How Silicon Valley Follows The Money

Authored by Pepe Escobar via Strategic-Culture.org,
There’s way more in common between Wall Street and Silicon Valley than meets the untrained eye
Wall Street and Silicon Valley are two of the key strategic hubs of hyperpower global domination. The others are the industrial-military-surveillance-security complex – of which Hollywood and corporate media are the soft power extensions – and the petrodollar racket/tributary system.
Silicon Valley has been relentlessly constructed and idolized as a benign myth; technology breaking the ultimate frontiers and reaching Utopia At Last. Not really. A joyride of a book – Chaos Monkeys: Inside the Silicon Valley Money Machine, by Antonio Garcia Martinez – argues it’s all about, what else, money. As in cold, hard cash, stock options and, just like in Wall Street, bonuses.
Martinez tells it like an American Dream insider. He’s a son of Cuban exiles, born in Southern California, with an almost PhD in Physics at Stanford, and a detour across Goldman Sachs that taught him how the casino system works. Then, back in California, he built a start-up with two friends whose embryonic product was a code-grounded method to target and boost electronic advertising. Secret revealed; electronic ads happen to be the real Holy Grail of the much lauded IT Revolution.

This post was published at Zero Hedge on Sep 2, 2016.

How a Small-ish Stock Market Swoon Might Unleash the Next Credit Nightmare

‘Weakest link’ companies worst since October 2009. The ‘weakest links,’ according to S&P Global Ratings, are financially squeezed companies that S&P rates B- (neck-deep into junk), with ‘negative’ rating outlooks or negative implications on CreditWatch. They’re uncanny predictors of corporate defaults. When the number of ‘weakest links’ rises, the default rate will soon rise as well. The last three times it rose enough, a recession kicked in. The last two times were accompanied by fabulous fireworks in the markets.
In August, the number of ‘weakest link’ companies rose to 251, the highest since October 2009, up from 140 two years ago, and heading toward the record of 300 in April 2009 when the financial world was coming unglued.
These weakest links have $359 billion in debt outstanding.
They serve as ‘potential default indicators’ because they’re almost 10 times more likely to default than run-of-the-mill junk-rated companies, according the S&P report, cited by Bloomberg. Blame oil and gas? The markets surely would like to. But only 62, or 25% of the weakest links, are oil and gas companies. The next largest sector: 34 financial institutions for a share of 14%.

This post was published at Wolf Street on September 3, 2016.

2/9/16: Does bank competition reduce cost of credit?

In the wake of the Global Financial Crisis, there has been quite a debate about the virtues and the peril of competitive pressures in the banking sector. In a paper, published few years back in the Comparative Economic Studies (Vol. 56, Issue 2, pp. 295-312, 2014 myself, Charles Larkin and Brian Lucey have touched upon some of the aspects of this debate.
There are, broadly-speaking two schools of thought on this subject:
The market power hypothesis – implying a negative relationship between bank competition and the cost of credit (as greater competition reduces the market power of banks and induces more competitive pricing of loans). This argument is advanced by those who believe that harmful levels of competition can lead to banks mispricing risk while competing with each other. The information hypothesis postulates a positive link between credit cost and competition, as the banks may be facing an incentive to invest in soft information.

This post was published at True Economics on Saturday, September 3, 2016.

Current Housing Bubble Varies By Metro

The Case Shiller home sales price indexes (CSI) overweight the sales of old houses and bank REO sales. The CSI indexes do not count sales of newer homes in good condition. As a result of that methodology, the CSIs seemed to do a good job showing when metro housing markets were beginning to roll over at the Great Housing Bubble top. Lower quality properties and increasing distress sales would obviously lead the market way down.
However, because Case Shiller indexes overweight older properties and distress sales, they missed the beginnings of the price bottom in 2010-12, and they typically lag the current housing market inflation on the way up.
In many US metros, median home prices are now well above the 2006-07 peak bubble levels. Newer, better quality homes perk up in price first and they inflate the most. As markets get frothier on the way up, the sales of better properties become an ever greater weight in the market. If you ignore them, then the fact that a market is in a bubble will be invisible. That’s what Case Shiller does. It ignores the hottest parts of the metro markets, either minimizing the magnitude of the bubble, or hiding it altogether.

This post was published at Wall Street Examiner on September 2, 2016.

Jumping Ship: Two Central Banks Just Printed Billions In Paper Currency… And Immediately Bought Gold Mining Stocks With It

When former Federal Reserve Chairman Ben Bernanke was questioned by Ron Paul during a 2011 monetary policy report, he famously told the Congressman that gold is not money and the only reason central banks hold it is because of ‘long-term tradition. ‘
Bernanke’s comments have since been cited by financial pundits as expert advice on why precious metals investments should be considered no different than other traditional investments like equities or bonds. Suggesting they may be a safe haven asset or that there are thousands of years of evidence supporting the claim that gold and silver are money are often laughed at and marginalized.

This post was published at shtfplan on September 2nd, 2016.

No Matter What Century, It’s Always Politics

If you look at the calendar, the months that have 31 days are January, March, May, July, August, October, and December. The only two months with 31 days back-to-back are July and August. Why? July was named for Julius Caesar. Augustus, meaning ‘father of the nation,’ died on August 19, 14 AD, and was probably poisoned by his wife. So they named August after him before his death. But of course, August had 30 days and that would be slighting Augustus relative to Julius who had 31 days. So the solution was obvious. They took the extra day from February which was only named for a feast day known as the Februarius or Februa, the feast of purification, and renamed the month with 31 days equal to July

This post was published at Armstrong Economics on Sep 3, 2016.

2/9/16: Investment in Italy: Banks, Capital and Firms Structures

In my course on the enterprise and financial risk last semester, we talked about the peculiar (or idiosyncratic) nature of Italian firms across a number of matters:
Relationship banking; Firm governance: family ownership, equity distribution and aspects of firm strategy and operations; Firm capital structure (leverage risks in particular); Firm dividend policy choices, etc. Now, let’s add to that literature something new. A recent paper from the Banca d’Italia, titled ‘Investment and investment financing in Italy: some evidence at the macro level’ by Claire Giordano, Marco Marinucci and Andrea Silvestrini (Banca d’Italia Occasional paper Number 307 – February 2016) looks at the evolution of the Global Financial Crisis and the Great Recession across the Italian economy in terms of credit fundamentals.

This post was published at True Economics on Friday, September 2, 2016.

ABOUT SEPT 2/DEUTSCHE BANK ADMITS IT HAS AN OBLIGATION TO DELIVER GOLD IN THE XETRA CASE: LOOKS LIKE A DEFAULT TO ME/ECB THROWS OUT A TRIAL BALLOON THAT THEY ARE GOING TO BUY STOCKS AS THEY ARE R…

Gold:1322.10 up $9.90
Silver 19.28 up 42 cents
In the access market 5:15 pm
Gold: 1324.90
Silver: 19.45
.
The Shanghai fix is at 10:15 pm est and 2:15 am est
The fix for London is at 2 am est (first fix) and 10 am est (second fix)
Thus Shanghai’s second fix corresponds within 15 minutes of London’s first fix.

This post was published at Harvey Organ Blog on September 2, 2016.

Psychological Manipulation and Economic Deception are now the Order of the day

A man has free choice to the extent that he is rational.
St. Thomas Aquinas
It is possible if one takes the right actions to make money and remain relatively unscathed in such an environment. One cannot say the same for the masses because they are walking with their eyes wide shut. In other words, they do not see what’s happening; their heads are stuck in the sand. They are oblivious to what’s going around, and if you try to warn them, they are apt to strangle you. This situation is strikingly similar to ‘Plato’s allegory of the cave.’
Psychological Manipulation
It is being used ubiquitously to control the masses and their perceptions. The goal is to alter the perception; modify the perception and you changereality. You need to start positioning yourself to be in the land of neutrality when it comes to taking a stance. Neutral does not mean running and hiding in some zone. You should be able to look at the argument from both sides of the coin and agree with either side if necessary without becoming emotionally attached to the outcome. When you commit yourself to a certain position you hamper your ability to see the full picture; you have willingly reduced your range of observation by 50% or more. Take thisprinciple to the stock markets; you should not forcefully try to find a camp you belong to. In other words being a perma-bull or a perma-bear is utterlysilly for now you only have access to 50% of the data; you will block any bullish scenario if you are perma-bear and vice versa. Data is there to be used not to be blocked, and that is where the top players are getting the masses; they are forcing them to make permanent choices or takepermanent positions that are detrimental to their welfare. The players doing the pushing though are not plagued with these handicaps; they easily navigate from one camp to another, never forming any attachment with any of these camps.

This post was published at GoldSeek on Friday, 2 September 2016.

Gold Daily and Silver Weekly Charts – Out of Season

The Jobs Report came in light in key areas of wages and hours worked, in addition to the net number of jobs added.
And so the market rallied, on expectations that the Fed will stay its hand in September.
There is a bit of mixed sentiment, with the defenders of the statist quo like Goldman Sachs, the NY Times, and the Washington Post suggesting that this was a goldilocks report that opens the door to a Fed interest rate increase.
However, the rest of the market which is saying that there is no sustainable recovery, and therefore the data does not warrant it.
And so gold and silver rallied a bit on the back of a weaker dollar. The US needs a stronger dollar like they need another Clinton in the White House. Although Trump is certainly no better, just differently bad.
The States will be on holiday on Monday, celebrating those who labor. Ironic, because the policy of the ruling class pretty much hold those sorts in contempt.
Try to carry on without the imperial guidance.

This post was published at Jesses Crossroads Cafe on 02 SEPTEMBER 2016.

S&P Warns High-Yield Credit Quality Worst Since 2009 As “At-Risk” Debt Soars To $359 Billion

A new report by S&P Global points out that the number of “at-risk” high-yield issuers (i.e. those with a B- or lower rating and negative outlook) soared in 2016 to the highest level since the “great recession” of 2009. As Bloomberg points out, S&P’s list of the most “at-risk” corporate issuers included 251 companies and $359 billion of debt which is the highest level since October 2009. As S&P’s head of global fixed income research notes, issuers at the low end of the HY rating spectrum have historically been 10x more likely to miss bond payments than other HY issuers.

This post was published at Zero Hedge on Sep 2, 2016.

Policyholders File Class Action Lawsuits As Sinking Bond Yields Force Insurers To Hike Rates

The latest victims of misinformed global central banking policies are retirees holding “universal life” policies…once again the “prudent” folks who saved for their retirement are exactly the ones being brutally punished for their efforts.
As the Wall Street Journal points out, insurers are facing a rapidly rising number of class action lawsuits around the country after their attempts to raise premiums on universal life policies in response to lackluster returns on their bond portfolios. As we’ve discussed on several occasions, low bond yields on sovereign debt are taking their toll on insurers whose asset returns have suffered. The problem faced by insurers is related to old policies underwritten before the “great recession” and before central banks around the world decided to embark upon their “grand experiment.” While insurance policies written today can be adjusted for the current market environment, policies written prior to the “great recession” often carried “guaranteed” interest payments as high as 4% – 5%. And, with central banking policies around the globe pushing sovereign bond rates to historic lows (see “With Over $13 Trillion In Negative-Yielding Debt, This Is The Pain A 1% Spike In Rates Would Inflict“) it is no wonder that insurers are taking a hit. Per the As the Wall Street Journal:
At issue are ‘universal life’ policies. In short, the policies combine a death benefit with a tax-advantaged savings account that has a minimum interest rate. Such policies accounted for more than a quarter of all individual life-insurance sales in some years past. Millions of Americans own them.

This post was published at Zero Hedge on Sep 2, 2016.

Does It Matter If China Cleans Up Its Banks?

It has been a while since we have taken a close look at China. After the dustup with Chinese ‘depreciation’ about this time last year and all the hysteria, all eyes have been trained on the rest of the world. It has been only a little more than a year since we published the book I co-wrote with Worth Wray on China, which we called ‘A Great Leap Forward?’ The title was meant to be ironic, because the original Great Leap Forward imposed by Mao in the ’60s was one of the most economically disastrous times in all of Chinese history. Chinese food production increased, yet 30 million people starved and the country underwent a true financial and economic crisis due to the utter insanity of central control of markets.
China is now attempting something that is different in texture but as powerful in scope as Mao’s Great Leap Forward. China has amassed an enormous amount of debt in its drive to pull itself into the modern world. That China has been successful in remaking itself into a major force in the world is self-evident. But those who are paying attention see the country’s debt growing at a phenomenal rate, much higher than the economy’s rate of growth; and that rate of growth is shrinking, so the ability to service that debt is shrinking, too. And we are talking about massive, humongous amounts of debt in relation to GDP.

This post was published at Mauldin Economics on SEPTEMBER 2, 2016.

Monetary Experiment Creating Mother Of All Crises: ‘Negative Rates Phenomenally Good for Gold and Silver’

It is the silver and gold lining of the dismal and imploding economy.
The longer that central banks force negative interest rates – and wipe out the value of savings, pensions, and insurance accounts by denying them return on investment – the more attractive gold and other commodities become as a safe haven for maintaining flexibility.
Moreover, the closer the system comes to unraveling altogether, gold and silver remain attractive as a means of holding onto money with ready, liquid exchange value.
If hyperinflation were to make the dollar virtually worthless overnight, or if cash controls were imposed to limit people to a paltry daily allowance from ATMs and prevent bank runs, physical commodities can still be used.

This post was published at shtfplan on September 2nd, 2016.

Market Talk – September 2, 2016

The Nikkei and Hang Seng closed virtually unchanged in anticipation of the US lunchtime numbers. The Hang Seng was the best performing Asian index closing up 0.45%. It was always going to be about the US Payrolls even as Europe opened marginally better bid. Overnight we had seen the USD take a bit of a breather and saw oil ( 2.5%) and gold ( 0.75%) both recovering from the past few days weakness.

This post was published at Armstrong Economics on Sep 2, 2016.

Sorry Losers!

By its actions, the Federal Reserve has selected a precious few winners and many, many losers. Sadly, you are highly likely to be one of the losers.
Sorry!
I’m one, too, if that helps soften the blow.
But we have a lot of company. Other losers include:
Savers Anyone with money in a checking account Anyone with money in a savings account Anyone with money in a CD Anyone depending on bond income All pensions Endowments First time homebuyers

This post was published at PeakProsperity on Friday, September 2, 2016,.

Crude Slides After US Oil Rig Count Rises To 7-Month Highs

Amid oil’s worst week in 2 months (and a big bounce today on the back of Putin’s comments) following large inventory builds and disappointing demand factors (PMI, ISM, shipping), Baker Hughes reports the US Oil Rig count rose by 1 to 407 (following last week’s unchanged) – the highest in 7 months. This is the 10th straight week no decline in the rig count and crude is sliding on the print…
*U. S. TOTAL RIG COUNT 497 , BAKER HUGHES SAYS *U. S. OIL RIG COUNT 407 , BAKER HUGHES SAYS The 10th week without a decrease in oil rig counts…

This post was published at Zero Hedge on Sep 2, 2016.

The High Cost of Honesty in a Sea of Low-Cost BS

As the cost of propagating BS drops to near-zero, the value of honestly achieved analyses and conclusions rises proportionately.
Longtime correspondent Michael M. recently recommended this long-form article The Market For Lemons, The Market For Bullshit, And The Great Cascading Credence Crash Of 2016.
The article discusses the soaring market for self-serving narratives, rigged statistics like the jobs report and unemployment, and officially sanctioned PR campaigns aimed at creating approval (or passive acceptance of) a corrupt, phony status quo.
All bubbles, even the one in distributing BS, eventually pop, decimating all who relied on the bubble for their livelihood.

This post was published at Charles Hugh Smith on FRIDAY, SEPTEMBER 02, 2016.