Tag: finance

Over the past couple of days, we’ve highlighted a couple of the mass protests that are being planned by disaffected Hillary supporters in an effort to disrupt the various Trump inaugural events that get kicked off tomorrow evening.  Perhaps the most aggressive “disruptions” have been planned by groups called “DisruptJ20” and the “DC Anti-Fascist Coalition” and include plans to “paralyze the city” with “clusterfuck blockades” of bridges and tunnels, “stink bombs” in ventilation systems and chaining metro trains to station platforms to shut down rail traffic.  Unfortunately for them, all of their plans were caught on tape by Project Veritas (see “New Video Exposes Anti-Trump Groups Plotting Criminal Acts To Disrupt Inauguration“) so we suspect police will be well prepared.

As Reuters points out this morning, efforts to disrupt the inaugural process will have to evade a massive force of 28,000 security personnel and miles of fencing and roadblocks fortified by sand-laden dump trucks and other heavy equipment. 

Washington will turn into a virtual fortress ahead of Donald Trump’s presidential inauguration on Friday, as the U.S. capital braces for more than a quarter-million protesters expected during the Republican’s swearing-in.

 

About 28,000 security personnel, miles (kilometers) of fencing, roadblocks, street barricades and dump trucks laden with sand will be part of the security cordon clamped around 3 square miles (almost 8 square km) of central Washington.

 

“If we do have a mass arrest, we’ll be able to get people processed very quickly,” he said in an interview with Washington’s NBC 4 television station.

And, if America’s millennial snowflakes are able to break through rhe police fortress they will undoubtedly be met by the “Wall of Meat“ recently promised by the “Bikers for Trump” group which has vowed to go “toe-to-toe with anyone that is going to break through any police barriers.”

Overall, the inauguration is expected to draw a crowd of 900,000 with 250,000 of those guests showing up to protest the new President-elect.

Police have forecast that some 900,000 people, both supporters and opponents, will flood Washington for the inauguration ceremony, which includes the swearing-in on the steps of the U.S. Capitol and a parade to the White House along streets thronged with onlookers.

 

About 30 groups that organizers claim will draw about 270,000 protesters or Trump backers have received permits for rallies or marches before, during and after the swearing-in. More protests are expected without permits.

 

By far the biggest protest will be the Women’s March on Washington on Saturday, which organizers expect to draw 250,000 people.

Luckily, at least one helpful protest group will be on hand with plans to calm down the rowdy masses by passing out 4,200 doobies.

One Washington inaugural protest will come amid a haze of pot smoke as pro-marijuana protesters show their opposition to Trump’s choice for attorney general, Alabama Republican Senator Jeff Sessions, a critic of pot legalization.

 

The group plans to distribute 4,200 joints at the inauguration and urge attendees to light up. Possession of small amounts of marijuana is legal in Washington, but public consumption is not.

As we’ve said before, we wish all the protesters the best of luck…we’re sure your dreams of disrupting the democratic process will be well rewarded with a free night’s stay at a local DC jail.

via http://ift.tt/2iX3NPr Tyler Durden

Submitted by Mac Slavo via SHTFPlan.com,

Can you picture empty store shelves?

A couple of weeks ago, in early January, there was a relatively minor storm in the South and Southeast U.S. Cold weather, threat of the power going out, snow and ice and empty store shelves.

This wasn’t the big one. And yet it was enough to bring things to a panic.

If this is how people react to an extreme cold spell, then what happens when something major hits?

With about two months of winter to go, it is the kind of routine disturbance that is likely to happen again without much ado. A much more severe storm may come as well.ey

Shortages, and ill prepared people scrambling about for the final available resources. The angry race to the checkout line probably elicited road rage, fights and arguments… the storm that is brought out in people poses perhaps an even larger threat than the natural disaster, etc. itself.

After a few short hours ahead of a short-lived bitter cold, practically everything was gone – and nothing even happened yet. None one had gone without, and things hadn’t even gotten the chance to turn ugly.

If this had been a true crisis, and not just extreme weather over the weekend, people would have killed and died over a cart of groceries, some bottles of water or some fuel… and they could have prepared instead.

Vic Bishop shared these photos via Waking Times.com that were sent by a Walmart employee in a North Carolina store. He witnessed a chaotic buying spree, hopeless long lines and a people who could be brought to their knees within mere hours, and without even facing a real threat:

As a wave of extremely cold temperatures and isolated winter storms hits the South and Southeastern parts of the United States, Americans are once again proving their tendency to panic buy food and basic provisions in the event of even the most predictable and short-term emergencies.

 

[…]

 

The following images were sent to Waking Times on January 6th, 2017, by a Wal-Mart employee of the Cambridge Court store in Charlotte, North Carolina, who photographed empty food shelves as a severe winter storm descended upon the region. Along with the photos, this employee commented that the store had been a madhouse all afternoon and that lines were incredibly long.

 

“It’s been a mess since Monday, the lines on the register look like people going to vote.” ~Wal-Mart employee, Ras Vosty

 

[…]

 

If this type of panic buying, which can empty the shelves of a major box retailer like Wal-Mart in just a few hours, is so common place even in the event of a minor, predictable weather event, then what will happen when a serious crisis like a severe economic crash or an escalation of global conflict breaks out?

These photos show that society is completely unprepared for ANYTHING AT ALL out of the ordinary… and if it lasts more than 12 hours, it will cause complete chaos shortly afterwards.

The people you see on the streets, in your community, and especially in the big cities, would be lucky on average to make it three days with the back-up canned goods and last pickings stored in their cabinet and fridge.

After 12-72 hours without ATMs and EBT debit cards working, and without food to buy at the stores, electricity and other services, people will absolutely lose it.

There will be nothing else holding back the inner animal.

That is when everyone you in the general population becomes a threat against you, and a liability to your survival.

Do your friends and neighbors know that you prep and store lots of extra food, fuel and supplies?

Will they be knocking on your door for shelter and refuge, only to eat through your carefully-stocked cache? Will their greed, ignorance and stupidity give you away, open you up to outside attacks, get your arrested or even killed?

There will be a lot revealed about the human character the next time a rise crisis hits and something lasts longer than a weekend storm.

Be prepared, and be on guard for signs like this – that things are not as stable as they appear on the surface:

Becoming self-sufficient, and cutting yourself out of the loop of dependency on the system, supply chain and people around you might be a good thing to do.

At the very least, a couple extra weeks of everything you might need in a crisis should be the minimum step to take – as political and economic unrest may well be coming, along with perhaps more than the average level of natural disasters and extreme weather events.These are not normal times.

h/t Vic Bishop at the Waking Times.

via http://ift.tt/2k7fPrk Tyler Durden

Ever since 2012 we have warned that one of the biggest threats arising from the US student loan bubble – which is no longer disputed by anyone except perhaps members of the outgoing administration – is not that it is soaring at an unprecedented pace, that’s obvious for anyone with the latest loan total number over $1.4 trillion, rising at a pace of nearly $100 billion per year, but that the government – either on purpose or due to honest miscalculation – was not correctly accounting for the true extent of delinquencies and defaults. Today, we finally got confirmation that, as speculated, the US government was indeed fabricating student loan default data, making it appear far lower than it was in reality.

An the WSJ reported overnight many more students have defaulted on or failed to pay back their college loans than the U.S. government previously believed. The admission came last Friday, when the Education Department released a memo saying that it had overstated student loan repayment rates at most colleges and trade schools and provided updated numbers. This also means that the number of loan defaults in various cohorts is far greater than previously revealed.

A spokeswoman for the Education Department said that the problem resulted from a “technical programming error.”

And so, the infamous “glitch” strikes again.

How bad was the data fabrication? When The Wall Street Journal analyzed the new numbers, the data revealed that the Department previously had inflated the repayment rates for 99.8% of all colleges and trade schools in the country. In other words, virtually every single number was made to appear better than it actually was. And people mock China for its own “fake data.”

According to an analysis of the revised data, at more than 1,000 colleges and trade schools, or about a quarter of the total, at least half the students had defaulted or failed to pay down at least $1 on their debt within seven years. This is a stunning number and suggests that the student loan crisis is far greater than anyone had anticipated previously. It also means that the US taxpayer will be on the hook for hundreds of billions in government-funded loans once attention finally turns to who is expected to foot the bill for years of flawed lending practices.

As the WSJ adds, this isn’t the first time data problems have affected the Education Department: a recent government report criticized how the department tracks information including the budgetary implications of student loan forgiveness.  “This is a quality control issue with a Department of Education that has been facing criticism already for other data issues,” Robert Kelchen, an assistant professor of higher education at Seton Hall University.  The department “needs to be regularly audited so these issues can be discovered sooner.”

There is another interpretation: as we reported yesterday, when we revealed that a Chinese province admitted it had fabricated fiscal data for the period 2011-2014, the reason the data were made up “because officials wanted to advance their careers.” One can imagine that the career pressure for those government workers who would report, and be held accountable, for revealing the true picture of America’s disastrous student loan bubble, would be likewise staggering.

* * *

Going back to the report findings, the student loan repayment rates were originally released in 2015 as part of the Obama administration’s College Scorecard, which followed an aborted attempt to rate colleges and tie federal funds to those ratings.

At the time, the Journal reported that at 347 colleges and vocational schools, more than half of students had defaulted or failed to pay down their debt within seven years. Those figures were based on students were supposed to start repaying loans in 2006 and 2007.  In September, the Department released data tracking students who should have begun repayment in 2007 and 2008, and that number rose to 477. But with the updated number released last week, that number grew to 1,029. Worse, no college saw its repayment rate improve under the revision, and some schools saw their seven-year repayment rates fall by as much as 29%.

The worst offender was the University of Memphis which had one of the largest drops in its repayment rate following the recalculation. Previously, the Department said that 67% of its students were repaying loans within seven years of entering the repayment period. That number fell to 47% after the recalculation.

The University was not happy. In a statement, the school said it “was not contacted by or made aware of the data changes” from the Education department.  “Given the magnitude of the numerical changes in the report released by the Department of Education, the University of Memphis will be challenging the accuracy of the newly adjusted data,” the statement said.

The far more dire implications, however, are for broader student loan market, because if the latest unfabricated data suggesting that loan delinquencies are rapidly rising toward 50% across most of America’s colleges, then the US is facing a default problem of staggering proportions. Recall that back in December 2014, The Treasury Borrowing Advisory Committee forecast that in an aggressive scenario, as much as $3.3 trillion in student loans could be oustanding by 2024. Incidentally, that is the scenario that has captured the growth of student loans since it was presented.

Apply default rates of 40-50% to this number, and the bill to the US taxpayer for the next mass bailout starts taking shape.

via http://ift.tt/2iNWDK5 Tyler Durden

The CIA is under pressure from a lot of individuals and groups that question the agency’s relevance in today’s world, even Jack Ma dropped the comment at Davos that $14 Trillion was ‘wasted’ on wars over the years.  As we explain in Splitting Pennies – Understanding Forex – The CIA has been a currency manipulator and agency-employee for the banks, since inception.  Now, we have the evidence.  Due to overwhelming public pressure, the CIA released 13 Million files online which are more than 25 years old, you can search this treasure trove here:  Access CIA Crest archive by clicking here.  

Bear in mind that, this is a view ‘back in time’ in an age before computers, we can only surmise based on facts and evidence how the agency is involved in FX operations today.  Notably, they were the hand twisting the Swiss arm in 2011 that led to the final destruction of the world’s only ‘real’ currency that had any value intrinsically; the Swiss Franc.  Now let’s go back to 1957 to examine our first case example:

This entire document can be seen here in PDF.  Although the operation here seems benign, the controlling of a client-state assets can be key in acheiving whatever goals set out, whether intelligence goals or economic ones.  In the case of Egypt, part of the ‘non-aligned’ movement during the post WW2 and Cold War period, in question was mostly their dealings with the Sino-Soviet Bloc, not their internal problems per se.  This is interesting as it follows a theme relevant today, that of blocking Russia’s economic success in order to gain a global advantage politically.

As explained in this groundbreaking book exposing the CIAs banking operations, Confessions of an Economic Hit Man, the CIA has a simple plan to control the wealth of a nation, first sending in the ‘economists’ offering loans and various economic incentives – if that doesn’t work they send in the ‘jackals’ or CIA hitsquad and finally, when all else fails, they bomb the country into oblivion.

In this example, the CIA is ‘concerned’ that Egypt will ‘settle debts’ with ‘discounted goods’ purchased from western countries.  Sounds like a reasonable deal – but the CIA doesn’t play fair.  It’s the ‘do as I say, not as I do’ approach, it’s OK for the CIA to topple foreign leaders and seize the assets of foreign countries, but if another country does it, they are accused of ‘aggression.’  This double standard has been an old CIA trick since the days of spying and confidence tricks began.  It also was the beginning of the CIAs ‘banks not tanks’ approach to foreign policy which was used for the greater part of the last 70 years since WW2.  For example, if the CIA could control the assets of a foreign country and thus crippling them, it was akin to invading their most critical city successfully.  Although this is a no-brainer (so it seems today) in previous times such methods were not feasible to implement.  But the CIA grew and evolved in a time of modern communications leading to where we are today, in a flat world based on instant electronic communication around the world.

For a more modern example, here’s the smoking gun regarding Iraq:

A bizarre political statement by Saddam Hussein has earned Iraq a windfall of hundreds of million of euros. In October 2000 Iraq insisted on dumping the US dollar – ‘the currency of the enemy’ – for the more multilateral euro.  The changeover was announced on almost exactly the same day that the euro reached its lowest ebb, buying just $0.82, and the G7 Finance Ministers were forced to bail out the currency. On Friday the euro had reached $1.08, up 30 per cent from that time.  Almost all of Iraq’s oil exports under the United Nations oil-for-food programme have been paid in euros since 2001. Around 26 billion euros (£17.4bn) has been paid for 3.3 billion barrels of oil into an escrow account in New York.  The Iraqi account, held at BNP Paribas, has also been earning a higher rate of interest in euros than it would have in dollars.

So now that the CIA has released 13 Million files and will continue to release more every year on the Crest archive, it will provide investors, historians, authors, academics, bankers, and others the evidence they need to research and confirm what we already knew:  The CIA is an agency-employee that works for international banks first, and US Citizens second.

To get an education about how this works and more, including how to trade the FX market, checkout FC Trading Academy.  For a pocket guide to make you a FX Genius checkout Splitting Pennies – Understanding Forex book.

via http://ift.tt/2jcvwZT globalintelhub

Bloomberg’s survey of economic expectations has soared since Donald Trump was elected and at 56.0 in January, it is the highest since 2002.

This spike in ‘hope’ is occurring as the current economic situation is seen as deteriorating and, as the chart below suggests, this might be as good as it gets…

But this time could be different?

via http://ift.tt/2jPHnOn Tyler Durden

In what is sure to be one of the fieriest confirmation hearings to date, Steven Mnuchin, Trump’s pick for Treasury Secretary, is set to take questions from the Senate Finance Committee starting at 10AM EST.  As the show gets started, Democrats will undoubtedly be looking to score theatrical points with the working class folks of the Midwest by peppering Mnuchin with zingers on his time at Goldman Sachs and demonizing his involvement with foreclosure efforts at IndyMac and OneWest. 

As the political theater get ready to begin, per The Hill, here are some of the things to expect:

1.  Democrats will undoubted try to score populist points with the working class folks of the Midwest by hitting Mnuchin on his banking background.

Democrats have ripped Trump for staffing his administration with several Goldman Sachs alumni and wealthy business figures after campaigning against corporate elites running government.

 

Mnuchin made millions through his private sector career in investing, banking and movie producing. He’s never worked in government, spurring Democrats to raise questions about his preparedness and familiarity with the job.

 

Democrats are putting a target on Mnuchin as they seek to bolster their populist credentials. They’ve already nicknamed him “the foreclosure king” and claimed his lack of government service won’t translate into fighting for middle class Americans.

 

Finance Committee Democrats Sens. Sherrod Brown (Ohio) and Claire McCaskill (Mo.) are up for reelection in 2018 in states that went for Trump. How they approach their questioning of Mnuchin will be something to watch. 

2.  Will Mnuchin weigh in on Dodd-Frank, a controversial piece of legislation that Republicans have been looking to overhaul for years.

Though the Senate Banking Committee has jurisdiction over the issues covered by the Dodd-Frank Act, some Senate Finance members are likely to press Mnuchin on the sweeping financial regulation law passed in 2010.

 

Republicans have been planning a Dodd-Frank overhaul for more than a year and are poised to make major changes to the law, even if it’s piece by piece.

 

Brown, the top Democrat on the Banking Committee, sent Mnuchin a letter in December with several questions on banking and housing regulation that he says Mnuchin didn’t answer. Brown also told reporters Tuesday that he expects such questions to be asked by other senators.

 

Mnuchin’s comments on Dodd-Frank could reveal where the Trump administration wants to start when it comes to changing Dodd-Frank. Trump shed little light during the campaign on how he’d approach the law, so Mnuchin could be the first look into the administration’s priorities.

3.  Will Mnuchin be opposed by any Republicans on the Committee?

While most Republicans appear ready to back Mnuchin, one GOP senator could waver: Sen. Dean Heller (Nev.).

 

Heller, a Finance Committee member, is up for reelection in 2018 in a state won by Hillary Clinton in the presidential election. Nevada was also devastated by foreclosures during the housing crisis, making Mnuchin’s record at OneWest a sensitive issue.

 

Heller told The Hill this month that despite his “very positive” conversation with Mnuchin, he still has reservations about supporting him.

4.  What will Mnuchin say regarding a strong-dollar policy?

It’s been a mantra of Treasury secretaries since the mid-1990s. Usually, Republican and Democratic administrations have maintained a policy of backing a strong U.S. currency, speaking neutrally about it, for fear of upsetting the financial markets. But Trump went and changed that.

 

“Our dollar is too strong,” Trump told The Wall Street Journal last week. “And our companies can’t compete with [China] now because our currency is too strong. And it’s killing us.”

 

Will Mnuchin echo Trump’s sentiments or will he maintain a strong-dollar policy tradition? The markets await his answer.

With that, courtesy of WikiPedia, here is a brief bio on Mnuchin:

Steven Terner Mnuchin is a former Goldman Sachs partner and senior manager and hedge fund investor. On November 30, 2016, it was announced that Mnuchin would be nominated as Secretary of the Treasury in the coming administration of President-elect Donald Trump.

 

After he graduated from Yale University, Mnuchin worked for investment bank Goldman Sachs for 17 years, reaching its management committee. After he left the bank in 2002, he worked for and founded a number of hedge funds. During the financial crisis, Mnuchin bought failed house lender IndyMac. He rebuilt the bank as chairman and CEO in the subsequent years under the name OneWest Bank, and sold it in 2015 to CIT Group. Mnuchin joined Trump’s presidential campaign in 2016, and was named national finance chairman for his campaign.

And here is a live stream of the festivities:

via http://ift.tt/2iWD5pY Tyler Durden

Submitted by Mike Shedlock via MishTalk.com,

TechDirt writer Mike Masnick is so disgusted with fake-patriot politicians that he stopped writing about tech dirt and instead wrote about human dirt: Senator John McCain.

Masnick took McCain’s statement “President Obama’s commutation of Chelsea Manning’s sentence is a grave mistake that I fear will encourage further acts of espionage and undermine military discipline.” and ripped to shreds.

Almost Every Word Of John McCain’s Response To Chelsea Manning’s Sentence Commutation Is Flat Out Wrong says Mike Masnick.

What follows is Masnick’s entire article because every point he makes is an important one.

From the Hypocrites-in-Congress Dept

It’s hardly a surprise that a bunch of people who have been fed a load of bullshit about what Chelsea Manning did years ago are now quite angry over President Obama’s decision to commute Manning’s sentence. But I don’t think any are quite as painstakingly wrong as Senator John McCain. Someone should call up the Guinness World Record folks, because the wrong-per-sentence ratio of McCain’s angry statement might just set a new world record. Let’s dig in.

President Obama’s commutation of Chelsea Manning’s sentence is a grave mistake that I fear will encourage further acts of espionage and undermine military discipline.

Wait. Really? Manning has been in prison for seven years, with a significant portion of that being held in solitary confinement, sometimes being made to strip naked before being able to sleep. This was called “cruel, inhuman and degrading treatment in violation of article 16 of the convention against torture” by the United Nations. You would think, of all people, Senator John McCain, who similarly was held in solitary confinement and tortured for extended periods while being held captive for 5 and a half years in Vietnam, would recognize that “only” 7 years of such treatment wouldn’t exactly encourage more of Manning’s behavior.

To put it more directly: who, in their right mind, is going to leak a bunch of documents thinking “oh, perhaps after going through literal torture, character assassination and basically hell on earth, it’ll be okay, because maybe some other President will commute my insane 35 year sentence to just 7 years? No one. The idea that this commutation is going to lead to further leaks is ridiculous. If anything will lead to further leaks it’s Manning’s courage in seeing something wrong in the system and actually doing something about it.

In fact, it was things like Manning’s courage that helped inspire Ed Snowden and other whistleblowers to step up. They didn’t do it on the idea that they might “only” suffer 7 years of torture.

Second, what Manning did was not “espionage” and for McCain to suggest it is, means McCain either has no idea what he’s talking about, or is lying. Manning leaked diplomatic cables and related information exposing vast wrongdoing by the US, to Wikileaks, who partnered with a number of respected press outlets to reveal the wrongdoing. That’s not espionage. That’s classic whistleblowing. And, yes, in case you’ve forgotten, Manning’s leaks revealed a hell of a lot of wrongdoing by the US government.

It also devalues the courage of real whistleblowers who have used proper channels to hold our government accountable.

Oh come on. We’ve highlighted repeatedly how the “proper channels” claim is a complete joke. The “proper channels” have a long history of retaliating against whistleblowers such that everyone now knows the best way to destroy your life is to use the proper channels.

It is a sad, yet perhaps fitting commentary on President Obama’s failed national security policies that he would commute the sentence of an individual that endangered the lives of American troops, diplomats, and intelligence sources by leaking hundreds of thousands of sensitive government documents to Wikileaks, a virulently anti-American organization that was a tool of Russia’s recent interference in our elections.

First of all, Manning did not endanger the lives of American troops, diplomats and intelligence sources. During Manning’s sentencing hearing, following her conviction, the US military admitted no one died because of Manning’s leaks. So why does this myth still persist? Mainly because it’s politically convenient to lie and pretend that whistleblowing leaks must “cost lives.”

Thousands of Americans have given their lives in Afghanistan and Iraq upholding their oaths and defending this nation. Chelsea Manning broke her oath and made it more likely that others would join the ranks of her fallen comrades. Her prison sentence may end in a few months’ time, but her dishonor will last forever.

This has been pointed out over and over again: the oath that people take is to defend the Constitution. And a big part of that is calling out unconstitutional behavior by “this nation.” Which is exactly what Manning did. Manning clearly felt that part of defending our nation and upholding her oath was to reveal wrongdoing by the US government. Furthermore, once again, the US military itself admitted that Manning didn’t cause anyone to die.

Finally, as Marcy Wheeler correctly points out, McCain isn’t just completely wrong with most of his statement, he’s a total hypocrite as well. After all, McCain has been one of the most vocal supporters of General David Petraeus, a man who was convicted of giving classified information (much more serious than anything leaked by Manning) to his mistress. When there was talk of demoting Petraeus for this fairly serious breach, McCain said he was going to launch a Congressional investigation. And, more recently, McCain had this to say about Petraeus:

People make mistakes in life, they pay a price and move on.

So, uh, yeah. Compare that to his statement about the commutation (not pardon) of Manning’s sentence and explain how McCain is not an utter and total hypocrite. If commuting Manning’s sentence after “just” 7 years of torture and inhuman treatment will incentivize more leaks, wouldn’t that also mean that Petraeus getting basically no punishment at all for leaking much more serious material will lead to more leaks, since it seems top government and intelligence community officials are clearly being given the message: it’s okay to give up the nation’s biggest secrets if it means you get laid.

End Masnick

Many people responded to my post on Manning, and some commented, as did McCain, that Manning endangered the lives of American Troops. I will cut my readers some slack, as they probably have been brainwashed.

As for McCain, he knows damn well Manning did no such thing.

Suggestions that Manning go through proper channels is a joke. Espionage? Give me a break.

McCain is ready to let General David Petraeus, a man who was convicted of giving classified information to his mistress, “move on”, but not Manning.

Senator McCain is one of the biggest hypocrite pieces of scum on this planet.

Related Articles

1. Chelsea Manning: Justice Delayed Is Not Justice Served; FU Senators Cotton, Graham
2. McCain has Blood on his Hands
3. Dear Senator McCain, Our National Security is Threatened by You, Your Policies, and Your Soulmate, Hillary Clinton

I am totally sick of fake-patriot, warmonger as*holes like senators John McCain, Tom Cotton, and Lindsey Graham.

— Mike Mish Shedlock (@MishGEA) January 18, 2017

The US will be better off and the world will be safer the minute they retire.

via http://ift.tt/2iWCjJR Tyler Durden

Before starting this article, I want to stress the following:

I HATE politics.

However, in todays’ highly politicized world, you cannot ignore some moves.

On that note, on Tuesday night, President-Elect Donald Trump stated in an interview with the WSJ that the “USD was too strong.”

Less than 24 hours later, Fed Chair Janet Yellen, openly defied Trump, talking up the $USD and claiming the Fed was worried about inflation and needed to hike interest rates.

THIS IS ASTOUNDING.

For 8 years the Fed has engaged in some of the most profligate monetary policy in history. The Fed has expanded its balance sheet by $4 trillion, employed ZIRP for seven years, and openly talked down the $USD anytime it broke above 98.

Then, suddenly, after the November 8^th Presidential election, the $USD spiked to above 100 and the Fed didn’t say a word.

More than that… the Fed has repeatedly stated that it wants to hike rates THREE times in 2017.

THREE rate hikes in a single year… after the Fed has only raise rates TWICE in the last TEN.

Let’s be clear… the Fed is now an actively political organization. We knew the Yellen Fed was a left-leaning group, but this is truly incredible from an organization that claims to be neutral.

Originally published at: http://ift.tt/QHtIFM

Best

Graham Summers

Chief Market Strategist

Phoenix Capital Resesarch

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By Chris at http://ift.tt/12YmHT5

Market dislocations occur when financial markets, operating under stressful conditions, experience large widespread asset mispricing.

Welcome to this week’s edition of “World Out Of Whack” where every Wednesday we take time out of our day to laugh, poke fun at and present to you absurdity in global financial markets in all its glorious insanity.

While we enjoy a good laugh, the truth is that the first step to protecting ourselves from losses is to protect ourselves from ignorance. Think of the “World Out Of Whack” as your double thick armour plated side impact protection system in a financial world littered with drunk drivers.

Selfishly we also know that the biggest (and often the fastest) returns come from asymmetric market moves. But, in order to identify these moves we must first identify where they live.

Occasionally we find opportunities where we can buy (or sell) assets for mere cents on the dollar – because, after all, we are capitalists.

In this week’s edition of the WOW we’re covering Australian bank funding costs

My sister-in-law just bought a new cupboard apartment in Sydney. AU$1.4 million, the going price for an inmate of the city’s digs, gets you enough room for a cat, its litter tray, and a wine rack, which you’ll be emptying regularly in order to keep your sanity, living in confinement.

Sydney and indeed Australian real estate isn’t new to us. It wasn’t that long ago (6 months, actually) that I took a swipe at overvalued real estate around the globe. I suggested Vancouver was due for a good spanking and then discussed how Australia looked rather ugly, despite it’s pretty beaches, sunshine, and Kylie Minogue.

In order for any market to reach dizzying levels we need only look to the debt markets, because it is debt which provides the leverage behind most modern day bubbles. Aussie real estate is no different.

In an article discussing New Zealand real estate, I mentioned the following, and since it applies to Australia as well, it’s worth revisiting:

“What makes New Zealand particularly vulnerable is the fact that it has no domestic capital markets and as such borrows offshore. But offshore lenders don’t like currency risk which they’re taking as all lending takes place against NZD denominated assets.

Banks have to match the fixed rate mortgages against what is mostly floating rate borrowing. And since the NZ housing market is the largest single form of borrowing it is the biggest influencer on New Zealand swap rates.

Because most of the debt that NZ banks take on is floating, they pass this risk onto borrowers. And so it’s no surprise that the vast majority of NZ mortgage debt is either floating or fixed for no longer than 2 years at initiation. Offering anything longer means NZ banks would be taking on risk they simply can’t hedge economically.”

Fast forward to just yesterday and the Sydney Morning Herald just published an article:

The article goes on to say:

“Big banks are predicted to raise variable interest rates this year in response to a squeeze on profits from higher funding costs.”

Another gem worth noting is this.

“After several smaller banks hiked variable rates over summer, NAB also said it was grappling with the higher cost of funding variable rate loans, used by the majority of borrowers.”

Variable rate loans have looked very attractive to borrowers for two reasons.

1. Fixed rates have kept falling, and falling, and falling, creating a complacency that this is indeed just what happens. Imagine locking yourself into a fixed rate only to wake up a month or two later to find it lower – an uncomfortable experience. And so it’s no surprise that when the reward for prudence is punishment, actors change their behaviours.
2. They offer flexibility to pay off loans in lump sums, and there are typically no break fees on the mortgages.

Now let’s revisit my article again:

“Any sudden rise in the cost of offshore borrowing can have a disproportionate effect on mortgage rates and the debt payments Joe Sixpack is making. Joe remains completely unhedged against interest rate risk. And there is precious little he can do about it unless he’s sophisticated enough to hedge his mortgage risk in the futures market – something I assure you is as likely as my following Justin Bieber on Twitter.

Simple volatility in the currency can cause risk premiums to rise as offshore lenders hedge this volatility risk but most Kiwis don’t seem to understand this risk. And that is at a time when the Kiwi dollar is under pressure due to the USD bull market, coupled with falling commodity prices, dairy in particular.”

According to the Sydney Morning Herald, only 15% of borrowers have fixed rate mortgages. Put another way, fully 85% of the mortgage market is sitting on variable rate mortgages. I’m sure it’ll be fine.

Recap

So the vast majority of folks are sitting on variable rate mortgages right as the global funding markets begin a sustained capital drive back to the US, causing funding liquidity to further constrict and costs to rise as a global shortage of capital makes itself felt in the commercial funding markets. Whoah, nice one!

If you want a better understanding of how the global funding markets are functioning (or should I say not functioning), I strongly suggest going back and reading or re-reading my articles on eurodollars. The first part deals with the eurodollar market, the second part with why the Eurodollar market is not functioning properly, and in the third part, entitled Collateral Damage, I discussed the underlying reasons for the breakdown in the global funding markets, of which the Eurodollar market is the big daddy.

National Australia banks COO had this to say of the funding markets:

“That is something we are continuing to see, and it’s something we’re still grappling with in working through how we reflect that longer term in terms of competitive positioning and pricing, etc.”

I’ll translate that for you. We’re soiling ourselves here because we’re completely unprepared for a turn in the bond market and subsequent rising funding costs. We haven’t figured this out but it does look worrying.

How long until we find the major Australian banks failing to meet common equity tier 1 capital requirements ,resulting in them going to the market to raise capital (issuing shares)? We’re probably going to find out in 2017.

The repercussions of decades of foolish monetary policy have created asset bubbles in multiple asset classes, while at the same time having starved other sectors of capital, thereby creating extraordinary asymmetry. Just what we’re focussed on here. Lucky us!

For this week’s World Out of Whack I ask the following question:

Cast your vote here and also see what others think

If I’m wrong and option 4 is indeed correct, I have a cunning plan for that scenario.

You see, if I’m wrong and prices just keep rising, people will live in smaller and smaller shoeboxes, and I’m going to go long hamsters. There won’t be space for fluffy the cat anymore, and instead we’ll see a boom in hamster sales with a deluge of cats and handbag dogs finding their way onto the streets and to the pound.

On the plus side we’ll see menu prices at Korean restaurants halve as cat supply hits the market. So there you have it. Long Korean restaurants and hamster sales.

– Chris

“We need to be thinking now about how to deal with higher interest rates down the track. We can’t just say it will be fine because it won’t be.” — Martin North, Principal of Digital Finance Analytics

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