Month: September 2014

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

Liberty Blitzkrieg was early in reporting on the trend of financial firms entering the U.S. residential real estate market with “all-cash” bids for tens of thousands of homes with the intention of turning former homeowners into permanent sources of rental income. The first of many pieces I published on the topic was in January 2013, titled: America Meet Your New Slumlord: Wall Street.

Now that the financial oligarchs have had their way with the U.S. property market, to the point that average citizens can’t even afford to own a home (Zillow recently showed that 1 in 3 homes are unaffordable), it appears they have turned their sights overseas. What better market for bailed-out bankers to feast on than Spain, with its 50%+ youth unemployment rate and a continued depressed real estate market.

We learn from Bloomberg that:

Marcelino Calvo Sanchez and his wife, Maria Luisa, had never heard of Goldman Sachs Group Inc. until last year, when the global investment bank bought the four-building housing estate where they live in Vallecas, on the southern outskirts of Madrid. Marcelino, a 71-year-old retired truck driver, isn’t impressed by his new landlord.

 

Goldman Sachs picked up the 289-unit complex in August 2013 as part of its purchase of 3,000 low-income apartments from the regional government of Madrid for 201 million euros ($269 million). With the sale, some subsidies for tenants disappeared, and, according to Sanchez, a small problem with squatters has become a larger one.

 

That’s exactly right, Bloomberg Markets will report in its October issue. Though the housing estate looks like one of the last places in the world smart-money Goldman Sachs bankers would bet on — glass doors are shattered, broken mailboxes hang open, and graffiti mars the courtyard walls — this is where Goldman has touched down in the Spanish real estate market. Blackstone Group LP, the world’s largest alternative-asset manager, bought a similar low-income-housing portfolio from the city of Madrid in July 2013 for 125 million euros.

 

These bets on Spain marked a turning point in investor sentiment. The country, for five long years a toxic no-go zone for foreign investors, is now at the top of the list for private-equity firms, hedge funds and sovereign wealth funds hunting for cheap assets in Europe.

 

“Spain now is a tale of two cities,” says Ismael Clemente, chairman and chief executive officer of Merlin Properties SA, which raised 1.25 billion euros in June in the largest initial public offering in Spain in three years.

I sometimes wonder when I hear people characterize the economy as a “tale of two cities,” if they even appreciate the fact that the book itself was written about the violent overthrow that was the French Revolution, itself sparked by extreme inequality and poverty.

Clemente, 44, is sitting in the art deco lobby of Madrid’s five-star Villa Magna hotel, which these days is crawling with investors and bankers chasing juicy deals. A 14-year veteran of Deutsche Bank AG, Clemente says the opportunities are enormous as Spain emerges from the depths of recession and banks continue to unload real estate assets.

 

Merlin’s IPO capped a dizzying six months of Spanish real estate deals. In January, the New York–based private-equity firm Apollo Global Management LLC bought the real estate unit of Banco Santander SA, Spain’s biggest bank by assets, for 664 million euros. In March, the Madrid-based REIT Hispania Activos Inmobiliarios SA raised 500 million euros from investors, including George Soros’s Quantum Strategic Partners LP and John Paulson’s Paulson & Co. In June, Texas-based private-equity firm Lone Star Funds and JPMorgan Chase & Co.bought a 4.4 billion euro portfolio of Spanish and Portuguese commercial property loans from Commerzbank AG of Frankfurt.

 

In the U.S., Auten was a managing director at Waypoint Real Estate Group, an Oakland, California-based investment firm that buys up foreclosed homes across the U.S. Auten says a lot of investors are looking at Spain, a country of 46 million, as if it’s a carbon copy of the U.S. market, where investors such as Blackstone and Waypoint have scooped up hundreds of millions of dollars’ worth of homes and rented them out.

I gave these serfs an offer they couldn’t refuse:

via Zero Hedge http://ift.tt/1rL7zew Tyler Durden

While it is unclear if August’s exuberant buy-it-all strategy will hold for September, the following chart from BofA should raise a few eyebrows. In August, practically all the gains for bonds (yield compression) occurred in the overnight session (from 8pmET to 6amET)…

 

 

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Normal trading? Well it’s better than no trades at all like in Japanese govvies…

Chart: BofA

via Zero Hedge http://ift.tt/1nSJsn5 Tyler Durden

When it comes to keeping track of China’s economy, one can listen, and ignore, the official goalseeked and made-up-on-the-fly data released by the government, or one can simply observe the price dynamics of the all-important Chinese commodities sector (because with fixed investment accounting for well over 50% of GDP, the marginal price of the commodities that are used in capital investment tell us all we need to know about the true state of the Chinese economy). It is here where we find that contrary to the recent performance of the Shanghai Composite, which has been trading exclusively on the coattails of the most recent unofficial QE by the PBOC, commodity prices in China are actually crashing across the board, which in turn suggest that the real GDP is most likely anywhere between 20% and 60%, if not more, below the “official” 7.5% GDP print.

Here are the charts, alongside some commentary from Bank of America:

Last week, Qinhuangdao (QHD) 5,500k thermal coal price was at RMB480/t, unchanged from the week prior. QHD coal inventory decreased to 5.6mt, down 0.5% wow.

 

In August, growth of daily coal consumption at 6 major IPPs dropped by 22.5% yoy, down from the -16.3% yoy in July.

 

Rebar price was RMB3,058/t, down 1.1% wow. Rebar inventory in 34 major cities was at 5.47mt, down 1.9% wow. Concerns about the property market and relatively high steel production are still weighing on steel prices.

 

Iron ore price was US$88.0/t, down 1.9% wow. Iron inventory at Chinese ports was 112mt, up 1.4% wow. Iron ore prices have been under immense pressure since the beginning of the year and are likely under continuous pressure from the weak housing market.

 

National average cement price was RMB347.5/t, down 0.9% wow.

 

That said, for the inflation watchers, there is some good news: pigs are flying! “Last week, national average pork prices increased by 2.3% from the previous week to RMB23.3/kg. Meanwhile, the hog-to-corn price ratio edged up to 5.57 compared to a breakeven point of 6 for pig farmers.“

 

Actually did we say, “good news”… in a contracting economy, the last thing China can afford is surging food prices from the most prevalent protein. Keep a close eye on this as should pork prices approach or take out 2011 highs just RMB5 higher from here, the events from the Arab Spring will be due for a quick and violent comeback.

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Finally, for the data purists, here are the three most “representative” charts: electricity, rail and autos.

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#IS Beheads Steven Joel #Sotloff, Threatens to Execute Briton David Cawthorne Haines

— SITE Intel Group (@siteintelgroup) September 2, 2014

BREAKING: Video purports to show beheading of U.S. reporter Steven Sotloff (center, black helmet) by ISIS. (Getty) http://ift.tt/1plTnAZ

— The Denver Post (@denverpost) September 2, 2014

 

Sadly it seems his mother’s calls fell on deaf ears…

• *WHITE HOUSE CAN’T CONFIRM REPORTS OF SOTLOFF BEHEADING

• VIDEO WARNS GOVERNMENTS TO BACK OFF “THIS EVIL ALLIANCE OF AMERICA AGAINST THE ISLAMIC STATE”-SITE

British #ISIS fighter warns Obama “as your missiles continue to strike our people, our knife will continue to strike necks of your people”

— Jon Williams (@WilliamsJon) September 2, 2014

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Submitted by Simon Black via Sovereign Man blog,

Imagine this scene:

“Everyone in the country was in shock. People’s net worth had devalued more than 53% overnight.”

 

“The value in savings accounts dropped in half and neither merchants nor consumers knew how to react because they had never been through something like it before…”

This is how an American business executive described living through Mexico’s devaluation of the peso exactly 38 years ago on September 1, 1976.

Looking back, it was so obvious.

Mexico had a mounting debt, destructive policies, and a woefully unsustainable fixed exchange rate with the US dollar. All the writing was on the wall.

But most people ignored the warning signs and kept their money in pesos.

Mexican President Luis Echevarria even went out on the radio to reassure people that the currency was safe.

Finally, under intense fiscal pressure, the government reached its breaking point. And on August 31, 1976, they made the decision to devalue the peso.

People woke up the next morning on September 1st to a 50%+ decline.

Coincidentally today is also the 75th anniversary of the Nazi invasion of Poland, the event that ultimately dragged the world into war.

Germany had already invaded Austria and Czechoslovakia in the months before.

By May 1939 Hitler had stated very plainly, “the decision remains to attack Poland at the first opportunity.”

Even a week before the invasion, Hitler told his military commanders, “I have prepared . . . my ‘Death’s Head’ formations with orders to kill without pity or mercy all men, women, and children of Polish descent or language.”

Germany had 60 divisions massed on the Polish border ready to invade.

Yet people in Poland were told to keep calm, remain in place, and have confidence in their leaders.

Finally, on August 30, the Polish government ordered a partial mobilization to meet the German threat.

Needless to say, it was too little, too late. Germany invaded only hours later.

This is a familiar story that repeats across history. Despite obvious warning signs, people almost universally allow themselves to ignore reality.

It’s human nature to want to believe that everything is going to be OK. And when our political leaders whisper soothing words of hope and optimism, we take the bait.

Looking back, it was plain as day that Mexico was going to devalue the peso. Everything about the economy and currency was totally unsustainable. Deep down people knew it.

Similarly, it was plain as day that Hitler was going to decimate Poland. And people knew it.

Yet millions allowed their confidence to be misplaced in leaders who assured them that everything was OK.

Are we so different today?

The raw numbers tell us that most banks in Europe are insolvent. Bank in the US are dangerously illiquid.

 

Most western governments are bankrupt. Pension and social security funds are insolvent.

 

Financial markets are at precarious valuations. And the dollar is beginning to unravel as the dominant reserve currency.

These are data-driven assertions. And my guess is, deep down, your instincts are also telling you that something is seriously wrong with the system.

Yet we’re all told to keep calm by our leaders. There’s nothing to see here, nothing to worry about.

Looking back, it’s all going to seem so obvious. If a major, global currency crisis hits within the next 12-months, people will think, “duh, how did I not see that coming?”

Unfortunately by then it will be too late.

It takes only a little foresight and planning to insulate yourself from an event that can have disastrous consequences.

If you knew the Mexican peso was at an unsustainable level, why would anyone continue to hold pesos?

Similarly, if all the objective data suggests that the dollar is in store for an epic decline… and that the entire world is on a path to shift away from the dollar, why in the world would any rational person base his entire life savings in dollars?

It takes little effort to actually do something about it. Hold stronger currencies overseas. Own real assets. Move your retirement account abroad where your bankrupt government can’t steal it.

These are common sense steps, just like putting on a seatbelt when you get into a car.

The time to act is now. Why play Russian roulette when the odds are clearly in favor of the house?

Don’t try to time it. Nobody has a crystal ball. It’s irrelevant whether the trend unfolds over weeks, months, or years. It’s pretty clear where this is all headed.

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As we discussed yesterday, Vladimir Putin’s apparent ‘threat’ to EU’s Barroso that “If I want to, I can take Kiev in two weeks,” prompted both anger and response as NATO reacted by stating a new “spearhead” force of 3-5,000 troops would be flown in to combat any (further) Russian aggression. However, Russia is not happy that the EC President leaked the conversation with Putin’s aide Ushakov stating that recounting the private conversation was “inappropriate,” “undiplomatic,” and “unworthy of a serious political player.” More troublingly, the cold-war-tension-like escalation from NATO has prompted Russia to revise its military doctrine to account for “changing military dangers and military threats.”

 

As The Telegraph reports,

Vladimir Putin has boasted to European leaders that his forces could sweep into Kiev in two weeks if he wanted.

 

The Russian president reportedly made the threat to the European Commission president during talks on the Ukraine crisis.

 

Mr Putin told Jose Manuel Barroso: “If I want to, I can take Kiev in two weeks,” Italy’s La Repubblica newspaper reported, implying this could be the result if the EU stepped up sanctions against Russia.

 

His comments, relayed by Mr Barroso to colleagues at last weekend’s EU summit, emerged as Nato announced it would build a new “spearhead” rapid reaction force of up to 4,000 troops that can be flown into eastern Europe in 48 hours to respond to possible Russian aggression.

Which prompted 2 responses from Russia..

First, a diplomatic talking to…

Yuri V. Ushakov, an aide to Mr. Putin, said Mr. Barroso’s recounting of a private conversation was “inappropriate.”

 

“Whether these words were said or not, in my viewpoint, this quote given is taken out of context and it had absolutely different sense,” Mr. Ushakov said.

 

Disclosing details of conversation is undiplomatic, “unworthy of a serious political player”

And second, as The NY Times reports, a military one…

With NATO leaders expected to endorse a rapid-reaction force of 4,000 troops for Eastern Europe this week, a senior Russian military official said on Tuesday that Moscow would revise its military doctrine to account for “changing military dangers and military threats.”

 

In an interview with the Russian state news agency RIA Novosti, the official, Mikhail Popov, deputy secretary of Russia’s military Security Council, called the expansion of NATO “one of the leading military dangers for the Russian Federation.”

 

Mr. Popov said Russia expected that leaders of NATO would seek to strengthen the alliance’s long-term military presence in Eastern Europe by establishing new military bases in the region and by deploying tanks in Estonia, a member of NATO that borders Russia.

 

“We believe that the defining factor in our relationship with NATO remains the unacceptability for Russia of plans to move military infrastructures of the alliance to our borders, including by means of expanding the bloc,” Mr. Popov said.

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Furthermore, Russia appears set to release the Putin-Barroso conversation…

Russia ready to release audio recording of conversation between President Vladimir Putin and European Commission President Jose Barroso, Interfax cites Russian ambassador to European Union as saying.

 

Unless EU objects, Russia will distribute recording of phone talk to establish truth within 2 days, Vladimir Chizov says in letter to Barroso, Interfax reports

One can only wonder what Barroso said…

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Un-de-escalation?

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