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.
Latest News From April 22, 2016 to April 28, 2016:
- Putin’s Decade-Old Dream Realized as Russia to Price Its Own Oil
Russian President Vladimir Putin is on the verge of realizing a decade-old dream: Russian oil priced in Russia. The nation’s largest commodity exchange, whose chairman is Putin ally Igor Sechin, is courting international oil traders to join its emerging futures market. The goal is to increase revenue from Urals crude by disconnecting the price-setting mechanism from the world’s most-used Brent oil benchmark. Another aim is to move away from quoting petroleum in U.S. dollars.
- Biggest Financial Bubble in History Will Engulf World-Gregory Mannarino
Financial analyst and stock trader Gregory Mannarino says pay no attention to the rising stock market because it is “fake.” Mannarino says, “The manipulation is absolutely epic. We have never seen anything like it. There is going to be a horrible price to pay for this. Why? Because it will correct to fair market value. There is no doubt in my mind that all of this will correct to fair value. All these distortions can only go so far, and we know this. We have seen this throughout history without exception. . . . We have the biggest bubble in the history of the world, and that is the debt bubble that has re-inflated this stock market bubble, it will burst. It will burst because every single financial bubble in history, without exception, has burst before it. This one is going to burst too, but this one is going to engulf the world. It’s going to be unlike anything we’ve seen in the history of the world, and there is no doubt that the middle class will no longer exist when this occurs. It’s going to be a massive transfer of wealth to these financial institutions that are going to go short all of this. It is legal theft on a magnitude and scale that is unimaginable.”
- How Puerto Rico’s debt bomb could blow up on the mainland
Puerto Rico, an awkward legacy of America’s 1898 testosterone spill, the Spanish-American War, is about to teach two things that few Americans know: If conditions get bad enough there, its residents, who are American citizens, can come here. And if Congress does not deal carefully with the mess made by the government in San Juan, Congress will find itself rescuing governments in Springfield, Ill., and other state capitals. Puerto Rico’s approximately 18 debt-issuing entities have debts — approximately $72 billion — they can’t repay. The Government Development Bank might miss a $422 million payment due in May, and the central government might miss a $2 billion payment in July. Congress won’t enact a US taxpayer “bailout.”
- Puerto Rico’s Governor Says the Island Will Default on Monday
Puerto Rico’s Government Development Bank has a $422 million payment due to creditors that day. Puerto Rican officials talked tough ahead of a major debt payment due on Monday, with the U.S. territory’s governor predicting default, and chances slipping for a restructuring deal with creditors. Speaking to reporters on Wednesday, Governor Alejandro Garcia Padilla said “there will be a default on Monday,” adding, “I don’t think there is a deal on the table that avoids a default.”
- Yen Surges Most Since 2010 as BOJ Refrains From Adding Stimulus
The yen surged by the most since 2010 after the Bank of Japan maintained its record stimulus, surprising traders who had expected additional easing and forcing them to exit bets on declines in the currency. Japan’s currency rose against all of its 16 major peers as BOJ Governor Haruhiko Kuroda and his colleagues opted to refrain from more policy action and to take more time to assess the impact of their negative interest-rate program. A slight majority of economists surveyed by Bloomberg predicted the central bank would respond to a strengthening yen that’s cast a shadow over prospects for higher wages and investment.
- COMEX Default Is Coming Soon-Bill Holter
According to financial writer Bill Holter, we are getting to the end of the gold and silver price suppression game. Holter contends, “Because the inventories are so small, silver and gold registered categories (at COMEX) total about $1.2 billion. That’s nothing in today’s world. That’s less than one day’s interest the U.S. pays on its debt. I don’t see this going for a long time because inventories are so small. . . . This whole suppression game on gold and silver was brought about to protect the reserve currency, the dollar, because gold is a direct competitor with the dollar. If the silver market blows up, and I shouldn’t say if, it’s when the silver market blows up, that’s going to blow the gold market up, and that is basically going to expose the fact the West is a fraud, that the gold and silver markets were a fractional reserve Ponzi scheme. That’s going to blow confidence, and you are going to see derivatives blow up all over the world, and markets will be closed in a couple of days.”
- US-Style Mortgage Fraud a ‘Nuclear Bomb’ to Australian Banks
The Australian Securities & Investments Commission (ASIC), which regulates financial services companies,has the backbone of a chicken wing when it comes to enforcing the rule of law; this is widely recognized in Australia and resulted in a Parliamentary inquiry. If any politician believes that ASIC is a “tough cop on the beat,” they should seriously reconsider their opinion on this issue. Under the pomp and ceremony of the government’s decision to levy the banks to fund ASIC’s prolonged $400 million+ annual fishing vacation is its pursuit of catching tadpoles in the open seas while leaving sharks and barracudas to freely roam. Unfortunately for the regulator, there is a new term Australians will become accustomed to. Control fraud. It refers to fraud committed by the high-ranking employees of a corporation: executives and managers, typically a bank. It’s a crime that ASIC has decided neither to investigate nor prosecute, leaving borrowers on their own with no pennies to spare and nowhere to turn to.
- Hong Kong Is Building The Biggest Gold Vault And Trading Hub In The World
Less than a week after the official launch of the Chinese Yuan-denominated gold fix on the Shanghai Gold Exchange, a historic move which represents “an ambitious step to exert more control over the pricing of the metal and boost its influence in the global bullion market” and which will gradually transform the market of paper gold trading, in the process shifting the global trading hub from west (London) to east (China), overnight Hong Kong’s Chinese Gold and Silver Exchange (CGSE) Society revealed plans to do something similar for physical gold when it announced plans for what may end up being the biggest gold vault in the world.
- Corporations Are Defaulting On Their Debts Like It’s 2008 All Over Again
The Dow closed above 18,000 on Monday for the first time since July. Isn’t that great news? I truly wish that it was. If the Dow actually reflected economic reality, I could stop writing about “economic collapse” and start blogging about cats or football. Unfortunately, the stock market and the economy are moving in two completely different directions right now. Even as stock prices soar, big corporations are defaulting on their debts at a level that we have not seen since the last financial crisis. In fact, this wave of debt defaults have become so dramatic that even USA Today is reporting on it…
- 47 Percent Of Americans Cannot Even Come Up With $400 To Cover An Emergency Room Visit
If you had to make a sudden visit to the emergency room, would you have enough money to pay for it without selling something or borrowing the funds from somewhere? Most Americans may not realize this, but this is something that the Federal Reserve has actually been tracking for several years now. And according to the Fed, an astounding 47 percent of all Americans could not come up with $400 to pay for an emergency room visit without borrowing it or selling something. Various surveys that I have talked about in the past have found that more than 60 percent of all Americans are living to paycheck to paycheck, but I didn’t realize that things were quite this bad for about half the country. If you can’t even come up with $400 for an unexpected emergency room visit, then you are just surviving from month to month by the skin of your teeth. Unfortunately, about half of us are currently in that situation.
- Halliburton says it cut 6,000 jobs in first quarter, delays earnings call
Halliburton Co said on Friday that it reduced headcount by more than 6,000 during the first quarter due to the prolonged slump in oil prices. The oilfield services provider said revenue dropped 40.4 percent to $4.2 billion in the quarter ended March 31. The company also said it would now hold its earnings conference call on May 3, instead of April 25, to accommodate the April 30 deadline for its merger with Baker Hughes Inc.
- UC Berkeley Touts $15 Minimum Wage Law, Then Fires Hundreds Of Workers After It Passes
Labor Markets: Hundreds of employees at the University of California at Berkeley are getting schooled in basic economics, as the $15 minimum wage just cost them their jobs. Too bad liberal elites “fighting for $15” don’t get it. A week after California Gov. Jerry Brown signed the state’s $15 minimum wage boost into law, UC Berkeley Chancellor Nicholas Dirks sent a memo to employees announcing that 500 jobs were getting cut.
- Economy In Decline: Apple Reports Massive Revenue Decline As iPhone Sales Plummet Dramatically
Corporate revenues in the United States have been falling for quite some time, but now some of the biggest companies in the entire nation are reporting extremely disappointing results. On Tuesday, Apple shocked the financial world by reporting that revenue for the first quarter had fallen 7.4 billion dollars compared to the same quarter last year. That is an astounding plunge, and it represents the very first year-over-year quarterly sales decline that Apple has experienced since 2003. Analysts were anticipating some sort of drop, but nothing like this. And of course last week we learned that Google and Microsoft also missed revenue and earnings projections for the first quarter of 2016. The economic crisis that began during the second half of 2015 is really starting to take hold, and even our largest tech companies are now feeling the pain.
- Apple shares plunge 7% on first drop in iPhone sales ever
Apple’s streak of iPhone-powered sales ended Tuesday when the company reported its first quarterly sales drop in more than a decade. The news sent Apple’s (AAPL) stock into a tailspin with shares plunging 6.5% to $97.55 in late trading Wednesday. CEO Tim Cook signaled a saturated smartphone market would keep a lid on sales, although he suggested the company’s new entry-level smartphone, the SE, promised to eventually goose sales among Android switchers and in emerging markets such as China and India.
- Bank-hacking malware discovery leaves 11,000 global financial institutions on high alert
Over ten thousand banks and financial institutions are being urged to remain vigilant after the secure Swift (Society for Worldwide Interbank Financial Telecommunication) system – used to send messages between global firms – was reportedly compromised by the sophisticated hacking scheme that targeted the Bangladesh central bank in March 2016. The news comes after security researchers at British defence contractor BAE Systems claimed to have uncovered a stealthy piece of malware used in the Bangladesh attack, which resulted in the loss of $81m (£56m, €71m). Previously, investigators said that cybercriminals broke into the bank’s computer networks to steal vital access credentials. However, fresh research claims that Swift was also likely compromised during the hack in order to erase records of malicious financial transfers.
- How California’s minimum wage increase will add more robotic automation in logistics
California’s minimum wage hikes are going to force logistics firms with low-paid warehouse workers to invest more heavily in robotic technology, according to Inland Empire economist John Husing. Husing said most of Southern California’s warehouse employees who earn minimum wage are working part time. But the newly approved pay hikes that will boost the state’s current minimum wage of $10 per hour to $15 per hour by 2022 will still place financial pressures on logistics companies. And they’ll be looking for ways to increase efficiency while reducing costs.
- The Ugly Truth About A $15 Minimum Wage
The Service Employees International Union spent 2015 expanding its campaign for a $15 minimum wage to other industries. In recent nationwide protests, the union focused again on its original target: Fast food companies, and McDonald’s MCD +0.19% in particular. I worked for the company for three decades, and served as its USA President for 13 years. I can assure you that a $15 minimum wage won’t spell the end of the brand. However it will mean wiping out thousands of entry-level opportunities for people without many other options.
- Australian dollar drops sharply after soft inflation data
The Australian dollar dropped two-thirds of a US cent on Wednesday after a lower-than-expected inflation reading saw markets calculating an increase in the risk of an interest rate cut. The Aussie fell to US$0.7678 to show a loss of 0.9 per cent on the day. It touched a 10-month peak of US$0.7836 last week.
- US new home sales fall amid weakness in the West
New U.S. single-family home sales unexpectedly fell in March, but the decline was concentrated in the West region, suggesting that the housing market continued to strengthen. The Commerce Department said on Monday new home sales decreased 1.5 percent to a seasonally adjusted annual rate of 511,000 units. February’s sales pace was revised up to 519,000 units from the previously reported 512,000 units.
- Another iconic British high-street brand has gone under
“Well, we have been declining for years,” reflected one despondent shop assistant at British Homes Stores (BHS) after learning that the department store had filed for administration on April 25th. The news has come as no great surprise to many of BHS’s staff and still less to the retail analysts who have been following the firm’s slow demise. Unless a buyer is found soon, the company could well be broken up, its 164 stores and stock sold off to repay creditors. That would spell the end of BHS, founded in 1928, as a high-street clothing and home-goods chain, and disaster for its 11,000 employees. Losses on this scale would simply compound the gloom that accompanied the thousands of recent job losses in the British steel industry, with more, probably, to come.
- Dallas Fed manufacturing index falls more than forecast
The Dallas Federal Reserve’s manufacturing index contracted for a 16th straight month, falling to -13.9 in April. Economists had forecast that the index rose a bit to -10 from -13.6 in March, according to Bloomberg. Although the headline index slipped, factory activity expanded for a second straight month, and production output grew. New orders, shipments and wages also increased. But labor-market indicators showed that employment was still weak.
- Austin Reed enters administration putting 1,200 jobs at risk
Menswear retailer Austin Reed has entered administration, putting almost 1,200 jobs at risk. A statement from the administrators blamed a “challenging” retail market and cash flow difficulties. The company, which has 100 standalone stores and is stocked in a further 50, has struggled to compete and has seen its sales fall. Austin Reed began in 1900 as a tailor and counted Winston Churchill as a customer. “Austin Reed is a well-regarded and iconic brand,” said Peter Saville, one of the newly appointed administrators. “We are confident that it is an attractive proposition for a range of potential buyers.” The menswear brand is the second UK retailer to enter administration in as many days, following the failure of BHS.
- America’s Department Stores May Have to Close Hundreds of Locations
That’s a quarter of their stores. To get back to their pre-recession productivity peak, the nation’s top department stores would have to close hundreds of locations, according to a leading real estate analysis firm. Chains such as Sears, J.C. Penney and Macy’s have been hit by a double whammy: the loss of market share to Amazon and specialty stores, coupled with chronic drops in shopper traffic to malls. Collectively, they would need to close some 800 stores for sales per square foot to go back to 2006 levels, Green Street Advisors wrote in a recent research note. That translates to 25% of all department stores nationwide, whose list also includes Dillard’s, Bon-Ton and Nordstrom.
- “A Total Game Changer” – From Over-Population To De-Population
Strangely, the world is suffering from two seemingly opposite trends…overpopulation and depopulation in concert. The overpopulation is due to the increased longevity of elderly lifespans vs. depopulation of young populations due to collapsing birthrates. The depopulation is among most under 25yr old populations (except Africa) and among many under 45yr old populations. So, the old are living decades longer than a generation ago but their adult children are having far fewer children. The economics of this is a complete game changer and is unlike any time previously in the history of mankind. None of the models ever accounted for a shrinking young population absent income, savings, or job opportunity vs. massive growth in the old with a vast majority reliant on government programs in their generally underfunded retirements (apart from a minority of retirees who are wildly “overfunded”). There are literally hundreds of reasons for the longer lifespans and lower birthrates…but that’s for another day. This is simply a look at what is and what is likely to be absent a goal-seeked happy ending.
- Gerald Celente – China Stock Market Crash To Create Full-Blown Global Panic, But Gold Will Shine
Today the top trends forecaster in the world told King World News that China’s stock market crash will crash along with their economy and this will create a full-blown global panic, but gold will shine. Gerald Celente: “George Soros came out earlier in the week warning about the Chinese debt bubble, which is estimated now to be at about $30 trillion, up from $500 billion twenty years ago… “Soros said: “Stimulus can buy you additional time, but it makes the problem that much bigger. That’s where we are.” So when they talk about China’s growth now at 6.7 percent, they leave out the fact that the Chinese banks pumped in some $212 billion in new local currency loans in March. There was also the social financing of another $360 billion in the month of March.
- Goldman Sachs opens to the masses
For almost 150 years Goldman Sachs has been the go-to bank of the rich and powerful. But now the Wall Street titan is opening up to the masses on Main Street by offering online savings accounts for as little as $1 on deposit.Goldman’s shift down market comes as the bank is under pressure to develop new streams of funding. Weak first-quarter results from the big US banks have highlighted the challenges faced by their investment banking units, under pressure from volatile markets and tight regulations. Analysts last week fired a barrage of questions at the US banks, and at Goldman in particular, wondering why they were not doing more to reboot their businesses. Goldman posted the lowest quarterly return on equity – just 6.4 per cent, on an annualised basis – of the past four years.
- “The Damage Could Be Massive” – How Central Banks Trapped The World In Bonds
Yields on $7.8 trillion of government bonds have been driven below zero by worries over global growth, forcing investors looking for income to flood into debt with maturities of as long as 100 years. Worse still, as Bloomberg reports, central banks’ policy is exacerbating matters, as the unprecedented debt purchases to spur their economies have soaked up supply and left would-be buyers with few options. This has driven the ‘duration’ – or risk sensitivity – of the bond market to a record high, meaning, as one CIO exclaimed, even with a small increase in rates “the positions are so huge that the damage can be massive… People are complacent.” Decelerating economic growth worldwide, combined with more aggressive stimulus measures by the Bank of Japan and the European Central Bank, pushed average yields on $48 trillion of debt securities in the BofA Merrill Lynch Global Broad Market Index to a record-low 1.29 percent this month, compared with 1.38 percent currently.
- In 1 Out Of Every 5 American Families, Nobody Has A Job
If nobody is working in one out of every five U.S. families, then how in the world can the unemployment rate be close to 5 percent as the Obama administration keeps insisting? The truth, of course, is that the U.S. economy is in far worse condition than we are being told. Last week, I discussed the fact that the Federal Reserve has found that 47 percent of all Americans would not be able to come up with $400 for an unexpected visit to the emergency room without borrowing it or selling something. But Barack Obama and his minions never bring up that number. Nor do they ever bring up the fact that 20 percent of all families in America are completely unemployed.
- Stricken shipping firm sells off its ships… for $1 each
A heavily indebted shipping firm has been forced to sell off its fleet for as little as $1 a piece as the global shipping crisis takes its toll. Goldenport Holdings said on Friday that it would sell six of its eight vessels for a token consideration of $1 each, while it would look for the best price it can get on its two remaining ships. The company will also delist from the London Stock Exchange after its debt pile spiralled “significantly higher” than the value of its fleet. The embattled shipping group has been locked in negotiations with its lenders, including RBS, since January this year in a bid to restructure its loan facilities, but within the last few weeks shareholders have given the go ahead to sell off the loss-making ships.
- Venezuela cuts power for four hours a day to save energy
Venezuela is introducing power cuts of four hours a day from next week to deal with a worsening energy crisis. The cuts will last for 40 days as the country struggles under a severe drought limiting hydroelectric output. It is the latest setback to Venezuela’s economy which has been hit by a sharp fall in the price of its main export, oil. The country’s main brewer, Polar, also says it will stop production because it has no dollars to buy grain abroad. The company, which produces 80% of the country’s beer, says 10,000 workers will be affected by the stoppage.
- This virtually guarantees that your taxes are going through the roof
I was thinking about this the other day when I read an article in the Financial Times about the “disastrous” $3.4 trillion funding hole in the United States public pension system. To be clear, they’re not talking about the Social Security mess. That’s an additional $40+ trillion funding shortfall. The $3.4 trillion gap is referring primarily to city and state pension funds; these pension funds essentially have way too many liabilities and obligation, with too few assets to support them. And the problem gets worse each year. Now, pension funds in the Land of the Free are supposed to be backed up and insured by a federal agency known as the Pension Benefit Guarantee Corporation (PBGC). The PBGC is sort of like the FDIC for pension funds. There’s just one small problem: in addition to all of these city and state pension funds that are under water, the PBGC is INSOLVENT. In its most recent annual report, the PBGC (which ensures the pension funds of more than 40 million Americans), showed net equity of NEGATIVE $76 billion. So not only do these pension funds need a bailout, but the government organization that is supposed to insure the pension funds needs a bailout…
- A Few Troubling Facts
BANKING BUSINESS – Just 4 banks in the United States hold 91% of all derivatives nationwide as of the end of 2015. The face amount of the derivative contracts held by all insured commercial banks and savings associations was $181.0 trillion as of 12/31/15. 76% of the $181.0 trillion were interest rate derivative contracts (source: Office of the Comptroller of the Currency). I am sure glad that the government has spread the risk in derivatives around.
- The Fed Sends a Frightening Letter to JPMorgan and Corporate Media Yawns
Yesterday the Federal Reserve released a 19-page letter that it and the FDIC had issued to Jamie Dimon, the Chairman and CEO of JPMorgan Chase, on April 12 as a result of its failure to present a credible plan for winding itself down if the bank failed. The letter carried frightening passages and large blocks of redacted material in critical areas, instilling in any careful reader a sense of panic about the U.S. financial system.
- “China Is Hoarding Crude At The Fastest Pace On Record”
In the aftermath of China’s gargantuan, record new loan injection in Q1, which saw a whopping $1 trillion in new bank and shadow loans created in the first three months of the year, many were wondering where much of this newly created cash was ending up. We now know where most of it went: soaring imports of crude oil. We know this because as the chart below shows, Chinese crude imports via Qingdao port in Shandong province surged to record 9.86 million metric tons last month based on data from General Administration of Customs.
- US banks endure biggest drop in revenues since 2011
The six biggest US banks have suffered their steepest decline in quarterly revenues since 2011, after a profound slump on Wall Street overshadowed a boost from their consumer businesses. JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs, Morgan Stanley and Wells Fargo generated total revenues of $98bn in the first quarter, down 9 per cent from a year earlier — the steepest fall in five years, according to a Financial Times analysis of Bloomberg data. Deep cost cuts failed to counteract the fall in revenue so the six lenders also saw their collective net income plummet 24 per cent year on year to $18bn.
- Why Are The Chinese Stockpiling Silver? Big Price Move Coming?
It looks like something big may happen to the silver market and the Chinese are preparing for it. After China launched it’s new Yuan Gold Fix today, the prices of the precious metals surged. At one point today, silver was up 5%. Silver is now trading at the $17 level, a price not seen in over a year. Even though gold has taken center stage today due to Chinese rolling out there new Yuan Gold fix, something quite interesting has been taking place in the silver market over the past six months. While Comex silver inventories have been declining from a peak of 184 million oz (Moz) in July 2015 to 154 Moz today, silver stocks at the Shanghai Futures Exchange have been doing the exact opposite.
- Mario Draghi Explains Why QE ‘Will’ Work This Time – ECB Press Conference Live Feed
As expected today’s ECB statements were a snoozer, and likely Mario Draghi’s official statement will be too – “more of the same.” However, the real fun and games will come as he combats questions on 1) the lack of effectiveness of QE so far (just wait, any day now it will work), and 2) helicopter money (“whatever it takes”). He better offer some hope for moar as EUR is surging into the meeting…
- “The Men Behind The Curtain Are Being Revealed” – CEO Says Real-World Pricing To Return To Gold & Silver Markets
Astute observers of financial markets, especially in the precious metals sector, have long argued that small concentrations of major market players have been manipulating asset prices. Last week those suspicions were confirmed when Deutsche Bank, one of the world’s leading financial institutions, not only admitted to regulators that they have been involved in the racket, but that they were prepared to turn over records implicating many of their cohorts in a global scheme to suppress prices. In his latest interview with SGT Report, straight-shooting Callinex Mines CEO Max Porterfield explains that now that the men behind the curtain are being revealed, asset prices in precious metals, base metals and other commodities will return to more natural pricing mechanisms based on core supply and demand fundamentals.
- The SUNE Finally Sets: SunEdison Files For Bankruptcy
It’s over. After months of arguing that everything will be ok as investors flee the troubled company, it is now officially over: *SUNEDISON FILES FOR BANKRUPTCY AFTER ACQUISITION BINGE. As Bloomberg notes, Terraform Power and Global are not part of the filing. The company reported between $10-50 billion in assets and $10-50 billion in debt.
- In “Unprecedented Snub”, Saudi Arabia Demands “Recalibration Of Relationship” With U.S.
As Obama concludes his fourth and supposedly final meeting to Saudi Arabia as U.S. president, the White House was quick to explain where relations with the Saudi Kingdom lay, and as CNN reported this morning, moved to tamp down suggestions that ties with Saudi Arabia are fraying, with administration officials saying that President Barack Obama “really cleared the air” with King Salman at a meeting Wednesday. Which is strange because that is not how the other side saw it: even as White House officials stressed that the leaders made progress, a prominent member of the Saudi royal family told CNN “a recalibration” of the U.S.-Saudi relationship was needed amid regional upheaval, dropping oil prices and ongoing strains between the two longtime allies.
- FEDERAL EUROPE PLOT: EU draws up plans for United States of Europe behind Britain’s back
PLANS for a United States of Europe have been drawn up in a bid to give Brussels bureaucrats an iron grip over the continent, it has been revealed. In a direct challenge to David Cameron’s claims of British sovereignty, Germany, France, Italy and Luxembourg signed a document last September in Rome calling for the creation of a “general union of states”, which has only now come to light. The further integrated union would not only take a central hold over economic and fiscal matters, as well as internal markets, but would also include social and cultural affairs and foreign, security and defence policy of member states.
- George Soros Warns “China Resembles US In 2008”, Hard Landing “Practically Unavoidable”
China’s credit growth in March (and $1 trillion surge in total social financing in Q1) is a “warning sign” according to billionaire George Soros, “because it shows how much work is needed to stop the slowdown.” Speaking at an event in new York this evening, Soros commented on “troubling developments” in China, the anti-corruption drive’s impact on capital outflows and the real-estate bubble “feeding on itself.” His conclusion, rather ominously, was that despite all the naysayers and fiction-peddlers, China “resembles US in 2007-8,” before credit markets seized up and spurred a global recession. As Bloomberg reports, Billionaire investor George Soros said China’s debt-fueled economy resembles the U.S. in 2007-08, before credit markets seized up and spurred a global recession.
- One of the nation’s largest pension funds could soon cut benefits for retirees
More than a quarter of a million active and retired truckers and their families could soon see their pension benefits severely cut — even though their pension fund is still years away from running out of money. Within the next few weeks, the Treasury Department is expected to announce a crucial decision on whether it will approve reductions to one of the country’s largest multi-employer pension plans. The potential cuts are possible under legislation passed by Congress in 2014 that for the first time allowed financially distressed multi-employer plans to reduce benefits for retirees if it would improve the solvency of the fund. The law weakened federal protections that for more than 40 years shielded one of the last remaining pillars that workers could rely on for financial security in retirement.
- Negative rates put pressure on central banks to take risks
Investors ranging from small German savers to global life insurers have long complained about central banks’ use of negative interest rates. Now, however, another group is feeling the pain from negative rates — central banks themselves. European and Japanese rate cuts are putting pressure on many central banks’ returns — a source of income used to cover running costs and to provide finance ministries with profits on which they have come to rely. A poll of reserve managers from 77 central banks, entrusted with reserves worth $6tn last August, found a clear majority were changing their portfolio management strategy as a result — including taking steps such as buying riskier assets.
- Abu Dhabi Fund Calls 1MDB in Default After Missed Payment
A key Middle Eastern business partner of 1Malaysia Development Bhd. said the Malaysian state development fund has failed to make a $1.1 billion payment as part of a debt-restructuring agreement and that as a result a debt deal between the two entities has been terminated. The announcement, made in a London Stock Exchange filing by the International Petroleum Investment Company, an Abu Dhabi sovereign-wealth fund, marks a deterioration in relations between the two funds and signals fresh complications for 1MDB as it tries to work its way out from under billions of dollars of debt.
- Saudi Arabia takes out $10bn in bank loans
Saudi Arabia is raising $10bn from a consortium of global banks as the kingdom embarks on its first international debt issuance in 25 years to counter dwindling oil revenues and reserves. The landmark five-year loan, a signal of Riyadh’s newfound dependence on foreign capital, opens the way for Saudi to launch its first international bond issue. It comes as the sustained slump in crude encourages other Gulf governments, such as Abu Dhabi, Qatar and Oman, to tap international bond markets. The oil-rich kingdom, which last weekend blocked a potential deal among oil producers to freeze output and bolster prices, has burnt through $150bn in financial reserves since late 2014 as its fiscal deficit is set to widen to 19 per cent of gross domestic product this year.
- “Swimming Naked” – Chinese Corporate Bond Market Worst Since 2003
A week ago we highlight the “last bubble standing” was finally bursting, and as China’s corporate bond bubble deflates rapidly, it appears investors are catching on to the contagion possibilities this may involve as one analyst warns “the cost has built up in the form of corporate credit risks and bank risks for the whole economy.” As Bloomberg reports, local issuers have canceled 61.9 billion yuan ($9.6 billion) of bond sales in April alone, and Standard & Poor’s is cutting its assessment of Chinese firms at a pace unseen since 2003. Simply put, the unprecedented boom in China’s $3 trillion corporate bond market is starting to unravel. As Bloomberg notes, China’s leaders face a difficult balancing act.
- China Launches Yuan Gold Fix To “Exert More Control Over Price Of Gold”
Overnight a historic event took place when China, the world’s top gold consumer, launched a yuan-denominated gold benchmark as had been previewed here previously, in what Reuters dubbed “an ambitious step to exert more control over the pricing of the metal and boost its influence in the global bullion market.” Considering the now officially-confirmed rigging of the gold and silver fix courtesy of last week’s Deutsche Bank settlement, this is hardly bad news and may finally lead to some rigging cartel and central bank-free price discovery. Or it may not, because China would enjoy nothing more than continuing to accumulate gold at lower prices.
- Eric Hunsader: The Financial System Is “Absolutely, Positively Rigged”
Eric Hunsader, founder of Nanex, has been at the vanguard of warning about the dangers and the rampant fraud that the rise of high-frequency trading (HFT) algorithims have let loose in today’s financial markets. While he usually feels like a lone voice in a world happy to deceive itself, he was shocked to receive a $750,000 whistleblower award from the SEC for his efforts. He’s been sadly less shocked to see that since the award was publicly announced, the abuses he reported have only become more extreme and frequent.
- China debt load reaches record high as risk to economy mounts
China’s total debt rose to a record 237 percent of gross domestic product in the first quarter, far above emerging-market counterparts, raising the risk of a financial crisis or a prolonged slowdown in growth, economists warn. Beijing has turned to massive lending to boost economic growth, bringing total net debt to Rmb163 trillion ($25 trillion) at the end of March, including both domestic and foreign borrowing, according to Financial Times calculations. Such levels of debt are much higher as a proportion of national income than in other developing economies, although they are comparable to levels in the U.S. and the eurozone. While the absolute size of China’s debt load is a concern, more worrying is the speed at which it has accumulated — Chinese debt was only 148 percent of GDP at the end of 2007.
- China Retaliates In Trade Wars – Increases Steel Output To Record High
A funny thing happened when US slapped a major tariff on China’s steel exports… prices exploded higher. But the almost 50% surge in steel prices since mid-December back to 15-month highs have left traders equally split on what happens next. Will record production levels exaggerate a global glut amid tumbling exports and rising tariffs, or will China’s trillion-dollar surge in credit fuel yet more so-called “iron rooster” projects driving domestic demand even higher. For now, it appears the former is more likely as US Trade reps suggested further protectionism looms. Since Dec 23rd 2015 when the US imposed a 256% tariff on Chinese steel imports, composite steel prices have soared almost 50% even as exports have slipped…
- How Systems Break: First They Slow Down
The reality that cannot be spoken is that all the financial systems we believe are permanent are actually on borrowed time. One way we can judge this decline of resilience is to look at how long it takes systems to recover when they are stressed, and to what degree they bounce back to previous levels. Another is to look at the extremes the system reaches without returning to “normal”: for example, interest rates, which rather than normalizing after seven years of suppression are being pushed to negative rates by increasingly desperate central bankers. The key insight here is that financial systems and indeed economies function as natural systems. Central planning/central banker manipulation appears to control the system, but this control masks the reality that the system is increasingly fragile and prone to collapse, not just from internal dynamics but as a direct result of central bank manipulation. The warning signs of fraying resilience are all around us.
- How The American Neoconservatives Destroyed Mankind’s Hopes For Peace
When Ronald Reagan turned his back on the neoconservatives, fired them, and had some of them prosecuted, his administration was free of their evil influence, and President Reagan negotiated the end of the Cold War with Soviet President Gorbachev. The military/security complex, the CIA, and the neocons were very much against ending the Cold War as their budgets, power, and ideology were threatened by the prospect of peace between the two nuclear superpowers. I know about this, because I was part of it. I helped Reagan create the economic base for bringing the threat of a new arms race to a failing Soviet economy in order to pressure the Soviets into agreement to end the Cold War, and I was appointed to a secret presidential committee with subpeona power over the CIA. The secret committee was authorized by President Reagan to evaluate the CIA’s claim that the Soviets would prevail in an arms race. The secret committee concluded that this was the CIA’s way of perpetuting the Cold War and the CIA’s importance. The George H. W. Bush administration and its Secretary of State James Baker kept Reagan’s promises to Gorbachev and achieved the reunification of Germany with promises that NATO would not move one inch to the East.
- Intel to lay off 11% of workforce in big shift from PCs
Intel will lay off 11% of its global workforce, up to 12,000 employees, a painful downsizing aimed at accelerating its shift away from the waning PC market to one more focused on cloud computing and connected devices. In an email to employees, CEO Brian Krzanich said that after the restructuring, “I am confident that we’ll emerge as a more productive company with broader reach and sharper execution.” Intel CFO Stacy Smith said that half the workforce reduction, 6,000 people, will be accomplished by the end of this year.
- Chinese Launch Gold Price Benchmark Further Increasing Influence on World Stage
In another sign that it is becoming a major player in the world gold market, China launched twice-daily price fixing on Tuesday. According to a Bloomberg report, the move is an attempt to establish a regional benchmark that will bolster its influence in the global gold market: “The Shanghai Gold Exchange set the price at 256.92 yuan a gram ($1,233.85 an ounce) at the 10:30 a.m. session after members of the exchange submitted buy and sell orders for metal of 99.99 percent purity. Members include Chinese banks, jewelers, miners and the local units of Standard Chartered Plc and Australia & New Zealand Banking Group Ltd., according to the bourse.”
- Goldman Sachs profit slumps for fourth straight quarter
Goldman Sachs Group Inc’s profit slumped for the fourth straight quarter as market volatility hit the company’s bond trading and investment banking businesses. Goldman – the last of the big US banks to release first-quarter results – reported a 56.3 per cent fall in net income applicable to common shareholders to $1.2 billion, or $2.68 per share, for the three months ended March 31. That compared to $2.75 billion, or $5.94 per share, a year earlier, when the Wall Street bank recorded its best quarterly profit in five years.
- Why stronger growth may lie ahead after March housing starts swoon
Disregard the dismal housing starts data out Tuesday, many analysts say: a spring rebound is in the cards. Starts plunged nearly 9% in March to a seasonally adjusted annual rate of 1.09 million, the Commerce Department said Tuesday. That badly missed estimates – economists surveyed by MarketWatch had expected a pace of 1.17 million – but many analysts think the data is unreliable and the overall trend in construction is up.
- Dollar Falls to Lowest Level Since June as Housing Starts Slump
The dollar reached a 10-month low Tuesday after a government report showed new-home construction in the U.S. slipped more than projected in March, clouding Federal Reserve plans to boost interest rates. The U.S. currency weakened against most of its major peers in New York as the central bank is scrutinizing data to measure whether the economy is meeting its goals of full employment and a 2 percent inflation rate. The yen had also declined as oil and stocks rallied, damping haven demand.
- UnitedHealth Flees Sinking Obamacare After Posting $1 Billion In Losses
UnitedHealth, America’s largest health insurance provider, says it will exit from most obamacare exchanges next year, citing more than $1 billion in losses. CEO Stephen Hemsley says his company “cannot continue to broadly serve the market created by the Affordable Care Act’s coverage expansion due partly to the higher risk that comes with its customers,” as reported by the Associated Press. The announcement came after UnitedHealth revised its projection for 2016 to $650 million in losses, up from a previous estimate of $525 million, after ending 2015 some $475 million in the red. As the AP tells it, UnitedHealth had “second thoughts” almost immediately after announcing it would expand participation from four state exchanges to 34.
- Greenspan Admits The Fed’s Plan Was Always To Push Stocks Higher
Former Federal Reserve Chairman Alan Greenspan admitted in an interview with Sara Eisen that quantitative easing did what it was supposed to do, which was to inflate stock prices and drive multiple expansion. He was confused as to why things such as corporate earnings, capital spending, and productivity have declined given how much QE was pumped into the system. The answer to the riddle of course, is that QE was never intended to help fix anything fundamentally, it was as Kyle Bass said recently, simply a mechanism to transfer wealth and make the rich richer.
- These Maps Show How Vast New Infrastructure Is Bringing the World Together
There’s no better way to score points for gravitas in today’s media than claiming that the world is falling apart. Just say on air that, “This is the most dangerous time since the peak of the Cold War,” and witness your star rise. But such talking heads are responding to yesterday’s news and extrapolating the worst scenarios, whereas the underlying trends seem in fact to point in a very different direction. If you want to understand the world of tomorrow, why not just look at a good map? For my new book, Connectography, I researched every single significant cross-border infrastructure project linking countries together on every continent. I worked with the world’s leading cartography labs to literally map out what the future actually — physically — will look like.
- Americans Spend More On Taxes Than On Housing, Food And Clothing
Three weeks ago, a recent report by Pew revealed something stunning: one third – the poorest – of US households can no longer afford even the most basic necessities: food, rent and transportation. The main reason for this: while the median income had fallen by 13% from 2004 levels over the next decade, expenditures had increased by nearly 14%, driven almost entirely by soaring rent costs. “This change in the expenditure-to-income ratio in the years following the financial crisis is a clear indication of why and how households feel financially strained” Pew concluded.
- OK, I Get it, this Junk-Bond Miracle-Rally Is Doomed – And since stocks follow junk bonds…
Junk bonds started to decline in June 2014, and earlier this year threatened to implode. Contagion was spreading from the collapsing energy sector to the brick-and-mortar retail sector, telecom (Sprint), the media (iHeartMedia), and other sectors. It was really ugly out there. As junk bond prices got beaten down, yields soared. The average yield of bonds rated BB, the top end of the junk-bond scale, according to the BofA Merrill Lynch index, went from 4.2% to 7.07% between June 2014 and February 11, 2016. For CCC-and-lower-rated junk bonds – the bottom end of the scale, deemed to be within uncomfortable proximity to default – the yield of the BofA Merrill Lynch index shot up from around 8% to 21.5% between June 2014 and February 12, 2016. But then the Fed heard the screaming from Wall Street about the chaos in the markets, with junk bonds losing their grip and large swaths of stocks careening deeper into a bear market. Incapable of any independence whatsoever, it brushed rate hikes off the table and changed its verbiage. What ensued was a marvelous rally all around, particularly in bonds.
- China Ocean Freight Index Collapses to Record Low – Relentless deterioration meets stunning overcapacity
The amount it costs to ship containers from China to ports around the world, a function of the quantity of goods to be shipped and the supply of vessels to ship them, just dropped to a new historic low. The China Containerized Freight Index (CCFI) tracks contractual and spot-market rates for shipping containers from major ports in China to 14 regions around the world. It reflects the unpolished and ugly reality of the shipping industry in an environment of deteriorating global trade. For the latest reporting week, the index dropped 0.6% to 636.14, its lowest level ever. It has plunged 41% from the already low levels in February last year, and 36% since its inception in 1998 when it was set at 1,000.
- “War, Confiscation Or Redistribution” – An Anecdote On Systemic Reset
Central banks face a different problem altogether. They need to get people who’ve saved time to exchange it for something other than clever inventions that store it. They’ve largely failed. So now, everything that stores time is extremely expensive and offers little or negative return, while the pace of economic activity slows.
- Obama Administration Makes Stunning Admission: “Seed Money For Al Qaeda Came From Saudi Arabia”
Following a dramatic deterioration in official diplomatic channels between the US and Saudi Arabia when over the weekend the Saudis threatened the U.S. with dumping billions in Treasuries if Congress were to pass a bill probing into their alleged support of Sept 11 terrorists in the aftermath of last weekend’s 60 Minutes report on the classified “28 pages” from the Septemeber 11 commission, moments ago the Obama administration made a stunning admission, when for the first time it revealed on the record that the Saudis were the original source of funding for Al Qaeda. As Politico reports, Obama’s deputy national security adviser, Ben Rhodes, while speaking to David Axelrod in Monday’s edition of “The Axe Files” podcast said that the government of Saudi Arabia had paid “insufficient attention” to money that was being funneled into terror groups and fueled the rise of Al Qaeda when he was asked about the validity of the accusation that the Saudi government was complicit in sponsoring terrorism.
- Sears closing 10 stores and 68 Kmarts
The company made the announcement Thursday, saying the move is an effort to accelerate its plan to close its unprofitable stores and return to profitability. Shares rose more than 6% after hours on the news. Sears said in a statement that employees affected by these closings will get severance and the chance to apply for open positions at local Kmart and Sears stores. The company didn’t say how many jobs will be affected.
- Mobs of Angry Investors Fight Market Rigging, Maul Deutsche Bank in Class-Action Lawsuit, other Banks Next
Prior to last week, Deutsche Bank made headlines for a string of huge losses and massive exposure to risky derivatives. The last time the firm’s shares traded at prices this low, the world was in the midst of 2008’s financial apocalypse. Deutsche Bank didn’t need more bad news, but a group of investors who brought suit against the massive German bank for cheating them by rigging the London “fix” price for gold and silver certainly must be smiling. Last week, the bank offered to settle their class action suit for an undisclosed amount.
- This Also Happened the Last 2 Times before Stocks Crashed
Something that happened just before the prior two market crashes, and the recessions that accompanied them, including the Great Recession, is happening again: the boom in financial engineering is starting to backfire against the companies doing it. Their credit ratings are getting slashed, and their borrowing costs are therefore rising, even while they need newly borrowed money to buy back even more shares to keep the charade going. Until the music stops. Downgrades ascribed to “shareholder compensation,” as Moody’s calls share buybacks and dividends, have been soaring, according to John Lonski, Chief Economist at Moody’s Capital Markets Research. The moving 12-month sum of Moody’s credit rating downgrades of US companies, jumped from 32 in March 2015, to 48 in December 2015, and to 61 in March 2016, nearly doubling within a year.
- U.S. Economy 2016: 3 Classic Recession Signals Are Flashing Red
Those that were hoping for an “economic renaissance” in the United States got some more bad news this week. It turns out that the U.S. economy is in significantly worse shape than the experts were projecting. Retail sales unexpectedly declined in March, total business sales have fallen again, and the inventory to sales ratio has hit the highest level since the last financial crisis. When you add these three classic recession signals to the 19 troubling numbers about the U.S. economy that I wrote about last week, it paints a very disturbing picture. Virtually all of the signs that we would expect to pop up during the early chapters of a major economic crisis have now appeared, and yet most Americans still appear to be clueless about what is happening.
- PBOC calls for broadening use of IMF’s basket of reserve currencies
Chinese central bank governor Zhou Xiaochuan on Saturday called for broadening the use of the International Monetary Fund (IMF)’s basket of reserve currencies to advance the reform of the International Monetary System (IMS). “The IMS has inherent deficiencies and faces new challenges from globalization, financial innovation, and volatility in capital flows,” Zhou said in a statement for the meeting of the International Monetary and Financial Committee (IMFC), the IMF’s policy setting committee, on the sidelines of the spring meetings of the IMF and the World Bank. The IMF announced it will add the Chinese yuan to its basket of reserve currencies last year. The addition will take effect Oct. 1, 2016, with the yuan having a 10.92 per cent weighting in the basket, the IMF said. “The SDR has the potential to resolve the existing deficiencies in the IMS,” Zhou said in Washington, referring to the Special Drawing Right, an international reserve asset created by the IMF in 1969.
- Precious Metals Puke – ‘Someone’ Dumps $2 Billion Of Gold Into Futures Markets
What goes up… must not be allowed to… Someone just decided this was the perfect time to dump over $2 billion worth of notional paper gold onto the markets… Over 16,000 gold contracts (and 7,500 silver) were dumped in that 5/10 minutes segment. It appears Draghi did not like the impression of his impotence that precious metals were suggesting. It appears the Gold/Silver ratio at 72x was a big buying opportunity?
- Collapse Strategist: “We’re In The Terminal Phase… Economic Pain Like We’ve Never Seen Before”
At this point, despite major highs in U.S. stock markets and reassurances from no less than President of the United States himself that the economy is sound, one only need to look around to understand that we are on the cusp of what researcher and collapse strategist Michael Snyder of The Economic Collapse Blog calls the “early chapters of a total meltdown.” In his latest interview with Future Money Trends Snyder notes that the fundamental economic problems we face can be seen across the globe. The United States, Europe, Asia, and South America are all crashing and no one will be immune to what comes next.
- Empire of Empty Dreams: “Chances of Securing a Better Life Are Declining”
The next few years will strip away the illusions of “growth” and reveal which dominates our society and economy: privilege or social mobility. Among the many lessons of empires is one shared by virtually every empire:once the privileged few limit the rise of those from humble origins (i.e. social mobility), the empire is doomed to rising instability and collapse. The greater the concentration of wealth and power, the lower the social mobility; the lower the social mobility, the greater the odds that the system will collapse when faced with a crisis that it would have easily handled in more egalitarian times.
- The Ruble Is the Most Gold-Backed Currency in the World
The economic situation is increasingly chaotic. The world economy is out of control. We target inflation, and it doubles. Talk about transitioning to a new direction results in a further degradation of the economy. ‘De-offshorization’ got us more foreign equity in our corporations and industries. Import substitution resulted in further price rises. This growing crisis is due to two things: our increasing dependence on the America-centric financial system, and American aggression, which we must resist. There’s clearly a dissonance between our financial and economic dependence on a foreign system and the need to pursue a sovereign foreign policy in order to survive.
- Opinion: Why this market rally looks like a classic investor trap
The U.S. stock market’s rally from its dismal start to the year appears to be a classic investor trap. Many investors have the tendency to jump in a bit too early on first signs of improvement in economic indicators or positive news. But the markets are primed to trap the solvent investors and fool the most rational among us. Nowadays, in a world of high-frequency trading and speculative derivatives, it is hard for even the most experienced investors to stay rational, let alone be clear on whether to buy or hold or sell. This is why so many experts on Wall Street are giving so much conflicting advice. Current forecasting science and predictive models are not yet developed enough to time the market for the next month or quarter.
- China Embracing Gold in Advance of Post Dollar Era
To challenge the US dollar hegemony and increase its power in the global realm of finance, China has a potent gold strategy. Whilst the State Council is preparing itself for the inevitable decay of the current international monetary system, it has firmly embraced gold in its economy. With a staggering pace, the government has developed the Chinese domestic gold market, stimulated private gold accumulation and increased its official gold reserves in order to ensure financial stability and support the internationalisation of the renminbi.
- When Money Fails
Money seldom fails, but occasionally, it does. It failed in Germany and Austria 1921-23. It failed in Hungary after World War II. It failed in Zimbabwe in 2008-9, when the rest of the world was in a recession.
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