Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-64779 Fri, 21 Jun 2019 16:34:49 GMT Americans Have Always Worked Hard to Ignore Vacation http://implode-explode.com/viewnews/2019-06-21_AmericansHaveAlwaysWorkedHardtoIgnoreVacation.html iehi-feed-64778 Wed, 19 Jun 2019 22:40:51 GMT Fed Holds Rates, But Signals Readiness To Cut (UNDER RELENTLESS TRUMP INTERFERENCE) http://implode-explode.com/viewnews/2019-06-19_FedHoldsRatesButSignalsReadinessToCutUNDERRELENTLESSTRUMPINTERFE.html "My colleagues and I have one overarching goal, to sustain the economic expansion," Powell told a press conference following the decision. He noted that apparent progress on trade talks had "turned to greater uncertainty" and many Fed officials "now see that the case for somewhat more accommodative policy has strengthened."

The shift followed attacks on the Fed by President Donald Trump for not doing more to bolster the economy and Tuesday's report by Bloomberg News that the president asked White House lawyers earlier this year to explore options for demoting Powell from the chairmanship.

Asked about the criticism, Powell said he thinks "the law is clear that I have a four-year term and I fully intend to serve it."

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iehi-feed-64777 Wed, 19 Jun 2019 17:43:26 GMT Libra White Paper Shows How Facebook Learned From Bitcoin and Ethereum http://implode-explode.com/viewnews/2019-06-19_LibraWhitePaperShowsHowFacebookLearnedFromBitcoinandEthereum.html With the long-awaited Libra white paper, Facebook is showing off its blockchain smarts, and making a bid for crypto credibility. Released Tuesday morning, the 29-page paper describes a protocol designed to evolve as it powers a new global currency

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As a first step toward achieving the "decentralized" part, the protocol has been turned over to a new organization, the Libra Association, whose members will hold separate tokens allowing them on-chain voting rights to govern decisions about Libra.

"Over time, it's designed to transition the node membership from these founding members who have a stake in the creation of the ecosystem to people who hold Libra and have a stake in the ecosystem as a whole," Ben Maurer, Facebook's blockchain technical lead, told CoinDesk in an exclusive interview.

In short, Libra is designed to be a high throughput, global blockchain, one that's built with programmable money in mind but limits how much users can do initially as it evolves from prototype to a robust ecosystem.

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iehi-feed-64773 Sun, 16 Jun 2019 15:50:56 GMT Minneapolis Leads The Way By Abolishing Single Family Home Zoning http://implode-explode.com/viewnews/2019-06-16_MinneapolisLeadsTheWayByAbolishingSingleFamilyHomeZoning.html Don't be misled by the construction cranes that punctuate city skylines. The number of housing units completed in the United States last year, adjusted for the size of the population, was lower than in any year between 1968 and 2008. And the problem is most acute in major urban areas along the east and west coasts. Housing prices, and homelessness, are rising across the country because there is not enough housing.

Increasing the supply of urban housing would help to address a number of the problems plaguing the United States. Construction could increase economic growth and create blue-collar jobs. Allowing more people to live in cities could mitigate inequality and reduce carbon emissions. Yet in most places, housing construction remains wildly unpopular. People who think of themselves as progressives, environmentalists and egalitarians fight fiercely against urban development, complaining about traffic and shadows and the sanctity of lawns.

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What went right in Minneapolis? The story begins with a crop of young politicians who want more housing: The city is conducting an early experiment in government by and for millennials. For the first time in the city's modern history, more than half of its residents are renters, including Mayor Frey. Many residents -- again, younger people in particular -- also describe density as a necessary response to climate change. Environmentalism, which began as an effort to protect people from cities, is increasingly embracing cities as the best way to protect the planet from people.

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All of this deserves wide emulation by other American cities. But Minneapolis has an important advantage: Its housing prices still are relatively modest, so its population includes a lot of middle-class families. Housing debates in coastal cities pit the wealthy against the poor, and middle ground has been hard to find.

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iehi-feed-64770 Thu, 13 Jun 2019 16:42:43 GMT THIS TIME ISN'T DIFFERENT: Billionaire investor warns lazy thinking is taking over markets http://implode-explode.com/viewnews/2019-06-13_THISTIMEISNTDIFFERENTBillionaireinvestorwarnslazythinkingistakin.html He continued: "Are recessions really avoidable or merely postponable? And if the latter, is it better for them to occur naturally or be postponed unnaturally? Might efforts to postpone them create undue faith in the power and intentions of the Fed, and thus return of moral hazard? And if the Fed wards off a series of little recessions, mightn't that just mean that, when the ability to keep doing so reaches its limit, the one that finally arrives will be a doozy? "

Such skepticism comes in stark contrast to the confidence exuded by the likes of venture capitalist Chamath Palihapitiya. An early Facebook stakeholder and investing presence across several industries, Palihapitiya told CNBC at the time that entities like the Fed have used tools like quantitative easing to orchestrate a pacified economy.

"I don't see a world in which we have any form of meaningful contraction nor any form of meaningful expansion," he told CNBC in April. "We have completely taken away the toolkit of how normal economies should work when we started with QE. I mean, the odds that there's a recession anymore in any Western country of the world is almost next to impossible now, save a complete financial externality that we can't forecast."

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iehi-feed-64769 Thu, 13 Jun 2019 16:11:29 GMT Japan Un-Publishes Government Report That Admitted Demographic and Pension Disaster http://implode-explode.com/viewnews/2019-06-13_JapanUnPublishesGovernmentReportThatAdmittedDemographicandPensio.html This year's ‘Annual Report on Ageing Society' plainly stated this reality; it was a brutally honest assessment of Japan's underfunded pension program.

The report went on to tell people that they needed to save their own money for retirement because the pension fund wouldn't be able to make ends meet.

This terrified a lot of Japanese workers and pensioners.

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Prime Minister Shinzo Abe apologized for the report, calling it "inaccurate and misleading."

And Finance Minister Taro Aso-- himself a pensioner at age 78 (though in typical Japanese form he looks like he's 45)-- simply un-published the report.

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iehi-feed-64766 Mon, 10 Jun 2019 22:06:45 GMT Shale Fail: A ‘'Gusher Of Red Ink'' for Whole US Industry, Stoking Recession Fears http://implode-explode.com/viewnews/2019-06-10_ShaleFailAGusherOfRedInkforWholeUSIndustryStokingRecessionFears.html iehi-feed-64765 Sun, 09 Jun 2019 02:02:55 GMT Millennials are unable to save the California housing market: Inflated prices and a labor force that is aging http://implode-explode.com/viewnews/2019-06-08_MillennialsareunabletosavetheCaliforniahousingmarketInflatedpric.html iehi-feed-64762 Tue, 04 Jun 2019 23:43:21 GMT The shadow banks are back with another big bad credit bubble http://implode-explode.com/viewnews/2019-06-04_Theshadowbanksarebackwithanotherbigbadcreditbubble.html Middle-market lending, of course, is just part of the biggest expansion in corporate borrowing the U.S. economy has ever seen, a result of eight years of cheap and easy money engineered by the Fed and other central banks after the 2008 financial crisis.

The ratio of corporate borrowing to a variety of metrics -- profits and assets, book value or the size of the overall economy -- is at or near an all-time high. So is the riskiness of the loans, reflecting the amount of debt companies have taken on, the absence of covenants and the rosy assumptions made about the amount of cash flow companies will have to cover debt service.

Meanwhile, the difference in interest rates between the safest loans and the riskiest -- in financial jargon, the "spread" -- is at historically low levels, a reliable indication of too much money chasing too few good lending opportunities. According to the latest "financial stability" reports from the Federal Reserve and the International Monetary Fund, all of these measures have gotten worse in the last two years, with many flashing yellow and red on their dashboards of systemic financial risk.

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If all this newly borrowed money were being used to create new technology or enhance productivity, piling up all this debt might be a risk worth taking. But the evidence suggests that what it is mostly doing is artificially stimulating the economy. Companies have used much of this newly borrowed money to buy back their own shares, pay special dividends to private equity investors and acquire other companies, all of which have the effect of inflating stock prices. The recent wave of richly priced mergers and overpriced stock offerings, and the declining returns offered by recent commercial real estate deals, are all good indications of a credit bubble waiting to burst.

So, is this a replay of 2008?

... as before, this excess of supply relative to demand has led to a deterioration of lending standards that started in the shadow banking system and has now spread to regulated banks anxious about a further reduction in their market share. (My favorite stat: During the first three months of this year, according to Trepp, a data company, interest-only loans -- loans requiring no payback of principal until the loan is due -- accounted for three-quarters of all new commercial real estate loans.)

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Perhaps the biggest similarity between the previous credit bubble and this one, however, is the stubborn reluctance of regulators to let some of the air out of the credit bubble before it bursts.

... The [Financial Stability Oversight] Council is headed by Treasury Secretary Stephen Mnuchin, a former Goldman Sachs investment banker who eventually made more than $10 million buying and selling -- with partners -- a California bank that, after engaging in aggressive mortgage lending, failed during the last housing crisis.

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Powell, Quarles and Mnuchin are overconfident for the same reason Fed chairmen Alan Greenspan and Ben Bernanke and Treasury Secretary Henry Paulson were overconfident during the Bush years.

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iehi-feed-64761 Tue, 04 Jun 2019 21:30:13 GMT GOP lawmakers discuss vote to block Trump's new tariffs on Mexico, in what would be its first real act of defiance http://implode-explode.com/viewnews/2019-06-04_GOPlawmakersdiscussvotetoblockTrumpsnewtariffsonMexicoinwhatwoul.html ``Congressional Republicans have begun discussing whether they may have to vote to block President Trump's planned new tariffs on Mexico, potentially igniting a second standoff this year over Trump's use of executive powers to circumvent Congress, people familiar with the talks said.

The vote, which would be the GOP's most dramatic act of defiance since Trump took office, could also have the effect of blocking billions of dollars in border wall funding that the president had announced in February when he declared a national emergency at the southern border, said the people, who spoke on the condition of anonymity because the talks are private.

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Trump's plans to impose tariffs on Mexico -- with which the United States has a free-trade agreement -- rely on the president's declaration of a national emergency at the border... Congress passed [a blocking] resolution in March after Trump reallocated the border wall funds, but he vetoed it. Now, as frustration on Capitol Hill grows over Trump's latest tariff threat, a second vote could potentially command a veto-proof majority to nullify the national emergency, which in turn could undercut both the border-wall effort and the new tariffs.

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iehi-feed-64760 Tue, 04 Jun 2019 21:28:00 GMT Cuba travel ban redux: Trump admin. halts cruise ships, group tours from visiting http://implode-explode.com/viewnews/2019-06-04_CubatravelbanreduxTrumpadminhaltscruiseshipsgrouptoursfromvisiti.html The Trump administration on Tuesday ended the most popular forms of U.S. travel to Cuba, banning cruise ships and a heavily used category of educational travel in an attempt to cut off cash to the island's communist government.

Cruise travel from the U.S. to Cuba began in May 2016 during President Barack Obama's opening with the island. It has become the most popular form of U.S. leisure travel to the island, bringing 142,721 people in the first four months of the year, a more than 300% increase over the same period last year. For travelers confused about the thicket of federal regulations governing travel to Cuba, cruises offered a simple, one-stop, guaranteed-legal way to travel.

That now appears to be over.

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Collin Laverty, head of Cuba Educational Travel, one of the largest Cuba travel companies in the U.S., called the new measures "political grandstanding aimed at Florida in the run up to the 2020 elections."

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iehi-feed-64759 Tue, 04 Jun 2019 21:09:05 GMT Investors Suing JPMorgan May Redefine the Leveraged Loan Market http://implode-explode.com/viewnews/2019-06-04_InvestorsSuingJPMorganMayRedefinetheLeveragedLoanMarket.html A group suing JPMorgan Chase & Co. and other Wall Street banks over a loan that went sour four years ago is alleging the underwriters engaged in securities fraud. If successful, the lawsuit could radically transform the $1.2 trillion leveraged lending market.

The defendants say there's one key problem -- unlike bonds, loans aren't securities. As a result, they've filed a petition asking the court to dismiss the suit on those exact grounds...

The debate strikes at the heart of the leveraged loan market, which in recent years has come to look markedly similar to the higher-profile one for junk-rated bonds. The standardization of loan terms, the deterioration of covenants and the growth of secondary trading continue to blur the lines between the two. Should the plaintiff ultimately prevail, it would dramatically alter how American companies raise debt, according to two industry groups that filed a brief supporting the defendants' argument last week.

"There are absolutely enormous market consequences if a court determines that leveraged loans are securities," said J. Paul Forrester, a partner at law firm Mayer Brown who's not involved in the litigation. "Leveraged loans and lenders would be potentially subject to the same offering and disclosure requirements as securities and would face the same regulatory oversight and enforcement consequences.

The suit stems from a $1.8 billion loan that JPMorgan and others arranged for Millennium Health LLC -- then owned by private-equity firm TA Associates -- and sold to investors in 2014. Within a matter of months, lenders saw the value of their loan plunge as the company disclosed that federal authorities were investigating their billing practices. Millennium agreed to pay $256 million to resolve the probe, and would go on to file for bankruptcy.

JPMorgan knew U.S. officials were investigating Millennium when it sold the loan, but didn't tell investors who were about to buy the debt, Bloomberg reported in 2015. The bankers did not provide the information because Millennium told them it wasn't material at the time.

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iehi-feed-64756 Sun, 02 Jun 2019 20:39:47 GMT Why the tariffs are bad news for America and for Donald Trump http://implode-explode.com/viewnews/2019-06-02_WhythetariffsarebadnewsforAmericaandforDonaldTrump.html iehi-feed-64755 Sun, 02 Jun 2019 18:15:42 GMT Minimum wage hike leaves bad taste for NYC's hospitality sector http://implode-explode.com/viewnews/2019-06-02_MinimumwagehikeleavesbadtasteforNYCshospitalitysector.html ``Surging costs are squeezing profit margins faster than barkeeps can pull pints. And nervous owners fear the latest high-profile push by Rep. Alexandria Ocasio-Cortez (D-NY) to raise the minimum wage for tipped employees will, if enacted, trigger more industry layoffs even as businesses introduce labor-saving technology and streamline their services.

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On Friday, AOC was in Jackson Heights as the featured bartender at The Queensboro Restaurant to campaign for the Raise the Wage Act. Her presence sent tremors through the industry. The law would catapult the minimum wage for tipped employees by more than 600 percent, flattening margins for many businesses in New York -- and hurting many workers, who oppose the law. That's because many customers are likely to trim or stop tipping altogether, as operators raise food and liquor prices, according to industry lobbyists

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The same policy promoted by AOC, a one-time bartender in New York, is blamed for shuttering her former employer The Coffee Shop, because of rising labor costs from higher wage regulations. The Coffee Shop's co-owner, Charles Milite, says New York's rising minimum wages resulted in the loss of 130 jobs overall for the Union Square operation.

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iehi-feed-64754 Sun, 02 Jun 2019 18:00:45 GMT Did Cellphones Bring Down Crime Rates in the '90s? http://implode-explode.com/viewnews/2019-06-02_DidCellphonesBringDownCrimeRatesinthe90s.html "The cellphones changed how drugs were dealt," Edlund told me. In the '80s, turf-based drug sales generated violence as gangs attacked and defended territory, and also allowed those who controlled the block to keep profits high.

The cellphone broke the link, the paper claims, between turf and selling drugs. "It's not that people don't sell or do drugs anymore," Edlund explained to me, "but the relationship between that and violence is different."

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iehi-feed-64752 Fri, 31 May 2019 14:06:11 GMT Tariffs, Mr. Trump's Miracle Cure http://implode-explode.com/viewnews/2019-05-31_TariffsMrTrumpsMiracleCure.html iehi-feed-64751 Fri, 31 May 2019 13:58:57 GMT How The Super Rich Are Buying Up Bitcoin http://implode-explode.com/viewnews/2019-05-31_HowTheSuperRichAreBuyingUpBitcoin.html The Dadiani Syndicate is described as a "peer to peer network," with people trading between each other; Dadiani claims her role is to put together people who want to sell and those who want to buy, just as she does in the art world.

... The trades so far have all been well into the millions of dollars, made up of thousands of trades per day... "The interest in bitcoin has never waned," said Dadiani, adding her art gallery has dabbled in cryptocurrency for years. "Though the media paints a very different picture."

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iehi-feed-64750 Thu, 30 May 2019 17:29:24 GMT Markets Have Gone Nuts: Junk-Bonds Are in Party Mood, Treasuries Clamor for Doom & Rate Cuts | Wolf Street http://implode-explode.com/viewnews/2019-05-30_MarketsHaveGoneNutsJunkBondsAreinPartyMoodTreasuriesClamorforDoo.html So now, the Treasury market with its inverted yield curve and declining yields on the long end is clamoring for rate cuts, and it's acting as if a recession were imminent or has already started. But the junk bond market is acting as if it were a big boom party, and risks are just minor company-specific issues, rather than overall economic issues.

But they cannot both be right. So what gives? ... if bond markets are seen as a predictor of the next downturn, then either the junk bond market or the Treasury market is wrong.

If the junk bond market is wrong, it would be set up for a painful reckoning.

But if the Treasury market -- and the Treasury yield curve -- is wrong, there could be an ugly snap-back in longer-term Treasury yields, and related interest rates, such as mortgage rates.

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iehi-feed-64749 Thu, 30 May 2019 17:26:08 GMT The Department of Energy is calling fossil fuels "molecules of freedom" and "freedom gas" http://implode-explode.com/viewnews/2019-05-30_TheDepartmentofEnergyiscallingfossilfuelsmoleculesoffreedomandfr.html iehi-feed-64748 Thu, 30 May 2019 17:24:16 GMT The Bond Market Is Trying to Tell Us Something (Worry) http://implode-explode.com/viewnews/2019-05-30_TheBondMarketIsTryingtoTellUsSomethingWorry.html ...falling yields are to the economy what barometric pressure is to the weather: When they drop it's often a sign that some kind of storm is coming.

And lately, they've been falling fast. Everywhere. In Japan, Britain, Australia, Germany and the United States. Long-term yields on government bonds around the world are hitting some of their lowest levels in recent years.

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Today, in the United States, a government bond that's due in three months will pay a higher rate than a government bond that is due in 10 years. These occurrences, called inversions, are rare, and they have grabbed Wall Street's attention for one simple reason: They have preceded every recession over the last 60 years (although some of those downturns took up to two years to materialize).

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Since the Fed did an abrupt about-face on raising interest rates, investors have been slowly increasing the odds they put on the Fed actually starting to cut rates. And according to the bond market, those cuts are almost a done deal.

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