Nov 272016
 
 November 27, 2016  Posted by at 10:14 am Finance Tagged with: , , , , , , , , , ,  


Unknown Paris 1900

This Is The Greatest Suckers’ Rally Of All Time: David Stockman (CNBC)
More Than Half Of New Yorkers One Paycheck Away From Homelessness (Gothamist)
US Thanksgiving, Black Friday Store Sales Fall 10.4%, Online Rises (R.)
Dollar to Benefit if $2.5 Trillion in Cash Stashed Abroad Is Repatriated (WSJ)
China’s Property Frenzy And Surging Debt Raises Red Flag For Economy (AFP)
India’s Rural Economy Hit Hard As Informal Lending Breaks Down (R.)
UK MPs Launch New Attempt To Interrogate Tony Blair Over Iraq (G.)
First Brexit then Trump. Is Italy Next For The West’s Populist Wave? (G.)
Clinton Camp Splits From White House On Jill Stein Recount Push (G.)
Justin Trudeau Ridiculed Over Praise Of ‘Remarkable’ Fidel Castro (G.)
Military Veterans Seek New Role In South Africa Poaching War (AFP)

 

 

Sell everything!

This Is The Greatest Suckers’ Rally Of All Time: David Stockman (CNBC)

The Trump rally raged on this week with all major U.S. indexes hitting record highs, but despite the historic run, David Stockman is doubling down on his call for investors to sell everything. “This 5% eruption is meaningless. It’s some robo machine trying to tag new highs,” Stockman said Tuesday on CNBC’s “Fast Money,” in a dismissal of the S&P 500 rally. “I see a recession coming down the pike in 2017. The stock market is going to go down and it’s going to stay down long and hard because, for the first time in 25 years, there’s nothing to bail it out.” This echoed the initial call Stockman made Nov. 3, when he urged investors to sell stocks and bonds before the presidential election. However, since the Nov. 8 election, the Dow Jones industrial average has gained 4% en route to surpassing 19,000.

Additionally, the S&P 500 and Nasdaq also hit record highs in the same time period, gaining 3% and 4%, respectively. Yet Stockman, who was director of the Office of Management and Budget under President Ronald Reagan, reaffirmed that markets are heading for disaster. “My call stands. Sell the stocks, sell the bonds, get out of the casino,” Stockman explained to CNBC in an off-camera interview. “Bonds have already cratered by nearly $2 trillion worldwide and have miles to go. This isn’t a rotation into stocks, either. It’s the greatest sucker’s rally ever.” Stockman, author of “Trumped: A Nation on the Brink of Ruin… And How to Bring It Back,” lamented that there will be no Trump stimulus or Reagan-style boom.

He further added that he expects “an unprecedented fiscal bloodbath” resulting from the $20 trillion worth of debt that the U.S. currently has on the books. “This isn’t Ronald Reagan with a clean $1 trillion balance sheet and with a fluke GOP and a Southern Democratic coalition that only materialized because he got shot,” Stockman said in reference to John Hinkley Jr. attempting to assassinate Reagan in Washington, D.C., in 1981. “Nor is it LBJ in 1965 with a thundering electoral mandate and a massive congressional majority for the Great Society.” On the contrary, Stockman, who initially predicted that Trump would win the election, added that Washington will be in chaos by June. This is because he anticipates ongoing disruptions from the tea party, which Stockman doesn’t foresee as allowing additional deficit increases.

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“..landlords are increasingly claiming “chronic rent delinquency” after just a single late payment..”

More Than Half Of New Yorkers One Paycheck Away From Homelessness (Gothamist)

More than half of all New Yorkers don’t have enough money saved to cover them in the event of a lost job, medical emergency, or other disaster, according to a new report by the Association for Neighborhood & Housing Development. Nearly 60% of New Yorkers lack the emergency savings necessary to cover at least three months’ worth of household expenses including food, housing, and rent, but that statistic isn’t spread evenly across the five boroughs. The Bronx has the highest rate of families without adequate emergency savings: in Mott Haven, Melrose, Hunts Point, Longwood, Highbridge, South Concourse, University Heights, Fordham, Belmont, and East Tremont, 75% of families have inadequate emergency savings.

The Staten Island neighborhoods of Tottenville and Great Kills have the lowest rate, with just 41% of families lacking the funds necessary to cover three months’ worth of expenses. Without these savings, families who face emergencies could be at risk of eviction, foreclosure, damaged credit, and even homelessness. In Brooklyn, families in Brownsville (70%), Bed-Stuy (67%), Bushwick (68%), East New York (67%), and South Crown Heights/Prospect Heights (67%) are the most at-risk—in Manhattan, an average of 67% of families in Harlem, Washington Heights, and Inwood lack necessary savings. In Queens, the neighborhoods with the highest%age of these households were Elmhurst/Corona (64%), Rockaway/Broad Channel (60%), Sunnyside/Woodside (59%), and Jackson Heights (59%).

As DNAinfo notes, advocates say that rental assistance is crucial in preventing homelessness citywide, especially in neighborhoods where rents rise faster than incomes—many of which overlap with the neighborhoods where families lack adequate savings. And although an increase in rental assistance services like the one proposed by Queens Assemblyman Andrew Hevesi could cost the cost $450 million in state and federal funding, it would be more cost-effective than allowing more families to enter the chronically underfunded shelter system. Many tenants don’t know where to get emergency rental assistance, which can prevent them from falling behind on their rent. And landlords are increasingly claiming “chronic rent delinquency” after just a single late payment, which allows them to begin eviction proceedings earlier on than they would otherwise.

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“Net sales on Black Friday slid 10.4% for brick-and-mortar chains..”

US Thanksgiving, Black Friday Store Sales Fall 10.4%, Online Rises (R.)

Sales and traffic at U.S. brick-and-mortar stores on Thanksgiving Day and Black Friday declined from last year, as stores offered discounts well beyond the weekend and more customers shopped online. Internet sales rose in the double digits on both days, surpassing $3 billion for the first time on Black Friday, according to data released on Saturday. Data from analytics firm RetailNext showed net sales at brick-and-mortar stores fell 5.0% over the two days, while the number of transactions fell 7.9%. Preliminary data from retail research firm ShopperTrak showed that shopper visits to such stores fell a combined 1% during Thanksgiving and Black Friday when compared with the same days in 2015.

The data highlights the waning importance of Black Friday, which until a few years ago kicked off the holiday shopping season, as more retailers start discounting earlier in the month and opened their doors on Thanksgiving Day. “We knew it (holiday season) was going to be off to a slow start,” Shelley Kohan, vice president of retail consulting at RetailNext, said. “The first couple of weeks with the election were a complete distracter from the normal course of business and…a warmer climate in November may have made the sales more stubborn,” she said, adding that she saw sales picking up in December.

Net sales on Black Friday slid 10.4% for brick-and-mortar chains, according to RetailNext. “Stores that opened on Thursday were not very busy on Black Friday,… and while the Thanksgiving Day opt-outs were busier on Black Friday, they didn’t see the crowds they saw in previous years,” NPD group’s Chief Industry analyst Marshal Cohen said. Still, total holiday season sales are expected to jump 3.6% to $655.8 billion this year, according to the National Retail Federation, due to a tightening job market.

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Only if buybacks are banned.

Dollar to Benefit if $2.5 Trillion in Cash Stashed Abroad Is Repatriated (WSJ)

Part of $2.5 trillion in profits held overseas by companies such as Apple and Microsoft could be heading back to the U.S., a move analysts say could further fuel the U.S. dollar’s powerful rally. U.S. corporations have been holding billions in earnings and cash abroad to avoid paying a 35% tax that would be levied whenever the money is brought home. President-elect Donald Trump has said he would propose a one-time cut of the repatriation tax to 10% to lure money back to the U.S. that can be spent on hiring, business development and funding Mr. Trump’s fiscal stimulus proposals. Market optimism that the stimulus plan can generate U.S. economic growth and push the Federal Reserve to raise interest rates has buoyed the dollar against a basket of major trading partners toward 14-year-highs since the Nov. 8 presidential election.

Now, some say the prospect of companies repatriating perhaps hundreds of billions of dollars could offer more impetus to the U.S. currency’s rally. “However small, however big this flow of money will be, it will be positive for the case of dollar strength,” said Daragh Maher at HSBC. “There will most likely be an inflow into dollars.” When a company repatriates earnings from abroad, it may have to exchange the local currency for the U.S. dollar. The $2.5 trillion hoard of overseas earnings is highly concentrated in the technology and pharmaceutical sectors, according to Capital Economics. Microsoft held about $108 billion in earnings overseas as of 2015, while pharmaceutical giant Pfizer had $80 billion. General Electric had $104 billion overseas, according to Capital Economics. Analysts note that many companies already hold their overseas earnings in U.S. dollar assets, which would mute the demand for dollars.

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Famous last words: “The notion that Chinese people do not like to borrow is clearly outdated..”

China’s Property Frenzy And Surging Debt Raises Red Flag For Economy (AFP)

Chinese household debt has risen at an “alarming” pace as property values have soared, analysts have said, raising the risk that a real estate downturn could wreak havoc on the world’s second largest economy. Loose credit and changing habits have rapidly transformed the country’s famously loan-averse consumers into enthusiastic borrowers. Rocketing real estate prices in major Chinese cities in recent years have seen families’ wealth surge. But at the same time they have fuelled a historic boom in mortgage lending, as buyers race to get on the property ladder, or invest to profit from the phenomenon. Now the debt owed by households in the world’s second largest economy has surged from 28% of GDP to more than 40% in the past five years.

“The notion that Chinese people do not like to borrow is clearly outdated,” said Chen Long of Gavekal Dragonomics. The share of household loans to overall lending hit 67.5% in the third quarter of 2016, more than twice the share of the year before. But this surge has raised fears that a sharp drop in property prices would cause many new loans to go bad, causing a domino effect on interest rates, exchange rates and commodity prices that “could turn out to be a global macro event”, ANZ analysts said in a note. While China’s household debt ratio is still lower than advanced countries such as the US (nearly 80% of GDP) and Japan (more than 60%), it has already exceeded that of emerging markets Brazil and India, and if it keeps growing at its current pace will hit 70% of GDP in a few years.

It still has some way to go before it outstrips Australia, however, which has the world’s most indebted households at 125% of GDP. The ruling Communist party has set a target of 6.5-7% economic growth for 2017, and the country is on track to hit it thanks partly to a property frenzy in major cities and a flood of easy credit. But keeping loans flowing at such a pace creates such “substantial risks” that it could be a “self-defeating strategy”, Chen said. China’s total debt – including housing, financial and government sector debt – hit 168.48 trillion yuan ($25 trillion) at the end of last year, equivalent to 249% of national GDP, according to estimates by the Chinese Academy of Social Sciences, a top government think tank.

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“..the informal sector accounts for [..] 80% of employment..”

India’s Rural Economy Hit Hard As Informal Lending Breaks Down (R.)

Life was good for Mitharam Patil, a wealthy money lender from a small village in the Indian state of Maharashtra. Small-time financiers like Patil would typically lend cash to farmers and traders every day, providing a vital source of funding for a rural economy largely shut out of the banking sector, albeit at interest rates of about 24%. All that came crashing down on Nov. 8, when Prime Minister Narendra Modi banned 500 and 1,000 rupee ($7.30-$14.60) banknotes, which accounted for 86% of currency in circulation. The action was intended to target wealthy tax evaders and end India’s “shadow economy”, but it has also exposed the dependency of poor farmers and small businesses on informal credit systems in a country where half the population has no access to formal banking.

Patil was stuck with 700,000 rupees ($10,144) of worthless cash. He can also only withdraw up to 24,000 rupees from his account every week, barely enough for his own personal needs given he also works as a farmer. That is bad news for farmers and traders who had come to depend on Patil, despite his high interest rates, given that bank branches are located far from the village, while the process to obtain loans is long and cumbersome. It may also hurt India’s economy, as the informal sector accounts for 20% of GDP and 80% of employment. The country is due to report July-September GDP on Wednesday. “Sowing of winter crops has been started and farmers badly need money. But I couldn’t lend (to) them due to restrictions on withdrawal,” Patil said.

Some farmers and small businesses say India’s informal credit system has ground to a virtual halt, despite government measures to steer more funds to them, including 230 billion rupees in crop loans. Not only are money lenders struggling to lend, they are also struggling to get paid. Saumya Roy, CEO of Vandana Foundation, a micro finance firm, said it has encountered difficulties in collecting payments from borrowers, which will have a knock-on effect on how much they can lend to others. “We can’t go on lending and suffer losses,” she said. “How can we force people to pay back when they don’t have money to buy food. How will they pay us?”

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That should be fun.

UK MPs Launch New Attempt To Interrogate Tony Blair Over Iraq (G.)

A cross-party group of MPs will make a fresh effort to hold Tony Blair to account for allegedly misleading parliament and the public over the Iraq war. The move, which could see Blair stripped of membership of the privy council, comes as the former prime minister tries to re-enter the political fray, promising to champion the “politically homeless” who are alienated from Jeremy Corbyn’s Labour and the Brexit-promoting government of Theresa May. The group, which includes MPs from six parties, will put down a Commons motion on Monday calling for a parliamentary committee to investigate the difference between what Blair said publicly to the Chilcot inquiry into the war and privately, including assurances to then US president George W Bush.

Backing the motion are Alex Salmond, the SNP MP and former first minister of Scotland; Hywel Williams, Westminster leader of Plaid Cymru; and Green party co-leader Caroline Lucas. Senior Tory and Labour MPs are also backing the move, which reflects widespread frustration that the publication of the Chilcot report in July, after a seven-year inquiry, did not result in any government action or accountability for Blair. Salmond said some MPs believe that senior civil servants were “preoccupied with preventing previous and future prime ministers being held accountable”. He said: “An example should be set, not just of improving government but holding people to account.”

He pointed to last week’s Observer story revealing that, according to documents released under the Freedom of Information Act, the inquiry was designed by senior civil servants to “avoid blame” and reduce the risk that individuals and the government could face legal proceedings. Salmond also noted that documents show many officials involved in planning the inquiry, including current cabinet secretary Sir Jeremy Heywood, were involved in the events that led to war. The new motion will be debated on Wednesday in Commons time allotted to the SNP.

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What Renzi’s Dec. 4 constitutional referendum tries to achieve: “They’re sealing the system off so it can’t be changed in the future.”

First Brexit then Trump. Is Italy Next For The West’s Populist Wave? (G.)

On a bitterly cold evening, MPs and senators representing the Five Star Movement (M5S), launched by Beppe Grillo, the comedian-turned-political rabble rouser, implored a packed piazza to use a referendum on the constitution on Sunday 4 December to send the prime minister, Matteo Renzi, packing. Renzi, the telegenic, youthful leader of the centre-left Democratic party (PD), has placed his authority behind proposals to limit the powers of the senate, Italy’s second chamber. His plan involves cutting the number of senators from 315 to 100, all of whom would be appointed – rather than elected, as at present – and restricting their power to influence legislation.

Since 1948 the Italian constitution has preserved a perfect balance of powers between the two houses of parliament, frequently leading to legislative gridlock in Rome. Renzi claims that slimming down the role of the senate will, along with other reforms to strengthen executive power, finally free governments to govern. Crucially, he has indicated he will step down if the vote goes against him. In other eras, a dry and technical debate might have preoccupied a few constitutional cognoscenti. But these are not ordinary times in western democracies. In Ferrara’s Piazza Trento e Trieste, Alessandro Di Battista, a rising star of Grillo’s movement, issued a populist call to arms. Renzi’s referendum, he told the crowd, was just the latest gambit by a political class determined to insulate itself from the people it should serve.

“This unelected senate will be constituted by the arselickers of the various parties”, said Di Battista, “and by those who are in trouble with the courts and need parliamentary immunity. They’re sealing the system off so it can’t be changed in the future.” Such a devious manoeuvre should, he said, come as no surprise: “There are two Italys: on the one side the very wealthy few who look after themselves, and on the other the masses who live every day with problems of transport and public health.” As his audience launched into a favourite Five Star chant, “A casa! A casa!” (“Send them home”), Di Battista referenced the political earthquake that was in everyone’s mind. “The election of Donald Trump is the American people’s business,” he said. “But what that election does show is that so many citizens are simply not taking the establishment’s bait any more.”

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Did Stein really raise more money for this than for her entire 2016 campaign?

Clinton Camp Splits From White House On Jill Stein Recount Push (G.)

Hillary Clinton’s presidential campaign said on Saturday it would help with efforts to secure recounts in several states, even as the White House defended the declared results as “the will of the American people”. The campaign’s general counsel, Marc Elias, said in an online post that while it had found no evidence of sabotage, the campaign felt “an obligation to the more than 64 million Americans who cast ballots for Hillary Clinton”. “We certainly understand the heartbreak felt by so many who worked so hard to elect Hillary Clinton,” Elias wrote, “and it is a fundamental principle of our democracy to ensure that every vote is properly counted.”

In response, President-elect Donald Trump said in a statement: “The people have spoken and the election is over, and as Hillary Clinton herself said on election night, in addition to her conceding by congratulating me, ‘We must accept this result and then look to the future.’” Wisconsin began recount proceedings late on Friday after receiving a petition from Jill Stein, the Green party candidate. Stein claims there are irregularities in results reported by Wisconsin as well as Michigan and Pennsylvania, where she plans to request recounts next week, having raised millions of dollars from supporters. Trump called Stein’s effort a “scam” and said it was “just a way … to fill her coffers with money, most of which she will never even spend on this ridiculous recount”. “The results of this election should be respected instead of being challenged and abused,” he added, “which is exactly what Jill Stein is doing.”

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I bet you there’s hardly a single American -or European- who knows Cuba has been one of Canada’s most popular holiday destinations for many years.

Justin Trudeau Ridiculed Over Praise Of ‘Remarkable’ Fidel Castro (G.)

Justin Trudeau, the Canadian prime minister, has been mocked and criticised over his praise of the late Cuban leader Fidel Castro. Following the death of Castro, Trudeau, whose father had a close relationship with the revolutionary, released a statement mourning the loss of a “remarkable leader”. Castro, who died on Friday aged 90, won support for bringing schools and hospitals to the poor but also created legions of enemies for his ruthless suppression of dissent. Trudeau’s comments were markedly more positive than most western leaders, who either condemned Castro’s human rights record or tip-toed around the subject. Instead, Trudeau warmly recalled his late father’s friendship with Castro and his own meeting with Castro’s three sons and brother – Raul, Cuba’s current president – during a visit to the island nation earlier this month.

“While a controversial figure, both Mr Castro’s supporters and detractors recognized his tremendous dedication and love for the Cuban people who had a deep and lasting affection for ‘el Comandante’,” Trudeau said in the statement. He called Castro “larger than life” and “a legendary revolutionary and orator”. Fidel Castro was an honorary pall bearer at the 2000 funeral of Trudeau’s father, former prime minister Pierre Trudeau. In 1976, the senior Trudeau became the first Nato leader to visit Cuba under Castro’s rule, at one point exhorting “Viva Castro!”. “I know my father was very proud to call him a friend and I had the opportunity to meet Fidel when my father passed away,” Trudeau said.

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Better be careful with private armies getting involved.

Military Veterans Seek New Role In South Africa Poaching War (AFP)

In another life, Lynn was a sniper in Afghanistan, Damien trained paramilitary forces in Iraq, and John worked undercover infiltrating drug cartels in central America. Now all three are back in action, this time fighting what they describe as a “war” against poachers in southern Africa as the killing of rhinos escalates into a crisis that threatens the survival of the species. In 2008, less than 100 rhinos were poached in South Africa, but in recent years numbers have rocketed with nearly 1,200 killed in 2015 alone. Faced with such slaughter, conservationists and government authorities have been desperately searching for ways to protect the animals.

Many ideas have been tried, including drones, tracking dogs, satellite imagery, DNA analysis, hidden cameras and even cutting horns off live animals before poachers can get to them. But the killing has continued, and now military veterans from the United States, Australia and elsewhere have been drafted to bring their expertise to the uphill battle to save the rhinos. “You have animals who are targeted by people using automatic weapons,” Damien Mander, a former Australian Navy special forces officer, told AFP. “You can not go to the communities and ask them nicely to stop. This is a war. We are fighting a war out there.”

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Nov 262016
 
 November 26, 2016  Posted by at 9:54 am Finance Tagged with: , , , , , , , , , ,  


Fidel Castro and Che Guevara ca. 1957

Cuban Revolutionary Fidel Castro Dies At 90 (AFP)
Wisconsin Agrees To Statewide Recount In Presidential Race (R.)
Bid To Challenge Brexit Gathers Pace Among Pro-Remain Politicians (G.)
Houses Have Never Been More Expensive To Buyers Who Need A Mortgage (Hanson)
Black Friday: The Death of Department Stores (WS)
US Payday Lenders Seek Emergency Court Help Against Regulators (R.)
When Money Dies (Bhandari)
Here’s What Happened When Ancient Romans Tried To ‘Drain The Swamp’ (Black)
Innovation Is Overvalued. Maintenance Matters More (Aeon)
Australia Eases Limits On Foreign Buyers As Apartment Glut Looms (AFR)
Australia Ceases Multimillion-Dollar Donations To Clinton Foundation (News)
Australia Joins Norway, Cuts Clinton Foundation Donations To $0 (ZH)
New Zealand Media Merger Risks Growth Of ‘Glib, Click-Bait’ Coverage (G.)
Greek Debt Relief Plan Said to Entail $35 Billion Bank Bond Swap (BBG)

 

 

How many people remember it was the US that drove Castro into Russian arms? He visited the US shortly after becoming president. Eisenhower refused to talk. Everything after that is propaganda and fake news.

Cuban Revolutionary Fidel Castro Dies At 90 (AFP)

Guerrilla revolutionary and communist idol, Fidel Castro was a holdout against history who turned tiny Cuba into a thorn in the paw of the mighty capitalist United States. The former Cuban president, who died aged 90 on Friday, said he would never retire from politics. But emergency intestinal surgery in July 2006 drove him to hand power to Raul Castro, who ended his brother’s antagonistic approach to Washington, shocking the world in December 2014 in announcing a rapprochement with US President Barack Obama. Famed for his rumpled olive fatigues, straggly beard and the cigars he reluctantly gave up for health reasons, Fidel Castro kept a tight clamp on dissent at home while defining himself abroad with his defiance of Washington.

In the end, he essentially won the political staring game, even if the Cuban people do continue to live in poverty and the once-touted revolution he led has lost its shine. As he renewed diplomatic ties, Obama acknowledged that decades of US sanctions had failed to bring down the regime – a drive designed to introduce democracy and foster western-style economic reforms – and it was time to try another way to help the Cuban people. A great survivor and a firebrand, if windy orator, Castro dodged all his enemies could throw at him in nearly half a century in power, including assassination plots, a US-backed invasion bid, and tough US economic sanctions.

Born August 13, 1926 to a prosperous Spanish immigrant landowner and a Cuban mother who was the family housekeeper, young Castro was a quick study and a baseball fanatic who dreamed of a golden future playing in the US big leagues. But his young man’s dreams evolved not in sports but politics. He went on to form the guerrilla opposition to the US-backed government of Fulgencio Batista, who seized power in a 1952 coup. That involvement netted the young Fidel Castro two years in jail, and he subsequently went into exile to sow the seeds of a revolt, launched in earnest on December 2, 1956 when he and his band of followers landed in southeastern Cuba on the ship Granma. Twenty-five months later, against great odds, they ousted Batista and Castro was named prime minister.

Once in undisputed power, Castro, a Jesuit-schooled lawyer, aligned himself with the Soviet Union. And the Cold War Eastern Bloc bankrolled his tropi-communism until the Soviet bloc’s own collapse in 1989. Fidel Castro held onto power as 11 US presidents took office and each after the other sought to pressure his regime over the decades following his 1959 revolution, which closed a long era of Washington’s dominance over Cuba dating to the 1898 Spanish-American War.

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How much of the $5 million so far was furnished by Soros?

Wisconsin Agrees To Statewide Recount In Presidential Race (R.)

Wisconsin’s election board agreed on Friday to conduct a statewide recount of votes cast in the presidential race, as requested by a Green Party candidate seeking similar reviews in two other states where Donald Trump scored narrow wins. The recount process, including an examination by hand of the nearly 3 million ballots tabulated in Wisconsin, is expected to begin late next week after Green Party candidate Jill Stein’s campaign has paid the required fee, the Elections Commission said. The state faces a Dec. 13 federal deadline to complete the recount, which may require canvassers in Wisconsin’s 72 counties to work evenings and weekends to finish the job in time, according to the commission. The recount fee has yet to be determined, the agency said in a statement on its website.

Stein said in a Facebook message on Friday that the sum was expected to run to about $1.1 million. She said she has raised at least $5 million from donors since launching her drive on Wednesday for recounts in Wisconsin, Michigan and Pennsylvania – three battleground states where Republican Trump edged out Democratic nominee Hillary Clinton by relatively thin margins. Stein has said her goal is to raise $7 million to cover all fees and legal costs. Her effort may have given a ray of hope to dispirited Clinton supporters, but the chance of overturning the overall result of the Nov. 8 election is considered very slim, even if all three states go along with the recount. The Green Party candidate, who garnered little more than 1 percent of the nationwide popular vote herself, said on Friday that she was seeking to verify the integrity of the U.S. voting system, not to undo Trump’s victory.

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In the same way that life imitates art, UK and US imitate each other.

Bid To Challenge Brexit Gathers Pace Among Pro-Remain Politicians (G.)

A series of informal but concerted efforts by pro-remain politicians to reshape or even derail the Brexit process is under way and gaining momentum, according to people involved. MPs from across the parties had discussed how to push the government into revealing its Brexit plans and to ensure continued single market access, sources said, as a series of senior political figures made public interventions suggesting the result of the EU referendum could be reversed. Tony Blair and John Major both suggested this week that the public should be allowed to vote on or even veto any deal for leaving the EU. However, those connected to efforts by serving pro-remain MPs say the former prime ministers’ views had little support in the Commons.

More significant, they argued, were strategy discussions involving MPs from all parties “caught between their own views and those expressed at the ballot box” in the referendum. “It’s a long process of gradually bringing people round to our way of thinking, on all sides,” said someone who works closely with pro-remain figures. “A lot of people are a bit unsure what to do – they’re caught between their own views and those expressed at the ballot box, often by their own constituents. “There’s a growing realisation that this is a long game. There’s actually very little information out there, and very little substance to get into. It’s hard to coalesce people around particular policy positions when the government has no policy to speak of. That’s quite a challenge.”

Major told a private dinner that there was a “perfectly credible case” for holding a second referendum on the terms of a Brexit deal. He said the views of the 48% of people who voted to remain should be taken into account and warned against the “tyranny of the majority”. Blair, in particular, is known to be sounding out opinion on Brexit as part of his re-emergence into political life. The former Labour prime minister’s office said he had discussed the issue with the former chancellor George Osborne, among “many people”.

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Be careful out there.

Houses Have Never Been More Expensive To Buyers Who Need A Mortgage (Hanson)

Houses have NEVER BEEN MORE EXPENSIVE to end-user, mortgage-needing shelter buyers. The recent rate surge crushed what little affordability remained in US housing. It now it requires 45% more income to buy the average-priced house than just four years ago, as incomes have not kept pace it goes without saying. The spike in rates has taken “UNAFFORDABILITY” to such extremes that prices, rates, and/or credit are now radically out of scope. At these interest rate levels house prices are simply not sustainable even in the lower-end price bands, which were far more stable than the middle-to-higher end bands (have been under significant pressure since spring). [..] The Data (note, for simplicity my models assume best-case 20% down and A-grade credit, which is the “minority” of lower-to-middle end buyers).

1) The average $361k builder house requires nearly $65k in income assuming a 4.5% rate, 20% down, and A-grade credit. Problem is, 20% + A-credit are hard to come by. For buyers with less down or worse credit, far more than $65k is needed. For the past 30-YEARS income required to buy the average priced house has remained relatively consistent, as mortgage rate credit manipulation made houses cheaper. Bottom line: Reversion to the mean will occur through house price declines, credit easing, a mortgage rate plunge to the high 2%’s, or a combination of all three. However, because rates are still historically low and mortgage guidelines historically easy, the path of least resistance is lower house prices.

2) The average $274k builder house requires nearly $53k in income assuming a 4.5% rate, 20% down, and A-grade credit. Problem is, 20% + A-credit are hard to come by. For buyers with less down or worse credit, far more than $53k is needed. For the past 30-YEARS income required to buy the average priced house has remained relatively consistent, as mortgage rate credit manipulation made houses cheaper. Bottom line: Reversion to the mean will occur through house price declines, credit easing, a mortgage rate plunge to the high 2%s, or a combination of all three. However, because rates are still historically low and mortgage guidelines historically easy, the path of least resistance is lower house prices.

3) Bonus Chart … Case-Shiller Coast-to-Coast Bubbles Bottom line: IT’S NEVER DIFFERENT THIS TIME. Easy/cheap/deep credit & liquidity has found its way to real estate yet again. Bubbles are bubbles are bubbles. And as these core housing markets hit a wall they will take the rest of the nation with them; bubbles and busts don’t happen in “isolation.”

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What does this mean for the future of human interaction?

Black Friday: The Death of Department Stores (WS)

There are still four weeks left to pull out the year. And hopes persists that this year will be decent. But online sales are hot, according to Adobe Digital Index, cited by Reuters. Online shoppers blew $1.15 billion on Thanksgiving Day, between midnight and 5 pm ET, according to Adobe Digital Index, up nearly 14% from a year ago. Sales by ecommerce retailers have been sizzling for years, growing consistently between 14% and 16% year-over-year and eating with voracious appetite the stale lunch of brick-and-mortar stores, particularly department stores. The lunch-eating process began in 2001. The chart below shows monthly department store sales, seasonally adjusted, since 1992. Note the surge in sales in the 1990s, driven by population growth, an improving economy, and inflation (retail sales are mercifully not adjusted for inflation). But sales began to flatten out in 1999. The spike in January 2001 (on a seasonally adjusted basis!) marked the end of the great American department store boom.

Even as the US fell into a recession in March 2001, ecommerce took off. But department store sales began their long decline, from nearly $20 billion in January 2001 to just $12.7 billion in October 2016, despite 14% population growth and 36% inflation! The decline of department stores is finding no respite during the holiday season. Not-seasonally-adjusted data spikes in October, November, and December. But these spikes have been shrinking, from their peak in December 2000 of $34.3 billion to $23.4 billion in December 2015, a 32% plunge, despite, once again, 14% population growth and 36% inflation!

In other words: the brick-and-mortar operations of department stores are becoming irrelevant. Ecommerce sales include all kinds of merchandise, not just the merchandise available in department stores. So it’s a broader measure. They have skyrocketed from $4.5 billion in Q4 1999 ($1.5 billion a month on average) to $101 billion in Q3 2016 ($33.7 billion a month on average).

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From the “It’s Just Not Fair!” department.

US Payday Lenders Seek Emergency Court Help Against Regulators (R.)

Payday lenders asked a federal judge in Washington, D.C., for emergency relief to stop what they called a coordinated effort by U.S. regulators to stop banks from doing business with them, threatening their survival. In Wednesday night filings, the Community Financial Services Association of America (CFSA) and payday lender Advance America, Cash Advance Centers Inc said a preliminary injunction was needed to end the “back-room campaign” of coercion by the Federal Reserve, the Federal Deposit Insurance Corp and the Office of the Comptroller of the Currency. Advance America said its own situation became dire after five banks decided in the last month to cut ties, including a 14-year relationship with U.S. Bancorp, putting it “on the verge” of being unable even to hold a bank account.

Payday lenders make small short-term loans that can help tide over cash-strapped borrowers. But critics say fees can drive effective interest rates well into three digits, and trap borrowers into an endless debt cycle in which they use new payday loans to repay older loans. The CFSA said other payday lenders are also losing banking relationships as a result of “Operation Choke Point,” a 2013 Department of Justice initiative meant to block access to payment systems by companies deemed at greater risk of fraud. “Protecting consumers from credit fraud is, of course, a commendable goal,” Charles Cooper, a lawyer for the CFSA, wrote. “But the manner in which the defendant agencies have chosen to pursue that ostensible goal betrays that their true intent has always been to eradicate a disfavored industry.”

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I don’t know to what extent Modi is the psychopath he’s made out to be here, but I do like the decentralization described (fits in with my end of centralization themes). “What a crazy idea it is to have a State monopoly on money..” [..] “In a tribalistic and irrational society, decentralization makes life much safer and makes the market more free, as complex decisions will be taken on the local level, where they belong”

When Money Dies (Bhandari)

Most people — particularly the salaried middle class – still seem to have a favorable opinion of Mr. Modi. They have been indoctrinated – in India’s extremely irrational and superstitious society – to believe that this demonetization will somehow alleviate corruption and that anything but support of Modi’s actions is anti-national and unpatriotic. This gives me pause to reflect. What a crazy idea it is to have a State monopoly on money, particularly a money that carries no inherent value and depends on regulatory edicts. On a deeper level, it makes me reflect on why for the culture of India – which is tribalistic, nativistic, superstitious and irrational – “India” is actually an unnatural entity. Such a society should consist of hundreds of tribes and countries, which is what “India” was before the British consolidated it.

In a tribalistic and irrational society, decentralization makes life much safer and makes the market more free, as complex decisions will be taken on the local level, where they belong . India’s institutions – not just organizations, but larger socio-political beliefs – have begun to decay and crumble after the British left, losing their underlying essence, the reason for which they had been institutionalized in the first place. This degradation is now picking up pace. They must eventually fall apart – including the nation-state of India – to adjust to the underlying culture. Let us consider some of these institutions. Western education implanted in India has mutated. It is making individuals cogs in a big machine, all for the service of one great leader. Public education and the mass-media have become instruments of propaganda.

Complexity and the diversity of options that technology brings make an irrational thinker extremely confused, forcing him to seek sanity in ritualistic religion —hence the increase in religiosity in India and elsewhere in the region. This has happened despite the explosion in information technology. The concept of the nation-state, when it took hold in Europe, was about the values the emergent rational and enlightened societies of Europe shared and had collectively come to believe in, at least among their elites. In India, the idea of the nation-state has morphed into a valueless thread, which binds people together through nothing but a flag and an anthem, symbols completely devoid of any values. It has collectivized tribalistic and irrational people (an irrationality that is amply epitomized by the negative force Islam has become in the last two decades).

In India and many similarly constituted countries, institutions that are not natural to their culture – the nation state, education, monetary system, etc. must eventually face entropy, slowly at first, and then rapidly. India has now entered the rapid phase. The death of money – amid a lack of respect for property rights (which again are a purely European concept that emerged from the intellectual revolutions of the last 800 years) – has been sudden and will very likely be catastrophic. It is a man-made disaster of gargantuan proportions. It will fundamentally change India in a very negative way, particularly if the demonetization effort succeeds, as it will have created the foundations enabling the rapid emergence of a police state.

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Yeah, expecting peaceful transitions is perhaps a bit much.

Here’s What Happened When Ancient Romans Tried To ‘Drain The Swamp’ (Black)

In late January of the year 98 AD, after decades of turmoil, instability, inflation, and war, Romans welcomed a prominent solider named Trajan as their new Emperor. Prior to Trajan, Romans had suffered immeasurably, from the madness of Nero to the ruthless autocracy of Domitian, to the chaos of 68-69 AD when, in the span of twelve months, Rome saw four separate emperors. Trajan was welcome relief and was generally considered by his contemporaries to be among the finest emperors in Roman history. Trajan’s successors included Hadrian and Marcus Aurelius, both of whom were also were also reputed as highly effective rulers.

But that was pretty much the end of Rome’s good luck. The Roman Empire’s enlightened rulers may have been able to make some positive changes and delay the inevitable, but they could not prevent it. Rome still had far too many systemic problems. The cost of administering such a vast empire was simply too great. There were so many different layers of governments—imperial, provincial, local—and the upkeep was debilitating. Rome had also installed costly infrastructure and created expensive social welfare programs like the alimenta, which provided free grain to the poor. Not to mention, endless wars had taken their toll on public finances. Romans were no longer fighting conventional enemies like Carthage, and its famed General Hannibal bringing elephants across the Alps.

Instead, Rome’s greatest threat had become the Germanic barbarian tribes, peoples viewed as violent and uncivilized who would stop at nothing to destroy Roman way of life. Corruption and destructive bureaucracy were increasingly rampant. And the worse imperial finances became, the more the government tried to “fix” everything by passing debilitating regulation and debasing the currency. In his seminal work The History of the Decline and Fall of the Roman Empire, Edward Gibbon wrote: “The story of its ruin is simple and obvious; and instead of inquiring why the Roman empire was destroyed, we should rather be surprised that it had subsisted so long.”

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Progress as a blind faith. “Critics wondered if Nixon was wise to point to modern appliances such as blenders and dishwashers as the emblems of American superiority.”

Innovation Is Overvalued. Maintenance Matters More (Aeon)

Innovation is a dominant ideology of our era, embraced in America by Silicon Valley, Wall Street, and the Washington DC political elite. As the pursuit of innovation has inspired technologists and capitalists, it has also provoked critics who suspect that the peddlers of innovation radically overvalue innovation. What happens after innovation, they argue, is more important. Maintenance and repair, the building of infrastructures, the mundane labour that goes into sustaining functioning and efficient infrastructures, simply has more impact on people’s daily lives than the vast majority of technological innovations. The fates of nations on opposing sides of the Iron Curtain illustrate good reasons that led to the rise of innovation as a buzzword and organising concept.

Over the course of the 20th century, open societies that celebrated diversity, novelty, and progress performed better than closed societies that defended uniformity and order. In the late 1960s in the face of the Vietnam War, environmental degradation, the Kennedy and King assassinations, and other social and technological disappointments, it grew more difficult for many to have faith in moral and social progress. To take the place of progress, ‘innovation’, a smaller, and morally neutral, concept arose. Innovation provided a way to celebrate the accomplishments of a high-tech age without expecting too much from them in the way of moral and social improvement.

Before the dreams of the New Left had been dashed by massacres at My Lai and Altamont, economists had already turned to technology to explain the economic growth and high standards of living in capitalist democracies. Beginning in the late 1950s, the prominent economists Robert Solow and Kenneth Arrow found that traditional explanations – changes in education and capital, for example – could not account for significant portions of growth. They hypothesised that technological change was the hidden X factor. Their finding fit hand-in-glove with all of the technical marvels that had come out of the Second World War, the Cold War, the post-Sputnik craze for science and technology, and the post-war vision of a material abundance.

Robert Gordon’s important new book, The Rise and Fall of American Growth, offers the most comprehensive history of this golden age in the US economy. As Gordon explains, between 1870 and 1940, the United States experienced an unprecedented – and probably unrepeatable – period of economic growth. That century saw a host of new technologies and new industries produced, including the electrical, chemical, telephone, automobile, radio, television, petroleum, gas and electronics. Demand for a wealth of new home equipment and kitchen appliances, that typically made life easier and more bearable, drove the growth. After the Second World War, Americans treated new consumer technologies as proxies for societal progress – most famously, in the ‘Kitchen Debate’ of 1959 between the US vice-president Richard Nixon and the Soviet premier Nikita Kruschev. Critics wondered if Nixon was wise to point to modern appliances such as blenders and dishwashers as the emblems of American superiority.

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Just wow. No lessons learned from Vancouver, keep digging while in that hole.

Australia Eases Limits On Foreign Buyers As Apartment Glut Looms (AFR)

The federal government has announced it will make it easier for foreigners to buy new apartments amid concerns of a looming glut that will drive down prices. Treasurer Scott Morrison said the government will make changes to the foreign investment framework to allow foreign buyers to buy an off-the-plan dwelling that another foreign buyer has failed to settle as a new dwelling. Previously, on-sale of a purchased off the plan apartment was regarded as a second hand sale, which is not open to foreign buyers. Foreign buyers can only buy new dwellings. The move effectively opens up the pool of buyers who can soak a potential flood of apartments hitting the residential markets due to failed settlements.

“This change addresses industry concerns, and means property developers won’t be left in the lurch when a foreign buyer pulls out of an off-the-plan purchase,” Mr Morrison said in an announcement. “It is common sense that an apartment or house that has just been built, or is still under construction and for which the title has never changed hands, is not considered an established dwelling.” The policy change comes after Mirvac said it experienced a rise in the default rate for the settlement of off-the-plan residential sales, above its historic average of 1%. The changes will apply immediately and regulation change will be made soon to enable developers to acquire “New Dwelling Exemption Certificates” for foreign buyers of these recycled off-the-plan homes.

On top of defaults, the Australian apartment markets – which boomed in the last four years – are facing other fresh risks. On Friday, HSBC said an oversupply of apartments in Melbourne and Brisbane could send unit prices down by as much as 6% in 2017. The apartment building boom, an ongoing concern for the Reserve Bank of Australia, especially in inner city Melbourne is likely to “start showing through” in price drops of between 2% and 6% in that city next year, HSBC chief economist Paul Bloxham said in a note. It’s a similar story in Brisbane where apartment prices are forecast to fall by as much as 4%. “A national apartment building boom, which has been part of the rebalancing act, is likely to deliver some oversupply in the Melbourne and Brisbane apartment markets, which is expected to see apartment price falls in these markets,” Mr Bloxham said.

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No play no pay.

Australia Ceases Multimillion-Dollar Donations To Clinton Foundation (News)

The Clinton Foundation has a rocky past. It was described as “a slush fund”, is still at the centre of an FBI investigation and was revealed to have spent more than $50 million on travel. Despite that, the official website for the charity shows contributions from both AUSAID and the Commonwealth of Australia, each worth between $10 million and $25 million. News.com.au approached the Department of Foreign Affairs and Trade for comment about how much was donated and why the Clinton Foundation was chosen as a recipient. A DFAT spokeswoman said all funding is used “solely for agreed development projects” and Clinton charities have “a proven track record” in helping developing countries. Australia jumping ship is part of a post-US election trend away from the former Secretary of State and presidential candidate’s fundraising ventures.

Norway, one of the Clinton Foundation’s most prolific donors, is reducing its contribution from $20 million annually to almost a quarter of that, Observer reported. One reason for the drop-off could be increased scrutiny on international donors. The International Business Times reported in 2015 on curious links between donors and State Department approval. IBT wrote that the State Department approved massive commercial arms sales for countries which had donated to the Clinton charity. More than $165 billion worth of arms sales were approved by the State Department to 20 nations whose governments gave money to the Clinton Foundation, data shows. The countries buying weapons from the US were the same countries previously condemned for human rights abuses. They included Algeria, Saudi Arabia and Kuwait.

But what does Australia gain from topping up the Clinton coffers? The Australian reported in February that Australia was “the single biggest foreign government source of funds for the Clinton Foundation” but questions remain unanswered about the agreement between the two parties. “It’s not clear why Canberra had to go through an American foundation to deliver aid to Asian countries (including Indonesia, Papua New Guinea and Vietnam). There is now every chance the payments will become embroiled in presidential politics.” The Daily Telegraph wrote in October that “Lo and behold, (Julia Gillard) became chairman (of the Clinton-affiliated Global Partnership for Education) in 2014”, one year after being defeated in a leadership ballot by Kevin Rudd.

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“After contributing $88mm to the Clinton Foundation over the past 10 years, making them one of the Foundation’s largest contributors, Australia has decided to pull all future donations.

But why would they stop funding now that Hillary has so much more free time to focus on her charity work?

Australia Joins Norway, Cuts Clinton Foundation Donations To $0 (ZH)

For months we’ve been told that the Clinton Foundation, and it’s various subsidiaries, were simple, innocent “charitable” organizations, despite the mountain of WikiLeaks evidence suggesting rampant pay-to-play scandals surrounding a uranium deal with Russia and earthquake recovery efforts in Haiti, among others. Well, if that is, in fact, true perhaps the Clintons could explain why wealthy foreign governments, like Australia and Norway, are suddenly slashing their contributions just as Hillary’s schedule has been freed up to focus exclusively on her charity work. Surely, these foreign governments weren’t just contributing to the Clinton Foundation in hopes of currying favor with the future President of the United States, were they? Can’t be, only an useless, “alt-right,” Putin-progranda-pushing, fake news source could possibly draw such a conclusion.

Alas, no matter the cause, according to news.com.au, the fact is that after contributing $88mm to the Clinton Foundation, and its various affiliates, over the past 10 years the country of Australia has decided to cease future donations to the foundation just weeks after Hillary’s stunning loss on November 4th. And just like that, 2 out of the 3 largest foreign contributors to the Clinton Foundation are gone with Saudia Arabia being the last remaining $10-$25mm donor that hasn’t explicitly cut ties or massively scaled by contributions. [..]
News.com.au confirmed Australia’s decision to cut future donations to the Clinton Foundation earlier today. When asked why donations were being cut off now, a Department of Foreign Affairs and Trade official simply said that the Clinton Foundation has “a proven track record” in helping developing countries. While that sounds nice, doesn’t it seem counterintuitive that these countries would pull their funding just as Hillary has been freed up to spend 100% of her time helping people in developing countries?

“Australia has finally ceased pouring millions of dollars into accounts linked to Hillary Clinton’s charities. Which begs the question: Why were we donating to them in the first place? The federal government confirmed to news.com.au it has not renewed any of its partnerships with the scandal-plagued Clinton Foundation, effectively ending 10 years of taxpayer-funded contributions worth more than $88 million. News.com.au approached the Department of Foreign Affairs and Trade for comment about how much was donated and why the Clinton Foundation was chosen as a recipient. A DFAT spokeswoman said all funding is used “solely for agreed development projects” and Clinton charities have “a proven track record” in helping developing countries.”

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Fake News Inc.

New Zealand Media Merger Risks Growth Of ‘Glib, Click-Bait’ Coverage (G.)

A group of distinguished former newspaper editors has launched a scathing attack on plans for New Zealand’s largest print media companies to merge, calling it a threat to democracy which could see a concentration of power exceeded “only in China”. The merger of NZME and Fairfax Media, which was proposed in May, would not be healthy in a country that “already suffers from a dearth of serious content and analysis”, the editors say in a submission to the commerce commission. The group, which includes Suzanne Chetwin, former Dominion chief Richard Long and ex-New Zealand Herald editor Gavin Ellis, also criticise the trend towards “click-bait stories” at a time when television has “all but abandoned current affairs and our public discourse is increasingly glib”.

“The merger would see one organisation controlling nearly 90% of the country’s print media market (and associated websites), the greatest level of concentration in the OECD and one that is exceeded only by China. “That cannot be healthy, particularly in a society like New Zealand’s that has so few checks and balances in its constitutional arrangements.” The submission went on to state the greatest threat to New Zealand media came from off-shore publishers who had “no feel for New Zealand’s social fabric”, and urged the commerce commission to decline the merger. The merger was sold as an attempt by both companies to stem revenue losses and drastic staff and budget cuts, particularly to rural and regional newsrooms.

Dunedin’s The Otago Daily Times would be the only newspaper in the country to remain independent, although it too could be affected as they have content sharing agreements with NZME’s The New Zealand Herald. Radio stations and magazines owned by both companies would also be affected.

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That’s not debt relief, it’s Schauble-friendly creative accounting.

Greek Debt Relief Plan Said to Entail $35 Billion Bank Bond Swap (BBG)

Greece’s battered banks are being asked to swap about 33 billion ($35 billion) euros in floating-rate bonds for 30-year, fixed-rate securities under a euro-area plan to shield Athens from future interest rate increases, three people with knowledge of the matter said. The swap is part of a package of debt-relief proposals for Greece to be presented at a Dec. 5 meeting of euro-area finance ministers, according to the people, who asked not to be named because they weren’t authorized to speak publicly about the matter. The notes were issued by the European Financial Stability Facility, the region’s crisis-fighting fund, to re-capitalize Greek lenders in 2013.

While the current EFSF holdings of Greek banks fall due between 2034 and 2046, the fixed-rate notes will expire in 2047, the people said. That will reduce Greece’s interest rate risk, but it may come at a cost for its four systemically important lenders, which could be left with securities that are more difficult to trade. The technical aspects of the operation are still being hashed out. “There are discussions going on as to proposals which will improve the sustainability of the Greek debt,” Piraeus Bank Chairman George Handjinicolaou said in an interview Thursday. “Part of this proposal is a change in the EFSF bonds for something else, some form of fixed-rate debt, which would improve the predictability of the sustainability of the Greek debt profile.”

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Nov 282015
 
 November 28, 2015  Posted by at 9:35 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle November 28 2015


Russell Lee Secondhand store in Council Bluffs, Iowa 1936

US Energy Sector “On The Cusp Of A Staggering Default Wave” (EI)
Black Friday Crowds Thin In Subdued Start To US Holiday Shopping (Reuters)
Salting The Economy To Death (Gordon)
Student Debt in America: Lend With a Smile, Collect With a Fist (NY Times)
China Calm Shattered as Brokerage Probe Sparks Selloff in Stocks (Bloomberg)
Half of Gold Output May Not Be ‘Viable’ as Price Sags (Bloomberg)
HSBC Whistleblower Falciani Sentenced To 5 Years By Swiss Court (Guardian)
NYSE Is Delisting National Bank of Greece After 91% Plunge (Bloomberg)
Future Of Human Gene Editing To Be Decided At Landmark Summit (Guardian)
The Monkey King: China’s Clone Factory (FT)
Piketty Says Russia Robbed of Bigger Reserves by Capital Flight (Bloomberg)
How Turkey Exports ISIS Oil To The World: The Scientific Evidence (Zero Hedge)
Turkey’s Erdogan Warns Russia Not To ‘Play With Fire’ (Reuters)
Russia to Keep Visa Regime With Turkey as Long as ‘Ankara Helps ISIL’ (Sputnik)
EU, Turkey Driving Hard Bargain Before Refugee Summit (Reuters)
Migrants At FYROM Border Crossing Block Trains (Kath.)
Six Migrant Children Drown On Way To Greece (AP)

Losses among lenders will be stunning.

US Energy Sector “On The Cusp Of A Staggering Default Wave” (EI)

The US E&P sector could be on the cusp of massive defaults and bankruptcies so staggering they pose a serious threat to the US economy. Without higher oil and gas prices – which few experts foresee in the near future – an over-leveraged, under-hedged US E&P industry faces a truly grim 2016. How bad could things get and when? It increasingly looks like a number of the weakest companies will run out of financial stamina in the first half of next year, and with every dollar of income going to service debt at many heavily leveraged independents, there are waves of others that also face serious trouble if the lower-for-longer oil price scenario extends further.

“I could see a wave of defaults and bankruptcies on the scale of the telecoms, which triggered the 2001 recession,” Timothy Smith, president of consultancy Petro Lucrum, told a Platts energy conference in Houston last week. Much has been made about the resiliency of US oil production in the face of low prices, but the truth is that many producers are maximizing their output — even unprofitable volumes — because they need the cash flow to service their debt (related). “As an industry, we’re at the point where every dollar of free cash flow now goes to paying back debt,” Angle Capital’s Steve Ilkay told the same conference. Ilkay, who advises North American producers on asset management, said during the boom years of 2012-14 about 55% of the sector’s free cash flow, which is calculated by subtracting capital expenditures from operating cash flow, was allocated toward debt repayment.

With West Texas Intermediate (WTI) stuck below $50 per barrel since August – and closer to $40 recently – the industry has responded with deeper cuts to capex and a greater focus on efficiency. However, experts say this won’t be enough to avoid a bloody reckoning with persistent low oil and gas prices, as the sector grapples with some $200 billion-plus in high-yield debt, which it absorbed to finance the shale oil boom. Credit quality has been steadily deteriorating since June 2014, when WTI peaked at $108/bbl. Standard and Poor’s says there have been 19 defaults so far in 2015 across the US oil and gas industry, while another 15 companies have filed for bankruptcy. Besides those that have missed interest or principal payments, the default category also includes companies that have entered into “distressed exchanges” with their creditors, including Halcon, SandRidge, Midstates, Goodrich, Warren, Exco, Venoco and Energy XXI.

Of the 153 oil and gas companies that S&P applies credit ratings to, roughly two-thirds are E&P firms. Among these E&Ps, 77% now have high-yield or “junk” ratings of BB+ or lower. 63% are rated B+ or worse, and 31% – or 51 companies – are rated below B-. What does this all mean in layman’s terms? “Quite frankly it’s a lot of gloom and doom,” says Thomas Watters, managing director of S&P’s oil and gas ratings. “I lose sleep over what could unfold.” He says companies with ratings of B- or below are “on life support,” while those further down the ratings scale at C+ or lower are “maybe looking at a year, year-and-a-half before they default or file for bankruptcy.”

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Disappointing won’t begin to describe it, but a suitable narrative will be found.

Black Friday Crowds Thin In Subdued Start To US Holiday Shopping (Reuters)

America’s annual Black Friday shopping extravaganza was short on fireworks this year as U.S. retailers’ discounts on electronics, clothing and other holiday gifts failed to draw big crowds to stores and shopping malls. Major retail stocks including Best Buy and Wal-Mart closed lower while Target, picked out by one analyst for its promotion strategy, saw its shares tick up. Bargain hunters found relatively little competition compared with previous years. Some had already shopped Thursday evening, reflecting a new normal of U.S. holiday shopping, where stores open up with deals on Thanksgiving itself, rather than waiting until Black Friday. Retailers “have taken the sense of urgency out for consumers by spreading their promotions throughout the year and what we are seeing is a result of that,” said Jeff Simpson, director of the retail practice at Deloitte.

Traffic in stores was light on Friday, while Thursday missed his expectations, he said. As much as 20% of holiday shopping is expected to be done over the Thanksgiving weekend this year, analysts said. But the four days are not considered a strong indicator for the entire season. A slow start last year led to deeper promotions and a shopping rush in the final ten days of December. Steve Bratspies, chief merchandising officer at Wal-Mart, told Reuters he was not surprised that a store would see thinner crowds on Friday after it kicked off Black Friday deals on Thursday night. Suntrust Robinson Humphrey analysts were more blunt, calling Thursday a “bust”. “Members of our team who went to the malls first had no problem finding parking or navigating stores,” he wrote in a note.

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“Debt based stimulus is both sustaining and killing the economy at the same time.”

Salting The Economy To Death (Gordon)

One popular delusion that won’t seem to go away is the notion that policy makers can stimulate robust economic growth by setting interest rates artificially low. The general theory is that cheap credit compels individuals and businesses to borrow more and consume more. efore you know it, the good times are here again. Profits increase. Jobs are created. Wages rise. A new cycle of expansion takes root. These are the supposed benefits to an economy that central bankers can impart with just a little extra liquidity. Unfortunately, this policy antidote doesn’t always work out in practice. Certainly cheap credit can have a stimulative influence on an economy with moderate debt levels. But once an economy has reached total debt saturation, where new debt fails to produce new growth, the cheap credit trick no longer works to stimulate the economy.

In fact, the additional credit, and its counterpart debt, actually strangles future growth. Present monetary policy has landed the economy at the unfavorable place where more and more digital monetary credits are needed each month just to stand still. After seven years of ZIRP, financial markets have been distorted to the point where a zero bound federal funds rate has become restrictive. At the same time, applications of additional debt only serve to further the economy’s ultimate demise. The fundamental fact is that the current financial and economic paradigm, characterized by heavy handed Federal Reserve intervention into credit markets, is dying. Debt based stimulus is both sustaining and killing the economy at the same time. No doubt, this is a strange situation that has developed.

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No government has the right to play such a role.

Student Debt in America: Lend With a Smile, Collect With a Fist (NY Times)

The American student loan crisis is often seen as a problem of profligacy and predation. Wasteful colleges raise tuition every year, we are told, even as middle-class wages stagnate and unscrupulous for-profit colleges bilk the unwary. The result is mounting unmanageable debt. There is much truth in this diagnosis. But it does not explain the plight of Liz Kelley, a Missouri high school teacher and mother of four who made a series of unremarkable decisions about college and borrowing. She now owes the federal government $410,000, and counting. This is a staggering and unusual sum. The average undergraduate who borrows leaves school with about $30,000 in debt. But Ms. Kelley’s circumstances are not unique.

Of the 43.3 million borrowers with outstanding federal student loans, 1.8%, or 779,000 people, owe $150,000 or more. And 346,000 owe more than $200,000. Ms. Kelley’s debt woes are also mostly a matter of interest, not principal, a growing problem for the nation’s student debtors. According to the Federal Reserve Bank of New York, the number of active borrowers enrolled in college has declined to roughly nine million today from about 12 million in 2010. Yet the total amount of outstanding debt continues to increase, because many borrowers are not paying back their older loans. This is partly a function of continuing economic hardship. But it also reflects how the federal government has become the biggest, nicest and meanest student lender in the world.

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Xi plays with a fire he doesn’t understand.

China Calm Shattered as Brokerage Probe Sparks Selloff in Stocks (Bloomberg)

China’s stocks tumbled the most since the depths of a $5 trillion plunge in August as some of the nation’s largest brokerages disclosed regulatory probes, industrial profits fell and two more companies said they’re struggling to repay bonds. The Shanghai Composite Index sank 5.5%, with a gauge of volatility surging from the lowest level since March. Citic Securities and Guosen Securities plunged by the daily limit in Shanghai after saying they were under investigation for alleged rule violations. The probe into the finance industry comes as the government widens an anti-corruption campaign and seeks to assign blame for the selloff earlier this year. Authorities are testing the strength of a nascent bull market by lifting a freeze on initial public offerings and scrapping a rule requiring brokerages to hold net-long positions, just as the earliest indicators for November signal a deterioration in economic growth.

A Chinese fertilizer maker and a pig iron producer became the latest companies to flag debt troubles after at least six defaults this year. “The sharp decline will raise questions whether the authorities’ confidence that we are seeing stability in the Chinese markets may be a tad premature,” said Bernard Aw, a strategist at IG Asia in Singapore. “The rally since the August collapse was not fundamentally supported. The removal of restrictions for large brokers to sell and the IPO resumptions may not have been announced at an opportune time.” Friday’s losses pared the Shanghai Composite’s gain since its Aug. 26 low to 17%. The Hang Seng China Enterprises Index slid 2.5% in Hong Kong. The Hang Seng Index retreated 1.9%. A gauge of financial shares on the CSI 300 slumped 5%. Citic Securities and Guosen Securities both dropped 10%. Haitong International Securities slid 7.5% for the biggest decline since Aug. 24 in Hong Kong.

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Deflation.

Half of Gold Output May Not Be ‘Viable’ as Price Sags (Bloomberg)

Half of the gold coming from mines may not be viable at current prices, underscoring the industry’s need for consolidation and output cuts, according to the best-performing producer of the metal in the past decade. “The more we continue to produce unprofitable gold, the more pressure we put on the gold price,” Randgold Resources CEO Mark Bristow said in Toronto on Friday. “In the medium term, it’s a very bullish outlook for the gold industry. The question is, how long are we going to supply it with unprofitable gold?” Gold fell to a five-year low on Friday as a rising dollar and speculation that U.S. policy makers will boost interest rates next month curbed the appeal of bullion as a store of value. While industrial metal producers have promised output cuts, “we don’t have that psyche in the gold industry, we just send it off our mine and somebody buys it,” Bristow said.

Gold miners buffeted by the drop in prices are shortening the life of mines by focusing only on the best quality ore, a practice known as high grading, which will restrict future output and support higher prices, according to Bristow. He said in a presentation to bankers in Toronto that the industry life span is down to about five years because companies have been aggressively high grading at the expense of future production. “The industry has moved away from looking at optimal life of mines because everyone is trying to demonstrate short-term delivery,” he said in the interview after the presentation. “Where is all this value that people promised in the gold industry? It’s not there.”

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Way to go! Lock up all whistleblowers! Leave the bankers alone!

HSBC Whistleblower Falciani Sentenced To 5 Years By Swiss Court (Guardian)

The whistleblower who exposed wrongdoing at HSBC’s Swiss private bank has been sentenced to five years in prison by a Swiss court. Hervé Falciani, a former IT worker, was convicted in his absence for the biggest leak in banking history. He is currently living in France, where he sought refuge from Swiss justice, and did not attend the trial. The leak of secret bank account details formed the basis of revelations – by the Guardian, the BBC, Le Monde and other media outlets – which showed that HSBC’s Swiss banking arm turned a blind eye to illegal activities of arms dealers and helped wealthy people evade taxes. While working on the database of HSBC’s Swiss private bank, Falciani downloaded the details of about 130,000 holders of secret Swiss accounts. The information was handed to French investigators in December 2008 and then circulated to other European governments.

It was used to prosecute tax evaders including Arlette Ricci, the heir to France’s Nina Ricci perfume empire, and to pursue Emilio Botín, the late chairman of Spain’s Santander bank. Switzerland’s federal prosecutor had requested a record six-year term for Falciani for aggravated industrial espionage, data theft and violation of commercial and banking secrecy. It was the longest sentence ever demanded by the confederation’s public ministry in a case of banking data theft. The trial was also the first conducted by the country’s federal criminal court in which the accused had not been present. The defendant’s lawyers had demanded a reduced sentence, of between two and three years, “compatible with the granting of a reprieve”.

Falciani himself refused to appear in the dock, on the grounds that he would not be allowed a fair trial. He described the process as a “parody of justice”. [..] Falciani’s lawyer, Marc Henzelin, pointed out that his client was on trial at a time when Switzerland was in the process of dismantling its banking secrecy practices with proposals for new laws that would pave the way for automatic information exchange about offshore accounts held in Switzerland. In fact, Switzerland announced on 4 November that the country’s finance ministry temporarily shelved the plans for reform. “It is not Falciani who is being judged. It is the court. It is Switzerland,” said Henzelin.

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The inevitable result of the Troika’s forced fire sale of Greek bank shares to global investment funds.

NYSE Is Delisting National Bank of Greece After 91% Plunge (Bloomberg)

The New York Stock Exchange is delisting American depositary receipts of National Bank of Greece SA after they lost 91% of their value this year. The ADRs were suspended on Friday, when their value slumped to 16 cents from as much as $1.96 in February. NYSE cited an “abnormally low” price in a statement. Losses spiraled to a record this month, after the Greek lender sold new shares at a more than 90% discount to market prices. The nation’s four largest banks have been raising capital to help fill a €14.4 hole in their accounts identified by the European Central Bank. National Bank of Greece has the right to appeal the decision to a committee of the board of directors of NYSE. The stock in Athens closed at a record low of 8 euro cents, taking its weekly slump to 64%.

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“What is unsettling is that the organisers are from the three areas of the world where there seems to be, among scientists at least, the most enthusiasm for going forward.”

Future Of Human Gene Editing To Be Decided At Landmark Summit (Guardian)

The question could hardly be more profound. Having stumbled upon a simple means to make precise changes to the code of life, should humans take control of their genetic fate, and rewrite the DNA of future generations? Once an idea explored only in fiction, the prospect is now a real one. The inexorable rise of gene editing has put the technology in labs across the globe. The first experiments on human embryos have been done, in a bid to correct faulty genes that cause disease. To thrash out an answer, or at least find common ground, an international group of experts will descend on Washington DC next week for a three day summit. Convened with some urgency by the US, UK and Chinese national academies, the meeting is billed as a “global discussion”. It is a chance to take stock of a revolutionary technology that has the power to do good, and the potential to wreak havoc.

“This new technology for gene editing, that is, selectively inserting and removing genes from an organism’s DNA, is spreading around the world,” says Ralph Cicerone, president of the US National Academy of Sciences, where the summit will take place. With the number of experiments ballooning, the uses and risks the technology brings must be worked through now, he adds. The last time scientists met like this was in 1975, when it became clear that the DNA from one species could be spliced into another. One experiment underway at the time aimed to put DNA from a cancer-causing monkey virus into bacteria that infect humans. The potential for disaster led to a meeting in Asilomar, California, to agree and make public fresh safeguards for the experiments.

Jennifer Doudna, an inventor of a gene editing tool called Crispr-Cas9, said Asilomar was much in mind when the summit was organised. “I think it’s this generation’s version of Asilomar,” she says. “It’s a very exciting time, but as with any powerful technology, there is always the risk that something will be done either intentionally or unintentionally that somehow has ill effects.” [..] Marcy Darnovsky, director of the Center for Genetics and Society, and a speaker at the summit, said that the meeting could make a real contribution to the debate, but needed to be far more inclusive. “What is unsettling is that the organisers are from the three areas of the world where there seems to be, among scientists at least, the most enthusiasm for going forward.”

Darnovsky wants a total ban on editing human embryos that are destined to become people. “It’s way too risky and it’s likely to remain that way,” she says. If editing was allowed to prevent diseases being passed on, it would quickly lead to designer babies, she argues. “People say it is a slippery slope. I don’t call that a slippery slope, I call that jumping off a cliff,” she says. “We would be well on the way to a world in which people who could afford to do so would attempt to give their children the best start in life, and competitive and commercial pressures would kick in. We’d end up in a world of genetic haves and have-nots, and risk introducing new kinds of inequality when we already have shamefully way too much.”

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“Starting with 100,000 cloned cattle embryos a year in “phase one”, Mr Xu envisages 1 million annually at some point in the future..”

The Monkey King: China’s Clone Factory (FT)

In Chinese mythology, the Monkey King is a beast with magical fur. All he has to do is pull out a hair, blow on it and it is instantly transformed into a clone of himself. Xu Xiaochun, chief executive of BoyaLife, says the fable is not far from reality, as far as his Chinese biotechnology company is concerned. This week he announced an investment of $31m in a joint venture with South Korea’s Sooam Biotech that aims to clone 1m cows a year from their hair cells. The Monkey King “sounds like a fairy tale but we are really doing the same thing”, he says. “We pull out 200 hairs, blow on them — and boom!” Sometime next year, researchers in BoyaLife’s laboratory on the outskirts of the coastal city of Tianjin will take skin cells from a few carefully chosen cattle (Kobe beef is Mr Xu’s favourite).

The scientists will extract the nucleus from each cell and place it into an unfertilised egg from another cow. The cloned embryos will then be implanted in surrogate dairy cows housed on cattle ranches throughout China. His ambition is staggering. Starting with 100,000 cloned cattle embryos a year in “phase one”, Mr Xu envisages 1 million annually at some point in the future. That would make BoyaLife by far the largest clone factory in the world. Mr Xu says the latest techniques enable cloning to be carried out in an “assembly line format” at a rate of less than 1 minute per cell. Based on a four- hour shift and 250 working days a year, a proficient cloner would “manufacture” 60,000 cloned cow embryos a year, he says, adding that a team of 50 will be sufficient for the planned scale of the project. Mr Xu plans to have a staff of 300 and eventual total investment is estimated at $500m.

If the venture comes anywhere near achieving its goal, it will be another example of the recent surge of path-breaking, taboo-busting biotechnology research, with China introducing mass production and commercialisation of projects that are still in the experimental and clinical stages elsewhere. China’s flag-bearer in biotech is BGI, formerly known as Beijing Genomics Institute and now based in Shenzhen. BGI has grown into the world’s biggest genomics organisation, with a huge capacity to read, analyse and alter DNA from plants, microbes, people and animals. It employs more than 2,000 PhD-level scientists and 200 top-of-the-range gene-sequencing machines. In September BGI captured the public imagination with an announcement that “micropigs”, originally developed for biomedical research through gene editing and cloning, would be sold as pets.

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Sanctions.

Piketty Says Russia Robbed of Bigger Reserves by Capital Flight (Bloomberg)

Count Russian reserves as another casualty of income inequality that Thomas Piketty believes is reshaping the world’s biggest economies. Russia, which is struggling to rebuild holdings depleted during last year’s currency crisis, has missed out on building a bigger stockpile in the past 15 years by failing to create a more transparent financial system to ease inequality and distribute the spoils of a boom in commodities prices, said Piketty, the author of the bestselling “Capital in the 21st Century.” Jailing “a couple of billionaires from time to time” is no way to address the challenge, the French economist said in an interview in Moscow on Thursday. “In the long term, Russia should have much more reserves, given the level of its trade surplus,” he said.

“It’s important to realize that Russia is being stolen money from, by capital flight and by the fact that billionaires and millionaires outside Russia and sometimes inside Russia are able to benefit from natural resources of Russia much more than they should.” Piketty, 44, who gave a lecture at the Higher School of Economics in Moscow, may already be preaching to the converted. The government is looking to wring greater revenue from the energy industry with a tax increase, while the Bank of Russia has set a target of about $500 billion for reserves after burning through a fifth of its holdings to prop up the ruble last year. Vladimir Putin, in power for 16 years as premier or president, has backed efforts to repatriate as much as $1 trillion in capital held by companies and high-ranking officials abroad as part of what he’s called the “de-offshorization” of the economy.

Putin, who introduced a 13% flat income tax rate in 2001, has also seen top ministers broach the subject of re-instituting a progressive tax system. The current income levy is “relatively small” in a country with “a lot of inequality” and “far too little transparency,” Piketty said. “Russia would be in a much better situation today if this reform for more transparency, progressive taxation would have been conducted before,” Piketty said. “It’s time, especially in the current crisis, to change course and to deal with inequality and transparency in a much more front-faced way.”

The debate is gaining urgency after the government allowed household finances to bear the brunt of the country’s first recession in six years, putting Russia on track for the biggest drop in consumption during Putin’s rule. This year, 21.7 million people, or about 15% of the population, are living beneath the subsistence level, according to the Federal Statistics Service. The crisis marks the “first significant” increase in Russia’s poverty since the crisis in 1998-1999, according to the World Bank.

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Long display.

How Turkey Exports ISIS Oil To The World: The Scientific Evidence (Zero Hedge)

Over the course of the last four or so weeks, the media has paid quite a bit of attention to Islamic State’s lucrative trade in “stolen” crude. On November 16, in a highly publicized effort, US warplanes destroyed 116 ISIS oil trucks in Syria. 45 minutes prior, leaflets were dropped advising drivers (who Washington is absolutely sure are not ISIS members themselves) to “get out of [their] trucks and run away.” The peculiar thing about the US strikes is that it took The Pentagon nearly 14 months to figure out that the most effective way to cripple Islamic State’s oil trade is to bomb… the oil. Prior to November, the US “strategy” revolved around bombing the group’s oil infrastructure.

As it turns out, that strategy was minimally effective at best and it’s not entirely clear that an effort was made to inform The White House, Congress, and/or the public about just how little damage the airstrikes were actually inflicting. There are two possible explanations as to why Centcom may have sought to make it sound as though the campaign was going better than it actually was, i) national intelligence director James Clapper pulled a Dick Cheney and pressured Maj. Gen. Steven Grove into delivering upbeat assessments, or ii) The Pentagon and the CIA were content with ineffectual bombing runs because intelligence officials were keen on keeping Islamic State’s oil revenue flowing so the group could continue to operate as a major destabilizing element vis-a-vis the Assad regime.

Ultimately, Russia cried foul at the perceived ease with which ISIS transported its illegal oil and once it became clear that Moscow was set to hit the group’s oil convoys, the US was left with virtually no choice but to go along for the ride. Washington’s warplanes destroyed another 280 trucks earlier this week. Russia claims to have vaporized more than 1,000 transport vehicles in November. Of course the most intriguing questions when it comes to Islamic State’s $400 million+ per year oil business, are: where does this oil end up and who is facilitating delivery?

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There will come a point when Erdogan’s own people turn against him.

Turkey’s Erdogan Warns Russia Not To ‘Play With Fire’ (Reuters)

Turkish President Tayyip Erdogan warned Russia on Friday not to “play with fire”, citing reports Turkish businessmen had been detained in Russia, while Moscow said it would suspend visa-free travel with Turkey. Relations between the former Cold War antagonists are at their lowest in recent memory after Turkey shot down a Russian jet near the Syrian border on Tuesday. Russia has threatened economic retaliation, a response Erdogan has dismissed as emotional and indecorous. The incident has proved a distraction for the West, which is looking to build support for the U.S.-led fight against Islamic State in Syria. The nearly five-year-old Syrian civil war has been complicated by Russian air strikes in defense of President Bashar al-Assad.

Turkey, which has long sought Assad’s ouster, has extensive trade ties with Moscow, which could come under strain. Erdogan condemned reports that some Turkish businessmen had been detained for visa irregularities while attending a trade fair in Russia. “It is playing with fire to go as far as mistreating our citizens who have gone to Russia,” Erdogan told supporters during a speech in Bayburt, in northeast Turkey. “We really attach a lot of importance to our relations with Russia … We don’t want these relations to suffer harm in any way.” He said he may speak with Russian President Vladimir Putin at a climate summit in Paris next week. Putin has so far refused to contact Erdogan because Ankara does not want to apologize for the downing of the jet, a Putin aide said.

Erdogan has said Turkey deserves the apology because its air space was violated. Russian Foreign Minister Sergei Lavrov said on Friday Moscow would suspend its visa-free regime with Turkey as of Jan. 1, which could affect Turkey’s tourism industry. Turkey’s seaside resorts are among the most popular holiday destinations for Russians, who make up Turkey’s largest number of tourist arrivals after Germany. An association of Russian defense factories, which includes the producers of Kalashnikov rifles, Armata tanks and Book missile systems, has recommended its members suspend buying materials from Turkey, according to a letter seen by Reuters. That could damage contracts worth hundreds of millions of dollars. Russia’s agriculture ministry has already increased checks on food and agriculture imports from Turkey, in one of the first public moves to curb trade.

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“This is exactly what the French did after the Paris attacks..”

Russia to Keep Visa Regime With Turkey as Long as ‘Ankara Helps ISIL’ (Sputnik)

Russia may resume visa-free travel with Turkey if Ankara stops helping the Islamic State terrorists, the head of the State Duma’s international affairs committee said on Friday. Russia has decided to suspend the visa-free regime with Turkey from the January 1, 2016, Foreign Minister Sergei Lavrov said on Friday after a meeting with his Syrian counterpart Walid Muallem in Moscow. “Relations between Russia and Turkey are the main factor here… If Ankara continues its de-facto support for ISIL militants, provides them with everything they need and endorses their actions in Syria, then we will not be able to restore the visa-free regime,” Alexei Pushkov said at a news briefing in Moscow.

Driving the Islamic State militants out of the territories they now control in Iraq and Syria would help lessen the threat they pose to the rest of the world. Destroying the ISIL headquarters would facilitate our joint fight against the terrorist threat, Pushkov added. “The terrorists use Turkish territory as a transit zone to bring reinforcements and arms to the conflict zone in Syria. Some of these militants may be sent to carry out terrorist attacks here in Russia, so our decision to suspend the visa-free regime with Turkey will help keep them out. This is exactly what the French did after the Paris attacks and the EU is now considering a closure of its external borders in the face of the terrorist threat,” Pushkov noted.

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Immoral dealmaking that the EU should never have been party to.

EU, Turkey Driving Hard Bargain Before Refugee Summit (Reuters)

European and Turkish officials are working to smooth out their remaining differences on an agreement to help stem flows of migrants to Europe, which they hope will be signed on Sunday by European Union leaders and Turkey’s prime minister. Turkish President Tayyip Erdogan broadly accepted a proposed action plan last month, under which the EU would provide €3 billion in aid for the 2.3 million Syrian refugees in Turkey. It will also “re-energize” talks on Ankara’s joining the bloc and ease visas for Turks visiting Europe. But diplomats and officials said on Friday that differences remained on just what Turkey would commit to do in return – and when – to prevent migrants from making the short but risky crossing to Greek islands and to accept the return of people who reach the EU but fail to qualify for asylum.

German Chancellor Angela Merkel, a driving force behind seeking Turkish help in easing the refugee crisis, has faced criticism from EU allies for encouraging Erdogan to increase his demands. A senior German official stressed on Friday that Ankara also had much to gain from greater cooperation. Bolstered by the victory of his AK party in a parliamentary election early this month, Erdogan re-appointed Prime Minister Ahmet Davutoglu and, EU officials and diplomats say, Turkey is now driving a hard bargain – notably seeking 3 billion euros per year instead of the EU offer of the same amount over two.

“There are things that can still go wrong. It’s not a simple negotiation. Among the 28 member states, there are different sensibilities about Turkey, then with Turkey itself a dialogue needs to be found,” a senior EU official said on Friday. “It’s always possible there won’t be an agreement.” A diplomat in Ankara said: “Turkey is pushing its luck. They’re asking for a lot and the atmospherics aren’t good. “At the same time, there are a lot of important actors within Europe that have a soft spot for Turkey and really want to find ways of taking the relationship forward.”

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“..no trains have come in or out of Greece for the last week.”

Migrants At FYROM Border Crossing Block Trains (Kath.)

A protest by migrants on Greece’s border with the Former Yugoslav Republic of Macedonia (FYROM) is putting railway operator Trainose at risk of losing major international clients. Migrants have over the last few days been protesting FYROM’s decision not to let them cross from Greece. Many migrants have camped on the railway lines connecting the two countries, which means that no trains have come in or out of Greece for the last week. This means that the freight Trainose is responsible for carrying has not been able to reach its destinations. The railway company serves major international clients such as Hewlett Packard and Sony.

There is concern that if the protest does not end soon, these companies will be forced to transport their goods by road. “The issue is not paying compensation to the companies, which we can pay even if the situation is not our fault,” said Trainose CEO Thanasis Ziliaskopoulos. “What is more important is that the country’s credibility is at stake.” Trainose’s contract with Chinese giant Cosco to transport goods that arrive at Piraeus port is seen as a key part of the goal to make Greece a logistics hub in Southeastern Europe.

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What will future generations say about us?

Six Migrant Children Drown On Way To Greece (AP)

Turkish state media say six children have drowned when boats carrying migrants to Greece sank in two incidents off the Turkish coast. A wooden boat smuggling some 20 people to the island of Kos capsized in bad weather off the Aegean resort of Bodrum early on Friday. The state-run Anadolu Agency says most of the migrants made it to shore with the help of rescuers, but two sisters aged 4 and 1 drowned. Their nationalities were not immediately known. The agency says a second boat carrying as many as 55 migrants from Syria and Afghanistan sank hours later off the town of Ayvacik, further north. Four Afghan children drowned in that incident, Anadolu reported. Ayvacik is a main crossing point for migrants trying to reach the island of Lesvos.

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Dec 012014
 
 December 1, 2014  Posted by at 12:10 pm Finance Tagged with: , , , , , , , ,  


Arthur Rothstein Family leaving South Dakota drought for Oregon Jul 1936

US Consumers Reduce Spending By 11% Over Thanksgiving Weekend (Bloomberg)
Stocks Have Been More Overvalued Only ONCE in the Last 100 Years (Phoenix)
The Imploding Energy Sector Is Responsible For A Third Of S&P 500 Capex (ZH)
Good Money After Bad: The Big Sell-Off of 2015 (Steen Jakobsen)
Can Oil Fall All The Way To $40? (CNBC)
Oil at $40 Possible as Market Transforms Caracas to Iran (Bloomberg)
‘We Are Entering A New Oil Normal’ (Jawad Mian)
Saudis Risk Playing With Fire In Shale-Price Showdown As Crude Crashes (AEP)
China Plays Big Role In Oil’s Slide (MarketWatch)
China Factory Gauge Drops as Shutdowns Add to Slowdown (Bloomberg)
China’s Slowdown Hits Iron-Ore Prices (MarketWatch)
China Winning in OPEC Price War as Hoarding Accelerates (Bloomberg)
Swiss Vote Against Gold Deals Blow to Investors Hurt by Slump (Bloomberg)
Swiss Headache To Continue Beyond Gold Vote (WSJ)
Moody’s Downgrades Japan As Concerns Grow (CNBC)
In Fading Japan Hinterland, Skeptics Doubt “Abenomics” Will Cure Ills (Reuters)
Eurozone Manufacturing Falls As Germany Contracts (CNBC)
So Banks Are Too Big To Fail. Are They Also Too Big To Regulate? (Guardian)
Tired’ Grillo Overhauls Leadership Of Italy’s 5-Star Movement (Reuters)
Commercial Seafood Set to Disappear from Oceans in 2048 (Alternet)
Ebola Death Toll in 3 West African Countries Most Affected Nears 7,000 (WSJ)

Shoppers are confident enough to not shop. Absolutely brilliant spin attempts, but the whole thing oozes desperation.

US Consumers Reduce Spending By 11% Over Thanksgiving Weekend (Bloomberg)

Even after doling out discounts on electronics and clothes, retailers struggled to entice shoppers to Black Friday sales events, putting pressure on the industry as it heads into the final weeks of the holiday season. Spending tumbled an estimated 11% over the weekend, the Washington-based National Retail Federation said yesterday. And more than 6 million shoppers who had been expected to hit stores never showed up. Consumers were unmoved by retailers’ aggressive discounts and longer Thanksgiving hours, raising concern that signs of recovery in recent months won’t endure.

The NRF had predicted a 4.1% sales gain for November and December – the best performance since 2011. Still, the trade group cast the latest numbers in a positive light, saying it showed shoppers were confident enough to skip the initial rush for discounts. “The holiday season and the weekend are a marathon, not a sprint,” NRF Chief Executive Officer Matthew Shay said on a conference call. “This is going to continue to be a very competitive season.” Consumer spending fell to $50.9 billion over the past four days, down from $57.4 billion in 2013, according to the NRF. It was the second year in a row that sales declined during the post-Thanksgiving Black Friday weekend, which had long been famous for long lines and frenzied crowds.

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How about them apples?

Stocks Have Been More Overvalued Only ONCE in the Last 100 Years (Phoenix)

Stocks today are overvalued by any reasonable valuation metric. If you look at the CAPE (cyclical adjusted price to earnings) the market is registers a reading of 27 (anything over 15 is overvalued). We’re now as overvalued as we were in 2007. The only times in history that the market has been more overvalued was during the 1929 bubble and the Tech bubble. Please note that both occasions were “bubbles” that were followed by massive collapses in stock prices.


Source: https://www.multpl.com/shiller-pe/

Then there is total stock market cap to GDP, a metric that Warren Buffett’s calls tge “single best measure” of stock market value. Today this metric stands at roughly 130%. It’s the highest reading since the DOTCOM bubble (which was 153%). Put another way, stocks are even more overvalued than they were in 2007 and have only been more overvalued during the Tech Bubble: the single biggest stock market bubble in 100 years.


Source: Advisorperspectives.com

1) Investor sentiment is back to super bullish autumn 2007 levels.
2) Insider selling to buying ratios are back to autumn 2007 levels (insiders are selling the farm).
3) Money market fund assets are at 2007 levels (indicating that investors have gone “all in” with stocks).
4) Mutual fund cash levels are at a historic low (again investors are “all in” with stocks).
5) Margin debt (money borrowed to buy stocks) is near record highs.

In plain terms, the market is overvalued, overbought, overextended, and over leveraged. This is a recipe for a correction if not a collapse.

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This is exactly what I’ve been warning about for more than a week now. Oil is big enough as an industry to drag the whole market down.

The Imploding Energy Sector Is Responsible For A Third Of S&P 500 Capex (ZH)

We have previously discussed the implications that tumbling crude oil prices will have not only on some of the most levered companies with exposure to Brent prices, namely the vast majority of the US energy space with outstanding junk bonds which, as we explained before, should WTI drop to $60, it would “Trigger A Broader HY Market Default Cycle” (based on a Deutsche Bank analysis) leading to pain across the entire credit market (and in the process impairing the stock-buyback machinery which companies aggressively use to artificially boost their stock price), as well as on oil-exporting nations, whose economies are assured to grind to a halt leading to broad social unrest or worse, and lastly, on global asset liquidity, which is set to contract even more now that for the first time in over a decade, the net flow of Petrodollars will be an outflow (as explained in How The Petrodollar Quietly Died, And Nobody Noticed).

And while much has been said about the “benefits” the US economy is poised to reap as a result of the plunge in gas prices, which has been compared to a major tax cut (whatever happened to the core Keynesian tenet that “deflation” is the worst thing that can possibly happen) on the US consumer, almost nothing has been said about the adverse impact on US GDP as a result of tumbling fixed investment spending and CapEx. The reason, clearly, is that the collapse in new investment will more than offset the boost from incremental household spending. Here are the facts, per Deutsche Bank:

US private investment spending is usually ~15% of US GDP or $2.8trn now. This investment consists of $1.6trn spent annually on equipment and software, $700bn on non-residential construction and a bit over $500bn on residential. Equipment and software is 35% technology and communications, 25-30% is industrial equipment for energy, utilities and agriculture, 15% is transportation equipment, with remaining 20-25% related to other industries or intangibles. Non-residential construction is 20% oil and gas producing structures and 30% is energy related in total. We estimate global investment spending is 20% of S&P EPS or 12% from US. The Energy sector is responsible for a third of S&P 500 capex. 35% of S&P EPS from investment and commodity spend, 15-20% US.

In short, while nobody knows just how many tens of billions in US economic “growth”, i.e., GDP, will be eliminated now that energy companies are not only not investing in growth spending or even maintenance, being forced to shut down unprofitable drilling operations and entering spending hibernation territory, the guaranteed outcome is that US GDP is set to slide as the CapEx cliff resulting from Brent prices dropping below the $75/bbl red line under which shale is broadly no longer profitable will offset any GDP benefit unleashed from the “supposed” increase in consumer spending (supposed because according to the latest NRF numbers, Thanksgiving spending was not only well below last year (with the average consumer spending $380.95 over Thanksgiving compared to $407.02 a year ago) but below even our worst case forecasts. So just where are all those external benefits to US retailers as a result of crashing gas prices?

Rhetorical questions aside, the real question is just how much will said GDP slide ultimately be? Sadly, this too will be one question the BEA will never answer, as instead the upcoming GDP plunge will be blamed once again on inclement weather as opposed to actually analyzing what is truly happening as America’s transformation to an oil-producing (and maybe exporting) powerhouse, is so rudely interrupted.

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The doomiest view of all made me also laugh out loud.

Good Money After Bad: The Big Sell-Off of 2015 (Steen Jakobsen)

The big selloff in 2015 will come from housing and housing-related investments as the marginal cost of capital rises through regulation and through “margin calls” on banks as their profit-to-GDP ratios grow too high for the economy to function properly. The dividend society is here and the true manifestation of Japanisation is not a future event but a thing we are living in right now… From a tactical point of view, I live in a very simple world:

[..] No, if there is any reality left in the world the market will realize — by its mistaken support for long USDJPY positions — that productivity gains and competitive edges are driven by the “need” to change… not from isolation but from cause and effect (but that’s also a 2015 story). In closing I have very little positions — the stock market is on a mission to kill the shorts (which will probably succeed), the FX market believes in Santa Japan and the ECB continues to do nothing but talk… but for now it’s enough to sell the product, which is risk-on at all costs.

The correction will be deeper and deeper as the market is dislocated through zero interest rates and an investing crowd that is rewarded for throwing all conservative risk rules overboard in a year where we again have double digit gains on… low interest rates. Let’s hope the ECB plays ball for the market to buy some more time; for now we are playing musical chairs, and when the music stops, more than one chair will be missing… How bad are things? Well, let me give you my starting slide from a presentation done in November:

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“”We’re seeing a lot of traders being forced into the market, a lot of hedges, because the prices have been so volatile toward the downside .. ”

Can Oil Fall All The Way To $40? (CNBC)

As oil prices drop to more than four-year lows, analysts are slashing their forecasts, with some predicting it could plunge as much as 40% to around $40 a barrel. “There is a possibility that if this price war becomes unmanageable, [we could] see prices down to about $40 a barrel [for WTI],” Jonathan Barratt, chief investment officer of Ayers Alliance Securities, told CNBC. But for oil to get all the way down to $40 a barrel would take “a massive lack of confidence in the economies, also a lack of pricing power,” Barratt said. Brent and WTI crude each fell more than 2% to as low as $67.90 and $64.10 a barrel respectively during Asian trade on Monday, levels last seen in 2010, as the European credit crisis was heating up. Global oil prices have plunged since peaking in June.

From around $115 a barrel, Brent crude has lost around a third of its price. Weak demand, a strong U.S. dollar and booming U.S. oil production are the three main reasons behind the fall, according to the IEA, which warned of a “new chapter” for oil markets, which could even affect the social stability of some countries. Saudi Arabia sparked talk of an oil price war as it has cut its official selling prices for some customers for four consecutive months through November. Part of oil’s drop has to do with supply conditions. Increased U.S. oil production has added to a glut in the world oil market. The U.S. now produces about 8.9 million barrels a day, while Saudi Arabia, the world’s largest producer, pumps about 9.6 million barrels a day.

But Barratt believes much of the price drop has to do with financial traders, citing the speed of the drop over the past few trading sessions amid relatively low volumes during the holiday period. “We’re seeing a lot of traders being forced into the market, a lot of hedges, because the prices have been so volatile toward the downside,” Barratt said. He isn’t alone in predicting oil could plunge to $40 a barrel – levels not seen in more than 10 years. Murray Edwards, chairman of Canadian Natural Resources, one of Canada’s biggest oil investors, predicted oil could fall as low as $30 a barrel before stabilizing at around $70-$75, according to a Financial Post article. While Forbes contributor Jesse Colombo, admittedly a perma-bear, said in an article that technical analysis suggests that if oil prices fall below $60 a barrel, $40 is the next major support.

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OPEC have turned into the proverbial cats in a sack.

Oil at $40 Possible as Market Transforms Caracas to Iran (Bloomberg)

Oil’s decline is proving to be the worst since the collapse of the financial system in 2008 and threatening to have the same global impact of falling prices three decades ago that led to the Mexican debt crisis and the end of the Soviet Union. Russia, the world’s largest producer, can no longer rely on the same oil revenues to rescue an economy suffering from European and U.S. sanctions. Iran, also reeling from similar sanctions, will need to reduce subsidies that have partly insulated its growing population. Nigeria, fighting an Islamic insurgency, and Venezuela, crippled by failing political and economic policies, also rank among the biggest losers from the decision by the Organization of Petroleum Exporting Countries last week to let the force of the market determine what some experts say will be the first free-fall in decades.

“This is a big shock in Caracas, it’s a shock in Tehran, it’s a shock in Abuja,” Daniel Yergin, vice chairman of Englewood, Colorado-based consultant IHS Inc. and author of a Pulitzer Prize-winning history of oil, told Bloomberg Radio. “There’s a change in psychology. There’s going to be a higher degree of uncertainty.” A world already unsettled by Russian-inspired insurrection in Ukraine to the onslaught of Islamic State in the Middle East is about be roiled further as crude prices plunge. Global energy markets have been upended by an unprecedented North American oil boom brought on by hydraulic fracturing, the process of blasting shale rocks to release oil and gas.

Few expected the extent or speed of the U.S. oil resurgence. As wildcatters unlocked new energy supplies, some oil exporters abroad failed to invest in diversifying their economies. Coddled by years of $100 crude, governments instead spent that windfall subsidizing everything from 5 cents-per-gallon gasoline to cheap housing that kept a growing population of underemployed citizens content. Those handouts are now at risk. “If the governments aren’t able to spend to keep the kids off the streets they will go back to the streets, and we could start to see political disruption and upheaval,” said Paul Stevens, distinguished fellow for energy, environment and resources at Chatham House in London, a U.K. policy group. “The majority of members of OPEC need well over $100 a barrel to balance their budgets. If they start cutting expenditure, this is likely to cause problems.”

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” The International Energy Agency says we could soon hit “peak oil demand”, due to cheaper fuel alternatives, environmental concerns, and improving oil efficiency.” But no slowdown anywhere!

‘We Are Entering A New Oil Normal’ (Jawad Mian)

Everyone believes that the oil-price decline is temporary. It is assumed that once oil prices plummet, the process is much more likely to be self-stabilizing than destabilizing. As the theory goes, once demand drops, price follows, and leveraged high-cost producers shut production. Eventually, supply falls to match demand and price stabilizes. When demand recovers, so does price, and marginal production returns to meet rising demand. Prices then stabilize at a higher level as supply and demand become more balanced. For the classic model to hold true in oil’s case, the market must correctly anticipate the equilibrating role of price in the presence of supply/demand imbalances.

By 2020, we see oil demand realistically rising to no more than 96 million barrels a day. North American oil consumption has been in a structural decline, whereas the European economy is expected to remain lacklustre. Risks to the Chinese economy are tilted to the downside and we find no reason to anticipate a positive growth surprise. This limits the potential for growth in oil demand and leads us to believe global oil prices will struggle to rebound to their previous levels. The International Energy Agency says we could soon hit “peak oil demand”, due to cheaper fuel alternatives, environmental concerns, and improving oil efficiency. The oil market will remain well supplied, even at lower prices. We believe incremental oil demand through 2020 can be met with rising output in Libya, Iraq and Iran.

We expect production in Libya to return to the level prior to the civil war, adding at least 600,000 barrels a day to world supply. Big investments in Iraq’s oil industry should pay-off too with production rising an extra 1.5-2 million barrels a day over the next five years. We also believe the American-Iranian détente is serious, and that sooner or later both parties will agree to terms and reach a definitive agreement. This will eventually lead to more oil supply coming to the market from Iran, further depressing prices in the “new oil normal”. [..] Our analysis leads us to conclude that the price of oil is unlikely to average $100 again for the remaining decade. We will use an oil rebound to gradually adjust our portfolio to reflect this new reality.

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Ambrose in July 2014: “A large chunk of US investment is going into shale gas ventures that are either underwater or barely breaking even, victims of their own success in creating a supply glut. One chief executive acidly told the TPH Global Shale conference that the only time his shale company ever had cash-flow above zero was the day he sold it – to a gullible foreigner. [..] … the low-hanging fruit has been picked and the costs are ratcheting up. Three Forks McKenzie in Montana has a break-even price of $91. [..]”

And today: “The International Energy Agency said most of North Dakota’s vast Bakken field “remains profitable at or below $42 per barrel. The break-even price in McKenzie County, the most productive county in the state, is only $28 per barrel.“

Saudis Risk Playing With Fire In Shale-Price Showdown As Crude Crashes (AEP)

Saudi Arabia and the core OPEC states are taking an immense political gamble by letting crude oil prices crash to $66 a barrel, if their aim is to shake out the weakest shale producers in the US. A deep slump in prices might equally heighten geostrategic turmoil across the broader Middle East and boomerang against the Gulf’s petro-sheikhdoms before it inflicts a knock-out blow on US rivals. Caliphate leader Abu Bakr al-Baghdadi has already opened a “second front” in North Africa, targeting Algeria and Libya – two states that live off energy exports – as well as Egypt and the Sahel as far as northern Nigeria. “The resilience of US shale may prove greater than the resilience of OPEC,” said Alistair Newton, head of political risk at Nomura. Chris Skrebowski, former editor of Petroleum Review, said the Saudis want to cut the annual growth rate of US shale output from 1m barrels per day (bpd) to 500,000 bpd to bring the market closer to balance. “They want to unnerve the shale oil model and undermine financial confidence, but they won’t stop the growth altogether,” he said.

There is no question that the US has entirely changed the global energy landscape and poses an existential threat to OPEC. America has cut its net oil imports by 8.7m bpd since 2006, equal to the combined oil exports of Saudi Arabia and Nigeria. The country had a trade deficit of $354bn in oil and gas as recently as 2011. Citigroup said this will return to balance by 2018, one of the most extraordinary turnarounds in modern economic history. “When it comes to crude and other hydrocarbons, the US is bursting at the seams,” said Edward Morse, Citigroup’s commodities chief. “This situation is unlikely to stop, even if prevailing prices for oil fall significantly. The US should become a net exporter of crude oil and petroleum products combined by 2019, if not 2018.” OPEC has misjudged the threat. As late as last year, it was dismissing US shale as a flash in the pan. Abdalla El-Badri, the group’s secretary-general, still insists that half of all US shale output is vulnerable below $85.

This is bravado. US producers have locked in higher prices through derivatives contracts. Noble Energy and Devon Energy have both hedged over three-quarters of their output for 2015. Pioneer Natural Resources said it has options through 2016 covering two- thirds of its likely production. “We can produce down to $50 a barrel,” said Harold Hamm, from Continental Resources. The International Energy Agency said most of North Dakota’s vast Bakken field “remains profitable at or below $42 per barrel. The break-even price in McKenzie County, the most productive county in the state, is only $28 per barrel.”

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” .. if the industrial commodities that have fed China’s prodigious economic rise are taken as a guide, there is little need for debate: There has already been a hard landing ..”

China Plays Big Role In Oil’s Slide (MarketWatch)

All eyes have been on OPEC after its failure to agree to a production cut triggered the latest dramatic slide in the price of crude oil. But if you want to understand why the demand side of oil has been unraveling — and why it could continue — look no further than China. Opinion over the state of the world’s second-largest economy is typically divided between whether it is merely undergoing a rebalancing or a more painful slowdown after years of excessive credit growth. But if the industrial commodities that have fed China’s prodigious economic rise are taken as a guide, there is little need for debate: There has already been a hard landing, as all the prices of these resources have collapsed to multi-year lows. Now oil is falling in line as it too adjusts to a world where China is no longer bidding prices ever higher. Granted, oil is different from steel, iron ore and coal, where China is the world’s largest consumer (The U.S. still consumes almost twice as much oil as China). Yet Chinese demand is still pivotal.

China became the dominant source of growth in crude-oil demand as it joined the world economy in recent decades. Indeed, Société Générale comments China’s opening to world trade was responsible for lifting the oil price from around $20 a barrel to around $100. This price move approximately correlates with China joining the World Trade Organization at the beginning of the last decade, a period in which the nation, by itself, added the equivalent of Japanese and U.K. total oil consumption. The oil market is unlikely to find another country, or even a continent, that can take over this degree of heavy lifting in demand growth. Meanwhile, longer-term forecasts that China can maintain anything close to its recent pace of growth increasingly look misplaced. Until recently, many economists had assumed that it was only a matter of time before China’s appetite for oil would surpass that of the U.S. But there are a number of reasons to question such bullish forecasts. For one, we can expect the Chinese investment cycle to be in for a prolonged adjustment as it digests past excesses.

There is widespread evidence of industrial overcapacity, and last week researchers at China’s National Development Commission became the latest to highlight this issue. In a new report, they estimated $6.8 trillion of “ineffective investment” had been wasted. There are other signs that China’s thirst for oil is coming up against capacity constraints. After surpassing the U.S. as the biggest automobile market in the world in 2010, recent years have seen traffic jams and pollution become recurring problems. This has forced authorities to use administrative measures to rein in growth. We should also expect China’s future demand for oil to be more price-sensitive. In the past, demand appeared inelastic as growth continued even as crude prices reached triple-digits. But this period coincided with state-funded industry being the dominant driver, whereas demand for gasoline for cars can be expected to be dependent on the income growth of the middle class.

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It’s close to contraction, and that’s a a long way away from 7.5% growth.

China Factory Gauge Drops as Shutdowns Add to Slowdown (Bloomberg)

A Chinese manufacturing gauge fell as factory shutdowns aggravated a pullback in the economy, raising pressure on the central bank to ease policy further after it lowered interest rates for the first time in two years. The government’s Purchasing Managers’ Index (PMI) fell to an eight-month low of 50.3 in November, compared with the 50.5 median estimate of analysts in a Bloomberg survey and October’s 50.8. Readings above 50 indicate expansion. The government ordered factories in Beijing and surrounding regions to shut down during the Asia-Pacific Economic Cooperation forum to curb pollution. China’s central bank cut interest rates last month as the economy heads for its slowest full-year expansion since 1990.

“Today’s official PMI reading points to continued downward pressure on manufacturing activity,” said Julian Evans-Pritchard, China analyst in Singapore at Capital Economics Ltd. “The recent cut in the benchmark rate will do little to boost economic activity unless followed by a loosening of quantitative controls on lending, which policymakers will remain cautious about given concerns over mounting credit risk.” The official PMI is released by the National Bureau of Statistics and China Federation of Logistics and Purchasing in Beijing. The index is based on responses to surveys sent to purchasing executives at 3,000 companies. The final reading of another manufacturing PMI for November from HSBC Holdings Plc and Markit Economics was 50.0. It was unchanged from a preliminary reading.

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Iron, steel, oil, it’s all under huge pressure. All the producers have gambled on continuing growth. And there’s more: “Meanwhile, the biggest mining companies say they are still committed to plans to keep topping production records.”

China’s Slowdown Hits Iron-Ore Prices (MarketWatch)

China’s hunger for minerals to build skyscrapers, cars and bridges produced a decadelong surge in the price and production of key commodities. Now, exporting nations are feeling the hit as the China-fueled boom slows. Topping the list are big commodity players Australia and Brazil, but also smaller resource-rich countries, such as Guinea, Indonesia and Mongolia, where minerals make up a disproportionate share of the economy and employment. In countries specializing in crucial commodities, such as iron ore and coal, sluggish demand and falling commodity prices are reducing government tax revenue, increasing trade deficits and affecting currency values. The Australian dollar reached a four-year low in November against the U.S. dollar due in part to sliding raw-material prices and slowing Chinese demand growth for those commodities. J.P. Morgan this month cut its forecast for 2015 Australian economic growth to 2.8% from 3.3%, and Brazil recently halved its own growth forecast for 2014 to 0.9% from 1.8%.

Mining profits as a share of the economy in both countries more than doubled during the past 15 years, according to the World Bank. The longer-term impact of a collapse in commodity prices could be even more profound, hurting the economies of producing countries and boosting buying power in Western consumer economies. “The impact of oversupply could be a mess,” says Lourenco Goncalves, CEO of Cliffs Natural Resources, a midsize miner that laid off workers in Australia. Meanwhile, the biggest mining companies say they are still committed to plans to keep topping production records. Rio Tinto and BHP Billiton have been shipping cargoes from Australia’s remote northwest at record rates. For smaller countries, the growing dependence on mining is even more apparent. In Guinea, the share of mining profits as a percentage of GDP more than tripled to 18.3% between 2000 and 2012, the latest data available, according to the World Bank. And in Mongolia, it nearly doubled to 11.9%.

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All the news about a China slowdown, and then this?! I don’t believe the numbers presented here for a minute.

China Winning in OPEC Price War as Hoarding Accelerates (Bloomberg)

China is emerging as the winner from OPEC’s battle with rival oil producers as the world’s biggest energy consumer stockpiles crude. The nation’s efforts to boost reserves may increase its imports by as much as 700,000 barrels a day in 2015, according to London-based Energy Aspects. That’s more than half the global glut forecast by Citigroup Inc. after the Organization of Petroleum Exporting Countries refrained from cutting output at its meeting last week. Brent crude has slumped 41% from its peak in June. The dwindling number of investors still betting on a rebound in prices can at least count on Chinese demand.

OPEC decided to maintain output targets even as a shale boom boosts U.S. production to the highest in more than three decades and causes a global supply glut. As crude extends its slump to the lowest level in more than four years, China is seeking to build a strategic petroleum reserve. “This is a golden time window to acquire more strategic oil stockpiles at lower costs,” Gordon Kwan, the Hong Kong-based head of regional oil and gas research at Nomura Holdings Inc., wrote in an e-mail Nov. 28. China will be “a big beneficiary” from the OPEC decision, he said.

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“We’ll get more pressure on gold. The overall outlook is not looking great.”

Swiss Vote Against Gold Deals Blow to Investors Hurt by Slump (Bloomberg)

With no chance that the Swiss central bank will be the next big buyer of gold, it’s one more reason for investors to be bearish. Voters today rejected a referendum requiring the Swiss National Bank hold at least 20% of its 520-billion-franc ($540 billion) balance sheet in gold. Had it been approved, it would have led to purchases of at least 1,500 metric tons over five years. With lower oil prices reducing costs for consumers and the U.S. considering raising interest rates, demand is fading for hedges against inflation such as gold. Gold has lost 16% since peaking in March and investor holdings of exchange-traded products are near a five-year low. While prices probably won’t be affected too much by the “no” vote of the initiative called “Save Our Swiss Gold,” approval would have improved sentiment and increased prices by as much as $50 an ounce, HSBC estimated in November.

“Gold had received some support in the last couple of weeks” before the vote, Georgette Boele, an analyst at ABN Amro Bank, said by phone. “We’ll get more pressure on gold. The overall outlook is not looking great.” The proposal stipulating the SNB raise the portion of its assets held in gold from about 8% now was voted down by 77% to 23%. The initiative would have also prohibited the SNB from ever selling any of its bullion and required the 30% currently stored in Canada and the U.K. to be repatriated. Polls forecast the initiative’s rejection. Approval would have probably made Switzerland the world’s third-biggest holder by country of the metal. Analysts had said purchases would have been at least 1,500 tons over five years. Adding 300 tons a year would equal about 7% of annual global consumption. SNB policy makers had a higher estimate, forecasting 70 billion francs worth of gold, or about 1,932 tons.

Proponents of the initiative said boosting bullion holdings would help preserve national wealth. The SNB and national government had argued that approving the measure could undermine efforts to prevent the franc from surging against the euro and erode the bank’s annual dividend distribution to regional governments.

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“The starting point is that the SNB cannot let the floor go. They will fight for it. They will do whatever it takes to defend the floor ..”

Swiss Headache To Continue Beyond Gold Vote (WSJ)

A Swiss vote on whether the country’s central bank should drastically ramp up its gold holdings — forever– happens this Sunday. The result is likely to be a no if the latest polls are accurate. But even in case of a negative outcome the pressure on the Swiss National Bank to cut interest rates below zero will not go away. The franc has been flying high of late, in part because the market has sniffed the possibility that forcing the SNB to buy lots and lots of gold (that’s what the vote’s all about) could cause problems for the central bank’s efforts to hold the currency down. The Swiss central bank keeps a floor on the currency, which controls how strong it gets against the euro, to protect the country’s exporters from an overly strong franc, which would damage them at international level. In order to do this, it buys euros which are added to its balance sheet.

With the new requirement in place, the SNB would have to match euro purchases with equal amounts of gold, which would not only be costly, but also permanent as it would be banned from selling it. Many have suggested that negative interest rates might be a useful tool for the central bank to deflect buying of the franc in the case the Swiss vote for the bank to ramp up its gold holdings to 20% by buying 1500 tons of gold over a period of five years. After all, the SNB has repeatedly said it’s open to the idea of negative rates. Since opinion polls started to point more clearly to a no vote, the franc has backed down a little. But the market’s bet on negative rates has not subsided.

Libor three month futures on the Swiss franc suggest that the market is pricing 0.11 percentage point in cuts by the end of next year, or a 45% probability of a 0.25 percentage point cut by the end of 2015, said a trader at SocGen. “The market is expecting rate cuts in the future and in the Swiss case, negative rates, to follow in the ECB footsteps. ”That’s the rub: the European Central Bank cut its deposit rate below zero in June, and it’s still firmly in easing mode. This has weakened the euro against all currencies, including against the franc, with the euro trading just above the level set by the central bank. “The starting point is that the SNB cannot let the floor go. They will fight for it. They will do whatever it takes to defend the floor,” said Samy Char, investment strategist at Swiss asset manager Lombard Odier. Negative rates may be part of that mix, investors and analysts add.

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Abenomics is a colossal failure that was entirely foreseeable. And still the Krugmans of the world call for Europe to do what Japan did.

Moody’s Downgrades Japan As Concerns Grow (CNBC)

Fears over the future of Japan’s economy are growing – and Moody’s, the credit ratings agency, reflected this on Monday by cutting its credit rating to A1 from AA3. The news came just after the country’s main stock market, the Nikkei, closed at a seven-year high. Increased “uncertainty” over whether Japan Prime Minister Shinzo Abe can achieve his deficit-cutting goals, and “the timing and effectiveness of growth enhancing policy measures” have made Japanese government debt riskier in the medium term, analysts at Moody’s said in a release. They added that the outlook for the rating was stable.

Abe swept into power two years ago, and was hailed as a savior because of his plan to reinvigorate Japan’s moribund economy – known as “Abenomics”. The three main pillars of Abenomics are: a large fiscal stimulus, more aggressive monetary easing from the Bank of Japan, and structural reforms to the country’s economy. Japan has been in a deflationary spiral for two decades, and it remains to be seen whether Abenomics can shake it out. Abe has called a snap election for December 14, in an effort to secure another four years to see his policies through. However, his popularity seems to be in decline. Japan’s economy is now back in recession after GDP shrank by 0.4% in the third three months of the year, on a quarter-on-quarter basis.

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How crazy is it that Abe is still set to win the December 14 snap election?

In Fading Japan Hinterland, Skeptics Doubt “Abenomics” Will Cure Ills (Reuters)

Mihoko Asaka wants to know how candidates in this month’s election in Japan will create jobs and halt the drastic population decline that is bleeding her home region of youth and vitality, but has little hope they will offer real solutions. Like many of his age group, her 25-year-old son left the largely rural prefecture of Akita in northeastern Japan to find work after graduating from college. “I’m interested to see how much they are listening to the voices from this region,” said Asaka, 57, waiting for a bus in Akita City, the prefecture’s capital. “But I don’t think our voices are being heard. They talk about money being thrown around, but we can’t see where it goes.” Critics say Prime Minister Shinzo Abe’s policies to end deflation and generate growth have helped mainly big cities, large companies and the rich by boosting share prices and exporters’ profits with a hyper-easy monetary policy that has slashed the value of the yen and sent asset prices higher.

All too aware of the criticism, Abe has made spreading the benefits of his “Abenomics” agenda to “every nook and cranny” of Japan a key plank of his Liberal Democratic Party (LDP) platform for the Dec. 14 lower house election. The LDP-led ruling coalition is expected to keep its lower house majority, so interest is focused on whether and to what extent its grip on two-thirds of the chamber erodes. Akita prefecture, with the dubious distinction of having Japan’s highest suicide rate and fastest-shrinking population, definitely needs a boost. Already, about 30% of its population is aged 65 and over compared to 25% nationwide, with the ratio predicted to rise to more than 40% by 2040, when Akita’s total population will have fallen by more than a third to 700,000.

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TEXT

Eurozone Manufacturing Falls As Germany Contracts (CNBC)

Euro zone manufacturing activity missed forecasts and slowed in November, with German activity contracting — hitting hopes of a pick-up in the bloc’s largest economy. Markit’s euro zone manufacturing PMI was nearly flat at 50.1 in November, missing analysts’ forecasts of 50.4. This was a fall from the 50.6 recorded in October. The latest figures will raise concerns among policymakers at the European Central Bank (ECB) who are battling extremely low inflation in the single currency bloc. Three of the euro zone’s largest economies – Germany, France and Italy – saw manufacturing activity contract in October. Germany’s November manufacturing PMI came in at 49.5, France’s reading was 48.4, and Italy’s figure was at 49, all below the 50 mark that signifies growth.

“With the final PMI coming in below the flash reading, the situation in euro area manufacturing is worse than previously thought. Not only is the performance of the sector the worst seen since mid-2013, there is a risk that renewed rot is spreading across the region from the core,” Chris Williamson, chief economist at Markit, said in a press release. “The sector has more or less stagnated since August, but we are now seeing, for the first time in nearly one-and-a-half years, the three largest economies all suffering manufacturing downturns.” The near-stagnant euro zone-wide PMI figure was driven by falling levels of new business and lackluster export orders, Markit said, alongside signs of slowing global growth. The fall in manufacturing growth also came amid continued price pressures with factories continuing to cut prices.

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“I am sure shareholders would trade an executive or two for a few billion less in regulator fines.”

So Banks Are Too Big To Fail. Are They Also Too Big To Regulate? (Guardian)

The broken culture of high street banking will take a generation to fix, according to a report this week. The thinktank New City Agenda calculated that over the past 15 years banks had incurred £38.5bn in fines and redress for the mistreatment of customers. Bank boards and their regulators acknowledge the need for change, and by all accounts this is a massive problem. So why should it take so long – and how can we force things to move faster? A few months ago, a dealer in old wine was given a 10-year sentence for misrepresenting the quality of the contents. A banker who misrepresented his or her product would not face anything like this penalty. Despite scandal after scandal, the absence of personal accountability persists.

The size of penalties varies by regulator, but the unwillingness to punish the individual perpetrator does not. The message being sent from the regulators to the banks is: “Here’s the deal: we fine you a ton of money; no one goes to jail; no individual is named; and the best part – you can settle the bill with your shareholders’ dough!” True, in Britain the government is proposing new laws to make criminal behaviour a crime. But tools already in place remain untouched. The UK has long had an “approved persons” regime administered initially by the Financial Services Authority, and now by the Prudential Regulatory Authority. The PRA determines who is fit and proper to hold key positions in finance. Most of the focus has been on who is approved and how. But prior authorisations can be revoked. One wonders why they haven’t.

Surely there is no shortage of scandal-linked wrongdoers. Who would not want them to act? Think about the list of those who have a stake in the matter. Banks serve multiple stakeholders. These include society, clients, shareholders, employees and executives. We have already mentioned society’s outrage and clients’ dismay. Both have been clamouring for justice. What about the others? Surely shareholders should want the unfit to be identified and punished. After all, the depth, breadth and persistence of the wrongdoing shows that either management were complicit in their subordinates’ actions, or they were too incompetent to prevent it. Take your pick, but both are cases for being banned as unfit for such responsibilities. I am sure shareholders would trade an executive or two for a few billion less in regulator fines.

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“I’m pretty tired, as Forrest Gump would say .. ”

Tired’ Grillo Overhauls Leadership Of Italy’s 5-Star Movement (Reuters)

Beppe Grillo, the unruly comic who built Italy’s 5-Star Movement into one of the most potent anti-establishment forces in Europe, is struggling to stop a steady slide following months of infighting and electoral setbacks. After a week that saw two local election defeats and two parliamentary members expelled from the party, Grillo announced his movement needed a more formal leadership structure. A five-member committee, approved by an online poll, will take over much day-to-day running with the aim of strengthening foundations for the future. The 66-year-old Grillo said he would remain as “guarantor” but what that means is unclear. “I’m pretty tired, as Forrest Gump would say,” he wrote in his blog beneath a mock-up of himself as the movie character, telling a band of followers that he is ending a marathon run across the country.

One of the most successful of the anti-system parties that have blossomed in Europe during the financial crisis, Grillo’s movement is fueled by anger at a corrupt and inefficient political class. It remains Italy’s second-biggest party but after its triumph in the 2013 elections, when it won 25% of the vote, it has struggled in parliament. In the latest of a string of disputes over issues including whether members may appear on television, two deputies were thrown out this week, accused of failing to repay state funding as party rules demand. The latest expulsions left the 5-Star Movement with 143 seats in parliament, compared with the 163 it won last year. It has done poorly in recent local elections, taking only 13% and 5% respectively last week in the regions of Emilia-Romagna and Calabria.

In its place, the anti-immigrant Northern League, which shares Grillo’s hostility to the euro, is capturing more of the protest vote, coming second in Emilia-Romagna, a traditional stronghold of the left. Even Silvio Berlusconi, fighting to regain influence following a conviction for tax fraud, has re-emerged. In an opinion poll last week, he beat Grillo’s personal approval rating for the first time in months. “Grillo’s tired. I’m in better form than ever,” he said on Saturday. Marco Travaglio, a prominent columnist for Il Fatto Quotidiano, a newspaper generally sympathetic to Grillo’s movement, wrote that the disputes were “suicidal” and would only strengthen Prime Minister Matteo Renzi, “who, with adversaries like this, can stay 100 years.”

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Wouldn’t that be something?

Commercial Seafood Set to Disappear from Oceans in 2048 (Alternet)

A prominent marine research ecologist says that commercial seafood could disappear from our oceans within the next three decades if humans don’t take action immediately. Boris Worm of Dalhousie University in Halifax, Canada said the oceans are quickly losing biodiversity and that nearly 30% of seafood species humans consume are already too small to harvest. If the long-term trend continues, there will be little or no seafood available for a sustainable harvest by 2048. Dr. Worm’s study was recently published in the journal Science and is an update of a study published in 2006. Importantly, the study is about the collapse of commercial catches, not species extinction. Catch collapse means that fish are caught at 10% or less of the rate they had been caught historically. Several media outlets have incorrectly stated that the study warns all seafood will be gone from the oceans.

CBS News, for example, reported that “the apocalypse has a new date: 2048” and that the oceans would be empty of fish at that time. To our knowledge, the television network has not issued a retraction. “We never said that,” says Dr. Worm. “We never talked about extinction. We talked about the collapse of the commercial catches.” Still, Worm and his international team of scientists and economists say that catch collapses paint a grim picture for the ocean and for human health. The accelerated loss of biodiversity, they say, is imperiled by overfishing, pollution, habitat loss and climate change. Saltwater ecosystems, including human populations that depend on it for survival, can be adversely affected by dwindling populations. Harmful algae blooms, coastal flooding and poor water quality can be the results of reduced fish populations. “Biodiversity is a finite resource, and we are going to end up with nothing left…if nothing changes,” says Worm.

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Still not going well at all. New warnings are iddues about the threat of ebola spreading.

Ebola Death Toll in 3 West African Countries Most Affected Nears 7,000 (WSJ)

Nearly 7,000 people have died from the Ebola virus disease in the three West African countries most affected by the current outbreak, according to new data from the World Health Organization. In an update, the United Nations health agency said 16,169 confirmed, suspected or probable cases of Ebola had been reported in Guinea, Liberia and Sierra Leone. The three countries are at the epicenter of the current outbreak. A total of 6,928 people have died of Ebola in the three countries since the outbreak began, the WHO said. Liberia reported the biggest rise in deaths; more than 1,000 since WHO data released on Wednesday The agency, which recently changed the format it uses for reporting Ebola data, provided no commentary as to why the death toll jumped.

However, a spokesman said via email that the increase was caused by previously unreported deaths now being counted in the official statistics, rather than a rash of new fatalities. The WHO has previously said some local authorities have had difficulty processing paperwork quickly. The agency has said its count may greatly underestimate the toll, and the U.S. Centers for Disease Control and Prevention has said it believes the actual count could be between two and four times the WHO numbers. Ebola causes high fever and internal bleeding. The disease spreads via bodily fluids and the corpses of its victims can be contagious.

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Nov 302014
 
 November 30, 2014  Posted by at 11:56 am Finance Tagged with: , , , , , , , , ,  


DPC Harlem River Speedway and Washington Bridge, New York 1905

Fresh Signs Of Global Slump Pose Challenge To US (WSJ)
Swiss Go to Polls on SNB’s Gold, Immigration in Economic U-Turn (Bloomberg)
Swiss To Vote On Massive Gold-Buying Plan (AP)
Can QE Prop Up Asset Prices Forever? (Acting Man)
Shale And Cheap Oil Make America The New Lucky Country (Telegraph)
Black Friday Online Sales Jump 22% as Jobs Spur Shopping (Bloomberg)
Capping Brazil’s Corruption Gusher (Bloomberg)
ECB Likely To Hold Off On Sovereign Bond Purchases (WSJ)
ECB Board Member Dampens Quantitative Easing Hopes (Reuters)
France Might As Well Be Communist, Blasts US Tyre Tycoon (Telegraph)
When Will the US National Debt Exceed $18 Trillion? (MyGovCost.org)
That Hot US-EU Trade Deal Destroys 600,000 EU Jobs (Don Quijones)
Economics’ Failure To Tackle Real-World Issues Drives Women Away (Observer)
Australia: Haven for Bank Control Frauds? (Macrobusiness)
Do We Own Our Stuff, or Does Our Stuff Own Us? (CH Smith)
Global Importance Of Urban Agriculture ‘Underestimated’ (BBC)
Geo-Engineering: Climate Fixes ‘Could Harm Billions’ (BBC)
Does Anybody Ever ‘Think The Unthinkable’? (John Gray)

“The low-growth outlook is raising questions over whether weak demand could wash onto U.S. shores in the coming months .. ”

Fresh Signs Of Global Slump Pose Challenge To US (WSJ)

Economic prospects are flagging across Europe, Japan and big emerging markets such as India, a turn that presents fresh challenges to the relatively robust U.S. economy at a time when the world needs a dependable growth engine. Multiple strands Friday pointed to slackening economic vitality across the globe. In Europe, consumer prices rose in November at their slowest annual pace in five years, deepening fears the continent may be tipping toward deflation. In Japan, the core consumer-price index in October rose at its slowest pace this year. In both places the fall in energy prices has clouded a concerted push by central banks to boost the inflation rate and stoke consumer and business confidence. The picture in emerging markets isn’t much brighter.

Economic growth in India decelerated in the third quarter, according to government data released on Friday. Figures in Brazil showed Latin America’s biggest economy had edged out of recession in the third quarter, helped by government spending, but economists warned of potentially prolonged stagnation. The low-growth outlook is raising questions over whether weak demand could wash onto U.S. shores in the coming months, even as American businesses and consumers benefit from falling gasoline prices heading into the holiday shopping season. America’s economy has grown steadily this year after a first-quarter contraction, and employers have added more than 200,000 jobs a month for nine straight months through October. But consumer spending and business investment in the U.S. was muted in October, suggesting the U.S. might provide insufficient demand to help buoy other economies.

Cheaper energy stands to boost both the U.S. economy and those of other oil importers, including China, by offering what amounts to a tax cut to businesses and consumers. But in Europe, “problems go well beyond oil,” said Joel Naroff, president of Naroff Economic Advisors, an economic forecasting firm in Holland, Pa. “But the better off the U.S. is, the better off Europe is going to be. So would we rather see oil at $70 a barrel instead of $100? The answer is absolutely yes, and so would Europe.” Economists at Oxford Economics estimated in a report Friday that oil prices at around $60 a barrel over the next two years would offer “a significant strengthening” of economic growth “for most of the major advanced and emerging economies.”

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A Yes vote would put the Swiss central bank in an unenviable position. It has spent tens of billions buying euros to keep the Swiss franc down. If it has to sell those to buy gold instead, it will be at a great loss, and it would push the euro down, which is what Switzerland tried to prevent in the first place.

Swiss Go to Polls on SNB’s Gold, Immigration in Economic U-Turn (Bloomberg)

Switzerland holds three referendums today that have the potential to have an effect on everything from the economy to the central bank and even the country’s international relations. Up for a vote is a requirement for the Swiss National Bank to hold at least 20% of its assets in gold, a clampdown on immigration and the abolishment of tax privileges for foreign millionaires. While polls by gfs.bern indicate all three proposals could get rejected, there remains a sizable cohort of undecided voters. Plebiscites are a key feature of Switzerland’s system of direct democracy, and are held nationally and at a municipal level several times a year. Campaigns in the run-up to the latest votes have seen factions throwing out accusations of xenophobia, while there have been warnings that the economy’s potential could be weakened and the SNB’s power neutered. “Independent of the fact of a ‘yes’ or a ‘no’ on the votes, the message that is being sent abroad is that the Swiss model is not as predictable as we thought it would be,” said Stephane Garelli at the IMD business school.

While most votes are cast by mail before today, polling stations will close by 12:00 p.m. Zurich time and the first projections are due after 12:30 p.m. A final tally will be announced later in the day and the government will hold a press conference. There has been a sharp increase in the number of initiatives in recent years, including a ban on construction of minarets, curbs on executive compensation and a minimum wage. Some in Switzerland argue direct democratic privileges are being abused. “The constitution is becoming the toy of political exhibitionism,” Richard Saegesser, member of government in the town of Uster, near Zurich, said in a Nov. 23 speech. The “Save Our Swiss Gold” initiative would require the SNB to build up its bullion holdings, currently about 8% of assets, over the next five years and forbid it from ever selling any. That would make it harder to defend its cap on the franc of 1.20 per euro and fulfill its price stability mandate. The central bank would have to buy about 70 billion francs ($73 billion) of gold, policy makers estimate.

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Swiss bankers and politicians must feverishly hope this is voted down.

Swiss To Vote On Massive Gold-Buying Plan (AP)

In Switzerland, a campaign is on to protect the country’s wealth by investing in gold – a lot of gold. In a test of their sense of financial security, the Swiss are being asked to vote on a proposal to make the central bank hold a fifth of its reserves in gold within five years. That would mean buying about 1,500 metric tons, or 1,650 short tons, of gold worth more than US$60 billion. If the initiative wins the backing of a majority of voters today, the Swiss National Bank would also be prohibited from spending any of the treasure, which would have to be locked away in vaults entirely on Swiss soil. The prospect risks causing a spike in gold prices globally. The nationalist Swiss People’s Party, the country’s largest, has brought the “Save our Swiss Gold” initiative, arguing it will restore trust in the central bank and its paper money. The proposal is opposed by the Government and financial leaders but aims to capitalise on a growing sense of caution among the Swiss about the perceived dangers and increasing volatility of financial markets.

Though the country is among the world’s most prosperous, the initiative argues that owning physical gold in vaults would protect the country’s wealth from trouble in markets beyond the control of this small Alpine nation. The experience of the 2008 global financial crisis, triggered in part by complex investments that brought down multiple banks and bankrupted states, is fresh in people’s memories. Jacques Mayor, a Geneva accountant, said he was wary of the idea of Switzerland buying or selling gold in large amounts in international markets. “The last time they sold gold, we had an enormous loss,” Mayor said, referring to the central bank going US$10 billion in the red in 2013, when the value of its gold holdings slumped. Despite the perception that gold’s value is protected by the fact it is a physical good, its market price can in fact be quite volatile. The metal is used often by speculators as a safe haven.

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” .. genuine economic growth comes from two things: the number of workers in the labor force and the productivity of those workers. That’s a problem for the US.”

Can QE Prop Up Asset Prices Forever? (Acting Man)

It’s not just voters who buy into popular myths. Many investors do too. Few have wider appeal than the myth that central banks can create economic growth via the printing press. What central bankers and their supporters seem to forget is that growth comes from living, breathing human beings. It often sounds a lot more complicated than it really is. But genuine economic growth comes from two things: the number of workers in the labor force and the productivity of those workers. That’s a problem for the US. Because according to a recent report in The Economist, its potential labor force is set to grow at less than one-third the 0.9% rate we saw between 2003 and 2013.

Making things worse, many of America’s boomers – the first of whom qualified for Social Security in 2008 – are opting out of the labor force. Instead of looking for jobs, they are choosing to live on benefits. This helps explain why the%age of working-age adults looking for jobs in the US has fallen to below 63% from about 66% when the global financial crisis struck. And it’s not just Americans who are getting older on average. From The Economist:

“[T]he ratio of workers to retirees is now plunging in most developed countries and soon will in many emerging markets. Japan is already liquidating the foreign assets its people acquired during their high-saving years; China and South Korea are starting to do so and Germany will soon.”

Fewer workers in the labor force. More retirees to support for those with jobs. Foreign retirees cashing out of their US stocks and bonds. Janet Yellen et al. better hope investors are gullible enough to believe the magic of QE can continue to levitate financial assets forever. Otherwise, stock and bond investors will start to reconsider the prices they’re willing to pay to own their pieces of paper.

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The positive at all costs message here at the Telegraph makes so little sense it hurts.

Shale And Cheap Oil Make America The New Lucky Country (Telegraph)

We normally think of Australia as the “lucky country” but that label is surely better applied to the US today. You could hardly envisage a more benign backdrop for its economy and stock market than the current environment of tumbling energy prices, low inflation, narrowing deficits, competitive industry, a popular currency and consequently lower-for-longer interest rates. The frantic shuttle diplomacy in the run up to last week’s Opec summit in Vienna illustrated the pain being felt by the world’s less favoured nations – those like Venezuela and Russia which simply can’t balance the books at a $75 oil price. The meeting showed how difficult it can be to persuade individual countries, even members of a supposedly co-operative cartel like Opec, to work together if doing so runs counter to their own self-interest.

It may be beneficial to Opec as a whole to curb production in the face of surging US shale oil output and flagging global energy demand, but individual countries may quite rationally decide it is better to keep the oil flowing to protect their market share. If you have built up enough foreign currency reserves in the good years (as Saudi Arabia has) and you want to make life tough for your new rivals in the marginal oilfields of North Dakota, you might feel a couple of years of cheap crude is a price worth paying. The excess supply created by America’s shale revolution has been disguised in recent years by capacity reductions in war-torn countries such as Libya.

But the producers’ luck has run out this year as supply has picked up around the world even as China’s slowdown and stagnation in Europe and Japan has reduced demand. The jockeying for position by Saudi Arabia and others might sound like a game, but it really matters. With world oil exports amounting to around 40m barrels a day, the $40 drop in the oil price since June represents a transfer from oil exporters to oil consumers of more than $400bn a year. US consumers have an extra $70bn in their pockets, money they used to spend on fuel and can direct towards eating out, buying electronic gizmos or going on holiday. Even with the usual lag before consumers see the benefit of falling petrol prices, we are starting to feel the impact. Last week’s revision to third quarter US GDP, from 3.5pc to 3.9pc, was in part a reflection of more confident consumers with higher disposable incomes.

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And Bloomberg does the Telegraph one better.

Black Friday Online Sales Jump 22% as Jobs Spur Shopping (Bloomberg)

Sales online the day after Thanksgiving surged 22% from a year earlier as U.S. consumers, buoyed by higher employment and lower gasoline prices, flocked to computers and smartphones to hunt bargains. The gain outpaced online shopping on Thanksgiving as heavy Black Friday promotions attracted consumers, researcher ChannelAdvisor Corp. said today in an online statement. Sales at EBay rose 27% on Black Friday over last year, and Amazon saw a 24% increase. The online gains give a strong start to a holiday shopping season that the National Retail Federation predicts will be the best in three years.

Consumer spending in the last quarter grew at a 2.2% annualized rate, exceeding estimates for a 1.8% improvement. Black Friday online shopping was done less on mobile devices this year than on Thanksgiving, slipping to 46% from 49%, the company said. The rates of actual purchases also declined from Thursday, perhaps because consumers were more selective or finding hot items out of stock, ChannelAdvisor said. IBM Benchmark said Black Friday online sales rose 9.5%, and mobile sales jumped 25%. For Thanksgiving, mobile sales on smartphones and tablets accounted for 52% of online traffic.

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Note: all this does not yet include the 40% oil price plunge. Petrobras can indeed drag the whole country down.

Capping Brazil’s Corruption Gusher (Bloomberg)

Petrobras, Brazil’s state-run oil giant, is now engulfed in a scandal befitting its size – a multibillion-dollar miasma of bribery, larceny and political chicanery. How newly re-elected President Dilma Rousseff responds may decide not only her fate but also, to exaggerate only slightly, that of Brazil itself. It’s hard to overestimate the role of Petrobras in Brazilian society. Once a symbol of national pride, just four years ago it had the largest stock offering. Now police say it is at the heart of the case in which some of Brazil’s biggest builders formed a cartel to win $23 billion in public contracts. One Petrobras refinery was budgeted at $2.5 billion but will end up costing at least $18.5 billion. Kickbacks from overpriced contracts were allegedly used to bribe politicians to support the ruling Workers’ Party.

Rousseff, who was Petrobras chairwoman from 2003 to 2010, has said the case “will forever change the relationship between Brazilian society, the Brazilian government and private companies.” It’s already threatening the financial health of Brazilian builders and the prospects for a revival in economic growth. Corruption in Brazil eats up as much as 2.3% of gross domestic product a year. To Rousseff’s credit, she has done more than just talk about the need to fight corruption. During her first term, several ground-breaking laws were passed, including a “clean companies act” that could fine companies as much as 20% of their revenue and bar them from state financing or state contracts, and a freedom of information law guaranteeing access to public documents. Yet Brazil is notorious for “laws that don’t take.” Many states and cities have yet to implement the 2011 freedom of information law, for instance; in one audit of those that have, two of every five requests for information received no response at all.

In the 14 years since Brazil joined the Anti-Bribery Convention of the OECD, only one case has been prosecuted, and no sanctions have ever been levied. That’s a pretty thin docket for the world’s seventh-biggest economy. The “clean companies” law that Brazil passed last year could change that. Unfortunately, Rousseff has yet to issue the regulations for implementing the law. She should. Rousseff also needs to follow through on her pledge to reform Brazil’s campaign finance laws. Under their current terms, companies can donate up to 2% of their gross annual revenue. In fact, they supply more than 95% of the money for Brazilian elections, which have become wildly expensive. And campaigns need only disclose the identity and contribution amounts of donors in a final consolidated report issued after the election is over.

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The Germans have been consistent all along in their message.

ECB Likely To Hold Off On Sovereign Bond Purchases (WSJ)

Economists expect the European Central Bank to hold off on sovereign bond purchases next week, despite further dangers of deflation haunting the eurozone. The bank’s governing council meeting Thursday – the final one of 2014 – is likely to convey a more dovish message and lower inflation expectations, analysts say, but no new measures are expected until next year. The central bank has set in motion schemes to purchase covered bonds and asset-backed securities, but weaker prices put pressure on its President Mario Draghi to start buying sovereign bonds as well, a policy known as quantitative easing.

In a speech this week, ECB Vice-President Vitor Constancio opened the door to such purchases in 2015. “We must wait to see if ECB President Mario Draghi will repeat his readiness to start buying government bonds if the inflation outlook deteriorates further,” said Zach Witton, economist at Moody’s Analytics, in a research note Friday. Purchasing managers’ index figures for the manufacturing and services sectors are expected to show economic activity in the core eurozone countries – Germany, France and Italy – remained broadly flat in November.

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But one wonders what will happen to the euro after Thursday meeting.

ECB Board Member Dampens Quantitative Easing Hopes (Reuters)

ECB Executive Board member Sabine Lautenschlaeger said on Saturday she saw little room for further easing of monetary policy despite a further fall in euro zone inflation. “According to the current situation, the threshold as I see it for taking further action is very high, particularly for large-scale purchasing programmes,” she said in Berlin, speaking five days ahead of the ECB’s next Monetary Policy Committee meeting. Innovation in monetary policy was not a taboo, but must also not be an “end in itself”, she added. The ECB has cut interest rates to practically zero and is readying more buying programmes that could include government bonds – known as quantitative easing – to ward off the threat of deflation in the euro zone. Vice President Vitor Constancio said this week the ECB could make a decision on government bond-buying in the first quarter if the economy did not improve. The purchase of government bonds would be viewed extremely critically in Germany.

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France suffers from a dangerous dose of entitlement.

France Might As Well Be Communist, Blasts US Tyre Tycoon (Telegraph)

A US tyre tycoon has ridiculed French laws and trade unions that he said had prevented him from rescuing a stricken factory, saying France should become “communist”. Maurice Taylor, chief executive of Titan International, had initially expressed interest in taking over the loss-making Goodyear tyre plant in Amiens. But he pulled out of the deal and explained why to France Info radio. “You can’t buy Goodyear. Under your law, we have to take a minimum of 662 or 672 employees. You can’t do that. The most you could take is 333 … there’s no business for that plant now,” said Mr Taylor. “I tried to tell them all that before but you guys have got to wake up over there and tell the unions, ‘Hey if they’re so smart, they should buy the factory’. “It’s stupid. It’s the dumbest thing in the world. France should just become communist and then when it goes all bad like Russia did, then maybe you’d have a chance,” added Mr Taylor.

Goodyear announced in January last year that it was closing the factory, which employs 1,173 people, after years of negotiations with unions failed to come up with a solution to save jobs. Unions launched a series of legal proceedings against the company, but to no avail. Mr Taylor, known as “The Grizz” for his tough talk, has made waves before for his comments on France. In 2013, he wrote a letter to the French industrial renewal minister calling the country’s workers lazy and overpaid after years of negotiations by Titan to take over the plant had failed. “They get one hour for breaks and lunch, talk for three and work for three. I told this to the French union workers to their faces. They told me that’s the French way,” wrote Mr Taylor. The minister at the time, Arnaud Montebourg, hit back, telling Mr Taylor: “Your extremist insults display a perfect ignorance of what our country is about. Be assured that you can count on me to inspect your tyre imports with a redoubled zeal.”

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“… can you point to what you personally got in return for that $42,291 worth of additional debt per household that the federal government accumulated during the last six years?”

When Will the US National Debt Exceed $18 Trillion? (MyGovCost.org)

Sometime in the next two to three weeks, the total public debt outstanding for the U.S. government will exceed 18 trillion dollars. If you were to ask us to pin down a precise date, we would say sometime around December 9, 2014, given the rate at which the national debt has been increasing during the federal government’s current fiscal year. Since the start of the U.S. federal government’s 2015 fiscal year on October 1, 2014, the national debt has grown at an average rate of $2.08 billion per day. If it helps put these very large numbers into a more human scale, when the U.S. national debt reaches $18 trillion, that will work out to be about $124,275 per U.S. household, which is up from $81,984 per U.S. household at the end of the 2008 fiscal year.

And the new figure would be on top of your mortgage, car loans, student loans, credit cards, et cetera that you might also have. But unlike those tangible things, where you can at least point to your house, your car, your education, or even the Christmas presents you might be buying this upcoming Black Friday, can you point to what you personally got in return for that $42,291 worth of additional debt per household that the federal government accumulated during the last six years? If you cannot, is it really worth it?

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The TTIP is more deadly than ebola.

That Hot US-EU Trade Deal Destroys 600,000 EU Jobs (Don Quijones)

In a 1994 interview with Charlie Rose, the British billionaire financier James Goldsmith delivered a stark, eerily prescient warning of the state the world would be in today if it succumbed to the freer borders and more centralized, corporate-owned governance envisaged by trade regimes such as NAFTA and GATT (the predecessor to the World Trade Organization). Goldsmith was spot on about just about everything, from the threats posed by derivatives – then in their infancy – to the risks of industrializing agriculture throughout the developing world. Yet his warnings went unheeded, as laments the U.S. economist and former Assistant Treasury Secretary Paul Craig Roberts:

Sir James called it correct, as did Roger Milliken. They predicted that the working and middle classes in the US and Europe would be ruined by the greed of Wall Street and corporations, who would boost corporate earnings by replacing their domestic work forces with foreign labor, which could be paid a fraction of labor’s productivity as a result of the foreign country’s low living standard and large excess supply of labor.

Now, 20 years on from the signing of NAFTA and GATT, our governments’ enthusiasm for bilateral and multilateral trade agreements is undimmed, despite the social upheaval and economic destruction they have left in their wake. Indeed, our governments now seek to take “free” trade to a whole new level, far beyond what was originally envisaged for NAFTA and GATT. If signed, the new generation of trade deals would sound the final death knell of what remains of nation-state sovereignty, while doing next to nothing to improve economic conditions on the ground. Of particular concern is the Transatlantic Trade and Investment Partnership (TTIP), which seeks to bind together the world’s two largest markets, the U.S. and the EU, under a homogenized regulatory and legal superstructure designed for the exclusive benefit of transatlantic corporations and banks. Unsurprisingly, most of the official (i.e. European Commission-commissioned) assessments of TTIP predict gains, albeit negligible ones, in trade and GDP for both the EU and US.

Some even predict gains for non-TTIP countries, suggesting that the agreement would be a win-win for just everyone. However, according to a new study by Tufts University Professor Jeronim Capaldo, these rose-tinted forecasts rely on methods virtually unchanged from the models used to promote the liberalization of markets in the 1980s and 1990s. As then, they assume that the “competitive” sectors of the economy would benefit from the enhanced trade conditions while the losses racked up in the other sectors would be offset by falling salaries and rising employment.This assumption is provably false. As recent experience in Southern Europe has shown, lower salaries do not necessarily translate into the creation of new jobs. In fact, according to Capaldo’s findings – based on the UN’s much more up-to-date Global Policy Model – not only would the TTIP not create new jobs in Europe, it would destroy in the space of ten years a net total of roughly 600,000 jobs.

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“In the UK, women make up just 27% of economics students, despite accounting for 57% of the undergraduate population .. ”

Economics’ Failure To Tackle Real-World Issues Drives Women Away (Observer)

On the first Thursday of every month, nine men and women meet within the marble halls of the Bank of England to decide whether the nation’s mortgages will get more expensive and to answer the £375bn question: is it time to reverse the Bank’s electronic printing presses, which pumped money into the economy during the financial crisis. More specifically, seven men and two women make those vital decisions. As recently as six months ago it was nine men. It was only the arrival of Nemat (Minouche) Shafik, a former World Bank official, and Kristin Forbes, a US academic, at the monetary policy committee that ended an all-male run that had lasted for four years. Around the same time Charlotte Hogg was poached from Santander to become the Bank’s chief operating officer, as part of governor Mark Carney’s attempt to get more women into the 320-year-old institution. And early next year in the US, Janet Yellen will mark the anniversary of her becoming the first woman to run the Federal Reserve.

But despite these appointments, researchers warn that progress in getting women into such influential jobs will remain slow because not enough women are studying economics. In the UK, women make up just 27% of economics students, despite accounting for 57% of the undergraduate population, according to a study from the University of Southampton last month. This gap has remained unchanged for almost 20 years, even though female undergraduates now outnumber men in law and medicine, while almost equal numbers study business. Fewer girls than boys take A-level maths, a common prerequisite for an economics degree, but according to the Southampton researchers, those girls who did were more likely to get top grades, but then less likely to go on to economics at university. Mirco Tonin, lead author of the study, thinks deeper cultural factors put women off the “dismal science”. “Maybe when people think about economics what comes to mind is a male role model,” he says.

Kate Barker, who served on the MPC for nine years, was at times the only woman and says it was an odd experience. “It is not because I felt crushed or got at… There is just something odd about being the only woman on a panel of nine. It was much better when [former members] Marion Bell and Rachel Lomax were on. When there were three women it felt much more normal.” She was invited to help recruit her successors when her fixed term came to an end, but says: “We weren’t always able to attract as many applications from women as we would like. On the first two occasions we appointed men and we felt uneasy about perpetuating an all-male panel…but equally you have to appoint people of the right calibre.”

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Subprime down under.

Australia: Haven for Bank Control Frauds? (Macrobusiness)

Identifying whether a similar form of subprime fraud is widespread in Australia’s banking system and housing market deserves close scrutiny. Deregulation and privatisation of the financial sector since the 1980s has increased competitive pressures and the potential for fraud, as commercial lenders are provided with an incentive to maintain robust profitability via strong credit growth. Substantial evidence of subprime fraud has been provided by Denise Brailey, a criminologist and president of the Banking & Finance Consumers Support Association (BFCSA). It is a public-interest organisation dedicated to protecting investors and the pursuit of compensation for victims of predatory finance. Brailey is responsible for eleven inquiries investigating the predations of the FIRE sector and compliant regulators between 1997 and 2010.

Having worked in this field since the 1980s, Brailey has witnessed first-hand the financial and social destruction wrought by a multitude of scams and predatory lending, including the ‘finance brokers scandal’ in Western and South Australia, and the ‘mortgage solicitor scams’ stretching down the east coast from Queensland to Tasmania. Brailey alleges that since 1996, commercial lenders have engaged in widespread subprime fraud through over-lending to owner-occupiers and property investors, far beyond their ability to finance the debt. At the centre of the alleged fraud are loan application forms (LAFs), with borrower metrics altered by lenders without the knowledge, authority or consent of borrowers. The value of borrowers’ assets and incomes are radically inflated, justifying the approval of large loan sums, to the benefit of lenders and the broker channel.

As defaults typically show several years after loan origination, subprime borrowers struggle for an extended period before eventually succumbing, to the great benefit of the lenders in the form of higher interest payments, including penalties. Lenders then realise borrowers’ entire equity through foreclosure and sale. Similar to the US, Australian mortgage fraud is more closely linked with low-doc and no-doc mortgages than conventional (prime) mortgages. The process of alleged fraud begins with a potential borrower completing a three page LAF detailing their current assets and incomes. In the back office, the broker inputs the borrower’s details into a password-protected online ‘service calculator’, an application determining the amount of credit the lender, associated with the broker, is willing to provide.

The service calculator amounts to a black box, as brokers are not provided with any information as to how this application functions; it simply provides a ‘calculated’ futuristic income based upon the basic provided income details entered and then uses accounting add-ons and add-backs providing tax incentive ‘advantages’, to produce greater incomes. This in turn enables the banks to significantly increase the volume of lending.

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The answer is obvious. Just look around you.

Do We Own Our Stuff, or Does Our Stuff Own Us? (CH Smith)

The frenzied acquisition of more stuff is supposed to be an unalloyed good: good for “growth,” good for the consumer who presumably benefits from more stuff and good for governments collecting taxes on the purchase of all the stuff. But the frenzy to acquire more stuff raises a question: do we own our stuff, or does our stuff own us? I think the answer is clear: our stuff owns us, not the other way around. Everything we own demands its pound of flesh in one way or another: space must be found for it amid the clutter of stuff we already own, it must be programmed, recharged, maintained, dusted, moved, etc. The only way to lighten the burden of ownership is to get rid of stuff rather than buy more stuff. The only way to stop being owned is to is get rid of the stuff that owns us.

I propose a new holiday event, Gold Sunday: this is the day everyone hauls all the stuff they “own” that is a burden to a central location and dumps it in a free-for-all. Whatever is left after the freeters have picked through the pile is carted to the recycling yard and whatever’s left after that culling is taken to the dump. Frankly, I wouldn’t accept a new big-screen TV, vehicle, tablet computer, etc. etc. etc. at any price because I am tired of stuff owning me. I don’t want any more entertainment or computational devices, musical instruments, vehicles, clothing, kitchen appliances, or anything else for that matter, except what can be consumed with some modest enjoyment and no ill effects. We live in a small flat and I have no room for more stuff, and I have no time for more devices or entertainment. I have too much of everything but money and time. I don’t want to pay more auto insurance, maintenance costs, etc., nor do I want more devices to fiddle with. I am enslaved to the few I already own.

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“The most interesting factor when we look at India is that we could map the whole country as urban or peri-urban because there are so many towns and cities.”

Global Importance Of Urban Agriculture ‘Underestimated’ (BBC)

Urban agriculture is playing an increasingly important role in global food security, a study has suggested. Researchers, using satellite data, found that agricultural activities within 20km of urban areas occupy an area equivalent to the 28-nation EU. The international team of scientists says the results should challenge the focus on rural areas of agricultural research and development work. The findings appear in the journal Environmental Research Letters. “This is the first study to document the global scale of food production in and around urban settings,” explained co-author Pay Drechsel, a researcher for the International Water Management Institute (IWMI). “There were people talking about urban agriculture but we never knew details. How did it compare with other farming systems? This assessment showed us that it was much larger than we expected.”

The team acknowledged that the study could actually be conservative, as it focused on urban areas with populations of 50,000 or greater.Dr Drechsel said that when urban farming was compared with other (ie rural) farming systems, the results were surprising. For example, the total area of rice farming in South Asia was smaller than what was being cultivated in urban areas around the globe. Likewise, total maize production in sub-Saharan Africa was not as large as the area under cultivation in urban areas around the world. UN data shows that more than 50% of the world’s population now lives in urban areas, which could explain the changing landscape of global agriculture. “We could say that the table is moving closer to the farm,” observed Dr Drechsel. “The most interesting factor when we look at India is that we could map the whole country as urban or peri-urban because there are so many towns and cities.”

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What’s that line again about human stupidity?

Geo-Engineering: Climate Fixes ‘Could Harm Billions’ (BBC)

Schemes to tackle climate change could prove disastrous for billions of people, but might be required for the good of the planet, scientists say. That is the conclusion of a new set of studies into what’s become known as geo-engineering. This is the so far unproven science of intervening in the climate to bring down temperatures. These projects work by, for example, shading the Earth from the Sun or soaking up carbon dioxide. Ideas include aircraft spraying out sulphur particles at high altitude to mimic the cooling effect of volcanoes or using artificial “trees” to absorb CO2. Long regarded as the most bizarre of all solutions for global warming, ideas for geo-engineering have come in for more scrutiny in recent years as international efforts to limit carbon emissions have failed. Now three combined research projects, led by teams from the universities of Leeds, Bristol and Oxford, have explored the implications in more detail.

The central conclusion, according to Dr Matt Watson of Bristol University, is that the issues surrounding geo-engineering – how it might work, the effects it might have and the potential downsides – are “really really complicated”. “We don’t like the idea but we’re more convinced than ever that we have to research it,” he said. “Personally I find this stuff terrifying but we have to compare it to doing nothing, to business-as-usual leading us to a world with a 4C rise.” The studies used computer models to simulate the possible implications of different technologies – with a major focus on ideas for making the deserts, seas and clouds more reflective so that incoming solar radiation does not reach the surface. One simulation imagined sea-going vessels spraying dense plumes of particles into the air to try to alter the clouds. But the model found that this would be far less effective than once thought.

Another explored the option of injecting sulphate aerosols into the air above the Arctic in an effort to reverse the decline of sea-ice. A key finding was that none of the simulations managed to keep the world’s temperature at the level experienced between 1986-2005 – suggesting that any effort would have to be maintained for years. More alarming for the researchers were the potential implications for rainfall patterns. Although all the simulations showed that blocking the Sun’s rays – or solar radiation management, as it is called – did reduce the global temperature, the models revealed profound changes to precipitation including disrupting the Indian Monsoon. Prof Piers Forster of Leeds University said: “We have found that between 1.2 and 4.1 billion people could be adversely affected by changes in rainfall patterns. “The most striking example of a downside would be the complete drying-out of the Sahel region of Africa – that would be very difficult to adapt to for those substantial populations – and that happens across all the scenarios.”

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“Capitalism has lurched into a crisis from which it still has not recovered. Yet the worn-out ideology of free markets sets the framework within which our current generation of leaders continues to think and act. Today nothing is safe from the juggernaut of market forces.”

Does Anybody Ever ‘Think The Unthinkable’? (John Gray)

I have a vivid memory of the moment when I realised it wouldn’t be long before Margaret Thatcher’s radical experiment hit the buffers. It must have been sometime in the late 1980s. The venue was one of the free market think tanks that were so prominent in those far-off years. The topic of discussion was how we should be ready to transgress the boundaries of what was considered politically possible. Nearly all of those present were at one on the need to challenge existing assumptions. What we needed to do, they insisted, was “think the unthinkable” and extend the reach of market forces into public services and throughout society. For me this earnest consensus was not without an element of comedy. Free market ideas had been in power in Britain since Thatcher became prime minister in 1979. They were the ruling ideas of the age, and from my point of view already becoming rather stale.

In the early 70s, when I first became interested in Hayek and other free market thinkers, challenging the post-war political consensus may have required a certain contrariness. By the late 70s, when Britain had come close to bankruptcy and been bailed out by the IMF, there were many signs that the country was heading for a shift of regime in which it would be transformed irreversibly. But an abrupt change of this kind seems unimaginable to most people until it actually happens, and in much of politics, the media and academia Thatcher’s policies came as a bolt from the blue. By the late 80s, what had been heresy had been enthroned as orthodoxy. In these circumstances, the suggestion that one could become a fearless free-thinker by repeating, in louder and more extreme tones, what those in power were constantly saying was entertainingly farcical. At the same time it illuminated how political ideas actually work in practice.

As a general rule, “thinking the unthinkable” means accentuating and exaggerating, preferably to the point of absurdity, beliefs that are currently fashionable. Over the past three decades, this has meant, to my mind, applying the ruling free market ideology with little regard for history, circumstances or common sense. One may agree or disagree with Thatcher’s policies, but throughout most of her time in power she was more pragmatic than is often imagined, and rarely did anything just because it was required by an idea or theory. It was only when the ideologues in the free market think tanks persuaded her of the virtues of the poll tax that she allowed doctrinaire thinking to guide her, and that was the beginning of her downfall. The irony is that the ideas that ended her career in government nearly a quarter of a century ago have shaped politics ever since.

Capitalism has lurched into a crisis from which it still has not recovered. Yet the worn-out ideology of free markets sets the framework within which our current generation of leaders continues to think and act. Today nothing is safe from the juggernaut of market forces. If British Telecom could be successfully privatised, why not the prison service, national forensic service and probation service? Why not hand over the provision of blood plasma, or the search and rescue operations that have long been provided by the RAF and the Royal Navy, to private companies? No sell-off has been so obviously ill-conceived that it couldn’t be implemented. All of these privatisations have in fact occurred, under a variety of governments, or are currently in the works.

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Nov 232014
 
 November 23, 2014  Posted by at 11:30 am Finance Tagged with: , , , , , , , , ,  Comments Off on Debt Rattle November 23 2014


Hans Behm Windy City tourists at Monroe Street near State 1908

China’s Surprise Rate Cut Shows How Freaked Out The Government Is (Quartz)
The End of China’s Economic Miracle? (WSJ)
Hugh Hendry: “A Bet Against China Is A Bet Against Central Bank Omnipotence” (MW)
Central Banks in New Push to Prime Pump (WSJ)
Forget What Central Bankers Say: Deflation Is The Real Monster (Observer)
“I Am 100% Confident That Central Banks Are Buying S&P Futures” (Zero Hedge)
UK Chancellor Haunted By Deficit And £1.45 Trillion Debt Pile (Telegraph)
Junk Bonds Whipsawed as Trading Drought Rattles Investors (Bloomberg)
Pension Funds Lambaste Private-Equity Fees (WSJ)
Sun Sets On OPEC Dominance In New Era Of Lower Oil Prices (Telegraph)
Google Break-Up Plan Emerges From European Parliament (FT)
European Season of Political Discontent Rung In by UKIP (Bloomberg)
The Curse Of Black Friday Sales (NY Post)
UK Retailers Pin Hopes On American Shopping Extravaganza (Independent)
Don’t Prick The Christmas Spending Bubble, It Keeps Capitalism Alive (Observer)
Food Banks Face Record Demand As Low-Income Families Look For Help (PA)
Russia FM Lavrov Accuses West Of Seeking ‘Regime Change’ In Russia (Reuters)
Rapper May Face 25 Years In Prison Over ‘Gangsta Rap’ Album (RT)
We Need A New Law To Protect Our Wildlife From Critical Decline (Monbiot)

“The push that came to shove might have been the grim October data, which showed industrial output, investment, exports, and retail sales all slowing fast. Those data suggest it will be much harder to get anywhere close to the government’s 2014 target of 7.5% GDP growth .. ”

China’s Surprise Rate Cut Shows How Freaked Out The Government Is (Quartz)

Earlier [this week], the People’s Bank of China slashed the benchmark lending rate by 40 basis points, to 5.6%, and pushed down the 12-month deposit rate 25 basis points, to 2.75%. Few analysts expected this. The PBoC—which, unlike many central banks, is very much controlled by the central government—generally cuts rates only as a last resort to boost growth. The government has been rigorously using less broad-based ways of lowering borrowing costs (e.g. cutting reserve requirement ratios at small banks, and re-lending to certain sectors). The fact that the government finally cut rates suggests that these more “targeted” measures haven’t succeeded in easing funding costs for Chinese firms. The push that came to shove might have been the grim October data, which showed industrial output, investment, exports, and retail sales all slowing fast.

Those data suggest it will be much harder to get anywhere close to the government’s 2014 target of 7.5% GDP growth, given that the economy grew only 7.3% in the third quarter, its slowest pace in more than five years. But wait. Isn’t the Chinese economy supposed to be losing steam? Yes. The Chinese government has acknowledged many times that in order to introduce the market-based reforms needed to sustain long-term growth and stop piling on more corporate debt, it has to start ceding its control over China’s financial sector. Things like, for instance, setting the bank deposit rate artificially low, which generally punishes savers to benefit state-owned enterprises (SOEs). But clearly, the economy’s not supposed to be decelerating as fast as it is. Tellingly, it’s been more than two years since the central bank last cut rates, when the economic picture darkened abruptly in mid-2012, the critical year that the Hu Jintao administration was to hand over power to Xi Jinping.

The all-out push to boost growth that followed made 2013 boom, but also freighted corporate balance sheets with dangerous levels of debt. But this could only last so long; things started looking ugly again in 2014. Up until now, attempts to buoy the economy have mainly focused on helping out small non-state companies, says Mark Williams, chief economist at Capital Economics, in a note. Often ineligible for state-run bank loans, small firms have mostly been paying steep rates for shadow financing. Since the benchmark rate cut affects official loans given out by mostly state-run banks, today’s cut will mainly benefit SOEs, hinting that the authorities “apparently feel larger firms are now in need of support too,” writes Williams. In addition, lowering the amount banks charge for capital makes them less likely to lend. Though that should in theory be offset by the lowering of the deposit rate, savers have been shunting their money into higher-yielding wealth management products, making deposits increasingly scarce.

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“I could see empty apartment buildings stretching for miles, with just a handful of cars driving by. It made me think of the aftermath of a neutron-bomb detonation.”

The End of China’s Economic Miracle? (WSJ)

On a trip to China in 2009, I climbed to the top of a 13-story pagoda in the industrial hub of Changzhou, not far from Shanghai, and scanned the surroundings. Construction cranes stretched across the smoggy horizon, which looked yellow in the sun. My son Daniel, who was teaching English at a local university, told me, “Yellow is the color of development.” During my time in Beijing as a Journal reporter covering China’s economy, starting in 2011, China became the world’s No. 1 trader, surpassing the U.S., and the world’s No. 2 economy, topping Japan. Economists say it is just a matter of time until China’s GDP becomes the world’s largest. This period also has seen China’s Communist Party name a powerful new general secretary, Xi Jinping , who pronounced himself a reformer, issued a 60-point plan to remake China’s economy and launched a campaign to cleanse the party of corruption.

The purge, his admirers told me, would frighten bureaucrats, local politicians and executives of state-owned mega companies—the Holy Trinity of vested interests—into supporting Mr. Xi’s changes. So why, on leaving China at the end of a nearly four-year assignment, am I pessimistic about the country’s economic future? When I arrived, China’s GDP was growing at nearly 10% a year, as it had been for almost 30 years—a feat unmatched in modern economic history. But growth is now decelerating toward 7%. Western business people and international economists in China warn that the government’s GDP statistics are accurate only as an indication of direction, and the direction of the Chinese economy is plainly downward. The big questions are how far and how fast. My own reporting suggests that we are witnessing the end of the Chinese economic miracle.

We are seeing just how much of China’s success depended on a debt-powered housing bubble and corruption-laced spending. The construction crane isn’t necessarily a symbol of economic vitality; it can also be a symbol of an economy run amok. Most of the Chinese cities I visited are ringed by vast, empty apartment complexes whose outlines are visible at night only by the blinking lights on their top floors. I was particularly aware of this on trips to the so-called third- and fourth-tier cities—the 200 or so cities with populations ranging from 500,000 to several million, which Westerners rarely visit but which account for 70% of China’s residential property sales. From my hotel window in the northeastern Chinese city of Yingkou, for example, I could see empty apartment buildings stretching for miles, with just a handful of cars driving by. It made me think of the aftermath of a neutron-bomb detonation—the structures left standing but no people in sight.

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“China’s had a decade which has been very, very similar to that of the US in the 1920s.”

Hugh Hendry: “A Bet Against China Is A Bet Against Central Bank Omnipotence” (MW)

Merryn Somerset Webb: That brings us, I guess, to China. You were one of the first to point out the native problems in China. Your rather amazing video wandering around empty housing estates, etc, which I think was pretty well watched. What’s your view now?

Hugh Hendry: I think my view would surprise you. Before I surprise you, I would like to seek legitimacy of my view by telling you that I have made money. It’s been my most successful profit centre in the year to date, and we’ve made over 5% trading in China-related macro themes. In terms of surprising you, I am more sanguine about China. Actually I’ve been rather impressed by their policy responses over the last two years. When I look at China, China has got two components. It’s got this manic investment gross capital formation and in something which has been deepening these global deflationary fears, because they kept expanding over capacity industries such as cement and steel and undermining prices in the rest of the world. That in itself lowers these inflation figures below Central Bank targets. It becomes reflexive and then the central bank says “Crikey, I’ve got to be radical here. I’ve got to buy equities”. So there’s been that going on.

On the other hand, there’s been a robbing Peter to pay Paul, and China’s had a decade which has been very, very similar to that of the US in the 1920s. The US, people forget this, but Liaquat Ahamed – I’ve just destroyed his name, forgive me, but the Lords of Finance author – I reread it recently and I was very taken by the notion of how mean the Fed had been in the 1920s. Again, I say it to you with cathartic crisis, the response of the rest of the world is to be long dollars invested in America and that was certainly the case in the 1920s. But America was recovering nicely from the Great War and it had this incredible productivity revolution. There was great demand for credit and so it was fine on its own.

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What can you expect from Jon Hilsenrath?

Central Banks in New Push to Prime Pump (WSJ)

Two major central banks moved Friday to pump up flagging global growth, sending stock markets soaring but raising new questions about the limitations of a seven-year effort to use monetary policy to address economic problems. The People’s Bank of China announced a surprise reduction in benchmark lending and deposit rates, the first cuts since 2012, after other measures to boost faltering growth fell short. Hours later, European Central Bank President Mario Draghi said the bank might take new measures to boost inflation, now near zero, his strongest signal yet that the ECB is getting closer to buying a broader swath of eurozone bonds.

The moves came less than two weeks after the Bank of Japan said it would ramp up its own securities-purchase program known as quantitative easing, or QE, as the Japanese economy fell into recession. The twin steps Friday, half a world apart, sent global stock prices sharply higher, bolstered the U.S. dollar and boosted oil prices. The Shanghai Composite Index rose 1.4%, while Germany’s DAX index jumped 2.6%. The Dow Jones Industrial Average finished up 0.51%, and at 17810.06 is now closing in on the 18000 threshold that has never been surpassed. The Nikkei rose 0.3%. Amid the flurry of central bank activity, the dollar was the winner among global currencies, rising 0.27% against a broad index of other currencies to put it up 9% for the year.

Though the moves toward easier money in Europe and Asia are good for investors, they come with multiple risks. They could perpetuate or spark asset bubbles, or stoke too much inflation if taken too far. Also, they don’t address structural problems that policy makers in each economy are struggling to fix. The steps, particularly in Europe, represent a subtle endorsement of the Federal Reserve’s easy-money approach to postcrisis economics, but come as the U.S. central bank shifts its own low-interest-rate policies. The Fed last month ended a six-year experiment with bond purchases, and it has begun talking about when to start raising short-term interest rates as the U.S. economy improves, though those discussions are early and rate increases are likely months away, at the earliest.

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“Even low inflation can be damaging, particularly if it breeds the expectation that outright deflation will follow. If people expect prices to fall, they are encouraged to hold off spending.” Makes you wonder about Christmas sales.

Forget What Central Bankers Say: Deflation Is The Real Monster (Observer)

The European Central Bank might like to update its website – specifically, its educational video to teach teenagers about the importance of keeping prices in check. In it, a spotted, fanged, snarling “inflation monster” floods money into the marketplace, making vivid the perils of prices rising too quickly. Near the end of the cartoon a much smaller, smiling, pink creature makes a brief appearance – the “deflation monster”. Fear of inflation is understandable in a continent that saw devastating hyperinflation last century – a shock seen by some as pivotal in the rise of Hitler. But look around the eurozone now and the bigger threat is deflation. Even in the UK, inflation is well below the Bank of England’s target and the central bank expects it to fall further over coming months.

Oil prices have been falling, as have other commodity prices. In Britain a supermarket price war is pushing food prices down further still. Wages are barely budging and a price freeze for energy bills should also help to keep inflation low this winter. The Bank fully admits it failed to forecast this significant drop below the government-set 2% target for inflation. Governor Mark Carney used the Bank’s latest forecasts earlier this month to warn of “some pretty big disinflationary forces”, largely coming from abroad. He predicted inflation would fall even further, to below 1% over the next six months. If it does, he will face the unenviable task of being the first governor since BoE independence in 1997 to write a letter to the chancellor explaining why inflation is so low.

All of the 14 letters written until now have been because inflation missed the target too far in the other direction, overshooting by more than 1 percentage point. Aside from the awkwardness of the Dear George moment, there are very real reasons why Carney is saying the Bank needs to get inflation back to target. The inflation monster may be scary, but the deflation monster is by no means harmless. Even low inflation can be damaging, particularly if it breeds the expectation that outright deflation will follow. If people expect prices to fall, they are encouraged to hold off spending. Economic stagnation and rising unemployment can follow.

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Why would anyone doubt that?

“I Am 100% Confident That Central Banks Are Buying S&P Futures” (Zero Hedge)

I have been an independent trader for 23 years, starting at the CBOT in grains and CME in the S&P 500 futures markets long ago while they were auction outcry markets, and have stayed in the alternative investment space ever since, and now run a small fund. I understand better than most I would think, the “mechanics” of the markets and how they have evolved over time from the auction market to ‘upstairs”. I am a self-taught, top down global macro economist, and historian of “money” and the Fed and all economic and governmental structures in the world. One thing so many managers don’t understand is that the markets take away the most amounts of money from the most amounts of people, and do so non-linearly.

Most sophisticated investors know to be successful, one must be a contrarian, and this philosophy is in parallel. Markets will, on all time scales, through exponential decay (fat tails, or black swans, on longer term scales), or exponential growth of price itself. Why was I so bearish on gold at its peak a few years back for instance? Because of the ascent of non-linearity of price, and the massive consensus buildup of bulls. Didier Sornette, author of “Why Stock Markets Crash”, I believe correctly summarizes how Power Law Behavior, or exponential consensus, and how it lead to crashes. The buildup of buyers’ zeal, and the squeezing of shorts, leads to that “complex system” popping. I have traded as a contrarian with these philosophies for some time.

The point here is, our general indices have been at that critical point now for a year, without “normal” reactions post critical points in time, from longer term time scales to intraday. This suggests that many times, there is only an audience of one buyer, and as price goes up to certain levels, that buyer extracts all sellers. After this year and especially this last 1900 point Dow run up in October, and post non-reaction, that I am 100% confident that that one buyer is our own Federal Reserve or other central banks with a goal to “stimulate” our economy by directly buying stock index futures. Talking about a perpetual fat finger! I guess “don’t fight the Fed” truly exists, without fluctuation, in this situation. Its important to note the mechanics; the Fed buys futures and the actual underlying constituents that make up the general indices will align by opportunistic spread arbitragers who sell the futures and buy the actual equities, thus, the Fed could use the con, if asked, that they aren’t actually buying equities.

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“Public sector net debt, excluding public sector banks, was £1.45 trillion in October, and now represents almost 80pc of UK gross domestic product. Britain’s debt pile has increased by almost £100bn over the past year alone .. ”

UK Chancellor Haunted By Deficit And £1.45 Trillion Debt Pile (Telegraph)

The Government’s ability to reduce the deficit this year and tame Britain’s huge debt mountain is in doubt, despite a slight fall in borrowing last month. Public sector net borrowing, excluding public sector banks, fell to £7.7bn in October, from £7.9bn in the same month a year ago. The deficit was also in line with economists’ expectations. While an across-the-board rise in tax receipts, including a 1.5pc increase in income tax to £10.5bn in October, helped to reduce borrowing last month, the deficit remains £3.7bn – or 6pc – higher this year than in 2013. The Office for Budget Responsibility had forecast a 7pc increase in income tax receipts this year, which are currently down 0.4pc compared with the same period in 2013, at £81.5bn. Income from VAT and stamp duties increased by 4.9pc and 3.6pc, to £10.3bn and £1.3bn respectively in October, while corporation tax payments also edged up, despite weak oil and gas revenues.

The OBR is expected to revise up the Government’s borrowing forecasts on December 3, when the Chancellor will present the Autumn Statement. This will reduce the likelihood of any big tax giveaways before the next election. Samuel Tombs at Capital Economics said: “This year’s poor borrowing figures limit the Chancellor’s room for manoeuvre and undermine his argument that the public finances can be restored to a sustainable position after the next election through spending cuts alone.” Robert Chote, the chairman of the OBR, said last month that the Government was likely to miss its income tax targets this year as weak pay growth and a surge in low paid jobs means the Treasury rakes in less revenue than predicted. A Treasury spokesperson said borrowing remained “in line with the Budget forecast” and stressed that the Government would continue to take steps to “build a resilient British economy”.

The Treasury and OBR expect a “sizeable” increase in income tax receipts from self-employed workers in January 2015 as distortions related to the reduction of the top rate of tax unwind. Economists were sceptical that any January boost would make up the current shortfall. Michael Saunders, chief UK economist at Citibank, expects the deficit to overshoot the OBR’s forecast by £13bn this fiscal year, taking borrowing up to £100bn this year. “The tax and benefit reforms of the last 15 years have proved very successful in boosting employment and workforce participation, but also have eroded the extent to which economic recovery generates a fiscal windfall,” he said. The size of Britain’s debt pile also continued to balloon in October. Public sector net debt, excluding public sector banks, was £1.45 trillion in October, and now represents almost 80pc of UK gross domestic product.

Britain’s debt pile has increased by almost £100bn over the past year alone, and the Treasury is expected to pay almost £1bn a week in debt interest payments this year. Debt interest payments are now close to the Goverment’s combined transport and defence budget, with payments expected to rise to £75bn in 2018-19.

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Noted this before: as capital fless junk bonds, big bad things can happen.

Junk Bonds Whipsawed as Trading Drought Rattles Investors (Bloomberg)

Junk bond investors have a bad case of the jitters. Every bit of bad news is whipsawing prices, with bonds tumbling as much as 50% in a single day. “We’ve seen some flash crashes in the market,” said Henry Craik-White, analyst at ECM Asset Management. “If you get caught on the wrong side of a name, you can get severely punished in this market.” Investors are rattled because they’re concerned that a lack of liquidity in the bond market will make it impossible for them to sell holdings in response to negative headlines. Trading dropped about 70% since 2008, with a corporate bond that changed hands almost five times a day a decade ago now only being sold once a day on average, according to Royal Bank of Scotland. Alarms started ringing in September with the collapse of British retailer Phones 4u after Vodafone and EE refused to renew contracts. The retailer shut its business and sought creditor protection on Sept. 15, sending the company’s payment-in-kind bonds down to 1.9 pence on the pound, according to data compiled by Bloomberg.

A month later, notes of Spanish online travel service EDreams Odigeo fell 57% in one afternoon when Iberia Airlines and British Airways said they were withdrawing tickets from the company’s websites. The 10.375% bonds almost fully recovered the following trading day when the airlines reinstated the tickets. Abengoa’s debt plunged as much as 32% last week amid investor confusion about how the Spanish renewable energy company accounted for $632 million of green bonds. The Seville-based company’s 8.875% notes dropped to 74 cents on the euro from 107 cents in two days and rebounded to 95 cents after Abengoa held a conference call to reassure bondholders.

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” .. a Dutch pension fund for nurses and social workers that she invests for paid more than €400 million (about $500 million) to private-equity firms in 2013..”

Pension Funds Lambaste Private-Equity Fees (WSJ)

Pension-fund managers from the Netherlands to Canada, searching for new ways to invest, lambasted private-equity executives at a conference in Paris this week for charging excessive fees. Ruulke Bagijn, chief investment officer for private markets at Dutch pension manager PGGM, said a Dutch pension fund for nurses and social workers that she invests for paid more than €400 million (about $500 million) to private-equity firms in 2013. The amount accounted for half the fees paid by the PFZW pension fund, even though private-equity firms managed just 6% of its assets last year, she said. “That is something we have to think about,” Ms. Bagijn said.

The world’s largest investors, including pension funds and sovereign-wealth funds, are seeking new ways to invest in private equity to avoid the supersize fees. Some investors are buying companies and assets directly. Others are making more of their own decisions about which funds to invest in, rather than giving money to fund-of-fund managers. Big investors are also demanding to invest alongside private-equity funds to avoid paying fees. Jane Rowe, the head of private equity at Ontario Teachers’ Pension Plan, which manages Can$141 billion (US$124.4 billion), is buying more companies directly rather than just through private-equity funds. The plan invests with private-equity firms including Silver Lake Partners and Permira, according to its annual report. Ms. Rowe told executives gathered in a hotel near Place Vendome in central Paris that she is motivated to make money to improve the retirement security of Canadian teachers rather than simply for herself and her partners.

“You’re not doing it to make the senior managing partner of a private-equity fund $200 million more this year,” she said, as she sat alongside Ms. Ruulke of the Netherlands and Derek Murphy of PSP Investments, which manages pensions for Canadian soldiers. “You’re making it for the teachers of Ontario. You know, Derek’s making it for the armed forces of Canada. Ruulke’s doing it for the social fabric of the Netherlands. These are very nice missions to have in life.”

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That’ one cute graph. But any article that quotes Yergin is dead in the water.

Sun Sets On OPEC Dominance In New Era Of Lower Oil Prices (Telegraph)

It wouldn’t be the first time that a meeting of OPEC has taken place in an atmosphere of deep division, bordering on outright hatred. In 1976, Saudi Arabia’s former oil minister Ahmed Zaki Yamani stormed out of the OPEC gathering early when other members of the cartel wouldn’t agree to the wishes of his new master, King Khaled. The 166th meeting of the group in Vienna next week is looking like it could end in a similarly acrimonious fashion with Saudi Arabia and several other members at loggerheads over what to do about falling oil prices. Whatever action OPEC agrees to take next week to halt the sharp decline in the value of crude, experts agree that one thing is clear: the world is entering into an era of lower oil prices that the group is almost powerless to change This new energy paradigm may result in oil trading at much lower levels than the $100 (£64) per barrel that consumers have grown used to paying over the last decade and reshape the entire global economy.

It could also trigger the eventual break-up of OPEC, the group of mainly Middle East producers, which due to its control of 60pc of the world’s petroleum reserves has often been accused of acting like a cartel. Even worse, some experts warn that a prolonged period of lower oil prices could reshape the entire political map of the Middle East, triggering a new wave of political uprisings in petrodollar sheikhdoms in the Persian Gulf, which depend on the income from crude to underwrite their high levels of public spending and support less wealthy client states in the Arab world. “We are now entering a new era in world oil and we will have lower prices for some time to come,” says Daniel Yergin, the Pulitzer prize-winning author of The Quest: Energy Security and the Remaking of the Modern World. “Oil was really the last commodity in the super-cycle to remain standing.” Mr Yergin spoke exclusively to The Sunday Telegraph ahead of what is being called the most important gathering of OPEC in more than 20 years.

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Don’t think the Financial Times finds it a good idea.

Google Break-Up Plan Emerges From European Parliament (FT)

The European parliament is poised to call for a break-up of Google, in one of the most brazen assaults so far on the technology group’s power. The gambit increases the political pressure on the European Commission, the EU’s executive arm, to take a tougher line on Google, either in its antitrust investigation into the company or through the introduction of laws to curb its reach. A draft motion seen by the Financial Times says that “unbundling [of] search engines from other commercial services” should be considered as a potential solution to Google’s dominance. It has the backing of the parliament’s two main political blocs, the European People’s Party and the Socialists.

A vote to effectively single out a big US company for censure is extremely rare in the European parliament and is in part a reflection of how Germany’s politicians have turned against Google this year. German centre-right and centre-left politicians are the dominant force in the legislature and German corporate champions, from media groups to telecoms, are among the most vocal of Google’s critics. Since his nomination to be the EU’s digital commissioner, Germany’s Günther Oettinger has suggested hitting Google with a levy for displaying copyright-protected material; has raised the idea of forcing its search results to be neutral; and voiced concerns about its provision of software for cars.

Google has become a lightning rod for European concerns over Silicon Valley, with consumers, regulators and politicians assailing the company over issues ranging from its commercial dominance to its privacy policy. It has reluctantly accepted the European Court of Justice’s ruling on the right to be forgotten, which requires it to consider requests not to index certain links about people’s past. The European parliament has no formal power to split up companies, but has increasing influence on the commission, which initiates all EU legislation. The commission has been investigating concerns over Google’s dominance of online search for five years, with critics arguing that the company’s rankings favour its own services, hitting its rivals’ profits.

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Eh, no. UKIP did not start this.

European Season of Political Discontent Rung In by UKIP (Bloomberg)

Some 16,867 voters in southeast England ushered in a season of European political tumult that in an extreme scenario could lead to Britain exiting the European Union, Greece quitting the euro or Catalonia seceding from Spain. Victory by the anti-EU U.K. Independence Party in a British parliamentary contest was fueled by the same sense of economic injustice and antagonism to politics-as-usual that will unsettle Europe in coming months. It also gave a flavor of the potential fallout, as the pound fell against most of its 16 major peers. “The markets have a lot to worry about,” Edmund Phelps, a Nobel Prize-winning economist at Columbia University in New York, said in an interview before the British vote. “It’s possible that we could see a swing toward the extreme right, and one must wonder what ramifications this would have for the European Union and the euro area.”

Since Greece’s runaway debt convulsed the euro region in 2010, Europe has avoided doomsday storylines like the breakup of the EU, the euro or a member state. Whether those risks were banished or merely deferred will become clearer in the next rounds of political jousting. Early elections are beckoning in Greece, Catalonia, Italy and Austria, and that’s before scheduled ballots including in the U.K. in May, Portugal in September or October and in Spain at year’s end. The re-emergence of political risk in Europe is cited by Royal Bank of Scotland Plc analysts including Alberto Gallo as among the “top trades” for 2015. Europeans rehearsed the revolt in last May’s European Parliament balloting, upping the vote count of anti-establishment parties to about 30% from 20%. The motley groups failed to form a cohesive force and mainstream parties retained control. Protest parties are now set to consolidate gains at the national level.

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I’ll pay plastic, please.

The Curse Of Black Friday Sales (NY Post)

After a tough 2014, nervous retailers couldn’t afford to wait for the traditional day after Thanksgiving to pull the trigger on holiday shopping discounts. So retail titans from Amazon to Walmart — and nearly every store in between — have been stretching the selling season with Black Friday discounts that started the day after Halloween. Macy’s, JCPenney and Toys R Us, which started opening on Thanksgiving a couple of years ago, are opening earlier than ever for Turkey Day 2014. Retail experts say the hysterical bombardment of deals both online and in stores all November long shows just how ineffective — and dysfunctional — the Black Friday business model has become. Just 28% of shoppers are expected to hit the stores the day after Thanksgiving this year, according to a survey released last week from Bankrate.com.

“Retailers know that big pop, the big Black Friday day — it’s not working,” said Bankrate.com analyst Jeanine Skowronski. Black Friday used to be the day retailers’ profit ledgers entered the black for the year. Now it’s known for chaos, stampeding crowds and deals that can be found with less hassle online or some other time. As shoppers struggle with stagnant wages and high food prices, stores are fighting to win their limited discretionary dollars and turn a profit amid all the price-cutting. Add to that, on Black Friday, picketers will be outside 1,600 Walmart stores, calling for higher wages and full-time jobs for those who want them. “Personally, I never go to a store on Black Friday—there’s no need to,” said Edward Hertzman, publisher of Sourcing Journal.

“A better sale is probably just around the corner, especially on seasonal merchandise.” Since the 2008 Black Friday trampling death of a Long Island Walmart employee by a mob of shoppers, the post Turkey Day doorbuster sales have been notorious for attracting dangerous crowds. This year, Walmart and other stores are staggering deals and trying new strategies to keep the crowds less dangerous. Stores began extending Black Friday to try to bounce back from the recession. Now, however, they have trained consumers to expect a constant stream of price cuts, and are jockeying for first place in a fiercely competitive race. The discounts may help stores reach the forecast of up to 4% revenue growth for the 2014 holiday season, but margins will suffer.

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Have they incorporated Alibaba’s Singles Day yet? How about if we have one ‘special’ event every week? Would they all shop like crazy?

UK Retailers Pin Hopes On American Shopping Extravaganza (Independent)

Black Friday begins on Monday. If that’s the sort of sentence that elicits a double-take, I can only apologise — and say, blame the Americans. Ever a nation to milk something for all it’s worth and a bit more, the US has turned the day after Thanksgiving, when retailers cut their prices, into a week-long extravaganza. So Amazon will begin its “Black Friday Deals Week” promotions from 8am on Monday, with “lighting deals” every 10 minutes and lasting until stocks run out. The climactic day will still be Friday, and this year, more than ever, Britain will be swamped with discounts online and in the High Street. Visa Europe is forecasting that £360,000 will be spent every minute, or £6000 per second on its cards next Friday.

Once the preserve of Amazon, which in 2010 brought the phenomenon of the day after Thanksgiving as the day for retailers to offer big bargains, it’s now become one of the most important dates in the retail calendar. Friday is already set to become the biggest online shopping day in the UK. [..] In the US, Black Friday got its name from Philadelphia, where the police had to cope with the collision of shoppers heading for the sales and American football fans going to the annual Army v Navy fixture. It quickly acquired another interpretation, as the day when stores moved from being in the red to the black. UK retailers are crossing their fingers and hoping that the second meaning comes true.

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So all we need to do is cut our holiday shopping?

Don’t Prick The Christmas Spending Bubble, It Keeps Capitalism Alive (Observer)

Global capitalism, as a system, simply doesn’t work. Russell Brand’s new book provides the proof. As does my new book. And the hundreds of other new books that are just out. And the Sainsbury’s advert. And all the current adverts for booze and perfume, chocolates and jewels, supermarkets and computer games. The gaudy, twinkly proof is going up all around us as the last of the leaves come down. It’s called Christmas. [..]

Christmas is an annual bubble – an irrational buying fever that’s actually scheduled. We know it will come and, like all bubbles, we know it will end. Unlike most bubbles, we also know precisely when it will end. The huge signs advertising a collapse in prices are already stacked in department stores’ stockrooms as the final spasm of Christmas Eve top-whack spending is taking place. At this time of year, the invisible hand gets delirium tremens – possibly from the number of drinks the invisible mouth is sticking away. Looked at with a Scrooge-like economist’s hat on (gift idea for an accountant!), this makes no sense. Millions of people are each buying hundreds of things they don’t need – often luxuries they can scarcely afford – and at a time when such items’ prices are artificially inflated because everyone else is also buying them.

Wait a couple of weeks and jumpers with reindeer on, chocolates in stocking-shaped presentation packs and sacks of brussels sprouts will be going for a song. The rational economic choice, even for an alcoholic gourmand who likes wearing jewels, would be to schedule a knees-up for 10 January. And, as every shopkeeper will tell you, a huge sector of our economy depends on this. Our already beleaguered high streets would be wastelands without it, the hellish out-of-town malls exist primarily to harness this “golden quarter” of spending. The capitalist dream that western economies aspire to live is sustained by a crazy retail spike caused by a bastardised form of religious observance.

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And now, after three pieces on shopping crazes, here’s your moment of zen:

Food Banks Face Record Demand As Low-Income Families Look For Help (PA)

Growing numbers of people on low incomes are turning to food banks to survive, new research has revealed. Almost 500,000 adults and children were given three days’ food in the first six months of the current financial year – a record – the Trussell Trust reported. The charity said the number of adults being referred to one of its 400 food banks had increased by 38% compared with the same period last year. Problems with social security were the biggest trigger for going to a food bank, but more than a fifth blamed low income. In the six months to September, 492,641 people were given three days’ food and support, including 176,565 children, compared with 355,982 during the same period in the previous year.

Trussell Trust chief executive David McAuley said: “Whilst the rate of new food banks opening has slowed dramatically, we’re continuing to see a significant increase in numbers helped by them. “Substantial numbers are needing help because of problems with the social security system but what’s new is that we’re also seeing a marked rise in numbers of people coming to us with low income as the primary cause of their crisis. “Incomes for the poorest have not been increasing in line with inflation and many, whether in low-paid work or on welfare, are not yet seeing the benefits of economic recovery. “Instead they are living on a financial knife-edge where one small change in circumstances or a life shock can force them into a crisis where they cannot afford to eat.”

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“He said that when international sanctions had been used against other countries such as Iran and North Korea, they had been designed not to harm the national economy.”

Russia FM Lavrov Accuses West Of Seeking ‘Regime Change’ In Russia (Reuters)

Foreign Minister Sergei Lavrov accused the West on Saturday of trying to use sanctions imposed on Moscow in the Ukraine crisis to seek “regime change” in Russia. His comments stepped up Moscow’s war of words with the United States and the European Union in their worst diplomatic standoff since the Cold War ended. “As for the concept behind to the use of coercive measures, the West is making clear it does not want to force Russia to change policy but wants to secure regime change,” Tass news agency quoted Lavrov as telling a meeting of the advisory Foreign and Defence Policy Council in Moscow. He said that when international sanctions had been used against other countries such as Iran and North Korea, they had been designed not to harm the national economy.

“Now public figures in Western countries say there is a need to impose sanctions that will destroy the economy and cause public protests,” Lavrov said. His comments followed remarks on Thursday in which President Vladimir Putin said Moscow must guard against a “colour revolution” in Russia, referring to protests that toppled leaders in other former Soviet republics. Western sanctions have limited access to foreign capital for some of Russia’s largest companies and banks, hit the defence and energy industries, and imposed asset freezes and travel bans on some of Putin’s allies.

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Move over, Pussy Riot?!

Rapper May Face 25 Years In Prison Over ‘Gangsta Rap’ Album (RT)

Brandon Duncan has no criminal record, but could face a life sentence of 25 years in prison as prosecutors say his latest album lent artistic motivation for a recent string of gang-related shootings. San Diego County prosecutors have charged Duncan, 33, with nine felonies connected to a wave of gang-related shootings in the California city. Although the musician has not been charged with discharging or providing firearms in the recent shootings, prosecutors say his musical lyrics encourage gang behavior. Duncan’s latest album, entitled “No Safety,” features a photograph of a revolver with bullets on the cover. The gangsta rapper, who is being held on $1 million bail, is scheduled to head to court in December. If found guilty of felony charges, Duncan could serve a life sentence of 25 years in prison, his lawyer said. San Diego police say Duncan is a gang member, who goes by the name TD.

In 2000, California, faced with an increase in gang-related violence, passed Proposition 21, which takes aim at individuals “who actively participates in any criminal street gang with knowledge that its members engage in or have engaged in a pattern of criminal gang activity.” Prosecutors, citing a section of the law, argued that Duncan, through his music and gang affiliations “willfully promotes, furthers, or assists in any felonious criminal conduct by members of that gang.” “We’re not just talking about a CD of anything, of love songs. We’re talking about a CD (cover)… There is a revolver with bullets,” said Deputy District Attorney Anthony Campagna, as quoted by the Los Angeles Times. Duncan’s lawyer, Brian Watkins, disputes the claim, saying the prosecution’s use of an obscure California law is “absolutely unconstitutional” and impedes his client’s First Amendment right to the freedom of speech.

“It’s no different than Snoop Dogg or Tupac,” Watkins, naming other rappers known for their controversial lyrics, said. “It’s telling the story of street life.” “If we are trying to criminalize artistic expression, what’s next, Brian De Palma and Al Pacino?” said Watkins, in reference to the 1983 movie “Scarface” directed by De Palma and starring Pacino.

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“Our living wonders, which have persisted for millions of years, are disappearing in the course of decades.”

We Need A New Law To Protect Our Wildlife From Critical Decline (Monbiot)

One of the fears of those who seek to defend the natural world is that people won’t act until it is too late. Only when disasters strike will we understand how much damage we have done, and what the consequences might be. I have some bad news: it’s worse than that. For his fascinating and transformative book, Don’t Even Think About It: why our brains are wired to ignore climate change, George Marshall visited Bastrop in Texas, which had suffered from a record drought followed by a record wildfire, and Sea Bright in New Jersey, which was devastated by Hurricane Sandy. These disasters are likely to have been caused or exacerbated by climate change.

He interviewed plenty of people in both places, and in neither case – Republican Texas or Democratic New Jersey – could he find anyone who could recall a conversation about climate change as a potential cause of the catastrophe they had suffered. It simply had not arisen. The editor of the Bastrop Advertiser told him: “Sure, if climate change had a direct impact on us, we would definitely bring it in, but we are more centred around Bastrop County.” The mayor of Sea Bright told him: “We just want to go home, and we will deal with all that lofty stuff some other day.” Marshall found that when people are dealing with the damage and rebuilding their lives they are even less inclined than they might otherwise be to talk about the underlying issues.

In his lectures, he makes another important point that – in retrospect – also seems obvious: people often react to crises in perverse and destructive ways. For example, immigrants, Jews, old women and other scapegoats have been blamed for scores of disasters they did not create. And sometimes people respond with behaviour that makes the disaster even worse: think, for instance, of the swing to Ukip, a party run by a former banker and funded by a gruesome collection of tycoons and financiers, in response to an economic crisis caused by the banks. I have seen many examples of this reactive denial at work, and I wonder now whether we are encountering another one. The world’s wild creatures are in crisis. In the past 40 years the world has lost over 50% of its vertebrate wildlife. Hardly anywhere is spared this catastrophe. In the UK, for example, 60% of the 3,000 species whose fate has been studied have declined over the past 50 years. Our living wonders, which have persisted for millions of years, are disappearing in the course of decades.

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