Thursday, May 26, 2016

Today's Links

1--The Looting Stage of Capitalism: Germany’s Assault on the IMF  PCR

The banks don’t want Greece to be able to service its debt, because the banks intend to use Greece’s inability to service the debt in order to loot Greece of its assets and resources and in order to roll back the social safety net put in place during the 20th century.  Neoliberalism intends to reestablish feudalism—a few robber barons and many serfs: the One Percent and the 99 percent....

Greece is being destroyed by the EU that it so foolishly joined and trusted.  The same thing is happening to Portugal and is also underway in Spain and Italy.  The looting has already devoured Ireland and Latvia (and a number of Latin American countries) and is underway in Ukraine.

2--Gross Trying to Short Credit to Reverse Four Decades of Instinct

Bill Gross, who built a career and a $1.9 billion personal fortune trading bonds, is trying to go short on credit, a position that he said runs contrary to his instincts and training as an investor.
Gross, who manages the $1.3 billion Janus Global Unconstrained Bond Fund, said he is moving to sell credit risk and insurance on market volatility rather than buying long-term debt, because he believes a day of reckoning will come when central banks will no longer be able to prop up asset prices and investors will withdraw from markets.

“It’s really hard to change your psychological makeup and to be a hedge manager that is comfortable with being short,” he said in an interview with Bloomberg’s Erik Schatzker. “I’m working on it, because I’m an investor that ultimately does believe in the system, but believes that the system itself is at risk.”

Central bankers, seeking to stimulate economies, have lowered rates below zero in Europe and Japan, driving down returns on national debt, while investors seeking higher yield have pushed up the value of other credit. Stimulus from central banks worldwide has artificially pushed up values of stocks and credit, which has made Gross cautious on such assets, he said.

Eliminating credit as an investment means “not buying stocks, not buying high-yield bonds,” Gross said. “It means going the other way, which comes at a price.”

The U.S. Fed Funds target rate is between 0.25 percent and 0.5 percent. Eventually, central bankers will have to raise rates to reward individual savers, insurance companies and other investors who depend on fixed-income returns, or the economy and markets will suffer, according to Gross

3--The Financial Invasion of Greece

IMF's concern about Greek debt is bogus, this is full scale financial war, forcing Greece give up ports, pensions, properties and much more

4--Bank of America Tipster Gets to Keep His Reward

Edward O’Donnell blew the whistle on “the Hustle,” a high-speed mortgage-selling scheme that led to a $1.27 billion fine against Bank of America BAC -0.74 % in 2014.....

The U.S. attorney’s office in Manhattan, which brought the case, had argued in a court filing that the contracts “expressly stated” that the representations about the quality of the loans were essentially renewed each time a loan was sold.

Mr. Wasinger said the average person would view the decision as a technical ruling, in which “the bank got off the hook after a jury and federal judge both found them liable.”

5--The lawsuit centered on a program at Countrywide nicknamed the hustle, which rewarded employees for producing more loans regardless of the quality....

. O’Donnell’s lawsuit said the division “continued to push loan production to record levels in spite of clear signals that there were problems with early loan repayment performance.”

6--In the U.S. and abroad, more young adults are living with their parents

(All the coverage fails to report that young people cannot find work to afford to move out....)

For many millennials, Pew's conclusions might seem both unsurprising and easy to explain: The Great Recession happened, of course!

But the rise in the number of young adults living at home started before the economic crash — and so did the possible contributing factors. Male unemployment has been on the rise for decades, Pew says. Even those who have jobs are making less than they would have in their parents' day — for young men, Pew notes, inflation-adjusted wages have been falling since 1970.

7--More Young Adults Living With Parents Than a Romantic Partner (more excuses for the shitty economy)

Pew researchers suggest several factors, including declining employment among young men in recent decades and lingering effects of the recession.  But the researchers said that the chief reason is a “dramatic drop in the share of young Americans who are choosing to settle down romantically before age 35” either with a spouse or a partner.

“Forming a new family is not nearly as important as it was for young adults,” said Richard Fry, a senior researcher with Pew, a nonpartisan think tank that conducts public-opinion polling, and does demographic and social-science research.

8--Wall Street Crime: 7 Years, 156 Cases and Few Convictions   --Proceedings against individual bank employees are rare, and authorities have had difficulty winning cases  Unprecedented corporate crime spree leads to zero convictions of higher-ups on Wall Street

The Wall Street Journal examined 156 criminal and civil cases brought by the Justice Department, Securities and Exchange Commission and Commodity Futures Trading Commission against 10 of the largest Wall Street banks since 2009. In 81% of those cases, individual employees were neither identified nor charged. A total of 47 bank employees were charged in relation to the cases. One was a boardroom-level executive, the Journal’s analysis found.

The analysis shows not only the rarity of proceedings brought against individual bank employees, but also the difficulty authorities have had winning cases they do bring...

Most of the bankers who were charged pleaded guilty to criminal counts or agreed to settle a civil case, with those facing civil charges paying a median penalty of $61,000. Of the 11 people who went to trial or a hearing and had a ruling on their case, six were found not liable or had the case dismissed. That left a total of five bank employees at any level against whom the government won a contested case. ...

The most senior banker charged in the reviewed cases was Gary Crittenden, former chief financial officer of Citigroup. The bank’s negotiations with the SEC related to his 2010 case show how the pressure on all parties to reach a settlement—rather than face expensive litigation, with the risk of losing—can affect cases against individuals.

Citigroup tried to “use whatever leverage they had” during the settlement talks to get the government to “lay off the individuals,” one unnamed SEC official said, according to a report in 2011 by the regulator’s inspector general. The agency was planning fraud charges in the 2010 case against Mr. Crittenden, who had left Citigroup by then, and another executive who was still with the bank, in parallel with a $75 million pact with the bank to resolve allegations investors were misled about its subprime-mortgage exposure.

After Mr. Crittenden refused any settlement that included fraud charges, the SEC agreed to bring the less serious charges, the report said.

The two men paid a total of $180,000 to settle their cases, without admitting liability. Mr. Crittenden’s lawyer didn’t respond to requests for comment

9--Trillions in Debt—but for Now, No Reason to Worry  

U.S. household borrowing nears precrisis peaks; global debt has already topped 2008 levels...

If current trends persist through the end of the year, U.S. households will owe as much as they did at the peak of borrowing in 2008.

Global debt has already topped 2008 levels and keeps rising. That’s pretty astonishing so soon after debt-driven crises in the U.S. and Europe and endless worries about too much borrowing in Japan, China and emerging markets.

But for all the hand-wringing, a near-term debt crisis is unlikely. Lower interest rates mean debt payments are far lower than they were before the crisis. In the U.S., household debt compared with the overall economy is way down. And overseas, loans can easily be rolled over.

U.S. households owed $12.25 trillion at the end of the first quarter, up 1.1% from the end of 2015, according to the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit, released Tuesday. If the first quarter repeats itself through the end of the year, U.S. household debt will approach its peak of $12.68 trillion, which it hit in the third quarter of 2008...

“In a  world where rolling over debt is not difficult, the sustainability of debt should be driven by interest costs,” said J.P. Morgan analyst Nikolaos Panigirtzoglou....

The losers in all of these scenarios are savers and lenders, who hardly get paid at all for providing capital—and then risk losing money in real terms....

The circumstances that allow big accumulations of debt can go on a very long time, but they never last forever.

10--Big Banks Ladle On the Risk

Hungry for revenue, Wall Street banks are taking on more risk to help companies sell large chunks of stock....

About half of all share sales by already-public companies listed in the U.S. have been block trades this year, according to data provider Dealogic. In the past five years, these deals typically accounted for about a third of all share sales, and in the past decade that figure averages about a fifth, according to Dealogic. Energy companies, in particular, have sought block trades this year to quickly raise funds and pay down debt....

But lately, ... banks have been doing a higher percentage of block-trade deals, exposing them to more risk.

The increase in such deals comes as a slump in banks’ trading revenue and the low-interest-rate environment have pressured profits.

The bankers paid $80 a share and reoffered the shares to clients for $80.10, aiming to make as much as $1.5 million, according to regulatory filings and Dealogic.

Walgreens’s stock fell 2.5%, to close at $79.43, the first day of trading after the share sale was announced. It is unclear whether Citigroup was able to flip all the shares. Walgreens’s shares closed above $80 the next three trading sessions. On Wednesday, Walgreens’s stock closed at $77.63.

11--Quantitative Easing and the Corruption of Corporate America

For every one job created in the United States in the last decade, $296,000 has been spent on share buybacks....

But now, it looks as if the trend is finally cresting. A fresh report by TrimTabs Investment Research found that companies have announced 35 percent less in buybacks through May 19th compared with the same period last year. And while $261.5 billion is still respectable (for the purpose of placating shareholders), it is nevertheless a steep decline from 2015’s $399.4 billion. Even this tempered number is deceiving – only half the number of firms have announced buybacks vs last year....

Six years on, corporate leverage is hovering near a 12-year high and domestic capital expenditures have plunged. In the interim, reams of commentary have been devoted to share buybacks and with good reason. Companies reducing their share count have, at least in recent years, been where the hottest action is, courtyard-seat level action....

The contextual backdrop is key: Just weeks before at Jackson Hole, Ben Bernanke had unleashed the mother of all stock market rallies by hinting that QE2 was indeed coming down the FOMC pipeline. The hawks were understandably hopping mad as the debate on the inside was anything but settled. Fisher indicated as much, albeit with notoriously diplomatic panache:

“In my darkest moments I have begun to wonder if the monetary accommodation we have already engineered might even be working in the wrong places. Far too many of the large corporations I survey that are committing to fixed investment report that the most effective way to deploy cheap money raised in the current bond markets or in the form of loans from banks, beyond buying in stock or expanding dividends, is to invest it abroad where taxes are lower and governments are more eager to please.”

12--Wells Fargo to Offer Low-Down-Payment Mortgages Without FHA Backing

Wells Fargo & Co. is rolling out a new mortgage for borrowers making minimal down payments, an offering that could allow the bank to step back significantly from a controversial Federal Housing Administration program ..

Wells Fargo WFC 0.11 % & Co. is rolling out a new mortgage for borrowers making minimal down payments, an offering that could allow the bank to step back significantly from a controversial Federal Housing Administration program.....The move comes as most of the country’s main banks exit from any substantial role making loans guaranteed by the FHA....

The bank’s new mortgage allows borrowers​with credit scores​as low as 620 on a scale of 300 to 850​to make down payments of as little as 3%, while also allowing them to use income from family members or renters to qualify. The requirements don’t represent a significant expansion of mortgage access, but will allow Wells Fargo to make more loans to low- and middle-income borrowers without going through the​FHA.....

In April, Wells Fargo and the government wrapped up a $1.2 billion settlement in which the lender admitted it submitted ineligible​loans for FHA backing and failed to notify the government when it became aware of the problems. With the settlement, Wells Fargo joined J.P. Morgan Chase JPM -0.63 % & Co., Bank of America Corp. BAC -1.04 % , SunTrust Banks Inc. STI -0.90 % and many other lenders that have been penalized or threatened with penalties for FHA-related problems.

13--Capex in the tank --US corps are not investing in their companies

the government just confirmed what many had said for years, namely that capex spending had been far lower than reported all along when it revised the capital goods orders nondefense ex-aircraft series lower by a whopping 6%, taking down the March print from $66.9 billion to only $62.4 billion, the lowest absolute number since early 2011.

So how did this downward revision to a critical historical series, and key driver of GDP, change the current GDP estimte?  Well, according to the Atlanta Fed, "the GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2016 is 2.9 percent on May 26, up from 2.5 percent on May 17. The forecast for second-quarter real gross private domestic investment growth increased from -0.3 percent to 0.4 percent following this morning's durable manufacturing release from the U.S. Census Bureau."
Oddly not a word about the sharp revisions to the core data

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