Jan 202019

Pablo Picasso Woman in an armchair (Olga) 1922


Pelosi Rejects Trump Shutdown Deal Before President Announces It (O.)
Battle Royale (Jim Kunstler)
No President Since Lincoln Treated Worse Than Me – Trump (RT)
Theresa May Wants Irish Treaty To Break Brexit Impasse (R.)
One Thing To Be Grateful To Brexit For: Britons Are Buying Less On Credit (G.)
‘The Gilets Jaunes Are Unstoppable’ (Guilluy)
Yellow Vests Defy Macron ‘National Debate’ In 10th Saturday Of Protests (F24)
Fannie Mae And Freddie Mac Regulator Has Plan To End Conservatorship (MW)
‘The Goal Is To Automate Us’: The Age Of Surveillance Capitalism (O.)



Pelosi and her ilk act as if they won the elections. They must be smart enough to know Trump does what he says he will?!

Pelosi Rejects Trump Shutdown Deal Before President Announces It (O.)

Donald Trump forged ahead on Saturday and proposed a deal to end the US government shutdown, despite Democrats having rejected it before he began to speak. If its timing was striking, the rejection was no surprise. In exchange for temporary concessions on the status of threatened migrant groups, the president doubled down on his demand for a border wall. A senior House Democratic aide told the Guardian the party, which has vowed not to give Trump funding for any wall, was not consulted. Speaking from the White House, the president outlined a plan that would extend protections for young undocumented migrants brought to the US as children, known as Dreamers, and individuals from some Central American and African nations, in exchange for $5.7bn for a wall on the US-Mexico border.

“A wall is not immoral,” he said, adding: “The radical left can never control our borders. I will never let that happen.” “As a candidate for president,” he said, “I promised I would fix this crisis, and I intend to keep that promise one way or the other.” Trump spoke as the partial shutdown of the federal government, the longest in US history, rolled through its 29th day. Prompted on 22 December over Trump’s demand for a wall, the partial closure of departments and services has left around 800,000 federal workers without pay. Hundreds of thousands of contractors are also going without a check.

Before the president took the podium, House speaker Nancy Pelosi panned his proposal. “Democrats were hopeful that the president was finally willing to re-open government and proceed with a much-need discussion to protect the border,” she said in a statement. “Unfortunately … his proposal is a compilation of several previously rejected initiatives, each of which is unacceptable and in total do not represent a good faith effort to restore certainty to people’s lives. It is unlikely that any one of these provisions alone would pass the House, and taken together, they are a non-starter.”

Read more …

“..a little dust-up in the meadows and cornfields known as the Civil War..”

Battle Royale (Jim Kunstler)

The effrontery of Ms. Pelosi, Speaker of the House, in cancelling Mr. Trump’s State of the Union address in the chamber she controls is perhaps the worst insult to institutional protocol since the spring day in 1856 when Congressman Preston Brooks (D-SC) skulked into the senate chamber and smashed Senator Charles Sumner (R-Mass) about the head within an inch of his life with a gold-headed walking stick. Brooks’s attack was launched after Sen. Sumner gave his “Bleeding Kansas” speech, arguing that the territory be let into the union as a “free” state, and denouncing “the harlot slavery,” whom he imputed was Rep. Brooks’s dearest consort.

Many of us — except perhaps students immersed in intersectional gender studies — know how that worked out: a little dust-up in the meadows and cornfields known as the Civil War. We’re about at that level of animosity today in the two federal houses of legislature, though it is very hard to imagine how Civil War Two might play out on the ground. Perhaps opposing mobs (not even armies) meet in the Walmart parking lots of Pennsylvania and go at it demolition derby style, with monster trucks bashing their enemies’ Teslas and Beemers. Throw in clown suits instead of blue and gray uniforms and we’ll really capture the spirit of the age.

Not to be outdone, days after the SOTU cancellation, the Golden Golem of Greatness cancelled a Democratic Party grandstanding junket to the Middle East, led by Ms. Pelosi. A US Air Force bus has just departed for Andrews Air Force Base, where an Air Force jet waited for the junketeers. But then, with impeccable timing, Mr. Trump cancelled the junket — denying the use of military aircraft as Commander-in-Chief — and forcing the bus back to town with its load of elected dignitaries and their luggage — making the reasonable suggestion that they fly a commercial airline instead.

Read more …

Trump trolling America.

No President Since Lincoln Treated Worse Than Me – Trump (RT)

Not since Abraham Lincoln has a US president been treated so badly by the media, Donald Trump lamented in a series of Twitter rants before going to Delaware to honor the four Americans killed in Syria. “Will be leaving for Dover to be with the families of four very special people who lost their lives in service to our Country,” Trump wrote on Twitter on Saturday. Two US troops, a civilian and a contractor were killed in a suicide bombing in the Kurdish-controlled northern Syrian city of Manbij on Wednesday. But the president had no intention to focus on his surprise visit to Dower Airforce Base in Delaware for too long.

His next Twitter post was dedicated to a completely different subject, as Trump cited former House Speaker, Newt Gingrich, who – according to him – said: “There has been no president since Abraham Lincoln who has been treated worse or more unfairly by the media than your favorite President, me!” At the same time, he insisted that “there has been no president who has accomplished more in his first two years in office!” Trump’s invocation of Lincoln prompted reactions from his supporters and opponents.

Read more …

May cannot have a bilateral treaty with Irleand that would essentially be designed to bypass the EU, as long as Ireland is part of the EU.

Theresa May Wants Irish Treaty To Break Brexit Impasse (R.)

British Prime Minister Theresa May plans to seek a bilateral treaty with the Irish government as a way to remove the contentious backstop arrangement from Britain’s divorce deal with the European Union, a newspaper reported. The Sunday Times said aides to May thought a deal with Ireland would remove the opposition to her Brexit plan from the Democratic Unionist Party that supports May’s minority government and from pro-Brexit rebels in her Conservative Party. However the Irish edition of the same newspaper quoted a senior Irish government source as saying the bilateral treaty proposal was “not something we would entertain” and a second senior political source as saying it would not work with the European Commission.

May suffered a heavy defeat in parliament on Tuesday when Conservative lawmakers and members of other parties rejected her Brexit plan by an overwhelming majority. That left Britain facing the prospect of no deal to smooth its exit from the EU in little more than two months’ time. May is due to announce on Monday how she plans to proceed. Many Conservatives and the DUP oppose the backstop that the EU insists on as a guarantee to avoid a hard border between the Irish Republic and Northern Ireland. Earlier on Saturday, Ireland’s foreign minister Simon Coveney said Dublin’s commitment to the Brexit divorce deal struck with the British government was “absolute,” including the border backstop arrangement. The Sunday Times also said a group of lawmakers in Britain’s parliament would meet on Sunday to consider ways they could suspend the Brexit process, wresting control away from May’s government.

Read more …

There’s that question again: a sign of confidence or despair?

One Thing To Be Grateful To Brexit For: Britons Are Buying Less On Credit (G.)

A sharp decline in household spending on the never-never, and especially spending on credit cards, is a trend that must surely be welcomed. The Bank of England said last week in its quarterly credit health check that high street banks were about to witness the biggest decline in such borrowing since records began 12 years ago. Threadneedle Street said its index of demand for credit card lending over the three months to the end of March had dropped to -20.7 from -7.2. That is a far cry from the summer of 2017, when consumer borrowing soared above £200bn and MPs across the political spectrum became alarmed at the return of binge buying on plastic.

At that time, with wages flat or at least not rising by more than inflation, policymakers feared that households were supplementing their incomes with borrowing to the degree that they had in the run-up to the 2008 financial crash. Regulators reacted to the rise by telling banks to tighten up their lending criteria. Most institutions obeyed, as anyone tracking the trend for borrowing across 2018 can see. So far, so good. That, after all, was supposed to be how the regulators looked after the interests of the country and its economy, and kept individual households from borrowing more than they could afford to repay.

However, it also seems clear that another force was at play – the Brexit effect, which began to have an impact once it became clear that Theresa May’s government was struggling to find a formula that could win over a majority in the House of Commons. The fall in sentiment since last summer has proved to be dramatic – far sharper than the banks would ever have expected from a few little tweaks to their lending rules. And the lack of consumer borrowing has been felt in few places more than it has in the car industry. Since 2010, cars have increasingly been sold through complex lease deals that fall under the credit figures. By 2017, nine out of 10 cars were being sold this way. Then came the diesel emissions scandal and a confused government reaction, which discouraged sales.

Brexit made the situation worse. Consumers were already reluctant to make major purchases such as a new home, or big-ticket household items like furniture. Next on the list of things not to buy was a car. Figures from the industry show that car sales in the UK declined by almost 7% in 2018. With a major slice of credit no longer in demand, the borrowing figures were bound to tumble. The shocking element of the story is how much harm a fall in personal lending can cause to the British economy, which has already suffered a lopsided expansion since the financial crash.

Read more …

Excellent essay on what the Yellow Vests actually are.

‘The Gilets Jaunes Are Unstoppable’ (Guilluy)

‘Paris creates enough wealth for the whole of France, and London does the same in Britain. But you cannot build a society around this. The gilets jaunes is a revolt of the working classes who live in these places. ‘They tend to be people in work, but who don’t earn very much, between 1000€ and 2000€ per month. Some of them are very poor if they are unemployed. Others were once middle-class. What they all have in common is that they live in areas where there is hardly any work left. They know that even if they have a job today, they could lose it tomorrow and they won’t find anything else. ‘Not only does peripheral France fare badly in the modern economy, it is also culturally misunderstood by the elite. …

One illustration of this cultural divide is that most modern, progressive social movements and protests are quickly endorsed by celebrities, actors, the media and the intellectuals. But none of them approve of the gilets jaunes. Their emergence has caused a kind of psychological shock to the cultural establishment. It is exactly the same shock that the British elites experienced with the Brexit vote and that they are still experiencing now, three years later. ‘The Brexit vote had a lot to do with culture, too, I think. It was more than just the question of leaving the EU. Many voters wanted to remind the political class that they exist. That’s what French people are using the gilets jaunes for – to say we exist. We are seeing the same phenomenon in populist revolts across the world. [ … ]

‘The Parisian economy needs executives and qualified professionals. It also needs workers, predominantly immigrants, for the construction industry and catering et cetera. Business relies on this very specific demographic mix. The problem is that ‘the people’ outside of this still exist. In fact, ‘Peripheral France’ actually encompasses the majority of French people. [ … ] Think of the ‘deplorables’ evoked by Hillary Clinton. There is a similar view of the working class in France and Britain. They are looked upon as if they are some kind of Amazonian tribe. The problem for the elites is that it is a very big tribe.

Read more …

Really, you think Macron can have his national debate? “..98 cases of serious injuries, including 15 cases of people losing an eye..”

Yellow Vests Defy Macron ‘National Debate’ In 10th Saturday Of Protests (F24)

Around 84,000 “Yellow Vest” demonstrators marched all around France on Saturday, marking a 10th straight weekend of anti-government protests, defying attempts by President Emmanuel Macron to channel their anger into a series of town hall debates. In Paris, Protesters assembled by the Invalides plaza near the National Assembly and marched through the city’s Left Bank in freezing temperatures. These demonstrations were largely peaceful but, according to reporters, clashes broke out late in the afternoon between police and demonstrators, some wearing masks, in Paris’ central Invalides district. Protesters threw firecrackers, bottles and stones at the police who responded with water cannon and tear gas to push them back.

Authorities said there were around 7,000 protesters in Paris, some of whom gathered near the world-famous Champs Elysees, while there were similar demonstrations in major cities across France. Rallies took place in Toulouse, Lyon, Rouen and other cities. According to the French Interior Ministry, some 84,000 people marched across France on Saturday, as many as last week. In the French capital though, there were fewer protestors on this 10th consecutive weekend than on the previous Saturday, when there were 8,000.

[..] the protesters behind the biggest crisis in Macron’s presidency remain fully mobilised. The centrist leader is hoping that the launch this week of a “grand national debate” on policy will mark a turning point. [..] many yellow vests have announced plans to boycott the discussions scheduled in dozens of towns and villages, seeing them as an attempt to drain support from a movement that erupted in mid-November over fuel taxes and quickly broadened into a campaign of weekly protests that have regularly ended in clashes with police and destruction of property. The growing number of demonstrators to suffer serious injuries at the hands of the police has compounded their anger towards the state. The “Disarm” collective, a local group that campaigns against police violence, has counted 98 cases of serious injuries, including 15 cases of people losing an eye, mostly after being hit by rubber bullets.

Read more …

Probably means they see a huge plunge come in housing.

Fannie Mae And Freddie Mac Regulator Has Plan To End Conservatorship (MW)

The acting director of the Federal Housing Finance Agency has told the agency’s employees that the regulator will announce a plan within weeks to take the government-sponsored enterprises out of conservatorship. Joseph Otting, who is leading the FHFA as Mark Calabria awaits Senate confirmation, said at an all-hands meeting on Thursday that a plan to lift Fannie Mae and Freddie Mac out of the conservatorship that has permeated the institutions since the financial crisis will soon be announced, according to an attendee of that gathering. A spokesperson for the agency confirmed there was discussion about ending Fannie and Freddie conservatorship but denied there was any talk of timing or details.

“Acting Director Otting held the internal meeting to meet FHFA staff and establish open lines of communication,” the FHFA said. “He mentioned, as he previously has, that Treasury and the White House are expected to release a plan for housing that will include details about reform and will likely include a recommendation for ending Fannie Mae and Freddie Mac conservatorships. [Treasury] Secretary Mnuchin has said that the goal of the [Trump] administration is to take the GSEs out of conservatorship. Acting Director Otting said that he and FHFA will work to advance that plan.” Fannie and Freddie were rushed into government control at the height of the financial crisis. Then, in 2012, the terms of the 2008 bailout were amended to steer the quarterly profits of both enterprises to Treasury. That wiped out holders of the companies’ stock, and they’ve fought the federal government in court ever since.

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Shoshana Zuboff’s new book The Age of Surveillance Capital sounds like a treat.

‘The Goal Is To Automate Us’: The Age Of Surveillance Capitalism (O.)

Surveillance capitalism is a human creation. It lives in history, not in technological inevitability. It was pioneered and elaborated through trial and error at Google in much the same way that the Ford Motor Company discovered the new economics of mass production or General Motors discovered the logic of managerial capitalism. Surveillance capitalism was invented around 2001 as the solution to financial emergency in the teeth of the dotcom bust when the fledgling company faced the loss of investor confidence. As investor pressure mounted, Google’s leaders abandoned their declared antipathy toward advertising. Instead they decided to boost ad revenue by using their exclusive access to user data logs (once known as “data exhaust”) in combination with their already substantial analytical capabilities and computational power, to generate predictions of user click-through rates, taken as a signal of an ad’s relevance.

Operationally this meant that Google would both repurpose its growing cache of behavioural data, now put to work as a behavioural data surplus, and develop methods to aggressively seek new sources of this surplus. The company developed new methods of secret surplus capture that could uncover data that users intentionally opted to keep private, as well as to infer extensive personal information that users did not or would not provide. And this surplus would then be analysed for hidden meanings that could predict click-through behaviour. The surplus data became the basis for new predictions markets called targeted advertising.

Here was the origin of surveillance capitalism in an unprecedented and lucrative brew: behavioural surplus, data science, material infrastructure, computational power, algorithmic systems, and automated platforms. As click-through rates skyrocketed, advertising quickly became as important as search. Eventually it became the cornerstone of a new kind of commerce that depended upon online surveillance at scale. The success of these new mechanisms only became visible when Google went public in 2004. That’s when it finally revealed that between 2001 and its 2004 IPO, revenues increased by 3,590%.

[..] Google began by unilaterally declaring that the world wide web was its to take for its search engine. Surveillance capitalism originated in a second declaration that claimed our private experience for its revenues that flow from telling and selling our fortunes to other businesses. In both cases, it took without asking. Page [Larry, Google co-founder] foresaw that surplus operations would move beyond the online milieu to the real world, where data on human experience would be free for the taking. As it turns out his vision perfectly reflected the history of capitalism, marked by taking things that live outside the market sphere and declaring their new life as market commodities.

We were caught off guard by surveillance capitalism because there was no way that we could have imagined its action, any more than the early peoples of the Caribbean could have foreseen the rivers of blood that would flow from their hospitality toward the sailors who appeared out of thin air waving the banner of the Spanish monarchs. Like the Caribbean people, we faced something truly unprecedented. Once we searched Google, but now Google searches us. Once we thought of digital services as free, but now surveillance capitalists think of us as free.

Bowie in 1999. He was a long way ahead.

Read more …

May 042018

Gutzon Borglum Mount Rushmore, Repairing Lincoln’s nose 1962



Dr. D figured his last missive was a bit heavy handed. So he went for something lighter this time. A penance, a doctor’s guide: “It’s hard enough to find a candidate that will even promise to do something right so it doesn’t help that they do the opposite 90% of the time.”



Dr. D:

Who wrote “We hold these Truths to be self-evident, that all Men are created equal”? Jefferson, a slave owner.

Who was one of the most ardent Abolitionists? Alexander Hamilton.

Was he a slave owner? Yes.

Who won the election of 1824? No one, it was decided by the House of Representatives.

So which party lost? None: all four candidates were Democratic-Republicans.

In response, Andrew Jackson, a slave owner, created the Democratic Party.

Jackson created the Democratic Party as an anti-bank, anti-oligarch, states-rights platform the Tea Party would recognize.

Martin Van Buren, a Democrat, created the first concentration camp for Cherokee Indians in 1838.

Those 17,000 Cherokees owned 2,000 slaves.

Did Lincoln create the Republican Party? No, it was an amalgamation of failed parties: Lincoln was their 1st candidate.

What was the Lincoln campaign of 1860? Non-interference in state slavery.

Why? The decision of Dred Scott in 1857, a slave owned by abolitionists in a state he did not reside. Overturning 250 years of history, the case determined that no slave could ever become a citizen, i.e. freed.

Who was the best known Confederate General? Stonewall Jackson.

What did he do when he sided with the Southern cause? Freed his slaves.

Who else was a top Confederate General? William Mahone.

What did he do? He was the creator of the most successful interracial alliance in the post-war South. His name was purged first by Southern Democrats (for integration), then by modern Democrats (for being a Confederate).


Woodrow Wilson (D) ran an anti-collectivism, limited government, anti-monopoly, anti-bank campaign in 1912. He created the Federal Reserve and is known for founding the modern welfare state.

Wilson was re-elected on the slogan “He Kept Us Out of War.” He immediately forced the reluctant nation into WWI.

Herbert Hoover, as Secretary of Commerce under Calvin Coolidge during the Crash of ’21, demanded economic aid and bailouts, but Coolidge, “the great refrainer,” refused. The market immediately recovered.

Hoover was President during the Crash of ’29. He gave unprecedented bailouts to help the economy recover. It never did.

Roosevelt campaigned against Hoover for being “ the greatest spending Administration in peacetime in all our history.” He outspent Hoover tenfold.

Did Roosevelt’s “New Deal,” the greatest stimulus and spending program up to that time, end the Great Depression? No. It was going strong in 1939.

What did Roosevelt campaign on? He promised to keep us out of war in Europe.

Who was Time’s Man of the Year in 1938? Adolf Hitler.

Who was Man of the Year in 1939? Joseph Stalin.

1942? Joseph Stalin.


Wars under “anti-war” Democratic Party: 93 years, 46.5%. 625K deaths since 1864.

Wars under “pro-war” “Republican” Party: 107 Years 53.5%. 12K deaths since 1864.

Who voted for the 1964 Civil Rights Act? Republicans 80% vs. Democrats 69%.

Who filibustered it? Southern Democrat Strom Thurmond.

Who signed it? Lyndon Johnson, a southern Democrat.

Where did Thurmond go? The GOP, who had voted against him and against southern segregation.

What did Richard Nixon campaign on? “Law and Order” and a “secret plan” to exit Vietnam. He immediately bombed Cambodia and was later impeached for a burglary.

Who said “the soundest way to raise revenues in the long run is to cut rates now” and “Every dollar released from taxation that is spent or invested will help create a new job and a new salary” ? John F. Kennedy.

Who gave the greatest modern tax cut? John F. Kennedy (income and capital gains, signed by Johnson).

Who most increased the postwar Federal deficit? Ronald Reagan 186%.

Who most increased taxes? Ronald Reagan, 1982 (as % of GDP, excluding Obamacare and Johnson’s one-year tax).


Who called young blacks “Superpredators”? Hillary Clinton, 1996.

Who put the most black men in jail? Bill Clinton, under the 1994 Violent Crime Control Act.

Who cut welfare most? Bill Clinton, 1996 Personal Responsibility and Work Act.

Who was called the first “Black President”? Bill Clinton (“white skin notwithstanding, this is our first black President. Blacker than any actual black person who could ever be elected in our children’s lifetime.” –Toni Morrison, 1998. I swear this is true).

What was George W. Bush’s platform? Smaller, less-invasive government, lower taxes, and no foreign wars.

Who are the Neoconservatives? “Liberal hawks who became disenchanted with the pacifist foreign policy of the Democratic Party”.

Where did these Liberal Democrats finally prosper? Under G.W. Bush and on Fox News, e.g. Bill Kristol.


Which President won the Nobel Peace Prize? Barack Obama. (As did Theodore Roosevelt, Woodrow Wilson and Jimmy Carter)

What was his legacy? War every day of all eight years, with +50,000 official strikes in Afghanistan, Pakistan, Libya, Yemen, Somalia, Iraq, and Syria and unofficial attacks in Ukraine, Sudan, Niger, Cameroon, Uganda, and elsewhere, as well as 3,000 drone deaths.

Wow, anything else? Due to his intervention, Obama, the first black president, caused the creation of an open-air black slave market in Libya.

Who campaigned advocating a Syrian no-fly zone expected to cause WWIII with Russia? Hillary Clinton (D).

Who campaigned for peace talks and de-escalation with Russia? Donald Trump (R).

Who sent 164 missiles into Russian ally Syria? Donald Trump (R).

Who advocated against the recent attacks? “Far-right” speakers Rand Paul and Tucker Carlson of Fox News.

Who advocated for the attacks? “Left” speakers Fareed Zakaria, and Rachel Maddow with left media Slate and Mother Jones.

What was the actual breakdown? 22% of GOP supported Syrian airstrikes in 2013 vs 86% for the same strikes in 2017.

And on and on. Got it? Know which side you’re on? History, party platforms, personal beliefs, economy, all clear?


“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

P.S. Mark Twain never said this.



Apr 122018
 April 12, 2018  Posted by at 1:09 pm Finance Tagged with: , , , , , , , , , , , , ,  7 Responses »

Pieter Bruegel the Elder The Triumph of Death c1562


This is turning into a comedy. A black comedy, for sure, but still. As both the Skripal novichok ‘poisoning’ case in Britain and the ‘chemical attack’ in Douma, Syria fall flat on their faces on a total and absolute lack of evidence, it’s becoming clear that western ‘authorities’ are not at all planning to let go of the privilege that in times gone by allowed them to claim whatever they wanted and demand to be believed.

And despite the insane amounts of spying that underlies their business models and will lead to their demise(s), here is where social media do play a decisive role. See, if you’re an ‘authority’, there’s nothing you would rather do than to close down those social media that let people spread news that contradicts and/or doubts what you just said, and undermines that privilege. But that also would mean you can’t spy on them anymore through social media. A toss-up?!

Whatever the outcome will be, it’s obvious that Donald Trump is having war talks with his military and closest advisers. And they can basically tell him anything, he’s not a military man. Which is fine, Lincoln wasn’t either. But it does mean he’s vulnerable to narratives and briefings that are simply not true. Lincoln went to great lengths to surround himself with people who could trust.

What about Trump? Does he know that, as Paul Craig Roberts said on Twitter yesterday ..

The Russians know that they can, at will within a few minutes, sink the entire US fleet, destroy every US airplane & ship in the ME & within range of the ME, completely destroy all of Israel’s military capability & wipe out the military of the two-bit punk state of Saudi Arabia.

.. or do they keep that from him? Because if he did know, why have this entire circus going on? Why did the King of Twitter yesterday threaten with his new and shiny toys and then today switch to:

Never said when an attack on Syria would take place. Could be very soon or not so soon at all! In any event, the United States, under my Administration, has done a great job of ridding the region of ISIS. Where is our “Thank you America?”

We already knew that US military won’t be ready for another 10 days or so for an attack on Syrian targets. So that makes sense. It takes the surprise factor out of the game, but nobody seems to want to surprise anyone much anyway. Syrian and Russian military are already way out of the way, and left the most decrepit infrastructure behind for the coalition of the willing (no Germany, Canada) to waste their firepower on.

But does Trump really want to start shooting anything? Certainly only if he knows he will win. And that, he doesn’t. And there’s something else. he’s not only talking to his military people, he’s got a financial/economic team as well. What will the financial effects of a military action be? That might give him some pause. And his military guys can’t fill him in on that.

Can Trump risk imploding the ‘markets’? They’re not actually markets anymore, and that makes them much less predictable.

As Bill Holter says talking to Greg Hunter:


It’s Pure Math – We’re Headed for a Train Wreck

Holter also points out the explosion of global debt. Holter charges, “It’s now $237 trillion. The amount of debt grew by $21 trillion globally over the last 12 months. That’s roughly 10 %. How much did global GDP grow? 2% or 3%, I mean that is totally unsustainable.” The biggest worry for Holter right now is escalating military action in Syria. Holter warns, “This is so, so dangerous. Obviously, you worry about a hot war because with the weapons you have today, you could have WWIII start in a heartbeat. But look at the market today. It’s up 400 or 500 points. You have talk of trade wars. You have talk of hot wars. It’s amazing the markets can hold together and ignore potential annihilation.”

David Stockman has something very similar:


The Deep State Closes In On The Donald, Part 1

Yes, maybe Wall Street has figured out that the Donald is more bluster than bite. Yet when you consider the broader context and what the Russian side is now saying, it is just plain idiotic to own the S&P 500 at 24X. After all, earnings that have been going nowhere for the past three years (earnings per share have inched-up from $106 in September 2014 to $109 in December 2017), and now could be ambushed by a hot war accident in Syria that would rapidly escalate.

Indeed, did the robo-machines and boys and girls down in the casino not ponder the meaning of this message from the Kremlin? It does not leave much to the imagination: #Russian ambassador in Beirut : “If there is a strike by the Americans on #Syria , then… the missiles will be downed and even the sources from which the missiles were fired..”

Trump would be much more likely to fire away if he thought he would win. And even then. Even if he could win, the whole situation is replete with unknown unknowns. If god forbid the thing escalates and the US and Russia end up facing each other, what will China do? Don’t forget that Beijing and the PBOC play an instrumental part in propping up the world economy, and the S&P 500.

It wouldn’t be hard for Xi to pull that carpet out from under Trump’s feet; it would be costly for China too, but if war were the reality, the rules and priorities change. And you can bet Xi and his people have run through the kinds of scenarios many many times. They’re prepared to “withdraw upon themselves”.

As for the US, the ‘markets are holding on to crazy levels so far despite the threat that hangs in the air, but once the first rockets fly, and gold and bitcoin -oil?- are still available, why hold on to stocks?

It’s the insanity of the so-called markets that makes them so vulnerable and unpredictable. And starting a war on very shaky grounds increases that unpredictability by a factor of 10 or so. And the MSM may -well, there’s no doubt- still fill their role as cheerleaders the way they used to, but social media are a different story.

And besides, which investors are going to say, hell, I feel so patriotic, I’m going to hold on to stocks that have been onvervalued for years already, just to support Bolton and McCain and Tony Blair and Boris Johnson’s fantasies? Who would do that who understands that it is at least quite possible that Russia has the better weapons today? Or that perhaps this kind of conflict is simply not winnable anymore?!

I don’t think there’ll be many. Nor do I think Trump wants to be known as the man who collapsed the S&P 500. So, abandoned buildings in the desert it is. And lots of CNN. Anderson Cooper’s your MC.



May 162016
 May 16, 2016  Posted by at 9:28 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle May 16 2016

Harris&Ewing Ford Motor Co. New medical center parking garage, Washington, DC 1938

Goldman: The Median Stock Has NEVER Been More Overvalued (ZH)
The Business Of Corporate America Is No Longer Business – It Is Finance (FT)
Stockman: Trump Will Scare The Hell Out Of The Markets, But That’s OK (CNBC)
Trump’s ‘Print the Money’ Proposal Echoes Franklin and Lincoln (E. Brown)
India’s Central Bank Governor Warns On Stimulus Overuse (FT)
Average Asking Price For UK First-Time Buyer Home Jumps 6.2% In A Month (G.)
CERN Discovers New Particle Called The FERIR (Steve Keen)
Isn’t it Time to Stop Calling it “The National Debt”? (Steve Roth)
Forget the Saudis, Nigeria’s the Big Oil Worry (BBG)
China Housing Revival Props Up Economy (WSJ)
China’s Record $26 Billion Buyout Deals at Risk of Unraveling (BBG)
China Private Sector Investment Is Declining (R.)
China’s Record Daily Steel Output Bodes Ill for Global Industry (BBG)
How Investors Are Duped Each Earnings Season (MW)
Battle Brews in Spain, Portugal Over Negative Mortgage Rates (WSJ)
Refugee Numbers Returned To Turkey Fall Short Of EU ‘Expectations’ (FT)

In some places, this would be called a bubble.

Goldman: The Median Stock Has NEVER Been More Overvalued (ZH)

When Goldman warned on Friday that a “big drop” in the market is possible before the S&P hits the firm’s year end price target of 2,100, one of the bearish reasons brought up by the firm’s chief strategist David Kostin is that stocks are now massively overvalued. In fact, according to Goldman , while the aggregate market is more overvalued than 86% of all recorded instances, the median stocks has never been more overvalued, i.e., is in the 100% valuation percentile, according to some key metrics such as Price-to-Earnings growth and EV/sales.

This is what Goldman said: “Valuation is a necessary starting point of any drawdown risk analysis. At 16.7x the forward P/E multiple of the S&P 500 index ranks in the 86th percentile relative to the last 40 years. Most other metrics paint a similar picture of extended valuation. The median stock in the index trades at the 99th percentile of historical valuation on most metrics (see Exhibit 3).” Goldman’s conclusion: “The most likely future path of US equities involves a lower valuation.”

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America no longer makes much of anything anymore.

The Business Of Corporate America Is No Longer Business – It Is Finance (FT)

One of the great ironies of business today is that the richest and most powerful companies in the world are more involved than ever before in the capital markets at a time when they do not actually need any capital. Take Apple, which has around $200bn sitting in the bank, yet has borrowed billions of dollars in recent years to buy back shares in order to bolster its stock price, which has lagged recently. Why borrow? Because it is cheaper than repatriating cash and paying US taxes, of course. The financial engineering helped boost the California company’s share price for a while. But it did not stop activist investor Carl Icahn — who had manically advocated borrowing and buybacks — from dumping the stock the minute revenue growth took a turn for the worse in late April. Apple is not alone in eschewing real engineering for the financial kind.

Top-tier US businesses have never enjoyed greater financial resources. They have $2tn in cash on their balance sheets – enough money combined to make them the tenth largest economy in the world. Yet they are also taking on record amounts of debt to buy back their own stock, creating a corporate debt bubble that has already begun to burst (witness Exxon’s recent downgrade). The buyback bubble is only one part of a larger trend, which is that the business of corporate America is no longer business – it is finance. American firms today make more money than ever before by simply moving money around, getting about five times the revenue from purely financial activities, such as trading, hedging, tax optimisation and selling financial services, than they did in the immediate postwar period. No wonder share buybacks and corporate investment into research and development have moved inversely in recent years.

It is easier for chief executives with a shelf life of three years to try to please investors by jacking up short-term share prices than to invest in things that will grow a company over the long haul. It is telling that private firms invest twice as much in things like new technology, worker training, factory upgrades and R&D as public firms of similar size — they simply do not have to deal with market pressure not to. Indeed, the financialisation of business has grown in tandem with the rise of the capital markets and the financial industry itself, which has roughly doubled in size as a percentage of gross domestic product over the past 40 years (even the financial crisis did not keep finance down; the industry itself shrank only marginally and the largest institutions that remained became even bigger). As finance grew, so did its profits — the industry creates only 4% of US jobs yet takes around 25% of the corporate profit share.

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“..Why would you hang in a boiling pot where the upside is 2% and the downside is 40?”

Stockman: Trump Will Scare The Hell Out Of The Markets, But That’s OK (CNBC)

Former Reagan administration aide David Stockman has a message for the next president: The markets are going down for the count and you can’t do anything about it! President Ronald Reagan’s director of the Office of Management and Budget said in a recent CNBC interview it doesn’t matter if Hillary Clinton or Donald Trump gets elected in November — neither will be able to stop the economic meltdown that’s looming. Wall Street seems to have its mind made up about which candidate it prefers. More than 70% of respondents to a recent Citigroup poll of institutional clients said the former secretary of state, first lady and New York senator would likely become the U.S.’s 45th president. Just over 10% gave Trump the nod, and small business owners appear to be divided between the GOP and Democratic standard bearers.

Stockman, however, doesn’t believe either one can prevent what may be on the horizon. “There’s no way the next president can stop a recession that’s already baked into the cake,” Stockman said Thursday in the “Futures Now” interview. Stockman has been calling for a major market downturn and global recession for some time, but he is more certain than ever that it could happen during this political cycle. He pointed to depleting earnings, peaked auto sales, inventory ratios and issues in the freight and rail space as some key indicators that the U.S. economy is more unstable than people would like to believe. “The idea that this economy is somehow going to get stronger in the second half, or that the next president can stall a recession I think is wrong,” he said.

According to Stockman, there is “plenty of evidence” that the U.S. will slip into a recession by year-end or shortly after. And as he sees it, that could send the S&P 500 spiraling to levels not seen since 2012. “The market can easily drop to 1,300,” Stockman warned. That represents a nearly 40% fall from where the large-cap S&P 500 Index is currently trading. “We have been trading in a range for the last 600 days plus or minus days 2,060 on the S&P 500. … Why would you hang in a boiling pot where the upside is 2% and the downside is 40?” Stockman noted that if given a choice between Trump and Clinton, he certainly would not want another Clinton in the White House. Instead, he said America needs a disruptor like Trump to “break the chains of the status quo” and manage the country in a different way than what has been done in the last decade.

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It’s time this becomes a serious discussion.

Trump’s ‘Print the Money’ Proposal Echoes Franklin and Lincoln (E. Brown)

“Print the money” has been called crazy talk, but it may be the only sane solution to a $19 trillion federal debt that has doubled in the last 10 years. The solution of Abraham Lincoln and the American colonists can still work today.
“Reckless,” “alarming,” “disastrous,” “swashbuckling,” “playing with fire,” “crazy talk,” “lost in a forest of nonsense”: these are a few of the labels applied by media commentators to Donald Trump’s latest proposal for dealing with the federal debt. On Monday, May 9th, the presumptive Republican presidential candidate said on CNN, “You print the money.”

The remark was in response to a firestorm created the previous week, when Trump was asked if the US should pay its debt in full or possibly negotiate partial repayment. He replied, “I would borrow, knowing that if the economy crashed, you could make a deal.” Commentators took this to mean a default. On May 9, Trump countered that he was misquoted:

People said I want to go and buy debt and default on debt – these people are crazy. This is the United States government. First of all, you never have to default because you print the money, I hate to tell you, okay? So there’s never a default.

That remark wasn’t exactly crazy. It echoed one by former Federal Reserve Chairman Alan Greenspan, who said in 2011:

The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default.

Paying the government’s debts by just issuing the money is as American as apple pie – if you go back far enough. Benjamin Franklin attributed the remarkable growth of the American colonies to this innovative funding solution. Abraham Lincoln revived the colonial system of government-issued money when he endorsed the printing of $450 million in US Notes or “greenbacks” during the Civil War. The greenbacks not only helped the Union win the war but triggered a period of robust national growth and saved the taxpayers about $14 billion in interest payments. But back to Trump. He went on to explain:

I said if we can buy back government debt at a discount – in other words, if interest rates go up and we can buy bonds back at a discount – if we are liquid enough as a country we should do that.

Apparently he was referring to the fact that when interest rates go up, long-term bonds at the lower rate become available on the secondary market at a discount. Anyone who holds the bonds to maturity still gets full value, but many investors want to cash out early and are willing to take less. As explained on MorningStar.com:

If a bond with a 5% coupon and a ten-year maturity is sold on the secondary market today while newly issued ten-year bonds have a 6% coupon, then the 5% bond will sell for $92.56 (par value $100).

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“..central banks “cannot claim to be out of ammunition because immediately that would create the wrong kind of expectations..”

India’s Central Bank Governor Warns On Stimulus Overuse (FT)

Central banks and governments of rich countries are running out of ammunition for stimulating their economies, says Raghuram Rajan, the head of the Indian central bank — but they can never admit as much. Speaking to the Financial Times at the University of Chicago Booth School of Business in London, Mr Rajan criticised efforts to use fiscal and monetary policy and infrastructure programmes to boost growth rates in advanced economies. Long a critic of low interest rates in rich countries that can drive hot-money flows to poorer parts of the world, the governor of the Reserve Bank of India suggested that loose policies were also weakening the underlying performance of advanced economies.

Although Mr Rajan said there were limits on stimulus, he said central banks “cannot claim to be out of ammunition because immediately that would create the wrong kind of expectations, so there’s always something up their sleeves”. Mr Rajan said he was a supporter of stimulus policies to “balance things out” over short periods when households or companies were proving excessively cautious with their spending. But eight years after the financial crisis, we “have to ask ourselves is that the real problem?”. “I have this image of stimulus as a bridge,” he said. “As the economy goes down, there is an expectation it will come up. Stimulus is a bridge which smoothes over the growth rate of the economy and prevents damaging expectations from building up.”

If stimulus went on for a long time, if it did not work, he said, the adjustment would be sharp, indicating there was little room for further stimulus. Mr Rajan warned governments not to rely too much on fiscal stimulus through cutting taxes or increasing public spending. “If your debt to GDP is over 100%, [and you] do more fiscal stimulus, you’d better have a pretty high rate of return in mind, otherwise your younger and middle-aged generations are thinking ‘This thing is not going to return enough, but I’m going to have to pay for it’.”

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Want to know how to bankrupt a society?

Average Asking Price For UK First-Time Buyer Home Jumps 6.2% In A Month (G.)

The average asking price of a typical first-time buyer home leapt by 6.2% in a month after buy-to-let investors rushed to buy properties before last month’s stamp duty increase, according to figures on Monday. The average for properties coming on to the market in England and Wales with two bedrooms or fewer was £11,298 higher in May than in April, at £194,224, according to data from the property website Rightmove. The figures, based on properties listed during the month, showed that across the UK the average price of a first-time buyer property had risen by 11.4% since May 2015. In hotspots such as Croydon, Dartford and Luton – all towns within easy commuting distance of central London – asking prices were up by more than 18% over the year.

The figures do not include inner-London homes. The website said strong demand from investors keen to buy before the introduction of the surcharge on second homes had caused a “property drought” at the lower end of the market, putting upwards pressure on prices for those homes that were being made available. However, Rightmove’s director, Miles Shipside, said: “It remains to be seen if these prices can be achieved and there may be some over pricing in the market. It is also a reflection of better quality property coming to market in this sector which is now targeting owner-occupiers rather than landlords.”

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Brilliantly hilarious must read.

CERN Discovers New Particle Called The FERIR (Steve Keen)

CERN has just announced the discovery of a new particle, called the “FERIR”. This is not a fundamental particle of matter like the Higgs Boson, but an invention of economists. CERN in this instance stands not for the famous particle accelerator straddling the French and Swiss borders, but for an economic research lab at MIT—whose initials are coincidentally the same as those of its far more famous cousin. Despite its relative anonymity, MIT’s CERN is far more important than its physical namesake. The latter merely informs us about the fundamental nature of the universe. MIT’s CERN, on the other hand, shapes our lives today, because the discoveries it makes dramatically affect economic policy.

CERN, which in this case stands for “Crazy Economic Rationalizations for aNomalies”, has discovered many important sub-economic particles in the past, with its most famous discovery to date being the NAIRU, or “Non-Accelerating Inflation Rate of Unemployment”. Today’s newly discovered particle, the FERIR, or “Full Employment Real Interest Rate”, is the anti-particle of the NAIRU. Its existence was first mooted some 30 months ago by Professor Larry Summers at the 2013 IMF Research Conference. The existence of the FERIR was confirmed just this week by CERN’s particle equilibrator, the DSGEin. Asked why the discovery had occurred now, Professor Krugman explained that ever since the GFC (“Global Financial Crisis”), economists had been attempting to understand not only how the GFC happened, but also why its aftermath has been what Professor Summers characterized as “Secular Stagnation”.

Their attempts to understand the GFC continued to fail, until Professor Summers suggested that perhaps the GFC had destroyed the NAIRU, leaving the ZLB (“Zero Lower Bound”) in its place. This could have happened only if there was a mysterious second particle, which was generated when a NAIRU equilibrated with a GFC. Rather than remaining in equilibrium, as sub-economic particles do in DSGEin, NAIRU apparently vanished instantly when the GFC appeared. Something else must have taken its place. DSGEin was unable to help here, since it rapidly returned to equilibrium—while the real world that it was supposed to simulate clearly had not. CERN’s attempts to model this phenomenon in DSGEin were frustrated by the fact that a GFC does not exist inside a DSGEin—in fact, the construction of the DSGEin was predicated on the non-existence of GFCs.

The ever-practical Professor Krugman recently suggested a way to overcome this problem. Why not turn to the real world, where GFCs exist in abundance, and feed one of those into the DSGEin? Unfortunately, the experiment destroyed the DSGEin, since the very existence of a GFC within it put it through an existential crisis. However, before it broke down (while mysteriously singing the first verse of “Daisy, Daisy, give me your answer do”), the value for the NAIRU in DSGEin suddenly turned negative. This led Professor Summers to the conjecture that perhaps there was a negative anti-particle to the NAIRU, which he dubbed the FERIR.

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It’s all in the eye of the beholder.

Isn’t it Time to Stop Calling it “The National Debt”? (Steve Roth)

Fourteen. Trillion. Dollars. That’s how much the U.S. government “owes.” You hear that massive number all the time, right? And people are forever telling you that you and your family are on the hook to pay off that scary huge number. There are 125 million U.S. households. You do the arithmetic. The horror. What those scare-mongers don’t tell you, and generally don’t even understand: it actually makes almost no sense to call that figure “the national debt.” And no, you’re not on the hook to pay it back. Imagine this: you’re the queen or king of a sovereign country. You decide to mint and issue a bunch of tin coins that your people will find useful. You use those coins to buy stuff from people in the private sector, and pay them to do work. Voilà, the people have money.

Is your government now in “debt” as a result of that “deficit spending”? Does it have to “pay” something to somebody at some point in the future? Do you have to redeem those coins for wheat or pigs or anything else? Obviously not. There’s just a bunch of money out there that people can use. You’ve made no promise that your treasury will ever redeem those coins for anything. They just circulate. Those government-issued assets, held by the private sector, are only “liabilities” to the government in the most pettifogging accounting sense. If you “owed” some money that you would never, ever have to pay, would you put that on your balance sheet as a liability? Would it be anything beyond a pro forma entry designed to satisfy some obsessive impulse for accounting closure? A debt that will never be paid off is a very questionable “liability.”

That’s essentially the situation with the U.S. national “debt.” The U.S. issues money by deficit spending. It puts more money into private accounts than it takes out via taxes. The private sector has more balance-sheet assets (but no more liabilities, so it has more “net worth,” the balancing item on the righthand side of its balance sheet). The treasury has made no promises to redeem that new money for…anything (except maybe…different government-issued assets). It’s just out there. Now it’s true that the U.S. et al operate under an arguably archaic and purely self-imposed rule: their treasuries are required to issue bonds equal to that deficit spending. This is a straightforward asset swap: the private sector gives checking-account deposits (back) to the government, and the government gives bonds in return.

Private sector assets and net worth are unaffected by that accounting swap; it just changes the private-sector portfolio mix — more bonds, less “cash.” (Treasury “forces” the private sector to make that collective portfolio-adjusting swap through the simple expedient of selling bonds at an attractive price — a point or two below similar deals in the private sector.) The same kind of asset swap happens when the Fed “prints money” for quantitative easing. The private sector gives bonds (back) to the government, and the Fed gives “reserves” in return — deposits in banks’ Fed accounts. Sure, the Fed creates those reserves ab nihilo, but they’re not a money injection into the private sector, like deficit spending. They’re just swapped for bonds. That accounting event doesn’t increase private-sector assets or net worth. It just changes the private-sector portfolio mix (more reserves, less bonds).

In any case, the private sector is holding government-issued assets. Whether they consist of bonds, “cash,” or reserves, is it realistic to call that money originally spent into private accounts a “debt” for the government? Is it in any real sense a government “liability” if it will never be redeemed for anything?

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Big Oil’s decades of criminal activity come home to roost.

Forget the Saudis, Nigeria’s the Big Oil Worry (BBG)

Drag your attention away from the Middle East for a moment. While policymakers have been focused on Saudi Arabia’s oil market machinations, what really matters right now is happening 3,000 miles away in the Niger River delta. The country that was, until recently, Africa’s biggest crude producer is slipping back into chaos. A wave of attacks and accidents have hit infrastructure, taking Nigeria’s output down to 20-year lows. Oil prices are responding, rising to their highest in more than six months. Part of this is explained by the IEA lifting demand estimates this week. But taking both things together, it’s easy to doubt whether current oil surpluses are sustainable. With no solution in sight to the problems that beset the delta’s creeks and mangrove swamps, production from onshore and shallow-water oil fields looks vulnerable.

If the latest group of freedom fighters seeks to outdo its predecessors, then deepwater facilities may be at risk too.The Niger Delta Avengers have certainly been busy, forcing Shell’s Forcados terminal to shut in about 250,000 barrels of daily exports; and breaching an offshore Chevron facility in the 160,000 barrels per day Escravos system. In April, ENI had to declare force majeure – letting it stop shipments without breaching contracts – on exports of its Brass River grade after a pipeline fire. It’s hard to see any long-term let-up given Nigeria’s record on fixing this problem. The previous wave of discontent, which hit a peak in 2009, only came to an end when President Yar’Adua offered amnesty, training programs and monthly cash payments to nearly 30,000 militants, at a yearly cost of about $500 million.

Some leaders of the Movement for the Emancipation of the Niger Delta (MEND), the militant group, got lucrative security contracts. But the failure to properly address local grievances means it was only a matter of time before another wave of angry young men took up the fight for a better deal for southern Nigeria. The crisis has been hastened by new president Muhammadu Buhari’s termination of the ex-militants’ security contracts and his seeking the arrest of former MEND leaders. The Avengers now say they want independence for the Niger River delta. And it’s not as if Nigeria’s oil woes are limited to the militants. Exxon had to declare force majeure on Qua Iboe exports after a drilling platform ran aground and ruptured a pipeline, while Shell did similar with Bonny Light exports after a leak from a pipeline feeding the terminal.

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Beijing will flood in enough money to ‘reach its targets’ while talking about clamping down.

China Housing Revival Props Up Economy (WSJ)

China’s housing market is showing nascent signs of recovery after a two-year downturn, helping to counter a slowdown in the broader economy but prompting fresh warnings about a buildup of debt. Property prices and sales have risen in recent months, driven by looser lending policies, accompanied by a sustained advance in new construction. That occurred even though China is weighed down by unsold homes with enough square footage to fill seven Manhattan islands. “Property developers’ appetite has returned,” said Xia Qiang, a senior partner at Yi He Capital, which provides loans to property firms. “Just two weeks ago four developers from Fujian and Zhejiang asked if there were any projects they could invest in in Shanghai.”

From January to April, housing sales rose 61.4% to 2.41 trillion yuan ($369 billion) from a year ago, the National Bureau of Statistics said on Saturday. Property investment in the first four months of this year rose 7.2% to 2.54 trillion yuan. Construction starts gained 21.4% to 434.3 million square meters. But the rosy statistics present a quandary for Chinese officials. After engineering a credit-fueled property upturn, Beijing has started tapping the brakes amid concern that it has overshot, economists say. Among the fixes Beijing has imposed are a decrease in bank lending and more purchase restrictions on some of the hottest property markets, including Shanghai and Shenzhen. A column in the official People’s Daily recently criticized debt-fueled growth policies, warning that China faces a “property bubble.”

The zigzag policy reflects China’s tough balancing act in a nation where empty apartment towers ring many smaller cities. It wants to boost the property sector enough to hit its 6.5%-plus growth target for 2016 without making its overcapacity and debt problems too much worse, economists said. “New loans are pouring into the real-estate sector,” said Alicia Garcia-Herrero, economist with investment bank Natixis, part of France’s Groupe BPCE. “But the elephant in the room is credit risk.”

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This is about money that doesn’t at all want to move back home, no matter how lucrative that may seem.

China’s Record $26 Billion Buyout Deals at Risk of Unraveling (BBG)

The great retreat of Chinese companies from the U.S. stock market is hitting a snag. Concern last week that Chinese regulators may restrict overseas-traded companies from returning home helped erase more than $5 billion in the market value of firms seeking to do so. Shares of companies from Momo to 21Vianet have plunged at least 20% since May 6 amid speculation that the management-led investor groups may back away from the buyout deals or lower their purchase prices. The selloff marks another twist in the saga of U.S.-listed Chinese companies seeking to go private, lured by the prospect of relisting at higher valuations in Shanghai or Shenzhen. More than 40 have received buyout offers worth at least $35 billion since the beginning of 2015.

About three quarters of the deals are still pending, including Qihoo 360, whose $9.3 billion offer is the largest. The unraveling started on May 6 when the China Securities Regulatory Commission said that it’s studying the impact of companies seeking to relist domestically after withdrawing from overseas. The regulators are concerned the valuations estimated for some domestic backdoor listings are too high and could affect the stability of the stock market, according to the people familiar with matter. Policy makers also want to avoid encouraging more buyouts that could prompt capital outflows, the people said.

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The one sector Beijing cannot control is the biggest there is. “Pushing on a string” comes to mind. “Interest rates are low, but investment is declining, which shows that the overall market – domestic and overseas market – is not good,” he said.”

China Private Sector Investment Is Declining (R.)

Xia Xiaokang and Bruno Chen, who both run private-sector companies, are the sort of businessmen that Chinese leaders are increasingly concerned about as economic growth slows. Beijing is counting on the private sector to invest more in the economy and take up the slack as the government tries to engineer a shift away from largely state-run heavy industry to more entrepreneurial and services-led growth. Unfortunately, just when China needs the private sector to step up, they look to be stepping back. “We plan to downsize our business rather than expand,” said Chen, who runs Ningbo Tengsheng Garments Co in the coastal export hub of Zhejiang province in eastern China. “We cannot feel any improvement in the economy,” he said.

Xia, general manager of Wenzhou Kingsdom Sanitary Ware, some 400 km from Shanghai, similarly lacks confidence in the economy. “We have hardly made any fixed-asset investment since last year and we now plan to rent out part of our factory building because it’s too big,” he said. After March data suggested that economic activity was finally picking up after a long slowdown, April figures released at the weekend suggested otherwise. Overall investment, factory output and retail sales all grew more slowly than expected. Private-sector investment for January to April grew just 5.2%, its weakest pace since the National Bureau of Statistics (NBS) started recording the data in 2012. More worrying, private-sector investment is decelerating sharply from rates near 25% in 2013, to just 10% last year and now just over 5%.

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Damn the torpedoes!

China’s Record Daily Steel Output Bodes Ill for Global Industry (BBG)

China’s record daily steel output in April bodes ill for an embattled global steel industry already reeling from a deluge of exports from the world’s top producer. Crude steel output over the month rose 0.5% to 69.42 million metric tons from a year earlier, the National Bureau of Statistics said on Saturday. The gains came after mills ramped up production to take advantage of a spurt higher in prices that has given them the best profits this decade. While below March’s record monthly figure of 70.65 million tons, the daily rate of 2.314 million tons was higher due to fewer producing days and surpassed the previous best set in June 2014. “Given how high margins went, we’ve been expecting to see a supply response like this,” Ian Roper at Macquarie said in a WeChat message. “Chinese mills will likely look back to the export market as domestic oversupply reappears.”

China’s overseas sales in the first four months were already running 7.6% higher than a year earlier, piling on the pressure after the nation shipped a record 112 million tons in 2015. Output remaining at such elevated levels “definitely adds to oversupply risks and exports may continue to rise,” said Helen Lau, Hong Kong-based analyst at Argonaut Securities. In a sign that China is recommitting to the reform of its bloated state sector, its top producer, Hebei Iron & Steel, said Friday it’ll cut 5.02 million tons of capacity. That still leaves a way to go. Japan’s biggest mill, Nippon Steel & Sumitomo Metal, also said Friday that it would take control of a smaller domestic steelmaker in a bid to weather a “rapid deterioration of the business environment” caused in part by overcapacity in China of some 400 million tons.

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It’s all so sad it’s funny.

How Investors Are Duped Each Earnings Season (MW)

A year ago, we explained the many ways companies make reading their quarterly earnings reports a miserable task. We weren’t just whining. We wanted to remind companies that our readers regularly tell us they struggle to understand earnings announcements, and our job is to decode them for investors. Making that difficult isn’t helping anyone. We noted that some of their tactics – inventing or manipulating numbers, using meaningless jargon, distributing lame executive quotes, and more — can be outright damaging, eroding investor trust and creating skepticism. We hoped they’d change their ways. We’re sorry to say that today, as another earnings season draws to a close, things are even worse.

“Companies are definitely less transparent than they used to be,” said Leigh Drogen, founder and chief executive of Estimize, which crowdsources earnings estimates. They are “using accounting schemes that are more specific to … how they want investors to perceive their results.” Earnings are a crucial quarterly update for investors, as they provide the “best unbiased” view of what’s going on with companies, sectors and the economy, said Karyn Cavanaugh, senior market strategist at Voya Investment Management. “Earnings discount all the noise,” she said. But today, according to FactSet, more than 90% of S&P 500 companies use their own metrics in an attempt to make their numbers look better. Some conceal revenue and other key numbers in hard-to-access tables.

And a recent NYSE rule change has led some companies to report very early in the morning and pushed others to join the posse reporting after the closing bell, creating bottlenecks. While all this has meant more stress for reporters and analysts, it’s also made things harder for everyday investors trying to do due diligence on the companies they own. Experts say more companies seem to be breaking the most fundamental pact they have with their co-owners: to keep them informed of the true state of their business. “It’s a holographic presentation bubble distorting underlying operational reality,” said analyst Nicholas Heymann at William Blair. “Companies are working all the angles.”

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What you get when decision makers don’t understand their fields.

Battle Brews in Spain, Portugal Over Negative Mortgage Rates (WSJ)

As interest rates in Europe fall near or below zero, lawmakers and consumer advocates in Spain and Portugal are attacking an ancient tenet of finance by insisting that lenders can owe money to borrowers. Banks in the two countries, struggling to recover from recessions that shook their financial systems, are fighting back, with billions of dollars in mortgage interest payments potentially at stake. Portugal’s central-bank governor, in a reversal, has rushed to defend the banks against a proposed law that would require them to pay borrowers when interest rates turn negative. Banks in both countries are rewriting new mortgage contracts to warn homeowners that they could never profit from subzero rates.

In Spain and Portugal, banks typically tie interest rates on mortgages to the euro interbank offered rate, or Euribor, a fluctuating rate banks pay to borrow from each other. In addition, interest rates in both countries include a fixed percentage of the loan, called the spread. In much of Europe, by contrast, fixed mortgage rates are common. Euribor began turning negative last year after the ECB cut interest rates below zero—charging lenders to hold deposits—to stimulate the Continent’s economies. That has pulled mortgage rates into negative territory in a few isolated cases in Portugal.

The vast majority of Spanish and Portuguese mortgage holders still pay interest, because Euribor hasn’t dropped enough to wipe out the spreads. But while lenders consider further steep drops unlikely, they are taking steps to protect themselves just in case. Europe already has a precedent: Banks in Denmark are paying thousands of borrowers interest on their home loans, nearly four years after the central bank introduced negative interest rates. Danish banks have increased some fees to compensate but never mounted serious legal objections. In Spain and Portugal, bank executives said they would pay borrowers when pigs fly.

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Europeans have established the ultimate NIMBY.

Another EU plan that goes predictably off track. “Brussels wants to see group returns but Greece is looking at applications for asylum on a case-by-case basis.”

Refugee Numbers Returned To Turkey Fall Short Of EU Expectations (FT)

The number of migrants being sent back to Turkey from Greece has fallen well short of EU expectations, prompting fears that a fresh wave of arrivals could overwhelm the Aegean Islands during this summer. Fewer than 400 of the 8,500 people who have arrived on the Greek islands since the March 20 EU deal with Ankara — aimed at reducing migrant flows — have been returned to Turkey, according to figures from the Greek government’s migration co-ordination unit. Instead, Athens has approved more than 30% of the 600 asylum applications from Syrians that have been assessed since March 20, a significantly higher percentage than anticipated, according to European officials and aid workers. While the slow pace of returns will irk many in Brussels, Greek officials say it reflects their own policy on asylum requests.

They dismiss fears that the deal between the EU and Turkey could collapse if the trend continues – leading to a fresh influx – and stress that Greece’s migration laws do not recognise Turkey as a safe third country for refugees. Maria Stavropoulou, a former UN official who heads the Greek asylum service, said: “We fully understand the [EU] concerns but if you look at it from the perspective of the rule of law, it is going exactly as it should. “We have many vulnerable people on the islands … a lot of very sick people. By law they are exempt from the return process.” Epaminondas Farmakis of Solidarity Now, a refugee charity funded by the billionaire investor George Soros, said: “Brussels wants to see group returns but Greece is looking at applications for asylum on a case-by-case basis.”

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