Jun 052018
 
 June 5, 2018  Posted by at 8:40 am Finance Tagged with: , , , , , , , , , , , , ,  


John French Sloan East Entrance, City Hall, Philadelphia 1901

 

Carbon Bubble To Destroy Trillions Of Dollars Of Global Wealth (Ind.)
The Effects Of Trump’s Steel Tariffs On Red State Energy (F.)
US Firms To Pour $2.5 Trillion Into Buybacks, Dividends, M&A This Year (CNBC)
India Central Banker Sees Sudden “Evaporation” Of Dollar Funding (ZH)
China’s Debt Crackdown To Hurt Emerging Markets, Oil, Metals – Fitch (R.)
Italy’s Long, Hot Summer (Carmen Reinhart)
Why The Euro Was Created (ZH)
Toronto’s House Price Bubble Not Fun Anymore (WS)
Why Australia’s Great Banking Boom Has Ended (SMH)
Apple Jams Facebook’s Web-Tracking Tools (BBC)
A West Coast State of Mind (Jim Kunstler)
Edward Snowden: ‘The People Are Still Powerless, But Now They’re Aware’ (G.)
Who Should Feed The World: Real People Or Faceless Multinationals? (Vidal)

 

 

Don’t think it will happen without an overall economic collapse.

Carbon Bubble To Destroy Trillions Of Dollars Of Global Wealth (Ind.)

Trillions of dollars of fossil fuel wealth will be wiped out at some point over the next 17 years even if governments fail to impose binding carbon emissions limits on industry to curb global warming, according to a major new study. Environmentalists and policymakers have long warned of the threat of a “carbon bubble” and “stranded assets” for listed energy companies, based on the possibility they will never be able to realise the value of their vast stores of oil, gas and coal if politicians actually deliver on their decarbonisation promises.

But today a group of scientists and analysts from Cambridge, Nijmegen, Macao and the Open University take that warning a step further by arguing that these assets are destined to be stranded regardless of official policies to discourage the use of fossil fuels because clean energy technologies are now developing so rapidly that those polluting assets will be worthless in any case. “Our analysis suggests that, contrary to investor expectations, the stranding of fossil fuels assets may happen even without new climate policies. This suggests a carbon bubble is forming and it is likely to burst,” said Professor Jorge Viñuales from Cambridge University. If policymakers did deliver on the decarbonisation programmes, the loss for investors would be even more rapid.

The research is at odds with work from the International Energy Agency, which projects steady price rises for fossil fuels until 2040. And Donald Trump’s decision last year to pull the United States out of the Paris Agreement on climate change has also done nothing to persuade most investors to take the stranded assets warning seriously. But the researchers’ new “simulation-based, energy-economy-carbon-cycle climate” model suggests investing in fossil fuel firms today is likely to prove a disastrous bet, suggesting that between $1 trillion and $4 trillion could be wiped off the value of global fossil fuel assets by 2035.

Read more …

Steel and concrete prices better not rise.

The Effects Of Trump’s Steel Tariffs On Red State Energy (F.)

Electricity production is heavily dependent on materials like steel, concrete, copper and aluminum, for both producing electricity and moving it around to where it’s needed (see figure). Solar and Wind energy take more steel than any other energy source. Natural gas and nuclear take the least. Solar needs 1,600 tons of steel per MW, wind energy needs over 400 tons of steel, while gas and nuclear need only 4 and 40 tons, respectively. Wind and solar also require ten times more transmission, also heavily steel-intensive, since they are usually sited far away from where the energy is used.

The average high-voltage transmission tower includes about 30 tons of steel and transmission wire contains about a ton of steel per mile. Going from our biggest solar array, located in the Mohave Desert, to Los Angeles is almost 300 miles, requiring on the order of 10,000 tons of steel depending on specific design. While we tend to think of renewables as associated with Blue States, they are actually growing faster in Red States. Four of the five states with the most installed wind energy are Texas (20,321 MW), Iowa (6,917 MW), Oklahoma (6,645 MW) and Kansas (4,451 MW). The only Blue State in the top five is California (5,662 MW).

Read more …

Prop up your stock some more.

US Firms To Pour $2.5 Trillion Into Buybacks, Dividends, M&A This Year (CNBC)

Money is pouring into the U.S. economy and in turn helping provide support for the otherwise struggling stock market. If current conditions persist, corporations are likely this year to inject more than $2.5 trillion into what UBS strategists term “flow” — the combination of share buybacks, dividends, and mergers and acquisitions activity. The development comes as companies find themselves awash in cash, thanks primarily to years of stashing away profits plus the benefits of a $1.5 trillion tax break this year that slashed corporate rates and encouraged firms to bring back money idling overseas. Companies have nearly $2.5 trillion in cash parked domestically, according to the Federal Reserve, and as much as $3.5 trillion overseas, various estimates have shown.

When all is said and done for 2018, UBS expects dividend issuance to top $500 billion, buybacks to range from $700 billion to $800 billion, and M&A to constitute about $1.3 trillion. If the numbers pan out, they would equate to about 10% of the S&P 500’s market cap and 12.5% of GDP. “Assuming improving growth and stable rates, we expect the positive positioning/flow backdrop to support US equities, which is important as the daily corporate flow slows from mid-June to mid-July,” UBS strategist Keith Parker said in a note. Parker pointed out that the firm has overweight positions in both tech and health care as the two sectors are leading the buyback boom.

Buybacks specifically have been on a torrid pace and are helping provide a floor to a market that for much of 2018 had looked tired and volatile after a 20% S&P 500 gain the year before. Repurchases are up 83% year to date, far ahead of the 9% gain in dividends, while M&A activity involving U.S. companies has surged 130%, according to UBS. [..] UBS estimates that the combination of buybacks, dividends and demand flows account for some 40% in performance this year. The S&P 500 has nudged 2.6% higher and the Dow industrials are just ahead of breakeven.

Read more …

The Fed retreats and the Treasury issues new debt.

India Central Banker Sees Sudden “Evaporation” Of Dollar Funding (ZH)

In an op-ed published overnight in the FT, a central banker writes that when it comes to the turmoil gripping the world’s Emerging Markets, whether it is the acute, idiosyncratic version observed in Argentina and Turkey, which according to JPM may be doomed, or the more gradual selloffs observed in places like Indonesia, Malaysia, Brazil, Mexico and India, don’t blame the Fed’s rate hike cycle. Instead blame the “double whammy” of the Fed’s shrinking balance sheet coupled with the dollar draining surge in debt issuance by the US Treasury.

That’s the message from the current Reserve Bank of India, Urjit Patel, who writes that “unlike previous turbulence, this episode cannot be attributed to the US Federal Reserve’s moves on interest rates, which have been rising steadily since December 2016 in a calibrated manner.” But does that mean that the Fed is not to blame for what increasingly looks like another budding EM crisis? Not at all: according to Patel, the dollar funding shortage “upheaval” stems from what he sees as the confluence of two significant events of which the Fed’s balance sheet reduction is one, while the second is the dramatic increase in US Treasury issuance to pay for Trump’s tax cuts; what is notable is that both events are drastically soaking up dollar liquidity.

As a result, Patel blames a lack a coordination between the Fed and Treasury on the adverse flow through across global funding markets as a result of this decline in dollar liquidity, and writes that “given the rapid rise in the size of the US deficit, the Fed must respond by slowing plans to shrink its balance sheet. If it does not, Treasuries will absorb such a large share of dollar liquidity that a crisis in the rest of the dollar bond markets is inevitable.” Putting these two parallel processes – which threaten to materially impair dollar funding markets – in context, on one hand there is QT, or the gradual decline in the Fed’s balance sheet which is set to peak at a rate of $50BN/month by October, while at the same time US net Treasury issuance is set to jump to $1.2 trillion in 2018 and 2019 to cover the forecasted budget deficit of $804BN and $981BN in 2018 and 2019, respectively.

And in a curious coincidence, the withdrawal of dollar funding by the Fed in monthly terms, as it reduces its reinvestment of income received, is proceeding at roughly the same pace as that of net issuance of debt by the US government. Furthermore, both processes are open ended which means that over the next few years, the government’s net issuance will stabilize, albeit at a high level, whereas the Fed’s balance-sheet reduction will keep rising. Both are terrible news for Emerging Markets, which are in desperate need of reversing the ongoing dollar outflows; however as long as Trump continues to make America great, and funds said stimulus with excess debt issuance, emerging market turmoil is virtually guaranteed.

Read more …

China retreats, too.

China’s Debt Crackdown To Hurt Emerging Markets, Oil, Metals – Fitch (R.)

China’s debt crackdown is a key risk to the country’s economic growth and will have significant knock-on effects for the global economy, particularly emerging markets with high commodity dependence or close Chinese trade links, Fitch Ratings said. Beijing’s campaign to put a lid on debt could also lead to a sharp slowdown in business investment, Fitch said late on Sunday, forecasting that growth in the world’s second-biggest economy would slow to around 4.5% over the medium term. Fitch said the implications of this scenario for the global economy would be significant but not dramatic, unlike a full-scale hard landing.

One of the most significant effects would be on commodity prices, with Fitch expecting oil and metal prices to fall 5 to 10% from its baseline scenario, reflecting China’s large role as a commodity consumer. In April, a Reuters poll of 72 institutions showed economists expected China’s economic growth to slow to 6.5% this year and 6.3% next year as Beijing extends its crackdown on riskier lending practices. GDP in 2017 expanded 6.9% in real terms and 11.2% in nominal terms. Beijing’s financial crackdown, now in its third year, has slowly pushed up borrowing costs and is choking off alternative, murkier funding sources for companies such as shadow banking.

The ratio of Chinese corporate debt to GDP is already very high by international standards – at 168% in 2017 – and is expected to start rising again as nominal GDP growth declines towards 8% from the unusually high rate of more than 11% in 2017, Fitch said. If the government aims to stabilize its corporate debt ratio by 2022, Fitch said China’s nominal economic growth rate could fall by 1 percentage point a year over the medium term while business investment growth would drop 5percentage points per year.

Read more …

Restructuring Target2. That should be fun.

Italy’s Long, Hot Summer (Carmen Reinhart)

The political upheaval and social unrest fueling the current crisis in Italy should surprise no one. On the contrary, the only uncertainty was when exactly matters would come to a head. Now they have. Italy’s per capita GDP in 2018 is about 8% below its level in 2007, the year before the global financial crisis triggered the Great Recession. And the International Monetary Fund’s projections for 2023 suggest that Italy will still not have fully recovered from the cumulative output losses of the past decade. Among the 11 advanced economies that were hit by severe financial crises in 2007-2009, only Greece has suffered a deeper and more protracted economic depression.

Greece and Italy were the two economies carrying the highest debt burdens at the outset of the crisis (109% and 102% of GDP, respectively), leaving them poorly positioned to cope with major adverse shocks. Since the crisis erupted a decade ago, economic stagnation and costly banking weaknesses have propelled debt burdens higher still, despite a decade of exceptionally low interest rates. Greece has already faced more than one “credit event” and, while Italy has also had a couple of close calls, the spring of 2018 is turning out to be its most tumultuous episode yet. The summer will probably be worse, bringing Italy closer to a sovereign debt crisis. On the surface, general government debt appears to have stabilized since 2013, at around 130% of GDP. However, as I have stressed here and elsewhere, this “stability” is misleading.

General government debt is not the whole story for Italy, even setting aside the private debt loads and the recent renewed upturn in nonperforming bank loans (a daunting legacy of the financial crisis). When evaluating Italy’s sovereign risk, the central bank’s debts (Target2 balances) must be added to those of the general government. As the most recent available data (through March) show, these balances increase the ratio of public-sector debt to GDP by 26%. With many investors pulling out of Italian assets, capital flight in the more recent data is bound to show up as an even bigger Target2 hole. This debt, unlike pre-1999, pre-euro Italian debt, cannot be inflated away. In this regard, it is much like emerging markets’ dollar-denominated debts: it is either repaid or restructured.

Read more …

What the euro has meant for Greece and Italy: lower wages, higher unemployment and higher current account deficit.

Why The Euro Was Created (ZH)

[..] we thought it would be a good idea to remind readers why the euro exists in the first place. The briefest possible answer: to make sure the Deutsche Mark does not. As presented in the chart below – which shows the performance for each of the EU12 countries against the German DEM in every decade from the 1950s to the start of the Euro in 1999 – apart from a small revaluation of core countries in the 1990s, every country devalued to Germany in every decade between the 1950s and the start of the Euro. Said otherwise, the Deutsche Mark appreciated in value against all of its European peers for 5 consecutive decades, a condition which if left unchanged, would have led to an economic and trade crisis.

And as a bonus chart, here is same data (with the US and UK added) from the end of the Bretton Woods system in 1971 to the start of the Euro (Lira -82% devaluation to German DM) and during the 1990s (-24% devaluation) – the decade immediately leading up to the Euro start. As can be seen Italy is amongs the weakest performers relative to the German DM over these periods and showed the momentum that existed in the period leading up to the start of the Euro.

And while the fixed exchange of the Euro for European nations allowed the German export industry to go into overdrive, the lack of the possibility for an external, i.e. currency, devaluation, meant that Italy has been forced to do it all by engaging in internal devaluation, i.e., lower wages, higher unemployment and boosting its current account deficit, which however is made virtually impossible given Italy’s deteriorating demographics. This is what DB’s Jim Reid said of Italy’s potential future: Looking forward, Italy will not find it easy to grow out of its problems as its facing one of the worst set of demographics of the G20 countries. Its population size has peaked (according to the UN) and is expected to decline out to 2050. Its working age population (15-64 year olds as a proxy) is set to fall -24% over the same period and is again one of the worst placed in the G20.

Read more …

“Home sales plunged 22% in May compared to a year ago..”

Toronto’s House Price Bubble Not Fun Anymore (WS)

Housing in the Greater Toronto Area is, let’s say, retrenching. Canada’s largest housing market has seen an enormous two-decade surge in prices that culminated in utter craziness in April 2017, when the Home Price Index had skyrocketed 32% from a year earlier. But now the hangover has set in and the bubble isn’t fun anymore. Home sales plunged 22% in May compared to a year ago, to 7,834 homes, according to the Toronto Real Estate Board (TREB). It affected all types of homes, even the once red-hot condos: • Detached houses -28.5% • Semi-detached houses -29.4% • Townhouses -13.4% • Condos -15.5%.

It was particularly unpleasant at the higher end: Sales of homes costing C$1.5 million or more plummeted by 46% year-over-year to 508 homes in May 2018, according to TREB data. Compared to the April 2017 peak of 1,362 sales in that price range, sales in May collapsed by 63%. But it’s not just at the high end. At the low end too. In May, sales of homes below C$500,000 – about 68% of them were condos – fell by 36% year-over-year to 5,253 homes. The TREB publishes two types of prices – the average price and its proprietary MLS Home Price Index based on a “composite benchmark home.” Both fell in May compared to a year ago.

The average price in May for the Greater Toronto Area (GTA) fell 6.6% year-over-year to C$805,320, and is now down 12.3%, or an ear-ringing C$113,000, from the crazy peak in April 2017. There are no perfect measures of home prices in a market. Each has its own drawbacks. Average home prices can be impacted by the mix and by a few large outliers – but over the longer term, it gives a good impression of the direction. The chart below shows thepercentage change in average home prices in the GTA compared to a year earlier:

Read more …

Because the boom was a bubble.

Why Australia’s Great Banking Boom Has Ended (SMH)

It doesn’t feel all that long ago that Australian banks were the envy of the world. In March 2009, when stress-testing of US financial institutions drove the final spasm of the previous year’s credit crisis, you could have bought all the shares in Citigroup, Royal Bank of Scotland Group and Barclays with their $US8.4 trillion ($11 trillion) of gross assets for less than you’d pay for the equity of Westpac, with $US347 billion of assets. Commonwealth Bank of Australia’s share price peaked six years later just a sliver south of three times the value of its net assets, an extraordinary level in a business where price-book ratios have struggled to break above one times over the past decade.

With the current Royal Commission inquiring into practices in the country’s financial services industry and a slew of court cases, those high-flyers have come to earth with a bump. CBA on Monday agreed to pay $700 million to settle a money laundering case in which it admitted that a software update allowed about 54,000 reportable transactions to go unreported over a period of almost three years. On Friday, ANZ and local units of Deutsche Bank and Citigroup announced they were facing possible criminal cartel charges over their handling of a $2.5 billion placement of ANZ shares in 2015. Having executives hauled up before government inquiries and paying out hundreds of millions in court settlements isn’t great for headlines, but it would be a mistake to see the declines in Australia’s banking sector as purely a result of this.

When your annual net income is in the region of $10 billion, as CBA’s is, a $700 million charge is more than just a rounding error. But the 1.2 per cent jump in the company’s stock after the settlement was announced Monday is an indication that the cost is worth less to shareholders than the benefit of putting the issue firmly in the past. The greater risk to Australia’s banks lurks not in the papers of regulators and inquisitors, but on the streets of the country’s sprawling suburbs. As we’ve argued before, the most ominous indicator to watch is also a favourite one of the Reserve Bank of Australia. Rents, as measured by the Australian Bureau of Statistics, have been increasing at less than 1 per cent for nine consecutive quarters , the worst performance for the measure since the housing crash of the early 1990s.

Read more …

The spirit of Steve Jobs?!

Apple Jams Facebook’s Web-Tracking Tools (BBC)

Apple will attempt to frustrate tools used by Facebook to automatically track web users, within the next version of its iOS and Mac operating systems. “We’re shutting that down,” declared Apple’s software chief Craig Federighi, at the firm’s developers conference. He added that the web browser Safari would ask owners’ permission before allowing the social network to monitor their activity. The move is likely to add to tensions between the two companies. Apple’s chief executive Tim Cook had previously described Facebook’s practices as being an “invasion of privacy” – an opinion Facebook’s founder Mark Zuckerberg subsequently denounced as being “glib”.

At the WWDC conference – held in San Jose, California – Mr Federighi said that Facebook keeps watch over people in ways they might not be aware of. “We’ve all seen these – these like buttons, and share buttons and these comment fields. “Well it turns out these can be used to track you, whether you click on them or not.” He then pointed to an onscreen alert that asked: “Do you want to allow Facebook.com to use cookies and available data while browsing?” “You can decide to keep your information private.”

One cyber-security expert applauded the move. “Apple is making changes to the core of how the browser works – surprisingly strong changes that should enable greater privacy,” said Kevin Beaumont. “Quite often the changes companies make around privacy are small, incremental, they don’t shake the market up much. “Here Apple is allowing users to see when tracking is enabled on a website – actually being able to visually see that with a prompt is breaking new ground.”

Read more …

Building on the Ring of Fire.

A West Coast State of Mind (Jim Kunstler)

It’s only been in the last thirty years that Seattle hoisted up its tombstone cluster of several dozen office and condo towers. That’s what cities do these days to demonstrate their self-regard, and Seattle is perhaps America’s boomingest city, what with Microsoft’s and Amazon’s headquarters there — avatars of the digital economy. A megathrust earthquake there today would produce a scene that even the computer graphics artistes of Hollywood could not match for picturesque chaos. What were the city planners thinking when they signed off on those building plans?

I survived the journey through the Seattle tunnel, dogged by neurotic fantasies, and headed south to California’s Bay Area, another seismic doomer zone. For sure I am not the only casual observer who gets the doomish vibe out there on the Left Coast. Even if you are oblivious to the geology of the place, there’s plenty to suggest a sense of impossibility for business-as-usual continuing much longer. I got that end-of-an-era feeling in California traffic, specifically driving toward San Francisco on the I-80 freeway out in the suburban asteroid belt of Contra Costa County, past the sinister oil refineries of Mococo and the dormitory sprawl of Walnut Creek, Orinda, and Lafayette.

Things go on until they can’t, economist Herb Stein observed, back in the quaint old 20th century, as the USA revved up toward the final blowoff we’ve now entered. The shale oil “miracle” (so-called) has given even thoughtful adults the false impression that the California template for modern living will continue indefinitely. I’d give it less than five years now.

Read more …

Snowden deserves as much support as Assange does.

Edward Snowden: ‘The People Are Still Powerless, But Now They’re Aware’ (G.)

Edward Snowden has no regrets five years on from leaking the biggest cache of top-secret documents in history. He is wanted by the US. He is in exile in Russia. But he is satisfied with the way his revelations of mass surveillance have rocked governments, intelligence agencies and major internet companies. In a phone interview to mark the anniversary of the day the Guardian broke the story, he recalled the day his world – and that of many others around the globe – changed for good. He went to sleep in his Hong Kong hotel room and when he woke, the news that the National Security Agency had been vacuuming up the phone data of millions of Americans had been live for several hours.

Snowden knew at that moment his old life was over. “It was scary but it was liberating,” he said. “There was a sense of finality. There was no going back.” What has happened in the five years since? He is one of the most famous fugitives in the world, the subject of an Oscar-winning documentary, a Hollywood movie, and at least a dozen books. The US and UK governments, on the basis of his revelations, have faced court challenges to surveillance laws. New legislation has been passed in both countries. The internet companies, responding to a public backlash over privacy, have made encryption commonplace.

Snowden, weighing up the changes, said some privacy campaigners had expressed disappointment with how things have developed, but he did not share it. “People say nothing has changed: that there is still mass surveillance. That is not how you measure change. Look back before 2013 and look at what has happened since. Everything changed.” The most important change, he said, was public awareness. “The government and corporate sector preyed on our ignorance. But now we know. People are aware now. People are still powerless to stop it but we are trying. The revelations made the fight more even.”

Read more …

Bayer-Monsanto: “It will effectively control nearly 60% of the world’s supply of proprietary seeds, 70% of the chemicals and pesticides used to grow food, and most of the world’s GM crop genetic traits..”

Who Should Feed The World: Real People Or Faceless Multinationals? (Vidal)

Unless there is a major hiccup in the next few days, an incredibly powerful company will shortly be given a licence to dominate world farming. Following a nod from Donald Trump, powerful lobbying in Europe and a lot of political arm-twisting on several continents, the path has been cleared for Monsanto, the world’s largest seed company, to be taken over by Bayer, the second-largest pesticide group, for an estimated $66bn (£50bn). The merger has been called both a “marriage made in hell” and “an important development for food security”.

Through its many subsidiary companies and research arms, Bayer-Monsanto will have an indirect impact on every consumer and a direct one on most farmers in Britain, the EU and the US. It will effectively control nearly 60% of the world’s supply of proprietary seeds, 70% of the chemicals and pesticides used to grow food, and most of the world’s GM crop genetic traits, as well as much of the data about what farmers grow where, and the yields they get. It will be able to influence what and how most of the world’s food is grown, affecting the price and the method it is grown by. But the takeover is just the last of a trio of huge seed and pesticide company mergers.

Backed by governments, and enabled by world trade rules and intellectual property laws, Bayer-Monsanto, Dow-DuPont and ChemChina-Syngenta have been allowed to control much of the world’s supply of seeds. You might think that these mergers would alert the government, but because political parties in Britain are so inward-looking, and because most farmers in rich countries already buy their seeds from the multinationals, opposition has barely been heard.

Read more …

Mar 182018
 
 March 18, 2018  Posted by at 12:14 pm Finance Tagged with: , , , , , , , , , ,  


Gordon Parks Daytona Beach, Florida. Bethune-Cookman College. Football practice 1943

 

 

Here’s a delicious little rant from Dr. D., by now a regular contributor at the Automatic Earth.

 

 

Dr. D: The schizophrenia surrounding the tariff plan is really startling. But then I could just say, “the level of insanity everywhere is startling.”

Self-avowed schmartz-guys are all “doesn’t the U.S. know their empire is failing and everybody is cutting them off? What are they thinking starting trade wars with allies and raising prices???” Stop. So your argument is the U.S. is losing its influence, other nations are about to cut it off and end the trade deficit, and thereby basically halt imports? While the U.S. has no internal manufacturing? And your argument here is that, not if but when the world cuts us off we a) would like to have some steel and aluminum to build factories, washing machines and tanks or b) do NOT want to have access to the basic raw materials of society? Whiskey Tango Foxtrot.

I’m sorry that this generation burned down the factory, then retreated to the mansion, sold off and burned all the furniture there too, then ran up the credit card with cocaine and heroin parties while yelling “I’m a rock star! I’m a Contender!”, but they did. Now there are only bad decisions, like the ones real adults have.

And there’s nothing but work to put that factory back up, and that’s going to cost something, in this case, money and higher prices, using the thousand-year method of protective tariffs. Why not? Europe has 25% tariffs. China has a virtual lockout. If the U.S. machine then also has higher real wages for U.S. workers they can afford the tariffs. I mean, what’s their counterargument? If it’s better to not have steel and aluminum, perhaps we should shut down the few remaining foundries and have NO materials? I mean, if a little is bad, surely none is way better.

Mish for example thinks this way: if China is willing to give us cheap, under-market steel we should take it. No, not if you want to have a country, you don’t. Isn’t it a matter of national security to be able to make tanks, ships, railroads, and artillery? There’s more to the world than money.

Nor is this arcane. You know that brewing Japanese scandal about approving sub-standard steel worldwide for going on 40 years? Well that sub-standard Chinese and Japanese steel was turned into, say, sub-standard U.S. Abrams Tanks, which may explain why they’ve been breaking and unexpectedly going up like roman candles. So how’s your low-cost steel discount look now that the U.S. doesn’t have an effective military? Come on, guys. Again, the world is not only money, to be measured in money. It’s strategy, it’s community, it’s values. I’m surprised we’re so lost I need to bring this up.

Don’t get me started on how we don’t own (and therefore don’t really secure) our toll roads, ports, bridges, and utilities. They are also widely owned by foreigners now. Really? We (or they) sold every living thing out of the United States, and we’re looking for Russians and Terrorists under the bed? For the love of Pete…

 

How do you prepare for an Argentina-like collapse and/or up to civil war we are so close to? People who have lived through it say, “you can’t.” If the whole country is mad, which it is, there is nowhere to turn for sense or even allies, to say nothing of dry goods. Co-Americans are now so immoral, so self-serving, so rapacious, so badly thinking, so ill-positioned and ill-prepared that they themselves are the largest single liability, to me, but mostly to themselves. Without basic morality — you know, like do your job, don’t lie about everyone around you, don’t sleep with other people and/or kids at the local high school — there is no “community” as Ilargi discusses. My place may be here, but I can only say: “stay exiled.”

Think the 30% uptick in opioid overdoses is bad? In my small county there are now 3 support groups of 30 each for pedophiles. These are mostly court-directed, meaning these are only the ones we know about. That’s in ADDITION to the self-help groups for alcohol and drug addition. Hey, where did we get those volunteers for Oxfam, UNICEF, and Haiti? And are the police, judges, Congressmen and FBI not also from this same population? Or are they going to arrest themselves and stop it? Maybe I should go arrest the police and see how that goes. It ain’t good.

Only Morality can fix it, where the nation cries out to God and says, “we shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe to assure the return of justice and order, even if it means paying for my own crimes.” You see that happening yet? My biggest fear is the present turn will patch it over enough to limp on a little further with no reform, and yet that seems the most likely.

Adams said, “Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other.” Benjamin Franklin said, “only a virtuous people are capable of freedom.” This is just Tytler’s cycle of history:

 

 

We’ve done it all but bondage. When China cuts off the imports and calls the loans, the cycle of bondage will be complete. Until we find faith, we’ll be peasants in our own land, as planned.

 

 

Mar 132018
 
 March 13, 2018  Posted by at 10:33 am Finance Tagged with: , , , , , , , , , , , ,  


Mayfair Building, Times Square NYC 1954

 

Sea Change Is Underway in Money Markets for Banks, Investors (BBG)
The Real Reasons Trump Blocked Broadcom’s Qualcomm Takeover (CNBC)
Donald Trump’s Attack on German Prosperity (Spiegel)
Trump Pushes EU to Cut Tariffs as Bloc Vows to Resist ‘Bullies’ (BBG)
Trump’s Metal Tariffs ‘Like An Atomic Bomb’ For European Firms (CNBC)
Is The Dot.Com Bubble Back? (Roberts)
China Plans New Ministries, Merger Of Regulators In Massive Revamp (R.)
Central Banks Are Looking for New Ways to Meet Inflation Targets (BBG)
Labour’s Nationalisation Plans As Damaging As ‘No Deal’ Brexit – CBI (G.)
Another Quandary (Jim Kunstler)
Russian Foreign Ministry Slams UK’s Comments On Skripal Poisoning Case (Tass)
Saudis Reportedly Wielding Veto Power Over Prince Alwaleed (CNBC)
The Rich Aren’t Happy About New Zealand Foreign Bolthole Ban (BBG)
The Pentagon & Hollywood’s Successful And Deadly Propaganda Alliance (RT)
Krill Fishing Poses Serious Threat To Antarctic Ecosystem (G.)

 

 

Is this where central banks fail in their quest for control?

Sea Change Is Underway in Money Markets for Banks, Investors (BBG)

While many fixed-income investors may be focused on the specter of higher long-term Treasury yields, there’s a sea change afoot at the shorter end – in U.S. money markets. The London interbank offered rate, or Libor, and rates on Treasury bills are at levels not seen since 2008. The Fed’s move to tighten policy forms the backdrop for the increase, but an added force behind the surge this year has come from a deluge of supply as U.S. deficits widen. Higher short-term borrowing costs have implications for investors and also for banks, which find themselves paying up to borrow through the commercial-paper market as they compete to lure cash. “We are in a new paradigm,” said Jerome Schneider at Pimco. “The clear focus for the market is where will incremental demand come from to meet this supply.”

The Treasury has been jacking up debt sales this quarter: Net issuance is slated to exceed $400 billion, with the bulk coming in bills. The Treasury increased the 4-week bill sale to $65 billion, from as low as $15 billion earlier in the year. The march higher in Libor has widespread consequences despite regulatory efforts to replace it following a price-fixing scandal. About $350 trillion of financial products and loans are linked to Libor, with a large chunk hinged to the dollar-based version of the benchmark. Libor is among the main indexes, along with one-year T-bill rates, used to set U.S. adjustable-rate mortgages.

Assets in U.S. government-only money funds, which include bills among key holdings, have risen to $2.26 trillion, from $2.07 trillion last year. As the Fed keeps hiking, with the next move likely this month, the influx may continue. But for banks, the increasing appeal of T-bill rates is making them pay up to compete, through offering better returns on the commercial paper they use for short-term borrowing. “Banks still need funding and they need to entice investors,” Schneider said.

Read more …

Protectionism, national security. Where’s the anti-Trump lobby on this?

The Real Reasons Trump Blocked Broadcom’s Qualcomm Takeover (CNBC)

The threat of China factored heavily into the U.S. government’s decision to block Broadcom’s proposed buyout of Qualcomm. President Donald Trump, for his part, officially declared on Monday that the proposed $117 billion deal was prohibited on national security grounds. The president said in his order that “there is credible evidence” leading him to believe that Broadcom through control of San Diego-based Qualcomm “might take action that threatens to impair the national security of the United States.” That conclusion may seem extreme given that Broadcom is based in Singapore — and looking to redomicile to the U.S., where it conducts most of its operations — but it’s not a fear of the Southeast Asian city state that is raising national security concerns.

“The case that has been constructed is that, given Broadcom’s business practices, the worry is that they will cut investment significantly, particularly in the 5G roadmap, weaken Qualcomm, as well as the U.S. position and allow Huawei, a Chinese company to take the lead,” explained Stacy Rasgon, chip analyst at Bernstein. The Treasury Department said last week in a letter to lawyers involved in the deal that Qualcomm was trusted by the U.S. government and cited Huawei as a competitive threat in the development of 5G, which is a telecommunications standard that will allow for faster transfer of data. Beyond those 5G concerns, there’s even more to Trump’s decision to block the deal, experts said.

“It is not just China, it is not just chips. It is broad technology. It is U.S. military power and economic power going forward and he’s got a very consistent point of view,” said Ron Napier, head of Napier Investment Advisors. “Trump has been saying all year long since he was inaugurated that security is very important to him, technology is very important to him, trade is very important to him and getting jobs back to the United States is very important to him. He’s making this all into one fabric,” he added. “He sees this as the U.S.’ last big stand if it’s going to remain the leader of the free world,” Napier told CNBC.

Read more …

Far too much steep is produced every year. THAT is the problem.

Donald Trump’s Attack on German Prosperity (Spiegel)

The looming conflict is a sign of the turning point at which the global economy finds itself. Recently, the economy in most corners of the globe has been healthy, with the world experiencing a rare phase of synchronous growth. But it looks as though that phase is now coming to an end. Interest rates are rising and sovereign debt is growing, the result of which is that governments are beginning to lose their flexibility and it is likely that some countries will soon face difficulties borrowing money on the open market. Increasing financial market instability shows that insecurity is on the rise. And in this situation, protectionist policies pursued by populists and nationalists harm economic growth and endanger international prosperity.

It is something on which a majority of economists actually agree: tariff barriers slow growth, put jobs at risk and drive up inflation. Once a trade war is triggered, there is no winner, although Munich-based economist Gabriel Felbermayr says that Germany has the most to lose. “There is no other country in the world that would be hit as hard.” Felbermayr, 41, heads up the Center for International Economics at the Center for Economic Studies (CES). The shaved-headed economics professor, originally from Austria, has examined just how devastating Trump’s economic policies could be for the German economy. Every fourth job in the country, he says, is dependent on exports. And in five key sectors – automobiles, machinery, electrical engineering, pharmaceuticals and precision instruments – fully three-quarters of all exports go to the United States.

“If the U.S. were to cut itself off, it would threaten the German business model,” Felbermayr says. “Everything would start teetering.” [..] The global steel market has been imbalanced for years, with producers manufacturing 1.6 billion tons of crude steel each year against an annual demand of just 900 million tons. China is primarily to blame for this lopsidedness. Inexpensive energy and low wages enable the country’s steel producers to sell their products cheaply around the world. If the U.S. were to make moves to protect its domestic steel producers, even more cheap steel would flow into the EU than is already the case. Were that to happen, says Wolfgang Eder, head of the Austrian steel concern Voestalpine, “Europe would threaten to become the world’s garbage pail.”

Read more …

The EU vows to stand up to bullies. Ask the Greeks about that one. What kind of person has the guts to say that?

Trump Pushes EU to Cut Tariffs as Bloc Vows to Resist ‘Bullies’ (BBG)

The EU told U.S. President Donald Trump it won’t be cowed by his escalating protectionist rhetoric and talk of punitive tariffs. “Europe is prepared,” Dutch Finance Minister Wopke Hoekstra said Monday as he headed into a meeting with his counterparts from the rest of the euro area. “We are not afraid, we will stand up to the bullies,” Trade Commissioner Cecilia Malmstrom said earlier in the day. Trump returned to the offensive over the weekend, raising the prospect of higher levies on European cars and telling supporters at a rally that the countries of the EU have banded together “to screw the U.S. on trade.” The latest brinkmanship follows new tariffs on steel and aluminum imports that are straining a transatlantic relationship already tested by disputes from climate change to Middle East policy.

“Secretary of Commerce Wilbur Ross will be speaking with representatives of the European Union about eliminating the large Tariffs and Barriers they use against the U.S.A.,” Trump tweeted on Monday. “Not fair to our farmers and manufacturers.” Trump’s rhetoric drew unanimous condemnation from European finance ministers gathering in Brussels. France’s Bruno Le Maire said that he’s concerned about “a trade war between the EU and the U.S.” while his Spanish counterpart Roman Escolano, making his debut as minister, said protectionism is always a mistake. Malmstrom accused the Trump administration of using trade “to threaten and intimidate” Europeans and using the issue as a “scapegoat.”

A meeting in Brussels between Malmstrom and her U.S. counterpart Robert Lighthizer on Saturday ended without a breakthrough, as the EU didn’t receive assurances that it will be exempted from the metal tariffs. “If anyone starts throwing stones, it’s better first to make sure he’s not living in a glass house,” European Commission spokesman Enrico Brivio said.

Read more …

If even more Chinese steel floods into Europe, that is now Trump’s fault.

Trump’s Metal Tariffs ‘Like An Atomic Bomb’ For European Firms (CNBC)

Donald Trump’s decision to impose tariffs on steel and aluminum could cause major disruption for companies in Europe, a business lobbyist told CNBC Monday, who argued that the U.S. president should have taken less severe measures to protect his domestic market. U.S.’s allies, including the European Union and Japan, are hoping to be excluded from new tariffs that Trump announced last week. The decision to raise steel import taxes by 25% and aluminum by 10% could hurt not only those industries directly, but also carmakers and construction firms which use the raw materials. Trump decided that the tariffs would be the best way to deal with overcapacity in these sectors and based his argument on national security.

“This is a very exceptional mechanism that is rarely used. It’s a bit considered like an atomic bomb, because really to use this is like saying ‘look we are really at a level where we cannot use anti-dumping or anti-subsidies’,” Luisa Santos, the international relations director at BusinessEurope, told CNBC Monday. [..] European steel and aluminum businesses are reportedly preparing for a collapse in local prices if the tariffs are indeed applied to their region. Charles de Lusignan, from the Steel Association for Europe, said ultimately the tariffs could mean a scaling back in Europe, with firms letting people go, cutting investment and also innovation. “We need to act immediately because the damage will be done within the first weeks,” he said. “In fact it might already be happening, because obviously an exporter knows that the steel might be blocked in the future so they already start sending it ahead.”

Read more …

Not a relevant question.

Is The Dot.Com Bubble Back? (Roberts)

Whether you believe there is a “bubble” in the Technology stocks, or the markets, is really not important. There are plenty of arguments for both sides. At the peak of every bull market in history, 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.” (Here is why it isn’t.) Yet, in the end, it was something unexpected, unknown or simply dismissed that devastated investors. This is why the discussion of “this time is not like the last time” is largely irrelevant.

Individuals no longer “invest” to become a “shareholder” in a publicly traded business. The “quaint concept” of “valuations” died with the mainstreaming of investing during the 1990’s as the “Wall Street Casino” opened for business. Today, investors only think in terms of speculating on “electronically traded bits of paper” in the hopes the value will rise over time. The problem, of course, is they are never told when to “sell” to capture that valuation increase which is the most critical aspect of the investment process. Instead, individuals continue to “bet” the “greater fool” will always appear. For now, the “bullish case” remains alive and well. The media will go on berating those heretics who dare to point out the risks that prevail, but the one simple truth is “this time is indeed different.”

Read more …

There goes the last shred of transparency.

China Plans New Ministries, Merger Of Regulators In Massive Revamp (R.)

China said it will merge its banking and insurance regulators, according to a parliament document released on Tuesday, in a series of proposed changes in the biggest ministry shake-up in years. In a long-awaited move to streamline and tighten oversight of the financial system in the world’s second-biggest economy, China will also transfer some of the banking and insurance regulators’ roles to the central bank, documents showed. In much-anticipated plans to create seven new ministries and a raft of government agencies announced on Tuesday, one of the most significant changes was creation of the national markets supervision management bureau.

The new body will decide on antimonopoly and pricing issues, replacing the roles played by the three national antitrust regulators: the National Development & Reform Commission (NDRC), the Ministry of Commerce and the State Administration for Industry and Commerce (SAIC). Unifying the structure under one agency, rather than handing the responsibility to one of the three existing watchdogs, reflects the growing importance of the issue for the government. China will also form a powerful new competition regulator in a bid to ramp up oversight of mergers and acquisitions and price-fixing as the world’s second-largest economy seeks to make policymaking more efficient and coordinated. Since the beginning of last year, Beijing has cracked down on leverage and risky market practices, with China’s various regulators releasing a flurry of new rules in an attempt to rein in risks.

Read more …

Only, they don’t know what it is.

Central Banks Are Looking for New Ways to Meet Inflation Targets (BBG)

With so many central banks failing to hit their inflation targets, some are considering changes to the tool kits they use to steer their economies. Norway’s decision to lower its price target is just the latest example, and follows more or less official adjustments in Sweden, Argentina and the euro area. Even in New Zealand, the birthplace of inflation targeting, the central bank is shifting to a broader goal that includes a focus on employment. But there’s no one-fits-all solution for monetary authorities and debate is splintered. Raising inflation targets has been discussed equally intensively in recent years as reducing or amending them.

And while some central banks acknowledge a need to reconsider their mandates, others are doubling down on existing policies. Claudio Borio, a top official at the Bank for International Settlements, poured fuel on the debate in September with a provocative speech calling for a broad rethink that accounts for how globalization and technological advances have influenced inflation. “Shall we throw away the books?” ECB President Mario Draghi asked on Thursday. “There are serious costs about changing course on credibility and the anchoring of expectations. We can go on on this for a while about changing objective.”

Read more …

Think tanks are your friend.

Labour’s Nationalisation Plans As Damaging As ‘No Deal’ Brexit – CBI (G.)

The head of Britain’s biggest business lobby group has attacked Labour’s nationalisation plans as potentially just as damaging to the economy as Britain leaving the European Union without a deal. In a speech on Monday, Paul Drechsler, the CBI president, said renationalising large parts of the economy would cause serious harm to the UK’s reputation as a place for international investors, which he argued would be as bad as a hard Brexit and would damage job prospects and living standards. “So you want to nationalise energy, rail and water, and bring public services contracts back in house? Let’s see the evidence that it will deliver a better service to consumers at a lower cost,” he said.

The intervention by the lobby group – which represents about 190,000 companies, including transport and utility firms – constitutes a warning from the boardrooms of corporate Britain that they harbour concerns over Labour’s plans for the economy despite supporting the party over its stance on Brexit. The CBI was among leading business voices supporting Jeremy Corbyn’s move to keep Britain in a customs union with the EU. The lobby group warned before the referendum that Brexit could lead to almost a million job losses and cost the economy £100bn – the equivalent of 5% of GDP – by 2020. Drechsler challenged Labour to provide evidence that its plans would lead to a better service for consumers at a lower cost.

He said private investment had helped create jobs and improve the efficiency of utility companies since they were sold off under the Thatcher government of the 1980s, and argued that progress could be undone if they were taken back into state control. However, utility companies and railway operators have faced intense pressure over their service standards and prices at a time when households are under increasing financial strain. Public support has swung behind Labour’s plans for greater state control of several key industries – shown in recent polls that suggest widespread backing for nationalisation of the railways, water, gas and electricity.

Read more …

Mentally ill, cannabis.

Another Quandary (Jim Kunstler)

That crusty ole rascal, Gov. Jerry Brown of California, seems to be enjoying his sunset journey into Civil War Two or maybe the destination is more like Blade Runner (since we know that history only rhymes but does not repeat). Anyway, it’s not a good place. The once-golden state begins to look something like what one federal official recently called — dare I say it? — a shithole. “A mix of used hypodermic needles, human feces, and other trash litters the streets and sidewalks in a large section of downtown San Francisco, a local news outlet reported Sunday night. It’s a problem that has grown by epic proportions in recent years and has many concerned for the health and safety of some the city’s youngest residents…” — The Blaze

Yes, quite literally. This particular failure of the political Left started in the 1970s when states began aggressively shuttering their large mental hospitals. Many of these institutions dated from the late 19th century – ghastly old gothic revival warehouses for the mentally ill, fraught with overtones of abuse and neglect, scenes out of Vincent Price movies… lightning flashes through the barred windows… a scream in the night… hysterical laughter echoing down the dark, tiled hallways…. They were an embarrassment, for sure, and certainly an affront to liberal sensibilities. But, of course, they fucked up the remedy for that. Instead of replacing the giant old state insane asylums with smaller, better-managed institutions, they just released the inmates under the rationale that they were a politically oppressed minority group. And there it ended.

And so here we are, going on a half-century later, with an economy that manufactures failure and immiseration at a greater volume than its other finished products, and many more lost souls out on the city streets, and now we are an even more ideologically inflamed society than we were in 1973, with the ranks of intersectional oppressed minorities and aggrieved victim groups grown into virtual armies-of-the-night — and the mentally ill just lost in the crowd. It never seems to occur to anyone that a mental hospital can be run humanely, at an appropriate scale, and that these poor, sad creatures might, at least, be better off there with a bed, a bathroom, and somebody to check in on them daily than they are wallowing in the gutters of San Francisco and other cities. Surely there are up-to-date models in other lands for this kind of caretaking — if maybe we sent a few bureaucrats overseas to have a look.

Read more …

Who needs proof in an echo chamber? Whether it’s Theresa May or the House Intelligence case, the lines have been drawn long ago.

Russian Foreign Ministry Slams UK’s Comments On Skripal Poisoning Case (Tass)

Russian Foreign Ministry Spokeswoman Maria Zakharova has dubbed as a ‘circus show’ comments of UK Prime Minister Theresa May on the poisoning of Sergey Skripal, a former colonel in Russia’s GRU military intelligence, and his daughter. “This is a circus show in Britain’s parliament,” she stressed. “The conclusion is obvious – a next political media campaign based on provocation,” Zakharova added. Earlier, Theresa May said it is “highly likely” that Russia is responsible for the poisoning of Sergey Skripal and his daughter. Moscow urges London to make public the results of the investigation into the deaths of Alexander Litvinenko and Boris Berezovsky, Zakharova said.

“Before making up new stories, let somebody in the Kingdom tell us what the previous fairy-tales ended in – those about Litvinenko, Berezovsky, Perepilichny and many others who died under mysterious circumstances on British soil,” the diplomat said. Former GRU Colonel Sergey Skripal, 66, and his 33-year-old daughter Julia on March 4 suffered from the effects of an unidentified nerve agent. They were found in an unconscious condition on a bench near The Maltings shopping center in Salisbury. Both are now in hospital in critical condition.

In 2004, Skripal was arrested by the federal security service FSB, charged, tried and convicted of high treason and stripped of all ranks and awards. In 2010 he was handed over to the United States under an arrangement to exchange persons arrested on spying charges. Later in the same year Skripal settled in Britain.

Read more …

The price of freedom.

Saudis Reportedly Wielding Veto Power Over Prince Alwaleed (CNBC)

Prince Alwaleed Bin Talal remains chairman of Kingdom Holding Company following his release from detention, but the Saudi government reportedly has final say over decisions at the investment firm. Investment decisions at Kingdom Holding are now subject to approval by the government, The Wall Street Journal reported on Monday, citing senior Saudi advisers. Kingdom Holding has $12.5 billion invested across more than a dozen sectors around the world, according to its website. Alwaleed’s personal investment portfolio is also under government control, according to the Journal. Alwaleed holds substantial stakes in companies like Citigroup, Twitter, Lyft and Time Warner.

The Journal report does not indicate whether the government has exercised its newfound influence over these investments. However, sources tell the Journal the government has already intervened in a major real estate project, ordering senior managers at Kingdom Holding to abandon the Jeddah Tower, which would be the world’s tallest skyscraper when — and if — it is completed. Officials have directed Kingdom Holding to instead focus its energy on a new city called Neom, which is expected to cost $500 billion to build. The project was announced in October by Crown Prince Mohammed bin Salman, the influential king in waiting who is overseeing the kingdom’s economic transformation and spearheaded the campaign that led to Alwaleed’s detention.

Read more …

What happens when there’s only rich people left? Or: who cares about New Zealanders?

The Rich Aren’t Happy About New Zealand Foreign Bolthole Ban (BBG)

Rich-listers like Californian billionaire Ric Kayne have issued a warning to New Zealand – banning house sales to foreigners could hurt the country’s reputation and turn wealthy investors away. Kayne, who has built an exclusive golf course in New Zealand and wants to expand his investments, is one of several rich businessmen who claim the proposed new law will have unintended consequences. They’re seeking amendments to the draft legislation or its withdrawal in its current form. “The vision we have for what we would like to contribute to New Zealand is now being threatened,” Kayne wrote in submissions to a parliamentary committee examining the proposed law change.

“The new rules will “impact on us personally, and others like us who, having discovered this country, want to devote considerable resources to preserving, protecting and enhancing it.” The new Labour-led government came to power in October on a pledge to fix a housing crisis with a raft of measures, including a ban on foreign speculators buying residential property. While data suggest non-residents have only a minor impact on the wider housing market, support for the move was boosted by headlines about rich foreigners buying mansions and farms in New Zealand as boltholes away from the world’s ills.

House prices have surged more than 60% in the past decade amid record immigration and a construction shortfall. In biggest city Auckland, prices have almost doubled since 2007 to an average of more than NZ$1 million ($730,000). That’s made it more difficult for first-time buyers to enter the market and driven up rents, leaving increasing numbers of poor people homeless. “It’s really important for us that we sort our housing market out, that we give New Zealanders a fair go at buying their first home,” Finance Minister Grant Robertson said in a television interview Sunday. While the country welcomes foreign investment, “what we want is good-quality investment that supports the productivity of the New Zealand economy,” he said.

Read more …

Ethics and Hollywood.

The Pentagon & Hollywood’s Successful And Deadly Propaganda Alliance (RT)

The Pentagon helps Hollywood to make money and, in turn, Hollywood churns out effective propaganda for the brutal American war machine. The US has the largest military budget in the world, spending over $611 billion – far larger than any other nation on Earth. The US military also has at their disposal the most successful propaganda apparatus the world has ever known… Hollywood. Since their collaboration on the first Best Picture winner ‘Wings’ in 1927, the US military has used Hollywood to manufacture and shape its public image in over 1,800 films and TV shows. Hollywood has, in turn, used military hardware in their films and TV shows to make gobs and gobs of money.

A plethora of movies like ‘Lone Survivor,’ ‘Captain Philips,’ and even blockbuster franchises like ‘Transformers’ and Marvel, DC and X-Men superhero movies have agreed to cede creative control in exchange for use of US military hardware over the years. In order to obtain cooperation from the Department of Defense (DoD), producers must sign contracts that guarantee a military approved version of the script makes it to the big screen. In return for signing away creative control, Hollywood producers save tens of millions of dollars from their budgets on military equipment, service members to operate the equipment, and expensive location fees.

Capt. Russell Coons, director of the Navy Office of Information West, told Al Jazeera what the military expects for their cooperation: “We’re not going to support a program that disgraces a uniform or presents us in a compromising way.” Phil Strub, the DOD chief Hollywood liaison, says the guidelines are clear. “If the filmmakers are willing to negotiate with us to resolve our script concerns, usually we’ll reach an agreement. If not, filmmakers are free to press on without military assistance.”

Read more …

We’ve screwed up even the bottom of the food chain. Winning!

Krill Fishing Poses Serious Threat To Antarctic Ecosystem (G.)

Industrial fishing for krill in the pristine waters around Antarctica is threatening the future of one of the world’s last great wildernesses, according to a new report. The study by Greenpeace analysed the movements of krill fishing vessels in the region and found they were increasingly operating “in the immediate vicinity of penguin colonies and whale feeding grounds”. It also highlights incidents of fishing boats being involved in groundings, oil spills and accidents, which it said posed a serious threat to the Antarctic ecosystem. The report, published on Tuesday, comes amid growing concern about the impact of fishing and climate change on the Antarctic.

A global campaign has been launched to create a network of ocean sanctuaries to protect the seas in the region and Greenpeace is calling for an immediate halt to fishing in areas being considered for sanctuary status. Frida Bengtsson, from Greenpeace’s Protect the Antarctic campaign, said: “If the krill industry wants to show it’s a responsible player, then it should be voluntarily getting out of any area which is being proposed as an ocean sanctuary, and should instead be backing the protection of these huge swaths of the Antarctic.” Last month a study found a combination of climate change and industrial-scale fishing is hitting the krill population, with a potentially disastrous impact on larger predators.


Photograph: Justin Hofman/Alamy Stock Photo

The study warned that the penguin population could drop by almost one-third by the end of the century due to changes in krill biomass. Krill are a key part of the delicate Antarctic food chain. They feed on marine algae and are a key source of food for whales, penguins and seals. They are also important in removing the greenhouse gas carbon dioxide from the atmosphere by eating carbon-rich food near the surface and excreting it when they sink to lower, colder water. There is a growing global demand for krill-based health products which are claimed to help with a range of ailments from heart disease to high blood pressure, strokes and depression. A recent analysis of the global krill industry predicted it was on course to grow 12% a year over the next three years. Krill populations have declined by 80% since the 1970s.

Read more …

Mar 112018
 
 March 11, 2018  Posted by at 10:06 am Finance Tagged with: , , , , , , , , , , , ,  


James McNeill Whistler Nocturne Blue and Gold Southampton Water 1872

 

$21 Trillion And Rising: Central Banks’ Leveraged Buyout of The World (ZH)
The $233 Trillion Dollar Dark Cloud of Global Debt (GT)
Trump Is Going For A Clean Reset in The West Wing (Vanity Fair)
Trump ‘Clarity’ on Tariff Conditions Not What EU Was Looking For (BBG)
China Ties Future to Xi as Congress Scraps President Term Limits (BBG)
Putin Says He ‘Couldn’t Care Less’ If Russians Meddled In 2016 Elections (NBC)
Millions Of Struggling UK Families Face Deepest Benefit Cuts In Years (O.)
UK Government Leaves At Least £1 Billion For Affordable Housing Unspent (O.)
‘We Are Nowhere Near Out Of Austerity’ – Institute for Fiscal Studies (G.)
UK Consumers Losing Interest In Buying New Cars On Credit (Ind.)
Erdogan Slams Allies’ Refusal To Support Turkey Offensive In Syria’s Afrin (RT)
Greek Defense Minister: We’re Close To A ‘Fatal Accident’ With Turkey (K.)
Post-Bailout Credit Line For Greece Probably Not Needed – Regling (R.)
UK Government Asks Public For Ideas To Curb Plastic Pollution (Ind.)

 

 

$21 trillion to buy out a broken system.

$21 Trillion And Rising: Central Banks’ Leveraged Buyout of The World (ZH)

Back in late 2016, we showed the unprecedented domination of capital markets by central banks using a chart from Citi, which had put together a fascinating slideshow asking simply “Where is the utility in marginal QE” and specifically pointing out that the longer unconventional monetary policy such as QE continues, the bigger its marginal cost, until eventually QE becomes a detriment. A broad criticism of monetary policy, the presentation carried an amusing footnote: “This presentation does not change any of Citi’s existing, published views on the actual future path of monetary policy. It is merely intended as a contribution to the ongoing debate about the efficacy of available policy tools” – after all, the last thing the market wanted is the realization that even banks no longer have faith in the central planners.

Incidentally, Citi’s broad critique of global QE took place when central banks owned just over $18 trillion in assets. Fast forward to today when in its latest update of central bank holdings, Citi shows that as of this moment not only has the total increased by another $3 trillion to a grand total of $21 trillion and rising, but that the big six central banks now own over 40% of global GDP, more than double the 17% they held before the financial crisis less than a decade ago. Which is remarkable in a world where there is still some confusion about what is behind the “global coordinated recovery”, and where there are deluded people who claim that central banks are now out of the picture.

Read more …

I admit: it was the headline. Nothing much else there.

The $233 Trillion Dollar Dark Cloud of Global Debt (GT)

Global debt has reached record heights without any signs of relief. While central bankers try to explain away the phenomenon of these out-of-control numbers, it’s not much of a mystery. Immediate consumption with the promise of repayment sometime in the future has consequences. Global debt is staggering to the point most of it will never be repaid. Certainly not in our generation. Perhaps by our grandchildren, but as global debt keeps mounting, the picture is doubtful. The per capita global debt is $30,000. Who, exactly, will be making repayments? Economists insist that the 2007 financial crisis could not have been predicted. Yet, all the signs of out-of-control credit where there.

Today, economists are repeating the same mantra, despite the spiraling world debt. The question is not if the next bubble will strike. It’s a matter of when. The math is fairly simple. The more a country increases its debt to simply stay afloat, the more like the increasing debt will cause a tightening of credit. The next step in the equation is a burst bubble and economic crisis. This is what happened in 1929, happened again in 2007, and it’s happening now. Past behavior is the best predictor of future behavior. Out-of-control credit will undoubtedly slow down the US’s current economic growth. It probably won’t cause an outright crisis. Other countries may not be as fortunate.

Countries such as China, Belgium, South Korea, Australia, and Canada are experiencing an unprecedented credit bubble, with few systems in place to control it. The resulted inflation or simply write-offs of debts could result in a global financial disaster we have not seen before. The current economic upswing is unlikely to continue.

Read more …

Coming out of the sophomore year. Cohn wanted to be Chief of Staff… Still, Bolton would be a grave mistake, he would be shredded.

Trump Is Going For A Clean Reset in The West Wing (Vanity Fair)

Even before he decided to launch a trade war and roll the nuclear dice by agreeing in the course of a West Wing afternoon to a risky sit-down with Kim Jong Un, Donald Trump was telling friends he was tired of being reined in. “I’m doing great, but I’m getting all these bad headlines,” Trump told a friend recently. A Republican in frequent contact with the White House told me Trump is “frustrated by all these people telling him what to do.” With the departures of Hope Hicks and Gary Cohn, the Trump presidency is entering a new phase—one in which Trump is feeling liberated to act on his impulses. “Trump is in command. He’s been in the job more than a year now. He knows how the levers of power work. He doesn’t give a fuck,” the Republican said.

Trump’s decision to circumvent the policy process and impose tariffs on imported steel and aluminum reflects his emboldened desire to follow his impulses and defy his advisers. “It was like a fuck-you to Kelly,” a Trump friend said. “Trump is red-hot about Kelly trying to control him.” According to five Republicans close to the White House, Trump has diagnosed the problem as having the wrong team around him and is looking to replace his senior staff in the coming weeks. “Trump is going for a clean reset, but he needs to do it in a way that’s systemic so it doesn’t look like it’s chaos,” one Republican said. Sources said that the first officials to go will be Chief of Staff John Kelly and National Security Adviser H.R. McMaster, both of whom Trump has clashed with for months.

On Tuesday, Trump met with John Bolton in the Oval Office. When he plans to visit Mar-a-Lago next weekend, Trump is expected to interview more candidates for both positions, according to two sources. “He’s going for a clean slate,” one source said. Cohn had been lobbying to replace Kelly as chief, two sources said, and quit when he didn’t get the job. “Trump laughed at Gary when he brought it up,” one outside adviser to the White House said. Next on the departure list are Jared Kushner and Ivanka Trump. Trump remains fiercely loyal to his family, but various distractions have eroded their efficacy within the administration. Both have been sidelined without top-secret security clearances by Kelly, and sources expect them to be leaving at some point in the near future.

Read more …

But he’s clear.

Trump ‘Clarity’ on Tariff Conditions Not What EU Was Looking For (BBG)

Hours after European Union trade chief Cecilia Malmstrom said she had “no immediate clarity” on whether the bloc will be let off the hook from planned U.S. tariffs, President Donald Trump laid down his conditions and repeated a threat if they’re not met. “The European Union, wonderful countries who treat the U.S. very badly on trade, are complaining about the tariffs on Steel & Aluminum,” he wrote on Twitter. “If they drop their horrific barriers & tariffs on U.S. products going in, we will likewise drop ours. Big Deficit. If not, we Tax Cars etc. FAIR!” Trump’s response came after Malmstrom on Twitter described what she called “frank” but fruitless talks with U.S. Trade Representative Robert Lighthizer in Brussels on Saturday.

There was still “no immediate clarity on the exact U.S. procedure on exemption,” Malmstrom, the 28-nation bloc’s trade commissioner, said after the meeting that also included Japanese Trade Minister Hiroshige Seko. “As a close security and trade partner of the U.S. the EU must be excluded from the announced measures,” she said. Canada, Mexico and Australia have secured exemptions from the tariffs of 25% on imported steel and 10% on aluminum announced by Trump, though Canada’s and Mexico’s were conditioned on progress renegotiating NAFTA. Trump has called the tariffs a matter of national security while threatening to tax European car imports and impose “reciprocal taxes” on countries that charge higher duties on U.S. goods than the U.S. now charges on their products.

Read more …

Just as China’s economic model is about to ‘go into a next phase..’

China Ties Future to Xi as Congress Scraps President Term Limits (BBG)

China’s parliament voted to repeal presidential term limits, allowing President Xi Jinping to retain power indefinitely in a formal break from succession rules set up after Mao Zedong’s turbulent rule. The rubber-stamp National People’s Congress agreed Sunday to strike a 36-year-old constitutional provision barring the president from serving more than two consecutive terms. The amendment – announced by the Communist Party two weeks ago – removes the only barrier keeping Xi, 64, from staying on after his expected second term ends in 2023. The vote – never in doubt – gives Xi more time to enact plans to centralize party control, increase global clout and curb financial and environmental risks.

It also ties the world’s most populous country more closely to the fate of a single man than at any point since reformer Deng Xiaoping began establishing a system for peaceful power transitions in the aftermath of Mao’s death. Before Sunday’s vote in Beijing, Donald Trump had joked that Xi was “now president for life.” The NPC could appoint Xi to a second term as soon as Saturday. “In the long run, the change may bring some uncertainties, like ‘key man’ risk,” Yanmei Xie, a China policy analyst for Gavekel Dragonomics in Beijing, said before the vote. “Dissenting is becoming riskier. The room for debate is becoming narrower. The risk of a policy mistake could become higher and correcting a flawed policy could take longer.”

Read more …

They all reported on the Megyn Kelly interview a while ago. Now all of a sudden there’s a new headline from that same interview. And.. “he even said it might be Jews..”

Putin Says He ‘Couldn’t Care Less’ If Russians Meddled In 2016 Elections (NBC)

Russian President Vladimir Putin has told NBC News that he “couldn’t care less” if Russian citizens tried to interfere in the 2016 American presidential election because, he claims, they were not connected to the Kremlin. In an exclusive and at-times combative interview with NBC’s Megyn Kelly, Putin again denied the charge by U.S. intelligence services that he ordered meddling in the November 2016 vote that put Donald Trump in the White House. “Why have you decided the Russian authorities, myself included, gave anybody permission to do this?” asked Putin, who will probably be returned as president in the March 18 elections.

Putin was unmoved by an indictment filed by special counsel Robert Mueller last month that accused 13 Russian nationals and three Russian companies of interfering in the election – including supporting Trump’s campaign and “disparaging” Hillary Clinton’s. Mueller is investigating whether the Trump campaign colluded with the Kremlin. “So what if they’re Russians?” Putin said of the people named in last month’s indictment. “There are 146 million Russians. So what? … I don’t care. I couldn’t care less. … They do not represent the interests of the Russian state.” Putin even suggested that Jews or other ethnic groups had been involved in the meddling.

“Maybe they’re not even Russians,” he said. “Maybe they’re Ukrainians, Tatars, Jews, just with Russian citizenship. Even that needs to be checked. Maybe they have dual citizenship. Or maybe a green card. Maybe it was the Americans who paid them for this work. How do you know? I don’t know.” Asked whether he was concerned about Russian citizens attacking U.S. democracy, Putin replied that he had yet to see any evidence that the alleged interference had broken Russian law. “Are we the ones who imposed sanctions on the United States? The U.S. imposed sanctions on us.” “We in Russia cannot prosecute anyone as long as they have not violated Russian law,” he said. “At least send us a piece of paper. … Give us a document. Give us an official request. And we’ll take a look at it.”

U.S. intelligence agencies and many Western analysts have said that Russian interference came at the orders of the Kremlin. Putin, Russia’s longest-serving leader since Stalin, dismissed this. “Could anyone really believe that Russia, thousands of miles away … influenced the outcome of the election? Doesn’t that sound ridiculous even to you?” he said. “It’s not our goal to interfere. We do not see what goal we would accomplish by interfering. There’s no goal.”

Read more …

In praise of austerity, of destroying the social and health care systems. A class society, more suited to the 19th than the 21st century.

Millions Of Struggling UK Families Face Deepest Benefit Cuts In Years (O.)

Families struggling to make ends meet will be hit by the biggest annual benefits cut for six years, according to a new analysis that exposes the impact of continuing austerity measures on the low paid. Chancellor Philip Hammond is preparing to give a stripped-down spring statement on Tuesday, where he is expected to boast of lower than expected borrowing figures. He will use them to suggest Britain has reached a “turning point”. He will point to forecasts showing the “first sustained fall in debt for a generation” to claim “there is light at the end of the tunnel” in turning around Britain’s finances. However, he will be speaking just weeks before a further public spending squeeze will see the second largest annual cut to the benefits budget since the financial crash.

According to new research by the Resolution Foundation thinktank, the changes from April will save around £2.5bn and dent the incomes of the “just about managing” families that Theresa May has vowed to help. The cuts will affect around 11 million families, including 5 million of the struggling families that the prime minister stated she would focus on. There will also be some good news for the low paid, with more than 1.5 million workers set to benefit from a 4.4% pay rise when the national living wage increases from £7.50 to £7.83 at the start of April. However, that measure will be outweighed by the effective £2.5bn cuts to working-age benefits.

Read more …

The real face of the British government.

UK Government Leaves At Least £1 Billion For Affordable Housing Unspent (O.)

MPs are demanding an urgent explanation from ministers after being told that £817m allocated for desperately needed affordable housing and other projects in cash-strapped local authorities has been returned to the Treasury unspent. The surrender of the unused cash has astonished members of the cross-party housing, communities and local government select committee at a time when Theresa May has insisted housebuilding is a top priority and when many local authorities are becoming mired in ever deeper financial crises. On Monday the committee, which discovered the underspend for 2017-18, will interrogate housing minister Dominic Raab and homelessness minister Heather Wheeler on the issue, before Tuesday’s spring statement by the chancellor, Philip Hammond.

He is under heavy pressure from MPs, and the Tory-controlled Local Government Association, to signal extra help for the local authority sector, which has seen budget cuts of around 50% since 2010. The acting chair of the committee, the Tory MP Bob Blackman, said: “We will be wanting to know why this very large sum has not been spent at a time of great strain on local authority budgets, and why it was not channelled to other spending projects. It does not help those of us who argue that more should be given to local authorities if the chancellor knows money he gave last time has not even been spent.” MPs believe they can argue for more for local authorities because Hammond will announce that unexpectedly high tax receipts have left the Treasury with a windfall of between £7bn and £10bn.

Read more …

Never trust anything that sounds even remotely like “Institute for Fiscal Studies”. This wanker goes on to praise the achievements of Britain’s austerity.

‘We Are Nowhere Near Out Of Austerity’ – Institute for Fiscal Studies (G.)

When the chancellor Philip Hammond sits down on Tuesday after delivering his first spring statement – the streamlined replacement for what we used to call the budget – one man will be greatly in demand, popping up on every media outlet to tell us what the figures on borrowing levels and the projected deficit really mean. That man is Paul Johnson, director of the Institute for Fiscal Studies (IFS). I suggest to him that his official role is to pour a bucket of cold water over Hammond’s head, and he doesn’t disagree. [..] The idea of the spring statement, with the budget now pushed back to autumn, is to tell us where we are financially, and to kickstart consultations about the long-term fiscal challenges facing the UK. That, for Johnson, is the important bit.

If the spring statement works, it is an opportunity to counteract the short-termism that bedevils British politics and to start thinking about the issues that really matter – the ageing population, the buckling health service, the lack of any coherent plan for social care, the fact that soon taxes are going to have to rise or public services will fall to pieces. There comes a point when you can no longer kick the can down the road because the road is no longer usable. The Office for Budget Responsibility numbers cited in the spring statement will be better than those projected last autumn because tax receipts have been higher than anticipated, and Johnson reckons Hammond will indulge in some self-congratulation for having met the government’s austerity targets (albeit two years later than his predecessor George Osborne forecast) and eliminated the deficit on day-to-day spending.

But Johnson is ready with his bucket of cold water. “Chancellors always talk up the positive numbers,” he says, “but we’re not out of austerity; we’re nowhere near out of austerity. There are still big spending cuts and big social security cuts to come.” [..] He says the government has done well to get the deficit under control [..] Local government until 2014 was coping fine. It really isn’t any more. Clearly, the health service is struggling in a way that, three or four years ago, it wasn’t. So it feels as if we’ve got to the crunch point. We’re really beginning to feel the cost.” Government borrowing is now back to pre-financial crash levels. “It is quite an achievement to have got borrowing down from the highest level since the war to pretty much normal kinds of levels,” he says.

Read more …

Followed by a car sales promo. No. 1 advertizers for newspapers.

UK Consumers Losing Interest In Buying New Cars On Credit (Ind.)

The march of the brand new car once seemed unstoppable. Cheap finance and personal contract plans (PCPs) fuelled a boom in new cars, accounting for more than 80% of all new car registrations. A fall at the start of 2017 was blamed on a collapse in consumer confidence in diesel vehicles and last year remains one of the highest on record for new car registrations. However, the latest figures reveal that the number of new cars registered in February fell by 2.8% compared with the same month last year, making it the 11th month in a row to show a decline. And once again it’s being blamed on falling demand for diesel vehicles; diesel cars accounted for just 35% of the new cars registered last month, compared with more than 44% in February 2017.

[..] The previous surge in new car registrations had been partly fuelled by changes to the way we buy vehicles. Buying a brand new car with a relatively small deposit and monthly fee can be more immediately affordable than buying an older car upfront. 37% of car buyers claim to have bought on finance because it enabled them to spread out their payment monthly, 36% to get a better deal and, revealingly, 36% because they couldn’t afford to purchase a car otherwise. [..] Justin Benson, KPMG’s UK head of automotive, says: “Consumers aren’t necessarily turning away from car finance. There is, however, evidence to suggest that the new car market is pretty saturated, ie most cars in the last few years have been bought using PCP plans. So many are using the vehicles they already have and we are seeing a drop in demand – although Brexit is also in the back of people’s minds.”

Read more …

Hollow phrases: “Washington has repeatedly called upon Turkey to stop its “aggression” against the Afrin region..”

Erdogan Slams Allies’ Refusal To Support Turkey Offensive In Syria’s Afrin (RT)

Turkey’s leader has scorched NATO allies over their failure to support his “counter-terrorist” operation in the Kurdish-held Syrian region of Afrin, but expressed gratitude that they at least had no guts to openly oppose Ankara. President Recep Tayyip Erdogan delivered the inflammatory comments while speaking before a gathering of his ruling AK Party in the Turkish city of Mersin on Saturday. “Hey NATO where are you? We’re fighting so much. NATO, Turkey is not a NATO country? Where are you? You’ve invited NATO-member states to Afghanistan,” Erdogan said. NATO members not only show no support towards Turkey’s Operation Olive Branch and would even openly oppose Ankara’s actions in Syria, but did not have the guts to do so, Erdogan claimed.

The offensive against Kurdish militias in Syria’s region of Afrin was launched late in January. Turkey describes the militias as offshoots of the terrorist-labeled outlawed Kurdistan Workers’ Party (PKK). So far, 3,213 “terrorists” have been killed during the operation, carried out by Turkish troops and affiliated Free Syrian Army (FSA) militants, Erdogan stated. “In fact, they would openly oppose Turkey in Syria if they could. But seeing Turkey’s adamant position, they did not find [the] resolve to do so,” the president said. The Turkish leader also reiterated his earlier statements, that his only goal in Syria was the “fight against terrorism.” When Ankara reaches it, the troops will be pulled out of the country, he stated.

[..] Washington has repeatedly called upon Turkey to stop its “aggression” against the Afrin region, omitting the fact that the US-led coalition itself spent years in Syria without any invitation from the government or international approval. The recent UNSC resolution, which urged a 30-days Syria-wide ceasefire, has been also used to call upon Erdogan to halt the invasion. “Turkey is more than welcome to go back and read the exact text of this UN Security Council resolution, and I would suggest that they do so,” US State Department spokeswoman Heather Nauert said on February 27, stating that the Afrin region was “certainly within Syria.”

Read more …

Don’t say you weren’t warned.

Greek Defense Minister: We’re Close To A ‘Fatal Accident’ With Turkey (K.)

As tensions rise over the detention of two Greek soldiers who crossed the Turkish border accidentally and over Turkish aggression off Cyprus, statements by both Greek and Turkish officials over the weekend underscored the fragility of the situation. In an interview with French daily Liberation on Saturday, Greek Defense Minister Panos Kammenos declared that “Greece is very close to a fatal accident with Turkey,” referring to Turkish violations of Greek air space and territorial waters. “We are obliged to defend our territory which is not only Greek but also European,” he said. Late last week, meanwhile, Kammenos had referred to two Greek soldiers being detained in Turkey as “hostages.”

Meanwhile, in an interview with German weekly Die Zeit published on Saturday, Turkish Foreign Minister Mevlut Cavusogu said Turkey’s judiciary was seeking to determine whether the Greek soldiers crossed into Turkey by accident or deliberately. Asked whether Ankara was considering exchanging the two men with eight Turkish servicemen who fled to Greece following an attempted Turkish coup in 2016, Cavusoglu ruled out such a prospect. “We do not want such an agreement,” he said.

Read more …

Oh yes, it will. Brussles won’t set its slaves free voluntarily.

Post-Bailout Credit Line For Greece Probably Not Needed – Regling (R.)

Greece will probably not need a precautionary credit line after its bailout ends in August if the country sticks to reforms, the head of Europe’s rescue fund said in an interview released on Saturday. Greece has received 260 billion euros in financial aid from euro zone countries and the IMF since 2010, and its third bailout expires in August. The country regained market access last year but some European Union policymakers and Greek central bankers believe Athens cannot go it alone without a standby line of credit after its financial support ends. But a precautionary credit line would come with conditions attached, something the government is keen to avoid after eight years of austerity that has worn down Greeks and hurt its popularity in polls.

In an interview with Proto Thema newspaper, the head of the European Stability Mechanism (ESM), Klaus Regling, said having a precautionary arrangement available is good because it gives more assurances to markets, investors and the Greek population. “But it very much depends whether it’s really needed,” he said. “If everything remains quiet, reforms continue and Greece continues to develop its market access, then based on what we know today it’s probably not needed.” The ESM and the European Financial Stability Facility are Greece’s largest creditors, together holding more than half of its 332 billion euro public debt, a sum equal to nearly 180% of economic output.

Read more …

They talk the talk because their pollsters say they must. And then deflect responsibility because they have no intention of doing anything. This way it becomes along term issue; the public must be heard first, and that takes years.

A tax on disposable cups is ridiculous. Just ban them, what’s the problem?

UK Government Asks Public For Ideas To Curb Plastic Pollution (Ind.)

The public will be urged by the Government to suggest tax changes to curb plastic pollution, amid growing criticism that ministers are dragging their heels. A “call for evidence” on how tax incentives could cut the amount of single-use plastics – such as cutlery, foam trays and coffee cups – that end up littering the land and poisoning the seas will be launched. But the move, in Tuesday’s Spring Statement, is not expected to include any specific proposals, nor will a formal consultation be launched by the Treasury. Philip Hammond, the Chancellor, will tell MPs he is determined that Britain will “lead the world in creating innovative solutions to tackling this global problem”.

But the call for evidence was first proposed by Mr Hammond four months ago, the delay prompting criticism that ministers have simply “talked the talk on plastic pollution”. A proposal for a 25p “latte levy” on disposable coffee cups, made by a cross-party Commons committee in January was met with a cool response from the Government. In January, Theresa May delivered the first major speech on the environment from a sitting prime minister since 2004 and published a 25-year Environment Plan with the ambition of abolishing plastic waste by 2042. However, it was widely criticised for being vague, for the lack of proposed legislation and for the lengthy timescales for dealing with the problems involved. [..] The UK still creates 2.26 million tons of plastic packaging waste a year and recycles only around a third.

On Tuesday, Mr Hammond will say the call for evidence is intended to find ways to use the tax system to deliver both technological progress and behavioural change. Individuals, green groups and industry will be urged to have their say, as the Chancellor announces a £20m innovation fund for businesses and universities to develop the new technologies and approaches needed. The Chancellor said: “Single-use plastics waste is a scourge to our environment. From crisp packets to coffee cups, each year the UK produces millions of tonnes of waste which is neither recyclable nor biodegradable. “That’s why I want British businesses and universities to lead the world in creating innovative solutions to tackling this global problem.

Read more …

Mar 092018
 
 March 9, 2018  Posted by at 10:29 am Finance Tagged with: , , , , , , , , , , , , , ,  


Broadway, New York 1954

 

Trump’s Historic Bet on Kim Summit Shatters Decades of Orthodoxy (BBG)
Trump Sets Steel And Aluminum Tariffs; Canada, Mexico Exempted (R.)
There Will Be No Economic Boom – Part II (Roberts)
“Gary Cohn, We Hardly Knew Ya” (David Stockman)
The Risk Lurking In The US Mortgage Market (CNN)
The End of Cheap Debt Will Bring a Wave of – Green- Bankruptcies (Mises)
Tesla Chief Musk Says China Trade Rules Uneven, Asks Trump For Help (R.)
China Will Rely Less On Stimulus As It Battles Risks From Debt – PBOC (CNBC)
UK Retirement Bill Rises More Than £1 Trillion In Five Years (Ind.)
Shares, Profits Of Britain’s Largest Estate Agent Countrywide Plummet (G.)
Toronto Home Builders Just Had Their Busiest February Since 1948 (BBG)
EU Freezes Brexit Talks Until Britain Produces Irish Border Solution (Ind.)
Calais ‘To Be 10 Times Worse Than Irish Border’ After Brexit (G.)
Bitcoin Tumbles Further In Broad Selloff For Cryptocurrencies (MW)
US Is Experiencing The Highest Drug Overdose Death Rates Ever (ZH)
Chinese Panda Conservation Park To Be Twice The Size Of Yosemite (G.)
Discarded Fishing Gear Massacres Whales, Dolphins, Seals, Turtles, Birds (Ind.)

 

 

Question is whether that is a bad thing. Or you could say: Trump brings along his own orthodoxy.

Trump’s Historic Bet on Kim Summit Shatters Decades of Orthodoxy (BBG)

Donald Trump took the biggest gamble of his presidency on Thursday, breaking decades of U.S. diplomatic orthodoxy by accepting an invitation to meet with North Korean leader Kim Jong Un. The bet is that Trump’s campaign to apply maximum economic pressure on Kim’s regime has forced him to consider what was previously unthinkable: surrendering the illicit nuclear weapons program begun by his father. If the president is right, the U.S. would avert what appeared at times last year to be a steady march toward a second Korean War. It was classic Trump, showing an unerring confidence to get the better end of any negotiation.

But it was also Trump in another way: high risk and high reward, with little regard for those in the foreign policy establishment who worry it’s too much, too soon. “He’s taking a risk,” said Patrick Cronin, senior director of the Asia-Pacific Security Program at the Center for a New American Security. “By seizing an opportunity for a summit meeting, a decision that would have taken much more time in another administration, the president has said, ‘I’m going to go right now. And we’re going to test this.”’

Read more …

“If you don’t want to pay tax, bring your plant to the USA..”

Trump Sets Steel And Aluminum Tariffs; Canada, Mexico Exempted (R.)

U.S. President Donald Trump pressed ahead on Thursday with import tariffs of 25% on steel and 10% for aluminum but exempted Canada and Mexico and offered the possibility of excluding other allies, backtracking from an earlier “no-exceptions” stance. Describing the dumping of steel and aluminum in the U.S. market as “an assault on our country,” Trump said in a White House announcement that the best outcome would for companies to move their mills and smelters to the United States. He insisted that domestic metals production was vital to national security. “If you don’t want to pay tax, bring your plant to the USA,” added Trump, flanked by steel and aluminum workers.

Plans for the tariffs, set to start in 15 days, have stirred opposition from business leaders and prominent members of Trump’s own Republican Party, who fear the duties could spark retaliation from other countries and hurt the U.S. economy. Within minutes of the announcement, U.S. Republican Senator Jeff Flake, a Trump critic, said he would introduce a bill to nullify the tariffs. But that would likely require Congress to muster an extremely difficult two-thirds majority to override a Trump veto. Some Democrats praised the move, including Senator Joe Manchin of West Virginia, who said it was “past time to defend our interests, our security and our workers in the global economy and that is exactly what the president is proposing with these tariffs.”

Read more …

Perhaps somewhat surprising: The consumer spending part of GDP only rises.

There Will Be No Economic Boom – Part II (Roberts)

When the “tax cut” bill was being passed, everyone from Congress to the mainstream media, and even the CFP’s I spoke with yesterday, regurgitated the same “storyline:” “Tax cuts will lead to an economic boom as corporations increase wages, hire and produce more and consumers have extra money in their pockets to spend.” As I have written many times previously, this was always more “hope” than “reality.” The economy, as we currently calculate it, is roughly 70% driven by what you and I consume or “personal consumption expenditures (PCE).” The chart below shows the history of real, inflation-adjusted, PCE as a percent of real GDP.

If “tax cuts” are going to substantially increase the growth rate of the U.S. economy, as touted by the current Administration, then PCE has to be directly targeted. However, while the majority of consumers will receive an “average” of $1182 in the form of a tax reduction, (or $98.50 a month), the increase in take-home pay has already been offset by surging health care cost, rent, energy and higher debt service payments. [..] But this is nothing new as corporations have failed to “share the wealth” for the last couple of decades.

Read more …

Those crazy earnings numbers WILL come crashing down.

“Gary Cohn, We Hardly Knew Ya” (David Stockman)

That was quick. The trade war scare was over by noon yesterday, and by the market close they were singing “Gary Cohn, we hardly knew ya”. Folks, what more evidence do you need that the financial markets are completely uncoupled from reality and that these feeble bounces between the 50-day and 20-day chart points are essentially the rigor mortis of a dead bull? At the moment, the 50-day stands at 2740 on the S&P 500 and is functioning as “resistance” according to the chart mavens, while the 20-day at 2700 is purportedly acting as “support”. So there’s that, but also this: At the exact mid-point of 2720, the broad market is currently trading at 25.6X reported earnings for 2017.

That’s the nosebleed section of history no matter how you slice it – and most especially in the context of an earnings growth trend that is shackled to the flat line, and which has no prospect of breaking away before the next recession, either. With virtually every company having reported, it turns out that GAAP earnings for 2017 came in at $109.46 per share on the S&P 500. Then again, 40 months earlier in September 2014 reported LTM earnings were $105.96 per share. That tabulates to a 1.0% per year gain during what will surely prove to have been the sweet spot (month #63 to month #102) of the current long-in-the-tooth business expansion.

Read more …

Non-banks. How is that different from China?

The Risk Lurking In The US Mortgage Market (CNN)

Low interest rates. Easy credit. Poor regulation. Toxic mortgages. These were just a few reasons regulators gave for the collapse of the US housing market a decade ago. Since then, regulators have improved the standards that lenders use when Americans apply for mortgages. But today increasing danger lurks in the mortgage market, and economists say it could put the financial system at “even greater risk” when the next recession strikes or too many borrowers fall behind on their mortgage payments. A growing segment of the mortgage market is being financed by so-called non-bank lenders — financial institutions that offer loans to consumers but don’t provide saving or checking accounts.

Borrowers with poor credit have increasingly turned to these alternative lenders instead of traditional banks. The alternative lenders are subject to far less regulation and have fewer safeguards when borrower defaults start to pile up. “A collapse of the non-bank mortgage sector has the potential to result in substantial costs and harm to consumers and the US government,” economists at the Federal Reserve and the University of California, Berkeley, write in a paper released Thursday at a Brookings Institution conference. As of 2016, non-bank financial institutions originated close to half of all mortgages. They originated three-quarters of mortgages with explicit government backing, underscoring the risk to taxpayers.

“The experience of the financial crisis suggests that the government will be pressured to backstop the sector in a time of stress,” the authors write. The danger is that non-banks may have fewer resources to weather economic shocks to the mortgage market, like a rise in interest rates or a decline in house prices. “What happens if interest rates rise and non-bank revenue drops? What happens if commercial banks or other financial institutions lose their taste for extending credit to non-banks? What happens if delinquency rates rise and servicers have to advance payments to investors?” the authors write. “We cannot provide reassuring answers to any of these questions,” they write.

Read more …

The entire Green Facade depends on cheap credit. And subsidies.

The End of Cheap Debt Will Bring a Wave of – Green- Bankruptcies (Mises)

The end of the era of cheap money highlights the risk of “Enron-style” bankruptcies in many sectors, including renewable energy. With the path of three rate hikes in the United States in 2018 confirmed by the Federal Reserve and a nervous equity market, the challenges are more evident than ever. The past eight years of massive liquidity and low rates have not helped deleverage, and many companies have used this period to increase imbalances and create complex debt structures. In fact: • Corporate net debt to EBITDA levels is at record highs. About 20% of US corporates face default if rates rise, according to the IMF. • The number of zombie companies has risen above pre-crisis levels according to the Bank of International Settlements (BIS). • This is particularly evident in the renewable sector where, even in the years of high liquidity and low rates, bankruptcies soared.

The renewable sector has undergone an absolutely spectacular transformation in the past eight years. Technology advanced, costs fell and global leaders strengthened when their strategy was to develop an energy model. Understanding that disruptive technologies cannot be more leveraged than traditional ones was key. When technology reduces costs and disrupts inflationary models, basing the business on ever-increasing subsidies and higher prices and financing it with massive debt is suicidal. In the era of cheap money and extreme liquidity, many companies used the “green” subterfuge to implement an extremely leveraged builder-developer model, ignoring demand, costs, and competition. A model whose sole objective was to install for the sake of installing capacity, whether there was a demand or not, and that pursued subsidies while stating that it is very competitive.

Even in a period of falling interest rates and very high liquidity, there have been spectacular bankruptcies, so imagine what can happen when rates rise. [..] If a technology is viable, it does not need subsidies. If it is unviable, no subsidies will change it. Bankruptcies in the solar sector exceed all those of the inefficient coal and fracking companies combined. This domino of bankruptcies, which includes more than 120 corpses of large companies around the world, was self-inflicted. And now, winter is coming. [..] The global renewable sector faces refinancing needs in the next seven to eight years that exceed its entire market capitalization (134 billion euros, Renixx Index).

It is not a problem of technology, it is the addiction to cheap debt and growth for growth sake. And it’s not just a problem in the renewable sector. The combination of lower revenues and increased debt costs is a danger. Cost of debt rises, and cost of equity soars due to higher perceived risk, which in turn can dry up the market for capital increases and refinancing. It is not just renewables, but it is worth highlighting that energy is -again- the most vulnerable sector due to the cyclical nature of its revenues and the perpetuation of overcapacity of the past eight years.

Read more …

Musk is the leader of the Green Facade.

Tesla Chief Musk Says China Trade Rules Uneven, Asks Trump For Help (R.)

Tesla CEO Elon Musk took to Twitter on Thursday to call on U.S. President Donald Trump to challenge China’s auto trade rules, which limit foreign ownership of Chinese ventures and impose steep tariffs on imported cars. In a series of tweets aimed at the president, Musk said he was “against import duties in general, but the current rules make things very difficult. It’s like competing in an Olympic race wearing lead shoes.” Tesla has been pushing hard to build cars in China, the world’s largest auto market, but has hit roadblocks in negotiations with local authorities, in part because Musk is keen to keep full control of any local venture. “No U.S. auto company is allowed to own even 50% of their own factory in China, but there are five 100% China-owned EV (electric vehicle) auto companies in the U.S.,” Musk wrote in another tweet.

Tesla “raised this with the prior administration and nothing happened. Just want a fair outcome, ideally where tariffs/rules are equally moderate. Nothing more. Hope this does not seem unreasonable,” he said. Trump quoted one of Musk’s tweets in his announcement on new tariffs and said American automakers have not been treated fairly by trade rules around the world. Trump announced steep tariffs on steel and aluminum imports on Thursday. Politicians “have known it for years and never did anything about it. It’s got to change,” Trump said, saying he plans to impose a “reciprocal tax” on other countries. “We’re changing things,” Trump added. “We just want fairness.”

Read more …

Yeah, we all believe that.

China Will Rely Less On Stimulus As It Battles Risks From Debt – PBOC (CNBC)

China has moved away from its old growth model which was heavily reliant on investment and will rely less on stimulus to boost the economy in future, People’s Bank of China governor Zhou Xiaochuan said on Friday. Zhou’s comments echoed those of other top officials at China’s parliament this week which suggested that Beijing will be more cautious about spending this year while it focuses on reducing the risks from a rapid build-up in debt. After years of heavy pump-priming, markets worry less generous stimulus could retard the pace of growth not only in China but globally. But analysts believe Beijing will continue to keep the system well supplied with cash to avoid the risk of a sharp slowdown in economic growth, even as they continue to tighten the screws on financial regulations.

“We now emphasize the new normal of the economy, shifting from the past growth model of quantitative growth… referring to the accumulation of capital and investment to boost economic growth,” Zhou told reporters on the sidelines of the annual parliament session. “While pursuing higher quality growth, we will have to reduce our reliance on the old growth model of investment,” said Zhou, in what was likely his last news briefing before his expected retirement this month. Zhou said China needs to improve its regulatory supervision as soon as possible to curb risks to the financial system. He said China has begun to make progress in reducing such risks, but numerous threats remain, such as a lack of transparency at financial holding companies and digital currencies.

Read more …

The Brexit fiasco continues to expose the hidden weaknesses. Which in the case of pensions are global, but mostly remain hidden.

UK Retirement Bill Rises More Than £1 Trillion In Five Years (Ind.)

The UK’s pension funding crisis reached a new crisis milestone this week as the Office for National Statistics revealed the UK’s pension funding liabilities rose to £7.6 trillion at the end of 2015. The figure – the total amount promised to pay Brits’ future retirement income – includes £5.3 trillion of pension entitlements that were the responsibility of central and local government, most of which – around £4 trillion – came from State Pension entitlements. The remaining £2.3 trillion were private sector employee pension entitlements with £2 trillion due to final salary pensions, up from £1.4 trillion in 2010. As things stand, expert commentators suggest there is only around a third of that ‘in the bank’ in company pension funds.

The remainder, it is hoped, will be generated by future working populations. The figures are designed to provide a snapshot of household retirement entitlements, though they don’t include self-invested personal pensions, which have grown significantly in recent years thanks to legislative changes known as pensions freedoms. “While these are obviously large amounts of money, it is important to remember that the payments will be drawn over many years,” says Darren Morgan, head of national accounts for the ONS. “The figures say nothing about the sustainability of our pension system in future.”

In fact, pensions experts have been shocked by the statistics, which come just days after official warnings from the Government Actuary that National Insurance may have to increase by 5% to pay for future state pay outs. “The figures published by the ONS today are astonishing and bring into sharp relief the reasons behind proposed increases in the state pension age,” adds Tom Selby, senior analyst at AJ Bell. “Unfunded state pension entitlements are worth more than double UK GDP – these are promises that will, ultimately, have to be paid for by future generations either through higher taxes, a lower state pension income or a later retirement age.

Read more …

Why not say it like it is?

Shares, Profits Of Britain’s Largest Estate Agent Countrywide Plummet (G.)

Countrywide, Britain’s largest estate agent, has reported a 22.5% fall in core annual earnings and scrapped its dividend, sending its shares to record lows. It pledged to go “back to basics” to return its sales and lettings business to profitable growth after what it described as a disappointing year. “We have got to put our resources back in the front line and not at the head office,” said the executive chairman, Peter Long, adding that restructuring would reduce headcount to 350 from 400. Countrywide said its 2018 property pipeline was “significantly lower” and that it expected a fall of about 36% (£10m) in first-half adjusted earnings before interest, taxation and amortisation (Ebitda).

Its 2017 adjusted Ebitda fell 22.5% to £64.7m while group income fell almost 9% to £671.9m. Shares in Countrywide plunged to a record low of 66.64p before rising to 77p in mid-morning trading, down 13.4% . “The next few months will be messy as new plans are put into place,” Jefferies analysts said in a note to clients. “However, banks are lending their support to the new plan and we believe those equity investors who choose to do the same will have their patience rewarded.”

Read more …

As sales are down 35%.

Greater Toronto Home Sales Down 35% From February 2017

Toronto Home Builders Just Had Their Busiest February Since 1948 (BBG)

Toronto developers had one of their busiest months on record in February in another sign the condo market is alive and well in Canada’s biggest real estate market, even amid a broader slowdown. Builders began work on 5,677 units during the month, most of them multiple-unit projects like condos, the Canada Mortgage and Housing Corp. said Thursday in Ottawa. That’s the strongest February, and the sixth-highest figure for any month, in records back to 1948. The bulk of Toronto condo units are typically sold before construction begins, so the latest surge may simply reflect past sales. But the report also suggests developers are betting the condo market will be less affected by headwinds including higher borrowing costs and tighter mortgage qualification rules that are currently hitting Toronto housing.

“It’s probably lagging a little bit. Historically you tend to see supply follow demand,” said Robert Kavcic, an economist at Bank of Montreal. “The other nuance here is that a lot of the policy changes we’ve seen over the last year, they really had a bigger impact on the higher end of the single detached housing market.” [..] Construction is picking up in Toronto just as sales begin to slide, after various levels of government and regulators took measures to curb surging prices. Most recently, tougher mortgage guidelines came into play on Jan. 1, making it harder for prospective buyers to qualify for loans. Many buyers rushed into the market in December to get ahead of the rules.

Transactions fell 35% in February from a year earlier to 5,175 units, according to data released Tuesday by the Toronto Real Estate Board. It was the weakest February for sales since 2009. Prices are holding up better, particularly in the condo segment, which has gained consistently over the past year and is up 20% since last February. Prices for single-detached homes have fallen 12% since reaching a record last year. Fundamentals that favor condos seem to be at work, as rising immigration levels drive demand. And since the net effect of the new regulations is to limit the size of mortgage credit, the tougher rules may be buoying the less-expensive condo market.

Read more …

Thumbscrews.

EU Freezes Brexit Talks Until Britain Produces Irish Border Solution (Ind.)

The EU has thrown down an ultimatum to Theresa May in Brexit talks, warning that it will not open discussions about trade or other issues until the Irish border question is solved. Speaking in Dublin alongside the Irish Prime Minister Leo Varadkar, European Council President Donald Tusk said talks would be a case of “Ireland first” and that “the risk of destabilising the fragile peace process must be avoided at all costs”. “We know today that the UK Government rejects a customs and regulatory border down the Irish Sea, the EU single market, and the customs union,” the Mr Tusk said. “While we must respect this position, we also expect the UK to propose a specific and realistic solution to avoid a hard border.

“As long as the UK doesn’t present such a solution, it is very difficult to imagine substantive progress in Brexit negotiations. “If in London someone assumes that the negotiations will deal with other issues first before the Irish issue, my response would be: Ireland first.” British negotiators have long been keen to move to discussions about trade and had hoped to do so after the March meeting of the European Council in two weeks, but Mr Tusk’s latest ultimatum suggests further delays could be in store. The EU says a withdrawal agreement must be negotiated by October to give it time to ratify the deal before the UK falls out of the bloc in March 2019.

Mr Tusk recalled that the Good Friday Agreement, whose 20th anniversary is next month, had been “ratified by huge majorities north and south of the border”. “We must recognise the democratic decision taken by Britain to leave the EU in 2016 – just as we must recognise the democratic decision made on the island of Ireland in 1998 with all its consequences,” he said, in a play on the rhetoric used by Brexiteers regarding the 2016 EU referendum. The EU27 nations granted the UK “sufficient progress” to move to the rest of Brexit talks in the December meeting of the European Council after the UK made a commitment to avoid a hard border on the island of Ireland at all costs.

Read more …

30-mile lines of waiting trucks. That was reason no. 1 to establish the EU. Well, they’re back.

Calais ‘To Be 10 Times Worse Than Irish Border’ After Brexit (G.)

The boss of the port of Calais has said there could be tailbacks up to 30 miles in all directions and potential food shortages in Britain if a Brexit deal involves mandatory customs and sanitary checks at the French ferry terminal. Jean-Marc Puissesseau made an impassioned plea to Theresa May and Michel Barnier to put plans in place immediately to avert congestion in Calais and Dover, where bosses have already warned of permanent 20-mile tailbacks. At the same time a leading politician for the Calais region said the problems in France would be 10 times worse than at the Irish border. At a private meeting at the European parliament, Xavier Bertrand, a former French health minister and the president of the Hauts-de-France political region, said politicians needed to grasp the magnitude of the problem.

“I know Ireland is going to be a real problem, but please remember the economic issues in Ireland are 10 times smaller than what is going to happen here,” he said. “This is a black scenario, but it is going to get darker and darker,” he said, urging politicians in Brussels and London to take urgent action by setting up working groups and listening to business. Bertrand angrily denounced those who had power to influence the Brexit outcome. It was not right that economic operators should be expected to “sit on their hands waiting very anxiously for something to happen”.

At the same meeting, Puissesseau said both sides would be affected by the problems at the ports, with suppliers from the UK trying to get their goods through strict EU controls treated no better than those from a developing country. “The UK is part of the 21st century. But this takes us back 100 years. This is sad,” he said. “From Brexit day, 100% of our traffic will be from outside the EU. I tell you honestly that GB will be a third country, this frightens me. There’s such a long history between the UK and EU.” “At the moment, 70% of food imported comes from the EU. Even if that goes down to 50% after Brexit because of controls, it still needs to flow smoothly; people still need to eat,” he said.

Read more …

$8,500 as I write this, -8.46%.

Bitcoin Tumbles Further In Broad Selloff For Cryptocurrencies (MW)

Selling intensified for digital currencies on Friday, as the price of the No.1 cryptocurrency bitcoin pushed below $9,000. The price of a single bitcoin fell 4.8% to $8,847.85, but bounced off a low of $8,370.80, according to CoinDesk. In a week, bitcoin has dropped around 20%. Losses were widespread across cryptocurrencies. Ether was down 4.5% to $671.66, bitcoin cash slid 6.4% to $970.66 and Litecoin fell 6.2% to $166.22, according to CoinDesk. Ripple tumbled 10% to $0.78, according to CoinMarketCap. The moves build on sharp drops on Thursday, which some suggested were due to technical factors.

Read more …

Winning.

US Is Experiencing The Highest Drug Overdose Death Rates Ever (ZH)

Across the United States, government officials are struggling to combat the next wave of the opioid epidemic, which is expected to deliver a massive blow to the heartland. A new report from the Centers for Disease Control and Prevention (CDC) confirms the opioid crisis has dramatically worsened since the second half of 2016. Raw data from hospital emergency rooms show a significant increase in drug overdoses across the U.S. In a press briefing on Tuesday, CDC Director Anne Schuchat, M.D., warned that the U.S. is currently experiencing the highest drug overdose death rates ever.

In the newly issued report, which examined data from 16 states, emergency department visits for suspected opioid overdoses jumped 30% from July 2016 through September 2017. In some regions of the country, overdoses were far more significant, but overall, data from most areas showed the opioid crisis is worsening, despite President Trump’s new initiative to tackle the epidemic.

Read more …

Save the symbols?!

Chinese Panda Conservation Park To Be Twice The Size Of Yosemite (G.)

The Bank of China has pledged at least 10bn yuan (£1.1bn) to create a vast panda conservation park in south-west Sichuan province, the Chinese forestry ministry has said. The Sichuan branch of the central bank signed an agreement with the provincial government to finance the vast national park’s construction by 2023. The park aims to bolster the local economy while providing the endangered animals with an unbroken range in which they can meet and mate with other pandas in order to enrich their gene pool.The ministry said the park will measure 2m hectares (5m acres), making it more than twice the size of Yellowstone national park in the US.

Zhang Weichao, a Sichuan official involved in the park planning, told the state-run China Daily the agreement would help alleviate poverty among the 170,000 people living within the project’s proposed territory. Plans for the park were initiated in January last year by the ruling Communist party’s central committee and the state council, the China Daily reported. Giant pandas are China’s unofficial national mascot and live mainly in the Sichuan mountains, with some in neighbouring Gansu and Shaanxi provinces. An estimated 1,864 live in the wild, where they are chiefly threatened by habitat loss. Another 300 live in captivity.

Read more …

By treating the oceans as our garbage bin, we will make it exactly that.

Discarded Fishing Gear Massacres Whales, Dolphins, Seals, Turtles, Birds (Ind.)

The world’s biggest seafood firms are all contributing to the deaths of more than 100,000 whales, dolphins, seals, turtles and seabirds that are killed in agony every year by discarded fishing equipment, according to a new report. Many of the creatures are drowned, strangled or mutilated by plastic gear lost or abandoned at sea, while others suffer “a prolonged and painful death, usually suffocating or starving” either because they cannot fish or their stomachs are full of plastic. Campaigners believe the fishing litter problem is becoming so bad that the oceans could end up unable to provide any catches for humans to eat.

They say “ghost gear” has become a huge but overlooked threat to marine life, and 640,000 tons of it are added to the oceans each year – a rate of more than a ton every minute. A new study analysed the approaches to fishing equipment of the world’s 15 biggest seafood companies, to rank them in five categories – but found that none could be ranked in the top two as having “best practice” or making “responsible handling” of their fishing gear integral to their business strategy. [..] The report, entitled Ghosts beneath the Waves, says abandoned and lost gear is four times more likely to trap and kill creatures than all other forms of marine debris combined, and more than 70% of visible plastic in the sea is fishing-related.

Microplastics – minuscule pieces – were found in the digestive tracts of 80% of seals tested off the coast of Ireland, while other research cited found that plastic accounted for 69% of the debris ingested by whales. Other studies said 98% of whale entanglements involved ghost gear, while 82% of North Atlantic right whales have become entangled at least once. “This is a huge crisis of animal suffering, yet hardly anyone is talking about it,” said World Animal Protection. In one deep water fishery in the north east Atlantic 25,000 nets have been recorded as lost or discarded each year, according to the report. “Even within small areas, the amount of ghost gear can be staggering,” it said. “The Florida Keys National Marine Sanctuary, for example, is estimated to be littered with 85,000 active ghost lobster and crab pots.

Read more …

Mar 022018
 
 March 2, 2018  Posted by at 9:43 am Finance Tagged with: , , , , , , , , , , , , , ,  


Harold Steggels Essex landscape 1932

 

Trump’s Steel And Aluminum Tariffs Trigger Market Sell-Off In US, Asia (G.)
Trump’s Tariffs Throw a Wrench in the Global Trading System (BBG)
S&P 500 Breaks Below 100-Day Average Technical Inflection Point (BBG)
JFK-Trump S&P500 Analog Chart (MW)
NRA Members On Trump Gun Control Plans: ‘Every Word Of It Was A Betrayal’ (G.)
Putin On New US Nuclear Stance: If Attacked, Russia Will Use Nukes (RT)
China Bans Orwell’s Animal Farm And Letter ‘N’ Amid Anger At Xi (Ind.)
‘Cleanest In History’ Diesel Cars Still Pollute Far Above Legal Limits (Ind.)
US Breaks 47-Year-Old Monthly Oil Production Record (Robert Rapier)
Bitcoin’s Plunge in Volume Stirs Questions About Its Popularity (BBG)
Making the Business Case for Gender Equality (PS)
UK Risks Running Out Of Gas, Prices Soar (G.)
UK Food Crisis Looms Without Brexit Deal (BBG)
Pesticides Put Bees At Risk, European Watchdog Confirms (CNBC)
‘Doomsday’ Seed Vault Gets Makeover As Arctic Heats Up (AFP)

 

 

What he was elected on. Why should the US be dependent on imports for all of its steel?

Trump’s Steel And Aluminum Tariffs Trigger Market Sell-Off In US, Asia (G.)

World stock markets have tumbled after Donald Trump said the United States would impose tariffs of 25% on steel imports and 10% on imported aluminum next week. The threat of a trade war with China and higher goods prices led to a sharp sell-off in Wall Street on Thursday, causing Asian markets to take fright on Friday. The Nikkei index in Japan fell 2.4%, Hong Kong and South Korea were down 1.6%, and the ASX200 in Sydney was off 1% in early afternoon trading. Asian steelmakers bore the brunt. South Korea’s Posco fell 3% and Japan’s Nippon Steel 4%. Michael McCarthy of CMC Markets in Sydney said it was a “sharp reminder of the initial negative reaction to the election of Mr Trump ..

… An explanation may come, but the initial market interpretation of the move is rank populism. The lack of structure makes anticipating further measures and possible responses to retaliatory moves difficult to predict.” The Dow Jones Industrial Average had initially fallen more than 570 points, with heavy losses for manufacturers like Caterpillar and Boeing. The index closed down 420 points and the S&P 500 and Nasdaq both dropped on the day. Trump campaigned on the promise of protecting the US steel industry but until now has done little to make good on those promises. At a meeting with US industry officials at the White House, he vowed to rebuild American steel and aluminum industries, saying they had been treated unfairly by other countries for decades.

The move is likely to increase tensions with China, whose top trade official, Lui He, is in Washington for trade talks. “People have no idea how badly our country has been treated by other countries, by people representing us that didn’t have a clue,” Trump said at a White House press conference attended by executives from the steel and aluminum industries. “Or if they did, then they should be ashamed of themselves because they’ve destroyed the steel industry, they’ve destroyed the aluminum industry, and other industries, frankly, when you look at all the plants, the car plants, automobile plants that moved down to Mexico for no reason whatsoever, except we didn’t know what we were doing. So we’re bringing it all back.”

Read more …

Bloomberg claims that “..it looked like the global economy was running on all cylinders ..” No it didn’t.

Trump’s Tariffs Throw a Wrench in the Global Trading System (BBG)

Just when it looked like the global economy was running on all cylinders, President Donald Trump injected a degree of risk to the otherwise favorable outlook. The U.S. president announced on Thursday plans to impose 25% tariffs on imported steel and 10% tariffs on foreign aluminum, with more details to be unveiled next week. American equities cratered for a third day as fears of a trade war spread and expectations for U.S. economic growth weakened a bit. The move to protect American metals producers threatens to raise prices for consumers and businesses that buy goods made with the raw materials. That will have implications for a U.S. central bank that’s debating how fast to raise interest rates this year.

“If tariffs go up, it will, at the margin, tend to put more upward pressure on prices, and those upward pressure on prices will have to be considered by the monetary authority,” New York Fed President William Dudley said in a speech in Brazil on Thursday. The extent of any economic damage will depend on the fine-print of Trump’s new policies and the severity of countries’ retaliation. Some economists worried the move might presage a shift toward an era of more economy-inhibiting protectionism just when it looked like the growth headwinds were fading. “It is possible that a more aggressive shift in policy is under way that could undermine the pro-growth tilt of fiscal policy, harming the U.S. and global economic expansions,” JPMorgan analysts wrote in a research note after Trump’s announcement.

Read more …

Jay Powell gets a warm welcome.

S&P 500 Breaks Below 100-Day Average Technical Inflection Point (BBG)

The stock market is flirting with a technical inflection point again. The S&P 500 Index briefly broke below its 100-day moving average Thursday, sinking as much as 2% after President Donald Trump said the U.S. will impose harsh tariffs on steel and aluminum imports. The announcement added fuel to a fire that’s been smoldering since last month’s selloff, as investors continue to worry about rising inflation and interest rates. That anxiety has brought the market close to collapsing through the line of defense the moving average represents.

“You’ve broken down below the halfway point, now you’re toying below the initial high after the collapse, and you’ve gotten into all sorts of technical problems,” Jim Paulsen, chief investment strategist at Leuthold Weeden, said by phone. “Breaking some technical averages here is starting to scare people.” The S&P 500 fell 1.1% to 2,684.02 as of 3:27 p.m. in New York, after going as low as 2,659.65. The index is down about 2.5% on the week. Before February’s correction, the gauge hadn’t touched the 100-day barrier since last August. And while the market is recovering some of Thursday’s losses late in the session, it still risks closing below the line for the third time in a month.

Read more …

Causation and correlation.

JFK-Trump S&P500 Analog Chart (MW)

Last month, MarketWatch used a chart overlay to illustrate how the stock market under John F. Kennedy has closely followed its performance over the same time frame with Donald Trump in the White House. Fast forward three weeks and, as of Wednesday’s close, the S&P 500, in relative terms, sat almost exactly where it did at this point during Kennedy’s administration. If the trend persists—a HUGE if, of course—prepare for some rather steep losses in the coming weeks. Perhaps it’s already started, with the Dow Jones Industrial Average down nearly 600 points at its Thursday low.

“After 328 trading days since election day, the Trump S&P 500 sits right on top of the JFK S&P 500,” the blogger behind the Global Macro Monitor wrote. ”The index, 328 trading days after the election day of each president, is less than five basis points within one another. Rather stunning, don’t you think?”

Read more …

Trump needs Democrat support on this. Where are they?

NRA Members On Trump Gun Control Plans: ‘Every Word Of It Was A Betrayal’ (G.)

NRA members have branded Donald Trump’s plans for stricter gun control legislation “stupid” and a “betrayal” after the president suggested reforms on Wednesday. In an open meeting with congressional Democrats and Republicans, Trump embraced raising the age limit on purchasing certain weapons and suggested that law enforcement should be allowed to confiscate people’s guns before going through due process in a court. Joe Biggs, an Austin, Texas-based NRA member and chief executive of Rogue Right, a conservative news website, was among those unimpressed by the proposal. “That’s the stupidest fucking thing I’ve ever heard in my life. Hopefully he was just having a momentary brain fart, a lapse of judgment,” Biggs said.

He added: “Hopefully someone pulled him into the back and said: ‘You’ve just lost half your base by saying something that stupid.’” During the meeting Trump called for a “beautiful” bill which would expand background checks on gun purchases and restrict young people from purchasing certain weapons. But it was his suggestion that in some cases law enforcement should be allowed to “take the guns first, go through due process second” – that most alarmed gun owners on the right. “You spend your whole life on the right and you always think that Democrats are going to be the ones who take your guns,” Biggs said. “And then you hear President Trump say: ‘Oh we’re gonna take your guns and go through due process later.’” Biggs said he would vote for another candidate in the 2020 presidential election if Trump pushed through his reforms.

Read more …

Putin in his state of the union announced to his people that Russia can defend itself from any attacks, including nuclear. Western media twist his words; the Guardian claims that “Russia threatens arms race” and even Zero Hedge says :“..the era of the Western world attempting to prevent Russia’s expansion is over.”

That’s all straight from NATO’s playbook.

Putin On New US Nuclear Stance: If Attacked, Russia Will Use Nukes (RT)

The new US nuclear posture allows a nuclear strike in response to a conventional attack. President Vladimir Putin said Russia, if attacked with nuclear weapons, would not hesitate to respond in kind. The warning came during a state of the nation address delivered by the Russian president on Thursday, in which he presented a number of new advanced strategic weapon systems which, he said, would render all anti-missile capabilities that the US currently has powerless. Putin also mentioned the new American nuclear posture, which has relaxed some rules on when the US is prepared to use its nuclear weapons. “We are greatly concerned by some parts of the new nuclear posture, which reduces the benchmark for the use of nuclear weapons…

..Whatever soothing words one may try to use behind closed doors, we can read what was written. And it says that these weapons can be used in response to a conventional attack or even a cyber-threat,” he said. “Our nuclear doctrine says Russia reserves the right to use nuclear weapons only in response to a nuclear attack or an attack with other weapons of mass destruction against her or her allies, or a conventional attack against us that threatens the very existence of the state.” “It is my duty to state this: Any use of nuclear weapons against Russia or its allies, be it small-scale, medium-scale or any other scale, will be treated as a nuclear attack on our country. The response will be instant and with all the relevant consequences,” Putin warned.

Read more …

Xi as a stand up comedian.

China Bans Orwell’s Animal Farm And Letter ‘N’ Amid Anger At Xi (Ind.)

The Chinese government has banned George Orwell’s dystopian satirical novella Animal Farm and the letter ‘N’ in a wide-ranging online censorship crackdown. Experts believe the increased levels of suppression – which come just days after the Chinese Communist Party announced presidential term limits would be abolished – are a sign Xi Jinping hopes to become a dictator for life. The China Digital Times, a California-based site covering China, reports a list of terms excised from Chinese websites by government censors includes the letter ‘N’, Orwell’s novels Animal Farm and 1984, and the phrase ‘Xi Zedong’. The latter is a combination of President Xi and former chairman Mao Zedong’s names.

Search terms blocked on Sino Weibo, a microblogging site which is China’s equivalent of Twitter, include “disagree”, “personality cult”, “lifelong”, “immortality”, “emigrate”, and “shameless”. It was not immediately obvious why the ostensibly harmless letter ‘N’ had been banned, but some speculated it may either be being used or interpreted as a sign of dissent. [..] Facebook, Twitter and YouTube have long been blocked in the country and even Winnie the Pooh recently found himself subject to China’s latest internet crackdown. In July, references to the cartoon bear on Sina Weibo were removed after his image was compared to President Xi.

Read more …

Our car addiction is deeply rooted. We built our communities around them. Not around ourselves. That is a much bigger problem than what fuel a car uses to power a vehicle 10-20 times heavier than its driver, with a 10% fuel efficiency.

‘Cleanest In History’ Diesel Cars Still Pollute Far Above Legal Limits (Ind.)

Over half of diesel cars recently approved for sale in Europe are emitting pollutants far above current legal air pollution limits, despite being marketed as the “cleanest in history”. Analysis of emissions data from nearly 100 car models revealed many vehicles from the new “Euro 6” generation would not be allowed on the market if they were tested today. An investigation by Greenpeace found dozens of these high-polluting vehicles were approved for sale during a “monitoring period” in which there was no limit set on the amount of nitrogen oxide (NOx) they could emit on roads. Many of these vehicles have only gone on sale across Europe in the recent months. The news comes after a German court ruled cities can impose driving bans on certain diesel cars in an effort to deal with the country’s air pollution.

Such restrictions on diesel cars – including the clean air zones found in London and other UK cities – tend to focus on older, dirtier car models. However, Greenpeace campaigners emphasised that while newer Euro 6 models are described as “light years away from their older counterparts” many of them still have the capacity to emit high levels of pollutants. Following the so-called “dieselgate” scandal in 2015, which found VW had installed “cheat software” in its vehicles to fool lab emissions tests, there was a widespread push for tough new regulations. In the aftermath of the scandal, testing revealed diesel cars that met the latest “Euro 6” limits for NOx emissions in lab tests were massively exceeding those limits when driving on the road.

Read more …

Our old Oil Drum pal Robert. I’d be interested to see how fast and how sharp the shale numbers are expected to start falling.

US Breaks 47-Year-Old Monthly Oil Production Record (Robert Rapier)

In a recent post, I wrote that the U.S. would almost certainly set a new oil production record this year. I noted that the most recent data from the Energy Information Administration (EIA) showed that last November U.S. oil production exceeded 10 million barrels per day (BPD) for the first time since 1970. This week the EIA revised November’s oil production upward, which pushed it into the #1 spot for monthly production. The revision increased U.S. oil production in November to 10.057 million BPD, just edging out the previous record of 10.044 million BPD from November 1970. However, many new records should be set this year, as the EIA projects that oil production will reach 11 million BPD by year-end.

This would push the U.S. into first place among the world’s oil producers. But depending on how it is measured, the U.S. is already #1. The 2017 BP Statistical Review of World Energy ranks the U.S. #1 in oil production, but that’s because they include natural gas liquids (NGLs), which have surged in the U.S. along with natural gas production. The gains in U.S. oil production are being driven by production gains across tight oil plays in the Bakken and Eagle Ford, and especially the Permian Basin – where oil production is approaching a staggering 3 million BPD.

Read more …

Are they buying their own?

Bitcoin’s Plunge in Volume Stirs Questions About Its Popularity (BBG)

Earlier this year, when Bitcoin’s price fell by more than 60% from its record close, a less-noticed Bitcoin figure also plunged: the number of daily transactions. There are many explanations for the fall-off in trading, from software- to news-related. What’s less understood is why the level hasn’t recovered as Bitcoin’s price made a 50% comeback since Feb. 5. That’s left some investors wondering whether the cryptocurrency is waning in popularity. The average number of trades recorded daily has roughly dropped in half from the December highs and touched its lowest in two years last month, even as Bitcoin became a household name and roared back above $10,000.

Read more …

1) Why does it take a guy to make that case?

2) “$28 trillion would be added to the global economy by 2025” sounds like a male argument. If the only advantage of more women is that the same arguments are made by different voices, why bother?

Making the Business Case for Gender Equality (PS)

Around the world, gender bias is attracting renewed attention. Through protest marches and viral social-media campaigns, women everywhere are demanding an end to sexual harassment, abuse, femicide, and inequality. But, as successful as the #MeToo and #TimesUp movements have been in raising public awareness, the struggle for parity is far from over. Empowering women and girls is key to achieving all 17 of the United Nations Sustainable Development Goals by 2030. At the moment, however, gender bias remains a significant obstacle to global progress, and it is particularly acute in the workplace. Today, only 5% of S&P 500 companies are led by women, according to Catalyst, a non-profit CEO watchdog.

That dismal figure is all the more remarkable when one considers that 73% of global firms allegedly have equal-opportunity policies in place, according to a survey by the International Labour Organization (ILO). Moreover, while research shows a clear link between a company’s gender balance and its financial health, women occupy fewer than 20% of governing board seats in the world’s largest companies. Addressing such deficiencies is both an economic and a moral imperative. A 2015 report by the McKinsey Global Institute found that if women and men played an “identical role in labor markets,” $28 trillion would be added to the global economy by 2025. These global gains would be in addition to the benefits for individual companies.

Firms with greater gender equality are more innovative, generous, and profitable. But, at the current rate of female empowerment, it would take nearly 220 years to close the gender gap. The world cannot afford to wait that long; we need a new approach.

Read more …

The thrills of the just in time economy.

UK Risks Running Out Of Gas, Prices Soar (G.)

National Grid has warned that the UK would not have enough gas to meet public demand on Thursday, as temperatures plummeted and imports were affected by outages. But the government said households would not notice disruptions to their supply or any increase in energy bills because suppliers, including British Gas, bought energy further ahead. The energy minister Claire Perry said people should cook and use their heating as they would normally. But experts said there was a strong chance that industrial users could experience interruptions to their gas supply. Within-day wholesale gas prices soared 74% to 200p per therm after the formal deficit warning, which acts as a call to suppliers to bring forward more gas.

It is the first time such an alert has been issued since 2010. By lunchtime on Thursday the price had spiked even higher, hitting a high of 275p per therm at one point. National Grid’s forecast for the day initially showed a shortfall across the day of 49.5m cubic metres (mcm) below the country’s projected need of 395.7mcm, which would normally be around 300mcm at this time of year. The gas deficit warning aims to fill the gap, which has since narrowed to 16.5mcm. “We are in communication with industry partners and are closely monitoring the situation,” the company said.

Gas demand is now at a five-year high, according to the market watchers S&P Global Platts. Simon Wood, a gas analyst at the group, said: “There’s a strong chance you’ll see some interruptions for industrial users to balance the system.” Big energy users such as car manufacturers have supply contracts which can be interrupted in return for lower prices. The situation has been compounded by several supply outages, which can relate to very cold weather. There have been problems with a pipeline to the Netherlands, reductions in gas flows from Norway, and technical issues at facilities in the UK, including at the North Morecambe Barrow terminal.

Read more …

Gas shortage, food shortage. Self-sufficiency, anyone?

UK Food Crisis Looms Without Brexit Deal (BBG)

Brexit would lead to an unprecedented food shortage if the U.K. leaves the European Union without a deal, the CEO of the country’s second-biggest grocer said. “The impact of closing the borders for a few days to the free movement of food would result in a food crisis the likes of which we haven’t seen,” J Sainsbury CEO Mike Coupe said in an interview. “It’s inconceivable to me that there won’t be a solution found.” Tensions are simmering between London and Brussels, with U.K. Prime Minister Theresa May saying Wednesday that no one in her position could ever agree to the draft Brexit treaty published by the EU.

May is seeking to get the EU to sign on to a transition phase at a summit of leaders later this month, but Michel Barnier, the EU’s chief Brexit negotiator, warned Thursday that any such agreement could still unravel before Britain’s scheduled exit in March 2019. Almost half of the food eaten in the U.K. is imported. Trade barriers would be especially damaging to Britain’s fresh-food retailers, who rely heavily on the unencumbered movement of perishable goods throughout the EU. In 2016, the U.K. imported 22.4 billion pounds ($30.8 billion) worth of meat, fish, dairy products, fruit and vegetables, according to the Department for Environment, Food and Rural Affairs.

Read more …

Hey, don’t keep us from poisoning ourselves. It’s our god-given right.

Pesticides Put Bees At Risk, European Watchdog Confirms (CNBC)

Wild bees and honeybees are put at risk by three pesticides from a group known as neonicotinoids, Europe’s food safety watchdog said on Wednesday, confirming previous concerns that prompted an EU-wide ban on use of the chemicals. The European Food Safety Authority (EFSA) report, which covered wild bees and honeybees and included a systematic review of scientific evidence published since EFSA’s 2013 evaluation, is seen as crucial to whether the European moratorium on neonicotinoid use remains in place. The updated risk assessment found variations due to factors such as species of bee, exposure and specific pesticide, “but overall the risk to the three types of bees we have assessed is confirmed,” said Jose Tarazona, head of EFSA’s pesticides unit.

The European Union has since 2014 had a moratorium on use of neonicotinoids — made and sold by various companies including Bayer and Syngenta — after lab research pointed to potential risks for bees, which are crucial for pollinating crops. EU nations will discuss a European Commission proposal to ban three neonicotinoids next month in the Plant Animal Food and Feed Standing Committee. “This is strengthening the scientific basis for the Commission’s proposal to ban outdoor use of the three neonicotinoids,” a spokeswoman for the EU executive said.

Read more …

The whole concept is based on permafrost. Or was.

‘Doomsday’ Seed Vault Gets Makeover As Arctic Heats Up (AFP)

Designed to withstand a nuclear missile hit, the world’s biggest seed vault, nestled deep inside an Arctic mountain, is undergoing a makeover as rising temperatures melt the permafrost meant to protect it. Dubbed the “Noah’s Ark” of food crops, the Global Seed Vault is buried inside a former coal mine on Svalbard, a remote Arctic island in a Norwegian archipelago around 1,000 kilometres (650 miles) from the North Pole. Opened in 2008, the seed bank plays a key role in preserving the world’s genetic diversity: it is home to more than a million varieties of seeds, offering a safety net in case of natural catastrophe, war, climate change, disease or manmade disasters.

But warmer temperatures have disrupted the environment around the vault. In an unexpected development, the permafrost, which was meant to help keep the temperature inside the vault at a constant -18 Celsius (-0.4 Fahrenheit), melted in 2016. “The summer season was (warmer) than expected. We had water intrusions in the (access) tunnel that could be related to climate change,” Asmund Asdal, one of the seed bank’s coordinators, told AFP. The Arctic is warming twice as fast as the rest of the planet, scientific studies show. And while Europe is at the moment experiencing a subzero cold spell, the North Pole recently registered above-zero temperatures, 30 degrees higher than normal.

Scientists say warm spells like this are occurring with increasing frequency in the Arctic. Norway recently announced it would contribute 100 million kroner (10 million euros, $12.5 million) to improve the repository in a bid to protect the precious seeds. “We want to be sure that the seed vault will be cold throughout the whole year, even if the temperature continues to increase in Svalbard,” Norway’s Agriculture Minister Jon Georg Dale told AFP.

Read more …

Sep 202016
 
 September 20, 2016  Posted by at 9:13 am Finance Tagged with: , , , , , , , , , ,  Comments Off on Debt Rattle September 20 2016


DPC Main Street, Buffalo, NY 1900

The Bank of Japan May Overshadow the Fed on Super Wednesday (CNBC)
Italy PM Renzi Tells Bundesbank To Solve German Banks’ Derivatives Problem (R.)
Housing Crisis Is Driving A “Geographic Wedge” Between Generations (Ind.)
Global Regulators See Risks in European Banks (WSJ)
Shore Up The Euro Before It’s Too Late (R.)
Theresa May Outs Herself as Wall Street’s Poodle in Brexit Talks (NC)
China Creates Global Steel Champion As Doubts Deepen On Output Cuts (AEP)
China’s Property Bubble Keeps Getting Bigger (WSJ)
Chinese Say Home Prices ‘High and Hard to Accept’ but Buying Frenzy Surges (WS)
Yuan Funding Crunch Shows Risks in Reserve Currency Ranking (BBG)
New Zealand’s Sizzling Economy Sees Goldman Go Out On a Limb Over Rates (BBG)
Alabama Selling Bonds Backed by Deepwater Horizon Settlement (BBG)
Slowly, Then All at Once (Jim Kunstler)
Italy ‘Ready To Go It Alone On Migrants’ (ANSA)
Thousands Flee As Blaze Sweeps Through Moria Refugee Camp In Lesbos (G.)

 

 

Stupid circus.

The Bank of Japan May Overshadow the Fed on Super Wednesday (CNBC)

In Super Wednesday’s central bank double-header, the Federal Reserve’s show may be an afterthought to the Bank of Japan’s performance. In a case of unusual timing, both the BOJ and the Fed will announce the outcomes of their monetary policy meetings on Wednesday. [..] Analyst predictions for the BOJ’s next move varied widely, from expectations that the central bank would cut interest rates deeper into negative territory, to changing the size or make up of its quantitative easing asset purchases, to trying to steepen the yield curve or to doing nothing at all. “The BOJ has a propensity to surprise, although most of the time, the surprises are negative,” Lam said. The market certainly took a negative view of the BOJ’s late January surprise move to introduce a negative interest rate policy, when the central bank cut the rate it pays on certain deposits to negative 0.1%.

That counterintuitively sent the yen sharply higher, frustrating policymakers who had hoped a weaker currency would help the BOJ reach its long-delayed 2% inflation target by increasing the cost of imports and spurring more consumption. Indeed, the yen may become the bellwether of how the markets view the twin central bank meetings. “Dollar-yen has fallen pretty much every time we’ve had an FOMC and BOJ meeting week this year,” David Forrester at Credit Agricole told CNBC’s “Street Signs” on Monday. He expected that the BOJ would aim to steepen Japan’s bond yield curve and if that move “impressed” the Nikkei stock index, then the yen might weaken. Forrester also noted that if the Fed sounded more hawkish in its statement, that would push up the dollar, and by extension, weaken the yen.

Read more …

At least $42 trillion worth.

Italy PM Renzi Tells Bundesbank To Solve German Banks’ Derivatives Problem (R.)

Italian Prime Minister Matteo Renzi said on Monday that Germany’s central bank chief Jens Weidmann should concentrate on fixing the problems of his own country’s banks, after Weidmann had urged Italy to cut its huge public debt. Renzi told reporters in New York that Weidmann needed to solve the problem of German banks which had “hundreds and hundreds and hundreds of billions of euros of derivatives” on their books. Renzi, who has staked his career on a referendum on constitutional reform this autumn, has repeatedly criticized other European leaders in the last few days over what he sees as an inadequate European Union response to the problems of the economy and immigration. In an interview with daily La Stampa published on Monday, Weidmann said Italy needed to consolidate its budget to avoid doubts emerging about the sustainability of its public debt.

Read more …

How to kill a city, Chapter 26.

Housing Crisis Is Driving A “Geographic Wedge” Between Generations (Ind.)

The housing crisis is driving a “geographic wedge” between the generations, weakening the bond between different age groups, according to new research. The study found that the rise in “age segregation”, caused by the lack of affordable housing for younger people, is damaging our society. Across England and Wales, the number of neighbourhoods in which half the population is aged over 50 has risen rapidly since 1991, the research from the Intergenerational Foundation (IF) found. In 1991 there were just 65 such neighbourhoods. This had risen to 485 by 2014, 60% of which were rural. But within urban areas, older people, children and young adults are also living increasingly separately.

“The housing crisis is driving a geographic wedge between the generations,” the research said. “It means that older and younger generations are increasingly living apart.” Since 1991, the median average age of neighbourhoods near the centre of cities has generally fallen by between five and 10 years, the report said. The report identified Cardiff, with its large student population, as “the most age segregated city in England and Wales”. Brighton, Leeds, Nottingham, Sheffield and Southampton were also identified by the report as age segregation “hotspots”. In Cardiff and Brighton, nearly a quarter of the population would need to move home in order to eliminate age segregation.

Surging house prices and a lack of choice for buyers have meant many people in the younger generation have had to move to find affordable housing close to employment. Younger generations are more likely rent than own, but older generations also face a “last-time buying crisis” due to a general lack of supply and a lack of affordable suitable accommodation to downsize into, the report said. Living apart in this way is making it harder for younger and older generations to look after each other, putting a bigger strain on the NHS. Age segregation also reduces people’s opportunities to find work and makes it harder for people to see different generations’ perspectives, it said.

Read more …

It is really simple: “..every euro of loans or securities they own is worth less than 30 cents in risk-weighted assets..”

Global Regulators See Risks in European Banks (WSJ)

Global rule makers think some banks are too clever by half. They want to limit the capital benefits those banks get from sophisticated risk models because they worry that these create a level of accuracy and detail as seductive as it is fallible. The Basel Committee, which sets global banking rules, wants to rein in the outliers: Those banks whose models produce the lowest-risk weightings and create most benefits in reducing their capital requirements. This will disproportionately affect European banks versus U.S. peers because Europeans have long designed their businesses around a risk-based approach to capital, while U.S. banks historically were governed by simpler leverage ratios that use plain asset measures.

It is quite easy to see which banks in Europe face the biggest potential impact from the changes currently being designed and debated by the rule makers who should complete them by the year’s end. Deutsche Bank, Société Générale, Barclays and BNP Paribas all have a relatively low-risk density, which is a measure of how little risk a bank assigns to the assets on its books. Each has a risk density of less than 30%, which means that every euro of loans or securities they own is worth less than 30 cents in risk-weighted assets. And it is risk-weighted assets that determines a bank’s capital requirement. For comparison, J.P. Morgan has a risk density of 61%.

Read more …

The answer to all problems with the euro(-zone): more euro.

Shore Up The Euro Before It’s Too Late (R.)

Will the euro survive the next big crisis? A new report inspired by Jacques Delors, one of the architects of the single currency, says it probably won’t and urges policymakers to pursue immediate changes to Europe’s troubled monetary union to ward off the inevitable collapse. The report, entitled “Repair and Prepare – Growth and the Euro after Brexit”, comes at a time when even the most ardent defenders of the euro are cautioning against closer integration in the aftermath of Britain’s vote to leave the European Union. Pressing ahead, they worry, would deepen public resentment towards Europe after years of economic crisis that has pushed up unemployment and sent populist, eurosceptic parties surging in opinion polls.

The authors, a group of academics, think tankers and former policymakers from across Europe, acknowledge the obstacles but argue that politicians cannot afford to wait. They have put together a three-pronged plan for shoring up the euro that they believe is politically feasible despite the troubling backdrop. “Reforming the euro might not be popular. But it is essential and urgent: at some point in the future, Europe will be hit by a new economic crisis,” the report says. “We do not know whether this will be in six weeks, six months or six years. But in its current set-up the euro is unlikely to survive that coming crisis.”

[..] In a first stage to shore up the single currency, they recommend “quick fixes” that include a reinforcement of the euro zone’s rescue mechanism, the ESM, a strengthening of banking union and improved economic policy coordination that does not require changes to the EU treaty. This would be followed by a north-south quid pro quo on structural reforms and investments. In a third stage, the euro zone would move to a more federal structure, with risk and sovereignty sharing. This final stage, the most controversial, could take a decade or more to realize and is described as important but optional.

Read more …

So there!

Theresa May Outs Herself as Wall Street’s Poodle in Brexit Talks (NC)

The only elements that differentiate Theresa May’s latest move from a Monty Python skit is her lack of a pith helmet and safari jacket. The British Prime Minister, per the Financial Times, plans to visit with top executives of major Wall Street firms to “canvass” them on “how Britain should structure its departure from the EU to reassure them that Brexit will not damage their UK business.” Mind you, she is not making this kiss-the-ring trip to New York to “reassure” the financial behemoths. That would mean the UK has a plan and is making the rounds to sell it and perhaps make cosmetic changes around the margins to make them feel important. Nor is it “consult,” which is diplo-speak for, “We’ll listen to your concerns but are making no commitment as to how much if any well take under advisement.”

No, “canvass” means they are a valued constituency she intends to win over and is seeking their input for real. This “canvass” is yet more proof of how out of its depth the UK government is in handling the supposedly still on Brexit. There’s a decent likelihood that May is running to the US because her team is short on staff and ideas and those clever conniving Americans might have some useful ideas up their sleeves. After all, they don’t want to go through the bother of getting more licenses and moving some staff to the Continent or Dublin. It’s much simpler to keep everything in London, particularly since top New York execs might face a tour of duty there, and the housing, shopping and schools are much more to their liking. Mind you, most financial services would remain in London with a Brexit, but Euroclearing will require a restructuring (that will have to be done out of an EU entity).

The embarrassing part is that May is apparently having to solicit input, when the big issue is obvious and binary: will the UK keep passporting rights for banking? This is binary and not hard to understand. If not, UK and US banks will need to obtain EU licenses to do certain types of business and some customer-facing personnel will need to be domiciled in the EU, not the UK. Numerous estimates have been bandied about, and they vary widely. Note that many important operations, like foreign exchange trading, were centered in the UK long before it entered the EU, are not regulated, and are conducted by phone and electronically, so there’s no reason to think they will need to migrate.

Read more …

China wa never going to restructure steel. It’s a strategic industry.

China Creates Global Steel Champion As Doubts Deepen On Output Cuts (AEP)

China has backed the creation of a giant national steel champion with continental reach, calling into question the country’s pledge at the G20 summit to slash over-production.Caixin Magazine said regulators have approved the merger of Baosteel and the loss-making group Wuhan Iron and Steel, calling it the birth of a strategic “behemoth” with a capacity of over 60 million tonnes a year. The move is touted as part of a restructuring plan to slash 100-150 million tonnes of excess capacity in China by 2020, with the loss of 180,000 steel jobs. But the evidence so far shows that output is still rising. An internal document from the German steel federation Stahl alleges that China has added 9m tonnes of extra capacity so far this year and there is no chance whatsoever that the country will meet its commitment to eliminate 45m tonnes of plant in 2016.

Stahl said China’s capacity has been increasing every year for the last four years, reaching 1,105m tonnes at a time when internal demand in China has slumped to 686m tonnes. Over-capacity has in effect doubled to 419m tonnes since 2012, more than twice the entire steel output of the EU. The Baosteel takeover of Wuhan is not necessarily a threat. Mergers can be part of the slow process of consolidation, and in this case the two state-owned companies have vowed to cut capacity by 13.4m tonnes between them. The nagging doubt is that steel is deemed a “strategic” industry by Beijing, a term with specific meaning in Communist Party ideology. The normal reflex of the authorities – especially regional party bosses – is to keep ailing steel mills alive by rolling over bad debts or forcing debt-equity swaps.

[..] For now the global steel crisis is in remission. The glut has been masked by China’s own policies over recent months, chiefly a fresh blast of infrastructure spending and a 20pc surge in new construction driven by easier credit. This looks like a cyclical bounce, now a routine feature of China’s stop-go economic management. The latest property boom is highly unstable. House prices rose 9.2pc in August from a year earlier, reaching 40pc in Hefei, 37pc in Shenzhen, 37pc in Nanjing, and 31pc in Shanghai. Once the new bubble deflates, a slowdown in building is likely to expose the immense scale of the steel glut once again.

Read more …

See my article yesterday.

China’s Property Bubble Keeps Getting Bigger (WSJ)

China’s attempts to contain property prices have been halfhearted. If anything, they may have made the bubble grow even bigger. Average new-home prices in August were up 1.3% from July, the government reported, the 17th straight increase and the biggest since at least January 2011. Prices declined in only four of the 70 cities surveyed. The latest leg of China’s property boom, which began last year in the biggest cities—such as Shenzhen and Shanghai—has recently spread to smaller cities, driving local governments to roll out tightening measures. Some specifically aim at capping land prices, which in some places exceed the price per square meter of already-built housing nearby. Shanghai has suspended land auctions while other cities, including Nanjing and Guangzhou, have capped land prices.

These measures, however, may have backfired by reducing supply, driving developers to acquire land in other ways. Sunac China, for example, said Sunday it would buy 42 property projects from Legend Holdings, the biggest shareholder of computer maker Lenovo, for 13.8 billion yuan ($2.1 billion). More important, tightening measures haven’t tackled the key factor of rising home prices—easy credit. As a%age of total loans, outstanding mortgage loans are at their highest since at least 2008. For developers, cheaper money available in the onshore bond market fuels aggressiveness. Sunac, for example, a company whose dollar-denominated bonds were yielding 10% just 17 months ago, raised 4 billion yuan last month with coupons of 3.44% to 4%—despite a doubling of its net debt in just the past year. With so many parties including banks and local governments all depending on real estate, it may not make sense for them to pop the bubble.

Read more …

Until another stock bubble is blown. Beijing had better understand that game is largely up after it’s in the IMF basket. Then stability becomes much more important.

Chinese Say Home Prices ‘High and Hard to Accept’ but Buying Frenzy Surges (WS)

Home prices in China are “high and hard to accept,” said 53.7% of the respondents in a survey by the People’s Bank of China, published today in the People’s Daily, the official paper of the Communist Party. Only 42.9% found them “acceptable.” And only 23.1% predicted that they would rise next quarter, while 11.9% expected them to fall. But that isn’t stopping people from wanting to participate in this frenzy: “Nevertheless, the ratio of residents who were prepared to buy a house within the next three months increased 1.3% from the third quarter to reach 16.3%.” That’s a lot of people “prepared to buy a house,” even with prices “high and hard to accept.”

There are several remarkable things in this survey: the worried tone in terms of the soaring prices, the increased desire to buy because, or despite, of the soaring prices, and the fact that this survey came via the official party organ from the PBOC which has been publicly fretting about the housing bubble, the debt bubble that comes along with it, and what it might do when it deflates. And what a bubble it is! The average new home price in 70 Chinese cities soared 9.2% in August year-over-year, after having jumped 7.9% in July, the eleventh month in a row of year-over-year gains, according to the China Housing Index, reported by the National Bureau of Statistics. In Tier 1 cities, prices skyrocketed: in Beijing, by 23.5% and in Shanghai by 31.2%!

Prices increased in 64 of the 70 cities, up from 51 in July. They fell in only four cities and remained flat in two. This chart by tradingeconomics.com shows the year-over-year percentage change in new home prices, the boom and bust cycles, and the stage of the boom where prices are at the moment:

Read more …

Beijing will have to give up a substantial part of the control it’s used to having over the yuan. That will not be a smooth process.

Yuan Funding Crunch Shows Risks in Reserve Currency Ranking (BBG)

China’s desire to stabilize the yuan risks undermining its future as a global reserve currency. For the second time this year, the overnight cost to borrow the offshore currency in Hong Kong surged above 20% amid speculation the People’s Bank of China is mopping up liquidity to boost the exchange rate. The volatility comes less than two weeks before the yuan’s inclusion in the IMF’s Special Drawing Rights – an event seen as a validation of President Xi Jinping’s efforts to promote its standing on the world stage. “This is not the sort of behavior you would expect from an SDR currency,” said Sue Trinh at Royal Bank of Canada in Hong Kong. “You can’t have funding for a reserve currency blowing up or moving in such a volatile fashion; it would be a nightmare for short-term portfolio management.”

Any use of borrowing rates to shake down bears risks eroding authorities’ pledges to give markets more sway in the world’s second-largest economy and undercutting Hong Kong’s position as the biggest offshore yuan trading center. The yuan’s funding costs at home and abroad have been more volatile than the four existing currencies in the IMF’s reserve basket over the past three years, data compiled by Bloomberg show. The offshore yuan funding cost, known as Hibor, jumped 15.7 percentage points to 23.7% on Monday, the second-largest increase on record, before falling to 12.4% on Tuesday. The rate previously surged to a high of 66.8% in January as China’s policy makers battled to restore control over the currency after a series of weaker fixings.

Traders are growing used to China’s policy makers intervening before key events, said Hao Hong at Bocom International in Hong Kong. “The central bank has done this before.” Still, the move is underscoring the greater volatility in China’s money markets compared with other reserve currencies. While the overnight Shanghai Interbank Offered Rate surged to 13% during a credit crunch in 2013, similar funding costs for the dollar, yen, euro and pound all traded within a 100 basis-point range in the past three years, according to data compiled by Bloomberg.

Read more …

Those Auckland homes are turning into ATMs.

New Zealand’s Sizzling Economy Sees Goldman Go Out On a Limb Over Rates (BBG)

New Zealand’s sizzling economy has prompted Goldman Sachs to go out on a limb and call an end to the country’s easing cycle. Data last week showed GDP expanded 3.6% in the year through June, putting New Zealand among the fastest-growing economies in the developed world and suggesting inflation should finally start to gather pace. The Kiwi economy is “too strong to justify further rate cuts,” Tim Toohey, chief economist at Goldman Sachs Australia, wrote in a note to clients. He cancelled the two rate reductions he’d been forecasting and said the Reserve Bank of New Zealand will now hold its official cash rate at 2% through 2017. That’s a bold call after RBNZ Governor Graeme Wheeler all but committed himself to at least one more cut as he struggles to return inflation to target.

While 16 other economists surveyed by Bloomberg expect Wheeler to keep borrowing costs on hold at Thursday’s policy decision, they all predict he’ll lower them in November and some forecast another cut early next year. New Zealand’s strong dollar is damping the price of imports, meaning Wheeler has to crank up domestic price pressures to get inflation back into his 1-3% target band. He’s worried the longer the gauge stays low – it’s currently at 0.4% and forecast to slow further – the greater the risk inflation expectations will drop and create a deflationary spiral. Goldman may be on to something though. The GDP data showed a surge in household spending growth to a four-year high, suggesting inflation may be just around the corner. Spending was led by categories such as furniture, carpets and audio equipment.

Read more …

Craziness. Not a crisis goes to waste.

Alabama Selling Bonds Backed by Deepwater Horizon Settlement (BBG)

The 2010 Deepwater Horizon oil-rig disaster, featured in a major-motion picture opening next week, may soon help Alabama rebuild its reserves, pay Medicaid expenses and fund road projects. Alabama plans to use annual payments from a $1 billion settlement with U.K. oil producer BP to back bonds issued within the next two months, said Bill Newton, the state’s acting director of finance, who also sits on the Alabama Economic Settlement Authority, which was created to handle the debt issue. The state will receive the payments under the settlement for 18 years.

State lawmakers earlier this month approved the bond sale and authorized creation of the six-member authority, which had its first meeting Monday. Under the legislation about $400 million of the bond proceeds will go to repay money the state loaned itself from reserve funds in prior years to balance budgets, with the rest going to fund Medicaid expenses and road work in the southern part of the state. The amount issued will depend on interest rates when the debt is sold. “We started the process to issue the bonds within the next two months,” said Newton. “We’ll see what the market brings.”

Read more …

Wise words: “They can organize ten-acre farms instead of cell phone game app companies. They can do physical labor instead of watching television. They can build compact walkable towns instead of suburban wastelands….”

Slowly, Then All at Once (Jim Kunstler)

As is usually the case with troubled, over-ripe societies, these elites have begun to resort to magic to prop up failing living arrangements. This is why the Federal Reserve, once an obscure institution deep in the background of normal life, has come downstage front and center, holding the rest of us literally spellbound with its incantations against the intractable ravages of debt deflation. One way out of this quandary would be to substitute the word “activity” for “growth.” A society of human beings can choose different activities that would produce different effects than the techno-industrial model of behavior.

They can organize ten-acre farms instead of cell phone game app companies. They can do physical labor instead of watching television. They can build compact walkable towns instead of suburban wastelands (probably even out of the salvaged detritus of those wastelands). They can put on plays, concerts, sing-alongs, and puppet shows instead of Super Bowl halftime shows and Internet porn videos. They can make things of quality by hand instead of stamping out a million things guaranteed to fall apart next week. None of these alt-activities would be classifiable as “growth” in the current mode. In fact, they are consistent with the reality of contraction. And they could produce a workable and satisfying living arrangement.

The rackets and swindles unleashed in our futile quest to keep up appearances have disabled the financial operating system that the regime depends on. It’s all an illusion sustained by accounting fraud to conceal promises that won’t be kept. All the mighty efforts of central bank authorities to borrow “wealth” from the future in the form of “money” – to “paper over” the absence of growth – will not conceal the impossibility of paying that borrowed money back. The future’s revenge for these empty promises will be the disclosure that the supposed wealth is not really there – especially as represented in currencies, stock shares, bonds, and other ephemeral “instruments” designed to be storage vehicles for wealth. The stocks are not worth what they pretend. The bonds will never be paid off. The currencies will not store value. How did this happen? Slowly, then all at once.

Read more …

Renzi has everyhting to lose with his referendum coming before the new year.

Italy ‘Ready To Go It Alone On Migrants’ (ANSA)

Italian Premier Matteo Renzi on Monday reiterated his disappointment at Friday’s EU summit in Bratislava, which concluded with him openly coming out against Germany’s and France’s stance on migrants and economic growth for the bloc’s post-Brexit future. “If Europe continues like this, we’ll have to get organised and act autonomously on immigration,” Renzi said. “This is the only new development to come from Bratislava, where there were so many words, but we weren’t capable to saying anything clear about the issue of Africa. “That’s why, to use a euphemism, we didn’t take it well. ” Juncker says lots of wonderful things, but we don’t see actions. “This is one of Europe’s problems. Italy will go it alone. “It is capable of doing it, but this is a problem for the EU”

Read more …

The camp is basically gone. The poor just got a whole lot more desperate. Why the EU should no longer exist.

Thousands Flee As Blaze Sweeps Through Moria Refugee Camp In Lesbos (G.)

Thousands of refugees detained at one of Greece’s biggest camps, on the island of Lesbos, have fled the facility amid scenes of mayhem after some reportedly set fire to it, local police have said. Up to 4,000 panic-stricken men, women and children rushed out of the barbed-wire-fenced installation following rumours of mass deportations to Turkey. “Between 3,000 and 4000 migrants have fled the camp of Moria,” a police source said, attributing the exodus to fires that rapidly swept through the facility because of high winds. Approximately 150 unaccompanied children, controversially housed at the camp, had been evacuated to a childrens’ village, the police source added. No one was reported to have been injured in the blaze.

But damage was widespread and with tents and prefabricated housing units going up in flames, the Greek channel Skai TV, described the site as “a war zone”. The disturbances, it reported, had been fuelled by frustration over the notoriously slow pace with which asylum requests were being processed. A rumour, earlier in the day, that Greek authorities were preparing to send possibly hundreds back to Turkey – in a bid to placate mounting frustration in Germany over the long delays – was enough to spark the protests. [..] The increase in arrivals in recent months from Turkey – the launching pad for more than a million Europe-bound refugees last year – has added to the pressure on Greek authorities.

On Monday, the government announced that 60,352 refugees and migrants were registered in the country, essentially ensnared by the closure of borders along the Balkan corridor into Europe. Some 13,536 were detained on Aegean islands, including Lesbos which has borne the brunt of the influx. The detention centre at Moria has a capacity to house no more than 3,000 but is now said to be holding almost twice that number ..

Read more …

Aug 082016
 
 August 8, 2016  Posted by at 9:20 am Finance Tagged with: , , , , , , , , ,  


NPC Dr. H.W. Evans, Imperial Wizard 1925

The US Market Has Been And Remains Today, The Last Ponzi Game Standing (Adler)
Priced Out Of The ‘Open Society’ (McKenna)
Shrinking Imports And Exports—A Far More Meaningful Counterpoint To BLS (Alh.)
China’s July Exports, Imports Fall More Than Expected (R.)
China Crude Imports Fall to 6-Month Low, Fuel Exports Surge (BBG)
China’s Great River of Steel Swells as Trade Tensions Build (BBG)
Draghi Jumps Brexit Hurdle to Find Oil Damping Price Outlook (BBG)
Bond Market’s Big Illusion Revealed as US Yields Turn Negative (BBG)
China’s Marshall Plan (BBG)
Earnings Beats Are Concealing Bad Results (MW)
We’re in a Low-Growth World. How Did We Get Here? (NYT)
Musical Chairs in a Depression (Thomas)

 

 

Great piece from Lee Adler. “It’s abstract impressionism. It’s a joke.”

The US Market Has Been And Remains Today, The Last Ponzi Game Standing (Adler)

I’m not here to argue whether the July report was lousy or not. The US economy may well be spawning big numbers of crappy low paying jobs. Withholding tax collections were huge in the last 4 weeks of July. We know that that didn’t come from big wage gains by existing workers. They’re running at about a 2.5% annual growth rate. So when tax collections increase by a significant margin over a similar period a year ago, it suggests that there were new jobs, maybe a lot of them. I’m also not here to argue that the headline number bears any semblance of reality. The headline number is the seasonally adjusted month to month gain in the estimated number of jobs. The whole process of seasonal adjustment is a bogus attempt to smooth a jagged trend with peaks and valleys into a continuous modified moving average.

The number is a fiction. Because it’s based on a moving average it has a built in lag, for which statisticians try to compensate with a bunch of statistical hocus pocus. That includes constantly revising the number based first on subsequent surveys, and then on benchmarking the data with actual tax collections in the 5 subsequent years. Not only is the number revised twice after the first month it’s issued, but it’s then fit to the curve of actuality for the next 5 years until the reading is finalized. July’s reading won’t be final until July 2021. The process is really “seasonal finagling.” It’s abstract impressionism. It’s a joke. What I have come to argue here is that the not seasonally adjusted (NSA) numbers, which I have always relied upon in my analysis of the jobs trend, is probably also a joke.

Look at this chart. Do those railroad tracks look like the real world to you, or are these some kind of computer generated auto-numbers that merely make a pretense of reality. Law of Large Numbers or not, I have never seen any other economic series behave with such regularity. This is a joke, a farce, a sham. But it doesn’t matter because the economy doesn’t matter. The world’s central banks have attempted, and largely succeeded, in rigging the financial markets. One of the consequences, intended or unintended, is that the bulk of the benefit of that rigging flows to the US financial markets. That has been so been since 2009. The US market has been and remains today, the Last Ponzi Game Standing. All roads lead to the US.

Read more …

Saxo Bank’s Mike McKenna comments on an Economist cheerleading piece on ‘Open Society’, which somehow -presumably because it sounds positive- has become synonymous to globalization. McKenna’s conclusion: the world can’t afford globalization. Which is what I’ve been saying: without growth there can be no centralization. The Saxo boys seem to think that a return to growth is still possible/desirable. I think not.

Priced Out Of The ‘Open Society’ (McKenna)

The biggest problem facing globalism, however, is neither its hypocrisy nor its will-to-power – these are ordinary human failings common to all ideologies. Its biggest problem is much simpler: it’s very expensive. The world has seen versions of the wealthy, cosmopolitan ideal before. In both Imperial Rome and Achaemenid Persia, for example, societies characterised by extensive trade networks, multicultural metropoli and the rule of law (relative to the times) eventually succumbed to rampant inequality, inter-community strife, and expensive foreign wars in the case of Rome and a death-spiral of economic stagnation and constant tax hikes in the case of Persia.

It seems near-axiomatic that, in the absence of the sort of strong GDP growth that characterised the post-World War Two era, the pluralist ideal might begin to show strains along the seams of its own construction. Such strains can be inter-ethnic, ideological, religious, or whatever else, but the legitimacy of The Economists’s favoured worldview largely came about due to the wealth and living standards it was seen to provide in the post-WW2 and Cold War era. Now that this is beginning to falter, so too are the politicians and institutions that have long championed it. In Jakobsen’s view, the rising tide of populist nationalism is in no way the solution, but it is a sign that globalisation’s elites have grown distant from the population as a whole.

“The world has become elitist in every way,” says Saxo Bank’s chief economist. “We as a society have to recognise that productivity comes from raising the average education level… the key thing here is that we need to be more productive. If everyone has a job, there is no need to renegotiate the social contract.” Put another way, would the political careers of Trump, Le Pen, Viktor Orban, and other such nationalist leaders be where they are if the post-crisis environment had been one of healthy wage growth, inflation, an increase in “breadwinner” jobs, and GDP expansion?

Read more …

Globalization crashing head first into its inherent limits.

Shrinking Imports And Exports—A Far More Meaningful Counterpoint To BLS (Alh.)

In the first six months of 2005, the US imported 27.2% more in Chinese goods than the first six months of 2004, and that was 28.8% more than the first six months of 2003. In the first six months of 2016, the US imported 6.5% less than the first six months of 2015, itself only 6.1% more than the first six months of 2014. The US actually imported slightly less from China so far this year than two years ago.

As we know very well from US production levels it’s not as if some native “buy American” grassroots opposition has successfully convinced American buyers to ditch the cheaper Chinese alternatives, redistributing “strong” consumer spending toward American products. There is much less goods being produced and traded with and within the United States – alarmingly so. Further, as you can see above and below, the timing of this most recent change from plain weakness to dangerous weakness is significant.

Starting September 2015, meaning dating back to August, US imports from China have dropped off a cliff. While year-over-year growth was slightly positive in September, it has been negative in every month since except February 2016 and that was due to calendar effects here and holiday weeks there (and was easily wiped out by the massive contraction in March). The mainstream reading of the payroll reports up to that point indicated that US demand would and should be nothing but strong. Instead, it has been much worse than it already was.

It isn’t just China that is feeling the increasing absenteeism of the US consumer. US imports from Europe contracted for the third straight month, where the -1.8% 6-month average is the lowest since 2010 and the initial recovery from the Great Recession. Imports from Japan were up for the first time in three months, but overall for the first half of 2016 are down nearly 5% in total.

Read more …

But that’s only due to who does the ‘expecting’.

China’s July Exports, Imports Fall More Than Expected (R.)

China’s exports and imports fell more than expected in July in a rocky start to the third quarter, suggesting global demand remains weak in the aftermath of Britain’s decision to leave the EU. Exports fell 4.4% from a year earlier, the General Administration of Customs said on Monday, while adding that it expects pressure on exports is likely to ease at the beginning of the fourth quarter. Imports fell 12.5% from a year earlier, the biggest decline since February, suggesting domestic demand remains sluggish despite a flurry of measures to stimulate growth. That resulted in a trade surplus of $52.31 billion in July, versus a $47.6 billion forecast and June’s $48.11 billion.

Read more …

Trying to keep the teapots alive…

China Crude Imports Fall to 6-Month Low, Fuel Exports Surge (BBG)

China’s crude imports fell to the lowest level in six months as demand from independent refineries eased. Net fuel exports surged to a record. The world’s biggest energy user imported 31.07 million metric tons of crude in July, according to data released by the General Administration of Customs on Monday. That’s about 7.35 million barrels a day, the slowest pace since January. Meanwhile, net fuel exports jumped to 2.49 million tons last month.

The nation’s appetite for overseas crude, which increased 14% in the first half year from the same period of 2015, may be weaker in the near term as insufficient infrastructure and scheduled maintenance at some independent refiners will likely hinder their crude purchases, BMI Research said in a report dated Aug. 4. “Teapots’ crude buying has slowed in the third quarter amid maintenance,” Amy Sun, an analyst with ICIS China, said before data were released. “Some plants have also seen their crude-import quotas filling up.”

Read more …

They have no intention of halting this either.

China’s Great River of Steel Swells as Trade Tensions Build (BBG)

There’s a river of steel flooding from China despite the best efforts of governments around the world to dam the flow from the world’s top producer, with data on Monday showing that overseas shipments held above 10 million tons in July. Sales increased 5.8% on-year to 10.3 million metric tons last month, compared with 10.9 million tons in June, according to China’s customs administration. Exports in the first seven months expanded 8.5% to 67.4 million tons, a record volume for the period. That’s in line with what South Korea, the world’s sixth-largest producer in 2015, makes in an entire year.

The robust export showing by China’s mills contrasts with the country’s broader performance last month, which fell in dollar terms, and risks further stoking trade tensions with partners from India to Europe after they imposed curbs to keep out the alloy. Premier Li Keqiang has defended the country’s growing presence in overseas steel markets, saying last month that overcapacity isn’t the fault of a single country. “Orders from abroad have held up relatively well as steelmakers in China have a cost advantage,” Dang Man, an analyst at Maike Futures Co. in Xi’an, said before the data. “Attention is still on global trade friction as the number of cases against Chinese exports is quite large.”

Read more …

The graph illustrates one thing alright. Food, Alcohol and Tobacco prices rise only because of taxes. That suggests governments could get rid of deflation just by raising taxes. Which, really, is nonsense. Therefore, so is the graph and the methodology it is based on. Rising prices don’t equal inflation.

Draghi Jumps Brexit Hurdle to Find Oil Damping Price Outlook (BBG)

Whenever Mario Draghi clears a hurdle on his path to higher inflation, a new one appears. Just as the 19-nation economy sends encouraging signals that challenges from Brexit to terrorism won’t derail the modest recovery, a new decline in oil prices is casting a shadow over an expected pick-up in inflation. With growth not strong enough to generate price pressures, the ECB president may have to revise his outlook yet again. Inflation remains far below the ECB’s 2% goal after more than two years of unprecedented stimulus and isn’t seen reaching it before 2018.

Staff will begin to draw up fresh forecasts in mid-August, and while officials are in no rush to adjust or expand their €1.7 trillion quantitative-easing plan in September, economists predict Draghi will have to ease policy before the end of the year. “Now that the euro-area economy seems to have shrugged off the Brexit vote, focus will again shift on inflation, against the background of those negative news from oil prices,” said Johannes Gareis, an economist at Natixis in Frankfurt. “Yes, the ECB has managed to dispel deflation fears, but all the uncertainty means inflation will stay lower for longer – and Draghi will have to take notice.”

Read more …

Maybe Zimbabwe bonds still offer some yield?

Bond Market’s Big Illusion Revealed as US Yields Turn Negative (BBG)

For Kaoru Sekiai, getting steady returns for his pension clients in Japan used to be simple: buy U.S. Treasuries. Compared with his low-risk options at home, like Japanese government bonds, Treasuries have long offered the highest yields around. And that’s been the case even after accounting for the cost to hedge against the dollar’s ups and downs – a common practice for institutions that invest internationally. It’s been a “no-brainer since forever,” said Sekiai, a money manager at Tokyo-based DIAM. That truism is now a thing of the past. Last month, yields on U.S. 10-year notes turned negative for Japanese buyers who pay to eliminate currency fluctuations from their returns, something that hasn’t happened since the financial crisis.

It’s even worse for euro-based investors, who are locking in sub-zero returns on Treasuries for the first time in history. That quirk means the longstanding notion of the U.S. as a respite from negative yields in Japan and Europe is little more than an illusion. With everyone from Jeffrey Gundlach to Bill Gross warning of a bubble in bonds, it could ultimately upend the record foreign demand for Treasuries, which has underpinned their seemingly unstoppable gains in recent years. “People like a simple narrative,” said Jeffrey Rosenberg at BlackRock. “But there isn’t a free lunch. You can’t simply talk about yield differentials without talking about currency differentials.”

Read more …

Imagine the enormous amounts of debt that would be involved in this. Then look at China’s current debt. Then draw your conclusions. More globalization nonsense. The next Chinese bubble.

China’s Marshall Plan (BBG)

China’s ambition to revive an ancient trading route stretching from Asia to Europe could leave an economic legacy bigger than the Marshall Plan or the EU’s enlargement, according to a new analysis. Dubbed ‘One Belt, One Road,’ the plan to build rail, highways and ports will embolden China’s soft power status by spreading economic prosperity during a time of heightened political uncertainty in both the U.S. and EU, according to Stephen L. Jen, CEO at Eurizon SLJ Capital, who estimates a value of $1.4 trillion for the project. It will also boost trading links and help internationalize the yuan as banks open branches along the route, according to Jen.

“This is a quintessential example of a geopolitical event that will likely be consequential for the global economy and the balance of political power in the long run,” said Jen, a former IMF economist. Reaching from east to west, the Silk Road Economic Belt will extend to Europe through Central Asia and the Maritime Silk Road will link sea lanes to Southeast Asia, the Middle East and Africa. While China’s authorities aren’t calling their Silk Road a new Marshall Plan, that’s not stopping comparisons with the U.S. effort to rebuild Western Europe after World War II. With the potential to touch on 64 countries, 4.4 billion people and around 40% of the global economy, Jen estimates that the One Belt One Road project will be 12 times bigger in absolute dollar terms than the Marshall Plan.

China may spend as much as 9% of GDP – about double the U.S.’s boost to post-war Europe in those terms. “The One Belt One Road Project, in terms of its size, could be multiple times larger and more ambitious than the Marshall Plan or the European enlargement,” said Jen. It’s not all upside. Undertaking an expansive plan like this one will inevitably run the risk of corruption, project delays and local opposition. Chinese backed projects have frequently run into trouble before, especially in Africa, and there’s no guarantee that potential recipient nations will put their hand up for the aid. In addition, resurrecting the trading route will need funding during a time of slowing growth and rising bad loans in the nation’s banks. Sending money abroad when it’s needed at home may not have an enduring appeal.

Still, at least China has a plan. “The fact that this is a 30-40 year plan is remarkable as China is the only country with any long-term development plan, and this underscores the policy long-termism in China, in contrast to the dominance of policy short-termism in much of the West,” said Jen. And that’s a win-win for soft power. “The One Belt One Road Project could be a huge PR exercise that could win over government and public support in these countries,” he said.

Read more …

“The beat on earnings is due at least in part to negative earnings revisions heading into earnings season, similar to what we have seen for the last 29 quarters..”

Earnings Beats Are Concealing Bad Results (MW)

Investors shouldn’t be fooled by this season’s “better-than-expected” earnings—they are still pretty bad. With nearly 90% of the S&P 500 companies having reported second-quarter results through Friday morning (437 out of 505), aggregate earnings-per-share for the group are on course to decline 3.5% from a year ago, according to FactSet. Many Wall Street strategists are pleased, because that is a lot better than expectations of a 5.5% decline on June 30, just before earnings reporting season kicked off. So are investors, as the S&P and Nasdaq Composite Index closed in record territory Friday, and the Dow Jones Industrial Average closed less than 0.3% away. But that is like saying you should be happy with the “D” you got, because it would really be a “B” if the teacher changed the scale to grade on a curve.

“The beat on earnings is due at least in part to negative earnings revisions heading into earnings season, similar to what we have seen for the last 29 quarters with aggregate upside to expectations,” Morgan Stanley equity strategists wrote in a recent note to clients. Earnings might be beating lowered expectations, but they are still worse than the aggregate FactSet consensus of a 3.1% decline at the end of the first quarter on March 31. It also means S&P 500 earnings will suffer the fifth-straight quarter of year-over-year declines, the longest such streak since the five-quarter stretch from the third quarter of 2008 through the third quarter of 2009, the heart of the Great Recession.

Read more …

By fooling ourselves into thinking we’d never get there again?

We’re in a Low-Growth World. How Did We Get Here? (NYT)

One central fact about the global economy lurks just beneath the year’s remarkable headlines: Economic growth in advanced nations has been weaker for longer than it has been in the lifetime of most people on earth. The United States is adding jobs at a healthy clip, as a new report showed Friday, and the unemployment rate is relatively low. But that is happening despite a long-term trend of much lower growth, both in the United States and other advanced nations, than was evident for most of the post-World War II era. This trend helps explain why incomes have risen so slowly since the turn of the century, especially for those who are not top earners. It is behind the cheap gasoline you put in the car and the ultralow interest rates you earn on your savings.

It is crucial to understanding the rise of Donald J. Trump, Britain’s vote to leave the European Union, and the rise of populist movements across Europe. This slow growth is not some new phenomenon, but rather the way it has been for 15 years and counting. In the United States, per-person gross domestic product rose by an average of 2.2% a year from 1947 through 2000 — but starting in 2001 has averaged only 0.9%. The economies of Western Europe and Japan have done worse than that. Over long periods, that shift implies a radically slower improvement in living standards. In the year 2000, per-person G.D.P. — which generally tracks with the average American’s income — was about $45,000.

But if growth in the second half of the 20th century had been as weak as it has been since then, that number would have been only about $20,000. To make matters worse, fewer and fewer people are seeing the spoils of what growth there is. According to a new analysis by the McKinsey Global Institute, 81% of the United States population is in an income bracket with flat or declining income over the last decade. That number was 97% in Italy, 70% in Britain, and 63% in France.

Read more …

“Since 2007, the world has been in an unacknowledged depression.”

Musical Chairs in a Depression (Thomas)

Economics is a bit like musical chairs. In a recession, the economy takes a hit and there are some casualties. Some players fail to get a chair in time and are out of the game. The game then goes on without them. The economy eventually recovers. But a depression is a different game entirely. Since 2007, the world has been in an unacknowledged depression. A depression is like a game of musical chairs in which ten children are walking around, but suddenly nine of the chairs are taken away. This means that nine of the children will soon be out of the game. But it also means that all ten understand that the odds of them remaining in the game are quite slim and that desperate times call for desperate measures. It’s time to toss out the rule book and do whatever you have to, to get the one remaining chair.

Of course, the pundits officially deny that we have even been in a depression. They regularly describe the world as “in recovery from the 2008–2010 recession,” but the “shovel-ready jobs” that are “on the way” never quite materialize. The “green shoots” never seem to blossom. So, what’s going on here? Depressions do not occur all at once. It takes time for them to bottom and, if an economy is propped up through economic heroin (debt), the Big Crash can be a long time in coming. In that regard, this one is one for the record books. As Doug Casey is fond of saying, a depression is like a hurricane. First there are the initial crashes, then a calm as the eye of the hurricane passes over, then, we enter the trailing edge of the other side of the hurricane.

This is the time when things really get rough—when even the politicians will start using the dreaded “D” word. We have entered that final stage, as the economic symptoms demonstrate, and this is the time when the game of musical chairs will evolve into something quite a bit nastier. In normal economic times, even including recession periods, we observe financial institutions maintaining their staunchly conservative image. For the most part, they deliver as promised. But, as we move into the trailing edge of the second half of the hurricane, we notice more and more that the bankers are rewriting the rule book in order to take possession of the wealth that they previously held in trust for their depositors.

And they don’t do this in isolation. They do it with the aid of the governments of the day. New laws are written in advance of the crisis period to assure that the banks can plunder the deposits with impunity. Since 2010, such laws have been passed in the EU, the US, Canada and other jurisdictions. Trial balloons have been sent up to ascertain to what degree they will get away with their freezes and confiscations. Greece has been an excellent trial balloon for the freezes and Cyprus has done the same for the confiscations. The world is now as ready as it’s going to be for the game to be played on an international level.

So what will it look like, this game of musical chairs on steroids? Well, first we’ll see the sudden crashes of markets and/or defaults on debts. Shortly thereafter, one Monday morning (or more likely one Tuesday after a long weekend) the financial institutions will fail to open their doors. The media will announce a “temporary state of emergency” during which the governments and banks must resolve some difficulties in order to “assure a continued sound economy.” Until that time, the banks will either remain shut, or will process only small transactions.

Read more …

Jul 222016
 
 July 22, 2016  Posted by at 8:26 am Finance Tagged with: , , , , , , , , ,  


Lewis Wickes Hine Night scene in Cumberland Glass Works, Bridgeton, NJ 1909

(There’s No) Money In The Mattress (Roberts)
Sub-Zero Government Bonds Turn the Hunt For Yield Upside Down (BBG)
US Sides With HSBC To Block Release Of Money Laundering Report (R.)
Are Wall Street Banks in Trouble? You’d Never Know from the Headlines (WSoP)
Denmark Faces ‘Out of Control’ Housing Market in Negative Spiral (BBG)
Fracklog in Biggest US Oil Field May All But Disappear (BBG)
China Continues To Produce More Steel Than The Rest Of The World Combined (BI)
China’s Vice FinMin: We’ve Got No Reason To Devalue The Yuan (CNBC)
Apple’s Q2 China Revenues Could Fall 20%: Baidu (CNBC)
Pension Funds Are Underwater – And Taking Us With Them (VW)
Once-Expanding EU Prepares To Contract For The First Time In Its History (G.)
Earth On Track For Hottest Year Ever As Warming Speeds Up (R.)
Fighting the Most Dangerous Animal in the World (Spiegel)

 

 

“Every time someone says, ‘There is a lot of cash on the sidelines,’ a tiny part of my soul dies.”

Scary graph.

(There’s No) Money In The Mattress (Roberts)

Here is a myth that just won’t seem to die: “Cash On The Sidelines.” This is the age old excuse why the current “bull market” rally is set to continue into the indefinite future. The ongoing belief is that at any moment investors are suddenly going to empty bank accounts and pour it into the markets. However, the reality is if they haven’t done it by now after 3-consecutive rounds of Q.E. in the U.S., a 200% advance in the markets, and now global Q.E., exactly what will that catalyst be? However, Clifford Asness summed up the problem with this myth the best and is worth repeating:

“Every time someone says, ‘There is a lot of cash on the sidelines,’ a tiny part of my soul dies. There are no sidelines. Those saying this seem to envision a seller of stocks moving her money to cash and awaiting a chance to return. But they always ignore that this seller sold to somebody, who presumably moved a precisely equal amount of cash off the sidelines. If you want to save those who say this, I can think of two ways. First, they really just mean that sentiment is negative but people are waiting to buy. If sentiment turns, it won’t move any cash off the sidelines because, again, that just can’t happen, but it can mean prices will rise because more people will be trying to get off the nonexistent sidelines than on.

Second, over the long term, there really are sidelines in the sense that new shares can be created or destroyed (net issuance), and that may well be a function of investor sentiment. But even though I’ve thrown people who use this phrase a lifeline, I believe that they really do think there are sidelines. There aren’t. Like any equilibrium concept (a powerful way of thinking that is amazingly underused), there can be a sideline for any subset of investors, but someone else has to be doing the opposite. Add us all up and there are no sidelines.”

Margin debt levels, negative cash balances, also suggest the same. Cash on the sidelines? Not really.

Read more …

And there are plenty plans to ‘do more’.

Sub-Zero Government Bonds Turn the Hunt For Yield Upside Down (BBG)

The erosion of yields on government debt is generally thought to push investors into riskier assets as they seek out higher returns. That’s true, argue Credit Suisse analysts in a new note, but only in the ‘first phase’ of a negative yield world. That is, when yields on government bonds with shorter-durations dip below zero, total returns on riskier assets such as junk-rated corporate debt do trump returns on German bunds. That tendency disappeared, however, as yields on longer-dated government debt also fell into negative territory — at least in Europe.

“The defining characteristic of Phase One is a strong outperformance of high-yielding credit assets versus low-yielding credit assets and government bonds, i.e. a strong hunt for yield trend. Nothing unusual so far,” write Credit Suisse’s William Porter and Chiraag Somaia. “However, more interestingly, Phase Two, still characterized by negative yields, actually sees an outperformance of government bonds versus both low- and high-yielding credit assets, i.e. any hunt for yield over the past 2.5 years as a whole has been an unsuccessful strategy.” The trend is shown in the below chart, where total returns on German government bonds have bested high-yield and investment-grade corporate debt.

“For now, we think ever-falling yields represent an overall risk aversion and/or verdict on economic policies that is not overly friendly to yieldier assets despite the obvious incentives they carry in this environment,” conclude the analysts. “So yield-hunting behavior is not always and everywhere wrong – this summer may treat it favorably – but any outperformance has subsequently been counter-trend in the past 2.5 years.”

Read more …

Quick! Find me a carpet to sweep this under!

US Sides With HSBC To Block Release Of Money Laundering Report (R.)

The U.S. government asked a federal appeals court on Thursday to block the release of a report detailing how HSBC is working to improve its money laundering controls after the British bank was fined $1.92 billion. In a brief filed with the 2nd U.S. Circuit Court of Appeals, the U.S. Department of Justice sought to overturn an order issued earlier this year by U.S. District Judge John Gleeson to make public a report by the bank’s outside monitor. “Public disclosure of the monitor’s report, even in redacted form, would hinder the monitor’s ability to supervise HSBC,” the government’s court filing said, adding that bank employees would be less likely to cooperate with the monitor if they knew their interactions could be released.

HSBC concurred with the court’s finding. “HSBC also argues that the Monitor’s report should remain confidential, as have the Monitor, the UK Financial Conduct Authority, the US Federal Reserve and other HSBC regulators,” HSBC said in a statement. “The effectiveness of the monitorship is dependent on confidentiality.” The filing comes a week after U.S. congressional investigators criticized senior officials at the Department of Justice for overruling internal recommendations to criminally prosecute HSBC for money-laundering violations. Instead, the government in 2012 fined HSBC and entered into a five-year deferred prosecution agreement that stipulated all charges would be dropped if the bank agreed to install an independent monitor to help improve compliance. In the 2012 settlement, HSBC admitted to violating U.S. sanctions laws and failing to stop Mexican and Colombian cartels from laundering hundreds of millions of dollars in drug proceeds through the bank.

Read more …

Martens & Martens. Strong.

Are Wall Street Banks in Trouble? You’d Never Know from the Headlines (WSoP)

On July 14, when America’s biggest bank by assets reported its second quarter earnings, this headline ran at the New York Times: “JPMorgan Chase Has Strong Quarter as Earnings Top Estimates.” CNBC, a unit of NBCUniversal, used the same criteria in its headlines to report the earnings of Citigroup, Bank of America and Morgan Stanley — putting a positive spin in the headline because the earnings had topped what analysts were expecting – rather than the far more meaningful, and traditional, measure of whether earnings had beaten the same quarter a year earlier. CNBC’s headlines read: Citigroup earnings handily top Wall Street expectations: CNBC-July 15, 2016 Bank of America earnings top expectations: CNBC-July 18, 2016 Morgan Stanley solidly beats earnings expectations: CNBC-July 20, 2016.

This is hubris of the highest order. Publicly traded companies simply guide research analysts toward lowered expectations on their upcoming quarterly earnings so that the companies can surprise on the upside and get these kinds of misleading headlines in the all-to-willing New York media – which has a vested interest in making everything appear rosy in the Big Apple. (New York media is dependent on fat Wall Street profits to boost the price of their own publicly traded shares since ad revenue in New York is linked to the health of Wall Street.) One would never know by these headlines that big bank earnings were actually down year over year – and in some cases, down dramatically. JPMorgan Chase earned $6.2 billion in the second quarter of 2016 versus $6.29 billion in the second quarter of 2015.

The news was far worse at Citigroup, despite the rosy headline at CNBC. Citigroup’s second quarter profit fell 17.5% year over year, to $4 billion from $4.85 billion in the second quarter of 2015. Its revenues were the lowest in 14 years according to S&P Capital IQ. At Bank of America, profit fell to $4.23 billion from $5.3 billion in the second quarter of 2015, a sharp decline of 20%. Morgan Stanley reported a year over year decline of 8%, with profits in the second quarter of 2016 falling to $1.67 billion from $1.82 billion in the second quarter of 2015. Now news of jobs cuts is spilling out with the Wall Street Journal reporting that Bank of America will make “$5 billion in annual cost cuts by 2018 as part of its strategy to deal with persistently low interest rates that are eating away at lenders’ profitability.”

The New York Post is calling job cuts at Goldman Sachs the worst since the financial crisis in 2008. Fortune’s Stephen Gandel reported two days ago that Goldman had slashed a whopping “1,700 positions in the past three months.” Something else one won’t find in those smiley-face headlines is the fact that Wall Street is not only bleeding profits and jobs but it’s also bleeding equity capital – the only thing that separates the word “bank” from the word “bankruptcy.” While the Dow Jones Industrial Average and Standard and Poor’s 500 Indices may be setting new highs, the big Wall Street banks are decidedly not.

Over the past 52 weeks, Goldman is down from a share price of $214.61 to an open this morning of $162.55 – a decline of 24%. Bank of America is off 22% from its 52-week high, based on today’s open. Morgan Stanley and Citigroup are in decidedly worse shape with declines of 28% and 27%, respectively, from their 52 week highs versus their share price at the open of the New York Stock Exchange this morning. Add this all up and you’re talking about tens of billions of dollars in equity capital vaporizing.

Read more …

Denmark is in the same position as dozens of other countries: “..there’s a real risk that housing prices can see a dramatic fall, even though we’re not seeing a bubble in the classical definition of the term..”

Denmark Faces ‘Out of Control’ Housing Market in Negative Spiral (BBG)

Denmark’s biggest mortgage bank is warning there’s a risk the housing market may get “out of control,” especially around cities, as long-term negative interest rates make borrowers complacent. “To be concrete, there is a danger that Danes go blind to the risk of rates ever rising again,” Tore Stramer, chief analyst at Nykredit in Copenhagen, said in an e-mail. “That raises the risk of a major housing price decline, when rates at some point or other start to rise again.” Denmark’s central bank has had negative interest rates for the better part of four years. Thomas F. Borgen, CEO of Danske Bank, says his managers are operating under the assumption that rates won’t go positive until “at least” 2018, with Britain’s departure from the EU adding to the risk of an even longer period below zero.

With no other country on the planet having experienced negative rates longer than Denmark, the distortions the policy is wreaking may provide a preview of what other economies face should they go down a similar path. Danes can get short-term mortgages at negative interest rates, and pay less to borrow for 30 years than the U.S. government. Apartment prices in Denmark are now about 5% above their 2006 peak. Back then, the country’s bubble burst and apartment prices slumped about 30% through 2009. “It’s worth remembering that there’s a real risk that housing prices can see a dramatic fall, even though we’re not seeing a bubble in the classical definition of the term,” Stramer said. Denmark’s negative rates are a product of the central bank’s policy of defending the krone’s peg to the euro. Its main rate was minus 0.75% for most of last year, though the bank raised it by 10 basis points in January in an effort to normalize policy.

Read more …

Reality kicks in. What’s going to happen to the lenders who made it all possible?

Fracklog in Biggest US Oil Field May All But Disappear (BBG)

The number of dormant crude and natural gas wells in the U.S. stopped growing in the first quarter – and may all but disappear in the nation’s biggest oil field should prices hold steady. As of April 1, there were 4,230 wells left idle after being drilled, a figure little changed from January, according to an analysis by Bloomberg Intelligence. While some explorers have continued to grow their fracklog of drilled but not yet hydraulically fractured wells, others began tapping them in February as oil prices rose, the report showed.

Crude in the $40- to $50-a-barrel range may wipe out most of the fracklog in Texas’s Permian Basin and as much as 70% of the inventory in its Eagle Ford play by the end of 2017, according to Bloomberg Intelligence analyst Andrew Cosgrove. While bringing them online is the cheapest way of taking advantage of higher prices, the wave of new supply also threatens to kill the fragile recovery that oil and gas markets have seen so far this year. “We think that by the end of the third quarter, beginning of the fourth quarter, the bullish catalyst of falling U.S. production will be all but gone,” Cosgrove said in an interview Thursday. “You’ll start to see U.S. production flat lining.”

Read more …

It’s the same as oil producers. In China’s steel industry, a return to reality would mean too many jobs lost to bear.

China Continues To Produce More Steel Than The Rest Of The World Combined (BI)

For the fourth month in a row, China produced more steel than all other nations combined in June. According to data released by the WorldSteel Association on Wednesday, a group that accounts for approximately 85% of the world’s steel production, China produced 69.5 million of crude steel in June, dwarfing production in all other nations which came in at 66.5 million tonnes. At 136 million tonnes, total global output in June was unchanged from the levels of a year earlier.

While down 1.4% on the 70.5 million tonnes produced in May, Chinese crude steel production is now 1.7% higher than the levels of June 2015, fitting with the splurge in state-backed infrastructure investment seen in recent months. Despite the recent uplift in steel production, shown in the chart below supplied by WorldSteel, global steel production came in at 794.8 million tonnes in the first half of the year, down 1.9% on the same corresponding period in 2015.

Read more …

They fix it daily, but that’s not manipulation nor devaluation…. That’s just fixing.

China’s Vice FinMin: We’ve Got No Reason To Devalue The Yuan (CNBC)

China has no reason to devalue the yuan, as economic fundamentals remained strong, with growth at 6.7% in the first half, the country’s Vice Finance Minister Zhu Guangyao told CNBC. Zhu’s comments came shortly before Republican presidential candidate Donald Trump lambasted China again, this time for what he said was “devastating currency manipulation. [..] “The yuan has been trading around five-year lows recently, as concerns over the state of the economy fueled capital outflows. Investors have also expressed concerns over the level of debt built up in the economy. China suffered almost $700 billion worth of capital flight in 2015. The surge in outflows late in 2015 sparked market concerns that China’s foreign reserves weren’t sufficient to stabilize the currency by buying yuan over the long term.

Meanwhile, the greenback has strengthened against most major currencies as investors reacted to negative interest rates in Japan and Europe, as well as the possibility the Federal Reserve would continue on its rate-hiking path. On Friday the dollar/yuan traded at 6.6683 on-shore and 6.6754 off-shore. China fixes its currency against the dollar every day. In August, China shifted the market mechanism for setting the daily fix, saying it would set the spot rate based on the previous day’s close, theoretically allowing market forces to play a greater role in its direction. That resulted in an effective 2% devaluation in the currency, a move that sparked fears of a “currency war” to make Chinese exports more competitive.

Read more …

What’s that going to do to the share price?

Apple’s Q2 China Revenues Could Fall 20%: Baidu (CNBC)

Apple’s revenues in China could be down 20% in China in its quarterly earnings report, according to research by Baidu, the so-called “Chinese Google.” As part of its online suite of products Baidu offers mapping software and a search platform. It has about a 70 to 80% market share in search in China and logs billions of location requests on Baidu Maps. Using this so called “big data” from the use of its map and search products, which is all anonymized, Baidu said it could predict employment and consumer trends and their impact on a company’s revenues. It used these tools on Apple’s retail sales in China, selecting a list of flagship Apple stores in mainland China and the counting the volume of map queries of all the stores.

Baidu found that in the last quarter of 2015, map query volumes were up 15.4% year-on-year, which corresponded with a 14% rise in Apple’s China revenue in that same period. But in the first quarter of 2016, map queries declined 24.5% year-on-year, which was parallel with a 26% decline in Apple’s China revenue. “The impressively strong correlation indicates that map query data provides possibilities for us to ‘nowcast’ the company’s revenues and reveal the future trends. Based on our analysis of latest data, we project that the Apple’s revenue in China of second quarter of 2016 may be down around 20% on a year-over-year basis,” Baidu concluded. The “second-quarter” that Baidu references is Apple’s fiscal third-quarter and will be announced on July 26.

Read more …

Pensions. A word your children will know only from history books.

Pension Funds Are Underwater – And Taking Us With Them (VW)

The California Public Employees’ Retirement System (CalPERS) has announced its worst performance in seven years. Its meager rate of return for the fiscal year ending June 30 just managed to squeak by .6%, not even beating our current meager rate of inflation. After two successive years of tepid returns, long-term fund averages have sunk far below the critical 7.5% benchmark. It’s bad news for California taxpayers, because if returns don’t soon show a long-term average of 7.5%, they’ll be the ones who will have to make up the difference. Ted Eliopoulos, the fund’s chief investment officer, admits the massive pension fund’s long-term returns are well below anticipated levels, telling the Los Angeles Times, “We’re moving into a much more challenging, low-return environment.”

Yeah. Average returns are now barely over seven% for a twenty-year period, and returns over ten and fifteen years now average less than 6%. These changes are not just a blip on the investment horizon, as we assume bond yields and stock dividends will improve. According to the Milliman pension consulting firm, many public pension funds have had to adjust their expectations to accommodate lower returns overall. CalPERS needs to adjust its own expectations accordingly, even though doing so would drive up costs for state and local government agencies covered by the big pension firm. “We quite clearly have a lower return expectation than we had just two years ago,” Eliopoulos said. “That will be reflected in our next cycle. We are cognizant that this is a challenging environment for institutional investors.”

Thus, while the Times reports this dismal turn of events as a new development, it’s apparent Eliopoulos and CalPERS have been struggling for a while. What’s more, financial observers have been voicing concerns about pension fund depletion for at least as long as bond yields and stock dividends have been anemic. [..] The bad news is: If you’re a California public employee, you’re going to take a hit. But even if you’re not a public employee, but merely a California taxpayer, you’ll also take a hit. In addition, while private employee pension funds don’t pose the same financial risk to non-participants, their members run a similar risk; after all, they’re toiling in the same universe of stocks and bonds.

Read more …

The Guardian gets the headline right, but shows no understanding of what it means.

Once-Expanding EU Prepares To Contract For The First Time In Its History (G.)

Johannes Hahn’s job title sounds a little incongruous these days: he’s the EU commissioner for European neighbourhood policy and enlargement negotiations. The job title was created in the late 1990s during a period of optimism and expansion. But now, thanks to the will of 52% of British voters, the EU looks set to contract rather than enlarge for the first time in its history. There are still six candidate countries for EU membership, in the process of making formal applications to join the bloc, as well as a number of other countries with various levels of association. But with many in the EU wary and sceptical of further expansion, the only enlargement negotiations going on at the moment are about managing the expectations of countries that want to join.

Hahn was in Kiev last week, meeting Ukrainian government officials and chairing ministerial meetings of the EU’s Eastern Partnership, a programme linking the EU with six former Soviet countries, which was launched as a response to the Russian war with Georgia in 2008 and was implicitly meant as the first step towards EU membership for the nations. “Don’t believe that the unfortunate decision of Brexit will have any influence on our relationship – quite the opposite,” he told a meeting of the group’s foreign ministers.

But in reality, the initial Eastern Partnership plans are in tatters, as both enlargement fatigue inside the EU and a stick-carrot combination from Russia has pushed a number of the countries away from wanting further integration with the EU. Two of them, Belarus and Armenia, have joined Russia’s Eurasian Economic Union, an explicit challenge to the EU, while nobody seriously speaks about Ukraine or Georgia as members any more.

Read more …

Surprise? What surprise?

Earth On Track For Hottest Year Ever As Warming Speeds Up (R.)

The earth is on track for its hottest year on record and warming at a faster rate than expected, the World Meteorological Organization (WMO) said on Thursday. Temperatures recorded mainly in the northern hemisphere in the first six months of the year, coupled with an early and fast Arctic sea ice melt and “new highs” in heat-trapping carbon dioxide levels, point to quickening climate change, it said. June marked the 14th straight month of record heat, the United Nations agency said. It called for speedy implementation of a global pact reached in Paris last December to limit climate change by shifting from fossil fuels to green energy by 2100.

“What we’ve seen so far for the first six months of 2016 is really quite alarming,” David Carlson, director of the WMO’s Climate Research Program, told a news briefing. “This year suggests that the planet can warm up faster than we expected in a much shorter time… We don’t have as much time as we thought.” The average temperature in the first six months of 2016 was 1.3° Celsius (2.4° Fahrenheit) warmer than the pre-industrial era of the late 19th Century, according to space agency NASA. [..] “There’s almost no plausible scenario at this point that is going to get us anything other than an extraordinary year in terms of ice (melt), CO2, temperature – all the things that we track,” Carlson said. “If we got this much surprise this year, how many more surprises are ahead of us?”

Read more …

Hard to gauge what’s going to happen with this.

Fighting the Most Dangerous Animal in the World (Spiegel)

[..] Aedes aegypti presents a threat to some 4 billion people across the globe. The world long approached the Aedes agypti plague as though it were a storm that would soon blow over, but it has now become a fixture in large cities in the tropics. If nothing is done, experts say, more and more people will die as a result. And it has also become clear that some of the tropical diseases carried by this insect are coming to Europe. Partly, that is the result of rising temperatures on the European continent. In the southwestern German city of Freiburg, for example, scientists have determined that a population of Aedes mosquitoes survived the German winter for the first time. It used to be that only those who traveled to the tropics were at risk of becoming infected with tropical illnesses.

But now, many in Europe must face the prospect of the tropics coming to them. It was images from Brazil that sent a jolt of fear around the world at the beginning of this year. Across the country, babies were suddenly being born with heads that were misshapen and too small. When indications mounted that this curious increase in cases of so-called microcephaly was connected to the Zika epidemic that had stormed across Brazil in the previous months, the WHO declared an international emergency. Brazil mobilized 220,000 soldiers for the battle, sending them through bathrooms, yards and garages to eliminate standing water where female Aedes mosquitoes lay their eggs. But the campaign did little to reduce the threat. In the first four months of this year, officials registered 100,000 additional cases thought to be Zika.

In addition, almost a million people were infected with dengue fever, more than ever before in such a short span of time. There is no vaccine against the Zika virus and there is no medicine that can prevent people from becoming infected. In March, medical researchers said that Zika can also be transmitted via sexual intercourse and, as if that weren’t enough, 151 health experts wrote an open letter in May demanding that the Olympic Games – set to kick off in Rio in two weeks – be postponed or moved. Taking the risk of holding the games as planned, they said, would be irresponsible. The city is expecting a half-million visitors. If only a tiny fraction of them become infected by the virus, these games – intended to crown Brazil’s climb to economic power status – could mark the beginnings of a catastrophe.

Read more …

Jul 142016
 
 July 14, 2016  Posted by at 9:08 am Finance Tagged with: , , , , , , , , ,  


NPC Hessick & Son Coal Co. Washington 1925

China June Exports, Imports Both Fall More Than Forecast (R.)
China’s Steel Exports Jump to Second Highest Amid Tensions (BBG)
Great American Oil Bust Rages on; Defaults, Bankruptcies Soar (WS)
Gundlach Says Wall Street’s Suffering ‘Mass Psychosis’ (MW)
Helicopter Money – The Biggest Fed Power Grab Yet (David Stockman)
35-Year-Old Bond Bull Is on Its Last Legs (WSJ)
Bank of England To Cut Interest Rates To Halt UK Recession (G.)
UK Housing Sales Forecast To Fall Sharply This Summer After Brexit (G.)
Steve Keen Accused Of Causing Australia’s Coming Recession (Mish)
Britain’s MEPs Ushered Quietly Off Stage As The EU Show Goes On (G.)
Spain’s Banks are Suddenly “Too Broke To Fine” (DQ)
What It’s Like To Be A Non-EU Citizen (Trninic)
The Fake Biodiesel Factory That Pumped Out Real Money (BBG)

 

 

And that is with record steel exports. Not the first time I ask this: where would China exports be without that?

China June Exports, Imports Both Fall More Than Forecast (R.)

China’s exports fell more than expected in June as global demand remained stubbornly weak and as Britain’s decision to leave the European Union clouds the outlook for one of Beijing’s biggest markets. Imports also shrank more than forecast, indicating the impact of measures to stimulate growth in the world’s second-largest economy may be fading, after encouraging import readings in May. Exports fell 4.8% from a year earlier, the General Administration of Customs said on Wednesday, adding that China’s economy faces increasing downward pressure and the trade situation will be severe this year. Imports dropped 8.4% from a year earlier. That resulted in a trade surplus of $48.11 billion in June, versus forecasts of $46.64 billion and May’s $49.98 billion.

Economists polled by Reuters had expected June exports to fall 4.1%, matching May’s decline, and expected imports to fall 5%, following May’s 0.4% dip. The marginal import decline in May was the smallest since late 2014, and had raised hopes that China’s domestic demand was picking up. “The world economy still faces many uncertainties. For example, Brexit, expectations of an interest rate hike by the Federal Reserve, volatile international financial markets, the geopolitical situation, the threat of terrorism … these will affect the confidence of consumers and investors globally and curb international trade,” customs spokesman Huang Songping told a news conference. “We believe China’s trade situation remains grim and complex this year. The downward pressure is still relatively big.”

Read more …

“Sales advanced 23% from a year earlier..”

China’s Steel Exports Jump to Second Highest Amid Tensions (BBG)

China’s steel exports climbed to the second-highest level on record in June, as shipments from the world’s biggest producer ramp up amid escalating trade tensions. Sales advanced 23% from a year earlier to 10.94 million metric tons, according to China’s customs administration. That’s only eclipsed by shipments in September last year, when the country sent 11.25 million tons overseas. Exports in the first six months were 57.12 million tons, the seventh on-year increase in a row and the most ever for the period.
China’s record supplies have fueled global trade tensions as too many producers compete for sales. An EU investigation launched last week into imports from five countries is “symptomatic of the rising protectionism in global steel markets as a result of overcapacity,” according to a note from Macquarie.

“There’s a lot of trade friction but overall Chinese steel prices are relatively low, demand is steady, and together with the renminbi’s depreciation, the Chinese exports are very competitive,” Helen Lau, an analyst at Argonaut Securities Asia Ltd., said from Hong Kong. “It’s encouraging for Chinese mills and good for overseas consumers, but it’s not what foreign mills want to see.” Faced with its slowest growth in decades, China is exporting its steel surplus. Shipments will accelerate in the second half as prices decline and margins at mills are squeezed, Ren Zhuqian, chief analyst at Mysteel Research, said last month, forecasting exports could reach 117 million tons for the year, higher than last year’s record 112.4 million tons.

Read more …

Cleansing.

Great American Oil Bust Rages on; Defaults, Bankruptcies Soar (WS)

Junk bonds, trading like stocks since February, have skyrocketed and yields have plunged. But that doesn’t mean the bloodletting is over. The trailing 12-month US high-yield bond default rate jumped to 4.9% at the end of June, the highest since May 2010 as the Financial Crisis was winding down, Fitch Ratings reported today. The first-half total of $50.2 billion of defaults already exceeds the $48.3 billion for the entire year 2015. Energy companies accounted for 56% of those defaults. The energy sector default rate shot up to 15%. Within it, the default rate of the Exploration & Production (E&P) sub-sector soared to 29%! And the default party isn’t over: “Despite the run-up in prices since the February trough, there will be additional sector defaults, with Halcon Resources expected to file imminently,” Fitch reported.

Issuance of junk bonds in the first half has plunged 34% from a year ago, to $120.5 billion, according to the Securities Industry and Financial Markets Association (SIFMA), as junk-rated energy companies are having one heck of a time borrowing money and issuing bonds. The fact that investors – who’ve now been burned for nearly two years – are reluctant to extend new credit to teetering oil & gas companies precipitates their default and bankruptcy. Fitch: “The combination of high energy and metals/mining default rates and lower year to date issuance has been a one-two punch for the high yield bond market this year,” said Eric Rosenthal, Senior Director of Leveraged Finance. “The question going forward is whether macro events will disrupt markets and restrain issuance for the remainder of the year.”

Read more …

“Call me old-fashioned, but I don’t like investments where if you’re right you don’t make any money..”

Gundlach Says Wall Street’s Suffering ‘Mass Psychosis’ (MW)

This market is dealing with a “mass psychosis.” That’s the latest perspective on the state of Wall Street from Jeff Gundlach, the star money manager who founded DoubleLine Capital. Late Tuesday, during his regular webcasts to discuss markets, Gundlach sounded perplexed that investors’ demand for the perceived safety of government bonds has driven 10-year Treasury notes to record lows, even as the Dow Jones Industrial Average and the S&P 500 index scored fresh record highs Wednesday. Treasury yields, which have come off their 2016 nadir, are still hovering below their levels before the U.K.’s decision to exit the European Union sent global stock markets spiraling down. Bond prices move inversely to yields. Gundlach used the following chart in his Tuesday webcast presentation to highlight the historic moves in Treasury yields:

“There’s something of a mass psychosis going on related to the so-called starvation for yield,” said Gundlach, whose fund manages about $100 billion. “Call me old-fashioned, but I don’t like investments where if you’re right you don’t make any money,” he said. Gundlach believes that the benchmark 10-year note will move above 2% soon, but perhaps not until sometime next year. Some market participants see the benchmark’s yield tumbling further before that rise happens. Tom Di Galoma, managing director at Seaport Global, predicts the 10-year yield will slip below 1% over the next six to nine months, citing the anemic European economy in the wake of Brexit and concerns over the world’s second-largest economy, China. Meanwhile, the 10-year yield slipped below 1.47% midday Wednesday as U.S. stocks were struggling for a fourth straight session of gains, extending a record run.

Read more …

“..our monetary politburo would overtly conspire and coordinate with the White House and Capitol Hill to bury future generations in crushing public debts.”

Helicopter Money – The Biggest Fed Power Grab Yet (David Stockman)

The Cleveland Fed’s Loretta Mester is a clueless apparatchik and Fed lifer, who joined the system in 1985 fresh out of Barnard and Princeton and has imbibed in its Keynesian groupthink and institutional arrogance ever since. So it’s not surprising that she was out flogging – albeit downunder in Australia – the next step in the Fed’s rolling coup d’ etat. We’re always assessing tools that we could use,” Mester told the ABC’s AM program. “In the US we’ve done quantitative easing and I think that’s proven to be useful. “So it’s my view that [helicopter money] would be sort of the next step if we ever found ourselves in a situation where we wanted to be more accommodative.” This is beyond the pale because “helicopter money” isn’t some kind of new wrinkle in monetary policy, at all.

It’s an old as the hills rationalization for monetization of the public debt – that is, purchase of government bonds with central bank credit conjured from thin air. It’s the ultimate in “something for nothing” economics. That’s because most assuredly those government bonds originally funded the purchase of real labor hours, contract services or dams and aircraft carriers. As a technical matter, helicopter money is exactly the same thing as QE. Nor does the journalistic confusion that it involves “direct” central bank funding of public debt make a wit of difference. Suppose Washington issues treasury bonds to the 23 primary dealers on Wall Street in the regular manner. Further, assume that some or all of these dealers stick the bonds in inventory for 3 days, 3 months or even 3 years, and then sell them back to the Fed under QE (and most likely at a higher price).

So what! The only thing different technically about “helicopter money” policy is the suggestion by Bernanke and others that the treasury bonds could be issued directly to the Fed. That would just circumvent the dwell time in dealer (or “investor”) inventories but result in exactly the same end state. In that event, of course, Wall Street wouldn’t get the skim. But that’s not the real reason why helicopter money policy is so loathsome. The unstated essence of it is that our monetary politburo would overtly conspire and coordinate with the White House and Capitol Hill to bury future generations in crushing public debts.

Read more …

“It is outright panic-driven momentum.”

35-Year-Old Bond Bull Is on Its Last Legs (WSJ)

They have been saying it for 35 years. But after 3Ω decades of stunning returns, the biggest bond bull market in history looks to be entering its final stages. Why? Changing politics and the perverse, looking-glass world of negative yields. Bonds are meant to be safe, dull investments. But there is nothing boring, and not a lot of safety, in Japanese government bonds this year: The 40-year has returned an extraordinary 48% in six months, including the paltry coupon, and other long-dated JGBs have also had their best returns on record. U.K. and German long-dated bonds have produced similar returns to those after the collapse of Lehman. Returns on U.S. Treasurys are less exotic, but the 30-year has returned 22% this year—a gain big enough to worry longtime bond watchers.

It would have been easy to make the mistake of thinking the bull run in bonds was over many times since then-Federal Reserve Chairman Paul Volcker got it started by taking control of inflation. The bet that the Japanese bond market—which long had the lowest yields in the world—would finally buckle has lost so much money for so many people that it is known as the “widowmaker” among traders. That hasn’t stopped Eric Lonergan, who runs a multistrategy fund for M&G in London. He has 15% of his fund betting against long-dated JGBs, and has endured a brutal move in the market against him in the past few weeks. Yet, he believes the likelihood is that the market will soon turn. “This is price driving price and is hugely, hugely vulnerable,” he said. “It is outright panic-driven momentum.”

Read more …

Did consumer confidence perhaps fall because Carney et al -the media!- spread all their fear stories before the Brexit referendum?! And now they can all go: I told you so!

Bank of England To Cut Interest Rates To Halt UK Recession (G.)

The Bank of England could cut interest rates and inject billions of pounds into the financial system as early as Thursday as policymakers seek to prevent Britain sliding into recession after the EU referendum. Under pressure to stem further falls in sterling, Mark Carney, the governor, is expected by financial markets to halve the 0.5% base rate on Thursday and reignite the Bank’s quantitative easing programme. Speculation has intensified in recent days after Carney dropped heavy hints that action would be needed to turn around an economy suffering badly as a result of the vote to leave the EU.

Several City economists said it was crucial for the central bank to step in and maintain the flow of cheap credit to the economy at a time when business and consumer confidence had fallen to levels last seen after the financial crash. A slump in the pound to a 31-year low has also undermined confidence among City investors concerned that the UK’s growth prospects will be damaged by leaving the single market. Markets have put an 80% probability on a move by the Bank by Thursday. Howard Archer, chief economist at IHS Global Insight, said: “With the UK economic outlook weakened by the Brexit vote, there can be little doubt – if any – that the Bank of England will enact some stimulus following the July MPC [monetary policy committee] meeting.

The only question really seems to be what action will the MPC take?” Carney said in a speech last month that the loss of confidence highlighted by a string of negative surveys meant “some monetary policy easing will likely be required over the summer”. A closely watched consumer confidence index from market researchers GfK last week recorded the biggest drop in sentiment for 21 years, following the Brexit vote.

Read more …

Britain gets exactly what it needs. Where is the joy?

UK Housing Sales Forecast To Fall Sharply This Summer After Brexit (G.)

The number of homes changing hands is expected to slump this summer in the wake of the UK’s vote to leave the EU, with estate agents and surveyors more pessimistic about the housing market than at any point since the late 1990s. Inquiries from buyers fell for the third month running in June, and the number of sales agreed dropped sharply as the Brexit vote fuelled uncertainty in the market, according to the latest monthly survey by the Royal Institution of Chartered Surveyors (Rics). New buyer inquiries declined “significantly” during the month, it said, with 36% more respondents reporting a drop than an increase – the lowest reading since the financial downturn was beginning in mid-2008.

Over the same period, the supply of properties coming onto the market fell in every region except Northern Ireland, Rics said, and sales fell for a third consecutive month. Looking ahead over the next three months, 26% more Rics members expected sales to drop further than expected a busier housing market. “This is the most negative reading for near-term expectations since 1998,” Rics said. The numbers of surveyors in London reporting falling prices slipped deeper into negative territory in June, with nearly half of surveyors in the capital reporting falls rather than rises. Price falls were particularly concentrated in central London.

The referendum is not the only factor behind the dip in activity. The stamp duty hike on second homes, which came into force on 1 April, has also disrupted the market. Rics’s chief economist, Simon Rubinsohn, said: “Big events such as elections typically do unsettle markets so it is no surprise that the EU referendum has been associated with a downturn in activity. “However even without the buildup to the vote and subsequent decision in favour of Brexit, it is likely that the housing numbers would have slowed during the second quarter of the year, following the rush in many parts of the country from buy-to-let investors to secure purchases ahead of the tax changes.”

Read more …

Australia Insolvencies +14%, Debt Agreements +25%, Bankruptcies +7%

“..we all know at heart there is precisely one person to blame: Australian economist Steve Keen, now exiled in God-forsaken London. Were it not for Keen’s incessant fearmomgering about the Australian housing bubble, property values in Sydney alone would now be worth more than the sum total of property values in the US, China, UK, Mars, and Uranus combined.”

Steve Keen Accused Of Causing Australia’s Coming Recession (Mish)

It appears there are a bit of credit difficulties down under. Cash-strapped Australian personal insolvencies, bankruptcies, and debt agreements experience their sharpest rise in seven years. Please consider Struggling Aussies Rack Up Debt.

“Alarming new figures released yesterday by the Australian Financial Security Authority found personal insolvencies in the June quarter climbed by nearly 14% compared to the June 2015. Debt agreements — an agreement between a debtor and a creditor where creditors agree to accept a sum of money from the debtor – rose by nearly a massive 25%. Bankruptcies increased by 7%. Veda’s general manager of consumer risk Angus Luffman said multiple factors were to be blamed for a stalling of consumer credit. “The continuing slowdown in residential property markets, coupled with weak wages growth and subdued retail sales growth had all contributed to the continued slowdown seen in the June credit demand index,’’ he said.

“Turnover for household goods which is often big-ticket items like whitegoods and couches which are financed by credit has slowed significantly in recent months.” Australian Bureau of Statistics lending data released yesterday found total new lending commitments including housing, personal, commercial and lease finance dropped by 3.2% in May, the second consecutive fall. Lending totalled $67.5 billion in May which was down seven per over the year and sat at a 17-month low. HSBC chief economist Paul Bloxham blamed the cooling of the housing market for the softening of the willingness to borrow.”

While others point the finger every which way, we all know at heart there is precisely one person to blame: Australian economist Steve Keen, now exiled in God-forsaken London. Were it not for Keen’s incessant fearmomgering about the Australian housing bubble, property values in Sydney alone would now be worth more than the sum total of property values in the US, China, UK, Mars, and Uranus combined. Were it not for Keen, every property owner down under could retire now and live off the perpetual appreciation of their property wealth.

Read more …

“..Nigel Farage and 20 other Ukip MEPs will get to vote on the terms of Britain’s exit, while the British government, led by remain supporter Theresa May, will have to accept the EU’s terms..”

Britain’s MEPs Ushered Quietly Off Stage As The EU Show Goes On (G.)

[..] Paradoxically, British MEPs are expected to vote on the UK’s EU divorce treaty, expected to be thrashed out by David Davis, the secretary of state for exiting the EU. Although the British government will be treated as a foreign country, there is nothing in the EU rulebook that prevents British MEPs from having a say when the European parliament votes on the British divorce treaty under article 50. This throws up the odd situation that Nigel Farage and 20 other Ukip MEPs will get to vote on the terms of Britain’s exit, while the British government, led by remain supporter Theresa May, will have to accept the EU’s terms. British diplomats also find themselves in a peculiar Brexit limbo.

They will have to decide how hard to fight Britain’s corner on EU legislation that will exist for years after the UK has left. The most likely outcome is that British diplomats will continue to press British interests, because EU legislation could still affect the UK after Brexit. Norway implements all EU directives as the price of being in the EU single market – the “pay without a say” model that politicians in Oslo think the British would loathe. It is the scenario envisaged by Cameron when he promised an EU referendum in 2013. “Even if we pulled out completely, decisions made in the EU would continue to have a profound effect on our country,” he said in a Bloomberg speech. “But we would have lost all our remaining vetoes and our voice in those decisions.”

British diplomats might push British interests, but they could be frozen out of the informal wheeling and dealing. “Politics is about the future and if someone at the table has no position any more, [the others] will do deals without them,” says Dirk Schoenmaker, a senior fellow at the Bruegel thinktank. He predicts that “the big three” that decide financial regulation – Germany, France and the UK – will be cut down to a big two. “It is quite clear, from 23 June onwards the big deals in this area will be made by Germany and France, without the UK.”

Read more …

Spain’s backdoor to hurt its already shattered people.

Spain’s Banks are Suddenly “Too Broke To Fine” (DQ)

After eight years of chronic crisis mismanagement, moral hazard and perverse incentives have infected just about every part of the financial system. Earlier this week, the U.S. Congress published the findings of a three-year investigation into why the Department of Justice chose not to punish HSBC and its executives for their violations of US anti-money laundering laws and related offenses – because doing so would have had “serious adverse consequences” for the financial system – the “Too Big To Jail” phenomenon, a perfect, all-purpose, real-world Get-Out-of-Jail-Free card. But now there’s “Too Broke to Fine.” Today over a dozen Spanish banks were given a life-line by the EU’s advocate general, Paolo Mengozzi, that could be worth billions of euros in savings for the banks.

For millions of Spanish mortgage holders, it could mean billions of euros in lost compensation. Just over seven years ago, when conditions were beginning to sour for Spain’s banking system, 40 out of 42 Spanish banks decided to insert “floor clauses” in their mortgage contracts. These effectively set a minimum interest rate — typically between 3% and 4.5% — for all their variable-rate mortgages (which are very common in Spain), even if the Euribor dropped far below that figure. This, in and of itself, was not illegal. The problem is that most banks failed to properly inform their customers that the mortgage contract included such a clause. Those that did, often told their customers that the clause was an extreme precautionary measure and would almost cerainly never be activated.

After all, they argued, what are the chances of the euribor ever dropping below 3.5% for any length of time? At the time (early 2009), Europe’s benchmark rate was hovering around the 5% mark. Within a year it had crashed below 1% and is now languishing deep below zero. As a result, most Spanish banks were able to enjoy all the benefits of virtually free money while avoiding one of the biggest drawbacks: having to offer customers dirt-cheap interest rates on their variable-rate mortgages. For millions of Spanish homeowners, the banks’ sleight of hand cost them an average of €2,000 per year in additional interest payments, during one of the worst economic crises in living memory. Many ended up losing their homes.

Read more …

Nice but very biased: “You have good jobs that make it possible to pay the taxes and your expenses.” Err.. no, too many don’t, and that’s why Leave won. You may have a master’s on engineering, but if you can’t understand these dynamics, what’s that worth?

What It’s Like To Be A Non-EU Citizen (Trninic)

[..] let me tell you a few things about the life of a non-EU citizen. When I came to Austria from Bosnia in 2003 to study at Technical University of Graz, I had to undergo various administrative and non-administrative checks. At one point, I and all my fellow Bosnian students had to show proof we didn’t have pneumonia, typhus – which I somewhat understand. But we even had to prove we did not have RABIES. Rabies! In the 21st century! My home country is only about 300 kilometers from Austria and yet we were treated as if we came from 200 years ago, at least. On top of that, we had – and still have – the pleasure of needing a visa every year and paying for it, of course. We even paid tuition for college, though the Austrians and EU students did not.

But that was the deal, and I personally was happy to be able to work the lowest level student jobs and in return get a decent education. The common attitude was “deal with it!” and so we did. After college, I got my first job at a big construction company. The trick? I worked with a Bosnian contract. It was an all-in contract, written for slaves. But hey, I had a job. I was one of three people in my branch office who had a master’s degree in engineering (much less went to college), spoke three foreign languages, drove 50,000 kilometers per year, yet I was still paid less than everyone. But I dealt with it. If the company was to say at any moment I was fired, I had two months to leave the country or find a new company.

Many highly qualified non-EU citizens live this kind of life day-to-day and the only thing on our minds is, “What the hell was on the UK’s mind when they voted LEAVE?” The UK always was the “favorite (and the spoiled) kid of the EU family.” It kept its currency. It had more favorable EU conditions and it always behaved a bit stand-offish toward the rest of the Europe, if we are honest. The UK has about 52 million residents and pays about €5 billion to EU fund per year (€96 per citizen). By comparison, Austria has 8 million residents and pays about €1 billion per year to EU fund (€125 per citizen).

Read more …

Great story.

The Fake Biodiesel Factory That Pumped Out Real Money (BBG)

The biodiesel factory, a three-story steel skeleton crammed with pipes and valves, squatted on a concrete slab between a railroad track and a field of storage tanks towering over the Houston Ship Channel. Jeffrey Kimes, an engineer for the Environmental Protection Agency, arrived there at 9 a.m. on a muggy Wednesday in August 2011. He’d come to visit Green Diesel, a company that appeared to be an important contributor to the EPA’s fledgling renewable fuels program, part of an effort to clean the air and lessen U.S. dependence on foreign fuel. In less than three years, Green Diesel had reported producing 50 million gallons of biodiesel. Yet Kimes didn’t know the company. He asked other producers, and they weren’t familiar with Green Diesel either.

He thought he ought to see this business for himself. Kimes, who works out of Denver, was greeted at the Green Diesel facility by a man who said he was the plant manager. He was the only employee there, which was odd. “For a big plant like that, you’re going to need a handful of people at least to run it, maintain it, and monitor the process,” says Kimes, a 21-year EPA veteran. The two toured the grounds, climbing metal stairways and examining the equipment. The place was weirdly still and quiet. Some pipes weren’t connected to anything. Two-story-high biodiesel mixing canisters sat rusting, the fittings on their tops covered in garbage bags secured with duct tape. Kimes started asking questions.

“They showed me a log, and from that you could see they hadn’t been producing fuel for a long period of time,” he says. An attorney for Green Diesel showed up. Kimes asked how he could reconcile the lack of production with what Green Diesel had been telling the EPA. The attorney said he didn’t know, he’d been hired only the day before. “It was obvious what was going on,” Kimes says. The next day, he appeared at Green Diesel’s office in Houston’s upscale Galleria neighborhood, 15 miles from the plant, hoping to collect production records and other information. Someone stuck him in a conference room. Soon he was on the phone with the lawyer from the day before, who told him not to speak with any more Green Diesel employees.

Kimes went back to Denver and started calling Philip Rivkin, Green Diesel’s founder and chief executive. He wasn’t available. And he never would be. That fall, Rivkin left Houston to live in Spain with his wife, their teenage son, a $270,000 Lamborghini Murcielago Coupe, and a $3.4 million Canadair Challenger jet. A passport Rivkin obtained in Guatemala, where he moved after living for an undetermined period in Spain, shows him with dark hair, a double chin, a lazy eye, and an impassive look. It’s one of the few publicly available photographs of the man. Now serving a 10-year sentence at the federal prison in Bastrop, Texas, Rivkin declined through his lawyer, Jack Zimmermann, to be interviewed for this story.

Read more …