Category: zerohedge

 

 

 

Weekend Krugman

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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/4dDkTQPEJIs/story01.htm williambanzai7

The House Judiciary Committee is about to discuss what it calls “The President’s Constitutional Duty to Faithfully Execute the Laws,” focusing on the Obamacare delays, enforcement of immigration laws, and more. As Mediaite notes, the question of whether the president can take unilateral action to cease enforcing laws stretches back at least to last summer, when President Barack Obama said he would stop deporting young undocumented immigrants, an end-run around congressional refusal to pass the DREAM Act.

Executive orders have played a part in everything from the non-enforcement of the Defense of Marriage Act to the administration’s “fix” two weeks ago allowing insurance providers to renew policies cancelled after the implementation of the Affordable Care Act. 

It seems the constitutional lawyers want to have their say in the “most transparent” administration ever.

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/deAjI50W9G8/story01.htm Tyler Durden

The House Judiciary Committee is about to discuss what it calls “The President’s Constitutional Duty to Faithfully Execute the Laws,” focusing on the Obamacare delays, enforcement of immigration laws, and more. As Mediaite notes, the question of whether the president can take unilateral action to cease enforcing laws stretches back at least to last summer, when President Barack Obama said he would stop deporting young undocumented immigrants, an end-run around congressional refusal to pass the DREAM Act.

Executive orders have played a part in everything from the non-enforcement of the Defense of Marriage Act to the administration’s “fix” two weeks ago allowing insurance providers to renew policies cancelled after the implementation of the Affordable Care Act. 

It seems the constitutional lawyers want to have their say in the “most transparent” administration ever.

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/deAjI50W9G8/story01.htm Tyler Durden

As somewhat expected – though hoped against by many Detroit union workers – Judge Steven Rhodes appears to have confirmed Detroit is eligible for bankruptcy protection (after pointing out that the city's accounting was accurate and it is indeed insolvent) making this the largest ever muni bankruptcy.

• JUDGE RHODES SAYS HE WILL ALLOW PENSION CUTS IN DETROIT'S BANKRUPTCY
• DETROIT JUDGE: NOTHING SEPARATES PENSIONS FROM OTHER DEBT

The city will now begin working toward its next major move – the submission of a plan to re-adjust its more than $18 billion in debt – including significant haircuts for pension funds (possibly 16c on the dollar recovery) and bondholders. With Detroit as precedent, we can only imagine the torrent of other cities in trouble that will be willing to fold.

 

He did provide an "out" though:

• RHODES WARNS THE CITY THAT JUST BECAUSE PENSION RIGHTS CAN BE IMPAIRED, DOESN'T MEAN HE WILL APPROVE A PLAN WITH STEEP CUTS

 

Via Bloomberg,

Before the bankruptcy, Orr proposed canceling $3.5 billion in future pension obligations and at least $1.4 billion in unsecured bonds. The debts would be replaced with a $2 billion note paying 1.5 percent interest.

But, of cours,

Detroit must ask “what is necessary to invest to attract business?” Spiotto said in a phone interview. “If you don’t solve the systemic problem, you are just going to repeat it.”

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/NSYfCS5is_U/story01.htm Tyler Durden

Gold fell $32.20 or 2.57% yesterday, closing at $1,219.00/oz. Silver slid $0.84 or 4.2% closing at $19.15/oz. Platinum dropped $20.95, or 1.5%, to $1,336.25 /oz and palladium fell $9.78, or 1.4%, to $708.72/oz.

 

Gold advanced from nearly a five-month low, after the biggest one-day drop since October, as investors assessed whether the U.S. economy is strong enough to warrant a move away from ultra loose monetary policies.

Gold fell despite the data yesterday being mixed. It showed that while U.S. manufacturing unexpectedly accelerated in November at the fastest pace in more than two years, retail spending fell on the weekend after Thanksgiving for the first time since 2009. The overly indebted U.S. consumer is struggling which does not bode well for the consumer dependent U.S. economy.

Gold in US Dollars, 5 Year (Bloomberg)

Bulls took solace in the fact that the price falls came on very low volumes – volume was 20% below the average for the past 100 days at this time of day, data compiled by Bloomberg showed.

Gold is down 26% year to date and many analysts agree that it is now very oversold.  The 14-day relative-strength index fell to 30 yesterday, signaling to some analysts who study charts that the price may be set to rebound.

Physical demand picked up on lower prices overnight – particularly in China and Asia. In China, now the largest buyer of gold in the world, premiums of 99.99% purity gold climbed to about $11 an ounce from $7 on Monday on the Shanghai Gold Exchange (SGE).

Bail-Ins And Deposit Confiscation Coming Noonan Confirms At ‘Future of Banking in Europe’ Conference
A major conference on the future of banking yesterday heard contributions on a European banking union which is being negotiated by Eurozone finance ministers. One of the aspects of that union will be a ‘bail-in’ of deposits when banks fail in the future. Michael Noonan, Ireland’s Minister for Finance confirmed yesterday that bail-ins or deposit confiscation will be used.

 

The toolkit underpinning the Single Resolution Mechanism is provided for in the bank recovery and resolution proposal (BRR) which was agreed last June in Council under the Irish Presidency. The proposal provides a common framework of rules and powers to help EU countries manage arrangements to deal with failing banks at national level as well as cross-border banks, whilst preserving essential bank operations and minimising taxpayers’ exposure to losses.
 
One of the main pillars to the BRR framework to facilitate a range of actions by authorities are “resolution tools”. Noonan confirmed yesterday that resolution tools include the sale of business, bridge bank and asset separation tools and also the use of bailins.

The era of bondholder bailouts is ending and that of depositor bail-ins is coming.

Preparations have been or are being put in place by the international monetary and financial authorities for bail-ins. The majority of the public are unaware of these developments, the risks and the ramifications.

It is now the case that in the event of bank failure, your deposits could be confiscated.

Let’s be crystal clear: The EU, UK, the U.S., Canada, Australia and New Zealand all have plans for bail-ins in the event of banks and other large financial institutions getting into difficulty.

Download our Bail-In Guide: Protecting your Savings In The Coming Bail-In Era (11 pages)

Download our Bail-In Research: From Bail-Outs to Bail-Ins: Risks and Ramifications(51 pages)

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/kOgOifdiEyQ/story01.htm GoldCore

In the most dramatic evidence yet that Britons are paying for the rising cost of living by raiding savings, Yahoo UK reports that households are pulling money out of their savings accounts at the fastest rate in modern record, according to Bank of England figures. Since the recent recession began, millions of workers have suffered repeated effective pay cuts as inflation has outstripped pay rises, and while consumer spending was one of the main contributors to the sharp rise in gross domestic product in the third quarter, “consumer strength usually reflects increased borrowing but this hasn’t been the key factor recently.”

In the year to October, the amount of cash in time deposits and cash ISAs fell by 4.7%, while the amount families have in their instant access current accounts or in their pockets rose by 11.2%. This inflationary shift of cash is the biggest since comparable records began in the 1970s.

 

Via Yahoo UK,

In the past year, families have withdrawn £23bn from their long-term savings accounts to convert into cash and put into current accounts – the equivalent of around £900 for every household in the country.

 

It is the most dramatic evidence yet that Britons are paying for the rising cost of living by raiding their savings accounts.

 

…

 

According to economists, the shift of cash is the biggest since comparable records began in the 1970s, and reverses much of the sharp increase in saving that happened at the height of the recession.

 

On Thursday, the Chancellor’s Autumn Statement is expected to focus on measures to help households deal with the rising cost of living, including energy bills.

 

Since the recent recession began, millions of workers have suffered repeated effective pay cuts as inflation has outstripped pay rises.

 

…

 

Consumer spending was one of the main contributors to the sharp rise in gross domestic product in the third quarter, and a further strong increase is implied by the Bank’s money figures.

 

But while the figures suggest that the economy is strengthening, they will also be taken as further evidence that savers are being deterred from putting money aside by record low interest rates.

 

…

 

Some also suspect that with households still facing a significant squeeze as a result of higher living costs, many are having to dig into their savings in order to afford day-to-day items.

So the UK economy is surging and being lauded as evidence of QE’s efficacy but the reality is inflation is eating away at people’s wealth and hot money flows have caused the cost of living to rise dragging out the mainstay of future growth – savings – to meet consumption needs today. How long before government inflation data reflects this?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/GosrIkf0NTc/story01.htm Tyler Durden

Perhaps the single most misunderstood item in the financial world is the Chicago Board Of Options Volatility Index, or VIX.

 

The VIX is a measure of how much investors are willing to pay for portfolio “insurance.” If they’re willing to pay a lot (the VIX is high), then it’s assumed investors are nervous. If they don’t want to pay much (the VIX is low), then it’s assumed investors are calm and expecting blue skies ahead

 

Because of this, most investors, including the majority of professional investors, believe the VIX provides a reliable barometer of market risk. 

 

This is not true. The reason is because investors are usually greedy when they should be fearful and vice versa. If the VIX is up, it’s not because the market is “risky” or at risk of falling… it’s because the market already FELL!

 

As anyone knows, the time to buy stocks is when they’re “low” as in “buy low, sell high.” But as I just explained, stocks are usually “low” when they’ve already fallen  (which would mean the VIX is already spiking). Put another way, the VIX doesn’t really measure risk per se… instead it shows you when investors are panicked… and that’s when you should consider buying.

 

 

Take a look at the above chart. Everytime the VIX spiked (the blue line below), the market had already dropped and was in the process of bottoming.

 

Now let’s look at a longer-term chart. Once again, the VIX spiked after the market had already plunged. In fact, buying stocks around the time the VIX spiked was a GREAT way to trade the market going back for years. If you had done this, you would have profited handsomely.

 

 

If you want to make a killing in the markets, you need to be willing to see the world the way it really is, NOT how you THINK it is. Most investors think the VIX measures the market’s risk, but really, it’s almost the opposite: a spike in the VIX almost always picks market bottoms!

 

For a FREE Special Report on how to beat the market both during bull market and bear market runs, visit us at:

 

http://phoenixcapitalmarketing.com/special-reports.html

 

Best Regards

 

Phoenix Capital Research

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/VPIQEJ5HP-8/story01.htm Phoenix Capital Research

While most of the world’s elites are bathing in a sea of liquidity and propagandizing the status quo to keep the dream alive, Richemont Chairman Johann Rupert has unleashed a torrent of uncomfortable truthiness this morning:

• *REMGRO CHAIRMAN RUPERT ‘VERY CONCERNED’ ABOUT GLOBAL ECONOMY
• *GLOBAL ECONOMY ‘VERY, VERY PRECARIOUS,’ RUPERT SAYS
• *WORLD HEADING FOR ‘BIG INFLATION’ OR `BIG DEPRESSION’: RUPERT
• *GLOBAL ECONOMY HEADED FOR ‘TEARS’: REMGRO, RICHEMONT CHAIRMAN
• *RUPERT SAYS HIS BIGGEST CONCERN IS JOBLESS GROWTH

And while things are good now, the owner of the Cartier brand warned if the global economy doesn’t do well, Richemont is not well positioned.

 

Via Bloomberg,

“It is very, very precarious,” Rupert said at the annual general meeting in Cape Town of Remgro Ltd., where he is also chairman.

 

“There will be tears, but we don’t know when, and we don’t know whether it’s going to be a big inflation or whether it’s going to be a depression. Just hedge your bets.”

 

…

 

“The luxury goods market is very cyclical and relies on consumers discretionary spend,” Rey Wium, an analyst at Renaissance Capital in Johannesburg, said by telephone. “When times are tough, consumers will tighten their belts.”

Perhaps it is time to book at ticket on the Freedom Ship?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/oaWdh8mEAro/story01.htm Tyler Durden

While most of the world’s elites are bathing in a sea of liquidity and propagandizing the status quo to keep the dream alive, Richemont Chairman Johann Rupert has unleashed a torrent of uncomfortable truthiness this morning:

• *REMGRO CHAIRMAN RUPERT ‘VERY CONCERNED’ ABOUT GLOBAL ECONOMY
• *GLOBAL ECONOMY ‘VERY, VERY PRECARIOUS,’ RUPERT SAYS
• *WORLD HEADING FOR ‘BIG INFLATION’ OR `BIG DEPRESSION’: RUPERT
• *GLOBAL ECONOMY HEADED FOR ‘TEARS’: REMGRO, RICHEMONT CHAIRMAN
• *RUPERT SAYS HIS BIGGEST CONCERN IS JOBLESS GROWTH

And while things are good now, the owner of the Cartier brand warned if the global economy doesn’t do well, Richemont is not well positioned.

 

Via Bloomberg,

“It is very, very precarious,” Rupert said at the annual general meeting in Cape Town of Remgro Ltd., where he is also chairman.

 

“There will be tears, but we don’t know when, and we don’t know whether it’s going to be a big inflation or whether it’s going to be a depression. Just hedge your bets.”

 

…

 

“The luxury goods market is very cyclical and relies on consumers discretionary spend,” Rey Wium, an analyst at Renaissance Capital in Johannesburg, said by telephone. “When times are tough, consumers will tighten their belts.”

Perhaps it is time to book at ticket on the Freedom Ship?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/oaWdh8mEAro/story01.htm Tyler Durden

Overnight, the WSJ reported a financial factoid well-known to regular readers: namely that as a result of a broken system that ever since the LTCM bailout has encouraged banks to become take on so much risk they become systematically important (as in their failure would “end capitalism as we know it”), and thus Too Big To Fail, there has been an unprecedented roll-up of existing financial institutions especially among the top, while the smaller, less “relevant”, if far more prudent banks have been forced out of business. “The decline in bank numbers, from a peak of more than 18,000, has come almost entirely in the form of exits by banks with less than $100 million in assets, with the bulk occurring between 1984 and 2011. More than 10,000 banks left the industry during that period as a result of mergers, consolidations or failures, FDIC data show. About 17% of the banks collapsed.”

The resulting elimination of over 10,000 banks in the past thee decades is shown in the WSJ chart below, which also shows total amounts of bank deposits.

The WSJ comments as follows:

The consolidation could help alleviate concerns that the abundance of U.S. banks leads to difficulties in oversight or a less-efficient financial system. Meanwhile, overall bank deposits and assets have grown, despite the drop in institutions.

Well, first of all, as David Kemper, chief executive of Commerce Bancshares Inc., a regional bank based in Missouri, said “Seven thousand is still an awful lot of banks,” particularly in an era where brick-and-mortar branches are becoming less profitable, said “There’s no reason why we need that many banks, especially if those smaller banks have a much lower return on capital. The small banks’ bread and butter is just not there anymore.”

But more important is the erroneous observation about deposits, which indicates a persistent lack of understanding about how QE works. As we won’t tire of explaining, the ~$2.2 trillion surge in deposits since Lehman is matched only by the ~$2.2 trillion surge in Fed created reserves. In other words, excess reserves appear on bank balance sheet as excess deposits, which are then used by banks to gamble away a la the London Whale, which used nearly half a trillion in fungible reserves (as manifested the liability side of its ledger) to fail in cornering the IG9 market. This transformation is shown on the chart below (discussed in depth here).

The point here is that the number of banks is largely irrelevant: it is obvious that the big will keep on getting bigger, and the Big 5 banks will do all in their power to either acquire their profitable competition or put everyone else out of business. However, the far bigger question is what happens to bank deposits once the Fed start to taper, ends QE or outright unwinds its balance sheet, which ultimately would soak up trillions from bank deposits. Because if there is one thing that is clear is that without the Fed, and without commercial bank loan creation (which has been non-existent in the past 5 years), bank balance sheet would be exactly where they were the day Lehman died.

Finally, one does not need to go any further than the following chart from the OCC showing total bank derivative holdings for all US banks and just the Top 4. The punchline: just the 4 biggest US banks hold $217.5 trillion, or 93% of the total $233.9 trillion in derivatives.

In light of the above, who cares how many other banks in the US exist?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/nms7a5SygrY/story01.htm Tyler Durden