Tag: news

Wolf Richter   www.wolfstreet.com   http://ift.tt/Wz5XCn

In its 2014 Annual Report to Congress, the US Treasury’s Office of Financial Research, which serves the Financial Stability Oversight Council, analyzed for our Representatives the “potential threats” to the US financial house of cards. Among the biggest concerns was a financial creature that has boomed in recent years. The Fed, FDIC, and OCC have warned banks about it since March 2013. But they’re just too juicy: “leveraged loans.”

Leveraged loans are issued by junk-rated corporations already burdened by a large load of debt. Banks can retain these loans on their balance sheets or sell them. They can repackage them into synthetic securities called Collateralized Loan Obligations (CLOs) before they sell them. They have “Financial Crisis” stamped all over them.

So the 160-page report laments:

The leveraged lending market provides a test case of the current approach to cyclical excesses. The response to these issues has been led by bank regulators, who regulate the largest institutions that originate leveraged loans, often for sale to asset managers through various instruments. Despite stronger supervisory guidance and other actions, excesses in this market show little evidence of easing.

How did we get here?

Relentless QE along with interest-rate repression by the Fed and other central banks – “accommodative global monetary policy,” the report calls it – caused changes in “risk sentiment,” compressed volatility, and reduced risk premiums. To get a visible yield in an environment where central banks wiped out any visible yield, investors were “encouraged” to take on more and more risk, even for their most conservative holdings, thus moving “out of money market instruments and into riskier assets such as leveraged loans….”

During the “bout of volatility” in September and October, investors sold off these creatures, but it wasn’t nearly enough to dent the vast positions they’d accumulated. “On the contrary,” the report pointed out, “the fleeting nature of the episode ultimately had the effect of reinforcing demand for duration, credit, and liquidity risk, and led many investors to reestablish such positions.”

This came at the wrong time.

The credit cycle has four phases: repair (balance-sheet cleansing), recovery (restructuring), expansion (increasing leverage, weakening lending conditions, diminishing cash buffers), and finally the downturn (funding pressures, falling asset prices, increased defaults). Now the US is “somewhere between the expansion and downturn phases.”

Nonfinancial corporate balance-sheet leverage is still rising, underwriting standards continue to weaken, and an increasing share of corporate credit risk is being distributed through market-based financing vehicles that are exposed to redemption and refinancing risk.

Financial engineering has taken over.

Early on in the credit cycle, corporations borrowed money long-term to replace short-term debt and to fund capital expenditures. Now they use the borrowed money to “increase leverage such as through stock buybacks, dividend increases, mergers and acquisitions, and leveraged buyouts, rather than to support business growth.” And ultra-low interest rates and loosey-goosey lending standards have encouraged corporations to take “on more debt than they can service.”

So the ratio of debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) for the most highly leveraged loans reached 7.7 in October, near the peak in 2007, at the cusp of the Financial Crisis. Large corporate loans with leverage ratios above the regulatory red-line of 6 times EBITDA soared from 15% of corporate bank loans, back when regulators started warning banks about them, to nearly 30% in 2014, exceeding the record set in 2007 before it all went down the tubes:

Why would that be a problem? Because…. “Even an average rate of default could lead to outsized losses once interest rates normalize.”

And the quality of the debt sucks.

Junk debt accounts for 24% of all corporate debt issued since 2008, up from 14% in prior cycles. Over the past year, junk debt “dominated new issuance volumes.” And ominously for the holders of this debt:  Two-thirds of these loans during the current credit cycle lack strict legal covenants to protect lenders, compared to one-third in previous cycles. Once the tsunami of defaults sets in during the downturn, these “covenant lite” loans will lead to lower recovery rates on defaulted debt, thus increasing the losses further.

This chart (2014 data through September, annualized) shows how volume of “highly leveraged loans” (those with a spread of 225 basis points above LIBOR), at nearly $600 billion this year, is about 50% higher than it was at the cusp of the Financial Crisis. And the dreaded covenant-lite loans, oh my:

Now enter CLOs.

The combined issuance of CLOs and leveraged loans has exceeded the peak levels of the last credit cycle, whose downturn phase turned into the Financial Crisis. This buildup in credit risk has frazzled bank regulators, and they have responded harshly, the OFR reported, um, “with guidance and exhortations.”

It may be too little, too late. As the credit cycle enters the downturn phase with the deterioration in corporate credit fundamentals and rising debt levels, “the buildup of past excesses will eventually lead to future defaults and losses.”

But we’re not there, yet.

Yields on leveraged loans and junk bonds, and spreads per unit of leverage, are still at historic lows, the OFR found (though some of it has very recently gone to heck, especially in the energy sector). And “investors are not being compensated for the incremental increase in corporate leverage.”

The increased credit, liquidity, and volatility risks – that “tend to rise simultaneously during periods of stress” – have led to these junk loans being wildly “mispriced.” When they’re repriced during the downturn, investors will lose their shirts.

And “product innovation” has soared, another “hallmark of late-stage credit cycles.” They led to “broader, cheaper access to credit such as exchange-traded, high-yield, and leveraged loan funds; total return swaps on leveraged loans; and synthetic collateralized debt obligations (CDOs).”

Banks, after originating these leveraged loans and repackaging them, increasingly sell them to nonbank lenders, such as institutional investors, pension funds, insurance companies, finance companies, mutual funds, ETF, etc. This process started long before the Financial Crisis – manifested by the collapse and occasional bailout of nonbanks, such as AIG. This chart (data through June 2014) shows this trend of risk being sloughed off to others:

The problem with nonbanks?

They’re not regulated by banking regulators. Even if the Fed, the FDIC, and the OCC crack down on banks with regards to leveraged loans, there is little they can do about nonbanks. And pushed to desperation by the Fed’s near-zero interest rates, nonbanks “engage in riskier deals than banks….”

Short-duration funds, which invest in leveraged loans, have shown the most significant growth. Assets under management have increased ten-fold over the last five years, driven by a search for yield and a hedge against an eventual rise in interest rates.

But banks can still be at risk when “a sudden stop in the leveraged lending market” – for example, when investors in ETFs and mutual funds get spooked – forces banks that originated these leveraged loans to hang on to them.

Yet a “significant amount of this risk continues to migrate to asset management products,” including mutual funds and ETFs that people have in their retirement funds. And investors in these products are largely on their own. When redemptions and fire sales start cascading thorough the system – the dreaded “structural vulnerabilities” – all heck could once again break loose. And that “adds urgency to the discussion” of how “a poorly underwritten leveraged loan that is pooled with other loans or is participated with other institutions may generate risks for the financial system.” Not to mention how it will savage the retirement portfolios of unsuspecting retail investors.

And some of this has already started happening in the energy sector. Revenues are plunging. Earnings will get hit. Liquidity is drying up. And stocks got eviscerated. Read…  Oil and Gas Bloodbath Spreads to Junk Bonds, Leveraged Loans. Defaults Next  

via Zero Hedge http://ift.tt/1vGVckh testosteronepit

Submitted by James E Miller via Mises Canada,

Late in his life, Murray Rothbard had a law that stated: “people tend to specialize in what they are worst at.” While the aphorism is definitely true about some specialists, more often than not the reverse is accurate. Artists have terrible opinions on politics. Managers of nonprofit organizations are fiscally irresponsible. Politicians don’t understand the profit incentive. Academics haven’t a clue about pricing or marketing.

American comedian Chris Rock is another violator Rothbard’s law. His flair for offensive but incisive comedy is well known. But his knowledge in other fields is lacking, and in some cases utterly misinformed. In a recent interview with Frank Rich of New York Magazine, the stand-up joke spitter has it all wrong when it comes to economics. No surprise there; the entertainment industry, despite raking in billions every year, is the brain trust of economic ignorance.

Mr. Rock’s main target of animus are those just like him: rich, well-off individuals. He tells Rich, “If poor people knew how rich rich people are, there would be riots in the streets.” Evidence for this assertion? Rock cites the “Virginia Airlines first-class lounge,” which offers expert mixologists (fancy for “bartender”) and free food. Apparently alcohol and sustenance priced into a plane ticket equate to robber barons pampered in luxury before jetsetting across the globe.

The idea that poor or working-class folks are itching on the sidelines, waiting to riot over what little crumbs are tossed to them from rapacious capitalists is an idea based in fantasy. Rarely does the proletariat secretly wish to overthrow their alleged oppressors. Instead, the middle and lower class yearn to enter the higher echelons of the income brackets. They are too busy working to bother with the ontology of class conflict and the end of history. The distraction acts as a blessing. Violent revolutions by the underclass often result in terrible things: the guillotine, the Bolsheviks, military coups, and senseless violence.

That Rock thinks his fellow Americans who make under six-figure salaries are brimming with hatred for the rich tells more about his out-of-touchness with the average guy than his closeness. This speaks to the larger issue of his own epistemology and the pompous way in which he undermines the views of voters. When asked why Americans “seem to want a Bush or a Clinton” in the White House, Rock replies that it’s “hard for me to figure out people voting against their own self-interests.”

Talk about fatal conceit. Rock may fancy himself a step above average intelligence and a keen observer of human affairs – which his comedy, at times, seems to corroborate – but his obvious disdain for those who vote conservative is supercillious to the highest degree. How does he know what the best interest is for everyone? How does he understand the motives behind every vote cast?

Chris Rock may be able to crack a joke but he isn’t a mind reader. He suffers from the same kind of vain arrogance so common in Hollywood celebrities. He doesn’t know what’s in the heart of the working guy who goes to the ballot box. The limelight provides attention; not intelligence.

A large part of the interview is focused on Rock’s children, and his difficulty balancing work life with family life. This a noble struggle, and one that many celebrities face. Yet later in the interview, Rock says that it’s “unfair that you can inherit money that you didn’t work for.” He also likens inheritance to racial intolerance passed down through generations – which, to be fair, can result in people being treated unfairly.

The idea that inheritance is some kind of metaphysical evil is thoroughly Marxist. The third plank of the Communist Manifesto is to abolish all rights of inheritance. Of course, if such a dictate were to be implemented, that would spell the end of capital accumulation and rising standards. It would bring about the ruination of Western civilization. While inheritance may seem unfair, it’s a crucial part of elevating time preferences and saving for the future.

Advanced production that breeds material abundance can only be accomplished through deferring consumption. That means putting away money for the future, including the next generation. Capital is the lifeblood of any economy. Without saving and investment, there is no consumption. As Garet Garrett wrote in his magnificent essay “The Revolution Was,” “If you put a ten-dollar bill under the rug instead of spending it, that is capital formation. It represents ten dollars’ worth of something that might have been immediately consumed, but wasn’t.” The millionaires and billionaires who decry passing your life’s work onto your children are damning their offspring to a life of material disadvantage.

In the hedonistic environment of the Hollywood Hills, it makes sense to spend now and ignore the future. It’s doubtful, however, that movie stars and directors actually spend all their income while they are alive. I imagine many of them sock away their savings for their children – including Chris Rock. So really, is there anything more conceited than a self-loathing millionaire?

What Chris Rock lacks in economic knowledge, he makes up for in pointed commentary about the deleterious effects of political correctness among young adults. Rock refuses to play college campuses because of the “special snowflake” mentality that so many students have adopted. He also condemns the practice of shaming comedians for offensive jokes to the point of career ruination. As a social observer, Rock comes off as fairly conservative. That makes it all the more disappointing he tut-tuts the virtue of prudence and self-preservation.

Surprisingly, Rock demonstrates an understanding of the market process and how the drive for profit has the happy consequence of squashing prejudices. Frank Rich calls comedy a “ruthless marketplace,” to which Rock replies, “It makes people hire people that they would never hire otherwise.” That’s certainly true. Markets demand social cooperation. They also allocate resources in an effective manner. If only Mr. Rock would take the lessons of the marketplace and apply it elsewhere. Perhaps then he could make more sense of the dismal science, and purge the leftist notions about income equality and inheritance that fog his judgment. Until then, I guess we can enjoy the laughs.

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

Unlike the Federal Reserve – which openly encourages speculative wealth creation/redistribution and has never seen an equity bubble it didn’t believe was contained – the PBOC appears, by its actions tonight, to be concerned that things have got a little overheated in its corporate bond and stock markets as hot money ripped into the nation’s capital markets on hints of further easing and QE-lite a few months ago. In a show of force, the PBOC simultaneously fixed CNY significantly stronger (implicit tightening) and enforced considerably stricter collateral rules on short-term loans/repos. With Chinese stocks concentrated is even fewer hands than in the US (and recently fearful of the surge in margin trading), it appears the PBOC is trying to stall the acceleration is as careful manner as possible. The result, as Bloomberg notes, is a major short squeeze in CNY (biggest drop since Dec 2008), interest-rate swaps ripped higher along with corporate bond yields,  and most Chinese stocks sold off (with two down for every one up) though the latter is stabilizing now.

 

The actions… (via Reuters)

China Securities Depository and Clearing Corp (CSDC) said in an announcement after the market closed on Monday that with immediate effect, only corporate bonds with the highest rating of AAA and those issued by firms with a high rating of AA and above could be used for bond repo business.

 

Analysts say the regulators’ exclusion of lower grade bonds from being used in bond repurchase contracts, a key source of secondary liquidity in trade, increases the risk of trading such bonds, depressing demand and putting upward pressure on yields.

 

The move follows through on a decree issued by the State Council, China’s cabinet, in early October to clear debt issued by local government financial vehicles (LGFVs), even though the CSDC’s ban apparently covers a wider range of corporate bonds, the announcement shows.

 

“Along with the clarification and clearing of local government debt, our company could take further steps to compress and clear related bonds already being included in the collateral in line with market risk conditions,” the announcement said.

 

Given that more than 1 trillion yuan of outstanding corporate bonds are now deposited at the CSDC, analysts estimate that around 500 billion yuan of the bonds will be excluded from the repo business starting Tuesday, with the yields of credit bonds possibly being pushed up by a few dozens of basis points as their prices fall.

And a considerably stronger fix in CNY…

The fallout:

“As low-rated bonds cannot be used for repurchases on the exchange, this will force many financial institutions to deleverage,” said Zhou Hao, a Shanghai-based economist at Australia & New Zealand Banking Corp. “When there’s a liquidity issue, all bonds are sold off. They want to grab liquidity first today as you don’t know what will happen tomorrow.”

Bonds…

China Development Bank bond yields rose nearly 30 basis points at market open on Tuesday, traders said, as the market reacted to new corporate bond market restrictions announced on Monday afternoon.

 

The benchmark government bond future contract also reacted, sliding over 1 percent in morning trade.

 

The yield on government debt due October 2019 surged 14 basis points, the most for a five-year note since November 2013, to 3.88 percent, according to prices from the National Interbank Funding Center.

 

The yield on Kashi Urban Construction Investment Group Co.’s 800 million yuan of debt due November 2019 climbed 75 basis points to 7.17 percent, the biggest jump since July, exchange data show. The issuer is an LGFV.

Interest-rate swaps…

China’s interest-rate swaps climbed to a three-month high, bonds dropped and stocks retreated after policy makers narrowed the pool of corporate debt that can be used as collateral for short-term loans.

 

China Securities Depository and Clearing Corp. has stopped accepting new applications for repurchase agreements that involve notes rated below AAA or sold by issuers graded lower than AA, according to a statement posted on the agency’s website yesterday. The move means that about 470 billion yuan ($76 billion) of outstanding corporate bonds regulated by the National Development and Reform Commission can no longer be pledged for repos, according to Haitong Securities Co.

 

“The regulation will damp investor demand for lower-rated corporate bonds,” said Yang Feng, a Beijing-based bond analyst at Citic Securities Co., the nation’s biggest brokerage. “That may result in higher borrowing costs for local government financing vehicles.”

 

One-year interest-rate swaps, the fixed payment to receive the floating seven-day repurchase rate, rose 12 basis points to 3.50 percent as of 10:05 a.m. in Shanghai, according to data compiled by Bloomberg. It earlier jumped as much as 29 basis points to 3.67 percent, the highest since August.

 

Currency

Despite strongest FIX since March…

• *YUAN EXTENDS DROP, SLIDES MOST SINCE DECEMBER 2008

Stocks

Most Chinese stocks fell after the benchmark index reached the most expensive level in three years and stricter collateral rules for short-term loans prompted investors to sell liquid assets.

 

China’s Shanghai Composite Index fell as much as 1.5 percent.

 

Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. slumped at least 3 percent. China Securities Depository and Clearing Corp. stopped accepting new applications for repurchase agreements that involve notes rated below AAA or sold by issuers graded lower than AA, according to a statement posted on the agency’s website yesterday. China Oilfield Services Ltd. slid 3.6 percent in Hong Kong after crude declined to the lowest level in five years.

 

The Shanghai Composite Index (SHCOMP) dropped 0.1 percent to 3,018.67 at 10:37 a.m. local time, with two stocks falling for every one gaining.

 

“There’s a correction in the Shanghai Composite now after rising a lot the past days”

*  *  *

Of course – it is not holding as bond market weakness is provbiding the unintended consequence of helping stocks stabilize… despite the PBOC’s fear of leverage…

The regulation change is intended to reduce leverage in China’s stock market…

 

This is because equity rally has much to do with leverage, and more than 80 percent of flows are retail and come with material increase in leverage, Liu says in phone interview.

 

“Securities firms that provided personal loans to retail investors would borrow money via repos, and the regulation change triggered a liquidity squeeze”: Liu

 

Move more likely to make leverage less risky rather than curb stock performance, but that’s the chain effect: Liu

*  *  *
We wil see what kind of fallout this creates but for now stocks are holding up as FX and bond markets are turmoiling

via Zero Hedge http://ift.tt/1wtNQT0 Tyler Durden

Just a few short months ago, investors were “buy buy buy”-ing the fact that The Baltic Dry Index had resurged off multi-year lows ‘proving’ China’s renaissance and that world economic growth will re-approach Nirvana. Simply put, with collapsing commodity prices (iron ore for instance) and massive fleets of credit-driven mal-investment-based vessels, it should surprise no one that the shipping index just plunged back below 1000, now at its lowest for this time of year since 2008. Furthermore, the seasonal bounce always seen in Q3 was among the weakest ever. But apart from that, buy stocks…

 

Nothing like the normal seasonal bounce in Baltic Dry this year…

 

leaving it at the lowest for December since 2008…

*  *  *

Quite a recovery…

Charts: Bloomberg

via Zero Hedge http://ift.tt/1Gc0Lbp Tyler Durden

Authored by Leanna Or ( @ai_CIO ), originally posted at Chief Investment Officer magazine,

Asset owners, prepare to nod vigorously.

1. You thought Bill Gross’ resignation was a joke. Or that some unambitious hacker had decided to target institutional investing publications. Then, when it turned out to be true, you’d have given your signed copy of Warren Buffett’s Essays to know what really went down in Newport Beach.

2. Korn/Ferry invited you to apply for the CalPERS CIO job… For the politically allergic among you, that call was like an invite to a party thrown across town by people you find tedious: Nice to be asked, and easy to turn down.

3. … but you were 0% surprised when it went to a well­connected insider. Those truly plugged­in to the California public scene say they knew Ted Eliopoulos was a shoo­in all along. But by 2010, everyone had seen the financial crisis coming in 2006, right?

4. You fantasized about running Harvard’s endowment (and what you’d do with the $3 million paycheck). Now this job had some serious appeal, and a much quieter recruitment drive. Correlation? We think so. If CEO­in­waiting Stephen Blyth posts another lackluster fiscal year for the world’s largest endowment, he may wish he had given those Korn/Ferry folks the time of day. Ivy League endowments = the Hunger Games of institutional investing.

5. As soon as CalPERS announced it was killing its hedge fund program, you began mentally preparing to defend yours to your board—and then actually had to do so at your next meeting. The tactful CIOs among you rehearsed delicate ways to differentiate your portfolio from the Sacramento giant’s. The cynical mumbled the word “politics,” and the shy emailed their consultant to prep a PowerPoint.

6. You happily opened an email from another CIO only to find out they’d “taken a new opportunity at x hedge fund or asset management firm,” and they’d love to catch up and tell you more about its offerings. Sigh. There’s another one lost to the dark side. Those who’ve crossed over to asset gathering —*cough* Jim Dunn, David Erickson, Patrick Groenendijk, Marina Mekhlis, Tim Walsh *cough*—find your calls do not always get returned within 11 seconds anymore. But, then again, diving Scrooge McDuck­style into your (well deserved) pool of money is actually very soothing.

7. You never want to hear the phrases “low­rate environment,” “investment solution,” or “tapering” ever again. Or “China’s unwind” or “low­return projections” or “quantitative easing” or “I’ve learned so much working for you these last few years and will really miss the team… but <insert asset management firm> made me an offer I couldn’t refuse.”

8. Seeing Mark Wiseman on top of the Power 100 list—again—was a total bore. What a surprise! A bunch of Canadians picked one of their countrymen as the most important investor on earth. (But fiiiine, that Alibaba deal was pretty cool.)

9. You flew coach on a business trip. While your organization may not mandate economy for short trips, you’ve done the math and $400/hour for an unnumb butt just isn’t a value proposition you can handle. Plus, you know who else flies coach? Mark Wiseman.

10. A new acquaintance asked you for “hot stock tips” or “insider info” when you told them what you do for a living. Then you had to patiently explain that with $50 billion to invest, you don’t have time to dig through annual reports comparing Ford and Honda’s ability to capitalize on advances in fuel efficiency technology. You pay people to do that for you. And as for “insider info”? You had to grab this poor soul by the lapels, pull them in close, and threaten bodily harm if they “ever, ever write that phrase in an email” to you.

11. You dealt with an “investor relations” specialist who didn’t seem to know anything about investing, but sure knew her way around a miniskirt.

12. You know one­year returns are irrelevant for your long time horizon… but you couldn’t help scoping out your peer’s performance for FY2014, and being secretly amped when you topped them, or disappointed when you didn’t. If you work at high­end endowment, your delight was not­so­secret. In fact, it was reflected in your paycheck.

13. Your spouse is so tired of hearing you rant about that one board member. “Yes, dear, I know he’s very frustrating and refuses to understand what basis points are/how risk parity works/why shifting to an all­passive allocation is a bad idea at this point in the cycle. No, dear, I’m sure he’s not doing that intentionally to make you want to stab yourself in the eye with a pen. And, sweetheart, I think you’ve had enough Scotch for one night.”

14. One of your best young team members appeared on the Forty Under Forty… and promptly asked for a raise. Stop cursing us and give them one—or someone else will.

15. You shuddered when your CFO/executive director mentioned he’d had a lunch with Caitlin Long—pension­risk transfer arranger­in­chief for Morgan Stanley—or anyone on the bulk annuity team at Prudential. Why is he going to Newark on business again?? That’s two trips in the last four months! What’s even in Newark anyway?!? Maybe he’s there visiting that big public plan everyone’s always talking about. Yeah, maybe that’s it. But it would seem so paranoid to ask…

16. You care way more about your Power 100 portrait than the profile that went with it. Who knew a group of altruistic­oriented finance nerds could be so… touchy? For those of you still eagerly awaiting the CIO portrait treatment, we have two pieces of advice. One: That business headshot you last had done in the mid­’90s is not your friend. How’s the artist to know feathered bangs and Seinfeld glasses aren’t just your thing? Two: When the Power 100 debut comes, your team will take literally any excuse to rib you—because they’re burning with jealousy that you made the cut. Sleep with one eye open.

17. As much as your job occasionally makes you want to bang your head against your desk, meeting an appreciative member/student/citizen/beneficiary makes it all worthwhile. At least until PIMCO asks whether you’d be willing to help fill Bill Gross’ shoes.

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

Tonight, the Barclays Center in Brooklyn, where the Nets and the Cavaliers are playing, is quite a sight.

On one hand, inside we have the US “royal family” present:

At http://t.co/2haHKj630m — Tonight in Brooklyn! #netsgame #barclayscenter #beyonce #jayz #RoyalVisitUsa #Prin… http://ift.tt/1w9siI4

— favgirlcrush (@favgirlcrush) December 9, 2014

… as well as the equally famous UK royals visiting from England:

America’s #RoyalCouple center court @barclayscenter. William & Kate have just entered. #RoyalVisitUSA #JayZ #Beyonce http://ift.tt/1IsBCxh

— Jim Shi (@jimshi809) December 9, 2014

Meanwhile, another King is down on the court, even if  in protest:

LeBron wearing #ICantBreathe shirt ahead of tonight’s game at @barclayscenter with William and Kate set to attend. http://ift.tt/1IsBCxl

— Bryan Armen Graham (@BryanAGraham) December 9, 2014

King James @barclayscenter playing 2night 4 the memory of #EricGarner #ICantBreathe #BarclaysCenter #NYC #Brooklyn http://ift.tt/1IsBCNB

— William Torres (@williamcrespo11) December 9, 2014

Meanwhile, other “protesters” have gathered outside…

#ICantBreathe protests inside mall across from #BarclaysCenter http://ift.tt/1IsBCND

— Chris Arnone (@arnone_chris) December 9, 2014

“Brimoore17: RT NYCityAlerts: #Royals get a #Brooklyn welcome at #BarclaysCenter #EricGarner #ICantBreathe #royal… http://ift.tt/1IsBAW7”

— Psychedelic Raver (@CharlesJayyy) December 9, 2014

“#NYC #Brooklyn MT @DevCNYC: #ICantBreathe being chanted in front of The #BarclaysCenter #RoyalShutDown #EricGarner https://t.co/3aE7Pw1SjB”

— Psychedelic Raver (@CharlesJayyy) December 9, 2014

“@Breaking911:Protesters Still Outside Of #BarclaysCenter In #NYC http://t.co/hPAzVXnenR http://ift.tt/1w9siYu”

A lot of ppl with no jobs

— Jonathan Capace (@Capace17) December 9, 2014

Activists at #BarclaysCenter hoping the #PowerOfSilence will be heard: @andersoncooper on #Brooklyn‘s, #NYC #die-in http://ift.tt/1IsBAWf

— Michael J. Buell (@buell003) December 9, 2014

Russell Simmons @UncleRUSH at the #BlackLivesMatter #royalshutdown at the #BarclaysCenter #EricGarner #HandsUp http://ift.tt/1w9skQe

— EdenBrower (@edenbrower) December 9, 2014

… and are proceeding to engage the police.

Protesters at #BarclaysCenter got what they wanted, entering a closed mall. http://ift.tt/1w9siYG

— Stephen Nessen (@s_nessen) December 9, 2014

“You serve us!!” Hundreds in front of #barclayscenter #icantbreathe https://t.co/E5wCDvi39O

— Mattiverse (@Mattiverse) December 9, 2014

… as well as attempting the now traditional looting of any local retail outlets:

NOW: Crowd Rushes Target Store Near #BarclaysCenter In #NYC –#ICantBreathe -WATCH – http://t.co/RSK0ZJVDi9 http://ift.tt/1IsBD49

— Breaking911 (@Breaking911) December 9, 2014

As for the punchline: until this moment Emergency Medical Services were waiting on standby, when this happened:

EMS responding to the Barclays Center after an NYPD officer accidentally pepper sprayed himself instead of a protestor.

— PzFeed Top News (@PzFeed) December 9, 2014

Or just the right amount of comic ineptitiude to either diffuse the tense situation or to result in something far more dangerous, especially with all the celebrities already present and accounted for.

Watch what happens with the following life feed.

Broadcast live streaming video on Ustream

via Zero Hedge http://ift.tt/1w9sl6O Tyler Durden

For an estimated 1 million Beijing residents, dubbed the "rat tribe", living above ground (or in ghost cities) is a luxury they simply cannot afford. As NPR reports, with even the tiniest apartment costing a fortune (and 21 million people fighting for space), there has emerged a new 'affordable' housing option… below the city's bustling streets. Thanks to building codes that force the creation of basements and bomb shelters under new residences, there's a lot of underground space (1 – 3 floors down) that is illegally – but affordably – used for habitation. With the Shanghai Composite stock index up over 40% year-to-date, creating wealth and trickling down, how can this be possible?

 

 

As NPR reports,

[In Beijing] it is possible to find more affordable housing. You'll just have to join an estimated 1 million of the city's residents, and look underground.

 

Below the city's bustling streets, bomb shelters and storage basements are turned into illegal — but affordable — apartments.

 

…

 

Annette Kim, a professor at the University of Southern California who researches urbanization, spent last year in China's capital city studying the underground housing market.

 

 

"Part of why there's so much underground space is because it's the official building code to continue to build bomb shelters and basements," Kim says. "That's a lot of new, underground space that's increasing in supply all the time. They're everywhere."

 

She says apartments go one to three stories below ground. Residents have communal bathrooms and shared kitchens. The tiny, windowless rooms have just enough space to fit a bed.

 

"It's tight," Kim says. "But I also lived in Beijing for a year and the city, in general, is tight."

 

With an average rent of $70 per month, she says, this is an affordable option for city-dwellers.

 

But living underground is illegal, Kim says, since housing laws changed in 2010.

 

 

Read more here…

And, in addition, there's a stigma to living in basements and bomb shelters, as Kim found when she interviewed residents above-ground about their neighbors directly below.

"They weren't sure who was down there," Kim says. "There is actually very little contact between above-ground and below-ground, and so there's this fear of security."

 

In reality, she says, the underground residents are mostly young migrants who moved from the countryside looking for work in Beijing.

 

"They're all the service people in the city," she says. "They're your waitresses, store clerks, interior designers, tech workers, who just can't afford a place in the city."

But it's rare to get a glimpse below. Property owners can be strict about whom they let in. But Beijing-based photographer Chi Yin Sim found a way. She's documented life under the city in a collection called China's "Rat Tribe."

 

"I started to try and find ways to get down there because I was fascinated by the fact that there was a universe beneath our feet," Sim says.

 

The first basement-dweller she met was a young woman, a pedicurist at a salon, who lived with her boyfriend.

 

"I was just like, 'Can I come and visit?' And she was like, 'Sure, come and visit us,' " Sim says.

 

The couple lived two floors below a posh Beijing apartment complex.

 

 

Sim's photos show just how tiny these units really are. The couple sits on their bed, surrounded by clothes, boxes and a giant teddy bear. There's hardly any room to move around.

 

"The air is not so good, ventilation is not so good," Sim says. "And the main complaint that people have is not that they can't see the sun: It's that it's very humid in the summer. So everything that they put out in their rooms gets a bit moldy, because it's just very damp and dank underground."

 

…

 

 

But despite the laws against living underground, and the discomfort and shame associated with it, Kim says it's still a very active market. For hundreds of thousands of people, it's the only viable option for living in, or under, Beijing.

 

 

See more image here…

Source: NPR

*  *  *

So much for that urbanization route to responsible growth… it's too late. Global hot money has squeezed an entire generation of service workers out from ever achieving the American/Chinese dream.

via Zero Hedge http://ift.tt/1z0MI7n Tyler Durden

It was a little over month ago when we presented our visual guide to the Millennial generation. Since then, dissecting America’s overindebted, overeducated, underqualified, underemployed, underpaid young adults – if only in charts – has become one of the nation’s favorite pastimes. And so, courtesy of the US Census Bureau which too has taken a fascination with the sad plight of the one generation that, at least in theory, should carry the weight of the US economy on its shoulders, is the latest demographic dressing down of Americans aged 18 to 34.

Percent of population aged 18 to 34

 

Percent of total population age 18 to 34 who are non-Hispanic, White

 

Percent of population age
18 to 34 who reported their ethnicity and race as something other than
non-Hispanic White. 

 

Percent of total population age 18 to 34 years who are foreign born

 

Percent of total population age 18 to 34 who speak a language other than English at home

 

Percent of civilian population age 18 to 34 who are veterans

 

Percent of population age 18 to 34 living alone

 

Percent of total population age 18 to 34 who never married

 

Living With a Parent, Age 18 to 34

 

 

Percent of total population age 18 to 34 years with bachelor’s degree or higher

 

Percent of total population age 18 to 34 who are employed

 

Median earnings for population age 18 to 34 with earnings who worked full-time, year-round (in 2013 inflation-adjusted dollars)

 

Percent
of total population age 18 to 34 for whom poverty status is determined
with income in the past 12 months below poverty level

 

And while the trends should be clear enough by now, those who seek an even more in-depth analysis can do so at the following interactive map:

via Zero Hedge http://ift.tt/1qnB3Pi Tyler Durden

Authored by Stephen L Carter via Contra Corner, originally posted at Bloomberg View,

On the opening day of law school, I always counsel my first-year students never to support a law they are not willing to kill to enforce. Usually they greet this advice with something between skepticism and puzzlement, until I remind them that the police go armed to enforce the will of the state, and if you resist, they might kill you.

I wish this caution were only theoretical. It isn’t. Whatever your view on the refusal of a New York City grand jury to indict the police officer whose chokehold apparently led to the death of Eric Garner, it’s useful to remember the crime that Garner is alleged to have committed: He was selling individual cigarettes, or loosies, in violation of New York law.

The obvious racial dynamics of the case — the police officer, Daniel Pantaleo, is white; Garner was black — have sparked understandable outrage. But, at least among libertarians, so has the law that was being enforced. Wrote Nick Gillespie in the Daily Beast, “Clearly something has gone horribly wrong when a man lies dead after being confronted for selling cigarettes to willing buyers.” Republican Senator Rand Paul of Kentucky, appearing on MSNBC, also blamed the statute: “Some politician put a tax of $5.85 on a pack of cigarettes, so they’ve driven cigarettes underground by making them so expensive.”

The problem is actually broader. It’s not just cigarette tax laws that can lead to the death of those the police seek to arrest. It’s every law. Libertarians argue that we have far too many laws, and the Garner case offers evidence that they’re right. I often tell my students that there will never be a perfect technology of law enforcement, and therefore it is unavoidable that there will be situations where police err on the side of too much violence rather than too little. Better training won’t lead to perfection. But fewer laws would mean fewer opportunities for official violence to get out of hand.

The legal scholar Douglas Husak, in his excellent 2009 book “Overcriminalization: The Limits of the Criminal Law,” points out that federal law alone includes more than 3,000 crimes, fewer than half of which found in the Federal Criminal Code. The rest are scattered through other statutes. A citizen who wants to abide by the law has no quick and easy way to find out what the law actually is — a violation of the traditional principle that the state cannot punish without fair notice.

In addition to these statutes, he writes, an astonishing 300,000 or more federal regulations may be enforceable through criminal punishment in the discretion of an administrative agency. Nobody knows the number for sure.

Husak cites estimates that more than 70 percent of American adults have committed a crime that could lead to imprisonment. He quotes the legal scholar William Stuntz to the effect that we are moving toward “a world in which the law on the books makes everyone a felon.” Does this seem too dramatic? Husak points to studies suggesting that more than half of young people download music illegally from the Internet. That’s been a federal crime for almost 20 years. These kids, in theory, could all go to prison.

Many criminal laws hardly pass the giggle test. Husak takes us on a tour through bizarre statutes, including the Alabama law making it a crime to maim oneself for the purpose of gaining sympathy, the Florida law prohibiting displays of deformed animals, the Illinois law against “damaging anhydrous ammonia equipment.” And then there’s the wondrous federal crime of disturbing mud in a cave on federal land. (Be careful where you run to get out of the rain.) Whether or not these laws are frequently enforced, Husak’s concern is that they exist — and potentially make felons of us all.

Part of the problem, Husak suggests, is the growing tendency of legislatures — including Congress — to toss in a criminal sanction at the end of countless bills on countless subjects. It’s as though making an offense criminal shows how much we care about it.

Well, maybe so. But making an offense criminal also means that the police will go armed to enforce it. Overcriminalization matters, Husak says, because the costs of facing criminal sanction are so high and because the criminal law can no longer sort out the law-abiding from the non-law-abiding. True enough. But it also matters because — as the Garner case reminds us — the police might kill you.

I don’t mean this as a criticism of cops, whose job after all is to carry out the legislative will. The criticism is of a political system that takes such bizarre delight in creating new crimes for the cops to enforce. It’s unlikely that the New York legislature, in creating the crime of selling untaxed cigarettes, imagined that anyone would die for violating it. But a wise legislator would give the matter some thought before creating a crime. Officials who fail to take into account the obvious fact that the laws they’re so eager to pass will be enforced at the point of a gun cannot fairly be described as public servants.

Husak suggests as one solution interpreting the Constitution to include a right not to be punished. This in turn would mean that before a legislature could criminalize a particular behavior, it would have to show a public interest significantly higher than for most forms of legislation.

He offers the example of a legislature that decides “to prohibit — on pain of criminal liability — the consumption of designated unhealthy foods such as doughnuts.”  The “rational basis test” usually applied by courts when statutes face constitutional challenge would be easily met. In short, under existing doctrine, the statute would be a permissible exercise of the police power. But if there existed a constitutional right not to be punished, the statute would have to face a higher level of judicial scrutiny, and might well be struck down — not because of a right to eat unhealthy foods, but because of a right not to be criminally punished by the state except in matters of great importance.

Of course, activists on the right and the left tend to believe that all of their causes are of great importance. Whatever they want to ban or require, they seem unalterably persuaded that the use of state power is appropriate.

That’s too bad. Every new law requires enforcement; every act of enforcement includes the possibility of violence. There are many painful lessons to be drawn from the Garner tragedy, but one of them, sadly, is the same as the advice I give my students on the first day of classes: Don’t ever fight to make something illegal unless you’re willing to risk the lives of your fellow citizens to get your way.

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