Tag: finance

Hardly surprising given February’s biggest miss in 10 months that March’s data would rebound and so it did from an initial -0.3% in Feb, March rose +0.6% (well above +0.2% expectations)  – 2.7% above last year’s levels. This 0.6% rise is above even the most exuberant “economists” estimates. Utilities fell 0.2% (as weather warmed up) but what was most notable is the 7.4% surge in motor vehicles (the biggest in at least 6 months) – which are already sitting at record levels of absolute inventories and the highest inventory-to-sales since the financial crisis.

 

IP swings back to recover Feb’s losses…

 

The indexes for consumer durables and consumer non-energy nondurables moved up 2.1 percent and 0.9 percent, respectively, in February, while the index for consumer energy products decreased 0.8 percent.

Within consumer durables, the production of automotive products jumped 4.6 percent to reverse most of a similarly sized decrease in January, and the output of home electronics increased 0.7 percent. These gains in February were partly offset by a decrease of 1.7 percent in the production of appliances, furniture, and carpeting as well as a decline of 0.1 percent in the output of miscellaneous goods.

Within consumer non-energy nondurables, the indexes for foods and tobacco, for chemical products, and for paper products each rose about 1 percent, while the output of clothing moved down 0.7 percent.

 

Of course, this IP number is largely irrelevant because in 11 days the Fed will revise the entire data series:

The Federal Reserve Board plans to issue its annual revision to the index of industrial production (IP) and the related measures of capacity utilization at noon on March 28, 2014. The revised indexes for IP will incorporate data from the U.S. Geological Survey regarding metallic and nonmetallic minerals (except fuels) for 2012. The update will also include revisions to the monthly indicators (either product data or input data) and to seasonal factors for each industry. In addition, the estimation methods for some series may be changed. Any modifications to the methods for estimating the output of an industry will affect the index from 1972 to the present.

via Zero Hedge http://ift.tt/1gu5veS Tyler Durden

It has not been a good month for Boeing: first one of its 777s disappears in the now infamous Malaysian Airlines MH370 heist, which is increasingly looking as a hijacking commited by the pilots, and yesterday, a Delta Airlines Boeing 757, Flight 2412 from Orlandon to Atlanta, saw an entire panel tear off from its wing forcing the plane to make an emergency landing. At least this time the plane was tracked for the duration of the flight, perhaps because there was nothing that would be considered extraordinary in its cargo manifest, speaking of which, perhaps it is time for Malaysia Airlines to reveal just what was held in flight MH370’s cargo hold.

From NBC:

A panel on one of the wings on a Delta aircraft fell off during a flight from Orlando, Fla., to Atlanta, Ga., on Sunday, according to the airline.

 

The detached panel did not impact the aircraft’s ability to fly or land, Delta spokesman Anthony Black said of Flight 2412.

 

“The crew, knowing that, followed procedure by declaring an emergency to air traffic control as they were landing, which gave them priority clearance to land and alerted ground crews,” Black said.

 

The aircraft landed uneventfully at 7:30 p.m. Sunday and taxied to the gate. None of the 179 passengers and six crew members aboard the flight was injured. The airline is inspecting the plane to determine why the panel came off.

And the clip:

via Zero Hedge http://ift.tt/1fReJ9z Tyler Durden

Since July of last year, the Empire Fed manufacturing index has only beaten expectations once as March data once again fell below consensus (5.61 vs 6.5 est.) – hardly confirming the weakness is weather-driven. The underlying sub-indices were ugly with the most worrisome being the outlook – despite some optimism for capex, the general business conditions 6-months ahead fell by the most since Oct 2011 to its lowest since July 2013 – which once again suggest this weakness is anything but weather-driven. The number of employees fell as inventories rose but the margin-compressing divide between prices paid and prices received is concerning.

 

 

And hope is fading:

 

 

Preices Received plunged back in line with Prices Received – suggesting hope for margin expansion is long gone…

 

Charts: Bloomberg

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

A few days ago, copper prices and the Chinese stock market were roiled by speculation that another – the second in a row – Chinese bond default may be imminent, in the shape of Baoding Tianwei Baobian Electric (TBE) a maker of electrical equipment and solar panels, whose bonds and stock were suspended from trading a week ago after reporting massive losses. A few days later, TBE “promised” not to default when its next interest payment is due in July (although how the insolvent company can see that far into the future is just a little confusing). And yet the market shrugged and contrary to its recent idiotic euphoria to surge on even the tiniest of non-horrible news, barely saw a rise. Today we may know the reason: overnight Bloomberg reports that second Chinese corporate bond default may be imminent after the collapse and arrest of the largest shareholder of closely held Chinese real estate developer Zhejiang Xingrun Real Estate Co, which just happens to be saddled with 3.5 billion yuan ($566.6 million) of debt.

Debt which absent a bailout, which at this point is very improbable, will not be repaid.

From Bloomberg:

Zhejiang Xingrun Real Estate Co. doesn’t have enough cash to repay creditors that include more than 15 banks, with China Construction Bank Corp. (939) holding more than 1 billion yuan of its debt, according to the officials, who asked not to be named because they weren’t authorized to discuss the matter. The company’s majority shareholder and his son, its legal representative, have been detained and face charges of illegal fundraising, the officials said.

What is curious about this particular potential default is that it touches not only on the massive leverage in the Chinese system, but on the one real bubble in China (since nobody there seems to care about the Shanghai Composite): housing.

The collapse of the company, in the eastern town of Fenghua, adds to concern of strains in China’s real estate sector. The property market in smaller Chinese cities faces “true risks of a sharp correction” due to oversupply and investors may have underestimated the risk, Nomura Holdings Inc. economists said in a March 14 report.

Two calls to the chairman’s office and financial department at Zhejiang Xingrun weren’t answered today. A woman who answered the phone at the Fenghua government’s news office who declined to give her name confirmed the company cannot pay its debt. A Beijing-based press officer at CCB said the bank asked for more information from its local branch about the report and hasn’t heard back.

So going back to the collapse, Bloomberg adds that the failure of the company was reported earlier today by the Chinese-language National Business Daily, which cited an unidentified government official for the news. The report blamed the failure on mismanagement and high costs of private lending, according to the newspaper.

“We think the default of the developer will alert the banks on escalating risk from developers amid the liquidity tightening,” said Johnson Hu, a Hong Kong-based property analyst at CIMB-GK Securities Research. “We maintain our view that banks may revisit loan policy on property and may take stricter stance on property development loans, particularly for small developers.”

It is also about to get worse: “Property shares slid to a 16-month low in February after Industrial Bank Co. suspended mezzanine financing for developers, adding to concerns that smaller developers may default on their borrowings amid the government’s property curbs and an economic slowdown.”

And just like that, quite suddenly, the tide is flowing out and all those swimming naked will be revealed. What happens next? Precisely what we said would happen a week ago, when we explained the imminent plight of Chinese corporate where things such as this are about to be revealed…

CITIC Trust tried to auction the collateral but failed to do so because the developer has sold the collateral and also mortgaged it to a few other lenders.

… as having taken place at a truly massive scale.

via Zero Hedge http://ift.tt/1cQ83J7 Tyler Durden

• Putin Is No Mad Man to Russians as Power Play Trumps Economy (BBG)
• Alibaba picks U.S. for IPO; in talks with six banks for lead roles (Reuters)
• Russia hearts selling German energy: Billionaire Fridman’s L1 Buys RWE Unit for $7.1 Billion (Bloomberg)
• Malaysia plane search straddles continent as police focus on crew (Reuters)
• Saudi Crown Prince’s visit to China set to bolster investment (Al-Awsat)
• Bugatti-Driving 26-Year-Old Tied to Penny-Stock Website (BBG)
• Vodafone agrees $10 billion deal to buy Spain’s Ono (Reuters)
• The Hidden Rot in the Jobs Numbers (WSJ)
• SocGen Ex-Trader Kerviel Walks to Forget Loss as Judgment Looms (BBG)
• U.S. Banks’ $75 Billion Payout at Stake in Fed Tests (BBG)
• Goldman Sachs to RenCap Poach Dubai Equity Bankers on Rally (BBG)
• France limits vehicle use in Paris amid soaring pollution (France 24)
• Statistician Nate Silver’s ESPN Site Debuts in Blog Glut (BBG)

 

Overnight Media Digest

WSJ

* More than 95 percent of Crimeans voted to break away from Ukraine and rejoin Russia, according to preliminary results, in a referendum that raises the stakes in the most acute East-West confrontation since the Cold War.

* Strange alliances have cropped up since armed militants overtook the city of Fallujah early this year and placed it under the control of the city’s Sunni majority. That majority may hate al Qaeda and its rigid theocratic mores – but they despise Nouri Al Maliki, the Shiite prime minister, even more.

* Vodafone Group Plc has reached an agreement with shareholders of Ono to buy the Spanish cable company for just over 7 billion euros ($9.73 billion) including debt.

* German utility RWE AG intends to sell its oil and gas production unit to Russian billionaire Mikhail Fridman for more than $7 billion.

* Senate lawmakers released their first draft of a bipartisan bill Sunday spelling out their proposal, previously announced last week, to eliminate Fannie Mae and Freddie Mac. The legislation replaces the mortgage-finance giants with a new system in which the government would continue to play a potentially significant role insuring U.S. home loans.

* American Financial Group Inc plans to withdraw its takeover bid for National Interstate Corp after a judge signaled he would block the deal and parties to a lawsuit over it were unable over the weekend to resolve their differences, an AFG spokeswoman confirmed.

* Hours after Chinese e-commerce giant Alibaba Group Holding Ltd kicked off the process for an IPO in New York, the head of the Hong Kong stock exchange, once the front-runner for the deal, urged regulators to allow changes of rules to accommodate new listings.

* Toyota Motor Corp has suspended operations at two auto assembly plants in India, following the failure of wage negotiations with the union, a company spokesman said Monday.

* Long frustrated in efforts to collect payments from some users of its software in China and other emerging markets, Microsoft Corp has enlisted help from an unlikely set of allies: attorneys general in states such as Louisiana and Oklahoma.

* Encana Corp is in advanced talks to sell its Wyoming natural-gas fields to private-equity firms Carlyle Group LP and NGP Energy Capital Management LLC for about $2 billion, according to people familiar with the matter.

 

FT

Vodafone has agreed to buy Spanish cable company Ono for 7.2 billion euros ($10.03 billion), ending plans for private equity backed Ono to list in Madrid, people with knowledge of the negotiations said.

Barclays, Citigroup and Royal Bank of Scotland have frozen bonuses across many of their foreign exchange trading teams as internal investigations scrutinise the possible manipulation of key currency benchmarks.

Germany’s debt-burdened utility RWE AG has agreed the sale of its oil and gas production arm at an enterprise value of 5.1 billion euros to a group of investors led by Russian tycoon Mikhail Fridman.

Italy’s largest bank by assets UniCredit is planning to sell or float its Pioneer Investments asset management business as part of a wider disposal programme, people familiar with the matter said.

Labelux, the owner of Jimmy Choo, is considering a stock market listing of the luxury shoe business that could value it at 1 billion pounds, according to people close to the company.

 

NYT

* British telecommunications company Vodafone has reached a deal to buy Spanish cable company Ono for about $10 billion, according to two people familiar with the matter. The deal is expected to be announced Monday morning and values Ono at about 7.2 billion euros, including the assumption of debt.

* German utility RWE said it had reached a preliminary agreement to sell its oil and natural gas subsidiary RWE Dea to Russian billionaires Mikhail Fridman and German Khan for 5.1 billion euros, or roughly $7 billion.

* Silicon Valley, not content with changing how retailers, taxi companies and hotels do business, is taking its disruptive ways into outer space. Several young companies with roots in Silicon Valley are trying to elbow their way into a business long dominated by national governments and aeronautics giants like Boeing.

* More than two dozen attorneys general sent letters on Sunday to five of United States’ largest retailers, encouraging them to stop selling tobacco products in stores that also have pharmacies. The letters were sent to Rite Aid, Walgreen , Kroger, Safeway and Walmart, five companies that are among the biggest pharmacy retailers in the country.

* China’s online commerce giant, Alibaba Group , confirmed early on Sunday that it planned to begin the process of becoming a public company in the United States. Analysts speculate that Alibaba could fetch a valuation well north of $130 billion. Alibaba said that at some point, it might be open to a dual listing in China.

* Simbol Materials is building a plant that will use a novel extraction process, in the hopes that it can provide the lithium needed for the batteries in Tesla’s cars.

* Guinness USA has dropped its sponsorship of the St. Patrick’s Day parade in New York, joining protests of a ban on public expression of gay pride. The decision, brought about by the event’s ban on public expression of gay pride, was applauded by gay rights groups that had threatened to boycott the company’s products.

 

China

CHINA BUSINESS NEWS

– Shanghai Pudong Development Bank Co Ltd will likely acquire Shanghai Trust as part of the Shanghai government’s plan to consolidate the city’s financial industry, sources said.

SECURITIES TIMES

– China International Marine Containers (Group) Ltd plans to invest 7 billion yuan in a production base in southern Guangdong province to make logistics equipment.

SHANGHAI DAILY

– Singapore-based bakery chain BreakTalk said it has isolated all of the ingredients bought from a Hangzhou-based supplier after China Central Television accused the supplier of selling out-of-date goods.

 

Britain

The Telegraph

UKRAINE SANCTIONS MOVE UPSETS OLIGARCHS

Russian oligarchs with extensive interests in Britain have been attempting to lower the risk to their assets from sanctions, which it is expected the European Union will impose over the Ukraine crisis.

VODAFONE COULD AGREE ONO TAKEOVER NEXT WEEK

Vodafone’s 6-billion-pound ($9.98 billion)acquisition of Ono could be completed as early as next week after it moved closer to an agreement with the Spanish operator’s shareholders.

BERNIE ECCLESTONE SAYS HE WILL SELL HIS FORMULA ONE SHARES WITH CVC

Bernie Ecclestone has revealed that he will sell his 5.3 percent stake in Formula One when its controlling shareholder, the private equity firm CVC, exits the business.

The Guardian

MANUFACTURERS PLAN RECRUITMENT BOOM AS RECOVERY BECOMES MORE ENTRENCHED

Manufacturers are planning to hire workers at the fastest rate in more than a decade in the coming months, as recovery in Britain’s factories becomes more firmly entrenched, giving Finance Minister George Osborne some positive news before Wednesday’s budget.

PRIMARK TO PAY 6 MLN STG MORE TO VICTIMS OF RANA PLAZA FACTORY IN BANGLADESH

Primark is to pay out a further $10 million in compensation to victims of the Rana Plaza factory collapse in Bangladesh weeks before the anniversary of the disaster in which more than 1,100 garment workers lost their lives.

The Times

RIO TINTO TO KEEP PWC ON ITS BOOKS

Rio Tinto has bucked the trend set by its FTSE-100 peers and decided not to put its audit contract on the market this year, despite increasing pressure from domestic and European rulemakers to do so.

LENDERS URGED TO FIND ALTERNATIVE FOR REJECTED SMES

British Finance Minister George Osborne is considering forcing banks to refer credit-starved small and medium-sized companies to alternative providers of finance.

SMITHS NEWS TAKES ON NEW NAME AS IT SEEKS FRESH HORIZONS

Smiths News has shifted its focus to distributing a variety of products, including books and paper towels for hospitals, as it seeks to reduce its dependence on the newspaper and magazine industries which are generating fewer editions as more readers move online.

 

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Empire State manufacturing survey for March at 8:30—consensus 6.5
Industrial production for February at 9:15–consensus up 0.2%
NAHB housing market index for March at 10:00–consensus 50

ANALYST RESEARCH

Upgrades

Alon USA Partners (ALDW) upgraded to Buy from Neutral at Citigroup
Ashford Hospitality (AHT) upgraded to Outperform from Market Perform at JMP Securities
Baker Hughes (BHI) upgraded to Buy from Neutral at Goldman
CommVault (CVLT) upgraded to Buy from Neutral at Mizuho
Lorillard (LO) upgraded to Buy from Neutral at Goldman
Martin Midstream Partners (MMLP) upgraded to Buy from Neutral at UBS
Patterson-UTI Energy (PTEN) upgraded to Conviction Buy from Neutral at Goldman
Post Holdings (POST) upgraded to Buy from Neutral at SunTrust
Regeneron (REGN) upgraded to Buy from Neutral at Citigroup
STAAR Surgical (STAA) upgraded to Buy from Hold at Canaccord
Siemens (SI) upgraded to Buy from Neutral at BofA/Merrill
Siemens (SI) upgraded to Overweight from Neutral at JPMorgan
TC PipeLines (TCP) upgraded to Buy from Neutral at UBS
Watts Water (WTS) upgraded to Buy from Hold at BB&T

Downgrades

Atwood Oceanics (ATW) downgraded to Buy from Conviction Buy at Goldman
Cameron (CAM) downgraded to Neutral from Buy at Goldman
Constellation Brands (STZ) downgraded to Neutral from Buy at Goldman
Extra Space Storage (EXR) downgraded to Neutral from Outperform at Macquarie
General Dynamics (GD) downgraded to Equal Weight from Overweight at Barclays
Gray Television (GTN) downgraded to Market Perform from Outperform at Wells Fargo
Harris (HRS) downgraded to Underweight from Equal Weight at Barclays
Huntington Ingalls (HII) downgraded to Underweight from Equal Weight at Barclays
Kinder Morgan Management (KMR) downgraded to Market Perform at Wells Fargo
LIN Media (LIN) downgraded to Market Perform from Outperform at Wells Fargo
National Oilwell (NOV) downgraded to Neutral from Buy at Goldman
Nexstar (NXST) downgraded to Market Perform from Outperform at Wells Fargo
Sinclair Broadcast (SBGI) downgraded to Market Perform from Outperform at Wells Fargo
Sovran Self Storage (SSS) downgraded to Neutral from Outperform at Macquarie
VeriSign (VRSN) downgraded to Market Perform from Outperform at Cowen

Initiations

Guaranty Federal Bancshares (GFED) initiated with an Outperform at Raymond James
RPX Corp. (RPXC) initiated with an Outperform at Cowen
WidePoint (WYY) initiated with a Buy at B. Riley

COMPANY NEWS

Sucampo (SCMP), Takeda said Amitiza NDA will not be filed in second half of 2014
Alibaba said it will begin U.S. IPO process
Honda (HMC) recalling almost 900,000 Odyssey minivans in U.S on possible fuel leakage
American Financial Group (AFG) terminated tender offer for National Interstate (NATL)
SINA’s (SINA) Weibo filed preliminary prospectus to raise up to $500M in U.S. IPO
Sears (SHLD) said board approved separation of Lands’ End business
Vodafone (VOD) agreed to acquire Ono for total consideration of EUR7.2B

EARNINGS

Companies that beat consensus earnings expectations include:
Intercept (ICPT)

Companies that missed consensus earnings expectations include:
Sterling Construction (STRL), Harvest Natural (HNR), Coastal Contacts (COA)

NEWSPAPERS/WEBSITES

Royal Bank of Scotland (RBS) in talks to resume paying dividend, FT reports
Qualcomm (QCOM), Intel (INTC) threatened as upstarts grab tablet share, Bloomberg says
Nissan (NSANY) could meet EV sales target before 2020, WSJ reports
Encana (ECA) in talks to sell Jonah Hill fields to Carlyle (CG), NGP for $2B, WSJ reports
BHP Billiton (BHP) gets closer to share buyback program, Sunday Times says
Hertz (HTZ) nears spin-off of construction equipment rental business, FT says
Yahoo (YHOO) redesigning Flickr again, sources say, Re/code reports
Toyota (TM) suspends operations at two plants in India, WSJ reports
Jos. A. Bank (JOSB) is no bargain, Men’s Wearhouse (MW) shares could drop 20%
Fresh Del Monte (FDP) shares could rise from Chiquita (CQB), Fyffes merger
Uncertainty, spill cleanup could cause sell-off of Matson (MATX) shares
Liberty Media (LMCA) wise to split into two stocks and drop Sirius (SIRI) bid, Barron’s says
Praxair (PX), FEI Co. (FEIC), Red Hat (RHT), EMC (EMC) should benefit from reinvestment

SYNDICATE

Orchid Island Capital (ORC) files to sell 4M shares of common stock
Tableau (DATA) files to sell $345M of Class A common stock
The Dixie Group (DXYN) files to sell $75M of common, preferred stock
YRC Worldwide (YRCW) files to sell 20.1M shares for selling stockholders

via Zero Hedge http://ift.tt/1fQZT2V Tyler Durden

My old friend Sol Sanders has written an important comment on the coming collapse of the Chinese Ponzi scheme.  For years now, I have been warning people that the Chinese Communist Party is not above manufacturing economic and financial statistics.  During my trip to France last week for an event sponsored by the Global Interdependence Center and the Banque de France, I appalled a group of economists by suggesting that there are no banks in China. Statistics on growth, debt and investment are all a fiction used to manipulate opinion, inside and outside of China.

We all remember the famous quote by Mao Zedong:  “Political power grows out of the barrel of a gun.” But how many of us have actually read the book?  Here is the full quote famed on 6 November 1938, during Mao’s concluding speech while addressing the “Problems on War and Strategy” on the party’s sixth Central Committee’s sixth Plenary session:

Every Communist must grasp the truth, “Political power grows out of the barrel of a gun.” Our principle is that the Party commands the gun, and the gun must never be allowed to command the Party. Yet, having guns, we can create Party organizations, as witness the powerful Party organizations which the Eighth Route Army has created in northern China. We can also create cadres, create schools, create culture, create mass movements. Everything in Yenan has been created by having guns. All things grow out of the barrel of a gun. According to the Marxist theory of the state, the army is the chief component of state power. Whoever wants to seize and retain state power must have a strong army. Some people ridicule us as advocates of the “omnipotence of war”. Yes, we are advocates of the omnipotence of revolutionary war; that is good, not bad, it is Marxist. The guns of the Russian Communist Party created socialism. We shall create a democratic republic. Experience in the class struggle in the era of imperialism teaches us that it is only by the power of the gun that the working class and the labouring masses can defeat the armed bourgeoisie and landlords; in this sense we may say that only with guns can the whole world be transformed. We are advocates of the abolition of war, we do not want war; but war can only be abolished through war, and in order to get rid of the gun it is necessary to take up the gun.

Enjoy

Chris

 

The [Chinese] emperor has no clothes

By Sol Sanders

http://ift.tt/1p3afx7

 

The shudder that relatively minor bad news from China sent through world markets last week was a warning that the halcyon days of Beijing’s economy are over. Indeed, reluctantly because of self-interest and wishful thinking, a universal consensus finally is emerging that the Chinese economy is in deep trouble, a crisis that could perhaps overturn the regime itself.

The cardinal indicator is that the Chinese economy is slowing down. How much, how fast, which sectors, is all open to speculation given the notorious unreliability of Beijing statistics. But certainly we long ago dipped below that 8% minimal annual gross national product growth rate which once was accepted inside and outside the Middle Kingdom as the requirement for political stability.

In a sense, it was inevitable: perhaps the world has no history of a regional economy as large as China’s growing at its phenomenally high rate over the past two decades. But, then, too, it has been obvious to all but the most optimistic that huge aberrations were being built into a wanting modernization process that would eventually haunt the leadership. That’s where we are now.

There is unusual agreement, again, among Chinese and foreign critics of what is wrong and even accord on remedies for amelioration. Communist Party Chairman, chief executive, and chief of state Xi Jinping and to a lesser degree Prime Minister Li Kegiang, some 18 months in office, are saying all the right things. Xi, unlike his predecessors, even manages to project charm to sell what will be under the best circumstances extremely difficult structural reforms. The new leadership has come down hard on corruption which is not only endemic, but has taken on growing economic aspects with everything from undermining manufacturing quality to facilitating a huge capital flight. It acknowledges that pollution, paralyzing major cities for days and increasingly jeopardizing children’s health, is an economic hazard.

But however clear a new formula would have to be found, the task is daunting. Such a strategy would have to replace the two-pronged drive put into place once the Chinese Communists abandoned Marxist-Leninist-Maoism in all but name. Mao-style autarky was trashed for an enthusiastic welcoming of foreign investment and transfer of technology to build export markets based primarily on abundant cheap labor. But at the same time, Beijing continued the Soviet tradition of enormous expansion of the infrastructure, well beyond contemporary or projected demand.

This Weltanschauung now has eroded dramatically.

The worldwide economic downturn ended an unlimited expansion of markets for Chinese exports. These manufactures had become part of a vast, new production chain in which international companies used Chinese assembly to produce products for sale to the U.S. and the rest of the industrial world at bargain prices. While these operations introduced limited manufacturing, through manipulation of currency and subsidies Beijing was in fact subsidizing foreign buyers. One look at the retail prices of products at an American retailer indicates that some dissident Chinese economists may well be right arguing that a capital-short country was exporting capital to wealthier nations.

Furthermore, Chinese razor thin margins have been jeopardized by rising costs, including growing fuel imports and a flattening out of the labor supply due to the regime’s attempts to stem population growth. For these reasons China already has lost many of the lowest end manufactures to other low-wage competitors; infants garments, for example, to Bangla Desh. There is even some movement because of technological improvements of off-shored manufacturing back to the industrial countries. For example, with America’s shale revolution reducing the price of domestic natural gas to a third of delivered prices of LNG in East Asia, petrochemicals and their plastic products are returning.

At the same time, China’s vast infrastructure expansion is falling victim to a growing credit crunch. Having sailed through the financial crisis with an unprecedented “stimulus” package of $586 billion in November 2008, Beijing created overcapacity and overinvestment. At the same time, local government’s expansion was based on sales of diminishing farmland for industrial and infrastructure development and credit from regional bankers.

The net result of all this is debt that even the government has found difficult to estimate and a fragile financial structure at every level of government. Perhaps more important, it has resulted in an increasingly onerous situation for private developers who carry a disproportionate weight in the overall growth. With stop and go credit policies, intrepid bureaucrats have created new shadow credit organizations beyond the scope of government monetary and fiscal policy.

The generally accepted recipe for solving these problems is to move the economy away from its concentration on investment and exports toward greater consumption and financial liberalization. But, in fact, recent trends have been in the opposite direction, as the government faced dismantling a system which had profited small urban elite enormously with a superficial appearance of modernization. The strongest resistance has come from huge government corporate entities and the welter of smaller SOEs [state owned enterprises] in the hands of regional and local Party apparatchiks. Their influence inside the ruling Communist Party gives them call on capital, even when as often happens, to entities either deficit or bankrupt.

What gave the markets the shivers last week was a statement from Li that a series of defaults were inevitable as the government tries to rationalize. A default by Haixin Steel, a relatively small operation but with ties to coal and iron ore companies was what gave rise to international concern. It also reflects what industry sources believe is a growing collapse with half of the country’s steel mills losing money. A week earlier China experienced its first bond default when Chaori Solar, a small privately owned solar panel maker, was unable to meet interest on Rmb1bn ($163 million) of bonds sold only two years ago.

In the past, the government has always picked up defaulting companies. If that policy is now to be abandoned, it is unclear just how big the debacle will be and whether it could lead to panic. Already world copper and iron prices fell sharply under the pressure of Chinese speculators retreating from their bets on a continued high level of metals production.

To remedy these problems, Xi’s highly publicized reforms, however much pushed by the leadership, are running into the often hidden outcome of past excesses. For example, not only does the attempt to moderate the “one child” policy appear as a lame effort to resolve an already warped sex ratio in the society – female fetus abortions having produced a vast excess of males – but a huge, corrupt bureaucracy created to enforce the strategy is blocking real changes. Furthermore, such side issues as hundreds of thousands of “illegal” births have produced a sizeable population which cannot claim identity from the still deeply held conviction of Party leaders they must control any dissidence through strict monitoring. A similar problem exists for the hundreds of thousands of part-time workers in all the major metropolitan centers, brought in as “cheap labor”, but refused urban citizenship and a right to limited social welfare benefits. The security proponents are allied with local governments in this instance against any “reform” because of the additional costs it would heap on already overburdened local government and the dismantling of authoritarian control of every individual.

While the system does have the support of the Party apparatchiks, a highly touted new urban middle class does not exist. Best estimates are an upper 1% of households — 2.1 million out of about 530 million households — owns 40-50% of the country’s $10.5 trillion worth of real estate and financial assets. That these ultra-rich – many at the Party’s highest echelons – are moving money into foreign real estate and other investments is widely reported. Should they consider moving 30% of their assets abroad, which is a figure rumored in Chinese circles, the much celebrated Chinese monetary reserves of $3 trillion in dollars would be inconsequential in stemming the tide.

This prelude to a cataclysmic readjustment of the Chinese economy is arriving at a time when Western economists and businessmen have had to abandon a long-cherished hope that continued rapid Chinese [and Indian] development would prop up the world economy. But their disillusionment on this aspect is likely to pale into insignificance as the effects of the Chinese slowdown impacts further on commodity producers in Africa, Latin America and Australia.

Beijing leadership’s quandary is that the struggle to refashion the Chinese economy with further liberal economics comes up against the determined effort of the CCP to maintain its power monopoly which forbids just that. For example, the effort to turn the yuan into an international currency requires it become convertible. That would not only jeopardize current export subsidies but would further encourage the flight of capital, largely a function of the corruption in the Party, often at its highest levels. 

That produces an explosive environment where almost any scenario is arguable.

sws-03-16-14

via Zero Hedge http://ift.tt/1iUAEzP rcwhalen

First, for those who have missed this weekend’s developing story surrounding events in Crimea, here is the 30 second summary, courtesy of Bloomberg:

• U.S., EU warn Russia not to annex Crimea after 95.5% of voters backed leaving Ukraine to join Russia in referendum.
• Ukrainian govt, EU, U.S. consider vote illegal
• Russia said vote  “fully met international norms”
• Russia deployed about 60,000 troops along Ukrainian border, Ukrainian government said yday; Ukraine closed border crossings and will mobilize as many as 15,000 volunteers in next 15 days
• Obama spoke with Putin, said referendum would never be recognized by intl community; U.S. prepared to impose “additional costs” on Russia for its actions
• Putin told Obama Kiev regime unable to curb radical, ultra- nationalists groups that are destabilizing situation, terrorizing peaceful residents
• EU ministers meet today to discuss sanctions that target Russian individuals rather than businesses; EU leaders to meet March 20-21 in Brussels to discuss further measures
• “We are all reluctant to impose sanctions because Russia will probably respond and we’ll all suffer as a result,” Poland Foreign Minister Radoslaw Sikorski said on CNN. “But Russia is leaving us with no choice.”
• Russian lawmakers to consider bill on March 21 that would allow Russia to incorporate parts of countries where residents want to secede, says a Kremlin adviser
• Russia vetoed UN Security Council resolution declaring referendum illegal; China abstained from voting
• Crimeans celebrate vote

And here is the latest : just hours ago, Crimea’s parliament officially applied to become part of Russia. The parliament “made a proposal to the Russian Federation to admit the Republic of Crimea as a new subject with the status of a republic,” according to a statement on its website. A Crimean parliamentary delegation was expected to arrive in Moscow on Monday to discuss the procedures required for the Black Sea peninsula to become part of the Russian Federation.

“If everything’s signed we’ll become a fully fledged region of the Russian Federation Wednesday or Thursday,” First Deputy Prime Minister Rustam Termigaliyev says in interview at govt headquarters in Simferopol. Termigaliyev added that Crimea will promptly get $1b aid from Russia in near-term, and that Hryvnia reserves enough for 10 days, then Crimea will switch to ruble. April pensions “most likely” to be paid in rubles. Crimea can be self-sufficient in natural gas after today’s nationalization of Chernomoreneftegaz. Crimea risks 150,000 hectares being left without water if Ukraine shuts off supply, though that’s “not critical,”  says Termigaliyev.

In other news, the west continues dithering and considering just how best to telegraph to the world that it is completely helpless in stopping the annexation of Crimea, which is now a fact, and that it is praying that Putin does nothing to annex any of the other Pro-Russian cities in east Ukraine in the coming days, as once again, it has absolutely no stopping power with Putin continuing to hold all the chips.

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

It took only a 60 USDJPY pip overnight ramp to send US equity futures 20 points off the overnight lows in the immediate aftermath of the Crimean referendum, which from a massive risk off event has somehow metamorphosed into a “priced in”, even welcome catalyst to buy stocks. The supposed reasoning, and in a world in which Virtu algos determine the price action of the USDJPY from which all else flows based solely on momentum we use the word reasoning “loosely”, is that there was little to indicate that the escalation between Russia and Ukraine was set to accelerate further. As we said: an annexation is now seen as risk off, something even Goldman appears unable to comprehend (more on that shortly). In macroeconomic news, European inflation – at least for the Keynesians – turned from bad to worse after the final February inflation print dropped from the flash, and expected, reading of 0.8% to just 0.7% Y/Y, a sequential increase of 0.3% and below the 0.4% expected, confirming that deflationary forces continue to ravage the continent. The only question is how soon until Europe comes up with some brilliant scheme that will help it join Japan in exporting its deflation.

So in summary, unwind of risk off positions dominated the price action this morning, with stocks in Europe trading higher as market participants breathed a sigh of relief that even though the referendum in Crimea showed an overwhelming support to join Russia, there is little to indicate that the stand-off between Ukraine/Russia will escalate further. As a result, Bunds quickly reversed the initial upside and heading into the North American open are seen lower, with USD/JPY and EUR/CHF also benefiting from flows into riskier assets.

Looking elsewhere, further reduction of the so-called war-premium relating to Ukraine/Russia crisis, saw energy complex come under broad based selling pressure. Going forward, market participants will get to digest the release of the latest US Empire Manufacturing report and NAHB Housing Market Index, while the BoE will conduct its latest APF as part of already announced reinvestment program.

Bulletin news summary from Bloomberg and RanSquawk

• Exit polls show that 95.5% of voters in Ukraine’s Crimea voted to leave Ukraine to rejoin the Russian Federation, however multiple EU and US officials have deemed the vote illegitimate and will not recognise the outcome.
• USD/CNY climbed to its highest level in 10-months overnight, with 1-month implied vol advancing to its highest in over 2 years after the PBoC widened the daily trading band for USD/CNY to 2% from 1%.
• UK listed home builders are also among the best performing stocks following reports that the Help to Buy scheme is likely to be extended in this week’s UK budget.
• Treasuries decline as JPY pares overnight gains, yields 5Y and longer rise by 1bp-2.5bps before Fed meeting begins tomorrow; 96.8% of voters in Crimea backed leaving Ukraine to join Russia, paving way for annexation by Vladimir Putin.
• Putin’s approval rating in Russia reached a three-year high as he poured troops into Crimea amid the overthrow of the Kremlin- backed government in Kiev; EU  foreign ministers met today to impose sanctions
• A closely held Chinese real estate developer with 3.5 billion yuan ($566.6 million) of debt has collapsed and its largest shareholder was detained, said government  officials familiar with the matter
• The yuan sank to an 11-month low as the PBOC doubled the currency’s trading limits vs the dollar; yuan is allowed, from today, to trade as much as 2% on either side of a daily reference rate compared with a previous limit of 1%
• Euro-area inflation rose 0.7% in February, down from 0.8% in Jan.; the rate has held below 1% for five months, maintaining pressure on ECB to maintain loose monetary policy
• Asking prices for homes in London surged to a record this month, as the buoyant outlook spread to other parts of the country, according to Rightmove Plc
• Sovereign yields mostly higher. EU peripheral spreads narrow. Asian equities mixed, with Nikkei -0.4%, Shanghai +1%; European equity markets, U.S. stock-index futures gain. WTI crude and gold lower, copper gains

US Event Calendar

• 8:30am: Empire Manufacturing, March, est. 7.00 (prior 4.48)
• 9:00am: Net Long-term TIC Flows, Jan., est. $30.0b (prior – $45.9b); Total Net TIC Flows, Jan. (prior -$119.6b)
• 9:15am: Industrial Production m/m, Feb., est. 0.2% (prior -0.3%); Capacity Utilization, Feb., est. 78.6% (prior 78.5%); Manufacturing (SIC) Production, Feb., est. 0.3% (prior -0.8%)
• 11:00am: POMO Fed to purchase $2.25b-$2.75b in 2019-2021 sector

Asian Headlines

USD/CNY climbed to its highest level in 10-months overnight, with 1-month implied vol advancing to its highest in over 2 years after the PBoC widened the daily trading band for USD/CNY to 2% from 1% effective March 17. However analysts at Bank of American have said that a more volatile CNY/USD without trend appreciation will deter hot money inflow and perhaps will result in some unwinding of previous inflow.

EU & UK Headlines

Eurozone CPI (Feb F) Y/Y 0.7% vs. Exp. 0.8% (Prev. 0.8%)
– CPI (Feb) M/M 0.3% vs. Exp. 0.4% (Prev. -1.1%)
– CPI Core (Feb F) Y/Y 1.0% vs. Exp. 1.0% (Prev. 1.0%)

The Office for Budget Responsibility will upgrade their UK economic growth forecast to 2.7% from 2.4%, according to the EY ITEM Club. (Daily Mail)

US Headlines

The Senate’s first order of business when lawmakers return to Washington on March 24 will be legislation to impose sanctions against Russia and provide aid to Ukraine, said Sen. John Hoeven (R., N.D.), who was part of a bipartisan group of eight senators to visit Ukraine. (WSJ)

Equities

Stocks traded higher this morning, with tech names leading the move higher, while oil & gas sector underperformed as WTI and Brent crude futures came under selling pressure amid alleviation of fears surrounding a military intervention by Russia in Crimea. Of note, UK listed home builders are also among the best performing stocks following reports that the Help to Buy scheme is likely to be extended in this week’s UK budget.

Moody’s said ECB plan to require marked to market loan collateral to reveal Italian bank exposures and require more capital.

FX

The unwind of risk off trades which benefited USD/JPY overnight failed to have a meaningful impact on EUR/USD and GBP/USD this morning, with both majors trading sideways for much of the session. However it is worth noting that EUR/USD edged off the best levels of the session following the release of lower than expected Eurozone CPI data. Analysts at Morgan Stanley have revised their EUR/USD forecasts and for Q1 now expect the pair to trade at 1.4000 vs. Prev. forecast of 1.3400, also raised Q4 forecast to 1.3300 from 1.2400. At the same time, analysts lowered Q1 forecast for USD/JPY to 99.00 from 103.00 and Q4 forecast was lowered to 108.00 from 109.00.

Commodities

Deutsche Bank and Barclays are advising calm over Chinese copper financing worries. Suggesting that the recent CNY drop and sell off of copper will not lead to a mass unwinding of copper backed financing. Codelco and Collahuasi mines reported to be running normally after north Chile is hit by a level 7 earth quake. (BBG) Chinese crude oil imports set to rise 5% to 6% annually by 2015. (Xinhua/DJN)

Iran’s Foreign Minister Mohammad Javad Zarif said does not expect March 18 nuclear talks in Vienna to end with agreement. (IRNA)

Libya rebels who have seized three oil export ports said they were ready to negotiate with the government over an end to their blocked if it abandoned plans for a military offensive line. (RTRS)

* * *

In conclusion, here is Jim Reid’s overnight recap:

Outside of the obvious problems with Ukraine and Crimea which we’ll discuss below, a major issue for markets at the moment is that the Fed, the PBoC and the ECB all seem to be less market friendly than they could be given how Q1 is going. We could even add the BoJ to that list as the sales tax rise looms. Over weekend the PBoC’s decision to widen the CNY band suggests to us and our Chinese economists that perhaps they are putting attempts at reforms ahead of growth. More on this below but this week also sees a FOMC meeting where the Fed are set to continue the taper despite mixed data and a more fragile global environment than they would have expected at this point. However the Fed rhetoric this year has suggested that there’s a high hurdle for them to stop the current meeting by meeting taper. Meanwhile the ECB seems stuck until there’s a more pressing need to act. Our start of the year view was for a decent 2014 after a choppy H1 but only due to what we thought would be central banks that continued to err on the side of more liquidity.

Despite the Chinese and Crimean headlines, Asian equities have shaken off a weaker start to trade higher overnight boosted by the release of China’s 2014-
2020 urbanisation plan on Sunday. While short on detail, the plan calls for China’s urbanisation rate to reach 60% by 2020 from its current level of 53.7%. The plan also targets to help rural residents become urban citizens by increasing the number of those with a “city hukou” to 45% of the total population. The Hang Seng China Enterprises and Shanghai Composite indices are trading 0.20% and 0.45% higher respectively as we type, led by construction companies and cement stocks. The AUDUSD (+0.3%), USDJPY (+0.1%) and S&P500 futures (+0.05%) are all trading on a firmer footing this morning and the KOSPI (+0.3%) has shrugged off reports of multiple missile test launches from North Korea late on Sunday. As expected, USDCNH and USDCNY are trading slightly higher this morning following the PBOC news over the weekend, but the move higher has been anchored by a lower PBoC fixing. Today’s CNY midpoint has been fixed at 6.1321 or 25 pips lower than Friday’s 6.1346. In Japan, the Nikkei (-0.8%) received a small boost after PM Abe’s advisor Hamada said that the BoJ can double the pace of JGB accumulation as an easing option if there are signs that the pending sales tax hike is damaging the economy (Bloomberg). BoJ Governor Kuroda has also made some similarly dovish comments before the Japanese Diet this morning.

Looking at the Crimean situation in more detail, preliminary results from Sunday’s disputed referendum showed that more than 95% of voters supported leaving the Ukraine and joining Russia. The turnout was judged to be relatively high at more than 70%, exceeding the minimum 50% required for the referendum. Though the result will not come as a surprise to most, the overwhelming nature of the result does stand in contrast to the demographics within Crimea which suggest ethnic Russians account for under two-thirds of the population. Over the weekend and overnight, Ukraine’s allies have continued to dispute the legality of the referendum and the White House says that it will not recognise the vote. Either way, the focus is on Russia’s next move and the reaction from Ukraine’s Western allies.

In terms of military responses, already some are suggesting that Russia may move onto eastern Ukraine and certainly the weekend headlines seemed to suggest that this may already have happened to some extent (Reuters). The  foreign ministry in Kiev denounced an “invasion” by Russia’s forces into its armored vehicles briefly seized a gas pumping station near the village of Strilkove, just north of Crimean territory – before retreating shortly afterwards. Russia said they had seized the pumping station out of fears it would be targeted by terrorists, according to a Ukrainian defense ministry official. Meanwhile, the Russian troop build up in Crimea continues to increase, with the last count at 22,000 according to the Ukrainian defense minister on Sunday, up from an estimate of 18,400 on Friday. In terms of military operations in Crimea, the Guardian reports that a truce has been agreed between Russian and Ukrainian forces in the Crimean region lasting until March 21st. What happens after March 21st is unclear at this stage. Aside from the military responses, there is also the question of political responses. At this stage our Russian economists’ base case scenario is that Russia will accept Crimea as a new subject of the Russian Federation, though there does remain a probability that Russia will seek concessions from the West in exchange for not going ahead with the formal incorporation of Crimea.

As we go to print, Reuters is reporting that Russia’s lower house of parliament will soon pass legislation allowing Crimea to join Russia, quoting the deputy speaker. The Crimean PM was quoted overnight saying that the peninsula will join Russia as soon as possible (Interfax). In terms of sanctions, the EU and the US have unveiled earlier a coordinated set of sanctions, with the US imposing visa bans on unspecified number of Russian and Ukrainian individuals, while the EU moved to suspend visa and investment talks with Russia. Further sanctions are possible according to the US and EU officials in case the Crimean referendum is recognized officially by Russia. Indeed Reuters is reporting that the EU will imminently impose travel bans and asset freezes on a list of people in Crimea and Russia who “threaten the territorial integrity” of Ukraine. The initial list of 120 to 130 names, including senior figures in Russia’s military and political establishment, will be whittled down to perhaps “tens or scores” of people before EU foreign ministers take the final decision in Brussels on Monday (Reuters). Germany’s foreign minister Frank-Walter Steinmeier said a level of sanctions against Russia will be decided on Monday, and he said he would argue for a regime of gradually tightening sanctions.

Moving to the other developing story of the weekend which was the PBoC’s announcement that it will be widening the yuan’s daily trading band. The announcement means that the central bank will allow the exchange rate to fluctuate by 2% from the daily midpoint set each morning (widening from +/- 1% previously). The move was widely anticipated but our FX and fixed income strategists think the move reinforces the notion that authorities in China are putting a priority on reforms over growth. As such, into 2014, further reforms are likely to happen even if growth was to slow further. Though we are likely to see a higher USDCNH and USDCNY in the spot market in a short term reaction to this news, our FX strategists think the PBoC could print the USDCNY fixing below the market’s expectation for the next few days to (1) calm the market’s nerves in the near-term and (2) prevent the perception of outright significant depreciation. Over the slightly longer term, DB’s Chinese economist Lin Li believes that the widened trading may encourage investors to position for further yuan depreciation, extending the unwinding of short USD positions
which was valued at USD59bn in January. Li writes that clearly there is a risk that this process could be disorderly, although the USD3.8tn in foreign exchange reserves held by the PBOC would seem to be adequate defense against such a risk. Indeed, the PBOC emphasized in this weekend’s press conference that the trading band widening won’t lead to sharp depreciation or appreciation in the short term. Indeed, it will be interesting if the CNH does move above 6.20 in the short term, as a number of technical factors start to come into play from offshore leveraged FX structures (e.g. target redemption forwards) which start to incur losses at the 6.20 level and above.

Amid the happenings in China and Ukraine, it’s easy to forget that we have the 2-day FOMC meeting this week (Tuesday to Wednesday). It’s the first meeting under the Janet Yellen who will also holding her first post-meeting press conference. While the Fed is expected to continue with the current pace of tapering, DB’s economists (and the broader market) expect the Fed to abandon its numerical unemployment and inflation thresholds, Instead it is expected that the Fed will adopt a more qualitative approach toward forward rate guidance. DB’s Joe Lavorgna notes that this would be consistent with recent public comments by monetary policymakers (e.g. Dudley and Plosser). In terms of what the qualitative guidance will look like, Yellen’s speech from last March discussed the broad array of indicators she was evaluating to determine whether a substantial improvement in the outlook for the labor market had occurred. These indicators include but are not limited to measures of gross job flows (job losses and hiring), quit rates, spending and economic growth. There has also been market talk that the Fed may split its current guidance in two parts – one that stays the same with unemployment above the current threshold of 6.5%, and another more qualitative form of guidance once unemployment falls below that level (Bloomberg).

Of the US data being released this week, of most interest will be Thursday’s jobless claims which cover the survey period for March payrolls. On the manufacturing side, the NY Empire State and Philly Fed manufacturing surveys, released on Monday and Friday, respectively, will get some attention, though the former has been fairly volatile of late. On the housing side, the NAHB homebuilding sentiment index for March (released on Monday) will be interesting given that it has been one of the most weather-impacted data points to date. Existing home sales for February will be released, though this may be subdued due to weather effects.

Elsewhere in the week ahead, the UK’s annual budget will be delivered on Wednesday which will be the penultimate budget before the 2015 general election. Markets are expecting an upgrade to the growth outlook which should feed through to the projected deficit. The UK prints Rightmove house prices today, the BoE publishes their latest MPC minutes on Wednesday and the latest UK employment report is due on the same day. In continental Europe, notable data releases include Eurozone CPI (Mon), the German ZEW survey (Tues) and consumer confidence (Fri). In the EM world, the developments between Russia and the Ukraine will dominate but there are also central bank policy meetings in Turkey (Tues), Colombia and Mexico (Fri). A busy week from all angles it seems!!

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

---

 

Waste is a many splendid thing that in all circumstances we attempt to reduce and get rid of, shunning it like a pariah. Well, perhaps almost all circumstances. There are times when waste is just the by-word for government these days. But, are we all equal in the quantity of waste that is generated in our countries’ governments?

China

Let’s take a look at China which seems to be the place that is cracking down on waste more than most (if we are to believe their figures). The Central Commission for Discipline Inspection (CCDI) stated that there was a fall of 53% of state money spent on meetings, money for official overseas trips was also cut by 39% and there was a 10% reduction in vehicle purchases between 2012 and 2013.

Xinhua, the official news agency of the People’s Republic of China stated that the anti-corruption chief Wang Qishan (March 15th) wishes to have a “Sword of Damocles” hanging over the heads of officials in the government to keep them from wasting public money. Perhaps allegorical and perhaps a moral anecdote, but the Sword is usually seen to be an illusion to imminent and impending, ever-present peril at the court of a tyrant.

Qishan stated that his fight against corruption was taking him to investigating the Ministry of Science and Technology, Fudan University, China National Cereals, Oils and Foodstuffs Corporation and Xinjiang Production and Construction Corps. He would also be looking closely at regional governments such as Beijing City.

The Central Commission for Discipline Inspection under the leadership of President Xi Jinping has been publically espousing the benefits of fighting tooth and nail to break with corruption, shoring up the governments mandate to rule. However, moving away from decades of suspicion, wasteful use of taxpayers’ money and outlandish extravagancies are hard things to inspect and even harder to discipline.

But, we could clearly do with a great deal more of that discipline and a great hefty blow of inspection (independent, of course) in the USA these days, however.

USA

Remember back when the Republicans and the Democrats were wasting our money flogging out the question as to whether or not they should vote the budget despite not having any money? Remember all those people that got told to stay at home and got laid off because Washington couldn’t find the greenbacks for them?

Well, the guys in Washington were certainly able to agree on continuing voting the budget for that Super Twiggy Squirrel advert that was running in Spain and trumpeting the healthy benefits of walnuts grown in California. The Department of Agriculture was spending $200 million a year on that promotion and $3 million went into the adverts. The Republicans and the Democrats voted 322 (only 98 against) for keeping that advert running while the Federal workers got sent home and told to eat humble pie (some of which incidentally were paid $4, 000 per month for doing nothing at all).

Here are some prime examples:

• The Department of Defense continued spending $432 million on the construction of aircraft that will never be put in the air. They have been financing the building of the C-27J Spartan since 2007. Despite having been told that the Air Force considered that this aircraft could not offer superior capabilities during airlift missions and that it could not match the already existent C-130. Since 2012, Congress has been informed that funding of production should stop. It hasn’t. Waste.
• The Department of Defense has thought up the wonderful idea of destroying $7 billion-worth of military equipment and vehicles that are in the Middle East as it pulls out and it feels that it’s too expensive to ship home. Waste.
• $60.4 million that was voted to be spent on Hurricane-Sandy victims should have gone to helping them rebuild things. Instead New York and New Jersey (state-level officials) spent that money on tourist ads. Waste. 
• Children are being taught about the effects of global warming by NASA ($390, 000) through a kids’ show (Green Ninja) via YouTube. Waste.
• Facebook gets a tax rebate (yes it doesn’t pay any tax and gets a refund from the state) worth $295 million. Waste. 
• NASA is searching for signs of intelligent life in space still ($3 million), while we can’t even find a trace of it in Washington itself. Waste.

Boondoggle Bungles by Washington that’s all they are. The examples of waste by Washington lead us to question every day what the government is actually doing with our money.

Governments don’t tend to ever cut back on wasteful spending. They reduce the level of services available to citizens and they attempt (perhaps outwardly) to continue providing that same service. That means that the federal workers just have to do more with less. But, it doesn’t ever limit the scope of the government. It rarely reduces the possibility of getting access to money that is embezzled, diverted or exploited by those that are in positions of authority.

The true question that comes to mind however is whether or not the government is a waste or just completely wasted when it thinks up he reasons why it should spend out hard earned tax-payers’ money on frivolous, questionable things. Baked, folded, call it what you will. But, governments when wasting must always be belligerent when it comes to justifying why they spent that money. Always remember that attack is the best form of defense; we all know that.

What a waste, government!

What waste has been the biggest for you?

Originally posted:  Government Waste

 

via Zero Hedge http://ift.tt/1p2MOEd Pivotfarm