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When it rains it pours…
The market has taken over The Fed’s role – forget above 25bps here or there, the cost of funding for even the highest quality US Corporates is exploding…
Simply put, the credit cycle has turned and is accelerating rapidly – crushing any hopes for debt-funded shareholder-friendliness.
via Zero Hedge http://ift.tt/1QSSIry Tyler Durden
As New Hampshire voters cast their ballots in the nation’s first 2016 presidential primary, here’s a question worth asking of the candidates from either party: Which ones, if any, would definitely reduce military spending? The short answer is: Maybe Bernie Sanders but probably not even him.
Among the Republicans, there is only talk of increasing spending on defense. Indeed, Tea Party faves Ted Cruz and Marco Rubio even pushed a spending measure that would increase the Pentagon’s budget without offsetting spending anywhere else. When it comes to rockets’ red glare, they’re all in, as is the rest of the GOP field, with the exception of Donald Trump (who recently announced that he would keep hold spending constant but increase efficiency and reduce waste).
Hillary Cinton is a well-known hawk who is very much committed to keeping America “strong,” by which she (and all pols) mean lining the pockets of the military-industrial complex. Even Bernie Sanders, the least hawkish of the remaining candidates and a vocal critic of 21st-century American wars, hedges his commitment to cutting defense spending this way: “Bernie firmly rejects any increase to defense spending at the cost of cuts to domestic social spending” [emphasis added].
Regardless of the massive amounts of dollars already being spent by the United States, expect the drumbeat for ever-larger defense expenditures to pick up going forward.
Despite the end of active engagements in Iraq and Afghanistan, the IISS Military Balance, a report that looks at global defense-related trends, states,
Contrasted with rising powers, defense budgets in Europe clearly seemed to be stagnating if not dropping. Britain saw its defense budget drop from $62 billion to $56.2 billion, for example, despite still relevant threats like the Islamic State in Syria and Iraq. Just four out of 26 European partners of NATO now meet the agreed spending aim of 2 percent of GDP, leaving a gap of almost $100 billion to reach the target.
That sound that you’re hearing is the sound of cash registers ringing in defense contractors’ offices all throughout the Beltway and beyond. The pitch for America to step up now to save the planet practically writes itself.
HT: Chris Preble’s Twitter feed.
On top of the sheer amount of money being spent, the United States is committed via treaties and other security agreements to come to the defense of a huge chunk of the globe’s population. From The Washington Post:
69 countries have some form of defense pact with the United States, and…they make up around 75 percent of the world’s economic output…. The combined population of these countries and the United States itself is in excess of 2 billion.
If foreign policy motivates you in your voting, it’s worth figuring out which if any candidate expresses your views on the matter.
Last month, Reason TV talked with David Vine, an American University anthropologist whose new book, Base Nation, looks at the costs and consequences of the U.S. military maintaining 800 bases around the globe outside the United States. The cost just for those operations comes in around $150 billion per year which is, as Vine notes, “huge.” More than that, though, he argues that having so many personnel in so many places actually makes us less safe by stretching resources and increasing the odds of small events blowing up into international incidents. Take a look now:
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WTI keeps dead-cat-bouncing thanks to the algos and crashing thanks to reality. This morning's reality check on the overnight ramp comes courtesy of a double-whammy from Goldman ("wouldn't be surprised to see WTI in the teens") and The IEA which increased its estimate of excess-supply drastically. This has dragged WTI back below $30 once again and where oil goes, stocks go…
Goldman Sachs Says No Surprise If Oil Price Drops Below $20/Bbl
“I wouldn’t be surprised if this market goes into the teens,” Head of Commodities Research Jeff Currie says in interview on Bloomberg TV.
“Once you breach storage capacity, prices have to spike below cash costs”
And IEA piled on…
The global oil surplus will be bigger than previously estimated in the first half, increasing the risk of further price losses, as OPEC members Iran and Iraq bolster production while demand growth slows, according to the International Energy Agency.
Supply may exceed consumption by an average of 1.75 million barrels a day in the period, compared with an estimate of 1.5 million last month, and the excess could swell if OPEC adds more output, the IEA said. Iran raised production in January following the removal of international sanctions, Iraqi volumes reached a record and Saudi Arabia also ramped up output. The agency trimmed estimates for global oil demand.
Oil volatility remains extremely elevated.
via Zero Hedge http://ift.tt/20lTNuK Tyler Durden
Just when we said DB should probably keep its mouth shut, the bank that everyone is suddenly very focused on decided to take to Twitter with the following rhetorical question:
#DAX dropped below 9,000 points yesterday – worst start to a year ever: are the markets overreacting? #DrStephan
— Deutsche Bank (@DeutscheBank) February 9, 2016
Well, judging by this…
… the markets are probably underreacting.
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The ECB’s “whatever it takes” ponzi strategy of keeping the dream alive in Europe’s financial system has finally been caught as rapid collapse in the banking system is contagiously spreading to peripheral sovereigns once again. Portugal risk spreads are up 120bps in the last 3 weeks and Spain and Italy are soaring over 35 and 50bps respectively as the almost self-dealing nature of banks buying “risk-free” EU bonds and repoing for cash via The ECB comes home to roost…
And now The ECB is cornered as any more NIRP will merely exacerbate the stress in the financial system and lead to a vicious circle in sovereign risk.
via Zero Hedge http://ift.tt/1T3f9fQ Tyler Durden
Here is how global currency warfare and the global “race to debase” works: ECB cuts rates to -0.3%, the BOJ cuts to -0.1%, then the ECB cuts to -0.7% next. At least that’s JPMorgan’s most recent forecast, which now see Mario Draghi going full NIRPtard, and cutting the ECB’s -0.3% deposit rate to -0.5% next month, and then to -0.7% in June, unleashing an epic deflationary tsunami around the globe, one which will send the USD soaring, will force more retaliation by the BOJ, will force more devaluation by the PBOC, will lead to more angry complaing by Deutsche Bank how easing is killing the bank, and so on.
When does it end? When fiat and modern neo-Keynesian economics are thoroughly discredited and when the world’s central bankers end up with fast food worker jobs.
From JPMorgan:
ECB to ease even more and cut the deposit rate to -0.7%
Until now, our expectation has been that the ECB would announce another policy package in March, comprising a 10bp cut of the deposit rate to -0.4%, an increase in the monthly pace of QE purchases by €10bn to €70bn/month, a three-month extension of the QE programme to mid-2017 and two additional TLTROs during 2H16. Beyond that, we have not been expecting any further easing, but we have been expecting the ECB to maintain a very accommodative stance for a long time, with the first hike only towards the end of 2019.
Today, we are changing this call. First, we now expect the March package to include a larger deposit rate cut of 20bp, taking it to -0.5%. Our expectations for QE and the TLTROs are unchanged. Second, we now expect further easing, possibly as early as June, with another 20bp deposit rate cut to -0.7% and another six month extension of QE at €70bn/month, taking QE through to the end of 2017. It is possible that the ECB will adopt a tiered deposit rate system as soon as March. But, even if it does not, we would expect a clear signal already in March that it will be considered later on; for example, the Governing Council could task the ECB’s technical committees to look into it. And in any case, we would expect the ECB to adopt a tiered system by the time it cuts the deposit rate to -0.7%. As we have argued before, the ECB would be sending a strong signal by adopting a tiered system, which can be designed in a way that minimises some potential side-effects.
This forecast change is motivated by two factors. First, we continue to think that inflation will rise towards the ECB’s target more slowly than its staff expects. Second, the ECB will be more sensitive to this in an environment of persistent downside risk. Hence, our new call is mainly about risk management, as we are not making any changes to our macro forecasts. Admittedly, GDP has grown at a sluggish pace in 2H15, but the underlying pace was likely firmer. And, while the January business surveys raise some concern about the underlying pace, we are not currently convinced that there has been a real change in underlying economic conditions. But, from an ECB perspective, uncertainty about the global economy has increased even further, while recent financial market developments are surely uncomfortable (e.g., in terms of the trade-weighted currency, inflation expectations, potential pressures on banks, etc).
Hence, even if the ECB staff publishes the new inflation forecast for 2018 in early March, which we think could be at 1.8%, we believe the Governing Council will remain nervous about the outlook and respond quickly to gradual disappointments on inflation.
via Zero Hedge http://ift.tt/20lTOif Tyler Durden
Overnight Media Digest
WSJ
– Market anxiety spilled over into Asia early Tuesday, sending investors scurrying for havens like Japanese government bonds, where 10-year yields fell to zero percent for the first time. (http://on.wsj.com/1TPdXxd)
– For investors in emerging markets, Venezuela has quickly turned from a source of opportunity to a cause for concern. Though the country vows it will make its Feb. 26 payment, markets remain skeptic. (http://on.wsj.com/1W92APu)
– In a blow to financial services giant Blackstone Group LP , Brixmor revealed that accounting personnel had manipulated financial results and said its chief executive and other top managers had stepped down. (http://on.wsj.com/1W98XCb)
– A loss by Hillary Clinton in New Hampshire would sting less if the former secretary of state trails only among independents in her party’s primary. While a Donald Trump’s victory would come with caution signs if the Republican doesn’t expand his blue-collar base. (http://on.wsj.com/1W9cBMw)
– The Obama administration plans to boost the federal government’s power to investigate and punish colleges accused of deceptive marketing tactics and other misconduct, part of a campaign to address years of student complaints about for-profit institutions. (http://on.wsj.com/1W9d7u3)
FT
* UK’s class of nuclear-armed submarines is near completion with the release of 201 million pounds ($289.80 million)to BAE Systems to fund the last development stages before parliament votes on renewing Trident.
* The Open Banking Working Group, which took a review last year at the request of the Treasury, called for information on banks’ products and customers to be more easily accessed by digital services, including comparison websites.
* An increasing squeeze on Britain’s public finances will require Chancellor George Osborne to break several records if he is to balance the books by end of the decade, according to the Institute for Fiscal Studies.
* HSBC Holdings Plc looks towards keeping its head office in London after months of agonising debate reflecting a reversal of the previous stance of Chief Executive Stuart Gulliver.
NYT
– After more than six years of negotiations, the global aviation industry agreed on Monday to the first binding limits on carbon dioxide emissions, tackling the fastest-growing source of greenhouse gas pollution. (http://nyti.ms/1UZJb35)
– Time may finally be running out on the Mixed Oxide Fuel Fabrication Facility, a multi-billion dollar, over-budget federal project that has been hard to kill. (http://nyti.ms/1UZJb35)
– Mark Zuckerberg’s grand vision to connect the entire world, hit a major roadblock on Monday, when Indian regulators banned free mobile data programs that favor some Internet services over others. (http://nyti.ms/1PxATMl)
– Investment manager Allianz Global Investors said on Monday it had agreed to acquire Rogge Global Partners, a fixed income firm in London, for an undisclosed amount. (http://nyti.ms/1nUiYrP)
Canada
THE GLOBE AND MAIL
** Bay Street lawyer Mitchell Finkelstein has launched an appeal of an Ontario Securities Commission ruling that he tipped a long-time friend about pending takeover deals, arguing the regulator made “impermissible inferences” in a ruling “based entirely on circumstantial evidence.” (http://bit.ly/1SFzrOb)
** Goodwill Industries of Toronto, Eastern, Central and Northern Ontario, Goodwill’s defunct Toronto-based chapter that suddenly closed last month and laid off 430 employees, is filing for bankruptcy in an attempt to restructure and even reopen some of its thrift stores. (http://bit.ly/20lDygY)
** Canadian investors are digging in their heels on both sides of the A$9 billion ($6.33 billion) tug-of-war for port and rail company Asciano Ltd – and the latest development shows neither side is backing down. On Monday, the months-long talks to acquire the Melbourne-based company took a turn as a revised offer from an Australian consortium became the new preference of the board of directors, putting previous board favorite Brookfield Infrastructure Partners LP on unsteady ground.
NATIONAL POST
** Interest rates should not be the only tool to promote financial stability, the Bank of Canada’s Timothy Lane said, amid worries of highly indebted consumers and frothy housing markets in Toronto and Vancouver. (http://bit.ly/20lGv12)
** Tahoe Resources Inc’s friendly $945 million deal to buy Lake Shore Gold Corp is being viewed as a logical transaction that addresses challenges faced by both companies. Tahoe gets to diversify into Canada, increase its growth profile and reduce exposure to Guatemala, a very challenging jurisdiction. Lake Shore, meanwhile, can develop its projects quickly without worrying about diluting shareholders or taking on more debt. (http://bit.ly/1QoRVfj)
Britain
The Times
The Financial Conduct Authority has admitted that it must tighten its rules over trading by staff in shares of the banks and brokers it regulates after an internal inquiry found that sensitive information was being stored in places where any employee could find it. (http://thetim.es/1TP38Lv)
Britain’s Supreme Court is to hear an urgent appeal on behalf of thousands of Lloyds bank retail bondholders against its attempts to buy back their assets at a reduced price, in a scheme that was due to start today. (http://thetim.es/1TP3emq)
The Guardian
Imagination Technologies, maker of Pure digital radios, has decided to sell the business and parted company with its longtime chief executive, Hossein Yassaie, after warning that it would suffer a loss this year. (http://bit.ly/1TP222p)
Britain’s leading experts on public finances are warning that the turmoil of global stock markets threatens to leave a 2 billion pounds ($2.88 billion) black hole in George Osborne’s deficit-reduction plans that could force the chancellor to raise taxes or make fresh cuts in spending to hit his budget targets. (http://bit.ly/1TP2bD1)
The Telegraph
Ascential, the magazine business jointly owned by Guardian Media Group and private equity group Apax, is expected to float for 820 million pounds ($1.18 billion) on Wednesday after eight years in private ownership. (http://bit.ly/1TP2DkC)
Royal London Asset Management, which manages more than 80 billion pounds ($115.36 billion) of assets, has told bosses that it will not tolerate mega bonus payouts at lenders which are failing. (http://bit.ly/1TP2Mof)
Sky News
The Rugeley plant in Staffordshire, a coal-fired power station that can provide enough energy to power one million homes, is to close this summer with the potential loss of 150 jobs. (http://bit.ly/1TP2QUW)
The major shareholders of easyGym – who do not include Stelios Haji-Ioannou, the high-profile easyGroup founder – have appointed Houlihan Lokey, an investment bank, to oversee a sale of the fitness club chain later this year, Sky News said. (http://bit.ly/1TP31j8)
The Independent
Charities in UK are calling on the government to introduce legislation to ban supermarkets from sending unsold food to landfills. On Wednesday, France introduced a law that bans supermarkets from throwing away waste food – instead forcing them to donate it to charities and food banks or face a fine of 3,750 euros ($4,200.38). (http://ind.pn/1W8D0Kk)
via Zero Hedge http://ift.tt/1V0s2pV Tyler Durden
Germany may be careening towards a head on-collision when it comes to Europe’s worsening migrant crisis, but tragically, the country had a very real fatal train wreck on Tuesday when two commuter trains crashed near Bad Aibling, in Bavaria.
Just before 7 a.m. two regional trains collided on a rail line which Bloomberg notes “is commonly used by commuters heading to work in Munich, and would normally also carry children traveling to school.”
It’s not clear what caused the crash but authorities say it’s “the biggest accident they’ve had in years.” Both trains are partially derailed and sit “wedged against each other” as as “hundreds” of emergency personnel search the wreckage for survivors.
The cause of the crash is a still unknown. “We need to find out know what happened, if the cause of the crash was based on the technology or human failure,” Federal Transport Minister Alexander Dobrindt said.
The Munich city blood center is on high alert. “[We have] an acute increased need for life-saving blood products,” the site said, calling for “immediate donations”. Here’s NBC:
At least nine people were killed and 150 injured when two commuter trains collided in southern Germany early Thursday, officials said.
A massive rescue operation was launched following the crash near the town of Bad Aibling in Bavaria at around 7 a.m. local time (1 a.m. ET).
Police spokeswoman Lisa Meier told NBC News that rescuers believed all survivors had been pulled from the wreckage as of noon local time.
At least 50 of the injuries from the crash were considered to be “serious,” according to police.
German Transport Minister Alexander Dobrindt rushed to the scene, calling the incident a “terrible catastrophe” and saying the cause needed to be investigated.
Here are the visuals:
For now, no one is blaming Mid-East asylum seekers. That could change in the hours ahead. “We need to find out what happened, if the cause of the crash was based on the technology or human failure,” Dobrindt added.
“This is a huge shock,” he said.
via Zero Hedge http://ift.tt/1V0s0hK Tyler Durden
Yesterday’s desperate scramble by Deutsche Bank to comfort markets about its liquidity position worked, for about three hours. And then, the bank which really should just keep its mouth shut, did the opposite and reminded an already panicked market just how “serious” things are, in the parlance of Jean-Claude Junkcer, when in an internal memo, the CEO assured his workers that:
That was the good news. The bad news:
More details from Bloomberg:
Deutsche Bank AG is “absolutely rock-solid,” Co-Chief Executive Officer John Cryan wrote in a letter to employees, seeking to reassure markets after a plunge in the shares.
Cryan said he isn’t concerned about the Frankfurt-based lender’s ability to meet legal costs, he wrote in the memo published on Tuesday. While Deutsche Bank will “almost certainly” have to add to its provisions for legal costs this year, the firm has already accounted for it in its financial planning, according to Cryan.
“I am personally investing time to resolve successfully and speedily open regulatory and legal cases,” he wrote. “I want to remove the uncertainty among staff and in the market that these cases cause. A small group of senior people, led by me, will focus on this. For everyone else, we ask you to continue to focus on our clients and on the implementation of our strategy.”
Or, said otherwise, “Deutsche Bank is fine.”
However, with numerous analogies being made between the German bank with the soaring default risk and Lehman or at least Bear, that may have been the absolutely worst thing for the bank to note at a time when the market is perfectly happy to interpret any assurance of ongoing solvency and viability as a desperate attempt to boost confidence, and resume selling the stock and buying even more default protection, which is what it has done, and as of last check DB stock just turned negative in German trading.
via Zero Hedge http://ift.tt/1KCEtYE Tyler Durden
The latest sexting scandal comes to us from Peters Middle School outside of Pittsburgh, where police are examining kids’ cell phones for nude photos.
Why? Seriously: Why? It sounds like a giant swath of middle school kids and teens have naked pictures of themselves and others on their phones. Naked selfies are a bad idea, to be sure, but why on earth should the police should the police be investigating or prosecuting them?
Peters Police Chief Harry Fruch certainly isn’t shedding much light on the matter:
“If the photograph was taken by the individual, male or female between the ages of 12 and under 18, she’s as much a guilty party as the person who received it. She is not a victim in this case or he is not a victim,” he said.
But if there is no victim, why prosecute the matter in the first place? Why ruin these kids’ lives by placing them on the sex offender registry (as is often the punishment in cases like this)?
I have no idea if the authorities will go in that awful direction. But the fact that other young people have been prosecuted for the same behavior just means that everyone who has sent naked pictures is in danger—not just because the pictures are embarrassing, but because the cops consider them child pornography.
It would be nice to see state legislators make the decision to protect their children and grandchildren from the true threat—criminal prosecution—by repealing such ridiculous laws. Kids who send selfies should be punished by their parents, not the police.
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