The Great Retirement Con

The Origins Of The Retirement Plan
Back during the Revolutionary War, the Continental Congress promised a monthly lifetime income to soldiers who fought and survived the conflict. This guaranteed income stream, called a “pension”, was again offered to soldiers in the Civil War and every American war since.
Since then, similar pension promises funded from public coffers expanded to cover retirees from other branches of government. States and cities followed suit — extending pensions to all sorts of municipal workers ranging from policemen to politicians, teachers to trash collectors.
A pension is what’s referred to as a defined benefit plan. The payout promised a worker upon retirement is guaranteed up front according to a formula, typically dependent on salary size and years of employment.
Understandably, workers appreciated the security and dependability offered by pensions. So, as a means to attract skilled talent, the private sector started offering them, too.
The first corporate pension was offered by the American Express Company in 1875. By the 1960s, half of all employees in the private sector were covered by a pension plan.
Off-loading Of Retirement Risk By Corporations
Once pensions had become commonplace, they were much less effective as an incentive to lure top talent. They started to feel like burdensome cost centers to companies.
As America’s corporations grew and their veteran employees started hitting retirement age, the amount of funding required to meet current and future pension funding obligations became huge. And it kept growing. Remember, the Baby Boomer generation, the largest ever by far in US history, was just entering the workforce by the 1960s.

This post was published at PeakProsperity on Friday, November 17, 2017,.

“Did Mike Pence Buy A Diet Dr.Pepper For A Woman That Was Not His Wife?”

Authored by James Howard Kunstler via Kunstler.com,
If only abortion were retroactive, we could suitably deal with monsters like Senator Al Franken (D – MN), who apparently ventured to apply a breast adjustment to a female colleague asleep on the military airplane winging them home from USO duty in Afghanistan. This was back in the day when Senator Franken was a professional entertainer, a clown to be precise, but his career shift to politics has rendered all his prior clowning anathema.
Will he slink out of the senate in disgrace with (ahem) his tail between his legs? Or will he bunker in and wait until the mega-storm of sexual accusation roars on to strand some bigger, flashier fish on the shoals of ignominy?
Perhaps we’ll soon learn that Warren Buffet repeatedly shagged his notoriously over-taxed secretary in the Berkshire Hathaway janitor’s closet.
Or that Mike Pence once bought a diet Dr. Pepper for a woman who was not his wife!
Seems to me this storm could roar and roil on until ninety-plus percent of the men in America are exposed as sex monsters and expelled from every workplace in the land. And then America can feel good about itself again. At least until the bond market blows up, or Kim Jung Fatboy sends a rocket over Rancho Cuckamonga.
But in the meantime, this scourging of male wickedness raises some interesting questions about human dynamics vis-a-vis workplace dynamics.

This post was published at Zero Hedge on Nov 17, 2017.

Manhattan Retail: The New Rust Belt

Via Global Macro Monitor,
Bleecker Street, said Faith Hope Consolo, the chairwoman of the retail group for the real estate firm Douglas Elliman, ‘had a real European panache. People associated it with something special, something different.’ Ms. Consolo, who has negotiated several deals on the street, added: ‘We had visitors from all over that said, ‘We’ve got to get to Bleecker Street.’ It became a must-see, a must-go.’
Early on, Ms. Consolo said, rents on the street were around $75 per square foot. By the mid-to-late 2000s, they had risen to $300. Those rates were unaffordable for many shop owners like Mr. Nusraty, who was forced out in 2008 when, he said, his lease was up and his monthly rent skyrocketed to $45,000, from $7,000.
– NY Times
Retail is not just being Amazoned in Manhattan, retailers are being priced out of business by exorbitant rents.
Note to commercial landlords: Lower your rents! But, God forbid, that would be deflationary!

This post was published at Zero Hedge on Nov 17, 2017.

Muddy Waters Proved Right As Huishan Dairy Prepares For Liquidation

On March 2017, we discussed the sudden 90% drop in the share price of China’s largest dairy farm operator, the Hong Kong-listed China Huishan Dairy Holdings. The collapse occurred the day after its creditors convened an emergency meeting to discuss the company’s cash shortage and was three months after Muddy Waters’ Carson Block questioned its profitability and said the company was ‘worth close to zero.’ After the collapse in the share price we joked that ‘it suddenly almost is.’ Now we have confirmation that Block was correct, as Huishan is entering provisional liquidation, citing liabilities of $1.6 billion. From Bloomberg.
China Huishan Dairy Holdings Co., the Hong Kong-listed company targeted by short sellers including Muddy Waters Capital LLC, is preparing for provisional liquidation in a move that could protect its assets as it negotiates with creditors. The firm had told its Cayman legal advisers to make the preparations, it said in a Hong Kong stock exchange filing Thursday.
Huishan’s board earlier found that the net liabilities of its units in China ‘could have been’ 10.5 billion yuan ($1.58 billion) as of March 31, the company said. A provisional liquidation generally is used to safeguard a company’s assets before a court rules what action to take.

This post was published at Zero Hedge on Nov 17, 2017.

How Tax Reform Can Still Blow Up: A Side-By-Side Comparison Of The House And Senate Tax Plans

To much fanfare, mostly out of president Trump, on Thursday the House passed their version of the tax bill 227-205 along party lines, with 13 Republicans opposing. The passage of the House bill was met with muted market reaction. The Senate version of the tax reform is currently going through the Senate Finance Committee for additional amendments and should be ready for a full floor debate in a few weeks. While some, like Goldman, give corporate tax cuts (if not broad tax reform), an 80% chance of eventually becoming law in the first quarter of 2018, others like UBS and various prominent skeptics, do not see the House and Senate plans coherently merging into a survivable proposal.
Indeed, while momentum seemingly is building for the tax plan, some prominent analysts believe there are several issues down the road that could trip up or even stall a comprehensive tax plan from passing the Congress, the chief of which is how to combine the House and Senate plans into one viable bill.
How are the two plans different?
Below we present a side by side comparison of the two plans from Bank of America, which notes that the House and the Senate are likely to pass different tax plans with areas of disagreement (see table below). This means that the two chambers will need to form a conference committee to hash out the differences. There are three major friction points:
the repeal of the state and local tax deductions (SALT), capping mortgage interest deductions and the delay in the corporate tax cut. The House seems strongly opposed to fully repealing SALT and delaying the corporate tax cuts and the Senate could push back on changing the mortgage interest deductions. Finding compromise on these issues without disturbing other parts of the plan while keeping the price tag under the $1.5tn over 10 years could be challenging.

This post was published at Zero Hedge on Nov 17, 2017.

Market Talk- November 17, 2017

The tax reform bill passing the US House yesterday certainly added to sentiment, after great earnings releases for markets but Asia need more help for cash today. Having opened strong all core markets then drifted and even saw the Nikkei trade negative. For the week it closes down 1.3% which has broken a two month rally. The Hang Seng performed well all day closing up around +0.6% but only off-set the decline in the Shanghai (-0.5%). India traded well following Thursday’s credit upgrade eventually adding an additional +0.7% onto yesterdays gain. All eyes are still on the DXY as we approach the weekend as just below we have the 50 Day Moving Average at 93.50. Oil has bounced following comments from potential output cuts led by OPEC.

This post was published at Armstrong Economics on Nov 17, 2017.

This Michigan Bank Just Brought Back The Zero-Down Mortgage; They’ll Even Cover Your Closing Costs

A small savings bank in Michigan, Flagstar Bank, has come up with a genius, innovative new mortgage product that they believe is going to be great for their investors and low-income housing buyers: the “zero-down mortgage.” What’s better, Flagstar is even offering to pay the closing costs of their low-income future mortgage debtors. Here’s more from HousingWire:
Under the program, Flagstar will gift the required 3% down payment to the borrower, plus up to $3,500 to be used for closing costs.
According to the bank, there is no obligation for borrowers who qualify to repay the down payment gift.
The program is available to only certain low- to moderate-income borrowers and borrowers in low- to moderate-income areas throughout Michigan.
Borrowers would not have to repay the down payment or closing costs. But a 1099 form to report the income would be issued to the Internal Revenue Service by the bank. So the gifts could be taxable, depending on the borrower’s financial picture.
Flagstar said borrowers who might qualify for its new program typically would have an annual income in the range of $35,000 to $62,000. The sales price of the home — which must be in qualifying areas — would tend to be in the range of $80,000 to $175,000.

This post was published at Zero Hedge on Nov 17, 2017.

U.S. Treasury Becomes a Laughing Stock

U. S. Treasury Secretary Steven Mnuchin appears to have inaugurated a perpetual bring your wife to work day. It’s become so farcical that it frequently feels like the United States Treasury Department has morphed into a low-budget, badly scripted reality TV show where the female star is so out-of-touch that she must continually scurry about in her haute couture erasing the haughty things she has written about the little people on multiple continents. We’ll get to that shortly, but first some background:
It all started back on January 19 when actress and then fiance Louise Linton sat by her man during his Senate Finance Committee confirmation hearing to become U. S. Treasury Secretary. At the hearing, Democratic Senator Ron Wyden of Oregon had this to say about his repugnance to see Mnuchin fill the post as U. S. Treasury Secretary:
‘Mr. Mnuchin’s career began in trading the financial products that brought on the housing crash and the Great Recession. After nearly two decades at Goldman Sachs, he left in 2002 and joined a hedge fund. In 2004, he spun off a hedge fund of his own, Dune Capital. It was only a few lackluster years before Dune began to wind down its investments in 2008.
‘In early 2009, Mr. Mnuchin led a group of investors that purchased a bank called IndyMac, renaming it OneWest. OneWest was truly unique. While Mr. Mnuchin was CEO, the bank proved it could put more vulnerable people on the street faster than just about anybody else around.

This post was published at Wall Street On Parade By Pam Martens and Russ Marte.

E-Commerce Meets Brick-and-Mortar Meltdown

But some big sectors are still resisting.
There is one sector in retail that is seriously booming: E-commerce sales in the third quarter jumped 15.5% from a year ago, to $115 billion seasonally adjusted, a new record, according to the Commerce Department this morning. This includes online sales by brick-and-mortar retailers. Over the same period, total retail sales increased 4.3%. And retail sales without e-commerce – an approximation for brick-and-mortar sales – ticked up only 3.1%, barely staying ahead of 2% inflation and 0.8% population growth.
The chart below shows the e-commerce sales boom on a quarterly basis (seasonally adjusted). Note the beating during the Great Recession. Not even e-commerce is recession proof. It was sharp. People just stopped clicking on the ‘buy’ button. But it was short. By Q3 2009, e-commerce was setting records again:

But how much of a danger is e-commerce to brick-and-mortar retail? Many observers keep pointing out that e-commerce accounts for only a tiny part of total retail sales. And that’s true. While growing rapidly, the numbers are still relatively small. In the third quarter, the e-commerce share of total retail was still just 9.1%, but that’s up from 8.2% a year ago.

This post was published at Wolf Street by Wolf Richter ‘ Nov 17, 2017.

Here’s Where E-commerce Crushes Brick-and-Mortar

But some big sectors are still resisting.
There is one sector in retail that is seriously booming: E-commerce sales in the third quarter jumped 15.5% from a year ago, to $115 billion seasonally adjusted, a new record, according to the Commerce Department this morning. This includes online sales by brick-and-mortar retailers. Over the same period, total retail sales increased 4.3%. And retail sales without e-commerce – an approximation for brick-and-mortar sales – ticked up only 3.1%, barely staying ahead of 2% inflation and 0.8% population growth.
The chart below shows the e-commerce sales boom on a quarterly basis (seasonally adjusted). Note the beating during the Great Recession. Not even e-commerce is recession proof. It was sharp. People just stopped clicking on the ‘buy’ button. But it was short. By Q3 2009, e-commerce was setting records again:

This post was published at Wolf Street on Nov 17, 2017.

Despite Massive Liquidity Injection, Chinese Stocks, Commodities Head For Worst Week Of Year

The PBOC stepped up cash injections this week, suggesting authorities are trying to shore up financial markets as a selloff in bonds spreads to equities… but it is not working!
As Bloomberg reports, the central bank has already added a net 510 billion yuan ($77 billion) via open-market operations into the financial system this week, matching the third biggest weekly injection this year.

This post was published at Zero Hedge on Nov 17, 2017.

BOE Warns Weekly Fund Redemptions Of 1.3% Would Break Corporate Bond Market

The Bank of England has done some timely and truly eye-opening research into the resilience of corporate bond markets. The research is contained in the Bank of England Financial Stability Paper No.42and is titled ‘Simulating stress across the financial system: the resilience of corporate bond markets and the role of investment funds’ by Yuliya Baranova, Jamie Coen, Pippa Lowe, Joseph Noss and Laura Silvestri.
The starting point of the analysis is to revisit the Global Financial Crisis (GFC) which saw $300 billion of related to subprime mortgages amplified to well over $2.5 trillion of write-downs across the global financial system as a whole. One of the problems was that the system was structured in a way that did not absorb economic shocks, but amplified them. The amplification came via a feedback loop. As the crisis unfolded, fears about credit worthiness of banks led to the collapse of interbank lending. Weaker banks had their funding withdrawn, which led to a downward spiral of asset sales and the strangling of credit in the broader economy.

This post was published at Zero Hedge on Nov 17, 2017.

Pentagon “Mistakenly” Retweets Post Calling For Trump To Resign

The Al Frankenstien picture is really bad, speaks a thousand words. Where do his hands go in pictures 2, 3, 4, 5 & 6 while she sleeps? …..
— Donald J. Trump (@realDonaldTrump) November 17, 2017

Defense Secretary James Mattis will get an earful from his boss this morning, after an ‘authorized user’ of the Pentagon Twitter account retweeted – and then swiftly deleted – a tweet calling for President Donald Trump to resign after the president slammed Sen. Al Franken while remaining silent about Alabama Sen. Candidate Roy Moore.
Pentagon spokesman Col. Rob Manning said in a statement that an authorized operator of the Defense Department’s official Twitter site ‘erroneously retweeted content that would not be endorsed by the Department of Defense. The operator caught this error and immediately deleted it.’
Chief Pentagon spokeswoman Dana White posted the same statement on Twitter.

This post was published at Zero Hedge on Nov 17, 2017.

Housing Starts, Permits Rebound In October After Storm-Soaked September

Following September’s storm-driven tumble, October has seen a big rebound in Housing Starts (+13.7% MoM) and Permits (+5.9% MoM) both beating expectations, as multi-family starts explode.
Housing starts printed above all analysts’ guesses (4 standard deviations above expectations) for the biggest monthly jump in a year.
The surge in starts was driven by a major rebound in multifamily units…

This post was published at Zero Hedge on Nov 17, 2017.

Huge Crude Stakes

This is a syndicated repost courtesy of Alhambra Investments. To view original, click here. Reposted with permission.
There is a titanic struggle going on right now in the oil market. On the one side of the futures market are the usual pace setters, the money managers. Last week, the latest COT data available, they went the most net long since March. If it continues, it will close in on the most positive futures position since the record long they established back in February.
Normally that would be insanely bullish for oil prices. But just as in February/March another part of the futures market has intervened on the other side. Back then it was the oil producers who rising inventory forced into a larger and larger offsetting net short (hedge).
This time, however, it is the swap dealers who are short for reasons that aren’t really clear. The weekly COT report for the last week in October showed a record net short for dealers, just beating their most extreme position from the middle of 2013 at -424k contracts. In the first week and November, they blew away that record at -470k.

This post was published at Wall Street Examiner by Jeffrey P. Snider ‘ November 16, 2017.

After Slamming Bitcoin As A Money Laundering Tool, JPMorgan Busted For Money Laundering

Score one for the poetic irony pages.
Two months after JPMorgan CEO Jamie Dimon lashed out at bitcoin, calling it a “fraud” which is “worse than tulip bulbs, warning it won’t end well”, will “blow up” and “someone is going to get killed” and threatened that “any trader trading bitcoin” will be “fired for being stupid” as it was merely a tool for money-laundering, today Swiss daily Handelszeitung reported that the Swiss subsidiary of JPMorgan was sanctioned by the Swiss regulator, FINMA, over money laundering and “seriously violating supervision laws.”
As the newspaper adds, the Swiss sanctions relate to breaches of due diligence in connection with money laundering standards. In other words, JPMorgan was actively aiding and abeting criminal money laundering.

This post was published at Zero Hedge on Nov 17, 2017.

Mueller Subpoena Spooks Dollar, Sends European Stocks, US Futures Lower

Yesterday’s torrid, broad-based rally looked set to continue overnight until early in the Japanese session, when the USD tumbled and dragged down with it the USDJPY, Nikkei, and US futures following a WSJ report that Robert Mueller had issued a subpoena to more than a dozen top Trump administration officials in mid October.
And as traders sit at their desks on Friday, U. S. index futures point to a lower open as European stocks fall, struggling to follow Asian equities higher as the euro strengthened at the end of a tumultuous week. Chinese stocks dropped while Indian shares and the rupee gain on Moody’s upgrade. The MSCI world equity index was up 0.1% on the day, but was heading for a 0.1% fall on the week. The dollar declined against most major peers, while Treasury yields dropped and oil rose.
Europe’s Stoxx 600 Index fluctuated before turning lower as much as 0.3% in brisk volumes, dropping towards the 200-DMA, although about 1% above Wednesday’s intraday low; weakness was observed in retail, mining, utilities sectors. In the past two weeks, the basic resources sector index is down 6%, oil & gas down 5.8%, autos down 4.9%, retail down 3.4%; while real estate is the only sector in green, up 0.1%. The Stoxx 600 is on track to record a weekly loss of 1.3%, adding to last week’s sell-off amid sharp rebound in euro, global equity pullback. The Euro climbed for the first time in three days after ECB President Mario Draghi said he was optimistic for wage growth in the region, although stressed the need for patience, speaking in Frankfurt. European bonds were mixed. The pound pared some of its earlier gains after comments from Brexit Secretary David Davis signaling a continued stand-off in negotiations with the European Union.
In Asia, the Nikkei 225 took its time to catch up to the WSJ report that US Special Counsel Mueller has issued a Subpoena for Russia-related documents from Trump campaign officials, although reports pointing to North Korea conducting ‘aggressive’ work on the construction of a ballistic missile submarine helped the selloff. The Japanese blue-chip index rose as much as 1.8% in early dealing, but the broad-based dollar retreat led to the index unwinding the bulk of its gains; the index finished the session up 0.2% as the yen jumped to the strongest in four-weeks. Australia’s ASX 200 added 0.2% with IT, healthcare and telecoms leading the way, as utilities lagged. Mainland Chinese stocks fell, with the Shanghai Comp down circa 0.5% as the PBoC’s reversel in liquidity injections (overnight net drain of 10bn yuan) did little to boost risk appetite, as Kweichou Moutai (viewed as a bellwether among Chinese blue chips) fell sharply. This left the index facing its biggest weekly loss in 3 months, while the Hang Seng rallied with IT leading the way higher. Indian stocks and the currency advanced after Moody’s Investors Service raised the nation’s credit rating.

This post was published at Zero Hedge on Nov 17, 2017.

Bill Blain: “Stock Markets Don’t Matter; The Great Crash Of 2018 Will Start In The Bond Market”

Blain’s Morning Porridge, Submitted by Bill Blain of Mint Partners
The Great Crash of 2018? Look to the bond markets to trigger Mayhem!
I had the impression the markets had pretty much battened down for rest of 2017 – keen to protect this year’s gains. Wrong again. It seems there is another up-step. After the People’s Bank of China dropped $47 bln of money into its financial system (where bond yields have risen dramatically amid growing signs of wobble), the game’s afoot once more. The result is global stocks bound upwards. Again. It suggest Central Banks have little to worry about in 2018 – if markets get fraxious, just bung a load of money at them.
Personally, I’m not convinced how the tau of monetary market distortion is a good thing? Markets have become like Pavlov’s dog: ring the easy money bell, and markets salivate to the upside.
Of course, stock markets don’t matter.
The truth is in bond markets. And that’s where I’m looking for the dam to break. The great crash of 2018 is going to start in the deeper, darker depths of the Credit Market.
I’ve already expressed my doubts about the long-term stability of certain sectors – like how covenants have been compromised in high-yield even as spreads have compressed to record tights over Treasuries, about busted European regions trying to pass themselves off as Sovereign States (no I don’t mean the Catalans, I mean Italy!), and how the bond market became increasingly less discerning on risk in its insatiable hunt for yield. Chuck all of these in a mixing bowl and the result is a massive Kerrang as the gears of finance explode!

This post was published at Zero Hedge on Nov 17, 2017.

The Demise of Dissent: Why the Web Is Becoming Homogenized

In other words, we’ll be left with officially generated and sanctioned fake news and “approved” dissent.
We’ve all heard that the problem with the web is fake news, i.e. unsubstantiated or erroneous content that’s designed to mislead or sow confusion.
The problem isn’t just fake news–it’s the homogenization of the web, that is, the elimination or marginalization of independent voices of skepticism and dissent.
There are four drivers of this homogenization:
1. The suppression of dissent under the guise of ridding the web of propaganda and fake news–in other words, dissent is labeled fake news as a cover for silencing critics and skeptics.
2. The sharp decline of advertising revenues flowing to web publishers, both major outlets and small independent publishers like Of Two Minds.
3. The majority of advert revenues now flow into the coffers of the quasi-monopolies Facebook and Google.
4. Publishers are increasingly dependent on these quasi-monopolies for readers and visibility: any publisher who runs afoul of Facebook and Google and is sent to Digital Siberia effectively vanishes.

This post was published at Charles Hugh Smith on FRIDAY, NOVEMBER 17, 2017.