Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-63147 Mon, 16 Oct 2017 21:10:11 GMT Goldman Sachs thinks we're heading into a bear market http://implode-explode.com/viewnews/2017-10-16_GoldmanSachsthinkswereheadingintoabearmarket.html iehi-feed-63145 Mon, 16 Oct 2017 15:22:05 GMT China's mortgage debt bubble raises spectre of 2007 US crisis http://implode-explode.com/viewnews/2017-10-16_Chinasmortgagedebtbubbleraisesspectreof2007UScrisis.html City residents in their 20s and 30s view property as a one-way bet because they've never known prices to drop. At the same time, property inflation has seen the real purchasing power of their money rapidly diminish.

"Almost all my friends born since the 1980s and 1990s are racing to buy homes, while those who already have one are planning to buy a second," Mai, 33, said. "Very few can be at ease when seeing rents and home prices rise so strongly, and they will continue to rise in a scary way."

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The rush of millions young middle-class Chinese like Mai into the property market has created a hysteria that eerily resembles the housing crisis that struck the United States a decade ago. Thanks to the easy credit that has spurred the housing boom, many young Chinese have abandoned the frugal traditions of earlier generations and now lead a lifestyle beyond their financial means.

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iehi-feed-63144 Mon, 16 Oct 2017 15:16:45 GMT A flawed argument used by Warren Buffett could be setting stocks up for 'one of the worst disasters in history' http://implode-explode.com/viewnews/2017-10-16_AflawedargumentusedbyWarrenBuffettcouldbesettingstocksupforoneof.html Speaking in an interview with CNBC on October 3, the chairman and CEO of Berkshire Hathaway said, "Valuations make sense with interest rates where they are."

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"It's an incomplete sentence ," Hussman wrote in a recent blog post. "Unfortunately, the convenience of investing-by-slogan, rather than carefully thinking about finance and examining evidence, is currently leading investors into what is likely to be one of the worst disasters in the history of the U.S. stock market."

Hussman calculates that stock valuations are stretched 175% above their historic norms, and predicts the S&P 500 will see negative total returns over the next 10 to 12 years. Along the way, the benchmark index will experience an interim loss of more than 60%, he estimates.''

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iehi-feed-63143 Mon, 16 Oct 2017 13:59:37 GMT Congress Votes To Lavishly Subsidize Flood Hazard In "Real US States" While Giving Puerto Rico a Lump of Coal http://implode-explode.com/viewnews/2017-10-16_CongressVotesToLavishlySubsidizeFloodHazardInRealUSStatesWhileGi.html The House approved the debt forgiveness in a 353-69 vote on Thursday. As The Intercept previously reported, the bill cancels two-thirds of the flood program's debt while offering Puerto Rico a $5 billion loan from the U.S. Treasury--a baffling move considering the small island is already at least $74 billion in the red to a number of mostly foreign creditors who aren't about to give up their investments without a fight.

The difference? Puerto Rico is effectively a colony of the United States. The National Flood Insurance Program (NFIP) happens to help a lot of millionaires.

For that reason, the NFIP has historically been a rare spot of cross-aisle agreement, with loyalties divided more along geographic lines than partisan ones. Because homeowners living in floodplains are required to purchase flood insurance, the politicians who represent coastal constituencies tend to favor keeping rates low in order to keep them happy.

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iehi-feed-63142 Sun, 15 Oct 2017 21:33:53 GMT Grim reality of NAFTA talks sets in after tough U.S. opening demands http://implode-explode.com/viewnews/2017-10-15_GrimrealityofNAFTAtalkssetsinaftertoughUSopeningdemands.html "The atmosphere is complicated," one trade official told reporters, adding that his fears about some "pretty harsh, pretty horrible" demands from the U.S. side of the negotiating table were coming true...

One of the U.S. proposals unveiled this week would require that 50 percent of the value of all NAFTA-produced cars, trucks and large engines come from the United States, people briefed on the negotiations said.

The same proposal calls for a sharp increase in NAFTA's regional automotive content requirement, boosting it to 85 percent from the current 62.5 percent. The existing level is already the highest local content requirement of any trading bloc in the world. [L2N1MO0U5]

Meanwhile, the Trump administration's call for a so-called NAFTA sunset clause would effectively trigger a renegotiation of the pact every five years.

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One of Lighthizer's predecessors, Robert Zoellick, said he thought there was a 50-50 chance Trump would quit NAFTA. "He's trying to go back to make trade agreements fix the bilateral trade deficit. I don't believe he can be successful in doing that," Zoellick, now non-executive chairman of AllianceBernstein, told a banking conference in Washington on Saturday.''

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iehi-feed-63140 Sun, 15 Oct 2017 17:33:28 GMT Russia Unveils 'CryptoRuble' As Assange Thanks US Govt For His 50,000% Gain On Bitcoin http://implode-explode.com/viewnews/2017-10-15_RussiaUnveilsCryptoRubleAsAssangeThanksUSGovtForHis50000GainOnBi.html iehi-feed-63139 Sat, 14 Oct 2017 23:30:44 GMT Wells Fargo Reveals $1 bln Skeleton in Closet From Pre-Crisis Mortgages; Crummy General Results http://implode-explode.com/viewnews/2017-10-14_WellsFargoReveals1blnSkeletoninClosetFromPreCrisisMortgagesCrumm.html The company took a surprise $1 billion charge in the quarter for previously disclosed regulatory investigations into its pre-crisis mortgage activity, the third-largest U.S. lender said Friday in a statement. The expense pushed total costs to a record $14.4 billion.

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The bank is one of the last firms not to have settled with regulators and the Justice Department over its handling of home loans in the run up to the housing crisis. It said in August that it was increasing its estimate for what it deemed "reasonably possible" legal charges beyond reserves in part because of "existing mortgage-related regulatory investigations."

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Wells Fargo also had trouble in its underlying businesses. Revenue in the third-largest U.S. bank's community banking division, the home for all the lending it does to America's consumers, fell to $12.1 billion, the lowest since the quarter after news broke about the fake accounts. Net income in the unit, which generates the majority of Wells Fargo's profit, plunged 31 percent to $2.23 billion.

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iehi-feed-63138 Sat, 14 Oct 2017 23:23:36 GMT Who needs low-skill migrants anyway? (UK) http://implode-explode.com/viewnews/2017-10-14_WhoneedslowskillmigrantsanywayUK.html Before we have even taken back control, a lot of EU migrants have decided to leave anyway... Will there be plenty of British workers waiting to fill their jobs? Probably not. The idea that there is an army of workless people in the UK is even more out-of-date. The UK-born working-age population is no longer increasing. According to some estimates it has already peaked.

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The government may be hell-bent on reducing the number of low-skill migrants but it isn't telling us how it plans to deal with the consequences. People might not complain too much when they can't get salad on a hot day but when their hospital is full and they can't get help for their elderly relatives they will blame the government.

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iehi-feed-63137 Sat, 14 Oct 2017 23:15:36 GMT Prepare for a Chinese Maxi-devaluation - Rickards (BIG IMPLICATIONS FOR US STOCKS!!) http://implode-explode.com/viewnews/2017-10-14_PrepareforaChineseMaxidevaluationRickardsBIGIMPLICATIONSFORUSSTO.html Since the impossible trinity really is impossible in the long-run, and since China's current solutions are non-sustainable, what can China do to solve its policy trilemma? The most obvious course, and the one likely to be implemented, is a maxi-devaluation of the yuan to around the 7.95 level or lower.

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There are early signs that this policy of devaluation is already being put into place. The yuan has dropped sharply in the past month from 6.45 to 6.62. This resembles the stealth devaluation of late 2015, but is somewhat more aggressive... Once the National Party Congress is over in late October, President Xi will have secured his political ambitions and will no longer find it necessary to avoid rocking the boat.

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Both Trump and Xi are readying a "gloves off" approach to a trade war and renewed currency war. A maxi-devaluation of the yuan is Xi's most potent weapon.

Finally, China's internal contradictions are catching up with it. China has to confront an insolvent banking system, a real estate bubble, and a $1 trillion wealth management product Ponzi scheme that is starting to fall apart.

A much weaker yuan would give China some policy space in terms of using its reserves to paper over some of these problems. Less dramatic devaluations of the yuan led to U.S. stock market crashes. What does a new maxi-devaluation portend for U.S. stocks?

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iehi-feed-63136 Sat, 14 Oct 2017 16:38:59 GMT No-deal Brexit: it's already too late http://implode-explode.com/viewnews/2017-10-14_NodealBrexititsalreadytoolate.html iehi-feed-63133 Fri, 13 Oct 2017 21:41:39 GMT The Curious Case of "Missing the Market Boom" http://implode-explode.com/viewnews/2017-10-13_TheCuriousCaseofMissingtheMarketBoom.html "The Cost of Missing the Market Boom is Skyrocketing", says a Bloomberg headline today. That must be the scariest headline I've seen in quite a while. For starters, it's misleading, because people who ‘missed' the boom haven't lost anything other than virtual wealth, which is also the only thing those who haven't ‘missed' it, have acquired.

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[As the article says:] "Aided by an 8% drop in the U.S. currency, the dollar-denominated capitalization of worldwide shares appreciated in 2017 by an amount -- $20 trillion -- that is comparable to the total value of all equities nine years ago. And yet skeptics still abound, pointing to stretched valuations or policy uncertainty from Washington to Brussels. "

$20 trillion. That's a lot of dough. It's what all equities in the world combined were ‘worth' 9 years ago. It's also, oh irony, awfully close to the total increase in central bank balance sheets, through QE etc. Might the two be related in any way?''

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iehi-feed-63131 Fri, 13 Oct 2017 14:38:13 GMT Trump to end key ACA subsidies, a move that could threaten the law's marketplaces http://implode-explode.com/viewnews/2017-10-13_TrumptoendkeyACAsubsidiesamovethatcouldthreatenthelawsmarketplac.html President Trump will end cost-sharing payments in the Affordable Care Act marketplaces that have helped lower-income consumers afford their health plans. The move, confirmed late Thursday by two people briefed on the decision, is likely to immediately threaten the marketplaces and could prompt insurers to withdraw. ...

The most far-reaching element of the order instructs a trio of Cabinet departments to rewrite federal rules for "association health plans" -- a form of insurance in which small businesses of a similar type band together through an association to negotiate health benefits. These plans have had to meet coverage requirements and consumer protections under the 2010 health-care law, but the administration is likely to exempt them from those rules and let such plans be sold from state to state without insurance licenses in each one.

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iehi-feed-63130 Fri, 13 Oct 2017 14:33:08 GMT Why Bitcoin Is Surging Higher And Why The Ban Is Fueling The Surge http://implode-explode.com/viewnews/2017-10-13_WhyBitcoinIsSurgingHigherAndWhyTheBanIsFuelingTheSurge.html iehi-feed-63129 Fri, 13 Oct 2017 14:17:43 GMT Mnuchin still backs key provision in GOP tax plan that would hurt (rich) Democrats http://implode-explode.com/viewnews/2017-10-13_MnuchinstillbackskeyprovisioninGOPtaxplanthatwouldhurtrichDemocr.html As congressional Republicans and the Trump administration attempt to overhaul the nation's tax code, much of the attention will be focused on changes that will end popular tax breaks to help pay for the revenue lost from lowering tax rates.

Among those in the plan's crosshairs is a long-standing provision that lets you deduct from your reported income the money you pay in state and local taxes on income, real estate or sales of big-ticket items.

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Proponents of the deduction have long argued that, without it, taxpayers would be hit twice for each dollar of income, by their state and by the U.S. Treasury. Opponents argue that the deduction benefits the richest taxpayers at the expense of those with lower incomes, or who don't own a home or make large purchases that carry a big sales tax.

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iehi-feed-63127 Thu, 12 Oct 2017 22:03:56 GMT Trump doesn't seem to understand the stock market. Or the national debt. http://implode-explode.com/viewnews/2017-10-12_TrumpdoesntseemtounderstandthestockmarketOrthenationaldebt.html What Trump is suggesting here is that because of the gains in the stock market -- which have absolutely happened -- the national debt is being reduced... The stock market and the national debt have, quite literally, no direct connection. The stock market, broadly speaking, measures wealth being created (or lost) by large corporations and investors in those companies.

The national debt, which sits at $20 trillion and counting, is the debt owed by the federal government. There are two ways to reduce the debt: Raise taxes or reduce government spending. A bull stock market is not one of those two options.

Trump seems not to know any of that.

Trump seems to be getting more senile by the hour...

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iehi-feed-63126 Thu, 12 Oct 2017 17:39:57 GMT Spain gives Catalan leader eight days to drop independence http://implode-explode.com/viewnews/2017-10-11_SpaingivesCatalanleadereightdaystodropindependence.html Spanish Prime Minister Mariano Rajoy on Wednesday gave the Catalan government eight days to drop an independence bid, failing which he would suspend the Catalonia's political autonomy and rule the region directly

His move could deepen the confrontation between Madrid and the northeastern region but also signals a way out of Spain's biggest political crisis since a failed military coup in 1981.

Rajoy would probably call a snap regional election after activating Article 155 of the constitution that would allow him to sack the Catalan regional government... If Puigdemont says he did proclaim independence, the central government will step in. If he says he did not declare it, then far-left party CUP would probably withdraw its support for his minority government.

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iehi-feed-63125 Thu, 12 Oct 2017 14:15:26 GMT IMF report suggests new Greek austerity measures necessary http://implode-explode.com/viewnews/2017-10-12_IMFreportsuggestsnewGreekausteritymeasuresnecessary.html iehi-feed-63123 Thu, 12 Oct 2017 01:25:52 GMT The bubble economy is set to burst, and US political turmoil may well be the trigger http://implode-explode.com/viewnews/2017-10-11_ThebubbleeconomyissettoburstandUSpoliticalturmoilmaywellbethetri.html Central banks continue to focus on consumption inflation, not asset inflation, in their decisions. Their attitude has supported one bubble after another. These bubbles have led to rising ­inequality and made mass consumer inflation less likely.

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Despite low unemployment and widespread labour shortages, wage increases and inflation in Japan have been around zero for a quarter of a century. Western central bankers assumed that the same wouldn't happen to them without understanding the underlying reasons.

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The mistaken stimulus has the unintended consequences of dissipating real wealth and increasing inequality. American household net worth is at an all-time high of five times GDP, significantly higher than the bubble peaks of 4.1 times in 2000 and 4.7 in 2007, and far higher than the historical norm of three times GDP. On the ­other hand, US capital formation has stagnated for decades. The outlandish paper wealth is just the same asset at ever higher prices.

The inflation of paper wealth has a serious impact on inequality. The top 1 per cent in the US owns one-third of the wealth and the top 10 per cent owns three-quarters . Half of the people don't even own stocks. Asset inflation will increase inequality by definition. Moreover, 90 per cent of the income growth since 2008 has gone to the top 1 per cent, partly due to their ability to cash out in the ­inflated asset market. An economy that depends on asset inflation always disproportionately benefits the asset-rich top 1 per cent.

There have been so many theories on why inequality has risen. The misguided monetary policy may be the culprit. Germany and Japan do not have significant asset bubbles. Their inequality is far less than in the Anglo-Saxon economies that have succumbed to the allure of financial speculation.

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How is this all going to end?... In 2007, structured mortgage products exposed cash-short borrowers. The defaults snowballed. But, in China, leverage is always rolled over. Default is usually considered a political act. And it never snowballs: the government makes sure of it. In the US, the leverage is mostly in the government. It won't default, because it can print money.

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The most likely cause for the bubble to burst would be the rising political tension in the West. The bubble economy keeps squeezing the middle class, with more debt and less wages. The festering political tension could boil over. Radical politicians aiming for class struggle may rise to the top. The US midterm elections in 2018 and presidential election in 2020 are the events that could upend the applecart.

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iehi-feed-63122 Wed, 11 Oct 2017 23:12:30 GMT Global Regulators Play Bitcoin Whack-a-Mole as Demand, Institutional Cachet Explodes http://implode-explode.com/viewnews/2017-10-11_GlobalRegulatorsPlayBitcoinWhackaMoleasDemandInstitutionalCachet.html ``While any central banker might be troubled by a stateless currency competing with the coin of the realm, China's efforts to crack down suggest it may be harder than it appears. While the government crackdown sent bitcoin prices plunging as much as 30 percent, it has now recovered those losses, even as a growing number of governments take action.

Once the largest global market for trading, China now accounts for 1.5 percent of bitcoin transactions, while Japan -- where regulators have been more open to digital currencies -- accounts for more than 60 percent, according to CryptoCompare.com.

... the U.K. has exempted bitcoin from value-added taxes, and says it should be considered a foreign currency for corporate tax purposes. The U.K. was early in publishing clear directives, ruling in 2014 that "bitcoin may be held as an investment or used to pay for goods or services at merchants where it is accepted."

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Japan this year began enforcing a law that recognizes bitcoin as a legal method of payment, and overseeing cryptocurrency exchanges -- effectively providing clarity and support to local entrepreneurs. That's something Vietnam may do as well.

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While government efforts to come to grips with digital money have been fraught, the more important trend may be the growing number of money managers who are looking at cryptocurrencies as an asset class for investment.

"What's more interesting is the increased sophistication of the institutional buy side for cryptocurrencies," said Nolan Bauerle, director of research at CoinDesk. "This new type of buyer means this is only a hiccup. There are important sums of fiat ready to cross into crypto in the short term." There are more than 68 hedge funds focused on cryptocurrencies today, many of them run by people from Wall Street.

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iehi-feed-63121 Wed, 11 Oct 2017 21:39:38 GMT Fed's Evans Says Weak Inflation May Not Be Temporary Phenomenon http://implode-explode.com/viewnews/2017-10-11_FedsEvansSaysWeakInflationMayNotBeTemporaryPhenomenon.html Gold Pops, Dollar Drops As Rate-Hike-Odds Slide After Fed Minutes.]]>