Rube Goldberg, eat your heart out…
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Rube Goldberg, eat your heart out…
via Zero Hedge http://ift.tt/1rK9N8g Tyler Durden
Submitted by Simon Black via Sovereign Man blog,
It was a scene just like out of the Wild West.
18-year-old David Moreyra had stolen a purse. And an angry mob gathered in broad daylight in Rosario, Argentina to lynch him.
It turns out that ‘mob justice’ is on the rise in Argentina, and Mr. Moreyra’s death was just one of more than a dozen recent instances.
Hundreds of years ago during the Age of Enlightenment, liberty-minded philosophers argued that governments could only derive their authority to govern by receiving consent of the governed.
And that the people would have to voluntarily surrender some of their freedoms to government in exchange for certain services (and protection of their other freedoms).
This idea has become twisted and mutated over time.
These days, the prevailing model is that [some] people pay taxes, and in exchange the government maintains a monopoly over a number of public services.
Security is one obvious example since, for most people, the local police force maintains a monopoly over citizen security.
Any high school economics student can tell you that most monopolies are terribly inefficient.
Yet this is what people have been indoctrinated to believe—that they need the government to protect them. And they’re willing to pay ever-increasing taxes to ensure the government can provide it.
In many cities and countries across the world, they’re even willing to give up their right to bear arms… to give up some personal freedom… in exchange for the government providing a generally inefficient service.
All of this is part of the modern social contract. And when nations go broke, this social contract breaks down.
Many of the public services that government has promised get curtailed, or cut entirely.
The people have held up their end of the bargain. They’ve traded in their freedoms and their income in exchange for services. But the government hasn’t held up theirs.
And because the government has a monopoly on many of these services, suddenly people find themselves without something they have come to depend on.
This is precisely what has happened in Argentina. As the economy continues to struggle from an absurd level of money printing, unemployment and inflation are both painfully high.
Many Argentines are desperate. Crime rates have soared. But the police are utterly worthless.
Once peaceful citizens have been driven to desperation as a result. They’re afraid… and they’re taking matters into their own hands, roaming the streets in lynch gangs.
This isn’t some neighborhood watch or citizen justice program.
They form these gangs out of desperation, signalling that Argentina’s social contract has completely disintegrated.
It’s a rather unfortunate regression for a society. Civilized people don’t form angry mobs to act as judge, jury, and executioner.
As I’ve long-written, there are consequences to destructive economic policy.
Central bankers cannot conjure infinite quantities of currency out of thin air, nor can politicians borrow more money just to pay interest on what they’ve already borrowed, all without consequence.
This is one of those consequences—a complete breakdown of the social contract, giving rise to something so Medieval as lynch gangs and mob justice.
Can it happen where you live? Maybe. No nation is immune to the social effects of economic decay (think Detroit, or even New Orleans after Hurricane Katrina…).
When every shred of data suggests that major western economies are decaying rapidly under the weight of excessive debt and paper currency, it’s foolish to presume that ‘it can’t happen here’.
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It was not a Tuesday, and it was not a Fed day – so stocks closed red. Volume was dismal. The Russell 2000 tested its 200DMA once again (and bounced) but was unable to sustain that strength, ending notably weak today. Once again the biggest news was the continued collapse in Treasury yields as a combination of massive spec positioning short "because rates have to go up" and the ugly reality of macro weakness combined to send rates to 2014 lows (and 11-month lows for 30Y yields). The Dow's weakness meant it lost its gains for 2014. Despite ongoing USD weakness (driven by GBP and EUR strength), commodities traded lower with silver worst today (red for 2014), copper weak, and gold and oil flat to modestly lower. VIX was pummeled down to almost 13 midday (which makes perfect sense ahead of NFP – why would anyone hedge that?) but leaked higher as bond market reality set in during the afternoon. The ubiquitous very-late-day VIX slam pulled stocks higher in a buying panic but failed to get the S&P, Dow, or Russell green on the day.
Before we start on the day's action… take a moment to call the world's largest capital market "wrong"…
And a close up this week…
Stocks and AUDJPY were largely in sync today…
And VIX was pressured and then slammed into the close to ramp stocks to unch…
Look at the lower pane for a sense of participation in this rally… lower lower lower volume as we creep higher…
Stocks were mixed on the day… with Russell 2000 testing its 200dma and bouncing with a late-day buying panic…
High-Yield bond yields did not agree with stocks late day ramp…
But Treasuries weren't – all lower yields all day long…
Commodities all slid lower on the day – with Silver's big dump early being retraced…
Just look at this idiocy in Silver futures today…
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We could yarn on for hundreds of words discussing the ins and outs of falling volumes and record-er highs in US equity markets as Treasury bond yields collapse, macro- and micro-fundamental data slumps, and the total nonsense with regard to ‘cash on the balance sheets’ when it is all levered to the max. But when it comes to showing just who is buying the hope… and who is selling the hype, the following chart from BofAML sums it all up… institutional clients sold the most since January and the 4th most on record in the last week as retail clients continued their buying streak.
Institutional clients are dumping equities off to retail clients… thank you very much…
Last week, during which the S&P 500 was down 0.1%, BofAML clients were net sellers of $1.5bn of US stocks following a week of net buying.
Net sales were chiefly due to institutional clients, who have now sold stocks for the last five consecutive weeks and are the biggest net sellers year-to-date. Net sales by this group last week were their largest since January and the fourth-largest in our data history (since 2008).
Hedge funds were net buyers for the fourth consecutive week, and private clients also continued their net buying streak.
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Submitted by Martin Armstrong via Armstrong Economics,
Fascism has been a term applied to the manner of organizing a society in which a government ruled by a dictator/bureaucracy that is unelected or a republic with pretend “lifetime” politicians, controls the lives of the people and in which people are not allowed to disagree with the government. Such systems have always placed the “good” of the state before the worth of an individual. The right to property is subject to constant search and seizure and courts only rule in favor of the state.
That was the closing days of Rome. It was also the Soviet Union and especially the East Germany with respect to organization. I went behind the Berlin Wall before it fell. You could not speak freely on the street but had to wait until you were alone.The Soviet Union was a Communist/Fascist State where you could not disagree with the government and they owned everything.
Government corruption may be at an all time high in history. I can find few periods where the state has hunted down its own people other than during the collapse of Rome. I have written about Maximinus who was declared Emperor by the troops and just consider them as government workers. Maximinus simply declared ALL PRIVATE wealth in the nation belonged to the state to pay the troops (government workers) so that government could retain its power. This was the first attempt at a Communist-Fascist State hybrid.
In Italy, the famous Fashion designers Domenico Dolce and Stefano Gabbana were sentenced to 18 months in prison this week for keeping hundreds of millions of euros from Italian tax authorities offshore. When I say there is a worldwide hunt for capital that is destroying the world economy – this is NO JOKE! Politicians have spent whatever they like and then imprison citizens for not handing over whatever they demand. This is not democracy – it is totalitarianism. The have NO right to take money from people and criminalize refusing to pay unreasonable sums. People come together to form societies because a synergy emerges that creates an economy from the Invisible Hand that is larger than the sum of the parts. It has historically be VOLUNTARY. Government has abused its power and looks upon the people as a herd of unwashed wild animals for them to drive in whatever direction they desire for their own self-interest. They retain that power by preaching to the ignorant that they are NEVER the problem, it is always the “rich” who refuse to turnover everything they own so politicians can live high and mighty.
This is WHY Thomas Jefferson, Madison, Adams. Washington, and Franklin, just to mention a few, forbid DIRECT taxation. They experienced that the power to DIRECTLY TAX the people destroys the liberty of the people for once a direct tax is imposed, you must account for whatever you do, earn, and have. The future of the present and younger generations is being systemically wiped out and therein we will discover the seeds of revolution. Justice Samuel Chase wrote in Hylton v. United States – 3 U.S. 171 (1796):
The great object of the Constitution was, to give Congress a power to lay taxes, adequate to the exigencies of government; but they were to observe two rules in imposing them, namely, the rule of uniformity, when they laid duties, imposts, or excises; and the rule of apportionment, according to the census, when they laid any direct tax.
If there are any other species of taxes that are not direct, and not included within the words duties, imposts, or excises, they may be laid by the rule of uniformity, or not; as Congress shall think proper and reasonable. If the framers of the Constitution did not contemplate other taxes than direct taxes, and duties, imposts, and excises, there is great inaccuracy in their language.
Clearly, taxes had to be fair to the states being uniform and apportioned by population. Only Socialists argued that taxes should be higher on a percentage basis the more you earn. They see any uniformity as an inequitable requirement. Let we claim women should have equal pay to men and there should be no discrimination with respect to race of creed. So where does this “social justice” come from other than coveting your neighbor’s possessions simply because they has things you do not.
The early Supreme Court solved the dilemma, when key Founders were still
Justices sitting on the Court, by interpreting “direct tax” strategically so that no tax was direct if apportionment was unreasonable. That solution was doctrine for one hundred
years, and courts need to return to it. Clearly, taxes that were not uniform or disproportionate had no constitutional weight. So much for Obama, IMF and Piketty.
The Founders knew best. Any sort of direct taxation against an individual necessitates a loss of liberty, freedom, and rights. In the USA, you cannot be imprisoned for NOT paying your taxes. They imprison you for not telling them you owe taxes. This is the lawyer-politicians again and how they circumvent the fundamental principles of the constitution all the time. This is no different from locking-up people who protest by claiming they lacked a permit or walked on the grass. In Russia, they just lock you up and don’t bother to pretend you have rights. There is no real difference.
This hunt for taxation on a global scale is simply outrageous. They track $3,000 now, not billions.
A reader sent this in:
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As U.S. Justice Department prosecutors begin to bring the first criminal charges against global banks since the financial crisis, they are facing dire warnings of uncontainable collateral damage from none other than the sell-side's banking analysts… "Don’t play with matches," warned Brad Hintz, bringing up the spectre of Enron (somewhow suggesting we would better if that had had not been prosecuted?) “The mere threat of requiring a hearing could cause customers to lose confidence in the institution and could cause a run on the bank,” warns a banking lawyer (well isn't that how it's supposed to be?). Too Big To Prosecute is starting to tarnish a little as Preet Bharara begins to bring the heat, adding, somewhat humorously that, banks have a "powerful incentive to make prosecutors believe that death or dire consequences await."
"But I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy. And I think that is a function of the fact that some of these institutions have become too large.
Again, I'm not talking about HSBC. This is just a — a more general comment. I think it has an inhibiting influence — impact on our ability to bring resolutions that I think would be more appropriate. And I think that is something that we — you all need to — need to consider. So the concern that you raised is actually one that I share."
But now, as Bloomberg reports,
Stung by lawmakers’ criticism that multibillion-dollar settlements have done too little to punish Wall Street in the wake of the financial crisis, prosecutors are considering indictments in probes of Credit Suisse Group AG and BNP Paribas SA, a person familiar with the matter said.
And that has led to significant backlash from the industry – how dare he!!
The 2002 collapse of Arthur Andersen, the accounting firm indicted in the Enron scandal, “should be a lesson” for prosecutors, Brad Hintz, an analyst at Sanford C. Bernstein & Co., said today in an interview on Bloomberg Television. “Don’t play with matches.”
Criminal action would have to be handled so that any review of a bank’s charter wouldn’t spook customers or revoke a firm’s license, said Gil Schwartz, a partner at Schwartz & Ballen LLP and a former Federal Reserve lawyer. “The mere threat of requiring a hearing could cause customers to lose confidence in the institution and could cause a run on the bank,” Schwartz said.
And as Preet Bharara somewhat comedically notes…
“Companies, especially financial institutions, will do almost anything to avoid a tough enforcement action and therefore have a natural and powerful incentive to make prosecutors believe that death or dire consequences await,” he said. “I have heard assertions made with great force and passion that if we take any criminal action, the skies will darken; the oceans will rise; nuclear winter will be upon us; and the world as we know it will end.”
But the threats arnd fears of what is clearly TBTF's contagious effects remain…
“You can’t do a guilty plea of a systemically important financial institution without first getting the regulators on board a commitment that the conviction won’t put the bank out of business,” he said in an e-mail. “That seems to be going on here, not surprisingly.”
And this is with stocks at record highs and the entire farce of opaque bank balance sheets now a dim and disatnt memrory for all but the sanest.
“These are test cases,” said Phan. “There’s a pragmatism behind this. You look for a target that’s small enough and that will send a message.”
Prosecuting banks would break with a practice of brokering settlements with companies that are considered integral to the financial system. Previous probes were resolved through so-called non-prosecution and deferred-prosecution agreements, which have been criticized by U.S. lawmakers for failing to hold banks accountable.
“It’s about time,” said Buell, who was part of the prosecution team at the trial of Arthur Andersen, whose indictment put about 85,000 people out of work. “The argument that we can’t have guilty pleas because of debarment provisions that are written into various regulatory codes has always seemed to be a case of the tail wagging the dog.”
So, to summarize, regulator is actually taking a crack at the TBTFs for fraud they committed and the industry is in full Mutually Assured Destruction threat mode should it actually be forced to admit guilt… well played Fed… more leveraged, more interconnected, and more TBTF in the world's economy…
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Overnight, RealtyTrac released its latest home-flipping report. What it found is that while the latest housing bubble may have indeed popped, manifesting itself not only in a decline in flipping prices but also a tumble in flipping activity across the US as a percentage of all sales from 6.5% a year ago to just 3.7% in Q1, and down from 4.1% last quarter, flipping, where a home is purchased and subsequently sold again within six months, can still be massively profitable, leading to returns that would make the pimpliest 25-year-old, math PhD HFT-firm owner green with envy.
Among the core findings was that the average sales price of single family homes flipped in the first quarter was $55,574 higher than the average original purchase price. That gross profit provided flippers with an unadjusted ROI (return on investment) of 30 percent of the average original purchase price averaged out across the US. The average gross profit per flip a year ago was $51,805 for an unadjusted ROI of 28 percent. However, it is the range that is notable: the flip ROI ranged from -8%, or a loss of $10k on the property, to a gain of 80%, a whopping $144K!
What is just as notable is that while flipping across the US is moderating, in some states it is as high as 12% of all sales activity. And just as notable, in the first quarter a whopping 43% of all flipping sales were to an all-cash buyer – in other words, flipping to other flippers!
“Slowing home price appreciation early this year in many of the most popular flipping markets put some investors in danger of flying too close to the sun,” said Daren Blomquist, vice president at RealtyTrac. “But investors appear to have recalibrated their flipping strategy, accounting for the slower home price appreciation even if that means fewer flips.”
This can be seen well on the chart below, which shows that while the average flipped price declined modestly to $239K across the US, the reason why the ROI surged is because the average purchase priced tumbled from roughly $240K to just $183K. What this means is that the flipping “sharks” are digging ever deeper into cheaper priced properties with hopes of holding to them then selling them, with or without renovations, to witless “dumber money.”
Further breaking down the flipping trends by market, we see that buying just with an intention to sell is most dominant in Las Vegas, Phoenix, Miami, the Inland Empire and Los Angeles – all well known regions from the last housing bubble.
Some of the other high-level findings of the report:
Which brings us to the topic of the headline: where exactly does flipping generate a whopping 80% return on one’s investment – nearly a doubling of the money – in under six months? The answer is shown on the chart below.
That’s right: the place that is most likely to generate a massive return for flipping activity also happens to be one of the poorest cities in the US: Washington D.C. A city which, however, in addition to the poor social element is also home to the political social element. One wonders just how much of those flips are paid for by corrupt politicians paying in all cash. All taxpayer cash that is.
As an added bonus, here is a ranking of states sorted by prevalency of flipping activity. The top place should not come as a surprise to anyone – after all, those foreign billionaire oligarchs have to launder their illegally obtained cash somehow.
Finally, and perhaps most curiously, is a chart showing the impact of “rehab” spending, i.e. renovation costs, on the flipping ROI. Curious, because it is quite obvious that some of the biggest returns take place in homes in which the flipper doesn’t put in even one cent of additional work, allowing returns of nearly 1000%. Alternatively, investing as much as the entire purchase price in “rehabiliation activity” provides absolutely no assurance that one will generate a significant return.
Bottom line: all of the above is merely a function of Fed monetary generosity. Anyone jumping into the ranks of the flippers should be aware that this, too, party is ending and very soon the flipper ROI is set to crash to 0% if not negative. Only when that happens will the housing bubble be well and truly on its way to a full blown, ahem, collapse.
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Submitted by Lance Roberts via STA Wealth Management,
Yesterday, I participated in a panel discussion on CNBC about the markets and the economy. It was during the course of that discussion that one of the participants uttered the most important phrase:
"Everbody knows interest rates are going to rise."
First, let me explain my reasoning for why it is possible that "everybody" is wrong. As I addressed last week in "Interest Rate Predictions Meet Rule #9" when everyone is expecting something to happen, it is often the opposite that occurs.
"As you can see there is a very high correlation, not surprisingly, between these three components (inflation, economic and wage growth) and the level of interest rates. Interest rates are not just a function of the investment market, but rather the level of "demand" for capital in the economy. When the economy is expanding organically the demand for capital rises as businesses expand production to meet rising demand. Increased production leads to higher wages which in turn fosters more aggregate demand. As consumption increases, so does the ability for producers to charge higher prices (inflation) and for lenders to increase borrowing costs.
However, in the current economic environment this is not the case. The need for capital remains low, outside of what is needed to absorb incremental demand increases caused by population growth, as demand remains weak. While employment has increased since the recessionary lows much of that increase has been the absorption of increased population levels. Many of those jobs remain centered in lower wage paying and temporary jobs which does not foster higher levels of consumption."
Whether you agree with this premise, or not, is largely irrelevant to this discussion. The current "bullish" mantra is the "great bond bull market is dead, long live the stock market bull." However, is that really the case?
When the bond bubble ends this means that bonds will begin to decline, potentially rapidly, in price driving interest rates higher. This is the worst thing that could possible happen.
1) The Federal Reserve has been buying bonds for the last 4 years in an attempt to push interest lowers to support the economy. The recovery in economic growth is still dependent on massive levels of domestic and global interventions. Sharply rising rates will immediately curtail that growth as rising borrowing costs slows consumption.
2) The Federal Reserve currently runs the world’s largest hedge fund with over $4 Trillion in assets. Long Term Capital Mgmt. which managed only $100 billion at the time, nearly brought the economy to its knees when rising interest rates caused it to collapse. The Fed is 40x the size and growing.
3) Rising interest rates will immediately kill the housing market taking that small contribution to the economy away. People buy payments, not houses, and rising rates mean higher payments. (Read "Economists Stunned By Housing Fade" for more discussion)
4) An increase in interest rates means higher borrowing costs which leads to lower profit margins for corporations. This will negatively impact corporate earnings and the financial markets.
5) One of the main arguments of stock bulls over the last 5 years has been the stocks are cheap based on low interest rates. When rates rise the market becomes overvalued very quickly.
6) The massive derivatives market will be negatively impacted leading to another potential credit crisis as interest rate spread derivatives go bust.
7) As rates increase so does the variable rate interest payments on credit cards. With the consumer being impacted by stagnant wages and increased taxes, higher credit payments will lead to a rapid contraction in income and rising defaults.
8) Rising defaults on debt service will negatively impact banks which are still not adequately capitalized and still burdened by large levels of bad debts.
9) Many corporate share buyback plans and dividend issuances have been done through the use of cheap debt, which has led to increases corporate balance sheet leverage. This will end.
10) Corporate capital expenditures are dependent on borrowing costs. Higher borrowing costs leads to lower capex.
11) Commodities, which are very sensitive to the direction and strength of the global economy, will plunge in price as recession sets in.
12) The deficit/GDP ratio will begin to soar as borrowing costs rise sharply. The many forecasts for lower future deficits will crumble as new forecasts begin to propel higher.
I could go on, but you get the idea.
However, for those of you who still doubt that rising rates are bad for stock market returns, let me put into graphical form for you.
The chart and table below show what happens to the financial markets, and the economy, when interest rates increase.
The problem with most of the forecasts for the end of the bond bubble is the assumption that we are only talking about the isolated case of a shifting of asset classes between stocks and bonds. However, the issue of rising borrowing costs spreads through the entire financial ecosystem like a virus. The rise and fall of stock prices has very little to do with the average American and their participation in the domestic economy. Interest rates, however, are an entirely different matter.
What would be required to diminish the impact of bursting bond market bubble is a slow, and controlled, unwinding of the bond market over an extremely long period of time. The Fed would have to step up interventions on a massive scale to offset the selling of the bond market to curtail the rise in rates. Even with that, I would expect a rather sharp economic deceleration as the housing market grinds to halt and overall consumption declines. The actual achievement of such a counter balance to a market as large as the bond market is difficult to fathom.
However, while bond prices are near historic highs, with interest rates near lows, it would certainly seem as if bonds are in a bubble. However, if interest rates are a reflection of economic growth, inflation and wages, as the first chart above suggests, then rates are likely "fairly valued."
As I discussed yesterday, there is an ongoing belief that the current financial market trends will continue to head only higher. This is a dangerous concept that is only seen near the peak of cyclical bull market cycles.
"We saw much of the same analysis as Brad's at the peak of the markets in 1999 and 2007. New valuation metrics, IPO's of negligible companies, valuation dismissals as "this time was different," and a building exuberance were all common themes. Unfortunately, the outcomes were always the same. It is likely that this time is "not different" and while it may seem for a while that Brad analysis is correct, it is 'only like this, until it is like that.'"
The point here is that while the current trends can last longer than reasonably believed, which is why we currently remain invested in the markets, it is inevitable that things will change. The problem for most is that by they time they recognize that the underlying dynamics have changed it will be too late to be proactive, only reactive. This is where the real damage occurs as emotional behaviors dominate logical processes.
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Given recent geopolitical and macroeconomic events we are surprised at how well credit markets have been in 2014. The world continues to be awash in liquidity and investors are chasing yield seemingly regardless of risk. Leverage levels in the United States are increasing and rose by almost a full third over the past year while spreads between IG and HY are ~250 basis points below the 20 year average. Thus, the market is not assigning a significant premium to riskier assets. We continually ask whether the fundamentals in the global credit markets are healthy and sustainable. Frankly, we don’t think so.
– From Carlyle Group’s 1Q14 Earnings Conference Call yesterday
Over the weekend, I published a Guest Post on the bubble in the junk bond market titled: Is There a Massive High Yield Credit Bubble? If you haven’t read it already, I suggest doing so before reading the rest of this post.
The following piece builds on that prior one by highlighting some of the most absurd practices currently going on in the less creditworthy areas of the bond market. Signs that prove without question there is some sort of dangerous bubble already percolating throughout the credit markets.
The first of these are known as “dividend deals.” For those of you who are unfamiliar with them, you might not believe what they actually are. Basically, dividend deals are when companies owned by private equity firms tap the credit markets, and then a sizable percentage of the money borrowed is used to cut a check to the private equity owners themselves. Often times, the remainder of the debt is used to refinance existing debt.
Yes, you heard that right. The money earned from credit issuance isn’t used to expand operations, it isn’t spend on R&D, or anything productive whatsoever. Rather, funds are used to pay money directly to the private equity owners. From a private equity owner perspective, this is free money and of course they will take it. The insane thing is that creditors are willing to buy this garbage, and buying it they are. By the billions. In fact, you might own some in your mutual fund or pension fund. Who fucking knows, but this is insane.
The second sign of insanity is the increase in “payment-in-kind” notes. What this means is that interest on the debt can be paid back in, wait this is no joke, more debt! Even crazier, we are seeing examples of “payment-in-kind” notes being issued for the purpose of paying out dividends to private equity owners. I want to know which fund managers are buying these notes, and you should too.
Bloomberg recently covered the credit insanity in their piece: Dividend Deal ‘Epidemic’ Intensifies Junk Alarm. Here are some excerpts:
Companies owned by private-equity firms are borrowing money to pay dividends like it’s 2007, adding to concern among regulators that excesses are emerging in the riskier parts of the debt markets.
Borrowers including Madison Dearborn Partners LLC’s mobile-phone insurer Asurion LLC obtained almost $21 billion in junk-rated loans this year to enrich their owners, the most in seven years, according to Standard & Poor’s Capital IQ LCD. Some of the least-creditworthy companies are even selling notes that may pay interest with more debt, which BMC Software Inc. did for its $750 million payout to a group led by Bain Capital LLC.
“It’s kind of like an epidemic,” Martin Fridson, a New York-based money manager at Lehmann, Livian, Fridson Advisors LLC, who started his career as a corporate-debt trader in 1976, said in a telephone interview. “Once an investment banker sees that, he’s going to go to his clients and say, ‘Here’s a window of opportunity, you can take a dividend and get away with it.’”
That says it all right there. Why is private equity rushing to do these deals? Well, why does a dog lick it balls? Because it can.
from A Lightning War for Liberty http://ift.tt/1jlShXs
Reflecting on the divergence between equities at all time-highs and drastically sliding bond yields, CNBC’s Rick Santelli reminds that it seems bonds recognize that business cycles work in “fits and starts” and not in straight-lines as some (equity bulls) would believe and reminds (as we noted previously) that with revisions, Q1 GDP could be negative. His discussion moves from US Treasury ‘cheapness’ relative to global bonds and the ‘weather’ effect’s over-exuberant expectations; but it is his final topic that raised an eyebrow or two. Santelli doesn’t buy into the meme that “the reason the Fed is doing all this is because Congress does nothing;” in fact, he exhorts, it’s the opposite, if the Fed wasn’t hunkered down supporting the stock market – and stocks started throwing little hissy fits (a la TARP), it would send signals… and things would get done!“
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