Apr 102018
 
 April 10, 2018  Posted by at 8:51 am Finance Tagged with: , , , , , , , , , , , , ,  


Acme Storm over Manhattan 1950

 

Trump Blasts “Disgraceful” FBI Raid Of Lawyer’s Office (ZH)
Xi Vows To Further Open China Economy As US Trade Spat Simmers (AFP)
Global Debt Jumped to Record $237 Trillion Last Year
US Deficit to Surpass $1 Trillion Two Years Ahead of Estimates – CBO (BBG)
Global Trade Is Broken, And Trump Is Sparking The Crisis Needed (Morici)
Russian Firms And Rouble Hit Heavily By Trump Sanctions (G.)
Bitcoin, the Biggest Bubble in History, Is Popping – BofA (BBG)
Bots, Good Or Bad, Dominate Twitter Conversation (AFP)
Black Lives Matter Facebook Page With 700,000 Followers Exposed As Fake (G.)
10 New Zealanders Download App On Facebook, Expose 63,714 Friends (G.)
Your Facebook Data Is Only Worth $5.20 On The Dark Web (MW)
Jerome Is The New Janet: Same Old Keynesian Jabberwocky (Stockman)
Yulia Skripal Discharged From Hospital (G.)
No Trace Of Chemical Weapons In Douma, Photos Are Fake – Russia (RT)
“Weapons Of Mass Destruction,” And All (Kunstler)
In 2020, German Society Will Start Collapsing (GEFIRA)
Fishing Boat Caught With Illegal 18-Mile-Long Nets (Ind.)

 

 

“..the fact that the FBI likely seized privileged material between the president and his lawyer is certainly troubling.”

Or is it just a promotion campaign for Comey’s book tour?

Trump Blasts “Disgraceful” FBI Raid Of Lawyer’s Office (ZH)

Update II: As many probably suspected, Trump attorney Michael Cohen is under investigation for possible fraud and campaign finance violations, the Washington Post reported. The FBI has seized documents – including emails, tax documents and other records – related to Cohen’s $130,000 payment to adult film star Stormy Daniels. Meanwhile, President Trump has stepped up to defend his longtime personal attorney, calling the raid “a whole new level of unfairness” and going as far to say it was an “attack on our country, on what we stand for before heading into a meeting with top military leaders.” He also described the special counsel’s team as “the most conflicted group of people I’ve ever met” and said the raid was “a disgraceful situation.”

Trump added that the raid happened after Deputy AG Rod Rosenstein – who is supervising the Mueller probe – approved a referral that Mueller brought to the US Attorney for the Southern District of New York. Jeff Sessions also came under fire as the president bashed him once again for recusing himself from the Mueller probe. Trump also exclaimed that “no one is looking at the other side” referring to Clinton’s 30,000 missing emails. “I have this witch hunt constantly going on,” he said. Of course, Trump has every reason to defend Cohen. As Trump’s longtime lawyer, Cohen knows where the bodies are buried. And the fact that the FBI likely seized privileged material between the president and his lawyer is certainly troubling.

Update: Michael Cohen’s lawyer says the FBI seized privileged communications between Cohen and his clients – a group that notably includes President Trump. And thus, we have what could quite possibly be an ulterior motive for the search. While initial reports suggested the raid on Cohen’s home wasn’t related to the Mueller probe, CBS is reporting that it’s unclear whether the raid was in relation to Stormy Daniels, the Mueller probe or something else. The Wall Street Journal reported that Cohen’s office in Rockefeller Center was searched along with his home and hotel room. The search was executed by the Manhattan US Attorney’s Office which is carrying out an independent investigation in coordination with Mueller. Cohen has of course already turned over his emails to the special counsel.

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For now it’s just words. But his tone could have been different.

Xi Vows To Further Open China Economy As US Trade Spat Simmers (AFP)

Chinese President Xi Jinping pledged on Tuesday to lower car tariffs this year and take other steps to further open the world’s number two economy, indirectly addressing major complaints by the United States in a simmering trade row. Promising a “new phase of opening up”, Xi told an economic forum on the southern island of Hainan that Beijing “does not seek a trade surplus” and hopes to increase imports. He said China will take measures to liberalise automobile investment, significantly reduce tariffs on cars this year and protect intellectual property – all areas that have been high on the list of demands by Washington. “Economic globalisation is an irreversible trend of the time,” Xi told the Boao Forum for Asia.

“The door of China’s opening up will not close, it will only open wider and wider.” Xi pushed measures in areas that have been high on the list of US President Donald Trump’s ire at China. “When a car is sent to the United States from China, there is a Tariff to be paid of 2.5%. When a car is sent to China from the United States, there is a Tariff to be paid of 25%,” Trump tweeted on Monday. “Does that sound like free or fair trade. No, it sounds like STUPID TRADE – going on for years!” Without directly responding to Trump, Xi promised China would lower import tariffs for vehicles and other products, but he gave no details or an exact date for taking the measures.

[..] Xi also pledged specific measures to address IP protection. “This year, we will reorganise the State Intellectual Property Office to strengthen law enforcement,” he told the forum, an Asian version of the World Economic Forum, which draws global leaders to its annual meeting in the Swiss ski resort of Davos. “We encourage Chinese and foreign companies to carry out normal technical exchanges and cooperation to protect the legitimate intellectual property rights of foreign-funded enterprises in China,” he said.

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This will be important: “Ireland and Italy are the only major countries where household debt as a percentage of GDP is below 50%.

Global Debt Jumped to Record $237 Trillion Last Year

Global debt rose to a record $237 trillion in the fourth quarter of 2017, more than $70 trillion higher from a decade earlier, according to an analysis by the Institute of International Finance. Among mature markets, household debt as a percentage of GDP hit all-time highs in Belgium, Canada, France, Luxembourg, Norway, Sweden and Switzerland. That’s a worrying signal, with interest rates beginning to rise globally. Ireland and Italy are the only major countries where household debt as a percentage of GDP is below 50%. Still, the ratio of global debt-to-GDP fell for the fifth consecutive quarter as the world’s economic growth accelerated. The ratio is now around 317.8% of GDP, or 4 percentage points below the high in the third quarter of 2016, according to the IIF. Among emerging markets, household debt to GDP is approaching parity in South Korea at 94.6%.

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And the Fed wants to raise rates?!

US Deficit to Surpass $1 Trillion Two Years Ahead of Estimates – CBO (BBG)

The U.S. budget deficit will surpass $1 trillion by 2020, two years sooner than previously estimated, as tax cuts and spending increases signed by President Donald Trump do little to boost long-term economic growth, according to the Congressional Budget Office. Spending will exceed revenue by $804 billion in the fiscal year through September, jumping from a projected $563 billion shortfall forecast in June, the non-partisan arm of Congress said in a report Monday. In fiscal 2019, the deficit will reach $981 billion, compared with an earlier projection of $689 billion. The nation’s budget gap was only set to surpass the trillion-dollar level in fiscal 2022 under CBO’s report last June.

Deficits are growing as the Trump administration enacted a tax overhaul this year that will lower federal revenue and Congress approved a roughly $300 billion spending increase. The fresh CBO estimates could heighten investor worries as they weigh the potential impact that tariff threats between the U.S. and China may have on the world economy. The report includes new projections for the effects of the tax legislation – saying it will increase the deficit by almost $1.9 trillion over the next 11 years, when accounting for its macroeconomic effects and increased debt-service costs. In December, Congress’s Joint Committee on Taxation had said the tax package would reduce federal revenue by almost $1.1 trillion over a 10-year period.

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The WTO and democracy.

Global Trade Is Broken, And Trump Is Sparking The Crisis Needed (Morici)

[..] It may be time to recognize that China is not a market economy — and is not likely to become one anytime soon. Over time, the WTO membership encompassed increasingly diverse nations. For example, Saudi Arabia joined in 2005, is not a democracy and hardly has a market economy. It’s a monarchy and dependent on oil, its government seeks to rig petroleum markets through OPEC. Nondemocratic, nonmarket economies were admitted on the premise that participation in the system would encourage reforms but as Saudi Arabia demonstrates — similar to Mexico in the 1980s — political and economic progress mostly happens when autocratic regimes are threatened by financial crisis.

For the oil kingdom, it took the U.S. shale boom and prospects of oil permanently depressed at about $65 a barrel to inspire House of Saud to select a progressive crown prince. China joined the WTO in 2002 but has hardly liberalized. Beijing is perfecting Orwellian mechanisms to monitor its citizens’ activities and squash political dissent. President Xi Jinping is enhancing the role of state-owned enterprises, extending state influence over private firms and foreign subsidiaries, and compelling the latter to form joint ventures with Chinese firms and embrace Beijing’s propaganda strategies.

China’s state capitalism clearly creates unfair advantages, imposes trade deficits and job losses on other nations, and has been the target of many unfair trade complaints in the WTO, but Beijing has invested in top flight U.S. lawyers — for example, Steptoe & Johnson. And the activities of its complex mix of state-owned and state-supported private enterprise have proven difficult to discipline under WTO rules, which were written to constrain governments operating in a market context.

From 2011 to 2017, the United States was frustrated in many dispute settlement processes covering nearly 50 industries. In 2016, the administration aides cited a long list of complaints in an effort to block the reappointment of a South Korean judge to the appellate body. Since then, Mr. Trump has been criticized — as he seems to be for every principled action — for continuing this policy by blocking the appointment of other judges to compel reform. It may be time to recognize that China is not a market economy — and is not likely to become one anytime soon. And it is not likely possible to rewrite the WTO rules just to suit its peculiar system.

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Talk is better.

Russian Firms And Rouble Hit Heavily By Trump Sanctions (G.)

The Trump administration’s new sanctions on Russian oligarchs and top government officials began to bite on Monday as the rouble suffered its biggest daily fall in more than three years, the main Russian stock index slumped and investors dumped shares in businesses controlled by Oleg Deripaska. Russia’s currency briefly dipped more than 4% before recovering slightly to trade at 60.42 to the dollar on Monday evening, down 3.8%, its biggest daily percentage fall since January 2015. The value of Deripaska’s aluminium producer Rusal halved in Hong Kong and more than 40% was wiped off the value of his London-listed EN+ as investors took fright at the potential impact.

Shares in Rusal and EN+ had already fallen sharply on Friday in response to the sanctions, which were announced towards the end of trading in London. The Russian stock market also fell heavily. The main RTS index dropped 11%, affecting companies not caught by the sanctions. The price of aluminium jumped as traders worried Rusal would be excluded from supplying the market. The firm, which produces almost 6% of the world’s aluminium, said the sanctions could cause technical defaults on bank loans and some credit obligations. Both Rusal and EN+, Deripaska’s holding company, said the sanctions could be “materially adverse to the business and prospects” of the companies.

Rusal and seven other companies linked to Deripaska were the main targets when the US imposed sanctions designed to punish Vladimir Putin’s inner circle for “malign activity”, including support for Bashar al-Assad’s government in Syria and interfering with the US election in 2016. Rusal sells more than 10% of its aluminium to the US.

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Not my words. But nice graph.

Bitcoin, the Biggest Bubble in History, Is Popping – BofA (BBG)

The greatest bubble in history is popping, according to Bank of America. The cryptocurrency is tracking the downfalls of the other massive asset-price bubbles in history less than one year out from its record, analysts lead by Chief Investment Strategist Michael Hartnett wrote in a note Sunday. The cryptocurrency has fallen more than 65% since peaking in December at $19,511. Bitcoin rose 2.2% to $6,750 on Monday.

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“..accounting for two-thirds of tweets linking to popular websites..”

Bots, Good Or Bad, Dominate Twitter Conversation (AFP)

Automated accounts or “bots” play a big role in disseminating information on Twitter, accounting for two-thirds of tweets linking to popular websites, a study showed Monday. The Pew Research Center report found bots were a major source for diffusing information on news, sports, entertainment and other topics. The researchers found that of all tweeted links to popular websites, 66% were shared by accounts that appeared to be automated rather than human users. While bots have gained attention due to concerns over Russian-sponsored manipulation of social media during the 2016 political campaign and for other hot-button topics, the researchers said they made no effort to distinguish between “good” or “bad” bots.

“The study does not find evidence that automated accounts currently have a liberal or conservative ‘political bias’ in their overall link-sharing behavior,” the researchers wrote. Twitter’s policy on automated accounts, last updated in November, allows bots to operate but with limitations. The policy allows for bots to “automatically broadcast helpful information” or “run creative campaigns that auto-reply to users.” But Twitter’s rules forbid automatic posts about trending topics or using automation “to attempt to influence or manipulate trending topics.” It also bans the use of multiple accounts to generate more activity.

“These findings illustrate the extent to which bots play a prominent and pervasive role in the social media environment,” says Pew researcher Aaron Smith. “Automated accounts are far from a niche phenomenon: They share a significant portion of tweeted links to even the most prominent and mainstream publications and online outlets. Since these accounts can impact the information people see on social media, it is important to have a sense their overall prevalence on social media.”

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“.. upwards of $100,000 in donations, at least some of which was directed to bank accounts registered in Australia.”

One thing: Facebook could have known this.

Black Lives Matter Facebook Page With 700,000 Followers Exposed As Fake (G.)

A high-ranking Australian union official has been suspended amid reports he ran a fake Black Lives Matter Facebook page that solicited donations from the movement’s supporters. CNN reports that Ian MacKay – an official with the National Union of Workers – helped set up and run a Facebook page called Black Lives Matter as well as other domain names linked to black rights. The page, which was removed by Facebook after CNN’s queries, had almost 700,000 followers – more than double the official Black Lives Matter page. MacKay – who is white – did not respond to calls or emails but denied running the page when contacted by CNN. A statement given to the Guardian by the NUW’s national secretary, Tim Kennedy, said the union had launched an investigation into the claims made in the CNN report.

He said the union had suspended “the relevant officials pending the outcome of an investigation”. “The NUW is not involved in and has not authorised any activities with reference to claims made in CNN’s story,” he said. The Guardian understands MacKay and one other NUW official has been suspended. In 2015 Mackay was appointed vice president of the NUW’s general branch and the union’s public office records state that he still holds the position. The investigation quoted sources who said the page may have garnered upwards of $100,000 in donations, at least some of which was directed to bank accounts registered in Australia.

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This happened 4 years ago! And only now Facebook is “..in the process of alerting New Zealanders..”?!

10 New Zealanders Download App On Facebook, Expose 63,714 Friends (G.)

Ten New Zealanders who downloaded an app on Facebook could have exposed up to 63,714 of their compatriots to the data mining tactics of Cambridge Analytica. Facebook has told the country’s privacy commissioner that it is in the process of alerting New Zealanders who were affected by the breach, which occurred when ten users downloaded a personality quiz app. “For New Zealand, we estimate a total of 63,724 people may have been impacted – 10 are estimated to have downloaded the quiz app with 63,714 friends possibly impacted,” said Antonia Sanda, head of communications for Facebook in Australia and New Zealand.

New Zealand’s privacy commissioner, John Edwards, said he was urgently seeking further information from Facebook on how New Zealanders data was used by Cambridge Analytica, and is working closely with his counterparts in the US, UK Australia and Canada to establish the severity and ramifications of the privacy beach. “I think we have some real information deficits that I hope my colleagues in the UK and the US will uncover … I am not sure New Zealanders were ‘targeted’ but I think there is a level of complacency [in New Zealand]. And when you say we’re so far away, we’re only one click away really,” Edwards said.

Edwards deleted his own Facebook account shortly after the revelations regarding Cambridge Analytica broke, and said New Zealanders should seriously consider doing the same and then resetting their profile. “I am actually quite concerned about the drip-feed of information [from Facebook]. These events occurred four years ago. There was knowledge about Cambridge Analytica targeting tactics a good two years ago, yet we are really only seeing Facebook confront this issue now,” Edwards said.

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This, too, is Facebook. Supply and demand.

Your Facebook Data Is Only Worth $5.20 On The Dark Web (MW)

Were you impacted by Cambridge Analytica’s misuse of Facebook data? An estimated 87 million Facebook users will find out Monday whether the group improperly used their data, the social-media company said. All 2.2 billion Facebook users will get see a message on Facebook called “Protecting Your Information,” that lays out which third-party apps have access to your individual Facebook profile. Whether or not you were impacted by the Cambridge Analytica incident, there’s a depressing aspect of many recent privacy violations: The most important parts of your identity can be sold online for just a few dollars.

Consumers have to spend hours of their time — and, sometimes, their own money — when they find out their driver’s license, Facebook “likes” or Social Security number have been exposed to hackers. But those who sell them are making only petty cash. That’s according to a new report from the content marketing agency Fractl, which analyzed all the fraud-related listings on three large “dark web” marketplaces — Dream, Point and Wall Street Market — over several days last month. The “dark web” is part of the internet that people can only access by using special software. To create this report, Fractl accessed the dark web through the browser Tor.

People buy other risky or illegal substances on the dark web, including drugs, pirated content like movies or music and materials that help with scams, including credit-card “skimmers.” Facebook logins can be sold for $5.20 each because they allow criminals to have access to personal data that could potentially let them hack into more of an individual’s accounts. The credentials to a PayPal account with a relatively high balance can be sold on the dark web for $247 on average, the report found. One’s entire online identity, including personal identification numbers and hacked financial accounts, can be sold for only about $1,200 on the dark web, Fractl found. That’s because so much personal information may already available to hackers, after repeated data breaches across a range of industries.

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“..fiscally incontinent government..” Great line.

Jerome Is The New Janet: Same Old Keynesian Jabberwocky (Stockman)

The election of 2016 was supposed to be the most disruptive break with the status quo in modern history, if ever. On the single most important decision of his tenure, however, the Donald has lined-up check-by-jowl with Barry and Dubya, too. That is to say, Trump’s new Fed chairman, Jerome Powell, amounts to Janet Yellen in trousers and tie. In fact, you can make it a three-part composite by adding Bernanke with a full head of hair and Greenspan sans the mumble. The overarching point here is that the great problems plaguing American society – scarcity of good jobs, punk GDP growth, faltering productivity, raging wealth mal-distribution, massive indebtedness, egregious speculative bubbles, fiscally incontinent government – are overwhelmingly caused by our rogue central bank.

They are the fetid fruits of massive and sustained financial repression and falsification of the most import prices in all of capitalism – the prices of money, debt, equities and other financial assets. Moreover, the worst of it is that the Fed is overwhelmingly the province of an unelected politburo that rules by the lights of its own Keynesian groupthink and by the hypnotic power of its Big Lie. So powerful is the latter that American democracy has meekly seconded vast, open-ended power to dominate the financial markets, and therefore the warp and woof of the nation’s $19 trillion economy, to a tiny priesthood possessing neither of the usual instruments of rule.

That is to say, never before in history has a people so completely and abjectly surrendered to an occupying power – even though its ostensibly democratic government already possessed all the votes and all the guns. So it is no exaggeration to say, therefore, that the Fed is an alien state unto itself. That was powerfully symbolized most recently by the appointment of John Williams, a lifetime apparatchik at the San Francisco Fed, to the job of head satrap at the central bank’s Liberty Street outpost in the heart of Wall Street. In the scheme of things, the President of the New York Fed is #2 in the whole central banking apparatus, and as such is immensely more powerful than any Senate Committee Chairman or House Speaker. But Williams’ appointment was not reviewed or passed upon by a single elected official accountable to any voter anywhere in the US of A.

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Hard to tell what the next steps are.

Yulia Skripal Discharged From Hospital (G.)

Yulia Skripal, the daughter of the former Russian spy Sergei Skripal, has been discharged from hospital, according to reports. Just over one month after she and her father were found in Salisbury in Wiltshire after being poisoned with a nerve agent, the BBC reported that Skripal had left Salisbury district hospital. Skripal, 33, flew to the UK on 3 March, the day before she and her father are believed to have been poisoned by a novichok nerve agent. She released a statement on Friday to say her strength was “growing daily”. The BBC reported on Tuesday morning that Skripal had been taken to a secure location, though a hospital spokesman declined to comment on the reports. Christine Blanshard, the hospital’s deputy chief executive, and Lorna Wilkinson, the director of nursing, are to make a statement later on Tuesday morning.

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It’s the White Helmets again.

No Trace Of Chemical Weapons In Douma, Photos Are Fake – Russia (RT)

The Russian military has found no trace of chemical weapons use after searching parts of Syria’s Douma allegedly targeted by an “attack.” Photos of victims posted by the White Helmets are fake, Russia’s Defense Ministry said. Experts in radiological, chemical and biological warfare, as well as medics, on Monday inspected the parts of the Eastern Ghouta city of Douma, where an alleged chemical attack supposedly took place on Saturday, the Russian Reconciliation Center for Syria said in a statement. The specialists “found no traces of the use of chemical agents” after searching the sites, the statement said. The center’s medical specialists also visited a local hospital but found no patients that showed signs of chemical weapons poisoning.

“All these facts show… that no chemical weapons were used in the town of Douma, as it was claimed by the White Helmets,” the statement said, referring to the controversial “civil defense” group that was among the first to report about the alleged attack. “All the accusations brought by the White Helmets, as well as their photos… allegedly showing the victims of the chemical attack, are nothing more than a yet another piece of fake news and an attempt to disrupt the ceasefire,” the Reconciliation Center said. On Saturday, some rebel-linked groups, including the White Helmets, accused the Syrian government of carrying out a chemical attack that, allegedly, affected dozens of civilians in the Eastern Ghouta town of Douma.

The reports have already provoked a wave of outrage in the West, as the US and the EU rushed to put the blame for the incident on Damascus and Moscow. US President Donald Trum hastily denounced the perceived attack as a “mindless” atrocity and a “humanitarian disaster for no reason whatsoever,” warning of a “big price” to be paid. Syria and Russia have dismissed the accusations and called the reports fake news, aimed at helping the extremists and at justifying potential strikes against Syrian forces. In the very early hours of Monday, Israeli fighter jets targeted Syria’s T-4 airbase in Homs province, the Russian Defense Ministry said. Israel has not commented on the strike. Earlier, a number of Israeli officials had called on the US to strike Syria as a response to the reported chemical attack.

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Like is the case with Russia, the Organization for the Prohibition of Chemical Weapons has declared Syria’s chemical weapons arsenal destroyed.

“Weapons Of Mass Destruction,” And All (Kunstler)

[..] a joint mission of the United Nations Human Rights Commission (UNHRC) and the Organization for the Prohibition of Chemical Weapons (OPCW) was called in to supervise the destruction of the Syrian government’s chemical weapons, and certified it as accomplished in late 2014. Yet, poison gas incidents continued – most notoriously in 2017 when President Donald Trump responded to one with a sortie of cruise missiles against a vacant Syrian government airfield. And now another incident in the Damascus suburb of Douma has provoked Mr. Trump to tweetstormed threats of retaliatory violence, just days after he proposed a swift withdrawal from that vexing corner of the world.

Surely by now the American public has developed some immunity to claims of nefarious doings in foreign lands (“weapons of mass destruction,” and all). The operative sentence in that New York Times report is “…Syrian forces hit a suburb of Damascus with bombs that rescue workers said unleashed toxic gas.” Yeah, well, how clear is it that the toxic gas was contained in the bombs, or rather that the bombs dropped by the Syrian military blew up a chemical weapon depot controlled by anti-government Jihadis? Does that hodgepodge of maniacs show any respect for the UN, or the Geneva Convention, or any other agency of international law?

As in many previous such incidents, we don’t know who was responsible — though there is plenty of reason to believe that parties within the US establishment are against Mr. Trump’s idea of getting the hell out of that place, and might cook up a convenient reason to prevent it. Lastly, how is it in Bashar al-Assad’s interests to provoke a fresh international uproar against him and his regime? I’d say it is not the least in his interest, since he is on the verge of putting an end to the awful conflict. He may not be a model of rectitude by Western standards, but he’s not a mental defective. And he has very able Russian support advising him in what has been so far a long and difficult effort to prevent his state from failing — or being failed for him.

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Germany, Japan, China.

In 2020, German Society Will Start Collapsing (GEFIRA)

The next crisis is just a couple of years away, and Germany will be its largest victim. Economies grow, driven by capital and labour. The ECB monetary policy is currently providing the German economy with enough funds, but the country is experiencing a catastrophic lack of youth, and its ageing labour force is not being replaced as a result of which workforce is already in short supply. Since the German population is declining at a staggering pace, before the end of the century there will only be 22 million indigenous Germans left. Currently the working population has already begun to shrink. This drop is still moderate compared to what will come after 2020.

The disappearing of the nation that has just begun will have catastrophic consequences. The German government recorded a large budget surplus last year, a sign that the authorities are not willing or able to invest in their own country. Germany lacks health care professionals, road construction workers and teachers, but allocating more tax money to this sector makes no sense because there are simply no people available. For that reason road construction sites have come to a standstill and road maintenance is postponed. In order to find consumers and labourers, the German industry is investing in new factories abroad.

In the past, the German economy was able to attract employees from Southern, Eastern and Central Europe, but at present the demographic situation in states such as Spain, Portugal, Italy and Poland – which have long provided Germany with workforce – has worsened, so for all practical purposes these sources of labour have all but dried out. Poland for instance has lost a large number of young people to the West European labour market and the loss has not been made good because of extremely low fertility.The financial sector depends on a growing economy, but – apart from periods of temporary increase – there is no significant growth, and banks have to unwind their positions by selling their assets and returning cash to their clients. When the ageing population tries to sell its investments – stocks, obligations or companies – after 2020 they will find a declining working age population that is willing and able to buy these assets. It is already difficult for German business owners to find successors.

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Tragic species, mankind.

Fishing Boat Caught With Illegal 18-Mile-Long Nets (Ind.)

A fishing ship carrying 600 illegal nets stretching up to 18 miles has been seized after it escaped Chinese authorities, while using the flags of eight different countries to evade capture. The vessel, STS-50, had targeted a cod species called Antarctic toothfish that plays an important role in the Southern Ocean ecosystem, according to Indonesia‘s fisheries ministry. Its hundreds of gillnets had walls of fine mesh and could expand to a distance of 18 miles. Gillnetting has been banned in Antarctic waters since 2006 and is described by Australia as posing a “huge risk to almost all marine life, including marine mammals due to [its] indiscriminate nature”.

The use of the nets also harm seabirds including endangered albatrosses, the country’s environment department said on its website in 2011. Indonesia was acting on a request from Interpol when it seized the officially stateless craft. It had eluded authorities by flying eight different flags at different times, including those of Sierra Leone, Togo, Cambodia, South Korea, Japan, Micronesia and Namibia, the ministry said in a statement. Interpol contacted Indonesia last week with a request to investigate the vessel, fisheries minister Susi Pudjiastuti said in the statement. “Navy ship Simeuleu conducted a ‘stop, investigate and detain’ operation on Friday and successfully seized the vessel,” she said.

The STS-50 had previously been detained by China, but escaped and was caught in the port of Maputo in Mozambique before fleeing again, Ms Pudjiastuti said. Prior to its capture off the Indonesian island of Weh in the northwestern province of Aceh, the vessel had also operated under several other names including Sea Breeze, Andrey Dolgov, STD No. 2 and Aida, the statement said. Shipping data in Thomson Reuters Eikon shows the 54m-long, 452-tonne vessel was built in 1985.

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Jan 302018
 
 January 30, 2018  Posted by at 11:08 am Finance Tagged with: , , , , , , , , , ,  


Horacio Coppola Obelisco, Buenos Aires 1936

 

House Intel Votes To Make “Shocking” FISA Memo Public (ZH)
Trump Administration Holds Off On New Russia Sanctions (R.)
Measure What Is Measurable (John Hussman)
Global Bond Yields Spike as Inflation Fears Rise (Street)
US Mortgage Rates Jump To The Highest Point In 4 Years (CNBC)
Stormy Weather (Jim Kunstler)
Leaked Brexit Report Shows Damage To UK Growth (G.)
Janet Yellen Sets Interest Rates One Last Time. How Will History Rate Her? (G.)
On The Death of Robert Parry (CJ)
Refugee Relocations From Italy And Greece Drawing To A Close (DW)

 

 

I like the suggestion that Trump can read the memo out loiud tonoght in SOTU. Though it’s been discussed so much already, it can only disappoint probably.

House Intel Votes To Make “Shocking” FISA Memo Public (ZH)

In a highly anticipated decision, on Monday evening the House Intelligence Committee voted to make public the memo alleging what some Republicans say are “shocking” surveillance abuses at the Department of Justice regarding the Trump presidential campaign. In immediate response to the vote, the Committee’s top democrat Adam Schiff said that “we’ve crossed a deeply regrettable line”, adding that the “committee voted to put the president’s interest above the interest of the country.” The decision [ends] weeks of speculation over whether the memo, which was drafted by staff for committee chairman Devin Nunes (R- Calif) would be made public. At the same time, it intensifies the dispute over what Democrats say is an all-out assault by Republicans to undermine special counsel Robert Mueller’s probe into Russian interference in the 2016 election.

Now the fate of the 4-page FISA memo is in the hands of Donald Trump: as we discussed earlier, the document will not be immediately released as under the House rule Republicans used to override the classification of the four-page memo, President Trump now has five days to review and reject its publication. But, as per Bloomberg’s reporting earlier, the White House has signaled support for the document’s release and is widely expected to defy the DOJ in allowing the publication to go forward. The DOJ has opposed the release of the document, reportedly infuriating President Trump. While Nunes has described the memo as “facts,” Democrats have slammed it as a collection of misleading talking points they are unable to correct without exposing the highly classified information underpinning the document.

As Bloomberg disclosed earlier on Monday, releasing the memo without allowing them to review it on those grounds, Assistant Attorney General Stephen Boyd wrote to Nunes, would be “extraordinarily reckless.” Of course, the reason for the DOJ – and the Democrats’ fury – is well-known: Republicans who have read the memo have hinted heavily that it contains information that could unravel the entire Mueller investigation, long described by the president as a “witch hunt.” In an amusing twist, now that transparency appears to be the watchword, the Republican controlled House Intel Committee also plans to release the transcript of the business meeting dealing with releasing the FISA memo.

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Russia has pledged to read the list ‘without letting emotion get in the way’.

Trump Administration Holds Off On New Russia Sanctions (R.)

The Trump administration said on Monday it would not immediately impose additional sanctions on Russia, despite a new law designed to punish Moscow’s alleged meddling in the 2016 U.S. election, insisting the measure was already hitting Russian companies. “Today, we have informed Congress that this legislation and its implementation are deterring Russian defense sales,” State Department spokeswoman Heather Nauert said in a statement. “Since the enactment of the … legislation, we estimate that foreign governments have abandoned planned or announced purchases of several billion dollars in Russian defense acquisitions.” Seeking to press President Donald Trump to clamp down on Russia, the U.S. Congress voted nearly unanimously last year to pass a law setting sweeping new sanctions on Moscow.

Trump, who wanted warmer ties with Moscow and had opposed the legislation as it worked its way through Congress, signed it reluctantly in August, just six months into his presidency. Under the measure, the administration faced a deadline on Monday to impose sanctions on anyone determined to conduct significant business with Russian defense and intelligence sectors, already sanctioned for their alleged role in the election. But citing long time frames associated with major defense deals, Nauert said it was better to wait to impose those sanctions. “From that perspective, if the law is working, sanctions on specific entities or individuals will not need to be imposed because the legislation is, in fact, serving as a deterrent,” she said in a statement.

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Next recession: Dow plunge by 2/3.

Measure What Is Measurable (John Hussman)

[..] it’s true that when we examine pre-crash extremes, like 2000 and 2007, we’ll typically find that actual returns over the preceding 12-year period were higher than the returns that one would have expected on the basis of valuations 12 years earlier. No surprise there. The only way to get to breathtaking valuations is to experience a period of surprisingly strong returns. Those breathtaking valuations are then followed by dismal consequences. Likewise, when we examine secular lows like 1974 and 1982, we’ll find that actual returns over the preceding 12-year period fell short of the returns one would have expected on the basis of valuations 12 years earlier.

The chart below offers a reminder of what this looks like, in data since the 1920’s. Look at the “errors” in 1988, 1995, and 2006. Count forward 12 years, and you’ll find the major valuation peaks of 2000, 2007 and today that were responsible for the overshoot of actual returns. The 2000 and 2007 instances were both followed by losses of 50% or more in the S&P 500. Look at the “errors” in 1937, 1962, 1966, and 1970. Count forward 12 years, and you’ll find the market lows of 1949, 1974, 1978 and 1982 that were responsible for the undershoot of actual returns. Those market lows turned out to be the best buying opportunities of the post-war era. When market cycles move to extreme overvaluation or undervaluation, they become an exercise in borrowing or lending returns to the future, and then surrendering or receiving them back over the remaining half of the cycle.

Put simply, in my view, stock prices are rising not because Wall Street has thoughtfully quantified the effect of taxes, interest rates, corporate profits, or anything else. Instead, Wall Street is mesmerized by the self-reinforcing outcomes of its own speculation, relying on verbal arguments, optimistic projections lacking grounds in observable data, and enthusiastic assertions about cause-effect relationships that are accepted without the need for any evidence at all (much less decades of it).

Back to Galileo. Measure what is measurable, and make measurable what is not so. When we do this, come to understand the current speculative extreme as the tension between two observations that are not actually contradictory – just uncomfortable. One is that stock prices are indeed three times the level at which they are likely to end the current market cycle. The other is that there is no pressure for valuations to normalize over shorter segments of the cycle, as long as risk-seeking speculative psychology remains intact.

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It’s starting to feel as if we passed an inflection point.

Global Bond Yields Spike as Inflation Fears Rise (Street)

Global government bond markets continued to sell-off Monday, taking U.S. Treasury yields to the highest level in four years amid renewed bets on faster inflation in the world’s biggest economy and hawkish comments on growth and inflation from central bank officials in Europe. The bond market moves have clipped early gains for stocks and raised the spectre of a correction in inflation assumptions as the global economy roars to life and oil and commodity prices continue to climb amid a surge in manufacturing activity. The selling was also accelerated, in part, by a Goldman Sachs research note which suggested that Wednesday’s meeting of the U.S. Federal Reserve, the last under the leadership of outgoing chairwoman Janet Yellen, could plant the early seeds for a March hike in benchmark borrowing costs.

“We expect the FOMC to issue a generally upbeat post-meeting statement that includes an upgrade to the balance of risks and a slightly hawkish rewording of the inflation assessment,” the note read, adding that public remarks since the December meeting “bolster the case for an upgrade, and by our count, at least half of the Committee has recently referenced upside risks to growth.” Benchmark 10-year U.S. Treasury yields were marked at 2.72% in early Monday trading, the highest since early 2014, while 2-year note yields were seen at 2.15%, the highest since 2008. Those gains followed Friday closing levels that showed the widest yield gap between so-called TIPS, or Treasury Inflation Protected Securities, and benchmark 10-year notes since Sept. 2014.

In Europe, five-year German bunds yields traded in positive territory for the first time since 2015 amid a solid assessment of the region’s growth prospects last week from ECB President Mario Draghi and comments over the weekend from Dutch central bank governor Klaas Knot that he saw “no reason whatsoever” to continue the Bank’s €2.55 trillion ($3.16 trillion) quantitative easing program beyond its September deadline. Both U.S. and European investors are bracing for faster inflation in the months ahead as global commodity prices – particularly crude oil – continue to rise. Brent crude futures for March delivery, the benchmark for prices around the world, were marked at $69.87 Monday, down from their Friday close of $70.52 but still some 28% higher from the same period last year, suggesting a big upside import into headline inflation readings over the first half of this year.

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Yields go up, then so do mortgage rates.

US Mortgage Rates Jump To The Highest Point In 4 Years (CNBC)

A huge sell-off in the bond market is about to make buying a home more expensive. Mortgage rates, which loosely follow the yield on the 10-year Treasury, have been rising for the past few weeks, but are seeing their biggest move higher Monday. “Bottom line, rate sheets are going to be ugly this morning,” wrote Matthew Graham, chief operating officer of Mortgage News Daily. “Some lenders will be at 4.5% on their best-case-scenario 30-year fixed quotes.” That is the highest rate since 2014. The average rate on the popular 30-year fixed started the year right around 4% but then began to climb on positive news in the U.S. economy, solid company earnings reports and a shift in foreign central bank policies which appear to now be following the Federal Reserve’s tightening of monetary policy.

The rate was at 4.28% by the end of last week. “Apart from central banks, there’s a ton of bond market supply coming down the pike due to infrastructure and tax bill spending,” Graham said. That new supply will send yields and, consequently, mortgage rates higher. While mortgage rates are still historically low, they were even lower in the years following the financial crisis. That not only helped juice the sharp increase in home prices, but it has also given borrowers a new sense of normal. Both will hurt affordability this spring on several fronts. “Today is one more reason for Realtors and buyers to move up their spring schedule,” said Chris Kopec, a mortgage loan consultant at Chicago-based Lakeside Bank.

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Why investigate Trump, but not Hillary et al?

Stormy Weather (Jim Kunstler)

It’s hard not to be impressed by the evidence in the public record that the FBI misbehaved pretty badly around the various election year events of 2016. And who, besides Rachel Maddow, Anderson Cooper, and Dean Baquet of The New York Times, can pretend to be impressed by the so far complete lack of evidence of Russian “meddling” to defeat Hillary Clinton? I must repeat: so far. This story has been playing for a year and a half now, and as the days go by, it seems more and more unlikely that Special Prosecutor Robert Mueller is sitting on any conclusive evidence. During this time, everything and anything has already leaked out of the FBI and its parent agency the Department of Justice, including embarrassing hard evidence of the FBI’s own procedural debauchery, and it’s hard to believe that Mr. Mueller’s office is anymore air-tight than the rest of the joint.

If an attorney from Mars came to Earth and followed the evidence already made public, he would probably suspect that the FBI and DOJ colluded with the Clinton Campaign and the Democratic Party to derail the Trump campaign train, and then engineer an “insurance policy” train wreck of his position in office. Also, in the process, to nullify any potential legal action against Clinton, including the matter of her email server, her actions with the DNC to subvert the Sanders primary campaign, the Steele dossier being used to activate a FISA warrant for surveillance of the Trump campaign, the arrant, long-running grift machine of the Clinton Foundation (in particular, the $150 million from Russian sources following the 2013 Uranium One deal, when she was Secretary of State), and the shady activities of Barack Obama’s inner circle around the post-election transition. There is obviously more there there than in the Resistance’s Russia folder.

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What Britain can quarrel about this week.

Leaked Brexit Report Shows Damage To UK Growth (G.)

Brexit would leave the UK worse off under three possible scenarios: a comprehensive free trade deal, single market access and no deal at all, according to a leaked government analysis of the economic impact of leaving the EU. The document was meant to be shown confidentially to cabinet ministers this week but was leaked in an embarrassing development for Theresa May and David Davis, the Brexit secretary. It said national income would be 8% lower under a no deal scenario, around 5% lower with a free trade agreement with the EU and about 2% lower with a soft Brexit option of single market membership over a 15-year period. The government would not comment on leaked documents but sources stressed the analysis did not cover May’s preferred option of a bespoke deal amounting to a “deep and special partnership” with the EU.

The document suggested that chemicals, clothing, manufacturing, food and drink, and cars and retail would be the hardest hit and every UK region would also be affected negatively in all the modelled scenarios, with the north-east, the West Midlands and Northern Ireland facing the biggest falls in economic performance. It comes after Davis refused to release impact assessments covering 58 sectors of the economy when requested to by parliament, claiming they did not in fact exist. Remain supporters said the report, seen by BuzzFeed News, was concerning but in line with what they had feared.

[..] Eloise Todd, the chief executive of anti-Brexit organisation Best for Britain, added: “According to the government’s secret analysis, even the softest Brexit scenario will mean a 2% hit to growth. “Almost every community, region and sector of the economy included in the analysis would be negatively impacted. The case for or against Brexit should be about more than balance sheets, but it’s painfully clear that the numbers are a gloomy part of the story. And behind these numbers are thousands of jobs, businesses and homes that are at risk. “The government are calling this document embarrassing but it’s more than that. It is a colossal act of economic self harm, written down clearly, in black and white. We are reading about an economy facing the abyss.”

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After Janet, the flood.

Janet Yellen Sets Interest Rates One Last Time. How Will History Rate Her? (G.)

Janet Yellen, the Federal Reserve chair, begins her final rate-setting meeting at the helm of the US central bank on Tuesday, before she is replaced by Donald Trump’s chosen successor, Jerome Powell. The first woman to lead the Fed arrived in February 2014 at a time when the money-printing machine of quantitative easing was whirring at full-tilt under her predecessor, Ben Bernanke. QE, which involved the Fed buying bonds from financial institutions, pumped billions of dollars into the US economy to keep it afloat after the financial crisis. Yellen leaves next month with a legacy as the Fed chair who began the long process of turning off the QE machine, and for raising interest rates for the first time in seven years in 2015.

Powell will have a tough act to follow, with the stock market currently sitting at a record high and as economic growth continues to strengthen and unemployment stands at the lowest level since 2000. No increase in interest rates is expected this month, although further hikes are forecast for later this year. James Knightley, senior economist at ING Bank, said: “She has followed up [Bernanke] with strong leadership and solid decision making that led to the robust economic performance we see today. Given all these successes, Jay Powell has been set a very tough bar to match.”

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Emotional by Caitlin Johnstone. We should have a piece that lists his topics through the years. And someone should pick up his legacy.

On The Death of Robert Parry (CJ)

The legendary journalistic titan Robert Parry has died, and I still haven’t quite figured out how to live with that. I did not know Parry and never had any kind of interaction with him, but I can’t stop crying. This is an immense loss and it feels deeply personal, just as one of the countless individuals his work has profoundly impacted. I’ve often recommended Parry’s outlet Consortiumnews as the overall best source of anti-war, anti-establishment information in the English-speaking world, and I cite its content constantly in my own work. This just sucks, and I’m a mess, and this might just be me getting sloppy and emotional for a few paragraphs, but this is all I can really be right now.

In a beautiful tribute to his father, Nat Parry describes a man who was driven not by self-interest, nor even ultimately by any ideology or conceptual values system, but by a deeply held commitment to humanity born out of concern for the future of our species. Parry’s journalistic integrity and ferocious dedication to the truth at all costs appear to have been a byproduct of that fundamental desire for humanity to survive and thrive, and an inability to be comfortable with our horrifying flirtation with extinction. “But besides this deeply held commitment to independent journalism, it should also be recalled that, ultimately, Bob was motivated by a concern over the future of life on Earth,” writes the younger Parry. “As someone who grew up at the height of the Cold War, he understood the dangers of allowing tensions and hysteria to spiral out of control, especially in a world such as ours with enough nuclear weapons to wipe out all life on the planet many times over.”

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Brussels, Paris and Berlin only care when it suits their careers.

Refugee Relocations From Italy And Greece Drawing To A Close (DW)

Germany’s Interior Ministry said on Monday that it will only resettle a small number of migrants from Italy and Greece in the coming weeks, as the EU’s migrant relocation program draws to a close. An Interior Ministry spokesperson told DW that far fewer people had fulfilled the necessary criteria for relocation than first expected. “There are now virtually no more asylum seekers in Greece who could be considered for resettlement,” according to the Ministry. To qualify, applicants had to be from a country where the chances of asylum are at least 75%. Last month, some 500 migrants were still waiting to be relocated from Italy to Germany, while in Greece the number less than 40. “The relocation scheme ended in September 2017, meaning all applicants arriving after that date will no longer be eligible for resettlement,” Annegret Korff, a speaker for the Interior Ministry, said.

“Germany largely completed all outstanding relocations by the end of 2017. In the coming weeks, Germany will only carry out the odd resettlement case that was left outstanding from last year.” The program to relocate migrants landing in Greece and Italy was launched by the European Union in the wake of the 2015 migrant crisis. Initially, EU member states agree to relocate some 160,000 refugees between them from the bloc’s two main points of entry by September 2017. The number was revised to just under 100,000 after officials found that fewer people were eligible under the scheme that first expected. Although the temporary progam has since passed its deadline, the final few migrants that qualify for resettlement are still awaiting asylum.

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Dec 012017
 
 December 1, 2017  Posted by at 10:05 am Finance Tagged with: , , , , , , , , , ,  


Edward S. Curtis Mosa Mohave girl c. 1903

 

The Mean Reverting History Of Profit Growth (Roberts)
US Household Debt Is Rising 60% Faster Than Wages (ZH)
We Give Up! Government Spending And Deficits Soar Everywhere (Rubino)
Lemmings In Full Stampede Toward The Fiscal Cliff (Stockman)
Brexit Risks Leaving Banks on the Hook for Impossible Contracts (BBG)
I’m Glad Morgan Stanley Has Warned Us About Jeremy Corbyn (Ind.)
US Senate Suspends Tax Bill Votes to Friday Morning (BBG)
Australian Banks Face Public Inquiry Amid String of Scandals
Gold Trader Implicates Erdogan In US Sanctions Breaking Case (BBC)
From The Caucasus To The Balkans, China’s Silk Roads Are Rising (Escobar)
Paris – The Financial Capital Of West And Central Africa (Gefira)
Chinese Satellite Closes In On Dark Matter Mystery (AFP)

 

 

Another great set of graphs from Lance Roberts, who just keep churning them out. I picked these two to show how dependent economies have become on suppressing wages. Problem is, that threatens economies. You need money rolling at the ground level to keep your economy going.

The Mean Reverting History Of Profit Growth (Roberts)

Since 2000, each dollar of gross sales has been increased to more than $1 in operating and reported profits through financial engineering and cost suppression. The next chart shows that the surge in corporate profitability in recent years is a result of a consistent reduction of both employment and wage growth. This has been achieved by increases in productivity, technology, and off-shoring of labor. However, it is important to note that benefits from such actions are finite. (Note the acceleration in profits starting with the Reagan Tax Cuts in the 1989’s. There is no evidence that cutting taxes for corporations leads to higher wages for employees.)

Given the economic landscape of recent years, large offsetting sectoral deficits and surpluses are not surprising, but they should not be taken as evidence that the long-term profitability of the corporate sector has permanently shifted higher. Stocks are not a claim to a few years of cash flows, but decades and decades of them. By pricing stocks as if current profits are representative of the indefinite future, investors have ensured themselves a rude awakening over time. Equity valuations are decidedly a long-term proposition, and from present levels, the implied long-term returns are quite dim.

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And then you get this…

US Household Debt Is Rising 60% Faster Than Wages (ZH)

The good news: total mortgage debt has decreased since 2008, to $8.743 trillion from $9.29 trillion, but as of the third quarter of 2017, still accounts for 67.5% of overall consumer debt. The bad news: since 2008, the growth in total debt has been attributable to the auto loan and student loan sectors. Auto loan debt has increased by 50% since 2008, to slightly over $1.2 trillion from approximately $800 billion. The most dramatic growth rate, as Zero Hedge readers know well, has been in student loan debt which has grown by 122% since 2008, to $1.357 trillion from $611 billion. But a bigger concern flagged by DBRS is that the growth in consumer debt is raising concerns when viewed in the context of the existing wage stagnation hampering the current economic environment.

The rating agency cites a paper published in October 2017 by the Harvard Business Review which stated that the inflation-adjusted hourly wage has grown by only 0.2% per year since the mid-1970s and labor’s share of income has decreased to its current level of 57% from 65%. Meanwhile, in the second quarter of 2017, wages were only 5.7% higher than they were a decade earlier. In comparison, the Federal Reserve Bank of New York/Equifax data shows that consumer debt growth over the same period was 9.3%. In other words, the purchasing power of US households has been largely a function of rapidly rising debt, which over the past decade has risen 60% faster than wages. There is another concern: while overall delinquency rates have stabilized in recent years, the one stubborn outlier remains student debt, where 90+ day delinquencies have risen to more than 10%.

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“Obviously debts of this magnitude can’t and therefore won’t be repaid. Which means the coming decade will be defined by how — and how quickly — we end up defaulting.”

We Give Up! Government Spending And Deficits Soar Everywhere (Rubino)

A recurring pattern of the past few decades involves governments promising to limit their borrowing, only to discover that hardly anyone cares. So target dates slip, bonds are issued, and the debts keep rising. This time around the timing is especially notable, since eight years of global growth ought to be producing tax revenues sufficient to at least moderate the tide of red ink. But apparently not. In Japan, for instance, government debt is now 250% of GDP, a figure which economists from, say, the 1990s, would have thought impossible. Over the past decade the country’s leaders have proposed a series of plans for balancing the budget, and actually did manage to shrink debt/GDP slightly in 2016. But now they seem to have given up, and are looking for excuses to keep spending.

[..] To put the above in visual terms, here’s an infographic from Howmuch.com that shows per-capita government debt for the world’s major countries. Note that a Japanese family of five’s share of its government’s debt is close to $450,000 while in the US a similar family owes $300,000. That’s in addition to their mortgages, car loans, credit cards, etc. Obviously debts of this magnitude can’t and therefore won’t be repaid. Which means the coming decade will be defined by how — and how quickly — we end up defaulting.

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More of that same story.

Lemmings In Full Stampede Toward The Fiscal Cliff (Stockman)

The lemmings are now in full stampede toward the cliffs. You can literally hear the cold waters churning, foaming and crashing on the boulders far below. From bitcoin to Amazon, the financials, the Russell 2000 and most everything else in between, the casinos are digesting no information except the price action and are relentlessly rising on nothing more than pure momentum. The mania has gone full retard. Certainly earnings have nothing to do with it. As of this morning, the Russell 2000, for instance, was trading at 112X reported LTM earnings. Likewise, Q3 reporting is all over except for the shouting and reported LTM earnings for the S&P 500 came in $107 per share. That’s of signal importance because fully 36 months ago, S&P earnings for the September 2014 LTM period posted at $106 per share.

That’s right. Three years and $1 of gain. They talking heads blather about “strong earnings” only because they think we were born yesterday. What happened in-between, of course, was the proverbial pig passing through the python. First, the global oil, commodities and industrial deflation after July 2014 took earnings to a low of $86.44 per share in the March 2016 LTM period. After that came the opposite—the massive 2016-2017 Xi Coronation Stimulus in China. The new Red Emperor and his minions pumped out an incredible $6 trillion wave of new credit, thereby artificially stimulating a global rebound and a profits recovery back to where it started three years ago.

The difference of course is that $106 of earnings back then were priced at an already heady (by historical standards) 18.6X, whereas $107 of earnings today are being priced at a truly lunatic 24.6X. After all, nothing says earnings bust ahead better than an aging business cycle, a cooling Red Ponzi, an epochal shift toward central bank QT (quantitative tightening) and a massive Washington Fiscal Cliff. Yet every one of those headwinds are self-evident and have made their presence known with a loud clang in the last few days.

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For good measure, let’s throw in some Catch 22.

Brexit Risks Leaving Banks on the Hook for Impossible Contracts (BBG)

As far as Brexit headaches go, John McFarlane, who chairs Barclays and London’s bank lobby, says that while his firm is on top of job moves, he’s more concerned about rewriting “hundreds of thousands” of contracts. He’s not alone. Andrew Bailey, head of the U.K. Financial Conduct Authority, said “contract continuity” was among the biggest potential disruptions from a no-deal, no-transition Brexit. Both men were testifying to lawmakers Wednesday. Bank of England Governor Mark Carney and ECB President Mario Draghi have also expressed concern about the issue and the dearth of time left for a fix. A week ago, data from the European Banking Authority showed the scope of the issue, and that money is already on the move for precisely this reason: European banks have slashed their U.K. assets by $425 billion, driven by a 35% drop in derivatives exposures.

Insurance policies are affected too: Carney estimates about 20 billion pounds of insurance liabilities in Britain could be affected without swift action. The issue arises because one side or the other of a contract can meet its obligations only thanks to an authorization that’s set to disappear once the U.K. leaves the European Union in 2019. This might result in a firm being obliged by contract law to do something that regulation prohibits it from carrying out, and impossibility generally isn’t a defense against non-performance of a contract, said Simon Gleeson at Clifford Chance in London. “A bank which enters into a contract which becomes illegal to perform by reason of Brexit may well be liable in damages for its non-performance to the counterparty,” said Gleeson. “Dealing with this is so much in everyone’s interest that I’m amazed it hasn’t been addressed.”

[..] Cross-border revolving credits – credit lines that can be drawn down, repaid, then drawn down again – are among such contracts. Many of these are issued to EU companies by syndicates with members based in the U.K. For example, lenders to Volkswagen Financial Services’s €2.5 billion ($3 billion) line include London-based entities for Bank of America and Citigroup, as well as the U.K. units of the major British banks, data compiled by Bloomberg show. A lender that lost its authorization but made an advance to the company under the revolver might find itself in breach of local law in jurisdictions including Germany and France, according to Clifford Chance. On the other hand, it might be in breach of contract if it failed to make the loan.

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Because Morgan Stanley exposes itself this way. As Corbyn himself said: Yes, we’re a threat. To you.

I’m Glad Morgan Stanley Has Warned Us About Jeremy Corbyn (Ind.)

This week, Morgan Stanley claimed that “Corbyn would be more of a danger to markets than hard Brexit”, something which I saw as supremely ironic. Because the actions of Morgan Stanley, and others like it, laid the foundations for Leave because of their role in the financial crisis: a crisis of capitalism, which ushered in seven years of austerity, falling wages and insecure work. Precisely the conditions that would encourage the majority of British people to vote against the status quo and opt for Leave. Morgan Stanley’s role in the financial crisis cannot be understated; and, given describing things as a “danger to markets” appears to be in fashion right now, let’s remind ourselves what they got up to just over a decade ago.

Essentially, they packaged up sub-prime mortgages as something called Collateralised Debt Obligations (CDOs), got credit ratings agencies – who were entirely conflicted as their clients were the investment banks – to rate these absolute garbage CDOs triple-A investments. Morgan Stanley then misled investors who bought them. Because they knew what those investments were actually worth, Morgan Stanley’s traders bought what are known as “credit default swaps” on those CDOs – effectively amounting to a bet on it defaulting. You can buy or sell a credit default swap even if you don’t own the investment. They did this thousands of times.

[..] the right-wing press, which gleefully reported on this Corbyn/Brexit warning, clearly has a short memory about what really happened. After all, the lie that Labour caused the financial crisis, and not investment banks like Morgan Stanley, was a convenient pretext for maintaining the economic status quo while cutting to public spending. This forced ordinary working people to pay for a financial crisis they did not cause. It’s little wonder that people voted Leave having been totally shafted by the system. But the opportunity to do so only arose because the narrative that “Labour crashed the economy” helped secure David Cameron a majority in 2015 on a manifesto that promised a referendum.

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Make it 2018.

US Senate Suspends Tax Bill Votes to Friday Morning (BBG)

Senate Majority Leader Mitch McConnell said votes on the tax bill will resume at 11 a.m. on Friday as the collapse of a key compromise to win a majority for a Senate tax overhaul left Republicans scrambling to salvage the legislation. Debate over the bill may continue into the evening, McConnell said. It’s unclear when the unlimited amendment vote series known as “vote-a-rama” would begin. After seeming to gain momentum during the day, the GOP’s tax cut plan smacked into a decision from the Senate’s rule-making office that said a so-called trigger proposed by GOP holdouts didn’t pass procedural muster. At least three Republicans – Bob Corker of Tennessee, Jeff Flake of Arizona and James Lankford of Oklahoma – had tied their votes to the mechanism, which would have increased taxes if revenue targets weren’t met.

The trio is now demanding that leaders agree to other changes in the bill to avoid a huge deficit increase. Republicans have a slim majority in the Senate and can only afford to lose two members if they want to pass the tax bill without Democratic support. Adding to the difficulty was a ruling by a key fiscal referee that the tax plan would blow a $1 trillion hole in the nation’s debt – even after accounting for economic growth. The day’s events left GOP leaders contemplating a variety of potentially unpalatable measures — including making some tax cuts on the individual and corporate side end within six or seven years. The current version of the Senate bill would sunset individual breaks in 2026.

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Wait till home priced start to plummet. That’s when the scandals will break.

Australian Banks Face Public Inquiry Amid String of Scandals

Australia’s banks will be subject to a wide-ranging public inquiry after Prime Minister Malcolm Turnbull bowed to pressure to address scandals besetting the industry. The yearlong royal commission will examine the conduct of the nation’s banks, insurers, financial services providers and pension funds, and consider whether regulators have enough power to tackle misconduct, Turnbull said Thursday. He pledged the inquiry would not put “capitalism on trial.” The announcement came just minutes after Commonwealth Bank of Australia, Australia & New Zealand Banking, Westpac and National Australia Bank dropped their opposition to an inquiry, saying in an open letter to the government that months of political squabbling over the issue risked undermining offshore investor confidence.

More than A$8 billion ($6 billion) was wiped off the market value of the big four lenders in early Sydney trading, with Commonwealth Bank declining as much as 2.7%. “Ongoing speculation and fear-mongering about a banking inquiry or royal commission is disruptive and risks undermining the reputation of Australia’s world-class financial system,” Turnbull said. The inquiry will “further ensure our financial system is working efficiently and effectively.” The main opposition Labor party has for months been demanding a royal commission into the finance industry, amid a string of scandals ranging from misleading financial advice, attempted rate-rigging and alleged breaches of anti-money laundering laws. Pressure was growing on Turnbull to hold an inquiry, with some lawmakers in his Liberal-National coalition threatening to force a vote in parliament next week.

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A big problem for Erdogan. The US takes its sanctions seriously.

Gold Trader Implicates Erdogan In US Sanctions Breaking Case (BBC)

A controversial Turkish-Iranian gold trader has told a US court that Turkish President Recep Tayyip Erdogan personally approved his sanction-breaking deals with Iran. Reza Zarrab, 34, is a key witness in the criminal trial of a Turkish banker whom he allegedly worked with to help Iran launder money. Mr Erdogan has denied that Turkey breached US sanctions on Iran. The case has strained relations between Ankara and Washington. In his testimony, Mr Zarrab implicated Mr Erdogan in an international money laundering scheme that he and the banker, Mehmet Hakan Atilla, ran between 2010 and 2015 that allegedly allowed Iran to access international markets despite US sanctions.

He said that he was told in 2012 by the then economy minister that Mr Erdogan, who was prime minister at the time, had instructed Turkish banks to participate in the multi-million dollar scheme. Mr Erdogan said earlier on Thursday that Turkey did not breach US sanctions on Iran, Turkish media report. His government has described the case as “a plot against Turkey”. The Turkish president is yet to respond to the new allegations about him made in court. Mr Atilla has pleaded not guilty. Nine people have been charged in total. Mr Zarrab was arrested by US officials in 2016 and accused of engaging in hundreds of millions of dollars’ worth of transactions on behalf of the Iranian government, money laundering and bank fraud. But he decided to cooperate with prosecutors and is now their star witness in the New York trial.

On Wednesday, he told the court he paid Zafer Caglayan, then Turkey’s economy minister, bribes amounting to more than €50m to facilitate deals with Iran. Turkey’s Deputy Prime Minister, Bekir Bozdag, responded to the allegations, saying that Mr Zarrab had been “pressured into committing slander”. Speaking to state-run news agency Anadolu, Mr Bozdag called the trial a “theatre”. The Turkish government had previously said that Mr Caglayan acted within Turkish and international law.

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Overcapacity export.

From The Caucasus To The Balkans, China’s Silk Roads Are Rising (Escobar)

The 19th Chinese Communist Party Congress made it clear that the New Silk Roads – aka, the Belt and Road Initiative (BRI) – launched by President Xi Jinping just four years ago, provides the concept around which all Chinese foreign policy is to revolve for the foreseeable future. Up until the symbolic 100th anniversary of the People’s Republic of China, in 2049, in fact. Virtually every nook and cranny of the Chinese administration is invested in making the BRI Grand Strategy a success: economic actors, financial players, state-owned enterprises (SOEs), the private sector, the diplomatic machine, think tanks, and – of course – the media, are all on board. It’s under this long-term framework that sundry BRI projects should be examined. And their reach, let’s be clear, involves most of Eurasia – including everything from the Central Asian steppes to the Caucasus and the Western Balkans.

Representatives of no fewer than 50 nations are currently gathered in Tbilisi, Georgia, for yet another BRI-related summit. The BRI masterplan details six major economic “corridors,” and one of these is the Central Asia-West Asia Economic Corridor. That’s where Georgia fits in, alongside neighboring Azerbaijan: both are vying to position themselves as the key Caucasus transit hub between Western China and the European Union. [..] The action in the Caucasus was mirrored in Europe earlier in the week as Chinese Premier Li Keqiang and Hungary’s Prime Minister Viktor Orban opened the sixth “16+1” summit, involving China and 16 Central and Eastern European nations, in Budapest. “16+1” is yet another of those trademark Chinese diplomatic “away wins.”

Some of these nations are part of the EU, some part of NATO, some neither. From Beijing’s point of view, what matters is the relentless BRI infrastructure and connectivity drive. Beijing may have invested as much as US$8 billion so far in Central and Eastern Europe. China is having a ball in the Western Balkans – especially in Serbia, in Montenegro, and in Bosnia and Herzegovina, where EU financial muscle is absent. China has invested in multiple connectivity and energy projects in Serbia – including the much-debated Belgrade-Budapest high-speed rail link. Construction of the Serbian stretch started this week, with 85% of the total cost (roughly €2.4 billion) coming from the Export-Import Bank of China.

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Dream of power are always costly.

Paris – The Financial Capital Of West And Central Africa (Gefira)

France’s current zone of influence in Africa is the result of the policies of President Charles de Gaulle, who was unable to come to terms with his defeats in Indochina (1954) and Algeria (1962) and therefore sought to achieve the dominance of France in his former colonies. After de Gaulle, however, other presidents did not refrain from using military force and violence in Africa to defend their interests, on the pretext of protecting human rights and democracy. The French often achieved the opposite, because they made the same mistakes in their military actions as Americans made elsewhere in the world: they supported people who later became their enemies or violated human rights.

For example, it was the regime of Juvenal Habyariman in Rwanda that was supported by Paris: the French supplied Hutu combat groups with weapons, thus contributing to the Tutsi massacre. Hollande, who in Paris and Europe was perceived as a weakling, showed the face of a warrior and sent heavy units and fighter planes to Mali in 2013. This would not have been necessary if French President Sarkozy and the USA had not overthrown Qaddafi. It was Sarkozy that initiated the NATO led airstrikes against Libya. The removal of Colonel Qaddafi gave rise to the creation of the Caliphate with the help of Tuaregs in the north of Niger and Mali. After a few years since the start of the mission in Mali one wonders: has it made Europe safer?

Has the flow of migrants been stopped through Sahel countries? Are the Jihadists of African descent a lesser threat in Europe? The cost of the military action in Mali in 2013 amounted to €650 million. Operation Barkhane (as it is called) continues to this day and costs the French budget €500 million per year. Of course, democracy in Mali is a top priority for most Europeans, right? A total of 9,000 French soldiers are currently stationed in Chad, Niger, Mali, Burkina Faso, Senegal, Gabon, the Central African Republic and Djibouti. The growing military presence is intended to support the fight against terrorism and crime, in fact it is about the French elites extending their power to the south, reaching for cheap raw materials and outlet markets.

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“..if we can identify it is dark matter for sure then that is very significant. And if not, it is even more significant because they would be fresh new particles that no one had predicted before..”

Chinese Satellite Closes In On Dark Matter Mystery (AFP)

Scientists have detected cosmic ray energy readings that could bring them closer to proving the existence of dark matter, a mysterious substance believed to comprise a quarter of our universe, a study revealed on Thursday. Likely made up of unknown sub-atomic material, dark matter is invisible to telescopes and can be perceived only through its gravitational pull on other objects in the universe. Beijing’s first astronomical satellite launched two years ago detected 1.5 million cosmic ray electrons and protons, the study said, and unprecedented measurements found curiously low-energy rays. The team of researchers from China, Switzerland and Italy, who published their first results in the journal Nature, said the data may cast light on “the annihilation or decay of particle dark matter”.

“This new unseen phenomena can bring breakthroughs,” Bai Chunli, president of the Chinese Academy of Sciences, said at a briefing. “After collecting more data, if we can identify it is dark matter for sure then that is very significant. And if not, it is even more significant because they would be fresh new particles that no one had predicted before,” Bai added, to applause from fellow scientists. The Dark Matter Particle Explorer (DAMPE) is now collecting more data from space to help researchers figure out what it could be. DAMPE was launched from the Jiuquan Satellite Launch Centre in the Gobi desert in December 2015, after nearly 20 years in development. Its designers boast that DAMPE is superior to its US counterpart, the AMS-02 (Alpha Magnetic Spectrometer) that NASA installed on the International Space Station in 2011.

“Our cosmic ray detection range is 10 times that of AMS-02 and three times as accurate,” said DAMPE chief scientist Chang Jin. “Proving the existence of dark matter takes a lot of time. Now we have worked out the most precise spectrum, but we are not 100% sure that this can lead us to the location of dark matter,” he said.

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Aug 032017
 
 August 3, 2017  Posted by at 8:58 am Finance Tagged with: , , , , , , , , ,  


Marion Post Wolcott Street scenes. Port Gibson, Mississippi 1940

 

Buybacks and Dividends Eat 100% of Bank Earnings (WS)
America’s Productivity Plunge Explained (ZH)
Amazon is the New Tech Crash (David Stockman)
Public Pensions Average 0.6% Return In 2016 Despite 7.6% Assumption (ZH)
Plan For The Worst (Roberts)
Who Needs $100 Oil? Majors Making More Cash at $50, Goldman Says (BBG)
China’s Fear of Japan-Style Economic Bust Drives Crackdown on Deals (BBG)
The US Just Declared Full-Scale Trade War On Russia (Medvedev)
Seymour Hersh: RussiaGate Is A CIA-Planted Lie, Revenge Against Trump (Zuesse)
The Witch Hunt for Donald Trump Surpasses the Salem Witch Trials (PCR)
Canada Opens Montreal’s Olympic Stadium To House Asylum Seekers (R.)
Number Of Child Refugees In Greek Detention Centres Rises ‘Alarmingly’ (PA)
We Got Too BIG For The World (Kingsnorth)

 

 

And then they go after the Volcker rule. Take away their political power or else.

Buybacks and Dividends Eat 100% of Bank Earnings (WS)

When tighter regulations were imposed on the banks after the Financial Crisis, the largest among them, the very ones that threatened to bring down the financial system, began squealing. Those voices are now being heard by Congress, which is considering deregulating the banks again. In particular, they claim that current capital requirements force banks to curtail their lending to businesses and consumers, and thus hurt the economy. Nonsense! That’s in essence what FDIC Vice Chairman Thomas Hoenig told Senate Banking Committee Chairman Mike Crapo and the committee’s senior Democrat, Sherrod Brown, in a letter dated Tuesday, according to Reuters. The senators are trying to find a compromise on bank deregulation. If banks wanted to increase lending, they could easily do so without lower capital requirements, Hoenig pointed out.

Rather than blowing their income on share-buybacks or paying it out in form of dividends, banks could retain more of their income, thus adding it to regulatory capital. Capital absorbs the losses from bad loans. Higher capital levels make a bank more resilient during the next crisis. If there isn’t enough capital, the bank collapses and gets bailed out. But banks that increase their capital levels through retained earnings are stronger and can lend more. Alas, in the first quarter, the 10 largest bank holding companies in the US plowed over 100% of their earnings into share buybacks and dividends, he wrote. If they had retained more of their income, they could have boosted lending by $1 trillion. The CEO of the top bank on this list has been very vocal about plowing more of the bank’s income into share buybacks and dividends, while pushing regulators to lower capital requirements.

In his “Dear Fellow Shareholders” letter in April, Jamie Dimon wrote under the heading “Regulatory Reform,” among many other things: “It is clear that the banks have too much capital.” “And we think it’s clear that banks can use more of their capital to finance the economy without sacrificing safety and soundness. Had they been less afraid of potential CCAR stress losses, banks probably would have been more aggressive in making some small business loans, lower rated middle market loans and near-prime mortgages. But the government was preventing them from doing it, he suggested.

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I think it started when manufacturing was exported to China et al. How are you supposed to be productive when you don’t make anything?

America’s Productivity Plunge Explained (ZH)

For the first time since the financial crisis, US multifactor productivity growth turned negative last year, mystifying economists who have struggled to find something to blame for the fact that worker productivity is declining despite a technology boom that should make them more efficient – at least in theory. To be sure, economists have struggled to find explanations for the exasperating trend, with some arguing that the US hasn’t figured out how to properly measure productivity growth correctly now that service-sector jobs proliferate while manufacturing shrinks. But what if there’s a more straightforward explanation? What if the decline in US productivity measured since the 1970s isn’t happening in spite of technology, but because of it?

To wit, Facebook has just released user-engagement data for its popular Instagram photo-sharing app. Unsurprisingly, the data show that the average user below the age of 25 now spends more than 32 minutes a day on the app, while the average user aged 25 and older. The last time Facebook released this data, in October 2014, its users averaged 21 minutes a day on the app.

According to Bloomberg, “time spent is an important metric for advertisers, which like to hear that users are browsing an app beyond quick checks for updates, making them more likely to run into some marketing.” Maybe they should matter more to economists, too. Aside from short-lived booms in the 1990s and 2000s, US productivity growth has averaged just 1.2% from 1975 up to today after peaking above 3% in 1972. As we detailed previously, adjusting for the WWII anomaly (which tells us that GDP is not a good measure of a country’s prosperity) US productivity growth peaked in 1972 – incidentally the year after Nixon took the US off gold.

The productivity decline witnessed ever since is unprecedented. Despite the short lived boom of the 1990s US productivity growth only average 1.2 per cent from 1975 up to today. If we isolate the last 15 years US productivity growth is on par with what an agrarian slave economy was able to achieve 200 years ago. As we reported last year, users spent 51% of their total internet time on mobile devices, for a total of 5.6 hours per day snapchatting, face-booking, insta-graming and taking selfies.

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The new wonders are the ones who don’t make dick all.

Amazon is the New Tech Crash (David Stockman)

It won’t be long now. During the last 31 months the stock market mania has rapidly narrowed to just a handful of shooting stars. At the forefront has been Amazon.com, Inc., which saw its stock price double from $285 per share in January 2015 to $575 by October of that year. It then doubled again to about $1,000 in the 21 months since. By contrast, much of the stock market has remained in flat-earth land. For instance, those sections of the stock market that are tethered to the floundering real world economy have posted flat-lining earnings, or even sharp declines, as in the case of oil and gas. Needless to say, the drastic market narrowing of the last 30 months has been accompanied by soaring price/earnings (PE) multiples among the handful of big winners.

In the case of the so-called FAANGs + M (Facebook, Apple, Amazon, Netflix, Google and Microsoft), the group’s weighted average PE multiple has increased by some 50%. The degree to which the casino’s speculative mania has been concentrated in the FAANGs + M can also be seen by contrasting them with the other 494 stocks in the S&P 500. The market cap of the index as a whole rose from $17.7 trillion in January 2015 to some $21.2 trillion at present, meaning that the FAANGs + M account for about 40% of the entire gain. Stated differently, the market cap of the other 494 stocks rose from $16.0 trillion to $18.1 trillion during that 30-month period. That is, 13% versus the 82% gain of the six super-momentum stocks.

Moreover, if this concentrated $1.4 trillion gain in a handful of stocks sounds familiar that’s because this rodeo has been held before. The Four Horseman of Tech (Microsoft, Dell, Cisco and Intel) at the turn of the century saw their market cap soar from $850 billion to $1.65 trillion or by 94% during the manic months before the dotcom peak. At the March 2000 peak, Microsoft’s PE multiple was 60X, Intel’s was 50X and Cisco’s hit 200X. Those nosebleed valuations were really not much different than Facebook today at 40X, Amazon at 190X and Netflix at 217X. The truth is, even great companies do not escape drastic over-valuation during the blow-off stage of bubble peaks. Accordingly, two years later the Four Horseman as a group had shed $1.25 trillion or 75% of their valuation.

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“The media don’t crow every time the price of milk goes up, so why should it cheer higher prices in a different market? It’s great only if you own the cow.”

Dow 22,000 Is Not Good News For Most Americans (MW)

The U.S. stock market hit another record Wednesday, with the Dow Jones Industrial Average surpassing 22,000 for the first time. The media acted like Dow 22,000 is a good thing. The cheerleaders in the anchor desks are wearing goofy hats and high-fiving each other like their team just won the Super Bowl. But record-high stock prices are not inherently a good thing. Whether it’s good for you individually depends on whether you own lots of shares or not. Most people do not own very many shares at all, so most of us aren’t benefiting much from high stock prices. The media don’t crow every time the price of milk goes up, so why should it cheer higher prices in a different market? It’s great only if you own the cow.

Who owns the stock market? About half of all equity is owned by the richest 1 million or so families, and another 41% is owned by the rest of the top 10%. The bottom 90% of families own about 9% of outstanding shares. [..] High stock prices might have a benefit if it meant that more capital would be invested in America’s corporations. That’s the myth of the stock market, anyway. In reality, the stock market doesn’t funnel any additional capital into corporations at all. Nonfinancial corporations have been net buyers — not sellers — of equities for the past 23 years in a row. The stock market is actually a process for extracting wealth from corporations and passing it along to the wealthy people who owns shares.

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The headline bumbers are all you need really. Ponzi as far as the eye can see.

Public Pensions Average 0.6% Return In 2016 Despite 7.6% Assumption (ZH)

We’ve frequently argued that public pension funds in the U.S. are nothing more than thinly-veiled ponzi schemes with their ridiculously high return assumptions specifically intended to artificially minimize the present value of future retiree payment obligations and thus also minimize required annual contributions from taxpayers…all while actual, if immediately intangible, underfunded liabilities continue to surge. As evidence of that assertion, we present to you the latest public pension analysis from the Center for Retirement Research at Boston College. As part of their study, Boston College reviewed 170 public pension plans in the U.S. and found that their average 2016 return was an abysmal 0.6% compared to an average assumed return of 7.6%. Meanwhile, per the chart below, the average return for the past 15 years has also been well below discount rate assumptions, at just 5.95%.

All of which, as we stated above, continues to result in surging liabilities and collapsing funding ratios.

But, perhaps the most telling sign of the massive ponzi scheme being perpetrated on American retirees is the following chart which shows that net cash flows have become increasingly negative, as a percentage of assets, as annual cash benefit payments continue to exceed cash contributions.

Conclusion, you can hide behind high discount rates and a “kick the can down the road” strategy in the short-term…but in the long run actual cash flows matter.

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Pensions, planning: good luck in the bubble.

Plan For The Worst (Roberts)

One of the biggest mistakes that people make is assuming markets will grow at a consistent rate over the given time frame to retirement. There is a massive difference between compounded returns and real returns as shown. The assumption is that an investment is made in 1965 at the age of 20. In 2000, the individual is now 55 and just 10 years from retirement. The S&P index is actual through 2016 and projected through age 100 using historical volatility and market cycles as a precedent for future returns. While the historical AVERAGE return is 7% for both series, the shortfall between “compounded” returns and “actual” returns is significant. That shortfall is compounded further when you begin to add in the impact of fees, taxes, and inflation over the given time frame.

The single biggest mistake made in financial planning is NOT to include variable rates of return in your planning process. Furthermore, choosing rates of return for planning purposes that are outside historical norms is a critical mistake. Stocks tend to grow roughly at the rate of GDP plus dividends. Into today’s world GDP is expected to grow at roughly 2% in the future with dividends around 2% currently. The difference between 8% returns and 4% is quite substantial. Also, to achieve 8% in a 4% return environment, you must increase your return over the market by 100%. The level of “risk” that must be taken on to outperform the markets by such a degree is enormous. While markets can have years of significant outperformance, it only takes one devastating year of losses to wipe out years of accumulation.

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A new business model? Does this apply only to oil, or should all businesses cut their sales prices in half to increase their profits? Alternatively, maybe shareholders should sue BP and Shell for all missed profits in the past?

Who Needs $100 Oil? Majors Making More Cash at $50, Goldman Says (BBG)

Oil majors are raking in more cash now than they did in the heyday of $100 oil, according to Goldman Sachs. Integrated giants like BP and Royal Dutch Shell have adapted to lower prices by cutting costs and improving operations, analysts at the bank including Michele Della Vigna said in a research note Wednesday. European majors made more cash during the first half of this year, when Brent averaged $52 a barrel, than they did in the first half of 2014 when prices were $109. Back then, high oil prices had caused executives to overreach on projects, leading to delays, cost overruns and inefficiency, Goldman said. Those projects are coming online now, producing more revenue, while companies have tightened their belts and divested some assets to reduce debt burdens.

“Simplification, standardization and deflation are repositioning the oil industry for better profitability and cash generation in the current environment than in 2013-14 when the oil price was above $100 a barrel,” the analysts said. In the second quarter, Europe’s big oil companies generated enough cash from operations to cover 91 percent of their capital expenses and dividends, showing that they’re close to being able to fund shareholder payments with business-generated revenue, according to Goldman. That will give companies the ability to stop paying dividends by issuing new stock, which has diluted major European energy shares by 3 to 13 percent since 2014.

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Too late.

China’s Fear of Japan-Style Economic Bust Drives Crackdown on Deals (BBG)

President Xi Jinping’s top economic adviser commissioned a study earlier this year to see how China could avoid the fate of Japan’s epic bust in the 1990s and decades of stagnation that followed. The report covered a wide range of topics, from the Plaza Accord on currency to a real-estate bubble to demographics that made Japan the oldest population in Asia, according to a person familiar with the matter who has seen the report. While details are scarce, the person revealed one key recommendation that policy makers have since implemented: The need to curtail a global buying spree by some of the nation’s biggest private companies. Communist Party leaders discussed Japan’s experience in a Politburo meeting on April 26, according to the person, who asked not to be identified as the discussions are private.

State media came alive afterward, with reports trumpeting Xi’s warning that financial stability is crucial in economic growth. Then in June came a bombshell: reports that the banking regulator had asked lenders to provide information on overseas loans made to Dalian Wanda Group Co., Anbang Insurance Group Co., HNA, Fosun International Ltd. and the owner of Italian soccer team AC Milan. While the timing of those requests is unclear, other watchdogs soon issued directives to curb excessive borrowing, speculation on equities and high yields in wealth-management products. Jim O’Neill, previously chief economist at Goldman Sachs and a former U.K. government minister, said Chinese policy makers are constantly looking to avoid the mistakes of other countries — and Japan in particular.

“You see it in repeated attempts to stop various potential property bubbles so China doesn’t end up with a Japan-style property collapse,” O’Neill said in an email. “There does appear to be some signs that some Chinese investors don’t invest in clear understandable ways, but they wouldn’t be the only ones where that is true!” [..] The moves reflect concerns that China’s top dealmakers have borrowed too much from state banks, threatening the financial system and ultimately the party’s legitimacy to rule — a key worry ahead of a once-in-five-year conclave later this year that will cement Xi’s power through 2022.

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Well argued by Russia’s PM, and it shows just how extensive the sanctions are. Does America need decades more of Cold War?: “The sanctions codified into law will now last for decades, unless some miracle occurs. [..] the future relationship between the Russian Federation and the United States will be extremely tense, regardless of the composition of the Congress or the personality of the president.”

The US Just Declared Full-Scale Trade War On Russia (Medvedev)

The signing of new sanctions against Russia into law by the US president leads to several consequences. First, any hope of improving our relations with the new US administration is over. Second, the US just declared a full-scale trade war on Russia. Third, the Trump administration demonstrated it is utterly powerless, and in the most humiliating manner transferred executive powers to Congress. This shifts the alignment of forces in US political circles.

What does this mean for the U.S.? The American establishment completely outplayed Trump. The president is not happy with the new sanctions, but he could not avoid signing the new law. The purpose of the new sanctions was to put Trump in his place. Their ultimate goal is to remove Trump from power. An incompetent player must be eliminated. At the same time, the interests of American businesses were almost ignored. Politics rose above the pragmatic approach. Anti-Russian hysteria has turned into a key part of not only foreign (as has been the case many times), but also domestic US policy (this is recent).

The sanctions codified into law will now last for decades, unless some miracle occurs. Moreover, it will be tougher than the Jackson-Vanik law, because it is comprehensive and can not be postponed by special orders of the president without the consent of the Congress. Therefore, the future relationship between the Russian Federation and the United States will be extremely tense, regardless of the composition of the Congress or the personality of the president. Relations between the two countries will now be clarified in international bodies and courts of justice leading to further intensification of international tensions, and a refusal to resolve major international problems.

What does this mean for Russia? We will continue to work on the development of the economy and social sphere, we will deal with import substitution, solve the most important state tasks, counting primarily on ourselves. We have learned to do this in recent years. Within almost closed financial markets, foreign creditors and investors will be afraid to invest in Russia due to worries of sanctions against third parties and countries. In some ways, it will benefit us, although sanctions – in general – are meaningless. We will manage.

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No, Hersh is not some kind of nut.

Seymour Hersh: RussiaGate Is A CIA-Planted Lie, Revenge Against Trump (Zuesse)

During the latter portion of a phone-call by investigative journalist, Seymour Hersh, Hersh has now presented “a narrative [from his investigation] of how that whole fucking thing began,” including who actually is behind the ‘RussiaGate’ lies, and why they are spreading these lies.

In a youtube video upload-dated August 1st, he reveals from his inside FBI and Washington DC Police Department sources — now, long before the Justice Department’s Special Counsel Robert Mueller will be presenting his official ‘findings’ to the nation — that the charges that Russia had anything to do with the leaks from the DNC and Hillary Clinton’s campaign to Wikileaks, that those charges spread by the press, were a CIA-planted lie, and that what Wikileaks had gotten was only leaks (including at least from the murdered DNC-staffer Seth Rich), and were not from any outsider (including ’the Russians’), but that Rich didn’t get killed for that, but was instead shot in the back during a brutal robbery, which occurred in the high-crime DC neighborhood where he lived. Here is the video…

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So maybe Paul Craig Roberts lays it on a bit thick sometimes. But what happens in America is dangerous, and Trump is not the principal danger.

The Witch Hunt for Donald Trump Surpasses the Salem Witch Trials (PCR)

In 1940 US attorney general Robert Jackson warned federal prosecutors against “picking the man and then putting investigators to work, to pin some offense on him. It is in this realm—in which the prosecutor picks some person whom he dislikes or desires to embarrass, or selects some group of unpopular persons and then looks for an offense—that the greatest danger of abuse of prosecuting power lies. It is here that law enforcement becomes personal, and the real crime becomes that of being unpopular with the predominant or governing group, being attached to the wrong political views or being personally obnoxious to, or in the way of, the prosecutor himself.” Robert Jackson has given a perfect description of what is happening to President Trump at the hands of special prosecutor Robert Mueller.

Trump is vastly unpopular with the ruling establishment, with the Democrats, with the military/security complex and their bought and paid for Senators, and with the media for proving wrong all the smart people’s prediction that Hillary would win the election in a landslide. From day one this cabal has been out to get Trump, and they have given the task of framing up Trump to Mueller. An honest man would not have accepted the job of chief witch-hunter, which is what Mueller’s job is. The breathless hype of a nonexistent “Russian collusion” has been the lead news story for months despite the fact that no one, not the CIA, not the NSA, not the FBI, not the Director of National Intelligence, can find a scrap of evidence.

In desperation, three of the seventeen US intelligence agencies picked a small handful of employees thought to lack integrity and produced an unverified report, absent of any evidence, that the hand-picked handful thought that there might have been a collusion. On the basis of what evidence they do not say. That nothing more substantial than this led to a special prosecutor shows how totally corrupt justice in America is. Furthermore the baseless charge itself is an absurdity. There is no law against an incoming administration conversing with other governments. Indeed, Trump, Flynn, and whomever should be given medals for quickly moving to smooth Russian feathers ruffled by the reckless Bush and Obama regimes. What good for anyone can come from ceaselessly provoking a nuclear Russian bear?

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Spent so much time in that stadium watching baseball etc. Good memories.

Canada Opens Montreal’s Olympic Stadium To House Asylum Seekers (R.)

Canadian health authorities and aid workers are using an Olympic stadium to shelter asylum seekers as a growing number of people walk into the country from the United States. The Quebec Red Cross and local health authorities opened Montreal’s Olympic Stadium on Wednesday to asylum seekers brought in by bus after having crossed the U.S. border, Red Cross spokeswoman Stephanie Picard said. The city is seeing a growing influx in refugee claimants coming from the United States and is scrambling to house them all. The Red Cross is assisting with beds and providing bedding and other personal-care items. Montreal’s health authority would not provide exact numbers on how many people are being housed in the stadium, built for the 1976 Olympics and which now serves as an event space.

More than 4,300 people have walked across the U.S. border into Canada this year seeking refugee status. The vast majority of them come to Quebec, according to figures from the federal government. Many asylum seekers who spoke to Reuters say they left the United States fearing President Donald Trump’s immigration crackdown. People who cross the border illegally to file refugee claims are apprehended and held for questioning by both police and border officials before being allowed to file claims and live in Canada while their application is processed. Montreal Mayor Denis Coderre welcomed the asylum seekers on Twitter Wednesday afternoon, saying 2,500 people had come in July alone. He said on Twitter that providing for the new arrivals is a “humanitarian gesture.”

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Look, there have to be limits, or we will not survive this, none of us. Locking up children just because they have fled bombs is beyond insane.

Number Of Child Refugees In Greek Detention Centres Rises ‘Alarmingly’ (PA)

The number of unaccompanied child migrants living in “dirty” Greek detention centres has increased “alarmingly”, a human rights organisation has warned. An estimated 117 children were in police cells or custody centres in Greece at the end of July, compared to just two in November 2016, according to figures released by the country’s government. Under Greek law, the authorities should separate minors into safe accommodation, where they are appointed guardians who represent them in legal proceedings. But when there is no space in safe shelters, the authorities detain them in police stations and immigration detention facilities, sometimes with unrelated adults. “Instead of being cared for, dozens of vulnerable children are locked in dirty, crowded police cells and other detention facilities across Greece, in some cases with unrelated adults,” said Eva Cossé, the country’s researcher at Human Rights Watch.

“The Greek government has a duty to end this abusive practice and make sure these vulnerable kids get the care and protection they need.” Human Rights Watch has written to Migration Policy Minister Yiannis Mouzalas to stop the automatic detention of unaccompanied children. It suggested the government should amend legislation and significantly shorten the amount of time a child can be detained in protective custody. While they wait for a space in a shelter, many children are not provided with information about their rights and are not told how to apply for asylum, the organisation said. Aid workers have previously reported that the uncertainty and distress caused by the asylum process, exacerbated an ongoing mental health crisis among migrants living on the islands. Children as young as nine have harmed themselves, while 12-year-olds have attempted to kill themselves, Save the Children said in March.

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Too big NOT to fail.

We Got Too BIG For The World (Kingsnorth)

Living through a collapse is a curious experience. Perhaps the most curious part is that nobody wants to admit it’s a collapse. The results of half a century of debt-fueled “growth” are becoming impossible to deny convincingly, but even as economies and certainties crumble, our appointed leaders bravely hold the line. No one wants to be the first to say the dam is cracked beyond repair. To listen to a political leader at this moment in history is like sitting through a sermon by a priest who has lost his faith but is desperately trying not to admit it, even to himself. Watch your chosen president or prime minister mouthing tough-guy platitudes to the party faithful. Listen to them insisting in studied prose that all will be well. Study the expressions on their faces as they talk about “growth” as if it were a heathen god to be appeased by tipping another cauldron’s worth of fictional money into the mouth of a volcano.

In times like these, people look elsewhere for answers. A time of crisis is also a time of opening up, when thinking that was consigned to the fringes moves to center stage. When things fall apart, the appetite for new ways of seeing is palpable, and there are always plenty of people willing to feed it by coming forward with their pet big ideas. But here’s a thought: what if big ideas are part of the problem? What if, in fact, the problem is bigness itself? The crisis currently playing out on the world stage is a crisis of growth. Not, as we are regularly told, a crisis caused by too little growth, but by too much of it. Banks grew so big that their collapse would have brought down the entire global economy. To prevent this, they were bailed out with huge tranches of public money, which in turn is precipitating social crises on the streets of Western nations. The European Union has grown so big, and so unaccountable, that it threatens to collapse in on itself.

Corporations have grown so big that they are overwhelming democracies and building a global plutocracy to serve their own interests. The human economy as a whole has grown so big that it has been able to change the atmospheric composition of the planet and precipitate a mass-extinction event. One man who would not have been surprised by this crisis of bigness, had he lived to see it, was Leopold Kohr. Kohr has a good claim to be the most interesting political thinker that you have never heard of. Unlike Karl Marx, he did not found a global movement or inspire revolutions. Unlike Friedrich Hayek, he did not rewrite the economic rules of the modern world. Kohr was a modest, self-deprecating man, but this was not the reason his ideas have been ignored by movers and shakers in the half-century since they were produced. They have been ignored because they do not flatter the egos of the power-hungry, be they revolutionaries or plutocrats. In fact, Kohr’s message is a direct challenge to them.

“Wherever something is wrong,” he insisted, “something is too big.”

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Aug 022017
 
 August 2, 2017  Posted by at 9:04 am Finance Tagged with: , , , , , , , , ,  


Stanley Kubrick Men’s fashion show, New York 1948

 

New Rule Makes It Easier To Get A Mortgage With Student Loan Debt (F.)
US Auto Market Slump Persists (BBG)
US Plans Trade Measures Against China (WSJ)
US Begins Russia Drawdown After Kremlin Retaliates For Sanctions (R.)
Former Obama Aide Rhodes A Person Of Interest In Unmasking Investigation (C.)
For Sale: Two Half-Finished Nuclear Reactors -Never Used- (BBG)
Nissan Runs One Of ‘Nastiest Anti-Union Campaigns’ In Modern US History (G.)
Monsanto’s Sway Over Research Is Seen in Disclosed Emails (NYT)
Pesticide ‘Drifting’ Wreaks Havoc Across US Crops (BBG)
Bees Are Bouncing Back From Colony Collapse Disorder – A Little (BBG)
8 Migrants Dead Off Libya, 500 Rescued As Italy Prepares Naval Mission (AFP)
EasyJet Passengers Left High And Dry In Greece Due to Mating Turtles (G.)

 

 

Desperately mining for a new generation of greater fools. Courtesy of government-owned Fannie Mae. What a world.

New Rule Makes It Easier To Get A Mortgage With Student Loan Debt (F.)

For millions of Americans drowning in student loan debt, the prospect of getting a mortgage might seem out of reach. Last week, Fannie Mae changed underwriting rules that could make it much easier for people with student loan debt to qualify for a mortgage. The new rule impacts people with federal student loan debt who are currently on an income-driven repayment program. An income-driven repayment plan sets your monthly student loan payment at an amount that is intended to be affordable based upon your income and family size. Depending upon the plan, your monthly payment could be capped as low as 10% of your discretionary income. And if your discretionary income is low enough, your monthly payment could be as low as $0.

In order to qualify for a mortgage, a borrower needs to meet certain debt-to-income (DTI) requirements. That seems simple enough. However, there was confusion regarding federal student loan debt on an income-driven repayment program. When calculating a debt burden, should the underwriter include the standard student loan payment, the reduced payment, or something in between? The new statement from Fannie Mae makes it clear: the reduced payment can be used, even when the payment is $0. According to Fannie Mae, “if the lender obtains documentation to evidence the actual monthly payment is $0, the lender may qualify the borrower with the $0 payment as long as the $0 payment is associated with an income-driven repayment plan.”

This is important, because the payment calculation for a student loan (10% of the discretionary income) is different from the DTI requirement of a mortgage. Many Americans could find it easier to qualify for a mortgage while in student loan debt. Michigan-based mortgage broker Cassandra Evers told MagnifyMoney that the changes “allow a lot more borrowers to qualify for a home.” Previously, there was a lot of confusion among borrowers, lenders, and brokers, Evers said. “[The rules have] changed at least five or six times in the last five years.”

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“You can’t jawbone the economy..”

US Auto Market Slump Persists (BBG)

Here’s a bad sign for the U.S. economy: Auto sales just fell the most since August 2010, a year after the federal government’s “Cash for Clunkers” program to stimulate demand came to an end. Sales at General Motors plunged 15% in its home market in July, the biggest drop in more than a year. Its Detroit rivals didn’t fare much better: Ford reported its biggest sales decline since October and Fiat Chrysler had its second worst tumble this year. The disappointing showing underscores how Detroit has been struggling to live up to President Donald Trump’s prediction that it would become “the car capital of the world again.” The hometown automakers are instead laying off U.S. workers, particularly those who build passenger cars that have fallen out of favor with American consumers.

A demand slump has rendered spending on vehicles and parts a drag on U.S. economic growth, after years of contributing to expansion. “You can’t jawbone the economy,” said Diane Swonk, CEO and founder of DS Economics. “The auto industry was stronger than the rest of the economy for a while because they were giving credit to people who couldn’t pay loans. Sales crested sooner and now they are paying the price.” The traditional U.S. automakers each missed projections for declines that analysts gave in a Bloomberg News survey. While Nissan and Honda both beat projections, only Toyota posted a gain. Industrywide deliveries fell 7%, the steepest drop since the anniversary of “Cash for Clunkers,” a program that inflated U.S. sales in August 2009 as buyers traded in for more fuel-efficient wheels. The annualized pace of light-vehicle sales, adjusted for seasonal trends, slowed to 16.7 million in July, according to Autodata Corp., from 17.8 million a year earlier.

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China is not liking this.

US Plans Trade Measures Against China (WSJ)

The Trump administration is planning trade measures to force Beijing to crack down on intellectual-property theft and ease requirements that American companies share advanced technologies to gain entry to the Chinese market. The administration is considering invoking a little-used provision of U.S. trade law to investigate whether China’s intellectual-property policies constitute “unfair trade practices,” according to people familiar with the matter. That would pave the way for the U.S. to impose sanctions on Chinese exporters or to further restrict the transfer of advanced technology to Chinese firms or to U.S.-China joint ventures. American business frustration with Chinese trade and market-access practices has mounted in recent years, with U.S. business groups urging the government to take a tougher trade line with China.

Many organizations have complained that the Trump administration hasn’t pushed hard enough in areas like intellectual property, as it has focused more on Chinese manufacturing and China’s $347 billion trade surplus with the U.S. last year. That discontent has intensified as China’s economy continued to expand and its computer and software sectors became bigger competitors internationally. Western firms fear China will use the regulations to bar foreign investments in areas that Beijing targets for investment, including semiconductors, advanced-machine tools and artificial intelligence. One big question hanging over the White House review is whether the administration pursues any complaint through the World Trade Organization, or whether it chooses to impose penalties on its own without first seeking permission from the international body, which some Trump advisers have argued is incapable of dealing with China’s trade practices.

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Has Trump even signed the new sanctions yet?

US Begins Russia Drawdown After Kremlin Retaliates For Sanctions (R.)

The United States began removing furniture and equipment from a diplomatic property in Moscow on Tuesday in the first sign of compliance with a Kremlin order to slash its presence in Russia as retaliation for new U.S. sanctions. President Vladimir Putin has ordered the United States to cut around 60% of its diplomatic staff in Russia by Sept. 1, and said Moscow will seize two U.S. diplomatic properties in response to sanctions approved by Congress last week. The White House has said U.S. President Donald Trump will sign the sanctions bill, meant as a response to alleged Russian meddling in the 2016 U.S. presidential election and to further punish Moscow for its 2014 annexation of Crimea from Ukraine.

On Tuesday, removal men began dismantling play equipment and barbecues at a U.S.-owned dacha (country villa) on the outskirts of Moscow, after being refused access the day before, according to a Reuters journalist at the scene. The dacha, which is being confiscated along with a U.S. warehouse in the south of the Russian capital, was used by U.S. diplomatic staff at the weekends and to host parties for students, journalists and other diplomats. [..] The ultimatum issued by the Russian leader is a display to voters at home that he is prepared to stand up to Washington – but is also carefully calibrated to avoid directly affecting the U.S. investment he needs, or burning his bridges with Trump. One person at the embassy, who spoke on condition of anonymity because they are not authorized to talk to the media, said staff there were feeling depressed and despondent as they came to terms with the Kremlin’s order. “The mood in the office is very pessimistic,” the person said. “Everyone is just loitering, or sitting on job websites looking for a new job.”

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Strange things were taking place.

Former Obama Aide Rhodes A Person Of Interest In Unmasking Investigation (C.)

Former Obama White House National Security Adviser Ben Rhodes is now an emerging as a person of interest in the House Intelligence Committee’s unmasking investigation, according to a letter sent Tuesday by the committee to the National Security Agency (NSA). This adds Rhodes to the growing list of top Obama government officials who may have improperly unmasked Americans in communications intercepted overseas by the NSA, Circa has confirmed. The House Intelligence Committee Chairman Devin Nunes, R-CA, sent the letter to the National Security Agency requesting the number of unmaskings made by Rhodes from Jan. 1, 2016 to Jan. 20, 2017, according to congressional sources who spoke with Circa.

Rhodes, who worked closely with former National Security Adviser Susan Rice and was a former deputy national security adviser for strategic communications for President Obama, became a focus of the committee during its review of classified information to assess whether laws were broken regarding NSA intercepted communications of President Trump, members of his administration and other Americans before and after the election, according to congressional officials. The committee is requesting that the NSA deliver the information on Rhodes by August, 21. Former U.S. Ambassador to the United Nations Samantha Power, Rice and former CIA Director John Brennan have all been named in the House Intelligence Committee’s investigation into the unmasking of Americans.

A letter sent last week from Nunes to Dan Coats, the director of National Intelligence, suggested that top Obama aides made hundreds of unmasking requests during the 2016 presidential elections. The story, which was first reported by The Hill last week, stated that the requests were made without specific justifications as to why the unmasking was necessary. Rice and Brennan have confirmed they sought the unredacted names of Americans in NSA-sourced intelligence reports but insisted their requests were routine parts of their work and had no nefarious intentions. Power also has legal authority to unmask officials, though the practice has not reportedly been common for someone in her position. Rhodes also had legal authority to unmask Americans in NSA-source intelligence reports. But intelligence and congressional sources question the extent of the unmasking.

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Testament to insanity and waste.

For Sale: Two Half-Finished Nuclear Reactors -Never Used- (BBG)

Looking to buy two half-finished nuclear reactors? It may be your lucky day. U.S. utility owner Scana Corp. dropped a plan to build two reactors at the V.C. Summer power plant in South Carolina on Monday after the projected total costs exceeded $20 billion. The cancelation of the project is another blow to the much-hyped (and thus far non-existent) nuclear renaissance in the U.S. As cheap natural gas squeezes the margins of nuclear generators, there’s only one company currently building reactors in the country — Southern Co., at its Vogtle plant in Georgia. So what’s a utility to do with two unfinished nukes laying around in South Carolina? Scana CEO Kevin Marsh said in a call with analysts that he wants to keep the equipment in operating condition in case someone in China, India or the U.K. wants to buy it.

A sale like that is easier said than done. “The Chinese are developing a competitive product, the Brits are in trouble with their nuclear projects and the Indians want to develop their own supply chain,” said Chris Gadomski, a nuclear industry analyst for Bloomberg New Energy Finance. It’s more likely the South Carolina project is “mothballed,” he said. Reactors have found new buyers and new life in the past. In 2016, the Tennessee Valley Authority turned on its Watts Bar 2 reactor after work had been suspended in 1985. Franklin L. Haney bought an unfinished, decades-old nuclear plant in northern Alabama at an auction last November for $111 million. The Bellefonte plant came with two partially built nuclear reactors, one that’s about 55% complete and another about 35% finished.

Haney still has to get the mothballed station into working order, find customers for its power and qualify for a federal nuclear production tax credit. Perhaps a similar fate awaits the V.C. Summer plant. “It makes more sense to let them sit in place, maintain them, and see if they can be revisited,” Gadomski said.

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What, there are still unions?

Nissan Runs One Of ‘Nastiest Anti-Union Campaigns’ In Modern US History (G.)

Days before a potentially historic union vote at the Nissan plant in Canton, Mississippi, the car company has been accused of running one of the “nastiest anti-union campaigns in the modern history of the American labour movement”. The vote, a fiercely contested effort by the United Auto Workers (UAW) union to represent a foreign automaker’s US plant, is planned for Thursday and Friday this week. It comes as US unions are hopeful they can overturn a series of defeats as they seek to build membership in southern states, where manufacturers have moved to take advantage of lower wages and non-union workforces. In the closing days of the campaign, which has attracted support from the former presidential hopeful Bernie Sanders, UAW officials and their allies have become increasingly confident of victory even as managers have pressured workers to vote no.

“People are rallying,” says Frank Figgers, co-chair of the Mississippi Alliance for Fairness at Nissan. The UAW is undertaking an extensive door-to-door campaign to visit workers in their homes to discuss the union. The UAW has shipped in staff from all over the country to help in the effort. Other unions from around the south have shipped in organizers from across the country to assist in the outreach to the plant’s nearly 4,000 workers. Nissan has responded with fierce opposition. The company has blitzed local TV with anti-union ads and stands accused of both threatening and bribing workers to vote no. It requires workers to regularly attend anti-union roundtable group meetings as well as one-on-one meetings with their direct supervisors, some of whom have worn “vote no” T-shirts to work. The Republican governor, Phil Bryant, has also come out hard for Nissan. “If you want to take away your job, if you want to end manufacturing as we know it in Mississippi, just start expanding unions,” Bryant said last week.

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Evil incorporated.

Monsanto’s Sway Over Research Is Seen in Disclosed Emails (NYT)

Documents released Tuesday in a lawsuit against Monsanto raised new questions about the company’s efforts to influence the news media and scientific research and revealed internal debate over the safety of its highest-profile product, the weed killer Roundup. The active ingredient in Roundup, glyphosate, is the most common weed killer in the world and is used by farmers on row crops and by home gardeners. While Roundup’s relative safety has been upheld by most regulators, a case in federal court in San Francisco continues to raise questions about the company’s practices and the product itself. The documents underscore the lengths to which the agrochemical company goes to protect its image. Documents show that Henry I. Miller, an academic and a vocal proponent of genetically modified crops, asked Monsanto to draft an article for him that largely mirrored one that appeared under his name on Forbes’s website in 2015.

A similar issue appeared in academic research. An academic involved in writing research funded by Monsanto, John Acquavella, a former Monsanto employee, appeared to express discomfort with the process, writing in a 2015 email to a Monsanto executive, “I can’t be part of deceptive authorship on a presentation or publication.” He also said of the way the company was trying to present the authorship: “We call that ghost writing and it is unethical.” A Monsanto official said the comments were the result of “a complete misunderstanding” that had been “worked out,” while Mr. Acquavella said in an email on Tuesday that “there was no ghostwriting” and that his comments had been related to an early draft and a question over authorship that was resolved. The documents also show internal talk about Roundup’s safety.

“If somebody came to me and said they wanted to test Roundup I know how I would react — with serious concern,” one Monsanto scientist wrote in an internal email in 2001. Monsanto said it was outraged by the documents’ release by a law firm involved in the litigation. “There is a standing confidentiality order that they violated,” said Scott Partridge, vice president of global strategy for Monsanto. He said that while “you can’t unring a bell,” Monsanto would seek penalties on the firm. “What you’re seeing are some cherry-picked things that can be made to look bad,” Mr. Partridge said. “But the substance and the science are not affected by this.”

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How does a farmer protect himself from Monsanto, DuPont and BASF?

Pesticide ‘Drifting’ Wreaks Havoc Across US Crops (BBG)

Larry Martin in Illinois says he’s never seen anything like it in his 35 years of farming. Arkansas soybean grower Joe McLemore says he faces the loss of his life savings. They’re among farmers across the U.S. suffering from a pesticide “drifting” across from neighboring fields onto their crops, leaving behind a trail of damage. Although not a new problem, it’s re-emerged with a vengeance this year. At least 2.5 million acres (1 million hectares) have been damaged in this growing season through mid-July, according to estimates from Kevin Bradley, a professor of plant sciences at the University of Missouri. Dicamba, the offending herbicide, is produced by seed and crop-chemical giants Monsanto, DuPont and BASF.

It’s been around for decades, but in recent years it gained a new lease of life after the companies developed new dicamba-resistant soybean and cotton seeds, allowing farmers to spray crops later in the growing process. Dicamba is fine if you’re growing those genetically modified varieties, but not if you’re cultivating others and the chemical wafts over from another farm. The situation is so bad that states including Missouri, Arkansas, and Tennessee have placed restrictions on dicamba use at various times during the summer. Martin, a third-generation farmer, says an 80-acre soybean field of his has been damaged by dicamba. McLemore, who started out on his own eight years ago, after two decades working on someone else’s farm, says 800 of his 1,026 acres of soybeans have suffered damage.

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3%? That’s hardly ‘bouncing back’.

Bees Are Bouncing Back From Colony Collapse Disorder – A Little (BBG)

The number of U.S. honeybees, a critical component in the agriculture industry, rose in 2017 from a year earlier, and deaths of the insects attributed to a mysterious malady that’s affected hives in North America and Europe declined, according a U.S. Department of Agriculture honeybee health survey released Tuesday. The number of commercial U.S. honeybee colonies rose 3% to 2.89 million as of April 1, 2017 compared with a year earlier, the Agriculture Department reported. The number of hives lost to Colony Collapse Disorder, a phenomenon of disappearing bees that has raised concerns among farmers and scientists for a decade, was 84,430 in this year’s first quarter, down 27% from a year earlier. Year-over-year losses declined by the same%age in April through June, the most recent data in the survey.

Still, more than two-fifths of beekeepers said mites were harming their hives, and with pesticides and other factors still stressing bees, the overall increase is largely the result of constant replenishment of losses, the study showed. “You create new hives by breaking up your stronger hives, which just makes them weaker,” said Tim May, a beekeeper in Harvard, Illinois and the vice-president of the American Beekeeping Federation based in Atlanta. “We check for mites, we keep our bees well-fed, we communicate with farmers so they don’t spray pesticides when our hives are vulnerable. I don’t know what else we can do.” Environmental groups have expressed alarm over the 90% decline during the past two decades in the population of pollinators, from wild bees to Monarch butterflies. Some point to a class of pesticides called neonicotinoids as a possible cause, a link rejected by Bayer AG and other manufacturers.

In the USDA study, beekeepers who owned at least five colonies, or hives, reported the most losses from the varroa mite, a parasite that lives only in beehives and survives by sucking insect blood. The scourge, present in the U.S. since 1987, was reported in 42% of commercial hives between April and June this year, according to the USDA. That’s down from 53% in the same period one year earlier. Among other factors, beekeepers said 13% of colonies in the second quarter of this year were stressed by pesticides, 12% by mites and pests other than varroa and 4.3 by diseases. Bad weather, starvation, insufficient forage and other reasons were listed as problems with 6.6% of hives.

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What does it mean to be human?

8 Migrants Dead Off Libya, 500 Rescued As Italy Prepares Naval Mission (AFP)

The bodies of eight migrants have been found at sea off the coast of Libya by rescuers coming to the aid of four rubber dinghies, the Italian coast guard said Tuesday. Some 500 survivors were pulled to safety, the coast guard told AFP, illustrating the huge challenge that continues to bedevil authorities as people try to reach Europe. The latest deaths came as the Italian government presented plans for a naval mission in Libyan territorial waters that aims to reduce the flow of migrants from the coast. Spanish NGO Proactiva Open Arms, which was taking part in the rescues, said the corpses were recovered by the Santa Lucia merchant ship.

“We are here to stop more people drowning, today eight dead and four drifting boats” in distress, Proactiva’s founder, Oscar Champs, said on Twitter. The charity said there were 79 women and 39 minors — including four young children — among those rescued. Nearly 95,000 people have been brought to safety in Italy this year, a rise of 1% on the same period last year, according to the interior ministry. The government intends to send a logistics ship that could support Libyan units and will also offer a patrol boat, Italian Defense Minister Roberta Pinotti told lawmakers on Tuesday. However, Italy has no intention to create a naval blockade, which would be a “hostile act,” she said, insisting that support for the Libyan mission was the aim and cooperation was necessary.

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If you read between the whining, what a lovely story. Night curfew because turtles are important. Perhaps that’s what it means to be human.

EasyJet Passengers Left High And Dry In Greece Due to Mating Turtles (G.)

Scores of easyJet passengers were stranded on the Greek island of Zakynthos (also known as Zante) after their plane developed technical difficulties and a replacement aircraft was prevented from flying in because of mating turtles. [..] The airline said the night curfew – apparently in place because of vulnerable loggerhead turtles breeding nearby – had prevented an alternative aircraft being sent out. The sea turtle breeding season is well under way in Zakynthos. According to Archelon, a group dedicated in protecting sea turtles in Greece, late June to early July see the highest levels of spawning. The group has recorded 500 nests on the island so far, but that is fewer than in previous years.

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Jul 292017
 
 July 29, 2017  Posted by at 9:09 am Finance Tagged with: , , , , , , , ,  


Dorothea Lange Grocery store in Widtsoe, Utah 1936

 

Trump’s Mistake In Taking Ownership Of The Stock Market Bubble (LR)
Congress Checkmates Trump (And The American People) (LR)
Russia Hits Back Over Sanctions, Orders US Diplomats To Leave (R.)
EU Explores Account Freezes To Prevent Runs At Failing Banks (R.)
The Great Transatlantic Bond Divergence Unwind (WSJ)
Top German Automakers Sued in US Over Two-Decade ‘Cartel’ (BBG)
Wells Fargo Faces Angry Questions After New Sales Abuses Uncovered (R.)
Wells Fargo Cuts 70 Senior Managers in Retail Bank After Accounts Scandal (BBG)
What Explains amazon.com’s Share Price? (PCR)
Panama Leaks and the Fall of Pakistan’s Prime Minister (Niaz)
Plastic Microparticles Found In Flesh Of Fish Eaten By Humans (Ind.)

 

 

More incentives for the Fed to trigger a crisis.

Trump’s Mistake In Taking Ownership Of The Stock Market Bubble (LR)

Let’s start at the beginning. Bubbles and Busts are both created by The Federal Reserve. Presidents are merely along for the ride. They like to credit themselves for the bubbles, and then look for scapegoats, usually the (non-existent) free market during the busts. But it is The Fed that creates them both. President Trump has made a big (yet understandable) mistake. He’s tried to portray himself as the cause of the current bubble in the stock market. He wants credit where credit is due. In this case, credit is not due. As we already mentioned, the Fed created the current bubble, and did so a long time ago. One look at a chart of the S&P 500 says it all:

Chances are, Trump realizes that most people won’t look at a chart of the stock market and he just wants some good PR. The president wants people to think that he is the reason for the stock market bubble. This is a big mistake. The Fed is the premier member of the so-called “Deep State”. In fact, without The Fed, there would hardly be a “Deep State” to speak of. The Fed sits at the top of the Deep State. They have the ultimate power (that no human beings should ever have) to create new money out-of-thin-air. In case Trump hasn’t figured it out yet, the Deep State does not like him. Should a major decline in the stock market occur during Trump’s Administration, guess who will take the blame? President Trump. After all, he took ownership of the bubble!

Should the market tumble, the mainstream media (that also despises Trump) will have plenty of his quotes, YouTubes, and Tweets to use against him. The economic woes will be pinned on Trump. Will Trump deserve the blame? No, but it’ll be too late. This is not to say that a major decline will occur during Trump’s tenure. Bubbles can take on a life of their own, and this one may last during Trump’s full term. But that’s a risky gamble to make. This bubble is going on almost 10 years now without a serious decline. Should we see a major selloff, Trump has very few friends in the major power centers that will come to his aid. As Peter Schiff points out in this fantastic clip below: The Fed now has their fall guy:

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A curious move. An ultimate power game.

Congress Checkmates Trump (And The American People) (LR)

Yesterday, the US Senate passed HR 3364, the Countering America’s Adversaries Through Sanctions Act by a massive 98 yeas to two nays. Opposing the bill were Sens. Bernie Sanders (I-VT) and Rand Paul (R-KY). The bill passed in the House by 419-3 on Tuesday, with Reps Massie (R-KY), Amash (R-MI), and Duncan (R-TN) opposing. The new sanctions bill ties President Trump’s hands on foreign policy, as he will be forced to ask Congress for permission to ease the measures. Speaking in favor of the legislation, Sen. Bob Menendez (R-NJ) cited the need to send Russia a message that it cannot meddle in US elections, that it cannot annex Crimea, that it cannot invade Ukraine, and that it cannot indiscriminately kill women and children in Syria.

Those of us living in the actual real world recognize that the first count remains unproven and the remaining counts are simply fatuous, fact-free bluster by Washington’s uninformed, group-thinking, foreign policy elites. Fueled by the millions coming in to the military-industrial complex. The House and Senate passed “Countering America’s Adversaries Through Sanctions Act” now goes to President Trump’s desk, where he faces a damned if he does and damned if he doesn’t scenario. A veto would certainly be over-ridden, handing the president a bitter bi-partisan blow that would likely end whatever aspirations he may retain to keep his campaign promises to get along better with Russia.

Similarly, signing the bill signs a death warrant for any foreign policy different than the one served up by the neocons for decades: create enemies; push war propaganda; collect massive checks from military industrial complex; demonize any American refusing to go along; repeat, adding bombs as necessary. Checkmate, President Trump.

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Over 600 would have to leave. Question: why does the US have over 6000 more staff in Russia than vice versa?

Russia Hits Back Over Sanctions, Orders US Diplomats To Leave (R.)

Russia told the United States on Friday that some of its diplomats had to leave the country in just over a month and said it was seizing some U.S. diplomatic property as retaliation for what it said were proposed illegal U.S. sanctions. Russia’s response, announced by the Foreign Ministry, came a day after the U.S. Senate voted to slap new sanctions on Russia, putting President Donald Trump in a tough position by forcing him to take a hard line on Moscow or veto the legislation and anger his own Republican Party. President Vladimir Putin had warned on Thursday that Russia had so far exercised restraint, but would have to retaliate against what he described as boorish and unreasonable U.S. behaviour. Relations between the two countries, already at a post-Cold War low, have deteriorated even further after U.S. intelligence agencies accused Russia of trying to meddle in last year’s U.S. presidential election, something Moscow flatly denies.

The Russian Foreign Ministry said on Friday that the United States had until Sept. 1 to reduce its diplomatic staff in Russia to 455 people, the same number of Russian diplomats it said were left in the United States after Washington expelled 35 Russians in December. It said in a statement that the decision by Congress to impose new sanctions confirmed “the extreme aggression of the United States in international affairs.” “Hiding behind its ‘exceptionalism’ the United States arrogantly ignores the positions and interests of other countries,” said the ministry. “Under the absolutely invented pretext of Russian interference in their “Under the absolutely invented pretext of Russian interference in their domestic affairs the United States is aggressively pushing forward, one after another, crude anti-Russian actions. This all runs counter to the principles of international law.”

[..] An official at the U.S. embassy in Moscow, who declined to be named because they were not allowed to speak to the media, said there were around 1,100 U.S. diplomatic staff in Russia. That included Russian citizens and U.S. citizens. Most staff, including around 300 U.S. citizens, work in the main embassy in Moscow with others based in outlying consulates. The Russian Foreign Ministry said it was also seizing a Moscow dacha compound used by U.S. diplomats to relax from Aug. 1 as well as a U.S. diplomatic warehouse in Moscow.

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Confidence spelled backwards. How to cause a bank run in 3 easy lessons.

EU Explores Account Freezes To Prevent Runs At Failing Banks (R.)

European Union states are considering measures which would allow them to temporarily stop people withdrawing money from their accounts to prevent bank runs, an EU document reviewed by Reuters revealed. The move is aimed at helping rescue lenders that are deemed failing or likely to fail, but critics say it could hit confidence and might even hasten withdrawals at the first rumors of a bank being in trouble. The proposal, which has been in the works since the beginning of this year, comes less than two months after a run on deposits at Banco Popular contributed to the collapse of the Spanish lender. It also come amid a bitter wrangle among European countries over how to deal with troubled banks, roughly a decade after a financial crash that required the ECB to print billions of euros to prevent a prolonged economic slump.

Giving supervisors the power to temporarily block bank accounts at ailing lenders is “a feasible option,” a paper prepared by the Estonian presidency of the EU said, acknowledging that member states were divided on the issue. EU countries which already allow a moratorium on bank payouts in insolvency procedures at national level, like Germany, support the measure, officials said. “The desire is to prevent a bank run, so that when a bank is in a critical situation it is not pushed over the edge,” a person familiar with German government’s thinking said. To cover for savers’ immediate financial needs, the Estonian paper, dated July 10, recommended the introduction of a mechanism that could allow depositors to withdraw “at least a limited amount of funds.”

Banks, though, say it would discourage saving. “We strongly believe that this would incentivize depositors to run from a bank at an early stage,” Charlie Bannister of the Association for Financial Markets in Europe (AFME), a banking lobby group, said. The Estonian proposal was discussed by EU envoys on July 13 but no decision was made, an EU official said. Discussions were due to continue in September. The plan, if agreed, would contrast with legislative proposals made by the European Commission in November that aimed to strengthen supervisors’ powers to suspend withdrawals, but excluded from the moratorium insured depositors, which under EU rules are those below 100,000 euros ($117,000).

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Price discovery.

The Great Transatlantic Bond Divergence Unwind (WSJ)

Many of the trades embraced by markets after President Donald Trump’s election have been slowly unwinding in 2017. Here’s an important one that could have further to go: the gap between U.S. and German government bond yields. The spread between 10-year Treasurys and bunds ballooned after Mr. Trump’s November victory to a level not seen since before the fall of the Berlin Wall, around 2.3 percentage points by the end of 2016. U.S. yields rose sharply on the idea of reflation and stimulus, while Europe appeared stuck in a rut. At 1.75%age points, the gap is close to its pre-election level. But even that is unusual by historical standards. Between 1990 and 2014, the spread was only rarely wider than one percentage point, and over that period averaged just 0.2 point, according to data from FactSet.

Such a tight relationship between German and U.S. bonds reflected the long global bull market for bonds in the glory years of globalization. Relatively synchronized monetary policy meant yields fell on both sides of the Atlantic together. The Fed’s 2013 taper, followed by signals of coming European Central Bank bond buying helped set the bond markets apart. That both helped weaken the euro and encouraged a rush of bond issuance by U.S. companies in European markets as borrowing costs fell. Where policy goes now is key. Markets doubt how far the Fed might get with its tightening, and seem unflustered by the prospect of the central bank shrinking its balance sheet. Investors may be too relaxed, but in the absence of fiscal stimulus and inflation, much higher yields for Treasurys might be hard to achieve in the near term.

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But they rule Germany. So yeah, some fines etc., but the culture just goes on.

Top German Automakers Sued in US Over Two-Decade ‘Cartel’ (BBG)

German’s major automakers were accused in a U.S. lawsuit of acting as a cartel, colluding for nearly two decades to limit the pace of technological advances in their vehicles and stifle competition – allegations that widen the scope of the latest scandal to hit the nation’s auto industry. BMW AG, Daimler AG, Volkswagen AG and its Audi and Porsche brands shared competitive information about vehicle technologies with one another from 1996 through at least 2015 in violation of antitrust laws, according to a complaint filed Friday in San Francisco federal court. “These coordinated actions enabled the manufacturer defendants — the self-named ‘Fünfer-Kreise,’ or Circle of Five — to impose a German automobile premium on consumers premised on superior German engineering, while secretly stunting incentives to innovate,” the suit alleges.

The suit, which seeks class-action status on behalf of U.S. drivers, says the companies agreed to limit the development of vehicle systems, including emissions control. The arrangement allegedly led to the development of so-called “defeat devices” used by Volkswagen to cheat on pollution tests. Plaintiffs claim the operation of convertible roofs, body design, brakes and electronic systems were also part of the “technological innovations inhibited” by the pacts. The supplier of VW’s cheat software, Robert Bosch Gmbh, was also named as a defendant in the lawsuit.

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“The added cost of insurance pushed 274,000 customers into delinquency..”

Elizabeth Warren has called on the Fed to remove Wells Fargo board members. I think if your legal system does not allow you to put these people behind bars, maybe you should look there first. Many of these people should be put before a judge and Wells Fargo should be forced to close. Institutions like that are diseases in a society.

Wells Fargo Faces Angry Questions After New Sales Abuses Uncovered (R.)

New revelations that Wells Fargo spent years enrolling unknowing borrowers in costly auto insurance has put the bank under new pressure to answer for a months-long scandal over sales practices that have harmed millions of Americans. The latest news that 800,000 Wells Fargo auto borrowers were improperly charged for insurance rattled investors yet again, and sent its stock down 2.6% on Friday. Shareholders, analysts, lawmakers and consumer advocates demanded answers about how the situation manifested, and why Wells Fargo did not disclose the problems sooner, given existing turmoil over phony deposit and credit card accounts opened in customers’ names without their permission.

“This is a full-blown scandal — again,” said New York City Comptroller Scott Stringer, who oversees public pension funds that hold roughly 11.6 million Wells Fargo shares. “It’s unbelievable, outrageous, sad, and yet quintessential Wells Fargo. This isn’t just a corporate debacle. It’s caused real human harm.” Stringer called on the bank to install a new independent chair and “immediately” disclose more information. Wells Fargo first became aware of potential problems a year ago, when the auto lending business began receiving an unusually high number of complaints, Franklin Codel, head of consumer lending, said in an interview. The auto insurance program was quickly suspended, and the problem escalated to senior management, the board and regulators, he said.

Wells Fargo planned to delay public disclosure until it could notify affected customers and reimburse them. “The problem with disclosing to the marketplace today or several months ago is customers start calling and asking when they’re going to get their money,” he said. “It’s not a great customer experience to say, ‘Yeah, we’ll get back to you.'” [..] Wall Street analysts expect the financial damage to go beyond the $80 million in reimbursements. In a note on Friday, Piper Jaffray’s Kevin Barker predicted the true cost would be “multiples” of that figure, with lawsuits and further customer remediation. The added cost of insurance pushed 274,000 customers into delinquency, and led to at least 20,000 wrongful repossessions, according to the Times.

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“Community bank” and Wells Fargo in one sentence. Take out the ones that are most guilty and go on as you were.

Wells Fargo Cuts 70 Senior Managers in Retail Bank After Accounts Scandal (BBG)

Wells Fargo, the lender struggling to overcome a fake-accounts scandal in its community bank, said the division’s new leader is cutting about 70 senior executive jobs. The lender will reduce the number of regional and area presidents to 91, Mary Mack, head of the retail bank, said Friday in a memo to staff, a copy of which was obtained by Bloomberg. Bank spokeswoman Bridget Braxton confirmed the contents of the memo and said employees whose positions are eliminated will remain staff members for 60 days until further steps are decided. Most of the remaining managers will be re-titled as region bank presidents with direct responsibility for more employees than before, in a move aimed at reducing management levels across the branch network, Mack wrote.

Across its 10 geographical divisions, Wells Fargo previously employed 160 regional and area presidents. “Change is hard, yet change is necessary to make sure we are well positioned for the future,” Mack wrote. “In order to truly be better, we must put the right structure in place,” she added. The community-banking division, which houses the retail bank, has generated weaker profit since September when Wells Fargo was fined $185 million because employees had been opening accounts for more than a half decade without customers’ permission. This week, the firm’s consumer operations revealed another scandal, announcing that the bank had charged as many as 500,000 customers for auto insurance they didn’t need.

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“..Bill Gates who heads the largest digital technology company is on occasion second fiddle to Bezos who heads an online Sears or Macy’s.”

What Explains amazon.com’s Share Price? (PCR)

“Here are today’s top stories on Bloomberg” “Jeff Bezos briefly overtook Bill Gates as the world’s richest person. A surge in Amazon shares Thursday morning in advance of its earnings report gave Bezos a net worth of $92.3 billion, surpassing the Microsoft founder’s $90.8 billion fortune. In afternoon trading, Bezos remains ranked second on the Bloomberg Billionaires Index. Gates has held the top spot since May 2013.” Amazon’s stock closed yesterday at $1,046 per share. Amazon’s profits do not support this extraordinary price. Apple, a very profitable company, has a share price of $150.56, an overprice itself. What or who is making Bezos so rich from an online sales company? Note, amazon.com is just sales. It is not some new manufacturing technology that produces valuable output at low cost.

amazon.com is what Walmart, Sears, and Macy’s do, the difference being that amazon.com is online and Walmart, Sears, and Macy’s are in physical locations where real merchandise can be experienced hands on and tried on for fit. In other words, online purchases are convenient, but you don’t know what you are getting. Does it fit? What is the quality? And so forth. How many times do you send it back before you get what you want? There are two answers to the question about who is making Bezos rich. One is that Wall Street is betting that the collapse of US anti-trust law and regulatory authority—it is still on the books but not enforced, just look at the Big Banks—and the ability of Bezos to use his ownership of the Washington Post, the newspaper of the country’s capital, to support those who support him, ensure that amazon.com will be an online monopoly.

Once this is put in place, amazon’s prices and profits will rise, and the extraordinary amazon.com P/E ratio will come into line with reality. Another is that Bezos’ cooperation with Washington’s spy network over all Americans is paid for by the CIA’s many front companies driving up the price of amazon.com’s stock. As the price of amazon.com rises, so does Bezos’ wealth. I don’t know that either of these answers is correct. What I notice is that Bill Gates who heads the largest digital technology company is on occasion second fiddle to Bezos who heads an online Sears or Macy’s.

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Just in case you’re thinking things are a mess where you are. His brother is rumored to succeed him.

Panama Leaks and the Fall of Pakistan’s Prime Minister (Niaz)

On July 28, 2017, the Supreme Court of Pakistan (SCP) rendered a unanimous verdict by a five-member bench that disqualified Prime Minister Nawaz Sharif from holding public office. This outcome was the result of the Panama Leaks, which revealed that the premier and his family owned assets disproportionate to their known sources of income. The opposition Pakistan Tehreek-i-Insaf (PTI), led by Imran Khan, seized on this issue and managed to compel Pakistan’s normally apathetic state institutions to take notice. For over a year, the premier and his family failed to explain how they acquired upscale properties in London. The ruling family dug themselves even deeper into the hole in their effort to establish some kind of cover for their acquisitions by being deliberately inaccurate before the SCP and even forging documents.

Surrounded by sycophants, the premier was evidently badly advised at each step and he and his family have paid a very high political price and could well face jail time. Pakistan has a long tradition of dragging its civilian chief executives over the coals. No prime minister has completed a regular term in office, their tenures cut short by assassination, civilian or military coups, judicial intervention, and intra-party machinations. Many premiers have been overthrown or dismissed for alleged abuse of power, mal-administration, and corruption. Nawaz Sharif and his family, in being unable to account for their wealth, and in their crude attempts at a cover up, have demonstrated that they are evidently crooks.

This said, the Pakistan Muslim League-Nawaz (PML-N) has done a better job of delivering on its campaign promises than any political party in Pakistan’s democratic experience. Pakistan’s energy crisis has eased, the economy is headed towards 6% annual growth, FDI is the highest in a decade, per capita income has risen perceptively, major cities have seen considerable investment in their infrastructure, and the gross level of terrorist violence has declined. Given that the ruling party won in 2013 with as many votes as the next two largest parties combined, its victory in 2018 seemed all but assured.

[..] Since 1947, Pakistan state elites have presided over a massive privatization of public wealth. Entitlements in the form of plots, perks, benefits, are part of an elaborate system of bureaucratically induced shortages that breed systemic corruption and undermines governance. Pakistani private and public sector corporations and entrepreneurs guzzle subsidies and thrive only in a cartelized environment. Any attempt by a government to rationalize the economy or improve productivity is met with howls of protest and demands for more subsidies. Pakistani professionals, be they lawyers, doctors, engineers, educators, behave like mafias, seeking to avoid ethical checks while relentlessly pursuing self-aggrandizement.

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We’ll eat our own crap yet. Garbage in, garbage out.

Plastic Microparticles Found In Flesh Of Fish Eaten By Humans (Ind.)

Plastic microparticles are getting into the flesh of fish eaten by humans, according to a new study. A team of scientists from Malaysia and France discovered a total of 36 tiny pieces of plastic in the bodies of 120 mackerel, anchovies, mullets and croakers. They warned that as plastic attracts toxins in the environment, these poisons could be released into people’s bodies after they ate the fish. The plastics found included nylon, polystyrene and polyethylene. Writing in the journal Scientific Reports, the researchers said: “The widespread distribution of microplastics in aquatic bodies has subsequently contaminated a diverse range of aquatic biota, including those sold for human consumption such as shellfish and mussels.

“Therefore, seafood products could be a major route of human exposure to microplastics. “Microplastics were suggested to exert their harmful effects by providing a medium to facilitate the transport of other toxic compounds such as heavy metals and persistent organic pollutants to the body of organisms. Upon ingestion, these chemicals may be released and cause toxicity.” They suggested people eating the fish examined in this study, which are often dried and sold across Malaysia and neighbouring countries, could consume up to 246 pieces of microplastic a year. However, they added: “The majority of the tested fish in this study did not contain microplastics. Therefore, it is less likely that an individual would ingest the suggested maximum number of microplastics per annum.”

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Jul 282017
 
 July 28, 2017  Posted by at 8:21 am Finance Tagged with: , , , , , , , , , , ,  


Gordon Burt Bond Street, Wellington, New Zealand c1957

 

Senate Blocks ‘Skinny’ Obamacare Repeal Bill In Dramatic Late-Night Vote (CNBC)
Russia Promises Retaliation As Senate Passes Sanctions Bill (G.)
US Housing Bubble 2.0 (Mark Hanson)
Is This The Bubble? (Lance Roberts)
Japan Defense Minister Quits Amid Plunging Support For PM Abe (R.)
Libor, The Scandal-Ridden Financial Benchmark, Doesn’t Have Long To Live (Qz)
Shell’s Profits Treble As Cost Cuts Take Effect (PA)
Oil Companies Trim Drilling Budgets in Sign of Rising Caution (BBG)
US Indicts Russian Suspected of $4 Billion Bitcoin Laundering Scheme (R.)
The Syrian Army Were Standing Up To Isis Long Before The Americans (Fisk)
France Plans Asylum ‘Hotspots’ In Libya (BBC)
Italy Loses Patience With France’s Macron Over Migrants, Libya (VoA)
EU Announces New Emergency Support For Greek Refugee Crisis (AP)

 

 

Three things:

1) Boy, was I right to say US politics should be observed through the eyes of Shakespeare.

2) Playing with people’s health care, let alone for petty political reasons, is not forgiveable.

3) What a bunch of has-beens these people are. Limit their terms, close the revolving doors, and let the future be decided by people young enough to actually have a future. Oh, and get money out of politics.

Senate Blocks ‘Skinny’ Obamacare Repeal Bill In Dramatic Late-Night Vote (CNBC)

The Senate blocked the latest Republican attempt to repeal Obamacare in a dramatic floor vote early Friday morning, yet again stalling — for now — the key campaign goal that eludes the GOP six months into the Trump administration. Three GOP defections — Sens. Susan Collins of Maine, Lisa Murkowski of Alaska and John McCain of Arizona — sank the measure in a 49-51 vote. McCain, who recently returned to the Senate after getting diagnosed with brain cancer, cast his “no” vote to audible gasps on the chamber’s floor, according to reporters there. Senate Republicans released the plan late Thursday just hours before voting on an amendment to take up the bill. The GOP could only afford to lose two votes on the proposal, which many senators suggested they would not even want to see become law.

The measure came after separate pushes to immediately replace the Affordable Care Act or repeal it with a two-year transition period failed amid GOP divisions. Several Republican senators slammed the plan and appeared to not even want it to become law. It marks another blow to the sprawling agenda that Republicans hoped to accomplish when President Donald Trump won the White House and the GOP held both chambers of Congress in November. After the vote, a visibly frustrated Senate Majority Leader Mitch McConnell called it “clearly a disappointing moment.” “So yes, this is a disappointment, a disappointment indeed … I regret that our efforts were simply not enough this time,” McConnell said.

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But this they do agree on. More reasons to get rid of the old order in Washington.

Russia Promises Retaliation As Senate Passes Sanctions Bill (G.)

Vladimir Putin has accused US lawmakers of “insolence”, and promised Russia will retaliate if the latest round of US sanctions against Russia are signed into law. The House of Representatives voted by 419 votes to three on Tuesday to pass the new sanctions bill, which targets Russia as well as North Korea and Iran. The US legislation was passed overwhelmingly by the Senate on Thursday, and will now go to Donald Trump for his signature. Trump, who enjoyed two warm conversations with Putin at the G20 summit earlier this month, is likely to face a major backlash if he attempts to veto the legislation, with his administration already embroiled in a Russia scandal. “We are behaving in a very restrained and patient way, but at some moment we will need to respond,” said Putin at a press conference with his Finnish counterpart, Sauli Niinistö.

“It’s impossible to endlessly tolerate this kind of insolence towards our country,” Putin said, referring to the sanctions. “This practice is unacceptable – it destroys international relations and international law.” Putin was vague on exactly how Russia might respond. The newspaper Kommersant quoted two unnamed sources saying a range of potential responses was under consideration in Moscow, including expelling US diplomats, seizing diplomatic properties, increasing restrictions on US companies working in Russia and halting enriched uranium shipments to US power plants. [..] Putin and other Russian officials have repeatedly denied any meddling in the US election, while US intelligence agencies say they have overwhelming evidence of a coordinated Russian campaign. Putin on Thursday described the allegations as “hysteria”, and said: “It’s a great pity that Russian-US relations are being sacrificed to resolve questions of domestic politics.”

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And you thought the US housing bubble was over?

US Housing Bubble 2.0 (Mark Hanson)

The striking Case-Shiller regional charts shown below, courtesy of MHanson.com, make Mark Hanson angry: “so, 2006/2007 was the largest house price bubble ever, but there is nothing to see here in 2017?” and sarcastically points out that “if this isn’t a house price bubble, I would hate to see one.” His bottom line: “If 2006/07 was the peak of the largest housing bubble in history with affordability never better vis a’ vis exotic loans; easy availability of credit; unemployment in the 4%’s; the total workforce at record highs; and growing wages, then what do you call “now” with house prices at or above 2006 levels; worse affordability; tighter credit; higher unemployment; a weakening total workforce; and shrinking wages? Whatever you call it, it’s a greater thing than the Bubble 1.0 peak.”

[..] Income required to buy the avg priced builder house is at historical highs and has completely diverged from the multi-decade trend line. Historically low growth & rebound relative to resales suggest “lack of supply” meme in the Existing Sales market is over-stated.

“Peak builder is here.”
1) New Home Sales “up to” 1995 levels after $15 TRILLION in debt and Fed liquidity aimed largely at the sector.
2) Builder pricing power largely flat for 2-years.
3) Income required to buy the average priced builder house has completely diverged from the multi-decade trend line. This obviously explains why sales are only at 600k SAAR now vs 1.2 million in Bubble 1.0. Reversion to this mean will occur…either thru a sharp rise in income; new exotic loan programs, which make payment less; or house prices dropping.

4) Last time builders were this euphoric was the peak of the biggest credit bubble in history.

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Rinse, forget and repeat.

Is This The Bubble? (Lance Roberts)

Every major market peak, and subsequent devastating mean reverting correction, has ever been the result of the exact ingredients seen previously. Only the ignorance of its existence has been a common theme. The reason that investors ALWAYS fail to recognize the major turning points in the markets is because they allow emotional “greed” to keep them looking backward rather than forward. Of course, the media foster’s much of this “willful” blindness by dismissing, and chastising, opposing views generally until it is too late for their acknowledgement to be of any real use. The next chart shows every major bubble and bust in the U.S. financial markets since 1871 (Source: Robert Shiller)

At the peak of each one of these markets, there was no one claiming that a crash was imminent. It was always the contrary with market pundits waging war against those nagging naysayers of the bullish mantra that “stocks have reached a permanently high plateau” or “this is a new secular bull market.” Yet, in the end, it was something that was unexpected, unknown or simply dismissed that yanked the proverbial rug from beneath investors. What will spark the next mean reverting event? No one knows for sure, but the catalysts are present from: • Excess leverage (Margin debt at new record levels) •IPO’s of negligible companies (Blue Apron, Snap Chat) • Companies using cheap debt to complete stock buybacks and pay dividends, and; • High levels of investor complacency.

Either individually, or in combination, these issues are all inert. Much like pouring gasoline on a pile of wood, the fire will not start without a proper catalyst. What we do know is that an event WILL occur, it is only a function of “when.” The discussion of why “this time is not like the last time” is largely irrelevant. Whatever gains that investors garner in the between now and the next correction by chasing the “bullish thesis” will be wiped away in a swift and brutal downdraft.

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Abe should just go. But before he does, he’ll throw Kuroda under the bus first, if he has the time.

Japan Defense Minister Quits Amid Plunging Support For PM Abe (R.)

Embattled Japanese Defence Minister Tomomi Inada on Friday said she was resigning, after a series of gaffes, missteps and a cover-up at her ministry that have contributed to a sharp plunge in public support for Prime Minister Shinzo Abe. Inada, 58, an Abe protege who shares his conservative views and had been suggested as a possible future premier, had already expected to be replaced in a likely cabinet reshuffle next week that Abe hopes will help rebuild his ratings. Support for the prime minister has sunk below 30% in some polls, due to scandals over suspected cronyism and a view among many voters that he and his aides took them for granted.

Abe apologized “to the people from my heart”, in comments to reporters carried live on national television after Inada announced her resignation. He said Foreign Minister Fumio Kishida would add the defense portfolio to his duties, to eliminate any gap at a time when Japan faces tough security challenges, such as from a volatile North Korea. “I want to make every effort to maintain a high degree of vigilance and protect the security of the people,” Abe said. Abe had drawn fire from both ruling and opposition party lawmakers for retaining Inada despite her perceived incompetence. “He should have thrown Inada under the bus long ago … doing so on the eve of a cabinet reshuffle only looks like desperation,” said Jeffrey Kingston, director of Asian Studies at Temple University Japan.

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Taking it out before the real big scandals come up?

Libor, The Scandal-Ridden Financial Benchmark, Doesn’t Have Long To Live (Qz)

A global borrowing benchmark that became synonymous with rigged financial markets, and cost banks some $9 billion in fines, is going away. Andrew Bailey, the head of Britain’s Financial Conduct Authority, said in a speech today that the regulator will phase out the indicator, Libor, by the end of 2021. Bailey said the reason the London interbank offered rate is being scrapped is because the market underpinning the benchmark—unsecured bank lending—has dried up. For one particular Libor benchmark—there are many rates for various durations and currencies—there were only 15 transactions last year, he said. Such benchmarks have long been problematic and susceptible to manipulation. Libor, for example, is based on an estimate of what supposed experts at banks think a borrowing rate would be.

Bloomberg describes the process like this: “The benchmark is the average rate a group of 20 banks estimate they’d be able to borrow funds from each other in five different currencies across seven time periods, submitted by a panel of lenders every morning. Its administration was overhauled in the wake of the scandal, with Intercontinental Exchange Inc. taking over from the then-named British Bankers’ Association.” Before the financial crisis, banks submitted daily estimates of borrowing rates to the BBA, which then averaged them to calculate that day’s Libor rate. Via allegedly colluding, the banks submitting rates could nudge the average up or down, depending on what was needed to increase a profit or reduce a loss in their portfolios.

Libor is of global importance because it’s used to help determine borrowing costs for more than $300 trillion in securities, for things like student loans and mortgages. But as a trader once said in a transcript uncovered by regulators, it’s “just amazing how libor fixing can make you that much money.” The Libor scandal was also part of an era in which recorded electronic communications—chat messages—became evidence and got a lot of people in a lot of trouble. Similar market manipulation was discovered in things like foreign-currency exchange rates and commodity prices. And now Libor is being scrapped. Banks didn’t really want to participate in the rate-setting process anymore anyway, Bailey said, given the market had shrank by so much. (Their recent history of being fined billions for their role in daily rate submissions probably didn’t help.) Some new indicator will have to be agreed on.

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When I saw the headline, I thought they must either have been real inefficient before, or they’re selling teh kitchen sink and not investing a penny. And whaddaya know?

Shell’s Profits Treble As Cost Cuts Take Effect (PA)

Royal Dutch Shell has reported a large rise in second quarter profits after the energy giant was boosted by higher oil and gas prices. The firm said adjusted earnings rose from £800m to £2.7bn, an increase of 245 per cent, as chief executive Ben van Beurden said he is making progress on “reshaping the company”. He said: “Cash generation has been resilient over four consecutive quarters, at an average oil price of just under $50 per barrel. “The external price environment and energy sector developments mean we will remain very disciplined, with an absolute focus on the four levers within our control, namely capital efficiency, costs, new project delivery, and divestments.

“I am confident that we are on track to deliver a world-class investment to our shareholders.” The figures were flattered by a disastrous second quarter in 2016, when it was stung by dilapidated crude prices and costs linked to its takeover of BG Group. This time last year Brent Crude was trading at round 45 US dollars a barrel compared to circa 50 US dollars today. Shell is also embarking on an ambitious cost-cutting drive and a £24.6bn divestment initiative. To this end, the oil major has sold off more than £16bn of assets since the BG takeover. Shell this year announced it will sell off a package of North Sea assets for up to £3bn to smaller rival Chrysaor, and recently agreed to sell its stake in Irish gas project Corrib in a deal worth up to £956 million.

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Everybody does it.

Oil Companies Trim Drilling Budgets in Sign of Rising Caution (BBG)

Caution lights are flashing for the oil industry. Facing lower-than-expected commodity prices, drillers from ConocoPhillips to Hess to Statoil have slashed their capital spending plans in recent days, as companies lay out their plans to cope with oil prices stuck below $50 a barrel. The budget cuts won’t necessarily mean less oil or natural gas on the market, with some of the companies saying they can now do more with less and expect to produce just as much oil and gas in 2017. But they speak to an investor community that’s grown anxious as a global rally in crude prices has stalled out this year.

“The expectation was that oil would be at least above $50 by this time,” said Brian Youngberg, an energy analyst with Edward Jones & Co. in St. Louis. “Right now, the market wants you to spend within your cash flow, no exceptions allowed. It’s just a response to that.” The “modest tweaks” in this week’s second-quarter earnings reports will probably continue in the coming days, Youngberg said, as drillers focused on U.S. shale plays take center stage. “Companies are going to be cautious,” he said. “No one wants to be the outlier.”

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The Mt. Gox link is interesting. Will BTC-e also close?

US Indicts Russian Suspected of $4 Billion Bitcoin Laundering Scheme (R.)

A US jury indicted a Russian man on Wednesday as the operator of a digital currency exchange he allegedly used to launder more than $4 billion for people involved in crimes ranging from computer hacking to drug trafficking. Alexander Vinnik was arrested in a small beachside village in northern Greece on Tuesday, according to local authorities, following an investigation led by the US Justice Department along with several other federal agencies and task forces. US officials described Vinnik in a Justice Department statement as the operator of BTC-e, an exchange used to trade the digital currency bitcoin since 2011.

They alleged Vinnik and his firm “received” more than $4 billion in bitcoin and did substantial business in the United States without following appropriate protocols to protect against money laundering and other crimes. US authorities also linked him to the failure of Mt. Gox, a Japan-based bitcoin exchange that collapsed in 2014 after being hacked. Vinnik “obtained” funds from the hack of Mt. Gox and laundered them through BTC-e and Tradehill, another San Francisco-based exchange he owned, they said in the statement.

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Robert Fisk is part of our conscience.

The Syrian Army Were Standing Up To Isis Long Before The Americans (Fisk)

I don’t like armies. They are dangerous institutions. Soldiers are not heroes just because they fight. And I’ve grown tired of saying that those who live by the sword sometimes die by the sword. But in an age when the Americans and the Iraqis and Isis can account for 40,000 civilian deaths in Mosul in the past twelve months, compared to 50,000 civilians slaughtered by the Mongols in 13th-century Aleppo – a human rights improvement of US aircrews, Iraqi brutality and Isis sadism over the Mongol hordes by a mere 10,000 souls – death sometimes seems to have lost its meaning. Unless you know the victims or their families. I have a friend whose mother was murdered in the Damascus suburb of Harasta near the start of the Syrian war, another whose brother-in-law was kidnapped east of the city and never seen again.

I met a little girl whose mother and small brother were shot down by al-Nusrah killers in the town of Jisr al-Shughour, and a Lebanese who believes his nephew was hanged in a Syrian jail. And then, this month, in the eastern Syrian desert, near the dust-swept shack village of al-Arak, a Syrian soldier I’d come to know was killed by Isis. He was, of course, a soldier in the army of the Syrian regime. He was a general in an army constantly accused of war crimes by the same nation – the United States – whose air strikes contributed so generously to the obscene massacre in Mosul. But General Fouad Khadour was a professional soldier and he was defending the oil fields of eastern Syria – the crown jewels of Syria’s economy, which was why Isis tried to occupy them all and why they killed Khadour – and the war in the desert is not a dirty war like so many of the conflicts perpetrated in Syria.

When I met him west of Palmyra, Isis had just conquered the ancient Roman city and publicly chopped or blown off the heads of the civilians and soldiers and civil servants who did not manage to flee. Just a year before, the general’s son, also a soldier, had been shot dead in battle in Homs. Fouad Khadour merely nodded when I mentioned this. He wanted to talk about the war in the hot, brown mountains south of Palmyra, where he was teaching his soldiers to fight back against the Isis suicide attackers, to defend their isolated positions around the oil pumping and electricity transmission station where he was based, and to save the T4 pipelines on the road to Homs. The Americans, who proclaimed Isis to be an “apocalyptic” force, sneered that the Syrian army did not fight Isis. But Khadour and his men were standing up to Isis before the Americans ever fired a missile, and learning the only lesson that soldiers can understand when confronted by a horrific enemy: not to be afraid.

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The idea is not exactly new. But Macron wants to go it alone.

France Plans Asylum ‘Hotspots’ In Libya (BBC)

France says it plans to set up “hotspots” in Libya to process asylum seekers, in a bid to stem the flow of migrants to Europe. President Emmanuel Macron said the move would stop people not eligible for asylum from “taking crazy risks”. The centres would be ready “this summer”. He said that between 800,000 and a million people were currently in camps in Libya hoping to get into Europe. But many of them did not have a right to asylum, Mr Macron said. The French leader said that migrants were destabilising Libya and Europe by fuelling people-smuggling, which in turn funded terrorism. “The idea is to create hotspots to avoid people taking crazy risks when they are not all eligible for asylum. We’ll go to them,” he said on Thursday at a naturalisation ceremony in the central city of Orléans.

On Tuesday, Mr Macron mediated talks in Paris between Libya’s opposing governments. UN-backed Prime Minister Fayez al-Sarraj and Khalifa Haftar, the rival military commander who controls the east, committed to a conditional ceasefire after the meeting. They are aiming to end the conflict which has engulfed the country since Col Muammar Gaddafi was ousted in 2011. Mr Macron and other EU leaders had been hoping for some sort of agreement, as Libya has become a key route for migrants making their way to Europe. The French leader said he hoped the deal would be a blow to the human traffickers who work in the region.

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This is not over. Macron wants to show he’s a tough guy, but pushing aside Italy is bad theater.

Italy Loses Patience With France’s Macron Over Migrants, Libya (VoA)

Macron’s Libya diplomacy is just one irritant in increasingly tension-filled Franco-Italian relations. In May, after meeting Gentiloni in Paris, Macron announced: “We have not listened enough to Italy’s cry for help on the migration crisis.” But Macron’s position since hasn’t changed much from Francois Hollande, his predecessor in the Elysee Palace, to the Italian government’s rising anger. “Italian pleas for more burden-sharing by other EU countries have, so far, fallen on deaf ears. Italy’s refugee centers and shelters have reached their capacity of 200,000. So far this year nearly 100,000 asylum seekers have crossed the Mediterranean from Libya — a 17% increase over the same period last year — and with months more of good weather, another 100,000 asylum seekers are likely to land at Italian ports.

This month, Italy’s deputy foreign minister, Mario Giro, complained, “it doesn’t seem like France wants to help us concretely.” French police are blocking hundreds of migrants on the Italian side of the border at Ventimiglia from entering France; the French government is refusing to allow asylum seekers rescued in the Mediterranean from landing at French ports and, like nearly every other EU country, France hasn’t come anywhere near meeting its quota of migrants as agreed to under a 2015 EU refugee relocation scheme. Macron this month talked of distinguishing between war refugees and economic migrants, indicating that France won’t admit any asylum-seekers who are just escaping poverty and hunger. But that doesn’t help Italy as it tries to cope with a mounting influx of mainly economic migrants, who, under EU rule, it has little alternative but to admit, at least for processing and to save lives.

Paris has also scorned an Italian proposal for an EU military mission to monitor and interdict migrants along Libya’s southern border. Italians question why a large French military mission in Niger isn’t being used to disrupt migrant trafficking when it is right by the main route being used by smugglers and would-be asylum seekers traveling north. Last month, the European Parliament’s most senior left-wing politician, Italian Gianni Pittella, launched a scathing attack on Macron after French police frogmarched back into Italy more than 100 migrants who’d crossed into France. “The situation is shameful. Italy and the Italians are being abandoned, they’re being expected to deal with all these migrants on their own with no support,” he said.

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I’ve said it before: help for refugees in fine, even though its distribution through NGOs is a colossal mess. But renting homes for refugees, and supplying them with money to live, is a huge blow in the face of the Greeks devastated by EU-induced austerity, who get nothing.

EU Announces New Emergency Support For Greek Refugee Crisis (AP)

The European Commission announced a new emergency support package for Greece Thursday to help it deal with the refugee crisis that has seen tens of thousands of migrants and refugees stuck in the country. The €209 million ($243 million) package includes a €151 million program to help refugee families rent accommodation in Greek cities and provide them with money in an effort to help them move out of refugee camps, EU officials said during a visit to Athens. The Commission said the new funding more than doubles the emergency support extended to Greece for the refugee crisis, bringing it to a total of €401 million.

The rental project is in cooperation with the UN High Commissioner for Refugees and will provide 22,000 rental places with the aim of increasing the number of refugees living in rented apartments to 30,000 by the end of the year, including 2,000 places on Greek islands. A parallel scheme worth €57.6 million will provide refugees and asylum seekers with monthly cash stipends distributed through cash-cards for expenses such as transport, food and medication. “The projects launched today are one part of our wider support to the country but also to those in need of our protection,” said Migration Commissioner Dimitris Avramopoulos. “Around €1.3 billion of EU funds are at the disposal of Greece for the management of the migration crisis.”

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Jul 272017
 
 July 27, 2017  Posted by at 8:42 am Finance Tagged with: , , , , , , , ,  


Hieronymus Bosch St. Jerome in Prayer 1482

 

Fed Says Balance-Sheet Unwind to Start ‘Relatively Soon’ (BBG)
Time Flies for Draghi and the Bumblebees (BBG)
The Greater Moderation (DDMB)
Thursday Is the ‘Day From Hell’ for Europe’s Stock Watchers (BBG)
Market Hype Triggers ‘New Major Warning’ Sign For Stocks (CNBC)
Financialization and Risk Asymmetry (CHS)
China’s Banks Now Stable, ‘Shadow’ Banking Less Threatening – Moody’s (CNBC)
Investor Howard Marks Says Bitcoin Is A ‘Pyramid Scheme’ (CNBC)
German Business Lobby Urges EU Action Against New US Sanctions On Russia (RT)
Macron Unleashes a Decade of Italian Anger (BBG)
Sweden Leaks Details Of Almost All Of Its Citizens (Ind.)
Armageddon Is Two and One-half Minutes Away (PCR)
Half Our Bodies’ Atoms ‘Formed Beyond The Milky Way’ (G.)

 

 

Far too much power. And then you get inane stuff like: Fed Chair Janet Yellen has allowed the labor market to strengthen .. That means exactly nothing at all.

Fed Says Balance-Sheet Unwind to Start ‘Relatively Soon’ (BBG)

Federal Reserve officials said they would begin running off their $4.5 trillion balance sheet “relatively soon” and left their benchmark policy rate unchanged as they assess progress toward their inflation goal. The start of balance-sheet normalization – possibly as soon as September – is another policy milestone in an economic recovery now in its ninth year. The Fed bought trillions of dollars of securities to lower long-term borrowing costs after cutting the main interest rate to zero in December 2008. “Near-term risks to the economic outlook appear roughly balanced,” the Federal Open Market Committee said in a statement Wednesday following a two-day meeting in Washington. “Household spending and business fixed investment have continued to expand.”

Fed watchers had anticipated that the inclusion of the term “relatively soon” would signal the central bank could announce the timing of the balance-sheet reduction program at its next meeting, scheduled for Sept. 19-20. U.S. stocks rose slightly and 10-year Treasury yields fell following the Fed’s statement. “I expect an announcement of the onset of the balance-sheet reduction at the conclusion of the September meeting, effective on the first of October,” Carl Tannenbaum, chief economist at Northern Trust Corp. in Chicago, said after Wednesday’s statement. U.S. central bankers have raised the benchmark policy rate four times since they began removing emergency policy in December 2015, and project another increase before the end of this year.

In June, the FOMC outlined gradually rising runoff caps for maturing Treasuries and mortgage-related securities, and said the program would start “this year.” Fed Chair Janet Yellen has allowed the labor market to strengthen while inflation has remained lower than the 2% goal of officials, with price pressures declining in recent months. The target range for the benchmark federal funds rate was held at 1% to 1.25%. The FOMC said it’s “monitoring inflation developments closely.”

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Also far too much power. It’s crazy to see the man’s babytalk endanger entire societies.

Time Flies for Draghi and the Bumblebees (BBG)

Five years ago today, Mario Draghi was talking about bumblebees. The European Central Bank president’s speech in London on July 26, 2012, became instantly famous because of his pledge to do “whatever it takes” to save the euro. But for all the power and clarity of that phrase, he started his remarks more obliquely. “The euro is like a bumblebee. This is a mystery of nature because it shouldn’t fly but instead it does. So the euro was a bumblebee that flew very well for several years. And now — and I think people ask “how come?”– probably there was something in the atmosphere, in the air, that made the bumblebee fly. Now something must have changed in the air, and we know what after the financial crisis.”

At the time, the currency bloc was being buffeted by soaring bond yields in peripheral nations as speculators bet the union’s fundamental flaws would rip it apart. Draghi’s answer was to state unequivocally that the immediate crisis fell under the ECB’s responsibility and he would deal with it. “The ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.” That pledge was followed by a program to buy the debt of stressed countries in return for structural reforms, and in that respect the words alone proved to be enough. Yield spreads collapsed even though the program has never been tapped.

The bumblebee metaphor tends to be forgotten, but Draghi’s point was this: even with many national governments and more than a dozen different languages dividing the labor force, the single currency can fly. He went further though, saying that it would fly better if European governments overhaul their economies and work more closely together. On that point, the ECB has less reason to be satisfied with the past five years. The institution has since become the regional banking supervisor but European-level integration has otherwise largely stalled, and Draghi has repeatedly lamented the sluggish pace of national economic reforms.

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“The last great central banker that we had in the last 110 years other than Volcker was J.P. Morgan. The difference is, when Morgan tried to contain the 1907 crisis, he wasn’t using zeros and ones of imaginary computer money; he was using his own capital.”

The Greater Moderation (DDMB)

In late June, the recently retired Robert Rodriguez, a 33-year veteran of the markets, sat down for a lengthy interview with Advisor Perspectives (linked here). Among his many accolades, Rodriguez carries the unique distinction of being crowned Morningstar Manager of the Year for his outstanding management of both equity and bond funds. He likens the current era to that of the nine years ended 1951, a period during which the Fed and Treasury held interest rates at artificially low levels to finance World War II. His main concern today is that price discovery has been so distorted by the Fed that the stage is set for a ‘perfect storm.’ His personal allocation to equities is at the lowest level since 1971. The combination of meteorological forces to bring on said storm, you ask? It may well be an act of God, an earthquake. It could just as easily be a geopolitical tremor the system cannot absorb; it’s easy enough to name a handful of potential aggressors.

Or history may simply rhyme with the unrelenting shock waves that catalyzed the subprime mortgage crisis, coupled per chance with a plain vanilla recession. We may simply and slowly wake to the realization that the assumptions we’ve used to delude ourselves into buying the most expensive credit markets in the history of mankind are built on so much quicksand. The point is panics do not randomly come to pass; they must be shocked into existence as was the case in advance of 1907 and 2007. One of Rodriguez’s observations struck a raw nerve for yours truly, who prides herself on being a reformed central banker: “The last great central banker that we had in the last 110 years other than Volcker was J.P. Morgan. The difference is, when Morgan tried to contain the 1907 crisis, he wasn’t using zeros and ones of imaginary computer money; he was using his own capital.”

It is only fair and true to honor history and add that Morgan’s efforts rescued depositors. Income inequality in the years that followed 1907 declined before resuming its ascent to its prior peak, reached at the climax of the Roaring Twenties. The Fed’s intrusions since 2007, built on the false premise of a fanciful wealth effect concocted using models that have no place in the real world, have accomplished the opposite. Income inequality has not only grown in the aftermath of The Great Financial Crisis and throughout The Greater Moderation; it has long since smashed through its former 1927 record and kept rising. The Fed’s actions have not saved the little guy; they’ve skewered him.

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Oh so busy with no price discovery.

Thursday Is the ‘Day From Hell’ for Europe’s Stock Watchers (BBG)

If you think your Thursday looks bad, spare a thought for James Edwardes Jones. The RBC analyst is bracing for what he calls the busiest earnings day he’s experienced in about 20 years covering the consumer-goods industry. Edwardes Jones plans to arrive at RBC Europe’s London offices along the River Thames about the time the world’s largest brewer, Anheuser-Busch InBev, reports results at 6 a.m. local time. Fifteen minutes later he has Nestle, followed by Danone at 6:30. Then come Diageo and British American Tobacco, along with a trading update from Britvic, all before the morning team meeting at 7:15 a.m. Next up are calls with executives of some of those companies at 8 a.m., 9:30 a.m., 1 p.m. and 2 p.m. Edwardes Jones has client notes to write before his final set of results from L’Oreal SA at 5 p.m. – 11 hours after the first batch.

Other retail or consumer-goods companies reporting Thursday include French grocer Casino, U.K. bookmaker Ladbrokes Coral and Paris-based luxury conglomerate Kering. “There has never been a day like that,” Edwardes Jones said. His recipe for getting through the day: “Maybe a quadruple espresso.” Across London’s financial district, analysts are readying themselves for what Martin Deboo at Jefferies called a “day from hell”: a bumper earnings session in which European companies worth more than $3 trillion are set to report results, according to data compiled by Bloomberg.

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Everyone still thinks they’ll be able to get out in time.

Market Hype Triggers ‘New Major Warning’ Sign For Stocks (CNBC)

With a fresh round of record-breaking highs in the stock market has come a surge in investor optimism, and that eventually could create problems. Bullishness in the most recent Investors Intelligence survey hit 60.2%, the highest level since late February. The survey comes from editors of market newsletters and thus provides a snapshot of what professional investors are thinking. Elevated levels of optimism often coincide with market dips. The last time the II survey hit this level, the S&P 500 proceeded to fall nearly 3%. John Gray, editor at II, cautions that the big spread between bulls and bears, who are at just 16.5%, is an indicator of potential danger ahead. “The latest sentiment is not encouraging for the rest of the year as markets rarely fulfill expectations,” Gray wrote.

“This is a new major warning calling for defensive measures to protect profits, renewing the same signal from earlier this year.” While there’s been plenty of talk in the market about elevated levels that could trigger a correction — or a 10% drop — II respondents don’t see it happening. Expectations for a correction dipped to 23.3% of respondents. By comparison, the correction reading was at a comparatively lofty 34% prior to the November presidential election — just before the market surged on hopes that President Donald Trump would usher in a new pro-business era in Washington. Since hitting the most recent bottom earlier in July, the market has been on what is just the latest leg higher. Defying expectations that stocks could see limited gains this year, the S&P 500 has climbed 10.6% on strength in tech, materials, health care and discretionary stocks.

Among the sampling of newsletter sentiment that II cited was a warning from Bert Dohmen’s Wellington Letter, which said the Fed could thwart the rally. “As long as Fed officials talk about hiking rates, it will enhance concerns about the Fed producing a recession,” Dohmen wrote. “We interpret each rate hike as another nail in the coffin for an economic recovery.” Ten of the last 13 Fed rate-hiking cycles ended with recession. Dohmen said that could be the case again, though he did not advocate that investors panic. “We are seeing warning signs, but not enough to run for the hills just yet. We have said for a number of months that the final phase in the bull market should be a noticeable spurt to the upside, forcing all skeptics into the market,” he wrote. “We haven’t seen that yet.”

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The opposite of skin in the game.

Financialization and Risk Asymmetry (CHS)

One of the most pernicious consequences of financialization is the shifting of risk from the top of the wealth-power pyramid to the bottom: those who benefit the most from financialization’s leveraged, speculative credit bubbles protect themselves from losses while those at the bottom of the pyramid (the bottom 99.5%) face the full fury of financialization’s formidable risk. Longtime correspondent Chad D. and I recently exchanged emails exploring how the higher debt loads and higher interest payments of financialization inhibits people at the bottom of the wealth-power pyramid (i.e. debt-serfs) from taking risks such as starting a small business. But this is only one serving of financialization’s toxic banquet of risk-related consequences.

Chad summarized how those at the apex of the wealth-power pyramid protect themselves from risk and losses. At the top levels of the pyramid, members in those groups collect way more interest than they pay out and at the very top, they get a ton of interest and pay little to none. The people at the top can take all sorts of risk, because of this dynamic and further, they also usually have a heavy influence on the financial/political machinery, so they get bailed out by taxpayers when their investments go bad. In addition, because their influence extends to the criminal justice system, they are able to commit fraud and at the same time neutralize regulators and prosecutors, thereby escaping any ramifications from their excessive risk taking and in many cases massive fraud.

As Chad observed, the wealthy own the income streams from debt (bonds, etc.), while everyone else owes the interest and principal due on debt. As this chart shows, the wealthy own business equity and financial securities and have a modest slice of debt. The bottom 90% owe most of the debt, and their primary asset is the family home– an asset that doesn’t generate income while it generates interest income for those who own the mortgage. In other words, it’s less an investment than a form of consumption– especially when the current housing bubble deflates.

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Moody’s is smoking the good stuff. What utter nonsense.

China’s Banks Now Stable, ‘Shadow’ Banking Less Threatening – Moody’s (CNBC)

Moody’s Investors Service no longer takes a negative view on China’s banking system, raising its outlook to stable on Thursday as concerns over so-called shadow banking eased. “The government’s adoption of more coordinated policy measures to curb shadow banking will help mitigate asset risks for banks, and address some key imbalances in the financial system,” Yulia Wan, a Moody’s banking analyst, said in a statement on Thursday. Shadow banking is a broad category of banking-like services from non-traditional players; it can include loans from non-financial companies as well as investment products. It is outside the bounds of normal banking regulation, so it largely goes unregulated.

Earlier this month, Moody’s had noted that actions on shadow-banking had included the central bank changing its monetary policy setting in the last quarter of 2016 to “moderate neutral” from “moderate,” which raised market funding costs and refinancing risks for banks, reducing the return from supporting long-term investments with short-term market funds. In March and April, the China Banking Regulatory Commission also requested banks test whether their interbank liabilities would exceed the regulatory ceiling at one-third of total liabilities. Moodys’ noted in the Thursday report that there were signs of declines in outstanding wealth management products issued by the mainland’s banks and fewer investments in loans and receivables among the 26 listed banks.

But it added that profit growth would be limited by continued pressure on net interest margins and slower fee-income growth on higher funding costs and stricter shadow-banking regulations. [..] “Overall delinquency rates will stabilize as corporate profit continues to recover, helped by stable and solid economic growth, steady commodity prices and a slower increase in corporate leverage,” the Moody’s statement said.

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In the present evironment, there’s no need to consider underlying value. Everything’s just a big leveraged bet on the Fed.

Investor Howard Marks Says Bitcoin Is A ‘Pyramid Scheme’ (CNBC)

Howard Marks, one of the most respected value investors out there, starkly warned his clients to avoid high-flying digital currencies. “In my view, digital currencies are nothing but an unfounded fad (or perhaps even a pyramid scheme), based on a willingness to ascribe value to something that has little or none beyond what people will pay for it,” Marks wrote in the investor letter Wednesday. Ethereum cryptocurrency is up more than 2,300% year to date through Wednesday, while bitcoin is up nearly 160% this year, according to data from industry website CoinDesk.

The co-chairman of Oaktree Capital is famous for his prescient investment memos, which predicted the financial crisis and the dotcom bubble implosion. The manager then went on to compare cryptocurrencies to the Tulip mania of 1637, the South Sea bubble of 1720 and the internet bubble of 1999. “Serious investing consists of buying things because the price is attractive relative to intrinsic value,” he wrote. “Speculation, on the other hand, occurs when people buy something without any consideration of its underlying value or the appropriateness of its price.”

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“There are suspicions the US government is introducing the new sanctions against Russia to boost exports of American natural gas to the European market.”

German Business Lobby Urges EU Action Against New US Sanctions On Russia (RT)

A US move to expand sanctions against Russia may have an adverse impact on Europe’s energy security, hurt the German economy, and appears to favor American firms, says Volker Treier, chief economist at the German Chambers of Commerce and Industry (DIHK). Treier has urged European authorities to address the new round of anti-Russian sanctions approved by the US House of Representatives on Tuesday. “The European Commission now must make efforts to shed light on the current situation, as well as resist the exterritorial effect of new US penalties. We get the impression the US pursues their own economic interests”, he told in an interview with TASS.

“If German firms are banned from participating in gas pipeline enterprises, very important projects in the energy supply security sector can be halted. In that case, the German economy will be discernibly influenced,” Treier said. The future of the Nord Stream-2 natural gas pipeline project from Russia to Germany is of particular concern to Europeans. Roughly a third of the European Union’s natural gas supply still comes from Russia. The proposed expansion would double the existing pipeline’s capacity and make Germany EU’s main energy hub. There are suspicions the US government is introducing the new sanctions against Russia to boost exports of American natural gas to the European market.

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What is happening to Italy’s sovereignty? And what do Italians think about that?

Macron Unleashes a Decade of Italian Anger (BBG)

The 2006 World Cup final should have been a triumph for Italians, but all people remember now is the iconic French soccer captain Zinedine Zidane headbutting an opponent in the last minutes. The controversy overshadowed much of the glory for the winning team that night and the subsequent carping of French fans convinced many Italians that their bigger, richer neighbor will never give them the respect they deserve, whether the field is sports, business or politics. That resentment burst into the open on Wednesday when Finance Minister Bruno Le Maire said France is ready to nationalize the STX shipyard in Saint-Nazaire if its would-be Italian buyer Fincantieri SpA doesn’t accept his government’s conditions. Fincantieri stock plunged as much as 13% and Italian ministers erupted.

Italian Finance Minister Pier Carlo Padoan said there’s “no reason” why Fincantieri should accept only a minority stake and his colleague Carlo Calenda, in charge of economic development, told Ansa newswire that Italy is ready to walk away from the deal after Le Maire changed terms already agreed with the previous administration, citing the need to protect a key national asset from foreign influence. The Italians have struggled to accept that rationale, given STX’s previous owner was Korean. President Emmanuel Macron’s June election victory may have reinvigorated the Franco-German relationship at the heart of the European Union. But ties with Italy, the continent’s No. 3 economy, are going from bad to worse, suggesting that competition for jobs, security, and indeed glory, could quickly dampen hopes for tighter EU cooperation.

“This situation is not good for business and not good for European integration,” Alessandro Ungaro, a security and defense analyst at Rome’s Institute for International Affairs, said in a phone interview. “We were hoping for a more market-friendly and pro-European stance, but they’re rejecting a European ally and reasonable industrial project in favor of a possible nationalization.” Italian officials were already smarting when they woke up on Wednesday. The previous day Macron had snubbed their Prime Minister Paolo Gentiloni by leaving him out of peace talks in Paris with Libyan Prime Minister Fayez al-Serraj and Khalifa Haftar, leader of the country’s powerful eastern-based military force. Italy sees Libya, its former colony, as its sphere of influence. Privately many Italian officials blame French meddling for contributing to the collapse of the North African country’s institutions.

[..] On Wednesday, Italy’s front pages were filled with anger at the French. “Macron’s blitz overshadows Italy,” said La Stampa, later adding on its website, “Italy and France head for naval battle.” Il Messaggero went with “Libya deal without Italy.” In response, Gentiloni invited the Libyan leader al-Serraj to Rome and held his own press conference on television to reassert his influence. “This is getting a bit childish,” said Sofia Ventura, a professor of politics at the University of Bologna, whose father is Italian and mother is French. “The problem is individual countries are looking after their interests and not really keeping with the European spirit. Among the bigger nations, Italy is weaker, it can’t fully compete.”

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IBM doesn’t look good either, I would say. Government ministers may not have the know-how, but IBM personnel does.

Sweden Leaks Details Of Almost All Of Its Citizens (Ind.)

Sweden appears to have accidentally leaked the details of almost all of its citizens. And now it’s getting worse. The brewing scandal – based around a leak that actually happened in 2015 but only emerged last week – could see prominent members of Sweden’s government removed from their post. The leak allowed unvetted IT workers in other countries to see the details of people registered in Swedish government and police databases. It happened after the government looked to outsource data held by the Transport Agency, but did so in a way that allowed that information to be available to almost anyone, critics have claimed. The opposition is seeking to boot out the ministers of infrastructure, defence and the interior – Anna Johansson, Peter Hultqvist and Anders Ygeman, respectively – for their role in outsourcing IT-services for the Swedish Transport Agency in 2015.

The minority government has said that contract process – won by IBM Sweden – was speeded up, bypassing some laws and internal procedures in a manner that may have led to people abroad, handling servers with sensitive materials. Prime Minister Stefan Lofven said on Monday his country and its citizens were exposed to risks by potential leaks as a result of the contract. The centre right opposition Alliance, comprising the Moderate, Centre, Liberal and Christian Democrat parties, has taken aim at the three ministers. “It is obvious (they) have neglected their responsibility. They have not taken action to protect Sweden’s safety”, Centre party leader Annie Loof told a news conference.

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“America has failed itself and the world.”

Armageddon Is Two and One-half Minutes Away (PCR)

Are you ready to die? You and I are going to die and not from old age, because our fellow Americans are so stupid, ignorant, and brainwashed that they believe the lies that are leading us to our certain destruction. This is what the Atomic Scientists tell us. And they are right. Can you comprehend the absurdity? President Trump is under full-scale attack from the military/security complex, the US presstitute media, the Democratic Party, and from many Republicans, such as Republican Senator from South Carolina Lindsey Graham and Republican Senator from Arizona John McCain simply because President Trump wants to reduce the dangerous tensions between the two major nuclear powers. What explains the total lack of concern for their own lives on the part of the populations in South Carolina and Arizona who send to the Senate and keep sending to the Senate two morons determined to provoke war between the US and Russia?

It should send shivers up your spine that you can ask this same question about all 50 states, and almost all congressional districts. You can ask the same question about the bordello known as “the American media.” There will be no one alive to post or to read the headlines of the war that they are helping to promote. The United States and the rest of the world with it along with all life on earth are being sent to their graves by the total failure of American leadership. What is wrong with Americans that they cannot understand that any “leader” who provokes war with a major nuclear power should be instantly institutionalized as criminally insane? Why do Americans sit night after night in front of the TV absorbing lies that commit them beyond all doubt to their deaths? America has failed itself and the world.

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We are stardust from far away.

Half Our Bodies’ Atoms ‘Formed Beyond The Milky Way’ (G.)

Nearly half of the atoms that make up our bodies may have formed beyond the Milky Way and travelled to the solar system on intergalactic winds driven by giant exploding stars, astronomers claim. The dramatic conclusion emerges from computer simulations that reveal how galaxies grow over aeons by absorbing huge amounts of material that is blasted out of neighbouring galaxies when stars explode at the end of their lives. Powerful supernova explosions can fling trillions of tonnes of atoms into space with such ferocity that they escape their home galaxy’s gravitational pull and fall towards larger neighbours in enormous clouds that travel at hundreds of kilometres per second.

Astronomers have long known that elements forged in stars can travel from one galaxy to another, but the latest research is the first to reveal that up to half of the material in the Milky Way and similar-sized galaxies can arrive from smaller galactic neighbours. Much of the hydrogen and helium that falls into galaxies forms new stars, while heavier elements, themselves created in stars and dispersed in the violent detonations, become the raw material for building comets and asteroids, planets and life. “Science is very useful for finding our place in the universe,” said Daniel Anglés-Alcázar, an astronomer at Northwestern University in Evanston, Illinois. “In some sense we are extragalactic visitors or immigrants in what we think of as our galaxy.”

The researchers ran supercomputer simulations to watch what happened as galaxies evolved over billions of years. They noticed that as stars exploded in smaller galaxies, the blasts ejected clouds of elements that fell into neighbouring, larger galaxies. The Milky Way absorbs about one sun’s-worth of extragalactic material every year. “The surprising thing is that galactic winds contribute significantly more material than we thought,” said Anglés-Alcázar. “In terms of research in galaxy evolution, we’re very excited about these results. It’s a new mode of galaxy growth we’ve not considered before.” The simulations showed that elements carried on intergalactic winds could travel a million light years before settling in a new galaxy, according to a report in the Monthly Notices of the Royal Astronomical Society.

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Jul 262017
 
 July 26, 2017  Posted by at 9:24 am Finance Tagged with: , , , , , , , , ,  


Jackson Pollock Greyed Rainbow 1953

 

The Rise And Fall Of The Property-Owning Democracy (FCFT)
Case-Shiller Home Prices Disappoint But Hit New Record High (ZH)
Australian Housing Affordability the Worst in 130 Years (Soos/David)
There Are More ‘Zombie’ Companies In Europe Now Than Pre-Lehman (CNBC)
Netherlands and UK Are Biggest Channels For Corporate Tax Avoidance (G.)
US Sanctions Have Taken A Big Bite Out Of Russia’s Economy (CNBC)
The Value of Everything (Jim Kunstler)
Bolivia’s President Declares ‘Total Independence’ from World Bank and IMF (AHT)
Germany Fails To Honour Its Part Of The Greek Bailout Deal (Bilbo)
Insolvent Greece Goes To Market 2.0 (Varoufakis)
Nine Out Of 10 People Call For ‘Plastic-Free Aisle’ In Supermarkets (Ind.)
Sperm Counts In The West Plunge By 60% In 40 Years (Ind.)

 

 

The article is somewhat confusing to me, bear of little brain and unpopular in China. But it’s good to make the point that bubbles spark poverty.

The Rise And Fall Of The Property-Owning Democracy (FCFT)

Sometime in the late 1980s, a friend who was on the libertarian right of the Conservative Party explained the idea of the property-owning democracy to me. The point, he said, was to detach the respectable working class from their poorer neighbours, encourage them to identify with the middle-class and thereby turn them into Tories. It worked for a while. Middle earners had been doing relatively well since the 1970s and home ownership was within the reach of many once mortgages became more readily available. Helped along by cheap council house sales, home ownership rose. In recent years, though, things have started shifting back the other way. The property-owning democracy is now looking like a one-off event rather than the ongoing process it was meant to be. Property analyst Neal Hudson pointed out that, as a proportion of all tenure, home ownership peaked in 2003 but mortgage ownership peaked in 1996. As older property owners paid off their housing debts, they were not being replaced at the same rate by new mortgagors.

[..] As the Resolution Foundation comments: The typical mortgagor AHC income is now twice that of the typical social renter, and over the past decade this income has grown by 17% compared to just 4% growth for the typical private renter. Even more than was the case before the financial crisis, the living standards split between those who own their own home and those who do not has become a key divide. While the proportion of households owning their own homes has fallen generally, that decline has been sharper among those on low to middle incomes. (Defined by the Resolution Foundation as working-age households with someone in work but with less than the median household income.) In the mid 1990s, over half of those on low to middle incomes were mortgagors. Now that has fallen to a third. Over the same period, private renting among this group rose.

Last week’s report on poverty and inequality by the Institute for Fiscal Studies notes that most of those in poverty (defined as income less than 60% of the median) are now from households where someone is in work. “[R]elative poverty among children and working-age adults has increased and, over the past 20 years or so, has increasingly become an in-work phenomenon due to declines in worklessness, low earnings growth and widening earnings inequality.”

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What bubble?

Case-Shiller Home Prices Disappoint But Hit New Record High (ZH)

Great news ‘Murica – your house has never been worth more than it was in May (according to Case-Shiller’s national home price index). On the slightly less silver-lining side of the equation, April’s 0.28% gain in price was revised to 0.18% MoM drop and May’s proint disappointed at just 0.1% rise MoM. The 20-city property values index increased 5.7% y/y (est. 5.8%). All cities in the index showed year-over-year gains, led by a 13.3% advance in Seattle, an 8.9% increase in Portland and a 7.9% gain in Denver.

After seasonal adjustment, Seattle had the biggest month-over-month increase, at 0.9%, while New York posted a 0.6% decline. “Home prices continue to climb and outpace both inflation and wages,” David Blitzer, chairman of the S&P index committee, said in a statement. “The small supply of homes for sale, at only about four months’ worth, is one cause of rising prices. New home construction, higher than during the recession but still low, is another factor in rising prices.”

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Just keep paying the piper.

Australian Housing Affordability the Worst in 130 Years (Soos/David)

The astronomical bubble in Australian housing prices has generated plenty of commentary regarding the current lack of affordability. This state of affairs clearly concerns aspiring home buyers everywhere, and Sydney and Melbourne in particular. First home buyers (FHBs) face almost insurmountable odds: the highest price to income and deposit to income ratios, the lowest savings rates, runaway dwelling prices, weak wage growth, including a political and economic establishment hell-bent on ensuring land prices keep on inflating no matter the wider cost to the economy. The legion of vested interests – basically 99% of commentators – choose to contend housing is actually more affordable today than back in the days of high mortgage interest rates, especially when rates peaked at 17% in 1989.

This is demonstrated by the standard mortgage payment to household income formula shown above, assuming 80% loan to value ratio (LVR). Their contention is bogus, however, because the metric is a static one, displaying mortgage payments to income at a particular point in time. The peak in 1989, for instance, is very high if, and only if, prices, interest rates and incomes remain constant over the life of the mortgage. Yet, these variables change by the next period. So, a more dynamic approach is required to assess housing affordability. The correct method was advocated by Glenn Stevens in 1997, Guy Debelle in 2004 and other economists like Dean Baker, who identified the US housing bubble and predicted the Global Financial Crisis in 2002. The important factor to consider is the effect wage inflation has upon mortgage payments.

While high mortgage interest rates result in large mortgage payments relative to income, this only occurs in the early years of the mortgage as high wage growth inflates away the burden. In contrast, borrowers facing high housing prices with low interest rates and poor wage growth face a greater burden across the life of the mortgage due to greater payments to income. This housing affordability analysis is applied to long-term annual data between 1880 and 2016, anchored to the median house price at an LVR of 80% at the start of each decade thereon. While data on mortgage interest rates and wage growth for the years after 2016 cannot be known, they are assumed to hold still at the present rates: 5.4% for the mortgage interest rate and 1.4% for wages. The following chart illustrates the outcome of applying this method, demonstrating the proportion of aggregate mortgage payments to household income over the 25 years of the mortgage. The results are overpowering.

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Well, that’s what Draghi’s QE guarantees.

There Are More ‘Zombie’ Companies In Europe Now Than Pre-Lehman (CNBC)

The ECB needs to beware of raising interest rates too quickly as there are a significant number of “zombie firms” in Europe that have become too dependent on cheap credit, according to analysis by the Bank of America Merrill Lynch. Barnaby Martin, head of European Credit Strategy at BofA Merrill Lynch, said businesses in Europe which have benefited from the ECB’s corporate bond purchase program would struggle once the bank raises interest rates, expected sometime in 2018. “The worst kept secret in the market is Mario Draghi is going to be tapering monetary policy next year and yet last week he was super, super dovish so I think that we’ve forgotten that monetary policy in Europe is on its way out,” he told CNBC on Tuesday, adding “there’s clearly political pressure for him to move away from this extraordinary era.”

“So the question becomes ‘can we handle a rapid rise in interest rates?’,” he said. ECB stimulus measures as part of its quantitative easing program designed to boost the European economy currently amount to €60 billion ($69.9 billion) a month. Some of this money goes into purchasing corporate bonds. While these purchases have enabled companies to continue to operate and invest, aiding a recovery in the European economy, the bank’s purchases have been credited for keeping ailing companies alive, hence the name “zombies.” The ECB started purchasing corporate bonds in June 2016 as part of its “corporate sector purchase program” (CSPP) and, as of June 7, 2017, its CSPP holdings stood at €92 billion, the bank said.

In a note examining “The rise of the Zombies” BofA Merrill Lynch’s credit strategists Martin, Ionnis Angelakis and Souhair Asba noted that 9% of non-financial companies in Europe (by market cap of Stoxx 600) are zombies, with “very weak interest coverage metrics.” “Note that this is still quite a high number: It was around 6% pre-Lehman, and fell to 5% in late 2013 after the peripheral crisis had faded,” they said. “The plethora of monetary support in Europe over the last 5 years has allowed companies with weak profitability to continue to refinance their debt and stave off defaults.” The analyst team also noted that bond issuance had been concentrated in “the hands of a few.” “Year-to-date, the top 20 bonds issuers have accounted for 40% of supply. In 2015 and 2016, the number was closer to 25%. The result has been that “superfirms” have been quietly building across the credit market,” they noted.

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“The Netherlands says they won’t let the UK be an offshore tax haven. That’s because they don’t want them taking their business.”

Netherlands and UK Are Biggest Channels For Corporate Tax Avoidance (G.)

Almost 40% of corporate investments channelled away from authorities and into tax havens travel through the UK or the Netherlands, according to a study of the ownership structures of 98m firms. The two EU states are way ahead of the rest of the world in terms of being a preferred option for corporations who want to exploit tax havens to protect their investments. The Netherlands was a conduit for 23% of corporate investments that ended in a tax haven, a team of researchers at the University of Amsterdam concluded. The UK accounted for 14%, ahead of Switzerland (6%), Singapore (2%) and Ireland (1%). Every year multinationals avoid paying £38bn-£158bn in taxes in the EU using tax havens. In the US, tax evasion by multinational corporations via offshore jurisdictions is estimated to be at least $130bn (£99bn) a year.

The researchers reported that there were 24 so-called “sink” offshore financial centres where foreign capital was ultimately stored, safe from the tax authorities. Of those, 18 are said to have a current or past dependence to the UK, such as the Cayman Islands, Bermuda, the British Virgin Islands and Jersey. The tax havens used correlated heavily to which conduit country was chosen by the multinational’s accountants. The UK is a major conduit for investments going to European countries and former members of the British Empire, such as Hong Kong, Jersey, Guernsey or Bermuda, reflecting the historical links and tax treaties enjoyed by firms setting up in Britain. The Netherlands is a principal conduit for investment ending in Cyprus and Bermuda, among others. Switzerland is used as a conduit to Jersey. Ireland is the route for Japanese and American companies to Luxembourg.

[..] Dr Eelke Heemskerk, who led the research, said that the work showed the importance of developed countries cleaning up their financial sectors. He said: “In the context of Brexit, where you have the UK threatening, unless they get a deal, to change their model to be attractive to companies who want to protect themselves from taxes, well, they are already doing it. “The Netherlands says they won’t let the UK be an offshore tax haven. That’s because they don’t want them taking their business.”

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Russia’s getting an invaluable lesson in self-suffciency. There’s nothing like it.

US Sanctions Have Taken A Big Bite Out Of Russia’s Economy (CNBC)

Congress moved Tuesday to step up sanctions on a shrinking Russian economy that is already struggling under the weight of low oil prices, high inflation and a battered currency that has sent capital fleeing. In response to Moscow’s interference in the 2016 U.S. presidential election, the House voted overwhelmingly to tighten existing economic sanctions imposed in 2014 following the Russian invasion of Crimea. Among other things, the measures freeze assets and prohibit transactions with specific Russian companies and individuals, restrict financial transactions with Russian firms, and ban certain exports that are used in oil and gas exploration or have possible military uses.

Those 2014 U.S. sanctions were paired with related measures imposed by the European Union, which placed restrictions on business with Russia’s financial, defense and energy sectors. Today, Russia’s economy is still feeling the harsh impact of those measures, which coincided with a crash in global oil prices that cut deeply into revenues from the country’s main export. The loss of oil revenues – a drop of as much as 60%, according to a 2017 Congressional Research Service report — helped spark a collapse in Russia’s currency, the ruble, sending the prices of Russian consumer goods soaring. The Russian economy has also been hurt by a wave of capital flight out of the country, as individual Russians sought to move money offshore and convert their shrinking rubles to dollars and euros to protect their wealth. That money flow slowed in 2014 as U.S. and European sanctions took hold.

Though U.S. sanctions have put pressure on the Russian economy, the impact on American business has been limited because Russia makes up less than 1% of U.S. exports. Only six U.S states count Russia as a significant market for goods and services. Washington, the most reliant, sells roughly 1% of its total exports to Russia, consisting mostly of machinery and farm products. That’s half the level before the 2014 sanctions took effect. European nations, which export greater volumes to Russia than the U.S., imposed their own set of sanctions response to the Crimean annexation.

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“The floundering non-elite masses have not learned the harsh lesson of our time that the virtual is not an adequate substitute for the authentic..”

The Value of Everything (Jim Kunstler)

We are looking more and more like France on the eve of its revolution in 1789. Our classes are distributed differently, but the inequity is just as sharp. America’s “aristocracy,” once based strictly on bank accounts, acts increasingly hereditary as the vapid offspring and relations of “stars” (in politics, showbiz, business, and the arts) assert their prerogatives to fame, power, and riches — think the voters didn’t grok the sinister import of Hillary’s “it’s my turn” message? What’s especially striking in similarity to the court of the Bourbons is the utter cluelessness of America’s entitled power elite to the agony of the moiling masses below them and mainly away from the coastal cities. Just about everything meaningful has been taken away from them, even though many of the material trappings of existence remain: a roof, stuff that resembles food, cars, and screens of various sizes.

But the places they are supposed to call home are either wrecked — the original small towns and cities of America — or replaced by new “developments” so devoid of artistry, history, thought, care, and charm that they don’t add up to communities, and are so obviously unworthy of affection, that the very idea of “home” becomes a cruel joke. These places were bad enough in the 1960s and 70s, when the people who lived in them at least were able to report to paying jobs assembling products and managing their distribution. Now those people don’t have that to give a little meaning to their existence, or cover the costs of it. Public space was never designed into the automobile suburbs, and the sad remnants of it were replaced by ersatz substitutes, like the now-dying malls. Everything else of a public and human associational nature has been shoved into some kind of computerized box with a screen on it.

The floundering non-elite masses have not learned the harsh lesson of our time that the virtual is not an adequate substitute for the authentic, while the elites who create all this vicious crap spend millions to consort face-to-face in the Hamptons and Martha’s Vineyard telling each other how wonderful they are for providing all the artificial social programming and glitzy hardware for their paying customers. The effect of this dynamic relationship so far has been powerfully soporific. You can deprive people of a true home for a while, and give them virtual friends on TV to project their emotions onto, and arrange to give them cars via some financing scam or other to keep them moving mindlessly around an utterly desecrated landscape under the false impression that they’re going somewhere — but we’re now at the point where ordinary people can’t even carry the costs of keeping themselves hostage to these degrading conditions.

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The kind of independence that tends to be bad for a man’s health.

Bolivia’s President Declares ‘Total Independence’ from World Bank and IMF (AHT)

Bolivia’s President Evo Morales has been highlighting his government’s independence from international money lending organizations and their detrimental impact the nation, the Telesur TV reported. “A day like today in 1944 ended Bretton Woods Economic Conference (USA), in which the IMF and WB were established,” Morales tweeted. “These organizations dictated the economic fate of Bolivia and the world. Today we can say that we have total independence of them.” Morales has said Bolivia’s past dependence on the agencies was so great that the IMF had an office in government headquarters and even participated in their meetings. Bolivia is now in the process of becoming a member of the Southern Common Market, Mercosur and Morales attended the group’s summit in Argentina last week.

Bolivia’s popular uprising known as the The Cochabamba Water War in 2000 against United States-based Bechtel Corporation over water privatization and the associated World Bank policies shed light on some of the debt issues facing the region. Some of Bolivia’s largest resistance struggles in the last 60 years have targeted the economic policies carried out by the IMF and the World Bank. Most of the protests focused on opposing privatization policies and austerity measures, including cuts to public services, privatization decrees, wage reductions, as well the weakening of labor rights. Since 2006, a year after Morales came to power, social spending on health, education, and poverty programs has increased by over 45%.

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A tour de force by Bill Mitchell. Germany’s profiting so much off of Greece’s despair that it can hide its own economic pitholes with it.

Germany Fails To Honour Its Part Of The Greek Bailout Deal (Bilbo)

Effectively the “German Federal Government – through KfW” is providing funds to Greece as part of the bailout. On May 20, 2014, the KfW issued a further press statement – Institution for Growth in Greece (IfG) – which further details the way in which German government bailout support is channeled through the KfW. For example, in relation to the “three planned IfG sub-funds … The Hellenic Republic and KfW — on behalf of the German Federal Government — will each contribute EUR 100 million in funding debt to this sub-fund.” Clear enough. The Süddeutsche Zeitung article says that since 2010, these loans granted to Greece through the KfW have generated 393 million euros of interest income net of refinancing costs [..] A handy sum. And what is more – the profits generated have not been transferred to the Greek government.

Further gains were made on the Greek bailouts via the ECB’s Securities Market Program (SMP), which has generated German gains of around $€952 million, through ECB distributions of the profits to the Member State central banks. A similar story appeared in the English-version of the Handelsbatt next day (July 12, 2017) – Germany Profits From Greek Debt Crisis. It essentially sourced the Süddeutsche Zeitung and made the story more accessible (repeating it in English). It says that: “The German government has long been accused by critics of profiting from Greece’s debt crisis. Now there are some new numbers to back it up: Loans and bonds purchased in support of Greece over nearly a decade have resulted in profits of €1.34 billion for Germany’s finance ministry.”

The issue became public because the Greens parliamentary representatives have challenged the morality of the German government’s decision not to redistribute the profits and the role played by the KfW. The Greens representative was reported as saying that: “The profits from collecting interest must be paid out to Greece … Wolfgang Schäuble cannot use the Greek profits to clean up Germany’s federal budget …” It has long been claimed that “Greece’s crisis has helped” Schäuble keep the German fiscal balance in surplus. The KfW have been part of that. We knew back in 2015 that the KfW was helping the Finance Ministry generate fiscal surpluses.

On March 5, 2015, the German daily newspaper Rheinische Post published a report – So geht es den Griechen wirklich – presented a summary of a 40-page document that the German Finance Ministry had provided in response to a demand for information from the Linksfraktion (German Left Party Die Linke). The Finance Ministry document conceded that: “Between 2010 to 2014, the KfW has paid out around 360 million euro in revenues to the German government and in the coming years the federal government is expecting around 20 million euro per year on interest revenues.”

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The Greek economy is worse than ever, but now people trust it?

Insolvent Greece Goes To Market 2.0 (Varoufakis)

Why do I refuse to be impressed by the news of Greece’s return to the markets? “It is because the Greek state and the Greek banks remain deeply insolvent. And, their return to the money markets is a harbinger of the next terrible phase of Greece’s crisis, rather than a cause for celebration”. The above was my answer in a BBC interview on 9th April… 2014! It is also the only answer that fits today’s announcement of Greece’s new bond issue. Indeed, why script a new article, when that old post offers a most helpful response to the question: “What should the world think of Greece’s new bond issue?”

The only thing I need to add to these circa 2014 posts is this: The Tsipras government today is simply rolling over precisely the same bond that the Samaras-Venizelos-Stournaras government issued in 2014 – the subject matter of my criticism above. This is a remarkable U-turn by Mr Tsipras and his ministers. In 2014 they had sided entirely with my criticism of the then government’s argument that Greece’s return to the markets, with the issue of that one bond, was a sign the country was achieving escape velocity from the gravitational pull of its debt-deflationary crisis. Now, they are not only parroting the same arguments as Samaras-Venizelos-Stournaras but they are, lo and behold, rolling over the same bond! I rest my case.

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It’s not that hard.

Nine Out Of 10 People Call For ‘Plastic-Free Aisle’ In Supermarkets (Ind.)

Nine out of 10 people want supermarkets to introduce a “plastic-free aisle”, according to a new poll amid rising concern about pollution. The survey – of 2,000 British adults by Populus – was commissioned by campaign group A Plastic Planet, which said it was clear that the public wanted an alternative to “goods laden with plastic packaging”. Evidence of the synthetic substance’s harmful effects on the natural world is growing. Since 1950, humans have produced 8.3 billion tons of the stuff, with 6.3 billion tons being sent to landfill sites or simply being dumped in what scientists described as an “uncontrolled experiment” on the planet. Plastic, which acts like a magnet for toxic chemicals in the environment, breaks down into tiny pieces that are capable of passing through animals’ gut walls and into their body tissue.

The UN warned in a report last year that “the presence of microplastic in foodstuffs could potentially increase direct exposure of plastic-associated chemicals to humans and may present an attributable risk to human health”. A third of seabirds in the North Sea were also found to be suffering “widespread breeding failure”, largely because of plastic waste. The new poll found 91% of people supported aisles free from plastic packaging and 81% said they were concerned “about the amount of plastic packaging that is thrown away in the UK”. Sian Sutherland, a co-founder of A Plastic Planet, said: “It’s becoming increasingly clear that the Great British public wants a fresh alternative to goods laden with plastic packaging. Too much of our plastic waste ends up in oceans and landfill.

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Am I a bad person for thinking that maybe this isn’t such a bad thing? Who wants more of us?

I like the term “semen parameters”. Name for a band. Double billing with Pussy Riot.

Sperm Counts In The West Plunge By 60% In 40 Years (Ind.)

Sperm counts have plunged by nearly 60% in just 40 years among men living in the West, according to a major review of scientific studies that suggests the modern world is causing serious damage to men’s health. Pesticides, hormone-disrupting chemicals, diet, stress, smoking and obesity have all been “plausibly associated” with the problem, which is associated with a range of other illnesses such as testicular cancer and a generally increased mortality rate. The researchers who carried out the review said the rate of decline had showed no sign of “levelling off” in recent years. The same trend was not seen in other parts of the world such as South America, Africa and Asia, although the scientists said fewer studies had been carried out there.

One expert commenting on the study said it was the “most comprehensive to date”, and described the figures as “shocking” and a “wake-up call” for urgent research into the reasons driving the fall. Writing in the journal Human Reproduction Update, the researchers – from Israel, the US, Denmark, Brazil and Spain – said total sperm count had fallen by 59.3% between 1971 and 2011 in Europe, North America, Australia and New Zealand. Sperm concentration fell by 52.4%. “Sperm count and other semen parameters have been plausibly associated with multiple environmental influences, including endocrine disrupting chemicals, pesticides, heat and lifestyle factors, including diet, stress, smoking and body-mass index,” the paper said. “Therefore, sperm count may sensitively reflect the impacts of the modern environment on male health throughout the life course.”

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Jul 252017
 
 July 25, 2017  Posted by at 8:34 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle July 25 2017


Vincent van Gogh Sunflowers 1887

 

The Next Financial Crisis Is Parked Out Front (G.)
Bank of England Warns of ‘Spiral Of Complacency’ on Household Debt (G.)
How Big Of A Deleveraging Are We Talking About? (Roberts)
IMF: US Looks Weaker, Rest Of The World Picks Up Economic Slack (CNBC)
Bloated London Property Prices Fuel Exodus (G.)
The Foreclosure ‘Pig’ Moves Through The Housing-Crisis ‘Python’ (MW)
Australian Housing Market At Risk Of Crash – UBS Research (CNBC)
It’s Time To Rethink Monetary Policy (Rochon)
Scandals Threaten Japanese Prime Minister Shinzo Abe’s Grip On Power (G.)
Brussels To Act ‘Within Days’ If US Sanctions Hurt EU Trade With Russia (RT)
EU Divided On How To Answer New US Sanctions Against Russia (R.)
US ‘May Send Arms’ To Ukraine, Says New Envoy (BBC)
Tsipras and Varoufakis Go Public With Spat (K.)
Alexis Tsipras’s Mixed Messages Over Appointing Me As Finance Minister (YV)
Greece Plans Return To Bond Market As Athens Sees End To Austerity (G.)
Greek Spending Cuts Prettify Budget Data (K.)

 

 

Can’t let a headline like that go to waste. More on the topic in the 2nd article.

The Next Financial Crisis Is Parked Out Front (G.)

Good morning – Warren Murray here with your Tuesday briefing. Britain’s rising level of personal debt has prompted a warning from the Bank of England about dire consequences for lenders and the economy. There are “classic signs” that the risks involved in car finance, credit cards and personal loans are being underestimated as financial institutions make hay while the sun shines, says Alex Brazier, the Bank’s director for financial stability. The economy defied expectations when it grew strongly in the six months after the EU referendum. But that was partly fuelled by consumers racking up their credit cards and loans, as lenders offered easier terms and longer interest-free deals. Much higher levels of borrowing compared with income are now being allowed, at a time when household incomes have only marginally risen.

As the anniversary of the global financial meltdown approaches, Brazier has suggested current low rates of default on personal credit may have again caused banks to become blinkered to the potential for disaster. Back in 2007, “banks – and their regulators – were blind to the basic fact that more debt meant greater risk of loss”. “Lenders have not entered, but they may be dicing with, the spiral of complacency. The spiral continues, and borrowers rack up more and more debt. “[In 2007] complacency gave way to crisis. Companies and households were unable to refinance their debts. The result was economic disaster.”

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The BoE creates huge bubbles, and afterwards starts warning about them. Typical central bank behavior.

Bank of England Warns of ‘Spiral Of Complacency’ on Household Debt (G.)

The Bank of England has told banks, credit card companies and car loan providers that they risk fresh action against reckless lending as it warned of a looming “spiral of complacency” about mounting consumer debt. In its toughest warning yet about the possibility of a rerun of the financial crisis that devastated the economy 10 years ago, Threadneedle Street admitted it was alarmed about the increase in the amount of money being borrowed on easy terms over the past year. “Household debt – like most things that are good in moderation – can be dangerous in excess”, Alex Brazier, the Bank director for financial stability, said in a speech in Liverpool. “Dangerous to borrowers, lenders and, most importantly from our perspective, everyone else in the economy.”

Brazier’s said there were “classic signs” of lenders thinking the risks were lower following a prolonged period of good economic performance and low losses on loans. The first signs of the Bank’s anxiety about consumer debt came from its governor, Mark Carney, a month ago, but Brazier’s comments marked a ratcheting up of Threadneedle Street’s rhetoric. “Lenders have been the lucky beneficiaries of the benign way the economy has evolved. In expanding the supply of credit, they may be placing undue weight on the recent performance of credit cards and loans in benign conditions,” Brazier said. The willingness of consumers to take on more debt to fund their spending helped the economy grow strongly in the six months after the EU referendum, a period when the Bank expected growth to fall sharply.

Over the past year, Brazier said, household incomes had grown by just 1.5% but outstanding car loans, credit card balances and personal loans had risen by 10%. He added that terms and conditions on credit cards and personal loans had become easier. The average advertised length of 0% credit card balance transfers had doubled to close to 30 months, while advertised interest rates on £10,000 personal loans had fallen from 8% to around 3.8%, even though official interest rates had barely changed.

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More great work by Lance. if these graphs and numbers don’t scare you, look again.

How Big Of A Deleveraging Are We Talking About? (Roberts)

Debt, if used for productive investments, can be a solution to stimulating economic growth in the short-term. However, in the U.S., debt has been squandered on increases in social welfare programs and debt service which has an effective negative return on investment. Therefore, the larger the balance of debt becomes, the more economically destructive it is by diverting an ever growing amount of dollars away from productive investments to service payments. The relevance of debt growth versus economic growth is all too evident as shown below. Since 1980, the overall increase in debt has surged to levels that currently usurp the entirety of economic growth. With economic growth rates now at the lowest levels on record, the growth in debt continues to divert more tax dollars away from productive investments into the service of debt and social welfare.

It now requires nearly $3.00 of debt to create $1 of economic growth.

In fact, the economic deficit has never been greater. For the 30-year period from 1952 to 1982, the economic surplus fostered a rising economic growth rate which averaged roughly 8% during that period. Today, with the economy growing at an average rate of just 2%, the economic deficit has never been greater.

But again, it isn’t just Federal debt that is the problem. It is all debt. As discussed last week, when it comes to households, which are responsible for roughly 2/3rds of economic growth through personal consumption expenditures, debt was used to sustain a standard of living well beyond what income and wage growth could support. This worked out as long as the ability to leverage indebtedness was an option. The problem is that eventually, the debt reaches a level where the level of debt service erodes the ability to consume at levels great enough to foster stronger economic growth. In reality, the economic growth of the U.S. has been declining rapidly over the past 35 years supported only by a massive push into deficit spending by households.

[..]The massive indulgence in debt, or a “credit induced boom”, has now begun to reach its inevitable conclusion. The debt driven expansion, which leads to artificially stimulated borrowing, seeks out diminishing investment opportunities. Ultimately these diminished investment opportunities lead to widespread malinvestments. Not surprisingly, we clearly saw it play out in “real-time” in 2005-2007 in everything from sub-prime mortgages to derivative instruments. Today, we see it again in mortgages, subprime auto loans, student loan debt and debt driven stock buybacks and acquisitions.

When credit creation can no longer be sustained the markets will begin to “clear” the excesses. It is only then, and must be allowed to happen, can resources be reallocated back towards more efficient uses. This is why all the efforts of Keynesian policies to stimulate growth in the economy have ultimately failed. Those fiscal and monetary policies, from TARP and QE to tax cuts, only delay the clearing process. Ultimately, that delay only potentially worsens the inevitable clearing process. That clearing process is going to be very substantial. With the economy currently requiring roughly $3 of debt to create $1 of real, inflation-adjusted, economic growth, a reversion to a structurally manageable level of debt would involve a nearly $35 Trillion reduction of total credit market debt from current levels.

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Difference: BOJ and ECB still buy trilions in ‘assets’.

IMF: US Looks Weaker, Rest Of The World Picks Up Economic Slack (CNBC)

Despite cutting the economic growth outlook for the U.S. and U.K., the IMF kept its global growth forecast unchanged on expectations the euro zone and Japanese growth would accelerate. In the July update of its World Economic Outlook, the IMF forecast global economic growth of 3.5% for 2017 and 3.6% for 2018, unchanged from its April outlook. That was despite earlier cutting its U.S. growth projection to 2.1% from 2.3% for 2017 and to 2.1% from 2.5% for 2018, citing both weak growth in the first quarter of this year as well as the assumption that fiscal policy will be less expansionary than previously expected. A weaker-than-expected first quarter also spurred the IMF to cut its forecast for U.K. growth for this year to 1.7% from 2.0%, while leaving its 2018 forecast at 1.5%.

But slowdowns in the U.S. and U.K. were expected to be offset by increased forecasts for many euro area countries, including Germany, France, Italy and Spain, where first quarter growth largely beat expectations, the IMF said. “This, together with positive growth revisions for the last quarter of 2016 and high-frequency indicators for the second quarter of 2017, indicate stronger momentum in domestic demand than previously anticipated,” the IMF said in its release. It raised its euro-area growth forecast for 2017 to 1.9% from 1.7%. For 2018, it increased its forecast to 1.7% from 1.6%.

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The Guardian has the guts to claim that people don’t move out because they don’t have the money to stay, but because they want to get on the f*cking property ladder.

Bloated London Property Prices Fuel Exodus (G.)

In the Kent seaside town of Whitstable, long-term residents call them DFLs – people who have moved “down from London”, sometimes for the lifestyle but more often for cheaper housing. The number of people fleeing the capital to live elsewhere has hit a five-year high. In the year to June 2016, net outward migration from London reached 93,300 people – more than 80% higher than five years earlier, according to analysis of official statistics. A common theme among the leavers’ destinations is significantly cheaper housing, according to the estate agent Savills, which analysed figures from the Office for National Statistics and the Land Registry. Cambridge, Canterbury, Dartford and Bristol are reportedly among the most popular escape routes for people who have grown tired of London and its swollen property prices.

The most likely destination for people aged over 25 moving from Islington is St Albans in Hertfordshire, where the average home is £173,000 cheaper. People moving from Ealing to Slough – the most popular move from the west London borough – stand to save on average £241,000. Among all homeowners leaving London, the average house price was £580,000 while the average in the areas they moved to was £333,000. The exodus is not just of homeowners, but of renters too. Rents in London have soared by a third in the last decade, compared to 18% in the south-west, 13% in the West Midlands and 11% in the north-west of England.

The only age group that has a positive net migration figure in the capital is those in their twenties, the research found. Everyone else, from teens to pensioners, is tending to get out. Since 2009, the trend has been steadily increasing among people in their thirties with 15,000 more people in that age bracket leaving every year than at the end of the last decade – a 27% rise. The phenomenon is being driven by a widespread desire to “trade up the housing ladder”, something that is all too often impossible in London according to Lucian Cook, Savill’s head of residential research. “Five years ago people would have been reluctant [to move out] because the economy wasn’t as strong and some owners didn’t want to miss out on house price growth [in London],” he said.

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Pretending it’s the last of the pig. We’ll see about that.

The Foreclosure ‘Pig’ Moves Through The Housing-Crisis ‘Python’ (MW)

As the effects of the housing crisis further recede, markers of distress are declining, with one notable exception: Among the batches of severely delinquent mortgages bought by institutional investors, foreclosures are on the rise. The trend is a reminder of the reasons many community advocates resisted allowing institutional investors to buy delinquent mortgages in government auctions that began in 2010. Wall Street, those advocates said, shouldn’t be rewarded for its role in creating the housing crisis with the chance to buy for pennies on the dollar the very assets whose values it dented. The government auctions promised a risk-sharing solution that would benefit nearly everyone: Homeowners whose mortgages had been bought dirt-cheap could get loan modifications, investors would get profitable assets, and communities would see tax revenues restored and neighborhoods revitalized.

But that win-win-win scenario may bring little relief to the most distressed among those troubled assets. A new Attom Data analysis for MarketWatch shows increasing foreclosures in the mortgages auctioned by the government. A subsidiary of private-equity firm Lone Star Investments, for example, has foreclosed on nearly 2,000 homeowners this year, through early July, and has increased foreclosures every year since 2013. And a Goldman Sachs subsidiary called MTGLQ, which has more than doubled foreclosures each year from 2014 to 2016, may do the same again this year, based on early 2017 data. Those figures stand in stark contrast to the housing market overall, where foreclosures fell 22% in the second quarter, touching an 11-year low of just over 220,000.

The institutional-investor foreclosure figures are a small fraction of the total, noted Daren Blomquist, Attom’s senior vice president of communications. And they don’t surprise investors who intentionally snatch up the most distressed mortgages available because their elevated risk promises higher yield. Attom Data does show an uptick in foreclosures by other lenders, though not all participated in the government auctions. But they’re a reminder that a decade after the housing downturn began, the pockets of foreclosures that still pop up represent the worst of the worst, prompting even those questioning the program to agree that some foreclosures were inevitable, no matter who owned the mortgages. Analysts call the current crop of foreclosures “the last of the pig moving through the python.”

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All bubble countries now face the issue. There’s no way out. So they’ll deny their bubble for a while longer.

Australian Housing Market At Risk Of Crash – UBS Research (CNBC)

The Australian housing market has peaked and could crash if the country’s central bank raises rates by too much or too quickly according to researchers at the Swiss bank, UBS. Property in Australia has boomed and the most recent government data marked growth in residential property prices at 10.2% year on year for the 2017 March quarter. In a note Monday, UBS Economist George Tharenou said any rash interest rate action from the Reserve Bank of Australia (RBA) could trigger a crash. “We still see rates on hold in the coming year, amid macroprudential tightening on credit growth and interest only loans. “Hence we still see a correction, but not a collapse, but if the RBA hikes too early or too much (as flagged by its hawkish minutes), it risks triggering a crash,” Tharenou warned.

Housing starts fell 19% in the first quarter of the year and May’s mortgage approvals also slid 20%. After a multi-year boom, the cost of an average home in the country now sits at 669,700 Australian dollars ($532,000) but Tharenou said price growth is certain to slow. “Despite weaker activity, house prices just keep booming with still strong growth of 10% y/y in June. However, this is unsustainably 4-5 times faster than income. “Looking ahead, we still see price growth slowing to 7% y/y in 2017 and 0-3% in 2018, amid record supply & poor affordability,” the economist added.

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Raising rates into a gigantesque bubble. No problem.

It’s Time To Rethink Monetary Policy (Rochon)

July 12 marks the date the Bank of Canada ignored common sense and increased its rate for the first time in seven years. Economists are largely divided on whether this was a good move, but in my opinion this was an ill-informed decision, largely based on the usually strong first quarter data, which may prove unsustainable in the longer term. In turn, it raises important questions about the conduct of monetary policy and the need to rethink the role and purpose of central bank policy. For the record, I don’t think there is much to fear from a single increase to 0.75% from 0.50, though it will have an immediate impact on mortgage rates — some Canadians will pay more for their homes. However, it is the prospect of what that move represents that sends chills down this economist’s spine.

As we know all too well, central banks never raise rates once or twice, but usually do so several times. Indeed, the consensus among economists is that there will be at least two more raises before the end of 2018, bringing the bank rate to 1.25%. This is still low by historical standards, but the raises begin to add up. I expect many more rate hikes through 2019 and 2020. You see, the Bank of Canada believes the so-called natural rate is 3%, which means we could possibly see nine more interest rate increases. Imagine the damage that will do. Yet, according to their own model, this rate is the “neutral” or “natural” rate and should have no far reaching impact. Try telling that to Canadians who have consumer debt and a mortgage. Clearly, there is nothing “neutral” about these rate increases. This alone is a reason to rethink monetary policy.

Second, the Bank of Canada targets inflation, and has been officially since 1991, a fact it reminds us of all the time. All other objectives, including economic growth and unemployment, or even household debt and income inequality, are far behind the principal objective of trying to keep the inflation rate on target. There is much to say about this, including whether interest rates and monetary policy in general are the best tool to deliver on the inflation crusade. Even if we accept this, inflation is currently at a near two-decade low. In other words, where’s the inflation beef? Inflation does not represent a current threat, and there are no inflationary pressures in the economy, which raises the question: Why raise rates?

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With Abenomics dead, so is Abe.

Scandals Threaten Japanese Prime Minister Shinzo Abe’s Grip On Power (G.)

Shinzo Abe is fighting for his future as Japan’s prime minister as scandals drag his government’s popularity close to what political observers describe as “death zone” levels. Apart from clouding Abe’s hopes of winning another term as leader of the Liberal Democratic Party (LDP) when a vote is held next year, the polling slump also undermines his long-running push to revise Japan’s war-renouncing constitution. Abe, who returned to the prime ministership four and a half years ago, was long seen as a steady hand whose position appeared unassailable – so much so that the LDP changed its rules to allow Abe the freedom to seek a third consecutive three-year term at the helm of the party. “He is no longer invincible and the reason why he is no longer invincible is he served his personal friends not the party,” said Michael Thomas Cucek, an adjunct professor at Temple University Japan.

Abe’s standing has been damaged by allegations of favours for two school operators who have links to him. The first scandal centred on a cut-price land deal between the finance ministry and a nationalist school group known as Moritomo Gakuen. The second related to the approval of a veterinary department of a private university headed by his friend, Kotaro Kake. Abe has repeatedly denied personal involvement, but polls showed voters doubted his explanations, especially after leaked education ministry documents mentioned the involvement of “a top-level official of the prime minister’s office” in the vet school story. Abe attempted to show humility in a parliamentary hearing this week by acknowledging it was “natural for the public to sceptically view the issue” because it involved his friend. “I lacked the perspective,” he said. Experts doubt that Abe’s contrition, combined with a planned cabinet reshuffle next week, will do much to reverse his sagging fortunes.

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The limits of the anti-Russia craze.

Brussels To Act ‘Within Days’ If US Sanctions Hurt EU Trade With Russia (RT)

The EU should act “within days” if new sanctions the US plans to impose on Russia prove to be damaging to Europe’s trade ties with Moscow, an internal memo seen by the media says. Retaliatory measures may include limiting US jurisdiction over EU companies. An internal memo seen by the Financial Times and Politico has emerged amid mounting opposition to a US bill seeking to hit Russia with a new round of sanctions. The bill, if signed into law, will also give US lawmakers the power to veto any attempt by the president to lift the sanctions. The document reportedly said European Commission chief Jean-Claude Juncker was particularly concerned the sanctions would neglect the interests of European companies. Juncker said Brussels “should stand ready to act within days” if sanctions on Russia are “adopted without EU concerns being taken into account,” according to the FT.

The EU memo also warns that “the measures could impact a potentially large number of European companies doing legitimate business under EU measures with Russian entities in the railways, financial, shipping or mining sectors, among others.” Restrictions against Russia come as part of the Countering Iran’s Destabilizing Activities Act, targeting not only Tehran, but also North Korea. Initially passed by the Senate last month, the measures seek to impose new economic measures on major sectors of the Russian economy. The draft legislation would also introduce individual sanctions for investing in Gazprom’s Nord Stream 2 gas pipeline project, outlining steps to hamper construction of the pipeline and imposing sanctions on European companies which contribute to the project.

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So EU vs US, and EU vs EU. The problem seems to be that US companies could profit from the sanctions, as European ones suffer.

EU Divided On How To Answer New US Sanctions Against Russia (R.)

European Commission preparations to retaliate against proposed new U.S. sanctions on Russia that could affect European firms are likely to face resistance within a bloc divided on how to deal with Moscow, diplomats, officials and experts say. A bill agreed by U.S. Senate and House leaders foresees fines for companies aiding Russia to build energy export pipelines. EU firms involved in Nord Stream 2, a 9.5 billion euro ($11.1 billion) project to carry Russian gas across the Baltic, are likely to be affected. Both the European Union and the United States imposed broad economic sanctions on Russia’s financial, defense and energy sectors in response to Moscow’s annexation of Crimea from Ukraine in 2014 and its direct support for separatists in eastern Ukraine. But northern EU states in particular have sought to shield the supplies of Russian gas that they rely on.

Markus Beyrer, director of the EU’s main business lobby, Business Europe, urged Washington to “avoid unilateral actions that would mainly hit the EU, its citizens and its companies”. The Commission, the EU executive, will discuss next steps on Wednesday, a day after the U.S. House of Representatives votes on the legislation, knowing that the U.S. move threatens to reopen divisions over the bloc’s own Russia sanctions. Among the European companies involved in Nord Stream 2 are German oil and gas group Wintershall, German energy trading firm Uniper, Anglo-Dutch Royal Dutch Shell, Austria’s OMV and France’s Engie. The Commission could demand a formal U.S. promise to exclude EU energy companies; use EU laws to block U.S. measures against European entities; or impose outright bans on doing business with certain U.S. companies, an EU official said.

But if no such promise is offered, punitive sanctions such as limiting the access of U.S. companies to EU banks require unanimity from the 28 EU member states. Ex-Soviet states such as Poland and the Baltic states are unlikely to vote for retaliation to protect a project they have resisted because it would increase EU dependence on Russian gas. An EU official said most member states saw Nord Stream 2 as “contrary or at least not fully in line with European objectives” of reducing reliance on Russian energy. Britain, one of the United States’ closest allies, is also wary of challenging the U.S. Congress as it prepares to leave the EU and seeks a trade deal with Washington. In fact, the EU’s chief executive, Jean-Claude Juncker, has few tools that do not require unanimous support from the bloc’s 28 governments.

The Commission could act alone to file a complaint at the World Trade Organisation. But imposing punitive tariffs on U.S. goods would require detailed proof to be gathered that European companies were being unfairly disadvantaged — a process that would take many months. Diplomatic protests such as cutting EU official visits to Washington are unlikely to have much effect, since requests by EU commissioners for meetings with members of Trump’s administration have gone unanswered, EU aides say.

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Let’s hope they don’t try.

US ‘May Send Arms’ To Ukraine, Says New Envoy (BBC)

The new US special representative for Ukraine says Washington is actively reviewing whether to send weapons to help those fighting against Russian-backed rebels. Kurt Volker told the BBC that arming Ukrainian government forces could change Moscow’s approach. He said he did not think the move would be provocative. Last week, the US State Department urged both sides to observe the fragile ceasefire in eastern Ukraine. “Defensive weapons, ones that would allow Ukraine to defend itself, and to take out tanks for example, would actually to help” to stop Russia threatening Ukraine, Mr Volker said in a BBC interview.

“I’m not again predicting where we go on this, that’s a matter for further discussion and decision, but I think that argument that it would be provocative to Russia or emboldening of Ukraine is just getting it backwards,” he added. He said success in establishing peace in eastern Ukraine would require what he called a new strategic dialogue with Russia.

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Undoubtedly not the last we hear of this.

Tsipras and Varoufakis Go Public With Spat (K.)

The coalition on Monday rejected calls for an investigation to be launched into the first months of the government’s time in power, as a dispute between Prime Minister Alexis Tsipras and ex-finance minister Yannis Varoufakis over that period in 2015 became public. “The evaluation of this period has to be conducted with political criteria, not myth-making or gossip,” said government spokesman Dimitris Tzanakopoulos, who accused Varoufakis of trying to advertise his recent book via the “systemic media” he once attacked. Tzanakopoulos’s comments came after Tsipras gave an interview to The Guardian in which he admitted making “big mistakes” in the past and suggested that Varoufakis’s plan for a parallel payment system could not be considered seriously.

“Yanis is trying to write history in a different way,” said Tsipras. “When we got to the point of reading what he presented as his plan B it was so vague, it wasn’t worth the trouble of even talking about. It was simply weak and ineffective.” The former minister immediately responded to the premier’s comments by claiming they displayed a “deep incoherence,” as Varoufakis claims that he had made Tsipras aware of the plan before he came to office yet the SYRIZA leader still chose to appoint him to the cabinet. “Either I was the right choice to spearhead the ‘collision’ with the troika of Greece’s lenders because my plans were convincing, or my plans were not convincing and, thus, I was the wrong choice as his first finance minister,” he wrote in a letter to The Guardian.

New Democracy called for judicial and parliamentary investigations into the claims made by Varoufakis, as well as by former energy minister Panayiotis Lafazanis. The latter claimed in a radio interview on Saturday that he had secured an advance payment from Russia for a gas pipeline to be used to held fund Greece if it left the euro. “Varoufakis and Lafazanis described with clarity the SYRIZA leadership’s plans to take Greece out of the eurozone,” said the conservatives in a statement. “If these plans were seen through to the end, the country would have found itself in a dramatic situation like Venezuela, with unforeseeable social consequences.”

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Makes sense.

Alexis Tsipras’s Mixed Messages Over Appointing Me As Finance Minister (YV)

[..] the Greek prime minister, Alexis Tsipras, having admitted to “big mistakes”, was asked if appointing me as his first finance minister was one of them. According to the interviewer, Mr Tsipras said “Varoufakis … was the right choice for an initial strategy of ‘collision politics’, but he dismisses the plan he presented had Greece been forced to make the dramatic move to a new currency as ‘so vague, it wasn’t worth talking about’”. Given that I presented my plans to Mr Tsipras for deterring the troika’s aggression and responding to a potential impasse (and any move by the troika to evict Greece from the eurozone) before we won the election of January 2015, and I was chosen by him as finance minister (one presumes) on the basis of their merit, his answer reflects a deep incoherence.

Either I was the right choice to spearhead the “collision” with the troika of Greece’s lenders because my plans were convincing, or my plans were not convincing and, thus, I was the wrong choice as his first finance minister. Arguing, as Mr Tsipras does, that I was both the right choice for the initial confrontation and that my plan B was so vague it wasn’t worth the trouble of even talking about is disingenuous, albeit insightful, for it reveals the impossibility of maintaining a radical critique of his predecessors while adopting the Tina (There Is No Alternative) doctrine.

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A brand new line of lipstick for farm animals.

Greece Plans Return To Bond Market As Athens Sees End To Austerity (G.)

Athens has outlined plans to return to the financial markets for the first time since 2014, with a plan to sell new five-year bonds to investors. Existing Greek five-year bonds were trading at 3.6% on Monday morning compared with 63% at the height of the Greek financial crisis in 2012 when the finance ministry was unable to pay public sector wages and there were riots in the streets. Following the announcement that Athens would be returning to the market, the yield fell to 3.4%. The Greek finance ministry has set a goal of a 4.2% interest rate on the new bond. But banking sources believe that level will be hard to achieve and say an interest rate of between 4.3% to 4.5% is much more likely. Government sources say valuation will take place on Tuesday 25 July.

The market test is crucial to Greece for not only judging sentiment of the market, from which it has been essentially exiled since the start of its economic crisis, but also for weaning itself off borrowed bailout funds. Speaking after the bond issue was announced, the EU’s economy commissioner, Pierre Moscovici, described the public spending cuts imposed on Greece since it almost went bust as “too tough” but “necessary”, adding there was now “light at the end of austerity”. Reuters reported that Greece had employed six banks – BNP Paribas, Bank of America Merrill Lynch, Citigroup, Deutsche Bank, Goldman Sachs and HSBC – to act as joint lead managers for a five-year euro bond “subject to market conditions”. Greek ministers will provide more details on Monday afternoon about how much it hopes to borrow, and on what terms.

If the issue is successful, it could help Greece, which is still coping with a debt to GDP ratio of 180%, to exit its long cycle of austerity and rescue packages. Late on Friday, S&P upgraded its outlook on Greek government debt from stable to “positive”, thanks partly to renewed hopes that the country’s creditors could finally grant it debt relief.

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And here’s how it’s done.

Greek Spending Cuts Prettify Budget Data (K.)

Delays in the funding of hospitals, social spending cuts and low expenditure on the Public Investments Program served to prettify the picture of the state budget over the first half of the year, producing a primary surplus of 1.93 billion euros, Finance Ministry figures showed on Monday. At the same time budget revenues posted a marginal increase over the target the ministry had set for the January-June period. However, the big challenge for the government starts at the end of this month with the payment of the first tranche of income tax by taxpayers, followed later on by the Single Property Tax (ENFIA) and road tax at the end of the year.

In total the state will have to collect 33 billion euros by the end of the year, which is considerably higher than in the second half of 2016. According to the H1 budget data, the primary surplus amounted to 1.936 billion euros, against a primary surplus of 1.632 billion in the same period last year, and a target for 431 million for the year to end-June. Expenditure missed its target by 1.15 billion euros, amounting to 22.86 billion in the first half. Compared to last year it was down 757 million euros. Hospital funding missed its target by 265 million.

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