Millennials & Marxism

Authored by Robert Gore via Straight Line Logic blog,
Children Learn What They’re Taught Many millennials embrace Marxism. So do their parents and grandparents…
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From the millennials’ abilities will supposedly flow the wherewithal to fund ‘needs’: their elders’ entitlements, debt, and ever-expanding blob of a government. Horror of horrors, polls and studies indicate that many millennials are embracing Marxism: they want somebody to fund their ‘needs’! Where did they learn this nonsense?
It must be those left-wing, snowflake sanctuary, social justice warrior haven, gender-bending colleges and their washed up Marxist professors.

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

Americans have no savings and with very good reason: housing, education, and health care have seen extraordinary inflation while wages are stagnant.

It has now become a daily ritual in which story after story of broke Americans plaster the web. Yet somehow on the mainstream press, very little is discussed about this topic. Americans are largely broke because inflation is vey real. Housing, education, and health care costs have soared out of control while wages have remained stagnant. The way Americans continue to pay for these items is by going into loan shark levels of debt. There used to be a pretense that ‘we’ actually cared about having a middle class but that is now thrown out the window. At this point, we are in a full on sprint towards low wage capitalism. Many people live on a paycheck to paycheck diet and are berated about saving more for retirement. The reality is, the new retirement model is working until you die.
In the land of no savings
Sunday morning, I wake up and take a stroll through the neighborhood. ‘Did you hear about Bitcoin? Wild right?’ I’m asked by a stranger at the park. ‘Sure seems wild. You own any?’ To which I get the following response, ‘I wish I had some money to even invest!’ I think we live in a world where most Americans are merely spectators to the wild gyrations of the market. They hear about investments too late or mistake speculation with actual investing.

This post was published at MyBudget360 on December 21, 2017.

Credit Card Debt Suddenly Surges 18% As U.S. Consumers “Pre-Spend” Tax Relief Savings

With Republicans in Washington D. C. on the verge of passing their first major piece of legislation in the form of comprehensive tax cuts that will allow Americans across the income spectrum to keep a little more of their hard earned cash in 2018, it appears as though eager U. S. consumers may have already “pre-spent” their savings on their credit cards.
As the folks at Gluskin Sheff point out, 13-week annualized credit card balances in the U. S. have gone completely vertical in the last few months of 2017 which should make for some great Christmas gifts for little Johnny and Susie…gifts that will undoubtedly find themselves tucked away in a dark closet, never to be seen again, by mid January.

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

What Will the Tax Law Do to Over-Indebted Corporate America?

A crackdown on excessive debt. Financial engineering gets more expensive. The new tax law is larded with goodies for Corporate America, but there is one shift – a much needed shift – in this debt-obsessed world that will punish over-indebted companies, discourage companies from taking on too much leverage, and perhaps, just maybe, make these companies less risky: The new law sharply limits the deductibility of corporate interest expense.
Starting in 2018, a company can only deduct interest expense of up to 30% of its Ebitda (earnings before interest, taxes, depreciation, and amortization). Any amount in interest expense beyond it will no longer be deductible.
This will tighten further in 2022, when the deductibility of corporate debt will be capped at 30% of earnings before interest and taxes but after depreciation and amortization expenses. This is a much smaller number than Ebitda. And interest expense deduction is capped at 30% of that much smaller amount. This will raise the tax bill further.
Most impacted will be highly indebted companies, which often have a junk credit rating. And due to this junk credit rating, they also pay higher interest rates. This made the interest expense deduction very valuable. But now it is getting partially gutted.

This post was published at Wolf Street on Dec 22, 2017.

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.

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.

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.