Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-65096 Thu, 05 Dec 2019 17:54:11 GMT The repo market is `broken' and Fed injections are not a lasting solution, market pros warn http://implode-explode.com/viewnews/2019-12-05_TherepomarketisbrokenandFedinjectionsarenotalastingsolutionmarke.html "The big picture answer is that the repo market is broken," said James Bianco, founder of Bianco Research in Chicago, in an interview with MarketWatch. "They are essentially medicating the market into submission," he said. "But this is not a long-term solution."

This chart shows the more than $320 billion of total repo market support from the Fed since Sept. 17, when for the central bank began pumping in daily liquidity after overnight lending rates jumped to almost 10% from nearly 2%.

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The goal was to keep banks flush as they deal with month-end funding issues, corporate tax payments, and the deluge of Treasury debt being sold by the federal government to fund its deficit.

Shortly thereafter, former New York Fed markets group head Brian Sack, now director of global economics at hedge fund D.E. Shaw Group, coauthored an article saying that the Fed could get a better control of overnight rates if it were to boost banking system reserves by purchasing $250 billion of Treasury debt.

But the Fed's total support already has eclipsed that threshold with the expansion of daily operations, the introduction of longer-term loans, and its balance sheet expansion through monthly T-bill purchases.

"This is now far bigger than anyone thought this was going to be," Bianco said. "I think they're hoping the market will magically fix itself. I don't see why it would.

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"The Fed really hasn't figured out the problem," said Bryce Doty, a senior portfolio manager at Sit Fixed Income in Minneapolis. "But they kind of have created their own problem."

By that, Doty meant the Fed's rescue operations have worked in terms of supplying banks with quick and cheap funding, but less so when it comes to luring them back to funding each other.

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iehi-feed-65095 Thu, 05 Dec 2019 01:24:49 GMT Musk Tells Libel Jury He's Worth $20 Billion, But Lacks Cash, Despite Paying $50k To Dig Dirt On Thai Rescuer http://implode-explode.com/viewnews/2019-12-04_MuskTellsLibelJuryHesWorth20BillionButLacksCashDespitePaying50kT.html Musk's wealth came up in the second day of his testimony before a federal jury in Los Angeles where the Tesla Inc. and SpaceX chief executive is on trial over a tweet in which he referred to a British cave expert as a "pedo guy."

After an unsuccessful objection from his lawyer, Musk told the jury he has Tesla stock, and SpaceX stock, with debt against those holdings, and his net worth is about $20 billion. But contrary to public opinion, he said, he didn't have much cash. Musk finished testifying after a total of about six hours on the stand over two days.

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In September, Musk revealed in court documents that one of his trusted

aides, Jared Birchall, paid $50,000 to hire a private investigator who looked into Unsworth. Attorneys for Unsworth said the investigator was offered a $10,000 bonus if he was able to confirm nefarious behavior -- which was never paid.

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Birchall testified he hired James Howard, who later turned out to be a conman.

After Howard came up with what later turned out to be fake dirt on Unsworth, such as that he had been visiting Thailand since the 1980s and that he met his wife when she was a teenager, Birchall, using the name James Brickhouse, told Howard to leak the information to media in the U.K.

"I believed him to be a credible investigator," Birchall told the jury. "I understood these things to be facts. I asked him to share facts."

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iehi-feed-65079 Tue, 19 Nov 2019 01:38:51 GMT Inside the doomed relationship of Masa Son and Adam Neumann http://implode-explode.com/viewnews/2019-11-18_InsidethedoomedrelationshipofMasaSonandAdamNeumann.html ``... there was a third man in the mix, Mohammad bin Salman, the crown prince of Saudi Arabia. Bin Salman was Son's biggest investor. Two years earlier, he'd put in nearly half the capital, $45 billion, to launch Son's $100 billion Vision Fund, a brash and controversial investment vehicle fueling the world's biggest startups, including WeWork, Uber, DoorDash, and ByteDance. In October, the prince would say publicly that he intended to put up another $45 billion. He was also expecting Son in Riyadh later in the month, at a Saudi financial conference known as Davos in the Desert. Neumann was invited, too, even though, as an Israeli citizen, he wasn't officially allowed in the Islamic country.

Then news broke on October 3 that Washington Post columnist Jamal Khashoggi had vanished inside the Saudi consulate in Istanbul. Almost immediately, bin Salman was implicated. As gruesome details emerged--a bone saw, body parts removed in suitcases--it didn't take long for investors or the general public to take issue with SoftBank's connection to the Saudi money. The company's stock plummeted 20%, losing some $20 billion in value.

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It was during this time, as pressures on SoftBank's stock price and Son's biggest backer mounted, that Son began to rethink his offer to Neumann. The pair had been arguing over who would ultimately control WeWork when the deal was done. On Christmas Eve, Son called Neumann to break the news that the deal they'd planned was off. Neumann was stunned and upset, and still desperate for cash. He managed to negotiate a revised $2 billion deal. Still feeling pressure for more capital, Neumann made another fateful move. On December 28, 2018, he filed confidential documents registering WeWork for an initial public offering.

Neither man knew it at that moment, but the move started a death clock ticking.

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iehi-feed-65073 Tue, 12 Nov 2019 20:54:12 GMT Trump, In Foamy-Mouthed Rant, Calls For Negative Interest Rates To "Boost Stock Market Another 25%" http://implode-explode.com/viewnews/2019-11-12_TrumpInFoamyMouthedRantCallsForNegativeInterestRatesToBoostStock.html iehi-feed-65071 Sat, 09 Nov 2019 17:32:32 GMT Elon Musk fires back at Tesla detractor: 'Allow us to send you a small gift of short shorts' http://implode-explode.com/viewnews/2019-11-09_ElonMuskfiresbackatTesladetractorAllowustosendyouasmallgiftofsho.html For years, Einhorn has decried Musk's controversial leadership style and called for him to be ousted from the CEO seat at Tesla. His October 30 letter to shareholders rails against Musk's handling of the SolarCity takeover, which Tesla acquired for $2.6 billion in 2016. SolarCity, which was run by Musk's cousin, has been the target numerous lawsuits and fraud allegations stretching back to before the acquisition.

One lawsuit filed by Tesla shareholders alleges Musk engineered the purchase of SolarCity, in which he was the majority shareholder, as a a bailout of the troubled solar panel company. That case is heading for trial in March.

Over the past two years, Tesla's electric car business has been beleaguered with manufacturing problems related to its rollout of the new Model 3 sedan. The company's latest earnings report signals the firm may be at a turning point. It posted a $342 million profit, indicating it's making bigger margins on car sales.

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Musk also invited Einhorn to tour the Tesla factory and learn more about the company, adding "I'm certain your investors would appreciate you getting smart on Tesla."

Einhorn responded Friday, in an open letter challenging Musk to identify inaccuracies in Greenlight's shareholder letter and accepting the invitation to visit Tesla factories, writing, "I think facility visits would be fun (can we start in Buffalo?). I might learn the difference between your alien dreadnought factory and cars made by hand in a tent."

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iehi-feed-65068 Thu, 07 Nov 2019 23:29:23 GMT Donald Trump to pay $2 million to settle Trump Foundation "personal piggybank" case http://implode-explode.com/viewnews/2019-11-07_DonaldTrumptopay2milliontosettleTrumpFoundationpersonalpiggybank.html iehi-feed-65065 Wed, 06 Nov 2019 23:47:20 GMT Founder of world's biggest hedge fund says ‘world has gone mad' with easy money and ‘system is broken' http://implode-explode.com/viewnews/2019-11-06_Founderofworldsbiggesthedgefundsaysworldhasgonemadwitheasymoneya.html iehi-feed-65064 Wed, 06 Nov 2019 23:40:37 GMT Why the prospective $70 billion buyout of Walgreens may signal the stock-market rally is about to end http://implode-explode.com/viewnews/2019-11-06_Whytheprospective70billionbuyoutofWalgreensmaysignalthestockmark.html Walgreens Boots Alliance shares surged Wednesday amid speculation that the U.S.-listed drugstore group has been considering a $70 billion take-private deal. If private equity can pull it off, it would be the biggest leveraged buyout ever, dwarfing the $45 billion transaction in which energy group TXU was taken private in 2007, just a year before the financial crisis rocked global markets and prompted unprecedented intervention by global central banks.

For one, Walgreens WBA, already has $15 billion in debt on its balance sheet. A potential bidder would need to add more leverage to fund the purchase. That would leave the drugstore chain particularly vulnerable when the credit cycle turns -- which is looking increasingly likely.

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the share of new leveraged loans with no maintenance covenants -- requiring the borrower to maintain certain financial buffers such as a debt-to-Ebitda ratio, or earnings before interest, tax, depreciation and amortization, of less than five times -- has tripled since 2007, the U.K. central bank said.

Banks are already struggling as investors steer clear of hefty private-equity debt package. Take Bain Capital's $4 billion buyout of market-research firm Kantar in July. The U.S. private-equity firm lined up 11 banks to assemble a $3 billion debt package.

But after an underwhelming reaction from the market, the banks had to restructure the debt package to make it more palatable to investors. This included raising the pricing on the loans and tightening the covenants.

Secondly, Walgreens finances aren't looking so good. The company's profit in the fourth quarter plunged 55% to $677 million, compared with the same quarter in 2018.

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iehi-feed-65061 Tue, 05 Nov 2019 19:00:06 GMT Worst May Be Over for Global Economy Amid Signs of Stabilization http://implode-explode.com/viewnews/2019-11-05_WorstMayBeOverforGlobalEconomyAmidSignsofStabilization.html One key reason for the potential turn is the wave of interest-rate cuts from global central banks. Of the 57 institutions monitored by Bloomberg, more than half cut borrowing costs this year with the Fed doing so three times and the European Central Bank pushing its deposit rate further into negative territory. Rate cuts also operate with a lag so the positive effects of easier monetary policy have yet to fully flow through, meaning a further impulse likely awaits.

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Also driving sentiment is that President Donald Trump and President Xi Jinping are on the cusp of signing "phase one" on a trade deal, which could be enough for global commerce to find a footing. China is reviewing locations in the U.S. where Xi would be willing to meet with Trump to sign a pact.

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"If the U.S.-Chinese trade escalates again, or if the U.S. starts a new trade war against the only other economy of almost equal size, the EU, it could all still go wrong," said Holger Schmieding, chief economist at Berenberg Bank. "But in the absence of such new political shocks, chances are that the global downturn could peter out in early 2020 and make way for a modest upturn thereafter."

Back on the "no recession ever" yellow brick road... all it takes is financial meltdown-level central bank intervention...

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iehi-feed-65054 Sun, 03 Nov 2019 01:54:38 GMT A New Startup Called Pattern Wants To Make Millennial Burnout Uncool http://implode-explode.com/viewnews/2019-11-02_ANewStartupCalledPatternWantsToMakeMillennialBurnoutUncool.html iehi-feed-65053 Sat, 02 Nov 2019 23:08:47 GMT Lots of Job Hunting, but No Job, Despite Low Unemployment http://implode-explode.com/viewnews/2019-11-02_LotsofJobHuntingbutNoJobDespiteLowUnemployment.html Beneath the clear benefits of the economic expansion, however, there is an undertow of anxiety, heightened recently by fears of slowing growth around the globe and in the United States.

"We're not focusing enough on the people who have continued to be left behind by this recovery," said Martha Gimbel, a manager of economic research at Schmidt Futures, a philanthropic initiative. "We have not talked enough about the workers who are still stuck even in a labor market that is this competitive."

Most of these people do not show up in the stunningly low official unemployment rate, which was 3.6 percent in October. Working even one hour during the week when the Labor Department does its employment survey keeps you out of the jobless category.

We love statements like this last part. The "3.6% unemployment rate" isn't "stunning" if it is juiced with people working 1 hour per week. This is why we've long considered the headline unemployment rate around here near-meaningless, and advocate that it should be weighted by fractional percentage of full time positions. I.e., it should take 40 people working 1 hour per week to equal one "employed" person, for the purposes of calculating the headline rate. But this is unlikely to change, since every politician who gets into power (including the current "populist") has an overwhelming incentive to use the current, bogus statistics for preening...

there are also many others, like Ms. Ward, who work temporary jobs for months at a time and are not necessarily captured in either measure. And millions of contract workers -- freelancers, consultants, Lyft drivers -- lack benefits, regular schedules and job security. They have found a foothold, but it rests on loose rock.

A recent survey by Gallup found that a majority of Americans do not consider themselves to be in a "good job."

Appealing to "Americans on the sidelines" and those who had not benefited from the "so-called recovery" was a key element of Donald Trump's presidential campaign in 2016. Now, Democratic presidential contenders like Elizabeth Warren and Bernie Sanders are arguing that American workers have barely shared in the economy's gains.

And they have bypassed benchmark statistics like the unemployment rate, and focused instead on the system's fundamental unfairness, highlighting stark income inequality and worker rights.

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iehi-feed-65050 Fri, 01 Nov 2019 14:01:16 GMT Fox News' Catherine Herridge defects to CBS, saying 'facts matter' http://implode-explode.com/viewnews/2019-11-01_FoxNewsCatherineHerridgedefectstoCBSsayingfactsmatter.html In a statement released through CBS, Herridge also invoked the importance of facts, but in a way that could be interpreted as a criticism of Fox: "CBS News has always placed a premium on enterprise journalism and powerful investigations," she said. "I feel privileged to join a team where facts and storytelling will always matter."

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Some journalists at the network have complained about a lack of space for real reporting and described feeling squeezed out by the right-wing talk shows that President Trump and his supporters prefer.

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iehi-feed-65037 Sat, 26 Oct 2019 22:41:45 GMT How WeWork's Adam Neumann Became a Billionaire http://implode-explode.com/viewnews/2019-10-26_HowWeWorksAdamNeumannBecameaBillionaire.html ... In documents filed with the Securities and Exchange Commission in anticipation of a public offering, WeWork announced that the company had lease agreements with four buildings in which Neumann had an ownership interest. Since 2016, WeWork has paid nearly $17 million to Neumann-owned buildings. Dick Costolo, the former CEO of Twitter, called this level of self-dealing "egregious."

Within the company, there were other signs that Neumann's "spirit of we" rhetoric was a cover for "lucre for me" behavior. In 2015, Neumann made tens of millions of dollars selling shares during an investment round. Soon after, the company offered to buy back ordinary employees' shares, but it offered a much lower "payout per share" than what Neumann had received. Many of Neumann's kibbutzniks didn't even know they had been shafted. "Neumann's sale wasn't publicized within the company," according to Wall Street Journal reports.

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iehi-feed-65036 Sat, 26 Oct 2019 22:29:04 GMT What It's Like to Be Stuck Inside the Wreckage of WeWork http://implode-explode.com/viewnews/2019-10-26_WhatItsLiketoBeStuckInsidetheWreckageofWeWork.html ... the structure of the company lent itself to failures of communication and inefficiency. "There are all these people at the top, put up on these pedestals as brilliant visionaries who will never admit when anything's going wrong, and all the rest of the company is just community managers," meaning workers who interact with tenants in WeWork spaces, the current WeWorker said. "Nobody is running the day-to-day business. It's such a shit show. Trying to get finances approved, expenses done--anything that a real company of that size should have the infrastructure for--it's a nightmare."

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``All of this gestures towards a broader point about so-called "unicorn" companies--startups valued above $1 billion--the current employee observed. "They get these massive, bloated valuations, they're allowed to do too much, too fast, without the proper parameters in place, and then it's the employees and their families who are hurt," they said. "The guys at the top aren't really affected."

Surprise -- between the founders and C-suite goofballs on one end, and the staff working the actual locations on the other, there was no actual company in the middle! How does the financial press not figure things out like this sooner -- even in the case of $10s-of-billions valued "unicorn" startup?

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iehi-feed-65032 Thu, 24 Oct 2019 20:40:09 GMT Fed repo bailout: Overnight operations level to increase to $120 billion http://implode-explode.com/viewnews/2019-10-24_FedrepobailoutOvernightoperationsleveltoincreaseto120billion.html iehi-feed-65031 Thu, 24 Oct 2019 20:37:26 GMT Fed repos: Worries continue over the efforts to fix funding issues http://implode-explode.com/viewnews/2019-10-24_FedreposWorriescontinueovertheeffortstofixfundingissues.html "The repo market has been drugged into submission by the Fed," said Jim Bianco, head of Bianco Research. "That's fine for a while. But what I am getting concerned about is that they're not figuring a way to get it off the drug and get it back to normal, and that will be a problem longer term for them."

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Market pros worry that a confluence of factors will make the Fed's market balancing act difficult.

Bianco insists that the Fed is not being discerning enough about credit quality in providing cash in exchange for collateral; others are concerned with what happens as the year draws to a close and banks are more focused on shoring up their liquidity mandates than keeping cash flowing in the overnight markets.

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iehi-feed-65027 Tue, 22 Oct 2019 14:35:37 GMT WeWork Considers Rescue Plans From SoftBank and JPMorgan As Val Cut To $8bln http://implode-explode.com/viewnews/2019-10-22_WeWorkConsidersRescuePlansFromSoftBankandJPMorganAsValCutTo8bln.html The board of WeWork, the cash-starved purveyor of shared office space, could choose between two competing financial rescue packages as early as Tuesday, according to people with knowledge of the matter. One is being offered by SoftBank, and another from a financial consortium led by JPMorgan Chase.

SoftBank, a Japanese technology giant that is already the largest outside shareholder in WeWork, is offering to take a controlling stake by accelerating a $1.5 billion investment it had planned to make next year and by buying up to $3 billion in shares held by other investors, two people said. SoftBank is also offering to put together loans totaling $5 billion from a consortium of financial institutions, including itself.

JPMorgan's proposal consists of several parts, including new bonds, some of which would carry high interest rates, according to a person with knowledge of its plans. That package could add up to roughly $5 billion.

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iehi-feed-65021 Sun, 20 Oct 2019 18:20:53 GMT Trump's (Now-Cancelled) Doral G7 Move, Even if Gratis, Would Have Likely Boosted Ailing Property http://implode-explode.com/viewnews/2019-10-20_TrumpsNowCancelledDoralG7MoveEvenifGratisWouldHaveLikelyBoostedA.html iehi-feed-65015 Fri, 18 Oct 2019 21:11:47 GMT Ray Dalio says the world is in a 'great sag' and echoes the 1930s http://implode-explode.com/viewnews/2019-10-18_RayDaliosaystheworldisinagreatsagandechoesthe1930s.html "This cycle is fading, we are now in the world in what I would call a ‘great sag'," said Dalio, adding that monetary policy, and especially interest rate reductions, were unlikely to offer much stimulus.

"Europe is at the limitation of that, Japan is (too) and the U.S. doesn't have much to go on for that," he told CNBC's Geoff Cutmore.

Dalio said the world was also experiencing the biggest wealth gap since the 1930s and that was creating political stress.

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iehi-feed-65012 Thu, 17 Oct 2019 22:19:09 GMT Holding G-7 at Trump's Doral resort is shameless - The Washington Examiner http://implode-explode.com/viewnews/2019-10-17_HoldingG7atTrumpsDoralresortisshamelessTheWashingtonExaminer.html