Month: May 2014

Submitted by David Stockman’s Contra Corner

Zaitech With A Chinese Accent: Beijing’s Tepid Efforts To Slow The Credit Boom Are Springing Giant Leaks With Classic End of Bubble Earmarks

China is a case of bastardized socialism on credit steroids. At the turn of century it had $1 trillion of credit market debt outstanding—-a figure which has now soared to $25 trillion. The plain fact is that no economic system can remain stable and sustainable after undergoing a 25X debt expansion in a mere 14 years.

But that axiom is true in spades for a  jerry-built command and control system where there is no free market discipline, meaningful contract law, honest economic information or even primitive understanding that asset values do not grow to the sky. Nor is there any grasp of the fact that the pell-mell infrastructure building spree of recent years is a one-time event that will leave the economy drowning in excess capacity to produce concrete, steel, coal, copper, chemicals and all manner of fabrications and machinery, such as backhoes and cranes, which go into roads, rails and high rises.

The borrowing, building and speculating mania in China has obviously gotten so extreme that even the new regime in Beijing has been desperately trying to cool it down. But this will end up as a catastrophic failure—not the “soft landing” brayed about by Wall Street bulls who do not have the slightest comprehension of the difference between free market capitalism and the phony “red capitalism” that has been confected by the party-controlled apparatus of the massive, intrusive, bureaucratic and hierarchically-driven Chinese State.

At bottom the fatal error among China bulls is the failure to recognize that the colossal boom and bust cycle that China is undergoing is not symmetrical. The much admired alacrity by which the state guided the export boom after 1994 and the infrastructure boom after 2008 is not evidence of a superior model of governance; its only proof that when credit, favors,  subsidies, franchises and speculative windfall opportunities are being passed out freely and to everyone, when there are all winners and no losers ( e. g. China’s bankruptcy rate has been infinitesimal), a statist regime can appear to walk on water.

But what it can’t do is walk the bubble back to stable ground. The boom phase unleashes a buzzing, blooming crescendo of enterprising, investing, borrowing and speculating throughout the population that cannot be throttled back without resort to the mailed fist of state power. But the comrades in Beijing have been in the boom-time Santa Claus modality for so long that they are reluctant to unleash the economic gendarmerie.

That’s partly because their arrogance blinds them to the great house of cards which is China today, and partly because they undoubtedly understand that the party’s popularity, legitimacy and even viability would be severely jeopardized if they actually removed the punch bowl.  Just look at the angry crowds which mill about when a bankrupt entrepreneur skips town and locks up his factory sans all the equipment; or when developers are forced to discount vastly over-priced luxury apartment units they sold to middle class savers/speculators; or when banks attempt to disavow repayment responsibility for “trust products” they sold out the backdoor through affiliates; or the growing millions of rural peasants who have been herded into high-rises without jobs after their land was expropriated by crooked local officials and developers trying to make GDP quotas and a quick fortune, respectively.

In short, the Chinese population “can’t handle the truth” in Jack Nicholson’s memorable line. They by now believe they are entitled to a permanent feast and have every expectation that they party and state apparatus will continue to deliver it. As a result, Beijing has resorted to a strategy of tip-toeing around the tulips in a series of start and stop maneuvers to rein-in the credit and building mania.

But these tepid initiative have pushed the credit bubble deeper into the opaque underside of China’s red capitalist regime, meaning that its inherent instability and unsustainability is being massively compounded. The billiard balls that have been bouncing around the table since Beijing attempted to throttle lending by the Big State banks a few years ago provides a dramatic example.

In round one the big banks attempted to avoid credit growth ceilings by taking a leaf out of Citigroup’s playbook, and opened up back-door affiliates which operated off-balance sheet in the world of so-called shadow banking. These affiliates peddled “trust products” which were essentially high yield CDs that returned double or triple the regulated ceiling on regular bank deposit accounts. And how were these  back door affiliates to earn a profit when paying say 12% for funds? No problem!  The loan departments of the big state banks kindly referred their shaky credits and borrowers desperately underwater to their back-door affiliates who then presented such dodgy supplicants with an offer they couldn’t refuse.–namely, 20% money for 12 or 24 months as an alternative to being shut-off by the parent bank

So the credit house of cards was just enlarged, extended and riddled with more repayment cliffs just around the next corner. From a standing start in 2010, trust product loans and other shadow banking credit extensions have exploded to upwards of $6 trillion.

But here’s the thing. The credit bubble is now migrating into the land of zombie borrowers such as coal mine operators who have always been heavily leveraged but now face plummeting demand and sinking prices owing to Beijing’s unavoidable crackdown on pollution and the rapid slowing of the BTU-intensive industrial economy. Moreover, the $6 trillion in shadow banking loans are the opposite of long-term debt capital: they are ticking time bombs in the form of 12-24 month credits that are being accumulated in a vast snow-plow of maturities that will only intensify the eventual crisis.

To be sure, the state banking regulators have belatedly launched a campaign to crack-down on the explosion of shadow banking loans, but already the proof of the inherent asymmetry in China’s bubble/bust cycle is in. New credit extension is now migrating to the last refuge of an aging bubble–namely, non-financial corporations are plowing vast sums of cash into speculative lending. As the following excerpts from the Wall Street Journal show, such lending has now reached epidemic proportions, and is a direct rebuke to the tepid and well-telegraphed efforts of Beijing to rein in China’s monumental credit bubble:

These company-to-company loans, known as entrusted lending, have emerged as the fastest-growing part of China’s shadow-banking system, which provides credit outside of formal banking channels.The increase in entrusted loans last year was equivalent to nearly 30% of local-currency loans issued by banks—almost double the portion in 2012. The jump is all the more pronounced since China’s total social financing, a broad measure of overall new credit, shrank 561.2 billion yuan over the same period, largely because other forms of shadow credit declined as Beijing sought to rein in runaway debt growth.

 

The modern world of debt-besotted economies and central bank printing press dominated financial systems resolutely refuses to heed the lessons of history. But in the case of China’s new up-welling of “entrusted lending” by commercial and industrial firms, the lessons are plain as day. During the final blow-off phase of the US stock market in 1928-1929, for example, margin lending nearly doubled from 5% to 10% of GDP in 12 months and the vast proportion of that expansion came from business corporations speculating with excess cash—much of it raised on the stock market!

Even more to the point is the even crazier bubble blow-off in Japan during 1988-1990, which was given the name Zeitech for financial engineering. In that case corporations raised massive amounts of cash in the convertible preferred and bond market and cycled it back into the stock market on its way to 50,000.

Today the denizens of Red Capitalism are just practicing Zeitech with a Chinese accent.  The big non-financials are converting their cash—which should be saved for a rainy day—and their preferred access to loans from the big state banks into poker chips for speculation in a vast junk loan market that is desperate for cash. When the state runs out of will or capacity to prop-up what will be a cascading spiral of defaults in the so-called SME (small and medium enterprise) sector, the thundering crash which ensues will make the Japanese melt-down look like a Sunday School picnic.

It is then that the mailed fist of the state will be called into play; the economic gendarmerie will be unleashed by the desperate comrades in Beijing; the show trials against corrupt enemies of the state will proliferate; and the streets will be filled by the masses deprived of their putative entitlement to a permanent prosperity party.

Needless to say, then, too, the Chinese growth machine will come to a screeching halt.The China Miracle will be exposed. It never was one.

 

BEIJING—With credit tight in China, companies in industries beset by overcapacity are turning to an unconventional source for cash—other companies—in a new rising risk for the country’s financial system.

 

These company-to-company loans, known as entrusted lending, have emerged as the fastest-growing part of China’s shadow-banking system, which provides credit outside of formal banking channels. Net outstanding entrusted loans increased by 715.3 billion yuan ($115.4 billion) in the first three months of 2014 from a year earlier, according to the most recent data from China’s central bank.

 

The increase in entrusted loans last year was equivalent to nearly 30% of local-currency loans issued by banks—almost double the portion in 2012. The jump is all the more pronounced since China’s total social financing, a broad measure of overall new credit, shrank 561.2 billion yuan over the same period, largely because other forms of shadow credit declined as Beijing sought to rein in runaway debt growth.

 

 

The growing popularity of such company-to-company lending offers a fresh—and to regulators, troubling—look at the rapid buildup of debt in China. In its latest report on the country’s financial stability, issued Tuesday, the central bank singled out entrusted lending as a problem, saying it is being used by banks to evade regulatory restrictions on lending. Banks, while generally not risking their own capital directly, act as middlemen in these transactions.

 

China’s debt levels have climbed in recent years at a pace similar to increases in the U.S., euro zone and South Korea before those economies fell into their most recent recessions. The concern among some economists and analysts is that debt will continue to balloon in China, exposing the country to greater financial risks as its economy slows down.

 

Officials at the People’s Bank of China, the central bank, have warned that much of the intercompany lending is flowing to sectors where the regulators have urged banks to reduce lending: the property market, infrastructure and other areas burdened by excess capacity. In central Shanxi province, 56% of entrusted loans in the past few years have gone to power producers, coking companies and steelmakers, among others, according to a recent paper byYan Jingwen, an economist at the PBOC.

 

Access to entrusted loans allows struggling companies to hang on longer than they otherwise could, delaying the consolidation that the government and some economists say is needed in a swath of industries.

 

Big publicly traded companies with access to credit—such as the shipbuilder Sainty Marine Corp., China Shipbuilder  and specialty-chemicals producer Zhejiang Longsheng Group      —are among the most active providers of entrusted loans. These companies, instead of investing in their core businesses, lend funds at hand to cash-strapped businesses at several times the official interest rate.

 

Companies provide funds to make the entrusted loans. To get around an official ban on direct lending to other companies, they need to use an intermediary—typically a bank—to lend the money out.

 

Banks, which in theory shouldn’t use any of their own funds in the process, make money by charging fees to both the lending company and the borrower, and they don’t have to record the loans on their balance sheets. However, in practice, some banks have disguised loans made with their own capital as entrusted loans, thereby helping them skirt regulatory limits on lending, according to officials at China’s central bank. That has helped banks hide “credit risks,” the PBOC said in the Tuesday report……

 

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via Zero Hedge http://ift.tt/1fHPjwZ Tyler Durden

In theory, the media and press is supposed to keep any given administration, even that of hope and change, “honest”, and to report its flaws, failings, criminality and hypocrisy. In practice, this never happens, since the bulk of US, and global media outlets, are owned by a handful of corporations which in turn do everything in their power to preserve the lucrative arrangement in which the administration pretends to administer, and the media pretends to do its job. 

With this kind of informational near-monopoly, corporations – and the media – are far more interested in perpetuating the crony-capitalist status quo, which in conjunction with Wall Street’s bribery funding of the three branches of US government, has come to symbolize just how broken US governance has become.

For 364 days of the year, the theater that the press and the administration are on the opposite sides of the table, continues without a glitch. However, one day a year, during the annual White House Correspondents’ Association dinner, the facade falls and Obama, together with his fawning press corps, have a night of laughs in an Oscar-inspired night of self-congratularoty excess. Which, just like every other night in Washington, is at the taxpayers’ expense.

Among the over 2000 “guests” enjoying the jokes were Jessica Simpson, Patrick Stewart, Matthew Morrison, Anna Chlumsky, Lindsey Vonn, Katharine McPhee, Jeremy Irvine, Lupita Nyong’o, Julianna Margulies, Sofia Vergara, Brad Paisley, Kevin Hart, Cynthia Nixon, Tim Tebow, Kareem Abdul-Jabbar, J.C. Chasez, Julia Louis-Dreyfus, Olivia Munn, Jesse Tyler Ferguson, Fred Armisen, Richard Sherman and Harvey Weinstein.

The good news: the humor – written by others, of course – was good. Here are the highlights from last night’s festivities.

First, Obama’s punchlines reported by Reuters:

“In 2008 my slogan was, ‘Yes we can.’ In 2013, it was control-alt-delete,” Obama joked to an audience also studded with film and television stars.

 

“At one point, things got so bad the 47 percent called Mitt Romney to apologize,” he said, referring to 2012 presidential campaign scandal in which the Republican candidate was secretly taped saying that 47 percent of Americans have become reliant on government handouts.

 

The president highlighted some of the low points of his administration’s last year, dwelling on the disastrous rollout of the website for his landmark health insurance reform legislation.

 

“Of course we rolled out HealthCare.gov. That could have gone better,” he deadpanned.

 

Later he turned on Republican opponents in Congress who are clamoring to repeal the legislation despite higher than expected enrollment figures in the government health care exchanges: “How well does Obamacare have to work before you stop trying to repeal it?”

 

At the end of his speech, Obama turned the audience’s attention to a video monitor, which failed to work. Kathleen Sebelius, the health secretary who announced her resignation this month after overseeing the botched rollout of Obamacare, stepped to the podium to try to fix the technical glitch.

 

Obama also took a swipe at Republicans for blocking his bid to raise the minimum wage. “If you want to get paid for not working you should run for Congress just like everyone else,” he said.

 

In a self-deprecating crack at his own low popularity ratings, the president referred to his fellow Democrats not wanting to campaign with him for November congressional elections in a wistful joke involving one of his daughters: “I did notice the other day that Sasha needed a speaker for career day and she invited Bill Clinton.”

 

“Let’s face the facts, you’ll miss me when I’m gone,” Obama directed to the Fox News table. “It will be harder for you to convince Americans that Hillary was born in Kenya.”

Some more from  USA Today:

When McHale took over duties, he aimed straight at Obamacare’s launch.

 

“It was so bad!” he said from the stage. “I don’t even have an analogy, because the website is now an analogy that people use to describe other bad things. ‘Boy that latest Johnny Depp movie really healthcare.gov’d at the box office.’ “

 

A few of McHale’s other best lines:

• On Chris Christie: “I promise that tonight will be amusing and over quickly. Just like Chris Christie’s presidential bid.”
• On Rob Ford: “Between Rob Ford, Justin Bieber and Ted Cruz, you just want to tell Canada, ‘Hey, hey, relax. We already have a Florida.’ “
• On Hillary running for office: Hillary Clinton has a lot going for her as a candidate. She has experience, she’s a natural leader. And as our first female president, we could pay her 30% less! That’s a saving this country could use. Who’s with me??”
• On Chelsea Clinton’s pregnancy: “In nine months we will officially have a sequel to Bad Grandpa.”

Finally, the video clips:

via Zero Hedge http://ift.tt/1nVyq4z Tyler Durden

Ukrainian War Crimes Whitewashed by Western Press

After more than 30 people died in a fire in the Ukrainian seaside resort town of Odessa, most of the Western press pretended that no one knows what happened or whose fault it was. For example, see these stories from the  Guardian and BBC.

But USA Today reports:

Witnesses and journalists reported that as the building burned with people inside, a crowd shouted, “Glory to Ukraine!” and “Death to enemies!” [These are neo-Nazi slogans.]

 

***

 

[T]he Associated Press reported that the Russian sympathizers took refuge in the trade union hall on Kulikovo Field Square after government supporters rousted their encampment outside and then burned their tents. Police said the building was set on fire with Molotov cocktails.

At 5 seconds into this 15-second video, you can see a Molotov cocktail being thrown at the building in which the Russian sympathizers:

 

And here is a picture of right-wing nationalist Ukrainian women making the Molotov cocktails which were later hurled at the building:

The design on the girls’ shirt on the right is the same as on the shirt of the Ukrainian neo Nazi with the unusual hairdo:

(The black and white photograph in the background is of Stepan Bandera, a Ukrainian who sided with the Nazis during World War II.  And see this).

And of the armbands on these men:

The symbol refers to the the neo Nazi Social-National Party of Ukraine:

Former Associated Press and Newsweek reporter Robert Parry points out how bad New York Times coverage of the Odessa attack has been:

On Saturday, for instance, the dominant story from Ukraine was the killing of more than 30 ethnic Russian protesters by fire and smoke inhalation in Ukraine’s southern port city of Odessa. They had taken refuge in a union building after a clash with a pro-Kiev mob which reportedly included right-wing thugs.

 

Even the neocon-dominated Washington Post led its Saturday editions with the story of “Dozens killed in Ukraine fighting” and described the fatal incident this way: “Friday evening, a pro-Ukrainian mob attacked a camp where the pro-Russian supporters had pitched tents, forcing them to flee to a nearby government building, a witness said. The mob then threw gasoline bombs into the building. Police said 31 people were killed when they choked on smoke or jumped out of windows.

 

“Asked who had thrown the Molotov cocktails, pro-Ukrainian activist Diana Berg said, ‘Our people – but now they are helping them [the survivors] escape the building.’” [Here's the Post story.]

 

By contrast, here is how the New York Times reported the event in its Saturday editions as part of a story by C.J. Chivers and Noah Sneider focused on the successes of the pro-coup armed forces in overrunning some eastern Ukrainian rebel positions.

 

“Violence also erupted Friday in the previously calmer port city of Odessa, on the Black Sea, where dozens of people died in a fire related to clashes that broke out between protesters holding a march for Ukrainian unity and pro-Russian activists. The fighting itself left four dead and 12 wounded, Ukraine’s Interior Ministry said. Ukrainian and Russian news media showed images of buildings and debris burning, fire bombs being thrown and men armed with pistols.”

 

Note how the Times evades placing any responsibility on the pro-coup mob for trying to burn the “pro-Russian activists” out of a building, an act that resulted in the highest single-day death toll since the actual coup which left more than 80 people dead from Feb. 20-22. From reading the Times, you wouldn’t know who had died in the building and who had set the fire.

Billmon comments:

Not even “atrocities were commited,” just a fire “related” to clashes that “broke out.” Immaculate conception theory of war crimes.

Postscript: While the Western press tries to paint the percentage of neo Nazis within the new Ukrainian government as small, the leader of the “protests” which ousted the previous president of Ukraine is a neo Nazi and follower of WWII Nazi sympathizer Stepan Bandera, and neo Nazis are largely in control of the new government.

Whatever You Think of Putin, You Should Understand How Russia Thinks

Even if you think Putin is a tyrant with ambitions to build an imperial Russia, you can’t understand the war in Ukraine unless you understand how Russians think.

20 million Russians died fighting the Nazis in World War II.

Neo Nazis just killed at least 42 Russians when they firebombed a building in Odessa, Ukraine that the Russians had taken shelter in.

Agence France-Presse reports:

Russian official rhetoric has increasingly compared events in Ukraine to the darkest crimes of Nazi Germany, ahead of next week’s anniversary of Soviet victory in World War II.

 

***

 

The fire in the southern Ukrainian city of Odessa that claimed at least 42 lives on Friday has been swiftly dubbed a new “reprisal raid” and even the “new Khatyn,” a reference to the Belarussian village where 149 residents were burned alive by the Nazis in 1943.

 

***

 

The Khatyn massacre went down in Russian history books as one of the Nazis’ most brutal “reprisal raids,” a term the Kremlin has now adopted to describe the offensive Kiev authorities have launched against pro-Moscow rebels in the flashpoint town of Slavyansk.

 

***

 

“What has happened, especially in the Trade Unions House, brings to mind the crimes of the Nazis during World War II,” pro-Kremlin lawmaker Leonid Slutsky told reporters in Moscow, referring to the Odessa fire.

 

“These are the new Khatyn and Auschwitz.”

 

A senior official in the pro-Kremlin government of Crimea, Ukraine’s peninsula taken over by Russia in March, chimed in.

 

“The last time people were burned alive in Ukraine was by the Nazis during the Great Patriotic War,” Rustam Temirgaliyev said on Facebook, referring to the Russian name for World War II.

 

***

 

Russia’s losses and sacrifice during World War II remain a hugely sensitive subject in the country ….

To the extent that the U.S. and Nato are backing the right-wing Ukrainians, we are creating conditions that the Russian leadership – rightly or wrongly – considers an existential threat.

via Zero Hedge http://ift.tt/1ofnXhD George Washington

Excerpted from Elliott Management’s Letter to investors (via Paul Singer),

The Euro reminds us of the weather in London: One minute you are basking in sparkling sunshine, and the next minute the sky opens in a deluge reminiscent of Noah’s flood.

Could it really be that peripheral countries’ interest rates are plunging and borrowing costs have converged to pre-crisis levels, Greece is issuing debt, and the euro crisis is over forever, but Mario “Whatever-It-Takes” Draghi is musing about starting QE now? Have policymakers lost touch with reality to such a startling degree that they now reach for the QE bottle like it is some 1850s cure-all nostrum, regardless of what is wrong with the patient? All we can imagine is the good doctor, handle bar moustache and full regalia, sitting behind his desk: “You have the vapors? Take this QE, you’ll feel better. Ma’am, you have a little hysteria? QE is just the thing! Sir, this QE will cure that headache! Son, you need some inflation, so QE is just right for you.”

There is nothing – we repeat, nothing – that is being done at present to enable Europe to perform better economically, to encourage its unemployed to get off the dole, or to empower its peripheral countries to deal with their underperformance on a sustainable basis. In this context, the bloc’s primary focus on generating inflation is nothing short of astounding.

Indeed, one could analogize this currency union at the present moment to a labor camp in the middle of a frozen waste: It is really bad to be locked in, but if you are obedient, you will at least get your next serving of bailout gruel, whereas if you are not obedient, you will be cast out into the howling cold of devaluation and collapse. Lure them in, load them up with debt and whip them into line … is this the plan that the Brussels crowd devised in the 1990s?

This is obviously preferable to constant and terrible continental warfare, but is it sustainable? How will it end? The spectacle is akin to a hair-raising (albeit slow-motion) TV series. Two years ago, it was about to collapse. Today it is working. What will happen on the next episode?

All of this talk may seem flip and sardonic, but it is really amazing that this currency union sans sovereignty has lasted so long – long enough to make Rube Goldberg drool with jealousy. Nobody knows how it will ultimately turn out, but we must admire in a sense the gall of politicians who think they can stay the current course and therefore must believe that citizens will stand for no growth and high unemployment forever.

Below are some specific outcomes that must be assumed to justify continued stability in the Eurozone, given current pricing of stocks and bonds:

1. Italy’s current government will succeed in solving its problems in the promised 100 days, and there will be no talk of elections that might be won by the comedian (who wants out of the Euro).

 

2. The Spanish and Italian unemployed will wait patiently for the good jobs they want without causing any social unrest or political turmoil.

 

3. The higher trading value of the euro will not cause even more pain to the countries that would have already devalued their currencies more than 50% against the current euro price if they were not in the Eurozone. (Remember, if you cannot devalue, you have to increase productivity to be competitive with Germany and the rest of the world. Easy, right?)

Do any of these outcomes seem likely? Tune in next year…

via Zero Hedge http://ift.tt/1kHJ9fn Tyler Durden

A day after over 40 anti-government protesters died brutally in Ukraine’s Black Sea town of Odessa, and Kiev resumed its “anti-terrorist” military offensive in Slavyansk and Krematorsk in what now even Ukraine officials admit is essentially a civil war, Ukraine has escalate its operation against pro-autonomy activists in the city of Mariupol, southeastern Ukraine, as well as the town of Konstantinovka, according to local self-defense activists.

According to RT, the troops have moved into Mariupol and have surrounded an administrative building held by anti-government protesters. There are a few hundred activists inside the building. They told RT that the army is warning them that if they do not leave the building in the coming minutes, they will be fired at and the building will be seized.

“Special forces units are in the city center. Mainly, they are deployed in yards and make warning shots from there,” Mikhail Krutko from the self-defense headquarters told Interfax news agency. “Residents are unarmed, they blocked roads in the city center, built up barricades from tires and other things not to let hardware pass. They set tires on fire,” Krutko said.

“Special forces units are in the city center. Mainly, they are deployed in yards and make warning shots from there,” Mikhail Krutko from the self-defense headquarters told Interfax news agency. “Residents are unarmed, they blocked roads in the city center, built up barricades from tires and other things not to let hardware pass. They set tires on fire,” Krutko said.

 

People on the ground told RT’s Paula Slier that there are 300-500 anti-Kiev protesters there and they are unarmed. There have so far been no reports of injuries. At the same time, a convoy of Ukrainian APCs has forced its way through self-defense checkpoints near the Donetsk Region town of Konstantinovka. Shots and alarm can be heard inside the city.

 

There are reports that at least two people have been killed, Paula Slier says. The TV building has reportedly been seized by the army and all transmissions are currently off-air, she adds. Self-defense units earlier seized the security services headquarters in the town.

The location of the latest military escalation: clearly the proximity to the Russian border is concerning.

The overnight events are hardly the end of the Kiev government’s attempt to regain the east: National Security Council secretary Andrey Parubiy has said that Kiev is planning to begin special military operations in other regions of Ukraine after it completes its current operations in Slavyansk and Kramatorsk.

Over the past few days, Ukraine has stepped up its military operations in southeastern Ukraine against pro-autonomy activists. The main opposition strongholds include Kramatorsk, Slavyansk, Lugansk, and others.

Naturally, as the IMF made it quite clear last week, unless the acting government manages to supress eastern militias and activists, any Ukraine bailout money could be halted, the government’s crackdown against its people is understandable. Just as understandable would be Russia’s inevitable retaliation against Ukraine’s crackdown, as the civil war become a full blown conflict between two nations.

But for now, perhaps the most dramatic footage of the night, is this clip from Mariupol, where a branch office of PrivatBank has just burned down to the ground. At this point US bankers are slaying various animals to their assorted idols hoping nobody in the US is watching this clip and getting any ideas.

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Authored by Jonathan Weil, originally posted at Bloomberg View,

Just when it seemed like investors might have lost some of their appetite for initial public offerings of companies that lose money . . . yeah, right.

Papa Murphy's Holdings Inc. priced its IPO today at $11 a share. The stock closed up a nickel. I've grown accustomed to seeing IPOs by profitless technology companies. But this is a pizza chain that had net losses of $606,000 in 2011, $2.1 million in 2012 and $2.6 million in 2013.

Now it has a stock-market value of about $187 million, or about 2.3 times its revenue last year. Founded in 1981, Papa Murphy's, based in Vancouver, Washington, sells uncooked pizzas that customers take home to bake. It had been majority-owned since 2010 by private-equity firm Lee Equity Partners LLC.

I can somewhat understand the appeal of speculating on some unproven Internet company that loses money but promises to change the world. But a 33-year-old pizza chain? Come on. In its registration statement, the company said that it has been "repeatedly rated the #1 pizza chain in the United States by multiple third-party consumer studies." So assuming that's true, why can't it make money?

Oh, but wait. It does make money on an "adjusted Ebitda" basis, which is one of those silly metrics that companies make up when they don't have actual profits to show off. Papa Murphy's said it had $24.4 million of adjusted Ebitda last year, which helpfully excluded such obviously unimportant items as — their words here, not mine — "expenses not indicative of future operations," "management fees and related expenses," "transaction costs" and "new store pre-opening expenses."

And of course, this makes soooo much sense. Because as we all know, management fees, transaction costs and new-store expenses aren't the same things as money. And shouldn't we all be blessed with the same power of insight that Papa Murphy has to distinguish between expenses that are indicative of the future and expenses that aren't?

Go ahead, try the pizza. But stay away from the stock.

 

Nope – No Bubble Here!!!

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In the aftermath of several recent events such as i) the issuance of new mega batch of $12 billion in bonds by a suddenly domestic-cash strapped Apple, ii) the repatriation of $9 billion in offshore profits (and payment of $3 billion in taxes) by eBay, iii) the flurry of pharma M&A deals and reverse mergers in which US companies are redomiciled offshore (in low corporate tax hosts like Ireland) to avoid paying US taxes, and iv) the outright use of offshore funds to buy offshore companies such as the GE-Alstom deal which bypasses the US treasury entirely, two questions emerge: who has the most offshore cash, and who is most likely to be the next US corporation to engage in one or all of the above listed transactions which merely seek to optimize a company’s offshore cash holdings.

The answer is shown on the chart below: this is the list of the top 15 US companies that have the bulk of accumulated offshore profits, amounting to roughly $1 trillion in cash, which is never subjet to US taxation, and which financial engineers try to generate the highest shareholder returns on.

via Zero Hedge http://ift.tt/1i6Ax1Y Tyler Durden