How Fed Rate Hikes Impact US Debt Slaves

But savers are still getting shafted.
Outstanding ‘revolving credit’ owed by consumers – such as bank-issued and private-label credit cards – jumped 6.1% year-over-year to $977 billion in the third quarter, according to the Fed’s Board of Governors. When the holiday shopping season is over, it will exceed $1 trillion. At the same time, the Fed has set out to make this type of debt a lot more expensive.
The Fed’s four hikes of its target range for the federal funds rate in this cycle cost consumers with credit card balances an additional $6 billion in interest in 2017, according to WalletHub. The Fed’s widely expected quarter-percentage-point hike on December 13 will cost consumers with credit card balances an additional $1.5 billion in 2018. This would bring the incremental costs of five rates hikes so far to $7.5 billion next year.
Short-term yields have shot up since the rate-hike cycle started. For example, the three-month US Treasury yield rose from near 0% in October 2015 to 1.33% today. Credit card rates move with short-term rates.
Mortgage rates move in near-parallel with the 10-year Treasury yield, which, at 2.39%, has declined from about 2.6% a year ago. Hence, 30-year fixed-rate mortgages are still quoted with rates below 4%, and for now, homebuyers have been spared the impact of the rate hikes.

This post was published at Wolf Street on Dec 11, 2017.

The Process Through Which the First Major Central Bank Goes Bust Has Begun

In the aftermath of the Great Financial Crisis, Central Banks began cornering the sovereign bond market via Zero or even Negative interest rates and Quantitative Easing (QE) programs.
The goal here was to reflate the financial system by pushing the ‘risk free rate’ to extraordinary lows. By doing this, Central Bankers were hoping to:
1) Backstop the financial system (sovereign bonds are the bedrock for all risk).
2) Induce capital to flee cash (ZIRP and NIRP punish those sitting on cash) and move into risk assets, thereby reflating asset bubbles.
In this regard, these policies worked: the crisis was halted and the financial markets began reflating.
However, Central Banks have now set the stage for a crisis many times worse than 2008.
Let me explain…
The 2008 crisis was triggered by large financial firms going bust as the assets they owned (bonds based on mortgages) turned out to be worth much less (if not worthless), than the financial firms had been asserting.
This induced a panic, as a crisis of confidence rippled throughout the global private banking system.
During the next crisis, this same development will unfold (a crisis in confidence induced by the underlying assets being worth much less than anyone believes), only this time it will be CENTRAL banks (not private banks) facing this issue.

This post was published at GoldSeek on 11 December 2017.

Deutsche: “We Are Almost At The Point Beyond Which There Will Be No More Bubbles”

Whereas many Wall Street strategists enjoy simplifying their stream of consciousness when conveying their thoughts to their increasingly ADHD-afflicted audience, the same can not be said for Deutsche Bank’s Aleksandar Kocic, who has a troubling habit of requiring a background and competency in grad level post-modernist literature as a prerequisite for his articles among the handful of readers who don’t already speak exclusively in binary. Here is an example of Kocic’s “unique” narrative style:
Volatility is a consequence of speed and speed is the result of fear. Acceleration of movement is a defensive maneuver, a tool of retreat — high speed and high volatility represent sophistication of flight (flight to quality is an example of the speed event). However, absence of volatility is not necessarily synonymous with absence of fear. Volatility is low not only when things become predictable, but also if the distribution of risks causes paralysis, when the state of no change, regardless how uncomfortable it might be, becomes the least undesirable of all alternatives.
While a passage like that is far more likely to have been taken from a book by Lacan, Derrida, Deleuze and Guattari, Foucault or any other prominent POMO-ists, in this case it comes from Kocic’ year end outlook which encapsulates many of the themes we have covered recently, most notably his recent take on the interplay between volatility and leverage, a topic which anyone who has read Minsky is quite familiar with, yet which Kocic decided to give it his unique post-modernist spin with the following “spiraling leverage” chart from one month ago…

This post was published at Zero Hedge on Dec 11, 2017.

Bama Blowout?: Latest Fox News Poll Shows Doug Jones With Commanding 10-Point Lead Over Moore

With voting set to get underway in the controversial Alabama Senate race in about 24 hours, the latest Fox News Poll of likely voters shows a commanding 10-point lead for Democrat Doug Jones. The poll was conducted among likely Alabama voters on Thursday through Sunday using traditional polling techniques, including a list-based probability sample with both landlines and cellphones.

This post was published at Zero Hedge on Dec 11, 2017.

Is A Recession Looming? Low Unemployment And Declining Treasury Curve Occur Just Before Recessions (And Lousy Wage Growth)

US Real GDP is growing at 2.3% YoY. What’s not to like?
How about the lowest unemployment rate since 2000 and the worst wage ‘recovery’ in modern times? AND a flattening Treasury yield curve?
Yes, we are once more staring into the abyss of a recession where unemployment rates are low (as they seemingly always are just prior to the end of a business cycle). Throw in a skidding Treasury curve and … this is it?

This post was published at Wall Street Examiner on December 11, 2017.

Treasury Forecasts Tax Reform Will Lead To Longest Period Without Recession In History

One week ago, in its latest assessment of the current state of tax reform in the aftermath of the Senate’s passage of the tax bill, Goldman analysts calculated that while growth impact from tax reform had increased fractionally to around 0.3% in 2018 and 2019 “reflecting the slightly larger amount of tax cuts in the Senate plan following revisions, and our expectations regarding the eventual compromise”, it expected a very modest – if any – boost to US economic growth from tax reform.
Today, in a report prepared by the US Treasury – which as reminder is run by former Goldmanite Steven Mnuchin – and which was meant to bolster the case for the economic growth to be unleashed by the Trump tax cuts, and distract from the spike in deficit funding, the Treasury’s Office of Tax Policy (OTP) calculated that – somehow – the Senate’s version of tax cuts will result in 2.9% real GDP growth rate over 10 years.

This post was published at Zero Hedge on Dec 11, 2017.

The Saudi-Qatar Diplomatic Dispute, Six Months Later

Six months ago, the Gulf Cooperation Council, helmed as always by its de facto leader Saudi Arabia, severed diplomatic ties with Qatar. This move was apparently meant to punish the country for its supposed support of terrorism. Riyadh announced the closure of its shared land border with Qatar. The remaining GCC members denied Qatar use of their airspace and ports. The measures were meant to bring the Qatari economy to its knees by isolating the government in Doha.
Why the Measures Failed
At first, these measures seemed as though they might succeed. They quickly sent a shock through the economy, particularly in banking and trade.
Since the Saudi announcement, an estimated $30 billion has been removed from Qatari banks, interest rates have risen, and deposits have declined. Foreign customers with deposits at Qatari banks have withdrawn and relocated their money. Deposits totaled 184.6 billion riyals ($50.7 billion) at the start of June; they have since declined to 137.7 billion riyals.
Trade initially suffered too.

This post was published at Mauldin Economics on DECEMBER 11, 2017.

The “Exit” Problem

Last week, I discussed the issue of ‘bubbles’ in the market. To wit:
‘Market bubbles have NOTHING to do with valuations or fundamentals.’
Hold on…don’t start screaming ‘heretic’ and building gallows just yet. Let me explain.
Stock market bubbles are driven by speculation, greed, and emotional biases – therefore valuations and fundamentals are simply a reflection of those emotions.
In other words, bubbles can exist even at times when valuations and fundamentals might argue otherwise. Let me show you a very basic example of what I mean. The chart below is the long-term valuation of the S&P 500 going back to 1871.’

This post was published at Zero Hedge on Dec 11, 2017.

084: Important Update; Why you should want a second passport

My colleague, Sean Goldsmith, just returned from a tour of the Caribbean.
He met with several local governments about their ‘citizenship by investment’ programs – a way to receive a passport by donating money or investing in local businesses or real estate.
If you have the means, this is probably the quickest and easiest way to obtain a second citizenship.
We’re exploring ways for Sovereign Man readers to get a special deal on these citizenships… and hope to make a major announcement on that front early next year.
In today’s podcast, Sean updates us on his travels and discussions with the government. And we discuss why everyone should want a second passport… especially today.

This post was published at Sovereign Man on December 11, 2017.

Near Record 5.6 Million Americans Were Hired In October, Most In Over 16 Years

After a burst of record high job openings which started in June and eased modestly in August, today’s October JOLTS report – Janet Yellen’s favorite labor market indicator – showed a sharp drop in job openings across most categories now that hurricane distortions have cleared out of the system, with the total number dropping from 6.177MM to 5.996MM, well below the 6.135MM estimate, the biggest monthly drop and the lowest job openings number since May, resulting in an October job opening rate of 3.9% vs 4% in Sept.
After nearly two years of being rangebound between 5.5 and 6 million, the latest drop in job openings despite the alleged improvement in the economy is another inidication that an increasingly greater number of jobs may simply remain unfilled in a labor market where skill shortages and labor imbalances are becoming structural.

This post was published at Zero Hedge on Dec 11, 2017.

The Fed’s Fantasy on Neutral Interest Rates

In her testimony to the Congress Economic Committee on November 29, 2017, the Fed Chair Janet Yellen said that the neutral rate appears to be quite low by historical standards. From this, she concluded that the federal funds rate would not have to increase much to reach a neutral stance.
The neutral rate currently appears to be quite low by historical standards, implying that the federal funds rate would not have to rise much further to get to a neutral policy stance. If the neutral level rises somewhat over time, as most FOMC participants expect, additional gradual rate hikes would likely be appropriate over the next few years to sustain the economic expansion.
It is widely accepted that by means of suitable monetary policies the US central bank can navigate the economy towards a growth path of economic stability and prosperity. The key ingredient in achieving this is price stability. Most experts are of the view that what prevents the attainment of price stability are the fluctuations of the federal funds rate around the neutral rate of interest.
The neutral rate, it is held, is one that is consistent with stable prices and a balanced economy. What is required is Fed policy makers successfully targeting the federal funds rate towards the neutral interest rate.
This framework of thinking, which has its origins in the 18th century writings of British economist Henry Thornton1, was articulated in late 19th century by the Swedish economist Knut Wicksell.

This post was published at Ludwig von Mises Institute on December 11, 2017.

Senate Tax Debacle: Certain Pass-Through Entities Face Marginal Tax Rates Over 100% Under Current Bill

As the House and Senate continue to try to reconcile their two versions of a tax plan, the taxing structure for pass-through entities (s-corps, LLC’s, etc.) continues to be somewhat controversial, if not completely nonsensical. As we pointed out last week, the Senate bill somewhat randomly chose to exclude pass-through entities organized as family trusts from tax cuts which would ultimately leave them on the hook for much larger tax bills due to the elimination of other deductions. It’s unclear whether this bizarre exclusion was just an oversight or an intentional political hit on an easy target that no one in Washington DC would dare defend publicly: rich families organized as trusts.
Now, a new note from the Tax Policy Center lays out some scenarios whereby the marginal tax rate for high-income pass-through entities could soar to over 100%. Of course, while two rational people can debate the impact of a ~40% tax rate on a person’s desire to work, we’re almost certain that a taxing structure that takes more than 100% of your marginal income will be a slight disincentive. Here’s an example of how it works from the Wall Street Journal:
Consider, for example, a married, self-employed New Jersey lawyer with three children and earnings of about $615,000. Getting $100 more in business income would force the lawyer to pay $105.45 in federal and state taxes, according to calculations by the conservative-leaning Tax Foundation. That is more than double the marginal tax rate that household faces today.
If the New Jersey lawyer’s stay-at-home spouse wanted a job, the first $100 of the spouse’s wages would require $107.79 in taxes. And the tax rates for similarly situated residents of California and New York City would be even higher, the Tax Foundation found. Analyses by the Tax Policy Center, which is run by a former Obama administration official, find similar results, with federal marginal rates as high as 85%, and those don’t include items such as state taxes, self-employment taxes or the phase-out of child tax credits.

This post was published at Zero Hedge on Dec 11, 2017.

Suspect In Custody After Pipe Bomb Explodes At Port Authority, Injuries Reported

Update 2 : The Terrorist in NYC attack is injured and in custody. Bomb exploded prematurely. The suspect is reportedly a Muslim man from Brooklyn, east Flatbush area, Investigators are on the way to his home, for further investigations
* * *
A clip of the moment an alleged pipe bomb exploded at Port Authority around 6:30am on Monday morning has been released.
BREAKING VIDEO: MOMENT OF EXPLOSION AT TIMES SQUARE SUBWAY STATION pic.twitter.com/bb6nEPwfqD
— Breaking911 (@Breaking911) December 11, 2017

This post was published at Zero Hedge on Dec 11, 2017.

NFL’s Problem is Poor Product, not Disrespect

President Trump has lambasted the NFL more than 20 times for players’ ‘Total Disrespect of Our Great Country.’ Ratings are down for NFL games and Trump figures it’s because some players aren’t standing, hand over heart, and mouthing the words to the national anthem.
Trump may have made some political hay out of all this, but one only has to follow the money to learn the real reason pro football ratings are down–competition from college football. The fact is, ‘Their product isn’t very good these days,’ Nick Bogdanovich told the Las Vegas Sun. He is the chief oddsmaker for William Hill, which operates 107 sportsbooks in Nevada.
The league that used to claim any team could win on ‘any given Sunday’ has turned into a predictable ‘If you have a quarterback, you have a chance. If you don’t, you don’t,’ as Ben Volin wrote of the Boston Globe at the finish of last year’s regular season. As evidence, he pointed to ‘the four quarterbacks remaining in the playoffs – Tom Brady, Ben Roethlisberger, Aaron Rodgers, and Matt Ryan.’
Jimmy Vaccaro has been running sports books for four decades. He says, it used to be, ‘Nearly $4 on the NFL for every buck on a college game.’ That is no longer the case. Now it is more like 60-40 with the college betting handle gaining.
Joe Drape writes of the sportsbook legend,
And when Vaccaro says he is becoming bearish on the betting health of professional football, you lean in and listen. Last month, for three consecutive weeks, for the first time that he can remember, betting on college football at South Point surpassed betting on the NFL, by as much as $400,000.

This post was published at Ludwig von Mises Institute on Doug French, Dec 11, 2017.

Russia May Turn To Oil-Backed Cryptocurrency To Challenge Sanctions & The Petrodollar

The gradual acceptance of digital currencies, with major exchanges about to launch bitcoin futures trading, may prompt some oil producing nations to ditch the US dollar in crude trade in favor of cryptocurrencies, an oil analyst says.
***
As RT reports, Russia, Iran and Venezuela have more than one thing in common.
All three are major oil producing nations dependent on the dollar since the global crude market is traditionally dominated by contracts denominated in US currency.
Moscow, Tehran and Caracas are also facing US sanctions; penalties which are proving effective since the sanctioned countries are dependent on the US dollar to sell their crude.

This post was published at Zero Hedge on Dec 11, 2017.

Bitcoin vs Fiat Currency: Which Fails First?

What if bitcoin is a reflection of trust in the future value of fiat currencies? I am struck by the mainstream confidence that bitcoin is a fraud/fad that will soon collapse, while central bank fiat currencies are presumed to be rock-solid and without risk. Those with supreme confidence in fiat currencies might want to look at a chart of Venezuela’s fiat currency, which has declined from 10 to the US dollar in 2012 to 5,000 to the USD earlier this year to a current value in December 2017 of between 90,000 and 100,000 to $1: *** Exchange Rate in Venezuela: On 1 December, the bolivar traded in the parallel market at 103,024 VED per USD, a stunning 59.9% depreciation from the same day last month. Analysts participating in the LatinFocus Consensus Forecast expect the parallel dollar to remain under severe pressure next year. They project a non-official exchange rate of 2,069,486 VEF per USD by the end of 2018. In 2019, the panel sees the non-official exchange rate trading at 2,725,000 VEF per USD.

This post was published at Charles Hugh Smith on SUNDAY, DECEMBER 10, 2017.

Amazon UK Drivers Reportedly Forced To Urinate In Bottles To Hit 200 Packages A Day Quota

Amazon delivery drivers in the UK are asked to deliver up to 200 packages a day while earning less than minimum wage for agencies contracted by Amazon. The drivers reportedly have to keep schedules so tight they are forced to skip rest breaks and urinate in bottles, according to an investigation by UK’s Sunday Mirror. The report comes weeks after the newspaper reported on brutal work conditions at an Amazon UK warehouses. “If the drivers return to the Amazon depot without having made enough attempts to deliver parcels, or if they can’t work for any reason, they risk having their pay cut, being fined or denied future shifts,” reports the Mirror.
***
The allegations surfaced after investigative reporter Dan Warburton spent a day with an Amazon delivery driver so he could experience the “impossible” schedules that often exceed their 11 hour shifts – a limit mandated by UK law.

This post was published at Zero Hedge on Dec 11, 2017.

US Futures Hit New All Time High Following Asian Shares Higher; European Stocks, Dollar Mixed

U. S. equity index futures pointed to early gains and fresh record highs, following Asian markets higher, as European shares were mixed and oil was little changed, although it is unclear if anyone noticed with bitcoin stealing the spotlight, after futures of the cryptocurrency began trading on Cboe Global Markets.
In early trading, European stocks struggled for traction, failing to capitalize on gains for their Asian counterparts after another record close in the U. S. on Friday. On Friday, the S&P 500 index gained 0.6% to a new record after the U. S. added more jobs than forecast in November and the unemployment rate held at an almost 17-year low. In Asia, the Nikkei 225 reclaimed a 26-year high as stocks in Tokyo closed higher although amid tepid volumes. Equities also gained in Hong Kong and China. Most European bonds rose and the euro climbed. Sterling slipped as some of the promises made to clinch a breakthrough Brexit deal last week started to fray.
‘Strong jobs U. S. data is giving investors reason to buy equities,’ said Jonathan Ravelas, chief market strategist at BDO Unibank Inc. ‘The better-than-expected jobs number supports the outlook that there is a synchronized global economic upturn led by the U. S.”
The dollar drifted and Treasuries steadied as investor focus turned from US jobs to this week’s central bank meetings. Europe’s Stoxx 600 Index pared early gains as losses for telecom and utilities shares offset gains for miners and banks. Tech stocks were again pressured, with Dialog Semiconductor -4.1%, AMS -1.9%, and Temenos -1.7% all sliding. Volume on the Stoxx 600 was about 17% lower than 30-day average at this time of day, with trading especially thin in Germany and France.
The dollar dipped 0.1 percent to 93.801 against a basket of major currencies, pulling away from a two-week high hit on Friday.

This post was published at Zero Hedge on Dec 11, 2017.