Jan 092018
 
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Thomas Abercrombie Beirut 1957

 

Americans Wait For Tax Refunds Before Seeing A Doctor (BBG)
US Has The Worst Rate of Child Mortality Among 20 Rich Nations (CNBC)
Chapter 11 Bankruptcies Spike 107% from a Year Ago (WS)
The New Gilded Age: First Time Arrogance, the Second Time Vengeance (Rosen)
Retail Investors Are Finally True Believers with Record Exposure (WS)
iPhone Addiction May Be A Virtue, Not A Vice For Investors (R.)
‘It Can’t Be True.’ Inside the Semiconductor Industry’s Meltdown (BBG)
The Decline of Anti-Trumpism (David Brooks)
Cryptocurrencies Are Selling Off (BBG)
Fund Managers Say US Regulator Told Them To Suspend Bitcoin ETF Bids (R.)
US Energy Watchdog Terminates Plan To Subsidize Coal, Nuclear Sectors (AFP)
Fairy Tale (Jim Kunstler)
Theresa May’s Cabinet Reboot Descends Into Chaos (BBG)
Merkel, Coalition Negotiators Agree To Scrap 2020 Climate Target (R.)

 

 

A nation of expendables. To think how hard earlier generations fought for health care.

Americans Wait For Tax Refunds Before Seeing A Doctor (BBG)

As tax season approaches, some consumers are waiting for their refund checks to spend on a long-delayed purchase – a visit to the doctor or dentist. U.S. consumers boosted their out-of-pocket health spending by 60% in the week after they got a tax refund, according to new research from JPMorgan Chase, based on data from Chase customer accounts. Spending stayed high for about 2 1/2 months, with about two-thirds of the extra spending money going to in-person payments to doctors and dentists. Much of the rest was used to pay down past bills. Health insurers and employers have raised copays and deductibles for consumers, making them bear a larger portion of the cost of care when they go see a health-care provider.

As a result, patients sometimes lack the cash to get the care they may need, according to the report. “Cash-flow dynamics are a significant driver of out-of-pocket spending for health care,” the study found. “Even when consumers knew with near-certainty the size and source of a major cash infusion, they still waited until the infusion arrived before spending.” The researchers found that availability of cash had far less of an impact on health-spending decisions among those with credit cards, or who had higher bank-account balances.

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Until about 1970, the US had the lowest child mortality rates. Then something happened.

US Has The Worst Rate of Child Mortality Among 20 Rich Nations (CNBC)

The United States has the worst child mortality rate among a group of 20 wealthy democracies, an analysis released Monday found. And despite overall improvement in the child mortality rate in the U.S. and those 19 other countries, the U.S. has persistently outpaced those nations in that grim metric for decades, the Health Affairs report said. “From 2001 to 2010, the risk of death in the US was 76% greater for infants and 57% greater for children age 1-19,” the report said. And during the same decade, children between the ages of 15 and 19 were 82 times more likely to die from gun-related homicide in the U.S. than in the comparison countries.

The authors of the Health Affairs report said that in the full 50-year period their study looked at, the U.S. had more than “600,000 excess deaths” among kids because of the country’s lagging performance in curbing child mortality. Those excess deaths have occurred even as the U.S. spends more money on health care for kids than the other countries. Among the countries looked at, “there has never been a better time to be born in any of these 20 countries,” the Health Affairs report said. “Despite this generalized trend, children are less likely to survive and transition into adulthood in the US than in other [countries examined],” the report said. “Persistently high poverty rates, poor educational outcomes, and a relatively weak social safety net have made the US the most dangerous of wealthy nations for a child to be born into.”

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Due to the tax law.

Chapter 11 Bankruptcies Spike 107% from a Year Ago (WS)

New Chapter 11 bankruptcies in the US more than doubled in December 2017 from a year ago to 699 filings. That jump of 362 filings from December 2016 was the largest year-over-year jump since the Financial Crisis. This chart shows Chapter 11 filings back to 2011, based on data from the American Bankruptcy Institute. I marked the prior five Decembers with red dots. Note how they’re near the low point of the seasonal swings. That makes the spike in December 2017 even more spectacular. A spike like this in Chapter 11 filings in a month of December is unheard of in normal times. Normally, bankruptcies jump during tax season, the first four or five months of the year, but not at the end of the year. But these are not normal times.

In December, Chapter 11 filings soared 61% from November. This is also highly unusual, as over the prior five years, presumably the “normal times,” the number of filings from November to December has fallen by an average 8.7%. The chart below shows the year-over-year change in Chapter 11 filings. I marked the prior Decembers in yellow. I circled the oil bust and the brick-and-mortar meltdown. But December 2017 was special.

I think companies and their owners and creditors know one thing: They can write off losses in 2017 under the old corporate tax rates, at 35%, thus getting the government to pick up 35% of the tab of their losses via lower taxes. In 2018, the new tax law applies and all kinds of uncertainties have yet to be ironed out, and these companies – the owners and creditors – are thinking (I assume) that it’s better to try to recognize the loss in 2017, support it with a Chapter 11 filing, and pull the write-off into 2017 against a tax rate of 35%, rather than 21% in 2018. A tax-law change of this drastic nature motivates people jump through all kinds of hoops to save some money – including waiting in line for hours to pay property taxes early, a hitherto unthinkable strategy. And I think this is the likely suspect for the spike.

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Wonderful history lesson about the robber barons. Go read.

The New Gilded Age: First Time Arrogance, the Second Time Vengeance (Rosen)

The U.S. is now living through a second Gilded Age. Where once the robber barons were millionaires, today they’ve added a few zeros to their wealth and became billionaires. However, they act with no-less impunity, but a greater sense of entitlement. The Trump administration, together with the Republican-controlled Congress, are functional shills for the current generation of robber barons. As evident from the recently-passed tax bill, legislators jump when their big-money donors order them to deliver the goods — and they did. The U.S. economy has rebounded from the 2007-2009 “great recession,” with the stock market hitting new highs, unemployment the lowest in a generation and home prices recovering. But Americans still haven’t regained the wealth they lost, with incomes remaining stagnant and, on the whole, working Americans worse off than since the late-1990s.

The Federal Reserve’s most recent Survey of Consumer Finances finds that median net worth for all families (measured in 2016 dollars) dropped 8% since 1998. Most sobering, the poorer you are, the worst your fate – and this is compounded by race, education level, gender and age factors. America’s poorest, the bottom fifth, saw their net worth fall 22%; the broad working class, the second-lowest income tier, were the hardest hit with their net worth shrinking by more than a third (34%); and those dubbed “middle class,” with incomes from $43,501 to $69,500, were barely treading water, with their worth gaining a whopping 3.5%. Since 1998, the top 10% saw their worth rise 146%. The share of the nation’s wealth held by the top 1% rose to 38.6% while that portion controlled by the bottom 90% fell 22.8% (from 33.2% in ’89).

Looking at the nation’s income for the period of 2013 to 2016, the same phenomenon is evident: income going to the top 1% climbed to 23.8% (from 20.3%) while the share going to the bottom 90% slipped to about 50% (from 54%). And then there is debt, the lubricant of the U.S. post-WW-II “consumer revolution.” During the 2013 to 2016 period, those with the lowest income (below $25,300), saw their debt rise by 57%; for the lower-middle class (incomes between $25,301 and $43,500), debt increased 58%; and for the middle class (incomes from $43,501 to $69,500), debt rose by a modest 12.5%.

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What beaking points are made of.

Retail Investors Are Finally True Believers with Record Exposure (WS)

As far as the stock market is concerned, it took a while – in fact, it took eight years, but retail investors are finally all in, bristling with enthusiasm. TD Ameritrade’s Investor Movement Index rose to 8.59 in December, a new record. TDA’s clients were net buyers for the 11th month in a row, one of the longest buying streaks and ended up with more exposure to the stock market than ever before in the history of the index. This came after a blistering November, when the index had jumped 15%, “its largest single-month increase ever,” as TDA reported at the time, to 8.53, also a record:

Note how retail investors had been to varying degrees among the naysayers from the end of the Financial Crisis till the end of 2016, before they suddenly became true believers in February 2017. “I don’t think the investors who are engaging regularly are doing so in a dangerous fashion,” said TDA Chief Market Strategist JJ Kinahan in an interview. But he added, clients at the beginning of 2017 were “up to their knees in it and then up to their thighs, and now up to their chests.” The implication is that they could get in a little deeper before they’d drown. “As the year went on, people got more confident,” he said. And despite major geopolitical issues, “the market was never tested at all” last year. There was this “buy-the-dip mentality” every time the market dipped 1% or 2%.

But one of his “bigger fears” this year is this very buy-the-dip mentality, he said. People buy when the market goes down 1% or 2%, and “it goes down 5%, then it goes down 8% — and they turn into sellers, and then they get an exponential move to the downside.” In addition to some of the big names in the US – Amazon, Microsoft, Bank of America, etc. – TDA’s clients were “believers” in Chinese online retail and were big buyers of Alibaba and Tencent. But they were sellers of dividend stocks AT&T and Verizon as the yield of two-year Treasuries rose to nearly 2%, and offered a risk-free alternative at comparable yields. And he added, with an eye out for this year: “It’s hard to believe that the market can go up unchallenged.” This enthusiasm by retail investors confirms the surge in margin debt – a measure of stock market leverage and risk – which has been jumping from record to record, and hit a new high of $581 billion, up 16% from a year earlier.

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Duh!

iPhone Addiction May Be A Virtue, Not A Vice For Investors (R.)

Apple investors are shrugging off concerns raised by two shareholders about kids getting hooked on iPhones, saying that for now a little addiction might not be a bad thing for profits. Hedge fund JANA Partners and the California State Teachers’ Retirement System (CalSTRS) pension fund said on Saturday that iPhone overuse could be hurting children’s developing brains, an issue that may harm the company’s long-term market value. But some investors said the habit-forming nature of gadgets and social media are one reason why companies like Apple, Google parent Alphabet Inc and Facebook Inc added $630 billion to their market value in 2017. “We invest in things that are addictive,” said Apple shareholder Ross Gerber, chief executive of Gerber Kawasaki Wealth and Investment Management.

He also owns stock in coffee retailer Starbucks Corp, casino operator MGM Resorts International and alcohol maker Constellation Brands Inc. “Addictive things are very profitable,” Gerber said. Still, the investment community is increasingly holding companies to higher social standards, and there is some concern that market-leading tech companies could draw attention from regulators much like alcohol, tobacco and gambling companies have in the past. Alphabet and Facebook could not immediately be reached for comment on Monday. Facebook has said social media can be beneficial if used appropriately. In a statement to Reuters, Apple said it has offered a range of controls on iPhones since 2008 that allow parents to restrict content, including apps, movies, websites, songs and books, as well as cellular data, password settings and other features.

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This leaves many questions about what the industry knew and what they did not. Hard to believe they were all entirely ignorant for 20 years.

‘It Can’t Be True.’ Inside the Semiconductor Industry’s Meltdown (BBG)

It was late November and former Intel Corp. engineer Thomas Prescher was enjoying beers and burgers with friends in Dresden, Germany, when the conversation turned, ominously, to semiconductors. Months earlier, cybersecurity researcher Anders Fogh had posted a blog suggesting a possible way to hack into chips powering most of the world’s computers, and the friends spent part of the evening trying to make sense of it. The idea nagged at Prescher, so when he got home he fired up his desktop computer and set about putting the theory into practice. At 2 a.m., a breakthrough: he’d strung together code that reinforced Fogh’s idea and suggested there was something seriously wrong. “My immediate reaction was, ‘It can’t be true, it can’t be true,’” Prescher said.

Last week, his worst fears were proved right when Intel, one of the world’s largest chipmakers, said all modern processors can be attacked by techniques dubbed Meltdown and Spectre, exposing crucial data, such as passwords and encryption keys. The biggest technology companies, including Microsoft, Apple, Google and Amazon.com are rushing out fixes for PCs, smartphones and the servers that power the internet, and some have warned that their solutions may dent performance in some cases. Prescher was one of at least 10 researchers and engineers working around the globe – sometimes independently, sometimes together – who uncovered Meltdown and Spectre. Interviews with several of these experts reveal a chip industry that, while talking up efforts to secure computers, failed to spot that a common feature of their products had made machines so vulnerable.

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David Brooks exposes everything his paper -NYT- has done for well over a year: make it all up. A mea culpa between the lines.

The Decline of Anti-Trumpism (David Brooks)

Let me start with three inconvenient observations, based on dozens of conversations around Washington over the past year: First, people who go into the White House to have a meeting with President Trump usually leave pleasantly surprised. They find that Trump is not the raving madman they expected from his tweetstorms or the media coverage. They generally say that he is affable, if repetitive. He runs a normal, good meeting and seems well-informed enough to get by. Second, people who work in the Trump administration have wildly divergent views about their boss. Some think he is a deranged child, as Michael Wolff reported. But some think he is merely a distraction they can work around. Some think he is strange, but not impossible. Some genuinely admire Trump. Many filter out his crazy stuff and pretend it doesn’t exist.

My impression is that the Trump administration is an unhappy place to work, because there is a lot of infighting and often no direction from the top. But this is not an administration full of people itching to invoke the 25th Amendment. Third, the White House is getting more professional. Imagine if Trump didn’t tweet. The craziness of the past weeks would be out of the way, and we’d see a White House that is briskly pursuing its goals: the shift in our Pakistan policy, the shift in our offshore drilling policy, the fruition of our ISIS policy, the nomination for judgeships and the formation of policies on infrastructure, DACA, North Korea and trade. It’s almost as if there are two White Houses. There’s the Potemkin White House, which we tend to focus on: Trump berserk in front of the TV, the lawyers working the Russian investigation and the press operation.

Then there is the Invisible White House that you never hear about, which is getting more effective at managing around the distracted boss. I sometimes wonder if the Invisible White House has learned to use the Potemkin White House to deke us while it changes the country. I mention these inconvenient observations because the anti-Trump movement, of which I’m a proud member, seems to be getting dumber. It seems to be settling into a smug, fairy tale version of reality that filters out discordant information. More anti-Trumpers seem to be telling themselves a “Madness of King George” narrative: Trump is a semiliterate madman surrounded by sycophants who are morally, intellectually and psychologically inferior to people like us. I’d like to think it’s possible to be fervently anti-Trump while also not reducing everything to a fairy tale.

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Still up and down, but that will be a big problem at some point, not some quaint feature..

Cryptocurrencies Are Selling Off (BBG)

Bitcoin slumped, dragging down smaller rivals such as ether and litecoin, as concerns that regulators will tighten their grip on the market weigh on the the world’s largest cryptocurrency. Regulators in China and South Korea are increasing oversight on cryptocurrency trading and mining, while the U.S. Securities and Exchange Commission late last year started cracking down on some digital token sales, known as ICOs. Coinmarketcap.com’s decision to exclude Korean pricing data for coins helped create the appearance of a large drop in prices, which some traders attributed as playing a part in the selloff. “News on the regulatory front is dragging down cryptos,” said Gabor Gurbacs at VanEck Associates.

“South Korea and China tightening is weighing on bitcoin and in the ICO market, things started slowing down, with the SEC cracking down on illegal offerings.” Bitcoin slumped as much as 17% to $14,820, the most in more than two weeks. The rout in bitcoin is part of a broader selloff in the cryptocurrency realm, with all of the top 10 by market cap falling, and most tumbling by at least 10%, according to Coinmarketcap.com. Cardano fell 16%, while litecoin slumped as much as 16% to as low as $230. Bitcoin is little changed this year after surging about 1,400% in 2017.

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Liquidity concerns.

Fund Managers Say US Regulator Told Them To Suspend Bitcoin ETF Bids (R.)

Two U.S. companies shelved proposals to launch bitcoin exchange-traded funds, citing ongoing concerns by the Securities and Exchange Commission (SEC), filings showed on Monday. Staff at the regulatory agency “expressed concerns regarding the liquidity and valuation” of futures contracts based on the digital asset, according to one of the filings. The move adds a new hurdle to the bid by Wall Street firms to capitalize on investor interest in cryptocurrencies, and it opens a rare public divergence between two financial regulatory agencies over how to regulate them. Trusts controlled by Rafferty Asset Management and Exchange Traded Concepts each canceled plans to launch three bitcoin funds that could be traded by retail investors as easily as stocks. Neither firm could be reached for comment.

Fund managers thought the proposals had a chance at winning approval given the launch last month of futures contracts based on bitcoin on both the CME and the CBOE exchanges. Regulators have been scrambling to figure out how to deal with this relatively new asset, and no single one has control. The SEC has dominion over funds, while the Commodity Futures Trading Commission (CFTC) governs futures contracts. The CFTC has been under pressure to address concerns it did not fully assess the potential risks that bitcoin poses to the financial system. [..] The SEC’s decisions also face close scrutiny given its power to clear the way for products that could be among the more volatile traded in U.S. equity markets.

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It was always nonsense, and they know it.

US Energy Watchdog Terminates Plan To Subsidize Coal, Nuclear Sectors (AFP)

The US energy watchdog terminated Monday a key proposal by President Donald Trump’s administration to subsidize coal and nuclear plants, finding it neither justified nor reasonable. The decision by the Federal Energy Regulatory Commission (FERC) was handed down in a unanimous verdict by its five members, a majority of whom belong to the president’s Republican Party. Energy Secretary Rick Perry had in September proposed providing federal aid to nuclear and coal power plants with at least 90 days’ worth of production capacity, arguing the move was necessary to make the national grid more resilient in case of extreme events.

Both sectors have seen their share of the energy market diminish in recent years, losing out to oil, natural gas and renewables – which had all opposed Perry’s plan. There are currently only two nuclear reactors under construction in the US, in addition to the 99 in service. Coal is also facing a crisis, and Trump made reversing its decline a major campaign pledge. In announcing its decision, FERC cited an existing department study’s findings that “changes in the generation mix, including the retirement of coal and nuclear generators, have not diminished the grid’s reliability or otherwise posed a significant and immediate threat to the resilience of the electric grid.”

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Of the Oprah kind.

Fairy Tale (Jim Kunstler)

Oprah might be the Democratic Party’s last best hope before it collapses into the mausoleum of US political history, where the Whigs, Free Soilers, and Anti-Federalists lie a’moldering. Politics in this land has failed in its effort to become show business, while show business is succeeding wildly in its attempt to replace politics. All Washington can produce these days is a succession of tedious irresolvable soap operas. Hollywood is enacting a grand moral drama of clear-cut heroines and villains, victims and oppressors, sticking to archetypal story-line of our lifetime: the campaign for freedom, equality, and decency. Show business loves the desert sunshine; politics is mired in the Potomac swamp. Oprah even has better hair than the current occupant of 1600 Pennsylvania Avenue.

Oprah herself is an object lesson in the social and political themes that America dares not talk about: a person of humble origins who succeeded wildly in American life by signing onto a once-sturdy and now-fading common culture. In fact, Oprah probably embodies all that remains of American common culture, and the multitudes adore her for it. They are reassured to know that the binding verities still exist. She moves in a realm where blackness and whiteness are emphatically irrelevant — which is surely a relief to people of good will who are sick of race-hustling from all quarters. Though she has credibly acted plenty of sharecropper roles in the movies, Oprah speaks English beautifully and doesn’t apologize for moving up from the ghetto patois of her rough childhood. She may not write all her own material — such as Sunday’s Golden Globes speech that may live on like MLK’s I Have a Dream oration — but she delivers her message with conviction.

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Stumbling from failure to failure.

Theresa May’s Cabinet Reboot Descends Into Chaos (BBG)

U.K. Prime Minister Theresa May’s attempt to give her government a 2018 reboot was marred by a chaotic cabinet reshuffle as senior ministers refused to follow her orders. It’s a development that bodes ill for her ability to successfully navigate the next, even trickier stage of Brexit talks. May’s office flagged Monday’s events as “a refresh” of her top team. But instead of the usual parade of lawmakers arriving at her office in quick succession to accept their new roles, things went off script. First Health Secretary Jeremy Hunt, then Education Secretary Justine Greening were locked in discussions with her after rejecting proposed moves. Hunt eventually won his argument to stay on, but Greening, who spent more than two hours in 10 Downing Street, quit rather than accept another job.

May was said to be “disappointed” at losing Greening, who opposed Brexit, and could now vote with pro-European Union rebels in the House of Commons. It was not the restart she wanted. There were echoes of her botched decision to call an election in her announcement of a reshuffle she didn’t have to carry out. In both instances May seemed to dissipate any political goodwill she recouped. She had begun the new year in a position of relative strength, having concluded a problematic first phase of talks over Brexit – still the issue that will define her political legacy and will only get more complicated this year. “She can’t have the government she would choose and has to select from a small group of people,” said Matt Beech, director of the Centre for British Politics at the University of Hull. “Even with a majority she’d be facing tough decisions because her party’s completely divided on Brexit.”

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Want to know when you’re being had? Look no further. The reasoning here is that the German economy is doing so well that climate targets can’t be met. But that’s an impossible contradiction. Because it tries to make you believe that the investments needed to meet the targets will be made when the economy is not doing so well. But they won’t, because by then the story will be that the money is needed to support the economy.

Merkel, Coalition Negotiators Agree To Scrap 2020 Climate Target (R.)

Germany’s would-be coalition partners have agreed to drop plans to lower carbon dioxide emissions by 40% from 1990 levels by 2020, sources familiar with negotiations said on Monday – a potential embarrassment for Chancellor Angela Merkel. Due to strong economic growth and higher-than-expected immigration, Germany is likely to miss its national emissions target for 2020 without any additional measures. Negotiators for Merkel’s conservative bloc and the centre-left Social Democrats (SPD) told Reuters the parties had agreed in exploratory talks on forming a government that the targeted cut in emissions could no longer be achieved by 2020. Instead, they would aim to hit the 40% target in the early 2020s, the sources said, adding that both parties are still sticking to their goal of achieving a 55% cut in emissions by 2030.

The deal would represent something of a U-turn for Merkel, who has long presented herself as an advocate of climate protection policies on the international stage. Sources said both parties had also agreed that the share of renewable energy in Germany’s electricity consumption should rise to 65% by 2030 from roughly a third last year. Currently, the government plans to raise the renewable energy quota to between 45 and 55% by 2025. Negotiators also agreed to cut the tax on electricity in order to reduce energy costs, according to a document seen by Reuters. They also plan to tender an extra 4 gigawatts of solar energy as well as onshore and offshore wind-generating capacity.

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Jan 082018
 
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James Karales Selma to Montgomery March Alabama 1965

 

Beijing’s Yuan Ambitions Look Dashed (BBG)
Two Major Apple Shareholders Push for Study of iPhone Addiction in Children (BBG)
New Jersey Poised To Bar Drunken Droning (R.)
South Korea Inspects Six Banks Over Crypto Currency Services To Clients (R.)
Bitcoin Futures Traders Are Quietly Building A Big Short Position (ZH)
Australia Forecasts 20% Iron Ore Price Drop In 2018 (R.)
Australia Government Can’t Supply Its Way To Housing Affordability (SMH)
Rising Volatility Begets Rising Volatility (Peters)
The Artificial Liquidity Bubble (Henrich)
Wikileaks Publishes Michael Wolff’s Entire Sold Out Trump Book As A PDF (ZH)
US Freezes While Sydney Sizzles: World’s Temperature Extremes Span 85ºC (BBG)

 

 

It’s not as if a strong yuan is all that good for China. A stable one might be. But the bottom line remains: nobody wants it.

Beijing’s Yuan Ambitions Look Dashed (BBG)

As 2018 gets underway, China seems to be on top again. The yuan has strengthened 6.8% against the dollar over the past 12 months and foreign-exchange reserves are growing. Not so fast.Remember November 2015, when the IMF- with some fanfare – agreed to add the yuan to its prestigious special drawing rights currency basket. Talk then was of the yuan one day becoming one of the world’s reserve currencies, perhaps even rivaling the dollar.Two years on and central banks aren’t buying the notion. Although China’s currency has a weight of more than 10% in the SDR basket, which gives equal importance to a country’s trade status and balance-sheet metrics, just 1.1% of the world’s forex reserves were held in yuan versus 63% in dollars as of the third quarter.

It’s understandable that central banks have been shying away from the euro. German two-year bunds have been offering a negative yield since mid-2014. But why the yuan? China’s short-dated government notes offer among the best interest rates: Part of the explanation is liquidity. According to the Bank of International Settlements, in 2016, the yuan constituted only 4% of the world’s currency trades. The dollar, through pairs with the euro and the yen, accounted for 88% of transactions.

Then there’s the question of time. It could be decades before any currency, yuan or bitcoin, replaces the greenback.But China itself is also to blame. It seems to have abandoned its great yuan ambitions.What happened to the dim sum bond market? The Chinese government, along with policy banks, sold fewer than $3 billion of offshore yuan notes last year, a sharp pullback from 2016 and 2015. And oddly, last October, China sold its first sovereign dollar debenture since 2004 – a move that was widely interpreted as Beijing wishing to develop a vibrant international bond market for its state-owned enterprises. The panda bond market, where foreign companies raise yuan onshore, is also going nowhere. Hungary had a small, 1 billion yuan ($154 million) issue in July, while the Philippines keeps delaying its plans. China has also hit the pause button on the idea of trading oil in yuan.

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Curious new problems.

Two Major Apple Shareholders Push for Study of iPhone Addiction in Children (BBG)

Two big shareholders of Apple are concerned that the entrancing qualities of the iPhone have fostered a public health crisis that could hurt children – and the company as well. In a letter to the smartphone maker dated Jan. 6, activist investor Jana Partners and the California State Teachers’ Retirement System urged Apple to create ways for parents to restrict children’s access to their mobile phones. They also want the company to study the effects of heavy usage on mental health. “There is a growing body of evidence that, for at least some of the most frequent young users, this may be having unintentional negative consequences,” according to the letter from the investors, who combined own about $2 billion in Apple shares. The “growing societal unease” is “at some point is likely to impact even Apple.”

“Addressing this issue now will enhance long-term value for all shareholders,” the letter said. It’s a problem most companies would kill to have: Young people liking a product too much. But as smartphones become ubiquitous, government leaders and Silicon Valley alike have wrestled for ways to limit their inherent intrusiveness. France, for instance, has moved to ban the use of smartphones in its primary and middle schools. Meanwhile, Android co-founder Andy Rubin is seeking to apply artificial intelligence to phones so that they perform relatively routine tasks without needing to be physically handled. Apple already offers some parental controls, such as the Ask to Buy feature, which requires parental approval to buy goods and services. Restrictions can also be placed on access to some apps, content and data usage.

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I must admit, another new problem, and one that hadn’t occurred to me yet.

New Jersey Poised To Bar Drunken Droning (R.)

U.S. drone sales in 2017 topped $1 billion for the first time ever, but don’t raise a glass too quickly if you are in New Jersey, where lawmakers are poised to outlaw drunken droning next week. It is one of a wave of U.S. states moving to bring the unmanned aircrafts’ high-flying fun back to earth. New Jersey’s Assembly is slated to vote on a bill approved by the state Senate to ban inebriated or drugged droning, as well as to outlaw flying unmanned aircraft systems over prisons and in pursuit of wildlife. The vote was set for Thursday but postponed until Monday because of a severe snowstorm that triggered a state of emergency in New Jersey. “It’s basically like flying a blender,” said John Sullivan, 41, of New York, a drone buff and aerial cinematographer.

He said he opposed drunk droning but also fretted about regulatory overreach. “If I had like one drink, I’d be hesitant to even fly it.” A 2015 drone crash on the White House lawn fueled debate in the U.S. Congress over the need for drone regulations. It was a drunken, off-duty employee of the National Geospatial-Intelligence Agency who flew the 2-foot-by-2-foot (60 cm by 60 cm) “quadcopter” from a friend’s apartment balcony and lost control of it over the grounds surrounding the White House, the New York Times reported. [..] “Like any technology, drones have the ability to be used for good, but they also provide new opportunities for bad actors,” said Assemblywoman Annette Quijano of Elizabeth, New Jersey. She backed the bill, which would impose a punishment of up to six months prison and a $1,000 fine for drunk droning.

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A big gap: “..bitcoin’s global price average was trading at $16,294 while in South Korean markets, it stood at 25 million won, or $23,467.35..?

South Korea Inspects Six Banks Over Crypto Currency Services To Clients (R.)

South Korean financial authorities on Monday said they are inspecting six local banks that offer virtual currency accounts to institutions, amid concerns the increasing use of such assets could lead to a surge in crime. The joint inspection by the Financial Services Commission (FSC) and Financial Supervisory Service (FSS) will check if banks are adhering to anti-money laundering rules and using real names for accounts, FSC Chairman Choi Jong-ku told a press conference. [..] Choi said the inspections are intended to provide guidance to banks and are not the result of any suspected wrongdoing. “Virtual currency is currently unable to function as a means of payment and it is being used for illegal purposes like money laundering, scams and fraudulent investor operations,” said Choi. “The side effects have been severe, leading to hacking problems at the institutions that handle cryptocurrency and an unreasonable spike in speculation.”

A Woori Bank spokesperson told Reuters the bank was filling out a checklist for the inspection. The spokesperson said Woori had stopped providing virtual account services last month as the costs of using a real-name transaction system were too prohibitive. [..] Choi said authorities are also looking at ways to reduce risks associated with cryptocurrency trading in the country, which could include shutting down institutions that use such currencies. Last month, the government said it would impose additional measures to regulate speculation in cryptocurrency trading within the country, including a ban on anonymous cryptocurrency accounts and new legislation to allows regulators to close virtual coin exchanges if needed.

Bitcoin and other virtual coins have been extremely popular in South Korea, drawing wide investments from housewives and students. Government officials have expressed concern over frenzied speculation, with South Korea’s central bank chief warning of “irrational exuberance” in trading of virtual currency last month. A South Korean cryptocurrency exchange, Youbit, shut down and filed for bankruptcy in December after it was hacked twice last year, highlighting security and regulatory concerns. South Korea’s virtual currency exchanges have been more vulnerable to hackers as bitcoin trades at higher rates on local exchanges than they do elsewhere. As of 0710 GMT, bitcoin’s global price average was trading at $16,294 while in South Korean markets, it stood at 25 million won, or $23,467.35, according to Coinhills.com.

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Bitcoin and Ripple are falling, ether rises.

Bitcoin Futures Traders Are Quietly Building A Big Short Position (ZH)

In retrospect, the launch of bitcoin futures one month ago has proven to be a modestly disappointing event: while it helped send the price of bitcoin soaring as traders braced for the institutionalization of bitcoin, the world’s most popular cryptocurrency has stagnated since the beginning of December when first the Cboe then CME started trading bitcoin futures, trading in a range between $12,000 and $17,000. And while bitcoin futures markets volumes have been lower than most had expected, the past 4 weeks have provided enough data to observe how volumes and open interest have evolved.

We discussed previously that Bitcoin futures were off to a slow start in the first week of trading, with volumes of CBOE Bitcoin futures averaging just around $40MM per day, despite intense media hype helping fuel heavy trading when both contracts launched, at least in the first hours of trading. Since then, volumes spike briefly in the following week coinciding with the launch of the CME futures, with volumes of on both exchanges at relatively similar levels. Then, as JPM’s Nikolaos Panagirtzoglou shows, after a spike in volumes to around $200mn on 22 December, which saw sharp swings in underlying Bitcoin prices, volumes have averaged around $50mn and $60mn per day on the CBOE and CME futures, respectively.

One month after their launch, futures trading volumes remain very modest compared to average Bitcoin trading volumes of around $15bn per day since futures contracts were launched according to coinmarketcap.com data. While open interest in both the CBOE and CME contracts has risen steadily, it too remains rather modest at around $60mn and $70mn, respectively. Putting futures volumes in context, on Friday, the combined size of the bitcoin-futures markets at the two exchanges was roughly $150 million, measured in terms of the value of outstanding contracts, while the total value of all bitcoins in existence was around $290 billion.

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That’s a big drop.

Australia Forecasts 20% Iron Ore Price Drop In 2018 (R.)

Australia on Monday said it expects iron ore prices to average $51.50 a tonne this year, down 20% from 2017, because of rising global supply and moderating demand from top importer China as its steel sector shrinks. The world’s top three mining companies, BHP and Vale rely heavily on iron ore sales for the bulk of their revenue despite efforts to diversify more into other industrial raw materials, such as copper, aluminium and coal. Brazil-based Vale is planning to lift iron ore exports 7% in 2018 to 390 million tonnes. In Australia, Rio Tinto and BHP, along with Fortescue Metals Group aim to add about 170 million tonnes of new capacity over the next several years.

The forecast price decline — from an average of $64.30 a tonne in 2017 — continues into 2019, when the steelmaking raw material will average only $49 a tonne, according to the Department of Industry, Innovation and Science. “The iron ore price is expected to experience some ongoing volatility in early 2018, as the market responds to uncertainty regarding the impact of winter production restrictions on iron ore demand,” the department warned in its latest commodities outlook paper. Iron ore currently sells for about $75 a tonne.

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All it needs to do is let prices crash. Does wonders for affordability.

Australia Government Can’t Supply Its Way To Housing Affordability (SMH)

Sydney and Melbourne are entering a housing downturn. While the government has hoped record high levels of property development would have an impact, research shows supply is not behind the price falls. Housing economists say the market slowdown is not due to additional home building but a drop in demand, in part thanks to the banking regulator making it more difficult for some to get a loan. In fact, the effect of new supply on property prices has been very limited despite state governments largely pinning hopes on a surging home building industry to rein in affordability. In a recent Australian National University paper Regional housing supply and demand in Australia academics Ben Phillips and Cukkoo Joseph found supply levels from 2001 to 2017 were larger than necessary to cover demand requirements, with thousands of excess homes in Sydney, but prices boomed over the time period.

This flies in the face of conventional economic wisdom, with the law of supply and demand dictating that the more of something you make, the cheaper it should be. There are many reasons why housing doesn’t respond to increases in supply in the way the market for coal, apples or t-shirts might be expected to react. When economists are making models they usually assume they are calculating the impacts on a “normal” good. One of the assumptions often made when modelling supply and demand for these goods is that what is produced is all homogenous, that is they are more or less the same. Typically, someone will pay the same amount for one item as they will for another that is identical.

Housing is not in this category. Even in the most sterile of apartment blocks, there will be many different design features, flaws, views and aspects that differ in each unit. The impact of new supply on the property market is limited by whether the type of property being built caters to existing demand. For instance, new apartments on the outskirts of greater Sydney or Melbourne may not appeal to the same market bidding up the price of mansions with water views.

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It’s just like Minsky: stability begets instability.

Rising Volatility Begets Rising Volatility (Peters)

To sell implied volatility at current 50yr lows, investors must imagine tomorrow will be virtually identical to today. They must imagine that bond yields won’t rise despite every major central bank eager to hike interest rates and exit QE. They must imagine that economies at or near full employment will not create inflation; that GDP will neither accelerate nor decelerate; that governments will tolerate historic levels of income inequality despite citizens voting for the opposite; that strongly rising global debts will be supported by structurally decelerating global growth. And volatility sellers must imagine that nine years into a bull market, amplified by a proliferation of complex volatility-selling strategies and passive ETFs with liquidity mismatches, that we will dodge a destabilizing shock to market infrastructure.

I can imagine a few of those things happening, but neither sustainably nor simultaneously. It is much easier to imagine a tomorrow that looks different from today. Also consider that investment banks and asset managers have always devised creative strategies to make money once asset valuations exceed reasonable levels. These perpetual prosperity machines typically combine leverage and alchemy, transforming real risk into perceived safety. Examples abound. But in this cycle, a proliferation of cleverly disguised volatility-selling strategies has dominated. Zero interest rates and quantitative easing left yield-starved investors with few ways to achieve their target returns. Wall Street’s engineers developed many wonderful solutions to this problem. Their magnificence is matched only by the amount of negative convexity now lurking in investment portfolios.

As volatility has declined, investors have had to sell even more of it to sustain sufficient profits. This selling reinforces the trend lower, which produces an illusion that legacy volatility shorts are less risky today than yesterday. Lower volatility thus begets lower volatility. And this also ensures that quantitative models reduce overall portfolio risk estimates, which allows (and in many cases forces) investors to buy more assets at prevailing prices. This in turn reduces volatility, reflexively. Naturally, the reverse is also true. Rising volatility begets rising volatility. And given the unprecedented volatility-selling in this cycle, this market is exposed to a historic reversal somewhere along the path to policy normalization. Which has now begun.

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aka the everything bubble.

The Artificial Liquidity Bubble (Henrich)

8 years after the financial crisis we remain in an environment that is entirely dependent on artificial liquidity, be it via central bank liquidity driven low rates and/or QE or now US fiscal stimulus in the form of tax cuts. And while a reduction in central bank stimulus is anticipated for 2018 the $1.5 trillion US tax cut is the next active artificial boost to hit markets. You can view it perhaps this way: When the US ended QE3 Europe and Japan took over the stimulus baton, and now that Europe is reducing stimulus the US again is taking the lead, this time with fiscal stimulus. It is a bizarre dance that excels in one aspect in particular: It never ends. Consider: German unemployment is at all time lows, and European PMIs are at their highest in over 7 years.

Is the ECB raising rates from record lows? Nope. Has QE ended? Nope. QE continues to run at $30B Euro a month and rates remain in full panic mode. Not what one would’ve expected 8 years ago following a return to full employment. Stimulus programs & interventions used to be methods of crisis management now they have become permanent fixtures in global economies. Why? Because this is what it takes. And they will continue. Japanese Prime Minister Shinzo Abe has just instructed central bank chief Kuroda to keep printing as he decides whether to keep him in his job. Wink wink. Normalizing rates? Reducing balance sheets back to pre-crisis levels? Letting markets run on their own without intervention? Call it the big central banking lie. It will never happen. It can’t. Global debt is now exceeding $233 Trillion.

[..] the math of higher rates doesn’t work and will eventual break the camel’s back. Low rates are an absolute must requirement to keep the construct afloat. It is no accident that Morgan Stanley wealth management has decided to pull out of junk bonds. They are warning of US tax cuts accelerating market excesses bringing about a coming recession. And make no mistake, a recession will come as we are very late in the cycle.

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Count me out.

Wikileaks Publishes Michael Wolff’s Entire Sold Out Trump Book As A PDF (ZH)

Considering that Wikileaks made its name by leaking confidential and/or hard to find documents and information, and also considering the reversal in the Trump administration vis-a-vis Julian Assange, whom it first lauded only to threaten with incarceration in recent months, it is perhaps not surprising that moments ago the official Wikileaks twitter account published Michael Wolff’s controversial – and largely sold out – book, “Fire and Fury” in pdf format.

New Trump book “Fire and Fury” by Michael Wolff. Full PDF: https://t.co/sf7vj4IYAx

— WikiLeaks (@wikileaks) January 7, 2018

Since, somewhat ironically, WikiLeaks picked a google drive to host the leaked pdf, it will unlikely remain available for an extended period, as it would mean substantial lost revenue for book published Henry Holt and Company. So for those who wish to read what all the hoople is about – for free – they are advised to do so sooner rather than later.

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View from the west only. How do you dress for a flight like that?

US Freezes While Sydney Sizzles: World’s Temperature Extremes Span 85ºC (BBG)

Temperature extremes across the globe spanned more than 85 degrees Celsius at the weekend as Sydney melted and parts of the U.S. froze. Western Sydney touched 47.3 degrees Celsius (117 degrees Fahrenheit) on Sunday afternoon local time, the city’s hottest day since 1939. Weekend temperatures at Mount Washington Observatory in New Hampshire plummeted to minus 36 degrees Fahrenheit (minus 38 degrees Celsius). Roads melted, firefighters battled wildfires across New South Wales state and Sydney residents retreated to air-conditioned shopping malls as temperatures surged. English cricket captain Joe Root was hospitalized with severe dehydration after battling Australia in the cauldron of the Sydney Cricket Ground. At the same time, freezing fog and snow buffeted Mount Washington, tying the observatory for the second-coldest place on Earth.

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Aug 062017
 
 August 6, 2017  Posted by at 8:26 am Finance Tagged with: , , , , , , , , ,  7 Responses »
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Giorgio de Chirico Piazza d’Italia 1913

 

The Bursting of the China Credit Bubble (Crescat)
The Swamp Is So Undrainable It Will End Up Making Mincemeat Of Trump (Stockman)
How The Trump Administration Broke The State Department (FP)
Have Smartphones Destroyed a Generation? (Atl.)
Amazon Isn’t The No. 1 Villain In Retail Sector’s Demise (Katsenelson)
On The Beach (John Pilger)
Merkel Is Kowtowing To The German Car Industry (Spiegel)
North Korea Sanctions Bring Nuclear Issue To ‘Critical Phase’, Says China (G.)
What If Every Government Paid Off Its National Debt? (Connelly)
Are Greek Capital Controls Easing? (K.)
More People Live Inside This Circle Than Outside It (WEF)
Is Global Ocean Circulation Collapsing? (Forbes)

 

 

A tour de force PDF by private firm Crescat on China and its potential influence on the world of finance. It echoes a longtime theme of mine: China’s shadow banking sector could bring it all down.

The Bursting of the China Credit Bubble (Crescat)

History has proven that credit bubbles always burst. China by far is the biggest credit bubble in the world today. We layout the proof herein. There are many indicators signaling that the bursting of the China credit bubble is imminent, which we also enumerate. The bursting of the China credit bubble poses tremendous risk of global contagion because it coincides with record valuations for equities, real estate, and risky credit around the world. The Bank for International Settlements (BIS) has identified an important warning signal to identify credit bubbles that are poised to trigger a banking crisis across different countries: Unsustainable credit growth relative to GDP in the household and (non-financial) corporate sector. Three large (G-20) countries are flashing warning signals today for impending banking crises based on such imbalances: China, Canada, and Australia.

The three credit bubbles shown in the chart above are connected. Canada and Australia export raw materials to China and have been part of China’s excessive housing and infrastructure expansion over the last two decades. In turn, these countries have been significant recipients of capital inflows from Chinese real estate speculators that have contributed to Canadian and Australian housing bubbles. In all three countries, domestic credit-to-GDP expansion financed by banks has created asset bubbles in self-reinforcing but unsustainable fashion. Post the 2008 global financial crisis, the world’s central bankers have kept interest rates low and delivered just the right amount of quantitative easing in aggregate to levitate global debt, equity, and real estate valuations to the highest they have ever been relative to income.

Across all sectors of the world economy: household, corporate, government, and financial, the world’s aggregate debt relative to its collective GDP (gross world product) is the highest it has ever been. Central banks have pumped up the valuation of equities too. The S&P 500 has a cyclically adjusted P/E of almost 30 versus a median of 16, exceeded only in 1929 and the 2000 tech bubble. The US markets are also in a valuation bubble because US-owned financial assets have never been more richly valued relative to income as we show below. The picture is equally frothy if we include real estate, also at record valuations to income. China’s capital outflow spillover from its credit bubble has driven up real estate valuations around the world.

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“And then the Donald will be gone, and well before August 2018, too…”

The Swamp Is So Undrainable It Will End Up Making Mincemeat Of Trump (Stockman)

What will be the trigger that finally sends the establishment after Trump? Ultimately, the hammer of fiscal crisis and a crashing stock market will break any remaining loyalty of the GOP elders as they smell the 2018 elections turning into a replay of the rout of 1974. And then the Donald will be gone, and well before August 2018, too. I told an audience in Vancouver last Friday that it could happen by February. The bottom line is that the Swamp is so undrainable that it will end up making mincemeat of Donald Trump. Needless to say, the ultimate causes of his demise are anchored deep in the failing status quo. America is so addicted to war, debt and central bank driven false prosperity that even the most resourceful and focused challenger would be taken down by its sheer inertia.

But the Donald is so undisciplined, naïve, out-of-touch, thin-skinned, unfocused and megalomaniacal that he is making it far easier for the Swamp critters than they deserve. To a very considerable extent, in fact, he is filling out his own bill of indictment. Moreover, he is totally clueless about how to manage his presidency or cope with the circling long knives of the Deep State which are hell bent on removing him from office. Accordingly, the single most important thing to know about the present risk environment is that it is extreme and unprecedented. In essence, the Donald is the ultimate bull in an exceedingly fragile China shop — and an already badly wounded one at that. So it is no understatement to suggest that the S&P 500 at 2470 and the Dow at 22,000 is about as fragile as the “market” has ever been.

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Is Trump trying the drain the swamp anyway? Or Tillerson? Foreign Policy can’t quite decide on the latter. But these lines, intended as positives, sort of say it all:

“..the legacy of decades of American diplomacy is at risk..”, or this one: “I used to wake up every morning with a vision about how to do the work to make the world a better place..”

How The Trump Administration Broke The State Department (FP)

Employees at the State Department couldn’t help but notice the stacks of cubicles lined up in the corridor of the seventh floor. For diplomats at the department, it was the latest sign of the “empire” being built by Secretary of State Rex Tillerson’s top aides. The cubicles are needed to accommodate dozens of outsiders being hired to work in a dramatically expanded front office that is supposed to advise Tillerson on policy. Foreign service officers see this expansion as a “parallel department” that could effectively shut off the secretary and his advisors from the career employees in the rest of the building. The new hires, several State officials told Foreign Policy, will be working for the policy planning staff, a small office set up in 1947 to provide strategic advice to the secretary that typically has about 20-25 people on its payroll.

One senior State Department official and one recently retired diplomat told FP that Tillerson has plans to double or perhaps triple its size, even as he proposes a sweeping reorganization and drastic cuts to the State Department workforce. Veterans of the U.S. diplomatic corps say the expanding front office is part of an unprecedented assault on the State Department: A hostile White House is slashing its budget, the rank and file are cut off from a detached leader, and morale has plunged to historic lows. They say President Donald Trump and his administration dismiss, undermine, or don’t bother to understand the work they perform and that the legacy of decades of American diplomacy is at risk.

By failing to fill numerous senior positions across the State Department, promulgating often incoherent policies, and systematically shutting out career foreign service officers from decision-making, the Trump administration is undercutting U.S. diplomacy and jeopardizing America’s leadership role in the world, according to more than three dozen current and former diplomats interviewed by FP. “I used to wake up every morning with a vision about how to do the work to make the world a better place,” said one State Department official, who spoke on condition of anonymity for fear of retaliation. “It’s pretty demoralizing if you are committed to making progress. I now spend most of my days thinking about the morass. There is no vision.”

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Interesting, but it can’t be just one generation.

Have Smartphones Destroyed a Generation? (Atl.)

The more I pored over yearly surveys of teen attitudes and behaviors, and the more I talked with young people like Athena, the clearer it became that theirs is a generation shaped by the smartphone and by the concomitant rise of social media. I call them iGen. Born between 1995 and 2012, members of this generation are growing up with smartphones, have an Instagram account before they start high school, and do not remember a time before the internet. The Millennials grew up with the web as well, but it wasn’t ever-present in their lives, at hand at all times, day and night. iGen’s oldest members were early adolescents when the iPhone was introduced, in 2007, and high-school students when the iPad entered the scene, in 2010. A 2017 survey of more than 5,000 American teens found that three out of four owned an iPhone.

The advent of the smartphone and its cousin the tablet was followed quickly by hand-wringing about the deleterious effects of “screen time.” But the impact of these devices has not been fully appreciated, and goes far beyond the usual concerns about curtailed attention spans. The arrival of the smartphone has radically changed every aspect of teenagers’ lives, from the nature of their social interactions to their mental health. These changes have affected young people in every corner of the nation and in every type of household. The trends appear among teens poor and rich; of every ethnic background; in cities, suburbs, and small towns. Where there are cell towers, there are teens living their lives on their smartphone. To those of us who fondly recall a more analog adolescence, this may seem foreign and troubling.

The aim of generational study, however, is not to succumb to nostalgia for the way things used to be; it’s to understand how they are now. Some generational changes are positive, some are negative, and many are both. More comfortable in their bedrooms than in a car or at a party, today’s teens are physically safer than teens have ever been. They’re markedly less likely to get into a car accident and, having less of a taste for alcohol than their predecessors, are less susceptible to drinking’s attendant ills. Psychologically, however, they are more vulnerable than Millennials were: Rates of teen depression and suicide have skyrocketed since 2011. It’s not an exaggeration to describe iGen as being on the brink of the worst mental-health crisis in decades. Much of this deterioration can be traced to their phones.

Even when a seismic event—a war, a technological leap, a free concert in the mud—plays an outsize role in shaping a group of young people, no single factor ever defines a generation. Parenting styles continue to change, as do school curricula and culture, and these things matter. But the twin rise of the smartphone and social media has caused an earthquake of a magnitude we’ve not seen in a very long time, if ever. There is compelling evidence that the devices we’ve placed in young people’s hands are having profound effects on their lives—and making them seriously unhappy.

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More on the iPhone.

Amazon Isn’t The No. 1 Villain In Retail Sector’s Demise (Katsenelson)

Retail stocks have been annihilated recently, despite the economy eking out growth. The fundamentals of the retail business look horrible: Sales are stagnating and profitability is getting worse with every passing quarter. Jeff Bezos and Amazon get most of the credit, but this credit is misplaced. Today, online sales represent only 8.5% of total retail sales. Amazon, at $80 billion in sales, accounts only for 1.5% of total U.S. retail sales, which at the end of 2016 were around $5.5 trillion. Though it is human nature to look for the simplest explanation, in truth, the confluence of a half-dozen unrelated developments is responsible for weak retail sales. Our consumption needs and preferences have changed significantly. Ten years ago we spent a pittance on cellphones.

Today Apple sells roughly $100 billion worth of i-goods in the U.S., and about two-thirds of those sales are iPhones. Apple’s U.S. market share is about 44%, thus the total smart mobile phone market in the U.S. is $150 billion a year. Add spending on smartphone accessories (cases, cables, glass protectors, etc.) and we are probably looking at $200 billion total spending a year on smartphones and accessories. Ten years ago (before the introduction of the iPhone) smartphone sales were close to zero. Nokia was the king of dumb phones, with sales in the U.S. in 2006 of $4 billion. The total dumb cellphone handset market in the U.S. in 2006 was probably closer to $10 billion. Consumer income has not changed much since 2006, thus over the last 10 years $190 billion in consumer spending was diverted toward mobile phones.

It gets more interesting. In 2006 a cellphone was a luxury only affordable by adults, but today 7-year-olds have iPhones. Our phone bill per household more than doubled over the last decade. Not to bore you with too many data points, but Verizon’s wireless’s revenue in 2006 was $38 billion. Fast-forward 10 years and it is $89 billion – a $51 billion increase. Verizon’s market share is about 30%, thus the total spending increase on wireless services is close to $150 billion. Between phones and their services, this is $340 billion that will not be spent on T-shirts and shoes. But we are not done. The combination of mid-single-digit health-care inflation and the proliferation of high-deductible plans has increased consumer direct health-care costs and further chipped away at our discretionary dollars. Health-care spending in the U.S. is $3.3 trillion, and just 3% of that figure is almost $100 billion.

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“A lobotomy is performed on each generation. Facts are removed. History is excised and replaced by what Time magazine calls “an eternal present”.”

On The Beach (John Pilger)

“This is the way the world ends; Not with a bang but a whimper”. These lines from T.S. Eliot’s poem The Hollow Men appear at the beginning of Nevil Shute’s novel On the Beach, which left me close to tears. The endorsements on the cover said the same. Published in 1957 at the height of the Cold War when too many writers were silent or cowed, it is a masterpiece. At first the language suggests a genteel relic; yet nothing I have read on nuclear war is as unyielding in its warning. No book is more urgent. Some readers will remember the black and white Hollywood film starring Gregory Peck as the US Navy commander who takes his submarine to Australia to await the silent, formless spectre descending on the last of the living world.

I read On the Beach for the first time the other day, finishing it as the US Congress passed a law to wage economic war on Russia, the world’s second most lethal nuclear power. There was no justification for this insane vote, except the promise of plunder. The “sanctions” are aimed at Europe, too, mainly Germany, which depends on Russian natural gas and on European companies that do legitimate business with Russia. In what passed for debate on Capitol Hill, the more garrulous senators left no doubt that the embargo was designed to force Europe to import expensive American gas. Their main aim seems to be war – real war. No provocation as extreme can suggest anything else. They seem to crave it, even though Americans have little idea what war is. The Civil War of 1861-5 was the last on their mainland. War is what the United States does to others.

The only nation to have used nuclear weapons against human beings, they have since destroyed scores of governments, many of them democracies, and laid to waste whole societies – the million deaths in Iraq were a fraction of the carnage in Indo-China, which President Reagan called “a noble cause” and President Obama revised as the tragedy of an “exceptional people”. He was not referring to the Vietnamese. Filming last year at the Lincoln Memorial in Washington, I overheard a National Parks Service guide lecturing a school party of young teenagers. “Listen up,” he said. “We lost 58,000 young soldiers in Vietnam, and they died defending your freedom.” At a stroke, the truth was inverted. No freedom was defended. Freedom was destroyed. A peasant country was invaded and millions of its people were killed, maimed, dispossessed, poisoned; 60,000 of the invaders took their own lives. Listen up, indeed.

A lobotomy is performed on each generation. Facts are removed. History is excised and replaced by what Time magazine calls “an eternal present”. Harold Pinter described this as “manipulation of power worldwide, while masquerading as a force for universal good, a brilliant, even witty, highly successful act of hypnosis [which meant] that it never happened. Nothing ever happened. Even while it was happening it wasn’t happening. It didn’t matter. It was of no interest.”

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Original tile: “‘Made in Germany’ Label Badly Damaged By Car Scandal”. But the power politics behind it are far more revealing.

Merkel Is Kowtowing To The German Car Industry (Spiegel)

Since the days of former Chancellor Gerhard Schröder, who served from 1998 to 2005, Germany’s leaders have been nicknamed the “Auto Chancellor” for their close ties to the industry. Schröder felt he was a patron of the industry. And Merkel, his successor, was quick to see the connection between maintaining close ties to the key industry and staying in power. On Sept. 23, 2008, she spoke to workers at a Volkswagen factory. “The German government stands behind VW. VW is a great piece of Germany.” The sheer mass of 18,000 workers seemed to awe her. She had likely never spoken in front of that many people at one time. She said she would travel home with the feeling that many workers at Volkswagen wanted “Germany to be doing well.” Observers of the chancellor say that visit to Wolfsburg had a deep impact on Merkel.

A short time later, as the world faced a major economic crisis, she gave employees and executives at Germany’s car companies a gift worth billions of euros in the form of government subsidies that saved jobs and kept the floor from falling out on the industry. The unsavory symbiosis between the government, the industry and the lobbying groups – and the revolving door of personnel moving between them – seems to be the root of the evil. This ensures that the industry has influence and access, and assures employees money and access to the career ladder. It can also cause a bit of head-scratching. A public servant who is supposed to one day passionately fight for the good of the people, is suddenly ready to contribute to their systematic poisoning only a moment later.

Former German Transportation Minister Matthias Wissmann, who served as a member of Merkel’s cabinet and is also a friend, sticks out. Today he’s the president of the German Association of the Automotive Industry (VDA). All he has to do to get the chancellor’s attention is send her a text message on his mobile phone. Merkel’s former chief of staff at the national headquarters of her conservative Christian Democratic Union (CDU) party, Michael Jansen, now works at Volkswagen as the head of the VW’s Berlin office, which conducts the company’s lobbying. A few months ago, carmaker Opel’s chief lobbyist, Joachim Koschnicke, left his job to join the CDU’s election campaign team. All have showered the federal government with emails and letters in recent years to ensure that their companies’ interests are fulfilled.

In May 2013, VDA head Wissmann wrote to “Dear Angela” that she should try to hinder the European Commission’s “excessive” proposals on CO2 targets. VW lobbyist Jansen also wrote to the Chancellery in July 2015 that, on the issue of “air quality/diesel,” the industry’s proposals should be given the “greatest possible consideration.” When he was still an Opel lobbyist, Joachim Koschnicke warned the head of the KBA when approval was delayed for a new Opel model that without it, there would be “potential effects on our business operations.” He said it jeopardized production at five plants and that the “negative effects would be dramatic in every aspect.” And then there’s Eckart von Klaeden, who served as minister of state in the Chancellery from 2009 to 2013 and has since served as head of global external affairs at Daimler.

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How far will China go?

North Korea Sanctions Bring Nuclear Issue To ‘Critical Phase’, Says China (G.)

The situation on the Korean peninsula is entering “a very critical phase”, China has warned after new United Nations sanctions targeting Pyongyang were announced following its recent intercontinental ballistic missile test. Speaking in Manila before a regional security summit, China’s foreign minister, Wang Yi, said the sanctions had been designed “to efficiently, or more efficiently, block North Korea’s nuclear missile development”. “Sanctions are needed but not the ultimate goal,” Wang added. “The purpose is to pull the peninsula nuclear issue back to the negotiating table, and to seek a final solution to realise the peninsula denuclearisation and long-term stability through negotiations.” “After the resolution is passed, the situation on the peninsula will enter a very critical phase,” Wang warned, according to China’s state broadcaster CGTN.

“We urge all parties to judge and act with responsibility in order to prevent tensions from escalating.” Wang met his North Korean counterpart, Ri Yong Ho, on Sunday who reportedly smiled continuously as he shook the Chinese official’s hand. According to Reuters, journalists were not given access to a meeting between the two men. On Saturday Nikki Haley, the US ambassador to the United Nations, said “further action is required” against North Korea. Earlier, National Security Adviser HR McMaster said Donald Trump had been “deeply briefed” on recent missile tests carried out by Pyongyang, and said the US would do “everything we can to to pressure this regime” while seeking to avoid “a very costly war”. Haley spoke to the UN security council after the 15-member body imposed the new sanctions against North Korea, in response to its two long-range missiles tests in July.

“We should not fool ourselves into thinking we have solved the problem,” Haley said. “Not even close. The North Korean threat has not left us, it is rapidly growing more dangerous. Further action is required. The United States is taking and will continue to take prudent defensive measures to protect ourselves and our allies.” Washington would continue annual military exercises with South Korea, Haley said. The UN-approved sanctions include a ban on exports worth more than $1bn, a huge bite out of North Korea’s total exports, valued at $3bn last year. Countries are also banned from giving any additional permits to North Korean laborers – another source of money for the regime of Kim Jong-un – and all new joint ventures with North Korean companies and foreign investment in existing ones are banned.

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“The national debt is actually the government’s savings account..”

What If Every Government Paid Off Its National Debt? (Connelly)

There were six times in US history in which budget surpluses were achieved for long enough to retire a significant amount of debt. Five of those were followed by depressions, the last of which culminated in the Great Depression of the 1930s. The last time America ran a significant budget surplus (about 2.5 years) was under President Clinton. The 2002 recession is a direct result of Clinton’s 1999 surplus which forced the domestic private sector into deficit. Consumer spending fell, unemployment rose and a recession occurred. The economy crashed first in 2000 and then onwards into the Great Recession that began in 2007. “But reducing or retiring the debt isn’t what caused the economic downturns,” says economist, Ellis Winningham. “It was the surpluses that caused it. Simply put, you cannot operate an economy with no money in it.”

So why have we convinced ourselves that government debt is the mother of all evil? That somehow, if the government is in surplus, our bank accounts will automatically improve? In fact, as we shall see, the precise opposite is what would probably happen. Anyone who has ever been chased by a debt collector has come to associate the word ‘debt’ as necessarily scary, bad and to be avoided. If you are a household, this is likely to be true. But debt has an entirely different meaning for governments. To whom is the national debt owed? That would be us: the people. But this truth has been avoided in favour of eliciting a pavlovian response based entirely on the principle that a government budget is the same as that of a household.

“People think that public debt is like a household debt, hence, they buy into the neoliberal nonsense about the government going ‘bankrupt’ and then it’s financial armageddon and we will all die,” says Winningham. “It’s total nonsense. The public debt is just a bunch of savings accounts that pay interest. “People think it will improve their lives because they believe that the government’s debt is their debt. In reality, the government’s debt is the private sector’s asset.” In truth, there is no such thing as the national debt beyond a rhetorical device used to scare the public into submission. In the US, the National Debt is the sum-total of all US dollars ever issued by the Federal Government, from the nation’s founding up until this very moment, that have never been taxed away by the Federal Government.

“From around the 1790’s until today, 2017, the US government has issued, after taxes, $18 trillion dollars for everyone in the non-government sector to use,” says Winningham. “In fact, the national debt has been around for over 170 years now, so at some point, you’re going to have to start understanding that it is not an actual problem. “Further, you need to start understanding that when you accuse Obama, or Bush, or Trump of adding to the national debt, you’re actually accusing them of adding US dollars to the US economy. Or, more precisely, you’re accusing them of adding US dollars to our national savings.” Put simply, The National Debt is the country’s total exports minus the country’s total imports, and isn’t an actual debt at all, but a “balance of trade”.

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A giant sleight of hand: ..new measures that are billed as easing the capital controls but which will in fact reduce the annual amount of cash bank clients can withdraw

Are Greek Capital Controls Easing? (K.)

The government is gearing up to launch new measures that are billed as easing the capital controls but which will in fact reduce the annual amount of cash bank clients can withdraw. As of September 1, when the new measures come into force, citizens will be able to withdraw a total of 1,800 euros per month. When the controls were first introduced in July 2015, Greeks could only withdraw €60 a day, 365 days a year, but since then they have been allowed to carry that amount forward up to a period of two weeks, giving them a €840 limit every 14 days (fixed, from midnight Friday to midnight two weeks later). That will remain the case until the end of August.

The extension of the cumulative withdrawal period may facilitate transactions, but on an annual basis the total amount a bank customer can withdraw will fall from €21,840 (€840 x 26 two-week periods) to €21,600 (€1,800 x 12 months). Greeks could in fact withdraw more money per year on the original limit of €60 per day, totaling €21,900 a year, as that avoided the fixed-two-week-period problem. In other words the “easing” of restrictions has resulted in curtailing people’s withdrawal limit by €300 per annum, for the right to transfer a withdrawal to another day or week. Bank sources tell Kathimerini it is a positive move that will strengthen confidence, make transactions easier and boost the economy.

The new measures will also affect withdrawals in foreign currency in Greece and the use of Greek debit cards for withdrawals abroad. As of September 1 any recipients of money forwarded from abroad will be able to withdraw 50% of the amount without any restrictions. Companies will also be able to open an account at a credit institution by creating a new customer ID regardless of whether they already have another account there. Farmers, who have not been allowed to open bank accounts since the controls started, will finally be allowed to (provided they do not have one already). Employees will be further able to open a new salary account at a different bank to the one at which they are already a client or if their new employer pays their salary at another lender.

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Perspective.

More People Live Inside This Circle Than Outside It (WEF)


Circle centred on 106.6° East, 26.6° North, projected using GMT, created by BCMM – Brilliant Maps

While the map looks surprising at first glance, it shouldn’t really once you consider it contains all or most of the world’s most populous countries: China, India, Indonesia (fourth), Pakistan (sixth), Bangladesh (seventh) and Japan (tenth). And according to the World Population Prospects 2017, a recently updated UN report, the world population will hit a staggering 9.8 billion by 2050. China (with currently 1.4 billion inhabitants) and India (with currently 1.3 billion inhabitants) will remain the two most populous countries, and Nigeria will overtake the United States to become the third-most populous country in the world.

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Not a new theme at all, the Gulfstream, so why present it as somehow new without any new evidence? Nice map though.

Is Global Ocean Circulation Collapsing? (Forbes)

Scientists have long known about the anomalous “warming hole” in the North Atlantic Ocean, an area immune to warming of Earth’s oceans. This cool zone in the North Atlantic Ocean appears to be associated with a slowdown in the Atlantic Meridional Overturning Circulation (AMOC), one of the key drivers in global ocean circulation. A recent study published in Nature outlines research by a team of Yale University and University of Southhampton scientists. The team found evidence that Arctic ice loss is potentially negatively impacting the planet’s largest ocean circulation system. While scientists do have some analogs as to how this may impact the world, we will be largely in uncharted territory. AMOC is one of the largest current systems in the Atlantic Ocean and the world. Generally speaking, it transports warm and salty water northward from the tropics to South and East of Greenland.

This warm water cools to ambient water temperature then sinks as it is saltier and thus denser than the relatively more fresh surrounding water. The dense mass of water sinks to the base of the North Atlantic Ocean and is pushed south along the abyss of the Atlantic Ocean. This process whereby water is transported into the Northern Atlantic Ocean acts to distribute ocean water globally. What’s more important, and the basis for concern of many scientists is this mechanism is one of the most efficient ways Earth transports heat from the tropics to the northern latitudes. The warm water transported from the tropics to the North Atlantic releases heat to the atmosphere, playing a key role in warming of western Europe. You likely have heard of one of the more popular components of the AMOC, the Gulf Stream which brings warm tropical water to the western coasts of Europe.

Evidence is growing that the comparatively cold zone within the Northern Atlantic could be due to a slowdown of this global ocean water circulation. Hence, a slowdown in the planet’s ability to transfer heat from the tropics to the northern latitudes. The cold zone could be due to melting of ice in the Arctic and Greenland. This would cause a cold fresh water cap over the North Atlantic, inhibiting sinking of salty tropical waters. This would in effect slow down the global circulation and hinder the transport of warm tropical waters north. Melting of the Arctic sea ice has rapidly increased in the recent decades. Satellite image records indicate that September Arctic sea ice is 30% less today than it was in 1979. This trend of increased sea ice melting during summer months does not appear to be slowing. Hence, indications are that we will see a continued weakening of the global ocean circulation system.

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