• Tag Archives Liabilities
  • Muddy Waters Proved Right As Huishan Dairy Prepares For Liquidation

    On March 2017, we discussed the sudden 90% drop in the share price of China’s largest dairy farm operator, the Hong Kong-listed China Huishan Dairy Holdings. The collapse occurred the day after its creditors convened an emergency meeting to discuss the company’s cash shortage and was three months after Muddy Waters’ Carson Block questioned its profitability and said the company was ‘worth close to zero.’ After the collapse in the share price we joked that ‘it suddenly almost is.’ Now we have confirmation that Block was correct, as Huishan is entering provisional liquidation, citing liabilities of $1.6 billion. From Bloomberg.
    China Huishan Dairy Holdings Co., the Hong Kong-listed company targeted by short sellers including Muddy Waters Capital LLC, is preparing for provisional liquidation in a move that could protect its assets as it negotiates with creditors. The firm had told its Cayman legal advisers to make the preparations, it said in a Hong Kong stock exchange filing Thursday.
    Huishan’s board earlier found that the net liabilities of its units in China ‘could have been’ 10.5 billion yuan ($1.58 billion) as of March 31, the company said. A provisional liquidation generally is used to safeguard a company’s assets before a court rules what action to take.

    This post was published at Zero Hedge on Nov 17, 2017.


  • Pension Panic In Paradise: Maui Residents Outraged Over 52% Spike In Pension Contributions

    Earlier this year, Maui County residents in the island state of Hawaii were somewhat less than ecstatic to learn that their property taxes were going to increase by approximately $29.7 million for fiscal 2018. According to County Council member statements at the time, the additional funding was needed to help provide better public services for Maui residents.
    That said, fast forward just a few months and it looks like a substantial portion of those tax increases won’t go to provide better public services for Maui residents at all but rather will be plowed into the state’s massively underwater pension fund. As The Maui Newspoints out today, Maui’s contributions to the state Employees’ Retirement System will surge 52% over just the next couple of years…and that’s if everything goes to plan.
    ‘This is a massive, massive increase,’ Williams said.
    Maui County paid $31 million into the pension fund in fiscal 2017. But now, its payments will increase to approximately $34 million in fiscal 2018, $36 million in fiscal 2019, $42 million in fiscal 2020 and $47 million in fiscal 2021.
    This amounts to a total of $36 million in extra payments by Maui County over the next four years alone – and its contributions are set to remain just as high every year afterward.
    Williams said the extra payments were needed to help the public pension system avert a crisis in unfunded liabilities, currently estimated at about $12.4 billion.

    This post was published at Zero Hedge on Nov 8, 2017 4.


  • Marc Faber – Massive Fraud In This Financial Bubble

    The following video was published by Greg Hunter on Oct 28, 2017
    A big difference between the market today and that of the 1987 crash are unfunded pensions. Renowned investor Dr. Marc Faber, who holds a PhD in economics, says, ‘The unfunded liabilities have gone up. They did not go down. So, if in rising asset markets the pension funds unfunded liabilities go up, can you imagine what will happen when markets fall? So, they will have to print money. . . . Bear markets do not occur just because of one event. It’s a series of circumstances that lead to a loss of confidence with people exiting markets, and then with people exiting markets in a panic. . . . Fed Head Janet Yellen said if conditions would warrant further measures, the Fed would take further measures. So, she (Yellen) said . . . if the Fed thought the economy was weakening, or their beloved asset markets go down, then she may again ease and introduce QE4 (money printing out of thin air.) . . . In today’s situation, the asset market is less overbought, but the asset bubbles are everywhere. . . . Each bubble has fraud cases, and I mean massive fraud. That’s the characteristic of each bubble. There is fraud.’


  • Kotlikoff: America in Worse Financial Shape than Russia or China

    America’s 2017 fiscal gap will come in near $6 trillion, nine times higher than the $666 billion deficit announced by the US Department of the Treasury week, says Laurence Kotlikoff, an economics professor at Boston University.
    ‘Our country is broke,’ says Kotlikoff, who estimates total US government debts at more than $200 trillion, when unfunded liabilities are included. ‘We are in worse shape than Russia, China or any developed nation.’
    Worse, says Kotlikoff, who has testified before Congress, government officials are well-aware that many of America’s debts and accruing liabilities are being written off the books.
    However, for the most part, they are keeping their mouths shut.
    A two-tier reporting system
    The upshot is a de facto ‘two-tier’ financial reporting system, in which politicians and insiders have access to key data buried in footnotes about unfunded liabilities, which indicate that there are huge problems in the economy.
    The public, on the other hand, in slews of Presidential and Congressional Speeches and publications, is led to believe that while things are tough, overall everything is OK.
    According to Kotlikoff, a long-time activist for fiscal rectitude, the problem stems in large part from the fact that the US government has been spending almost all of Americans’ approximately $795 billion in social security payroll taxes to pay current bills, rather than investing them to fund retirees’ benefits.
    The upshot is that on a net basis, the US government has no money to pay all the benefits that have been promised. Politicians know that defaults will occur, they just haven’t figured out how to finesse this.

    This post was published at GoldSeek on 24 October 2017.


  • GDP Is Bogus: Here’s Why

    Here’s a chart of our fabulous always-higher GDP, adjusted for another bogus metric, official inflation.
    The theme this week is The Rot Within. The rot eating away at our society and economy is typically papered over with bogus statistics that “prove” everything’s getting better every day in every way. The prime “proof” of rising prosperity is the Gross Domestic Product (GDP), which never fails to loft higher, with the rare excepts being Spots of Bother (recessions) that never last more than a quarter or two. Longtime correspondent Dave P. of Market Daily Briefing recently summarized the key flaw in GDP: GDP doesn’t reflect changes in the balance sheet, i.e. debt. So if we borrow money to pay people to dig holes and then fill them with the excavated dirt, GDP rises to general applause. The debt we took on to fund the make-work isn’t accounted for at all. Here’s Dave’s explanation: Once I learned about accounting, I figured out why the GDP metric wasn’t sufficient. What is missing? The balance sheet. Hurricanes are a direct hit to your nation’s balance sheet. The national income statement goes up because of increased spending to replace lost assets, but the “equity” part of the national balance sheet ends up taking a hit in direct proportion to the damage that occurred. Even if you rebuild everything just the way it was, your assets remain the same, while your liabilities have increased.

    This post was published at Charles Hugh Smith on WEDNESDAY, OCTOBER 18, 2017.


  • It’s Over for Sears Canada

    Brick and mortar meltdown. Sears Canada hired the same leading bankruptcy advisory firm on June 12 that had represented Target Canada in its insolvency proceedings. Ten days later, it filed for bankruptcy protection to restructure its capital and its operations, shutter dozens of it 225 stores and lay off nearly 3,000 employees, but planned to continue operating. Today it said that the restructuring efforts failed, and that it would seek court approval to liquidate, shutting all its remaining stores and laying off its remaining 12,000 employees.
    Retailers are notoriously difficult to restructure. Once they’re this deep in trouble, after years of losses, they own few assets and are burdened with debts, as everything has been sold or pledged to creditors. Their suppliers, who’ve been burned too many times, are getting skittish. Lenders are getting desperate. And acquirers can be impossible to find. Most retailer bankruptcies start out as restructurings but end as liquidations.
    To stay alive while losing money for years, Sears Canada has sold off most of its real estate holdings, and the most valuable assets are already gone. What’s left are C$1.1 billion ($880 million) in liabilities.

    This post was published at Wolf Street on Oct 10, 2017.


  • What Is Your City’s Debt Burden?

    What is your local government’s debt burden? Or in other words, how much of your local government’s annual revenue would be fully consumed by its liabilities?
    That’s a question that J. P. Morgan took on in its recent analyst report The ARC and the Covenants 3.0, in which it considered the total debt burdens of the governments of US cities, counties, and states.
    Read Transcending Government – A Future of Competitive Governance Driven by ‘Governance Entrepreneurs’
    Here’s an excerpt from the report’s Executive Summary, in which the private bank explains its interest in the results of the analysis and what liabilities are included in each level of government’s total debt, which goes into the calculation of their ‘IPOD’ ratio, which is their estimate of the true burden of debt local governments throughout the United States:
    As managers of $70 billion in US municipal bonds across our asset management business (Q2 2017), we’re very focused on credit risk of US municipalities. Last year, we completed our tri-annual credit review of US states. While a few states have very large debts relative to their revenues, many are in decent shape. This summer, we completed a review of the largest US cities and counties. In general, US cities and counties have substantially more debt relative to their revenues than US states. While most have several years to undertake remediation measures, some very difficult choices will be required in order for them to meet all of their future obligations. And when these choices become untenable and rare municipal bankruptcies do occur, bondholders have usually received lower recoveries than pensioners.

    This post was published at FinancialSense on 10/09/2017.


  • Central Banks at Risk of Default?

    Central banks do not play games with the markets but it sure feels like we are being played by someone! Earlier this year the Bank of Japan, Federal Reserve and the European Central Bank all had similar balance sheets at around $4.5 trillion. As we know, over the past ten years all three have risen from lower levels but have seen faster expansion by the BOJ and the FED gaining pace to now catch the ECB. Foreign exchange rates are always subjected to inherent volatility that is thrown into the mix. However, given the recent extremes on all fronts, there has been uncanny similarity around end of Q1′ 2017.
    Typically, a central bank balance sheet would off-set Assets against Liabilities and capital.

    This post was published at Armstrong Economics on Oct 4, 2017.


  • Is That a Feature or a Bug?

    We have covered many reasons why bitcoin is unsound and not money. It’s a ledger of unbacked liabilities. It is designed to have finite quantity but therefore indeterminate and hence volatile value. This makes it unusable for borrowing or lending and hence savings, but a great a vehicle for conversion of one person’s wealth into another’s income. It is not a commodity – discussion of the usefulness of the network notwithstanding – nor is it backed by a commodity or any asset. It is a perfect, cryptographically secure record – of itself. People use it to get rich quick. In other words, it’s the very model of a (post)modern monetary marvel (OK, Keith is not the next Gilbert and Sullivan).
    And bitcoin has a questionable feature. Transactions are irreversible.
    First it should be addressed that irreversible transactions have an appeal to merchants. Everyone who sells on eBay knows the frustration of shipping merchandise to a customer only to have the customer claim it was never received. Merchants would surely love the idea that once payment is made, it cannot be unmade.
    However, there are good reasons why our payments system was designed as it is. Sometimes there is a clear mistake. No one has an interest in allowing the payee to keep $100,000 when $10,000 was the purchase price of the used car. No one wants to see Jon Schmidt get the money that was intended for John Smith. There is also the occasional case of fraud. If someone breaks into your account, you want recourse to recover the lost funds. Irreversible transactions are not a dream come true for consumers who are defrauded by merchants.

    This post was published at GoldSeek on Monday, 2 October 2017.


  • Household Wealth Hits A Record $96.2 Trillion… There Is Just One Catch

    In the Fed’s latest Flow of Funds report, today the Fed released the latest snapshot of the US “household” sector as of June 30, 2017. What it revealed is that with $111.4 trillion in assets and a modest $15.2 trillion in liabilities, the net worth of US households rose to a new all time high of $96.2 trillion, up $1.7 trillion as a result of an estimated $564 billion increase in real estate values, but mostly $1.23 trillion increase in various stock-market linked financial assets like corporate equities, mutual and pension funds, and deposits as the market soared to new all time highs thanks to some $2 trillion in central bank liquidity injections this year.
    Total household assets in Q2 rose $1.8 trillion to $111.4 trillion, while at the same time, total liabilities, i.e., household borrowings, rose by only $15 billion from $15.1 trillion to $15.2 trillion, the bulk of which was $9.9 trillion in home mortgages.

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


  • This $700 Billion Public Employee Ticking Time Bomb Is Only 6.7% Funded; Most States Are Under 1%

    We’ve spent a lot of time of late discussing the inevitable public pension crisis that will eventually wreak havoc on global financial markets. And while the scale of the public pension underfunding is unprecedented, with estimates ranging from $3 – $8 trillion, there is another taxpayer-funded retirement benefit that has been promised to union workers over the years that puts pensions to shame…at least on a percentage funded basis.
    Other Post-Employment Benefits (OPEB), like pensions, are a stream of future payments that have been promised to retirees primarily to cover healthcare costs. However, unlike pensions, most government entities don’t even bother to accrue assets for this massive stream of future costs resulting in $700 billion of liabilities that most taxpayer likely didn’t even know existed.
    As a study from Pew Charitable Trusts points out today, the average OPEB plan in the U. S. today is only 6.7% funded (and that’s if you believe their discount rates…so probably figure about half that amount in reality) and many states around the country are even worse.
    States paid a total of $20.8 billion in 2015 for non-pension worker retirement benefits, known as other post-employment benefits (OPEB). Almost all of this money was spent on retiree health care. The aggregate figure for 2015, the most recent year for which complete data are available, represents an increase of $1.2 billion, or 6 percent, over the previous year. The 2015 payments covered the cost of current-year benefits and in some states included funding to address OPEB liabilities. These liabilities – the cost of benefits, in today’s dollars, to be paid in future years – totaled $692 billion in 2015, a 5 percent increase over 2014.
    In 2015, states had $46 billion in assets to meet $692 billion in OPEB liabilities, yielding a funded ratio of 6.7 percent. The total amount of assets was slightly higher than the reported $44 billion in 2014, though the funding ratio did not change. The average state OPEB funded ratio is low because most states pay for retiree health care benefits on a pay-as-you-go basis, appropriating revenue annually to pay retiree health care costs for that year rather than pre-funding liabilities by setting aside assets to cover the state’s share of future retiree health benefit costs.

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


  • Really Bad Ideas, Part 4: Federal Flood Insurance

    As Hurricanes Harvey and Irma wreaked their havoc over the past couple of weeks, several interconnected questions popped up, the answers to which make us look, to put it bluntly, like idiots.
    Why, for instance, are there suddenly so many Cat 4 and 5 hurricanes? Is this due to man-made climate change and is this summer therefore our new normal? The answer: Maybe, but that misses the point. There have always been huge storms (like the one that wiped Galveston, TX off the map in 1900, long before global warming was a thing), and barring another ice age there always will be. So the US east coast will remain one of Mother Nature’s favorite targets.
    A second (and vastly more pertinent) question is why we’ve been encouraging millions of people to move into this bulls-eye in recent decades. Since 2000, Houston and surrounding Harris County have added 1.2 million people. Since 1980 Florida has added 10 million people – most of them in the coastal corridor from Miami to Fort Lauderdale.
    Seems a little unwise, doesn’t it, to put tens of millions of people and millions of houses and cars where they’re guaranteed to be damaged or destroyed by inevitable future storms. But it’s not an accident. Government programs actively encourage this migration by picking up part or all of the tab for homes that are flooded by storms. The result: A massive and growing liability for future damage on top of all the other massive and growing liabilities for Medicare, Social Security, underfunded state and local pensions, etc. From last week’s Wall Street Journal:
    One House, 22 Floods: Repeated Claims Drain Federal Insurance Program
    Brian Harmon had just finished spending over $300,000 to fix his home in Kingwood, Texas, when Hurricane Harvey sent floodwaters ‘completely over the roof.’

    This post was published at DollarCollapse on SEPTEMBER 19, 2017.


  • Global Debt Bubble Understated By $13 Trillion Warn BIS

    – Global debt bubble may be understated by $13 trillion: BIS
    – ‘Central banks central bank’ warns enormous liabilities have accrued in FX swaps, currency swaps & ‘forwards’
    – Risk of new liquidity crunch and global debt crisis
    – ‘The debt remains obscured from view…’ warn BIS
    ***
    Global debt may be under-reported by around $13 trillion because traditional accounting practices exclude foreign exchange derivatives used to hedge international trade and foreign currency bonds, the BIS said on Sunday.
    Bank for International Settlements researchers said it was hard to assess the risk this ‘missing’ debt poses, but that the main worry was a liquidity crunch like the one that seized FX swap and forwards markets during the financial crisis.
    The $13 trillion unaccounted-for exposure exceeds the on-balance-sheet debt of $10.7 trillion that data shows was owed by firms and governments outside the United States at end-March.

    This post was published at Gold Core on September 19, 2017.


  • Mother of All Bubbles: Global Debt May Be Understated By $13 Trillion

    The US national debt was in the news last week as Pres. Trump signed a spending bill that raised the debt ceiling limit for the next three months and added approximately $318 billion to the national debt. Officially, the US debt surged to to $20.16 trillion. Of course, the actual figure for government unfunded liabilities runs even higher. And Trump wants to do away with the debt ceiling altogether.
    The US debt makes up just one part of a rapidly growing worldwide debt problem. Earlier this summer, US Global Investors CEO Frank Holmes called global debt ‘the mother of all bubbles.’ Now we have a report from the Bank of International Settlements saying worldwide debt may actually be understated by $13 trillion. Reuters reports the understatement is because ‘traditional accounting practices exclude foreign exchange derivatives used to hedge international trade and foreign currency bonds.’
    Bank for International Settlements researchers said it was hard to assess the risk this ‘missing’ debt poses, but that the main worry was a liquidity crunch like the one that seized FX swap and forwards markets during the financial crisis. The $13 trillion unaccounted-for exposure exceeds the on-balance-sheet debt of $10.7 trillion that data shows was owed by firms and governments outside the United States at end-March.’

    This post was published at Schiffgold on SEPTEMBER 18, 2017.


  • Government Nearing Default on Debt to Russia

    The government in question is that of Venezuela, which is nearing default as it is running out of resources to pay back the money it owes to its Russian creditors according to the terms it accepted when it chose to borrow money from them.
    MOSCOW, Sept 8 (Reuters) – Russian Finance Minister Anton Siluanov told reporters on Friday that Venezuela is having problems with fulfilling its obligations on its debt to Russia.
    ‘We have a request from our colleagues in Venezuela to do a restructuring,’ Siluanov said.
    Venezuela owed Russia $2.84 billion as of September last year.
    The Venezuelan government is now scrambling to restructure its foreign-held liabilities following sanctions put on the country’s President Nicolas Maduro and 20 other individuals, and also the Venezuelan government-owned oil company by the US Treasury Department after Maduro rigged an election to select representatives to rewrite the country’s constitution in his favor.

    This post was published at FinancialSense on 09/15/2017.


  • GOLD HAS BROKEN OUT – DON’T BE LEFT BEHIND

    The coming gold and silver moves in the next few months will really surprise most investors as market volatility increases substantially.
    It seems right now that ‘All (is) quiet on the Western Front’ as Erich-Maria Remarque wrote about WWI. Ten years after the Great Financial Crisis started and nine years after the Lehman collapse, it seems that the world is in better shape than ever. Stocks are at historical highs, interest rates at historical lows, house prices are booming again and consumers are buying more than ever.
    HAVE CENTRAL BANKS SAVED THE WORLD?
    So why were we so worried in 2007? There is no problem big enough that our friendly Central Bankers can’t solve. All you need to do to fool the world is to: Print and expand credit by $100 trillion, fabricate derivatives for another few $100 trillion, make further commitments to the people in forms of pensions and medical, social care for amounts that can never be paid and lower interest rates to zero or negative.
    And there we have it. This is the New Normal. The Central Banks have successfully applied all the Keynesian tools. How can everything work so well with just more debt and liabilities? Well, because things are different today. We have all the sophisticated tools, computers, complex models, making fake money QE, interest rate manipulation management and very devious intelligent central bankers.
    Or is it different this time?

    This post was published at GoldSwitzerland on September 7, 2017.


  • Pension Ponzi Exposed: Minnesota Underfunding Triples After Tweaking This One Small Assumption…

    Defined Benefit Pension Plans are, in many cases, a ponzi scheme. Current assets are used to pay current claims in full despite insufficient funding to pay future liabilities… classic Ponzi. But unlike wall street and corporate ponzi schemes no one goes to jail here because the establishment is complicit. Everyone from government officials to union bosses are incentivized to maintain the status quo…public employees get to sleep better at night thinking they have a “retirement plan,” public legislators get to be re-elected by union membership while pretending their states are solvent and union bosses get to keep their jobs while hiding the truth from employees.
    So what allows this ponzi to persist? It all comes down to one simple assumption: Discount Rates. You see, if you simply discount future liabilities at a high enough discount rate then you can make any massively underfunded pension ponzi look like a stable, healthy retirement gold mine.
    In fact, just over a year ago we took a look at what would happen if we calculated the true underfunded level of America’s public pensions at more reasonable discount rates. The result showed that the media’s highly referenced underfunding of $2 trillion soared to something closer to $5-$8 trillion when more reasonable discount rates were employed.

    This post was published at Zero Hedge on Sep 1, 2017.


  • Already Gone! US Public Pension Funds As Low As 31% Funding Ratio (New Jersey, Kentucky and Illinois The Worst)

    This is a syndicated repost courtesy of Snake Hole Lounge. To view original, click here. Reposted with permission.
    Three states in the US are below 40% in terms of funding ratio: New Jersey, Kentucky and Illinois. And the funding ratio has deteriorated in 43 states. And the funding ratio deteriorated in each of the worst 15 states.
    (Bloomberg) -The news continues to worsen for America’s public pensions and for the people who depend on them. The median funding ratio – the percentage of assets states have available for future payments to retirees – declined to 71.1 percent in 2016, from 74.5 percent in 2015 and 75.6 percent in 2014. Only six states and the District of Columbia have narrowed their funding gaps; New York did best, going from 90.6 percent to 94.5 percent. D. C. is now overfunded.
    By contrast, New Jersey, Kentucky and Illinois continue to lose ground and now have only about one third of the money they need to pay retirement benefits. And three states had double-digit declines in their pension funding ratios in the past year: Colorado, Oregon and Minnesota – though some of this can be attributed to actuarial changes in the way pension liabilities are calculated.

    This post was published at Wall Street Examiner by Anthony B Sanders ‘ September 1, 2017.


  • Corporate Debt Threatens U.S. Economic Prospects

    According to recent studies, U. S. corporations’ debt levels could pose some serious headwinds for the United States’ economy in the next major downturn. In April, the International Monetary Fund announced the following red flags:
    The U. S. corporate sector has added $7.8 trillion in debt and other liabilities since 2010;
    Among S&P 500 firms, median net debt ‘is close to a historic high of more than 1 times earnings’;
    Looking at a ‘broader set of nearly 4,000 firms accounting for about half of the economy-wide corporate sector balance sheet, suggests a similar rise in leverage across almost all sectors to levels exceeding those prevailing just before the global financial crisis’;
    Debt is especially high ‘in the energy, real estate, and utilities sectors, ranging between four and six times earnings’;
    ‘The average interest coverage ratio – a measure of the ability for current earnings to cover interest expenses – has fallen sharply over the past two years. Earnings have dropped to less than six times interest expense, close to the weakest multiple since the onset of the global financial crisis.’

    This post was published at Wall Street On Parade on August 24, 2017.


  • This Silver Price Prediction Shows 3 New Bullish Targets in 2017

    Two weeks ago, the price of silver rallied to one-month highs above the $17 level, as U. S. President Donald Trump and North Korean leader Kim Jong Un exchanged direct threats. Trump notably said the small Asian country would be met with ‘fire and fury,’ which pushed Kim Jong Un to threaten Guam with missile strikes.
    But silver prices saw a modest decline last week despite a 1.4% bounce after the divisive Fed minutes on Wednesday, which indicated half of Fed officials are dovish while the other half are hawkish. The metal ultimately saw a weekly drop of 0.4% from Friday, Aug. 11, to Friday, Aug. 18.
    Oh and wait, there’s the debt ceiling as well. The federal U. S. debt now sits at more than $19 trillion – more than the total 2015 GDP of $17.9 trillion – and that’s without accounting for unfunded liabilities like Medicare and Social Security.
    Congress has until late September to get a deal done. The debt ceiling has been raised 78 separate times since 1960. But as we’ve seen over the last seven months, this is no typical administration, and if the debt ceiling isn’t raised on time, a ‘technical default’ could tank markets and boost flight-to-safety investments like silver.

    This post was published at Wall Street Examiner on August 21, 2017.