China ‘Banking Stress Indicator’ Spikes To Record High

China’s credit-to-gross domestic product “gap” has reached 30.1%, the highest for the nation in data stretching back to 1995, according to the Basel-based Bank for International Settlements. As Bloomberg points out, the warning indicator for banking stress rose to a record in China in the first quarter, underscoring risks to the nation and the world from a rapid build-up of Chinese corporate debt.
The gap is the difference between the credit-to-GDP ratio and its long-term trend. As BIS explains:
The build-up of excessive credit features prominently in discussions about financial crises.

This post was published at Zero Hedge on Sep 18, 2016.

Why Hanjin’s Zombie Collapse Won’t Be the Last One

China Containerized Freight Index remains near record low.
Hanjin Shipping Co. filed for the equivalent of bankruptcy protection in South Korea on August 31 and over the past two weeks in the US and dozens of other countries. Some of its ships are still idling at sea, trying to out-wait the uncertainty, and being seized by creditors. Some have made it to port and are being unloaded. Others have already been sold at fire-sale prices.
When US Bankruptcy Judge John Sherwood asked Hanjin lawyer Ilana Volkov if the carrier was liquidating, she said: ‘There is no clear visibility yet on what will happen with this business.’
The seventh largest container carrier in the world is not the only carrier in financial trouble. Another huge Korean carrier, HMM, was restructured and bailed out earlier this year, with creditors, including the Korean taxpayer, taking a big hit. The state-owned Korean Development Bank is now its largest shareholder.
Whatever the company-specific reasons, the entire industry has been caught up in a collapse of the rates they charge to transport containers across the seas. This started in early 2015, as a result of a shipbuilding boom of historic proportions, fueled by cheap money, endless liquidity, yield-desperate investors, and over-optimistic projections of demand. It created a vast oversupply of container ships that will continue to get worse through 2017 as a slew of new ships, ordered years ago, are being delivered.

This post was published at Wolf Street on September 18, 2016.

American Economics

My Two Cents
Over the years, we have written multiple times about the system of Keynesian economics, its dysfunction, and the fact that it is a pure lie. This has all been well-documented from studies, observations, right down to remarks made by Keynes himself regarding the long-term viability of his new faux economics.
However, from Keynesian economics, there has morphed another type of economics. A more ignorant and destructive type of scarce resource allocation – which is what economics really is after all – and this type is no respecter of persons, intellect, position, or influence. We could easily call it the economics of entitlement, but that would be misleading because when most think of entitlements, they think about Social Security, Medicare, and other government programs. No, that’s not where the sense of American (and global) entitlement ends. It ends with the average working stiff who is paying 20% on a $40,000 / 7 -year truck loan with a balloon payment because his buddies told him he wasn’t cool if he didn’t have such a truck. There are zillions of other such examples of financial stupidity, however, nobody is bothering to tell these folks that they’re committing financial suicide. The banks certainly aren’t going to tell them. The government? Talk about the kettle and the pot. Or maybe there is too much legal pot. We certainly can’t legislate common sense, but we sure try to legislate away the consequences of foolish behavior.
Yes, we feel we are entitled to have whatever we want, whenever we want, regardless of price or cost. Note there is a difference between price and cost. Price is the number of depreciated American dollars you need to part with in order to obtain the toy of the day. The cost is real amount of labor you pledge, lost sleep, heartburn you endure or other opportunities you forego in order to have that toy. Big deal guys, right? Well it is a big deal. We are going to show you quite a few charts today. You’ve seen some of them before, so part of this editorial will be an update of sorts, but then we are going to take a look at what individuals might do on an individual and community level to insulate themselves to some degree from the fallout that is inevitable from the decades of abuse of the true laws of economics.

This post was published at GoldSeek on 19 September 2016.

Rent prices drop in 10 of top 12 US Markets: Rental Armageddon taking a brief break for the election.

The last decade has added 10 million renter households. This has happened at the same time that the homeownership rate has fallen to a generational low. Since builders realize that broke Millennials are not going to save the housing market certain markets went into housing mania 2.0. Many people are unable to buy given prices and in many markets home prices are above their pre-market bubble peaks. So with investors and foreigners crowding out the market, we are now left with the current predicament. High home prices and high rents. Rents in many markets seem to be softening. This might be a summer lull or a slight turning point. It is amazing to hear people talk about ‘stability’ but look at this election year! Would you call this predictable? So let us take a look at some rental data.
Rents soften in many markets
Rents are paid with after tax income. What they don’t tell nave future landlords about rents is that sure, rents are stickier on the way down but vacancies can eat deep into profits. And normally when business cycles turn, people realize how weak or strong their cash reserves are.
So I saw this report highlighting rents from Zumber looking at 1 million active listings:

This post was published at Doctor Housing Bubble on September 18, 2016.

20 Year Metals Charts

Stocks saw a very choppy weak as we enter the seasonally 6 to 8 week, weak stretch.
I’m expecting lots of chop with a few trades here and I’ll also be looking for dip buys when they come but we may not see a nice trend higher until November or so.
We’ve had a great summer trading and we should have another nice run into years end.
The metals are showing weakness but shouldn’t fall too far.
The odd time I show long-term charts to give us all the longview so that’s what I’ll do this weekend.
Let’s kick it off with the 20 years monthly gold chart.

This post was published at GoldSeek on 19 September 2016.

Why Beijing Desperately Needs A Recession

New loans grew more than expected on the mainland last month… The monthly total grew to 948.7 billion yuan, compared with July’s total of 463.6 billion yuan, the central bank said. It beat expectations of 750 billion yuan from analysts polled by Reuters.
I like recessions. Let me repeat this in case you think your eyes have deceived you on this page. I like recessions. I think they do any economy an enormous amount of good.
The problem is that no-one ever changes direction in boom times. Whatever any business or industry is doing when things are going well, it is all just full speed straight ahead, pedal to the metal, don’t bother yourself with anything else going on around you. There is money to be made. Grab it while you can.
But economies have to change direction from time to time, just as racing cars do, and any racing driver who is still going top speed when he comes to a sharp bend in the track is in for serious trouble. Likewise economic performance. There are times when it is best to slow down.

This post was published at Zero Hedge on Sep 18, 2016.

“The Only Asset That Matters Right Now” – Treasury Correlations Have Never Been Higher

In a week in which there is not one but two critical central bank announcement within hours of each other on September 21 – first the Fed, followed hours later by the Bank of Japan – there is just one asset traders should keep an eye on: the 10Y Treasury.
As Goldman shows, as a result of an unprecedented scramble for duration over the past year courtesy of global NIRP, the sensitivity to bond yields is at its all time highs across all assets, which means whatever the 10Y does, everything else will do, especially as a result of the ongoing rout in risk-parity and systematic funds which create a positive selling (or buying) feedback loop.

This post was published at Zero Hedge on Sep 18, 2016.

Is This What Panic Looks Like? Reuters Polls Show Huge Shift In Electoral Map Toward Trump

A few weeks back, Reuters/Ipsos released a fun, interactive electoral college map that allowed users to model their own expectations of how the 2016 presidential election would play out. Reuters also offered up their own scenario based on their internal polling data from all 50 states. And, as early as August 26, 2016 Reuters was predicting a landslide victory for Clinton.

This post was published at Zero Hedge on Sep 18, 2016.

If “Everything’s So Awesome”, Explain This

It appears the American People are losing faith in the American Dream as no matter how much the American President tells the paeons that everything is awesome, they are just not buying it. In fact, according to the latest survey by the University of Michigan, the percentage of US consumers who are ‘uncertain’ about the the economy has never, ever been higher…
Good times ahead, or bad times? The percentage of U. S. consumers saying “it depends” rose to the highest on record in September, according to preliminary results of the University of Michigan’s monthly survey.

This post was published at Zero Hedge on Sep 18, 2016.

Is The Latest Risk-Parity Blow Up Just Starting

Perhaps it was just a coincidence that one month ago, as we approached the anniversary of last year’s August 24 ETFlash Crash which showed just how broken ETfs can get in a coordinated market selloff during a liquidity vacuum, we previewed “What Would Prompt Another Blow Up Of Risk Parity Funds“, the same funds which suffered acute losses last August just after China devalued its currency and roiled global markets. One of the cataysts listed was a sharp spike in bond yields.
A few weeks later, with bullish positioning across the systematic investor universe (risk-parity, CTAs, etc) at all time, levered highs asJPM observed two weeks ago, that is precisely what happened, when none other than a central bank provided the spark to catalyze the latest episode of risk impairity, a technical term for a mass quant puke. Thanks to the relentless barrage of Bank of Japan trial balloons, which ultimately unleashed a dramatic steepening of the bond curve first in Japan and then everywhere else (as we first explained on September 8), the ‘risk-parity’ rout indeed arrived.
This is what Goldman, which last week downgraded the S&P 500 and Stoxx 600 to a ‘sell’ citing the spike in risk of systematic leverage as one of the reasons for its bearishness, said about the sharp hit to risk-parity.

This post was published at Zero Hedge on Sep 18, 2016.

Wells Fargo: Who Says Crime Doesn’t Pay

Unless you’re one of the few people still watching CNN, you may have missed what can only be one of the most scandalous in-house criminal activities to be uncovered at a bank. And not just any bank. It happened at none other than Wells Fargo, which, up until the scandal was revealed, was the number one bank (as measured via its market cap) in the U. S. The scandal? Here are just a few highlights as reported. To wit:
‘On Thursday, federal regulators said Wells Fargo (WFC) employees secretly created millions of unauthorized bank and credit card accounts – without their customers knowing it – since 2011.
The phony accounts earned the bank unwarranted fees and allowed Wells Fargo employees to boost their sales figures and make more money.
‘Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses,’ Richard Cordray, director of the Consumer Financial Protection Bureau, said in a statement.’
And to use CNN’s own words to describe it: ‘The scope of the scandal is shocking.’
How shocking you may ask? Fair enough, here’s a little more from their reporting…

This post was published at Zero Hedge on Sep 18, 2016.

Raoul Pal: Business Cycle Tinder For A Global Banking System Fire

This week, Raoul Pal, founder of Real Vision TV and Global Macro Investor, joined the MacroVoices podcast for a full-length feature interview wherein he sweeps through a plethora of convergent global financial issues. In addition to his thoughts on his long U. S. dollar thesis, the recent sell-off in bonds, gold, central bank policy, and soft commodities, Pal explains why the crumbling European banking system, within a slumping global business cycle, is the biggest systemic risk yet. This is an interview you don’t want to miss. The episode starts with a weekly market summary and the interview begins at 13:30, which is summarized below.

This post was published at Zero Hedge on Sep 18, 2016.

Proof: Hillary Is Unfit

Folks, you can argue over whether Hillary has an undisclosed medical condition or not. I believe she does, and it’s serious.
But here’s the deal — being President means being able to “switch on” at a moment’s notice and have full control of your faculties.


This post was published at Market-Ticker on 2016-09-18.

Janet Yellen’s Shame

Playing Politics In honest capitalism, you do what you can to get other people to voluntarily give you money. This usually involves providing goods or services they think are worth the price. You may get a little wild and crazy from time to time, but you are always called to order by your customers.
***
That is true of honest banking, too. Back when such a thing existed, the job of an honest banker was to aggregate people’s savings and lend them to worthy borrowers. You make too many mistakes, your customers leave and you go broke.
Politics is a different game altogether. It produces no wealth of any sort. So the only way you can prosper in politics is to connive, cheat, and steal – manipulating your friends… sidelining your enemies… and exploiting the public.
It is a game of taking wealth, not making it. And you have no customers, so there’s not much of a check on how out-of-order you can get. Still, a politician is not always lying, not always stealing – and not always wrong. Occasionally, he blunders into honesty and slips into truth.
On Monday, for example, Republican presidential nominee Donald Trump said Fed chief Janet Yellen should be ashamed of herself for what she was doing to Americans and for creating a ‘false stock market.’

This post was published at Acting-Man on September 18, 2016.

Coco Loco! DOJ Slaps Deutsche Bank With $14 BILLION Demand Related To MBS (6% CoCo Bond Yield Spikes To 11.3%)

The US Department of Justice just slapped Deutsche Bank with a $14 billion demand related to mortgage-backed security abuses.
The reaction in terms of Deutsche’s stock price was swift.
Of course, there will be negotiations between DOJ and Deutsche Bank to lower the demand amount. Consider the DOJ’s demand the opening salvo.
Then again, how low can Deutsche Bank go? They have declined precipitously since the financial crisis (and The Great Recession) and all the ECB’s negative deposit rates and all the ECB’s asset purchases can’t putt Deutsche Bank together again.

This post was published at Wall Street Examiner on September 16, 2016.