Jan 172018
 


Eugene de Salignac Painters suspended on cables of the Brooklyn Bridge Oct 7 1914

 

If Bull Market For Stocks Ends In 2018, Blame The Credit Market Bubble (MW)
Dramatic Stock Market Reversal Signals More Volatility Ahead (CNBC)
Bitcoin, Ethereum Suffer Massive Drops, Many Crypto’s Fare Even Worse (CNBC)
South Koreans Sign Petition To Stop Crackdown On Bitcoin ‘Happy Dream’ (CNBC)
‘Black Swan’ Event Could Threaten China’s Financial Stability (R.)
US and China Brace For Trade War That Could Rattle Global Economy (ZH/WSJ)
The New Cold War In 2018 (Stephen Cohen)
The One Fact Which Disproves Russiagate (CJ)
Carillion’s Failure: The Many Questions That Need Answers (Coppola)
After Carillion How Many Firms Can UK Pensions Lifeboat Rescue? (G.)
No Way Around Sorry Shape Social Security Is In (Newsmax)
Britain Is Being Stalked By A Zombie Elite (G.)
Dutch Say Nations Hit By Brexit Shouldn’t Plug EU Budget Hole (BBG)
Nomi Prins’ New Book: Central Banks Have Become the Markets (Martens)
New Zealand Fisheries Want Images Of Dead Penguins Caught In Nets Censored (G.)

 

 

Blame the Everything Bubble.

If Bull Market For Stocks Ends In 2018, Blame The Credit Market Bubble (MW)

Will 2018 be the year the stock market rally screeches to a halt? It may be, if those analysts who are cautioning that a bubble is forming in credit markets are right and companies are overextending themselves to a degree that could spell trouble ahead. Most analysts agree that the credit market has been speeding ahead at a bubble-like pace. Companies have been piling on debt in recent years to take advantage of low interest rates, or more recently, to get ahead of a series of well-telegraphed interest-rate hikes. If their borrowing is simply to refinance existing debt at lower interest rates, it’s a positive for balance sheets. But many companies have borrowed to raise funds for shareholder rewards, and that may come back to bite them if rates were to spike.

For example, Apple debt may be highly rated, just two notches below triple-A at AA+ at S&P Global Ratings, but the technology giant continues to ride the borrowing bandwagon as it looks to fund its massive share buyback program. Apple issued $7 billion of debt in November, two months after selling $5 billion worth of corporate bonds and several months after adding more debt. The U.S. primary corporate bond market is currently at record levels. The investment-grade market saw $1.44 trillion of issuance in 2,127 deals through December 26, topping the record $1.34 trillion recorded in 2016, according to data analytics company Dealogic. The high-yield market has chalked up $266.3 billion of debt in 469 deals, making it the fourth-biggest year for issuance, according to Dealogic. The high-yield record goes to 2012 when issuers sold $321 billion of debt in 604 deals.

Combined investment-grade, high-yield and FIG issuance—FIG is financial institutions group—is a record $1.71 trillion, topping the previous record of $1.57 billion set in 2015. What’s starting to worry some analysts is that despite the fact that the Federal Reserve and other central banks are draining liquidity from the marketplace and the yield curve is flattening, near-record credit market valuations suggest investors haven’t prepared for any potential speed bumps. One sign of this complacency, is how narrow the spread is between yields on speculative grade, or “junk” bonds, and corresponding risk-free Treasury notes. S&P Global Ratings said Tuesday its speculative-grade composite spread tightened by three basis points (0.03 percentage points) to 399 basis points, well below the five-year moving average of a 528 basis-point spread.

Read more …

How much longer can volatility remain ultra low?

Dramatic Stock Market Reversal Signals More Volatility Ahead (CNBC)

After a mostly one-way trade higher for weeks, Tuesdays’ dramatic stock market reversal signals the potential for more choppy trading ahead. The Dow rocketed 283 points Tuesday, before erasing those gains and heading down 100 points. It later recovered and closed just 10 points lower at 25,792 after its most volatile day since Dec. 1 and on the first day it traded above 26,000. Traders blamed Washington for some of the selling as lawmakers appeared to be having difficulty agreeing to a spending resolution and on reports that former White House advisor Steve Bannon will testify in the Russia investigation. But while the focus was on Washington, traders also looked at the morning market surge Tuesday as another sign that the market was getting too frothy and overbought.

“The healthiest thing would be some downward action for the next two or three sessions. Today you did have a somewhat bearish, outside reversal,” said Scott Redler, partner with T3Live.com, who follows the market’s short-term technicals. A reversal is when the market opens above a prior high and then closes below a prior low. “That happened in some sectors like small-caps. … You can’t get too bearish if you’re still above the 8- and 21-day moving average,” Redler said. Strategist Laszlo Birinyi on Tuesday said he expects a possible six weeks of consolidation and sideways trade, but he is not bearish on stocks. “Right now, the market is at the upper end of the trading range. It’s 5% over its 50-day moving average, and those are areas where the market tends to digest, consolidate, take a breather but not go down,” he said, as the market gyrated Tuesday.

Steve Massocca, managing director at Wedbush Securities, said the market has clearly become fatigued after its sharp move higher. The S&P 500 is up 4% since the beginning of the year and crossed above 2,800 for the first time Tuesday before closing down 9 at 2,776. “We’ve had a pretty significant move. It’s quite natural that this would be exhausted at some point. … A potential government shutdown is a handy excuse,” he said. But a government shutdown Friday is not likely, said Dan Clifton, head of policy research for Strategas. “My overall view on this is they’re preparing a temporary stop-gap measure. I just don’t think we’re going to shut down, but we’re trying to buy time until there could be a larger spending package. It was very much companies that were influenced by government spending that were selling off. The market is saying there is some risk of a government shutdown,” Clifton said.

Read more …

Closing in on $10,000 as we speak. Is that a psychological barrier?

Bitcoin, Ethereum Suffer Massive Drops, Many Crypto’s Fare Even Worse (CNBC)

Most major digital currencies sold off sharply on Tuesday, but the declines in bitcoin, ethereum and litecoin prices weren’t as bad as much of the rest of the market. All of the top 20 digital currencies — by market value — suffered double digit losses over the last 24 hours, according to data from industry website CoinMarketCap. For example, ripple was down 26%, bitcoin cash was down 24%, iota was down 27% and monero was down 22% as of 8:51 a.m. HK/SIN. In fact, at their low point on the day, many cryptocurrencies with large market caps saw their prices essentially halved. On the other hand, bitcoin was down 17% at that time, ethereum was down 19% and litecoin was down 19%, according to the same site.

The declines followed speculation in the market about what regulators in Asia may be planning for digital tokens. On Monday, a report from Bloomberg, citing unnamed sources, said Beijing plans to block domestic access to Chinese and offshore cryptocurrency platforms that allow centralized trading. Last week, South Korean Justice Minister Park Sang-ki said his ministry was preparing a bill that, if passed, could ban trading via cryptocurrency exchanges. His comments roiled the market and subsequently the justice ministry and other sections of South Korea’s government have softened their stance.

Read more …

Just perfect.

South Koreans Sign Petition To Stop Crackdown On Bitcoin ‘Happy Dream’ (CNBC)

A petition in South Korea against cryptocurrency regulation has reached the number of signatures that would induce a government response. As of Tuesday morning, ET, more than 212,700 had signed a petition launched Dec. 28 on the website of the South Korean presidential office. A Google translation of the website states that if more than 200,000 people support a petition within 30 days, officials will respond. “Our people have been able to make a happy dream that they have never had in Korea because of virtual money,” the anonymous author of the petition wrote, according to a Google translation. “People are not stupid. … virtual money is invested because it is judged to be the fourth revolution.” The petition did support South Korea’s recent actions on cryptocurrencies, such as banning anonymous trading accounts.

“However, I wish that the economy will not decline due to unjustifiable regulations in the present situation,” the Google translation of the petition said. Unemployment among South Korean youth, or those ages 15 to 29, is around 9%, nearly three times the national average, according to Statistics Korea. Young people are generally more interested in buying and selling digital currencies than their elders. In the last several months, South Korea has accounted for a significant portion of the trading volume in digital currencies such as bitcoin, ethereum and ripple. Earlier this month, ripple prices appeared to plunge in U.S. dollar terms after CoinMarketCap said it was excluding price information from some Korean exchanges due to “extreme divergences in price from the rest of the world.”

Read more …

No kidding.

‘Black Swan’ Event Could Threaten China’s Financial Stability (R.)

China’s banking regulator chief warned that a “black swan,” or an unforeseen event could threaten the country’s financial stability, official People’s Daily reported on Wednesday. In an interview with the paper, Guo Shuqing said that while risks in the financial system are manageable, they are still “complex and serious.” Since his appointment as the head of the China Banking Regulatory Commission early last year, Guo has introduced a flurry of new rules to reign in lender risks including from curbs on shadow banking activities to the crackdown on loan fraud. Guo said the dangers stem from the pressure of rising bad debt, imperfect internal risk systems at financial institutions, the relatively high levels of shadow banking activities and rule violations.

All of these risks could upend financial stability through a “black swan” event, Guo told the People’s Daily, referring to major, unexpected occurrences. “We need to focus on reducing the debt ratio of companies, restrict household leverage, strictly control cross-financial sector products, continue to dismantle shadow banking,” said Guo. China will step up oversight of the banking sector this year to reduce financial risks, the CBRC said on Monday, stressing that long-term efforts would be needed to control banking sector chaos.

Read more …

A trade war wouldn’t qualify as a black swan.

US and China Brace For Trade War That Could Rattle Global Economy (ZH/WSJ)

Once under way, the repercussions of a trade war would be felt well beyond the combatants themselves. US friends and allies along Asian supply chains would be early collateral damage. China is still to a large extent the final assembly point for imported high-tech components from Japan, South Korea and Taiwan. Navigating increasingly complex global supply chains in a constant state of disruption would be hugely problematic for businesses across industries. Furthermore, if it escalated far enough, a trade war could take down the entire global trading architecture. That could be Trump’s goal. Many in his administration, including trade representative Robert Lightizer, believe the biggest mistake the US ever made was to usher China into the World Trade Organization in 2001. Aides say Trump regularly threatens to pull out of the rules-setting body.

Trump has in the past suggested that Chinese help on North Korea could head off US trade action. In a phone call with the US president on Tuesday, Xi suggested that trade issues should be resolved by “making the cake of cooperation bigger.” Meanwhile, Trump expressed disappointment that the US trade deficit with China has continued to grow” and made clear that “the situation is not sustainable.” In private, however, senior Chinese officials believe Beijing has many tactical advantages: Some are cultural – the Chinese people, one says, are more prepared to endure economic hardship. [..] Many US trade experts don’t mince words: They believe China would prevail in a trade war with the US, and that the US economy would suffer lasting damage.

Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics, thinks China would win. Among his reasons: China’s ability to concentrate pain, and the outcry from affected businesses in America’s more open political system. He argues that “the political costs to the Trump administration of maintaining new protectionist measures will be much higher than the costs of retaliation to the Xi regime.” Derek Scissors, a trade expert at the American Enterprise Institute argues that the major US advantage is that China is far more dependent on trade for its financial health. “A shorter, smaller-scale trade conflict favors China due to its comparative agility,” he says. “The more serious it gets, the worse China would fare because it’s badly outmatched monetarily.”

Read more …

Part of a podcast with America’s no.1 Russia scholar Stephen Cohen at TFMetalsReport.com.

The New Cold War In 2018 (Stephen Cohen)

I’m not a Trump supporter and I didn’t vote for him. However, we can actually support Donald Trump’s campaign promise which I think he’s tried to act on since he’s been president that it’s necessary to cooperate with Russia. This is what was called detente in the 20th century. I don’t know why Trump doesn’t make this point. I don’t think he has very good advisors in regard to Russia either in terms of what’s going on in Russia or in terms of his own policy making but Trump might say in his own defense because they’re indicting him for simply saying I want to cooperate with Russia and with Putin in particular. He could say look, every Republican president of consequence in the 20th century pursued detente with Russia.

First Eisenhower, the first detente the spirit of Camp David with Khrushchev, then the Nixon Kissinger attempt at a grand detente with Brezhnev and finally above all Ronald Reagan a detente with Gorbachev the last Soviet leader Soviet Russian leader so great that Reagan and Gorbachev ended the cold war. Trump could put himself in that tradition and say “I’m the traditional Republican. This is what Eisenhower, Nixon and Reagan did. They did it wisely. They avoided nuclear war with Russia. We’re in a new Cold War. The dangers are grave. It’s not only my duty as the American president to pursue cooperation to ward off a catastrophe but I commend the honorable tradition of the Republican Party”. He doesn’t say that. I don’t know why as I say it because he doesn’t know what or because he wants to be the one and only I have no idea what he needs to say.

And if he said it it would compel a conversation in Washington that we’re not having. What’s happened to detente and what’s happened is we have if we ignore his own idiom and put it in again I speak as a story in the historical language of 20th century diplomacy. We have a pro-detente President who for the first time in history is not permitted to at least try because every time he has a sensible conversation with Putin, no matter whether it’s face to face or on the telephone, he’s accused not only by the traditionally crazies in American politics but by the New York Times of treason. So what we could do and it will be hard for a lot of people because of the loathing for Trump. Is so pervasive just and I didn’t vote for Trump is the fifth amendment I didn’t vote for Trump and I didn’t support President Trump. But about this he is not only right. He’s our only hope at the moment.

Read more …

Caitlin Johnstone is a delight to read. Summary here: Putin is supposed to have paid out many billions when no-one believed Trump was a viable candidate. Was he psychic?

The One Fact Which Disproves Russiagate (CJ)

Just a few days ago Russiagaters were having yet another “BOOM! We got him!” social media parade about an article from the Clinton-directed Daily Beast, claiming that a senior national security aide within the Trump administration had suggested scaling down the US troop presence along Russia’s border, a dangerous escalation which all peace advocates support eliminating. In the first sentence of the article’s second paragraph, the author Spencer Ackerman acknowledges that “the proposal was ultimately not adopted.” Huh? So President Trump, alleged to have been groomed early and at great expense by the Kremlin in anticipation of a presidential victory nobody else imagined possible at that time, was pitched a recommendation to scale down new cold war escalations with Russia… and he refused? That’s how you’re starting your article about the “return on Russia’s election-time investment in President Trump”?

Russiagate is so weird. You need to plug yourself into Louise Mensch and Rachel Maddow ramblings so extensively that you can contort your sense of reason to the point where it looks perfectly rational to believe that Putin was omniscient enough to know that Trump could defeat all primary opponents and take the fight to the heir apparent Hillary Clinton back when virtually no one else imagined such a thing was possible, recruited his team reportedly at the cost of billions of dollars, poured all kinds of intel and resources into ensuring Trump’s election using hackers and bots to influence American opinion, only to get a US president who is, when it comes to facts in evidence, already just a year into his administration demonstrably more hawkish towards Russia than his predecessor was. Again: huh?

Nobody wants to think about this because it doesn’t fit in with America’s stale partisan models; Democrats would have to admit that their best shot at getting a rival president impeached is pure gibberish, and Trump supporters would have to acknowledge that their swamp-draining populist hero is actually just one more corrupt globalist neocon like his predecessors.

Read more …

The next Carillion is already in sight: Interserve. The British privatization model is failing spectacularly. That will cost a lot of jobs.

Carillion’s Failure: The Many Questions That Need Answers (Coppola)

Britain is reeling from the shock collapse of one of its largest corporations, the giant construction and services company Carillion Group plc. In talks over the weekend, Carillion’s management was unable to persuade its lenders to provide any more funds, and the U.K. government refused to help. Carillion was left with no options. On Monday morning, Carillion filed for compulsory liquidation. This was a completely unexpected move. Discussions about Carillion’s fate over the previous week had centered around restructuring, bail-in of creditors and perhaps placing the company into administration, the U.K.’s equivalent of Chapter 11 bankruptcy protection. No one expected the company to be wound up. But that is what will now happen to it.

As Carillion has extensive U.K. Government construction and services contracts, the U.K.’s High Court appointed the Government’s Official Receiver to manage the liquidation. Among other things, the Official Receiver will be responsible for ensuring that public sector services currently provided by Carillion continue to run, and the staff providing them continue to be paid. Without this assurance, meals to hospital patients and schoolchildren might not be delivered, and prisons might not be staffed. But the future of Carillion’s 19,000 employees in the U.K. (43,000 worldwide) is still highly uncertain. Staff working on U.K. public sector service contracts are protected for the moment, but those working on other projects could lose their jobs within days.

The Official Receiver will be supported by six insolvency specialists from the accountancy firm PWC, who will act as “special managers”. PWC’s message to Carillion’s shareholders was blunt and immediate: Unfortunately, as a result of the liquidation appointments, there is no prospect of any return to shareholders. At least shareholders know where they stand. They have been wiped. Trading in Carillion’s shares has been suspended, of course.

Read more …

I see trouble in your future.

After Carillion How Many Firms Can UK Pensions Lifeboat Rescue? (G.)

The pensions lifeboat that comes to the rescue when firms go bust is about to get a lot more crowded following the collapse of Carillion. The sprawling construction and outsourcing firm had a pension deficit of £580m but is now likely to rise to at least £800m because it no longer has a solvent business standing alongside it. The company’s crash into liquidation has thrown the spotlight on other firms with huge pension scheme deficits such as IAG, BT and BAE. It has also raised questions about how many more big company failures the Pension Protection Fund (PPF) can absorb, and why companies with big deficits are allowed to pump out bumper dividend payouts to shareholders.

It is almost certain that the fund will now have to step in and bail out workers at Carillion, which has more than 28,000 defined-benefit – in this case, final salary – pension scheme members. Those already taking pensions will be protected, but those members below retirement age will face cuts of 10-20% because there is a cap on payouts to higher earners. It’s been a busy time for the PPF: in the spring, roughly 20,000 members of the British Steel pension scheme will start moving into the fund. They will eventually be joined by about 2,000 former BHS workers (the vast majority of the retailer’s staff chose to move their retirement funds into a new pension scheme).

Carillion’s liquidation has fuelled concern about the financial stability of other big companies. Last year a report by JLT Employee Benefits put the total deficit in FTSE 100 pension schemes at the end of 2016 at £87bn – £17bn worse than a year earlier, even though firms paid in around £11bn. 66 companies had deficits – ie their liabilities to pension scheme members were greater than their assets. Booming stock markets in 2017 helped narrow the gap. Mercer, the leading pensions consultancy, said deficits at the biggest 350 firms fell to £76bn from £84bn the year before. But even with the FTSE at a new peak, the deficits remain alarmingly high.

Read more …

Pensions, Social Security, it’s all stupidly overpromised. And that will remain so until it’s too late.

No Way Around Sorry Shape Social Security Is In (Newsmax)

If you want to know what makes people worry, here are four facts to make you lose your sleep whatever your age:

1. The Social Security Shortfall Is Growing Three Times Faster Than the US Economy. The imbalance of Social Security is measured by its shortfall, or the amount of money, that with interest earned, would enable the program to pay benefits over the next 75 years. That hole in the program’s finances is growing at three times the rate of our ability to fill it. Here are the numbers. Over the past 15 years, the system’s liabilities have grown at 9.6% compounded annually, while the trustees expect that even in a robust year real economic growth will not break 3%. Moreover, the trustees believe that the long-term growth rate of the economy is 2.1%. At the end of 2001, the Social Security shortfall was $3.157 trillion. At the end of 2016, it was $12.5 trillion. With the passage of yet another year of inaction on the program’s finances, the figure is more than $13 trillion.

2. People Turning 70 Today expect to Be Alive When Benefits are Reduced. If you think the problems of Social Security are limited to people under the age of 40 —think again. That assessment has not been a realistic concern in nearly two decades. The Social Security Administration believes that more than half of the people turning 70 today will be alive and well when the trust fund is exhausted. The exhaustion of the trust fund means that benefits will be reduced to the level of revenue collected. At this point, the trustees of the Social Security Trust Funds believe that benefits will fall by 23% in 2034, with cuts rising over time. The CBO believes that the reductions will rise to 30% over time.

3. In 2016, the Program Lost More Money than It Collected. Over the course of 2016, the program’s unfunded liabilities rose by nearly $1.2 trillion. That is a breathtaking jump considering that the program only collected about $950 billion in revenue. Mechanically, Social Security takes in money in exchange for the promise of future benefits. In the case of 2016, for every $1 that the program took in, the system generated more than $1.20 of promises that no one expects it to keep. In English, we could have reduced benefits to zero for the entire year of 2016, and the program would have finished the year in worse shape than it started.

4. Dependency on Social Security Rises with Age. Typically, worriers about Social Security say that Social Security accounts for 90% of the income of more than one-third of seniors. Politifact has largely confirmed this statistic.

Read more …

It’s a zombie nation.

Britain Is Being Stalked By A Zombie Elite (G.)

Britain in 2018 is stalked by zombie ideas, zombie politicians, zombie institutions – stripped of credibility and authority, yet somehow still presiding over our lives. Nowhere is this more true than in the way we run our economy. This September marks the 10th anniversary of the death of Lehman Brothers. In autumn 2008, the banks broke, the governments stepped in – and the cast-iron premises that underpin our economic system were exposed as fiction for all to see on the Ten O’Clock News. Yet a decade later, those dead ideas still walk among us. They form what John Quiggin at the University of Queensland terms zombie economics – dogmas now cracked beyond repair, but which continue to shape British society.

Austerity – the policy that more than any other will define this decade – was lifted by George Osborne straight out of Margaret Thatcher’s handbag. He justified it with zombie rhetoric about how business was being “crowded out” by childcare centres and the rest of the public sector, and how 21st-century sovereign countries could be run just like household budgets. Tax cuts for “wealth creators” and privatisations of the few remaining national assets: all utter zombie-ism. And this was no one-party game. Labour frontbenchers from Andy Burnham to Chuka Umunna spent the first half of this decade pleading guilty to the trumped-up charge of creating a debt crisis.

Labour councils are among those pursuing outrageous privatisations. And over the past four decades both sides have adopted as an article of faith the idea that politics is about What Works – and that What Works is a mix of Potemkin markets and crude managerialism. From Tony Blair to David Cameron and Nick Clegg, politics was no longer about left battling right – but technocrats and open-necked Oxford philosophy, politics and economics graduate special advisers who “got it” versus the dinosaurs and well-meaning naifs. In this way, a broken economy has been force-fed more of the same ideas that helped to break it. The outcome has been almost predictably dire.

Read more …

Yeah, let’s get Greece to pay up for that. Show us some solidarity!

Dutch Say Nations Hit By Brexit Shouldn’t Plug EU Budget Hole (BBG)

Dutch Finance Minister Wopke Hoekstra said European Union countries that are set to suffer the most from Brexit shouldn’t also have to help plug the hole it will tear in the bloc’s budget. “A small group of countries on the west coast of Europe is hit very hard in the economy by Brexit, which applies primarily to Ireland, but also to the Netherlands, Denmark, Spain and a number of other countries,” Hoekstra said in interview with Dutch TV station RTL Z. “It cannot be the intention that those who already experience the damage of Brexit will also pay the bill.” While the remaining 27 EU countries are maintaining a united front in Brexit talks, national interests diverge when it comes to the future trading relationship and splits are starting to emerge.

The Netherlands is one of the EU countries keenest on securing a trade deal with the U.K. that doesn’t harm crucial commercial trade ties between the two countries, whose ports face each other across the North Sea. Hoekstra met his Spanish counterpart Luis de Guindos last week and the pair agreed they both wanted a Brexit deal that keeps the U.K. as close to the EU as possible, according to a person familiar with the situation. A Spanish economy ministry official said last week the two finance chiefs had underlined the importance of U.K. ties for both countries, and agreed to keep track of their common interests. The U.K. will continue to pay into the current budget until the end of 2020; after that a new seven-year budget cycle comes into effect. The U.K. is a net contributor to the current budget, which redistributes funds across the bloc.

Read more …

The real collusion.

Nomi Prins’ New Book: Central Banks Have Become the Markets (Martens)

Nomi Prins’ latest book, Collusion: How Central Bankers Rigged the World, ensures her place as one of this century’s most informed Wall Street historians. It’s the perfect segue from Prins’ earlier “It Takes a Pillage,” and her 2014 book All the Presidents’ Bankers. If you are serious about understanding the corrupting influences that have left the U.S. vulnerable to another epic financial crash, buy all three books and read them as one. Prins is a veteran of Wall Street who has now written six books and dozens of articles to help Americans navigate the snake pit that has replaced the financial system of the United States. It all started with her first book in 2004, Other People’s Money: The Corporate Mugging of America, where she explained her motivation as follows:

“When I left Wall Street, at the height of a wave of scandals uncovering scores of massively destructive deceptions, my choice was based on a very personal sense of right and wrong…So, when people who didn’t know me very well asked me why I left the banking industry after a fifteen-year climb up the corporate ladder, I answered, ‘Goldman Sachs.’ “For it was not until I reached the inner sanctum of this autocratic and hypocritical organization – one too conceited to have its name or logo visible from the sidewalk of its 85 Broad Street headquarters [now relocated to 200 West Street] that I realized I had to get out…The fact that my decision coincided with corporate malfeasance of epic proportions made me realize that it was far more important to use my knowledge to be part of the solution than to continue being part of the problem.”

In Collusion, Prins walks us through the critically-important events occurring during the 2007-2009 financial crash, many of which would have been relegated to the dust bin of history if not for this book. Prins makes the case that the U.S. is headed toward another epic financial crash as a result of the unchecked powers of the U.S. central bank (the Federal Reserve) and its global counterparts who are creating dangerous new asset bubbles in an effort to paper over the last ones. Prins convincingly shows that colluding central bankers have effectively become the markets through a never-ending flow of cheap money to the mega banks which have deployed that cheap money to buy back and inflate their own stock – with a green light from their own regulator and money pimp (our term, not hers) – the U.S. Federal Reserve.

Read more …

The new PM should jump on this. She cannot afford to let this stand.

New Zealand Fisheries Want Images Of Dead Penguins Caught In Nets Censored (G.)

The seafood industry in New Zealand has asked the government to withhold graphic video of dead sea life caught in trawler nets as they are potentially damaging to fisheries and to brand New Zealand. A letter from five seafood industry leaders to the Ministry of Primary Industries highlights the fisheries’ growing unease with the government’s proposal to install video cameras on all commercial fishing vessels to monitor bycatch of other species and illegal fish dumping. The letter requests an amendment to the Fisheries Act, so video captured onboard cannot be released to the general public through a freedom of information request, frequently used by the media, campaign groups and opposition parties.

“They [the proposed videos] also raise significant risks for MPI and for ‘New Zealand Inc'”, the letter reads, also citing concerns about invading the privacy of employees onboard, and protecting commercial and trade secrets. There are no reliable figures on the numbers of penguins, sea lions, dolphins and seals that die in fishing nets or longlines in New Zealand, but according to some researchers and environmental groups the commercial fishing industry is the main culprit for declining populations of endangered sea lions and yellow-eyed penguins. Only 25% of deepwater trawlers in New Zealand have government observers onboard to record bycatch and discards, according to the National Institute of Water and Atmospheric Research [Niwa], which relies on statistical modelling techniques to generate bycatch estimates for the 75% of boats that work unobserved.

Niwa estimates for every kilogram of reported target catch (what the fishing boat aims to catch ) there is 0.2 kg of bycatch. “These are the images the fishing industry doesn’t want you to see”, said Forest & Bird’s chief executive Kevin Hague. “What they [the seafood industry] are saying is catching endangered penguins, dumping entire hauls of fish overboard and killing Hector s dolphins looks really bad on TV. Well, the solution is to stop doing it, not to hide the evidence. It’s hard to think of a more credibility damaging activity than trying to change the law so the rest of us can’t see what’s really happening out there.” Deepwater fishing vessels account for 80% of New Zealand’s annual catch and earn NZ$650m per annum in export dollars.

Read more …

Dec 312017
 
 December 31, 2017  Posted by at 10:18 am Finance Tagged with: , , , , , , , , , ,  


Paul Klee Dancing Under the Empire of Fear 1938

 

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2017 Sets A Record (Roberts)
The Greatest Bubble Ever: Why You Better Believe It, Part 2 (Stockman)
China To Cap Overseas Withdrawals Using Domestic Bank Cards (R.)
Bitcoin Tensions Rise As Australia Investors Claim Banks Freeze Accounts (SMH)
South Korea’s “Bitcoin Zombies” (ZH)
Merkel Reclaims Role of EU Anchor in Outline of Her 2018 Agenda (BBG)
May Says 2018 Brexit Progress Will Renew British Confidence And Pride (AFP)
Ex-Catalan Leader Demands Regional Government Be Reinstated (AFP)
Facebook Deletes Accounts at the Direction of US and Israeli Governments (GG)
One Of Eight Turkish Servicemen Granted Asylum By Greece (K.)
Greek Gov’t Applies For Cancellation Of Asylum Granted To Turkish Soldier (R.)
Calgary Zoo Moves Penguins Indoors Because Of The Cold (Ind.)

 

 

Let’s not forget that 2017 was exceptional in many ways. Record debt and record tranquillity. What are the odds that 2018 will continue along that path?

2017 Sets A Record (Roberts)

In just the past year, the markets set a record by going 12-straight months without a loss. That liquidity driven surge was accompanied by extremely low volatility as noted last week by Dana Lyons: “Specifically, the average daily closing price of the VIX in 2017 was 11.10 (through 12/26/17). That is the lowest of any year — by more than one and a half points — since the VIX inception in 1986 (by comparison, the ‘average yearly average’ is over 20).”

Of course, with very little volatility, there were very few draw downs along the way as markets continued their advance higher. “Accordingly, we took a look at the amount of losses incurred by the stock market during the year as a measure of adversity faced along the way to its solid full-year gains. Specifically, we tabulated the amount of losses incurred during every down day in the market. We used the Dow Jones Industrial Average (DJIA) as it has a longer history than the S&P 500. And based on these calculations, the stock market enjoyed less adversity in 2017 than any other year in history going back over 100 years (our daily DJIA data begins in 1915).”

All that exuberance has got Wall Street already prognosticating that next year could be as good, or better, than 2017. “‘I would expect 2018 to be an almost repeat of 2017,’ said Saut, chief investment strategist at Raymond James. ‘People are still way underinvested. Earnings are starting to come in better than expected. And with the tax reform, and especially the corporate tax cuts, I think earnings are going to continue to surprise on the upside. The professional investors are all in for the most part but the individual investor is not all in.’” Maybe. But there is more than sufficient evidence that not only professional investors, but individuals, are “all in.”

And, not only are they “all in,” they are all in with leverage as I noted previously: “While investors have been chasing returns in the “can’t lose” market, they have also been piling on leverage in order to increase their return.”

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In a 2-part article, Stockman doesn’t see 2018 as being quiet.

The Greatest Bubble Ever: Why You Better Believe It, Part 2 (Stockman)

During the 40 months after Alan Greenspan’s infamous “irrational exuberance” speech in December 1996, the NASDAQ 100 index rose from 830 to 4585 or by 450%. But the perma-bulls said not to worry: This time is different – it’s a new age of technology miracles that will change the laws of finance. It wasn’t. The market cracked in April 2000 and did not stop plunging until the NASDAQ 100 index hit 815 in early October 2002. During those a heart-stopping 30 months of free-fall, all the gains of the tech boom were wiped out in an 84% collapse of the index. Overall, the market value of household equities sank from $10.0 trillion to $4.8 trillion – a wipeout from which millions of baby boom households have never recovered. Likewise, the second Greenspan housing and credit boom generated a similar round trip of bubble inflation and collapse.

During the 57 months after the October 2002 bottom, the Russell 2000 (RUT) climbed the proverbial wall-of-worry – rising from 340 to 850 or by 2.5X. And this time was also held to be different because, purportedly, the art of central banking had been perfected in what Bernanke was pleased to call the “Great Moderation”. Taking the cue, Wall Street dubbed it the Goldilocks Economy – meaning a macroeconomic environment so stable, productive and balanced that it would never again be vulnerable to a recessionary contraction and the resulting plunge in corporate profits and stock prices. Wrong again! During the 20 months from the July 2007 peak to the March 2009 bottom, the RUT gave it all back. And we mean every bit of it – as the index bottomed 60% lower at 340.

This time the value of household equities plunged by $6 trillion, and still millions more baby-boomers were carried out of the casino on their shields never to return. Now has come the greatest central bank fueled bubble ever. During nine years of radical monetary experimentation under ZIRP and QE, the value of equities owned by US households exploded still higher – this time by $12.5 trillion. Yet this eruption, like the prior two, was not a reflection of main street growth and prosperity, but Wall Street speculation fostered by massive central bank liquidity and price-keeping operations. Nevertheless, this time is, actually, very different. This time the central banks are out of dry powder and belatedly recognize that they have stranded themselves on or near the zero bound where they are saddled with massively bloated balance sheets.

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Are card withdrawals an actual issue, or is this a show?

China To Cap Overseas Withdrawals Using Domestic Bank Cards (R.)

China’s foreign exchange regulator will cap overseas withdrawals using domestic Chinese bank cards at 100,000 yuan ($15,370) per year in an effort to target money laundering, terrorist financing and tax evasion, it said on Saturday. Individuals who exceed the annual quota will be suspended from overseas transactions for the remainder of the year and an additional year, the State Administration of Foreign Exchange (SAFE) said in a notice posted on its website. Under the new rules SAFE will submit a daily list of individuals banned from making overseas bank card withdrawals, and banks must suspend the users by no later than 5 p.m. the same day, the notice said.

Domestic card users will also be barred from withdrawing more than 10,000 yuan a day overseas, it said. The new rules come into effect on Jan. 1, and reporting adjustments must be adopted by banks by April 1, 2018, it said. China has strengthened regulatory oversight of overseas card transactions in the past year, targeting illegal cross-border transfers and money laundering. In September SAFE brought in regulations requiring Chinese banks to report daily their bank card holders’ overseas withdrawals as well as every transaction exceeding 1,000 yuan. China’s foreign exchange reserves rose for the 10th straight month in November due to tighter regulation and a stronger yuan, which continue to discourage capital outflows.

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Banks targeting crypto. They’ve talked to each other beforehand, and presumably also with the government.

Bitcoin Tensions Rise As Australia Investors Claim Banks Freeze Accounts (SMH)

Bitcoin investors are claiming Australia’s banks are freezing their accounts and transfers to cryptocurrency exchanges, with a viral tweet slamming the big four and an exchange platform putting a restriction on Australian deposits. Cryptocurrency trader and Youtuber Alex Saunders called out National Australia Bank, ANZ, the Commonwealth Bank of Australia and Westpac Banking Corporation on Twitter for freezing customer accounts and transfers to four different bitcoin exchanges – CoinJar, CoinSpot, CoinBase and BTC Markets. Bitcoin, a currency once known for its use by criminals trading online through a ‘Silk Road’ for drugs and weapons, has become a popular investment option.

After hundreds of shares and responses to the social media posts calling the banks’ alleged behaviour “disgusting” and “appalling” with some threatening to move their accounts, some users said their activities with the cryptocurrency had still been described as a “security risk” by their financial institutions. Banks were remaining tight-lipped on whether bitcoin activity was causing specific accounts to be closed or frozen, though its understood none had company-wide policies banning cryptocurrency investment activity. Yet the terms and conditions in some cases do reference Bitcoin. Commonwealth Bank’s June 2017 terms and conditions for CommBiz accounts specifically excludes this activity, saying it can refuse to process an international money transfer or an international cash management transaction “because the destination account previously has been connected to a fraud or an attempted fraudulent transaction or is an account used to facilitate payments to Bitcoins or similar virtual currency payment services”.

A Commonwealth Bank spokesman said it was receptive to innovation in alternative currencies and payment systems “however, we do not currently use or recommend any existing virtual currencies as we do not believe they have yet met a minimum standard of regulation, reliability, and reputation compared to other currencies that we offer to our customers”. “Our customers can interact with these currencies as long as they comply with our terms and conditions and all relevant legal obligations,” he said.

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This doesn’t ooze a healthy feeling.

South Korea’s “Bitcoin Zombies” (ZH)

[..] what happens in South Korean crypto trading, does not stay in South Korea: the country is the world’s third-largest market in bitcoin trading after Japan and the US, with roughly 2 million digital-currency investors by one estimate – one in every 25 citizens. The country is also home to one of the world’s biggest cryptocurrency trading exchanges, Bithumb. The country’s crypto-trading craze is so pervasive that the country has developed the term “bitcoin zombie” referring to people who check the cryptocurrency’s price around the clock. Even the country’s prime minister Lee Nak-yeon expressed concerns over Korea’s bitcoin craze, warning that “young people and students are rushing into virtual currency trading to earn huge profits in just a short period of time,” and that “it is time for the government to take action as it could lead to serious pathological phenomena if left unchecked” forcing young people into illegal activities like drug dealing.

For now, the “bitcoin zombies” are winning. As an example, as Reuters details in its just released deep dive in South Korea’s crypto-community, on a recent weeknight at Sungkyunkwan University in Seoul, more than a dozen students crammed into a classroom not to study, but to share tips on investing in so-called cryptocurrencies, which have driven tales of fantastic returns for savvy investors. “The group sat in rapt silence – broken only by a sudden shout of “there was just a big jump!” from someone monitoring his virtual currencies – as one student gave a presentation on how to read financial data and predict future trends.” Make no mistake: it’s a countrywide craze: “I no longer want to become a math teacher,” said 23-year-old Eoh Kyong-hoon, who founded the club, Cryptofactor.

“I’ve studied this industry for more than 10 hours a day over months, and I became pretty sure that this is my future.” [..] Eoh said the talk of more regulation had not dented his plans, especially after making what he said was a 20-fold gain on his investments over the past six months. He added that many students were bringing laptops to class to track the movements of their investments and participate in actual trading. “Even when professors are giving lectures right in front of them,” he said. Meanwhile, with Bitcoin soaring to record levels, younger investors have gravitated toward “altcoins” which often trade at much lower values, analysts say. Today’s surge in Ripple is just one such example. Another is Iota, which traded at $0.82 in late November and now stands at $3.89, a gain of 375%. Energo gained 400% during the same period.

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Her own people don’t even want a full term from her anymore. Hard to accept you lost power, Angela? You have though.

Merkel Reclaims Role of EU Anchor in Outline of Her 2018 Agenda (BBG)

German Chancellor Angela Merkel said she’ll team up with France to hold the European Union together and pledged to her form next government “without delay.” In a New Year’s Eve speech to the nation, Merkel outlined a vision for her fourth term that includes an alliance with French President Emmanuel Macron to strengthen Europe’s economic clout and control migration, while upholding values of tolerance and pluralism within the EU and abroad. “Twenty-seven countries in Europe must be impelled more strongly than ever to remain a community,” Merkel said in a copy of the speech provided by her office in advance of the televised address on Sunday.

“That will be the decisive question of the next few years. Germany and France want to work together to make it succeed.” Merkel’s effort to combine the strengths of the euro area’s two biggest economies has been hamstrung by Germany’s longest post-election party deadlock since World War II, which has left her a caretaker chancellor since September. Exploratory talks on renewing her coalition with the Social Democrats are due to start on Jan. 7. After a poll this week suggested that Germans increasingly don’t want Merkel, 63, to serve another full term, the chancellor sought to put her stamp on the political debate. Merkel said she’s committed to forming “a stable government for Germany without delay in the new year.”

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Straight faced lies. Or is it Python?

May Says 2018 Brexit Progress Will Renew British Confidence And Pride (AFP)

Prime Minister Theresa May said 2018 would be a year of “renewed confidence and pride” for Britain as it confronts the challenges of negotiating Brexit, in her New Year message out Sunday. Divorce talks between London and Brussels are set to move on to transition arrangements, trade and security next year as Britain prepares to leave the European Union in March 2019. May said 2017 had been a year of progress for Britain as it struck agreement on its departure bill, Northern Ireland and the rights of EU citizens, in the first phase of Brexit negotiations. “I believe 2018 can be a year of renewed confidence and pride in our country,” the premier said. “A year in which we continue to make good progress towards a successful Brexit deal, an economy that’s fit for the future, and a stronger and fairer society for everyone.

“And whatever challenges we may face, I know we will overcome them by standing united as one proud union of nations and people.” However, the British Chambers of Commerce, which represents thousands of firms across the country, warned that business was losing patience waiting for clarity on what will happen once Britain leaves the EU. “That patience is now wearing thin. Businesses want answers,” director general Adam Marshall told The Observer newspaper. “Getting the twin challenges of Brexit and the economic fundamentals right will require leadership, consistency and clarity – after a year in which business has been dismayed by what it sees as division and disorganisation.”

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Once again we’ll see how the EU and democracy don’t go well together.

Ex-Catalan Leader Demands Regional Government Be Reinstated (AFP)

Ousted Catalan president Carles Puigdemont on Saturday demanded Madrid reinstate his regional government, which was deposed after an independence referendum that Spanish courts judged illegal, as part of a political settlement. “As president, I demand the Spanish government and those who support it… restore all they have expropriated from the Catalans without their say-so,” Puigdemont said from Brussels as he called on Madrid to “negotiate politically.” Puigdemont’s administration followed up the October 1 referendum by declaring independence but Madrid promptly sacked him and his team and, facing arrest, he fled into Belgian exile while colleagues were arrested and jailed. Puigdemont campaigned for the region’s December 21 snap election from his Brussels exile after a Spanish court charged him with rebellion, sedition and misuse of public funds.

But a solid showing by pro-independence parties in the poll strengthened the hand of the secessionists, albeit they did not capture a majority of votes cast. In a seven-minute recorded message Puigdemont insisted he was still Catalonia’s “legitimate” leader and that the electorate had shown themselves to be “democratically mature, winning the right to constitute a republic of free men and women.” After the divisive regional elections, how the independence camp intends to rule remains a mystery, with other secessionist leaders, including Puigdemont’s former deputy Oriol Junqueras, behind bars pending trial. “The ballot box has spoken,” said Puigdemont, who said he hoped the election outcome could kickstart moves towards “dialogue and negotiation.” “So what is (Prime Minister Mariano) Rajoy waiting for to accept the results?”

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Facebook will be a big story next year.

Facebook Deletes Accounts at the Direction of US and Israeli Governments (GG)

IN September of last year, we noted that Facebook representatives were meeting with the Israeli government to determine which Facebook accounts of Palestinians should be deleted on the ground that they constituted “incitement.” The meetings — called for and presided over by one of the most extremist and authoritarian Israeli officials, pro-settlement Justice Minister Ayelet Shaked — came after Israel threatened Facebook that its failure to voluntarily comply with Israeli deletion orders would result in the enactment of laws requiring Facebook to do so, upon pain of being severely fined or even blocked in the country. The predictable results of those meetings are now clear and well-documented. Ever since, Facebook has been on a censorship rampage against Palestinian activists who protest the decades-long, illegal Israeli occupation, all directed and determined by Israeli officials.

[..] Facebook now seems to be explicitly admitting that it also intends to follow the censorship orders of the U.S. government. Earlier this week, the company deleted the Facebook and Instagram accounts of Ramzan Kadyrov, the repressive, brutal, and authoritarian leader of the Chechen Republic, who had a combined 4 million followers on those accounts. To put it mildly, Kadyrov — who is given free rein to rule the province in exchange for ultimate loyalty to Moscow — is the opposite of a sympathetic figure: He has been credibly accused of a wide range of horrific human rights violations, from the imprisonment and torture of LGBTs to the kidnapping and killing of dissidents. But none of that dilutes how disturbing and dangerous Facebook’s rationale for its deletion of his accounts is.

A Facebook spokesperson told the New York Times that the company deleted these accounts not because Kadyrov is a mass murderer and tyrant, but that “Mr. Kadyrov’s accounts were deactivated because he had just been added to a United States sanctions list and that the company was legally obligated to act.” As the Times notes, this rationale appears dubious or at least inconsistently applied: Others who are on the same sanctions list, such as Venezuelan President Nicolas Maduro, remain active on both Facebook and Instagram. But just consider the incredibly menacing implications of Facebook’s claims. What this means is obvious: that the U.S. government — meaning, at the moment, the Trump administration — has the unilateral and unchecked power to force the removal of anyone it wants from Facebook and Instagram by simply including them on a sanctions list. Does anyone think this is a good outcome? Does anyone trust the Trump administration — or any other government — to compel social media platforms to delete and block anyone it wants to be silenced?

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It took almost a year and a half to decide this. In custody.

One Of Eight Turkish Servicemen Granted Asylum By Greece (K.)

One of eight Turkish servicemen who sought protection in Greece in the wake of a botched coup in Turkey in the summer of 2016 was granted asylum on Saturday. The Asylum Appeals Committee that examines applications in the second degree approved a request for protection from the copilot of the helicopter that flew the eight servicemen into the northern Greek town of Alexandroupoli on July 16, 2016, a day after the attempted takeover by the military in Turkey.

According to the ANA-MPA news agency, the committee upheld an opinion from human rights groups, the Council of Europe and other international agencies decrying human rights violations in Turkey in the aftermath of the failed coup. The panel said that there is no evidence to suggest that the copilot was involved in the coup attempt, yet is nevertheless, being sought by Turkey for “political crimes” and on these grounds may not receive a fair trail if extradited. The other seven Turkish officers remain in custody until a decision is reached on their respective applications.

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At the exact same time that Athens lauds the independence of its courts, it seeks to interfere with their decisions.

Greek Gov’t Applies For Cancellation Of Asylum Granted To Turkish Soldier (R.)

The Greek government said on Saturday that it had filed a request for the cancellation of the asylum granted to a Turkish soldier accused of involvement in last year’s coup attempt. Greece’s administrative court of appeal will now look into the case. Eight Turkish soldiers fled to Greece following Turkey’s abortive July 2016 coup. Seven of them applied for asylum and were rejected, but have been kept in preventive custody. Angered by a decision to grant asylum to the eighth soldier by the Greek asylum service committee, a panel of judges and experts, Turkey said earlier in the day that the move would affect bilateral relations and cooperation. Athens said it was following its standing position regarding the eight soldiers, “as it has been repeatedly expressed, also in public”, a government official said.

The Greek government has said that it does not support coup plotters and that the country’s justice system is independent. A Greek police official said the soldier who was granted asylum would be released from custody. “By granting asylum to one of eight coup plotters involved in the July 15 coup, Greece has once again showed that it is a country that protects and embraces coup plotters with this decision,” Turkey’s Foreign Ministry said in a statement. Greek courts have blocked two extradition requests by Turkish authorities, drawing an angry rebuke from Ankara and highlighting the tense relations between the NATO allies, who remain at odds over various issues. During his visit to Greece earlier this month, Turkish Foreign Minister Mevlut Cavusoglu said Ankara did not want Greece to turn into a safe haven for coup plotters.

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But the people still come to watch them.

Calgary Zoo Moves Penguins Indoors Because Of The Cold (Ind.)

Temperatures have dropped so low in Canada that Calgary Zoo has had to move its penguins indoors. As an extreme-cold warning was in effect for the country – temperatures hit a frosty -25C late this week – zookeepers thought it safer to move the penguins to their indoor enclosure. Larissa Mark, manager of communications at Calgary Zoo told Global News that: “On cold days like this, we have to make that choice for them because it is so cold, but on other days, we do give them the option of coming in and out as they please.” Ms Mark explained that king penguins, like the ones at Calgary zoo, are not as accustomed to sub-zero temperatures as their cousins, the emperor penguins.

King penguins, characterised by the bright orange spots on the sides of their heads and feathers at the nape of their necks, are generally found in sub-Antarctic regions in Chile and Argentina and temperate places like the Falklands, Macquarie and the Sandwich islands. However, the cold snap has not stopped people from going to the zoo. “Calgarians are a hardy bunch. A cup of hot chocolate and a warm fire and they are still coming out and enjoying Zoolights. Our attendance is doing well, it is on par with where we were last year,” said Ms Mark of the annual holiday-lights display event put on by the zoo.

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