Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us 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-64213 Sun, 16 Sep 2018 14:24:16 GMT Mortgage Application Fraud Skyrocketing By Double Digits http://implode-explode.com/viewnews/2018-09-16_MortgageApplicationFraudSkyrocketingByDoubleDigits.html 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-64211 Sun, 16 Sep 2018 14:02:22 GMT These countries are most vulnerable to the emerging market storm http://implode-explode.com/viewnews/2018-09-16_Thesecountriesaremostvulnerabletotheemergingmarketstorm.html iehi-feed-64210 Sat, 15 Sep 2018 23:49:17 GMT Mortgage Shotgunning Scheme Sends NY Real Estate Broker To Prison http://implode-explode.com/viewnews/2018-09-16_MortgageShotgunningSchemeSendsNYRealEstateBrokerToPrison.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-64208 Fri, 14 Sep 2018 19:10:23 GMT Trader blows €100m hole in Nasdaq's Nordic power market http://implode-explode.com/viewnews/2018-09-15_Traderblows100mholeinNasdaqsNordicpowermarket.html One of Norway's richest men has blown a hole of more than €100m in a stability fund that ensures the safety of derivatives-trading in European electricity markets.Coming in the same week as the 10th anniversary of Lehman Brothers' collapse, the trading losses will focus attention on the robustness of standards promoted by policymakers globally after the financial crisis.Einar Aas, a private trader who has been among Norway's highest earners in recent years thanks to aggressive bets in European power markets, saw his positions collapse on Monday after extreme market moves in German and Nordic energy markets.Nasdaq, the principal trading exchange where futures contracts tied to physical energy markets in the Nordic region are transacted, said Mr Aas had defaulted on Tuesday after he was unable to meet margin calls at its clearing house on lossmaking trades.

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Nasdaq cut the entire trade on Wednesday and the exchange confirmed that the loss accounted for all of the exchange's own default fund of €7m and swallowed €107m, or two-thirds, of its €166m mutual default fund that clearing house members must contribute to.

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With Nasdaq and members of its clearing house repairing the damage, questions as to how a single trader could come close to wiping out the clearing house's layers of protection will merit the attention of regulators, including the European Central Bank.Members of the clearing house include some of the biggest banks and energy traders such as Morgan Stanley, UBS and Equinor, Norway's state oil company... .The catalyst for the trading loss was a series of backfiring bets on the price difference between German and Nordic power markets, according to multiple sources in the industry.

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iehi-feed-64206 Thu, 13 Sep 2018 16:19:50 GMT Pro-Marijuana Candidate Keeps Having Bank Accounts Closed http://implode-explode.com/viewnews/2018-09-14_ProMarijuanaCandidateKeepsHavingBankAccountsClosed.html iehi-feed-64204 Tue, 11 Sep 2018 15:35:33 GMT American Homeownership At 35-Year Low And Plummetting http://implode-explode.com/viewnews/2018-09-11_AmericanHomeownershipAt35YearLowAndPlummetting.html iehi-feed-64203 Mon, 10 Sep 2018 23:40:15 GMT Forget the stock. Tesla's bonds are imploding http://implode-explode.com/viewnews/2018-09-11_ForgetthestockTeslasbondsareimploding.html $1.8 billion of Tesla bonds due in August 2025 plunged to a record low on Friday. The bonds traded for just 84 cents on the dollar, down from 98 cents a year ago. The yield, which moves opposite price, almost doubled over that span to 8.6%.

The action in the bond market signals mounting worry about the high-wire act at Tesla. Elon Musk is scrambling to ramp up Model 3 production fast enough to turn a profit -- and use that money for looming debt payments.

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More than $9 billion of Tesla's debt is scheduled to mature before 2025, including a total of $2.7 billion this year and next, according to a Goldman Sachs research report that called the company's balance sheet "concerning."

"Tesla is extremely leveraged. They have a gun to their heads dictated by the timing of the debt payments," said Cowen's Osborne, who has an "underperform" rating on the stock.

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iehi-feed-64202 Mon, 10 Sep 2018 21:07:23 GMT Elon Musk smoking weed has much more dire consequences than you realize http://implode-explode.com/viewnews/2018-09-11_ElonMusksmokingweedhasmuchmoredireconsequencesthanyourealize.html I want to be clear. This isn't about whether or not Elon puffed weed. Honestly, who cares. It's just a plant. What's important is that this is more demonstrably erratic and manic behavior from the visionary founder. He's just showing A LOT of inconsistencies.

And in addition to Tesla, the government is gunning for Zuckerberg and Facebook. Snapchat is proving to be a disastrous investment (down nearly 65% from its IPO). WeWork bonds just got downgraded to junk... We're starting to see major cracks in tech investors' faith.

This is a MAJOR turn that's taken place over the last couple of months. And if tech stocks go down, the market is going with it. Tech stocks, in particular "FAANG" stocks -- Facebook, Amazon, Apple, Netflix, Google -- have been holding this market up for a long time. Tech stocks have been responsible for around 95% of stock market gains this year.

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In addition to investor's losing faith, the government is also breathing down the necks of these tech giants... Senator Bernie Sanders introduced the cutely named Stop Bad Employers by Zeroing Out Subsidies Act (aka Stop BEZOS Act) that aims to tax companies for low-wage employees receiving government assistance.

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And now companies are viewing their visionary founders as liabilities... Apparently investors and boards have woken up to the fact that these guys are fallible (and mortal), so there's more talk of key man risk insurance should anything happen to them.

It's been nothing but buttercups and unicorns for tech stocks these past few years. And these recent developments go to show you, everything moves in cycles. And we may be entering a downcycle in tech.

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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-64200 Mon, 10 Sep 2018 18:21:39 GMT Trump's latest boast about the economy isn't even close to accurate http://implode-explode.com/viewnews/2018-09-11_Trumpslatestboastabouttheeconomyisntevenclosetoaccurate.html The overall US economy grew at a 4.2% annual rate in the second quarter. Unemployment was between 3.8% and 4% during the quarter, and it came in at 3.9% in August. That's all good news.

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But Trump got it wrong -- way wrong -- when he said it hasn't happened in a century. In the last 70 years, it's happened in at least 62 quarters, most recently in 2006.

Yes, and this is assuming GDP won't simply get revised down...

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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-64191 Sun, 09 Sep 2018 14:40:55 GMT The Bitcoin Boom Reaches a Canadian Ghost Town http://implode-explode.com/viewnews/2018-09-09_TheBitcoinBoomReachesaCanadianGhostTown.html