Tuesday, June 3, 2014

Today's links

1--Why homeowners who got mortgage help may still end up losing their homes, WA Post


Since the housing market unraveled in 2008, lenders have slashed the interest rates on millions of mortgages belonging to struggling borrowers – but only for a limited time.
And for about 2 million of the loans, that time is up, or soon will be.
Starting this year, the rates will begin to gradually rise on those mortgages, and it’s unclear if the homeowners will be able to handle the higher payments, according to an analysis released Monday by Black Knight Financial Services, a mortgage research firm


2---Treasurys Are Screaming Crisis While Stocks Yawn , Wall Street on Parade


Stocks have been setting new highs of late while the yields on the benchmark 10-year and 30-year Treasurys decline. The 10-year Treasury began the year at a yield of approximately 3 percent and closed on Friday at a yield of 2.49. The 30-year Treasury started the year at a yield of approximately 4 percent and closed last week with a yield of 3.33 percent.


Strong economies produce a higher demand for money and, thus, rising interest rates. For stocks, which are wedded to earnings, to be rising while Treasury yields are falling shows a serious decoupling of market logic.
The question is, does high frequency trading and stock market rigging have anything to do with this decoupling?...


Joseph Ciolli and Lu Wang of Bloomberg News report today that only “1.8 billion shares traded each day in S&P 500 companies last month, the fewest since 2008.” Equally worrying, say the reporters, is that when the S&P 500 index “hit an all-time high on May 23, only about 20 of its 500 companies reached 52-week highs…”


3---FINRA Bombshell: Biggest Wall Street Banks Are Trading Their Own Stock in Dark Pools , Wall Street on Parade


Thus far, the business media has overlooked the bombshell in the data: the biggest banks on Wall Street — the same ones the U.S. taxpayer bailed out in 2008 – have been making a market in their own stock inside the dark pools they own, right under the nose of FINRA and the SEC to the tune of tens of millions of shares a year if this data is typical of an average week.


This is the equivalent of Bank of America or Citigroup being a specialist in their own stock on the floor of the New York Stock Exchange.
During the week of May 12 – 16, Merrill Lynch’s dark pool is shown executing 16,246 trades in the stock of its parent, Bank of America, for a total of 8,207,150 shares. This figure represents 12 percent of the 67.8 million shares of Bank of America that traded in dark pools that week.


4--Japan Base Wages Decline 23 Months In A Row, zero hedge


Japan's base wages failed to rise month-over-month for the 24th month in a row (the longest streak in history). Even after all the promises and hope of the spring wage negotiations, Abe's 'plan' to guilt employers into raising wages is not working; which is especialy problematic given the surge in inflation (as the 'real' wage slumped 3.1% in April) As Goldman warns, we caution against excessive expectations for sustained wage growth.


5---Is This The Top? First Quarter Corporate Profits Tumble Most Since Lehman, zero hedge


6---Top 10 reasons housing under-performs in 2014, oc housing


After a decade of boom-bust-boom,” explains Bloomberg Businessweek “the U.S. housing market is going downhill just when many economists thought it would be heading higher.”
“Some growth was inevitable after sub-par housing activity in the first quarter,” said Lawrence Yun, chief economist with the National Association of Realtors “but improved inventory is expanding choices and sales should generally trend upward from this point. Annual home sales, however, due to a sluggish first quarter, will likely be lower than last year.”
Here’s another term for “improved inventory.” It’s called “more unsold homes.” There’s now a 5.9-month supply of homes for sale versus 5.2 months a year ago and total existing home sales for 2014 are expected to be lower than last year....


In 2013 we formed just 448,800 households, representing a 48 percent drop in household growth relative to that from 2012 and marking the lowest annual household growth measure since 2008, in the depths of the Great Recession. (See: Home sales down, household formation down, purchase applications down: Housing recovery?)
Second, fewer of us are entering the real estate marketplace.
According to NAR, first-time buyers represented 29 percent of the market in April. That sounds like a lot but traditionally first-timers make-up about 40 percent of all buyers....


5 Other Reasons Housing is under-performing in 2014

6. Large real estate investor purchases steeply decline in California. A large portion of the buyer pool simply went away, and unless prices fall, they aren’t coming back.
7. 9.7 million loanowners are underwater. They can’t sell and they can’t buy, so they are effectively removed from participation in the real estate market.
8. The economic recovery creates low-paying jobs that fail to stimulate housing. If the new jobs don’t pay well enough to buy a house, then home sales will be weak, which they are.
9. Excessive student loan debt is another long-term drag on housing. Even those recent graduates fortunate enough to find a good-paying job often are burdened with so much student loan debt they don’t qualify for a home loan.
10. Lack of boomerang buyers keeping purchase originations down. People who got foreclosed on were expected to return to the housing market in large numbers, despite the fact that data shows only about 25% ever do. A large number of people will decide to rent for the rest of their lives.


7(archive)---"The first downleg of a new bear market"....Felix Zulauf Warns Of "Another Deflationary Episode" As "The Mother Of All Bubbles" Pops, zero hedge

Research on private sector credit booms over the last 20 years show that whenever credit to the private sector expanded by 30% or more within a 10-year period, a banking crisis and recession resulted without any exception. The following countries are all far above that danger level today and candidates for a banking crisis: Hong Kong, China, Thailand, Brazil, Turkey and Singapore. And recently even Korea, Romania, Ukraine and even Russia have broken the danger level. This is quite a long list, and the big EM economies are all part of it except India that has other deficiencies.
Now, these economies differ from each other, of course, but they share a common disease, namely a previous economic boom built on excessive credit
.....
Smaller deficits by the largest economy have unpleasant implications for many other nations. Of course, foreign oil producers will earn less income, but foreign exporters selling to U.S. markets are also being hurt. Simply speaking, what once was ever-increasing economic stimulus provided to the world is now turning into restraining factors for the rest of the world....

For the U.S., it means she is now losing less growth to the rest of the world and keeping more for herself, which is growth positive. That is one of the reasons why the U.S. is performing relatively better than other economies, although still well below an average recovery. While I completely disagree with the consensus about the “normalization” of the world economy and the reacceleration thesis, if one economy can achieve the forecasts, it will be the U.S.

Credit Booms Are Followed by Busts



As Chart 1 shows, China’s surpluses are declining and therefore trade data for many other economies are deteriorating. At the same time, many of the EM economies have gone through a tremendous boom in recent years, driven by their previous success story and large capital inflows


The problem with credit booms is that they always end badly, although they usually go further and last longer than rational minds expect. The weakest links are breaking first, as always. Completely mismanaged economies like Argentina and Venezuela are already in deep crisis, but that was no surprise. Next follow the deep and chronic deficit countries like Turkey or South Africa, which have already seen their currencies declining sharply...

While the timing of this described process is open as is the way the Chinese will choose, we must expect it to begin at any time and last many quarters if not years. The message is that problems in emerging economies are not over, and weakness in currencies, bonds and equities are in general not an opportunity to buy, yet. What investors should be aware of is that the problems in Turkey, South Africa or Russia are only sideshows compared with what’s out there in China and its implications for the world, which in our view are still not understood and not priced in by markets.

As we don’t live in an isolated world, there will be knock-on effects
....
The mechanism, in simple terms, has been QE in the developed world leading to capital flows into emerging markets, triggering an investment and consumption boom built on cheap credit. The boom led to rising wages, reduced competitiveness, less household income after inflation, taxes and rent (which rose sharply due to the real estate boom). Now, domestic and external demand is weakening while inflation is high and external accounts are imbalanced. Hence, the world will see the next chapter of the unintended consequences of QE, namely many economies going through a balance-of-payment crisis leading to recessions and banking crises and hurting global economic growth. The U.S. will be hurt too, but is the least exposed....


Risk aversion will rise again, once investors find out the world has entered another deflationary episode, with many balance-of-payment crises that are only now beginning. Yes, it may look far away in the emerging world, but it will have knock-on effects and slow down the global economy much more than expected and hurt particularly multinationals’ revenues and profits. Nowadays, the emerging world is half of the world economy, and the world economy is more intertwined than ever before...

I am expecting their tapering to continue and to be complete later this year, provided no major accident happens in the financial markets in between. This is equivalent to raising interest rates from minus two percent to zero. And while zero is still low, it is in my view a step by step removal of stimulus and therefore a regime shift in monetary policy at the most important central bank of the world. This is a strong message. Unfortunately, we have no experience with “tapering” and therefore do not know when and how it impacts markets. However, such a change in combination with frothy markets has now triggered a serious correction that in our view has more to run. ...

In our reading, the current weakness is led by emerging equity markets, and most of them are already deep in their second downleg of this cyclical bear market, while for most equities in developed markets it is only the first downleg of a new bear market...

The big surprise for the world will in our view be a temporary strengthening of the yen. ...
, we are expecting another deflationary episode and see in particular U.S. Treasuries with maturities of 10 years and longer as offering attractive trading opportunities over the next 6-12 months, whereby 10-year yields could decline to around 2%. ....

In general, we expect another deflationary episode leading to systemic risks and economic disappointments. Hence, it is time to structure portfolios much more conservatively and put capital preservation ahead of aggressive return strategies. In contrast to last year, 2014 will hardly be a year with a powerful and easy trend to ride. Instead, it will bring much more volatility but also plenty of trading opportunities for flexible investors.


8---Treasuries Drop a 4th Day on Speculation Rally Gains Excessive, Bloomberg


10-year yields still at recession-era level of 2.55%


9---Japan sees largest wage drop in April since Dec. 2009, shanghai daily


The ministry said the drop could be attributed to sales tax hike on April 1, which triggered price rises, although increasing number of companies raised wages this spring.




"The pay rise trend needs to be closely monitored until summer" as small and medium-sized companies are still working on pay negotiations, local media quoted the ministry as saying.




Average monthly pay for workers in Japan rose 0.9 percent in April from a year earlier to 274,761 yen (about 2684.96 U.S. dollars), due to increased overtime pay and bonuses, said the ministry.




On the contrary, average basic salary fell for the 23rd straight month, declining 0.2 percent to 243,989 yen (about 2384. 26 dollars), said the ministry.


10--Newsflash: Fukushima Is Still a Disaster, smirking chimp


At least 300 tons of heavily contaminated Fukushima water still pour daily into the Pacific. Hundreds more tons are backed up on site, with Tepco apologists advocating they be dumped directly into the ocean without decontamination.
Despite billions of dollars in public aid, Tepco is still the principal owner of Fukushima. The “cleanup” has become a major profit center. Tepco boasted a strong return in 2013. Its fellow utilities are desperate to reopen other reactors that netted them huge annual cash flow.
Little of this has made its way into the American corporate media.


Meanwhile, children nearby are dying. The rate of thyroid cancers among some 250,000 area young people is more than 40 times normal. According to health expert Joe Mangano, more than 46 percent have precancerous nodules and cysts on their thyroids. This is “just the beginning” of a tragic epidemic, he warns....


The American corporate media have been dead silent or, alternatively, dismissive about the radiation now washing up on our shores, and about the extremely dangerous job of bringing intensely radioactive fuel rods down from their damaged pools.
Fukushima’s General Electric reactors feature spent fuel pools perched roughly 100 feet in the air. When the tsunami hit, thousands of rods were suspended over Units 1, 2, 3 and 4. 


According to nuclear engineer Arnie Gundersen, the bring-down of the assemblies in Unit 4 may have hit a serious snag. Gundersen says that beginning in November 2013, Tokyo Electric Power removed about half of the suspended rods there. But at least three assemblies may be stuck. The more difficult half of the pile remains. And the pools at three other units remain problematic. An accident at any one of them could result in significant radiation releases, which have already far exceeded those from Chernobyl and from the bombings of Hiroshima and Nagasaki.


11---Abe, LDP agree to cut Japan’s corporate tax rate from FY 2015, japan times
               
Prime Minister Shinzo Abe and his ruling Liberal Democratic Party’s tax panel agreed Tuesday to cut Japan’s corporate tax rate from fiscal 2015 on the condition that the government continues efforts to restore the country’s precarious public finances.....


At a press conference on Tuesday morning, Aso said he would support the move “if stable financial resources are found,” reversing his opposition to the corporate tax cuts on the grounds they would thwart the government’s attempt to rebuild Japan’s fiscal health — which is the worst among developed economies.


12---The bloodbath in Donetsk, wsws


It is now clear that the election was organized to establish a political basis for the military onslaught in the east. The poll was carried out to provide a fig leaf of legitimacy to a regime installed illegally by means of a coup led by neo-fascist forces in the Svoboda Party and Right Sector militia.


In fact, the election exposed the government’s extremely narrow base of popular support. There was a near-total boycott in the Russian-speaking industrial heartland in the east and widespread abstention in the south of the country. The leaders of Svoboda and the Right Sector received negligible votes.


The bloodletting in Donetsk and mounting attacks in Luhansk and other rebellious areas are aimed not only at crushing a regional insurgency, but at terrorizing the population as a whole. At the urging of Washington’s CIA and military personnel in Kiev, the regime is seeking to intimidate anyone, in the west as well as the east of Ukraine, who opposes its IMF-dictated policies of austerity, privatization and unlimited plundering by Western banks and corporations.


This economic scorched earth program is to be accompanied by the transformation of Ukraine into an advanced staging area for US-NATO military operations against Russia


13---Consumer Spending in U.S. Unexpectedly Declines , Bloomberg


14-- Hagel to Beijing: "Do what we say, or else." wsws


Hagel delivered an ultimatum to Beijing, declaring that China had “a choice: to unite and recommit to a stable regional order, or to walk away from that commitment and risk the peace and security that have benefited millions of people throughout the Asia-Pacific, and billions around the world.”
The meaning is clear enough. Either China submits to the post-World War II arrangements establishing US hegemony over the Asia-Pacific region, or it will face the direct threat of war with the United States.
.....
He placed China in the same category as Russia, presenting the two countries as threats to regional peace and security. “China’s economic rise and military reach worries its neighbors,” Obama declared.


He went on to describe the territorial disputes in the South and East China seas, which Washington has deliberately inflamed and turned into global flash points, accusing China of “regional aggression” that could “ultimately impact our allies, and could draw in our military.” And he vowed to back Southeast Asian governments in maritime disputes with China in the South China Sea.


Yet there was no mention of the “pivot,” no declaration of a new over-arching strategic turn by the US and its massive military machine to confront China in the Asian-Pacific theater. Instead, the president told the American people that the principal threat faced by the United States was “terrorism,” the same boogeyman that has been used to justify US aggression abroad since the beginning of the century. No doubt this lack of an explicit statement of US strategy in a major presidential speech was deliberate.


Hagel was asked directly by one of the participants at the conference in Singapore why Obama does not explain the “pivot” to the American people with the same forcefulness with which the defense secretary and other US officials promote it in Asia. The answer is obvious. The popular reaction to a public campaign in support of a policy of military provocation and aggression against a nuclear-armed China would be one of horror and virulent opposition. So, the thinking in ruling circles undoubtedly goes, better to lead the population unwittingly to the brink of a global conflagration than risk a political firestorm....


Hagel declared that the “pivot” or “rebalance” to Asia “is not a goal, not a promise, or a vision—it’s a reality.”
He pointed to the ten-year Enhanced Defense Cooperation Agreement (EDCA) reached between Washington and the corrupt Aquino regime in the Philippines offering Washington virtually unrestricted rights to deploy US military forces in that country.
Similarly, he touted the close alliance established between the Obama administration and Prime Minister Shinzo Abe, who heads up the most right-wing Japanese government in postwar history.


“Consider that just three years ago, the strength of our alliance with Japan was being overshadowed by disagreement over the future of the US presence in Okinawa,” said Hagel. “Today [after a change in government that was pushed by Washington], we have a fully agreed force realignment map …We have also deployed our most advanced capabilities to Japan—including two Global Hawks at Misawa, F-22 fighter aircraft at Kadena, and MV-22 Ospreys on Okinawa.”...


US imperialism is seeking to encircle China militarily. Its aim is to utilize its residual military superiority to suppress economic and political challenges posed in Asia and on a world scale by the growth of China’s economy


15---Obama heads to Europe for week of meetings directed against Russia, wsws


Press reports suggest that Obama and Poroshenko will discuss direct US military aid to help the Kiev regime in its campaign to suppress opposition groups in eastern Ukraine, populated mainly by Russian speakers hostile to the ultra-right Ukrainian nationalists who now control the country’s government.


Washington has so far limited its aid to “nonlethal” supplies, including military rations, but may well use the May 25 presidential election—largely boycotted in the eastern third of the country—as the pretext for escalating its intervention in the Ukraine crisis by supplying weapons and ammunition as well as providing military training....


The “dialogue” pursued by Poroshenko involves the use of armored cars, artillery shells and aerial bombardment to “reduce tensions” with the people of eastern Ukraine by killing as many as possible. In the city of Slavyansk, for example, a center of opposition to the right-wing Kiev regime, Ukrainian government forces have hit residential districts with indiscriminate mortar and shellfire—actions that constitute war crimes under international law.....


The US will use the G-7 meeting to pressure its European allies, who have been reluctant to impose sweeping economic sanctions on Russia because of the consequences for their own economies. Germany relies on Russia for one-third of its energy supplies, for example, while Britain depends on the influx of capital from Russian billionaires to prop up the London financial markets....


In June 1944, as US, British and Canadian troops were storming the beaches in Normandy, Soviet troops were mopping up the last Nazi strong points in Ukraine, taking Odessa in April; capturing Sevastopol, the main port of Crimea, in May, after a protracted siege; and opening a new offensive into Byelorussia in June. At the same time, pro-Hitler Ukrainian nationalist forces—the political ancestors of the Right Sector and Svoboda—were engaged in exterminating the last remnants of the ethnic Polish population of eastern Galicia and Volhynia (present-day western Ukraine) under the protection of the retreating Wehrmacht.


16---NATO to spread wings of war due to 'eastern threat', pravda



The most discussed issue will be the defense of the allies on the eastern front in connection with the situation in Ukraine. The alliance has already enhanced air patrols of the Baltic countries, deployed ships in the Baltic and Black Seas, reinforced contingent in Poland and the Baltic countries and conducted military exercises in the region with the participation of six thousand troops, RIA Novosti reports.

"We consider it in the headquarters, whether it is enough, as several allies are worried about their security and the security of NATO. We already have plans for larger, more visible drills, we strive to improve threat-preventive procedures and crisis response plans. We are revising the abilities of NATO Response Forces, so that they could respond to any threat," a spokesperson for the alliance told reporters, commenting on the expectations of the ministerial meeting.


17---Noam Chomsky | Edward Snowden, the World's "Most Wanted Criminal, Truthout


Policy must assure the security of state authority and concentrations of domestic power, defending them from a frightening enemy: the domestic population, which can become a great danger if not controlled.....


Throughout, the basic principle remains: Power must not be exposed to the sunlight. Edward Snowden has become the most wanted criminal in the world for failing to comprehend this essential maxim.
In brief, there must be complete transparency for the population, but none for the powers that must defend themselves from this fearsome internal enemy

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