For the past five years, every FBI secret spy court request to snoop on Americans has sucked, says watchdog

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Feeling secure? Sucker

Analysis  The FBI has not followed internal rules when applying to spy on US citizens for at least five years, according to an extraordinary report [PDF] by the Department of Justice’s inspector general.…


Fed Buys $587 Billion In Bonds In Past Week, 2.7% Of GDP, Just As Foreign Central Banks Start To Liquidate

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Fed Buys $587 Billion In Bonds In Past Week, 2.7% Of GDP, Just As Foreign Central Banks Start To Liquidate

Having moved from "Not QE" (or QE4 as it was correctly called), to the $750BN QE5 which came and went with the blink of an eye, to the Fed's open-ended and unlimited QEnfinity in the span of one week, the full "shock and awe" of the Fed's money printer is now on full display, and in just the past week, from March 19 to Marc

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h 25, the Fed has purchased $587BN in securities ($375BN in TSYs, $212BN in MBS), or roughly 2.7% of the $21.4TN in US GDP.

This means that as of Wednesday close, when accounting for last week's repo operations, the Fed's balance sheet has increased by roughly $650BN, bringing it to just over $5.3 trillion, an increase of $1.2 trillion in the past two week, or roughly 5.6% of US GDP.

Some more scary statistics: if the Fed continues QE at the current pace of $625 billion per week, the Fed's balance sheet will hit $10 trillion by June, or just below 50% of US GDP. Even assuming the Fed eases back of the gas pedal, its balance sheet is almost certain to hit $7 trillion by June.

Which is hardly an accident: one look at the Treasury securities held in custody at the Fed shows that the past two weeks have seen a whopping $50BN in foreign central bank sales, a 1.7% drop which was the highest in six years since Russia pulled over $100BN in TSYs from the Fed at the start of the Crimean war in 2014.

As Bloomberg observes, the selling may have contributed to record volatility in the Treasury market and prompted the Fed’s intervention. More importantly, it also means that the biggest buyer of US Treasurys in the past decade, foreign official institutions (i.e., central banks and reserve managers) are now sellers, so now the U.S. government needs private investors to soak up the ever increasing debt issuance.

And since those are busy avoiding a deadly virus, it means that only the Fed now can fund the exploding US budget deficit... which is precisely what it is doing.

Ironically, it was back on Jan 28, just as the world was learning about the coronavirus pandemic that we showed the long-term trajectory of the Fed's balance sheet as calculated by the CBO...

... when we said when we said that "MMT will be launched after the next financial crisis, and which will see the Fed directly monetize US debt issuance from the Treasury until the dollar finally loses its reserve currency status."

We were right about the first part. Now we just have to wait for the second.

Tyler Durden

Wed, 03/25/2020 - 22:10

MAGA-Tech Stocks Stumble After FTC Starts Probe Of Past Acquisitions

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MAGA-Tech Stocks Stumble After FTC Starts Probe Of Past Acquisitions

The Federal Trade Commission has just announced that it will issue special orders to Alphabet, Amazon, Apple, Facebook, and Microsoft in order to probe the purpose of acquisitions they made between January 2010 and December 31, 2019.

That has sent all of the so-called MAGA tech stocks sliding but also Facebook is worst for no

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Full Statement from FTC...

The Federal Trade Commission issued Special Orders to five large technology firms, requiring them to provide information about prior acquisitions not reported to the antitrust agencies under the Hart-Scott-Rodino (HSR) Act. The orders require Alphabet Inc. (including Google), Amazon.com, Inc., Apple Inc., Facebook, Inc., and Microsoft Corp. to provide information and documents on the terms, scope, structure, and purpose of transactions that each company consummated between Jan. 1, 2010 and Dec. 31, 2019.

The Commission issued these orders under Section 6(b) of the FTC Act, which authorizes the Commission to conduct wide-ranging studies that do not have a specific law enforcement purpose. The orders will help the FTC deepen its understanding of large technology firms’ acquisition activity, including how these firms report their transactions to the federal antitrust agencies, and whether large tech companies are making potentially anticompetitive acquisitions of nascent or potential competitors that fall below HSR filing thresholds and therefore do not need to be reported to the antitrust agencies.

“Digital technology companies are a big part of the economy and our daily lives,” said FTC Chairman Joe Simons. “This initiative will enable the Commission to take a closer look at acquisitions in this important sector, and also to evaluate whether the federal agencies are getting adequate notice of transactions that might harm competition. This will help us continue to keep tech markets open and competitive, for the benefit of consumers.”

The Special Orders require each recipient to identify acquisitions that were not reported to the FTC and the U.S. Department of Justice under the HSR Act, and to provide information similar to that requested on the HSR notification and report form. The orders also require companies to provide information and documents on their corporate acquisition strategies, voting and board appointment agreements, agreements to hire key personnel from other companies, and post-employment covenants not to compete. Last, the orders ask for information related to post-acquisition product development and pricing, including whether and how acquired assets were integrated and how acquired data has been treated.

The Commission plans to use the information obtained in this study to examine trends in acquisitions and the structure of deals, including whether acquisitions not subject to HSR notification might have raised competitive concerns, and the nature and extent of other agreements that may restrict competition. The Commission also seeks to learn more about how small firms perform after they are acquired by large technology firms. These and related issues were discussed during several sessions of the FTC’s 2018 Hearings on Competition and Consumer Protection in the 21st Century, and this study is part of the follow-up from those Hearings.

The FTC has a statutory right under the HSR Act to review acquisitions and mergers over a certain size before they are consummated, and the study will help the Commission consider whether additional transactions should be subject to premerger notification requirements. The orders will also contribute broadly to the FTC’s understanding of technology markets, and thereby support the FTC’s program of vigorous and effective enforcement to promote competition and protect consumers in digital markets.

The Commission vote to approve issuing the Special Orders was 5-0. Commissioners Christine S. Wilson and Rohit Chopra issued a joint statement.

As a reminder, the 4 super-cap names are more than 60% of the S&P 500’s returns YTD:

  • Microsoft: 28% of the S&P’s gains this year

  • Apple: 15%

  • Amazon: 13%

  • Google: 11%

  • Total: 67% of the S&P 500’s YTD return.

And so if FTC's probe 'breaks' these MAGA stocks, then the overall market's strength will collapse... and President Trump will be forced to tweet aggressively at Jay Powell to save the world again.

Tyler Durden

Tue, 02/11/2020 - 11:49

Forgotten motherboard driver turns out to be perfect for slipping Windows ransomware past antivirus checks

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Old Gigabyte code lets file-scrambling RobbinHood go undetected

A kernel-level driver for old PC motherboards has been abused by criminals to hijack Windows computers, disable antivirus, and hold files to ransom.…

0 View

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"Past Due": Court Declares Hunter Biden The Father Of Child In Arkansas

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"Past Due": Court Declares Hunter Biden The Father Of Child In Arkansas

Authored by Jonathan Turley,

In a long expected order, Arkansas Circuit Judge Holly Meyer has declared Hunter Biden, son of presidential candidate Joe Biden, to be the “biological and legal father” of a child he fathered with former GW student, 29-year-old Lunden Alexis Roberts.

Biden has long denied being the father and has refuse

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d to support the child. He has also refused to turn over information on his assets, part of discovery that Meyer referred to as “past due.” It was obviously not the only element past due for Biden with regard to this child.

Roberts, reportedly was a stripper at a Washington, D.C., club that Biden liked to party at while in Washington.

In the order, Meyer ordered the Arkansas Department of Health to issue a birth certificate listing Biden as the father.

Biden has children by at least three different women. Roberts filed papers that portrayed him as a deadbeat father, stating that Biden “had no involvement in the child’s life since the child’s birth, never interacted with the child, never parented the child,” and “could not identify the child out of a photo lineup.”

The next hearing is set for January 29th on child support. That could create some fireworks as Biden has resisted disclosures of his wealth — information that could reveal how much he received from dubious Ukrainian and Chinese contracts.

Ironically, Joe Biden has been attacked for a 1981 op-ed entitled “Congress is Subsidizing Deterioration of Family.”

In the column, Biden suggested that families with more income should not receive tax credits for child care because one parent should stay at home while the other works. Biden bemoaned the loss of “individual responsibility and said that day-care centers were “monuments to our growing unwillingness to accept personal responsibility.” Of course, that is particularly difficult when one of the parents not only does not support his child but denies that he ever had an intimate relationship with the mother.

When asked about the court previously ordering DNA tests confirming Biden’s status as the father, Joe Biden snapped at a reporter and said “No, that’s a private matter and I have no comment.”

He then told the Fox reporter “Only you would ask that. You’re a good man. You’re a good man. Classy.”

Joe Biden, like many presidential candidates, has long identified deadbeat dads as a major national problem.

He even used the issue to defend a controversial bankruptcy bill in 2001 when he was a senator. In a 2001 Senate floor speech, Biden defended the law by arguing that the bankruptcy bill would actually improve the situation for women and children.

By including a requirement that “deadbeat dads” who file for bankruptcy must make child support payments above nearly all other creditors, Biden insisted “this bill empowers women. It gives them a say in the bankruptcy proceedings relating to her absent spouse.”

Hunter Biden is also reportedly expecting a child with his new wife, Melissa Cohen Biden, whom he married this past May.

Tyler Durden

Wed, 01/08/2020 - 18:05

Investors Have Already Forgotten The Most Important Financial Lessons Of The Past Decade

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Investors Have Already Forgotten The Most Important Financial Lessons Of The Past Decade

With only a few trading sessions left in the decade, the Wall Street Journal's investing columnist Jason Zweig, the longtime author of paper's "Intelligent Investor" column, is looking back on some of the biggest blunders of the decade.

As it turns out, there were a lot: Remember, investors started the decade with US stocks near their post-crisis lows, with

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few anticipating the unbridled rebound that would come to pass during the ensuing months and years.

Even more surprising was the drop in interest rates: Negative interest rates were a defining feature of the decade. But few expected them to persist as long as they did, nor did they expect Treasury yields to remain mired in the 1- and 2-handle territory for as long as they have. Ten years ago, most investors expected yields and interest rates to climb back into a "normal" range north of 4% on the ten year.

Investors couldn't have been more wrong. But that's not all that surprising, as Zweig explained. History has shown again and again that investors tend to base their expectations on the recent past. And at the end of 2009, investors were looking back on a decade where stocks had gone nowhere, value shares had outperformed growth, small companies had outperformed large companies, international shares outperformed US shares and EM markets had outperformed developed markets.

One of the more successful trends to emerge over the past decade is worth a quick note. And that trend is: retail investors' shift from active to passive funds, and from mutual funds to ETFs. Over the past ten years, investors withdrew more than $160 billion from all active funds, while pouring more than $3.76 trillion into index funds, according to Morningstar. Few active managers managed to outperform their benchmarks, making the comparatively low-fee index-based ETFs

Another popular prediction from a decade ago that turned out to be way off base: the notion that EM stocks would outperform their American rivals:

Emerging markets proceeded to underperform U.S. stocks by nearly 10 percentage points a year this decade through Dec. 12. Also striking: The MSCI Emerging Markets index has generated a cumulative total return of 42.3% since Dec. 31, 2009—less than half its return from the March 2009 low through the end of that year.

Though that trend got off to a promising start, the top was in by the end of 2009. Over the next ten years, some of the most popular EM benchmarks (like those produced by MSCI) were effectively flat, meaning that investors who committed to EM over US equities missed out on the entirety of one of the biggest and longest equity rallies in modern history.

Even so, surprises lurked everywhere. From the market low on March 9, 2009, through the end of that year, the MSCI Emerging Markets index gained 108%.

Lured by that spectacular return, investors poured nearly $180 billion into mutual funds and exchange-traded funds specializing in stocks and bonds from developing nations between the end of 2009 and the beginning of 2013, according to data from Morningstar. Emerging markets proceeded to underperform U.S. stocks by nearly 10 percentage points a year this decade through Dec. 12.

Also striking: The MSCI Emerging Markets index has generated a cumulative total return of 42.3% since Dec. 31, 2009 - less than half its return from the March 2009 low through the end of that year.

Zweig concluded with some anecdotal evidence to support his theory that investors have forgotten one of the most important, and most painful, lessons of the financial crisis. He claimed that, if you ask investors how much their portfolio lost during the financial crisis, most will say somewhere between 20% and 30%.

But US stocks collapsed by 55% from the October 2007 highs to the March 2009 lows, while global stocks crashed 59%.

This is dangerous, Zweig said, because investors who underestimate how much they lost during the last crisis can easily overestimate how much they stand to gain from the next one if they can only hold on to their wits.

Just like it did ten years ago, the market is beginning a new decade with the prevailing sentiment unquestionably stretched.

But this time, it's in the other direction.

Source: CNN

Tyler Durden

Tue, 12/24/2019 - 07:20


Business Finance


Democrats, Deficits, & Whistling Past The Graveyard

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Democrats, Deficits, & Whistling Past The Graveyard

Authored by Lance Roberts via RealInvestmentAdvice.com,

I was stunned by a recent article from Marshall Auerback via The Nation entitled “Why Democrats Need To Stop Worrying And Love The Deficit.”

“Delivering on big progressive ideas like Medicare for All and the Green New Deal will never happen until Democrats get over their fear of red

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While the article is long, winding, and a convoluted mess of ideas, the following is the all you really need to read:

The perceived problem:

“In an environment increasingly characterized by slowing global economic growth, businesses are understandably hesitant to invest in a way that creates high-quality, high-paying jobs for the bulk of the domestic workforce. The much-vaunted Trump corporate “tax reform” may have been sold to the American public on that basis, but corporations have largely used their tax cut bonanza to engage in share buybacks, which fatten executive compensation but have done nothing for the rest of us. At the same time, private households still face constraints on their consumption because of stagnant wages, rising health care costs, declining job security, poorer employment benefits, and rising debt levels.

Instead of solving these problems, the reliance on extraordinary monetary policy from the Federal Reserve via programs such as quantitative easing has exacerbated them. In contrast to properly targeted fiscal spending, the Federal Reserve’s misguided monetary policies have fueled additional financial speculation and asset inflation in stock markets and real estate, which has made housing even less affordable for the average American.”

The Non-Solution

According to Mr.  Auerback is the solution is simple:

“Democrats should embrace the ‘extremist’ spirit of Goldwater and eschew fiscal timidity (which, in any case, is based on faulty economics). After all, Republicans do it when it suits their legislative agenda. Likewise, Democrats should go big with deficits—as long as they are used for the transformative programs that progressives have long talked about and now have the chance to deliver.”

This is essentially the adoption of Modern Monetary Theory (MMT), which, as discussed previously, is the assumption debt and deficits “don’t matter,” as long as there is no inflation.

“Modern Monetary Theory is a macroeconomic theory that contends that a country that operates with a sovereign currency has a degree of freedom in their fiscal and monetary policy, which means government spending is never revenue constrained, but rather only limited by inflation.” – Kevin Muir

However, the solution isn’t really a solution.

Mr. Auerback suggests the Democrats should go big with deficits to fund the “transformative programs” they have long talked about. These programs are, as we know, socialistic from government-run healthcare to more social welfare, to free college.

The problem is that these progressive programs lack an essential component of what is required for “deficit” spending to be beneficial – a “return on investment.” 

This was a point addressed by Dr. Woody Brock previously in “American Gridlock;”

Country A spends $4 Trillion with receipts of $3 Trillion. This leaves Country A with a $1 Trillion deficit. In order to make up the difference between the spending and the income, the Treasury must issue $1 Trillion in new debt. That new debt is used to cover the excess expenditures but generates no income leaving a future hole that must be filled.

Country B spends $4 Trillion and receives $3 Trillion income. However, the $1 Trillion of excess, which was financed by debt, was invested into projects, infrastructure, that produced a positive rate of return. There is no deficit as the rate of return on the investment funds the “deficit” over time.

There is no disagreement about the need for government spending. The disagreement is with the abuse and waste of it.

John Maynard Keynes’ was correct in his theory that in order for government “deficit” spending to be effective, the “payback” from investments being made through debt must yield a higher rate of return than the debt used to fund it.

Currently, the U.S. is “Country A.” 

The programs that Mr. Auerback suggests the Democrats pursue with deficit spending, only exacerbate the current problem. According to the Center On Budget & Policy Priorities, roughly 75% of every current tax dollar goes to non-productive spending. (The same programs the Democrats are proposing.)

To make this clearer, in 2018, the Federal Government spent $4.48 Trillion, which was equivalent to 22% of the nation’s entire nominal GDP. Of that total spending, ONLY $3.5 Trillion was financed by Federal revenues, and $986 billion was financed through debt.

In other words, if 75% of all expenditures go to social welfare and interest on the debt, those payments required $3.36 Trillion of the $3.5 Trillion (or 96%) of the total revenue coming in. 

Currently, because of corporate tax cuts, a slowing economic environment, and weak wage growth, tax revenues have declined as federal expenditures have surged.

The result of unbridled fiscal largesse is a surging deficit that must be met by growing debt issuance.

Debt Begets Debt

There used to be an actual debate between “Austerity” and “Spending.” Conservatives in Government used to at least talk a “good game” about cutting spending, budgeting, and debt reduction. Now, that is no longer the case as during the past several Administrations, both “conservative” and “liberal” have opted for more “fiscal largesse.”

The irony is that increases in debt only lead to further increases in debt as economic growth must be funded with further debt. As this money is used for servicing debt, entitlements, and welfare, instead of productive endeavors, there is no question that high debt-to-GDP ratios reduce economic prosperity over time. In turn, the Government tries to fix the “economic problem” by adding on more “debt.” The Lowest Common Denominator provides more information on the accumulation of debt and its consequences.

Another way to view the impact of debt on the economy is to look at what “debt-free” economic growth would be. In other words, without debt, there has been no organic economic growth.

For the 30-year period, from 1952 to 1982, the economic surplus fostered a rising economic growth rate which averaged roughly 8% during that period. Today, with the economy expected to grow at just 2% over the long-term, the economic deficit has never been greater. If you subtract the debt, there has not been any organic economic growth since 1990. 

What is indisputable is that running ongoing budget deficits that fund unproductive growth is not economically sustainable long-term.

Whistling Past The Graveyard

Let me be clear.

As Dr. Brock notes, deficit spending can be beneficial when the debt is used in a productive manner. The U.S. has the labor, resources, and capital for a resurgence of a “Marshall Plan” which could foster the development of infrastructure with high rates of return on each dollar spent.

However, that isn’t what Mr. Auerback, the Democrats, are suggesting or offering. The Government has already delved into the MMT pool over the last 40-years spending trillions bailing out banks, boosting welfare support, supporting Wall Street, and reducing corporate tax rates, which all have a negative rate of return.

The results have been disappointing, and suggesting that more of the same will produce a different result is the precise definition of “insanity.” 

In the meantime, the aging of the population continues to exacerbate the underfunded problems of Social Security, Medicare, and Medicaid, which is roughly $70 trillion and growing. It is simply a function of demographics and math.

As Dr. Brock noted:

“Mathematics and Sex create performance anxiety in men – because you can’t fake the outcome of either.”

Two recent studies show the problem clearly.

Demographics is an easy problem to see and mathematically calculate. The ratio of workers per retiree, as retirees are living longer (increasing the relative number of retirees), and lower birth rates (decreasing the relative number of workers), present a massive headwind to economic solvency. 

The Institute for Family Studies, published a report showing the decline in the fertility ratio to the lowest levels since 1970,

With fertility rates low, the future “support-ratio” will continue to be a problem.

The second, and more immediate, problem is the vastly underfunded savings of the “baby boomer” generation heading into retirement. To wit:

” Anxiety over retirement and how to support oneself after calling it a career is impacting many Americans. A recent poll found that one in three adults has less than $5,000 in retirement savings.”

This is simple math.

Currently, 75.4 million Baby Boomers in America—about 26% of the U.S. population—have reached or will reach retirement age between 2011 and 2030. A vast majority of them are “under saved” and primarily unhealthy.

This combination ensures the demand on the health care system, along with Medicaid and Medicare, will increase at a rate faster than it can supply. Bankruptcy, without substantive changes, is inevitable.

Of course, it isn’t just the social welfare and healthcare system that is effectively “broken,” but the economic model itself.

The current path we are on is unsustainable. The remedies being applied today is akin to using aspirin to treat cancer. Sure, it may make you feel better for the moment, but it isn’t curing the problem.

Unfortunately, the actions being taken have been repeated throughout history as those elected into office are more concerned about satiating the mob with bread and games” rather than suffering the short-term pain for the long-term survivability of the empire.

In the end, every empire throughout history fell to its knees under the weight of debt and the debasement of their currency.

As Dr. Brock suggests – it is truly “American Gridlock” as the real crisis lies between the choices of “austerity” and continued government “largesse.”

One choice leads to long-term economic prosperity for all, the other doesn’t.

“Today we are borrowing our children’s future with debt. We are witnessing the ‘hosing’ of the young.”

Tyler Durden

Mon, 12/16/2019 - 21:10

Visualizing The World's Stock Market's Performance For The Past 30 Years

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Visualizing The World's Stock Market's Performance For The Past 30 Years

Most investors around the world are familiar with the S&P 500 index.

Not only is it the most widely accepted barometer of U.S. stock market performance, but it’s also been on a 10-year bull run, now sitting at all-time highs near 3,170.

This week, Visual Capitalist's Jeff Desjardins charts those historical returns, and then use the U.S. benchmark

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as a backdrop to compare other major stock markets around the world, such as those in Europe, Asia, and Canada.

Putting Them All at Scale

One challenge in comparing global markets directly is that all indices are on arbitrary scales.

To directly compare them, the most natural option would be to transform the data to percentage terms. While that’s all fine and dandy, it’s also a little boring.

To make things more interesting, we’ve collected historical data that goes back nearly 30 years for each index. This was mostly done using Macrotrends, a fantastic resource for historical data. We used November 26th, 1990 as a cut-off date, since that was the earliest data point available for some of the country indices used.

We then transformed all of this data to be on the same scale of the S&P 500, so performance can be directly compared to the common American stock market benchmark.

Comparing Markets Using the S&P 500

Alright, now that we have the same scale for each market, let’s dive into the data:

Note: Data has been transformed to match the scale of the S&P 500, and is current as of December 13, 2019

If you invested $100 in the U.S. market on November 26, 1990, you’d have over $1,000 today.

Over nearly 30 years, the S&P 500 has increased by 901%, which is the most out any of these major indices. If you invested in the German or Hong Kong markets, you’d have fairly similar results as well — each gained more than 800% over the same time period.

Meanwhile, the markets in Canada, France, and the United Kingdom have all increased, but at a far slower pace:

  • In S&P 500 terms, Canada would be sitting at 1,717 — which is where the U.S. market was back in 2013.

  • France would be at 1,160, a mark the S&P 500 last hit in 2010.

  • The United Kingdom would sit at 1,072, also equivalent to 2010 for the U.S. market.

Finally, in S&P 500 terms, the Japanese stock market would be at a lowly 315 points today — roughly where it started 30 years ago. In other words, if you had invested $100 in Japanese stocks in 1990, you’d have gained just $1 over a period of three decades.

Tyler Durden

Sun, 12/15/2019 - 23:30


Business Finance


This Is The Best Performing Asset Of The Past Decade... And Other Remarkable "Best" And "Worsts"

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This Is The Best Performing Asset Of The Past Decade... And Other Remarkable "Best" And "Worsts"

It's almost time for the month-end, year-end and, yes, decade-end retrospectives from various investment banks.

To start us off, here is an excerpt from the latest "Flow Show" from BofA's Michael Hartnett, who in addition to pointing out that this week in which the S&P hit another new all time high, $1.7 billion was pulled out of equities

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trong>while $9.1 billion flowed into bonds, confirming that once again the stock market levitated entirely on the back of Apple's non-stop stock buybacks as mom and pop were selling, lays out the following decade-long walk down memory lane.

And so, without further ado, here is "2010s did you know..."

  • Central banks: most activist…Brazil (25 cuts, 24 hikes); least activist…Japan (1 cut, 0 hikes).

  • Population growth: most…India +149 million since 2010; least…Syria -4 million since 2010.

  • US jobs: in the 2000s US economy lost net 1 million jobs; in the 2010s US economy created net 22.4 million jobs.

  • Negative yielding debt: $0 of bonds were negative yielding in 2010 vs. $17 trillion at peak in 2019.

  • Government bonds: best…30-year Treasury $1 in 2010 = $2.08 today; worst… Turkey govt $1 in 2010 = $0.61 today.

  • Equities: best…US equities $1 in 2010 = $3.46 today; worst…Greece $1 in 2010 = $0.07 today.

A little something for the goldbugs:

  • Commodities: best…gold $1 in 2010 = $1.34 today; worst…oil $1 in 2010 = $0.74 today.

And last but not least:

  • Asset class: best…Bitcoin $1 in 2010 = $90,026 today; worst…Myanmar Kyat $1 in 2010 = $0.004 (spot) today.

Tyler Durden

Sat, 12/14/2019 - 12:00


Business Finance


Bitcoin's Past Accomplishments And Future Challenges

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Bitcoin's Past Accomplishments And Future Challenges

Authored by Robert Murphy, op-ed via The Hill,

Oct. 31 marked the 11th anniversary of the release of the famous bitcoin whitepaper. It is worthwhile to take stock of the first crypto-currency’s impressive achievements to date, while also warning of the future perils it faces.

Bitcoin has defied the critics

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repeatedly, being declared “dead” many times over. (In this respect it’s appropriate that it was born on Halloween.) Although its price has been volatile, it’s currently trading at a market cap of $170 billion - more than McDonald’s, and comparable to CitiGroup.

Along the way, internecine battles led to a “hard fork” and the creation of “Bitcoin cash” (in August 2017), but the cryptocurrency community emerged wiser. As for the future, ironically a piece of otherwise good news - faster computing power - may pose serious problems if the promise of “quantum supremacy” should be fulfilled.

An estimated 5 percent of Americans hold bitcoin, and the global number of users is probably around 25 million. More impressive (and precise) details concern the financials: as of this writing, some 18 million bitcoins have been “mined” — the metaphorical term describing the procedure by which a new bitcoin becomes recognized as belonging to someone’s address on the blockchain — and a single bitcoin currently fetches a market price of about $9,450. For something that critics derided as a tech fad that would soon evaporate, that’s a rather impressive accomplishment.

The disputes between bitcoin and bitcoin cash concerns the trade off between speed of transactions and the diffusion of transaction approval among a greater number of players in the network. These debates are of intense interest to crypto-enthusiasts and merchants, but for me they underscore some of the confusion in the original “marketing” of bitcoin to the public.

The fundamental achievement of bitcoin was its genuine peer-to-peer payment system; no person or even institution was “in charge” of bitcoin. In a financial system lacking trust, it seemed a “trustless” transaction network was just what the doctor ordered. 

Yet as the acrimonious debates and eventual “hard fork” showed, dominant personalities indeed appealed to public opinion, at least where “the public” referred to the community of bitcoin miners. To be sure, a tremendously important difference exists between the way the blockchain (its system of rules) works and (say) credit card purchases. 

But just as it was misleading when some proponents originally described bitcoin as “anonymous” — since “pseudonymous” is a better term — it was likewise misleading when some claimed that changing the rules of bitcoin would be as impossible as changing the laws of arithmetic.

It would have been more accurate to say that changing the rules of bitcoin would be like changing the rules of grammar: much more stable than the IRS code, to be sure, but ultimately malleable as the whole community’s behavior evolves. 

As an economist I have argued that bitcoin is even “harder” than precious metals because in principle humans might discover an asteroid laden with silver, or scientists might figure out a cheap way to transform baser matter into gold. In contrast, the bitcoin protocol locks in an ultimate limit of 21 million bitcoins that will ever be mined. (It’s true that even this “rule” could in principle be changed, but that would be akin to English speakers deciding to consistently start sentences with verbs instead of nouns).

However, the possibility of quantum computing poses a threat. This isn’t unique to bitcoin; the encryption currently safeguarding internet transactions in general is vulnerable. In the grand scheme, it will be of immense value to humans if a new type of computer can perform in seconds what would take a classical computer millennia. However, when the security of bitcoin had originally been promised by saying, “Why, it would take a mainframe a thousand years to reverse engineer your private key,” there is obviously a concern.

In the long run, financial transactions can be hardened even against attacks from quantum computers. Even so, Google’s recent announcement of a milestone in quantum computing means the adaptation will probably need to be accelerated.

On its 11th birthday we should celebrate bitcoin as an amazing accomplishment of human ingenuity and financial innovation that forced several disciplines — including economics — to adapt. Those of us studying its evolution have become wiser, but crypto currencies will need to continue their evolution as the rest of the world progresses.

Tyler Durden

Sun, 11/03/2019 - 14:30

Employer Health-Benefit Costs Soared Past $20,000 Per Worker - "The Price Of An Economy Car"

zerohedge News employer health-benefit costs soared past worker price economy All https://www.zerohedge.com   Discuss    Share
Employer Health-Benefit Costs Soared Past $20,000 Per Worker - "The Price Of An Economy Car"

Brace yourself, because this stat is about to be utilized by Democrats in every debate and speech between now and November 2020. The average cost of employer-provided health coverage passed $20,000 for a family plan this year, according to a new survey by the Kaiser Family Foundation.

Premiums rose 5% to $20,576 for th

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e employer-provided plans in 2019. On average, 71% of that cost is borne by the businesses while the rest is paid by the employee.

But why is this number such a milestone? As economist Drew Altman told WSJ: "It's the cost of buying an economy car, but buying it every year."

Though employers still bear a larger percentage of the overall cost of health-insurance plans, costs for families rose even more swiftly than costs for employers this past year, with an 8% jump (to $6,015 a year). Singletons fared slightly better: Premiums for the individual plans increased by just 4% (to $7,188).

The disappointing fact is that, for many companies, a 5% annual increase in health-benefit-related costs isn't new, according to WSJ. And some firms are instituting new policies, like a $250 penalty for employees who get imaging scans without checking a price-transparency system.

At Elkay Manufacturing Co., a closely held company in Oak Brook, Ill., with around 1,500 US employees, the cost of coverage has been going up around 5% to 6% a year, said Carol Partington, senior manager of total benefits. For 2019, the company introduced its first high-deductible plan, and put in place a new $250 penalty for employees who get imaging scans without checking prices through a price-transparency program.

Elkay, which makes products including sinks and faucets, and does interior design work, tries to keep workers’ share of health costs at roughly 20%, with the company bearing the rest, Ms. Partington said.

"If our costs go up, theirs is going to go up in that same proportion."

And another trend: The rising cost of employee health benefits continued to exceed inflation and wage growth, according to the Kaiser foundation, squeezing workers despite a low unemployment rate, which should, in theory, press companies to raise wages and sweeten benefit packages.

"For some workers, employer-based coverage isn’t such a great deal," because of the high costs they have to bear, said Gary Claxton, a senior vice president of the Kaiser foundation.

At companies that employ a lot of low-wage employees, the low-wage earners are often forced to shoulder a larger percentage of their health-care costs.

"For some workers, employer-based coverage isn’t such a great deal," because of the high costs they have to bear, said Gary Claxton, a senior vice president of the Kaiser foundation.

But why is this stat so important to the election cycle? As one political expert said, health-care policy is playing a big role in the Democratic debates thanks to the party's embrace of Bernie Sanders' Medicare for All ("M4A") plan.

"Health-care affordability is generally the No. 1 issue for voters," said Dan Mendelson, a founder of a health-care consulting firm and former federal official who is now an operating partner at a private-equity firm. "The issue is the costs that consumers actually see, including deductibles, copays and the cost of prescription drugs."

Remember: Joe Biden has endorsed a plan that would effectively create a public option by letting consumers buy into Medicaid.

Though Democratic Socialists like to complain about the immense profits that the health-care industry is raking in, the biggest driver of these higher insurance costs is simply the rising price that insurers and employers pay for health care.

"The vast majority of this can be explained by prices," particularly for hospital care, said Niall Brennan, chief executive. Consolidation by hospital systems has in many cases given them a larger share of their local markets, which "enables them to engage in pretty unconstrained pricing behavior," he said.

A report published earlier this year from the Health Care Cost Institute found that between 2013 and 2017, average health care prices increased 17.1%, while health-care utilization declined 0.2%.

Of course, this number might also benefit President Trump, too; it's just one more thing that he can blame on Obama.

Tyler Durden

Fri, 09/27/2019 - 18:05


Social Issues
Health Medical Pharma


"This Is The Most Alarming Trend In The Market": 1 In 4 Luxury NYC Apartments Remain Unsold Over The Past 5 Years

zerohedge News this most alarming trend market luxury apartments remain unsold over past years All https://www.zerohedge.com   Discuss    Share
"This Is The Most Alarming Trend In The Market": 1 In 4 Luxury NYC Apartments Remain Unsold Over The Past 5 Years

Across the US, but especially in coastal cities like New York and San Francisco, the ultraluxury property market increasingly looks like a buyers' market. Ever since the market for condos peaked three years ago, it has been rapidly cooling off across the most popular urban markets.

We've been documenting this trend

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for a few years now, and according to a new report by the website StreetEasy that was cited by the New York Times this week, there are now more than 16,200 condo units across 682 new buildings completed in New York City that have appeared since 2013, and 25% remain unsold, roughly 4,050, most of them in luxury buildings.

The biggest difference between the the last recession and the conditions in today's market are that projects aren't stalling out today, perhaps due to the overabundance of cheap credit that has made virtually every unprofitable company into a "corporate zombie" which can continue existing largely thanks to record low interest rates.

"I think we’re being really conservative," said Grant Long, StreetEasy's senior economist, noting that the study looked specifically at ground-up new construction that has begun to close contracts. Sales in buildings converted to condos, a relatively small segment, were not counted, because they are harder to reliably track. And there are thousands more units in under-construction buildings that have not begun closings but suffer from the same market dynamics."

Projects have not stalled as they did in the post-recession market of 2008, and new buildings are still on the rise, but there are signs that some developers are nearing a turning point. Already the prices at several new towers have been reduced, either directly or through concessions like waived common charges and transfer taxes, and some may soon be forced to cut deeper. Tactics from past cycles could also be making a comeback: bulk sales of unsold units to investors, condos converting to rentals en masse, and multimillion-dollar “rent-to-own” options for sprawling apartments — a four-bedroom, yours for just $22,500 a month.

In a city where brokers are accustomed to selling condos months, and even years, before construction is finished, this sudden freeze has left many confused as to the cause.

"That to me is the most alarming trend here," said Mr. Long. "That’s the group of folks that could go away at any minute - if there’s a recession, people just want to put their money in Treasury bonds," he said, referring to a lower-risk investment strategy.

What's worse, a growing share of condos sold in recent years have been quietly re-listed as rentals by the investors who bought them, the NYT reports. Just how reluctant are buyers to try their hand at flipping? Of the 12,133 new condos sold in NYC between January 2013 and August 2019, 38% have appeared on StreetEasy as rentals.

But so far, the most impacted elements of the housing downturn in markets like NYC have been in the ultraluxury market. Over the past few years, Manhattan in particular kick-started the trend toward bigger, fancier apartments, which afforded foreign oligarchs and billionaires an easy, "no questions asked" way to park their ill-gotten gains. However, following a recent crackdown on anonymous purchases of trophy real estate coupled with the depressed market in commodities which has elimanted the Arab and Russian buyers, not to mention China's aggressive crackdown on foreign outflows, Manhattan is now hurting the most.

Take the super-tall One57 tower, completed in 2014 and considered the forerunner of Billionaires’ Row, a once largely commercial corridor around 57th Street in Midtown, which remains about 20% unsold, with 27 of roughly 132 multimillion-dollar apartments still held by the developer, according to Jonathan J. Miller, the president of Miller Samuel Real Estate Appraisers & Consultants.

That’s mind-blowing,” Miller said, because the building actually began marketing eight years ago, in 2011, and a typical building might sell out in two to three years in a balanced market.

In an analysis of seven luxury towers on and around Billionaires’ Row, including pending sales, almost 40% of units remain unsold, Miller said. Another competitor, Central Park Tower, set to become the tallest and, by some measures, the most expensive residential building in New York, has not released any sales data.

One expert said the biggest difference between the last recession and today is that projects aren't stalling out today. In a city where brokers are accustomed to selling condos months before construction is even finished, this sudden freeze in demand is particularly jarring for sellers.

"That to me is the most alarming trend here," said Mr. Long. "That’s the group of folks that could go away at any minute - if there’s a recession, people just want to put their money in Treasury bonds," he said, referring to a lower-risk investment strategy.

By Miller’s count, which includes buildings that are still under construction, there are over 9,000 unsold new units in Manhattan. (His estimate includes so-called “shadow inventory,” which developers strategically do not list for sale to hold off for a stronger market.) At the current pace of sales, it would take nine years to sell them - a daunting timeline that could be reduced if sales were to accelerate, but there are few reasons to expect such a surge in the short term, he said.

Tyler Durden

Sat, 09/21/2019 - 19:15


Business Finance


Stocks & Bonds Pop, Cryptos Drop, As Silver Surges Past Gold Year-To-Date

zerohedge News stocks bonds cryptos drop silver surges past gold year-to-date All https://www.zerohedge.com   Discuss    Share

USTR confirmed that additional tariffs will be put on China next week... and The Dow roars 400 points off the lows as bond yields hit record lows...


Chinese stocks went nowhere overnight...

Source: Bloomberg

European stocks dipped and ripped as Italy headlines spurred risk-on after US opened...

Source: Bloomberg

Italian markets ripped higher (yields and spreads lower) as signs of political agreements emerged

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(ITA 10Y yields tumbled to a new record low below 1.00%)...

Source: Bloomberg

US equities opened weak, then exploded higher into the European close, after which they went sideways...


All thanks to another VIX monkeyhammering...


Big surge in cyclicals relative to growth today...

Source: Bloomberg

The momentum of small caps versus blue chips is at levels not seen since the financial crisis. The ratio between the Russell 2000 and the S&P 500 has fallen to the lowest since March 2009, with RTY declining almost twice as much as SPX this month.

Source: Bloomberg

Dow remains tightly rangebound between the 100- and 200-day moving averages...


Major short-squeeze today...

Source: Bloomberg

Bank stocks outperformed today, despite a flattening curve...

Source: Bloomberg

Notably, from the US open, it appeared pension rebalancing was impacting markets with stocks suddenly bid and bonds offered, but that stopped ahead of the EU close and bond yields and stock prices began to diverge...

Source: Bloomberg

Pension rebalancing and last-second buybacks ahead of blackouts likely prompted the decoupling of stocks from bond yields.


Treasury yields slipped lower once again today...

Source: Bloomberg

10Y (and 30Y) yields closed at record lows...

Source: Bloomberg

The yield curve remains inverted (2s10s steepened very modestly but below 0 as 3m10Y flattened to new cycle lows once again...

Source: Bloomberg

The dollar index rallied once again, perfectly erasing the plunge from Trump's tariff tantrum last Friday...

Source: Bloomberg

Cable crashed early on as BoJo pushed to suspend parliament but rebounded as various officials jawboned the tensions down...

Source: Bloomberg


Cryptos were a bloodbath today...

Source: Bloomberg

Pushing all cryptos red for the month (litecoin down a stunning 33% in August)...

Source: Bloomberg

As Bitcoin blew back below $10,000...

Source: Bloomberg


Gold was flat today as silver and crude rallied (silver leads the week)...

Source: Bloomberg


WTI spiked above $56.50 in early trading but despite a huge crude draw, oil prices slipped back intraday...


Gold was slammed once again from significant resistance...

Quite a different picture for silver over the same period...


Silver's recent surge has erased all gold's relative outperformance for 2019...

Source: Bloomberg

Silver in Yuan hit a new 3 year high...

Source: Bloomberg


And finally, the 30-year Treasury bond is yielding less than what the S&P 500 pays in dividends (on a trailing 12-month basis), something we've only seen in about three months over the past four decades.

Source: Bloomberg

It appears that Bitcoin has decoupled from the safe-haven from policymaker pandemonium trade...

Source: Bloomberg

Despite stocks rebounding and being only 4% from record highs, traders are piling into bets that The Fed will cut rates to negative before this is over...

Source: Bloomberg


FBI, NSA to hackers: Let us be blunt. Weed need your help. We'll hire you even if you've smoked a little pot in the past

logicfish Security hackers blunt weed need your help well hire even youve smoked little past All http://go.theregister.com   Discuss    Share
Now that's what we call a joint task force: Uncle Sam chills out, relaxes recruitment rules on drugs

Black Hat  America's crime-fighters, desperate to recruit white-hat hackers to collar spies and cyber-crooks, have been quietly and slightly relaxing the ban on hiring anyone who has used illegal drugs.…


Whistling Past The $70 Trillion Debt Graveyard

zerohedge News whistling past trillion debt graveyard All https://www.zerohedge.com   Discuss    Share

Authored by Lance Roberts via RealInvestmentAdvice.com,

Market Review & Update

Last week, we discussed the setup for a near-term mean reversion because of the massive extension above the long-term mean. To wit:

“There is also just the simple issue that markets are very extended above their long-term trends, as shown in the chart below. A geopolitical event, a shift in expectations, or an acceleration in economic weakness in the U.S. could spark a mean-reverting event which would be quite the norm of what we have s

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een in recent years.”

This analysis is what led us to take action for our RIAPRO subscribers last week (30-Day Free Trial), as we added a 2x-short S&P 500 index fund to Equity Long-Short Account to hedge our longs (GOOG, CRM, NVDA, EMN, IVV, RSP) against a potential mean reversion.

“This morning, we are adding a small 2x S&P 500 short position to the trading portfolio to hedge our core long positions against a retracement over the next few weeks. We will remove the short if the market can regain its footing and move higher, or the market sells off and reaches oversold conditions.”

This is the purpose of hedging, as it reduces volatility over time, which inherently reduces the risk of emotionally based trading mistakes.

My friends at Polar Futures Group laid out the same concerns on Friday:

“The mean reversion trade: For the past few weeks I’ve been musing that the “irresistible force” that has moved all markets has been the aggressive repricing of future interest rate expectations since last November. We’ve had a HUGE rally in the bond market, MASSIVE flows into bond funds, record levels (>$13.7T) of negative yielding bonds, inverted yield curves, even Greek bonds trading through Treasuries…as markets anticipate a recession and much more Central Bank largess…which might just take us into MMT and/or never-never land where the Central Banks just buy all the bonds and that’s that. I’ve thought that this irresistible force may have gone too far too fast and was due for a “set-back” which would precipitate mean reversion trades across markets.

The core concepts of the mean reversion trades I’m considering are as simple as, 1) the public buys the most at the top (thank you, Bob Farrell,) and 2) when they’re yelling you should be selling, and 3) positioning risk leaves some markets especially vulnerable.”

They are exactly right. 

While the market is rallying in anticipation of more Central Bank easing, especially following the recent announcement by the ECB of lower rates and more QE, the markets are momentarily detached from weaker earnings growth, weaker economic growth, and a variety of other market-related risks. 

However, in the very short-term, the market is grossly extended and in need of some correction action to return the market to a more normal state. As shown below, while the market is on a near-term “buy signal”(lower panel) the overbought condition, and near 9% extension above the 200-dma, suggests a pullback is in order. 

As we have noted over the last few weeks, the very tight trading range combined with negative divergences also does not historically suggests continued bullish runs higher without some type of corrective action first.

All of this supports why we trimmed our long positions slightly last week and increased our cash holdings for the time being. 

Our models still suggest a likely correction over the next two months as we move past the Fed. Such is particularly the case if the Fed signals their “rate cut” may be “one and done” for the time being. 

But for now, we are going to opt to “wait and see” what happens.

The $70 Trillion Dollar Graveyard

On Thursday, Congress passed the spending bill we discussed last week:

“A divided House on Thursday passed a two-year budget deal that would raise spending by hundreds of billions of dollars over existing caps and allow the Government to keep borrowing to cover its debts, amid grumbling from fiscal conservatives over the measure’s effect on the federal deficit.

65 Republicans joined the Democratic majority in the 284-149 vote, with 132 Republicans voting against the bill, despite President Trump’s endorsement and pressure from key outside groups, including the Chamber of Commerce, to avoid a potentially catastrophic default on the Government’s debt.” 

I highlighted the last sentence in red because it is an outright “LIE” used to convince Americans that out of control spending must be done. 

The reality is that “interest payments on the debt” are part of the MANDATORY spending in our budget along with social security, medicare, etc. Currently, about $0.75 of every dollar of tax revenue goes to mandatory spending. For the last few months the Government has been at its statutory debt limit, and “surprise” we didn’t default on our debt. Why? Because there is enough revenue currently coming in to cover the mandatory spending. 

As I noted specifically last week,

In 2018, the Federal Government spent $4.48 Trillion, which was equivalent to 22% of the nation’s entire nominal GDP. Of that total spending, ONLY $3.5 Trillion was financed by Federal revenues, and $986 billion was financed through debt.

In other words, if 75% of all expenditures is social welfare and interest on the debt, those payments required $3.36 Trillion of the $3.5 Trillion (or 96%) of revenue coming in.”

Do some math here.

The U.S. spent $986 billion more than it received in revenue in 2018, which is the overall ‘deficit.’ If you just add the $320 billion to that number you are now running a $1.3 Trillion deficit.

The U.S. will not default on its debt. 

This is particularly the case since we no longer have any budgetary controls. 

Importantly, the spending increase of $320 billion is on top of the annual 8% automated budget increase and the preexisting deficit. My original projection above is too conservative by $500 billion, or more. 

But that’s not the real story.

The crux of that article was focused on the roughly $6 Trillion of unfunded liabilities of U.S. pension funds which Congress is now drafting a piece of legislation for entitled the “Rehabilitation For Multi-employer Pensions Act.” 

As noted in that article, while Congress is preparing a bailout for U.S. pension funds, there is a $70 Trillion pension problem globally which is not being addressed. 

“According to an analysis by the World Economic Forum (WEF), there was a combined retirement savings gap in excess of $70 trillion in 2015, spread between eight major economies…

However, this isn’t the $70 Trillion graveyard we are addressing today.  From CNN:

“America’s debt load is about to hit a record. The combination of cheap money and soaring debt helped fuel the decade-long economic expansion and bull market, but America’s gluttony of loans could work against it if its fragile economic balance shifts.

In the first quarter of 2019, the United States’ total public- and private-sector debt amounted to nearly $70 trillion, according to research by the Institute of International Finance. Federal government debt and liabilities of private corporations excluding banks both hit new highs.”

Oh…you are talking about THAT $70 Trillion. 

The chart below is Total U.S. Credit Market Debt (including Student Loans) which is currently running just a smidgen over $74 Trillion.The last time there was even a hint of deleveraging was during the “Financial Crisis.” 

Corporate debt is a problem. 

The wonderful website “HowMuch” put the corporate debt bubble into a graphic to help us visualize the potential for widespread defaults during the next economic and market downturn. 

The problem with corporate debt is the amount of debt which is at risk of default during the next economic recession. (This isn’t an “IF,” it’s a “WHEN” statement.)

Let’s start with a note from Michael Lebowitz:

“The graph shows the implied ratings of all BBB companies based solely on the amount of leverage employed on their respective balance sheets. Bear in mind, the rating agencies use several metrics and not just leverage. The graph shows that 50% of BBB companies, based solely on leverage, are at levels typically associated with lower rated companies.”

“If 50% of BBB-rated bonds were to get downgraded, it would entail a shift of $1.30 trillion bonds to junk status. To put that into perspective, the entire junk market today is less than $1.25 trillion, and the subprime mortgage market that caused so many problems in 2008 peaked at $1.30 trillion.Keep in mind, the subprime mortgage crisis and the ensuing financial crisis was sparked by investor concerns about defaults and resulting losses.”

The reason BBB-rated debt is so plentiful is due to the Fed’s ultra-low interest rate policy over the last decade. Near zero rates, and easy credit terms, has seduced companies into taking on debt to fund operations, dividends, and stock buybacks. The consequence is we are now seeing corporate debt exceeding the levels of the global financial crisis.

The real risk is that over the next 5-years more than 50% of the junk-bonds and leveraged-loans (which is sub-prime debt for corporations) is maturing and must be refinanced. 

Let that sink in for a minute.

A weaker economy, recession risk, falling asset prices, or rising rates could well lock many corporations OUT of refinancing their share of this $4.88 trillion debt. Defaults will move significantly higher, and much of this debt will be downgraded to junk.

But it isn’t just corporate debt, that’s a problem.

Whistling Past The $246+ Trillion Graveyard

“According to the latest IIF Global Debt Monitor released today, debt around the globe hit $246 trillion in Q1 2019, rising by $3 trillion in the quarter, and outpacing the rate of growth of the global economy as total debt/GDP rose to 320%.

This was the second-highest dollar number on record after the first three months of 2018, though debt was higher in 2016 and 2017 as a share of world GDP. Total debt was broken down as follows:

  • Households: 60% of GDP

  • Non-financial corporates: 91% of GDP

  • Government 87% of GDP

  • Financial Corporations: 81% of GDP

And while the developed world has some more to go before regaining the prior all time leverage high, with borrowing led by the U.S. federal government and by global non-financial business, total debt in emerging markets hit a new all time high, thanks almost entirely to China.”

This is why Central Banks, from the ECB to the Federal Reserve, are terrified of an economic recession or downturn. As I said previously, “debt is the ‘weapon of mass destruction'” 

Given that global debt is 320% of global GDP, a deleveraging cycle will be too large for Central Banks to contain.

The deleveraging cycle WILL occur, all that Central Banks can do is hope to extend the current cycle long enough that “maybe” economic growth will catch up with the problem and lower the risk.

The irony is that it is the Central Banks on actions (lowering interest rates to zero and flooding the system with liquidity) which has inflated the debt bubble.

But that’s everyone else’s problem, right.

As noted above, the U.S. is currently running a debt-to-GDP ratio of roughly 350% so we are certainly not immune to the risk of a global “debt contagion.” 

We can look at this a bit differently. The economy currently requires $3.50 of NEW debt just to generate $1 of new growth.  

The problem with the exceedingly high debt levels is that since economic growth is a function of debt-supported spending, there is a finite limit to how much debt can be absorbed. As “HowMuch” showed, 10-years after the financial crisis, individuals are more levered today than they were then. (Notice the doubling of auto and student loan debt in particular.)

The Real Crisis Is Coming

As I noted this past week, the real crisis comes when there is a “run on pensions.” With a large number of pensioners already eligible for their pension, and a near $6 trillion dollar funding gap, the next decline in the markets will likely spur the “fear” that benefits will be lost entirely. 

The combined run on the system, which is grossly underfunded, at a time when asset prices are dropping, credit is collapsing, and shadow-banking freezes, the ensuing debacle will make 2008 look like mild recession. 

It is unlikely Central Banks are prepared for, or have the monetary capacity, to substantially deal with the fallout.

As David Rosenberg previously noted:

“There is no way you ever emerge from eight years of free money without a debt bubble. If it’s not a LatAm cycle, then it’s energy the next, commercial real estate after that, a tech mania years after, and then the mother of all of them, housing over a decade ago. This time there is a huge bubble on corporate balance sheets and a price will be paid. It’s just a matter of when, not if.”

Never before in human history have we seen so much debt.  Government debt, corporate debt, shadow-banking debt, and consumer debt are all at record levels. Not just in the U.S., but all over the world.

If you are thinking this is a “Goldilocks economy,” “there is no recession in sight,” “Central Banks have this under control,” and that “I am just being bearish,” you would be right.

But that is also what everyone thought in 2007.


Go on, Skippy, spill yer guts: 10.5 million+ Australians' data was breached in past 3 months

logicfish Security skippy spill guts million australians data breached past months All http://go.theregister.com   Discuss    Share
Out of 25 million? Cripes

The Office of the Australian Data Information Commissioner's quarterly report has revealed that more than 10.5 million Ozzies – about 40 per cent of the lot of them – had their personal data slurped in one single incident in the first three months of 2019.…

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