Oct 252017
 
 October 25, 2017  Posted by at 8:48 am Finance Tagged with: , , , , , , , , , ,  11 Responses »
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Jackson Pollock Male and female 1942

 

Clinton Campaign, DNC Paid For Research That Led To Russia Dossier (WaPo)
Gold-Backed Petro-Yuan Silliness: Reserve Currency Curse? (Mish)
Do Democrats Really Need Wall Street? (BM)
4 In 10 Canadians Can Not Cover Basic Expenses Without Adding More Debt (ZH)
Italy Faces Worst Shock In Europe As ECB Prepares To Taper Bond Buys (MW)
Don’t Blame Others For Your Problems, Germany’s Schaeuble Tells Greece (R.)
What Happened To The €8 Billion Europe Took From Greece? (EN)
Turkey Says Doesn’t Want Greece To Become ‘Safe Haven’ For Coup Plotters (R.)
Monsanto Faces Blowback Over Cancer Cover-Up (Spiegel)
EU Parliament Votes To Ban Controversial Weedkiller Glyphosate By 2022 (AFP)
Spain’s Government Prepared To ‘Discipline Disobedient Catalans’ (CNBC)
US Military Is Conducting Secret Missions All Over Africa (Vice)
Yes, The US Leads All Countries In Reducing Carbon Emissions (Rapier)
Global Wine Output Hits 50-Year Low (AFP)
Ancient Amazon Tribe Vow To Defend Their Territory Against Mining (AFP)

 

 

What a cesspool, what a shithole Washington has become. Actually, reading through today’s news, the whole world has.

Clinton, Podesta, Corker, Flake, Trump, Clapper, Comey, Mueller, Manafor, Ppmpeo, Sessions, people are simply going to walk away from it all.

And you can say good on the WaPo for publishing this, but they have thrown so much echo chamber stuff out there over the past year, this doesn’t make that right.

Clinton Campaign, DNC Paid For Research That Led To Russia Dossier (WaPo)

The Hillary Clinton campaign and the Democratic National Committee helped fund research that resulted in a now-famous dossier containing allegations about President Trump’s connections to Russia and possible coordination between his campaign and the Kremlin, people familiar with the matter said. Marc E. Elias, a lawyer representing the Clinton campaign and the DNC, retained Fusion GPS, a Washington firm, to conduct the research. After that, Fusion GPS hired dossier author Christopher Steele, a former British intelligence officer with ties to the FBI and the U.S. intelligence community, according to those people, who spoke on the condition of anonymity. Elias and his law firm, Perkins Coie, retained the company in April 2016 on behalf of the Clinton campaign and the DNC.

Before that agreement, Fusion GPS’s research into Trump was funded by an unknown Republican client during the GOP primary. The Clinton campaign and the DNC, through the law firm, continued to fund Fusion GPS’s research through the end of October 2016, days before Election Day. Fusion GPS gave Steele’s reports and other research documents to Elias, the people familiar with the matter said. It is unclear how or how much of that information was shared with the campaign and the DNC and who in those organizations was aware of the roles of Fusion GPS and Steele. One person close to the matter said the campaign and the DNC were not informed by the law firm of Fusion GPS’s role.

The dossier has become a lightning rod amid the intensifying investigations into the Trump campaign’s possible connections to Russia. Some congressional Republican leaders have spent months trying to discredit Fusion GPS and Steele and tried to determine the identity of the Democrat or organization that paid for the dossier. Trump tweeted as recently as Saturday that the Justice Department and FBI should “immediately release who paid for it.”

Read more …

“Mathematically, as long as China runs surpluses, foreign holding of yuan will not match foreign holding of dollars.”

Gold-Backed Petro-Yuan Silliness: Reserve Currency Curse? (Mish)

A massive amount of hype is spreading regarding China’s alleged ambitions to dethrone the dollar. The story this time involves China’s plan is to price oil in yuan using a gold-backed futures contract. Even if that were true, the impact would be zero. Nonetheless, CNBC is now in on the hype. CNBC reports China has grand ambitions to dethrone the dollar. It may make a powerful move this year. Yuan pricing and clearing of crude oil futures is the “beginning” of a broader strategic push “to support yuan pricing and clearing in commodities futures trading,” Pan Gongsheng, director of the State Administration of Foreign Exchange, said last month. To support the new benchmark, China has opened more than 6,000 trading accounts for the crude futures contract, Reuters reported in July. Yawn.

Jeff Brown, president at FGE, an international energy consultant has a more accurate assessment. “Most counterparties will not want anything to do with this contract as it adds in a layer of cost and risk. They also don’t like contracts with only a few dominant buyers or sellers and a government role.” Repeat after me: It’s meaningless what currency oil is quoted in. Once you understand the inherent truth in that statement, you immediately laugh at headlines like that presented on CNBC. For those who do not understand the simple logic, consider the fact that one does not need to have dollars to buy oil. Currencies are fungible. In less than a second, and at ant time day or night, one can convert any currency to any other currency. If countries want to hold dollars they can. If one wants to hold Swiss Francs, Euros, or Yen they can as well. Oil likely trades in all of those currencies right now.

Countries accumulate US dollars because the US runs a trade deficit, and those dollars will eventually return to the US. If China wants to assume the role of having the world’s reserve currency, something I highly doubt actually, it will need to have a free-floating currency and the world’s largest bond market . China will need property rights protection and a global willingness of countries to hold the yuan. To assume the role of China would have to be willing to run trade deficits instead of seeking trade surpluses via subsidized exports. Please read that last sentence over and over again until it sinks in. Mathematically, whether they like it or not, China and Japan have massive US dollar reserves as a result of cumulated trade surpluses. Mathematically, as long as China runs surpluses, foreign holding of yuan will not match foreign holding of dollars.

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More on that cesspool. Nothing to do with ideas, or convictions, or voters. Just power.

Do Democrats Really Need Wall Street? (BM)

Halloween is coming and fear mongering seems to be the order of the day — not just on the part of Republicans, but apparently no less so on the part of “centrist” and conservative Democrats who are expressing growing anxiety about offending big donors who see politics not as the pursuit of justice but as the pursuit of their interests. Douglas Schoen, said to have been Bill Clinton’s favorite pollster during his presidency, has taken to the op-ed page of The New York Times to warn center-right party members and friends that ‘all Hell will break loose’ if the Democrats embrace a platform promising “wealth redistribution through higher taxes and Medicare for all” and utilizing democracy to challenge the power of money.

Don’t be bewitched by the fantasies of folks such as Sens. Bernie Sanders (I-VT) and Elizabeth Warren (D-MA), Schoen counsels, for if you do, the American financial elite will not keep the party’s “coffers full.” Indeed, he argues, “Democrats should strengthen their ties to Wall Street,” for “America is a center-right, pro-capitalist nation.” “Memories in politics are short,” Schoen wrote. And he wrings his hands over the amnesia that robs people of remembering that the center-right assembled under Bill Clinton enabled him to balance the budget, limit government and protect essential programs “that make up the social safety net.” Leaving behind “that version of liberalism,” Schoen writes, has cost Democrats several elections. He even claims that Hillary Clinton lost in Michigan and Wisconsin in 2016 because she “lurched to the left.”

Yes, memories are short indeed, but they are made even shorter by the likes of Schoen. The horrors he prophesies make it clear that he does not want us to remember. He wants us to forget, and therefore to tame our aspirations for social democracy and an economy that serves everyday people instead of the 1%. Schoen wants us to forget that Hillary Clinton lost the Upper Midwest not because of her supposed “lurch to the left,” but because many working people could not erase from their minds her lavishly paid Wall Street engagements and her adamant refusal to “release the transcripts” of those flattering speeches to the bankers. To many a Rust Belt voter she was the “Goldman Sachs” candidate, something Schoen would consign to the memory hole.

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You will see this wherever a housing bubble rules the economy.

4 In 10 Canadians Can Not Cover Basic Expenses Without Adding More Debt (ZH)

[..] BNN reported that a survey released yesterday found that almost half of Canadian households don’t feel financially prepared for further interest rate increases. According to the Ipsos poll, conducted on behalf of MNP, 40% of respondents said they fear ending up in financial trouble if rates go up much higher, with one-in-three already feeling the impact of higher rates. “It’s clear that people are nowhere near prepared for a higher rate environment,” MNP President Grant Bazian said in a release. “The good news is that there seems to be at least the acknowledgement now that rates are going to climb which might make people reassess their spending habits – especially using credit.”

It gets worse: 42% of respondents said they don’t think they can cover basic expenses over the next year without going deeper into more debt. The same number said they’re within $200 of not being able to cover monthly expenses. This familiar “ponzi state” means that more than 4 in 10 Canadians effectively have no savings, which is ominously similar to US trends: as we reported earlier this year, a quarter of American adults can’t pay all their monthly bills, while 44% have less than $400 in cash. The Ipsos poll also found 70% of Canadians said they will take a more cautious approach to spending amid higher interest rates, which may be enough to choke off any economic growth and make the Canadian rate hikes a “one and one” affair.

Concern about rising rates is greater among lower-income Canadians – those who tend to rely on credit cards – according to the survey, as opposed to homeowners who said they are a bit more optimistic they can absorb a rate increase of… a whopping 1%. Geographically, over half of Albertans say they’ll be more concerned about paying off debt if interest rates rise, which is more than those in British Columbia and Quebec, where less than half said they are worried. Meanwhile, Ontarians are the least concerned (44 per cent) about their ability to pay down their debts.

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But .. but .. Draghi’s Italian… At one point, he wanted to be its PM.

Italy Faces Worst Shock In Europe As ECB Prepares To Taper Bond Buys (MW)

The entire eurozone will face a crucial test when the European Central Bank begins to wind down its asset-buying program, but one country stands to lose the most as the monetary punch bowl is taken away: Italy. Saddled with mountains of debt and a looming election, the southern European nation will likely struggle to find buyers for its government bonds when the European Central Bank stops snapping up Italian debt over the coming years, according to Christian Schulz, European economist at Citigroup. That means yields are set to rise, potentially strangling the country’s nascent recovery. “It comes at a difficult time. At the moment political uncertainty is rising and the ECB pulling out of the market just makes [the end of quantitative easing] so much harder on Italy than other countries,” Schulz said.

“They have a huge pile of debt, which makes the country much more sensitive to interest rate changes than countries with smaller piles of debt,” he said. Italy has particularly benefited from the ECB’s quantitative easing program that began in 2015, as it’s been one of the biggest bond issuers in the currency union. The central bank has purchased 300 billion euros ($352.9 billion) of Italian bonds under the program, which is more than three times the net bond issuance for the country during that period, according to Schulz. That means the ECB has not only bought pretty much all new bonds issued in Italy since 2015, but also existing bonds from other investors. The ECB is widely expected to announce some sort of tapering at its monetary policy setting meeting on Thursday, and most economists expect the asset purchases to end altogether in late 2018.

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” Schaeuble said Greece had decided to cut pensions instead of taxing wealthy ship-owners..” Not true.

Don’t Blame Others For Your Problems, Germany’s Schaeuble Tells Greece (R.)

Outgoing German Finance Minister Wolfgang Schaeuble urged debt-wracked Greece to stop blaming others for its financial woes and stick to a reform agenda instead of relying on debt relief. Schaeuble, a leading advocate of Greece’s tough austerity programs and one of Germany’s most powerful politicians, was elected speaker of its lower house of parliament on Tuesday. The 75-year-old lawyer, whose no-nonsense approach on austerity made him a popular hate figure among Greeks, told Greek Skai TV that Athens must take responsibility for its fiscal difficulties and act on them. “When you ask others for loans, you cannot insult them for granting the loans. It doesn’t make sense. Greece’s problems are Greece’s problems,” the conservative Christian Democrat said in an interview aired in Greece on Tuesday.

Asked if he ever suggested a “time out” on Greece’s participation in the euro zone, he said he had discussed the option “as a currency devaluation tool” with a former finance minister, who rejected it saying Greece would implement reforms. Schaeuble said he warned Prime Minister Alexis Tsipras while the latter was still in opposition in 2014 that the Greek politician would not be able to meet his pre-election platform of zero austerity. Tsipras, Schaeuble said, told him he wanted to remain in the euro without any conditions. “I responded that I wished, for his sake, that he didn’t win that election because he wouldn’t be able to keep his promises,” Schaeuble said in comments translated from German to Greek.

Seven months after he was elected, Tsipras was forced to cave into lenders’ demands for more belt-tightening. He was re-elected saying the bailout, the country’s third since 2010, was a product of blackmail. Greece is eyeing a bailout exit in 2018. Asked if the Greek case had become a personal issue for him, Schaeuble said: “Obviously in Greece I was a bogeyman, or at least for some media.” Politicians, he said, had a habit of using lenders as an excuse to impose cutbacks. “That saddened me somewhat, because nobody ever wanted to harm Greece,” he said. By way of example, Schaeuble said Greece had decided to cut pensions instead of taxing wealthy ship-owners – contrary to what the leftist Syriza party promised before elections. “This wasn’t a German parliament decision, it was a Greek government decision,” he said.

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Anything to say on this, Wolfgang? Where I come from this is called ordinary blackmail.

What Happened To The €8 Billion Europe Took From Greece? (EN)

In 2012 with Greece on the verge of bankruptcy, fellow Eurozone states rallied round to rescue one of their own. Part of the bailout package they agreed was to use almost 27 billion euros to buy up Greek debt to prevent a vicious circle that would see the country facing more and more expensive borrowing costs. At the time, the countries agreed that they should not profit from this action and that the interest paid to them by Athens linked to the bonds they had bought should be returned. To this day, that interest amounts to almost €8 billion (More precisely €7,838,000,000, according to an email sent by EU finance commissioner Pierre Muscovici to MEPs). Some of this money has been sent back to Greece but much of it remains in the hands of other European countries. And they seem determined not to reveal how much.

“For legal reasons, it’s not possible for member states to declare the amounts paid by their central banks to Greece,” said a source at the European Commission, citing the principle that central banks should not disclose details about their investments to avoid unduly influencing the behaviour of markets. For once, it seems, that Europe is united on the issue – Ireland, Italy, Spain and even Greece all refused to disclose how much had been returned and how much they were still holding. In Luxembourg, the press revealed that the government had handed back to Greece €28.3 million and was committed to returning the entire €40.2 million of interest it had accrued.

According to Euronews’ calculations, the Bundesbank, due to its position as the largest of Europe’s central banks earned €2 billion of interest since 2012 on the debt they purchased from Greece. France took €1.58 billion and Italy €1.37 billion. Documents obtained by Euronews confirm the figure for France, officials from other countries would not confirm or deny the amounts by the time this story was published.

Under the Securities Market Programme, Eurozone central banks bought up Greek government bonds, pushing up the prices for that debt and thereby lowering the interest rates Athens needed to pay to borrow. This offset to a degree the impact of market fears about the country’s economy which had obliged the government to pay significantly higher rates to secure the money it needed to keep operating. As a result of this programme, the countries participating received interest from Greece on the bonds they had purchased.

It was this money that they agreed to return under the 2012 bailout deal. When Alexis Tsipras swept to power in 2015 and rejected a proposed deal to extend the bailout, Eurozone finance ministers agreed to freeze these payments, having returned €4.3 billion relating to the debt buyup and a separate programme known as ANFA. The withholding of this money, according to Christopher Dembik, an economist at Saxo Bank, serves as a “kind of punishment” combined with a “means to pressure” Greece to fulfill its bailout obligations.

Read more …

What Greece moves close to the US.

Turkey Says Doesn’t Want Greece To Become ‘Safe Haven’ For Coup Plotters (R.)

Turkish Foreign Minister Mevlut Cavusoglu urged Greece on Tuesday to not become a “safe haven” for plotters of last year’s coup attempt, citing the 995 people who have applied for asylum since the failed putsch. Speaking at a joint news conference with his Greek counterpart, Nikos Kotzias, Cavusoglu said asylum seekers needed to be evaluated to determine those linked to the network of U.S.-based cleric Fethullah Gulen, blamed by Turkey for masterminding the putsch. “We would not want our neighbor Greece, with whom we are improving our ties, to be a safe haven for Gulenists. We believe these applications will be evaluated meticulously and that traitors will not be given credit,” Cavusoglu said.

Responding to Cavusoglu’s comments, Kotzias said the decisions on asylum seekers were made by the Greek judiciary and had to be respected even if “it doesn’t please some”. Relations between Turkey and Greece were further strained in May after a Greek court ruled to not extradite eight Turkish soldiers who fled to Greece following last year’s coup attempt. Turkey alleges the men, who fled to Greece in a military helicopter as the July coup unfolded, were involved in efforts to overthrow President Tayyip Erdogan and has repeatedly demanded they be sent back. Greek courts have blocked two extradition requests by Ankara, drawing an angry rebuke from Turkey and highlighting the tense relations between the NATO allies, who remain at odds over issues from territorial disputes to ethnically split Cyprus.

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Lies, threats and ghostwriting.

Monsanto Faces Blowback Over Cancer Cover-Up (Spiegel)

Some companies’ reputations are so poor that the public already has low expectations when it comes to their ethics and business practices. That doesn’t make it any less shocking when the accusations against them are confirmed in black and white. Agricultural chemicals giant Monsanto is under fire because the company’s herbicide, Roundup (active ingredient: glyphosate), is suspected of being carcinogenic. Permission to sell the chemical in the European Union expires on December 15 with member states set to decide on Wednesday whether to renew it for another 10 years. And now, the longstanding dispute about glyphosate has been brought to a head by the release of explosive documents. Monsanto’s strategies for whitewashing glyphosate have been revealed in internal e-mails, presentations and memos.

Even worse, these “Monsanto Papers” suggest that the company doesn’t even seem to know whether Roundup is harmless to people’s health. “You cannot say that Roundup is not a carcinogen,” Monsanto toxicologist Donna Farmer wrote in one of the emails. “We have not done the necessary testing on the formulation to make that statement.” The email, sent on Nov. 22, 2003, is one of more than 100 documents that a court in the United States ordered Monsanto to provide as evidence after about 2,000 plaintiffs demanded compensation from Monsanto in class-action suits. They claim that Roundup has caused non-Hodgkin’s lymphoma, a form of lymph node cancer, in them or members of their family.

The documents suggest the company concealed risks, making their publication a disaster for the company. The matter is also likely to be a topic of discussion at Bayer, the German chemical company in the process of acquiring Monsanto. “The Monsanto Papers tell an alarming story of ghostwriting, scientific manipulation and the withholding of information,” says Michael Baum, a partner in the law firm of Baum, Hedlund, Aristei & Goldman, which is bringing one of the US class actions. According to Baum, Monsanto used the same strategies as the tobacco industry: “creating doubt, attacking people, doing ghostwriting.”

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First of multiple steps. The European Commission has totally different ideas.

EU Parliament Votes To Ban Controversial Weedkiller Glyphosate By 2022 (AFP)

The European Parliament Tuesday called for the controversial weedkiller glyphosate to be banned by 2022 amid fears it causes cancer, a day before EU states vote on whether to renew its licence. MEPs approved a resolution which is not binding but will add fresh pressure on the European Commission, the bloc’s executive arm, which has recommended the licence for the herbicide be renewed for 10 years. Glyphosate critics, led by environmental campaigners Greenpeace, are calling for an outright ban in Europe and on Monday activists handed the EU a petition signed by more than 1.3 million people backing such a move.

Experts from the EU’s 28 member states are due to vote on the commission recommendation on Wednesday, just as a row escalates over claims that US agro giant Monsanto unduly influenced research into its weedkiller’s safety. MEPs criticised the commission’s proposal, saying it “fails to ensure a high level of protection of both human and animal health and the environment (and) fails to apply the precautionary principle”. They called for a halt to non-professional use of glyphosate when its licence runs out in December 15 and for its use to end near public parks and playgrounds. Opponents of glyphosate, used in Monsanto’s best-selling herbicide Roundup, point to a 2015 study by the World Health Organization’s (WHO) International Agency for Research on Cancer that concluded it was “probably carcinogenic”.

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Madrid better be careful.

Spain’s Government Prepared To ‘Discipline Disobedient Catalans’ (CNBC)

Spain’s central government is prepared to discipline Catalan citizens who chose to disobey direct rule from Madrid, the Spanish government’s official representative in Catalonia told CNBC. “The Spanish government is going to have the responsibility of taking decisions of a disciplinary nature if there is a rejection, by any functionaries, of any of the orders that they receive,” Enric Millo told CNBC on Monday, according to a translation. Prime Minister Mariano Rajoy invoked unprecedented constitutional powers on Saturday, vowing to curtail some of the freedoms of Catalonia’s parliament, sack some of its political players and force regional elections within six months. A vote in the national Senate to implement this direct rule is scheduled for Friday.

In response, the far-left CUP party — a key supporter of Catalonia’s pro-independence minority government in the regional parliament — described Madrid’s actions as an aggression against all Catalans. The secessionist group also urged Catalan citizens to engage in “massive civil disobedience.” Millo said he was hopeful the “large majority” of public servants based in the northeast of Spain would resist calls from separatist leaders to disobey the constitution. However, when he was asked what preparations had been made for those who ignored Madrid’s direct rule, Millo said that it would be the politicians who had decided to break with “democratic legality” that would be dealt with first. “These people will resign … And therefore, although they may not agree, they will not have any type of responsibility, validity, nor any type of authorization in any institutional decision. They will be left without any responsibilities,” he said.

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Colonialism 2.0

US Military Is Conducting Secret Missions All Over Africa (Vice)

U.S. troops are now conducting 3,500 exercises, programs, and engagements per year, an average of nearly 10 missions per day, on the African continent, according to the U.S. military’s top commander for Africa, General Thomas Waldhauser. The latest numbers, which the Pentagon confirmed to VICE News, represent a dramatic increase in U.S. military activity throughout Africa in the past decade, and the latest signal of America’s deepening and complicated ties on the continent. With the White House and the Pentagon facing questions about an Oct. 4 ambush in Niger in which four U.S. Special Forces soldiers were killed, Secretary of Defense James Mattis reportedly indicated to two senior members of the Senate Armed Services Committee Friday that these numbers are only likely to increase as the U.S. military shifts even greater attention to counterterrorism in Africa.

“You’re going to see more actions in Africa, not less,” said Sen. Lindsey Graham after the briefing. “You’re going to see more aggression by the United States toward our enemies, not less; you’re going to have decisions being made not in the White House but out in the field.” But the U.S. military has already seen significant action in Africa, where its growth has been sudden and explosive. When U.S. Africa Command, the umbrella organization for U.S. military operations on the continent, first became operational in 2008, it inherited 172 missions, activities, programs, and exercises from other combatant commands. Five years in, that number shot up to 546. Today’s figure of 3,500 marks an astounding 1,900 percent increase since the command was activated less than a decade ago, and suggests a major expansion of U.S. military activities on the African continent.

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But…

Yes, The US Leads All Countries In Reducing Carbon Emissions (Rapier)

Last week, in an interview with Fox News, Environmental Protection Agency Administrator Scott Pruitt claimed: “We are leading the nation – excuse me – the world with respect to our CO2 footprint in reductions.” The Washington Post fact-checked this claim and rated it “Three Pinocchios,” which means they rate the claim mostly false. They further wrote that Pruitt’s usage of data appeared to be a “deliberate effort to mislead the public.” I agree that this is a nuanced issue, but the data mostly support Pruitt’s claim. According to the 2017 BP Statistical Review of World Energy, since 2005 annual U.S. carbon dioxide emissions have declined by 758 million metric tons. That is by far the largest decline of any country in the world over that timespan and is nearly as large as the 770 million metric ton decline for the entire EU.

By comparison, the second largest decline during that period was registered by the United Kingdom, which reported a 170 million metric ton decline. At the same time, China’s carbon dioxide emissions grew by 3 billion metric tons, and India’s grew by 1 billion metric tons. Thus, I don’t think it’s the least bit misleading to claim that the U.S. is leading the world in reducing carbon dioxide emissions. The Washington Post gets into per capita emissions, and indeed despite the decline, U.S. per capita emissions are still among the highest in the world. However, the Washington Post story claimed: “The United States may have had the largest decrease in carbon emissions, but it is still the largest per capita emitter.” That’s not accurate either. According to World Bank data, U.S. per capita carbon dioxide emissions rank 11th among countries.

So, we are not the largest per capita emitter, but we do emit 2.2 times as much on a per capita basis as China. But, China has 4.3 times as many people, and that matters from an overall emissions perspective. China’s lower per capita carbon dioxide emissions are more than offset by its greater population, so China emits over 70% more carbon dioxide annually than the U.S. The story quoted Pruitt a second time: “We have reduced our CO2 footprint by over 18%, almost 20%, from 2000 to 2014.” The Post also disputes this claim, citing EPA numbers that stated “energy-related CO2 emissions” have fallen by 7.5% since 2000. I am not sure why anyone is using numbers from 2000, as U.S. carbon dioxide emissions continued to rise until 2005. That’s when they began to fall.

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Can’t say that makes me feel happy.

Global Wine Output Hits 50-Year Low (AFP)

Worldwide wine production tumbled 8.2% this year to hit a 50-year low due to unfavourable climate conditions, the International Organisation of Vine and Wine (OIV) said Tuesday. The total output of 246.7 million hectolitres was due in large part to steep drops in the top three wine producing countries: Italy, France and Spain. “This drop is consecutive to climate hazards, which affected the main producing countries, particularly in Europe,” said the Paris-based OIV, an intergovernmental organisation that provides scientific and technical advice on vines and wine. In Italy production slumped 23% to 39.3 mhl, while in France the drop was 19% to 36.7 mhl. Production in Spain fell 15% to 33.5 mhl.

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Symbol of all our troubles as a species.

Ancient Amazon Tribe Vow To Defend Their Territory Against Mining (AFP)

They appear silently, seemingly from nowhere: a dozen figures, naked except for bright red loincloths, blocking the dirt road. These are the Waiapi, an ancient tribe living in Brazil’s Amazon rainforest but now fearing invasion by international mining companies. Leading AFP reporters to a tiny settlement of palm-thatched huts hidden in foliage, the tribesmen streaked in red and black dye vow to defend their territory. They brandish six-foot (two-meter) bows and arrows to reinforce the point. “We’ll keep fighting,” says Tapayona Waiapi, 36, in the settlement called Pinoty. “When the companies come we’ll keep resisting. If the Brazilian government sends soldiers to kill people, we’ll keep resisting until the last of us is dead.”

The Waiapi indigenous reserve is in pristine rainforest near the eastern end of the Amazon river. It is part of a much larger conservation zone called Renca, covering an area the size of Switzerland. Surrounded by rivers and towering trees, the tribe operates almost entirely according to its own laws, with a way of life at times closer to the Stone Age than the 21st century. Yet modern Brazil is barely a few hours’ drive away. And now the center-right government is pushing to open Renca to international mining companies who covet the rich deposits of gold and other metals hidden under the sea of green.

Read more …

Oct 132017
 
 October 13, 2017  Posted by at 9:04 am Finance Tagged with: , , , , , , , , ,  3 Responses »
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Joan Miro Dancer 1925

 

The Shoeshine Boy Moment For FANG And Friends (DR)
Valuations Are Expensive (Lance Roberts)
Central Banks Have Effectively Manufactured The World’s Biggest Economy (BBG)
ECB to Consider Cutting QE Purchases in Half Next Year (BBG)
Boeing Passenger Jets Have Falsely Certified Kobe Steel Products (R.)
Kobe Steel Scandal Expands Into Core Business Overseas (BBG)
Distressed Investors Buying Houston Homes for 40 Cents on the Dollar (BBG)
Tesla Plays Auto Game By Silicon Valley Rules (DN)
What Powers America (CB)
Greek Civil Servants’ Wages 38% Higher Than Private Sector Staff (K.)
US Obesity Rates Hit New Records: 39.6% of Adults Now Obese (AFP)
Antibiotic Resistance Could Spell End Of Modern Medicine (G.)
Penguin Disaster As Only Two Chicks Survive From Colony Of 40,000 (G.)

 

 

My guess is that once one of them starts falling, the others will domino right along.

The Shoeshine Boy Moment For FANG And Friends (DR)

In early March 2009, the current bull market began in the same way that most of the great bull runs in history have, at a moment when investors were terrified to own stocks. Since then it has been nothing but good times. We are now eight and a half years into this bull market making it the second longest in history. This party has been fun. And for a handful of the most popular stocks, fun doesn’t do it justice. The party has been positively off the chains. The stocks that I’m talking about are the FANG (Facebook, Amazon, Netflix and Google) stocks plus a few of their friends (Tesla, Alibaba and others). These stocks have vastly outperformed the market during this bull-run. Now this is where I become a bit of a party-pooper.

Where Joseph Kennedy Sr. had his shoeshine boy moment for the market in 1929, I believe that a similar warning sign arrived for FANG and friends this summer. Remember, they don’t ring a bell at the top but there are signs. This I believe is a big one… The demand for these stocks has become so high that specific ETFs and dedicated index funds are being launched that are comprised only of FANG and friends. Not just an ETF or index fund, but multiple versions. That latest is called the NYSE FANG+ index. It includes 10 highly liquid stocks that are considered innovators across tech and internet/media companies. It is marketed as a benchmark of today’s tech giants. That may be true, but it is also a benchmark of some of the most expensive stocks in the entire S&P 500. Here are its components:

Yes, I’d love to go back in history and own this group of stocks three years ago. But would I want to own them after an already incredible run? No! As a group these stocks are frighteningly expensive today. That is generally what happens when stocks go up that fast, they become much less attractively valued.

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Another great effort by Lance.

Valuations Are Expensive (Lance Roberts)

[..] the repetitive cycle of monetary policy: • Using monetary policy to drag forward future consumption leaves a larger void in the future that must be continually refilled. • Monetary policy does not create self-sustaining economic growth and therefore requires ever larger amounts of monetary policy to maintain the same level of activity. • The filling of the “gap” between fundamentals and reality leads to consumer contraction and ultimately a recession as economic activity recedes. • Job losses rise, wealth effect diminishes and real wealth is destroyed. • Middle class shrinks further. • Central banks act to provide more liquidity to offset recessionary drag and restart economic growth by dragging forward future consumption. •Wash, Rinse, Repeat.

If you don’t believe me, here is the evidence. The stock market has returned more than 60% since 2007 peak, which is more than three times the growth in corporate sales growth and 30% more than GDP. The all-time highs in the stock market have been driven by the $4.5 trillion increase in the Fed’s balance sheet, hundreds of billions in stock buybacks, PE expansion, and ZIRP.

It is critical to remember the stock market is NOT the economy. The stock market should be reflective of underlying economic growth which drives actual revenue growth. Furthermore, GDP growth and stock returns are not highly correlated. In fact, some analysis suggests that they are negatively correlated and perhaps fairly strongly so (-0.40). However, in the meantime, the promise of a continued bull market is very enticing as the “fear of missing out” overrides the “fear of loss.” This brings us back to Jack Bogle and the importance of valuations which are often dismissed in the short-term because there is not an immediate impact on price returns. Valuations, by their very nature, are HORRIBLE predictors of 12-month returns should not be used in any strategy that has such a focus. However, in the longer term, valuations are strong predictors of expected returns.

[..] I have also previously modified Shiller’s CAPE to make it more sensitive to current market dynamics. “The need to smooth earnings volatility is necessary to get a better understanding of what the underlying trend of valuations actually is. For investor’s, periods of ‘valuation expansion’ are where the bulk of the gains in the financial markets have been made over the last 116 years. History shows, that during periods of ‘valuation compression’ returns are more muted and volatile. Therefore, in order to compensate for the potential ‘duration mismatch’ of a faster moving market environment, I recalculated the CAPE ratio using a 5-year average as shown in the chart below.”

To get a better understanding of where valuations are currently relative to past history, we can look at the deviation between current valuation levels and the long-term average going back to 1900.

Read more …

“Central Banks’ Return to Normalcy Is Nothing But a Charade”

Central Banks Have Effectively Manufactured The World’s Biggest Economy (BBG)

The Federal Reserve keeps talking about a “return to normal” in monetary policy. The media must buy into it, because it keeps repeating the phrase. Many investors buy into it, too. After all, it is the high and mighty Fed speaking. This “normal” is defined by interest rates, but interest rates are defined by the economics that surround them. Interest rates do not exist in a vacuum. But since we are in an economic environment never before seen in history, where data compiled by Bloomberg show that central banks have amassed $21.5 trillion in assets, how can there possibly be any notion of “normal?” Nothing in history supports the claim. Without a history, “normal” is a meaningless term. Think about it: In response to the financial crisis, central banks have essentially manufactured in just nine years an economy that is bigger than the gross domestic products of either the U.S. or China.

I am more than willing to recognize the accomplishment, but to call it “normal” is either a ruse or the height of foolishness. There is nothing “normal” about it. Some may say it is the “crown of creation,” and a case can be made for this argument, but it is not a crown that was ever seen before. This is why, when assessing financial markets, I keep pointing at the money. It is the giant amount of manufactured capital that is holding interest rates down, pushing equities up and compressing all risk assets against their sovereign benchmarks. It isn’t inflation or housing data or wages or any other piece of data that can be singled out. Those are, by comparison, flyspecks in the wind. Simply put, all that money has created demand that outstrips the current supply in bonds, in equities, in stock price-to-earnings multiples, in historical risk valuations and in credit assets.

Therefore, the economic environment that underlies asset pricing is, in fact, distorted. The Fed’s claim of some sort of “normalcy” is a charade. Fed Chair Janet Yellen can say it, and so can Fed governors and presidents, but there is not one grain of truth in the telling. It is nothing more than mumbo-jumbo because they do not wish you to recognize what is actually happening. They have taken over markets and now totally control and dominate them, regardless of the usual day-to-day antics.

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More ‘normalcy’.

ECB to Consider Cutting QE Purchases in Half Next Year (BBG)

ECB officials are considering cutting their monthly bond buying by at least half starting in January and keeping their program active for at least nine months, according to officials familiar with the debate. Reducing quantitative easing to €30 billion ($36 billion) a month from the current pace of €60 billion is a feasible option, said the officials, who asked not to be identified because the deliberations are private. While the central bank’s governors are split on the need to identify an end date for purchases, a pledge to keep buying bonds until September – with the proviso that it could be extended if needed – may offer grounds for compromise, they said. Policy makers led by President Mario Draghi are becoming increasingly confident that ECB policy makers will on Oct. 26 agree to the specifics of how much debt the euro-area’s central banks will buy in the coming year.

After more than 2 1/2 years of trying to revive the region’s economy through bond purchases, some governors see the recent period of robust growth as a reason to rein in the support. Others are concerned that inflation remains too weak. Any changes to the sum and time frame of quantitative easing would still fit into the ECB’s present guidance on monetary policy, which commits the ECB to promise “a sustained adjustment in the path of inflation consistent with its inflation aim.” It also pledges that if “the outlook becomes less favorable, or if financial conditions become inconsistent with further progress toward a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the program in terms of size and/or duration.”

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The Japanese government better act fast. Kobe requires controlled demolition.

And this sort of comment needs to stop: “Boeing does not as yet consider the issue a safety problem..”

Of course it’s safety problem. Or are we to believe the safety standards never amounted to anything?

Boeing Passenger Jets Have Falsely Certified Kobe Steel Products (R.)

Boeing, the world’s biggest maker of passenger jets, has used Kobe Steel products that include those falsely certified by the Japanese company, a source with knowledge of the matter told Reuters. Boeing does not as yet consider the issue a safety problem, the source stressed, but the revelation may raise compensation costs for the Japanese company, which is embroiled in a widening scandal over the false certification of the strength and durability of components supplied to hundreds of companies. The U.S. airline maker is carrying out a survey of aircraft to ascertain the extent and type of Kobe Steel components in its planes and will share the results with airline customers, said the source who has knowledge of the investigation.

Even if the falsely certified parts do not affect safety, given the intense public scrutiny that airlines operate under they may opt to replace suspect parts rather than face any backlash over concerns about safety. Any large-scale program to remove those components, even during scheduled aircraft maintenance, could prove costly for Kobe Steel if it has to foot the bill. Kobe Steel’s CEO, Hiroya Kawasaki, on Thursday said his company’s credibility was at “zero.” The company, he said, is examining possible data falsification going back 10 years, but does not expect to see recalls of cars or airplanes for now.. Also in the U.S., General Motors said it is checking whether its cars contain falsely certified components from Kobe Steel, joining Toyota and around 200 other firms that have received falsely certified parts from the company.

Boeing does not buy products such as aluminum composites, used in aircraft because of their light weight, directly from Kobe Steel. Its key Japanese suppliers, including Mitsubishi Heavy Industries, Kawasaki Heavy Industries and Subaru, however, do. These Japanese companies are key parts of Boeing’s global supply chain, building one fifth of its 777 jetliner and 35% of its carbon composite 787 Dreamliner.

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This is getting bigger by the minute.

“..the company holds roughly half of the global market share for the wires used in valve springs of auto engines

Kobe Steel Scandal Expands Into Core Business Overseas (BBG)

Kobe Steel’s fake data scandal expanded to its core business after the company admitted “inappropriate actions” related to steel wire produced overseas, triggering a fresh collapse in its shares and heightened speculation that the steelmaker may get broken up. Customers have been informed about the issue, which has been resolved, Tokyo-based spokeswoman Eimi Hamano said by phone, declining to provide details. Kobe Steel falsified quality certification data for steel wire used in auto engines and to strengthen tires, the Nikkei newspaper reported Friday. Kobe’s admission of misconduct in its steel business, which accounts for about a third of revenue, ratchets up the pressure on Japan’s third-biggest steelmaker.

The company’s disclosures had up until now dealt with aluminum, copper and iron ore products used in everything from cars to computer hard drives to Japan’s iconic bullet trains, although there haven’t been any reports of products being recalled or safety concerns raised. The deepening scandal “suggests that this is company culture, not just the actions of a few rogue employees,” Alexander Robert Medd, managing director at Bucephalus Research in Hong Kong, said by email. The question to be resolved is “were they trying to save money or just unable to produce the right spec in the right quantities,” he said. Kobe’s shares have plunged 42% this week, including a 9.1% drop on Friday, after it revealed on Sunday that it had fudged data on the strength and durability of metals supplied to as many as 200 customers around the world, including Toyota, General Motors and space rocket-maker Mitsubishi Heavy Industries.

[..] SMBC Nikko Securities said in a note the new revelations around steel wires could be “quite negative” for Kobe Steel’s creditworthiness as the company holds roughly half of the global market share for the wires used in valve springs of auto engines. If doubts arose over the safety of the wires, it could “shake the foundation” of the company, according to chief credit analyst Takayuki Atake.

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“The whole thing makes me feel like there’s a bunch of vultures sitting on my back fence..”

Distressed Investors Buying Houston Homes for 40 Cents on the Dollar (BBG)

Bryan Schild drives through the byways of Houston looking for what could be the investment opportunity of a lifetime: homes selling for as little as 40¢ on the dollar. “We Pay Cash For Flooded Homes $$$$$$$$ Don’t fix it, sell it. Quick close,” read the signs piled in the back seat of his Ford pickup. Schild stops by a ranch-style house where 74-year-old Paul Matlock lives with his wife, disabled from multiple sclerosis. Matlock is desperate to leave and is considering Schild’s offer of $120,000—half the home’s value three weeks earlier. A half-dozen other investors have made offers, one as low as $55,000. “The whole thing makes me feel like there’s a bunch of vultures sitting on my back fence,” Matlock says. “They’re waiting for the dead body to fall over.”

It’s axiomatic on Wall Street that the time to buy is when fear overtakes greed—when blood (or, in this case, water) is in the streets. Now some are eyeing the billions of dollars in hurricane-ravaged property in Texas and Florida and deciding it may be the time to take out their checkbooks. Investors such as Schild figure they can buy low, either fix up and flip the houses or rent them out for several years, and unload them later, doubling their money or more. Those kinds of bets have often paid off. Buyers who snapped up co-ops and office towers when New York was near bankruptcy in the 1970s made a killing. More recently, companies including Blackstone and other marquee names bought foreclosed homes after the 2008 financial crisis and are sitting on billions in potential gains.

The cycle begins with small-time investors such as Schild, who’s bought more than 30 waterlogged houses for an average $175,000 apiece. Then Wall Street swoops in. Gary Beasley, former CEO of Waypoint Homes, also sees an opportunity. He’s pitching private equity firms and pension funds on the potential profit in buying flooded homes, repairing them, and renting them back to homeowners. Bain Capital and billionaire Marc Benioff, co-founder of Salesforce.com, are backing Beasley’s two-year-old company, Roofstock. It runs a website where investors can buy and sell single-family rental properties. Beasley thinks owner-occupants may be interested in selling there, too, and that flooded neighborhoods are the Next Big Thing. “It’s much like the housing crisis, when the institutional guys came in to buy homes nobody wanted,” he says. Like other investors, Beasley and Schild view themselves as helping homeowners to move on and Houston to rebuild.

Read more …

Will Musk take Silicon Valley down with him?

Tesla Plays Auto Game By Silicon Valley Rules (DN)

Lest there be any doubt, the electrified race for supremacy in self-driving cars is being played by Silicon Valley rules. How do we know this? By Tesla Chairman Elon Musk’s recognition that his long-awaited Model 3 compact is “in production hell,” that it’s complicated by “bottlenecks” and by confirmation that parts of the cars are being “hand-built.” This amazing accomplishment is being greeted, well, differently by investors than it would if, say, General Motors Chairman Mary Barra copped to the same kind of chaos with its electric Chevrolet Bolt … or just about any other eagerly anticipated model in its lineup. Tesla mostly gets a pass, as it does for losing money on every car it produces. The nearly 4% slide in its shares Monday, the first trading day after The Wall Street Journal reported the messy Model 3 launch, has since recouped most of the loss, judging by the market close Wednesday.

To free “resources to fix Model 3 bottlenecks” and increase battery production to help hurricane-ravaged Puerto Rico, Musk tweeted that Tesla’s anticipated demonstration of its self-driving truck would be delayed until Nov. 16. Detroit (and its foreign-owned rivals) would get crucified for a similar mess. Analysts, the news media and, especially, investors would show scant tolerance for misses of that magnitude from traditional auto industry players — and all of them would demand answers. Tesla? Not so much. Never mind that Musk, the automotive wunderkind, might risk missing what Barclays Research calls the “iPhone moment” for the Model 3, Tesla’s long-awaited entry into the volume-priced electric car segment. You know, the segment already occupied by GM’s Chevy Bolt, Nissan’s Leaf and a slew of coming electric entrants from global automakers.

As a rule, they don’t botch production launches with the same aplomb as Musk’s hand-built production hell. They also have broader distribution networks under existing state franchise laws; more disciplined production systems with longer lead times to ensure more consistent quality at launch; and greater transparency with investors, analysts and the news media. This will be fascinating to watch. Tesla’s Model 3 is one of the most highly anticipated car launches in a long time. It’s supposed to be sheet metal and electric powertrain proof that Silicon Valley innovation can beat Detroit and Stuttgart, Tokyo and Seoul at their own game.

Read more …

Click the link to see the whole thing.

What Powers America (CB)

The US electricity system is often described as the world’s largest machine. It is also incredibly diverse, reflecting the policy preferences, needs and available natural resources of each state. Carbon Brief has plotted the nation’s power stations in an interactive map to show how and where the US generates electricity. A few key messages can be gleaned from the map and associated data interactives below: • The US electricity system has been changing rapidly over the past decade. This reflects not only federal policy, but also technologies, geographies, markets and state mandates. •The average US coal plant is 40 years old and runs half the time. Some 15% are at least 50 years old, against an average retirement age of 52. • Planned new power plants are almost exclusively gas, wind or solar.

Supplying electricity to a nation’s homes, business and industry is an almost uniquely challenging enterprise. For now, electrical energy is either expensive or inconvenient to store, meaning supply and demand must be balanced in real time. It is also easier to generate power close to home than to transport it over long distances. The way electricity is generated fundamentally depends on the fuels and technologies available. The march of progress means this mix is changing – but natural resources and geographies are fixed. Moreover, US states have broad powers to influence the electricity systems within their borders. Putting the US electricity system on a map offers visual confirmation of how important these factors are. Why is solar so prevalent in North Carolina, for example? Or coal in West Virginia?

You can use Carbon Brief’s interactive map to view all the power plants in the US and their relative electricity generating capacities, which are proportional to the size of the bubbles. The dynamic chart in the sidebar summarises the makeup of the capacity mix. It’s important to note that the map and related charts, below, are based on electrical generating capacity. The electricity generated each year by each unit varies according to its load factor (average output of a power station, relative to its installed capacity). US wind has a load factor of around 35% while solar is around 27%. These are lower load factors than for nuclear at around 90%. Coal and gas can, in theory, have similarly high load factors, but in practice both are at around 50% in the US.

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Article gets numbers mixed up, but one thing is certain: Greeks make very little money compared to cost of living.

Greek Civil Servants’ Wages 38% Higher Than Private Sector Staff (K.)

Despite years of austerity policies, Greek civil servants remain significantly better paid than private sector wages, with their average wages 38% higher than their counterparts in the private sector, according to the Hellenic Federation of Enterprises (SEV). The average net monthly wage in the public sector is €1,075 compared to €777 in the private sector, according to figures made public in SEV’s weekly bulletin which underlined that the gap between the two is widening rather than closing. In the first half of this year, the average wage in the public sector rose marginally – by 0.1% – compared to a drop of 1.3% for private sector salaries, according to SEV’s analysis, which concluded that private sector workers saw their wages shaved by about €10 a month over that period.

In a related development, a report conducted by the civil servants’ union ADEDY reported an increase in permanent staff in the Greek civil service over the past year. An additional 1,293 staff were hired between August 2016 and last August, bringing the total number to 566,022, according to the report. Another finding was that most Greek civil servants – 80% of the total – take home a net monthly salary of less than €1,300. Half earn up to €1,000 a month, 44% take home between €1,000 and €1,500 and 3.6% net between €1,500 and €2,100, according to the report. Last month, SEV painted a dire picture of the state of the Greek pension system, which it described as running on empty, while warning that the country’s beleaguered private sector has taken on a disproportionate share of the burden to support pensioners and the public sector.

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Easy to figure out what this will mean to health care. The richest country in the world kills its people for profit.

US Obesity Rates Hit New Records: 39.6% of Adults Now Obese (AFP)

The rate of obesity in the United States has reached a new high, at 39.6% of adults, according to US government data released Friday. Health experts are concerned about obesity because it is associated with a number of life-threatening health conditions, including heart disease, stroke, diabetes and certain kinds of cancer. The adult obesity rate in the United States has risen steadily since 1999, when 30.5% of adults were obese. “From 1999–2000 through 2015–2016, a significantly increasing trend in obesity was observed in both adults and youth,” said the report, based on a nationally representative sample of the population, and issued by the National Center for Health Statistics.

“The observed change in prevalence between 2013–2014 and 2015–2016, however, was not significant among both adults and youth.” Its previous report for 2013 to 2014 found that 37.7% of adults were obese. Researchers said the difference between the current and last report is not statistically significant because it falls within the margin of error of the estimate. Adult obesity is defined as having a body mass index (BMI) of 30 or higher. Among youths aged two to 19, 18.5% are obese, the report said. The rate of youth obesity was 13.9% in 1999.

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Another example of killing people for profit.

Antibiotic Resistance Could Spell End Of Modern Medicine (G.)

England’s chief medical officer has repeated her warning of a “post-antibiotic apocalypse” as she urged world leaders to address the growing threat of antibiotic resistance. Prof Dame Sally Davies said that if antibiotics lose their effectiveness it would spell “the end of modern medicine”. Without the drugs used to fight infections, common medical interventions such as caesarean sections, cancer treatments and hip replacements would become incredibly risky and transplant medicine would be a thing of the past, she said. “We really are facing – if we don’t take action now – a dreadful post-antibiotic apocalypse. I don’t want to say to my children that I didn’t do my best to protect them and their children,” Davies said.

Health experts have previously said resistance to antimicrobial drugs could cause a bigger threat to mankind than cancer. In recent years, the UK has led a drive to raise global awareness of the threat posed to modern medicine by antimicrobial resistance (AMR). Each year about 700,000 people around the world die due to drug-resistant infections including tuberculosis, HIV and malaria. If no action is taken, it has been estimated that drug-resistant infections will kill 10 million people a year by 2050. The UK government and the Wellcome Trust, along with others, have organised a call to action meeting for health officials from around the world. At the meeting in Berlin, the government will announce a new project that will map the spread of death and disease caused by drug-resistant superbugs.

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Too sad for words.

Penguin Disaster As Only Two Chicks Survive From Colony Of 40,000 (G.)

A colony of about 40,000 Adélie penguins in Antarctica has suffered a “catastrophic breeding event” – all but two chicks have died of starvation this year. It is the second time in just four years that such devastation – not previously seen in more than 50 years of observation – has been wrought on the population. The finding has prompted urgent calls for the establishment of a marine protected area in East Antarctica, at next week’s meeting of 24 nations and the European Union at the Commission for the Conservation of Antarctic Marine Living Resources (CCAMLR) in Hobart. In the colony of about 18,000 breeding penguin pairs on Petrels Island, French scientists discovered just two surviving chicks at the start of the year. Thousands of starved chicks and unhatched eggs were found across the island in the region called Adélie Land (“Terre Adélie”).

The colony had experienced a similar event in 2013, when no chicks survived. In a paper about that event, a group of researchers, led by Yan Ropert-Coudert from France’s National Centre for Scientific Research, said it had been caused by a record amount of summer sea ice and an “unprecedented rainy episode”. The unusual extent of sea ice meant the penguins had to travel an extra 100km to forage for food. And the rainy weather left the chicks, which have poor waterproofing, wet and unable to keep warm. This year’s event has also been attributed to an unusually large amount of sea ice. Overall, Antarctica has had a record low amount of summer sea ice, but the area around the colony has been an exception.

Ropert-Coudert said the region had been severely affected by the break-up of the Mertz glacier tongue in 2010, when a piece of ice almost the size of Luxembourg – about 80 km long and 40km wide – broke off. That event, which occurred about 250km from Petrels Island, had a big impact on ocean currents and ice formation in the region. “The Mertz glacier impact on the region sets the scene in 2010 and when unusual meteorological events, driven by large climatic variations, hit in some years this leads to massive failures,” Ropert-Coudert told the Guardian. “In other words, there may still be years when the breeding will be OK, or even good for this colony, but the scene is set for massive impacts to hit on a more or less regular basis.”

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Oct 092017
 
 October 9, 2017  Posted by at 2:08 pm Finance Tagged with: , , , , , , , ,  2 Responses »
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Fan Ho In Paris 1953

 

 

Update: I never did this before, but now I think I must: change the title of an article. “Minsky and Volatility” isn’t nearly as good as “The S&P Is A Bloated Corpse”. Simple, really. The URL will be the same as before

 

 

According to Hyman Minsky, economic stability is not only inevitably followed by instability, it inevitably creates it. Complacent humans being what they are. If he’s right, and would anyone dare doubt it, we’re in for that mushroom cloud on the financial horizon. We know that because market volatility, as measured for instance by the VIX, the Chicago Board Options Exchange (CBOE)’s volatility index, is scraping the depths of the Mariana trench.

Two separate articles at Zero Hedge this weekend, one by NorthmanTrader.com and one by LPLResearch.com, address the issue: it is time to be afraid and wake up. And that is not just true for investors or traders, it’s true for ‘everyone out there’ perhaps even more. Central bank policies, QE and ultra low rates, have distorted the financial system to such an extent -ostensibly in an attempt to save it- that the depressed, compressed volatility these policies have created can only come back to life with a vengeance.

Feel free to picture zombies and/or loss of heartbeat as much as you want; it’s all true. Financial markets haven’t been functioning for years, and there have been no investors either, only gamblers and profiteers, as savers and pensioners have been drawn and quartered. Central bankers have eradicated price discovery, nobody knows what anything is really worth anymore, be it stocks, bonds, housing, gold, bitcoin, you name it.

If you make interest rates ‘magically’ disappear anyone can spend any amount of money on anything they fancy buying. And it’s not just traders and investors either. Scores of people think: look, I can buy a house, others think they can buy a bigger house, many will get into stocks and/or bonds, because prices just keep going up. Even savers and pensioners are drawn into the central bank Ponzi, often in an effort to make up for what they lose when their accumulated wealth no longer pays them any returns. Shoeshine boys are dishing out market tips.

Crypto may or may not be a new tulip, but many Silicon Valley start-ups -increasingly funded by crypto ICO’s- certainly are. There’s so much money sloshing around nobody can tell, or even cares, whether they are actually worth a penny. It’s all based on gossip multiplied by the idea that they will be smart enough to get out in time in case things go awry.

 

People mistakenly think that a market’s heartbeat can be found in for instance rising stock prices, the Dow, the S&P. But that’s simply not true. The S&P is a bloated corpse increasingly filling up with gases that will eventually cause it to explode, with guts and blood and body parts and fluids flying all around.

The US stock market’s heartbeat manifests itself in volatility, and the overall economy’s heartbeat in interest rates. Rising and falling volatility and interest rates is how we know whether a market is in good health, or even alive at all. They are its vital signs.

That follows straight from Minsky. Ultra-low rates and ultra-low volatility, especially if they last for a longer period of time, are signs of trouble. The markets the central banks’ $20+ trillion QE and ZIRP have created are bloated corpses that no longer have a heartbeat. They are zombies. But markets, unlike natural bodies, won’t die, they can’t. They will instead rise from their graves and take over Wall Street, the City, and then everyone else’s street.

Bernanke, Yellen, Draghi and Kuroda are sorcerer’s apprentices and Dr. Frankensteins, who have created walking dead monsters they have no control over. But the monsters won’t turn on them personally; that’s the tragedy here as much as it is the reason why they have worked their sorcery. They themselves won’t go bankrupt, other will. No skin in the game.

Enough with the metaphors. First, here’s NorthmanTrader:

 

Flatliners

In the movie Flatliners aspiring medical doctors tried to unlock the mysteries of death by, well, killing themselves. It was meant to be a controlled death of course, to flat line on the heart rate monitor for a few minutes to find out what wonders where to be found “on the other side” only to then return safe & sound thanks to medical intervention. Well, they soon found out the other side wasn’t everything it was cracked up to be and the main character soon got regular beatings as the sins of his past came back to haunt him.

In my view markets find themselves in a very similar script. The promise of investor nirvana where the pains of real life no longer matter. If you only pay attention to the record highs headlines it all looks rather fantastical these days. [..] any trader staring at the tape knows that we find ourselves in the most compressed price environment in history. This is not normal, there’s no heartbeat:

As I’m writing this I’m fully aware I may be viewed as the bear who cried wolf. After all I’ve been outlining structural risk factors for a while and markets have moved past my technical risk zones of 2450-2500 and most recently 2530. That’s what bubbles do. They blow past anyone’s expectations, they make believers of the unbelievers, make bears look like idiots and the most reckless look like geniuses. But an extreme market that only becomes more extreme is not any less extreme, it is just more extreme. As no risk is apparent these extremes are then dismissed as the new normal. Yet momentum driven price appreciation has absolutely zero predictive value of future price appreciation, it only appears as such at the time.

We find ourselves in a very unique point in history and in a world dominated by false narratives. It is a challenge to keep an analytical grip on reality, but I’ll try to tie a few threads together here to put everything in a macro context. Firstly the underlying base reality: Free money, easy money, whatever you want to call it, permeates everything we see in financial markets. Indeed I would argue price appreciation has been paid for with unprecedented and, in my view, unsustainable volatility compression. A couple of charts really highlight this. Most clearly perhaps is the precise trend line tagging we can observe in the correlated picture of price appreciation and volatility compression since the February 2016 lows:

The $VIX’s corollary, the inverse $XIV, embarked on an explosive near one way journey since the US election coinciding with over $2 trillion central bank intervention in just the first 9 months of 2017:

And it has continued to this day and just made another all time high this past week on a massive negative divergence. It is the magnitude of this volatility compression that explains the current trading environment we find ourselves in.

 

[..] Debt expansion at low rates continues to sustain the illusion of real prosperity for the 90%:

 

And then LPLResearch with another indicator that goes to show we’re dealing with a zombie here: stock prices are not moving, either up or down. Or rather, they’re moving up all the time, but in too small increments. Yeah, like that bloated corpse.

 

Where Did All the Big Moves Go?

There have only been eight moves of at least 1% for the S&P 500 Index so far this year—the least since 13 in 1995. The all-time record was an incredible three in 1963. What about a big move? The last time the S&P 500 moved at least 4% was nearly six years ago. In fact, the S&P 500 had four consecutive days with 4% (or greater) changes in August 2011. Other than 2008 and the crash of ’87, that is the only other time since the Great Depression to see four consecutive 4% changes. That isn’t anything like today’s action.

As the chart below shows, so far in 2017, big moves have been nonexistent; and even 1% changes have been rare. Per Ryan Detrick, Senior Market Strategist, “If you had forecast that the 11 months after the 2016 U.S. presidential election would be one of the least volatile periods ever, you would be in the minority. Then again, the last time we saw a streak of calm like this was the year after John F. Kennedy was assassinated in November 1963. Once again proving that the market rarely does what the masses expect and usually surprises us.”

You want a heartbeat. That tells you if a body or a market is alive, healthy, functioning. We don’t have one. We haven’t for years. But we will again. Natural bodies can tend towards equilibrium, i.e. death. Markets cannot. They’re doomed to flatline, and then to always come back from near death experiences. They tend to do so in violent ways though. When volatility at last returns, so will price discovery. It won’t be pretty.

 

 

Sep 282017
 
 September 28, 2017  Posted by at 1:52 pm Finance Tagged with: , , , , , , ,  11 Responses »
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Koyaanisqatsi

 

The film Koyaanisqatsi was released in 1982. The title means ‘life out of balance’ in the language of the Hopi, a Native American tribe who live(d) mainly in what is now north-east Arizona. It is directed by Godfrey Reggio with music by Philip Glass and cinematography by Ron Fricke. There are no actors, and no dialogue. Philip Glass’s music underlies a series of film fragments that contrast the beauty of American nature with the noise and pollution mankind has added to it. Wikipedia:

The film consists primarily of slow motion and time-lapse footage of cities and many natural landscapes across the United States. The visual tone poem contains neither dialogue nor a vocalized narration: its tone is set by the juxtaposition of images and music. Reggio explained the lack of dialogue by stating “it’s not for lack of love of the language that these films have no words. It’s because, from my point of view, our language is in a state of vast humiliation. It no longer describes the world in which we live.”

Due to its initial success, Reggio and Glass made two sequels to the film, Powaqqatsi (1988), meaning “parasitic way of life” or “life in transition”, and Naqoyqatsi (2002) which means “life as war”, “civilized violence” and “a life of killing each other”. If you haven’t seen them, they come highly recommended.

 

 

Koyaanisqatsi is an fitting term to describe not only our world in general, but also our economies. They are severely out of balance, and getting more so every day. But economies, like nature, need at least a minimum in balance. If that disappears, this lack of balance will tip them over. It is somewhat strange that this is not being recognized, and not even discussed.

It’s as if people think that when almost all wealth goes to a select very few, an economy can still continue to function. It can’t. The rich getting continually richer means the poor getting poorer (as overall growth is slow or non-existent), until the latter reach a point where they can no longer afford even basic necessities. That’s when parts of an economy will start dying, in the same vein that parts of a living body, an organism, die off when the supply of blood, nutrients and oxygen is cut off.

For an economy to function, it needs money to flow through it the same way a body needs blood to flow. If all the money gets increasingly concentrated in just a small area, the economy stagnates. We measure the flow of money as velocity:

 

 

If that graph would describe a human body, it would be in an ambulance on the way to ER. The only times velocity of money have been as low as today was during a Great Depression and a World War.

The ever richer rich cannot spend enough to keep things moving. They can buy stocks and bonds and houses, but they can’t buy all the groceries and clothing that the poor and middle class no longer can. But it’s those things that keep the economy humming along.

An economy as unbalanced as the one we presently have is bound to perish. The rich are killing their own economies by trying to get richer all the time. And they have no idea that’s what happens. It’s sort of baked into their understanding of what capitalism is. Or neo-liberalism if you want.

We should look upon, and handle, our economies and societies as living, and vibrant, systems, but we’re miles away from any such understanding. Our education systems are gross failures when it comes to this, and our media, owned by the rich, support anything that will make them richer. Even though that is suicidal for everyone involved. We are a tragic species in many more ways than one.

This has nothing to do with political views, with socialism or communism or any ism, it’s a simple empirical observation. It’s not about ‘everyone deserves their fair share’, but about if they don’t get their share, no economy will be left to hand out any shares even to the rich. If the rich want to get richer, they will need a functioning economy to get there.

In other words, someone will have to call a halt, or at least a pause, to the pace at which they’re getting richer, or their quest for riches will become self-defeating. Literally every single human being can grasp this, but hardly anyone even considers it. At their peril.

Here’s just a small example from CNBC, there are thousands just like it:

The Top 1% Of Americans Now Control 38% Of The Wealth

America’s top 1% now control 38.6% of the nation’s wealth, a historic high, according to a new Federal Reserve Report. The Federal Reserve’s Surveys of Consumer Finance shows that Americans throughout the income and wealth ladder posted gains between 2013 and 2016. But the wealthy gained the most, driven largely by gains in the stock market and asset values. The top 1% saw their share of wealth rise to 38.6% in 2016 from 36.3% in 2013.

The next highest 9% of families fell slightly, and the share of wealth held by the bottom 90% of Americans has been falling steadily for 25 years, hitting 22.8% in 2016 from 33.2% in 1989. The top income earners also saw the biggest gains. The top 1% saw their share of income rise to a new high of 23.8% from 20.3% in 2013. The income shares of the bottom 90% fell to 49.7% in 2016.

Now, you may think: 38%, how bad is that?, and you may be forgiven for thinking that way. After all, you’re in a majority there. To understand the severity of what’s happening, you need to look at the trends:

 

 

This one from the New York Times, annotated by Charles Hugh Smith, is very revealing too. What happens is that just as we find ourselves in a stagnating/shrinking economy, the rich get richer fast. They can do that because central banks are releasing trillions of dollars in QE, but also because the system is geared towards eviscerating the poor, and increasingly the middle class as well:

 

 

And this is amplified by the ultra-low rates policies central banks have been pushing over the past decade. They allow for the ever poorer to keep up appearances of wealth by plunging into debt ever deeper, but they don’t allow for their living conditions, their jobs, their savings, their pensions, to recover. They do the exact opposite. As this graph from Mike Lebowitz, one of many to show the same trendline, goes to show:

 

 

This is not an American phenomenon, though it’s more pronounced stateside. And Trump’s tax reform plans promise to only make it worse. It looks like Bernie Sanders might be the only politician in the US to stop it, but what are the odds of that? We live in a system that is warranting economic suicide for everyone including its own proponents, and we’re blindly following it like so many lemmings.

The Koyaanisqatsi film doesn’t have a happy Hollywood ending, and it makes no pretense of it. Our Koyaanisqatsi economy will not end with ‘they lived happily ever after’ either. The protagonists wouldn’t know how to achieve that. They don’t understand what makes an economy run, and keeps it running.

And they don’t want to understand, because they think it’ll make them less rich. Nobody gives balance a second’s thought. Presumably because they think the system, like nature, will eventually balance itself. And they’re right in that. They just haven’t considered what that balancing act might mean for them personally.

if you’re rich, good on you. But don’t forget what made it possible for you to gather your riches, or you’ll lose them, and probably a lot more too.

 

 

 

Sep 272017
 
 September 27, 2017  Posted by at 1:31 pm Finance Tagged with: , , , , , , , ,  8 Responses »
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Fan Ho Construction 1952

 

You would think, certainly if you were as naive and innocent as I am, that when you get offered the job of Chair of the Federal Reserve, you must be sure, before accepting, that you have the credentials and the knowledge required. If you don’t, it looks as if you don’t take the job seriously. Janet Yellen, who’s been Chair since January 2014, doesn’t seem to agree.

In a speech Tuesday for the National Association for Business Economics Yellen ‘honestly’ admitted that she doesn’t understand inflation, control of which is the Fed’s no.1 task (it’s debatable whether that’s a good idea). She doesn’t understand a bunch of other issues either. Those are her own words, not mine. Here are these own words:

“My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation..”

Clear enough, you would think. But she didn’t offer her resignation. And for an important post like Fed chair, that is a major problem. As she undoubtedly does. So why is she keeping her job? Doesn’t she realize that when you don’t understand the issues you deal with, you’re prone to make disastrous mistakes?

Yellen and her colleagues work with models, and the models are wrong. The Fed’s predictions for things like inflation are ridiculously off, all the time. That may be news to her, but it’s old hash for many people in her field. So that she’s surrounded solely by people who don’t understand these things either is not an excuse.

So what does she expect now? That she will start to understand them all of a sudden, after years and years of not being able to? That reality will change to comply with her models? We can discount the option that she will suddenly begin using entirely different models, they’re all she has. But what then?

Under her predecessor Ben Bernanke, who never conceded he had no idea either but still didn’t, the Fed lowered interest rates to near zero Kelvin and bought trillions of dollars in bonds and securities. Now Yellen for some reason thinks it’s time to get rid of the stuff.

But on what basis does she make such a decision, if she self-admittedly doesn’t even understand the fundamental forces in play? How is that different from handing a box of matches to a 3-year old? Isn’t she really simply an academic dropped in a casino? From CNBC:

Yellen said a regular pace of rate hikes ahead is likely still warranted, though Fed officials are looking closely at the assumptions underlying those projections. While conceding that the Fed may need to slow the removal of accommodation, she also said the central bank “should also be wary of moving too gradually.”

There comes a point when naive innocent me starts asking: what does that even mean? Rate hikes are warranted but we don’t know why? Accommodative policies have been going too fast but they shouldn’t be too slow? Based on what? It can only be based on models that have proven faulty, can’t it, because they have no others.

 

Here are a few pointers for the occupants of the Marriner S. Eccles Federal Reserve Board Building. Inflation is money velocity multiplied by money and credit supply. MV = PY. M is money supply, V is velocity, P is price level and real GDP is Y.

Velocity of money means consumer spending. 70% of US GDP is consumer spending. But American consumers are neck deep in debt and have very little money left to spend. Much of what they spend, they must borrow.78% of Americans live paycheck to paycheck. So forget about money velocity.

 

 

Moreover, as for the Fed’s second mandate after inflation, full employment, they don’t get that one either. They seem to act on the presumption that any one job is just like the other. And then bleat: “My colleagues and I may have misjudged the strength of the labor market”.

But America has turned into a nation where the gig economy (the natural successor to first the knowledge economy, then the service economy), waiters, greeters and people working 3 jobs just to make ends meet have become the norm. When in the present circumstances you claim to have almost ‘achieved’ full employment, as Yellen and the Fed do, you must really be blind as a bat.

The other side of the equation is money supply. Interestingly, the Fed has issued tons of it, but handed it all to its owner banks. If they had spent it inside the economy itself, we could have been looking at a whole other picture. If those trillions would have gone to investment, manufacturing etc., instead of propping up banks and companies buying their own shares, Yellen might have actually seen some inflation.

If Americans have no money to spend, there can not be inflation. Simple. But the same stupid faulty predictions just keep coming:

 

 

So why is anybody still paying attention to Janet Yellen? Well, because she has her finger on the biggest financial trigger on the planet. No matter how shaky and uneducated that finger may be. Or do we pay attention exactly because we know what’s behind that shaky finger? Do we all put everything on red just because grandma does it too?

The craziest thing of all is that in reactions in the media to Yellen’s speech, she’s praised for admitting she has no clue what she’s doing. That takes the cake. And eats it too. Praised for admitting you’re terribly unfit for your job. That’s just great. That’s Bizarro world.

It’s well past best before time to get rid of Janet Yellen, and all the intellectual but idiots who work at the Fed. What is it, 1,000 PhDs, or was that 10,000? But the only thing that makes any real sense of course, the only thing that can save the nation, is to get rid of the Fed and its braindead mandates, interests and occupants altogether.

Hedgeye got this one painfully right:

 

 

And yeah, I know Yellen could be fired too if she doesn’t resign, but with Goldman Sachs all over the White House, what are the odds? And who would come in when she goes? She’s ideal, who’s going to get angry at a barely 5′ grandmother even is she clearly out of her depth and league?

 

 

Sep 262017
 
 September 26, 2017  Posted by at 1:21 pm Finance Tagged with: , , , , , , , , ,  7 Responses »
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Fan Ho The Evening of Life 1963

 

“Forget Germany, Spain Is The Real Problem”, reads a headline. Eh… no. Germany is definitely the problem in Europe. Spain is a bit player. That doesn’t mean nothing major could happen in Spain in its fight with Catalonia, and soon, but Spain, like all EU nations, is a de facto province of Germany.

What matters in the end is how Brussels and Merkel deal with Spain. And while it’s tempting to say that perhaps Brussels, the EU, is the main European problem, the European Union is run exclusively by and for Germany, so that doesn’t work either.

The only thing that might work if you really want to find a bigger issue than Germany is if you would point at the role the incessant lies about economic conditions for people play. But that’s not a European issue, that’s global.

The talk about how economies are recovering, how there’s light at the end of the tunnel, and how any day now we’ll be back to where we were at some point in time that many can not even remember. But then, at least when it comes to Europe, that happy talk comes from Germany too, to a large degree. Just wait till Draghi starts cutting his QE.

You can try and tell people that they’re doing just great, using the media you control, and it’ll work for a stretch, if only because they want to believe it, badly, but when these same people can’t even feed their children while you make such claims, you will eventually lose their attention and support. The difference between beliefs and experiences.

 

If you’re a politician, you try to feed people what they want to hear, invariably an upbeat message, but there comes a time when you have to back it up. You can say that austerity is necessary, inevitable, and the only choice, and it will be beneficial to them, but austerity is one of those things that have a very limited best before date.

If you can only make employment numbers look good by creating a gig economy that takes away all their benefits, and their entire sense of security, they’re going to turn their backs on you. Because you’re lying.

Rising inequality is a one way street right up to the point where it turns into a dead end alley. Inequality breeds more inequality until it no longer can, until people say ‘I want that cake you are having because my kids are hungry. And I brought a pitchfork’.

That is where we’re at, and that is why Merkel lost some 25% of her votes. That is why there’s Trump and Brexit, and why an impossible candidate like Marine Le Pen in France gathered so much attention and support. It’s why eastern European countries will start fighting Brussels and Berlin much harder than they have to date, and why Berlin will fight back harder than it has. Poor Greece.

In the US, there’s only one party, and it divvies up the spoils of very rich campaign contributions. Bernie Sanders tried to circumvent this; not a chance. Trump succeeded. In Britain, there was no difference between left and right for a long time, and no alternative party either. That led to Brexit. In France, Macron started a whole new party from scratch and somehow got it funded (bankers?!). It wiped the left off the map.

The same happened in Holland, where like in France the right wing alternative was judged too unpalatable by too many. No left left. The leaders of Germany’s Alternative für Deutschland do not have the visibility for that yet. In Italy, Five Star have a good shot at the throne. Greece’s Syriza already overtook both left and right. In eastern Europe, right wing parties often didn’t even have to overthrow an existing order, they could just slide in.

 

The pattern is so obvious only those who stand to lose from acknowledging it end up not seeing it, or telling themselves it’s all just an incident. But it’s not, because the shrinking economies everywhere are not. When left and right, either in public or in practice, rule a country together and their promises don’t hold up, people will look for a way out. If far right is the only way available, they will pick that.

It’s not because they’re all nazis or something like that. But people do lean towards smaller units of organization, decentralization, when they get poorer. And despite all the talk of recovery, that is what most people have seen happen to their lives, while their leaders told them they’re just fine. So you get this kind of headline (and map) for the US (h/t Mish/ZH).

Large Parts Of America Are Being Left Behind

Economic prosperity is concentrated in America’s elite zip codes, but in an interesting report on Distressed Communities, from The Economic Innovation Group, it is increasingly clear that economic stability outside of those communities is rapidly deteriorating. As Axios noted, this isn’t a Republican or Democratic problem. At every level of government, both parties represent distressed areas. But the economic fortunes of the haves and have-nots have only helped to widen the political chasm between them, and it has yet to be addressed by substantial policy proposals on either side of the aisle. Economic Prosperity Quintiles.

 

 

And a very similar headline appears in the Guardian in a report about the German election.

 

‘A Lot of People Feel Left Behind’: Voters on the Far-Right Surge in Germany

Sarah, 37, teacher, Bonn: “A lot of people feel left behind. They are looking for scapegoats. It is the easy way to deal with problems. The AFD makes use of this feeling. With the grand coalition, there was no real debating culture left. The CDU went too much into the middle, leaving the right out. Just like the SPD under Schröder left the left-wing out.”

Perhaps a lot of those who voted for Trump, and Brexit, Le Pen, Wilders, the AfD, are not so much looking for scapegoats, they’ve identified those as their incumbent politicians; they’re instead looking for a way away from them. All these people who feel left behind base that feeling primarily on their deteriorating economic circumstances. And if the only alternative they have rants, against foreigners and immigrants, they’ll go with that.

Angela Merkel pushed over 1 million refugees and immigrants down the German population’s throats. She never asked their opinion. But many Germans are not doing any better than many Americans or French or British. So the consequences of such things are predictable. You have to explain, you have to communicate with your people. Just saying ‘we can do this’ is not enough. No more than ‘change we can believe in’ was. It’s just hollow.

Merkel lost ‘only’ 25% of her votes. Because Germans know what right wing is, and what it can do. Germany is not full of nazis, no more than America is. Both countries just have a lot of people who feel trapped in a web of lies, and their existing and alleged democratic systems offer no way out of that web.

All these countries, the people and their politicians, have the tendency to see their situations as somehow unique, but they’d be much better off looking at what they have in common with others.

The only solution is to tell people the truth, that the incumbent political class has screwed up badly because of limited brain capacity and unlimited greed, and that they should elect people next time who are both smarter and less sociopathic. But that is not something that comes voluntarily, that takes a battle. And it tends to end careers, and lives.

That is what we can expect. In many different shapes and forms, but all for the same underlying reasons. You can’t fool all of the people all of the time, you can’t even fool a majority for long. You can only fool a limited number of them for a limited amount of time.

Well, time’s up.

 

 

Sep 222017
 
 September 22, 2017  Posted by at 9:15 am Finance Tagged with: , , , , , , , , , ,  3 Responses »
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Harry Callahan Chicago 1947

 

Albert Edwards: The Bank Of England’s ‘Monetary Schizophrenia’ (CW)
4-Warnings For The Bull Market (Roberts)
QT1 Will Lead to QE4 Rickards)
S&P Strips Hong Kong of AAA Rating A Day After China Downgrade (BBG)
China Hits Back At S&P’s ‘Mistaken’ Credit Downgrade (AFP)
Jamie Dimon Faces Market Abuse Claim Over Bitcoin Comments (ZH)
Spain’s Attack On Catalonia Spills Over To 100,000 Domain Names (IN)
Spain Hires Cruise Liner to House Police in Rebel Catalonia (BBG)
Greece Will Remain Under Strict Supervision For Years, EWG Chief Says (K.)
Life Unlikely Beyond 115 Year Mark Despite Medical Advances (DT)

 

 

“At the same time it is warning of a consumer credit bubble, the BoE has just increased its programme of lending to banks at preferential rates to increase bank lending in things like, yes you’ve guessed it, consumer credit!”

Albert Edwards: The Bank Of England’s ‘Monetary Schizophrenia’ (CW)

After last month admitting he was becoming tired of central bank bashing – a feeling many of his readers may relate to – Albert Edwards has launched another scathing attack. The Bank of England (BoE) was in the line of fire this time, with the SocGen strategist claiming Mark Carney’s team was leading the way when it comes to ‘monetary schizophrenia’. Edwards finds it remarkable how similar the US and UK macro situations often are. ‘This was most evident in the run-up to the 2008 global financial crisis with both the Federal Reserve and Bank of England (BoE) asleep at the wheel, building a most precarious pyramid of prosperity upon the shifting sands of rampant credit growth and illusory housing wealth,’ he said. ‘These of all the major central banks were the most culpable in their incompetence and most prepared with disingenuous excuses. And 10 years on, not much has changed.

‘The Fed and BoE are once again presiding over a credit bubble, with the BoE in particular suffering a painful episode of cognitive dissonance in an effort to shift the blame elsewhere. The credit bubble is everyone’s fault but theirs.’ Edwards sees unsecured credit at the heart of the problem, where growth has shot up by more than 10% in both the UK and US. Edwards accepts the debt time-bomb is specific to the UK. ‘We are in a QE, zero interest rate world, where central banks are effectively force-feeding debt down borrowers’ throats. They did it in 2003-2007 and they are doing it again,’ he highlights. ‘Most of the liquidity merely swirls around financial markets, but there is certainly compelling evidence now of a consumer credit bubble in both the UK and US (as well as a corporate credit bubble in the US).’

However, he finds the reaction of the BoE most ‘bizarre’, with Carney darkly warning banks of lessons of the past while recently increasing bank capital requirements on consumer loans. The perplexed Edwards points out: ‘At the same time it is warning of a consumer credit bubble, the BoE has just increased its programme of lending to banks at preferential rates to increase bank lending in things like, yes you’ve guessed it, consumer credit!

Read more …

“It may not ‘feel’ like the mania of the late 1990s to early 2000, but in terms of actually measurable data, the overall bullish consensus seems to be even greater than it was back then.”

4-Warnings For The Bull Market (Roberts)

As I have discussed many times previously, the stock market rise has NOT lifted all boats equally. More importantly, the surge in confidence is a coincident indicator and more suggestive, historically, of market peaks as opposed to further advances. As David Rosenberg, the chief economist at Gluskin Sheff noted: ‘For an investment community that typically lives in the moment and extrapolates the most recent experience into the future, it would only fall on deaf ears to suggest that peak confidence like this and peak market pricing tend to coincide with each other.” He is absolutely correct. As shown below in the consumer composite confidence index (an average of the Census Bureau and University Of Michigan surveys), previous peaks in confidence have been generally associated with peaks in the market.

For those of you unfamiliar with Texas sayings, “all hat, no cattle” means that someone is acting the part without having the “stuff” to back it up. Just wearing a “cowboy hat,” doesn’t make you a “cowboy.” I agree with the premise that leverage alone is not a problem for stocks in the short-term. In fact, it is the increase in leverage which pushes stock prices higher. As shown in the chart below, there is a direct correlation between stock price and margin debt growth. But, margin debt is NOT a benign contributor. As I discussed previously in “The Passive Indexing Trap:” “At some point, that reversion process will take hold. It is then investor ‘psychology’ will collide with ‘margin debt’ and ETF liquidity. It will be the equivalent of striking a match, lighting a stick of dynamite and throwing it into a tanker full of gasoline.”

Not surprisingly, the expansion of leverage to record levels coincides with the drop in investor cash levels to record lows. As noted by Pater Tenebrarum via Acting-Man blog: “Sentiment has become even more lopsided lately, with the general public joining the party. It may not ‘feel’ like the mania of the late 1990s to early 2000, but in terms of actually measurable data, the overall bullish consensus seems to be even greater than it was back then. Along similar lines, here is a recent chart that aggregates the relative cash reserves of several groups of market participants (including individual investors, mutual fund managers, fund timers, pension fund managers, institutional portfolio managers, retail mom-and-pop type investors). It shows that there is simply no fear of a downturn:”

So much for the “cash on the sidelines” theory. When investors believe the market can’t possibly go down, it is generally time to start worrying. As Pater concludes: “As a rule, such extremes in complacency precede crashes and major bear markets, but they cannot tell us when precisely the denouement will begin.”

Read more …

“The Fed has essentially trapped itself into a state of perpetual manipulation.” All major central banks have.

QT1 Will Lead to QE4 Rickards)

There are only three members of the Board of Governors who matter: Janet Yellen, Stan Fischer and Lael Brainard. There is only one Regional Reserve Bank President who matters: Bill Dudley of New York. Yellen, Fischer, Brainard and Dudley are the “Big Four.” They are the only ones worth listening to. They call the shots. The don’t like dots. Everything else is noise. Here’s the model the Big Four actually use: 1. Raise rates 0.25% every March, June, September and December until rates reach 3.0% in late 2019. 2. Take a “pause” on rate hikes if one of three pause factors apply: disorderly asset price declines, jobs growth below 75,000 per month, or persistent disinflation. 3. Put balance sheet normalization on auto-pilot and let it run “on background.” Don’t use it as a policy tool.

[..] Here’s what the Fed wants you to believe… The Fed wants you to think that QT will not have any impact. Fed leadership speaks in code and has a word for this which you’ll hear called “background.” The Fed wants this to run on background. Think of running on background like someone using a computer to access email while downloading something on background. This is complete nonsense. They’ve spent eight years saying that quantitative easing was stimulative. Now they want the public to believe that a change to quantitative tightening is not going to slow the economy. They continue to push that conditions are sustainable when printing money, but when they make money disappear, it will not have any impact. This approach falls down on its face — and it will have a big impact.

Markets continue to not be fully discounted because they don’t have enough information. Contradictions coming from the Fed’s happy talk wants us to believe that QT is not a contractionary policy, but it is. My estimate is that every $500 billion of quantitative tightening could be equivalent to one .25 basis point rate hike. The Fed is about to embark on a policy to let the balance sheet run down. The plan is to reduce the balance sheet $30 billion in the fourth quarter of 2017, then increase the quarterly tempo by an additional $30 billion per quarter until hitting a level of $150 billion per quarter by October 1, 2018. Under that estimate, the balance sheet reduction would be about $600 billion by the end of 2018, and another $600 billion by the end of 2019. That would be the equivalent of half a .25 basis point rate hike in each of the next two years in addition to any actual rate hikes.

While they might attempt to say that this method is just going to “run on background,” don’t believe it. The decision by the Fed to not purchase new bonds will be just as detrimental to the growth of the economy as raising interest rates. The Fed’s QT policy that aims to tighten monetary conditions, reduce the money supply and increase interest rates will cause the economy to hit a wall, if it hasn’t already. The economy is slowing. Even without any action, retail sales, real incomes, auto sales and even labor force participation are all declining. Every important economic indicator shows that the U.S. economy is slowing right now. When you add in QT, we may very well be in a recession very soon. Because they’re getting ready for a potential recession where they’ll have to cut rates yet again. Then it’s back to QE. You could call that QE4 or QE1 part 2. The Fed has essentially trapped itself into a state of perpetual manipulation.

Read more …

Hong Kong dollar is pegged to USD.

S&P Strips Hong Kong of AAA Rating A Day After China Downgrade (BBG)

S&P Global Ratings cut Hong Kong’s credit rating a day after it downgraded China for the first time since 1999, a move that reflects the “strong institutional and political linkages” between the special administrative region and the mainland, the ratings firm said. The financial hub’s long-term issuer credit rating was lowered to AA+ from AAA, S&P said in a statement Friday. The agency lowered China’s sovereign rating Thursday to A+ from AA-, citing the risks from soaring debt, and revised its outlook to stable from negative. “We are lowering the rating on Hong Kong to reflect potential spillover risks to the SAR should deleveraging in China prove to be more disruptive than we currently expect,” S&P said in a statement, referring to the Hong Kong special administrative region.

It’s the second time this year Hong Kong’s rating has been cut in response to a China downgrade. Moody’s Investors Service in May lowered the finance hub’s rating and changed the outlook to stable from negative after it cut China for the first time since 1989. “Downgrading Hong Kong after China is a natural step,” said Mark McFarland, chief Asia economist at Union Bancaire Privee. “It has been widely anticipated that S&P would eventually follow the others and that Hong Kong would be dropped a notch too.” While S&P said Hong Kong’s credit metrics remain “very strong” based on the strength of the central government in Beijing, it faces a slew of challenges from surging property prices to the Federal Reserve’s plans to raise interest rates. Because the former British colony’s currency is pegged to the dollar, it effectively imports U.S. monetary policy.

Read more …

The only thing they can do. But claiming that China is ‘so different’ from developed nations is not terribly encouraging.

China Hits Back At S&P’s ‘Mistaken’ Credit Downgrade (AFP)

China on Friday lashed out at the decision by Standard & Poor’s to downgrade the country’s credit rating, calling the warning against ballooning debt “mistaken” and based on “cliches” about its economy. The agency slashed China from AA-minus to A-plus on Thursday, a move that followed a similar decision in May by Moody’s stemming from concerns that the world’s second largest economy is increasingly overleveraged. “Standard & Poor’s downgrade of China’s sovereign credit rating is a mistaken decision,” the finance ministry said in a statement, adding that the move was “perplexing.” It went on to scold the company for making a decision based on “cliches” about China’s economy. The rating “ignores the unique characteristics of the capital raising structure of China’s financial markets”, it said.

“Most unfortunately, this is inertial thinking that international ratings agencies have held for a long time and is a misreading of China’s economy based on the experiences of developed countries,” the ministry said. “This misreading also overlooks the good fundamentals and development potential of China’s economy.” S&P followed the move on Friday by cutting the top-notch credit rating of Hong Kong citing the city’s close links the the mainland economy. Debt-fuelled investment in infrastructure and property has underpinned China’s rapid growth, but there are widespread concerns that years of freewheeling credit could lead to a financial crisis with global implications. Beijing has been clamping down on bank lending and property purchases, but those efforts are complicated by the government’s determination to meet its full-year growth target of around 6.5%. That compares with last year’s pace of 6.7%, which was the slowest in more than a quarter of a century.

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JPMorgan trading in what its CEO calls a fraud demands some answers.

Jamie Dimon Faces Market Abuse Claim Over Bitcoin Comments (ZH)

A week after Jamie Dimon made headlines by proclaiming Bitcoin a “fraud” and anyone who owns it as “stupid,” the JPMorgan CEO faces a market abuse claim for “spreading false and misleading information” about bitcoin. Unless you have been living under a rock for the past week, you will be well aware of JPMorgan CEO Jamie Dimon’s panicked outburst with regard the ‘fraud’ that Bitcoin’s ‘tulip-like’ bubble is. To paraphrase: “It’s a fraud. It’s making stupid people, such as my daughter, feel like they’re geniuses. It’s going to get somebody killed. I’ll fire anyone who touches it.” One week later, an algorithmic liquidity provider called Blockswater has filed a market abuse report against Jamie Dimon for “spreading false and misleading information” about bitcoin. The firm filed the report with the Swedish Financial Supervisory Authority against JPMorgan Chase and Dimon, the company’s chief executive.

Blockswater said Dimon violated Article 12 of the EU Market Abuse Regulation (MAR) by declaring that cryptocurrency bitcoin was “a fraud”. The complaint said Dimon’s statement negatively impacted “the cryptocurrency’s price and reputation”. It also said Dimon “knew, or ought to have known, that the information he disseminated was false and misleading”. “Jamie Dimon’s public assertions did not only affect the reputation of bitcoin, they harmed the interests of some of his own clients and many young businesses that are working hard to create a better financial system,” said Florian Schweitzer, managing partner at Blockswater. Blockswater said JPMorgan traded bitcoin derivatives for their clients on Stockholm-based exchange Nasdaq Nordic before and after Dimon’s statements, which Schweitzer said “smells like market manipulation”.

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Democracy 2017.

Spain’s Attack On Catalonia Spills Over To 100,000 Domain Names (IN)

The offices of the .cat registry were raided by Spanish police this morning. The Guardia Civil officers entered the .cat registry’s offices around 9am local time this morning and have seized all computers in the domain registry’s offices in downtown Barcelona. The move comes a couple of days after a Spanish court ordered the domain registry to take down all .cat domain names being used by the upcoming Catalan referendum. The .cat domain registry currently has over 100 thousand active domain names and in light of the actions taken by the Spanish government it’s unclear how the registry will continue to operate if their offices are effectively shutdown by the Spanish authorities. The seizure won’t impact live domain names or general day to day operations by registrars, as the registry backend is run by CORE and leverages global DNS infrastructure. However it is deeply worrying that the Spanish government’s actions would spill over onto an entire namespace.

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Why do you think the Catalans want out? Spain is answering that.

Spain Hires Cruise Liner to House Police in Rebel Catalonia (BBG)

Spain has discreetly hired ferries to be moored in the Port of Barcelona as temporary housing for possibly thousands of police specially deployed to keep order in rebel Catalonia and help suppress an illegal independence referendum. The country’s interior ministry asked Catalan port authorities to provide a berth for one ship until Oct. 3 – two days after the planned vote – saying it was a matter of state, a spokeswoman for the port said by phone Wednesday. The vessel, known as “Rhapsody,” docked in the city about 9:30 a.m. Thursday, she said. The aim is to amass more than 16,000 riot police and other security officers by the Oct. 1 referendum, El Correo newspaper reported on its website. That would exceed the number of Catalan police, the Mossos d’Esquadra, who serve both the Catalan and central governments.

Spain is putting more boots on the ground in the northeastern region as it arrests local officials, raids regional-government offices and takes control of payroll administration in the run-up to the referendum. The ballot initiative, passed by the Catalan Parliament and declared illegal by the country’s highest court, has escalated a years-long stand-off between pro-independence campaigners and Spain’s central administration in Madrid. As well as the “Rhapsody,” with capacity for 2,448 people, the ministry also hired another vessel to dock in Barcelona with a third headed for the port of Tarragona, 100 kilometers (60 miles) west along the coast, El Confidencial website reported. The “Rhapsody” is operated by the Italian shipping company Grandi Navi Veloci SpA, the port spokeswoman said.

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Without debt relief all streets are dead ends.

Greece Will Remain Under Strict Supervision For Years, EWG Chief Says (K.)

The Greek economy will remain under close supervision for years after the completion of the third bailout deal, the president of the Euro Working Group (EWG), Thomas Wieser told insider.gr in an interview published on Wednesday. Even though he is confident the cash-strapped country will be able to recover, Wieser says that a lot of work needs to be done first, starting with the timely completion of the third bailout review. He also suggests that additional measures may be needed in 2019 and 2020 depending on the course of the budget next year. Asked whether he believes this will be Greece’s last memorandum, the Austrian-American economist says “three programs have already been implemented in the space of eight years and the political desire for yet another is zero. The rest of the eurozone also wants the third program to be the last one.”

Wieser adds that Greece’s ability to tap international lending markets by the end of the program in August 2018 will be a “decisive factor for the Greek government to push ahead with reforms.” “In other words, knowing that the program is ending in a few months is a huge incentive to get the reforms done,” he says, adding that a successful completion of the program is within reach given the government’s limited fiscal obligations. Wieser appears confident that Greece will successfully wrap up the upcoming review within the fall even though the government needs to push through 95 so-called prior actions, saying the majority has already been legislated. However, he adds, Greece may need additional measures after August 2018 depending on whose scenario plays out: the IMF’s pessimistic outlook, or the upbeat projects of the European institutions and the Greek government.

Greece will also remain under supervision – as have Spain, Ireland, Portugal and Cyprus – until 75% of its debts are paid off, and this will be much stricter “in the first few years at least, than, say, it was for Ireland,” Wieser adds. Regarding debt relief, Wieser tells insider.gr that “an analysis will be conducted in the summer of 2018 and a decision taken upon the completion of the program.”

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Freedom exists because there are limits and boundaries. Living forever is not freedom.

Life Unlikely Beyond 115 Year Mark Despite Medical Advances (DT)

Researchers claim to have discovered the maximum age ‘ceiling’ for human lifespan. Despite growing life expectancy because of better nutrition, living conditions and medical care, Dutch scientists say our longevity cannot keep extending forever. Women can only live to a maximum of 115.7 years, they said, while men can only hope for 114.1 years at the most. The research by statisticians at Tilburg and Rotterdam’s Erasmus universities said, however, there were still some people who had bent the norm. The research by statisticians at Tilburg and Rotterdam’s Erasmus universities said women could live to a maximum of 115.7 years, while men could only hope for 114.1 years at the most. However, they did concede that there were exceptions, like Jeanne Calment, the French woman who died in 1997 at the age of 122 years and 164 days old – the longest life ever recorded.

Lifespan is the term used to describe how long an individual lives, while life expectancy is the average duration of life that individuals in an age group can expect to have – a measure of societal wellbeing. The team mined data over 30 years from some 75,000 Dutch people whose exact ages were recorded at the time of death. “On average, people live longer, but the very oldest among us have not gotten older over the last thirty years,” Prof John Einmahl said. “There is certainly some kind of a wall here. Of course the average life expectancy has increased,” he said, pointing out the number of people turning 95 in the Netherlands had almost tripled. “Nevertheless, the maximum ceiling itself hasn’t changed,” he said.

The Dutch findings, to be published next month, come in the wake of those by US-based researchers who last year claimed a similar age ceiling. However, that study by Albert Einstein College of Medicine in New York found that exceptionally long-lived individuals were not getting as old as before. Einmahl and his researchers disputed that, saying their conclusions deduced by using a statistical brand called ‘Extreme Value Theory’, showed almost no fluctuation in maximum lifespan.

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Sep 192017
 
 September 19, 2017  Posted by at 12:52 pm Finance Tagged with: , , , , , , , , ,  11 Responses »
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Wynn Bullock Child on a Forest Road 1958

 

A few days ago, former Reagan Budget Director and -apparently- permabear (aka perennial bear) David Stockman did an interview (see below) with Stuart Varney at Fox -a permabull?!-, who started off with ‘the stock rally goes on’ despite a London terror attack and the North Korea missile situation. His first statement to Stockman was something in the vein of “if I had listened to you at any time after the past 2-3 years, I’d have lost a fortune..” Stockman shot back with (paraphrased): “if you’d have listened to me in 2000, 2004, you’d have dodged a bullet”, and at some point later “get out of bonds, get out of stocks, it’s a dangerous casino.” Familiar territory for most of you.

I happen to think Stockman is right, and if anything, he doesn’t go far enough, strong enough. What that makes me I don’t know, what’s deeper and longer than perennial or perma? But it’s Varney’s assumption that he would have lost a fortune that triggered me this time around. Because it’s an assumption built on an assumption, and pretty soon it’s assumptions all the way down.

First, that fortune is not real, unless and until he sells the stocks and bonds he made it with. If he has, that would indicate that he doesn’t believe in the market anymore, which is not very likely for a permabull to do. So Varney probably still has his paper ‘fortune’. I’m using him as an example, of course, of all the permabulls and others who hold such paper.

Presumably, they often also think they have made a fortune, and presumably they also think that means they are smart. But that begs a question: how can it be smart to put one’s money into paper that is ‘worth’ what it is today ONLY because the world’s central banks have been handed the power to save the ailing banks that own them with many trillions of freshly printed QE? And no, there can be no doubt of that.

And there are plenty other data that tell the story. The world’s central banks have blown giant bubbles all over the place. That’s where the bulls’ “fortunes” come from. They are bubble fortunes. It has nothing to do with being smart. And of course, as I’ve said many times before, there are no investors left to begin with, because you can’t be an investor if there are no functioning markets, and for a market to function you need price discovery.

Which is exactly what central banks have killed. No-one has one iota of a clue what anything is really worth, what the difference between ‘price’ and ‘value’ is. Stockman at one point suggests people should hold on to Microsoft, but does he really believe that Bill Gates will remain standing when everyone around him crashes? That tech stocks are immune to the impending crash for some reason? If true, that would seem to indicate that tech stocks represent real value while -virtually- no others do. Hard to believe.

Please allow me to insert a graph. This one is from Tyler Durden the other day, and it paints a clear picture as much as it raises a big question. It suggests that until December 2016 the S&P and the ‘real economy’ were in lockstep. I think not. But one thing’s for sure: ever since January, i.e. the Trump presidency, the gaping gap between the two has grown so fast it’s almost funny.

 

 

Not that I would for one moment wish to blame Trump for that; he’s merely caught up in a wave much larger than an election or a White House residency. What is happening to the US -and global- economy goes back decades, not months. Which makes the graph puzzling, too, obviously. Just ask the new-fangled platoons of waiters and greeters with multiple jobs in America. And/or the 50-60-70% who can’t afford a $500 emergency bill, the 97 million who live paycheck to paycheck.. America’s already crashing, it’s just a matter of waiting for the markets to catch up with America’s reality. That’s what price discovery is about. Here’s another, similar, graph. Note: I don’t really want to go and find the best graphs, we’ve posted and re-posted so many of them it would feel like an insult to everyone involved.

 

 

But I digress. This was to be about Stuart Varney and the platoons and legions of permabulls out there. As I said, many of them, make that most, will feel they’ve made their fortune because they’re smart. Even if riding a Yellen and Draghi and Abenomics wave has zilch to do with intelligence. But there’s another side to that supposed smartness. And Stockman is on to it.

The large majority of people who think they got rich because they’re smart will also lose their ‘fortunes’ because they think they’re smart. It is inevitable, it’s a mathematical certainty. And not only because the central banks are discussing various forms of tapering. It’s a certainty because those who think they’re smart will hold on to their ‘assets’ too long. Because the markets will become much less liquid. Because the doors through which people will have to pass to escape the fire are too narrow to let them all though at the same time.

Fortunes built on central banks largesses are virtual. You have to sell your assets to make them real. But the same mechanics that blew the bubbles in housing, stocks, bonds et al also keep people from selling them. Until it’s too late. It may seem easier to sell stocks and bonds than homes, and it is, but in a crash it’s harder than one might think. And prices can come down very rapidly in very little time.

So perhaps the right way to look at this is to tell yourself you were not smart at all when you made that fortune, but now you’re going to smarten up. There will be a few people who do that, but only a few. Most will feel confident that they can see the crash coming in time to get out. Because they’re smart enough. After all, they just made a fortune, right?

It’s not just individuals. Pension funds have been accumulating huge portfolios in ever riskier ‘assets’. Which of them will be able to react fast enough if things start unraveling? And for the lucky few that will, what are they going to buy with the money? Bonds, stocks? Gold perhaps? Crypto? Everyone at once?

Don’t let’s forget that one of the main characteristics -and its consequences- of the everything bubble the central banks granted us is far too often overlooked: leverage. Low interest rates have made borrowing stupidly cheap, and so everyone has borrowed. As soon as things start crashing, there will be margin calls, lines of credit will be withdrawn, people and institutions will have to panic sell (everything including crypto) just to try to stay somewhat afloat, it’s all very predictable and we’ve seen it all before.

But yes, you’re right. The rally continues. And we can’t know what will trigger the downfall, nor can we pinpoint the timing. Still, it should be enough to know that it’s coming. Alas, for many it is not. They’re blinded by the light. But even that light is not real. It’s entirely virtual.

 

 

 

 

 

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

 

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

 

 

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

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

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

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

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Eerie.

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

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

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

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

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

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

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

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

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

Stock, Flow or Impulse? (JPMi)

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

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

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

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Do low rates kill growth?

Signs, Signs, Everywhere A Sign (Roberts)

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

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

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

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China’s too late.

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

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

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

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

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

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

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

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

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

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

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

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

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

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But the feeding frenzy will continue.

Laughing on the Way to Armageddon (PCR)

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

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

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

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

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The UK needs a national government. Or else.

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

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

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

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It needs a national conscience too.

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

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

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

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

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

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

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

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

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

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

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

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

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Interesting mystery. No answers so far.

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

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

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

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

Read more …

Aug 272017
 
 August 27, 2017  Posted by at 12:27 pm Finance Tagged with: , , , , , , , , ,  9 Responses »
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Henri Cartier-Bresson Trafalgar Square on the Day of the Coronation of George VI 1937

 

The Jackson Hole gathering of central bankers and other economics big shots is on again. They all still like themselves very much. Apart from a pesky inflation problem that none of them can get a grip on, they publicly maintain that they’re doing great, and they’re saving the planet (doing God’s work is already taken).

But the inflation problem lies in the fact that they don’t know what inflation is, and they’re just as knowledgeable when it comes to all other issues. They get sent tons of numbers and stats, and then compare these to their economic models. They don’t understand economics, and they’re not interested in trying to understand it. All they want is for the numbers to fit the models, and if they don’t, get different numbers.

Meanwhile they continue to make the most outrageous claims. Bank of England Governor Mark Carney said in early July that “We have fixed the issues that caused the last crisis.” What do you say to that? Do you take him on a tour of Britain? Or do you just let him rot?

Fed head Janet Yellen a few days earlier had proclaimed that “[US] Banks are ‘very much stronger’, and another financial crisis is not likely ‘in our lifetime’. “ While we wish her a long and healthy life for many years to come, we must realize that we have to pick one: it has to be either a long life, or no crisis in her lifetime.

Just a few days ago, ECB President Mario Draghi somehow managed to squeeze through his windpipe that “QE has made economies more resilient”. Even though everybody -well, everybody who’s not in Jackson Hole- knows that QE has blown huge bubbles in lots of asset classes and caused severe damage to savings and pensions, problems that will reverberate through economies for a long time and rip entire societies apart.

But they really seem to believe what they say, all of them. Which is perhaps the biggest problem of all. That is, either they know better and lie straight-faced or they are blind to what they’re doing. Which might be caused by the fact that they are completely blind to what goes on in their countries and societies, and focus exclusively on banking systems. But that’s not where financial crises reside, or at least not only there.

How do we know? Easy. Try this on for size.

78% of Americans Live Paycheck To Paycheck

No matter how much you earn, getting by is still a struggle for most people these days. 78% of full-time workers said they live paycheck to paycheck, up from 75% last year, according to a recent report from CareerBuilder. Overall, 71% of all U.S. workers said they’re now in debt, up from 68% a year ago, CareerBuilder said. While 46% said their debt is manageable, 56% said they were in over their heads. About 56% also save $100 or less each month, according to CareerBuilder.

Haven’t seen anything as ironic in a long time as having a company called CareerBuilder report on this. But more importantly, when almost 4 out of 5 people live paycheck to paycheck, that is a financial crisis right there. Just perhaps not according to the models popular in Jackson Hole. What do they know about that kind of life, anyway? So why would they care to model it?

Yellen’s Fed proudly report almost full employment -even if they felt forced to abandon their own models of it. But what does full employment constitute, what does it mean, when all those jobs don’t allow for people to live without fear of the next repair bill, the next hospital visit, their children’s education?

What does it mean when banks are profitable again and pay out huge bonuses while at the same time millions work two jobs and still can’t make ends meet? How is that not a -financial- crisis? In the economists’ models, all those jobs must lead to scarcity in the labor market, and thus rising wages. And then inflation, by which they mean rising prices. But the models fail, time and time again.

Moreover, talking about inflation without consumer spending, i.e. velocity of money, is empty rhetoric. 78% of Americans will not be able to raise their spending levels, they’re already maxed out at the end of each week, and 71% have debts on top of that. So where will the inflation, rising wages, etc., come from? When nobody has money to spend? Nobody can put that Humpty Dumpty together again.

An actual -as opposed to theoretical- recovery of wages and inflation will certainly not come from QE for banks, that much should be clear after a decade. And that is exactly where the problem is. That is why so many people work such shitty jobs. The banks may be more resilient (and that comes with a big question mark), but it has come at the cost of the economies. And no, banks are not the same as economies. Moreover, ‘saving’ the banks through asset purchases and ultra low rates has made ‘real economies’ much more prone to the next downturn.

The asset purchases serve to keep zombie firms -including banks- alive, which will come back to haunt economies -and central banks- when things start falling. The ultra low rates have driven individuals and institutions into ‘investments’ for which there has been no price discovery for a decade or more. Homes, stocks, you name it. Everyone and their pet hamster overborrowed and overpaid thanks to Bernanke, Yellen and Draghi, and their ‘policies’.

QE for banks didn’t just not work as advertized, it has dug a mile deep hole in real economies. No economy can properly function unless most people can afford to spend money. It’s lifeblood. QE for banks is not, if anything it’s the opposite.

 

Another -joined at the hip- example of what’s really happening in -and to- America, long term and deep down, and which will not be a discussion topic in Jackson Hole, is the following from the Atlantic on marriage in America. And I can hear the disagreements coming already, but bear with me.

Both the above 78% paycheck to paycheck number and the Atlantic piece on marriage make me think back of Joe Bageant. Because that is the world he came from and returned to, and described in Deer Hunting with Jesus: Dispatches from America’s Class War. The Appalachians. I don’t believe for a moment that Joe, if he were still with us, would have been one bit surprised about Trump. And reading this stuff, neither should you.

This is not something that is new, or that can be easily turned around anymore. This is the proverbial oceanliner which requires a huge distance to change course. Victor Tan Chen’s piece is a worthwhile read; here are a few bits:

America, Home of the Transactional Marriage

Over the last several decades, the proportion of Americans who get married has greatly diminished—a development known as well to those who lament marriage’s decline as those who take issue with it as an institution. But a development that’s much newer is that the demographic now leading the shift away from tradition is Americans without college degrees—who just a few decades ago were much more likely to be married by the age of 30 than college graduates were.

Today, though, just over half of women in their early 40s with a high-school degree or less education are married, compared to three-quarters of women with a bachelor’s degree; in the 1970s, there was barely a difference. [..] Fewer than one in 10 mothers with a bachelor’s degree are unmarried at the time of their child’s birth, compared to six out of 10 mothers with a high-school degree.

The share of such births has risen dramatically in recent decades among less educated mothers, even as it has barely budged for those who finished college. (There are noticeable differences between races, but among those with less education, out-of-wedlock births have become much more common among white and nonwhite people alike.)

And then you make education so expensive it’s out of reach for a growing number of people… Insult and injury.

Plummeting rates of marriage and rising rates of out-of-wedlock births among the less educated have been linked to growing levels of income inequality. [..] Why are those with less education—the working class—entering into, and staying in, traditional family arrangements in smaller and smaller numbers? Some tend to stress that the cultural values of the less educated have changed, and there is some truth to that.

But what’s at the core of those changes is a larger shift: The disappearance of good jobs for people with less education has made it harder for them to start, and sustain, relationships. What’s more, the U.S.’s relatively meager safety net makes the cost of being unemployed even steeper than it is in other industrialized countries—which prompts many Americans to view the decision to stay married with a jobless partner in more transactional, economic terms.

And this isn’t only because of the financial ramifications of losing a job, but, in a country that puts such a premium on individual achievement, the emotional and psychological consequences as well. Even when it comes to private matters of love and lifestyle, the broader social structure—the state of the economy, the availability of good jobs, and so on—matters a great deal.

This is the erosion of social cohesion. And there is nothing there to fill that void.

Earlier this year, the economists David Autor, David Dorn, and Gordon Hanson analyzed labor markets during the 1990s and 2000s—a period when America’s manufacturing sector was losing jobs, as companies steadily moved production overseas or automated it with computers and robots. Because the manufacturing sector has historically paid high wages to people with little education, the disappearance of these sorts of jobs has been devastating to working-class families, especially the men among them, who still outnumber women on assembly lines.

Autor, Dorn, and Hanson found that in places where the number of factory jobs shrank, women were less likely to get married. They also tended to have fewer children, though the share of children born to unmarried parents, and living in poverty, grew. What was producing these trends, the researchers argue, was the rising number of men who could no longer provide in the ways they once did, making them less attractive as partners.

The perks of globalization. Opioids, anyone?

[..] In doing research for a book about workers’ experiences of being unemployed for long periods, I saw how people who once had good jobs became, over time, “unmarriageable.” I talked to many people without jobs, men in particular, who said that dating, much less marrying or moving in with someone, was no longer a viable option: Who would take a chance on them if they couldn’t provide anything?

It’s not only Joe Bageant. These are also the people Bruce Springsteen talked about when he was still the Boss.

[..] The theory that a lack of job opportunities makes marriageable men harder to find was first posed by the sociologist William Julius Wilson in regard to a specific population: poor, city-dwelling African Americans. [..] In later decades of the last century, rates of crime, joblessness, poverty, and single parenthood soared in cities across the country.

[..] In a 1987 book, Wilson put forward a compelling alternative explanation: Low-income black men were not marrying because they could no longer find good jobs. Manufacturers had fled cities, taking with them the jobs that workers with less in the way of education—disproportionately, in this case, African Americans—had relied on to support their families. The result was predictable. When work disappeared, people coped as best they could, but many families and communities frayed.

By now it’s all Springsteen, Darkness on the Edge of Town. That album is some 40 years old. That’s -at least- how long this has been going on. And why it’ll be so hard to correct.

Decades later, the same storyline is playing out across the country, in both white and nonwhite communities, the research of Autor, Dorn, and Hanson (as well as others) suggests. The factory jobs that retreated from American cities, moving to suburbs and then the even lower-cost South, have now left the country altogether or been automated away.

[..] “The kinds of jobs a man could hold for a career have diminished,” the sociologists wrote, “and more of the remaining jobs have a temporary ‘stopgap’ character—casual, short-term, and not part of a career strategy.” The result: As many men’s jobs have disappeared or worsened in quality, women see those men as a riskier investment.

This next bit is painful: life ain’t gonna get any better, so we might as well have kids.

At the same time, they are not necessarily postponing when they have kids. As the sociologists Kathryn Edin and Maria Kefalas have found in interviews with low-income mothers, many see having children as an essential part of life, and one that they aren’t willing to put off until they’re older, when the probability of complications in pregnancy can increase.

For mothers-to-be from more financially stable backgrounds, the calculation is different: They often wait longer to have children, since their career prospects and earnings are likely to improve during the period when they might otherwise have been raising a child. For less-educated women, such an improvement is much rarer.

Tan Chen follows up with a comparison of European and American safety nets, and suggests that “It’s not a matter of destiny, but policy”, but I don’t find that too relevant to why I found his piece so touching.

It describes a dying society. America is slowly dying, and not all that slowly for that matter. The Fed is comfortably holed up in Jackson Hole after having handed out trillions to bankers and lured millions of Americans into buying -or increasingly renting- properties that have become grossly overpriced due to its ZIRP policies, and congratulating itself on achieving “full employment”.

Why that ever became part of its mandate, g-d knows. I know, ML King et al. But. Thing is, when full employment means 78% of people have such a hard time making ends meet that they can’t afford to keep each other in a job by spending their money in stores etc., you’re effectively looking at a dying economy. Maybe we should not call it ‘full’, but ’empty employment’ instead.

Yeah, I know, trickle down. But instead of wealth miraculously trickling down, it’s debt that miraculously trickles up. How many Americans have mortgages or rents to pay every month that gobble up 40-50% or more from their incomes? That’d be a useful stat. Model that, Janet!

The article on marriage makes clear that by now this is no longer about money. The 40+ year crisis has ‘transcended’ all that. If and when money becomes too scarce, it starts to erode quality of life, first in individuals and then also in societies. It erodes the fabric of society. And you don’t simply replace that once it’s gone, not even if there were a real economic recovery.

But there will be no such recovery. As bad as things are for Americans today, they will get a whole lot worse. That is an inevitable consequence of the market distortion that QE has wrought: a gigantic financial crisis is coming. And the crowd gathered at Jackson Hole will be calling the shots once more, and bail out banks, not people. What’s that definition of insanity again?