Monday, November 3, 2014

Today's links

1--Hedge funds pursue alternative lending, FT
In the past year some of the largest hedge funds in the UK have started investing their own money in platforms that bring together small savers and borrowers, as well as providing financing to small local businesses.

2--Every last drop of blood: The New Loan Sharks, Jacobin
The dependence of the poor on payday loans is neither natural nor inevitable. It is the result of neoliberal policies....

Before World War I, American wage earners who couldn’t make ends meet before their next paycheck relied on an insidious form of loan sharks known as salary lenders. These predators lent money at an illegal rate of interest and without collateral. They often charged annual interest rates in excess of 1,000 percent. State sanctions against salary lenders were not rigorously imposed, and the industry thrived not through the threat of physical violence, but the illusion of a legal obligation.

Fast-forward one hundred years, and salary lending has expanded, but under a different name: payday lending, a wildly lucrative industry that occupies more storefronts than McDonald’s and Starbucks combined. These new loan sharks operate under the same logic as salary lenders, but specifically target more vulnerable populations like welfare recipients, and are armed with new techniques to squeeze as much surplus as possible from debtors.....

Alongside other components of neoliberalism such as workfarism (replacing welfare provisioning with work) and prisonfare (criminalizing poverty), debtfarism aims to regulate social insecurity by expanding the credit system: payday loans, student loans, credit card debt.

3--Why Housing Is Dead: First-Time Buyers Collapse To 27-Year Lows, zero hedge

it should be no surprise that The National Association of Realtors (NAR) today admitted that first-time homebuyers plunged to the lowest level in 27 years. ...
Despite an improving job market and low interest rates, the share of first-time buyers fell to its lowest point in nearly three decades and is preventing a healthier housing market from reaching its full potential, according to an annual survey released today by the National Association of Realtors®.

The long-term average in this survey, dating back to 1981, shows that four out of 10 purchases are from first-time home buyers. In this year’s survey, the share of first-time buyers* dropped 5 percentage points from a year ago to 33 percent, representing the lowest share since 1987 (30 percent).

4---Bank of Japandemonium Resorts to “Monetary Shamanism,” and all Heck Breaks Loose , wolf street

But the QE that the BOJ has unleashed since April 2013 isn’t just QE anymore. It’s QQE: quantitative and qualitative easing. No-holds-barred QE. So in the true spirit of Halloween, Kuroda promised that the BOJ would:
  • Increase the monetary base by ¥80 trillion annually (over 16% of GDP!), up from the previous commitment of ¥60-70 trillion. In a few years, its balance sheet will exceed Japan’s GDP.
  • Increase its JGB holdings by ¥80 trillion annually, up 60% from the prior insanity.
  • Lengthen the average remaining maturity of its JGB holdings to 7-10 years, up from the current goal of 6-8 years. Before Kuroda arrived at the BOJ, the average maturity was under 3 years.
  • Triple the annual purchases of ETFs and J-REITs.
  • And keep doing all of this until hell freezes over.
The goal is to demolish the yen, savings, real wages, people’s wealth, and that onerousness mountain of debt, much of which will end up on the BOJ’s balance sheet in a few years. And it seems to be working.
As planned under the economic religion of Abenomics, inflation has roared higher. In September, prices were up 3.2% compared to a year ago, with goods prices up 4.6% and service prices up 1.9% (service providers are so pressured by struggling consumers and businesses that they’re eating the 3-percentage-point consumption tax increase rather than passing it on). Here is what that inflation looks like:...

But wages aren’t rising, so households – which do have to pay for food, energy, and the consumption tax hike – are having a hard time making ends meet. And the increasingly numerous retirees are losing purchasing power and wealth as their savings are being devalued. They’re all coming to grips with the scourge of Abenomics: “inflation without compensation.” It boils down to this, as the Statistics Bureau reported today with equally impeccable timing: In September, inflation-adjusted household incomes plunged 6.0% from a year ago.
And demand? Average monthly inflation-adjusted consumption expenditures by two-or-more-person households plunged 5.6%  from a year ago. It’s the sixth month in a row that expenditures and incomes have plunged in this manner.

The Bank of Japandemonium at work in all its glory!
Its announcement was also impeccably coordinated with another hocus-pocus announcement, this one by Japan’s Government Pension Investment Fund (GPIF). It confirmed that the mega-fund would slash its holdings of Japanese Government Bonds (JGB) down to 35% of its ¥127 trillion in assets (from 53% at the end of September). The fund will dump its JGBs at a pace that is slightly below the additional purchases by the BOJ. This way, everything remains under control. The market only gets involved for the sake of appearances. Beyond the charade, the GPIF will hand its JGBs to the BOJ.

But then the GPIF will plow the newly liberated funds into the stock market to buy up domestic and foreign stocks and foreign bonds – by June! This announcement has been made in various forms for months. Each time such verbiage hit the news, stocks jumped on cue, which was the sole purpose of those announcements.
With the total commitment to monetary shamanism artfully pronounced on Halloween during Japan’s trading hours, pandemonium followed. The Nikkei stock index instantly jumped 5%. The yen collapsed by over 3.5%. In one fell swoop, it cut a big chunk out of the still considerable yen-denominated wealth of the Japanese. And JGB yields dropped further.

5---What the Bank of Japan’s Surprise Move Means for the Global Economy, NYT

6---Housing: Buyer and seller traffic drops, Dr Housing Bubble

7---Bank of Japan’s shock stimulus further destabilizes global economy, wsws
It is indicative of the breakdown of the global capitalist economy that measures taken by the world’s major central banks to boost their own national economies contribute to growing instability internationally.
Last Wednesday, the US Federal Reserve announced the ending of its program of asset purchases as a step towards a return to a more normal monetary regime. But one of the likely effects of this move will be to promote the shift of volatile financial capital out of so-called emerging markets that have been the main source of economic growth since the financial crisis of 2008.

Likewise, Friday’s shock decision by the Bank of Japan to increase its purchases of government bonds in an attempt to lift the country out of its deflationary spiral, moving in the opposite direction to the Fed, will impact adversely on economies in the Asian region, notably South Korea and China, and will also hit the euro zone.
One of the immediate effects of the stepped-up Japanese version of “quantitative easing” will be to further push down the value of the yen, which has fallen markedly in the past three years. The currency hit a seven-year low against the dollar last Friday and has fallen 40 percent against the dollar, euro and Korean won since mid-2012, and 50 percent against the Chinese yuan.

Hans Redeker, who is in charge of Morgan Stanley’s foreign exchange strategy, told the London-based Telegraph that Japan was exporting its deflationary pressures to other countries.

“It is not clear whether other countries can cope with this,” he said. “There have been a lot of profit warnings in Korea. The entire region is already in difficulties with overcapacity and a serious debt overhang. Dollar-denominated debt has risen exponentially to $2.5 trillion from $300 billion in 2005, and credit efficiency is declining.”

8---Japan's yen is about to get pummeled—even more, cnbc

The Bank of Japan just lit a fire under the already-hot dollar-yen trade.
A surprise move Friday to supercharge the central bank's quantitative easing program sent the yen tumbling as much as 2.5 percent to a six-year low of 111.89 against the dollar.
That's on top of an 11 percent fall in the last year, driven by easy policy in Japan implemented to fight deflation and a sluggish economy, setback even further by a planned increase in the nation's consumption tax....

"The figure as it stands now is already over 50 percent of Japan's nominal GDP and this is now expected to move up to around 75 percent. That is extraordinary and unprecedented." ...

"As far as the USD/JPY is concerned, this definitely brings the 115 level onto the radar screen. We are also watching the psychologically important 1.2500 level in EUR/USD, which if or when breaks is likely to result in another big leg down in the single currency," wrote Forcheski....

The announcement by the Bank of Japan that it was adding to its purchase programs is a clear positive for the stock market that had been largely unexpected," said Tobias Levkovich, chief U.S. equity strategist at Citigroup.
"Additionally the decision by the Japanese pension fund to bump its holdings of foreign stocks to 25 percent of its monetary base establishes a new incremental buyer of shares and the U.S. should be a significant beneficiary. These new developments were not part of the Street's mindset a day ago and thus cannot be discounted as a flash in the pan since it provides some downside support to the broad market

9--Deflation a growing possibility: Bill Gross, cnbc

The roughly $7 trillion pumped into the financial system since the financial crisis by the world's three biggest central banks has succeeded mostly in lifting asset prices rather than the cost of goods and workers' wages, he said.
"Prices go up, but not the right prices," Gross wrote

10--New debt crisis fear: Subprime auto loans, cnbc

.S. regulators are also taking note. In August, both Santander Consumer and General Motors Financial Co. acknowledged receiving Justice Department subpoenas in connection with a probe over possible violations of civil-fraud laws. And the Consumer Financial Protection Bureau and the Securities and Exchange Commission have both stepped up their scrutiny of the auto-loan market.

11--Libya Falls Into the Abyss, cp

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