Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-63158 Wed, 18 Oct 2017 17:24:38 GMT Cohn: Overseas Cash Could Be Used For Stock Buybacks (I.E. CONTINUED PROPPING) http://implode-explode.com/viewnews/2017-10-18_CohnOverseasCashCouldBeUsedForStockBuybacksIECONTINUEDPROPPING.html iehi-feed-63157 Wed, 18 Oct 2017 16:43:15 GMT Ray Dalio's Shorting The Entire EU; Derivs-Clearing Could Be EU's Brexit Achilles Heel http://implode-explode.com/viewnews/2017-10-18_RayDaliosShortingTheEntireEUDerivsClearingCouldBeEUsBrexitAchill.html Great compilation today by Raul Illargi. On the derivatives-clearing issue:

Calling into question the continuity of tens of thousands of derivative contracts , [Carney] stated that it was "pretty clear they will no longer be valid", that this "could only be solved by both sides" and has been "underappreciated" by Europe . Carney had a snipe at Europe for its lack of preparation "We are prepared as we should be for the possibility of a hard exit without any transition...there has been much less of that done in the European Union."

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Shifting clearing of euro-denominated derivatives from London to the European continent would require banks to set aside far more cash to insure trades against defaults, a cost that would be passed on to companies, a global derivatives industry body says. [..]The London Stock Exchange's subsidiary LCH currently clears the bulk of euro-denominated swaps, a derivative contract that helps companies guard against unexpected moves in interest rates or currencies.

And on Dalio's bets against the Eurozone:

Dalio doesn't call the bluff of Italy, and this is not just like George Soros' shorting the British pound in 1992, he's calling out the entire EU and its financial system. He's saying I don't believe you can keep up the charade. He's making a mockery of Mario Draghi's "whatever it takes".

So what are Rome, Brussels and Frankfurt going to do? They can't ignore the no. 1 hedge fund forever. They will have to pump money into Italy, in large amounts. Merkel won't like that, neither will her new coalition partner FDP, and the Bundesbank may start legal action.

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Bridgewater didn't enter that theater for nothing. $1.85 billion is not chump change for them. Intesa Sanpaolo CEO Carlo Messina may have said that Dalio will lose his bets, but according to the IMF Italy's non-performing loans levels were €356 billion at the end of June 2016, which is 18% of total loans for Italian banks, 20% of Italy's GDP and one-third of total Eurozone NPLs. Intesa Sanpaolo holds a nice chunk of that.

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iehi-feed-63156 Wed, 18 Oct 2017 14:41:00 GMT How money will divide Europe after Brexit http://implode-explode.com/viewnews/2017-10-18_HowmoneywilldivideEuropeafterBrexit.html iehi-feed-63154 Wed, 18 Oct 2017 14:20:45 GMT Gloom Boom & Doom Editor Faber Goes "Boom" With Racist Outburst http://implode-explode.com/viewnews/2017-10-18_GloomBoomDoomEditorFaberGoesBoomWithRacistOutburst.html iehi-feed-63153 Tue, 17 Oct 2017 19:26:29 GMT Asset Prices & Monetary Policy in an Irrational World - Whalen http://implode-explode.com/viewnews/2017-10-17_AssetPricesMonetaryPolicyinanIrrationalWorldWhalen.html As with many other sectors, in large-cap financials there was little excitement, no alpha -- just slightly higher loss rates on loan portfolios that are growing high single-digits YOY.  Yet equity valuations are up mid-double digits over the same period. 

The explanation for this remarkable divergence between stock prices and the underlying performance of public companies lies with the Federal Open Market Committee.  Low interest rates and the extraordinary expansion of the Fed's balance sheet have driven asset prices up by several orders of magnitude above the level of economic growth...

Stocks, commercial real estate and many other asset classes have been vastly inflated by the actions of global central banks. Assuming that these central bankers actually understand the implications of their actions, which are nicely summarized by Greenspan's remarks some 20 years ago, then the obvious conclusion is that there is no way to "normalize" monetary policy without seeing a significant, secular decline in asset prices.

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iehi-feed-63152 Tue, 17 Oct 2017 19:19:22 GMT Why Have Investigations of Wall Street Disappeared from Corporate Media? http://implode-explode.com/viewnews/2017-10-17_WhyHaveInvestigationsofWallStreetDisappearedfromCorporateMedia.html As recently as two months ago, the Wall Street Journal's editorial board was again attempting to write a revisionist history of the criminal conduct on Wall Street that led to the 2008 financial crisis -- the greatest economic bust in America since the Great Depression. Under the subhead "Bankers haven't gone to jail because they haven't committed crimes," the editorial board wrote....

Again, the Wall Street Journal is seriously out-of-touch with its beat. In order "to prove a crime," the U.S. Justice Department has to actually use one of the many weapons in its arsenal -- like subpoenas and wiretaps. That didn't happen because President Barack Obama put the wrong men in charge at the Justice Department. Again, that intrepid reporting didn't make its way into the public domain via the Wall Street Journal but via the PBS program, Frontline, and producer Martin Smith. The 2013 program indicated that there wasn't even a pretense of a real investigation by the Justice Department against the biggest Wall Street banks.

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The lurking danger for shareholders and investors and U.S. taxpayers is that systemic contagion is once again building up among the handful of mega banks on Wall Street that control an obscene share of the nation's deposits and assets. Ferreting out that information and bringing it to the front page may not be popular with Wall Street advertisers or their legions of lawyers. But it's essential to maintaining an engaged, free press.

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iehi-feed-63151 Tue, 17 Oct 2017 19:06:44 GMT Varoufakis tells Macron to adopt the ‘empty-chair' tactic http://implode-explode.com/viewnews/2017-10-17_VaroufakistellsMacrontoadopttheemptychairtactic.html iehi-feed-63149 Tue, 17 Oct 2017 16:45:02 GMT What Debt Crackdown? China's Banks Are Binging on Bonds http://implode-explode.com/viewnews/2017-10-17_WhatDebtCrackdownChinasBanksAreBingingonBonds.html China's banks are still bingeing on short-term financing, defying analyst predictions that they would wean themselves off such debt as regulators intensify a crackdown on leverage.

Sales of negotiable certificates of deposit -- a key funding source for medium and smaller banks -- surged 49 percent from a year ago in the third quarter to a record 5.4 trillion yuan ($819 billion), according to data compiled by Bloomberg... China's deleveraging looms large in debt-market dynamics these days, with government bond yields at two-year highs and the one-week Shanghai Interbank Offered Rate not far from the most expensive since 2015. Still, officials are also trying to keep the economy humming: they've tweaked the rules governing NCD issuance, but haven't shut off the taps as credit growth accelerates.

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The certificates -- which have been used by lenders to finance purchases of each other's wealth-management products -- came under regulatory scrutiny last year, when they started to serve as a source of leveraged bond investments for some institutions. In August, the People's Bank of China asked lenders with more than 500 billion yuan of assets to classify the debt as interbank liabilities from next year. This is seen effectively capping sales.

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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-63146 Mon, 16 Oct 2017 17:04:17 GMT HSBC Tries To Sell Stake in Times Square Office Tower, Once Lost By Macklowe, for $445M (VALUED ABT. $250 mln in 2010) http://implode-explode.com/viewnews/2017-10-16_HSBCTriesToSellStakeinTimesSquareOfficeTowerOnceLostByMacklowefo.html

According to The Real Deal, "The 44-story tower was built in 1990 as the headquarters of German publisher Bertelsmann. In 2006, Vornado Realty Trust bought the retail space for $260 million. A year later, Harry Macklowe paid the Blackstone Group $830 million for the office portion of the property. Macklowe lost the property to his lender, Deutsche Bank, which sold it to CBRE Global Investors."

... In 2010, a 49 percent stake in the property was purchased by HSBC, in a deal that valued the office space at $520 million. Then in 2011 the remaining 51 percent was acquired in a deal valuing it at $660 million, respectively. Adobe Systems, Viacom, Verizon, Pillsbury Winthrop and Duane Morris are among the tenants of the building.

We expect the results will not be great. The commercial market is definitely on the rocks, and an office tower just a flew blocks north of Times Square -- recently financed -- is already distressed (reported a few months ago).

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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-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-63141 Sun, 15 Oct 2017 17:37:53 GMT The land of the permanent renter:  More single family homes are now rentals with households moving less http://implode-explode.com/viewnews/2017-10-15_ThelandofthepermanentrenterMoresinglefamilyhomesarenowrentalswit.html 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-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.

...

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.

...

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-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-63132 Fri, 13 Oct 2017 17:05:11 GMT Investors Head to Houston to Buy From Panicked Homeowners http://implode-explode.com/viewnews/2017-10-13_InvestorsHeadtoHoustontoBuyFromPanickedHomeowners.html Schild stops by a ranch-style house where 74-year-old Paul Matlock lives with his wife, disabled from multiple sclerosis. Matlock is desperate to leave and is considering Schild's offer of $120,000--half the home's value three weeks earlier. A half-dozen other investors have made offers, one as low as $55,000. "The whole thing makes me feel like there's a bunch of vultures sitting on my back fence," Matlock says. "They're waiting for the dead body to fall over."

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The cycle begins with small-time investors such as Schild, who's bought more than 30 waterlogged houses for an average $175,000 apiece. Then Wall Street swoops in. Gary Beasley, former chief executive officer of Waypoint Homes, also sees an opportunity. He's pitching private equity firms and pension funds on the potential profit in buying flooded homes, repairing them, and renting them back to homeowners.

Bain Capital LP and billionaire Marc Benioff, co-founder of Salesforce.com Inc., are backing Beasley's two-year-old company, Roofstock Inc. It runs a website where investors can buy and sell single-family rental properties. Beasley thinks owner-occupants may be interested in selling there, too, and that flooded neighborhoods are the Next Big Thing. "It's much like the housing crisis, when the institutional guys came in to buy homes nobody wanted," he says. Like other investors, Beasley and Schild view themselves as helping homeowners to move on and Houston to rebuild.

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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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