Tag: finance

While the US is debating which set of Al Qaeda “rebels” in Syria is the best local partner for the State Department to provide military support to, once Qatar’s demands for a trans-Syria pipeline return some time in 2014, Vladimir Putin – fresh from his diplomatic oup in the Ukraine – is reinforcing his other major victory in 2013: the preservation of the Assad state, this time however with more than words. As Reuters reports, Russia has sent 25 armored trucks and 50 other vehicles to Syria to help transport toxins that are to be destroyed under an international agreement to rid the nation of its chemical arsenal, Defense Minister Sergei Shoigu said on Monday. Or in other words, Russia just sent Syria more than 75 military vehicles.

From Reuters:

In a report to President Vladimir Putin, Shoigu said Russian aircraft delivered 50 Kamaz trucks and 25 Ural armored trucks to the Syrian port city of Latakia on December 18-20 along with other equipment, state-run news agency RIA reported.

 

“The Defence Ministry has very swiftly implemented actions to deliver to Syria equipment and materiel to provide for the removal of Syrian chemical weapons and their destruction,” Shoigu was quoted as saying.

Unlike Obamacare’s scheduling issues, Syria is expected to honor its commitment to transfer its chemcial weapons to external control by the deadline.

Damascus agreed to transport the “most critical” chemicals, including around 20 tons of mustard nerve agent, out of the northern port of Latakia by December 31 to be safely destroyed abroad away from the war zone.

 

“The Defence Ministry has very swiftly implemented actions to deliver to Syria equipment and materiel to provide for the removal of Syrian chemical weapons and their destruction,” Shoigu was quoted as saying.

And while the west may have bungled both the Syrian escalation and the more recent return of the Ukraine to the Russian sphere of influence, they were at least smart enough to realize that Russia adding more weapons in Syria will hardly allow the EU to benefit from Qatari gas in the near future.

Western powers has baulked at Syria’s request for military transport equipment to transport chemical weapons material to Latakia because of concerns it could be used to fight Assad’s opponents in the conflict or kill civilians.

 

Russia has been a major seller of conventional weapons to Syria and has given Assad crucial support during the conflict, blocking attempts to punish with sanctions and saying his exit must not be a precondition for a peace process.

 

Syrian government forces took control of a key highway connecting Damascus to the coast earlier this month, but the Organisation for the Prohibition of Chemical Weapons has voiced concern the deadline could be missed.

But for all intents and purposes, Syria and the Middle East may be yesterday’s news. The one “asset” that Putin is certainly focued on next, as is China, as is the US, is Africa: it is here that the geopolitical hotspots of 2014 are far more likely to generate significant headaches for the superpowers (unless of course Israel decides it needs the GDP boost and launches the Iranian attack on its own).

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/jNoRreDHPXc/story01.htm Tyler Durden

Submitted by Howard Kunstler of Kunstler.com,

And so in his valedictory, Federal Reserve chief Ben Bernanke pulls one last dead rabbit out of his hat — it suffocated while the head-fake taper percolated in Ben’s brain lo these many months of jive talkin’. As the year turns, the central bank will supposedly monetize $10 billion less debt per month — $75 billion down from $85 billion — with $5 billion each deducted from the US Treasury stream and the rotten mortgage barrel. Was there a catch?

You could say that. For instance, what to make of the curious report out of the American Enterprise Institute by John H. Makin saying that the Fed’s actual purchase of debt paper amounted to an average $94 billion a month through the year 2013, not $85 billion? I have averred often in this space to the Fed’s ability to conduct back-door buying operations of all kinds of janky financial crapola — and in a world where claims on promises to pay hugely exceed anyone’s ability to pay or re-pay, there’s as much of it out there as there are plastic grocery bags floating in the horse latitudes of the Pacific Ocean. The Fed can hose up bad paper all the live-long day and apparently get away with mis-reporting what it is doing, and is the country any the worse for it?

At the end of that live-long day the American people are left in a matrix of lies so thick and sticky that all the de-greasing agents supposedly vested in freedom of the press will not avail to liberate them, and they are suspended like little morsels of winged prey to be sucked dry by the descending spiders of crony capital.

Bottom line: the taper so far is just  $1 billion shy of being completely fake (so far as anyone knows), a magician’s mis-direction from the real action of the gag, which was removing the previous “threshold” of a 6.5 percent unemployment figure for raising interest rates — in other words, promising ZIRP (zero interest rate policy) forever! That would green light a never-ending continued carry trade (i.e. looting operation) of Too-Big-To-Fail-or-Jail primary dealer banks extracting “free” money from the Fed window for conversion, abracadabra, into, say, student loans at 5 percent, guaranteed to enslave the generation now coming into adult flower. (The catch there being that they might flower into revolutionaries eager to string up such bankers from every lamp post in the Hamptons.)

I know there is a lot of confusion “out there” about what constitutes inflation — is it a so-called “monetary phenomenon” or just shit costing more? — but that’s probably too fine a distinction for “folks” (to use the president’s favorite term) who can’t pay five bucks for a jar of peanut butter. The price of everything except the yellow junk called gold, seems to be shooting up. Pretty soon, they’ll be using that worthless gold to solder the drain pipes on bathroom fixtures out where the housing starts roam.

Which brings us to the interesting question: exactly what mysterious entities have been systematically pounding the price of the yellow stuff down in the PM markets like Tony Soprano’s crew “tuning up” some pathetic vic with thirty-inch lengths of re-bar and a fungo bat? And, per corollary, who are the anonymous agents yanking the equity indexes such as we saw on Wednesday, December 18, when a holy host of stock shorts was magically deployed in anticipation of Ben Bernanke’s taper announcement so as to inspire a short-covering mega-rally when he opened the hole in his beard? What I wonder: if we have so much fabulous surveillance technology, why doesn’t some enterprising nerd team find out who’s behind all these pushing-pullings, yanking-and-crankings? Where is the Snowden of the financial markets who will unmask these actors?

Let’s cut to the chase. You heard it here: not only will the Fed eventually (i.e. soon) fail to taper in any meaningful sense; before this is over they will ramp up the purchases of worthless securities beyond $100 billion a month through every back door and trap door in the infamous Eccles Building, including perhaps Janet Yellen’s dainty fundament. The inflation — whatever that is — is sitting out there waiting behind the Hoover Dam of the Fed’s balance sheet. I wouldn’t want to be in Las Vegas when the first cracks appear on it. Merry Christmas everyone.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/joCmUfNpDjE/story01.htm Tyler Durden

Submitted by Howard Kunstler of Kunstler.com,

And so in his valedictory, Federal Reserve chief Ben Bernanke pulls one last dead rabbit out of his hat — it suffocated while the head-fake taper percolated in Ben’s brain lo these many months of jive talkin’. As the year turns, the central bank will supposedly monetize $10 billion less debt per month — $75 billion down from $85 billion — with $5 billion each deducted from the US Treasury stream and the rotten mortgage barrel. Was there a catch?

You could say that. For instance, what to make of the curious report out of the American Enterprise Institute by John H. Makin saying that the Fed’s actual purchase of debt paper amounted to an average $94 billion a month through the year 2013, not $85 billion? I have averred often in this space to the Fed’s ability to conduct back-door buying operations of all kinds of janky financial crapola — and in a world where claims on promises to pay hugely exceed anyone’s ability to pay or re-pay, there’s as much of it out there as there are plastic grocery bags floating in the horse latitudes of the Pacific Ocean. The Fed can hose up bad paper all the live-long day and apparently get away with mis-reporting what it is doing, and is the country any the worse for it?

At the end of that live-long day the American people are left in a matrix of lies so thick and sticky that all the de-greasing agents supposedly vested in freedom of the press will not avail to liberate them, and they are suspended like little morsels of winged prey to be sucked dry by the descending spiders of crony capital.

Bottom line: the taper so far is just  $1 billion shy of being completely fake (so far as anyone knows), a magician’s mis-direction from the real action of the gag, which was removing the previous “threshold” of a 6.5 percent unemployment figure for raising interest rates — in other words, promising ZIRP (zero interest rate policy) forever! That would green light a never-ending continued carry trade (i.e. looting operation) of Too-Big-To-Fail-or-Jail primary dealer banks extracting “free” money from the Fed window for conversion, abracadabra, into, say, student loans at 5 percent, guaranteed to enslave the generation now coming into adult flower. (The catch there being that they might flower into revolutionaries eager to string up such bankers from every lamp post in the Hamptons.)

I know there is a lot of confusion “out there” about what constitutes inflation — is it a so-called “monetary phenomenon” or just shit costing more? — but that’s probably too fine a distinction for “folks” (to use the president’s favorite term) who can’t pay five bucks for a jar of peanut butter. The price of everything except the yellow junk called gold, seems to be shooting up. Pretty soon, they’ll be using that worthless gold to solder the drain pipes on bathroom fixtures out where the housing starts roam.

Which brings us to the interesting question: exactly what mysterious entities have been systematically pounding the price of the yellow stuff down in the PM markets like Tony Soprano’s crew “tuning up” some pathetic vic with thirty-inch lengths of re-bar and a fungo bat? And, per corollary, who are the anonymous agents yanking the equity indexes such as we saw on Wednesday, December 18, when a holy host of stock shorts was magically deployed in anticipation of Ben Bernanke’s taper announcement so as to inspire a short-covering mega-rally when he opened the hole in his beard? What I wonder: if we have so much fabulous surveillance technology, why doesn’t some enterprising nerd team find out who’s behind all these pushing-pullings, yanking-and-crankings? Where is the Snowden of the financial markets who will unmask these actors?

Let’s cut to the chase. You heard it here: not only will the Fed eventually (i.e. soon) fail to taper in any meaningful sense; before this is over they will ramp up the purchases of worthless securities beyond $100 billion a month through every back door and trap door in the infamous Eccles Building, including perhaps Janet Yellen’s dainty fundament. The inflation — whatever that is — is sitting out there waiting behind the Hoover Dam of the Fed’s balance sheet. I wouldn’t want to be in Las Vegas when the first cracks appear on it. Merry Christmas everyone.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/joCmUfNpDjE/story01.htm Tyler Durden

With both current conditions and future expectations indices jumping higher, the UMich consumer confidence headline final print rose at its equal fastest pace since Sept 2009. The surge in current conditions – the largest since Dec 2008 – has lifted it back to the highest level since July 2007. If there was anything to note that took the shine off such an exuberant surge it's the fact that the headline number did actually miss expectations (3rd miss of last 4) and the final outlook data dropped from the preliminary print. As we have noted before, it is confidence that 'inspires' the multiple-expanding hope as fundamental reality fades – bulls better hope it's different this time as we hit the year's highs in confidence.

Current conditions spiked as much as theu did off the post-Lehman collapse…

 

and while the index overall is back at multi-year highs, we have missed 3 of the last 4 months…

 

As a gentle reminder, as we have noted previously – this move in confidence is key…

But, it's all about confidence… investors will not be willing to pay increasing multiples unless they are confident that the future streams of earnings are sustainable and forecastable… And simply put, the current levels of Consumer Sentiment need to almost double for the US equity market tp approach historical multiple valuation levels…

 

 

 

and the cycle appears to be shifting…

Via Citi,

Is consumer confidence set to turn?

Consumer Confidence is once again following a dynamic where we see it move higher for 4 years and 4 months before beginning to collapse

• Moves higher from 1996-2000 with a smaller dip halfway through in October 1998
• Moves higher from 2003-2007 with a smaller dip hallway through in October 2005
• Moves higher and so far tops out in June 2013. Also sees a small dip halfway through in October 2011.

 

Higher yields do not help confidence…

 

A sharp rise in mortgage rates has a negative feedback loop to consumer confidence. For those families and individuals that were now looking/able to enter the housing market, the recent spike in rates acts as a headwind.

 

In addition to the economic backdrop, there is plenty of tail risk as we head into the end of the year. Oil prices have been rising since the summer began (and in reality since the Summer of 2012), partially due to geopolitical risks which are very much “top of mind.” A bigger spike due to a supply shock would choke the economic recovery.(In our view)

In the US, the appointment of a new Fed Chairman and the upcoming budget/debt ceiling debates are likely to bring added volatility. Tapering itself can also induce concern as the “Bernanke put” is being removed from markets.

In Europe, many of the structural problems related to the single currency union have not actually been addressed and the peripheral countries could still create turmoil going forward (see Fixed Income section focusing on Italy in particular for more on this). There has also been little concern with both the German elections and the German Court decision on the constitutionality of the OMT program. A surprise in either of these could be cause for concern.

Emerging Markets are still not out of the woods yet as growth has been weak relative to expectations and countries with current account deficits are beginning to feel pressure in their FX and Bond markets. This is an issue we believe is only starting to develop which we will continue to expand on at later dates.(We have also looked at this in our EM FX section this week)

Overall, the weak economic backdrop, poor housing recovery and potential for tail risk events over the next few months suggest that we have topped out in Consumer Confidence, a warning sign for equity markets.

 

The relationship between Consumer Confidence is clear, and IF June did mark the high and Confidence continues to decline, then we would expect to see that translate to weakness in the equity markets. The removal of the “Bernanke put” only adds to this concern.

A major turn has taken place in equity markets on average four months after Consumer Confidence turns, which would point to a decline beginning around September-October. As we have previously expressed, we remain of the bias that a correction in equity markets on the order of 20%+ is likely this year/ into 2014 and the current dynamics support such a move.

Should we see a decline of that magnitude, it is almost certain that yields would move lower in a rush to safe assets.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/yHzWmIhnFPo/story01.htm Tyler Durden

A month ago, the press was aflutter with rumors that NYPD commissioner Ray Kelly, spurned by mayor-elect Bill de Blasio, would join JPMorgan in a “top security” position. The rumor was since denied and the fate of Kelly was unclear, until today, when the Council on Foreign Relations announced that the NYPD top man would join the CFR as a “distinguished visiting fellow” in turn opening the doors wide for a world of financial opportunities to Kelly. Considering his tenure, where Kelly served as senior managing director of global corporate security at Bear, Stearns & Co. Inc. from 2000 to 2001, he seems like a perfect fit for the CFR.

From CFR:

NYPD Commissioner Raymond W. Kelly to Join CFR as Distinguished Visiting Fellow

Raymond W. Kelly, commissioner for the New York Police Department (NYPD), will join the Council on Foreign Relations (CFR) as a distinguished visiting fellow. Kelly will be joining CFR in early January and will be based at the organization’s headquarters in New York. He will focus on counterterrorism, cybersecurity, and other national security issues.

“Ray Kelly spearheaded the modernization of the New York Police Department. The result is that crime is down and the NYPD’s counterterrorism capabilities are second to none. We are excited and proud to have his experience, expertise, and judgment at the Council,” said CFR President Richard N. Haass.

As the first and only police commissioner to serve under New York City mayor Michael R. Bloomberg, from 2002 to 2014, Kelly presided over the country’s largest municipal police force, seeing violent crime decrease from 2001 levels by 40 percent. He created the first counterterrorism bureau of any municipal police department in the country, as well as a global intelligence program that operates in eleven foreign cities.

Kelly will leave the NYPD as the longest-serving police commissioner in the city’s history. He also served as New York City police commissioner from 1992 to 1994, under then mayor David N. Dinkins, and is the first person to serve in two nonconsecutive mayoral administrations. Kelly served in twenty-five different commands before being named commissioner, spanning a forty-three–year career with the NYPD.

Previously, Kelly served as senior managing director of global corporate security at Bear, Stearns & Co. Inc. from 2000 to 2001. From 1998 to 2001, he was commissioner of the U.S. Customs Service. He also served as undersecretary for enforcement at the U.S. Treasury Department, the third–highest ranking position in Treasury at the time. From 1996 to 2001, Kelly was vice president on the board of the international police organization Interpol.

In 1995, President Clinton appointed Kelly director of the State Department’s International Police Monitors mission, tasked to restore order in Haiti following the return of then president Jean-Bertrand Aristide.

Kelly received his undergraduate degree from Manhattan College. He is also a lawyer and holds a law degree from St. John’s University School of Law and a masters of laws from New York University School of Law. Kelly also holds a masters of public administration from the Kennedy School of Government at Harvard University.
Kelly served in the U.S. Marine Corps and Reserve for thirty years and is a combat veteran of Vietnam. He retired with the rank of colonel.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/14S9TOdMacY/story01.htm Tyler Durden

Learn How To Protect Your Savings From Bail-Ins and Deposit Confiscation(11 pages)

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Today’s AM fix was USD 1192.75, EUR 871.957 and GBP 729.466 per ounce.
Friday’s AM fix was USD 1,195.00, EUR 875.33 and GBP 731.69 per ounce.

Gold rose 0.85% and silver rose 0.74% on Friday. Gold made gains Friday but still finished the week 2.8% lower. Gold fell back below $1,200 an ounce today as technical selling and year end book squaring led to price falls.

Gold in U.S. Dollars, 1 Month – (Bloomberg)

Prices were slightly higher in Asian trading overnight as physical demand picked up in Asia and holdings of the SPDR Gold Trust rose 5.40 tonnes to 814.12 tonnes on Friday – the first inflow since November 5.

Gold in U.S. Dollars, 1 Year – (Bloomberg)

Volumes traded on the increasingly important Shanghai Gold Exchange (SGE) overnight on their benchmark 99.99% pure gold contract were a robust 14.83 tonnes. Chinese premiums edged up $2 – from $16 on Friday to $18 today.

Allegations that banks are rigging the gold and silver markets continue to gain credence and Bloomberg have published an article by Rosa Abrantes-Metz entitled‘How to Keep Banks From Rigging Gold Prices’ (see article including charts below).

Rosa Abrantes-Metz concludes that gold prices may be manipulated and gives evidence to support her assertion. Abrantes-Metz is adjunct associate professor at New York University’s Stern School of Business and a director in the antitrust, securities and financial regulation practices of Global Economics Group.

Falling gold prices despite robust physical demand this year, especially in China, have intensified allegations that gold prices are being manipulated lower. This is the contention of the Gold Anti-Trust Action Committee (GATA), influential blog Zero Hedge and others who contend that bullion banks and central banks may be intervening and surreptitiously manipulating gold prices lower in order to maintain faith in fiat currencies.

It is an important debate and one that has ramifications not just for the gold and silver market but for markets in general and for free market capitalism.

Rosa Abrantes-Metz, Director of Global Economics Group

Abrantes-Metz’s article shows how what was once dismissed as an outlandish “conspiracy theory” and the proponents of the theory laughed at as paranoid tin foil hat wearers, is now not considered quite so outlandish. This is especially the case, given the fact that banks have been found to be manipulating and rigging many markets and governments are openly active in currency and especially bond markets today.

As long ago as two years ago, the assistant editor of the Financial Times, Gillian Tett wrote in that paper that it would be “foolish” to “deride or ignore” the Gold Anti-Trust Action Committee (GATA) and their allegations regarding manipulation of the gold market.

Tett is an award-winning journalist and author and one of the most astute observants of markets and finance in the world today. Yet her article failed to lead to a wider debate and went down the ‘memory hole.’ As many positive gold facts, figures and developments have done in recent years.

Tett acknowledged that central banks intervene in and manipulate interest rates and her article explored whether central banks might also be manipulating gold prices.

“For my money, though, I think there are at least two reasons why it would be foolish simply to deride or ignore GATA, “ Tett concluded. She acknowledged that some of GATA’s points “have at least a grain of truth”.

Gillian Tett, Assistant Editor, Financial Times

“Even if you find it hard to believe that central bankers would be dastardly enough to create a plot – or competent enough to do what Gata claims – the fact is that global commodity markets are pretty murky, central banks are often opaque and western rhetoric about “free” markets is often hypocritical. Those issues merit far more debate, not just among journalists, but central bankers too.”

Abrantes-Metz article is in a similar vein and may signal the beginning of a real debate about the allegations made about gold price manipulation that have yet to be rebutted.

How to Keep Banks From Rigging Gold Prices by Rosa Abrantes-Metz

Authorities around the world are gradually piecing together a shocking picture of how banks have manipulated benchmarks that influence the price of everything from mortgage loans to foreign currencies.

Another area deserves their scrutiny: gold and silver.

In recent weeks, Bloomberg News and others have reported on concerns, among market participants and regulators, that the process for establishing the price of gold may lend itself to insider trading and other forms of unfair dealing. The available evidence strongly suggests manipulation and, given the structure of the market, possibly collusion.

The price-setting mechanism, known as the fixing, provides an easy vehicle for manipulation. Twice every business day in London, representatives of five banks and some select clients participate in a phone call in which offers to buy and sell gold are put forward. These calls determine the morning and afternoon gold fixings, which serve as the benchmark for trillions of dollars in transactions around the world. Silver fixings work similarly, with only three banks involved.

Such direct communication is conducive to collusive pricing, especially when the group of participating competitors is very small. We now know that collusion distorted both the Libor and Euribor interest-rate benchmarks, which involved many more participants. In those cases the coordination occurred through e-mails and instant messages. In the case of gold and silver, an organized live call allows for real-time signaling of the desired prices, obviating the need for additional contacts.

One needn’t look far for a motive. The participating banks all stand to gain both from using the privileged knowledge they glean during the fixing process and from influencing the fixing itself. Aside from trading in the spot markets for gold and silver, they may have significant derivatives positions tied to the benchmarks. The system isn’t set up to identify, let alone deter, such activity. It is the participating banks themselves that administer the gold and silver benchmarks.

So are prices being manipulated? Let’s take a look at the evidence. In his book “The Gold Cartel,” commodity analyst Dimitri Speck combines minute-by-minute data from most of 1993 through 2012 to show how gold prices move on an average day (see attached charts). He finds that the spot price of gold tends to drop sharply around the London evening fixing (10 a.m. New York time). A similar, if less pronounced, drop in price occurs around the
London morning fixing. The same daily declines can be seen in silver prices from 1998 through 2012.

For both commodities there were, on average, no comparable price changes at any other time of the day. These patterns are consistent with manipulation in both markets.

It’s extremely odd that the prices of gold and silver are still based on such an archaic and exclusive system. Whether or not authorities seek and find conclusive evidence of manipulation, they should learn the lesson of the London interbank offered rate and reform the gold and silver markets in a way that will deter such behavior. Both metals are highly liquid commodities, so their benchmark prices could easily be set by observing actual trades. To ensure reliability, the process should be overseen by an independent institution with the appropriate governance structure and minimal conflicts of interest.

The best way to restore confidence in financial benchmarks is to remove the means, motive and opportunity for abuse.

It is an important debate as increasingly governments and central banks are distorting financial markets through constant interventions which could lead to the financial system itself being impaired.

In the western world, we have seen interest rates cut close to zero, capital injections and bank bailouts, lending guarantees, saving and deposit guarantees, favouring certain banks and institutions over others, banning short selling and now the latest policy initiative is again bailing out banks but this time bailing in depositors inbail-ins.

At the same time competitive currency devaluations are taking place globally with central banks debasing currencies. We also see outright intervention in currency markets in order to lower the value of national and supranational currencies.

Japan is the glaring example of this and Switzerland’s ‘pegging’ of the Swiss franc was in the same vein. With governments surreptitiously and openly manipulating and debasing their currencies, it would seem logical that some governments might have an interest in not seeing gold and silver prices soar.

Surging gold prices are a vote of no confidence in fiat paper currencies and government and central banks stewardship of these currencies.

This is especially the case with the US dollar as the global reserve currency and all governments have an interest in maintaining faith in the dollar and in fiat currencies which is a possible motive for intervention in the gold and silver markets.

Learn How To Protect Your Savings From Bail-Ins and Deposit Confiscation(11 pages)

Check Out From Bail-Outs to Bail-Ins: Risks and Ramifications – Includes 60 Safest Banks In World (51 pages)

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/w4sqpaY1IW8/story01.htm GoldCore

The ink on the final Volcker Rule has not dried yet, and already the TBTF armies of lawyers have found all the loopholes in the rule they need to continue prop trading as if nothing has changed. Enter Goldman Sachs which as the WSJ reported, is raising a new fund, to which it will contribute 20% in capital, which will make investments in commercial real estate-backed loans including office buildings, hotels, and shopping centers. “Goldman has raised more than $1 billion for the new fund, according to people briefed on the matter. The fund aims to boost that total to $2 billion, and Goldman expects to invest “up to 20% of total equity commitments,” according to September marketing documents reviewed by The Wall Street Journal.” Just how did Goldman get the green light to allocated up to $400 million for what is clearly a prop trading bet: “because regulators excluded many real-estate loans from the tough restrictions on investment funds, allowing Wall Street firms to continue making concentrated bets—sometimes risky ones—with their own capital.” In other words, when it comes to reflating the precious real estate bubble, anything goes.

The details from the WSJ:

Goldman also is making direct investments in real-estate assets, according to people familiar with the matter. Last year, it formed a partnership to purchase and upgrade a Chicago office building.

 

Both forays appear to navigate around new regulations mandated by the Volcker rule, a provision designed to limit how big banks risk their own capital in pursuit of profits from trading securities and investing in hedge funds and private equity.

 

“There’s no way you’re going to write enough rules to outlaw every conceivable type of risky investment a bank might make,” said Michael Mayo, an analyst with CLSA Americas. “There’s a balance between making sure banks don’t blow themselves up and allowing them to take enough risks to help facilitate economic growth.”

 

The new fund’s focus on real-estate loans, and its status under previous U.S. investment-company laws, leaves it outside the Volcker rule’s definition of hedge funds and private-equity funds, according to the rule and people familiar with Goldman’s fund. The rule did compel Goldman to change the fund’s name, removing the reference to “GS” that appears in a predecessor real-estate debt fund. Now it is called Broad Street Real Estate Credit Partners II, a nod to Goldman’s former headquarters at 85 Broad Street.

Of course, that is not the only Volcker loophole Goldman has found:

In September 2011, it joined forces with investors to buy a portfolio of distressed property loans from a unit of Popular Inc., BPOP +0.79% one of Puerto Rico’s largest banks, for about $173 million, or less than half the unpaid principal balance of the loans, according to Popular.

 

Goldman told investors in marketing documents in September that there is a big opportunity in real-estate lending, citing in fund documents an estimated $1.4 trillion of commercial-real-estate debt set to mature over the next five years. It said there are fewer real-estate lenders than in past years, and that remaining active lenders have a “lower risk tolerance.”

 

The firm also said loans in the first real-estate fund average $121 million, which the documents say are “in excess of competitors and provide a competitive advantage.”

 

As for Goldman’s direct real-estate investments, people familiar with the firm’s thinking said it held its direct debt and stock investments for a long enough time to avoid the label of “proprietary trading,” an activity the Volcker rule limits.

So… held to maturity prop trading? Worked miracles for Zions. But don’t worry: loans, unlike other securities, apparently don’t go down in value and thus can be exempted from all regulation.

Let’s hope this time Goldman times the commercial RE bubble well: the last time around things didn’t work out quite as expected:

Goldman jumped into property investing in the 1990s, buying up distressed loans during the savings-and-loan crisis. Its Whitehall real-estate fund group raised billions of dollars over the years and made splashy equity investments, such as buying Manhattan’s Rockefeller Center in 1996.

 

During the crisis, Whitehall wrote down big losses following top-of-the-market property deals like the Stratosphere, a Las Vegas casino.

 

In an investor letter this September, Whitehall said the equity value of its $4 billion fund that closed in 2007 had been marked down by 59%. That is Goldman’s estimated value of the fund, about 41 cents on the dollar, as reported to its investors.

That’s ok though: the very well connected hedge fund that is Goldman Sachs is insured by the FDIC. Probably thanks to all those Goldman ATMs strewn around the country…

< a href="http://da.feedsportal.com/r/184842095912/u/49/f/645423/c/34894/s/35233f13/a2.htm">

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/VYyQZ7oZOp8/story01.htm Tyler Durden

With still more than half the homeowners with a mortgage in the state of Nevada underwater on their mortage and a hoped for recovery in prices now petering out as ‘investors’ realize banks have completed foreclosures and are set to unload their huge inventories, fear is growing that Las Vegas (and for that matter Atlantic City) could be the next Detroit. However, as FoxNY reports, the nascent dreams of the good old days face an even bigger headwind – that of gambling regulation easements (online gambling for instance) and globalization which are impacting their biggest industries. Time will tell if these two cities will end up like Detroit.

 

Via FoxNY,

With the closure of the recent Atlantic Club Casino Hotel, rumors of the bankrupt Revel being sold to Hard Rock, more than half of the mortgages in Las Vegas under water, casinos opening up all around the country and online gambling legislation underway in various states, it seems as if the reasons for the very existence of Atlantic City and Las Vegas are in serious jeopardy.

 

…

 

However in the late 1980s, a landmark ruling considered Native-American reservations to be sovereign entities not bound by state law. It was the first potential threat to the iron grip Atlantic City and Vegas had on the gambling and entertainment industry.

 

…

 

Then Macau, formally a colony of Portugal, was handed back to the Chinese in 1999. The gambling industry there had been operated under a government-issued monopoly license by Stanley Ho’s Sociedade de Turismo e Diversões de Macau. The monopoly was ended in 2002 and several casino owners from Las Vegas attempted to enter the market.

 

Under the one country, two systems policy, the territory remained virtually unchanged aside from mega casinos popping up everywhere. All the rich ‘whales’ from the far east had no reason anymore to go to Las Vegas to spend their money.

 

…

 

Then came their biggest threat.

 

As revenue from dog and horse racing tracks around the United States dried up, government officials needed a way to bring back jobs and revitalize the surrounding communities. Slot machines in race tracks started in Iowa in 1994 but took off in 2004 when Pennsylvania introduced ‘Racinos’ in an effort to reduce property taxes for the state and to help depressed areas bounce back.

 

As of 2013, racinos are legal in ten states: Delaware, Louisiana, Maine, New Mexico, New York, Ohio, Oklahoma, Pennsylvania, Rhode Island, and West Virginia

 

…

 

From June 2012 to June 2013, Aqueduct matched a quarter of Atlantic City’s total gaming revenue from its dozen casinos: $729.2 million compared with A.C.’s $2.9 billion. It has taken an estimated 15 percent hit on New Jersey casino revenue and climbing.

 

…

 

The situation in Vegas isn’t much better. The Great Recession of the late 2000s hit Las Vegas hard. As the recession wore on, and as gambling received approval in various jurisdictions throughout the United States, folks realized they didn’t need to travel thousands of miles just to gamble.

 

…

 

More than half of all home owners with a mortgage in the entire state of Nevada owe more than their homes are worth.

 

…

 

But according to Bloomberg.com this so-called bubble is simply from banks completing their foreclosures and holding onto inventory.  The increased value of properties has been attracting various investors and speculators, which is helping fuel this latest rise in real estate prices. 

 

Experts say once banks start releasing the foreclosed homes into the market to start selling them, the prices may begin to get depressed again.

 

…

 

One local said “The reality is, people just won’t fly to the middle of a desert to play some slots, watch shows and sit down for some blackjack when they can drive right near their town or city, or play legally online.”

 

And now it looks like the feds may soon allow online gambling across the United States.

 

…

 

With this in mind, it seems the niche that Las Vegas and Atlantic City once offered as a gambling and entertainment hub is heading toward the dustbin of history.

 

Time will tell if these two cities will end up like Detroit. However, the fact that they are losing their biggest industries to major competition, much like Detroit did, with depressed housing, casinos bankrupting/closing and businesses fleeing, makes their fate seem eerily similar.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/tl6azN97aDo/story01.htm Tyler Durden

Moments ago the BEA reported the latest, November, data on Personal Income and Spending. For the second month in a row, Income, which rose a modest 0.2%, missed expectations which were at 0.5% for the month, even as Personal Spending rose by 0.5% – driven by a 2.2% increase in spending on Durable Goods even as spending on Nondurables was unchanged, in line with expectations. As a result, the US consumers dug even deeper into their meager savings, and in November the savings rate dropped once again, sliding from 4.5% to 4.2%, the lowest since January 2013, after hitting a high of 5.2% in September on “government shutdown uncertainty.”

But perhaps most important, is that Real Disposable Income rose by just 0.1% in November, following a -0.2% drop the prior month. As a result, and as the chart below shows, the annual growth in Real Disposable Income has once again resumed its downward trajectory, and at the current pace of declines, it will likely turn negative as soon as next month.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/bRKf-M7_-eY/story01.htm Tyler Durden

The following graphic from @Amazing_Maps struck us in its stunning comparison between Greater London and the Greater Tokyo Area superimposed over England.

With a population of around 36 million, making it by far the world’s most populous metropolitan area, it covers an area of approximately 13,500 km² (5,200 mi²), giving it a population density of 2,642 person/km² – which is more than twice the population density of Bangladesh.

The area has the largest metropolitan economy in the world, with a total GDP (nominal) of approximately US$1.9 trillion (¥165 trillion) in 2008.

And visually:

Souce: Amazing Maps

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/aHyj-JjaItc/story01.htm Tyler Durden