IEHI Feed: The Hedge Fund Implode-o-Meter http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-60540 Sat, 27 Aug 2016 16:58:04 GMT Former Fed Governor Warsh Blasts Central Bank For "Manipulation"; Broken Policy http://hf-implode.com/viewnews/2016-08-27_FormerFedGovernorWarshBlastsCentralBankForManipulationBrokenPoli.html iehi-feed-60538 Sat, 27 Aug 2016 03:50:30 GMT The Global Real Estate Bubble Is OFFICIALY Bursting http://hf-implode.com/viewnews/2016-08-26_TheGlobalRealEstateBubbleIsOFFICIALYBursting.html iehi-feed-60537 Sat, 27 Aug 2016 01:58:03 GMT Drug companies spend millions to keep charging high prices http://hf-implode.com/viewnews/2016-08-26_Drugcompaniesspendmillionstokeepcharginghighprices.html The Drug Price Relief Act would make prescription drugs more affordable for people in Medi-Cal and other state programs by requiring that California pay no more than what's paid for the same drugs by the U.S. Department of Veterans Affairs. It would, in other words, protect state taxpayers from being ripped off.

Industry donations to crush the Drug Price Relief Act "will top $100 million by the election, I'm quite certain of it," said Michael Weinstein, president of the AIDS Healthcare Foundation and a leading backer of the state measure, also known as Proposition 61. "They see this as the apocalypse for their business model."

...

It probably would make more sense if Medicare, with more than 55 million beneficiaries, served in that federal capacity rather than the VA. But Big Pharma, abetted by the industry's Republican cronies, has consistently blocked efforts to allow Medicare to negotiate drug prices. The VA has no such constraint.

]]>
iehi-feed-60535 Fri, 26 Aug 2016 20:08:42 GMT U.S. Stocks Slip as Investors Ramp Bets for Rate Hike This Year http://hf-implode.com/viewnews/2016-08-26_USStocksSlipasInvestorsRampBetsforRateHikeThisYear.html U.S. stocks slipped in a volatile session, as remarks from Federal Reserve officials lifted optimism on the economy while also bolstering speculation interest rates could rise as soon as next month.

A speech by Fed Chair Janet Yellen sparked an early surge in equities amid a bullish economic assessment, which included a lack of clear guidance on when a rate boost may come. Equities then tumbled after Vice Chairman Stanley Fischer said Yellen's comments were consistent with a possible September increase, only to recover most of their losses in a final-hour rebound...

Expectations for a rate increase climbed after Fischer spoke, with traders pricing in a 42 percent probability of a move next month, from 32 percent after Yellen's remarks. Odds are now nearly 63 percent the central bank will act by December, up from 42 percent two weeks ago, based on fed fund futures data compiled by Bloomberg.

]]>
iehi-feed-60533 Fri, 26 Aug 2016 18:13:38 GMT "QE-Infinity" Is Grinding the Global Economy to a Halt http://hf-implode.com/viewnews/2016-08-26_QEInfinityIsGrindingtheGlobalEconomytoaHalt.html Alberto Gallo, head of macro strategies and manager of the Algebris Macro Credit Fund, describes this paradox as "QE infinity," whereby low rates and seemingly endless rounds of bond-buying programs encourage cheap borrowing, and investment in financial markets -- but not in the real economy.'

"The problem is rising debt and monetary easing comes with many collateral effects. One is the distortion of asset prices, leading to asset bubbles," Gallo explained on his website.

"Asset price distortion also has a ripple effect on wealth distribution, increasing inequality by benefitting the already-wealthy who are more likely to hold financial assets. Over time, low rates and QE can also encourage misallocation of resources to leverage-sensitive sectors, including real estate and construction."

]]>
iehi-feed-60531 Fri, 26 Aug 2016 15:02:03 GMT Portugal Gets EU Approval to Inject $5 bln Into Ailing Bank http://hf-implode.com/viewnews/2016-08-26_PortugalGetsEUApprovaltoInject5blnIntoAilingBank.html Portugal's plan to pump nearly 5 billion euros ($5.6 billion) into its biggest bank by assets is "another big step towards the stabilization of the Portuguese financial system," the country's financial minister told CNBC on Thursday.

The European Commission (the executive wing of the EU, of which Portugal is a member) and Portugal have agreed in principle to the recapitalization of state-owned Caixa Geral de Depósitos.

...

The plan was agreed late on Tuesday afternoon. It would see Portugal pump up to 2.7 billion euros of state funds into Caixa, transfer 500 million euros of its ParCaixa shares to Caixa and convert 960 million euros of contingent convertible bonds into equity.

...

Meanwhile, Caixa will issue highly subordinated debt worth around 1.0 billion euros that will be compliant with regulatory capital ratios designed to bolster banks' ability to withstand financial shocks.

This follows negotiations with Brussels officials, aimed at ensuring the plan is not viewed as state-aid to the bank, which would add to Portugal's problematically high budget deficit.

Although the government would put money into the bank, the hope is that the returns for the state would outweigh the cash injection.

Uh-huh. Since now we're obviously about to go into an economic boom period, we're sure the Portugese government will make money on this definitely-not-a-bailout cash injection...

]]>
iehi-feed-60529 Fri, 26 Aug 2016 14:50:26 GMT Yellen Says Rate-Hike Case ‘Has Strengthened in Recent Months' http://hf-implode.com/viewnews/2016-08-26_YellenSaysRateHikeCaseHasStrengthenedinRecentMonths.html "In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months," she said in the text of a speech Friday to central bankers and economists in Jackson Hole, Wyoming.

She also said the economy is "nearing" the Fed's goals of full employment and stable prices. The Fed chair didn't discuss the specific timing of a rate move in her first public comments since June.

It's pretty clear that Yellen wants to re-claim some of the Fed's "ammunition" to be able to respond to the next (coming soon) crisis. However, the Fed has rewired the central banking system so that the Fed funds market is now almost completely bypassed, rendering any such "aid" the Fed could offer by lowering rates (or, "tightening" due to raising them) nearly meaningless -- more a matter of "perception management". The only real constraint or impact is the exchange rate impact of nominally higher or lower dollar rates. And ultimately, the Fed is constrained not to step too far out of line of the global pack, or risk too much dollar appreciation.

]]>
iehi-feed-60527 Fri, 26 Aug 2016 14:41:06 GMT Japan July consumer prices post biggest annual fall in three yrs (TIME FOR A NIRP DOUBLE-DOWN?) http://hf-implode.com/viewnews/2016-08-26_JapanJulyconsumerpricespostbiggestannualfallinthreeyrsTIMEFORANI.html Japan's consumer prices fell in July by the most in more than three years as more firms delayed price hikes due to weak consumption, keeping the central bank under pressure to expand an already massive stimulus program.

The gloomy data reinforces a dominant market view that premier Shinzo Abe's stimulus program have failed to dislodge the deflationary mindset prevailing among businesses and consumers.

...

"Given how prices are behaving and how the BOJ is asked to cooperate with Abe to beat deflation, it's very hard to think the BOJ will unwind stimulus any time soon," said Takeshi Minami, chief economist at Norinchukin Research Institute.

"Instead, the September analysis will probably lay the grounds for a deepening of negative interest rates."

]]>
iehi-feed-60520 Thu, 25 Aug 2016 00:35:40 GMT Investors controlling $13tn call on G20 leaders to ratify Paris climate agreement http://hf-implode.com/viewnews/2016-08-24_Investorscontrolling13tncallonG20leaderstoratifyParisclimateagre.html A group of 130 institutions that control US$13tn of investments have called on G20 nations to ratify the Paris agreement this year and accelerate investment in clean energy and forced disclosure of climate-related financial risk.

Countries that ratified the Paris agreement early would benefit from better policy certainty and would attract investment in low-carbon technology, the signatories said in a letter before the G20 heads of government meeting in September.

They called for strong carbon pricing to be implemented, as well as regulations that encouraged energy efficiency and renewable energy. Plans for how to phase out fossil fuels also needed to be developed, they said.

]]>
iehi-feed-60519 Thu, 25 Aug 2016 00:32:36 GMT Illinois governor's office warns of crippling pension payment hike http://hf-implode.com/viewnews/2016-08-24_Illinoisgovernorsofficewarnsofcripplingpensionpaymenthike.html Potential action this week by Illinois' biggest public pension fund could put a big dent in the state's already fragile finances, Governor Bruce Rauner's administration warned.

A Monday memo from a top Rauner aide said the Teachers' Retirement System (TRS) board could decide at its meeting this week to lower the assumed investment return rate, a move that would automatically boost Illinois' annual pension payment...

When TRS lowered the investment return rate to 7.5 percent from 8 percent in 2014 the state's pension payment increased by more than $200 million, according to the memo.

Illinois' fiscal 2017 pension payment to its five retirement systems was estimated at $7.9 billion, up from $7.617 billion in fiscal 2016 and $6.9 billion in fiscal 2015, according to a March report by a bipartisan legislative commission.

]]>
iehi-feed-60518 Thu, 25 Aug 2016 00:12:10 GMT Forget "Brexit" - Referendum Looms in Italy; "Italeave" Increasingly Possible http://hf-implode.com/viewnews/2016-08-24_ForgetBrexitReferendumLoomsinItalyItaleaveIncreasinglyPossible.html The possibility of a "No" vote in Italy's constitutional referendum come October or November is the biggest clear and present danger to the euro's survival. Both 5-Star and the Northern League are promising a plebiscite on euro membership should they come to power in a post-referendum election... in the event of a "No" vote in October, the only economic choice for Italy would be between continued stagnation, or a return to the old economic model of successive devaluations. The latter course would naturally mean exiting the eurozone anyway.

...

The chances of a "Yes" vote in the referendum have not been improved by the slump in Renzi's personal popularity following last year's attempt to reform the labor market, and a series of small bank restructurings that saw retail savers "bailed-in" -- forced to take losses -- under new European Union banking regulations. From 40% after Renzi entered office two years ago with optimistic promises of reform, the approval rating of the prime minister's PD party has fallen to little better than 30% today, much the same as that of the opposition 5-Star Movement. As a result, with two months to go the referendum is too close to call. Opinion polls indicate the "Yes" and "No" camps are running roughly equal, with a large proportion of voters still undecided.

]]>
iehi-feed-60516 Wed, 24 Aug 2016 18:33:03 GMT US Housing is "Comradely capitalism" (PROBLEMS STILL FESTERING; NOW NATIONALIZED) http://hf-implode.com/viewnews/2016-08-24_USHousingisComradelycapitalismPROBLEMSSTILLFESTERINGNOWNATIONALI.html The trouble is that, in America, the banks are only part of the picture. There is a huge, parallel structure that exists outside the banks and which creates almost as much credit as they do: the mortgage system. In stark contrast to the banks it is very badly capitalised (see chart 2). It is also barely profitable, largely nationalised and subject to administrative control.

...

America's mortgage-finance system, with $11 trillion of debt, is probably the biggest concentration of financial risk to be found anywhere. It is still closely linked to the global financial system, with $1 trillion of mortgage debt owned abroad. It has not gone unreformed in the ten years since it set off the most severe recession of modern times. But it remains fundamentally flawed.

...

The supply of mortgages in America has an air of distinctly socialist command-and-control about it. Some 65-80% of all new home loans are repackaged by organs of the state. The structure of these loans, their volume and the risks they entail are controlled not by markets but by administrative fiat.

No one is keen to make transparent the subsidies and dangers involved, the risks of which are in effect borne by taxpayers. But an analysis by The Economist suggests that the subsidy for housing debt is running at about $150 billion a year, or roughly 1% of GDP. A crisis as bad as last time would cost taxpayers 2-4% of GDP, not far off the bail-out of the banks in 2008-12.

]]>
iehi-feed-60515 Wed, 24 Aug 2016 17:42:25 GMT Troika prompts ministry to tighten debt repayments http://hf-implode.com/viewnews/2016-08-24_Troikapromptsministrytotightendebtrepayments.html iehi-feed-60513 Wed, 24 Aug 2016 00:58:22 GMT U.S. new-home sales climb to best level since late 2007 http://hf-implode.com/viewnews/2016-08-23_USnewhomesalesclimbtobestlevelsincelate2007.html New-home sales jumped 12.4 percent last month to a seasonally adjusted rate of 654,000 annual units, the strongest level since October 2007, the Commerce Department said Tuesday. The demand has eclipsed the pace of construction. Just 4.3 months' supply of new homes is available on the market, down from 5.2 months a year ago.

...

The improved sales of both new and existing homes has supported the broader U.S. economy, which is still hampered by a global slowdown and weak worker productivity. Existing-home sales reached a seasonally adjusted annual rate of 5.57 million in June, the best performance since early 2007.

Happy times are hear again! Or, maybe, it's pretty much a peak...

]]>
iehi-feed-60512 Wed, 24 Aug 2016 00:37:46 GMT Deutsche Bank's $10-Billion Russian Scandal http://hf-implode.com/viewnews/2016-08-23_DeutscheBanks10BillionRussianScandal.html The counterparties were not owned by Russian oligarchs. They were brokerages run by Russian middlemen who took commissions for initiating mirror trades on behalf of rich people and businesses eager to send their money offshore. A businessman who wanted to expatriate money in this way would invest in a Russian fund like Westminster, which would then use mirror trades to move that money into an offshore fund like Cherryfield. The offshore fund then wired the money, in dollars, into the businessman's private offshore account. A middleman who formed one of the Russian counterparty funds told me that the cost of his services depended upon the Russian authorities' desire to stop the export of capital. In 2011, when controls were lax, the fee was 0.2 per cent. In 2015, when sanctions were strong, and Putin was determined to retain as much wealth as he could in Russia, the fee rose to more than five per cent.

...

Deutsche Bank has not commented on whose money was expatriated through the mirror trades, although John Cryan, the C.E.O., has said that the bank has not knowingly assisted Russians on the sanctions list. In the deadening argot of finance, Deutsche Bank's Russian fiasco has frequently been called a "failure of controls." In an interview in March, 2016, Cryan said, "To our knowledge, the individual transaction steps in themselves were innocuous. However, the case raises questions about how effective our systems and controls were, especially with regard to the onboarding of new clients, an area where we experienced difficulties in collecting sufficient information."

This passive language is hard to square with the blatant nature of the scheme. Roman Borisovich, a former investment banker at Deutsche Bank in London, who focussed on Russian businesses, told me, " ‘Fucking Obvious' is the middle name of Russian corruption."

]]>
iehi-feed-60511 Tue, 23 Aug 2016 21:47:23 GMT BIS and JP Morgan-led Gold Capping Cartel Has Miners Underwater http://hf-implode.com/viewnews/2016-08-23_BISandJPMorganledGoldCappingCartelHasMinersUnderwater.html iehi-feed-60509 Tue, 23 Aug 2016 21:41:56 GMT Rent at Trump Tower Surged After Donald Trump Stopped Self-Funding His Campaign http://hf-implode.com/viewnews/2016-08-23_RentatTrumpTowerSurgedAfterDonaldTrumpStoppedSelfFundingHisCampa.html In March, when Trump was still paying for his presidential run mostly out of his own pocket, his campaign spent $35,458 to rent its headquarters in Trump Tower. Last month, however, that figure surged to $169,758, even as the number of paid campaign employees and staff dropped from 197 to 172 over the same period, the Huffington Post reports. The sharp increase in campaign spending appears to correspond to a large infusion in cash from outside donors. According to the Huffington Post, the amount Trump Tower has charged the campaign for rent has steadily increased since May, the same month that Trump clinched the nomination and inked a deal with the Republican National Committee to fund his campaign. At the end of May the campaign doled out $72,800, followed by $110,684 in June, and $169,758 in July.

Trump Tower isn't the only Trump property to have benefited. Over the same period, the Huffington Post reports a number of Trump's namesake golf courses and restaurants have earned a total of $260,000, citing F.E.C. records. In July alone, the campaign spent $495,000 on Trump's air travel, which is operated by a company that he owns. The Washington Post estimated that the Trump clan has pocketed $7.7 million as a result of the campaign's expenditures.

Who is surprised? Once a con artist, always a con artist...

]]>
iehi-feed-60507 Tue, 23 Aug 2016 21:22:42 GMT Fed Admits Another $4 Trillion In QE Would Be Needed To Offset An "Economic Shock" http://hf-implode.com/viewnews/2016-08-23_FedAdmitsAnother4TrillionInQEWouldBeNeededToOffsetAnEconomicShoc.html iehi-feed-60506 Tue, 23 Aug 2016 14:13:52 GMT Goldman Says It's Too Late to Chase the Booming Real Estate Sector http://hf-implode.com/viewnews/2016-08-23_GoldmanSaysItsTooLatetoChasetheBoomingRealEstateSector.html iehi-feed-60504 Tue, 23 Aug 2016 13:55:10 GMT Citi Sours on Stocks; Cites "Great Rotation" http://hf-implode.com/viewnews/2016-08-23_CitiSoursonStocksCitesGreatRotation.html