Sep 112017
 
 September 11, 2017  Posted by at 9:06 am Finance Tagged with: , , , , , , , , ,  2 Responses »
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Edward Hopper Gas 1940

 

Irma Weakens But Continues To Batter Central Florida (NPR)
Reinsurers Will Largely Be Writing the Checks to Pay for Irma Damage (WSJ)
Insurers Ache For Qualified Inspectors After US Hurricanes (R.)
Elon Musk Magically Extends Battery Life Of Teslas Fleeing Irma (ZH)
US Earnings Recovery Remains An Illusion (F.)
Cracks In China Inc’s Rosy Earnings Reveal A Patchier Picture (R.)
China Said to Ban Bitcoin Exchanges While Allowing OTC Trades (BBG)
Australian Banks Sitting on A$500 Billion of ‘Liar Loans’ – UBS (BBG)
Canadian Gold Company Suspends Investments In Greek Mines (AP)
Plastic Fibres Found In 83% of Tap Water Around The World (G.)
Sea Salt Around The World Is Contaminated By Plastic (G.)

 

 

Even hurricanes run out of energy eventually. And water.

Irma Weakens But Continues To Batter Central Florida (NPR)

Irma has weakened since beginning its push up central Florida, but is still a Category 1 hurricane with winds near 85 mph and higher gusts, according to the National Hurricane Center. Its center is about 25 miles northeast of Tampa and continues to move toward the north-northwest. The NHC says Irma is expected to turn northwest later today and further weaken to a tropical storm. Irma’s hurricane force winds extend at least 80 miles from the storm’s center and tropical storm force winds extend as far as 415 miles. The hurricane is forecast to reach the southeastern United States later tonight. The NHC warns coastal areas could see rising water moving inland over the next 36 hours. “This is a life threatening situation,” it said in a bulletin issued at 2 a.m. ET.

Hurricane Irma had touched land again as a Category 3 Sunday afternoon, hitting Marco Island on Florida’s southwest coast, after it plowed through the Florida Keys as a Category 4 earlier in the day. Miami International Airport announced it will remain closed to passenger flights at least through Monday, though some airlines will fly personnel to the airport in preparation for reopening. The airport’s director, Emilio Gonzalez, said via Twitter that the airport had endured wind gusts near 100 mph and “sustained significant water damage throughout.” “The interaction with the Florida Peninsula along with strong southwesterly shear should cause significant weakening, but Irma’s large and powerful circulation will likely maintain hurricane strength until Monday morning at the earliest,” according to the National Hurricane Center’s latest forecast.

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The industry works from Bermuda.

Reinsurers Will Largely Be Writing the Checks to Pay for Irma Damage (WSJ)

A global array of reinsurance companies will bear the financial brunt of Hurricane Irma’s damage to potentially millions of homes across Florida. Irma’s winds are expected to leave tens of billions of dollars in insured damage. And when the insurance money arrives for many homeowners, much of it will be via reinsurance companies—not the carrier on their contract. Reinsurers play an especially large role in Florida’s home-insurance market. Andrew, Katrina and other severe hurricanes from 1992 through 2005 devastated the state’s insurance marketplace. Most brand-name national home insurers sharply reduced their presence. Picking up the slack today is a state-run “insurer of last resort,” Citizens Property Insurance, and some 50 small to midsize home insurers.

Those carriers all are required to buy ample amounts of reinsurance to help ensure they have money for their policyholders, because they don’t have the fat capital cushions of the national carriers. These reinsurance firms are specialty insurers that take on the risk of some of the policies sold by primary insurers. They send insurers money to help pay claims once claims reach contractual, designated levels. As a result, the reinsurers “might end up holding the bag” for much of Irma’s damage to residential properties, said Taoufik Gharib, a senior director at Standard & Poor’s Global Ratings. In addition to reinsurance, the U.S. government’s National Flood Insurance Program will face payouts to those homeowners who hold its policies. Under standard homeowners contracts, insurers cover wind damage but exclude flooding.

Much of Irma’s damage is expected to come from storm surge. The use of so much reinsurance introduces a few worries into the marketplace. The home insurers are exposed to potential disputes with their reinsurers over claims payments, industry analysts note. It also ties the home insurers’ fates to the financial health of their reinsurers. Irma’s arrival is well-timed from one perspective: The global reinsurance industry is awash in capital. As of March, it had a record $605 billion capital cushion, which was built up thanks in large part to relatively few major natural disasters in the U.S. since 2005. “Every company in Florida has reinsurance,” said Joseph Petrelli, president of Demotech, an insurance ratings firm with a specialty in Florida’s homeowners market. “They buy reinsurance for multiple storms, and it is across the entire season.”

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Good luck to all who need it.

Insurers Ache For Qualified Inspectors After US Hurricanes (R.)

Insurers are scrambling to find inspectors in Texas and Florida after fierce hurricanes battered the states one after the other, causing tens of billions of dollars’ worth of property damage in less than two weeks. Although insurers maintain some number of inspectors, known as claims adjusters, across the U.S. year-round, they must redeploy staff from other areas or hire contract workers to fill gaps when catastrophes like Hurricanes Harvey and Irma strike. The speed with which they can do so is critical to residents and business owners awaiting insurance payments. “The one-two punch of Harvey and Irma is no question challenging to the industry,” said Kenneth Tolson, who heads the U.S. property and casualty division of Crawford, which provides claims adjusters and staff after disasters.

Adjusters investigate claims on behalf of property insurers like Travelers, Hartford, Allstate, State Farm and Farmers Insurance. Many other policies are backed by federal or state flood insurance programs. Texas and Florida together have more than 340,000 licensed adjusters, according to state agencies, but it was unclear precisely how many were on the ground. Insurers and industry groups said thousands were headed to affected areas from other parts of the United States. [..] Insurers have been put to the test before. After Hurricanes Katrina and Sandy in 2005 and 2012, it took months for many property owners to receive payouts, partly because there were too few adjusters with the needed expertise. Novice errors like not pulling off drywall to inspect for hidden damage, or not being familiar with software used for loss estimates, can reduce or delay insurance payments, adding to hardships residents are already facing.

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This is the craziest thing. You pay an arm and a leg for a car and then the maker pre-cripples it.

Elon Musk Magically Extends Battery Life Of Teslas Fleeing Irma (ZH)

In what is either a generous act of charity or an unnerving example of the control Tesla exercises over the vehicles it producers, or perhaps both, Tesla CEO Elon Musk has magically unlocked the batteries of every Tesla in Florida to maximize the distance that people fleeing from Hurricane Irma can travel before stopping to refuel at one of the company’s “superstation” charging centers. Typically, these types of over-the-air upgrades can cost thousands – if not tens of thousands – of dollars. But Musk is temporarily offering full battery capacity to all owners of Model S/X 60/60D vehicles with 75 kilo watt battery packs, according to Electrek, a blog that covers electric vehicles. The upgrade will surely help Floridians who are still rushing to escape as the now category 3 storm makes its second landfall near Naples. The upgrade will last through Saturday.

As a Tesla spokesperson explained to Electrek, the company decided on the mass-unlocking strategy after a customer called and asked if the company could upgrade his battery because he was trying to flee the storm. Tesla’s Supercharger network is fairly extensive in Florida and most owners should be able to get by even with a Model S 60 (the shortest range option). A Tesla Model S 60 owner in Florida told Electrek that his Tesla was getting 40 more miles without a charge after Tesla had temporarily unlocked the remaining 15 kilo watts of the car’s software-limited battery pack. “The company says that a Tesla owner in a mandatory evacuation zone required another ~30 more miles of range to optimize his evacuation route in the traffic and they reached out to Tesla who agreed to a temporary access to the full 75 kWh of energy in the battery pack, an upgrade that has cost between $4,500 and $9,000 depending on the model and time of upgrade.”

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“..market trend of rising valuations and falling economic earnings..”

US Earnings Recovery Remains An Illusion (F.)

While analysts hail “the best earnings season in 13 years,” the market has delivered a solidly lackluster response. Over the past month, the S&P 500 is down roughly 1% despite a string of earnings beats. With valuations this stretched, the market no longer appears willing to reward companies merely for beating quarterly expectations. Perhaps more investors now understand that GAAP net income numbers omit valuable information. They include non-operating items, are subject to manipulation, and don’t account for the cost of capital. GAAP earnings don’t drive valuation. What investors should focus on are economic earnings, which make adjustments to exclude non-operating items and account for all sources of capital, both on and off the balance sheet.

My analysis of the latest 10-K and 10-Q filings for the S&P 500 shows that the GAAP earnings growth in the market has not translated to an increase in economic earnings. Through the first two quarters of 2017, GAAP earnings are up $61 billion from their 2016 levels, while economic earnings have declined by $28 billion. Figure 2 shows the source of the discrepancy between GAAP and economic earnings comes mostly from invested capital growth that has outpaced growth in NOPAT. Companies are generating more operating profits, but they require an ever-larger invested capital base to do so. In other words, companies are growing their balance sheets faster than they are growing profits.

Figure 3 expands upon the trend shown in Figure 2. Companies are earning more profit for each dollar of revenue, but they’re also having to invest more capital to earn that revenue. When investors such as Jeremy Grantham argue that margins are higher today than in the past, they miss the balance sheet side of the story. Declining capital turns more than offset the rise in margins.

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Everybody has trouble with their earnings.

Cracks In China Inc’s Rosy Earnings Reveal A Patchier Picture (R.)

At first glance, China Inc’s earnings are off to a roaring start to 2017: first-half net profits surged by nearly a quarter, helped by healthy expansion in the world’s second-largest economy. Last year, the rise was a mere 6%. Robust profits have been a key factor in pushing the benchmark Hong Kong index .HSI to three-year highs and its Shanghai counterpart .SSEC to its strongest levels in 20-months. But the corporate investment and M&A that is driving those earnings is being fueled by growth in debt that is too rapid for comfort, analysts say. Frequent use of one-off gains to lift results and unhealthy fundamentals in some sectors may also give investors pause for thought.

Total debt at some 1,200 firms listed in Shanghai, Shenzhen and Hong Kong as of end-June grew 13% from a year earlier, Reuters calculations show, much faster than the first half of 2016 when the rate was 7.5%. Profits were not used to retire debt in significant quantities over the period and cash levels at those firms, selected for the survey as they have reported earnings for at least two years in a row, shot up 12%. All in all, debt-to-equity ratios were little changed from last year, an indication that hopes of a broad deleveraging for Chinese firms, widely seen as having worrisome debt levels, seem premature. “These earnings improvements are credit driven and I have doubts about the sustainability,” said Andrew Kemp Collier at independent research firm Orient Capital.

China’s property developers have led the way in debt creation, and even if some of the most heavily burdened like China Evergrande did cut back, others kept borrowing. Acquisition-hungry Sunac saw contract sales almost double and gross profit climb 86%, but its total borrowing also jumped, up 60% to nearly $28 billion. “The picture is not as rosy as shown by rising earnings – credit is accumulating faster than nominal growth,” said Natixis Chief Economist Alicia Garcia Herrero, also noting that very short term debt is not captured in conventional leverage ratios.

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“Old users will definitely still trade, but the entry threshold for new users is now very high.”

China Said to Ban Bitcoin Exchanges While Allowing OTC Trades (BBG)

China plans to ban trading of bitcoin and other virtual currencies on domestic exchanges, dealing another blow to the $150 billion cryptocurrency market after the country outlawed initial coin offerings last week. The ban will only apply to trading of cryptocurrencies on exchanges, according to people familiar with the matter, who asked not to be named because the information is private. Authorities don’t have plans to stop over-the-counter transactions, the people said. China’s central bank said it couldn’t immediately comment. Bitcoin slumped on Friday after Caixin reported China’s plans, capping the virtual currency’s biggest weekly retreat in nearly two months. The country accounts for about 23% of bitcoin trades and is also home to many of the world’s biggest bitcoin miners, who use vast amounts of computing power to confirm transactions in the digital currency.

“Trading volume would definitely shrink,” said Zhou Shuoji, Beijing-based founding partner at FBG Capital, which invests in cryptocurrencies. “Old users will definitely still trade, but the entry threshold for new users is now very high. This will definitely slow the development of cryptocurrencies in China.” While Beijing’s motivation for the exchange ban is unclear, it comes amid a broad clampdown on financial risk in the run-up to a key Communist Party leadership reshuffle next month. Bitcoin has jumped about 600% in dollar terms over the past year, fueling concerns of a bubble. The People’s Bank of China has done trial runs of its own prototype cryptocurrency, taking it a step closer to being the first major central bank to issue digital money.

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One third lies on their loans.

Australian Banks Sitting on A$500 Billion of ‘Liar Loans’ – UBS (BBG)

Here’s something else for policy makers to worry about as they attempt to engineer a soft landing in Australia’s property market. The country’s lenders could be sitting on A$500 billion ($402 billion) of “liar loans,” or mortgages obtained on inaccurate financial information, according to an estimate from. A survey by the firm of 907 Australians who took out a mortgage in the last 12 months found only 67% stated their application was “completely factual and accurate,” down from 72% the previous year. The most common inaccuracies were overstating income and understating living expenses, the survey found. These findings “suggest mortgagors are more stretched than the banks believe, implying losses in a downturn could be larger than the banks anticipate,” analysts including Jonathan Mott wrote in a note to clients dated Sept. 11. UBS is underweight bank stocks. And “liar loans,” the analysts say, was a term coined in the U.S. during the financial crisis. An ominous moniker for Australian lenders.

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Just go away.

Canadian Gold Company Suspends Investments In Greek Mines (AP)

Canadian mining company Eldorado Gold, one of Greece’s largest foreign investors, said Monday it planned to suspend investment at its mines in Greece following what it said are government delays in the issuing of permits and licenses. Eldorado, which runs Greek subsidiary Hellas Gold, operates mines in northern Greece that have faced vehement opposition from parts of local communities on environmental grounds, with protests often turning violent. Eldorado said in an announcement it would continue maintenance and environmental safeguards but would make no further investment in three mines in the Halkidiki area of northern Greece and two projects in the northeastern province of Thrace.

“Despite repeated attempts by Eldorado and its Greek subsidiary, Hellas Gold, to engage constructively with the Greek government, the Ministry of Energy and Environment … and other government agencies, delays continue in issuing routine permits and licences for the construction and development of the Skouries and Olympias projects in Halkidiki, northern Greece,” the company said. “These permitting delays have negatively impacted Eldorado’s project schedules and costs, ultimately hindering the Company’s ability to effectively advance development and operation of these assets.” [..] the Halkidiki mines have been mired in controversy for decades, with Eldorado’s predecessors facing similar protests. Many in the local communities are vehemently opposed to the development of the mines on environmental grounds, saying local forests would be decimated and groundwater could be contaminated.

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“If it’s impacting [wildlife], then how do we think that it’s not going to somehow impact us?”

Plastic Fibres Found In 83% of Tap Water Around The World (G.)

Microplastic contamination has been found in tap water in countries around the world, leading to calls from scientists for urgent research on the implications for health. Scores of tap water samples from more than a dozen nations were analysed by scientists for an investigation by Orb Media, who shared the findings with the Guardian. Overall, 83% of the samples were contaminated with plastic fibres. The US had the highest contamination rate, at 94%, with plastic fibres found in tap water sampled at sites including Congress buildings, the US Environmental Protection Agency’s headquarters, and Trump Tower in New York. Lebanon and India had the next highest rates.

European nations including the UK, Germany and France had the lowest contamination rate, but this was still 72%. The average number of fibres found in each 500ml sample ranged from 4.8 in the US to 1.9 in Europe. The new analyses indicate the ubiquitous extent of microplastic contamination in the global environment. Previous work has been largely focused on plastic pollution in the oceans, which suggests people are eating microplastics via contaminated seafood. “We have enough data from looking at wildlife, and the impacts that it’s having on wildlife, to be concerned,” said Dr Sherri Mason, a microplastic expert at the State University of New York in Fredonia, who supervised the analyses for Orb. “If it’s impacting [wildlife], then how do we think that it’s not going to somehow impact us?”

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The revenge of carbon?!

Sea Salt Around The World Is Contaminated By Plastic (G.)

Sea salt around the world has been contaminated by plastic pollution, adding to experts’ fears that microplastics are becoming ubiquitous in the environment and finding their way into the food chain via the salt in our diets. Following this week’s revelations in the Guardian about levels of plastic contamination in tap water, new studies have shown that tiny particles have been found in sea salt in the UK, France and Spain, as well as China and now the US. Researchers believe the majority of the contamination comes from microfibres and single-use plastics such as water bottles, items that comprise the majority of plastic waste. Up to 12.7m tonnes of plastic enters the world’s oceans every year, equivalent to dumping one garbage truck of plastic per minute into the world’s oceans, according to the United Nations.

“Not only are plastics pervasive in our society in terms of daily use, but they are pervasive in the environment,” said Sherri Mason, a professor at the State University of New York at Fredonia, who led the latest research into plastic contamination in salt. Plastics are “ubiquitous, in the air, water, the seafood we eat, the beer we drink, the salt we use – plastics are just everywhere”. Mason collaborated with researchers at the University of Minnesota to examine microplastics in salt, beer and drinking water. Her research looked at 12 different kinds of salt (including 10 sea salts) bought from US grocery stores around the world. The Guardian received an exclusive look at the forthcoming study. Mason found Americans could be ingesting upwards of 660 particles of plastic each year, if they follow health officials’ advice to eat 2.3 grammes of salt per day. However, most Americans could be ingesting far more, as health officials believe 90% of Americans eat too much salt.

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Sep 102017
 
 September 10, 2017  Posted by at 9:15 am Finance Tagged with: , , , , , , , , ,  2 Responses »
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Irma gets closer

 

‘The Most Catastrophic Storm Florida Has Ever Seen’ (G.)
Bahamians Freak Out As Hurricane Irma ‘Sucks Away’ Miles Of Ocean (RT)
Houston Residents Confront Officials Over Decision To Flood Neighborhoods (R.)
Stock, Flow or Impulse? (JPMi)
Signs, Signs, Everywhere A Sign (Roberts)
China Targets A $3 Trillion Shadow Banking Industry (R.)
China Studying When To Ban Sales Of Traditional Fuel Cars (R.)
How Democrats Learned To Stop Worrying And Love ‘Medicare For All’ (CNN)
Laughing on the Way to Armageddon (PCR)
Scotland and Wales Deliver Brexit Ultimatum To Theresa May (Ind.)
British Arms Sales To Repressive Regimes Soar To £5 Billion Since Election (G.)
Greek PM Vows Bailout Exit In 2018, Help For Workers, Youth (R.)
Greek Government Aims To Integrate Up To 30,000 Migrants (K.)
Astronomers Find Stars That Appear Older Than The Universe (F.)

 

 

But it looks like things could have been much worse. Still, do spare a prayer.

‘The Most Catastrophic Storm Florida Has Ever Seen’ (G.)

Florida faces the “most catastrophic” storm in its history as Hurricane Irma prepares to unleash devastating force on the state, including 120mph winds, life-threatening sea surges that could submerge buildings and an advance battery of tornadoes. “You need to leave – not tonight, not in an hour, right now,” Governor Rick Scott commanded in a press conference, 12 hours before the cyclone was expected to make landfall on Sunday morning. “This is the most catastrophic storm the state has ever seen.” The US national hurricane centre said in its 8pm Saturday update on Irma that “heavy squalls with embedded tornadoes” were already sweeping across south Florida. The US National Weather Service later said the first hurricane-force wind gust had been recorded in the Florida Keys, a low-lying island chain off the state’s southern coast.

Irma dropped to a category three hurricane but could regain its category four intensity as the bathtub-warm seawater of nearly 32C (90F) will enable the storm to build strength. It was forecast to hit the Keys first, then again near Cape Coral or Fort Myers, and then a third time near Tampa Bay on its path up Florida’s west coast. Weather stations in Marathon, a city in the Keys, reported sustained winds of 51mph (81kmh) with a gust to 71mph (115kmh) on Saturday night. In Florida’s south-west, officials expected sea surges as high as 15ft (4.5 metres), which can rapidly rise and fall. “Fifteen feet is devastating and will cover your house,” Scott said. “Do not think the storm is over when the wind slows down. The storm surge will rush in and it could kill you.” He said at least 76,000 people were without power as the 350 miles (560km) wide storm unleashes winds and rain on the state. Officials said the window for people in evacuation zones was shutting, with gas stations closing and bridges blocked off.

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Eerie.

Bahamians Freak Out As Hurricane Irma ‘Sucks Away’ Miles Of Ocean (RT)

Footage from the Irma-hit Bahamas freaked out social media users on Saturday as it emerged that seawater was missing from a bay as far as the eye could see. The scene turned out to be a rare natural occurrence tied to the outgoing hurricane. “I am in disbelief right now… This is Long Island, Bahamas and the ocean water is missing!!! That’s as far as they see,” @Kaydi_K wrote on Twitter. The eerie scene was shared over 50,000 times in one day and it spooked web users, many of whom suggested it resembled the sucking away of water before a tsunami. However, weather experts analyzing the scene put the blame on Hurricane Irma, which had just left a trail of destruction in the Caribbean and was about to land in Florida. The ominous-looking occurrence was in fact caused by a combination of low tide, low pressure and strong winds in the right direction, which literally pushed the water away from the long narrow bay. The phenomenon has been dubbed “reverse storm surge” by some of those explaining it online.

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“..homes may also be occupied by alligators, rodents and snakes due to the floods.”

Houston Residents Confront Officials Over Decision To Flood Neighborhoods (R.)

Angry Houston residents shouted at city officials on Saturday over decisions to intentionally flood certain neighborhoods during Hurricane Harvey, as they returned to homes that may have been contaminated by overflowing sewers. A town hall grew heated after City Council member Greg Travis, who represents parts of western Houston, told about 250 people that an Army Corps of Engineers official told him that certain gauges measuring water levels at the Buffalo Bayou – the city’s main waterway – failed due to a decision to release water from two municipal reservoirs to avoid an overflow. Travis’ words inflamed tensions at the town hall, held at the Westin Houston hotel, as the region struggled to recover from Hurricane Harvey, which dropped as much as 50 inches (127 cm) of rain in some areas along Texas’ Gulf Coast, triggering historic floods.

More than 450,000 people either still do not have safe drinking water or need to boil their water first. On Aug. 28, the Army Corps and the Harris County Flood Control District opened the Addicks and Barker reservoirs in western Houston to keep them from overflowing. They warned it would flood neighborhoods, some of which remained closed off two weeks later. Travis said the Army Corps official said they kept releasing water without knowing the extent of the flooding. “They didn’t understand that the bathtub effect was occurring,” he said. Residents attempting to return to flooded homes may have to contend with contaminated water and air because the city’s sewer systems overflowed during the floods. Fire chief Samuel Pena said people returning home should wear breathing masks and consider getting tetanus shots.

“We couldn’t survive the Corps – why should we rebuild?” Debora Kumbalek, who lives in Travis’ district in Houston, shouted during the town hall. Scattered heaps of discarded appliances, wallboard and mattresses can be still seen throughout the city of 2.7 million people, the nation’s fourth-largest. There were no representatives from the Army Corps at the town hall. The Corps released water at an intended maximum rate of 13,000 cubic feet (370 cubic meters) per second to keep those reservoirs from overflowing. However, preliminary data from the U.S. Geological Survey suggests that on at least two days, the average release rate exceeded that 13,000 level.

Many residents face lengthy rebuilding processes, and the majority do not have flood insurance. The Federal Emergency Management Administration will contribute a maximum of $33,000 per home in assistance to cover damages, a FEMA official said at the town hall, though for heavily flooded homes, damages will likely exceed that amount. Fire chief Pena said homes may also be occupied by alligators, rodents and snakes due to the floods.

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From JPMorgan. Central banks set prices for everything. But the impulse has turned negative.

Stock, Flow or Impulse? (JPMi)

Notwithstanding all the discussion of balance sheet reduction and tapering, the developed market central banks in aggregate are still very much in expansionary mode, with the G4 balance sheets still growing by more than $1 trillion per year on an annualized pace (see Chart). The strength of asset prices in the face of fundamental challenges serves as an enduring reminder for me of the importance of this positive QE flow. The link between QE flow and asset prices makes intuitive sense. The world’s stock of savings is held in two places: cash and everything else (“financial assets”). QE, by its nature, increases the supply of cash in the world, and simultaneously decreases the supply of non-cash financial assets, by removing government bonds, corporates, and in some cases equities from circulation.

Those securities are replaced in the financial system by cash of equivalent value. So, QE increases the ratio of cash to financial assets worldwide, and that ratio reflects the relative abundance or scarcity of cash available to purchase each unit of assets. QE’s influence on that ratio drives up the price of financial assets, all else equal. This rationale suggests that it is the flow of QE, i.e. the speed with which cash is injected and financial assets are removed, that influences the change in asset prices. Flow is positive, asset prices go up; flow is negative, asset prices go down. However, despite this simplicity (or maybe because of it) the relationship between balance sheets and asset prices is still a matter of intense debate.

Some clever analysis yields a compelling case that the impulse, rather than the flow, of global central bank balance sheets is likely to be the primary driver of asset prices. Whereas the “flow” of QE is the speed of balance sheet increase, the “impulse,” is its acceleration. If the speed of balance sheet growth is slowing down, impulse is negative. A carefully constructed dataset shows a remarkably good fit between QE impulse and change in spreads and stock prices. Unfortunately the fit is so good historically that it almost looks like data mining, and recently, there has been a material breakdown: global central bank QE impulse has already turned negative, most demonstrably back in Q2 of this year, and asset prices have continued to remain buoyant.

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Do low rates kill growth?

Signs, Signs, Everywhere A Sign (Roberts)

You don’t have to look very hard to see a rising number of signs that suggest the “Trump Trade” has come to its inevitable conclusion. Following the election, this past November the financial markets rallied sharply on the hopes of major policy reforms and legislative agenda coming out of Washington. Eleven months later, the markets are still waiting as the Administration has remained primarily embroiled in Washington politics with a divisive, Republican controlled, House and Senate. While there are still “hopes” the Administration will pass through tax reform, the failure to “rally the troops” to repeal the Affordable Care Act leaves permanent tax cuts an unlikely outcome. That hopeful outcome was further exacerbated with the deal cut between President Trump and leading Democrats to lift the debt ceiling and fund the Government through December.

That “deal” has effectively nullified any leverage the Republicans had to strong-arm a deal on taxes later this year. The markets are figuring it out as well. If you want to know where the economy is headed over the next few months, you don’t have to look much further than interest rates. Since interest rates are ultimately driven by the demand for credit, and that demand is driven by economic growth, their historical correlation is no surprise.

But like I said, if you want to know where GDP is going to be in the months ahead, keep a close watch on rates. I suspect, before year-end, we will see rates below 2.0%. As a reminder, this is why we have remained rampant bond bulls since 2013 despite the continuing calls for the end of the “bond bull market.” The 3-D’s (Demographics, Deflation & Debt) ensure that rates will remain low, and go lower, in the years to come. Think Japan.

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China’s too late.

China Targets A $3 Trillion Shadow Banking Industry (R.)

As a flood of unregulated cash swirls through the Chinese economy, Beijing has been taking aim at the trust companies whose unrestrained lending practices are worrying regulators. The trusts, at the heart of a vast shadow banking industry, are being pressured to step up compliance and background checks, and are being pushed towards greater transparency. But the fast-growing 20 trillion yuan ($3 trillion) industry, whose lending operations are cloaked behind opaque structures, will be tough to rein in, according to employees at some trusts. A regulatory sanction against one trust, Shanghai International Trust, and a legal case against another, National Trust, offer rare insights into the industry, and reveals just how hard it will be to police it. Shanghai Trust was fined 200,000 yuan for selling a product that violated leverage rules, according to a regulator’s notice in January.

Under these rules, property developers are only allowed to borrow up to three times their existing net assets. According to two people with direct knowledge of the case, an unknown sum was loaned by China Construction Bank through Shanghai Trust to Cinda Asset Management Company. Cinda then invested the cash. One of the sources said Cinda used the cash to acquire land, a sector rife with speculation that regulators have singled out as a “risky” destination for trust company loans. [..] The case against National Trust, which had revenue of 655 million yuan in 2016, involves wealth management products linked to the steel industry. The trust was sued in June this year by eight investors who allege it misrepresented the risks involved in products it sold them and failed to adequately assess the guarantor’s creditworthiness.

The trust skirted restrictions on loans to the steel industry by using the products to raise money to lend to a subsidiary of Bohai Steel Group, according to Tang Chunlin, a lawyer at Yingke Law Firm, who is representing the investors. The plaintiffs invested different sums in the wealth management products, which National Trust promised would deliver an annual return of over 9 percent. National Trust lent the money collected to a Bohai subsidiary, Tianjin Iron and Steel Group. National Trust has now defaulted on the product, according to Tang and Gongyu Zhou, one of the eight investors, because Tianjin Iron and Steel is unable to pay back its loan.The products were also illegally sold via third-party non-financial institutions, Tang and Zhou said.

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Let me guess. When lithium prices go to the moon?

China Studying When To Ban Sales Of Traditional Fuel Cars (R.)

China has begun studying when to ban the production and sale of cars using traditional fuels, the official Xinhua news agency reported, citing comments by the vice industry minister, who predicted “turbulent times” for automakers forced to adapt. Xin Guobin did not give details on when China, the world’s largest auto market, would implement such a ban. The UK and France have said they will ban new petrol and diesel cars from 2040. “Some countries have made a timeline for when to stop the production and sales of traditional fuel cars,” Xin, vice minister of the Ministry of Industry and Information Technology, was quoted as saying at an auto industry event in the city of Tianjin on Saturday. “The ministry has also started relevant research and will make such a timeline with relevant departments. Those measures will certainly bring profound changes for our car industry’s development,” he said.

To combat air pollution and close a competitive gap between its newer domestic automakers and their global rivals, China has set goals for electric and plug-in hybrid cars to make up at least a fifth of Chinese auto sales by 2025. Xin said the domestic auto industry faced “turbulent times” over the years to 2025 to make the switch towards new energy vehicles, and called on the country’s car makers to adapt to the challenge and adjust their strategies accordingly. Banning the sale of petrol- and diesel-powered cars would have a significant impact on oil demand in China, the world’s second-largest oil consumer. Last month, state oil major China National Petroleum Corp (CNPC) said China’s energy demand will peak by 2040, later than the previous forecast of 2035, as transportation fuel consumption rises through the middle of the century.

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As Hillary’s starting a book tour attacking Bernie, he’s gathering Democrats around him.

How Democrats Learned To Stop Worrying And Love ‘Medicare For All’ (CNN)

First, consider this: It’s the summer of 2019 and a dozen Democratic presidential candidates are gathered onstage for a debate somewhere in the Midwest. The network moderator concludes her introductions and tees up the opening question. “Who here tonight supports moving the United States toward a single-payer, or ‘Medicare for all,’ taxpayer-funded health care system?” Pause it there and rewind to January 2016 in Iowa. The caucuses are days away, and Hillary Clinton is fending off an unexpected challenge from Sen. Bernie Sanders. The discussion turns to single-payer, and Clinton balks. “People who have health emergencies can’t wait for us to have a theoretical debate about some better idea that will never, ever come to pass,” she tells voters in Des Moines, explaining her campaign’s focus on preserving and expanding Obamacare, while dismissing the progressive insurgent’s more ambitious pitch.

Go back even further now to the last contested Democratic primary before that, in 2008, and recall the lone and lonely voices in favor of single-payer care. They belonged to Ohio Rep. Dennis Kucinich and former Alaska Sen. Mike Gravel. The pair combined for a delegate haul of precisely nil. Back to the present – a decade on – and after a chaotic months-long push by Republicans to dismantle former President Barack Obama’s Affordable Care Act, the prospect of Sanders’ “Medicare-for-all” program has emerged as the hot-button centerpiece of the Democratic Party’s roiling public policy debate. After a summer that has seen so many of the party’s most ambitious officials and brightest prospects line up in vocal support of what was so recently a fringe cause, consider again how the single-payer question will be received on a Democratic debate stage. Here’s a hint: Expect to see a lot of hands.

[..] .. in mid-July, Sanders returned to Des Moines, Iowa, for the first time since the 2016 election to water the grassroots. “Our immediate test,” he said, was to defeat the Republican plan. “But as soon as we accomplish that, I will be introducing legislation which has gained more and more support all across this country, legislation for a Medicare for All, single-payer system.” Robert Becker, Sanders’ 2016 Iowa campaign director, was in the hall that day. Between cigarettes, and before his old boss arrived on the scene, Becker sat back and diagnosed the bubbling dynamic. “Every time Paul Ryan, or someone who is trying to dismantle the Affordable Care Act, steps to the podium and starts talking about insurance rates and premiums getting higher and higher and higher, they’re actually making an argument for a single-payer system,” he said. “You don’t hear people on Medicare and Medicaid complaining about their co-pays.”

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But the feeding frenzy will continue.

Laughing on the Way to Armageddon (PCR)

The United States shows the world such a ridiculous face that the world laughs at us. The latest spin on “Russia stole the election” is that Russia used Facebook to influence the election. The NPR women yesterday were breathless about it. We have been subjected to ten months of propaganda about Trump/Putin election interference and still not a scrap of evidence. It is past time to ask an unasked question: If there were evidence, what is the big deal? All sorts of interest groups try to influence election outcomes including foreign governments. Why is it OK for Israel to influence US elections but not for Russia to do so? Why do you think the armament industry, the energy industry, agribusiness, Wall Street and the banks, pharmaceutical companies, etc., etc., supply the huge sum of money to finance election campaigns if their intent is not to influence the election?

Why do editorial boards write editorials endorsing one candidate and damning another if they are not influencing the election? What is the difference between influencing the election and influencing the government? Washington is full of lobbyists of all descriptions, including lobbyists for foreign governments, working round the clock to influence the US government. It is safe to say that the least represented in the government are the citizens themselves who don’t have any lobbyists working for them. The orchestrated hysteria over “Russian influence” is even more absurd considering the reason Russia allegedly interfered in the election. Russia favored Trump because he was the peace candidate who promised to reduce the high tensions with Russia created by the Obama regime and its neocon nazis—Hillary Clinton, Victoria Nuland, Susan Rice, and Samantha Power.

What’s wrong with Russia preferring a peace candidate over a war candidate? The American people themselves preferred the peace candidate. So Russia agreed with the electorate. Those who don’t agree with the electorate are the warmongers—the military/security complex and the neocon nazis. These are democracy’s enemies who are trying to overturn the choice of the American people. It is not Russia that disrespects the choice of the American people; it is the utterly corrupt Democratic National Committee and its divisive Identity Politics, the military/security complex, and the presstitute media who are undermining democracy. I believe it is time to change the subject. The important question is who is it that is trying so hard to convince Americans that Russian influence prevails over us?

Do the idiots pushing this line realize how impotent this makes an alleged “superpower” look. How can we be the hegemonic power that the Zionist neocons say we are when Russia can decide who is the president of the United States? The US has a massive spy state that even intercepts the private cell phone conversations of the Chancellor of Germany, but his massive spy organization is unable to produce one scrap of evidence that the Russians conspired with Trump to steal the presidential election from Hillary. When will the imbeciles realize that when they make charges for which no evidence can be produced they make the United States look silly, foolish, incompetent, stupid beyond all belief?

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The UK needs a national government. Or else.

Scotland and Wales Deliver Brexit Ultimatum To Theresa May (Ind.)

Wales and Scotland will formally lay down a challenge to Theresa May’s Brexit plans this week, warning she risks a constitutional crisis if changes are not made. Governments in both nations are expected to officially submit documents confirming their intention to withhold consent for the Prime Minister’s approach to EU withdrawal unless it radically alters. Conservative ministers have admitted to The Independent that pushing on without their backing could hold up Brexit, while politicians outside England warn it will strain the UK at the seams. The devolved governments claim Ms May’s key piece of Brexit legislation will see London snatch authority over key policy areas and give Conservative ministers unacceptably-strong powers to meddle with other laws.

It comes as MPs are expected to approve the EU (Withdrawal) Bill at its first Commons hurdle on Monday, but the Prime Minister faces a rebellion later on because even Tories want changes to the same clauses that are angering leaders in Cardiff and Edinburgh. On Tuesday the Scottish and Welsh administrations will officially start their drive to force concessions, by submitting ‘legislative consent’ papers in their assemblies that set out how the bill must change. Welsh First Minister Carwyn Jones told The Independent Ms May’s bill will allow Whitehall to “hijack” powers during Brexit that should be passed to Cardiff. He said: “The UK Government is being rigid in its approach. It’s saying there is only one way. It’s acting as if it won a majority at the election in June. It didn’t.

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It needs a national conscience too.

British Arms Sales To Repressive Regimes Soar To £5 Billion Since Election (G.)

UK arms manufacturers have exported almost £5bn worth of weapons to countries that are judged to have repressive regimes in the 22 months since the Conservative party won the last election. The huge rise is largely down to a rise in orders from Saudi Arabia, but many other countries with controversial human rights records – including Azerbaijan, Kazakhstan, Venezuela and China – have also been major buyers. The revelation comes before the Defence and Security Equipment International arms fair at the Excel centre in east London, one of the largest shows of its kind in the world. Among countries invited to attend by the British government are Egypt, Qatar, Kenya, Bahrain and Saudi Arabia. Campaigners called on the government to end arms sales to the United Arab Emirates in light of its record on human rights.

They accused the government of negotiating trade deals to sell the Gulf state cyber surveillance technology which the UAE government uses to spy on its citizens, and weaponry which, they allege, has been used to commit war crimes in Yemen. The Saudis have historically been a major buyer of British-made weapons, but the rise in sales to other countries signals a shift in emphasis on the part of the government, which is keen to support the defence industry, which employs more than 55,000 people. Following the referendum on leaving the EU, the Defence & Security Organisation, the government body that promotes arms manufacturers to overseas buyers, was moved from UK Trade & Investment to the Department for International Trade. Shortly afterwards, it was announced that the international trade secretary, Liam Fox, would spearhead the push to promote the country’s military and security industries exports.

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What’s going to happen to Tsipras when Greeks find out he can’t deliver?

Greek PM Vows Bailout Exit In 2018, Help For Workers, Youth (R.)

Greece will exit successfully its bailout program in 2018 helped by strong growth, Prime Minister Alexis Tsipras said on Saturday, vowing to support workers, young Greeks and small businesses as the economy recovers. Addressing a Greek public worn out by austerity and skeptical after years of reform efforts have failed to fix the country’s woes, Tsipras said his leftist-led government would do whatever it takes to end lenders’ supervision next year. “The country, after eight whole years, will have exited bailouts and suffocating supervision. That’s our aim,” Tsipras said in his annual policy speech in the northern city of Thessaloniki. “We are determined to do everything we can.” Greece’s current international bailout, worth 86 billion euros, expires next year. Tsipras’ term ends a year later.

Tsipras said Athens would continue to outperform its fiscal targets and fight endemic tax evasion to create fiscal room for tax cuts that would alleviate the burden on businesses and households, long squeezed by the debt crisis. Greece has received about 260 billion euros in bailout aid from its eurozone partners and the International Monetary Fund since 2010 in return for draconian austerity which has wiped out a quarter of its output and cut tens of thousands of jobs. Unemployment stood at 21.2 percent in June, the euro zone’s highest, with young Greeks the hardest hit. Greece’s economy is expected to grow by about 2 percent in 2018, a sign that sacrifices are bearing fruit, Tsipras said outlining initiatives to boost employment and fight a brain drain.

A march of thousands of workers was largely peaceful outside the venue where he spoke. Tsipras said the state would give financial incentives to employers to hire more younger workers and spend 156 million euros to subsidize social security contributions of employers who will turn contractors into full-time staff. Unregistered work and contract jobs have increased during the debt crisis, as businesses are desperate to cut costs. The government will also pay 100 million euros to subsidize unpaid workers in struggling sectors and businesses, he said, promising to fight labor law violations.

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In a country that has no jobs for its own people.

Greek Government Aims To Integrate Up To 30,000 Migrants (K.)

Authorities are preparing measures to integrate between 25,000-30,000 asylum seekers who are not entitled to relocation under the existing European Union program, Migration Minister Yiannis Mouzalas has said. Speaking to Ta Nea newspaper over the weekend, Mouzalas said that a three-pronged scheme is under way to integrate newcomers, involving a new registration process and the issuing of tax identification and social security numbers; school enrolment for children; and access to the local labor market. Asked about Greece’s recent decision to take back a small number of asylum seekers in line with the EU’s so-called Dublin rules, Mouzalas said that Athens had only accepted returns “from countries who helped us by consenting to up to 17,000 relocations and 7,000 [family] reunions.”

The minister said that a new agreement is currently in the works because the Dublin system is “dead.” Meanwhile, more than 350 police officers took part in a pre-dawn operation on Saturday at the Moria camp on the Aegean island of Lesvos to transfer an unspecified number of migrants to the pre-deportation center. These individuals, who have all received a final rejection of their asylum application, will be returned to Turkey. Moria has been rocked by riots twice in recent weeks in protest at the slow pace of registration and asylum processing for certain nationalities, as well as crowded conditions.

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Interesting mystery. No answers so far.

Astronomers Find Stars That Appear Older Than The Universe (F.)

If you understand how stars work, you can observe the physical properties of one of them and extrapolate its age, and know when it had to have been born. Stars undergo a lot of changes as they age: their radius, luminosity, and temperature all evolve as they burn through their fuel. But a star’s lifespan, in general, is dependent on only two properties that it’s born with: its mass and its metallicity, which is the amount of elements heavier than hydrogen and helium present within. The oldest stars we’ve found in the Universe are nearly pristine, where almost 100% of what makes them up is the hydrogen and helium left over from the Big Bang. They come in at over 13 billion years old, with the oldest at 14.5 billion. And this is a big problem, because the Universe itself is only 13.8 billion years old.

You can’t very well have a star that’s older than the Universe itself; that would imply that the star existed before the Big Bang ever happened! Yet the Big Bang was the origin of the Universe as-we-know-it, where all the matter, energy, neutrinos, photons, antimatter, dark matter and even dark energy originated. Everything contained in our observable Universe came from that event, and everything we perceive today can be traced back to that origin in time. So the simplest explanation, that there are stars predating the Universe, must be ruled out. It’s also possible that we’ve got the age of the Universe wrong! The way we arrive at that figure is from precision measurements of the Universe on the largest scales.

By looking at a whole slew of features, including: • The density and temperature imperfections in the cosmic microwave background, left over from the Big Bang, • The clustering of stars and galaxies at present and going back billions of light years, • The Hubble expansion rate of the fabric of the Universe, • The history of star formation and galactic evolution, and many other sources, we’ve arrived at a very consistent picture of the Universe. It’s made up of 68% dark energy, 27% dark matter, 4.9% normal matter, about 0.1% neutrinos and 0.01% radiation, and is right around 13.8 billion years old. The uncertainty on the age figure is less than 100 million years, so even though it might be plausible that the Universe is slightly older-or-younger, it’s extraordinarily improbable to get up to 14.5 billion years.

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Sep 092017
 
 September 9, 2017  Posted by at 9:04 am Finance Tagged with: , , , , , , , , , , , ,  4 Responses »
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Irma projections took a slight deflection west

 

Hurricane Irma Becomes Category 5 Storm Again (CNN)
5.6 Million People Told To Evacuate Florida Due To Irma (AP)
Hurricane Irma Thrives On Fateful Mix Of ‘Ideal’ Conditions (R.)
Harvey Won’t Help Flagging Housing Market (DDMB)
Swamp Fever (Jim Kunstler)
Capitalism, the State and the Drowning of America (CP)
The “Real” Vampire Squid (Roberts)
Venezuela’s Maduro Says Will Shun US Dollar In Favor Of Yuan, Others (R>)
What Happens To Nations That Try To Ditch The Dollar (TAM)
Bitcoin Tumbles On Report China To Shutter Digital Currency Exchanges (R.)
Russia Faces Internal Battle Over Bitcoin (Forbes)
Artificial Intelligence Fuels New Global Arms Race (Wired)
Data Swamped US Spy Agencies Put Hopes On Artificial Intelligence (AFP)
EU Brushes Off ‘Democratic Scandal’ Of Greek Bailout (EUO)

 

 

Irma took a light dip south towards Cuba last night. This may save Miami from a direct hit – but not Tampa. Irma’s the first Category 5 hurricane to make landfall in Cuba since 1924. 3 storms making landfall at the same time has never been recorded before.

Hurricane Irma Becomes Category 5 Storm Again (CNN)

Hurricane Irma regained Category 5 status late Friday as the core of the storm made landfall in Cuba with maximum sustained winds of 160 mph, the US National Hurricane Center said. Irma made landfall on the Camaguey archipelago of Cuba, the center said late Friday night. The massive storm edged closer to US landfall in the Florida Keys after leaving a trail of devastation and death in much of the Caribbean as it advanced toward South Florida. Forecasters with the National Hurricane Center say the storm’s wind speeds will increase after Irma passes Cuba then slips into the extremely warm waters near the Keys. “Nowhere in the Florida Keys will be safe,” the National Weather Service tweeted.

There were worries the storm’s most powerful winds, on the northeastern side of the core, could pummel Miami, but it appears the city will avoid a direct hit, while still getting pounded by strong winds, storm surge and heavy rains. At least 24 people were killed this week when Irma pummeled northern Caribbean islands such as Barbuda and the Virgin Islands. In Puerto Rico, hundreds of thousands of people – nearly 70% of the US territory’s utility customers – were left without power, the governor’s office said. Irma slammed the Turks and Caicos, and southeastern Bahamas early before it was off to pound northern Cuba and the central Bahamas.

Irma is expected be near the Florida Keys and South Florida by early Sunday, and many residents there have moved inland or to shelters. Many counties are under evacuation orders. “If you have been ordered to evacuate, leave now. Not tonight, not in an hour, now,” Gov. Rick Scott said Friday night. Staying in homes could subject residents to storm surge as high as 12 feet, the governor added. Forecasters have advised that the storm’s potential path could change and residents should realize that most of Florida will feel its impact.

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How do you evacuate millions? The logistics are staggering.

5.6 Million People Told To Evacuate Florida Due To Irma (AP)

Florida has asked 5.6 million people to evacuate ahead of Hurricane Irma, or more than one-quarter of the state’s population, according to state emergency officials. Andrew Sussman, the state’s hurricane program manager, said Friday the total includes people throughout the southern half of the state as well as those living in inland Florida in substandard housing who were also told leave due to the dangerous storm that will slam the state this weekend. Florida is the nation’s third-largest state with nearly 21million people according to the U.S. Census. For days Gov. Rick Scott has been urging residents to evacuate, especially those who live in coastal areas that could be flooded due to the walls of water expected from Irma’s arrival. The National Hurricane Center is warning Floridians that even if the storm seems to moving away from the East Coast in the latest tracks, don’t get complacent.

“This is a storm that will kill you if you don’t get out of the way,” said National Hurricane Center meteorologist and spokesman Dennis Feltgen. Feltgen says the storm has a really wide eye, with hurricane-force winds that cover the entire Florida peninsula and potentially deadly storm surges on both coasts. “Everybody’s going to feel this one,” Feltgen said. As Florida deals with a catastrophic, dangerous hurricane, it may have a financial storm to deal with. The annual budget forecast released this week shows, despite an ongoing economic recovery, Florida is expected to bring in just enough money to meet its spending needs. That forecast shows the state will have a surplus of just $52 million during the fiscal year that starts in July 2018. The new estimate does not take into account the potential effects that will come from Hurricane Irma.

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Ironically, Irma has sucked up so much warm surface water, it is lowering water temperatures and thereby ‘hampering’ the next storm up, José. Who was still noted as ‘close to Category 5’ overnight.

Hurricane Irma Thrives On Fateful Mix Of ‘Ideal’ Conditions (R.)

Hurricane Irma, a deadly, devastating force of nature, rapidly coalesced from a low-pressure blip west of Africa into one of the most powerful Atlantic storms on record, following an unhindered atmospheric path and fed by unusually warm seas. A combination of many factors, experts said on Friday, set the stage for Irma’s formation and helped the storm achieve its full thermodynamic potential, creating the monster tropical cyclone that wreaked havoc on the eastern Caribbean and may inflict widespread damage on Florida. “It got lucky,” said John Knaff, a meteorologist and physical scientist for the National Oceanic and Atmospheric Administration (NOAA). “This storm is in the Goldilocks environment for a major hurricane. It’s bad luck for whoever is in its path, but that’s what going on here.”

Brian Kahn, an atmospheric scientist and cloud specialist for NASA’s Jet Propulsion Laboratory, called the ocean conditions that spawned Irma “absolutely ideal.” Balmy water temperatures along Irma’s trajectory ran deep beneath the surface and slightly higher than normal, by as much as a degree Fahrenheit in places, providing ample fuel for the storm’s development, scientists said. Irma also encountered little if any interference in the form of wind shear – sudden changes in vertical wind velocity that can blunt a storm’s intensity – as it advanced at about 10 to 18 miles per hour, an ideal pace for hurricanes. Its fortuitous path of least resistance was essentially ordained by a well-placed atmospheric ridge of high pressure that steered the storm by happenstance through some of the Caribbean’s warmest waters as well as an area mostly devoid of wind shear.

The result was a gargantuan storm that rapidly grew to a Category 5, the top of the Saffir-Simpson scale of hurricane strength, with sustained winds of 185 miles per hour, the most forceful ever documented in the open Atlantic. It also ranks as one of just five Atlantic hurricanes known to have achieved such wind speeds during the past 82 years.

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“..of the 1 million or so mortgaged homeowners in the disaster area, more than 300,000 could become delinquent within two months..”

Harvey Won’t Help Flagging Housing Market (DDMB)

Something is up, or more likely down, with the U.S. housing market. And the reconstruction after Hurricane Harvey may not do much to help. Here’s the evidence: The latest take on home-builder sentiment showed that buyer traffic stubbornly remains in negative territory, despite some of the highest readings of the current cycle on builders’ expectations for sales gains in the next six months. In addition, recent mortgage rate declines have not led to an increase in applications to buy a home. Over the past few weeks, purchase activity has slumped to a six-month low, even though rates are at their lowest level since November. This defies a central tenet of the housing market that falling rates naturally lead to an uptick in sales. As for actual sales volumes, both new and existing July home sales missed forecasts by wide margins.

At an annualized rate of 571,000, new home sales dropped to a seven-month low, well off their long-term average pace of 727,000. The number of homes on the ground rose to 276,000 units, the highest since June 2009. At July’s pace, it would take 5.8 months to clear the inventory. The existing home sales report that followed was similarly weak, with closings sliding to the lowest since August 2016. Not only was the 5.44-million annualized pace 110,000 units below forecast, July’s figures reveal the all-important spring selling season was something of a bust, given July’s data captured contracts signed from April through June. Prices have been and remain the main impediment. The median new home sales price of $313,700 marked the highest July price on record and is up more than 6% over last year’s level.

At an annual gain of 6.2%, the best that can be said of the median sales price for previously occupied homes is that it’s off the record pace it set in June. Corroborating the slowdown in sales, both the Federal Housing Finance Agency and S&P Case-Shiller home-price indexes have softened unexpectedly. [..] About 1.2 million homes in and around Houston were at moderate to high risk for flooding but aren’t in a designated flood zone that would have required insurance. Many will qualify for federal disaster relief. Still, the government program comes in the form of low-interest rate loans to help shoulder the burden of repair costs at a time when many households are already buried in debt with precious little in savings; as the third quarter got underway, the saving rate fell to 3.5%, a fresh low for the current cycle.

Although many have drawn comparisons to the aftermath of Hurricane Katrina, Harvey will affect more than twice as many mortgaged properties. According to Black Knight Financial Services, of the 1 million or so mortgaged homeowners in the disaster area, more than 300,000 could become delinquent within two months, and 160,000 are at risk of becoming seriously delinquent inside a four-month period. As per the Mortgage Bankers Association, homes in foreclosure nationwide totaled 502,437 in the second quarter, exemplifying the very real potential for Harvey to leave a huge scar on the housing market.

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“A week or so after Irma has gone away, the ill-feeling that heaps this country like a swamp fever will still be there, driving the new American madness into precincts yet unknown.”

Swamp Fever (Jim Kunstler)

The destruction of Florida (and whatever else stands in the way up the line) will be as real as it gets. You’ve heard the old argument, I’m sure, that a natural disaster turns out to be a boon for the economy because so many people are employed fixing the damage. It’s not true, of course. Replacing things of value that have been destroyed with new things is just another version of the old Polish Blanket Gag: guy wants to make his blanket longer, so he cuts a foot off the top and sews it onto the bottom. The capital expended has to come from something and somewhere, and in this case it probably represents the much talked-about necessary infrastructure spending that is badly needed for bridges, roads, water and sewer systems, et cetera, in all the other parts of the USA that haven’t been hit by storms.

Instead, these places and the things in them will quietly inch closer to criticality without drawing much notice. The second major weather disaster this year may not be enough to induce holdouts to reconsider the issue of climate change, but it ought to provoke some questioning about the development pattern known as suburban sprawl, which even in its pristine form can be described as the greatest misallocation of resources in the history of the world. Surely there will be some debate as to whether Florida, or at least parts of it, gets rebuilt at all. The wilderness of strip malls, housing subdivisions, and condo clusters deployed along the seemingly endless six-lane highways that accumulated in the post-war orgy of development was an affront to human nature, if not to a deity, if one exists.

There are much better ways to build towns and we know how to do it. Ask the shnooks who paid a hundred bucks to walk down Disney’s Main Street the week before last. Apart from all that remains the personal tragedy that awaits, the losses of many lifetimes of work invested in things of value, of homes, of meaning, and of life itself. Many people who evacuated will return to… nothing, and perhaps many of them will not want to stay in such a fragile place. But the America they roam into in search of a place to re-settle is going to be a more fragile place, too. A week or so after Irma has gone away, the ill-feeling that heaps this country like a swamp fever will still be there, driving the new American madness into precincts yet unknown.

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Is it really capitalism that’s to blame? Do other systems not build where they should not? It seems a general human propensity to look at a desert or a swamp and declare ‘there’s nothing there’, so let’s build and exploit.

Capitalism, the State and the Drowning of America (CP)

What we need to understand is how capitalism has managed to reproduce itself since the Great Depression, but in a way that has put enormous numbers of people and tremendous amounts of property in harm’s way along the stretch from Texas to New England. The production of risk began during the era of what is sometimes called regulated capitalism between the 1930s and the early 1970s. This form of capitalism with a “human face” involved state intervention to ensure a modicum of economic freedom but it also led the federal government to undertake sweeping efforts to control nature. The motives may well have seemed pure. But the efforts to control the natural world, though they worked in the near term, are beginning to seem inadequate to the new world we currently inhabit.

The U.S. Army Corps of Engineers built reservoirs to control floods in Houston just as it built other water-control structures during the same period in New Orleans and South Florida. These sweeping water-control exploits laid the groundwork for massive real estate development in the post–World War II era. All along the coast from Texas to New York and beyond developers plowed under wetlands to make way for more building and more impervious ground cover. But the development at the expense of marsh and water could never have happened on the scale it did without the help of the American state. Ruinous flooding of Houston in 1929 and 1935 compelled the Corps of Engineers to build the Addicks and Barker Dams. The dams combined with a massive network of channels—extending today to over 2,000 miles—to carry water off the land, and allowed Houston, which has famously eschewed zoning, to boom during the postwar era.

The same story unfolded in South Florida. A 1947 hurricane caused the worst coastal flooding in a generation and precipitated federal intervention in the form of the Central and Southern Florida Project. Again, the Corps of Engineers set to work transforming the land. Eventually a system of canals that if laid end to end would extend all the way from New York City to Las Vegas crisscrossed the southern part of the peninsula. Life for the more than five million people who live in between Orlando and Florida Bay would be unimaginable without this unparalleled exercise in the control of nature. It is not simply that developers bulldozed wetlands with reckless abandon in the postwar period. The American state paved the way for that development by underwriting private accumulation.

Concrete was the capitalist state’s favored medium. But as the floods mounted in the 1960s, it turned to non-structural approaches meant to keep the sea at bay. The most famous program along these lines was the National Flood Insurance Program (NFIP) established in 1968, a liberal reform that grew out of the Great Society. The idea was that the federal government would oversee a subsidized insurance program for homeowners and in return state and local municipalities would impose regulations to keep people and property out of harm’s way.

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Central bankers lie when they say there is a recovery, but still keep buying assets by the trillions.

The “Real” Vampire Squid (Roberts)

According to the Bank for International Settlements: “Policy tools that involve the active use of central bank balance sheets – both the assets and the liabilities – can help monetary authorities to navigate the policy challenges during times of financial stress and when interest rates are close to zero.“ But wait, this is what Draghi said next: “The economic expansion, which accelerated more than expected in the first half of 2017, continues to be solid and broad-based across countries and sectors.” So, what is it?

If you actually have “solid and broad-based” economic growth across countries and sectors, why are you still flooding the system with “emergency measures,” and keeping interest rates near zero? That’s a rhetorical question. The reality is that Central Banks are keenly aware of the underlying economic weakness that currently exists as evidenced by the inability to generate inflationary pressures. They also understand that if the financial markets falter, the immediate feedback loop into the global economic environment will be swift and immediate. This is why there continue to be direct purchases of equities by the ECB and the BOJ. Which is also the reason why, despite nuclear threats, hurricanes, geopolitical tensions and economic disconnects, the markets remain within a one-day striking distance of all-time highs.

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Maduro trying to stay ahead of the CIA.

Venezuela’s Maduro Says Will Shun US Dollar In Favor Of Yuan, Others (R>)

Venezuelan President Nicolas Maduro said on Thursday his cash-strapped country would seek to “free” itself from the U.S. dollar next week, using the weakest of two official foreign exchange regimes and a basket of currencies. Maduro was refering to Venezuela’s “DICOM” official exchange rate in which the dollar buys 3,345 bolivars, according to the central bank. At the strongest official rate, one dollar buys just 10 bolivars, but on the black market the dollar fetches 20,193 bolivars, a spread versus the official rate that economists say has fostered corruption. A thousand dollars of local currency bought when Maduro came to power in 2013 would now be worth $1.20. “Venezuela is going to implement a new system of international payments and will create a basket of currencies to free us from the dollar,” Maduro said in an hours-long address to a new legislative superbody, without providing details of the new mechanism.

“If they pursue us with the dollar, we’ll use the Russian ruble, the yuan, yen, the Indian rupee, the euro,” Maduro said. The oil-rich nation is undergoing a major economic and social crisis, with millions suffering food and medicine shortages and what is believed to be the world’s highest inflation. Monthly inflation quickened to 34%, according to the opposition-controlled National Assembly. Critics say that instead of overhauling Venezuela’s failing currency controls or enacting reforms to shake the economy out of a fourth straight year of recession, Maduro has dug in and increased controls. On Thursday night, he increased the country’s minimum wage by 40%, taking it to just over $7 per month at the black market exchange rate. He also announced that around 50 “essential” products and services would have their prices frozen at new levels, auguring higher inflation and more shortages.

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Sorry, but this isn’t “a theory advanced in William R. Clark’s book Petrodollar Warfare”. This is general knowledge, has been for many years.

What Happens To Nations That Try To Ditch The Dollar (TAM)

Venezuela sits on the world’s largest oil reserves but has been undergoing a major crisis, with millions of people going hungry inside the country which has been plagued with rampant, increasing inflation. In that context, the recently established economic blockade by the Trump administration only adds to the suffering of ordinary Venezuelans rather than helping their plight. A theory advanced in William R. Clark’s book Petrodollar Warfare essentially asserts that Washington-led interventions in the Middle East and beyond are fueled by the direct effect on the U.S. dollar that can result if oil-exporting countries opt to sell oil in alternative currencies. For example, in 2000, Iraq announced it would no longer use U.S. dollars to sell oil on the global market. It adopted the euro, instead. By February 2003, the Guardian reported that Iraq had netted a “handsome profit” after making this policy change. Despite this, the U.S. invaded not long after and immediately switched the sale of oil back to the U.S. dollar.

In Libya, Muammar Gaddafi was punished for a similar proposal to create a unified African currency backed by gold, which would be used to buy and sell African oil. Though it sounds like a ludicrous reason to overthrow a sovereign government and plunge the country into a humanitarian crisis, Hillary Clinton’s leaked emails confirmed this was the main reason Gaddafi was overthrown. The French were especially concerned by Gaddafi’s proposal and, unsurprisingly, became one of the war’s main contributors. (It was a French Rafaele jet that struck Gaddafi’s motorcade, ultimately leading to his death). Iran has been using alternative currencies like the yuan for some time now and shares a lucrative gas field with Qatar, which may ultimately be days away from doing the same. Both countries have been vilified on the international stage, particularly under the Trump administration.

Nuclear giants China and Russia have been slowly but surely abandoning the U.S. dollar, as well, and the U.S. establishment has a long history of painting these two countries as hostile adversaries. Now Venezuela may ultimately join the bandwagon, all the while cozying up to Russia, as well (unsurprisingly, Venezuela and Iran were identified in William R. Clark’s book as attracting particular geostrategic tensions with the United States). The CIA’s admission that it intends to interfere inside Venezuela to exact a change of government — combined with Trump’s recent threat of military intervention in Venezuela and Vice President Mike Pence’s warning that the U.S. will not “stand by” and watch Venezuela deteriorate — all start to make a lot more sense when viewed through this geopolitical lens.

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It’s still unclear what exactly Beijing is banning.

Bitcoin Tumbles On Report China To Shutter Digital Currency Exchanges (R.)

Bitcoin fell sharply on Friday after a report from a Chinese news outlet said China was planning to shut down local crypto-currency exchanges, although analysts said this was just a temporary setback. Sources close to a cross regulators committee that oversees online finance activities told Chinese financial publication Caixin that authorities plan to shut key bitcoin exchanges in China. [..] two sources in direct contact with officials at three Chinese bitcoin exchanges – Beijing-based OKCoin, Shanghai-based BTC China, and Beijing-based Huobi – said the platforms told them that they have not heard anything from the Chinese government.

The news follows China’s move earlier this week to ban so-called “initial coin offerings,” or the practice of creating and selling digital currencies or tokens to investors in order to finance start-up projects. Greg Dwyer, business development manager at crypto-currency trading platform BitMEX, said there was confusion over whether China would close bitcoin exchanges following the ICO ban. [..] China’s Bitcoin exchanges said on Saturday they are still awaiting clarification from the authorities on a media report that they will be shut down.

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Nabiullina, the world’s smartest central banker, doesn’t seem to be seeing eye to eye with Putin on this.

Russia Faces Internal Battle Over Bitcoin (Forbes)

A lot can happen in month. Russian institutions went from preparing the Moscow Stock Exchange for the legal trading in crypto-currencies like bitcoin and ether, the two most popular ones used in Russia, to coming a hair away from following in China’s footsteps and banning initial coin offerings (ICO), a crypto-currency funding mechanisms for new tech companies. “The use of crypto-currency as a surrogate for the ruble in trading in goods and services, in our opinion, has a risk of undermining the circulation of money,” central banker Elvira Nabiullina told Russian newswire Tass on Friday. “We will not allow the use of crypto-currency as a surrogate money,” she said without mentioning ICOs in particular. One can only speculate that those crowdfunding platforms are on her radar.

Nabiullina is arguably one of the most powerful women in Russia. She has Vladimir Putin’s ear on all things economic and financial. Putin defers to her on such matters. This summer, Putin met with Ethereum developer and CEO Vitalik Buterin to discuss developments in so-called blockchain technologies, the tech platforms that provide the backbone to digital money. Buterin later told a local newspaper in Tatarstan that he felt Putin was opening to these new technologies as a matter of Russian national tech strategy. “Many people at different levels of the Russian government are open to crypto-currencies. I think my meeting with Putin helped him see things clearer,” Buterin was quoted as saying in Tatarstan’s online daily Realnoe Vremya. This is the second time this week that the Russian Central Bank has come out against crypto-currencies.

“Crypto-currencies are issued by an unlimited circle of anonymous entities. Due to the anonymous nature of the issuance of crypto-currency, citizens and legal entities can be involved in illegal activities, including legalization (laundering) of proceeds from crime and financing of terrorism,” the Russian central bank said in a statement issued on September 4. “Given the high risks of circulation and use of crypto-currency, the Bank of Russia considers it premature to admit crypto-currencies, as well as any financial instruments nominated or associated with crypto-currencies, into circulation and used at organized trades such as clearing and settlement infrastructure within the territory of the Russian Federation.” Nabiullina likened the rapid expansion of crypto-currency to the gold rush. Others have referred to it as a bubble. “For a long time there was very little growth (in this technology), and now we see something like a gold rush,” she warned.

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Why Google and Facebook won’t be regulated anythime soon. They’re part of the CIA now.

Artificial Intelligence Fuels New Global Arms Race (Wired)

For many Russian students, the academic year started last Friday with tips on planetary domination from President Vladimir Putin. “Artificial intelligence is the future, not only for Russia but for all humankind,” he said, via live video beamed to 16,000 selected schools. “Whoever becomes the leader in this sphere will become the ruler of the world.” Putin’s advice is the latest sign of an intensifying race among Russia, China, and the US to accumulate military power based on artificial intelligence. All three countries have proclaimed intelligent machines as vital to the future of their national security. Technologies such as software that can sift intelligence material or autonomous drones and ground vehicles are seen as ways to magnify the power of human soldiers.

“The US, Russia, and China are all in agreement that artificial intelligence will be the key technology underpinning national power in the future,” says Gregory C. Allen, a fellow at nonpartisan think tank the Center for a New American Security. He coauthored a recent report commissioned by the Office of the Director of National Intelligence that concluded artificial intelligence could shake up armed conflict as significantly as nuclear weapons did. In July, China’s State Council released a detailed strategy designed to make the country “the front-runner and global innovation center in AI” by 2030. It includes pledges to invest in R&D that will “through AI elevate national defense strength and assure and protect national security.” The US, widely recognized as home to the most advanced and vibrant AI development, doesn’t have a prescriptive roadmap like China’s.

But for several years the Pentagon has been developing a strategy known as the “Third Offset,” intended to give the US, through weapons powered by smart software, the same sort of advantage over potential adversaries that it once held in nuclear bombs and precision-guided weapons. In April, the Department of Defense established the Algorithmic Warfare Cross-Functional Team to improve use of AI technologies such as machine vision across the Pentagon. Russia lags behind China and the US in sophistication and use of automation and AI, but is expanding its own investments through a military modernization program begun in 2008. The government’s Military Industrial Committee has set a target of making 30 percent of military equipment robotic by 2025. “Russia is behind the curve—they are playing catchup,” says Samuel Bendett, a research analyst who studies the country’s military at the Center for Naval Analyses.

Algorithms good at searching holiday photos can be repurposed to scour spy satellite imagery, for example, while the control software needed for an autonomous minivan is much like that required for a driverless tank. Many recent advances in developing and deploying artificial intelligence emerged from research from companies such as Google. China’s AI strategy attempts to directly link commercial and defense developments in AI. For example, a national lab dedicated to making China more competitive in machine learning that opened in February is operated by Baidu, the country’s leading search engine.

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It’s not just about warfare either, it’s about tracking your own people.

Data Swamped US Spy Agencies Put Hopes On Artificial Intelligence (AFP)

Swamped by too much raw intel data to sift through, US spy agencies are pinning their hopes on artificial intelligence to crunch billions of digital bits and understand events around the world. Dawn Meyerriecks, the Central Intelligence Agency’s deputy director for technology development, said this week the CIA currently has 137 different AI projects, many of them with developers in Silicon Valley. These range from trying to predict significant future events, by finding correlations in data shifts and other evidence, to having computers tag objects or individuals in video that can draw the attention of intelligence analysts. Officials of other key spy agencies at the Intelligence and National Security Summit in Washington this week, including military intelligence, also said they were seeking AI-based solutions for turning terabytes of digital data coming in daily into trustworthy intelligence that can be used for policy and battlefield action.

AI has widespread functions, from battlefield weapons to the potential to help quickly rebuild computer systems and programs brought down by hacking attacks, as one official described. But a major focus is finding useful patterns in valuable sources like social media. Combing social media for intelligence in itself is not new, said Joseph Gartin, head of the CIA’s Kent School, which teaches intelligence analysis. “What is new is the volume and velocity of collecting social media data,” he said. In that example, artificial intelligence-based computing can pick out key words and names but also find patterns in data and correlations to other events — and continually improve on that pattern finding.

AI can “expand the aperture” of an intelligence operation looking for small bits of information that can prove valuable, according to Chris Hurst, the chief operating officer of Stabilitas, which contracts with the US intelligence community on intel analysis. “Human behavior is data and AI is a data model,” he said at the Intelligence Summit. “Where there are patterns we think AI can do a better job.” The volume of data that can be collected increases exponentially with advances in satellite and signals intelligence collection technology. “If we were to attempt to manually exploit the commercial satellite imagery we expect to have over the next 20 years, we would need eight million imagery analysts,” Robert Cardillo, director of the National Geospatial-Intelligence Agency, said in a speech in June.

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The EU is full of people who have no say. Ultimately, only Merkel does, or rather, those who keep her in power. The Eurogroup is not accountable to anyone but her, because it doesn’t even officially exist.

EU Brushes Off ‘Democratic Scandal’ Of Greek Bailout (EUO)

The European Commission has defended its role in the Greek bailout despite Pierre Moscovici, the EU finance commissioner, having called the Eurogroup “a democratic scandal.” The Eurogroup is a club of eurozone states’ finance ministers presided over by Dutch finance minister Jeroen Dijsselbloem but dominated in practice by his German counterpart, Wolfgang Schaeuble. It imposed its will on Greece when the country was teetering on the verge of economic collapse and a eurozone exit in 2015, in exchange for access to bailout funds from the European Commission, the ECB, and IMF. A Commission spokesperson on Tuesday (5 September) noted that the EU executive had “invested a lot of time and effort and resources to keep Greece in the eurozone.” But Pierre Moscovici, the EU finance commissioner, took a more critical line.

Over the weekend, he described the Eurogroup as a “democratic scandal”, given that its talks are held behind closed doors and without any public accountability. “Let’s face it, the Eurogroup as we know it is rather a pale imitation of a democratic body,” he said in his blog on Saturday (2 September). Moscovici said the governance behind the EU’s economic and monetary union had also lacked proper democratic oversight. “Sometimes in the past, when we look at Greece, it has been close to a democratic scandal,” he said. Moscovici’s admission is all the more striking given the recent publication of a book by Greece’s former finance minister, Yanis Varoufakis. Varoufakis, who steered Greek talks at the Eurogroup until his resignation in July 2015, provides a detailed account of the Commission’s double-standards during the initial rounds.

He said that Moscovici would agree in private to easing the austerity measures but, in the Eurogroup, the Commission’s representative would then reject everything in favour of harsh measures driven by Dijsselbloem and Schaeuble. In one private meeting in Dijsselbloem’s office, Varoufakis said that Moscovici had even capitulated to Dijsselbloem, despite having previously agreed to concessions that would render the Greek programme more flexible. Dijsselbloem refused to agree to the measures proposed by the Commission. Varoufakis said that Moscovici had responded to Dijsselbloem with “whatever the Eurogroup president says” in a voice that quavered with dejection. “During the Eurogroup meeting, whenever I looked at him [Moscovici] I imagined the horror Jacques Delors or any of the EU’s founding fathers would have felt had they observed the scene in Jeroen’s [Dijsselbloem’s] office,” writes Varoufakis.

[..] Most of the bailout funds have gone towards paying off international loans and proved beneficial to German and French banks that were massively exposed to Greek public debt in the lead up to the financial crisis. According to one study, Germany had also ended up with large profits, yielding interest savings on German bonds of more that €100 billion during the period of 2010 to 2015 from the Greek debt crisis.

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