Wednesday, April 10, 2013

Today's links

Today's quote:

The US kill rate in the 1950-53 Korean War equaled more than one 9-11 every day, day after day, for the whole 1100 day war. US people had a scar from one 9-11.  So what kind of war scars do Koreans have?...

If we really want more rights for the people of the DPRK then we should stop pointing a gun at their head....Stansfield Smith, North Korea’s Justifiable Anger, counterpunch

1---My Cohort Believes QE Only Benefits the Nation's Wealthiest, Forbes

There was plenty of lively controversy– consternation and even angry shouting at a midtown New York restaurant last night as two hedge fund mavens, two immensely successful internet investment services, a closely-followed fixed income adviser and two journalists met to hash over the economic and market controversies of our day.

To my way of thinking, there was just about unanimous opinion that Ben Bernanke’s 4 years of quantitative easing (QE) had for the most part benefited only the nation’s wealthiest cohort– without doing much practically to create more jobs for ordinary people.

At least one participant was strident about phasing out QE and letting interest rates begin to rise, arguing vociferously that QE was just the most recent terrible major policy making mistake for America. The yelling across the table rose several pitches at this moment. One closely followed blogger of sharp wit and tongue was clear that Messrs. Bernanke, Paulson and Geithner should have let the insolvent giant banks fail rather than stabilizing them with cheap money.

2---The great rotation; "This won't end well", WSJ

The so-called Great Rotation – this notion that bond investors would flee to the higher yielding equities market – hasn’t exactly panned out as expected. Yes, after several years of outflows, equity funds have seen inflows this year. But the money hasn’t come at the expense of the bond market, as MarketWatch’s Mark Hulbert pointed out this morning on the Markets Hub.

Looking at the Fed’s latest flow of funds report, and data culled from TrimTabs, Hulbert said it appears that the money going into equities is being redirected from money that previously was going into CDs and bank deposits. Bonds are still seeing inflows. This is, in fact, a not-exactly unexpected result of Fed policy: more money going into riskier assets like equities as yields on any “safe” investments are driven into the ground.

“The co-conspirator in all of this is the Federal Reserve,” Hulbert said. It’s taken years for investors to get over their fears of the stock market, and while it appears to be happening, it’s coming at the expense of household savings, not bonds. The fact that it’s coming at the expense of current income, and the history of stock flows – the most money seems to pour in right at market tops – means this is “probably not a story that’s going to end well,” Hulbert said.

3---BBC on Child Poverty in the US, naked capitalism

4---Syrian Rebel Faction Merges With al-Qaeda in Iraq, antiwar

5---Documents show Homeland Security spies on peaceful demonstrators, RT

6---Japan: Taking QE to a whole new level, sober look

7---On the other hand, loan demand remains strong, Forbes

With the bulls running, issuers flooded the zone to refinance seasoned loans and finance dividends. Leveraged loan volume climbed, therefore, to a post credit crunch high of $185 billion between January and March. Most of this issuance, however, was churn. Refinancings, in fact, accounted for nearly two-thirds of the total. As a result, the loan market’s technical equation tilted further in favor of issuers as we discuss in the slides ahead.

8---'Blind to the Obvious' in Europe, cal risk

Bill McBride at Calculated Risk is puzzled (for good reason). Maybe puzzled is the wrong word. He sees what's going on, but others appear "blind to the obvious" (or they're serving some other purpose):
This is an actual quote today from the German Finance Minister Wolfgang Schauble:
"Nobody in Europe sees this contradiction between fiscal policy consolidation and growth,” Schauble said. “We have a growth-friendly process of consolidation, and we have sustainable growth, however you want to word it.”
Obviously there is a contradiction between "fiscal policy consolidation and growth". And not everyone is blind to the obvious - some people in Europe see the obvious contradiction (just look at the data).
And a "growth friendly process"? "Sustainable growth"?  Nonsense. Maybe Schauble should look at the data (here is the eurostat data on GDP and unemployment.
Comment: Obviously Schauble is the worst kind of policymaker. He believes in "austerity ├╝ber alles" and can't be swayed by the results. Very sad. ...

9---We have all the conditions to see a further decrease in interest rates during the period 2008-2013, VOX

 related theory is that emerging economies’ citizens find it difficult to diversify the huge risk inherent in their fast-growing but volatile environments, and feel particularly vulnerable as a result of weak social safety nets. So they save massively. ...

Interest rates should be seen as the price that clears a market where the supply of funds (saving) meets the demand for funds (investment).

10--From Mexico, Some Lessons for Europe, NYT

Tweak a few of the details and Mexico in the 1980s looks a lot like most Southern European countries today. In Mexico’s case, runaway government spending in the 1970s, fueled by high oil prices and greased by foreign debt, threatened to bankrupt the country after the Fed sharply raised interest rates to curb rampant inflation in the United States, increasing Mexico’s interest payments even as oil prices crashed to earth.
Similarly, money poured into Spain and Greece when investors persuaded themselves that the bonds of all members of the euro zone should be as safe as Germany’s, the region’s most creditworthy country. In Greece, this allowed a government spending binge. In Spain it ignited a housing bubble. Both countries were left with an unbearable burden when the world economy hit a wall, creditors took flight and the money stopped.        ...
But the most relevant parallel is one that European leaders refuse to see. If there is one overwhelming lesson from the debt crisis that struck Mexico and other Latin American countries so hard three decades ago, it is that countries that cannot grow will not pay. It is up to creditors, too, to allow them to grow. It took Mexico and its lenders seven years to figure that out. The European crisis is in its fifth year. You would think they might have learned something by now, but no.....
This must sound familiar to Europe’s unemployed. If anything it’s far worse there. The Greek economy has shrunk more than a fifth over the last five years. Government debt amounts to about 170 percent of the economy; it was 100 percent when the crisis started. The economies of Ireland, Portugal, Spain and Italy are smaller, too, than they were five years ago. Their debt burden is heavier. And still, European leaders insist that more of the same must be the solution.
The refinance index also turned around, increasing 6% after falling 6% a week ago.
Meanwhile, the purchase index inched down 1% compared to a slight increase last week.
"Although total purchase application volume fell last week, there was a significant divergence between the conventional and government markets," said Mike Fratantoni, MBA’s vice president of research and economics

12---North Korea’s Justifiable Anger, counterpunch

The US kill rate in the 1950-53 Korean War equaled more than one 9-11 every day, day after day, for the whole 1100 day war. US people had a scar from one 9-11.  So what kind of war scars do Koreans have?

Would the US government and people get a little “irrational” if a foreign country that previously had killed millions of our people, sent nuclear capable stealth bombers off the coasts of New York City, Washington DC, Houston, Miami, Los Angeles, San Francisco, there to fly around for a month in preparation for a possible nuclear attack on us? For what is called, in warped US language, war “games”?

The US may have killed 20% of the population of Korea, said General Curtis Lemay, who was involved in the US air war on Korea. If so, that is a higher rate of genocidal slaughter than what the Nazis inflicted on Poland or the Soviet Union. The Korean War may be unknown ancient history to us, but it is no more ancient history to Koreans than the Nakba is to Palestinians.

North Korea knows that history, and it is warning the US they know what to expect and are arming themselves to prevent it. Are the DPRK leaders “paranoid” or taking justifiable precautions?

What kind of deranged people call war preparations a “war game”? North Korea doesn’t think it’s a “game.” Over 4 million died in the last war to reunify their country that the US divided. If men had an annual rite called “group rape games” wouldn’t we think it a criminal misogynist pathology, and wouldn’t women be justified in being outraged and arming themselves in self-defense?

13---Japan's big leak, IFR

14---Fitch says banks in China are "significantly exposed" to shadow financing, IFR

15---Housing's Big Challenge: $1 Trillion in Student Debt, CNBC

total student loan balances nearly tripled between 2004 and 2012, according to a new survey from the Federal Reserve Bank of New York. Now $1 trillion in collective student loan debt is directly affecting the housing recovery.
"Short term, you see a decrease in the number of first-time home buyers," said Brian Coester of Coester Valuation Management. "You're going to see somebody who would have been able to afford a more expensive house maybe go for the lower version or the downgraded version."
First-time home buyers usually make up over 40 percent of the home buying population, but their share has hovered at or below 30 percent during this recovery, according to the National Association of Realtors. The student debt burden has kept many potential buyers out of the market, either forced to rent or to move back in with their parents, like Sophia Chaale.

16---Home Builder Stocks Soar as Housing Battles Back, CNBC

Housing demand is suddenly roaring back, and the nation's home builders are rushing just to keep up. New orders are soaring, as supplies of existing homes continue to plummet.
Stocks of the big builders, which surged even before real recovery began, continue to rise, up nearly 54 percent from a year ago. With room to grow, and after a decade lull, more builders are now going public...

But not all are bullish on the builders, especially those that concentrate in the formerly hard hit housing markets like Arizona and California. Inventories are low in these states and prices are surging largely because of huge investor demand for foreclosed properties. With a strong, new single family rental market, investors rushed in and are cashing in on rents, but some say that demand is already starting to ease.
"Despite multi-billion dollar buying sprees by well-funded Wall Street hedge funds, real estate investors bought fewer properties in 2012 than they did in 2011, which was a record year for investors. Investment-home sales declined 2.1 percent to 1.21 million from 1.23 million in 2011, but those sales had been well under a million during the market downturn," according to a new survey from the National Association of Realtors.
Meanwhile, previously surging single family rents are flattening...

In Phoenix—like Las Vegas, Florida, the Inland Empire, Central Valley et al—we now have a rental supply glut," said Mark Hanson, a California-based housing and mortgage analyst.
"Wherever the institutional money has gone in and ravaged is high risk for housing investment or building. These regions have become highly volatile speculative regions in which prices can rise 20 percent one year and fall 15 percent the next. The insti's have turned these markets into something I have never seen before...more like high-beta, speculative, volatile tech stock markets than housing markets." ...
If investors hold and rent the homes, recovery will continue apace, but if sentiment shifts, and investors see bigger returns in sales than rents, the game could turn quickly.

17---The only increase in housing demand is coming from investors, oc housing

As I’ve repeated many times, owner occupant demand is showing no signs of life. If not for investor demand, the housing market would still be languishing with prices and sales volumes lingering at the bottom. However, both prices and volume are up, and those who want that outcome have investors to thank for it...

The increase in demand we are seeing in Orange County is entirely investor driven. DataQuick reported that absentee buyers set a new record of 31.4% of all sales. The monthly average since 2000, when the absentee data begin, is 17.9 percent. The NAr reports a similar trend on a national level....

While private equity hedge funds have invested a great deal of money, it pales in comparison to the banks. Banks are the largest players in the REO-to-rental space.
Investors are concentrating on markets that have cheap housing and where job growth—and rental demand—is revving up. A year ago, Phoenix became the hottest target, and with prices there up by 20% since early last year, investors have raced to find similar discounts in other metro areas. …
Las Vegas properties are up substantially over the last year as well

18---Detroit emergency manager prepares to attack pensions, wsws

19---The brutal face of neocolonialism in Afghanistan, wsws

US imperialism is not in Afghanistan to fight terrorism—that pretext has been thoroughly exploded as Washington has allied itself with Al Qaeda-linked militias in wars for regime change in Libya and Syria—nor to bring “light” to the Afghan people. It intervened there, as in the Middle East and Africa, to assert Washington’s hegemony against its European and Asian rivals—particularly China—in geo-strategically vital, energy-rich regions of the world.

While the Obama administration has announced a formal deadline of the end of 2014 for the withdrawal of all US troops from Afghanistan, it is negotiating with the regime of President Hamid Karzai to keep thousands of troops and US bases in Afghanistan indefinitely. This force is to include both special operations commandos to continue hunting down and killing those who resist US domination, as well as trainers and advisors to direct Afghan puppet forces and of course air power to continue the kind of bombing raids that killed the 11 children in Kunar province last Saturday.

Washington aims to keep Afghanistan as a base for what the Pentagon terms “power projection” into the Caspian Basin with its vast oil and gas reserves and against both Russia and China. Contained within this strategy are the seeds of a far wider and more catastrophic global conflict.

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