Month: September 2016

I was discussing the US Department of Justice $14B fine levied at Deutsche Bank with my 15 year old son last week. I told him the fine amounted to roughly 70% of Deutsche’s market cap, while a similar retroactive tax levy from the EU towards Apple for $14B was about 3% of their cash on hand or a quarter’s operating profit.  My son said, “Whoah! Waitaminute! I thought Deutsche Bank was a big company like Apple. Didn’t you say that they had trillions of euros of assets on their balance sheet?”.

Indeed, I did say such, and he brings up a very valid point that is missed by many a so-called professional. DB is valued at 14.5 billion euros by Mrs Market, yet that amount controlls 1.8 trillion euros worth of assets, and 1.415 trillion after netting and credit adjustments, etc. And to think, some people think a 90 LTV loan is pushing the leverate limiit. Let’s take a look at this from a graphica perspective to illustrate just how absurd it is…

Over time, the accounting expression of equity diverges significantly from the markets perception of the bank’s equity value.  Somebody is most assuredly mistaken! As of today, DB’s books are carrying equity value at 3x that of the stock market. 

If one were to use the stock market’s equity valuation, one would see that a very, very tiny sliver of equity is controlling nearly 1.5 trillion euro of assets – and that’s after the slimming down game is done. Expressed differently, DB is leveaged 97.4x. 

For those who feel this is an unrealistice way of looking at things, run the same exercise for every failed bank and cross reference the results to that of the European banking regulatory body’s methodology of calculating leverage and tell me which methid was (and is) the better predictor of bank failure.

Here’s What A Real, Live Veritaseum 5x Short DB Smart Contract Looks Like to Our Research Subscribers 

 If you haven’t heard, we’re giving out free, fully smart contracts as a 5% rebate to anyone who purchases any of our research packages above the introductory novice $50 level. This is not your Daddy’s rebate! The rebate actually gets larger as DB goes down in price. For those who may be coming late to the party, we can offer a 5x long gold (or even a long gold, short DB) smart contract rebate as well. Of course, the bulk of our research targets banks and entities other than DB, but I thought we’d make DB the subject of the rebate to drive the point home. Below is an actual contract crafted off of the price of a single share of DB for about 2 weeks.

The research and knowledge subscription module “European Bank Contagion Assessment, Forensic Analysis & Valuation” contains a full report of a very large European Deutsche Bank counterparty that faces a full 27% downside from current levels. It appears as if no one suspects a clue. It also contains much, much more (including at least 3 to 5 suspect banks). We can break this apart a la carte, if requested.

via http://ift.tt/2d9tsBV Reggie Middleton

This morning, Janet Yellen testifies before the House Financial Services Committee on financial regulation topics. While there us unlikely to be much talk of monetary policy, it may come up, although most of the lawmakers’ questions are likely to relate to the Fed’s oversight of banks; other questions may touch on the Fed’s recent bank commodity oversight push, the November election, and especially the recent Wells scandal.

Here are the main things to watch for, courtesy of the WSJ:

• Big Bank Stress Tests

The Fed announced major changes to its stress testing regime on Monday, detailed in a new rule proposal and a 29-page speech from Fed governor Daniel Tarullo. Expect Ms. Yellen to get quizzed about the changes, which generally make the tests easier to pass for regional banks and tougher on global megabanks. Several lawmakers, especially Republicans, have their own ideas about how the Fed should make further changes to the tests, including by revamping the way it measures banks’ riskiness.

• Banks in the Commodities Business

Last week, the Fed took another regulatory action that is sure to generate attention from members of Congress: It proposed new rules targeting some of banks’ commodity-market businesses, citing the risk of outsize liabilities in the event of an environmental disaster. Lawmakers might take the view that the rules are an end-run around Congress, which explicitly allowed banks to engage in those activities in 1999. Big banks have also lobbied extensively against the rules, with help from local officials who say they rely on banks to help finance purchases of natural gas and other commodities for their municipalities.

• Wells Fargo and Executive Compensation

Republicans are likely to ask Ms. Yellen why the Fed and other regulators didn’t do more to stem misconduct at Wells Fargo, while Democrats will push for her to commit to finishing the incentive pay rules soon—a promise Comptroller of the Currency Thomas Curry made last week.

• Monetary Policy

Fed policy makers’ decision last week to hold interest rates steady while hinting at an increase in the near future could easily come up Wednesday. The Fed chief made clear she was ready for a bump up in borrowing costs, saying the case for a rate increase “has strengthened.” Democrats could press Ms. Yellen on the effect that higher interest rates would have on the labor market, particularly among low-income and minority workers, who have been slow to recover from the recession. Republicans on the other hand could push for higher rates.

• The Election

The Fed is finding itself in an unusual position this election cycle. While central bank officials try very hard to maintain their impartiality and skirt all talk of politics, they have had to parry charges from Donald Trump, the Republican presidential nominee, that they are artificially holding rates down to make President Barack Obama look good and to help Democrat Hillary Clinton get elected. Ms. Yellen spent much of her news conference last week defending the Fed’s impartiality. Mr. Trump accused the Fed again during Monday night’s debate of “doing political things.” Ms. Yellen could face questions related to the election from both sides of the aisle Wednesday. Don’t look for her to say more than she did during last week’s news conference, however.

* * *

Watch the hearing live below:

Janet Yellen’s Prepared Remarks…

Yellen Testimony

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Submitted by Charles Hugh-Smith via OfTwoMinds blog,

Memo to the D.C. Beltway/mainstream media apologists and propagandists: the 25 million Invisible Americans are no longer buying your shuck-and-jive con job.

For the bottom 90% of American households, the "prosperity" of the "recovery" since 2009 is a bright shining lie. The phrase is from a history of the Vietnam War, A Bright Shining Lie: John Paul Vann and America in Vietnam.

Just as the Vietnam War was built on lies, propaganda, PR and rigged statistics (the infamous body counts–civilians killed as "collateral damage" counted as "enemy combatants"), so too is the "recovery" nothing but a pathetic tissue of PR, propaganda and lies. I have demolished the bogus 5.3% "increase" in median household income, the equally bogus "official inflation" body counts, oops I mean statistics, and the bogus unemployment rate:

Fun with Fake Statistics: The 5% "Increase" in Median Household Income Is Pure Illusion (September 19, 2016)

What's the Real Unemployment Rate? That's the Wrong Question (September 14, 2016)

Could Inflation Break the Back of the Status Quo? (August 5, 2016)

Revealing the Real Rate of Inflation Would Crash the System (August 3, 2016)

Inflation Hidden in Plain Sight (August 2, 2016)

The Burrito Index: Consumer Prices Have Soared 160% Since 2001 (August 1, 2016)

I'm not the only one calling the "recovery" a lie: the chairman of Gallup, Jim Clifton, recently unloaded on the "recovery":

The Invisible American.

"I've been reading a lot about a "recovering" economy. It was even trumpeted on Page 1 of The New York Times and Financial Times last week. I don't think it's true.

The percentage of Americans who say they are in the middle or upper-middle class has fallen 10 percentage points, from a 61% average between 2000 and 2008 to 51% today."

Now that is a self-reported number. The reality is much worse: only 20% of American households possess the income and assets that characterize the middle class in financial terms. Granted, someone making $28,000 a year can self-identify as middle class, but if we look at basic metrics of financial security, they're not even close.

I have analyzed this in depth for years:

The Three-and-a-Half Class Society (October 22, 2012)

What Does It Take To Be Middle Class? (December 5, 2013)

The Destabilizing Truth: Only the Wealthy Can Afford a Middle Class Lifestyle (May 6, 2014)

America's Nine Classes: The New Class Hierarchy (April 29, 2014)

We got your "middle class" right here: see that little green slice of the pie? The upper middle class is the purple slice, and the top 10% is blue (most of this wealth is held by the top 1% and top 5%.)

Jim Clifton calls those who have been pushed out of the middle class Invisible Americans: here is his report:

"Ten percent of 250 million adults in the U.S. is 25 million people whose economic lives have crashed.

What the media is missing is that these 25 million people are invisible in the widely reported 4.9% official U.S. unemployment rate.

Let's say someone has a good middle-class job that pays $65,000 a year. That job goes away in a changing, disrupted world, and his new full-time job pays $14 per hour — or about $28,000 per year. That devastated American remains counted as "full-time employed" because he still has full-time work — although with drastically reduced pay and benefits. He has fallen out of the middle class and is invisible in current reporting.

More disastrous is the emotional toll on the person — the sudden loss of household income can cause a crash of self-esteem and dignity, leading to an environment of desperation that we haven't seen since the Great Depression.

Millions of Americans, even if they themselves are gainfully employed in good jobs, are just one degree away from someone who is experiencing either unemployment, underemployment or falling wages. We know them all."

This is where the bright shining lies come in. The worker now earning $28,000 annually is counted as employed, but there is no official metric for the household's increasing insecurity and loss of opportunity.

Even worse, nobody tracks the erosion of benefits. Not only has nominal pay plummeted from $65,000 to $28,000, the deductions for the employee's share of healthcare insurance have skyrocketed, along with co-pays for meds, visits to a doctor, eyewear, etc.

The lucky employees may still receive the benefit of matching 401K retirement funds from the employer, but the matching sums have declined.

This is death by a thousand cuts. According to a report by the St. Louis Federal Reserve, real (adjusted for official inflation) wages have risen a mere 3% since 1970–46 years ago.

Could the 25 million Invisible Americans be the key swing demographic in the upcoming presidential election? As I noted in What If We're in a Depression But Don't Know It? (September 23, 2016), The top 5% of households that dominate government, Corporate America, finance, the Deep State and the media have been doing extraordinarily well during the past eight years of "recovery," and so they report that the economy is doing splendidly because they've done splendidly.

The gulf between reality and the official happy story of "recovery" spewed by the status quo's well-paid army of apparatchiks, flunkies, flacks, hacks, toadies, lackeys and functionaries gorging at the trough of the status quo is widening to the point of surrealism. Memo to the D.C. Beltway/mainstream media apologists and propagandists: the 25 million Invisible Americans are no longer buying your shuck-and-jive con job.

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Crowds gathered after an unarmed black man who was “behaving erratically” died after being shot by a police officer in El Cajon in southern California on Tuesday, the local police department said, appealing for calm.

Officers responded to an erratic subject that ended with an officer involved shooting. We will post updates here as they are available.

— El Cajon Police (@elcajonpolice) September 27, 2016

The death comes less than two weeks after black men in Charlotte, North Carolina and in Tulsa, Oklahoma, were shot dead by police, sparking protests. In Charlotte, rioting prompted the authorities to impose a state of emergency.

#elcajon update http://pic.twitter.com/Ep0rorRkbV

— ana. (@ana_lauraSD) September 28, 2016

As Reuters reports, EL Cajon Police Department spokesman Rob Ransweiler told reporters that two officers responded to a call about an “erratic subject” who was claimed to be walking into traffic. The man refused their instructions to remove his hand from his pocket and then pulled out an object from his pants and pointed it at them, the department said in a statement. The officers then simultaneously shot and Tasered the man who died after being taken to hospital, the department said.

A woman on the scene who claimed to be his sister is saying that she was the one who called the police, because her brother needed medical attention, NBC-owned local channel KNSD reported. A witness who lives nearby told KNSD that he saw police officers surround a black man with their guns drawn. He described the man as seeming fearful and lurching to the side with his hands up before being shot five times by the police. A second witness claimed to have seen the same thing.

However, an employee at the restaurant of the parking lot where the confrontation took place claimed to have recorded the entire incident. Her manager told KNSD that she had seen the video and heard police instruct the victim to remove his hands from his hip. It is not known whether his hands were in his pockets, pants or just on his hip. The video allegedly also showed the victim’s sister pleading for her brother to cooperate. Police have viewed the video and interviewed the employee.

An additional witness was recorded in a Facebook Live video saying that the sister was pleading with her brother to take his hands out of his pockets and when he did, “he did have something in his hand but it wasn’t a gun.”

Statements made by the sister to reporters also imply that her brother was not showing his hands. His sister was recorded crying “He’s so sick” in a Facebook Live video posted by another woman on the scene.

During a news conference hours after the shooting, El Cajon Police Department Jeff Davis said no weapon was found on the scene. He did not say what exactly the man pointed at the unidentified officers.

The man, who was later identified as Alfred Olango, was hospitalized and left in a critical condition, according to Fox-affiliate KSWB. However his sister told reporters that her brother died at the scene. The American Civil Liberties Union later confirmed the man died, but did not specify where and when.

Other videos show her asking police, “Why couldn’t you guys tase him? Why, why, why? I told you he’s sick.”

“I called you to help me but you killed my brother,” she also said.

It remains unknown whether the man was armed. When Ransweiler was questioned about it, he told KNSD, “I have the information, I’m just not…It’s an ongoing investigation, so I’m not releasing details of the investigation.”

The shooting is not the only El Cajon police action under scrutiny. Employees at the nearby Los Panchos restaurant claimed that police confiscated cell phones from employees and advised them to not talk to anyone about the shooting.

The ACLU has released a statement saying, “there are disturbing reports from a number of witnesses that police officers confiscated cell phones from people who witnessed the shooting. Confiscating cell phones is a violation of the Fourth Amendment (unreasonable seizure without warrant or exigent circumstance) and the First Amendment (interference with the right to record in public) under the U.S. Constitution and analogous rights under the California Constitution.”

El Cajon Police have denied confiscating cellphones and urged the community to “please be careful about reacting to inaccurate information.”

We ask that the community please be careful about reacting to inaccurate information. No phones were confiscated from anyone at the scene.

— El Cajon Police (@elcajonpolice) September 28, 2016

Many people claim that the man was having or had recently had a seizure when he was shot. While there has been no official statement on his health or condition at the time of the shooting, confusion and unresponsiveness can occur after a grand mal seizure.

The investigation just started, but based on the video voluntarily provided by a witness, the subject did NOT have his hands up in the air

— El Cajon Police (@elcajonpolice) September 28, 2016

“Now is a time for calm,” Davis said at the news conference. “I implore the community to be patient with us, work with us, look at the facts at hand before making any judgment.”

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The age of the iconic keyboard-ed smartphone is over as BlackBerry’s John Chen confirmed that the firm will stop developing hardware in-house as its pivot to software shows “signs of momentum”.

As Bloomberg reports,

BlackBerry has completely outsourced smartphone design and production, a process that Chen had been doing piecemeal since taking over as CEO almost three years ago.

 

 

Analysts had been holding their breath for the news after Chen said September was his deadline for making the chronically money-losing device business profitable. BlackBerry’s device business, which it calls “Mobility Solutions,” will focus on developing applications and an extra-secure version of Google’s Android operating system that it can license to other companies.

 

“Our new Mobility Solutions strategy is showing signs of momentum, including our first major device software licensing agreement with a telecom joint venture in Indonesia,” Chen said in a statement.

 

“Under this strategy, we are focusing on software development, including security and applications. The company plans to end all internal hardware development and will outsource that function to partners. This allows us to reduce capital requirements and enhance return on invested capital.”

What will Hillary do?

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Nancy Pelosi and Paul Ryan have seemingly reached a deal to keep the federal government running for another 3 months.  A deal was originally delayed over a dispute on funding for the water crisis in Flint, Michigan, Zika funding for Florida and aid to flood victims in Louisiana.  The agreement struck between Ryan and Pelosi ultimately will provide $170 million to help Flint and other cities with water emergencies which would be added as an amendment to a separate water projects bill.

According to The Hill, the agreement comes after Senate Democrats and a handful of Republicans blocked a stop-gap spending bill to fund the government past Sept. 30.  Democrats vowed to block the stopgap funding bill Tuesday afternoon, after a House version of the bill included aid to Florida to fight the Zika virus and aid to help Louisiana flood victims but did not provide funding for the water crisis in Flint, Michigan.  

Per NBC, Senate Minority Leader Harry Reid (D-Nev) vowed to fight any legislation that excluded funding for Flint.

“Democrats have been clear that Congress should not leave Flint and other lead-tainted communities out of any (stopgap spending) negotiation that includes emergency disaster funding.  Our request is simple: include both bipartisan disaster relief packages for consideration in the CR. We urge you to include bipartisan Flint legislation in the CR.”

The Senate originally passed a version of the waterways bill that included a $220 million Flint aid package, but the House version lacked the same drinking water provisions. That said, the House Rules Committee agreed late Tuesday night to allow a floor vote on a bipartisan amendment from Reps. Dan Kildee (D-Mich.) and John Moolenar (R-Mich.) that would authorize up to $170 million for communities around the country that are facing a drinking water crisis. 

The deal between the House leaders promises to free up the short-term spending measure, which had failed to advance in the Senate on Tuesday. That had left lawmakers facing responsibility for a government shutdown at midnight Friday, if they did not act.

Of course, with the presidential election just a couple of months away it’s not terribly surprising that this issue was cleared up with relative ease.

via http://ift.tt/2d9A7KM Tyler Durden

In the last 60 years, the US economy has never suffered such a long contraction in core durable goods orders (20 months) without officially being in recession.

It's probably nothing… US Durable Goods New Orders Ex Transports YoY down for the 20th straight month…

Headline (short-term) data beat thanks to notably lower revisions.

• Durable Goods Orders unchanged MoM (exp -1.5%, prior revised markedly lower from +4.4% to +3.6%)
• Durables Ex Trans -0.4% MoM (exp -0.5%, prior revised lower from +1.3% to +1.1%)
• Capital Goods New Orders Non-Defense, Ex-Aircraft +0.6% (-0.1% exp but prior revised from +1.5% to +0.8%)

But for the 4th month in a row, Capital Goods Shipments (Ex Air) fell MoM – down 0.4%, missing expectations of a 0.1% rise, and historical data was revised lower.

Thank the lord of war forsaving the economy again…

• 5.8% drop in Computer new orders
• 0.5% drop in Machinery
• 0.5% drop in Fabricated products
• 2.0% drop in Communication equipment
• 2.5% drop in Electrical equipment and appliances
• 21.9 drop in Nondefense aircraft and parts

BUT

• 23.6% surge in defense capital goods new orders

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