Archive - Jun 2015 - Story

The Department of Education says it will forgive federal student loans made to Corinthian Colleges students who can prove they were victims of fraud. The potential cost to taxpayers: nearly $4 billion. With the precedent thus set, the question now is whether continued pressure on for-profit colleges will result in further closures and more petitions from hundreds of thousands of students with hundreds of billions of loans they now know can be legally discharged.

While investor behavior hasn't sunk to the depths seen just before the crisis, Oaktree Capital's Howard marks warns, in many ways it has entered the zone of imprudence. "Today I feel it's important to pay more attention to loss prevention than to the pursuit of gain... Although I have no idea what could make the day of reckoning come sooner rather than later, I don’t think it’s too early to take today’s carefree market conditions into consideration. What I do know is that those conditions are creating a degree of risk for which there is no commensurate risk premium."

Corporate executives offer three main reasons for share repurchases: 1. Buybacks are investments in our undervalued shares signaling our confidence in the company’s future; 2. Buybacks allow the company to offset the dilution of EPS when employee stock options are exercised or stock is granted to employees; or 3. The company is mature and has limited investment opportunities, therefore we are obligated to return unneeded cash to shareholders. The logic behind each of these explanations is in the vast majority of cases is flawed, to be kind, and deceptive to be blunt.

MSCI has not decided to include China stocks in its index yet - as opposed to what mainstream media believes. MSCI instead says the inclusion is "on track" for inclusion but there remains three significant hurdles including liquiidty restrictions.

What happens in Vegas, stays in Vegas... apart from the water. As the following interactive chart from ProPublica shows, water usage in the greater Las Vegas region has more than doubled in the last 40 years and with the drought conditions, every reservoir is near record lows. Welcome To Las Vegas (while water supplies last).

While API and DOE data has not exactly been consistent recently, the fact that API reported a huge 6.7 million barrel inventory draw for the last week is significant. Of course, all eyes will be focused on production data tomorrow but for now, WTI prices are up at the highs of the day.

Chinese stocks are around 4 times more volatile than the current MSCI World index... in other words, if asset allocators maintain current equity weightings then portfolio risks will soar (if China is added). But given that most risk budgets are fixed, rising volatility in the equity portion of portfolios (from adding China) will require rotation out of equities and into bonds (or lower vol assets) in order to maintain VaR limits. Be careful what you wish for...

What’s really at issue here is a transfer from national democratic sovereignty to, instead, international-corporate sovereignty, in which international coporations will have locked-in an international dictatorial control over a large portion of what it is that national governments do, and necessarily must do, in order to serve the public good. The whole thing is a corrupt con-job.

"costs" or Plan A all along?

David Nicholls: “Banks do not collude to try to set a Libor rating. “I think I am just hearing a lot of hysteria about Libor that is just misinformed."
John Ewan: “A cabal of them could.”
Nicholls: “What’s a cabal?”
Ewan: “A group together could."
Nicholls: “That’s an interesting conspiracy theory."

A Russian Tu-95 has overshot the runway after taking off in Russia’s Far East, resulting in injuries to several crewmembers. The four-engine Tu-95 (NATO codename Bear) is a long-range strategic bomber capable of carrying nuclear warheads. As RT reports, the accident has prompted the Russian Defense Ministry to temporarily freeze all flights carried out by the aircraft.

*WHITE HOUSE BRIEFING ROOM WAS EVACUATED ON BOMB THREAT: EARNEST
*WHITE HOUSE GIVES ALL CLEAR ON BRIEFING ROOM
*SECRET SERVICE QUICKLY MADE SURE ROOM WAS SAFE, EARNEST SAYS
*BOMB THREAT WAS PHONED IN, EARNEST SAYS

We should not even want to rebuild the world as it was in the decade of the 2000’s because it was so unbelievably unstable, a fact revealed persistently in the nearly eight years since that peak. Economists and central bankers treated the Panic of 2008 and the Great Recession as if it were a temporary interruption in an otherwise healthy system, a cyclical problem that over time heals on its own. Most of them still, to this day, hold the same view and the world’s economy and financial system is paying the costs of doing so. The eurodollar economy is falling apart and no amount of orthodoxy can reverse it because the eurodollar economy is orthodoxy.