Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-64222 Wed, 19 Sep 2018 17:13:03 GMT CNBC Just Posted Fake Inflation News. What Are The Implications for Fed Dovishness? | Lee Adler http://implode-explode.com/viewnews/2018-09-20_CNBCJustPostedFakeInflationNewsWhatAreTheImplicationsforFedDovis.html ... is there any evidence of persistence here? Or is there any evidence that this month's headline reading was even material in the first place? A quick answer to the second question requiring no deeper analysis is...

No. There's no evidence that this was even material... In other words, the rally was based on the idea that the Fed might not tighten as fast or as much if inflation is really slowing. It's perfectly obvious to us that it isn't.

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There's simply no reason in the CPI data to believe that the Fed will back off from its tightening regimen. The longer the market stays high and the more it rises, the greater the risk of a severe adjustment.

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iehi-feed-64217 Mon, 17 Sep 2018 14:07:13 GMT China reportedly says it won't just play defense in a trade war with the US http://implode-explode.com/viewnews/2018-09-17_ChinareportedlysaysitwontjustplaydefenseinatradewarwiththeUS.html Beijing has said it would retaliate to trade war escalation with tariffs of its own as well as qualitative measures, which it has not specified but are perceived within the U.S. business community as likely to include increased customs and regulatory scrutiny.

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Beijing may also decline to participate in the proposed trade talks with Washington later this month if the Trump administration goes ahead with the additional tariffs, The Wall Street Journal reported on Sunday, citing Chinese officials.

The Journal report quoted one senior Chinese advisory official saying China would not negotiate "with a gun pointed to its head".

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iehi-feed-64215 Sun, 16 Sep 2018 15:05:37 GMT The 2008 crisis really did start off worse than the Great Depression http://implode-explode.com/viewnews/2018-09-16_The2008crisisreallydidstartoffworsethantheGreatDepression.html ``As economists Barry Eichengreen and Kevin O'Rourke have shown, global stocks, trade and output actually all fell faster in 2008 than they had in 1929. Maybe the best example, though, of how quickly things turned was that South Korea, which didn't have any exposure to subprime mortgages but did have banks that depended on borrowing the money they needed from markets, went from growing at a 3.5 percent pace right before the Lehman Bros. collapse to shrinking at a 12.7 percent pace right after.''

This is really fascinating. The debate is between those who believe "policymakers deserve credit for doing enough to stop this from turning into a Second Great Depression", and "those who say policymakers didn't do enough to stop this from being far worse than it needed to be." There is apparently no space for those who think policymakers did too much, or even that they screwed up royally in creating the conditions for the collapse in the first place. Be afraid.

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iehi-feed-64214 Sun, 16 Sep 2018 14:58:57 GMT Polarization in Poland: A Warning From Europe http://implode-explode.com/viewnews/2018-09-16_PolarizationinPolandAWarningFromEurope.html At that moment, when Poland was on the cusp of joining the West, it felt as if we were all on the same team. We agreed about democracy, about the road to prosperity, about the way things were going... That moment has passed. Nearly two decades later, I would now cross the street to avoid some of the people who were at my New Year's Eve party. They, in turn, would not only refuse to enter my house, they would be embarrassed to admit they had ever been there.

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Some of my New Year's Eve guests continued, as my husband and I did, to support the pro-European, pro-rule-of-law, pro-market center-right--remaining in political parties that aligned, more or less, with European Christian Democrats, with the liberal parties of Germany and the Netherlands, and with the Republican Party of John McCain. Some now consider themselves center-left. But others wound up in a different place, supporting a nativist party called Law and Justice--a party that has moved dramatically away from the positions it held when it first briefly ran the government, from 2005 to 2007, and when it occupied the presidency (not the same thing in Poland), from 2005 to 2010.

Since then, Law and Justice has embraced a new set of ideas, not just xenophobic and deeply suspicious of the rest of Europe but also openly authoritarian. After the party won a slim parliamentary majority in 2015, its leaders violated the constitution by appointing new judges to the constitutional court. Later, it used a similarly unconstitutional playbook to attempt to pack the Polish Supreme Court. It took over the state public broadcaster, Telewizja Polska; fired popular presenters; and began running unabashed propaganda, sprinkled with easily disprovable lies, at taxpayers' expense. The government earned international notoriety when it adopted a law curtailing public debate about the Holocaust. Although the law was eventually changed under American pressure, it enjoyed broad support by Law and Justice's ideological base--the journalists, writers, and thinkers, including some of my party guests, who believe anti-Polish forces seek to blame Poland for Auschwitz.

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iehi-feed-64212 Sun, 16 Sep 2018 14:04:15 GMT Yellen Advocates Insane Boom-and-Bust-Cyclical Policy http://implode-explode.com/viewnews/2018-09-16_YellenAdvocatesInsaneBoomandBustCyclicalPolicy.html iehi-feed-64209 Sat, 15 Sep 2018 14:51:51 GMT JPMorgan Sees Liquidity Wildcard in Gauging Depth of Next Crisis http://implode-explode.com/viewnews/2018-09-15_JPMorganSeesLiquidityWildcardinGaugingDepthofNextCrisis.html ``A decade after the collapse of Lehman Brothers sparked a plunge in markets and a raft of emergency measures, strategists at the bank have created a model aimed at gauging the timing and severity of the next financial crisis. And they reckon investors should pencil it in for 2020.

The good news is, the next one will probably generate a somewhat less painful hit than past episodes, according to their analysis. The bad news? Diminished financial market liquidity since the 2008 implosion is a "wildcard" that's tough to game out...

Assuming an average-length recession, the model came up with the following peak-to-trough performance estimates for different asset classes in the next crisis, according to the note:

U.S. stock slide of about 20 percent.

A jump in U.S. corporate-bond yield premiums of about 1.15 percentage points.

A 35 percent tumble in energy prices and 29 percent slump in base metals.

A 2.79 percentage point widening in spreads on emerging-nation government debt.

A 48 percent slide in emerging-market stocks, and a 14.4 percent drop in emerging currencies.

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[But] JPMorgan's Marko Kolanovic has previously concluded that the big shift away from actively managed investing -- through the rise of index funds, exchange-traded funds and quantitative-based trading strategies -- has escalated the danger of market disruptions. He and his colleagues wrote in a separate note Monday of the potential for a future "Great Liquidity Crisis." ... This change has "eliminated a large pool of assets that would be standing ready to buy cheap public securities and backstop a market disruption," Chang and Loeys warned.

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iehi-feed-64201 Mon, 10 Sep 2018 18:57:12 GMT No more neutral rate? The shine comes off the Fed's r-star http://implode-explode.com/viewnews/2018-09-11_NomoreneutralrateTheshinecomesofftheFedsrstar.html "In some sense lower rates beget lower rates," said Piti Disyatat, one of the authors of the paper and a research economist with the Bank of Thailand. If Fed policy decisions also affect the neutral rate, "its ability to act as a benchmark is undermined," he said.

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A shift away from the focus on the neutral rate could buttress the arguments of those who feel the Fed should instead pay more attention to financial markets, and particularly to the evolution of financial risks.

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In a paper released Thursday evening, [Boston Fed President] Rosengren said the Fed in conjunction with state and local authorities should be preparing more to fight the next recession, including with the possible use of higher capital buffers for banks.

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iehi-feed-64199 Mon, 10 Sep 2018 04:09:30 GMT Chinese government invites top Wall Street bankers to Beijing (CIRCUMVENTING "GREAT WALL OF TRUMP"?) http://implode-explode.com/viewnews/2018-09-10_ChinesegovernmentinvitestopWallStreetbankerstoBeijingCIRCUMVENTI.html The Chinese government is inviting Wall Street's top bankers to a hastily arranged meeting in Beijing as US president Donald Trump threatens to impose punitive tariffs on all Chinese exports to the US worth an estimated $267 billion (€230 billion).

According to three people briefed on the initiative, Chinese Communist party officials have invited the heads of America's leading financial institutions to attend a "China-US Financial Roundtable" in Beijing on September 16th, followed by a meeting with Wang Qishan, vice-president of China.

Chinese officials hope the new group, which will be jointly chaired by Zhou Xiaochuan, a former Chinese central bank governor, and John Thornton, the former Goldman Sachs executive who now chairs mining group Barrick Gold, will meet every six months to discuss Sino-US relations and advise the Chinese government on financial and economic reforms.

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People briefed on the planning for the China-US Financial Roundtable said it reflected the Chinese government's frustrations in dealing with Mr Trump, who has refused to designate a point person for China relations and has increasingly deferred to the hawkish views of Robert Lighthizer, the US trade representative.

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iehi-feed-64198 Mon, 10 Sep 2018 04:05:41 GMT Cryptocurrency Is Not Conducive for Terrorism, Says Defense Expert to U.S. Congress http://implode-explode.com/viewnews/2018-09-10_CryptocurrencyIsNotConduciveforTerrorismSaysDefenseExperttoUSCon.html iehi-feed-64196 Sun, 09 Sep 2018 21:56:48 GMT In Charts: Disaster Is Inevitable When America's Stock Market Bubble Bursts http://implode-explode.com/viewnews/2018-09-10_InChartsDisasterIsInevitableWhenAmericasStockMarketBubbleBursts.html To keep it simple, the current U.S. stock market bubble will pop due to the ending of the conditions that created it in the first place: cheap credit/loose monetary conditions. The Federal Reserve inflated the stock market bubble via its record low Fed Funds Rate and quantitative easing programs, and the central bank is now raising interest rates and reversing its QE programs by shrinking its balance sheet. What the Fed giveth, the Fed taketh away.

The Fed claims to be able to engineer a "soft landing," but that virtually never happens in reality. It's even less likely to happen in this current bubble cycle because of how long it has gone on and how distorted the financial markets and economy have become due to ultra-cheap credit conditions.

I'm from the same school of thought as billionaire fund manager Jeff Gundlach, who believes that the Fed will keep hiking interest rates until "something breaks." In the last economic cycle from roughly 2002 to 2007, it was the subprime mortgage industry that broke first, and in the current cycle, I believe that corporate bonds are likely to break first, which would then spill over into the U.S. stock market.

... Because of the record debt burden in the U.S., interest rates do not have to rise nearly as high as in prior cycles to cause a recession or financial crisis this time around.

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iehi-feed-64195 Sun, 09 Sep 2018 18:01:13 GMT Summers Calls Fed Bank Stress Test Results ‘Absurd' http://implode-explode.com/viewnews/2018-09-10_SummersCallsFedBankStressTestResultsAbsurd.html Former Treasury Secretary Lawrence Summers called the results of the most recent Federal Reserve stress test of the largest banks "comically absurd," and called on regulators to boost capital at financial institutions.

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"If we are likely to live in a world of systematically lower interest rates, systematically more higher asset price multiples than we have in the past," then the case "for prudential regulation and for high levels of capital requirements in banks and more financial institutions is greatly increased," Summers said.

Continually low interest rates, a feature of the nine-year-old U.S. expansion where the policy rate is only 1.75 percent to 2 percent currently, can produce asset bubbles.

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The Fed asserted that if every bank continued to pay out capital in the form of dividends and share buybacks despite the severe scenario, "that none would have any capital deficiency." "That, I would suggest, is a comically absurd conclusion that is belied by the most elementary analysis of the beta of those major financial institutions," Summers said. "And the fact that that assertion continues to be made has to undercut whatever credibility one would would otherwise attach to the very substantial efforts that have been made to strengthen financial regulation."

Summers's criticism follows similar calls by officials such as Cleveland Fed President Loretta Mester, Boston Fed President Eric Rosengren, Kansas City Fed President Esther George and Fed Governor Lael Brainard to use the current period of strong growth and rising asset prices to ask banks to build up capital beyond the stress test requirements.

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iehi-feed-64194 Sun, 09 Sep 2018 17:52:09 GMT The Empty Storefronts of New York: A Panoramic View (UP TO 20% VACANCY!!) http://implode-explode.com/viewnews/2018-09-10_TheEmptyStorefrontsofNewYorkAPanoramicViewUPTO20VACANCY.html New York City's streetscape has been transformed -- visually and economically -- by the staggering numbers of vacant storefronts now dotting its most popular retail corridors. The Times set out with a panoramic camera to capture what this commercial blight feels like on the ground.

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A survey conducted by Douglas Elliman found that about 20 percent of all retail space in Manhattan is currently vacant, she said, compared with roughly 7 percent in 2016.

While a commercial crisis might more likely be associated with periods of economic distress, this one comes during an era of soaring prosperity, in a city teeming with tourism and booming with development.

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Particularly hard hit are gentrifying areas in Brooklyn and many of Manhattan's top retail strips in some of the world's priciest shopping districts, from Broadway in SoHo to Madison Avenue on the Upper East Side.

Yeah right, it's just a "period of prosperity" -- not a time of papered-over economic lacunae using cheap money...

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iehi-feed-64193 Sun, 09 Sep 2018 16:51:33 GMT Why Ethereum Co-Creator Believes Days of 1000x Crypto Growth is Gone http://implode-explode.com/viewnews/2018-09-10_WhyEthereumCoCreatorBelievesDaysof1000xCryptoGrowthisGone.html iehi-feed-64188 Fri, 07 Sep 2018 23:49:34 GMT Trump threatens China with tariffs on $267B more goods http://implode-explode.com/viewnews/2018-09-08_TrumpthreatensChinawithtariffson267Bmoregoods.html President Donald Trump on Friday threatened to hit Beijing with tariffs on an additional $267 billion in goods, a move that would expand the growing trade war to cover virtually everything the United States imports from China.

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Those penalties, if applied, would come on top of tariffs the administration has already implemented on roughly $53 billion in Chinese imports and on another $200 billion that could be imposed in the coming days.

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Imposing tariffs on an additional $267 billion in goods from China -- on top of the roughly $253 billion that have already been imposed or are pending -- would mean virtually all current imports from China would be caught in the crossfire, including consumer goods like cellphones and televisions. Trump‘s comments Friday seemed to indicate that he was prepared to put in place the duties on the additional amount without any new public input or comment period.

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"The notion that the president is going to add an extra $267 billion worth of tariffs is grossly irresponsible and possibly illegal," Jose Castaneda, a spokesman for the Information Technology Industry Council, said in a statement. "While we cannot overstate the potential economic harm of such a decision, we also question whether the administration has done the necessary investigation of Chinese policies and practices to justify this level of tariffs under the Section 301 statute. We urge the administration to clearly explain how Section 301 allows it to take such action."

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iehi-feed-64186 Wed, 05 Sep 2018 16:24:37 GMT Doug Noland: Weekly Commentary: "Unassailable" (Market Bubble) http://implode-explode.com/viewnews/2018-09-06_DougNolandWeeklyCommentaryUnassailableMarketBubble.html Here in the U.S., the bullish consensus view holds that a faltering EM doesn't matter. The U.S. economy is strong and largely immune to global factors. Profits are booming. Prospects are unequivocally positive. The mindset is uncomfortably reminiscent of the "subprime doesn't matter" blather heading right into a devastating crisis. It's worth recalling that U.S. GDP exceeded 2% in 2007's 2nd, 3rd and 4th quarters, with Q4's 2.5% expansion the strongest in a year.

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Mr. Buffett, along with virtually everyone, was blindsided by the 2008 crisis. This should matter but doesn't. Amazingly, another crisis is viewed these days as an opportunity rather than a risk. Stocks, as they always do, will come roaring back. The last crisis was only an issue for those that lacked conviction and sold stocks in an irrational panic.

At this point, the bullish view that stocks must be bought and held for the long-term has surpassed rational. It's Unassailable. Your price entry point matters little - the global backdrop even less. Politics little, geopolitics less. Holding cash is stupid, shorting much worse. Indeed, to not bet confidently on the U.S. for the long-term is an act of self-destructive irrationality. A risk-based approach, to be sure, would lead to irrational decisions. It's been proven - repeatedly. Don't sell.

I believe we're nearing the end of an historic multi-decade Bubble. Risk is incredibly high, a view that has by now been thoroughly discredited. A key factor boosting risk is the overwhelming consensus view that risk is virtually nonexistent. In stark contrast, I believe this protracted period of serial boom and bust cycles has led to the accumulation of financial and economic distortions and deep structural impairment.

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iehi-feed-64185 Wed, 05 Sep 2018 15:59:52 GMT Venezuela: Life Without Water: Sweaty, Smelly, and Furious in Caracas http://implode-explode.com/viewnews/2018-09-05_VenezuelaLifeWithoutWaterSweatySmellyandFuriousinCaracas.html Dishes are brushed off and reused, and clothing is not something regularly laundered, though, personally, I draw the line at multiple wearings of underwear or socks. You ask friends whether it's okay to flush. You often do not. We're sweaty and, yes, smelly, especially in the rainy season when the humidity can top 80 percent. We're at risk, too, because water stagnating in the vessels that people stash around their homes attracts mosquitoes; malaria rates have soared.

The poorest, as usual, have it the worst, though no one is spared. Hospitals and schools, posh neighborhoods and slums, they all go without water--at times for weeks on end--making this man-made drought arguably the most equalizing disaster the socialist government has ever managed to engineer.

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iehi-feed-64184 Wed, 05 Sep 2018 15:50:44 GMT Trump Flirts With Government Shutdown GOP Is Racing to Avoid http://implode-explode.com/viewnews/2018-09-05_TrumpFlirtsWithGovernmentShutdownGOPIsRacingtoAvoid.html President Donald Trump is asking advisers whether it would be good politics to provoke an October government shutdown fight over money for his border wall, even though Republicans in Congress say a closure before the midterm elections in November would backfire.

Republican leaders thought they had persuaded Trump weeks ago to delay any such confrontation until later in the year, but the president raised the prospect of an earlier showdown in conversations in recent days with at least three aides and outside advisers, according to people familiar with the matter.

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iehi-feed-64182 Mon, 03 Sep 2018 15:48:44 GMT For Venezuelans fleeing economic catastrophe, Brazil has proven a tough place to land http://implode-explode.com/viewnews/2018-09-03_ForVenezuelansfleeingeconomiccatastropheBrazilhasprovenatoughpla.html iehi-feed-64180 Fri, 31 Aug 2018 21:47:26 GMT Impeachment? Markets Don't Care... http://implode-explode.com/viewnews/2018-09-01_ImpeachmentMarketsDontCare.html iehi-feed-64179 Fri, 31 Aug 2018 17:17:45 GMT Stocks snap 4-day winning streak after report Trump backs tariffs on $200 billion in Chinese goods http://implode-explode.com/viewnews/2018-09-01_Stockssnap4daywinningstreakafterreportTrumpbackstariffson200bill.html Bloomberg News reported that Trump told aides he supports moving forward with proposed tariffs on an additional $200 billion in Chinese goods. The report also said, however, that Trump has not made up his mind on the matter. The White House declined to comment on the report.

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Investors also watched as the U.S. and Canada tried to strike a deal on trade.

"We had some momentum when the U.S and Mexico struck a deal earlier in the week," said Ryan Nauman, market strategist at Informa Financial Intelligence. "But as the deadline approaches, people are getting a bit worried."''

David Stockman's comments on Trump's NAFTA "revamp", from this article, are pretty hilarious:

David Stockman, Ronald Reagan's budget director, described that agreement as an older version of NAFTA with Trump missteps sprinkled in. "There was never a problem with NAFTA anyway, and what he has done is basically remove the name and complicated the machinery [and] given a big wage increase to Mexican workers," Stockman told Bloomberg Television on Friday.
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