Thursday, June 2, 2016

Today's Links

1--House flipping heats up, creating 'home price pressure cooker'


"While responsible home flipping is helpful for a housing market, excessive and irresponsible flipping activity can contribute to a home price pressure cooker that overheats a housing market, and we are starting to see evidence of that pressure cooker environment in a handful of markets," said Daren Blomquist, senior vice president at RealtyTrac.


2--Macro and Credit - Through the Looking-Glass

This brings us further "Through the Looking)Glass" of the relationship between lending growth and the credit cycle thanks to UBS's recent take on the subject from their Global Credit Comment note from the 17th of May 2015 entitled "Bank vs nonbank lending signals: the plot thickens...":
"In corporate (non-household) lending markets we believe the proverbial plot has thickened considerably. The two key lending segments are commercial and industrial (C&I) and commercial real estate loans (CRE). For C&I lending, banks comprise less than 20% of total lending; the bond markets are the new marginal provider of liquidity (Figure 2). 
Our non-bank proxy, incorporating bond and trade finance measures of credit conditions, has been indicating more tightening than bank proxies (i.e., the Fed's SLOOS survey) for several quarters. And our proxy is still suggesting further tightening ahead, primarily given that new issuance in US high yield and leveraged loan markets remains sluggish despite recent outperformance (US HY and institutional LL issuance are down 47% and 33%, respectively, in 2016; CLO issuance is off 68% YTD). That said, the rate of tightening has slowed, as HY issuance and trade-credit standards improved in April (Figure 3). ....

we are already seeing rising delinquencies and defaults weigh on corporate profits and growth (stages 3 and 4 of our rudimentary credit cycle model outlined earlier). But for CRE loans we think there is greater cause for concern as potential harbingers of greater credit constriction emerge.
Importantly, we have yet to see much rise in delinquency and default rates – although examiners noted rising concerns over CRE credit risk for 75% of banks and expected credit risk to rise in 50% of all commercial loans at year-end...

US bond market - The warning sign from the long end....o us, there is one worrying sign in the reaction of the bond market to the better data and hawkish Fed speak unlike 2013: instead of the optimistic signal the yield curve sent during the taper tantrum, long end rates now suggests a re-ignition of the policy mistake trade. Raising June/July probabilities is a small victory that is coming at the cost of dealing with higher probability of inverted yield curves 2-years forward, in our view....


To us, this inability of the Fed to improve longer term expectations priced in to the market tows the line of igniting a bigger concern: getting dangerously close to the market pricing in inverted yield curves, 2 to 3 years forward." - source Bank of America Merrill Lynch
So go ahead "Humpty Dumpty", hike, because looking through the "Looking-Glass" of retail earnings, their respective CDS price action, the state of CRE versus lending standards continuing to tighten and the state of the "long end" of the US yield curve, we do think that you will not be able to return the US economy to its earlier state of lower entropy...


Growing mortality rates for working people are not the outcome of accidental or unavoidable processes, but rather a social counterrevolution which has been consciously directed at dramatically lowering the living standards of the working class. The impact of the implementation of multi-tier wage structures, the elimination of employer-paid health care, the eradication of defined-benefit pensions and the slashing of retiree pension benefits is finding expression in these statistics....

Decades of deindustrialization and austerity, accompanied by a dramatic rise in economic inequality and associated social ills, are finding expression in the broadest of social indicators: mortality and life expectancy.....

The long-term reversal of the social gains made by the working class has only accelerated in the wake of the 2008 economic crisis. President Obama has overseen one of the greatest transfers of wealth from the working class to the rich in world history.
Obama’s much-hailed economic recovery has seen 95 percent of all income gains go to the top 1 percent and all job growth over the last decade has come from people working as independent contractors, temps through contract agencies or on-call. Median household income has declined as workers have seen their wages and benefits stagnate or decline.

4--Lessons of the Verizon strike

5--The ECB’s Illusory Independence

6--Post-Recession Rethink: Growth Potential Dimmed Before Downturn

Something looks wrong. Just as consumer spending picks up, business investment is headed in the opposite direction: It’s down now for two straight quarters, which typically has happened only in a recession.
These numbers add to evidence that today’s subpar economic growth isn’t just an aftereffect of the Great Recession but part of a deeper malaise that predates, and indeed may have helped cause, the financial crisis.
Consider how poorly the economy has performed. Growth averaged 3% between 1980 and 2007. Since then it has averaged 1.2%. That suggests the economy’s underlying potential growth rate—what’s possible with the available work force and its productivity—has downshifted. That has left the economy 11% smaller than what the nonpartisan Congressional Budget Office thought, before the recession, would be achievable by now.

7--Jamie Dimon just sounded the alarm on auto loans

In May, the total amount of auto loans cracked the $1 trillion mark for the first time, marking a 10 percent increase. It comes as auto sales have hovered around record highs.
At more than $30,000, the average auto loan for a new car is also at an all-time high, according to Experian. Also, at more than $500, the average monthly auto loan payment is at a record

8--Mosler---Corparte profits down big...Capex, down big

Corporate Profits
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From the Bank of Canada- shows how just US oil capex spending and production has and continues to decline:
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Interesting blip up and reversal pattern here too:

9--Here's why we need payday lenders (Huh?)

10--Try this before you turn to a 390 percent payday loan

11--The OECD’s $11 Trillion Forecast Miss——Stunning Proof That ‘Stimulus’ Hasn’t Worked

12Top of the bubble?  RealtyTrac: Home flipping reaches 2-year high

13--Curbing Our Enthusiasm Over Rising Home Prices

14--The Minimum Wage and McDonald's Welfare

If the minimum wage had merely kept up with price inflation since 1968, it would currently be at $10.77. That is $22,401.60 per year, bringing wages closer to the poverty line. Beyond inflation, if it kept pace with productivity increases, it would be closer to $20 per hour; annual salary would be $41,600, higher than the U.S. median. And just for laughs, if the minimum wage kept up with the earnings of the top 1 percent, it would be higher than $22, or about $45,760.

What does all of this have to do with McDonald's and Wal-Mart? Plenty. As Bloomberg Businessweek reported earlier this year, net total public assistance to the fast-food industry is about $7 billion dollars. (This does not include future medical costs associated with diabetes or heart disease). If the minimum wage were suddenly raised to $15, it would drive fast-food prices 25 percent higher, adding a $1 to the cost of a Big Mac.

As the accompanying chart shows, employees of the industry receive more taxpayer aid than any other sector.

Just how much? More than half (52 percent) of the families of fast-food workers receive some form of public assistance. That's more than double the rate of the workforce as a whole. Most of it is through Medicaid and the Children's Health Insurance Program ($4 billion), while the Earned Income Tax Credit, food stamps, and Temporary Assistance for Needy Families program are the rest ($3 billion).

Of the 3.9 million fast-food employees in U.S., the biggest group of workers are employed by McDonald's. Estimates are their employees have received public assistance of about $1.2 billion a year since 2007. (Source: University of California at Berkeley's Labor Center and the University of Illinois at Urbana-Champaign

Another surprise about fast-food workers: They are no longer mostly teenagers. More than two-thirds are adults; more than one in four are raising children.

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