• Tag Archives Debt

  • “Brexit Is A Lose-Lose” – George Soros Slams Brits’ “False Hopes” As UK Economy Nears “Tipping Point”

    Posted on by Jon Comment

    A day after Brexit negotiations officially began, and seemingly unable to get over the result of democracy, George Soros is once again rattling his op-ed sabre, proclaiming the ignorance of British ‘brexit’ voters is about to get its come-uppance…
    Economic reality is beginning to catch up with the false hopes of many Britons.
    One year ago, when a slim majority voted for the United Kingdom’s withdrawal from the European Union, they believed the promises of the popular press, and of the politicians who backed the Leave campaign, that Brexit would not reduce their living standards. Indeed, in the year since, they have managed to maintain those standards by running up household debt.
    This worked for a while, because the increase in household consumption stimulated the economy. But the moment of truth for the UK economy is fast approaching.

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

    This entry was posted in Politics and tagged

  • 5 Ways Fed Rate Hikes May Squeeze Your Wallet

    Posted on by Jon Comment

    The Federal Reserve nudged up interest rates another .25 points last week. Of course, nobody was surprise by the central bank’s move. It was widely expected. Nevertheless, the Fed’s latest policy move has everybody bullish on increasing rates into the future
    Of course, nothing has fundamentally changed. As Paul Singer said earlier this month, the financial system is no more sound than it was in 2008. All of this talk about rate hikes will vanish like a vapor if actual economic data continues to point toward a slowdown.
    But since everybody is talking rate hikes right now, this is probably a good time to consider just how rising interest rates will effect your wallet.
    We tend to think about Federal Reserve policy in macro-economic terms. How will it effect the stock market? What kind of bubbles will it blow up? How will it impact the price of gold? But Fed policy also has a direct effect on the average American. In simplest terms, rising rates mean it will cost you more to pay off credit cards and other loans. That’s not good news for an economy buried in debt.
    Here are five ways rising interest rates can put the squeeze on your pocketbook.

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

    This entry was posted in Government and tagged

  • Could Recent FANG Weakness Be Signaling the End of the Bull Run?

    Posted on by Jon Comment

    As we survey the financial markets and global economic backdrop, it appears that a change in the wind could be slowly taking place. Across the tides of global capital markets, a chillier wind may be starting to blow, ushering in what could soon be some sweeping changes in the major trends for primary capital markets. In China, the air of debt deleveraging seems to be taking root, with tightness in the money markets, bond market collapses, bond market closures, and inverted yield curves. In addition, there are also widespread rumors surrounding the viability of an assortment of wealth management products that have embedded duration mismatch problems baked into the cake.
    Here at home in the USA, boom times remain in full swing with stock market averages busting out to new highs seemingly day-after-day. Yet, behind the bullish headlines, there seems to be developing a clear pattern of parabolic (terminal) excess within the technology space, a pattern familiar to those market watchers who recall 1999 and 2008.
    Sure enough, for the most part, today’s current valuation metrics for technology stocks are nothing close to the fantasy price-to-eyeball ratios that seemed to capture the imagination of so many when the first internet boom developed in the late 1990s and peaked in March 2000. Yet, today’s market harkens back to a blend of the pre-tech wreck mania vertical blow off patterns and the famous Nifty 50 market of the early 1970s.

    This post was published at FinancialSense on 06/21/2017.

    This entry was posted in Economy and tagged

  • China ‘Rescues’ Bond Market In Symbolic Move But Yield Curve Remains Inverted

    Posted on by Jon Comment

    For the 10th day in a row, China’s bond yield curve remains inverted (the longest in history).

    With yields at 3-year highs, corporate bond issuance is evaporating, and has now emerged as the latest major, and most imminent, threat facing China’s financial sector and $10 trillion corporate debt market.
    However, it appears Chinese authorities have reached their max pain point.

    This post was published at Zero Hedge on Jun 20, 2017.

    This entry was posted in Economy and tagged

  • Oil, Gold and Bitcoin

    Posted on by Jon Comment

    The falling price of oil did not garner any mainstream financial media attention until today, when U. S. market participants woke up to see oil (both WTI and Brent) down nearly $2. WTI briefly dropped below $43. The falling price of oil reflects both supply and demand dynamics. Demand at the margin is declining, reflecting a contraction in global economic activity which, I believe the data shows, is accelerating. Supply, on the other hand, is rising quickly as U. S. oil producers – specifically distressed shale oil companies – crank out supply in order to generate the cash flow required to service the massive energy sector debt load.
    I am quite surprised by the rapid fall of oil (WTI basis) from the $50 level, because I concluded earlier this year that the Fed was attempting to ‘pin’ the price of oil to $50:
    The graph above is a 5-yr weekly of the WTI continuous futures contract. Oil bottomed out in early 2016 and had been trending laterally between the mid-$40’s and $55. I read an analysis in early 2016 that concluded that junk-rated shale oil companies would implode if oil remained in the low $40’s or lower for an extended period of time. Note that some of the TBTF banks who underwrote shale junk debt were stuck with unsyndicated senior bank debt (i.e. they were unable to find enough investors to relieve the banks of this financial nuclear waste). Thus, the Fed has been working to keep the price of oil levitating in the high $40’s/low $50’s, in part, to prevent financial damage to the big banks who have big exposure to shale oil debt.

    This post was published at Investment Research Dynamics on June 21, 2017.

    This entry was posted in Economy and tagged

  • US Treasury Secretary Mnuchin Still Interested In Ultralong (High Duration) Sovereign Debt As Argentina Sees strong demand for surprise 100-year bond

    Posted on by Jon Comment

    This is a syndicated repost courtesy of Confounded Interest. To view original, click here. Reposted with permission.
    US Treasury Secretary Steve ‘The Munchkin’ Mnuchin said on Bloomberg News today that Treasury is still considering issuing ultra-long sovereign debt. This comes on the news that Argentina is issuing a 100 year sovereign bond that is in hot demand. Reuters – Argentina sold $2.75 billion of a hotly demanded 100-year bond in U. S. dollars on Monday, just over a year after emerging from its latest default, according to the government.
    The South American country received $9.75 billion in orders for the bond, as investors eyed a yield of 7.9 percent in an otherwise low yielding fixed income market where pension funds need to lock in long-term returns.
    Thanks to a stronger-than-expected peso currency, the government has increased its overall 2017 foreign currency bond issuance target to $12.75 billion from its previous plan of issuing $10 billion in international bonds, Finance Minister Luis Caputo told reporters in Buenos Aires.

    This post was published at Wall Street Examiner by Anthony B Sanders ‘ June 20, 2017.

    This entry was posted in Government and tagged

  • 69 Percent Of Americans Do Not Have An Adequate Emergency Fund

    Posted on by Jon Comment

    Do you have an emergency fund? If you even have one penny in emergency savings, you are already ahead of about one-fourth of the country. I write about this stuff all the time, but it always astounds me how many Americans are literally living on the edge financially. Back in 2008 when the economy tanked and millions of people lost their jobs, large numbers of Americans suddenly couldn’t pay their bills because they were living paycheck to paycheck. Now the stage is set for it to happen again. Another major recession is going to happen at some point, and when it does millions of people are going to get blindsided by it.
    Despite all of our emphasis on education, we never seem to teach our young people how to handle money. But this is one of the most basic skills that everyone needs. Personally, I went through high school, college and law school without ever being taught about the dangers of going into debt or the importance of saving money.
    If you are ever going to build any wealth, you have got to spend less than you earn. That is just basic common sense. Unfortunately, nearly one out of every four Americans does not have even a single penny in emergency savings…
    Bankrate’s newly released June Financial Security Index survey indicates that 24 percent of Americans have not saved any money at all for their emergency funds.
    This is despite experts recommending that people strive for a savings cushion equivalent to the amount needed to cover three to six months’ worth of expenses.

    This post was published at The Economic Collapse Blog on June 20th, 2017.

    This entry was posted in Government and tagged

  • Illinois Comptroller: “The State Can No Longer Function, We Have Reached A New Phase Of Crisis”

    Posted on by Jon Comment

    With just 10 days to go until Illinois enters its third year without a budget, resulting in the state’s imminent downgrade to junk status and potentially culminating in a default for the state whose unpaid bills now surpass $15 billion, Democratic Illinois Comptroller Susana Mendoza issued a warning to Illinois Gov. Rauner and other elected officials on Tuesday, saying in a letter that her office has “very serious concerns” it may no longer be able to guarantee “timely and predictable payments” for some core services.
    In the letter posted on her website, Mendoza who over the weekend warned that Illinois is “in massive crisis mode” and that “this is not a false alarm” said the state is “effectively hemorrhaging money” due to various court orders and laws that have left government spending roughly $600 million more a month than it’s taking in. Mendoza said her office will continue to make debt payments as required, but indicated that services most likely to be affected include long-term care, hospice and supportive living centers for seniors. She added that managed care organizations that serve Medicaid recipients are owed more than $2.8 billion in overdue bills as of June 15.
    “The state can no longer function without a responsible and complete budget without severely impacting our core obligations and decimating services to the state’s most in-need citizens,” Mendoza wrote. “We must put our fiscal house in order. It is already too late. Action is needed now.”
    Unveiling the most dire langage yet, in her letter Mendoza said “we are now reaching a new phase of crisis” perhaps in an attempt to prompt the Democrats and Republicans to sit down and come up with a comrpomise:

    This post was published at Zero Hedge on Jun 20, 2017.

    This entry was posted in Government and tagged

  • Argentina (!) Sells 100-Year Dollar-Denominated Junk Bonds

    Posted on by Jon Comment

    Yield-desperate investors stop before nothing. What have central banks wrought? Junk-rated, deficit-plagued, inflation-whacked Argentina just sold $2.75 billion of 100-year dollar-denominated bonds. This was the first time ever that a junk-rated country was able to sell 100-year bonds denominated in a foreign currency, or any currency.
    Argentina sports a ‘B’ credit rating from Standard & Poor’s. Five notches below investment grade. Deep junk.
    And 100 years is a very, very long time for Argentina and its regularly beaten-up creditors: Just over the past 65 years, it has defaulted six times – in 1951, 1956, 1982, 1989, 2001, and its ‘selective default’ in 2014. Its default in 2001 on $80 billion of dollar-denominated debt was the largest sovereign default at the time.
    And yet, yield-desperate investors don’t seem to care. According to The Wall Street Journal, demand for the private-placement offering was such that Argentina could sell those ‘century’ bonds at a yield of 7.9%, down from the initial price talk of 8.25%.

    This post was published at Wolf Street on Jun 20, 2017.

    This entry was posted in Economy and tagged

  • “Mr. Carlson Said One Of His Clients Had 40% Of His Net Worth In Apple”

    Posted on by Jon Comment

    The WSJ has a good article explaining how schizophrenic the tech rally this year has been, with shares of giant tech firms “cropping up everywhere” in the universe of factor-based strats, even contradictory ones. Some examples: “Apple is in five low-volatility ETFs with a collective $14 billion and nine momentum ETFs with $17.7 billion, according to data firm XTF. Alphabet resides in seven low-volatility ETFs and three momentum ETFs, while Microsoft is in 11 low-vol ETFs and four momentum ETFs.”
    That’s not all: Apple is also the fourth-largest position in the iShares Quality Factor ETF , which invests in firms with high returns on equity, low debt and stable earnings growth. At the same time, Apple is a large holding in a separate BlackRock ETF that aims to capture momentum, and it is also the top holding in BlackRock’s iShares Edge Value Factor ETF, representing nearly 10% of the portfolio.
    While in the past different factors offered different investment styles, and at least superficial diversification, the tech juggernaut has made some of the most popular quant strats virtually overlapping.
    This “style creep” means investors holding a mix of seemingly disparate funds in the name of diversification “could be surprised to find heavy concentrations in the same group of in-favor stocks, making them vulnerable in bouts of selling. Rules-based funds and strategies that gradually added tech stocks could sell them in a downturn, adding to price declines.”
    The biggest risk may be volatility itself.

    This post was published at Zero Hedge on Jun 19, 2017.

    This entry was posted in Market Commentary and tagged

  • Cry For Argentina! Issuing 100 Year Sovereign Debt As Fiscal Deficits Grow To Worst Since 2000

    Posted on by Jon Comment

    Cry for Argentina.
    Argentina, which has defaulted on its debt seven times, is now faced with the worst fiscal gap since 2000.
    (Bloomberg) Argentina is planning to sell its first 100-year bond a year after returning to global capital markets, as it grapples with a soaring budget deficit.
    The bond, which will be used to shore up its budget and refinance debt, may be priced as soon as Monday and yield about 8.25 percent, according to a person with knowledge of the matter, who asked not to be named because the deal is private. Citigroup Inc. and HSBC Holdings Plc are managing the sale. The debt-issuance plan was announced on Twitter by the Argentine Finance Ministry, which hasn’t provided further details.

    This post was published at Wall Street Examiner on June 19, 2017.

    This entry was posted in Economy and tagged

  • Inflation Trade: AMZN + WFM

    Posted on by Jon Comment

    ‘Markets go up on an escalator, they come down on an elevator. This is the most hideously overvalued market in history.’
    David Stockman
    Last week’s action by the Fed was an effort to restore normalcy, but in the context of extraordinary action by the central bank. When you tell markets that the risk free rate is zero, it has profound implications for the cost of debt and equity, and resulting in different asset allocation decisions. Ending this regime also has profound implications for investors and markets.
    In the wake of the financial crisis, some investors found comfort in the fact that when risk free interest rates are at or near zero, the discounted future value of equity securities was theoretically infinite. Markets seem to have validated this view. But to us the real question is this: If a company or country has excessive and growing amounts of debt outstanding against existing assets, what is the value of the equity? The short answer is non-zero and declining. But hold that thought.
    Reading through Grant’s Interest Rate Observer over the weekend, we were struck by the item on China Evergrande Group (OTC:ERGNF), a real estate development company and industrial conglomerate that has reported negative free cash flow since 2006, but has made it up in volume so to speak. The stock is up over 200% this year, Grant’s reports. The real estate conglomerate has its hands into all manner of businesses and seems to typify the China construction craze.

    This post was published at Wall Street Examiner on June 19, 2017.

    This entry was posted in Banking and tagged

  • Take advantage of this free insurance policy for your savings

    Posted on by Jon Comment

    The “fixes” to the stagnation of postwar Capitalism in the 1970s were financialization, globalism, and the sustained expansion of debt–all have run out of steam.
    Many of us have written about cycles in the past decade: Kondratieff economic cycles, business/credit cycles, the Strauss – Howe generational theory (an existential national crisis arises every four generations, as described in their book The Fourth Turning), and long-wave cycles of growth and decline, as described in seminal books such as The Great Wave: Price Revolutions and the Rhythm of History and War and Peace and War: The Rise and Fall of Empires.
    There is another Rhythm of American History that few recognize: the economic, social and political crises sparked by exploitive Elites. There are two dynamics that drive these crises:< 1. The exploitation of commoners by financial/political Elites reaches extremes that create systemic instability as commoners no longer have the means to improve their conditions. 2. The economic mode of production that generated Elite wealth no longer functions, but the Elites cling to the failing system and enforce it with increasingly violent suppression of dissent.
    Here are the previous Crises of Exploitive Elites:
    1. Slavery, 1850 to 1865. Though the toxins generated by slavery are still with us, the existential political, social and economic crisis arose in the years between 1850 and the end of the Civil War in 1865

    This post was published at Charles Hugh Smith on SUNDAY, JUNE 18, 2017.

    This entry was posted in Banking and tagged

  • Democracy Is A Front For Central Bank Rule

    Posted on by Jon Comment

    Several years ago when the Federal Reserve had its Fed funds rate at zero to 25 basis points (one-quarter of one percent – 0.25%), there was a great deal of talk, somehow presented as urgent, whether the Federal Reserve would raise interest rates.
    RT asked me if the Fed was going to raise interest rates. I answered that the purpose of low interest rates was to restore the solvency of the balance sheets of the ‘banks too big to fail’ by raising debt prices. The lower the interest rate, the higher the prices of debt instruments. The Fed drives bond prices up by purchasing bonds, and the Fed raises interest rates by selling bonds, or by purchasing fewer of them than previously.
    I told RT that a real increase in interest rates would undercut the Fed’s policy of rescuing the balance sheets of the big banks whose balance sheets were loaded up with bad debt that desperately needed a rise in debt prices for the banks to remain solvent.

    This post was published at Paul Craig Roberts on June 19, 2017.

    This entry was posted in Government and tagged

  • Suicide Over European Banking Crisis

    Posted on by Jon Comment

    The European ‘bail-in’ rules have been cheered claiming taxpayer money will be spared. However, many seniors bought bank bonds for their retirement. In the rescue of the small Banca Popolare d’Etruria, a retiree who had lost more than 100,000 euros worth of bonds lost everything and committed suicide. There have been many such events that do not always make the press. In Italy, the death of a pensioner who also committed suicide after losing his life savings as a result of a controversial move by the government to rescue four banks. The 68-year-old hung himself at his home in Civitavecchia, a port town near Rome, after the so-called ‘save banks’ plan wiped out 100,000 in savings held at Banca Etruria, one of the four lenders included in the government rescue deal announced on November 22nd, 2015. There was the 23-year old who committed suicide over 8000 in debts for student loans. A Greek pensioner who was 77-years old committed suicide in central Athens shooting himself with a handgun just several hundred meters from the Greek parliament building in apparent despair over his financial debts.

    This post was published at Armstrong Economics on Jun 19, 2017.

    This entry was posted in Government and tagged

  • German Politicians Hammer the ECB, But Only to Get Votes

    Posted on by Jon Comment

    They know: the Eurozone would plunge into a sovereign debt crisis all over again, only worse this time.
    By Don Quijones, Spain & Mexico, editor at WOLF STREET. These days it’s easy to tell when general elections are approaching in Germany: members of the ruling government begin bewailing, in perfect unison, the ECB’s ultra-loose monetary policy. Leading the charge this time was Finance Minister Wolfgang Schaeuble, who on Tuesday urged the ECB to change its policy ‘in a timely manner’, warning that very low interest rates had caused problems in ‘some parts of the world.’
    Werner Bahlsen, the head of the economic council of Merkel’s CDU conservatives, was next to take the baton. ‘The ongoing purchase of government bonds has already cost the European project a great deal of credibility and has damaged it,’ he said. ‘The ECB can only regain trust with the return to a sound monetary policy.’
    As Schaeuble and Balhsen well know, that is not likely to occur any time soon. Indeed, like all other Eurozone finance ministers, Schaeuble is benefiting handsomely from the record-low borrowing costs made possible by the ECB’s negative interest rate policy. But by attacking ECB policy he and his peers can make it seem that they take voters’ concerns about low interest rates seriously, while knowing perfectly well that the things they say have very little effect on what the ECB actually does.

    This post was published at Wolf Street on Jun 18, 2017.

    This entry was posted in Government and tagged

  • Global Equity Markets Firmer As Oil Stabilizes, Greece Gets Bailout Money

    Posted on by Jon Comment

    (Kitco News) – World stock markets were mostly higher overnight. Crude oil prices are firmer today, which helped out the equities. Also, Greece’s creditors approved another release of bailout money for the indebted country, which assuaged European investors. U. S. stock indexes are pointed toward slightly higher openings when the New York day session begins.
    Gold prices are modestly up in pre-U. S. market trading, on a technical and short-covering bounce from solid selling pressure seen earlier this week.
    In overnight news, Russia’s central bank cut its key interest rate by 25 basis points. The Russian ruble rallied on the news.
    The Bank of Japan held its regular monetary policy meeting Friday and made no major changes in its policy.
    The Euro zone’s consumer price index for May was reported down 0.1% from April and up 1.4% from a year ago. The numbers were right in line with market expectations but down from the European Central Bank’s target rate of around 2.0% annual inflation.

    This post was published at Wall Street Examiner on June 16, 2017.

    This entry was posted in Banking and tagged

  • We’re in a Boiling-Point Crisis of Exploitive Elites

    Posted on by Jon Comment

    The “fixes” to the stagnation of postwar Capitalism in the 1970s were financialization, globalism, and the sustained expansion of debt–all have run out of steam. Many of us have written about cycles in the past decade: Kondratieff economic cycles, business/credit cycles, the Strauss – Howe generational theory (an existential national crisis arises every four generations, as described in their book The Fourth Turning), and long-wave cycles of growth and decline, as described in seminal books such as The Great Wave: Price Revolutions and the Rhythm of History and War and Peace and War: The Rise and Fall of Empires. There is another Rhythm of American History that few recognize: the economic, social and political crises sparked by exploitive Elites. There are two dynamics that drive these crises: 1. The exploitation of commoners by financial/political Elites reaches extremes that create systemic instability as commoners no longer have the means to improve their conditions.

    This post was published at Charles Hugh Smith on SUNDAY, JUNE 18, 2017.

    This entry was posted in Economy and tagged

  • S&P Warns It May Downgrade Amazon

    Posted on by Jon Comment

    Unlike Apple, Amazon does not have a quarter trillion in (mostly offshore held) cash. Which means, it will issue debt to fund the Whole Foods purchase. Which means its leverage will rise above 1x. Which means S&P just warned of a downgrade of Amazon’s AA- rating.
    From S&P:
    Amazon.com Inc. Ratings Placed On CreditWatch Negative On Debt-Financed Acquisition Of Whole Foods
    Amazon has announced an agreement to purchase Whole Foods Market Inc. in a debt-financed purchase of about $14 billion. We are placing our ‘AA-‘ corporate credit rating on Amazon on CreditWatch with negative implications. Our preliminary view is that Amazon’s leverage will approach 1.5x, but mostly likely remain below 2x. We see the purchase as a major strategic initiative for Amazon, with execution risk, but also potential significant implications for Amazon’s market strategy as well as for the broader U. S. grocery market. S&P Global Ratings placed its ratings, including the ‘AA-‘ corporate credit rating, on Amazon.com Inc. on CreditWatch with negative implications.
    “The CreditWatch placement reflects our expectation that Amazon’s leverage will increase as a result of its plan to purchase Whole Foods for about $14 billion,” said S&P Global Ratings credit analyst Robert Schulz.

    This post was published at Zero Hedge on Jun 16, 2017.

    This entry was posted in Economy and tagged

  • The Pin To Pop This Mother Of All Bubbles?

    Posted on by Jon Comment

    Global macro economic data has been weak for many years, but there’s now a very real chance of a world-wide recession happening in 2017.
    Why? A dramatic and worsening shortfall in new credit creation.
    The world’s major central banks have, again, done the world an enormous disservice. Instead of admitting that maybe/perhaps/possibly the practice of issuing debt at more than twice the rate of underlying economic growth was a very bad idea over the past several decades, they instead doubled down and created an even larger debt monster to be dealt with.
    The resulting global asset price bubble — or, more accurately, set of nested and incestuously intertwined bubbles — can collectively be called the Mother Of All Bubbles (MOAB). None has ever been larger in history.
    As with all prior bubbles, it shares the collective delusion that there’s such a thing as a free lunch. History has seen many attempts to eat this elusive meal, with each generations convinced that they were the chosen ones who could finally crack that nut.
    So, dutifully, our central bankers have tried, and tried again, to deliver that free lunch — i.e. to print up prosperity.
    But, alas, prosperity cannot be printed out of thin air. All that can be accomplished by central bank slight of hand is a transfer of wealth. Central banks steal from the many to give to the few. They are the reverse Robin Hoods of our day.

    This post was published at PeakProsperity on Friday, June 16, 2017,.

    This entry was posted in Economy and tagged