• GoldCore
    07/25/2014 - 09:41
    The EU and global drive toward bail-ins continues unabated. Bail-ins are coming to financial institutions and banks in the EU, UK, U.S. and much of the western world - with painful consequences for...

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Ron Paul Proposes Elimination Of Education, Energy Departments, Lowering Presidential Salary To $39,336

Today at 3pm on Las Vegas, perpetually ignored by the media on both the left and right presidential candidate Ron Paul will announce details of his $1 trillion proposal in government spending cuts, which will be the start of a process to balance the Federal budget in three . As Politico reports, "the Texas congressman will lay out a budget blueprint for deep and far-reaching cuts to federal spending, including the elimination of five cabinet-level departments and the drawdown of American troops fighting overseas." Amusingly, and if there is anything that will Paul brownie points with an electorate disgusted by those spreading hypocritical class warfare, "there will even be a symbolic readjustment of the president’s own salary to put it in line with the average American salary." Which will simply make it a given that every president going forward will have at least three laid off Hollywood scriptwriters preoccupied as ghost writers and writing presidential "autobiographies." For the royalties. But we digress. "The federal workforce would be reduced by 10 percent, and the president’s pay would be cut to $39,336 — a level that the Paul document notes is “approximately equal to the median personal income of the American worker.” We somehow doubt that even Paul will go as far as proposing a much needed overhaul of campaign finance, which basically forces every politician to wear sponsorship tags of all the Wall Street banks that have "gifted" a given politician and/or president in the past 5 years, but we can surely hope.



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"Internet Killed The Radio Store" - Mall Vacancies Hit All Time Record

Two years ago, when discussing the long-term prospects for Bill Ackman's aggressive pursuit of General Growth, we noted that while the short-term post-reorg oversold bounce is warranted, the secular shift away from big-box stores and disappearance of retailers means that many more bankruptcies are sure to follow, and will be punctuated by all time highs in mall vacancies courtesy of an ever-growing shift to internet shopping. So while the incremental bankruptcies in commercial REITs have been slow in coming primarily due to record low interest rates, the mall vacancy number just hit a new all time high. According to Bloomberg Brief: "In 1979 the one-hit wonder Buggles sang “Video killed the Radio Star.” Several economic indicators suggest it’s time for a Buggles revival: “Internet Killed the Radio Store.” The popularity of Internet shopping is having a considerable impact on the retail landscape; mall vacancies are at the highest level in measured history, big box stores are looking to reduce their footprints, and those selling book, electronics, and sporting goods are closing. During the third quarter, vacancies at regional and super-regional malls rose to 9.4 percent from 8.8 percent a year earlier and 9.3 percent in the second quarter, according to the New York-based property research company Reis. This was the highest since data was compiled in 2000." In other words, in addition to the Fed, REITs are the next entity class to have gone all in on interest rates never going up: because without organic upside growth, the only marginal benefit is from continues interest benefits. Once those end, it is game over, first on the margin, and then literally.



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Empire Fed Manufacturing Misses Expectations; Hopium Ends As Future Conditions Index Lowest Since February 2009

The green shoots are almost here. But not quite. Those expecting a solid rebound in the October print of the Empire State Fed's General Business Conditions index, which consensus had at rising to -4 from -8.8 before, were disappointed after the number printed at -8.48. "The general business conditions index was negative for a fifth consecutive month, and at -8.5, adhered closely to the level it had held since June. Seventeen percent of respondents reported that conditions had improved over the month, while 26 percent reported that conditions had worsened." There was some good news, primarily in the New Orders series: "After a series of negative readings from June through September, the new orders index rose to 0.2 in October—an indication that orders were unchanged after declining for a number of months. The shipments index advanced eighteen points, rising above zero to 5.3 and signaling an increase in shipments. The unfilled orders index inched upward, but remained below zero at -4.5. The delivery time index was unchanged at -1.1. The inventories index also remained below zero and, at -9.0, indicated a modest decline in inventory levels." As for the future, it's not so bright and nobody ain't wearing shades: "Future indexes generally indicated an expectation that conditions would improve in the months ahead, but the level of optimism remained relatively low. The future general business conditions index fell six points to 6.7, its lowest level since February of 2009." Hopium = Empty.



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Citi Earnings Bloodbath: $3.8 Billion ($1.23/Share) In Reported "Earnings" Really $0.5 Billion Or $0.16/Share

Another stunning EPS beat from Citi today which reported $20.8 billion in revenue and $1.23 in earnings on expectations of $19.23 billion in top line and $0.82 in EPS.... Until one actually reads the following two parts from the earnings release: "Third quarter revenues included $1.9 billion of credit valuation adjustment (CVA) reflecting the widening of Citi’s credit spreads during the third quarter. Excluding CVA, third quarter 2011 revenues were $18.9 billion, 8% below the prior year period and 8% below the second quarter 2011. CVA increased reported third quarter earnings by $0.39 per share"....and... "Loan Loss Reserve Release of $1.4 Billion in Third Quarter, Down from $2.0 Billion in Each of Second Quarter 2011 and Third Quarter 2010." Once again, the bank releases reserves (i.e. a perceived improvement in economic conditions), even as its takes a benefit for major economic deterioration (the equivalent of hypothetically buying bank its debt at lower prices due to risk flaring, or said otherwise, buying CDS on itself). Either way, this is non-recurring gibberish. You take the $3.77 billion in Net Income, take out $1.9 billion in "buying CDS on yourself", and the $1.4 billion in phantom EPS loss reserve, and end up with $0.5 billion or $0.16 per share. It will take the vacuum tubes about an hour to figure this out. Oh yes, and revenues were really $18.9 billion ex $1.888 billion in CVA. Adding insult to injury is that Citi will now have to pull a Morgan Stanley and defend itself against its European exposure: Citigroup (C) has $14.4 billion gross funded exposure in France and Belgium, and $18.0 billion unfunded commitment to Belgium/France.



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Frontrunning: October 17

  • Chinese banks fight for deposits (FT)... unlike those in the US
  • Hong Kong Starts Trading Bullion in Yuan (Bloomberg)
  • Can hyperinflation happen here? (Mauldin)
  • G-20 Gives EU One Week to Fix Debt Crisis (Bloomberg)... make that 6 days now
  • Greek PM calls for unity before reform vote (FT)
  • Banks and insurers defend ‘liquidity swaps’ (FT)
  • Greek debt write-down must be larger: German finance minister (Reuters)
  • EU faces 20 years of rising energy bills (FT)
  • Lack of ECB firepower weakens Europe’s Grand Plan (Telegraph)
  • Deutsche Bank’s casinos exposure hits $4.9bn (FT)


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Daily US Opening News And Market Re-Cap: October 17

Appetite for risk was observed during the Asian and European sessions on enhanced prospects that the eight-day deadline given by the G-20 leaders to resolve an ongoing Eurozone debt crisis would bring some positive outcome before the EU leaders' summit on October 23rd. Nikkei (+1.41%) closed higher and European equities also received a boost, with financials as one of the better performing sectors, which was further helped by comments from Moody's that accelerating talks to recapitalise European banks are credit positive for the banks. News that China has offered to spend tens of billions buying European infrastructure projects and government debts strengthened the appetite for risk. However, later in the European session, comments from the German finance minister and a German government spokesman that a concrete solution for the Eurozone crisis couldn't be found by the EU summit dented risk-appetite. In the forex market, after trading lower during early European trade, the USD-Index ventured in positive territory, which in turn weighed upon EUR/USD, GBP/USD and commodity-linked currencies, however GBP did receive support following a sharp jump in the Rightmove House Prices from the UK overnight. In other news, CHF received a boost across the board following market talk that SNB's president Hildebrand may resign, whereas CAD received support on news that the Canadian finance minister and the Bank of Canada governor may go beyond inflation-beating monetary policy measures. Moving into the North American open, markets will look ahead to key economic data from the US in the form of Empire manufacturing, industrial production and capacity utilisation.



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Yuan Gold Trading In Hong Kong On 'Triple Demand' ?- China Positioning CNY As Reserve Currency

Hong Kong, the world's third-largest gold trading centre, has become the world's first place to offer gold trading in yuan, further positioning the yuan or renminbi as a potential global reserve currency. Hong Kong’s Chinese Gold & Silver Exchange Society, a century old bullion bourse, has introduced gold trading quoted in Chinese yuan, making it more convenient for Chinese people and high net worth individuals (HNWs) holding yuan to invest in the precious metal and opening a new way to hedge. The move comes amid the continuing push by Chinese authorities for a more international role for its currency and as an alternate reserve currency to the embattled dollar and euro. With gold now traded in yuan, it is only a matter of time before oil is traded in yuan thereby positioning the yuan as ‘petro yuan’ and a rival to the petrodollar’s status as the global reserve currency. The move reinforces Hong Kong’s status as an offshore hub for the Chinese currency and as a rival to New York, London and other cities as a global financial capital. The Chinese Gold & Silver Exchange said that the service, dubbed "Renminbi Kilobar Gold," is targeting retail and institutional investors. The product is among the latest offerings designed to tap the fast-growing pool of yuan deposits within Hong Kong banking system. "By attracting both local and international investors, the Renminbi Kilobar Gold is a significant step towards internationalizing the renminbi," said Haywood Cheung, president of CGSE.



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Win-Win And The Cold War

With all the anticipation of Grand Plans this week, I decided I should get in the mood and write something positive. So I tried hard to think of something truly positive and linked to the Grand Plan and then it hit me. The Cold War. Both sides won. I think “win-win” might be more of a lie than synergy, but here is a case where both sides won.



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Schedule Of Greek Strikes For The Upcoming Week

The US and the rest of the developed world have a schedule of occupied venues for the next several days, false European headlines, and the occasional economic event.... Greece has a schedule of strikes. For those wondering what the oppotunity cost of Greek GDP and surplus is, here you go.



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So Much For Dreams, Hopes And The European Way: Schaeuble, Merkel Warn EU Summit To Be A Dud

Nobody could have foreseen this, nobody, certainly not the vacuum tubes who took the S&P for a ride for nearly 150 points. As Reuters reports, "the euro fell to a session low versus the dollar on Monday after comments from German Finance Minister Wolfgang Schaeuble saying the EU summit would not present a definitive solution to the euro zone debt crisis prompted investors to sell the single currency." No, that's not true, it's impossible. You mean all those hopes... Dashed? "A Bundesbank report saying the German economic outlook had deteriorated further also curbed some of the market optimism that had helped push the euro to a one-month high earlier in the session. The euro hit a session low of $1.3824 before recovering slightly to last trade down 0.3 percent on the day at $1.3840." And since the EURUSD and stocks trade as one... You know the rest.



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43,454,601,693,238 Reasons Why The World Is Broke - Presenting The Interactive Global Debt Clock

By now everyone has had a chance to play with the US debt clock. But what about its global cousin? Courtesy of The Economist, we now have a convenient way to track the hundreds of millions in dollars added each and every hour by the global governments who see to spur global deleveraging by, you guessed it, adding more debt. Yes, in the process the world's sovereigns are transferring default risk away from global corporations to sovereigns, but few in the #OWS crowd appear to have yet figured out this rather disturbing and very insidious usurpation of sovereignty by the global corporatocracy, so said risk and leverage transfer will continue until such time as any and all paper backed by these insolvent corporate shells (f/k/a countries) is completely worthless. Regardless, one should not forget that like in the sandalone case, the "debt clock" below only tracks on balance sheet debt. Should one add the NPV of all "welfare state" obligations (pensions, retirement, healthcare), the number will be well over quarter of a quadrillion dollars. Have fun funding that, never mind paying it off...



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Guest Post: Yet Another Reason Why the Euro Is Doomed

I have previously discussed the many profound financial reasons why the euro is doomed. But there is another political/financial reason why the euro's unraveling is inevitable. To understand this dynamic, we must start with this reality: in the wealthy countries of the north, the crisis is abstract; there is so much wealth and apparent financial stability, the notion that some sort of real-world hardship could actually spread from the southern Eurozone to the north is simply impossible to grasp. In the nations impacted directly by the crisis, there is nothing abstract about the unraveling; it is now part of everyday experience.



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10 Essential Fiscal Charts Demonstrating America's Disastrous Condition

By now nobody should have any doubts as to just how disturbing America's fiscal debacle is. For those naive and innocent few who still think there is a Hollywood ending with a pot of gold awaiting everyone at the end of the rainbow, we present the following "10 essential fiscal charts" from the Pew Policy Institute. To be sure, these are all charts summarizing data that has appeared on Zero Hedge repeatedly over the years in some way shape or form. Pew does, however, have a flair for dramatic visual presentation. In Pew's own words: "Since April 2010, the Pew Fiscal Analysis Initiative has published several reports explaining the medium-and long-term fiscal challenges facing the federal government. With stagnating economic conditions and the passage of new legislation, especially the Budget Control Act of 2011, the outlook for the deficit and debt has changed considerably over the past six months. We have created 10 charts that illustrate how the choices made over the last 10 years contributed to our nation’s debt and the challenges currently facing the Joint Select Committee on Deficit Reduction." So without further ado...



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Morgan Stanley's Japanese JV Supports Euroexposed Bank... By Cutting 20% Of Its Workforce

Remember when Morgan Stanley pulled out the kitchen sink two weeks ago in support of its surging CDS (which incidentally will be the sole reason for the bank's "surprising" EPS beat when the bank pulls a DV(D)A page right out of JPMorgan's playbook) by enlisting the support of Japanese JV Mistubishi UFG with promises that it would never let its bigger US brother down? Well, we now have the first indication of just "how" said plan will look like. As Reurters reports, the JV "is planning to cut 1,200 to 1,300 jobs, or about 20 percent of the total workforce, a source familiar with the matter said on Monday. A spokesman at Mitsubishi UFJ Morgan Stanley said his firm made a call for early retirements earlier this month but declined to say how many workers responded. A previous call for early retirements in February cut about 270 jobs. The company had about 6,600 employees at the end of March." And there you have it. With supporting JV partners such as these, who needs CDS vigilantes, or the difference between gross and net exposure when bilateral netting is discovered to be the biggest fraud ever?



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