Tuesday, October 29, 2013

Today's Links

1--29 Incredible Facts Which Prove That Poverty In America Is Absolutely Exploding, economic collapse

. According to a Gallup poll that was recently released, 20.0% of all Americans did not have enough money to buy food that they or their families needed at some point over the past year.  That is just under the record of 20.4% that was set back in November 2008....

According to a Feeding America hunger study, more than 37 million Americans are now being served by food pantries and soup kitchens.

. It has been reported that 4 out of every 5 adults in the United States "struggle with joblessness, near-poverty or reliance on welfare for at least parts of their lives

2--Abenomics--One year later, zero hedge
Stocks up, wages down, inflation up, trade deficit way up, taxes higher and core inflation barely zero.

One year later and due mainly to the fact the Japanese stock market has risen an astounding 70% year-over-year...Abe has managed to devalue his nation's currency by 25.5% against the USD in that time ...Job creation remains stifled, inflation is rising (but thanks to import prices) and wages languish down 0.9% as the trade balance is collapsing

...inflation has broken into positive territory after many years below zero. Unfortunately, much of this change has been due to the rise in import prices, which will be a one-off boost unless wages rise in response, which they are not yet doing. Core inflation is barely at zero....

The great unknown for Mr Abe and his successors is whether this fiscal tightening can be accomplished without tipping the economy back into recession.


3---Economic Confidence Ends Month Still Deeply Negative, Gallup
Improvement is slow after mid-month, shutdown-induced plunge
Gallup Economic Confidence Index -- 2013 Weekly Averages
4---Fukushima Is Here, Washington's blog

5---NYSE Margin Debt at Record High, Big Picture

. Do you think the fact that the broad stock market was priced at about 20% of the value of GDP in 1980–whereas it is now priced at about 120% of GDP–might be an important consideration? Might that make a difference when considering margin debt level sustainability? And I’m to tell myself ‘this is like 1980′? 

6---A complete disaster, economists view

Dean Baker reminds us that:
... The United States is still down almost 9m jobs from its trend path. We are losing close to $1tn a year in potential output, with cumulative losses to date approaching $5tn.
These numbers correspond to millions of dreams ruined. Families who struggled to save enough to buy a home lost it when house prices plunged or they lost their jobs. Many older workers lose their job with little hope of ever finding another one, even though they are ill-prepared for retirement; young people getting out of school are facing the worst job market since the Great Depression, while buried in student loan debt. ...

From Comments:  Medical costs at 25% of disposable income and 41% of public and private wages and salaries.
Boomer demographic drag effects.
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.
U.S. nonfinancial companies has $1.8 trillion in cash on their books at the end of the second quarter, according to the Federal Reserve’s quarterly “flow of funds” report (now known formally as the “Financial Accounts of the United States”). But that figure includes a lot of assets that most people wouldn’t consider “cash” in their day-to-day lives, such as treasury securities, mutual fund shares and commercial paper. Use a narrower definition of cash –just checking-account deposits and literal currency — and companies had about $386 billion on hand, or a bit more than a fifth of their total liquid assets.

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 Z├╝rcher 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
 

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