• Tag Archives Debt
  • 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.


  • Considering Faking Your Own Death? Then The Philippines Is The Place For You

    The technical term is pseudocide – a fancy word that means, essentially, ‘faking your own death.”
    Hundreds of thousands of Americans – some struggling with seemingly insurmountable debt burdens or are being hounded by the IRS after stiffing the tax man – have probably fantasized about faking their own deaths. But few understand just how easy it is to – um – execute such an ambitious, if legally precarious, plan.
    That’s where purveyors of so-called ‘death kits’ come in. Few westerners are aware of its existence, but there’s actually a thriving cottage industry based in the Philippines, where investors can purchase all the tools they need to fake their own deaths for the surprisingly low price of about 350 pounds (about $500).
    Of course, the scheme has several macabre elements. The process involves buying an unclaimed corpse from one of the many morgues in the Philippines where the bodies of John and Jane Does are stored.
    According to the Telegraph, many customers who choose this route are desperate Wall Street bankers seeking to escape debt, and men having affairs who want to leave their families.

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


  • What Will the Tax Bill Do to the Housing Market?

    The enormity of this change has not been fully appreciated just yet.
    The tax bill now becoming law will impact the housing market in a big way via four mechanisms that gut the government’s subsidies of homeownership:
    Nearly doubling the standard deduction (but wait…) Lowering the cap on the mortgage interest deduction for new purchase mortgages Capping the deduction for state and local taxes at $10,000 Eliminating the deduction for interest on home-equity debt, such as HELOCs. The Big Equalizer: The New Standard Deduction
    Nearly doubling the standard deduction – from $6,350 for individuals and $12,700 for married couples filing jointly in 2017 to $12,000 and $24,000 respectively in 2018 – would be a simple way of giving many Americans an instant, massive, no-hassles tax cut.
    But wait: The law also eliminates the personal exemption of $4,050 allowed for each family member. A married couple will see an increase in the standard deduction of $11,300 (compared to 2017). But it will lose $8,100 in personal exemptions. This whittles down the net increase in deductions to $3,200. For couples with kids, it gets more complicated.

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


  • Margin Debt, Backed by Enron-Dj -Vu Steinhoff Shares, Hits BofA, Citi, HSBC, Goldman, BNP

    ‘Shadow margin’ is a hot business for brokers. Now they’re licking their wounds. When the bankers of Christo Wiese, the former chairman and largest shareholder of Steinhoff International Holdings – a global retail empire that includes the Mattress Firm and Sleepy’s in the US – went to work on December 6 in the epic nothing-can-go-wrong calm of the rising stock markets, they suddenly discovered that much of their collateral for a 1.6-billion margin loan they’d made to Wiese had just evaporated.
    Citigroup, HSBC, Goldman Sachs, and Nomura had extended Wiese this ‘securities-based loan’ in September 2016. His investment vehicles pledged 628 million of his Steinhoff shares as collateral, at the time worth 3.2 billion. He wanted this money so he could participate in a Steinhoff share sale in conjunction with the acquisition of Mattress Firm and Poundland, essentially borrowing against his Steinhoff shares to buy more Steinhoff shares.
    This loan forms part of the $21 billion of debt associated with Steinhoff that global banks are exposed to.
    But that December 6, the shares of Steinhoff plunged 64% to 1.07 on the Frankfurt stock exchange after the company announced the departure of the CEO and unspecified ‘accounting irregularities requiring further investigation.’

    This post was published at Wolf Street on Dec 19, 2017.


  • Jefferies Fixed Income Revenue Plunges 37% To 2 Year Low

    Once upon a time Jefferies was the country’s biggest junk bond trading shop, with a small investment banking group on the side. Now, it’s the other way around.
    in its latest quarter and fiscal year ended November 30, Jefferies – which is the last public company to announce results in the old bank convention with a Nov 30 fiscal year end – reported a record $529 million investment banking advisory revenue for the quarter, up 27% Y/Y, and $1.76BN for the 12 months ended Nov. 30. This was the fourth year in a row that the firm has brought in more revenue from investment banking than from trading.
    ‘Our fourth quarter performance was driven by $529 million in Investment Banking net revenues. These quarterly record Investment Banking results reflect solid contributions from equity and debt capital markets, strong performance in our merger and acquisition advisory business, and broad participation across our industry groups and regional efforts… Our strategy of prioritizing expansion of our investment banking effort continues to succeed and should yield further growth over the next several years” CEO Rich Handler said in the statement.

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


  • China Systemic Risk: Liquidity Problem Surfaces At HNA Group Less Than Two Weeks After Company’s Denial

    Here we go again…
    On December 8, we lamented how every few days we return to the subject of systemic risk in China related to its big four highly-indebted conglomerates, HNA, Anbang, Evergrande and Dalian Wanda. We also noted how our chief source of concern had become HNA, after it issued a bond with less than one year to maturity with the extortionately high coupon of 9%. And S&P downgraded HNA’s credit rating from b+ to b, five levels below investment grade. The reason for our continuing focus on HNA is its $28bn of short-term debt which matures before the end of next June, much of it accumulated during a $40 billion binge of acquisition-driven growth which saw it become a major shareholder in Deutsche Bank, Hilton Worldwide and others.
    In our update less than two weeks ago, we noted how HNA business units had suffered further credit downgrades and been forced into cancelling bond issues. For example, Hainan Airlines cancelled a 1 billion yuan ($151.2 billion) issue of perpetual bonds to repay maturing debt, HNA Investment Group (hotels and real estate) cancelled a 5.22 billion yuan ($790 million) issue and S&P cut the long-term credit rating of HNA’s Swissport Group Sarl to b-, six levels below investment grade, citing concerns about its parent.

    This post was published at Zero Hedge on Dec 18, 2017.


  • ESPN President Quits Due To “Substance Addiction”

    Amid plummeting ratings, mass job cuts, and constant #resistance, ESPN President John Skipper has finally called it quits from running the so-called sports channel.
    Here is Skipper’s statement:
    Today I have resigned from my duties as President of ESPN. I have had a wonderful career at the Walt Disney Company and am grateful for the many opportunities and friendships. I owe a debt to many, but most profoundly Michael Lynton, George Bodenheimer and Bob Iger.
    I have struggled for many years with a substance addiction. I have decided that the most important thing I can do right now is to take care of my problem.

    This post was published at Zero Hedge on Dec 18, 2017.


  • Greece Is The Patsy For Europe’s Failure (And The Ordeal Is Far From Over)

    Authored by Raul Ilargi Meijer via The Automatic Earth blog,
    I feel kind of sorry this has become such a long essay. But I still left out so much. You know by now I care a lot about Greece, and it’s high time for another look, and another update, and another chance for people to understand what is happening to the country, and why. To understand that hardly any of it is because the Greeks had so much debt and all of that narrative.
    The truth is, Greece was set up to be a patsy for the failure of Europe’s financial system, and is now being groomed simultaneously as a tourist attraction to benefit foreign investors who buy Greek assets for pennies on the dollar, and as an internment camp for refugees and migrants that Europe’s ‘leaders’ view as a threat to their political careers more than anything else.
    I would almost say: here we go again, but in reality we never stopped going. It’s just that Greece’s 15 minutes of fame may be long gone, but its ordeal is far from over. If you read through this, you will understand why that is. The EU is deliberately, and without any economic justification, destroying one of its own member states, destroying its entire economy.

    This post was published at Zero Hedge on Dec 18, 2017.


  • Moody’s Considers Municipal Ratings Changes That Could Push Illinois Into Junk Territory

    A few weeks ago, we expressed some level of astonishment that the rating agencies, in their infinite wisdom, decided to bestow an investment grade rating upon a new $3 billion bond issuance by the City of Chicago. Of course, this wouldn’t be such a big deal but for the fact that the state of Illinois is a financial disaster that will undoubtedly be forced into bankruptcy at some point in the future courtesy of a staggering ~$150 billion funding gap on its public pensions, a mountain of debt and $16.4 billion in accrued AP because they can’t even afford to pay their bills on a timely basis. Here are just a couple of our recent posts on these topics:
    Illinois Pension Funding Ratio Sinks To 37.6% As Unfunded Liabilities Surge To $130 Billion Illinois Unpaid Vendor Backlog Hits A New Record At Over $16 Billion The State Of Illinois Is “Past The Point Of No Return” Alas, as Capitol Fax notes this morning, it seems as though Moody’s may finally be waking up to the farce that is their own municipal ratings system and is currently in the process of seeking comments from market participants on proposed changes for states’ general obligation credit ratings, which would include an increased emphasis on debt and pension obligations. Of course, with their GO rating just one notch above junk, all of those long-only bond funds that have scooped up billions in ‘juicy’ 4% Illinois paper over the past couple of months should probably take notice.

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


  • Bank of Canada’s Poloz Is Right to Be Worried

    Three possibilities come to mind. By Peter Diekmeyer, Canada, for Sprott Money: Bank of Canada governor Stephen Poloz cited numerous worries plaguing the economy during his speech to Toronto’s financial elites at the prestigious Canadian Club. However, the title of Poloz’s presentation, ‘Three things keeping me awake at night’ seemed odd, given positive recent Canadian employment, GDP and other data.
    Poloz highlighted high personal debts, housing prices, cryptocurrencies and other causes for concern, along with actions that the BoC is taking to alleviate them. His implicit message was (as always) ‘We have things under control.’ But if that’s all true, then Canada’s central bank governor should be sleeping like a baby. So, what is really keeping Mr. Poloz up at night? Three possibilities come to mind.

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


  • The Great Oil Swindle

    When it comes to the story we’re being told about America’s rosy oil prospects, we’re being swindled.
    At its core, the swindle is this: The shale industry’s oil production forecasts are vastly overstated.
    Swindle: Noun – A fraudulent scheme or action.
    And the swindle is not just affecting the US. It’s badly distorted everything from current geopolitics to future oil forecasts.
    The false conclusions the world is drawing as a result of the self-deception and outright lies we’re being told is putting our future prosperity in major jeopardy. Policy makers and ordinary citizens alike have been misled, and everyone — everyone — is unprepared for the inevitable and massive coming oil price shock.
    An Oil Price Spike Would Burst The ‘Everything Bubble’
    Our thesis at Peak Prosperity is that the world’s equity and bond markets are enormous financial bubbles in search of a pin. Sadly, history shows there’s nothing quite as sharp and terminal to these sorts of bubbles as a rapid spike in the price of oil.
    And we see a huge price spike on the way.
    As a reminder, bubbles exist when asset prices rise beyond what incomes can sustain. Greece is a prime recent example. In 2008 when the price of oil spiked to $147/bbl, Greece could no longer afford imported oil. But oil is a necessity so it was bought anyway, their national balances of payments were stressed to the point that they were exposed as insolvent and then their debt bubble promptly and predictably popped. The rest is history. Greece is now a nation of ruins and their economy might as well be displayed alongside the Acropolis.

    This post was published at PeakProsperity on Friday, December 15, 2017,.


  • Still Can’t Find That Pitchfork, Can You?

    Corporate balance sheets have never been in the condition they are now, but most of this is a fraud.
    Virtually all of the so-called “growth” has been in buybacks and (to a lesser extent) dividends. The problem with buybacks is that into ramping prices they are a terrible long-term deal. They make some sense in the depths of a crash, but of course nobody has the cash to do it during a crash.
    When debt financed it’s even worse because history says that corporate debt is never paid off, only rolled over. In point of fact non-financial companies did not decrease their total debt levels (as measured by the Fed Z1) even during the depth of the financial crisis of 2007-2009. This of course means that debt:equity levels go vertical as soon as the ramp in equity price stops.
    I remind you that while buybacks increase earnings during good years (by reducing the divisor) they also increase losses during bad ones. People forget this because, well, there haven’t been any bad ones recently. That will end and when it does it will provide a gross amount of acceleration for the decline in equity prices. In fact, it’s not going to be gasoline poured on that fire, it’s going to a mixture of diesel fuel and ammonium nitrate…. See Galveston for what will come of that.
    But on top of this we now have the real screw job in the tax bill.

    This post was published at Market-Ticker on 2017-12-15.


  • Why We Should Worry About China

    Many of our readers might remember the late 80s. There were hundreds of movies, songs and books about the inevitable Japanese economic invasion. The ones of you that did not live that period can see that it did not happen.
    Why? Because the Japanese growth miracle was built on a massive debt bubble and, once it burst, the country fell into stagnation for the better part of two decades. It still has not recovered.
    China presents many similarities in its economic model. Massive debt, overcapacity and central planned growth targets.
    Many economists and investors feel relieved because China is still growing at 6.8%. They should think twice. On one side, that level of growth is clearly overestimated. By any realistic measure of growth, China’s Gross Domestic Product annual increase is significantly lower than the official figures show. Patrick Artus, global chief economist at Natixis Global Asset Management, as well as other economists have noted that there has been a significant decoupling since mid-2014 between the government’s official growth reading and more reliable indicators. On the other hand, even if we agree with the official readings, this growth has been achieved using a worryingly high level of debt.

    This post was published at Ludwig von Mises Institute on December 15, 2017.


  • A Word of Thanks, Lew

    Many Mises.org readers know that Lew Rockwell, founder of the Mises Institute and quiet benefactor to countless individuals in libertarian circles over the decades, continues to recover from a recent back injury. While the episode has not quelled his enthusiasm for liberty, recovery is no picnic.
    Apparently medicine remains in the Dark Ages when it comes to backs, especially lower backs. Some treatments are sketchy and unreliable, cortisone injections provide only fleeting benefit, pain management is fraught with nausea and other nasty side effects, and surgical options portend Armageddon. All that said, Lew is in great hands with innovators at Emory University (yes, xenophobes, we have wonderful doctors down South) and feeling much better. A procedure performed earlier this week appears to have yielded tremendous benefit, and we expect Lew back at 100% very soon.
    My point in writing this is twofold: first, to update friends and supporters of the Institute on Lew’s progress, and second to remind all of us of the tremendous debt of gratitude we owe him.
    Let me risk Lew’s wrath by sharing a few personal details about him.
    Few people know that his much older brother was killed as a young pilot during World War II – by friendly fire. The family never fully recovered, of course, and the event instilled a deep antiwar sentiment in Lew as a boy even though he could not fully grasp the depth of the tragedy and his parents’ grief. And while he grew up as a Taft and later a Goldwater conservative, Lew soured on the GOP during the Nixon era and dismissed it as a hopeless and even malevolent force.

    This post was published at Ludwig von Mises Institute on 12/14/2017.


  • Yamada: Market Technicals Strong Though Record Margin Debt Spells Trouble

    There’s no denying that 2017 has been a good year for investors, with most major asset classes showing gains for the year.
    This time on Financial Sense Newshour, we spoke with Louise Yamada of LY Advisors about current conditions and whether she sees any signs of a market top or concerning developments.
    Are We on Track for Longest Recovery?
    Everything looks to be in alignment and going in one direction, and we’re already in the ninth year of this current bull market.
    The cumulative advance-decline line has been confirming the rally, Yamada noted. It has been hitting new highs along with the major indexes.
    Minimal Signs of Stress
    On the Dow, there were some prior concerns because the Transports had been lagging the Industrials, but last week they experienced a strong breakout.
    If you look at the Nasdaq, it’s behavior looks just like the Dow, consisting of a stepping stone pattern with higher lows and higher highs.

    This post was published at FinancialSense on 12/14/2017.


  • Canada Home Values Hit ‘First Quarterly Decline since Q1 2009’ as Household Debt Binge Hits New High

    How exposed are over-indebted household to rising interest rates?
    Household debt in Canada rose to a new record of C$2.11 trillion in the third quarter 2017, up 5.2% from a year ago and up 10.7% from two years ago, Statistics Canada said on Thursday in its quarterly report on national balance sheets. Mortgages accounted for 65.6% of the total. Canada’s infamous household-debt-to-disposable income ratio, one of the highest in the world, rose to a breath-taking record of 173.3%.
    The ratio means that households, on average, owed C$173.3 for every dollar of after-tax income earned. This chart shows how the indebtedness in relationship to after-tax income has soared since 2001, when Canada’s housing boom took off in earnest:

    This post was published at Wolf Street on Dec 14, 2017.


  • ECB Keeps Rates Unchanged, Sees Current Policy Stance “Contributing To Favorable Liquidity Conditions”

    As expected, there was little surprise in the ECB monetary policy decision, which kept all three key ECB rates unchanged, and which announced that rates will “remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.”
    As it unveiled before, QE will run at 30BN per month from January 2018 until the end of September ‘or beyond, if necessary, and in case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.’ The ECB also noted it can extend QE size or duration if needed.
    The central bank repeated it will reinvest maturing debt for extended period after QE, and that the “reinvestment will continue for as long as necessary, will help deliver appropriate stance” and “will contribute both to favourable liquidity conditions and to an appropriate monetary policy stance.”
    The market reaction to the statement which was completely in line with expectations, was modest, with the EURUSD hardly even moving on the news.
    Full statement below

    Monetary policy decisions At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.

    This post was published at Zero Hedge on Dec 14, 2017.


  • Yellen’s Big Goodbye (And What She’s Leaving Behind)

    The past three Fed Chairs before Yellen all had their own crisis to deal with.
    Volcker had the disaster of the early 1980’s as he struggled to tame inflation with double digit interest rates. That helped contribute to the Latin American debt crisis, and the subsequent global bear markets in stocks.
    He handed over the reins to Greenspan in the summer of ’87 and within months, the new Fed Chairman faced the largest stock market crash since the 1920’s. That trial by fire was invaluable for Greenspan, as he faced a second crisis when the DotCom bubble burst at the turn of the century.
    His successor, Ben Bernanke also did not escape without a record breaking financial panic when the real estate collapse hit the global economy especially hard in 2007.
    But Yellen? Nothing. Nada. She has presided over the least volatile, most steady, market rally of the past century. Was she lucky? Or was this the result of smart policy decisions? I tend to attribute it more to luck, but it’s tough to argue that she made any large mistakes. Sure you might quibble about the rate of interest rate increases. And her critics will argue that economic growth, and more importantly, wage increases have been especially anemic under her watch, but to a large degree, those variables are out of her hands.

    This post was published at Zero Hedge on Dec 13, 2017.


  • Canadian Homeowners Take Out HELOCs to Fund Subprime Buyers Unable to get a Mortgage

    The Housing & Debt Bubble ascends to the next level of risk.
    By Steve Saretsky, Vancouver, Canada, Vancity Condo Guide:
    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%.

    This post was published at Wolf Street by Steve Saretsky ‘ Dec 13, 2017.


  • RAND PAUL: ‘I CANNOT VOTE TO ADD MORE TO THE ALREADY MASSIVE $20 TRILLION DEBT’

    Senator Rand Paul said Tuesday that he cannot vote to add more to the national debt. The lawmaker wrote in a post on Twitter that ‘I promised Kentucky to vote against reckless, deficit spending and I will do just that.’
    Rand Paul may be one of the few fiscally conservative Republicans in politics today. Paul’s tweet didn’t suggest he would oppose the GOP tax bill due to deficit concerns.
    I cannot in good conscience vote to add more to the already massive $20 trillion debt. I promised Kentucky to vote against reckless, deficit spending and I will do just that. pic.twitter.com/BUYqm91mli
    – Senator Rand Paul (@RandPaul) December 12, 2017
    The lawmaker clarified in a follow-up tweet that tax cuts ‘are never the problem.’

    This post was published at The Daily Sheeple on DECEMBER 12, 2017.