May 102019
 


James McNeill Whistler Symphony in White, No. 3 1867

 

US Hikes Tariffs On Chinese Goods, China Says To Strike Back (R.)
Historic Lawsuit Could “Wreak Havoc” On The Leveraged Loan Market (ZH)
The Real Muellergate Scandal (Craig Murray)
From Russiagate to Gunboat Diplomacy (Jacobin)
FBI’s Steele Story Falls Apart (Solomon)
Roger Stone Wins Right To Receive Unredacted Parts of Mueller Report (SC)
Chelsea Manning Released After 2 Months, Might Be Back In Jail In 6 Days (RT)
The Law Being Used to Prosecute Julian Assange Is Broken (Ekeland)
Swedish Prosecutor To Give Decision On Assange Rape Inquiry (G.)
The Revelations of WikiLeaks: No. 2 (Vos)
Facebook Co-Founder Calls For Breakup Of The Company (ZH)
UK Tories Could Come Sixth In European Elections (G.)
America, You Are Fired! (Dmitry Orlov)
Chernobyl Has Become A Refuge For Wildlife 33 Years Later (Conv.)
Ireland Second Country To Declare Climate, Biodiversity Emergency (RTE)

 

 

Keep talking!

US Hikes Tariffs On Chinese Goods, China Says To Strike Back (R.)

U.S. President Donald Trump’s tariff increase to 25% on $200 billion worth of Chinese goods took effect on Friday, and Beijing said it would strike back, ratcheting up tensions as the two sides pursue last-ditch talks to try salvaging a trade deal. China’s Commerce Ministry said it “deeply regrets” the U.S. decision, adding that it would take necessary countermeasures, without elaborating. The hike comes in the midst of two days of talks between top U.S. and Chinese negotiators to try to rescue a faltering deal aimed at ending a 10-month trade war between the world’s two largest economies. Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin talked for 90 minutes on Thursday and were expected to resume talks on Friday.


The Commerce Ministry said that negotiations were continuing, and that it “hopes the United States can meet China halfway, make joint efforts, and resolve the issue through cooperation and consultation”. With no action from the Trump administration to reverse the increase as negotiations moved into a second day, U.S. Customs and Border Protection imposed the new 25% duty on affected U.S.-bound cargoes leaving China after 12:01 a.m. EDT (0401 GMT) on Friday. Goods in the more than 5,700 affected product categories that left Chinese ports and airports before midnight will be subject to the original 10% duty rate, a CBP spokeswoman said.

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Don’t worry, Fed to the rescue.

Historic Lawsuit Could “Wreak Havoc” On The Leveraged Loan Market (ZH)

Ask any banker (or analyst) what the difference is between a junk bond and a loan, and you’ll most likely get a blank start in response: starting with the size of the loan market, which is now virtually identical to that of the high yield bond market, continuing through the standardization of loan terms, the growth of secondary trading, and all the way through to “protections” granted to loan investors, which in an age of exclusively covenant-lite issuance, no longer exist, and one can argue that at least superficially, a loan is effectively the same as a junk bond. And yet, there is one critical difference between the two: junk bonds are securities, while loans aren’t. That difference, however, may not be true for much longer.

As Bloomberg reports, a group suing JPMorgan Chase and other banks over a loan that went sour four years ago is alleging the underwriters engaged in securities fraud. If successful, the article contends correctly, the lawsuit will “radically transform the $1.2 trillion leveraged lending market” because should the plaintiff ultimately prevail in arguing that loans are de facto securities, it would dramatically alter how American companies raise debt, according to two industry groups that filed a brief supporting the defendants’ argument last week. “There are absolutely enormous market consequences if a court determines that leveraged loans are securities,” J. Paul Forrester, a partner at Mayer Brown told Bloomberg. “Leveraged loans and lenders would be potentially subject to the same offering and disclosure requirements as securities and would face the same regulatory oversight and enforcement consequences.”

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Well, whaddaya know, there are people who agree with me… The VIPS, Assange, it’s all I’ve been talking about. I said Mueller is a coward and a liar, Murray calls him deeply corrupt. Same difference.

The Real Muellergate Scandal (Craig Murray)

Robert Mueller is either a fool, or deeply corrupt. I do not think he is a fool. I did not comment instantly on the Mueller Report as I was so shocked by it, I have been waiting to see if any other facts come to light in justification. Nothing has. I limit myself here to that area of which I have personal knowledge – the leak of DNC and Podesta emails to Wikileaks. On the wider question of the corrupt Russian 1% having business dealings with the corrupt Western 1%, all I have to say is that if you believe that is limited in the USA by party political boundaries, you are a fool. On the DNC leak, Mueller started with the prejudice that it was “the Russians” and he deliberately and systematically excluded from evidence anything that contradicted that view.

Mueller, as a matter of determined policy, omitted key steps which any honest investigator would undertake. He did not commission any forensic examination of the DNC servers. He did not interview Bill Binney. He did not interview Julian Assange. His failure to do any of those obvious things renders his report worthless. There has never been, by any US law enforcement or security service body, a forensic examination of the DNC servers, despite the fact that the claim those servers were hacked is the very heart of the entire investigation. Instead, the security services simply accepted the “evidence” provided by the DNC’s own IT security consultants, Crowdstrike, a company which is politically aligned to the Clintons.

That is precisely the equivalent of the police receiving a phone call saying: “Hello? My husband has just been murdered. He had a knife in his back with the initials of the Russian man who lives next door engraved on it in Cyrillic script. I have employed a private detective who will send you photos of the body and the knife. No, you don’t need to see either of them.” There is no honest policeman in the world who would agree to that proposition, and neither would Mueller were he remotely an honest man.

[..] Mueller’s failure to examine the servers or take Binney’s evidence pales into insignificance compared to his attack on Julian Assange. Based on no conclusive evidence, Mueller accuses Assange of receiving the emails from Russia. Most crucially, he did not give Assange any opportunity to answer his accusations. For somebody with Mueller’s background in law enforcement, declaring somebody in effect guilty, without giving them any opportunity to tell their side of the story, is plain evidence of malice. Inexplicably, for example, the Mueller Report quotes a media report of Assange stating he had “physical proof” the material did not come from Russia, but Mueller simply dismisses this without having made any attempt at all to ask Assange himself.

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Where would US media be without Russia?

From Russiagate to Gunboat Diplomacy (Jacobin)

One of the things Russiagate skeptics found unsettling about the frenzy over supposed “collusion” was that it made war more likely. Not only did the now-debunked conspiracy theories and resulting political climate push officials into a more aggressive posture toward Russia, but once the Kremlin was returned to its status as the foreign policy elite’s Big Bad, it was easy to imagine a situation where the threat of a Russian bogeyman could be used to justify any number of unrelated foreign adventures. This appears to be exactly what’s happening with Venezuela right now. First there was Fareed Zakaria, who two months ago tried to goad Trump into attacking Venezuela by pointing to Russia’s support for Maduro.

“Putin’s efforts seem designed to taunt the United States,” he said (it might also have something to do with the billions of dollars Russia sank into the country), making reference to the Monroe Doctrine. He asked if Washington would “allow Moscow to make a mockery of another American red line,” warning that “if Washington does not back its words with deeds” the country could become another Syria. Zakaria concluded: “will Venezuela finally be the moment when Trump finally ends his appeasement?” More recently, Secretary of State Mike Pompeo charged that Russia had “invaded” Venezuela before claiming the Kremlin had dissuaded Maduro from fleeing the country at the last moment, something Pompeo has provided no evidence for but much of the media has treated as fact since.

National Security Advisor John Bolton has said that “this is our hemisphere” and “not where the Russians ought to be interfering.” Democratic Sen. Doug Jones echoed this sentiment on CNN, praising the Trump administration for saying “all options are on the table” to deal with Venezuela, something he suggested may have to be acted on “if there is some more intervention [by] Russia.” The national press, taking a break from warning about Trump being a dangerous authoritarian, has been demanding to know why he hasn’t been more aggressive toward the country over this. Particularly shameless was Florida Rep. Mario Díaz-Balart, who went on Tucker Carlson’s show to peddle half-baked innuendo as brazen as anything claimed in the lead up to the Iraq War. If Maduro’s government survived, he claimed, it would be “a green light, an open door for the Russians and for the Chinese and for others to increase their activity against our national security interest right here in our hemisphere.”

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John Solomon digs on. “She quoted Steele as saying, “Payments to those recruited are made out of the Russian Consulate in Miami..” [..] “It is important to note that there is no Russian consulate in Miami.”

FBI’s Steele Story Falls Apart (Solomon)

The FBI’s sworn story to a federal court about its asset, Christopher Steele, is fraying faster than a $5 souvenir T-shirt bought at a tourist trap. Newly unearthed memos show a high-ranking government official who met with Steele in October 2016 determined some of the Donald Trump dirt that Steele was simultaneously digging up for the FBI and for Hillary Clinton’s campaign was inaccurate, and likely leaked to the media. The concerns were flagged in a typed memo and in handwritten notes taken by Deputy Assistant Secretary of State Kathleen Kavalec on Oct. 11, 2016. Her observations were recorded exactly 10 days before the FBI used Steele and his infamous dossier to justify securing a Foreign Intelligence Surveillance Act (FISA) warrant to spy on Trump campaign adviser Carter Page and the campaign’s contacts with Russia in search of a now debunked collusion theory.

It is important to note that the FBI swore on Oct. 21, 2016, to the FISA judges that Steele’s “reporting has been corroborated and used in criminal proceedings” and the FBI has determined him to be “reliable” and was “unaware of any derogatory information pertaining” to their informant, who simultaneously worked for Fusion GPS, the firm paid by the Democratic National Committee (DNC) and the Clinton campaign to find Russian dirt on Trump. That’s a pretty remarkable declaration in Footnote 5 on Page 15 of the FISA application, since Kavalec apparently needed just a single encounter with Steele at State to find one of his key claims about Trump-Russia collusion was blatantly false.

In her typed summary, Kavalec wrote that Steele told her the Russians had constructed a “technical/human operation run out of Moscow targeting the election” that recruited emigres in the United States to “do hacking and recruiting.” She quoted Steele as saying, “Payments to those recruited are made out of the Russian Consulate in Miami,” according to a copy of her summary memo obtained under open records litigation by the conservative group Citizens United. Kavalec bluntly debunked that assertion in a bracketed comment: “It is important to note that there is no Russian consulate in Miami.”

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What if the relevant sections did get redacted?

Roger Stone Wins Right To Receive Unredacted Parts of Mueller Report (SC)

A federal judge in Washington ordered the Department of Justice to turn over any unredacted sections of Special Counsel Robert Mueller’s report on Russian activities during the 2016 presidential campaign that relate to Roger Stone. U.S. District Judge Amy Berman Jackson gave the prosecutors until Monday to “submit unredacted versions of those portions of the report that relate to defendant Stone and/or ‘the dissemination of hacked materials.” Judge Jackson would review the material in private to see if it is relevant to the case and to decide whether Stone and his defense team will have access to the material.

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Is this a game?

Chelsea Manning Released After 2 Months, Might Be Back In Jail In 6 Days (RT)

Whistleblower Chelsea Manning has been released from a Virginia prison where she spent the last 62 days for refusing to testify on her 2010 leak of classified military files before a grand jury. Manning was released from William G. Truesdale Adult Detention Center in Alexandria, Virginia, on Thursday after the term of the grand jury before which she was supposed to testify expired, her legal team said in a statement reported by the Sparrow Project. However, the WikiLeaks whistleblower and activist might soon be locked up again and has already been served with another subpoena, requesting that she testifies before a different set of jurors. “Unfortunately, even prior to her release, Chelsea was served with another subpoena.


This means she is expected to appear before a different grand jury, on Thursday, May 16, 2019, just one week from her release today,” her lawyers said. Despite having spent over two months behind bars, Manning has no intention to cave in to the demand and make herself available to a secret grand jury’s questioning, according to the statement. “Chelsea will continue to refuse to answer questions, and will use every available legal defense to prove to District Judge Trenga that she has just cause for her refusal to give testimony.” Manning insists that she already gave an “exhaustive testimony” on all the matters concerning her disclosure of military documents at a 2013 court martial. In an 8-page declaration filed to the Virginia court on May 6, Manning accused the US government of using the “corrupt and abusive tool” of grand jury to “harass and disrupt political opponents and activists.”

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Taking us back to Aaron Schwartz.

The Law Being Used to Prosecute Julian Assange Is Broken (Ekeland)

[..] the UK courts will evaluate the US’s request to send Assange to Virginia to stand trial in federal court for a single felony charge of conspiracy to commit unauthorized access to a government computer, a violation of the Computer Fraud and Abuse Act (CFAA). After Assange’s arrest, many reached out to ask me about the CFAA. For years, I’ve represented hackers in federal criminal cases nationally involving the CFAA, including Lauri Love, whom the US unsuccessfully tried to extradite from the UK. The US indicted Love in three separate federal courts in New York, New Jersey, and Virginia, for hacking of a number of government sites including NASA, the FBI, the United States Sentencing Commission, and the Bureau of Prisons.

This was part of #OpLastResort, in protest of the CFAA prosecution and death of computer science pioneer Aaron Swartz, whose suicide in 2013 was widely viewed as resulting from a draconian CFAA prosecution. Whether intended or not, the CFAA makes it easy for a prosecutor to bring felony computer crime charges even when there’s little or no harm. [..] The core problem with the Computer Fraud and Abuse Act is that it doesn’t clearly define one of the central things it prohibits: unauthorized access to a computer. The courts across the country aren’t any help on this front, issuing conflicting decisions both with other jurisdictions and often within their own. Under the CFAA, what is a felony in one jurisdiction is legal in another.

This lack of definitional clarity allows prosecutors to charge felonies even when the harms are minimal, questionable, or just political views that DOJ doesn’t like. This is a serious problem, given that much political speech and protest these days is done with computers. And DOJ has previously used the CFAA in a politically charged prosecution. In 2011, DOJ charged the politically outspoken Aaron Swartz under the CFAA for going into an open server closet at MIT, a mecca of modern American hacking, and downloading academic articles—many of which were publicly funded—for public distribution. Even though the extent of any harm was questionable—this was a mere copying of articles—DOJ charged him with felony unauthorized access to a computer, unauthorized damage to a protected computer, felony aiding and abetting of both, and wire fraud.

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All Swedes need to be deeply ashamed. Is it too much to ask of you to let your voices be heard? All I hear is silence.

Swedish Prosecutor To Give Decision On Assange Rape Inquiry (G.)

Sweden’s state prosecutor will announce on Monday whether she will reopen a preliminary investigation into a rape allegation against Julian Assange. The WikiLeaks founder is in prison in Britain after he was arrested last month after seven years holed up in the Ecuadorian embassy in London. The US wants to extradite him in a case relating to WikiLeaks’ massive release of sensitive military and diplomatic documents. Sweden’s legal tussle with the Australian Assange has dragged on for nearly a decade after he was accused by two Swedish women of sexual assault and rape in 2010.


The statute of limitations ran out on the sexual assault allegations in 2015 and the prosecutor dropped the investigation into the rape allegation in 2017 because Assange was in the Ecuadorian embassy, where he had taken refuge to avoid extradition. The prosecutor said at the time the investigation could be reopened if the situation changed. After Assange’s arrest last month, the lawyer representing the woman who accused Assange of rape asked for the investigation to be reopened. “At [a] press conference, the prosecutor will announce her decision, which will formally be made immediately before the press conference,” the Swedish prosecution authority said in a statement.

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Elizabeth Lea Vos is compiling a history of all WikiLeaks files.

The Revelations of WikiLeaks: No. 2 (Vos)

Three months after it published the “Collateral Murder” video, WikiLeaks on July 25, 2010 released a cache of secret U.S. documents on the war in Afghanistan. It revealed the suppression of civilian casualty figures, the existence of an elite U.S.-led death squad and the covert role of Pakistan in the conflict, among other revelations. The publication of the Afghan War Diaries helped set the U.S. government on a collision course with WikiLeaks founder Julian Assange that ultimately led to his arrest last month. The war diaries were leaked by then-Army-intelligence-analyst Chelsea Manning, who had legal access to the logs via her Top Secret clearance.

Manning only approached WikiLeaks, after studying the organization, following unsuccessful attempts to leak the files to The New York Times and The Washington Post. A major controversy surrounding the Diaries’ release were allegations that operational details were made public to the Taliban’s battlefield advantage and that U.S. coalition informants’ lives were put at risk by publishing their names. Despite a widely-held belief that WikiLeaks carelessly publishes un-redacted documents, only 75,000 from a total of more than 92,201 internal U.S. military files related to the Afghan War (between 2004 and 2010) were ultimately published.

WikiLeaks explained that it held back so many documents because Manning had insisted on it: “We have delayed the release of some 15,000 reports from the total archive as part of a harm minimization process demanded by our source.” Manning testified at her 2013 court-martial that the files were not “very sensitive” and did not report active military operations.

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Facebook: We’re Not A Monopoly, We’re “A Successful American Company”

Chris Hughes, Zuck’s former roommate, said in a NYT op-ed that Facebook should be split up. The reaction: no, we’re just successful, but we do need new laws, and Zuck himself has some great ideas for that.

Facebook Co-Founder Calls For Breakup Of The Company (ZH)

[..] would-be rivals can’t raise the money to take on Facebook. Nobody would finance them knowing that if they get too powerful, Facebook will run them out of business. Hughes doesn’t blame Zuckerberg for this; after all, he’s simply demonstrating the “virtuous hustle of a talented entrepreneur.” But this is exactly why the government should feel obligated to step in and “break up Facebook’s monopoly and regulate the company to make it more accountable to the American people.” Specifically, Hughes believes the FTC should work with the DoJ to undo the Instagram and Whatsapp acquisitions. There is some precedent for this, he says.

How would a breakup work? Facebook would have a brief period to spin off the Instagram and WhatsApp businesses, and the three would become distinct companies, most likely publicly traded. Facebook shareholders would initially hold stock in the new companies, although Mark and other executives would probably be required to divest their management shares. Until recently, WhatsApp and Instagram were administered as independent platforms inside the parent company, so that should make the process easier. But time is of the essence: Facebook is working quickly to integrate the three, which would make it harder for the F.T.C. to split them up. For what it’s worth, Hughes acknowledges his complicity in creating Facebook, and the fact that he didn’t speak out – or even question the company’s monopoly power – until after Cambridge Analytica.

But that’s the past: Already, support for breaking up big-tech monopolies is gaining traction among Democrats and Republicans alike. The fact that Hughes has decided to criticized his former co-founder (and one-time college buddy) in such a public forum might seem galling to some: After all, Hughes was transformed into a millionaire 500 times over largely because he had the good fortune of being assigned to the same dorm room as Zuckerberg at Harvard. But regardless, now that Hughes has broken the seal, will he inspire more of Facebook’s co-founders and former top employees speak out. It’s worth noting that in March, Chris Cox, one of Zuckerberg’s top deputies and a longtime FB executive, left the company. Cox’s decision to leave was reportedly due to ‘disagreement’s’ that were alluded to in a blog post.

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Torn between multiple lovers. The UK governed by a fringe party.

UK Tories Could Come Sixth In European Elections (G.)

Conservative officials fear the party could come sixth in the European elections, with their support plummeting to single digits. Candidates running in the election said the party was “almost in denial” that the poll was happening and continued to insist they would not need to take up their seats in the European parliament, despite fading prospects for a cross-party deal with Labour that would enable Brexit to happen before 2 July. The fears of a dismal performance have been stoked by the fact that the party plans to spend no money on candidate campaigning, will not publish a manifesto and is refusing to hold a launch.


One MEP said candidates were funding their campaigns out of their own pockets, unlike previous years when there was a central pot of funding available. They have been told they are allowed to have their own regional manifestos, but many are not bothering, and there will be no central party manifesto. “The thinking is that if we make no effort then we will have an excuse for having done so badly. But it is seriously embarrassing,” said one MEP. Another Conservative source said internal data showed the party could do worse than the Brexit party, Labour, the Lib Dems, Change UK and even potentially the Greens, with support at less than 10%. That would translate to only a handful of seats, down from the current 22.

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Nuclear is set to make a come back, because it is the only option to maintain our complex societies. He may have a point there. The ultimate desperation.

America, You Are Fired! (Dmitry Orlov)

Some ironies are just too precious to pass by. The 2016 US presidential elections gave us Donald Trump, a reality TV star whose famous tag line from his show “The Apprentice” was “You are fired!” Focus on this tag line; it is all that is important to this story. Some Trump Derangement Disorder sufferers might disagree. This is because they are laboring under certain misapprehensions: that the US is a democracy; or that it matters who is president. It isn’t and it doesn’t. By this point, the choice of president matters as much as the choice of conductor for the band that plays aboard a ship as it vanishes beneath the waves. I have made these points continuously since before Trump got into office. Whether or not you think that Trump was actually elected, he did get in somehow, and there are reasons to believe that this had something to do with his wonderfully refreshing “You are fired!” tag line.

[..] Financially ruinous and generally nonsensical schemes such as tar sands, shale oil and industrial-scale photovoltaics, wind generation and electric cars will only accelerate the process of sorting nations into energy haves and energy have-nots, with the have-nots wiping themselves out sooner rather than later. Leaving aside various fictional and notional schemes (nuclear fusion, space mirrors, etc.) and focusing just on the technologies that already exist, there is only one way to maintain industrial civilization, and that is nuclear, based on Uranium 235 (which is scarce) and Plutonium 239 produced from Uranium 238 (of which there is enough to last for thousands of years) using fast neutron reactors. If you don’t like this choice, then your other choice is to go completely agrarian, with significantly reduced population densities and no urban centers of any size.

And if you do like this choice, then you have few alternatives other than to go with the world’s main purveyor of nuclear technology (VVER-series light water reactors, BN-series fast neutron breeder reactors and closed nuclear fuel cycle technology) which happens to be Russia’s state-owned conglomerate Rosatom. It owns over a third of the world nuclear energy market and has a portfolio of international projects stretching far into the future that includes as much as 80% of the reactors that are going to be built. The US hasn’t been able to complete a nuclear reactor in decades, the Europeans managed to get just one new reactor on line (in China) while Japan’s nuclear program has been in disarray ever since Fukushima and Toshiba’s financially disastrous acquisition of Westinghouse. The only other contenders are South Korea and China. Again, if you don’t like nuclear—for whatever reason—then you can always just buy yourself some pasture and some hayfields and start breeding donkeys.

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Nuclear anyone?

Chernobyl Has Become A Refuge For Wildlife 33 Years Later (Conv.)

About 30 researchers from the United Kingdom, Ireland, France, Belgium, Norway, Spain and Ukraine presented the latest results of our work. These studies included work on big mammals, nesting birds, amphibians, fish, bumblebees, earthworms, bacteria and leaf litter decomposition. These studies showed that at present the area hosts great biodiversity. In addition, they confirmed the general lack of big negative effects of current radiation levels on the animal and plant populations living in Chernobyl. All the studied groups maintain stable and viable populations inside the exclusion zone. These studies showed that at present the area hosts great biodiversity.

In addition, they confirmed the general lack of big negative effects of current radiation levels on the animal and plant populations living in Chernobyl. All the studied groups maintain stable and viable populations inside the exclusion zone. A clear example of the diversity of wildlife in the area is given by the TREE project (TRansfer-Exposure-Effects, led by Nick Beresford of the UK’s Centre for Ecology and Hydrology). As part of this project, motion detection cameras were installed for several years in different areas of the exclusion zone. The photos recorded by these cameras reveal the presence of abundant fauna at all levels of radiation. These cameras recorded the first observation of brown bears and European bison inside the Ukrainian side of the zone, as well as the increase in the number of wolves and Przewalski horses.

Our own work with the amphibians of Chernobyl has also detected abundant populations across the exclusion zone, even on the more contaminated areas. Furthermore, we have also found signs that could represent adaptive responses to life with radiation. For instance, frogs within the exclusion zone are darker than frogs living outside it, which is a possible defence against radiation. Studies have also detected some negative effects of radiation at an individual level. For example, some insects seem to have a shorter lifespan and are more affected by parasites in areas of high radiation. Some birds also have higher levels of albinism, as well as physiological and genetic alterations when living in highly contaminated localities. But these effects don’t seem to affect the maintenance of wildlife population in the area.


European bison (Bison bonasus), boreal lynx (Lynx lynx), moose (Alces alces) and brown bear (Ursus arctos) in Chernobyl Exclusion Zone (Ukraine). Proyecto TREE/Sergey Gaschack

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Wondering what practical measures they have in mind. Renewables?

Ireland Second Country To Declare Climate, Biodiversity Emergency (RTE)

Ireland has become only the second country in the world to declare a climate and biodiversity emergency. The development came after a Fianna Fáil amendment to the Oireachtas report on Climate Action was accepted by both the Government and Opposition parties without a vote. Chair of the Climate Action Committee, Fine Gael’s Hildegarde Naughton, welcomed the outcome as “an important statement” but added “now we need action.” She said Minister for Climate Action Richard Bruton would speedily return to the Dáil with new proposals, and she looked forward to working “with all parties and none” to scrutinise them.


Green Party leader Eamon Ryan also welcomed the development, but warned that “declaring an emergency means absolutely nothing unless there is action to back it up. That means the Government having to do things they don’t want to do”. Deputy Bríd Smith, of Solidarity/People Before Profit, said she was “delighted” with the declaration, but added it will be “interesting to see” if the Government will support her Climate Emergency Measures Bill next month, which seeks to to limit oil and gas exploration.

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Feb 262019
 


Salvador Dali The Feeling of Becoming 1931

 

Bubble-Era Home Mortgages Are A Disaster Waiting To Happen (Jurow)
18 Reasons Why Australian Property Prices Will Fall Further (AFR)
Imports by China, Emerging Asia Plunge Most Since 2008 (WS)
Debt Roars Back in China, Deleveraging Is Dead (BBG)
With 10-to-1 Leverage, Shadow Banks Fuel China’s Huge Stock Boom (BBG)
Paul Volcker Is Worried About the ‘Culture of the Financial System’ (Fortune)
Rising Level Of Corporate Debt A Risk To Global Economy – OECD
Germany & Netherlands The Only Real Euro Winners (RT)
Jeremy Corbyn: We’ll Back A Second Referendum To Stop Tory No-Deal Brexit (G.)
UK and US Agree Post-Brexit Derivatives Trading Deal (G.)
Judge Threatens To ‘Shut Down’ Cancer Patient’s Lawyer in Monsanto Case (G.)
Concrete Is Tipping Us Into Climate Catastrophe. It’s Payback Time (Vidal)

 

 

“..almost one-third of these delinquent owners had not paid the mortgage for at least five years..”

Bubble-Era Home Mortgages Are A Disaster Waiting To Happen (Jurow)

Remember all those sub-prime mortgages that blew up in 2007 and popped the housing bubble? The widely-held consensus is that millions of them were foreclosed as housing markets cratered. [..] The truth is these mortgages are still dangerous and could soon undermine the housing recovery. Collectively, loans from the bubble period that were not guaranteed by Fannie Mae or Freddie Mac were called non-agency securitized mortgages. Researcher Black Box Logic had an enormous database of non-agency loans until it was sold to Moody’s three years ago. At the peak of the buying madness — November 2007 — its database showed 10.6 million loans outstanding with a total balance of $2.43 trillion.

In 2016, Fitch Ratings first published a spreadsheet showing what percentage of these loans had been delinquent for more than three-, four-, or five years. Here is an updated table showing the 10-worst states and how the number of deadbeat borrowers has soared.

In 2012, just 2% of all these delinquent borrowers had not paid for more than five years. Two years later that number had skyrocketed to 21%. Why? Mortgage servicers around the country had discontinued foreclosing on millions of delinquent properties. Homeowners got wind of this and realized they could probably stop making payments without any consequences whatsoever. So they did. Take a good look at the figures for 2016. Nationwide, almost one-third of these delinquent owners had not paid the mortgage for at least five years.

In the worst four states, more than half of them were long-term deadbeats. Notice also that four of the other states were those you would not expect to have this rampant delinquency — North Dakota, Massachusetts, Vermont, and Maryland. Another way to gauge the extent of the problem is to look at the major metros with the highest delinquency rate. Here is a table of the 10 metros with the worst delinquency rate in early 2016, taken from Black Box Logic’s database.

Within the last two years, important graphs and tables showing the extent of the delinquency mess have disappeared from reports issued regularly by Fannie Mae, mutual fund provider TCW, and data provider Black Knight Financial Services. According to a TCW spokesperson, the graph is no longer published in the firm’s Mortgage Market Monitor because there did not seem to be much demand for it. Really? This graph had appeared in their report for years and showed the extremely high percentage of modified non-agency loans where the borrower had re-defaulted. Meanwhile, the omitted Fannie Mae table also showed the rising percentage of modified Fannie Mae loans that had re-defaulted. Its last published table showed re-default rates of almost 40%. Do you think these important omissions are just coincidence?

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25% in 2019 alone?!

18 Reasons Why Australian Property Prices Will Fall Further (AFR)

The housing market has taken a turn for the worse moving deeper into the decline of a debt-financed asset bubble, possibly driving house prices to fall by as much as 25 per cent in 2019 on nominal terms, according to housing bear and analyst LF Economics. The group made up of Lindsay David and Philip Soos, who have authored books on boom and bust in housing markets, lists 18 factors that are putting extreme pressure on the Sydney and Melbourne markets. Their baseline prediction is a 15 per cent to 20 per cent fall in prices just in 2019 although 25 per cent is possible.

One of the main factors driving the pressure is $120 billion worth of interest-only loans that are transitioning to principal and interest loans between now and 2021. “Banks and regulators have already softened their stance on these borrowers, allowing some greater time to sell or extending the interest-only period ,” LF Economics said in a new report “Let The Bloodbath Begin”. “Nevertheless, with debt repayments rising anywhere between 20 [per cent] to 50 per cent upon conversion, many recent borrowers will be placed under considerable financial stress.”

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Question: how are the shadow banks linked to international trade?

Imports by China, Emerging Asia Plunge Most Since 2008 (WS)

Imports by China and other emerging Asian economies in December plunged to the lowest level in two years, in the steepest one-month plunge since 2008, after having already plunged in November, according to the Merchandise World Trade Monitor, released on Monday by CPB Netherlands Bureau for Economic Policy Analysis, a division of the Ministry of Economic Affairs. For November and December combined, imports by China and other Emerging Asian Economies plunged 13%, the steepest two-month plunge since November and December 2008 (-18%). In point terms, it was the largest plunge in the data going back to 2000. “Emerging Asia” includes China, Hong Kong, India, South Korea, Indonesia, Malaysia, Taiwan, Thailand, the Philippines, Pakistan, and Singapore. But China is by far the largest economy in the group, and by far the largest importer in the group.

The fact that imports into Emerging Asia are plunging is a sign of suddenly and sharply weakening demand in China. This type of abrupt demand-downturn was clearly visible in the double-digit plunge in new-vehicle sales in China over the last four months of 2018, plunging demand in many other sectors in China, and record defaults by Chinese companies. When it comes to China, “plunge is no longer an exaggeration. So the US trade actions against China – the variously implemented, threatened, or delayed tariffs – was largely geared toward hitting exports by China to the US. But it was imports that plunged! Exports from Emerging Asia too dropped in November and December, but not nearly as brutally as imports, down by 6.7% over the two months combined. And these drops were not all that unusual in the export index:

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Xi has lost control. There are reports about him being replaced, but that would be way into the future, if it happens.

Debt Roars Back in China, Deleveraging Is Dead (BBG)

For almost two years, the question has lingered over China’s market-roiling crackdown on financial leverage: How much pain can the country’s policy makers stomach? Evidence is mounting that their limit has been reached. From bank loans to trust-product issuance to margin-trading accounts at stock brokerages, leverage in China is rising nearly everywhere you look. While seasonal effects explain some of the gains, analysts say the trend has staying power as authorities shift their focus from containing the nation’s $34 trillion debt pile to shoring up the weakest economic expansion since 2009.

The government’s evolving stance was underscored by President Xi Jinping’s call for stable growth late last week, while on Monday the banking regulator said the deleveraging push had reached its target. “Deleveraging is dead,” said Alicia Garcia Herrero, chief Asia Pacific economist at Natixis in Hong Kong. Investors reacted positively to the official remarks, with the more than 30 brokerages listed in Shanghai and Shenzhen up by the 10 percent daily limit on Monday, according to data compiled by Bloomberg. Industrial & Commercial Bank of China Ltd., the world’s biggest lender by assets, rose 6.3 percent.

[..] China’s overall leverage ratio stood at 243.7 percent at the end of 2018, with corporate debt reaching 154 percent, household borrowings at 53 percent and government leverage at 37 percent, according to Zhang Xiaojing, deputy head of the Institute of Economics at the Chinese Academy of Social Sciences. Before that, the nation’s leverage ratio climbed at an average 12 percentage points each year between 2008 and 2016. China’s total debt will rise relative to GDPthis year, after a flat 2017 and a decline in 2018, Wang Tao, head of China economic research at UBS in Hong Kong, predicted in a report this month. While Wang cautioned that “re-leveraging” may increase concerns about China’s commitment to ensuring financial stability, investors have so far cheered the prospect of easier credit conditions.

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The shadows reign supreme in China.

“..a rally that added more than $1 trillion to stock values since the start of 2019.”

With 10-to-1 Leverage, Shadow Banks Fuel China’s Huge Stock Boom (BBG)

Eager to pile into the world’s most-volatile major stock market with 10-to-1 leverage? China’s shadow bankers are happy to help – and that has the nation’s policy makers worried. Just hours after China’s CSI 300 Index notched a 6 percent surge on Monday, its biggest gain in more than three years, the country’s securities regulator warned of a rise in unregulated margin debt and asked brokerages to increase monitoring for abnormal trades. The China Securities Regulatory Commission’s statement followed a pickup in advertising by margin-finance platforms, which operate with little to no supervision and offer far more leverage than the country’s regulated securities firms.

While margin debt in China is much lower today than when it helped precipitate a market collapse in 2015, investors are taking on leverage quickly as they chase a rally that added more than $1 trillion to stock values since the start of 2019. The risk is that a sudden reversal would force leveraged traders to sell, exacerbating volatility in a market that posted bigger swings than any of its peers over the past 30 days. That prospect may unnerve Chinese policy makers, who have a history of trying to protect the nation’s 147 million individual investors from outsized losses. “If the market continues to go up, the situation will get worse and so will the risks,” said Yang Hai, an analyst at Kaiyuan Securities Co. in Shanghai. “Under the current regulatory scope, investors have to shoulder risks themselves.”

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Finally someone talks to Volcker and he doesn’t say anything.

Paul Volcker Is Worried About the ‘Culture of the Financial System’ (Fortune)

Former Federal Reserve chairman Paul Volcker has some serious fears about the banking industry. And he believes supporting regulators to combat those fears is imperative. Speaking to analyst Mike Mayo in a CFA Enterprising Investor interview published on Monday, Volcker said that he’s “concerned” about the current “culture of the financial system, banking in particular.” He told Mayo that banks have been dominated by “how much profit the firm (and you) make.” And he believes that the focus on profitability could ultimately affect corporate oversight. “What’s the role of directors in keeping culture under control?” he asked. “Can the directors of a big bank really do an effective job of overseeing an institution? Or do they see their job as protecting the CEO who they appointed?

Or maybe the CEO appointed them, so there is a certain amount of built in mutual interest in ducking emphasis on internal controls.” Volcker, who served as Fed chairman during the Carter and Reagan administrations, has been one of the more vocal supporters of controlling and regulating banks. He’s the namesake for the Volcker Rule, which aims at limiting banking activity and bank interaction with hedge funds and private equity funds. It also puts the onus on banks to protect customers. In his interview with Mayo, Volcker talked about the importance of banks protecting their customers. He said that a right and good banking culture is one where “the customer comes first.” The issue, however, is that banks sometimes fail in doing that, Volcker said.

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No kidding.

Rising Level Of Corporate Debt A Risk To Global Economy – OECD

The global economy faces escalating risks from rising levels of corporate debt, with companies around the world needing to repay or refinance as much as $4tn (£3.1tn) over the next three years, according to the OECD. Sounding the alarm over the scale of the debt mountain built up over the past decade since the last financial crisis, the Paris-based Organisation for Economic Co-operation and Development found that global company borrowing has ballooned to reach $13tn by the end of last year – more than double the level before the 2008 crash. Nearly the equivalent of the entire US Federal Reserve balance sheet – roughly $4tn – will need to be repaid or refinanced over the coming years, the report said. However, the task is complicated by cooling economic growth from trade tensions and a slower rate of expansion in China ..

Financial market investors have grown increasingly concerned that high debt levels in the US could turn a looming slowdown for the world’s largest economy into a full-blown recession. High debt levels in several other nations as the Federal Reserve raises interest rates has also rattled financial markets in recent months. According to research from the Economist Intelligence Unit, a potential meltdown in the US bond market is the second biggest risk to the world economy after the US-China trade standoff, amid a combination of global economic headwinds “more wide-ranging and complex than at any point since the great recession”. The IMF has previously warned of gathering “storm clouds” for the world economy, including from trade tensions and heightened levels of debt – particularly in China.

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.. since 1999, Germans on average cumulatively richer by $26,120. Italians poorer by $84,000.

Germany & Netherlands The Only Real Euro Winners (RT)

The eurozone’s single currency, the euro, has been a serious drag on the economic growth of almost every member of the bloc, according to a study by German think tank, the Centre for European Politics (CEP).
Germany and the Netherlands, however, have benefited enormously from the euro over the 20 years since its launch, the study showed. The currency triggered credit and investment booms by extending the benefits of Germany’s low interest-rate environment across the bloc’s periphery. However, those debts became hard to sustain after the 2008 financial crisis, with Greece, Ireland, Spain, Portugal and Cyprus forced to seek financial aid as growth slowed and financing became scarce.

According to CEP, over the entire period since 1999, Germans were on average estimated to be cumulatively richer by €23,000 ($26,120) than they would otherwise have been, while the Dutch were €21,000 ($23,850) wealthier. To compare, Italians and French were each €74,000 ($84,000) and €56,000 ($63,600) poorer, respectively. The survey did not include one of Europe’s fastest-growing economies, Ireland, due to a lack of appropriate data. [..] In the first few years after its introduction, Greece gained hugely from the euro but since 2011 has suffered enormous losses,” the authors wrote, explaining that over the whole period, Greeks were each €190 ($216) richer than they would have been.

The study concluded that since the loser countries could no longer restore their competitiveness by devaluing their currencies, they had to double down on structural reforms. Spain was highlighted as a country that was on track to erase the growth deficit it had built up since the euro’s introduction. “Since 2011, euro accession has resulted in a reduction in prosperity. Losses reached their peak in 2014. Since then, they have been falling steadily,” said the report, adding: “The reforms that have been carried out, are paying off.”

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Corbyn should have been much more concerned about his credibility. This late in the game, does it even matter anymore?

Jeremy Corbyn: We’ll Back A Second Referendum To Stop Tory No-Deal Brexit (G.)

Jeremy Corbyn has finally thrown his party’s weight behind a second EU referendum, backing moves for a fresh poll with remain on the ballot paper if Labour should fail to get its own version of a Brexit deal passed this week. The decision to give the party’s backing to a second referendum follows a concerted push by the shadow Brexit secretary, Sir Keir Starmer, and deputy leader, Tom Watson, who fear any further delay could have led to more defections to the breakaway Independent Group (TIG), whose members all back a second referendum. Although the move has delighted MPs who are backing the People’s Vote campaign, Corbyn is likely to face determined opposition from dozens of MPs in leave seats if the party whips to back a second referendum, including a significant number of frontbenchers.

The former shadow minister Lucy Powell said she believed at least 25 MPs would vote against any whip to back a second referendum, meaning that it would face an uphill struggle to pass the Commons without significant Conservative support. A private briefing sent to Labour MPs on Monday night and seen by the Guardian makes it clear that Labour’s policy would be to include remain as an option in any future referendum. “We’ve always said that any referendum would need to have a credible leave option and remain,” the briefing said. “Obviously at this stage that is yet to be decided and would have to be agreed by parliament.”

The briefing also makes it clear that the party would not support no deal being included on the ballot paper. “There’s no majority for a no-deal outcome and Labour would not countenance supporting no deal as an option,” the briefing says. “What we are calling for is a referendum to confirm a Brexit deal, not to proceed to no deal.”

https://twitter.com/i/status/1100294356706168832

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No matter how big the political mess,

UK and US Agree Post-Brexit Derivatives Trading Deal (G.)

The US has lent its backing to Britain to protect the City from losing trillions of pounds of complex financial derivatives business after Brexit, warding off a potential banking industry land grab by the EU. In a joint announcement heralded as a sign of the special relationship between the UK and the US, the two countries said they would take every step to ensure the continued trading of derivatives across the Atlantic under every Brexit eventuality. Derivatives are financial contracts widely used by companies to manage risks, ranging from hedging against changes in central bank interest rates to fluctuations in commodity prices. Brexit threatens to unpick trading in the UK, even with the US, as City banks currently operate under EU rules while Britain is a member of the bloc.

Under the steps announced by the Bank of England, the Financial Conduct Authority and the US Commodity Futures Trading Commission, firms working in the US and the UK will continue to meet the requirements required to operate in both countries, even if Britain leaves the EU without a deal. London and New York sit at the centre of the world’s multitrillion-pound derivatives market, with the US and the UK controlling 80% of the $594tn (£454tn) a year business – worth more than five times world GDP. About a third of the £230tn of derivatives contracts traded in the UK every year come from US companies, more than any other jurisdiction. The development comes as Brussels prepares rules that would force clearing houses – financial institutions key to the trading of derivatives – outside the EU to come under the supervision of its regulators.

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This is getting awfully close to class justice. Monsanto has hundreds of the top lawyers, and what do the plaintiffs have?

Judge Threatens To ‘Shut Down’ Cancer Patient’s Lawyer in Monsanto Case (G.)

Monsanto is facing its first federal trial over allegations that its Roundup weedkiller causes cancer, but a US judge has blocked attorneys from discussing the corporation’s alleged manipulation of science. In an extraordinary move in a packed San Francisco courtroom on Monday, US judge Vince Chhabria threatened to sanction and “shut down” a cancer patient’s attorney for violating his ban on talking about Monsanto’s influence on government regulators and cancer research. “You’ve completely disregarded the limitations that were set upon you,” the visibly angry judge said to attorney Aimee Wagstaff, threatening to prevent her from continuing. “If you cross the line one more time … your opening statement will be over … If I see a single inappropriate thing on those slides, I’m shutting you down.”

The unusual conflict in the federal courtroom has fueled concerns among Monsanto’s critics that the trial may be unfairly stacked against the plaintiff, Edwin Hardeman, a 70-year-old Santa Rosa man who alleges that his exposure to Roundup over several decades caused his cancer. Building on longstanding allegations, Hardeman’s lawyers and other critics have argued that Monsanto has for years suppressed negative studies and worked to promote and “ghostwrite” favorable studies about its herbicide to influence the public and regulators.

In a blow to the plaintiffs, Chhabria this year approved Monsanto’s request to prohibit Hardeman’s attorneys from raising allegations about the corporation’s conduct, saying issues about its influence on science and government were a “significant … distraction”. That means jurors must narrowly consider the studies surrounding Roundup’s cancer risks, and if they rule that Monsanto caused Hardeman’s illness, then in a second phase the jury would learn about the company’s conduct when assessing liability and punitive damages.

[..] Wagstaff told the Guardian last week before trial began that the limitations on evidence in the first phase meant the “jury will only hear half of the story”. “The jury will hear about the science, but they won’t get to hear about how Monsanto influenced it,” she said. “The jury won’t have a complete understanding of the science. If we win without the jury knowing the complete science, that’s a real problem for Monsanto.” Chhabria repeatedly interrupted Wagstaff’s opening statement Monday morning, reminding jurors that her comments did not constitute evidence and should be taken with a “grain of salt”. He also asked her to speed up when she was introducing Hardeman and his wife and discussing how they first met in 1975.

Wagstaff spoke in detail about the research on cancer and glyphosate, about some of Monsanto’s involvement in studies, and about the company’s communications with the Environmental Protection Agency. [..] The restrictions on testimony about Monsanto’s conduct and alleged manipulation of science is likely to be a major detriment to Hardeman and future plaintiffs, said Jean M Eggen, professor emerita at Widener University Delaware Law School. “It was a brilliant move on the part of the defendant Bayer to try to keep [out] all of that information,” she said. “And it may pay off for them.”

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We paved paradise. Which is a much wider and bigger issue than just a climate one.

Concrete Is Tipping Us Into Climate Catastrophe. It’s Payback Time (Vidal)

Because of the heat needed to decompose rock and the natural chemical processes involved in making cement, every tonne made releases one tonne of C02, the main greenhouse warming gas. Including the new Crossrail line through London, the building of Britain’s four largest current construction projects will, if completed, together emit more than 10m tonnes of CO2 – roughly the same amount as a city the size of Birmingham, or what 19 million Malawians emit in a year. Nearly 6% of all UK greenhouse gas emissions, and up to 8% of the world’s, are now sourced from cement production. If it were a country, the cement industry would be the third largest in the world, its emissions behind only China and the US.

So great is its carbon footprint that unless it is transformed and made to adopt cleaner practices, the industry could, on its own, jeopardise the whole 2015 Paris agreement which aims to hold worldwide temperatures to a 2C increase. To bring it into line, the UN says its annual emissions need to fall about 16% in the next 10 years, and by far more in the future. While some of the biggest cement companies have reduced the carbon intensity of their products by investing in more fuel-efficient kilns, most improvements gained have been overshadowed by the massive increase in global cement and concrete production. Population increases, the urban explosion in Asia and Africa, the need to build dams, roads and houses, as well as increases in personal wealth have stoked demand.

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Jul 102018
 


John Swope Trees in fog (Chile) 1939

 

Leveraged-Loan Risks Are Piling Up (WS)
UK House Prices Should Be Frozen For Five Years – Think Tank (Ind.)
24 Hours of Brexit Mayhem (Ind.)
Britain Has Gone To Huge Trouble To Humiliate Itself (Fintan O’Toole)
Novichok In Wiltshire Death ‘Highly Likely’ From Batch Used On Skripals (G.)
Nissan Says Emissions And Fuel Economy Tests Were Falsified (R.)
Trump Slams Pfizer After July 1 Drug Price Hikes (R.)
Judge Rejects Trump Request For Long-Term Detention Of Immigrant Children (R.)
Egypt Rejects Europe’s Intent To Set Up ‘Regional Disembarkation Centres’ (AW)
If You Love Greece, Help Us Get Rid Of Alexis Tsipras And His Zombie Party (G.)
When Collapse Goes Kinetic (Kunstler)
As Trial Opens, Man Dying Of Cancer Blames Monsanto’s Roundup (AFP)

 

 

Not learned a single thing in the past 10 years.

Leveraged-Loan Risks Are Piling Up (WS)

US junk-bond issuance in June plunged 31% from a year ago to just $14.5 billion, the lowest of any June in five years, according to LCD of S&P Global Market Intelligence. During the first half of the year, junk bond issuance dropped 23% from a year ago to $110.6 billion. Is investor appetite for risky debt drying up? Have investors given up chasing yield? On the contrary! They’re chasing harder than before, but they’re chasing elsewhere in the junk-rated credit spectrum: leveraged loans. Leveraged loans are another way by which junk-rated companies can raise money. These loans are arranged by banks and sold either as loans or as Collateralized Loan Obligation (CLOs) to other investors, such as pension funds or loan funds.

They’re a $1 trillion market and trade like securities. But the SEC, which regulates securities, considers them loans and doesn’t regulate them. No one regulates them. In the first half, companies issued $274 billion of non-amortizing leveraged loans, and $97 billion in revolving and amortizing leveraged loans, according to LCD, for a total of $371 billion, on par with the record set in the first half last year. This is well over triple the amount of junk bonds issued in same period ($110 billion). Many of these loans have floating interest rates, typically pegged to the dollar-Libor. And in an investment environment where the Fed has been trying to push up interest rates, Libor has surged, and floating-rate loans, whose interest payments increase as Libor ratchets higher, are very appealing to investors – despite the additional risks these higher interest payments pose for the companies that are already struggling with negative cash flows.

[..] Leveraged loans come with covenants that are supposed to protect investors during the term of the loan and in case of default. With strong covenants and good collateral, leveraged loans tend to be less risky than junk bonds issued by the same company. Alas, investors have the hots for this debt, and companies are taking advantage of it by weakening covenants, giving investors fewer protections and the company more leeway – such as paying interest with more debt rather than cash if it runs out of cash (payment-in-kind or PIK); normally, not being able to pay interest would constitute a default, but not with these “covenant lite” or “cov-lite” loans. The boom in cov-lite has started years ago and has surged to massive record proportions. When these loans default, investors are exposed to much greater losses.

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Interesting idea. Decades too late though.

UK House Prices Should Be Frozen For Five Years – Think Tank (Ind.)

UK house prices should be frozen for five years to help prevent another financial crisis, the think tank IPPR has said. The group has urged the Bank of England to freeze property prices under a separate new inflation target and said this could lead to house prices falling by around 10 per cent in real terms as other prices and wages continue to rise, making homes more affordable. Under the IPPR’s proposals, house prices would be allowed to increase “only after expectations of constantly rising house prices have been ‘reset’”. The think tank also said prices would be allowed to grow “no faster than the general consumer price inflation target of 2 per cent, meaning no further growth in the real value of people’s homes”.

The IPPR said its recommendations were part of a wider plan to “rebalance the UK economy away from finance” so as to avoid another financial crisis. According to the IPPR, the financial sector’s “dominance” since the 1980s has contributed to a strong pound, which has hurt exporters, and has attracted surplus money from other countries, which has been channelled into loans for speculative investors, including mortgage lending. This speculation over house prices, the think tank said, has helped drive up prices and at the same time made the economy more vulnerable to a crisis, because it has reduced funds available for more productive investment, created regional inequalities with disproportionate growth in London and the South East, and “concentrated market power into the hands of a small number of large banks”.

[..] Grace Blakeley, IPPR research fellow, said: “Since the 1980s, the UK’s business model has rested on attracting capital from the rest of the world, which it has channelled into debt for UK consumers. The 2008 crisis proved that this is unsustainable. “We need to move towards a more sustainable growth model, one built on production and investment rather than debt and speculation. To do this, we must break the cycle of ever-rising house prices driving property speculation, crowding out investment in the real economy.”

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A confidence vote looks inevitable.

24 Hours of Brexit Mayhem (Ind.)

Theresa May is clinging on to power following the dramatic resignation of Boris Johnson and a bruising 24 hours of conflict with Tory Brexiteers. Mr Johnson became the third minister to quit in the space of a day, accusing Ms May of pursuing a Brexit that would lock Britain into “the status of colony”. In a scathing letter, he said her plans for negotiating with Europe decided at Chequers last week equated to going into battle with “white flags fluttering”. But despite the resignations and the looming threat of a “vote of no confidence”, Ms May survived the day and finished it with a swipe at Mr Johnson, in which she appeared to question his motives for quitting.

After David Davis left his job as Brexit secretary just before midnight on Sunday, speculation grew as to whether there would be a slew of resignations, bringing down the government. He had been followed by fellow Brexit minister Steve Baker, but it was not until 3pm on Monday, when it emerged that Mr Johnson was walking, that Ms May looked at her most precarious. It was claimed that Downing Street leaked news of his resignation before he could write his letter, which the prime minister’ aides guessed would be wounding. When it came it said: “Brexit should be about opportunity and hope. It should be a chance to do things differently, to be more nimble and dynamic, and to maximise the particular advantages of the UK as an open, outward looking global economy. “The dream is dying, suffocated by needles doubt.”

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“Instead of the Star Trek vision of boldly going where no imperial nostalgic society had gone before, this Brexit would not have enough thrust to get the UK out of the gravitational pull of the European Union”

Britain Has Gone To Huge Trouble To Humiliate Itself (Fintan O’Toole)

The best headline about British prime minister Theresa May’s short-lived triumph over the hard Brexiteers last Friday was undoubtedly the one on Pádraig Collins’s report in the Guardian: “Possum rescued after getting head stuck in Nutella jar”. Admittedly, Collins was actually reporting, not from Chequers, but from Brisbane, Australia. Yet the accompanying photograph was the perfect image of what May is trying to do. It showed the furry creature all curled up and immobilised with its head completely encased in a glass jar streaked with visible residues of sticky brown stuff. As a spokesman for the Australian RSPCA explained, the dumb animal “managed to get his head in the jar, but obviously couldn’t get it out”.

The rescuer put “towels around the possum so she could get him out of the jar without getting scratched by his claws”. The story saves me the trouble of thinking up a metaphor. The Brexiteers have their heads stuck in a jar of sticky brown stuff that seemed so sweet and enticing. May’s compromise deal and the White Paper she is still expected to publish this week are the towels wrapped round the Brexiteers’ claws so that their heads can be pulled out of the jar without her premiership getting scratched to death.

The only problem is that David Davis and Boris Johnson, having been successfully extracted, decided to bare their claws again. As any possum or two-year-old child will tell you, sticking your head inside a glass jar is quite a thrill. You get to see the world through a distorting lens that creates a comforting distance between you and reality. You can’t hear unwanted voices raising awkward questions. Brexit has so far been conducted through a glass darkly. It has been seen through glorious fantasies of imperial revival and layers of self-pity about imaginary oppression. What May has been attempting, very late in the day, is to force her more deluded colleagues to get their heads out of the jar and look directly at Brexit.

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The story is the two have been exposed to high dose of novichok. That is not possible; they would have died in instants.

Novichok In Wiltshire Death ‘Highly Likely’ From Batch Used On Skripals (G.)

Britain’s counter-terrorism chief has said it is highly likely the novichok that killed Dawn Sturgess in Wiltshire came from the same batch used four months earlier to attack a former Russian spy and his daughter at their Salisbury home. The Metropolitan police assistant commissioner Neil Basu also said the substance that led to Sturgess and her partner Charlie Rowley falling ill on Saturday was in a vessel or container when the couple came across it. Police have opened a murder investigation after Sturgess died in hospital on Sunday at 8.26pm. Basu said: “It is both shocking and utterly appalling that a British citizen has died having being exposed to a Novichok nerve agent.

“But make no mistake, we’re determined to find out how Dawn and her partner, Charlie Rowley, came into contact with such a deadly substance; and we will do everything we possibly can to bring those responsible to justice.” Basu said Sturgess and Rowley got a high dose of novichok after handling a container containing the nerve agent. It was most likely that the container police are hunting for was linked to the attack four months earlier on the Skripals. [..] “In the four months since the Skripals and Nick Bailey were poisoned, no other people besides Dawn and Charlie have presented with symptoms. Their reaction is so severe it resulted in Dawn’s death and Charlie being critically ill. This means they must have got a high dose. Our hypothesis is they must have handled the container we are now seeking.”

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“The carmaker blamed staffing shortages for the scandal..”

Nissan Says Emissions And Fuel Economy Tests Were Falsified (R.)

Nissan has said it has found evidence of misconduct relating to exhaust emissions and fuel economy measurements for 19 models sold in Japan. The Japanese carmaker said on Monday it had discovered the testing environments for emissions and fuel economy in final vehicle inspections at most of its factories in Japan were not in line with requirements, and inspection reports were based on altered measurements. “A full and comprehensive investigation of the facts … including the causes and background of the misconduct, is under way,” Nissan said. The problems were found during voluntary compliance checks following an improper vehicle inspection scandal last year.

In October, a recall of 1.2m vehicles was triggered after Nissan said uncertified inspectors had signed off on final checks for cars sold in Japan. The carmaker blamed staffing shortages for the scandal, which caused annual operating profit to slide. Nissan said the latest misconduct did not compromise the safety of the affected models, and mileage readings were in line with levels presented in product catalogues. It was in the process of compiling data for the GT-R sports car to confirm it satisfied safety standards. The carmaker said it would take appropriate action to prevent similar problems in future.

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Time to keep promises.

Trump Slams Pfizer After July 1 Drug Price Hikes (R.)

U.S. President Donald Trump on Monday took aim at Pfizer Inc and other U.S. drugmakers after they raised prices on some of their medicines on July 1, saying his administration would act in response. “Pfizer & others should be ashamed that they have raised drug prices for no reason.” Trump wrote in a post on Twitter on Monday. “We will respond!” Health and Human Services Secretary Alex Azar followed up with his own tweet saying that drugmakers who have raised prices have created a tipping point in U.S. drug pricing policy. “Change is coming to drug pricing, whether painful or not for pharmaceutical companies,” Azar wrote. Neither Trump nor Azar detailed what policy changes would be implemented to decrease prices.

Trump had said in May that some drug companies would soon announce “voluntary, massive” cuts in prices, but none have materialized yet. During his presidential campaign, he promised lower U.S. drug costs. Pfizer raised list prices on around 40 medicines earlier this month. Those include Viagra, cholesterol drug Lipitor and arthritis treatment Xeljanz, according to Wells Fargo. List prices do not include rebates and discounts drugmakers may offer. “The list price remains unchanged for the majority of our medicines. Our portfolio includes more than 400 medicines and vaccines. We are modifying prices for approximately 10 percent of these, including some instances where we’re decreasing the price,” Pfizer spokeswoman Sally Beatty told Reuters.

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Enough of this already. Stop it.

Judge Rejects Trump Request For Long-Term Detention Of Immigrant Children (R.)

A U.S. federal judge on Monday rejected the Trump administration’s request to allow long-term detention of illegal immigrant children, a legal setback for President Donald Trump’s push to detain immigrant families taken into custody at the U.S.-Mexico border. Los Angeles U.S. District Court Judge Dolly Gee dismissed as “dubious” and “unconvincing” the U.S. Justice Department’s proposal to modify a 1997 settlement known as the Flores Agreement, which says that children cannot be held in detention for long periods. The government made its request in June after public outcry over its policy of separating children from parents who entered the United States illegally.

A judge in a different case in San Diego ordered the government last month to reunite the families it had separated. The government asserted in its Flores filing that the San Diego ruling would necessitate longer-term detention of children, since that would be the only way to both reunite them with their parents and keep the parents incarcerated during their immigration proceedings. Gee rejected that argument. “Defendants advance a tortured interpretation of the Flores Agreement in an attempt to show that the … injunction permits them to suspend the Flores release and licensure provisions,” she wrote.

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“The solution to the problem will be to resettle these refugees in their countries..” “This can only happen when the conflicts raging in these countries are settled.”

Egypt Rejects Europe’s Intent To Set Up ‘Regional Disembarkation Centres’ (AW)

Egypt’s opposition to establishing camps for screening migrants heading to Europe has made the European Union’s “regional disembarkation centres” proposal seem even more implausible. Cairo’s stand has underscored the deep worries in the Egyptian administration about the country’s increasing refugee responsibilities, analysts said. “This is a burden Egypt shoulders alone, without any support from the international community,” said MP Ghada Agamy, a member of the Egyptian parliament’s Foreign Relations Committee.

Egypt said it would not be able to accommodate “regional disembarkation centres” for migrants trying to cross the Mediterranean to Europe just hours after European leaders reached a controversial migration deal that included refugee centres in North Africa and “controlled centres” in European countries. Egypt, Tunisia, Morocco and Algeria have rejected the idea of regional disembarkation centres. The Egyptian government said establishing refugee camps would violate the Egyptian constitution. Refugees, Egyptian parliament Speaker Ali Abdel A’al said, can live wherever they want in Egypt. “We do not establish camps here,” he said. Egyptian officials are concerned about Cairo’s ability to shoulder refugee-related burdens, analysts said, particularly at a time of economic transition.

[..] Instead of asking economically struggling countries to act as refugee hosts, European leaders need to solve the problems that cause these refugees to leave their countries in the first place, particularly the unrest that has engulfed many countries, Egyptian specialists said. “The solution to the problem will be to resettle these refugees in their countries,” said Youssef al-Metany, a refugee lawyer at local NGO Egyptian Network for International Law. “This can only happen when the conflicts raging in these countries are settled.”

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Zoe Konstantopoulou is the former president of the Hellenic parliament.

If You Love Greece, Help Us Get Rid Of Alexis Tsipras And His Zombie Party (G.)

Last week was the third anniversary of the 2015 referendum, in which the Greek people voted no to more austerity, and no to the violation of democracy by the creditors. The week before Alexis Tsipras, the prime minister who betrayed the brave no of the Greek people, visited London to present his capitulation to the troika of the European commission, the International Monetary Fund and the European Central Bank as an achievement.

Imagine how the British people would view a prime minister elected to end privatisation, and who instead privatised almost every piece of public property; who was elected to serve peace, and who instead facilitated military action against targets in Syria and agreed to sell weapons to countries accused of committing international crimes; who was elected to protect people’s homes, and who stood by while banks seized them, leaving people homeless; who was elected to serve democracy and the independence of his country, and who instead turned it over to the EU, the IMF and the ECB. This is what Tsipras did to the Greek people.

I was a Syriza MP and president of the Greek parliament during the seven months of the first Syriza government. When Tsipras signed the toxic third memorandum in 2015, I fought hard to protect our parliamentary procedures that he and the troika violated. In spite of continuous pressure, I refused to bend our democratic rules and accept more illegal debt for our people. Together with dozens of other Syriza MPs, I voted against the monstrous agreement. Tsipras then dissolved parliament prematurely to get rid of me and the dissenting MPs.

Three years on, his capitulation to the troika has proved the disaster many of us predicted. People’s lives have become unbearable. Youth unemployment has become the norm and an estimated 8% of the population has left in search of work. The minimum salary doesn’t pay the bills, and hundreds of thousands of families go without electricity for extended periods of time. This tragedy began in 2010, but Tsipras’s so-called left government has done everything to prove that it can implement austerity better than its predecessors. It even brags about exceeding the troika’s cruel targets in cuts and taxes.

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“..the landscape as demolition derby..”

When Collapse Goes Kinetic (Kunstler)

I suppose many who think about the prospect of economic collapse imagine something like a Death Star implosion that simply obliterates the normal doings of daily life overnight, leaving everybody in a short, nasty, brutish, Hobbesian free-for-all that dumps the survivors in a replay of the Stone Age — without the consolation of golden ages yet to come that we had the first time around. The collapse of our techno-industrial set-up has actually been going on for some time, insidiously and corrosively, without shattering the scaffolds of seeming normality, just stealthily undermining them. I’d date the onset of it to about 2005 when the world unknowingly crossed an invisible border into the terra incognito of peak oil, by which, of course, I mean oil that societies could no longer afford to pull out of the ground.

It’s one thing to have an abundance of really cheap energy, like oil was in 1955. But when the supply starts to get sketchy, and what’s left can only be obtained at an economic loss, the system goes quietly insane. In the event, popular beliefs and behavior have turned really strange. We do things that are patently self-destructive, rationalize them with doctrines and policies that don’t add up, and then garnish them with wishful fantasies that offer hypothetical happy endings to plot lines that do not really tend in a rosy direction. The techno-narcissistic nonsense reverberating through the echo-chambers of business, media, and government aims to furnish that nostrum called “hope” to a nation that simply won’t admit darker outcomes to the terrible limits facing humanity.

Thus, we have the Tesla saga of electric motoring to save the day for our vaunted way of life (i.e. the landscape as demolition derby), the absurd proposals to colonize distant, arid, frigid, and airless Mars as a cure for ruining this watery blue planet ideally suited for our life-form, and the inane “singularity” narratives that propose to replace grubby material human life with a crypto-gnostic data cloud of never-ending cosmic orgasm. The psychological desperation is obvious. Apparently, there are moments in history when flying up your own butt-hole is the most comforting available option.

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But how do you prove it?

As Trial Opens, Man Dying Of Cancer Blames Monsanto’s Roundup (AFP)

A lawyer for a California groundskeeper dying of cancer took aim at Monsanto Monday as a jury began hearing the lawsuit accusing the chemical giant of ignoring health risks of its top-selling weed killer Roundup. “For the past 40 years, Monsanto has known the primary ingredient in Roundup can produce tumors in lab animals,” attorney Brent Wisner told a California state court. A jury is hearing the case brought by Dewayne Johnson, a 46-year-old father of two. Diagnosed in 2014 with non-Hodgkin’s lymphoma, a cancer that affects white blood cells, Johnson used a Monsanto generic version of Roundup called “Ranger Pro” repeatedly in his job at a school in Benicia, California, after being promoted to groundskeeper in 2012.

In his opening statement, Wisner said Monsanto opted against warning consumers of the risks and that instead “they have fought science” by playing down the suspected link between the chemical herbicide and cancer. “Monsanto has gone out of its way to bully scientists and fight researchers,” he told the jury. The case in California Superior Court is the first trial in which Roundup is said to have caused cancer, a claim repeatedly denied by the chemical company. If Monsanto loses, the case could open the door to hundreds of additional lawsuits against the company recently acquired by German-based pharmaceutical and chemical group Bayer.

Johnson had little warning about the risks of Roundup, his lawyer said. “He was told you could drink it, it was completely non toxic,” Wisner said with his client sitting in the San Francisco courtroom. “You will hear testimony from him that he got drenched in it, repeatedly.” The lawyer said Johnson, who is between rounds of chemotherapy, “is actually on borrowed time, he is not supposed to be alive today.” A key to Johnson’s case will be convincing jurors that Monsanto’s pesticide — whose main ingredient is glyphosate — is responsible for the illness. Wisner contended glyphosate combined with an ingredient intended to help it spread over leaves in a cancer-causing “synergy.”

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Apr 262018
 


James McNeill Whistler Miss Ethel Philip Reading 1894

 

Debt-Enabled Asset Bubbles On Crash Course With Demographics (Park)
‘Grotesque’ Leverage and Rising Rates Already Causing Damage – SocGen (BBG)
‘Big Bear Market’ For Stocks Appears To Have Begun (MW)
Market Is Obsessed With 10-Year Yield, Should Be Watching The 2-Year (CNBC)
Deutsche Bank Plans ‘Significant’ Job Cuts After Sharp Drop In Profits (CNBC)
Ford Kills Most US Cars (BBG)
Yield Shock On Wall Street, Conservative Default In Washington (Stockman)
Democrats Have a Plan to Save the Post Office – and Kill Payday Lenders (NYMag)
The Democratic Party Is Paying Millions For Hillary Clinton’s Email List (IC)
Finland Denies Claims Basic Income Experiment Has Fallen Flat (Ind.)
NATO Think-Tank Expert: Russia Is ‘Comfortable’ Using Nuclear Weapons (RT)
North Korea Nuclear Test Site Has Collapsed Beyond Use – Chinese Study (G.)
President Trump Will Personally Review Documents In Cohen Case (ABC)
UK Businesses Make World-First Pact To Ban Single-Use Plastics (Ind.)
Is The World’s Most Drastic Plastic Bag Ban Working? (G.)

 

 

A useful summary fo many things we’ve said many times.

Debt-Enabled Asset Bubbles On Crash Course With Demographics (Park)

If finance had not been able to ‘securitize’ debts (turn them into assets) and sell them to speculators/investors over the past two decades, then debt creation could not have gone to such extremes and consumers would not have been able to borrow and spend themselves so far into financial ruin. If western consumers had not been able to borrow themselves so far into ruin, they would also not have been able to buy so many goods from Asia and other developing nations for a time.

Asia and developing nations would not then have been able to mint so many new millionaires and billionaires in their governments and businesses who then funneled capital into western property markets, and western property markets would not have appreciated so far beyond domestic income gains. If property prices had not increased so far beyond income gains, then households would not have had to borrow so much just to get a roof over their heads or a post-secondary education. If they had not been able to borrow so much, property prices, education and related services would never have been able to rise so much for so long, and become so unaffordable for the masses. But they did.

[..] The old need the young to drive productivity and innovation, pay taxes and support the social safety net. They also need the young to buy their assets (real estate, securities, businesses) when they wish to downsize and raise liquidity. If the young are broke: under-employed, over-indebted and under-saved, they cannot get a footing and the social contract is undone. Twenty years of central bank and government-enabled debt-driven asset bubbles, have broken long-standing laws of financial and social equilibrium. A secular global repricing cycle is necessary to break the impasse and reboot the system. The status quo is unraveling, as it must.

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The same as above.

‘Grotesque’ Leverage and Rising Rates Already Causing Damage – SocGen (BBG)

The fear over 10-year U.S. Treasury yields breaking through 3 percent has been a long time coming, according to Societe Generale. “Interest rates are already doing damage, people just haven’t noticed,” Andrew Lapthorne, the firm’s global head of quantitative strategy, said in an interview Tuesday. “Leverage in the U.S. is grotesque for this stage of the cycle. At the moment you’ve got peak leverage at peak prices. It’s not like you have to dig deep to find a problem.” The number-one conversation Societe Generale’s having with clients right now is about the correlation between bonds and equities. But risks to corporate balance sheets is a bigger problem at the moment, particularly in the U.S. and China.

Lapthorne said he worries about volatility in debt because of the impact it can have on the economy, particularly how it weighs on businesses and the job market. Credit markets may get choppier due to triggers like high-profile bankruptcies, such as Toys ‘R’ Us, or if corporate buybacks drop, Lapthorne said. While Credit Suisse anticipates fewer share repurchases this year, they’re an outlier. JPMorgan Chase estimates they’ll rise to a record $800 billion from $530 billion last year. Bank of America said if the current pace continues there may be as much as $850 billion in 2018, while Goldman Sachs sees buybacks becoming “less constructive” in 2019. [..] He has further concerns about the direction of the markets as well. “Instead of the usual market driver of economic growth, this bull market has been driven by valuation growth,” Lapthorne said, adding that confidence in asset prices is deteriorating as volatility has risen.

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“..a technical indicator using exponential moving averages of closing price data..”

‘Big Bear Market’ For Stocks Appears To Have Begun (MW)

The “big bear market” for stocks that market timer Tom McClellan has been expecting appears to have begun, as Tuesday’s broad selloff turned a key technical indicator down from an already negative position to convey a “promise” of lower lows. McClellan, publisher of the McClellan Market Report, said there could be a pause in the downtrend this week, as his market-timing signals point to a minor top due on Friday. But with his “price oscillator” turning lower following the Dow Jones Industrial Average 425-point drop, and the S&P 500 1.3% slide on Tuesday, he turned bearish for short- and intermediate-term trading styles. He has been bearish for long-term trading styles since Feb. 28.

“I have been looking for a big downturn in late April….We appear to have gotten that downturn now,” McClellan wrote in a note to clients. He said it is possible that the big down move pauses briefly in honor of the minor top signal due Friday, “but it should be a lasting and painful downtrend, heading down toward a bottom due in late August.” His bearishness for all trading styles was a result of the McClellan Price Oscillator, a technical indicator using exponential moving averages of closing price data, turning down after it was already in negative territory, as the chart below shows. “Turning down a Price Oscillator while it is still below zero conveys the promise of a lower closing low on the ensuing move,” McClellan wrote. Since “promise” isn’t the same as a “guarantee,” he said the indication can get revoked if the Price Oscillator turns up right away.

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Central bank control is an illusion. Naked emperors.

Market Is Obsessed With 10-Year Yield, Should Be Watching The 2-Year (CNBC)

The government’s benchmark debt instrument saw its yield pass 3% Tuesday, a four-year high that ostensibly helped to trigger a violent stock market reversal that saw the Dow industrials close lower by about 425 points. The calculus behind fear of the 3% yield seems obvious: With the S&P 500 dividend yield at 1.9%, a risk-free investment like U.S. Treasurys yielding 3% makes more sense in a volatile environment. But that reasoning is weak. The play assumes holding the bond to duration and clipping coupons, and the stock market has never shown inflation-adjusted returns that low over a 10-year period. Absent a major crash and a deep recession it likely won’t over the next decade as well.

The next two years, though? That could be a different story. While everyone on Wall Street is pounding the table over the rising 10-year yield, the 2-year note rose above 2.5% Wednesday, a level it last closed at August 2008, just a month before the financial crisis imploded with the collapse of Lehman Brothers. A risk-free investment with a 2.5% yield over two years? That seems a little more reasonable. Investors who bought the 2-year in mid-2006 would have gotten it at 5%, ahead of a stock market that was about to drop 60%. “As much as every investor knows market timing is very difficult, that’s the sort of case study that resonates just now,” Nick Colas, co-founder of DataTrek Research, said in his daily note Wednesday.

Investors have been testing the waters over the past month, yanking $868 million out of U.S. equity ETFs while pouring $5.2 billion into funds that invest in fixed income with duration of less than three years, Colas said, citing XTF data. The iShares Short Treasury Bond fund, which focuses on fixed income with duration between one and 12 months, alone has pulled in $3.4 billion over the past month, according to FactSet.

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This can’t be good. How much longer?

Deutsche Bank Plans ‘Significant’ Job Cuts After Sharp Drop In Profits (CNBC)

Deutsche Bank posted first-quarter net profits of 120 million euros ($146 million) Thursday, a 79% fall from last year’s figure. The bank announced plans to significantly reduce its workforce through the rest of 2018, particularly in its corporate and investment bank and infrastructure functions. It also aims to scale back operations in bond sales and equities trading, particularly in the United States and Asia.

The net profit number was significantly lower than a Reuters poll prediction of 376 million euros. The Frankfurt-based lender has been under scrutiny from shareholders for posting three consecutive years of losses, including a 497 million euro loss for 2017. Revenues for the quarter were down by 5% on the prior year period at 7 billion euros, pressured by the appreciation of the euro against the dollar and lower corporate and investment bank revenues, which fell 13% year-on-year to 3.8 billion euros. Revenues for all businesses were lower year-on-year.

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Oh, good, everyone will drive a truck. These things are 40x your weight, not just 20x.

Ford Kills Most US Cars (BBG)

Ford Motor is sharpening its knives to cleave another $11.5 billion from spending plans and cut several sedans, including the Fusion and Taurus, from its lineup to more quickly reach an elusive profit target. The automaker expects to save $25.5 billion by 2022, Chief Financial Officer Bob Shanks told reporters Wednesday as Ford reported first-quarter earnings per share and revenue that beat estimates. The company now anticipates reaching an 8 percent profit margin by 2020, two years ahead of schedule. The cuts are aimed at kick-starting a turnaround effort almost one year after Ford’s board ousted its chief executive officer.

New CEO Jim Hackett has been trying to convince investors that betting on a rebound is a worthwhile wager by laying out plans to get rid of slow-selling, low-margin car models and refocusing the company around more lucrative sport utility vehicles and trucks. “We’re going to feed the healthy part of our business and deal decisively with areas that destroy value,” Hackett said on an earnings call Wednesday. “We aren’t just exploring partnerships; we’ve now done them. We aren’t just talking about ideas; we’ve made decisions.” Ford finds itself on a road similar to the route Fiat Chrysler followed to pass Ford in North American profitability. Fiat Chrysler CEO Sergio Marchionne now wants to eclipse General Motors before his retirement in 2019.

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“..they have had virtually no role in real governance since the Gipper last nodded in their direction decades ago..”

Yield Shock On Wall Street, Conservative Default In Washington (Stockman)

[..] capitalist prosperity depends upon keeping the state and its central banking branch at bay and out of the way. And once upon a time that pretty much happened because the conservative party in Washington adhered reasonably well to the pillars of sound money, fiscal rectitude, free markets at home and non-intervention abroad. In the last three decades, however, the GOP has either jettisoned these pillars of capitalist prosperity or relegated them to ritual incantation. Either way, they have had virtually no role in real governance since the Gipper last nodded in their direction decades ago. What has happened, instead, is that the neocons hijacked the GOP and turned it into the party of Empire—the very opposite of Robert Taft’s notion of homeland security and non-intervention.

Likewise, the supply siders spread the insidious lie that deficits don’t matter and that you can grow your way out of unfinanced tax cuts. So, too, the devotees of Alan Greenspan and the Wall Street lobbies buried the storied idea of sound money–supplanting it with the new ideology of monetary central planning and stock market bailouts. Stated differently, the GOP in Washington today is essentially useless because it has abandoned the pillars of prosperity and has become an opportunistic gang of neocons, social cons, tax cons and Wall Street hand maidens. As a result, we now have a financial system that is flying blind toward a monumental monetary/fiscal crack-up.

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Makes too much sense.

Democrats Have a Plan to Save the Post Office – and Kill Payday Lenders (NYMag)

Generally speaking, advancing economic justice is neither cheap nor easy. The Democratic Party has assembled a long list of worthwhile economic reforms — almost all of which, for all their considerable virtues, pose either a significant budgetary cost, or policy-design challenge, or political risk (universal child-care costs money; the federal job guarantee is complicated and untested; and Medicare-for-all is disruptive … and complicated, and costs money). But Kirsten Gillibrand’s new plan to establish a public option for banking is an exception to the rule: By requiring the post office to provide basic financial services, Gillibrand’s bill would significantly mitigate the economic exploitation of America’s most vulnerable people, punish predatory lenders — and increase federal revenue — all without requiring policy wonks to navigate uncharted territory, or even break a sweat.

The stagnation of working-class wages in the U.S. combined with the rising cost of housing, and declining value of welfare benefits have left millions of American families dependent on short-term loans to make ends meet. And payday lenders have mined their financial desperation for hefty profits. A parent with a gap in employment and a hungry child is liable to accept a loan no matter how usurious the interest rate. Thus, the average annualized interest rate on a payday loan is 390%. And the average American household that uses alternative forms of credit earns just $25,500 a year — and spends nearly 10% of that meager salary on interest and fees, according to a 2011 KPMG study.

But the post office — with its economies of scale, and freedom from avaricious shareholders — could offer America’s working class access to short-term credit at a fraction of the present cost. Under the current system, billions of dollars move from the pockets of the poor into the coffers of payday lenders each year. Postal banking could redirect those funds — saving low-income borrowers billions on fees and interest, while plowing the (non-usurious) interest payments they do still make into the post office’s trust fund. According to a 2014 study by the Postal Service Inspector General, if just 10% of the money that working Americans currently spend on high-risk financial products were instead spent on loans from the post office, the agency could offer said loans at 90% less than the current market cost — and gain nearly $9 billion in annual revenue in the process.

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This, too, are the Democrats. A deeply troubled party. The power of email lists, reminiscent of Facebook.

The Democratic Party Is Paying Millions For Hillary Clinton’s Email List (IC)

Heading Into The 2018 midterms, with Democrats hoping to take back the House of Representatives and even make a run at the Senate, the party has spent more than $2 million worth of campaign resources on payments to Hillary Clinton’s new group, Onward Together, according to Federal Election Commission filings and interviews with people familiar with the payments. The Democratic National Committee is paying $1.65 million for access to the email list, voter data, and software produced by Hillary for America during the 2016 presidential campaign, Xochitl Hinojosa, a spokesperson for the DNC, told The Intercept. The Democratic Congressional Campaign Committee has paid more than $700,000 to rent the same email list.

Clinton is legally entitled to rent her list to the party, rather than hand it over as a gift, but in 2015, Barack Obama gave his email list, valued at $1,942,640, to the DNC as an in-kind contribution. In 2013 and 2014, OFA had similarly made in-kind contributions exceeding $3.4 million for uses of the list that cycle. Obama’s list was at one point considered to be the most valuable in politics and raised more than twice as much money for the 2012 Obama campaign as Clinton’s did for hers in 2016. The DNC agreement with the Clinton campaign calls on the debt-ridden organization to fork the money over to an entity of Clinton’s choosing, which wound up being Onward Together, the operation she formed after her campaign ceased to exist.

Former DNC Chair Donna Brazile told The Intercept the deal was the result of “tough negotiations between the Clinton campaign and the DNC. I wanted to bring back our assets. I wanted to get as much from them as they got from us,” she said. “Under the terms I worked out, we had to pay quarterly for items that the DNC acquired. The final payment would have been in February of this year.” The DNC announced in April 2017 that Clinton had turned over her email list and related data and tools as an in-kind contribution to the party, with no suggestion that payments would later be made for it. “[P]utting the DNC on a strong footing is something that she’s been very focused on since the campaign, when she set out to leave the DNC in the black and did so,” said Clinton spokesman Nick Merrill at the time.

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The biggest problem is people don’t understand the issue, as illustrated by the original headline, which said universal basic income. That’s not what Finland is doing.

Finland Denies Claims Basic Income Experiment Has Fallen Flat (Ind.)

Finland has denied widespread claims its basic income experiment has fallen flat. A series of media reports said the Finnish government had decided not to expand its trial – a version of events which has been repudiated by officials. Miska Simanainen, a social affairs official, said the trial, where about 2,000 unemployed people aged 25-58 are being paid a tax-free €560 monthly income with no questions asked, was “proceeding as planned.” The €20m programme, which seeks to reform Finland’s social security system, ends in December, at which point Prime Minister Juha Sipila’s centre-right government will assess initial results.

Reports have said the government social affairs agency has requested up to €70m in extra funding this year, something Mr Simanainen says is false. Finland became the first country in Europe to start the basic income experiment in January 2017. Supporters of basic income argue it would help get unemployed people into temporary jobs, rather than forcing them to remain unemployed to qualify for benefits. They say it would provide a safety net, address insecurities associated with workers not having full-time staff contracts, and help boost mobility in the labour market as people would have a source of income between jobs.

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Sheer insanity.

NATO Think-Tank Expert: Russia Is ‘Comfortable’ Using Nuclear Weapons (RT)

Russia is more willing to run the risk of nuclear war than the West and NATO must pour more money into developing new capabilities to deter Moscow’s nuclear aggression, according to Atlantic Council analysts.
In a lengthy discussion on preparing for nuclear war with Russia, analysts from the neocon think tank lobbied for the US and NATO to spend more money on low-yield nuclear weapons and other methods of deterrence in order to dissuade Russia from using a limited nuke strike in order to “de-escalate” a conflict using the scare factor. The panel argued that Russia has adopted a policy of “escalate to de-escalate” which lowers the bar for nuclear weapons use.

Under this policy, Russia would respond to a large-scale conventional military attack by employing a limited nuclear response in order to deter further aggression against itself. Matthew Kroenig, the deputy director for strategy at the Atlantic Council’s Scowcroft Center for Strategy and Security, went further by suggesting that Russia is simply “more comfortable using and threatening nuclear weapons” than the West. Russia’s so-called “escalate to de-escalate” policy was even referred to in the latest Nuclear Posture Review from the Trump administration. But while the Atlantic Council and White House are seemingly adamant that Russia is almost looking for excuses to use nuclear weapons, others have argued that the West has actually misunderstood Russia’s policy on nuclear use.

There is weak evidence that Russia has actually dropped its threshold for nuclear use at all. [..] Russia’s 2014 doctrine actually introduced the term “system of non-nuclear deterrence,” which is explained as a focus on preventing aggression “primarily through reliance on conventional (non-nuclear) forces.” It is more than likely that the Atlantic Council and its members are fully aware of this, which leads to the question: are they misleading people on Russia’s intentions in order to lobby for more military spending in Eastern Europe?

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We sort of knew that already. But yeah, makes one wonder what Kin is giving up.

North Korea Nuclear Test Site Has Collapsed Beyond Use – Chinese Study (G.)

North Korea’s main nuclear test site has partially collapsed under the stress of multiple explosions, possibly rendering it unsafe for further testing and leaving it vulnerable to radiation leaks, a study by Chinese geologists has shown. The findings could cast doubt on North Korea’s sincerity in announcing last weekend that it would stop testing nuclear weapons at the site ahead of Friday’s summit between the country’s leader, Kim Jong-un, and the South Korean president, Moon Jae-in. The test site at Punggye-ri, in a mountainous area in North Korea’s north-east, has been the location for all six of the regime’s nuclear tests since 2006.

The findings, by scientists at the University of Science and Technology of China, suggest the partial collapse of the mountain that contains the testing tunnels, as well as the risk of radiation leaks, have potentially rendered the site unusable. The study was published soon after Kim said his country would stop testing nuclear weapons and ballistic missiles, and close down Punggye-ri before his meeting with Moon just south of the countries’ heavily armed border. Nuclear explosions release enormous amounts of heat and energy, and the North’s largest test, in September last year, was believed early on to have rendered the site – a network of tunnels beneath Mount Mantap – unstable.

The Chinese scientists collected collected data for their study following the most powerful of the North’s six nuclear tests, on 3 September. The controlled explosion, which caused an initial magnitude-6.3 tremor, is believed to have triggered four more earthquakes over the following weeks. The study concluded that eight-and-a-half minutes after the test, there was “a near-vertical on-site collapse towards the nuclear test centre”.

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Obvious. But he won’t be the only one.

President Trump Will Personally Review Documents In Cohen Case (ABC)

In a filing Wednesday afternoon, attorneys for President Donald Trump told the federal judge overseeing the investigation of his personal attorney, Michael Cohen, that Trump would, as necessary, personally review documents to ensure that privileged information is not revealed accidentally to the FBI or prosecutors. “…Our client will make himself available, as needed, to aid in our privilege review on his behalf,” wrote attorneys Joanna Hendon, Christopher Dysard and Reed Keefe in their filing. The filing is part of the ongoing effort by Cohen and Trump to get the first crack at reviewing records seized earlier this month from Cohen’s home, hotel and office.

So far, US District Judge Kimba Wood has ruled against Cohen and Trump, though she has said she would be willing to consider their backup request to have an independent third-party review record before prosecutors and agents do. Trump’s attorneys made their submission late Wednesday in advance of a Thursday status meeting in US District Court in Manhattan. The issue of document review arose after the FBI raids and the subsequent public confirmation that Cohen has been under federal investigation for months. The probe is focused both on Cohen’s private business dealings as well as his work for and on behalf of Trump.

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May and her government are behind this? And Windrush at the same time?

UK Businesses Make World-First Pact To Ban Single-Use Plastics (Ind.)

More than 40 major businesses have pledged to eradicate single-use plastics from packaging in an effort to tackle the global pollution crisis. The launch of the UK Plastics Pact comes amid concerns over the impact such waste is having on the environment as it pervades the world’s land, oceans and waterways. With members across major food and non-food brands – including Sainsbury’s, Nestlé and Coca-Cola – the pact’s participants are collectively responsible for more than 80% of the UK’s supermarket plastic packaging. As the first initiative of its kind in the world, it is hoped the pact will serve as a template for other countries and spark a “global movement for change”.

The pact, which was welcomed by government ministers and environmental campaigners, consists of a series of targets that the industry as a whole will aim to meet by 2025. These include the complete elimination of “problematic or unnecessary” single-use plastic packaging by developing new designs and alternative delivery methods. Other targets include all plastic packaging being reusable, recyclable or compostable, and ensuring that at least 70% of packaging that is used actually makes it to recycling or composting facilities. There is also a commitment to ensuring 30% of the content of all plastic packaging comes from recycled sources by the target date.

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Contact ourman in Kenya about this: “Yes it happened last year. About 300 factories were shut down, about 6 months notice was given. BUT there is still a black market for low quality black plastic bags amongst smaller vendors in rural areas and small towns.  In the major supermarkets plastic has been entirely phased out, though please note that Kenya has a much lower number and density of supermarkets vs Europe. We’re looking at 120/150 major supermarkets country wide and 300-500 mini marts and mostly thousands of smaller kiosks. 

Also plastic packaging has not been phased out yet. But they are targeting for the conversion of plastic to paper packaging in products. And also to phase out plastic water bottles if a national recycling scheme is not put in place.  They’ve also banned forest logging as the tree cover of the nation is under 6-7%. So we will have to import trees and paper now instead of oil for plastic. [..] There’s been a large number of bans on all sorts of things since last year, we’re in a very weird phase politically. “

Is The World’s Most Drastic Plastic Bag Ban Working? (G.)

Waterways are clearer, the food chain is less contaminated with plastic – and there are fewer “flying toilets”. A year after Kenya announced the world’s toughest ban on plastic bags, and eight months after it was introduced, the authorities are claiming victory – so much so that other east African nations Uganda, Tanzania, Burundi and South Sudan are considering following suit. But it is equally clear that there have been significant knock-on effects on businesses, consumers and even jobs as a result of removing a once-ubiquitous feature of Kenyan life. “Our streets are generally cleaner which has brought with it a general ‘feel-good’ factor,” said David Ong’are, the enforcement director of the National Environment Management Authority.

“You no longer see carrier bags flying around when its windy. Waterways are less obstructed. Fishermen on the coast and Lake Victoria are seeing few bags entangled in their nets.” Ong’are said abattoirs used to find plastic in the guts of roughly three out of every 10 animals taken to slaughter. This has gone down to one. The government is now conducting a proper analysis to measure the overall effect of the measure. The draconian ban came in on 28 August 2017, threatening up to four years’ imprisonment or fines of $40,000 (£31,000) for anyone producing, selling – or even just carrying – a plastic bag.

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Feb 282018
 
 February 28, 2018  Posted by at 11:09 am Finance Tagged with: , , , , , , , , , , , ,  9 Responses »


Vincent van Gogh Le moulin de la galette 1886

 

Fed Chairman Powell: Market Volatility Won’t Stop More Rate Hikes (CNBC)
The Albatross Of Debt Part 4 (David Stockman)
Slowing Euro-Area Inflation Helps Draghi Push Back Exit Debate (BBG)
Banks Have The Right To ‘Do What They Want’ In Leveraged Lending: Otting (R.)
EU and China Consider Retaliation To Potential Trump Tariffs (CNBC)
People in Sweden at Risk of Losing Access to Cash Altogether (BBG)
May Is Ready to Fight With EU Over Draft Brexit Deal (BBG)
“We’ve Got To DO Something About Syria!” Uh, No You Don’t. Please Don’t. (CJ)
Protesters in FYROM Decry Proposed ‘Macedonia’ Name Compromise (AP)
World’s First Plastic-Free Aisle Opens In Netherlands Supermarket (G.)
Arctic Warming: Scientists Alarmed By ‘Crazy’ Temperature Rises (G.)

 

 

The news about Powel’s first speech is as boring as the man himself. “We’re doing so well I just gotta wear shades..”

Fed Chairman Powell: Market Volatility Won’t Stop More Rate Hikes (CNBC)

Federal Reserve Chairman Jerome Powell played down concerns about recent market volatility, arguing Tuesday that the dramatic swings do not weigh heavily on his outlook for the economy and maintaining his expectation for further gradual increases in interest rates. In Capitol Hill testimony, Powell emphasized that the job market remains robust, consumer spending is solid and wage growth is accelerating. He also highlighted gains in U.S. exports and stimulative fiscal policy as new “tailwinds” for the economy. “After easing substantially during 2017, financial conditions in the United States have reversed some of that easing,” he said in prepared remarks. “At this point, we do not see these developments as weighing heavily on the outlook for economic activity, the labor market and inflation. Indeed, the economic outlook remains strong.”

Powell’s appearance before the House Financial Services committee was his first as the powerful chairman of the world’s most influential central bank. The Fed has been aiming to boost inflation to 2%, but the recent pickup in monthly readings has spooked some investors who worry the central bank might overshoot its target. Instead, Powell’s remarks suggested the firmer data give Fed officials confidence they will actually hit a goal that has long proved elusive. He characterized inflation as “low and stable.” “Despite the recent volatility, financial conditions remain accommodative. At the same time, inflation remains below our 2% longer-run objective. In the FOMC’s view, further gradual increases in the federal funds rate will best promote attainment of both of our objectives.”

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Stockman has the best assessment of Powell. A longtime and clueless Fed puppet with no opinion of his own.

The Albatross Of Debt Part 4 (David Stockman)

Donald Trump is all about delusional and so are the casino punters. They keep buying what the robo-machines are buying, which, in turn, persist in feasting on the dip because it’s there and because it’s worked like a charm for nine years running. So doing, the punters have become downright reckless. After all, the market was already sky high last January – trading at 23X earnings on the S&P 500 and resting precariously on a record $554 billion of margin debt . Yet in order to load up on even more of these ultra risky shares, punters have since added $112 billion to their already staggering margin accounts, thereby helping to propel the S&P index to a truly ludicrous 27X by the end of January 2018.

And therein lies the true danger of the Fed’s 30-year long regime of Bubble Finance and the $67 trillion of debt it has piled upon the US economy. To wit, it has completely unmoored Wall Street from the main street economy, meaning that the speculative momentum and internals of the casino are operating in free flight: They will just keep levitating financial asset prices higher until some powerful shock triggers another meltdown of the type experienced during 2008, 2000 and 1987.

We happen to believe strongly that a bond market “yield shock” will be the crash-trigger this time around and for a self-evident reason. The central banks of the world have unleashed a credit monster – $67 trillion in the US, $40 trillion or more in China and $230 trillion on a global basis—and know they must finally stop the relentless monetization of existing debt and other assets. The leadership for that task falls to the new Fed Chairman, Jerome Powell, who is a dyed-in-the-wool Keynesian and lifetime crony capitalist bubble rider. Indeed, during the 45 meetings during which he served as a member of the Bernanke-Yellen Fed, he did not dissent a single time.

So he now owns the epic bubble generated by that madcap regime of massive money printing and drastic interest rate repression, but through his Keynesian beer goggles Powell is thoroughly clueless about the resulting giant disconnect between main street and Wall Street. Accordingly, he seems to think that there is a strong full-employment economy on main street, when it’s nothing of the kind; and a reformed, prudently regulated banking system at the center of Wall Street, when in fact it’s teeming with the fruits of relentless speculation – FANGS, leveraged ETFs, options gambling, risk parity trades, structured finance deals loaded with hidden risk and debt and countless more.`

In other words, the Fed’s new chairman avers that there is smooth sailing ahead, even suggesting to Congress today that the US economy is blessed with considerable tailwinds – including exports and fiscal policy! We will address that tommyrot below, but what’s ahead is tumult, not smooth. That’s because the disconnect between a flat-lining main street economy and Wall Street’s bubble ridden financial house of cards is blatantly unstable and unsustainable. Indeed, this fraught condition, which Powell and his Keynesian posse fail to see, will soon give rise to a thundering upheaval triggered by the Fed’s own action.

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And Draghi too just keeps claiming the economy is doing great, and it’s due to him.

Slowing Euro-Area Inflation Helps Draghi Push Back Exit Debate (BBG)

A third month of slowing inflation in the euro-area has given European Central Bank President Mario Draghi ammunition to ward off the hawks a little while longer. The rate of price growth slowed to 1.2% this month from 1.3%, dropping to its weakest since 2016. The core measure was unchanged at 1%. The figures follow a series of releases that have checked the economy’s thundering momentum at the start of 2018, which had emboldened policy makers who want a faster unwinding of the central bank’s crisis-era monetary stimulus. Draghi emphasized to European lawmakers this week that an expansionary policy is still warranted even as the economic situation is “improving constantly.”

At the same time, he’s more confident that declining unemployment will boost pay and inflation eventually, even if the rate remains below the ECB’s target of just under 2% for now. The ECB’s Governing Council meets next week and is likely to discuss a change in its policy language to pave the way for an end of quantitative easing. Executive Board member Benoit Coeure – an architect of the program who has more recently taken a hawkish turn – said last week that the ECB can afford to slow bond purchases, as long as it gives clear guidance on the path of interest rates. Bundesbank President Jens Weidmann, who has long argued in favor of unwinding stimulus, chimed in on Tuesday, saying in a Bloomberg TV interview that the ECB’s guidance on interest rates is “rather vague” and could be strengthened as the end of bond buying approaches.

The European Commission said on Tuesday euro-area economic sentiment slipped for a second month in February after touching a 17-year high in December. Data last week showed business confidence in Germany and manufacturing and services activity in the euro area all weakened more than economists forecast. Such bumps along the road of Europe’s recovery from the ravages of its debt crisis underscore why Draghi is not yet ready to pare back support for the euro area.

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You mean the ones we bailed out, right?

Banks Have The Right To ‘Do What They Want’ In Leveraged Lending: Otting (R.)

Banks have the “right” to do the leveraged lending they want as long as it does not impair their “safety and soundness,” Joseph Otting, Comptroller of the Currency, said on Tuesday. Otting was speaking to an audience at the ABS Vegas conference co-hosted by SFIG, in response to a question from the audience about whether the OCC would be more lenient with banks about leveraged lending. The Government Accounting Office, the investigative arm of the US Congress, said last October that US bank guidelines on leveraged lending are subject to Congressional review, clearing the way for them to possibly be overturned. The GAO said the guidelines, which critics said have hampered the leveraged debt market, are under the purview of the Congressional Review Act of 1996, which they would not be if the GAO had deemed them to be less formal instruments of policy.

“As long as banks have the capital, I am supportive of banks doing leveraged lending,” said Otting. That stands even if leveraged lending activities transgresses guidelines, he said. “When (the idea of the) guidance came out – it was like people were afraid to jump over the line without feeling the wrath of Khan from the regulators,” Otting said. “But you have the right to do what you want as long as it does not impair safety and soundness. It’s not our position to challenge that.” US regulators said they are open to revising restrictions on leveraged lending, offering an olive branch to a Republican-controlled Congress keen to roll back banking regulations. The response from regulators indicated a desire to avoid a protracted battle with a Congress.

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Trump the anti-globalist. That should appeal to some people.

EU and China Consider Retaliation To Potential Trump Tariffs (CNBC)

As the Trump administration considers what action to take on trade tariffs on steel and aluminum, EU and Chinese officials are considering taking aim at politically strategic products made in the U.S., such as bourbon and motorcycles. Of the options laid out by Commerce Secretary Wilbur Ross, the administration is considering the most wide-reaching penalty: slapping tariffs on all steel and aluminum imported into the U.S., not just imports from specific countries. The EU is targeting products with political punch, revisiting a list compiled during George W. Bush-era trade disputes of symbolic American brands. Potentially in the EU’s sights: items such as Harley-Davidson motorcycles, whose corporate headquarters is in House Speaker Paul Ryan’s home state of Wisconsin.

Bourbon is another target, having enjoyed a surge in exports to the EU. Senate Majority Leader Mitch McConnell’s home state of Kentucky exported $154 million worth of bourbon to the EU, up from $128 million in 2016, according to data from the International Trade Commission. Agriculture products such as cheese, orange juice, tomatoes and potatoes are also targets for retaliation. “The EU stands ready to react swiftly and appropriately in case our exports are affected by any restrictive trade measures from the U.S.,” a European Commission source tells CNBC. The counterpunch from China could land harder because of the scale of trade between the two countries and the reliance of American farmers on China as an export destination. China’s Ministry of Commerce is already investigating whether to limit imports of U.S. sorghum, a cereal grain used to feed livestock, in response to previous tariffs from the White House on solar panels and washing machines.

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NOW they find out: “Cash is important in a crisis situation…”

People in Sweden at Risk of Losing Access to Cash Altogether (BBG)

People living in the world’s most cashless society may soon lose their access to notes and coins. To avoid that extreme scenario, Swedish cash-handling provider Loomis wants authorities to force banks and retailers to continue accepting cash. The warning follows similar calls from the Swedish central bank, which is worried that the rapid disappearance of cash will ultimately lead to the disintegration of the infrastructure needed to use notes and coins and undermine its task to promote a safe and efficient payment system. “We have to have cars, vaults and all that, and in order to maintain the infrastructure we also need a base volume,” Loomis CEO Patrik Andersson said in an interview. He says Sweden’s more remotely populated areas in the north are most at risk of losing access to cash.

Such a scenario would be worrying in the event of natural disaster or a technological breakdown, with Swedes potentially unable to buy the basics needed to survive. “Cash is important in a crisis situation,” Andersson said. “Swedes don’t maybe have the insight to understand the effects of such a crisis, that it pervades the whole community.” A parliament committee reviewing the broader framework for the Riksbank plans to publish a special report this summer looking at the challenges posed by declines in cash usage. Riksbank Governor Stefan Ingves this week called for legal changes to safeguard the central bank’s governance of the payment system amid the rapid decrease in the use of cash. [..] The amount of cash in circulation in Sweden last year dropped to the lowest level since 1990 and is now more than 40% below its 2007 peak. The declines in 2016 and 2017 were the biggest on record.

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Much as you may wish this were to vanish from the news, it’ll drag on for a very long time.

May Is Ready to Fight With EU Over Draft Brexit Deal (BBG)

Prime Minister Theresa May is preparing to reject the EU’s draft Brexit deal when it’s published Wednesday, a senior official said, as her government steps up its fight with the bloc over the terms of Britain’s departure. With just three weeks left to agree on the Brexit transition phase, the EU will unveil a legal text that’s likely to infuriate euroskeptics in May’s Conservative government, piling further pressure on the premier at a critical time. According to the senior official, May will take on the EU over two of its key proposals that are unacceptable to her government. These are allowing the European Court of Justice to oversee the final deal, and arranging a separate trading regime for Northern Ireland – which, although it could avoid a “hard border” with Ireland, would impose new barriers with mainland Britain.

Almost a year in since May triggered the U.K.’s withdrawal from the 28-nation club, talks have yet to begin on what kind of trade accord will follow. Time is running out to limit the damage this ongoing uncertainty will cause to British businesses, who want a status quo transitional phase to be agreed by the end of March at the latest, to help them prepare and adapt when Britain leaves in March 2019. Yet key conflicts remain unresolved between the U.K. and the EU negotiating teams. “I maintain the evaluation that I gave you three weeks ago, which is that in light of these divergences, that we haven’t achieved the transition,” EU chief negotiator Michel Barnier said Tuesday. His remarks raise the prospect that the deal will miss its crucial end-March deadline.

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Caitlin Johnstone has it right. It’s out leadership that has turned Syria into such a mess (like Lybia, Iraq), not Assad or Putin.

“We’ve Got To DO Something About Syria!” Uh, No You Don’t. Please Don’t. (CJ)

Arguing that the western war machine is a good way to bring about peace and justice is like arguing that a bulldozer is a useful tool for brain surgery. Arguing that the western war machine is a good way to bring about peace and justice in Syria is like arguing that the gasoline which was used to start a house fire can also be used to extinguish it. The cutesy fairy tale you will hear from empire loyalists is that what started out as peaceful protests slowly morphed into a battle between the Syrian government and various terrorist factions, with the west only backing the terrorists later on in the conflict. This is false. [..] This has never been about “saving children”; this is about money, power, and resources, which are all of course ultimately the same thing as far as the empire is concerned.

Longtime US rival Russia has recently been awarded exclusive rights to oil and gas production in Syria in return for its efforts in helping its longtime ally stop the regime change, a predictable step in the fight for fossil fuel dominance in the region. Syria’s border dispute with Israel over the Golan Heights means that Israel has every reason to want to keep Syria destabilized, not only because the Golan Heights contains oil but because it provides a third of Israel’s water supply. Bashar al-Assad also launched what he called his “Five Seas Vision” in 2004, a strategy to use Syria’s supreme geographic location to become an economic superpower. Such a plan wouldn’t sit well with the US hegemon, which can only maintain its dominance by keeping other nations down.

“Once the economic space between Syria, Turkey, Iraq and Iran becomes integrated, linking the Mediterranean, the Caspian Sea, the Black Sea and the Arabian Gulf, will not only be important in the Middle East,” Assad once famously said in 2009. “When these seas are connected, we will become the inevitable intersection of the whole world in investment, transportation, and more.” It’s not hard to imagine how the imperialists would suddenly accelerate the urgency of removing Assad once he began speaking like that. Go try and find anything damning about Bashar al-Assad in the western mainstream media prior to 2009. You’ll find a bunch of positive expressions, including a nomination for honorary knighthood in 2002 by British Prime Minister Tony Blair. Interesting how he then suddenly transformed overnight into a bloodthirsty sexual sadist who gets off on gassing children to death for no reason.

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The name dispute continues. Came upon a map recently (below), which explains quite well why Greeks don’t want FYROM to call itself Macedonia: 90% of former Macedonia is in Greece.

Protesters in FYROM Decry Proposed ‘Macedonia’ Name Compromise (AP)

Several thousand protesters rallied in Skopje, the capital of the Former Yugoslav Republic of Macedonia (FYROM), late Tuesday for the government to call off talks with Greece aimed at settling a decades-long name dispute. The protesters marched peacefully from the main Orthodox cathedral in Skopje past the European Union office, chanting “Macedonia! Macedonia!” and waving national flags. Prime Minister Zoran Zaev’s 9-month-old center-left government has opened negotiations with Greece to resolve the dispute over the country’s name. Greece says the country’s name in its current form implies a territorial claim against its own region of Macedonia. Zaev has said he is willing to support a modified name. But the head of the so-called “World Macedonian Congress” group, Todor Petrov, told the protesters that changing the country’s name would be tantamount to committing treason.

“Our country has a name….To change it would mean that the Macedonian identity would be permanently lost,” he said. The rally was organized by several hard-line nationalist associations. The rally ended peacefully, but a Greek flag was burned during the march. Greeks also held a large rally in Athens earlier this month to reject a proposed compromise. Zaev has said he could accept a “geographical qualifier” in Macedonia’s name – such as “new”, “upper” or “north” – to forge a compromise, but insisted the new name must “respect the dignity” of people in both countries. Greece is also seeking changes in FYROM’s Constitution to eliminate what Athens considers tacit territorial claims. FYROM insists constitutional amendments made in 1995 already addressed Greek concerns.

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1) It’s crazy that we find this so special.

2) Shops have had plastic free aisles for many years, and in many places. Just not your supermarket.

3) That unfortunate photo makes it look as if everything is wrapped in plastic.

World’s First Plastic-Free Aisle Opens In Netherlands Supermarket (G.)

Shoppers in the Netherlands will get the chance to visit Europe’s first plastic-free supermarket aisle on Wednesday in what campaigners claim is an turning point in the war on plastic pollution. The store in Amsterdam will open its doors at 11am when shoppers will be able to choose from more than 700 plastic-free products, all available in one aisle. The move comes amid growing global concern about the damage plastic waste is having on oceans, habitats and food chains. Scientists warn plastic pollution is now so widespread it risks permanent contamination of the natural world. [..] Sian Sutherland, co-founder of A Plastic Planet, the group behind the campaign, said the opening represented “a landmark moment for the global fight against plastic pollution”.

“For decades shoppers have been sold the lie that we can’t live without plastic in food and drink. A plastic-free aisle dispels all that. Finally we can see a future where the public have a choice about whether to buy plastic or plastic-free. Right now we have no choice.” The aisle will open in the Amsterdam branch of the Dutch supermarket chain Ekoplaza. The company says it will roll out similar aisles in all of its 74 branches by the end of the year. Ekoplaza chief executive, Erik Does, has been working with the campaign for the past month and said the initiative was “an important stepping stone to a brighter future for food and drink”. “We know that our customers are sick to death of products laden in layer after layer of thick plastic packaging. Plastic-free aisles are a really innovative way of testing the compostable biomaterials that offer a more environmentally friendly alternative to plastic packaging.”

The aisle will have more than 700 plastic-free products including meat, rice, sauces, dairy, chocolate, cereals, yogurt, snacks, fresh fruit and vegetables. Campaigners say the products will not be anymore expensive than plastic-wrapped goods and will be “scalable and convenient”, using alternative biodegradable packing where necessary rather than ditching packaging altogether. They add the aisles will be a “testbed for innovative new compostable bio-materials as well as traditional materials such as glass, metal and cardboard.” Sutherland said: “There is absolutely no logic in wrapping something as fleeting as food in something as indestructible as plastic. Plastic food and drink packaging remains useful for a matter of days yet remains a destructive presence on the Earth for centuries afterwards.”

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Really? ‘Alarmed’? ‘Crazy’? They knew weeks ago the polar vortex was about to split. And still don’t know why that is. Keep it real.

Arctic Warming: Scientists Alarmed By ‘Crazy’ Temperature Rises (G.)

An alarming heatwave in the sunless winter Arctic is causing blizzards in Europe and forcing scientists to reconsider even their most pessimistic forecasts of climate change. Although it could yet prove to be a freak event, the primary concern is that global warming is eroding the polar vortex, the powerful winds that once insulated the frozen north. The north pole gets no sunlight until March, but an influx of warm air has pushed temperatures in Siberia up by as much as 35C above historical averages this month. Greenland has already experienced 61 hours above freezing in 2018 – more than three times as many hours as in any previous year. Seasoned observers have described what is happening as “crazy,” “weird,” and “simply shocking”.

“This is an anomaly among anomalies. It is far enough outside the historical range that it is worrying – it is a suggestion that there are further surprises in store as we continue to poke the angry beast that is our climate,” said Michael Mann, director of the Earth System Science Center at Pennsylvania State University. “The Arctic has always been regarded as a bellwether because of the vicious circle that amplify human-caused warming in that particular region. And it is sending out a clear warning.” Although most of the media headlines in recent days have focused on Europe’s unusually cold weather in a jolly tone, the concern is that this is not so much a reassuring return to winters as normal, but rather a displacement of what ought to be happening farther north.

At the world’s most northerly land weather station – Cape Morris Jesup at the northern tip of Greenland – recent temperatures have been, at times, warmer than London and Zurich, which are thousands of miles to the south. Although the recent peak of 6.1C on Sunday was not quite a record, but on the previous two occasions (2011 and 2017) the highs lasted just a few hours before returning closer to the historical average. Last week there were 10 days above freezing for at least part of the day at this weather station, just 440 miles from the north pole.


Snowstorm nears London Photo: NPAS

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Feb 272018
 
 February 27, 2018  Posted by at 11:02 am Finance Tagged with: , , , , , , , , ,  5 Responses »


Lewis Wickes Hine Mother and child, Ellis Island, New York 1907

Stock Market Rests Happily on Smoldering Powder Keg (WS)
China’s Bailouts Won’t End With Anbang (Balding)
US January New Home Sales Crash As Rates Spike (ZH)
US Gross National Debt Spikes $1 Trillion in Less Than 6 Months (WS)
Dark Money: The Secret Force Behind Today’s Rigged Markets (Nomi Prins)
Problem With Rising Rates: Corporate America Has Binged On Debt (CNN)
European Companies’ Alarming Leverage (BBG)
Central Banks Need To Stay Vigilant For Further Volatility – Lagarde (BBG)
US Will Overtake Russia As Top Oil Producer By 2019 (R.)
The Matrix? Alice In Wonderland? Praise For Corbyn From UK Business (Ind.)
Generational Battle Lines Harden Over Pensions (G.)
The Real Reason Behind The US Student Debt Problem (F.)
20 US States Sue Federal Government, Seeking End To Obamacare (R.)
US Supreme Court Rebuffs Trump, Won’t Hear Immigration Appeal (BBG)
And Now the Schiff Memo (Jim Kunstler)
East Ghouta: The Last Great Battle Of The Syrian War? (Duran)
Women ‘Sexually Exploited In Return For Aid’ in Syria (BBC)

 

 

The beauty of low rates.

Stock Market Rests Happily on Smoldering Powder Keg (WS)

There is nothing like a big shot of leverage to fire up the stock market. And that’s what the market got in 2017, when the S&P 500 surged 26%, and in January 2018, when the index soared another 7.5% through January 26 – until suddenly something happened. One measure of leverage in the stock market is margin debt – the amount individual and institutional investors borrow from their brokers against their portfolios – which surged $22.9 billion in January to a new record of $665.7 billion, according to FINRA (Financial Industry Regulatory Authority), which regulates member brokerage firms and exchange markets, and which has taken over margin-debt reporting from the NYSE.

For the 12-month period through January, margin debt soared $112.2 billion, among the largest 12-month gains in the history of the data series, behind only the 12-month periods ending in: • December 2013 ($123 billion) • July 2007 ($160 billion) • March 2000 ($133.7 billion) • November 1997 ($132 billion). But it’s not just the recent surge; it’s the length of the surge. With only a few noticeable down periods, margin debt has soared for nine years in a row and now exceeds the prior peak of July 2007 ($416 billion) by 60%. By comparison, over the same period, nominal GDP (not adjusted for inflation) has grown 32%, and the Consumer Price Index has grown 20%.

In other words, margin debt has ballooned twice as fast from peak to peak as GDP and three times as fast as the Consumer Price Index. The chart below shows margin debt based on the FINRA data, which includes margin debt from its own member firms and from NYSE Member firms, and is therefore more complete and larger than the NYSE data was. For example, NYSE margin debt in November 2017, the last month available, was $580.9 billion while FINRA’s data for November showed margin debt of $627.4 billion. And in January, FINRA warned about the levels of margin debt – marked in green on the chart. Note the spike that started in June 2016:

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Xi’s main problem: he can’t let these companies go belly-up. And there’s lots of them, some big, some smaller.

China’s Bailouts Won’t End With Anbang (Balding)

When the China Insurance Regulatory Commission announced last week that it was seizing Anbang, the only surprise was that it took so long. Last year, the company was told to sell its overseas assets, its founder was placed behind bars, and banks were ordered to stop offering its products. So what, if anything, does this latest incident tell us about China’s economy and its attempt to crack down on debt? Anbang is often referred to as an insurance company, but this is misleading. Although the company does offer some run-of-the-mill products, such as property and casualty insurance, what really drove its growth were unusually structured life-insurance products. At the end of 2016, shortly before regulators intervened, property and casualty premiums made up a mere 4% of the group’s revenue. Life insurance made up 96%.

The growth in this business stunned even China analysts accustomed to tales of fabulous growth. From 2010 to 2016, Anbang’s annual life-insurance premium revenue increased from 1 million yuan to 114.2 billion yuan, or total growth of 11 million %. Even during a period of rapid economic expansion, annualized growth of 593% is amazing. The problem was that the life-insurance products were actually high-yielding debt instruments; investors could opt out of the insurance portion in as little as two years. With some products yielding more than 5% in the first three years, this essentially made Anbang a highly leveraged investor taking on significant risks to cover its cost of capital. Customers were basically extending loans to Anbang that it used to overpay for assets. Regulators finally stepped in to prevent a collapse that could have led to significant instability – with some 35 million customers demanding their money back.

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Econ 101 redux: “..prices will be forced to adjust lower as affordability collapses..”

US January New Home Sales Crash As Rates Spike (ZH)

Following the significant disappointment of January’s existing home sales, hopes were high for a rebound in new home sales (+3.5% expected after December’s 9.3% plunge) but those hopes were crushed as January new home sales crashed 7.8% MoM. This is the lowest level since August, even as the supply of homes at current sales rate climbed to 6.1 months from 5.5 months.

This is the biggest two-month drop in new home sales SAAR since August 2013. The Median price dropped from $336,700 to $323,000 – the lowest since October…

16% of new homes sold in January cost more than $500,000, down from 22% last month. As sales in the Northeast collapsed: • Northeast -33.3%, from 36K to 24K • Midwest +15.4%, from 65K to 75K • South -14.2%, from 351K to 301K • West +1.0%, from 191K to 193K So we are sure NAR will blame ‘inclement’ weather – as opposed to soaring rates and plunging affordability. Just as we warned previously, the following chart shows, that surge in rates will have a direct impact on home sales (or prices will be forced to adjust lower) as affordability collapses… This won’t end well.

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When trapped by crazy, go crazier.

US Gross National Debt Spikes $1 Trillion in Less Than 6 Months (WS)

As of the latest reporting by the Treasury Department, the US gross national debt rose by $41.5 billion on Thursday, February 22, to a grand total of $20.8 trillion. Here’s the thing: On September 7, 2017, five-and-a-half months ago, just before Congress suspended the debt ceiling, the gross national debt stood at $19.8 trillion. At that time, I was holding my breath waiting for the gross national debt to take a huge leap in a single day – as it always does after the debt ceiling gets lifted or suspended – and jump to the next ignominious level. It sure did the next day, when it jumped $318 billion. And it continued. Over a period of 8 weeks, the gross national debt jumped by $640 billion.

Four weeks after that, it had ballooned by $723 billion, at which point Fed Chair Yellen – whose cheap-money policies had enabled Congress to do this for years – said that she was “very worried about the sustainability of the US debt trajectory.” Then Congress served up another debt ceiling – a regular charade lawmakers undertake to extort deals from each other, beat the White House into submission, and keep the rest of the world their on their toes. It goes like this: First they pass the spending bills, directing the Administration to spend specific amounts of money on a gazillion specific things spread around specific districts. Then they block the means to pay the credit card bill. That debt ceiling was suspended on February 8, at which point the gross national debt began to surge again, adding $960.4 billion, a 5% jump in the gross national debt in just 5.5 months:

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Dark money will end up killing everything.

Dark Money: The Secret Force Behind Today’s Rigged Markets (Nomi Prins)

Markets were up again big today and volatility was down. But we haven’t seen the last of rising volatility, nor of the central banks’ attempts to thwart it. This week, new Fed Chair Jerome Powell will be giving his first congressional testimony, and you can be sure that markets are waiting on his words with bated breath. Before his testimony, the Fed will be releasing its Monetary Policy Report, which will also give an indication to the direction of Fed policy. Because these will be his first official comments as Fed chair, Powell will want to both make a personal mark and make sure markets don’t panic over his remarks. I believe he will temper his comments to neutralize any negative market impact the report could have. Wall Street wants to hear that Powell’s not going to aggressively hike rates.

The risk is that, as an article from CNBC reports, “Powell may not clarify anything,” in which case, “traders could be stuck with the same dilemma that shook stocks and sent bond yields spiking [last] Wednesday after the release of the minutes from the Fed’s January meeting.” I think Powell will sound as dovish as he can to avoid that outcome. So even if he confirms rate hikes will be executed at the already forecast pace of three rates this year, he won’t indicate there could be more, which should keep markets calmer and bullish. In other words, I don’t believe that Powell will implement dramatically different monetary policy from his predecessors Janet Yellen or Ben Bernanke. The Fed will do whatever the markets need. Banks have grown accustomed to what I call “dark money” and don’t want Powell to rock the boat.

What is dark money? Dark money basically means money coming from central banks. In essence, central banks “print” money or electronically fabricate money by buying bonds or stocks. They use other tools like adjusting interest rate policy and currency agreements with other central banks to pump liquidity into the financial system. That dark money goes to the biggest private banks and financial institutions first. From there, it spreads out in seemingly infinite directions, affecting different financial assets in different ways. These dark money flows stretch around the world according to a pattern of power, influence and of course, wealth for select groups. Dark money is the No. 1 secret life force of today’s rigged financial markets. It drives whole markets up and down. It’s the reason for today’s financial bubbles.

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CNN wakes up.

Problem With Rising Rates: Corporate America Has Binged On Debt (CNN)

Corporate America, egged on by ridiculously-low borrowing costs, has built up more debt than any time since the end of the Great Recession. The credit binge has allowed companies to grow faster, invest in the future and reward shareholders with huge dividends and share buybacks. Yet elevated levels of debt will also make businesses vulnerable when the next recession strikes or if borrowing costs spike because of rising interest rates. Either outcome will make it harder for Corporate America to pay back the $4 trillion of debt coming due by 2022. This risk has been underlined by the recent surge in Treasury yields and rising concerns that inflation could force the Federal Reserve to consider aggressive rate hikes.

“Removing the easy money punch bowl could trigger the next default cycle,” S&P Global Ratings wrote in a recent report titled “Debt high, defaults low – something’s gotta give.” For nearly a decade, companies have taken advantage of extremely cheap money set by the Fed and foreign central banks trying to pump up sluggish growth. Excluding the highly leveraged financial sector, corporate debt relative to GDP matched an all-time high during the third quarter of 2017, according to an analysis of the most recent numbers by Informa Financial Intelligence. “It’s certainly a reason to be cautious, particularly when we are long into this growth cycle and the Fed is raising rates,” said David Ader, chief macro strategist at Informa Financial Intelligence. “Everything is fine and well – until it isn’t,” he said.

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US, China, Europe et al. Leverage is all that’s left.

European Companies’ Alarming Leverage (BBG)

Much has been written recently about whether companies are going to look overstretched as monetary policy is tightened and bond yields rise. Some excellent research on European non-financial corporates by our Bloomberg Intelligence colleagues Laurent Douillet and Tim Craighead shines more light on the subject. It’s a slightly worrying picture. First off, they looked at cumulative free cash flows over the five years between 2012 and 2016, and then compared them with shareholder payouts and M&A spending. In every sector, except telecoms, free cash flow was exceeded by combined dividends, buybacks and deal-making, as this chart shows:

Consumer companies, drugs makers and industrials have splurged the most on dividends and takeovers. When you take a first glance at leverage, this doesn’t appear to be the end of the world. When you look at the most recent period, net debt to Ebitda looks pretty undemanding, except for the utilities – which are something of a problem child in Europe generally. Even if you look at free cash flow as a proportion of total debt, utilities are probably the only real outlier. Yet if you take a stricter view of what makes up debt, and include pension deficits and operating lease obligations, things start to look less benign. Operating leases are something that Gadfly’s Chris Bryant has looked at before, as companies will have to include them as part of their assets and associated debts when the new IFRS 16 accounting rules come in next year. If you use an adjusted measure of debt by including pensions and leases, as our BI colleagues have done, you get this:

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Blah blah.

Central Banks Need To Stay Vigilant For Further Volatility – Lagarde (BBG)

Central banks need to stay vigilant as uncertainty remains over the impact of the normalization of monetary policies in advanced economies, IMF Managing Director Christine Lagarde said. “We have known for some time that this is coming, but it remains uncertain as to how exactly it will affect companies, jobs, and incomes,” Lagarde told a conference in Jakarta on Tuesday. “Clearly, policy makers need to stay vigilant about the likely effects on financial stability, including the prospect of volatile capital flows.” Stock markets from the U.S. to Asia were in turmoil in recent weeks on concerns that the U.S. could raise interests rates at a faster pace than previously thought. Investors are awaiting Jerome Powell’s first public comments in the role of Fed chairman on Tuesday.

The global economy is on a broad-based upswing, involving about two-thirds of the world, and it offers an opportunity to reform financial markets, upgrade labor laws, and lower barriers to entry in overly protected industries, Lagarde said. The IMF forecasts global economic growth of 3.9 percent this year and in 2019. “As I have been saying recently, the time to repair the roof is when the sun is shining,” Lagarde said. “Repairing the roof also means using fiscal reforms to generate higher public revenues, where needed, and improve spending. By boosting public finances, countries can increase infrastructure investment and development spending, especially on social safety nets for the most vulnerable.‘”

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Burn baby burn.

US Will Overtake Russia As Top Oil Producer By 2019 (R.)

The United States will overtake Russia as the world’s biggest oil producer by 2019 at the latest, the International Energy Agency (IEA) said on Tuesday, as the country’s shale oil boom continues to upend global markets. IEA Executive Director Fatih Birol said at an event in Tokyo the United States would overtake Russia as the biggest crude oil producer “definitely next year”, if not this year. “U.S. shale growth is very strong, the pace is very strong … The United States will become the No.1 oil producer sometime very soon,” he told Reuters separately. U.S. crude oil output rose above 10 million barrels per day (bpd) late last year for the first time since the 1970s, overtaking top oil exporter Saudi Arabia.

The U.S. Energy Information Administration said early this month that U.S. output would exceed 11 million bpd by late 2018. That would take it past top producer Russia, which pumps just below that mark. Birol said he did not see U.S. oil production peaking before 2020, and that he did not expect a decline in the next four to five years. The soaring U.S. production is upending global oil markets, coming at a time when other major producers — including Russia and members of the Middle East-dominated OPEC — have been withholding output to prop up prices. U.S. oil is also increasingly being exported, including to the world’s biggest and fastest growing markets in Asia, eating away at OPEC and Russian market share.

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Briatin’s much further down the rabbit hole than it wants to see.

The Matrix? Alice In Wonderland? Praise For Corbyn From UK Business (Ind.)

A Labour Party led by Jeremy Corbyn as the party of business? JC as the last, best hope for the business community? It’s the sort of thing that would make even one of those nutty internet conspiracy theorists who believe that contactless payments are a satanic plot scoff. Now? Now we’re in Terri May’s Brexit wonderland and the Cheshire Cat is pissing himself. Madness is part of everyday life and nothing seems strange anymore, not even the CBI’s director general Carlyn Fairbairn saying this: “The Labour leader’s commitment to a customs union will put jobs and living standards first by remaining in a close economic relationship with the EU. It will help grow trade without accepting freedom of movement or payments to the EU.”

Or Stephen Martin, the director general of the Institute of Directors, saying this: “Labour has widened the debate today on the UK’s relationship with the EU post-Brexit, and many businesses, particularly manufacturers, will be pleased to hear the Opposition’s proposal to keep a customs union on the table.” You remember the scene from the Wachowskis’ Matrix where Morpheus references Lewis Carroll’s most famous work? “You take the blue pill, you stay in your bed and believe whatever you want to believe. You take the red pill, you stay in wonderland and I show you how deep the rabbit hole goes.” With the Tory party having taken leave of its senses in favour of plunging us into a nightmare beyond anything either Carroll or the the brothers could have conceived, the red pill suddenly doesn’t seem quite as scary as it once did, not now the Tories’ mad ideologues are making merry. The Corbyn rabbit hole might actually be the better option.

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Prediction: no-one’s even going to try to control this, because it would mean having to admit that pensions are Ponzis.

Generational Battle Lines Harden Over Pensions (G.)

A report by the Intergenerational Foundation, a charity that funds research into issues that divide the generations, has found that far from losing out to younger people, baby boomers have proved themselves adept at ensuring they are the winners across many areas of public policy. Governments, say the authors, have been “tempted by short-term pressures to set rates that clearly disadvantage the young and favour the older generations” – compare university fees charged at an interest rate of 6.1% with the 2% the elderly are charged on loans to pay for residential care costs. Another example can be found in the rates of interest offered on state-sponsored savings bonds. The pensioner bond, which was launched by George Osborne and proved so popular it was credited with helping the Tories secure a majority in the 2015 general election, paid a 4% rate of interest.

National Savings bonds for everyone else pay a maximum 2.2%. Worst of all is the huge bill in store for younger people in 30 or 40 years’ time by virtue of the current calculations of future liabilities. Pension liabilities are top of the list, with public sector pensions in particular carrying a heavy cost. The foundation’s concern is that the government overestimates the state’s capacity to pay for future liabilities by exaggerating how fast the UK’s income will grow over time. If GDP growth is forecast at an absurdly high rate then the income will supposedly be in place to pay generous pension payments in 30 years. If that growth fails to materialise, those who are in their 20s and 30s today will need to find large sums of cash to fill the hole when they are in their 50s and 60s.

The debate centres on the discount rate, which is the calculation of a fund’s long-term growth, which is used to reflect how much money should be set aside today to pay for tomorrow. Downgrade the discount rate by 0.5% and the government will need to set aside additional pension contributions worth 3% of salaries, it says. “From this you can see very starkly why representatives of older workers have been lobbying strongly for higher discount rates. If they succeed in keeping discount rates 1% above what they should be, they have essentially transferred 6% of the total pension bill for each of these years from the old to the young, so the young will have to pay this bill,” the authors say.

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Failed education systems.

The Real Reason Behind The US Student Debt Problem (F.)

The New York Fed publishes the always-interesting Quarterly Report on Household Debt and Credit. The Q4 2017 version came out recently. In total, Americans carried $13.15 trillion in debt as of year-end 2017. Most of it is mortgage debt—about 71% of the total, if you include home equity loans. Much to our surprise, the next-largest category isn’t auto loans or credit cards. It’s student loans, which are now 10% of total debt. Their share has been growing steadily. This might be okay if the debt enhanced the student’s financial security, but for millions of Americans, that’s not what has happened. Borrowers don’t achieve the desired results but remain stuck with the debt anyway. While delinquency rates for other forms of debt fell after the recession, student loans didn’t. As of year-end 2017, about 11% of nearly $1.4 trillion in student debt was at least 90 days delinquent.

It’s actually worse than that. Roughly half of student debt is held by borrowers who aren’t required to make payments yet. That’s because they are still in school, unemployed, or otherwise excused. Much of that debt would likely be delinquent too. Also important: The delinquent loans tend to be small (less than $10,000) and held by borrowers who never earned degrees. These borrowers probably thought they were doing the right thing. They wanted decent jobs and saw that having a college degree was necessary to get one. So why is college the key to gainful employment? It hasn’t always been so. It’s because employers require a degree as a job qualification… and that’s partly the fault of IQ tests.

[..] College degrees are convenient, legal substitutes for the kind of testing employers haven’t been able to use since the 1970s. So apart from whatever you learn in college, merely having the credential became necessary to career success. As a result, everyone in the equation made certain choices. • Employers: demand a college degree even for jobs that don’t require college-level skills. • Workers: get a college degree even if you must take on debt. Colleges: Raise prices since so many students are begging for degrees.
This made college more expensive, forcing students to borrow more and more money.

Politicians jumped in to promote and guarantee those loans. And here we are.

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Thw two parties will have to come together to solve this. Just blaming the other won’t do it.

20 US States Sue Federal Government, Seeking End To Obamacare (R.)

A coalition of 20 U.S. states sued the federal government on Monday over Obamacare, claiming the law was no longer constitutional after the repeal last year of its requirement that people have health insurance or pay a fine. Led by Texas Attorney General Ken Paxton and Wisconsin Attorney General Brad Schimel, the lawsuit said that without the individual mandate, which was eliminated as part of the Republican tax law signed by President Donald Trump in December, Obamacare was unlawful. “The U.S. Supreme Court already admitted that an individual mandate without a tax penalty is unconstitutional,” Paxton said in a statement.

“With no remaining legitimate basis for the law, it is time that Americans are finally free from the stranglehold of Obamacare, once and for all,” he said. The U.S. Justice Department did not immediately respond to a request for comment on whether the Trump administration would defend the law in court. The individual mandate in Obamacare was meant to ensure a viable health insurance market by forcing younger and healthier Americans to buy coverage. Republicans have opposed the 2010 law formally known as the Affordable Care Act, the signature domestic policy achievement of Trump’s Democratic predecessor Barack Obama, since its inception.

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The Supreme Court is wise enough to keep its distance from executive and legislative branches.

US Supreme Court Rebuffs Trump, Won’t Hear Immigration Appeal (BBG)

The U.S. Supreme Court rejected a Trump administration appeal aimed at ending deportation protections for young undocumented immigrants, steering clear for now of the debate over the fate of hundreds of thousands of people. The justices, without published dissent, turned away the administration’s appeal of a ruling that has kept the Obama-era program in place. The rejection buys time for the so-called dreamers even as Congress has been unable to agree on legislation to give them permanent protection. The Senate earlier this month blocked three proposals that would have shielded the dreamers. The administration was asking the Supreme Court to take the unusual step of bypassing an appeals court and granting fast-track review of a federal trial judge’s decision.

The court’s rebuff leaves open the possibility that the justices could consider the case later, after a San Francisco-based federal appeals court hears it. “It is assumed that the Court of Appeals will proceed expeditiously to decide this case,” the Supreme Court said in its two-sentence order. The Deferred Action for Childhood Arrivals program “is clearly unlawful,” White House spokesman Raj Shah said in a statement. “We look forward to having this case expeditiously heard by the appeals court and, if necessary, the Supreme Court, where we fully expect to prevail,” he said. DACA, begun under President Barack Obama, protects undocumented immigrants who were brought to the U.S. as children. Applicants are shielded from deportation and allowed to apply for work permits.

The first group of DACA recipients had been set to lose their protected status in March before U.S. District Judge William H. Alsup’s Jan. 9 order. The Trump administration appeal argued that the judge’s order “requires the government to sanction indefinitely an ongoing violation of federal law being committed by nearly 700,000 aliens.” The administration resumed accepting DACA renewal applications after the order. Congress is at an impasse over legislation to protect the dreamers, as President Donald Trump and many Republicans insist that it must be combined with strict new limits on legal immigration. Even though the judge’s order means the prior March deadline isn’t in force, House Speaker Paul Ryan of Wisconsin said this month, “we want to operate on deadlines. We clearly need to address this issue in March.”

Alsup said the Department of Homeland Security based its decision to end the program on the “flawed legal premise” that Obama lacked the authority to set it up in the first place. In issuing his temporary order, which extends the protection while the lawsuit goes forward, Alsup said the “public interest” would be served by keeping the program in place. The judge pointed to Trump tweets that suggested he actually supported DACA. A September tweet read: “Does anybody really want to throw out good, educated and accomplished young people who have jobs, some serving in the military? Really! . . . .” Alsup wrote: “We seem to be in the unusual position wherein the ultimate authority over the agency, the chief executive, publicly favors the very program the agency has ended.”

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” Can I be alone in wondering how these agencies can mount massive prosecutions of nobodies like George Papadopoulos and Rick Gates while ignoring the much better documented intrigues?..”

And Now the Schiff Memo (Jim Kunstler)

The excruciating quandary President Trump presents to the nation is dragging the sad remnant of the thinking class ever-deeper into a netherworld of desperation, paranoia, and mendacity that may exceed even their own official fantasies about the enemy in the White House. Everything about the lumbering, blundering occupant of 1600 Pennsylvania Avenue drives his Dem/Prog opponents — or #Resistance, if you will — plumb batshit: his previous incarnations as a shady NYC real estate schmeikler, as a TV clown, as a business deadbeat, as a self-described pussy-grabber… his vulgar casinos, his mystifying hair-do, his baggy suits and dangling neckties, his arrant, childish, needless lying about trivialities, his intemperate tweets, his unappetizing associates, his loutish behavior in foreign lands, his fractured, tortured syntax, his obvious insincerity, his sneery facial contortions… and lots lots more — and of course that doesn’t even touch the actual policy positions he struggles to articulate.

In sum, Trump represents such a monumentally grotesque embarrassment to the permanent Washington establishment that they will pay any price, bear any burden, meet any hardship, support any friend, oppose any foe, in order to assure the removal of this odious caitiff. And in the process abandon all reason and decency. To complicate matters, there really are policy differences that, despite Mr. Trump’s oafish profferings, must somehow be faced for the sake of the country’s future — two of the clearest, just for example, being whether we will have coherent, enforceable immigration laws and whether we will continue to allow the sale of tactical military rifles to the general public. These are matters, by the way, which people of sound mind and honorable intentions could actually resolve through open legislative debate.

[..] in creating this horror movie, the #Resistance is dangerously perverting institutions that may not recover from being written into the script. For instance, the Department of Justice, its subsidiary, the FBI, and sundry intel outfits whose highest officers have been enlisted as cast members. Can I be alone in wondering how these agencies can mount massive prosecutions of nobodies like George Papadopoulos and Rick Gates while ignoring the much better documented intrigues of officials such as Bruce Ohr, Andrew McCabe, Peter Strzok, Lisa Page, Sally Yates, James Comey, Loretta Lynch, John Brennan, Debbie Wasserman-Schultz, Hillary Clinton, and possibly even the sainted Barack Obama?

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All the west has left is fabricated narratives.

East Ghouta: The Last Great Battle Of The Syrian War? (Duran)

Just as was the case with the crisis in Aleppo in 2016, the crisis in east Ghouta today is the subject of much handwringing in the Western media. There are also – just as there were in 2016 – pleas to President Putin to “show mercy”. In 2016 these pleas came mainly from British Foreign Minister Boris Johnson. This time they are coming from German Chancellor Merkel and French President Macron. Meanwhile – as in 2016 – there is grandstanding against Russia at the UN Security Council by the US’s UN ambassador. In 2016 it was Samantha Power; this time it is Nikki Haley. Just as in 2016 we are now seeing overheated and hysterical demands for ‘military action’ to ‘bring the killing to a stop’, with all concerns about what that might lead to brushed aside.

To complete the truly extraordinary parallels, there has even been a US bombing raid on Syrian forces far away in eastern Syria in Deir Ezzor province, just as there was during the fighting in Aleppo in 2016. Moreover the Russian response to the US threats and to the US bombing raid appears to be the same as it was in 2016: the deployment of further powerful additional military forces to Syria and to Khmeimim air base. In 2016 it was S-300VM Antey 2500 anti aircraft missiles; today it is additional S-400 anti aircraft missiles and (reportedly) SU-57 fighters. As to what is really behind the furious campaign to stop the attack on east Ghouta, it is the same as was the case with the furious campaign to stop the attack on eastern Aleppo in 2016: to prevent a Jihadi enclave which threatens one of Syria’s two great cities – Aleppo in 2016, Damascus today – from being destroyed.

As to what would actually happen if – or rather when – that Jihadi enclave is finally destroyed, I can do no better than quote Marcus Papadopoulos “Once East Ghouta is liberated from Al-Qaeda, the world will see the same response from its inhabitants as the world saw once East Aleppo was liberated: jubilation. And, like with East Aleppo, East Ghouta will serve as another testimony about the facade that is the White Helmets.” Why all these frantic attempts to save an Al-Qaeda controlled Jihadi enclave from being destroyed near Damascus? The short answer is that just as the destruction in 2016 of the Jihadi enclave in eastern Aleppo showed to the Western ‘democracy promotion’ lobby that their regime change war in Syria could not be won, so the destruction of the Jihadi enclave in east Ghouta near Damascus today would show to the Western ‘democracy promotion’ lobby that their regime change war in Syria is irretrievably lost.

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The UN is just as guilty as Oxfam etc.

Women ‘Sexually Exploited In Return For Aid’ By Charities In Syria (BBC)

Women in Syria have been sexually exploited by men delivering aid on behalf of the UN and international charities, the BBC has learned. Aid workers said the men would trade food and lifts for sexual favours. Despite warnings about the abuse three years ago, a new report shows it is continuing in the south of the country. UN agencies and charities said they had zero tolerance of exploitation and were not aware of any cases of abuse by partner organisations in the region. Aid workers told the BBC that the exploitation is so widespread that some Syrian women are refusing to go to distribution centres because people would assume they had offered their bodies for the aid they brought home. One worker claimed that some humanitarian agencies were turning a blind eye to the exploitation because using third parties and local officials was the only way of getting aid into dangerous parts of Syria that international staff could not access.

The United Nations Population Fund (UNFPA) conducted an assessment of gender based violence in the region last year and concluded that humanitarian assistance was being exchanged for sex in various governorates in Syria. The report, entitled “Voices from Syria 2018”, said: “Examples were given of women or girls marrying officials for a short period of time for ‘sexual services’ in order to receive meals; distributors asking for telephone numbers of women and girls; giving them lifts to their houses ‘to take something in return’ or obtaining distributions ‘in exchange for a visit to her home’ or ‘in exchange for services, such as spending a night with them’.” It added: “Women and girls ‘without male protectors’, such as widows and divorcees as well as female IDPs (Internally Displaced Persons), were regarded as particularly vulnerable to sexual exploitation.” Yet this exploitation was first reported three years ago.

Danielle Spencer, a humanitarian adviser working for a charity, heard about the allegations from a group of Syrian women in a refugee camp in Jordan in March 2015. [..] “I remember one woman crying in the room and she was very upset about what she had experienced. Women and girls need to be protected when they are trying to receive food and soap and basic items to live. The last thing you need is a man who you’re supposed to trust and supposed to be receiving aid from, then asking you to have sex with him and withholding aid from you.” She continued: “It was so endemic that they couldn’t actually go without being stigmatised. It was assumed that if you go to these distributions, that you will have performed some kind of sexual act in return for aid.”

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Jan 272018
 
 January 27, 2018  Posted by at 10:58 am Finance Tagged with: , , , , , , , , , , ,  10 Responses »


Grete Stern Bertolt Brecht 1934

 

Bankers, Policy Makers at Davos Revel in ‘Sweet Spot’ Economy (BBG)
IMF Chief Warns Trump’s Tax Cuts Could Destabilise Global Economy (G.)
China Set To Lose ‘Emerging Market’ Status As Growth Declines (F.)
This was 1987. Start Rebalancing – David Rosenberg (ZH)
What Could Possibly Go Wrong? (Lance Roberts)
Equity Allocations At Record Highs As Investor Cash Hits All Time Low (ZH)
Japanese Cryptocurrency Exchange Loses $535 Million To Hackers (CNBC)
How Bitcoin Regulation Will Happen, And What It Will Mean (Ind.)
Bombardier Gets Surprise Win After U.S. Rebuffs Boeing Trade Case (BBG)
Canada Illegally Subsidized Bombardier: Embraer (R.)
More Than Half Of New-Build Luxury London Flats Fail To Sell (G.)
Building More Homes Will Not Solve Britain’s Housing Crisis (Pettifor)
Brexit Saddles EU With A Huge Budget Problem (CNBC)
Deal With France ‘Could Bring Hundreds More Child Refugees To UK’ (G.)

 

 

Not much longer.

Bankers, Policy Makers at Davos Revel in ‘Sweet Spot’ Economy (BBG)

The global elites have rediscovered their animal spirits. As the World Economic Forum drew to a close in the Swiss ski resort, the overarching mood of the executives, policy makers and investors was that their economies are in fine shape and that stock markets have every reason to extend their run. “Let’s celebrate what could go right for the moment because we are in a sweet spot,” IMF Managing Director Christine Lagarde said on the closing panel discussion. The Standard & Poor’s 500 Index has gained about a quarter since the start of 2017 and the IMF is forecasting the strongest worldwide economic growth this year since a brief post-recession bounce in 2011. Some 57% of executives polled by PricewaterhouseCoopers saw the economy improving in 2018, about double the number of a year ago.

The rise of cryptocurrencies was evident in the Swiss town both in conference sessions and on the promenade where companies rent shopfronts to promote their wares. “The greatest worry I’ve heard over the past days in Davos is that there is not enough worry,” Mary Callahan Erdoes, JPMorgan asset-management unit CEO, said on the panel. “It’s O.K. to not be worried, to celebrate how we got here.” Erdoes thanked the policy makers on the stage for working “tirelessly” and “giving all of these government jobs such fabulous prestige and something that I know all of us now perhaps aspire to do.” “Wow,” said Bank of England Governor Mark Carney. “This is fantastic.” Such sentiment led delegates to declare that it was the most upbeat Davos gathering since before the financial crisis. Yet the giddiness also gave some investors pause as they warned against turning too exuberant.

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Lagarde gets what she wants and then turns against it. Cover all your bases.

IMF Chief Warns Trump’s Tax Cuts Could Destabilise Global Economy (G.)

Donald Trump’s huge tax cuts are a threat to the stability of the global economy, the managing director of the IMF has warned. Christine Lagarde singled out Trump’s tax reforms as one of three risks that could destabilise the current economic recovery, especially given the boom in stock markets in the past year. “While the US tax reforms certainly will have positive effects in the short term, for the US and other countries around, it might also lead to serious risks,” Lagarde told the World Economic Forum in Davos. “That has an impact on financial vulnerability, particularly given the high asset prices that we see around the world, and the easy financing that it still available,” she added. She was speaking shortly after the US president told Davos that his tax reforms had created “a big, beautiful waterfall” of pay rises for US workers, as American companies passed the tax cut on.

However, the IMF is concerned that cutting taxes will lead to a bigger US budget deficit, and that extra borrowing by the US Treasury will force up long-term American interest rates. As a result, it fears growth could be choked off in the longer term, making the stock market vulnerable to a sudden downward lurch. Lagarde cautioned against people becoming too complacent about the pick-up in global growth reported by the IMF at the start of the WEF’s annual meeting. The IMF raised its forecasts for global expansion to 3.9% this year and in 2019, reporting that all major economies – the US, EU and Japan – are doing better. “I don’t think that we’ve completed the job,” said Lagarde, who fears that the growing economic inequality in many countries is creating “fractures”. “Having growth is good, improving productive is good, but [policymakers should] make sure that the results of that growth are properly allocated,” said the IMF chief, adding that inequality is growing in many advanced economies, and very high in emerging markets.

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An emerging market that’s stopped emerging.

China Set To Lose ‘Emerging Market’ Status As Growth Declines (F.)

China has been considered an emerging market for over 25 years due to its rapid reform process. Generally speaking, emerging markets are defined as developing countries moving toward an open market economy. Unfortunately, if one takes a close look at growth levels and reform factors, China has shed some of the key characteristics of an emerging market, due to a sharp slowdown in the reform process, an increasingly state centered economy, and lower levels of true growth. China is an upper middle income country that enjoyed gangbusters growth through the 1990s and 2000s, but that is now suffering from a major economic slowdown that has no end in sight. One major reason for slowing growth is that market forces have been quashed by a a buildup in the state sector and mounting economic and financial risks that would result in economic collapse if the reform process is restarted.

Under President Xi Jinping, China’s economic policy has shifted toward enhancing the organization and financial sources of state owned enterprises, and away from liberalizing the currency and financial sector. Strides that were made toward internationalizing the RMB and bringing about a more market-based financial system have been reversed. A simultaneous over-reliance on easy credit has created plenty of risks in the financial sector that now prevent officials from even considering making the financial sector more market-based. Slow reform of the service sector and strong state presence in service subsectors like health and education have contributed to declining growth.

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When fear is gone, all that’s left is greed. No balance.

This was 1987. Start Rebalancing – David Rosenberg (ZH)

When discussing today’s unexpectedly weak Q4 GDP print, which came in at 2.6%, far below consensus and whisper estimates in the 3%+ range, and certainly both the Atlanta and NY Fed estimates, we pointed out the silver lining: personal spending and final sales, which surged 4.6% Q/Q (vs 2.2% in Q3), although even this number had a major caveat: “as we discussed previously, much of it was the result of a surge in credit card-funded spending while the personal savings rate dropped to levels last seen during the financial crisis.” Indeed, recall the stunning Gluskin Sheff chart we presented a month ago, which showed that 13-week annualized credit card balances in the U.S. had gone “completely vertical” in the last few months of 2017 which we said “should make for some great Christmas.”

Meanwhile, even more troubling was the ongoing collapse in the US personal savings rate, which last month tumbled to the lowest level since the financial crisis as US consumers drained what little was left of their savings to splurge on holiday purchases.

And while we highlighted and qualified two trends as key contributors to the spending surge in Q4 personal spending, Gluskin Sheff’s David Rosenberg – who is once again firmly in the bearish camp – did one better and quantified the impact. Not one to mince words, the former Merrill chief economist described what is going on as “The Twilight Zone Economy” for the following reason: “how many times in the past have we seen a 2.6% savings rate coincide with a 4.1% jobless rate? How about never…huge ETF flows driving equities higher, but these metrics are screaming ‘late cycle’.” He then proceeded to give “some haunting math” from the GDP number: “The savings rate fell from 3.3% to 2.6%. If it had stayed the same, real PCE would have been 0.8% (annualized) instead of 3.8% and GDP would have been 0.6% instead of 2.6%.”

[..] a more troubling development is that the conditions observed ahead of the Black Monday crash are becoming increasingly apparent. Here is Rosenberg’s stark assessment of where we stand: “Rising bond yields. Full employment. Fed tightening. Trade frictions. Weak dollar. Rising twin deficits, spurred by tax reform. Sound familiar? It should. This was 1987. Start rebalancing.”

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More 1987.

What Could Possibly Go Wrong? (Lance Roberts)

What goes up, eventually comes down. That is just reality. The bull market that began in 2009, has now entered the final stage of “capitulation” as investors throw caution to the wind and charge headlong into the markets with reckless regard for the consequences.

Of course, it isn’t surprising given the massive amounts of liquidity continually injected into the financial markets and global Central Banks have now figured out that continually rising financial markets solve much of the world’s ills. Simply, with enough liquidity, you can cover up bad (credit risks) by guaranteeing holders they will never default. It’s genius. It’s a “no lose” investment scheme. Unfortunately, we have seen this repeatedly in the past. In the 1980’s it was “Portfolio Insurance” – a “no lose” investment program that eventually erupted into the crash of 1987. But not before the market went into a parabolic advance first.

In the 1990’s – it was the dot.com phenomenon which was “obviously” a “no lose” proposition. Even after Alan Greenspan spoke of “irrational exuberance,” two years later the market went parabolic once again.

Then in 2006-2007, banks invented the CDO-squared, a collateralized derivative obligation based on other collateralized derivative obligations. It was a genius way to invest with “no risk” because the real estate market had never crashed in history.

Today, it is once again an absolute “certainty” that markets will rise from here as global Central Banks have it all under control. What possibly could go wrong?

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Leverage squared.

Equity Allocations At Record Highs As Investor Cash Hits All Time Low (ZH)

While Bank of America may or may not be right in its forecast that as a result of the market meltup, buying panic and sheer euphoria to get into stocks, which just pushed the bank’s proprietary “Bull and Bear” indicator to a level which on 11 out of 11 prior occasions always presaged a ~12% selloff…

… a market correction or worse is imminent, one thing that is indisputable is the funding status of the Private Clients served by BofA’s Global Wealth and Investment Management (GWIM) team. What it shows is that investor cash allocation has just dropped to a record low of just 10%…

… while investor equity exposure is rising at fastest pace in 10 years.

… and total equity allocations are back to record highs.

In other words: ‘bear capitulation’ as everyone is now long stocks in what BofA called a “non-stop euphoric cabaret.” When will this stop, or reverse? According to BofA, keep an eye on the dollar, which as long as it keeps sliding is supporting of risk assets, however the risk is once it bounces, to wit, the “US dollar key catalyst; note US-Europe FX spat sparked ’87 crash” and “higher US$ “pain trade” = risk-off coming weeks”

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Even if cryptos don’t have a security issue, they certainly appear to have one.

Japanese Cryptocurrency Exchange Loses $535 Million To Hackers (CNBC)

Hackers stole several hundred million dollars’ worth of a lesser-known cryptocurrency from a major Japanese exchange Friday. Coincheck said that around 523 million of the exchange’s NEM coins were sent to another account around 3 a.m. local time (1 p.m. ET Thursday), according to a Google translate of a Japanese transcript of the Friday press conference from Logmi. The exchange has about 6% of yen-bitcoin trading, ranking fourth by market share on CryptoCompare. The stolen NEM coins were worth about 58 billion yen at the time of detection, or roughly $534.8 million, according to the exchange. Coincheck subsequently restricted withdrawals of all currencies, including yen, and trading of cryptocurrencies other than bitcoin. Bloomberg first reported the hack. A CNBC email sent to Coincheck’s listed address bounced back.

Cryptocurrency NEM, which intends to help businesses handle data digitally, briefly fell more than 20% Friday before recovering to trade about 10% lower near 85 cents, according to CoinMarketCap. Most other major digital currencies, including bitcoin, traded little changed on the day. Coincheck management said in the press conference that it held the NEM coins in a “hot” wallet, referring to a method of storage that is linked to the internet. In contrast, leading U.S. exchange Coinbase says on its website that 98% of its digital currency holdings are offline, or in “cold” storage. The Japanese exchange said it did not appear that hackers had stolen other digital currencies.

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There will never be a global consensus. Just a lot of poorly understood laws.

How Bitcoin Regulation Will Happen, And What It Will Mean (Ind.)

Bitcoin has been surging and falling in recent weeks. And it seems mostly to come down to one thing: regulation. The lack of regulation is, for now, a large part of bitcoin and other cryptocurrencies’ intrigue: they seem to allow people to avoid the traditional restrictions in place in money and other assets. But they’re also part of their bad reputation, with the same anonymity and decentralisation allowing them to be used for crime. Many governments have suggested they could introduce such rules. But it’s still not clear what they’d look like, or how they’d arrive; here’s an attempt to predict what might be to come in that most unpredictable of markets. In recent weeks, bitcoin has plunged after the threat of regulation in South Korea.

But it was part of a much broader trend – countries around the world have already introduced new rules, and those that haven’t are talking about it. The price has mostly levelled out in recent weeks, after regulation brought volatility and a slowly sliding price. But there might be more disruption coming, as countries look towards regulation, worried about the activity and behaviour that bitcoin could be enabling. That was obvious as world leaders arrived in Davos and were asked their opinion. The event could be a preview of far more wide-ranging controls that could be introduced in March, when the G20 governments’ financial and economic leaders meet in Argentina – a number of the countries attending have specifically said they will focus on fixing regulation of cryptocurrencies at that meeting.

They include France and Germany, which are said to be working together on bitcoin regulation. Many other countries have called for the international community to work together to bring regulation to bitcoin. Davos has been a platform for various world leaders to give their opinion on bitcoin. And they all seem to agree on one thing. “My number-one focus on cryptocurrencies, whether that be digital currencies or bitcoin or other things, is that we want to make sure that they’re not used for illicit activities,” said Steven Mnuchin, Donald Trump’s most senior financial policymaker, told the World Economic Forum in Davos, Switzerland. “We encourage fintech and we encourage innovation, but we want to make sure all of our financial markets are safe,” Mnuchin said. “We want to make sure that the rest of the world – and many of the (Group of) 20 countries are already starting on this – have the same regulations.”

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Airplane makers wars are set to intensify.

Bombardier Gets Surprise Win After U.S. Rebuffs Boeing Trade Case (BBG)

Bombardier can start shipping C Series jets to Delta Air Lines after a surprise ruling by a U.S. trade panel that said the proposed imports won’t hurt American industry. U.S. companies and workers aren’t being harmed by sales of 100- to-150-seat aircraft from Canada, the International Trade Commission said Friday. The tribunal’s unanimous vote blocks a Commerce Department decision last month to impose duties of almost 300%. Friday’s vote deals a blow to Boeing, which said Bombardier sold the C Series in the U.S. at less than fair value while benefiting from government subsidies. The ruling also opens the door for Montreal-based Bombardier to woo new American customers while potentially easing U.S. trade tensions with Canada and the U.K., where the company builds wings for the aircraft. “I’m shocked,” said Chris Murray, an analyst in Toronto. “This clears the way for the jets being to delivered to Delta,” Murray said. “It also removes any concerns about potential future orders in the U.S.”

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Bombardier goes from one lawsuit to another. Should have stuck to making skidoos.

Canada Illegally Subsidized Bombardier: Embraer (R.)

Brazilian planemaker Embraer said on Friday that the U.S. Department of Commerce has shown that the Canadian government “heavily and illegally subsidized” Bombardier and its C Series aircraft, allowing the company to survive and distorting the aviation industry. The statement came just after Bombardier won an unexpected trade victory against U.S. planemaker Boeing when a U.S. agency rejected imposing hefty duties on sales of Bombardier’s new CSeries jet to American carriers.

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Oh well, there’s plenty homeless people.

More Than Half Of New-Build Luxury London Flats Fail To Sell (G.)

Developers have 420 towers in pipeline despite up to 15,000 high-end flats still on the market. More than half of the 1,900 ultra-luxury apartments built in London last year failed to sell, raising fears that the capital will be left with dozens of “posh ghost towers”. The swanky flats, complete with private gyms, swimming pools and cinema rooms, are lying empty as hundreds of thousands of would-be first-time buyers struggle to find an affordable home. The total number of unsold luxury new-build homes, which are rarely advertised at less than £1m, has now hit a record high of 3,000 units, as the rich overseas investors they were built for turn their backs on the UK due to Brexit uncertainty and the hike in stamp duty on second homes.

Builders started work last year on 1,900 apartments priced at more than £1,500 per sq ft, but only 900 have sold, according to property data experts Molior London. A typical high-end three-bedroom apartment consists of around 2,000 sq ft, which works out at a sale price of £3m. There are an extra 14,000 unsold apartments on the market for between £1,000-£1,500 per sq ft. The average price per sq ft across the UK is £211. Molior says it would take at least three years to sell the glut of ultra-luxury flats if sales continue at their current rate and if no further new-builds are started. However, ambitious property developers have a further 420 residential towers (each at least 20 storeys high) in the pipeline, says New London Architecture and GL Hearn. Henry Pryor, a property buying agent, says the London luxury new-build market is “already overstuffed but we’re just building more of them”.

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Building more is the worst of all options. See above. But it’s alos the only option that lets the illusion last a bit longer.

Building More Homes Will Not Solve Britain’s Housing Crisis (Pettifor)

Everyone – from the government, to housing charities, to housebuilders – has bought into the conventional wisdom that the dysfunction that racks our housing market is a matter of demand and supply. We’re not building enough houses, so house prices have been sent rocketing, taking home-ownership out of reach for growing numbers of young people. But in reality, our housing problems are not a simple feature of supply and demand. Rather, our housing market has a bitcoin problem. What has bitcoin mania got in common with house prices, especially in the capital? For starters, both are speculative bubbles. Vast sums of money have been poured into finite supplies of bitcoins and London property. Both have consequently exploded in value, albeit over different time periods.

And so both have become financialised assets that deliver capital gains far in excess of people’s ability to earn income from work, or from investment in the real economy. And as with bitcoin, so with London property: speculators are convinced that prices will continue to rise for ever. It’s speculation in the property market that is fuelling stratospheric house price rises, not shortage of supply. When the “fuel” of private capital, mortgage credit and cash from the bank of mum and dad is supplemented by government subsidies and tax breaks, house prices rise. Moreover, wealthy global and non-resident buyers have funnelled more than £100bn into London property over recent years, making the problem even worse.

So, rather counterintuitively, building more houses is not the right prescription. House prices won’t fall until the tide of cash flowing into the market abates, for example by tightening mortgage credit, or shrinking the pool of buy-to-let investors. That may already be starting to happen as real incomes continue to fall, the Bank of England toughens up buy-to-let mortgages, and stamp duty rises are phased in for second properties. Despite this, the government pretends the real cause of unaffordable housing is a shortage of new builds. It uses this argument to provide cover for further taxpayer-funded subsidies and tax breaks that benefit its property-owning core voters, its close allies in the construction industry and property market, and its supporters in the City of London.

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Germany crony Holland wants to pay less toward Brexit because its economy is hit harder than others. It also wants the entire EU budget cut. Juncker wants to raise that budget and buy more Europe. This could blow up. Expect more heavy handedness from Brussels.

Brexit Saddles EU With A Huge Budget Problem (CNBC)

Brexit is leaving the EU with a big problem on its hands and a “very tough” negotiation ahead, European Commission Vice-President Jyrki Katainen told CNBC on Friday. The U.K. has been one of the main contributors to the European budget, but once it has left the bloc there will be a gap in the EU budget that will have to be worked out somehow, Katainen said. “It is certainly a problem and we have to address it,” he said at the World Economic Forum (WEF) in Davos, Switzerland. “If I should bet something, we need to adjust the budget to a certain extent but also we need fresh money from member states. We also have to look at how money is spent, how we could get more out of less.”

But many EU members do not want to pay more to compensate for the U.K.’s decision to leave the union. Denmark, for example, made it clear last year that it would not step up its financial commitment because of Brexit. Katainen told CNBC that one solution could be using more financial instruments, including equity investments, to finance European projects rather than direct financial contributions. “This is what we are planning or exploring at the moment… it’s going to be a very though negotiation,” he said.

The current EU budget is planned out until 2020. The European Commission is due to come up with proposals on the future of the budget in May. During a speech in September, EC President Jean-Claude Juncker said: “An important element will be the budgetary plans the commission will present in May 2018. Here again, we have a choice — either we pursue the European Union’s ambitions in the strict framework of the existing budget, or we increase the European Union’s budgetary capacity so that it might better reach its ambitions. I am for the second option.”

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Yeah, the ones they previously promised to take but never did.

Deal With France ‘Could Bring Hundreds More Child Refugees To UK’ (G.)

Charities working to bring unaccompanied refugee children to safety are optimistic that agreements signed by Theresa May and Emmanuel Macron could lead to hundreds more receiving permission to travel legally to the UK. Details emerging from last week’s summit show that officials agreed to extend an eligibility deadline so that children fleeing conflict and arriving in Europe before last Friday could be considered under the Dubs amendment, the scheme launched in 2016 under which the government agreed to offer a safe and legal route to refugee children travelling alone. Previously, refugee children had to have arrived in Europe before March 2016 to be considered for acceptance under the scheme. This deadline meant large numbers of vulnerable young people who had arrived in France, Germany and Italy more recently were not eligible.

Lord Dubs, the Labour peer who forced the government to commit to helping more young refugees in January 2016, welcomed the development. “We hope dozens more will be transferred, but it is crucial that they get a move on. In France they are sleeping under the trees in very bleak conditions.” Although the May-Macron agreement focused on France, concerns are growing for the large number of unaccompanied refugee children in Greece where there are currently 3,150 refugee children, travelling without families, and only 1,109 spaces in shelters, according to the charity Safe Passage, which has campaigned to bring more young refugees to the UK. The charity hopes that a further 250 could be brought to safety under the Dubs scheme. The government has committed to accommodating 480 refugee children under the scheme, but has so far only transferred about 220.

Campaigners hope the announcement could reduce the number of young refugees killed on roads outside Calais, after a spike in deaths in recent weeks among asylum seekers attempting to climb on to lorries in order to travel illegally to the UK. The UK government also agreed to speed up the time it spends considering applications from young refugees for transfer to the UK, committing to providing an answer in 10 days, and to transferring them within 15 days after that. George Gabriel, at Safe Passage, said: “For those who are awaiting family reunion, these changes will mean that there is a much lower incentive to make a dangerous journey to reunite with a loved one.”

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Dec 282017
 
 December 28, 2017  Posted by at 10:23 am Finance Tagged with: , , , , , , , , , ,  6 Responses »


Ansel Adams Church, Taos, Pueblo 1942

 

The Automatic Earth and its readers have been supporting refugees and homeless in Greece since June 2015. It has been and at times difficult and at all times expensive endeavor. Not at least because the problems do not just not get solved, they actually get worse. Because the people of Greece and the refugees that land on their shores increasingly find themselves pawns in political games.

Therefore, even if the generosity of our readership has been nothing short of miraculous, we must continue to humbly ask you for more support. Because our work is not done. Our latest essay on this is here: The Automatic Earth for Athens Fund – Christmas and 2018 . It contains links to all 14 previous articles on the situation.

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S&P 500 Hits Most Overbought Level In 22 Years (MW)
Peak Good Times? Stock Market Risk Spikes to New High (WS)
Russia’s Finance Minister Confirms Upcoming Bitcoin Regulations (CCN)
Bitcoin Tumbles Over Exchange-Closure Fears (BBG)
Bitcoin’s Surging Price Drives Private Investor Demand For Derivatives (BBG)
Trump Tax Reform Blew Up The Treasury Market (ZH)
The Tax Plan Could Change How Wall Street Works (BBG)
“We’ve Centralized All Of Our Data To A Guy Called Mark Zuckerberg” (HN)
The Petro-yuan Bombshell (Escobar)
John McDonnell Warns Over ‘Alarming Increase’ In UK Household Debt (G.)
Another Fukushima? Tepco Plans To Restart World’s Biggest Nuclear Plant (G.)
Children Increasingly Used As Weapons Of War – Unicef (G.)

 

 

All the lovely things that debt buys.

S&P 500 Hits Most Overbought Level In 22 Years (MW)

Following a year in which the U.S. stock market hit a record number of records and seen basically nothing in the way of pullbacks or volatility, investors have gone all-in on stocks. Exchange-traded funds, perhaps the most popular way to get exposure to broad parts of the market, have seen record-breaking inflows over the year, with both domestic and foreign-based stock funds seeing heavy interest and no major category seeing outflows. Both retail and institutional investors have gotten in on the action and are positioning in a way that suggests both see further gains ahead. The S&P 500 has rallied about 20% over 2017, on track for its best year since 2013.

According to Torsten Sløk, Deutsche Bank’s chief international economist, “U.S. retail investors say that today is the best time ever to invest in the market,” based on data from the University of Michigan consumer sentiment report, which asks about the probability of an increase in stock prices over the coming year. Younger investors in particular are warming up to equities, according to E*Trade. The latest AAII investor sentiment survey indicates that 50.5% of polled investors are bullish on the market, meaning they expect prices will be higher in six months. That’s the highest level in nearly two years, and significantly above the 38.5% historical average. The number of bullish investors has gone up by 5.5 percentage points in the last week alone, while the percentage of bearish investors has dropped to 25.6%, down 2.5 percentage points over the last week.

Optimism has gotten so high that cash balances for Charles Schwab clients reached their lowest level on record in the third quarter, according to Morgan Stanley, which wrote that retail investors “can’t stay away.” The investment bank noted a similar trend in institutional investors, who it wrote were “loading the boat on risk,” with “long/short net and gross leverage as high as we have ever seen it.”

There have been fundamental reasons for this optimism, including a strong labor market and improving economic data. Furthermore, the recently passed tax bill will cut corporate taxes, which should boost corporate profits — which have already been enjoying their fastest year of growth since 2011. However, the incessant buying has pushed valuations to levels that are not only stretched, but stretched to a historic extent. As was recently noted by LPL Financial, the relative strength index, an indicator of technical momentum, is at its highest level since 1995, which indicates the S&P 500 is at its most overbought level in 22 years.

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Thank your central banker.

Peak Good Times? Stock Market Risk Spikes to New High (WS)

Margin debt is the embodiment of stock market risk. As reported by the New York Stock Exchange today, it jumped 3.5%, or $19.5 billion, in November from October, to a new record of $580.9 billion. After having jumped from one record to the next, it is now up 16% from a year ago. Even on an inflation-adjusted basis, the surge in margin debt has been breath-taking: The chart by Advisor Perspectives compares margin debt (red line) and the S&P 500 index (blue line), both adjusted for inflation (in today’s dollars). Note how margin debt spiked into March 2000, the month when the dotcom crash began, how it spiked into July 2007, three months before the Financial-Crisis crash began, and how it bottomed out in February 2009, a month before the great stock market rally began:

Margin debt, which forms part of overall stock market leverage, is the great accelerator for stocks, on the way up and on the way down. Rising margin debt – when investors borrow against their portfolios – creates liquidity out of nothing, and much of this new liquidity is used to buy more stocks. But falling margin debt returns this liquidity to where it came from. Leverage supplies liquidity. But it isn’t liquidity that moves from one asset to another. It is liquidity that is being created to be plowed into stocks, and that can evaporate just as quickly: When stocks are dumped to pay down margin debt, the money from those stock sales doesn’t go into other stocks or another asset class, doesn’t become cash “sitting on the sidelines,” as the industry likes to say, and isn’t used to buy gold or cryptocurrencies or whatever. It just evaporates without a trace.

After stirring markets into an eight-year risk-taking frenzy, the Fed is now worried that markets have gone too far. Among the Fed governors fretting out loud over this was Dallas Fed President Robert Kaplan who recently warned about the “record-high levels” of margin debt, along with the US stock market capitalization, which, at 135% of GDP, is “the highest since 1999/2000.” “In the event of a sell-off, high levels of margin debt can encourage additional selling, which could, in turn, lead to a more rapid tightening of financial conditions,” he mused. The growth in margin debt has far outpaced the growth of the S&P 500 index in recent years. The chart below (by Advisor Perspectives) shows the percentage growth of margin debt and the S&P 500 index, both adjusted for inflation:

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Will Russia set the model for the rest of the world? Don’t be surprised if others follow.

Russia’s Finance Minister Confirms Upcoming Bitcoin Regulations (CCN)

The Russian Ministry of Finance has prepared a sweeping regulatory law that will cover many facets of cryptocurrencies like bitcoin in Russia. In an interview with state-owned television broadcaster Rossiya 24 over Christmas, Russia’s finance minister Anton Siluanov confirmed the ministry’s draft law on a regulatory framework for cryptocurrencies. The regulation, as expected, will cover bitcoin mining rules, taxation laws for adopters and guidelines for exchanges selling cryptocurrencies. As reported by Russian news source TASS, Siluanov stated: The Ministry of Finance has prepared a draft law, currently under consideration, which will determine the procedure for issuing, taxing, buying and circulation of cryptocurrency. In conjunction, the Ministry of Finance is also reportedly preparing amendments to Russian legislation toward the broader regulation of new financial technologies and digital payments.

The developments are a remarkable contrast to legislation proposed by Russia’s Finance Ministry as recently as March 2016. At the time, the ministry proposed a 7-year prison sentence for bitcoin adopters and users. Earlier in September, Siluanov called for the Russian government to accept and understand “that cryptocurrencies are real.” “There is no sense in banning them,” Siluanov said at the time, “there is a need to regulate them.” The new laws, in its draft, is expected to be submitted to the State Duma (the lower house of the Russian Parliament) tomorrow before its anticipated adoption sometime in March 2018. The new laws were fast-tracked by authorities following Russian President Vladimir Putin’s mandate to develop regulations for cryptocurrencies, mining and initial coin offerings (ICOs). The amendments to existing Russian laws to recognize cryptocurrencies will also aid in the prepping for the launch of Russia’s own national cryptocurrency – the CryptoRuble.

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Korea may be the first to copy Moscow. This is not action, it’s reaction.

Bitcoin Tumbles Over Exchange-Closure Fears (BBG)

Bitcoin resumed its tumble on Thursday after South Korea said it was eyeing options including a potential shutdown of at least some cryptocurrency exchanges to stamp out a frenzy of speculation. South Korea has been ground zero for a global surge in interest in bitcoin and other cryptocurrencies as prices surged this year, prompting the nation’s prime minister to worry over the impact on Korean youth. While there’s no immediate indication Asia’s No. 4 economy will shutter exchanges that have accounted by some measures for more than fifth of global trading, the news poses a warning as regulators the world over express concerns about private digital currencies. Bitcoin fell as much as 9% to as low as $13,828 in Asia trading, erasing modest gains after the South Korean release, composite Bloomberg pricing shows.

It’s now down about 28% from its record high reached last week. South Korea will require real-name cryptocurrency transactions and impose a ban on the offering of virtual accounts by banks to crypto-exchanges, according to a statement from the Office for Government Policy Coordination. Policy makers will review measures including the closure of crypto-exchanges suggested by the Ministry of Justice and take proper measures swiftly and firmly while monitoring the trend of the speculation. Bitcoin was trading at about a 30% premium over prevailing international rates on Thursday in Seoul – a continuing sign of the country’s obsession, and the difficulty in arbitraging between markets. “Cryptocurrency speculation has been irrationally overheated in Korea,” the government said in the statement, which comes little more than a week after the bankruptcy filing of one South Korean exchange. “The government can’t leave the abnormal situation of speculation any longer.”

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The combination of crypto and derivatives sends shivers.

Bitcoin’s Surging Price Drives Private Investor Demand For Derivatives (BBG)

Bitcoin’s surging price has driven private-investor demand for derivatives tracking the virtual currency. Trading in so-called participation notes has skyrocketed this year on Boerse Stuttgart, Europe’s largest exchange for retail derivatives. The number of executed orders jumped 22-fold from 436 in January to almost 10,000 in December.

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Beware when stirring up a complex system.

Trump Tax Reform Blew Up The Treasury Market (ZH)

Over the past week we have shown on several occasions that there once again appears to be a sharp, sudden dollar-funding liquidity strain in global markets, manifesting itself in a dramatic widening in FX basis swaps, which – in this particular case – has flowed through in the forward discount for USDJPY spiking from around 0.04 yen to around 0.23 yen overnight. As Bloomberg speculated, this discount for buying yen at future dates widened sharply as non-U.S. banks, which typically buy dollars now with sell-back contracts at a future date, scrambled to procure greenbacks for the year-end. However, as Deutsche Bank’s Masao Muraki explains, this particular dollar funding shortage is more than just the traditional year-end window dressing or some secret bank funding panic.

Instead, the DB strategist observes that the USD funding costs for Japanese insurers and banks to invest in US Treasuries – which have surged reaching a post-financial-crisis high of 2.35% on 15 Dec – are determined by three things, namely (1) the difference in US and Japanese risk-free rates (OIS), (2) the difference in US and Japanese interbank risk premiums (Libor-OIS), and (3) basis swaps, which illustrate the imbalance in currency-hedged US and Japanese investments. In this particular case, widening of (1) as a result of Fed rate hikes and tightening of dollar funding conditions inside the US (2) and outside the US (3) have occurred simultaneously. This is shown in the chart below.

What is causing this? Unlike on previous occasions when dollar funding costs blew out due to concerns over the credit and viability of the Japanese and European banks, this time the Fed’s rate hikes could be spurring outflows from the US, European, and Japanese banks’ deposits inside the US. Absent indicators to the contrary, this appears to be the correct explanation since it’s not just Yen funding costs that are soaring. In fact, at present EUR/USD basis swaps are widening more than USD/JPY basis swaps. [..] According to Deutsche, it is possible that an increase in hedged US investments by Europeans could be indirectly affecting Japan, and that market participants could also be conscious of the risk that the repatriation tax system could spur a massive flow-back into the US, of funds held overseas by US companies In fact, one can draw one particularly troubling conclusion: the sharp basis swap moves appear to have been catalyzed by the recently passed Trump tax reform.

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More ‘unintended’ consequences?!

The Tax Plan Could Change How Wall Street Works (BBG)

Leon Black recently posed a question whose answer will determine how profitable the new U.S. tax regime could make Wall Street firms like his Apollo Global Management. Publicly traded partnerships, including private equity firms Apollo, Blackstone and Carlyle Group, are taxed differently than corporations. So should they take advantage of the overhauled tax rules to pay less in taxes? Or should they use this chance to change to an Inc. from an LLC or LP, which would increase tax bills but allow them to attract investments from mutual funds that have previously been out of reach? “We’re still analyzing,’’ Black told the Goldman Sachs U.S. Financial Services Conference Dec. 6. “It’s an uncertain outcome.’’

Either way, it’s most likely a money-making outcome. The tax changes are a boon for firms such as Apollo, where Black is chief executive officer. The new lower corporate rate has made it possible for bigger publicly traded partnerships to consider the change. As it is, management fees, which typically account for 30 percent or more of their earnings, are already taxed at the corporate rate. That will drop. The legislation scarcely touched the 23.8 percent rate paid on incentive fees, also called carried interest, which incur no additional levy when paid out to shareholders. If the partnerships converted to corporations, the incentive fees would be hit with a second layer of tax when they’re paid out. That would push the combined tax rate on incentive income paid out as dividends to nearly 40 percent, according to Peter Furci, co-chair of Debevoise & Plimpton’s global tax practice.

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I’m sure this guy is smart, but he misses the point here by a mile. What has happened is the data have been centralized to the NSA and CIA and their peers. Zuckerberg is just a conduit.

“We’ve Centralized All Of Our Data To A Guy Called Mark Zuckerberg” (HN)

At its inception, the internet was a beautifully idealistic and equal place. But the world sucks and we’ve continuously made it more and more centralized, taking power away from users and handing it over to big companies. And the worst thing is that we can’t fix it – we can only make it slightly less awful. That was pretty much the core of Pirate Bay’s co-founder, Peter Sunde‘s talk at tech festival Brain Bar Budapest. TNW sat down with the pessimistic activist and controversial figure to discuss how screwed we actually are when it comes to decentralizing the internet. In Sunde’s opinion, people focus too much on what might happen, instead of what is happening. He often gets questions about how a digitally bleak future could look like, but the truth is that we’re living it.

“Everything has gone wrong. That’s the thing, it’s not about what will happen in the future it’s about what’s going on right now. We’ve centralized all of our data to a guy called Mark Zuckerberg, who’s basically the biggest dictator in the world as he wasn’t elected by anyone. Trump is basically in control over this data that Zuckerberg has, so I think we’re already there. Everything that could go wrong has gone wrong and I don’t think there’s a way for us to stop it.” One of the most important things to realize is that the problem isn’t a technological one. “The internet was made to be decentralized,” says Sunde, “but we keep centralizing everything on top of the internet.”

To support this, Sunde points out that in the last 10 years, almost every up-and-coming tech company or website has been bought by the big five: Amazon, Google, Apple, Microsoft and Facebook. The ones that manage to escape the reach of the giants, often end up adding to the centralization. We don’t create things anymore, instead we just have virtual things. Uber, Alibaba and Airbnb, for example, do they have products? No. We went from this product-based model, to virtual product, to virtually no product what so ever. This is the centralization process going on. Although we should be aware that the current effects of centralization, we shouldn’t overlook that it’s only going to get worse. There are a lot of upcoming tech-based services that are at risk of becoming centralized, which could have a huge impact on our daily lives.

[..] Feeling a bit optimistic, I asked Sunde whether we could still fight for decentralization and bring the power back to the people. His answer was simple. “No. We lost this fight a long time ago. The only way we can do any difference is by limiting the powers of these companies – by governments stepping in – but unfortunately the EU or the US don’t seem to have any interest in doing this.”

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Right in theory, but…

The Petro-yuan Bombshell (Escobar)

The website of the China Foreign Exchange Trade System (CFETS) recently announced the establishment of a yuan-ruble payment system, hinting that similar systems regarding other currencies participating in the New Silk Roads, a.k.a. Belt and Road Initiative (BRI) will also be in place in the near future. Crucially, this is not about reducing currency risk; after all Russia and China have increasingly traded bilaterally in their own currencies since the 2014 US-imposed sanctions on Russia. This is about the implementation of a huge, new alternative reserve currency zone, bypassing the US dollar. The decision follows the establishment by Beijing, in October 2015, of the China International Payments System (CIPS). CIPS has a cooperation agreement with the private, Belgium-based SWIFT international bank clearing system, through which virtually every global transaction must transit.

What matters in this case is that Beijing – as well as Moscow – clearly read the writing on the wall when, in 2012, Washington applied pressure on SWIFT; blocked international clearing for every Iranian bank; and froze $100 billion in Iranian assets overseas as well as Tehran’s potential to export oil. In the event Washington might decide to slap sanctions on China, bank clearing though CIPS works as a de facto sanctions-evading mechanism. Last March, Russia’s central bank opened its first office in Beijing. Moscow is launching its first $1 billion yuan-denominated government bond sale. Moscow has made it very clear it is committed to a long term strategy to stop using the US dollar as their primary currency in global trade, moving alongside Beijing towards what could be dubbed a post-Bretton Woods exchange system.

Gold is essential in this strategy. Russia, China, India, Brazil & South Africa are all either large producers or consumers of gold – or both. Following what has been extensively discussed in their summits since the early 2010s, the BRICS are bound to focus on trading physical gold. Markets such as COMEX actually trade derivatives on gold, and are backed by an insignificant amount of physical gold. Major BRICS gold producers – especially the Russia-China partnership – plan to be able to exercise extra influence in setting up global gold prices. [..] The current state of play is still all about the petrodollar system; since last year what used to be a key, “secret” informal deal between the US and the House of Saud is firmly in the public domain.

Even warriors in the Hindu Kush may now be aware of how oil and virtually all commodities must be traded in US dollars, and how these petrodollars are recycled into US Treasuries. Through this mechanism Washington has accumulated an astonishing $20 trillion in debt – and counting. Vast populations all across MENA (Middle East-Northern Africa) also learned what happened when Iraq’s Saddam Hussein decided to sell oil in euros, or when Muammar Gaddafi planned to issue a pan-African gold dinar. But now it’s China who’s entering the fray, following on plans set up way back in 2012. And the name of the game is oil-futures trading priced in yuan, with the yuan fully convertible into gold on the Shanghai and Hong Kong foreign exchange markets.

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The UK Labour party need to cash in now on the government’s mishandling of Brexit and the country’s economy, or risk being seen as part of that government. Corbyn et al know thay could jump in the polls by denouncing Brexit itself, but they don’t have the courage to do that. So on the no. 1 problem, they’re the same as the Tories.

John McDonnell Warns Over ‘Alarming Increase’ In UK Household Debt (G.)

John McDonnell has said the UK is in the grip of a personal debt crisis with levels of unsecured borrowing predicted to hit a record of £19,000 per household by the end of this parliament. The shadow chancellor said the increase in debt, to more than £14,000 per household this year, was alarming. Analysis from Labour shows unsecured debt is on course to exceed £15,000 per household next year and could go on to exceed £19,000 per household by 2022 if it follows the current trajectory. It is understood Labour plans to focus on the issue in the new year, warning that the continuing squeeze on wages and the high level of inflation are contributing to high levels of personal debt.

On Wednesday the Resolution Foundation, a thinktank, predicted that the stagnation in real wages was set to continue throughout 2018 and may only begin to lift towards the end of the year. McDonnell said: “The alarming increase in average household debt already means many families in our country are struggling over the Christmas period. The Tories have no real answers to tackle the debt crisis gripping our country and have no solutions to offer those struggling to get by as prices run ahead of wages. “The next Labour government will introduce a £10 per hour real living wage, scrap student fees, end the public sector pay cap and cap interest on consumer credit to build an economy for the many, not the few.”

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Why go this crazy route? Well, money of course.

Another Fukushima? Tepco Plans To Restart World’s Biggest Nuclear Plant (G.)

If a single structure can define a community, for the 90,000 residents of Kashiwazaki town and the neighbouring village of Kariwa, it is the sprawling nuclear power plant that has dominated the coastal landscape for more than 40 years. When all seven of its reactors are in operation, Kashiwazaki-kariwa generates 8.2m kilowatts of electricity – enough to power 16m households. Occupying 4.2 sq km of land along the Japan Sea coast, it is the biggest nuclear power plant in the world. But today, the reactors at Kashiwazaki-kariwa are idle. The plant in Niigata prefecture, about 140 miles (225km) north-west of the capital, is the nuclear industry’s highest-profile casualty of the nationwide atomic shutdown that followed the March 2011 triple meltdown at Fukushima Daiichi.

The company at the centre of the disaster has encountered anger over its failure to prevent the catastrophe, its treatment of tens of thousands of evacuated residents and its haphazard attempts to clean up its atomic mess. Now, the same utility, Tokyo Electric Power [Tepco], is attempting to banish its Fukushima demons with a push to restart two reactors at Kashiwazaki-kariwa, one of its three nuclear plants. Only then, it says, can it generate the profits it needs to fund the decommissioning of Fukushima Daiichi and win back the public trust it lost in the wake of the meltdown. This week, Japan’s nuclear regulation authority gave its formal approval for Tepco to restart the Kashiwazaki-kariwa’s No. 6 and 7 reactors – the same type of boiling-water reactors that suffered meltdowns at Fukushima Daiichi.

After a month of public hearings, the nuclear regulation authority concluded that Tepco was fit to run a nuclear power plant and said the two reactors met the stricter safety standards introduced after the 2011 disaster.

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What hope is there for us, if there’s none for our children? And yes, all children are our children, not just the ones that live in our homes and communities.

Children Increasingly Used As Weapons Of War – Unicef (G.)

Children caught in war zones are increasingly being used as weapons of war – recruited to fight, forced to act as suicide bombers, and used as human shields – the United Nations children’s agency has warned. In a statement summarising 2017 as a brutal year for children caught in conflict, Unicef said parties to conflicts were blatantly disregarding international humanitarian law and children were routinely coming under attack. Rape, forced marriage, abduction and enslavement had become standard tactics in conflicts across Iraq, Syria and Yemen, as well as in Nigeria, South Sudan and Myanmar. Some children, abducted by extremist groups, are abused again by security forces when they are released.

Others are indirectly harmed by fighting, through malnutrition and disease, as access to food, water and sanitation are denied or restricted. Some 27 million children in conflict zones have been forced out of school. “Children are being targeted and exposed to attacks and brutal violence in their homes, schools and playgrounds,” said Manuel Fontaine, Unicef’s director of emergency programmes. “As these attacks continue year after year, we cannot become numb. Such brutality cannot be the new normal.” Much of the fighting affecting children occurred in long-running conflicts in Africa.

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Dec 262017
 
 December 26, 2017  Posted by at 11:19 am Finance Tagged with: , , , , , , , , , , ,  4 Responses »


Edward Hopper Christmas card 1928

 

Shale Gas Fuels 40% Increase In Funding For Plastics Production (G.)
Bitcoin Could Crash Financial Markets Because Of Massive Borrowing (MW)
Was Coinbase’s Bitcoin Cash Rollout A Designed Hit? (Luongo)
Japan PM Abe Urges Firms To Raise Wages By 3% Or More (R.)
Japan’s Household Spending Jumps But BOJ Seen Keeping Stimulus (R.)
Shanghai Sets Population At 25 Million To Avoid ‘Big City Disease’ (G./R.)
Europe Banks Brace For Huge Overhaul That Opens The Doors To Their Data (CNBC)
Scotland United In Curiosity As Councils Trial Universal Basic Income (G.)
UK Asylum Offices ‘In A Constant State Of Crisis’, Say Whistleblowers (G.)
‘Normality’ To Be Restored At Moria By End of January – Greek Minister (K.)
UNHCR Calls For Migrant Transfers, Blames Greece For Grim Conditions (K.)

 

 

It’s up to you to refuse plastics. Nothing else will work.

Shale Gas Fuels 40% Increase In Funding For Plastics Production (G.)

The global plastic binge which is already causing widespread damage to oceans, habitats and food chains, is set to increase dramatically over the next 10 years after multibillion dollar investments in a new generation of plastics plants in the US. Fossil fuel companies are among those who have plooughed more than $180bn since 2010 into new “cracking” facilities that will produce the raw material for everyday plastics from packaging to bottles, trays and cartons. The new facilities – being built by corporations like Exxon Mobile Chemical and Shell Chemical – will help fuel a 40% rise in plastic production in the next decade, according to experts, exacerbating the plastic pollution crisis that scientist warn already risks “near permanent pollution of the earth.”

“We could be locking in decades of expanded plastics production at precisely the time the world is realising we should use far less of it,” said Carroll Muffett, president of the US Center for International Environmental Law, which has analysed the plastic industry. “Around 99% of the feedstock for plastics is fossil fuels, so we are looking at the same companies, like Exxon and Shell, that have helped create the climate crisis. There is a deep and pervasive relationship between oil and gas companies and plastics.” Greenpeace UK’s senior oceans campaigner Louise Edge said any increase in the amount of plastic ending up in the oceans would have a disastrous impact. “We are already producing more disposable plastic than we can deal with, more in the last decade than in the entire twentieth century, and millions of tonnes of it are ending up in our oceans.”

The huge investment in plastic production has been driven by the shale gas boom in the US. This has resulted in one of the raw materials used to produce plastic resin – natural gas liquids – dropping dramatically in price. The American Chemistry Council says that since 2010 this has led to $186bn dollars being invested in 318 new projects. Almost half of them are already under construction or have been completed. The rest are at the planning stage. “I can summarise [the boom in plastics facilities] in two words,” Kevin Swift, chief economist at the ACC, told the Guardian. “Shale gas.”

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For now, crypto is too small to sink anything at all, but a potential future issue is: If derivatives and leverage play such a big role in crypto, how exactly is it different from all other ‘investments’?

Bitcoin Could Crash Financial Markets Because Of Massive Borrowing (MW)

Bitcoin mania is starting to look like a religion. I say that because both bitcoin and religion involve faith in the unknowable. Some bitcoin investors believe the cryptocurrency, along with the underlying blockchain technology, will be a vital part of a new, decentralized, post-government society. I can’t prove that won’t happen — nor can bitcoin evangelists prove it will. Like life after death, they can only say it’s out there beyond the horizon. If you believe in bitcoin paradise, fine. It’s your business … until your faith puts everyone else at risk. As of this month, bitcoin is doing it. Is bitcoin in a price bubble? I think so. Asset bubbles usually only hurt the buyers who overpay, but that changes when you add leverage to the equation.

Leverage means “buying with borrowed money.” So when you buy something with borrowed money and can’t repay it, the lender loses too. The problem spreads further when lenders themselves are leveraged. For bitcoin mania to infect the entire financial system, like securitized mortgages did in 2008, buyers would have to use leverage. The bad news is that a growing number do just that. In the U.S., we have a Financial Stability Oversight Council to watch for system-wide vulnerabilities. The FSOC issued its 164-page annual report this month. Here’s its plan on bitcoin and other cryptocurrencies: It is desirable for financial regulators to monitor and analyze their effects on financial stability. Sounds like FSOC is on the case — or at least will be on it, someday. Meanwhile, this month commodity regulators allowed two different U.S. exchanges to launch bitcoin futures contracts.

Oddly, instead of griping about slow regulatory approval, futures industry leaders think the government moved too fast. To get why, you need to understand how futures exchanges work. One key difference between a regulated futures exchange and a private bet between two parties is that the exchange absorbs counterparty risk. When you buy, say, gold futures, you don’t have to worry that whoever sold you the contract will disappear and not pay up. If you close your trade at a profit, the exchange clearinghouse guarantees payment. The clearinghouse consists of the exchange’s member brokerage firms. They all pledge their own capital as a backstop to keep the exchange running. So when the Commodity Futures Trading Commission (CFTC) gave exchanges the green light to launch bitcoin futures, member firms collectively said (I’ll paraphrase here): “WTF?”

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No matter if crypto surges or collapses in 2018, controversies will be much much bigger than this year. Just getting started.

Was Coinbase’s Bitcoin Cash Rollout A Designed Hit? (Luongo)

[..] if there is a path to harming Bitcoin and the cryptocurrency market available to the money center banks, then they will always opt for it. I’ve been pretty vocal about the need for having a slow, annoying reserve asset in the cryptocurrency space. I’ve talked about it multiple times (here and here). This doesn’t jibe with Bitcoin Cash proponent and Bitcoin.com CEO Roger Ver’s image of Bitcoin. And that is to Roger’s credit, actually. It’s pretty obvious from a cursory glance at Roger’s Twitter feed that he approaches Bitcoin as a radical libertarian/Austrian Economist would — a purely decentralized, trustless money that can wrest control of the world’s monetary system from rentiers in Government and Banking. Music to my ears. On the other hand is the very shady attitude of Blockstream and the Bitcoin Core group who prevailed in the Segwit 2x fight, which, from Roger Ver’s perspective is actually a mop-up operation, not the decisive battle in the war.

“The reason there is so much hostility from Bitcoin Core towards Bitcoin Cash is because Core knows they have stolen the name but are advocating a completely different system than what was originally described by Satoshi. Bitcoin Cash is Bitcoin” — Roger Ver (@rogerkver) December 19, 2017

The real battle for the soul of Bitcoin happened back in August with the fork that created Bitcoin Cash. Complaining about all of these other forks, to Roger, is like closing the barn door after the horses are gone. By keeping Bitcoin slow and expensive they create the need for new solutions to improve it. Why solve a problem when you can artificially create one and then sell everyone the solution? So, I’m ambivalent about this fight for the soul of Bitcoin, because I want a real digital analogue to Gold which only moves the most important transactions. I don’t want all coins to be all things to all people. But, I also know that with this much money at stake there will be pushback from the ‘powers-that-be.’ The Banks and central banks are staring at an existential threat to their future and are doing what they can to stop it from happening. And that, to them, means gaining control over the Bitcoin blockchain. It also means cutting off the means of entry and exit from the cryptocurrency market for average people.

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Unemployment in Japan is almost non-existent, but apparently markets don’t work the way they’re supposed to. Tight labor doesn’t lead to higher wages.

Japan PM Abe Urges Firms To Raise Wages By 3% Or More (R.)

Japanese Prime Minister Shinzo Abe on Tuesday urged companies to raise wages by 3% or more next year, keeping up pressure on firms to spend their huge cash pile on wages to broaden the benefits of his “Abenomics” stimulus policies.“We must sustain and strengthen Japan’s positive economic cycle next year to achieve our long-standing goal of beating deflation,” Abe said in a speech at a meeting of Japan’s biggest business lobby Keidanren. “For that, I’d like to ask companies to raise wages by 3% or higher next spring,” he said. Wages at big companies have been rising slightly more than 2% each year since 2014, government data shows, and an increase of 3% or more next year would help the Bank of Japan to reach its elusive 2% inflation target.

BOJ Governor Haruhiko Kuroda told the same meeting that companies remain hesitant to raise wages because they had become accustomed to prioritising job security over wage hikes during 15 years of deflation. “With consumers remaining reluctant to accept price rises, many firms are concerned about losing customers if they raise prices,” he said. “It seems so difficult for many firms to take the first step to raise their prices, that they wait and see what other firms are doing.” Sadayuki Sakakibara, chairman of Keidanren, made no reference to wages at his speech at the meeting, focusing instead on the need for Japan to get its fiscal house in order. “We’d like to strongly call on the need to restore fiscal health,” as worries over the sustainability of Japan’s social welfare system could discourage consumers to spend, he said.

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“..due mostly to a boost from rising fuel costs that is seen fading in 2018..”

Japan’s Household Spending Jumps But BOJ Seen Keeping Stimulus (R.)

Japan’s households spent more than expected in November while consumer inflation ticked up and the jobless rate hit a fresh 24-year low, offering the central bank some hope an economic recovery will drive up inflation to its 2% target. But the increase in prices was due mostly to a boost from rising fuel costs that is seen fading in 2018, keeping the Bank of Japan under pressure to maintain its huge monetary support even as other central banks seek an end to crisis-mode policies. Minutes of the BOJ’s October rate review showed that while most central bank policymakers saw no need to ramp up stimulus, they agreed on the need to sustain “powerful” monetary easing for the time being. “There’s a chance inflation may gradually accelerate toward the fiscal year beginning in April,” as a tightening job market pressures companies to raise wages, said Takeshi Minami, chief economist at Norinchukin Research Institute.

“But inflation remains distant from the BOJ’s 2% target, so the central bank will probably maintain its current policy framework.” Spending was driven by broadbased gains, with households loosening the purse strings for items such as refrigerators, washing machines, and sporting goods and services such as eating-out and travel. Data also showed wage earners’ disposable income rose 1.8% in November from a year earlier, suggesting that higher incomes have encouraged consumers to open their wallets. The nationwide core consumer price index (CPI), which includes oil goods but excludes volatile fresh food prices, rose 0.9% in November from a year earlier, government data showed on Tuesday, marking the 11th straight month of gains. The pace of price growth was just ahead of October’s 0.8% and a median market forecast of the same rate.

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Illusions of control. China’s no. 1 threat.

Shanghai Sets Population At 25 Million To Avoid ‘Big City Disease’ (G./R.)

China’s financial hub of Shanghai will limit its population to 25 million people by 2035 as part of a quest to manage “big city disease”, authorities have said. The State Council said on its website late on Monday the goal to control the size of the city was part of Shanghai’s masterplan for 2017-2035, which the government body had approved. “By 2035, the resident population in Shanghai will be controlled at around 25 million and the total amount of land made available for construction will not exceed 3,200 square kilometres,” it said. State media has defined “big city disease” as arising when a megacity becomes plagued with environmental pollution, traffic congestion and a shortage of public services, including education and medical care.

But some experts doubt the feasibility of the plans, with one researcher at a Chinese government thinktank describing the scheme as “unpractical and against the social development trend”. Migrant workers and the city’s poor would suffer the most, predicted Liang Zhongtang last year in an interview with state media, when Shanghai’s target was being drafted. The government set a similar limit for Beijing in September, declaring the city’s population should not exceed 23 million by 2020. Beijing had a population of 21.5 million in 2014. Officials also want to reduce the population of six core districts by 15% compared with 2014 levels. To help achieve this goal authorities said in April some government agencies, state-owned companies and other “non-core” functions of the Chinese capital would be moved to a newly created city about 100 kilometres south of Beijing.

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Well, actually, your data, that is.

Europe Banks Brace For Huge Overhaul That Opens The Doors To Their Data (CNBC)

From current accounts to credit cards, established lenders have access to vast amounts of information that financial technology (fintech) competitors could only dream of. In Europe, that could all be about to change. On January 8, banks operating in the European Union will be forced to open up their customer data to third party firms — that is, when customers give consent. EU lawmakers hope that the introduction of the revised Payment Services Directive (PSD2) will give non-banking firms the chance to compete with banks in the payments business and give consumers more choice over financial products and services. Britain’s Competition and Markets Authority (CMA) has set out similar plans to let customers share their data with other banks and third parties.

With customer consent, U.K. banks will be required to give authorized third-party firms access to current account data. Those regulations form part of a conceptual transition known as “open banking.” Under an open banking framework, proponents say, non-banking firms — from corporations as big as Amazon and IBM to start-ups — would be able create new financial products by utilizing the data of banks. Banks will be required to build application programming interfaces (APIs) — sets of code that give third parties secure access to their back-end data. Those APIs serve as channels for developers to get to the data and build their own products and services around it.

Such information could serve as a tool to understand things such as customers’ spending habits or credit history, and could lead to the creation of new services. “In a world of open banking, the customer can choose a provider in each part of the value chain. And each bank has to participate in the value chain as an earners’ right to be there,” Anne Boden, co-founder and chief executive of U.K. mobile-only bank Starling, told CNBC in an interview earlier this year. [..] Some European lenders are giving early signals as to what a post-PSD2 world will look like. Spain’s BBVA, Denmark’s Saxo Bank, Nordic lender Nordea and Ireland’s Ulster Bank have already published open developer portals ahead of the EU legislation.

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UBI experiments that are poorly designed are real threats to the principle.

Scotland United In Curiosity As Councils Trial Universal Basic Income (G.)

In Scotland, a country wearily familiar with divisions of a constitutional nature, the concept of a basic income is almost unique in enjoying multi-party favour. Across the four areas currently designing basic income pilots – Glasgow, Edinburgh, Fife and North Ayrshire – the projects have variously been championed by Labour, SNP, Green and, in one case, Conservative councillors. Matt Kerr, who has tirelessly lobbied for the idea through Glasgow city council, said: “Reactions to basic income have not split along the usual left/right party lines. Some people to the left of the Labour party think that it undermines the role of trade unions and others take the opposite view. But there should be room for scepticism; you need that to get the right policy.” Advocates are aware such unity of purpose is precious and worth preserving.

“The danger is that this falls into party blocks,” said Kerr. “If people can unite around having a curiosity about [it] then I’m happy with that. But having the first minister on board has done us no harm at all.” Inevitably, Sturgeon’s declared interest has invited criticism from her opponents. A civil service briefing paper on basic income, which expressed concerns that the “conflicting and confusing” policy could be a disincentive to work and costed its national roll-out at £12.3bn a year, was obtained by the Scottish Conservatives through a freedom of information request in October. The party accused her of “pandering to the extreme left of the [independence] movement”. But advocates argue the figures fail to take into account savings the scheme would bring.

The independent thinktank Reform Scotland, which published a briefing earlier this month setting out a suggested basic income of £5,200 for every adult, has calculated that much of the cost could be met through a combination of making work-related benefits obsolete and changes to the tax system, including scrapping the personal allowance and merging national insurance and income tax. [..] Joe Cullinane, the Labour leader of North Ayrshire council, said: “We have high levels of deprivation and high unemployment, so we take the view that the current system is failing us and we need to look at something new to lift people out of poverty. “Basic income has critics and supporters on the left and right, which tells you there are very different ways of shaping it and we need to state at the outset that this is a progressive change, to remove that fear and allow people to have greater control over their lives, to enter the labour market on their own terms.”

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“Two whistleblowers claim Home Office departments delay asylum applications for profit..

UK Asylum Offices ‘In A Constant State Of Crisis’, Say Whistleblowers (G.)

Staff in the Home Office’s asylum directorate are undertrained, overworked and operating in a “constant state of crisis”, two whistleblowers have claimed, as applicants endure long waits to have their case dealt with due to internal pressures. The Home Office staff have also told the Guardian that asylum case workers are making poor decisions about applications because they are under pressure to focus on more profitable visa applications. Despite a “shocking increase in complaints (from applicants) and MP enquiries questioning delays”, they say caseworkers have been told to brush off all enquires and “just give standard lines” of response when called to account.

A source from the UK Visa and Immigration Unit (UKVI) has alleged that caseworkers have been ordered to kick applications for spousal visas “into the long grass” because they can make more money for the directorate by processing student visas. Spousal visas, also known as settlement visas, cost more than student visas but take much longer to process. The source also claims visa applications are routinely labelled “complex” or ”non-straightforward” by staff – a term which excuses the UKVI from adhering to their standard processing times – it is, the source claimed, “just a euphemism for ‘there’s more profitable stuff we could be doing’”. Paying hundreds of pounds for priority services to try to avoid delays on decisions is a “waste of time”, they warned applicants.

The allegations reflect concerns expressed in a report earlier this year by David Bolt, the Independent Chief Inspector of Borders and Immigration, who said the Home Office is not “in effective control” of its asylum process. [..] Some of the more shocking findings from Bolt’s report included pregnant women being made to wait more than two years for decisions on their immigration applications; an increasing numbers of applicants having their immigration applications registered as “not straightforward” and endlessly delayed; and Home Office employees being “pushed to the limit” by individual targets and threatened with disciplinary action as deadlines approach.

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At least one more month of utter despair, with little reason to assume any improvement by then. Mouzalas cannot escape his part of the blame.. That said, he’s not lying when he says “Here in Moria we have a problem with unaccompanied minor refugees. We have asked Europe to take a share of these children. It refuses to do so..”

‘Normality’ To Be Restored At Moria By End of January – Greek Minister (K.)

Migration Minister Yiannis Mouzalas said Monday authorities were making huge efforts to improve conditions at the Moria camp on the eastern Aegean island of Lesvos, while accusing European officials of “hypocrisy” for failing to shoulder their share of the burden. Speaking after an unannounced visit at the infamous migrant and refugee processing center, Mouzalas said Greek authorities were hoping to restore “normality” at the facility by the end of January. “It all depends on arrivals,” Mouzalas said. “Today it was good weather and a total of 175 arrivals have been recorded on Lesvos as of this morning,” he said.

Responding to criticism over the scenes of misery and squalor documented by foreign media at Moria last week, the leftist minister said: “Europe must put an end to its hypocrisy.” “Here in Moria we have a problem with unaccompanied minor refugees. We have asked Europe to take a share of these children. It refuses to do so,” Mouzalas said. “It’s very easy to act like a prosecutor. Dealing with the situation in a way that helps refugees and migrants is the hard part. And this is what we are expected to do,” he said. “There is no point in wagging your finger. What you need to do is mobilize the procedures and mechanisms in order to improve conditions and solve problems,” he said.

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And the UNHCR is not beyond blame, either. Pointing fingers at others is always easy, but hard to keep up after two whole years.

UNHCR Calls For Migrant Transfers, Blames Greece For Grim Conditions (K.)

As temperatures drop, the UN refugee agency (UNHCR) once more urged Greek authorities to swiftly transfer thousands of refugees and migrants living in cramped and unsafe island camps to the mainland where better conditions and services are available. “Tension in the reception centers and on the islands has been mounting since the summer when the number of arrivals began rising,” UNHCR spokeswoman Cecile Pouilly told Voice of America. “In some cases, local authorities have opposed efforts to introduce improvements inside the reception centers,” Pouilly was quoted as saying. More than 15,000 people have been transferred to the mainland over the past year.

Meanwhile, speaking to the New Europe news website, the EU’s special envoy on migration, Maarten Verwey, suggested that Greek authorities were to blame for the grim living conditions inside island migrant camps, as recently documented by American news outlet BuzzFeed and Germany’s Deutsche Welle. “The Commission has made the funding available to ensure appropriate accommodation for all. However, the Commission cannot order the creation or expansion of reception capacity, against the opposition of the competent authorities,” Verwey said, according to New Europe.

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Nov 232017
 
 November 23, 2017  Posted by at 9:43 am Finance Tagged with: , , , , , , , , , , , ,  8 Responses »


Roger Viollet Great Paris Flood, Avenue Daumesnil 1910

 

Fed Fears New Record High Credit Bubble – Danielle DiMartino Booth (USAW)
Global Debt Is Rising, Especially in Emerging Economies (St. Louis Fed)
Pressure on US Households Intensifies (DDMB)
Zombie Firms Roam Europe Because Banks Help Keep Them Undead
China Is Pumping A Lot Of Cash Into Its Economy To Calm Investors (CNBC)
Chinese Investors Eye Leverage to Juice U.S. CLO Returns (BBG)
China’s $3.4 Trillion Corporate Bond Market Faces Rocky 2018 (BBG)
Worst Growth In Decades Pushes UK To Inject £25bn Into Economy (Ind.)
Budget Shows Tories Are Unfit For Office – Corbyn (G.)
Facebook To Let Users See If They ‘Liked’ Russian Accounts (R.)
Putin Tell Russian Firms To Be Ready For War Production (Ind.)
PNG Police Move In On Closed Australia Refugee Camp On Manus (AFP)
Night Being Lost To Artificial Light (BBC)

 

 

“I don’t think any of us know what the implications are for a $50 trillion debt build since the great financial crisis (of 2008). It is impossible to say. We have never dealt with anything of this magnitude.”

Fed Fears New Record High Credit Bubble – Danielle DiMartino Booth (USAW)

Former Federal Reserve insider Danielle DiMartino Booth says the record high stock and bond prices make the Fed nervous because it’s fearful of popping this record high credit bubble. DiMartino Booth says, “The Fed’s biggest fear is they know darn well this much credit has built up in the background, and the ramifications of the un-wind for what has happened since the great financial crisis is even greater than what happened in 2008 and 2009. It’s global and pretty viral. So, the Fed has good reason to be fearful of what’s going to happen when the baby boomer generation and the pension funds in this country take a third body blow since 2000, and that’s why they are so very, very intimidated by the financial markets and so fearful of a correction.”

Why will the Fed not allow even a small correction in the markets? DiMartino Booth says, “Look back to last year when Deutsche Bank took the markets to DEFCON 1. Maybe you were paying attention and maybe you weren’t, but it certainly got the German government’s attention. They said the checkbook is open, and we will do whatever we need to do because we can’t quantify what will happen when a major bank gets into a distressed situation. I think what central banks worldwide fear is that there has been such a magnificent re-blowing of the credit bubble since 2007 and 2008 that they can’t tell you where the contagion is going to be. So, they have this great fear of a 2% or 3% or 10% (correction) and do not know what the daisy chain is going to look like and where the contagion is going to land.

It could be the Chinese bond market. It could be Italian insolvent banks or it might be Deutsche Bank, or whether it might be small or midsize U.S. commercial lenders. They can’t tell you where the systemic risk lies, and that’s where their fear is. This credit bubble is of their making.” In short, the Fed does not know what is going to happen, and according to DiMartino Booth, nobody does. DiMartino Booth contends, “I don’t think any of us know what the implications are for a $50 trillion debt build since the great financial crisis (of 2008). It is impossible to say. We have never dealt with anything of this magnitude.”

“2017 is the record for quantitative easing (money printing) globally. We have never, not even in the darkest days of the financial crisis, central banks have never injected as much money as they have into the markets. . . . I am not a gold bug, but we do know that in times of corrections that there is no place to hide in traditional asset classes that you can get at your Merrill Lynch brokerage. Gold and silver in the precious metals complex are the only places to hide and get true diversification and safety.”

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They do know what’s going on.

Global Debt Is Rising, Especially in Emerging Economies (St. Louis Fed)

The world has become used to cheap credit. And the increase in borrowing by emerging economies could pose a risk as monetary policy normalizes. In response to the most recent recession, central banks around the world decreased their main policy rates to almost zero, as seen in the figure below.

[..] The downward trend in short-term and long-term interest rates has made borrowing cheaper over time. As a result, global debt has increased substantially since 2007. According to Bank for International Settlements (BIS) data, total debt of the nonfinancial sector (that is, households, government and nonfinancial corporations) amounted to $145 trillion in the first quarter of 2017, an increase of 40% since the first quarter of 2007. Most of this increase has been driven by an increase in total debt in emerging economies, especially in China, as seen in the following figure.

Furthermore, emerging economies have borrowed heavily in foreign currency, mainly in U.S. dollars, shown in the figure below.

According to the BIS, total dollar-denominated debt outside the U.S. reached $10.7 trillion in the first quarter of 2017, and about a third of this debt is owed by the nonfinancial sector of emerging economies. Analysts have stressed that the rapid accumulation of debt in emerging economies could pose risks for the global economy in the presence of U.S. monetary policy normalization. Market expectations of a rapid increase in the policy rate and the reduction of the Federal Reserve’s balance sheet could lead to higher borrowing costs and an appreciation of the U.S. dollar. This, in turn, would increase the cost of refinancing debt in emerging economies. If these risks materialized, there could be an increase in the demand for safe assets, particularly U.S. Treasuries. This would lead to a decrease in long-term rates. In times of monetary normalization, the yield curve would flatten, and banks profitability could be eroded.

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After the storms…

Pressure on US Households Intensifies (DDMB)

The full effects of Hurricanes Harvey and Irma are rapidly showing up in the data. In September, according to Black Knight, the number of mortgages either past due or in foreclosure rose by 214,000, or 9%, compared with August. At 5.1%, the combined rate is far off the previous month’s 4.7% and the most recent low of 4.5% recorded in March 2007. October’s numbers have brought the picture more clearly into focus. More than 229,000 past-due mortgages are tied to the storms. Hurricane Irma accounted for 163,000 and Harvey, 66,000. To place the damage to households in context, before the storms, Florida and Texas ranked 22nd and 20th among non-current mortgage states. As of October, Florida has risen to second place and Texas is in fifth place.

The economy has also enjoyed a rush of car sales as sufficiently-collateralized and insured drivers immediately replaced vehicles destroyed by the storms. According to the latest retail data, car sales slowed to a 0.7% growth rate in October, far below September’s blistering 4.6-percent pace. Nonetheless, the next development could be a further deterioration in auto delinquencies attributed to storm victims. The most recent third-quarter data from the New York Fed suggest struggling households continue to buckle under the strains of their monthly payments. The delinquency rate for subprime loans originated by auto-finance companies, as opposed to banks, hit 9.7% in the three months ended in September.

With one in four auto loans outstanding going to subprime borrowers, the rate has been rising since 2013 and is at a seven-year high. What’s most notable is that these delinquency rates are being recorded outside recession, all but ensuring 2009’s peak of 10.9% will be breached in the next downturn. And while credit-card delinquencies are nowhere near their crisis-era double-digit peaks, the New York Fed noted that serious delinquencies have been on the rise for one year. The serious delinquency rate hit 4.6% in the third quarter, up from 4.4% the prior quarter. Adjusted for inflation, the growth of U.S. credit-card spending has outpaced that of incomes for 26 straight months.

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Anyone shorting Italy for real yet?

Zombie Firms Roam Europe Because Banks Help Keep Them Undead

So-called zombie firms – companies that would be out of business or painfully restructured in a competitive economy – have become a key issue for policy makers grappling with sluggish productivity growth in developed economies. The fear is that those “zombies” are sucking up capital that could otherwise go to more productive firms. A new study by the OECD helps explaining how banks favor the spread of zombie firms. It shows that weak companies tend to be connected to weak banks which prefer to roll over or restructure bad loans rather than declaring them delinquent and writing them off. The OECD’s research by Dan Andrews and Filippos Petroulakis lends new urgency to the ECB’s efforts to slash non-performing loans in the region.

Supervisors have asked for detailed plans of how NPLs will be cut and are mulling requiring banks to set aside more capital for soured loans. “In order to facilitate the unwinding of the zombie problem, it is essential that bank balance sheets are strong, underlining the need for fast recapitalizations after crises and other measures to reduce NPLs,” write the authors. “The zombie firm problem in Europe may at least partly stem from bank forbearance.” Weak productivity matters in an ageing continent like Europe, where a shrinking working population is expected to support an ever increasing number of retirees. This can’t happen unless technology and education make it possible to squeeze more and more output from labor and capital.

The OECD has been investigating the impact of living-dead companies for years. It argues that zombification leads to capital misallocation, as weak banks tend to steer less capital to healthier and more productive firms. This in turn leads to low productivity and returns, making it more difficult to get credit even for innovative companies. Andrews and Petroulakis also say that, in addition to forcing banks to work down their NPLs and bolster capital, efficient laws on insolvency are needed. It is not a coincidence that Italy – the European country with the largest NPL problem – overhauled its bankruptcy rules last month to make them quicker and more efficient.

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Mr. Xi, sir, it’s time to be careful.

China Is Pumping A Lot Of Cash Into Its Economy To Calm Investors (CNBC)

China has been pumping a lot of cash into its system to lift market sentiment, as the world’s second-largest economy walks a thin line between curbing debt and keeping everything running smoothly. Last week, the People’s Bank of China injected cash totaling 810 billion Chinese yuan ($122.4 billion) in five straight days of daily liquidity management operations. Those actions, which represented the largest weekly net increase since January, were in part a Beijing response to its 10-year sovereign bond yields spiking to multiyear highs, experts said. “Surging Chinese government bond yields hit the nerve of policymakers, so in order to further prevent a greater surge, they injected liquidity into the system to improve market sentiment,” said Ken Cheung, a foreign exchange strategist at Mizuho Bank who focuses on Chinese currencies and monetary policies.

Nomura analysts said last week in a note that the bond rout was due to fears of regulatory tightening from Beijing. Bond yields, which move inversely to prices, briefly hit 4% in China for the first time in three years. A rise in the benchmark government bond yield threatens to drive up overall borrowing costs — and potentially worsen the country’s debt situation. On Monday and Tuesday of this week, the PBOC injected a net 30 billion yuan ($4.5 billion), but it didn’t expand that money supply on Wednesday. Analysts said that pause may have been due to market sentiment seemingly stabilizing, but it may be short-lived. As Chinese 10-year yields are still near the psychologically important 4% level, Cheung told CNBC he expects more injections ahead if necessary, as Beijing needs to “maintain liquidity to please the market.”

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“It’s dangerous territory. Leveraging BB-rated bonds – is that a good idea?”

Chinese Investors Eye Leverage to Juice U.S. CLO Returns (BBG)

The last time Asian investors borrowed money to invest in structured-credit products – during the run-up to the financial crisis – it didn’t work out so well. Now, a new set of buyers from China are hoping things turn out differently. Instead of snapping up packages of risky derivatives tied to U.S. home loans, they’re buying collateralized loan obligations that bundle together corporate loans to highly leveraged companies. And while such CLOs weathered the last crisis relatively well, there’s already concern that these investors are being tempted to deploy leverage to amplify their returns. The problem is that even the riskiest pieces of CLOs can yield less than the 8 to 10% targets Chinese investors have grown accustomed to in their markets, according to Collin Chan, a CLO analyst at Bank of America Corp.

So CLOs, the junk-rated slices of which yield just 5.5 percentage points more than Libor, “may not be crazily attractive” to them, said Chan, whose team has trekked to China multiple times this year to pitch the products to investors there. On a recent trip to China, potential new investors expressed interest in the idea of applying leverage for the purchase of CLOs, even at the riskier BB level, Chan said. He estimates levered returns for the BB-rated CLO slice may be almost 20%. Leverage is employed using the repo financing market, where short-term loans allow investors to borrow money by lending securities. It’s the latest evidence of the search for yield that has engulfed credit markets and provided a significant boost for CLO sales this year. China and its many types of financial institutions now look like promising buyers for a product that in Asia has typically been bought by Japanese banks and Korean insurers.

“It wouldn’t be wise for the Chinese to use leverage at this stage,” said Asif Khan, head of CLO origination and distribution at MUFG. “It’s dangerous territory. Leveraging BB-rated bonds – is that a good idea? Any potential use of leverage by Chinese investors could pose potential risk in case of severe volatility.” [..] Chinese investors have yet to enter the CLO market en masse. However signs point to their growing participation. In some cases, investment banks and CLO managers have made as many as five trips to Asia this year, adding on special CLO-focused investor conferences in mainland China for the first time ever to raise the product’s profile. The demand to diversify into dollar assets has grown from a wide range of investors, despite Chinese-government capital controls limiting deployment of capital abroad.

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$3.4 trillion sounds low.

China’s $3.4 Trillion Corporate Bond Market Faces Rocky 2018 (BBG)

China’s deleveraging campaign is finally starting to bite in the nation’s corporate-bond market, a shift that will make 2018 a clearer test of policy makers’ appetites to let struggling companies fail. Yields on five-year top-rated local corporate notes have jumped about 33 basis points since the month began, to a three-year high of 5.3%, according to data compiled by clearing house ChinaBond. Government bonds, which have far greater liquidity, had already moved last month as the central bank warned further deleveraging was needed. With more than $1 trillion of local bonds maturing in 2018-19, it will become increasingly expensive for Chinese companies to roll over financing – and all the tougher for those in industries like coal that the nation’s leadership wants to shrink.

Two companies based in Inner Mongolia, a northern province that’s suffered from a debt-and-construction binge, missed bond payments on Tuesday, in a demonstration of the kind of pain that may come. In the long haul, that all may be good for China. Allowing more defaults could see its bond market become more like its overseas counterparts, with a greater differentiation in price. And that could mean it channels funds more productively. “The deleveraging campaign and the new rules on the asset management industry will further differentiate good and bad quality credits, and make the onshore credit market more efficient,” said Raymond Gui at Income Partners Asset Management. “Weaker companies will find it harder to roll over their debts because funding costs will stay high.” Gui predicts yields will keep climbing. The average for top-rated corporate bonds is already 2.2 percentage points above what investors demanded to hold them in October last year.

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More austerity.

Worst Growth In Decades Pushes UK To Inject £25bn Into Economy (Ind.)

Britain faces its worst period of economic growth in more than half a century after official data revealed a country hamstrung by feeble productivity and Brexit. Dismal figures released alongside Philip Hammond’s Budget led the Chancellor to announce a £25bn cash injection to strengthen the ailing economy. The major giveaway will see money head towards housebuilding, preparing Whitehall for Brexit, the NHS and boosting the tech sector. But despite the extra cash most government departments will still experience deep cuts over the next five years, as Mr Hammond struggles to get the public finances under control. Mr Hammond tried to put a positive sheen on progress towards reducing net debt and abolishing the deficit, but data suggested Britain would now fail to achieve a budget surplus before 2031.

Forecasts from the Office for Budget Responsibility indicated GDP would grow by 1.5% in 2017, down from the 2% forecast in March. The Government’s official financial auditor said growth would drop to 1.4% next year – as low as 1.3% in 2019 and 2020 – and then pick up to 1.5% in 2021 and 1.6% in 2022. The OBR said the main downward pressure on growth was a big fall in the UK’s projected productivity, intensifying public spending cuts and Brexit uncertainty. The body was established in 2010 by then-Chancellor George Osborne to end a system under which the Treasury produced its own economic growth estimates. The latest predictions are the gloomiest that the auditor has ever given, and they are also smaller than any produced by the Treasury since 1983. Institute for Fiscal Studies director Paul Johnson said the 1.4% average growth forecast over the period was “much worse than we have had over the last 60 or 70 years”.

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“.. the reality will be – a lot of people will be no better off. And the misery that many are in will be continuing.”

Budget Shows Tories Are Unfit For Office – Corbyn (G.)

In his response to the budget, Corbyn – it is the leader of the opposition who traditionally speaks rather than the shadow chancellor – said Hammond had completely failed to tackle a national crisis of stagnation and falling wages. “The test of a budget is how it affects the reality of people’s lives all around this country,” the Labour leader said. “And I believe as the days go ahead, and this budget unravels, the reality will be – a lot of people will be no better off. And the misery that many are in will be continuing.” Largely eschewing direct focus on Hammond’s specific announcements in favour of a broader critique of the government’s wider economic approach, Corbyn castigated Hammond for again missing deficit reduction targets, and for a continued spending squeeze on schools and the police.

Speaking about housing, Corbyn said rough sleeping had doubled since 2010, and that this Christmas 120,000 children would be living in temporary accommodation. “We need a large-scale publicly funded housebuilding programme, not this government’s accounting tricks and empty promises.” Summing up, he said: “We were promised a revolutionary budget. The reality is nothing has changed. People were looking for help from this budget. They have been let down. Let down by a government that, like the economy they’ve presided over, is weak and unstable and in need of urgent change. They call this budget ‘Fit for the Future’. The reality is this is a government no longer fit for office.”

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Mish commented on Twitter he’d be more interested in seeing which CIA propaganda sites he’d liked.

Question is: should we trust Facebook’s assessment of what is Russian and what not? I don’t think so.

Facebook To Let Users See If They ‘Liked’ Russian Accounts (R.)

Facebook said on Wednesday it would build a web page to allow users to see which Russian propaganda accounts they have liked or followed, after U.S. lawmakers demanded that the social network be more open about the reach of the accounts. U.S. lawmakers called the announcement a positive step. The web page, though, would fall short of their demands that Facebook individually notify users about Russian propaganda posts or ads they were exposed to. Facebook, Alphabet Inc’s Google and Twitter are facing a backlash after saying Russians used their services to anonymously spread divisive messages among Americans in the run-up to the 2016 U.S. elections. U.S. lawmakers have criticized the tech firms for not doing more to detect the alleged election meddling, which the Russian government denies involvement in.

Facebook says the propaganda came from the Internet Research Agency, a Russian organization that according to lawmakers and researchers employs hundreds of people to push pro-Kremlin content under phony social media accounts. As many as 126 million people could have been served posts on Facebook and 20 million on Instagram, the company says. Facebook has since deactivated the accounts. Facebook, in a statement, said it would let people see which pages or accounts they liked or followed between January 2015 and August 2017 that were affiliated with the Internet Research Agency. The tool will be available by the end of the year as “part of our ongoing effort to protect our platforms and the people who use them from bad actors who try to undermine our democracy,” Facebook said.

The web page will show only a list of accounts, not the posts or ads affiliated with them, according to a mock-up. U.S. lawmakers have separately published some posts. It was not clear if Facebook would eventually do more, such as sending individualized notifications to users.

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NATO is a real threat.

Putin Tell Russian Firms To Be Ready For War Production (Ind.)

Russian business should be prepared to switch to production to military needs at any time, said Vladimir Putin on Wednesday. The Russian president was speaking at a conference of military leaders in Sochi. “The ability of our economy to increase military production and services at a given time is one of the most important aspects of military security,” Mr Putin said. “To this end, all strategic, and simply large-scale enterprise should be ready, regardless of ownership.” A day earlier, the president had spoken of a need to catch up and overtake the West in military technology. “Our army and navy need to have the very best equipment — better than foreign equivalents,” he said. “If we want to win, we have to be better.”

Since the 2008 Georgian war, which was a difficult operation, the Russian military has undergone extensive modernisation. Ageing Soviet equipment has gone. There is a new testing regime. There are new command structures. The budget has also increased exponentially. This year, military expenses will cross 3 trillion roubles, or 3.3% of GDP. This would be a record were it not for one-off costs in 2016. Over the next two years, spending is forecast to be cut back slightly, to approximately 2.8% of GDP. Though that budget remains less than 30% of the combined Nato budget in Europe, many countries are increasing their military spending in response to the “Russian threat”. Nato military command has also been restructured — it says in response to Russian cyber and military threats.

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First thing that needs to happen is Australian media reporting on this. Then people must protest. New Zealand recently offered to take a whole group of these people, Australia declined. Many need medical treatment. Australia refuses.

PNG Police Move In On Closed Australia Refugee Camp On Manus (AFP)

Papua New Guinea police moved into the shuttered Australian refugee camp on the country’s Manus Island Thursday in the most aggressive push yet to force hundreds of men to leave, the Australian government and detainees said. The police operation was confirmed by Australia’s Immigration Minister Peter Dutton, who said Canberra was “very keen for people to move out of the Manus regional processing centre”. “I think it’s outrageous that people are still there,” he told Sydney commercial radio station 2GB. “We want people to move.” Iranian Behrouz Boochani tweeted from inside the camp earlier Thursday, writing that “police have started to break the shelters, water tanks and are saying ‘move, move'”.

“Navy soldiers are outside the prison camp. We are on high alert right now. We are under attack,” he said, adding that two refugees were in need of urgent medical treatment. Other refugees posted photos to social media sites showing police entering the camp, which Australia declared closed on October 31 after the PNG Supreme Court declared it unconstitutional. [..] Australia had shut off electricity and water supplies to the camp and demanded that some 600 asylum-seekers detained there move to three nearby transition centres. Around 400 of the asylum-seekers have refused to leave, saying they fear for their safety in a local population which opposes their presence on the island. They also say the three transition centres are not fully operational, with a lack of security, sufficient water or electricity.

[..] Canberra has strongly rejected calls to move the refugees to Australia and instead has tried to resettle them in third countries, including the United States. But so far, just 54 refugees have been accepted by Washington, with 24 flown to America in September. Despite widespread criticism, Canberra has defended its offshore processing policy as stopping deaths at sea after a spate of drownings.

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Oh, the lights will go out eventually…

Night Being Lost To Artificial Light (BBC)

A study of pictures of Earth by night has revealed that artificial light is growing brighter and more extensive every year. Between 2012 and 2016, the planet’s artificially lit outdoor area grew by more than 2% per year. Scientists say a “loss of night” in many countries is having negative consequences for “flora, fauna, and human well-being”. A team published the findings in the journal Science Advances. Their study used data from a Nasa satellite radiometer – a device designed specifically to measure the brightness of night-time light. It showed that changes in brightness over time varied greatly by country. Some of the world’s “brightest nations”, such as the US and Spain, remained the same. Most nations in South America, Africa and Asia grew brighter. Only a few countries showed a decrease in brightness, such as Yemen and Syria – both experiencing warfare.

The nocturnal satellite images – of glowing coastlines and spider-like city networks – look quite beautiful but artificial lighting has unintended consequences for human health and the environment. Lead researcher Christopher Kyba from the German Research Centre for Geoscience in Potsdam said that the introduction of artificial light was “one of the most dramatic physical changes human beings have made to our environment”. He and his colleagues had expected to see a decrease in brightness in wealthy cities and industrial areas as they switched from the orange glow of sodium lights to more energy-efficient LEDs; the light sensor on the satellite is not able to measure the bluer part of the spectrum of light that LEDs emit.

“I expected that in wealthy countries – like the US, UK, and Germany – we’d see overall decreases in light, especially in brightly lit areas,” he told BBC News. “Instead we see countries like the US staying the same and the UK and Germany becoming increasingly bright.” Since the satellite sensor does not “see” the bluer light that humans can see, the increases in brightness that we experience will be even greater than what the researchers were able to measure.


UK, Netherlands, Belgium

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