Canadian Homeowners Take Out HELOCs To Fund Subprime Purchases

The HELOC (Home Equity Line of Credit) has been a blessing and a curse for Canadian households. While it has helped spur house prices and simultaneously provided consumers the ability to tap into their new found equity, it has also crippled many Canadian households into a debt trap that seems insurmountable.
Between 2000 and 2010, HELOC balances soared from $35 billion to $186 billion, according to the Financial Consumer Agency of Canada, an average annual growth rate of 20%.
As of 2016, HELOC balances sit at $211 billion, a 500% increase since the year 2000. While also pushing Canadian household debt to incomes to record highs of 168%.
Scott Terrio, a debt consultant, says the situation is a full blown ‘extend and pretend’ meaning borrowers are just continuously refinancing or taking on more and more debt in order to sustain their lifestyle. Canadians can extend their debt repayment terms and pretend to live a lifestyle they can’t otherwise obtain.

This post was published at Zero Hedge on Dec 21, 2017.

Is California Already In Recession?

When it comes to the health of his state’s economy, California Governor Jerry Brown has been walking on eggshells this year.
Twice each year, once in January and again in May, Gov. Jerry Brown warns Californians that the economic prosperity their state has enjoyed in recent years won’t last forever.
Brown attaches his admonishments to the budgets he proposes to the Legislature – the initial one in January and a revised version four months later.
Brown’s latest, issued last May, cited uncertainty about turmoil in the national government, urged legislators to “plan for and save for tougher budget times ahead,” and added:
“By the time the budget is enacted in June, the economy will have finished its eighth year of expansion – only two years shorter than the longest recovery since World War II. A recession at some point is inevitable.”
It’s certain that Brown will renew his warning next month. Implicitly, he may hope that the inevitable recession he envisions will occur once his final term as governor ends in January, 2019, because it would, his own financial advisers believe, have a devastating effect on the state budget.
Unfortunately for Governor Brown, the recession he fears may already have arrived in California.

This post was published at Zero Hedge on Dec 21, 2017.

Alphabet’s Eric Schmidt Steps Down From Executive Chairman Role

After 17 years in senior leadership at the “Do No Evil” shop, Eric Schmidt is stepping down from his executive chairman role at the internet behemoth…
After ten years as CEO and seven as Executive Chairman, I can’t wait to dive into the latest in science, technology, and philanthropy. I look forward to working with Larry and Sergey on our future here at Alphabet. – Eric Schmidt (@ericschmidt) December 21, 2017
He will become a technical adviser to Google parent Alphabet, while continuing to serve on the board.
Full Alphabet Statement:

This post was published at Zero Hedge on Dec 21, 2017.

(Some) Commodity Charts are Breaking Out

Tonight I would like to update some charts for the commodities complex as we are starting to see some action in this sector. Back in the summer months when we first started to get long some of the different commodities sectors, we got many breakouts from some very nice H&S bases. After the initial move up came the first consolidation phase that has been going on for nearly four months or so. We are now starting to see some of these consolidation patterns breaking out which should lead to the next impulse move higher in most cases.
Lets start with BHP, one of the biggest miners on the planet, that shows a good example of where we are at in the bull market. Today the price action broke out with a gap above the top rail of an almost 5 month triangle consolidation pattern. A backtest to the top rail would come in around the 43.50 area.

This post was published at GoldSeek on 21 December 2017.

Caroline Miller: 2018 Will See Outperformance Shift Back to US

Global growth is still in a synchronized upswing and confidence by both consumers and businesses is the strongest it has been in years. Are investors headed for a big surprise in 2018?
Caroline Miller, BCA Research Global Stategist, believes there will be as the US economy sees better than expected growth starting next year. She recently spoke with FS Insider about BCA’s outlook, including both opportunities and risks for investors.
Global Synchronized Upswing Still Underway
Business is booming, and BCA’s data says that global growth is liable to remain firm heading into next year.
Though their 40-country leading economic indicator has moderated slightly from its 2017 highs, it is still pointing to above-trend growth.

This post was published at FinancialSense on 12/21/2017.

11 Of 19 Bear Market Indicators Have Now Been Triggered: BofA

Two weeks ago, Bank of America tripped recession-watcher alarms, when it announced out that one of its surest bear-market indicators, one which has never had a false negative, had just been triggered. As we said at the time, according to BofA’s Savita Subramanian in November the S&P 500’s three-month earnings estimate revision ratio (ERR) fell for the fourth consecutive month to 0.99 (from 1.03), indicating that for the first time in seven months, there were more negative than positive earnings revisions, needless to say a major negative inflection point in the recent surge in profits.
Why was this significant? Becase as BofA explained, the three-month S&P 500 ERR has been used by the bank as one of its 19 key “bear market signposts”, and with the one-month ERR falling below 1.0 for the second time in six months, this marks the trigger for the 11th bear market signpost. BofA’s ERR rule is triggered when, over a six-month window, all of the following criteria are met: 1) the one-month ERR falls from above 1.0 to below 1.0; 2) the one-month ERR is below 1.0 for two or more months; and 3) the three-month ERR falls below 1.1 for at least one month. Incidentally, the hit rate of the “ERR” bear market indicator, meaning its historical accuracy in predicting a bear market is 100%, the only question is how long it takes. The last time this trigger was set was mid-2003, and here is the punchline from Bank of America:

This post was published at Zero Hedge on Dec 21, 2017.

3 (Mis)Statements About Tax Reform

With the passage of the Tax Cut And Jobs Act on Wednesday, I wanted to address a few of the questions and misinformation currently circulating about the impact of tax cuts on the U. S. economy.
Over the last couple of months, I have been repeatedly asked why I am not ‘enthusiastic’ about the ‘greatest tax reform’ since the Reagan era.
First, let me be clear, I like getting a ‘tax cut.’ Under the new plan, and because I own several small businesses structured as limited liability corporations (LLC’s), I will potentially see a reduction in the amount of taxes I will pay next year.
What I am opposed to, as a ‘fiscal conservative,’ is the ongoing expansion of our debts and deficits which are an inherent drag on the future prosperity of the country.
For the last 8-years, Republicans have repeatedly blamed the previous Administration for doubling the national debt and further expanding dependency on the welfare and entitlement system. When the Republican-controlled Senate and House had the opportunity to live up to their promise of reducing spending and being more fiscally responsible, their first piece of major legislative action will add another $10 Trillion in debt over the next 10-years, increase the deficit to more than $1 Trillion, and double the size of an existing welfare program through increasing child tax credits.
As the Committee for a Responsible Federal Budget just wrote:

This post was published at Zero Hedge on Dec 21, 2017.

The Dark Side of AI – Deception and Propaganda

In 1896, cinema pioneers Auguste and Louis Lumiere debuted a short film showing a train pulling into a station. Audience members reportedly fled the Paris theater in terror, afraid they would be run down. Though the train on screen could do them no harm, of course, the experience, and the danger, nevertheless felt real. Today, filmgoers are a savvier lot, well-versed in the many feats that camera tricks and postproduction can accomplish. But a certain threat still lurks in the deceptions of the cinema – only now the dangers are often more real than the objects and actors depicted on screen.
On Dec. 11, Vice’s Motherboard ran a story discussing how advances in artificial intelligence have made it possible to digitally superimpose celebrities’ faces onto other actors’ bodies with an algorithm. The article focused on the technology’s use for making fake celebrity porn videos, but the trick has come in handy for mainstream movies as well: Think Carrie Fisher and Peter Cushing in a recent “Star Wars” installment. The possibilities in the mainstream and adult film industries are practically endless with this innovation, especially combined with programs such as Adobe Voco or Lyrebird, which can create a vocal library from a recorded sample of someone’s voice. Using these tools in tandem, filmmakers of all kinds can make any person, or at least a convincing digital replica, say and do whatever they want for whatever end – be it entertainment or something more insidious.

This post was published at FinancialSense on 12/21/2017.

Thousands Abandoning Illinois and Its Big Government Debacle

There is a mass exodus from Illinois.
According to the US Census Bureau, the Prairie State lost a net 33,700 residents in fiscal year 2017. More people bailed out of Illinois than any other state in the US. And based on calculations the folks over at ZeroHedge worked out, the exodus was even worse than the Census Bureau numbers indicate.
Of course, the net population loss masks the true gross outflow of Illinois residents as it doesn’t account for natural births/deaths. Assuming that Illinois has the same natural population growth as the US as a whole (0.7%) implies that the state lost a staggering ~125,000 residents in aggregate, or roughly 1 man/woman/child every 4.3 minutes.’
So, why the big rush to bail out of the great state of Illinois?
The state is a fiscal mess.
Over the summer, the Illinois legislature pushed through a budget that included $5 billion in tax hikes. Even so, the state’s bond rating continues to teeter just above junk status. Moody’s wasn’t particularly impressed with the new Illinois budget.

This post was published at Schiffgold on DECEMBER 21, 2017.

These PE Firms Are About To Get Crushed By Their Subprime Auto Bets

In the aftermath of the ‘great recession,’ private equity firms placed massive bets on subprime auto finance companies with the typical “thesis” going something like this: “well, people have to get to work don’t they?”…genius, if we understand it correctly.
Of course, the “thesis” seemed to be confirmed when auto securitizations performed relatively well throughout the financial crisis, amid a sea of mortgage bonds getting wiped out, and private equity titans were off to the races with wall street titans from Perella Weinberg to Blackstone and KKR scooping stakes in small niche lenders.
Unfortunately, as Bloomberg points out today, the $3 billion bet on subprime auto lenders hasn’t played out precisely to plan as the “well, people have to get to work” thesis has proved to be somewhat less than full proof.
A Perella Weinberg Partners fund has been sitting on an IPO of Flagship Credit Acceptance for two years as bad loan write-offs push it into the red. Blackstone Group LP has struggled to make Exeter Finance profitable, despite sinking almost a half-billion dollars into the lender since 2011 and shaking up the C-suite multiple times. And Wall Street bankers in private say others would love to cash out too, but there’s currently no market for such exits.
Since the turn of the decade, buyout firms, hedge funds and other private investors have staked at least $3 billion on non-bank auto lenders, according to Colonnade. Among PE firms, everyone from Blackstone and KKR & Co. to Lee Equity Partners, Altamont Capital and CIVC Partners waded in.

This post was published at Zero Hedge on Dec 21, 2017.

Another Liberal Governor Demands His State’s Pension Abandon Fiduciary Duties, Sell Fossil-Fuel Investments

As if public pension managers around the country weren’t having enough difficulty digging themselves out of their massive $3-$5 trillion funding gap, the chorus of liberal governors suggesting they should recklessly abandon their fiduciary obligations to future retirees and choose investments not on their financial merits but rather based on the political preferences of clueless politicians is growing stronger by the day. As Pensions & Investments points out today, New York Governor Andrew Cuomo is the latest such politician to jump on the bandwagon after suggesting that the New York State Common Retirement Fund should “divest from all fossil-fuel holdings.”
New York Gov. Andrew Cuomo on Tuesday proposed that the New York State Common Retirement Fund halt all new investments “with significant fossil-fuel-related activities” and prepare a plan to divest existing fossil-fuel investments.
“New York has made incredible strides in securing a clean energy future for this state … yet the Common Fund remains heavily invested in the energy economy of the past,” Mr. Cuomo said in a news release.
“Moving the Common Fund away from fossil-fuel investments will protect the retirement savings of New Yorkers,” he said. “This proposal lays out a roadmap for the Common Fund to take responsible steps to divest from its fossil-fuel holdings.”

This post was published at Zero Hedge on Dec 21, 2017.

Asian Metals Market Update: December-21-2017

‘Spend wisely and Invest lavishly should be life mantra for 2018’
American companies announcing large bonuses for its employees after the passage of Tax bill will result in higher consumption in the first quarter of next year. Higher retail consumption in the USA will result in higher employment and higher profitability. Global stock markets will remain firm and result in rosier projections for economic growth in the USA and China.
Negative news surrounding crypto currencies like hacking etc this week is state manipulated. States know that block chain technology is like the Linux of the world (which is free) and not windows (which is very expensive).

This post was published at GoldSeek on 21 December 2017.

Treasury Curve Inverts As Trump Slams Dems For Forcing Shutdown

House Democrats want a SHUTDOWN for the holidays in order to distract from the very popular, just passed, Tax Cuts. House Republicans, don’t let this happen. Pass the C. R. TODAY and keep our Government OPEN!
— Donald J. Trump (@realDonaldTrump) December 21, 2017

Early in the week, anxiety over a government shutdown appeared to ebb as the short-term Treasury Bill market began to ‘normalize’, but following the tax-reform ‘win’, President Trump is accusing Democrats of trying to force a government shutdown…

This post was published at Zero Hedge on Dec 21, 2017.

BOOM: AMERICAN COMPANIES RAIN DOWN CASH ON EMPLOYEES IN RESPONSE TO TRUMP TAX CUTS

After Republicans passed sweeping tax reform Wednesday, some of the largest employers in America began dropping cash bombs on their employees. The businesses also pledged to invest hundreds of millions of dollars into the American economy.
The GOP tax bill cuts the corporate tax rate nearly in half.
Here is a round up, so far, of companies that are celebrating the tax cuts by enriching their employees.
1. AT&T

This post was published at The Daily Sheeple on DECEMBER 21, 2017.

Holiday Spending Set To Hit 12-Year High Thanks To…Debt

Even though consumer confidence cooled for a second straight month in November, CNBC is reporting that holiday spending for the average American household is on track to be the highest in 12 years.
Amazingly, the CNBC All-America Survey found that the average family will spend $900 for the first time in the 12-year history of the poll, eclipsing last year’s estimate of $702 by a wide margin.
Furthermore, the survey of 800 American households – which has a margin of error of plus or minus 3.5 percentage points – found a surge in the percentage of Americans planning to spend more than $1,000. The number climbed to 29%, up from24% last year.
But before economists and retail analysts begin recalibrating their expectations, it’s worth noting that much of this spending will be funded by debt. Another study by RentCafe which examined spending habits of American renters discovered that, in the 50 largest US metropolitan areas, the average renting family will go into debt due to holiday-related expenses, debt that must be paid off in the opening months of the following year.

This post was published at Zero Hedge on Dec 21, 2017.

Coming Housing Boom Could Mean It’s Time to Add Raw Materials

In its November report, mortgage security firm Freddie Mac called 2017 the ‘best year in a decade’ for the housing market by a variety of measures. These include low inflation, strong job growth and historically-low mortgage rates. This assessment is very encouraging, not just for homebuyers and builders and the U. S. economy in general, but also for commodities, resources and raw materials as we head into 2018.
Although past performance is no guarantee of future results, it’s still instructive to look back at how materials performed the last time the U. S. was ramping up housing starts and mortgages. The last housing boom, which peaked in 2006, was accompanied by elevated commodity prices. We could see a return to these valuations over the next couple of years on higher demand, a stronger macroeconomic backdrop and cyclical fundamentals, as shown in the following chart courtesy of DoubleLine Capital:
***
Speaking on CNBC’s ‘Halftime Report’ last week, DoubleLine founder Jeffrey Gundlach said he thought “investors should add commodities to their portfolios’ for 2018, pointing out that they are just as cheap relative to stocks as they were at historical turning points.
‘We’re at that level where in the past you would have wanted commodities’ in your portfolio, Gundlach said. ‘The repetition of this is almost eerie. And so if you look at that chart, the value in commodities is, historically, exactly where you want it to be a buy.’

This post was published at GoldSeek on Thursday, 21 December 2017.

In Unprecedented Intervention, Swiss Central Bank Bails Out Firm That Prints Swiss Banknotes

In the most ironic story of the day, the company that makes the paper that Swiss banknotes are printed on was just bailed out by the money-printing, stock-purchasing, plunge-protecting, savior-of-global equities…Swiss National Bank.
***
While The SNB has a long and checkered history of buying shares in companies… as we have detailed numerous times, it is no stranger to pumping money into companies all over the world…

This post was published at Zero Hedge on Dec 21, 2017.

Architecture Billing Index Shows Continued Growth

The folks at the American Institute of Architects, aia.org, publish an interesting set of data each month, collectively known as the Architecture Billing Index, or ABI. The main ABI represents actual billings that member firms have sent out in the previous month. They also have an ‘Inquiries Index’, which measures potential business as opposed to actual business.
The reason why I find examining the ABI so useful is that it correlates pretty well with GDP data, and we get the ABI data well ahead of the GDP numbers, which only come out quarterly and which take several weeks to tabulate before they are released.
The latest release out this week showed a value of 55 for the ABI, which is the 4th highest monthly reading since the 2009 depression. It says that there is strong demand for architectural services, which is a forerunner of actually building a new home or other type of building. The implication is that there is no slowdown to the building boom going on now, at least as far as such a slowdown might show up in the architectural services part of that market.

This post was published at FinancialSense on 12/21/2017.