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-63149 Tue, 17 Oct 2017 16:45:02 GMT What Debt Crackdown? China's Banks Are Binging on Bonds http://hf-implode.com/viewnews/2017-10-17_WhatDebtCrackdownChinasBanksAreBingingonBonds.html China's banks are still bingeing on short-term financing, defying analyst predictions that they would wean themselves off such debt as regulators intensify a crackdown on leverage.

Sales of negotiable certificates of deposit -- a key funding source for medium and smaller banks -- surged 49 percent from a year ago in the third quarter to a record 5.4 trillion yuan ($819 billion), according to data compiled by Bloomberg... China's deleveraging looms large in debt-market dynamics these days, with government bond yields at two-year highs and the one-week Shanghai Interbank Offered Rate not far from the most expensive since 2015. Still, officials are also trying to keep the economy humming: they've tweaked the rules governing NCD issuance, but haven't shut off the taps as credit growth accelerates.

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The certificates -- which have been used by lenders to finance purchases of each other's wealth-management products -- came under regulatory scrutiny last year, when they started to serve as a source of leveraged bond investments for some institutions. In August, the People's Bank of China asked lenders with more than 500 billion yuan of assets to classify the debt as interbank liabilities from next year. This is seen effectively capping sales.

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iehi-feed-63147 Mon, 16 Oct 2017 21:10:11 GMT Goldman Sachs thinks we're heading into a bear market http://hf-implode.com/viewnews/2017-10-16_GoldmanSachsthinkswereheadingintoabearmarket.html iehi-feed-63146 Mon, 16 Oct 2017 17:04:17 GMT HSBC Tries To Sell Stake in Times Square Office Tower, Once Lost By Macklowe, for $445M (VALUED ABT. $250 mln in 2010) http://hf-implode.com/viewnews/2017-10-16_HSBCTriesToSellStakeinTimesSquareOfficeTowerOnceLostByMacklowefo.html

According to The Real Deal, "The 44-story tower was built in 1990 as the headquarters of German publisher Bertelsmann. In 2006, Vornado Realty Trust bought the retail space for $260 million. A year later, Harry Macklowe paid the Blackstone Group $830 million for the office portion of the property. Macklowe lost the property to his lender, Deutsche Bank, which sold it to CBRE Global Investors."

... In 2010, a 49 percent stake in the property was purchased by HSBC, in a deal that valued the office space at $520 million. Then in 2011 the remaining 51 percent was acquired in a deal valuing it at $660 million, respectively. Adobe Systems, Viacom, Verizon, Pillsbury Winthrop and Duane Morris are among the tenants of the building.

We expect the results will not be great. The commercial market is definitely on the rocks, and an office tower just a flew blocks north of Times Square -- recently financed -- is already distressed (reported a few months ago).

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iehi-feed-63144 Mon, 16 Oct 2017 15:16:45 GMT A flawed argument used by Warren Buffett could be setting stocks up for 'one of the worst disasters in history' http://hf-implode.com/viewnews/2017-10-16_AflawedargumentusedbyWarrenBuffettcouldbesettingstocksupforoneof.html Speaking in an interview with CNBC on October 3, the chairman and CEO of Berkshire Hathaway said, "Valuations make sense with interest rates where they are."

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"It's an incomplete sentence ," Hussman wrote in a recent blog post. "Unfortunately, the convenience of investing-by-slogan, rather than carefully thinking about finance and examining evidence, is currently leading investors into what is likely to be one of the worst disasters in the history of the U.S. stock market."

Hussman calculates that stock valuations are stretched 175% above their historic norms, and predicts the S&P 500 will see negative total returns over the next 10 to 12 years. Along the way, the benchmark index will experience an interim loss of more than 60%, he estimates.''

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iehi-feed-63142 Sun, 15 Oct 2017 21:33:53 GMT Grim reality of NAFTA talks sets in after tough U.S. opening demands http://hf-implode.com/viewnews/2017-10-15_GrimrealityofNAFTAtalkssetsinaftertoughUSopeningdemands.html "The atmosphere is complicated," one trade official told reporters, adding that his fears about some "pretty harsh, pretty horrible" demands from the U.S. side of the negotiating table were coming true...

One of the U.S. proposals unveiled this week would require that 50 percent of the value of all NAFTA-produced cars, trucks and large engines come from the United States, people briefed on the negotiations said.

The same proposal calls for a sharp increase in NAFTA's regional automotive content requirement, boosting it to 85 percent from the current 62.5 percent. The existing level is already the highest local content requirement of any trading bloc in the world. [L2N1MO0U5]

Meanwhile, the Trump administration's call for a so-called NAFTA sunset clause would effectively trigger a renegotiation of the pact every five years.

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One of Lighthizer's predecessors, Robert Zoellick, said he thought there was a 50-50 chance Trump would quit NAFTA. "He's trying to go back to make trade agreements fix the bilateral trade deficit. I don't believe he can be successful in doing that," Zoellick, now non-executive chairman of AllianceBernstein, told a banking conference in Washington on Saturday.''

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iehi-feed-63140 Sun, 15 Oct 2017 17:33:28 GMT Russia Unveils 'CryptoRuble' As Assange Thanks US Govt For His 50,000% Gain On Bitcoin http://hf-implode.com/viewnews/2017-10-15_RussiaUnveilsCryptoRubleAsAssangeThanksUSGovtForHis50000GainOnBi.html iehi-feed-63139 Sat, 14 Oct 2017 23:30:44 GMT Wells Fargo Reveals $1 bln Skeleton in Closet From Pre-Crisis Mortgages; Crummy General Results http://hf-implode.com/viewnews/2017-10-14_WellsFargoReveals1blnSkeletoninClosetFromPreCrisisMortgagesCrumm.html The company took a surprise $1 billion charge in the quarter for previously disclosed regulatory investigations into its pre-crisis mortgage activity, the third-largest U.S. lender said Friday in a statement. The expense pushed total costs to a record $14.4 billion.

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The bank is one of the last firms not to have settled with regulators and the Justice Department over its handling of home loans in the run up to the housing crisis. It said in August that it was increasing its estimate for what it deemed "reasonably possible" legal charges beyond reserves in part because of "existing mortgage-related regulatory investigations."

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Wells Fargo also had trouble in its underlying businesses. Revenue in the third-largest U.S. bank's community banking division, the home for all the lending it does to America's consumers, fell to $12.1 billion, the lowest since the quarter after news broke about the fake accounts. Net income in the unit, which generates the majority of Wells Fargo's profit, plunged 31 percent to $2.23 billion.

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iehi-feed-63137 Sat, 14 Oct 2017 23:15:36 GMT Prepare for a Chinese Maxi-devaluation - Rickards (BIG IMPLICATIONS FOR US STOCKS!!) http://hf-implode.com/viewnews/2017-10-14_PrepareforaChineseMaxidevaluationRickardsBIGIMPLICATIONSFORUSSTO.html Since the impossible trinity really is impossible in the long-run, and since China's current solutions are non-sustainable, what can China do to solve its policy trilemma? The most obvious course, and the one likely to be implemented, is a maxi-devaluation of the yuan to around the 7.95 level or lower.

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There are early signs that this policy of devaluation is already being put into place. The yuan has dropped sharply in the past month from 6.45 to 6.62. This resembles the stealth devaluation of late 2015, but is somewhat more aggressive... Once the National Party Congress is over in late October, President Xi will have secured his political ambitions and will no longer find it necessary to avoid rocking the boat.

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Both Trump and Xi are readying a "gloves off" approach to a trade war and renewed currency war. A maxi-devaluation of the yuan is Xi's most potent weapon.

Finally, China's internal contradictions are catching up with it. China has to confront an insolvent banking system, a real estate bubble, and a $1 trillion wealth management product Ponzi scheme that is starting to fall apart.

A much weaker yuan would give China some policy space in terms of using its reserves to paper over some of these problems. Less dramatic devaluations of the yuan led to U.S. stock market crashes. What does a new maxi-devaluation portend for U.S. stocks?

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iehi-feed-63133 Fri, 13 Oct 2017 21:41:39 GMT The Curious Case of "Missing the Market Boom" http://hf-implode.com/viewnews/2017-10-13_TheCuriousCaseofMissingtheMarketBoom.html "The Cost of Missing the Market Boom is Skyrocketing", says a Bloomberg headline today. That must be the scariest headline I've seen in quite a while. For starters, it's misleading, because people who ‘missed' the boom haven't lost anything other than virtual wealth, which is also the only thing those who haven't ‘missed' it, have acquired.

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[As the article says:] "Aided by an 8% drop in the U.S. currency, the dollar-denominated capitalization of worldwide shares appreciated in 2017 by an amount -- $20 trillion -- that is comparable to the total value of all equities nine years ago. And yet skeptics still abound, pointing to stretched valuations or policy uncertainty from Washington to Brussels. "

$20 trillion. That's a lot of dough. It's what all equities in the world combined were ‘worth' 9 years ago. It's also, oh irony, awfully close to the total increase in central bank balance sheets, through QE etc. Might the two be related in any way?''

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iehi-feed-63130 Fri, 13 Oct 2017 14:33:08 GMT Why Bitcoin Is Surging Higher And Why The Ban Is Fueling The Surge http://hf-implode.com/viewnews/2017-10-13_WhyBitcoinIsSurgingHigherAndWhyTheBanIsFuelingTheSurge.html iehi-feed-63129 Fri, 13 Oct 2017 14:17:43 GMT Mnuchin still backs key provision in GOP tax plan that would hurt (rich) Democrats http://hf-implode.com/viewnews/2017-10-13_MnuchinstillbackskeyprovisioninGOPtaxplanthatwouldhurtrichDemocr.html As congressional Republicans and the Trump administration attempt to overhaul the nation's tax code, much of the attention will be focused on changes that will end popular tax breaks to help pay for the revenue lost from lowering tax rates.

Among those in the plan's crosshairs is a long-standing provision that lets you deduct from your reported income the money you pay in state and local taxes on income, real estate or sales of big-ticket items.

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Proponents of the deduction have long argued that, without it, taxpayers would be hit twice for each dollar of income, by their state and by the U.S. Treasury. Opponents argue that the deduction benefits the richest taxpayers at the expense of those with lower incomes, or who don't own a home or make large purchases that carry a big sales tax.

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iehi-feed-63128 Thu, 12 Oct 2017 22:08:00 GMT Some Struggling Malls Turn To Churches For "Redemption" http://hf-implode.com/viewnews/2017-10-12_SomeStrugglingMallsTurnToChurchesForRedemption.html As retailers consolidate and shrink the number and sizes of their stores, retail center landlords, especially in weaker markets, are being forced to consider a wider range of prospective tenants that might not fit the conventional retail mold. Among them: houses of worship.

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The growth of e-commerce has hit retailers hard. In Elmira, N.Y., the local mall is struggling to find new tenants and attract shoppers. But in weaker markets where vacancies are higher, it is more difficult for landlords to find complementary retailers, and churches are becoming palatable options.

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According to a Wall Street Journal analysis of August 2017 data from the Directory of Major Malls that tracks about 8,200 retail centers in the country, at least 111 malls and open-air centers have a church in them. Some have two or more.

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Churches usually weren't in the mix. Shopping center owners prefer tenants that draw foot traffic on a daily basis and often consider churches to be second-tier tenants because they aren't typically open all week. What's more, if rents aren't paid, landlords might find it harder to evict a church than another tenant.

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iehi-feed-63127 Thu, 12 Oct 2017 22:03:56 GMT Trump doesn't seem to understand the stock market. Or the national debt. http://hf-implode.com/viewnews/2017-10-12_TrumpdoesntseemtounderstandthestockmarketOrthenationaldebt.html What Trump is suggesting here is that because of the gains in the stock market -- which have absolutely happened -- the national debt is being reduced... The stock market and the national debt have, quite literally, no direct connection. The stock market, broadly speaking, measures wealth being created (or lost) by large corporations and investors in those companies.

The national debt, which sits at $20 trillion and counting, is the debt owed by the federal government. There are two ways to reduce the debt: Raise taxes or reduce government spending. A bull stock market is not one of those two options.

Trump seems not to know any of that.

Trump seems to be getting more senile by the hour...

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iehi-feed-63126 Thu, 12 Oct 2017 17:39:57 GMT Spain gives Catalan leader eight days to drop independence http://hf-implode.com/viewnews/2017-10-11_SpaingivesCatalanleadereightdaystodropindependence.html Spanish Prime Minister Mariano Rajoy on Wednesday gave the Catalan government eight days to drop an independence bid, failing which he would suspend the Catalonia's political autonomy and rule the region directly

His move could deepen the confrontation between Madrid and the northeastern region but also signals a way out of Spain's biggest political crisis since a failed military coup in 1981.

Rajoy would probably call a snap regional election after activating Article 155 of the constitution that would allow him to sack the Catalan regional government... If Puigdemont says he did proclaim independence, the central government will step in. If he says he did not declare it, then far-left party CUP would probably withdraw its support for his minority government.

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iehi-feed-63125 Thu, 12 Oct 2017 14:15:26 GMT IMF report suggests new Greek austerity measures necessary http://hf-implode.com/viewnews/2017-10-12_IMFreportsuggestsnewGreekausteritymeasuresnecessary.html iehi-feed-63123 Thu, 12 Oct 2017 01:25:52 GMT The bubble economy is set to burst, and US political turmoil may well be the trigger http://hf-implode.com/viewnews/2017-10-11_ThebubbleeconomyissettoburstandUSpoliticalturmoilmaywellbethetri.html Central banks continue to focus on consumption inflation, not asset inflation, in their decisions. Their attitude has supported one bubble after another. These bubbles have led to rising ­inequality and made mass consumer inflation less likely.

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Despite low unemployment and widespread labour shortages, wage increases and inflation in Japan have been around zero for a quarter of a century. Western central bankers assumed that the same wouldn't happen to them without understanding the underlying reasons.

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The mistaken stimulus has the unintended consequences of dissipating real wealth and increasing inequality. American household net worth is at an all-time high of five times GDP, significantly higher than the bubble peaks of 4.1 times in 2000 and 4.7 in 2007, and far higher than the historical norm of three times GDP. On the ­other hand, US capital formation has stagnated for decades. The outlandish paper wealth is just the same asset at ever higher prices.

The inflation of paper wealth has a serious impact on inequality. The top 1 per cent in the US owns one-third of the wealth and the top 10 per cent owns three-quarters . Half of the people don't even own stocks. Asset inflation will increase inequality by definition. Moreover, 90 per cent of the income growth since 2008 has gone to the top 1 per cent, partly due to their ability to cash out in the ­inflated asset market. An economy that depends on asset inflation always disproportionately benefits the asset-rich top 1 per cent.

There have been so many theories on why inequality has risen. The misguided monetary policy may be the culprit. Germany and Japan do not have significant asset bubbles. Their inequality is far less than in the Anglo-Saxon economies that have succumbed to the allure of financial speculation.

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How is this all going to end?... In 2007, structured mortgage products exposed cash-short borrowers. The defaults snowballed. But, in China, leverage is always rolled over. Default is usually considered a political act. And it never snowballs: the government makes sure of it. In the US, the leverage is mostly in the government. It won't default, because it can print money.

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The most likely cause for the bubble to burst would be the rising political tension in the West. The bubble economy keeps squeezing the middle class, with more debt and less wages. The festering political tension could boil over. Radical politicians aiming for class struggle may rise to the top. The US midterm elections in 2018 and presidential election in 2020 are the events that could upend the applecart.

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iehi-feed-63122 Wed, 11 Oct 2017 23:12:30 GMT Global Regulators Play Bitcoin Whack-a-Mole as Demand, Institutional Cachet Explodes http://hf-implode.com/viewnews/2017-10-11_GlobalRegulatorsPlayBitcoinWhackaMoleasDemandInstitutionalCachet.html ``While any central banker might be troubled by a stateless currency competing with the coin of the realm, China's efforts to crack down suggest it may be harder than it appears. While the government crackdown sent bitcoin prices plunging as much as 30 percent, it has now recovered those losses, even as a growing number of governments take action.

Once the largest global market for trading, China now accounts for 1.5 percent of bitcoin transactions, while Japan -- where regulators have been more open to digital currencies -- accounts for more than 60 percent, according to CryptoCompare.com.

... the U.K. has exempted bitcoin from value-added taxes, and says it should be considered a foreign currency for corporate tax purposes. The U.K. was early in publishing clear directives, ruling in 2014 that "bitcoin may be held as an investment or used to pay for goods or services at merchants where it is accepted."

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Japan this year began enforcing a law that recognizes bitcoin as a legal method of payment, and overseeing cryptocurrency exchanges -- effectively providing clarity and support to local entrepreneurs. That's something Vietnam may do as well.

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While government efforts to come to grips with digital money have been fraught, the more important trend may be the growing number of money managers who are looking at cryptocurrencies as an asset class for investment.

"What's more interesting is the increased sophistication of the institutional buy side for cryptocurrencies," said Nolan Bauerle, director of research at CoinDesk. "This new type of buyer means this is only a hiccup. There are important sums of fiat ready to cross into crypto in the short term." There are more than 68 hedge funds focused on cryptocurrencies today, many of them run by people from Wall Street.

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iehi-feed-63121 Wed, 11 Oct 2017 21:39:38 GMT Fed's Evans Says Weak Inflation May Not Be Temporary Phenomenon http://hf-implode.com/viewnews/2017-10-11_FedsEvansSaysWeakInflationMayNotBeTemporaryPhenomenon.html Gold Pops, Dollar Drops As Rate-Hike-Odds Slide After Fed Minutes.]]> iehi-feed-63119 Wed, 11 Oct 2017 19:35:22 GMT American Kakistocracy http://hf-implode.com/viewnews/2017-10-11_AmericanKakistocracy.html iehi-feed-63117 Wed, 11 Oct 2017 13:52:22 GMT Bill Gross of Janus blames Fed for 'fake markets' http://hf-implode.com/viewnews/2017-10-11_BillGrossofJanusblamesFedforfakemarkets.html