Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-63185 Sun, 22 Oct 2017 20:44:15 GMT Unprecedented Housing Bailout Revealed; China Property Sales Drop For First Time In 30 Months http://implode-explode.com/viewnews/2017-10-22_UnprecedentedHousingBailoutRevealedChinaPropertySalesDropForFirs.html iehi-feed-63184 Sun, 22 Oct 2017 20:41:02 GMT Japan election: Abe on track for big win, polls show http://implode-explode.com/viewnews/2017-10-22_JapanelectionAbeontrackforbigwinpollsshow.html Japanese Prime Minister Shinzo Abe and his ruling coalition are on course for a landslide win in Sunday's parliamentary elections, exit polls show. Abe had called the snap vote to seek a boost to his parliamentary majority and is likely to use any new powers to attempt to overhaul the country's defense strategy and pacifist stance.

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In the face of an increasingly hostile North Korea, Abe earlier this year set a deadline of 2020 to revise Japan's constitution, which contains language that bans Japan from maintaining armed forces. It is a controversial proposal that strikes at the heart of the country's post-war identity...Abe had sought to win a two-thirds "super majority" in Parliament, which would help him achieve his goal of amending the constitution.

Also, nothing like a war to mask the implosion of a decades-long malaise and culminating government debt bubble...

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iehi-feed-63183 Sun, 22 Oct 2017 20:38:36 GMT Global Housing Affordability: NYC Far From The Worst http://implode-explode.com/viewnews/2017-10-22_GlobalHousingAffordabilityNYCFarFromTheWorst.html Average monthly take-home pay won't cover the cost of buying a 1,000-square-foot residence or renting a three-bedroom home in any of the 105 metropolitan areas ranked by the Bloomberg Global City Housing Affordability Index -- based on a general rule of thumb among U.S. lenders that people should spend no more than 28 percent of net income on housing costs. Only 12 cities would be considered affordable if they spend 50 percent.

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Residents face many obstacles, including urban land-use regulations, underdeveloped rental markets and difficulty getting financing, according to Enrique Martínez-García, a senior research economist at the Federal Reserve Bank of Dallas who studies housing prices. Policy solutions to these problems aren't clear, he adds.

"Not having access to credit is a challenge to develop a healthy housing market," he said. "But opening it up too fast might be a problem as well; it might actually lead to a boom-bust episode."

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iehi-feed-63182 Sun, 22 Oct 2017 20:10:22 GMT HAMP Was Undermined By The Banks http://implode-explode.com/viewnews/2017-10-22_HAMPWasUnderminedByTheBanks.html iehi-feed-63181 Sun, 22 Oct 2017 18:07:31 GMT Lofty Valuations and Smart-Money Positioning Portend Ill http://implode-explode.com/viewnews/2017-10-22_LoftyValuationsandSmartMoneyPositioningPortendIll.html iehi-feed-63180 Sun, 22 Oct 2017 18:01:31 GMT The Mathematics of Economic Inequality http://implode-explode.com/viewnews/2017-10-22_TheMathematicsofEconomicInequality.html It's easy to imagine how wealth-attained advantage works in real life. "The people with that advantage receive better returns on their investments, lower interest rates on loans, and better financial advice," said Boghosian. "Conversely, as Barbara Ehrenreich famously observed, it is expensive to be poor. If you are working two jobs, you don't have time to shop for the best bargains. If you can't afford the security deposit demanded by most landlords, you may end up staying in a motel at inflated prices. The model tracks the data with remarkable accuracy, he said...

This is great work, though it seems to a large extent, mainly what these researchers are discovering is that capitalism and the "free market" are embedded in a set of non-market social relationships that tend to confer advantage to the advantaged (as most people, i.e., not free market fundamentalist economists, would find intuitive or even obvious). There may even be a connection to Coasian transaction theory: i.e., the market doesn't account for all trust factors, therefore market participants will resort to success and notoriety as a fallback mechanism to determine whether to engage in a transaction and prospectively make more money for both parties (Coase originally showed that corporations will form to lower "transaction costs" in what otherwise would be a decentralized market; and this work was extended in the early 2000s to explain the rise of open/collaborative information projects.).

To counteract this sort of effect, one could certainly argue for "redistribution". However, we'd argue that this is best done in the form of mechanisms to help increase "grassroots" access to capitalism (i.e., startup and small business funding, free entrepreneurial education, no taxes for small businesses, etc.)

All that said, we would argue that all of these emergent-inequality problems are made much worse by a biased central banking paradigm, and a political deck that stacks the economy against the little guy (both in "micro" ways, and in "macro" -- i.e., bailouts). Schumpeter observed ages ago that creative destruction was vital to capitalism -- we find it not coincidental, then, that periods of high inequality coincide with stagnation of the mechanism of creative destruction.

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iehi-feed-63179 Sun, 22 Oct 2017 17:43:40 GMT Italians vote in autonomy referendums in shadow of Catalonia crisis http://implode-explode.com/viewnews/2017-10-22_ItaliansvoteinautonomyreferendumsinshadowofCataloniacrisis.html Two wealthy regions of northern Italy began voting on Sunday in referendums for autonomy, ballots that could fan regional tensions in Europe at a time when neighboring Spain is striving to prevent Catalonia from breaking away.

Lombardy and Veneto, regions that are both run by the once openly secessionist Lega Nord party, are holding non-binding votes which the party hopes will deliver it a mandate to negotiate better financial deals from Rome.

Unlike the Spanish region of Catalonia, which held an independence referendum on Oct. 1 despite it being ruled unconstitutional, the Italian referendums are within the law... The referendum results are not binding, and some of the Lega's political opponents say it is a waste of time and money. Under Italy's constitution, regions can enter into negotiations at any time with Rome to take on more functions from the center.

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iehi-feed-63178 Sun, 22 Oct 2017 17:10:28 GMT Bitcoin's Fair Value: $25,000? http://implode-explode.com/viewnews/2017-10-22_BitcoinsFairValue25000.html ... that's the big number, that your -- the $25,000 per unit hinges on the 5% of the money going into gold, going into bitcoin. So how do you come up with the 5%?

Lee: We explain this in our research. It's a very -- it's actually the most conservative collection of elements to get to the 5%. Because number one, we assume that gold only appreciates essentially a nominal GDP. So there's no inflation. And we assume that money supply grows at slower rates than it has historically. And then the 5% number, really reflects the assumption that investors will allocate in their blended portfolio only 5% to alternative currencies. Today, that allocation is much greater, it's closer to 10% or 15% in some portfolios. So, but at a 5% allocation that would value bitcoin at $25,000. You could easily get to $100,000, $200,000 numbers.

... what's interesting is bitcoin is uncorrelated to other asset classes right now, and I think it really speaks to the fact that it's not institutionally held. It's really held by miners, and enthusiasts. Most of them are what they call hodlers. You know, they're not sellers of the coin. So the liquidity of bitcoin is deceptively small. So if you can imagine, you know, there was recently of a very well-known portfolio manager starting at a $500M hedge fund. If he employs typical leverage, he's buying $2.5B of bitcoin. There isn't $2.5B of bitcoin available to purchase. So I think you can easily see a liquidity-based move in bitcoin that's much beyond our target prices...

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iehi-feed-63177 Sun, 22 Oct 2017 15:33:58 GMT Euroskeptic Billionaire on Route to Czech Election Victory http://implode-explode.com/viewnews/2017-10-22_EuroskepticBillionaireonRoutetoCzechElectionVictory.html A Czech billionaire looks set to win parliamentary elections Saturday, overcoming traditional political parties on a pledge to run the state like a business, fight Muslim immigration and oppose deeper integration with the European Union.

Andrej Babis, who has drawn comparisons to Donald Trump and Silvio Berlusconi, had a wide lead in opinion polls before two days of voting started Friday. With a chemical, food and media empire employing 34,000 in 18 countries, the Slovak-born businessman -- and second-richest Czech -- increased his popularity while serving as finance minister before he was fired by his coalition partner, Prime Minister Bohuslav Sobotka.

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Regardless of the government's economic achievements, polls have shown the emergence of protest parties including the anti-immigrant Freedom and Direct Democracy, known as SPD, and the Pirate party. Alongside the Communists -- the descendants of the Moscow-backed regime that ruled before the 1989 collapse of the Iron Curtain -- the three could take more than a quarter of parliament's seats.

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iehi-feed-63176 Sun, 22 Oct 2017 03:00:47 GMT Harvey Weinstein Pulls Hamptons Mansion Off The Market http://implode-explode.com/viewnews/2017-10-21_HarveyWeinsteinPullsHamptonsMansionOffTheMarket.html iehi-feed-63175 Sun, 22 Oct 2017 00:28:51 GMT U.S. fiscal year deficit widens to $666 billion http://implode-explode.com/viewnews/2017-10-21_USfiscalyeardeficitwidensto666billion.html ``The U.S. budget deficit widened to $666 billion for the fiscal year 2017 as record spending more than offset record receipts, the Treasury Department said on Friday. The 2017 deficit increased to 3.5 percent of gross domestic product. The previous fiscal year deficit was $586 billion, with a deficit-to-GDP ratio of 3.2 percent.'' -- Of course this means the actual debt growth was probably around 2x as much...]]> iehi-feed-63174 Sat, 21 Oct 2017 14:40:36 GMT Schiff: Sanguine Market Optimism At an All-Time High http://implode-explode.com/viewnews/2017-10-21_SchiffSanguineMarketOptimismAtanAllTimeHigh.html iehi-feed-63173 Sat, 21 Oct 2017 14:22:39 GMT Catalonia: Rajoy urges removal of region's leaders http://implode-explode.com/viewnews/2017-10-21_CataloniaRajoyurgesremovalofregionsleaders.html Spanish Prime Minister Mariano Rajoy said Saturday that his government was seeking to remove the leaders of Catalonia's regional government from power and call new elections as soon as possible.

The unprecedented measures -- intended to end Catalan leaders' independence bid -- would be taken under Article 155 of the Spanish constitution and must be sent to the Spanish Senate for approval. This would happen within the next week, Rajoy said.

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On Thursday, Catalan President Carles Puigdemont threatened that the wealthy northeastern region could formally declare independence if the Spanish government did not engage in dialogue.

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iehi-feed-63172 Sat, 21 Oct 2017 02:09:32 GMT Prof.: "Unicorn" Companies On Avg. Worth Half Claimed Valuations http://implode-explode.com/viewnews/2017-10-20_ProfUnicornCompaniesOnAvgWorthHalfClaimedValuations.html Those eye-popping valuations regularly fill articles and water-cooler conversations in Silicon Valley, all under the umbrella of "unicorn" companies -- a term for private companies that are said to be worth more than $1 billion. That moniker now applies to at least 135 businesses, making the descriptions of them as unicorns, well, less apt. (Maybe donkeys?) Early investors and employees spend countless hours calculating and recalculating how much their stake is worth.

Here is some bad news for them: Those valuations may be a bit of myth -- or perhaps wishful thinking.

In Palo Alto, Calif., just down the road from many of the biggest tech companies and the most influential venture capitalists, a professor at Stanford University has quietly been working on a project to crunch the valuation numbers behind some of these private companies.

Ilya A. Strebulaev and another professor working with him, Will Gornall of the University of British Columbia, have come to a startling conclusion: The average unicorn is worth half the headline price tag that is put out after each new valuation

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That black box increasingly has relevance not just to gossips in Silicon Valley, but also to public investors. Big mutual fund companies like T. Rowe Price and BlackRock have aggressively begun investing in unicorn companies in recent years on behalf of public investors -- yes, you may own a stake in Uber and not even know it -- helping to increase the valuations even further.

And even the big public mutual funds, the researchers contend, are not properly valuing the assets. "It is inappropriate to equate post-money valuations and fair values," the professors said, explaining how, more often than not, public funds use the headline price that comes after a round of financing, and don't distinguish between various types of shares.

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To cite one example from the research: In 2015, Appdynamics issued a Series F round with special terms for certain investors, including "a provision offering a 20% bonus in down I.P.O.s," meaning one that fell in price. Legg Mason, already an investor, then revalued its shares in the company at a higher price, "despite not being eligible for the 20% bonus," the professors wrote. "These examples are representative of common industry practices."

This is mostly a big deal because of the major, "main street" funds buying into these companies. As far as the VC world, everyone knows that post-money valuations are more "aspirational" than anything -- if the company is ultimately successful, you end up with a much higher "valuation" provided through IPO and the stock market anyways. And if the company is not (which is the only other possibility, and the most likely one), the "real" valuation is of course zero. So post-money valuations while a startup is growing are really more of an internal benchmarking metric than anything else; they are nothing like a cash-flow valuation of a mature company, or a share price in the stock market.

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iehi-feed-63171 Fri, 20 Oct 2017 21:19:09 GMT Is the Fed Getting Cold Feet about the QE Unwind? http://implode-explode.com/viewnews/2017-10-20_IstheFedGettingColdFeetabouttheQEUnwind.html We're now two and half weeks and three weekly balance-sheet releases into the QE unwind period. How much has the Fed actually reduced its balance sheet?... You read correctly: Since October 4, the balance sheet gained $10 billion, all of it in the week ending October 18. The Fed is supposed to unload $10 billion in October. But curiously, so far, it has done the opposite.

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There is willfulness in it -- a sign that they're not ready, or that they want to give the markets more time to get used to the idea of it, etc. And this could be the case. [Or] They're seeing something that worries them, and they're holding off for now to get a clearer picture. But I doubt this because their decision to commence the QE-unwind on October 1 was unanimous, and since then nothing of enough enormity has changed.

We think it actually could be the latter reason -- but it's not that something ominous happened since the Oct. 1 planned start of the QE-unwind; rather, that the market condition has always been ominous since QE began (i.e., dependent upon massive credit inflation), and the Fed knows it's going to cause a crash.

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iehi-feed-63170 Fri, 20 Oct 2017 16:08:41 GMT Greenwich Mansion Listings Pulled to Wait for a Better Day http://implode-explode.com/viewnews/2017-10-20_GreenwichMansionListingsPulledtoWaitforaBetterDay.html Luxury-home listings in the Connecticut town plunged 31 percent from a year earlier, according to a report Thursday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. That's largely because sellers who failed to get their hoped-for price quit trying to find buyers and took their properties off the market to wait for a better day.

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Tastes are changing in Greenwich, home to many Wall Street executives who take the 50-minute train ride to Manhattan. Lavish mansions on several acres have languished, while smaller homes closer to downtown get scooped up. In the third quarter, sales of luxury homes -- the top 10 percent of deals by price -- fell 13 percent from a year earlier to 21, the firms said. Condo purchases, meanwhile, jumped 35 percent to 58 transactions, the most for a quarter in data going back to 1999.

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iehi-feed-63169 Fri, 20 Oct 2017 16:06:13 GMT U.S. Senate Adopts Budget, Giving Momentum to Trump's Tax-Cut Plans http://implode-explode.com/viewnews/2017-10-20_USSenateAdoptsBudgetGivingMomentumtoTrumpsTaxCutPlans.html The Senate adopted a fiscal 2018 budget resolution Thursday that House GOP leaders agreed to accept, a show of unity aimed at speeding consideration of President Donald Trump's plan to enact tax cuts. The budget cleared the Senate 51-49, with all Democrats and Republican Senator Rand Paul of Kentucky voting against it.

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The GOP budget compromise took shape Thursday evening. It allows for more defense spending in the first year, in line with the House budget, according to a Republican aide. It eliminates House language to expedite $203 billion in entitlement savings, while leaving in place Senate language that would allow drilling in the Arctic National Wildlife Refuge. Senate Democrats tried without success to strip out the drilling provision.

On taxes, the compromise would keep the Senate's language allowing tax cuts that add up to $1.5 trillion to the deficit, not including the effects of economic growth, according to the aide. The House plan had required tax changes not to lose revenue.

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iehi-feed-63168 Fri, 20 Oct 2017 15:53:47 GMT Senate Will Probably Confirm Trump's Fed Pick, But Not Without Some Drama http://implode-explode.com/viewnews/2017-10-20_SenateWillProbablyConfirmTrumpsFedPickButNotWithoutSomeDrama.html There could be some awkward moments if Powell is selected and sits down with Republican Banking Committee members Toomey of Pennsylvania and Dean Heller of Nevada, both of whom voted against him in the past. The two were among 20 Republicans who opposed him in 2012 when he was confirmed to complete an unexpired Fed term. Powell was opposed by 23 Republicans, including Crapo, South Carolina's Tim Scott and Senate Majority Leader Mitch McConnell when he was confirmed for a full 14-year term in 2014.

... Powell has been criticized by Republicans for failing to stand up to Daniel Tarullo, the former Fed governor who pushed for tougher oversight as the central bank's point man on financial regulation. He is also opposed by conservatives who would like to see a more hawkish, rules-based monetary policy.

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iehi-feed-63167 Fri, 20 Oct 2017 14:45:06 GMT What would happen if Amazon brought 50,000 workers to your city? Ask Seattle. http://implode-explode.com/viewnews/2017-10-20_WhatwouldhappenifAmazonbrought50000workerstoyourcityAskSeattle.html Maybe no city could have built housing fast enough to keep prices from spiraling upward during Amazon's growth, but Seattle - despite nearly leading the nation in new apartment construction - hasn't come close.

On the sidewalks, alongside rentable neon bikes, people subsist in tents and sleeping bags in places locals say they did not congregate at 10 years ago - a warning sign for cities nationwide trying to capture a version of Seattle's glory.

"We don't have enough housing for low-income people especially, but we also just don't have enough housing," said Myers, a longtime Seattle housing advocate. "And Amazon obviously impacts both of those things."

Officials at Bellwether Housing, the city's largest nonprofit manager of affordable housing, at 2,000 units, report a vacancy rate of 1 percent. "It's very rare that someone moves out, because they have nowhere else to go," said chief executive Susan Boyd.

A state analysis of evictions found they were driven not by social problems but by economics. As Amazon's boom has continued, the city approved a rule this year requiring landlords to accept the first viable renter who applies - rather than cherry-picking a tech worker. The government also adopted an inclusionary zoning policy requiring developers to set aside some new units at below-market rates or pay into a fund to develop other affordable units.

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iehi-feed-63166 Fri, 20 Oct 2017 00:30:52 GMT Varoufakis: Capitalism is ending because it has made itself obsolete http://implode-explode.com/viewnews/2017-10-19_VaroufakisCapitalismisendingbecauseithasmadeitselfobsolete.html ``Capitalism is going to undermine capitalism, because they are producing all these technologies that will make corporations and the private means of production obsolete. And then what happens? I have no idea."

Describing the present economic situation as "unsustainable" and fearing the rise of "toxic nationalism", Mr Varoufakis said governments needed to prepare for post-capitalism by introducing redistributive wealth policies. 

He suggested one effective policy would be for 10 per cent of all future issue of shares to be put into a "common welfare fund" owned by the people. Out of this a "universal basic dividend" could be paid to every citizen. ''

Or perhaps technology is making "capitalism" obsolete (it's not even clear, however, that "capitalism" is what's being displaced, so much as an ad hoc set of public-private power relations mixed in with semi-free flowing capital and quasi-free markets...)

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