Who Gets Hit by Mortgage Losses in Harvey and Irma Areas?

‘We need to ask for a policy change because the burden with these losses is too big.’ Somebody is going to pay for losses on mortgages of homes that were destroyed by Hurricanes Harvey and Irma. It’s a just a question of who.
The taxpayer is on the hook, along with some investors. But then there are the servicers of mortgages guaranteed by the Government National Mortgage Association, for short Ginnie Mae. The largest of them is Wells Fargo, but they mostly include smaller non-banks such as PennyMac and Quicken Loans. The amounts could be large. And now they’re asking for a bailout of sorts.
In total, 4.3 million properties with nearly $700 billion in outstanding mortgage balances are located in FEMA-designated disaster areas in Texas and Florida, according to a preliminary estimate by Black Knight Financial Services:
Disaster areas of Hurricane Harvey: 1.18 million mortgaged properties with $179 billion in unpaid mortgages. Disaster areas of Hurricane Irma: 3.14 million mortgaged properties with $517 billion in unpaid mortgages. Many of these homes survived mostly unscathed. So the mortgage balances of homes that have been severely damaged or destroyed remain uncertain but are significant.

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

Market View Update – September 2017

When thinking about how to start a market view update, it is often helpful to pick up where the last one left off. Alas, that is what we will do.
In mid-June, we wrote that the stock market has continued to defy calls for a correction and has held its ground time and again in the face of scary-sounding headlines due to the stabilizing force of strong earnings growth and the persistence of low-interest rates.
We said at the time that, if there were to be a destabilizing force for the stock market, it would be disappointing earnings growth and/or rising interest rates that lessen the relative appeal of owning equities. That was an observation by the way and not a forecast.
Since that time, market participants have learned that second-quarter earnings increased 10.4%, per FactSet, well above the estimated growth rate of 6.6% in front of the reporting period, and have seen the yield on the benchmark 10-year note tick up slightly to 2.20%, which is still 28 basis points lower than where it started the year.

This post was published at FinancialSense on 09/19/2017.

Buildings Collapse, Thousands Take To The Street After Powerful Quake Shakes Mexico City

Flight #AM2689 from Dallas (DFW) to Mexico City is diverting to Monterreypic.twitter.com/2vgjY117Jd
— Breaking Flight News (@FlightBreaking) September 19, 2017

On the anniversary of a massive 1985 earthquake that killed at least 5,000 people, Mexico City has been shaken by another powerful earthquake, the second the shake the city in the past two weeks. The 7.4 magnitude quake shook buildings in the capital city, sending thousands rushing into the streets, according to Reuters.
Ironically, the quake hit only hours after many people participated in earthquake drills around the nation – drills specifically timed to mark the anniversary of the 1985 earthquake.
According to the Associated Press, much of Mexico City is built on former lakebed, and the soft soil can amplify earthquakes even hundreds of miles away.

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

Euro Tumbles On Report ECB Is “Concerned And Divided” Over End To QE

Talk ’em up, then slam ’em down.
The familiar pattern of “clear and transparent” central bank communication was on full display moments ago, when following months of build up to an ECB taper announcement, the ECB used its favorite mouthpiece, Reuters, to “trial balloon” that an ECB decision over whether to announce a firm end-date to the central bank’s bond buying could be “put off until December” as a result of disagreement among the ECB council stemming from “concern over Euro strength” which is leading to “uncertainty and divide within the council.”
As a result, some within the ECB want to be able to “extend or expand” buys if needed, in other words if the EURUSD rises too far above 1.20.
The highlights from Reuters:

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

Markets Pause As FOMC Meeting Begins Tuesday

Global stock markets were mostly weaker overnight. U. S. stock indexes are pointed toward narrowly mixed openings when the New York day session begins.
Traders and investors worldwide are a bit cautious ahead of the U. S. Federal Reserve’s monetary policy meeting.
Gold prices are slightly higher in pre-U. S. day session trading, on some tepid short covering following recent selling pressure that pushed prices to a three-week low on Monday.

This post was published at Wall Street Examiner on September 19, 2017.

Ahead Of Tomorrow’s Historic Fed Meeting, Here Is The Only “Cheat Sheet” You Need

Ahead of tomorrow’s historic Fed announcement, in which for the first time the Fed is expected to announce the phasing out of bond reinvestment and the shrinking of its balance sheet by roughly $10 billion per month starting in October and November, but fear not the BOJ and ECB will more than offset this decline..

… there are various other unknowns with which Yellen could still surprise the market, including the Fed’s signalling on policy rates, economic projections, a shift in the “dots”, comments on asset prices and, last but not least, whether Yellen will stay or leave when her term expires in Feb 2018.
Below, courtesy of ING, is the definitive “cheat sheat” matrix laying out all possible permutations of what can happen tomorrow, as well as the most likely market reaction.

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

BIS Hunts for ‘Missing’ Global Debt, Inflation (Try Including Housing!)

This is a syndicated repost courtesy of Snake Hole Lounge. To view original, click here. Reposted with permission.
Just like global central banks, the Bank for International Settlements can’t seem to find inflation and $114 trillion in off-balance sheet FX derivatives.
ZURICH – Nonfinancial companies and other institutions outside of the U. S., excluding banks, may be sitting on as much as $14 trillion in ‘missing debt’ held off their balance sheets through foreign-exchange derivatives, according to research published Sunday by the Bank for International Settlements.
These transactions, which resemble debt but for accounting purposes aren’t classified that way, aren’t new. Rather, researchers from the BIS – a consortium of central banks based in Basel, Switzerland – used global banking data and surveys to estimate the size of this debt for the first time.
The implications for financial stability are unclear because FX swaps are backed by cash collateral and can be used to hedge exposure to currency swings, thus promoting stability. Still, the debt ‘has to be repaid when due and this can raise risk,’ the authors wrote.

This post was published at Wall Street Examiner on September 19, 2017.

Hurricane Maria Causes “Widespread Devastation” In Dominica As It Races Toward Puerto Rico

In less than two days, Hurricane Maria has strengthened from a tropical storm to a powerful category five hurricane, dubbed in no uncertain terms as “catastrophic” by the NHC. Though it has been downgraded to a category 4 overnight, the storm made landfall on the tiny Caribbean island of Dominica, leaving it utterly ‘devastated,’ according to the island’s prime minister.
“We’re just waiting for daybreak to do an assessment of the damage,” Dominica Prime Minister Roosevelt Skerrit told CNN’s Rosemary Church.
The storm, which made landfall Monday night, has maximum sustained winds of 155 mph, and remains on track to directly hit Puerto Rico, what would make it the first category four hurricane to directly hit the island in 85 years, according to CNN. Skerrit said the island’s ‘first order of business’ following the storm would be to make sure ‘every single citizen and resident is safe.’

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

The World Is Creeping Toward De-Dollarization

The issue of when a global reserve currency begins or ends is not an exact science. There are no press releases announcing it, and neither are there big international conferences that end with the signing of treaties and a photo shoot. Nevertheless we can say with confidence that the reign of every world reserve currency has to come to and end at some point in time. During a changeover from one global currency to another, gold (and to a lesser extent silver) has always played a decisive role. Central banks and governments have long been aware that the dollar has a sell-by date as a reserve currency. But it has taken until now for the subject to be discussed openly. The fact that the issue has been on the radar of a powerful bank like JP Morgan for at least five years, should give one pause. Questions regarding the global reserve currency are not exactly discussed on CNBC every day. Most mainstream economists avoid the topic like the plague. The issue is too politically charged. However, that doesn’t make it any less important for investors to look for answers. On the contrary. The following questions need to be asked: What indications are there that the world is turning its back on the US dollar? And what are the clues that gold’s role could be strengthened in a new system?
The mechanism underlying today’s ‘dollar standard’ is widely known and the term ‘petrodollar’ describes it well. This system is based on an informal agreement the US and Saudi Arabia arrived at in the mid-1970s. The result of this deal: Oil, and consequently all other important commodities, is traded in US dollars – and only in US dollars. Oil producers then ‘recycle’ these ‘petrodollars’ into US treasuries. This circular flow of dollars has enabled the US to pile up a towering mountain of debt of nearly $20 trillion – without having to worry about its own financial stability. At least, until now.

This post was published at Ludwig von Mises Institute on September 20, 2017.

Dr Bouthain Shaaban: ‘Catching a Glimpse of Tomorrow’s World’

Dr Bouthaina Shaaban, Political & Media Advisor to Syrian President, Bashar Al Assad
Despite all the pain and suffering imposed by the ongoing nihilistic wars in our region, I thank God that we are witnessing this historical era, which is one of the most complex eras mankind has passed through. The daily regional and international events reinforce an image I’ve painted in my mind for the past six years about how the world we know is moving slowly to be replaced by another world; and the transition will take few years to be completed.
I see two different intersecting circles today, and we can only see a sliver of each circle, but the intersecting parts remain hidden. In the BRICS summit that took place in China few days ago, I could see signs of the new world, a glimpse of the coming decades, what our children and grandchildren will definitely see in their lifetime, and I was pleased by what I saw.
I saw the BRICS leaders arriving at the summits and being welcomed by a body language that entails respect and parity, and everyone had a happy expression on their faces, signalling their liberation from having to deal with the supremacists who reside on the other half circle. I saw the First Lady of China standing very humbly and elegantly, wearing a silk dress made in China, representing a country with a great civilisation that is preparing to revive the Silk Road, which would change the identity and life style of the entire world.

This post was published at 21st Century Wire on SEPTEMBER 18, 2017.

Tech Stocks Are Tanking, Banks Panic-Bid

After an exuberant overnight session – ignoring the slump in USDJPY and bond yields – the US cash session open appears to have triggered a wave of selling (especially in tech stocks)…
Nasdaq is getting whacked at the open…
Bank stocks are bid once again – back to pre-FOMC Minutes levels – as Tech rolls over…

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

Diwali, Lord Rama, and the Return of Gold from Exile

October 19, 2017 marks an important holiday in the Indian culture. Diwali begins.
Diwali is one of the biggest festivals for Hindus, Sikhs, and Jains. It is a lavish celebration of the victory of light over darkness with its gleaming candles, luxurious works of art, and opulent feasts. Diwali is also characterized by gift giving. Buying and gifting gold is considered auspicious during Diwali.
Given the nature of the holiday and the number of people who celebrate it, according to CNBC, the past few years have seen a tendency for the gold price to rise around Diwali. Last year during Diwali, Mihir Kapadia, founder & CEO of Sun Global Investments, said ‘As heavy consumers, the festive seasons always tend to surge the demand, and considering the current low prices, this should increase the market activity and thus push the prices a little.’ Kapadia continued, ‘We do not expect it to boost prices significantly as the overall market is subdued due to the worries about rising interest rates.’
There is no shortage of economic analysis during the buildup to this year’s celebration as The Economic Times reported ‘bullion has climbed almost 10 percent on the Indian market this year as world prices increased on… reduced chances of a further hike in U. S. interest rates in 2017.’

This post was published at GoldSeek on Tuesday, 19 September 2017.

How to Beat Banks at Their Own Game

When it comes to public sentiment, banks and Congress have a lot in common.
People tell pollsters they dislike Congress in general, but they keep re-electing their own representative and senators.
Similarly, people tend to like their own bank and disapprove of others, according to the latest American Banker/Reputation Institute survey.
One glaring exception: Wells Fargo (WFC). Pretty much no one likes Wells Fargo since last year’s revelation that the bank’s staff had opened millions of false accounts to meet ambitious sales targets.
I said at the time there’s never just one cockroach. Turn on the lights, and you’ll see more scurrying away.
That proved true for Wells Fargo. It’s now embroiled in several other scandals, like forcing customers to buy car insurance they didn’t need. Other banks may have similar issues.
The banking giants get away with these things because people feel powerless against them, but now there’s a new way to beat the banks at their own game – and keep some of those handsome profits for yourself.

This post was published at Mauldin Economics on SEPTEMBER 19, 2017.

Scientists Say Italian Supervolcano Is “Becoming More Dangerous” As Magma Builds Beneath It

After the long-dormant supervolcano Campi Flegrei awakened late last year, a team of scientists that has pinpointed the now-active volcano’s magma source says a potentially devastating eruption could be just around the corner.
Campi Flegrei is a volcanic caldera to the west of Naples that last erupted in the sixteenth century. It has been mostly quiet since then, with the exception of a few small tremors in the 1980s. Seismographic data from those rumbles allowed scientists to pinpoint the source of the magma that flooded into Campi Flegrei’s chamber and caldera, according to United Press International. The results are unequivocal: An analysis of the supervolcano’s hot zone suggests Campi Flegrei could be nearing an eruption.
“What this means in terms of the scale of any future eruption we cannot say, but there is no doubt that the volcano is becoming more dangerous,” De Siena said.
“The big question we have to answer now is if it is a big layer of magma that is rising to the surface, or something less worrying which could find its way to the surface out at sea.”
Researchers liken the volcano’s hot zone to a boiling pot of soup. Over the last several years, the volcano has gotten considerably hotter.

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

Toys ‘R’ Us Bankruptcy: Another Wall Street Debt Slave Falls

The year 2017 is likely to be remembered for devastating hurricanes and storm surges, waves of retail bankruptcies amidst record-setting household debt and a stock market that carelessly sailed through these dangerous waters to record highs.
Toys ‘R’ Us was the latest in a growing string of retail bankruptcies to hit the mat last evening. Its bonds have been telegraphing trouble for some time, with one bond due next year careening from 97 cents on the dollar to 22 cents in a little more than two weeks. On September 6, Wolf Richter at WolfStreet.com provided the short narrative of how Toys ‘R’ Us found itself driving toward the ditch. Citing its leveraged buyout in 2005 by private equity firms Bain Capital, KKR & Co. and real estate firm Vornado Realty Trust, Richter wrote:
‘So here’s what the three PE firms did to Toys R Us: they stripped out cash and loaded the company up with debt. And these are the results: At the end of its fiscal year 2004, the last full year before the buyout, Toys R Us had $2.2 billion in cash, cash equivalents, and short-term investments. By Q1 2017, this had collapsed to just $301 million. Over the same period, long-term debt has surged 126%, from $2.3 billion to $5.2 billion… It takes a lot of expertise and Wall Street connivance to pull this off.’
If the name, Bain Capital, sounds familiar to you, it’s because it’s the private equity firm that was co-founded by Mitt Romney in 1984 and overseen by him in the 80s and 90s. In his book, Turnaround, Romney writes that he owned 100 percent of the shares of Bain Capital. Romney went on to become the Republican Party’s nominee for President in 2012 and his varnished version of just what Bain Capital did for a living came under close scrutiny.

This post was published at Wall Street On Parade on September 19, 2017.

Home ownership bounces from a 50-year low

In a 2015 blog post titled ‘Unintended Consequences’ I explained that policies implemented by the Clinton and Bush administrations to boost the rate of home ownership not only had unintended consequences, but the opposite of the intended consequence. This post is a brief update on the US home ownership situation.
As evidenced by the following chart, the government was initially successful in its endeavours. The home-ownership rate sky-rocketed during the second half of the 1990s and the first half of the 2000s as it became possible for almost anyone to borrow money to buy a house. As also evidenced by the following chart, the home-ownership rate subsequently collapsed. The collapse was an inevitable consequence of people throughout the economy first responding to the Fed’s and the government’s incentives to take on excessive debt and then finding themselves in drastically-weakened financial situations.

This post was published at GoldSeek on Tuesday, 19 September 2017.

Bill Blain: “One Fund I Met Is Convinced Bond Markets Are On The Edge Of A Precipice”

Blain’s Morning Porridge – September 19th 2017
‘I had to phone someone so I picked on you. Hey, that far out so you heard him too..’
There is a veritable hurricane of new issues hitting the market. Like the new Ukraine deal they are being priced to sell – perhaps racing to get down before the rains come. There is the sure and certain knowledge this feeding frenzy is going to stop. With a thumping great crunch.
But the new issue bond market is always feast/famine. There is bigger stuff happening. I managed to spend some time yesterday in the West End of London, speaking with a number of clients about where they think markets are going. Three big themes emerged:
Much of the current ‘noise’ is utter distraction – including what’s really going on in Washington, the nuances of the Brexit negotiations, Korea and all the other political rumour and sigh hitting markets. Some of stories emanating from Whitehall, Brussels, Berlin and Washington are tremendous – I’d love to share them, but… Strip out the political flummery and noise, and the prospects for global stock markets should be positive. Every major economy that matters is now in positive growth, after 10-years we finally seem to have shaken off the Global Financial Crisis, and stock markets (which high) are not impossibly overvalued. The reflation trade is on. The fly in the ointment is the bond market. One fund I met is convinced Global bond markets and credit are on the edge of precipice and about to take that terminal step forward. Others fear the unintended consequences of taper and the ‘End of QE’ triggering a reset across global financial asset values – especially across the bond markets.

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

To Hell In A Bucket

No-one Cares… ‘No one really cares about the U. S. federal debt,’ remarked a colleague and Economic Prism reader earlier in the week. ‘You keep writing about it as if anyone gives a lick.’
We could tell he was just warming up. So, we settled back into our chair and made ourselves comfortable.
‘The voters certainly don’t care about the federal debt,’ he continued. ‘They keep electing the same spendthrifts to office. And the politicians know the voters don’t care. They also know that making more and more promises is the formula for getting reelected.
‘Deep down, the aging masses know they need massive amounts of government debt to pay their social security, medicare, and disability checks. On top of that, many of the so-called gainfully employed are really on corporate welfare; they hang their hats on government contracts to fund their paychecks.
‘You know as well I do how this crazy debt based fiat money system works. The debt must perpetually increase or the whole financial system breaks down. The best we can hope for is that the ongoing currency debasement merely leads to a subtle erosion of living standards. That’s the best-case scenario.
‘But, again, no one except maybe a handful of your readers’ gives a rip about the federal debt. Plus, if you’re gonna keep writing about it you need to use better terminology. The federal debt has grown at such a rapid rate that standard dollar units no longer capture what’s going on. The debt numbers are so large it is difficult to distinguish between hundreds of billions and tens of trillions of dollars.

This post was published at Acting-Man on September 19, 2017.