It’s happening. As expected, dynastic politics is prevailing in campaign 2016. After a tease about as long as Hillary’s, Jeb Bush (aka Jeb!) officially announced his presidential bid last week. Ultimately, the two of them will fight it out for the White House, while the nation’s wealthiest influencers will back their ludicrously expensive gambit. And here’s a hint: don’t bet on Jeb not to make it through the Republican gauntlet of 12 candidates (so far). After all, the really big money’s behind him.
The fact that Moody's and Fitch are beginning to reevaluate student loan ABS is indicative of an underlying shift in the market. Between the proliferation of IBR and the Department of Education's recent move to open the door for debt forgiveness in the wake of the Corinthian collapse, financial markets are beginning to see the writing on the wall. Perhaps Bill Ackman said it best: "there's no way students are going to pay it all back."
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.
There's Always Been Some Corruption in the U.S. ... But Never Like THIS
Last month, Chicago saw its debt cut to junk at Moody's, triggering billions in accelerated payment rights and jeopardizing efforts to improve the city's finances in the face of a budget gap that's set to triple over three years. Citi has more on the dreaded "downgrade feedback loop."
While yesterday most markets were closed and unable to express their concerns at the very strong showing of "anti-austerity" parties in Spain's municipal election from Sunday, then today they have free reign to do just that, and as a result European stocks are broadly lower, alongside the EURUSD which dripped under 1.09 earlier today, with Spanish banks among the worst performers: Shares of Banco Sabadell, Bankia, Caixabank and Popular were down 1.8 to 2.3% earlier this morning, and while the stronger dollar was a gift to both the Nikkei and Europe in early trading, after opening in the green, Spain's IBEX has since slid into the red on concerns of what happens if the Greek anti-status quo contagion finally shifts to the Pyrenees.
Futures Flat With Greece In Spotlight; UBS Reveals Rigging Settlement; Inventory Surge Grows Japan GDPSubmitted by Tyler Durden on 05/20/2015 07:00 -0400
The only remarkable macroeconomic news overnight was out of Japan where we got the Q1 GDP print of 2.4% coming in well above consensus of 1.6%, and higher than the 1.1% in Q4. Did it not snow in Japan this winter? Does Japan already used double, and maybe triple, "seasonally-adjusted" data? We don't know, but we do know that both Japan and Europe have grown far faster than the US in the first quarter.
Following an Illinois Supreme Court ruling that struck down a pension reform plan aimed at closing a $100 billion funding gap, Moody's downgrades Chicago to junk, giving the city the dubious distinction of being the only major city "in recent history" to carry such a low rating other than Detroit. Chicago now faces accelerated payments to creditors of more than $2 billion.
Systematic Corruption Has Metastasized throughout the U.S. ... Making Our Once-Great Nation Deathly Ill
To paraphrase H.L. Mencken, anyone who wants the government and Federal Reserve to create a housing recovery, deserves to get it good and hard, like a four by four to the side of their head. Subprime mortgages, subprime auto loans, and subprime student loans driven by preposterously low interest rates are the liquefying foundation of this fake economic recovery. Most rational people would agree that loaning money to people who will eventually default is not a good idea. But it is the underpinning of everything the Fed and government apparatchiks have done to keep this farce going a little while longer. It will not end well – Again.
In a critical disclosure this past Friday which quietly flew under everyone's radar, the Bundesbank director responsible for bank supervision, Andreas Dombret, who is also a member of the board of the European Central Bank’s Single Supervisory Mechanism told Bloomberg in an interview in Johannesburg that "German banks should expect to lose at least half of their investments in bonds of Austrian bad bank Heta Asset Resolution AG and make the appropriate provisions... I think this situation has to be taken seriously by the German banks... if I were to put a number on this I would say it should be a minimum of a 50 percent provision for potential losses."
The Cop Is On the Take
"A relatively low-profile entity in Austria – Pfandbriefbank Oesterreich AG (Pfandbriefbank) – is becoming the next critical chapter in the Austrian banking system story." - Daiwa
Fraud grows in good times because rescission is rarely sought (or granted) when asset values rise. Fraud is not a problem, till it is.
Dear Greek readers: the writing is now on the wall, and it is in very clear 48-point, double bold, and underlined font: when the ECB "leaks" that it is modelling a Grexit, something Draghi lied about over and over in 2012 and directly in our face too, take it seriously, because it is time to start planning about what happens on "the day after." And incidentally to all those curious what the fair value of peripheral European bonds is excluding ECB backstops, the ECB has a handy back of the envelope calculation: a 95% loss.