Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us 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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iehi-feed-64963 Wed, 25 Sep 2019 16:00:03 GMT Gold Busts Out of 6-Year Trading Range On Fed Capitulation http://implode-explode.com/viewnews/2019-09-25_GoldBustsOutof6YearTradingRangeOnFedCapitulation.html iehi-feed-64959 Tue, 24 Sep 2019 18:21:01 GMT Fed repo injects $105 billion into market, continuing injection streak http://implode-explode.com/viewnews/2019-09-24_Fedrepoinjects105billionintomarketcontinuinginjectionstreak.html iehi-feed-64954 Thu, 19 Sep 2019 18:47:43 GMT Powell says the Fed may have to resume balance sheet growth http://implode-explode.com/viewnews/2019-09-19_PowellsaystheFedmayhavetoresumebalancesheetgrowth.html Powell's comment that the central bank may have to start to organically grow the size of its balance sheet comes after officials said earlier this year that they were considering a new program that would allow banks to exchange Treasurys for reserves. Such a move, they hoped, would guarantee liquidity during difficult times but also would help the central bank decrease the size of its nearly $4 trillion balance sheet.

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Powell's 2018 comments that the Fed's balance sheet reduction was on "autopilot" sparked a market meltdown that soured markets for much of the quarter. Since October 2017, the Fed has been allowing a set level of proceeds from Treasurys and mortgage-backed securities holdings to roll off each month.

Total capitulation.

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iehi-feed-64952 Wed, 18 Sep 2019 23:23:05 GMT For the second day in a row, the New York Fed injected billions of dollars into the market http://implode-explode.com/viewnews/2019-09-18_FortheseconddayinarowtheNewYorkFedinjectedbillionsofdollarsintot.html For the second day in a row, the New York Federal Reserve injected a huge sum of money into the financial system in a bid to calm stress that has emerged in the overnight lending market.

The Fed on Wednesday poured another $75 billion into the market following a $53 billion rescue by the NY Fed on Tuesday. Overnight lending rates have suddenly spiked, and the Fed is acting to bring them back down to keep markets functioning smoothly.

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The fact the Fed has needed to pump $128 billion into the system over the past two days shows how a crack has emerged in a seldom-discussed corner of Wall Street that is central to the global financial system. It raises concern that the Fed is losing its grip on the short-term rates the central bank is supposed to control.

"It shows you the plumbing is broken," said Michael Block, market strategist at Third Seven Advisors. "It's nice they are recognizing this and that they have safety valves."

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iehi-feed-64951 Wed, 18 Sep 2019 22:06:46 GMT S&P 500 ends slightly higher after Fed cuts, gives mixed signals http://implode-explode.com/viewnews/2019-09-18_SP500endsslightlyhigherafterFedcutsgivesmixedsignals.html iehi-feed-64949 Tue, 17 Sep 2019 22:48:59 GMT A crack emerges in financial markets: The New York Fed spends $53 billion to rescue the overnight lending market http://implode-explode.com/viewnews/2019-09-17_AcrackemergesinfinancialmarketsTheNewYorkFedspends53billiontores.html Borrowing rates skyrocketed on Tuesday in a corner of the markets the public rarely notices but that is critical to the functioning of the global financial system. The spike in overnight borrowing rates forced the New York Federal Reserve to come to the rescue with a special operation aimed at easing stress in financial markets.

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It was the NY Fed's first such rescue operation in a decade, the last occurring in late 2008.

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On Tuesday morning, the NY Fed launched what's called an "overnight repo operation," during which the central bank attempts to ease pressure in markets by purchasing Treasuries and other securities. The goal is to pump money into the system to keep borrowing costs from creeping above the Fed's target range .

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The episode demonstrates evidence of emerging strains in financial markets and raises concern that the Federal Reserve could be losing its grip on short-term rates.

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The NY Fed announced plans late Tuesday to hold another repurchase agreement operation on Wednesday that would aim to repurchase up to an additional $75 billion.

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The rate on overnight repurchase agreements hit 5% on Monday, according to Refinitiv data. That's up from 2.29% late last week and well above the target range set in July by the Federal Reserve, which is 2% to 2.25%. The surge continued Tuesday, with the overnight rate hitting a high of 10% before the NY Fed stepped in.

Although it doesn't get as much attention as the Dow or the 10-year Treasury rate, this overnight market plays a central role in modern finance. It allows banks to quickly and cheaply borrow money, for short periods of time, often to buy bonds like Treasuries. This market broke down during the 2008 financial crisis.

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"No one knows why this is happening," Jim Bianco CEO of Bianco Research, said on Twitter. "If it persists more than another day or two, it will be a problem."

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iehi-feed-64946 Tue, 17 Sep 2019 03:02:12 GMT U.S. charges JPMorgan metals traders over alleged precious metals market manipulation http://implode-explode.com/viewnews/2019-09-16_USchargesJPMorganmetalstradersoverallegedpreciousmetalsmarketman.html The Department of Justice charged two current and one former JPMorgan Chase & Co executives on Monday with alleged racketeering and manipulating prices of metals such as gold, silver, platinum and palladium between 2008 and 2016

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In a statement and in the indictment, prosecutors described how the trio executed "thousands" of unlawful trading sequences that included "layering" deceptive orders at different prices in rapid succession. Prosecutors also described attempts to influence market prices toward specific price points to trigger or avoid triggering options.

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