Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-62288 Tue, 23 May 2017 18:37:55 GMT US attack on North Korea is imminent, George Friedman says http://implode-explode.com/viewnews/2017-05-23_USattackonNorthKoreaisimminentGeorgeFriedmansays.html ``Speaking Monday to a rapt audience at the 2017 Strategic Investment Conference in Orlando, Friedman said that while it is unlikely the US will take action before President Trump returns home at the weekend, North Korea's actions appear to have "offered the US no alternative" to a clash.

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Pointedly branding the North Korean elites "neither crazy nor stupid," Friedman said they have "homicidal, but not suicidal tendencies." "We are facing a war that is not simple," he said, adding that Russia and China are both washing their hands of the matter.

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"There is no other power that can conceivably--and I include the Chinese in this--take effective military action against the North Koreans to stop a nuclear program," he continued. "That means it's either the US [takes action], or North Korea has a nuclear weapon."

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Rumors of the demise of America's hegemonic status are greatly exaggerated, according to Friedman. A consequence of its unparalleled power is that it will continue to "be involved in all sorts of miserable wars every 5--10 years. It's partly because no one else wants to do it and partly because we can afford to and partly because of long-term threats."

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iehi-feed-62286 Tue, 23 May 2017 15:18:46 GMT Jared Kushner's Slumlord Empire http://implode-explode.com/viewnews/2017-05-23_JaredKushnersSlumlordEmpire.html iehi-feed-62282 Mon, 22 May 2017 15:16:24 GMT Interest-only loans could be 'Australia's sub-prime' http://implode-explode.com/viewnews/2017-05-22_InterestonlyloanscouldbeAustraliassubprime.html High-risk mortgage loans to young families, professionals and other over-extended borrowers amounting to more than six times household incomes could wipe out 20 per cent of the major banks' equity base, institutional investment fund JCP Investment Partners has warned.

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In a proprietary study of the nation's record high-and-growing household debt mountain, the Melbourne-based fund said Irish-style housing losses for the bigger-than-recognised pool of riskier borrowers could wipe out half of the banks' equity capital.

Interest-only loans, said JCP -- which is one of three Australian equities managers appointed by the Future Fund -- could be "Australia's sub-prime".

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Among the biggest concerns is what may happen when households feel they can no longer service their loans, for instance, as borrowing costs are reset higher or those with interest only mortgages are forced to repay the principal as well.

That creates a negative feedback loop -- experienced by Ireland after the financial crisis -- in which stressed borrowers slash their spending, in turn crunching the economy, driving up unemployment and adding to downward pressure on house prices.

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The fund's senior researchers Matthew Wilson and Craig Shephard found that about half of all the nation's mortgage debt was in the hands of borrowers whose debt was more than four times larger than their gross income.

The same borrowers had paid off less than half of their loans, the team found, based on data from several official and private sector sources that adjusted for changes in incomes and the collateral values of their homes.

The average loan-to-income ratio of these heavily indebted households was 6.4, or more than double the old banking "rule of thumb" that mortgage managers didn't lend more than three times a household's income "unless they were doctors".

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JCP calculated how the banks' balance sheets would handle an 2008 Irish-style loss on the high risk loans. It estimated that 50 per cent of the equity of Australian banks would be destroyed by soured loans to these high-risk borrowers.

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iehi-feed-62281 Mon, 22 May 2017 14:58:37 GMT Car loans, low rates, second mortgages: all the ingredients for a new credit crunch (UK) http://implode-explode.com/viewnews/2017-05-22_Carloanslowratessecondmortgagesalltheingredientsforanewcreditcru.html A credit crunch is brewing and when it happens, the UK is going to get hurt. That is the message emerging from senior executives in the financial services industry, who do not think Britain has changed that much since the 2008 credit disaster and the devastating crash that followed. Three developments lie at the heart of this disturbing analysis: spectacular growth in the sale of second mortgages, car loans and credit cards.

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Officials at the Bank have a growing list of concerns. Not only is there the second mortgage problem and the number of car loans: figures show consumer spending on unsecured credit has also rocketed in the last year. In March alone, the amount UK consumers owed on loans and cards grew by £1.9bn, the highest figure in 11 years.

Households are known to have increased their reliance on short-term unsecured loans to buy cars and furniture, and to kit out new kitchens. Some use them to maintain their lifestyle in the face of a decade of flat wages. Unfortunately, another group use credit to pay the monthly rent.

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Try as they might, the UK's two big high street lenders cannot put the financial crisis behind them. Last week, when Lloyds Banking Group was congratulating itself over its return to the private sector, it was still being haunted by the fraud perpetrated at the Reading branch of HBOS, the hotshot lender it rescued in 2008. To add to the pressure, Noel Edmonds, the TV celebrity, is leading the campaign for compensation for the victims of the fraud which took place in the run-up to the financial crisis.

This week, Royal Bank of Scotland will be transported back to those calamitous days of 2008. A high court judge will begin hearing a claim for compensation from investors who backed a £12bn cash call by RBS in April 2008 -- only for the Edinburgh-based institution to be bailed out by taxpayers six months later.

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iehi-feed-62277 Sun, 21 May 2017 18:02:38 GMT A Quarter Of American Adults Can't Pay All Their Monthly Bills; 44% Have Less Than $400 In Cash http://implode-explode.com/viewnews/2017-05-21_AQuarterOfAmericanAdultsCantPayAllTheirMonthlyBills44HaveLessTha.html iehi-feed-62276 Sun, 21 May 2017 17:59:45 GMT U.K. Threatens to Quit Brexit Talks If It Faces Massive Bill http://implode-explode.com/viewnews/2017-05-21_UKThreatenstoQuitBrexitTalksIfItFacesMassiveBill.html The U.K. will quit talks on leaving the European Union unless the bloc drops its demands for a divorce payment as high as 100 billion euros ($112 billion), Brexit Secretary David Davis said.

Britain's negotiations would otherwise be plunged into "chaos," and even a 1 billion-pound settlement would be "a lot of money," Davis said in an interview published in the Sunday Times.

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Davis also said the negotiations, which are expected to begin on June 19, will be "fairly turbulent" and that he would reject any blueprint for discussions that requires the issues of the divorce bill, EU citizens' rights and Northern Ireland's border to be solved before talks can begin on future trade.

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iehi-feed-62275 Sat, 20 May 2017 19:30:34 GMT Home ownership among young families halves in 20 years (UK) http://implode-explode.com/viewnews/2017-05-20_Homeownershipamongyoungfamilieshalvesin20yearsUK.html iehi-feed-62274 Sat, 20 May 2017 14:35:02 GMT The Housing Moment Investors Dread Is Here http://implode-explode.com/viewnews/2017-05-20_TheHousingMomentInvestorsDreadIsHere.html The May University of Michigan Consumer Sentiment survey showed a six-year low among those who think it's a good time to buy a house and a 12-year high among those who say it's a good time to sell. Disparities of this breadth tend to coincide with break points and that's just where we've landed in the cycle.

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The silver lining in the dynamic that's just beginning to play out is what pricing pressures on the home front imply for the future of household finances -- that is after the recession comes and goes. The cost to rent and buy has never been as high as it is today for the average working young American. The preponderance of apartments constructed in the current cycle has been luxury units. At the same time, private equity investors with deep pockets swooped in and bid up the price of rental homes, leaving many would-be first-time homebuyers and renters alike with no choice but to remain at home with their parents after graduating from college.

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iehi-feed-62273 Fri, 19 May 2017 22:54:53 GMT Manafort's Real-Estate Deals Said to Be Probed by N.Y.'s Top Cop, Manhattan DA http://implode-explode.com/viewnews/2017-05-19_ManafortsRealEstateDealsSaidtoBeProbedbyNYsTopCopManhattanDA.html The probe by New York Attorney General Eric Schneiderman, one of the most outspoken critics of the president, is in a preliminary stage, according to a person familiar with the matter who asked not to be named because the investigation isn't public. Manafort, who ran Trump's campaign from April to August last year, has owned property in the Hamptons and Trump Tower in Manhattan.

Manhattan District Attorney Cyrus Vance Jr. is also in the early stages of an investigation into Manafort's transactions, a person familiar with that probe said. Representatives for Schneiderman and Vance declined to comment.

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The inquiries by the two Democrats could pose added legal peril for Manafort if investigators find evidence of a crime. Unlike a probe by the U.S. Justice Department and FBI, the president and Attorney General Jeff Sessions have no authority over New York state investigators scrutinizing whether Manafort broke state laws. Schneiderman is responsible for enforcing New York's securities laws under the Martin Act, which gives him broad powers to pursue white-collar crime.

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Manafort's business dealings have featured prominently in discussions of links between the Trump campaign and Russia. He used Cypriot bank accounts to receive money from Russian tycoon Oleg Deripaska and Ukrainian clients, according to court records and former executives at the bank where the accounts were kept. Manafort and Deripaska have said the accounts were opened for legitimate business transactions.

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iehi-feed-62272 Fri, 19 May 2017 22:47:09 GMT Get Ready for "Quantitative Tightening" http://implode-explode.com/viewnews/2017-05-19_GetReadyforQuantitativeTightening.html iehi-feed-62271 Fri, 19 May 2017 17:56:43 GMT Trump Admin's Mnuchin Backtracks on Glass-Steagall http://implode-explode.com/viewnews/2017-05-19_TrumpAdminsMnuchinBacktracksonGlassSteagall.html iehi-feed-62270 Fri, 19 May 2017 17:50:24 GMT ECB Tapering May Trigger "Disorderly Restructuring" of Italian Debt, Return to National Currency http://implode-explode.com/viewnews/2017-05-19_ECBTaperingMayTriggerDisorderlyRestructuringofItalianDebtReturnt.html Since 2008, 88% of government debt net issuance has been acquired by the ECB and Italian Banks. At current government debt net issuance rates and announced QE levels, the ECB will have been responsible for financing 100% of Italy's deficits from 2014 to 2019. But now there's a snag... The ECB has already reduced the rate of purchases to €60 billion a month. And it plans to further withdraw from the super-expansionary monetary policy.

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Astellon Capital's report on Italy's dependence on ECB bond purchases poses the question: If the ECB tapers its purchase of Italian bonds further, who would pick up the slack?... According to Astellon , the only long-term solution to this problem is to carry out an orderly restructuring of Italian debt. In fact, by this stage in proceedings, the stark choice is between an orderly or disorderly restructuring of Italy's debt... [the latter] would significantly increase the likelihood of an Italian exit from the Eurozone.

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iehi-feed-62269 Thu, 18 May 2017 14:41:12 GMT Households owe record amount, topping pre-recession peak http://implode-explode.com/viewnews/2017-05-18_Householdsowerecordamounttoppingprerecessionpeak.html The Federal Reserve Bank of New York said Wednesday that household debt, which also includes home equity lines of credit, stood at $12.73 trillion in the first quarter. That's above the $12.68 trillion outstanding in the fall of 2008, the previous record. The figure isn't adjusted for inflation or population size.

Even with debt levels back to record heights, analysts note that household borrowing appears more sustainable now than it did nearly a decade ago. Interest rates are lower, and lenders are much more focused on credit-worthy borrowers.

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iehi-feed-62267 Thu, 18 May 2017 14:12:18 GMT Banks Tighten Auto Lending as More Borrowers Fall Into Default http://implode-explode.com/viewnews/2017-05-18_BanksTightenAutoLendingasMoreBorrowersFallIntoDefault.html iehi-feed-62266 Wed, 17 May 2017 20:56:19 GMT Turmoil over recent Trump controversies triggers the Dow's biggest losses since September http://implode-explode.com/viewnews/2017-05-17_TurmoiloverrecentTrumpcontroversiestriggerstheDowsbiggestlossess.html iehi-feed-62264 Wed, 17 May 2017 14:16:02 GMT Gold Rallies as Trump's ‘Toughest Time in Office' Batters Dollar http://implode-explode.com/viewnews/2017-05-17_GoldRalliesasTrumpsToughestTimeinOfficeBattersDollar.html iehi-feed-62262 Wed, 17 May 2017 14:12:28 GMT Report: State and Local Governments Have Almost $4 tln Pension Shortfall http://implode-explode.com/viewnews/2017-05-17_ReportStateandLocalGovernmentsHaveAlmost4tlnPensionShortfall.html iehi-feed-62261 Tue, 16 May 2017 22:55:07 GMT AP reports Trump's tax returns show no Russian money ... except none of that is true http://implode-explode.com/viewnews/2017-05-16_APreportsTrumpstaxreturnsshownoRussianmoneyexceptnoneofthatistru.html iehi-feed-62260 Tue, 16 May 2017 22:48:50 GMT Stocks hit record high on sagging performance, higher debt! http://implode-explode.com/viewnews/2017-05-16_Stockshitrecordhighonsaggingperformancehigherdebt.html ... let's look at ExxonMobil, whose 2010 annual report showed $383 billion in revenue, $30 billion in profit, and $12 billion in debt. The company's most recent annual report from 2016 posted $226 billion in revenue (42% decline), $7.7 billion in profit (74% decline), and $28 billion in debt (133% increase)! Once again a rational person would think that the price of ExxonMobil's stock (XOM) would be dramatically lower. Wrong again. XOM is up from $78 to $83 over that period.

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Then there's Apple, a company so hallowed and consecrated that it's almost sacrilegious to question the business. But if you compare Apple to its own performance just two years ago, both revenue and profit are lower. A few weeks ago Apple reported $39.6 billion in operating cash flow for the first three months of this year. That's a full 25% LOWER than the $52.8 billion the company reported for the same quarter in 2015. Over the same period, Apple's DEBT more than DOUBLED from $40 billion to $84.5 billion. Again, it seems obvious that Apple stock should be LOWER in 2017 than it was in 2015. But it's not. Apple stock has climbed 19% in the last two years from $130 to $155, and its price is also now at an all-time high.

Something in these markets is obviously broken... I'm not suggesting that stocks are going to crash tomorrow or that this is the top of the market... But it seems pretty obvious that investors who buy these asset are taking on significant risks relative to prospective returns.

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iehi-feed-62258 Tue, 16 May 2017 18:55:06 GMT Obamacare Will Soon Be Zombiecare http://implode-explode.com/viewnews/2017-05-16_ObamacareWillSoonBeZombiecare.html Insurers need months to reprogram systems, train staff, and build provider networks. Congress can't dawdle into summer and then unveil something entirely new. If they do, the 2018 rollout will be a catastrophe. So insurers are doing the rational thing. They're either backing out or raising rates to compensate for all the unknown risks they will be taking.

Early signs are ugly: Maryland's top insurer, CareFirst Blue Cross, has requested an average 50% rate increase for 2018; In Virginia, Anthem Blue Cross is asking for 37.7% higher rates; Aetna said it will be pulling out of all Obamacare exchanges nationwide, [and] Iowa is down to only one carrier, Medica, which only covers a few counties.

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[Due to its structure,] Obamacare won't explode or collapse, even if Congress does nothing. That's because most of the beneficiaries will still be heavily subsidized under current law. They won't care what the price is... Bottom line: In 2018 Obamacare will still exist, but only as taxpayer-provided indigent care. The program's heart and soul--the grand vision of "Affordable Health Care" for every American--will be gone.

... The losers will be in the middle: Working-age people who make too much to get Obamacare subsidies, but not enough to do without insurance.

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