March 31, 2016

Robert Kiyosaki And Harry Dent Warn That Financial Armageddon Is Imminent

Financial experts Robert Kiyosaki and Harry Dent are both warning that the next major economic crash is in our very near future.  Dent is projecting that the Dow will fall to “5,500 to 6,000 by late 2017″, and Kiyosaki actually originally projected that a great crash was coming in 2016 all the way back in 2002.  Of course we don’t exactly have to wait for things to get bad.  The truth is that things are not really very good at the moment by any stretch of the imagination.  Approximately one-third of all Americans don’t make enough money to even cover the basic necessities, 23 percent of adults in their prime working years are not employed, and corporate debt defaults have exploded to the highest level that we have seen since the last financial crisis.  But if Kiyosaki and Dent are correct, economic conditions in this country will soon get much, much worse than this.

During a recent interview, Harry Dent really went out on a limb by staking his entire reputation on a prediction that we would experience “the biggest global bubble burst in history” within the next four years…

There will be… and I will stake my entire reputation on this… we are going to see the biggest global bubble burst in history in the next four years…

There’s only one way out of this bubble and that is for it to burst… all this stuff is going to reset back to where it should be without all this endless debt, endless printed money, stimulus and zero interest rate policy.

Read the entire article

March 30, 2016

"Bad News Is Great Again" - Global Stocks Soar After Yellen Admits Global Economy Is Much Weaker

At the end of the day, it was all about the dollar.

Starting March 18, the Bloomberg Dollar Spot had risen as much as 1.9% as Fed officials including Lacker, Williams and Bullard noted upside risks on rate-hike projection and suggested a rate hike may be imminent as soon as April. And then Yellen unleashed the latest round of dovishness, when she made it very clear that the Fed is no longer just the U.S. central bank, but that of the world (and mostly China) and as such its prerogative is to not only keep stocks high, but to also assure there is no currency crisis in Beijing (where a month ago she met other G-20 central bankers to decide precisely this).

The result of Yellen's much discussed speech, was an immediate plunge in the Dollar spot index of 1.2% to 8 month lows, its worst month in 5 years, a drop which has continued this morning, and is on par to equal the dollar's tumble from the first week of March when Bill Dudley likewise came out very dovish, and when the index dropped 1.7% within a week.

What is notable about these two crying doves is that both have roundly ignored the simmering "mutiny" by the Fed's hawks (remember Hilsenrath's humorous "The Decline of Dissent at the Fed" last week) advice of central banker incubator Goldman Sachs, that it is in the US interest to push the dollar higher (it had a report just last week titled "Inflation Finally Begins to Firm"). It will be very interesting to see how this particular conflict is resolved.

Read the entire artcile

March 29, 2016

Corporate Debt Defaults Explode To Catastrophic Levels Not Seen Since The Last Financial Crisis

If a new financial crisis had already begun, we would expect to see corporate debt defaults skyrocket, and that is precisely what is happening.  As you will see below, corporate defaults are currently at the highest level that we have seen since 2009.  A wave of bankruptcies is sweeping the energy industry, but it isn’t just the energy industry that is in trouble.  In fact, the average credit rating for U.S. corporations is now lower than it was at any point during the last recession.  This is yet another sign that we are in the early chapters of a major league economic crisis.  Yesterday I talked about how 23.2 percent of all Americans in their prime working years do not have a job right now, but today I am going to focus on the employers.  Big corporate giants all over America are in deep, deep financial trouble, and this is going to result in a tremendous wave of layoffs in the coming months.

We should rejoice that U.S. stocks have rebounded a bit in the short-term, but the euphoria in the markets is not doing anything to stop the wave of corporate defaults that is starting to hit Wall Street like a freight train.  Zero Hedge is reporting that we have not seen this many corporate defaults since the extremely painful year of 2009…

While many were looking forward to the weekend in last week’s holiday-shortened week for some overdue downtime, the CEOs of five, mostly energy, companies had nothing but bad news for their employees and shareholders: they had no choice but to throw in the towel and file for bankruptcy.

And, as Bloomberg reports, with last week’s five defaults, the 2016 to date total is now 31, the highest since 2009 when there were 42 company defaults, according to Standard & Poor’s. Four of the defaults in the week ended March 23 were by U.S. issuers including UCI Holdings Ltd. and Peabody Energy Corp., the credit rating company said.

Read the entire article

March 28, 2016

23 Percent Of Americans In Their Prime Working Years Are Unemployed

Did you know that when you take the number of working age Americans that are officially unemployed (8.2 million) and add that number to the number of working age Americans that are considered to be “not in the labor force” (94.3 million), that gives us a grand total of 102.5 million working age Americans that do not have a job right now?  I have written about this before, but today I want to focus just on Americans that are in their prime working years.  When you look at only Americans that are from age 25 to age 54, 23.2 percent of them are unemployed right now.  The following analysis and chart come from the Weekly Standard

Clearly, we have never recovered from the impact of the last recession.

But let’s try to put these numbers in context.

Below, I would like to share two charts with you.  They show what has happened to the inactivity rates for men and for women in their prime working years in the United States in recent years.

In order to be considered “inactive”, you can’t have a job and you can’t be looking for a job.  So this subset of people is smaller than the group that we were talking about above.  The 23.2 percent of Americans in their prime working years that are unemployed right now includes those that are looking for a job and those that are not looking for a job.

These next two charts do not include anyone that has a job or that is currently looking for a job.  These charts only cover “inactive” people in their prime working years that are not considered to be in the labor force.

Read the entire article

March 25, 2016

For The Average American, Owning A Home Is Increasingly Unaffordable

One month ago, in its traditionally cheerful assessment of the US housing market, the NAR's Larry Yun snuck in an unexpected warning:

"Home prices ascending near or above double-digit appreciation aren't healthy – especially considering the fact that household income and wages are barely rising."

He did it again just a few days ago:

"The overall demand for buying is still solid entering the busy spring season, but home prices and rents outpacing wages and anxiety about the health of the economy are holding back a segment of would-be buyers."

This is about as close to a warning that the US housing market is back into bubble territory as one can hope to get from the NAR.

Overnight, we got another confirmation of American runaway - if only for the vast majority of people - home prices, when RealtyTrac released its Q1 2016 Home Affordability Index, which showed that in Q1 2016, 9% of U.S. county housing markets were less affordable than their historically normal levels, up from 2 percent of markets that exceeded historic home affordability levels a year ago.

Read the entire article

March 24, 2016

Peak Hypocrisy: Rockefeller Fund Divests Fossil Fuels, Says Exxon Is "Morally Reprehensible"

The winner of today's "peak irony", or rather hypocrisy, award is easy: it goes to the Rockefeller Family Fund, a charity which exists only thanks to John D. Rockefeller's creation of the Standard Oil carbon-spewing behemoth (a predecessor to today's ExxonMobil) which over the past century has created billions in profits for the Rockefeller family and billions in tons of CO2 emissions, "proudly announcing" this morning that it intends to sell all fossil fuel exposure, and that it would "eliminate holdings" of ExxonMobil because the oil company associated with the family fortune has "worked since the 1980s to confuse the public about climate change."

The U.S.-based charity will also divest its coal and Canadian oil sands holdings.

This striking move is the result of the Fund's "green" metamorphosis. According to the charity, given the threat posed to the survival of human and natural ecosystems, "there is no sane rationale for companies to continue to explore for new sources of hydrocarbons."

Oh, now they tell us.

In response to the divestment movement, many oil industry leaders have argued that millions of people in the developing world would be condemned to darkness and poverty if society halted the burning of fossil fuels anytime in the next several decades, before there is an ample supply of cleaner energy sources. And considering the price of oil is so cheap currently that the research and development of so-called alternative, or clean sources of energy is completely uneconomical, it means that the kind, liberal folks over at the Rockefeller foundation would rather see Africa in the dark than suffer the immoral indignity of even a few more grams of CO2 emissions.

Today's move follows the launch last November by New York State Attorney General Eric Schneiderman of an investigation into whether Exxon misled the public and shareholders about the risks of climate change. At the time, the company said it has included information about the business risk of climate change for many years in its quarterly filings, corporate citizenship report and in other reports to shareholders.

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March 23, 2016

It's Official: Canadian Bank Depositors Are Now At Risk Of Bail-Ins

Earlier today, Canada's new Liberal government unveiled a stimulus budget meant to revive slumping growth with a surge in infrastructure spending and said it would run a deficit nearly three times larger than promised during last year's election.

The government projected a C$29.4 billion ($22.5 billion) deficit for fiscal 2016-17 and gave no target date for returning to a balanced budget. This budget broke virtually all pledges the Liberals made before the election, including running just three years of deficits of up to C$10 billion before balancing the books by fiscal 2019-20.

"We are seizing the opportunity to invest in people and the economy, and to prepare Canada for a brighter future," Finance Minister Bill Morneau said.

What he is really seizing is the Bank of Canada money printer, because in order to monetize this surging deficit, the BOC will soon have to unleash its own QE in the coming months. 

As Reuters adds, because the Liberals command a majority in the Canadian Parliament's House of Commons, the budget is guaranteed to pass.

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March 22, 2016

Helicopter Money: Global Central Banks Consider Distributing Money Directly To The People

Should central banks create money out of thin air and give it directly to governments and average citizens?  If you can believe it, this is now under serious consideration.  Since 2008, global central banks have cut interest rates 637 times, they have injected 12.3 trillion dollars into the global financial system through various quantitative easing programs, and we have seen an explosion of government debt unlike anything we have ever witnessed before.  But despite these unprecedented measures, the global economy is still deeply struggling.  This is particularly true in Japan, in South America, and in Europe.  In fact, there are 16 countries in Europe that are experiencing deflation right now.  In a desperate attempt to spur economic activity, central banks in Europe and in Japan are playing around with negative interest rates, and so far they seem to only have had a limited effect.

So as they rapidly run out of ammunition, global central bankers are now openly discussing something that might sound kind of crazy.  According to the Telegraph, central banks are becoming increasingly open to employing a tactic known as “helicopter money”…

Faced with political intransigence, central bankers are openly talking about the previously unthinkable: “helicopter money”.

A catch-all term, helicopter drops describe the process by which central banks can create money to transfer to the public or private sector to stimulate economic activity and spending.

Long considered one of the last policymaking taboos, debate around the merits of helicopter money has gained traction in recent weeks.

Read the entire article

March 21, 2016

Why The True Cost Of Living Is Much Higher Than We're Told (Or Sold)

Over the past decade, we've been told that inflation has been tame -- actually below the target the Federal Reserve would like to see. But if that's true, then why does the average household find it harder and harder to get by?

The ugly reality is that the true annual cost of living is far outpacing the government's reported inflation rate. By nearly 10x in many parts of the country.

This week, we welcome Ed Butowsky, developer of the Chapwood Index, to the program. His index is a 'real world' measure of how prices are increasing much faster than the wages of the 99% can afford:

In my business, I wanted to make sure that I was building portfolios that weren’t just efficient but got people the rate of return that they needed. I thought: My goodness, what I need to do is give people a list of everything they spend money on and have them track quarter by quarter exactly their increases, so I can do a better job as a financial advisor in determining what return I need to target.

I got a hold of a list of 50 major metropolitan areas and found people in every city and I gave them a job: I asked everybody to send me what items they spend their after-tax dollars on. I got about 4,000 different items. Then I took the 500 that most frequently appeared on the list and we've been tracking specifically these same items in every city since that period of time. I weight this list based on what percentage of a normal income people spend on each item.

Read the  entire article

March 18, 2016

What Happened Yesterday: Either Something Spooked The Fed Or There Is A "Central Bank Accord"

Yesterday’s FOMC meeting and press conference generated widespread unease. My personal uncomfortable feeling was reminiscent of a time many decades ago when a date stood me up and provided an excuse that made little sense. Simply put, the combination of the FOMC’s forecasts, economic assessment, and guidance on the future path of interest rates were incongruous and disconnected to their ‘data dependency’ message. 

This week was a curious time to recalibrate to a far more dovish stance since it has followed clear improvement in labor markets, inflation indicators, and inflationary expectations.  Even with the modest downward adjustments to their economic projects, the Fed’s goals and mandates have not only (basically) been achieved but they seemingly have economic momentum behind them as well.

Core year-over-year inflation measures have been rising. Core CPI rose to 2.3% earlier this week. The PCE deflator has risen to 1.7% which already stands above the Fed’s year-end estimate.  The Fed once again lowered the level it believes to be its longer-run estimate of the natural rate to 4.8%.

Regardless, with the unemployment rate currently at 4.9%, the Fed is implying by its belief in the Philips Curve that wages will soon accelerate. Despite modest changes in the Fed’s economic projections, the Fed is forecasting growth above its estimate of potential growth. So how is it possible that a ‘data dependent’ Fed turned dovish?

Read the entire article

March 17, 2016

World’s Second Largest Reinsurer Buys Gold, Hoards Cash To Counter Negative Interest Rates

The world’s second-largest reinsurer, German Munich Re which is roughly twice the size of Berkshire Hathaway Re, is boosting its gold reserves and buying gold in the face of the punishing negative interest rates from the European Central Bank, it announced today.

As caught by Mark O'Byrne at GoldCore and reported by Thomson Reuters this afternoon, the world’s largest reinsurer is far from alone in seeking alternative investment strategies to counter the near-zero or negative interest rates that reduce the income insurers require to pay out on policies.

Munich Re has held gold in its coffers for some time and recently added a cash sum in the two-digit million euros, Chief Executive Nikolaus von Bomhard told a news conference.

“We are just trying it out, but you can see how serious the situation is,” von Bomhard said.

The ECB last week cut its main interest rate to zero and dropped the rate on its deposit facility to -0.4 percent from -0.3 percent, increasing the amount banks are charged to deposit funds with the central bank.

Read the entire article

March 16, 2016

We Are Being Killed On Trade – Rapidly Declining Exports Signal A Death Blow For The U.S. Economy

Exports fell precipitously during the last two recessions, and now it is happening again.  So how in the world can anyone make the claim that the U.S. economy is in good shape?  On my website I have been repeatedly pointing out the parallels between the last two major economic downturns and the current crisis, and I am going to discuss another one today.  Since peaking in late 2014, U.S. exports have been steadily declining, and this is something that we never see outside of a major recession.  On the chart that I have shared below, the shaded gray bars represent the last two recessions, and you can see that exports of goods and services plunged dramatically in both instances…

And this chart does not even show the latest numbers that we have.  During the month of January, U.S. exports fell to a five and a half year low…

The U.S. trade deficit widened more than expected in January as a strong dollar and weak global demand helped to push exports to a more than 5-1/2-year low, suggesting trade will continue to weigh on economic growth in the first quarter.

The Commerce Department said on Friday the trade gap increased 2.2 percent to $45.7 billion. December’s trade deficit was revised up to $44.7 billion from the previously reported $43.4 billion. Exports have declined for four straight months.

Read the entire article

March 15, 2016

Former Citi Vice Chairman Robert Rubin, Target of DoJ Investigation, is Too Big to Jail

The Financial Crisis Inquiry Commission released a raft of documents from its 2010 investigation, including interviews with senior government officials like Alan Greenspan, Hank Paulson, and Sheila Bair, as well as other individuals deemed to be prominent like Warren Buffett and subprime short-seller Steve Eisman. It’s hard to see the justification for keeping information from private individuals under wraps for this long.

Here is a juicy tidbit flagged by Fortune, on the long-standing stealth power in the Democratic party, Robert Rubin, singularly responsible for its strong dollar (as in anti labor) and bank friendly policies:

According to the minutes, the commission voted on September 29, 2010, on whether to refer persons related to an item titled “Potential Fraud and False Certifications: Citigroup” to the office of the Attorney General of the United States. The staff notes that describe the item names Rubin, along with then Citi CEO Charles Prince, as having potentially violated the law. At the meeting, the commission’s general counsel Gary Cohen said that what the commissioners were voting on was just a referral and “not a recommendation for prosecution.” The vote was unanimous to refer the Rubin matter among the commission members present at the meeting, 6-to-0.

A spokesman for Rubin says, “We hadn’t heard anything about this and have no knowledge of it.” Fortune reached out but was not able to contact Prince. The Department of Justice declined to comment…..

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March 14, 2016

Energy Wars Of Attrition - The Irony Of Oil Abundance

Three and a half years ago, the International Energy Agency (IEA) triggered headlines around the world by predicting that the United States would overtake Saudi Arabia to become the world’s leading oil producer by 2020 and, together with Canada, would become a net exporter of oil around 2030. Overnight, a new strain of American energy triumphalism appeared and experts began speaking of “Saudi America,” a reinvigorated U.S.A. animated by copious streams of oil and natural gas, much of it obtained through the then-pioneering technique of hydro-fracking. “This is a real energy revolution,” the Wall Street Journal crowed in an editorial heralding the IEA pronouncement.

The most immediate effect of this “revolution,” its boosters proclaimed, would be to banish any likelihood of a “peak” in world oil production and subsequent petroleum scarcity.  The peak oil theorists, who flourished in the early years of the twenty-first century, warned that global output was likely to reach its maximum attainable level in the near future, possibly as early as 2012, and then commence an irreversible decline as the major reserves of energy were tapped dry. The proponents of this outlook did not, however, foresee the coming of hydro-fracking and the exploitation of previously inaccessible reserves of oil and natural gas in underground shale formations.

Understandably enough, the stunning increase in North American oil production in the past few years simply wasn’t on their radar. According to the Energy Information Administration (EIA) of the Department of Energy, U.S. crude output rose from 5.5 million barrels per day in 2010 to 9.2 million barrels as 2016 began, an increase of 3.7 million barrels per day in what can only be considered the relative blink of an eye. Similarly unexpected was the success of Canadian producers in extracting oil (in the form of bitumen, a semi-solid petroleum substance) from the tar sands of Alberta. Today, the notion that oil is becoming scarce has all but vanished, and so have the benefits of a new era of petroleum plenty being touted, until recently, by energy analysts and oil company executives.

“The picture in terms of resources in the ground is a good one,” Bob Dudley, the chief executive officer of oil giant BP, typically exclaimed in January 2014.  “It’s very different [from] past concerns about supply peaking.  The theory of peak oil seems to have, well, peaked.”

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March 11, 2016

Could This Lawsuit Be the Straw That Breaks the TPP’s Back?

Throw into this mix the current U.S. presidential race. So too could strong statements by U.S. presidential contenders have an influence.  Bernie Sanders, the independent Senator from Vermont, has been opposed to NAFTA from the start and is a harsh and outspoken critic of the TPP and its investment chapter.  Sanders has made this one of his campaign issues and Hillary Clinton, under heavy pressure from the more populist Sanders, said in the fall of 2015 that she would not support the TPP in its current form.  Not surprisingly, given her past support of trade agreements, she has largely avoided the issue on the campaign trail. But the Democratic party base deeply opposes the agreement, and a broad coalition of citizen groups under the Citizens Trade Campaign is rallying people against it.  On the Republican side, all the remaining candidates support the TPP save the frontrunner and likely Republican nominee, Donald Trump.  Trump has attacked the TPP, charging that it will accelerate the shift of good U.S. jobs to Asia.

In the context of this fluid debate, it is crucial for academics, activists, politicians, and citizens in the United States and around the globe to speak out against this outrageous assault on democracy enshrined in the TPP.  In the longer-run, we need a truly democratic set of rules to replace the current investor provisions in trade agreements, a new set of rules that do not give global corporations unfair advantage over people and the environment.  This is not pie in the sky; promising alternatives have been raised in the trans-Atlantic trade negotiations that are going on right now.

In the short term, however, the current TPP strengthens these undemocratic rules.  The TransCanada case offers new chilling evidence as to why these agreements are a danger to the environment, to workers, and to democracy, and why the TPP must be stopped.

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March 10, 2016

China Proposes Unprecedented Nationalization Of Insolvent Companies: Banks Will Equitize Non-Performing Loans

In what may be the biggest news of the day, and certainly with far greater implications than whatever Mario Draghi will announce in a few hours when we will again witness the ECB doing not "whatever it takes" but "whatever it can do", moments ago Reuters reported that China is preparing for an unprecedented overhaul in how it treats it trillions in non-performing loans.

Recall that as we first wrote last summer, and as subsequently Kyle Bass made it the centerpiece of his "short Yuan" investment thesis, the "neutron bomb" in the heart of China's impaired financial system is the trillions - officially at $614 billion but realistically anywhere between 8% and 20% of China's total $35 trillion in bank assets - in non-performing loans. It is the unknown treatment of these NPLs that has been the greatest threat to China's just as vast deposit base amounting to well over $20 trillion, which has been the fundamental catalyst behind China's record capital flight as depositors have been eager to move their savings as far from China's domestic banks as possible.

As a result, conventional thinking such as that proposed by Bass, Ray Dalio, KKR and many others, speculated that China will have to devalue its currency in order to inflate away what is fundamentally an excess debt problem as the alternative is unleashing a massive debt default tsunami and "admitting" to the world just how insolvent China's state-owned banks truly are, not to mention leading to the layoffs of tens of millions of workers by these zombie companies.  

However, China now appears to be taking a surprisingly different track, and according to a Reuters report China's central bank is preparing regulations that would allow commercial banks to swap non-performing loans of companies for stakes in those firms. Reuters sources said the release of a new document explaining the regulatory change was imminent.

Read the entire article

March 9, 2016

Are You Kidding Me? Chinese Exports Plunge 25.4 Percent Compared To Last Year

We just got more evidence that global trade is absolutely imploding.  Chinese exports dropped 25.4 percent during the month of February compared to a year ago, and Chinese imports fell 13.8 percent compared to a year ago.  For Chinese exports, that was the worst decline that we have seen since 2009, and Chinese imports have now fallen for 16 months in a row on a year over year basis.  The last time we saw numbers like this, we were in the depths of the worst economic downturn since the Great Depression of the 1930s.  China accounts for more global trade than any other nation (including the United States), and so this is a major red flag.  Anyone that is saying that the global economy is in “good shape” is clearly not paying attention.

If someone would have told me a year ago that Chinese exports would be 25 percent lower next February, I would not have believed it.  This is not just a slowdown – this is a historic implosion. The following comes from Zero Hedge

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March 8, 2016

"The Commodity Rally Is Not Sustainable" - Goldman Is Now Waiting For The Next Big Drop

As noted yesterday morning, "Goldman does it again" when just hours after Goldman said the "bearish cash for iron ore was intact," the commodity recorded its biggest surge in history crushing anyone short, and soaring 20% across the globe. That however has not dented Goldman's conviction that the commodity rally is overdone (we actually agree with Goldman for once) and just hours ago the head of commodities at Goldman Jeffrey Currie doubled down on Goldman's bearish commodities call saying  "market views on reflation, realignment and re-levering have driven a premature surge in commodity prices that we believe is not sustainable.

Indeed the fundamentals - especially in oil - remain dire, with land storage especially in PADD2/Cushing about to overflow as we have been showing for the past 2 months, and yet the sentiment has shifted the most in years. As Currie puts it: "Energy needs lower prices to maintain financial stress to finish the rebalancing process; otherwise, an oil price rally will prove self-defeating as it did last spring."

It is this premature excitement that according to Goldman, will be catalyst that leads to the next leg lower in commodities, as the price surge gone far too soon and long before the much needed rebalancing and excess production was taken out:

Last year commodity prices were driven lower by deflation, divergence and deleveraging which were reinforcing through a negative feedback loop. Deflationary pressures from excess commodity supply reinforced divergence in US growth and a stronger US dollar which in turn exacerbated EM funding costs and the need for EMs to de-lever though lower investment and hence commodity demand. While we believe that these dynamics likely ran their course last year resulting in signs of rebalancing, the force of their reversal has created a new trend in market positioning that could run further. However, the longer they run, the more destabilizing they become to the nascent rebalancing they are trying to price.

Read the entire article

March 7, 2016

Are Greek Banks About To Charge For The Privilege Of Banning €500 Bills?

Officials would have you believe that all of this talk about banning cash is nonsense - a myth likely perpetuated by fringe bloggers or else by Austrian economists in the early stages of dementia.

The problem, however, is that we get more signs that cash is on the way out each and every day.

Take Larry Summers, who reckons it might be time to get rid of the $100 note in order to “make the world a better place” (the idea being that only criminals transact in high denomination notes). There’s also Citi’s Willem Buiter, and the German Council of “Experts” Peter Bofinger, and Harvard’s Kenneth Rogoff, and the list goes on. In fact, just yesterday we learned that Sweden will likely be completely cashless in the short space of 5 years.

As mentioned above, there’s always this amorphous notion of fighting crime built in there somehow as if the world's central banks recently adopted a Batman mandate to go along with price stability, but the real reason is, and always will be, simple: controlling citizens’ economic decisions. Or, put a little more harshly: stripping depositors of their economic autonomy.

Do away with cash and you can set rates as low as you want them. People not spending enough to get the economy moving? Well to hell with those people - set interest rates at -30%. You can bet they'll start spending then. Economy overheating? No problem, jack interest rates on savings up to +20% and watch the personal savings rate rise.

Read the entire article

March 4, 2016

"It Hasn't Been This Bad Since The Viking Age": Dry Bulk CEO Warns Of Bankruptcy Tsunami, Counterparty Risk

In the past three months we have repeatedly shown that, despite the recent modest rebound off the all time lows, the bottom is about to fall out of the dry bulk shipping market in articles such as these:


Overnight, the CEO of Dry bulk shipper Golden Ocean Group, Herman Billung spoke before an industry conference in Oslo, and made it clear that our worst-case expectations may prove to be optimistic.

He said that Dry Bulk shippers should expect little respite for another two years, adding that an enormous oversupply of vessels isn’t sustainable: "It's a fair assumption to make that only half of the orderbook in 2016 will be delivered."

He warned that "in the coming months there will be a lot of bankruptcies, counterparty risk will be on everybody's lips."

Read the entire article

March 3, 2016

How Wall Street Is Preparing For "President Trump"

While the market has had its share of bogeymen to worry about so far in 2016, mostly along the lines of the "Four Cs", namely China, Crude, Credit and Currencies, it has so far largely ignored one letter: the Big D, for Donald, as in how would a Trump presidency affect the market. And, as Reuters writes, it is time for Wall Street to add "the juggernaut that is Donald J. Trump to the list of what-ifs that is worrying Wall Street."

The kneejerk, conventional wisdom reaction is that the non-establishment outsider would be a big risk for stocks: "a growing realization that the unpredictable New York real estate developer is in a position to win the Republican nomination and then battle Hillary Clinton for the White House in November's election has caused some investors to sell U.S. stocks. They fear having such a wild-card president could trigger trade wars, hurt the economy and add a lot of market volatility."

AS Doug Kass notes, "as the market rarely feasts on lack of predictability - Trump represents a nightmare for investors this year." Kass said last week that he was adding to his existing short bet on the U.S. stock market in part because of Trump's increasingly strong position in the race.

The problem is that it is difficult to pigeonhole Trump's market policies: according to Reuters, "his statements on business and Wall Street don't neatly fit into one ideological worldview, but if anything, they are seen as isolationist in a globally connected world. He can also suddenly pick on businesses over various issues, such as his call for a boycott of Apple’s products after the tech giant refused to help the FBI unlock the iPhone used by one of the San Bernardino shooters."

Read the entire article

March 2, 2016

Plunging Manufacturing Numbers Mean That It Is Time To Hit The Panic Button For The Global Economy

We haven’t seen numbers like these since the last global recession.  I recently wrote about how global trade is imploding all over the planet, and the same thing is true when it comes to manufacturing.  We just learned that manufacturing in China has now been contracting for seven months in a row, and as you will see below, U.S. manufacturing is facing “its toughest period since the global financial crisis”.  Yes, global stocks have bounced back a bit after experiencing dramatic declines during January and the first part of February, and this is something that investors are very happy about.  But that does not mean that the crisis is over.  All bear markets have their ups and downs, and this one will not be any different. Meanwhile, the cold, hard economic numbers that keep coming in are absolutely screaming that a new global recession is here.

Just consider what is happening in China.  Manufacturing activity continues to implode, and factories are shedding jobs at the fastest pace since the last financial crisis

Chinese manufacturing suffered a seventh straight month of contraction in February.

China’s official Purchasing Managers’ Index (PMI) stood at 49.0 in February, down from the previous month’s reading of 49.4 and below the 50-point mark that separates growth from contraction on a monthly basis.

A private survey also showed China’s factories shed jobs at the fastest rate in seven years in February, raising doubts about the government’s ability to reduce industry overcapacity this year without triggering a sharp jump in unemployment.

Read the entire article

March 1, 2016

Oil Giant Cuts Budget By 80 Percent And Suspends Fracking

Whiting Petroleum Corp. (NYSE:WLL), the largest oil producer in North Dakota, has announced that it will suspend all fracking in the state and cut its budget for this year by 80 percent in a move that sent its shares up 9 percent on Wednesday, back down to a record low on Thursday, and $4.02 Friday morning.

Across the E&P patch, it’s a volatile game of craps right now that has investors torn between responding positively to spending cuts to weather the oil price downturn, and negatively to the notion that all these companies are doing is narrowly avoiding bankruptcy.

As of 1 April, Whiting will halt all fracking and stop completing its wells at 20 Bakken and three Forks sites. By this summer it will cut spending to $160 million for the rest of year to fund maintenance.

These are some of the biggest spending cuts in the industry so far, and investors have responded positively to Whiting’s strategy for waiting out low oil prices.

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