Wednesday, May 7, 2014

Today' Links

President Turchynov and Prime Minister Yatsenyuk was directed by Washington and Berlin, with the fascists of Right Sector and Svoboda playing leading roles.
The Western imperialist powers expected the unelected regime in Kiev to encounter popular opposition and provoke a Russian reaction. In a country where 6 million were killed during the Nazi occupation—including 1.5 million Jews—a government glorifying Nazi collaborators such as Stepan Bandera would inevitably provoke deep disgust.

1---Americans Raid 401(k)s, Replacing Home Equity Withdrawals as Way to Make Ends Meet
naked capitalism

A Bloomberg story gives the sobering details of how prevalent 401 (k) withdrawals have become. For the latest year in which data is available, 2011, 4% of all households paid early withdrawal penalties. A Federal Reserve study found that 9.3% of taxpayers with retirement accounts paid early withdrawal penalties, an increase from 7.9% in 2004.....
As Michael Olenick remarked via e-mail:
This reads like a Dickens novel. Her retirement savings, in her mid 50′s, were less than $10K but she tapped 1/4th of that. She had to pay a 10% tax penalty plus the funds were treated as ordinary income. In contrast, the executive who outsourced her job probably has investments that will be treated as long-term capital gains and taxed at a much lower rate and the people managing her paltry retirement fund are probably taxed at carried interest rates too.

2---American Doomsday, (climate) NBC News

3---China's property bust, macrobusiness

4---Finally a pause in the leveraged loan market, sober look
After several years of frenzied buying (see post), corporate loans have fallen out of favor - somewhat. Fund flows have turned negative,

Source: Goldman Sachs

... and performance on a total return basis has flat-lined. Over the past six months, HY bonds have outperformed sub-investment grade senior loans by some 1.75...

- Ninety-five consecutive weeks of inflows to US funds that invest in leveraged loans made by banks came to an abrupt halt in the second week of April, when investors pulled $249m from the market. Since then, investors have continued to withdraw money from the funds, taking out $664m just last week, according to Lipper data.Why all of a sudden? Here are some reasons:

1. With the average leveraged loan yield dipping into the 4.5% - 4.75% territory a couple of months ago, some investors felt the asset class is too richly priced

5---The unprecedented chase for yield, sober look
The major market surprise of 2014 so far has been the extent of investors' appetite for yield in the developed fixed income markets. It has been quite spectacular. The Eurozone in particular has been a key beneficiary of this trend. We've seen German government bond yields hit a low not seen in almost a year (see Twitter post), but the real action has taken place in the periphery bonds. We are seeing multi-year and even all-time lows in government bond yields.


And this trend is not limited to sovereign paper. European corporate high yield bonds are now yielding  just over 3.6% on average - a record low

6---Debt Rattle May 6 2014: Americans Find A New Source Of Spending Money, automatic earth

7---Explosive Hidden Leverage Threatens To Blow Up the Markets , Testosterone Pit

Cheap leverage, the holy grail these days. It’s the driver behind the asset bubbles all around. It’ll goose otherwise minuscule returns. He might invest this borrowed money in his fund, which might for example buy Collateralized Loan Obligations. Banks that carry them on their books have to dump them to satisfy new regulations. But prices have dropped, and so banks are lending hedge funds cheap money so that they buy these CLOs. Some banks are offering to lend as much as nine times the amount that the hedge fund itself would invest. More massive and cheap leverage.

CLOs are similar to subprime-mortgage-backed Collateralized Debt Obligations that turned into toxic waste during the financial crisis. But they’re backed by junk-rated corporate loans, some of them malodorous “leveraged loans” that private equity firms use to strip-mine their portfolio companies. These already overleveraged companies borrow money from banks and pay it out as a special dividend to the PE firms. It pushes the company deeper into the hole, loads up the PE firm with cash, and saddles the bank with a dubious asset, the “leveraged loan.”...

Heloc originations soared 42% in the fourth quarter. The average credit line for “super-prime” borrowers was $120,000. Even “deep subprime” borrowers got an average credit line of $60,000. And “cash-out refinancing” is hot again, making up about 25% of all new refis in the first quarter, according to Quicken Loans.

Strung-out consumers might blow this money on a car and food and other things and some might consolidate debt and pay off their maxed-out credit cards so that they can charge more in their heroic effort to keep consumer spending from collapsing altogether. But the gorgeously mediatized stock market gains over the last few years, and especially last year, seduced many people to step back into the this craziness, all guns blazing, after having missed the entire run-up. And they’re doing it at precisely the worst possible moment.

This kind of hidden leverage pervades the investment scene at all levels. When multiple layers of debt are used to finance a chain of speculation, with very little equity involved, returns on equity can be eye-popping, as long as everything soars without ever as much as hesitating. But once progression begins to totter, and many feverishly hyped stocks, like Twitter, lose more than half their value in a matter of months, the bloodletting starts and margin calls go out, and banks are suddenly worried about their collateral, and some of the art gets dumped into a market with no buyers, and junk bonds plunge, and “leveraged loans” default, and it kicks off another bout of forced selling into an illiquid market, and the cross-connections and tie-ins and the whole counterparty spaghetti of these layers of leverage get knotted up, and all heck breaks lose. And as the whole construct tumbles down, Cohen and his ilk will once again press their cronies at the Fed and the Treasury to bail out their investments just one more time.

8---Jeremy Stein sees 'bumps' in markets as Fed gets less precise on policy plan, Reuters

9--Three Charts on Secular Stagnation, Krugman

10--There's no evidence that privatisation works, but it marches on, Guardian

11--US Media Covers Up Mass Murder in Odessa, peace and prosperity

12--Robert Shiller's Data Say the Last Two Times Have Been Different, Dean Baker

13--US defends role of Kiev regime and fascists in Odessa massacre, wsws

14--NATO expansion to Ukraine?, guardian

Nato's top commander, General Philip Breedlove, said that Nato will have to consider permanently stationing troops in eastern Europe as a result of the increased tension. "I think this is something we will have to consider and we will tee this up for discussion through the leaderships of our nations to see where that leads." He added it was important to note that these measures were defensive and not intended to provoke Russia

15--Proof of false flag in Odessa, RT video

16--Charred bodies in Odessa, English subtitles (No one under 18 , please)

No comments:

Post a Comment