German bank that almost failed now being paid to borrow money

The 12.5 hours spent crossing the Pacific on Qantas flight 27 feels like going through a wormhole.

The flight departs Sydney, Australia at 12:50pm and arrives to Santiago, Chile the same day at 11:20am. In other words, the plane lands 90 minutes before it departs.

When I landed yesterday, the captain came on the P.A. and said, “Ladies and Gentlemen, I have good news; if you enjoyed Wednesday March 9th, it’s still Wednesday March 9th!”

It really does feel like going back in time.

This feeling was only reinforced when I whipped out my phone and saw that German bank Berlin Hyp had just issued 500 million euros worth of debt… at negative interest.

I wondered if I really did go through a time warp, because this is exactly the same madness we saw ten years ago during the housing bubble and the subsequent financial crisis.

To explain the deal, Berlin Hyp issued bonds that yield negative 0.162% and pay no coupon.

This means that if you buy €1,000 worth of bonds, you will receive €998.38 when they mature in three years.

Granted this is a fairly small loss, but it is still a loss. And a guaranteed one.

This is supposed to be an investment… an investment, by-the-way, with a bank that almost went under in the last financial crisis.

It took a €500 billion bail-out by the German government to save its banking system.

Eight years later, people are buying this “investment” that guarantees that they will lose money.

The bank is now effectively being paid to borrow money.

We saw the consequences of this back in 2008.

During the housing bubble, banking lending standards got completely out of control to the point that they were paying people to borrow money.

At the height of the housing bubble, you could not only get a no-money down loan, but many banks would actually finance 105% of the home’s purchase price.

They were effectively making sure that not only did you not have to invest a penny of your own money, but that you had a little bit of extra cash in your pocket after you bought the house.

Paying people to borrow money is just crazy, whether it’s homebuyers, bankrupt governments, or banks.

Global insurance giant Swiss Re calculated that roughly 20% of all government bonds worldwide now have negative yields. And over 35% of Eurozone government bonds have negative yields.

(They would know—along with pension funds and banks, insurance companies are some of the largest buyers of bonds.)

With this deal, Berlin Hyp becomes the first non-state owned company to issue euro-denominated debt at a negative yield.

They won’t be the last.

We’re repeating the same crazy thing that nearly brought down the system back in 2008—paying people to borrow money.

The primary difference is that, this time around, the bubble is much bigger.

Back then, the subprime bubble was “only” $1.3 trillion.

Today, conservative estimates show that there’s over $7 trillion in negative rate bonds.

What could possibly go wrong?

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Is The Establishment Rigging Ohio’s “Intentionally Confusing Ballot” Against Trump?

Submitted by Mac Slavo via SHTFPlan.com,

The GOP has a history of manipulating the primary, but this time they are going all out to destroy Trump. Is it any wonder that Ohio’s ballot – which will be cast next week – is so confusing that Trump may lose votes just as a result of the ballot’s design?

 

It is the home state of Governor John Kasich – a lackluster candidate who, nonetheless, was expected to win Ohio, and keep the delegates for the establishment side. But according to the polls, Trump is beating Kasich in Ohio AND Rubio in Florida – and they are big delegate, winner take all states. However, Kasich is close enough in his homestate, that a bit of meddling could change things. If Trump wins both, the GOP insiders have even less of a chance to trip up The Donald.

 

But if the Ohio GOP ballot leaves as many people scratching their heads as the newscaster in the video below, anything could happen in Ohio. Polls will not translate into votes if the machines are designed to deceive.

You Won’t Believe What They Did to the Ohio Ballot to Stop Trump

Authored by Piper McGowan and originally published at The Daily Sheeple.

We all know the elite are on the warpath against Donald Trump, with everyone from pundits, to major world leaders, to the Pope speaking out against him. Newt Gingrich recently said it’s because Trump isn’t part of the secret societies and hasn’t taken the initiation rites.

Regardless, Trump has received a groundswell of support from the average conservative American, winning state primaries left and right. Ohio’s primary is coming up on March 15, and it’s a big one because it’s a “winner takes all” state.

Well now it’s being alleged that Ohio’s GOP has intentionally set up a confusing ballot in a bid to try to make sure Donald Trump does not win.

The Dem ballot has one place for voters to mark their choice for president. Period.

The Republican ballot in Ohio this year apparently has two, leaving a lot more questions than answers about whether or not voters will understand how it works.

Take a look, (via the Conservative Treehouse):

ohio-vote

Is the ballot intentionally confusing by design?

 

Given the previous discussions on State Party shenanigans, and the intent of state republican party leadership to hold complete influence over their delegate’s decision-making, many believe the answer is “probably”.

Look at that ballot. It definitely raises a lot of questions… that aren’t answered on the ballot.

Do the majority of voters know the difference between “Delegates-at-Large” and “District Delegates”? Does a person need to choose their candidate twice, or are they only supposed to chose once? Which is right? What if they pick a different candidate in each box, do they cancel each other out? What if they pick someone in the first box and not the second, or vice versa?

Why the confusing GOP ballot, Ohio?


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US Treasury Yields Jump As Europeans Dump Bunds

Well we warned you. Bund yields were extremely optimistic about Draghis’ bazooka.. and were disappointed.

 

As traders dumped their Bund bets so this has sent Treasury yields jumping to the highs of the day (compressing the UST-Bund spread by 12bps)…

 

as it appears Draghi has driven a great rotation (for now) into IG credit from Treasuries.

 

But it seems the flow has stopped (as yields leg higher)


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Colorado Springs Shuts Down Its Cannabis Clubs…in Eight Years

After Colorado legalized marijuana, Denver became the center of the newly legal industry, accounting for more than a third of the state’s recreational retail licenses. Yet local politicians in the state capital still have not seen fit to allow cannabis consumption in any setting other than private residences. Meanwhile, Colorado Springs, a considerably more conservative city that has banned the sale of recreational marijuana, boasts about 15 cannabis clubs. That surprising situation now has an expiration date: Thanks to a ban that the Colorado Springs City Council approved by a vote of 6 to 3 on Tuesday, the clubs must close by March 22, 2024.

The Colorado Springs Gazette says the ban’s supporters complained that “many clubs charged ‘membership dues’ or collected ‘donations’ in trade for marijuana,” thereby violating the city’s ban on recreational sales. Such arrangements might also violate state law, depending on how clear the quid pro quo is. Under Amendment 64, Colorado’s legalization initiative, adults 21 or older are allowed to give up to an ounce of marijuana at a time to other adults “without remuneration.” But sales are limited to licensed stores, where on-site consumption is prohibited.

The legal status of bring-your-own-cannabis clubs is a matter of dispute. State law prohibits “consumption that is conducted openly and publicly,” which does not seem to cover a private, members-only club. But Denver officials maintain that any business to which you can gain entry by paying a fee qualifies as open and public. A local ballot initiative proposed by two of Amendment 64’s main backers would have changed that policy, allowing cannabis consumption in businesses that exclude people younger than 21. They withdrew that initiative last September in the hope of negotiating a compromise with the city council.

Since the Colorado Springs ban does not take effect for eight years, it may yet be reversed by the city council or by a local ballot initiative. Jayman Johnson, owner of the Speakeasy Vape Lounge and Cannabis Club on East Bijou Street, threatened to run against Councilman Keith King, a ban supporter who represents Johnson’s district. According to the Gazette, King, who said he supported the ban mainly because residents currently have no say over whether clubs open in their neighborhoods, “urged cannabis club supporters to organize and get an initiative on the ballot to try to save their social communities.”

Reason TV covers Colorado’s cannabis consumption conundrum:

Last August I explained how the issue is addressed in the five jurisdictions that have legalized marijuana so far.

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Goldman Turns Bearish: “Relief Rally Was Too Fast, We Do Not Feel Comfortable Taking More Risk”

The market’s volatile swing are clearly too much for the central banker-incubating hedge fund known as Goldman Sachs, because just three days after Goldman said there has “never been a better time to buy S&P calls”, when it said that “our GS-EQMOVE model estimates there is a 21% probability of a 5% up-move over the next month based on the current levels of S&P 500 Free Cash Flow yield, Return on Equity, ISM new orders and US Capacity Utilization“…

 

… moments ago the same Goldman announced that:

the recent relief rally might be short-lived, especially with oil prices now at the upper end of our commodities team’s forecast range for 1H 2016.

and adding that “we make no changes to our asset allocation at this stage as the relief rally has been too fast, in our view. We still do not feel comfortable taking more risk in equities until valuation or growth becomes more attractive.

Gartman flip-flopping within 3 days is normal, but Goldman? As for the “relief rally” being short-lived, it might be even shorter if Goldman’s various divisions for some reason are unable to communicate with each other on how to best fleece muppets.

This is what else Goldman thinks in its latest “recommendation”:

We make no changes to our asset allocation at this stage as the relief rally has been too fast, in our view. We still do not feel comfortable taking more risk in equities until valuation or growth becomes more attractive. Although we believe the market has been too pessimistic, we think a key driver of the relief has been higher oil prices. With oil at the upper end of our commodities team’s forecast range for 1H 2016, it could drive further volatility as we do not believe oil weakness is necessarily over. We still believe credit remains attractive, particularly in Europe, where further ECB easing and good credit fundamentals remain supportive. Although US high yield has rallied recently, over the near term we remain Neutral US HY within credit. Despite seeing fundamental value in US HY spread levels, downside risk to oil makes us tactically cautious (see Global Markets Daily: Oil and HY redux, March 8, 2016). We remain Underweight bonds given the relatively low level of yields, potential for reflation, and our economists’ expectation that the Fed rate hike cycle continues in June. We retain our relative preference for German Bunds over US Treasuries as policy divergence should play out over the coming months and drive the Treasury-Bund rate differential significantly wider.

Some more observations:

Volatility potential in a central bank filled month…should not be too unfamiliar given past moves
The ECB meets this Thursday (March 10), with the BoJ and Fed meeting next week…. Measuring how frequent extreme asset price movements have been in the past, the figure on the left below plots the average number of days over the prior 12 months with return moves (positive or negative) of 3 standard deviations or more by asset class, using rolling 1-year standard deviations. Since 1986, no period besides 2008-09 has had a larger number of relatively extreme asset price movements than we have experienced recently. This has been particularly true for the 10-year government bond and FX markets.

 

The figure on the right breaks down extreme movements by region by taking averages of 3-SD return days in Europe and the US across equity, 10y bonds, and IG and HY credit. We find that, of late, large asset price movements in Europe have become more prevalent than in the US, which is somewhat unsurprising given the higher volatility of those markets. EUR/USD has seen significant movements around the period of QE (both in the US and Europe) as policy drove near-term rate differentials and currency moves.

 

 

Notably, assets moving from a low- to high-vol regime are most likely to have a large number of 3-SD return days, as relatively extreme movements are easier to achieve when trailing vol is low, but these extreme days then contribute to raising realized vol. Thus, a decrease in a large number of 3-SD return days may actually signal a transition has occurred from a low- to a higher-volatility regime. We believe we will remain in a high-volatility regime, with no particular asset being immune, until a combination of policy, oil prices and growth stabilise.

How  the ECB plays into this:

In our view, before the ECB may still be too early to enter the front end of the European equity vol curve. Should the ECB meet expectations or surprise, it is likely that short-dated equity vol may come down further, which we think could present an opportunity to go long shorter-dated equity vol in Europe.

Since it is safe to say the ECB massively disappointed, it is now time to play short-dated equity vol, which once again has a green light to surge higher.


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UK Inquiry Finds Gulf “Allies” Sustaining ISIS in the Face of Oil Price Collapse

Screen Shot 2016-03-10 at 9.01.05 AM

Although the extent to which oil-related funding has sustained ISIS over the past couple of years is highly contested, it’s undeniable that the collapse in prices has had a negative cash flow impact on the terror threat du jour. As such, how’s the group sustaining itself in the fact of such a major cash crunch? According to a UK inquiry, we can thank donations from America’s Persian Gulf “allies.”

Of course, none of this will be surprising to Liberty Blitzkrieg readers. I’ve been pointing this out for a very long time. In fact, evidence was already piling up two years ago, as can be seen in the following excerpts from a piece published in June 2014 titled, America’s Disastrous Foreign Policy – My Thoughts on Iraq:

But in the years they were getting started, a key component of ISIS’s support came from wealthy individuals in the Arab Gulf States of Kuwait, Qatar and Saudi Arabia. Sometimes the support came with the tacit nod of approval from those regimes; often, it took advantage of poor money laundering protections in those states, according to officials, experts, and leaders of the Syrian opposition, which is fighting ISIS as well as the regime.

“Everybody knows the money is going through Kuwait and that it’s coming from the Arab Gulf,” said Andrew Tabler, senior fellow at the Washington Institute for Near East Studies. “Kuwait’s banking system and its money changers have long been a huge problem because they are a major conduit for money to extremist groups in Syria and now Iraq.”

Iraqi Prime Minister Nouri al-Maliki has been publicly accusing Saudi Arabia and Qatar of funding ISIS for months. Several reports have detailed how private Gulf funding to various Syrian rebel groups has splintered the Syrian opposition and paved the way for the rise of groups like ISIS and others.

Fast forward two years, and not much has changed. The Guardian reports:

continue reading

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The Democrats’ Deceptive Narrative on Immigration: New at Reason

Last night’s presidential debate illustrated once again the vast differences between Donald Trump’s immigrant-bashing Republican Party and the kinder, gentler Democrats. Instead of fighting over who would deport more people—or speak less Spanish—Hillary Clinton and Bernie Sanders vowed to intervene (even personally!) to help poor, undocumented immigrants.

But are immigration politics really as simple as good guys vs. bad guys?

(Click below for full text and downloadable versions.)

View this article.

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Confirmation Bias and the Science of Psychology

ConfirmationBiasResearchers famously tried to replicate 100 prominent psyhology studies and reported last year in Science that only about 40 percent could be. This scandalous result has recently provoked a defensive backlash from other practitioners who asserted that the Science replicability study itself was flawed and that the reported results of psychological research are, in fact, stronger than its critics have claimed. Even as the controversy has been playing out, a new study finds that one of the more robust results of psychological research may be bunkum. Specifically, the new study to be published in Perspectives on Psychological Science challenges the finding that an individual’s willpower declines as he or she resists various immediate temptations.

During the past two decades, the ego depletion effect has been confirmed by scores of psychological studies using all manner of experimental techniques. However, according to Slate, a new study using 2,000 subjects in experiments across the world that tried to replicate ego depletion has found absolutely no such effect. This is a huge bombshell. As Slate explains:

No sign that the human will works as it’s been described, or that these hundreds of studies amount to very much at all. …

For scientists and science journalists, this back and forth [over replicability] is worrying. We’d like to think that a published study has more than even odds of being true. The new study of ego depletion has much higher stakes: Instead of warning us that any single piece of research might be unreliable, the new paper casts a shadow on a fully-formed research literature. Or, to put it another way: It takes aim not at the single paper but at the Big Idea.

ProgressArgument[Roy] Baumeister’s theory of willpower, and his clever means of testing it, have been borne out again and again in empirical studies. The effect has been recreated in hundreds of different ways, and the underlying concept has been verified via meta-analysis. It’s not some crazy new idea, wobbling on a pile of flimsy data; it’s a sturdy edifice of knowledge, built over many years from solid bricks.

And yet, it now appears that ego depletion could be completely bogus, that its foundation might be made of rotted-out materials. That means an entire field of study—and significant portions of certain scientists’ careers—could be resting on a false premise. If something this well-established could fall apart, then what’s next? That’s not just worrying. It’s terrifying.

The whole Slate article is well worth your attention.

In his seminal 2005 article, “Why Most Published Research Findings Are False,” Stanford University statistician John Ioannides concluded that “for many current scientific fields, claimed research findings may often be simply accurate measures of the prevailing bias.”

Might I suggest that psychology and, in fact, the rest of science would benefit from some really focused research on the problem of confirmation bias?

For more background, see my Reason feature “Broken Science.

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Trump Supporter Sucker-Punches Protester, Police Respond by Handcuffing Protester

Multiple video clips have emerged showing an anti-Donald Trump protester, part of a group being ejected from last night’s Trump rally in Fayetteville, NC, being sucker-punched by a Trump supporter.

Though the incident took place mere feet away from the same law enforcement officials escorting protester Rakeem Jones out of the venue, the officers in question ignored the perpetrator and instead immediately grabbed a stunned Jones, threw him to the ground, and placed him in handcuffs. 

Jones told the Washington Post that he and three companions, “a white woman, a Muslim, and a gay man” went to the rally as a “social experiment.” One of the people in the group, Ronnie C. Rouse, said that as soon as Trump’s speech began, someone in the crowd “singled them out” and moments later a group of eight officers wearing “Sheriff’s Office” uniforms arrived to remove them from the premises. 

With officers both in front and behind him, Jones walked up the stairs, pausing briefly to throw his hands up in mocking defiance of the booing crowd. The video clips show a man wearing a ponytail under a cowboy hat walking toward the aisle, waiting until Jones is within arm’s reach, then decking him with a right cross. Seconds later, the officers yanked Jones up the stairs and forcibly detained him. 

“The police jumped on me like I was the one swinging,” Jones said to the Post. He added, “It’s like this dude really hit me and they let him get away with it. I was basically in police custody and got hit.”

The identity of the man who threw the Moment before a suckerpunch.punch is unknown at this time, but one video shows several officers walking right past him, not even looking in his direction, after he threw the punch. 

In a strange twist, the area’s local law enforcement agencies are all refusing to take responsibility for what happened. The Post reports:

Fayetteville is in Cumberland County, N.C., but an official from the Cumberland County Sheriff’s Office, reached by The Washington Post early Wednesday, said officers from that jurisdiction were not the ones who detained the man. The Fayetteville Police Department also told The Post they did not detain anyone at the rally, held at the city’s Crown Coliseum.

As previously noted here at Reason, violence and threats of violence have become an increasingly common feature of Trump rallies, and disrupting a Trump event can technically be prosecuted as a federal crime

The Republican frontrunner has also mused publicly that he’d like to punch a protester in the face, insinuated that people who disrupt his events might deserve to get “roughed-up,” and encouraged his supporters to forcibly remove anti-Trump demonstrators, telling one crowd he’d “defend you in court.”

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