Jul 162019
 
 July 16, 2019  Posted by at 9:51 am Finance Tagged with: , , , , , , , , , ,  


Jack Delano South Water Street freight depot of the Illinois Central Railroad, Chicago 1943

 

US “Transportation Recession” Gets Uglier (WS)
Stress Test a Sham, European Court of Auditors Warns (WS)
Boeing 737 Max Ordered By Ryanair Undergoes Name Change (G.)
What Looms Behind (Kunstler)
Von Der Leyen Faces Crucial Vote In Quest To Lead EU Executive (R.)
Christine Lagarde Must Confront Berlin To Save The Euro (Varoufakis)
Epstein’s Accusers Urge US Judge To Keep Him Jailed Until Trial (R.)
Epstein and the Explosive Crisis of the Deep State (CHS)
CNN Twists Embassy Surveillance Records To Attack Assange (SP)
Pathologizing Kids, Pharma Style (CP)
The True Cost Of Cheap Food Is Health And Climate Crises (G.)

 

 

A hidden crisis in plain sight?!

US “Transportation Recession” Gets Uglier (WS)

Freight shipments in the US across all modes of transportation – truck, rail, air, and barge – fell 5.3% in June compared to June last year, after having fallen 6.0% in May, the seventh month in a row of year-over-year declines, according to the Cass Freight Index for Shipments. This decline, along with other freight indicators, including orders for heavy trucks, now clearly outline the new Transportation Recession – number 2 since the Great Recession – in this very cyclical business. In terms of freight traffic by rail, the Association of American Railroads (AAR) reported that in June overall, volume fell 6.3% from a year ago. The volume of intermodal freight – containers hauled by truck and then transferred to rail, or semi-truck trailers that piggyback on special rail cars – dropped 7.2% in June.

For the first half, overall freight volume by rail was down 3.2%, with all segments in the red, except Petroleum and Petroleum Products, which was up 23%! Intermodal was down 3.3%. The Cass Freight Index, which tracks shipments of consumer and industrial goods but not bulk commodities such as grains, has now fallen below the June 2014 level. June 2014 had set a record in shipments just before Transportation Recession 1 came along. The boom in 2018 broke the 2014 records, and by a big margin. And now the industry is back in its own recession. In the stacked chart below of the Cass Freight Index, the red line denotes 2019 through June, which has now dipped below June 2014 (green line). Note how much of an outlier the boom of 2018 (black line at the top) had been, though it faded sharply at the end of last year:

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“Unlike its counterparts in the UK, the US and Japan, the European Banking Authority (EBA) does not itself calculate the impacts on banks of the adverse scenario; it leaves that up to the banks themselves.”

Stress Test a Sham, European Court of Auditors Warns (WS)

European bank stocks continue to get hammered near multi-decade lows by a slew of problems, including the ECB’s monetary policies, particularly its negative-interest-rate policy (NIRP), festering nonperforming loans, and a well-deserved lack of confidence by investors. This was just exacerbated by a scathing new report from the European Court of Auditors (ECA) highlighting a litany of problems and shortcomings with the European Banking Authority’s latest stress test. Among other things, the test ignored some of the most common factors that cause a bank to fail, excluded many of Europe’s most fragile banks, and used simulations that were a lot more benign than the last financial crisis.


Banking stress tests are supposed to gauge the resilience of a banking system by imposing a hypothetical shock — or “adverse stress scenario” — on a large share of the system’s banks. The problem in Europe is that the European Banking Authority’s stress tests have tended to ignore, rather than identify, many of the worst stress points in the banking system, which is probably why many of the Continent’s worst banking failures, including Bankia BFA, Dexia and Banco Popular, have happened shortly after the banks in question had passed a stress test. Unlike its counterparts in the UK, the US and Japan, the European Banking Authority (EBA) does not itself calculate the impacts on banks of the adverse scenario; it leaves that up to the banks themselves. It does not even corroborate the information provided or conduct on-site inspections.

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What a surprise. I would dump the entire 737 name.

Boeing 737 Max Ordered By Ryanair Undergoes Name Change (G.)

A Boeing 737 Max due to be delivered to Ryanair has had the name Max dropped from the livery, further fuelling speculation that the manufacturer and airlines will seek to rebrand the troubled plane. Photos have emerged of a 737 Max in Ryanair colours outside Boeing’s manufacturing hub, with the designation 737-8200 – instead of 737 Max – on the nose. The 737-8200 is a type name for the aircraft that is used by aviation agencies. The Max aircraft remains grounded worldwide after two crashes in Indonesia and Ethiopia killed a total of 346 people. Boeing has yet to convince regulators that modifications to its software are sufficient to ensure its safety.


Ryanair has 135 of the 737 Max models on order, the first five of which are due for delivery in the autumn, once regulators have declared it safe. The airline’s fleet order is comprised entirely of a larger version of the Max 8, with 197 seats, which it has until now referred to in official Ryanair announcements as the 737 Max 200. Neither Ryanair nor Boeing has commented on nor confirmed the substitution of the 737-8200 for the better known brand Max, as seen on the photographs taken at Renton in Washington, US, and posted on social media by Woodys Aeroimages. In previous photos from the same source, new Ryanair 737 Max 200 planes from Boeing are shown with 737 Max on its nose. It is understood that what is painted on the plane is a matter for the airline rather than the manufacturer. According to sources reported in the Wall Street Journal, the Max plane is unlikely to return to the skies before 2020.

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“Shale oil was a neat stunt. Turns out you can produce a helluva lot of it by paying more to pull it out the ground than you get from selling it.”

What Looms Behind (Kunstler)

Don’t hold your breath waiting for a coherent pre-election debate about the mother-of-all-issues facing this republic, namely, that we can’t afford the living arrangements Americans think of as “normal” anymore. This quandary has stalked us since the millennium turned. It thunders through all the activities of daily life, and the tensions emanating from it are so agonizing and difficult to face that our politics have deflected off into the kind of hysteria spawned by bad dreams. As the great Wendell Berry pointed out years ago, this is about the nation’s home economics: energy and resources in, production out, surplus wealth saved.

America had a brush with reality in 2008 when all the distortions of our home economics came together and whapped the country between the eyes with a two-by-four. Our energy-in was faltering. US oil production had fallen to a new low of under 4 million barrels a day and we were importing around 15 million. We papered over the problem with borrowed money in ever-larger amounts. This dynamic prompted ever riskier work-arounds on Wall Street, especially “innovations” in securitized debt, which invited criminal shenanigans. It blew up badly. Wealth vaporized. Industries collapsed. Homes and jobs were lost. Lives ruined.

The fairy-tale narrative since then is that technology rode to the rescue. The shale oil miracle “solved” the energy-in problem. Sure seems like it. But lots of things aren’t what they seem to be. Shale oil was a neat stunt. Turns out you can produce a helluva lot of it by paying more to pull it out the ground than you get from selling it. You can goose the process nicely by paying for it with borrowed money. And so it has gone. America now produces a new record of over 12 million barrels a day, and most of the companies doing it can’t make a red cent. And since it is increasingly obvious that they won’t ever pay back the money they borrowed before, they are unlikely to get new loans to continue their profitless operations.

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Even if she pulls it off, it will be by the slimmest of margins. Pretty ridiculous.

Von Der Leyen Faces Crucial Vote In Quest To Lead EU Executive (R.)

Germany’s Ursula von der Leyen faces a make-or-break vote on Tuesday in her quest to be the European Commission’s first female leader, and a raft of promises made the previous day may help her win over skeptical European Union socialist and liberal lawmakers. To appease them, von der Leyen pledged more ambitious carbon dioxide emissions targets, a more growth-oriented fiscal policy and taxing big tech companies. She also vowed to create an additional comprehensive European rule-of-law mechanism that includes annual reporting, boost the EU’s border guards earlier than scheduled to deal with the migrant issue, and set a minimum wage for EU workers.


Von der Leyen also suggested scrapping unanimous agreement by all 28 EU countries on climate, energy, social and taxation issues and give Britain more time to negotiate its exit from the bloc. Her pledges came amidst anger among some EU lawmakers over her nomination by EU leaders and their rejection of the “spitzenkandidaten”, the main parliamentary groups’ candidates for the job. Von der Leyen will address the 751-member European Parliament at 0700 GMT, to be followed by a debate and a secret ballot at 1600 GMT. The assembly however is currently four members short which means she needs 374 votes instead of 376.

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Draghi gave it all Europe has got.

Christine Lagarde Must Confront Berlin To Save The Euro (Varoufakis)

Lagarde’s greatest challenge is that she is replacing a man credited with saving the eurozone by means of policies that are no longer fit for purpose. If she departs from Draghi’s script, she will face fierce criticism. And if she does not, the eurozone’s never-ending crisis will spin further out of the ECB’s control. Draghi saved the eurozone by printing trillions of euros to fund the bankrupt banks and to allow Italy, Spain and other stressed states (though not Greece) to roll over their debts. To do this, he needed to skilfully subvert the eurozone’s rules which, in turn, required painstaking work to co-opt Germany’s Angela Merkel in his great clash with both the Bundesbank, Germany’s powerful central bank, and Wolfgang Schäuble, Germany’s finance minister.


While Draghi’s wall of money helped the eurozone perk up, it could not cure its underlying disease and had some pretty nasty side-effects. Stubborn negative interest rates continue to undermine pension funds and insurance companies in Germany and beyond. Rates remain negative because investment is woefully low due to investors’ self-fulfilling pessimism given the prospect of more austerity. This creates deflationary pressures that eat into the savings of the middle class, replace quality jobs with precarious ones and, thus, beget political monsters across Europe.

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You’d almost hope he gets out on bail, just to see the reactions.

Epstein’s Accusers Urge US Judge To Keep Him Jailed Until Trial (R.)

Two women who say they are victims of sexual misconduct by American financier Jeffrey Epstein on Monday urged a U.S. judge to keep him in jail while he awaits trial on charges of sex trafficking dozens of underage girls. “He’s a scary person,” one of the women, Courtney Wild, told U.S. District Judge Richard Berman in federal court in Manhattan. Wild and another accuser, Annie Farmer, spoke at the end of a hearing in which prosecutors argued that Epstein, 66, posed an “extraordinary risk of flight” and danger to the community and must remain in jail. Epstein, who has pleaded not guilty, has asked to be allowed to live under house arrest with armed guard at his expense in his mansion on Manhattan’s Upper East Side, which is valued at $77 million.

The hedge fund manager had a social circle that over the years has included Donald Trump before he became U.S. president, former President Bill Clinton and Britain’s Prince Andrew. Berman said he would probably announce his bail decision on Thursday at 9:30 a.m. EDT (1330 GMT), saying he needed more time to absorb the case. Lawyers for Epstein said their client, who wore dark blue jail scrubs in court, has had an unblemished record since he pleaded guilty more than a decade ago to a state prostitution charge in Florida and agreed to register as a sex offender.

[..] One of Epstein’s lawyers, Martin Weinberg, told Berman on Monday that Epstein needed to be out of jail so he and his lawyers could prepare their defense. In 2016, Berman rejected a similar bail proposal from Turkish-Iranian gold trader Reza Zarrab to let him live in an apartment under the watch of privately funded guards, saying wealthy defendants should not be allowed to “buy their way out of prison by constructing their own private jail.” The judge expressed similar skepticism on Monday, noting that all defendants have the same right to prepare their defense as Epstein. “If that’s the standard, then what are we going to tell all those people who can’t make the $500 or $1,000 bail?” he said.

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“..the fatal danger to empires arises not from external foes but from inside the center of power as elite corruption erodes the legitimacy of the state.”

Epstein and the Explosive Crisis of the Deep State (CHS)

Enter the sordid case of Jeffrey Epstein, suddenly unearthed after a decade of corporate-media/elitist suppression. It’s laughable to see the corporate media’s pathetic attempts to glom onto the case now, after actively suppressing it for decades:Jeffrey Epstein Was a Sex Offender. The Powerful Welcomed Him Anyway. (New York Times) Where was the NYT a decade ago, or five years ago, or even a year ago? Of all the questions that are arising, the signal one is simply: why now? There are many questions, now that the dead-and-buried case has been dug up: where did Epstein get his fortune? Why did he return to the U.S. from abroad, knowing he’d be arrested? Why was the Miami Herald suddenly able to publish numerous articles exposing the scandalous suppression of justice after 11 years of silence?

Years later, victims recount impact of Jeffrey Epstein abuse. Here’s my outsider’s take: the anti-Neocon camp within the Deep State observed the test case of Harvey Weinstein and saw an opportunity to apply what it learned. If we draw circles representing the anti-Neocon camp and the moralists who grasp the state’s legitimacy is hanging by a thread after decades of amoral exploitation and self-aggrandizement by the ruling elites, we would find a large overlap. But even die-hard Neocons are starting to awaken to the danger to their power posed by the moral collapse of the ruling elites. They are finally awakening to the lesson of history, that the fatal danger to empires arises not from external foes but from inside the center of power as elite corruption erodes the legitimacy of the state.

The upstarts in the Deep State have united to declare open war on the degenerates and their enablers, who are everywhere in the Deep State: the media, the intelligence community, and on and on. Since the battle is for the legitimacy of the state, it must be waged at least partially in the open. This is a war for the hearts and minds of the public, whose belief in the legitimacy of the state and its ruling elites underpins the power of the Deep State. If this wasn’t a war over the legitimacy of the state, the housecleaning would have been discrete. Insiders would be shuffled off to a corporate boardroom or do-nothing/fancy title office, or they’d retire, or if necessary, they’d die of a sudden heart attack or in a tragic accident (if only they knew).

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Got to keep the Russia-Assange link alive that never existed. CNn got these files, that El Pais wrote about last week, but still calls them “exclusive”.

CNN Twists Embassy Surveillance Records To Attack Assange (SP)

Spanish newspaper EL PAÍS reported on July 9 that WikiLeaks founder Julian Assange was spied on by a Spanish private defense and security firm called Undercover Global S.L., when he lived in the Ecuador embassy in the United Kingdom. The report was based on “documents, video, and audio material” that was “used in an extortion attempt against Assange by several individuals.” In May, Spanish police arrested journalist José Martín Santos, who had a record of fraud, and a computer programmer for their alleged involvement in an “attempt to make €3 million from the sale of private material.” Reporters for EL PAÍS found the spying on Assange’s legal defense meetings to be most significant.


They were stunned by the fact that Assange felt he had to hold meetings in the women’s bathroom if he wanted to ensure privacy. And they took note of U.C. Global’s “feverish, obsessive vigilance” toward “the guest,” which became more intense after Lenin Moreno was elected president of Ecuador in May 2017. That is not how CNN viewed the same cache of information compiled by the private security company and eventually used to allegedly extort Assange. Although EL PAÍS makes no mention of meddling in the 2016 presidential election in its coverage, CNN approached the material like analysts at the CIA. They voraciously consumed logs hoping the documents would confirm Assange collaborated with Russian intelligence assets to release emails from John Podesta, Hillary Clinton’s campaign chairman. Compare the two reports, as they appeared on the news organization’s websites:

 

CNN was unable to find concrete proof, and the words “potentially” and “possibility” do heavy lifting for the media organization. “New documents obtained exclusively by CNN reveal that WikiLeaks founder Julian Assange received in-person deliveries, potentially of hacked materials related to the 2016 US election, during a series of suspicious meetings at the Ecuadorian Embassy in London,” the CNN report reads. It adds, “The documents build on the possibility, raised by special counsel Robert Mueller in his report on Russian meddling, that couriers brought hacked files to Assange at the embassy.”

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A suicidal species.

Pathologizing Kids, Pharma Style (CP)

Millions of kids today are on meds for conduct disorders, depression, bipolar disorder, oppositional defiant disorder, mood disorders, obsessive-compulsive disorders, mixed manias, social phobia and, of course, ADHD. But according to data from IMS health in a Wall Street Journal article, just as many kids are being treated for non-psychiatric conditions that were often considered “adult diseases.” In fact, 25 percent of children and 30 percent of adolescents now take at least one prescription for a chronic condition said Medco, a pharmacy benefit manager, making the kid prescription market four times as strong as the adult in 2009. Between 2001 and 2009, high blood pressure meds for kids rose 17 percent, respiratory meds 42 percent, diabetes meds 150 percent and heartburn/GERD meds 147 percent.

In one study, 18.6 million children’s doctor visits for sleep problems, resulted in sleeping med prescriptions 81 percent of the time. One reason for Pharma’s pediatric bonanza is kids have become more sedentary and likely to overeat, like their adult counterparts. Over a third of U.S. kids are overweight and 17 percent are obese — which for a 4-foot-10 inch child would be 143 pounds. Obesity predisposes children to diabetes, hypertension, high cholesterol, sleep apnea, gallbladder disease, osteoarthritis and musculoskeletal disorders. But rather than telling kids to unplug the TV or video games, go outside and don’t come back until dinner, parents and medical professionals enable the deleterious lifestyles with the easy out of a pill.

In fact, the Lipitor, already the world’s top selling medication in adults until it went off patent, was approved for US children in 2008 in a chewable form in Europe. Adults on statins are six times more likely to develop liver dysfunction, acute kidney failure, cataracts and muscle damage, says an article in the British Medical Journal. So, give them to kids? “Plenty of adults down statins regularly and shine off healthy eating because they know a cheeseburger and steak can’t fool a statin,” wrote Michael J. Breus, PhD on the Huffington Post. “Imagine a 10-year-old who loves his fast food and who knows he can get away with it if he pops his pills.”

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Food should not be an industry. Food production should be part of everybody’s life, we should know where our food comes from.

The True Cost Of Cheap Food Is Health And Climate Crises (G.)

The true cost of cheap, unhealthy food is a spiralling public health crisis and environmental destruction, according to a high-level commission. It said the UK’s food and farming system must be radically transformed and become sustainable within 10 years. The commission’s report, which was welcomed by the environment secretary, Michael Gove, concluded that farmers must be enabled to shift from intensive farming to more organic and wildlife friendly production, raising livestock on grass and growing more nuts and pulses. It also said a National Nature Service should be created to give opportunities for young people to work in the countryside and, for example, tackle the climate crisis by planting trees or restoring peatlands.

“Our own health and the health of the land are inextricably intertwined [but] in the last 70 years, this relationship has been broken,” said the report, which was produced by leaders from farming, supermarket and food supply businesses, as well as health and environment groups, and involved conversations with thousands of rural inhabitants. “Time is now running out. The actions that we take in the next 10 years are critical: to recover and regenerate nature and to restore health and wellbeing to both people and planet,” said the commission, which was convened by the RSA, a group focused on pressing social challenges. The commission said most farmers thought they could make big changes in five to 10 years if they got the right backing.

“Farmers are extraordinarily adaptable,” said Sue Pritchard, director of the RSA commission and an organic farmer in Wales. [..] Pritchard said the UK had the third cheapest basket of food in the developed world, but also had the highest food poverty in Europe in terms of people being able to afford a healthy diet. Type 2 diabetes, a diet-related illness, costs the UK £27bn a year, she said. The commission also said agriculture produced more than 10% of the UK’s climate-heating gases and was the biggest destroyer of wildlife; the abundance of key species has fallen 67% since 1970 and 13% of species are now close to extinction. To solve these crises, the commission said “agroecology” practices must be supported – such as organic farming and agroforestry, where trees are combined with crops and livestock such as pigs or egg-laying hens.

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Oct 252014
 
 October 25, 2014  Posted by at 12:12 pm Finance Tagged with: , , , , , , , , , , , ,  


DPC Luna Park, Coney Island 1905

An Economy Based On Property Has Much To Fear (Independent)
Lenders Facing Soaring Costs Shutting Out U.S. Homebuyers (Bloomberg)
It Shouldn’t Hurt This Much to Get a Mortgage (Ritholtz)
Paying For Bad Habits: Hookers And Drugs Lift UK’s EU Bill (Guardian)
UK Chancellor Osborne’s Choice Of Words Is Sounding Alarm Bells (Guardian)
A Mystery Bidder Offers $3 Million for 6,000 of Detroit’s Worst Homes (BW)
Spanish Accuse Goldman, Blackstone Of Hiking Rent For Poor (Independent)
EU Bank Breakup Plan Hits More Hurdles as Danes Reject Idea (Bloomberg)
Citigroup Bets ECB Will Do QE as Morgan Stanley Sees Odds at 40% (Bloomberg)
50% Of American Workers Make Less Than $28,031 A Year (Snyder)
The American Dream Is Still Possible, Just Not in the US (Daily Bell)
Rosenberg Says No Recession Until At Least 2016 (MarketWatch)
China Auto Market Growth To Shrink by 50% This Year: Industry Head (Reuters)
Blood In The Water As Amazon Magic Fades (Reuters)
Putin Accuses U.S of Blackmail, Weakening Global Order (Bloomberg)
NPR Slashes Number Of Environment Reporters To One Part-Timer (HuffPo)
Ebola Epidemic In Africa To Explode Without Rapid, Substantial Aid (Lancet)
‘Official’ Number of Ebola Cases Passes 10,000, With 5,000 Deaths (BBC)

A very smart way to look at it.

An Economy Based On Property Has Much To Fear (Independent)

Believe it or not, the Bank of England isn’t just a bunch of bowler-hatted types stuck behind desks in Threadneedle Street. It has agents up and down the country interviewing business people on how their companies are faring: what goods are selling well, whether they’re hiring or firing, that sort of thing. The monthly bulletins that result rarely get reported, but are useful because they layer anecdotal evidence on top of the regular run of dry economic stats. Superficially, October’s feedback had much to cheer – order books are swelling in most sectors, employment is expected to increase, and access to credit has improved. But it is striking how much of this positive stuff is related, directly or indirectly, to the property market.

Business services firms – accountants, lawyers and the like – are growing because of an increase in construction deals; manufacturing and retail sales are being kept afloat by sales of kitchens, bathrooms and furniture thanks to people moving house; business investment is growing as firms spend more on doing up their premises or moving to new sites. Property, property, property. Exporters, meanwhile, were gloomy, with all, from farmers to manufacturers, complaining of eurozone weakness, Russian belligerence and war in the Middle East. That means we will be reliant on the domestic economy for years to come. With this still clearly so dominated by the world of bricks and mortar, one has to wonder, what would happen if interest rates start to rise? Disaster, that’s what. The Bank’s other document release yesterday – the minutes to the Monetary Policy Committee’s last meeting on rates – show a continuing doveish slant. Good job, too.

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No, prices vs income shuts out potential buyers. So either significantly raise wages or drop prices, and stop whining.

Lenders Facing Soaring Costs Shutting Out U.S. Homebuyers (Bloomberg)

Clem Ziroli Jr.’s mortgage firm, which has seen its costs soar to comply with new regulations, used to make about three loans a day. This year Ziroli said he’s lucky if one gets done. His First Mortgage Corp., which mostly loans to borrowers with lower FICO credit scores and thick, complicated files, must devote triple the time to ensure paperwork conforms to rules created after the housing crash. To ease the burden, Ziroli hired three executives a few months ago to also focus on lending to safe borrowers with simpler applications. “The biggest thing people are suffering from is the cost to manufacture a loan,” said Ziroli, president of the Ontario, California-based firm and a 22-year industry veteran. “If you have a high credit score, it’s easier. For deserving borrowers with lower scores, the cost for mistakes is prohibitive and is causing lenders to not want to make those loans.”

Federal regulations, enacted after the collapse of the subprime market spurred the financial crisis, are boosting mortgage costs this year. Most lenders are responding by providing home loans only to borrowers with near perfect credit, shutting out creditworthy Americans whose loan files are too expensive to review and complete. If banks commit compliance errors in issuing a loan that goes bad, they have to buy it back at a loss from Fannie Mae or Freddie Mac. During the housing boom between 2004 and 2007, lenders provided about $2 trillion in subprime loans, many to unqualified borrowers. So-called liar loans didn’t require borrowers to provide pay stubs or tax returns to document earnings. Teaser rates as low as 1% offered on mortgages soared when they reset a few years later.

The share of subprime mortgages for which borrowers either provided little documentation of their assets or none at all rose to 38% in 2007 from 32% in 2003, according to a paper published by the Federal Reserve. Almost one in four of those mortgages defaulted by 2008 compared with one in five of fully documented subprime loans. Wall Street firms securitized pools of the loans called collateralized debt obligations and sold them to investors. They also created so-called synthetic CDOs that were derivative instruments designed to mirror the performance of the loan pools. “What started the crisis were these loans that were designed to fail, loans that weren’t underwritten at all,” said Julia Gordon, director of housing finance and policy at the Washington-based Center for American Progress, which has ties to the Democratic Party. “No one quite realized that these loans were then at the bottom of this giant pyramid scheme, where the Wall Street derivative products that were based off of them would just come crashing down and take the whole economy with them.”

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Sorry, Barry, but that’s as wrong as can be. It should very much be this hard, or prices will never find their ‘natural’ floor.

It Shouldn’t Hurt This Much to Get a Mortgage (Barry Ritholtz)

Under normal circumstances, approving my mortgage application should be a no-brainer: High income, no debt, good credit score. The missus also makes a good income, has an almost-perfect credit score and has been working for the same business for 28 years. But these are not normal circumstances. Let me jump to the end: Yes, we got our mortgage. We put 20% down, bought a house that appraised for more than the purchase price and got a 3.25% rate on a mortgage that resets after seven years. We moved in last month.

But the process was surreal. Indeed, it was such a bizarre experience that I started hunting for explanations from people in the industry about why mortgage lending has gone astray. I spoke to numerous experts, many of whom spoke only on background. Today’s column is about what I learned. By just about any measure, credit is tighter today than it has been in decades. Although former Federal Reserve Chairman Ben Bernanke’s inability to refinance a mortgage is merely anecdotal, consider instead the gauge CoreLogic developed. It used 1998 as a baseline and considered six quantitative measurements to evaluate how loose or easy mortgage lending is. By those metrics, this is the tightest credit market for mortgage lending in at least 16 years.

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I like my take from yesterday better: French hookers are cheaper than British ones.

Paying For Bad Habits: Hookers And Drugs Lift UK’s EU Bill (Guardian)

Listening to EU officials describe how Britain pays its annual EU contribution brings to mind George W Bush being questioned about one of his administration’s budgets. Flicking the pages before assembled journalists he said: “There’s a lot of pages, a lot of lines and a lot of numbers.” To all but a few, the addings up and subtractings that go on in Brussels make little more sense. One of the few things that does seem clear is that Britain is paying for its bad habits. Brussels needs more cash this year to cope with overspent budgets. And while it might seem unfair to tax a country for needing a bigger crutch than others in the EU club, relatively speaking, the UK’s GDP has jumped courtesy of new estimates of the nation’s consumption of drugs and use of prostitutes. The EU applies its complex calculation of how much member states should pay into its coffers largely on GDP levels. The bigger the national income, the bigger the contribution. So far, so simple.

However, earlier this year the UK’s GDP was given a £10bn boost after officials calculated that sex work generated £5.3bn for the economy in 2013, with another £4.4bn coming from the sale of cannabis, heroin, powder cocaine, crack cocaine, ecstasy and amphetamines. Other countries have been affected too after the EU calculated how much of their hidden economies should be brought on the books. Greece faces a larger contribution despite losing a fifth of is national income since 2009. Italy is another victim, though arguably it has only included a fraction of the mafia’s business in its GDP calculations. More importantly, Britain is paying more because this year it is simply bigger than 18 months ago while other countries have stood still or contracted. Like soldiers in a lineup who find themselves volunteering for toilet duty after everyone else has taken a step back, the UK Treasury is paying for being one of the few among the EU’s 27 economies to strengthen this year.

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A glitch in the posturing process?!

UK Chancellor Osborne’s Choice Of Words Is Sounding Alarm Bells (Guardian)

George Osborne is clearly worried. Going into a pre-election war-gaming huddle with his advisers, the economic numbers that once sang a happy tune and are so crucial to victory, now sound a little discordant. It seems churlish to strain for the bum notes in the latest GDP figures. All parts of the economy are growing, with the exception of agriculture. And growing more strongly than they are in any of the major European economies. But it is the chancellor’s words that set off the alarm bells. He said: “If we want to avoid a return to the chaos and instability of the past, then we need to carry on working through our economic plan that is delivering stability and security.” Adopting the word “chaos” is at once interesting and alarming. He seems to be saying that any other path than the one he has chosen will bring with it a swirling storm of instability. Billing himself as Lord Protector, Osborne risks overstating his case, especially when the GDP numbers are so strong.

Growth is moderating, but most surveys report that businesses remain confident about the recovery and continue to hire more staff. As a result, unemployment continues to fall. So what can he be worried about? There is the three months of restrained housing market activity. If it’s true, and we don’t fully understand the link, that much of the recovery is connected to the increase in property buying, then any slowdown is a cause for concern. Except the chancellor wanted the housing market to cool. And his policies are largely the reason banks are refusing to dole out loans after he gave regulators instructions in April to clampdown on risky mortgage lending. A slowdown in housebuilding was also a logical knock-on effect, given that a majority of homes are constructed by a private building sector keen to maintain its extraordinary profit levels.

We know he is worried about the slowdown in exports, which didn’t take off four years ago, as he had expected. The eurozone’s impending recession is largely to blame, but a lack of support to exporters, particularly multimillion-pound credit insurance, has also proved a barrier. However, the crucial issue is the government’s finances, which have worsened this year despite the strong recovery. For a man with the electoral cycle stamped on his DNA, it is tragic that businesses and workers are not paying much extra tax.

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What do Detroiters think of this?

A Mystery Bidder Offers $3 Million for 6,000 of Detroit’s Worst Homes (BW)

Three million dollars can barely buy a new townhouse in Brooklyn these days, but it could be enough to purchase a bundle of more than 6,000 foreclosures up for auction in Detroit. The cost of dealing with the many blighted buildings included in the Detroit mega-auction means a $3.2 million bid received last week—roughly the minimum allowable bid of $500 per property—will likely prove too high to turn a profit. “I can’t imagine that you are going to make money on this,” says David Szymanski, chief deputy treasurer of Wayne County, which is selling the properties. So it’s all the more mysterious that the auction, opened with little fanfare earlier this month, has attracted any bidder at all. Still, at least one unidentified party is willing to pay $3.2 million to take control—and responsibility—for scores of dilapidated homes. In fact, winning the bid could cost the lucky winner a small fortune beyond the auction price.

Finding a way to deal with Detroit’s blight is critical for the city’s future. A task force has already called for immediately tearing down 10% of all structures. The group surveyed the condition of every Detroit property and identified neighborhoods at a tipping point at which stripping them of blight could keep certain areas from slipping away entirely. “I had cancer 12 years ago, and this is exactly like cancer,” Szymanski says. “If you don’t get it all, it’s going to come back.” Wayne County has become a major owner of blighted properties, which it can seize when owners fall behind on taxes. The scale of its distressed holdings is unprecedented. When Szymanski joined the treasurer’s office four years ago, he called the treasurer of Cuyahoga County in Ohio to compare notes. His counterpart, whose domain includes Cleveland and was a bellwether during the housing crisis, asked: “Are you sitting down? We are foreclosing on 4,500 properties.” Szymanski says he replied: “I hope you’re laying down.” At the time, Wayne County had 42,000 properties in foreclosure.

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Throw ’em out!

Spanish Accuse Goldman, Blackstone Of Hiking Rent For Poor (Independent)

The London investment arms of Goldman Sachs and Blackstone were accused last night of jacking up the rents of Madrid’s poorest people after they bought thousands of the city’s council flats. Many, unable to afford their new terms, have now been threatened with eviction or moved out. During the financial crisis, the city was advised by the accountants PwC to sell off swathes of its social housing in order to raise desperately needed funds. It sold 5,000 flats to investors including Goldman and Blackstone. Nothing changed in the tenants’ rents until their leases ran out, when, in many cases, the charges shot up dramatically. Reuters interviewed over 40 households who have been thrown into difficulties by the rent rises. They include Jamila Bouzelmat, a mother of six who lives in a four-bed flat now owned by Goldman and a Spanish property firm. She said her family had been paying €58 (£46) a month rent from her husband’s €500 unemployment benefit. But in April, her new landlords suddenly took €436 from her account.

Ms Bouzelmat said she only discovered the problem when she tried to pay an electricity bill: “We went to take money out and there wasn’t a cent left in the bank,” she explained. 1 in 5 adults in Madrid are unemployed. Goldman and Blackstone are entirely within their rights to charge market-price rents. However, a number of lawsuits have now been launched by local politicians against the councils that sold the homes. The problem is particularly bad in Spain because it already had one of the smallest stocks of social housing in Europe. Now 15 per cent of it has been sold off to London banks and private equity firms, there is even less. Goldman’s properties had about 400 households on reduced rents, often negotiated individually with the council and set for up to two years. Goldman referred inquiries to Encasa Cibeles, the local firm set up to manage the flats. A spokesperson said: “Evictions occur in an extremely small number of cases.”

Blackstone’s tenants have been on longer leases but most have been paying below-market rents. As leases approach expiry, rates have risen 40%. Blackstone referred inquiries to Fidere, the local estate management company, which said “some people have lost the public subsidy they received from the council”. It is negotiating with the 2% of its tenants in that situation.

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There’s always another politician to put on the payroll.

Bank Breakup Plan Hits More EU Hurdles as Danes Reject Idea (Bloomberg)

Denmark won’t back a proposal to split Europe’s biggest banks as the region’s first country to enforce bail-in rules questions the value of more regulation. “With all the legislation now in place there really shouldn’t be more worries,” Business Minister Henrik Sass Larsen said in an interview yesterday at the parliament in Copenhagen. A proposal by Michel Barnier, the European Union’s financial services chief, to break up systemically important banks has resurfaced with local regulators trying to defend national interests, according to a document obtained by Bloomberg News. Italy, which holds the EU’s rotating presidency, said it was looking for “concrete options for the way forward” after registering “strong concerns” among member states, the document showed. “With the regulation we’ve put in place, we’re fully covered,” Larsen said, characterizing the notion that more may be needed as obsolete. The proposal for reforming bank structures has come under attack on multiple fronts since Barnier presented it in January.

In addition to a narrowly defined proprietary-trading ban, Barnier set out EU-wide standards for splitting up the most systemically important banks that would push certain kinds of derivatives and other trading activities into separately capitalized units. Barnier’s plans require approval from national governments and the European Parliament to take effect, with talks set to continue into next year. Britain’s Jonathan Hill, who will replace Barnier as financial services commissioner on Nov. 1, has said he will “take forward work” on the proposal. Larsen’s position shows some EU nations back industry efforts to block further regulation. Christian Clausen, the president of the European Banking Federation and the chief executive of Nordea Bank AB, said this week plans to add rules to the existing framework are “going beyond reason.” Clausen said he plans to have a “serious talk” with the European Commission and parliament to prevent further regulatory tightening.

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Think Berlin.

Citigroup Bets ECB Will Do QE as Morgan Stanley Sees Odds at 40% (Bloomberg)

Economists are at odds over whether the European Central Bank will do “whatever it takes” to revive inflation in the euro area. More than two years after President Mario Draghi promised to pull out all the stops to protect the euro from a swirling debt crisis, ECB-watchers are split over whether the central bank will buy government bonds to aid the struggling economy. In making forecasts for the possible deployment of full-blown quantitative easing, the pressures of weak growth and sliding inflation are being balanced against Germany’s aversion to purchasing sovereign debt and practical considerations such as how and whether it would work. Draghi said earlier this month that the ECB will use further unconventional monetary policy instruments if needed to support recovery. Goldman Sachs sees one-in-three odds of QE, Morgan Stanley views the chances at 40% and JPMorgan is at 50-50. By contrast, HSBC, Barclays and Bank of Americahave sovereign QE as part of their central scenarios. Citigroup even says it could happen before the end of this year.

Here then is a handy round-up, gleaned from reports and interviews, of where economists at major banks stand. Huw Pill, Goldman Sachs: “Sovereign QE is not part of our baseline scenario, which is for economic activity to go sideways and inflation to remain low. We think the current gloom and doom about the euro area outlook is overdone.” Joerg Kraemer, Commerzbank: “We were one of the first banks to predict at the end of August that the ECB would buy government bonds on a generous scale, envisaging this happening at the start of next year rather than this year.” “It has become far more likely that the bank will act before the end of this year. Concerns about the economy that have triggered the drop in equity prices make it ever more likely that the ECB will have to lower its optimistic growth forecast for 2015 of 1.6%.” “This fact plays into the hands of those on the ECB Council in favour of relaxing the reins, as does our expectation that the end of the bank stress test will not in fact sound the all-clear for weak lending. Long-term inflation expectations have dropped sharply.”

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Gutted like a fish.

50% Of American Workers Make Less Than $28,031 A Year (Snyder)

The Social Security Administration has just released wage statistics for 2013, and the numbers are startling. Last year, 50% of all American workers made less than $28,031, and 39% of all American workers made less than $20,000. If you worked a full-time job at $10 an hour all year long with two weeks off, you would make $20,000. So the fact that 39% of all workers made less than that amount is rather telling. This is more evidence of the declining quality of the jobs in this country. In many homes in America today, both parents are working multiple jobs in a desperate attempt to make ends meet. Our paychecks are stagnant while the cost of living just continues to soar.

And the jobs that are being added to the economy pay a lot less than the jobs lost in the last recession. In fact, it has been estimated that the jobs that have been created since the last recession pay an average of 23% less than the jobs that were lost. We are witnessing the slow-motion destruction of the middle class, and very few of our leaders seem to care. The “average” yearly wage in America last year was just $43,041. But after accounting for inflation, that was actually worse than the year before… American paychecks shrank last year, just-released data show, further eroding the public’s purchasing power, which is so vital to economic growth.

Average pay for 2013 was $43,041 — down $79 from the previous year when measured in 2013 dollars. Worse, average pay fell $508 below the 2007 level, my analysis of the new Social Security Administration data shows. Flat or declining average pay is a major reason so many Americans feel that the Great Recession never ended for them. A severe job shortage compounds that misery not just for workers but also for businesses trying to profit from selling goods and services. Average pay declined in 59 of the 60 levels of worker pay the government reports each October.

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In Canada? Really? What part of the dream is that?

The American Dream Is Still Possible, Just Not in the US (Daily Bell)

Although there are no firm statistics on the number of Americans living outside the US, the US State Department estimates that somewhere between 3 and 6 million Americans now live offshore. I think this is a low estimate and the number is clearly growing. I now live in Canada but often travel back to the United States. Driving through Customs near Buffalo is usually not a big ordeal but it does involve a time-wasting delay much like visiting the post office or any other US government bureaucracy. But governments should police their borders, as this is one of the few legitimate functions of a central government. Still, whenever I’m there I do notice the America I grew up in and once knew has really changed since 9/11. The trend toward a more militarized and aggressive police force continues to quicken. I know most Americans accept this as part of the consequences of the War on Terror just as they do the loss of financial privacy, increased fines and asset seizures.

The Canadian government recently warned citizens to be careful when taking cash to the US because of the risk of police taking their cash for hyped-up offenses. Did you know that in the last 13 years, over $2.5 billion has been stolen by law enforcement in almost 62,000 cash seizures? I have to say that as an American, I’m outraged at the situation and always on guard when in the USSA. I fear many Americans who don’t travel internationally might have become somewhat immune to the intrusive, arbitrary nature of today’s American government and its institutions. Here in Canada, law enforcement is almost always professional and courteous and even the bureaucrats are friendly and helpful, which simply amazes me. So to my American family, friends and business associates, I want you to know it is still possible to achieve the American Dream of a simple life with opportunity for wealth creation, fun, freedom and good times without an overly intrusive, threatening government … just not in the United States.

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Rosy’s started living up to his nickname.

Rosenberg Says No Recession Until At Least 2016 (MarketWatch)

It’s going to take a little bit more than Ebola, eurozone pessimism and a rising U.S. dollar to turn David Rosenberg into a bear. The chief economist and strategist at Gluskin Sheff, in his economic commentary, points out the leading economic indicator released Thursday showed a 0.8% monthly advance and a 6.3% year-over-year gain in September. This rate, he says, is consistent with annual real GDP just under 4.5%. Plus, the one-month diffusion index jumped to a four-year high of 90%. Usually, within six months of a recession, the year-over-year trend turns negative while the diffusion index falls below 30%.

“Looking at the situation another way, based on where both the YoY LEI trend and the diffusion indices are now, and tracing them through the classic business cycle, we are at least two years away from the next recession,” he says. What does that mean for stocks? “The reality is that bear markets do not just pop out of the air,” he said. “They are caused by tight money, recessions, or both. These conditions do not apply, nor will they until 2016 at the earliest.”

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That’s a lot of cars planned for and produced, that are not going to be sold.

China Auto Market Growth To Shrink by 50% This Year: Industry Head (Reuters)

Growth in China’s auto market, the world’s biggest, will halve to 7% this year weighed down by a slowing economy, the head of an industry body said on Saturday. “Personally, I think growth this year can reach 7%,” Dong Yang, secretary general of the China Association of Automobile Manufacturers (CAAM), told reporters on the sidelines of an industry conference in Shanghai. “The economy is slowing. The auto industry would reflect that but typically lags the economic cycle by a bit.” CAAM had forecast China’s auto market, which grew by 13.9% last year, to expand at 8.3% in 2014. Dong said CAAM will not make any official revisions to its forecast. [..] Nissan has said its China sales fell by 20% in September from a year earlier, the third straight month of decline, due to sluggish sales of light commercial vehicles and increased competition in the passenger car segment. During the first nine months of the year, overall vehicle sales in China rose 7% from the same period a year earlier, according to CAAM data.

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Jeff Bezos has issues.

Blood In The Water As Amazon Magic Fades (Reuters)

Amazon.com’s once fairy-tale ride on Wall Street has hit its most jarring bump yet. The company that for years enthralled investors with improbable growth and earned one of the technology sector’s highest valuations drew widespread ire after a spectacular results letdown on Thursday. Amazon missed expectations across the board – on margins, on its net loss and on revenue. An unaccountably poor 7% to 18% revenue growth forecast for the typically strongest holiday quarter was the final straw for some. Coming just three months after a big letdown in July, the warning may represent a tipping point for investors who are already wary of a triple-digit price-earnings ratio and a persistent unwillingness to throttle back spending.

“They’re becoming much too distracted in all these other efforts” outside core businesses like online retailing and web services, said Matthew Benkendorf, portfolio manager at Vontobel Asset Management. Benkendorf unloaded his Amazon holdings a year ago and said he would be skeptical of future involvement even if the stock falls further. “They are their own worst enemy to success,” he said. “They really need to do some soul searching and get focused.”

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Not a bad analysis.

Putin Accuses U.S of Blackmail, Weakening Global Order (Bloomberg)

The U.S. is behaving like “Big Brother” and blackmailing world leaders, while making imbalances in global relations worse, Russia’s president said. Current conflicts risk bringing world order to collapse, Vladimir Putin told the annual Valdai Club in the Black Sea resort of Sochi. The Cold War’s “victors” are dismantling established international laws and relations, while the global security system has become weak and deformed, with the U.S. acting like the “nouveau riche” as global leader, he said. “The Cold War has ended,” Putin said. “But it ended without peace being achieved, without clear and transparent agreements on the new rules and standards.” Russia has clashed with the U.S. over conflicts from Syria to Ukraine, sending relations between the two countries to levels not seen since Soviet times. Putin, whose nation is on the brink of recession because of U.S. and European sanctions over Ukraine, also offered asylum to fugitive American government intelligence contractor Edward Snowden in 2013.

“Global anarchy” will grow unless clear mechanisms are established for resolving crises, Putin told the invited group of foreign and Russian academics and analysts. The U.S.’s “self-appointed” leadership has brought no good for other nations and a unipolar world amounts to a dictatorship, he said. “The United States does not seek confrontation with Russia, but we cannot and will not compromise on the principles on which security in Europe and North America rests,” State Department spokeswoman Jen Psaki said in response today in Washington. Psaki said the U.S. was committed to upholding Ukraine’s sovereignty and territorial integrity while continuing to cooperate with Russia on other issues, including destroying nuclear stockpiles and Syria’s chemical weapons cache.

“Our focus is on continuing to engage with Russia on areas of mutual concern, and we’re hopeful that we’ll be able to continue to do that,” Psaki said, “while we still certainly have disagreements on some issues.” Putin also attacked globalization, which he said has “disillusioned” many countries and risks hurting trust in the U.S. and its allies. More nations are trying to escape dependence on the dollar as a reserve currency by forming alternative financial systems, according to the Russian leader. Russia doesn’t want to restore its empire or have a special place in the world, Putin said. While it’s not seeking superpower status in international relations, it wants its interests to be respected, he said.

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Progress!

NPR Slashes Number Of Environment Reporters To One Part-Timer (HuffPo)

National Public Radio is down to just one environment reporter, and he’s only covering the beat part time, InsideClimate News reported Friday. As of early 2014, NPR had three reporters and an editor on the environment beat. Now they have one person, science reporter Christopher Joyce, holding down coverage of the issue, and his stories span a broad range of issues beyond the environment. The other three environment staffers have left NPR or moved to other beats. While other reporters could, of course, fill in with environment coverage, as needed, InsideClimate’s analysis of NPR’s archives finds that the number of environment stories has declined:

The number of content pieces tagged “environment” that NPR publishes (which include things like Q&As and breaking news snippets) has declined since January, according to an analysis by InsideClimate News, dropping from the low 60s to mid-40s every month. A year-to-year comparison shows that the outlet published 68 environment stories in September 2013 and 43 in September 2014. Last month, about 40% of that content was climate-related due to NPR’s cities project, as well as the media-intensive People’s Climate March and the UN climate summit in New York City. The rest was a mix of stories on agriculture and food, land conservation, wildlife, pollution and global health.

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Key line: “90,122 deaths in Montserrado alone by Dec. 15. Of these, the authors estimate 42,669 cases and 27,175 deaths will have been reported by that time.” Less than a third of deaths to be reported.

Ebola Epidemic In Africa To Explode Without Rapid, Substantial Aid (Lancet)

The Ebola virus disease epidemic already devastating swaths of West Africa will likely get far worse in the coming weeks and months unless international commitments are significantly and immediately increased, new research led by Yale researchers predicts. The findings are published in the Oct. 24 issue of The Lancet Infectious Diseases. A team of seven scientists from Yale’s Schools of Public Health and Medicine and the Ministry of Health and Social Welfare in Liberia developed a mathematical transmission model of the viral disease and applied it to Liberia’s most populous county, Montserrado, an area already hard hit. The researchers determined that tens of thousands of new Ebola cases — and deaths — are likely by Dec. 15 if the epidemic continues on its present course. “Our predictions highlight the rapidly closing window of opportunity for controlling the outbreak and averting a catastrophic toll of new Ebola cases and deaths in the coming months,” said Alison Galvani, professor of epidemiology at the School of Public Health and the paper’s senior author.

“Although we might still be within the midst of what will ultimately be viewed as the early phase of the current outbreak, the possibility of averting calamitous repercussions from an initially delayed and insufficient response is quickly eroding.” The model developed by Galvani and colleagues projects as many as 170,996 total reported and unreported cases of the disease, representing 12% of the overall population of some 1.38 million people, and 90,122 deaths in Montserrado alone by Dec. 15. Of these, the authors estimate 42,669 cases and 27,175 deaths will have been reported by that time.

Much of this suffering — some 97,940 cases of the disease — could be averted if the international community steps up control measures immediately, starting Oct. 31, the model predicts. This would require additional Ebola treatment center beds, a fivefold increase in the speed with which cases are detected, and allocation of protective kits to households of patients awaiting treatment center admission. The study predicts that, at best, just over half as many cases (53,957) can be averted if the interventions are delayed to Nov. 15. Had all of these measures been in place by Oct. 15, the model calculates that 137,432 cases in Montserrado could have been avoided. There have been approximately 9,000 reported cases and 4,500 deaths from the disease in Liberia, Sierra Leone, and Guinea since the latest outbreak began with a case in a toddler in rural Guinea in December 2013.

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Reality is likely three times worse here as well.

‘Official’ Number of Ebola Cases Passes 10,000, With 5,000 Deaths (BBC)

The number of cases in the Ebola outbreak has exceeded 10,000, with 4,922 deaths, the World Health Organization says in its latest report. Only 27 of the cases have occurred outside the three worst-hit countries, Sierra Leone, Liberia and Guinea. Those three countries account for all but 10 of the fatalities. Mali became the latest nation to record a death, a two-year-old girl. More than 40 people known to have come into contact with her have been quarantined. The latest WHO situation report says that Liberia remains the worst affected country, with 2,705 deaths. Sierra Leone has had 1,281 fatalities and there have been 926 in Guinea.

Nigeria has recorded eight deaths and there has been one in Mali and one in the United States. The WHO said the number of cases was now 10,141 but that the figure could be much higher, as many families were keeping relatives at home rather than taking them to treatment centres. It said many of the centres were overcrowded. And the latest report also shows no change in the number of cases and deaths in Liberia from the WHO’s previous report, three days ago.

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Oct 242014
 
 October 24, 2014  Posted by at 7:42 pm Finance Tagged with: , , , , , , ,  


Russell Lee Sharecropper mother teaching children in home, Transylvania, LA. Jan 1939

Europe is fast turning into a freak comedy show. Very fast. Or maybe we should say it’s always been one, and it’s just that the Larry, Curly and Moe moves are only now coming out in droves. Or maybe, what do I know, we’re just starting to understand how much talent for farce and slapstick the boys from Brussels have always had.

Just Wednesday, I wrote in 40% of Eurozone Banks Are In Bad Shape about a Reuters report based on Spanish source Efe, that claimed 12 banks would fail the ongoing stress tests, results of which are due this Sunday at 12pm CET (their daylight savings time will be over by then). I noted how the indignation expressed over the leaked data by Brussels seemed odd, since in 2014 everything leaks.

Then, I cited Pimco’s global banking specialist, Philippe Bodereau, saying he thought 18 banks would fail, and moreover, almost a third would narrowly pass. Something that according to several sources was important than who actually failed. Because all banks have had many many months to shore up their capital positions, and if they’re now still below or just above the dividing line today, that’s suspect at best.

130 banks were supposed to have been tested, and ‘almost a third’ of that is some number north of 40. Add the 12 to 18 sure failures, and you’re north of 40%.

But today Bloomberg reports on a new draft they have obtained, which raises the numbers even further.

ECB Set to Fail 25 Banks in Review, Draft Document Shows

25 lenders in the European Central Bank’s euro-area bank health check are set to fail the regulator’s Comprehensive Assessment, according to a draft communique of the final results, seen by Bloomberg News. 105 banks are shown passing the review, according to the draft statement. Of the lenders that failed, about 10 will still face capital shortfalls they need to plug, according to a person with knowledge of the matter, who asked not to be identified…

If 25 fail, and ‘almost a third’, i.e. at least 40, narrowly make it, 50% or more of Europe’s banks are in trouble. And that’s after they’ve been given ample time to borrow, sell assets, do whatever it takes to pass. More than half of all banks. And sure, Europe has scores of ‘systemic’ or Too Big To Fail banks, and they’ll never be put in the corner with the dunce hat on. But that’s not as great as it may seem, it just means we’re not allowed to know what shape they’re really in, and if they threaten to topple over, taxpayers will need to pay up.

And that’s still not all. Catherine Boyle explains a few things at CNBC about the stress tests:

What’s Missing From The EU Bank Stress Tests

The EBA stress tests involve running banks’ books through shocks like a 14% drop in house prices from current predictions. However, they do not involve deflation, or a sustained period with higher or lower prices for commodities such as oil – both of which the euro zone is potentially facing.

If ‘shocks’ like these are the worst case scenario of the tests, and half of the banks fail that, you might want to speak of a systemic problem. Many housing markets are still very expensive, let’s see interest rates go up to any historic average of your choosing and then see what happens to home prices. No review of what havoc deflationary pressures or oil and gas prices might do to banks sounds hardly serious either.

There is also disagreement over how certain assets may be classed. In weaker economies like Portugal, Greece, Spain and Italy, the governments have passed laws allowing banks to convert deferred tax assets (DTAs), which are tax payment deferrals generally awarded during times of weaker profitability, into more capital-enhancing deferred tax credits (DTCs).

Translation: local accounting tricks are still alive and well. Deferred tax credits are just one example, obviously.

Oliver Burrows, senior analyst at Rabobank, told CNBC: “European banks have actually done quite a lot in terms of balance sheet repair and capital raising. To give it additional credibility, you need to have some victims, and those are going to be quite predictable. Another fear is that if there is a rush of these weaker “victims” to raise more capital, there may not be much demand for it – and that could weaken the sector further. “Who would want to support or buy new equity in these banks?” Burrows asked.

That’s it right there: they’ve done a lot, and still fail. So where are they going to get the rest of the investments they need?

And then the EU comes this morning with a new stunt worthy of Larry, Curly and Moe. They’ve sent new calculations about members’ economic data, and the contributions they need to send to Brussels based on those data, around, and it’s a shame all the news is about how Britain is told to pay a billion and a half or so extra. Holland must fork over much more per capita, for one thing.

But what makes it even better is that Greece has been told to pay more, and that can go straight to Germany, which is set to receive a billion. Explain that. Italy has to pay extra, France receives.

The problem is of course, Brussels feels it doesn’t have to explain anything it does. They put the data on some webpage before even informing the member nations, as per the Dutch finance minister. Who, like Cameron, had no idea where the numbers came from. Brussels thinks: you don’t have the guts to break up the EU, anyway. So what are you going to do about it? Well, Cameron feels Nigel Farage breathing down his neck, that’s what.

The best part is that everyone’s falling over one another to assure us that the new accounting methods, which include drugs and prostitution, have nothing to do with this madness. But isn’t it just great to ponder that Britain has to fork over an additional billion only because the French have cheaper hookers?

Someone finish off that inane union before it starts to do real serious harm. Because it will.