Implode-Explode Heavy Industries news feed 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 "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%.


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.


"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.

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 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.


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.


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."

iehi-feed-65094 Thu, 05 Dec 2019 01:15:55 GMT Nearly 700,000 will lose food stamps with USDA work requirement change The USDA rule change affects people between the ages of 18 and 49 who are childless and not disabled. Under current rules, this group is required to work at least 20 hours a week for more than three months over a 36-month period to qualify for food stamps, but states have been able to create waivers for areas that face high unemployment.

The new rule would limit states from waiving those standards, instead restricting their use to those areas that have a 6 percent unemployment rate or higher. The national unemployment rate in October was 3.6 percent.


"This Administration is out of touch with families who are struggling to make ends meet by working seasonal jobs or part time jobs with unreliable hours," Stabenow said. "Seasonal holiday workers, workers in Northern Michigan's tourism industry, and workers with unreliable hours like waiters and waitresses are the kinds of workers hurt by this proposal."


"There's a reason Republicans and Democrats overwhelmingly rejected this callous proposal in the Farm Bill and instead focused on bipartisan job training opportunities that actually help families find good paying jobs," she said.

Hunger advocates have repeatedly emphasized that SNAP is intended to address hunger and not compel people to work. Many also noted that those affected are impoverished, tend to live in rural areas, often face mental health issues and disabilities. Black and Hispanic households, women and LGBTQ people would be disproportionately affected by the change.

iehi-feed-65093 Tue, 03 Dec 2019 23:04:05 GMT Manhattan Luxury Condo Sales Moving Slowly, Even With Freebies Extell Development gave Israeli investors a peek into how well its condos are selling in New York, and the message is clear: When trying to offload luxury apartments, throwing in concessions helps, but not enough to clear inventory in a market brimming with high-priced competition.


Even Extell's lower-priced luxury offerings are struggling to find an audience. At One Manhattan Square on the Lower East Side, just 202 of the project's 815 units were spoken for as of the end of September, the filing shows. Sales started four years ago.

At that building, Manhattan's largest new condo tower, Extell has tried several experiments to lure buyers, including allowing them to rent a unit while having their monthly payments go toward an eventual purchase. Another program allows takers to put down a 10% deposit and live in their apartments for free -- not including utilities -- on the promise that they'll take ownership within a year or forfeit their money.

iehi-feed-65087 Mon, 25 Nov 2019 20:32:25 GMT OK Boomer, Who's Going to Buy Your 21 Million Homes? The U.S. is at the beginning of a tidal wave of homes hitting the market on the scale of the housing bubble in the mid-2000s. This time it won't be driven by overbuilding, easy credit or irrational exuberance, but by an inevitable fact of life: the passing of the baby boomer generation.

One in eight owner-occupied homes in the U.S., or roughly nine million residences, are set to hit the market from 2017 through 2027 as the baby boomers start to die in larger numbers, according to an analysis by Issi Romem conducted while he was a senior director of housing and urban economics at Zillow. That is up from roughly 7 million homes in the prior decade.

By 2037, one quarter of the U.S. for-sale housing stock, or roughly 21 million homes will be vacated by seniors. That is more than twice the number of new properties built during a 10-year period that spanned the last housing bubble.

Most of these homes will be concentrated in traditional retirement communities in Arizona and Florida, according to Zillow, or parts of the Rust Belt that have been losing population for decades. A more modest infusion of new housing is expected in pricey coastal neighborhoods of New York or San Francisco where younger Americans are still flocking in large numbers.

On the face of it, this doesn't sound all bad. Dying homeowners have always needed to be replaced by younger ones and the U.S. has for a number of years suffered from a shortage of housing, a development that has dampened recent home sales activity and kept many millennials stuck in rentals.

iehi-feed-65084 Thu, 21 Nov 2019 23:50:58 GMT The World May Have a Bigger Problem Than a Potential Recession For OECD Chief Economist Laurence Boone, the worry is that the world could continue to suffer in the decades to come if authorities offer short-term fiscal and monetary fixes as the only response.


The pessimism about the deep seated problems in the global economy contrasts with more upbeat signals coming from financial markets, where investors are increasingly betting on an upswing next year depending on the latest twists in trade talks.

iehi-feed-65083 Thu, 21 Nov 2019 22:53:16 GMT Greece's Moria Refugee Camp: A European Failure From up close, Moria is a chaotic mass of humanity. Built to house about 3,000 people, it is now home to more than 13,000 (including an estimated 1,000 unaccompanied minors)--more than it has ever held. They wait, sometimes for more than a year, for the slow wheels of Greek bureaucracy to turn, to review their asylum applications, to send them to the mainland for a decision. Winter is approaching, and many of these 13,000 live outside the camp's walls, in tents pitched on the surrounding hillsides, without electricity or running water, which are provided only inside the camp. NGOs, which lease the land for the tents, help run basic services and report atrocious conditions. Fights break out in the hours-long food lines. Women are afraid to use the toilets for fear of harassment. In September, a woman died in a deadly fire.

How did it come to this? Because Europe allowed it to come to this.


What is Moria? It is where Europe's ideals--solidarity, human rights, a safe haven for victims of war and violence--dissolve in a tangle of bureaucracy, indifference, and lack of political will. It is the normalization of a humanitarian crisis. It is the moral failure of Europe.

iehi-feed-65080 Wed, 20 Nov 2019 02:38:24 GMT The Future of Banking Is ... You're Broke | WIRED Better banking isn't a bad idea, nor is it a tough sell. There's definitely an ambient frustration with the megabanks that have destroyed the global economy, bilked consumers with fake accounts and hidden terms, propped themselves up on the comfortable elbow of your overdraft fees, routinely discriminated against people of color, and on and on and on. I mean, there really should be a mission to take customers away from these companies. At minimum, it's smart to capitalize on all of this well-earned consumer rage.

Still, it's deeply depressing to attend a large gathering of executives, founders, and industry veterans, as I did at October's Money 20/20 conference, and hear the same, somber message repeated over and over again: The future of money will be predicated on the fact that the personal finances of the next generation are as fragile as a Fabergé egg. This, according to attendees and speakers, is both a problem and an opportunity. No one bothered mentioning that the sick state of the nation's finances isn't technology's problem to solve.

iehi-feed-65079 Tue, 19 Nov 2019 01:38:51 GMT Inside the doomed relationship of Masa Son and Adam Neumann ``... 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.


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.

iehi-feed-65078 Sat, 16 Nov 2019 16:21:35 GMT State of NJ: Uber Must Pay $650 Million in Unpaid Employment Taxes, Fines New Jersey has for years been hard at work trying to collect from Uber for those exact reasons. It assessed the amount that Uber and subsidiary Rasier LLC, which processes payments to Uber drivers, owed at $523 million, and it tacked on around $119 million in additional penalties and interest.

Reached for comment and Uber spokesperson told Gizmodo that ""We are challenging this preliminary but incorrect determination, because drivers are independent contractors in New Jersey and elsewhere."


Uber's home state of California still leads the fight in enforcement, however, passing the contentious AB5 bill in September, opening up rideshare companies (and other businesses) to strict legal challenges for worker misclassification. Lyft, Uber, and other allies still intend to fight the law's implementation.

After the single worst IPO in history, Uber's share price has continued to fall, hovering at $26.25 per share at the time of this writing--nearly half of what it debuted at nine months ago.

iehi-feed-65077 Fri, 15 Nov 2019 14:38:21 GMT ‘Chile Woke Up': Legacy of Inequality Triggers Mass Protests The end of the Pinochet dictatorship, in 1990, came with an implicit caveat: Military rule would end, but the socialist policies of Salvador Allende, the leftist president Gen. Augusto Pinochet had deposed in a coup, would not return. Subsequent governments preserved the extreme laissez-faire economic system imposed in the 1970s and 1980s.

But today, widespread public anger over the inequality and economic precarity that many Chileans see as a consequence of that system means that conservative economic policies may be more of a threat to political stability than a means of ensuring it.

... [But] the Chilean political crisis is not unique to Chile. It carries unmistakable echoes of a problem that is at the center of political conflict all over the developed world.

As free trade, new technologies, the rise of China, and other seismic changes have reshaped the world's economies, political divisions have emerged between those who gain from the current system and those who do not.


In much of Europe and the United States, onetime industrial towns declined as economic growth accrued to large, globally connected cities, instead. For many, even those who have seen modest objective improvements in their own standards of living, watching others surge ahead while they struggle has left them feeling angry and disillusioned. In many countries, trust in institutions is falling, surveys show.

The same economic changes have shattered longstanding political coalitions, weakening mainstream parties. Far-right populists and other outsider politicians have moved to fill the vacuum left behind.

And with no effective channels for public anger, mass frustration has erupted into protest movements like France's Yellow Vests and the demonstrations in Chile.''

iehi-feed-65075 Thu, 14 Nov 2019 05:53:04 GMT The SoftBank Effect: How $100 Billion Left Workers in a Hole Mr. Solankey is one of millions of workers and small-business people who worked with start-ups financed by the biggest venture capital fund in history, the $100 billion Vision Fund run by the Japanese conglomerate SoftBank. The fund was part of a flood of money that has washed over the world in the past decade -- and that has upended people's lives when the start-ups broke their promises.

Masayoshi Son, SoftBank's chief executive, was hailed as a kingmaker in 2016 when he unveiled the Vision Fund. Using the cash hoard, Mr. Son poured money into fledgling companies across the world, many of which have a business model of hiring contractors who deliver their services. Above all, he urged these start-ups to grow as fast as possible.

Many of the young companies used SoftBank's cash to dangle incentives and other payments to quickly attract as many workers as they could. But when they failed to make a profit and SoftBank changed its tune on growth, the companies often slashed or reneged on those same incentives.

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%" iehi-feed-65072 Mon, 11 Nov 2019 15:05:25 GMT Warren Would Take Billionaires Down a Few Billion Pegs Forbes counts 607 American billionaires. A handful have stated that they support a moderate wealth tax. George Soros, Liesel Pritzker Simmons, Ian Simmons, Chris Hughes, Nick Hanauer and 13 other wealthy individuals signed a letter over the summer in support of such a tax.

"I definitely understand how that would make lots and lots of extremely rich people uncomfortable," said Mr. Hanauer, co-founder of a Seattle-based venture capital firm and an early investor in Amazon. "But I'm more worried about our democracy."

"Don't get me wrong," he added. "I would prefer 3 percent." But even at 6 percent, he said, "we would all survive and continue to be rich and fly around in our planes."

He pointed out that most Americans had been living with meager income growth for decades, while the silk-thin layer at the top shoveled in enormous gains, cumulatively more than 400 percent since 1980.

"All you're doing is saying to the richest percent of Americans that the rate of growth of your assets and wealth will now match what has happened to other Americans over the last 40 years," Mr. Hanauer said.

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' 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.


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."

iehi-feed-65068 Thu, 07 Nov 2019 23:29:23 GMT Donald Trump to pay $2 million to settle Trump Foundation "personal piggybank" case 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' 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 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.


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.

iehi-feed-65063 Wed, 06 Nov 2019 01:53:02 GMT The Self-Defeating Effects of New York's Redoubled Rent Control ``Rent regulation has insidious consequences. Unable to recoup their costs, landlords invest less. Conditions in buildings, especially those with lower-income tenants, worsen. Higher-income renters spend their own money on upkeep, and the additional costs wipe out much of the money they save from cheaper rent. "The benefits of rent control, from the tenant's standpoint, are likely to decline steadily over time," a 1997 study by the Department of Housing and Urban Development found.

What we're most concerned about is how rent regulation harms the very class of person it is designed to help -- the renter. (It's not so fundamentally bothersome that property values don't soar to endless heights -- after all, homes are ultimately places to live, first and foremost).

iehi-feed-65062 Tue, 05 Nov 2019 22:23:38 GMT 'We created a monster,' SoftBank CEO Masayoshi Son reportedly said of WeWork