""A liquidity trap is a situation described in Keynesian economics in which injections of cash into the private banking system by a central bank fail to lower interest rates and hence fail to stimulate economic growth. A liquidity trap is caused when people hoard cash because they expect an adverse event such as deflation, insufficient aggregate demand, or war. Signature characteristics of a liquidity trap are short-term interest rates that are near zero and fluctuations in the monetary base that fail to translate into fluctuations in the general price levels." Lawrence Summers
1---Obama's approval Hits New Low in Poll as Discontent Extends Beyond GOP, WSJ
Mr. Obama's job approval fell to 42%, with 51% of respondents disapproving of his performance as president. That marked a drop in his approval rating from 47% in early October and 53% at the end of 2012.
At the same time, more Americans now view Mr. Obama negatively than positively, for the first time since he emerged as a national political candidate.
In all, the poll of 800 Americans captured an extraordinarily deep and widespread public distaste for the two political parties, those parties' leaders and the state of politics in the nation's capital....
A majority of Americans said they belonged to neither party—a rarity in decades of Journal/NBC polling—while 30% said they would prefer an independent or third-party candidate for Congress, more than wanted to vote for a Republican candidate.
Optimism about the U.S. system of government, at 30%, was at the lowest ebb in 40 years...
There are at least glimmers of an improved attitude on a few fronts. A sharp surge in gloom from the first week of the shutdown appears to have abated, as 70% in the poll think the U.S. is on the wrong track, down from nearly 80% two weeks ago. Optimism about the economy ticked up, even though three-quarters of those polled think the outlook will stay the same or get worse in the next year.
2--Qui Bono? Who benefits from Bank of Japan's money? Testosterone Pit
More beneficiaries of Bank of Japan Money Printing: After the banks, and their massively rising profits, it's the Japanese brokerage firms that shine in the bright light of Abenomics. Much of the new money that the BOJ handed to the banks to create asset bubbles and water down the yen ended up in the stock market, stimulated trading, drove up stock valuations, and is creating asset bubbles. For the first half of the fiscal year (April through September), Nomura's profits jumped 22-fold from the same period last year to the highest level in 11 years. Profits at number two, Daiwa Securities, jumped 9-fold. It's always clear when central banks print money who wins the mostest the fastest, and it's never the real economy, which keeps lumbering along with its normal ups and downs as before.
3---The Smart Money Denies They’re The Smart Money As They Franticly Sell Their Crown Jewels Before The Bubble Blows Up , Testosterone Pit
4---Congress cuts food stamps. What it means, econbrowser
The House is seeking to cut an additional $40 billion over the next ten years, while the Senate is seeking only $4.5 billion in cuts. [1] What are the macro implications? From the Wall Street Journal:
Retailers and grocers are bracing for another drain on consumer spending when a temporary boost in food-stamp benefits expires Friday.Estimates of the multipliers for SNAP expenditures center around 1.5 [2]. While not a big amount overall, it's just one more bit of fiscal drag (and a particularly uncharitable one paid for by the lowest income groups). But I guess it's important to keep tax rates low for the top income quintile at all costs.
The change will leave 48 million Americans with an estimated $16 billion less to spend over the next three years and comes just months after the expiration of a payroll tax cut knocked 2% off consumers' monthly paychecks.
5---Barack Obama: Austerity's biggest proponent, NYT
.....few countries can match the speed with which the United States has embraced fiscal austerity. In 2013, the federal deficit shrank at its fastest pace in more than four decades, dropping to 3.9 percent of the nation’s gross domestic product, from 6.8 percent the year before, according to the Congressional Budget Office.
According to the International Monetary Fund, the general government deficit of the United States, which includes states and municipalities, will fall by about two-thirds as a share of G.D.P. from 2009 to 2014. Most of the decline will come from reductions in spending.
Not even Britain has trimmed its budget as steeply. Only Greece, Ireland and Portugal — cornered into austerity by creditors in Berlin and in Brussels demanding a cleanup from past excesses — have shrunk government spending more sharply.
Yet for all the cuts already in the bag, calls in Washington for further retrenchment remain strong. “None of us can be proud of the way we spend the money,” the Oklahoma Republican Tom Coburn said the other day from the Senate floor.
Such fiscal virtue comes at a cost. Considering the depth of the cuts, it is remarkable that the American economy did not fall off a cliff. In a sign that the United States is still much more resilient than most other advanced nations, its $16 trillion economy has managed to trundle along, overcoming austerity, the government shutdown and a brief flirtation with default. If I.M.F. forecasts hold, the American economy will grow by roughly 1.6 percent this year and add about 1.5 million jobs, significantly better than Europe and Japan.
But that hardly means no harm was done. A recent analysis by the research firm Macroeconomic Advisers estimated that cuts to discretionary government spending — roughly everything the government spends money on except for Social Security and Medicare — trimmed growth by seven-tenths of a percentage point a year since 2010, and cost some 1.2 million jobs. ...
By cutting teachers or raising taxes, reducing government transfers or trimming public purchases of goods and services, austerity shrinks the economy in the short term, often more than it shrinks the burden of public debt.....
Lawrence H. Summers, the former Treasury secretary under Bill Clinton and architect of President Obama’s initial economic program, pointed out in congressional testimony last May, the sequestration’s $64 billion in cuts this year might reduce federal debt by 0.39 percent of G.D.P. But if the G.D.P. shrinks by 0.6 percent, as estimated by the Congressional Budget Office, it will make the debt burden heavier, not lighter.
6---Obama’s Betrayal of Honduras, counterpunch
Polling data shows that 80 percent of Hondurans think they are worse off than they were four years ago, and the data backs them up. The top 10 percent got over 100 percent of all income gains in the two years after Zelaya was overthrown, sharply reversing a strong trend toward more equality during the Zelaya years. The number of people involuntarily working part time has increased by 176 percent. Poverty has also increased, whereas it had been reduced significantly under Zelaya, who raised the minimum wage by nearly 100 percent in real terms during his 3.5 years in office. Even private investment, despite the complaints of businesspeople who supported the coup, grew much faster under Zelaya than under the current regime....
The problem is that the Obama administration does not respect either the right to free elections or basic human rights in Honduras. They went through a lot of trouble in 2009 to get rid of a democratically elected president, and paid a significant political cost in the hemisphere: at the time, all of South America’s governments were hoping that Obama would be different from his predecessor and took his word that Washington would not back the coup. They were more than disappointed; the Obama administration’s support for the coup and its manipulation of the Organization of American States for this purpose led to the formation of a new hemispheric organization, the Community of Latin American and Caribbean States, which excludes the U.S. and Canada.
It feels like back to the future in bonds. A brand-new investment product will launch next week that is born of the housing and mortgage crashes but based on the same strategy that caused at least some of the crisis.
JPMorgan, Deutsche Bank and Credit Suisse will market about $500 million of the securities, said sources close to the matter. At least one of the tranches will be triple-A rated, according to sources, although ratings firms said to be involved would not comment. ...
Through its Invitation Homes, Blackstone had invested an estimated $5.5 billion in 32,000 homes, according to a KBW report in September, and has continued buying aggressively. The homes are largely in Western states, where the foreclosure crisis hit hardest.
Overall, investors have bought close to 200,000 foreclosed homes in the last few years, sinking nearly $20 billion into this new asset class. Blackstone would not comment on the bond deal, but competitors are watching closely.
"I do believe that securitization serves a great purpose if done well," said Laurie Hawkes, president and chief operating officer of Arizona-based American Residential Properties, a single-family REIT. "But I think it takes a little more development coming."
8---The meager 1.6% GDP growth in 2013 is partially self-inflicted, sober look
More evidence is emerging that the US economic activity has slowed recently. In addition to the manufacturing output decline (see Twitter chart) and slower home sales (chart), the latest private payrolls number from ADP now shows a decline in job creation.
The US is now on track to reach only 1.6% real GDP growth for 2013 - in spite of the extraordinary amount of central bank stimulus. The sad part about this weakness is that to some extent it has been self-inflicted. Policy uncertainty, including "taper"-related fears and the recent dysfunction in Washington have continued to impede growth in the United States.
The chart below shows the Conference Board's consumer confidence index
Source: ADP |
The US is now on track to reach only 1.6% real GDP growth for 2013 - in spite of the extraordinary amount of central bank stimulus. The sad part about this weakness is that to some extent it has been self-inflicted. Policy uncertainty, including "taper"-related fears and the recent dysfunction in Washington have continued to impede growth in the United States.
The chart below shows the Conference Board's consumer confidence index
The giant US banks have been bailed out again from huge potential writeoffs by loosey-goosey accounting accepted by the accounting profession and the regulators.
They are allowed to accrue interest on non-performing mortgages ” until the actual foreclosure takes place, which on average takes about 16 months.
All the phantom interest that is not actually collected is booked as income until the actual act of foreclosure. As a resullt, many bank financial statements actually look much better than they actually are. At foreclosure all the phantom income comes off gthe books of the banks.
This means that Bank of America, Citigroup, JP Morgan and Wells Fargo, among hundreds of other smaller institutions, can report interest due them, but not paid, on an estimated $1.4 trillion of face value mortgages on the 7 million homes that are in the process of being foreclosed.
Ultimately, these banks face a potential loss of $1 trillion on nonperforming loans, suggests Madeleine Schnapp, director of macro-economic research at Trim-Tabs, an economic consulting firm 24.5% owned by Goldman Sachs
10---Rep. Frank: Revamped Mortgage Rules a ‘Grave Error”, WSJ
WASHINGTON–An architect of the 2010 Dodd-Frank law is accusing federal regulators of watering down new mortgage rules in the face of opposition from the housing industry.
Former Rep. Barney Frank (D., Mass.) slammed federal regulators for their decision to dial back a proposal to impose new rules on the mortgage-securities market–a key piece of the Dodd-Frank law that bears Mr. Frank’s name.
“This is a grave error, and contrary to the assertion that it would best carry out the statutory intent, significantly repudiates it,” Mr. Frank wrote in a comment letter being sent to regulators Tuesday.
At issue is a proposal from August by six regulators — including the Federal Reserve and Federal Deposit Insurance Corp. — to revamp proposed rules requiring issuers of mortgage securities to retain 5% of the credit risk on their books. Supporters of this requirement, including Mr. Frank, argue it will force Wall Street to be more cautious when packaging assets such as mortgages into securities.
The regulators’ original proposal from 2011 contained a narrow exemption focusing on only high-quality loans, where the borrower brings a 20% down payment and meets other stringent criteria. But a proposal released in August for the so-called “qualified residential mortgage” exemption is much broader and covers most loans being made today.
11---Work Until You Die? More Middle Class Americans Say They Can Never Retire, Forbes
An alarming 37% of middle class Americans believe they’ll work until they’re too sick or until they die.
Another 34% believes retirement will come at the ripe age of 80. Just two years ago only 25% of respondents felt the same way.
It’s a grim look at the state of retirement which seems to be getting worse for middle class Americans.
Wells Fargo WFC +0.33% interviewed 1,000 Americans between age 25 and 75 and with household income ranging between $25,000 and $99,000.
More than half (59%) said their top day-to-day financial concern is paying the monthly bills; that’s up from 52% who said the same last year.
...
And here’s something for leaders in Washington DC to consider: One third of those surveyed said their primary source of retirement income will come from social security.
That figure gets even bigger for those who make less than $50,000–48% of those earners say social security is going to be their primary retirement income.
Those between age 25 and 29 are the most apprehensive about stocks with 58% of them saying they’d rather put $5,000 in a savings account or CD than in the stock market.
“There is a striking amount of fear about the stock market among all investors. The middle class just isn’t making the link between being invested and the potential growth of their savings, but on top of this fear is apathy – there is no interest in learning more about investing,” Nordquist says
12--Central Banks Make Swaps Permanent as Crisis Backstop, Bloomberg
Banks strengthen infrastructure for global banking cartel one world gov
13---Japan Salaries Extend Fall as Abe Urges Companies to Raise Wages, Bloomberg
Japan’s salaries extended the longest slide since 2010, even as Prime Minister Shinzo Abe urges companies to raise workers’ wages as part of his bid to reflate the world’s third-largest economy.
Regular wages excluding overtime and bonuses fell 0.3 percent in September from a year earlier, marking a 16th straight month of decline, according to labor ministry data released today. Total cash earnings rose 0.1 percent.
“The key for the success of Abenomics is whether companies will raise wages,” Norio Miyagawa, a senior economist at Mizuho Securities Research and Consulting Co. in Tokyo, said before the report.
Wages are falling behind price gains. National consumer prices excluding fresh food rose 0.7 percent last month from a year earlier, a fourth straight increase
14---How to Help Protect Yourself from Fukushima Radiation, Washingtons blog
15---NSA revelation: Use 9-11 fear to justify spy programs, Al Jazeera
The National Security Agency advised its officials to cite the 9/11 attacks as justification for its mass surveillance activities, according to a master list of NSA talking points.
The document, obtained by Al Jazeera through a Freedom of Information Act request, contains talking points and suggested statements for NSA officials (PDF) responding to the fallout from media revelations that originated with former NSA contractor Edward Snowden.
Invoking the events of 9/11 to justify the controversial NSA programs, which have caused major diplomatic fallout around the world, was the top item on the talking points that agency officials were encouraged to use.
16---Libya's decent into anarchy: Two years since the end of the US-NATO war in Libya, wsws
Two years later, there is no sign of any such Libya. The country bombarded by the US military and its European allies is in an advanced state of disintegration. It was reported Monday that oil production, which is responsible for virtually all of the country’s export earnings and over half of its gross domestic product, has fallen to 90,000 barrels per day, less than a tenth of the pre-war level.
Major installations have been seized by armed militias. In eastern Libya, these militias advocate the country’s partition into the three regional governorates—Cyrenaica, Tripolitania and Fezzan—maintained under the colonial regime of fascist Italy.
According to best estimates, there are nearly one-quarter of a million militiamen who are armed and paid by the Libyan government but operate with complete impunity under the direction of Islamist and regional warlords. The warlords constitute the principal power in the country.
The nearly eight-month-long war achieved its goal of toppling the regime of Colonel Muammar Gaddafi, whose murder by a mob of NATO-backed “rebels” prompted President Barack Obama to proclaim from the White House Rose Garden that this grisly event signaled the advent of “a new and democratic Libya.”
Two years later, there is no sign of any such Libya. The country bombarded by the US military and its European allies is in an advanced state of disintegration. It was reported Monday that oil production, which is responsible for virtually all of the country’s export earnings and over half of its gross domestic product, has fallen to 90,000 barrels per day, less than a tenth of the pre-war level.
Major installations have been seized by armed militias. In eastern Libya, these militias advocate the country’s partition into the three regional governorates—Cyrenaica, Tripolitania and Fezzan—maintained under the colonial regime of fascist Italy.
According to best estimates, there are nearly one-quarter of a million militiamen who are armed and paid by the Libyan government but operate with complete impunity under the direction of Islamist and regional warlords. The warlords constitute the principal power in the country....
Meanwhile, two years after the withdrawal of American troops, Iraq is descending into civil war, with casualties approaching the record levels reached during the US occupation. In Syria, the Obama administration found itself compelled to retreat from the direct use of US military force in the face of overwhelming popular opposition both at home and abroad, driven by the immense hostility to the previous wars waged, in the interests of the financial oligarchy, on the basis of lies.
17---US Federal Reserve continues massive subsidy for financial markets, wsws
US corporate profits, which hit a new record in the third quarter, have shot up 18.6 percent over the past year. As a result, corporate profits now make up a larger share of America’s gross domestic product than at any previous time in US history.
On the same day the central bank made clear it will continue its vast cash handouts to the banks, bipartisan talks began in Congress to slash the food stamp program beyond an automatic reduction in benefits that takes effect this Friday, and a House-Senate conference committee held its first formal meeting on a new budget that will further slash social programs....
The Fed’s announcement followed a string of lackluster reports on jobs and other economic indices. The US economy added 148,000 jobs in September, less than the number expected by economists and barely enough to keep up with population growth, according to the Labor Department’s employment report released last week. So far, the second half of 2013 has averaged 143,000 new jobs per month, compared to an average of 195,000 for the first half of the year, pointing to an economic slowdown.
18---Abenomics: Pushing on a string, economonitor
Japan has maintained a zero interest rate policy (“ZIRP”) for over 15 years and implemented several rounds of QE. The new plan will assist the Japanese government to finance its spending. It may also help devalue the Yen and boost asset prices. But given that short term rates were near zero and 10 year rates around 0.50% before the announcement of the plan, the effect of monetary initiatives on real economic activity are likely to be less significant - ...
In October 2013, Mr. Abe announced the implementation of an increase in the consumption tax from 5% to 8%, initiated by the previous government. A further rise to 10% is planned in 2015 but is contingent on economic conditions. -
19---Deutsche Bank Said to Market $479 Million of Rental Bonds, Bloomberg
20---Rental bonds could spark backlash, Reuters
Bankers are hoping that an innovative, long awaited US home-rental ABS from private equity giant Blackstone will open up a brand new single-family rental asset class with issuance of US$10bn likely over the next 18 months - providing they can win investors over.
The new sector, built on what some naysayers are calling the housing "detritus" of the financial crisis, is not expected to be met with tons of praise in the court of public opinion, some industry participants say.
"I think there's a potential for a backlash on this," said one RMBS investor...
Securitization technology can be applied to cashflows of any asset class, as long as there is a transparent and supportable basis for estimating the underwritten cashflows as the basis of paying the debt-holders," said Ron D'Vari, CEO of NewOak Capital, a financial advisory and investment banking firm.
"Single-family rental cashflows are no exception if they can be properly managed and modeled
21---zirp: The Federal Reserve’s War On Seniors, personal liberty
22--You're on your own: A Year After Sandy: Poor Still Out in Cold, The Root
Housing advocates say that New Jersey disproportionately allocated recovery funds to those less in need of help
They are allowed to accrue interest on non-performing mortgages ” until the actual foreclosure takes place, which on average takes about 16 months.
All the phantom interest that is not actually collected is booked as income until the actual act of foreclosure. As a resullt, many bank financial statements actually look much better than they actually are. At foreclosure all the phantom income comes off gthe books of the banks.
This means that Bank of America, Citigroup, JP Morgan and Wells Fargo, among hundreds of other smaller institutions, can report interest due them, but not paid, on an estimated $1.4 trillion of face value mortgages on the 7 million homes that are in the process of being foreclosed.
Ultimately, these banks face a potential loss of $1 trillion on nonperforming loans, suggests Madeleine Schnapp, director of macro-economic research at Trim-Tabs, an economic consulting firm 24.5% owned by Goldman Sachs
10---Rep. Frank: Revamped Mortgage Rules a ‘Grave Error”, WSJ
WASHINGTON–An architect of the 2010 Dodd-Frank law is accusing federal regulators of watering down new mortgage rules in the face of opposition from the housing industry.
Former Rep. Barney Frank (D., Mass.) slammed federal regulators for their decision to dial back a proposal to impose new rules on the mortgage-securities market–a key piece of the Dodd-Frank law that bears Mr. Frank’s name.
“This is a grave error, and contrary to the assertion that it would best carry out the statutory intent, significantly repudiates it,” Mr. Frank wrote in a comment letter being sent to regulators Tuesday.
At issue is a proposal from August by six regulators — including the Federal Reserve and Federal Deposit Insurance Corp. — to revamp proposed rules requiring issuers of mortgage securities to retain 5% of the credit risk on their books. Supporters of this requirement, including Mr. Frank, argue it will force Wall Street to be more cautious when packaging assets such as mortgages into securities.
The regulators’ original proposal from 2011 contained a narrow exemption focusing on only high-quality loans, where the borrower brings a 20% down payment and meets other stringent criteria. But a proposal released in August for the so-called “qualified residential mortgage” exemption is much broader and covers most loans being made today.
11---Work Until You Die? More Middle Class Americans Say They Can Never Retire, Forbes
An alarming 37% of middle class Americans believe they’ll work until they’re too sick or until they die.
Another 34% believes retirement will come at the ripe age of 80. Just two years ago only 25% of respondents felt the same way.
It’s a grim look at the state of retirement which seems to be getting worse for middle class Americans.
Wells Fargo WFC +0.33% interviewed 1,000 Americans between age 25 and 75 and with household income ranging between $25,000 and $99,000.
More than half (59%) said their top day-to-day financial concern is paying the monthly bills; that’s up from 52% who said the same last year.
...
And here’s something for leaders in Washington DC to consider: One third of those surveyed said their primary source of retirement income will come from social security.
That figure gets even bigger for those who make less than $50,000–48% of those earners say social security is going to be their primary retirement income.
Those between age 25 and 29 are the most apprehensive about stocks with 58% of them saying they’d rather put $5,000 in a savings account or CD than in the stock market.
“There is a striking amount of fear about the stock market among all investors. The middle class just isn’t making the link between being invested and the potential growth of their savings, but on top of this fear is apathy – there is no interest in learning more about investing,” Nordquist says
12--Central Banks Make Swaps Permanent as Crisis Backstop, Bloomberg
Banks strengthen infrastructure for global banking cartel one world gov
13---Japan Salaries Extend Fall as Abe Urges Companies to Raise Wages, Bloomberg
Japan’s salaries extended the longest slide since 2010, even as Prime Minister Shinzo Abe urges companies to raise workers’ wages as part of his bid to reflate the world’s third-largest economy.
Regular wages excluding overtime and bonuses fell 0.3 percent in September from a year earlier, marking a 16th straight month of decline, according to labor ministry data released today. Total cash earnings rose 0.1 percent.
“The key for the success of Abenomics is whether companies will raise wages,” Norio Miyagawa, a senior economist at Mizuho Securities Research and Consulting Co. in Tokyo, said before the report.
Wages are falling behind price gains. National consumer prices excluding fresh food rose 0.7 percent last month from a year earlier, a fourth straight increase
14---How to Help Protect Yourself from Fukushima Radiation, Washingtons blog
15---NSA revelation: Use 9-11 fear to justify spy programs, Al Jazeera
The National Security Agency advised its officials to cite the 9/11 attacks as justification for its mass surveillance activities, according to a master list of NSA talking points.
The document, obtained by Al Jazeera through a Freedom of Information Act request, contains talking points and suggested statements for NSA officials (PDF) responding to the fallout from media revelations that originated with former NSA contractor Edward Snowden.
Invoking the events of 9/11 to justify the controversial NSA programs, which have caused major diplomatic fallout around the world, was the top item on the talking points that agency officials were encouraged to use.
16---Libya's decent into anarchy: Two years since the end of the US-NATO war in Libya, wsws
Two years later, there is no sign of any such Libya. The country bombarded by the US military and its European allies is in an advanced state of disintegration. It was reported Monday that oil production, which is responsible for virtually all of the country’s export earnings and over half of its gross domestic product, has fallen to 90,000 barrels per day, less than a tenth of the pre-war level.
Major installations have been seized by armed militias. In eastern Libya, these militias advocate the country’s partition into the three regional governorates—Cyrenaica, Tripolitania and Fezzan—maintained under the colonial regime of fascist Italy.
According to best estimates, there are nearly one-quarter of a million militiamen who are armed and paid by the Libyan government but operate with complete impunity under the direction of Islamist and regional warlords. The warlords constitute the principal power in the country.
The nearly eight-month-long war achieved its goal of toppling the regime of Colonel Muammar Gaddafi, whose murder by a mob of NATO-backed “rebels” prompted President Barack Obama to proclaim from the White House Rose Garden that this grisly event signaled the advent of “a new and democratic Libya.”
Two years later, there is no sign of any such Libya. The country bombarded by the US military and its European allies is in an advanced state of disintegration. It was reported Monday that oil production, which is responsible for virtually all of the country’s export earnings and over half of its gross domestic product, has fallen to 90,000 barrels per day, less than a tenth of the pre-war level.
Major installations have been seized by armed militias. In eastern Libya, these militias advocate the country’s partition into the three regional governorates—Cyrenaica, Tripolitania and Fezzan—maintained under the colonial regime of fascist Italy.
According to best estimates, there are nearly one-quarter of a million militiamen who are armed and paid by the Libyan government but operate with complete impunity under the direction of Islamist and regional warlords. The warlords constitute the principal power in the country....
Meanwhile, two years after the withdrawal of American troops, Iraq is descending into civil war, with casualties approaching the record levels reached during the US occupation. In Syria, the Obama administration found itself compelled to retreat from the direct use of US military force in the face of overwhelming popular opposition both at home and abroad, driven by the immense hostility to the previous wars waged, in the interests of the financial oligarchy, on the basis of lies.
17---US Federal Reserve continues massive subsidy for financial markets, wsws
US corporate profits, which hit a new record in the third quarter, have shot up 18.6 percent over the past year. As a result, corporate profits now make up a larger share of America’s gross domestic product than at any previous time in US history.
On the same day the central bank made clear it will continue its vast cash handouts to the banks, bipartisan talks began in Congress to slash the food stamp program beyond an automatic reduction in benefits that takes effect this Friday, and a House-Senate conference committee held its first formal meeting on a new budget that will further slash social programs....
The Fed’s announcement followed a string of lackluster reports on jobs and other economic indices. The US economy added 148,000 jobs in September, less than the number expected by economists and barely enough to keep up with population growth, according to the Labor Department’s employment report released last week. So far, the second half of 2013 has averaged 143,000 new jobs per month, compared to an average of 195,000 for the first half of the year, pointing to an economic slowdown.
18---Abenomics: Pushing on a string, economonitor
Japan has maintained a zero interest rate policy (“ZIRP”) for over 15 years and implemented several rounds of QE. The new plan will assist the Japanese government to finance its spending. It may also help devalue the Yen and boost asset prices. But given that short term rates were near zero and 10 year rates around 0.50% before the announcement of the plan, the effect of monetary initiatives on real economic activity are likely to be less significant - ...
In October 2013, Mr. Abe announced the implementation of an increase in the consumption tax from 5% to 8%, initiated by the previous government. A further rise to 10% is planned in 2015 but is contingent on economic conditions. -
19---Deutsche Bank Said to Market $479 Million of Rental Bonds, Bloomberg
20---Rental bonds could spark backlash, Reuters
Bankers are hoping that an innovative, long awaited US home-rental ABS from private equity giant Blackstone will open up a brand new single-family rental asset class with issuance of US$10bn likely over the next 18 months - providing they can win investors over.
The new sector, built on what some naysayers are calling the housing "detritus" of the financial crisis, is not expected to be met with tons of praise in the court of public opinion, some industry participants say.
"I think there's a potential for a backlash on this," said one RMBS investor...
Securitization technology can be applied to cashflows of any asset class, as long as there is a transparent and supportable basis for estimating the underwritten cashflows as the basis of paying the debt-holders," said Ron D'Vari, CEO of NewOak Capital, a financial advisory and investment banking firm.
"Single-family rental cashflows are no exception if they can be properly managed and modeled
21---zirp: The Federal Reserve’s War On Seniors, personal liberty
22--You're on your own: A Year After Sandy: Poor Still Out in Cold, The Root
Housing advocates say that New Jersey disproportionately allocated recovery funds to those less in need of help
Unemployed, underemployed, and indebted Millennials.
Money velocity and the multiplier plunging from unprecedented bank reserve expansion and banks hoarding cash, resulting in bubbles EVERYWHERE, including bank reserves, margin debt, leverage for carry trades via derivatives, stocks, corporate bonds, real estate, farmland, collectables, trophy properties, student loans, subprime auto loans, and food stamps.
What a disaster.
7---Storm clouds for the Fed, McClatchy
The Fed already owns more than a third of longer-term marketable Treasury debt and roughly a quarter of the mortgage-backed securities guaranteed by the federal government. If the current pace of purchases continued until the end of 2014, the Fed could own close to half of the outstanding longer-term Treasuries and about a third of federally guaranteed mortgage-backed securities. By removing such a large share of these securities from circulation, the Fed would run the risk of impairing the operation of these crucial markets and of fueling bubbles by pushing investors to hold riskier assets.
If confronted with a persistently weak economy, the Federal Reserve will have to give up on quantitative easing at some point. And its options for filling the gap are limited. The Fed's authority to buy other types of assets is severely constrained; notably, it cannot buy corporate bonds or stocks. As an alternative, the Fed could signal an intention to keep the federal funds rate near zero until 2016, 2017 or even beyond. But financial markets could well question the credibility of guidance so far into the future. Ultimately, the Fed might have to concede that it has run out of options, which would be a serious blow. 8---Number of the Week: Companies Holding Lots More Cash, WSJ 21.4%: Share of corporate cash holdings held in, well, cash.
Until a few years ago, this was fairly unimportant distinction. For companies, “cash” was anything they could quickly convert into cash when needed. From the 1970s through the mid-2000s, the share of liquid assets held in literal cash fell as more financial options became available. In 1970, companies held about 60% of their liquid assets in cash. By 2007, the share had stabilized at around 10%.
Then the financial crisis hit, and all of a sudden a lot of “liquid assets” — money-market funds, in particular — turned out to be far less liquid than they had once seemed. With financial markets frozen, companies were forced to rely on literal cash: In a single quarter, corporate cash holdings fell by nearly three quarters, from $53 billion in the third quarter of 2008 to $14 billion at the end of the year.
Corporate executives appear to have learned their lesson. In less than a year, they had more than rebuilt their cash holdings, and they didn’t stop there. In absolute terms, cash holdings are at an all-time high, even after adjusting for inflation. As a share of liquid assets, holdings of cash and checkable deposits are back to where they were in 2000, though they ticked down in the second quarter.
The sharp rise in holdings of hard cash doesn’t appear to reflect a broader caution among executives. The $1.8 trillion in liquid assets — the line item most people are referring to when they talk about “corporate cash” — accounted for 5.4% of all assets held by nonfinancial corporations in the second quarter, down from 6% in 2009 and pretty much flat for the past two years.
That narrative is pretty different from the “cash on the sidelines” storyline that dominated a couple years ago. Back then, Fed data showed companies holding more than $2 trillion in cash and other liquid assets, accounting for more than 7% of total assets. But a massive data revision last year wiped away nearly half a trillion dollars of that hoard. Based on the new data, it looks like companies rebuilt the liquid assets they’d lost (or spent), but little more than that.
Companies, in other words, aren’t holding more liquid assets. They’re holding more of their liquid assets in cash.
9--Eight years to recycle this property, OC Housing (more mark-to-fantasy)
Have you ever wondered why we used to have rules that require lenders to resolve their bad loans? We suspended those rules when we instituted mark-to-fantasy accounting, but prior to that, lenders used to have to write down their bad loans. This usually prompted them to foreclose on the property and sell it to recover their capital so they could recycle that money into a more productive use. It’s the concept of productive use that drives the need to recycle bad loans. Failure to liberate money tied up in bad loans lead to the lost decade in Japan, and it’s responsible for the economic malaise we experienced over the last six years.
Today’s featured property has been non-performing for the better part of eight years. It was originally purchased as a flip in 2005. Zovall at the IHB profiled this property back in November of 2006. Since then it’s been in and out of foreclosure and listed on and off for the last seven years. Nobody has made any payments on this mortgage since 2006 at least. This non-performing note kept getting can-kicked. Finally, it was bought by the bank late last year, but they sat on it for another year hoping to make some of the lost interest from eight years of non-performance.
Should it really take eight years to resolve a bad loan?
10---GSE Sees New Business Slip to Lowest Volume in 18 Months , DS News
11--‘Worst in years’: St Jude storm wreaks havoc across N. Europe, at least 15 dead, RT
16--Tip of the iceberg--NSA stores data to target any citizen at any time - Greenwald, RT
17---Leaving Afghanistan: Not With a Bang, But a Whimper, antiwar
What if you lost a war but no one noticed?
18--War-weary Iraqis scared to leave homes as violence reaches levels not seen since 2008, NBC world news
Mission accomplished?
19---What a joke! Stocks hit record highs on crappy data, Bloomberg
U.S. stocks rose, with the Standard & Poor’s 500 Index extending a record, as data showing lower retail sales and consumer confidence fueled bets the Federal Reserve will maintain stimulus as it starts a policy meeting. ...
The S&P 500 rose 0.2 percent to 1,765.01 at 11 a.m. in New York. The Dow Jones Industrial Average gained 40.30 points, or 0.3 percent, to 15,609.23. Trading in S&P 500 stocks was in line with the 30-day average at this time of day.
“It still seems that the Fed has created this good news is bad news, bad news is good news scenario,” Randy Bateman, who oversees $15 billion as chief investment officer of Huntington Asset Advisors in Columbus, Ohio, said by telephone. “The anticipation is that the Fed will retain its purchasing of $85 billion in monthly Treasury and mortgage securities, which is going to continue to help the housing market. That will be taken fairly well by the market.”
The S&P 500 climbed in 12 of the past 14 sessions through yesterday, as companies beat estimates in the current earnings reporting season and signs of slower economic growth fueled bets the Fed will maintain stimulus measures. The rally has pushed the index up 24 percent this year, leaving it poised for the best annual gain in a decade.
Taper Bets
The 16-day government shutdown earlier this month took at least $24 billion out of the economy and will spur the Fed to wait until March to taper, a Bloomberg survey showed this month. The central bank’s policy makers convene today and tomorrow.Data today showed retail sales dropped 0.1 percent last month, restrained by the biggest decrease at auto dealers since October 2012. Wholesale prices unexpectedly fell in September as food costs retreated. Inflation has been running below the Fed’s 2 percent objective in the near-term, giving policy makers room to maintain monetary stimulus.
The Conference Board’s index of consumer confidence fell to 71.2 in October from 80.2 the month prior, the New York-based private research group said today. The median forecast in a Bloomberg survey of economists called for a reading of 75.
Weak Data
Weaker-than-forecast data yesterday on factory output and sales of previously owned homes added to concern that growth slowed in the weeks before the shutdown. Home prices in 20 U.S. cities rose in August from a year ago by the most since February 2006, the S&P/Case-Shiller index indicated today.The Fed’s stimulus has helped propel the S&P 500 up more than 160 percent from a 12-year low in 2009. While the rally lifted equity valuations to a four-year high, with the index trading at 15.9 times estimated operating earnings, that’s still below the multiples at the market’s two previous peaks, when the ratio reached 16.5 in October 2007 and 25.7 in March 2000, data compiled by Bloomberg show.
“The market has traveled away, sentiment has got to fairly elevated levels, therefore to push these markets on requires some pretty positive earnings news to come through,” Mark Harris, a London-based fund manager at City Financial, which oversees about $1.2 billion, said in an interview today.
20---Fed aware of emerging bubbles, Bloomberg
Financial-market bubbles are proving a more pressing threat than inflation to Federal Reserve officials who’ve bought trillions of dollars in bonds and kept the target for short-term interest rates near zero since 2008.
“There is a threshold out there somewhere” where markets will become too frothy or the balance sheet becomes too large and the central bank will have to react, said Michael Gapen, a former member of the Fed board’s Division of Monetary Affairs and now a senior U.S. economist at Barclays Plc in New York. “The problem since the beginning of quantitative easing three is there isn’t significant enough clarity for what is the stopping rule.” ...
Stein has argued the Fed should consider raising interest rates to fight bubbles when regulation or the central bank’s supervisory reach fall short.
“While monetary policy may not be quite the right tool for the job, it has one important advantage relative to supervision and regulation: namely that it gets in all of the cracks,” he said in a Feb. 7 speech in St. Louis.
In Denver on Sept. 26, George noted “some excess” in the leveraged-lending market, which “bears watching,” along with the price of farmland...
(financial) stability doesn’t “factor heavily into the Fed’s macro policy until it is staring into the abyss of market turbulence,” Goodman said.
21--China reconsiders long bet on Treasuries, Stephen Roach, global times
22---China Signals ‘Unprecedented’ Policy Changes on Agenda at Plenum, Bloomberg
23--Obamacare prompts insurers to drop hundreds of thousands from coverage, wsws
24--Bankruptcy proceedings in Detroit: The looting of an American city, wsws
25--Europe discovers US cannot be trusted, wsws
Nevertheless, Merkel’s attempts at conciliation cannot hide the fact that a profound rupture in international relations has taken place, with far-reaching consequences that are only gradually coming to the surface.
For decades, the German intelligence services have worked closely with their American counterparts. Governments on both sides of the Atlantic are intent on building up their police state apparatuses in order to suppress their respective populations. This is behind the hostility of both Washington and Berlin to the revelations made by Edward Snowden.
Commenting on the Der Spiegel report, columnist Jakob Augstein wrote: “The bitter truth is that digital omnipotence has turned the heads of the Americans. Is the country in its current condition even capable of maintaining an alliance?”
Augstein went on to say that the United States “regards its right to security to be absolute and all-embracing—and has thereby become somewhat self-destructive.” There was no conceivable benefit that could outweigh the damage already done by the recently exposed espionage, he concluded.
The conservative newspaper Die Welt declared that the Obama administration was enmeshed “in its most dangerous crisis,” while the Swiss Neue Zürcher Zeitung reported that German anger over US spying was intense. The “Obama-mania” that prevailed in layers of the European population before his 2008 election had disappeared.
High-ranking representatives of the German government and parliament from all parties declared their indignation in press releases and statements. At the end of last week, German Chancellor Angela Merkel scolded the US administration. “Spying on friends is unacceptable,” she declared prior to the EU summit in Brussels, adding, “We need trust between allies and partners, and such trust must now be restored.”
Despite the criticisms and demands for an explanation or apology directed at Washington, the German government is trying to limit the damage.
Read more here: http://www.mcclatchydc.com/2013/10/28/206632/storm-clouds-for-the-fed.html#storylink=cpy