12 trading days since the S&P first hit 2,000 (Aug 25th) in which we have failed to hold 2,000 for a full day. Not one and, unless the Futures pop 10 points before we open, not today either. On 10 of those days, we've had a late-day run-up on low volume that popped us over 2,000 and on 7 of those days, 2,000 held at the close but EVERY SINGLE DAY – it also failed to hold.
Let's not forget that, during this time, we've had TRILLIONS of Dollars of additional stimulus pledged by Carney, Draghi, Kuroda and other minor Central Banksters and Yellen has certainly been as doveish as she could by (while still tapering our existing Trillion Dollar stimulus). This is how our market behaves WITH Trillions of Dollars of cash being pumped into the Global economy – I wonder what will happen when it stops?
Of course, maybe it won't stop but, if it doesn't, this chart will look even uglier. This is a chart of our projected net annual interest payments on our debt in 10 years. That's $880 BILLION Dollars each year, just in interest payments, up $650Bn from the $233Bn we are spending now.
That's WITHOUT additional stimulus so I guess we can go for a bit more and make it an even Trillion, right? These are what we used to call CONSEQENCES – back when we used to care about such things. The US is not the leader in debt issuance, not by a long shot. Japan is 150% more in debt than we are and China has now doubled our debt to GDP ratio, after having been a creditor back in 2007 but now the undisputed king of stimulus spending.
Europe is also a mess. As I said to our Members in an early-morning Alert: Another thing the US Media is purposely ignoring is the 12.5% correction in Europe (example on Germany chart) since July that, so far, has bounced weakly (4-point drop on EWG has weak bounce at 28.8 and strong at 29.6) – failing exactly…
The system for financing mortgages and regulating that financing has failed, completely and utterly. The mortgage and real estate markets are now in collapse.
Yesterday I wrote about how positive feedback loops lead to collapse. Welcome to the U.S. housing and mortgage markets. As I have documented here numerous times, the entire U.S. mortgage market has already been socialized: 99% of all mortgages are backed by the three FFFs--Fannie, Freddie and FHA--and the Federal Reserve has purchased a staggering $1.2 trillion in mortgage-backed assets in the past year or so to maintain the illusion that there is a market for mortgage-backed securities.
There is, but only because the mortgages are backed by the Federal Government and propped up by the Federal Reserve.
The mortgage market is completely dependent on government guarantees and quasi-Government purchases of securitized mortgages. If the mortgage market were truly socialized, then the Central State would own the banks which originate, service and own the mortgages.
But then the private owners and managers of the "too big to fail" banks would not be reaping hundreds of billions in profits and bonuses. And since the banking industry has effectively captured the processes of governance (that is, Congress and the various regulatory agencies), then what we have is a system of private ownership of the revenue and profits generated by the mortgage industry and public absorption of the risks and losses.
Could anything be sweeter for the big banks? No.
The incestuous nature of the system is breathtaking. The Fed creates the credit which enables the mortgages, the Treasury guarantees the mortgages via Fannie, Freddie and FHA, the Fed buys the mortgages ($1.3 trillion in mortgages are on their balance sheet) and the private banks collect the fees and profits.
One of the core tenets of the Survival+ critique is the State/Financial Plutocracy partnership. There are many examples of this partnership (crony capitalism in which the State is the "enforcer" which collects the national income and distributes it to its private-sector cronies), but perhaps none so blatant and pure as the mortgage/banking sector.
But now the entire legal basis for that privatized-profits, socialized losses system has dissolved. The foreclosure scandal…
And it appears this is one ‘reform’ that can’t be blamed on ‘the liberals’ and Obama. Crony Capitalism is not a political party, it’s a way of life in which power and greed are the measure of all things.
Well, some of the New York real estate developers are poor, relatively speaking, compared to an investment banker or a trader pulling down a fifty million dollar annual bonus for packaging fraudulent financial instruments. But they are all rich in their well connected friends in the government.
The kleptocracy never sleeps; crony capitalism knows no bounds…
The federal government may soon come to the rescue of stalled luxury condominiums in Manhattan.
Manhattan luxury condominiums known for posh amenities and high price tags are beginning to apply for Federal Housing Administration backing.
Condominium developers hope to open financing opportunities for their purchasers as well as guarantee a little protection for themselves. Not only will lending institutions be more willing to lend to purchasers with FHA backing, but the FHA will pay the mortgage should a home buyer default.
The FHA loosened the condo rules because of “market conditions,” Lemar Wooley, an agency spokesman told Bloomberg.com
The administration recently agreed to insure mortgages for apartments at the 98-unit Gramercy Park development, known as Tempo in Match, according to Bloomberg. That deal allowed buyers to make a down payment of as low as 3.5 percent in a complex where apartments run up to $3 million…
As you may know, and as we suggested the other day, the ADP report, based on payroll data from American business, showed a loss of 84,000 jobs in December, versus expectations of a loss of only 75,000 jobs.
We also suggested that this Friday’s US Non-Farm Payroll Report will be a positive surprise, at least 10,000 or so jobs to the good. Here are the details.
The Imaginary Jobs component, also known as the Bureau of Labor Statistics Birth-Death Model, will contribute approximately 72,000 jobs allegedly created by small businesses with less credible evidence than a Bigfoot or an Elvis sighting.
Not that they are always positive. Each January there is an enormous job loss shown here, in the neighborhood of about 350,000 jobs. The reason they do this is because the seasonal adjustment factor is so huge in January that this imaginary jobs number does not matter, since it is subtracted (and added) from the numbers prior to the seasonal adjustment.
We can expect this model to continue to show positive annual jobs growth until the End of Days, and perhaps longer than that if there is fireproof paper in the afterlife. [click on tables and charts to enlarge]
The ‘headline jobs number’ which is the Seasonally Adjusted Number will be a positive 58,000 jobs, and provide much joy and exultation in Washington and on Wall Street. Pundits like Paul Krugman will caution that the economy is still fragile and a second stimulus bill will be required to insure these positive gains.
What is the basis for these projected numbers? The same basis used by the BLS – nothing. At least nothing connected with the real world. These are the numbers that bureaucrats might mindlessly crank out in response to the desire of their bosses for certain targets, a phenomenon well understood by most corporate financial staffs.
We drew the trendline on that chart earlier this year, assuming that the government would wish to show a steady job increase with a positive number by December, or at least January. So far we have not been disappointed, although there have been quite a few revisions along the way.
There will also be revisions this time again, with some jobs added and borrowed from prior months to help
At first it was just the smaller banks, but now the big boys have joined the collective cry against FASB 166 and 167, according to which beginning January 1, banks will likely see up to $900 billion in off-balance sheet assets being onboarded to bank balance sheets. This would likely mean banks need to dramatically increase their Tangible and Tier 1 Capital to offset the capital needed to account for possible asset deterioration. And that, of course, is unacceptable to banks who know too well the deep shit they still find themselves in.
The irony is that banks, which have already virtually halted lending to those in need of credit, are threatening they will cut any available credit even futher. How anyone could admit to being stupid enough to believe this latest episode of Mutual Assured Destruction courtesy of the US banking system is a mystery. And yet this is precisely the type of "gun against the head" negotiating that Max Keiser was fulminating against, and that the banks are once again perpetrating:
“With any increase in required capital, a banking institution is likely to reduce the amount of lending using such securitization vehicles, as well as other lending,” the American Bankers Association wrote in a letter to regulators. The association, the nation’s biggest banking lobby, suggested that any transition period should be three years at least, with no change in regulatory capital impact in the first year.
Taking a cue from the ABA, the big 3 record earners have decided to join in: last thing one would want is JPMorgan not earning yet another record amount in Q4. First Citi chimes in:
Banks should be given three years to raise capital for offsetting assets and liabilities that must be brought onto their balance sheets, Citigroup Chief Financial Officer John Gerspach said yesterday in a letter to regulators. Requiring banks to “assume the risk-based capital effects immediately, or even over one year, is an undeniably severe penalty,” he wrote.
Then you have record earner JPMorgan:
The capital requirements “will have a significant and negative impact on the amount of consumer-conduit funding that will be made available by U.S. banks,” said
Jesse of Jesse’s Café Américain posted on the important subject of deregulation in his last post, “Why the Austrian, Keynesian, Marxist, Monetarist, and Neo-Liberal Economists Are All Wrong.” In it, he opined that it is entirely wrong-headed to assume everything will be alright if we just let free markets work their magic. I want to take his thoughts one step further because I think there is a misperception about what the free market entails and why the deregulation movement went astray.
To review, Diamond won a Pulitzer Prize in 1998 for his book Guns, Germ and Steel, which is a narrative of how Eurasian societies as a whole have dominated others throughout the last 10,000-odd years. One of his basic premises is that Eurasian societies are stratified, and hence less egalitarian, allowing individuals to specialize. The hierarchy and specialization have combined to give these societies advantages that less stratified (and less resource-rich) societies do not have.
The corollary of this – and where I want to concentrate – is that advanced societies are not egalitarian. Some will de facto have more, and others will have less. Moreover, as Diamond asserts, this lack of equality becomes, in essence, a kleptocracy i.e. a reverse Robin Hood organization where the elites enrich themselves at the expense of the others.
This has been the reality in all advanced societies based on agriculture, manufacturing and services for the last 10,000-odd years. This social structure has been net beneficial to the societies employing it in comparison to more simple societies – a case of a rising tide lifting all boats. So, on some level, kleptocracy is nothing about which to get irate.
The problem is that not all kleptocracies are created equal. At some point, the ruling class overreaches in a way that subtracts from rather than adds to the overall…
With all the equity excitement from China to Europe to the US, it was easy to forget that the US has some $24 billion in budget deficit and debt rollovers to find in the form of 3 Year paper. And moments ago the US Treasury priced the first of the week bond issue when it sold 3 Year notes at a 0.932% yield, the lowest since April, and stopping through the When Issued 0.936%. While the Bid to Cover came in at a lowish 3.156, the weakest since last August, the internals made up for it, as the Direct take down jumped from 9.7% to 13.9%, and Indirects ended up with 47.7% of the issue leaving 38.4%, or 3% below the TTM average of 41.3%.
From the first of February to the end of June, the yield on the 10-year note shot up nearly 40%. This sharp rally hurt bond funds big time, as TLT suffered one of worst short-term declines in its history, falling 13% in a 16-weeks. (See post here and chart below)
The strong rally in yields took them to the 2.5% level, where they hit dual resistance at (1) above. This dual resistance was its 2-year falling channel and the 61% level. Now yields could be breaking down from its historic yield ra...
Please review a collection of WWW browsing results.Date Found: Friday, 05 June 2015, 03:53:56 PM
Click for popup. Clear your browser cache if image is not showing. Comment: FAIR QUESTION: is the Fed simply rising rates just so it badly crashes the economy and has the cover to launch QE4, the same way Russian sanctions crippled Germany's economy and led to the ECB's very first episode of bond monetization?
Date Found: Friday, 05 June 2015, 08:54:03 PM
Click for popup. Clear your browser cache if image is not showing. Comment: Zerohedge : This is the simplest way to describe Keynesianism: A slow steady rise up, with quick steps down towards where you came from.
Date Found: Saturday, 06 June 2015, 02:12:32 AM...
Of course, all eyes have been on Greece in an ongoing saga that, although critical to the Greeks, is mostly just an annoying distraction for global investors -- partly because it has been going on for so many years, with the proverbial can of inevitability continually being kicked down the road, and partly because there can be no winners in this intractable situation. Predictably, the electorate chose to follow the advice of the communists that they elected and reject the rigid bailout offer, calling the bluff of the IMF, ECB, and Eurozone and betting they will do whatever it takes to avoid losing one of its members. These are uncharted waters, and with the resultant s...
Brussels has been dead wrong. The stupid idea that the euro will bring stability and peace, as it was sold from the outset, has migrated to European domination as if this were “Game of Thrones.” Those in power have misread history, almost at every possible level. The assumption that the D-marks’ strength was a good thing that would transfer to the euro has failed because they failed to comprehend the backdrop to the D-mark.
Germany moved opposite of the USA toward extreme austerity and conservative economics because of its experience with hyperinflation. The USA moved toward stimulation because of the austerity policies that created the Great Depression, which led to a sh...
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If the early bitcoin markets are an indication of what will happen once New Zealand opens for illiquid FX trade, it will be a risk off kinda day.
And that doesn't even take into account the pandemonium that will be unleashed in China in a few hours after the PBOC just went all-in to halt the crashing stock market. What if it fails to get a green close before tomorrow's US open?
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Baxter Int. (BAX) is splitting off its BioSciences division into a new company called Baxalta. Shares of Baxalta will be given as a tax-free dividend, in the ratio of one to one, to BAX holders on record on June 17, 2015. That means, if you want to receive the Baxalta dividend, you need to buy the stock this week (on or before June 12).
Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself.
Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene
The replay is now available on BNN's website. For the three part series, click on the links below.
Part 1 is here (discussing the macro outlook for the markets)
Part 2 is here. (discussing our main trading strategies)
Part 3 is here. (reviewing our pick of th...
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at firstname.lastname@example.org with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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