Mar 292018
 
 March 29, 2018  Posted by at 1:15 pm Finance Tagged with: , , , , , , , , , , , ,  


Rembrandt van Rijn Christ In The Storm On The Sea Of Galilee 1633
Stolen from Gardner Museum March 18 1990, single largest art theft in the world. Never recovered

 

I am gullible. Very. I betcha I am more gullible than you. And that tells you something, because you know how gullible you are. Or so you think. Still, as bad as I got it, something physically snapped in the back of my head this morning, I could hear it snap, when I saw this Guardian headline:

Skripals Poisoned From Front Door Of Salisbury Home, Police Say

Detectives investigating the attempted murders of Russian double agent Sergei Skripal and his daughter Yulia Skripal have said they believe the pair were poisoned with a nerve agent at the front door of his Salisbury home. Specialists investigating the poisoning of the the Skripals have found the highest concentration of the nerve agent on the front door at the address, police said. Counter-terrorism detectives will continue to focus their inquiries on the home address for the coming weeks, and possibly months…

See, because of my gullibility, I’ve decided that if I’m to have any idea of what really goes on around me, I’m condemned to reading a lot. Obviously, like you, I’ve found that the vast majority of what passes for news is as fake as it gets. More so by the day. So we have to read between the lines all the time. It’s what it is. But this…

If these two people have actually been poisoned, that’s a really terrible thing. But maybe lying about such things is much worse. And I doubt that anything at all we’ve been told about the Skripal case is true. Not because I don’t want to believe it, but because the storytellers plant so many trees they’re getting lost in their own forest.

Today the British press reports that the Skripal father and daughter pair were poisoned “from their front door”. They do that with the same level of certainty that just a few days ago they used in telling us they were poisoned through the air vents of the dad’s BMW. Exact same story, just a different location. And that’s after a by now long sequence of headlines that claimed it had happened inside the home, or in a bar, a pizzeria, or on the parkbench they were ostensibly ‘found’ on.

What that headline above, and all others on the topic that came before it, tells me is that evidently the hundreds of ‘experts’ involved in the case have not yet been able to locate the ‘nerve agent’. They’re still just guessing, even 25 days after the incident is supposed to have happened. How would that be done? I have no idea, but I’m surely thinking that after almost 4 weeks it’s essentially a pure guessing game, and nothing more than that.

Does the alleged nerve agent leave traces after all that time? I don’t have a clue, but I do know from what I’ve read that it’s apparently so toxic (as in lethal) that even very faint traces of the stuff are, well, lethal. So when I first read the BMW air vent theory last week I was thinking: did the guy who towed that car to the police station wear a full hazmat suit? He would have had to if he’s still alive.

And where is that car anyway? Come to think of it, where are the Skripals? And how is it possible that they survived the ‘attack’? Were they given a full blood transfusion? Are they being treated 24/7 by dedicated personnel in hazmat suits? There are too many questions for me to answer. And that goes for you too. And for Boris Johnson. And Donald Trump. And the governments of the 30-or-so nations that nevertheless expelled well over a hundred Russian diplomats.

 

Now, I’m not a chemist, let alone an organic chemist. So perhaps I should consult with my friend Dave Collum, who is. But I was going to write this from memory, not go back and find all those headlines, or ask around. This is not about me being 100% correct, it’s about the ‘news reports’ being so far off the truth.

Here’s what I have picked up about the nerve agent. The press calls it “Novichok“ (Russian for newbies), but Novichok is not a nerve agent, it’s a group of them. In the Skripal case, the journalists -who I can only hope are not as gullible as I am- behind all the ‘news’ have been told by ‘authorities’ that we’re dealing with A-234, which is a novichok nerve agent.

Developed by Russia a long time ago, but no longer produced in Russia after 1993, as the 2013 Nobel Peace Prize winning Organisation for the Prohibition of Chemical Weapons (OPCW) has confirmed. Its chemical formula has been made public, which means that at least in theory anyone could produce it.

Russia would seem to be the last country to try that, because it would point straight to them. And they haven’t stood still for 25 years, they can make Novichok 2.0 if they want. Not that they appear to have much if any reason to poison the Skripals, there are quite a few parties that have at least as much incentive to do that.

 

Wait, before I forget, there was a policeman who allegedly ‘treated’ the Skripals first, and was himself ‘poisoned’ in the act and hospitalized, but was released a few days ago. What exactly happened to him? How did the A-234 not kill him? Did he receive such a faint trace that he was ‘cleaned’ within days? Where is he now? Why has he not released any statement? Doesn’t he strike you, too, as being a little bit pregnant?

But, again, I’m not a chemist. Collum, who I can’t really claim as a friend anymore, because he’s everybody’s friend these days, tweets a hint:

Hey organic chemists: the Novichuk nerve agents are like those below. [..] You could just use the racemate with plenty of effect. Unlike drugs, the goal here is to kill the recipient.

From what I understand, A-234, like all novichoks, is just a pesticide with a fancy dress on. Not terribly unique or special, and not terribly Russian after 25 years either. Just terribly lethal. Which by the way is saying something about how we produce our food, too. Can we blame Putin for losing our insects as well, please? It’s so much easier that way.

 

But I digress. As I started out saying, it’s the ‘news’ that yet another ‘location’ for the ‘nerve agent’ had been discovered after 25 days and hundreds of specialists, at the bleeping front door of the ‘victims’ home, as if nobody ever thought of looking there, that snapped that thingy in my head. Location, location, location.

Still, when I venture beyond what can be or has been proven, which is about as near to zero Kelvin as I even want to think about, there was this other thing this morning. Julian Assange has been cut off from the internet by his gracious Ecuadorian hosts in their London embassy. And I betcha that’s because he dared question Britain in the Skripal case, on Twitter.

Here’s my theory, borne off my gullibility in all its glory: Theresa May and her government have been stumbling from disaster to catastrophe over the Brexit calamity for months now, and they needed some relief. But they themselves are not smart enough to provide it. So someone got it for them.

They’re keeping Labour boss Jeremy Corbyn occupied for all he’s worth with a cocked-up narrative of him being an antisemite. Stupid as can be story, but it works for as long as they need it to. The other day the BBC photoshopped a Russian hat on Corbyn’s face; that stuck less than the Jew-hater tale, so they went with that one. Some UK parliamentary fake news committee wants to talk to Zuckerberg, but they should look closer to home. If fake news is what they’re really after.

So anyway, they all went with the Novichok concocted thing, and boy did that ever catch on. Even every western politicians’ pet hamsters have now sent their Russian caregivers packing. And you know what it is, even if May and Boris had any proof of Russian involvement, all those countries certainly do not. Even if they had the evidence, they’re not going to send it around to dozens of countries. Just not.

Boris Johnson couldn’t resist comparing Putin to Hitler. You can’t fall any lower than that. Or can you? The diplomats were all expelled on a day that Russia was lamenting the death of 64(?) victims (mostly children) in a shopping mall fire, in what they declared a day of national mourning. You think Boris sent his condolences?

 

I can write about this all day long, and weekends too. You know, Crimea, Ukraine, MH17, the new cold war narrative has been well prepared. And now John Bolton, who may well be the deadliest cartoon character we’ve ever seen -let alone imagined-, is all set to score the easy tip-in. But that is possible only because all of you are as gullible as I am. Don’t forget that. They’re blinding you with silence, with stupidity, with your own lack of neuron activity.

Even if this is a story with too many holes in it to qualify as Swiss cheese. The story doesn’t make any sense? Who cares, really, all the front pages shout it out in bold print. And if you get tired of it: where’s the remote, Mildred?

 

British politician and former candidate for mayor of London, George Galloway, on Twitter, says it so much better than I ever could, and shorter too, which is why I quote him at the end of this article:

Why do I not believe you? Let me count the ways. You’re not looking for anyone in connection with the attack on the Skripals. There is no manhunt, no all points alert, no description, no identikit drawing, no CCTV. No suspects. That means you already know what happened. #Russia

We know Facebook is trying to screw with your brains. Well, they’re not the only ones. Your government -and ‘intelligence’ services- want the monopoly on that, too.

I can not make this a definitive, or final, or complete story. Because nobody can. But I can tell you this: if you think that Russia or God forbid Putin, ‘poisoned’ the Skripals, you’re so wrong you’re beyond salvation. Not because it may or may not be true, but because you have seen no evidence. And you still go with it. Where’s the remote, Mildred?

 

 

Mar 192018
 
 March 19, 2018  Posted by at 9:32 am Finance Tagged with: , , , , , , , , , , , ,  


Ernest R. Ashton Evening near the Pyramids 1898

 

Facebook And Cambridge Analytica Face Mounting Pressure Over Data Scandal (G.)
Boris Johnson Ramps Up Anti-Russia Rhetoric (G.)
Why Default Rates Are Subdued Even As Corporate Debt Levels Hit Records (MW)
How Seriously is the Treasury Market Taking the Fed? (WS)
65% of Americans Save Little or Nothing (CNBC)
Developing Countries At Risk From US Rate Rise, Debt Charity Warns (G.)
Rising US Interest Rates May Damage Gulf Economies (MEE)
Kim Jong-Un Has Committed To Denuclearisation, Says South Korea (G.)
Kim Jong-Un Caught Off Guard by Trump’s Quick Agreement to Meet (BBG)
Japan: Embattled Shinzo Abe Blames Staff Over Land Sale Scandal (AFP)
Apple Is Secretly Developing Its Own Screens for the First Time (BBG)
Canadian Household Debt Hits Record $1.8 Trillion (CP)
German Interior Minister Wants More Internal EU Border Controls (DW)
Water Shortages Could Affect 5 Billion People By 2050 – UN (G.)

 

 

Facebook knows more about you than your friends and family do. No, really. But it can’t figure out -for years- that its data are being downloaded and used?! Yeah, I’ll buy that.

The real issue here should be what Facebook itself uses its -or should that be ‘your’- data for, and what intelligence services do with it.

Facebook And Cambridge Analytica Face Mounting Pressure Over Data Scandal (G.)

Facebook and that worked with Donald Trump’s election team have come under mounting pressure, with calls for investigations and hearings to explain a vast data breach that affected tens of millions of people. In Britain, the head of the parliamentary committee investigating fake news accused Cambridge Analytica and Facebook of misleading MPs after revelations in the Observer that more than 50m Facebook profiles were harvested and used to build a system that may have influenced voters in the 2016 presidential campaign. The Conservative MP Damian Collins said he would call the heads of both companies, Alexander Nix and Mark Zuckerberg, to give further testimony.

His intervention came after a whistleblower spoke to the Observer and described how the profiles, mostly of US voters, were harvested for Cambridge Analytica, in one of Facebook’s biggest ever data breaches. The disclosures caused outrage on both sides of the Atlantic; in the US, a state attorney general has called for investigations and greater accountability and regulation. There have been reports that Cambridge Analytica is trying to stop the broadcast of a Channel 4 News exposé in which Nix is said to talk unguardedly about the company’s practices. According to the Financial Times, reporters posed as prospective clients and secretly filmed a series of meetings, including one with the chief executive. The report is due to air this week.

Read more …

Very little credibility so far. From descriptions of the nerve agent, it would seem impossible that “..at least 38 people in Salisbury had been identified as having been affected by it..” and all lived to tell it. Is the whole Novichok story a fabrication? Know what, Boris? Why not show the proof you claim to have?!

Boris Johnson Ramps Up Anti-Russia Rhetoric (G.)

Boris Johnson will today seek to convince the EU foreign affairs council to join him in fresh condemnation of Russia after his explosive claims that Moscow has been creating and stockpiling nerve agent novichok and working out how to use it for assassinations. Scientists from the UN-backed Organisation for the Prohibition of Chemical Weapons arrive today to analyse samples of the agent used to poison the former spy Sergei Skripal and his daughter Yulia. The foreign secretary made his claims after Russian EU ambassador Vladimir Chizhov issued blanket denials and said British agents might have used their stockpiles at Porton Down.

As the row enters its third week, Johnson dismissed Chizhov’s comments, saying they were “not the response of a country that really believes it’s innocent”. On Sunday, Vladimir Putin, fresh from a profoundly unsurprising electoral victory, denied any such nerve agents existed and said the idea of carrying out such a killing during an election campaign would be “rubbish, drivel, nonsense”. The latest theory to gain prominence is that the Skripals were poisoned via his car’s ventilation system. The report, from ABC news in the US, came as counter-terrorism police renewed their appeal for sightings of Skripal’s burgundy BMW 320D saloon car on 4 March. ABC also reported that at least 38 people in Salisbury had been identified as having been affected by the nerve agent.

Read more …

Zero interest rates?!

Why Default Rates Are Subdued Even As Corporate Debt Levels Hit Records (MW)

U.S. corporate debt levels stand above crisis highs even as default rates among the most leveraged firms remain subdued. With an economy hitting its stride, it’s perhaps no surprise that the high-yield bond market is placid. The extent of the divergence between debt levels and defaults, however, is worrying to some analysts who feel rising corporate indebtedness will eventually catch out unwary investors and deflate the junk-bond market. But beyond complacency John Lonski at Moody’s Capital Market Research, argued that globalization and the tendency of U.S. businesses to hoard cash as reasons why corporate debt levels may no longer move in sync with default rates and credit spreads.

The high-yield default rate in the fourth-quarter of 2017 fell to 3.3%, even as U.S. nonfinancial-corporate debt ended in 2017 at 45.4% of GDP. This compares with a much higher default rate of 11.1% in the second quarter of 2009, with corporate debt levels at 45% of GDP. Granted, the current levels come with the economy in the eighth year of an expansion, while the second quarter of 2009 marked the final quarter of the longest and deepest U.S. recession since the Great Depression. The yield spread between high-yield bonds and safe government paper, as represented by the 10-year Treasury note narrowed to an average 3.63 percentage points in the fourth quarter of 2017, from an average 12.02 percentage points in the second quarter of 2009.

The tight credit spreads reflects that borrowing costs are still close to historic lows, and that investors are demanding minimum compensation for holding arguably the riskiest debt in the bond market. One answer “might be supplied by the ever increasing globalization of U.S. businesses where the more relevant denominator is not U.S. GDP, but world GDP” said Lonski. The fortunes of U.S. companies are now wove into the broader global economy. When commodity prices took a hit in 2015 and early 2016, crimping growth in China and other emerging markets, high-yield bonds were also slammed.

Read more …

If they keep up the forward guidance, everyone will sleep on. But will the yield spread sleep too?

How Seriously is the Treasury Market Taking the Fed? (WS)

Back in October 2015, the three-month Treasury yield was 0%. Many on Wall Street said that the Fed could never raise interest rates, that the zero-interest-rate policy had become a permanent fixture, like in Japan, and that the Fed could never unload the securities it had acquired during QE. How things have changed! On Friday, the three-month Treasury yield closed at 1.78%, the highest since August 19, 2008. When yields rise, by definition bond prices fall:

Back in October 2015, the three-month Treasury yield was 0%. Many on Wall Street said that the Fed could never raise interest rates, that the zero-interest-rate policy had become a permanent fixture, like in Japan, and that The Fed’s target range for the federal funds rate has been 1.25% to 1.50% since its last rate hike at the December FOMC meeting. In other words, the three-month yield is already above the upper limit of the Fed’s target range after the next rate hike. So the market has fully priced in a rate hike at the FOMC meeting ending March 21. And it’s also starting to price in another rate hike in June. In this rate-hike cycle, the Fed has engaged in policy action only at meetings that are followed by a press conference.

There are four of these press-conference meetings per year. The next two are this week and June. If, in this cycle, the Fed hike rates at an FOMC meeting that is not followed by a press conference – there are also four of them this year – it would be considered a “monetary shock” that the Fed decided to administer to the markets. It would be like a rate hike of 50 basis points instead of the expected 25 basis points. There would be a hue and cry in the markets around the world. But I think the Fed isn’t ready to spring that on the markets just yet. Maybe later. The two-year yield rose to 2.31% on Friday, the highest since August 29, 2008:

Back in October 2015, the three-month Treasury yield was 0%. Many on Wall Street said that the Fed could never raise interest rates, that the zero-interest-rate policy had become a permanent fixture, like in Japan, and that In past rate hike cycles, the two-year yield reacted faster to rate-hike expectations than the 10-year yield. This is happening now as well. The 10-year yield has its own dynamics that are not in lockstep with the Fed’s rate-hike scenario. On Friday, the 10-year yield closed at 2.85%, within the same range where it had been since late February, tantalizingly close to 3%:

Back in October 2015, the three-month Treasury yield was 0%. Many on Wall Street said that the Fed could never raise interest rates, that the zero-interest-rate policy had become a permanent fixture, like in Japan, and that [..] After the surge of the two-year yield, the difference between the two-year and the 10-year yield – the “two-10 spread” – has narrowed again. On Friday, it was at 54 basis points. In the chart below, note the narrowing at the end of last year to 50 basis points, then the mini-spike, as the 10-year yield surged faster than the two-year yield, and the recent fallback:

Read more …

Always the same braindead question: “What’s keeping Americans from saving?” We still don’t know?!

65% of Americans Save Little or Nothing (CNBC)

Despite a low unemployment rate and increasing wage growth, Americans still aren’t saving much. That’s according to a new survey from Bankrate.com, which found that 20% of Americans don’t save any of their annual income at all and even those who do save aren’t putting away a lot. Only 16% of survey respondents say that they save more than 15% of what they make, which is what experts generally recommend. A quarter of respondents report saving between 6 and 10% of their income and 21% say they sock away 5% or less.

At this rate, many people could be setting themselves up to fall short in retirement, Bankrate warns. “With a steady, significant share of the working population saving nothing or relatively little, it’s virtually guaranteed that they’ll be unable to afford a modest emergency expense or finance retirement,” says Mark Hamrick, senior economic analyst at Bankrate. “That amounts to a financial fail.” The economy might be prospering now, but that won’t last forever: “The party has to stop sometime, and when it does, employers will lay off workers,” the study says. In fact, Bankrate estimates that half of the American population won’t be able to maintain their standard of living once they stop working.

A report from GoBankingRates found similar results: Over 40% of Americans have less than $10,000 saved for when they retire. What’s keeping Americans from saving? “Expenses” was the No. 1 answer of 39% of respondents. Another 16% say they don’t have a “good enough job” to be able to save, which presumably means they aren’t earning enough. “The average American has less than $5,000 in a financial account, a quarter to a fifth of what you should have, and those aged 55 to 64 who have retirement savings only carry $120,000 — which won’t last long in the absence of paychecks,” the survey reports.

Read more …

How strong will this make the dollar?

Developing Countries At Risk From US Rate Rise, Debt Charity Warns (G.)

The expected rise in US interest rates will increase financial pressures on developing countries already struggling with a 60% jump in their debt repayments since 2014, a leading charity has warned. The Jubilee Debt Campaign said a study of 126 developing nations showed that they were devoting more than 10% of their revenues on average to paying the interest on money borrowed – the highest level since before the G7 agreement to write off the debts of the world’s poorest nations at Gleneagles, Scotland, in 2005. Five of the countries on the charity’s list – Angola, Lebanon, Ghana, Chad and Bhutan – were spending more than a third of government revenues on servicing debts.

Developing country debt moved down the international agenda following the Gleneagles agreement in which the G7 industrial countries agreed to spend £30bn writing off the debts owed to the International Monetary Fund and the World Bank by the 18 poor countries. But developing country debt is now once again being closely monitored by the IMF, which says 30 of the 67 poor countries it assesses are in debt distress or at risk of being so. Lending to developing countries almost doubled between 2008 and 2014 as low interest rates in the west led to a search for higher-yielding investments. A boom in commodity prices meant many poor countries borrowed in anticipation of tax receipts that have not materialised.

But the Jubilee Debt Campaign said the boom–bust in commodity prices was only one factor behind rising debt, pointing out that some countries were paying back money owed by former dictators, while others had been struggling with high debts for many years but had not been eligible for help. The campaign said developing countries were also vulnerable to a rise in global interest rates as central banks withdrew the support they have been providing since 2008. [..] The US Federal Reserve is expected to raise interest rates this week – with the financial markets expecting two or three further upward moves during 2018.

Tim Jones, an economist at the Jubilee Debt Campaign, said: “Debt payments for many countries have risen rapidly as a result of a lending boom and fall in commodity prices. The situation may worsen further as US dollar interest rates rise, and as other central banks reduce monetary stimulus. Debt payments are reducing government budgets when more spending is needed to meet the sustainable development goals.”

Read more …

A few economies that have not done well.

Rising US Interest Rates May Damage Gulf Economies (MEE)

[..]The latest available data shows that Oman, for instance, has a debt equivalent to 31.4% of their GDP for 2016, which is up from 4.9% in 2014, according to TradingEconomics.com. That jump in debt coincided with a fall in oil prices from more than $100 a barrel in mid-2014 to a low of $26 in early 2016. Rising rates also tend to increase costs for businesses, says Rosso. And the higher costs of borrowing ultimately means that fewer businesses that request loans from banks will receive the money they need. In short, growth in the available credit in the economy will slow. If we learned nothing else from the financial crisis of 2008-2009, it is that the world of business runs on credit. Slower credit growth usually means slower economic growth.

The base case is that among the countries with the dollar peg such as Saudi Arabia, UAE and Oman, the increased interest rates will likely drag on growth for their economies. The timing is really pretty bad for some of the countries involved. For instance, the Saudi economy shrank by 0.43% in the quarter ending September 2017, according to TradingEconomics.com. The prior quarter was worse; the economy sank 1.03%. Two quarters of negative growth is generally seen as a recession. Will the impact of rising rates push Saudi’s economy back into another recession? It’s hard to tell so far, but there is a risk. Similar problems seem likely for some other countries in the dollar-peg group.

The latest data from Oman is awful as well, although not as recent as that on Saudi Arabia. That economy contracted 14.1% in 2015, followed by another 5.1% decline in 2016. Likewise, the UAE has seen its growth steadily decline in each of the five years through 2016 from 6.9% to 3% most recently. That would not be bad for economic growth, but it is going in the wrong direction.

Read more …

That’s quite the statement.

Kim Jong-Un Has Committed To Denuclearisation, Says South Korea (G.)

South Korea’s foreign minister has said that North Korea’s leader has “given his word” that he is committed to denuclearization, a prime condition for a potential summit with President Donald Trump in May. Trump has agreed to what would be historic talks after South Korean officials relayed that Kim Jong-un was committed to ridding the Korean Peninsula of nuclear weapons and was willing to halt nuclear and missile tests. North Korea hasn’t publicly confirmed the summit plans, and a meeting place isn’t known. South Korea’s Kang Kyung-wha said Seoul has asked the North “to indicate in clear terms the commitment to denuclearization” and she says Kim’s “conveyed that commitment.” She told the CBS programme Face the Nation that “he’s given his word” and it’s “the first time that the words came directly” from the North’s leader.

Read more …

Only include this because it’s exactly what I said last week. Kim still hasn’t publicly agreed to meet.

Kim Jong-Un Caught Off Guard by Trump’s Quick Agreement to Meet (BBG)

U.S. President Donald Trump’s immediate willingness to meet Kim Jong Un for nuclear talks likely caught the North Korean leader by surprise, forcing him to consider his position before responding publicly, the South Korean foreign minister said. “We were all quite surprised by the readiness of that decision,” South Korea’s Kang Kyung-wha said on CBS’s “Face the Nation” Sunday. “It was an extremely courageous decision on the part of President Trump. We believe the North Korean leader is now taking stock.” Trump agreed to meet with Kim on March 8 after a briefing from South Korean officials.

The summit, expected to take place in a few months, would represent the first time a U.S. president has met a North Korean leader – either Kim or his father or grandfather – and is part of an overall strategy to dismantle that nation’s rapidly advancing nuclear weapons program. Pyongyang has already detonated what it described as a hydrogen bomb capable of riding an intercontinental ballistic missile to cities across the U.S., and Kim has threatened to use nuclear arms against Americans. The summit, if it occurs, will likely follow an already-scheduled meeting between Kim and South Korean President Moon Jae-in to take place in South Korea, at which denuclearization will also be discussed, Kang said.

Read more …

Yeah, Shinzo, the Russians did it.

Tyler earlier: “82% of Asahi poll respondents said Abe bears responsibility for the doctored documents relating to the Moritomo scandal”

Japan: Embattled Shinzo Abe Blames Staff Over Land Sale Scandal (AFP)

Japan’s embattled prime minister has hit back at critics over a favouritism and cover-up scandal that has seen his popularity plunge and loosened his grip on power. In a statement in parliament, Shinzo Abe stressed he had not ordered bureaucrats to alter documents relating to a controversial land sale. “I have never ordered changes,” he said. The scandal surrounds the 2016 sale of state-owned land to a nationalist operator of schools who claims ties to Abe and his wife Akie. The sale was clinched at a price well below market value amid allegations that the high-level connections helped grease the deal. The affair first emerged early last year, but resurfaced after the revelation that official documents related to the sale had been changed.

Versions of the original and doctored documents made public by opposition lawmakers appeared to show passing references to Abe were scrubbed, along with several references to his wife Akie and Finance Minister Taro Aso. Aso has blamed the alterations on “some staff members” at the ministry. But Jiro Yamaguchi, a politics professor at Hosei University in Tokyo, said the public was “not at all convinced” by this explanation. “Why was the land sold at a discount price? Without any political pressure, this could never happen, and voters are angry about it,” said Yamaguchi. The prime minister repeated an apology, saying he “keenly felt” his responsibility over the scandal that has “shaken people’s confidence in government administration.”

The affair is hitting Abe’s ratings hard, with a new poll in the Asahi Shimbun showing public support nosediving by 13 percentage points from the previous month to 31%. The figure is the lowest approval rating for Abe in the poll since his return to power at the end of 2012.

Read more …

A different kind of protectionism.

Apple Is Secretly Developing Its Own Screens for the First Time (BBG)

Apple is designing and producing its own device displays for the first time, using a secret manufacturing facility near its California headquarters to make small numbers of the screens for testing purposes, according to people familiar with the situation. The technology giant is making a significant investment in the development of next-generation MicroLED screens, say the people, who requested anonymity to discuss internal planning. MicroLED screens use different light-emitting compounds than the current OLED displays and promise to make future gadgets slimmer, brighter and less power-hungry. The screens are far more difficult to produce than OLED displays, and the company almost killed the project a year or so ago, the people say.

Engineers have since been making progress and the technology is now at an advanced stage, they say, though consumers will probably have to wait a few years before seeing the results. The ambitious undertaking is the latest example of Apple bringing the design of key components in-house. The company has designed chips powering its mobile devices for several years. Its move into displays has the long-term potential to hurt a range of suppliers, from screen makers like Samsung, Japan Display, Sharp and LG to companies like Synaptics that produce chip-screen interfaces. It may also hurt Universal Display, a leading developer of OLED technology. Display makers in Asia fell after Bloomberg News reported the plans. Japan Display dropped as much as 4.4%, Sharp tumbled as much as 3.3% and Samsung slid 1.4%.

Read more …

“$22,837 per person, not including mortgages…”

Canadian Household Debt Hits Record $1.8 Trillion (CP)

Canadians’ collective household debt has climbed to $1.8 trillion as an international financial group sounds an early warning that the country’s banking system is at risk from rising debt levels. Equifax Canada says consumers now owe $1.821 trillion including mortgages as of the fourth-quarter of 2017, marking a 6% increase from a year earlier. Although nearly half of Canadians reduced their personal liabilities, roughly 37% added to their debt to push the average amount up 3.3% to $22,837 per person, not including mortgages.

The fresh numbers come as an international financial group owned by the world’s central banks says Canada’s credit-to-GDP and debt-service ratios show early warning signs of potential risk to the banking system in the coming years. The latest report by the Bank for International Settlements says Canada’s credit-to-GDP gap and debt-service ratios have surpassed critical thresholds and are signalling red, pointing to vulnerabilities. The group, however, cautions that these indicators should not be treated as a formal stress test, but as a first step in a broader analysis.

Read more …

From Merkel’s own camp.

German Interior Minister Wants More Internal EU Border Controls (DW)

Germany should consider stepping up its border controls, German Interior Minister Horst Seehofer said on Sunday. “Not that many border points in Germany are permanently occupied,” Seehofer told German weekly newspaper Die Welt am Sonntag, adding: “We will now discuss whether that needs to change.” Seehofer also appealed for the suspension of the Schengen Agreement, which allows free movement within the EU bloc. “Internal border checks [between EU member states] must be in place so long as the EU fails to effectively control the external border,” he said, adding: “I don’t see it being able to do this in the near future.” The reintroduction of border controls is a prerogative of EU member states. Under EU rules they must remain an exception and respect the principle of proportionality.

Germany’s temporarily reintroduced border controls continue until May 12 and have been imposed on the land border with Austria and on flight connections from Greece because of the “security situation in Europe and threats resulting from the continuous secondary movements,” according to the European Commission. Seehofer’s comments follow EU demands in February that Germany and four other Schengen members – Austria, Denmark, Sweden and Norway – lift their border controls when the current agreed terms run out in May. [..] Seehofer is a member of the Christian Social Union (CSU), the Bavarian sister party of German Chancellor Angela Merkel’s conservative Christian Democrats (CDU).

Read more …

Waterwars in waterworld.

Water Shortages Could Affect 5 Billion People By 2050 – UN (G.)

More than 5 billion people could suffer water shortages by 2050 due to climate change, increased demand and polluted supplies, according to a UN report on the state of the world’s water. The comprehensive annual study warns of conflict and civilisational threats unless actions are taken to reduce the stress on rivers, lakes, aquifers, wetlands and reservoirs. The World Water Development Report – released in drought-hit Brasília – says positive change is possible, particularly in the key agricultural sector, but only if there is a move towards nature-based solutions that rely more on soil and trees than steel and concrete.

“For too long, the world has turned first to human-built, or ‘grey’, infrastructure to improve water management. In doing so, it has often brushed aside traditional and indigenous knowledge that embraces greener approaches,” says Gilbert Houngbo, the chair of UN Water, in the preface of the 100-page assessment. “In the face of accelerated consumption, increasing environmental degradation and the multi-faceted impacts of climate change, we clearly need new ways of manage competing demands on our freshwater resources.” Humans use about 4,600 cubic km of water every year, of which 70% goes to agriculture, 20% to industry and 10% to households, says the report, which was launched at the start of the triennial World Water Forum.

Global demand has increased sixfold over the past 100 years and continues to grow at the rate of 1% each year. This is already creating strains that will grow by 2050, when the world population is forecast to reach between 9.4 billion and 10.2 billion (up from 7.7 billion today), with two in every three people living in cities. [..] By 2050, the report predicts, between 4.8 billion and 5.7 billion people will live in areas that are water-scarce for at least one month each year, up from 3.6 billion today, while the number of people at risk of floods will increase to 1.6 billion, from 1.2 billion.

Read more …

Feb 142018
 
 February 14, 2018  Posted by at 10:56 am Finance Tagged with: , , , , , , , ,  


Times Square, New York 1954

 

The Payback Date For Today’s Economic Recovery Is Getting Closer (WEF/PS)
Big Reset Looms for Corporate Credit Market (WS)
Record $23 Billion Flees World’s Largest ETF (BBG)
Wednesday Could Be a Huge Day for the VIX (BBG)
Europe Has a $1 Trillion Bad-Loan Problem (BBG)
Draghi Faces Impossible Task To Weaken The Euro; He Might Not Even Try (CNBC)
Greek Bond Yields Keep Increasing (K.)
Britons Face Surge In Household Debts In Next Five Years (G.)
The World’s Biggest Housing Bubbles According To UBS (VisualC)
UK House Price Growth Accelerates To 5.2% (Ind.)
First-Time Buyers Hit 10-Year High As Buy-to-let Property Sales Fade (G.)
House Price Flatlining Is A Good Thing, Despite Estate Agents’ Gripes (G.)
Boris Johnson: Stopping Brexit Would Be ‘Disastrous’ (Ind.)

 

 

But nary a soul still sees a payback ahead….

The Payback Date For Today’s Economic Recovery Is Getting Closer (WEF/PS)

In recent days, the initial New Year optimism of many investors may have been jolted by fears of an economic slowdown resulting from interest-rate hikes. But no one should be surprised if the current sharp fall in equity prices is followed by a swift return to bullishness, at least in the short term. Despite the recent slide, the mood supporting stocks remains out of sync with the caution expressed by political leaders. Market participants could easily be forgiven for their early-year euphoria. After a solid 2017, key macroeconomic data – on unemployment, inflation, and consumer and business sentiment – as well as GDP forecasts all indicated that strong growth would continue in 2018. The result – in the United States and across most major economies – has been a rare moment of optimism in the context of the last decade.

For starters, the macro data are positively synchronized and inflation remains tame. Moreover, the IMF’s recent upward revision of global growth data came at precisely the point in the cycle when the economy should be showing signs of slowing. Moreover, stock markets’ record highs are no longer relying so much on loose monetary policy for support. Bullishness is underpinned by evidence of a notable uptick in capital investment. In the US, gross domestic private investment rose 5.1% year on year in the fourth quarter of 2017 and is nearly 90% higher than at the trough of the Great Recession, in the third quarter of 2009. This is emblematic of a deeper resurgence in corporate spending – as witnessed in durable goods orders. New orders for US manufactured durable goods beat expectations, climbing 2.9% month on month to December 2017 and 1.7% in November.

Other data tell a similar story. In 2017, the US Federal Reserve’s Industrial Production and Capacity Utilization index recorded its largest calendar year gain since 2010, increasing 3.6%. In addition, US President Donald Trump’s reiteration of his pledge to seek $1.5 trillion in spending on infrastructure and public capital programs will further bolster market sentiment. All of this bullishness will continue to stand in stark contrast to warnings by many world leaders. In just the last few weeks, German Chancellor Angela Merkel cautioned that the current international order is under threat. French President Emmanuel Macron noted that globalization is in the midst of a major crisis, and Canadian Prime Minister Justin Trudeau has stated that the unrest we see around the world is palpable and “isn’t going away.”

Read more …

Ne’er a lesson learned: Collateralized Loan Obligations.

Big Reset Looms for Corporate Credit Market (WS)

“Leveraged loans,” extended to junk-rated and highly leveraged companies, are too risky for banks to keep on their books. Banks sell them to loan mutual funds, or they slice-and-dice them into structured Collateralized Loan Obligations (CLOs) and sell them to institutional investors. This way, the banks get the rich fees but slough off the risk to investors, such as asset managers and pension funds. This has turned into a booming market. Issuance has soared. And given the pandemic chase for yield, the risk premium that investors are demanding to buy the highest rated “tranches” of these CLOs has dropped to the lowest since the Financial Crisis. Mass Mutual’s investment subsidiary, Barings, has packaged leveraged loans into a $517-million CLO that is sold in “tranches” of different risk levels.

[..] These floating-rate CLOs are attractive to asset managers in an environment of rising interest rates. If rates rise further, Libor rises in tandem, and investors would be protected against rising rates by the Libor-plus feature of the yields. Libor has surged in near-parallel with the US three-month Treasury yield and on Monday reached 1.83%. So the yield of Barings CLO was 2.82%. While the Libor-plus structure compensates investors for the risk of rising yields and inflation, it does not compensate investors for credit risk!

[..] One of the measures that track whether “financial conditions” are getting “easier” or tighter is the weekly St. Louis Fed Financial Stress Index. In this index, zero represents “normal.” A negative number indicates that financial conditions are easier than “normal”; a positive number indicates that they’re tighter than “normal.” The index, which is made up of 18 components – including six yield spreads, including one based on the 3-month Libor – had dropped to a historic low of -1.6 on November 3, 2017. Despite the Fed’s rate hikes and the accelerating QE Unwind, it has since ticked up only a smidgen and remains firmly in negative territory, at -1.35.

The Financial Stress Index and the two-year Treasury yield usually move roughly in parallel. But since July 2016, about the time the Fed stopped flip-flopping on rate hikes, the two-year yield began rising and more recently spiking, while the Financial Stress Index initially fell. The chart below shows this disconnect between the St. Louis Fed’s Financial Stress Index (red, left scale) and the two-year Treasury yield (black, right scale). Note the tiny rise of the red line over the past few weeks (circled in blue):

Read more …

Volatility ain’t done with you yet.

Record $23 Billion Flees World’s Largest ETF (BBG)

Investors actively abandoned the world’s biggest passive fund during the onset of market mayhem. The SPDR S&P 500 exchange-traded fund (ticker SPY) suffered a record $23.6 billion in outflows last week amid the worst momentum swing in history for the underlying U.S. equity benchmark. Outflows amounted to 8% of the fund’s total assets at the start of the week, a rate of withdrawals not seen since August 2010. A blowup in volatility-linked products sent markets haywire, eliciting waves of risk aversion from jittery investors. Strategists at JPMorgan said the swiftness and severity of the positioning unwind is a sign that further selling from the likes of commodity trading advisors and risk parity funds “should be limited from here.”

“The picture we are getting in the U.S. equity ETF space is one of advanced rather than early state de-risking,” they added. The five-session stampede for the exits erased the previous nine weeks of inflows into the fund, which is issued by State Street. The combination of price declines and withdrawals erased $38.6 billion in SPY’s assets. That’s nearly double the second-worst showing of $19.4 billion in asset shrinkage during the week ending Aug. 21, 2015, when China’s surprise devaluation of the yuan roiled markets. Prior to this recent market tumult, extreme enthusiasm for U.S. equities had propelled the fund’s total assets above $300 billion.

Read more …

What you say? Volatility?

Wednesday Could Be a Huge Day for the VIX (BBG)

Tomorrow’s VIX options expiration could prove extra volatile for the gauge. The Cboe Volatility Index tends to have bigger swings on days its contracts mature, with intraday moves of 13% on average on the past 12 monthly expirations. That compares with a mean daily fluctuation of 10% in the year through January. Of course, that was before this month, when a record VIX surge on Feb. 5 sent its average intraday move for February to almost 60%. What’s more, the recent market turmoil has led to a surge in the number of VIX contracts, and put open interest almost tripled to a record since the Jan. 17 expiration. Counting puts and calls, there are 15.4 million VIX options outstanding, and 40% of them mature tomorrow. While most stock-index options expire on the third Friday of every month, monthly VIX contracts expire two days earlier, on the Wednesday.

Read more …

Wait for rates to rise.

Europe Has a $1 Trillion Bad-Loan Problem (BBG)

For European banks, it’s a headache that just won’t go away: the €944 billion ($1.17 trillion) of non-performing loans that’s weighing down their balance sheets. Economists say the pile of past-due and delinquent debt makes it harder for banks to lend more money, hurting their earnings. European authorities are prodding lenders to sell or wind down non-performing credit, but they’re split on how to tackle the issue, and some investors are disappointed by the pace of progress.

The problem is particularly acute in the countries that were hit hardest by the sovereign debt crisis. Greece, which has yet to exit its bailout program, tops the list of non-performing loans as a share of total credit, while Italy has the biggest pile of bad debt in absolute terms.

Italian banks have fixed goals for shrinking their bad credit levels by selling portfolios or winding down loans. Intesa Sanpaolo, the country’s biggest bank by market value, got a head start on its rivals two years ago and plans to accelerate the reduction of non-performing loans, Chief Executive Officer Carlo Messina said last month. He says other Italian banks “are doing the right job” and should make further progress this year.

Read more …

Trumped.

Draghi Faces Impossible Task To Weaken The Euro; He Might Not Even Try (CNBC)

Mario Draghi is facing yet another headache this year as a strong currency threatens to derail his quest to keep prices stable, with many analysts suggesting there’s no easy way out for the president of the ECB. Investors have been flocking to the single currency as the euro zone economy keeps growing and political risks dissipate. However, that could become a problem for the ECB as a stronger currency can mean that European-produced products become pricier and less attractive outside the region. The euro has risen nearly 3% against the U.S. dollar since the start of the year, at a time when the ECB has been assessing how to reduce its monetary stimulus – which aims to increase lending and stoke consumer prices. At the bank’s last press conference in January, Draghi admitted that recent volatility in the exchange rate was a “source of uncertainty.”

The ECB’s primary target has always been inflation and not the exchange rate and Draghi — like many central bankers around the world — has been cautious when speaking of his own currency. However, analysts believe that Draghi wouldn’t be able to talk down the euro, even if he wanted to. “I believe it will be difficult for the ECB to talk the euro down in a very significant manner as it has already pretty much exhausted its preferred expansionary monetary policy instruments which it could use to weaken the currency (rate hikes and QE),” Thu Lan Nguyen at Commerzbank told CNBC via email. “And as the G-20 nations have agreed that they will refrain from manipulating their exchange rates, interventions are not a viable option either. Or even directly talking the euro down for that matter, because other nations would see this as a violation of the agreement as well,” she said.

Read more …

As everyone else’s yields rise (often from below zero), Greece is helpless.

Greek Bond Yields Keep Increasing (K.)

Greek bond yields continued to rise Tuesday, increasing worries about the cost of borrowing the country will face once it has to cover all of its financing needs through the market. At the same time Finance Minister Euclid Tsakalotos is adamant that Greece will not need a precautionary credit line and is embarking on a series of contacts in an attempt to attract investor interest. Tsakalotos departed on Tuesday for Paris for meetings with representatives of investment companies, hoping to convince them about the prospects of the Greek economy. He will continue his mission in London on Thursday. He is due back to Athens on Friday. The Greek 10-year bond saw its yield climb further on Tuesday, reaching 4.38% from 4.29% on Monday, while the yield on five-year paper advanced from 3.64% to 3.77% in a day. The 7-year debt yield exceeded 4%, having been sold to investors with a 3.5% yield just last Thursday.

Read more …

I shudder to imagine what Britain will look like in 5 years time.

Britons Face Surge In Household Debts In Next Five Years (G.)

Britons will spend almost a third more on their mortgages and other household debts over the next five years, according to new data, sparking fears many may struggle to cope with mounting costs if interest rates rise as predicted. The projection, revealed by a freedom of information request to the Office for Budget Responsibility, found household debt servicing costs were set to climb 29% by 2023, the vast majority of which are likely to be mortgages. The rise may take homeowners by surprise, given that costs fell 9% over the previous five years and also declined as a share of household income by almost a quarter due to historically low interest rates.

The Bank of England has indicated that it plans to raise interest rates from as early as May. On Monday the Resolution Foundation warned it could hit millions of low-income families who have relied on cheap credit. The Bank’s governor, Mark Carney, has said he believes the growing economy, including GDP growth and rising average wages, warrants a rise in interest rates from their low of 0.5%. Labour’s analysis found that an average household would see an increase of £468 in annual debt costs, from £1,983 in 2018 to £2,451 by 2023. The shadow chancellor, John McDonnell, called the figures “eye-watering increases in the potential costs faced by working families at a time when incomes are being squeezed”.

Read more …

Nice series of articles on UK housing. Nice because contradictory.

The World’s Biggest Housing Bubbles According To UBS (VisualC)

If you had $1 billion to spend on safe real estate assets, where would you look to buy? For many funds, financial institutions, and wealthy individuals, the perception is that the world’s financial centers are the places to be. After all, world-class cities like New York, London, and Hong Kong will never go out of style, and their extremely robust and high-density city centers limit the supply of quality assets to buy. But what happens when too many people pile into a “safe” asset? According to UBS, certain cities have seen prices rise at rates that are potentially not sustainable – and eight of these financial centers are at risk of having real estate bubbles that could eventually deflate.

Every year, UBS publishes the Global Real Estate Bubble Index, and the most recent edition shows several key markets in bubble territory. The bank highlights Toronto as the biggest potential bubble risk, noting that real prices have doubled over 13 years, while real rents and real income have only increased 5% and 10% respectively. However, the largest city in Canada was certainly not the only global financial center with real estate appreciating at rapid rates in the last year. In Munich, Toronto, Amsterdam, Sydney and Hong Kong, prices rose more than 10% in the last year alone. Annual increases at a 10% clip would lead to the doubling of prices every seven years, something the bank says is unsustainable.

In the last year, there were three key markets where prices did not rise: London, Milan, and Singapore. London is particularly notable, since it holds more millionaires than any other city in the world and is rated as the #1 financial center globally.

Read more …

Article above: Prices did not rise in London. Article below: they did.

UK House Price Growth Accelerates To 5.2% (Ind.)

UK house price growth accelerated to 5.2% in the year to December, new official data shows. That was a rise from 5% in the twelve months to November. The jump exceeds rises in average wages, prompting experts to warn of a further strain on affordability. The average UK house price hit £227,000 in December 2017, up £1,000 from the previous month and £12,000 higher than in December 2016. The house price index compiled by the Office for National Statistics and the Land Registry shows Scotland and the South-west experienced the highest annual house price growth, registering 7.7% and 7.5% respectively.

Average prices in England rose 5% in the year, to £244,000 while Wales saw house prices increase by 5.4% over the last 12 months to stand at £154,000. Growth in Northern Ireland was slightly more subdued, with the average price rising 4.3% to £130,000. Richard Snook, a senior economist at PwC, said the overall UK rise was above his projection made at the start of 2017. [..] “In terms of regional trends, London prices showed a slight recovery from the sharp fall in November so the picture is one of a market that has plateaued since the summer. London prices are just 2.5% above their level a year ago.

Read more …

And first time buyers rise. That’s supposed to be a good thing.

First-Time Buyers Hit 10-Year High As Buy-to-let Property Sales Fade (G.)

The number of first-time buyers hit the highest level for a decade in 2017 while lending for buy-to-let has gone into retreat, according to official figures. A total of 365,000 buyers took ownership of their first home last year, an increase of 7.4% on 2016 and the highest number since 2006, said UK Finance, the trade body for Britain’s banks. Its data showed that the average first-time buyer was 30 and had an income of £41,000. Property experts said the government’s help-to-buy programme plus lower deposit and cheap mortgage deals propelled first-time buyers in 2017. But in a sign that the boom may be waning, the figures for December show the number slipped compared with the same month last year. The slowdown comes despite the stamp duty cut in the November budget, which is expected to save four out of five first-time buyers up to £5,000.

The raft of tax measures on buy-to-let introduced last year has sent the sector swiftly into retreat. There were 5,300 new buy-to-let house purchase mortgages completed in December, 17.2% fewer than in the same month a year earlier. Paul Smee, of UK Finance, said: “2017 saw the number of first-time buyers reach its highest level in a decade, which is welcome news for those getting started on the housing ladder. “But although the market remains competitive there is no room for complacency, with weaker December figures consistent with our market forecast of subdued growth this year. [..] Separate figures from the Office for National Statistics revealed that house price inflation in 2017 was 5.2%, taking the price of a typical UK home to £226,760.

Read more …

OK, we’ve had rising prices and falling prices. Flatlining is door no. 3.

House Price Flatlining Is A Good Thing, Despite Estate Agents’ Gripes (G.)

Over the past year the rate of house price inflation has fallen while the number of first-time buyers has risen to its highest level since 2006. These two facts are connected: the reason young people have become renters rather than owner-occupiers is that property became expensive. Property has become so dear that the average first-time buyer is now 30 years old and has a salary of £41,000 a year. Owner-occupation rates have fallen from 70% to 63% over the past decade and it is not difficult to see why. Ultra-low interest rates mean that it has never been cheaper to service a mortgage, but that doesn’t matter all that much when the price of a home relative to incomes is so high.

For those who want to buy their own home, the good news is that house-price inflation will be modest in 2018. Earnings growth is still around 2.5%; the Bank of England is warning that interest rates are likely to go up faster and by more than previously expected; and tax changes that have helped cause a 17% annual drop in buy-to-let purchases in the year to December are going to become more stringent in April. House prices would already be falling were it not for the fact that interest rates and unemployment are low. It was the combination of 15% interest rates and a doubling of the jobless total that caused the property-price collapse of the early 1990s, and a repeat of that looks highly improbable because of a (welcome) lack of distressed sellers.

Read more …

For his career.

Boris Johnson: Stopping Brexit Would Be ‘Disastrous’ (Ind.)

Boris Johnson will say he fears people are becoming “even more determined” in their efforts to stop Britain’s withdrawal from the European Union (EU), as he sets out in a major speech what allies claim is a liberal vision of Brexit. The Foreign Secretary’s Valentine’s Day address – entitled the Road to Brexit – will be the first in a series of set pieces from Cabinet ministers and preludes Theresa May’s address in Germany this weekend. At a central London location, Mr Johnson will say he fears that some are becoming “even more determined” to stop Brexit and “frustrate the will of the people”.

“I believe that would be a disastrous mistake that would lead to permanent and ineradicable feelings of betrayal,” Mr Johnson will say. “We cannot and will not let it happen.” “But if we are to carry this project through to national success – as we must – then we must reach out to those who still have anxieties. “I want to try today to anatomise at least some of those fears and to show to the best of my ability that they are unfounded, and that the very opposite is usually true: that Brexit is not grounds for fear but hope.”

Read more …

Nov 132017
 
 November 13, 2017  Posted by at 2:17 pm Finance Tagged with: , , , , , , , , , , ,  


Jackson Pollock Man with knife 1940

 

There can be little doubt that the British, in general, have a sense of humor. And that’s perhaps the lens through which we should view the country these days. After all, what other options do we have? A comment yesterday to a Guardian article sums up the situation quite perfectly in just a few words (note: Dignitas has something to do with assisted dying):

Brexit is rapidly becoming like someone who booked a trip to Dignitas when they were told they were dying and has now been told there’s a cure. But they’re going to Switzerland anyway, because they can’t face dealing with Ryanair’s customer service team.

There are two main British political parties, Tories and Labour, which fight each other whenever and wherever they can. Moreover, each party has several camps that fight each other even more, if at all possible. The George W.- friendly Tony Blair Orchestra in the Labour Party seems to have lost out to the actually left-wing Jeremy Corbynistas for now, but they won’t give up without a fight (power is their only hobby). Blair is still commenting from the sidelines on Corbyn’s perceived follies while his faithful lament about how their Tone was misled by 43 into bombing Iraq.

The Tories have gone full-monty Monty Python. John Cleese et al must feel at least a pang of jealousy. 40 Tory MPs have allegedly gathered to demand for PM Theresa May to quit. A whole bunch of both Labour and Tory lawmakers threaten to tackle her over not allowing them a vote in any Brexit deal (which for now is entirely hypothetical). Other voices across party lines demand the resignation -or sacking- of foreign not-so-very-ministerial Boris Johnson.

One Tory MP, the Rt. Hon. John Redwood MP, who’s also Chief Global Strategist for Charles Stanley, wrote an op-ed in the FT telling investors to pull their money out of the UK. You can’t make that kind of stuff up. Or you can, but no-one would believe a word. The Python crew would have never made a dime if they had started out today, because life in Britain has now seriously trumped art. When the other guys are funnier without even trying, maybe comedy’s not your thing.

And that’s how we slide seamlessly right down into Theresa May and the Holy Grail, the probably best representation of what is going on. May never wanted a Brexit, but she’s so power hungry that she jumped at a chance of defending what she doesn’t believe in. By the way, apart maybe from Corbyn, all the actors in this comedy are in it not because they care for their country, but for themselves, exclusively. Brilliant video, by the way.

 

 

Not that Brexit is necessarily such a terrible thing. Putting distance between yourselves and the European Union may well be the most sensible thing there is. Because Brussels is now defined more than anything by what it has done -and failed to do- to Greece, to the refugees and to Catalonia. And it will never be able to shake that off. The EU, just like the UK, is ruled by people who care only about themselves. Our political systems self-select for sociopaths, with precious few exceptions.

Even if you see Brexit as a purely economical move, which most people do even though it’s very much not true, the British people should rejoice knowing that they won’t be the ones forking over for the next pan-European bank bailout. Then again, they’ll have to bail out their own banks. Which have grown way out of hand, the price paid for wanting to become a global finance center.

Nor will the British people be forced to pay up for the newly-revived, scary-as-hell and unholy idea of a European army, an idea that originated in the 1950s and has re-gained support the very moment Britain voted for Brexit:

 

EU To Sign Defense Pact, May Allow Limited British Role

France, Germany and 20 other EU governments are set to sign a defense pact on Monday they hope marks a new era of European military integration to cement unity after Britain’s decision to quit the bloc. In Europe’s latest attempt to lessen its reliance on the United States, the 22 governments will create a formal club that should give the European Union a more coherent role in tackling international crises.

“We’ve never come this far before,” said a senior EU official said of EU defense integration efforts that date back to a failed bid in the 1950s. “We are in a new situation.” The election of pro-European Emmanuel Macron as France’s president and warnings by U.S. President Donald Trump that European allies must pay more towards their security have propelled the project forward, diplomats said.

[..] A system to spot weaknesses across EU armed forces, in coordination with U.S.-led NATO, is due to start in a pilot stage, while a multi-billion-euro EU fund to support the pact is still under negotiation. Long blocked by Britain, which feared the creation of an EU army, defense integration was revived by France and Germany after Britons voted to leave the EU in June 2016.

[..] London is not part of the initiative but British officials have been pressing for third country involvement. Britain’s aerospace industry and its biggest defense firm BAE Systems fear losing out, diplomats said. Britain may be able to join in, but only on an exceptional basis if it provides substantial funds and expertise.

They don’t even know who’ll be the leader of this European Army. There are plenty of reasons this was voted down 60 years ago and left in the dustbin ever since. A German supreme commander, anyone? The female German minister of defence just yesterday let slip that she supports regime change in Poland. That’s all you should need to know.

This is presented in Brussels as a money saver. European countries have too many different weapons systems, is the reasoning, and need to become ‘more efficient’. I bet you right here and now that it will cost Europe an arm and an extra leg or two-three. But not Britain. Which can also, simultaneously, if and when sensible people are in office, ditch its grandiose notions of being an empire or world power, and cut its armed forces by 50 or 75%.

And while they’re at it, cut its arms industry into little pieces and flush them down the Thames. Brexit can be an opportunity, a chance for the country to fully re-invent itself. But first, the Python-styled tragic comedy starring Theresa and Boris will have to be played to its tragic finale. To that end, and since it just wouldn’t feel fair to leave him out, let’s make sure we reserve a role for George Orwell as well – it comes natural:

 

UK Government Tensions Rise After Leak Of ‘Orwellian’ Memo Sent To May

The tensions in Theresa May’s government intensified on Sunday night ahead of this week’s vital votes on the Brexit bill, as ministers accused Boris Johnson and Michael Gove of sending an “Orwellian” set of secret demands to No 10. As an increasingly weakened prime minister faces the possibility of parliamentary defeats on the bill, government colleagues have said they are aghast at the language used by the foreign secretary and the environment secretary in a joint private letter.

The leaked letter – a remarkable show of unity from two ministers who infamously fell out during last year’s leadership campaign – appeared to be designed to push May decisively towards a hard Brexit and limit the influence of former remainers. It complained of “insufficient energy” on Brexit in some parts of the government and insisted any transition period must end in June 2021 – a veiled attack on the chancellor, Philip Hammond.

A decision as big and defining as Brexit should always have been executed by a government, or a coalition, in which as broad a spectrum of the population as possible is represented. It’s crazy to let just one party push through their version, especially when views are so divergent and tensions run this high. The Tories have just a slight majority.

But really, all Labour have to do is wait until May and Boris and Gove and all the others run out of gas and their engine seizes. They lost two ministers in a week and more will follow. So Labour makes a peace offer, knowing full well it won’t be accepted, but has to be made just for form.

As per tomorrow, May’s EU Withdrawal Bill will be discussed in Parliament and the next episode of Theresa May and the Holy Grail can start. John Cleese will be watching, thinking every five minutes: “Why didn’t I think of that?”. The Bill will be ripped to shreds, between a Hard Brexit and a No Brexit side, and hundreds of amendments, and May will be ripped along with it.

Even her chances of lasting just the week are slim. She has to turn to Labour for support, but she can’t. If she does, Boris will smell his opportunity for the top post. He might even get it, but that would lead to something awfully close to civil war; still, maybe that’s inevitable anyway, and perhaps it would be a good thing. Cards on the table.

 

UK Labour Makes Brexit Offer to May as Future in Balance

Keir Starmer, the party’s Brexit spokesman, wrote to May on Monday telling her there was a “sensible majority” in Parliament to secure a two-year transition deal for after Brexit. That would allow Britain to stay inside the European Union’s single market and customs union after 2019 while it completes trade talks with the bloc. He said the opposition to such an arrangement came from Conservatives.

“Over recent weeks, it has become increasingly clear that you alone do not have the authority to deliver a transitional deal with Europe and to take the necessary steps to protect jobs and the economy,” Starmer wrote in the letter, which was released by his office.

May is unlikely to welcome Labour’s offer, which highlights the fragility of her position. The premier, who lost two cabinet ministers in a week to different scandals, has received a letter from pro-Brexit rival Boris Johnson demanding a bolder approach to the divorce, the Mail on Sunday reported. And 40 Conservative lawmakers back a challenge to her leadership, The Sunday Times said, just eight short of the number that triggers a vote.

[..] May’s landmark Brexit legislation, the EU Withdrawal Bill, returns to Parliament on Tuesday, where it faces hundreds of proposed amendments to be considered over eight days of debate. Even with the backing of Northern Ireland’s Democratic Unionist Party, May only has a slim majority. Tories who want to keep close ties to the EU have put their names on many of the measures, suggesting the government will have to back down or be defeated.

They’re talking about dates and timelines to present proposals to the EU, but they’ll never agree on any. And even if they do, Brussels will be ready to tear them to pieces. It’s hard to see how a Brexit will ever happen, but it’s easy to see that if it ever does, it’ll be an absolutely fabulous mess. And then even John Cleese won’t be laughing anymore.

 

 

Jun 062017
 
 June 6, 2017  Posted by at 6:41 pm Finance Tagged with: , , , , , , , , , ,  


Joseph Mallord William Turner Wreckers, Coast of Northumberland 1834

 

Is it sheer hubris, or is it just incompetence? It’s a question often asked when it comes to politics. And regularly, the answer is both. Still, what the ruling British political class has put on display recently seems to exist in a category all its own. Less than a year go, then-PM David Cameron lost the Brexit referendum that he called himself and was dead sure he would win by a landslide.

His successor Theresa May, Cameron’s Home Secretary and a staunch Remain advocate, lost the Brexit vote as much as her PM did, but stayed on, was promoted, and acted for 11 months like Downing Street 10 was hers by Divine Decree. Then she did the exact same thing Cameron did: she looked at polling numbers and decided to go for the jugular: more power through a snap vote.

In the process, May has succeeded in accomplishing the remarkable feat of rejuvenating her main opponent Jeremy Corbyn and his Labour party, who had been left for infighting dead until she called the election, while at the same time dividing her own Tories so much they now resemble Labour from just weeks ago.

The thing that sort of irks is that the speed and intensity with which it all came down would have been way more impressive if she had meant to do it. Oh, and what also irks is that despite a performance worthy of the Comedy Capers, May may still win, since there was always little time, there’s so little time left till Thursday and there have been terror attacks.

A nice addition to the comedy sphere, and I mean no disrespect to any of the terror victims, they’ve gotten enough of that from May et al, is the story behind the PM’s refusal to appear in public debates with Corbyn and perhaps others. When I first saw a few weeks ago that she had announced that refusal, I immediately thought she did not make that decision. She doesn’t have the savvy for that kind of thing.

Someone did it for her. I presumed there had been American advisers added to her team, but I didn’t read anything about that. Until a few days ago, when I saw that political -presumed- heavyweights like Australian Lynton Crosby and American Jim Messina had joined around the time of the snap election announcement on April 18.

And now of course I can’t help thinking that these guys are responsible for the epic failure that May has been over the past six weeks. But that might be giving them too much honor, she’s quite capable of screwing up the way she has all on her own.

And yes, it’s hard to escape a comparison with Hillary here. It’s not about gender, it’s about competence. And if you manage to -almost or entirely- lose to the likes of Trump and Corbyn, despite having a huge lead in the polls, as both ladies had, you’re simply in the wrong place at the wrong time. Not that Corbyn has won yet, at least not in the election.

Guys like Crosby and Messina get paid the big bucks for their expertise in both clean and dirty tricks. They have plenty experience in both. They don’t have opinions, but they make up voters’ opinions for them. Messina was Obama’s 2012 re-election campaign leader, Crosby did elections in Australia, New Zealand, Canada. Funny thing is if you check their records, they have lost quite a few of these campaigns. Even funnier would be if they lose this one too.

 

But you’re right, it’s not right to be laughing. This past weekend saw another attack on Britain, and another -to put it mildly- far below par performance by Theresa May in its wake. If after this the Britons still hand her a win in Thursday’s general election, give up the country for lost. Stick a fork in it.

May was the one who as Home Secretary was responsible for an investigation into the foreign funding of extremist Islamist groups in the UK that was set to be released a year ago. Instead, we saw last week, she’s actively suppressing its release now that she’s PM, ostensibly because the report mentions Saudi Arabia as a source of such funding, and May recently used her position to help UK arms manufacturers sell billions worth of additional weapons to the Saudi’s.

She’s even on record as saying that arms sales to the House of Saud make Britain more safe, though the report apparently fingers that same House of Saud as funding the very terrorism her country was hit by, three times in a row now, during her stint as PM.

Where does terrorism originate? May won’t admit it’s Saudi Arabia, so she tried, in her first post-attack speech, to deflect the obvious by blaming ‘the internet’. But the internet doesn’t sell arms to countries that support terrorism. Theresa May does.

 

 

As people understandably call for more protection after three hits in a row, May has another thing to suppress: as Home Secretary she has been responsible for cutting some 22,000 jobs in the police force, 20,000 in the army, and 60,000 in the healthcare system. And if she would win on Thursday, more of all that is in the offing. At least, that was what was planned; she may make yet another U-turn on that one.

It’s really quite amusing to see a candidate trying to hide from the very elections she herself called, but -again-, given the short time-frame this hide-and-seek tactic might actually work. Moreover, if the British media and his own Labour MPs had not turned against Jeremy Corbyn the way they did until very recently, would May be anywhere near having a shot at victory? It looks unlikely.

There are already bets going that even if she wins the election, which if it happens is sure to be a very narrow win, she’ll be replaced as PM by Boris Johnson before July 1. But he’s as much of a clown as all other major Tory figureheads are today.

 

 

The problem of course is that the problems for Britain won’t stop on Thursday, no matter who wins. The problems haven’t even started blooming yet, let alone flowering.

If Corbyn might win, he’s have the entire Conservative entitlement class on his back, and that would turn ugly fast. If May wins, she’ll be ousted in no time, she did far too bad of a job. And then in just a few weeks’ time the Brexit negotiations begin. But with what? With a country that’s been divided to the bone, that’s what.

As things are, Corbyn may yet succeed where Bernie Sanders was rejected and suppressed by his own party. The world today needs people like them, not because it needs ‘socialism’ that much, but because the political landscape has been thrown too far out of balance. If the left gets co-opted by neo-liberalism as much as the right is, there is no left left.

And a sound political system needs representation for the people, the poor(er), as much as representation for the richer ruling classes. It’s not about ideology, but about balance. If you allow either one side or the other of the political equation to run rampant, you will inevitably end up with a dysfunctional society.

 

And that is what Britain is today. There are plenty slogans out there after yet another terror attack that say things like ‘Britain Stands United’, “London is United” , but it doesn’t and they are not. It’s not terrorism that has divided the country, it’s the political class. It’s not terrorism that has ‘crippled democracy’, it’s the sense of entitlement that many -on both sides of the aisle- have brought to Whitehall.

You would think that at least Jeremy Corbyn could do something about that if he wins. But he would then face an EU negotiating team that operates with a very similar sense of entitlement. And they’re going to come after the British people the same way they have in Greece. Not exactly an enviable position.

And that’s just Brussels. Then there are the terrorist attacks, and there’s little reason to think they will stop. What Britain refuses to recognize until now, and has for hundreds of years as I said before, is that these attacks in London and Manchester are not where it has all started. They don’t come out of the blue, and they don’t come from people who ‘hate us for our freedom’.

The first step is the UK et al spreading terror in Libya and Syria and Iraq, bombing away and selling weapons to ‘friendly’ regimes, creating utter chaos as a political power tool. If you don’t stop that you don’t stop terrorism. The only way to stop terror directed at you is to stop directing it at others.

Stop bombing these countires with impunity, and use the money you save with that to rebuild what you’ve destroyed. That will take away the main reason why there is terrorism in our streets. It will likely go a long way towards solving the refugee problems as well.

All this seems a long way away. It’ll recede further if the entitlement-laden establishment win on Thursday. But whichever way the vote goes, Britain will face a decade or more of deepening hardship, don’t underestimate that; there is no easy way out, not for the people.

Oh wait, I totally forgot to mention that the housing bubble is going to burst too. Oh, well, when it rains…

 

 

Jul 142016
 
 July 14, 2016  Posted by at 9:08 am Finance Tagged with: , , , , , , , , ,  


NPC Hessick & Son Coal Co. Washington 1925

China June Exports, Imports Both Fall More Than Forecast (R.)
China’s Steel Exports Jump to Second Highest Amid Tensions (BBG)
Great American Oil Bust Rages on; Defaults, Bankruptcies Soar (WS)
Gundlach Says Wall Street’s Suffering ‘Mass Psychosis’ (MW)
Helicopter Money – The Biggest Fed Power Grab Yet (David Stockman)
35-Year-Old Bond Bull Is on Its Last Legs (WSJ)
Bank of England To Cut Interest Rates To Halt UK Recession (G.)
UK Housing Sales Forecast To Fall Sharply This Summer After Brexit (G.)
Steve Keen Accused Of Causing Australia’s Coming Recession (Mish)
Britain’s MEPs Ushered Quietly Off Stage As The EU Show Goes On (G.)
Spain’s Banks are Suddenly “Too Broke To Fine” (DQ)
What It’s Like To Be A Non-EU Citizen (Trninic)
The Fake Biodiesel Factory That Pumped Out Real Money (BBG)

 

 

And that is with record steel exports. Not the first time I ask this: where would China exports be without that?

China June Exports, Imports Both Fall More Than Forecast (R.)

China’s exports fell more than expected in June as global demand remained stubbornly weak and as Britain’s decision to leave the European Union clouds the outlook for one of Beijing’s biggest markets. Imports also shrank more than forecast, indicating the impact of measures to stimulate growth in the world’s second-largest economy may be fading, after encouraging import readings in May. Exports fell 4.8% from a year earlier, the General Administration of Customs said on Wednesday, adding that China’s economy faces increasing downward pressure and the trade situation will be severe this year. Imports dropped 8.4% from a year earlier. That resulted in a trade surplus of $48.11 billion in June, versus forecasts of $46.64 billion and May’s $49.98 billion.

Economists polled by Reuters had expected June exports to fall 4.1%, matching May’s decline, and expected imports to fall 5%, following May’s 0.4% dip. The marginal import decline in May was the smallest since late 2014, and had raised hopes that China’s domestic demand was picking up. “The world economy still faces many uncertainties. For example, Brexit, expectations of an interest rate hike by the Federal Reserve, volatile international financial markets, the geopolitical situation, the threat of terrorism … these will affect the confidence of consumers and investors globally and curb international trade,” customs spokesman Huang Songping told a news conference. “We believe China’s trade situation remains grim and complex this year. The downward pressure is still relatively big.”

Read more …

“Sales advanced 23% from a year earlier..”

China’s Steel Exports Jump to Second Highest Amid Tensions (BBG)

China’s steel exports climbed to the second-highest level on record in June, as shipments from the world’s biggest producer ramp up amid escalating trade tensions. Sales advanced 23% from a year earlier to 10.94 million metric tons, according to China’s customs administration. That’s only eclipsed by shipments in September last year, when the country sent 11.25 million tons overseas. Exports in the first six months were 57.12 million tons, the seventh on-year increase in a row and the most ever for the period.
China’s record supplies have fueled global trade tensions as too many producers compete for sales. An EU investigation launched last week into imports from five countries is “symptomatic of the rising protectionism in global steel markets as a result of overcapacity,” according to a note from Macquarie.

“There’s a lot of trade friction but overall Chinese steel prices are relatively low, demand is steady, and together with the renminbi’s depreciation, the Chinese exports are very competitive,” Helen Lau, an analyst at Argonaut Securities Asia Ltd., said from Hong Kong. “It’s encouraging for Chinese mills and good for overseas consumers, but it’s not what foreign mills want to see.” Faced with its slowest growth in decades, China is exporting its steel surplus. Shipments will accelerate in the second half as prices decline and margins at mills are squeezed, Ren Zhuqian, chief analyst at Mysteel Research, said last month, forecasting exports could reach 117 million tons for the year, higher than last year’s record 112.4 million tons.

Read more …

Cleansing.

Great American Oil Bust Rages on; Defaults, Bankruptcies Soar (WS)

Junk bonds, trading like stocks since February, have skyrocketed and yields have plunged. But that doesn’t mean the bloodletting is over. The trailing 12-month US high-yield bond default rate jumped to 4.9% at the end of June, the highest since May 2010 as the Financial Crisis was winding down, Fitch Ratings reported today. The first-half total of $50.2 billion of defaults already exceeds the $48.3 billion for the entire year 2015. Energy companies accounted for 56% of those defaults. The energy sector default rate shot up to 15%. Within it, the default rate of the Exploration & Production (E&P) sub-sector soared to 29%! And the default party isn’t over: “Despite the run-up in prices since the February trough, there will be additional sector defaults, with Halcon Resources expected to file imminently,” Fitch reported.

Issuance of junk bonds in the first half has plunged 34% from a year ago, to $120.5 billion, according to the Securities Industry and Financial Markets Association (SIFMA), as junk-rated energy companies are having one heck of a time borrowing money and issuing bonds. The fact that investors – who’ve now been burned for nearly two years – are reluctant to extend new credit to teetering oil & gas companies precipitates their default and bankruptcy. Fitch: “The combination of high energy and metals/mining default rates and lower year to date issuance has been a one-two punch for the high yield bond market this year,” said Eric Rosenthal, Senior Director of Leveraged Finance. “The question going forward is whether macro events will disrupt markets and restrain issuance for the remainder of the year.”

Read more …

“Call me old-fashioned, but I don’t like investments where if you’re right you don’t make any money..”

Gundlach Says Wall Street’s Suffering ‘Mass Psychosis’ (MW)

This market is dealing with a “mass psychosis.” That’s the latest perspective on the state of Wall Street from Jeff Gundlach, the star money manager who founded DoubleLine Capital. Late Tuesday, during his regular webcasts to discuss markets, Gundlach sounded perplexed that investors’ demand for the perceived safety of government bonds has driven 10-year Treasury notes to record lows, even as the Dow Jones Industrial Average and the S&P 500 index scored fresh record highs Wednesday. Treasury yields, which have come off their 2016 nadir, are still hovering below their levels before the U.K.’s decision to exit the European Union sent global stock markets spiraling down. Bond prices move inversely to yields. Gundlach used the following chart in his Tuesday webcast presentation to highlight the historic moves in Treasury yields:

“There’s something of a mass psychosis going on related to the so-called starvation for yield,” said Gundlach, whose fund manages about $100 billion. “Call me old-fashioned, but I don’t like investments where if you’re right you don’t make any money,” he said. Gundlach believes that the benchmark 10-year note will move above 2% soon, but perhaps not until sometime next year. Some market participants see the benchmark’s yield tumbling further before that rise happens. Tom Di Galoma, managing director at Seaport Global, predicts the 10-year yield will slip below 1% over the next six to nine months, citing the anemic European economy in the wake of Brexit and concerns over the world’s second-largest economy, China. Meanwhile, the 10-year yield slipped below 1.47% midday Wednesday as U.S. stocks were struggling for a fourth straight session of gains, extending a record run.

Read more …

“..our monetary politburo would overtly conspire and coordinate with the White House and Capitol Hill to bury future generations in crushing public debts.”

Helicopter Money – The Biggest Fed Power Grab Yet (David Stockman)

The Cleveland Fed’s Loretta Mester is a clueless apparatchik and Fed lifer, who joined the system in 1985 fresh out of Barnard and Princeton and has imbibed in its Keynesian groupthink and institutional arrogance ever since. So it’s not surprising that she was out flogging – albeit downunder in Australia – the next step in the Fed’s rolling coup d’ etat. We’re always assessing tools that we could use,” Mester told the ABC’s AM program. “In the US we’ve done quantitative easing and I think that’s proven to be useful. “So it’s my view that [helicopter money] would be sort of the next step if we ever found ourselves in a situation where we wanted to be more accommodative.” This is beyond the pale because “helicopter money” isn’t some kind of new wrinkle in monetary policy, at all.

It’s an old as the hills rationalization for monetization of the public debt – that is, purchase of government bonds with central bank credit conjured from thin air. It’s the ultimate in “something for nothing” economics. That’s because most assuredly those government bonds originally funded the purchase of real labor hours, contract services or dams and aircraft carriers. As a technical matter, helicopter money is exactly the same thing as QE. Nor does the journalistic confusion that it involves “direct” central bank funding of public debt make a wit of difference. Suppose Washington issues treasury bonds to the 23 primary dealers on Wall Street in the regular manner. Further, assume that some or all of these dealers stick the bonds in inventory for 3 days, 3 months or even 3 years, and then sell them back to the Fed under QE (and most likely at a higher price).

So what! The only thing different technically about “helicopter money” policy is the suggestion by Bernanke and others that the treasury bonds could be issued directly to the Fed. That would just circumvent the dwell time in dealer (or “investor”) inventories but result in exactly the same end state. In that event, of course, Wall Street wouldn’t get the skim. But that’s not the real reason why helicopter money policy is so loathsome. The unstated essence of it is that our monetary politburo would overtly conspire and coordinate with the White House and Capitol Hill to bury future generations in crushing public debts.

Read more …

“It is outright panic-driven momentum.”

35-Year-Old Bond Bull Is on Its Last Legs (WSJ)

They have been saying it for 35 years. But after 3Ω decades of stunning returns, the biggest bond bull market in history looks to be entering its final stages. Why? Changing politics and the perverse, looking-glass world of negative yields. Bonds are meant to be safe, dull investments. But there is nothing boring, and not a lot of safety, in Japanese government bonds this year: The 40-year has returned an extraordinary 48% in six months, including the paltry coupon, and other long-dated JGBs have also had their best returns on record. U.K. and German long-dated bonds have produced similar returns to those after the collapse of Lehman. Returns on U.S. Treasurys are less exotic, but the 30-year has returned 22% this year—a gain big enough to worry longtime bond watchers.

It would have been easy to make the mistake of thinking the bull run in bonds was over many times since then-Federal Reserve Chairman Paul Volcker got it started by taking control of inflation. The bet that the Japanese bond market—which long had the lowest yields in the world—would finally buckle has lost so much money for so many people that it is known as the “widowmaker” among traders. That hasn’t stopped Eric Lonergan, who runs a multistrategy fund for M&G in London. He has 15% of his fund betting against long-dated JGBs, and has endured a brutal move in the market against him in the past few weeks. Yet, he believes the likelihood is that the market will soon turn. “This is price driving price and is hugely, hugely vulnerable,” he said. “It is outright panic-driven momentum.”

Read more …

Did consumer confidence perhaps fall because Carney et al -the media!- spread all their fear stories before the Brexit referendum?! And now they can all go: I told you so!

Bank of England To Cut Interest Rates To Halt UK Recession (G.)

The Bank of England could cut interest rates and inject billions of pounds into the financial system as early as Thursday as policymakers seek to prevent Britain sliding into recession after the EU referendum. Under pressure to stem further falls in sterling, Mark Carney, the governor, is expected by financial markets to halve the 0.5% base rate on Thursday and reignite the Bank’s quantitative easing programme. Speculation has intensified in recent days after Carney dropped heavy hints that action would be needed to turn around an economy suffering badly as a result of the vote to leave the EU.

Several City economists said it was crucial for the central bank to step in and maintain the flow of cheap credit to the economy at a time when business and consumer confidence had fallen to levels last seen after the financial crash. A slump in the pound to a 31-year low has also undermined confidence among City investors concerned that the UK’s growth prospects will be damaged by leaving the single market. Markets have put an 80% probability on a move by the Bank by Thursday. Howard Archer, chief economist at IHS Global Insight, said: “With the UK economic outlook weakened by the Brexit vote, there can be little doubt – if any – that the Bank of England will enact some stimulus following the July MPC [monetary policy committee] meeting.

The only question really seems to be what action will the MPC take?” Carney said in a speech last month that the loss of confidence highlighted by a string of negative surveys meant “some monetary policy easing will likely be required over the summer”. A closely watched consumer confidence index from market researchers GfK last week recorded the biggest drop in sentiment for 21 years, following the Brexit vote.

Read more …

Britain gets exactly what it needs. Where is the joy?

UK Housing Sales Forecast To Fall Sharply This Summer After Brexit (G.)

The number of homes changing hands is expected to slump this summer in the wake of the UK’s vote to leave the EU, with estate agents and surveyors more pessimistic about the housing market than at any point since the late 1990s. Inquiries from buyers fell for the third month running in June, and the number of sales agreed dropped sharply as the Brexit vote fuelled uncertainty in the market, according to the latest monthly survey by the Royal Institution of Chartered Surveyors (Rics). New buyer inquiries declined “significantly” during the month, it said, with 36% more respondents reporting a drop than an increase – the lowest reading since the financial downturn was beginning in mid-2008.

Over the same period, the supply of properties coming onto the market fell in every region except Northern Ireland, Rics said, and sales fell for a third consecutive month. Looking ahead over the next three months, 26% more Rics members expected sales to drop further than expected a busier housing market. “This is the most negative reading for near-term expectations since 1998,” Rics said. The numbers of surveyors in London reporting falling prices slipped deeper into negative territory in June, with nearly half of surveyors in the capital reporting falls rather than rises. Price falls were particularly concentrated in central London.

The referendum is not the only factor behind the dip in activity. The stamp duty hike on second homes, which came into force on 1 April, has also disrupted the market. Rics’s chief economist, Simon Rubinsohn, said: “Big events such as elections typically do unsettle markets so it is no surprise that the EU referendum has been associated with a downturn in activity. “However even without the buildup to the vote and subsequent decision in favour of Brexit, it is likely that the housing numbers would have slowed during the second quarter of the year, following the rush in many parts of the country from buy-to-let investors to secure purchases ahead of the tax changes.”

Read more …

Australia Insolvencies +14%, Debt Agreements +25%, Bankruptcies +7%

“..we all know at heart there is precisely one person to blame: Australian economist Steve Keen, now exiled in God-forsaken London. Were it not for Keen’s incessant fearmomgering about the Australian housing bubble, property values in Sydney alone would now be worth more than the sum total of property values in the US, China, UK, Mars, and Uranus combined.”

Steve Keen Accused Of Causing Australia’s Coming Recession (Mish)

It appears there are a bit of credit difficulties down under. Cash-strapped Australian personal insolvencies, bankruptcies, and debt agreements experience their sharpest rise in seven years. Please consider Struggling Aussies Rack Up Debt.

“Alarming new figures released yesterday by the Australian Financial Security Authority found personal insolvencies in the June quarter climbed by nearly 14% compared to the June 2015. Debt agreements — an agreement between a debtor and a creditor where creditors agree to accept a sum of money from the debtor – rose by nearly a massive 25%. Bankruptcies increased by 7%. Veda’s general manager of consumer risk Angus Luffman said multiple factors were to be blamed for a stalling of consumer credit. “The continuing slowdown in residential property markets, coupled with weak wages growth and subdued retail sales growth had all contributed to the continued slowdown seen in the June credit demand index,’’ he said.

“Turnover for household goods which is often big-ticket items like whitegoods and couches which are financed by credit has slowed significantly in recent months.” Australian Bureau of Statistics lending data released yesterday found total new lending commitments including housing, personal, commercial and lease finance dropped by 3.2% in May, the second consecutive fall. Lending totalled $67.5 billion in May which was down seven per over the year and sat at a 17-month low. HSBC chief economist Paul Bloxham blamed the cooling of the housing market for the softening of the willingness to borrow.”

While others point the finger every which way, we all know at heart there is precisely one person to blame: Australian economist Steve Keen, now exiled in God-forsaken London. Were it not for Keen’s incessant fearmomgering about the Australian housing bubble, property values in Sydney alone would now be worth more than the sum total of property values in the US, China, UK, Mars, and Uranus combined. Were it not for Keen, every property owner down under could retire now and live off the perpetual appreciation of their property wealth.

Read more …

“..Nigel Farage and 20 other Ukip MEPs will get to vote on the terms of Britain’s exit, while the British government, led by remain supporter Theresa May, will have to accept the EU’s terms..”

Britain’s MEPs Ushered Quietly Off Stage As The EU Show Goes On (G.)

[..] Paradoxically, British MEPs are expected to vote on the UK’s EU divorce treaty, expected to be thrashed out by David Davis, the secretary of state for exiting the EU. Although the British government will be treated as a foreign country, there is nothing in the EU rulebook that prevents British MEPs from having a say when the European parliament votes on the British divorce treaty under article 50. This throws up the odd situation that Nigel Farage and 20 other Ukip MEPs will get to vote on the terms of Britain’s exit, while the British government, led by remain supporter Theresa May, will have to accept the EU’s terms. British diplomats also find themselves in a peculiar Brexit limbo.

They will have to decide how hard to fight Britain’s corner on EU legislation that will exist for years after the UK has left. The most likely outcome is that British diplomats will continue to press British interests, because EU legislation could still affect the UK after Brexit. Norway implements all EU directives as the price of being in the EU single market – the “pay without a say” model that politicians in Oslo think the British would loathe. It is the scenario envisaged by Cameron when he promised an EU referendum in 2013. “Even if we pulled out completely, decisions made in the EU would continue to have a profound effect on our country,” he said in a Bloomberg speech. “But we would have lost all our remaining vetoes and our voice in those decisions.”

British diplomats might push British interests, but they could be frozen out of the informal wheeling and dealing. “Politics is about the future and if someone at the table has no position any more, [the others] will do deals without them,” says Dirk Schoenmaker, a senior fellow at the Bruegel thinktank. He predicts that “the big three” that decide financial regulation – Germany, France and the UK – will be cut down to a big two. “It is quite clear, from 23 June onwards the big deals in this area will be made by Germany and France, without the UK.”

Read more …

Spain’s backdoor to hurt its already shattered people.

Spain’s Banks are Suddenly “Too Broke To Fine” (DQ)

After eight years of chronic crisis mismanagement, moral hazard and perverse incentives have infected just about every part of the financial system. Earlier this week, the U.S. Congress published the findings of a three-year investigation into why the Department of Justice chose not to punish HSBC and its executives for their violations of US anti-money laundering laws and related offenses – because doing so would have had “serious adverse consequences” for the financial system – the “Too Big To Jail” phenomenon, a perfect, all-purpose, real-world Get-Out-of-Jail-Free card. But now there’s “Too Broke to Fine.” Today over a dozen Spanish banks were given a life-line by the EU’s advocate general, Paolo Mengozzi, that could be worth billions of euros in savings for the banks.

For millions of Spanish mortgage holders, it could mean billions of euros in lost compensation. Just over seven years ago, when conditions were beginning to sour for Spain’s banking system, 40 out of 42 Spanish banks decided to insert “floor clauses” in their mortgage contracts. These effectively set a minimum interest rate — typically between 3% and 4.5% — for all their variable-rate mortgages (which are very common in Spain), even if the Euribor dropped far below that figure. This, in and of itself, was not illegal. The problem is that most banks failed to properly inform their customers that the mortgage contract included such a clause. Those that did, often told their customers that the clause was an extreme precautionary measure and would almost cerainly never be activated.

After all, they argued, what are the chances of the euribor ever dropping below 3.5% for any length of time? At the time (early 2009), Europe’s benchmark rate was hovering around the 5% mark. Within a year it had crashed below 1% and is now languishing deep below zero. As a result, most Spanish banks were able to enjoy all the benefits of virtually free money while avoiding one of the biggest drawbacks: having to offer customers dirt-cheap interest rates on their variable-rate mortgages. For millions of Spanish homeowners, the banks’ sleight of hand cost them an average of €2,000 per year in additional interest payments, during one of the worst economic crises in living memory. Many ended up losing their homes.

Read more …

Nice but very biased: “You have good jobs that make it possible to pay the taxes and your expenses.” Err.. no, too many don’t, and that’s why Leave won. You may have a master’s on engineering, but if you can’t understand these dynamics, what’s that worth?

What It’s Like To Be A Non-EU Citizen (Trninic)

[..] let me tell you a few things about the life of a non-EU citizen. When I came to Austria from Bosnia in 2003 to study at Technical University of Graz, I had to undergo various administrative and non-administrative checks. At one point, I and all my fellow Bosnian students had to show proof we didn’t have pneumonia, typhus – which I somewhat understand. But we even had to prove we did not have RABIES. Rabies! In the 21st century! My home country is only about 300 kilometers from Austria and yet we were treated as if we came from 200 years ago, at least. On top of that, we had – and still have – the pleasure of needing a visa every year and paying for it, of course. We even paid tuition for college, though the Austrians and EU students did not.

But that was the deal, and I personally was happy to be able to work the lowest level student jobs and in return get a decent education. The common attitude was “deal with it!” and so we did. After college, I got my first job at a big construction company. The trick? I worked with a Bosnian contract. It was an all-in contract, written for slaves. But hey, I had a job. I was one of three people in my branch office who had a master’s degree in engineering (much less went to college), spoke three foreign languages, drove 50,000 kilometers per year, yet I was still paid less than everyone. But I dealt with it. If the company was to say at any moment I was fired, I had two months to leave the country or find a new company.

Many highly qualified non-EU citizens live this kind of life day-to-day and the only thing on our minds is, “What the hell was on the UK’s mind when they voted LEAVE?” The UK always was the “favorite (and the spoiled) kid of the EU family.” It kept its currency. It had more favorable EU conditions and it always behaved a bit stand-offish toward the rest of the Europe, if we are honest. The UK has about 52 million residents and pays about €5 billion to EU fund per year (€96 per citizen). By comparison, Austria has 8 million residents and pays about €1 billion per year to EU fund (€125 per citizen).

Read more …

Great story.

The Fake Biodiesel Factory That Pumped Out Real Money (BBG)

The biodiesel factory, a three-story steel skeleton crammed with pipes and valves, squatted on a concrete slab between a railroad track and a field of storage tanks towering over the Houston Ship Channel. Jeffrey Kimes, an engineer for the Environmental Protection Agency, arrived there at 9 a.m. on a muggy Wednesday in August 2011. He’d come to visit Green Diesel, a company that appeared to be an important contributor to the EPA’s fledgling renewable fuels program, part of an effort to clean the air and lessen U.S. dependence on foreign fuel. In less than three years, Green Diesel had reported producing 50 million gallons of biodiesel. Yet Kimes didn’t know the company. He asked other producers, and they weren’t familiar with Green Diesel either.

He thought he ought to see this business for himself. Kimes, who works out of Denver, was greeted at the Green Diesel facility by a man who said he was the plant manager. He was the only employee there, which was odd. “For a big plant like that, you’re going to need a handful of people at least to run it, maintain it, and monitor the process,” says Kimes, a 21-year EPA veteran. The two toured the grounds, climbing metal stairways and examining the equipment. The place was weirdly still and quiet. Some pipes weren’t connected to anything. Two-story-high biodiesel mixing canisters sat rusting, the fittings on their tops covered in garbage bags secured with duct tape. Kimes started asking questions.

“They showed me a log, and from that you could see they hadn’t been producing fuel for a long period of time,” he says. An attorney for Green Diesel showed up. Kimes asked how he could reconcile the lack of production with what Green Diesel had been telling the EPA. The attorney said he didn’t know, he’d been hired only the day before. “It was obvious what was going on,” Kimes says. The next day, he appeared at Green Diesel’s office in Houston’s upscale Galleria neighborhood, 15 miles from the plant, hoping to collect production records and other information. Someone stuck him in a conference room. Soon he was on the phone with the lawyer from the day before, who told him not to speak with any more Green Diesel employees.

Kimes went back to Denver and started calling Philip Rivkin, Green Diesel’s founder and chief executive. He wasn’t available. And he never would be. That fall, Rivkin left Houston to live in Spain with his wife, their teenage son, a $270,000 Lamborghini Murcielago Coupe, and a $3.4 million Canadair Challenger jet. A passport Rivkin obtained in Guatemala, where he moved after living for an undetermined period in Spain, shows him with dark hair, a double chin, a lazy eye, and an impassive look. It’s one of the few publicly available photographs of the man. Now serving a 10-year sentence at the federal prison in Bastrop, Texas, Rivkin declined through his lawyer, Jack Zimmermann, to be interviewed for this story.

Read more …

May 252016
 
 May 25, 2016  Posted by at 1:31 pm Finance Tagged with: , , , , , , , , ,  


G.G. Bain Immigrants arriving at Ellis Island, New York 1907

There’ve been a bunch of issues and topics on my -temporarily non-writing- mind, and politics, though as I’ve often said it’s not my preferred focus, keeps on slipping in. That’s not because I’ve gotten more interested in ‘the game’, but because the game itself is changing in unrecognizable fashion, and that is intricately linked to subjects I find more appealing.

For instance, in the past few days, I’ve read Matt Taibbi’s epos on the demise of America’s Republican Party in R.I.P., GOP: How Trump Is Killing the Republican Party, and Shaun King on a similar demise of the Democrats in Why I’m Leaving the Democratic Party After This Presidential Election and You Should Too, and both make a lot of sense.

But I think both also miss out on the main reason why these ‘demises’ are happening. In my view, it’s not enough, not satisfactory, to talk about disgruntled voters and corrupt politicians and the antics of Donaldo, and leave it at that. There is something bigger, much bigger, going on that drives these events.

But that I will explain in a later article (soon!). Right now, I want to address another piece of the same pie (though it’s perhaps not obvious that it is): the Brexit ‘discussion’ in Europe. A May 11 piece by ex-World Banker Peter Koenig provides as good a starting point as any:

The Collapse of the European Union: Return to National Sovereignty and to Happy Europeans?

Imagine – the EU were to collapse tomorrow – or any day soon for that matter. Europeans would dance in the streets. The EU has become a sheer pothole of fear and terror: Economic sanctions – punishment, mounting militarization, the abolition of civil rights for most Europeans. A group of unelected technocrats, representing 28 countries, many of them unfit to serve in their own countries’ political system, but connected well enough to get a plum job in Brussels – are deciding the future of Europe. In small groups and often in secret chambers they decide the future of Europe.

Koenig makes much work of connecting what’s bad about the EU, to the TTiP and TiSA trade deal negotiations. And though the TTiP deal has lately come under rapidly increasing fire in Europe, that is a relevant point. Koenig also, perhaps more importantly, concludes that the EU has no future.

If the TTIP is ratified despite all logic, and if subsequently the EU fell apart – each country would still be held accountable to the terms of the agreement. Hence, time for an EU collapse before signing of the TTIP and TiSA is of the essence. This radical solution may be too much even for staunch EU / Euro opponents. Many of them still seek, hope and dream of a reformed EU. They still live under the illusion that ‘things’ could be worked out. Believe me – they cannot.

The Machiavellian US-invented venture called EU with the equally US-invented common currency – the Eurozone – has run its course. It is about to ram the proverbial iceberg. The EU-Euro vessel is too heavy to veer away from disaster. Europe is better off taking time to regroup; each nation with the objective of regaining political and economic sovereignty – and perhaps with an eye a couple of generations down the road envisaging a new United Europe of sovereign federal states, independent, totally delinked from the diabolical games of the western Anglo-American empire.

That last bit is- or should be- highly relevant to the Brexit discussion that’s ongoing in Britain, working up to an undoubtedly grotesquely clownesque climax on June 23, the day some 40 million by then supremely confused Britons get to vote. Koenig’s last words also contradict the goals and aspirations of Yanis Varoufakis’ new initiative DiEM25, which seeks to democratize the EU from the inside out.

Now, I appreciate Yanis quite a bit, and certainly much more than most Greeks seem to do these days, but ever since DiEM25 announced itself I haven’t been able to keep from thinking: have you looked at the EU lately, like, really looked? I get the idea, obviously, but why would you, to use a convenient metaphor, want to go through the trouble of renovating a building that’s been structurally condemned for good reasons, instead of tearing it down and build a new one?

The only reason I can think of is that DiEM25 thinks the building is still salvageable. Question then: is it? And that’s a question Britain should ask itself too in the run-up to June 23. If you vote yes, what exactly are you voting to belong to, what -sort of- edifice are you electing to continue living in? A delapidated structure bound and waiting to be torn down? If so, why would you do that, and what would be the consequences?

And what about the alternative, what if you voted to leave the building? It’s not as if the present EU is the only way for European countries to work together. There are a zillion others, and arguably some of those might actually do what the EU portends to do but is failing miserably at: that is, prevent violence from breaking out. The narrative of Brussels as a grand peacemaker sounds less credible by the minute.

It is perhaps open to personal interpretation, but when I look at what the EU has done, and is still doing to Greece, the country I’m visiting again trying to relieve some of the pain inflicted on it by the EU, and I look at how the refugee issue has been handled by ‘Brussels the peacemaker’s actions and inactions, causing thousands of deaths and infinitely more misery, you’d have to be a darn great orator to make me support the what I have come to call Unholy Union.

What Greece shows is that there is no Union, other than in times of plenty. What Aylan Kurdi and the sorrowful litany of other drowned toddlers of the Aegean show is that there are no moral values inside the -leadership of the- Union. One drowned child can be an accident. Hundreds of them constitute criminal moral deficiency.

Of course you can argue that since Britain’s handling of the refugee crisis is just as obscene as the rest of Europe’s, this is not in and of itself a reason to vote Leave, but it’s no ground to vote Remain either. If anything, it’s a reason to indict politicians across the European board. Their behavior contrasts sharply with that of many of their constituents, as countless stories testify and as I’ve seen in such sparkling bright light here in Athens.

But we can take this back a few steps. I was surprised to see PM David Cameron appear as the big voice for “Remain”, for the UK to stay within the EU. Cameron was never exactly a fan of the Union. And as the Daily Mail observes, just 6 months ago Mr Cameron “declared there was ‘no question’ that Britain could survive and do well outside the EU.”

But then, he’s a man who’ll happily blow along with whatever wind is prevalent. I was even more surprised to see Boris Johnson try to take the lead of the “Leave” side, because Boris, a weather vane as much as Cameron, had always belonged to the same side as the latter on everything, and now suddenly differs on Remain or Leave. A shrewd career gamble?

The British Conservative Party has managed to corner the entire debate, both yes and no, between them. I mean, kudos and well done old boys, but what a farce that is. Labour’s Jeremy Corbyn sides with Cameron’s Remain side, without wanting to, but has failed utterly to make sure he has a realistic part in the discussion. Exit Jeremy. Where was their spin team when Corbyn fell into that hole?

Of course, there’s Nigel Farage and UKIP, but Nigel will forever be a fringe character. Which is not necessarily a bad thing, by the way; the British Lower House is not that fine of a place to sit in on a daily basis. Whenever I see footage of it I can’t help thinking AA meeting for masochists.

Farage’s main contribution to the discussion will forever be the countless YouTube clips in which he very succinctly explains how dysfunctional the European Parliament he is (was?) a member of, is, to the very same parliamentarians. Maybe more Brits should watch those and think again about what their vote is about.

An apt comparison would seem to lean towards a Tower of Babel much bigger than the original one, and in which between mountains of paper not a single scrap can be found that pertains to the prevention of poverty, misery and the drowning deaths of 4- and 5-year olds. Or at least such, most basic, principles are nowhere near the top of any lists.

Inside the pretend Union, it is obvious that the people of Germany, Holland, France find their own children’s lives more valuable than those of other children. And their futures too; half of Spanish and Greek youngsters are out of work and out of a future. And Brits are asked to vote to keep that demonic apparatus intact and join the oppressors.

Framing it in those terms also tells you something about the DiEM25 question: is it worth one’s while to try and democratize the EU from within? Given how entrenched the predators vs prey positions have become, and how unlikely the predators are to defend their advantages tooth and nail, and how their ‘chosen’ people have taken over Brussels, does that look like a project to put a lot of energy in?

The Euro is just 15 years old, but the EU goes back many decades. Strategic positions have long been taken in trenches that have long been dug. Is that the fight you want to fight? There’ll always be a Europe, but there’s nothing inevitable or incontrovertible about the EU, or about Brussels being its capital. All it takes is perhaps for one country to say “Thanks, but no, thanks.” The EU for all its bluster is very vulnerable.

So there’s your voting options. But it should be clear that the Brexit vote is headlined by the wrong people, for all the wrong reasons, and with all the wrong arguments. It can’t be exclusively about money, but it is. And if the Unholy Union falls apart sometime further down the line regardless, a vote for Remain on purely financial grounds will take on a whole different light: wasted energy, wasted money, wasted morals.

Besides, nobody knows what the -financial- effects of a Brexit will be, and any claims that are made to the contrary are just guesses based on whatever political -career- preferences the person or institution making them has. ‘Things’ ‘could’ crash on Trump victories and they could crash on Brexit, but any numbers attached to these potential events are 100% made up. It’s hilarious to see Treasurer George Osborne declare with a straight face that a Brexit would cause UK home prices to fall by 18%, but that’s all it is.

First question is: you sure it’s not 18.5%? What genius advisor came up with that number? Or did they have a committee of wise men in a week-long cigar-fueled brainstorming session that split their differences? Second question: do you guys realize that falling home prices are exactly what at least half of Britain is looking for? That distorting your real estate market to the extent that nobody can afford a home anymore is a dead-end street that kills cities and communities and people in the process?

I should stop here right? I can write a book about this, not because Brexit is such a huge subject (just see if anyone in Europe cares), but because the EU is such a yuuge disaster, and there will be many more opportunities to return to the topic. I have tons more little notes scribbled down, and a flood more crazy claims and comments will be made by various parties in the ‘fight’. Just wanted to say that this whole ‘debate’ -if you can call it that- has so far been very different from what it should have been.

Why would you want to belong to a team like the EU? I know that Cameron does, and so does Corbyn, but none of that is reason you should too. Nor should you want to ‘Leave’ because Boris Johnson wants to. You need to look out over the whole landscape. But that’s just me.

May 152016
 
 May 15, 2016  Posted by at 9:28 am Finance Tagged with: , , , , , , , , , , ,  


Jack Delano Brakeman H.B. Van Santford on the AT&SF line from Summit to San Bernardino 1943

Steve Keen Talks Debt, Trump and Gold (RT)
Economists Disagree With Voters Who See US Worse Off Today Than in 1960s (WSJ)
China: “It Appears That All The Engines Suddenly Lost Momentum” (R.)
Chinese Banks’ New Loans Plunge By More Than Half In April (R.)
Shell Eyes $40 Billion Non-Core Asset Spin-Off To Cut Its Huge Debt Pile (Tel.)
Moody’s Downgrades Saudi Arabia, Bahrain, Oman (AP)
German Professors And Entrepreneurs File Complaint Against ECB Policy (R.)
The Vultures’ Vultures: New Hedge-Fund Strategy Corrupts Washington (HuffPo)
Farmland Values Fall Sharply in Parts of the Midwest (WSJ)
Cameron’s Anti-Brexit ‘Remain’ Campaign Has A Major Trust Issue (Ind.)
German Government Plans To Spend €93.6 Billion On Refugees By End 2020 (R.)

Very interesting. I’ve said it a thousand times: everyone should let sink in what Steve has to say. It’s curious to see that people like Max agree with everything Steve says -as far as they can understand him-, but disagree with him on gold.

Steve Keen on Debt, Trump and Gold (RT)

Read more …

No, really, this is a serious WSJ article. Economists claim they know better then you about your own situation, and the paper gives them the space to utter their blubber. “You’re not really hungry, you’re just imagining that, and your hospital bill is not REALLY higher than it was 40 years ago, and in student debt was this high in 1970 too, don’t you remember?!”

Economists Disagree With Voters Who See US Worse Off Today Than in 1960s (WSJ)

When was America at its best? Put the question to voters and many will point as far back as the 1960s. Put the question to economists and they identify a much more recent peak in U.S. living standards. Forecasters in The Wall Street Journal’s monthly survey of business, academic and financial economists were asked to rate whether U.S. living standards were higher today or at various points in the past. Around 80% say those standards are higher today than during the 1990s or earlier. The 2016 presidential campaign has exposed worries among many voters about a U.S. in decline. The sentiment played a particular role in boosting the candidacy of businessman Donald Trump, with a campaign slogan pledging to “Make America Great Again.”

While many economists view the U.S. as not fully recovered from the recession that began in 2007 or the previous recession in 2001, that still leaves a 40-year disconnect compared to voters who see the U.S. in a half-century of decline. The Pew Research Center recently polled voters on the question “Compared with 50 years ago, life for people like you in America is better or worse?” A plurality of 46% said things were worse now. Only 34% said life today is better than in the 1960s. A Morning Consult poll asked voters whether the 1960s or 1980s were better than today. In that survey, 31% said the ‘60s were better and 37% said the 1980s were better. By contrast, 88% of economists said the U.S. is better today than in 1960 and 87% see today as better than 1980.

“Between technology and health advances, today is much better than in 1960,” said Amy Crews Cutts, chief economist at Equifax. By many of the measures economists are inclined to look at, it is not a close call. In 1960, the life expectancy of the average American was a full decade shorter than it is today, according to the Centers for Disease Control and Prevention. The median personal income, after adjusting for inflation, is 55% higher today than in 1960, according to the Census Bureau. These measures of overall well-being continued to rise throughout the 1980s and 1990s. Why do so many voters put such little stock in the past 50 years? Economists point to a few culprits.

First, wages or available jobs have deteriorated for some demographic groups, particularly men without a high-school diploma and men who worked in manufacturing (two groups with some overlap). Second, we have just lived through the “first decade where the average worker lost ground,” said Joel Naroff, chief economist of Naroff Economic Advisers. Overall incomes declined during the two most recent recessions, but not enough to set people back to a 1960s standard of living. About 53% of respondents in the Journal’s survey said the U.S. today is “about the same” or “worse” than it was in 2000. About 63% said the same about 2007. The survey of 70 economists was conducted from May 6 to May 10, though not every economist answered every question.

Read more …

And these are ‘official’ numbers, which for a reason that escapes me we‘re still clinging on to. So I ‘adapted’ the title.

China: “It Appears That All The Engines Suddenly Lost Momentum” (R.)

China’s investment, factory output and retail sales all grew more slowly than expected in April, adding to doubts about whether the world’s second-largest economy is stabilizing. Growth in factory output cooled to 6% in April, the National Bureau of Statistics (NBS) said on Saturday, disappointing analysts who expected it to rise 6.5% on an annual basis after an increase of 6.8% the prior month. China’s fixed-asset investment growth eased to 10.5% year-on-year in the January-April period, missing market expectations of 10.9%, and down from the first quarter’s 10.7%.

Fixed investment by private firms continued to slow, indicating private businesses remain skeptical of economic prospects. Investment by private firms rose 5.2% year-on-year in January-April, down from 5.7% growth in the first quarter. “It appears that all the engines suddenly lost momentum, and growth outlook has turned soft as well,” Zhou Hao, economist at Commerzbank in Singapore, said in a research note. “At the end of the day, we have acknowledge that China is still struggling.”

Read more …

The PBoC’s bizarro explanation:“..the figures don’t include new local government bond issuance to refinance debt previously issued by local government financing vehicles.” As if to say: don’t worry, we’re still borrowing like crazy, only now half of it is to refi what we couldn’t pay back.

Chinese Banks’ New Loans Plunge By More Than Half In April (R.)

China’s central bank said it has not changed its “prudent” monetary policy stance despite a disappointing release of April data showing banks had cut back sharply on new loans. Banks made 555.6 billion yuan ($85.21 billion) in net new yuan loans in April, much lower than expected and less than half the 1.37 trillion yuan seen in March, data showed on Friday. The People’s Bank of China (PBOC), in a question and answer posted on its website on Saturday, attributed the slide to seasonal and technical factors, including the fact that the figures don’t include new local government bond issuance to refinance debt previously issued by local government financing vehicles.

“If this is factored in, new loans in April were more than 900 billion yuan,” the PBOC said, in answer to a question as to whether the figures indicated a decline in the real economy. That number would match analysts previous forecasts for April. However, the bank also pointed to a decline in corporate bond financing, which came in over 500 billion less than March – while still up slightly from the same period last year, and noted that banks remain cautious given increased focus on asset quality control. “On the whole, current financial support to the real economy is still strong,” it said. “Prudent monetary policy has not changed.”

Read more …

Curious attempt to make deeply troubling problems look like great opportunities instead. Nobody wants to buy these assets and everyone knows they MUST sell, which is why Shell try to sell as much as $40 billion of it now, and in the way they do (IPO?!). And that would “..let Shell benefit from a sustained oil price recovery?!”

Shell Eyes $40 Billion Non-Core Asset Spin-Off To Cut Its Huge Debt Pile (Tel.)

Oil giant Royal Dutch Shell is eyeing a possible $40bn spin-off of non-core assets around the globe as it grapples with a $70bn debt pile following a takeover of BG Group earlier this year. Chief financial officer Simon Henry told analysts last week that a float of Shell’s non-core assets is “very much on the agenda”. The comments were made after the Anglo-Dutch multinational announced its intention to sell off assets totalling $30bn over the next three years in an attempt to protect its dividend, after the merger with BG left it with a stretched balance sheet. Analysts at Exane BNP Paribas are now concerned that despite its attempts to offload assets, “a dry market for asset sales leaves Shell exposed”.

Reducing Shell’s debt burden is “critical for shares to perform”, said Aneek Haq, of Exane BNP Paribas, but failure to do so may force management to “bite the bullet” and make a radical move, such as an initial public offering of the parts of Shell’s empire it wants to offload. Henry said: “There are no prima facie reasons why we would not look at such a monetisation route, if that was the best way to create value.” However, given the foundering oil price, he said it was “not obvious in today’s market” where such value would be. Unlike a divestment, an IPO of the company’s mature assets, which has been dubbed “Baby Shell” would let Shell benefit from a sustained oil price recovery. Mr Haq also believes such a move would refocus management on core assets and reduce net debt by more than $50bn over four years.

The non-core upstream assets, from markets such as the UK, Norway, New Zealand, Italy and Nigeria, are cash-generative, averaging at $4bn a year free cash flow, and adding additional assets from Kazakstan could “prove attractive for shareholders”, said Haq. Although a $40bn listing would be cumbersome, it is not unfamiliar territory. In 2014, Shell raised $920m by spinning off a pipeline of US assets, Shell Midstream Partners. Given its previous form, Henry said: “It should be clear that not only are we open to innovation, [but also] we are able to deliver such complicated deals and execute over a period of time.”

Read more …

These downgrades are expensive.

Moody’s Downgrades Saudi Arabia, Bahrain, Oman (AP)

Saudi Arabia’s credit rating has been downgraded by Moody’s because of the long and deep slump in oil prices. Moody’s Investors Service said it also downgraded Gulf oil producers Bahrain and Oman. It left ratings unchanged for other Gulf states including Kuwait and Qatar. Saudi Arabia is the world’s largest oil exporter. Moody’s cut the country’s long-term issuer rating one notch to A1 from Aa3 after a review that began in March. Crude prices fell from more than $100 in mid-2014 to under $30 a barrel in February, although they have recovered into the mid-$40s. Benchmark international crude settled on Friday at $47.83 a barrel.

“A combination of lower growth, higher debt levels and smaller domestic and external buffers leave the Kingdom less well positioned to weather future shocks,” Moody’s said in a note. Moody’s lowered Oman to Baa1 from A3 and Bahrain to Ba2 from Ba1. The ratings agency did not downgrade Kuwait, Qatar, the United Arab Emirates or Abu Dhabi, but it assigned a negative outlook to each. Oil prices slumped because of production that grew faster than demand. Surging production from shale operators in the US contributed to the glut. So did OPEC, which decided in November 2014, several months after prices began falling, to continue pumping rather than give up market share.

Read more …

Germany’s Constitutional Court has been asked for opinions on the ECB a dozen times now, but not much has come of it.

German Professors And Entrepreneurs File Complaint Against ECB Policy (R.)

A group of professors and entrepreneurs in Germany filed a complaint against the ECB’s monetary policy this week at the country’s top court, the Welt am Sonntag newspaper said. A complaint would open a new chapter in a long-running legal battle between the ECB and groups within the euro zone’s biggest economy who want to curb the bank’s power. A challenge to an emergency plan the ECB made at the height of the euro zone crisis is also back at Germany’s Constitutional Court after being rejected by Europe’s top court in June. The German court will make a final ruling this year. There has been widespread criticism in Germany of the ECB’s monetary policy in recent weeks, with politicians complaining that low interest rates are hitting the retirement provisions of ordinary Germans and could boost the right wing.

Welt am Sonntag said the issue in the latest complaint filed at the Constitutional Court was whether the ECB had overstepped its mandate by extensively buying government bonds and with its plan to start buying corporate bonds. The newspaper said the professors and entrepreneurs thought the ECB was starting programs that contained incalculable risks for the German central bank’s balance sheet, and hence for German taxpayers – under the pretence of reaching its inflation target of just under 2% in the medium term. “The ECB’s current policy is neither necessary nor appropriate to directly revive the economy in the euro zone by increasing the inflation rate to around 2% in terms of consumer prices,” Markus Kerber, a lawyer and professor of public finance who initiated the complaint, was quoted as saying.

Kerber said the ECB was losing sight of the principle of the “proportionality” of its measures, according to Welt am Sonntag. In March, the ECB unveiled a large stimulus package that included cutting its deposit rate deeper into negative territory, expanding it asset buying program and offering free loans to the corporate sector to stimulate growth. German central bank governor Jens Weidmann, who sits on the ECB’s Governing Council, said on Wednesday the ECB’s expansionary monetary policy stance was “justified for now” while Bundesbank board member Andreas Dombret also said the ECB’s policy was justified by a subdued growth outlook in the euro zone.

Read more …

“They may have finally gone too far. A backlash is brewing, threatening not just their current bets, but their various tax benefits too. One senior House Republican aide who’s worked closely with the hedge funds says that members of Congress have seen enough. “I think on the Fannie stuff, they’ve hurt themselves,” he said. “We’re like, fuck em. If they’re not your friends, they’re your enemies.”

The Vultures’ Vultures: New Hedge-Fund Strategy Corrupts Washington (HuffPo)

Take Robert Shapiro. A Harvard-trained political economist, Shapiro is the head of a consulting firm called Sonecon. That business card doesn’t do it for you? He’s got a few more in his wallet: Senior fellow at the Georgetown University School of Business. Adviser to the International Monetary Fund. Director of the Globalization Initiative at NDN, a progressive think tank. Shapiro, a Democrat, has advised presidents and presidential candidates, and has held powerful government posts. It stands to reason, then, that when he has thoughts on public policy, he can find an outlet ready to publish them. Recently, he’s had ideas on how the government can address the debt crisis in Puerto Rico and how it can end the conservatorship of Fannie Mae and Freddie Mac by moving them into the private market.

Before that, he had a take on how to deal with Argentina’s debt crisis. For all three, he produced academic-looking papers, complete with footnotes and charts. All three situations have one thing in common: If they were resolved the way Shapiro suggested, a variety of bets placed by a select group of the most politically powerful hedge funds would pay off in a huge way. In the case of Argentina, they mostly have. Fights over how to resolve the other two issues are still raging in Washington. For this article, we called Shapiro to ask on whose behalf he has been waging these intellectual battles. His answer was surprising in its honesty: He’s working with DCI Group, a political dark arts master known to be advocating on behalf of a group of powerful hedge funds that are changing how Washington works.

Shapiro, it turns out, is but one foot soldier in the hedge fund infantry. A review of public documents, tax filings and interviews with people involved finds that in each of the three campaigns, hedge funds have enlisted the same set of lobbyists, political operatives, dark money groups and think-tank experts spanning the political spectrum. No single document or set of disclosures ties all of these groups together. They don’t put out joint press releases, parade themselves around Washington as part of a coalition, or chat together on conference calls. Finding the players in this game, instead, is more a process of deduction. For a group of firms and experts to be working for vulture funds on the issue of Argentine debt is normal Washington practice. (Vulture’s meaning here isn’t pejorative: it refers to an investment strategy that feeds off of assets the market has left for dead.)

For the exact same people and groups to be working on the next big issue that these funds care about — the Puerto Rican debt crisis — could be a coincidence. But now, the hedge funds are focused on a third issue — government-sponsored enterprise reform, which refers to the effort to establish new housing finance policy in the wake of the federal takeover of lenders Fannie Mae and Freddie Mac. And it’s the same political firms and the same independent experts that are once again weighing in — coincidentally, all on the side of the hedge funds. Maybe it’s all coincidence, but let’s run the traps either way.

Read more …

Make basic human needs part of speculative financial markets and mayhem is inevitable. Some things do not belong in a casino. When will we learn? When we run out of water and food?

Farmland Values Fall Sharply in Parts of the Midwest (WSJ)

Real farmland values in parts of the Midwest fell at their fastest clip in almost 30 years during the first quarter, according to a regional Federal Reserve report on Thursday. Falling crop prices have weighed on land values from Kansas to Indiana over the past two years as farm income declined and investors who had piled into the asset at the start of the decade retrenched. Three regional Federal Reserve banks all reported year-over-year declines in farmland values in their districts and said the drops would continue, though their forecasts were based on surveys taken before the recent rally in corn and soybean prices.

The St. Louis Fed region that includes parts of the U.S. agricultural heartland in Illinois, Indiana and Missouri reported the steepest decline, with the average price of “quality” farmland falling 6.4% in the quarter, the biggest decline since its survey began in 2012. The Chicago Fed said prices for similar land in its district fell 4% from a year ago, the seventh successive quarterly decline. Adjusted for inflation, prices in an area that includes parts of Illinois, Indiana, Iowa, Michigan and Wisconsin fell 5%, the biggest quarterly drop since 1987. Declines in the Kansas City Fed’s district, which includes Kansas and Nebraska, were less pronounced, but the bank said prices for nonirrigated cropland fell 4% in the quarter.

Though some agricultural markets have rallied in recent weeks, prices for corn and wheat are still more than 50% lower than their 2012 peak, and the U.S. Department of Agriculture has projected that net U.S. farm income will fall this year to the lowest level in more than a decade. Commodity prices have declined as farmers in the U.S. and elsewhere harvested bumper crops, adding to already generous stockpiles. U.S. farmers have also been hit by the strength of the dollar, which has stymied demand to export their crops. The drop in land values has been accompanied by deteriorating credit conditions, with more loans taken out to cover farm operations even as repayment rates fell on existing debt.

Read more …

Wow: “Boris Johnson is trusted to tell the truth about Europe by twice as many voters as trust David Cameron..” I can’t imagine anyone trusting Boris, so what does that say about trust in Cameron?

Cameron’s Anti-Brexit ‘Remain’ Campaign Has A Major Trust Issue (Ind.)

Boris Johnson is trusted to tell the truth about Europe by twice as many voters as trust David Cameron, according to a ComRes poll for The Independent. By a two-to-one margin, 45% to 21%, voters say that Mr Johnson is “more likely to tell the truth about the EU” than Mr Cameron. By a smaller margin, 39% to 24%, campaigners for Leave generally are considered “more likely to tell the truth” than campaigners for Remain.

The Referendum Campaigns
• Following key speeches this week, Britons are more than twice as likely to say Boris Johnson would tell the truth about the EU than David Cameron (45% v 21%).
• Conservative voters also say Boris Johnson is more likely to tell the truth about the EU than the Prime Minister (42% v 27%).
• Similarly, Britons tend to say the campaigners for leaving the EU are more likely to tell the truth than the remain campaigners (39% v 24%), although a significant minority say they don’t know (38%).

The EU Referendum
• The British public remain divided over whether they would be personally better off if Britain left the EU or remained part of it (29% v 33%). Around two in five (38%) say they don’t know how the referendum outcome would personally affect them.
• There has been a rise in the proportion of Britons saying national security would be better if Britain left the EU – 42% say it would be stronger if Britain left, compared to 38% who say it would be stronger if Britain remained. This represents an increase of 7 points from March in favour of leaving (35% in March 2016).
• However, attitudes towards immigration are clear; British adults are more than twice as likely to say the government could control Britain’s borders better if it left the EU (57% v 27% if Britain remains).

Read more …

Presenting it this way makes it look like the money is lost. Presenting it as an investment would be a lot fairer.

German Government Plans To Spend €93.6 Billion On Refugees By End 2020 (R.)

Germany’s government expects to spend around €93.6 billion by the end of 2020 on costs related to the refugee crisis, a magazine said on Saturday, citing a draft from the federal finance ministry for negotiations with the country’s 16 states. The figure is likely to stoke concerns, particularly among growing anti-immigration movements, on the impact of new arrivals on Europe’s largest economy which took in more than a million people last year, many from Syria and other war zones. The numbers arriving have fallen this year, helped by a deal between the EU and Turkey that was designed to give Turks visa-free travel to Europe in return for stemming the flow of migrants.

German weekly news magazine Der Spiegel said the finance ministry’s calculations included the costs for accommodating and integrating refugees as well as tackling the root causes for people fleeing from crisis-stricken regions. Officials based their estimates on 600,000 migrants arriving this year, 400,000 next year and 300,000 in each of the following years, the report said, adding that they expected 55% of recognized refugees to have a job after five years. A spokesman for the finance ministry declined to comment on the figures but pointed to ongoing talks between the government and states, saying they would meet again on May 31 to discuss how to divide up the costs between them.

The report said that €25.7 billion would be needed for jobless payments, rent subsidies and other benefits for recognized asylum applicants by the end of 2020. Another €5.7 billion would be needed for language courses and €4.6 billion would be required for measures to help migrants get jobs, it added. The annual cost of dealing with the refugee crisis would hit €20.4 billion in 2020, up from around €16.1 billion this year, the report said.

Read more …