Category: zerohedge

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

Varoufakis said that Schäuble, Germany’s finance minister and the architect of the deals Greece signed in 2010 and 2012, was “consistent throughout”. “His view was ‘I’m not discussing the program – this was accepted by the previous [Greek] government and we can’t possibly allow an election to change anything.

 

“So at that point I said ‘Well perhaps we should simply not hold elections anymore for indebted countries’, and there was no answer. The only interpretation I can give [of their view] is, ‘Yes, that would be a good idea, but it would be difficult. So you either sign on the dotted line or you are out.’”

 

– From last year’s post:  Everything You Need to Know About the Greek Crisis and ECB Fascism in Two Paragraphs

By now, most of you have heard about Wikileaks’ release of internal deliberations between the top two IMF officials in charge of managing the Greek debt crisis – Poul Thomsen, the head of the IMF’s European Department, and Delia Velkouleskou, the IMF Mission Chief for Greece.

In nutshell, the two discussed whether or not a new credit crisis would be required in order to force EU creditors to agree with the IMF’s debt relief objective. Shedding some much needed perspective on the situation, former Greek finance minister Yanis Varoufakis has chimed in, and he makes one thing perfectly clear — no matter who comes out ahead in this dispute (the IMF or the EU), it will be the Greek people who lose.

Here are a few excerpts from his op-ed published at Der Spiegel.

The feud between the International Monetary Fund (IMF) and the European side of Greece’s troika of creditors is old news. However, Wikileaks’ publication of a dialogue between key IMF players suggests that we are approaching something of a hazardous endgame.Ever since the first Greek ‘bailout’ program was signed, in May 2010, the IMF has been violating its own “primary directive”: the obligation not to fund insolvent governments. As a result, the IMF’s leadership has been facing a revolt from its staff members who demand an exit strategy arguing that, if the EU continues to obstruct the debt relief necessary to restore the solvency of the Greek government, the IMF should leave the Greek program.

 

Five years on, this IMF-EU impasse continues, causing a one-third collapse of Greek GDP and fuelling hopelessness to a degree that has made real reform harder than ever.

 

To the uninitiated it looks as if the IMF-EU tussle is about some botched numbers. But the real issue behind them is deeply political and has ramifications well beyond Greece.

 

The IMF is right that the Commission’s numbers do not add up and, thus, engender the insufferable hypocrisy of a Commission pretending to prefer “lighter” austerity when its denial of debt relief translates into a primary budget surplus target (total tax revenues minus government expenditure, exempting debt repayments) of 3.5 percent of Greek GDP which, in turn, requires measures even harsher than the IMF’s.

 

Are the IMF’s numbers any better? Regarding the primary budget surplus target (a crucial number that must be kept under 1.5 percent of GDP to give Greece any chance of recovery) Thomsen and Velculescu embrace precisely the number that I was proposing to the troika last year.

 

Why then did the IMF not back me in 2015 but are adopting the same 1.5 percent surplus target now? Because they also wanted something that I would never grant: crushing new austerity which is inhuman and unnecessary but which, today, the Tsipras government (according to Velculescu) seems ready to accept, having already surrendered once in July 2015.

 

The IMF’s austerity package is inhuman because it will destroy hundreds of thousands of small businesses, defund society’s weakest, and turbocharge the humanitarian crisis. And it is unnecessary because meaningful growth is much more likely to return to Greece under our policy proposals to end austerity, target the oligarchy, and reform public administration (rather than attacking, again, the weak).

 

To give a monstrously exaggerated but terribly instructive parallel of the IMF’s logic, if Greece is nuked tomorrow the economic crisis ends and its macroeconomic numbers are “fixed” as long as creditors accept a 100 percent haircut. But, if I am right that our numbers added up just as well, while allowing Greece to recover without further social decline, why did the IMF join Berlin to crush us in 2015?

 

For decades, whenever the IMF “visited” a struggling country, it promoted “reforms” that led to the demolition of small businesses and the proletarisation of middle-class professionals. Abandoning the template in Greece would be to confess to the possibility that decades of anti-social programs imposed globally might have been inhuman and unnecessary.

 

To recap, the Wikileaks revelations unveil an attrition war between a reasonably numerate villain (the IMF) and a chronic procrastinator (Berlin). We also know that the IMF is seriously considering bringing things to a head next July by dangling Greece once more over the abyss, exactly as in July 2015. Except that this time the purpose is to force the hand not of Alexis Tsipras, whose fresh acquiescence the IMF considers in the bag, but of the German Chancellor.

 

Will Christine Lagarde (the IMF’s Managing Director with ambitions of a European political comeback) toe the line of her underlings? How will Chancellor Merkel react to the publication of these conversations? Might the protagonists’ strategies change now that we have had a glimpse of them?

 

While pondering these questions, I cannot stem the torrent of sadness from the thought that last year, during our Athens Spring, Greece had weapons against the troika’s organised incompetence that I was, alas, not allowed to use. The result is a Europe more deeply immersed in disrepute and a Greek people watching from the sidelines an ugly brawl darkening their already bleak future.

Sad beyond words.

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Over the past several months, the recurring story of hedge fund billionaires taking leave their home states, and heading to tax-friendly Florida has led various pundits to focus on the deteriorating fiscal state of hedge-fund heavy Connecticut, where as we reported recently credit risk surged to record highs following a disappointing bond auction.

 

As we reported at the time, the likely culprit was the state’s $550 million general-obligation sale on March 17, which included debt due in 2026 that priced to yield 2.52 percent, compared with an expected 2.37 percent based on Bloomberg’s Connecticut index. The state’s office of policy and management said last week that the budget deficit for the current fiscal year is $131 million, an increase of $111 million from the prior month’s estimate.

The ongoing hedge fund exodus, as billionaires leave for states where their money is treated better, will only make things for CT worse.

Now another state is in the crosshairs following the imminent “exstatiation” of prominent hedge fund billionaire, Appaloosa’s David Tepper. 

As Bloomberg reports, the decision by billionaire hedge-fund manager David Tepper to quit New Jersey for tax-friendly Florida has put the Garden State in fiscal peril, and  could complicate estimates of how much tax money the struggling state will collect, the head of the Legislature’s nonpartisan research branch warned lawmakers.

That’s right: one person can make or break the precarious fiscal balance of New Jersey.

According to Bloomberg, Tepper, 58, registered to vote in Florida in October, listing a Miami Beach condominium as his permanent address, and in December filed a court document declaring that he is now a resident of the state. On Jan. 1, he relocated his Appaloosa Management from New Jersey to Florida, which is free of personal-income and estate taxes.

His move has put NJ state official in a state of near panic.

“We may be facing an unusual degree of income-tax forecast risk,” Frank Haines, budget and finance officer with the Office of Legislative Services told a Senate committee Tuesday in Trenton.

The reason for the panic is that New Jersey relies on personal income taxes for about 40% of its revenue, and less than 1 percent of taxpayers contribute about a third of those collections, according to the legislative services office. A one percent forecasting error in the income-tax estimate can mean a $140 million gap, Haines said.

Tepper’s departure is unexpected: he has lived in New Jersey for more than two decades, initially as an executive at Goldman Sachs where he helped run junk-bond trading during the late 1980s and early 1990s, and then after founded Appaloosa in 1993. His fortune is estimated at $10.6 billion, according to the Bloomberg Billionaires Index.

That makes him as the wealthiest person in New Jersey. Or rather “made” him.

But the worst news is for New Jersey residents who already bear the country’s third-highest tax burden, according to the Tax Foundation in Washington. Along with the nation’s highest property taxes, it’s one of two states that levy both an estate tax on the deceased and an inheritance tax on their heirs. The income-tax rate for top earners is 8.97%. Democratic legislators have repeatedly passed a millionaire’s tax that would increase the levy to 10.75 percent, but Republican Governor Chris Christie has vetoed it each time.

With Tepper’s departure, Christie will have no choice but to comply.

Meanwhile, keep an eye on NJ CDS: already the riskiest state in the country, NJ credit default swaps are set to blow out further in the coming weeks.

via Zero Hedge http://ift.tt/238I2hP Tyler Durden

In what he assures will be "an easy decision," Donald Trump has released details of his plan to "compel Mexico to pay for the wall." In a 600 word statement, Trump proposes, in a potentially devastating move for Mexico’s economy, to block billions of dollars in payments immigrants send back home until the nation made "a one-time payment of $5-10 billion" to the U.S.

The Donald cites a section of the USA Patriot Act antiterrorism law that he argues can be changed to enforce his proposal if he is elected president, but as Bloomberg reports, it's unclear if Trump would be able to carry out the plan without approval from Congress.

Trump's full statement: COMPELLING MEXICO TO PAY FOR THE WALL

Introduction: The provision of the Patriot Act, Section 326 – the "know your customer" provision, compelling financial institutions to demand identity documents before opening accounts or conducting financial transactions is a fundamental element of the outline below. That section authorized the executive branch to issue detailed regulations on the subject, found at 31 CFR 130.120-121. It's an easy decision for Mexico: make a one-time payment of $5-10 billion to ensure that $24 billion continues to flow into their country year after year. There are several ways to compel Mexico to pay for the wall including the following:

 

On day 1 promulgate a "proposed rule" (regulation) amending 31 CFR 130.121 to redefine applicable financial institutions to include money transfer companies like Western Union, and redefine "account" to include wire transfers. Also include in the proposed rule a requirement that no alien may wire money outside of the United States unless the alien first provides a document establishing his lawful presence in the United States.

 

On day 2 Mexico will immediately protest. They receive approximately $24 billion a year in remittances from Mexican nationals working in the United States. The majority of that amount comes from illegal aliens. It serves as de facto welfare for poor families in Mexico. There is no significant social safety net provided by the state in Mexico.

 

On day 3 tell Mexico that if the Mexican government will contribute the funds needed to the United States to pay for the wall, the Trump Administration will not promulgate the final rule, and the regulation will not go into effect.

 

Trade tariffs, or enforcement of existing trade rules: There is no doubt that Mexico is engaging in unfair subsidy behavior that has eliminated thousands of U.S. jobs, and which we are obligated to respond to; the impact of any tariffs on the price imports will be more than offset by the economic and income gains of increased production in the United States, in addition to revenue from any tariffs themselves. Mexico needs access to our markets much more than the reverse, so we have all the leverage and will win the negotiation. By definition, if you have a large trade deficit with a nation, it means they are selling far more to you than the reverse – thus they, not you, stand to lose from enforcing trade rules through tariffs (as has been done to save many U.S. industries in the past).

 

Cancelling visas: Immigration is a privilege, not a right. Mexico is totally dependent on the United States as a release valve for its own poverty – our approvals of hundreds of thousands of visas to their nationals every year is one of our greatest leverage points. We also have leverage through business and tourist visas for important people in the Mexican economy. Keep in mind, the United States has already taken in 4X more migrants than any other country on planet earth, producing lower wages and higher unemployment for our own citizens and recent migrants.

 

Visa fees: Even a small increase in visa fees would pay for the wall. This includes fees on border crossing cards, of which more than 1 million are issued a year. The border-crossing card is also one of the greatest sources of illegal immigration into the United States, via overstays. Mexico is also the single largest recipient of U.S. green cards, which confer a path to U.S. citizenship. Again, we have the leverage so Mexico will back down.

 

Conclusion: Mexico has taken advantage of us in another way as well: gangs, drug traffickers and cartels have freely exploited our open borders and committed vast numbers of crimes inside the United States. The United States has borne the extraordinary daily cost of this criminal activity, including the cost of trials and incarcerations. Not to mention the even greater human cost. We have the moral high ground here, and all the leverage. It is time we use it in order to Make America Great Again.

The Donald cites a section of the USA Patriot Act antiterrorism law that he argues can be changed to enforce his proposal if he is elected president, but as Bloomberg reports, it's unclear if Trump would be able to carry out the plan without approval from Congress.

World Bank data show Mexico gets about $25 billion in total remittances annually, and while that includes payments originating in other countries, the bulk is from the U.S. The data also show that remittances accounted for about 2 percent of Mexico’s gross domestic product in 2014.

 

Officials in Mexico have repeatedly said they would not fund the border wall as Trump proposes.

 

Mexican President Enrique Pena Nieto’s administration said last year that Trump’s plan to bill Mexico for the wall “reflects an enormous ignorance for what Mexico represents, and also the irresponsibility of the candidate who’s saying it.”

 

Trump said he would also consider adding trade tariffs to Mexican goods or increasing visa fees for Mexican travelers to increase pressure on the Mexican government to pay for the wall.

 

“Mexico needs access to our markets much more than the reverse, so we have all the leverage,” Trump said in the memo, which also proposes canceling or denying business or tourism visas for some “important people in the Mexican economy.”

Trump released his proposal as Republican voters went to the polls in the Wisconsin primary. If Trump loses that contest Tuesday to Texas Senator Ted Cruz, as polls indicate is likely, it would complicate his path to winning the nomination outright before the party’s national convention in July.

The wall proposal — and the plan to use economic leverage to get Mexico to fund it — reflect broader pieces of Trump’s foreign and domestic policy vision.

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

Looks like this rally has ended.

The S&P 500 has run into the downward sloping trnedline set by the 2015 top. It has since rolled over. We’re likely heading down in a big way.

Investors forget, the sharpest, most aggressive rallies occur during bear markets.  This is because bear market rallies are driven by short-covering: those investors who went short are forced to “cover” or buy back shares they have sold previously.

Consider the Tech Bubble.

Once the top was in, stocks stage SIX separate rallies ranging in size from 15% to 27%. And ALL of these massive moves took place in roughly than one year’s time.

That’s six double-digit rallies, some of which lasted as long as two months… but all of which ended in stocks making new lows.

Virtually the same thing happened after the 2007 top, with stocks staging four significant rallies ranging from 7% to 12.5% as they ground their way lower going into the Crash.

Even after the Crash hit, we had a monster 25% rally that lasted two months!

My point with all of this is that sharp rallies occur during bear markets after major market peaks are formed. I suspect this latest rally will prove to be yet another example as stocks roll over and head to new lows.

The time to prepare for this is now, BEFORE it hits.

If you’ve yet to prepare for a bear market in stocks we just published a 21-page investment report titled Stock Market Crash Survival Guide.

In it, we outline precisely how the crash will unfold as well as which investments will perform best during a stock market crash.

We are giving away just 100 copies for FREE to the public.

To pick up yours, swing by:

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Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

 

 

via Zero Hedge http://ift.tt/1SNCPUc Phoenix Capital Research

Define irony.

While the global media has been almost entirely focused on the “circle of close Putin friends” who have emerged as some of Mossack Fonseca’s clients, and moments ago the Panama Papers even had their first official casualty when the Iceland prime minister resigned, far more amusing examples of “shell firm” perpetrators have emerged, if deep under the radar.

As Reuters reports with barely a trace of humor, the president of the Chilean branch of Transparency International resigned on Monday after documents from a Panamanian law firm showed he was linked to at least five offshore companies.

For those who are unfamiliar, Transparency International is a German-based organization that seeks to monitor and root out corporate and political corruption worldwide.

Awkward.

Perhaps he should have used Bill Clinton to get the definition of the word “transparency”?

 

As much as he would have wanted not to, ultimately he had no choice: “Gonzalo Delaveau presented his resignation as the president of Transparency Chile, which has been accepted by the board of directors,” the national body wrote on Twitter.

The reason for his resignation is that Delaveau’s name was among the tens of thousands of people (most non-US) that were exposed in the Mossack Fonseca leak. 

While Delaveau is not accused of illegal activity, the leaks called into question his post at Transparency International.

According to CIPER, Delaveau, a lawyer, acts as a representative for Turnbrook Corporation, DK Corporation, Heatlhey International Inc, Turnbrook Mining Ltd and Vizcachitas Ltd, all of which are domiciled in the Bahamas. Delaveau also serves as a director for Turnbrook Mining, which owns 51.6 percent of Los Andes Copper, a Canadian exploration and development company currently focused on a mine project north of Chile’s capital, Santiago.

Reuters adds that in response to questions from CIPER, he said he was a director only at Turnbrook Mining and that his relations with the other companies were consistent with his role as a lawyer and legal clerk. He added in an interview with a local radio station that he was “extremely surprised” by the “gray, dark area” of Mossack Fonseca.

We would be too.

Delaveau’s resignation came hours after Chile’s tax authority announced the beginning of an “intense follow-up” of the Chileans mentioned in the Panama Papers, who range from ex-soccer stars to newspaper magnates.

The disclosures come as Chile deals with political and corporate corruption scandals that have left Chileans angry with the entire professional class and eroded the government’s popularity.

Sounds very much like the US.

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Via Dana Lyons' Tumblr,

Despite positive action in the major averages, market breadth has very recently begun to lag.

One of the hallmarks of the post-February stock market rally has been the superb breadth. That stood in stark contrast to the internal deterioration that had been in effect since about a year ago. This recent strong breadth dynamic has finally shown signs of potentially waning, however. One of the first signs we noticed was the new 7-year low in the ratio of micro-caps to large caps about a week ago. And we saw another piece of evidence pointing to breadth potentially starting to lag again last Friday, April 1.

The major averages scored new rally highs yet again on Friday as the Dow Jones Industrial Average gained 100 points, the Nasdaq 100 was up 1% and the S&P 500 was higher by almost 2/3 of a percent. Despite that appearance of strength, in what was seemingly an April Fool’s joke, NYSE breadth was actually negative on the day (i.e., there were more declining issues than advancing issues). Now it is only one day so we wouldn’t make too much of it unless it becomes a larger trend. Furthermore, it was the first day of the month and quarter so there may have been some seasonal structural forces at work as well. However, it was unusual to see negative breadth on such a seemingly positive day in the market.

For example, in the past 50 years, it was only the 24th day that the S&P 500 gained at least 0.6% when within 3% of a 52-week high – and yet NYSE breadth was negative.

 

 

As the chart reveals, the previous 23 events occurred in both secular bull and bear markets. Therefore, while the sample size is on the small side, to the extent that there is any consistency to the performance measures following those events, they are probably more robust. As it happens, returns in the shorter-term have been fairly consistent – to the downside.

As the table shows, 16 of the 23 occurrences showed the S&P 500 lower from 2 days to 2 weeks following. Furthermore, even out to 3 months, the median return was almost -3%. Again, the sample size is small but it includes several occurrences during the secular bull market of the 1980′s-1990′s. In fact, even after a number of the occurrences during very strong advances in 1986 and 1999, the S&P 500 was some 6% lower 3 months later.

The rally since February has done very little “wrong” in terms of its quality of advance. Sure, many folks would have liked to have seen more volume accompanying the move. Furthermore, the broader indices are still a long ways from not only their all-time highs of last spring, but even from making higher highs above the peaks in late 2015. However, in terms of the pace of advance and the breadth measures involved, there has been little to complain about.

As the major averages are now pushing up against either their 2015 tops or the downtrends connecting those tops, it is perhaps not surprising to see the first signs of struggle in this rally. We have pointed out some preliminary evidence of complacent or overly bullish sentiment, at least on a short-term basis. Now, we are beginning to see the until-now stellar rally breadth begin to show cracks. Once again, we’ll emphasize that this is very preliminary evidence. A more substantial negative reversal in breadth is far from certain at this point and the burden of proof is on the bears to do more extensive technical damage to this uptrend.

However, for the first time since mid-February, the breadth situation is not looking quite as sweet as it was.

*  *  *

More from Dana Lyons, JLFMI and My401kPro.

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Following this morning’s disappointing trade data (but… but… surveys showed that the workers in the service sector are more optimistic… just ignore the actual hard data) we asked if today’s Atlanta Fed GDP update would be above or below 0.3%.

Atlanta Fed Q1 GDP update today: over/under on 0.3%

— zerohedge (@zerohedge) April 5, 2016

Moments ago we got the answer: it was over, but by the smallest possible increment. And the answer is….

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2016 is 0.4 percent on April 5, down from 0.7 percent on April 1. After yesterday morning’s light vehicle sales release from the U.S. Bureau of Economic Analysis and the manufacturing report from the U.S. Bureau of the Census, the forecast for real GDP growth declined from 0.7 percent to 0.4 percent due to declines in the forecasts for real consumer spending growth and real equipment investment growth. The forecast for real GDP growth remained at 0.4 percent after this morning’s international trade report from the U.S. Census Bureau, as a slight decline in the forecast for real net exports was offset by a slight increase in the forecast of real equipment investment growth.

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Thanks to an ever-increasing need for tax revenues to fund an ever-increasing horde of government-handout-beneficiaries, the populist-in-chief has once again taken aim at tax inversions for the crusade-du-jour. We look forward to him explaining how this is different (and better for American jobs) from what Donald Trump has suggested.

As AP reports,

President Barack Obama will speak from the White House about new rules aimed at deterring "tax inversions."

 

The White House says Obama will speak at 12:15 p.m. in the Brady Press Briefing Room. His remarks come a day after the Treasury Department announced a package of steps designed to make inversions less financially appealing.

 

Tax inversions occur when companies move abroad for lower tax rates. The use of inversions has sparked a political outcry.

 

Obama supports new legislation to reform corporate taxes, and several Democrats have announced bills to make it harder for U.S. corporations to invert. But prospects for passing such legislation in an election year appear low given wide differences between Democrats and Republicans on taxes.

 

Obama's statement also comes amid an uproar over publication of thousands of names of rich and powerful people who conducted offshore financial dealings through a Panamanian law firm. Obama has yet to address those disclosures publicly.

Live Feed (due to start at 1215ET)

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We suspect more than a few ‘prosecuted’ bankers will be smiling wryly today as, following the exposure of his offshore financial dealings – revealed in the Panama Papers – Iceland’s embattled Prime Minister Sigmundur David Gunlaugsson has resigned.

 

Despite earlier refusal to step down, the decision, which was reported by national broadcaster RUV, followed street protests that attracted thousands of Icelanders angered by the alleged tax evasion.

The FT reports that

• ICELAND FISHERIES AND AGRICULTURE MINISTER SIGURDUR INGI JOHANSSON WILL BECOME PRIME MINISTER

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Moments ago the US Treasury priced its 4 Week Bill auction, which was unique in that at just $35 billion, was not only $10 billion lower than a month ago, but was the lowest since October 15.

This may or may not explain why after last week’s curious auction yield of 0.20%, or 5 bps below the effective Fed Funds floor, today’s auction showed an even more dramatic scramble for short term liquidity, when the government sold 4 Week Bills at a rate of 0.185%, or 6.5 bps below the rate charged by the Fed!

 

 

Clearly some correlation algo in the market did not expect this because the moment the auction results were released, the USDJPY snapped lower to fresh 14 months lows, just above 110, from where it is only downhill.

 

The move in the USDJPY has in turn pressured stocks and all risk assets, as suddenly there appears to be a rather pronounced flight to safety and/or a fault with the Fed’s plumbing as primary dealers are willing to lock up funds with the Treasury for 4 week at a rate lower than the Fed Funds, something which shouldn’t technically be happening, and suggests the market is once again forcing the Fed to cut rates.

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