Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-59725 Fri, 06 May 2016 22:03:08 GMT 'Paralyzing Volatility' Means Trouble for Wall Street Giants http://implode-explode.com/viewnews/2016-05-06_ParalyzingVolatilityMeansTroubleforWallStreetGiants.html There's plenty of volatility, but what happened to the volume?

From stocks to currencies and bonds, the upswing in turbulence to start the year is chasing all but the bravest traders from financial markets. Despite the recent rebound in U.S. equities, volume in the S&P 500 Index is down 23 percent

Worries about the outlook for the U.S., Europe and China, as well as mixed policy signals from central bankers around the world, have all contributed to what UBS Group AG Chief Executive Officer Sergio Ermotti called a "paralyzing volatility" that's scaring away clients and caused industry-wide trading revenue to tumble to the lowest since 2009.

... in some ways, it also underscores the changing nature of the market itself. Big banks have cut back on trading as post-crisis regulations like Dodd-Frank and Basel III force them to take fewer risks, particularly in fixed-income. Last year alone, Wall Street eliminated more than 20,000 jobs, with trading desks bearing the brunt of the cuts. And while automated traders have swept in to fill the void, some say they've made markets more prone to sudden shocks.

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iehi-feed-59724 Fri, 06 May 2016 20:46:57 GMT Americans Unleash Epic Debt-Fuelled Spending Spree As Credit Card Debt Jumps Most On Record http://implode-explode.com/viewnews/2016-05-06_AmericansUnleashEpicDebtFuelledSpendingSpreeAsCreditCardDebtJump.html iehi-feed-59723 Fri, 06 May 2016 20:32:27 GMT Panama Papers alleged source breaks silence, denies being a spy http://implode-explode.com/viewnews/2016-05-06_PanamaPapersallegedsourcebreakssilencedeniesbeingaspy.html iehi-feed-59722 Fri, 06 May 2016 20:26:40 GMT World's rich families put private equity firms on notice http://implode-explode.com/viewnews/2016-05-06_Worldsrichfamiliesputprivateequityfirmsonnotice.html Wealthy families are embracing their inner Warren Buffett, albeit on a smaller scale. They used to hand most of their assets to managers to invest. Now, following the likes of Buffett, Michael Dell and Bill Gates, many are acting like private equity firms, buying large stakes in companies or acquiring them outright. Families can exert tighter control over their money, give the kids something to do and cut their deal fees.

But the trend has meant that private equity shops have been forced to scramble to make sure they don't lose a critical source of money for their buyout funds.

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"After a decade of direct investing we found that we actually saved millions, which were reinvested in companies and assets -- huge, huge savings," said Chad Hagan, whose family built its wealth in private health-care and financial businesses... Almost 70 percent of family offices engage in direct investing, according to an April survey of 80 offices by the Family Office Exchange. And in 2015 they outperformed buyout firms. Direct deals returned them 15 percent on average, the survey showed -- more than double private equity results that year.

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iehi-feed-59721 Fri, 06 May 2016 20:24:32 GMT Hiring Slowdown Diminishes Chance of Fed Move in June http://implode-explode.com/viewnews/2016-05-06_HiringSlowdownDiminishesChanceofFedMoveinJune.html iehi-feed-59720 Fri, 06 May 2016 18:41:32 GMT Millennials Lead the Way Toward Financial Literacy http://implode-explode.com/viewnews/2016-05-06_MillennialsLeadtheWayTowardFinancialLiteracy.html iehi-feed-59719 Fri, 06 May 2016 18:39:28 GMT Ending [Carried Interest] Tax Break for Ultrawealthy May Not Take Act of Congress http://implode-explode.com/viewnews/2016-05-06_EndingCarriedInterestTaxBreakforUltrawealthyMayNotTakeActofCongr.html doesn't changing the carried interest loophole require an act of Congress? Not according to an array of tax experts. Just as Mr. Obama's Treasury Department recently changed the rules to curb corporate inversions, in which companies shift their official headquarters to another country to lower their tax bills, the Treasury secretary, Jacob J. Lew, and his colleagues could jettison the carried interest loophole.

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"It's something that Obama could accomplish and, to be honest, I'm not entirely sure why the Treasury hasn't taken an interest in it," Mr. Fleischer said in an interview. "In fact, there is quite a bit of revenue at stake. And doing this on carried interest would cement Obama's legacy in substance as well as symbolically."

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The provision has come under repeated political attack. During the current presidential campaign, all three remaining candidates -- Bernie Sanders, Hillary Clinton and Donald Trump -- have called for eliminating it. A number of lawmakers tried to get rid of the carried interest tax benefit beginning in 2007; by 2010, it looked as if the special treatment would go by the boards.

But a lobbying campaign by the financial industry, supported by a number of influential Republican lawmakers who argued that carried interest should be ended only as part of a broader tax overhaul, put a stop to the effort.

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"Hedge fund and private equity managers are really the one-tenth of the 1 percent, and the carried interest rule hits their pocketbooks directly," Mr. Wilensky said. "It's much easier to implement regulations that have an adverse effect on anonymous shareholders and institutions."

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Financial officials in Britain have already started to trim beneficial treatment for carried interest. They have cut back on what qualifies for the lower, long-term tax rate.

Beyond fairness, there's another compelling reason for Mr. Obama to act on this inequity: It could generate $150 billion in revenue over 10 years, by Mr. Fleischer's estimate

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iehi-feed-59718 Fri, 06 May 2016 18:10:38 GMT Showdown! In Leaked Letter IMF Tells Germany "Debt Relief for Greece or IMF Drops Out" http://implode-explode.com/viewnews/2016-05-06_ShowdownInLeakedLetterIMFTellsGermanyDebtReliefforGreeceorIMFDro.html In a letter to all 19 ministers sent on Thursday night and obtained by the Financial Times, Christine Lagarde, the IMF chief, said stalemated talks with Athens to find €3bn in "contingency" budget cuts, which have gone on for a month, had become fruitless and that debt relief must be put on the table immediately, or risk losing IMF participation in the programme.

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Ms Lagarde stuck by the IMF's assessment that such reforms would only produce a primary surplus of 1.5 per cent in 2018 -- not the 3.5 per cent the EU has mandated.

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iehi-feed-59717 Fri, 06 May 2016 16:22:31 GMT U.S. Added Only 160,000 Jobs Last Month as Brisk Hiring Slowed http://implode-explode.com/viewnews/2016-05-06_USAddedOnly160000JobsLastMonthasBriskHiringSlowed.html iehi-feed-59716 Fri, 06 May 2016 16:20:58 GMT Donald Trump just threatened to cause an unprecedented global financial crisis http://implode-explode.com/viewnews/2016-05-06_DonaldTrumpjustthreatenedtocauseanunprecedentedglobalfinancialcr.html In an interview Thursday on CNBC, Donald Trump broke with tired clichés about the evils of federal debt accumulation. "I am the king of debt," he said. "I love debt. I love playing with it." But he replaced fearmongering about debt with an even more alarming notion -- a bankruptcy of the United States federal government that would incinerate the world economy.

"I would borrow, knowing that if the economy crashed, you could make a deal," Trump said. "And if the economy was good, it was good. So therefore, you can't lose."

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The government doesn't work like [a business]. Right now, people and companies all around the world treat US government bonds as the least risky financial asset in the universe. If the government defaults and banks fail as a result, the government needs to clean up the mess. And if risk-free federal bonds turn out to be risky, then every other financial asset becomes riskier. The interest rate charged on state and local government debt, on corporate debt, and on home loans will spike. Savings will evaporate, and liquidity will vanish as everyone tries to hold on to their cash until they can figure out what's going on.

Hilarious -- The Donald has gotten closer to speaking the truth here than anyone else, but doesn't seem quite to grasp how intentionally breaking this "taboo" could cause the illusion that keeps the monetary order chugging right along to prematurely implode.

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iehi-feed-59715 Fri, 06 May 2016 12:29:54 GMT The Book That Will Save Banking From Itself http://implode-explode.com/viewnews/2016-05-06_TheBookThatWillSaveBankingFromItself.html The financial system, King reveals, is still wired so that a handful of well-connected people capture the benefits from risk-taking while the entire society bears the cost. Complexity was once used to disguise the risk in the financial system. Now it's being used to disguise how little has actually been done to fix that system. Or, as King puts it, "Regulation has become extraordinarily complex, and in ways that do not go to the heart of the problem. ... The objective of detail in regulation is to bring clarity, not to leave regulators and regulated alike uncertain about the current state of the law. Much of the complexity reflects pressure from financial firms. By encouraging a culture in which compliance with detailed regulation is a defense against a charge of wrongdoing, bankers and regulators have colluded in a self-defeating spiral of complexity."

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The first thing that King thinks must be done is to separate the boring bits of banking (providing a safe place to deposit money, facilitating payments) from the exciting ones (trading). There is no need, he thinks, to break up the existing institutions. Deposits and short-term loans to banks simply need to be separated from other bank assets. Against all of these boring assets, banks would be required to hold government bonds or reserves at the central bank in cash. That is, there should be zero risk that there won't be sufficient cash on hand to repay people wanting to flee any bank at a moment's notice -- and thus no reason for those people to flee.

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iehi-feed-59714 Fri, 06 May 2016 12:20:16 GMT Supposed Bitcoin founder says 'goodbye' after presenting fake evidence http://implode-explode.com/viewnews/2016-05-06_SupposedBitcoinfoundersaysgoodbyeafterpresentingfakeevidence.html iehi-feed-59713 Fri, 06 May 2016 01:26:34 GMT Seven big banks settle U.S. rate-rigging (ISDAfix) lawsuit for $324 million http://implode-explode.com/viewnews/2016-05-05_SevenbigbankssettleUSrateriggingISDAfixlawsuitfor324million.html iehi-feed-59712 Thu, 05 May 2016 23:42:03 GMT Here's one way to escape America's high college costs: Leave the country http://implode-explode.com/viewnews/2016-05-05_HeresonewaytoescapeAmericashighcollegecostsLeavethecountry.html iehi-feed-59711 Thu, 05 May 2016 22:28:38 GMT Fed Proposes New "Bail In By Stealth" Collateral Rule http://implode-explode.com/viewnews/2016-05-05_FedProposesNewBailInByStealthCollateralRule.html In its essence, this "collateral freeze" regulation will eventually morph into a de facto bail-in mechanism and serves the purpose of transferring wealth from the banks' counter-parties to the banks.  At the very least, this collateral freeze regulation adds yet another layer of moral hazard into the banking system, as banks are incentivized to underwrite even riskier derivatives transactions with knowledge that the risk of collapse is further minimized.

Interestingly, this new law is "asymmetrical." If the bank fails, it gets to keep all counter-party collateral locked-up.   But if the bank's counter-party fails, that counter-party has no ability to freeze the collateral it put up with the bank. The bank has possession of that collateral.  This is what happened in the MF Global collapse, where JP Morgan seized all of MF Global's collateral, at the detriment of MF Global's customers.  At the time JPM's move was illegal but the judicial system looked the other way.

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iehi-feed-59710 Thu, 05 May 2016 20:48:44 GMT L.A. sees another sharp rise in homelessness and tent, vehicle living http://implode-explode.com/viewnews/2016-05-05_LAseesanothersharpriseinhomelessnessandtentvehicleliving.html Homelessness increased in the last year in the city and county of Los Angeles, leaving nearly 47,000 people in the streets and shelters despite an intensive federal push that slashed the ranks of homeless veterans by nearly a third, according to figures released Wednesday by the Los Angeles Homeless Services Authority.

Nearly two-thirds of the homeless people tallied countywide, or 28,000, were in the city of Los Angeles, representing an 11% jump in January from a year earlier, a report from the agency stated. The county's homeless population grew 5.7%.

Homelessness has increased steadily since 2013, as local officials struggle to identify funding for billion-dollar plans they approved this year to solve one of the region's most intractable problems.

The number of homeless women across most of the county -- Long Beach, Glendale and Pasadena are counted separately -- has jumped 55% since 2013, to 14,461 from 9,348.

In that same area, the most visible form of homelessness -- tents, shantytowns and vehicles with people living in them -- climbed 20%, on top of an 85% jump in 2015... Garcetti called the increase in the "unsheltered" population -- homeless people living outdoors in tents, shanties, cars and RVs -- particularly worrisome.

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iehi-feed-59709 Thu, 05 May 2016 17:33:34 GMT Insurers Flee Hedge Funds Amid Slump http://implode-explode.com/viewnews/2016-05-05_InsurersFleeHedgeFundsAmidSlump.html The insurer is seeking to redeem $1.2 billion of the $1.8 billion in holdings, a process that may take a couple of years to complete, Chief Investment Officer Steven Goulart said Thursday in a conference call discussing first-quarter results at the New York-based company. The portfolio, which posted negative returns in the quarter, was cut by about $600 million in 2015, he said.

...

"It's had up-and-down years and really it's just too inconsistent, we think, in actual performance," Goulart said. "What we'll be left with is a small portfolio of really our most consistently performing managers in hedge funds."

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Competitor American International Group Inc. is also shifting allocations after posting three straight unprofitable quarters. The company said Tuesday that it has submitted notices of redemption for $4.1 billion of hedge-fund holdings through March 31. Average invested assets in hedge funds at AIG were $10.1 billion for the first quarter.

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iehi-feed-59708 Thu, 05 May 2016 16:36:30 GMT It finally happened: 500 euro notes will no longer be produced http://implode-explode.com/viewnews/2016-05-05_Itfinallyhappened500euronoteswillnolongerbeproduced.html All of us law-abiding little people have no need for such high denomination cash. That's a very convenient view for the ECB to take given that they've led the crusade to make interest rates negative.

... To be clear, 500 euro notes are not ‘banned'. The ECB tells us that current 500 euro notes in circulation will still be honored as legal tender... The next step for them would be to quietly take these bills out of circulation until one day there's simply no more of them available. Then they can rinse and repeat with the 200 and 100 euro notes. All of this is tantamount to capital controls-- a way for central banks to trap your savings inside a worthless financial system.

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iehi-feed-59707 Thu, 05 May 2016 15:33:57 GMT Atlas Crumbles Under Weight of Italian Banks http://implode-explode.com/viewnews/2016-05-05_AtlasCrumblesUnderWeightofItalianBanks.html iehi-feed-59706 Thu, 05 May 2016 15:07:43 GMT U.N. Envoy Warns of New 400,000 Refugee Wave From Syria Amidst Renewed Conflict http://implode-explode.com/viewnews/2016-05-05_UNEnvoyWarnsofNew400000RefugeeWaveFromSyriaAmidstRenewedConflict.html A top United Nations official warned of a new tide of refugees from Syria if world powers didn't succeed in calming an outbreak of hostilities in and around the northern Syrian city of Aleppo.

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The talks come amid a renewed offensive by the Assad regime and its allies against rebel groups in and around Aleppo, which has been under intense bombardment and shelling.

Russia, which backs the Syrian government, said Wednesday that a 24-hour truce was planned for Aleppo province but couldn't be put in place because of attacks by a militant rebel group linked to al Qaeda, the Nusra Front.

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Short-term truces have been put into effect in northern parts of the western province of Latakia as well as parts of the capital, Damascus, to help buttress a nine-week cease-fire that is faltering across much of the country.

Russian and U.S. officials have been trying to arrange one in and around Aleppo. The U.S. has said talks were continuing.

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