October 19, 2017

A Look Inside The Secret Swiss Bunker Where The Ultra Rich Hide Their Bitcoins

Somewhere in the mountains near Switzerland’s Lake Lucerne lies a hidden underground vault containing a vast fortune.

It’s no ordinary vault, according to Quartz. Built inside a decommissioned Swiss military bunker dug into a granite mountain, it’s precise location is a closely guarded secret, and access is limited by myriad security precautions.

But instead of gold bars, the bunker contains hard drives on which customers’ bitcoins are being kept in what’s call “cold storage” – i.e. the owners’ private keys are protected by an air-gapped hard drive. The vault is one of many operated by Xapo, an early bitcoin company known for its cold storage wallet products and a debit card that pays for transactions in digital currencies.

The company won’t disclose how much bitcoin is stored in the vault, but one employee who spoke with Quartz said he sometimes takes customers with millions of dollars in bitcoin on tours of the vaults where their fortune is stored. Xapo was founded by Argentinian entrepreneur and current CEO Wences Casares, whom Quartz describes as “patient zero” of bitcoin among Silicon Valley’s elite. Cesares reportedly gave Bill Gates and Reed Hoffman their first bitcoins.

Read the entire article

October 18, 2017

What Goldbugs Have Been Waiting For: Goldman’s New Primer On Gold

The good news is that Goldman believes “precious metals remain a relevant asset class in modern portfolios, despite their lack of yield” and disagrees with Ben Bernanke and the naysayers “They are neither a historic accident or a relic. Indeed, by looking at each of the physical properties of an ideal long-term store of value…we can clearly see why precious metals were initially adopted and why they remain relevant today.”

It was sounding really good – and there was 91 pages to go - although when it came to the drivers of precious metal prices, Goldman did not exactly re-invent the wheel “We see two key drivers of the precious metals markets: Fear and Wealth”

That said, there was a new take on what, in Goldman's eyes constitutes fear as “in our new framework we see a closer link to growth expectations. However, we ?nd that many risk factors are relevant, depending on the sub-component of gold demand: real interest rates, debasement risks, sovereign balance sheet risks, geopolitical risks and other market tail-risks. Stated more simply, we are talking about the drivers of “risk-on”/”risk-off” behavior in markets.”

On the wealth angle, the good news for gold was that “as economies grow, they tend to go through a rapid gold accumulation phase at around per capita GDP of $20,000-$30,000, following a ‘hump-shaped’ relationship between per capita income and gold demand. As more EM economies (including China) are set to grow to these income levels over the next few decades.” 

As in-depth students of gold market research, our mood was lifted by some genuinely original research. Goldman found that the ratio between gold purchases and household savings (global we assume) has been broadly stable at around 1.7% for almost 40 years. Who knew that.

Read the entire article

October 17, 2017

ECB May Have Only €220 Billion In QE Left If The Hawks Get Their Way

After seemingly sending out trial balloons (via Bloomberg and Reuters simultaneously) on tapering last Thursday, which had almost zero impact (see “ECB Reportedly Considering Slashing QE in Half in January, EURUSD Shrugs), Draghi’s minions have been busy again.

“Central bank officials familiar with the matter” told Bloomberg that some - presumably quite hawkish - ECB policy makers “see room for little more than 200 billion euros ($235 billion) of purchases under the institution’s bond-buying program next year.”  With said “officials” (who asked not to be named because the talks are not private anymore) seeing a limit to bond buying of 2.5 trillion euros under the current rules and purchases expected to reach 2.28 trillion by the end of 2017, we can do the calculation.

According to last week’s trial balloons, the ECB was looking at reducing its purchases from €60 billion euros to about €30 billion for at least nine months.

As we also explained in “How Will The ECB's QE Tapering Impact The Market? Here Are The Possible Scenarios”, the market neutral level of APP extension estimated by Citi appears to be around 250 billion Euros, or roughly €50 billion more than "some" ECB policymakers will permit. The three broadly market neutral scenarios laid out in Citi’s model were €20bn x 12mth, €30bn x 9mth and €40bn x 6mth as shown below.

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October 16, 2017

China's Mortgage Debt Bubble Raises Spectre Of 2007 US Crisis

Behind the dream of property ownership they share with many like-minded friends lies an uninterrupted housing price rally in major Chinese cities that dates back to former premier Zhu Rongji’s privatisation of urban housing in the late 1990s.

Rapid urbanisation, combined with unprecedented monetary easing in the past decade, has resulted in runaway property inflation in cities like Shenzhen, where home prices in many projects have doubled or even tripled in the past two years.

City residents in their 20s and 30s view property as a one-way bet because they’ve never known prices to drop. At the same time, property inflation has seen the real purchasing power of their money rapidly diminish.

“Almost all my friends born since the 1980s and 1990s are racing to buy homes, while those who already have one are planning to buy a second,” Mai, 33, said.

“Very few can be at ease when seeing rents and home prices rise so strongly, and they will continue to rise in a scary way.”

Read the entire article

October 13, 2017

China Launches Yuan-Ruble Payment System

The monetary regimes of China and Russia, two of the world's most resource-rich nations, are drawing closer with every passing day.

In the latest push for convergence, China has established a payment versus payment (PVP) system for Chinese yuan and Russian ruble transactions in a move to reduce risks and improve the efficiency of its foreign exchange transactions. The PVP system for yuan and ruble transactions, designed to streamline commerce and curency transactions between the two nations, was launched on Monday after receiving approval from China’s central bank, according to a statement by the country’s foreign exchange trading system.

It marks the first time a PVP system has been established for trading the yuan and foreign currencies, said the statement, which was posted on Wednesday on the website of the China Foreign Exchange Trade System (CFETS). PVP systems allow simultaneous settlement of transactions in two different currencies.

According to CFETS, the system would reduce settlement risk as well as the risk of transactions taking place in different time zones, and improve foreign exchange market efficiency. Of course, if the two countries had a blockchain-based settlement system, they would already have all this and much more.

CFETS said it plans to introduce PVP systems for yuan transactions with other currencies based on China’s Belt and Road initiative, and complying with the process of renminbi internationalization. Russia, however, is a top priority: the world's biggest oil producer recently became the largest source of oil for China, the world’s top energy consumer.

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October 12, 2017

Goldman Is Allowing Its Clients To Bet On The Next Financial Crisis

Just over a decade ago, as the S&P was hitting all time highs and there was a line around the block of 30-some year old hedge fund managers, desperate to put other people's money in various ultra risky investments just so they could pick a few excess bps of yield over Treasurys - a situation painfully familiar to what is going on now - Goldman had an epiphany: create new synthetic products that have huge convexity, i.e., provide little upside (such as a few basis points pick up in yield) versus unlimited downside, link them to the shittiest assets possible and sell them to gullible, yield-chasing idiots (collecting a transaction fee) while taking the other side of the trade (collecting a huge profit once everything crashes). The instruments, of course, were CDOs, and not long after Goldman sold a whole of them, the financial system crashed and needed a multi-trillion bailout from which the world has not recovered since.

Ten years later, Goldman is doing it again, only instead of targeting subprime mortgages, this time the bank has focused on quasi-insolvent European banks.

And just like right before the last financial crash, Goldman is once again allowing its clients to profit from the upcoming collapse, or as Bloomberg puts it, "less than a decade after the last major banking crisis, Goldman Sachs and JPMorgan  are offering investors a new way to bet on the next one."

The trade in question is a total return swap, a highly levered product which is similar or a credit default swap but has some nuanced differences, which targets what are known as Tier 1 , or AT1 or "buffer" notes issued by European banks, and which usually are the first to get wiped out when there is even a modest insolvency event (just ask Banco Popular), let alone a full blown financial crisis.

Goldman and JPM are offering the derivative trades that enable investors to bet on or against high-risk bank bonds that financial regulators can wipe out if a lender runs into trouble. Other banks are also hoping to get in on the fun, and start making markets in the contracts, known as total-return swaps, or TRS, in the coming weeks, according to Max Ruscher, the London-based director of credit indexes at IHS Markit Ltd., which administers the benchmarks that the swaps are linked to.

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October 11, 2017

National Rents Stall For 4th Month In A Row As Multi-Family Supply Glut Takes Its Toll

After a steady march higher in the wake of the 'great recession' nearly a decade ago, a note today from Rent Cafe reveals that average rents in the United States have now stalled for 4 months in row with September's national average coming in at $1,354 per month, which is virtually flat from the $1,350 average reached in the summer.

National rents have barely moved through the entire peak rental season and into September, marking the longest period of stagnation in recent history — 4 consecutive months. Coming in at $1,354 for the month of September, the average rent is only 2.2 percent higher than this time last year. This is the slowest annual growth rate we’ve seen in more than six years — having reached a high point of 5.5%-5.6% peak growth around two years ago — a pretty good indicator that the rental market has entered calmer waters.

Still, that doesn’t mean rents have flat-lined everywhere. Though nationally and in the most expensive cities for renters prices have finally come to a full stop, there are still some holdouts—and it seems renters in smaller and mid-sized cities are not yet getting a break, on the contrary.

As we pointed out over the summer, just like almost any bubble, stagnating rents are undoubtedly the symptom of a massive, multi-year supply bubble in multi-family housing units sparked by, among other things, cheap borrowing costs for commercial builders.  Per the chart below from Goldman Sachs, multi-family units under construction is now at record highs and have eclipsed the previous bubble peak by nearly 40%.

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October 10, 2017

Mapping The World's Trillion-Dollar Asset-Manager Club

In the late 1700s, it was the start of the battle of stock exchanges: in 1773, the London Stock Exchange was formed, and the New York Stock Exchange was formed just 19 years later.

And while London was a preferred destination for international finance at the time, Visual Capitalist's Jeff Desjardins notes that England also had laws that restricted the formation of new joint-stock companies. The law was repealed in 1825, but by then it was already too late.

In the U.S., exchanges in New York City and Philadelphia took full advantage by dealing in stocks early on. Eventually, for this and a variety of other reasons, the NYSE emerged as the most dominant exchange in the world – helping propel New York and Wall Street to the center of finance.

THE CENTER OF FINANCE

Wall Street and the U.S. in general is now synonymous with finance – and most of the world’s largest banks, funds, and investors maintain a presence nearby. The biggest asset management companies, which pool investments into securities such as stocks and bonds on behalf of investors, are no exception to this.

Today’s chart shows all global companies with over $1 trillion in assets under management (AUM).

Read the entire article

October 9, 2017

Economic Slowdown Confirmed: The U.S. Economy Lost Jobs Last Month For The First Time In 7 Years

Don’t worry – even though the employment numbers are terrible the mainstream media insists that everything is going to be wonderful for the U.S. economy in the months ahead.  According to the Bureau of Labor Statistics, the U.S. economy lost 33,000 jobs during September.  That was the first monthly decline in seven years, and as you will see below, overall 2017 is on pace for the slowest employment growth in at least five years.  But the Bureau of Labor Statistics insists that the downturn in September was due to the chaos caused by Hurricane Harvey and Hurricane Irma, and they are assuring us that happier times are right around the corner.

Economists were projecting that we would see an increase of around 80,000 jobs last month, and we need to add at least 150,000 jobs each month just to keep up with population growth.  So the -33,000 number was a huge disappointment.

But even though we lost 33,000 jobs last month, the Bureau of Labor Statistics says that the unemployment rate fell from 4.4 percent to 4.2 percent.

Yes, I know that doesn’t make any sense at all, but that is what they are telling us.

Perhaps if several volcanoes go off inside this country, terrorists detonate a dirty bomb in one of our major cities and Godzilla invades the west coast next month the unemployment rate will drop all the way to zero.

Read the entire article

October 6, 2017

Will Retailers Switch to a Price Tag System That Screws Customers at Every Opportunity?

Retailers intend to engage in very sneaky price discrimination. But big data is way overhyped and regularly underdelivers. It might be great at pricing airline seats, but airlines have only so many routes and run planes only so many times of day and days of the week. By contrast, the average grocery store has over 40,000 SKUs. They aren’t going to have granular enough data to discriminate finely on a lot of things. They may try to draw crude inferences, like “People who go to Starbucks daily are higher income and can/will pay more” but aside from using certain criteria to pick out less price sensitive customers, how much price gouging they might take is a crude inference. And what about stores you rarely visit, say the once a year at best sports store shopper?

In addition, this type of price discrimination is against the law in many cities which require merchants to post prices and honor them. But the threat of this sort of system is an argument in favor of not using ApplePay and other phone-based payment systems, which could provide even more granular info about your shopping habits, or not using a smart phone, or putting it in a mini Faraday cage when you are going on a serious shopping mission. Plus if this sort of system starts to be implemented, it’s not hard to imagine that software developers would implement apps to block inquiries from purchase snooping systems, or better yet, feed them incorrect data that says you are price sensitive (like a false history of shopping regularly at discounters).

But as Ramsi Woodcock, professor of legal studies at Georgia State University, observes, those outraged by Delta’s reportedly asking $3,200 for a ticket out of Florida as Hurricane Irma approached should be aware that dynamic pricing enabled Delta to charge the same price to last minute customers two weeks before.

We’ve imposed no limits on dynamic pricing, although we’re nibbling around the edges of imposing some constraints on the sale of our personal data. Woodcock believes dynamic pricing could have anti-trust implications. Anti-trust is justified by many as a way to stop or break up monopolies that could artificially raise prices and reduce total consumer welfare. In a detailed article, Woodcock argues that big data enables “price discrimination (that) extracts more value from consumers than uniform pricing, by tailoring price to the maximum level tolerated by each consumer.” And thus warrants anti-trust enforcement.

Read the entire article

October 5, 2017

De-Dollarization & Disintermediation - Russian Mobile Phone Operator Issues First Blockchain-Backed Bond

Russian Mobile phone operator, Megafon, issued RUB500 million in zero-coupon blockchain-based bonds recently. This was purely a proof of concept issuance.

But, it speaks to the bigger picture of bypassing traditional book runners, i.e. the major banks, for selling securities to investors. No longer does Goldman Sachs, Standard Charted, HSBC and Deutsche Bank have a stranglehold on how capital is raised for emerging markets.

Moreover, it will prove just how much of an advantage the blockchain has over these older and much more expensive business models. 

This reduces the cost of a bond issuance to practically nothing, beyond the needed legal work. 

These bonds can and will be sold without the need for the middle man to take a huge cut.

The blockchain is changing everything.

This news also puts paid the news from a couple of months back that the National Settlement Depository is moving, via the WAVES platform, to token-ize as much of the Russian economy as it can. This is your first example of their integrating with the Moscow Exchange to trade securities via the blockchain.

Read the entire article

October 4, 2017

Uber Shareholder Drops Lawsuit Against Kalanick, Clearing Way For Softbank Investment

Tuesday’s meeting of the Uber Inc. board – the first following Kalanick’s unilateral decision to appoint former Xerox Corp. Chairwoman and CEO Ursula Burns and former Merrill Lynch Chairman and CEO John Thain – appears to have been a productive one.

Reuters is reporting that the board voted to move ahead with two issues, a change in governance rules, and an investment by Japan’s Softbank Group, which it was reported last month has been in talks to invest as much as $10 billion in the cash-burning ride-share giant.

To anyone who hasn’t been following the ongoing boardroom struggle between former Uber CEO Travis Kalanick, who was ousted after an investor revolt in June, and Benchmark Capital, these might seem like routine housekeeping matters.  

But in reality, they’re signs that two warring factions have agreed to put aside their differences - for now, at least - for the good of the company (not to mention their bank accounts). Benchmark has been trying to change the board's rules to try and limit Kalanick's power with the ultimate goal of ensuring he never returns as CEO. But today, Kalanick assented to the governance changes, albiet in a watered-down form. Meanwhile, Kalanick also gave his blessing to the Softbank deal, letting go of his reservations despite reports that Softbank had struck an agreement with Benchmark to do everything in its power to oppose Kalanick’s return as CEO as a condition of its investment, which should result in the Japanese company gaining control over at least one board seat.

Of course, by allowing both of these proposals to proceed, Kalanick is making some major concessions. What is he getting in return?

Read the entire article

October 3, 2017

Hard Assets In An Age Of Negative Interest Rates

In a word, the hard asset vision is about building wealth outside the stock market. It refers to three main strategies overall: 

1) land ownership and/or farmland, forestry and agriculture

2) gold, other precious metals, and certain base-metal commodities, and

3) The (Old Masters/Classic Modern) art market.

Where this last is concerned, we mean art as investment and not art-as-commerce, such as that which contaminates today’s insipid and overpriced world of ‘Balloon-Dog’ bad art. The auction world of Rembrandt and Picasso; of El Greco and Gerhardt Richter has been on a tear, is smashing records, and cannot be ignored as an excellent safe-haven vehicle, as outstanding works of art traditionally always have been.

To begin with, physical gold and precious metals remain an investment enigma despite being market-leading performers for the past seventeen years. Gold is a must-have portfolio asset amid the aggressive debt levels and monetary debasement that have so unhinged the market. Silver, for its part, in addition to its prestige status, also has innumerable industrial applications and throughout the precious-metal bull market since 2000.

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October 2, 2017

Blowback? NFL Ticket Sales Crash 17.9% As Owners Lose Control Of Players

Probably just a coincidence... or just transitory, but The online ticket reseller TickPick told The Washington Examiner that sales have dropped 17.9 percent, far more than the usual Week Three fall...

17.9 percent decrease in NFL orders this week compared to the previous week.
Last year the drop was 10.8 percent in orders on Monday & Tuesday following Week Three games.

"We have seen a massive decrease in NFL ticket purchases this past week in comparison to years past. Week 3 seems to usually have less ticket orders than week 2, but this year ticket purchases are down more than 7 percent from this time last year," said TickPick's Jack Slingland.

"While we can't specify if this decrease is due to the president's comments, player and owner protests, play on the field, or simply the continued division of consumer's media attention, the conversation around the NFL this week has focused on the president's comments as well as the players' and owners' reaction. As viewers continue to abandon their NFL Sunday habits, both the number of ticket sales and the purchase price of tickets will drop," he told us.

Read the entire article

September 29, 2017

Is The Bubble About To Burst? Student-Loan Delinquency Rates Rise For First Time In Years

Since the financial crisis, most market observers and economists have cheerfully ignored the aggregate student-debt load in the US, which recently swelled to an economy-threatening $1.4 trillion. Even as student-debt, which can't be discharged in bankruptcy, grew to represent 10% of the total US debt burden, defenders of the status quo pointed to declining default rates as evidence that the government-backed student loan industry wasn’t in danger of imploding.

But that may soon change.

As Bloomberg reports, the student-loan default rate in the US ticked higher during the second quarter for the first time since 2013. While it’s only one quarter of data, it should send a chill down the spine of government and private lenders, who have every reason to worry that this could be more than a temporary blip.

To wit, the share of Americans at least 31 days late on loans from the U.S. Department of Education ticked up to 18.8% as of June 30, up from 18.6% during the same period a year ago, according to new federal data. Meanwhile, about 3.3 million Americans have gone more than a month without making a required payment on their Education Department loans—up about 320,000 borrowers.

The rise interrupts a period of 12 straight quarters of declines in delinquency rates, according to numbers dating to 2013. It also comes at a time when US economic growth is nominally expanding (the BEA announced earlier today that the US economy expanded by 3.1% during the second quarter, an improvement over its previous estimate).

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September 28, 2017

The “Trump Tax Plan” - Details & Analysis

Business tax changes:

  • A 20% corporate tax rate. This is the first time Trump has publicly backed down from one of his earliest campaign promises: a 15% corporate tax rate. The budget math required for a 15% rate was too difficult, so the somewhat higher rate is the opening bid. The current statutory federal rate is 35%.
  • A 25% rate for pass-through businesses. Instead of getting taxed at an individual rate for business profits, people who own their own business would pay at the pass-through rate. The plan also says it will consider rules to prevent “personal income” from being taxed at this rate. Mnuchin previously suggested there may be limitations on what types of businesses get this rate — it could apply only to goods producers and not service-oriented companies to prevent people from creating limited-liability corporations to store their assets and receive a lower rate.
  • Elimination of some business deductions, industry-specific incentives, and more. There are few details, but the plan includes language regarding the “streamlining” of business tax breaks.
  • A one-time repatriation tax. All overseas assets from US-owned companies would be considered repatriated and taxed at a one-time lower rate — this is designed to bring corporate profits back from overseas. Illiquid assets like real estate would be taxed at a lower rate than cash or cash equivalents, and the payments would be spread out over time. While there is no precise number in the plan, officials have indicated the rate could end up somewhere around 10%.

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September 27, 2017

California Mulls Combustion-Engine Car Ban: "You Could Stop All Sales By 2030"

California, the state which single-handedly turned Elon Musk into the billionaire that he is today by forcing taxpayers to subsidize his unprofitable electric vehicle scam via "Zero Emission Vehicle" credits, is now considering a full ban of combustion-engine cars by as early as 2030. The potential ban was discussed by Mary Nichols of the California Air Resources Board, the same folks who decided to regulate cow farts last year, who told Bloomberg that Governor Jerry Brown has expressed interest in a ban.

Governor Jerry Brown has expressed an interest in barring the sale of vehicles powered by internal-combustion engines, Mary Nichols, chairman of the California Air Resources Board, said in an interview Friday at Bloomberg headquarters in New York. Brown, one of the most outspoken elected official in the U.S. about the need for policies to combat climate change, would be replicating similar moves by China, France and the U.K.

“I’ve gotten messages from the governor asking, ‘Why haven’t we done something already?’” Nichols said, referring to China’s planned phase-out of fossil-fuel vehicle sales. “The governor has certainly indicated an interest in why China can do this and not California.”

California has set a goal to cut carbon dioxide emissions by 80 percent from 1990 levels by 2050. Rising emissions from on-road transportation has undercut the state’s efforts to reduce pollution, a San Francisco-based non-profit said last month.

“To reach the ambitious levels of reduction in greenhouse gas emissions, we have to pretty much replace all combustion with some form of renewable energy by 2040 or 2050," Nichols said. “We’re looking at that as a method of moving this discussion forward.”

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September 26, 2017

As Cash Use Plummets, Swedish Government Begins Testing Cryptocurrencies

Riksbank estimates that cash transactions made up only 15 percent of all retail transactions last year. That number is down from 40 percent in 2010, thanks in large part to massively popular mobile payment services. That leaves the bank wondering if a technology similar to that of Bitcoin’s could be implemented in Sweden.

Riksbank isn’t the only central bank taking a serious look at blockchain, the technology that makes Bitcoin and other cryptocurrencies run.

These systems, also called distributed ledgers, rely on networks of computers, rather than a central authority like a bank, to verify and record transactions on a shared, virtually incorruptible database.

Government bankers across the world believe this has the potential to replace cash and make other payment systems more efficient.

Read the entire article

September 25, 2017

China's ICO Crackdown Boosts Hong Kong's Hopes Of Becoming Blockchain Hub

China’s decision to shutter digital-currency exchanges based on the mainland, a strategy meant to extinguish the rampant fraud and abuse associated with initial coin offerings, or ICOs, is brightening Hong Kong's hopes of asserting itself as a hub for blockchain technology.

As Bloomberg reports, while China has at least nominally embraced blockchain technology - even building a prototype digital yuan – Hong Kong’s city government has gone a step further by encouraging blockchain startups to set up shop in the city. One firm run by Johnson Leung, who has found success in finance and shipping, and now runs a blockchain startup, is focusing on applications for container ship operators.

The city’s embrace of blockchain is its latest attempt to nurture a domestic technology industry that could compliment the city’s dominance in banking and shipping. But as Bloomberg notes, betting on blockchain, a technology that has generated a ludicrous amount of hype, much of it undeserved, could be a risky proposition. Despite Hong Kong’s status as a financial hub, the city, one of the most expensive in the world for average working families, has zero “unicorns” – a term for startups valued at over $1 billion.

Skeptics say it’s a risky bet on an unproven technology - one with more than its fair share of hype and, in some cases, fraud. But a growing number of Hong Kong entrepreneurs and policy makers are convinced the online ledger system that underlies cryptocurrencies like bitcoin will eventually reshape everything from financial services to supply chains. They say the city’s laissez faire approach toward regulation, along with its expertise in finance and logistics, make it a natural hub for blockchain startups.

I don’t see why Hong Kong can’t be a leader of blockchain technology,” said Leung, who co-founded 300cubits.tech after more than a decade in the financial industry that included stints as a research analyst at JPMorgan Chase & Co. and Jefferies Group LLC. “It’s so new that it’s not like any country has a huge advantage compared to us.”

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September 22, 2017

"You're Going To See A Rush For Gold" - Katusa Warns De-Dollarization Is Accelerating

Global strategist Marin Katusa is the New York Times best selling author of The Colder War, which details the geo-political power shift that threatens the global dominance of the United States. He’s also a well known resource hedge fund manager who legendary investor Doug Casey has called one of the best market analysts he’s ever worked with.

His prior forecasts noted that countries around the world would soon stop trading commodities like oil in the U.S. dollar, something we’re already seeing with China, Russia, Iran, and Venezuela, all of which are preparing non-dollar, gold-backed mechanisms of exchange.

This trend, according to Katusa in a must see interview with Future Money Trends, will only continue to weaken the U.S. dollar going forward and the result will be a massive capital flight to gold in coming years:

I think we’ll have a near term bounce on the U.S. dollar… then it’s going to be very weak… and then it’s going to go much, much lower… With China and Russia working together to de-dollarize the U.S. dollar starting with oil, which is the biggest market… and then all the other commodities.

You’re going to start seeing a massive unwind of these U.S. dollars in the emerging markets.

Read the entire article

September 21, 2017

S&P Downgrades China To A+ From AA- Due To Soaring Debt Growth

Four months after Moody's downgraded China to A1 from Aa3, unwittingly launching a startling surge in the Yuan as Beijing set forth to "prove" just how stable China truly is, moments ago S&P followed suit when the rating agency also downgraded China from AA- to A+ for the first time since 1999 citing risks from soaring debt growth, less than a month before the most congress for Chiina's communist leadership in the past five years is set to take place. In addition to cutting the sovereign rating by one notch, S&P analysts also lowered their rating on three foreign banks that primarily operate in China, saying HSBC China, Hang Seng China and DBS Bank China Ltd. are unlikely to avoid default should the nation default on its sovereign debt. Following the downgrade, S&P revised its outlook to stable from negative.

“China’s prolonged period of strong credit growth has increased its economic and financial risks,” S&P said. “Since 2009, claims by depository institutions on the resident nongovernment sector have increased rapidly. The increases have often been above the rate of income growth.  Although this credit growth had contributed to strong real GDP growth and higher asset prices, we believe it has also diminished financial stability to  some extent."

According to commentators, the second downgrade of China this year represents ebbing international confidence China can strike a balance between maintaining economic growth and cleaning up its financial sector, Bloomberg reported. The move may also be uncomfortable for Communist Party officials, who are just weeks away from their twice-a-decade leadership reshuffle.

The cut will “have a relatively big impact on Chinese enterprises since corporate ratings can’t be higher than the sovereign rating,” said Xia Le, an economist at Banco Bilbao Vizcaya Argentaria SA in Hong Kong. “It will affect corporate financing.”

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September 20, 2017

Do You Trust What JP Morgan CEO Says About Bitcoin?

JP Morgan CEO Jamie Dimon commented that he thinks Bitcoin is a fraud, and that “it will eventually be closed.”

CNBC continues its amazing economic news coverage with his interview.

Yes, the CEO of a major financial institution thinks Bitcoin will be “closed.”

Look, however unlikely, it is possible that the Bitcoin price goes to $0. It is not, however, anywhere within the realm of possibilities that the crypto-currency will be “closed” as Dimon put it.

This is because there is nothing to close. It is not a business. It is not owned by anyone except a vast and disunited network of Bitcoin miners and those who own Bitcoins.

So again, miners could conceivably shut off their computers. People who hold Bitcoin could conceivably sell off at such a rate that the price crumbles. But no one can “close” the cryptocurrency.

If you listen to his complete remarks, what he seems to mean is that governments will crack down on Bitcoin when it becomes too popular.

Read the entire article

September 19, 2017

Top Financial Expert Warns Stocks Need To Drop ‘Between 30 And 40 Percent’ As Bankruptcy Looms For Toys R Us

Will there be a major stock market crash before the end of 2017?  To many of us, it seems like we have been waiting for this ridiculous stock market bubble to burst for a very long time.  The experts have been warning us over and over again that stocks cannot keep going up like this indefinitely, and yet this market has seemed absolutely determined to defy the laws of economics.  But most people don’t remember that we went through a similar thing before the financial crisis of 2008 as well.  I recently spoke to an investor that shorted the market three years ahead of that crash.  In the end his long-term analysis was right on the money, but his timing was just a bit off, and the same thing will be true with many of the experts this time around.

On Monday, I was quite stunned to learn what Brad McMillan had just said about the market.  He is considered to be one of the brightest minds in the financial world, and he told CNBC that stocks would need to fall “somewhere between 30 and 40 percent just to get to fair value”…

Brad McMillan — who counsels independent financial advisors representing $114 billion in assets under management — told CNBC on Monday that the stock market is way overvalued.

“The market probably would have to drop somewhere between 30 and 40 percent to get to fair value, based on historical standards,” said McMillan, chief investment officer at Massachusetts-based Commonwealth Financial Network.

McMillan’s analysis is very similar to mine.  For a long time I have been warning that valuations would need to decline by at least 40 or 50 percent just to get back to the long-term averages.

Read the entire article

September 18, 2017

One-Tenth Of Global GDP Is Now Held In Offshore Tax Havens

Accurately measuring the scope of global wealth inequality is a notoriously difficult undertaking – a fact that was brought to light last year when the International Consortium of Investigative Journalists published the Panama Papers, exposing clients of Panamanian law firm Mossack Fonseca. As the papers revealed, Mossack Fonseca, which is only the world’s fourth-largest provider of offshore financial services, boasted a client roster stacked with some of the world’s wealthiest and most politically connected individuals. The former prime minister of Iceland (who was forced from office because of the revelations), associates of Russian President Vladimir Putin, and the father of former UK Prime Minister David Cameron.

In a first-of-its kind study from the National Bureau of Economic Research, a team of economists has broken down rates of offshore wealth holdings as a percentage of GDP to identify countries with the largest, and smallest, percentages of wealth held offshore. The study’s conclusion suggests a reality that many readers probably suspected: the true scope of wealth inequality is far larger than the official statistics would suggest.

The study found that as much as one-tenth of the world’s GDP is held in tax havens, though that percentage can vary widely from country to country.

Here's Bloomberg:

“One-tenth of the world’s GDP is held in offshore tax havens, but that share jumps to as much of 15 percent for Europe and as much as 60 percent for Gulf and some Latin American countries, new research shows.

When it comes to total offshore wealth as a share of GDP, the United Arab Emirates, Venezuela, Saudi Arabia, Russia and Argentina lead the pack, while Germany, the U.K. and France all have above-average holdings. The U.S. is slightly below average.”

Read the entire article

September 15, 2017

Comparing Bitcoin, Ether, & Other Cryptos

Unless you’ve been hiding under a rock, you’re probably aware that we’re in the middle of a cryptocurrency explosion. In one year, the value of all currencies increased a staggering 1,466% – and newer coins like Ethereum have even joined Bitcoin in gaining some mainstream acceptance.

And while people like Jamie Dimon of J.P. Morgan and famed value investor Howard Marks have been extremely critical of cryptocurrencies as of late, many other investors are continuing to ride the wave. As Visual Capitalist's Jeff Desjardins has noted in the past, the possible effects of the blockchain cannot be understated, and it could even change the backbone of how financial markets work.

However, even with the excitement and action that comes with the space, a major problem still exists for the layman: it’s really challenging to decipher the differences between cryptocurrencies like Bitcoin, Ethereum, Ethereum Classic, Litecoin, Ripple, and Dash.

For this reason, we worked with social trading network eToro to come up with an infographic that breaks down the major differences between these coins all in one place.

Read the entire article

September 14, 2017

De-Dollarization Spikes - Venezuela Stops Accepting Dollars For Oil Payments

Apparently confirming what President Maduro had warned following the recent US sanctions, The Wall Street Journal reports that Venezuela has officially stopped accepting US Dollars as payment for its crude oil exports.

As we previously noted, Venezuelan President Nicolas Maduro said last Thursday that Venezuela will be looking to “free” itself from the U.S. dollar next week. According to Reuters,

“Venezuela is going to implement a new system of international payments and will create a basket of currencies to free us from the dollar,” Maduro said in a multi-hour address to a new legislative “superbody.” He reportedly did not provide details of this new proposal.

Maduro hinted further that the South American country would look to using the yuan instead, among other currencies.

“If they pursue us with the dollar, we’ll use the Russian ruble, the yuan, yen, the Indian rupee, the euro,” Maduro also said.

Read the entire article

September 13, 2017

Former BIS Chief Economist Warns "More Dangers Now Than In 2007"

India’s debt problems go back a long way, and there are significant governance issues, including at state-owned banks.

China’s debt situation isn’t a lot different to India’s, but the acceleration of loans and credit growth in China is very fast

It’s not just the debt level in China that is worrisome, but the speed that it’s accumulating; maybe some of these loans won’t be repaid or serviced.

We don’t have a liquidity problem that central banks can solve - if we have too much debt, we have a debt resolution or insolvency problem and only governments can address problems like that.

World needs more fiscal expansion, structural reforms, and also have to look closely at debt write-off some of it and maybe recapitalize financial institutions.

We have got the mix of income that goes to capital versus labor wrong in many countries, and we need to look at that.

Central bank tightening is inevitable, but have to be careful.

Read the entire article

September 12, 2017

Debt Nightmare: Does Anyone Actually Care That Our Exploding National Debt Is Destroying Our Future?

When will America finally wake up?  The borrower is the servant of the lender, and we now have a colossal 20 trillion dollar chain around our collective ankles.  We have willingly enslaved ourselves, our children and our grandchildren, and yet our addiction is so insatiable that we continue to add more than 100 million dollars to our debt load every single hour of every single day.  The national debt is sitting at a grand total of $20,162,176,797,904.13 at this moment, but now that the debt ceiling has been lifted that number is expected to shoot up very rapidly toward 21 trillion dollars by the end of the year.  The national debt had been held down by accounting tricks to keep it under the debt limit for many months, but every time this has happened before we have seen the national debt absolutely explode back to projected levels once the debt ceiling was raised.

But very few of our “leaders” in Washington seem to care that we are in the process of committing national suicide.  There is no possible way that we will be able to continue to be the most powerful economy on the planet if we continue down this road.  During Obama’s eight years in the White House, we added more than 9 trillion dollars to the national debt. That certainly improved things in the short-term, because if we could go back and take 9 trillion dollars out of the economy over the past 8 years we would be in an absolutely nightmarish economic depression right now.

But even with all of this borrowing and spending, our economy has still only grown at an average rate of just 1.33 percent a year over the last 10 years.

And by going into so much debt, we are literally destroying the future for our children and our grandchildren.

What we are doing to them is beyond criminal, and people should be going to prison over this.  But instead we just keep rewarding these Congress critters by sending the same cast of characters back to Washington over and over again.

Are we insane?

Read the entire article

September 11, 2017

A Matter Of "Trust": A Look Inside China's Crackdown Of Its $3 Trillion Shadow Banking Industry

Finally, even if China manages to crackdown on Shadow Banking there is another problem: as a recent report by Natixis put it perfectly, "when one [credit] door closes [in China], another one opens up." This simply means that as Beijing slams the door shut on Trust and other key shadow debt components, these will be offset by an increased usage in others such as WMPs, NBFIs, Repos, Negotiatable Certificates of Deposit, and money markets. Below are the highlights from the report:

As deleverage becomes a higher level objective (but sometimes conflicting) to the Chinese leadership, banks now face more restrictions from regulators. In any event, this is not the first time they find themselves in the regulatory whirlpool. From the usage of repo agreements to wealth management products (WMPs), and most recently negotiable certificate of deposits (NCDs), banks have been very creative in playing the cat and mouse game in front of evolving regulations.

Flourishing financial innovation has helped China’s leverage process to continue unabated. The deleveraging process has hardly begun. In contrast, liquidity seems to be increasingly scarce, which keeps on lifting the cost of funding. In fact, overnight SHIBOR is at record high since the difficult events in 2015, very close to 3% (Chart 1). One of the key reasons for the liquidity shortage is related to tighter regulatory control from the People's Bank of China (PBoC), in particular stricter Macro Prudential Assessment (MPA). This has hampered the use of WMPs to fund banks’ asset growth. They have already shrunk by 1.6 RMB trillion to 28.4 RMB trillion in May 2017 (Chart 2)

Read the entire article

September 8, 2017

Toronto Home Price Bubble Bursts Into Bear Market

With surprise rate hike, Bank of Canada turns against housing market...

Home sales in the Greater Toronto Area, the largest housing market in Canada, plunged 34.8% in August compared to a year ago, to 6,357 homes, with sales of detached homes and semi-detached homes getting eviscerated:

Sales by type:

Detached houses -41.6%
Semi-detached houses -37.3%
Townhouses -27.5%:
Condos -28.0%.

Even as total sales plunged, the number of active listings of homes for sale soared 65% year-over-year to 16,419, with 11,523 new listings added in August, according to the Toronto Real Estate Board (TREB).

“The relationship between sales [plunging] and listings in the marketplace today [soaring] suggests a balanced market,” the report explained, adding hopefully:

“If current conditions are sustained over the coming months, we would expect to see year-over-year price growth normalize slightly above the rate of inflation. However, if some buyers move from the sidelines back into the marketplace, as TREB consumer research suggests may happen, an acceleration in price growth could result if listings remain at current levels.”



September 7, 2017

NYC Commercial Real Estate Sales Plunge Over 50% As Owners Lever Up In The Absence Of Buyers

So what do you do when the bubbly market for your exorbitantly priced New York City commercial real estate collapses by over 50% in two years?  Well, you lever up, of course

As Bloomberg notes this morning, the 'smart money' at U.S. banking institutions are tripping over themselves to throw money at commercial real estate projects all while 'dumb money' buyers have completely dried up.

A growing chasm between what buyers are willing to pay and what sellers think their properties are worth has put the brakes on deals. In New York City, the largest U.S. market for offices, apartments and other commercial buildings, transactions in the first half of the year tumbled about 50 percent from the same period in 2016, to $15.4 billion, the slowest start since 2012, according to research firm Real Capital Analytics Inc.

At the same time, the market for debt on commercial properties is booming. Investors of all stripes -- from banks and insurance companies to hedge funds and private equity firms -- are plowing into real estate loans as an alternative to lower-yielding bonds. That’s giving building owners another option to cash in if their plans to sell don’t work out.

“Sellers have a number in mind, and the market is not there right now,” said Aaron Appel, a managing director at brokerage Jones Lang LaSalle Inc. who arranges commercial real estate debt. “Owners are pulling out capital” by refinancing loans instead of finding buyers, he said.

Read the entire article

September 6, 2017

US Bitcoin Exchange Coinbase Hits 10 Million Users

After two (and soon three) "generational" market crashes, Joe Sixpack may have lost interest in the stock market (or at least in single names, the transfer of bagholder rights from institutions to retail investors via ETFs is doing just fine), but when it comes to chasing torrid, upward price momentum, US retail investors are doing their best frenzied Chinese housewife impression now that they have discovered the next big bubble thing, and it's called bitcoin. And nowhere is America's sudden infatuation with cryptocurrencies such as bitcoin, ethereum, litecoin and all other "coins" which can make (or break) a hedge fund's annual return in days if not hours, more obvious than on Coinbase, the US bitcoin exchange, which has just hit a remarkable 10 million registered users, all of whom are there for just one thing: to trade, but mostly buy, crypto currencies.

The San Francisco startup has seen tremendous growth in 2017, adding thousands of users per day and handling increasing levels of trading volume. Last month, CEO Brian Armstrong announced that the company had raised $100 million during its latest funding round, giving the company a valuation of $1 billion, making it first “bitcoin unicorn” according to Cryptocoinsnews. A few weeks later, following the latest burst higher in bitcoin, Coinbase has surpassed 10 million registered users. In the last three weeks of August, the bitcoin exchange added an astonishing 800,000 users as the bitcoin price briefly rose above $5,000. According to data from the Coinbase website, the exchange and wallet service has also recently surpassed $20 billion in total volume.

While many bitcoin veterans have panned Coinbase for its simplistic approach to trading (no limit orders, no shorting, etc) and exorbitant fees, some actually enjoy the minimialist, if expensive, experience: one user on reddit, btcltc77, referred to the exchanges as the “McDonald’s of Bitcoin banking.”

Coinbase is still the most mainstream way of buying Bitcoin. It’s the McDonald’s of Bitcoin banking.

That, and the implied safety net from its increasingly bigger venture backing, appears to be working and has made Coinbase the go-to site for millions of armchair cryptocurrency investors.

Read the entire article

September 5, 2017

These cheap retail stocks can hold their own against Amazon

When it comes to consumer stocks, it's the best of times and the worst of times.  

On the plus side, consumer sentiment is strong. The Conference Board's measure of consumer confidence hit a 16-year high a few months back, and there's little sign of a slowdown. July retail figures released a few weeks ago were the best they've been all year.

Yet retail and consumer stocks have been toxic despite these broader metrics. The SPDR S&P Retail ETF XRT, +1.35%  , for example, is down more than 15% in the past two years vs. a 25% gain for the S&P 500 SPX, +0.20%  ; this year so far the fund is down 10% vs. a 10% gain for the S&P 500

Are consumer stocks and traditional retailers dead forever? Or are they poised for a comeback as the all-important holiday shopping season kicks off?

Unfortunately, there are no easy answers. Certain segments of specialty retail have remained resilient, while others look to be down for the count. But take a closer look at the fundamentals of these three specific companies after their recent earnings reports. Each of them a good chance of mounting a late-2017 comeback, particularly if consumer sentiment stays strong:

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September 4, 2017

Visualizing The Unparalleled Explosion In Cryptocurrencies

After the massive Bitcoin price surge in November 2013, the popularity of launching new cryptocurrencies took off along with it.

In fact, as Visual Capitalist's Jeff Desjardins notes, if you go back at historical snapshots around that time, you’ll see that there were literally hundreds of new coins available to mine and buy. Here’s one from November 2014 – a time when there were only 32 coins that were worth more than $1 million in market cap, and 354 coins that were worth less than $50,000, usually trading for tiny fractions of a cent.

It seems like everyone and their dog were launching cryptocurrencies back then, even if they were a longshot to materialize into anything.

Then vs. Now

Fast forward to today, and things haven’t changed much – many people and companies are still launching new cryptocurrencies through a mechanism known as an ICO (Initial Coin Offering).

The only difference?

Today, there is real money at play, and in 12 months the number of cryptocurrencies worth >$1 million has soared by 468%. Meanwhile, the total value of all currencies together has skyrocketed by 1,466%.

Read the entire article

September 1, 2017

Six Banks Join UBS's "Utility Coin" Blockchain Project

Here’s a piece of news that the remaining human members of Wall Street’s FX sales and trading desks probably don’t want to hear.

According to the Financial Times, six of the world’s largest banks have decided to join a blockchain project called “utility coin” that will allow banks to settle trades in securities denominated in different currencies without a money transfer. What’s worse, the banks expect to begin live-testing the project late next year.

“Barclays, Credit Suisse, Canadian Imperial Bank of Commerce, HSBC, MUFG and State Street have teamed up to work on the “utility settlement coin” which was created by Switzerland’s UBS to make financial markets more efficient.

The move comes as the project shifts into a new phase of development, in which its members aim to deepen discussions with central banks and to work on tightening up its data privacy and cyber security protections.”

The project’s managers say they’ve already involved representatives from various central banks…

Read the entire article

August 31, 2017

Nomi Prins: A Decade Of G7 Central Bank Collusion... And Counting

Since late 2007, the Federal Reserve has embarked on grand-scale collusion with other G-7 central banks to manufacture a massive amount of money. The scope and degree of this collusion are historically unprecedented and by admission of the perpetrators, unconventional in approach, and - depending on the speech - ineffective.

Central bank efforts to provide liquidity to the private banking system have been delivered amidst a plethora of grandiose phrases like “unlimited” and “by all means necessary.” Central bankers have played a game with no defined goalposts, no clock rundown, no max scores, and no true end in sight.

At the Fed’s instigation, central bankers built policy on the fly. Their science experiment morphed into something even Dr. Frankenstein couldn’t have imagined. Confidence in the Fed and the U.S. dollar (as well as in other major central banks globally) has dropped considerably, even as this exercise remains in motion, and even though central bankers have tactiltly admitted that their money creation scheme was largely a bust, though not in any one official statement.

Cracks in the Facade

On July 31, 2017, Stanley Fischer, vice chairman of the Fed, delivered a speech in Rio de Janeiro, Brazil. There, he addressed the phenomenon of low interest rates worldwide.

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August 30, 2017

Emerging Market Debt: Dumb, Dumber, And Dumbest

One of the classic signs that the credit cycle is nearing the end is that borrowers that shouldn’t be getting financed not only get funded, but get it at terms that seem crazy. I’ve recently written about the silly things happening in global high yield debt, Chinese debt and the global attitude to sovereign debt. Continuing this theme are recent examples of emerging market sovereign debt; Greece, Argentina and Iraq. Each of these shouldn’t have been funded, but the desperation for yield saw all three get funded on terms that seem crazy. Here’s the detail on each.

Conclusion

In considering emerging market debt, investors have to be careful to consider each country on its own merits. In the examples of Argentina, Greece and Iraq, bond buyers have suspended sceptical analysis. They’ve banked the equity case, hoping for a substantial change from historical precedents, even though they won’t get a share of the upside if the rosy scenario occurs.

The examples aren’t unusual; as shown in the graph below from Bloomberg Belarus, Mongolia and Ukraine are all CCC+ rated but have bonds yielding less than 6%.

These examples point to the greater fool theory playing out in many credit markets. We’ve now reached the point in the credit cycle where further gains seem dependent upon more dumb money arriving and pushing spreads even tighter.

How much longer can this farce continued?

Read the entire article

August 29, 2017

What Does the Surprise Selection of Expedia’s Dara Khosrowshahi as CEO Mean for Uber?

You could have gotten whiplash from watching Uber’s CEO selection ping pong today. First former supposed lead horse, ex GE CEO Jeff Immelt, withdrew, apparently because he’d gotten wind he wasn’t going to get the nod. Then the press briefly reported that HP’s Meg Whitman was who the board wanted….despite her having said firmly she didn’t want the job, twice. It turns out she’d come on Saturday, apparently at Benchmark’s behest, and given the board a little speech on what she thought Uber ought to do.

Not long after that, the press started reporting that the board had settled on a name that had been kept under wraps, that of Dara Khosrowshahi, currently the CEO of Expedia, who was also the highest paid CEO in 2015, pulling down a cool $94.5 million in 2015. While there has been some grumbling about Khosrowshahi’s rich compensation, he’s never made any of the “overpaid CEO” lists. That’s because his spectacular 2015 payday was almost entirely the result of a grant of $90.8 million in stock options…for signing a long term employment agreement stipulating that he remain at the helm until September 2020. In 2016, his pay was a more staid $2.45 million.

But Khosrowshahi is going to be Uber’s $100+ million man, since that’s going to be the order of magnitude cost of buying him out from his Expedia agreement plus whatever special inducements needed for him to join Uber (almost certainly vastly richer in expected comp if you believe that Uber will be able to do an IPO at a suitably lofty valuation, an idea we regard with considerable skepticism).

The press has been positive about the choice, if nothing else because Expedia has been a drama-free tech company and the financial media likes the idea of a tech CEO for Uber (arguably a necessity to keep up the fantasy that a local transportation company deserves a unicorn premium). Expedia managed to be one of two winners in what was originally a four-company fight for dominance in the travel booking business. And it also represents at least a momentary cessation of hostilities at the Uber board, since the vote on Khosrowshahi was unanimous. Recode gives some detail about his background, focusing on factors that may help him succeed, without acknowledging the magnitude of the task.

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August 28, 2017

On The Coming Collapse Of China's Ponzi Scheme Economy

As long as it keeps growing everything is fine. When it stops growing it collapses.

In this case you justify production with demand based purely on more production. As long as you keep pushing production up everything looks fine. At its peak in 2014 China turned out 30 times more cement than the United States, and the latest production figures are only a smidgen less than 2014’s.

Command systems may be good at deciding where to direct economic effort in wartime but they are hopeless in peacetime at deciding when to stop and do something else.

They just keep going down the same old track and then what you get is economic cancer, uncontrollable growth.

You don’t see it right away. Any Ponzi scheme looks just fine as long as more people can be found to put their money in. But the end is inevitable and the longer it is delayed the more resounding the collapse.

It has so long been delayed in the mainland that, when the end finally comes, I believe more than half of the loans and advances of the financial system will prove irrecoverable, which would be very resounding indeed.

Read the entire article

August 27, 2017

Ford To Abandon "Traditional Credit Scores" For Underwriting Decisions As Sales Stall

So, what do you do when your sales are stalling because you've already financed new cars for every man, woman and child with a credit score north of 500?  Well, you simply abandon credit scores in the underwriting process and instead explicitly mandate that your loan officers approve every potential car buyer that walks through the door with a pulse. 

Maybe we're exaggerating a little, but according to a new report from the Wall Street Journal, Ford Credit "has decided to change its approval process to look beyond credit scores in an effort to pump up sales."  Which is a genius strategy if we understand it correctly.

The company says it is looking at ways to increase loan and lease approvals for applicants with limited credit histories. These consumers are often denied credit because they lack a history of managing debt and as a result have low credit scores. Ford’s credit division plans to review new data to try to determine whether these customers, as well as those with more robust borrowing histories, are likely to repay their loans.

The move by Ford Motor's financing unit is expected to unfold in coming years, even as concerns mount about rising auto-loan losses in the industry. Ford Motor Credit is expected to announce the plans as soon as Friday.

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