Illinois State Official: “We Are In Massive Crisis Mode, This Is Not A False Alarm”

Last week we reported that as Illinois, a state which now faces over $15 billion in backlogged bills, struggles over the next two weeks to somehow come up with its first budget in three years ahead of a June 30 fiscal year end, and faces an imminent ratings downgrade to junk – the first ever in US state history – traders finally puked, sending the yield on its bonds surging after a judge ruled at the start of the month that the state is violating consent decrees and previous orders, and instructed the state to achieve “substantial compliance with consent decrees”, further pressuring its financial situation.

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

The Next Minsky Moment

‘China’s economy has entered a state of new normal.’
– Premier Li Keqiang, 2015
‘Success breeds a disregard of the possibility of failure.’
– Hyman Minsky
Welcome to the new, improved, faster-to-read, better yet still-free Thoughts from the Frontline. My team and I have been doing a lot of research on what my readers want. The reality is that my newsletter writing has experienced a sort of ‘mission creep’ over the years. Bluntly, the letter is just a lot longer today than it was five or ten years ago. And when I’m out talking to readers and friends, especially those who give me their honest opinions, many tell me it’s just too much. There are some of you who love the length and wish it were even longer, but you are not the majority. Not even close. We all have time constraints, and I wish to honor those. So I am going to cut my letter back to its former size, which was about 50% of the length of more recent letters. (Note: this paragraph is going to open the letter for the next month or so, since not everybody clicks on every letter. Sigh. Surveys showed us it’s not because you don’t love me but because of demands on your time. I want you to understand that I get it.) Now to your letter…

This post was published at Mauldin Economics on JUNE 17, 2017.

How Precious Metals Can Help Protect Your Wealth from Hackers

Could your wealth be hacked? It’s a threat most investors overlook. But they do so at their own peril.
Learn How to Exploit the Gold Frenzy! If elections can be hacked, then so can bank and brokerage accounts, as well as any online platforms for digital currencies.
More than five months into Donald Trump’s presidency, the ‘Russia hacked the election’ conspiracy theories still won’t go away. They’re expanding to also implicate Russian hackers for meddling in elections in France and elsewhere. The latest Russian hacking story centers on Qatar.
According to the Guardian, ‘An investigation by the FBI has concluded that Russian hackers were responsible for sending out fake messages from the Qatari government, sparking the Gulf’s biggest diplomatic crisis in decades.’
Choose From 10-100oz Pure Silver Trusted Bullion Dealer – Buy Now! silvergoldbull.com The Russian government has repeatedly denied involvement in these hacking campaigns. Regardless of whether the news about Russian hackers is fake, the threat of cyber-attacks is very real.
In recent months, major e-mail providers and e-commerce sites have been hit by hackers. They often take customers’ information and try to sell it on the dark web.

This post was published at GoldSilverWorlds on June 17, 2017.

“Someone’s Going To Jail” Gingrich Warns Mueller’s Russia ‘Witch Hunt’ Too Big To Fail Now

After the Washington Post-New York Times-CNN axis got the public worked into a lather by effectively trying President Donald Trump and his administration in the court of public opinion, Americans are desperate to see somebody held accountable for…wait…what is it again? Collusion? Obstruction? The narrative changes so quickly, it’s difficult keeping track.
Enter Former Speaker Newt Gingrich, who told Fox’s Sean Hannity on Friday that the investigators who’ve been hired by Special Counsel Robert Mueller won’t quit until they’ve found their own Scooter Libby-type figure to play the role of political pariah.

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

“The Next Leg Is Clearly Lower” – Global Excess Liquidity Collapses

First it was Citi’s Hans Lorenzen warning about the threat to growth and global risk assets as a result of the upcoming slowdown in global central bank balance sheet growth. Then, yesterday, it was Matt King’s turn to caution that “the Fed’s hawkishness this week adds to the likelihood that in markets a significant un-balancing (or perhaps that should be re-balancing?) is coming.”

That said, with both the ECB and BOJ injecting hundreds of billions each month – even as they are set to run ouf of “haven assets” in the coming year, there is still time before the global central bank balance sheet “tipping point” is reached and assets roll over…

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

Week in Review: June 17, 2017

The Federal Reserve this week raised the Federal Funds Rate a quarter point to 1.25 percent, bringing the rate to the highest it’s been in eight years. One might now say monetary policy has progressed from a policy of “ultra low” rates to simply a policy of low rates.
How this will play out over time continues to depend quite a bit on how much the Fed shrinks its balance sheet and how soon a recession descends on the economy.
Not surprisingly, then, many continue to discuss the best ways to reform the Federal Reserve. But, there’s definitely a wrong way to do this.

This post was published at Ludwig von Mises Institute on June 17, 2017.

Deutsche Bank: The Market’s Current “Metastability” Will Lead To “Cataclysmic Events”

With the VIX slammed at the close of trading on “quad-witch” Friday, sending it just shy of single-digits once again and pushing stocks back in the green in the last seconds of trading, the much discussed topic of (near) record low volatility simply refuses to go away, which means even more attempts to i) explain it, ii) predict what ends the current regime of “endemic complacency” and iii) forecast the “catastrophic” damage to markets when it does finally end as JPM’s Kolanovic did earlier this week, when he set the bogey on a modest increase in the VIX from 10 to just 15.
Overnight, applying his typical James Joycean, stream-of-consciousness approach to capital markets, Deutche Bank’s derivatives analyst Aleksandar Kocic penned his latest metaphysical essay on this topic, which covered most of the above bases, and which postulates that far from “stable” the current market equilibrium is one which can be described as “metastable”, the result of widespread complacency, and which he compares to an avalanche:”a totally innocuous event can trigger a cataclysmic event (e.g. a skier’s scream, or simply continued snowfall until the snow cover is so massive that its own weight triggers an avalanche.”
He also inverts the conventionally accepted paradigm that lack of volatility means lack of uncertainty, and writes that to the contrary, it is the ubiquitous prevalence of uncertainty that has allowed vol to plunge to its recent all time lows, keeping markets “metastable.”
How does the regime change from the current “metastable” regime to an “unstable” one? To Kocic the transition will take place when uncertainty, for whatever reason, is eliminated: “Big changes threaten to explode not when uncertainty begins to rise, but when it is withdrawn.” He also points out that while there is punishment for those who seek to defect from a “complacent regime”…

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

San Francisco Bay Area Sheds Jobs and Workers

Commercial and residential real estate bubbles choke the economy. The upper bounds of hype and craziness have been reached.
The San Francisco Bay Area has seen an astounding jobs boom since the Great Recession. The tsunami of global liquidity that washed over it after the Great Recession, central-bank QE and zero-interest-rate policies that sent investors chasing blindly after risk, a blistering no-holds-barred startup bubble with the craziest valuations, one of the greatest stock market bubbles ever – whatever caused the boom, it created one of the craziest housing bubbles ever, a restaurant scene to dream of, traffic jams to have nightmares over, and hundreds of thousands of jobs. But it’s over.
In May, employment in San Francisco dropped to 542,600 jobs, the lowest since June 2016, according to the data released on Friday by the California Employment Development Department. The employment peak was in December 2016 at 547,200.
The labor force in the City fell to 557,600. That’s below March 2016! This confirms a slew of other data and anecdotal evidence: People and businesses are leaving. It’s too expensive. They’re voting with their feet.

This post was published at Wolf Street by Wolf Richter ‘ Jun 17, 2017.

Carmageddon Crashes into ‘the Recovery’ Right on Schedule – EXACTLY as Predicted Here

By: David Haggith
Carmageddon, as Wolf Richter has called it, is hitting the US economy exactly as I said a year and a half ago would start to happen at the very end of 2016 or the start of 2017. Measured year-on-year, auto sales have declined every month of 2017, and are now starting to cause the financial wreckage that I said we would experience in what will become a demolition derby for US auto manufacturers.
‘A stretched auto consumer, falling used [vehicle] prices, and technological obsolescence of current cars are ingredients for an unprecedented buyer’s strike,’ wrote Morgan Stanley’s auto analyst Adam Jonas in a note to clients. (Wolf Street)
Stanley now foresees a ‘multiyear cyclical decline,’ along with a declining ‘willingness of financial institutions to lend as aggressively as in the past.’
After an eight-year boom, the industry appears ‘to be hitting a point of diminishing returns where the tactics required to attract the incremental consumer may be putting even more pressure on the second-hand market, leading to adverse conditions for selling new vehicles….’ not even record incentives, reaching $14,000 for some truck models, have much impact. Those are the ‘diminishing returns’ – when you throw gobs of money at a problem and it doesn’t have much impact. Lenders, particularly the captives, stepped forward, making loans with very long terms, low and often subsidized interest rates (‘0% financing’), sky-high loan-to-value ratios, and leases that gambled on very high residual values that have now gone up in smoke as used vehicle prices are heading south.

This post was published at GoldSeek on Sunday, 18 June 2017.

The Eternal Plea for Inflation

This is a syndicated repost courtesy of The Daily Reckoning. To view original, click here. Reposted with permission.
We learned in yesterday’s Washington Post that the Federal Reserve ‘needs to learn to love inflation.’
Economics writer Matt O’Brien argues the Fed’s 2% inflation target is far too modest… that Janet Yellen lacks something in the way of vocational ambition.
This fellow believes Ms. Yellen should set her cap much higher – 4% inflation:
The higher inflation is, the higher interest rates have to be to control it – and the more room there is to cut them when the economy gets into trouble. So if a 2% target doesn’t get rates high enough to keep them away from zero, then maybe a 4% one will…

This post was published at Wall Street Examiner by Brian Maher ‘ June 17, 2017.

“Robots, Drones” Mean Mass Layoffs For Whole Foods Employees

When describing the logic behind Amazon’s blockbuster acquisition of Whole Paycheck Foods, a deal that made the “greedy bastards” over at Jana Partners $400 million richer in just a few months, Credit Suisse analyst Stephen Ju explained that he views this acquisition as “an offensive expansion move to accelerate its progress in the largest consumer spend category. In other words, Amazon is paying roughly 3% of its enterprise value for an improved position in an addressable segment that amounts to ~$1.6 trillion according to the US Dept. of Agriculture’s ERS, especially as progress at Amazon Fresh (in terms of regional rollout) has been admittedly slower than we expected.”
He may be correct in the long-run but in the medium-term, Amazon Foods faces major hurdles, including a significant slowdown in how much Americans spend at food and beverage stores…

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

Monetary Madness and Rabbit Consumption

Down the Rabbit Hole
‘The hurrier I go, the behinder I get,’ is oft attributed to the White Rabbit from Lewis Carroll’s, Alice in Wonderland. Where this axiom appears within the text of the story is a mystery. But we suspect the White Rabbit must utter it about the time Alice follows him down the rabbit hole.
No doubt, today’s wage earner knows what it means to work harder, faster, and better, while slip sliding behind. However, for many wage earners the reasons why may be somewhat mysterious. At first glance, they may look around and quickly scapegoat foreigners for their economic woes.
Yet like Wonderland, things are often not as they first appear. When it comes to today’s financial markets, there is hardly a connection to the real economy at all. Stock markets are just off record highs, yet 6 in 10 Americans don’t have $500 to cover an unexpected bill.

This post was published at Acting-Man on June 17, 2017.

Trump Reports Income Of $594 Million, Net Worth Of At Least $1.1 Billion

Late on Friday, the U. S. Office of Government Ethics released a 98-page financial disclosure form according to which President Trump reported income of at least $594 million for the period from 2016 and through April 2017 and assets worth at least $1.4 billion; he also had personal liabilities of at least $315.6 million to German, U. S. and other lenders as of mid-2017 implying a net worth of just over $1.1 billion. The disclosure form was Trump’s first since taking office.

“President Trump welcomed the opportunity to voluntarily file his personal financial disclosure form,” the White House said in a statement, adding that the form was “certified by the Office of Government Ethics pursuant to its normal procedures.”
On the income side, the largest component was $115.9 million listed as golf-resort related revenues from Trump National Doral in Miami, down from $132 million a year ago. Income from his other hotels and resorts largely held steady according to Reuters. Revenue from Trump Corporation, his real-estate management company, nearly tripled, to $18 million, and revenue from Mar-a-Lago grew by 25%, to $37.25 million helped perhaps by the doulbing of the club’s initiation fee to $200,000 after Trump’s election.

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

History May Rhyme, But These Curves Repeat

What is most tragically ironic about the last decade is that the people who are supposed to have been in charge are the same people claiming it could never happen. Ben Bernanke, for example, made his career on studying the Great Depression. Using Milton Friedman’s brand of primitive monetarism as a base, he and others like him developed the modern central bank based on analysis of all the grave mistakes made primarily by monetary authorities in the 1930’s (updated with further opposite mistakes made in the 1970’s).
But in starting with Friedman, it is quite apparent they never really listened to him. Economists like Bernanke, Alan Greenspan, or Janet Yellen don’t get the bond market. It’s a problem because they really should given their self-assigned responsibilities, and more than that bonds describe fundamentals better than anything else. Next to every complex and elegant DSGE model ever invented, the simple yield curve is beyond compare.
In 1987, Ohio State economist Stephen Cecchetti wrote a paper for the NBER examining other characteristics of US Treasury rates during the 1930’s. Nominal rates were not exclusively determined by the outlook for growth and inflation, rather there was great value leftover at maturity. Because of the US deficit situation throughout the decade, the US Treasury Department offered what Cecchetti called an ‘exchange privilege’ that at many times proved quite valuable.

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

Haunting Yellen

I wouldn’t put it in the category of LBJ ‘losing Cronkite’, but it is at least a measure of amplified pressure (or just any pressure). This week has been utterly embarrassing for the Federal Reserve, a central bank that refuses to define clearly what it is attempting to do. It leaves questions even for who used to be highly sympathetic.
Their aim is simple enough as a matter of pure economics. The economy didn’t recover and is never going to (so long as monetary matters remain truly unexamined). Having resisted this possibility for nearly a decade, officials who have now come around wish to avoid having to admit it. So they let the media define the economy by the unemployment rate which projects an image of conditions that simply don’t exist.
The New York Times has typically been friendlier to the official stance on these matters. Credentials go a long way there, and who has better pedigree than Federal Reserve policymakers? But even they may have to call foul because it’s not like the unemployment rate just yesterday dropped so low. It’s been flirting with official levels of ‘full employment’ for three years, forcing the FOMC’s suspect models to redefine down their calculated central tendency (the theorized range where low unemployment is believed to spark serious wage acceleration and then consumer price inflation) time and again.
At 4.3%, the unemployment rate doesn’t any longer leave much room for interpretation. It’s go time, now or never.

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

What Housing Recovery? Real Home Prices Still 16% Below 2007 Peak

Since the financial crisis, home equity has gone from being America’s biggest driver of (illusory) wealth to one of the biggest sources of economic inequality.
And while the post-crisis recovery has returned the national home price index to its highs from early 2007, most of this rise was generated by a handful of urban markets like New York City and San Francisco, leaving most Americans behind.
To wit: home prices in the 10 most expensive metro areas have risen 63% since 2000, while home prices in the 10 cheapest areas have gained just 3.6%, according to Harvard’s annual State of the Nation’s Housing report. And while nominal prices may have returned to their pre-recession levels, when you adjust for inflation, real prices are as much as 16 percent below past peaks.

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

How Much Do People Actually Make From “Gigs” Like Uber And Airbnb

Coined shortly after the financial crisis in 2009, the so-called ‘gig economy’ or ‘sharing economy’ refers to the growing cadre of companies like Airbnb, Lyft, and TaskRabbit – platforms that employ temporary workers who provide a wide variety of services: delivery, ridesharing, rentals, and odd jobs. A recent Pew study estimated that nearly a quarter of all Americans earn some money through these platforms.

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

French Parliament Elections Tomorrow June 18th

Macron was hoping to have a super majority that his new party would sweep the election to give him ultimate power. However, the latest poll taken by BFMTV showed a stunning 61% of French voters did not want the 39-year-old’s party to take the National Assembly. The majority of French voters have said they will vote against Macron’s party to prevent a ‘crushing’ majority in parliament. Most have responded that they would vote for a rival party in the second round in a bid to ‘rectify’ the the decision.
It is looking more and more that the vote for Macron was not in support of him handing sovereignty to Brussels. The election point overlooked by everyone is the fact that Le Pen beat ALL mainstream parties. There is no mandate for the surrender of rights in France to a new Federalized Europe. The election is this Sunday, June 18th. We will see the results soon.

This post was published at Armstrong Economics on Jun 17, 2017.