Tuesday, January 26, 2016

Today's Links

1--What’s Really Going on with Oil? F. William Engdahl

2--Already in recession?…Mosler

Recession Warnings May Not Come to Pass

Jan 24 (WSJ) — Every U.S. recession since World War II has been foretold by sharp declines in industrial production, corporate profits and the stock market. Industrial production has declined in 10 of the past 12 months, and is now off nearly 2% from its peak in December 2014. Corporate profits peaked around the summer of 2014 and were off by nearly 5% as of the third quarter of last year. The Dow Jones Industrial Average is down 7.6% so far this year. A Goldman Sachs analysis found that profit margins among the companies in the S&P 500 stock index—if energy companies are excluded—have been little changed over the past year...

3--Could Low Oil Prices Cause A Global Recession?, James Hamilton

4--So Yes, the Oil Crash Looks a Lot Like Subprime, Bloomberg

The point here is not that oil is necessarily the new subprime crisis per se but that the recent action in the price of crude resembles nothing if not the bursting of a bubble and the sudden realization that the asset has been overvalued for too long. More worrying for oil investors will be BofAML's idea of forced selling. As Flanagan notes: "The systemic margin call of 2008 seems to be back for now, albeit to a far lesser degree."....

Given that both housing and oil prices were fueled to spectacular heights in the two periods by massive credit expansion, it’s probably more than just coincidence that the respective “bubble” bursting patterns are so similar.

Consider how things tend to work. Denial on what constitutes fair value is a big component of bubbles, on the part of both market participants and policymakers. When perceived “bubbles” burst, markets take their time in steadily shredding views of the perception of fundamental value, as prices move lower and lower. Along the way, many will cite “technical factors” as the cause of the decline, which in some way suggests the price decline may not be real when in fact it is all too real. In the end, the technicals drive the fundamentals, as credit flees and borrowers go bust, and a feedback loop lower kicks in. Lower prices beget accelerated selling, as asset owners need to raise cash. It could be margin calls or it could be producer selling needs, it doesn’t really matter: the selling becomes inevitable and turns into forced selling.

5--Deutsche Bank Declares War On Mario Draghi, Warns Him Any Further QE Will Push Stocks Lower

6--3% Downpayment FHA Loans Surge As Subprime Buyers Are Back In The Housing Market

First-time homebuyers are finally jumping into the U.S. property market.
Need proof? Look at the mortgage market’s fastest-growing segment: loans with low down payments insured by the Federal Housing Administration.

Originations of FHA-backed mortgages, used predominately by first-time buyers, were up 54 percent in September from a year earlier, according to the most recent data from CoreLogic Inc. By December, the FHA insured 22 percent of all loan originations, up from 17 percent a year earlier, according to data compiled by Ellie Mae Inc.
Yes you read that right. Up 54%. 

President Barack Obama’s administration, in January 2015, reduced mortgage-insurance premiums for FHA loans. That lowered the cost of getting a home loan and brought in at least 75,000 new borrowers with credit scores of less than 680, according to a November report from the U.S. Department of Housing and Urban Development.

The rate of FHA lending, which had been in decline through most of 2014, tripled the month after the insurance premium was cut, according to CoreLogic.

7--Former BIS Chief Economist Warns of Massive Debt Defaults, Need for Debt Jubilee; Fingers Europe as First in Line

8--IRA terrorist behind 1993 Belfast bombing was ‘MI5 informant’ – leaked documents

9--Belgian security was aware of Paris attackers’ terror cell since 2012 - report

10--‘Horrific experiment’: MI Gov. Snyder slammed for power grabs from minority communities, cronyism

11--Visas for Al-Qaeda: CIA Handouts That Rocked the World

This revelation by NYT adds additional weight to the allegations made in a book by Mike Springmann, former head of the US visa section in Jeddah, Saudi Arabia, from1987-1989. In Visas for al-Qaeda: CIA Handouts that Rocked the World, Springmann details how, “during the 1980s, the CIA recruited and trained Muslim operatives to fight the Soviet invasion of Afghanistan. Later, the CIA would move those operatives from Afghanistan to the Balkans, and then to Iraq, Libya, and Syria, traveling on illegal US visas. These US-backed and trained fighters would morph into an organization that is synonymous with jihadist terrorism: al-Qaeda.”

“I Know. I Was There. I Issued The Visas”...

“As I later learned to my dismay, the visa applicants were recruits for the war in Afghanistan against the Soviet Union’s armed forces. Further, as time went by, the fighters, trained in the United States, went on to other battlefields: Yugoslavia, Iraq, Libya, and Syria.”...

Likewise, Springmann says, it was a CIA “consular officer” at Khartoum in Sudan who issued a tourist visa to Sheikh Omar Abdel Rahman, later linked to the World Trade Center bombing in 1993. The “blind” Sheikh had been on a State Department terrorist watch list when he was issued the visa, entering the United States by way of Saudi Arabia, Pakistan, and Sudan in 1990....

In a chance meeting, Joe Trento, a journalist at the Public Education Center in Washington, DC, put into perspective for Sprigmann what had been really going on with the CIA in Jeddah.

“It wasn’t a garden variety visa fraud as I had once thought, but something much more serious: it was a ‘visas for terrorists program,’ set up to recruit and train (in the United States) murderers, war criminals, and human rights violators for combat in Afghanistan against the Soviet Union. These men became the founding members of al-Qaeda, the Arab-Afghan Legion.”...

“These were the people who arranged for recruiting and training what were then the mujahedeen, who later became al-Qaeda, who then transformed themselves into ISIS. I saw, but didn’t recognize, their start at Jeddah. We’ve all seen their later development and what happens when the intelligence services control foreign policy and diplomacy: the people they assembled aided the breakup of Yugoslavia, the destruction of Iraq, the collapse of Libya, and the savaging of Syria.”

12--Bond Yield Curve Holds Predictive Powers
13--Roach nails it, Stockman
14--What Recovery? Koo

15--30-year mortgage rates continue to fall

What’s up with mortgage rates? Jeff Lazerson of Mortgage Grader in Laguna Niguel gives us his take.

From Freddie Mac’s weekly survey: The 30-year fixed rate dropped 11 basis points, landing at 3.81 percent from last week’s 3.92 percent. The 15-year fixed landed at 3.10 percent, 9 basis points lower than last week’s 3.19 percent.
BOTTOM LINE: Assuming a borrower gets the average 30-year fixed rate on a conforming $417,000 loan, last year’s rate of 3.63 percent and payment of $1,903 was $42 less than this week’s payment of $1,945.

16--How Michigan Governor Rick Snyder knowingly poisoned and killed civilians with lead

DR. MONA HANNA-ATTISHA: Yeah. So, in late August, we were hearing reports from the Virginia Tech group that there was lead in the water. And when pediatricians hear about lead anywhere, we freak out. We know lead. Lead, as you said, is a known potent, irreversible neurotoxin. So we wanted to see if that lead in the water was getting into the bodies of children. So that’s when we started doing our research.

And what we found was alarming, but not surprising, based on what we knew about the water. The percentage of children with elevated lead levels tripled in the whole city, and in some neighborhoods—actually, it doubled in the whole city, and in some neighborhoods, it tripled. And it directly correlated with where the water lead levels were the highest. So we shared these results at a press conference, and you don’t usually share research at press conferences. It’s supposed to be shared in published medical journals, which now it is. But we had an ethical, moral, professional responsibility to alert our community about this crisis, this emergency....

17-- Rebel Defences Crumbling In Latakia Province, Patrick BAHZAD

The Fall of Salma

Things had started to move early last week, when the SAA, NDF and local militias moved into Salma, the rebel stronghold that was key to defensive positions South of the M4 highway linking Latakia to Idlib. After weeks of preparations and softening up defences, R+6 finally moved in and there was not much the various rebel groups could have done at that point to stop or reverse this trend. ...

... Once the strategic breaking point is reached though, the side having gained the upper hand usually pushes through, which results in the opponent's posture crumbling under the pressure. This is what happened with Salma, a former mountain resort North-East of Latakia... When R+6 went for their final assault, Salma had already become untenable. Its loss meant that the whole defensive line South of the M4 highway was compromised and both SAA advances and "tactical" retreat by the rebels made for a very quick correction of the frontline in the area.

Focus on Rabiah

As a consequence, R+6 were able to reach and cross the M4 at Sheekhaneh, taking over Mount Baradun as well as the Baradun dam. Almost simultaneously, operations started towards Rabiah, the main rebel stronghold in the Jabal Turkmen and HQ to the FSA's "First Coastal Division". The inroads made by the SAA, with CAS from the RuAF, again proved decisive against a rebel frontline that had already been destabilized by the loss of Salma and the prospect of being cut off from their LOCs with Jisr al-Shughur.

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