en There's A New Subprime Crisis, But It's Not What You Think <p><a href=";utm_source=CapX+Newsletter&amp;utm_campaign=2fe4994fa0-EMAIL_CAMPAIGN_2017_07_17&amp;utm_medium=email&amp;utm_term=0_dcdc78d804-2fe4994fa0-241772733"><em>Authored by Robert Colvile via,</em></a></p> <ul> <li><strong>The struggles of Provident Financial have fuelled concerns about a new sub-prime crisis</strong></li> <li>Buyers of Provident&#39;s car loans are up to their eyeballs in debt</li> <li><strong>Regulation has discouraged big banks from offering affordable credit to the poor</strong></li> </ul> <p class="selectionShareable"><strong>A decade on from the financial crisis, the <a href="" rel="noopener" target="_blank">reports today</a> about the sub-prime lender Provident Financial have given us a nasty case of déjà vu. </strong></p> <p class="selectionShareable"><a href=""><img height="320" src="" width="600" /></a></p> <p class="selectionShareable"><strong>Within the space of a year, its loan repayment rates have fallen from 90 per cent to 57 per cent &ndash; leading to profit warnings, the departure of its chief executive, and a collapse in its share price.</strong></p> <p class="selectionShareable">It feels like a frighteningly familiar story. Overstretched customers at the bottom of the economic food chain rack up unaffordable loans from greedy financiers. When the music stops, the credit failures cascade upwards, bringing down lender after lender until the whole financial edifice comes apart.</p> <p class="selectionShareable"><u><strong>So are we facing a new sub-prime crisis?</strong></u> There are two conflicting narratives.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p class="selectionShareable"><strong>The first is that Provident&rsquo;s problems are unique to Provident.</strong> The firm operates in what is euphemistically known as &ldquo;the non-standard credit market&rdquo; &ndash; ie providing loans to people who are woeful credit risks. It does this via Vanquis Bank, which sells credit cards; Provident, which sells domestic loans; Satsuma, which does short-term online loans a la Wonga; and Moneybarn, which provides car finance.</p> <p class="selectionShareable">&nbsp;</p> <p class="selectionShareable">The one-line explanation for what went wrong with the business is that Provident moved from collecting what it was owed via &ldquo;self-employed door-to-door agents&rdquo; to full-time &ldquo;customer experience managers&rdquo;. In other words, rather than outsourcing the business of debt collection it would bring it in-house.</p> <p class="selectionShareable">&nbsp;</p> <p class="selectionShareable">The move followed followed claims, for example <a href="" rel="noopener" target="_blank">by Citizens Advice</a> (&pound;), that the agents of some doorstep lenders were engaging in illegal cold-calling, irresponsible lending or naked intimidation &ndash; though Provident denied that its own agents engaged in such behaviour, and said they would be sacked immediately if they did so.</p> <p class="selectionShareable">&nbsp;</p> <p class="selectionShareable">The problem was that, as soon as the firm told the existing collection agents that they were being fired, they walked out rather than stay through the transition. Hence the plunging rates of debt collection, which the new staff haven&rsquo;t been able to get back up.</p> <p class="selectionShareable">&nbsp;</p> <p class="selectionShareable"><strong>But there&rsquo;s another narrative &ndash; which is that Provident&rsquo;s entire business model is evidence of a serious and potentially systemic financial problem.</strong></p> <p class="selectionShareable">&nbsp;</p> <p class="selectionShareable">The alarm here is particularly focused on the sub-prime car-finance industry, in which Provident (via Moneybarn) is the biggest player. Across the sector, the credit checks are incredibly swift and (according to many reports) rather cursory. That&rsquo;s led many people <a href="" rel="noopener" target="_blank">to worry</a>&nbsp;that the market is getting out of hand &ndash; including the Financial Conduct Authority, which has <a href="" rel="noopener" target="_blank">launched an investigation</a>.&nbsp;There&rsquo;s a particular echo of the sub-prime crisis in the increasing popularity of personal contract plans (PCPs) &ndash; clever financial innovations which offer very poor people access to very nice cars, because they are effectively leasing them rather than owning them.</p> <p class="selectionShareable">&nbsp;</p> <p class="selectionShareable">Moneybarn, to be fair, doesn&rsquo;t focus on PCPs: it&rsquo;s more about old-fashioned lending. But that lending is going to people who are often heavily indebted already. Back in July, Liberum Capital published a research note explaining why it had put a SELL rating on Provident. The most startling figure was an estimate that &ldquo;a typical Moneybarn customer spends 66 per cent of after-tax income on rent, car loan and credit card payments&rdquo;. These, in other words, are people who are already drowning in debt &ndash; and the slightest rise in interest rates, or economic slowdown, or spike in inflation, could see them go under completely.</p> </blockquote> <p class="selectionShareable"><strong>In America, it was fears that another bubble was forming in sub-prime loans that prompted the big banks to <a href="" rel="noopener" target="_blank">pull back from the car market</a> in particular. So are we in for a repeat of 2008?</strong></p> <p class="selectionShareable">Personally, I&rsquo;m optimistic. We&rsquo;re talking about fewer borrowers and lenders: Moneybarn, for example, has only 41,000 customers. Also, regulators are now hyper-aware of the dangers of excessive lending, and have taken a whole series of steps to make sure that the dominos cannot (or should not) topple into each other as they did back then.</p> <p class="selectionShareable"><strong>In fact, the real message of the Provident story is very different &ndash; because it&rsquo;s about the unintended consequence of those same regulations, and the people who have suffered because of them.</strong></p> <p class="selectionShareable">If you read Provident&rsquo;s <a href="" rel="noopener" target="_blank">annual report</a>, there is an awful lot in there about social responsibility &ndash; to the point where the opening dozen or so pages could essentially be boiled down to the phrase &ldquo;We&rsquo;re not Wonga!&rdquo; in 144pt bold caps. But there&rsquo;s not a lot of stuff in there about interest rates.</p> <p class="selectionShareable">You can get an idea of just how profitable Provident is, however, by looking at its component businesses. Last year Vanquis made &pound;204.5 million from its 1.5 million credit card customers. Provident and Satsuma, which are part of the same unit, made &pound;115.2 million from approximately 850,000 customers. And Moneybarn made &pound;31.1 million from those 41,000 customers.</p> <p class="selectionShareable">In other words, each customer for Provident&rsquo;s credit cards, and home or online loans delivered approximately &pound;135 in profit. For Moneybarn, it was a staggering &pound;758.</p> <p class="selectionShareable"><strong>So where are these profits coming from?</strong> Not, as you might think, from those at the very bottom of society. The average customer for Vanquis is 35-45, living in rented accommodation but with a full-time job paying &pound;20k to &pound;35k. Because of their &ldquo;thin or impaired credit history&rdquo;, the maximum line of credit is no more than &pound;4,000, with a representative APR of 39.9 per cent. The statistics for Moneybarn are similar: &pound;20k to &pound;30k in income, with an APR of 33 per cent.</p> <p class="selectionShareable">For Provident and Satsuma, the income is lower and the interest is higher &ndash; a lot higher. These are people on &pound;10k-&pound;15k, paying interest rates of 535.3% for Provident and an eye-watering 991% for Satsuma, although the loans are usually smaller and shorter-term.</p> <p class="selectionShareable"><u><em><strong>How, given these statistics, can I argue that the regulations are a problem? Don&rsquo;t we really need more regulations to protect people from these greedy, unscrupulous loan sharks?</strong></em></u></p> <p class="selectionShareable">The problem here is actually pretty simple.</p> <p class="selectionShareable"><strong>Before the financial crisis, the big banks lent to all sorts of people they really shouldn&rsquo;t have.</strong> In order to prevent the same thing happening again, the rules were tightened up &ndash; now you could only get a loan for a house, or a car, or pretty much anything, if you had the sort of credit rating that would make your bank manager (if they still existed) beam with approval.</p> <p class="selectionShareable"><strong>Yet this process had a very important consequence: the mass withdrawal of blue-chip financial institutions from the lower end of the market. </strong>Barclays, for example, used to be well known as a place that bankrupts could go to for a second chance. <u><strong>Now, such customers often find themselves locked out of the credit market.</strong></u></p> <p class="selectionShareable">Britain, as the official Financial Inclusion Commission <a href="" rel="noopener" target="_blank">points out</a>, has a pretty comprehensive banking system: only 1.5 million people are officially &ldquo;unbanked&rdquo; (although a great deal more are not all that happy with the service they&rsquo;re getting&hellip;).</p> <p class="selectionShareable">But even those with bank accounts often struggle to get access to credit.&nbsp;According to Provident, there are between 41 and 43 million Britons in the &ldquo;standard&rdquo; credit market, and between 10 and 12 million who are locked out of it &ndash; plus approximately two million who flow between the two depending on the health of their finances.</p> <p class="selectionShareable"><strong>Thanks in large part to the banks&rsquo; and regulators&rsquo; flight from risk post-2008, those 10 to 12 million &ndash; and their counterparts in foreign countries &ndash; have been left to the likes of lenders like Provident. Or to those who are far less scrupulous: since the crash, payday lending has grown massively, but so has the number of illegal moneylenders and pawnbrokers.</strong></p> <p class="selectionShareable">As Provident&rsquo;s profit figures suggest, this is an incredibly profitable niche. Last year, Provident&rsquo;s return on equity (ROE) across the group was 45 per cent &ndash; in other words, every &pound;1 in assets delivered a 45p return in profit. &nbsp;By comparison, Metro Bank &ndash; a challenger bank serving a more conventional market &ndash; is aiming for an ROE of 18 per cent in 2020. At the height of the boom years, Barclays&rsquo;s ROE only reached 20 per cent &ndash; in these staider times, it is now barely 3 per cent.</p> <p class="selectionShareable"><u><strong>What&rsquo;s happening, in other words, is that the poorest in society are paying more &ndash; much more &ndash; than they should for credit and lending, or even for access to the banking system.</strong></u> Syed Kamall MEP has <a href="" rel="noopener" target="_blank">written powerfully on CapX</a>&nbsp;about the <a href="" rel="noopener" target="_blank">damage this causes</a>.</p> <p class="selectionShareable">Access to credit is one of the things that lets people climb the economic ladder, in the developed and <a href="" rel="noopener" target="_blank">the developing</a> world.&nbsp;But access to too much credit &ndash; or to credit on the terms that are generally now on offer &ndash; keeps them trapped in debt.</p> <p class="selectionShareable">No one wants to open the floodgates in terms of lending &ndash; lord knows we&rsquo;re all <a href="" rel="noopener" target="_blank">indebted enough already</a> as it is. But encouraging the banks to expand their services, or coming up with new ways to help the unbanked and deliver low-cost, low-risk credit, would directly benefit the poorest in society.<strong> Such people will never be able to borrow on the same terms as those with unblemished credit records. But the more players there are in the market, the lower the premium they will be charged.</strong></p> <p class="selectionShareable">As it is, <strong>in attempting to protect the financial system from another crash, we&rsquo;ve left millions of people with no option but to turn to the likes of Provident &ndash; which may often end up being a very improvident move indeed.</strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1021" height="545" alt="" src="" /> </div> </div> </div> Banking Barclays Business Credit Economy Finance Financial Inclusion Commission Loan shark Loans Money Payday loan Personal finance Provident Financial Provident Financial Subprime mortgage crisis SWIFT Vanquis Bank Tue, 22 Aug 2017 20:50:00 +0000 Tyler Durden 602129 at WTI Drops After 3rd Weekly Build In Gasoline Inventories <p>Amid Libya headlines and contract rollover, <strong>WTI prices were wild heading into the inventory data tonight.</strong> Following two weeks of surprising builds in Gasoline inventories, API reports a <strong>surprise 3rd weekly build in gasoline inventories, and crude drawing only modestly (in line with expectations).</strong> The initial reaction was a kneejerk lower, breaking down the day&#39;s wedge.</p> <p>&nbsp;</p> <p><u><strong>API</strong></u></p> <ul> <li><strong><span style="color:#ff8c00;">Crude -3.595mm (-3.5mm exp)</span></strong></li> <li>Cushing -462k (+300k exp)</li> <li><span style="color:#ff0000;"><strong>Gasoline +1.402mm (-1mm exp)</strong></span></li> <li><strong><span style="color:#ff0000;">Distillates +2.048mm</span></strong></li> </ul> <p>Last week confirmed the concerns about building gasoline (even though crude saw a draw) and API shows a 3rd week of builds (and crude&#39;s draw was just in line) and Distillates also saw the biggest build since July</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 316px;" /></a></p> <p>Price action was chaotic today heading into the API data and immediately kneejerked lower (breaking down from the wedge)...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 327px;" /></a></p> <p><em><strong>&ldquo;If we are going to get into a new era of instability with Libyan oil production, if it becomes a wild card again, that&rsquo;s definitely supportive for prices,&rdquo;</strong></em>&nbsp;Phil Flynn, senior market analyst at Price Futures Group, told Bloomberg, adding, with reference to today&#39;s price action, <em><strong>there&rsquo;s &ldquo;a little bit of expiration madness. There&rsquo;s a lot of positioning before the September expiration.&quot;</strong></em></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="2162" height="1180" alt="" src="" /> </div> </div> </div> API Business Commodity markets Crude Distillates Finance Financial economics Futures contract headlines Investment Price Action Tue, 22 Aug 2017 20:37:30 +0000 Tyler Durden 602137 at Here's How The Next Recession Begins <p><a href=""><em>Authored by Simon Black via,</em></a></p> <p>In 1886 there were only 38 states in the United States.</p> <p>Electric power was still cutting edge technology that few people had ever seen.</p> <p>The Statue of Liberty hadn&rsquo;t even been dedicated yet.</p> <p><strong>But it was that year that a man named Richard Sears founded a small retail company in Minneapolis, Minnesota that would grow into a retail juggernaut.</strong></p> <p><span style="text-decoration: underline;"><strong>Sears was truly the Amazon of its day.</strong></span></p> <p>Even in the late 1800s the company was able to deliver just about any product you wanted right to your doorstep.</p> <p>This was no small feat considering the first delivery truck wouldn&rsquo;t be invented until 1895. There was no transportation infrastructure. And two-thirds of the population lived in remote rural areas.</p> <p><strong>Yet despite those challenges, Sears was still able to put any product you wanted in your hands.</strong></p> <p>Over time as consumer trends changed, the company started opening physical retail stores.</p> <p>And once the concept of the &lsquo;shopping mall&rsquo; became popular, Sears department stores became a mainstay at malls across America.</p> <p>To give you an idea of the size and dominance of Sears back at its peak&ndash; the company owned stock broker Dean Witter Reynolds (now part of Morgan Stanley), Coldwell Banker (real estate brokerage), Allstate Insurance (currently a $33 billion company) and it started the Discover card (a $22 billion company).</p> <p><em><strong><u>Sears seemed unstoppable&hellip;</u> a company so large and powerful that it would rule retail forever.</strong></em></p> <p><u><em><strong>Then Wal-Mart entered the scene.</strong></em></u></p> <p><em><a href=""><img height="278" src="" width="515" /></a></em></p> <p>And after years of focusing on efficient logistics and cost savings, Wal Mart eventually outmaneuvered Sears to become the world&rsquo;s largest retailer.</p> <p><strong>By 2001, Wal-Mart&rsquo;s revenues were about five times that of Sears.</strong></p> <p><u><strong>Then Amazon was founded&hellip;</strong></u> and consumers began changing their tastes to shop online.</p> <p>Sears totally missed the trend. And today the company is a tiny shell of its former self.</p> <p>Over the past three years alone, Sears has lost more than $5 billion. And its stock price is down nearly 75% since 2014.</p> <p>Plus the company has had to lay off more than half of its peak workforce, around 200,000 employees.</p> <p>To add insult to injury, the company spent about $6 billion over the past decade buying back its shares at prices as high as $174 a share.</p> <p>Shares now trade below $9. That&rsquo;s a <em>95% loss</em> to shareholders.</p> <p>Sears recently announced it will close an <em>additional</em> 43 stores (on top of the 265 closures it already announced this fiscal year).</p> <p>This will leave the company with 1,140 stores &ndash; just above half its 2012 size.</p> <p><strong>This is a death spiral. And it could mean the sudden loss of 140,000 American jobs.</strong></p> <p><u><strong>And that&rsquo;s just Sears.</strong> </u>We could see several, large retailers shutter causing hundreds of thousands of lost jobs.</p> <p>Retailers have announced more than 3,200 store closures this year. And investment bank Credit Suisse expects that number will increase to more than 8,600 before the end of the year.</p> <p>For the sake of context, the WORST year on record for retail store closures was in 2008 when the global financial crisis kicked off.</p> <p>But even in 2008, only 6,163 retailers closed.</p> <p><strong>Bear in mind that <em>about one in 10 Americans works in retail.</em></strong></p> <p>And given the rise of e-commerce, most of those retail jobs are going away. Quickly.</p> <p>E-commerce currently accounts for 9% of the approximately $22 trillion in annual retail sales, up from 0.6% in 1999.</p> <p>And that number is only growing.</p> <p>Most retail stores operate very LOW margin businesses. They rely on having LOTS of customers in order to stay profitable.</p> <p>If even a small percentage of their prospective customers stay home and shop online, they&rsquo;re finished&ndash; from Sears all the way down to the small mom and pop stores.</p> <p><strong>We could see hundreds of thousands of retail workers lose their jobs as companies like Sears fail.</strong></p> <p>Sure, e-commerce will pick up some of the jobs.</p> <p>Large e-commerce companies like Amazon have had to quickly build infrastructure and warehouses to serve customers around the country. That requires lots of hiring.</p> <p>But it&rsquo;s temporary work.</p> <p><u><em><strong>Think of it this way: it took a lot of men to lay railroad tracks across the US. It takes far fewer workers to maintain the rail system.</strong></em></u></p> <p>And as shipments increase, you simply run more cars across those tracks.</p> <p>Plus, e-commerce warehouses are becoming more automated and efficient, requiring less human labor than ever before.</p> <p><strong>This sort of creative destruction and disruption isn&rsquo;t anything to be afraid of; there aren&rsquo;t exactly too many blacksmiths and buggy repairmen anymore either.</strong></p> <p><strong>Progress occasionally requires the decimation of entire industries, and that&rsquo;s what&rsquo;s happening now.</strong></p> <p><u><strong>In the long-run it&rsquo;s better for everyone. But shorter-term, there&rsquo;s going to be a lot of pain.</strong></u></p> <p>Some of the largest and most vulnerable retailers include Sears, Macy&rsquo;s and JC Penney, and in total those companies employ close to 400,000 people.</p> <p>All three of these companies could &ndash; <em>and probably will</em> &ndash; go bankrupt. But it would only take one of these stores going under (a near certainty) to roil the US economy.</p> <p>You may remember during the US Presidential campaign that candidates Trump and Clinton made a big deal about the declining number of coal jobs in the US.</p> <p>To put things in perspective, the US coal industry employs just over 76,000 workers.</p> <p>Sears alone employs almost double that amount.</p> <p>And the pace of job losses across the entire retail sector is gaining steam.</p> <p>The US economy has been in &lsquo;recovery&rsquo; now for more than eight years, i.e. it&rsquo;s been nearly 100 months since the end of the last recession.</p> <p>Yet the average time between recessions in modern US history is 57 months, according to the National Bureau of Economic Research.</p> <p><u><strong>In other words, the economy is overdue for a recession.</strong></u></p> <p><strong><em>And the rapid loss of hundreds of thousands of jobs could certainly end up triggering it.</em></strong><em> </em></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="515" height="278" alt="" src="" /> </div> </div> </div> Business Credit Suisse Dean Witter Reynolds Department store Discover Card Distribution business) Economy Fail Hoffman Estates, Illinois JC Penney Morgan Stanley National Bureau of Economic Research Real estate Recession recovery Retail Retailing Sears Sears Sears Holdings Trade Walmart Tue, 22 Aug 2017 20:25:00 +0000 Tyler Durden 602128 at Stocks Surge To Best Day In 4 Months As Warmongery & Tax Talk Trump Debt-Ceiling Doubts <p>Seriously...</p> <p><iframe allowfullscreen="" frameborder="0" height="315" src="" width="560"></iframe></p> <p>&nbsp;</p> <p>Thanks to The White House saying something de minimus about Tax Reform progress (and a little help from Boeing after Trump&#39;s warmongery), Nasdaq was the day&#39;s best-performer as The Dow had its best day in 4 months...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 340px;" /></a></p> <p>&nbsp;</p> <p>Futures show the driver of the actions...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 342px;" /></a></p> <p>&nbsp;</p> <p>Bonds &amp; Bullion were sold post-tax-headline as stocks surged...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 435px;" /></a></p> <p>&nbsp;</p> <p>Most-Shorted stocks surged/squeezed to their best day in a month (after 5 straight down days)...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 313px;" /></a></p> <p>&nbsp;</p> <p>VIX was smashed down below 12 at the open amid Trump Tax chatter...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 383px;" /></a></p> <p>&nbsp;</p> <p>The S&amp;P ramped all the way to the 50DMA (having bounced perfectly off the 100DMA yesterday)...</p> <p><a href=""><img alt="" src="" /></a></p> <p>&nbsp;</p> <p>This week&#39;s bounce has an odd sense of deja vu all over again...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 620px;" /></a></p> <p>&nbsp;</p> <p>S&amp;P VIX dropped back to 5-day lows but Nasdaq and Russell vol remains elevated...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 315px;" /></a></p> <p>&nbsp;</p> <p>S&amp;P traders are actively hedging with Put/Call Open Interest Ratio at its highest since July 2015...</p> <p><a href=""><img height="271" src="" width="600" /></a></p> <p>&nbsp;</p> <p>And ironically, there has never been more money bet on volatility dropping (SVXY AUM at record high $1.3 billion)</p> <p><a href=""><img height="279" src="" width="600" /></a></p> <p>&nbsp;</p> <p>FANG Stocks had their best day in over a month...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 312px;" /></a></p> <p>&nbsp;</p> <p>Treasury yields rose 2-3bps across the curve today with 7Y underperforming...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 313px;" /></a></p> <p>&nbsp;</p> <p>30Y Yield hs now traded in a 3bps range for the last 3 days...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 307px;" /></a></p> <p>&nbsp;</p> <p>Meanwhile, debt ceiling concerns remain high in the T-Bill market....</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 395px;" /></a></p> <p>&nbsp;</p> <p>&nbsp;</p> <p>The Dollar Index rallied today after Trump Tax headlines...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 316px;" /></a></p> <p>&nbsp;</p> <p>Cable was weakest and Yuan modestly stronger against the greenback on the week...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 316px;" /></a></p> <p>&nbsp;</p> <p>And the 2016 analog is at an inflection point...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 320px;" /></a></p> <p>&nbsp;</p> <p>&nbsp;</p> <p>Industrial metals had a bad day after days of surging...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 315px;" /></a></p> <p>&nbsp;</p> <p>&nbsp;</p> <p><strong>Crude pared earlier gains</strong> after Libya announced security forces reopened a valve that had been closed on the pipeline linking Libya&rsquo;s Sharara oil field, the nation&rsquo;s largest according to Petroleum Guard. Tonight&#39;s API data will likely drive the next few hours...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 328px;" /></a></p> <p>&nbsp;</p> <p>Gold was down on the day, not helped by a stronger dollar, with some notable vol around the Tax headlines...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 328px;" /></a></p> <p>&nbsp;</p> <p>And finally this 1987 analog is really starting to get spooky...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 313px;" /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="600" height="62" alt="" src="" /> </div> </div> </div> Across the Curve API Boeing Business Crude Debt Ceiling Donald Trump Dow 30 Economy Finance headlines Mathematical finance Money NASDAQ S&P Short Technical analysis VIX Volatility White House White House Yuan Tue, 22 Aug 2017 20:02:58 +0000 Tyler Durden 602135 at One Trader's Antidote To 'Billionaire Bear' Dalio's Fearmongering <p><a href=""><em>Authored by Kevin Muir via The Macro Tourist blog,</em></a></p> <p>Yesterday, yet another <strong><a href="">Billionaire Bear</a></strong> issued a stark warning. This time it was Bridgewater Chief Investment Officer Ray Dalio who <strong><a href="">penned a piece comparing the current environment to 1937</a></strong>.</p> <p>This was after an earlier in the month letter where Bridgewater warned that risks were rising, and that clients should have 5% to 10% of their portfolio in gold:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;Most immediately, during the calm of the August vacation season, we are seeing 1) two confrontational, nationalistic and militaristic leaders playing chicken with each other, while the world is watching to see which one will be caught bluffing, or if there will be a hellacious war, and 2) the odds of Congress failing to raise the debt ceiling (leading to a technical default, a temporary government shutdown, and increased loss of faith in the effectiveness of our political system) rising. It&rsquo;s hard to bet on such things one way or another, so the best that one can do is be neutral to such possibilities.</p> </blockquote> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;When it comes to assessing political matters (especially global geopolitics like the North Korea matter), we are very humble. We know that we don&rsquo;t have a unique insight that we&rsquo;d choose to bet on &hellip; We can also say that if the above things go badly, it would seem that gold (more than other safe haven assets like the dollar, yen, and treasuries) would benefit, so if you don&rsquo;t have 5-10% of your assets in gold as a hedge, we&rsquo;d suggest you relook at this. Don&rsquo;t let traditional biases, rather than an excellent analysis, stand in the way of you doing this (and if you do have an excellent analysis of why you shouldn&rsquo;t have such an allocation to gold, we&rsquo;d appreciate you sharing it with us.)&rdquo;</p> </blockquote> <p>Although I am sympathetic to Ray&rsquo;s view that the <strong><a href="">dysfunction</a></strong> in Washington will cause American financial assets to underperform in the coming quarters, <strong>I wonder if we aren&rsquo;t maybe overthinking the whole situation.</strong></p> <p>And in that vein, I represent one of my favourite indicators. I have written about <strong><a href="">Ed Yardeni&rsquo;s &lsquo;fundamental stock indicator&rsquo;</a></strong> many times in the past. It appears overly simple, and the fact that it doesn&rsquo;t directly include interest rates or earnings, seems to make it destined to break. Yet, somehow it magically continues to work.</p> <p><u><em><strong>Is the Yardeni &lsquo;fundamental stock indicator&rsquo; confirming the bears&rsquo; thesis that it is time to exit stocks?</strong></em></u></p> <p>Well, let&rsquo;s have a look at the indicator over a long time frame to get a feel for how it has performed in the past.</p> <p><a href=""><img alt="" src="" style="height: 444px; width: 600px;" /></a></p> <p>As you will notice, the correlation is not perfect, and there are definitely times when the indicator ran ahead of the stock market, but its ability to match large moves in the stock market is remarkable.</p> <p><strong>Let&rsquo;s quickly review Yardeni&rsquo;s secret sauce. His indicator is a combination of;</strong></p> <ul> <li>consumer confidence</li> <li>initial jobless claims</li> <li>CRB raw industrials</li> </ul> <p><strong>That&rsquo;s it. Nothing more. </strong>It&rsquo;s surprising that it tracks the stock market as well as it does with nothing more than these three inputs.</p> <p>Look closely at the chart. I am hard pressed to find an example where the stock market declined by a meaningful amount that the indicator hadn&rsquo;t foreshadowed, or at the very least, mirrored.</p> <p>So let&rsquo;s zoom in on the recent action to get a feel for the potential of a stock market sell off.</p> <p><a href=""><img alt="" src="" style="height: 444px; width: 600px;" /></a></p> <p><strong>Contrary to most pundits&rsquo; warnings, the Yardeni indicator is sitting at new highs.</strong></p> <p>Wow. How can that be? That doesn&rsquo;t make any sense. Aren&rsquo;t things rolling over?</p> <p>Well, maybe we should have a look at the various components a little more closely.</p> <p><strong>First of all, jobless claims are sitting at cycle lows.</strong></p> <p><a href=""><img alt="" src="" style="height: 444px; width: 600px;" /></a></p> <p>With all the help wanted signs littering store windows, I don&rsquo;t see this changing anytime soon.</p> <p>And given all the reporting about the recent rise in Chinese centric commodities, it is no wonder <strong>the CRB Raw Industrials index is pushing up against the previous highs.</strong></p> <p><a href=""><img alt="" src="" style="height: 444px; width: 600px;" /></a></p> <p>Finally, even though the news seems awful, <strong>consumers are still an optimistic bunch.</strong></p> <p><a href=""><img alt="" src="" style="height: 444px; width: 600px;" /></a></p> <p><em><strong>When you add up these three inputs, you get a Yardeni &lsquo;fundamental stock indicator&rsquo; that is pushing up to the highs.</strong></em></p> <p>Now maybe this is the period where this indicator finally stops working. <em><strong>Maybe all those billionaire bears will prove smarter than Yardeni&rsquo;s simple system. Yeah sure. </strong></em>Maybe my homemade boat will also pass my upcoming coast guard safety inspection.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="263" height="130" alt="" src="" /> </div> </div> </div> Bridgewater Business Congress CRB CRB Raw Industrials Debt Ceiling default Music North Korea Oral literature Ray Dalio Safe Vocal music Yen Tue, 22 Aug 2017 19:50:00 +0000 Tyler Durden 602126 at In Latest North Korea Propaganda Clip, "Crazy" Trump Is Overlooking A Sprawling Cemetary <p>In the latest propaganda video warning from North Korea, released just as the US and South Korea begin their massive 10-day military drill, President Trump is shown overlooking a sprawling Guam graveyard cluttered with crosses in a crudely photoshopped image.&nbsp; As <a href="">Fox News reports</a>, the North Korea regime followed the video with a statement posted through the state-owned KCNA news agency according to which Trump "spouted rubbish" and frequently tweeted about "weird articles of his ego-driven thoughts" while attacking South Korea's "puppy-like" Defense Minister Song Young-moo for "pinning hope on that crazy&nbsp; man."</p> <p><iframe src="" width="560" height="315" frameborder="0"></iframe></p> <p>"Trump spouted rubbish that if a war breaks out, it would be on the Korean Peninsula, and if thousands of people die, they would be only Koreans and Americans may sleep a sound sleep," the KCNA statement said. </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>But the picture of a graveyard believed to be in Guam may be the most rattling in the video, given dictator Kim Jong Un's repeated threats to strike the U.S. territory with a missile.<strong> The video also features Vice President Pence engulfed in flames.</strong></p> </blockquote> <p>Meanwhile, KCNA went on, saying on North Korea it would be ready to stage "ruthless" retaliation against South Korea and the U.S.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>"The U.S. will be wholly held accountable for the catastrophic consequences to be entailed by such reckless aggressive war maneuvers, as it chose a military confrontation [with North Korea]," a North Korean military spokesman said to KCNA. </p> </blockquote> <p>Earlier in the day, North Korean diplomat Ju Yong Chol said the communist regime's missile program is "justifiable and a legitimate option for self-defense," Reuters reported.&nbsp; "The measures taken by [North Korea] to strengthen its nuclear deterrence and develop inter-continental rockets is justifiable and a legitimate option for self-defense in the face of such apparent and real threats," Ju said at a U.N.-sponsored disarmament conference. </p> <p>“The DPRK will never place its self-defense nuclear deterrence on the negotiating table or step back from the&nbsp; path it took to bolster the national nuclear force,” a North Korean diplomat stated at the UN disarmament forum in Geneva, as cited by Reuters.</p> <p>Both the video and the various harsh statements came before a harsh response from China to the latest sanctions imposed, among others, on several Chinese companies. A Chinese embassy spokesman "urged" the U.S. to "immediately correct its mistake"' of sanctioning Chinese firms over North Korea, to avoid impact on bilateral cooperation, seomthing which the US has no intention of doing. </p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="505" height="291" alt="" src="" /> </div> </div> </div> Business China Chinese Embassy Donald Trump Economy of the United States Fox News Guam KCNA KIM Korean Central News Agency national nuclear force North Korea Politics Politics of the United States Reuters United Nations Tue, 22 Aug 2017 19:41:13 +0000 Tyler Durden 602134 at Defining Hypocrisy: Democrats Warn Steve Bannon Against Publishing Classified Info On Breitbart <p>Now this is rich.&nbsp; After nearly 9 months of Democrat operatives leaking every piece of sensitive and/or embarrassing information they could get their hands on to the New York Times and Washington Post, they're now suddenly worried about Steve Bannon doing the same.&nbsp; We guess it's one of those 'do as I say, not as I do" sort of things.</p> <p>As <a href="">McClatchy</a> points out, Elijah Cummings, the senior Democrat on the House Oversight Committee, seems to be particularly worried about what Bannon might publish in his renewed role at the helm of Breitbart.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>"Steve Bannon has an ongoing obligation to safeguard our nation’s secrets, and he does not gain some kind of extra Constitutional protection just because he is now returning to a position in the media,”</strong> said Rep. Elijah Cummings, D-Md., the senior Democrat on the House Oversight Committee.</p> <p>&nbsp;</p> <p>Cummings said lawmakers closely watch people in such positions after they leave high level security positions. He said Bannon should not guide Breitbart to publish information based on classified material he learned while working for the president.</p> <p>&nbsp;</p> <p><strong>“If he or anyone else in a similar position fails to meet this obligation and provides classified information to someone who is not entitled to have it, he could and should be brought to justice,”</strong> he said.</p> </blockquote> <p><img src="" alt="Cummings" width="600" height="341" /></p> <p>&nbsp;</p> <p>Of course, this is the same Elijah Cummings who relentlessly defended the "extremely careless" Hillary Clinton during her email scandal which revealed numerous classified documents being illegally stored on a private server...not to mention the 1,000's of State Department emails that ended up on the computer of Anthony Wiener.&nbsp; Per the <a href="">Washington Examiner</a>, Cummings thought Hillary's misuse of confidential information was simply a <strong>"desperate onslaught of frivolous attacks" from Republicans and should be ignored.</strong></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>House Democrats slammed their Republicans colleagues Thursday for issuing 17 subpoenas and sending 54 letters in pursuit of information related to Hillary Clinton's private email server.</p> <p>&nbsp;</p> <p>Rep. Elijah Cummings, ranking Democrat on the House Oversight and Government Reform Committee, called the congressional investigation a "desperate onslaught of frivolous attacks."</p> <p>&nbsp;</p> <p>"House Republicans have focused more on their obsession with bringing down Secretary Clinton than on any other issue facing Congress," Cummings said in a statement. "This is an outrageous abuse of taxpayer dollars for partisan political purposes, particularly when Republicans are ignoring so many pressing issues facing the American people."</p> </blockquote> <p>Meanwhile, the ranking Democrat on the Senate Intelligence Committee also decided to weigh in on Bannon's new role outside the White House:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Rachel Cohen, press secretary for Sen. Mark Warner, D-Va., top Democrat on the Senate Intelligence Committee, said Bannon faces strict limitations.</p> <p>&nbsp;</p> <p>“Bannon is subject to all the same legal restrictions on sharing classified information to which he was exposed in his role at the White House as any other former government employee,” she said. <strong>“Those who violate those restrictions can be subject to prosecution.”</strong></p> </blockquote> <p><strong>Perhaps Mr. Warner could also provide his thoughts on Comey leaking his controversial memos, which were technically stolen property belonging to the FBI, to the New York Times?</strong>&nbsp; We presume that leak was ok for some reason?</p> <p>Ironically, despite the bluster from Democrats, the folks inside the White House may have the most to lose from Bannon's new position.&nbsp; As <a href="">we pointed out just yesterday</a>, Bannon has declared war are on the "globalists" in the White House which seems to include Ivanka, Jared, Gary Cohn and National Security Advisor H.R. McMaster, among others.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Bannon’s main targets are the West Wing’s coterie of New York Democrat “globalists”—<strong>Ivanka Trump, Jared Kushner and former Goldman Sachs president Gary Cohn—as well as the “hawks,” comprised of National Security Adviser H.R McMaster and his deputy, Dina Powell. “He wants to beat their ideas into submission,” </strong>Breitbart News Editor-in-Chief Alex Marlow told me. “Steve has a lot of things up his sleeve.”</p> <p>&nbsp;</p> <p>The chaotic, war-torn West Wing of the past six months will be prologue, but the coming struggles will be as personal as they are ideological, waged not with leaks but with slashing Breitbart banners. On Sunday, Breitbart took renewed aim at McMaster, with a headline claiming he advocated “Quran Kissing.”</p> <p>&nbsp;</p> <p>But the biggest target of all is squarely on the back of Jared Kushner, Trump's son-in-law who Bannon affectionately describes as a "dope" with "highly questionable political instincts."</p> <p>&nbsp;</p> <p><strong>But most of all, there’s a deep animosity between Bannon and Kushner, amplified by a lack of respect.</strong> Bannon finds Kushner’s political instincts highly questionable.<strong> “He said Jared is a dope,”</strong> one Bannon ally recalled. </p> </blockquote> <p>Finally, perhaps Doc Holiday summarized the Democrats' faux outrage the best...</p> <p><iframe src="" width="600" height="337" frameborder="0"></iframe></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="630" height="354" alt="" src="" /> </div> </div> </div> Alt-right Breitbart News Cohen Congress Conservatism in the United States Department of State Dina Powell Donald Trump Donald Trump presidential campaign FBI Federal Bureau of Investigation goldman sachs Goldman Sachs House Oversight and Government Reform Committee House Oversight Committee House Oversight Committee Jared Kushner Kushner national security New York Times Politics Politics of the United States Senate Intelligence Committee Steve Bannon United States United States House Committee on Oversight and Government Reform White House White House Tue, 22 Aug 2017 19:30:00 +0000 Tyler Durden 602121 at Is Trump's Agenda Being Eclipsed? <p><a href=""><em>Authored by Patrick Buchanan via,</em></a></p> <p><em><strong>&ldquo;I have not become the King&rsquo;s First Minister in order to preside over the liquidation of the British Empire,&rdquo; </strong></em>said Winston Churchill to cheers at the Lord Mayor&rsquo;s luncheon in London in November 1942.</p> <p>True to his word, the great man did not begin the liquidation.</p> <p><strong>When his countrymen threw him out in July 1945, that role fell to Clement Attlee, who began the liquidation. </strong>Churchill, during his second premiership from 1951-1955, would continue the process, as would his successor, Harold Macmillan, until the greatest empire the world had ever seen had vanished.</p> <p>While its demise was inevitable, the death of the empire was hastened and made more humiliating by the wars into which Churchill had helped to plunge Britain, wars that bled and bankrupted his nation.</p> <p>At Yalta in 1945, Stalin and FDR treated the old imperialist with something approaching bemused contempt.</p> <p><strong>War is the health of the state, but the death of empires.</strong></p> <p>The German, Austro-Hungarian, Russian and Ottoman empires all fell in World War I. World War II ended the Japanese and Italian empires &mdash; with the British and French following soon after. The Soviet Empire collapsed in 1989. Afghanistan delivered the coup de grace.</p> <p><u><em><strong>Is it now the turn of the Americans?</strong></em></u></p> <p>Persuaded by his generals &mdash; Mattis at Defense, McMasters on the National Security Council, Kelly as chief of staff &mdash; President Trump is sending some 4,000 more U.S. troops to Afghanistan to augment the 8,500 already there.</p> <p>Like Presidents Obama and Bush, he does not intend to preside over a U.S. defeat in its longest war. Nor do his generals. <strong><em>Yet how can we defeat the Taliban with 13,000 troops when we failed to do so with the 100,000 Obama sent?</em></strong></p> <p>The new troops are to train the Afghan army to take over the war, to continue eradicating the terrorist elements like ISIS, and to prevent Kabul and other cities from falling to a Taliban now dominant in 40 percent of the country.</p> <p>Yet what did the great general, whom Trump so admires, Douglas MacArthur, say of such a strategy?</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><span style="text-decoration: underline;"><em><strong>&ldquo;War&rsquo;s very object is victory, not prolonged indecision.&rdquo;</strong></em></span></p> </blockquote> <p><em><strong>Is not &ldquo;prolonged indecision&rdquo; what the Trump strategy promises? Is not &ldquo;prolonged indecision&rdquo; what the war policies of Obama and Bush produced in the last 17 years?</strong></em></p> <p>Understandably, Americans feel they cannot walk away from this war. For <strong>there is the certainty as to what will follow when we leave.</strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>When the British left Delhi in 1947, millions of former subjects died during the partition of the territory into Pakistan and India and the mutual slaughter of Muslims and Hindus.</em></p> <p>&nbsp;</p> <p><em>When the French departed Algeria in 1962, the &ldquo;Harkis&rdquo; they left behind paid the price of being loyal to the Mother Country.</em></p> <p>&nbsp;</p> <p><em>When we abandoned our allies in South Vietnam, the result was mass murder in the streets, concentration camps and hundreds of thousands of boat people in the South China Sea, a final resting place for many. In Cambodia, it was a holocaust.</em></p> </blockquote> <p><strong>Trump, however, was elected to end America&rsquo;s involvement in Middle East wars.</strong> And if he has been persuaded that he simply cannot liquidate these wars &mdash; Libya, Syria, Iraq, Yemen, Afghanistan &mdash; he will likely end up sacrificing his presidency, trying to rescue the failures of those who worked hardest to keep him out of the White House.</p> <p><u><strong>Consider the wars, active and potential, Trump faces.</strong></u></p> <p>Writes <a href="" target="_blank"><strong>Bob Merry in the fall issue of The National Interest</strong></a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;War between Russia and the West seems nearly inevitable. No self-respecting nation facing inexorable encirclement by an alliance of hostile neighbors can allow such pressures and forces to continue indefinitely. Eventually (Russia) must protect its interests through military action.&rdquo;</p> </blockquote> <p><strong>If Pyongyang tests another atom bomb or ICBM, some national security aides to Trump are not ruling out preventive war.</strong></p> <p>Trump himself seems hell-bent on tearing up the nuclear deal with Iran. This would lead inexorably to a U.S. ultimatum, where Iran would be expected to back down or face a war that would set the Persian Gulf ablaze.</p> <p><strong>Yet the country did not vote for confrontation or war.</strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>America voted </strong>for Trump&rsquo;s promise to improve ties with Russia, to make Europe shoulder more of the cost of its defense, to annihilate ISIS and extricate us from Mideast wars, to stay out of future wars.</p> <p>&nbsp;</p> <p><strong>America voted</strong> for economic nationalism and an end to the mammoth trade deficits with the NAFTA nations, EU, Japan and China.</p> <p>&nbsp;</p> <p><strong>America voted</strong> to halt the invasion across our Southern border and to reduce legal immigration to ease the downward pressure on American wages and the competition for working-class jobs.</p> </blockquote> <p><em><strong>Yet today we hear talk of upping and extending the U.S. troop presence in Afghanistan, Iraq and Syria, of confronting Iran, of sending anti-tank and anti-aircraft weapons to Ukraine to battle pro-Russia rebels in the east.</strong></em></p> <p><u><strong>Can the new custodians of Trump&rsquo;s populist-nationalist and America First agenda, the generals and the Goldman Sachs alumni association, be entrusted to carry it out?</strong></u></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="231" height="149" alt="" src="" /> </div> </div> </div> Afghan army Afghanistan American people of German descent China Climate change skepticism and denial Donald Trump European Union Foreign policy of Donald Trump Foreign policy of the Donald Trump administration goldman sachs Goldman Sachs India Iran Iraq Japan Middle East Middle East Military history by country national security National Security Council Nationalism Persian Gulf Politics Politics South China South Vietnam Taliban Taliban The Apprentice Ukraine United States War War in Afghanistan White House White House WWE Hall of Fame Tue, 22 Aug 2017 19:11:39 +0000 Tyler Durden 602123 at "The Perfect Storm Is Brewing": Goldman Warns Italy Has The Lowest Capacity To Absorb Migrants <p>While Europe's economy and capital markets have been spared any major shocks in the past year, and in fact European GDP has been on a surprisingly resilient uptrend in recent quarters led higher by the relentless German export-growth dynamo (courtesy of the very, very low Deutsche Mark and a lot of broke Greeks), an old and recurring problem has re-emerged, one which threatens the stability and cohesion of the European Union itself: the latest surge of refugees which, arriving mostly from North Africa in recent months, has made Italy its primary landfall target resulting in a surge in migrant arrivals on Italian shores. However, with the rest of Europe largely shutting its borders to this refugee influx forcing Rome to deal with what many in Italy see as an unwelcome presence, a distinct sense of bad-will has been floating around Europe in recent months as Rome's pleas for more solidarity from its European peers have been stubbornly ignored. Meanwhile, Italy has accepted nearly 100,000 refugees in the first six months of the year and the number is rapidly rising.</p> <p><img src="" width="505" height="327" /></p> <p>Now, a new report issued by Goldman Sachs will likely pour even more gasoline on the fire, as it finds that just as Rome alleges, "<strong>Italy has the lowest capacity to absorb migrants among the major EU economies. This is measured using three indicators of integration: (1) economic integration; (2) social integration; and (3) policy effectiveness.</strong>"</p> <p>While hardly new for regular readers, this is how Goldman lays out the problem: </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>migrant flows into Europe are changing and countries differ in their capacity to integrate new arrivals. <strong>An increasing proportion of migrants crossing the Mediterranean Sea come from sub-Saharan Africa rather than fleeing conflict in the Middle East. </strong>Increasingly, <strong>the destination countries are Italy and Spain</strong>, with reduced flows through Greece and the western Balkans towards Germany, largely as a result of the EU-Turkey agreement and the imposition of stricter border controls.</p> </blockquote> <p><a href=""><img src="" width="500" height="357" /></a></p> <p>As a result of this constant migrant flow, successful integration is naturally a key objective for policymakers, <strong>who hope that the influx will boost output growth in the long run while seeking ways to mitigate the short-run costs caused by disruption to the labour market and wider society. </strong></p> <p><strong>&nbsp;</strong>Here, Goldman's analysts take a broad view of the integration process and provide an initial comparison of countries’ capacity for immigration: "<strong>We focus on Italy throughout, which has become the main destination country of trans-Mediterranean migrant flows and faces a general election next May."</strong>&nbsp; Goldman also adds that successful integration matters for the bank's macroeconomic outlook two reasons. </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>First, the bulk of migrant flows into the EU this year have been in the central Mediterranean, oriented towards Italy. Second, the country already faces economic and political pressures from its struggling public finances and the rise of populism ahead of next year’s election.</p> </blockquote> <p>And yet, what Goldman finds is that the nation that has been "tasked" with accepting the vast majority of migrants in 2017 is the one that is most unsuited to do just that. Here are the summary findings:</p> <ul> <li><strong>Economic integration</strong>, measured by relative immigrant-native unemployment rates, appears particularly low in Italy, Greece, Spain and Hungary. These countries suffer from high unemployment across the population but immigrants bear a disproportionate amount of the burden. In contrast, the UK has the lowest immigrant-native unemployment gap.</li> <li><strong>Social integration</strong>, roughly estimated using information on public attitudes towards immigration, is weakest in the countries most affected by the migration crisis. While the crisis shows signs of easing for countries such as Greece, it is intensifying in Italy.</li> <li><strong>Policy effectiveness</strong>, measured by independent research by the MIPEX organisation, is lowest in Greece and Hungary.</li> </ul> <p>Some additional details, first on economic integration:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Economic integration can be measured by assimilation to the labour market. Exhibit 3 shows the immigrant-native gap in unemployment rate for 1st and 2nd generation migrants across several EU countries. The immigrant-native gap in unemployment provides an initial and general measure of economic integration, with full integration implied by no gap at all. Looking at the change in this gap across generations provides a dynamic measure of the integration process: a smaller gap for the children of migrants relative to their parents implies integration over generations. In this way, Exhibit 3 illustrates two ways to analyse economic integration across countries:</p> <ul> <li>By considering the bars in levels, one can compare the level n of integration across countries (by generation).</li> <li>By considering the difference between generations, once can compare the rate of integration across countries.</li> </ul> <p><a href=""><img src="" width="500" height="338" /></a></p> <p>&nbsp;</p> <p>Spain and Greece show the lowest levels of economic integration, implied by the widest immigrant-native gaps. <strong>Italy and Hungary show the lowest rates of economic integration, with 2nd generation migrants faring even worse than their parents on average</strong>. These four countries also have the highest unemployment rates among the population as a whole. The point to be made is that within these countries, unemployment disproportionately affects the immigrant population and there is a clear lack of catch-up by the 2nd generation.</p> </blockquote> <p>Ok, so Italy is hardly the place to park refugees if one hopes to see them integrated economically. What about socially? Here is the answer:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Social integration can be estimated by the public’s attitude towards immigration. Social cohesion is hard to measure but can be estimated from certain kinds of information produced by surveys. Existing research focuses on two indicators: the discrimination against migrants and the host country’s degree of acceptance of immigration. We choose to consider the latter. Exhibit 4 shows public sentiment in the EU toward new immigrants, based on the Eurobarometer 2017. </p> <p>&nbsp;</p> <p><a href=""><img src="" width="500" height="288" /></a><strong>&nbsp;</strong></p> <p>&nbsp;</p> <p><strong>Prima facie, Hungary appears the most socially hostile to migrants, with Italy and Greece also expressing robust anti-immigration sentiment. </strong>In all countries, negative attitudes have been provoked by the migration crisis. Yet while migrant flows to Hungary and Greece have slowed, <span style="text-decoration: underline;"><strong>in Italy they are picking up</strong></span>. According to the Italian interior ministry, <strong>migration figures in Italy are on track to exceed the annual record of 181,000 immigrants set in 2016 </strong>and widespread violence in Libya has driven the number of asylum seekers crossing the central Mediterranean to surge by 44% compared with the same period last year</p> </blockquote> <p>So far, Italy - along with Hungary - appears to be the most inhospitable nation in Europe when it comes to two key core verticals: economical and social.&nbsp; How about the inverse: which European nations have the most effective policies, an indicator of a government's ability to promote integration. Goldman's answer:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The Migration Integration Policy Index (MIPEX) is an indicator produced by the Migration Policy Group and the Barcelona Centre for International Affairs. It uses a range of policy areas to evaluate and compare how governments are promoting integration. Exhibit 5 shows the overall score MIPEX has given each country. Greece and Hungary have the least effective policies for integrating migrants. In 2013, Greece passed legislation obstructing the right of immigrants to vote at the national level, while a repeal of birth-right citizenship laws has left many children born in Greece without equal rights. <strong>Italy performs moderately well against this indicator and MIPEX recognises that it has made the first steps towards legal integration and equal rights.</strong> However, the challenge of achieving this in practice remains; although most long-term migrants have found jobs, they are often below their level of qualification.</p> </blockquote> <p><a href=""><img src="" width="500" height="357" /></a></p> <p>Which brings us to Goldman's conclusion on which European nation is best suited to accept the thousands of daily migrant arrivals: in short - it's not Italy, or as Goldman puts it "<span style="text-decoration: underline;"><strong>Overall, Italy has the lowest capacity to absorb migrants compared with the major EU economies</strong></span>." </p> <p><a href=""><img src="" width="500" height="390" /></a></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>From the indicators used, <strong>Italy appears the least economically and socially integrated, despite performing marginally better than the EU average according to the MIPEX score for policy effectiveness</strong>. Our findings are highly significant in light of this year’s surge in trans-Mediterranean migration to Italy and the country’s vulnerable public finances. Moreover, <strong>Italy’s handling of the migration crisis will be a central issue when the country goes to the polls in the general election next May, particularly as a driving force behind support for populist opposition parties</strong>.</p> </blockquote> <p>And while Goldman reiterates the long-held conventional credo that "<em>the influx of migrants to Italy has the potential to bring economic benefits in the long run and offers a means to counter the country’s demographic problems (Italy’s population shrunk for the second year running in 2017)" </em>it admits that <em>"realising these benefits is conditional on successful economic and social integration" </em>something which most likely will not happen as Goldman's "<span style="text-decoration: underline;"><strong>analysis casts doubts over Italy’s capacity to achieve this and suggests the ‘perfect storm’ is brewing.</strong></span>"</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="917" height="655" alt="" src="" /> </div> </div> </div> Barcelona Centre Capital Markets Central Mediterranean Demography European migrant crisis European Union European Union Germany goldman sachs Goldman Sachs Greece Human migration Hungary Immigration Immigration to Greece Italy Mediterranean Middle East Middle East Migration Integration Policy MIPEX North Africa Opposition to immigration Politics Social integration Social Issues Sub-Saharan Africa Unemployment Western Balkans Tue, 22 Aug 2017 18:48:31 +0000 Tyler Durden 602131 at How To Set Up Your Own Bitcoin/Ethereum IRA <p><a href=""><em>Authored by Eric Falkenstein via Falkenblog,</em></a></p> <p><strong>For the past&nbsp;couple of centuries&nbsp;technology empowered the state, put more things under its control. </strong>They have ultimate custody of all your financial assets, and custody is nine-tenths of the law. <strong>You simply can&#39;t hold $1M in financial assets in a form where &#39;The Man&#39; can grab it if he finds you an enemy of the state, which in many states includes righteous men.</strong></p> <p><a href=""><img height="325" src="" width="600" /></a></p> <p>But like so many things the effect is not linear, in that<strong> now technology is putting power back in individuals. </strong>We can now take classes online, and be evaluated objectively via tests, making Universities less important. We no longer have a handful of news sources, but a spectrum that allows us to choose among vastly different interpretations of the same data. And we have digital currencies, which exploit cryptography innovations aligned with processing power to<strong> create ways of assigning credits more efficiently than fiat currency.</strong></p> <p><strong>The essence of money is not that it is backed by something intrinsically valuable we can hold. Once &nbsp;we severed its link to gold and silver, it still &#39;worked.&#39; </strong>I would not have predicted that in 1900. Money works because people accept it, and the <strong>large network effects of everyone accepting it make it indispensable,</strong> because it avoids the &#39;<a href="">double coincidence of wants</a>.&#39; Bitcoin was created by geeks who were incented to invest their technical skills into mining and developing the network, and as these highly productive people began to accumulate these assets, they appreciate its value. Since highly productive people appreciate these assets, they are valuable because they can be translated into purchasing the services of such people. Thus, initial coin offerings (ICOs) allow people to fund new businesses focused on blockchain technology because the same people creating these businesses are fine with getting paid in &#39;tokens&#39;, something that would be hard to convince for your average person.</p> <p><strong>Long term, I see much wealth going off the fiat grid into cryptocurrencies, because as we&#39;ve seen throughout history, governments eventually run out of other people&#39;s money, leaving only expropriation via inflation or outright takings</strong> (see &#39;<a href="">Fragile by Design</a>&#39;). Anticipating this, getting your money into something the government can&#39;t seize is important, and cryptocurrencies allow you to do this. If a government tries to prohibit bitcoin, those with large bitcoin accounts will simply move to someplace that accepts it, like Singapore, and a country filled with those who appreciate and have a lot of bitcoin will tend to prosper. So unless the world governments can enforce a worldwide compact with over a hundred players, bitcoin will succeed, and I&#39;m sure most smart countries will ultimately allow general digital currency use reluctantly, to avoid such a brain drain.</p> <p><strong>While I love Bitcoin, Ethereum is better because it builds contracts into the same blockchain, which creates greater functionality.</strong> If you go to Reddit, you&#39;ll see more development in &#39;Go&#39;, a cutting edge software language, in Ethereum projects, and there are already more wikis on GitHub for Ethereum projects than Bitcoin projects, so I&#39;m confident that Ethereum will surpass Bitcoin in market cap someday, especially once they move to proof-of-stake (sometime next year).</p> <p>Since 2014, one has been able to put Bitcoin into IRAs (see <a href="">here</a>), though IRAs are so highly regulated, finding how to do this is non-trivial. <strong>So I thought I would move some of my 401k into cyber currencies such as Ethereum (you can do BTC too, but I&#39;ll use ETH as the example). &nbsp;Most 401ks and IRAs do not allow you to do this directly, and BitcoinIRA charges 10% to set up a Bitcoin IRA.</strong> I don&#39;t blame them for charging this much, as it&#39;s difficult, and as there&#39;s an 80% premium to NAV with the Bitcoin Investment Trust (<a href="">GBTC</a>), investors are clearly willing to pay extra to avoid the complexities involved in directly owning them (eg, try to explain this to your parents).</p> <p><strong>The problem is that no IRA custodian can translate USD into ETH the way they can move your USD into a mutual fund. You have set up an account at a&nbsp;cybercurrency&nbsp;exchange to do that, and most exchanges do not handle IRA transactions. </strong>The new regulated&nbsp;bitcoin&nbsp;exchanges have very small staffs relative to the number of customers, and so have automated most of their support function. Thus, if you have a question (&#39;how can I buy BTC for my IRA on your exchange?&#39;), you&#39;ll get an auto-bot answer using an algorithm that finds the best fit your keywords. These are irrelevant to unorthodox questions, and follow up questions just lead to more pointless&nbsp;autobot&nbsp;answers.</p> <p>The humans, alas, are rarely better, basically doing the same thing with their meat-based neural nets by looking at their FAQs and copy and pasting answers from there. At Coinbase, if you follow up your question after not hearing anything for 3 days, they will assume you have changed your question, so it moves it to the back of their queue. Thus I had an issue where my question was never answered because every couple of days I would write, &#39;is anyone there?&#39; which would put me back at the bottom of the queue, and my question was thus unanswered (and funds frozen) for 3 weeks.</p> <p><u><strong>It took me a while to find the companies that allow this directly.</strong></u> It&#39;s not straightforward, however, as Kingdom Trust clearly stumbled into this capability, and they gave me a bunch of contradictory information, all standard confusion. &nbsp;I&#39;m sure they and others will figure this all out eventually, but by the time it becomes easy to invest in digital currencies, the incentive will be a lot lower. &nbsp;So, <strong>be patient, it will happen, but just about every step takes at least a day.</strong></p> <p><span style="text-decoration: underline;"><strong>Here&#39;s how you set up a cybercurrency IRA:</strong></span></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>1) Go to <a href="">Kingdom Trust</a>, an IRA custodian based in Kentucky. &nbsp;Rollover your IRA/401k there, informing them you plan to hold ETH or BTC in your IRA.</p> <p>&nbsp;</p> <p>2) Set up an account at <a href="">Genesis</a>&nbsp;(not Gemini). You will need a clear picture of your driver&#39;s license you can email them, and a digital photo of a recent utility bill (w/in 3 months).</p> <p>&nbsp;</p> <p>3) Once approved at Genesis, you to open a <a href="">BitGo</a> account, as this exchange stores your initial wallet after the Genesis trade.</p> <p>&nbsp;</p> <p>4) Ask Kingdom Trust for an &quot;Investment Directive For Digital Currency&quot; form.</p> <p>&nbsp;</p> <p>5) Once you have this form, request a trade at Genesis, so that if you have $100K USD, ask them to buy as much as possible with that (it&#39;s called RFQ--request for quote--on the Genesis portal). You will get back a confirmation with the amount of USD paid for X units of ETH. You then &#39;accept&#39; that on the Genesis site.</p> <p>&nbsp;</p> <p>6) You then immediately fill out the Kingdom Trust &quot;Investment Directive&quot; form, which includes wire instructions to send your IRA money to Genesis&#39;s bank account at Silvergate Bank (see <a href="">here</a>), and your trade terms from Genesis, which includes how many ETHs were bought and for what USD price. You will need to sign the Kingdom Trust Investment Directive digitally, so add the PDF plug-in that allows digital signatures. Do this early in the morning, as even then it takes a day for them to instantiate the wire.</p> <p>&nbsp;</p> <p>7) Kingdom Trust then gives you a wallet address from your BitGo account. You then go your Genesis portal and click on your earlier RFQ trade. Click on the blue box to the left of this, and under Buyer Actions put in the ETH address that Kingdom Trust gives you. Send your ETH to the BitGo wallet address Kingdom Trust gives you.</p> <p>&nbsp;</p> <p>For Bitcoin, this is ultimately put into a multi-sig wallet. For ethereum, they do not have this capability yet&nbsp;but are working on it, so your money stays at an address at BitGo under Kingdom Trust&#39;s control. &nbsp;After that, Genesis is basically out of the picture.</p> <p>&nbsp;</p> <p>Fees: Genesis charges 1.5% for their service, which is implicit in the price paid relative to the market price. You have to pay Kingdom Trust $50 to open the account, $40 for the wire, and a $250 annual fee.</p> </blockquote> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="782" height="423" alt="" src="" /> </div> </div> </div> Bitcoin Bitcoin Blockchain centuries technology Coinbase Cryptocurrencies cryptography Digital currency E-commerce Economics of bitcoin Ethereum Finance Legality of bitcoin by country or territory Money pdf Proof-of-stake Tue, 22 Aug 2017 18:29:58 +0000 Tyler Durden 602111 at