Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-65199 Mon, 24 Feb 2020 15:58:09 GMT Trump's Seedy & Dysfunctional Relationship With Deutsche Bank: Over $1.7bln In Defaults--$1bln To Outside Bond Investors http://implode-explode.com/viewnews/2020-02-24_TrumpsSeedyDysfunctionalRelationshipWithDeutscheBankOver17blnInD.html iehi-feed-65172 Thu, 30 Jan 2020 01:25:36 GMT Rebuffing Trump, Fed Chairman says he will 'avoid' negative interest rates http://implode-explode.com/viewnews/2020-01-29_RebuffingTrumpFedChairmansayshewillavoidnegativeinterestrates.html In spite of numerous criticisms from President Donald Trump, the Federal Reserve has stayed away from the negative interest rates that have characterized many other central bank approaches to monetary policy, and Powell indicated this wouldn't change anytime soon, explaining that low interest rates could become a self-fulfilling cycle from which economies can struggle to emerge. "We're determined to avoid it here in the United States," he said.

"It's become very clear that inflation is the problem that central banks can solve," Battifarano said, but he pointed to Japan's prolonged economic slump as a cautionary tale of how negative interest rates can play out long-term. "Not only does it not work, it's damaging to banks' traditional spread-lending mode," he said.

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iehi-feed-65138 Thu, 02 Jan 2020 23:07:54 GMT ‘They've turned their backs on us': California's homeless crisis grows in numbers and violence http://implode-explode.com/viewnews/2020-01-02_TheyveturnedtheirbacksonusCaliforniashomelesscrisisgrowsinnumber.html Communities have largely declined to treat the crisis like a natural disaster that demands humanitarian aid. In many places, what followed instead was a backlash, and in some cases overt attacks.

There were at least eight incidents in LA where people threw flammable liquids or makeshift explosives at homeless people or their tents this year, according to authorities and the Los Angeles Times.

A 62-year-old beloved musician's tent was set on fire in Skid Row in August, killing him in what police say was an intentional killing. That month, two men also allegedly threw a "firework" at an encampment, causing a blaze that grew into a major brush fire just outside of the city. One of the men arrested was the son of a local chamber of commerce president. Police said this fire was intentional. In a separate attack, a molotov cocktail destroyed tents and donations.

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This month, in a case closely watched by many west coast cities, the US supreme court dealt a victory to homeless advocates by allowing an existing ruling to stand that states governments cannot ban people from living on the street if they don't offer enough shelter beds.

Officials in Oakland have proposed a new policy to cite homeless people in parks while some have suggested setting up a shelter in a defunct jail. Law enforcement leaders in Bakersfield in the Central Valley pushed a plan to throw homeless people in jail for misdemeanor offenses. A state taskforce has also suggested a similar system of forcibly placing homeless people into shelters.

These efforts ignore the overwhelming evidence that criminalization and locking people up are costly and harmful responses that fail to fix the crisis, said Eve Garrow, homelessness policy analyst with the American Civil Liberties Union of Southern California.

"There's a dangerous and disturbing movement in California to address homelessness not by expanding access to safe, affordable and permanent housing ... but by jailing people," she said. "It's a terrifying prospect of a world in which we segregate, incarcerate and restrict the civil liberties of people just because they have disabilities and they are too poor to afford a home in our skyrocketing private rental market."

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iehi-feed-65135 Wed, 01 Jan 2020 15:54:18 GMT I, Who Vowed to Never-Ever Short Stocks Again, Just Shorted the Entire Market | Wolf Street http://implode-explode.com/viewnews/2020-01-01_IWhoVowedtoNeverEverShortStocksAgainJustShortedtheEntireMarketWo.html

In my decades of looking at the stock market, there has never been a better setup. Exuberance is pandemic and sky-high. And even after today's dip, the S&P 500 is up nearly 29% for the year, and the Nasdaq 35%, despite lackluster growth in the global economy, where many of the S&P 500 companies are getting the majority of their revenues.

Mega-weight in the indices, Apple, is a good example: shares soared 84% in the year, though its revenues ticked up only 2%. This is not a growth story. This is an exuberance story where nothing that happens in reality -- such as lacking revenue growth -- matters, as we're now told by enthusiastic crowds everywhere... The unanimity of it all was astounding. I've seen this before, but not in this magnitude.

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iehi-feed-65106 Thu, 12 Dec 2019 18:01:34 GMT Despite No-Love From Trump, Jerome Powell is (still) propping up Trump's economy http://implode-explode.com/viewnews/2019-12-12_DespiteNoLoveFromTrumpJeromePowellisstillproppingupTrumpseconomy.html Powell, addressing reporters after the Fed's final meeting of a turbulent decade, predicted smoother sailing next year as Trump gears up to face voters. He said monetary policymakers "expect moderate growth to continue," at a slowed but still healthy 2% pace. Indeed, the Fed's official statement - accompanying the announcement it is holding the benchmark interest rate steady between 1.5 and 1.75% - dropped its mention of "uncertainties" facing the economic outlook.

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Powell's presentation marked a heel turn from earlier this year. Stocks tanked in July after Powell described the Fed's first interest rate cut in a decade as a "mid-cycle adjustment," because investors interpreted the remark as a signal the relief monetary policymakers were providing was only temporary. Now, however, "the cuts look much more permanent," Grant Thornton chief economist Diane Swonk wrote in a note. "The vote to hold rates unchanged was unanimous, the first time that all agreed on what the Fed should be doing since May 2019."

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"Markets liked Mr. Powell's assertion that he would want to see a 'significant' and 'persistent' increase in inflation before he would want to raise rates, and he again drew attention to the undershoot to the target in recent years," Pantheon Macroeconomics chief economist Ian Sheperdson wrote in a note. "Mr. Powell's view is not shared by all his colleagues, given that most of them expect rates to rise slightly over the next three years while core inflation is expected to be little changed. But markets put much more weight on the views of the Chair; that's probably the right approach."

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iehi-feed-65103 Thu, 12 Dec 2019 04:55:17 GMT Broke billionaires (and other ridiculous signs of the top) http://implode-explode.com/viewnews/2019-12-11_Brokebillionairesandotherridiculoussignsofthetop.html 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-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-65048 Thu, 31 Oct 2019 19:38:50 GMT Fed Unveils Plan to Expand Balance Sheet In New "I Can't Believe It's Not QE(TM)" Program http://implode-explode.com/viewnews/2019-10-31_FedUnveilsPlantoExpandBalanceSheetInNewICantBelieveItsNotQETMPro.html While the amount could change, buying $60 billion in Treasury bills over a month is substantial, even by the Fed's standards. For context, the Fed bought about $85 billion in bonds each month during its final round of quantitative easing, which started in 2012.

Yet the new purchases are different from those postcrisis packages.

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Mr. Powell and his colleagues have repeated, time and again, that the current balance sheet expansion should not be confused with quantitative easing.

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To drive home the point that there is no broader policy signal this time, officials made the new package look unique. The Fed is buying only Treasury bills, for one thing. The Fed's recession-era buying focused on bonds, in a bid to make mortgages and car loans cheaper by pushing down longer-term interest rates. By concentrating this effort on short-term debt, the Fed is forgoing that sort of stimulus.

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Still, some onlookers were skeptical that the Fed would manage to convince investors that this was not an attempt to bolster the economy, given the size of the purchases.

"When it swims like a duck and quacks like a duck, it's hard to prove your intentions aren't fowl," Paul Ashworth, chief economist at Capital Economics, wrote in research note.

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It is important that the Fed's message sticks. The Fed will be short on room to cut interest rates when the next recession hits, because they are already at just 2 percent -- leaving the central bank with far less than the five percentage points of cuts it made in the 2007 to 2009 downturn. That means bond-buying will be an essential part of the Fed's future easing packages, and one to be used in case of emergency.

"They want to keep Q.E. as something special," said Laura Rosner, a co-founder of MacroPolicy Perspectives. "I don't think they want to send a signal that things are bad."

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Officials had decided this year that they wanted to continue setting interest rates in what they called an "ample reserve" framework. In such an approach, the central bank keeps its balance sheet holdings big enough to leave plenty of cash in the financial system. Banks keep their extra cash on deposit at the central bank, and the Fed adjusts interest rates by changing how it pays on those excess holdings, commonly called reserves.

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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-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-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-65007 Wed, 16 Oct 2019 21:15:39 GMT CoinShares, Blockchain Launch Gold Token Network on a Bitcoin Sidechain http://implode-explode.com/viewnews/2019-10-16_CoinSharesBlockchainLaunchGoldTokenNetworkonaBitcoinSidechain.html Working with wallet provider Blockchain and precious medal trader MKS (Switzerland) SA, the U.K.-based firm announced Tuesday a gold-backed network for trading tokens representing digitized physical gold, a project two years in the making.

According to CoinShares, the network launches today with more than $20 million in gold held in a Swiss vault to back up its tokens. Each DGLD token is backed by 1/10th troy ounce.

CoinShares chairman Danny Masters said the product's network security is based on the bitcoin state, with DGLD operating as a sidechain of the bitcoin network.

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iehi-feed-65005 Wed, 16 Oct 2019 20:50:19 GMT Liquidity Provider B2C2 Launches Gold Derivative Settled in Bitcoin http://implode-explode.com/viewnews/2019-10-16_LiquidityProviderB2C2LaunchesGoldDerivativeSettledinBitcoin.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-64977 Fri, 04 Oct 2019 03:29:32 GMT Donald Trump is much worse than Richard Nixon. He may even have committed treason. http://implode-explode.com/viewnews/2019-10-03_DonaldTrumpismuchworsethanRichardNixonHemayevenhavecommittedtrea.html Entitlements? He has reportedly told Senate Republicans that cutting Social Security and Medicare could be a second-term project. We got a preview of his plans to do just that in his 2020 budget blueprint in which he proposed cuts. Funny, Trump likes to run his mouth on Twitter and at his rallies, but this is something he hasn't blabbed to his wide-eyed, believe-whatever-he-says base.

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And cleaning up the environment? Nixon proposed a new Environmental Protection Agency in July 1970, and it began operations five months later. Trump has gutted it, and when he brags about all the regulations he has cut -- to the wild applause of his base -- what he's not telling them is that he is endangering the air they breathe and the water they drink. They applaud and then go home, apparently oblivious to the 85 (and counting) rules he has rolled back. Air pollution, water pollution, toxic substances, on and on and on.

There's more, but you get the point: Trump is worse than Nixon. And I haven't even gotten to the scandals. What Trump has done is far more damaging to our country. To me, it can be summed up from just one event: his infamous meeting in the Oval Office in May 2017 with Russian Foreign Minister Sergey Lavrov and Russian Ambassador Sergey Kislyak.

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iehi-feed-64976 Thu, 03 Oct 2019 14:43:36 GMT Wealth Tax: For and Against http://implode-explode.com/viewnews/2019-10-03_WealthTaxForandAgainst.html ``The tax would apply to fortunes above $50 million, hitting them with a 2% annual rate; there would be a surcharge of 1% per year on wealth in excess of $1 billion. Economists advising her estimate that this tax on 75,000 families would raise $2.75 trillion in revenue over a 10-year period.

Not only would such a tax be very hard to administer, as many have pointed out. It likely won't collect nearly as much revenue as Warren claims.''

The linked article is against; this twitter thread has economist Gene Sperling arguing the "for" side.

For our part, we think 2% is too high. Even ignoring inflation, at that rate, assets/investments will be cut in half in value every 30 years or so. That seems punitive -- even if the goal is to penalize legacy wealth. Also, adding inflation, your are subjecting capital to a likely 5%+ penalty each year. Ignoring fairness, this will tend to drive investors into even crazier assets to chase yield. Whatever is done, we should avoid things that have an even more destabilizing effect on the financial economy.

Perhaps a tax on anomalously high-yield investments instead? A tax only on stocks? Etc.

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iehi-feed-64970 Mon, 30 Sep 2019 16:07:02 GMT The Real Story Of The Repo Market Meltdown: Wall Street's House Built on Sand (And Contrast With Bitcoin) http://implode-explode.com/viewnews/2019-09-30_TheRealStoryOfTheRepoMarketMeltdownWallStreetsHouseBuiltonSandAn.html iehi-feed-64967 Mon, 30 Sep 2019 03:36:55 GMT How WeWork blew it. http://implode-explode.com/viewnews/2019-09-29_HowWeWorkblewit.html It's just not (with the exception of Beyond Meat) the names you know. The important distinction might be between software companies, like Facebook or Palantir or Oracle, and those that have to muddy their hands in the world of gig workers and real estate and manufacturing. In the latter group are companies like Peloton--a business that makes stationary bicycles but calls itself an "automated vehicle technology company"--or Uber, which is a taxi and delivery company but says it just runs a "marketplace." Or Sweetgreen, a salad chain valued at $1.6 billion that, according to its chief executive, "doesn't consider [itself] just a salad place" because, apparently, many salads are ordered through an app. Or Blue Apron. Or WeWork, which is evidently a real estate company with a founder who could convincingly play the role of tech CEO.

As Ben Thompson points out in Stratechery, it's in those hybrid firms that the big losses are occurring--not just a lack of profits (which again, appears to be par for the course), but a lack of confidence there ever will be profits. "Looking at 29 U.S. tech IPOs over the past two years, 20 have increased in market cap over their offering price, and all of them are pure tech companies with high margins," Thompson writes. Adding an additional 100 users costs nothing to Adobe or Citrix; for WeWork, it requires a big new 10-year lease--and a huge red mark on the balance sheet. You can't code your way out of a skyscraper.

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