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“This issue of participation in the labor force is a highly contentious one,” notes RDG’s Jon Ryding and has been extensively discussed here as some people leave the labor pool and retire after giving up on the job search (do people really want to work past age 65 given the choice? Are that many people doing what they love?) But, as Bloomberg reports, there is a growing segment of boomers who are paying for retirement with the proceeds of rallying stocks. For the select few, last year’s 30% surge in the S&P500 capped a bull market now in its sixth year (with ‘wealth’ trickling down to 401(k)s), but as one wealth manager warned “everyone understands that the market went crazy last year,” and while 8 million people aged 65 and older are working, a 72% jump from a decade ago; there are a lucky few who are cashing out with the view that “if I need to, I can go back to work, but right now I’m going to enjoy life.”

 

As Bloomberg reports, most economists agree that boomers will drive declines in the labor force for years to come. The Bureau of Labor Statistics projects that the aggregate participation rate will be 62.5 percent in 2020, 1.8 percentage points below the level in 2010.
 
But as UBS’ Drew Matus notes, wealth effects and retirement aren’t just coincidence…

“You’ve seen a drop in the participation rate for people over 55, and you look at it in the context of a rebound in wealth, and it all makes sense,” he said.

 

“Do people really want to work past age 65 given the choice? Are that many people doing what they love? Let’s put it this way: I’ve got an 8-year-old son, and he doesn’t exactly say, ‘When I grow up, I want to be an economist.’”

And the result is an increasingly bifurcated boomer population…

Some people leave the labor pool and retire after giving up on the job search. Others pay for it with the proceeds of rallying stocks. Joblessness and labor participation levels reaching pre-recession lows are stoking debate among Federal Reserve policy makers and politicians about what’s behind the swings in data underlying the most important economic barometer, employment.

 

“This is not some abstract discussion about sociology or demography, it’s really a discussion about interest rates. The stakes are huge.”

And a pumped up stock market has enabled some to exit…

What’s not in dispute: the sheer size of the aging baby-boomer generation and that an unprecedented demographic shift distorts statistics. It means, for instance, that retirees can play a significant role in the shrinking labor force even as people are staying on the job longer than ever. About 8 million people aged 65 and older are working, a 72 percent jump from a decade ago.

 

It is the sharp rise of departing retirees from the workforce in the past two years that suggests more is at play, according to an analysis by Shigeru Fujita, a senior economist at the Federal Reserve Bank of Philadelphia. While demographic trends have headed this way since about 2000, retirees became a more prominent block of the drop in the participation rate in 2010, and then grew to account for 80 percent of the decline since early 2012, he found.

 

Last year’s 30-percent surge in the Standard & Poor’s 500 Index capped a bull market now in its sixth year, while the benchmark gauge reached a record high this month. Wealth has trickled into 401(k) accounts and home valuations, tempting those who may have delayed retirement during the financial crisis, said financial adviser Jay Barish.

However, this is limited to a lucky few…

Stock market gains haven’t helped everyone. Those who want a job but have given up looking reached 783,000 in April, almost triple a low in 2007. That figure has remained stable since the beginning of 2012, ruling it out as a key factor behind the drop in participation rate, Fujita said.

 

Further complicating matters: Stock holdings are concentrated among the top 20 percent of the wealthiest boomers, who have 96 percent of all the equities owned by the group

The bottom line… if stocks rise – don’t expect boomers to stick around…

“Everyone understands that the market went crazy last year,” said Barish, who advises 155 clients as a partner at Murphy Matza Wealth Management in Raleigh, North Carolina. “If they’re not in love with their career, the natural question is, ‘Can I go?’”

Read more here…

via Zero Hedge http://ift.tt/1n64xNa Tyler Durden

It would appear the mantra of “don’t fight the Fed” is one that only applies when they are saying “buy stocks.” Yesterday’s minutes exposed some concerns: “the low level of expected volatility implied by some financial market prices might also signal an increase in risk appetite” and thus complacency and Fed’s Fisher open “concern at almost no volatility in markets.” So while J-Yell and her buddies see no bubbles… we thought the following chart, which is ‘the sum of all volatilities’ across FX, equity, and interest rate markets, might help…

 

 

Chart: Bloomberg

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

The last time we wrote about the number 125% it was in the context of the return of that old Subprime 1.0 staple home loans that cover more than the purchase price of the home (because one must always have some leftover cash for improvements), i.e. 125% loan-to-value mortgages. Today 125% comes back and again it is in the context of subprime, only this time it is about the second coming of the credit bubble when, as Bloomberg writes, a certain group of distinguished individuals is now offering loans to troubled Americans at the whopping annual interest rate of 125%.

Which group of distinguished individuals? The same group that helped make The Wolf of Wall Street into a cult classic: the people who were trained by that born again scammer par excellence Jordan Belfort.

From an office near New York’s Times Square, people trained by a veteran of Jordan Belfort’s boiler room call truckers, contractors and florists across the country pitching loans with annual interest rates as high as 125 percent, according to more than two dozen former employees and clients. When borrowers can’t pay, Naidus’s World Business Lenders LLC seizes their vehicles and assets, sometimes sending them into bankruptcy.

If the phrase predatory lending comes to mind it is because this is precisely what it is:

“This is the new predatory lending,” said Mark Pinsky, president of Opportunity Finance Network, a group of lenders that help the poor. “And the predators, just as they did in the mortgage market, have gotten increasingly aggressive.”

 

Subprime business lending — the industry prefers to be called “alternative” — has swelled to more than $3 billion a year, estimates Marc Glazer, who has researched his competitors as head of Business Financial Services Inc., a lender in Coral Springs, Florida. That’s twice the volume of small loans guaranteed by the Small Business Administration.

Naturally, since these are the kinds of loans that ordinary Americans who don’t have defaults and a horrible credit rating would never touch, the probability of repayment is virtually nil. Which means that the probability of default on the new subprime loans is assured, and as such all that is happening is yet another case of credit money assisted wealth transfer: from the very poor to the very aggressive, and increasingly wealthy. In other words, what the Fed has done for Wall Street, subprime 2.0 is doing for its far shadier, and criminal some would say, subsector.

The name of the company that makes the loans is almost too cheese to fit into its own ironic meme:

Naidus, 48, chief executive officer of World Business Lenders, declined to be interviewed. Marcia Horowitz, a spokeswoman at public relations firm Rubenstein Associates Inc., said the company explains loan terms in plain English and takes steps to ensure that borrowers understand.

 

“World Business Lenders’ sales and marketing techniques, as well as the interest rates it charges and the default rates it experiences, are generally consistent with those throughout the industry,” Andy Occhino, general counsel for the company, wrote in a May 21 letter. “In serving the underserved small-business community along Main Street USA, World Business Lenders complies with all applicable laws and endeavors to ensure a positive experience for its customers.”

To be sure World Business Leaders (or WBL in short) are just that, and much more – you see they are pure humanitarians by nature:

Horowitz, the spokeswoman for World Business Lenders, said the company works with borrowers to avoid defaults.

 

“If the default cannot be cured, World Business Lenders enforces its rights under the loan documents, including the recovery of the pledged collateral,” she said.

The good news is that at least someone has collateral, unlike all those countries in Europe where the loan itself is the collateral repledged back with the central bank (several times).

Sadly, the only reason why WBL exists is simple: they supply a product that is in great demand…

“While I am not real thrilled about some of the prices being charged, in some cases businesses need to get something done in a hurry and it makes sense,” said William Dennis, who directs the research foundation at the National Federation of Independent Business. “It may not be the world’s best choice, but at least it’s your choice.”

 

Brokers are popping up around the country to originate loans on behalf of lenders including OnDeck and World Business Lenders. The companies pay fees to the brokers of about $6,000 for finding people willing to take a $50,000 loan, according to current and former brokers, most of whom asked not to be identified to preserve their job prospects.

… a demand that would not exist if the economy was truly, as some of the more humorous economists out there allege, recovering.

As for what the insiders think of their business model, it is the same as what the outsides would have to say:

“Our industry is absolutely crazy,” said Steven Delgado, who left World Business Lenders last year to become an independent loan broker. “There’s lots of people who’ve been banned from brokerage. There’s no license you need to file for. It’s pretty much unregulated.”

 

David Glass, 39, was still on probation for insider trading when he co-founded Yellowstone Capital LLC, a New York-based brokerage and lender that originated $200 million in loans last year, including for OnDeck.

 

He said he learned to sell in the 1990s at Sterling Foster & Co., a Long Island firm where he got his friend a job interview that inspired “Boiler Room,” a movie that portrayed a college dropout’s foray into high-pressure stock sales. Glass said he coached actor Vin Diesel on cold-calling for the film. “A natural,” Glass said.

How will all of this end?

World Business Lenders put up job listings seeking former brokers, and they came. A February orientation schedule provided by a former employee shows that training is run by Bryan Herman, who got his start under Stratton Oakmont Inc.’s Belfort, the con man portrayed in “The Wolf of Wall Street.” Herman later ran his own boiler room in the 1990s and avoided jail by informing on other brokers when he was charged with fraud in 1998, court records show. Another salesman was released from prison in 2010 after serving about a year for penny-stock fraud

 

Herman has paid for his crimes, according to his lawyer, Marty Kaplan.

 

“It’s really like saying Bill Clinton smoked dope in college,” Kaplan said. “Who cares?”

Indeed: who cares. Certainly not the Fed, for whose erudite members this too will be a perfectly normal occurrence and hardly a signal that something is horribly wrong with its centrally-planned, Frankenstein economy.

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

At least 13 Ukrainian soldiers (and reportedly at least 20 pro-Russian supporters) were killed today as WSJ reports fighting flared across breakaway regions in the east just days before a presidential election the rebels have vowed to block. Markets have forgotten that the US-Europe-Russia-China-Ukraine tensions continue and the major event risk this weekend but the last 24 hours have seen several attacks with the highest number of casualties since the conflict began 2 months ago. Separatists near Luhansk blew up a bridge over the Siverskiy Donets river near Novodruzhesk in several hours of fighting, Interfax reported, citing witnesses. The worst fighting appeared to take place near Volnovakha, on the road from the regional capital, Donetsk, to Mariupol, where there hadn’t been heavy separatist fighting before.. and the dismal episode was caught on tape.

 

 

As EuroNews reports,

At least eleven Ukrainian troops were killed and about 30 others were wounded on Thursday when pro-Russian insurgents attacked a military checkpoint, the deadliest raid in weeks of fighting in eastern Ukraine.

 

Journalists saw 11 bodies scattered around the checkpoint on the edge of the village of Blahodatne, about 30 kilometers (20 miles) south of the city of Donetsk.

 

Witnesses said that more than 30 Ukrainian troops were wounded when the insurgents attacked the checkpoint, and some of them were in grave condition.

 

The attack came three days before the country’s presidential vote.

 

Three charred Ukrainian armored infantry vehicles, their turrets blown away by powerful explosions, and several burned trucks stood at the site of the combat area. A military helicopter landed on the site, carrying officials who inspected the scene.

 

The Ukrainian Defence Ministry confirmed the attack, but wouldn’t comment on casualties. There was no report of casualties on the insurgent side.

 

The Volnovakha hospital was closed to the media, as Ukrainian soldiers rushed in and out, and guarded the entrances.

 

In the town of Horlivka, a rebel commander claimed responsibility for the raid and produced an array of weapons they said they had seized.

 

Scores have been killed in fighting between pro-Russian insurgents, who have seized government buildings and engaged in clashes with government troops in eastern Ukraine.

 

Thursday’s carnage cast a shadow over Ukraine’s presidential vote on Sunday, which insurgents in the east have pledged to derail.

The Responses… (via WSJ)

Ukraine

“Under heavy fire from mortars, grenade-launchers and heavy machine-guns, our boys died for Ukraine,” Mr. Turchynov told a group of religious leaders in the capital Kiev.

“Today a major operation was prepared on all fronts and it was repulsed,” Mr. Parubiy told a briefing in Kiev, according to the Interfax news agency.

Russia

In Moscow, officials said the instability in the region cast further doubt on the elections.

 

“We will follow how the preparations for these elections go and make our conclusions based on their results,” Foreign Ministry spokesman Alexander Lukashevich said. “We can’t express anything other than indignation about the atmosphere in which the preparations for these elections are being conducted.”

The US

The Pentagon also announced that a U.S. guided missile cruiser will enter the Black Sea on Friday for training with U.S. allies.

NATO

“It’s too early to know where they’re moving to or how many of them are moving,” Gen. Philip Breedlove, NATO’s top military commander said after a meeting in Brussels of military officers from NATO’s 28 members. “But what we do know is that the force that remains on the border is very large, and it’s very capable, and it remains in a very coercive posture.”

via Zero Hedge http://ift.tt/Reu762 Tyler Durden