.2% in the second quarter, year over year, when revenues for all S&P 500 companies fell 3.1%. Revenues rose not because people are getting more health care; they rose because health care has been getting more expensive at a breath-taking pace for many years as the industry has been consolidating into oligopolies and as outrageous prices increases on pharmaceutical products regularly grace the headlines.

Read more …

“They were trying to mix all kinds of powders and chemicals to produce essentially gold. And they all failed..”

‘When I Think Of Central Banks, I Think Of Alchemists’: Marc Faber (CNBC)

Central bankers trying to spur growth are like alchemists trying to make gold and they’re just as likely to fail, said Marc Faber, the publisher of the Gloom, Boom & Doom report. “When I think of central banks, I think of alchemists,” Faber, also known as Dr. Doom for his pessimistic views, told CNBC’s “Squawk Box” on Thursday. “They were trying to mix all kinds of powders and chemicals to produce essentially gold. And they all failed,” he said, although he noted that some alchemists did produce other useful chemicals during their ill-fated search for the precious metal. “But the central banks are just mixing water, in other words, paper money, and the results cannot be a favourable outcome in the long run.”

Faber noted that from the 1970s to the mid-1980s, people believed inflation was “forever,” but now the same central banks that were fighting inflation were now fighting deflation. This fight was a mistake, he said, claiming that across Asia, price rises were exceeding income gains. “It’s possible that suddenly inflationary pressures will be there, that central banks should then act but they cannot because the system is so overleveraged,” he said. At the same time, Faber noted that the low and negative interest rates globally were hurting pension funds. “Pension funds, even in these beautiful years of returns, 2009 to today, they have become less funded, they have become more underfunded,” he said. “With interest rates at zero and this low, their portion that’s in bonds is never going to meet the expected returns of 7.5%. It’s physically not possible.”

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Alchemists and arsonists.

Central Bankers Are The Arsonists That Create The Fire: Bill Fleckenstein (ZH)

Having been invited on to CNBC to discuss his views of the market, famous short-seller Bill Fleckenstein explained rather eloquently that QE4 is coming and people will wake up to the fact that central bankers “are the arsonists that create the fire, not the firemen that put it out.” This non-mainstream view was treated with disdain by CNBC host Tim Seymour who slammed Fleckenstein for “missing out” on the “artificial market’s” (because even CNBC now admits that’s what it is) gains. The response was epic. “Don’t be such a jerk… I don’t ask to come on this show, you invited me… and don’t get in my face because I won’t join your party…”

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A $2 trillion black hole.

Bad Debts In Chinese Banking System 10 Times Higher Than Admitted: Fitch (AEP)

Bad debts in the Chinese banking system are ten times higher than officially admitted, and rescue costs could reach a third of GDP within two years if the authorities let the crisis fester, Fitch Ratings has warned. The agency said the rate of non-performing loans (NPLs) has reached between 15pc and 21pc and is rising fast as the country delays serious reform, relying instead on a fresh burst of credit to put off the day of reckoning. It would cost up to $2.1 trillion to clean up this toxic legacy even if the state acted today, and much of this would inevitably land in the lap of the government. “There are already signs of stress that point to NPLs being much higher than official estimates (1.8pc), most obviously the increased frequency with which the banks are writing off or offloading loans,” it said.

The banks have been shuffling losses off their balance sheets through wealth management vehicles or by classifying them as interbank credit, seemingly with the collusion of the regulators. Loans are past 90 days overdue are not always deemed bad debts. “The longer debt grows, the greater the risk of asset quality and liquidity shocks to the banking system,” said Fitch. Capital shortfalls are currently 11pc to 20pc of GDP, but this threatens to hit 33pc in a worst case scenario by the end of 2018. “Defaults in China could lead to mutual credit guarantees in the background pulling other firms into distress. A large increase in real defaults risks triggering a chain of bankruptcies that magnifies the potential for financial instability,” it said.

“Mid-tier banks have the weakest buffers, and are the most vulnerable to funding stress,” said the report, by Jonathan Cornish and Grace Wu. The damage eclipses losses during the global financial crisis in Britain and the US, where the direct costs of bank rescues were roughly 8pc of GDP. It would be closer to the trauma suffered by Ireland, Greece, and Cyprus when their banking systems collapsed, but on a vastly greater scale. The Chinese state has deep pockets but strains are mounting. Public debt has reached 55pc of GDP following the bail-out of local governments. This is now higher than among ‘A’ rated peers, mostly in the developing world. “Pressure on China’s sovereign rating could emerge if general government indebtedness were to rise significantly,” said the Fitch report.

China let rip with a fresh burst of credit growth from the middle of last year after a series of policy errors triggered a recession – with ‘Chinese characteristics’ – in early 2015. It ditched any serious effort to reform the economy and opted for stimulus as usual, cutting interest rates and the reserve requirement ratio. Credit reached 243pc of GDP by the end on last year, double the level in 2008. Banking system assets have grown by $21 trillion over that time, 1.3 times greater than the entire US commercial banking nexus.

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“Defaults mean loans and bonds won’t be paid back. The owners of the bonds and debt (mortgages, auto loans, etc.) will have to absorb massive losses.”

The Coming Wave of Defaults Will Be Devastating (CH Smith)

In an economy based on borrowing, i.e. credit a.k.a. debt, loan defaults and deleveraging (reducing leverage and debt loads) matter. Consider this chart of total credit in the U.S. Note that the relatively tiny decline in total credit in 2008 caused by subprime mortgage defaults (a.k.a. deleveraging) very nearly collapsed not just the U.S. financial system but the entire global financial system. Every credit boom is followed by a credit bust, as uncreditworthy borrowers and highly leveraged speculators inevitably default. Homeowners with 3% down payment mortgages default when one wage earner loses their job, companies that are sliding into bankruptcy default on their bonds, and so on. This is the normal healthy credit cycle.

Bad debt is like dead wood piling up in the forest. Eventually it starts choking off new growth, and Nature’s solution is a conflagration–a raging forest fire that turns all the dead wood into ash. The fire of defaults and deleveraging is the only way to open up new areas for future growth. Unfortunately, central banks have attempted to outlaw the healthy credit cycle. In effect, central banks have piled up dead wood (debt that will never be paid back) to the tops of the trees, and this is one fundamental reason why global growth is stagnant. The central banks put out the default/deleveraging forest fire in 2008 with a tsunami of cheap new credit. Central banks created trillions of dollars, euros, yen and yuan and flooded the major economies with this cheap credit.

They also lowered yields on savings to zero so banks could pocket profits rather than pay depositors interest. This enabled the banks to rebuild their cash and balance sheets – at the expense of everyone with cash, of course. Having unleashed tens of trillions of dollars in new credit since 2008, the central banks have simply increased the likelihood and scale of the coming default conflagration. Now the amount of deadwood that’s piled up is many times greater than it was in 2008. Very few observers explore what happens after defaults start cascading through the system. Defaults mean loans and bonds won’t be paid back. The owners of the bonds and debt (mortgages, auto loans, etc.) will have to absorb massive losses.

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We’ve been alarmed about it for years.

Time to ‘Be Alarmed’ about Emerging Market Debt: UN (DQ)

[..] It was the peak of the emerging market bubble, when the amount of debt that low-income developing economies could have sold to eager investors seemed almost limitless. The main reason for this unprecedented surge in appetite for EM debt was the huge monetary expansion unleashed in many of the world’s major economies, led by the Fed’s QE program. The result was the now-all-too-familiar reality of anemic (at best) yield opportunities in developed markets, prompting investors to seek out much riskier emerging market assets. The moment the Fed turned off the spigot, in mid-2014, the flow of funds began to reverse, according to the report, creating ripe conditions for a “prolonged commodity price shock, steep currency depreciations and worsening growth prospects,” which have “quickly driven up borrowing costs and debt-to-GDP ratios.”

For the first time since the Latin American debt crisis in the second half of the 1980s, aggregate net capital flows entered negative territory. Aggregate outflows reached $656 billion in 2015 and $185 billion in the first quarter of 2016. The capital flight was particularly pronounced in China and other parts of Asia. Note how capital flight heated up in 2014 toward the end of the Fed’s “QE Infinity”.

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More consequences of unbridled manipulation of financial markets.

The Ted Spread Is Dead, Baby. The Ted Spread Is Dead (WSJ)

A measure of stress in financial markets, whose alarm bells heralded the 2008 financial crisis, just hit its highest level in over seven years. But don’t worry. It turns out the so-called Ted Spread might be dead, an unlikely casualty of the recent changes in U.S. money-market regulation. This spread charts the difference between the London interbank offered rate and the yield on three-month U.S. Treasury bills. Libor is a dollar-denominated global gauge of private-sector credit strength, particularly that of banks, and three-month bills measure an ultrasafe bet—the U.S. government’s creditworthiness. Ted stands for Treasury-Eurodollar rate, the Eurodollar being the greenback denominated lending reflected in the Libor rate.

If the difference, or spread, between what banks charge each other increases compared with yields on safe government debt, that reflects an elevated risk of defaults in the private sector that the banking sector lends to. For the past year and a half the spread has been creeping higher, rising from 0.2 of a percentage point at the turn of 2015, to 0.653 of a percentage point on Wednesday. That is the highest it has been since May 2009, in the aftermath of the global financial crisis, surpassing other moments of extreme stress, like the euro sovereign-debt crisis around 2011. But there is a problem with that. Looming U.S. regulation of money-market funds has driven Libor higher, meaning that it isn’t quite the indicator that it once was.

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Blair and Cameron’s scorched earth.

UK Councils ‘Building Up Dangerous Levels Of Debt And Risk’ (Ind.)

Cash-strapped local councils are building up dangerous levels of risk and debt as they turn to commercial ventures in a bid to raise funds, credit agencies and campaigners have warned. Moody’s, the credit agency, warned that a series of ambitious plans to boost revenue by setting up businesses could put council tax payers at risk should they run into difficulties. The warning, in a report into local government finance, comes amid mounting evidence that local authorities are increasingly turning to borrowing after a run of tough settlements with central Government. Roshana Arasaratnam, a senior credit officer at Moody’s, said in the wake of the report’s publication:

“Borrowing to invest in commercial projects exposes local authorities to additional credit risk, as the revenues that flow from these projects are inherently uncertain. “Those adopting this strategy also face increased project execution risk, and greater competition from the private sector.” Ms Arasaratnam said such borrowing contrasted sharply with local authorities’ traditional investments in schools, housing and transport which are underpinned by government grants and do not depend on generating revenues from commercial activities. The report highlights a series of business ventures set up by councils, some of which are now on negative credit watch. They include Warrington Borough Council, which in 2015 issued £150m of bonds to support an economic development plan aimed at increasing business rate revenues.

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Paper wealth is not wealth.

You’re Not as Rich as You Think (Satyajit Das)

The idea that the world is awash in savings – one factor driving the theory of secular stagnation – is, on the surface, a persuasive one. Too bad it may not be true. Yes, the postwar generation is wealthier than any before it. But the ultimate value of any investment depends upon being able to convert it into cash and thus generate purchasing power. In fact, the world’s accumulated wealth – around $250 trillion, according to Credit Suisse’s Global Wealth Report – is almost certainly incapable of realization at its paper value. The headline number thus vastly overstates the supposed savings glut. Most of these savings are held in two forms: real estate, primarily principal residences, and retirement portfolios that are invested in stocks and bonds.

Both are rising in value. A combination of population growth, higher incomes, increased access to credit, lower rates and, in some cases, limited housing stock have driven up home prices; those who got in early have done especially well. Meanwhile, increased earnings and dividends, driven by economic growth and inflation, have boosted equity values. So have loose monetary policies designed to counteract the Great Recession since 2009. Yet the appreciating value of one’s own home doesn’t automatically translate into purchasing power. A primary residence produces no income. Indeed, maintenance costs, utility bills and property taxes – which often rise along with home prices – mean that houses are cash-flow negative.

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As soon as they understand the magnitude of the numbers, they’ll look the other way.

Deutsche Bank Woes Sparks Concern Among German Lawmakers (BBG)

Deutsche Bank’s finances, weakened by low profitability and mounting legal costs, are raising concern among German politicians after the U.S. sought $14 billion to settle claims related to the sale of mortgage-backed securities. At a closed session of Social Democratic finance lawmakers this week, Deutsche Bank’s woes came up alongside a debate over Basel financial rules, according to two people familiar with the matter. Participants discussed the U.S. fine and the financial reserves at Deutsche Bank’s disposal if it had to cover the full amount, according to the people, who asked not to be identified because the meeting on Tuesday was private. While the participants – members of the junior party in Angela Merkel’s government – didn’t reach any conclusions on the likely outcome, the discussion signals that the risks have the attention of Germany’s political establishment.

The German Finance Ministry last week called on the U.S. to ensure a “fair outcome” for Deutsche Bank, citing cases against other banks where the government settled for reduced fines. Pressure on Germany’s biggest lender has increased since German Finance Minister Wolfgang Schaeuble told Bloomberg Television on Feb. 9 that he has “no concerns about Deutsche Bank.” Germany’s biggest bank was already ranked among the worst-capitalized lenders in European stress tests before U.S. authorities demanded $14 billion during initial talks to settle a probe into how it handled mortgage securities during the 2008 financial crisis. The announcement led Deutsche Bank’s riskiest bonds to plunge.

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Never ending story. Because it can’t end well.

Regulators Expect Monte Dei Paschi To Ask Italy For Help (R.)

European regulators expect Italian bank Monte dei Paschi di Siena will have to turn to the government for support, three euro zone officials with knowledge of the matter said, although Rome would strongly resist such a move if bondholders suffered losses. Less than two months after the Tuscan lender announced an emergency plan to raise €5 billion of fresh capital, having come last in a health check of 51 European banks, there is growing concern among European regulators that the cash bid will fall short. While the bank is determined to see through the capital raising, if it were to disappoint, it would be left with a capital hole. Now euro zone authorities are considering whether state support would have to be tapped after what bankers have described as slack interest in the bank’s share offer.

“There is clearly an execution risk to the capital raising,” said one official with knowledge of the rescue attempt, adding that the bank’s value, about one ninth the size of the planned €5 billion cash call, would be a turn-off for investors. That person said a “precautionary recapitalization by the Italian state” could be used to make up any shortfall once attempts to raise fresh cash from investors had concluded in the coming months. [..] Monte dei Paschi faces a considerable challenge in convincing investors to back its third recapitalisation in as many years. Further complicating the picture, a constitutional referendum, expected to be held by early December that could decide the future of Renzi, is likely to push the bank’s fund-raising into next year, the officials say. The bank’s fragile state poses a threat to confidence in other Italian lenders and even to heavily-indebted Italy, the euro zone’s third-largest economy.

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There’s 24/7 propaganda and then there’s reality. It’s about air time more than anything else.

How Does A 60% Increase In NYC Homelessness Constitute A Recovery? (ZH)

[..] ..courtesy of data from the New York City Department of Homeless Services, we have a couple of additional charts to add to the list like the one below that shows a ~60% increase in the number of NYC families living in homeless shelters over the past five years. Aside from an increse during the “great recession”, the number of New York City families living in homeless shelter remained fairly constant at around 8,000 from July 2008 through July 2011. That said, over the following 5 years beginning in August 2011 through today, NYC has experienced a nearly 60% increase in the number of families living in homeless shelters to nearly 13,000. Ironically, the increase in homelessness experienced during the “great recession” was just a blip on the radar compared to the past five years as residential rental rates in NYC have soared.

Alternatively, we offer up the following statistics from Mayor Bill De Blasio’s Fiscal 2016 “Mayor’s Management Report” highlighting a 42% increase in applications for “Emergency Rent Assistance” from New York City families at risk of losing their housing. If this is what a “recovery” looks like to Obama we would certainly like to better understand how he would define a recession.

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“..journalism should not be used as a “weapon of destruction against persons and even entire peoples..“

Pope Francis: Journalism Based On Gossip And Lies Is A Form Of Terrorism (G.)

Journalism based on gossip or rumours is a form of “terrorism” and media that stereotype entire populations or foment fear of migrants are acting destructively, Pope Francis has said . The pope, who made his comments in an address to leaders of Italy’s national journalists’ guild, said reporters had to go the extra mile to seek the truth, particularly in an age of round-the-clock news coverage. Spreading rumours is an example of “terrorism, of how you can kill a person with your tongue“, he said. “This is even more true for journalists because their voice can reach everyone and this is a very powerful weapon.“ In Italy, a number of newspapers are highly politicised and are regularly used to discredit those with differing political views, sometimes reporting unsubstantiated rumours about their private lives.

In 2009 several media outlets owned by the family of then-prime minister Silvio Berlusconi came under fire from the journalists’ guild over stories questioning the trustworthiness of a magistrate who had ruled against a company owned by the Berlusconi family. The stories were filled with insinuations about the way he dressed, including the colour of his socks, and the way he took walks in the park. The pope, who has often strongly defended the rights of refugees and migrants, said journalism should not be used as a “weapon of destruction against persons and even entire peoples“. “Neither should it foment fear before events like forced migration from war or from hunger,” he added.

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A highly developed culture 10s of 1000s of years before anywhere else on the planet. Ignored as such by Europe and North American bias.

Indigenous Australians The Oldest Living Culture; It’s In Our Dreamtime (G.)

Australia’s Aboriginal people have already been using the tag of “world’s oldest living culture” before given scientific confirmation in a recent study of the DNA of Australia’s Indigenous people. One likely response to the finding from the subjects of the research is a satisfied, “I told you so”. Scientific research often reaffirms what is in an oral history. This has been particularly so in Australia where cultural stories – often referred to as Dreamtime stories – that describe land movements and floods fit in with what later becomes known about seismic and glacial shifts from the geological record. For example, Associate Professor Nick Reid and Professor Patrick D. Nunn have analysed stories from Indigenous coastal communities and have seen a thread of discussions about the rise of tidal waters that occurred between 6,000 and 7,000 years ago.

And these are the newer stories. Other stories collected from around Cairns showed that stories recalled a time when the land covered the area that is now the Great Barrier Reef and stories from the Yorke Peninsula reference a time when there was no Spencer Gulf (it is now 50m below sea level). Reid and Nunn hypothesise that this could make these stories over 12,000 years old. So oral history and observation can reinforce what the science says. Or science can confirm what we’ve been saying all along. For many older Indigenous people, the cultural stories will seem the more trustworthy. There are historic reasons why Indigenous people remain suspicious of science practiced by Europeans, who have not yet countered the legacy of their obsessions with head measuring and blood quantum.

Aboriginal culture and traditions have been often viewed through a Eurocentric gaze that has failed to see the wisdom contained within its values and teachings. Cultural stories were often illustrated for children without looking for deeper meanings and codes. These stories didn’t just tell a tale of how the echidna got its spikes, they contained – like parables in the bible – a set of messages about the importance of sharing resources in a hunter-gatherer society and the consequences of selfishness.

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Nov 142014
 
 November 14, 2014  Posted by at 12:13 pm Finance Tagged with: , , , , , , , , , ,  


DPC St. Catherine Street, Montréal, Québec 1916

Most US Cities Unaffordable For Average Americans To Live In (MarketWatch)
US Wealth Inequality: Top 0.1% Worth As Much As The Bottom 90% (Guardian)
US Foreclosure Filings Climb 15% In October (MarketWatch)
Sub-$2-a-Gallon Gasoline Futures Hand US Motorists Gift (Bloomberg)
Albert Edwards: USDJPY 145, “Tidal Wave Of Deflation Westward” (Zero Hedge)
Oil, Other Commodities Will Be In The Dumps For Another Decade (MarketWatch)
Oil Price Rout To Deepen Amid Supply Glut, Warns IEA (Telegraph)
Keystone Left Behind as Canadian Oil Pours Into US (Bloomberg)
Putin Stockpiles Gold As Russia Prepares For Economic War (Telegraph)
It May Be Too Late for Japan PM to Fix World’s Third Largest Economy (TIME)
Europe’s Debt Fight May Undermine Push for Growth Deal (Bloomberg)
Cold Comfort As France, Germany Eke Out Tiny Q3 Growth (Reuters)
Italy’s Slump Enters Fourth Year, Complicating Renzi’s Plans (Bloomberg)
World Outlook Darkening as 89% in Poll See Europe Deflation Risk (Bloomberg)
China Busts Underground Banks Linked to $23 Billion Transactions (Bloomberg)
Stock Market Fear, Stress And Tensions Climbing (MarketWatch)
Apple Could Swallow Whole Russian Stock Market (Bloomberg)
Fracking Boom Spurs Demand for Sand and Clouds of Dust (Bloomberg)
Massive OW Bunker Bankruptcy: Questions Of Governance And Oversight (SeaTrade)
Aboriginals Decry G-20 Host Australia as Leaders Gather (Bloomberg)

This is what we’ve come to, and it’s hardly surprising. Where are the raised voices, though?

Most US Cities Unaffordable For Average Americans To Live In (MarketWatch)

Most big American cities are no longer affordable for the average worker. Home buyers earning a median income can only afford a median-priced home in 10 of the 25 largest metropolitan areas in the U.S., according to a survey by personal finance site Interest.com. That’s still a slight improvement on last year when only 8 of those metropolitan areas were affordable, but still lower than 2012 when 14 of those 25 areas were affordable for people on a median income in those regions. Being priced out of buying a home in the country’s major cities means more multi-family buildings in big cities and more people moving into second-tier cities and rural areas, says Stuart Gabriel, director of UCLA’s Richard S. Ziman Center for Real Estate.

“The consequences are large,” he says, “and they’re not just about affordability. It affects economic growth and economic viability of our major metropolitan areas.” While some people will find ways to work from home, for instance, spiraling housing costs also hurt people who need to work in cities. “Teachers, firefighters and police, these are people who are absolutely essential to the functioning of our urban areas, are priced out of those areas and have to commute long distances to get to work,” Gabriel says. “It’s certainly true here in L.A.” Sacramento had the biggest drop in home affordability over the past 12 months, falling to No. 18 this year from No. 12 in 2013. But it’s still more affordable than the other three California metro areas on the list: Los Angeles (No. 22), San Diego (No. 24) and San Francisco (No. 25) where the median income is 46% less than what is required to buy a median-priced home here. New York is No. 23 on the list.

The cheapest areas are Minneapolis, Atlanta, St. Louis and Detroit. “Low mortgage rates are helping home affordability to some extent, but the key ingredient — which has been missing to this point — is substantial income growth,” says Mike Sante, managing editor of Interest.com. “Millennials, in particular, are struggling to overcome their student loans and save enough money for a down payment.” The Interest.com survey reflects a broader trend: 52% of Americans have made at least one major sacrifice to cover their rent or mortgage over the last three years, according to research commissioned by the nonprofit John D. and Catherine T. MacArthur Foundation released earlier this year. These sacrifices include getting a second job, deferring saving for retirement and cutting back on health care.

Read more …

Here’s why Americans can’t afford their own cities anymore.

US Wealth Inequality: Top 0.1% Worth As Much As The Bottom 90% (Guardian)

Wealth inequality in the US is at near record levels according to a new study by academics. Over the past three decades, the share of household wealth owned by the top 0.1% has increased from 7% to 22%. For the bottom 90% of families, a combination of rising debt, the collapse of the value of their assets during the financial crisis, and stagnant real wages have led to the erosion of wealth. The research by Emmanuel Saez and Gabriel Zucman [pdf] illustrates the evolution of wealth inequality over the last century. The chart shows how the top 0.1% of families now own roughly the same share of wealth as the bottom 90%. The picture actually improved in the aftermath of the 1930s Great Depression, with wealth inequality falling through to the late 1970s. It then started to rise again, with the share of total household wealth owned by the top 0.1% rising to 22% in 2012 from 7% in the late 1970s. The top 0.1% includes 160,000 families with total net assets of more than $20m (£13m) in 2012.

In contrast, the share of total US wealth owned by the bottom 90% of families fell from a peak of 36% in the mid-1980s, to 23% in 2012 – just one percentage point above the top 0.1%. The growing indebtedness of most Americans is the main reason behind the erosion of the wealth share of the bottom 90%, according to the report’s authors. Many middle-class families own their homes and have pensions, but too many have higher mortgage repayments, higher credit card bills, and higher student loans to service. The average wealth of bottom 90% jumped during the stock market boom of the late 1990s and the housing bubble of the early 2000s. But it then collapsed during and after the most recent financial crisis. Since then, there has been no recovery in the wealth of the middle class and the poor, the authors say. The average wealth of the bottom 90% of families is equal to $80,000 in 2012— the same level as in 1986. In contrast, the average wealth for the top 1% more than tripled between 1980 and 2012.

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No surprise here either.

US Foreclosure Filings Climb 15% In October (MarketWatch)

The pace of new foreclosures picked up last month as more troubled properties were pushed through the system, according to data released Thursday. In October, there were default notices and other foreclosure filings reported on more than 123,000 U.S. homes, up 15% from September — the largest monthly growth since foreclosure activity peaked in early 2010, online foreclosure marketplace RealtyTrac reported. Last month’s pop was driven by seasonal factors — banks were trying to “get ahead of the usual holiday foreclosure moratoriums,” said Daren Blomquist, vice president at RealtyTrac.

October’s spike narrowed the year-over-year contraction in foreclosure filings to 8%, the slowest annual drop since May 2012. “Distressed properties that have been in a holding pattern for years are finally being cleared for landing at the foreclosure auction,” Blomquist said. Despite October’s increase in filings, the pace of the foreclosure-related notices is trending closer to levels seen before the U.S. housing bubble burst. In 2006, as home prices were near their peak, there were average monthly foreclosure filings on 105,000 properties. October’s 123,000 foreclosure filings were down about 66% from a peak of 367,000 hit in 2010.

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Not going to boost holiday sales.

Sub-$2-a-Gallon Gasoline Futures Hand US Motorists Gift (Bloomberg)

U.S. drivers will have some extra money in their pockets this holiday season as gasoline futures tumbling below $2 a gallon mean lower prices at the pump. “The drop in futures is eventually going to translate into further declines at the pump,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone yesterday. “There will be a little extra discretionary spending that consumers can use somewhere else this holiday season.” The nation’s largest motoring club says retail prices “have a very good chance” of being the lowest for the Nov. 28 Thanksgiving holiday in five years. Motorists are already paying the least since 2010 after crude oil tumbled more than 20% in the past four months. Gasoline futures added 0.7 cent, or 0.3%, to $2.0085 a gallon in electronic trading at 12:12 p.m. Singapore time.

Yesterday the contract closed at the lowest since September 2010. The average retail price for regular gasoline fell 0.6 cent to $2.917 a gallon on Nov. 12, the least since December 2010, according to Heathrow, Florida-based AAA. Based on the drop in the futures market, pump prices could fall to $2.70 or thereabouts, Michael Green, a Washington-based spokesman for AAA, said by telephone yesterday. “At this point, the market refuses to stabilize, the price of crude oil continues to fall and refiners are making more gasoline. There’s no end in sight.” Almost one-fourth of filling stations in the U.S. are selling gasoline for less than $2.75 a gallon, Green said. Less than 1% are under $2.50, he said. “We’re still a long way from getting down to $2,” Green said. “But I didn’t think it was going below $3, and here we are.”

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Edwards is one scary guy. Because he’s mostly right.

Albert Edwards: USDJPY 145, “Tidal Wave Of Deflation Westward” (Zero Hedge)

Less than two months ago, Albert Edwards presented “The Most Important Chart For Investors” in which he predicted, correctly, that the real action will come not in the Euro but the Japanese Yen, and at a time when the USDJPY was trading around 108, Edwards forecast a sharp move to 120. A month later, Abe’s just as shocking “all in” bet on boosting QE to a level where it matches the Fed’s peak monthly POMO despite an economy that is a third the size of the US, proved Edwards correct and has since sent the USDJPY some 800 pips higher and just 400 pips shy of Edwards’ 120 forecast. At this rate, the 120 target may be taken out within weeks not months. So what happens next? Here, straight from the horse’s mouth that got the first part of the rapid Yen devaluation so right, is the answer.

As Edwards updates with a note from this morning, “the yen is set to follow the US dollar DXY trade-weighted index by crashing through multi-decade resistance – around ¥120. It seems entirely plausible to me that once we break ¥120, we could see a very quick ¥25 move to ¥145, forcing commensurate devaluations across the whole Asian region and sending a tidal wave of deflation westwards.” Edwards, never one to beat around the bush, slams strategists who are at best willing to get the direction of a given move, if not the magnitude. So he will be the outlier:

… in the foreign exchange (FX) world, extreme volatility is often readily apparent but seldom ever predicted. We explained recently that investors were overly focusing on the euro/US$ when a further round of Japanese QE would make the yen the dominant currency story. I expect the key ¥120/$ support level to be broken soon and the lows of June 2007 (¥124) and Feb 2002 (¥135) to be rapidly taken out. If you want a target to reflect historic volatility, think about the Y145 low of August 1998 (see chart). That is my Q1 forecast.

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I see little value in predicting anything 10 years out today. The US dollar looks strongest, stocks definitely do not, they’re way too overvalued. in 2024, who says there’ll be much of any financial markets remaining? But hey, someone has to lose all that money going forward. Might as well this guy.

Oil, Other Commodities Will Be In The Dumps For Another Decade (MarketWatch)

Remember the commodities supercycle, that seemingly endless 2000s commodities boom? It drove oil, gold, copper and other commodities to record levels. The supercycle was driven by exploding demand from China and other emerging countries, supply bottlenecks caused by years of not developing wells and mines, and rock-bottom interest rates that inflated demand for hard assets all around the world. But now gold, oil and other commodities are well off their peaks, so far off, in fact, and for so long that they can only be described as in a supercycle in reverse, or a secular bear market. If that’s true – and I’m pretty sure it is – investors who piled in to commodities are in for a bruising decade ahead unless they take profits or cut their losses.

Meanwhile, stocks, which run counter to commodities, may well go much higher, along with the U.S. dollar. “We believe that we are in the initial years of a secular down cycle in commodities,” wrote Shawn Driscoll, manager of the natural resource-focused T. Rowe Price New Era Fund in the fund’s most recent semiannual report. “Commodity cycles are very long on the way up and the way down,” he told me in a phone interview. They last around 13 to 15 years, because it takes that long for fundamentals of supply and demand to go to extremes. When the most recent supercycle began in 1998, Driscoll said, commodities prices had plummeted, so producers shuttered old mines and wells and hadn’t opened new ones in a while. But when demand revived, it took years for producers to catch up. Ultimately, companies built too much capacity just in time for the next peak.

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“With this key level out of the way a move towards $75 now looks likely as the hunt for a real floor in oil prices goes on.” WTI at $74 this morning, Brent at $78.

Oil Price Rout To Deepen Amid Supply Glut, Warns IEA (Telegraph)

The rout which has sent oil prices to a four-year low is expected to deepen, the International Energy Agency warned in its latest monthly market report. The Paris-based watchdog said Friday: “While there has been some speculation that the high cost of unconventional oil production might set a new equilibrium for Brent prices in the $80 to $90 range, supply/demand balances suggest that the price rout has yet to run its course.” Against a backdrop of weakening demand, oil supply in October increased adding further downward pressure on prices, the IEA said in its monthly market report. According to the watchdog, global oil supply inched up by 350,000 barrels per day (bpd) in October to 94.2m bpd.

However, in London Brent crude bounced at the open up almost 1pc at around $78 per barrel after heavy losses overnight in the US saw West Texas Intermediate blend crude fall to $74 per barrel. “Crude prices are enduring another hefty move lower, with Brent shifting below $80 for the first time since late 2010,” said Chris Beauchamp, Market Analyst, IG. “With this key level out of the way a move towards $75 now looks likely as the hunt for a real floor in oil prices goes on.” The supply glut will add to pressure on the Organisation of Petroleum Exporting Countries to sharply cut back on production at their meeting on November 27. However, the group’s major producers may be reluctant to do so due to the risk of losing more market share to shale oil drillers in the US.

The IEA’s warning on prices follows the US Energy Department, which this week pared back its forecasts for prices in 2015. The US Energy Information Administration (EIA) – part of the Department of Energy – has slashed its price forecasts for 2015. The EIA now expects US crude blends to average $77.75 per barrel next year, down from a previous forecast of $97.72, and Brent to average $83.42 in 2015, down from its old estimate of $101.67. The EIA has also revised down its global demand forecast by 200,000 barrels per day (bpd) to average 92.5m bpd in 2015, based on weaker global economic growth prospects for next year.

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The US doesn’t produce enough domestically yet, or so I guess.

Keystone Left Behind as Canadian Oil Pours Into US (Bloomberg)

Delays of the Keystone XL pipeline are providing little obstacle to Western Canadian oil producers getting their crude to the U.S. Gulf Coast, with shipments set to more than double next year. The volume of Canadian crude processed at Gulf Coast refineries could climb to more than 400,000 barrels a day in 2015 from 208,000 in August, according to Jackie Forrest, vice president of Calgary-based ARC Financial. The increase comes as Enbridge’s Flanagan South and an expanded Seaway pipeline raise their capacity to ship oil by as much as 450,000 barrels a day. Canadian exports to the Gulf rose 83% in the past four years.

The expansion shows Canadians are finding alternative entry points into the U.S. while the Keystone saga drags on. In the latest chapter, a Democratic senator and a Republican representative are seeking votes in their chambers to set the project in motion. The two are squaring off in a runoff election for a Senate seat from Louisiana, a state where support for the project is strong. “Keystone is kind of old news,” Sandy Fielden, director of energy analytics at Austin, Texas-based consulting company RBN Energy, said Nov. 12 in an e-mail. “Producers have moved on and are looking for new capacity from other pipelines.” TransCanada’s Keystone XL, which would transport Alberta’s heavy oil sands crude to refineries on the Gulf, has been held up for six years, awaiting Obama administration approval.

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Over the top headline and commentary. Russia buys gold because sanctions make access to dollar markets harder.

Putin Stockpiles Gold As Russia Prepares For Economic War (Telegraph)

Russia has taken advantage of lower gold prices to pack the vaults of its central bank with bullion as it prepares for the possibility of a long, drawn-out economic war with the West. The latest research from the World Gold Council reveals that the Kremlin snapped up 55 tonnes of the precious metal – far more than any other nation – in the three months to the end of September as prices began to weaken. Vladimir Putin’s government is understood to be hoarding vast quantities of gold, having tripled stocks to around 1,150 tonnes in the last decade. These reserves could provide the Kremlin with vital firepower to try and offset the sharp declines in the rouble. Russia’s currency has come under intense pressure since US and European sanctions and falling oil prices started to hurt the economy.

Revenues from the sale of oil and gas account for about 45pc of the Russian government’s budget receipts. The biggest buyers of gold after Russia are other countries from the Commonwealth of Independent States, led by Kazakhstan and Azerbaijan. In total, central banks around the world bought 93 tonnes of the precious metal in the third quarter, marking it the 15th consecutive quarter of net purchases. In its report, the World Gold Council said this was down to a combination of geopolitical tensions and attempts by countries to diversify their reserves away from the US dollar. By the end of the year, central banks will have acquired up to 500 tonnes of gold during the latest buying spell, according to Alistair Hewitt, head of market intelligence at the World Gold Council.

“Central banks have been consistently adding to their gold holdings since 2009,” Mr Hewitt told the Telegraph. In the case of Russia, Mr Hewitt said that the recent increases in its gold holdings could be a sign of greater geopolitical risk that has arisen since it seized Crimea sparking a dispute with Ukraine and the West. Overall, the World Gold Council said that global demand for gold was down 2pc year-on-year to 929 tonnes in the third quarter amid signs that buying in China, one of the main markets, had tailed off. Jewellery demand in the quarter ending in September was down 39pc to 147 tonnes, signalling weaker consumer sentiment in the world’s second-largest economy.

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After 2.5 years, and countless comments at TAE about Abe’s inevitable failure, mainstream America is catching on. Even a jibe at Krugman here.

It May Be Too Late for Japan PM to Fix World’s Third Largest Economy (TIME)

Tokyo is abuzz with speculation that Prime Minister Shinzo Abe is about to dissolve the Diet, as the country’s legislature is known, and call a snap election. He by no means has to take such action. It has only been two years since his Liberal Democratic Party, or LDP, swept to power in a massive landslide, and the opposition is in such disarray that there is little doubt Abe would be returned to office in a new election. Nevertheless, Abe apparently feels the need for another vote of confidence from the public, likely in part to bolster support for his radical program to revive Japan’s economy, nicknamed Abenomics. The problem is that it could already be too late. Abenomics is a failure, and Abe isn’t likely to fix it, no matter how many seats his party holds in parliament.

When Abe first introduced Abenomics, many economists – most notably, Nobel laureate Paul Krugman – believed the unconventional program would finally end the economy’s two-decade slump. The plan: the Bank of Japan (BOJ), the country’s central bank, would churn out yen on a biblical scale to smash through the economy’s endemic and destructive cycle of deflation, while Abe’s government would pump up fiscal spending and implement long-overdue reforms to the structure of the economy. Advocates argued that Abenomics was just the sort of bold action to jump-start growth and fix a broken Japan, and we all had reason to hope that it would work. Japan is still the world’s third largest economy, and a revival there would add another much-needed pillar to hold up sagging global economic growth.

However, I had my concerns from the very beginning. In my view, Japan’s economy doesn’t grow because there is a lack of demand. Pumping more cash into the economy, therefore, will not restart growth. Only deep reform to raise the potential of the economy can do that — by improving productivity and unleashing new economic energies. Unless Abe changed the way Japan’s economy works — and I doubted he would — all of the largesse from the BOJ would at best come to nothing. In a worst-case scenario, Abe’s program could turn Japan into an even bigger economic mess than it already is.

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The G20 is the most useless gathering on the planet. They see one thing only, growth, whether it’s there or not.

Europe’s Debt Fight May Undermine Push for Growth Deal (Bloomberg)

Europe’s infighting over debt rules may be the biggest challenge to its ambitions for a new commitment to growth at the Group of 20 summit in Australia. World leaders have already expressed their frustration with the European Union’s German-mandated obsession with budget deficits. When they sit down in Brisbane this weekend to consider the 28-nation bloc’s call for a “comprehensive” growth strategy that seeks to boost private investment and rein in fiscal excess, the G-20 group will include France and Italy, the euro nations that have most publicly fought the EU view. Germany and its allies say the debt rules are essential for the EU’s credibility yet the euro area’s six-year slump has already weakened the bloc’s reputation for economic management, regardless of whether the 18 euro members can eventually wrestle their budget deficits under control.

As global growth wanes, the rest of the world’s capacity to keep indulging Europe’s budget focus is narrowing too. “Europe has, from a global perspective, been too tight for years,” said Jacob Funk Kirkegaard, senior fellow at the Peterson Institute for International Economics in Washington. Even if the euro area relaxes its stance somewhat, “the global economy is growing slower now, so any undershoot matters more.” Behind the united facade European leaders will present in Brisbane, France and Italy are straining at the budget limits they’ve been set, spurred on by calls from European Central Bank President Mario Draghi for nations to supplement his “whatever it takes” monetary policy stance.

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A big relief, was the announcement. So why are EU stocks falling?

Cold Comfort As France, Germany Eke Out Tiny Q3 Growth (Reuters)

European stocks were flat on Friday after gross domestic product numbers showed both France and Germany grew marginally in the third quarter, while the dollar rose further against the yen on expectations of a snap election in Japan. The European data confirmed that the outlook for much of the world economy still looks much shakier than for the United States, although France beat expectations. Asian stocks fell following the latest signs that growth in China is slowing. Energy stocks were depressed as crude oil hovered near a four-year low in an oversupplied market and the Russian ruble, hammered in recent weeks as world oil prices fell, was again testing record lows around 48 rubles per dollar. Germany’s economy eked out growth of 0.1% on the quarter, while France – generally seen as in deeper trouble than its neighbor – grew by 0.3%. Overall euro zone data was due later. “The German number is slightly positive in line with expectations but it’s still soft,” said Patrick Jacq, a rate strategist at BNP Paribas in Paris.

“The (French) growth in Q3 is only driven by inventories. It’s just a one-off positive figure in a very weak environment and therefore this is not something which could lead the market to think that the economic situation is improving in France.” A Reuters poll showed Japanese companies overwhelmingly want Prime Minister Shinzo Abe to delay or scrap a planned tax increase, a move expected to come along with a decision, expected by many, to call a new election. The yen, down more than 3% against a stronger dollar this month, fell another half% to a seven-year low of 116.385 yen per dollar. “The argument is that delaying the sales tax hike means the impulse to CPI inflation will start to drop,” said Alvin Tan, a currency strategist at French bank Societe Generale in London. “If there’s no additional sales tax hike, the impulse to higher inflation starts to fade away quite rapidly. So in order to push inflation higher, which is what everybody wants, you need the currency to weaken a lot more.”

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All those years lost for growth that will never come. Renzi is not a smart guy.

Italy’s Slump Enters Fourth Year, Complicating Renzi’s Plans (Bloomberg)

Italy’s economy shrank in the third quarter pushing the nation into a fourth year of a slump that has complicated Prime Minister Matteo Renzi’s efforts to revive growth and keep public finances in check. Gross domestic product fell 0.1% from the previous three months, when it declined 0.2%, the national statistics institute Istat said in a preliminary report in Rome today. That matched the median forecast in a Bloomberg survey of 22 economists. Output was down by 0.4% from a year earlier. GDP in the euro region’s third-biggest economy has fallen in all but two of the last 13 quarters as the jobless rate rose to the highest on record.

Renzi is relying on estimated 0.6-percent growth next year to rein in a public debt of more than €2 trillion ($2.50 trillion) and preserve a tax rebate to low-paid employees aimed at reviving consumer demand. The Bank of Italy said yesterday in a report that the country needs to avoid a “recessionary demand spiral” due to the “persistence of economic difficulties, which have been exceptional in terms of duration and depth.” Italians rallied in Rome last month to protest an overhaul of labor market rules tha Renzi proposed to make it easier for businesses to hire and fire workers. The premier has repeatedly said the plan is a way to attract investments and that its framework will get parliamentary approval by year’s end before being fully implemented in 2015.

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Finally a Bloomberg poll that gets something right?

World Outlook Darkening as 89% in Poll See Europe Deflation Risk (Bloomberg)

The world economy is in its worst shape in two years, with the euro area and emerging markets deteriorating and the danger of deflation rising, according to a Bloomberg Global Poll of international investors. A plurality of 38% of those surveyed this week described the global economy as worsening, more than double the number who said that in the last poll in July and the most since September 2012, when Europe was mired in a recession. Much of the concern is again focused on the euro area: Almost two-thirds of those polled said its economy was weakening while 89% saw disinflation or deflation as a greater threat there than inflation over the next year. Respondents said the European Central Bank and the region’s governments are making the situation worse by pursuing too-tight policies, and fewer expressed confidence in ECB President Mario Draghi and German Chancellor Angela Merkel.

“The euro-zone economy has deteriorated and will get worse if there are no fiscal policy actions from core European countries, mainly Germany,” poll participant Sanwook Lee, a senior portfolio manager at Shinhan Bank in Seoul, said in an e-mail. Europe isn’t the only source of concern in the global economy, according to the quarterly poll of 510 investors, traders and analysts who are Bloomberg subscribers. More than half of those contacted said conditions in the BRIC economies – Brazil, Russia, India and China – are getting worse, compared with 36% who said so in July.

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China is filled to its credit boom with this kind of shady deals.

China Busts Underground Banks Linked to $23 Billion Transactions (Bloomberg)

Beijing police raided and shut down more than 10 underground banks that were involved in 140 billion yuan ($23 billion) of transactions over the past few years. The banks were raided on Sept. 18, with 59 people arrested and 264 bank accounts frozen, Beijing Municipal Public Security Bureau said in a statement today. The investigation started in February when Beijing police found that a man with surname Yao had transferred more than $5 million abroad in a year, according to the statement. Yao, who had a number of bank accounts, frequently bought $50,000 of foreign exchange, the police said. That’s the most overseas currency that a Chinese citizen can buy annually. The underground banks, most of which are family-run and operating out of homes, use online and mobile payment devices to buy or sell foreign exchange and illegally transfer funds abroad, according to the statement. Beijing police said they would continue to crackdown on crimes that threaten China’s economic and financial security.

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Investors are clueless and befuddled. Ideal patsies.

Stock Market Fear, Stress And Tensions Climbing (MarketWatch)

What happens if we get another melt-up, maybe to 18,000 on the Dow Jones Industrial Average before we see 17,000 again? I’m in a less aggressive mode for now, but feet to fire, if this bubble-blowing bull market is to keep on blowing, why not a total melt-up into and above 18,000 before year-end? Stranger things have happened. I often ask, who’s more scared right now, the bulls or the bears because when there’s an overwhelming consensus in the answer to that question, it’s often time for the markets to put on a big contrarian move opposite that sentiment. Are you a bull or one of the few bears remaining? Are you scared right now? Do you think most bulls are scared right now?

Fear, stress and tensions have been climbing along with the markets, which isn’t what you’d expect, is it? I’ve noticed throughout this week that tensions have been very high on Latest Scuttles and that’s a reflection of the stress felt by most traders and investors right now. There’s likely a lot of money managers who missed this last leg higher from the Ebola lows and now find themselves drastically behind their market benchmarks with just 45 days to go into year-end. That kind of technical setup into year-end could be a catalyst for the winners to keep their momentum heading higher. I personally am not trying and wouldn’t suggest trying to game the next market move, but it’s something to think about.

And what if you’ve missed this bull run over the last five years and still aren’t in the markets or even if you just find yourself like the aforementioned money managers and feel underinvested here? Like I said, I don’t think the continuing bubble-blowing bull market that I’ve predicted would play out like this is over yet. I wouldn’t be aggressive, but if you don’t think you own enough stocks (or any for that matter) then I do suggest scaling into some of the best stocks you can find, including some of the very best, most revolutionary growth stocks you can find.

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The take-away: Apple is an 800-pound bubble.

Apple Could Swallow Whole Russian Stock Market (Bloomberg)

If you owned Apple Inc., and sold it, you could purchase the entire stock market of Russia, and still have enough change to buy every Russian an iPhone 6 Plus. The CHART OF THE DAY shows the total market capitalization of all public companies in the world’s largest country slipped below that of the world’s most-valued company for the first time on record. The gap, at $121 billion on Nov. 12, is about the price of 143 million contract-free 64-gigabyte iPhones, based on Apple Store prices. The value of Russian equities has slumped $234 billion to $531 billion this year, while Apple gained $147 billion to $652 billion, according to data compiled by Bloomberg.

The technology company’s innovation and brand value attract investors, while Russia’s political conflicts, sanctions and the threat of economic stagnation next year make them nervous, according to Vadim Bit-Avragim, a portfolio manager who helps oversee about $4 billion at Kapital Asset Management LLC in Moscow. “Apple works with shareholders to maximize returns and is based where property is protected by law,” Bit-Avragim said. “In Russia, the legislative protection for property is not as good, most state-run companies have poor corporate governance, resources are concentrated in state hands and borrowing costs are shooting up. After all this, when you get involved in conflicts with your neighbors, it becomes very hard to persuade investors from all over the world to invest here.”

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Destruction is our middle name.

Fracking Boom Spurs Demand for Sand and Clouds of Dust (Bloomberg)

A little sand mine down the road didn’t seem like a big deal 17 years ago, when Alphonse Dotson picked the site for a vineyard in the Texas Hill Country. Today he’s surrounded by four mines blasting sand from the earth, filling the air with a fine dust that drifts across acres of sensitive grape vines. A fifth will open soon, and he says he’s worried. “I don’t want us to be smothered to death,” he said. Add sand mining to the list of industries transformed by the U.S. oil boom. The tiny grains of silica are what keep frackers fracking, propping open cracks punched into rock so oil and natural gas can flow. As drilling surged, so has demand for sand. Sand production has more than doubled in the U.S. over the past seven years. By the end of 2016, oil companies in North America will be pumping 145 billion pounds (66 billion kilograms) of it down wells annually. That’s enough to fill railcars stretching from San Francisco to New York – and back.

That’s triggering complaints from local communities, according to a Grant Smith, senior energy policy adviser at the Civil Society Institute. Dust from sand can penetrate deep into lungs and the bloodstream; mines consume massive amounts of water; sand-laden trucks are damaging roads; and property values can be affected. The surge in mining is a “little-understood danger of the fracking boom,” Smith said in a September call with reporters. Energy companies are paying 6% more for sand this year at a time when oil prices are plunging. While low prices may slow down drilling, that won’t make up for a supply bottleneck, said Samir Nangia, a principal at the Houston-based research company PacWest Consulting Partners. Fracking companies are struggling to get enough sand because there aren’t enough trucks and railcars to deliver it. Higher transportation costs are eating into profits at oil-services companies like Schlumberger, Halliburton and Baker Hughes.

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A company that had revenues of $17 billion in 2013 just topples over, and no-one pays attention, because it happened to be in Denmark and SIngapore.

Massive OW Bunker Bankruptcy: Questions Of Governance And Oversight (SeaTrade)

The rapid collapse into bankruptcy of OW Bunker just 48 hours after it revealed a $125m fraud at Singapore subsidiary Dynamic Oil Trading, as well as $150m in risk management losses announced at the same time, leaves an awful lot of unanswered questions. OW Bunker was not a two-bit marine fuel supplier, it had revenues of $17bn in 2013 and claimed a 7% share of the global marine fuel supply market. In March this year its IPO on Copenhagen’s NASDAQ exchange valued the company at DKK5.33bn ($900m), making it one of Denmark’s largest IPOs in recent years. In May this year OW Bunker made Forbes list of top 2,000 list of the world’s biggest public companies. As it stands just seven months on the from the IPO some 20,000 investors will have lost everything they put into the company, based on the statement when it filed for in-court restructuring of its main operating subsidiaries that it “must be assumed that the group’s equity is lost”.

Suppliers and sub-contractors will find themselves with large unpaid bills, something which P&I insurers Skuld have warned shipowners about. And more than 600 employees of the group worldwide face a very uncertain future. Trading is a risky business, and anyone investing in it needs to understand this, but this is also why corporate governance and oversight are so important. It is worth noting that according to reports in the Danish media the company did not actually uncover the fraud at Dynamic itself; one of its senior executives flew to Denmark and tearfully confessed to it. How long it would have gone on if this had not happened we can only speculate. Two employees have since been reported to the Danish police as OW Bunker filed for bankruptcy. What fraud was actually committed we do not know, although we do know it was over a six month period, so its open to question whether it was actual embezzlement or the hiding of losses as the market turned against the executives involved.

Certainly the recent sharp falls in the oil and bunker price point to the latter as a possibility. The case bears certain parallels to then Singapore-based, British national, rogue trader Nick Leeson who caused the collapse of Barings Bank in 1995 having run up losses on speculative trades that eventually totaled in the region of $1.4bn. Indeed the BBC is reporting the fraud at Dynamic could be one of Singapore’s largest financial scandals in the last 10 years, joining what is already a huge scandal in Denmark. The fraud revelations came on top of the $150m in risk management losses that resulted in the firing of OW Bunker head of risk management and evp Jane Dahl Christensen. The full extent of the fallout of OW Bunker’s sudden bankruptcy will most likely take years to unravel. However, lessons do need to be learned on corporate governance and oversight for the benefit of all going forward.

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That Tony Abbott is one dumb f*ck: “Sydney before British settlement was “nothing but bush.”

Aboriginals Decry G-20 Host Australia as Leaders Gather (Bloomberg)

Across the Brisbane River from where some of the world’s biggest leaders will soon gather, a group of 200 indigenous Australians is seeking to present another side to the country’s image as host and regional power. “We want to talk to the people of the world,” said twenty-seven-year-old Meriki Onus, who joined the Aboriginal people protesting in a city park after a two-day, 1,100-mile bus ride to the Queensland state capital. “The police system here is racist, the government systems here are racist and we’ve used the G-20 as an opportunity to tell the world that it’s not OK.” Australia’s first inhabitants – who lived on the continent at least 40,000 years prior to British settlement in 1788 and now make up about 3% of the population – are among groups using the draw of leaders like U.S. President Barack Obama at the Group of 20 meetings to highlight their causes.

The indigenous people gathered in the subtropical city, where police outnumber the 7,000 delegates and media, say the system of government has entrenched poverty. “This country is occupied by force, like what happened in Poland and France during War War II, but for us this has been going on for more than two centuries,” Wayne Wharton, spokesman for the Brisbane Aboriginal Sovereign Embassy, said today at the park protest. “Our people want our rightful place in the world, and that means economic benefits, social benefits, responsibility and services.” Speaking at a business breakfast today in Sydney with U.K. Prime Minister David Cameron, Australia’s leader Tony Abbott, a self-declared prime minister for Aborigines and host of this weekend’s G-20 summit, said Sydney before British settlement was “nothing but bush.”

“As we look around this glorious city, as we see the extraordinary development, it’s hard to think that back in 1788 it was nothing but bush and that the marines and the convicts and the sailors that straggled off those 12 ships just a few hundred yards from where we are now must have thought they’d come almost to the moon,” Abbott said. Daubed with “mourning paint” across his face and torso to highlight indigenous deaths in police custody, Wharton said the G-20 won’t help his people or other Aboriginal races throughout the world because it’s designed to make rich nations wealthier at the expense of the poor. “It all comes back to having the ability to accumulate and then distribute wealth – my people have never had that,” he said.

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