Wednesday, April 23, 2014

Today's links

"If you want to understand the policy of a country, look at the map.”   Napoleon Bonaparte

1---China's Largest Manager Of Bad Debt On The Economy: "Grim And Complicated", zero hedge

As Bloomberg reports, new nonperforming loans amounted to more than 60 billion yuan ($9.6 billion) in the first two months of this year, compared with 100 billion yuan for all of 2013, China Business News reported on April 9, citing people it didn’t identify.

The economic indicators we’ve seen so far are quite disappointing and repayment risks are rising across sectors from property to small businesses due to weak demand,” Rainy Yuan, a Shanghai-based analyst at Masterlink Securities Corp., said by phone.

Banks will be hit in such an operating environment...
The business environment this year has been “grim and complicated” as lenders face pressures on asset quality, liquidity and lending margins...
China’s bad-loan ratio rose “significantly” in the first quarter, increasing risks for the nation’s banking industry...
2---Fed’s Wealth Effect: Richest 200 Moguls Made $13.9 Billion Today , Testosterone Pit

This is the Fed’s “wealth effect,” on a daily basis, as seen from the top. It’s a construct that the Greenspan Fed conjured up out of thin air and presented to the incredulous American people as a valid economic theory. Bernanke then promoted it to the Fed’s stated raison d’être. His theory: if we immensely enrich during years of bailouts, money-printing, and interest rate repression the richest few thousand people in the world, everyone would be happy somehow.

And so central bankers, with glowing support from the bondholder bailout organ, the IMF, inflated by hook or crook and for over five years the prices of assets that these chosen few were holding, and they gave them free money to acquire every asset insight and drive up values even further. It all worked out wonderfully and like clockwork for over five years, and the numbers of this “wealth effect” are truly impressive as we can see above. The only thing that Bernanke regretted not doing, based on his own admission, was to explain the whole noble construct to the American people.

3---Moving in with parents becomes more common for the middle-aged , LA Times

The number of Californians 50 to 64 who live in their parents' homes has surged in recent years, reflecting the grim economic aftermath of the Great Recession.

4--The Future of the Captured State, project syndicate

5---Deflation Is About to Wallop Europe, gary shilling

6--New Home Sales Collapse To 8 Month Lows, zero hedge

New Home Sales collapsed 14.5% month-over-month to its lowest since July 2013. A mere 384k versus 450k expectations is the biggest miss since July. So much for the Spring buying season... This is a 7 standard deviation miss against the smart economists' estimates! Whocouldanode that when the free-money sponsored fast money leaves the game that real people with real debt and real wages are simply priced out of buying a new home? Supply of unsold new homes jumps to 6 months, its highest since Oct 2011

7---California Foreclosure Starts Hover Near 8-Year Low, dataquick

8---Existing home sales fall three months in row, USA Today
Sales of existing homes slowest since July 2012

The housing market continued to sputter in March as adverse weather, low supplies and higher costs discouraged home buyers.
Existing home sales declined 0.2% to a seasonally adjusted annual rate of 4.59 million, the lowest level since July 2012, the National Association of Realtors said Tuesday. Home sales have fallen in seven of the past eight months.

Other factors are also holding down sales. The average 30-year fixed mortgage rate is at 4.27%, low by historical standards but up from about 3.4% a year ago. And higher home prices and a tight supply of homes for sale discouraged some buyers, NAR said.
There was a a 5.2-month supply of homes last month, up from a five-month supply in February, but six months is normal. Some of the tight inventory is welcome as the housing market recovers from the 2006 crash. Distressed homes, including foreclosures and short sales, accounted for 14% of sales in March, down from 21% a year ago.
Still, the market was a bit firmer than expected. Economists' median estimate was for an annual sales rate of 4.57 million, according to Action Economics' survey...

But tight supplies limit selection and push up prices, crimping sales. The median price of a single-family home was $198,200 last month, up 7.4% from March 2013.
Another obstacle is that first-time buyers are making up an unusually low share of purchases — 30%, down from 40% traditionally — largely because of strict credit standards.

9---Inequality in Well-Being, House of Debt

“The post-recession reality is that the customer base for businesses that appeal to the middle class is shrinking as the top tier pulls even further away. If there is any doubt, the speed at which companies are adapting to the new consumer landscape serves as very convincing evidence. Within top consulting firms and among Wall Street analysts, the shift is being described with a frankness more often associated with left-wing academics than business experts. ‘Those consumers who have capital like real estate and stocks and are in the top 20 percent are feeling pretty good,’ said John G. Maxwell, head of the global retail and consumer practice at PricewaterhouseCoopers.”....

Aaron Cobet of the Bureau of Labor Statistics used information from the Consumer Expenditure Survey to plot the following chart, which measures the change in annual expenditures for the richest and poorest Americans between 2008 and 2012.


As it shows, spending increased the most from 2008 to 2012 for the richest households in the United States. So stronger income growth for rich Americans from 2008 to 2012 has translated into stronger spending growth as well. A working paper by Barry Cynamon and Steve Fazzari shows similar results.
The chart above is consistent with this fantastic New York Times article written by Nelson Schwartz earlier this year. He reports that high-end hotels and casinos that target rich customers are doing much better than mid-scale hotels. Retailers aimed at the middle class, such as Sears and J.C. Penney, are suffering while high end retailers such as Nordstrom are doing great.

10---New home sales plummet 14.5% in March, HW

Spring buying season off with a whimper

Sales of new single-family homes in March plummeted 14.5% to a seasonally adjusted annual rate of 384,000, hitting the lowest level since July 2013, the U.S. Census Bureau reported Wednesday.
The March drop in new home sales was a year-over-year drop of 13.3%. The report showed there were drops in three of four U.S. regions.
The March results were well below analyst expectations. The report can be read here.
Home sales have been tepid in market facing rising interest rates, investor-driven home price increases, declining inventory, a rising affordability gap and the much tighter lending standards imposed on the industry

11---Bond Bubbles? Dean Baker

First, I was surprised to read that the size of the U.S. bond market is almost $40 trillion, which the piece rightly points out is considerably larger than the $28 trillion stock market or the $20 trillion housing market. When I checked the source for this number I discovered that the figure referred to the total size of the debt market, not just longer term debt that we would typically refer to as "bonds." The FiveThirtyEight figure includes 90-day T-notes and money market funds.

This is not just a question of semantics. Longer term debt (with a duration of five years or more) has large fluctuations in value in response to a change in interest rates. The price of shorter debt will also vary, but the size of the changes is trivial by comparison. This means that if we are worried about a bubble inflating bond prices, we should really only be looking at longer term debt. The size of this market would be roughly half as large, or less than $20 trillion. That's still big, but a considerably smaller basis for concern than the piece implies.

More importantly, the room for losses in this market is not nearly as large as it was in the case of the stock or housing bubbles. The stock market lost more than half of its value from its 2000 peak to its 2002 trough. House prices lost more than one third of their real value from the 2006 peak to the 2011 trough. By contrast, it is difficult to envision a scenario where the bond market loses even 10 percent of its value....

Lower interest rates certainly help the economy, but does anyone believe that investment would freeze up or that housing construction would plummet if the interest rate on long-term debt rose by a percentage point from current levels? In short, the only reason to be concerned about a bubble in the bond market is that influential people are apparently taking the risk seriously and could pressure the Fed to needlessly raise interest rates and cause more unemployment.

12---Kiev must immediately deescalate east Ukraine crisis, call back troops - Moscow, RT

Kiev authorities must “immediately” deescalate the situation in southeast Ukraine by withdrawing its troops from the region, Russia’s Foreign Ministry has said, adding that Kiev must start nationwide talks and stop “distorting” the Geneva agreement.
“The Russian side once again insists on an immediate deescalation of the situation in the southeast of Ukraine, the withdrawal of divisions of the Ukrainian Army and the start of a real inter-Ukrainian dialogue including all the regions and political entities of the country,” the Foreign Ministry said in a statement on its website.

Moscow is “surprised” by Kiev’s interpretation of the four-sided Geneva agreement adopted by Russia, Ukraine, the US and the EU on April 17, it added.
Despite the call for disarmament of “all the illegal armed groups” specified by the agreement, Kiev, Washington and a number of European leaders “keep harping on the necessity to ‘hand over weapons’ [referring] only to the Ukrainian citizens defending their rights in southeastern Ukraine.” With that, the Western powers “are turning a blind eye to the ongoing provocative actions of the gunmen of the far-right groups, including that of the so-called Right Sector.”

13---Lavrov: Kiev issued 'criminal order' allowing use of weapons against civilians, RT

The coup-appointed Kiev government’s order to use force against Ukrainian citizens is “criminal,” the Russian Foreign Minister told RT. He also denied claims that there is Russian military presence on Ukrainian territory.
In an interview with RT’s Sophie Shevardnadze, Sergey Lavrov called acting Ukrainian President Alexander Turchinov’s order to reinitiate an anti-terror operation in East Ukraine, a criminal act.
Referencing the four-sided talks between the EU, the US, Russia and Ukraine that took place in Geneva on April 17, Lavrov accused Kiev’s coup-appointed government of going back on its pledge to put a stop to all violence.

“In Geneva we agreed there must be an end of all violence. Next afternoon [interim Ukrainian President Aleksandr] Turchinov declared almost a state of emergency and ordered the army to shoot at the people.”
Turchinov announced the resumption of the anti-terrorist operation in eastern Ukraine on Tuesday. Moscow has decried the operation and urged the Ukrainian government to refrain from using force on civilians living in the region.
The Russian Foreign Minister said the buildup of troops on the border with Ukraine was within the bounds of international law and denied the presence of Russian troops in East Ukraine. Lavrov said the troops were participating in routine military drills, something that has been verified by international inspectors.
Describing a worst case scenario in the Ukrainian crisis, Lavrov said Russia would be forced to respond if it were attacked.

“If we are attacked, we would certainly respond. If our interests, our legitimate interests, the interests of Russians have been attacked directly, like they were in South Ossetia for example, I do not see any other way but to respond in accordance with international law,” he said.

“Russian citizens being attacked is an attack against the Russian Federation,” he told RT...

There is no reason not to believe that the Americans are running the show,” said Lavrov, referencing US Vice-President Joe Biden’s visit to Kiev and its coincidence with the renewed counter-terror operation on activists in eastern Ukraine.

“It’s quite telling they chose the moment of the Vice President of the US’ visit to announce the resumption of this operation because the launching of this operation happened immediately after [head of the CIA] John Brennan’s visit to Kiev,”
said Lavrov.
The situation in Ukraine is just another example of Washington trying to gain ground in the geopolitical fight, the minister said.
“Ukraine is just one manifestation of the American unwillingness to yield in the geopolitical fight. Americans are not ready to admit that they cannot run the show in each and every part of the globe from Washington alone,” said Lavrov, adding Washington’s “ready-made solutions” cannot remedy a crisis that it does not understand.

14---Ukraine President Vows New Offensive Against East , antiwar 

15---New York Times propaganda photos on Ukraine exposed, wsws

Today, the lies the Times is palming off as news could provoke a war with Russia, a nuclear-armed power. By fabricating evidence of Russian involvement in east Ukraine, the Times was providing political ammunition for calls in Ukraine and in the Western imperialist powers for a military crackdown against protests in east Ukraine, a region with a large Russian population. This could lead to a military intervention by Moscow in eastern Ukraine to break up the crackdown, and a clash between Russia and Ukraine drawing in the Western powers......

In publishing the false allegations, the Times worked closely with the US government, which received the photos from the unelected pro-US regime in Kiev and “endorsed” them before passing them on. At a press briefing, however, US State Department spokeswoman Jen Psaki, whom the New York Times quoted in its article, indicated that the administration was well aware that the photos did not constitute proof of what was being claimed.
Pressed about whether she was certain the pictures showed individuals linked to Russia, Psaki replied: “What we see in these photos that have been, again, in international media, on Twitter, and publicly available, is that there are individuals who visibly appear to be tied to Russia. We’ve said that publicly a countless number of times. I will let you draw all the conclusions yourself as to whether these are individuals who look similar or not to other events.”

A journalist at the briefing objected to calling this “evidence,” and asked, “Do you think this is evidence that would stand up in a court of law?”
Psaki replied, “I don’t think it’s a legal—we’re not making a court-of-law case here. We’re just showing that this is photographic evidence that indicates the connection we’ve been talking about for weeks now.”

The journalist asked, “You think it is proof of connection, or it’s just—or you’re just alleging that it’s another sign of this?”
Psaki replied, “It’s another sign.”
In fact, the Times has worked to mislead its readers, uncritically presenting concocted photos delivered by its contacts in the State Department.

16---Kiev regime orders crackdown as US steps up threats against Moscow, wsws

 the real motivation behind the US-backed coup in Ukraine: to escalate the military encirclement of Russia, bringing NATO to its borders and eliminating Moscow as an impediment to US geostrategic hegemony over the Eurasian landmass.....

Asked by the Post whether the regime was going “to fight the terrorists,” Avakov replied, “Tomorrow the holidays will be finished and the announced Easter truce will be finished… We will act… We will start liberating people from the terrorists.”

Turchynov claimed the resumption of the crackdown was triggered by the discovery in Slovyansk of the body of a local politician and member of his own right-wing Batkivshchyna, or “Fatherland,” party, who had been abducted earlier. Another body found in the town has yet to be identified. Turchynov charged that “these crimes are being committed with the full support and connivance” of Russia....

The Kiev regime initially launched its “antiterrorist” offensive early last week, seizing control of a military airfield in Kramatorsk and sending an armored column rolling toward Slovyansk. Halted by a crowd of local people, however, the Ukrainian soldiers refused to take action against them, instead turning over their armored vehicles and weapons to anti-Kiev militiamen.
It was in the aftermath of this humiliating fiasco that the Ukrainian regime’s foreign minister joined his counterparts from the US, Russia and the European Union in drafting an agreement in Geneva to halt all violence and de-escalate tensions by disarming illegal groups, ending occupations of public buildings and spaces, freeing political prisoners and initiating a dialogue between the regions.

Shortly afterwards, the regime in Kiev added that it was observing an “Easter truce.” It was during this supposed truce that a column of four cars carrying Right Sector gunmen attacked a roadblock on the outskirts of Slovyansk on Easter Sunday, killing three local men.
It is now apparent that the Kiev regime and its patrons in Washington were only playing for time with the negotiations in Geneva. It hardly seems a coincidence that the first abortive “counterterrorist” offensive was launched after a secret visit to Kiev by CIA Director John Brennan, while the second attempt was initiated immediately after Vice President Biden’s trip to the country.

Tuesday, April 22, 2014

1---IBM End to Buyback Splurge Pressures CEO to Boost Revenue , Bloomberg

International Business Machines Corp. (IBM) is reducing stock buybacks after an $8.2 billion first-quarter splurge, putting more pressure on Chief Executive Officer Ginni Rometty to reignite sales growth or cut costs to hit her profit targets.
IBM said last week it won’t sustain its rate of share repurchases in the first quarter, when buybacks more than tripled from a year earlier to the most since 2007. The company plans to spend less than $5.8 billion total in the final nine months of this year.

Even so, IBM reported first-quarter adjusted earnings per share in line with analysts’ projections, suggesting it would have missed their profit estimates if it hadn’t been so aggressive in stock repurchases.
IBM’s sales have fallen from a year earlier for eight straight quarters
...Declining sales and rising buybacks have squeezed IBM’s free cash flow...

The repurchases, meanwhile, have taken a toll on IBM’s balance sheet.
Total debt climbed to $44 billion in the first quarter, up from $33.4 billion a year ago. IBM had a cash balance of $9.7 billion at the end of the period, down $1.4 billion from December.
During the first quarter, IBM issued $4.5 billion of new bonds, clearly used to fund buybacks, Black said. The sale included $2 billion in 3.625 percent, 10-year bonds, which paid 95 basis points more than similar-maturity Treasuries at the time, a wider spread than the extra 83 basis points of yield IBM garnered six months prior. ...

“The company tapped the bond market five different times last year, then you have a pretty sizable February issuance,” Black said in the interview. “I feel like there is investor fatigue on the name.”

2---Consumption Inequality, House of Debt

The state of the art study using the Consumer Expenditure Survey is by Attanasio, Hurst, and Pistaferri (2012). They make progress in reducing bias in the survey data by relying on a diary survey, which asks households to record their purchases meticulously for two weeks. They argue that the diary measures spending much more accurately.

When using this data source, they find evidence that there was a substantial rise in consumption inequality from 1980 to 2010. As they write: “In summary, our analysis of a variety of different data sources suggests that the well documented rise in income inequality during the last thirty years was accompanied by an increase in consumption inequality of nearly the same magnitude.” So rising income inequality is associated consumption inequality

3---WSJ/NBC News Poll;   57% believe the U.S. is still in a recession, wsj

Unease over the economy continues to drive these concerns. Sixty-five percent of those polled said the country is on the wrong track, compared with the 26% who said it was on the right one, a wider spread than in the midterm-election years of 2006 and 2010. Roughly one-quarter of the respondents think the economy will improve over the next year, while 57% believe the U.S. is still in a recession, despite years of modest economic growth and robust stock-market gains.

Recessionary Sentiment Lingers
According to Nielsen’s survey, more than half (57%) of global respondents believed their country was in an economic recession in Q4 2013, a one-point decrease from the previous quarter and a two-point decrease from the same period last year (Q4 2012).

"The U.S. junk-loan market has never fueled so much dealmaking.
A total of $85 billion of loans have been raised this year to finance acquisitions, topping 2007’s record pace, data compiled by Bloomberg show. Issuance is set to accelerate as Avago Technologies Ltd. locks in the year’s second-biggest loan for its takeover of chipmaker LSI Corp. as soon as today and Men’s Wearhouse Inc. borrows $1.1 billion to fund its deal for Jos. A. Bank Clothiers Inc.

Leveraged loans are booming as the value of takeovers in the U.S. reaches levels last seen in 2008. While regulators have warned excesses may be emerging in riskier parts of the market as the Federal Reserve’s zero-interest rate policy extends into a sixth year, the loan surge underscores renewed confidence in the ability of the least-creditworthy companies to expand as the world’s largest economy strengthens.

“There’s a lot of money waiting to be put to work,” Judith Fishlow Minter, co-head of U.S. loan capital markets at Royal Bank of Canada, said in a telephone interview from New York. “The market is exceptionally strong.”" - source Bloomberg.

5---Margin debt still exploding, macronomics

Risk: Net free credit at -$178b – exceeds extreme negative level from Feb 2000
Net free credit is free credit balances in cash and margin accounts net of the debit balance in margin accounts. At -$178b (from -$159b in January), this measure of cash to meet margin calls is at an extreme low or negative reading that has exceeded the February 2000 low of $-129b. The risk is if the market drops and triggers margin calls, investors do not have cash and would be forced to sell stocks or get cash from other sources to meet the margin calls. This would exacerbate an equity market sell-off.
- source Bank of America Merrill Lynch

Many investors hope that the central banks magician spell "Hocus Bogus" will last long enough for them to exit in both credit and equities in an orderly manner, they once again suffer from "optimism bias" we think.

"Four of the nation’s largest banks, led by JPMorgan Chase & Co., are driving a surge in borrowing from the Federal Home Loan Bank system as they raise funds to buy assets that meet new liquidity requirements.

Lending at the 12 regional Home Loan Banks rose 30 percent to $492 billion between March of 2013 and December 2013, largely the result of advances made to JPMorgan, Bank of America Corp., Wells Fargo & Co. and Citigroup Inc., according to a report released today by the Federal Housing Finance Agency Office of the Inspector General.

The concentration of Home Loan Bank lending in four large institutions could present safety and soundness risks, the report said. In addition, auditors questioned whether lenders created to support housing finance should be providing funds so banks can meet standards set under the international Basel III accord.
“The increasing use of advances by members to meet Basel III’s liquidity requirements could raise public concerns about the system’s commitment to its housing obligations,” the report said.

The Federal Home Loan Banks, established by the government in 1932 to support mortgage credit, have an implicit government guarantee, meaning that investors expect they won’t be allowed to fail. They make advances to their 7,500 member financial institutions that can be used to originate home loans or for other purposes.

Citigroup, JPMorgan, Bank of America and Wells Fargo accounted for 27 percent of total advances from the Home Loan Banks at the end of 2013, up from 14 percent the year before, the report said. Lending to JPMorgan increased the most, to $61.8 billion in December 2013 from $13.3 billion in March 2012." - source Bloomberg.

U.S. mortgage lending is contracting to levels not seen since 1997 -- the year Tiger Woods won his first of four Masters championships -- as rising interest rates and home prices drive away borrowers.
Wells Fargo (WFC) & Co. and JPMorgan Chase & Co., the two largest U.S. mortgage lenders, reported a first-quarter plunge in loan volumes that’s part of an industry-wide drop off. Lenders made $226 billion of mortgages in the period, the smallest quarterly amount since 1997 and less than one-third of the 2006 average, according to the Mortgage Bankers Association in Washington.

Lending has been tumbling since mid-2013 when mortgage rates jumped about a percentage point after the Federal Reserve said it might taper stimulus spending. A surge in all-cash purchases to more than 40 percent has kept housing prices rising, squeezing more Americans out of the market. That will help push lending down further this year, according to the association.

“Banks large and small are going to have to adapt to a new reality because mortgage origination volumes going forward aren’t going to support the big businesses they’ve had in place for the last few years,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. “They’re going to have smaller, leaner operations, and we’re seeing them make that shift.”

At Wells Fargo, home-loan originations exceeded $100 billion for seven straight quarters, ending in June 2013. The figure plunged to $36 billion in the three months through March, the San Francisco-based bank said April 11.

8--The  US pays 75 percent of NATO's defense, wsws

Deutsche Welle added: “According to insiders, the US has complained that it foots 75 percent of NATO's defense budget; in recognition of that, the US expects that its European partners—in particular, Germany—will help finance Ukraine as its rebuilds its economy.”....

Lavrov further warned: “Those who are deliberately pursuing a civil war, in a possible attempt to start a big, serious bloody conflict, are pursuing a criminal policy. And we will not only condemn this policy, but will also stop it.”...

“Before giving us ultimatums, demanding that we fulfill demands within two or three days with the threat of sanctions, we would urgently call on our American partners to fully accept responsibility for those whom they brought to power,” Lavrov said at his press conference. He said all attempts to isolate Russia would fail, because Russia is “a big, independent power that knows what it wants.”

This bravado notwithstanding, the truth is that the government of President Vladimir Putin, which represents the interests of the corrupt and grasping oligarchy that seized control of former state property in the wake of the Soviet Union’s dissolution, is desperately seeking some means of accommodation with US and German imperialism that would still allow it to preserve Russia’s most elemental security interests.

Putin’s problem is that Washington has no interest in such an accommodation. Rather, it is determined to escalate economic and military pressure with the ultimate aim of eliminating Russia as an impediment to US global hegemony and reducing its territories to a group of dismembered semi-colonies.

9---Amateur Hour In Ukraine, eric Margolis

Speaking of history, it’s also worth recalling past efforts to weaken Russia by detaching Ukraine, its most important center of agriculture and coal. In 1917, after the collapse of the Romanov dynasty, Russia sued for peace. The result was the rapacious Treaty of Brest-Litowsk in which the Germany and Austria stripped away Ukraine, parts of today’s Romania, and the Baltic states from Russian control.

Ukraine was briefly independent during the 1920’s Russian civil war. Stalin crushed Ukraine’s independent farmers, murdering 6-7 million in a 1930’s holocaust. To no surprise, invading German troops were greeted as liberators by many Ukrainians. But Hitler decided to turn Ukraine into Germany’s granary and its people into serfs.

The US and NATO are now trying to impose a second Brest-Litowsk on Russia. Without Ukraine, Russia can not return to being a world power. Stalin undid Brest-Litowsk. Vlad Putin is determined that the punitive eastern version of the “Versailles Treaty” will not be again imposed on Mother Russia. Pity the poor Ukrainians caught between the crushing millstones of East and West.

10--More War Lies Sold By the Same Lying Liars, Big Picture

Just like the “aluminum tube” story that justified killing so many Iraqis and the “vector analysis” that almost unleashed a devastating U.S. bombing campaign on Syria, the Times’ “green men” piece may be the prelude to a bloodbath in eastern Ukraine.
The powers-that-be are desperate for a war to distract the population.

11--Foreclosures: 7 million and counting, Dr Housing Bubble

If a foreclosure happens in the wilderness, does it make a sound? It seems like people have conveniently forgotten that since the housing crisis hit we have witnessed more than 7,000,000+ foreclosures. Do you think these people believe the Fed is almighty and can stop a speeding train or turn water into wine? Apparently some people forget that the Fed failed to prevent the tech bust or the housing bust in the first place. Now, the Fed is somehow the cult leader and the leader will not let housing values fall. The nation still has 9.1 million seriously underwater homeowners on top of the more than 7 million that have gone through foreclosure. It is abundantly clear that the mindless drivel of “buying is always a good decision” is just that. Investors are starting to pull back in expensive states because value is harder to find. I see the lemmings at open houses and you can see the drool at the side of their mouths hoping for a morsel of real estate. The Fed, for better or worse, has turned us all into speculators. Simply putting your money in a bank is a losing battle because inflation is eroding your buying power. Yet wages are not keeping up. What you have is people competing with investors, foreign money, and a market with low inventory and trying to guess the next move from the Fed. Yet the tech bust and housing crash (keep in mind these happened only since 2000) were major events not prevented by the Fed....

It helps to understand that many foreclosures are happening because people are spread thin. People are still maxed out. Unlike big banks with sophisticated deals and systems in place, most households are living paycheck to paycheck even those with higher incomes. First, take a look at some foreclosure history:
Print this chart out and just remember that housing is a big freaking purchase
If the trend is so obvious and clear, why do we see low volume in housing sales?
existing home sales
Existing home sales are down more than 35 percent from their peak reached in 2006. Our population is growing and prices are going up. Yet the push for higher prices has come from Wall Street, low rates, and normal buyers competing with the investor group. A big question that many are wondering is what will happen when big money starts to flow out of real estate. We are starting to find out slowly. Rates are also likely to go up – so for those that believe the almighty Fed can do anything they should listen to their leader that is utterly telling the market rates will go in one direction....
What we don’t have to guess on is that this recent trend has made it tougher for first time buyers:
First-time home buyers are a small portion of the market today because of investors crowding them out. We also have a large number of young ones living in the basement of their parent’s granite countertop sarcophagus....

7 million foreclosures and currently 9.1 million seriously underwater home owners. It should be apparent that when it comes to buying a house, you really need to run the numbers. Investors have and they are pulling back from certain markets.

Monday, April 21, 2014

Today's Links

1---Retail Store Closures Soar In 2014: At Highest Pace Since Lehman Collapse, zero hedge

From Credit Suisse's Michael Exstein

Since the start of 2014, retailers have announced the closure of more than 2,400 units, amounting to 22.6 million square feet, more than double the closures at this point in 2013 ..... We expect this trend to continue as Office Depot evaluates its real estate in the wake of its merger with OfficeMax. Even dollar stores and drug stores, which combined have consistently built out hundreds of stores per year, are beginning to reel back on expansion, with Family Dollar and Walgreens both planning to shutter  underperforming stores.

2---Is This What a Credit Bubble Looks Like?, zero hedge

There’s been some buzz recently about a pick-up in business lending. The six largest banks increased business loans at an average annual rate of 8.5% in the first quarter, according to a Wall Street Journal report last week. Other first quarter data reported by the Fed shows commercial and industrial loans jumping 12% from last year. Charles Schwab’s chief strategist went so far as to call a chart depicting the Fed’s broader lending data “the most important chart in the world.”

Unlike some pundits, though, we’re not convinced that a surge in business credit is such a good thing. We don’t doubt that more lending to small businesses, in particular, might do some good if it doesn’t go too far. Lending to large corporations, on the other hand, is a different story. Corporations are already borrowing at a pace that’s only before been seen near cyclical peaks:

debt to asset 1

At over 4% of GDP, you might say that borrowing is too high, not too low, especially as this pace never lasts long. The bigger issue, though, is that companies are choosing not to invest borrowed funds back into their businesses. You may have seen recent posts by David Stockman or Tyler Durden, breaking down financial statements for IBM, in particular. They showed that IBM’s borrowing in recent years was matched almost exactly by stock buybacks. Clearly, this isn’t the kind of borrowing that helps the real economy, and IBM’s not alone.

3---Americans Continue to Enjoy Saving More Than Spending, Gallup
Gap largest among lower-income Americans and Southerners

WASHINGTON, D.C. -- The majority of Americans continue to enjoy saving money more than spending it, by 62% to 34%. The 2014 saving-spending gap is the one of the widest since Gallup began tracking Americans' preferences in 2001
Trend: Americans' Enjoyment of Saving and Spending
These results are from Gallup's April 3-6 Economy and Personal Finance poll...
The majority of Americans continue to report enjoying saving more than spending. However, this trend is not necessarily indicative of actual behavior. While the number of Americans to report greater enjoyment of saving has been increasing in recent years, so has personal consumption. Although Americans, since 2009, have been significantly more likely to enjoy saving, or perhaps more likely to feel guilty about spending, their views have not been evident in their real-world behavior.

This disconnection between desired state and actual behavior could have significant implications.
On a macro level, economists would typically view increases in personal consumption as a positive sign of an improving economy. But if the increases in spending are occurring out of necessity, not desire, and Americans take on more debt or deplete their savings, the picture may not be quite as rosy. Data from the U.S. Department of Commerce show that the 2013 average personal savings rate was 4.5%, the lowest since 2007 and low historically. The U.S. average personal savings rate in the 1970s was 11.8%, 9.3% in the 1980s, and 6.7% in the 1990s.

Stagnant wage growth and the overall sluggish recovery from the Great Recession perhaps have contributed to decreasing personal savings. While Gallup data indicate a stronger preference to save than to spend, in reality Americans seem to be having difficulty putting together a safety net. This has more than likely contributed to the lingering pessimism about the U.S. economy.

4--Is America an Oligarchy?, New Yorker

5---Japan’s Trade Deficit Widens as Export Growth Weakens: Economy , Bloomberg

6---Blame Robert Rubin for the GFC, guardian

Wall Street deregulation pushed by Clinton advisers, documents reveal
Previously restricted papers reveal attempts to rush president to support act, later blamed for deepening banking crisis

Wall Street deregulation, blamed for deepening the banking crisis, was aggressively pushed by advisers to Bill Clinton who have also been at the heart of current White House policy-making, according to newly disclosed documents from his presidential library.
The previously restricted papers reveal two separate attempts, in 1995 and 1997, to hurry Clinton into supporting a repeal of the Depression-era Glass Steagall Act and allow investment banks, insurers and retail banks to merge.

7--The state of mortgage lending, wsj

8---Risk of Stock Pullback Continues , wsj

9--Banks Cling to Bundles Holding Risk, NYT

Recall that the Volcker Rule was intended to bar banks with insured deposits from making large and risky trading bets. The rule was lawmakers’ attempt to reinstate some of the taxpayer protections lost when Congress gutted the Glass-Steagall Act in 1999.....

Mr. Volcker is right. Issuance of these instruments, strong last year, is even stronger now. Through April 16, over $32 billion in C.L.O.s have been issued this year, up from $29 billion during the same period last year, according to S&P Capital Insight’s Leveraged Commentary & Data. In March, issuance of C.L.O.s was the highest in any month since 2007 and April is on track to being the biggest month ever....

Their big bank brethren do, however. Regulatory filings from year-end 2013 show that 52 banks held an estimated $81 billion in C.L.O.s. Small institutions, those with less than $50 billion in assets, held only $5.4 billion, the filings show. By contrast, JPMorgan Chase, Wells Fargo and Citibank held almost $60 billion altogether, or three-quarters of the total.....

Some $431 billion worth of C.L.O.s are currently outstanding, according to the most recent figures from the Securities Industry and Financial Markets Association. Roughly $150 billion worth were issued before 2009. That group represents the riskiest securities in the asset class, regulators say. Another $150 billion in C.L.O.s, issued after 2009, contain fewer problematic assets; those remaining, raised after the pending Volcker Rule restrictions had been announced, are viewed by regulators as the least risky of all.

Insurance companies, pension funds and foreign banks own most C.L.O.s. But large United States banks hold an estimated $75 billion worth, and would have to divest many of them under the Volcker Rule. Being forced to sell these holdings is what the banks find objectionable.
Under the rule, banks are not allowed to have ownership stakes or relationships with hedge funds or private equity firms. Many C.L.O.s are issued and overseen by hedge funds and private equity firms, though, making C.L.O.s just the kind of trading vehicles the Volcker Rule intended to exorcise from bank balance sheets.

10---Amateur Hour In Ukraine, smirking chimp

it’s also worth recalling past efforts to weaken Russia by detaching Ukraine, its most important center of agriculture and coal. In 1917, after the collapse of the Romanov dynasty, Russia sued for peace. The result was the rapacious Treaty of Brest-Litowsk in which the Germany and Austria stripped away Ukraine, parts of today’s Romania, and the Baltic states from Russian control.

Ukraine was briefly independent during the 1920’s Russian civil war. Stalin crushed Ukraine’s independent farmers, murdering 6-7 million in a 1930’s holocaust. To no surprise, invading German troops were greeted as liberators by many Ukrainians. But Hitler decided to turn Ukraine into Germany’s granary and its people into serfs.

The US and NATO are now trying to impose a second Brest-Litowsk on Russia. Without Ukraine, Russia can not return to being a world power. Stalin undid Brest-Litowsk. Vlad Putin is determined that the punitive eastern version of the “Versailles Treaty” will not be again imposed on Mother Russia. Pity the poor Ukrainians caught between the crushing millstones of East and West.

11--Ukraine's Neo-Nazi Imperative, smirking chimp

The new role for the neo-Nazi militias was announced last week by Andriy Parubiy, head of the Ukrainian National Security Council, who declared on Twitter, “Reserve unit of National Guard formed #Maidan Self-defense volunteers was sent to the front line this morning.”

Parubiy is himself a well-known neo-Nazi, who founded the Social-National Party of Ukraine in 1991. The party blended radical Ukrainian nationalism with neo-Nazi symbols. Parubiy also formed a paramilitary spinoff, the Patriots of Ukraine, and defended the awarding of the title, “Hero of Ukraine,” to World War II Nazi collaborator Stepan Bandera, whose own paramilitary forces exterminated thousands of Jews and Poles in pursuit of a racially pure Ukraine.

In the hasty structuring of the post-coup government in February, part of the compromise with the ascendant neo-Nazis was to give them control of four ministries, including Parubiy in the key position heading national security. To give him loyal and motivated forces to strike at the pro-Russian east, he incorporated many of the storm troopers from his Maidan force into the National Guard....

But Kristof appears to be readying his New York Times readers to support the violent crushing of the popular resistance in eastern Ukraine, which was President Yanukovych’s political base. Kristof is a renowned R2Per, urging a “responsibility to protect” civilians from government force, but his sense of responsibility appears to be highly selective, fitting with his favored geopolitical priorities.
More broadly, the U.S. news media’s hiding of Ukraine’s neo-Nazis has become a near obsession, indeed, done in greater uniformity across the mainstream press and even much of the blogosphere than the misguided consensus on Iraq’s WMD in 2002-03 that led to the disastrous Iraq War.

From a purely news point of view, you might think the inclusion of Nazis in a European government for the first time since World War II might make for a good story. But that would go against the preferred American narrative that the protesters in the Maidan were peaceful and idealistic – and that they were set upon by the evil Yanukovych who simply fled because he could no longer withstand their moral pressure.
Left out of this narrative is that Yanukovych signed an agreement on Feb. 21 brokered by three European governments in which he agreed to reduce his powers, accept early elections to vote him out of office, and – most fatefully – pull back the police. It was then that the neo-Nazi militias, from western Ukraine and organized in 100-man brigades, attacked the few remaining police, seized government buildings and sent Yanukovych and many of his officials fleeing for their lives.

12--Japan March trade deficit jumps 300% to record $14.1 bn, RT

13--Shootout in Slavyansk, wsws

On “Meet the Press,” Yatsenyuk called for a military escalation against Russia. “It’s crystal clear that Russia is the threat, the threat to the globe, and the threat to the European Union and the real threat to Ukraine,” he said. “[Russian President Vladimir] Putin has a dream to restore the Soviet Union,” Yatsenyuk continued, “and every day he goes further and further. And God knows where the final destination is.”
Pressed by NBC’s David Gregory to ask the Western powers to send weapons to bolster his regime’s armed forces, Yatsenyuk asked for help rebuilding Ukraine’s economy and military
This aggressive and provocative policy, centered on the standoff in eastern Ukraine between pro-Russian protesters and the military and fascist paramilitary forces of the unelected regime in Kiev, is inflaming tensions throughout Europe. Late Saturday and early Sunday, pro-regime forces attacked armed pro-Russian protesters who had set up roadblocks outside Slavyansk, killing at least one protester. A number of pro-regime fascists were also killed or wounded.

One of the pro-regime fighters killed in Slavyansk carried a badge of the fascist Right Sector militia, which led the February putsch that installed the current regime in Kiev.
“The personal belongings of a militant killed in the skirmish included a Right Sector badge number 20,” said Vyachaslav Ponomarev, the leader of Slavyansk’s pro-Russian forces. “Badge number one is held by [Right Sector leader Dmytro] Yarosh.”

A week ago, Yarosh called for the “total mobilization” of the Right Sector fascists to crush opposition to the Kiev regime....

Surveying US policy towards Russia, the New York Times wrote on Sunday: “Just as the United States resolved in the aftermath of World War II to counter the Soviet Union and its global ambitions, Mr. Obama is focused on isolating President Vladimir V. Putin’s Russia by cutting off its economic and political ties to the outside world, limiting its expansionist ambitions in its own neighborhood and effectively making it a pariah state.”

14---America’s hungry 21st Century, wsws
21 April 2014
Feeding America, the US national network of food banks, released its annual report on local food insecurity Thursday, showing that one in six Americans, including one in five children, did not have enough to eat at some point in 2012.
The report found that there are dozens of counties where more than a third of children do not get enough to eat. The incidence of hunger has grown dramatically. The percentage of households that are “food insecure” rose from 11.1 percent in 2007 to 16.0 percent in 2012.

15---Big Banks Ramp Up Business Lending, wsj
Increase Driven by Loosening Lending Standards

Banks are boosting their lending to businesses, providing fuel for companies to increase spending on workers and equipment as the economy improves.
The rise is being driven both by banks, which are loosening their lending standards, and companies, which are seeking more money, bank executives said.


» and Wells Fargo & Co., show a 8.3% increase in commercial loans outstanding in the first quarter from the same period a year earlier.
The results suggest companies are getting more confident about the economy after years of sluggish growth, and are anticipating interest rates might start to climb from rock-bottom levels.

Thursday, April 17, 2014

Today's links

1---U.S. States Revive Debtors’ Prisons, firedog lake

More and more states have revived the debtors prison, albeit in a specific form, locking people up for failure to pay court costs and fees. Like so many other things in America, shortfalls in budgets are made up not by raising taxes (or heaven forbid, fiscal prudence) but by new arrays of costs and fees paid by people in the criminal justice system. We are not referring to fine or penalty (ex. speeding ticket=$250) here, but to that thing the judges say on TV– “Guilty, with a fine of $300 and court costs. Next case please.”
The new costs can be dizzying...

The reality in America is that far too many people go to jail as punishment for not paying the fees and court costs incurred finding them already guilty of something else. One is left with a tough conclusion: we are more and more a crude, course society on path towards some sort of feudalism, where the rich (if ever brought to court at all) pay their money and walk out, while poor people are punished for no valid reason. We as a society want to set examples, clear the streets of our lowers, punish those who aren’t able to pay the government for giving them their day in court. That’s who we are now. And you better pay your bills.

2---Housing bubble bursts, Testosterone Pit

“Lately on Saturdays and Sundays, you see open house signs everywhere,” Carey Chenoski, a real estate agent in Redlands, told the LA Times. “The houses that last spring would be gone in the first day are sitting maybe 60 days.” That’s at the low end. At the high end, at prime beachfront locations in Manhattan Beach, the wealth effect runs the show. Agents are getting “multiple offers on just about everything,” said Barry Sulpor, with Shorewood Realtors. “The market is really on fire.”

In the nine-county Bay Area, the median price paid for a home in March jumped  to $579,000, up a bubblelicious 23.2% from a year ago, the highest since December 2007, according to DataQuick. In my beloved San Francisco, the median price jumped 14.6% to $937,500. In Solano County, the “cheapest” county in the Bay Area, the median price soared 30.4% to $300,000.

Alas, sales plummeted 12.9% to 6,308 houses and condos in the Bay Area, the worst March since 2008, and the second-worst in the history of the data series going back to 1988. And the debacle was concentrated at the lower end: while sales of homes over $500,000 rose 5.2%, sales of those under $500,000 collapsed by 32.9%
Some analysts, tired of looking silly blaming the weather, started blaming low inventories. So inventories were flat in the 19 markets overall compared to March last year; no reason for plunging sales. In Boston, Portland, and Austin inventories dropped. But in the cities where the sales plunge has been particularly nasty, inventories skyrocketed: up 41.9% in Phoenix, 28.9% in Ventura, 25.7% in Riverside, 24.8% in Los Angeles, 23.1% in Sacramento, 21.3% in San Diego.
And the number of new listings across the 19 markets rose by 6.3%, the first year-over-year growth in March in three years. The usual suspects in California saw the largest jump, with listings in Ventura up 13.1%. But they were up elsewhere too: in Long Island 12.7%, in Las Vegas 11.9%, in Chicago 10.6%, in Phoenix 7.8%, etc.
You get the idea: rising inventories, rising new listings, soaring prices, and plunging sales. Something has to give.

3---Putin Says Russia Will Respond To NATO Moves, Accuses Kiev Of Plunging Ukraine Into "Abyss, zero hedge

Russia must respond when NATO moves closer to country’s border, President Vladimir Putin says during annual televised call-in show.....

"Instead of realizing that there is something wrong with the Ukrainian government and attempting dialogue, they made more threats of force ... This is another very grave crime by Kiev's current leaders," Putin said in a televised question-and-answer session with the Russian public that has become an annual event.

"I hope that they are able to realize what a pit, what an abyss the current authorities are in and dragging the country into," said Putin, who dismissed as "rubbish" accusations that Russian agents were acting in east Ukraine
Russia must respond when NATO moves closer to country’s border
  • U.S. anti-missile system isn’t defensive, Putin says

  • 4---'Secular Stagnation or Secular Boom?', economists view

    Antonio Fatás:
    Secular stagnation or secular boom?: The notion that some countries are caught in a long and protracted period of low growth ... has been labeled "secular stagnation". The pessimism that the idea of secular stagnation has created has been reinforced by the notion the potential for emerging markets to grow is becoming weaker. ...
    Let's start with a simple chart that summarizes the pattern of annual growth in ... advanced and emerging markets...

    ... So stagnation might be the right label for 50% of the world, but accelerating growth is the right label for the other half.
    And if we look at the engines of growth, in particular investment rates (in physical capital) we can see again the divergence in performance.

    ... Looking at the above charts... Could it be that investment opportunities in emerging markets moved capital away from advanced economies? Not obvious because we know that the explosion in investment rates in emerging markets came in many cases with even larger increases in saving rates and (financial) capital flew away from these countries. In fact, interest rates in the world were trending downwards during this period. And this makes the performance of advanced economies even more surprising: despite a favorable environment in terms of low interest rates, investment and growth declined.

    5---The impending housing collapse, alhambra

    I speculated in May last year that the introduction of the taper concept was in large part due to what Jeremy Stein articulated in February 2013, namely the idea that certain “markets” were becoming overheated in the “reach for yield.” In essence, it amounted to an attempt to “talk down” assets, chief among them the raging price appreciation once again in housing. The inflation of home prices in 2012 and to that point in 2013 actually worked out to be at a faster pace, more importantly without interruption, than anything we saw during the main housing bubble in the middle of the last decade, so that certainly provides some solid context if indeed the FOMC discussions tended in that direction.
    ABOOK Feb 2014 Home Sales Prices Y-Y
    I’m sure some will make the argument that was simply markets recognizing “value” after the bust, but you would expect a far more widespread participation if that was actually the case

    In any event, the future path of housing in the US is not bright, intent or not:
    ABOOK Apr 2014 RE Constr Bank Originations
    LA Times:
    “Prices have gotten to the stage where we cannot buy a house, renovate it, rent it and still make a reasonable return,” said Peter Rose, a spokesman for Blackstone, which owns roughly 41,000 rental houses nationwide. “There was a moment in time where it made sense.”
    Among the 20 firms buying the most California real estate since January 2012, purchases are down more than 70% compared with last year in each of the last four months, according to DataQuick. At the 20 biggest foreclosure buyers, including arms of Blackstone and Colony American Holdings, purchases have fallen at about the same rate.
    Blackstone’s acquisition pace has declined 70 percent from its peak last year, when the private equity firm was spending more than $100 million a week on properties, said Jonathan Gray, global head of real estate for the New York-based firm.
    American Homes 4 Rent and Colony American Homes, the second- and third-largest single-family landlords, also have been scaling back as bargains dry up. Home prices have risen 24 percent since a post-bubble low in March 2012, which was about when corporate buyers started their buying spree, according to the S&P/Case-Shiller index. 

    6---Putin on Kiev op: 'Tanks, jets against own people?! Are they nuts?!, RT

    7---'How can I trust him?' Putin reveals NATO chief secretly recorded their talk, leaked to media, RT

    8--Mass spying on citizens in Russia impossible unlike in US — Snowden-Putin, itar tass

    9---Four-party meeting approves document on deescalation of tensions in Ukraine, Itar Tass

    Four-party meeting has approved a document on deescalation of tension in Ukraine, Russian Foreign Minister Sergei Lavrov said. The Geneva statement calls for national dialogue in Ukraine, Lavrov emphasized.
    Russia, US, EU urge all sides in Ukraine to refrain from violence, the Russian foreign minister stressed.

    Russia will support OSCE (Organization for Security and Cooperation in Europe) mission in Ukraine towards dialogue, Lavrov noted.
    All illegal armed groups in Ukraine must be disarmed, he added. “The steps that must be taken include the following: all illegal armed groups must be disarmed, all administrative buildings must be returned to their legitimate owners,” Lavrov said after four-party talks on Ukraine in Geneva. “All protesters must be amnestied except for those who committed grave crimes,” he stressed.
    A four-party meeting on Ukraine with Russia, the United States and the European Union was held in Geneva on April 17.

    Russian Foreign Minister Sergei Lavrov, US Secretary of State John Kerry, EU foreign policy chief Catherine Ashton and the parliament-appointed Ukrainian acting Foreign Minister Andrii Deshchytsia took part in the meeting.

    10--Are We Headed for a Credit Market Crash?, House of Debt

     11--Kiev's grip on eastern Ukraine weakens as pro-Russians seize army vehicles, Guardian
    He added: "I'm against America. But I have to say they make good guns."

    What was meant to be a show of strength by Ukraine's army has instead shown how the country is unraveling

    For Kiev's beleaguered army it was meant to be a display of strength. Early on Wednesday a column of six armoured personnel carriers trundled through the town of Kramatorsk, in eastern Ukraine. Some 24 hours earlier Ukrainian soldiers had recaptured a small disused aerodrome. Their next target appeared to be Slavyansk, the neighbouring town, occupied by a shadowy Russian militia. Was victory close?
    The column didn't get far. At Kramatorsk's railway junction, next to an open-air market and a shop selling building materials, an angry crowd caught up with it. Next armed separatists dressed in military fatigues turned up too. Within minutes the Ukrainian soldiers gave up. Without a shot being fired they abandoned their vehicles. The pro-Russian gunmen grabbed them. They raised a Russian tricolour. They sat on top and went for a victory spin....

    Within minutes, the captured APCs had become the town's newest, most extraordinary tourist attraction. Teenage girls posed coquettishly with the men in balaclavas. Small children lined up too. Someone put a cuddly toy next to a gun barrel. "We were very afraid. Now we are reassured. The tanks are here to protect us," Olga Yuriyevna said. She added: "I'm Russian-speaking. We have relatives in Russia. My husband fought in the Afghan war."...

    This febrile anti-Kiev mood has acquired a momentum that increasingly seems unstoppable. A vocal section of the population appears to support the protesters' key demand for a referendum on Ukraine's federalisation. A "people's governor" has been appointed – though it is not clear by whom. Many local politicians, the security services in key eastern towns and the police appear to have gone over to the anti-government side. Kiev's powerlessness in this fast-moving drama seems absolute.
    On Wednesday another gang of armed youths seized control of the city hall in Donetsk. Other pro-Russian activists have occupied Donetsk's regional administration building since 6 April. (They have fortified it with a thicket of tyres. On one wall someone had scrawled in Cyrillic script: "Fuck America".)

    12--America the corrupt, counterpunch

    All US financial markets are rigged for the benefit of a few. We have had the exposure of high frequency trading front-running buy and sell orders. We have had the exposure of the big banks rigging the LIBOR interest rate and the London gold price fix. We have had the exposure of the Federal Reserve rigging via its dependent bullion banks the price of gold in the futures market. We have had the exposure in Congressional hearings of the rigging of metal and commodity prices. The dollar’s exchange value is rigged.  And so forth.  Yet no heads have rolled. Recently a SEC prosecuting attorney, James Kidney, retired. Upon his retirement, he proclaimed that his cases against the criminal big banks have been suppressed by SEC higher ups who have their eyes fixed on big jobs with the banks they are protecting while in government service.
    So there you have it. The United States government is so overwhelmingly corrupt that even the financial regulatory agencies have been corrupted by the money of the private capitalists they are supposed to regulate.
    America the corrupted.  That is what we have become....

    How much longer will dumbshit americans fall for the flag-waving deception?

    The Republicans used the wars in order to create huge budget deficits and national debt that are now being used to dismantle the social safety net, including Social Security and Medicare. There’s talk of privatizing Social Security and Medicare. More profits for Oligarchs in the offering. The gullibility of the American population is really without compare.

    The gullibility of the American public will doom the world to extinction

    15--Ukraine: OSCE - Right Sector Fascists Deploy To Donetsk, Moon of Alabama

    There was some conflict in Mariupol with three Ukrainians ending up dead after protesters went to a military base. There are some videos but it is unclear what actually happened. There is a chance that provocateurs were involved.
    The OSCE has an observer mission in Ukraine. From their latest (April 15) report:
    The Lviv Team was told by Right Sector activists that they had begun recruiting for their paramilitary structure on 14 April. They said that approximately 100 paramilitaries had already been deployed to Donetsk region and were being trained in the eastern part of the country. One of the paramilitaries seen in Lviv was wearing a new military uniform, including a flak jacket, but carried no weapons. There was a demonstration in Kyiv in support of Ukraine’s unity, attended by approximately 400people, about two thirds of whom were members of the Self-Defence force. The Team observed around 50 people armed with iron bars, baseball bats or makeshift clubs. Some protesters demanded the resignation of Interior Minister Avakov and more decisive action by the Kyiv authorities in Eastern Ukraine.
    Lviv is in west Ukraine and the center of the Ukrainian fascists. That these deploy to Donetsk is a real concern that could lead to serious escalations...

    Oh, and there are the real poll numbers now in the new narrative. From the link above.
    It is thus not surprising that, when questioned about the Soviet past or about support for European or Russian alignment in the present, the country cleaves sharply, and consistently, along regional lines. According to a recent poll, the idea of joining NATO is popular only in western Ukraine (64 percent in favor). It is deeply unpopular in the south (11 percent in favor) and the east (14 percent in favor). Much the same is true for membership in the European Union. If the matter were up for a referendum, which it will not be anytime soon, 90 percent would vote yes in the west, 29 percent would vote yes in the south, and 22 percent would vote yes in the east. Perhaps looking for a silver lining to the Russian invasion, some observers maintained that the Russian occupation and annexation of Crimea would change those attitudes -- after all, the stability and protection that Europe would offer starts to look better when your neighbor invades -- but the regional divides are remarkably durable. Even surrounded by battle-ready Russian forces and at risk of annexation, southerners and easterners seem more interested in having the Russian military protect them from NATO than they are in having NATO protect them from Russia.

    Wednesday, April 16, 2014

    Today's Links

    1---EZ Deflation Alert, Reuters

    2---As growth slows, Bank of Japan “opens spigot” to the rich, wsws

    The Japanese economy slowed markedly in the final quarter of 2013, pointing to an unraveling of Prime Minister Shinzo Abe’s much-vaunted “Abenomics.” Statistics released last week revealed that GDP grew by only 0.3 percent (1.2 percent annualised) for the quarter—less than half the expected 0.7 percent. Overall growth for 2013 was just 1.6 percent. The slowdown reflected weakening exports, private consumption and corporate capital spending.
    After coming to office in December 2012, Abe proclaimed that his economic policy, dubbed Abenomics, had three “arrows.” The first was an unprecedented monetary easing policy to double Japan’s monetary base over 21 months, from its initiation in April 2013. As with the US “quantitative easing” program, the Bank of Japan (BOJ) pumps 60 to 70 trillion yen ($US585 to $680 billion) annually into the economy, mainly through government bond-buying. The central bank is aiming to achieve 2 percent inflation and end more than a decade of deflation. The second “arrow” involved a modest stimulus spending program.
    The final “arrow” consisted of anti-working class “structural reforms.” These are yet to be announced in detail, but the general aim is to further dismantle job security and undermine wages and working conditions while cutting corporate taxes. At the World Economic Forum last month in Davos, Abe indicated that this was in store when he boasted of carrying out pro-market reforms previously thought impossible. A “new dawn [is]... breaking over Japan,” he declared, promising that “companies ... will find Japan among the most business-friendly places in the world.”

    3---Abenomics Rout Makes Stocks Cheapest Versus Bonds, Bloomberg

    Abe has yet to take new pro-growth steps even as the economy faces the sharpest quarterly contraction in three years after a sales-tax increase

    4---Japan’s GDP back to peak levels: Auto sales and Toyota benefit , market realist

    5---Japan bond market liquidity dries up as BOJ holding hits 200 trln yen, Reuters

    6--The Greek economy lies in ruins, RT

    The Greek economy lies in ruins. After six years (yes, six years!) of depression, 27.5 percent of the workforce, and some 58.3 percent of youth, are unemployed. Over a quarter of the economy (26 percent) has been destroyed on the sacrificial altar of saving the flawed euro, spurring Athens’ lost decade. True, unemployment peaked nearer to 30 percent, but the economy can barely be said to be recovering with gusto… Well, unless you belong to the curious ‘troika’ tribe who promised rescue loans. Rather, their austere prescription delivered damnation

    7---US-backed crackdown threatens civil war in Ukraine, wsws

    US and European support for the crackdown makes clear that their intervention in Ukraine is not motivated by concerns for Ukrainians’ democratic rights. From the outset it has been aimed at inciting a civil war in Ukraine and producing a confrontation with Russia. Having organized a fascist-led coup in Kiev, Washington, Berlin and Brussels are now denouncing the inevitable opposition of people in eastern Ukraine as a Russian plot, and using this lie to escalate the violence....

    Washington is fully supporting this military operation backed by fascist thugs, which threatens the lives of countless thousands of civilians in eastern Ukraine.
    White House spokesman Jay Carney signaled Washington’s support for the crackdown. After cynically declaring that the United States “agreed that the use of force is not a preferred option,” he proceeded to endorse the violent attack on protesters. “That said, the Ukrainian government has a responsibility,” he declared, “to provide law and order, and these provocations in eastern Ukraine are creating a situation in which the government has to respond. Ukraine has proceeded with great caution, has for days now been offering amnesty, dialogue, has been trying to resolve these conflicts peacefully.”

    Carney made clear that the operation was directly planned and is now being carried out under the auspices of the Obama White House and the Central Intelligence Agency, whose director, John Brennan, traveled to Kiev this past weekend.
    Asked what Brennan and other US officials told security forces in Kiev, Carney replied bluntly: “We urged the Ukrainian government to move forward, gradually, responsibly, and with all due caution, as it deals with this situation caused by armed militants… Let’s be clear: the way to ensure that violence does not occur is for these armed paramilitary groups, and these armed so-called pro-Russian separatists, to vacate the buildings and to lay down their arms.”

    Carney’s praise of the Kiev regime’s “responsibility” and “due caution” as helicopter gunships were firing on the population and tanks were massing around major cities is a repulsive lie.
    General Vasily Krutov—the first deputy head of the Ukrainian Security Service (SBU), who is leading the operation—summed up the policy Brennan and other US officials undoubtedly discussed with their stooges in Kiev. Krutov threatened to “destroy” anti-government activists, stating: “They must be warned; if they do not lay down their arms, they will be destroyed.”.

    8---Bye Bye Bandar, ahram

    9---Let’s not follow Harper’s tough talk on Crimea crisis , spirit de corps

    Following the March 16 referendum in which the ethnic Russian majority voted for Crimea to become part of Russia, Ukrainian soldiers were offered the choice of returning to the mainland or changing their uniforms to join a Russian military force in the Crimea.
    Only 11 per cent chose to remain in the Ukrainian military while an astonishing 89 per cent chose to volunteer for the Russian military. Again, without a shot fired, Ukrainian navy vessels hauled down their yellow and blue flags and happily hoisted the red, white and blue Russian flag up their masts

    10--Special Report: How the Fed fueled an explosion in subprime auto loans, Reuters archive
     11--Subprime Loans Are Boosting Car Sales, Bloomberg

    ....according to Bloomberg, three-month rolling US auto sales are now only about 3% off their pre-crisis levels. On the other hand, US labour force participation is down to 63% while duration of unemployment remains fairly high.

    So, if the country’s labour force participation is at its lowest level since 1978, how can car sales be very nearly back to their boom-year levels? The answer would seem to lie in the ease with which almost anyone in the US can obtain a loan to buy a car – with a great example of this detailed in the Bloomberg Business Week article
    Subprime loans are boosting car sales

    12---About That “Surge” In March Retail Sales , Testosterone Pit

    Nevertheless, the Wall Street talking heads can’t help themselves with the constant ridiculous refrain that the consumer is back, and it's soon off the races:
    The linchpin of economic growth, the consumer, is back,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi.
    Oh, really. Real wage and salary income is only 2% above its level 73 months ago when the economy last peaked. And after a salutary rebound in the savings rate during the Great Recession, the household savings rate has been drawn down to its unsustainable bubble lows. But pettifoggers like Rupkey just keep pouring the Kool-Aid.

    So the Fed sponsored Wall Street bubble inflates to its final asymptote. When the inevitable bust occurs, it will trigger a sharp retrenchment in business inventories, investment and consumer spending, but  the usual suspects will say it's time to restart the Keynesian Clock. That being the one that is now permanently broken but never acknowledged by our rulers in the Wall Street-Washington corridor — who long ago threw sound money and the laws of economics to the winds in a desperate attempt to hang on to ill-gotten power and wealth.

    In any event, in
    today’s post by Jeffrey Snider, it is evident that we just had winter; that the three month retail spending average including the ballyhooed March bounce was the second weakest of this century, and that the fifth annual spring time leap into “escape velocity” is nowhere in sight.

    13---Russian lawmaker calls Kiev's 'anti-terrorist operation' extremely cynical, Itar Tass

    Speaker of the Federation Council's upper house of Russia's parliament Valentina Matviyenko has reiterated that Russia is insisting on a peaceful settlement of the Ukrainian crisis. Matviyenko said Kiev's decision to start an 'anti-terrorist operation' in the east of the country was extremely cynical.
    "Russia has always called for peaceful ways of settlement, and Ukrainian national dialogue, and heeding regions' opinion and civilians' demands," Matviyenko said, adding that the decision by incumbent Ukrainian authorities to use force and start 'anti-terrorist operation' against the civilian population and unarmed persons in the east was extremely cynical.

    The Federation Council speaker underlined that Moscow was trying to use all possible platforms to launch dialogue. However, she regretted the absence of response in the issue. Two weeks ago, the Federation Council had invited Ukrainian parliament speaker Oleksandr Turchynov and the Ukrainian delegation to participate in the session of the Parliamentary Assembly of the Commonwealth of Independent States due to take place in St. Petersburg later this week, in order to use this platform for dialogue, the search or peaceful solution and deescalation.

    14---The "Housing Recovery" Is Complete: Major US Banks' Mortgage Originations Tumble To Record Low, zero hedge

    15--Secular stagnation, the movie, econ view

    16---The Housing “Recovery”, House of Debt
    April 16, 2014
    New housing starts for March are out today. Rather than focus on the short-term movements, it’s worth looking at the long run. Here is the graph from

    It’s really quite an amazing graph. We are now five full years from the end of the recession (if you buy NBER dating). And housing starts are still below any level we’ve seen since the early 1990s!
    So who out there thinks we are ever going to get back to the 1.5 million annualized rate? When?
    It may be time to start taking seriously the idea that the boost to the economy from new residential construction in the long-run may be much lower than it was in the 10 years prior to the Great Recession. The anomaly is not the weakness now, but the strength in the late 1990s and early 2000s.

    March’s bond issuance was the second lowest since the early 2000′s

    March’s mortgage bond issuance was the second lowest since the early 2000’s, according to the latest Securitization Weekly report from Bank of America (BAC).
    March saw only $54 billion in mortgage bonds issued, the smallest amount since the inception of the third round of quantitative easing.
    The absence of the first-time homebuyer flags a secular shift reflective of lower affordability and tight lending standards,” Bank of America’s report states. …
    With home prices on the rise and lending standards tightening, first-time homebuyers represent less than 28% of the market, down from a 36% market share in May 2011, the analysts state.