Jul 052018
 
 July 5, 2018  Posted by at 8:15 am Finance Tagged with: , , , , , , , , , , ,  


Vincent van Gogh Ravine 1889

 

China Warns US ‘Opening Fire’ On World With Tariff Threats (R.)
China Denies It Will Be First To Impose Tariffs On $34bn Of US Goods (G.)
Europe Turns Down Chinese Offer For Grand Alliance Against The US (ZH)
EU Reportedly Considering International Talks To Cut Car Tariffs (CNBC)
Germany’s Massive Trade Surplus ‘Is Becoming Toxic,’ Ifo Director Says (CNBC)
Tories ‘Toast’ If They Don’t Deliver On Brexit, Theresa May Warned (Sky)
There Is Only Option On The Table: Soft Brexit (G.)
UK Home Office Separating Scores Of Children From Parents (Ind.)
Bank of Japan Takes Away Punch Bowl, Balance Sheet Declines (WS)
India Is Emerging As Ground Zero Of The World’s Biggest NPL Crisis (ZH)
Kim Dotcom Loses New Zealand Extradition Appeal (AFP)
Babies (CJ)

 

 

Negotiate!

China Warns US ‘Opening Fire’ On World With Tariff Threats (R.)

The United States is “opening fire” on the world with its threatened tariffs, the Chinese government warned on Thursday, saying Beijing will respond the instant U.S. measures go into effect as the two locked horns in a bitter trade war. The Trump administration’s tariffs on $34 billion of Chinese imports are due to go into effect at 12.01 am eastern time on Friday (0401 GMT Friday), which is just after midday on Friday Beijing time. U.S. President Donald Trump has threatened to escalate the trade conflict with tariffs on as much as a total of $450 billion in Chinese goods if Beijing retaliates, with the row roiling financial markets including stocks, currencies and global trade of commodities from soy beans to coal.

China has said it will not “fire the first shot”, but its customs agency said on Thursday in a short statement that Chinese tariffs on U.S. goods will take effect immediately after Washington’s tariffs on Chinese goods kick in. Speaking at a weekly news conference, Chinese Commerce Ministry spokesman Gao Feng warned the proposed U.S. tariffs would hit international supply chains, including foreign companies in the world’s second-largest economy. “If the U.S. implements tariffs, they will actually be adding tariffs on companies from all countries, including Chinese and U.S. companies,” Gao said. “U.S. measures are essentially attacking global supply and value chains. To put it simply, the U.S. is opening fire on the entire world, including itself,” he said.

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Well, obviously.

China Denies It Will Be First To Impose Tariffs On $34bn Of US Goods (G.)

China has denied it will fire the opening salvo in an escalating trade dispute with the US, insisting that it would not bring in 25% tariffs on $34bn (£26bn) of American goods before a move from Washington. Both sides have threatened to impose similarly sized tariffs on 6 July, but because of the 12-hour time difference, it was thought the Chinese tariffs on US imports ranging from soybean to stainless steel pipes could take effect earlier. However, China’s finance ministry issued a statement on Wednesday saying that it would not be the first to levy tariffs.

“The Chinese government’s position has been stated many times. We absolutely will not fire the first shot, and will not implement tariff measures ahead of the United States doing so.” The US will implement a 25% tariff on $34bn of Chinese imports – 818 product lines ranging from cars to vaporisers and “smart home” devices – on Friday. There had been hopes the US and China might step away from the measures, but neither side has backed down. Economists have warned that the tariffs will damage economic growth and cost jobs, and could escalate into a full-blown trade war between the world’s two largest economies.

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Nonstarter.

Europe Turns Down Chinese Offer For Grand Alliance Against The US (ZH)

Publicizing its growing exasperation in dealing with president Donald Trump who refuses to halt the tit-for-tat retaliation in the growing trade war with China – which is set to officially begin on Friday when the US slaps $34 billion in Chinese exports with 25% tariffs – but has a habit of doubling down the threatened US reaction to every Chinese trade counteroffer (after all the US imports far more Chinese goods than vice versa)…China has proposed a novel idea: to form an alliance with the EU – the world’s largest trading block – against the US, while promising to open up more of China’s economy to European corporations.

The idea was reportedly floated in meetings in Brussels, Berlin and Beijing, between senior Chinese officials, including Vice Premier Liu He and the Chinese government’s top diplomat, State Councillor Wang Yi, according to Reuters. Willing to use either a carrot or a stick to achieve its goals, in these meetings China has been putting pressure on the European Union to issue a strong joint statement against President Donald Trump’s trade policies at a summit later this month. However, perhaps because China’s veneer of the leader of the free trade world is so laughably shallow – China was and remains a pure mercantilist power, whose grand total of protectionist policies put both the US and Europe to shame – the European Union has outright rejected any idea of allying with Beijing against Washington ahead of a Sino-European summit in Beijing on July 16-17.

Instead, in the tradition of every grand, if ultimately worthless meeting of the G-X nations, the summit is expected to produce a “modest communique”, which affirms the commitment of both sides to the multilateral trading system and promises to set up a working group on modernizing the WTO. Incidentally, the past two summits, in 2016 and 2017, ended without a statement due to disagreements over the South China Sea and trade. Then there is China’s “free-trade” reputation: a recent Rhodium Group report showed that Chinese restrictions on foreign investment are higher in every single sector save real estate, compared to the European Union, while many of the big Chinese takeovers in the bloc would not have been possible for EU companies in China. And while China has promised to open up, EU officials expect any moves to be more symbolic than substantive.

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Caving.

EU Reportedly Considering International Talks To Cut Car Tariffs (CNBC)

European officials are considering holding talks on a tariff-cutting deal between the world’s largest car exporters to prevent an all-out trade war with the U.S., according to the Financial Times who cited diplomats briefed on the matter. The proposal is being looked at by officials in Brussels, the administrative heartland of the European Union, ahead of a meeting between Jean-Claude Juncker, the president of the European Commission, and President Donald Trump in Washington later in July, the report published Wednesday said.

The FT reported that three diplomats, which it did not name, said the European Commission “is studying whether it would be feasible to negotiate a deal with other big car exporters such as the U.S., South Korea and Japan.” Such a move could address Trump’s complaint that the U.S. sector is unfairly treated, while reducing export costs for other participating countries’ auto sectors. “Under such a deal, participants would reduce tariffs to agreed levels for a specified set of products — a concept in international trade known as a ‘plurilateral agreement’ that lets countries strike deals on tariffs without including the entire membership of the WTO,” the FT said.

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Even Italy has a big surplus.

Germany’s Massive Trade Surplus ‘Is Becoming Toxic,’ Ifo Director Says (CNBC)

Germany exporting more than it imports is becoming a big problem for its economy, a director from the country’s closely-watched Ifo Institute said Wednesday. “(The trade surplus) is turning out to be an increasing issue, not just with the U.S. but with other trade partners as well, and also within the European Union,” Gabriel Felbermayr, the director of the Ifo Center for International Economics at the Munich-based institute, told CNBC’s “Squawk Box Europe. “The surplus is becoming toxic, and also within Germany many argue now that we need to do something about it with the purpose of lowering it. It turns out to be a liability rather than an asset.”

Germany’s export-orientated, manufacturing economy and its resulting trade surplus — the value of its exports exceeding that of its imports — has long been a subject of criticism and Berlin has been pressured to encourage more domestic spending and boost imports. Trade surpluses are viewed as encouraging trade protectionism and worsening the economic problems of other countries. Germany’s trade surplus fell in 2017 for the first time since 2009, shrinking to $300.9 billion, data published in February by the country’s Federal Statistics Office showed. Still, its trade surplus with the U.S. was $64 billion.

[..] Eric Lonergan, macro fund manager at M&G, told CNBC on Wednesday that Trump might be mollified by European countries promising to address their current account surpluses. A current account surplus is a broader measure of the trade surplus, plus earnings from foreign investments and transfer payments. “(Regarding the trade surplus) the truth is it’s not just Germany anymore — central and eastern Europe, if you look at Hungary, Poland, the Czech Republic and take them as an aggregate, were running a big current account deficit before, now they’re running a big current account surplus,” he said. “Italy’s running a big current account surplus, the periphery is — so it’s the ‘Germanification’ of the whole of greater Europe.”

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Rumor has it that Boris Johnson will resign. Maybe he’ll wait until after England lose to Sweden in the World Cup.

Tories ‘Toast’ If They Don’t Deliver On Brexit, Theresa May Warned (Sky)

Theresa May has been warned the Tories will be “toast” if they fail to deliver on their Brexit promises, as eurosceptic MPs maintain the pressure on the prime minister ahead of a crunch meeting of her top team. As the PM prepares to gather ministers at her country retreat of Chequers on Friday, she has been put on notice by the European Research Group (ERG) of Conservative backbenchers. Around 40 members of the ERG met with chief whip Julian Smith on Wednesday, reports Sky’s senior political correspondent Beth Rigby. Our correspondent said that they told Mr Smith the party will be “toast” if it “welches” on its previous Brexit promises, adding that the roughly £40bn “divorce bill” should only be paid to Brussels on condition of getting a deal.

After the meeting, Jacob Rees-Mogg, who chairs the ERG, told Sky News that Mr Smith “doesn’t determine policies” and so backbench Brexiteers remain in the dark over the government’s plans beyond media reports. Asked about suggestions the PM could propose a UK-EU deal that keeps regulatory alignment with Brussels for goods, as well as keeping the same level of tariffs as the EU, Mr Rees-Mogg warned such an agreement is “not Brexit”. He insisted continued regulatory alignment would mean the UK “cannot do trade deals with the rest of the world” and would mean “we haven’t really left the EU”. “Indeed, worse than that, we’re a vassal state because we take the EU’s rules and have no say over them,” the Leave supporter added.

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Not for the diehards.

There Is Only Option On The Table: Soft Brexit (G.)

The proverbial can has been kicked down the proverbial road ever since Britain voted to leave the European Union in 2016. Don’t get me wrong. Can-kicking has a necessary place in politics. Theresa May has often had little choice but to resort to it. But the road and the can-kicking must end at Chequers on Friday. That’s when the prime minister and her divided cabinet must finally decide what kind of relationship they seek with the EU after Brexit. In the end, May’s government faces the same two choices at Chequers that it has faced throughout all the twists and turns of the Brexit negotiations.

Either the government must embrace a form of soft Brexit that it can then persuade the rest of Europe to accept as a proper basis for good future relations – the option that May herself and the chancellor, Philip Hammond, both prefer and will put forward – or it must reject that option and prepare for a no-deal Brexit, in which all of Britain’s economic and political relations with Europe and the rest of the world become matters of pure conjecture. There are no other choices on the table. If Brexit is to go ahead, it is simply one or the other. This means, therefore, that only the first of the two choices is in fact a serious option.

If the cabinet rejects May’s and Hammond’s approach and adopts a no-deal option as government policy, there would be both a parliamentary and an extra-parliamentary revolt against it. Large businesses such as British Airways might relocate to Europe. Labour might even find an explicit anti-Brexit voice. One way or another, the no-deal approach would therefore explode on the launch pad. And Brexit might even not take place. Most ministers are neither idiots nor wreckers, so the no-deal option is not going to happen. It is even questionable as to whether any of the no-dealers will resign. The much more serious question, though, is whether the soft Brexit package that May wants to sell to the cabinet is much of a runner either.

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If they’re capable of Windrush, they can do this too.

UK Home Office Separating Scores Of Children From Parents (Ind.)

The Home Office is separating scores of children from their parents as part of its immigration detention regime – in some cases forcing them into care in breach of government policy. Schools, the NHS and social services have written letters to the department begging them to release parents from detention because of the damaging impact it is having on their children. Bail for Immigration Detainees (Bid), a charity that supports people in detention, said they have seen 170 children separated from their parents by the Home Office in the past year – and believes there are likely to be many more.While usually the youngsters remain in the care of their other parent, the charity has seen a number of cases where children are taken into local authority care as a result of the detention.

Case workers highlight that this is in breach of Home Office guidelines, which state that a child “must not be separated from both adults if the consequence of that decision is that the child is taken into care”. In one case, three young children were taken into care for several days after their dad was detained earlier this year – an experience that left them traumatised and fearful that he will be “taken away” again. Kenneth Oranyendu, 46, was detained in March while his wife was abroad for her father’s funeral. Despite the Home Office being aware of this, they kept him in detention and his four young children were forced to go into care.

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Japan’s toast without the punch bowl.

Bank of Japan Takes Away Punch Bowl, Balance Sheet Declines (WS)

In June, total assets on the Bank of Japan’s balance sheet dropped by ¥3.79 trillion yen ($34 billion) from May, to ¥537 trillion ($4.87 trillion). It was the third month-over-month drop in seven months, and the first such drops since late 2012, when the Abenomics-designed blistering “QQE” (Qualitative and Quantitative Easing) kicked off. So has the “QQE Unwind” commenced? This chart shows the month-to-month changes of the total balance sheet. Note the trend over the past 16 months and the three “QQE unwind” episodes (red):

But this sporadic balance sheet reduction and the overall “tapering” of its growth contradict the official rhetoric. Bank of Japan Governor Haruhiko Kuroda along with most of his colleagues keep insisting that the BOJ would “patiently” maintain its ultra-easy monetary policy and that it would “keep expanding the monetary base until inflation is above 2%.” The blistering asset purchases would add about ¥80 trillion ($725 billion) to the balance sheet every year. And the BOJ has repeatedly affirmed its short-term interest-rate target of a negative -0.1%.

[..][ Under QQE, the BOJ has been buying mostly Japanese government securities (JGBs and short-term bills); it also purchased corporate bonds, Japanese REITs, and equity ETFs. But now, the party appears to be ending, despite the speeches to the contrary. From the distance, however, the flattening out (tapering) of the BOJ’s assets is barely noticeable, given the magnitude of the whole pile that amounts to about 96% of Japan’s GDP (the Fed’s balance sheet amounted to about 23% of US GDP at the peak):

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I’d say China is much worse than the graph indicates.

India Is Emerging As Ground Zero Of The World’s Biggest NPL Crisis (ZH)

While bad loans in the Italian banking system have received a ton of attention from investors who fear that the Italians could inadvertently blow up the European banking union, it’s not the only financial landmine lurking among the world’s ten largest economies. To wit, while Italy has the largest percentage of non-performing loans among the world’s largest economies, India isn’t far behind and India’s economic recovery is built on an even shakier foundation. According to Bloomberg, India’s $1.7 trillion formal banking sector is presently struggling with $210 billion in bad loans, most of which are concentrated within its state-owned banks. During the 2018 fiscal year, growth slowed to 6.7%, down from the previous year’s 7.1%, back to its levels from 2014, before Modi came to power.

The state banks have been so badly mismanaged that some analysts say the country’s banking crisis is an opportunity for private sector banks, as CNBC reported. “If you take a 10-year view, currently the private sector banks’ market share is 30 percent. Probably it will become 60 percent,” Sukumar Rajah, senior managing director at Franklin Templeton Emerging Markets Equity, told CNBC. As a result, he said, “the overall health of the banking system will improve because the better banks will be a bigger portion of the market and the weaker banks will become a smaller portion of the market.”

Some also see opportunities for investment bankers looking to underwrite corporate bond issuance in the country.. “My view is that, incrementally, a lot of long-term financing of corporate India can also be met by the corporate bond market, which has developed reasonably well,” he said. “Between the corporate bond market and the private banks, I think most of the requirements can be met as far as corporate India is concerned.” When it comes to lending directly to individuals, Prasad said that is mostly done by the private banks and non-banking financial companies.

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Can’t extradite someone who has broken none of your laws.

Kim Dotcom Loses New Zealand Extradition Appeal (AFP)

Megaupload founder Kim Dotcom suffered a major setback in his epic legal battle against online piracy charges Thursday when New Zealand’s Court of Appeal ruled he was eligible for extradition to the United States. The German national, who is accused of netting millions from his file sharing Megaupload empire, faces charges of racketeering, fraud and money laundering in the US, carrying jail terms of up to 20 years. Dotcom had asked the court to overturn two previous rulings that the Internet mogul and his three co-accused be sent to America to face charges. Instead, a panel of three judges backed the FBI-led case, which began with a raid on Dotcom’s Auckland mansion in January 2012 and has dragged on for more than six years.

The court said US authorities had “a clear prima facie case to support the allegations that the appellants conspired to, and did, breach copyright wilfully and on a massive scale for commercial gain”. Dotcom is accused of industrial-scale online piracy via Megaupload, which US authorities shut down when the raid took place. They allege Megaupload netted more than US$175 million in criminal proceeds and cost copyright owners US$500 million-plus by offering pirated content including films and music. “We are disappointed with today’s judgment by the NZ Court of Appeal in the Kim Dotcom case,” his lawyer Ira Rothken tweeted, indicating there would be an appeal to the Supreme Court.

“We have now been to three courts each with a different legal analysis – one of which thought that there was no copyright infringement at all.” Dotcom and his co-accused – Finn Batato, Mathias Ortmann, Bram van der Kolk – have denied any wrongdoing and say Megaupload was simply a case of established interests being threatened by online innovation. The website was an early example of cloud computing, allowing users to upload large files onto a server so others could easily download them without clogging up their email systems. At its height in 2011, Megaupload claimed to have 50 million daily users and account for 4% of the world’s internet traffic.

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How people are made.

Babies (CJ)

When a baby is born, its parents teach it how to eat solid foods and walk and talk, which generally works out fine. Then they start teaching the baby all the lies their parents taught them, and things start to get messy. When the baby is old enough, they send it to school, where it spends twelve years being taught lies about how the world works so that one day it will be able to watch CNN and say “Yes, this makes perfect sense” instead of “This is ridiculous” or “Why does this whole entire thing seem completely fake?” or “I want to punch Chris Cuomo in the throat.” The baby is taught history, which is the study of the ancient, leftover propaganda from whichever civilization happened to win the wars in a given place at a given time.

The baby is taught geography, so that later on when its country begins bombing another country, the baby’s country won’t be embarrassed if its citizens cannot find that country on a globe. The baby is taught obedience, and the importance of performing meaningless tasks in a timely manner. This prepares the baby for the half century of pointless gear-turning it will be expected to undertake after graduation. The baby is taught that it lives in a free country, with a legitimate electoral system which facilitates meaningful elections of actual representatives in a real government. It is never taught that those elections, representatives and government are all owned and operated by the very rich, who use them to ensure policies which make them even richer while keeping everyone else as poor as possible so that they won’t have to share political power.

It is never taught that highly secretive intelligence and defense agencies form alliances with those rich people to advance murderous and exploitative agendas for profit and power. It is never taught that the things it sees on television are mostly lies. The baby is smoothly, seamlessly funneled from uterus to full-time employment through this system, often with a little religion mixed in to really drive home the importance of obedience and meekness and the nobility of poverty.

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Waiting for my man

Jun 282018
 
 June 28, 2018  Posted by at 8:59 am Finance Tagged with: , , , , , , , , , , ,  


Vincent van Gogh Courtesan (after Eisen) 1887

 

Same Old Greed In A Shiny New Wrapper (Felder)
Brexit To Put £29 Trillion In Derivatives Contracts At Risk – BOE (G.)
EU To Raise Pressure On May Over Chances Of No-Deal Brexit (G.)
Bank of Japan Now Owns Half the Country (ZH)
Trump Says Security Panel Can Protect US Technology From China (R.)
Whack-a-Mole: China Steps Up Property Crackdown In 30 Major Cities (R.)
Lobbyists And Business-Friendly Pundits Mourn Ocasio-Cortez’s Victory (IC)
An Upset in the Making: Joe Crowley Never Saw Defeat Coming (NYT)
Thomson Reuters Defends Its Work For ICE (IC)
How To Get Away With Financial Fraud (Davies)
After the Fall (John Lanchester)
Animals Are Becoming Nocturnal To Avoid Human Beings (Wef)

 

 

Everyone to the same side of the boat!

Same Old Greed In A Shiny New Wrapper (Felder)

The flows into tech funds of late have been absolutely astounding if not totally surprising. The FAANNG stocks have been the market darlings for quite some time now so it’s understandable investors would chase this performance just as they do during every bull market.

It’s not just tech-focused funds overweighting the FAANNG stocks. There is a huge number of non-tech-focused funds that own these stocks, as well, and in a significant way further supporting their popularity in the marketplace. You can find them represented in size today in everything from consumer discretionary, retail, media and entertainment to momentum, cloud computing, internet and social media. In fact, without Amazon and Netflix, the consumer discretionary sector would be down on the year rather than up.

What’s more, in many cases, the ownership of these companies in many funds appear to be clear violations of their implicit if not explicit mandates. To demonstrate, let’s just run through the FAANNG stocks by market cap beginning with the biggest: Apple. There are fully 92 ETFs, according to ETFdb.com, that not only own the stock but also have an overweight (relative to the S&P 500) allocation to the shares. So not only are Apple fans and traditional passive investors buying tons of Apple stock, these other ETF investors are even more aggressively acquiring shares.

What I found notable in this case was that Apple was found in both value and growth-focused ETFs. I guess this isn’t really much of a stretch theoretically. A high-growth stock can become cheap just like any other. What is strange in Apple’s case, though, is that the stock now trades at its highest price-to-free cash flow in years. At the same time, the company’s 5-year average revenue growth is now the lowest in its history. Still, these systematic funds somehow find reason to not just own it but to overweight it as both a value stock and as a growth stock.

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Deutsche Bank should be scared.

Brexit To Put £29 Trillion In Derivatives Contracts At Risk – BOE (G.)

Britain’s chief financial watchdog has warned that contracts worth trillions of pounds between UK and European Union banks remain at risk of collapse following Brexit, after Brussels’ failure to implement protective legislation. In a warning to EU officials that time is running out before next March to devise rules for EU banks, the Bank of England’s financial policy committee (FPC) said £29tn worth of contracts could be declared void. Derivatives contracts, which provide banks and corporations with protection from interest rate rises, could come to an end without fresh legislation from the UK and EU, the committee said in its latest quarterly health check on Britain’s financial services industry.

The warning will be seen as a direct response to the European Banking Authority, which argued earlier this week that the UK was dragging its feet preparing for Brexit. In an increasingly bitter war of words, EBA officials said there was little preparation by the UK authorities and individual banks for life outside the EU. The FPC hit back, saying the Treasury was well advanced in its efforts to bridge the gap between banks in London and those on the continent, but Brussels had made little obvious effort to support its own financial institutions. “The biggest remaining risks of disruption are where action is needed by both UK and EU authorities, such as ensuring the continuity of existing derivatives contracts. As yet the EU has not indicated a solution analogous to a temporary permissions regime,” it said.

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The incompetence is almost funny.

EU To Raise Pressure On May Over Chances Of No-Deal Brexit (G.)

The European Union’s 27 leaders are to ratchet up the pressure on Theresa May by giving her a strong warning about the growing risk of a no-deal Brexit, as countries across Europe confirmed they were intensifying work on their contingency plans for Britain crashing out of the bloc. With a complete absence of progress on key issues, including that of avoiding a hard border on the island of Ireland, the prime minister will be pressed at a summit in Brussels to reassure her fellow leaders about her intentions. The Danish prime minister, Lars Løkke Rasmussen, told his parliament in Copenhagen on Wednesday: “It is the first time we are saying clearly to the British that we can end, in the worst scenario, [with] no deal.”

May has agreed to address the leaders at a dinner on Thursday night after discussions with Donald Tusk, the European council president, earlier this week in Downing Street. She is expected to sketch out her intentions for the coming few weeks before they come to their conclusions on the state of the negotiations the following morning. Asked whether Tusk was more confident about the future following his last meeting with May, a senior EU official laughed, adding: “Well, I don’t think he is less optimistic.” On the so-called backstop solution for the Irish border – a default state to be in place until a free trade deal or bespoke technological solution is agreed – the official said there had “frankly been no progress, and that’s reason to express concern”.

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I made up that headline. It’s a little exaggerated. But only a little. It’s a crazy experiment Kuroda is in.

Bank of Japan Now Owns Half the Country (ZH)

The last time we looked at how much of the stock market the Bank of Japan controls, we found that as of September, Kuroda’s central bank owned a stunning 75% of all Japanese ETFs as the central bank keeps buying stocks under its ultraloose monetary policy. Since December 2010 – when The Bank of Japan held no ETFs at all – the central bank has been buying ETFs (doubling its annual buying target to 6 trillion yen in July 2016) as part of unprecedented economic stimulus. Over this period, the Nikkei 225 Stock Average has risen 89% since December 2010. It is safe to say the two are correlated. Fast forward to today, when according to the latest BOJ holdings update following even more ETF purchases, the Japanese central bank has also become a major shareholder in nearly 40% of listed companies.

According to Nikkei calculations, the bank was one of the top 10 shareholders in 1,446 listed companies out of 3,735 at the end of March. This means that just over the past year, when the BOJ was a major owner of 833 stocks, the BOJ’s equity holdings have expanded by a staggering 70%. In addition, the Central Bank bank is now the top shareholder in Tokyo Dome, Sapporo Holdings, Unitika, Nippon Sheet Glass and Aeon. This means that the BOJ has amassed an estimated 25 trillion yen ($227 billion) of equities as a result of purchasing exchange-traded funds. Putting these holdings in context, the BOJ holdings are equal to nearly 4% of the roughly 652 trillion yen aggregate market value of stocks traded on the first section of the Tokyo Stock Exchange.

In justifying the BOJ’s relentless takeover of the stock market, Kuroda has said that buying up stocks is an integral part of the BOJ’s strategy to lift inflation to 2%, a program which “has fulfilled its role to a certain extent,” according to Kuroda. But, as the Nikkei adds, the size of the buying spree could complicate an eventual exit strategy from the monetary easing and also distort basic market mechanisms.

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We’re still talking.

Trump Says Security Panel Can Protect US Technology From China (R.)

President Donald Trump on Tuesday endorsed U.S. Treasury Secretary Steven Mnuchin’s measured approach to restricting Chinese investments in U.S. technology companies, saying a strengthened merger security review committee could protect sensitive American technologies. Trump, in remarks to reporters at the White House, said the approach would target all countries, not just China, echoing comments from Mnuchin on Monday amid a fierce internal debate over the scope of investment restrictions due to be unveiled on Friday. “It’s not just Chinese” investment, Trump told reporters when asked about the administration’s plans. Mnuchin and White House trade adviser Peter Navarro sent mixed signals on Monday about the Chinese investment restrictions, ordered by Trump on May 29.

Mnuchin said they would apply to “all countries that are trying to steal our technology,” while Navarro said they would be focused specifically on China. The restrictions are being developed to help put pressure on China to address the administration’s complaints that it has misappropriated U.S. intellectual property through joint-venture requirements, unfair licensing policies and state-backed acquisitions of U.S. technology firms. Mnuchin would prefer to use new tools associated with pending legislation to enhance security reviews of transactions by the Committee on Foreign Investments in the United States (CFIUS), some administration officials have said.

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Property gains have been a substantial part of ‘growth’. Watch out Xi.

Whack-a-Mole: China Steps Up Property Crackdown In 30 Major Cities (R.)

China said on Thursday it would renew efforts to crack down on property irregularities in 30 major cities from July to end-December, mobilizing powers from seven major Chinese government agencies in a concerted effort to rein in rising prices. Property prices in China have soared since 2016, prompting the government to roll out tightening measures in more than 100 cities to dampen demand amid bubble fears. But new home prices in May posted their fastest growth in nearly a year even as prices cooled in big cities, suggesting buyers are shifting to smaller cities. Policymakers have been careful not to tap on the brakes too hard, as real estate remains a major driver of the economy.

Growth in the world’s second-largest economy is at risk of slowing as the authorities try to tame rapid domestic credit growth at a time when trade tensions are causing worries for the economic outlook. The crackdown would be carried out by government entities including the housing ministry and the Ministry of Public Security, and the banking and insurance regulators, according to a notice posted on the housing ministry’s website. They would focus on stemming speculation, cracking down on illegal agencies and developers, and fake advertisements.

Among the 30 cities that will be scrutinized are the country’s four largest or top tier cities, including Beijing and Shanghai, and tier 2 provincial capitals such as Wuhan and Chengdu, and also smaller cities, such as Yichang and Foshan. The notice said targeted irregularities include manipulating prices, deliberately holding off sales, illegally providing loans for downpayment and publishing false price information that mislead buyers.

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The party swung so far right the only way to go is left.

Lobbyists And Business-Friendly Pundits Mourn Ocasio-Cortez’s Victory (IC)

Several Democratic pundits appeared on Fox Business Network to raise the alarm about the election. “The party is swinging left,” said Robin Biro, a former DNC delegate supporting Hillary Clinton. “It’s concerning for someone who is more moderate like myself.” Mark Penn, a strategist who owns several corporate lobbying and public relations firms and previously advised both Bill and Hillary Clinton’s presidential campaigns, attempted to downplay the significance of Ocasio-Cortez’s victory. Asked by Fox Business host Maria Bartiromo if Ocasio-Cortez’s win signified a drift toward socialism, Penn said no. “I just don’t think that’s where the Democratic Party is going. I think that’s where that district is going,” said Penn.

“I think the national implications are being overblown,” he added. Crowley was seen as the next Democratic House leader and had won support from business executives as a leading moderate. As The Intercept reported, Crowley helped spearhead efforts against bank regulations, and, as a longtime leader of the New Democrat Coalition, was widely viewed as a point person for lobbyists to influence that caucus of centrist Democrats. He also voted in support of the Iraq War and the Patriot Act. The Wall Street-friendly wing of the Democratic Party similarly attempted to diminish Ocasio-Cortez’s victory.

Matt Bennett, co-founder of Third Way, a business-friendly Democratic think tank governed by a council of finance industry executives, told Axios that Crowley lost because of his gender and the particular dynamics of the district. Ocasio-Cortez’s victory “had more to do with the nature of her very blue district than it does with national politics,” Bennett said.

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Many similarities to Hillary’s loss.

An Upset in the Making: Joe Crowley Never Saw Defeat Coming (NYT)

It was less than three weeks until Primary Day and, on first blush, the poll that Representative Joseph Crowley had been shown by his team of advisers was encouraging: He led his upstart rival, Alexandria Ocasio-Cortez, by 36 percentage points. It was the last poll Mr. Crowley’s campaign would conduct. Despite his many reputed strengths — his financial might as one of the top fund-raisers in Congress, his supposed stranglehold on Queens politics as the party boss, his seeming deep roots in an area he had represented for decades — Mr. Crowley was unable to prevent his stunning and thorough defeat on Tuesday night. Ms. Ocasio-Cortez bested Mr. Crowley by 15 percentage points, delivering a victory expected to make her, at 28, the youngest woman ever elected to Congress.

If it takes a perfect storm to dislodge a congressional leader, then Ms. Ocasio-Cortez and her crusading campaign about class, race, gender, age, absenteeism and ideology proved to be just that. She and her supporters swept up Mr. Crowley in a redrawn and diversifying 14th Congressional District where the incumbent, despite two decades in Congress, had never run in a competitive primary. She flipped the levers of power he was supposed to have — his status as a local party boss and his money — against him, using that as ammunition in an insurgent bid that cut down a possible successor to Nancy Pelosi and the No. 4 Democrat in the House. No single factor led to Mr. Crowley’s defeat, more than a half-dozen officials inside and close to his campaign said in interviews, most on the condition of anonymity.

It was demographics and generational change, insider versus outsider, traditional tactics versus modern-age digital organizing. It was the cumulative weight of them all. [..] Ms. Ocasio-Cortez, in an interview on Wednesday, dismissed race as a driving factor in her win, though she had regularly highlighted her heritage on the campaign trail. “It would be a huge mistake to just say that this election happened because X demographics live here. That is to absolutely miss the entire point of what we just accomplished,” Ms. Ocasio-Cortez said. A former organizer for Bernie Sanders, Ms. Ocasio-Cortez won across the district, carrying Mr. Crowley’s home borough of Queens by a larger margin than she won the Bronx. “She won virtually everywhere,” said Steven Romalewski, a researcher at the Center for Urban Research [..], who mapped the results.

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It’s not just Facebook and Google, everyone wants a piece of the fat pie.

Thomson Reuters Defends Its Work For ICE (IC)

The reporters at Reuters have been providing crucial, unfliching coverage of the cruel treatment of would-be immigrants under policies pushed by President Donald Trump. Meanwhile, the news agency’s parent company, Thomson Reuters, has been supplying U.S. Immigration and Customs Enforcement with data from its vast stores as part of federal contracts worth close to $30 million. A letter from a Thomson Reuters executive shows that the company is ready to defend at least one of those contracts while remaining silent on the rest. Last week, advocacy and watchdog group Privacy International wrote to Thomson Reuters CEO James Smith to “express concern” over contracts between ICE and two of the company’s subsidiaries.

Thomson Reuters Special Services sells ICE “a continuous monitoring and alert service that provides real-time jail booking data to support the identification and location of aliens” as part of a $6.7 million contract, and West Publishing, another subsidiary, provides ICE’s “Detention Compliance and Removals” office with access to a vast license-plate scanning database, along with agency access to the Consolidated Lead Evaluation and Reporting, or CLEAR, system, which Thomson Reuters advertises as holding a “vast collection of public and proprietary records.” The two West contracts are together worth $26 million. The Privacy International letter cites the practice by U.S. authorities of separating children from their parents, as well as the Trump administration’s overall “zero tolerance” approach to immigration violations.

The children — thousands of them — are typically intercepted by U.S. Customs and Border Protection with their parents; the parents are then detained by ICE while the children, having been forcibly separated, are held in conditions that some have described in horrifying terms, under the supervision of Health and Human Services. (ICE agents have also been accused of sexual abusing hundreds of detainees, underhanded arrest tactics, and more.) Privacy International’s letter requested that Thomson Reuters “commit to not providing products or services to U.S. immigration agencies which may be used to enforce such cruel, arbitrary, and disproportionate measures.”

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Long read on how fraud takes place where no-one expects it. And on a scale that no-one thinks possible. Libor.

How To Get Away With Financial Fraud (Davies)

It is not a pleasant thing to see your industry subjected to criticism that is at once overheated, ill-informed and entirely justified. In 2012, the financial sector finally got the kind of enemies it deserved. The popular version of events might have been oversimplified and wrong in lots of technical detail, but in the broad sweep, it was right. The nuanced and technical version of events which the specialists obsessed over might have been right on the detail, but it missed one utterly crucial point: a massive crime of dishonesty had taken place. There was a word for what had happened, and that word was fraud. For a period of months, it seemed to me as if the more you knew about the Libor scandal, the less you understood it.

That’s how we got it so wrong. We were looking for incidental breaches of technical regulations, not systematic crime. And the thing is, that’s normal. The nature of fraud is that it works outside your field of vision, subverting the normal checks and balances so that the world changes while the picture stays the same. People in financial markets have been missing the wood for the trees for as long as there have been markets. Some places in the world are what they call “low-trust societies”. The political institutions are fragile and corrupt, business practices are dodgy, debts are rarely repaid and people rightly fear being ripped off on any transaction.

In the “high-trust societies”, conversely, businesses are honest, laws are fair and consistently enforced, and the majority of people can go about their day in the knowledge that the overall level of integrity in economic life is very high. With that in mind, and given what we know about the following two countries, why is it that the Canadian financial sector is so fraud-ridden that Joe Queenan, writing in Forbes magazine in 1989, nicknamed Vancouver the “Scam Capital of the World”, while shipowners in Greece will regularly do multimillion-dollar deals on a handshake? We might call this the “Canadian paradox”.

There are different kinds of dishonesty in the world. The most profitable kind is commercial fraud, and commercial fraud is parasitical on the overall health of the business sector on which it preys. It is much more difficult to be a fraudster in a society in which people only do business with relatives, or where commerce is based on family networks going back centuries. It is much easier to carry out a securities fraud in a market where dishonesty is the rare exception rather than the everyday rule.

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Long read on what happened since 2008.

After the Fall (John Lanchester)

Some of the more pessimistic commentators at the time of the credit crunch, myself included, said that the aftermath of the crash would dominate our economic and political lives for at least ten years. What I wasn’t expecting – what I don’t think anyone was expecting – was that ten years would go by quite so fast. At the start of 2008, Gordon Brown was prime minister of the United Kingdom, George W. Bush was president of the United States, and only politics wonks had ever heard of the junior senator from Illinois; Nicolas Sarkozy was president of France, Hu Jintao was general secretary of the Chinese Communist Party, Ken Livingstone was mayor of London, MySpace was the biggest social network, and the central bank interest rate in the UK was 5.5 per cent.

It is sometimes said that the odds you could get on Leicester winning the Premiership in 2016 was the single most mispriced bet in the history of bookmaking: 5000 to 1. To put that in perspective, the odds on the Loch Ness monster being found are a bizarrely low 500 to 1. (Another 5000 to 1 bet offered by William Hill is that Barack Obama will play cricket for England. I’d advise against that punt.) Nonetheless, 5000 to 1 pales in comparison with the odds you would have got in 2008 on a future world in which Donald Trump was president, Theresa May was prime minister, Britain had voted to leave the European Union, and Jeremy Corbyn was leader of the Labour Party – which to many close observers of Labour politics is actually the least likely thing on that list. The common factor explaining all these phenomena is, I would argue, the credit crunch and, especially, the Great Recession that followed.

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It may be smart but it can’t be good.

Animals Are Becoming Nocturnal To Avoid Human Beings (Wef)

On Thursday, ecologists at the University of California, Berkeley, released a study published in Science Magazine that indicates animals are adjusting their habits to avoid the stresses of human encroachment on their habitat. According to the research from Kaitlyn M. Gaynor, Cheryl E. Hojnowski, Neil H. Carter, and Justin S. Brashares, human population growth is having a profound influence on the way animals go about their business—specifically, when they choose to go about their business. It seems that a number of mammalian species have become nocturnal in an effort to avoid us. Scientists admit that this probably works for the animals, but could have potential “ecosystem-level consequences” we don’t yet fully understand.

It’s been acknowledged in the past that mammals have been adjusting to the presence of humans by moving less, retreating to remote areas, and spending less time looking for food, according to Phys.org, who spoke with Gaynor, the leader of the study. All these altered behaviors contribute to overall stress in the animals. Gaynor’s study indicates that even things like camping and hiking could be having a negative effect on wildlife. “It suggests that animals might be playing it safe around people,” said Gaynor. “We may think that we leave no trace when we’re just hiking in the woods, but our mere presence can have lasting consequences.”

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Apr 272018
 
 April 27, 2018  Posted by at 7:57 am Finance Tagged with: , , , , , , , , , , ,  


Edward Curtis Red Hawk 1905

 

Moon and Kim’s Unprompted DMZ Dance (AFP)
Sophisticated North Korean Diplomacy Rewards Kim Jong-un (Pieraccini)
China Open To Trade Negotiations With United States – Li (R.)
BOJ Maintains Stimulus While Removing Language on Timing of 2% (BBG)
What’s The Most Important Chart For Investors? (MW)
A New Type Of Poverty Is Hurting The Middle Class (SMH)
Amazon Cloud Revenue Jumps 49% In First Quarter (CNBC)
Facebook Profits Soar 63% Despite Cambridge Analytica (Ind.)
EU Doesn’t Need The City Of London, Says Chief Brexit Negotiator (G.)
Turkey Crackdown Suffocates Society, Creates Climate Of Fear (Amnesty)
Greece’s Economic Crisis Is Over Only If You Don’t Live There (WaPo)
Greece: Economic Health In Grim State (EN)
Solar And Wind Really Do Increase Electricity Prices (F.)
EU Member States To Vote On Near-Total Neonicotinoids Ban (BBC)

 

 

Kim needs money.

Moon and Kim’s Unprompted DMZ Dance (AFP)

It was a historic handshake that Koreans had waited more than a decade to see — and it sparked a completely unscripted dance with the two leaders hopping back and forth over the border that divides their nations. Everything about the inter-Korean summit had been minutely choreographed and rehearsed but the North’s Kim Jong Un went off-script when he invited his southern counterpart Moon Jae-in to join him over the border. After a prolonged clasp lasting almost half a minute over the Military Demarcation Line that acts as the border, a beaming Moon invited his guest over to South Korea. They posed for pictures as Kim became the first Northern leader to set foot in the country since Korean War hostilities ceased in 1953.

Kim then beckoned Moon over to the other side. Moon seemed initially hesitant but the North’s jovial young leader was not taking “no” for an answer, grabbing his hand and accompanying him across the border before they warmly shook hands again. Grinning broadly, the pair then crossed back to the South hand-in-hand, to be presented with flowers by children from a village in the buffer area next to the Demilitarized Zone. It all went to show that even for a moment as carefully planned as the first inter-Korean summit in more than a decade, where the North’s nuclear arsenal will be high on the agenda, the best-laid preparations rarely run completely to schedule. South Korean officials had carried out a full dress rehearsal on the eve of the summit, including stand-ins for the two leaders. “We examined every single detail including lighting and flower decorations,” a Moon spokesman said.


You put your left foot in: Kim Jong Un and Moon Jae-in were engaged in a metaphorical and literal diplomatic dance on Friday when they met at the frontier (AFP Photo/Korea Summit Press Pool)

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Sanctions bite too. And “United States with its back against the wall” is perhaps not the right picture.

Sophisticated North Korean Diplomacy Rewards Kim Jong-un (Pieraccini)

[..] what appears to be emerging is very similar to a strategy cleverly developed by the North Korean leadership over a number of years. As Pyongyang needed to bring the United States to the negotiating table, while at the same time guaranteeing its survival, it pursued its nuclear-weapons program. Since Washington seems to have understood that a military solution is not practicable, especially given the pressure brought to bear by its allies all too cognizant of a nuclear-armed DPRK, Pyongyang is now willing to display its good will, deciding to surprise the world by embarking on negotiations, with the renunciation of its nuclear weapons as a major bargaining chip.

Under these conditions, Pyongyang is willing to cooperate, and South Korea welcomes the initiative with open arms, accelerating the meeting between the two leaders and paving the way for peace on the peninsula. The People’s Republic of China applauds the diplomatic efforts and encourages South Korea, and later America, in these diplomatic efforts. Seoul, Beijing and Pyongyang have every interest in reaching an all-encompassing deal, with or without Washington. The diplomatic ability of this trio has managed to leave the United States with its back against the wall, first of all obliging it to sit down at the negotiating table (something already revolutionary for reasons explained above), and then requiring it to ease sanctions considerably.

Otherwise, North Korea would be seen as the party that is willing to achieve peace, while Washington is left isolated and looking like the warmonger. North Korea finds itself in a win-win situation. If sanctions are eased and peace talks are managed in the right manner, then the process of socio-economic rebirth, which Kim Jong-un considers a priority, can begin. Should the rhetoric of war prevail in Washington, then Washington would find itself at odds with its main ally, Seoul. It is likely that China could even justifiably renounce its sanctions against the DPRK, blaming the US for not making any progress in the face of extraordinary offers by Kim Jong-un to renounce his nuclear weapons.

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Win win.

China Open To Trade Negotiations With United States – Li (R.)

China is open to negotiating with the United States to resolve trade tensions, Premier Li Keqiang was quoted as saying by state media late on Thursday, noting that the countries should manage their conflicts through dialogue. Li made the remarks at a meeting with U.S. Secretary of Transportation Elaine Chao, state broadcaster China Central Television (CCTV) said. U.S. Treasury Secretary Steven Mnuchin is due to lead a delegation to China for talks intended to ease trade tensions. President Donald Trump has threatened a new round of tariffs on $100 billion worth of Chinese products that could target mobile phones, computers and other consumer goods. China retaliated against an initial round of U.S. tariffs on $50 billion in Chinese exports.

“There is no winner in trade conflict, which will not only affect the recovery of the world economy but also the global industrial chain,” Li said in comments reported by the official Xinhua news agency. “It is also what the international community expects from our two countries,” he said. Larry Kudlow, Trump’s top economic adviser, who will join Mnuchin’s delegation in Beijing, said on Thursday he hoped the talks with China would yield progress but that resolving U.S. complaints would be “a long process.” Xinhua cited Li as saying he hoped the two countries would be able to “manage and control” their differences. Li added China would “unswervingly open further to the outside world”, reiterating President Xi Jinping’s assurances over about the country opening more widely to trade.

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Abenomics was all about inflation targeting. Silently forgotten.

BOJ Maintains Stimulus While Removing Language on Timing of 2% (BBG)

The Bank of Japan left its stimulus program unchanged on Friday, while removing language from its statement declaring that it would reach 2% inflation around fiscal 2019. The decision to maintain the yield-curve control program and asset purchases was forecast by all analysts surveyed by Bloomberg. As he enters his sixth year at the helm, Governor Haruhiko Kuroda has the BOJ pushing forward with stimulus even as other major central banks move further toward policy normalization, if at a more moderate pace. Though it removed the language on reaching its 2% target, indicating that more time may be needed, the BOJ left its inflation forecasts largely unchanged. It still forecasts core inflation, which excludes fresh food prices, to reach 1.8% in fiscal 2019.

Still, seven of nine board members said risks to that forecast were weighted to the downside. “The momentum for achieving the inflation target as early as possible is fading,” said Masamichi Adachi, senior economist at JPMorgan Chase. “I take the change as a positive because you can say that their communication is becoming realistic.” Kuroda is expected to reiterate his intention to carry on with the stimulus during his news conference later on Friday. Doing so would likely provide a tailwind for the yen to continue falling, as rising U.S. bond yields widens the gap between returns in the U.S. and Japan.

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Pick your favorite.

What’s The Most Important Chart For Investors? (MW)

Wolf Richter, the man behind the Wolf Street blog, had no trouble zeroing in on the theme for his pick for “chart of the century”: U.S. debt. He did have trouble choosing whether the chart should show ballooning student loans, or ballooning government debt. Either way, ballooning’s the key, as he predicts both narratives will continue to raise alarms. When push came to shove, he opted for the government debt chart.

[..] Spending and debt are also the theme of the chart selected by Lance Roberts, chief strategist for Clarity Financial. But his chart focuses on the consumer side of that picture. Visualized here is the widening gap between cost of living, and the income and credit Americans have at their disposal. Up until the late 1980s, disposable income, savings and debt funded the standard cost of living. Since then, however, this chart shows that hasn’t been the case — and the national personal savings rate has dropped from above 10% in the 1970s to below 4% today.

[..] While we’re on the topic of the dollar and rising rates, Tadas Viskanta of the Abnormal Returns blog says this chart tells “the most important story of the century”. “Central banks engineered 0% or in some cases negative yields on cash for the better part of the decade,” Tadas said. “We’re only now coming out of it. Investors may once again begin to think of cash as a viable investment option.”

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From Australia, but applicable anywhere. You’re not poor yet? Give us a minute.

A New Type Of Poverty Is Hurting The Middle Class (SMH)

The banking and finance royal commission has cast light on a new type of poverty to emerge in our society: middle class poverty. To understand it, we have to go back to an earlier government inquiry: the 1972 Commission of Inquiry into Poverty, conducted by Professor Ronald Henderson [which] gave prominence to the Henderson Poverty Index: a measure of consumption described by Henderson as so austere that it was unchallengeable. Updated versions of this index remain a standard benchmark of poverty. But more than 45 years on, the royal commission into finance is revealing that poverty is no longer just about low income.

The commission has heard that Australian banks have adopted actual lending practices (as distinct from their official lending policies) that claim so much household income for contract payments that borrowers are left without enough money to fund basic consumption levels: they are living in poverty. This isn’t an accident: it is a strategic policy by banks. How much do banks think households need for daily living? According to the Australian Prudential Regulation Authority’s submission to the royal commission, banks “typically use the Household Expenditure Measure [a relative poverty measure] or the Henderson Poverty Index in loan calculators to estimate a borrower’s living expenses”. So measures designed to capture the impacts of low incomes are now targeting financially-enmeshed middle-income households, and not as a statement of social shame, but as strategic objects of bank policy.

This has caused embarrassment to APRA, the regulator charged with overseeing those bank practices. In response, it was permitted to make a supplementary submission to the royal commission in March. A consequence of APRA neglect is that “poverty” now goes significantly up the income scale, well into what we generally call the middle class. Middle income people are the cohort in greatest financial risk. They are highly leveraged: they spend more of their income on loan repayments than do people with higher incomes. Second, their assets are undiversified: they own labour market skills, some home equity and some superannuation. Third, these assets are illiquid (not easily sold): you can’t transfer your skills to another, houses are costly to sell and superannuation is generally inaccessible..

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The cloud is not a safe environment.

Amazon Cloud Revenue Jumps 49% In First Quarter (CNBC)

Amazon’s cloud business exceeded analyst estimates, with revenue climbing 49% in the first quarter. Amazon Web Services reported sales on Thursday of $5.44 billion, compared to the $5.26 billion average estimate of analysts surveyed by FactSet. AWS contributed about 11% of Amazon’s total revenue for the period, up from 8.5% in the prior quarter. AWS continues to be a big revenue driver and even larger profit engine for its parent company, which dominates the low-margin e-commerce market.

In cloud-computing infrastructure, Amazon has a substantial market share lead over Microsoft Azure, Google’s Cloud platform and IBM, as well as other players like Alibaba and Oracle. While AWS has maintained growth above 40%, Microsoft and Google are currently expanding much faster and picking up share. In the first quarter Microsoft’s Azure cloud grew 93%. AWS produced $1.4 billion in operating income in the first quarter. That accounted for 73% of Amazon’s $1.93 billion in operating income.

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How much of that comes from selling data?

Facebook Profits Soar 63% Despite Cambridge Analytica (Ind.)

Facebook profits soared 63% to $5bn (£3.6bn) in the first three months of the year despite the company being engulfed in a data privacy scandal that has angered millions of users. Allegations that up to 87 million Facebook users’ data was collected without their knowledge and then used by Cambridge Analytica to try to sway the US Presidential election and the Brexit vote, did little to slow the tech company’s rapid growth. Total revenues jumped 49% compared to the same three months last year, Facebook reported on Wednesday. Facebook has been scrambling to mollify angry politicians and reassure users that it will safeguard their personal information.

Amid the turmoil, observers were keenly watching the company’s user figures to assess the potential damage and see if the scandal would suppress Facebook’s growth. Despite high-profile social media campaigns calling users to boycott Facebook, user numbers kept in line with expectations. Those results again demonstrated the company’s ability to thrive amid controversy. It continued to grow over the last year despite a steady drumbeat of revelations that Russian-linked actors used the platform to try and fracture the electorate and promote Mr Trump ahead of the 2016 presidential election.

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But the CIty still has lots of political power.

EU Doesn’t Need The City Of London, Says Chief Brexit Negotiator (G.)

The EU does not need the City of London, and Theresa May’s “pleading” for a special deal for the UK’s financial services sector will not be rewarded, the EU’s chief negotiator, Michel Barnier, has said. In his toughest rebuff yet to the demands made by the British prime ministerin her landmark Mansion House speech, Barnier suggested the City would be granted nothing more generous than that enjoyed by Wall Street. “Some argue that the EU desperately needs the City of London, and that access to financing for EU27 business would be hampered – and economic growth undermined – without giving UK operators the same market access as today,” Barnier said at a meeting of finance ministers in Sofia, Bulgaria. “This is not what we hear from market participants, and it is not the analysis that we have made ourselves.”

May had argued in March, in a keynote speech spelling out her vision of a future UK-EU trading relationship, that failing to construct a special deal for the City would hurt economies on both sides. The City provided more than £1.1tn of cross-border lending to the rest of the EU in 2015 alone. May conceded in her speech that the current “passporting” regime, under which UK-based financial services would automatically have the right to operate across the EU, would not survive Brexit. However, she went on to suggest that a mutually agreed system would be necessary that would give the UK’s financial services sector greater assurances over future rules than the current “equivalence regime”.

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Our ‘leaders’ look the other way, they have other priorities.

Turkey Crackdown Suffocates Society, Creates Climate Of Fear (Amnesty)

The report reveals how few areas of Turkey’s once vibrant independent civil society have been left untouched by the ongoing state of emergency. A nationwide crackdown has resulted in mass arrests and dismissals, thehollowing out of the legal system and the silencing of human rights defenders through threats, harassment and imprisonment. “Whilst the jailing of journalists and activists may have hit the headlines, the profound impact that Turkey’s crackdown has had on wider society is harder to quantify but it is no less real,” said Amnesty International’s Europe Director, Gauri van Gulik. “Under the cloak of the state of emergency, Turkish authorities have deliberately and methodically set about dismantling civil society, locking up human rights defenders, shutting down organisations and creating a suffocating climate of fear.”

The state of emergency, declared in July 2016 as a temporary exceptional measure in the wake of the failed coup attempt, was renewed for a seventh time last week. Under its imposition, the rights to freedom of expression to liberty and security and to fair trials have been decimated. In so doing, the last line of defence for any healthy society – namely the work of human rights defenders – has been breached. Blanket bans on public gatherings in cities across Turkey have curtailed the right to assembly and association. Meanwhile more than 100,000 people have faced criminal investigations and at least 50,000 people have been imprisoned pending trial. More than 107,000 public sector employees have been summarily dismissed.

Many of the country’s most prominent journalists and human rights defenders, including Taner Kılıç, honorary chair of Amnesty International Turkey, have been jailed on baseless “terrorism” charges. But their arrests are merely the tip of the iceberg. Anti-terrorism laws and trumped-up coup related charges are used to target and silence peaceful, legitimate dissent. Prominent journalists, academics, human rights defenders and other civil society actors are subjected to arbitrary detention, prosecutions and, if found guilty in unfair trials, face long sentences.

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Greek recovery narrative is an insult.

Greece’s Economic Crisis Is Over Only If You Don’t Live There (WaPo)

Greece’s economic crisis is over only if you don’t live there. Everyone else, in other words, might have moved on because Greece isn’t threatening to knock over the other dominoes that are known as the global economy anymore, but its people are still stuck in what is the worst collapse a rich country has ever gone through. Indeed, if the International Monetary Fund’s latest projections are correct, it might be at least another 10 years before Greece is back to where it was in 2007. And that’s only if there isn’t another recession between now and then. Two lost decades, then, are something of a best-case scenario for Greece. The numbers are staggering. It’s not just that Greece’s economy shrank 26% in per capita terms between the middle of 2007 and the start of 2014.

That, as you can see below, might have put it on par with some of the biggest calamities in economic history — it was a little better than the United States had done in the 1930s, but a little worse than Argentina had done in the 2000s — but it didn’t distinguish it among them. No, it’s that Greece has grown only a total of 2.8% — again, adjusted for its population — in the first four years of what is supposedly a recovery. To give you an idea how miserable that is, 1930s America grew 30.2% and 2000s Argentina grew 26.9% during the first four years of theirs. The result is that, by this point of their recoveries, the United States was nearly all the way back to where it had been before its crash, and Argentina was actually 17.1% richer than it had been. Greece, meanwhile, is still 23.5% poorer than it was.

The IMF somewhat optimistically thinks that Greece will still be 12.8% poorer than it was in 2007 in 2023, which would put it on pace to get back to its pre-recession peak sometime around 2030 or so. They have made a desert, and called it a recovery.

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“..33% of Greeks now work for less than 380 euros a month. Gross, before tax…”

Greece: Economic Health In Grim State (EN)

In an extended interview in Lisbon, Greece’s former finance minister Yanis Varoufakis has given a very grim assessment of his country’s economic health. It came after European Commission President Jean-Claude Juncker said on Thursday, whilst on a visit to Athens, that Greece will become what he termed a “normal” country by the end of the summer. “Everyday is worse than the previous day. All talk of recovery, and of Greece having turned the corner, is to add insult on the injuries of the Greek people,” Varoufakis said. “We have a constant reduction in pensions, in wages. Do you know that 33% of Greeks now work for less than 380 euros a month? Gross, before tax.

“Already the government has committed, even legislated, to introduce pension cuts in January 2019, to introduce a further increase in taxation of the poorest families, after January 2019. They have comitted to escalate exponentially the evictions of poor families from their homes, repossessions. So, of course there will be no changes after the summer of 2018.” In 2016 Varoufakis formed the DiEM25, a pan-European left-wing party which is now asssembling a list of candidates for next’s year’s EU parliamentary elections.

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The only thing that counts is the energy that isn’t used.

Solar And Wind Really Do Increase Electricity Prices (F.)

In my last column I discussed an apparent paradox: why, if solar panels and wind turbines are so cheap, do they appear to be making electricity so expensive? One big reason seems to be their inherently unreliable nature, which requires expensive additions to the electrical grid in the form of natural gas plants, hydro-electric dams, batteries, or some other form of stand-by power. Several readers kindly pointed out that I had failed to mention a huge cost of adding renewables: new transmission lines. Transmission is much more expensive for solar and wind than other plants. This is true around the world — for physical reasons. Think of it this way. It would take 18 of California’s Ivanpah solar farms to produce the same amount of electricity that comes from our Diablo Canyon nuclear plant.

And where just one set of transmission lines are required to bring power from Diablo Canyon, 18 separate transmission lineswould be required to bring power from solar farms like Ivanpha. Moreover, these transmission lines are in most cases longer. That’s because our solar farms are far away in the desert, where it is sunny and land is cheap. By contrast, Diablo Canyon and San Onofre nuclear plants are on the coast right near where most Californians live. (The same is true for wind.) New transmission lines can make electricity cheaper, but not when they are used only part of the time and duplicate rather than replace current equipment. Other readers pointed to cases that appear to challenge the claim that increased solar and wind deployments increase electricity prices.

[..] What is most remarkable about U.S. states heavy in solar and wind is that electricity prices rose so much given the huge decline in natural gas prices. Had natural gas prices not plummeted at what was almost the exact same time as the beginning of the large-scale build-out of solar and wind in the United States, price increases in solar and wind heavy states would have been far larger. Around the world, from Germany and Denmark to Spain and South Australia, even modest penetrations of solar and wind, compared to what advocates claim we will need to decarbonize, lead to large price increases.

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It’s a step alright. But it’s far from total.

EU Member States To Vote On Near-Total Neonicotinoids Ban (BBC)

Member states will vote on Friday on an almost complete ban on the use of neonicotinoid insecticides across the EU. Scientific studies have linked their use to the decline of honeybees, wild bees and other pollinators. The move would represent a major extension of existing restrictions, in place since 2013. Manufacturers and some farming groups are opposed, saying the science remains uncertain. Neonicotinoids are the most widely used class of insecticides in the world, but concerns about their impact on bees have been reinforced by multiple research efforts, including so-called “real world” trial results published last year. Back in 2013 the European Union opted for a partial ban on the use of the three chemicals in this class: Imidacloprid, clothianidin and thiamethoxam.

The restrictions applied to crops including maize, wheat, barley, oats and oil seed rape. The new Commission proposal would go much further, meaning that almost all outdoor uses of the chemicals would be banned. The action has been driven by a recent report from the European Food Safety Authority (Efsa), which found that neonicotinoids posed a threat to many species of bees, no matter where or how they are used in the outdoor environment. Another key element that has pushed the Commission to hold a vote has been the UK’s change of heart on the use of these insecticides. Environment Secretary Michael Gove announced last November that the UK would now support further restrictions. “I think it has helped the dynamic,” Franziska Achterberg from Greenpeace told BBC News.

“It has helped sway Ireland definitely, and then lately, the Germans, the Austrians and the Dutch. I think the fact the UK had come around was a good signal for them as well, that they could not stay behind.” During the partial ban, some countries including the UK were given permission to use neonicotinoids for short periods. However, the EU Commission is now signalling that it is seemingly intent on pushing the proposal through as it stands. “Several countries have said they want exemptions on sugar beet for example,” said Sandra Bell from Friends of the Earth (FOE). “So far the Commission have been very strong on this, because they say the Efsa evidence backs the extension of the ban to sugar beet and therefore they are following the science and won’t put in an exemption for a compromise.”

Growers will be free to use neonicotinoids in greenhouses across the EU, despite some environmental groups having reservations about the chemicals leaching into water supplies. Other neonicotinoids including thiacloprid and sulfoxaflor will continue to be exempt from the ban.

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Feb 022018
 
 February 2, 2018  Posted by at 11:01 am Finance Tagged with: , , , , , , , , , ,  


Vincent van Gogh Pink peach trees (Souvenir de mauve) 1888

 

Trump to Release Memo Friday Morning Without Redactions (DisM)
Bank of Japan Offers ‘Unlimited’ Bond Buying To Curb Rising Yields (CNBC)
Bitcoin’s Brutal Week Is Even Worse in South Korea (BBG)
Chinese Stocks Tumble As Hong Kong ATM Withdrawals Surge (ZH)
Surprise Rise In UK House Prices As Lack Of Homes For Sale Fuels Lift (G.)
Buying Home In UK Cities At Least Affordable Level Since 2007 (Ind.)
UK Labour Party Plans To Make Landowners Sell To State For Fraction Of Value (G.)
Big Banks Accused of Stifling Competition in Stock Lending (Morgenson)
Here Comes the Next Financial Crisis (Nomi Prins)
Texas Shale Challenges North Sea Crude As World Oil Benchmark (R.)
Greek Taxpayers’ Debts To The State Soar To Record Highs (K.)
Erdogan’s Top Adviser Threatens To “Break The Legs” Of Greek PM (KTG)
Polar Bears Could Become Extinct Faster Than Was Feared (G.)
Warming Could Breach 1.5ºC Within Five Years (CCN)

 

 

Finally we get to see how ugly it can get.

Trump to Release Memo Friday Morning Without Redactions (DisM)

According to a recent report by the Washington Examiner, President Trump will declassify the controversial four-page memo that reportedly details surveillance abuses by the Department of Justice and FBI, and send it back to House Intelligence for a Friday morning release. The news comes just days after President Trump’s State of the Union address, where he was overheard stating that he would “100%” release the memo. The Examiner further reports that FBI Director Wray continues to oppose the release of the memo to the American public, citing: “grave concerns about the memo’s accuracy.” However, as the Wall Street Journal reports, it is important to remember that the FBI knows and has known what is in the memo for a long time, as the Bureau had, “refused to provide access to those documents until director Christopher Wray and the Justice Department faced a contempt of Congress vote.”

The Journal further relates that: “The FBI’s public statement appears to be an act of insubordination after Mr. Wray and Deputy Attorney General Rod Rosenstein tried and failed to get the White House to block the memo’s release. Their public protest appears intended to tarnish in advance whatever information the memo contains. The public is getting to see amid this brawl how the FBI plays politics, and it isn’t a good look.” Members of the Democratic Party have also expressed their opposition to the release of the memo. For example, ranking member of the House Intelligence Committee, Rep. Adam Schiff (D-CA), has also come out against the release of the memo to the public.

Last week, Schiff and Sen. Diane Feinstein (D-CA), wrote a letter to Facebook and Twitter, in which they expressed their fears that the top trending hashtag “#ReleaseTheMemo” was being pushed by Russian bots as part of a propaganda effort seeking to “attack our democracy”. However, much to their dismay, it was revealed that the top trending hashtag was not the work of Russian bots, but originated organically by fellow Americans. This news did not deter a California duo from penning a second letter to Facebook and Twitter on Wednesday, in order to raise awareness about potential abuse of their platforms by “agents of foreign influence”.

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Artificial ‘market’. How can anyone see it as a good thing?

Bank of Japan Offers ‘Unlimited’ Bond Buying To Curb Rising Yields (CNBC)

Japanese government bond prices recovered from earlier losses after the Bank of Japan acted decisively on Friday to curb a rise in bond yields, offering “unlimited” buying in long-term Japanese government bonds. Heavy buying of JGBs raises the price of bonds to force down their yield, an essential element of the BOJ’s ultra-loose yield curve control (YCC) policy. It was the first time in more than six months that the BOJ has conducted special operations to buy bonds to achieve the yields it wants to see, rather than the auctions used in regular operations – a powerful show of force to direct the market. On top of that, the BOJ increased the amount of its planned buying in five- to 10-year JGBs to 450 billion yen from the 410 billion amount it has favored since late August.

Following the BOJ’s operations, the price of the 10-year JGB futures rose to as high as 150.31 from the day’s low of 150.09. It was up 0.11 on the day. The benchmark 10-year cash JGB yield edged down to 0.090%, the same level as its previous close, from 0.095% touched earlier. JGB yields have risen in recent weeks, in line with global peers, on rising expectations that the world’s central banks are increasingly leaning towards winding back stimulus as the global economy gains momentum. Investors have started to speculate that the BOJ could also be moving towards an exit from ultra-easy policy, although BOJ Governor Haruhiko Kuroda has denied that he was considering such a major policy adjustment in the near future.

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Significant shift: “The country’s waning frenzy has been reflected in declining activity on domestic exchanges. Data compiled by CryptoCompare.com show that volumes have dropped by about 85% from December highs.”

Bitcoin’s Brutal Week Is Even Worse in South Korea (BBG)

Bitcoin’s brutal start to the year is proving especially painful in South Korea. While prices for the cryptocurrency are falling on major exchanges around the world, nowhere have the declines been faster than in Asia’s fourth-largest economy. The losses have erased a 51% premium for Bitcoin on Korean venues, sending prices back in line with those on international markets for the first time in seven weeks on Friday. The so-called kimchi premium had been so persistent – and so unusual for a large country – that traders named it after Korea’s staple side dish. While its disappearance is partly explained by selling pressure from arbitragers, it also reflects a dramatic reversal of investor sentiment in one of the world’s most frenzied markets for cryptocurrencies.

Bitcoin has tumbled more than 60% from its high in Korea after the nation’s regulators took several steps over the past two months to restrict trading and said they may ban cryptocurrency exchanges outright. Policy makers around the world have been moving to rein in the mania surrounding digital assets amid concerns over excessive speculation, money laundering, tax evasion and fraud. “The bubble in crytpocurrencies has burst” in Korea, said Yeol-mae Kim at Eugene Investment & Securities in Seoul. The kimchi premium began shrinking in mid-January as fears of a regulatory clampdown escalated. Selling by arbitragers – who have been buying Bitcoin on international venues to offload at a higher price in Korea – also played a role, although the country’s capital controls and anti-money-laundering rules made it difficult to execute such transactions in bulk.

Bitcoin traded at about 9.1 million won ($8,449) in Korea on Friday morning, according to a CryptoCompare index tracking the country’s major exchanges. That compared with the $8,601 composite price on Bloomberg, which is derived from venues including Bitstamp and Coinbase’s GDAX exchange. When the kimchi premium reached its peak in January, Bitcoin’s price was about $7,500 higher in Korea. The country’s waning frenzy has been reflected in declining activity on domestic exchanges. Data compiled by CryptoCompare.com show that volumes have dropped by about 85% from December highs.

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Liquidity.

Chinese Stocks Tumble As Hong Kong ATM Withdrawals Surge (ZH)

Chinese stocks are down for the fifth day in a row (something that hasn’t happened since May 2017) with the tech-heavy Shenzhen Composite is now down 5% YTD and the Shanghai Composite is tumbling back towards unchanged. The decline is happening at the same time as Bitcoin is in freefall… And chatter about bankers using WeChat to ask for Deposits. In other words – a liquidity crisis. And that anxiety is only increased by the latest report from Reuters that cash withdrawals at Hong Kong ATMs have surged, prompting scrutiny from monetary authorities, the banking industry, and police amid media reports that mainland Chinese are withdrawing hundreds of thousands of dollars using up to 50 cards at a time. China has battled to curb capital outflows for years. A move that took effect on Jan. 1 caps overseas withdrawals using domestic Chinese bank cards.

The gambling hub of Macau last year introduced facial recognition technology at ATMs to target illicit outflows from mainland China, a move that Hong Kong’s central bank told Reuters could increase cash withdrawals in the financial center. “The HKMA is aware of media reports about people using multiple mainland cards to withdraw cash at ATMs in Hong Kong,” the central bank said in a statement, adding that it was “monitoring the situation and is in discussion with the banking industry and the police about this issue”. A local banker said some commercial banks have stepped up monitoring of cash withdrawals. Hong Kong police said they were working closely with the HKMA and banking industry to respond to any changes in financial crime trends. While this is as much to do with money-laundering and capital flight, the liquidation of stocks, cryptocurrencies, and now mass ATM withdrawals suggests more is going on that the usual pre-new-year liquidity hording.

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There is no lck of homes. There’s a huge surplus in ultra low interest rate loans.

Surprise Rise In UK House Prices As Lack Of Homes For Sale Fuels Lift (G.)

UK house prices rose at the fastest annual pace in 10 months in January, bolstered by a lack of new homes coming on to the market, according to Nationwide. The average price of a home reached £211,756 last month, according to the building society’s monthly survey. Property values were up 0.6% from the month before, the same monthly gain as in December, but the annual growth rate picked up to 3.2% from 2.6%, the highest since March 2017, when it was 3.5%. Robert Gardner, Nationwide’s chief economist, said: “The acceleration in annual house price growth is a little surprising, given signs of softening in the household sector in recent months. Retail sales were relatively soft over the Christmas period, as were key measures of consumer confidence, as the squeeze on household incomes continued to take its toll.”

But he added: “The flow of properties coming on to estate agents’ books has been more of a trickle than a torrent for some time now and the lack of supply is likely to be the key factor providing support to house prices.” Many forecasters predicted the housing market would continue to slow to about 1% this year. This would mean property values falling in real terms. Nationwide is still forecasting price growth of 1-1.5% this year.

Chris Scicluna, an economist at Daiwa, said: “With real wage growth remaining below zero and consumer confidence still subdued, house price growth appears unlikely to extend this upward trend over coming months and quarters. However, a similar pace could well be maintained on the back of very attractive mortgage rates, limited supply, record high employment, and the strong likelihood that consumer price inflation is likely to moderate.” Home ownership in England remained at a 30-year low last year. The government’s latest English housing survey showed that of an estimated 22.8m households, 14.4m – or 62.6% – were owner-occupiers in 2016-17, compared with 62.9% in 2016. This was similar to the rate seen in the mid-1980s and down from a peak of 71% in 2003. Of young adults aged 25 to 34, only 37% owned their home.

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Greater Fool hour.

Buying Home In UK Cities At Least Affordable Level Since 2007 (Ind.)

The typical cost of buying a home in a UK city has reached its least affordable levels in a decade, a report has found. The average house price across cities equated to seven times typical annual earnings in 2017, the Lloyds Bank Affordable Cities Review found. This is the highest house price-to-income multiple since the average city home cost seven and-a-half times earnings in 2007. In 2012, the average city home cost around 5.6 times wages. But over the past five years, the average house price across UK cities has surged by over a third (36%), reaching £232,945 in 2017.

Over the same period, average city earnings have risen by 9% to £33,420. Oxford was found to be the least affordable city in the study, with average property prices there equating to 11-and-a-half times average annual earnings. Stirling in Scotland was identified as the UK’s most affordable city for the fifth consecutive year, with average property prices at around four times annual earnings. Six cities in the study have house prices commanding at least 10 times the average earnings of residents.

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Only, so-called value is highly inflated, profiting from government actions.

UK Labour Party Plans To Make Landowners Sell To State For Fraction Of Value (G.)

Labour is considering forcing landowners to give up sites for a fraction of their current price in an effort to slash the cost of council house building. The proposal has been drawn up by John Healey, the shadow housing secretary, and would see a Jeremy Corbyn-led government change the law so landowners would have to sell sites to the state at knockdown prices. Landowners currently sell at a price that factors in the dramatic increase in value when planning consent is granted. It means a hectare of agricultural land worth around £20,000 can sell for closer to £2m if it is zoned for housing. Labour believes this is slowing down housebuilding by dramatically increasing costs. It is planning a new English Sovereign Land Trust with powers to buy sites at closer to the lower price.

This would be enabled by a change in the 1961 Land Compensation Act so the state could compulsorily purchase land at a price that excluded the potential for future planning consent. Healey’s analysis suggests that it would cut the cost of building 100,000 council houses a year by almost £10bn to around £16bn. With the “hope value” removed from the price of land, the cost of building a two-bed flat in Wandsworth, south-west London, would be cut from £380,000 to £250,000, in Chelmsford it would fall from £210,000 to £130,000 and in Tamworth in the West Midlands, where land values are lower, it would drop from £150,000 to £130,000. “Rather than letting private landowners benefit from this windfall gain – and making everyone else pay for it – enabling public acquisition of land at nearer pre-planning-permission value would mean cheaper land which could help fund cheaper housing,” said Healey.

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Stock lending links to shorting.

Big Banks Accused of Stifling Competition in Stock Lending (Morgenson)

A newly filed lawsuit against six major investment banks contends they worked together to prevent a startup company from competing in the vast and lucrative stock-lending market. The complaint, filed Tuesday in a New York federal court, follows a suit brought last summer against the same institutions by three pension funds who accused the banks of conspiring to keep their stranglehold on the roughly $1 trillion market. The litigation brings increased scrutiny on the stock-loan business, an opaque, over-the-counter market that is a crucial but behind-the-scenes cog in Wall Street’s trading machinery. At issue are stock-lending transactions, in which pension funds, insurance companies and other investors lend their shares to brokerage firms whose customers, such as hedge funds, borrow stock to offset other positions or make bets against companies in trades known as short sales.

Asset managers receive a fee for the stock they lend depending on borrower interest in it. The suit was filed by QS Holdings, the parent of Quadriserv, which was formed in 2001 and built an electronic trading platform. Called AQS, the platform gave stock-loan participants access to real-time prices on trades that reflected actual bids and offers. Transactions on AQS were executed anonymously and centrally settled; the system was registered with the Financial Industry Regulatory Authority and the Securities and Exchange Commission. But it never gained traction and was sold in a distressed sale in 2016. On Jan. 26, the six firms — Bank of America, Credit Suisse, Goldman Sachs, JPMorgan Chase, Morgan Stanley and UBS— filed a motion to dismiss the lawsuit filed last summer by the pension funds.

In that filing, the firms said the allegations were meritless, noting that “none of the plaintiffs’ allegations identified ‘direct evidence’ of conspiracy.” In the stock-loan business, investors borrowing shares from brokerage firms also pay, sometimes steeply, for the service. When many traders want to borrow a company’s shares, its stock is known as “hard-to-borrow” and fees associated with the transaction are far higher. The middlemen in these trades often are Goldman, J.P. Morgan and Morgan Stanley. They make trades in an over-the-counter market where prices are typically given privately to customers. It thus is difficult for them to determine whether they are getting appropriate prices.

The middlemen typically keep most of the fees collected on the most lucrative trades, and critics say that amount would be far lower if borrowers and lenders met in a centralized market where pricing was transparent, like the AQS.

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Squid squared.

Here Comes the Next Financial Crisis (Nomi Prins)

Thanks to the Senate confirmation of his selection for chairman of the board, Donald Trump now owns the Fed, too. The former number two man under Janet Yellen, Jerome Powell will be running the Fed, come Monday morning, February 5th. Established in 1913 during President Woodrow Wilson’s administration, the Fed’s official mission is to “promote a safe, sound, competitive, and accessible banking system.” In reality, it’s acted more like that system’s main drug dealer in recent years. In the wake of the 2007-2008 financial crisis, in addition to buying trillions of dollars in bonds (a strategy called “quantitative easing,” or QE), the Fed supplied four of the biggest Wall Street banks with an injection of $7.8 trillion in secret loans. The move was meant to stimulate the economy, but really, it coddled the banks.

Powell’s monetary policy undoubtedly won’t represent a startling change from that of previous head Janet Yellen, or her predecessor, Ben Bernanke. History shows that Powell has repeatedly voted for pumping financial markets with Federal Reserve funds and, despite displaying reservations about the practice of quantitative easing, he always voted in favor of it, too. What makes his nomination out of the ordinary, though, is that he’s a trained lawyer, not an economist. Powell is assuming the helm at a time when deregulation is central to the White House’s economic and financial strategy. Keep in mind that he will also have a role in choosing and guiding future Fed appointments. (At present, the Fed has the smallest number of sitting governors in its history.)

The first such appointee, private equity investor Randal Quarles, already approved as the Fed’s vice chairman for supervision, is another major deregulator. Powell will be able to steer banking system decisions in other ways. In recent Senate testimony, he confirmed his deregulatory predisposition. In that vein, the Fed has already announced that it seeks to loosen the capital requirements big banks need to put behind their riskier assets and activities. This will, it claims, allow them to more freely make loans to Main Street, in case a decade of cheap money wasn’t enough of an incentive.

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Crude still rules.

Texas Shale Challenges North Sea Crude As World Oil Benchmark (R.)

As the United States approaches a record 10.04 million barrels of daily production, trading volumes of so-called “WTI” futures exceeded volumes of Brent crude in 2017 by the largest margin in at least seven years. A decade ago, falling domestic production and a U.S. ban on exports meant that WTI served mostly as a proxy for U.S. inventory levels. “There was a time when the U.S. was disconnected from the global market,” said Greg Sharenow, portfolio manager at PIMCO, who co-manages more than $15 billion in commodity assets. Two changes drove the resurgence of the U.S. benchmark. One was the boom in shale production, which spawned a multitude of small producers that sought to hedge profits by trading futures contracts.

Then two years ago, the United States ended its 40-year ban on crude exports, making WTI more useful to global traders and shippers. U.S. exports averaged 1.1 million barrels a day through November 2017, rising to an average 1.6 million bpd in the final three months. That compares to just 590,000 bpd in 2016. As U.S. production and exports grow, global firms that increasingly buy U.S. oil are offsetting their exposure by trading in U.S. financial markets. That also gives U.S. shale producers more opportunity to lock in profits on their own production.

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Why Greece needs debt relief across the board “It is estimated that just 20% of expired debts are collectible.”

Greek Taxpayers’ Debts To The State Soar To Record Highs (K.)

Taxpayers’ total overdue debts to the state soared to a record 101.8 billion euros at the end of December, in a clear indication that society’s taxpaying capacity is at breaking point due to overtaxation. In December alone, when 2018 road tax and an installment of the Single Property Tax (ENFIA) came due, new expired debts amounted to 1.3 billion euros. According to data released on Thursday by the Independent Authority for Public Revenue, the new expired debts added last year came to 12.9 billion euros, concerning all tax obligations that went unpaid, from income tax and ENFIA to tax penalties and value-added tax. The phenomenon has major consequences for taxpayers. The figures also showed that confiscations and debt settlements brought 5.07 billion euros into the state coffers in 2017, of which 2.69 billion concerned old debts (dating before 2017). More than 1 million taxpayers have already had assets confiscated over debts to the tax authorities. Their number grew by 14,871 in December to reach 1,050,077 at the end of 2017.

The authority’s data reveal that 4,068,857 taxpayers – or more than half – have expired debts to the state, and that this figure would have been 138,260 higher had those people not settled their dues in December due to fears of repossessions. At the moment taxpayers can enter a tax payment program involving 12 to 24 monthly installments, even for dues that are not classified as expired. The online platform also allows them to add new debts to the fixed plan each month. Taxpayers who want to enter such a payment plan can visit the authority’s website and choose which of their debts that are not overdue they want to add to the 12-installment scheme. The picture regarding expired debts is set to change drastically once the bailout obligation for arrears clearance is completed, separating collectible dues from those that cannot be collected. It is estimated that just 20% of expired debts are collectible.

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Fulminating against the 1923 Lausanne Treaty is easy populist fodder for Erdogan. His gamble is that Turkey’s bust-up with the US in Syria, and the threat to NATO because of it, will allow him to take Greek territory.

Erdogan’s Top Adviser Threatens To “Break The Legs” Of Greek PM (KTG)

Chief advisor of Turkish President Erdogan, Yigit Bulut, has threatened Greece over the disputed islet of Imia in the Eastern Aegean Sea. “Athens will face the wrath of Turkey worse than that in Afrin,” Bulut said in a Television show of a private network. “We will break the arms and legs of officials, of the Prime Minister and any Minister, who dares to step on the Kardak/Imia islet in the Aegean,” he claimed. Bultu’s threats come just a couple of days after Defense Minister Panos Kammenos sailed to Imia and threw a wreath into the sea to honor the three fallen soldiers during the Imia conflict in 1996. Ankara does not miss a chance to challenge Greece’s sovereignty in the islets and islands of the Aegean Sea, escalate tension around Imia and risk an ugly incident that could bring the two neighboring countries at the verge of an armed conflict like two decades ago.

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Much higher metabolism than anyone had ever noticed.

Polar Bears Could Become Extinct Faster Than Was Feared (G.)

Polar bears could be sliding towards extinction faster than previously feared, with the animals facing an increasing struggle to find enough food to survive as climate change steadily transforms their environment. New research has unearthed fresh insights into polar bear habits, revealing that the Arctic predators have far higher metabolisms than previously thought. This means they need more prey, primarily seals, to meet their energy demands at a time when receding sea ice is making hunting increasingly difficult for the animals. A study of nine polar bears over a three-year period by the US Geological Survey and UC Santa Cruz found that the animals require at least one adult, or three juvenile, ringed seals every 10 days to sustain them.

Five of the nine bears were unable to achieve this during the research, resulting in plummeting body weight – as much as 20kg during a 10-day study period. “We found a feast and famine lifestyle – if they missed out on seals it had a pretty dramatic effect on them,” said Anthony Pagano, a USGS biologist who led the research, published in Science. “We were surprised to see such big changes in body masses, at a time when they should be putting on bulk to sustain them during the year. This and other studies suggest that polar bears aren’t able to meet their bodily demands like they once were.” Pagano’s team studied the bears in a period during April over the course of three years, from 2014 to 2016, in the Beaufort Sea off Alaska.

They fitted the bears with GPS collars with video cameras to measure activity levels. Blood chemistry was also taken from the bears. Previously, polar bears were thought to expend relatively little energy during days where they often wait for hours beside holes in the ice, which seals emerge from in order to breathe. But the researchers found that they actually have an average metabolism 50% higher than prior estimates. With previous studies showing recent drops in polar bear numbers, survival rates and body condition, scientists said the new research suggests the species is facing an even worse predicament than was feared.

A recent widely-shared video of an emaciated polar bear is a “horrible scene that we will see more of in the future and more quickly than we thought,” according to Dr Steven Amstrup, who led polar bear research for 30 years in Alaska. “This is an excellent paper that fills in a lot of missing information about polar bears,” said Amstrup, who was not involved in the USGS research. “Every piece of evidence shows that polar bears are dependent on sea ice and if we don’t change the trajectory of sea ice decline, polar bears will ultimately disappear. “They face the choice of coming on to land or floating off with the ice as it recedes, out to the deep ocean where there is little food. We will see more bears starving and more of them on land, where they will get into trouble by interacting with humans.”

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The takeaway from this is not in the numbers. It’s in the certainty that we will not stop the process. All we have is a Paris agreement spearheaded by politicians who see their polls and businessmen who see a profit.

Warming Could Breach 1.5ºC Within Five Years (CCN)

The UK’s meteorological agency has forecast the global temperature might flicker above 1.5C within the next five years. That would be within a decade of the Paris climate deal setting 1.5C as an aspirational limit on global warming. The Met Office’s decadal forecast said the global average temperature was “likely” to exceed 1C between 2018-2022 and could reach 1.5C. “There is also a small (around 10%) chance that at least one year in the period could exceed 1.5C above pre-industrial levels,” the office said in a statement on Wednesday. “It is the first time that such high values have been highlighted within these forecasts.” Met Office scientists were quick to point out that this would not actually breach the Paris Agreement, as that limit refers to a long term average, rather than a yearly reading.

The office’s chief scientist, professor Stephen Belcher, said: “Given we’ve seen global average temperatures around 1C above pre-industrial levels over the last three years, it is now possible that continued warming from greenhouse gases along with natural variability could combine so we temporarily exceed 1.5C in the next five years.” The Paris climate deal, agreed by 197 UN member states in 2015, set a global goal for keeping temperatures “well below 2C”, aiming for 1.5C. The lower goal is considered by many of the most vulnerable countries, especially low-lying island nations, to be the upper limit for their homelands to survive. Coral scientists also predict that more than 1.5C of warming would wipe out most coral reefs.

Read more …

Jan 102018
 
 January 10, 2018  Posted by at 10:19 am Finance Tagged with: , , , , , , , , , , , ,  


Ansel Adams The Tetons and the Snake River 1942

 

Is Bank of Japan The Latest To Take The Punch Bowl Away? (CNBC)
Fed Officials Are Scrambling To Figure Out How To Fight Next Recession (BI)
Market Could Be Headed For A ‘Melt-Up’ Of 30% – Bill Miller (CNBC)
People Have A Hard Time Even Imagining How The Market Could Decline (ZH)
World Bank Issues Warnings On Interest Rates And Inflation (G.)
South Korea’s Moon Says Trump Deserves ‘Big’ Credit For North Korea Talks (R.)
Apple’s Privacy Feature Costs Ad Companies Millions (G.)
Antivirus Tools Caught With Their Hands In The Windows Cookie Jar (Reg.)
Julian Assange’s Stay In London Embassy Untenable, Says Ecuador (G.)
Australia Must Rescue Assange From The Establishment That Tortured Manning (CJ)
The Fog of War: Global Airstrike Deaths Up At Least 82% In 2017 (RT)
Scores Feared Dead And Up To 100 Missing After Boat Sinks Off Libya Coast (G.)

 

 

The Last of the Mohicans. But does Japan really want to, and can it, carry the global financial system on its shoulders now the Fed and ECB no longer want to do their share?

Is Bank of Japan The Latest To Take The Punch Bowl Away? (CNBC)

The Bank of Japan is seen as the last grown-up in the room actively filling the global liquidity punch bowl with both hands. That’s why a slight tweak to its bond-buying program caused a flurry across financial markets Tuesday, sparking speculation it was joining the Fed and ECB in cutting back on asset purchases, a move that could ultimately help drive up global interest rates. On Tuesday, the BOJ modestly trimmed its purchases of Japanese government bonds by about $10 billion in the 10- to 25-year maturities and another $10 billion in maturities of more than 25 years. The yen jumped about 0.5% to about 112.60 to the dollar, and bond yields rose. The U.S. 10-year yield also moved higher, breaking above the key 2.50% to as high as 2.55%. Meanwhile, the 10-year JGB yield moved in a range of about 0.16 and saw a high of 0.074%.

But some strategists say while the BOJ may have sent a powerful signal, it is just acting on a technicality that comes with changes it made to its bond purchase program back in 2016. Unlike the U.S. and Europe, where central banks have targeted the balance sheet size, the Japanese central bank is targeting interest rates and its purchases are based on prices. “I think it’s too early to proclaim the easy conditions in Japan are over. That said, I do think it’s constructive and it shows how sensitive the markets are to any potential change,” said Greg Peters, senior portfolio manager at PGIM Fixed Income. The Bank of Japan has been a poster child for central bank easing, taking its rates to negative levels and buying all types of assets, including stocks.

“They’re still buying ETFs, J-REITs, corporate paper. They changed how they’re easing, but they’re still easing,” said Marc Chandler, head of fixed-income strategy at Brown Brothers Harriman. “I think the market is overinterpreting this, partly because of their positions. They’re short yen. They’re long euros. They’re being squeezed on both legs today.” [..] While it’s last to leave the party, a change in BOJ policies would be the most symbolic move yet that the extreme policies adopted in the global financial crisis are finally coming to an end, and the juice that helped push risk assets higher is being slowly withdrawn. Chandler said the BOJ has made a point of saying it will continue to ease. “The BOJ says, ‘We’re going to be patient. We’re going to be the last one out.’ … [Prime Minister Shinzo] Abe told the Bank of Japan..

“If long rates continue to move higher, and the BOJ follows this with a continued reduction in the pace of the purchases, then we know we’re on to something. We’re on to a potential change in monetary policy in Japan,” said Peter Boockvar, chief investment officer at Bleakley Financial Group. “I think that is likely in 2018,” Boockvar said. “Whether this is the beginning of it, we’ll have to see. They have some cover too. They know what the Fed is going to do, and they know what the ECB is doing. Does the BOJ want to be the outlier of temporary insanity when every other central bank is pulling back? They are the epitome of extremity in terms of monetary policy.”

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Fed interference will go down in history as the uttermost of stupidities. Not yet though, the narrative of saving the economy can still be kept alive. But wait till things go south.

Fed Officials Are Scrambling To Figure Out How To Fight Next Recession (BI)

Federal Reserve officials puzzled by chronically-low US inflation seem to agree on at least one thing: They worry, almost universally, that they will lack the tools to fight the next recession, whenever it comes. Yet instead of focusing on tried and true policy measures like low interest rates and possibly bond buys, Fed officials current and former appear focused instead on broad shifts in the policy framework, including moving away from the current inflation targeting regime toward a potentially more aggressive approach. More importantly, the string of discordant ideas being offered up at a Brookings Institution conference by such high profile figures as former Fed Chairman Ben Bernanke, former White House economic advisor Lawrence Summers, and two current Fed members, does more to confuse the already muddled outlook for monetary policy than clarify it.

Boston Fed President Eric Rosengren suggested the Fed follow the model of the Bank of Canada, which periodically reviews its approach to maintaining price stability. He also called for the Fed to move toward an inflation target range, which he hinted might be from 1.5% to 3%, rather than the current 2% goal. John Williams, president of the San Francisco Fed, called for a system where the Fed would target the price level, meaning that it would compensate periods of undershooting the 2% inflation goal with periods of overshooting. US inflation has remained stubbornly below the Fed’s 2% target for much of the economic recovery, suggesting the labor market is not as healthy as the 17-year low unemployment rate of 4.1% suggests.

Shifting to a price-level target is “not nearly as scary as you might think” Williams told the audience of monetary economists, academics, and market participants. He worried about the “issue of credibility” that has resulted from persistently below-target inflation, which makes it look ” like the central bank is not committed to its goals.” Prolonged low inflation, which also reflects soft wage growth, can make monetary policy less effective because “it gets into inflation expectations and makes it harder to achieve 2% objective in good times.”

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Possible in theory, but with CB tightening not in practice.

Market Could Be Headed For A ‘Melt-Up’ Of 30% – Bill Miller (CNBC)

Worried about higher interest rates putting a dent on the stock market’s rip-roaring rally? Fear not, a rise in rates will actually help stocks, according to legendary investor Bill Miller. “Those 10-year yields go through 2.6% and head towards 3%, I think we could have the kind of melt-up we had in 2013, where we had the market go up 30%,” Miller, the founder of Miller Value Partners, told CNBC’s “Closing Bell” on Tuesday. “If we can get the 10-year towards that 3% level, you’ll see the same thing.” “In 2013, people finally began to lose money in bonds. They took money out of bond funds and put it into equity funds,” Miller said. Miller is considered one of the best investors ever, after beating the market for 15 years in a row while working at Legg Mason. Stocks have been on a rip-roaring rally for more than a year, as economic data and corporate earnings have improved.

On Tuesday, they closed at fresh record highs. But some experts fear the improvements in the economy could force the Federal Reserve to tighten monetary policy faster than they forecast, thus pushing interest rates higher. The 10-year U.S. Treasury yield rose to 2.55% on Tuesday and hit its highest level since March.The yield has not traded above 3% since early 2014. It last traded above 2.6% last March. But Miller thinks the stock market could get another boost from lower corporate tax rates. President Donald Trump signed a bill in December that slashed the corporate tax rate to 21% from 35%. “The tax cuts are probably partly in the market, but maybe not wholly in the market because we’re seeing things like companies raising the minimum wage, giving bonuses,” he said. “The people that are getting those $1,000 bonuses probably have a marginal propensity to consume of 99%.”

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It’s high time for that decline then.

People Have A Hard Time Even Imagining How The Market Could Decline (ZH)

A calm complacency never before seen has fallen blanket-like over US equity markets. “The behavior of volatility has entirely changed since 2014,” noted BAML in a a recent note thanks to major central banks keeping interest rates near historic lows (and printed more money than ever before). As The Wall Street Journal points out, One sign of that: VIX closed below 10 more times last year than any others year in its history, and until today, closed below 10 for the first 5 days of 2018… And while correlation is not causation, there is a clear causal link between the conditioning now deeply embedded within investors’ minds and the endless expansion of central bank balance sheets…

As JPMorgan’s infamous quant guru Marko Kolanovic wrote, “the first four Fed hikes in a decade have failed to generate the revival of volatilities that many had expected at the end of last year,” and a wave of political uncertainty linked to U.S. tensions with North Korea and the new presidential administration also raised the prospect that market tumults could occur with greater frequency… but no… In fact worse still for The Fed, financial conditions eased as they tightened and vol collapsed to levels never seen before…

All of which has led, as The Wall Street Journal reports, to a number of investors abandoning defensive positions taken to protect against a market downturn, in the latest sign that many doubters are shedding caution as the long rally rolls on. “I haven’t seen hedging activity this light since the end of the financial crisis,” said Peter Cecchini, a New York-based chief market strategist at Cantor Fitzgerald. “It started in late 2016 and accelerated in the second half of the year.” But as Morgan Stanley warns in a recent note, what goes up (this fast) typically comes down… “Our team has observed a dramatic shift in sentiment since we initiated coverage in April. In April, it felt as if people were looking for a reason for the market to fail. Now, we have seen a total reversal with people having a hard time even imagining how the market could decline.”

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Recovery is just a story. Unless it has become viable to fight debt with more debt.

World Bank Issues Warnings On Interest Rates And Inflation (G.)

Financial markets are complacent about the risks of sharply higher interest rates that could be triggered by better than expected growth in the global economy this year, the World Bank has warned. The Washington-based organisation said that much of the rich west was running at full capacity as a result of a broad-based upswing in activity, but were now vulnerable to a period of rising inflation that would prompt action from central banks. Launching the Bank’s global economic prospects, the lead author Franziska Ohnsorge said: “There could be faster than expected inflation that would mean faster than expected interest rate hikes.” Ohnsorge added that stock markets were at levels similar to those seen before the Wall Street Crash of 1929, while bond markets were assuming that low inflation would keep official borrowing costs down.

“Financial markets are vulnerable to unforeseen negative news. They appear to be complacent,” she said, while announcing that the Bank has revised up its 2018 forecast for the global economy following a better than expected performance in the US, China, the eurozone and Japan in 2017. In its half-yearly assessment, the Bank said a recovery in manufacturing, investment and trade would mean global growth of 3.1% this year, up from the 2.9% pencilled in last June. But it warned the acceleration in growth would be temporary unless governments implemented structural reforms to raise long-term growth potential. “The broad-based recovery in global growth is encouraging, but this is no time for complacency,” said Jim Yong Kim, the World Bank’s president.

“This is a great opportunity to invest in human and physical capital. If policy makers around the world focus on these key investments, they can increase their countries’ productivity, boost workforce participation, and move closer to the goals of ending extreme poverty and boosting shared prosperity.”

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They’re even planning to march in the Olympics opening ceremony together.

South Korea’s Moon Says Trump Deserves ‘Big’ Credit For North Korea Talks (R.)

South Korean President Moon Jae-in credited U.S. President Donald Trump on Wednesday for helping to spark the first inter-Korean talks in more than two years, and warned that Pyongyang would face stronger sanctions if provocations continued. The talks were held on Tuesday on the South Korean side of the demilitarized zone, which has divided the two Koreas since 1953, after a prolonged period of tension on the Korean peninsula over the North’s missile and nuclear programs. North Korea ramped up its missile launches last year and also conducted its sixth and most powerful nuclear test, resulting in some of the strongest international sanctions yet. The latest sanctions sought to drastically cut the North’s access to refined petroleum imports and earnings from workers abroad. Pyongyang called the steps an “act of war”.

Seoul and Pyongyang agreed at Tuesday’s talks, the first since December 2015, to resolve all problems between them through dialogue and also to revive military consultations so that accidental conflict could be averted. “I think President Trump deserves big credit for bringing about the inter-Korean talks, I want to show my gratitude,” Moon told reporters at his New Year’s news conference. “It could be a resulting work of the U.S.-led sanctions and pressure.” Trump and North Korean leader Kim Jong Un exchanged threats and insults over the past year, raising fears of a new war on the peninsula. South Korea and the United States are technically still at war with the North after the 1950-53 Korean conflict ended with a truce, not a peace treaty.

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Ads are killing the experience. Most people by now have ad blockers. That whole industry needs drastic change.

Apple’s Privacy Feature Costs Ad Companies Millions (G.)

Internet advertising firms are losing hundreds of millions of dollars following the introduction of a new privacy feature from Apple that prevents users from being tracked around the web. Advertising technology firm Criteo, one of the largest in the industry, says that the Intelligent Tracking Prevention (ITP) feature for Safari, which holds 15% of the global browser market, is likely to cut its 2018 revenue by more than a fifth compared to projections made before ITP was announced. With annual revenue in 2016 topping $730m, the overall cost of the privacy feature on just one company is likely to be in the hundreds of millions of dollars. Dennis Buchheim, general manager of the Interactive Advertising Bureau’s Tech Lab, said that the feature would impact the industry widely.

“We expect a range of companies are facing similar negative impacts from Apple’s Safari tracking changes. Moreover, we anticipate that Apple will retain ITP and evolve it over time as they see fit,” Buchheim told the Guardian. “There will surely be some continued efforts to ‘outwit’ ITP, but we recommend more sustainable, responsible approaches in the short-term,” Buchheim added. “We also want to work across the industry (ideally including Apple) longer-term to address more robust, cross-device advertising targeting and measurement capabilities that are also consumer friendly.” ITP was announced in June 2017 and released for iPhones, iPads and Macs in September. The feature prevents Apple users from being tracked around the internet through careful management of “cookies”, small pieces of code that allow an advertising technology company to continually identify users as they browse.

Its launch sparked complaints from the advertising industry, which called ITP “sabotage”. An open letter signed by six advertising trade bodies called on Apple “to rethink its plan … [that risks] disrupting the valuable digital advertising ecosystem that funds much of today’s digital content and services.” It also accused the company of ignoring internet standards, which say that a cookie should remain on a computer until it expires naturally or is manually removed by a user. Instead, the industry said, Apple is replacing those standards “with an amorphous set of shifting rules that will hurt the user experience and sabotage the economic model for the internet”.

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We haven’t heard the last of this flaw which is actually a feature.

Antivirus Tools Caught With Their Hands In The Windows Cookie Jar (Reg.)

Microsoft’s workaround to protect Windows computers from the Intel processor security flaw dubbed Meltdown has revealed the rootkit-like nature of modern security tools. Some anti-malware packages are incompatible with Redmond’s Meltdown patch, released last week, because the tools make, according to Microsoft, “unsupported calls into Windows kernel memory,” crashing the system with a blue screen of death. In extreme cases, systems fail to boot up when antivirus packages clash with the patch. The problem arises because the Meltdown patch involves moving the kernel into its own private virtual memory address space. Usually, operating systems such as Windows and Linux map the kernel into the top region of every user process’s virtual memory space.

The kernel is marked invisible to the running programs, although due to the Meltdown design oversight in Intel’s modern chips, its memory can still be read by applications. This is bad because it means programs can siphon off passwords and other secrets held in protected kernel memory. Certain antivirus products drill deep into the kernel’s internals in order to keep tabs on the system and detect the presence of malware. These tools turn out to trash the computer if the kernel is moved out the way into a separate context. In other words, Microsoft went to shift its cookies out of its jar, and caught antivirus makers with their hands stuck in the pot. Thus, Microsoft asked anti-malware vendors to test whether or not their software is compatible with the security update, and set a specific Windows registry key to confirm all is well.

Only when the key is set will the operating system allow the Meltdown workaround to be installed and activated. Therefore, if an antivirus tool does not set the key, or the user does not set the key manually for some reason, the security fix is not applied. In fact, until this registry key is set, the user won’t be able to apply any Windows security updates – not just this month’s patches, but any of them in the future.

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UK and US will not give in any time soon.

Julian Assange’s Stay In London Embassy Untenable, Says Ecuador (G.)

Ecuador’s foreign minister has said Julian Assange’s five-and-a-half-year stay in her country’s London embassy is “untenable” and should be ended through international mediation. The WikiLeaks founder has been holed up in Knightsbridge since the summer of 2012, when he faced the prospect of extradition to Sweden over claims that he sexually assaulted two women. He denies the accusations. Swedish prosecutors last year unexpectedly dropped their investigation into the allegations, which included a claim of rape. But Assange still faces arrest for breaching bail conditions if he steps outside the embassy and WikiLeaks has voiced fears that the US will seek his extradition and that there is a sealed indictment ordering his arrest. [..] Jeff Sessions, said last May that Assange’s arrest was now a “priority”.

Ecuador’s foreign minister, María Fernanda Espinosa, said her country was now seeking a “third country or a personality” to mediate a final settlement with the UK to resolve the impasse and said it was “considering and exploring the possibility of mediation”. “No solution will be achieved without international cooperation and the cooperation of the United Kingdom, which has also shown interest in seeking a way out,” she told foreign correspondents in Quito, according to Agence France-Presse. Assange, who has received numerous visitors to his modest quarters in the embassy, ranging from Nigel Farage to Lady Gaga, has described the period since his initial arrest as a “terrible injustice”. Not being able to see his children grow up was “not something I can forgive”, he said.

[..] On Tuesday evening, a lawyer for Assange appeared to welcome Ecuador’s proposal. He said his client had a right to asylum and argued that the risk of him being persecuted in the US had “escalated further in recent months under the Trump administration’s war on WikiLeaks” and that the investigation in Sweden had twice been discontinued. “If the UK wishes to show that it is a nation that respects its human rights obligations and commitments to the United Nations, it is time for Mr Assange to be allowed to enjoy his right to liberty, and fundamental right to protection against persecution in the United States,” he said. A spokesperson for the UK government said: “The government of Ecuador knows that the way to resolve this issue is for Julian Assange to leave the embassy to face justice.”

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“Julian Assange isn’t hiding from justice, he’s hiding from injustice.”

Australia Must Rescue Assange From The Establishment That Tortured Manning (CJ)

Private Manning was tortured. As sure as if they’d strapped her down and set upon her flesh with fire and steel, she was tortured. United Nations special rapporteur on torture Juan E. Mendez stated unequivocally in 2012 that Manning’s treatment at the hands of the US government during her imprisonment was “cruel, inhuman and degrading,” after 295 legal scholars had already signed a letter in 2011 declaring that she was being “detained under degrading and inhumane conditions that are illegal and immoral.” Humans, like all primates, are evolutionarily programmed to be social animals, which is why solitary confinement causes our systems to become saturated in distress signals as real as pain or fear. Studies have shown that fifteen days of this draconian practice causes permanent psychological damage. Manning was in solitary confinement for nearly a year.

Manning attempted suicide in July of 2016. To punish her for her attempt to end her misery, they tortured her some more. She attempted suicide again three months later. The same sadistic regime which inflicted these horrors upon Manning has during the current administration prioritized the arrest of WikiLeaks editor-in-chief Julian Assange, and the international arms of the US power establishment have been working to facilitate that aim. The Guardian reports that Ecuador’s foreign minister is now saying Assange’s continued stay in the nation’s London embassy has become “untenable” and is seeking international mediation, to which a spokesman for the UK government has responded that “The government of Ecuador knows that the way to resolve this issue is for Julian Assange to leave the embassy to face justice.”

Justice. A government whose international operations are uniformly indistinct from America’s wants Assange to leave political asylum and trust his life to an international power establishment that tortures whistleblowers in the name of “justice”. Julian Assange isn’t hiding from justice, he’s hiding from injustice. What sane human being wouldn’t? Time after time after time we are shown that whistleblowers, leakers, and those who facilitate them are not shown anything remotely resembling justice by this depraved Orwellian establishment. Which is why Australia must intervene and protect him.

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The value of your life plunges along with that of others.

The Fog of War: Global Airstrike Deaths Up At Least 82% In 2017 (RT)

More than 15,000 civilians were killed by explosive weapons in 2017, a 42 percent increase on last year, while deaths by airstrikes increased by 82 percent, a new study by Action on Armed Violence has found. The research shows that, while official stats on civilian casualties are on the rise, they’re still modest in comparison to the “true figures.” “The US has a habit of assuming all fighting-aged men are, in fact, fighters…This is the hammer that the US uses to establish the truth in war,” the organization’s Executive Director Iain Overton told RT. Much of the increase is due to the battles to retake Islamic State strongholds in Mosul, Iraq and Raqqa, Syria. The Syrian conflict and the Saudi-led coalition bombing Yemen also accounted for a large proportion of civilian deaths.

The survey, found 8,932 civilians were killed by air-launched explosives in the first 11 months of 2017, compared to 4,902 during the same period in 2016. “At least 60 countries around the world saw explosive weapons being used last year,” Action on Armed Violence’s Executive Director Iain Overton told RT. “We have always acknowledged that our data would likely represent a lower figure of total civilians killed or injured than might actually be the case,” Overton said. “This is particularly true when there is a single fatality or wounding, and particularly in under-reporting of those injured by a bomb blast.” “When the fog of war descends casualty figures often fall short – both because they become highly politicized and because accurate reporting is often a casualty of war itself,” he added.

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Europe has no morals left.

Scores Feared Dead And Up To 100 Missing After Boat Sinks Off Libya Coast (G.)

Survivors from a boat that foundered off Libya’s coast on Tuesday said about 50 people who had embarked with them were feared dead, while the coastguard said the number of missing might be as high as 100. Libyan coastguard vessels picked up nearly 300 migrants from three boats off the coast of the North African country on Tuesday, but one rubber boat was punctured and the coastguard only found 16 survivors clinging to its wreckage. “We found the migrant boat at about 10 o’clock this morning. It had sunk and we found 16 migrants. The rest were all missing and, unfortunately, we didn’t find any bodies or [other] survivors,” said Nasr al-Qamoudi, a coastguard commander.

Several of the survivors, who were brought back to a naval base in Tripoli, said there were originally about 70 people on board the boat when it set off near the town of Khoms, east of the capital. A coastguard statement later said that “at least 90-100” migrants were missing. The two other migrant boats were found off Zawiya, west of Tripoli. [..] Libya is the most common departure point for migrants trying to reach Europe from Africa by sea. More than 600,000 have crossed the central Mediterranean in the past four years, generally travelling in flimsy inflatable craft provided by smugglers that often break down or puncture. Under heavy pressure from Italy, some Libyan armed factions have blocked smuggling since last summer. Libya’s Italian-backed coastguard has also stepped up interceptions, returning migrants to Libya, where they are detained and often re-enter smuggling networks.

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Feb 052017
 
 February 5, 2017  Posted by at 8:59 pm Finance Tagged with: , , , , , , , , ,  


Hugo Simberg The Wounded Angel 1903

 

US Appeals Court Denies Request To Restore Trump’s Immigration Ban (R.)
DHS Suspends Actions On Travel Ban; ‘Standard Policy’ Now In Effect (R.)
Trump Tells O’Reilly He ‘Respects’ Putin in Super Bowl Interview (Fox)
As Trump Weighs Thaw With Putin, EU Set to Renew Its Blacklist (BBG)
Goldman Throws Cold Water On Trump Agenda (CNBC)
Economists Say Action On Carbon Is Vital, Or Say Nothing At All (Age)
Japan – It’s Finally Happening (Muir)
Le Pen Kicks Off Campaign With Promise Of French ‘Freedom’ (R.)
Theresa May Abandons ‘Home Owning Democracy’ of Thatcher and Tories (G.)
Attention Trade Warriors: Germany’s Surplus is on the Wane (BBG)
Dennis Kucinich Rages Against The Military-Industrial-Complex (FB)
NATO, Not Russia, Has Deployed Tanks To Poland & Baltic States – Galloway (RT)
Varoufakis Calls on PM Tspiras to Ditch Bailout Restructuring (GR)
Varoufakis Urges Tsipras To Ditch Negotiations, Adopt “Parallel System” (KTG)
UK: Refugees Heading To Europe To Be Sent To Asia And Latin America (Ind.)

 

 

It was always going to the Supreme Court. More interesting right now is how strongly this is dividing the White House team. Kelly refused to enact some of Bannon’s demands. Tillerson and Mattis are not sitting comfortable either. And the legal team has gained in standing, a lot. Trump cannot afford too many of these snags, even if they love the attention and controversy coming from it. All in all, a good thing that the legal system gets tested, never a thing to fall asleep on.

US Appeals Court Denies Request To Restore Trump’s Immigration Ban (R.)

A U.S. appeal court late on Saturday denied an emergency appeal from the U.S. Department of Justice to restore an immigration order from President Donald Trump barring citizens from seven mainly Muslim countries and temporarily banning refugees. “Appellants’ request for an immediate administrative stay pending full consideration of the emergency motion for a stay pending appeal is denied,” the ruling by the U.S. Court of Appeals for the Ninth Circuit said. It said a reply from the Department in support of the emergency appeal was due on Monday. The Department filed the appeal a day after a federal judge in Seattle ordered Trump’s travel ban to be lifted. The president’s Jan. 27 order had barred admission of citizens from the seven nations for 90 days.

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Law.

DHS Suspends Actions On Travel Ban; ‘Standard Policy’ Now In Effect (R.)

A Seattle federal judge on Friday put a nationwide block on U.S. President Donald Trump’s week-old executive order that had temporarily barred refugees and nationals from seven countries from entering the United States. The judge’s temporary restraining order represents a major setback for Trump’s action, though the White House said late Friday that it believed the ban to be “lawful and appropriate” and that the U.S. Department of Justice would file an emergency appeal. As a result of the ruling, the Department of Homeland Security suspended its enforcement of the ban, announcing on Saturday that “standard policy and procedures” were now in effect. “In accordance with the judge’s ruling, DHS has suspended any and all actions implementing the affected sections of the Executive Order entitled, “Protecting the Nation from Foreign Terrorist Entry into the United States,” DHS said in a statement.

“DHS personnel will resume inspection of travelers in accordance with standard policy and procedure,” it stated, adding that the Justice Department would file an emergency stay to “defend the president’s executive order, which is lawful and appropriate.” The move came on the heels of the State Department announcing it was reversing the revocation of visas that left countless travelers stranded at airports last weekend. The move all but ensures a protracted public and legal battle over one of Trump’s most controversial policies, barely two weeks after he was inaugurated. Early Saturday morning, Trump criticised the ruling as “ridiculous” and warned of big trouble if a country could not control its borders.

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Quite right. Putin bashing is a losing strategy.

Trump Tells O’Reilly He ‘Respects’ Putin in Super Bowl Interview (Fox)

On Sunday, Bill O’Reilly will hold a special Super Bowl pre-game interview with President Trump at 4 p.m. ET on your local FOX broadcast station. In a special preview, Trump revealed his plans for dealing with Russian President Vladimir Putin. O’Reilly asked Trump whether he “respects” the former KGB agent: “I do respect him, but I respect a lot of people,” Trump said, “That doesn’t mean I’m going to get along with him.” Trump said he would appreciate any assistance from Russia in the fight against ISIS terrorists, adding that he would rather get along with the former Cold War-era foe than otherwise. “But, [Putin] is a killer,” O’Reilly said. “There are a lot of killers,” Trump responded, “We’ve got a lot of killers. What do you think? Our country’s so innocent?”

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For the EU, like NATO, Putin bashing is the only thing left that provides a reason to be. That’s just dangerous.

As Trump Weighs Thaw With Putin, EU Set to Renew Its Blacklist (BBG)

The European Union plans to renew asset freezes and travel bans against key allies of Russian President Vladimir Putin who are accused of destabilizing Ukraine, at a time when Donald Trump is weighing warmer ties with Moscow. Four EU officials said member governments intend by mid-March to prolong the sanctions for another six months on more than 100 Ukrainians and Russians. Among them: Arkady Rotenberg, co-owner of SMP Bank and InvestCapitalBank, and Yury Kovalchuk, the biggest shareholder in Bank Rossiya, the Brussels-based officials said. The officials spoke on condition of anonymity because the deliberations are confidential. Trump, who had a phone call with Putin on Jan. 28, has left open the possibility of easing the U.S.’s sanctions against Russia.

Former President Barack Obama drew up the American penalties in coordination with the 28-nation EU after Putin annexed the Ukrainian region of Crimea in 2014 and lent support to separatist rebels. “The Europeans are waiting to see what hand grenade Trump throws into the Russia-Ukraine pond,” Michael Emerson, a foreign-policy expert at the CEPS think tank in Brussels, said by phone. With the asset freezes and travel bans due to expire on March 15, “European politicians and diplomats will be cautious and stick to the status quo,” he said. The planned renewal of the blacklist highlights the EU’s political commitment to a policy that Angela Merkel and Francois Hollande guided in step with Obama. The European sanctions against Russia resemble the U.S. penalties and include a separate set of curbs – prolonged for another six months just before Trump took office on Jan. 20 – on Russia’s financial, energy and defense industries.

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Volatility.

Goldman Throws Cold Water On Trump Agenda (CNBC)

The policy halo effect that provided ballast to the stock market and fueled investor optimism is already being dimmed by political realities, according to Goldman Sachs, which may have negative implications for economic growth. In a note to clients on Friday, the investment bank noted President Donald Trump’s agenda was already running into bipartisan political resistance, with doubts growing about potential tax reform and a repeal of the Affordable Care Act, among other marquee Trump administration initiatives. Just two weeks into his tenure, “risks are less positively tilted than they appeared shortly after the election ,” Goldman wrote. Growing resistance to Trump’s executive orders on immigration and financial reform has galvanized opposition while dividing members of the president’s own Republican Party.

It has also curbed the enthusiasm of investors, who sent stocks on a roller-coaster ride this week as they struggled to reconcile the new restrictions on immigration with Trump’s professed pro-business bent. “While bipartisan cooperation looked possible on some issues following the election, the political environment appears to be as polarized as ever, suggesting that issues that require bipartisan support may be difficult to address,” the bank added. The balance of risks “are less positively tilted than they appeared shortly after the election,” Goldman said, which may blunt the force of future growth. Amid reports that top GOP members are reportedly becoming nervous about the impact of a full-fleged repeal of health care, that political pushback “does not bode well for reaching a quick agreement on tax reform or infrastructure funding, and reinforces our view that a fiscal boost, if it happens, is mostly a 2018 story.”

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Steve on Twitter: “Coulnd’t resist it: sanctimonious carbon price pap, & belief market can solve an ecological problem just baug me. So my satirical gene fired.”

Economists Say Action On Carbon Is Vital, Or Say Nothing At All (Age)

There is no consensus. Economists either believe it is vital that Australia becomes a low-carbon intensity economy, or that the issue is so unimportant – or perhaps that it is so politically divisive – that they choose not to volunteer an opinion. Asked about the importance of reducing the country’s carbon footprint and how best to do it, more than half of 27 economists from industry, consultancy, academia and finance questioned for the annual BusinessDay Scope survey agreed it was a must. Another 10 left the question blank. Whether this indicates a lack of interest or the contentious nature of climate change policy is unclear. But none of those who did answer made the case that cleaning up the economy did not matter. They overwhelmingly said action should be swift and include a market-based carbon pricing scheme.

[..] Steve Keen, of London’s Kingston University, made what – we think – was a similar point about the importance of climate action, albeit less conventionally. “Nah mate! Wassa matta, dontcha own a pair of budgie smugglers?” he wrote. “It’s all a conspiracy by Marxists anyway to undermine the Ostralyan way of life – you know, burning stuff and damn well enjoying it rather than whingeing. “A bit a coal never hurt anyone, matter of fact it tastes even better than a raw onion!”

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“I am shorting JGBs with both fists.”

Japan – It’s Finally Happening (Muir)

I still shake my head at the stupidity. One of the most overindebted countries in the history of modern finance trading with a 0% thirty year bond. Professor Malkiel – stick that in your pipe and smoke it. But into that panic a crazy thing happened. Worried its bonds would trade at negative yields and pressure the financial system, the Bank of Japan pegged its 10 year yield at 0%. In doing so, the Bank of Japan moved from a set rate of balance sheet expansion to one that varies based on whether that peg is either too high, or too low. If the equilibrium level of 10 year rates was in fact below 0%, the Bank of Japan would be forced to sell bonds to keep rates stuck at 0%. If there was demand for credit and 10 year rates moved higher, then the BoJ would be forced to buy bonds to keep them from declining.

The BoJ program was a little more nuanced, and there were some caveats, but at its heart, the BoJ was giving up control of its balance sheet so it could peg a specific part of the yield curve. Of course Central Banks do this all the time. The difference is they usually operate at the front part of the curve, and when there is too much demand or supply, they change the rate. When the Bank of Japan took this unprecedented step, I walked away from my short JGB position. I figured there were better fixed income markets to short. Yet I highlighted that by pegging the 10 year rate, the Bank of Japan had not eliminated volatility, but merely postponed it. Eventually the Bank of Japan’s massive balance sheet expansion would kick in. At that point, inflation would pick up, credit would be demanded and the Bank of Japan would be forced to defend the 0% peg.

Yet this defending would be expansionary as they would be forced to buy bonds and expand the amount of base money, which if not offset with a decline in the velocity of money, would create more inflation, etc… All of this would be occurring with an already highly supercharged Japanese Central Bank balance sheet. I have been sitting and waiting for this expansionary feedback loop to kickstart. Until recently, the Bank of Japan had not been forced to buy any bonds to keep the rate pegged at 0%. When 10 year rates drifted far enough above 0%, the Bank of Japan made a bid to buy an unlimited number of bonds at a level below the market, which scared the market back to the pegged level. But this week the market decided to test the BoJ’s resolve.

The JGB 10 Year bond spiked through the previous high yield on news the Bank of Japan would not be expanding their balance sheet quite as aggressively as expected in their regular QE program. As yields popped through the previous 0.10% yield ceiling, the Bank of Japan came charging into the market. The BoJ bid 3-4 basis points through the market with unlimited size to push yields back down to the 0.10% level. What does this mean? The market is finally saying the demand for credit is enough to force the Bank of Japan to buy bonds to keep rates down. And that was the signal I was waiting for. I am shorting JGBs with both fists. It probably won’t happen tomorrow, nor the next day. Heck it probably won’t even happen next month, but we have reached the point where I need to be short JGBs.

The pressure will continue to build and when it finally bursts, the torrent will be overwhelming and quick. Although many traders think they will be able to climb on board, it will most likely be extremely difficult – like jumping on a raft bouncing down a raging river, it always seems way easier than it is. I hate German bunds, but I now have a fixed income instrument I hate even more. I expect bund yields to double or even triple in the coming quarters, but JGBs will eventually trade significantly though bunds. It would be just like the Market Gods to finally usher in the JGBs collapse once all the hedge fund guys had given up on it…

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Count her out at your own peril.

Le Pen Kicks Off Campaign With Promise Of French ‘Freedom’ (R.)

French far-right leader Marine Le Pen kicked off her presidential campaign on Saturday with a promise to shield voters from globalization and make their country “free”, hoping to profit from political turmoil to score a Donald Trump-style upset. Opinion polls see the 48-year old daughter of National Front (FN) founder Jean-Marie Le Pen topping the first round on April 23 but then losing the May 7 run-off to a mainstream candidate. But in the most unpredictable election race France has known in decades, the FN hopes the scandal hitting conservative candidate Francois Fillon and the rise of populism across the West will help convince voters to back Le Pen. “We were told Donald Trump would never win in the United States against the media, against the establishment, but he won… We were told Marine Le Pen would not win the presidential election, but on May 7 she will win!” Jean-Lin Lacapelle, a top FN official, told several hundred party officials and members.

In 144 “commitments” published at the start of a two-day rally in Lyon, Le Pen proposes leaving the euro zone, holding a referendum on EU membership, slapping taxes on imports and on the job contracts of foreigners, lowering the retirement age and increasing several welfare benefits while lowering income tax. The manifesto also foresees reserving certain rights now available to all residents, including free education, to French citizens only, hiring 15,000 police, curbing migration and leaving NATO’s integrated command. “The aim of this program is first of all to give France its freedom back and give the people a voice,” Le Pen said in the introduction to the manifesto.

[..] “This presidential election puts two opposite proposals,” Le Pen said in her manifesto. “The ‘globalist’ choice backed by all my opponents … and the ‘patriotic’ choice which I personify.” If elected, Le Pen says she would immediately seek an overhaul of the European Union that would reduce it to a very loose cooperative of nations with no single currency and no border-free area. If, as is likely, France’s EU partners refuse to agree to this, she would call a referendum to leave the bloc.

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Horse barn.

Theresa May Abandons ‘Home Owning Democracy’ of Thatcher and Tories (G.)

A major shift in Tory housing policy in favour of people who rent will be announced by ministers this week as Theresa May’s government admits that home ownership is now out of reach for millions of families. In a departure from her predecessor David Cameron, who focused on advancing Margaret Thatcher’s ambition for a “home-owning democracy”, a white paper will aim to deliver more affordable and secure rental deals, and threaten tougher action against rogue landlords, for the millions of families unable to buy because of sky-high property prices. Ministers will say they want to change planning and other rules to ensure developers provide a proportion of new homes for “affordable rent” instead of just insisting that they provide a quota of “affordable homes for sale”.

They will also announce incentives to encourage landlords to offer “family-friendly” guaranteed three-year tenancies, new action to ban unscrupulous landlords who offer sub-standard properties, and a further consultation on banning many of the fees that are charged by letting agents. A senior Whitehall source said: “We want to help renters get more choice, a better deal and more secure tenancies.” They added that the government did not want to scare people off from renting out homes, but offer incentives to encourage best practice and isolate the worst landlords. By emphasising the rights of renters, as well as trying to boost house building, the white paper will mark a turning point for a party that since the 1980s, and the first council house sales, has promoted home ownership as a badge of success, while neglecting the interests of renters.

The Tory manifesto for the 2015 general election spelt out plans for 200,000 new “starter homes” that could be bought by first-time buyers at 20% discounts, but said little about promoting the interests and improving the lot of so-called “generation rent”. Cameron also pushed the idea of getting people on the housing ladder through shared ownership schemes, an idea that is no longer such a priority. The white paper will be seen as part of May’s deliberate break with Cameron, and her drive to create a country “that works for everyone, not just the privileged few”.

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Makes no difference anymore to Greece and Italy.

Attention Trade Warriors: Germany’s Surplus is on the Wane (BBG)

The Trump administration appears intent on escalating the long-standing U.S. practice of attacking Germany’s current-account surplus. Good news for those on the receiving end: It has probably peaked. As officials like National Trade Council director Peter Navarro rail against the trade imbalance that dominates the balance of payments between the two countries, pensioners, home-buyers and immigrants are quietly working to bring that $297 billion current-account surplus down. According to research by Deutsche Bank, demographics and a housing boom are two factors that will drive the current account balance – the difference between what a country earns from abroad and what it spends – to its lowest level in seven years by 2020.

That may offer little consolation to the German delegation when it hosts a Group of 20 meeting of finance ministers in March, as they’ll likely face intensified criticism for allowing such an imbalance to continue. Germany has long faced flak, both within the euro area and outside it, for failing to encourage greater domestic spending and imports to balance out its external excess. Still, while the weaker euro will continue to make German exports attractive in the U.S. – think expensive sedans, high-tech machinery – there are countervailing factors at play on the other side of the equation. “In the medium term we expect the demographic development and the solid domestic economy, driven by a sustained positive development on the property market, to push the surplus down to 7 percent of GDP,” Deutsche Bank economist Heiko Peters said by phone.

A rising share of pensioners in the German population, who normally have less money to save than people in jobs, will crimp household savings rates, while an increasing number of immigrants such as refugees will contribute to boosting German imports, Peters wrote in a study first published last year. And with housing valuations outpacing income and rent growth since 2009, home owners feel richer, save less toward retirement and borrow against their property. That leads to rising imports of building materials to fuel the property boom and increased demand for foreign consumer goods on the back of the wealth effect. 7% of GDP is still a mighty big number for an economy as large as Germany’s. “That’s still a relatively high level until 2020,” Peters says. “But an even greater demographic effect is then expected for 2020-2025, and the surplus should then decline clearly further.”

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Another ‘curious’ WaPo feat.

Dennis Kucinich Rages Against The Military-Industrial-Complex (FB)

I have dedicated my life to peace. As a member of Congress I led efforts to avert conflict and end wars in countries such as Afghanistan, Iraq, Lebanon, Libya, Syria and Iran. And yet those of us who work for peace are put under false scrutiny to protect Washington’s war machine. Those who undermine our national security by promoting military attacks and destroying other nations are held up as national leaders to admire. Recently Rep. Tulsi Gabbard and I took a Congressional Ethics-approved fact finding trip to Lebanon and Syria, where we visited Aleppo and refugee camps, and met with religious leaders, governmental leaders and people from all sides of the conflict, including political opposition to the Syrian government.

Since that time we have been under constant attack on false grounds. The media and the war establishment are desperate to keep hold of their false narrative for world-wide war, interventionism and regime change, which is a profitable business for Washington insiders and which impoverishes our own country. Today, Rep. Gabbard came under attack yet again by the Washington Post’s Josh Rogin who has been on a tear trying to ruin the reputations of the people and the organization who sponsored our humanitarian, fact-finding mission of peace to the Middle East. Rogin just claimed in a tweet that as community organization I have been associated with for twenty years does not exist. The organization is in my neighborhood. Here’s photos I took yesterday of AACCESS-Ohio’s marquee.

It clearly exists, despite the base, condescending assertions of Mr. Rogin. Enough of this dangerous pettiness. Let’s dig in to what is really going on, inside Syria, in the State Department, the CIA and the Pentagon. In the words of President Eisenhower, let’s beware (and scrutinize) the military-industrial-complex. It is time to be vigilant for our democracy.


These leaders of the Christian faith in Aleppo begged for the US to stop funding terrorists in #Syria. They expressed that before international interventions (covert and overt) Syrians lived in peace without concern as to whether they were Christian, Muslim or Jew.

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Line of the day: “Why are we spending £160bn on renewing Trident when we now know its missiles are more likely to hit Australia if they were aimed at Russia?..”

NATO, Not Russia, Has Deployed Tanks To Poland & Baltic States – Galloway (RT)

British Defense Secretary speech on “Russian threat” is a desperate attempt to “save jobs and budgets” for the Cold War crowd, which is worried the new US leader will not consider Russia an enemy, broadcaster and former British MP George Galloway told RT. Addressing a group of university students, the UK’s defense secretary Michael Fallon warned of a resurgent Russia and said that it is becoming aggressive. RT: What did you make of Michael Fallon’s speech? George Galloway: Well, Michael Fallon puts the ‘squeak’ in the word ‘pipsqueak.’ He is of course the defense minister of a small and semi-detached European power with not much military prowess and which wants to feel big about itself.

And these people, and he’s not alone – the military industrial complex in the United States is up to the same game – they are desperately thrashing around to save their jobs, to save their budgets, to save their roles as muscle-men in the world. And Fallon got used to, as did other European powers, going around the world, threatening people with America’s army. Now America’s army is not quite so reliable, because America has a President who might not want to use the army in the way that these people want him to, at least one hopes not. And so they desperately seek to continually exacerbate the existing tensions with Russia to defend their own relevance. The people are asking, “What’s NATO for?”

The people are asking, “Why are we spending £160bn on renewing Trident when we now know its missiles are more likely to hit Australia if they were aimed at Russia? And in any case Russia has thousands of nuclear weapons, and we only a handful.” So it’s all pretty pitiful, actually. Right down to the audience of university students, hoping that none of them would challenge him. I’d like him to debate these matters with me, he knows me well, he comes from the same town in Scotland as me. I’d really love to get my metaphorical hands on him to have some of these matters out. The truth is that the European Union is having to come to terms with the fact that the US now has a President that doesn’t want war with Russia and they – who have built their entire 50-60 years of history on the possibility of war with Russia – are all at sea, except we don’t have that many battleships left either.

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Greece turning into an impoverished prison camp is a feature not a bug.

Varoufakis Calls on PM Tspiras to Ditch Bailout Restructuring (GR)

Yanis Varoufakis wrote in an op-ed in Efimerida ton Syntakton on Saturday. The former finance minister called on Prime Minister Alexis Tspiras to adopt a plan originally proposed by Varoufakis while he was still in office. The plan would unilaterally restructure the loans the ECB holds. In addition according to BitCoin Magazine and reiterated in the former FM’s op-ed a payment system that could operate in euros but which could be changed into drachmas “overnight” if necessary would be implemented along with a parallel payment system. “This two-pronged preparation is the only way to prevent another excruciating retreat by the prime minister in the short-term and [German Finance Minister Wolfgang] Schaeuble’s plan in the long-term,” Varoufakis wrote. Varoufakis has been a vocal protester to Greek bailout plans and restructuring as it stands now, hence his resignation. He firmly believes that the current plan could lead to Greece leaving the Eurozone of their own accord.

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More on that. “In reality there was never a basis for hope that the toxic 3rd bailout would be gradually rationalized, in terms that the European Commission would support Athens so that the austerity and anti-social IMF measures would relax..”

Varoufakis Urges Tsipras To Ditch Negotiations, Adopt “Parallel System” (KTG)

Former finance minister Yanis Varoufakis strikes back and urges Prime Minister Alexis Tsipras to turn his back on Greece’s lenders, adopt a parallel payment system and to unilaterally restructure the loans held by the ECB. In an op-ed in Efimerida ton Syntakton, Varoufakis, Varoufakis calls on Tispras to prepare for rupture with creditors in order to avoid rupture. “This two-pronged preparation is the only way to prevent another excruciating retreat by the prime minister in the short term and [German Finance Minister Wolfgang] Schaeuble’s plan in the long term,” Varoufakis wrote. In his article, Varoufakis suggested that Schaeuble’s strategy is to lead Greeks to the point of exhaustion so they ask to leave the euro themselves.

Noting that the “parallel payment system was already designed in 2014”, Varoufakis stresses that Tsipras had “two delusions” that led the government to the current impasse: A) that on the night of the referendum, the dilemma was between Schaeuble’s Grexit Plan and the 3rd bailout, and B) that the obedience to the 3rd bailout could be politically manageable through a parallel, society-friendly program. Both of these “working assumptions” were based only on autosuggestion, the ex finance minister stresses adding that he tried to explained this to the Prime Minister on the night of the referendum

“In reality there was never a basis for hope that the toxic 3rd bailout would be gradually rationalized, in terms that the European Commission would support Athens so that the austerity and anti-social IMF measures would relax, the IMF would force Berlin to accept debt restructuring and lower primary surpluses, the ECB would include Greece in the bond purchase program (QE),” Varoufakis wrote. He accused leading European negotiators of lying. “That Moscovici [EU Monetary Affairs Commissioner], Coerer [ECB] and Sapen [French finance minister] might have given such promises was not an excuse. Since May 2015 we were fully aware that these gentlemen know how to lie and fail to deliver on their promises when they do not lie.”

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Completely devoid of any comprehension or compassion. Moral Bankruptcy. Throw money at it, that should work… And then keep bombing, British involvement in that makes a lot of profit.

UK: Refugees Heading To Europe To Be Sent To Asia And Latin America (Ind.)

Refugees heading to Europe will be urged to settle in Asia and Latin America instead, under a new £30m British aid package. Theresa May announced the scheme at an EU summit in Malta, arguing it showed the Government is “stepping up its support for the most vulnerable refugees”. The package will see Britain provide lifesaving supplies for people facing freezing conditions across Eastern Europe and Greece, including warm clothing, shelter and medical care. However, it will also pay for better infrastructure in far-flung countries willing to take refugees who had hoped to settle in Europe. The move builds on an existing scheme run by The UN Refugee Agency (UNHCR), but it is the first time Britain’s aid budget has been used to bolster it. It risks adding to criticism that the Prime Minister is unwilling for the UK to accept a reasonable share of the refugees and migrants fleeing Syria and other war zones.

Only a few thousand Syrian refugees have been resettled in Britain – and the Government has refused to take part in an EU-wide programme to co-ordinate the continent’s response to the crisis. Government sources stressed that people would only be diverted to countries in Asia and Latin America if they were willing to be resettled there. The Department for International Development is expected to release a list of interested countries later. In Malta the Prime Minister insisted the focus of the £30m programme was “helping migrants return home rather than risk their lives continuing perilous journeys to Europe”. It would provide assistance to refugees and migrants across Greece, the Balkans, Libya, Egypt, Tunisia, Morocco, Algeria and Sudan. Priti Patel, the International Development Secretary, said: “Conflict, drought and political upheaval have fuelled protracted crises and driven mass migration. We cannot ignore these challenges.

The package will be delivered by UNHCR, the International Organisation for Migration (IOM) and NGO collective Start Network. Its aim is to:

* provide 22,400 life-saving relief items including tents, blankets, winter clothes such as hats and gloves and hygiene kits including mother and baby products

* help more than 60,000 people with emergency medical care, legal support and frontline workers to identify those at risk of violence and trafficking

* allow up to 22,000 people to reunite with family members they have become separated from

* help countries in Asia and Latin America that “might be able to resettle refugees put the infrastructure and systems in place to do so”

* provide more than 1,500 refugees in Egypt, including those fleeing Syria and other conflicts, with urgent health assistance and educational grants for students to go back to school

* provide a migrant centre in Sudan to enable “voluntary returns home when safe”, replicating a successful scheme in Niger.

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Oct 302016
 
 October 30, 2016  Posted by at 7:51 am Finance Tagged with: , , , , , , , , ,  


Jack Delano The Chicago & North Western between Chicago and Clinton, Iowa 1943

It looks like I owe you an update. Things move fast in the FBI vs Huma Abedin case. When only some 24 hours ago I started writing my article “Throw Huma Under the Bus?”, there was one thing I did not know at all, one thing I was guessing at as much as the reporters who brought it up, and one I couldn’t verify sufficiently to feel comfortable about including it in the piece.

First, what I did not know at all was the role of Department of Justice head and US Attorney General, Loretta Lynch. Nobody I had read wrote a single word about her role, and I said “Wait a minute! Anybody seen Loretta Lynch lately?”. 24 hours later we know that Lynch, and the DOJ, actively attempted to keep James Comey from writing his infamous letter to members of Congress.

These attempts were ostensibly based on a ‘longstanding’ tradition of the DOJ and FBI to minimalize any potential interference in (presidential) elections. Given that Comey didn’t have ‘enough’ solid evidence gathered from the emails, Lynch et al apparently told him he should not come forward. But it turns out there’s a dark flipside to this argument, please bear with me.

Second, there was the ‘rumor’, or whatever we may call it, that Comey faced pressure from agents (or ‘assets’) in the Bureau to either come forward or risk having details leaked into the press from within the FBI. This is still not verified, and maybe never will be, but it does fit a narrative that’s starting to take shape. Though perhaps not quite the way one might have suspected.

Third, something I couldn’t verify sufficiently, was the issue of a warrant the FBI would need to examine the emails on devices owned by, and in at least some cases shared by, Huma and husband Anthony Weiner. I had seen this, and wrote in yesterday’s Debt Rattle at the Automatic Earth that “The NY Post suggests that NBC suggests that the FBI needs a fresh warrant to study the new batch of emails..”. Nobody else mentioned it though.

But now there’s more on that aspect, and it changes the story, perhaps a lot. In an overall pretty good article, Yahoo’s Michael Isikoff has this:

FBI Still Does Not Have Warrant To Review New Abedin Emails Linked To Clinton Probe

When FBI Director James Comey wrote his bombshell letter to Congress on Friday about newly discovered emails that were potentially “pertinent” to the investigation into Hillary Clinton’s private email server, agents had not been able to review any of the material, because the bureau had not yet gotten a search warrant to read them, three government officials who have been briefed on the probe told Yahoo News.

At the time Comey wrote the letter, “he had no idea what was in the content of the emails,” one of the officials said, referring to recently discovered emails that were found on the laptop of disgraced ex-Rep. Anthony Weiner, the estranged husband of top Clinton aide Huma Abedin. Weiner is under investigation for allegedly sending illicit text messages to a 15-year-old girl.

As of Saturday night, the FBI was still in talks with the Justice Department about obtaining a warrant that would allow agency officials to read any of the newly discovered Abedin emails, and therefore was still in the dark about whether they include any classified material that the bureau has not already seen. “We do not have a warrant,” a senior law enforcement official said.

When I saw that confirmed, a whole new picture started emerging. You have on the one side James Comey who does something ‘unprecedented’, for which he knows he’ll face a lot of flack. On the other you have Loretta Lynch, a staunch Democrat not known to be nearly as impartial as Comey, trying to keep him from sending the letter.

And on top of that you have ‘negotiations’ between the DOJ and FBI about obtaining a warrant to get access to the emails. The DOJ can, and still may, refuse to grant the FBI that warrant. But that chance is a lot smaller now than if Comey had not sent his letter. By bringing the matter out into the open, he’s hugely increased the pressure on Lynch to issue the warrant.

What we have here in fact is a power struggle. And as I hinted before, this may not be Lynch vs Comey directly, but it may come from within the FBI. Where various ‘assets’ have become so frustrated with how the investigations have been conducted so far that they have put pressure on Comey that may even have taken the form of an ultimatum. “We’ll leak unless we get a warrant”.

But it’s quite possible that Comey himself is the one behind the pressure on the DOJ, it’s quite possible that he has grown as weary as his people of the ‘progress’ in the entire Hillary email proceedings.

There is no indication from the eight-page FBI report on the interview, however, that the agents ever pressed her on what has now turned into an explosive issue in the final days of the 2016 campaign: Did Weiner have access to any classified government documents on his laptop and iPhone — devices that, he apparently used to exchange sexually charged messages with women he met online, including in one alleged case, an underage teenager in North Carolina?

The fact that FBI agents failed to follow up on this shows that the original probe into the Clinton email server was “not thorough” and was “fatally flawed,” said Joseph DiGenova, a former U.S. attorney and independent counsel who has been a strong critic of Comey and the FBI probe. “The first thing they should have done was gotten a sworn affidavit about all her accounts and devices,” he said, adding that agents should have immediately attempted to obtain the devices, including Weiner’s.

We don’t know why the agents haven’t. The suggestion I referred to yesterday that Huma Abedin may have been granted a ‘secret immunity’ deal could have played a big part in that. After all, there must be some reason why no devices were seized in ‘part 1’ of the investigation; even if that reason is not exactly public knowledge. The ‘secret immunity’ and the lack of devices seized, of course remind us again of Lynch’s meeting with Bill Clinton on a tarmac in Phoenix back in June.

Agents may simply not have had the authority to ‘obtain’ the devices. Whether that was because the DOJ actively frustrated their investigation, or the orders came from Comey, we don’t know and we never may. But something’s changed since then. That’s what Comey’s letter, and its timing, strongly seems to suggest.

About the material found on Weiner’s devices, Hillary’s side of course has a good idea what’s in the emails. Huma has been thoroughly grilled by now, if she hadn’t been before. The FBI probably has at least a partial idea: it’s highly likely they have seen things when investigating Weiner that would now be a part of the Hillary email investigation if the warrant were issued.

Hillary and other Dems can now protest Comey’s actions all they want, and demand full openness, but they know full well that this openness depends on ‘their own Loretta Lynch’ granting the FBI that warrant. And every single second that the warrant is not issued is a dark cloud on Hillary’s campaign, and indeed on the whole of America.

Of course the Democrats would love to lift this whole thing over November 8, and that’s why they seek to play for time and focus -again- not on the content but on the process, the proceedings and the individuals involved. People inside the FBI -whether that includes Comey or not- appear to think that would not serve democracy. But they have tens of thousands of mails to dig through even if they get the warrant, and that takes time. Will they get that time?

There’s no way Comey is not smart enough to have seen coming what’s happening now. From the Democrats’ favorite son he’s become in their eyes so incompetent they even suggest he may be yet another of Putin’s assets in America.

Is he seeking to right a wrong? Did he think that no matter what he did he would be fed to either the Republican or the Democrat sharks anyway? Or was he pressured by his ‘assets’? Right now, it seems too soon to tell. But don’t be surprised if James Comey comes out of this looking like a true American Hero. Even if it costs him his job.

 

 

Sep 212016
 
 September 21, 2016  Posted by at 9:16 am Finance Tagged with: , , , , , , , , ,  Comments Off on Debt Rattle September 21 2016


Harris&Ewing Preparations for the inauguration of Woodrow Wilson, Court of Honor before White House 1913

Unlike in 1986, This Time US Might Not Dodge a Recession: Deutsche Bank (BBG)
Get Ready For The Mother Of All Stock Market Corrections (Tel.)
Japan Exports Fall 11th Straight Month, 9.6% YoY, Imports Plunge 17.3% (R.)
Bank of Japan Overhauls Policy Framework, Sets Yield Curve Target (R.)
Bank of Japan Introduces Rate Target for 10-Year Government Bonds (WSJ)
Could Germany Allow Deutsche Bank To Go Under? (Golem XIV)
Keynesian Deflation Humbug (Mish)
Nobody Has Ever Shut Down The World’s Best Drilling Rigs – Until Now (BBG)
Crude Slips As Venezuela Says Market Is 10% Oversupplied (Dow Jones)
SEC Probes Exxon Over Asset Valuation, Climate Change Accounting (WSJ)
Court Says Hanjin Shipping Rehab Plan ‘Realistically Impossible’ (R.)
Elizabeth Warren to Wells Fargo CEO: Resign, Return Earnings, Face Inquiry (G.)
Mexico Police Raid Sawmills To Rescue Monarch Butterfly Refuge (AFP)
Italy PM Renzi: Merkel Is ‘Lying To The Public’, Europe Is a ‘GHOST’ (Exp.)
EU: Refugees Must Stay On Greek Islands Despite Lesbos Fire (AP)

 

 

There are few things more nonsensical than ‘experts’ saying things like “..there’s a 30% probability that the U.S. will succumb to a recession over the next 12 months..” Yet, people keep listening.

Unlike in 1986, This Time US Might Not Dodge a Recession: Deutsche Bank (BBG)

Falling corporate margins, weakness in the U.S. labor market and rising corporate default rates — all features of the U.S. economy in 1986, a year it avoided a recession. Even if this year markets are largely shrugging off the deterioration in those key indicators and betting grim readings are down to temporary forces, Deutsche Bank strategists say to take little hope from a 30-year old precedent. Investors jittery over bleak readings on a slew of macro and corporate data have seized on 1986, when the same signals for a U.S recession were in place but the economy ended up growing 3.5% after inflation.

But bets on the continued expansion in U.S. output over the next year might be misplaced, according to European equity strategists at Deutsche Bank, since the economy is on a significantly weaker footing compared to the year that saw the release of Ferris Bueller’s Day Off. They restate the bank’s call that there’s a 30% probability that the U.S. will succumb to a recession over the next 12 months. That compares pessimistically with the 20% that is the average expectations of analysts surveyed by Bloomberg — and even with other analysts at the bank.

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…when central banks stop printing…

Get Ready For The Mother Of All Stock Market Corrections (Tel.)

[..] According to Chris Watling at Longview Economics, a wide range of indicators confirm the message: recession risks are rising. And if a recession is indeed looming, it almost certainly means a bear market in equities. Looking at all the US recessions of the last 77 years, Mr Watling finds that there is only one (1945) which has not been accompanied by a stock market correction. Complicating matters further is an ever more worrisome phenomenon – that both bond and equity markets are being artificially propped up by central bank money printing. Further easing this week from the Bank of Japan would only deepen the problem. Yet eventually it must end, and when it does, share prices globally will return to earth with a bump. Only lack of alternatives for today’s ever rising wall of money seems to hold them aloft.

Over the last year, central bank manipulation of markets has reached ludicrous levels, far beyond the “quantitative easing” used to mitigate the early stages of the crisis. Through long use, “unconventional monetary policy” of the original sort has become ineffective, and, well, simply conventional in nature. To get pushback, central banks have been straying ever further onto the wild-west frontiers of monetary policy. Today it’s not just government bonds which are being bought up by the lorry load, but corporate debt, and in the case of the Bank of Japan and the Swiss National Bank (SNB), even high risk equities. [..] For global corporations at least, credit has never been so free and easy, encouraging aggressive share buy-back programmes.

This in turn further inflates valuations already in danger of losing all touch with underlying fundamentals. By the by, it also helps trigger lucrative executive bonus awards. Where’s the real earnings and productivity growth to justify the present state of stock markets? As long as the central bank is there to do the dirty work, it scarcely seems to matter. In any case, the situation seems ever more precarious and unsustainable. Conventional pricing signals have all but disappeared, swept away by a tsunami of newly created money. Globally, the misallocation of capital must already be on a par with what happened in the run-up to the financial crisis, and possibly worse given the continued build-up of debt since then.

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World trade summed up.

Japan Exports Fall 11th Straight Month, 9.6% YoY, Imports Plunge 17.3% (R.)

Japan’s exports fell 9.6% in August from a year earlier, posting an 11th straight month of decline, Ministry of Finance data showed on Wednesday, underscoring sluggish external demand. The fall compares with a 4.8% decrease expected by economists in a Reuters poll. It followed a 14.0% drop in July, the data showed. Imports fell 17.3% in August, versus the median estimate for a 17.8% decline. The trade balance swung to a deficit of 18.7 billion yen ($184 million), versus the median estimate for a 202.3 billion yen surplus. It was a first trade deficit in three months.

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Who says Kuroda has no sense of humor? After failing to lift inflation for years, he now says he will “..allow inflation to overshoot its target..

Bank of Japan Overhauls Policy Framework, Sets Yield Curve Target (R.)

The Bank of Japan added a long-term interest rate target to its massive asset-buying program on Wednesday, overhauling its policy framework and recommitting to reaching its 2% inflation target as quickly as possible. The central bank also said it will allow inflation to overshoot its target by maintaining an ultra-loose policy – beefing up its previous commitment to keep policy easy until the target was reached and kept in a stable manner. At the two-day rate review that ended on Wednesday, the BOJ maintained the 0.1% negative interest rate it applies to some of the excess reserves that financial institutions park with the central bank.

But it abandoned its base money target and instead adopted “yield curve control” under which it will buy long-term government bonds to keep 10-year bond yields at current levels around zero %. The BOJ said it would continue to buy long-term government bonds at a pace that ensures its holdings increase by 80 trillion yen ($781 billion) per year. Under the new framework that adds yield curve control to its current quantitative and qualitative easing (QQE), the BOJ will deepen negative rates, lower the long-term rate target, or expand base money if it were to ease again, the central bank said in a statement announcing the policy decision. “The BOJ will seek to lower real interest rates by controlling short-term and long-term interest rates, which would be placed as the core of the new policy framework,” it said.

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But seriously, historians will look back on today wondering how on earth we could have all swallowed this continuing gibberish.

Bank of Japan Introduces Rate Target for 10-Year Government Bonds (WSJ)

Japan’s central bank took an unexpected step Wednesday, introducing a zero interest-rate target for 10-year government bonds to step up its fight against deflation, after an internal review of previous measures that fell short of expectations. he adoption of a long-term target, the first such attempt in the BOJ’s history, came as global central banks struggle to find ways to get prices rising. Financial markets gyrated following the Bank of Japan’s announcement of what it called a “new framework” to overcome deflation. Some thought it illustrated the limits of the BOJ’s powers, since the decision didn’t include any direct new stimulus measures, while others were encouraged by the BOJ’s tone.

“Investors are showing a positive response as they got the feeling that the BOJ will do whatever it can do to tackle deflation,” said Kengo Suzuki at Mizuho Securities in reference to the yen’s fall following the BOJ action. The dollar was around 102.60 yen in afternoon Tokyo trading, compared with around 101.90 yen before the decision. The 10-year Japanese government bond yield had already been near zero in recent weeks. It was minus 0.06% just before the decision and was minus 0.03% in Tokyo afternoon trading hours after the decision. The new framework puts 10-year interest rates at the center of policy, a contrast to the BOJ’s approach for the last 3 1/2 years under Gov. Haruhiko Kuroda, when asset purchases and expanding the monetary base were the key policy tool.

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Smart from Golem.

Could Germany Allow Deutsche Bank To Go Under? (Golem XIV)

[..] public bail outs are supposed to be strictly temporary. No holding 80% of RBS for most of a decade. Really? But that’s not the point which is important for Deutsche Bank. The important point is that in any sale of the viable parts of Germany’s only G-SIB, the brutal fact of the matter is that there is no other German financial institution that could afford to buy any of it. Commerzbank? Allianz? Letting an insurer buy a bank? So imagine the situation for Germany. They lose their seat at the top table and then they watch as France, England, American or perhaps China buy the crown of German financial might. So I don’t think it will ever happen. Or at least it will only happen when Germany is truly out of any other options. So if Deutsche is not going to be declared “no longer viable” what are the alternatives?

One option is the UniCredit route. UniCredit was a trillion euro bank. It was Italy’s flag carrier. It had bought Bavaria’s banks and some of Austria’s as well. And yet it’s share price was always paltry. Just 7.6 Euros at the market top in May ’07. And since then it has been a hollow and enfeebled giant. Lumbering and ineffectual. It has been the laughing stock of European banks. But Italy doesn’t seem to mind. They seem content to let UniCredit be the quintessential Zombie bank. Would Germany be as sanguine to leave Deutsche to go the same way? This would, I suggest, be almost as injurious to German pride and industrial policy as letting Deutsche go down completely.

But if Germany decided it could not face the financial consequences of obeying the letter of the resolution law nor leave the bank to be a bloated and useless zombie then the alternatives bring in their train even greater political upheavals. Imagine the German government decides that not bailing out Deutsche just inflicts too much damage on Germany – potentially reducing Germany from the front rank of globally significant nations to something lesser. It becomes a matter of national pride if not of survival. So Germany ignores all the FSB rules and regulations and bails Deutsche bringing it into government ownership/protection – call it what you like. In so doing it demolishes the entirety of European policy regarding bail outs, government debts and austerity.

Where then all the German insistence on fiscal discipline it has forced upon Greece, Ireland, Portugal, Spain and Italy? The Bundesbank, Berlin and the ECB would have no authority at all. Every country would have a green light to do the same for their flag carriers. It would be the end the European experiment. Or the European system would have to try to continue without Germany. And that could only happen if all debts to Germany were repudiated. I realise all this is speculation. But Deutsche has lost 90% of its value. Only RBS has lost more. Deutsche has 7000 legal cases against it. Frau Merkel is losing her grip, Brexit rocked the complacent rulers of Euroland and Madame Marine Le Pen would like to push France to do the same.

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Mish restates the obvious: “Keynesian theory says consumers will delay purchases if prices are falling. In practice, all things being equal, it’s precisely the opposite.”

Keynesian Deflation Humbug (Mish)

Hip, hip, hooray! The CPI is up more than expected, led by a huge 1.1% month-over-month surge in medical care supplies. Medical care services jumped 0.9%, and shelter jumped 0.3%. This will not help the economy. And it will subtract from consumer spending other than Obamacare and rent, but economists are cheering.

Real World Happiness

  • Food at home -1.9%
  • Energy -9.2%
  • Gasoline -17.3%
  • Fuel Oil -12.8%
  • Electricity -.07%
  • Used cars -4.0%

Unreal World Happiness

  • Food Away From Home +2.8%
  • Medical Care Commodities +4.5%
  • Shelter +3.4%
  • Transportation Services +3.1%
  • Medical Care Services +5.1%

Keynesian Theory vs. Practice Keynesian theory says consumers will delay purchases if prices are falling. In practice, all things being equal, it’s precisely the opposite. If consumers think prices are too high, they will wait for bargains. It happens every year at Christmas and all year long on discretionary items not in immediate need.

Reality Check Questions

  • If price of food drops will people stop eating?
  • If the price of gasoline drops will people stop driving?
  • If price of airline tickets drop will people stop flying?
  • If the handle on your frying pan falls off or your blow-dryer breaks, will you delay making another purchase because you can get it cheaper next month?
  • If computers, printers, TVs, and other electronic devices will be cheaper next year, then cheaper again the following year, will people delay purchasing electronic devices as long as prices decline?
  • If your coat is worn out, are you inclined to wait another year if there are discounts now, but you expect even bigger discounts a year from now?
  • Will people delay medical procedures in expectation of falling prices?
  • If deflation theory is accurate, why are there huge lines at stores when prices drop the most?

Bonus Question

If falling prices stop people from buying things, how are any computers, flat screen TVs, monitors, etc., ever sold, in light of the fact that quality improves and prices decline every year?

Anyone who thinks soaring Obamacare and rent is a good thing and will help the economy is crazy.

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Forget the OPEC output cut talks, here’s what’s really happening in oil.

Nobody Has Ever Shut Down The World’s Best Drilling Rigs – Until Now (BBG)

In a far corner of the Caribbean Sea, one of those idyllic spots touched most days by little more than a fisherman chasing blue marlin, billions of dollars worth of the world’s finest oil equipment bobs quietly in the water. They are high-tech, deepwater drillships – big, hulking things with giant rigs that tower high above the deck. They’re packed tight in a cluster, nine of them in all. The engines are off. The 20-ton anchors are down. The crews are gone. For months now, they’ve been parked here, 12 miles off the coast of Trinidad & Tobago, waiting for the global oil market to recover. The ships are owned by a company called Transocean Ltd., the biggest offshore-rig operator in the world. And while the decision to idle a chunk of its fleet would seem logical enough given the collapse in oil drilling activity, Transocean is in truth taking an enormous, and unprecedented, risk.

No one, it turns out, had ever shut off these ships before. In the two decades since the newest models hit the market, there never had really been a need to. And no one can tell you, with any certainty or precision, what will happen when they flip the switch back on. It’s a gamble that Transocean, and a couple smaller rig operators, felt compelled to take after having shelled out millions of dollars to keep the motors running on ships not in use. That technique is called warm-stacking. Parked in a safe harbor and manned by a skeleton crew, it typically costs about $40,000 a day. Cold-stacking – when the engines are cut – costs as little as $15,000 a day. Huge savings, yes, but the angst runs high.

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OPES helps the US bring Maduro to his knees.

Crude Slips As Venezuela Says Market Is 10% Oversupplied (Dow Jones)

Oil prices dipped to a new one-month low Tuesday as hopes for any deal between OPEC countries and Russia to freeze production continued to fade. U.S. crude for October delivery recently fell 14 cents, or 0.3%, to $43.18 a barrel on the New York Mercantile Exchange. The October contract expires at settlement, and the more actively traded November contract recently fell 27 cents, or 0.6%, to $43.59 a barrel. Brent, the global benchmark, fell 42 cents, or 0.9%, to $45.53 a barrel on ICE Futures Europe. Recent trade has been marked by fears that more OPEC members are intent on increasing production, even as leaders discuss the possibility of an output cap. Libya, Iran and Nigeria combined want to increase their output by about 1.5 million barrels a day this year.

Even Venezuela is raising exports, despite financial and production troubles, and the moves from all these countries are a clear message that none would be interested in agreeing to a cap, said Bjarne Schieldrop from Sweden’s SEB bank. He added that any deal would probably allow exceptions for Nigeria, Libya, Venezuela and Iran to lift production, possibly nullifying any agreement. “It doesn’t seem like any oil producers outside of North America are doing anything to control their production levels,” said Gene McGillian, research manager at Tradition Energy. Oil has been in a steady downtrend for the better part of two weeks with concerns over lingering oversupply. Prices are down 9.4% since they hit a high point for nearly the past month on Sept. 8.

The biggest drop came in two days last week after the International Energy Agency said a slowdown in global oil demand growth accelerated this quarter, sinking to 800,000 barrels a day – 1.5 million barrels a day lower than the third quarter of 2015. Despite that and talks of an output cap, data show OPEC members broadly producing near-record amounts of crude. “Fundamentals suggest the oil market is likely to remain in surplus for longer than many expected,” strategists at ING Bank said in a note.

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Exxon has not: 1) written down valuations of reserves as prices plunged, and 2) accounted for the financial consequences of climate change regulations.

SEC Probes Exxon Over Asset Valuation, Climate Change Accounting (WSJ)

The U.S. Securities and Exchange Commission is investigating how Exxon Mobil values its assets in a world of increasing climate-change regulations, a probe that could have far-reaching consequences for the oil and gas industry. The SEC sought information and documents in August from Exxon and the company’s auditor, PricewaterhouseCoopers, according to people familiar with the matter. The federal agency has been receiving documents the company submitted as part of a continuing probe into similar issues begun last year by New York Attorney General Eric Schneiderman, the people said.

The SEC’s probe is homing in on how Exxon calculates the impact to its business from the world’s mounting response to climate change, including what figures the company uses to account for the future costs of complying with regulations to curb greenhouse gases as it evaluates the economic viability of its projects. The decision to step into an Exxon investigation and seek climate-related information represents a moment in the effort to take climate change more seriously in the financial community, said Andrew Logan, director of the oil and gas program at Ceres, a Boston-based advocacy organization that has pushed for more carbon-related disclosure from companies.

“It’s a potential tipping point not just for Exxon, but for the industry as a whole,” he said. As part of its probe, the SEC is also examining Exxon’s longstanding practice of not writing down the value of its oil and gas reserves when prices fall, people familiar with the matter said. Exxon is the only major U.S. producer that hasn’t taken a write down or impairment since oil prices plunged two years ago. Peers including Chevron have lowered valuations by a collective $50 billion.

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Shipping prices will plummet.

Court Says Hanjin Shipping Rehab Plan ‘Realistically Impossible’ (R.)

The South Korean court overseeing Hanjin Shipping’s receivership said a rehabilitation plan is “realistically impossible” if top priority debt such as backlogged charter fees exceed 1 trillion won ($896 million), South Korea’s Yonhap newswire reported on Wednesday. Hanjin Shipping, the world’s seventh-largest container carrier, filed for receivership late last month in a South Korean court and must submit a rehabilitation plan in December. With debt of about 6 trillion won ($5.4 billion) at the end of June and the South Korean government’s unwillingness to mount a rescue, expectations are low that Hanjin Shipping will be able to survive. Top priority debt means claims for public interests, which are paid first to creditors and include cargo owners’ damages and unpaid charter fees, Yonhap reported citing the Seoul Central District Court.

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Shouldn’t such an inquiry be as obvious as common sense??

Elizabeth Warren to Wells Fargo CEO: Resign, Return Earnings, Face Inquiry (G.)

Wells Fargo chief executive John Stumpf should resign, return his pay and be criminally investigated over the bank’s illegal sales practices, Senator Elizabeth Warren said on Tuesday. The Massachusetts senator’s comments came moments after Stumpf said he was “deeply sorry” for the more than 2m unauthorized accounts his staff opened for the bank’s customers. The accounts, ranging from credit cards to checking accounts, were opened by thousands of the bank’s employees in an effort to meet Wells Fargo’s sales quotas and have already led to a record $185m fine. While testifying in front of the Senate banking committee, Stumpf said he was “deeply sorry” that the bank let down its customers and apologized for violating their trust.

“I accept full responsibility for all unethical sales practices in our retail banking business, and I am fully committed to doing everything possible to fix this issue, strengthen our culture, and take the necessary actions to restore our customers’ trust,” Stumpf said in his prepared remarks. Warren accused Stumpf of “gutless leadership”, telling him that his definition of being accountable is to push the blame on lower-level employees who do not have a PR firm to defend them. Warren questioned Stumpf’s compensation, asking him: “Have you returned one nickel of the millions of dollars that you were paid while this scam was going on?” “The board will take care of that,” Stumpf said after attempting to duck the question. He also told Warren that this “was not a scam”.

Warren pointed out that during the time that the unauthorized accounts were being opened, the share price of Wells Fargo went up by about $30. Stumpf personally owns about 6.75m shares of Wells Fargo stock and made more than $200m just off his stock during that time, Warren said. [..] At the hearing Stumpf pointed out that the lowest paid employees at Wells Fargo earn $12 an hour and that the employees let go for opening unauthorized accounts were making “good money”, earning $30,000 to $60,000 a year. “How much money did you make last year?” New Jersey senator Robert Menendez asked Stumpf. “$19.3m,” said Stumpf. “Now that’s good money,” said Menendez.

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Kudo’s.

Mexico Police Raid Sawmills To Rescue Monarch Butterfly Refuge (AFP)

A special Mexican police unit has raided seven sawmills near the monarch butterfly’s mountain sanctuary in a bid to prevent illegal logging threatening the insect’s winter migration, officials said Tuesday. Backed up by a helicopter, some 220 members of the country’s police force and 40 forestry inspectors participated in the September 12 operation in the western state of Michoacan. North American governments have taken steps since last year to protect the monarch butterfly, which crosses Canada and the United States each year to hibernate on the fir and pine trees of Mexico’s western mountains. Last week’s raid was the first since the government decided in April to add the police to protection efforts for the brilliant orange and black monarchs.

The force has been conducting foot patrols day and night, using drones and helicopters for surveillance when weather permits, Abel Corona, director of the special units, said at a news conference. [..] Illegal logging dropped by 40% between the 2014-2015 and 2015-2016 butterfly season, environmental protection authorities said last month. But March storms killed seven% of the monarchs. The cold spell came after authorities had reported a rebound in the 2015-2016 season, with the butterfly covering 4.01 hectares (9.9 acres) of forest, more than tripling the previous year’s figure.

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Renzi in his referendum desperation finally tells the truth, somewhat.

Italy PM Renzi: Merkel Is ‘Lying To The Public’, Europe Is a ‘GHOST’ (Exp.)

Angela Merkel has been lying to the public about European unity, Italian Prime Minister Matteo Renzi has said. In a brutal attack on his fellow EU members, he said the first EU summit without the UK amounted to no more than “a nice cruise on the Danube”. Having been excluded from a joint news conference by the German Chancellor, Mrs Merkel and French President Francois Hollande, he said he was dissatisfied with the Bratislava summit’s closing statement. The outspoken Italian premier hit out at the lack of commitments on the economy and immigration in the summit’s conclusions, despite signing it himself. In a fiery interview in Italian daily Corriere della Sera, Mr Renzi intensified his criticisms, although he remained vague on what commitments he would have liked the summit to produce.

The Prime Minister has staked his career on a referendum this autumn over plans for constitutional reform, promising to resign if he loses. Talking about his fellow leaders, he said: “If we want to pass the afternoon writing documents without any soul or any horizon they can do it on their own. “I don’t know what Merkel is referring to when she talks about the ‘spirit of Bratislava’. “If things go on like this, instead of the spirit of Bratislava we’ll be talking about the ghost of Europe.” Mr Renzi said he is preparing a 2017 budget which he claims will cut taxes despite a slowing economy and record high public debt. He added: “At Bratislava we had a nice cruise on the Danube, but I hoped for answers to the crisis caused by Brexit, not just to go on a boat trip.”

He was similarly belligerent about the Italian budget to be presented next month, saying there would be “no negotiation” with Brussels, and money he planned to spend on tackling immigration and making Italy safer from earthquakes would be excluded from EU rules on deficit limits. Other countries were more guilty than Italy of breaking budget rules and Italy had met its commitments on tackling the inflows of migrants crossing the Mediterranean, Renzi said. He said: “I’m not going to stay silent for the sake of a quiet life. “If someone wants to keep Italy quiet they have picked the wrong place, the wrong method and the wrong subject.”

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In case anyone still had any doubts about this, here’s more proof that it’s the EU, not Greece, that is responsible for the expanding misery. Europe wants the islands to serve as holding pens, so richer Europe doesn’t have to face the consequences of the policies it itself dictates.

“To avoid secondary movement to the rest of Europe, that means keeping asylum seekers on the islands..”

EU: Refugees Must Stay On Greek Islands Despite Lesbos Fire (AP)

Authorities on the island of Lesvos called for the immediate evacuation Tuesday of thousands of refugees to the Greek mainland after a fire gutted a detention camp following protests. But EU officials appeared cool to the idea. More than 4,000 people were housed at the camp in Moria on Lesvos where the fire broke out late Monday, destroying or damaging tents and trailers. No injuries were reported at the camp, about 8 kilometers north of the island’s main town. Nine migrants were arrested on public disturbance charges after the chaotic scenes. Families with young children hastily packed up their belongings and fled into the nearby fields as the fire raged after nightfall. Many were later given shelter at volunteer-run camps. “We have been saying for a very long time that overcrowding on the islands must be eased,” regional governor Christiana Kalogirou said.

“On the islands of the northeast Aegean, official facilities have a capacity of 5,450 places, but more than 10,500 people are there. There is an immediate need to take people off the islands because things will get even more difficult,” she said. More than 60,000 migrants and refugees are stranded in transit in Greece, and those who arrived after March 20 have been restricted to five Aegean islands under an EU-brokered deal to deport them back to Turkey. But the agreement has been fraught with delays. In Brussels, a spokeswoman for the European Commission, Natasha Bertaud, said the Greek government had described the situation as being under control. Transfers to the mainland, she said, would remain limited. “To avoid secondary movement to the rest of Europe, that means keeping asylum seekers on the islands for the most part,” Bertaud said.

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Sep 202016
 
 September 20, 2016  Posted by at 9:13 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle September 20 2016


DPC Main Street, Buffalo, NY 1900

The Bank of Japan May Overshadow the Fed on Super Wednesday (CNBC)
Italy PM Renzi Tells Bundesbank To Solve German Banks’ Derivatives Problem (R.)
Housing Crisis Is Driving A “Geographic Wedge” Between Generations (Ind.)
Global Regulators See Risks in European Banks (WSJ)
Shore Up The Euro Before It’s Too Late (R.)
Theresa May Outs Herself as Wall Street’s Poodle in Brexit Talks (NC)
China Creates Global Steel Champion As Doubts Deepen On Output Cuts (AEP)
China’s Property Bubble Keeps Getting Bigger (WSJ)
Chinese Say Home Prices ‘High and Hard to Accept’ but Buying Frenzy Surges (WS)
Yuan Funding Crunch Shows Risks in Reserve Currency Ranking (BBG)
New Zealand’s Sizzling Economy Sees Goldman Go Out On a Limb Over Rates (BBG)
Alabama Selling Bonds Backed by Deepwater Horizon Settlement (BBG)
Slowly, Then All at Once (Jim Kunstler)
Italy ‘Ready To Go It Alone On Migrants’ (ANSA)
Thousands Flee As Blaze Sweeps Through Moria Refugee Camp In Lesbos (G.)

 

 

Stupid circus.

The Bank of Japan May Overshadow the Fed on Super Wednesday (CNBC)

In Super Wednesday’s central bank double-header, the Federal Reserve’s show may be an afterthought to the Bank of Japan’s performance. In a case of unusual timing, both the BOJ and the Fed will announce the outcomes of their monetary policy meetings on Wednesday. [..] Analyst predictions for the BOJ’s next move varied widely, from expectations that the central bank would cut interest rates deeper into negative territory, to changing the size or make up of its quantitative easing asset purchases, to trying to steepen the yield curve or to doing nothing at all. “The BOJ has a propensity to surprise, although most of the time, the surprises are negative,” Lam said. The market certainly took a negative view of the BOJ’s late January surprise move to introduce a negative interest rate policy, when the central bank cut the rate it pays on certain deposits to negative 0.1%.

That counterintuitively sent the yen sharply higher, frustrating policymakers who had hoped a weaker currency would help the BOJ reach its long-delayed 2% inflation target by increasing the cost of imports and spurring more consumption. Indeed, the yen may become the bellwether of how the markets view the twin central bank meetings. “Dollar-yen has fallen pretty much every time we’ve had an FOMC and BOJ meeting week this year,” David Forrester at Credit Agricole told CNBC’s “Street Signs” on Monday. He expected that the BOJ would aim to steepen Japan’s bond yield curve and if that move “impressed” the Nikkei stock index, then the yen might weaken. Forrester also noted that if the Fed sounded more hawkish in its statement, that would push up the dollar, and by extension, weaken the yen.

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At least $42 trillion worth.

Italy PM Renzi Tells Bundesbank To Solve German Banks’ Derivatives Problem (R.)

Italian Prime Minister Matteo Renzi said on Monday that Germany’s central bank chief Jens Weidmann should concentrate on fixing the problems of his own country’s banks, after Weidmann had urged Italy to cut its huge public debt. Renzi told reporters in New York that Weidmann needed to solve the problem of German banks which had “hundreds and hundreds and hundreds of billions of euros of derivatives” on their books. Renzi, who has staked his career on a referendum on constitutional reform this autumn, has repeatedly criticized other European leaders in the last few days over what he sees as an inadequate European Union response to the problems of the economy and immigration. In an interview with daily La Stampa published on Monday, Weidmann said Italy needed to consolidate its budget to avoid doubts emerging about the sustainability of its public debt.

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How to kill a city, Chapter 26.

Housing Crisis Is Driving A “Geographic Wedge” Between Generations (Ind.)

The housing crisis is driving a “geographic wedge” between the generations, weakening the bond between different age groups, according to new research. The study found that the rise in “age segregation”, caused by the lack of affordable housing for younger people, is damaging our society. Across England and Wales, the number of neighbourhoods in which half the population is aged over 50 has risen rapidly since 1991, the research from the Intergenerational Foundation (IF) found. In 1991 there were just 65 such neighbourhoods. This had risen to 485 by 2014, 60% of which were rural. But within urban areas, older people, children and young adults are also living increasingly separately.

“The housing crisis is driving a geographic wedge between the generations,” the research said. “It means that older and younger generations are increasingly living apart.” Since 1991, the median average age of neighbourhoods near the centre of cities has generally fallen by between five and 10 years, the report said. The report identified Cardiff, with its large student population, as “the most age segregated city in England and Wales”. Brighton, Leeds, Nottingham, Sheffield and Southampton were also identified by the report as age segregation “hotspots”. In Cardiff and Brighton, nearly a quarter of the population would need to move home in order to eliminate age segregation.

Surging house prices and a lack of choice for buyers have meant many people in the younger generation have had to move to find affordable housing close to employment. Younger generations are more likely rent than own, but older generations also face a “last-time buying crisis” due to a general lack of supply and a lack of affordable suitable accommodation to downsize into, the report said. Living apart in this way is making it harder for younger and older generations to look after each other, putting a bigger strain on the NHS. Age segregation also reduces people’s opportunities to find work and makes it harder for people to see different generations’ perspectives, it said.

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It is really simple: “..every euro of loans or securities they own is worth less than 30 cents in risk-weighted assets..”

Global Regulators See Risks in European Banks (WSJ)

Global rule makers think some banks are too clever by half. They want to limit the capital benefits those banks get from sophisticated risk models because they worry that these create a level of accuracy and detail as seductive as it is fallible. The Basel Committee, which sets global banking rules, wants to rein in the outliers: Those banks whose models produce the lowest-risk weightings and create most benefits in reducing their capital requirements. This will disproportionately affect European banks versus U.S. peers because Europeans have long designed their businesses around a risk-based approach to capital, while U.S. banks historically were governed by simpler leverage ratios that use plain asset measures.

It is quite easy to see which banks in Europe face the biggest potential impact from the changes currently being designed and debated by the rule makers who should complete them by the year’s end. Deutsche Bank, Société Générale, Barclays and BNP Paribas all have a relatively low-risk density, which is a measure of how little risk a bank assigns to the assets on its books. Each has a risk density of less than 30%, which means that every euro of loans or securities they own is worth less than 30 cents in risk-weighted assets. And it is risk-weighted assets that determines a bank’s capital requirement. For comparison, J.P. Morgan has a risk density of 61%.

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The answer to all problems with the euro(-zone): more euro.

Shore Up The Euro Before It’s Too Late (R.)

Will the euro survive the next big crisis? A new report inspired by Jacques Delors, one of the architects of the single currency, says it probably won’t and urges policymakers to pursue immediate changes to Europe’s troubled monetary union to ward off the inevitable collapse. The report, entitled “Repair and Prepare – Growth and the Euro after Brexit”, comes at a time when even the most ardent defenders of the euro are cautioning against closer integration in the aftermath of Britain’s vote to leave the European Union. Pressing ahead, they worry, would deepen public resentment towards Europe after years of economic crisis that has pushed up unemployment and sent populist, eurosceptic parties surging in opinion polls.

The authors, a group of academics, think tankers and former policymakers from across Europe, acknowledge the obstacles but argue that politicians cannot afford to wait. They have put together a three-pronged plan for shoring up the euro that they believe is politically feasible despite the troubling backdrop. “Reforming the euro might not be popular. But it is essential and urgent: at some point in the future, Europe will be hit by a new economic crisis,” the report says. “We do not know whether this will be in six weeks, six months or six years. But in its current set-up the euro is unlikely to survive that coming crisis.”

[..] In a first stage to shore up the single currency, they recommend “quick fixes” that include a reinforcement of the euro zone’s rescue mechanism, the ESM, a strengthening of banking union and improved economic policy coordination that does not require changes to the EU treaty. This would be followed by a north-south quid pro quo on structural reforms and investments. In a third stage, the euro zone would move to a more federal structure, with risk and sovereignty sharing. This final stage, the most controversial, could take a decade or more to realize and is described as important but optional.

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So there!

Theresa May Outs Herself as Wall Street’s Poodle in Brexit Talks (NC)

The only elements that differentiate Theresa May’s latest move from a Monty Python skit is her lack of a pith helmet and safari jacket. The British Prime Minister, per the Financial Times, plans to visit with top executives of major Wall Street firms to “canvass” them on “how Britain should structure its departure from the EU to reassure them that Brexit will not damage their UK business.” Mind you, she is not making this kiss-the-ring trip to New York to “reassure” the financial behemoths. That would mean the UK has a plan and is making the rounds to sell it and perhaps make cosmetic changes around the margins to make them feel important. Nor is it “consult,” which is diplo-speak for, “We’ll listen to your concerns but are making no commitment as to how much if any well take under advisement.”

No, “canvass” means they are a valued constituency she intends to win over and is seeking their input for real. This “canvass” is yet more proof of how out of its depth the UK government is in handling the supposedly still on Brexit. There’s a decent likelihood that May is running to the US because her team is short on staff and ideas and those clever conniving Americans might have some useful ideas up their sleeves. After all, they don’t want to go through the bother of getting more licenses and moving some staff to the Continent or Dublin. It’s much simpler to keep everything in London, particularly since top New York execs might face a tour of duty there, and the housing, shopping and schools are much more to their liking. Mind you, most financial services would remain in London with a Brexit, but Euroclearing will require a restructuring (that will have to be done out of an EU entity).

The embarrassing part is that May is apparently having to solicit input, when the big issue is obvious and binary: will the UK keep passporting rights for banking? This is binary and not hard to understand. If not, UK and US banks will need to obtain EU licenses to do certain types of business and some customer-facing personnel will need to be domiciled in the EU, not the UK. Numerous estimates have been bandied about, and they vary widely. Note that many important operations, like foreign exchange trading, were centered in the UK long before it entered the EU, are not regulated, and are conducted by phone and electronically, so there’s no reason to think they will need to migrate.

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China wa never going to restructure steel. It’s a strategic industry.

China Creates Global Steel Champion As Doubts Deepen On Output Cuts (AEP)

China has backed the creation of a giant national steel champion with continental reach, calling into question the country’s pledge at the G20 summit to slash over-production.Caixin Magazine said regulators have approved the merger of Baosteel and the loss-making group Wuhan Iron and Steel, calling it the birth of a strategic “behemoth” with a capacity of over 60 million tonnes a year. The move is touted as part of a restructuring plan to slash 100-150 million tonnes of excess capacity in China by 2020, with the loss of 180,000 steel jobs. But the evidence so far shows that output is still rising. An internal document from the German steel federation Stahl alleges that China has added 9m tonnes of extra capacity so far this year and there is no chance whatsoever that the country will meet its commitment to eliminate 45m tonnes of plant in 2016.

Stahl said China’s capacity has been increasing every year for the last four years, reaching 1,105m tonnes at a time when internal demand in China has slumped to 686m tonnes. Over-capacity has in effect doubled to 419m tonnes since 2012, more than twice the entire steel output of the EU. The Baosteel takeover of Wuhan is not necessarily a threat. Mergers can be part of the slow process of consolidation, and in this case the two state-owned companies have vowed to cut capacity by 13.4m tonnes between them. The nagging doubt is that steel is deemed a “strategic” industry by Beijing, a term with specific meaning in Communist Party ideology. The normal reflex of the authorities – especially regional party bosses – is to keep ailing steel mills alive by rolling over bad debts or forcing debt-equity swaps.

[..] For now the global steel crisis is in remission. The glut has been masked by China’s own policies over recent months, chiefly a fresh blast of infrastructure spending and a 20pc surge in new construction driven by easier credit. This looks like a cyclical bounce, now a routine feature of China’s stop-go economic management. The latest property boom is highly unstable. House prices rose 9.2pc in August from a year earlier, reaching 40pc in Hefei, 37pc in Shenzhen, 37pc in Nanjing, and 31pc in Shanghai. Once the new bubble deflates, a slowdown in building is likely to expose the immense scale of the steel glut once again.

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See my article yesterday.

China’s Property Bubble Keeps Getting Bigger (WSJ)

China’s attempts to contain property prices have been halfhearted. If anything, they may have made the bubble grow even bigger. Average new-home prices in August were up 1.3% from July, the government reported, the 17th straight increase and the biggest since at least January 2011. Prices declined in only four of the 70 cities surveyed. The latest leg of China’s property boom, which began last year in the biggest cities—such as Shenzhen and Shanghai—has recently spread to smaller cities, driving local governments to roll out tightening measures. Some specifically aim at capping land prices, which in some places exceed the price per square meter of already-built housing nearby. Shanghai has suspended land auctions while other cities, including Nanjing and Guangzhou, have capped land prices.

These measures, however, may have backfired by reducing supply, driving developers to acquire land in other ways. Sunac China, for example, said Sunday it would buy 42 property projects from Legend Holdings, the biggest shareholder of computer maker Lenovo, for 13.8 billion yuan ($2.1 billion). More important, tightening measures haven’t tackled the key factor of rising home prices—easy credit. As a%age of total loans, outstanding mortgage loans are at their highest since at least 2008. For developers, cheaper money available in the onshore bond market fuels aggressiveness. Sunac, for example, a company whose dollar-denominated bonds were yielding 10% just 17 months ago, raised 4 billion yuan last month with coupons of 3.44% to 4%—despite a doubling of its net debt in just the past year. With so many parties including banks and local governments all depending on real estate, it may not make sense for them to pop the bubble.

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Until another stock bubble is blown. Beijing had better understand that game is largely up after it’s in the IMF basket. Then stability becomes much more important.

Chinese Say Home Prices ‘High and Hard to Accept’ but Buying Frenzy Surges (WS)

Home prices in China are “high and hard to accept,” said 53.7% of the respondents in a survey by the People’s Bank of China, published today in the People’s Daily, the official paper of the Communist Party. Only 42.9% found them “acceptable.” And only 23.1% predicted that they would rise next quarter, while 11.9% expected them to fall. But that isn’t stopping people from wanting to participate in this frenzy: “Nevertheless, the ratio of residents who were prepared to buy a house within the next three months increased 1.3% from the third quarter to reach 16.3%.” That’s a lot of people “prepared to buy a house,” even with prices “high and hard to accept.”

There are several remarkable things in this survey: the worried tone in terms of the soaring prices, the increased desire to buy because, or despite, of the soaring prices, and the fact that this survey came via the official party organ from the PBOC which has been publicly fretting about the housing bubble, the debt bubble that comes along with it, and what it might do when it deflates. And what a bubble it is! The average new home price in 70 Chinese cities soared 9.2% in August year-over-year, after having jumped 7.9% in July, the eleventh month in a row of year-over-year gains, according to the China Housing Index, reported by the National Bureau of Statistics. In Tier 1 cities, prices skyrocketed: in Beijing, by 23.5% and in Shanghai by 31.2%!

Prices increased in 64 of the 70 cities, up from 51 in July. They fell in only four cities and remained flat in two. This chart by tradingeconomics.com shows the year-over-year percentage change in new home prices, the boom and bust cycles, and the stage of the boom where prices are at the moment:

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Beijing will have to give up a substantial part of the control it’s used to having over the yuan. That will not be a smooth process.

Yuan Funding Crunch Shows Risks in Reserve Currency Ranking (BBG)

China’s desire to stabilize the yuan risks undermining its future as a global reserve currency. For the second time this year, the overnight cost to borrow the offshore currency in Hong Kong surged above 20% amid speculation the People’s Bank of China is mopping up liquidity to boost the exchange rate. The volatility comes less than two weeks before the yuan’s inclusion in the IMF’s Special Drawing Rights – an event seen as a validation of President Xi Jinping’s efforts to promote its standing on the world stage. “This is not the sort of behavior you would expect from an SDR currency,” said Sue Trinh at Royal Bank of Canada in Hong Kong. “You can’t have funding for a reserve currency blowing up or moving in such a volatile fashion; it would be a nightmare for short-term portfolio management.”

Any use of borrowing rates to shake down bears risks eroding authorities’ pledges to give markets more sway in the world’s second-largest economy and undercutting Hong Kong’s position as the biggest offshore yuan trading center. The yuan’s funding costs at home and abroad have been more volatile than the four existing currencies in the IMF’s reserve basket over the past three years, data compiled by Bloomberg show. The offshore yuan funding cost, known as Hibor, jumped 15.7 percentage points to 23.7% on Monday, the second-largest increase on record, before falling to 12.4% on Tuesday. The rate previously surged to a high of 66.8% in January as China’s policy makers battled to restore control over the currency after a series of weaker fixings.

Traders are growing used to China’s policy makers intervening before key events, said Hao Hong at Bocom International in Hong Kong. “The central bank has done this before.” Still, the move is underscoring the greater volatility in China’s money markets compared with other reserve currencies. While the overnight Shanghai Interbank Offered Rate surged to 13% during a credit crunch in 2013, similar funding costs for the dollar, yen, euro and pound all traded within a 100 basis-point range in the past three years, according to data compiled by Bloomberg.

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Those Auckland homes are turning into ATMs.

New Zealand’s Sizzling Economy Sees Goldman Go Out On a Limb Over Rates (BBG)

New Zealand’s sizzling economy has prompted Goldman Sachs to go out on a limb and call an end to the country’s easing cycle. Data last week showed GDP expanded 3.6% in the year through June, putting New Zealand among the fastest-growing economies in the developed world and suggesting inflation should finally start to gather pace. The Kiwi economy is “too strong to justify further rate cuts,” Tim Toohey, chief economist at Goldman Sachs Australia, wrote in a note to clients. He cancelled the two rate reductions he’d been forecasting and said the Reserve Bank of New Zealand will now hold its official cash rate at 2% through 2017. That’s a bold call after RBNZ Governor Graeme Wheeler all but committed himself to at least one more cut as he struggles to return inflation to target.

While 16 other economists surveyed by Bloomberg expect Wheeler to keep borrowing costs on hold at Thursday’s policy decision, they all predict he’ll lower them in November and some forecast another cut early next year. New Zealand’s strong dollar is damping the price of imports, meaning Wheeler has to crank up domestic price pressures to get inflation back into his 1-3% target band. He’s worried the longer the gauge stays low – it’s currently at 0.4% and forecast to slow further – the greater the risk inflation expectations will drop and create a deflationary spiral. Goldman may be on to something though. The GDP data showed a surge in household spending growth to a four-year high, suggesting inflation may be just around the corner. Spending was led by categories such as furniture, carpets and audio equipment.

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Craziness. Not a crisis goes to waste.

Alabama Selling Bonds Backed by Deepwater Horizon Settlement (BBG)

The 2010 Deepwater Horizon oil-rig disaster, featured in a major-motion picture opening next week, may soon help Alabama rebuild its reserves, pay Medicaid expenses and fund road projects. Alabama plans to use annual payments from a $1 billion settlement with U.K. oil producer BP to back bonds issued within the next two months, said Bill Newton, the state’s acting director of finance, who also sits on the Alabama Economic Settlement Authority, which was created to handle the debt issue. The state will receive the payments under the settlement for 18 years.

State lawmakers earlier this month approved the bond sale and authorized creation of the six-member authority, which had its first meeting Monday. Under the legislation about $400 million of the bond proceeds will go to repay money the state loaned itself from reserve funds in prior years to balance budgets, with the rest going to fund Medicaid expenses and road work in the southern part of the state. The amount issued will depend on interest rates when the debt is sold. “We started the process to issue the bonds within the next two months,” said Newton. “We’ll see what the market brings.”

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Wise words: “They can organize ten-acre farms instead of cell phone game app companies. They can do physical labor instead of watching television. They can build compact walkable towns instead of suburban wastelands….”

Slowly, Then All at Once (Jim Kunstler)

As is usually the case with troubled, over-ripe societies, these elites have begun to resort to magic to prop up failing living arrangements. This is why the Federal Reserve, once an obscure institution deep in the background of normal life, has come downstage front and center, holding the rest of us literally spellbound with its incantations against the intractable ravages of debt deflation. One way out of this quandary would be to substitute the word “activity” for “growth.” A society of human beings can choose different activities that would produce different effects than the techno-industrial model of behavior.

They can organize ten-acre farms instead of cell phone game app companies. They can do physical labor instead of watching television. They can build compact walkable towns instead of suburban wastelands (probably even out of the salvaged detritus of those wastelands). They can put on plays, concerts, sing-alongs, and puppet shows instead of Super Bowl halftime shows and Internet porn videos. They can make things of quality by hand instead of stamping out a million things guaranteed to fall apart next week. None of these alt-activities would be classifiable as “growth” in the current mode. In fact, they are consistent with the reality of contraction. And they could produce a workable and satisfying living arrangement.

The rackets and swindles unleashed in our futile quest to keep up appearances have disabled the financial operating system that the regime depends on. It’s all an illusion sustained by accounting fraud to conceal promises that won’t be kept. All the mighty efforts of central bank authorities to borrow “wealth” from the future in the form of “money” – to “paper over” the absence of growth – will not conceal the impossibility of paying that borrowed money back. The future’s revenge for these empty promises will be the disclosure that the supposed wealth is not really there – especially as represented in currencies, stock shares, bonds, and other ephemeral “instruments” designed to be storage vehicles for wealth. The stocks are not worth what they pretend. The bonds will never be paid off. The currencies will not store value. How did this happen? Slowly, then all at once.

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Renzi has everyhting to lose with his referendum coming before the new year.

Italy ‘Ready To Go It Alone On Migrants’ (ANSA)

Italian Premier Matteo Renzi on Monday reiterated his disappointment at Friday’s EU summit in Bratislava, which concluded with him openly coming out against Germany’s and France’s stance on migrants and economic growth for the bloc’s post-Brexit future. “If Europe continues like this, we’ll have to get organised and act autonomously on immigration,” Renzi said. “This is the only new development to come from Bratislava, where there were so many words, but we weren’t capable to saying anything clear about the issue of Africa. “That’s why, to use a euphemism, we didn’t take it well. ” Juncker says lots of wonderful things, but we don’t see actions. “This is one of Europe’s problems. Italy will go it alone. “It is capable of doing it, but this is a problem for the EU”

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The camp is basically gone. The poor just got a whole lot more desperate. Why the EU should no longer exist.

Thousands Flee As Blaze Sweeps Through Moria Refugee Camp In Lesbos (G.)

Thousands of refugees detained at one of Greece’s biggest camps, on the island of Lesbos, have fled the facility amid scenes of mayhem after some reportedly set fire to it, local police have said. Up to 4,000 panic-stricken men, women and children rushed out of the barbed-wire-fenced installation following rumours of mass deportations to Turkey. “Between 3,000 and 4000 migrants have fled the camp of Moria,” a police source said, attributing the exodus to fires that rapidly swept through the facility because of high winds. Approximately 150 unaccompanied children, controversially housed at the camp, had been evacuated to a childrens’ village, the police source added. No one was reported to have been injured in the blaze.

But damage was widespread and with tents and prefabricated housing units going up in flames, the Greek channel Skai TV, described the site as “a war zone”. The disturbances, it reported, had been fuelled by frustration over the notoriously slow pace with which asylum requests were being processed. A rumour, earlier in the day, that Greek authorities were preparing to send possibly hundreds back to Turkey – in a bid to placate mounting frustration in Germany over the long delays – was enough to spark the protests. [..] The increase in arrivals in recent months from Turkey – the launching pad for more than a million Europe-bound refugees last year – has added to the pressure on Greek authorities.

On Monday, the government announced that 60,352 refugees and migrants were registered in the country, essentially ensnared by the closure of borders along the Balkan corridor into Europe. Some 13,536 were detained on Aegean islands, including Lesbos which has borne the brunt of the influx. The detention centre at Moria has a capacity to house no more than 3,000 but is now said to be holding almost twice that number ..

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Sep 092016
 
 September 9, 2016  Posted by at 8:57 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle September 9 2016


NPC Daredevil John “Jammie” Reynolds, Washington DC 1917

ECB’s Mario Draghi Has Run Out Of Magic As Deflation Closes In (AEP)
ECB Stands Pat on Stimulus as Draghi Defends Policy (WSJ)
German July Exports, Imports Plunge (Street)
Goldman Calculates True Growth Rate Of China’s Debt: 40% of GDP Per Year (ZH)
China’s Reviving the American Heartland – One Low Wage at a Time (BBG)
Bank of Japan Risk: Running Out of Bonds to Buy (WSJ)
Australia, New Zealand Housing Booms Set Currencies On Course For Parity (BBG)
Coal Rises From the Grave to Become One of Hottest Commodities
Historic Tax Fraud Rocks Denmark As Loss Estimates Keep Growing (BBG)
Goldman Sachs Just Launched Project Fear in Italy (DQ)
Humans Have Destroyed A Tenth Of Earth’s Wilderness In 25 Years (G.)

 

 

Why does it seem so normal to use the word ‘magic’ in this context? When did that start?

ECB’s Mario Draghi Has Run Out Of Magic As Deflation Closes In (AEP)

Large parts of the eurozone are slipping deeper into a deflationary trap despite negative interest rates and €1 trillion of quantitative easing by the ECB, leaving the currency bloc with no safety buffer when the next global recession hits. The ECB is close to exhausting its ammunition and appears increasingly powerless to do more under the legal constraints of its mandate. It has downgraded its growth forecast for the next two years, citing the uncertainties of Brexit, and admitted that it has little chance of meeting its 2pc inflation target this decade, insisting that it is now up to governments to break out of the vicious circle. Mario Draghi, the ECB’s president, said there are limits to monetary policy and called on the rest of the eurozone to act “much more decisively” to lift growth, with targeted spending on infrastructure.

“It is abundantly clear that Draghi is played out and we’re in the terminal phase of QE. The eurozone needs a quantum leap in the nature of policy and it has to come from fiscal policy,” said sovereign bond strategist Nicholas Spiro. Mr Draghi dashed hopes for an expansion of the ECB’s monthly €80bn programme of bond purchases, and offered no guidance on whether the scheme would be extended after it expires in March 2017. There was not a discussion on the subject. “The bar to further ECB action is higher than widely assumed,” said Ben May from Oxford Economics. The March deadline threatens to become a neuralgic issue for markets given the experience of the US Federal Reserve, which suggests that an abrupt stop in QE stimulus amounts to monetary tightening and can be highly disruptive.

The ECB has pulled out all the stops to reflate the economy yet core inflation has been stuck at or below 1pc for three years. Officials are even more worried about the underlying trends. Data collected by Marchel Alexandrovich at Jefferies shows that the percentage of goods and services in the inflation basket currently rising at less than 1pc has crept up to 58pc. This is a classic precursor to deflation and suggests that the eurozone is acutely vulnerable to any external shock. The figure has spiked to 67pc in Italy, and is now significantly higher that it was when the ECB launched QE last year. The eurozone should have reached economic “escape velocity” by now after a potent brew of stimulus starting last year: cheap energy, a cheaper euro, €80bn a month of QE, and the end of fiscal austerity. [..] “The euro is far stronger than they want, and stronger than the economy deserves, but they don’t know how to weaken it. This is exactly what happened to the Japanese,” said Hans Redeker, currency chief at Morgan Stanley.

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Draghi’s starting to come down on Germany, but it’s too late: their exports just fell 10%.

ECB Stands Pat on Stimulus as Draghi Defends Policy (WSJ)

The ECB left its €1.7 trillion stimulus unchanged at a policy meeting Thursday, brushing off concerns over economic shock waves from Britain’s vote to leave the EU and disappointing investors expecting the ECB to act again soon. The decision to stand pat, even as new forecasts showed the ECB missing its inflation target for years, underlines how central banks are approaching the limits of what they can achieve without support from other policy areas, notably governments. In China earlier this month, Group of 20 leaders warned that monetary policy alone can’t fix the world’s economic ills, and pledged to boost spending and adopt overhauls aimed at boosting growth.

At a news conference here, ECB President Mario Draghi said he was concerned about persistently low eurozone inflation, which has fallen short of the ECB’s near-2% target for more than three years. Fresh ECB staff forecasts, published Thursday, showed inflation rising very gradually, to 1.2% next year and 1.6% in 2018. Despite that, Mr. Draghi said policy makers didn’t even discuss fresh stimulus, and praised the effectiveness of the bank’s existing policy measures, which include negative interest rates and €80 billion a month of bond purchases. He also aimed an unusually direct rebuke at Germany, criticizing Berlin for not boosting spending to support the economy. “Countries that have fiscal space should use it,” Mr. Draghi said. “Germany has fiscal space.”

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Germany looks a lot like Japan and China.

German July Exports, Imports in Shock Plunge (Street)

German imports and exports unexpectedly shrunk in July, with a sharp export contraction causing a surprise narrowing in Germany’s trade balance. Federal Statistical Office data showed seasonally adjusted exports fell by 2.6% – analysts had expected about 0.3% growth – whereas imports fell by 0.7%, as against expectations for a 0.8% rise. On the year exports slumped by 10% and imports shriveled by 6.5%. The foreign trade balance shrunk to €19.4 billion from €21.4 billion in June, as against expectations for a balance of €22 billion. The Federal Statistical Office said the pace of German exports to other EU countries fell by 7% in July, while imports from the region fell by 4.5%. The falls were slightly narrower for trade with other eurozone countries.

German trade outside the 28-nation EU fared worse, with exports plunging by 13.8% and imports by 10.1%. Faltering German exports amid lackluster worldwide growth and emerging-market volatility has long been a drag on German growth. But the sharper-than-expected export fall challenges expectations of a second-half pickup in German trade with the rest of the world, and the surprise – albeit small -import decline suggests domestic demand isn’t robust enough to step into the breach. The trade data come in a week that the statistics office reported weaker-than-expected industrial output and manufacturing production for July. But the euro held firm against the dollar after the figures and was recently up 0.11% at $1.1272.

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“..some time around 2019, China’s total Debt/GDP will be over 400%, an absolutely ridiculous number, and one which assures a banking, if not global, financial crisis.”

Goldman Calculates True Growth Rate Of China’s Debt: 40% of GDP Per Year (ZH)

For a long time when it came to Chinese loan creation, analysts would only look at the broadest reported aggregate: the so-called Total Social Financing. And, for a long time, it was sufficient – TSF showed that in under a decade, China had created over $20 trillion in new loans, vastly more than all the “developed market” QE, the proceeds of which were used to kickstart growth after the 2009 global depression, to fund the biggest capital misallocation bubble the world has ever seen and create trillions in nonperforming loans. However, a problem emerged about a year ago, when it was revealed that not even China’s TSF statistic was sufficient to fully capture the grand total of total new loan creation in China.

[..] according to Goldman, “a substantial amount of money was created last year, evidencing a very large supply of credit, to the tune of RMB 25tn (36% of 2015 GDP).” This massive number was 9% higher than the TSF data, which implied that “only” a quarter of China’s 2015 GDP was the result of new loans. As Goldman further noted, the “divergence from TSF has been particularly notable since Q2 last year after a major dovish shift in policy stance.” In short, in addition to everything else, China has also been fabricating its loan creation data, and the broadest official monetary aggregate was undercutting the true new loan creation by approximately a third. The reason for this is simple: China does not want the world – or its own population – to realize just how reliant it is on creating loans out of thin air (and “collateralized” by increasingly more worthless assets), as it would lead to an even faster capital outflow by the local population sensing just how unstable the local banking system is.

Here is the good news: compared to late 2015, the record credit creation has slowed down fractionally, and the gap with the TSF total has shrunk. The smaller gap seems to be in line with recent reports that listed banks’ “investment receivables” expanded less rapidly in 2016 H1, and it might partly reflect the regulators’ tougher stance against shadow lending in recent months. And now, the bad news: this “tougher stance” has not been nearly tough enough, because as the following chart shows on a 1-year moving average, nearly 40% of China’s “economic growth” is the result of new credit creation, or in other words, new loans. What this really means, is that China’s debt/GDP, estimated most recently by the IIF at 300%…

… is now growing between 30% and 40% per year, when one accounts for the unaccounted for “shadow” credit conduits. Here is how Goldman concludes this stunning observation: “The PBOC appears to have shifted to a less dovish, though still supportive, policy bias in the last few months. However, given the prospective headwinds from slower housing construction and tighter on-budget fiscal stance in the coming months, there remains a clear need to sustain a high level of infrastructure investment, which is credit intensive, to achieve the minimum 6.5% full-year growth target. This poses constraints on how much further the PBOC can keep reining in credit, in our view.”

Translating Goldman, some time around 2019, China’s total Debt/GDP will be over 400%, an absolutely ridiculous number, and one which assures a banking, if not global, financial crisis.

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The resounding success of globalization.

China’s Reviving the American Heartland – One Low Wage at a Time (BBG)

For six years, the General Motors factory that used to make Chevy Trailblazers in Moraine, Ohio, sat abandoned, a rusting monument to the decline of the American auto industry. These days, the plant is humming again, fueled by a resurgent U.S. consumer – but now under Chinese management. On the shop floor, Chinese supervisors in sky-blue uniforms that carry the logo of the new owners, Fuyao Glass, teach American employees how to assemble windshields. Drive along Interstate 75, through America’s industrial heartland, and you’ll find no shortage of Chinese-owned firms like Fuyao. They’re setting up shop in states such as Ohio and Michigan, key voter battlegrounds in November, where traditional manufacturing has been hollowed out – in many cases, by trade. With China.

[..] Fuyao acquired roughly half the old GM plant in 2014, spending $450 million to buy and remodel it. For a company that started out as a small producer of covers for water-meters and is now the world’s second-biggest auto-glass supplier, the acquisition capped a decade-long push into U.S. markets. For the Dayton area, it meant employment: the city, hometown of the Wright brothers, was hit hard by the shutdown of the GM plant two days before Christmas in 2008. [..] “Hey, 1,700 jobs is 1,700 jobs,” said Shawn Kane, a 28-year-old chef shopping at the Kroger grocery store in Moraine last month. “At least it’s not sitting empty anymore.” They’re jobs that tend not to pay as well as factory work once did, though – and there probably aren’t as many of them.

To keep its production in the U.S. viable, Fuyao uses more automation than it does in China, said John Gauthier, president of Fuyao Glass America. “Our customers, all they care about is that their cost doesn’t increase,” he said. A line worker at Fuyao starts at $12 per hour, equivalent to an annual salary of about $25,000. GM workers at the old Moraine plant could make at least twice that, topped off by perks like defined-benefit pensions, according to union officials and former employees. “When you don’t have enough protections for American workers, and when you’ve got a globalized economy, this is what happens,” said Chris Baker, a 40-year-old sales rep based near Moraine. “This is the new normal. It’s very sad.”

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WHen will they start buying people’s homes? Cars perhaps?

Bank of Japan Risk: Running Out of Bonds to Buy (WSJ)

Japan’s central bank is facing a new problem: It could be running out of government bonds to buy. The Bank of Japan is snapping up the equivalent of more than $750 billion worth of government debt a year in an effort to spur inflation and growth. At that rate, analysts say, banks could run out of government debt to sell within the next 18 months. The looming scarcity is a powerful sign of the limits central banks face as they turn to ever-more aggressive means of stimulating their economies. The problem is mirrored in Europe, where self-imposed rules limit how many eurozone government bonds the ECB can buy from individual governments. Facing a diminishing supply of sovereign bonds, the ECB started buying corporate debt in June.

Some economists have even called for the ECB to start buying stocks. The central bank left its bond-buying program and interest-rate policy unchanged at its meeting Thursday. The Japanese central bank has fewer options if the country’s banks, which have to hold a certain amount of safe debt to use as collateral in everyday transactions, ever become unwilling to sell more of their holdings. Its most obvious alternatives—pushing rates deeper into negative territory or buying other types of assets—have practical limitations. Meanwhile, the BOJ’s economic goals remain out of reach: Inflation is stubbornly low, and the yen has strengthened about 18% this year.

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Does nobody have any common sense down under?

Australia, New Zealand Housing Booms Set Currencies On Course For Parity (BBG)

Housing booms in New Zealand and Australia could be putting the neighbors’ currencies on course to reach parity for the first time ever. Both nations have seen house prices surge in recent years, but the underlying causes are fundamentally different, according to Deutsche Bank analysis. Australia’s boom is largely home-grown, whereas New Zealand’s is being fueled by record immigration. That’s affecting the countries’ current accounts differently. While Aussies are feeling richer due to house-price gains, prompting them to spend more on imports and boosting their current account deficit, New Zealand is sucking more offshore capital into its housing market, narrowing its current account gap. Currencies are sensitive to trends in the current account – a country’s balance with the rest of the world – because they are a gauge of risk for investors.

“The nature of the real estate boom in Australia should have bearish currency implications because it leads to deterioration in the basic balance,” Robin Winkler, a London-based strategist for Deutsche Bank, said in a research note. “This is not the case in New Zealand and adds to our conviction that AUD/NZD should drop to parity.” The two currencies have never converged in the free-floating era that began in the 1980s. They came close in April last year, when the kiwi briefly reached 99.79 Australian cents or, to express it the other way, the Aussie dollar fell below NZ$1.01. The New Zealand dollar was worth 96.8 Australian cents at 12:35p.m. in Wellington Friday.

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Burn baby burn.

Coal Rises From the Grave to Become One of Hottest Commodities

For all the predictions about the death of coal, it’s now one of the hottest commodities in the world. The resurrection may have further to run. A surge in Chinese imports to compensate for lower domestic production has seen European prices jump to near an 18-month high, while Australia’s benchmark is set for the first annual gain since 2010. At the start of the year, prices languished near decade lows because of waning demand from utilities seeking to curb pollution and amid the International Energy Agency’s declaration that the fuel’s golden age in China was over. Now, traders are weighing the chances of extreme weather hitting major producers and China further boosting imports as factors that could push prices even higher.

“It’s a commodity that’s been on a slippery slide for the past four years and it’s making a remarkable recovery,” said Erik Stavseth, an analyst at Arctic Securities in Oslo, who’s tracked the market for almost a decade. “There’s a strong pulse.” What could light up the market further is the occurrence of a La Nina weather pattern later this year. Last time it happened in 2010 and 2011, heavy rains flooded mines in Australia and Indonesia, the world’s two largest exporters. While some meteorologists have toned down their predictions for the weather phenomenon forming, “another strong forecast” would cause prices to rise further, according to Fitch’s BMI Research.

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Still don’t think I know what exactly the fraud was. Though I read the piece twice.

Historic Tax Fraud Rocks Denmark As Loss Estimates Keep Growing (BBG)

About two weeks after Denmark revealed it had lost as much as $4 billion in taxes through a combination of fraud and mismanagement, the minister in charge of revenue collection says that figure may need to be revised even higher. Speaking to parliament on Thursday, Tax Minister Karsten Lauritzen said he “can’t rule out” that losses might be bigger than the most recent public estimates indicate. It would mark the latest in a string of revisions over the past year, in which Danes learned that losses initially thought to be less than $1 billion somehow ended up being about four times as big. The embarrassment caused by the tax fraud, which spans about a decade of successive administrations, has prompted Lauritzen to consider debt collection methods not usually associated with Scandinavian governments.

Denmark has long had one of the world’s highest tax burdens – government revenue as a percentage of GDP – and a well-functioning tax model is essential to maintaining its fabled welfare system. “We’re entertaining new ideas, considering more new measures,” Lauritzen told Bloomberg. Danish officials are now prepared to pay anonymous sources for evidence from the same database that generated the Panama Papers. Jim Soerensen, a director at Denmark’s Tax Authority, says the first batch of clues obtained using this method is expected by the end of the month.

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Project Fear didn’t work in Britain either.

Goldman Sachs Just Launched Project Fear in Italy (DQ)

Project Fear began two years ago in the run up to Scotland’s national referendum. It then spread to the rest of the UK in the lead up to this summer’s Brexit referendum. But it keeps on moving. Its latest destination is Italy, where the campaign to instill fear and trepidation in the hearts and souls of Italy’s voters was just inaugurated by the world’s most influential investment bank, Goldman Sachs. It just released a 14-page report warning about the potentially dire consequences of a “no” vote in Italy’s upcoming referendum on the government’s proposed constitutional reforms. The reforms seek, among other things, to streamline Italy’s government process by dramatically restricting the powers of the senate, a major source of political gridlock, while also handing more power to the executive.

The polls in Italy are currently neck and neck, though the momentum belongs to the reform bill’s opponents. If the Italian public vote against the bill, the response of the markets could be extremely negative, warns Goldman, putting in jeopardy the latest attempt to rescue Italy’s third largest and most insolvent bank, Monte dei Paschi di Siena. The rescue is being led by JP Morgan Chase and Italian lender Mediobanca, and includes the participation of a select group of global megabanks that are desperate to prevent contagion spreading from Italy’s banking system to other European markets, and beyond. In the event of a “no” vote, MPS’ planned €5 billion capital increase would have to be put on ice, while investors wait for the political uncertainty to clear before pledging further funds.

This being Italy, the wait could be interminable and the delay fatal for Monte dei Paschi and other Italian banks, Goldman warns. It also points out that Italy is the only European country where a substantial portion of its bank bonds are held in household portfolios (about 40% according to data from Moody’s, four times more than Germany and eight times more than France and Spain). In other words, things could get very ugly, very fast, if those bank bonds collapse! As for Italian government bonds and Europe’s broader debt markets, they would be insulated from any fallout by former Goldmanite Mario Draghi’s bond binge buying.

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We are unstoppable.

Humans Have Destroyed A Tenth Of Earth’s Wilderness In 25 Years (G.)

Humans have destroyed a tenth of Earth’s remaining wilderness in the last 25 years and there may be none left within a century if trends continue, according to an authoritative new study. Researchers found a vast area the size of two Alaskas – 3.3m square kilometres – had been tarnished by human activities between 1993 and today, which experts said was a “shockingly bad” and “profoundly large number”. The Amazon accounted for nearly a third of the “catastrophic” loss, showing huge tracts of pristine rainforest are still being disrupted despite the Brazilian government slowing deforestation rates in recent years. A further 14% disappeared in central Africa, home to thousands of species including forest elephants and chimpanzees.

The loss of the world’s last untouched refuges would not just be disastrous for endangered species but for climate change efforts, the authors said, because some of the forests store enormous amounts of carbon. “Without any policies to protect these areas, they are falling victim to widespread development. We probably have one to two decades to turn this around,” said lead author Dr James Watson, of the University of Queensland and Wildlife Conservation Society. The analysis defined wilderness as places that are “ecologically largely intact” and “mostly free of human disturbance”, though some have indigenous people living within them. The team counted areas as no longer wilderness if they scored on eight measures of humanity’s footprint, including roads, lights at night and agriculture.

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