Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us 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-65026 Tue, 22 Oct 2019 14:31:45 GMT McKinsey: Over half of the world's banks could fail in a downturn http://implode-explode.com/viewnews/2019-10-22_McKinseyOverhalfoftheworldsbankscouldfailinadownturn.html A majority of banks around the world may not be economically viable if the global economy falters, according to a new study by McKinsey & Company.

Return on equity has fallen below their costs for nearly 60 percent of banks, which is financially unsustainable in the long run. A downturn in the economy, or even a spread of negative interest rates around the world, could make things even worse.

And banks face new competition from all corners, from fintech start-ups with lower costs to tech giants muscling into lucrative banking activities.

"We believe we're in the late economic cycle and banks need to make bold moves now because they are not in great shape," Kausik Rajgopal, a McKinsey senior partner, told Bloomberg. "In the late cycle, nobody can afford to rest on their laurels."

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iehi-feed-65024 Mon, 21 Oct 2019 13:47:08 GMT Cum-ex: German tax case could ripple through the finance industry http://implode-explode.com/viewnews/2019-10-21_CumexGermantaxcasecouldripplethroughthefinanceindustry.html

In cum-ex trades, shares with and without dividend rights were quickly traded between various market participants just before the payout date for the dividend, allowing traders to reclaim double the taxes...

The cum-ex deals orchestrated by the two British bankers on trial in Bonn eventually led to a tax loss of 400 million euros ($443 million).

However, the wider scheme carried out in the first decade of the 21st century, and unearthed in 2017, is thought to have cost state coffers across Europe, including at least 10 countries outside Germany, over $60 billion.

Nearly 500 cum-ex deals worth around 5.5 billion euros are being investigated in Germany, according to the German Finance Ministry. Around 2.4 billion euros has already been recovered by the tax authorities.

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iehi-feed-65022 Sun, 20 Oct 2019 20:36:06 GMT SoftBank seeks to avoid WeWork's liabilities with new investment: sources http://implode-explode.com/viewnews/2019-10-20_SoftBankseekstoavoidWeWorksliabilitieswithnewinvestmentsources.html While the split in SoftBank's contribution between equity and debt is still being negotiated, its investment could make it the majority owner of WeWork. Were this to translate to formal voting control for SoftBank, it could force it to consolidate the loss-making company on its balance sheet, the sources said.

This in turn could result in SoftBank assuming WeWork's liabilities, which include long-term leases for office space that it refurbishes and rents out under short-term contracts, according to the sources. WeWork had $18 billion in long-term lease obligations as of the end of June, according its most recent public financial disclosure. It also had $1.3 billion in net debt.

SoftBank has been keen not to burden its balance sheet further, given its net debt of about 5 trillion yen ($46 billion) as of the end of June, more than half its 9 trillion yen market capitalization, according to the Japanese technology conglomerate's most recent quarterly earnings statement.

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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-65019 Sun, 20 Oct 2019 15:34:34 GMT Brexit vote postponed: Here's what could happen now http://implode-explode.com/viewnews/2019-10-20_BrexitvotepostponedHereswhatcouldhappennow.html U.K. Prime Minister Boris Johnson was thwarted by a cross-party group of politicians who voted to postpone the "meaningful vote" on his new divorce deal and force him to ask Brussels for an extension to the current Oct. 31 Brexit deadline. The developments in Parliament set up a complicated week with just 11 days left until the U.K. is still due to leave the world's largest trading bloc.

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Johnson grudgingly asked for an extension to the deadline late on Saturday night, but EU leaders don't necessarily have to accept it. Some have ruled out giving Britain more time, piling pressure on U.K. lawmakers to accept the current deal. But it's unlikely they would want a no-deal scenario and the potential economic hit it could mean for both sides of the English Channel.

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iehi-feed-65018 Sun, 20 Oct 2019 15:01:06 GMT Are We on the Cusp of the Next Dot-Com Bubble? http://implode-explode.com/viewnews/2019-10-20_AreWeontheCuspoftheNextDotComBubble.html iehi-feed-65017 Sun, 20 Oct 2019 14:59:15 GMT Without Unicorns, The Millennial Lifestyle Is About to Get More Expensive http://implode-explode.com/viewnews/2019-10-20_WithoutUnicornsTheMillennialLifestyleIsAbouttoGetMoreExpensive.html Starting about a decade ago, a fleet of well-known start-ups promised to change the way we work, work out, eat, shop, cook, commute, and sleep. These lifestyle-adjustment companies were so influential that wannabe entrepreneurs saw them as a template, flooding Silicon Valley with "Uber for X" pitches.

But as their promises soared, their profits didn't. It's easy to spend all day riding unicorns whose most magical property is their ability to combine high valuations with persistently negative earnings--something I've pointed out before. If you wake up on a Casper mattress, work out with a Peloton before breakfast, Uber to your desk at a WeWork, order DoorDash for lunch, take a Lyft home, and get dinner through Postmates, you've interacted with seven companies that will collectively lose nearly $14 billion this year. If you use Lime scooters to bop around the city, download Wag to walk your dog, and sign up for Blue Apron to make a meal, that's three more brands that have never recorded a dime in earnings, or have seen their valuations fall by more than 50 percent.

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iehi-feed-65016 Sun, 20 Oct 2019 14:57:37 GMT Libor rigging inquiry shut down by Serious Fraud Office http://implode-explode.com/viewnews/2019-10-20_LiborrigginginquiryshutdownbySeriousFraudOffice.html The decision comes despite evidence that implicates the Bank of England. It means no one will now be prosecuted in the UK for so-called "low-balling", where banks understate interest rates they pay to borrow cash. The Serious Fraud Office (SFO) said its decision followed a detailed review of the evidence.

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A further 11 traders have been prosecuting for manipulating Euribor, the eurozone equivalent of Libor. The SFO said aspects of its Euribor investigation remain open.

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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-65014 Fri, 18 Oct 2019 21:03:43 GMT American Youth Impoverished and Disenfranchised: Solutions http://implode-explode.com/viewnews/2019-10-18_AmericanYouthImpoverishedandDisenfranchisedSolutions.html The geographically based idiosyncrasies of American democracy that the founders put in place compound the problem. On average, ballots cast by older people hold more weight and are less frequently "wasted" than those of the young. (Wasted votes are those garnered in excess of what a candidate needs to win; in our winner-take-all systems that means anything over 50 percent.) Clustered in sparsely populated states and counties, voters who are older, whiter and wealthier get a boost: Older Americans wield disproportionate sway over the Electoral College, the Senate and a gerrymandered Congress.

Migration patterns worsen these trends. A growing percentage of young people now dream of city life, but their preferences inadvertently reduce their political clout: "18 percent of rural residents are 65 or older versus 15 percent in suburban and small metro counties and 13 percent in cities," the Pew Research Center reported last year. Millennials, concentrated in metropolitan areas, are the predominant generation of potential voters in only 86 congressional districts, while boomer voters predominate in 341. By 2040, 70 percent of Americans are expected to live in the 15 most populous states; that would mean that 70 percent of America will be represented by only 30 senators.

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The other critical divide is the economy. The boomers who came of age in the 1950s and '60s benefited from boom times while millennials and Generation Z have been dogged by the aftermath of the mortgage meltdown, an underwhelming recovery and Gilded Age levels of inequality. One generation enjoyed a comparatively high minimum wage, affordable college tuition and reasonable costs of living; for everyone after, stagnating wages, ballooning student debt and unaffordable housing have become the norm.

"Millennials are less well off than members of earlier generations when they were young," a 2018 report by economists from the Federal Reserve Board bluntly states. Other economists have shown that a household headed by someone born in 1970 has a quarter less income and 40 percent less wealth than one headed by a comparable person born in 1940. In contrast, between 1989 and 2013, only the cohort of families headed by people at least 62 saw an increase in median wealth. Older people are more likely to own property, stocks and other assets -- and, consequently, to prefer policies that will keep the values of those assets high. No wonder so many young people have pivoted left, rejecting conventional wisdom about the virtues of unfettered capitalism.

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iehi-feed-65011 Thu, 17 Oct 2019 15:55:36 GMT WeWork Might Be A Zombie Unicorn. SoftBank Should Probably Let It Be ‘WeDead' http://implode-explode.com/viewnews/2019-10-17_WeWorkMightBeAZombieUnicornSoftBankShouldProbablyLetItBeWeDead.html If the last month made anything clear, it is that the New York-based startup has a business model that's doomed to fail. And yet SoftBank's Masayoshi Son and JPMorgan Chase's Jamie Dimon are engaged in a tug of war over who gets to delay WeWork's demise.

Both billionaires erred in drinking Adam Neumann's Kool Aid that an office-sharing supplier was, somehow, a tech disruptor. Now, Son and Dimon are embroiled in a race to save face by rescuing a corporate boondoggle better left to die.

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Dimon appears to be determined to perpetuate the myth of omnipotence bestowed on him in 2008. As Bear Stearns and Lehman Brothers crashed, Wall Street executives faced existential crises. JP Morgan Chase avoided the worst the subprime debacle. Dimon played the role of white knight. There is reputational risk to admitting he got played by Neumann's we-are-a-game-changer spiel.

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There's a good argument Son should walk away. Sure, WeWork accounts for 10% of his $100 billion Vision Fund. Son could write it off completely, apologize to shareholders and pivot elsewhere to raise returns.

Yet Son appears to be embracing Japan Inc.'s worst impulses by tossing a life-preserver at a drowning company. As the Nasdaq tech-IPO set hit a wall in the 1990s, Japan swung into bailout mode. Bureaucrats and business lobby bigwigs joined hands to stop any major company from going bust or being acquired by overseas executives.

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iehi-feed-65009 Thu, 17 Oct 2019 01:20:29 GMT SoftBank reportedly plans to offer $5 billion in financing to WeWork without majority control, offering an alternative to JPMorgan's high-interest option http://implode-explode.com/viewnews/2019-10-16_SoftBankreportedlyplanstooffer5billioninfinancingtoWeWorkwithout.html SoftBank could provide about $US5 billion in debt and equity financing to the embattled office company, with the money coming from the Japanese investor directly, rather than its Vision Fund,Nikkei Asian Review first reported on Wednesday. And JPMorgan has lined up 100 investors to review an all-debt financing package, also around $US5 billion.

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SoftBank's latest deal may not solve WeWork's governance issues, depending on how the voting shares work out, said Erik Gordon, a professor at the University of Michigan's business school.

"If they do it without getting voting control away from Neumann, they will miss their best chance of solving the governance problem that will keep the company from going public," he told Business Insider in an email.''

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iehi-feed-65008 Wed, 16 Oct 2019 21:32:56 GMT Brookfield Reveals Pricey Makeover, Address Change For 666 Fifth Ave., Kushner's White Elephant http://implode-explode.com/viewnews/2019-10-16_BrookfieldRevealsPriceyMakeoverAddressChangeFor666FifthAveKushne.html iehi-feed-65004 Wed, 16 Oct 2019 15:03:39 GMT One look at this and you'll get why Warren Buffett sits on a record cash pile http://implode-explode.com/viewnews/2019-10-16_OnelookatthisandyoullgetwhyWarrenBuffettsitsonarecordcashpile.html ... the ratio [of the Wiltshire 5000 to the GDP] suggests valuations are at a level not seen since the internet bubble two decades ago, prompting Evans to warn that there's "very little to the upside" and "very much to the downside" in the current climate.

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Can the market keep chugging along in the face of historic valuations? Evans says it's possible but investors "will need a theme to fuel the delusion."

Those themes could come in the form of "QE Forever," though he says that's not likely. "That jig is almost up and any further rise in inflation will put a stake through its heart," Evans wrote in his post.

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iehi-feed-65002 Tue, 15 Oct 2019 17:45:56 GMT Articles on the Fed's Secret Trillions in Loans to Wall Street During '08 Crisis Have Fallen Into Bloomberg's "Memory Hole" http://implode-explode.com/viewnews/2019-10-15_ArticlesontheFedsSecretTrillionsinLoanstoWallStreetDuring08Crisi.html At the time of Pittman's death, the Fed was still refusing to release the details of its secret loans, despite losing its court battle at the Federal District Court. The appellate court decision against the Fed would not come until March 19, 2010, four months after Pittman's death. Even then, the Fed did not release the data. First it asked for a rehearing by the Second Circuit Court of Appeals. When that was rejected, a Wall Street consortium of banks, that were the recipients of the trillions of dollars in secret loans, appealed the case to the U.S. Supreme Court. That appeal failed as well and the Fed was forced to release its data in 2011. When all of its bailout programs were tallied up, the tab came to a staggering, cumulative $29 trillion -- all transacted without the involvement or awareness of anyone elected to office by the American people. Congress remained in the dark throughout this period as trillions of dollars were sluiced to Wall Street, foreign banks, insolvent banks, even hedge funds that were shorting (betting against) the market.

Now the Fed has turned on its unaccountable money spigot to Wall Street once again and is attempting to pass it off as part of its normal open market operations --  keeping Congress and the American people in the dark. To date, the Fed has refused to name which Wall Street firms are taking the hundreds of billions of dollars in revolving loans and how much each is receiving.

... To our shock and dismay, many of Pittman's articles that we found referenced in academic journals about the Fed have been purged from Bloomberg News. (We asked Bloomberg via email to explain its removal of these articles but have yet to hear back. We'll update this article should we receive a response.)

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iehi-feed-65001 Tue, 15 Oct 2019 17:28:27 GMT WeWork set to sack 2,000 staff as anger towards founder Adam Neumann grows http://implode-explode.com/viewnews/2019-10-15_WeWorksettosack2000staffasangertowardsfounderAdamNeumanngrows.html Some WeWork executives were in line for million-dollar payouts if the sale had gone ahead and are now likely to get nothing and could even lose their jobs.

One worker said: "I left crypto to join an even more ludicrous ‘parody, IRL [in real life]' enterprise. Didn't even think that was possible."

Neumann, 40, cashed in around $700m of his own shares in WeWork before a share sale that at one point valued WeWork at $47bn. The company has begun attracting larger tenants, including IBM and Microsoft. The Guardian uses a WeWork space in California.

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iehi-feed-64999 Mon, 14 Oct 2019 22:43:08 GMT Trump's Trillion-Dollar Hit to Homeowners http://implode-explode.com/viewnews/2019-10-14_TrumpsTrillionDollarHittoHomeowners.html iehi-feed-64997 Fri, 11 Oct 2019 20:42:09 GMT Treasury will again borrow $1 trillion to pay for tax cuts, spending http://implode-explode.com/viewnews/2019-10-11_Treasurywillagainborrow1trilliontopayfortaxcutsspending.html For the second straight year, the Treasury Department will have to borrow $1 trillion to pay for the government's growing budget deficit, a consequence of juiced government spending and smaller revenues as a result of the late 2017 tax cuts, Bloomberg reports.

The big picture: Treasury borrowing surpassed $1 trillion during President Obama's first term as government spending soared amid the stimulus to combat the 2008 financial crisis, but it has steadily declined in the years since, settling down to $519 billion in 2017 before nearly doubling last year.

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iehi-feed-64995 Thu, 10 Oct 2019 22:17:40 GMT Why The World Is Getting Louder http://implode-explode.com/viewnews/2019-10-10_WhyTheWorldIsGettingLouder.html Scientists have known for decades that noise--even at the seemingly innocuous volume of car traffic--is bad for us. "Calling noise a nuisance is like calling smog an inconvenience," former U.S. Surgeon General William Stewart said in 1978. In the years since, numerous studies have only underscored his assertion that noise "must be considered a hazard to the health of people everywhere." Say you're trying to fall asleep. You may think you've tuned out the grumble of trucks downshifting outside, but your body has not: Your adrenal glands are pumping stress hormones, your blood pressure and heart rate are rising, your digestion is slowing down. Your brain continues to process sounds while you snooze, and your blood pressure spikes in response to clatter as low as 33 decibels--slightly louder than a purring cat.

Experts say your body does not adapt to noise. Large-scale studies show that if the din keeps up--over days, months, years--noise exposure increases your risk of high blood pressure, coronary heart disease, and heart attacks, as well as strokes, diabetes, dementia, and depression. Children suffer not only physically--18 months after a new airport opened in Munich, the blood pressure and stress-hormone levels of neighboring children soared--but also behaviorally and cognitively. A landmark study published in 1975 found that the reading scores of sixth graders whose classroom faced a clattering subway track lagged nearly a year behind those of students in quieter classrooms--a difference that disappeared once soundproofing materials were installed. Noise might also make us mean: A 1969 study suggested that test subjects exposed to noise, even the gentle fuzz of white noise, become more aggressive and more eager to zap fellow subjects with electric shocks.

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