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  • 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.


  • 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.


  • 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.


  • 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.


  • 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.


  • 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.


  • 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.


  • These Are The 30 Biggest Risks Facing Markets In 2018

    Once upon a time, Wall Street analysts had just two things to worry about: interest rate risk and corporate profits – virtually everything else was derived from these. Unfortuantely, we now live in the new normal, where central banks step in every time there is even a whiff of an imminent market correction (as BofA explained last week), and the result is that nobody know what is and what isn’t priced into the market any more, simply because the market in the conventional sense of a future discounting mechanism no longer exists (as Citi explained earlier this summer).
    Which is why, paradoxically, even as the VIX slides to record lows, the number of things to worry about on Wall Street grows longer and longer. In fact, according to Deutsche Bank’s Torsten Slok, there are no less than 30 material risks investors should beware in the coming year, ranging from a U. S. equity correction to a reversal of Brexit to Irish presidential elections, to a “Bitcoin crash,” rising inflation, danger from North Korea and results from special counsel Robert Mueller’s probe.

    This post was published at Zero Hedge on Dec 10, 2017.


  • No Risk Of Recession?

    Review
    I have been traveling a lot the last couple of weeks, so a big ‘Thank You’ goes to Michael Lebowitz for ‘pinch hitting’ for me. This week, I just want to review a couple of things as we begin to wrap up 2017.
    Earlier this week, I wrote a piece called ‘This Is Nuts.’ If you haven’t got a chance to read it, I suggest you do. It outlines my view on the current market extension in the short-term and the potential for a mean-reverting correction at some point in the future. To wit:
    ‘More importantly, a decline of such magnitude will threaten to trigger ‘margin calls’ which, as discussed previously, is the ‘time bomb’ waiting to happen.
    Here is the point. The ‘excuses’ driving the rally are just that. The election of President Trump has had no material effect on the market outside of the liquidity injections which have exceeded $2 Trillion.
    Importantly, on a weekly basis, the market has pushed into the highest level of overbought conditions on record since 2005. I have marked on the chart below each previous peak above 80 which has correlated to a subsequent decline in the near future.’

    This post was published at Zero Hedge on Dec 10, 2017.


  • Bank of America: “We’ve Seen This Movie Before: It Ends With A Recession”

    In a merciful transition from Wall Street’s endless daily discussions and more often than not- monologues – of why vol is record low, and why a financial cataclysm will ensue once vol finally surges, lately the main topic preoccupying financial strategists has been the yield curve’s ongoing collapse – with the 2s10s sliding and trading at levels last seen in April 2015, and with curve inversion predicted by BMO to take place as soon as March 2018. And, according to at least one other metric, the yield curve should already be some -25bps inverted. This is shown in the following chart from Bank of America which lays out the correlation between the US unemployment rate and the 2s10s curve, and which suggests that the latter should be 80 bps lower, or some 25 basis points in negative territory.
    Here is some additional context from BofA’s head of securitization Chris Flanagan, who views “the recent sharp flattening of the yield curve, which has seen the 2y10y spread go from 80 bps to almost 50 bps since late October, as the natural course of events at this stage of the economic cycle. Unemployment is low, and probably headed lower, and the Fed is intent on raising rates to stave off future inflation; we’ve seen this movie before and it typically ends with a flat or inverted yield curve. Based on history (and gravity), we think the most likely path forward is that the 2y10y spread reaches zero or inverts sometime over the next year or so and that recession of some kind follows in 2020 or 2021. (Given that the curve has flattened 30 bps in just over a month, projecting an additional 50 bps flattening over the next year is not really too bold.) Of course, much can happen along the way to change that outcome, but for now that seems to us to be the most likely course of events to us.”
    Here Flanagan openly disagrees with the BofA’s “house call” of a steepening yield curve, and explains why:

    This post was published at Zero Hedge on Dec 10, 2017.


  • Leaked DNC Memo Demands ‘Unity’ of All 2018 Candidates – GOP Tax Bill Shows a Party Beyond Repentance

    The political and social establishment is ensnared, strangling within a credibility trap. It prevents them from truly confronting themselves and what they have done, and what they are still doing in the service of power and money.
    It prevents them from addressing the problems, much less the needed reforms. It prompts them to act ineffectively and oddly, to the point that they obviously become a part of the problem and an impediment to progress.
    The GOP seems almost beyond repair. The Democrats need to unravel the Clinton Wall Street elite wing of the party which has its head buried in them like a big fat tick.
    The Republicans need a ‘twelve step’ program for any kind of helpful change to have even the slightest chance.
    The GOP tax bill is blatant corporate giveaway for the benefit of the one percent, and one of the more recent signs of their blindness caused by ideology in service to greed. They are not even bothering to excuse it anymore, except for the most naive of their supporters. They try to hide it by voting in secret on largely undiscussed bills with little debate. And as usual cover their perfidy with hypocritical slogans about freedom.

    This post was published at Jesses Crossroads Cafe on 10 DECEMBER 2017.


  • 10/12/17: Rationally-Irrational AI, yet?..

    In a recent post (I mused about the deep-reaching implications of the Google’s AlphaZero or AlphaGo in its earliest incarnation capabilities to develop independent (of humans) systems of logic. And now we have another breakthrough in the Google’s AI saga.
    According to the report in the Guardian (“AlphaZero, the game-playing AI created by Google sibling DeepMind, has beaten the world’s best chess-playing computer program, having taught itself how to play in under four hours. The repurposed AI, which has repeatedly beaten the world’s best Go players as AlphaGo, has been generalised so that it can now learn other games. It took just four hours to learn the rules to chess before beating the world champion chess program, Stockfish 8, in a 100-game match up.”

    This post was published at True Economics on Sunday, December 10, 2017.


  • Plasma For Pay: Broke Millennials Sell Blood Just To Survive

    There is no doubt, in a period where burdensome student loans and wage stagnation are crushing the hopes of achieving the American dream while living in their parents’ basements, the millennial generation is struggling to survive.
    In recent times, we have explained how this generation is selling sex on the internet in exchange for money to pay bills. Across the United States, there could be upwards 2.5 million college students selling sex on a website to cover expenses (see: Millions Of Millennials Could Be Trading Sex For Their Next Debt Payment – Here’s How) or there is a new trend with millennial women, auctioning their virginities to the highest bidder (see: Abu Dhabi Businessman Pays $2.9 Million For 19-Year-Old Model’s Virginity.) If it’s sex, the millennial generation has made it a commodity, using the power of the internet to leverage the sale.
    Besides the out of control sex advertisement on creepy websites, struggling millennials are now supplementing their incomes at blood plasma facilities across the United States.

    This post was published at Zero Hedge on Dec 10, 2017.


  • National Health Crisis: US Inner-City Kids Suffer ‘War-Zone’-Like PTSD

    BBC’s ‘America First?’ series sent Aleem Maqbool, a North America correspondent, to the inner city of Atlanta, Georgia, where he uncovered a rather shocking statistic in which 46% of the inner city residents suffered from post-traumatic stress disorder (PTSD), a rate that is much higher than U. S. soldiers (10-20%).
    ***
    Maqbool describes Atlanta’s inner city environment as a ‘war zone’, where death and destruction are contributing to high levels of PTSD in adults and children. He further quoted researchers and said levels of PTSD in America’s inner cities are comparable to refugee populations around the world.
    To make matters worse, the video makes the claim: gun murder rates (per 100,000) in the US are at astronomical levels when compared to other countries. A startling find, when considering the US, the richest country in the world, does not perform well in the international rankings.

    This post was published at Zero Hedge on Dec 10, 2017.