Month: July 2019

First it was the shocking junk bond fiasco at Third Avenue which led to a premature end for the asset manager, then the three largest UK property funds suddenly froze over $12 billion in assets in the aftermath of the Brexit vote; two years later the Swiss multi-billion fund manager GAM blocked redemptions, followed by iconic UK investor Neil Woodford also suddenly gating investors despite representations of solid returns and liquid assets, and most recently the ill-named, Nataxis-owned H20 Asset Management decided to freeze redemptions.

By this point, a pattern had emerged, one which Bank of England Governor Mark Carney described best when he said last month that investment funds that promise to allow customers to withdraw their money on a daily basis are “built on a lie.”

And now, the chief investment officer of Europe’s biggest independent asset manager agrees with him, because while for much of 2019 the biggest risk bogeymen were corporate credit, leveraged loans, and trillions in negative yielding debt, gradually consensus is emerging that investment funds may be the basis for the next liquidity crisis.

“There is no point denying we are faced with a looming liquidity mismatch problem,” said Pascal Blanque, who oversees more than 1.4 trillion euros ($1.6 trillion) as the CIO of Amundi SA, according to Bloomberg’s Mark Gilbert who in a Bloomberg View piece writes that Blanque told him that the prospect of melting liquidity is one of “various things keeping me awake at night.”

Continuing the discussion of illiquid institutions, Blanque said that market making, where firms generate prices at which they are willing to either buy or sell financial products, is effectively “a public good” (or “public bad”, if it is being done by HFTs who disappear at the first sign of volatility, and them having to take on real positional risk). Of course, as that activity declines, the drop in turnover reduces the banking industry’s exposure to a collapse in prices or a surge in volatility. But the dangers are simply transferred, rather than diminished.

“Market making is falling off a cliff at the level of individual banks, but creating a systemic problem,” Blanque told Gilbert. “The banks are less risky – but the risks have been shifted to the buy side.”

As we have discussed extensively in the past, and as Gilbert reminds us, following the global financial crisis, as part of their macroprudential duties, regulators forced investment banks to bolster their balance sheets, which in turn reduced the amount of capital those institutions are able to commit to the securities markets, resulting in a creeping shortage of liquidity when it comes to market making, not only at buyside institutions but also market making banks.

“Market making is falling off a cliff at the level of individual banks, but creating a systemic problem,” Blanque says. “The banks are less risky – but the risks have been shifted to the buy side.”

Blanque is probably referring to a recent report from Deutsche Bank (which should know systemic risks better than anyone), which last month published a report titled “Investment Funds – The next liquidity crisis”, in which it wrote that recent events, i.e. the abovementioned collapse of GAM, Woodford and H20, have been “a timely reminder of the potential risks of illiquid securities within open-ended mutual funds offering daily liquidity.” Citing the FSB (Financial Stability Board), Deutsche Bank noted that over half of global intermediation now happens outside the banking system, and that the assets of NBFIs (Non-bank financial Institutions) have grown by over 50% since 2008.

The bank showed this transformation in the pursuit of yield and “shift in the hegemony of Wall Street” in the following chart showing the transition from pension and financial institutions (mediated by investment banks), to pension insurers and individual investors (mediated by at times extremely illiquid asset managers) in the following chart.

Deutsche goes on to show how liquidity risks have shifted, highlighting – like Blanque noted – that while post-crisis banking regulations have materially reduced liquidity (and other) risks within the banking system, some of these risks have been merely transferred to the unregulated NBFI ecosystem, notably mutual funds.

And this is where sudden, unexpected blow ups like Woodford, GAM and H20 are especially jarring as they are an indication of what to expect once the broader market locks up.

And speaking of the above funds, there is a reason why they are went from liquid to illiquid overnight: they have all geared into corporate bonds. As DB notes, US corporate bond outstandings have doubled since 2005 with recent issuance running at $1.5trn each year.

Over the same period, mutual funds’ ownership of corporate bonds has increased from 12% to almost 30%, or $2.6 trillion…

 

… with the balance is largely held by insurance and pension funds 45%.

But the biggest reason why liquidity has become an illusion (or rather mass delusion), is that while the dealer inventory of corporate bonds has declined by 90%…

… the ratio of corporate bonds held by mutual funds vs dealer inventory has increased from 2x in 2007 to 43x currently.

In short, as DB highlights, the buy-side significantly outweighs the sell-side and the gap has never been bigger. Worse, this comes at a time when BBB represents 60% of the Investment Grade and 250-300% of the High Yield market.

Incidentally, for those wondering if liquidity remains an illusion – a test that can only be confirmed when there is a crash and the market is indefinitely halted, an outcome that is now virtually inevitable – Deutsche has a simple test: it all has to do with the sequence of events unleashed by widening spreads, where redemptions and first movers rush to sell, collapsing the market’s liquidity, freezing refinancings, and resulting in a surge in defaults and firesales, which in turn leads to even wider spreads and so on, until central banks have to step in to short circuit this toxic loop.

This also explains why GAM, Woodford, H20 and many more funds (in the near future), will be similarly gated once their investors discover there is no liquidity to sell into and the only “real time” liquidity is offered to those who have a “first seller mover advantage”, to wit:

• If investors anticipate severe losses on the fund’s investments, they could be incentivised to “run for the exit” to be the first to redeem their shares.
• The first-mover advantage in open-ended funds arises because losses on asset sales to meet redemptions are incurred by investors which remain in the fund.
• As in a ‘bank run’, the asset manager is, in principle, forced to sell assets in a fire sale in order to meet its short-dated liabilities

As an aside, while the above is 100% correct,we find it ironic that it comes from none other than Deutsche Bank, a financial institution which due to a similar considerations among its clients, has itself become the target of a mini “bank run” one targeting the bank’s prime brokerage assets, and which as we explained last week, is reportedly draining roughly $1 billion per day from the German lender.

In any case, this dramatic imbalance of asset holdings at market making banks and buyside “bagholders” of illiquid securities, is now posing a major problem for regulators, something the Bank of England acknowledged in a working paper published earlier this month, and highlighted by Mark Gilber, to wit: “as the funds industry has supplanted banks as a source of credit in the past decade, households and companies have benefited from a useful alternative source of financing. But, the report warned, we don’t know how this market-based system will respond under stress.”

Modelling such a scenario “can generate an adverse feedback loop in which lower asset prices cause solvency/liquidity constraints to bind, pushing asset prices lower still,” the BOE found. In other words, the new market structure may be worse than the old.

The feedback loop discussed by the BOE is the one we showed above. Here it is again:

And, as recent notable fund “gates” and/or collapses have shown, the difficulty for asset managers in such an eventuality is finding sufficient cash to repay exiting investors while preserving the structure of the portfolio without distorting market prices, according to Amundi’s Blanque.

According to Bloomberg, part of Amundi’s response to this seemingly intractable issue is to include liquidity buffers in its portfolios, which may mean holding securities such as German bunds and U.S. Treasuries, which should always trade freely. But the industry needs to come up with a common definition so that liquidity is included along with risk and return when assessing a portfolio’s robustness, Blanque says. Additionally, this band aid only works for modest redemptions. A wholesale liquidation would crush even the most “buffered” up fund.

For now, asset managers have to cope with what Blanque called “the sacred cow” – although a better phrase would be “constant risk” of allowing clients to withdraw funds on a daily basis.

“It is a bomb, given the risks of liquidity mismatch,” he warns. “We don’t know if what is sellable today will be sellable in six months’ time.”

That’s not the only we don’t know. As Blanque concluded, “we don’t know the channels of transmission, we don’t know how the actors will act. It is uncharted territory.”

And that, precisely, is why central banks can never again allow risk asset prices to drop: the alternative means gating not one, or two, or a hundred funds, but halting the entire market, because once everyone start selling and price discovery finally returns to a market that has been dominated by central banks for the past decade, several generations of traders and investors who have grown up without price discovery will be shocked to discover just where “fair” market prices reside.

via ZeroHedge News https://ift.tt/2SDcjn2 Tyler Durden

Authored by Simon Watkins via OilPrice.com,

The recent announcement that Saudi Arabia’s Alfanar Group is to set up an office in the U.K. to oversee its multi-billion dollar renewable investments there is interesting not for what it says but for what it implies and what it implies is extremely misleading, to say the least. The implication is that Saudi Arabia is at the leading edge of the global green energy initiative and the apotheosis of this was the earlier statement from Saudi Arabia that its state oil and gas behemoth, Aramco, plans to eliminate all fuel oil production at its refineries within the next five years.

Although this will not be by 2020 – when the International Maritime Organization’s (IMO) global sulphur cap for marine fuels drops to 0.5% from 3.5% – it was regarded by those unfamiliar with previous Saudi posturing as a positive move, coming as it does from the world’s largest exporter of oil. As seasoned oil market traders and analysts have long known, though, anything Saudi Arabia says should be taken with a huge degree of scepticism.

“There’s a huge gap between Saudi Arabia’s lofty rhetoric and the reality of its [renewable energy] achievements to date,” Richard Mallinson, senior cross-energy analyst for global energy consultancy, Energy Aspects, in London, told OilPrice.com. The truth of the matter is that the real global impact of Saudi halting production of fuel oil will be non-existent as it is in reality set to become an even bigger importer of fuel oil than it already is, making it one of the world’s central hubs for fuel oil and a catalyst for other countries to keep producing the highly polluting fuel oil, if not actually increase their production.

Despite the recent comment from Saudi Aramco’s senior vice president of downstream operations, Abdulazziz al-Judaimi, that the company’s fully-owned refining assets are already 85% IMO-compliant, “Saudi is already one of the very few places in the world that actually imports fuel oil now [the remaining 15% of Aramco’s assets produced around 200,000 barrels per day on average over the course of last year],” said Mallinson. “And, as it reduces its own production of the dirty product, so it will increase its imports of it so, far from this announcement being a product of transition to a more renewable energy idea, it is a product instead of economics,” he added.

The reason for the increasing substitution of imported fuel oil for domestically produced fuel oil is locational, in that currently the vast bulk of Saudi’s home-produced fuel oil is produced in regions that are a long way from the populous areas where it is needed to burn as fuel oil for power generation.

“It makes sense for the Saudis to import fuel oil to places where it can be easily used for power generation rather than have to build an expensive logistical network to move it from where it is produced in Saudi to where it is needed,” Mallinson told OilPrice.com.

“The Saudis have done this, of course, to move crude oil from East to West, and everywhere else in the country for that matter, but that is because crude oil is important to the Saudis and fuel oil is not,” he underlined.

Economics is also behind the phasing out of its own fuel oil and its substitution with imported fuel oil.

“Saudi is actually looking to increase its burn of fuel oil over time to make up for the burning of crude oil in the domestic power generation energy mix, as crude oil is a valuable and flexible energy export and fuel oil is not, especially when the new IMO rules come in next year,” he said.

A close look at the real figures is instructive in this regard. In 2018, the kingdom exported an average of 340,000 bpd of fuel oil but it also imported just over 300,000 bpd over the same period. The imported fuel oil went to domestic power generation centres and the exported fuel oil went to Saudi’s big markets for the product, mainly India and East Africa. Net/net, then, Saudi’s carbon footprint for fuel oil was around double that of its own production.

Exactly the same pattern has occurred since 2015 which was a peak year for fuel oil production. According to Energy Aspects, from 2015 to 2018, the amount of crude oil that Saudi Arabia used in domestic power generation decreased from 570,000 bpd to 410,000 bpd. However, during the same period, the amount of fuel oil that the Kingdom used in domestic power generation increased from 400,000 bpd to 500,000 bpd. “And this trend is set to continue after the new IMO ruling for 2020,” highlighted Mallinson.

The key point for IMO 2020 compliance, and for all other of Saudi Arabia’s much-vaunted but little realised renewable energy projects for that matter, is that the Saudis have no pressing need to diversify its energy origination from the easiest course – crude oil production, especially with oil prices at a relatively decent level, said Mallinson. This is despite Saudi Arabia having more natural advantages for generating renewable energy than almost any other country in the world. Specifically, it has only 45 cloudy days each year, making it perfect for solar energy projects, and has significant sustained wind patterns in the Red Sea area, making it perfect for wind energy projects as well. “Saudi still has lots of cheap oil [with a lifting cost of around US$2 per barrel, excluding capital expenditure], so there is no push factor compelling it to take action,” he told OilPrice.com.

“The Saudis have barely taken the first step on the renewable energy ladder, which is to switch more to gas, as again this would require a build-out of infrastructure along the lines of that which it has for oil and it has not done it,” he added.

“It has only recently begun to even develop its gas fields,” he underlined.

via ZeroHedge News https://ift.tt/32NU8j4 Tyler Durden

Following Russia signalling last week, its willingness to join the controversial payments channel Instex – designed to circumvent both SWIFT as well as US sanctions banning trade with Iran – new statements from Russian Deputy Foreign Minister Sergei Ryabkov called on the international community to free itself from a purely US-controlled international financial system and US dollar dominance. 

“We must protect ourselves from political abuses made with the help of the US dollar and the American banking system,” he said while addressing a ministerial meeting of the Non-Aligned Movement held in Venezuela, according to TASS. “We must turn our dependence in this sphere into independence,” he added.

“Let us be multipolar in the spheres of finance and currency,” he said.

The senior diplomat was specifically addressing US-led sanctions and the tightening economic noose, including a near total oil export blockade, on the Maduro government in Caracas. 

The comments also come after early this year the Maduro regime was stymied in its bid to pull $1.2 billion worth of gold out of the Bank of England, according to a January Bloomberg report. The Bank of England’s (BoE) decision to deny Maduro officials’ withdrawal request was a the height of US coup efforts targeting Maduro.

Specifically top US officials, including Secretary of State Michael Pompeo and National Security Adviser John Bolton, had lobbied their UK counterparts to help cut off the regime from its overseas assets, as we reported at the time. Washington has further lobbied other international institutions, and especially its Latin American allies, to seize Venezuelan assets and essentially hold them for control of Juan Guaido’s opposition government in exile. 

Deputy FM Ryabkov held up the Venezuela situation as an example of “barefaced misappropriation of assets kept at Western banks.”

He described further:

“This is just one of the examples of a wider policy of deliberate instigation of crises to change government, to replace legitimately elected politician with American stooges.”

Despite western capitals virtue-signaling their “rules-based order” approach, Ryabkov said instead, “We think that it is not a rule-based world order, it is rather a foisted and imposed world order.”

Meanwhile, the establishment of the ‘SWIFT-alternative’ Instex – now online as of three weeks ago – constitutes the biggest threat the dollar as a reserve currency to date, especially if Russia follows through on its signalling it could join. 

via ZeroHedge News https://ift.tt/2OiY6gj Tyler Durden

Authored by Robby Soave via The College Fix,

The following is adapted from “Panic Attack: Young Radicals in the Age of Trump,” a recently published book by former College Fix editor Robby Soave. Soave is currently an associate editor at Reason.

Today there are tensions between a second-wave feminism that is worried about people who were born men co-opting their movement and a younger feminism that embraces all people who self-identify as women. The new view has largely won that fight, and this victory has influenced how the broader public discusses trans issues.

Consider what happened to filmmaker Kimberly Peirce at Reed College in 2016. She had been invited to Reed College in the fall of 2016 for a screening of her landmark 1999 film Boys Don’t Cry. The movie tells the true story of a transgender man who was murdered. Peirce herself has identified as a lesbian and genderqueer, and her movie contains a message of acceptance.

To say that Peirce was not well received at Reed would be a considerable understatement. Students hung profane posters near the podium; one read “You don’t fucking get it.” Waiting at the podium itself was a “Fuck you” poster, and students screamed other expletives at Peirce, bringing the event to an early close.

One would be forgiven for presuming that Reed must be some kind of Christian fundamentalist college brimming with intolerant, homophobic students, but alas, no: Reed is among the most liberal campuses in the country, according to Princeton Review. The students who jeered at Peirce were leftists.

In the eyes of these students, Peirce was a traitor. For one thing, she cast the cisgender Hilary Swank in the role of the trans character, a choice that marginalizes trans identities and contributes to trans erasure.

For another thing, Peirce profited from the exploitation of a trans person. Her film depicted violence against a trans person. This was unforgivable, in the students’ view, even though it actually happened and Peirce’s goal was to shed light on a tragic, socially significant event.

Lucía Martínez, an assistant professor of English at Reed College, posted a comment on an article about the Peirce shutdown in which she confessed that these students terrify her.

“I am intimidated by these students,” she wrote.

“I am scared to teach courses on race, gender, or sexuality, or even texts that bring these issues up in any way—and I am a gay mixed-race woman. There is a serious problem here and at other [selective liberal arts colleges], and I’m at a loss as to how to begin to address it, especially since many of these students don’t believe in either historicity or objective facts.”

Nationwide, the movement for LGBT equality has come a long way. Gay marriage is legal across the nation, and LGBTQ people enjoy unprecedented social acceptance. Kids find it strange that it was ever acceptable to mock people for their sexuality; it’s more okay to be gay – or bisexual, or asexual, or even unsure— than ever before.

Liberals, libertarians, and even many socially tolerant Republicans and conservatives agree that members of the LGBT community deserve the same rights and dignity as everyone else. I, too, celebrate these strides. And I join other libertarians and social liberals in wanting transgender people to achieve acceptance and equality as well.

In many cases, trans goals are perfectly reasonable and will likely come to pass as the country becomes more sympathetic toward them. But, as the incident at Reed shows, there’s an illiberal streak within trans activism that might make the movement’s goals seem less reasonable to the average person. The tendency of some trans activist leaders to make hyperbolic statements could be undermining a worthy cause—and putting them at odds with potential allies.

Many of the loudest trans voices, particularly on social media, routinely decry all criticism of their activism as not just wrong but a form of assault. Nowhere else has the distinction between words and actions been so thoroughly eroded; people who criticize the trans community are accused of literal violence.

This strain of illiberalism occasionally puts radical trans activists in tension with other members of the LGBT acceptance movement.

In 2015, Colorado College’s Film and Media Studies Department attempted to screen the movie Stonewall, and invited a producer to participate in a discussion with students. The film, a coming-of-age story about a gay teenager set during the Stonewall riots in 1969, had been critically panned and accused of whitewashing the actual history of late-1960s gay liberation. If students had merely complained about the film, they would have been in good company.

But Colorado College activists claimed that the film was not merely awful. To the extent that it had failed to properly credit trans people for the role they played in gay liberation, they said, Stonewall had either committed or encouraged violence against them.

“The film is discursively violent,” a group of student activists affiliated with the campus’s LGBTQIA+ chapter wrote in an open letter. The students formed a new group, RAID (Radicals Against Institutional Damage), for the explicit purpose of boycotting the film and preventing it from being shown on campus.

A professor who supported screening the film told the student newspaper, the Catalyst, that even if the film was bad or if it was unfair to trans people, it was still worthwhile to have a discussion about it. The activists did not agree.

“Critical discussion is simply a way of engaging in respectability politics,” Amelia Eskani, a first-year student, countered.

“I think Colorado College should cancel the screening because the safety and well-being of queer and trans students surpasses the importance of a critical discussion.”

Clashes between certain radical feminists and radical trans activists have occasionally produced violence. Tara Wolf, a 26-year-old trans woman, hit a 61-year-old feminist, Maria Maclachlan, during a rally in London’s Hyde Park in 2017. Prior to the event, Wolf had written on Facebook that she planned to “fuck up some terfs,” an acronym for “trans-exclusionary radical feminists.” She compared them to fascists.

Parker Molloy, a trans woman and well-known writer on trans issues, told me trans activists “understand that there are nuances to these issues.”

“It’s just a lot of people, unfortunately, they’re screaming so loudly that I think it distorts the perception of trans people entirely. They seem completely unwilling to listen to reason, which is not true of the trans population as a whole.”

*  *  *

Panic Attack is available from All Points Books.

via ZeroHedge News https://ift.tt/2YgJJc3 Tyler Durden

A few days after another round of violent protests rocked Hong Kong, Beijing on Wednesday issued its harshest warning yet to the citizens of Hong Kong: It sought to remind them that Beijing has the authority to mobilize the People’s Liberation Army garrison in Hong Kong if it felt that the central government’s authority was threatened.

The New York Times reports that the warning was part of the unveiling of the Communist Party’s new “defense strategy” which relied heavily on demonizing the western powers – an oblique reference to the US and the UK – for encouraging the protests.

Col. Wu Qian

Citing the Sunday protests, Senior Col. Wu Qian, a spokesman for China’s defense ministry, implied that the destructive behavior – protesters painted the central government’s liaison office with graffiti, the latest example of the extradition bill protests leading to the vandalism of government buildings – was swiftly straining the patience of Beijing.

“The behavior of some radical protesters challenges the central government’s authority, touching on the bottom line principle of ‘one country, two systems,'” Colonel Wu said during a news conference in Beijing where he laid out the government’s new strategy. “That absolutely cannot be tolerated.”

When pressed, Wu said that “Article 14 of the Garrison Law has clear stipulations,” and refused to elaborate, the SCMP reports.

Hong Kong’s government would need to request the garrison’s assistance, like it does during a natural disaster.

In response, a spokesman for the Hong Kong government said on Wednesday that the city was “fully capable” of dealing with its own affairs.

“There is no need to ask for assistance from the garrison,” he said.

Eric Chan Kwok-ki, director of the Chief Executive’s Office, dismissed Wu’s reference to the Garrison law, suggesting that it wasn’t a threat.

“This is nothing new,” he said. “The Hong Kong government has no plan to seek help from the [PLA Hong Kong] garrison in accordance with that provision.”

The press conference coincided with the release of a new defense report – the first to be published since the beginning of Xi Jinping’s second term – that identified these same ‘western powers’ as a threat to global stability. It’s one of the clearest signs yet that Beijing views the US as its key geopolitical adversary, and is ready to strike back should Washington continue to ‘support’ Taiwan by supplying it with advanced arms. The paper restated Beijing’s goal of eventually presiding over the ‘reunification’ of Taiwan with mainland China – and notably didn’t rule out the use of force.

Notably, the paper accused the US of jeopardizing international stability by expanding its nuclear arsenal, boost its missile defenses and cyberwarfare capabilities and weaponize outer space (remember the Space Force?).

The defense plan also criticized Taiwanese President Tsai Ing-wen’s Democratic Progressive Party for “stepping up efforts to sever the connection with the mainland.” Hong Kong, of course, is governed by officials selected by Beijing, but the protests have posed their own unique problems for the Communist Party.

Circling back to the press conference, Col. Wu cited the specific laws detailing relations between Hong Kong and Beijing that would allow the PLA to intervene. Notably, Hong Kong wasn’t specifically mentioned in China’s new defense paper, but Wu relayed the above-mentioned warning and the Communist Party’s view on the situation in response to a question asked by the ‘press’. Not long before Wu spoke, Hong Kong police arrested six men for partaking in Sunday’s protests and a similarly violent episode that took place on July 1. Some of these men reportedly had links to ‘triad’ criminal gangs.

Protests have been ongoing in Hong Kong since mid-June, in response to the HK government’s fast-tracking of a controversial extradition bill that would have empowered Beijing to extradite people from Hong Kong (both citizens and people just passing through) something that would give it unprecedented powers to crack down on dissidents.

If the PLA were to ‘intervene’ in the protests, local financial markets would probably melt down (HK’s stock market has performed remarkably well despite the protests). Western powers would also condemn China’s actions, and it might impact the prospects for a permanent trade truce to the US. But would the West actually do anything to stop them? That’s extremely unlikely.

via ZeroHedge News https://ift.tt/2SBmvw4 Tyler Durden

Authored by Michael Snyder via The End of The American Dream,

We have raised an entire generation of Americans that have no respect for the law, and now we are reaping what we have sown. 

I cannot even begin to tell you how alarmed I am by some of the videos that I have been watching lately.  As you will see below, all over the nation young people are brazenly flouting the law, obstructing and assaulting law enforcement officers, and committing criminal acts in large groups.  I think that “lawlessness” is perhaps the best word to describe what is happening, and many believe that what we have witnessed so far is just the beginning.  I have so much respect for the good law enforcement officers across the country that put their lives on the line day after day to protect all of us, but I wouldn’t want to be in their shoes at this point.  If you wonder why I would say such a thing, just consider what just happened in New York City…

In a series of shocking videos, NYPD officers can be seen being doused with buckets of water and pelted with projectiles as they tried to do their jobs (in one video, the officers were in the middle of making an arrest).

The stunning footage, which was first spotted online on Monday, shows the brazen young men in Harlem and Brooklyn dousing cops with water and, in one frame, an officer gets beaned in the back of the head with an empty red plastic bucket. The attacks on the officers started as they were arresting another young man, and in the video, they can be seen handcuffing the man while he was splayed out on the hood of a car.

How would you respond if you were attacked like this?

If I was a police officer in that situation, I would not have been able to let that kind of abuse go, and those young attackers would have learned the hard way that there are very serious consequences for assaulting a police officer.

But this is what happens when we raise an entire generation without any values whatsoever.

These young people are just doing whatever seems right in their own eyes, and similar things are happening all over the nation.

For example, a “flash mob” recently stormed into a North Face store in Wisconsin and stole $30,000 worth of merchandise…

A band of shoplifters who formed a ‘flash mob’ and rushed into a North Face store are accused of stealing $30,000 worth of merchandise, according to a report in the Kenosha News.

Dramatic video obtained from the Pleasant Prairie Police Department shows the group of ten shoplifters walk into the store, before quickly grabbing as many items as they can carry and rushing out.

How cold-hearted do you have to be to do something like this?

An even larger flash mob stormed a Walgreens in Philadelphia on the 4th of July…

Philadelphia police have released surveillance video showing dozens of teens vandalizing and stealing from a South Street Walgreens on the 4th of July. The incident happened at the store on the 1800 block of South Street in the Graduate Hospital section of the city.

As you can see from video footage of the incident, the young people seemed to take great joy in the crimes that they were committing.

If things are this crazy now, what will things look like when economic conditions get really bad and those young people get really desperate?

Elsewhere in Philadelphia, a pack of teen girls was viciously attacking random female victims that they came across in the street, and video of the attacks caused quite a bit of outrage…

A gang of teenage girls filmed themselves targeting female strangers in random attacks on the streets of Philadelphia.

The disturbing video shows the girls approaching their unsuspecting victims on the street before proceeding to slap them and wrestle them to the ground.

The violent video sparked outrage when it was shared online.

Of course many of these young criminals will end up in prison, but in many cases that will just mean that they will learn how to be even better criminals from those they are incarcerated with.

And the truth is that in many instances our prisons are completely and utterly out of control.  For example, it is being reported that one prison down in Mississippi allegedly put the gangs in charge at one point.

Everywhere you look there is lawlessness.  This week when ICE officials showed up to arrest an illegal immigrant in Nashville, the man’s neighbors formed a human chain around him in order to keep that from happening…

When U.S. Immigration and Customs Enforcement agents arrived at a Nashville home Monday in an attempt to detain a man there, neighbors and activists gathered to support the man, who remained shuttered in a van with a child for hours before the agents left.

And once the agents and police officers they had called to the scene finally drove away, neighbors who had kept the man and the boy fed, hydrated and cool, formed a human chain from the van to the house as the man and the boy shuffled inside.

In the end, the ICE officials left and the illegal immigrant got away.

When there is a complete and utter lack of respect for law enforcement on a widespread basis, that is a recipe for chaos.

And without a doubt, our nation is on the brink of great chaos.  Just consider these numbers…

After a week that saw President Trump and his foes toss toxic words at each other, there is now a warning that the next phase could be “violence.”

Nearly 8 of 10 Americans told the Pew Research Center that supporters for both sides could “act” on the politically charged rhetoric with violence. It was higher for Democrats, 91%, than Republicans, 61%.

It is not going to take much of a spark at all to set off the kind of civil unrest that I have been repeatedly warning about.

Day after day, the mainstream media is stirring up more anger, frustration, strife, discord and division.  I have never seen more hatred in America than I see right now, and it is exceedingly difficult to imagine how all of this could possibly end well.

via ZeroHedge News https://ift.tt/32NNsBw Tyler Durden

Elizabeth Warren’s twitter feeds have been clogged with clips of Rachel Maddow and links accusing President Trump of breaking the law (in honor of Robert Mueller’s appearance before Congress on Wednesday), but as soon as she has a spare moment to read it, we imagine the following report will soon make an appearance in her campaign literature and stump speeches.

Entitled “Pirate Equity: How Wall Street firms are Pilaging American Retail,” a group of researchers funded by a coalition of left-wing political groups and think tanks drew some startling conclusions about the number of retail jobs that have been destroyed by private equity firms and hedge funds.

In just the first three months of 2019, 33 retailers have announced 6,683 store closures. The vast majority of these retailers (70%) are owned by private equity firms. Another 4,680 stores at name brands like Payless Shoes, Sears, K-Mart, J. Crew, Shopko, and Charlotte Russe, to name a few, are expected to close in the coming months.

The wave of retailer bankruptcies that has swept across the US over the past few years has destroyed hundreds of thousands of jobs. Of course, the expansion of the US labor market has more than offset this. But the report’s authors have determined that firms controlled by PE or hedge funds destroyed a net 597,000 jobs, even as the sector as a whole added more than a million jobs.

Additionally, the researchers determined that another 728,000 “indirect jobs” were lost at suppliers and local businesses who relied on these chains for business. And over the coming years, another 1 million low-paid retail jobs could be in jeopardy.

With all of this considered, the researchers determined that PE firms have “destroyed eight times as many jobs as they have created over the past ten years,” the report said.

The analysts also cited a Jan. 2019 study by the Economic Policy Institute – a left-leaning think tank based in Washington that has longstanding ties to the American labor movement – which also determined that, for every 100 retail jobs that are lost, another 122 additional indirect jobs are also lost. As evidence, the report cited Mattel, the toymaker, which laid off 2,200 workers after Toys R Us closed its stores, causing Mattel’s sales to drop by 14%. A similar pattern of layoffs took place at Hasbro.

We’re not sure where the EPI got these numbers (the report doesn’t specify), but these numbers seem high to us. It would be specious to blame Toys R Us’s closure for every layoff at one of its former suppliers, as the researchers seem to imply. And even if Hasbro, Mattel and a handful of other toymakers laid off a few thousand employees each, that pales in comparison to the number of retail jobs lost when Toys R Us closed. Plus, toymakers are struggling to adapt to competition from tech gadgets and video games, trends that have nothing to do with Wall Street.

But the number of jobs lost might not matter as much as the, uh, demographics of those who lost their jobs.

That’s right: Not only is the private equity industry guilty of boundless greed and cruel indifference to the suffering of the working class – they’re also guilty – however inadvertently – of being racist.

According to the report, the layoffs were most concentrated in the clothing, general merchandise, and grocery subsectors – industries that employ disproportionately large numbers of women and people of color.

Given the workforce demographics of those subsectors and the dynamics of the broader economy, these job losses disproportionately impact a diverse workforce with large numbers of women and people of color.

Given the workforce demographics of those subsectors and the dynamics of the broader economy, these job losses disproportionately impact a diverse workforce with large numbers of women and people of color. For instance, more than three-quarters (76%) of workers in the retail clothing sector are women, and 43% are Black, Asian, or Latinx. In the general merchandise sector, nearly half of workers (46%) are Black, Asian, or Latinx, and 60% are women.

These job losses are especially devastating for people working in retail because they already face high rates of poverty and income volatility. Retail employers often provide poor quality jobs with low pay and no benefits, stagnant wages, high rates of underemployment (despite many workers wanting full-time hours), and unstable schedules that fluctuate week to week.

Losing a job is difficult for anybody. But at least white cisgender men have the benefit of being, well, white cisgender men while they’re hunting for their next low-wage, no-benefit part-time retail job(s). Black and Latinx workers “have a harder time rebounding and face employment discrimination” after hedge funds and private equity firms have destroyed their jobs. The report also notes that black unemployment has historically been twice the level of white unemployment (though, as President Trump has repeatedly reminded us, black unemployment has fallen to historic lows during the Trump era).

But why, exactly, are retail companies so attractive to private equity firms? After all, retailers can be vulnerable to unpredictable shifts in tastes and rely on low profit margins. But retail chains often have one critical asset that’s attractive to the LBO crowd: real estate. Like Sears, retailers often own the land on which their stores operate. This has two benefits: PE firms can borrow against the land to secure the debt loaded on the companies, or they can sell it (then, as Eddie Lampert did with Sears, lease it back) to fund a quick dividend or to make a payment.

We’d like to add another reason why PE firms are attracted to retail. Avenue Capital founder Marc Lasry said during an interview on CNBC this week that energy and retail are the two sectors most attractive to distressed funds. Many PE firms search for businesses that are in trouble so they can A) buy them at attractive valuations and B) turn them around for a profit.

There is one criticism that we couldn’t easily rebut: PE firms do have a nasty habit of taking on debt to finance dividends to pay themselves at the expense of bondholders and, of course, employees at the underlying businesses. It’s difficult to deny the bad optics of Payless Shoes entering liquidation while Randall Smith, the founder of Alden Global Capital (the hedge fund that controls Payless), goes on a mansion shopping spree.

While we concede that the juxtaposition of ridiculously expensive luxury homes with poor, freshly fired cashiers, stockboys and managers, one mustn’t forget that Democrats have benefited from Wall Street’s largesse just as much as Republicans have. Still, since ratcheting up her attacks on Wall Street, Warren has seen her poll numbers climb. But will this be enough for her to sow up the nomination?

That, of course, remains to be seen.

via ZeroHedge News https://ift.tt/2Oi2kVE Tyler Durden