Jun 142017
 
 June 14, 2017  Posted by at 9:34 am Finance Tagged with: , , , , , , , , , ,  17 Responses »
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Fred Lyon San Francisco cable car turnaround 1946

 

A Record 60% Of Americans Disapprove Of President Trump (ZH)
Age Is The New Dividing Line In British Politics (YouGov)
UK Low Income Families Forced To Walk ‘Relentless Financial Tightrope’ (G.)
Gundlach Says DC Establishment Wants to ‘Wait Trump Out’ (BBG)
Trump Administration Welshes on “Repeal Dodd Frank” Promise (NC)
Tillerson Says Allies Pleading With US To ‘Improve Russia Relations’ (RT)
Are Public Pensions A Thing Of The Past? (CNN)
Death Of The Human Investor: Just 10% Of Trading Is Regular Stock Picking (C.)
OPEC Oil Production Jumps In May Despite Output Cuts Deal (CNBC)
China Defaults Feared as Firms Confront Short Debt Addiction (BBG)
Greeks Promised Economic Boost Despair of Ever Seeing Debt Deal (BBG)
Schaeuble Promises Greece Deal With Lenders On Thursday (R.)
Foreign Buyers Snap Up Greek Property (K.)
State Of Emergency Declared On Lesvos As 800 Left Homeless (AP)
‘Impossible And Risky To Take In More Migrants’ – Rome’s Mayor (RT)

 

 

A nation divided.

A Record 60% Of Americans Disapprove Of President Trump (ZH)

Despite record high stock prices, 43-year lows in jobless claims, and near record-high optimism among small business owners, Gallup reports the percentage of Americans who disapprove of the job President Trump has risen to a record 60% this week. As Gallup details, despite the president’s claim on Monday at a Cabinet meeting that “Never has there been a president, with few exceptions – in the case of F.D.R. he had a major Depression to handle – who’s passed more legislation, who’s done more things than what we’ve done,” his administration has been roiled by controversies. Most recently, Trump ran into a buzz saw of criticism with his decision, announced June 1, to withdraw the U.S. from participation in the Paris climate accord.

He has also been under significant political scrutiny over the June 8 testimony of former FBI Director James Comey before the Senate Intelligence Committee. Those events coincided with the lower averages seen in the past two weeks. But, given that his averages were almost as low in the weeks leading up to them, it is difficult to establish direct causality between specific events and the president’s ratings.

The highly polarized nature of Americans’ views of Trump (and Obama before him) have been well-documented, and that pattern continues: Trump’s 8% average approval rating among Democrats last week is right at his 9% average to date; His 83% approval among Republicans is three points lower than his average among that group; Among independents, his approval is 31%, five points lower than his average among that group; Notably the spread between Republican ‘confidence’ and Democrat ‘confidence’ (via Bloomberg) has not been this wide since before Barack Obama was elected…

Trump’s job approval ratings are the worst of his administration so far, and Trump continues to have the lowest ratings for a newly elected president in Gallup’s history of approval ratings. The previous low first-year approval rating in June for an elected president was Bill Clinton, with a 37% approval June 5-6, 1993. The approval ratings of all other presidents since 1953 in June (May in the case of Eisenhower) of their first year after being elected were above 50%.

Read more …

Another nation divided, but not along the same lines. Older people, especially pensioners, vote Conservative, and a much higher percentage of them actually vote.

Age Is The New Dividing Line In British Politics (YouGov)

Since last week’s election result YouGov has interview over 50,000 British adults to gather more information on how Britain voted. This is part of one of the biggest surveys ever undertaken into British voting behaviour, and is the largest yet that asks people how they actually cast their ballots in the 2017 election. The bigger sample size allows us to break the results down to a much more granular level and see how different groups and demographics voted on Thursday. In electoral terms, age seems to be the new dividing line in British politics. The starkest way to show this is to note that, amongst first time voters (those aged 18 and 19), Labour was forty seven percentage points ahead. Amongst those aged over 70, the Conservatives had a lead of fifty percentage points.

In fact, for every 10 years older a voter is, their chance of voting Tory increases by around nine points and the chance of them voting Labour decreases by nine points. The tipping point, that is the age at which a voter is more likely to have voted Conservative than Labour, is now 47 – up from 34 at the start of the campaign.

Despite an increase in in youth turnout, young people are still noticeably less likely to vote than older people. While 57% of 18 and 19 year-olds voted last week, for those aged 70+ the figure was 84%.

Read more …

Corbyn growth territory.

UK Low Income Families Forced To Walk ‘Relentless Financial Tightrope’ (G.)

Low-income families are going without beds, cookers, meals, new clothes and other essential items as they struggle to cope with huge debts run up to pay domestic bills, according to a survey highlighting the cost-of-living crisis experienced by the UK’s poorest households. Clients of the debt charity Christians Against Poverty (CAP) had run up an average of £4,500 in debts on rent or utility bills, forcing them on to what the charity described as a “relentless financial tightrope” juggling repayments and basic living costs, leaving many acutely stressed and in deteriorating health. The pressure of coping with low income and debt frequently triggered mental illness or exacerbated existing conditions, with more than a third of clients reporting that they had considered suicide and three-quarters visiting a GP for debt-related problems.

More than half were subsequently prescribed medication or therapy. “The crippling reality of living in poverty and debt is still unashamedly evident in every home we visit, and year on year we see financial difficulty taking a tighter grip,” said Matt Barlow, the UK chief executive of CAP. Experts said the survey highlighted the extreme hardship faced by the “new destitute” – people on low incomes who might in the past have been able to rely on a welfare safety net to help them through financial shocks but who now were forced to go into debt to survive, leaving them struggling to afford even the basics. Debt had a crushing effect on living standards, the CAP survey found, with one in 10 clients unable to afford to buy or repair a bed, washing machine, TV, sofa or fridge. Roughly the same proportion could afford to acquire furniture only on punitive rent-to-buy terms, for example paying £6 a week to acquire a bed and mattress over a set three-year period.

The impact on family life was severe, with a quarter of clients saying debt caused relationship breakdowns, and more than two-thirds saying they felt unable to cater for their children’s needs. A sixth said they could not afford to feed their children three meals a day. A third feared eviction. A tiny handful of clients – predominantly single mothers – reported that they had turned to prostitution to make ends meet. Prof Suzanne Fitzpatrick, of Heriot Watt University, the co-author of groundbreaking research into destitution, told the Guardian: “The new destitute are citizens who would previously have managed to avoid absolute destitution with the help of the welfare safety net. But the level of working age benefits is now so low that people barely managing to get by can easily find themselves in a position where they can’t afford even the basic essentials to eat, stay warm and dry, and keep clean.”

Read more …

“If you’re a trader or a speculator, I think you should be raising cash today, literally today..”

Gundlach Says DC Establishment Wants to ‘Wait Trump Out’ (BBG)

DoubleLine Capital’s Jeffrey Gundlach said the establishment in Washington is trying to undermine President Donald Trump by running out the clock on his administration. “They’re really just trying to wait Trump out, trying to obstruct his agenda as much as possible,” Gundlach, one of the few money managers to predict Trump’s election, said during a webcast Tuesday. “Small change is what they’re looking for.” Gundlach, manager of the $53.9 billion DoubleLine Total Return Bond Fund, spoke during televised Senate testimony by Attorney General Jeff Sessions, which the money manager called “a sideshow or entertainment.” He called the U.S. political conflict “rope-a-dope,” a strategy used by boxer Muhammad Ali to wear out opponents.

Among Gundlach’s other observations:
• There’s a low probability of a recession.
• The days of low volatility markets are probably numbered.
• Expect higher bond yields and lower stock prices this summer.
• Yields on 10-year Treasuries are likely to end 2017 roughly in the 2.7% to 2.8% range, from about 2.2% currently.

The Dow Jones Industrial Average and the S&P 500 Index closed at record highs Tuesday prior to Gundlach’s talk. Futures trading implies a 98% probability the Federal Reserve will raise interest rates by 0.25% when it meets Wednesday. “If you’re a trader or a speculator, I think you should be raising cash today, literally today,” Gundlach said. “If you’re an investor, I think you can sit through a seasonally weak period.” The Total Return fund was up 2.7% this year through June 12, beating 84% of its peers, according to data compiled by Bloomberg.

Read more …

Yves Smith’s piece is too long and comprehensive to do justice here. Click the link.

Trump Administration Welshes on “Repeal Dodd Frank” Promise (NC)

After having promised banks to get rid of Dodd Frank, which was never a strong enough bill to have a significant impact on profits or industry structure, Trump didn’t even back the House version of the bill to crimp Dodd Frank. But you’d never know that from the cheerleading from bank lobbyists upon the release of a 147 page document by the Treasury yesterday, the first of a series describing the gimmies that the Administration seeks to lavish on banks. As we’ll touch on below, the document repeatedly asserts that limited bank lending post crisis to noble causes like small businesses was due to oppressive regulations. We wrote extensively at the time that small business surveys showed that small businesses then overwhelmingly weren’t interested in borrowing and hiring. Businessmen don’t expand operations because money is cheap, they expand because they see a commercial opportunity.

But the even bigger lie at the heart of this effort is the idea that the US will benefit from giving more breaks to its financial sector. As we’ve written, over the last few years, more and more economists have engaged in studies with different methodologies that come to the same conclusion: an oversized financial sector is bad for growth, and pretty much all advanced economies suffer from this condition. The IMF found that the optimal level of financial development was roughly that of Poland. The IMF said countries might get away with having a bigger banking sector and pay no growth cost if it was regulated well. Needless to say, with the banking sector already so heavily subsidized that it cannot properly be considered to be a private business, deregulating with an eye to increasing its profits is driving hard in the wrong direction.

[..] So if it wasn’t Dodd Frank, what was led the banks to focus so much on high FICO score borrowers? It was mortgage servicing reforms, which made it hard to foreclose due to stopping abuses, like dual tracking (continuing to foreclose even when supposedly considering a mortgage modification). To look at the bigger picture, it’s hard to take bank complaints about oppressive regulation seriously in light of this:

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But the domestic echo chamber makes that hard to do.

Tillerson Says Allies Pleading With US To ‘Improve Russia Relations’ (RT)

All of America’s allies and partners have been calling on Washington to improve its relations with Russia, Secretary of State Rex Tillerson acknowledged after the US Senate reached a bipartisan deal to boost sanctions against Moscow. “I have yet to have a bilateral, one-on-one, a poolside conversation with a single counterpart in any country: in Europe, Middle East, even South-East Asia, that has not said to me: please, address your relationship with Russia, it has to be improved,” Tillerson said on Tuesday during testimony before the Senate Appropriations Committee on Foreign Operations. Tillerson added that the countries urging the US to review its Russian policy “believe worsening this relationship will ultimately worsen theirsituation.” He added: “People have been imploring me to engage and try to improve the situation, so, that was our approach anyway.”

Earlier, Tillerson warned that the US Senate’s bipartisan deal on new set of restrictive measures against Moscow might further worsen relations with Russia and hinder existing efforts on joint US-Russia progress to fight terrorism in Syria. “There are efforts under way in Syria specifically, those are, I would say, progressing in a positive way,” America’s top diplomat said on Tuesday during testimony to the Senate Foreign Relations Committee. Despite the relationship between US and Russia being “at an all-time low,” according to Tillerson, the “objective is to stabilize that” rather than deteriorate it further. Washington is “engaged” and working with Moscow “in a couple of areas,” including on such issues of international importance as the Ukrainian and Syrian crises. “We have some channels that are open, where we are starting to talk, and I think what I wouldn’t want to do is close the channels off,” Tillerson told the Senate committee, warning that to establish “something new… will take time.”

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Yes, they are.

Are Public Pensions A Thing Of The Past? (CNN)

New teachers and state workers will no longer get a traditional pension in Pennsylvania. Governor Tom Wolf signed a bill Monday, making it the ninth state to replace the pension with a “hybrid” retirement plan. It goes into effect in 2019. The new plan combines elements of a traditional pension and a 401(k)-style account. Overall, new workers will contribute more of their salary, work longer, and likely receive a smaller payout in retirement than under the current system, according to a report from the state’s Independent Fiscal Office. But Pennsylvania’s pension system is currently one of the most underfunded in the country and is in need of reform. The bill had bipartisan support. “It’s a win for Pennsylvania taxpayers and fair to Pennsylvania’s workforce,” Wolf said at a press conference Monday.

The reform will build upon previous legislation to help fully fund the pension system and preserve a path to retirement for public workers, said Greg Mennis, a director at Pew Charitable Trusts. “Our research indicates that this would be one of the most – if not the most – comprehensive and impactful reforms any state has implemented,” he wrote in a letter urging state lawmakers to pass the bill. Over the past 10 years, Rhode Island, Virginia, Tennessee and Georgia have created plans similar to Pennsylvania’s. They require workers to contribute some of their salary to a pension-like plan that guarantees a certain payout based on their salary. Workers also contribute to a 401(k)-style plan that they can take with them if they leave public service. The state will make contributions to both plans on their behalf.

In Pennsylvania, workers will be defaulted into a hybrid plan, but there will be two other versions they could opt into. Under the default, workers will have to contribute a total of 8.25% of their salary. (Teachers currently contribute 7.5% and other public workers pay 6.25%.) Most will have to work until 67, instead of 65, in order to get their full payout in retirement. A state employee who works for 35 years and earns a final salary of $60,000, currently receives an estimated $40,000 a year in retirement. Under the reformed system, that same worker would receive $34,1048, according to the Independent Fiscal Office report. [..] Like pension plans in other states, Pennsylvania’s was badly hurt by the Great Recession. It also took a hit because of retroactive benefit increases made before the market took a dive. The pension fund went from a nearly $20 billion surplus in 2000 to a $70 billion deficit in 2015.

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ZIRP machines have taken over.

Death Of The Human Investor: Just 10% Of Trading Is Regular Stock Picking (C.)

Quantitative investing based on computer formulas and trading by machines directly are leaving the traditional stock picker in the dust and now dominating the equity markets, according to a new report from JPMorgan. “While fundamental narratives explaining the price action abound, the majority of equity investors today don’t buy or sell stocks based on stock specific fundamentals,” Marko Kolanovic, global head of quantitative and derivatives research at JPMorgan, said in a Tuesday note to clients. Kolanovic estimates “fundamental discretionary traders” account for only about 10% of trading volume in stocks. Passive and quantitative investing accounts for about 60%, more than double the share a decade ago, he said.

In fact, Kolanovic’s analysis attributes the sudden drop in big technology stocks between Friday and Monday to changing strategies by the quants, or the traders using computer algorithms. In the weeks heading into May 17, Kolanovic said funds bought bonds and bond proxies, sending low volatility stocks and large growth stocks higher. Value, high beta and smaller stocks began falling in a rotation labeled “an unwind of the ‘Trump reflation’ trade,” Kolanovic said. “Upward pressure on Low Vol and Growth, and downward pressure on Value and High Vol peaked in the first days of June (monthly rebalances), and then quickly snapped back, pulling down FANG stocks” — Facebook, Amazon.com, Netflix and Google parent Alphabet, the report said.

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Told you those output cuts wouldn’t go anywhere.

OPEC Oil Production Jumps In May Despite Output Cuts Deal (CNBC)

OPEC’s oil production jumped in May, despite the exporter group agreeing last month to extend its six-month deal to cap output into 2018. Production across OPEC rose by about 336,100 barrels per day to 32.1 million bpd, according to secondary sources, led by increases from Libya and Nigeria, which are exempt from the deal, and Iraq. Output from Libya surged by more than 178,000 bpd to 730,000 bpd as the country’s rival factions moved toward reconciliation, and supplies disrupted throughout years of conflict remained on line. In Nigeria, production was up more than 174,000 bpd to 1.68 million bpd as supplies sidelined by militant attacks on energy infrastructure last year came back into operation. With the gain, Nigeria reclaimed the title of largest African producer in OPEC from Angola, where output fell by 54,000 bpd, the biggest drop among the 13 members in May.

Iraq, OPEC’s second-largest producer, contributed the third-biggest increase with a more than 44,000 bpd jump. Baghdad has yet to cut deeply enough to hit its quota of 4.35 million bpd under the output cut deal. In May, it produced 4.42 million bpd. Only four countries were producing at or below the levels they agreed to in November: Saudi Arabia, Angola, Kuwait, and Qatar. Last month, OPEC and other exporters extended an agreement to remove 1.8 million barrels a day from the market in order to shrink brimming global stockpiles of crude oil. In May, inventories in the OECD, a group of mostly wealthy countries, remained 251 million barrels above the five-year average.

Read more …

More ground for shadow banks to take over.

China Defaults Feared as Firms Confront Short Debt Addiction (BBG)

China’s leverage crackdown is forcing local companies to confront their addiction to short-term bond sales that they use to roll over debt. The shock therapy is worsening the outlook for corporate defaults in the second half of this year after borrowing costs jumped to a two-year high. With yields surging, Chinese non-banking firms sold 131 billion yuan ($19.3 billion) of bonds with a maturity of one year or less in May, the least since January 2014 and less than half of the same month last year, according to data compiled by Bloomberg. About 87% of the short note sales last month will be used for refinancing, according to Bloomberg data.

The habit of relying on borrowing short-term money to repay maturing debt has pushed up such liabilities to a total of 5.2 trillion yuan on China’s listed non-financial companies’ balance sheets as of March 31, the highest on record, according to data compiled by Bloomberg. With no sign of an end to the government’s campaign against leverage, the average coupon rate for bonds maturing in one year or less rose to 5.5% in June, deterring issuers from raising money to roll over debt. “Small issuance of short-term bonds will be a normal phenomenon in the coming six months because cash supply will probably remain tight,” said Ma Quansheng at Fullgoal Fund Management. “Both default risks and the number of corporate bond defaults may increase.”

The loose funding environment last year helped Chinese companies raise enough money to withstand repayment pressure so far in 2017. There have been 13 onshore defaults in the public bond market in 2017, compared with 16 in the same period of 2016. The yield on one-year AAA rated company bonds averaged 4.19% this year, up from 2.97% in 2016. HFT Investment Management said more note defaults may come as the economy doesn’t look good. In the second half of this year, Chinese non-banking firms must repay 2.36 trillion yuan of bonds. “The current rising borrowing costs may have a big impact on companies’ operations and finance,” said Lu Congfan at HFT Investment Management. “What can you do when you must refinance to repay maturing debt while facing such high borrowing costs? That would be a question challenging many local companies in the second half or next year.”

Read more …

Well, well… Let’s see it.

Schaeuble Promises Greece Deal With Lenders On Thursday (R.)

German Finance Minister Wolfgang Schaeuble said on Tuesday he was confident that Greece and its international lenders will reach a compromise deal this week, a step that would unleash more loans for Athens. “We’ll manage it on Thursday. You’ll see,” Schaeuble said during a panel discussion in Berlin. Officials have said eurozone finance ministers and the IMF are likely to strike a compromise on Greece on Thursday, paving the way for new loans for Athens while leaving the contentious debt relief issue for later. IMF head Christine Lagarde suggested a plan last week under which the Fund would join the Greek bailout now, because Athens is delivering on agreed reforms, but would not disburse any IMF money until the euro zone clarifies what debt relief it can offer Greece.

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Greeks don’t believe you, Wolfie…

Greeks Promised Economic Boost Despair of Ever Seeing Debt Deal (BBG)

Alexis Tsipras has spent nearly two years telling Greeks that a debt deal and inclusion in the ECB’s quantitative-easing program will unleash an investment boom that salves the pain of austerity. The prime minister’s message hasn’t convinced Panagiotis Kouinis, a 60-year-old civil engineer in Corinth who says business has steadily dwindled through all of Greece’s eight-year crisis and has now ground almost to a halt. “What I know is they tell you pensions will be cut another 20%, wages down, and what is quantitative easing?” Kouinis said in an interview in his office near the city center. “Do we have to be economists so we can understand what they’re saying?” Across the country in places like Corinth, an industrial hub 80 kilometers west of Athens, Greeks have spent years treading water as news bulletins bombard them daily with reports of meetings and decisions in Brussels and Frankfurt that will determine their economic future.

In the meantime, as the ECB’s stimulus measures – including its asset-purchase program – buoy the rest of the euro-area economy, Greece’s output has been stagnant, leaving its people the most pessimistic in the region. Yet the ECB remains unlikely to include Greek bonds in its QE program in the foreseeable future, according to a person familiar with the matter. That’s because a meeting on Thursday of euro-area finance ministers, whose electorates are leery of debt relief, looks like delivering another fudge. There may be agreement to disburse more bailout loans but without easing repayment terms enough to satisfy the ECB and IMF. That would leave Tsipras high and dry.

[..] Despite some signs of an improvement in industrial output, Greece has been heavily reliant on consumers and a booming tourist sector to keep GDP – which shrank by a quarter in the early years of the crisis – from continuing its slide. While the economy hasn’t been in a recession since 2015, and grew 0.4% at the start of the year, it hasn’t strung together more than two quarters of consecutive expansion in more than a decade. Accountancy firm PWC said in March that infrastructure investment plunged during the crisis, leaving a backlog of planned and in-progress projects amounting to more than 21 billion euros. Near Corinth, that includes rail, waste management, road and marina developments. “With taxation what it is, not only will no-one come to invest here, but they’d need to be mad to,” said Kouinis, the civil engineer. “Growth needs to start from public works, because the private sector has been killed.”

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Foreigners buy apartments in Athens to rent out to other foreigners on Airbnb. So wrong in so many ways.

Foreign Buyers Snap Up Greek Property (K.)

Property buyers from abroad are this year growing at the fastest pace in a decade, as booming Greek tourism has had a positive impact on the property market too. According to the latest data from the Bank of Greece, in the first quarter of the year the inflow of capital from abroad for real estate acquisitions increased by 61.7% on an annual basis. The March figures have signaled a further improvement, since in the first couple of months the yearly rise had come to 56.7%. If the existing growth rate is sustained throughout 2017, it is likely that by the end of the year more than 430 million euros will have been invested the Greek property market from other countries. The equivalent figure for the whole of 2016 had amounted to 270 million euros, up 45.3% on the 2015 inflow of 186 million euros.

The only time a similar growth rate had been recorded before was in the first quarter of 2007, when foreign investors spent 66.5% more money on property acquisitions than a year earlier. Real estate professionals say this uptick in foreign funds entering the local property market is particularly positive because it came during a period when transactions are usually sparse: Expressions of buying interest this year started in the winter months, not in the summer when demand typically peaks. This has bolstered optimism about an even better summer in terms of transactions, which may reach their high for the entire period since the outbreak of the financial crisis.

The major rise in inflows this year is due to the increase in demand for apartments in Athens, primarily in the city center and the southern suburbs. This mainly concerns flats eligible for short-term leasing through Internet platforms such as HomeAway, Airbnb and FlipKey. It also concerns luxury mansions that would fit the bill for the same type of online platforms as well as for the purpose of getting a Golden Visas (for buys of properties worth 250,000 euros or more by investors from outside the European Union). Besides those buyers aiming for the five-year residence permits, considerable buying interest is also coming from Italy, France, Switzerland, Germany and the Scandinavian countries.

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It’s a miracle there are not many more victims.

State Of Emergency Declared On Lesbos As 800 Left Homeless (AP)

Authorities in Greece have declared a state of emergency on the island of Lesvos after an earthquake left one woman dead and more than 800 people displaced. The 6.1 magnitude undersea quake on Monday occurred south of Lesvos but was felt as far as Istanbul, Turkey. Officials from the island’s regional government on Tuesday said homes in 12 villages in southern Lesvos had been seriously damaged or destroyed. The mostly elderly residents affected were being housed with relatives, in hotels or at an army-run shelter. The earthquake marked the second crisis to hit the island in the last two years, after hundreds of thousands of migrants and refugees, including many fleeing war in Syria and Iraq, crossed to Lesvos on boats from Turkey as they headed to Europe.

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Brussels should be forced to take in 100,000. In their new swanky buildings.

‘Impossible And Risky To Take In More Migrants’ – Rome’s Mayor (RT)

Rome Mayor Virginia Raggi has asked the Italian Interior Ministry for stricter measures to be taken toward the influx of foreigners into the capital. A letter outlining the need for a “moratorium” on “the continued influx of foreign citizens” was sent by Raggi to Roman prefect Paola Basilone. “I find it impossible, as well as risky, to think up further accommodation structures,” she wrote in the letter, as quoted by La Repubblica on Tuesday. “This administration, given the high flows of unregistered migrants, hopes the assessments of new facilities take into account the evident migrant pressure on Roma Capitale [the City of Rome] and the possible devastating consequences in terms of social costs as well as for the protection of the beneficiaries themselves.”

In May, Raggi told RT that she was working to help accommodate refugees and asylum seekers in Rome, but also that she also has a responsibility to her constituents and other countries in the EU must do their part. “Let’s put it this way – Rome would be better off if European states didn’t build walls along their borders, but rather followed through on their obligations and respected the migrant quotas agreed upon by the EU,” she told RT’s Sophie Shevardnadze. “According to the law, the city of Rome must accept migrants, as Mayor – I have to follow the law and do everything in my power to make sure that people are granted a safe place to stay here. But if other European countries decide to finally follow through on their obligations, we will welcome that decision.” “As mayor of Rome, I have to accommodate migrants, but I am also responsible for the security of my city and its residents. We cannot ignore either issue.”

Read more …

Apr 252017
 
 April 25, 2017  Posted by at 7:59 am Finance Tagged with: , , , , , , , , , ,  4 Responses »
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Pablo Picasso Self portrait 1972

 

Trump Slaps 20% Duty on Canada Lumber, Intensifying Trade Fight (BBG)
Trump Summons Entire Senate To White House Briefing On North Korea (G.)
Trump Advisers To Lay Out Tax Plan For Top Republicans Tuesday (BBG)
The Oil Market Has One Big Problem: People Aren’t Buying Enough Gas (CNBC)
Canadians’ Confidence In Housing Hits Record High (HPoC)
Housing’s Echo Bubble Now Exceeds the 2006-07 Bubble Peak (CHSmith)
Bubble, Bubble, Toil And Trouble: Ultra-Low Mortgage Rates Are Dangerous (G.)
Rising Defaults In China Reveal Hidden Debt (BBG)
China Markets Reel as $1.7 Trillion in Shadow Funds Unwinds (BBG)
Naked Selfies Used As Collateral For Chinese Loans (AFP)
Italy Is the Euro-Area’s Swaps Loser Facing $9 Billion Bill (BBG)
Ontario To Pay Guaranteed Incomes To The Poor (AFP)
Kim Dotcom Wants FBI Director Comey Questioned By New Zealand Police (IBT)
At Least 16 Refugees Drown as Boat Sinks off Greece’s Lesbos (R.)

 

 

They’ve been doing this forever: “..the fight is the “longest-running battle since the Trojan War.”

Trump Slaps 20% Duty on Canada Lumber, Intensifying Trade Fight (BBG)

U.S. President Donald Trump intensified a trade dispute with Canada, slapping tariffs of up to 24% on imported softwood lumber in a move that drew swift criticism from the Canadian government, which vowed to sue if needed. Trump announced the new tariff at a White House gathering of conservative journalists, shortly before the Commerce Department said it would impose countervailing duties ranging from 3% to 24.1% on Canadian lumber producers including West Fraser Timber. “We’re going to be putting a 20% tax on softwood lumber coming in – tariff on softwood coming into the United States from Canada,” Trump said Monday, according to a tweet by Charlie Spiering at Breitbart News. A White House official confirmed the comment.

The step escalates an economic battle among neighboring countries that normally have one of the friendliest international relationships in the world. U.S. Commerce Secretary Wilbur Ross amplified Trump’s remarks in a statement afterward that also referenced a fight over a new Canadian milk policy that U.S. producers say violates Nafta. “It has been a bad week for U.S.-Canada trade relations,” Ross said, adding “it became apparent that Canada intends to effectively cut off the last dairy products being exported from the United States.” He said the Commerce Department “determined a need” because of unfair Canadian subsidies to the lumber industry to impose “countervailing duties of roughly one billion dollars.” In a dig at NAFTA, which Trump has said he wants to renegotiate, Ross added, “This is not our idea of a properly functioning Free Trade Agreement.”

[..] The so-called countervailing duties, which counter what the U.S. considers Canadian subsidies, came in below some analyst expectations. CIBC analyst Hamir Patel forecast the initial combined countervailing and anti-dumping duties could reach 45 to 55%, he said in an April 23 note. The U.S. may also apply anti-dumping duties if it determines Canadian firms are selling for below costs. That decision is expected in June. “It definitely could’ve been a heck of a lot worse,” Kevin Mason at ERA Forest Products Research said by phone. “I think a lot of people were bracing for a higher duty.”

[..] Most of the softwood in Canada is owned by provincial governments, which set prices to cut trees on their land, while in the U.S. it’s generally harvested from private property. The fees charged by Canadian governments are below market rates, creating an unfair advantage, U.S. producers say. Canada disputes that. Robert Lighthizer, Trump’s nominee to be the next U.S. Trade Representative, said at his confirmation hearing last month that he views the lumber dispute as the top trade issue between the U.S. and Canada. Oregon Democratic Senator Ron Wyden told Lighthizer the fight is the “longest-running battle since the Trojan War.”

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Huffin’-and-a-puffin’.

Trump Summons Entire Senate To White House Briefing On North Korea (G.)

The entire US Senate will go to the White House on Wednesday to be briefed by senior administration officials about the brewing confrontation with North Korea. The unusual briefing underlines the urgency with which the Trump administration is treating the threat posed by Pyongyang’s continuing development of nuclear weapons and missile technology. It follows a lunch meeting Trump held with ambassadors from UN member states on the security council on Monday where he emphasised US resolve to stop North Korea’s progress. “The status quo in North Korea is unacceptable and the council must be prepared to impose additional and stronger sanctions on North Korean nuclear and ballistic missile programs,” Trump said at the meeting. “North Korea is a big world problem, and it’s a problem we have to finally solve.”

On Friday the US secretary of state, Rex Tillerson, is due to chair a security council foreign ministers’ meeting on the issue in New York, at which the state department said he would call once more for the full implementation of existing UN sanctions or new measures in the event of further nuclear or missile tests. “This meeting will give the security council the opportunity to discuss ways to maximise the impact of existing security council measures and to show their resolve to response further provocations with appropriate new measures,” said Mark Toner, state department spokesman. Senators are to be briefed by the defence secretary, James Mattis, and Tillerson on Wednesday. Such briefings for the entire senate are not unprecedented but it is very rare for them to take place in the White House, which does not have large secure facilities for such classified sessions as Congress.

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Not going to be easy. Trump’s too desperate to get a deal done.

Trump Advisers To Lay Out Tax Plan For Top Republicans Tuesday (BBG)

President Donald Trump will call for cutting taxes for individuals and lowering the corporate rate to 15% to fulfill a promise he made during his campaign, according to a White House official. The president on Wednesday plans to make public the broad outlines of what he wants to change in the tax code, though the details likely will be left until later negotiations among congressional leaders and officials from Treasury. Trump’s top economic adviser Gary Cohn and Treasury Secretary Steven Mnuchin will brief House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell and the leaders of congressional tax-writing committees – House Ways and Means Committee Chairman Kevin Brady and Senate Finance Committee Chairman Orrin Hatch.

While Trump and Ryan broadly agree on sharply cutting individual income and corporate taxes, there are areas of disagreement between the two. On the campaign, Trump called for a corporate tax rate of 15%; Ryan wants 20%, and he has warned that cutting it an additional 5 percentage points could prevent the ultimate tax plan from being revenue neutral. Without Democratic support, a plan would have to be revenue neutral to meet the criteria set by lawmakers to make tax changes permanent. “I’m not sure he’s going to be able to get away with that,” Hatch told reporters Monday. “You can’t very well balance the budget that way.”

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Demand goes down because people have less money to spend. All the rest is humbug.

The Oil Market Has One Big Problem: People Aren’t Buying Enough Gas (CNBC)

Lackluster gasoline demand is once again raising concerns that the oil market won’t be able to escape the doldrums. Demand for U.S. gasoline has recovered since January, but remained below 2016 levels throughout much of this year. Now, analysts are worried weak consumption will cause gasoline stockpiles to keep building and eventually result in weaker crude oil demand and pricing. U.S. gasoline futures were down more than 1% on Monday, reflecting demand concerns as refiners emerge from the winter maintenance season and prepare to turn out more fuel. Meanwhile, U.S. crude settled 39 cents lower at $49.23, extending last week’s deep losses. “As gas prices drop, that creates an undertow for the entire crude oil market,” said Tom Kloza, global head of energy analysis at Oil Price Information Service.

Part of the problem is a tough comparison with extraordinarily low gasoline prices last year. The national average gasoline price on Monday was nearly 28 cents above last year’s level, according to GasBuddy.com. “I’m in the camp that says last year was a little bit of the anomaly,” Kloza said. “Gas was so cheap that we drove a little bit more almost capriciously. This year, I just don’t think it’s going to happen.” In a troubling sign, the nation’s gasoline station operators have reported at industry conferences that their sales are down 1.5 to 2% this year, according to Andy Lipow, president of Lipow Oil Associates. “When you hear retailers telling you that their demand is down you’ve got to be a believer,” he told CNBC. Lipow said he fears that trend will carry through for the balance of 2017. Demand is certain to rise as the summer driving season ramps up, but Lipow sees stockpiles remaining relatively high.

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Stark raving madness. A housing market that is rising at ‘only’ 9.5% per year is labeled ‘rational’.

Canadians’ Confidence In Housing Hits Record High (HPoC)

The experts are getting louder in their warnings that a housing bubble has formed in some parts of Canada, but Canadians don’t seem worried. In fact, confidence in the housing market hit a record high in the latest weekly Bloomberg-Nanos index — even as respondents turned negative on their own personal finances. The survey found 48.5% of Canadians expect house prices to rise in the next six months, the highest level recorded in the survey since 2008. Fewer than 11% expect to see house prices decrease. “Bullish sentiment on real estate in Canada continues to drive consumer confidence,” pollster Nik Nanos said in a statement. “Household expectations have improved by roughly 10% since the start of the year as the effects of the oil price shock have stabilized and the focus has moved toward rising property values,” Bloomberg economist Robert Lawrie said.

“In recent weeks, however, consumer sentiment regarding personal finances began drifting lower, with extended household balance sheets perhaps the next focus of concern for policymakers.” High debt levels are precisely why many market observers are growing concerned about Canada’s priciest housing markets, namely the Toronto and Vancouver regions. House prices in Toronto jumped 33% in March from a year earlier, to an average of $916,567. While Vancouver’s house prices have moderated over the past six months, they remain elevated, with the benchmark price at $919,300 in March.

National Bank of Canada, which co-publishes the Teranet house price index, warned recently that “irrational exuberance” may be setting into some Canadian housing markets, noting that more than half of Canada’s regional markets are seeing price growth above 10% annually. With mortgages ballooning, Canadian household debt has repeatedly hit record highs in recent years, and now stands at $1.67 of debt for every dollar of disposable income. Those elevated debt levels are the main reason one why the Bank for International Settlements (BIS), a Geneva-based “central bank of central banks,” warned recently that Canada has the second-highest risk of a financial crisis, behind only China.

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Essential and repeated here a 1000 times: “Bubbles have a habit of overshooting on the downside when they finally burst.”

Housing’s Echo Bubble Now Exceeds the 2006-07 Bubble Peak (CHSmith)

A funny thing often occurs after a mania-fueled asset bubble pops: an echo-bubble inflates a few years later, as monetary authorities and all the institutions that depend on rising asset valuations go all-in to reflate the crushed asset class. Take a quick look at the Case-Shiller Home Price Index charts for San Francisco, Seattle and Portland, OR. Each now exceeds its previous Housing Bubble #1 peak:

It seems housing bubbles take about 5 to 6 years to reach their bubble peaks, and about half that time to retrace much or all of the gains. Bubbles have a habit of overshooting on the downside when they finally burst. The Federal Reserve acted quickly in 2009-10 to re-inflate the housing bubble by lowering interest rates to near-zero and buying over $1 trillion of mortgage-backed securities. When bubbles are followed by echo-bubbles, the bursting of the second bubble tends to signal the end of the speculative cycle in that asset class. There is no fundamental reason why housing could not round-trip to levels below the 2011 post-bubble #1 trough.

Consider the fundamentals of China’s remarkable housing bubble. The consensus view is: sure, China’s housing prices could fall modestly, but since Chinese households buy homes with cash or large down payments, this decline won’t trigger a banking crisis like America’s housing bubble did in 2008. The problem isn’t a banking crisis; it’s a loss of household wealth, the reversal of the wealth effect and the decimation of local government budgets and the construction sector. China is uniquely dependent on housing and real estate development. This makes it uniquely vulnerable to any slowdown in construction and sales of new housing. About 15% of China’s GDP is housing-related. This is extraordinarily high. In the 2003-08 housing bubble, housing’s share of U.S. GDP barely cracked 5%. Of even greater concern, local governments in China depend on land development sales for roughly 2/3 of their revenues.

If you need some evidence that the echo-bubble in housing is global, take a look at this chart of Sweden’s housing bubble. Oops, did I say bubble? I meant “normal market in action.”

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“..we may be in the latter stages of a bubble. As prices rise further and further out of reach, lenders need to find more and more ingenious tricks to keep rich people pumping their cash into an overheated market. The punch bowl has to keep going round, or the party stops.”

Bubble, Bubble, Toil And Trouble: Ultra-Low Mortgage Rates Are Dangerous (G.)

Between autumn 1977 and Christmas 1979, interest rates rose from 5% to 17%. If you were a young boomer whose biggest cost was a variable rate mortgage, that would have hurt. In 2009, by contrast, interest rates were cut to a record low of 0.5%, and stayed there for the better part of a decade. When eventually they did move again, it was down. You don’t know you’re born. Except, of course, you do – because, if you’re reading this and you’re under 40, there’s a pretty good chance you’re still stuck paying rent. Yes, interest rates are low; no, this is not particularly helpful. Even if you do have a mortgage, it’s probably a fixed rate one because, let’s be honest, those rates are going up again one day. But not, it seems, today. The Yorkshire Building Society has just launched a new mortgage that charges an interest rate of just 0.89%. “We are very pleased to offer borrowers the lowest mortgage rate ever available,” said a spokesman.

“The cost of funding has fallen in recent weeks and, as a financially strong building society with no external shareholders to satisfy, we have the ability to pass this on to borrowers.” (“We used to dream of mortgages at under 1%,” say the boomers.) So does that means that owning a home is now cheaper than it’s ever been? Well, no, of course not. For one thing, this isn’t a fixed rate deal. It’s actually a (bear with me on this) two-year-long discount of 3.85% to the standard variable rate (SVR) of 4.74%. That means it’s very, very unfixed indeed: a normal tracker mortgage moves in response to Bank of England rates; an SVR one moves in response to the lender’s whims. Accepting this mortgage means placing a bet that the Yorkshire Building Society will be nice to you. It also comes with an unusually high arrangement fee of £1,495, but this shouldn’t bother you, because you probably can’t get that rate anyway. To even be considered, you need a deposit worth 35% of the value of your home.

[..] But there’s another, more sinister, reading of the recent rash of ultra-low mortgage rates: it suggests we may be in the latter stages of a bubble. As prices rise further and further out of reach, lenders need to find more and more ingenious tricks to keep rich people pumping their cash into an overheated market. The punch bowl has to keep going round, or the party stops. But bubbles tend to burst. Prices can’t rise forever: one day, interest rates must surely rise. When the inevitable happens, there is a danger that those who took advantage of this deal may find their equity wiped out – and the rate they’re paying will shoot through the roof.

That would obviously be very sad for those who are affected; for those shut out of home ownership, though, it may be no bad thing. That’s because nine years of record-low interest rates have probably contributed to the fact that house prices have soared out of reach; and higher prices have meant increasingly unattainable deposits. A rise in interest rates could, paradoxically, make housing more affordable.

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Companies guaranteeing each other’s crappy debt. What could go wrong? Problem is, Beijing had let them do it for years.

Rising Defaults In China Reveal Hidden Debt (BBG)

Rising defaults in China are unearthing hidden debt at companies across the country. Small firms that can’t get loans by themselves have been winning banks over by getting other companies to guarantee their borrowings. The companies making those pledges exclude them from their balance sheets, leaving creditors in the dark. Borrowers often extend the guarantees for each other, raising the risk that failures could ricochet, at a time when increasing borrowing costs have already added to strains. China’s banking regulator has ordered checks of such cross-guaranteed loans, Caixin reported Friday. Scrutiny is mounting after a corn oil producer in the eastern province of Shandong said last month it had guaranteed debt of a neighboring aluminum product manufacturer which is now stuck in a cash crunch.

Just days before that, a local government financing vehicle in China’s southwest had to repay an auto parts maker’s loans it had guaranteed after the latter defaulted. “Disclosure of such guarantees isn’t timely,” said Qiu Xinhong at Shenzhen-based First State Cinda. “Sometimes, it’s like a buried mine and you don’t know when the risks will explode.” This debt minefield could be big. The amount of loan guarantees at privately held firms in China is equivalent to 11% of their equity, and at LGFVs is 18%, according to Citic Securities. The load is even heavier at weaker borrowers. About 44% of issuers rated lower than AA- have a ratio of more than 30%, according to Everbright Securities. The phenomenon is less common in the U.S. because banks don’t require such guarantees to offer loans, according to Fitch Ratings.

“If companies in the same region offer a huge amount of guarantees for each other’s debt, it would form a guarantee web and deepen interconnections among the companies,” said Gang Meng, director of rating at Golden Credit Rating International Co. in Beijing. “If one company has to repay debt for its guaranteed company, risks would quickly ripple to other companies in the web, which will result in a butterfly effect.” [..] Guarantors don’t mark the pledges on their balance sheets and often disclose them only on an annual basis. Such shadow debts pose rising risks after central bank tightening pushed up onshore corporate bond yields to two-year highs and defaults on local notes surged to a record.

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The distinction between state banks and shadows has become very murky.

China Markets Reel as $1.7 Trillion in Shadow Funds Unwinds (BBG)

A $1.7 trillion source of inflows into Chinese markets has suddenly switched into reverse, roiling the nation’s money management industry and sending local bonds and stocks to their biggest losses of the year. The turbulence has centered on so-called entrusted investments – funds that Chinese banks farm out to external asset managers. After years of funneling money into such investments, banks are now pulling back in response to a series of regulatory guidelines over the past three weeks that put a spotlight on the risks. Critics have blamed entrusted managers for adding leverage to China’s financial system and reducing transparency.

The banks’ withdrawals helped erase $315 billion of stock market value over the past six days and sent bond yields to the highest level in nearly two years, highlighting the challenge for Chinese authorities as they try to rein in shadow banking activity without destabilizing financial markets. While the government has plenty of firepower to prop up asset prices if it wants to, forecasters at Australia & New Zealand Banking predict the selloff will deepen this year. “We are seeing an exodus of funds,” said He Qian at HFT Investment Management, which oversaw about 189 billion yuan ($27.5 billion) as of last year. He was one of about half-a-dozen asset managers and analysts who said banks have started scaling back their entrusted investments.

The arrangements have become an important part of China’s shadow finance system. When banks sell wealth-management products – the ubiquitous savings vehicles that offer higher yields than deposits – the firms sometimes farm out client money to entrusted managers such as hedge funds and mutual funds. The managers invest the cash in bonds, stocks and other securities, hoping to generate enough income to cover the banks’ promised returns to WMP clients – plus some extra for themselves.

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You better look good than feel good.

Naked Selfies Used As Collateral For Chinese Loans (AFP)

Hundreds of photos and videos of naked women used as collateral for loans on a Chinese online lending service have leaked onto the web, highlighting regulatory problems in the fast-growing peer-to-peer marketplace. A 10-gigabyte file posted on the internet exposed the personal details of more than 160 young women who were asked to provide the explicit material to secure money through online lending platform Jiedaibao. Launched by JD Capital in 2015, Jiedaibao allows lenders to operate anonymously but requires borrowers to reveal their real names when making transactions. Loan amounts and interest rates can be customised to meet the needs of users – often people who have a hard time accessing loans through more traditional financial institutions, like banks.

Interest on the “nude loans” reached an astonishing 30% a week, according to the Global Times newspaper. Lenders told female borrowers that if they failed to repay the loans, their nude photos would be sent to their families and friends, whose information was also required for some transactions, the article said. Material in the file put on the web last Wednesday showed some borrowers also promised to repay loans with sexual favours, according to screen captures posted on social media websites. In a statement on its official Twitter-like Weibo account, Jiedaibao said it had tracked down the accounts of several borrowers through photos and ID information circulated online and had frozen the suspected lenders’ accounts. “The ‘nude loans’ deals were mainly initiated and completed offline, and Jiedaibao only played the role of a money transfer platform in the deals,” the statement said.

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Derivatives used this way are instruments of massive wealth destruction. Why use different rates for each side of the deal? “..the Italian Treasury “usually pays a flow anchored to a fixed rate, while receiving one indexed to the 6-month Euribor rate..”

Italy Is the Euro-Area’s Swaps Loser Facing $9 Billion Bill (BBG)

Derivatives burdened Italy’s public debt again last year for a record amount of €8.3 billion ($9 billion), making the country the biggest swaps loser in the euro region. Losses related to swaps held by the nation added €4.25 billion to the country’s debt while net liabilities’ burden totaled €4.07 billion, based on data released Monday by EU statistics office Eurostat. In the 2012-2016 period, the burden totaled €29.6 billion, also a euro-area record. Italy’s derivative-related losses and net liabilities were higher than those for the whole euro region combined both in 2016 and in the five-year period as some countries actually saw the swaps helping to alleviate their debts. Governments across the euro region have used derivatives to manage their debt-financing costs and to hedge against sudden changes in rates and excessive exchange-rate volatility.

Those deals have sometimes backfired with the effect of pushing nations’ debts even higher. In the existing interest-rate swaps the Italian Treasury “usually pays a flow anchored to a fixed rate, while receiving one indexed to the 6-month Euribor rate,” the government said earlier this month in an annex to its annual Economic and Financial Document. Since starting from November 2015, the Euribor stayed negative and the impact on the flow indexed to that rate was that the Treasury had to pay money to its counterparts, instead of being paid by them, the document also said. Italy’s public debt rose last year to €2.2 trillion, or 132.6% of the country’s GDP, Eurostat said in a separate report on Monday.

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it’s important to get it right.

Ontario To Pay Guaranteed Incomes To The Poor (AFP)

Ontario has launched a pilot program to provide a guaranteed basic income to a few thousand people to test its effects on recipients and public finances, the Canadian province announced on Monday. Provincial premier Kathleen Wynne said the program would provide a “basic income” for three years to 4,000 people living under the poverty line. “We want to find out whether a basic income makes a positive impact in people’s lives,” Ms Wynne said, adding that “everyone should benefit from Ontario’s economic growth.” Income support payments will be as high as Can$16,989 (£9,800) a year for an individual, or Can$24,027 for a couple, plus an additional Can$6,000 for the disabled.

The figures will be reduced for those holding part-time jobs – they will receive 50 cents less for each dollar earned. As a concrete example, a single person with a yearly salary of Can$10,000 will receive an additional payment of Can$11,989. The 4,000 participants, aged 18 to 65, have been chosen at random in three cities: Hamilton and Lindsay in the Toronto suburbs and Thunder Bay in the province’s west. The province estimates the cost of the program at Can$50 million a year. Ontario is the most heavily populated Canadian province, with 38% of the country’s 36.5 million inhabitants. 13% of Ontario residents live below the poverty line, according to Statistics Canada.

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What the FBI did has already been declared illegal in New Zealand courts.

Kim Dotcom Wants FBI Director Comey Questioned By New Zealand Police (IBT)

FBI Director James Comey is currently in New Zealand and if Kim Dotcom has his way, Comey could find himself being questioned by the New Zealand police. The internet entrepreneur, who is wanted by the United States on multiple charges including fraud and copyright infringement, filed a complaint with the police Tuesday against the FBI director for what Dotcom called theft of his data by the agency. The alleged theft happened when the police raided Dotcom’s home Jan. 20, 2012, as part of investigations instigated by the U.S. The charges against him are based on the now-defunct website Megaupload that he operated, where users could share content with each other.

Some of that content was illegal to share, but according to New Zealand laws, internet service providers are not held responsible for the actions of their users. In his complaint Tuesday, Dotcom’s lawyer urged the police to urgently question Comey, who is in New Zealand for a conference. The grounds for the complaint are that the FBI received copies of data that was taken from Dotcom’s home during the 2012 raid, an act which courts in the country have held to be illegal, according to the complaint.

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The value you put on someone else’s life inevitably becomes the value of your own life.

At Least 16 Refugees Drown as Boat Sinks off Greece’s Lesbos (R.)

At least 16 people, including two children, drowned after an inflatable boat carrying refugees and migrants sank off Greece’s Lesbos island, authorities said on Monday. They are believed to be the first confirmed deaths in Greek waters this year of migrants or refugees making the short but dangerous crossing from Turkey on overcrowded rubber dinghies. Nine bodies were recovered in Greek territory and another seven in Turkish waters, Greek and Turkish coastguard officials said. Two survivors have been rescued. The two women, one of whom is pregnant, told the United Nations refugee agency UNHCR that 20 to 25 people were on board when the dinghy capsized around 1900 GMT on Sunday. The women are from Cameroon and the Democratic Republic of Congo.

Though fewer than 10 nautical miles separate Lesbos from Turkish shores, hundreds of people have drowned trying to make the crossing since Europe’s refugee crisis began in 2015. In that year, Lesbos was the main gateway into the European Union for nearly a million Syrians, Iraqis and Afghans. But a deal in March 2016 between the EU and Ankara has largely closed that route. Just over 4,800 people have crossed to Greece from Turkey this year, according to UNHCR data. An average of 20 arrive on Greek islands each day. “The number of people crossing the Aegean to Greece has dropped drastically over the past year, but this tragic incident shows that the dangers and the risk of losing one’s life remains very real,” said Philippe Leclerc, UNHCR Greece representative.

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Dec 302015
 
 December 30, 2015  Posted by at 9:12 am Finance Tagged with: , , , , , , , , ,  4 Responses »
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DPC Boston and Maine Railroad depot, Riley Plaza, Salem, MA 1910

US Companies Led the World in 2015 Debt Defaults (BBG)
China’s Unprecedented Real Estate Bubble Is a Ticking Time Bomb (Dent)
The Most Important China Chart Of 2015 (BI)
China Suspends Foreign Banks’ Forex Business (Reuters)
Oil Prices Become a Problem for US Steelmakers (BBG)
Oil-Producing US States Battered as Tax-Gushing Wells Are Shut Down (BBG)
Gulf States Forced To Empty Their Sovereign Wealth Funds (Reuters)
Oil Price Rout Will Bring End To Era Of Saudi Arabian Largesse (Telegraph)
Oil Crash Is Giving Ship Owners a Billion-Dollar Windfall (BBG)
Puerto Rico’s Debt Trap (Simon Johnson)
Marc Faber Seeing Recession Clashes With Yellen, Likes Treasuries (BBG)
World’s Oldest Bank Sells Bad Loans To Deutsche (BBG)
Italy’s Five Star Movement on the Rise (FT)
In the Year of Trump, the Joke Was On Us (Matt Taibbi)
Turkey’s Dangerous Game in Syria (WSJ)
Ukraine Inflation Hits 44% Amid Economic Collapse (Telegraph)
Frontex Sends 300 Guards In Migrant Mission To Greece (AFP)
Heated Areas To Open To Homeless In Athens As Cold Snap Expected (Kath.)
As Europe Turns Gray (Pantelis Boukalas)

“About 60% of this year’s global defaults have come from U.S. borrowers, Vazza wrote, up from 55% a year ago..”

US Companies Led the World in 2015 Debt Defaults, S&P Says (BBG)

More U.S. companies have defaulted on their debt this year than issuers from any other country or region, S&P analysts led by Diane Vazza wrote in a Dec. 24 report. As of last week, 111 companies worldwide had defaulted on their obligations, the highest tally since 2009 when the the figure hit 242 for the same period. About 60% of this year’s global defaults have come from U.S. borrowers, Vazza wrote, up from 55% a year ago, when 33 of 60 defaulters were American. After the U.S., companies from emerging markets were the second-largest defaulters, accounting for 23% of the pool, which is a smaller share than last year, according to S&P data. Plummeting oil prices and speculation about how the Federal Reserve’s plan to tighten monetary policy would affect corporate borrowing costs has made companies more vulnerable, Vazza wrote.

“The current crop of U.S. speculative-grade issuers appears fragile, and particularly susceptible to any sudden, or unanticipated shock,” she wrote. Arch Coal was the most recent addition to the list, having its credit rating downgraded to “speculative default” by Standard & Poor’s last week after the coal producer missed about $90 million in interest payments and exercised a 30-day grace period with the holders of some of its notes. Looking ahead, S&P expects the U.S. corporate default rate will rise to 3.3% by September 2016 from 2.5% a year earlier. The bulk of the failures will come from companies in the oil and gas sector, which accounted for about a quarter of this year’s defaults. Since 1981, the average default rate for global speculative-grade companies is 4.3%, Vazza said.

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The Chinese are buying into global bubbles. That’s going to hurt.

China’s Unprecedented Real Estate Bubble Is a Ticking Time Bomb (Dent)

We woke up this morning to find oil prices weighing on the market… again… with China suffering the biggest losses. Oil prices have already kept stocks at bay in the best time of the year. Funny how this “Santa Claus” rally that I predicted wouldn’t happen this year, didn’t. The last time was in 2007 and 2008 – the last years the stock market crashed. I’ve been looking at how low oil prices will be the first trigger in the next crisis. Although it helps consumers a bit, low prices kill the $1 trillion QE-driven fracking industry that’s been such a stalwart of this bubble economy. And it’s already causing junk bonds to fall further in value, as energy-related bonds have been as high as 20% of that market recently. But the second and biggest trigger I’ve been warning about is China’s unprecedented real estate bubble collapsing…

Recall the Japanese at the top of their stock and real estate bubble in 1989. They were buying real estate hand-over-fist, from Pebble Beach to Rockefeller Center to London. Then, after bidding them up, they ended up selling those holdings at big losses. The Chinese make the Japanese look prudent! Chinese buyers are bidding up the high end of the top coastal cities in English-speaking countries like they’ll never go down and like they can’t get enough. We’re talking Sydney, Melbourne, Brisbane, Auckland, Singapore, San Francisco, L.A., Vancouver, Toronto, New York, London… These markets are considered “Teflon-proof.” They’re not! In fact, they’re some of the greatest bubbles that exist today. China’s leading cities – like Shanghai, Beijing and Shenzhen – are up 700% or more since 2000!

Guess what happens when the bubble wealth in real estate that has built up in China finally collapses? So does the capacity of the more affluent Chinese to buy real estate around the world. And these are the guys who have by-and-large been driving this global real estate bubble at the margin on the high end! Bear in mind that Chinese real estate has been slowing and prices falling for over a year. That is precisely why China’s stock market bubbled up 160% in less than one year. When Chinese investors realized they could no longer make easy money in the real estate bubble, they turned to stocks. And after the dumb money piled in, the Shanghai Composite stock index fell 42% in just 2.5 months!

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China’s move towards a service economy is sure to fail. Xi cannot force his people to spend.

The Most Important China Chart Of 2015 (BI)

Now that the year is almost over, it’s time to reflect on 2015. BI reached out to the brightest minds on Wall Street to get their thoughts on what just happened. Hopefully, they’ll help us get a better handle on what is about to happen in 2016. Charlene Chu, of Autonomous Research, is widely considered one of the most brilliant China analysts in the world. So we asked her to send us a chart that helped her make sense of the world in 2015. Naturally it’s about China. “The chart below highlights the growth problem China is grappling with. In our view, a broken growth model lies at the core of China’s financial sector issues,” she wrote in an email to Business Insider. “This chart comes directly from official data, which is not adjusted in any way. Secondary industry comprises about 40-45% of GDP. As the title says, nearly half of China’s economy is already experiencing a very hard landing. This will likely intensify in 2016, which will weigh on global growth and add to corporate debt repayment problems.”


CEIC and the National Bureau of Statistics; Charlene Chu, Autonomous Research

In China, GDP is classified into three industries, primary (agriculture), secondary (manufacturing and construction), and tertiary (services). This slowdown in the secondary industry is part of China’s intentional shift toward an economy focused on services and consumer consumption rather than manufacturing. Chu’s point is that it’s happening harder and faster than anyone thought it would. All of this became all too apparent in 2015. This year China experienced two mainland stock market crashes, it devalued its currency, and once booming sectors of the economy — like exports and property — slowed sharply. In response, the government loosened monetary policy and enacted stimulus measures. The measures have had a limited impact, however, indicating that more structural measures will be needed to remedy the situation. Chu expects this slowdown to continue through 2016, affecting markets around the world.

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Trying to stop outflows. Ever since the IMF included the yuan in its basket, it’s been all downhill.

China Suspends Foreign Banks’ Forex Business (Reuters)

China’s central bank has suspended at least three foreign banks from conducting some foreign exchange business until the end of March, three sources who had seen the suspension notices told Reuters on Wednesday. Included among the suspended services are liquidation of spot positions for clients and some other services related to cross-border, onshore and offshore businesses, the sources said. The sources, speaking on condition that the banks were not named, said the notices sent to the affected foreign banks by the People’s Bank of China (PBOC) gave no reason for the suspension. The sources said the banks might have been targeted due to the large scale of their cross-border forex businesses.

“This is part of the PBOC’s expedient means to stabilize the yuan’s exchange rate,” said an executive at a foreign bank contacted separately. China has taken a slew of steps to keep the yuan stable since it devalued the currency in August. The latest move comes just three months since the PBOC ordered banks to closely scrutinize clients’ foreign exchange transactions to prevent illicit cross-border currency arbitrage, which takes advantage of the different exchange rates the yuan fetches in offshore and onshore markets. The spread has been growing since the August devaluation, which makes it increasingly difficult for the bank to manage its currency and stem an outflow of capital from its slowing economy.

The yuan has come under renewed pressure since late November amid speculation that Beijing would permit more depreciation after the IMF announced the currency’s admission into the fund’s basket of reserve currencies. The onshore yuan traded in Shanghai has lost 1.44% of its value since the end of November, and has repeatedly hit 4-1/2 year lows. The offshore market has traced a similar pattern. The Hong Kong-traded offshore yuan hit an intraday low of 6.5965 on Wednesday morning, its weakest since late September 2011.

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The oil industry is (was) a major purchaser of steel products.

Oil Prices Become a Problem for US Steelmakers (BBG)

U.S. steelmakers battered by plunging prices have been quick to blame a flood of cheap Chinese shipments. But with imports nearing four-year lows, another culprit is emerging: the energy collapse. Foreign steel coming into the U.S. dropped 36% in November from a year ago, according to U.S. Census Bureau data. That’s with domestic prices at the weakest in at least nine years and new taxes on products from six countries deemed to be unfairly priced. Yet U.S. mills have idled the most capacity since the financial crisis, operating at just 61% in the week ending Dec. 21. Helping explain the capacity decline is a drop in demand for steel pipes and drill bits used in the energy industry after the price of oil plunged 66% in the past 18 months. Previously, sales of high-margin products to oil and gas companies had helped shield U.S. mills from sluggish growth in construction and other industries.

“I don’t think imports are the only problem,” domestic mills face, Timna Tanners at Bank of America said in an interview Tuesday. “Nobody really expected oil to stay as low as it did as long as it has.” An important result of the energy collapse for steel consumption is that inventories held by steel and energy companies take longer to deplete as demand falls, exacerbating the decline in consumption, Tanners said. “Domestic mills in 2014 charged a price that was much higher than the rest of the world and that drew imports,” she said. “The domestic mills can complain that it’s unfairly traded, but there are factors outside of that that have nothing to do with fairness.” The price of hot-rolled steel coil, a benchmark product, has dropped 38% this year, according to The Steel Index, a trade publication that surveys buyers and sellers.

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Wait till home prices, and hence property tax revenues, go down as well.

Oil-Producing US States Battered as Tax-Gushing Wells Are Shut Down (BBG)

In Kern County, California, one of the nation’s biggest oil producers, tumbling energy prices have wiped more than $8 billion from its property-tax base, forcing officials to tap into reserves and cut every department’s budget. It’s only getting worse. The county of 875,000 in the arid Central Valley north of Los Angeles may face another blow in January, when it reassess the oil-rich fields that line the landscape. Last year’s tax bills were based on crude selling for $54 a barrel. It finished Monday at less than $37.
“We may never go back to $99 a barrel, but we were good at $54,” said Nancy Lawson, assistant administrative officer of Kern County, which includes the city of Bakersfield. “If it keeps going down and stays down we may have to look at more cuts in the next budget.”

As the price of crude falls for a second year, marking the steepest decline since the recession, the impact is cascading through the finances of states, cities and counties, in ways big and small. Once flush when production boomed, some governments in major energy producing regions are facing a new era of unwelcome austerity as wells are shut – along with the tax-revenue gushers they spouted. Alaska, Louisiana and Oklahoma have seen tax collections diminished by the rout, which has put pressure on credit ratings and led investors to demand higher yields on some securities. In Texas, the largest producer, the state’s sales-tax revenue dropped 3% in November from a year earlier as the energy industry exerted a drag on the economy.

Further west, Colorado’s legislative forecasters on Dec. 21 estimated that the state’s current year budget will have a shortfall of $208 million, in part because of the impact of lower commodity prices. In North Dakota, tax collections have trailed forecasts by 9% so far for the 2015-2017 budget. “The longer it goes the more significant it gets,” said Chris Mier at Loop Capital Markets in Chicago.

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“..these sheikhdoms – which pump about a fifth of the world’s oil – would almost drain their funds entirely by 2020.”

Gulf States Forced To Empty Their Sovereign Wealth Funds (Reuters)

Oil-rich Gulf sheikhdoms are being forced to raid their sovereign wealth funds to shore up their budgets. With U.S. crude oil prices falling below $40 per barrel in December, they have no choice but to reach into these rainy-day savings. For now, they can hold on to some of their trophy assets, like strategic investments in Volkswagen or Barclays. But if crude prices keep tumbling, a fire sale will be hard to avoid. During the most recent energy boom, the six members of the Gulf Cooperation Council – including Saudi Arabia, Qatar and Kuwait – amassed sovereign funds worth more than $2.3 trillion. These assets have traditionally comprised a mix of debt and other securities, in addition to influential stakes in some of the world’s biggest companies such as Glencore, VW and Barclays.

Large chunks of this cash are now being repatriated back to the region to finance widening budget deficits, which this year are expected to be in the region of 13% of GDP in the GCC. Should oil prices average $56 per barrel next year, then GCC states would need to liquidate some $208 billion of their overseas assets, or just below 10% of their sovereign fund holdings, based on a Breakingviews analysis of their fiscal break-even costs. But if oil prices fall to $20 a barrel, as Goldman Sachs has warned, the GCC states may have to sell $494 billion worth of booty to make up the budgetary shortfalls based on forecast fiscal costs for their oil production in 2016. This is provided they maintain the lavish rates of public spending that the region’s populations have become accustomed to.

At that rate of divestment these sheikhdoms – which pump about a fifth of the world’s oil – would almost drain their funds entirely by 2020. The Saudi Arabian Monetary Agency – which also acts as the country’s central bank – has already started to sell down some of its foreign assets, while money managers are reporting growing redemptions from other funds in the region. Gulf rulers have so far resisted any temptation to jettison their most treasured assets, which in many cases have granted them board seats atop some of the world’s leading companies. As oil keeps falling, even these investment jewels will come up for grabs.

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Saud will have to cut payments to its thousands of princes.

Oil Price Rout Will Bring End To Era Of Saudi Arabian Largesse (Telegraph)

A global oil price rout will bring an end to the era of Saudi Arabian largesse, as crude prices have tumbled to 11-year lows. “The era of material overspending is likely firmly behind us”, said Jean-Michel Saliba, an economist at Bank of America. A brutal sell-off in commodity prices has taken its toll on the Gulf state, which has been dependent on oil for more than three-quarters of its revenues. “Fiscal space is likely tight,” Mr Saliba said, in the wake of a historic budget for the Saudi regime. Officials have been forced to report a record budget deficit of 367bn riyals (£66bn) this year, up from 54bn riyals the previous year. While the deficit was smaller than anticipated, at 15pc of Saudi’s GDP, rather than the 20pc anticipated by economists, Mr Saliba warned that the government’s official figures have been prone to revision in the past, and have “tended to be revised upwards mid-way through the following year”.

Policymakers now plan to slash the deficit to 327bn riyals in 2016, by cutting back spending from 975bn riyals to 840bn riyals. The budget “is a significant one for the Saudi Arabian economy,” explained Mr Saliba. The country’s leadership, painfully reliant on oil, have failed to diversify the Saudi economy. The kingdom’s 2016 budget “likely markets the end of material overspending practices given tighten controls”, as the price of a barrel of Brent crude has tumbled from $115 (£77) in July 2014 to just $36 in recent days. “Budget execution will now be paramount,” said Mr Saliba. The new Saudi budget revealed plans to throttle investment spending. However, officials intend “only to slow the growth in recurring expenditure”, the Wall Street bank explained, rather than planning to cut it outright. The small non-oil parts of the economy will find themselves constrained by plans to cut public spending growth, preventing Saudi Arabia from rebalancing away from the commodity that until now has kept it wealthy.

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Don’t forget this is happening as everyone is producing at full blast. Storage space will be finite. And then?!

Oil Crash Is Giving Ship Owners a Billion-Dollar Windfall (BBG)

The most destructive oil crash in a generation is giving ship owners a billion-dollar windfall. With OPEC abandoning output limits in a drive for market share, ships that carry as much as 2 million barrels a trip are in demand to haul crude from the Middle East to Asia and North America. While oil prices fell about 35% in 2015, average earnings for these carriers jumped to $67,366 a day, the most since at least 2009, according to Clarkson, the world’s largest shipbroker. “The stars are aligned for us right now,” Nikolas Tsakos, CEO of Tsakos Energy Navigation, said in an interview at Bloomberg’s New York offices, adding that falling oil prices will likely stimulate demand and cargoes next year. Tanker analysts are predicting the rate boom will persist for many of the same reasons oil forecasters are bearish.

OPEC shows no sign of reversing its market strategy, and Iran has outlined plans to ramp up its exports once economic sanctions against the country are lifted. At the same time, the U.S. just repealed a four-decades old limit on its exports. With on-land inventories already at record levels, this could mean more barrels will eventually be stored on ships, further increasing profit, said Tsakos. The biggest tanker operators who manage fleets from Europe are Euronav, based in Antwerp, Belgium, DHT, Frontline, which runs Norway-born billionaire John Fredriksen’s tanker fleet, and Tsakos Energy in Greece. All have seen their shares rise this year while most energy producers have fallen. “We are benefiting from what is currently a challenging environment for the energy sector,” said Svein Moxnes Harfjeld, joint CEO for DHT. “We expect 2016 to be a rewarding year.”

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America’s very own Greece.

Puerto Rico’s Debt Trap (Simon Johnson)

The Caribbean island of Puerto Rico — the largest United States “territory” — is broke, and a human calamity is unfolding there. Unless a constructive course of political action is found in 2016, Puerto Rican migration to the 50 states will rival the scale of the 1930s Dust Bowl exodus from Oklahoma, Arkansas, and other climate-devastated states. With public debt service (principal plus interest) projected to reach nearly 40% of government revenue in 2016, Puerto Rico needs a new set of economic policies. But austerity will not work; this must be an investment-led recovery, with official measures oriented toward boosting growth by reducing the cost of doing business. The question is whether Puerto Rico will have that option.

Much of its $73 billion debt has been issued by government corporations. But, though federal law allows such municipal debt to be restructured under Chapter 9 of the bankruptcy code in all 50 states, this does not apply to U.S. territories like Puerto Rico. As a result, a protracted series of confusing legal battles and selective defaults looms. The cost of essential infrastructure services — electricity, water, sewers, and transportation — will go up while quality declines. One response has been to demand further belt-tightening, for example, in the form of wage reductions and health care cuts. But residents of Puerto Rico are also U.S. citizens and they vote with their feet — the population has fallen from 3.9 million to 3.5 million in recent years as talented and energetic people have moved to Florida, Texas, and other parts of the mainland.

The more creditors insist on lower living standards and higher taxes, the more the tax base will simply leave the island — causing bondholders’ losses to rise. Disorganized defaults by public corporations will make it hard for any part of the private credit system to function. Leading conservatives in the U.S. — including at the Hoover Institution — have long argued in favor of using established bankruptcy procedures when large financial firms fail. The same logic applies here: A judge can remove any doubt that actual insolvency exists, while also ensuring that credit remains available during a restructuring. During that process, a judge can rely on precedent and ensure fairness across creditor classes based on the precise terms under which loans were obtained.

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Oh good lord, Joe Stalwart Weisenthal…

Marc Faber Seeing Recession Clashes With Yellen, Likes Treasuries (BBG)

Marc Faber recommends Treasuries and says the U.S. is at the start of an economic recession, clashing with Federal Reserve Chair Janet Yellen’s view that things are improving. “Ten-year U.S. Treasuries are quite attractive because of my outlook for a weakening economy,” Faber, the publisher of the Gloom, Boom & Doom Report, said on Monday. “I believe that we’re already entering a recession in the United States” and U.S. stocks will fall in 2016, he said. Yellen raised interest rates this month for the first time in almost a decade and said Americans should take the decision as a sign of confidence in the U.S. economy. Analysts differ over whether the Fed’s decision to increase its benchmark came at the right time because the inflation rate is stuck near zero even as gross domestic product expands.

The benchmark U.S. 10-year note yield rose 2 basis points, or 0.02 percentage point, to 2.25% as of 8:31 a.m. in New York, according to Bloomberg Bond Trader prices. The price of the 2.25% security due in November 2025 fell 6/32, or $1.88 per $1,000 face amount, to 99 31/32. Treasuries have returned 1.1% in 2015, down from 6.2% last year, based on Bloomberg World Bond Indexes. U.S. economic growth slowed to an annualized 2% rate last quarter from 3.9% in the previous three months, the Commerce Department said Dec. 22. The last time the economy was in a recession was December 2007 until June 2009, according to the National Bureau of Economic Research. “While things may be uneven across regions of the country and different industrial sectors, we see an economy that is on a path of sustainable improvement,” Yellen said Dec. 16 after the Fed increased its benchmark rate by a quarter percentage point.

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Bank bailouts and bail-ins are Italy’s political powder keg.

World’s Oldest Bank Sells Bad Loans To Deutsche (BBG)

Banca Monte dei Paschi di Siena agreed to sell non-performing loans with a book value of about €1 billion to Epicuro SPV, a company backed by affiliates of Deutsche Bank, as the world’s oldest bank seeks to shore up its finances. Most of the loans became non-performing before 2009, the Italian bank said in a statement on Monday. The deal will have a negligible impact on Monte Paschi’s earnings and be completed by the end of the year. The portfolio is composed of almost 18,000 borrowers. CEO Fabrizio Viola is bolstering the bank’s finances by reducing risk and divesting assets after tapping investors twice in less than two years. In June, Monte Paschi sold €1.3 billion of non-performing loans to Cerberus Capita and Banca Ifis.

The portfolio sale is consistent with Monte Paschi’s 2015 to 2018 business plan, which forecasts as much as €5.5 billion of NPL disposals, according to a note from brokerage Fidentiis, which has a sell rating on the bank’s shares. The Siena, Italy-based lender said Dec. 16 that it will restate its financial accounts to comply with a request from Italy’s stock-market watchdog Consob that the bank change how it booked a transaction with Nomura. Consob asked the bank to amend its 2014 and first-half accounts to reflect the deal dubbed Alexandria should be treated as a credit-default swap instead of a repurchase agreement.

Milan prosecutors found new information this year as they investigated the transaction, which the former management had used to hide losses, the bank said, citing Consob’s request. The restatement should have a positive impact of €714 million before taxes on 2015 results, while it will be neutral on capital. Monte Paschi has been engulfed by legal probes into former managers who had covered losses with the Nomura transaction and a similar deal with Deutsche Bank. The lender is now seeking a buyer to help restore profit as bad loans mount.

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Can’t help wondering what Beppe is thinking right now. He never wanted M5S to get caught up in the poisonous Italian mainstream politics.

Italy’s Five Star Movement on the Rise (FT)

When the populist Five Star Movement burst into Italian politics in 2009 during the financial crisis, it was defined by uncompromising protests and the burly, sardonic figure of its leader, the comedian Beppe Grillo. But the Five Star Movement is now attempting to change its face from that of one of Europe s most eccentric -even clownish political parties. The transformation aims to achieve what seemed like a fantasy only a year ago: to govern the country and challenge the centre-left government led by prime minister Matteo Renzi. Mr Grillo, 67, has removed his name from the party logo, signalling that he may soon step aside. His most likely heir is Luigi Di Maio, a 29-year-old smooth-talking Neapolitan with polished looks, tight-fitting dark suits and moderate tones.

The perception of the movement has changed, Mr Di Maio tells the FT. At the beginning there was the idea that this was a protest movement .. “But we crashed through that wall. We want to govern”. The odds of that happening are increasing. The Five Star Movement is now Italy s second party. After trailing Mr Renzi s Democratic party by nearly 20 percentage points a year ago, recent polls suggest the margin has shrunk to about 5 percentage points, 32% to 27%. The Five Star Movement is certainly in the best shape of all of Renzi’s challengers, and he is scared of them, says Gianfranco Pasquino, a professor of political science at SAIS-Europe in Bologna. That the Five Star Movement even has a shot at threatening Mr Renzi says much about the waning political momentum suffered by the 40-year former mayor of Florence, who took office in February 2014 amid high hopes that he could transform Italy.

The economy is growing again after years of stagnation and recession. But the gains have not been broadly felt. “People are discouraged, disappointed and still angry”, Roberto D Alimonte, a political-science professor at Luiss university in Rome, says. The recovery has not filtered down. Mr Di Maio has certainly been honing his message against the prime minister. “Renzi seemed like a new face but it didn’t take much to understand that he was moving in the direction of the same old way of governing this country”, he says. But convincing Italians that the Five Star Movement is a credible alternative remains a tall order since many still see it as a party of pure obstruction and opposition. Mr Grillo’s best known political slogan when he launched the movement was “vaffanculo”, an earthy expletive aimed at the establishment. And he has refused to consider being part of any coalition government.

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I really don’t really want to spend time on Trump, or US politics in general, but Taibbi does a way above par analysis.

In the Year of Trump, the Joke Was On Us (Matt Taibbi)

A pre-2015 Trump fantasy was probably something like romping with models after simultaneously winning the Nobel Prizes for Peace, Literature and Physics (they love me in Sweden – scientists were amazed by the size of my skyscraper!). He almost certainly would have been grossed out by a Ghost-of-Christmas-Future-style image of his 2015 self being feted by crowds of rifle-toting white power nerds. But shortly after Trump jumped into the race, he stumbled onto a secret: whenever he blurted out forbidden thoughts about race, ethnicity or gender, he was showered with the attention he always craved. A sizable portion of the country seemed appalled at the things he said. But at the same time he was suddenly attracting huge and adoring crowds at down-home sites like Bluffton, South Carolina and Mobile, Alabama, pretty much the last places you’d ever expect the Trump brand to take off.

Trump had spent his entire career lending his name to luxury properties that promised exclusivity and separation from exactly the sort of struggling Joes who turned out for these speeches. If you live in a Trump building in a place like the Upper West Side, it’s supposed to mean that you’re too cosmopolitan, stylish, and successful – too smart-set – to mix with the rabble. But the rabble – white, working-class, rural, despising exactly those big-city elites who live in Trump’s buildings – turned out to be Trump’s base. They’re the people who hooted and hollered every time he said something off-color about Muslims or Mexicans or Asians (“We want deal!” Trump snickered earlier this year, in a Chinese-waiter voice) or “the blacks.” It was a bizarre marriage, but it made sense from from a clinical point of view. Attention is attention.

Patient with narcissistic personality disorder discovers massive source of narcissistic supply, so he sets about securing its regular delivery. So one comment about Mexicans turned into another about Megyn Kelly’s “wherever,” which turned into a call for a Black Lives Matter protester to be “roughed up,” which turned into an insane slapstick routine about a Times reporter with arthrogryposis, and so on. By December, you had to check Twitter every few hours just to see which cultural taboo Trump was stomping on now. The presidential campaign Trump began as just the latest in a long line of zany self-promotional gambits has now turned into the long-delayed other shoe dropping from the American civil rights movement. This goofball billionaire mirror-gazer has unleashed a half-century of crackpot grievances about the post-civil rights cultural landscape that a plurality of seething white people felt they never had permission to air, until he came along.

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“Turkey has gone from being viewed by Western government officials, media and academics as an influential, moderating force for regional stability and economic growth, to a tacit supporter, if not outright sponsor, of international terrorism.”

Turkey’s Dangerous Game in Syria (WSJ)

When the Syrian civil war broke out in 2011, Turkey was one of the earliest countries to invest heavily in the overthrow of the Assad regime. Despite a decade of warming relations with Syria, President Recep Tayyip Erdogan was making a bid to become the region’s dominant power. The situation in Syria has since changed dramatically—but the Erdogan strategy has not. The result is that Turkey has become a barrier to resolving the conflict. It wages war on the Syrian Kurds, Islamic State’s most effective opponents. And the country now plays host to an elaborate network of jihadists, including ISIS. Early on, Turkey wanted to foster a Sunni majority government in Syria, preferably run by the local branch of the Muslim Brotherhood.

This would deprive Turkey’s two historical rivals, Russia and Iran, of an important client state, while allowing it to gain one of its own. The plan was simple and elegant. But the Assad regime proved more resilient than expected, and the West refused to intervene and deliver a coup de grâce. So-called moderate Syrian rebels have either been sidelined by Islamist militants, or revealed to have been Islamist militants themselves. Thanks to Islamic State, the war has spread to engulf half of Iraq. And yet, as a global consensus solidified about the importance of defeating ISIS, Turkey has continued to play the game as if it were 2011. This summer, for example, the Erdogan government came to an important agreement to let the U.S. use two of its air bases for strikes against ISIS.

Yet Turkey has used the same bases to attack Kurdish forces in Iraq and Syria. The Erdogan government remains more concerned with limiting the power of the Kurds in Syria than with defeating ISIS. Turkey has gone from being viewed by Western government officials, media and academics as an influential, moderating force for regional stability and economic growth, to a tacit supporter, if not outright sponsor, of international terrorism. It is also viewed as a dangerous ally that risks plunging NATO into an unwanted conflict with Russia. When Russian President Vladimir Putin labeled the Erdogan government “accomplices of terrorists” after its fighter planes downed a Russian jet on Nov. 24, he was bluntly rewording an accusation that has been made repeatedly, but more diplomatically, in the West.

The accusation: Turkey allows oil and artifacts looted by Islamic State to flow across its border in one direction, while foreign jihadists, cash and arms travel in the other. Speaking last year of the porous Turkey-Syria border, Vice President Joe Biden let slip, in a moment of candor, that the biggest problem the U.S. faced in confronting ISIS was its own allies. More recently, on Nov. 27, a senior Obama administration official described the situation to this newspaper as “an international threat, and it’s all coming out of Syria and it’s coming through Turkish territory.”

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Throw in eye-watering corruption and you have a lot of misery. Thanks, Victoria Nuland!

Ukraine Inflation Hits 44% Amid Economic Collapse (Telegraph)

Inflation will hit 44pc in Ukraine this year, as the embattled economy has seen prices soar amid economic collapse. Consumer prices have hit eye-watering levels in 2015, according to the country’s central bank governor. Inflation averaged 24.9pc in 2014. Valeria Gontareva, of the National Bank of Ukraine, said authorities were aiming to get inflation to around 5pc by 2019. The war-torn economy, which has been plunged into crisis following conflict with neighbouring giant Russia, will also start to gradually lift capital controls as it begins to receive disbursements of bail-out cash from international lenders, said Ms Gontareva. Ukraine is set to receive around $9bn in rescue cash in 2016, including $4.5bn from the IMF, $1.5bn from the EU, and $1bn loan guarantee from the United States, which will be released in the first quarter of next year.

The economy has also lumbered under capital controls which limit the purchasing of foreign exchange in a bid to protect the collapsing value of the hryvnia. Bail-out cash will also help boost Ukraine’s dwindling foreign exchange reserves, which have steadily grown over the last months to stand at $13.3bn in December. Ukraine has been locked in a stalemate with Moscow over the repayment of a $3bn bond. Kiev defaulted on the debt earlier this month after Russian authorities refused to take part in a private sector debt haircut. The issue has also stoked tensions with the IMF, which changed its lending rules to continue providing aid to governments who fall into arrears. But Ukraine’s central bank chief said there was now no “hindrance” to the release of IMF aid to the country in 2016. “The IMF mission has agreed everything, they don’t need to come to Kiev anymore.”

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Frontex are the vanguard of an occupation force.

Frontex Sends 300 Guards In Migrant Mission To Greece (AFP)

EU border agency Frontex said Tuesday it had started to deploy 293 officers and 15 vessels on Greek islands to help Athens cope with the massive influx of migrants to its shores. The guards “will assist in identifying and fingerprinting of arriving migrants, along with interpreters and forged document experts,” Frontex said in a statement. “The number of border guards deployed will gradually increase to over 400 officers as well as additional vessels, vehicles and other technical equipment,” it added. More than one million migrants and refugees have landed in Europe this year, with more than 800,000 coming via Greece. At least 3,692 have died attempting to reach Europe across the Mediterranean, according to the International Organization for Migration (IOM).

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Topping off the misery. What everyone feared would happen. Kostas and his crew are handing out warm blankets like crazy.

Heated Areas To Open To Homeless In Athens As Cold Snap Expected (Kath.)

Municipal authorities in Athens are bracing for a cold snap at the end of the week and are opening emergency shelters for the capital’s homeless. Heated halls will be open to vulnerable groups from 10 a.m. on Wednesday at 35 Alexandras Avenue and at the indoor gymnasium opposite 165 Pireos Street. They will remain open until the cold snap ends, which is expected to happen on the weekend. The National Meteorological Service on Tuesday said that temperatures in the capital are expected to drop on Thursday and Friday to nighttime lows of below 0 degrees Celsius (32 Fahrenheit), with a chance of snow in northern parts. The cold weather is also expected to grip other parts of the country, particularly in the north, where authorities are also taking steps to provide warm spaces for vulnerable groups.

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F**king Amen, brother. “I was a stranger, and ye took me not in: naked, and ye clothed me not.”

As Europe Turns Gray (Pantelis Boukalas)

While the religious leaderships of Christian Europe went to pains to remind their faithful in their Christmas messages that Christ and his family were also refugees, Europe’s political leadership did not appear particularly moved – even less so great chunks of the societies that shape the contradictory and self-seeking face of Europe. The fact is that gray is about the most hopeful color that this part of the bloc can be colored, and it has covered much of its area. This is evidenced by elections and public opinion polls in France, Austria, the Czech Republic, Slovakia, the Netherlands and of course Greece, where the rot of racism from the far-right part of those nations is marring the heartfelt expressions of solidarity from so many other members of their societies.

This is also confirmed by the spike in hate attacks: Molotov cocktails launched at refugee camps, anti-refugee rallies, attacks on foreigners, sacred sites and symbols of non-Christian religions, enthusiasm for fences and barricades etc. This gray rot is insidious and threatens to swallow up all that is bright and gives birth to the solidarity shown toward migrants and refugees by those who have chosen to take action in the face of intolerance: people who act in the proper Christian spirit even if they are atheists, agnostics or of another faith. In an atmosphere where consumption fever and the commercialized “Christmas spirit” leaves little room for the true spirit of giving without expecting anything in return to flourish, the symbol of Christ as the political refugee becomes inert.

You cannot use him as a paradigm because he too will become another irritating figure without a home, someone belonging to a bygone era, unwanted and shunned. The fugitive Christ is born and dies every day in the faces of the children that drown in the Aegean or in the waters off Italy, Spain and France. He dies every day in front of the walls of a West that knows how to create wave upon wave of refugees through its cold, calculating actions but is indifferent to helping the victims.

The human mind cannot predict divine will. But maybe it is not blasphemous to speculate that if the Son of God were at Stephansplatz in Vienna last week – during the time of the year meant to celebrate his birth – and seen the disgusting performance of hate staged by far-right “thespians” (men in hoods posing as jihadists, beheading Europeans holding signs welcoming refugees), he would have been unable not to utter the words: “I was a stranger, and ye took me not in: naked, and ye clothed me not.”

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