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-61931 Wed, 22 Mar 2017 14:42:18 GMT US "Too Big To Fail" Banks Top $1 Trillion - What Happens Next? http://hf-implode.com/viewnews/2017-03-22_USTooBigToFailBanksTop1TrillionWhatHappensNext.html iehi-feed-61929 Wed, 22 Mar 2017 00:26:11 GMT How Long Can Stocks' P/E-Multiple Expansion Outlive Declining Earnings and Companies' Financial Engineering? http://hf-implode.com/viewnews/2017-03-21_HowLongCanStocksPEMultipleExpansionOutliveDecliningEarningsandCo.html ... stocks have soared despite these miserable growth fundamentals. So what gives in this no-earnings-growth environment? Turns out the only thing that has soared is the price-earnings multiple. Over the three-plus years, it expanded by 47% from a P/E ratio of 18.15 on January 1, 2014, to P/E ratio of 26.64 today

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This combination of flat earnings and soaring stock prices, and thus expanding P/E ratios, is not uncommon. It comes in cycles: periods of multiple expansion are followed by periods of multiple compression. The current cycle of year-over-year multiple expansion has lasted for 57 months, the longest on record. The prior three record cycles -- which ended in 1987, 2000, and 2009 -- turned into periods of multiple compression associated with blistering crashes.

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iehi-feed-61926 Tue, 21 Mar 2017 15:13:03 GMT I attended the top of the Canadian Housing Market, so you didn't have http://hf-implode.com/viewnews/2017-03-21_IattendedthetopoftheCanadianHousingMarketsoyoudidnthave.html The second important factor in real estate is financing.  Not everyone has money, so what can they do?  The answers were shocking.  Be ‘creative' was the first response.  Pool your money, borrow from friends and family, own just 5% of a house, get the money however you can and just do it - remember, it only goes up.  Other financing suggestions were get cozy with a lender and they will ‘bend the rules' for you!  The fact that the biggest condo developer in Canada (Brad Lamb) said lenders will bend (but not break, apparently) rules to get you financing in front of 15k people with most people smiling and nodding was shocking.  

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Plenty of "high double-digit monthly yields", retire early with real estate, "everyone needs a place to live - buy apartments" type messages. Almost all of these pitches were second lien lending. Most offered yields in the 8 to 10% range. The presentations all suggested that you can borrow money, if you don't have it, at 4% and then buy these investments at 10% - easy money.

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The Paramount Equity pitch was also interesting and stated in all caps "HIGH DOUBLE-DIGIT RETURNS ON YOUR CASH, RRSP". This product pays monthly, is a second lien mortgage, with a one year term and LTV <85%. Paramount uses clever language that states they cover the cost of defaults. By that they mean they pay some of the fees, not the default risk itself.

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iehi-feed-61925 Tue, 21 Mar 2017 15:07:42 GMT Why Trump will have to trash the dollar to create jobs http://hf-implode.com/viewnews/2017-03-21_WhyTrumpwillhavetotrashthedollartocreatejobs.html Trump may just be blowing smoke when he talks about tariffs and border-adjustment taxes.

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The collapse of American manufacturing towns, and the old industrial middle class, has gone hand in hand with a staggering 40-year rise in the dollar, Klody observed. It is standard economics that as your currency rises, your exports become more expensive and less competitive in foreign markets.

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Klody noted that since the mid-1970s, the U.S. dollar has quadrupled in price -- yes, really -- when measured against the Federal Reserve's broad basket of foreign currencies.

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Since the early 1990s, the Mexican peso has collapsed from 32 U.S. cents to only 5 cents. That's a huge windfall to Mexican manufacturers -- far greater, one suspects, than NAFTA's reduction in tariffs. During that time, the price in dollars of the Vietnamese currency, the dong, has nearly halved. The Indian rupee has more than halved. And so on.

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iehi-feed-61922 Tue, 21 Mar 2017 00:07:43 GMT Central Bank Shell Game: What Sweden's Negative Interest Rates Do to Consumers http://hf-implode.com/viewnews/2017-03-20_CentralBankShellGameWhatSwedensNegativeInterestRatesDotoConsumer.html the "Swedish Model" is under attack. The egalitarian underpinnings, unwinding with the negative rates, are driving a wedge into Swedish society, creating extremes on both sides of the economic spectrum. The rampant consumerism, encouraged by artificially low rates, continues to widen the wealth gap. Coincidentally, the middle class deteriorated the most between 2014 and 2015: the same time that deposit rates took a dive. Furthermore, the negative savings rates are driving the average person to "gamble" on speculative investments instead of saving and building a future over the long term.

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Recently, inflation has been heating up. Near zero from 2013 to 2015, it edged up to almost 1% in 2016, and printed 1.8% in February. Much of it is supply driven: rising import prices attributed to a falling SEK. The real interest rates fell to negative -2.3% (Repo Rate minus Inflation) last month. At some point, Riksbank will either have to raise rates or the government will have to intervene to avert a currency crisis.

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It is clear that the negative rate experiment is neither sustainable nor helpful to economic growth. It only inflates bubbles while widening the wealth gap in Swedish society. A once prudent and financially conservative people are now getting drunk on debt, wrecking their future. The very premise of Swedish society is under attack. Nevertheless, it does not appear that this policy will abate anytime soon.

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iehi-feed-61921 Mon, 20 Mar 2017 16:11:35 GMT The Fed's Global Dollar Problem http://hf-implode.com/viewnews/2017-03-20_TheFedsGlobalDollarProblem.html iehi-feed-61920 Mon, 20 Mar 2017 16:09:58 GMT Euro zone's Jeroen Dijsselbloem calls for ESM to be turned into a European IMF http://hf-implode.com/viewnews/2017-03-20_EurozonesJeroenDijsselbloemcallsforESMtobeturnedintoaEuropeanIMF.html The European Stability Mechanism (ESM) - the euro zone's bailout fund - should ultimately be turned into a European version of the International Monetary Fund, the head of euro zone finance ministers told a German newspaper.

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He said that would also mean that Greece's current "troika" of lenders -- the European Commission, European Central Bank and the IMF -- would need to be broken up in the longer term.

"The ECB feels increasingly uncomfortable in its troika role, and rightly so I think," Dijsselbloem said, adding that the European Commission had other "important tasks" that it should concentrate on.He said the ESM should "build up the technical expertise that only the IMF has at the moment".

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iehi-feed-61919 Mon, 20 Mar 2017 14:35:37 GMT Greece Edges Toward Another Crisis as Bailout Quarrel Persists http://hf-implode.com/viewnews/2017-03-20_GreeceEdgesTowardAnotherCrisisasBailoutQuarrelPersists.html Greece is set to miss yet another deadline for unlocking bailout funds this week, edging closer to a repeat of the 2015 drama that pushed Europe's most indebted state to the edge of economic collapse.... While Tsipras had promised the long delayed review of the latest bailout would be completed by March 20, a European official said last week that reaching an agreement even in April is now considered a long shot.

... The two sides are still far apart on reforms demanded by creditors in the Greek energy market and the government in Athens is resisting calls for additional pension cuts. And while discussions continue on how to overhaul the labor market, a finance ministry official said in an email to reporters on Friday that the issue can't be solved in talks with technocrats.

... Even as Greek bonds have performed better than most of its euro-area peers this year on expectations that the government will capitulate, uncertainty has weighed on economic activity, raising the risk that an additional bailout may be needed. Unemployment rose in the last quarter of 2016, the economy unexpectedly contracted, and a bleeding of deposits from the nation's battered lenders resumed.

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iehi-feed-61918 Mon, 20 Mar 2017 14:29:49 GMT Ackman's "Surefire Bet" Turns Into a $4 bln Loss... While Facing $2 bln Insider-Trading Suit http://hf-implode.com/viewnews/2017-03-20_AckmansSurefireBetTurnsIntoa4blnLossWhileFacing2blnInsiderTradin.html Hailed as a master investor, he clinched his highflier status in the fall of 2014 by paying $90 million with some friends to buy the penthouse at One57, a 13,500-square-foot aerie in Midtown Manhattan overlooking Central Park. He didn't plan to live there -- it was an investment property -- but until he sold it, the apartment would make a good party space, he told The New York Times. If Mr. Ackman were a stock, that might have been his peak.

Today, things are very different for him. His company's performance is way down, he is in the midst of an expensive divorce, and on March 13, he and investors in funds run by Pershing Square Capital Management swallowed a $4 billion loss on Valeant Pharmaceuticals International, a beleaguered drug company.

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while his funds notched an exceptional 40 percent gain in 2014 -- much of it attributable to the Allergan trade that has drawn the lawsuit -- Mr. Ackman's funds lost 13.5 percent last year and 20.5 percent in 2015. Through March 15, Pershing Square is flat.

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One reason so many on Wall Street have been riveted by Mr. Ackman's wrong-way Valeant bet is that it seems to confirm an age-old investing truth: Karma has everyone's address. For example, Mr. Ackman's $4 billion loss in Valeant more than wiped out the $2.2 billion he made in 2014 on Allergan.

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As [the Valeant] calamity played out, Mr. Ackman was also fighting the Allergan lawsuit in California. The plaintiffs were investors who had missed out on gains in Allergan stock in 2014 because they had sold shares without knowing about Valeant's impending bid, while Pershing Square, which did know about it, was buying Allergan shares. They contended that Valeant and Pershing Square violated securities laws, which prohibit fraudulent, deceptive or manipulative actions in connection with a tender offer.

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iehi-feed-61917 Mon, 20 Mar 2017 11:48:28 GMT Is Simon Property Group In Trouble Over An Alleged Insurance Fraud Scheme? http://hf-implode.com/viewnews/2017-03-20_IsSimonPropertyGroupInTroubleOverAnAllegedInsuranceFraudScheme.html iehi-feed-61916 Sun, 19 Mar 2017 17:30:55 GMT More Proof of Janet Yellen's Idiocy - David Stockman http://hf-implode.com/viewnews/2017-03-19_MoreProofofJanetYellensIdiocyDavidStockman.html ... the market is priced as if the business cycle has been outlawed and as if the feckless band of Keynesian pretenders who have seized control of financial markets have ushered in the Nirvana of permanent full-employment.

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if the Fed plans to keep raising until rates until they reach 3.0% by 2019, it will have to suck massive amounts of cash out of the financial markets. So doing, it will drive long-term yields substantially higher and thereby obliterate the ultra-low cap rate delusion on which the entire regime of Bubble Finance is based.

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Yellen proved she is clueless about the financial firestorm our rogue central bank is about to unleash. She claimed that the Fed could implement 3-4 money market rate increases a year, while deferring the shrinkage of its balance sheet into the indefinite future. But that it most assuredly cannot do.

With a staggering overhang of $2.1 trillion of excess reserves in the financial system, even our vaunted monetary politburo cannot command the tides to recede. If it wants the money rate to rise on its appointed path through 2019, it must drain loads of cash from Wall Street.

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iehi-feed-61915 Sun, 19 Mar 2017 01:47:29 GMT ECB Trapped in its Own "Doom Loop" as Inflation Surges http://hf-implode.com/viewnews/2017-03-18_ECBTrappedinitsOwnDoomLoopasInflationSurges.html To the ECB's barely contained glee, inflation is back, alive, kicking and biting, in the Eurozone. In February, for the first time in four years, the region-wide 12-month inflation rate reached 2%.... In Spain it was 3% in both January and February, having almost doubled from the 1.6% rate recorded in December, 2016. The last time it was that high was in October 2012. The biggest mover in January were energy prices, propelled by rising global prices as well as regulatory changes, while in February the biggest driver was food prices, with fresh fruit alone surging 7.6%.

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If the central bank begins tapering, and investors get wind that it is buying fewer Italian bonds, investors will begin selling, triggering downward spiraling prices and rising yields. In a repeat of 2012, Italy's government will start having difficulty servicing its debt, which will merely serve to exacerbate the sell-off.

Despite the ECB's QE program, the biggest holders of sovereign bonds are still European resident banks, reports Breugel. In other words, the Doom Loop is still intact, just waiting to be set in motion.

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iehi-feed-61914 Sun, 19 Mar 2017 01:35:48 GMT Deepening EU Banking Crisis Meets Euro-TARP, Taxpayers http://hf-implode.com/viewnews/2017-03-18_DeepeningEUBankingCrisisMeetsEuroTARPTaxpayers.html ... the European banking sector may face even higher bad loan risks if the ECB begins to scale back its monetary stimulus programs, something it has already begun, albeit extremely tentatively. The total stock of non-performing loans (NPL) in the EU is estimated at over €1 trillion, or 5.4% of total loans, a ratio three times higher than in other major regions of the world.

... someone else must step in, and soon. And that someone is almost certain to be the European taxpayer.

In February ECB Vice President Vitor Constancio called for the creation of a whole new class of government-backed "bad banks" to help buy some of the €1 trillion of bad loans putrefying on bank balance sheets. Constancio's idea bore a striking resemblance to a formal proposal put forward by the European Banking Authority (EBA) for the creation of a massive EU-wide bad bank that, in the words of EBA president Andrea Enria, would "make it much easier to achieve critical mass and to create a well functioning market for (impaired) assets."

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iehi-feed-61913 Sat, 18 Mar 2017 23:53:03 GMT World Out Of Whack: What's Next For Global Real Estate? http://hf-implode.com/viewnews/2017-03-18_WorldOutOfWhackWhatsNextForGlobalRealEstate.html iehi-feed-61912 Sat, 18 Mar 2017 19:04:00 GMT A Bad Week and Getting Badder Bigly Fast - KUNSTLER http://hf-implode.com/viewnews/2017-03-18_ABadWeekandGettingBadderBiglyFastKUNSTLER.html ... the longer a debt ceiling stalemate goes on in congress, the more trapped President Trump will be. The cherry on top is the Federal Reserve's move to raise interest rates the same day the debt ceiling truce expired. That will thunder through the system, making many loans more expensive to repay, dampening the real estate markets (at a time when commercial real estate is already tanking), and draining all kinds of other mojo (however falsely engineered) from the Potemkin economy.

As if being trapped in a political minefield isn't bad enough, the remaining safe patch Trump is stranded on turns out to be the LaBrea Tar Pit of health care reform. At this point, the crusade is doing worse than going nowhere -- it's getting sucked into the primordial bitumen where the mastodons and camelops sleep.

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iehi-feed-61909 Sat, 18 Mar 2017 15:37:26 GMT Neel Kashkari: I Almost Couldn't Get a Mortgage, But Banks Should Still Have Larger Capital Buffers http://hf-implode.com/viewnews/2017-03-18_NeelKashkariIAlmostCouldntGetaMortgageButBanksShouldStillHaveLar.html There's a straightforward way to help prevent the next financial crisis, fix the too-big-to-fail problem, and still relax regulations on community lenders: increase capital requirements for the largest banks. In November, the Federal Reserve Bank of Minneapolis, which I lead, announced a draft proposal to do precisely that. Our plan would increase capital requirements on the biggest banks--those with assets over $250 billion--to at least 23.5%. It would reduce the risk of a taxpayer bailout to less than 10% over the next century.

Alarmingly, there has been recent public discussion of moving in the opposite direction. Several large-bank CEOs have suggested that their capital requirements are already too high and are holding back lending. As this newspaper reported, Bank of America CEO Brian Moynihan recently asked, "Do we have [to hold] an extra $20 billion in capital? Which doesn't sound like a lot, but that's $200 billion in loans we could make."

.. [But] Borrowing costs for homeowners and businesses are near record lows. If loans were scarce, borrowers would be competing for them, driving up costs. That isn't happening. Nor do other indicators suggest a lack of loans. Bank credit has grown 23% over the past three years, about twice as much as nominal gross domestic product. Only 4% of small businesses surveyed by the National Federation of Independent Business report not having their credit needs met.

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There is a simple and fair solution to the too-big-to-fail problem. Banks ask us to put 20% down when buying our homes to protect them in case we run into trouble. Similarly, taxpayers should make large banks put 20% down in the form of equity to prevent bailouts in case the financial system runs into trouble. Higher capital for large banks and streamlined regulation for small banks would minimize frustration for borrowers. If 20% down is reasonable to ask of us, it is reasonable to ask of the banks.

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iehi-feed-61907 Fri, 17 Mar 2017 17:24:05 GMT Why raising interest rates this week may have been a bad idea http://hf-implode.com/viewnews/2017-03-17_Whyraisinginterestratesthisweekmayhavebeenabadidea.html One of the big surprises over the past 18 months is that the job market continues to be so strong, able to pull people back into the labor force who gave up looking for work altogether, Kashkari wrote. The United States added 235,000 jobs in February, official data show, far above the level needed to keep up with population growth.

"This surprised us a bit because it suggests that there were many more people who were interested in working than historical patterns predicted," he said.

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"Today's hike seems to signal that Fed policymakers think that we're currently at or very near full employment, and that failing to slow the pace of economic growth in coming months would soon lead to accelerating wage and price inflation. They could be right, of course, but it is important to note that there is little in actual economic data to indicate this," Bivens wrote.

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iehi-feed-61906 Fri, 17 Mar 2017 17:18:28 GMT Goldman Cuts Blankfein's Pay to $22 Million for 2016, Scraps "Opaque" Long-Term Incentive Plan http://hf-implode.com/viewnews/2017-03-17_GoldmanCutsBlankfeinsPayto22Millionfor2016ScrapsOpaqueLongTermIn.html Goldman Sachs Group Inc. reduced Chief Executive Officer Lloyd Blankfein's compensation 27 percent, awarding him $22 million for 2016 after eliminating a long-term incentive award.

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Goldman Sachs redesigned its compensation structure for 2016 after investors complained that the long-term incentive was overly complex. The bank also changed the performance-based awards to reflect the company's relative performance. The changes came after an advisory vote on pay at last year's annual meeting received the least support since such votes were instituted in 2009.

Blankfein becomes the third-highest paid CEO of the six largest U.S. banks. JPMorgan Chase & Co.'s Jamie Dimon received $28 million; Morgan Stanley's James Gorman $22.5 million; Bank of America Corp. Brian T. Moynihan $20 million; and Citigroup Inc.'s Mike Corbat $15.5 million. Wells Fargo & Co.'s Tim Sloan, who became CEO in October, got $12.8 million.

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iehi-feed-61904 Fri, 17 Mar 2017 15:12:53 GMT This Map Shows Where the World's Billionaires Got Their Money http://hf-implode.com/viewnews/2017-03-17_ThisMapShowsWheretheWorldsBillionairesGotTheirMoney.html iehi-feed-61903 Fri, 17 Mar 2017 15:11:02 GMT Gold Eyes First Weekly Gain in Three as Fed Hurts Dollar http://hf-implode.com/viewnews/2017-03-17_GoldEyesFirstWeeklyGaininThreeasFedHurtsDollar.html