The financial debt crisis of 2008 did more than cause a world recession, it exposed the inner finances of nations with not only their banks, but interrelated banking systems. The EU, now under Mario Draghi, has expressed the thought that the EU will do whatever it takes to return to growth. The US central bank chief, Ben Bernanke gave the world more time to get their houses in order with below inflation credit last Thursday. With that said, let us take a closer look at the results of these QE measures.
Everyone knows that Ireland and Greece were the first to implode under the recession, and both nations received bailout loans. Soon, they were followed by Spain, Portugal and Italy which caused a small riff in the EU as the wealthier northern nation's said that they were being put at risk because the poorer southern nation's could not get their act together. This too passed with time, especially when the effects of the recession hit those same northern nation's. Then, the debt crisis fell off the radar until Cyprus, which by the way, the IMF stated on Friday of last week, is suffering more than first thought. Unemployment grew from 15% to 17%. Not good, considering the haircut that depositors took from the EU, the troika and IMF's response to that nation's banking crisis. So, here's the results.
GDP
is the sum total of economic activity in a nation.
Nation Growing Declining
Greece 3.8%
Portugal 2.1%
Italy 2.1%
Netherlands 1.8%
Spain 1.6%
Belgium - 0% -
France .3%
Germany .5%
One other nation, although not a EU member, still part of economic system.
UK 1.5%
Bottom line: 63% are negative and yet, the EU and IMF always forecast positive growth. Why? You got to make people believe, but when supper's due and you have nothing to eat and then the rent's due or a unexpected bill happens, those beliefs face reality and distrust grows. Not good.
What about the austerity plans and other solutions? The next fact is one that you would never believe, yet it is true. Name the one EU nation to lower its debt in the past year? Greece and this is no Ripley's Believe It or Not. Every and I mean ALL the other nations in Europe increased their debt. This government spending is the reason for some growth or a reason to contain the declining growth. Not good. By the way Portugal's debt increased by 15.3%. This is a total failure and you will be able to see this more clearly when I show you the unemployment picture.
Nation Unemployment rate
Greece 27.9%
Spain 26.3%
Portugal 16.5%
Ireland 13.8%
Italy 12.0%
France 11.0%
Belgium 8.9%
UK 7.7%
Netherlands 7.0%
Germany 5.3%
Maybe the above nations should attend a BLS conference to learn how to fudge the numbers?
Last Question
if the EU is a union, how come there are large differences in bond rates? For example, Greece pays 9.6% on a ten year note while Germany only pays 1.94%. Wake Up, Greece! You are being exploited to lower the value of the euro which allows the northern economies to export more at a lower cost. The EU wants to you end your sovereignty and until you do, they say you have to bare the costs of borrowing on your own merits, but we're here to help. Like I've stated before, leave the EU and form a new union with the southern nations where you can utilize the one benefit that you got, a lower value currency. You would be able to export more, lower your unemployment and maybe, just maybe achieve some real growth without government spending which only increases your debt picture.
Liars and Crooks: goes to the BLS, again! They stated that the August employment picture increased by 162K jobs, only to have that figure quietly revised lower by104K. Can you believe a miss by over a hundred thousand?!
Saturday, September 21, 2013
Saturday, September 14, 2013
Bits and Pieces...L&C
"I'm in pieces, bits and pieces..."
- Dave Clark Five
An old rocker from the British invasion. Not a great song, but it presents a direct message about a guy and a girl. Don't fret. Not where I'm going, however in correlation to the market and the economy, it definitely relates. The market cannot decide to rise to a new high or descend to a new low. This is reflected in the economy where one report is positive, followed by another that is negative. You could make the same relationship to the global community.
Economic Principle
it is called the "Accelerator Law of Economics." It declares that if an economy is not accelerating at an accelerating rate, that economy is really decelerating.
Is this principle reflective in our present state? One could point to the vast improvement in the economies of Mexico, S.Korea, and Vietnam. To me, this is a very small list.
One could point to the turn-around in the U.K., Sweden and Colombia. Again, this is a very short list.
China has been the world leader in creating jobs, growth and trade, however there are questions to the validity of facts, a very real housing and financial bubble, not to mention a slowdown in activity in growth and trade. As special as China appears to be, as noted in previous articles, there is a fly in the chow mien.
Then, there is the US which is just as guilty as China concerning the facts of its economy. At best, it is around 2%, but from quarter-to-quarter, the growth is uneven. There are more countries in the EU that are in recession than growing. Japan, Brazil, Argentina, India, and Australia all face problems, especially with their currency. Not good. If you placed the above on a scale, you would have only 6 economies that show acceleration, while the weight of all the other nations slams the scale to the downside.
Second Opinion
Michael Hartnett, of BofA, recently gave a report that agrees with the above. He is credited in coining the term, "Great Rotation."
- The Next 5 Years, Curb Your Enthusiasm
(With) Significant monetary stimulus, the end of fiscal austerity, a booming housing market, a cheap dollar, record corporate cash balances...if he US economy does not accelerate in coming quarters, it never will.
Mortgage Bankers Association
released their refinance and purchase index on Wednesday. It was down a very large 13.5%. Now, dear reader, if housing is the largest component in a consumer economy like ours and it shows buyers in retreat in five of the last seven reports, well, that is a downward trend. In fact, mortgage applications are down 70% since the "recovery" lows of 2009. By the way, refinancing which has led this market, thanks to the Fed, is also down 20%. When you consider all the stimulus that this segment of the market has received and it cannot grow with historic low interest rates, how does this relate to the law of acceleration?
Get the Blue Box of macaroni and cheese because the blues are coming.
Liars and Crooks:President Obama wins hands down. Why? Because he now claims that the military threat to Syria is the reason that the chemical question is resolved and escalation avoided. It was the intervention of Putin of Russia who deserves all the credit. It turns out that Putin writes as well as Obama speaks. Of course, they are both politicians and cannot be really trusted.
Keep this in mind from one of our great founding fathers, James Madison.
"No nation could preserve its liberty in the midst of continual warfare."
- Dave Clark Five
An old rocker from the British invasion. Not a great song, but it presents a direct message about a guy and a girl. Don't fret. Not where I'm going, however in correlation to the market and the economy, it definitely relates. The market cannot decide to rise to a new high or descend to a new low. This is reflected in the economy where one report is positive, followed by another that is negative. You could make the same relationship to the global community.
Economic Principle
it is called the "Accelerator Law of Economics." It declares that if an economy is not accelerating at an accelerating rate, that economy is really decelerating.
Is this principle reflective in our present state? One could point to the vast improvement in the economies of Mexico, S.Korea, and Vietnam. To me, this is a very small list.
One could point to the turn-around in the U.K., Sweden and Colombia. Again, this is a very short list.
China has been the world leader in creating jobs, growth and trade, however there are questions to the validity of facts, a very real housing and financial bubble, not to mention a slowdown in activity in growth and trade. As special as China appears to be, as noted in previous articles, there is a fly in the chow mien.
Then, there is the US which is just as guilty as China concerning the facts of its economy. At best, it is around 2%, but from quarter-to-quarter, the growth is uneven. There are more countries in the EU that are in recession than growing. Japan, Brazil, Argentina, India, and Australia all face problems, especially with their currency. Not good. If you placed the above on a scale, you would have only 6 economies that show acceleration, while the weight of all the other nations slams the scale to the downside.
Second Opinion
Michael Hartnett, of BofA, recently gave a report that agrees with the above. He is credited in coining the term, "Great Rotation."
- The Next 5 Years, Curb Your Enthusiasm
(With) Significant monetary stimulus, the end of fiscal austerity, a booming housing market, a cheap dollar, record corporate cash balances...if he US economy does not accelerate in coming quarters, it never will.
Mortgage Bankers Association
released their refinance and purchase index on Wednesday. It was down a very large 13.5%. Now, dear reader, if housing is the largest component in a consumer economy like ours and it shows buyers in retreat in five of the last seven reports, well, that is a downward trend. In fact, mortgage applications are down 70% since the "recovery" lows of 2009. By the way, refinancing which has led this market, thanks to the Fed, is also down 20%. When you consider all the stimulus that this segment of the market has received and it cannot grow with historic low interest rates, how does this relate to the law of acceleration?
Get the Blue Box of macaroni and cheese because the blues are coming.
Liars and Crooks:President Obama wins hands down. Why? Because he now claims that the military threat to Syria is the reason that the chemical question is resolved and escalation avoided. It was the intervention of Putin of Russia who deserves all the credit. It turns out that Putin writes as well as Obama speaks. Of course, they are both politicians and cannot be really trusted.
Keep this in mind from one of our great founding fathers, James Madison.
"No nation could preserve its liberty in the midst of continual warfare."
Saturday, September 7, 2013
Ain't No Sunshine...L&C
With yet another American contribution in the know-how to make solar energy, people and businesses are realizing that the sun gives us more than warmth and light. However, the sun does not shine every day, not to mention rain, sleet or snow. Just as humans take for granted things that are free like water, fresh air and sunshine, it takes a crisis to understand some aspects of life like the beauty of nature.
Water Pipe Break
and everyone acts crazy, running to stores, buying every water bottle available. If you can make money or save money with solar, then soon, the market has more sticks than you need to start a fire.
There are some other new truths out there.
American Know-how
let someone in our country tinker and create a new product, idea or formula, and the global community will copy it, mass produce it with state support and generally, control whatever it is that finds mass appeal.
Why?
because unless the rich or vision gifted find a way to run with it, there is no incentive to do something with it in America. No one thinks that this gizmo will develop new jobs, increase our standard of living, while at the same time, give me a return on my investment.
This is one sad side of the coin. The other is the make-up of state economies. In these vast structures, there are individual incentives along with government plans. The age old problem is greed and it is showing itself in alternative energy.
Germany
did the world a great service by showing it that a cold climate nation can develop solar energy. It use to be that Japan or Korea would enter a market if the return was there. Now, China is that nation that enters and unduly influences a market. It is the world's largest maker of solar products.
China, like almost every other nation in the global community, tries to appear as capitalistic, but it is a state supported economy. One positive aspect to this is investors find safety because the government will back a company or at least until now. The new regime in China is weening away from government support of local government actions and company projects. This showed itself to be factual when LDK Solar Co., failed to pay its debt of $23.8m last month and is trying to restructure another $240m of securities due in 2014. They are not alone. Suntech Power Holdings Co.'s, is asking or demanding, depending on your side of the desk, to renegotiate, its loan of $8.4b in renewable energy bonds due in 2014.
Like I previously stated, the Chinese government is letting the chips fall when it comes to bailouts of local government or corporate bonds. Although China's predecessor, Wen Jiabao turned China into the world's biggest maker of solar panels by spending $47.5b in support, the new administration says, it needs to stand on its own. Not to distract you, dear reader or this train of thought, but I feel that the new leader is worried about the potential real estate bubble that will run into the trillions and he does not want the same public complaint of helping with bailouts for the rich and putting people out of homes, if it comes to that like in the US.
This alternative attitude indicates Chinese energy bonds are in trouble when due in 2014. China's 10 biggest photovoltaic companies have debt of more than $100b yuan($16.3b US). Notes like 600m yuan for GCL Poly Energy Holding's LTD., the world's biggest maker of polysilicion, and 100m yuan of bonds from ZK Energy Science & Technology Co., a wind/solar hybrid maker.
Not all of Chinese solar companies are suffering. Gingli Green Energy Holding(YGE), the nation's largest and Jinko Solar Holding Co., are returning to profitability after two years of losses, but the world market is saturated and the global community is slowing while at the same time, the Chinese Photovoltaic Industry Alliance between companies and the state expects to double solar installations. I don't think the sun will shine on these type of investments for a while.
Liars and Crooks: I could give it to Obama for rejecting the advice of the G-20 on intervening in Syria, but I'll wait until the word from Congress. With that said, I'm gonna share it between the Basil Committee in Europe and the US chief on derivatives, Gary Gensler. In Europe banks got the committee to relax the fees to strenghten the derivative market by not requiring banks and brokerages to post a margin for these trades not passed through a "clearing house." They said it might harm the economy. Ha! This $633t market has the US with half of the valuation and our banks said that they would lose business to Europe which will harm the economy. Pure B.S.! Gensler bowed to the new US treasurer, Jacob Lew who bowed to the banks.
Why? Because they know the Fed is their back-up. End the Fed!
Water Pipe Break
and everyone acts crazy, running to stores, buying every water bottle available. If you can make money or save money with solar, then soon, the market has more sticks than you need to start a fire.
There are some other new truths out there.
American Know-how
let someone in our country tinker and create a new product, idea or formula, and the global community will copy it, mass produce it with state support and generally, control whatever it is that finds mass appeal.
Why?
because unless the rich or vision gifted find a way to run with it, there is no incentive to do something with it in America. No one thinks that this gizmo will develop new jobs, increase our standard of living, while at the same time, give me a return on my investment.
This is one sad side of the coin. The other is the make-up of state economies. In these vast structures, there are individual incentives along with government plans. The age old problem is greed and it is showing itself in alternative energy.
Germany
did the world a great service by showing it that a cold climate nation can develop solar energy. It use to be that Japan or Korea would enter a market if the return was there. Now, China is that nation that enters and unduly influences a market. It is the world's largest maker of solar products.
China, like almost every other nation in the global community, tries to appear as capitalistic, but it is a state supported economy. One positive aspect to this is investors find safety because the government will back a company or at least until now. The new regime in China is weening away from government support of local government actions and company projects. This showed itself to be factual when LDK Solar Co., failed to pay its debt of $23.8m last month and is trying to restructure another $240m of securities due in 2014. They are not alone. Suntech Power Holdings Co.'s, is asking or demanding, depending on your side of the desk, to renegotiate, its loan of $8.4b in renewable energy bonds due in 2014.
Like I previously stated, the Chinese government is letting the chips fall when it comes to bailouts of local government or corporate bonds. Although China's predecessor, Wen Jiabao turned China into the world's biggest maker of solar panels by spending $47.5b in support, the new administration says, it needs to stand on its own. Not to distract you, dear reader or this train of thought, but I feel that the new leader is worried about the potential real estate bubble that will run into the trillions and he does not want the same public complaint of helping with bailouts for the rich and putting people out of homes, if it comes to that like in the US.
This alternative attitude indicates Chinese energy bonds are in trouble when due in 2014. China's 10 biggest photovoltaic companies have debt of more than $100b yuan($16.3b US). Notes like 600m yuan for GCL Poly Energy Holding's LTD., the world's biggest maker of polysilicion, and 100m yuan of bonds from ZK Energy Science & Technology Co., a wind/solar hybrid maker.
Not all of Chinese solar companies are suffering. Gingli Green Energy Holding(YGE), the nation's largest and Jinko Solar Holding Co., are returning to profitability after two years of losses, but the world market is saturated and the global community is slowing while at the same time, the Chinese Photovoltaic Industry Alliance between companies and the state expects to double solar installations. I don't think the sun will shine on these type of investments for a while.
Liars and Crooks: I could give it to Obama for rejecting the advice of the G-20 on intervening in Syria, but I'll wait until the word from Congress. With that said, I'm gonna share it between the Basil Committee in Europe and the US chief on derivatives, Gary Gensler. In Europe banks got the committee to relax the fees to strenghten the derivative market by not requiring banks and brokerages to post a margin for these trades not passed through a "clearing house." They said it might harm the economy. Ha! This $633t market has the US with half of the valuation and our banks said that they would lose business to Europe which will harm the economy. Pure B.S.! Gensler bowed to the new US treasurer, Jacob Lew who bowed to the banks.
Why? Because they know the Fed is their back-up. End the Fed!
Saturday, August 31, 2013
Periphery Red Flags...L&C
"Anything that won't go on forever...won't"
- Herb Stein
The global community and the stock market are raising red flags. There is no central, focal point to base this view, only the general whole picture. It is appearing at the edges. Things don't just spin out of control. The ancient Greeks understood this with their transition point in philosophy. You cannot go from A to C without passing B. You can only realize there is a forest when you stand outside of it, preferably from a high vantage point. These sayings and concepts are reflected in many small ways around the globe and within the market.
Bailout
Greece needs more money. They are trying to hold off on the announcement until after the German election. The previous bailout money was suppose to last until 2015. They are not the only one. Italy just lost $6.5B because they repealed their property tax law. They do not at this time have an alternative plan to cover this deficit. I'm guessing the plan is to sell more bonds to the EU, which is really a bailout.
Arab Spring
has escalated into riot form under the four stages of civil disobedience. There are other problems like evacuees that are flooding neighbor nations like Jordan and Lebanon because Syria has moved onto the revolution stage. These small nations with limited finances are suffering with this extra burden. They will ask for aid from the UN, IMF, US, Europe, anywhere they can get it.
Bonds
US notes are experiencing out-flows greater than the crisis of 2008. July's report won't come until 15 September. It won't be good. In addition, the velocity of money, which is the movement by lending is down straight from 1997. This deleveraging is one reason for low inflation. I will not say there is no inflation because it appears in energy and food. In everything else it is contained. This deflationary outlook is not good for gold and the overall economy. One other aspect, there are more stocks making new lows than are making new highs. This is a tell in card lingo. There are other currency problems with the rupee, yen and baht. They are feeling inflation due to QE by western central banks.
History Repeats
This scenario has happened twice. The first time was a short recession in 1919 and the second in 1929, which needs nothing more said.
There is someone that I follow who studies cycles. He uses these trends and he correlates them with national demographics to form concepts about economies. Harry Dent has written many books with his ideas which are very accurate. I believe that they are close to truths in relationship to economies. Dent sees a crisis due to the aging of the western nations.
One financial aspect of these trends is reflected in less revenues for government. The US will reach its spending level in October. President Obama will ask Congress to raise the debt ceiling. It has been raised 78 times since WWII. As much as the Republicans claim that the Democrats are the tax and spend party, they have raised the debt level 49x to 29x for the Dems. Last year at this time our debt level was $15.97t and it grew at 4.75% to $16.73t today. It would be nice to say our wages grew by that percentage, but they didn't and won't in the future where rising rates will make this debt figure unbearable.
Back to the top
leads us back to Herb Stein. Periphery-to-core is how things change and in this case, we are talking about an approaching recession. We, and many global nations have a problem that is centered on debt. You cannot "solve" this problem by adding more debt. Prosperity cannot be achieved by printing out of thin air which only rigs the market which only destroys trust. If you prefer a bigger name with the same idea, how about Albert Einstein, "insanity is doing the same thing, over and over and expecting a different solution."
Liars and Crooks: I cannot trust Obama anymore. The past week has the same feel as when Bush ran the show with his rush to war with his lies on Iraq, which gave us two wars for the decade which is bankrupting the nation. We are not the police for the world!
- Herb Stein
The global community and the stock market are raising red flags. There is no central, focal point to base this view, only the general whole picture. It is appearing at the edges. Things don't just spin out of control. The ancient Greeks understood this with their transition point in philosophy. You cannot go from A to C without passing B. You can only realize there is a forest when you stand outside of it, preferably from a high vantage point. These sayings and concepts are reflected in many small ways around the globe and within the market.
Bailout
Greece needs more money. They are trying to hold off on the announcement until after the German election. The previous bailout money was suppose to last until 2015. They are not the only one. Italy just lost $6.5B because they repealed their property tax law. They do not at this time have an alternative plan to cover this deficit. I'm guessing the plan is to sell more bonds to the EU, which is really a bailout.
Arab Spring
has escalated into riot form under the four stages of civil disobedience. There are other problems like evacuees that are flooding neighbor nations like Jordan and Lebanon because Syria has moved onto the revolution stage. These small nations with limited finances are suffering with this extra burden. They will ask for aid from the UN, IMF, US, Europe, anywhere they can get it.
Bonds
US notes are experiencing out-flows greater than the crisis of 2008. July's report won't come until 15 September. It won't be good. In addition, the velocity of money, which is the movement by lending is down straight from 1997. This deleveraging is one reason for low inflation. I will not say there is no inflation because it appears in energy and food. In everything else it is contained. This deflationary outlook is not good for gold and the overall economy. One other aspect, there are more stocks making new lows than are making new highs. This is a tell in card lingo. There are other currency problems with the rupee, yen and baht. They are feeling inflation due to QE by western central banks.
History Repeats
This scenario has happened twice. The first time was a short recession in 1919 and the second in 1929, which needs nothing more said.
There is someone that I follow who studies cycles. He uses these trends and he correlates them with national demographics to form concepts about economies. Harry Dent has written many books with his ideas which are very accurate. I believe that they are close to truths in relationship to economies. Dent sees a crisis due to the aging of the western nations.
One financial aspect of these trends is reflected in less revenues for government. The US will reach its spending level in October. President Obama will ask Congress to raise the debt ceiling. It has been raised 78 times since WWII. As much as the Republicans claim that the Democrats are the tax and spend party, they have raised the debt level 49x to 29x for the Dems. Last year at this time our debt level was $15.97t and it grew at 4.75% to $16.73t today. It would be nice to say our wages grew by that percentage, but they didn't and won't in the future where rising rates will make this debt figure unbearable.
Back to the top
leads us back to Herb Stein. Periphery-to-core is how things change and in this case, we are talking about an approaching recession. We, and many global nations have a problem that is centered on debt. You cannot "solve" this problem by adding more debt. Prosperity cannot be achieved by printing out of thin air which only rigs the market which only destroys trust. If you prefer a bigger name with the same idea, how about Albert Einstein, "insanity is doing the same thing, over and over and expecting a different solution."
Liars and Crooks: I cannot trust Obama anymore. The past week has the same feel as when Bush ran the show with his rush to war with his lies on Iraq, which gave us two wars for the decade which is bankrupting the nation. We are not the police for the world!
Saturday, August 24, 2013
Repo Market: Shadow Banking=Fullview Crisis...L&C
There are many aspects to every economy that operate differently within it due to culture and other diversified reasons unique to it. One of these is Shadow Banking. Inside the field of shadow banking is another strange contributor called the Repo Market. It provides short-term loans to the banking industry. These are generally over-night loans that institutions use for bond transactions or covering new rule guidelines like the recent Basil Accord which requires banks to have higher capital assets. The new level of safe banking is 5%.
95% at Risk
This means that banks previously had leverage over 95%. They use our money to increase their bonuses and shareholder value. This is not safe in my thinking and the recent situation in Cypress exposes the weakness in the banking industry that is too interrelated. If one gets a cough, the industry catches a virus.
How Affects the Repo Market
In many countries like China, the Repo market is unregulated. In many western nations it is loosely regulated. In addition, Europe is killing the repo market in two ways. One, the EU says banks now need more capital and they have to follow new improved rules. These requirements will cut $883b of assets. The EU has also instituted a new tax called the "FFT(financial transaction tax)". This tax will effect all bonds and derivative trades.
These new rules have caused the spreads on repo loans to jump 72 percentage points to lend money to banks to cover these taxes. This high rate jump will kill the repo market and when, not if, banks need quick over-night funds, they won't be there. Read trouble and another potential crisis.
There is another aspect to the repo market that is troubling. It is shrinking. In the US it has declined 35% from a peak of $7t in 2008 to $4.6t today. Analysts say the Fed will use it to guide rates higher under the tapering concept of QE.
The Problem
the Fed buys over 60% of treasuries, leaving little investing for the repo market. Richard Comotto of ICMA(International Capital Market Association) says, the new EU tax makes the repo loans unprofitable and this will also effect money market funds. This will surface as rates climb and there won't be a repo market to make the short-term loans that banks will need. Not good.
What I See
there are new rules for capital, but no one is prepared for cyber crime like hacking. There were six major US banks which suffered websites outages in 2012. The KPMG, a UK bank has seen a 12% increase in fraud, especially from hacking. There is at this time the demographic issue. Many older bank executives are retiring and the new, younger replacement hires have no experience. This replacement aspect will effect over 5 large UK banks. Can you say, "I didn't know!"
Liars and Crooks: Obama wins again! His idea to use student loans based on some arbitrary concept of "value" is just a status quo in disguise. The results will be all the established schools getting lower rate loans and all the smaller schools getting screwed. This is very troubling when the student population is shrinking due to demographics.
95% at Risk
This means that banks previously had leverage over 95%. They use our money to increase their bonuses and shareholder value. This is not safe in my thinking and the recent situation in Cypress exposes the weakness in the banking industry that is too interrelated. If one gets a cough, the industry catches a virus.
How Affects the Repo Market
In many countries like China, the Repo market is unregulated. In many western nations it is loosely regulated. In addition, Europe is killing the repo market in two ways. One, the EU says banks now need more capital and they have to follow new improved rules. These requirements will cut $883b of assets. The EU has also instituted a new tax called the "FFT(financial transaction tax)". This tax will effect all bonds and derivative trades.
These new rules have caused the spreads on repo loans to jump 72 percentage points to lend money to banks to cover these taxes. This high rate jump will kill the repo market and when, not if, banks need quick over-night funds, they won't be there. Read trouble and another potential crisis.
There is another aspect to the repo market that is troubling. It is shrinking. In the US it has declined 35% from a peak of $7t in 2008 to $4.6t today. Analysts say the Fed will use it to guide rates higher under the tapering concept of QE.
The Problem
the Fed buys over 60% of treasuries, leaving little investing for the repo market. Richard Comotto of ICMA(International Capital Market Association) says, the new EU tax makes the repo loans unprofitable and this will also effect money market funds. This will surface as rates climb and there won't be a repo market to make the short-term loans that banks will need. Not good.
What I See
there are new rules for capital, but no one is prepared for cyber crime like hacking. There were six major US banks which suffered websites outages in 2012. The KPMG, a UK bank has seen a 12% increase in fraud, especially from hacking. There is at this time the demographic issue. Many older bank executives are retiring and the new, younger replacement hires have no experience. This replacement aspect will effect over 5 large UK banks. Can you say, "I didn't know!"
Liars and Crooks: Obama wins again! His idea to use student loans based on some arbitrary concept of "value" is just a status quo in disguise. The results will be all the established schools getting lower rate loans and all the smaller schools getting screwed. This is very troubling when the student population is shrinking due to demographics.
Sunday, August 18, 2013
Lights Out Arab Spring...SA
There are four stages to civil unrest. It begins with demonstrations, moves to protests, then violence and it ends with riots. This is not good for a society unless life is so untenable that it needs to clean house and try something new. This is how revolutions start. We had one in Libya which is still a work in progress. We have one happening now in Syria.
In the Middle East the global community has seen the Arab Spring movement in many countries. Egypt is the latest example of the third stage and it appears to be entering the final stage. If you recall, Algeria entered this stage and it took a decade to end it. This is not good for Egypt's citizens and world economies. Whether emotions calm down in the historical leading Muslim nation or not, there are other problems looming. The infrastructure within the nation is suffering and it could be the root cause for many problems throughout the world.
Electricity
Although it hardly receives media attention with all the unrest in Egypt, there have been rolling blackouts within the nation. When it is reported, the tone is that the leaders in government do this to curtail their citizens. This is false. According to Ken Moors of Oil & Energy Investors, it is happening because the utility companies lack the resources to keep the lights on. Electricity production comes from either water, oil, natural gas, nuclear, coal, sun or some hybrid form. With people not paying their bills and a dysfunctional government, utility operators are left to their own devices. Moors estimates that by November under the present conditions, the nation will go dark.
When or if this happens, the global community will see future shock.
In Syria, President Bashar Al-Assad does this as part of his military struggle to defeat the revolutionaries within his nation. He cuts off water, electricity and fuel shipments to areas he deems hostile. The Egyptian military in charge will do the same thing in short order. One, because it is an effective option and the operators in charge of producing electricity will inform them of the current situation. Rolling blackouts will save fuel and time to regain control of their society. It will happen in Egypt and soon wherever people gather to demonstrate against their leaders. These acts will push their societies towards protests and the other two stages. We are in troubling times for world peace.
SPECIAL AWARD: No L&C this week. Instead we have an award recognition. It goes to T. Mark Jones. He did receive $597million from the federal government as a whistle-blower. His story is a life struggle against Big Pharmacy. Jones opened a small clinic in Key West in the 80s to help aid victims. After a few years of success, a big pharmaceutical company came to town. Suddenly, he lost all his business. In fact, he was put out of business. He looked into the reasons. He found out the big company gave kickbacks to all doctors if they used their services. Jones could not prove this, although he kept up the fight and gathering information. He finally was able to prove to the government that after the kickbacks, Big Pharma would pad their prices to Medicare, stealing billions from the government program. It is estimated by government officials that Jones es pose will save Medicare over $15.7b in the next decade. Consider this: this is only one region within the nation. The government watchdogs should be all over these crooks. Maybe we could hire some "old" KGB guys to do the job? Anyway, congrats!
In the Middle East the global community has seen the Arab Spring movement in many countries. Egypt is the latest example of the third stage and it appears to be entering the final stage. If you recall, Algeria entered this stage and it took a decade to end it. This is not good for Egypt's citizens and world economies. Whether emotions calm down in the historical leading Muslim nation or not, there are other problems looming. The infrastructure within the nation is suffering and it could be the root cause for many problems throughout the world.
Electricity
Although it hardly receives media attention with all the unrest in Egypt, there have been rolling blackouts within the nation. When it is reported, the tone is that the leaders in government do this to curtail their citizens. This is false. According to Ken Moors of Oil & Energy Investors, it is happening because the utility companies lack the resources to keep the lights on. Electricity production comes from either water, oil, natural gas, nuclear, coal, sun or some hybrid form. With people not paying their bills and a dysfunctional government, utility operators are left to their own devices. Moors estimates that by November under the present conditions, the nation will go dark.
When or if this happens, the global community will see future shock.
In Syria, President Bashar Al-Assad does this as part of his military struggle to defeat the revolutionaries within his nation. He cuts off water, electricity and fuel shipments to areas he deems hostile. The Egyptian military in charge will do the same thing in short order. One, because it is an effective option and the operators in charge of producing electricity will inform them of the current situation. Rolling blackouts will save fuel and time to regain control of their society. It will happen in Egypt and soon wherever people gather to demonstrate against their leaders. These acts will push their societies towards protests and the other two stages. We are in troubling times for world peace.
SPECIAL AWARD: No L&C this week. Instead we have an award recognition. It goes to T. Mark Jones. He did receive $597million from the federal government as a whistle-blower. His story is a life struggle against Big Pharmacy. Jones opened a small clinic in Key West in the 80s to help aid victims. After a few years of success, a big pharmaceutical company came to town. Suddenly, he lost all his business. In fact, he was put out of business. He looked into the reasons. He found out the big company gave kickbacks to all doctors if they used their services. Jones could not prove this, although he kept up the fight and gathering information. He finally was able to prove to the government that after the kickbacks, Big Pharma would pad their prices to Medicare, stealing billions from the government program. It is estimated by government officials that Jones es pose will save Medicare over $15.7b in the next decade. Consider this: this is only one region within the nation. The government watchdogs should be all over these crooks. Maybe we could hire some "old" KGB guys to do the job? Anyway, congrats!
Sunday, August 11, 2013
Progression Test: Vallejo, Detroit, ?...L&C
Vallejo
Not familiar with Vallejo, Ca.? It is in the San Francisco Bay area. It has served twice as the capital of California. It became the largest city to file for bankruptcy in the state in 2008. In the short time period since then, Vallejo lost its infamous recognition to Stockton, California, when it filed in 2012. It did find more insufferable recognition by being named the most miserable US city in 2013.
Detroit
What needs to be said that hasn't been said already? I think the Tigers will win the pennant and they have a good chance to win it all. The Lions will probably be a five hundred team. The court system is rigged in favor of the rich over the poor which translates to the labor unions getting kick again. The real problem will be the "aha!" moment by the workers in Detroit and in the state of Michigan and in the country. They will suffer by having their pension cut. Their emotions will be steaming over the fact that the government bailed out the banks. There will be protests and strikes. Not good. There will probably be violence which could erupt because this awareness will have sympathy across the US. If this connection is coupled, the labor movement will awaken after 50 years or more from a comatose position. This could be a blessing, especially if a new political party is formed to which I advocate. However, this is a long shot and it will be very difficult to tell the difference between the candidates, whether, good, bad or ugly, if the opportunity surfaced.
These things take time and time is exactly what the status quo utilize. How recent were the financial problems of Spain and Italy? It was just last July when the European Central Bank President, Mario Draghi vowed to do,"whatever it takes..." to keep the euro from collapsing and the membership intact. At the time short-term interest rates in Spain and Italy were rising to 7%, but with the ECB buying their bonds, rates fell. The stock markets in both of these nations has risen, although both economies are in recession with unemployment rising. Go figure?
When will Europe have their aha moment? Where does Europe go after the reelection of Angela Merkel in September? I have no idea, however the global situation will determine the EUs continuation in its present form. I think the present state of currency fires will arise from India which will be the spark that lights the weapons of financial destruction or derivatives
Meanwhile, in the US the national scene will continue to talk with gridlock over our many issues, but few will draw attention to the progression of financial troubles that are emerging within our state governments. According to Moody's, there are only fifteen states that are credit worthy to cover their costs for state pension workers. By the way the threshold number that Moody uses is 80% funded. Simple math tells you that we have a serious financial problem that is looming for 35 states. The federal government will not help for many reasons with number one being that they cannot afford to help. There is no money. These people never look ahead, plan for a rainy day. This is reflected in our national debt.
Forecast
are given for everything. Not-with-standing my predictions for the two Detroit professional teams, but here, dear reader, I'm talking about financial estimates. Does anyone in the media bring up the fact that the Fed stated that our recession would be over by now back in 2008? They predicted that the stimulus would give us 3.5% to 4% GDP. Didn't happen. In fact the Fed along with the Obama administration have been wrong about every financial estimate for our economy which at present, is less than half of what was forecast. Not good. This leads to the question, is there a trend? If there is a trend, where is it going?
Illinois
is the fifth largest state with 12,875,255 people. The state government has made its forecast too, especially about state pension workers. The state government has only funded 43% of its needs. It has a very serious problem. It owes for 350,000 past workers and another 500,000 present workers. This means the taxes for the twelve million will go up for the 800K state workers and all will be well. It could happen except that the people running these pensions always give rosy numbers like all government workers, but fail when the due date results are counted. The state pension people said that they would receive 7.84% growth rate when they only got 5.6%. This difference in percentages is small, but in real money the shortfall is in the billions which only adds to lower the 43% funded amount. Consider multiplying the number of years to retirement along with the aspect of new regulations on state mandates to fund pensions and the discrepancy reaches 57%. Sadly, this state will be the first to fall. When? Can't say, but the debt is rising with every passing moment.
Liars and Crooks: goes to China and all those who call for free trade. China was found by the WTC to have illegally taxed US chicken exporters of chicken parts, legs, breasts, etc,(very sexy)to the tune of 105.4%. Ouch! This is a tariff. No wonder that they run a surplus with us. In fact, the average Chinese tariff on US products is 25%. There is no such thing as free trade. Tax all imports! End the Fed!
Not familiar with Vallejo, Ca.? It is in the San Francisco Bay area. It has served twice as the capital of California. It became the largest city to file for bankruptcy in the state in 2008. In the short time period since then, Vallejo lost its infamous recognition to Stockton, California, when it filed in 2012. It did find more insufferable recognition by being named the most miserable US city in 2013.
Detroit
What needs to be said that hasn't been said already? I think the Tigers will win the pennant and they have a good chance to win it all. The Lions will probably be a five hundred team. The court system is rigged in favor of the rich over the poor which translates to the labor unions getting kick again. The real problem will be the "aha!" moment by the workers in Detroit and in the state of Michigan and in the country. They will suffer by having their pension cut. Their emotions will be steaming over the fact that the government bailed out the banks. There will be protests and strikes. Not good. There will probably be violence which could erupt because this awareness will have sympathy across the US. If this connection is coupled, the labor movement will awaken after 50 years or more from a comatose position. This could be a blessing, especially if a new political party is formed to which I advocate. However, this is a long shot and it will be very difficult to tell the difference between the candidates, whether, good, bad or ugly, if the opportunity surfaced.
These things take time and time is exactly what the status quo utilize. How recent were the financial problems of Spain and Italy? It was just last July when the European Central Bank President, Mario Draghi vowed to do,"whatever it takes..." to keep the euro from collapsing and the membership intact. At the time short-term interest rates in Spain and Italy were rising to 7%, but with the ECB buying their bonds, rates fell. The stock markets in both of these nations has risen, although both economies are in recession with unemployment rising. Go figure?
When will Europe have their aha moment? Where does Europe go after the reelection of Angela Merkel in September? I have no idea, however the global situation will determine the EUs continuation in its present form. I think the present state of currency fires will arise from India which will be the spark that lights the weapons of financial destruction or derivatives
Meanwhile, in the US the national scene will continue to talk with gridlock over our many issues, but few will draw attention to the progression of financial troubles that are emerging within our state governments. According to Moody's, there are only fifteen states that are credit worthy to cover their costs for state pension workers. By the way the threshold number that Moody uses is 80% funded. Simple math tells you that we have a serious financial problem that is looming for 35 states. The federal government will not help for many reasons with number one being that they cannot afford to help. There is no money. These people never look ahead, plan for a rainy day. This is reflected in our national debt.
Forecast
are given for everything. Not-with-standing my predictions for the two Detroit professional teams, but here, dear reader, I'm talking about financial estimates. Does anyone in the media bring up the fact that the Fed stated that our recession would be over by now back in 2008? They predicted that the stimulus would give us 3.5% to 4% GDP. Didn't happen. In fact the Fed along with the Obama administration have been wrong about every financial estimate for our economy which at present, is less than half of what was forecast. Not good. This leads to the question, is there a trend? If there is a trend, where is it going?
Illinois
is the fifth largest state with 12,875,255 people. The state government has made its forecast too, especially about state pension workers. The state government has only funded 43% of its needs. It has a very serious problem. It owes for 350,000 past workers and another 500,000 present workers. This means the taxes for the twelve million will go up for the 800K state workers and all will be well. It could happen except that the people running these pensions always give rosy numbers like all government workers, but fail when the due date results are counted. The state pension people said that they would receive 7.84% growth rate when they only got 5.6%. This difference in percentages is small, but in real money the shortfall is in the billions which only adds to lower the 43% funded amount. Consider multiplying the number of years to retirement along with the aspect of new regulations on state mandates to fund pensions and the discrepancy reaches 57%. Sadly, this state will be the first to fall. When? Can't say, but the debt is rising with every passing moment.
Liars and Crooks: goes to China and all those who call for free trade. China was found by the WTC to have illegally taxed US chicken exporters of chicken parts, legs, breasts, etc,(very sexy)to the tune of 105.4%. Ouch! This is a tariff. No wonder that they run a surplus with us. In fact, the average Chinese tariff on US products is 25%. There is no such thing as free trade. Tax all imports! End the Fed!
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