Tag: finance

In his latest, politically-charged music video, Snoop Dogg shoots down a clown dressed as President Trump with a toy gun. The controversial scene is part of a video released Sunday by BADBADNOTGOOD for the remix of “Lavender.” The clip is supposed to represent a satirical look at current events, with Clown-in-Chief Klump even holding a press conference to announce the deportation of all dogs. Actor Michael Rapaport steps in as the father (also a clown), who smokes weed to alleviate his stress, and is ultimately shot dead with a glitter gun by clown cops.

The track, which focuses on police brutality, shows a world inhabited by clowns. “This is the final call,” Snoop says before pointing a gun to the head of a cigarette-puffing clown dressed as Trump. After pulling the trigger, a “bang” flag shoots out from the music star’s gun. In an interview with Billboard about the video released Sunday, the rapper said “the whole world is clownin’ around,” adding “if you really look at some of these motherf–kers, they are clowns.”

When asked what was going through his mind as he wrote the song, Snoop says he was “making a song that was not controversial but real — real to the voice of the people who don’t have a voice. It’s not like [Jesse] told me to make a record to express what I’m expressing on the song, but there were certain things that he said that brought that feeling, to make me want to express that when I was writing.”

Dogg, who endorsed Hillary Clinton in last year’s White House race, slammed Trump:

“The ban that this motherf–ker tried to put up; him winning the presidency; police being able to kill motherf–kers and get away with it; people being in jail for weed for 20, 30 years and motherf–kers that’s not black on the streets making money off of it — but if you got color or ethnicity connected to your name, you’ve been wrongfully accused or locked up for it, and then you watching people not of color position themselves to get millions and billions off of it. It’s a lot of clown sh-t going on that we could just sit and talk on the phone all day about, but it’s a few issues that we really wanted to lock into [for the video] like police, the president and just life in general.”

“When I be putting shit out, I don’t ever expect or look for a reaction,” Snoop Dogg said of the video. “I just put it out because I feel like it’s something that’s missing. Any time I drop something, I’m trying to fill in a void”

“I feel like it’s a lot of people making cool records, having fun, partying, but nobody’s dealing with the real issue with this f–king clown as president, and the shit that we dealing with out here, so I wanted to take time out to push pause on a party record and make one of these records for the time being.”

via http://ift.tt/2n1d1gr Tyler Durden

After being ‘triggered’ last week by White House tweets alleging that the Obama administration wiretapped Trump Tower, Mika Brzezinski of MSNBC’s ‘Morning Joe’, has apparently still not come to terms with Trump’s frequent Twitter rants.  After continuing to press White House staff on how she should interpret Trump’s tweets, Mika told viewers this morning that a person “high up in the administration” told her they should be viewed “as like side bodily functions.”

“I’ve heard from people close, high up in the administration that we should look at these tweets as like side bodily functions.  I swear to God those were the words that were used.  I’m not trying to be snarky.”

 

“These are the words the President is using to shape the way people think, whether or not he means to, isn’t he the President of the United States.  Shouldn’t this be taken at face value, seriously?  And bared out for its truth or lack thereof?”

 

This latest commentary from the disgruntled morning talk show host followed a report earlier this morning from “Death and Taxes” that Trump had unfollowed both Joe Scarborough and Mika Brzezinski on Twitter.

 

Unfortunately, this is what qualifies as ‘news’ these days…

* * *

Of course, all of this follows last week’s Mika meltdown in which she fought back tears during a segment in which she described Trump’s presidency as “fake and failed.”  Here’s what we wrote previously:

President Trump’s weekend tweet storm about alleged wiretapping of his Trump Tower, apparently did not sit well with MSNBC’s Mika Brzezinksi.  Fighting back tears during her opening remarks this morning, Mika lamented that she has “lost hope completely” in President Trump’s competency and declared that “This presidency is fake and failed.”

“I had hope and an open mind and I have lost hope completely and my mind is closed.  This presidency is fake and failed.”

 

Meanwhile, the obviously flustered Mika struggled to even speak in a coherent manner in the following clip in which she declares that “we’re at a low point in American history.”

“I also don’t understand why the former head of Breitbart appears to be handing the President some fake news.  And the President is just riffing on it wildly.  With no sense that he is President of the United States.  No respect for the office.  And calling the former President of the United States unbelievable names.”

 

“We are at a low point in American history and I don’t know how anybody can defend this president, even if it’s their job. Like you’ve got to have a job after this. You’ve got to look in the mirror after this. Sarah Huckabee or whoever is speaking out next. You have to look in the mirror and think about this country after this is over. You need to think of the end game here, because there isn’t one at the rate we are going.”

 

And here are more great one-liners from the emotionally distraught Mika who says that Steve Bannon and his “dangerous far-right agenda” is “going to threaten everything.”

“It looks like he looking to deflect from something much bigger, probably pertaining to Russia at this point, who knows.”

 

“But the people close to him, the people guiding him, are so poorly serving him.  They are pushing a strange far-right agenda that is going to threaten everything.”

 

Thank you for the glorious start to the week, Mika.

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

Authored by Nick Cunningham via OilPrice.com,

Spanish oil firm Repsol SA just announced the largest onshore oil discovery in the U.S. in three decades, a 1.2 billion barrel find on Alaska’s North Slope. Repsol has been actively exploring in Alaska since 2008 and finally hit a big one.

The find came after drilling two wells with its partner, Armstrong Oil & Gas. Repsol says that it if it moves forward and develops the project, first oil could come by 2021. The field could produce 120,000 bpd, a significant volume given the predicament the state of Alaska finds itself in.

Alaskan oil production has been declining for decades. After BP’s massive Prudhoe Bay oil field came online in the 1970s – the largest oil field in North America – Alaska’s oil production shot up. But the field saw its production peak in the late 1980s at 1.5 million barrels per day, after which it went into long-term decline.

The Trans-Alaskan Pipeline System (TAPS) has made oil production on Alaska’s northern coast possible. With a price tag of $8 billion, the pipeline was the largest privately-funded construction project in the 1970s. The 800-mile pipeline carries oil from Alaska’s northern coast to a terminus on its southern coast in Valdez for export. The pipeline traverses mountain ranges, and much of it has to run at an elevated position above ground because of melting permafrost.

The pipeline is absolutely critical to Alaska’s oil industry – without it, producing on the North Slope never would have gotten off the ground. But falling output levels on the North Slope from aging fields like Prudhoe Bay put the pipeline’s existence into jeopardy. The pipeline has a throughput capacity of 2 million barrels per day, but actual oil flows have declined to roughly 0.5 mb/d, and are falling by about 5 percent per year.

That isn’t just a problem from a revenue standpoint, but also from an operational one. Declining throughput means slower moving oil, which means lower temperatures for that oil. Slower and colder oil leads to water separating from the oil and freezing. That can damage the pipeline. Also, oil contains some small amounts of wax, and when the crude flow slows and gets cold, wax separates and sticks to the pipeline. Removing that wax requires more cleaning and maintenance, raising costs and operational problems.

If the oil flow drops too low, the pipeline operator might have to switch from continuous flows to more intermittent throughput. Ultimately, the pipeline’s very existence is in doubt if the state’s oil production continues to fall.

That puts greater weight on Repsol’s discovery. The Pikka area, as it is known, could add 120,000 bpd to North Slope production and throw a life line to the Trans-Alaskan Pipeline. “We must all pull together to fill an oil pipeline that’s three-quarters empty—and today’s announcement shows measurable results of that hard work,” Alaska’s Governor Bill Walker said on Thursday.

“We think that Pikka is going to be critical to bring production not only in balance, but to raise it tremendously,” Andy Mack, Alaska’s Commissioner for the Department of Natural Resources, said back in November. Repsol’s partner Armstrong Oil & Gas said that there is probably even more oil to discover in the area.

Separately, a small exploration company known as Caelus Energy made another discovery last October, a “world class” find that could hold as much as 1.8 to 2.4 billion barrels. That amount of oil could raise Alaska’s reserve base by 80 percent. However, Caelus Energy’s discovery would require much heavier investment in infrastructure. Caelus’ play is tricky: it would have to drill in the winter through frozen manmade islands and then piped through a yet-to-be-built $800 million pipeline to connect to existing infrastructure at Prudhoe Bay. The discovery’s prospects are uncertain at this point. Related: The Bakken Gets A Second Wind

Yet another route for the resurgence in Alaska’s oil industry is from ConocoPhillips, which is hoping to drill in the National Petroleum Reserve-Alaska. However, conflict with Inupiaq communities caused Conoco to recently put its drilling plans on hold, a move that has angered state officials. The fortunes of this oil prospect are also unknown.

And, of course, drilling offshore in the Chukchi Sea was essentially put on ice in 2015 when Royal Dutch Shell pulled out after disappointing exploration results.

That arguably makes Repsol’s discovery the most viable of the bunch. The state of Alaska is desperate to see somebody move forward and produce more oil in order to save the Trans-Alaskan Pipeline – and the state’s deteriorating fiscal situation.

via http://ift.tt/2n14zxy Tyler Durden

One week ago we reported that "Mega-Bears Smell Blood As Mall REITs Tumble" in which we wrote that "just like 10 years ago, when the "big short" was putting on the RMBX trade, and to a smaller extent, its cousin the CMBX, so now too some are starting to short CMBS through the CMBX. They are betting against securities backed by malls in weaker locations where stores could close in quick succession, triggering debt defaults."

This morning Bloomberg has followed up our post with a not-so-subtly-titled "Wall Street Has Found Its Next Big Short" in which it writes that "Wall Street speculators are zeroing in on the next U.S. credit crisis: the mall…. It’s no secret many mall complexes have been struggling for years as Americans do more of their shopping online. But now, they’re catching the eye of hedge-fund types who think some may soon buckle under their debts, much the way many homeowners did nearly a decade ago."

The trade, as we discussed before, is not so much shorting the equities where a persistent threat of a short squeeze has burned the bears on more than one occasion, but going long default risk via CMBX or otherwise shorting the CMBS complex.

Like the run-up to the housing debacle, a small but growing group of firms are positioning to profit from a collapse that could spur a wave of defaults. Their target: securities backed not by subprime mortgages, but by loans taken out by beleaguered mall and shopping center operators. With bad news piling up for anchor chains like Macy’s and J.C. Penney, bearish bets against commercial mortgage-backed securities are growing.

To be sure, as we first noted last week and as Bloomberg confirms, the activity surrounding CMBS shorting has soared:

In recent weeks, firms such as Alder Hill Management — an outfit started by protégés of hedge-fund billionaire David Tepper — have ramped up wagers against the bonds, which have held up far better than the shares of beaten-down retailers. By one measure, short positions on two of the riskiest slices of CMBS surged to $5.3 billion last month — a 50 percent jump from a year ago.

 

The trade itself is similar to those that Michael Burry and Steve Eisman made against the housing market before the financial crisis, made famous by the book and movie “The Big Short.” Often called credit protection, buyers of the contracts are paid for CMBS losses that occur when malls and shopping centers fall behind on their loans. In return, they pay monthly premiums to the seller (usually a bank) as long as they hold the position.

 

This year, traders bought a net $985 million contracts that target the two riskiest types of CMBS, according to the Depository Trust & Clearing Corp. That’s more than five times the purchases in the prior three months.

Further, based on fundamentals, the trade indeed appears justified: "Sold in 2012, the mortgage bonds have a higher concentration of loans to regional malls and shopping centers than similar securities issued since the financial crisis. And because of the way CMBS are structured, the BBB- and BB rated notes are the first to suffer losses when underlying loans go belly up."

“These malls are dying, and we see very limited prospect of a turnaround in performance,” according to a January report from Alder Hill, which began shorting the securities. “We expect 2017 to be a tipping point.”

 

Cracks have started to appear. Prices on the BBB- pool of CMBS have slumped from roughly 96 cents on the dollar in late January to 87.08 cents last week, index data compiled by Markit show.

For now, there is little hope of a recovery on the horizon as more and more retailers continue to fail, leaving even more vacant, and thus non-rent collecting, mall space.

Just this morning, Gordmans Stores, the century-old discount department store chain, filed for bankruptcy with plans to liquidate its inventory and assets. According to Bloomberg, the company, which posted losses in five of the past six quarters, listed total debt of $131 million in Chapter 11 papers filed Monday in Nebraska federal court. Gordmans said in a statement that it has an agreement with Tiger Capital Group and Great American Group “for the sale in liquidation of the inventory and other assets of Gordmans’ retail stores and distribution centers,” subject to court approval or a better offer.

Omaha, Nebraska-based Gordmans, which operates over 100 stores in 22 states and employs about 5,100 people, is the latest victim in a retail industry suffering from sluggish mall traffic and a move by shoppers to the internet. 

 

The shift has been especially rough on department stores, including regional chains like Gordmans that once enjoyed strong customer loyalty, but even national concerns like Sears Holdings Corp. and Macy’s Inc. have had to close hundreds of locations to cope with the slump

Gordmans, founded in 1915 by Russian immigrant Sam Richman, was acquired by PE firm Sun Capital in 2008 which took it public two years later. Funds managed by Sun Capital hold about 49.6% of Gordmans’ equity, according to a court filing. Growth slowed in 2014, and losses began to mount. Same-store sales fell more than 9 percent in the most recently reported quarter. The company announced job cuts in January, citing the “sluggish retail environment.”

“Like many other apparel and retail companies, the debtors have fallen victim in recent months to adverse macro-economic trends, especially a general shift away from brick-and-mortar to online retail channels, a shift in consumer demographics, and expensive leases,” Chief Financial Officer James B. Brown said in court papers.

While Gordman's decline was long in the making, its financial conditions deteriorated rapidly in March, when vendors began to refuse to ship new inventory, Brown said. After entertaining various offers, the company concluded that its best recourse was the liquidation deal with Tiger and Great American.

To be sure, Gordman's is hardly the last retailer to shutter and while many of its comps have yet to default, the pain is tangible: retailers had one of the worst Christmas-shopping seasons in memory, J.C. Penney said in February it plans to shutter up to 140 stores. That echoed Macy’s decision last year to close some 100 outlets and Sears’s move to shut about 150 locations. Delinquencies on retail loans have risen to 6.5 percent, a percentage point higher than CMBS as a whole, according to Wells Fargo.

* * *

So does that mean that shorting malls is now accepted as the next "big short"? Some are not convinced.

Take for example Credit Suisse who said last month non-CMBS specialists – perhaps an apt name is "CMBS tourists" – are helping drive the recent run-up in demand for credit protection. That raises concern too many people are chasing the same trade. Of course, it may simply be that Credit Suisse analysts are being paid in CMBS

“The short feels crowded to us,” said Matthew Weinstein, principal at Axonic Capital, a hedge fund that specializes in structured products. “If these defaults start happening soon, the short will work, but if the defaults do not occur quickly, the first guy out could drive the market meaningfully higher.”

Others, such as TCW, say CMBS sold in 2012 and 2013 might fall as low as 20 cents on the dollar, however the firm isn’t betting against them because it’s hard to know when the wagers might pay off. "

Plus, the contracts aren’t cheap. It costs about 3 percent a year to short BBB- rated securities and 5 percent to bet against BB notes, plus an upfront fee to put on the trade.

 

Consequently, it’s “more speculative than it is the next big short,” according to Sorin Capital Management’s Tom Digan.

Whatever the case, here’s what the endgame might look like. About two hours north of Manhattan, in Kingston, New York, stands the Hudson Valley Mall. It used to house J.C. Penney and Macy’s. But both then left, gutting the complex. In January, the mall was sold for less than 20 percent of the original $50 million loan. Mortgage-bond holders exposed to the loan were partly wiped out.

“When a mall starts to falter, the end result is typically binary in nature,” said Matt Tortorello, a senior analyst at Kroll Bond Rating Agency. “It’s either the mall is going to survive or it’s going take a substantial loss."

* * *

Ultimately, whether or not this is indeed that next big short as we first hinted one week ago, or the skeptics will be proven right, will depend on one thing: access to capital. Ironically, it was that variable that ended up crushing OPEC's plans to wipe out shale, which despite a dramatic downturn in oil prices managed to obtain enough funding and capital from generous, yield-starved creditors, to survive the past year while technological advances caught up and pushe the breakeven point to $50, or in many cases lower.

For now, banks and hedge funds have proven far less willing to be "last resort" sources of distressed funding to retailers, and malls, (perhaps with the notable exception of Sears where Eddie Lampert has expressed a desire to go down with the sinking ship) both of which continue to deteriorate as the US consumer is either tapped out, or simply resorts to online retailers like Amazon. Should that not change any time soon, and should the cash flow profile of retailers continue to deteriorate, it is virtually assured that those who are now rushing into the next "big short" will be rewarded.

Finally, as we noted last week, here is a brief note from Horseman Capital's Russell Clark laying out the latest dangers inherent in the mall space:

MALL RATS

Shopping mall REITS have been a fantastic investment over the years. Not only have they provided investors with large capital gains, they have also typically offered above market dividend yields. My interpretation of the REIT model is that the operator collects rents from a diverse number of retailers. This is then passed on to the end investors after costs and financing. The REIT manager reduces risk by diversifying the retailers paying rent, and by also spreading the risk geographically. If the REIT manager can acquire more real estate assets at a yield higher than what it needs to pay out as dividend yield, then the REIT can issue more shares and grow indefinitely. Mall REITs have generally done well, except during the financial crisis.

However, it seems to me that North America could well have too many shopping malls. On a per capita basis, the US has twice the space of Australia and 5 times that in the UK.

One source of REITs revenue growth comes from acquiring more malls. Intriguingly we have started to see volumes of real estate transactions for shopping malls fall. This means that the number of transactions to buy or sell properties is beginning to decline. Last time this happened, rents began to fall a year later. Perhaps it’s a sign that buyers believe rents have some downside risk?

Many people in the market are aware of the problems that the large department stores in the US are currently facing, and their resultant plans to retrench. This affects two of the largest shopping mall REITs that have the department stores as tenants. The reality is that the shopping mall REITs charge extremely low rents to the department stores. The large shopping malls use the department stores to lure traffic, and then make their money from higher rents charged to speciality retailers. Often the per square foot rent of the specialty retailer can be 30 times or higher that paid by the anchor tenant. Looking at the top 2 shopping mall operators, they disclose their top rent payers. Recent share prices performance of 8 shared tenants has been poor, and management commentary has seeming implied that they may also be looking to reduce store count.

It should also be pointed out that many tenants have a clause in their lease to reduce rents should an anchor close a store. Thus, even though the loss of rent due to an anchor closing is minimal, the knock-on effect of reduced rents from the remaining tenants is a serious concern for the REITs.

One of the other problems that shopping mall REITs face is that the size that the large department stores take up is more than 400 million square feet. The largest and most successfully specialty retailer is TJ Maxx which currently has 100 million square feet. It is difficult to see any single retailer quickly being able to fill the space made vacant by department store closures.

Back in the lead up to the financial crisis we found that the share prices of REITs and their tenants were very closely related. Recently we have seen tenants share price weaken again, but REITS remain relatively strong.

Investors are advised to exercise caution with the shopping mall REITs

via http://ift.tt/2n143Qc Tyler Durden

The Fed meets this week on Tuesday and Wednesday.

The market believes that there is an 86% chance the Fed will be hiking rates during this meeting. The Fed has been broadcasting this for a month straight. It is possibly THE most expected rate hike in years. The consensus is that we will see a 0.25% rate hike bringing the Federal Funds Target rate to 0.75%-1.00%.

BORING.

No one makes money by trading the most expected thing. With that in mind, what the Fed does or doesn’t do is largely irrelevant as far as I’m concerned.

The far more important development for the markets comes from the ECB,which revealed that it discussed a “rate hike” before the end of QE during its meeting last week.

Bear in mind, this is the ECB… which has cut rates into NEGATIVE four times; the same Central Bank that is currently engaged in a €60 billion per month QE program.

And it is talking about RAISING RATES.

THIS is something few in the markets are anticipating. And it has set the stage for a RAGING Euro rally (and $USD Collapse).

The Euro comprises 56% of the basket of currencies against which the $USD trades. So if the Euro begins to rally based on the ECB tightening, the $USD will drop hard. You can see the two currencies “mirroring” one another in the chart below. You can also see the Euro bottoming out and preparing to rally hard.

THIS is the big issue for the markets this week: not a completely expected Fed rate hike, but a completely UNEXPECTED potential rate hike from the ECB.

The market is not ready for this. And it's going to cause an "event" for many asset classes.

According to fund managers, being long the $USD is the single most popular trade in the world right now.

So what do you think will happen when these investors are caught on the wrong side of this trade as the Euro erupts and the $USD plunges… particularly since stocks have been tracking the $USD closely since early February?

These charts are warning that the market is susceptible to a sharp correction at best and possibly even a meltdown.

On that note, we are already preparing our clients for this with a 21-page investment report titled the Stock Market Crash Survival Guide.

In it, we outline the coming collapse will unfold…which investments will perform best… and how to take out “crash” insurance trades that will pay out huge returns during a market collapse.

We are giving away just 99 copies of this report for FREE to the public.

To pick up yours, swing by:

http://ift.tt/1HW1LSz

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

 

 

 

 

 

 

 

via http://ift.tt/2mj8hOK Phoenix Capital Research

From the Slope of Hope: I’m a chartist, so I don’t normally make a habit of shorting stocks that have just a few days of historical data. I made an exception for SNAP, however, since everything – – everything!! – – about this company screams “ridiculous overvalued bubble”, including, but not limited to, Evan Spiegel’s smug little cleft-chinned face on every magazine cover including, importantly, Time:

I’m a pretty big believer in the “Cover Curse”, but that normally applies to such business magazines as Forbes, where public stocks tend to be the dominant topic of conversation:

(I’ll note, regarding the above cover, that the stock immediately reversed the moment this hit the newsstands and this “sexiest stock” fell from $70.96 to $25.98, making it just about as “sexy” as the egg-shaped bald dude shown therein).

But if Forbes is a bad cover curse, Time is far, far worse.

Snap, weirdly, holds itself out as a “camera company”, which is sort of weird, since they’re actually a company that gives away an app for snapping disappearing dick pics. But it also occurred to me that there was another “camera” company that was red-hot and crazy-popular, just like Evan’s little outfit. Allow me to offer up this bit of financial history for your perusal:

My conclusion from all of this? I think SNAP’s performance so far is a good indication of what’s to come. Next stop: the teens.

via http://ift.tt/2mSde4S Tim Knight from Slope of Hope

Another M&A deal, another sinister sequence of options activity leading up to the ‘surprise‘ announcement…

The number of bullish Mobileye NV options rose to an all-time high last week, ahead of this morning’s news that Intel would buy the Israeli maker of cameras and chips for driver-assistance features. As Bloomberg points out, call open interest surged 84% since the February expiration to almost 160,000 contracts, 33% more than outstanding puts.

 

This extremely unusual actvitiy did not go unnoticed as Joe Kunkle (@OptionsHawk) pointed out last week that there was a sudden burst of call options activity and a steeply inverted implied volatility skew…

Of course, The SEC seems to have failed to notice it.

Somebody is going to do very well…

Lucky guess we presume.

Notably Intel put volume also spiked on Friday (as the price of the stock rose).

via http://ift.tt/2mj4qBW Tyler Durden

Authored by Simon Black via SovereignMan.com,

In the year 1517, one of the most important innovations in financial history was invented in Amsterdam: the government bond.

It was a pretty revolutionary concept.

Governments had been borrowing money for thousands of years… quite often at the point of a sword.

Italian city-states like Venice and Florence had been famously demanding “forced loans” from their wealthy citizens for centuries.

But the Dutch figured out how to turn government loans into an “investment”.

It caught on slowly. But eventually government bonds became an extremely popular asset class.

Secondary markets developed where people who owned bonds could sell them to other investors.

Even simple coffee shops turned into financial exchanges where investors and traders would buy and sell bonds.

In time, the government realized that its creditworthiness was paramount, and the Dutch developed a reputation as being a rock-solid bet.

This practice caught on across the world. International markets developed.

English investors bought French bonds. French investors bought Dutch bonds. Dutch investors bought American bonds.

(By 1803, Dutch investors owned a full 25% of US federal debt. By comparison, the Chinese own about 5.5% of US debt today.)

Throughout it all, debt levels kept rising.

The Dutch government used government bonds to live beyond its means, borrowing money to fund everything imaginable– wars, infrastructure, and ballooning deficits.

But people kept buying the bonds, convinced that the Dutch government will never default.

Everyone was brainwashed; the mere suggestion that the Dutch government would default was tantamount to blasphemy.

It didn’t matter that the debt level was so high that by the early 1800s the Dutch government was spending 68% of tax revenue just to service the debt.

Well, in 1814 the impossible happened: the Dutch government defaulted.

And the effects were devastating.

In their excellent book The First Modern Economy, financial historians Jan De Vries and Ad Van der Woude estimate that the Dutch government default wiped out between 1/3 and 1/2 of the country’s wealth.

That, of course, is just one example.

History is full of events that people thought were impossible. And yet they happened.

Looking back, they always seem so obvious.

Duh. The Dutch were spending 68% of their tax revenue just to service the debt. Of course they were going to default.

But at the time, there was always some prevailing social influence… some wisdom from the “experts” that made otherwise rational people believe in ridiculous fantasies.

Today is no different; we have our own experts who peddle ridiculous (and dangerous) fantasies.

Case in point: this week, yet another debt ceiling debacle will unfold in the Land of the Free.

You may recall the major debt ceiling crisis in 2011; the US federal government almost shut down when the debt ceiling was nearly breached.

Then it happened again in 2013, at which point the government actually DID shut down.

Then it happened again in 2015, when Congress and President Obama agreed to temporarily suspend the debt ceiling, which at the time was $18.1 trillion.

That suspension ends this week, at which point a debt ceiling of $20.1 trillion will kick in.

There’s just one problem: the US government is already about to breach that new debt limit.

The national debt in the Land of the Free now stands at just a hair under $20 trillion.

In fact the government has been extremely careful to keep the debt below $20 trillion in anticipation of another debt ceiling fiasco.

One way they’ve done that is by burning through cash.

At the start of this calendar year in January, the federal government’s cash balance was nearly $400 billion.

On the day of Donald Trump’s inauguration, the government’s cash balance was $384 billion.

Today the US government’s cash balance is just $34.0 billion.

(Google has twice as much money, with cash reserves exceeding $75 billion.)

This isn’t about Trump. Or even Obama. Or any other individual.

It’s about the inevitability that goes hand in hand with decades of bad choices that have taken place within the institution of government itself.

Public spending is now so indulgent that the government’s net loss exceeded $1 trillion in fiscal year 2016, according to the Treasury Department’s own numbers.

That’s extraordinary, especially considering that there was no major war, recession, financial crisis, or even substantial infrastructure project.

Basically, business as usual means that the government will lose $1 trillion annually.

Moreover, the national debt increased by 8.2% in fiscal year 2016 ($1.4 trillion), while the US economy expanded by just 1.6%, according to the US Department of Commerce.

Now they have plans to borrow even more money to fund multi-trillion dollar infrastructure projects.

Then there’s the multi-trillion dollar bailouts of the various Social Security and Medicare trust funds.

And none of this takes into consideration the possibility of a recession, trade war, shooting war, or any other contingency.

This isn’t a political problem. It’s an arithmetic problem. And the math just doesn’t add up.

The only question is whether the government outright defaults on its creditors, defaults on promises to its citizens, or defaults on the solemn obligation to maintain a stable currency.

But of course, just like two centuries ago with the Dutch, the mere suggestion that the US government may default is tantamount to blasphemy.

Our modern “experts” tell us that the US government will always pay and that a debt default is impossible.

Well, we’re living in a world where the “impossible” keeps happening.

So it’s hard to imagine anyone will be worse off seeking a modicum of sanity… and safety.

Do you have a Plan B?

via http://ift.tt/2miZv3l Tyler Durden

The tension over the disputed territory in the South China Sea is about to escalate to another level: according to a Reuters report, Japan is preparing to to dispatch its largest warship on a three-month tour through the South China Sea beginning in May, in “its biggest show of naval force in the region since World War Two.”

Japan Maritime Self Defense Force’s helicopter carrier Izumo

The 249 meter-long (816.93 ft) Izumo is as large as Japan’s World War Two-era carriers and can operate up to nine helicopters. It resembles the amphibious assault carriers used by U.S. Marines, but lacks their well deck for launching landing craft and other vessels.

While China claims almost all the disputed waters despite the regular complaints of other nations in the region, and its growing military presence has fueled concern in Japan and the West, with the United States holding regular air and naval patrols to ensure freedom of navigation, so far Japan’s territorial claims have involved the Senkaku island chain in the East China Sea; that however appears to be changing as Japan seeks to stake a military presence in the contested region.

The Izumo helicopter carrier, commissioned only two years ago, will make stops in Singapore, Indonesia, the Philippines and Sri Lanka before joining the Malabar joint naval exercise with Indian and U.S. naval vessels in the Indian Ocean in July, before returning to Japan in August.

Why create another point of Chinese antagonism over the region? “The aim is to test the capability of the Izumo by sending it out on an extended mission,” said one of the sources who have knowledge of the plan. “It will train with the U.S. Navy in the South China Sea,” he added, asking not to be identified because he is not authorized to talk to the media. A spokesman for Japan’s Maritime Self Defense Force declined to comment.

Taiwan, Malaysia, Vietnam, the Philippines and Brunei also claim parts of the sea which has rich fishing grounds, oil and gas deposits and through which around $5 trillion of global sea-borne trade passes each year. Japan does not have any claim to the waters, but has a separate maritime dispute with China in the East China Sea.

 

Japan wants to invite Philippine President Rodrigo Duterte, who has pushed ties with China in recent months as he has criticized the old alliance with the United States, to visit the Izumo when it visits Subic Bay, about 100 km (62 miles) west of Manila, another of the sources said. Asked during a news conference about his view on the warship visit, Duterte said, without elaborating, “I have invited all of them.”

He added: “It is international passage, the South China Sea is not our territory, but it is part of our entitlement.” On whether he would visit the warship at Subic Bay, Duterte said: “If I have time.”

Japan’s unexpected flag-flying operation comes as the United States is conflicted between taking a tougher line with China and making concessions ahead of Xi’s visit to Trump next month. Washington has criticized China’s construction of man-made islands and a build-up of military facilities that it worries could be used to restrict free movement. Beijing responded in January said it had “irrefutable” sovereignty over the disputed islands after the White House vowed to defend “international territories”.

As Reuters notes, Japan in recent years, particularly under Prime Minister Shinzo Abe, has been stretching the limits of its post-war, pacifist constitution and has been making aggressive pushes for a return to militarism. It has designated the Izumo as a destroyer because the constitution forbids the acquisition of offensive weapons. The vessel, nonetheless, allows Japan to project military power well beyond its territory. Based in Yokosuka, near to Tokyo, which is also home to the U.S. Seventh Fleet’s carrier, the Ronald Reagan, the Izumo’s primary mission is anti-submarine warfare.

via http://ift.tt/2mDo7XK Tyler Durden

The Federal Reserve Bank of Atlanta has selected Raphael Bostic as its new president, replacing Dennis Lockhart after his retirement last month. 

In a statement by Thomas A. Fanning, chairman of the board of the Atlanta Fed, he said Raphael W. Bostic will become the 15th president and chief executive officer of the Federal Reserve Bank of Atlanta effective June 5, 2017. Bostic, 50, succeeds Dennis Lockhart, who retired from the Atlanta Fed on Feb. 28, 2017. The appointment was jointly approved by eligible directors of the Atlanta Fed’s board of directors, all nonbankers by law, and the Board of Governors of the Federal Reserve System in Washington, D.C.

Bostic was a senior economist on the Fed board in Washington from 1995 to 2001, working in the monetary and financial studies section. He is currently a University of Southern California professor with expertise in urban development, and was assistant secretary at HUD for policy development and research during the Obama administration.

Oddly, Bostic has no prior experience at Goldman Sachs, as the bank now appears more focused on the executive branch.

Bostic has a doctorate in economics from Stanford University and a BA from Harvard University.

More details from the press release:

Atlanta Fed Names Bostic New President and Chief Executive Officer

Bostic is currently the Judith and John Bedrosian Chair in Governance and the Public Enterprise at the Sol Price School of Public Policy at the University of Southern California (USC), a position he has held since 2012.

“We are very pleased that Raphael will join the Atlanta Fed as its president and chief executive officer,” said Fanning, who is also chairman, president and chief executive officer of Southern Company. “He is a seasoned and versatile leader, bringing with him a wealth of experience in public policy and academia. Raphael also has significant experience leading complex organizations and managing interdisciplinary teams. He is a perfect bridge between people and policy.”

From 2009 to 2012, Bostic served as assistant secretary for Policy Development and Research at the U.S. Department of Housing and Urban Development (HUD). In that Senate-confirmed position, Bostic was a principal adviser to the secretary on policy and research, with the goal of helping the secretary and other principal staff make informed decisions on HUD policies and programs, as well as on budget and legislative proposals.

Bostic arrived at USC in 2001. There, he served as a professor in the School of Policy, Planning and Development. His work spans many fields, including home ownership, housing finance, neighborhood change and the role of institutions in shaping policy effectiveness. He was director of USC’s master of real estate development degree program and was the founding director of the Casden Real Estate Economics Forecast.  He served the Lusk Center for Real Estate as the interim associate director from 2007 to 2009 and as the interim director from 2015 to 2016.

Bostic worked at the Federal Reserve Board of Governors from 1995 to 2001, serving as an economist and then a senior economist in the monetary and financial studies section, where his work on the Community Reinvestment Act earned him a special achievement award. While working at the Federal Reserve, he served as special assistant to HUD’s assistant secretary of policy development and research in 1999, and also was a professional lecturer at American University in 1998.

Commenting on his selection, Bostic said, “The Reserve Banks are vital contributors to our nation’s economic and financial success. I’m excited about the opportunity to work with the Bank’s well-respected staff in advancing the excellent reputation this organization has built over many years. In my role as president of the Atlanta Reserve Bank, I also look forward to confronting the challenges the Federal Reserve faces in today’s increasingly global and rapidly changing economy.”

Bostic was born in 1966 and grew up in Delran, New Jersey. A high school valedictorian, he graduated from Harvard University in 1987 with a combined major in economics and psychology—disciplines he believes are intimately interrelated. After a brief stint in the private sector, Bostic earned his doctorate in economics from Stanford University in 1995.

Bostic serves as a board member of Freddie Mac, the Lincoln Institute of Land Policy and Abode Communities. He is a fellow of the National Association of Public Administration, vice president of the Association of Public Policy and Management, a member of the board of trustees of Enterprise Community Partners, and a research advisory board member of the Reinvestment Fund.

As president of the Atlanta Fed, Bostic will lead one of the 12 regional Reserve Banks that, with the Board of Governors, make up the Federal Reserve System, the nation’s central bank. The Atlanta Fed is responsible for the Sixth Federal Reserve District, which encompasses Alabama, Florida and Georgia and portions of Louisiana, Mississippi and Tennessee. As its key functions, the Atlanta Fed participates in setting national monetary policy, supervises numerous banking organizations and provides a variety of payment services to financial institutions and the U.S. government. Bostic will have overall responsibility for these functions and will represent the Sixth Federal Reserve District at meetings of the Federal Open Market Committee, the policymaking body within the Federal Reserve that sets monetary policy for the nation.

via http://ift.tt/2mj2w3n Tyler Durden