From James Harkin (Webmaster & Editor of LindseyWilliams.net). Here is a summary of articles of interest from around the world for this week. Please LIKE the Lindsey Williams Online Facebook Page to see stories posted daily regarding the current state of the economy around the world.
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Latest News From July 22, 2016 to July 28, 2016:
- The U.S. Presidential Election is a Mess – Thank Goodness!
Let's put in bluntly: the United States Presidential election campaign is a complete and utter mess. We are looking a country that is deeply divided on key and fundamental differences. We are looking at two potential leaders that stand in stark difference to one another and are attracting very different supporters because of this. Thank God! Finally, we are seeing a campaign that is different. Finally, we are seeing an election cycle that your vote will make a difference. In the past, any Presidential candidate you voted for was typically controlled by the same financial elite pulling their strings. They have been the puppet masters behind the scenes for decades. Arguably, we have not seen a real President of the United States since the era of Reagan, and even he was made to step in line after his botched assassination attempt. - Stocks Were Already Crashing the Last Two Times this Happened. So What Gives?
Over the last 20 years, margin debt – when investors buy stocks with borrowed money – went through three multi-year run-ups, each topped off with a spike, followed by a reversal and decline: during the final throes of the bubbles in 2000 and 2007, each followed by an epic stock market crash – and now. That pattern of jointly soaring and then declining margin debt and stocks even occurred during the run-up and near-20% swoon in 2011. - Contagion from Italy’s Bank Meltdown Spreads
Without a taxpayer-funded bailout that directly contravenes the Eurozone’s new bail-in rules, the world’s oldest surviving bank, Monte Dei Paschi, could soon be out of business. Shares of the decrepit financial entity have long been reduced to a penny stock. So far this year, they’ve lost 78% to close on Tuesday at an inconsequential €0.28. The closer it comes to its end, the louder the calls for its rescue. Last week saw two out of three of the members of the institutional triad formerly known as the Troika — the ECB and the IMF — lend their support to a taxpayer funded bailout of Italy’s banking system. So, too, did the biggest U.S. bank by assets, JP Morgan Chase. - Armageddon Approaches — Paul Craig Roberts
The Western public doesn’t know it, but Washington and its European vassals are convincing Russia that they are preparing to attack. Eric Zuesse reports on a German newspaper leak of a Bundeswehr decision to declare Russia to be an enemy nation of Germany. This is the interpretation that some Russian politicians themselves have put on the NATO military bases that Washington is establishing on Russia’s borders. Washington might intend the military buildup as pressure on President Putin to reduce Russian opposition to Washington’s unilateralism. However, it reminds some outspoken Russians such as Vladimir Zhirinovsky of Hitler’s troops on Russia’s border in 1941. - Deutsche Bank Profit Plunges 98% And The Worst Is Yet To Come
The latest confirmation that Germany's troubled banking giant Deutsche Bank is unable to navigate the troubled waters of NIRP came on Wednesday when the bank announced that its second-quarter net income fell 98% from a year earlier, hurt by weaker performances in trading, investment banking and other core areas. The lender said net income tumbled to €20 million ($22 million) from €818 million a year earlier, modestly better than the €22mm loss expected, while net revenue dropped 20% to €7.4 billion. After rebounding modestly on the beat, the bank’s shares fell tumbled 5% on Wednesday morning, their lower level in 2 weeks; today's decline has dragged DB stock 45% lower in 2016, making it one of Europe's worst performers YTD (the Stoxx 600 is down 27% in 2016). - Gold Price Set To Skyrocket To $2,300 In 22 Months!
With continued volatility in key global markets, the gold price is set to skyrocket to $2,300 in 22 months! There is also a remarkable chart included in this fantastic piece. Gold Is Back! The instability of growth induced by credit expansion, which we routinely criticize, is impressively illustrated by the following chart. Since 1959, “total credit market debt” – the broadest debt aggregate in the US – has increased by 9,100%, its annualized growth rate amounts to 8.26%. In every decade, outstanding debt has at least doubled. In order to get credit-induced GDP growth to restart again after the volume of total outstanding debt dipped slightly for the first time in 2009, the Fed implemented a series of never before seen monetary policy measures. - You’re Likely Committing a Crime Right Now
Do you own a dog? You could face six months in federal prison If you walk it on federal lands on a leash longer than six feet in length. Do you have a bank account? If you deposit or withdraw more than $10,000 in cash over multiple transactions, you could be imprisoned for up to five years. You could also lose every penny in the account, under the theory it “facilitated” your crime. Do you have foreign investments? If you neglect to tell Uncle Sam about them, you could face draconian penalties. Forget to file just one form? You could face a $10,000 penalty per account per year. There’s no requirement that you know any of these crimes exist for you to be found guilty of violating them. After all, “Ignorance of the law is no excuse.” - Halliburton Reports A Negative Income
On Wednesday, Halliburton released their earnings reports, revealing a $3.21 billion loss. That amounts to a $3.73 per share loss. The firm also announced that they cut another 5,000 jobs in the second quarter. During the same period last year, Halliburton managed to turn a $54 million profit. Much of the Halliburton loss was due to the $3.5 billion payment to Baker Hughes after the failed merger earlier this year. The combination of the two companies faced opposition from multiple international antitrust organizations. - Terror Attacks And Mass Killings Are Becoming A Daily Event
Terror attacks and mass killings are happening so rapidly now that it is really difficult to keep up with them all. In fact, as you will see below, so far there have been several this week alone. This latest attack in France during which radical Islamic terrorists slit the throat of a Catholic priest was particularly disturbing. Just a few days ago I warned that churches in the western world would be targeted, and now it is happening. According to thereligionofpeace.com, there have been 1274 Islamic terror attacks in 2016. These attacks have been spread across 50 different nations, and as a result of these attacks more than 11,000 people have been killed and more than 14,000 people have been injured. When are we going to finally wake up and understand how serious this threat really is? Very few people would have imagined that a sleepy Catholic church in France would be the target of an Islamic terror attack on Tuesday morning, but that is precisely what happened. - Questionable Libyan Oil Deal Could Further Escalate Oil War
Tripoli-based National Oil Corporation of Libya (NOC) chairman Mustafa Sanalla has protested to the U.N. envoy to Libya Martin Kobler over a deal struck with militia strongman and Petrol Facilities Guards (PFG) head Ibrahim Jadran to resume Libyan oil exports through the key terminals of Ras Lanuf, Es Sider and Zueitina. In a letter obtained by Oilprice.com, Sanalla describes the deal as a big mistake that essentially rewards Jadran for his blockade of Libyan oil exports for three years, which resulted in US$100 billion in losses to the Libyan government. UN envoy Kobler flew to Ras Lanuf on 21 July to meet with the controversial PFG leader, after which the two announced in a joint press conference that oil exports would now be resumed through the ports. - Study: NC Green Energy Law Will Destroy 50,000 Jobs
North Carolina’s green energy mandate will end 50,000 mostly manufacturing jobs and cost $7 billion by the end of the decade, according to a new study by a scientist from the University of Wyoming. The study found that the North Carolina Renewable Portfolio Standard (RPS), which requires 12.5 percent of the state’s power comes from green energy by 2020, will increase electricity prices by 42 percent. The rate hike will cost the state billions, and destroy 50,000 jobs, mostly in the manufacturing and services sectors. - What Will Happen To Turkey’s Energy Security Following The Failed Coup?
On July 15, 2016, a new chapter opened in Turkish political history. A group of military officers attempted a coup to overthrow the Erdogan regime in Turkey. Recep Tayyip Erdogan was elected as President of Turkey in August 2014, and since then Turkish politics has been experiencing turbulence. The most common criticisms of the Erdogan regime include allegations of corruption, restrictions of freedom, and foreign policy crises, such as with Syria and Russia. It is expected that the post-coup attempt period will also be unsteady. According to some experts, Erdogan may take advantage of the coup attempt to set up a more authoritarian system. As a matter of fact, experts consider it likely that there will be another coup in the months or years to come. The question is, while Turkish politics is in upheaval, what will happen to Turkey’s energy security? - Erdogan shuts down 1,000+ private schools, 1,200+ charities, 15 universities
Turkey’s purge of Gulen supporters continued on Saturday with the closure of hundreds of private schools, charities and other institutions suspects of links with the US-based cleric. Ankara declared a state of emergency after a failed military coup. The decree issued by President Recep Tayyip Erdogan is his first since the state of emergency was declared on Wednesday. He has ordered the closure of 1,043 private schools, 1,229 charities and foundations, 19 trade unions, 15 universities and 35 medical institutions, state news agency Anadolu reported on Saturday. The organizations slated to be shut down are suspected of links with US-based Muslim cleric, Fethullah Gulen, a former ally of Erdogan, who turned into his fierce opponent. The Turkish government accused Gulen of having a hand behind the last week’s coup attempt as well as earlier attacks on it. - Italy Races To Arrange €5 Billion Bailout For Monte Paschi Before Friday's Stress Test
As we noted over the weekend, Italy's bank stress test the result of which is due out on Friday, is a “near-term stress event”, and one which Italy's most troubled bank, Monte dei Paschi di Siena, is expected to fail. It is Monte Paschi's massive non-performing debt load that is also the reason why over the past month Italy's Prime Minister Matteo Renzi has been desperately spinning Brexit as a catalyst event which would get Germany's blessing to enact a taxpayer-funded, public, bailout of not just the world's oldest, and Italy's third largest, bank but also of the entire Italian banking sector. Alas that has not panned out as expected, and Italy never got Germany's – or Dijsselbloem's – permission to launch another TARP. Which explains why moments ago the FT reported that Italy was last night “racing to secure a privately backed bailout of Monte dei Paschi di Siena, the most exposed of the country’s troubled lenders, including a plan to raise €5 billion of fresh capital so as to avert nationalisation, according to bankers and European officials.” - These Are The Best And Worst U.S. Cities To Own A House
Earlier today, in its latest update looking at March home prices, Case Shiller pointed out that “home prices continue to appreciate across the country”, at just over 5%, a pace that has held since early 2015. Actually that is an understatement: in 16 of 20 of the tracked metro areas, the pace of home appreciation over the past year was 5% or higher, or equivalent to more than twice the pace of core inflation. And with rents continuing to soar across the country, in many cases at a double digit clip, not to mention exploding healthcare costs, one wonders just what the BLS “measures” with its monthly CPI update. - Nigeria Says “Don't Panic, Banks Are Fine” Amid Currency Collapse, Inflation Spike Concerns
A month ago we warned of the looming hyperinflation coming to Nigeria (as well as much of Africa). It appears, following the central banks' rate hike to a record 14% (reach for yield anyone) in an attempt to stall the ongoing currency collapse, that Emefiele is worried, warning of “concern over headline inflation spike.” Perhaps most worrying though, amid the chaos, Emefiele advised depositors in banks “to go about your business,” adding that there was “no need to panic or worry.” Hhhmm… The rate hike is not working, Spot Naira is tumbling on the day to record lows, and forward rates are signaling much more to come… but don't let that stop Emefiele from jawboning… *NIGERIA'S EMEFIELE:`SO FAR, SO GOOD' ON NEW FX REGIME - One Analyst's Surprising Indicator Why Recession Is Coming In Early 2017
Stifel analyst Paul Westra downgraded the restaurant industry in a note released today, slashing estimates and ratings on 11 stocks in the sector, while warning that a slowdown in the restaurant industry is a harbinger for an overall economic recession. The report warns that the restaurant industry is facing a perfect storm of slowing demand, rising minimum wage mandates across the country and minimal opportunity for commodity cost declines. This fits with the thesis laid out by KeyBanc analysts last week, suggested last week when upgrading Papa John's Pizza on the expectations that the recent surge in political unrest and terrorism fears would prompt more Americans to stay at home and order food instead of eating out. - New Legislation Proposes To “Bail-In' Social Security
It was only a few weeks ago that I told you about the government’s annual report on Social Security. It was a veritable death sentence for the program. The Board of Trustees for Social Security (which includes the US Treasury Secretary) wrote that major parts of the program have already run out of money, and the rest of Social Security will run out of money in the next decade. Amazing. Even Social Security knows that they’re bankrupt and unable to keep their promises to taxpayers. - Zimbabwe government asks workers to work for free as government is broke
SPEAKER of Parliament Advocate Jacob Mudenda on Friday called on workers to work overtime and expect not to be paid extra remuneration. Mudenda said this would steer productivity and ensure companies remain afloat than for them to retrench workers because of low production. He was speaking at the Institute of People Management of Zimbabwe (IPMZ) convention in Victoria Falls, where he also advocated for empathy among workers and directors. The convention which ended Saturday was being held under the theme “Igniting human resources in the changing environs-evolve, transform and add value” and was attended by human resources managers and directors from private and public companies countrywide. Mudenda told the managers that they should strive to create an environment that would compel workers to provide labour for no extra-pay. - RBS Customers May Face Negative Interest Rates
The RBS banking group has warned 1.3 million customers they could be charged negative interest rates if the Bank of England cuts base rates below zero. The group, which includes NatWest, wrote to its business and commercial account holders about the potential changes, which mean they could lose money even when they are in credit. The letter said: “Global interest rates remain at very low levels and in some markets are currently negative. “Dependent on future market conditions, this could result in us charging on credit balances.” - More Abenomics Failing—-Japan’s June Exports Down 7.4% Y/Y, Ninth Consecutive Monthly Drop
Japan’s exports dropped again in June, with shipments down for a ninth consecutive month, underscoring the continuing challenge of reviving the nation’s economy. Key Points: Overseas shipments declined 7.4 percent in June from a year earlier, the Ministry of Finance said on Monday. This was better than the median estimate of economists surveyed by Bloomberg, which pointed to an 11.3 percent drop. Imports slid 18.8 percent, leaving a trade surplus of 692.8 billion yen ($6.5 billion). Japan had a trade surplus of 1.81 trillion yen in the January-June period, the first surplus since the second half-year of 2010. - Morgan Stanley Predicts Plummeting Oil Prices – $35 Likely
The price of oil will likely continue to falter in the latter half of this year amid an oversupply of gasoline, according to a Morgan Stanley study published last Sunday. The Morgan Stanley analysts predicted numerous “worrisome trends” for the supply and demand of oil, chief of which is an excessive production of gasoline by refineries. The study’s authors believe that faced with the need to cut back on capacity utilization to protect profit margins, these refineries will cut back on crude oil purchases and drag prices lower in an attempt to protect profit margins. “Crude oil demand is trending below refined product demand for the first time in three years…Given the oversupply in the refined product markets, fading refinery margins, and economic run cuts, we expect crude oil demand to deteriorate further over the coming months,” the report detailed. - Trump Forsees A Grim Future For The US Economy…
Trump Got It Right Again. However, the mainstream media isn't saying a word about it! What are they really trying to cover up? Are we really entering the final phase of the financial system? Trump knows that this may be the final bubble. - Oil Bulls Headed Over Demand Cliff as Refinery Shutdowns Loom
Beware, oil bulls: Just as U.S. oil production sinks low enough to drain supplies, demand is about to fall off a cliff. American gasoline consumption typically ebbs in August and September as vacationers return home, and refiners use that dip to shut for seasonal maintenance. Over the past five years, refiners’ thirst for oil has dropped an average of 1.2 million barrels a day from July to October. - G-20 Meeting Ends With Rising Discord Between China And US
Over the weekend, the Group of 20 convened in yet another meeting in Chengdu, China, where they reiterated a long-running pledge to use all policy tools to help boost confidence and growth, but instead of emphasizing monetary policy the group said they would focus on fiscal and structural measures. Then again, since incremental fiscal stimulus would likely result in additional central bank monetization in order to avoid a steep selloff in government bonds and risk a yield spike, what the G-20 really did is set the stage for even more central bank-funded deficit spending, aka soft helicopter money. - Hong Kong On The Edge—–Debt And Property bubble fixing to Burst
Hong Kong’s economy can’t hold on for much longer. For one thing, the territory is in the midst of two large bubbles. One is a credit bubble, similar to the one in China. Since 2008, the ratio of private nonfinancial credit to GDP has surged to 281% in Hong Kong. The other is Hong Kong’s infamous property bubble. Since 2008, property prices have risen 105%. Prices peaked in August of last year, and have been declining since — a correction of 14% that has put the property market in “free fall” and contributed to a growth slowdown — but remain higher than they were in 1997, when the last bubble burst. - Goldman Warns Of A Sharp Plunge In Stocks In “Next Few Months”
That Goldman's David Kostin has been warning about the possibility of a sudden, sharp drawdown in the market, is not new: we first reported on that in early May when we presented “Six Reasons Why Goldman Is Suddenly Warning About A “Large Drop” In The Market” in which we cited the head Goldman equity strategist who said that “unbalanced distribution of upside/downside risks suggests “sell in May” or buy protection.” He adds that “we continue to expect S&P 500 will end 2016 at 2100, roughly 3% above the current level even as “a shift in investor perception of various risks could easily trigger a drawdown.” - Donald Trump is Right About Globalization: It’s a Broken System
While seemingly elegant in theory, globalization suffers in practice. That is the lesson of Brexit and of the rise of Donald Trump in the United States. And it also underpins the increasingly virulent anti-China backlash now sweeping the world. Those who worship at the altar of free trade, including me, must come to grips with this glaring disconnect. Truth be known, there is no rigorous theory of globalization. The best that economists can offer is David Ricardo’s early-19th century framework: If a country simply produces in accordance with its comparative advantage (in terms of resource endowments and workers’ skills), presto, it will gain through increased cross-border trade. Trade liberalization — the elixir of globalization — promises benefits for all. - The Last Two Times P/E Multiples Expanded This Much, The Result Was A Historic Crash
It’s not just former Fed economists who are getting worried. So is Goldman. As we wrote last weekend, “With “Stock Valuations At Extremes” Goldman’s Clients Are Asking Just One Question“, namely how much longer can the rally continue. This followed another Goldman warning from two weeks ago, where as we noted before, “Goldman Warns Of A Sharp Plunge In Stocks In “Next Few Months.” Who knows: maybe Goldman will be right and the market will plunge – it certainly isn’t trading at all time highs and 25x GAAP multiples on fundamentals. But for now those who heeded Goldman’s warning and traded ahead of a 10% “pullback” have gotten crushed. - John Pilger: Why Hillary Clinton Is More Dangerous Than Donald Trump
The following is an edited version of an address given by John Pilger at the University of Sydney, entitled ‘A World War Has Begun’. I have been filming in the Marshall Islands, which lie north of Australia, in the middle of the Pacific Ocean. Whenever I tell people where I have been, they ask, “Where is that?” If I offer a clue by referring to “Bikini”, they say, “You mean the swimsuit.” Few seem aware that the bikini swimsuit was named to celebrate the nuclear explosions that destroyed Bikini island. - Japan government planning at least 20 trillion yen to support economy: Kyodo
The Japanese government is planning to compile a stimulus package of at least 20 trillion yen ($186.60 billion) to help the economy emerge from deflation and fend off possible adverse effects of Brexit, Kyodo reported on Thursday, citing sources close to the matter. The stimulus package is likely to be double the 10 trillion-plus yen that was previously expected, as it will now include projects for fiscal 2017 and beyond and increase “zaito” low-interest government loans by 6 trillion yen, Kyodo reported, citing the sources. - Reserve Bank hints at rate cuts, dollar falls
The Reserve Bank is set to cut its cash rate next month to a record low and may deliver further cuts later in the year, to counter risks to economic growth, low inflation and a high dollar. The central bank this morning gave a clear signal of lower interest rates, which knocked the New Zealand dollar almost 1 percent lower. “At this stage it seems likely that further policy easing will be required to ensure that future average inflation settles near the middle of the target range,” Reserve Bank Governor Graeme Wheeler said in an unscheduled economic update. - Philly Fed Slumps To 6-Month Lows As National Activity Index Jumps To 6-Month Highs
In the first wave of macro data today, initial claims beat expectations, dropping to 253k near record lows (but remains wildly divergent from tumbling consumer confidence). Following June's rebound in Philly Fed, July missed expectations tumbling to six-month lows, back to a contractionary -2.9 (against expectations of a flat print of +4.5). Finally, Chicago Fed's National Activity Index surged unexpectedly to six-month highs (+0.16 vs -0.20 exp) but the smoother 3-month avg remains in contraction for its 17th straight month. If the jobs market is so awesome, judging by initial claims near historic lows, then why is US consumer's economic confidence collapsing? - Plan to Solve Puerto Rican Debt Crisis Already Off the Rails
Efforts to solve the Puerto Rican debt crisis have already run off the rails. Late last month, Congress passed a bill allowing Puerto Rico to restructure its debt. Under the plan, the US territory essentially declared bankruptcy. The US government won’t expend funds to bail out Puerto Rico, but will allow the island’s government to pay back debtors at less than 100%. Although the bill doesn’t say so explicitly, for all practical purposes it created a bankruptcy process for the island. - Two-year Brexit ‘shadow' looms over global economy concedes Philip Hammond
The result of the EU referendum will “hang over the world economic outlook” until at least 2018, Philip Hammond has said on the sidelines of the G20 finance ministers' meeting in Chengdu, China. While the chancellor conceded that a two-year Brexit “shadow” looms, he said it is “just one of many sources of uncertainty that the world's economic governance mechanisms have to deal with.” Speaking to Sky News, Hammond said: “It [the EU referendum result] was a shock to the economic system. It was not something that markets or businesses were expecting. “So obviously there was going to be a reaction, a response to that,” he added. “And because there will now be a fairly lengthy negotiating period, there is going to be uncertainty about the outcome hanging over the world economic outlook for perhaps the next couple of years.” - After NATO, the WTO: Trump ready to rip up post-war order
Toughening immigration checks for the French and Germans, questioning NATO obligations and hinting at an exit from the World Trade Organization: Donald Trump cast further doubt Sunday on US alliances and commitments around the world. In his first wide-ranging interview since he was crowned the Republican Party's White House nominee, the billionaire and political novice spelled out his stance on a slew of foreign policy, international trade and national security issues. If he wins in November, he told NBC's “Meet the Press,” France and other nations hit by recent terror attacks would be subjected to “extreme” immigration checks as a deterrent to attacks on US soil. - Central Bank Wonderland is Complete and Now Open for Business — The Epocalypse Has Fully Begun
Summer vacation is here, and the whole global family has arrived at Central-Bank Wonderland, the upside-down, inside-out world that banksters and their puppet politicians call “recovery.” Everyone is talking about it as wizened traders puzzle over how stocks and bonds soared, hand-in-hand, in face of the following list of economic thrills. - DAVID MORGAN: After the ship has sunk, everyone knows how it might have been saved.
Phil interviews the silver guru David Morgan to discuss the recent momentum and long-term upside in the silver market. Phil and John cover Brexit and some of the action in the precious metals market since the June 23rd vote. - Oliver Stone: Pokemon Go is a New Stage in “Totalitarism” and “Surveillance Capitalism”
Film director Oliver Stone believes that Pokemon Go is a tool capable of collecting massive amounts of data about its users and represents a step towards “robot society”. The director of Platoon, Wallstreet and JFK was at Comic-Con 2016 in San Diego to discuss his new movie Snowden. Considering the topic of the movie, the panel were discussing the NSA, online privacy and government surveillance. A question from a fan lead Oliver Stone to lash out against today’s newest worldwide phenomenon: Pokemon Go. - Kmart workers believe all the stores are going to be imminently shut down
Kmart employees believe the company is nearing bankruptcy and is in the process of shutting down all its stores. The chain has closed one-third of its stores in the last decade, and sales have been cut in half in the same time period. Store-level employees who spoke to Business Insider said many of the remaining 941 Kmart stores now appear to be in the midst of liquidation. Stores are being entered into numbered phases — such as Phase 1 and Phase 2 — employees said. - Hammond Seeks Brexit Business Boost In China
The Chancellor has arrived in China to promote Britain as a destination for “new opportunities” in the wake of the Brexit vote. It is Philip Hammond's first trade trip since his appointment – with the significance of the destination underlined by the Treasury which said the UK was currently home to more Chinese investment that any EU country. It said this would be the first of several such visits to key economic partners following the referendum. - Zimbabwe Misses Own Deadline to Pay $1.8 Billion; Pays None
Zimbabwe failed to repay $1.8 billion to the International Monetary Fund, the World Bank and African Development Bank by its own June 30 deadline. “Right now, we’ve not paid anything,” John Mangudya, Zimbabwe’s central bank governor, said by phone from the capital, Harare, on Thursday. “That is why we have this re-engagement process with international financial institutions.” Finance Minister Patrick Chinamasa said earlier the country would repay at least $1.8 billion by the end of June to be able to resume borrowing in a bid to revive an economy that’s half the size it was in 2000. Zimbabwe owes $110 million to the IMF, $1.1 billion to the World Bank and $601 million to the African Development Bank, Mangudya said in an e-mailed response to questions on Thursday. - Sinking Yields Drag Investment Income to 12-Year Low at Insurers
U.S. property-casualty insurers’ quarterly investment income dropped to the lowest since 2004 as falling bond yields pressured the industry. The figure fell to $10.9 billion in the three months ended March 31 from $11.7 billion a year earlier, according to a report Thursday from the Property Casualty Insurers Association of America and ISO, a unit of Verisk Analytics Inc. The annualized yield on the industry’s portfolio fell to 2.9 percent from 3.1 percent. That compares with an average of 3.8 percent over the past decade and peaks of more than 8 percent in 1984 and 1985. - Spanish Slapdown Shows Timing Matters When Breaking EU Rules
Spain might justifiably claim to be the victim of unfortunate timing and an arbitrary application of rules. Under European Union principles, countries should keep their budget deficits below 3 percent of gross domestic product. This matters now more than ever, because persistent infringements of the EU’s rules on budgets have helped erode confidence in the bloc and its currency, the euro. What the euro area needs now more than anything is confidence that it will survive. Spain has breached the measure every year since 2008 — a total of eight times. With neighboring Portugal falling short 15 times, it can't come as a total surprise that the two are about to become the first EU nations to be slapped with a fine for running an excessive deficit. - China Fuels Speculation Debt-for-Equity Swaps Starting Soon
China’s cabinet fueled speculation that the nation is pressing ahead with debt-to-equity swaps that would give lenders stakes in some companies as part of tackling a build-up in corporate leverage and bad loans. A brief reference in a statement on Monday to letting financial institutions hold stakes in companies in a trial indicated that the swaps are coming soon, according to China Merchants Securities Co. analyst Ma Kunpeng. Caixin magazine reported that the State Council was signaling the start of the program, citing an unidentified person close to the authorities. - Bank of America second quarter profits fall 19%
Bank of America reported a 19% slide in profit in the second quarter, as persistently low interest rates hurt the bank's loan business. The bank made just $3.89bn (£2.93bn) in profit during the period between April and June, down from $4.8bn last year. The results still beat analysts expectations, and Bank of America's shares rose 1.8%. Profits across US banks have been hit by the Federal Reserve's low interest rate policy. - Obamacare company shutdown leaves customers in a lurch, facing higher costs
Ken Sullivan bought health insurance for his family this year from Land of Lincoln Health, a small, nonprofit company in Chicago. The 52-year-old Chicagoan knew the purchase was a risk because the three-year-old insurer was struggling financially. But he said he didn't have much choice after Blue Cross and Blue Shield of Illinois eliminated his plan last year and its alternative didn't include any of his family's doctors and hospitals. Now his worst fears have come true. The Illinois Insurance Department moved Tuesday to shut down Land of Lincoln because of its unstable financial health, leaving about 49,000 policyholders in a lurch. They will lose coverage in the coming months, but neither regulators nor the company have said exactly when. - Singapore Seeks U.S. Chapter 11 Prowess in Bankruptcy Reform
Singapore is seeking to enhance its position as a center for debt restructuring by giving its insolvency law some of the powers of the U.S. bankruptcy code’s Chapter 11, just as companies worldwide default on bonds at the fastest pace since the global financial crisis. The government has “broadly accepted” 17 recommendations submitted by a committee after a yearlong review, the Ministry of Law said in a statement. Those include offering automatic stay of legal and enforcement actions for debtors, creating a bench of specialist judges for its bankruptcy court and increasing rescue-financing capital by enticing distressed-debt funds and private equity firms to set up shop in the city-state. - India introduces first bankruptcy law
India is the world's fastest-growing major economy, but just five years ago it was a very different story. Growth had slowed and many businesses could not repay money they had borrowed. That hit the country's banks hard – and some are still swamped with bad debts. Now India has put in place its first bankruptcy laws – designed to try and help lenders. - Puerto Rico Sued for Diverting Cash After Federal Law Passed
A group of hedge funds sued Puerto Rico Governor Alejandro Garcia Padilla, claiming the island government is using a default on its debt to shirk its responsibility to pay bondholders. Puerto Rico defaulted on almost $1 billion of principal and interest on July 1 as Garcia Padilla said the commonwealth was unable to pay creditors and continue essential services. It happened one day after President Barack Obama enacted a law, called Promesa, creating a federal control board to oversee the restructuring of the commonwealth’s $70 billion of debt. The law also shields Puerto Rico from creditor lawsuits seeking repayment. - 19.4 Trillion Dollars In Debt – We Have Added 1.1 Trillion Dollars A Year To The National Debt Under Obama
In 2006, U.S. Senator Barack Obama’s voice thundered across the Senate floor as he boldly declared that “increasing America’s debt weakens us domestically and internationally. Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren.” That was one of the truest things that he ever said, but just a couple of years later he won the 2008 election and he turned his back on those principles. As I write this article, the U.S. national debt is sitting at a grand total of $19,402,361,890,929.46. But when Barack Obama first entered the White House, our federal government was only 10.6 trillion dollars in debt. That means that we have added an average of 1.1 trillion dollars a year to the national debt under Obama, and we still have about six more months to go. - A U.S. Junk-Bond Sale Gets Pulled as Investors Show Their Limits
Bond investors globally are clamoring for yield, but they’ll only take so much risk to get it. Case in point: U.S. Xpress Enterprises Inc. scrapped its $320 million bond offering late Wednesday after investors, concerned that growth is slowing in the trucking industry, pushed for higher yields on the securities. It was the first pulled deal in the junk-bond market in two months. - Prominent Gold Skeptic Willem Buiter Says “Gold Looks Pretty Good”
Back in November 2014, Willem Buiter, who has so far been wrong in his recent gloomier forecasts about the fallout from the Eurozone mess, or his predictions about a global economy, decided to become a commodity expert and announced that “Gold Is A 6,000 Year Old Bubble.” The irony is that while virtually every other asset class in the span of these 6,000 years has risen, risen more, in many cases indeed formed a bubble, burst, fallen, and ultimately turned to dust and forgotten, gold remains and furthermore has seen its value in recent years soar. - India Moves Nearly One Hundred Tanks, Troops to Chinese Border
With tensions rising between China and India, New Delhi has deployed nearly 100 tanks to its eastern border. The mountainous region of Ladakh, in northern India, lies in a tense location between disputed Kashmir and Tibet. In an effort to boost its military presence in the area, the Indian military has sent Russian-made T-72 tanks to Ladakh’s Chinese border. “The vast flat valleys along the mountain ranges allow for armored movement; besides, there has been an increase in the force levels across the border,” an unnamed military official told NDTV. - Have we learned nothing from 2008? It’s clear we’re heading into recession
This week the International Monetary Fund and the European commission slashed their forecasts for UK growth. The referendum result had “thrown a spanner in the works” of the global recovery, the IMF said. It now expects the UK economy to grow by 1.3% in 2017, compared with its 2.2% prediction in April. The commission’s projections were, at best, 1.1% growth next year and worst case, a 0.3% contraction. Both sets of forecasts look optimistic. It seems almost inevitable that the UK is heading for recession. The Bank of England governor, Mark Carney, had clearly signalled that his monetary policy committee (MPC) would cut rates at its July meeting, but it didn’t. Hopefully, its members will make up for this big mistake at their next meeting in August. - Potential Crisis Triggers Continue To Pile Up In 2016
We are a little over half way through 2016 and, at the current rate, it will be a miracle if the year finishes without outright catastrophe in half the nations of the world. Some might call these events “Black Swans,” some might call them completely engineered threats, others might call it all a simple “coincidence” or a tragedy of errors. I stand strictly by the position that most of the dangers we see today have been deliberately escalated, if not strategically implemented. Here is the problem; international financiers and globalist nut-jobs are clearly operating on a timeline with the end goal of creating enough general chaos to convince the masses that complete centralized authority over every aspect of our lives is preferable to constant fear. - REVEALED: EU subsidises the CHINESE steel which is decimating British industry
BRITISH taxpayers have been forced to subsidise the very Chinese steel companies that are threatening 40,000 UK jobs, critics say. It comes after revelations that the European Investment Bank has given so-called “soft loans” to China of £80million as part of a climate policy intended to lower emissions. The astonishing figures include a loan of £40million to one of the world’s worst “steel dumping” culprits, the Wuhan Iron & Steel Corporation. To add insult to injury Wuhun, the world’s eighth largest steel producer, boasts the Chinese state as its main shareholder. Wuhun is such a prolific steel dumper that it has now been especially targeted by the European Commission, which wants to slap it with 36.6 per cent tariffs. - Russian warplanes reportedly bombed US base in Syria
Russian warplanes reportedly bombed a secret military base in Syria used by elite American and British forces last month. The Wall Street Journal reported Thursday that the Russian strike on the CIA-linked site was part of a campaign by Russia to pressure the White House to agree to closer cooperation in the Syrian skies, U.S. military and intelligence officials said. Despite the fact that some forces could have been killed and the bombing dampened relations between Russia and the Pentagon and CIA, the White House and State Department still persued a compromise. - EU TRADE DISASTER: Deal with Canada on the brink as German party SUES Brussels over CETA
THE European Union’s flagship trade deal with Canada was on the brink of collapse today after a Germany political party sued Brussels over its implementation. Centre-left Die Linke has launched legal action to block the controversial Comprehensive Economic and Trade Agreement (CETA) pact, saying it is unconstitutional under German law. The party’s attempt to torpedo the hated deal is just the latest in a series of devastating trade blows for the EU, which is unravelling following the Brexit vote. - Japanese Turning to Gold as Their Economy Spirals into Central Bank Oblivion
The Japanese economy is sliding into oblivion pulled along by central bank policy. In response, the Japanese people are buying gold. Economic growth has languished in Japan for nearly two decades despite extraordinary monetary policy including negative interest rates and round after round of stimulus. The government even flirted with the idea of helicopter money, although that appears to be off the table, at least for the time being. Factory output is down and stocks are slumping. The Japanese government just cut its GDP estimate from 1.7% to 0.4%, and Prime Minister Shinzo Abe urged more central bank intervention. He called for coordinated stimulus from the government and the central bank in yet another attempt to revive the ailing economy. - Silver Up 44.7% in First Half of 2016
While investors have primarily focused on gold’s bull run, silver has quietly outperformed the yellow metal. Between Jan. 1 and July 11, the price of silver increased 44.7%, according to the Silver Institute. The price of gold increased 27.7% in that same time period. The Silver Institute said the surge in the price of silver was “fueled by increased investor interest in silver as a safe haven asset and as leveraged exposure to gold’s price rally.” - Government Student Loan Policies Have Perverse Incentives
Millions of Americans are saddled with student loan payments. And that’s just considering those who can actually repay their debt. Data released in March revealed that 46% of student loans are not currently being repaid. But despite the squeeze student loan repayment puts on American budgets, few choose to refinance their debt at lower interest rates. - Business Inventories At Highest Level To Sales Since The Crisis
Autos and buidling materials are at their highest levels of inventories relative to sales since the financial crisis leaving overall business inventories-to-sales ratio hovering near cycle highs at 1.40x. A 0.2% rise in inventories (bigger than expected) matched the 0.2% rise in sales MoM but YoY it's a different picture with sales down 0.3% and inventories up 0.9% (with retailers seeing inventories surging 6.1%). - Inside Draghi’s Corporate Bond Frenzy—–$10 Billion/ Month, 440 Different Issues, Heavy BBB and BB Risk
Yesterday for the first time, the various central banks of the Eurosystem disclosed which bonds the ECB had bought under its CSPP program. Specifically, we broke down the purchases of the Bundesbank, which revealed some of the most prominent public company debt issuers in Europe. However, we were curious to get a more detailed look at what Mario Draghi’s trading desk was spending their time BWICing all day. For that we went to the undisputed master when it comes to tracking what the ECB does in the bond realm (because the ECB is not buying equities just yet), BofA’s Barnaby Martin. Here is the big picture as revealed in his report today titled “CSPP: Buying Frenzy” – “in just over a month of the Corporate Sector Purchase Programme, the ECB have bought 458 bonds, with virtually no stone left unturned.With the monthly run-rate of buying hovering around the €8.5bn mark, our conclusion for CSPP is, bluntly, that it is too big, too powerful and ultimately too bullish for spreads.” But the best part was Martin’s answer to the key question: “So what did they buy?” His answer: “In short, almost everything.” - The Bond Market: Beware of Junkyard Dogs
Having spent a chunk of his youth “shopping” them, Jim Croce came to know a thing or two about junkyards. In those youthful days, should his clunker de jour be missing some vital part or parts, a trolling expedition through South Philly’s scrap heaps was always the enterprising Croce’s preferred method of procurement. Amid all of Croce’s parts foraging, it was a universal joint for a ‘57 Chevy and a ‘51 Dodge transmission, two must have and must-be-cheap or, better yet, free, parts that the legendary folk singer still recalled. He also reminisced that junkyards could and would provide a no frills, but highly motivated and easy way to get in some cardio, as in running for your life. - Destination Mars – Asset Price Levitation
One of the more preposterous deeds of modern central banking involves creating digital monetary credits from nothing and then using the faux money to purchase stocks. If you’re unfamiliar with this erudite form of monetary policy this may sound rather fantastical. But, in certain economies, this is now standard operating procedure. For example, in Japan this explicit intervention into the stock market is being performed with the composed tedium of a dairy farmer milking his cows. The activity is more art than science. Similarly, if you stop – even for a day – pain swells in certain sensitive areas. In late April, a Bloomberg study found that the Bank of Japan (BOJ), through its purchases of ETFs, had become a top 10 shareholder in about 90 percent of companies that comprise the Nikkei 225. - IMF Called “Clowns” After Admitting They Fabricated Brexit Doom And Gloom
“The IMF has serious credibility problems. It has been seriously wrong for years. I hope that one of the things that the new government does is push to have some credible people running this institution… rather than the clowns currently running it,” exclaimed UKIP MP Douglas Carswell, pointing out Lagarde's legion of fools flip-flop that the British economy will grow faster than Germany and France in the next two years – only weeks after its doom-laden warnings about Brexit. As The Daily Mail reports, after saying that leaving the European Union could trigger a UK recession, the International Monetary Fund now expects the British economy to grow by 1.7 per cent this year and 1.3 per cent next year. That is weaker than the 1.9 and 2.2 per cent growth forecasts before the referendum, but the UK is still set to be the second-fastest growing economy in the Group of Seven industrialised nations this year – behind the United States – and third-fastest next year, behind the US and Canada. - Legend Jeremy Grantham Just Issued A Dire Warning To The World
With the U.S. dollar continuing its surge as gold and silver pull back, legend Jeremy Grantham has issued a dire warning to the world. A portion of today’s note from Art Cashin: “You’re Gonna Need A Bigger Boat! – As you hopefully remember, that’s the famous line from the movie, “Jaws”, uttered when the authorities realize that the problem (the shark) is much, much larger than they first assumed. When it comes to immigration, maybe the line should be – you’re gonna need a bigger wall – and we’re not talking Donald Trump here. We’re referring to Britain, the EU and what fear might have helped pushed the Brexit vote through. Jeremy Grantham touched on the potentially explosive possibilities of immigration pressures in a recent discussion of Brexit.
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