• Tag Archives Money
  • What’s Booming? Asset-Stripping by Private Equity Firms

    Here are the numbers. Peak chase for yield by institutional investors? Most of the brick-and-mortar retailers that have filed for bankruptcy protection to be restructured or liquidated over the past two years have been owned by private equity firms – including the most recent major casualty, Toys ‘R’ Us. Part of how PE firms make money is by stripping capital out of their portfolio companies via special dividends funded by ‘leveraged loans’ – more on those creatures in a moment.
    So just how much have PE firms paid themselves in special dividends extracted from their portfolio companies? $4.76 billion in the third quarter, bringing the year-to-date total to $15.3 billion.

    This post was published at Wolf Street on Oct 16, 2017.

  • The Crash Of ’87 Remembered: “It Was Clear The Acapulco Cliff-Dive Was On For Monday”

    ‘The markets in a panic are like a country during a coup, and seen in retrospect that is how they were that day,’ wrote a young Salomon bond salesmena named Michael Lewis, of the chaos he witnessed. ‘One small group of people with its old, established way of looking at the world is hustled from its seat of power.’
    As Bloomberg details, most of the people willing to share their memories count themselves as winners who seized the moment as an opportunity not only to make money, but also to insert themselves in the new financial order – Paul Tudor Jones, Stanley Druckenmiller, Nassim Nicholas Taleb. Their story, and the story of Black Monday, is the birth story of modern financial markets – a wild ride of shock, angst, and, for some, glory.
    In the weeks before Black Monday, a few investors spotted patterns that gave them pause.
    The most confident were Paul Tudor Jones and Peter Borish, young partners at a small hedge fund in Lower Manhattan. In a prescient Sept. 24 note to investors, Jones even signed off with ‘caveat emptor’ – buyer beware.

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

  • SWOT Analysis: Gold In Focus After Climbing Above Key Threshold Level

    The best performing precious metal for the week was palladium, up 7.28 percent as money managers raised their net-long positions on continued expectations that the shift from diesel to gasoline powered cars will continue. Gold traders and analysts surveyed by Bloomberg are bullish for the first time in five weeks, reports Bloomberg. Following the release of the Fed minutes which showed rising concern about low inflation, the yellow metal climbed to a two-week high. A fresh flare-up in tensions with North Korea pushed gold higher this week, writes Bloomberg, along with a U. S.-Turkey diplomatic spat regarding visitor visas was supportive. The Indian government withdrew an order that brought the gold industry under anti money-laundering legislation, reports Bloomberg. Jewelers were included in the Prevention of Money-Laundering Act in August that increased compliance requirements. In response to the rule reversal, shares of jewelers climbed in the country. This move comes just as gold buying improves before the Hindu festival of Diwali, the peak season for demand, the article continues. Weaknesses
    The worst performing precious metal for the week surprisingly was gold, up more than 2 percent, despite grabbing most of the precious metals headlines. According to the People’s Bank of China website, gold reserves in China came in at 59.24m fine troy ounces in September, unchanged again from the previous month, which unfortunately is beginning to become a trend. Chinese markets had been closed the prior week to mark National Day.

    This post was published at GoldSeek on Monday, 16 October 2017.

  • Italy’s Parallel Fiscal Currency: All You Need To Know

    There is an increased talk in Italy about fiscal money as an instrument to resolve the economic crisis, which is not over yet.
    Despite the optimism shown by the Italian government and the EU, the Eurozone economy is far from being in an acceptable condition, and this applies in particular for Italy.
    In 2017 Italy’s real GDP will grow by 1.5% compared to the previous year, which is 6% less than what it was in 2007, ten years earlier! Within the same period unemployment has doubled, the number of people in poverty tripled from 1.5 million to almost 5, and this trend does not seem to be reversing. The Italian economic system is working far below its potential: this gap has been created first by the global financial crisis of 2008 and then by the austerity policies ‘prescribed’ by the EU in 2011. Italy can solve this problem by introducing an adequate quantity of purchasing power in its economic system. It can’t do it by issuing euros, nor (due to the mechanisms of the Eurozone) by increasing the state deficits.

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

  • Bill Blain: “This Time It Really Is Different! The Machines Have Taken Over And They Will Never Sell”

    Submitted by Bill Blain of Mint Partners
    Forget the Known Unknows, its the shocking surprises that are going to get us

    ‘Bubbles don’t grow out of thin air, they have a solid basis in reality. But, reality is distorted by misconception..’ And it’s a bad start to the week as my Bloomberg obliquely gave the finger by refusing to log me on.
    Markets don’t care about my travails. They continue on their unstoppable upward trajectory. (Remember that word – trajectory, often parabolic. Look it up.) Lots of folks warning about complacency, but markets pay no heed. They prefer the global unlimited growth vibe..
    Now, I know I sound like a broken record with my boring repeated warnings the market has gone overly frothy. I could counter with arguments about low volatility and short-tops painting a weakening technical picture. I could make arguments about how the short-term and long term business cycles all converge on weak indicators – I could even give you a lengthy discussion on how the Kondratieff ultra-long cycle says ‘run-away!’ I could refer to volume of money issues, or QE concerns. I could even point you to some astrological stuff…
    Or I could point out what a worrying place the markets are. After reading through all the news this morning it strikes me we’re in thrall to a host of known unknowns.
    If you want to worry, then pick your choice: it’s a delightful smorgasbord of things to go bump from the anniversary of the Hurricane and Crash of 87, the right-wing in Austria, noise about Tax reform in the US, Norte Korea, Kurds vs Iraq/Turkey, Catalunya vs Spain, UK vs Everyone, Trump vs the Universe, and everything in between. (In my own case, tomorrow is exactly a year since the unpleasantness with my primary pump – just doesn’t feel like it’s going to be a lucky week!).

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

  • China’s Mortgage Debt Bubble Raises Spectre Of 2007 US Crisis

    In an inglorious echo of 2007 America, many young homeowners in booming cities owe more than they earn, and some even falsify salary details to get bigger mortgages…
    Young Chinese like Eli Mai, a sales manager in Guangzhou, and Wendy Wang, an executive in Shenzhen, are borrowing as much money as possible to buy boomtown flats even though they cannot afford the repayments.
    Behind the dream of property ownership they share with many like-minded friends lies an uninterrupted housing price rally in major Chinese cities that dates back to former premier Zhu Rongji’s privatisation of urban housing in the late 1990s.
    Rapid urbanisation, combined with unprecedented monetary easing in the past decade, has resulted in runaway property inflation in cities like Shenzhen, where home prices in many projects have doubled or even tripled in the past two years.

    This post was published at Zero Hedge on Oct 15, 2017.

  • The land of the permanent renter: More single family homes are now rentals with households moving less.

    There has been a massive trend towards renting. The vast majority of household growth since the housing bubble imploded has been with rental households. I know this is hard to believe for Taco Tuesday baby boomers but this is simply the new reality. And all of those investors that bought up single family homes for rentals are living it up. There are now a few major changes impacting the housing market – many more single family homes are rentals and many more renters are staying put. In other words, many are not looking to buy and builders realize this. There is now a large category of permanent renters since many people live and work in more expensive metro markets. Short of forking out an insane amount of money to live in say San Francisco, people are opting to rent. The proof is in the numbers.
    More renters are not moving
    Many households used renting as a bridge before venturing out and buying a home. But more people are renting and staying put:

    This post was published at Doctor Housing Bubble on Oct 14, 2017.

  • Why It Doesn’t Matter Who the Next Fed Chair Is

    This is a syndicated repost courtesy of Money Morning. To view original, click here. Reposted with permission.
    Financial media pundits have been breathlessly speculating lately about who the next Fed chair will be.
    Yellen again? Will it be Cohn? Warsh? Or… somebody else?
    I’m sure it’s something that you, like me, have been spending sleepless nights thinking about.
    Well… maybe not.
    But the media needs a ‘topic du jour’ to get us all to watch the birdie and divert us from the only fact that matters…
    That the Federal Reserve is getting ready to knock the markets for a serious loop. The ‘fix’ is in. That outcome is inevitable.
    Still, this horse race the media has set up (‘Who will win?!’) is pretty entertaining. So I’m going to handicap it for you.

    This post was published at Wall Street Examiner by Lee Adler ‘ October 14, 2017.

  • It’s Always About the Money

    In Sweden, the government has realized that if fossil-fuel cars were to disappear, the government would lose around SEK 50 billion a year in tax revenues. Just like cigarettes, the government realized that stopping smoking is costly for them. So what did they do? They imposed taxes of e-cigarettes. And if everyone stopped e-cigarettes, they will probably have to tax air.
    Sweden used the Global Warming issue to tax people driving cars to help the environment.

    This post was published at Armstrong Economics on Oct 14, 2017.

  • The Endgame of Financialization: Stealth Nationalization

    This is the new model of nationalization: central banks control the valuation of private-sector assets without actually having to own them lock, stock and barrel. As you no doubt know, central banks don’t actually print money and toss it out of helicopters; they create a digital liability and use this new currency to buy assets such as bonds and stocks. Central banks have found that they can take control of the stock and bond markets by buying up as much as these markets as is necessary to force price and yield to do the central banks’ bidding. Central Banks Have Purchased $2 Trillion In Assets In 2017. This increases their combined asset purchases above $15 trillion. A trillion here, a trillion there, and pretty soon you’re talking real money–especially if you add in assets purchased by sovereign wealth funds, dark pools acting on behalf of monetary authorities, etc.

    This post was published at Charles Hugh Smith on FRIDAY, OCTOBER 13, 2017.

  • Trump, the Chaos President, Adds Cruelty to His Brand

    Donald Trump, the President of the United States, who took his companies through bankruptcy six times, picked the three-week anniversary of Hurricane Maria delivering an epic humanitarian crisis to Puerto Rico to shame the U. S. territory for its financial troubles and to traumatize the struggling residents by suggesting he may yank Federal workers from Puerto Rico.
    The President, whose key job is to rally people in the time of crisis, posted the following, insanely cruel Tweet yesterday to a region where 84 percent of the residents still lack electrical power; one-third lack clean running water; and only 8 percent of the roads are passable according to government statistics: ‘We cannot keep FEMA, the Military & First Responders, who have been amazing (under the most difficult circumstances) in P. R. forever!’ Trump posted to his Twitter page. That post came shortly after Trump retweeted a statement suggesting that Puerto Rico’s ‘financial crisis looms largely from their own making.’
    The three-week time frame for Trump’s patience to be running out in the midst of a humanitarian crisis contrasts with the three-year time frame, from 2007 to 2010, in which the Federal government’s patience and money were lavished on Wall Street to the tune of $16 trillion. Wall Street’s crisis was not the product of Mother Nature but a thundering herd of greed-obsessed banksters hell bent on looting the investing public and the public purse. (See Puerto Rico Relief Efforts Pale to that for Just One Wall Street Bank.)

    This post was published at Wall Street On Parade By Pam Martens and Russ Marte.

  • Yellen Was Right: ‘Transitory’ Factors of ‘Low’ Inflation Are Reversing, with Much More to Come

    What’s Boiling Beneath the Surging Inflation?
    Consumers are going to shell out more money for the same stuff, that’s for sure. Inflation as measured by the Consumer Price Index jumped 2.2% in September compared to a year ago, the Bureau of Labor Statistics reported this morning. All fingers pointed at energy costs: the index jumped 10.1% year-over-year. Within it, ‘motor fuel’ prices (gasoline and diesel) jumped 19.2%.
    Food prices rose 1.2% year-over-year, kept down by prices for ‘food at home’ – the stuff you buy at the grocery store – which inched up only 0.4% year-over-year in part due to the price war currently tearing into the supermarket sector.
    In the chart below of CPI, note the dreadful ‘Deflation Monster’ – one of those rare and brief occasions in the US when the purchasing power of wages actually rose just a tiny bit on a year-over-year basis. It was caused by the energy bust. And it was ‘transitory’:

    This post was published at Wolf Street on Oct 13, 2017.

  • Asian Metals Market Update: October-13-2017

    The focus is on Bitcoin as it edged past $5000 and shows no sign of correction. Gold and silver are firm. It is just a technical trade. No one is taking seriously US economic data releases due to hurricane impact. Focus will shift to Japanese elections on 22nd October, Chinese communist party meet and demand. Short term traders are investing into Bitcoin and other forms of crypto currencies. Gold and silver will not attract short term hot money. Most of the investors in gold and silver are medium term to long term. The rally in gold and silver is on solid fundamentals.
    Some of the readers might be thinking why I extensively discuss the impact of the global political situation on precious metals and currency markets.

    This post was published at GoldSeek on 13 October 2017.

  • DOLLAR BLOW: China Launches New ‘Yuan-Ruble’ Payment Mechanism

    The US received a major blow to its global hegemony, and one which is sure to trigger more fighting talk from hawks in Washington.
    This week it was announced that China has established a ‘payment versus payment’ (PVP) system to clear Chinese yuan and Russian ruble transactions. The aim, we’re told, is to to ‘reduce risks and improve the efficiency’ of its foreign exchange system.
    The new mechanism, which could rival the long-held monopoly of the US SWIFT inter-bank payment system (allowing for simultaneous settlement of transactions in two different currencies) was launched on Monday after receiving approval from China’s central bank, according to a statement by the country’s foreign exchange trading system.
    However, financial oligarchs in Wall Street will view this move as an act of aggression in challenging the preeminence of the US dollar as the planet’s global reserve currency – which is inextricably tied and nearly completely dependent on the US ‘Petrodollar’ to prop-up the value of the US fiat currency. Georgetown University scholars note here:
    Since petrodollars and petrodollar surpluses are by definition denominated in U. S. dollars, then purchasing power is dependent on the U. S. rate of inflation and the rate at which the U. S. dollar is exchanged (whenever there is need for convertibility) by other currencies in international money markets. It follows that whenever economic or other factors affect the U. S. dollar, petrodollars will be affected to the same magnitude. The link, therefore, between the U. S. dollar and petrodollar surpluses, in particular, has significant economic, political, and other implications.

    This post was published at 21st Century Wire on OCTOBER 13, 2017.

  • What Not To Buy In Today’s Stock Market

    Dear reader, if you are overcome with fear of missing out on the next stock market move; if you feel like you have to own stocks no matter the cost; if you tell yourself, ‘Stocks are expensive, but I am a long-term investor’; then consider this article a public service announcement written just for you.
    Before we jump into the stock discussion, let’s quickly scan the global economic environment.
    The health of the European Union did not improve in the last year, and Brexit only increased the possibility of other ‘exits’ as the structural issues that render this union dysfunctional went unfixed.
    Japan’s population has not gotten any younger since the last time I wrote about it – it is still the oldest in the world. Japan’s debt pile got bigger, and it remains the most indebted developed nation (though, in all fairness, other countries are desperately trying to take that title away from it). Despite the growing debt, Japanese five-year government bonds are ‘paying’ an interest rate of – 0.10 percent. Imagine what will happen to its government’s budget when Japan has to start actually paying to borrow money commensurate with its debtor profile.
    Regarding China, there is little I can say that I have not said before. The bulk of Chinese growth is coming from debt, which is growing at a much faster pace than the economy. This camel has consumed a tremendous quantity of steroids over the years, which have weakened its back – we just don’t know which straw will break it.

    This post was published at Zero Hedge on Oct 12, 2017.

  • Goldman Is Allowing Its Clients To Bet On The Next Financial Crisis

    Just over a decade ago, as the S&P was hitting all time highs and there was a line around the block of 30-some year old hedge fund managers, desperate to put other people’s money in various ultra risky investments just so they could pick a few excess bps of yield over Treasurys – a situation painfully familiar to what is going on now – Goldman had an epiphany: create new synthetic products that have huge convexity, i.e., provide little upside (such as a few basis points pick up in yield) versus unlimited downside, link them to the shittiest assets possible and sell them to gullible, yield-chasing idiots (collecting a transaction fee) while taking the other side of the trade (collecting a huge profit once everything crashes). The instruments, of course, were CDOs, and not long after Goldman sold a whole of them, the financial system crashed and needed a multi-trillion bailout from which the world has not recovered since.
    Ten years later, Goldman is doing it again, only instead of targeting subprime mortgages, this time the bank has focused on quasi-insolvent European banks.
    And just like right before the last financial crash, Goldman is once again allowing its clients to profit from the upcoming collapse, or as Bloomberg puts it, “less than a decade after the last major banking crisis, Goldman Sachs and JPMorgan are offering investors a new way to bet on the next one.”
    The trade in question is a total return swap, a highly levered product which is similar or a credit default swap but has some nuanced differences, which targets what are known as Tier 1 , or AT1 or “buffer” notes issued by European banks, and which usually are the first to get wiped out when there is even a modest insolvency event (just ask Banco Popular), let alone a full blown financial crisis.

    This post was published at Zero Hedge on Oct 12, 2017.

  • Schuble Warns of Coming Economic Crisis

    In his farewell interview for the Financial Times, Federal Minister of Finance Wolfgang Schuble warned of a new global financial crisis predicated upon the Quantity of Money theory that the central banks had pumped trillions of dollars into the financial system that is creating a risk of ‘new bubbles’. Indeed, many just do not comprehend what is going on and are blaming the new highs in share markets on concerns about the increased risks from the accumulation of more and more liquidity and the growth of public and private debt.

    This post was published at Armstrong Economics on Oct 12, 2017.

  • Is Bridgewater A Fraud? Here Are The Troubling Questions Posed By Jim Grant

    Jim Grant, author of Grant’s Interest Rate Observer, first hinted last week that not all is well when it comes to the world’s biggest hedge fund, Ray Dalio’s $160 billion Bridgewater (of which one half is the world’s biggest risk-parity juggernaut). Speaking to Bloomberg last week, Grant said he was “bearish” on Bridgewater because founder Dalio has become “less focused on investing, while the firm lacks transparency and has produced lackluster returns.”
    Grant slammed Dalio’s transition from investor to marketer, and in a five-page critique of the world’s largest hedge fund, said Dalio has been preoccupied with his new book, sitting for media interviews and sending Tweets.
    ‘Such activities have one thing in common: They are not investing,’ Grant writes in the Oct. 6 issue of his newsletter. ‘Yet here he is, laying it all out to the world again, Tweeting, promoting his book, attacking the press — necessarily doing less of his day job than he would otherwise do.’
    Grant continued his scathing critique, accusing Bridgewater of “lately performed no better than the typical hedge fund.’ Grant is right: since the start of 2012, Bridgewater’s Pure Alpha II Fund has posted an annualized return of 2.5% vs its historic average of 12%, and is down 2.8% this year through July.
    The underperformance may be explainable: after all the polymath billionaire has been busy opining in recent months on subjects from the rise of populism to his affinity for China, “which are distraction from making money” Grant said.
    But if Grant had limited himself to merely Dalio’s stylistic drift, it would be one thing: to be sure, the fund’s billionaire founder may simply have lost a desire to manage money and has instead discovered a flair for writing books and being in the public spotlight.
    However, Grant – or rather his colleague Evan Lorenz – went deeper, and as he writes in the latest Grants letter, he raises several troubling points, which go not to the hedge fund’s recent underprofmrance – which can be perfectly innocuous – but implicitly accuse the world’s biggest hedge fund of borderline illegal activities and, gasp, fraud. Some of the more troubling points brought up by Lorenz are the following:

    This post was published at Zero Hedge on Oct 11, 2017.

  • Trading And Investing In Gold: Follow The Money

    The paper gold attack that I first suggested might occur in the September 7th issue has taken gold from $1360 down to $1270 (continuous contract basis). Technically, gold has moved from an ‘overbought’ condition to a mildly ‘oversold’ condition. The RSI and MACD indicate that gold is slightly ‘oversold’ but I believe both indicators will flash ‘extremely oversold’ before this price attack over. This should occur sometime in the next 2-3 weeks.
    I say this because I continue to believe the open interest in Comex paper gold, combined with the analyzing the weekly Commitment of Traders report, is the best indicator of gold’s next move, at least until the western Central Banks are unable to control the price of gold with paper derivatives. To be sure, the COT report is not always a perfect predictor but in the last 15 years the two reports combined have been around 90% accurate.
    Currently, the Comex banks’ net short position in paper gold is at the high end of its historical range. Concomitantly, the net long position of the hedge funds is also at the high end of its historical range. Per last Friday’s COT report, the banks began to reduce the short positions, thereby reducing their net short position, and the hedge funds began to reduce the long positions, thereby reducing their net short position (click to enlarge):

    This post was published at Investment Research Dynamics on October 11, 2017.