http://www.zerohedge.com/fullrss2.xml/wp-content/plugins/uBillboard/%20%20liker.profile_URL%20%20 en "Choose North Korea Or The US": White House Releases Details On Latest N.Korean Sanctions http://www.zerohedge.com/news/2017-09-21/white-house-releases-details-latest-north-korea-sanctions <p>Earlier, when we discussed Trump's <a href="http://www.zerohedge.com/news/2017-09-21/trump-launches-new-sanctions-north-korea-through-executive-order">latest executive order </a>launching new sanctions on North Korea, we got a big picture of the crackdown but not the details. Moments ago, however, the White House unveiled the full breakdown of what Trump's latest crackdown on North Korea will involve. </p> <p>Among other things, not only will the latest crackdown on NKorea include sanctions "on any foreign financial institution that knowingly conducts or facilitates any significant transaction on behalf of certain designated individuals and entities" but also on trade, and targets North Korea's shipping and trade networks and "<strong>issues a 180-day ban on vessels and aircraft that have visited North Korea from visiting the United States</strong>" and "also targets vessels that have engaged in a ship-to-ship transfer with a vessel that has visited North Korea within 180 days.":</p> <p>Ultimately, the White House says, "foreign financial institutions must choose between doing business with the United States or facilitating trade with North Korea or its designated supporters."</p> <p>* * * </p> <p><em>The full statement:</em></p> <p><strong>FINANCIAL INSTITUTIONS</strong>: The E.O. provides the authority to impose sanctions on any foreign financial institution that knowingly conducts or facilitates any significant transaction on behalf of certain designated individuals and entities, or any significant transaction in connection with trade with North Korea, on or after the date of the E.O.</p> <ul> <li>Under this new authority, the sanctions measures can be either restrictions on correspondent or payable-through accounts or blocking sanctions.</li> <li>The E.O. also provides the Secretary of the Treasury additional authority to block any funds originating from, destined for, or passing through accounts linked to North Korea that come within the United States or possession of a U.S. person.</li> <li>Foreign financial institutions must choose between doing business with the United States or facilitating trade with North Korea or its designated supporters.</li> </ul> <p><strong>TRADE: </strong>The E.O. directly targets North Korea's shipping and trade networks and issues a 180-day ban on vessels and aircraft that have visited North Korea from visiting the United States. <strong>This ban also targets vessels that have engaged in a ship-to-ship transfer with a vessel that has visited North Korea within 180 days. </strong>North Korea is dependent on its shipping networks to facilitate international trade.<br />The E.O. also authorizes the Secretary of the Treasury, in consultation with the Secretary of State, to impose sanctions on persons involved in:</p> <ul> <li><strong>Industries: </strong>The construction, energy, financial services, fishing, information technology, manufacturing, medical, mining, textiles, or transportation industries in North Korea;</li> <li><strong>Ports: </strong>Ownership, control, or operation of any port in North Korea, including any seaport, airport, or land port of entry;</li> <li><strong>Imports/Exports: </strong>at least one significant importation from or exportation to North Korea of any goods, services, or technology.</li> </ul> <p>And here is Steven Mnuchin announcing the sanctions:<br /> <iframe width="560" height="315" src="https://www.youtube.com/embed/W9zrJW4ynyQ" frameborder="0" allowfullscreen></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="1600" height="900" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/trump%20kim%202_3.jpg?1506020617" /> </div> </div> </div> http://www.zerohedge.com/news/2017-09-21/white-house-releases-details-latest-north-korea-sanctions#comments Business Forms of government Information Technology Member states of the United Nations Myanmar–United States relations North Korea North Korea North Korea Sanctions Enforcement Act Politics Republics South Korea Steven Mnuchin White House White House Thu, 21 Sep 2017 19:03:47 +0000 Tyler Durden 603941 at http://www.zerohedge.com Yield Curve Flashes Recession Warning In Collapse To 10 Year Lows http://www.zerohedge.com/news/2017-09-21/yield-curve-flashes-recession-warning-collapse-10-year-lows <p>Since The Fed unveiled its cunning plan to unwind the balance sheet ever so gradually and in an ever so well-telegraphed manner, <strong><em>the US Treasury yield curve has collapsed</em></strong>!</p> <p>Banks do not care as the <strong>yield curve has crashed to its flattest since 2007...</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_eod2.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_eod2_0.jpg" width="600" height="318" /></a></p> <p>In fact, the collapse to just 91bps places the <strong>yield curve right at the start of both of the last two recessions...</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_eod3.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_eod3_0.jpg" width="600" height="317" /></a></p> <p>So, no! You do not need to invert the yield curve to see a recession - <em><strong>in fact we are already there.</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="960" height="507" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20170921_eod3.jpg?1506019407" /> </div> </div> </div> http://www.zerohedge.com/news/2017-09-21/yield-curve-flashes-recession-warning-collapse-10-year-lows#comments Business Economics Economy Elasticity Financial markets Fixed income Market economics) Recession Recession Stress–strain curve U.S. Treasury Unemployment US Federal Reserve Yield Yield Curve Yield curve Thu, 21 Sep 2017 18:46:25 +0000 Tyler Durden 603938 at http://www.zerohedge.com Five Bitcoin Crashes (And What You Can Learn From Them) http://www.zerohedge.com/news/2017-09-21/five-bitcoin-crashes-and-what-you-can-learn-them <p><a href="https://cointelegraph.com/news/five-bitcoin-crashes-and-what-you-can-learn-from-them"><em>Authored by Darryn Pollock via CoinTelegraph.com,</em></a></p> <div class="post-full-text contents"> <p dir="ltr">With Bitcoin price reaching a new high of $5,000 recently, and then <a href="https://cointelegraph.com/news/bitcoins-recent-drop-normal-correction-adam-sharp" target="_blank">dumping back down to nearly $3,000</a>, <strong>it&rsquo;s been a wild ride this month.</strong></p> <p><strong>These crashes are part and parcel of the volatile digital currency,</strong> and <a href="https://cointelegraph.com/news/bitcoins-price-declines-anew-hits-three-week-low" target="_blank">drops of 10, 20, even 40 percent</a> are not that uncommon.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_btc7.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_btc7_0.jpg" style="width: 600px; height: 356px;" /></a></p> <p><em><strong>Since Bitcoin began, there have been some major crashes, but there have also been some good lessons to learn.</strong></em></p> <h2><span style="text-decoration: underline;">April 2013&rsquo;s meltdown</span></h2> <p>In one of the earlier and larger drops, <a href="https://cointelegraph.com/news/top-13-major-bitcoin-price-crashes-endurance-of-an-idea" target="_blank">Bitcoin price went from $233 to $67</a> overnight, a massive 71 percent drop in 12 hours. It would take seven months to recover.</p> <p><img height="311" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_btc1_0.jpg" width="600" /></p> <p>This meltdown was attributed to Bitcoin rubbing shoulders with the mainstream for the first time. The digital currency had never crossed $15 before 2013 but a flood of media coverage helped drive it well above $200.</p> <p>This was a drastic and violent correction that followed the exuberant price rise, although, there was also an outage at Mt. Gox which was said to be a catalyzing factor.</p> <h2><span style="text-decoration: underline;">The famed 2013 bubble</span></h2> <p>After April, Bitcoin price hovered around $120 until later in the year when prices suddenly skyrocketed to a high of $1,150 in late November. However, by mid-December, the price had tumbled back down to less than half of that, and that&rsquo;s where it would stay for four years before crossing $1,000 again.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_btc2.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_btc2_0.jpg" style="width: 600px; height: 320px;" /></a></p> <p>The late 2013 crash had all the signs of a bubble, as amateur investors rushed the digital currency. It was further perpetuated as regulators took a positive stance on it, while exchanges such as Coinbase had started making the buying process far easier.</p> <h2><u>The Mt. Gox misfortune</u></h2> <p>Adding to the long road to recovery after the collapse in December 2013 <a href="https://cointelegraph.com/news/mt-gox-trial-update-karpeles-admits-willy-bot-existence" target="_blank">was the Mt. Gox calamity that nearly sunk the whole Bitcoin boat</a>. Bitcoin was steadily growing through January and February when it suddenly fell nearly 50 percent from $867 to $439.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_btc3.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_btc3_0.jpg" style="width: 600px; height: 321px;" /></a></p> <p>This collapse was triggered when Mt. Gox announced that it had had a major hack. On Feb. 7, the exchange halted withdrawals, and later revealed thieves had made off with 850,000 Bitcoins (which would be worth around $3.5 bln today).</p> <h2><u>The summer sale of 2017</u></h2> <p>In early January of this year, Bitcoin price once again crossed the $1,000 mark which set off a massive price spike as through June the digital currency was topping $3,000. However by Mid-July it had fallen back 36 percent to $1,869.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_btc4.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_btc4_0.jpg" style="width: 600px; height: 315px;" /></a></p> <p dir="ltr">Despite the boom and increased interest, there were still concerns about the code and a civil war was brewing. <a href="https://cointelegraph.com/news/bitcoin-fork-cash-volatility-continues-while-bitcoin-price-remains-stable" target="_blank">The Aug. 1 hardfork</a> was looming large and scaring many investors as to the future of the coin, since users and miners sought different solutions.</p> <p>Ironically, such a fork did materialize in August in the form of rival Bitcoin Cash &mdash; but this seems to have done no long term harm to Bitcoin.</p> <h2><u>China&rsquo;s stern intervention</u></h2> <p>With the fork out of the way and peace restored between different parties, Bitcoin once again tore off on a huge growth spurt. It climbed close to $5,000 at the start of September before plunging 37 percent by Sep. 15, shaving off over $30 bln from Bitcoin&#39;s total market cap in the process.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_btc5.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_btc5_0.jpg" style="width: 600px; height: 327px;" /></a></p> <p dir="ltr">This drop has been put down to one thing really, and that&rsquo;s China. The socialist country first loudly <a href="https://cointelegraph.com/news/china-ban-on-ico-is-temporary-licensing-to-be-introduced-official" target="_blank">cracked down on ICOs</a>, and then went after <a href="https://cointelegraph.com/news/is-china-really-banning-bitcoin-exchanges-or-is-it-fake-news" target="_blank">digital currency exchanges</a>, making its feelings on the disruptive monetary system known.</p> <h2><u>Lessons to be learned</u></h2> <p>While it is not a lesson, more a way of life with Bitcoin, <strong>it must be plainly known that the digital currency is volatile.</strong></p> <p>What&rsquo;s just as apparent is that<strong> Bitcoin crashes seem to coincide with speculative run-ups coupled with exogenous shocks, such as a major hack or a government crackdown.</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_btc6.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_btc6_0.jpg" style="width: 600px; height: 971px;" /></a></p> <p><strong>However, it has been seen that Bitcoin always bounces back. </strong>The bouncing back process can be anywhere from a week to a couple years, and the cautionary tale there is long term holding bypasses any stress caused by massive drops.</p> <p><strong>The crashes of late have been far smaller, less susceptible, and the bounce backs have been quicker and more resilient.</strong> This is <a href="https://cointelegraph.com/news/crypto-market-maturing-not-stalling" target="_blank">indicative of a maturing market</a>. Today, the cryptocurrency market is so much bigger and has proven to be resilient.</p> </div> <p>&nbsp;</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="712" height="423" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20170921_btc7.jpg?1506009573" /> </div> </div> </div> http://www.zerohedge.com/news/2017-09-21/five-bitcoin-crashes-and-what-you-can-learn-them#comments Alternative currencies Bitcoin Bitcoin China Coinbase CoinDesk Cryptocurrencies Digital currency exchange Economics of bitcoin Meltdown Mt. Gox recovery Thu, 21 Sep 2017 18:40:51 +0000 Tyler Durden 603922 at http://www.zerohedge.com Are These Two Companies Proof That The Housing Bubble Is Back? http://www.zerohedge.com/news/2017-09-21/are-these-two-companies-proof-housing-bubble-back <p>As most people are undoubtedly aware, the whole point of requiring a down payment on a home is to make sure that homeowners have "skin in the game" and to prevent the kind of rampant speculation that undoubtedly comes when banks and other lending institutions make it easier for American gamblers (a.k.a. "real estate investors") to play around with other people's money.</p> <p>As we all learned the hard way back in 2008, lack of discipline on enforcing down payment rules results in massive pricing bubbles in a $30 trillion residential housing market that has devastating consequences when they pop...<strong>it all results in charts that look like this:</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user230519/imageroot/2017/09/21/2017.09.21 - National Home Price.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user230519/imageroot/2017/09/21/2017.09.21%20-%20National%20Home%20Price_0.jpg" style="width: 600px; height: 330px;" /></a></p> <p>&nbsp;</p> <p><strong>Alas, regulations designed to thwart speculative housing bubbles</strong> (regulations that likely wouldn't be required if banks were simply allowed to suffer the consequences of their bad financing decisions...but that's a discussion for another post) <strong>are only as good as the latest business model designed specifically to evade them.</strong> And, as <a href="https://www.axios.com/the-incredible-disappearing-home-down-payment-2487175423.html">Axios</a> points out this morning, two of the latest such business models are eerily reminiscent of the insanity we all witnessed in 2006.</p> <p>The first is called <a href="https://www.unison.com/">Unison Home Ownership Investors</a> and is a company that raises capital from pension funds specifically to "invest" in down payments on houses where the buyer can't afford to put 20% down.&nbsp;<strong> It's a "win-win" relationship where the buyer gets to purchase a house he/she really can't afford and some unsuspecting teacher in Minnesota gets to "invest" in the equity slug of a highly levered house in Bubble Town USA.</strong></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Unison co-invests with prospective homebuyers—typically putting 10% down along with a bidder's own 10%, helping them qualify for a standard 20%-down home loan.</strong> Depending on the lender Unison partners with, a homebuyer can end up putting as little as 5%:</p> <p>&nbsp;</p> <p><strong>Unison's investors—who Riccitelli says are typically large pension funds with long investment time horizons</strong>—realize a profit only when the home is sold. The product is attractive to such investors because they need assets that match their liabilities, i.e. pension payments sometimes 30 or 40 years away.</p> <p>&nbsp;</p> <p>Other than a few private equity funds that bought up cheap single family homes at the housing market's bottom between 2010-2012, there are few ways for investors to own a diversified pool of residential real estate, a market that at $30 trillion is more valuable than the U.S. stock market</p> <p>&nbsp;</p> <p><strong>A homeowner can buy Unison out at any point after three years—as long it recoups its original investment.</strong> A homeowner can sell the home to another party at any point, however, even if it results in Unison taking a loss.</p> </blockquote> <p>Meanwhile, a startup called <strong><a href="https://www.loftium.com/">Loftium</a> will pay you entire down payment if you just agree to rent out one of the rooms in your new house over Airbnb </strong>for a specified period of time.&nbsp; But there's a catch...for now Loftium is only available in Seattle.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Loftium has an alternative strategy. <strong>It will will contribute $50,000 for a down payment, as long as the owner will continuously list an extra bedroom on Airbnb for one to three years and share most of the income with Loftium.</strong></p> <p>&nbsp;</p> <p>This strategy might be particularly appealing in booming markets like Seattle, where rent prices are rising even faster than home values themselves, and which are popular tourist destinations.</p> </blockquote> <p>All of which may help explain why Seattle home prices have suddenly gone parabolic...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user230519/imageroot/2017/09/21/2017.09.21 - City Home Price.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user230519/imageroot/2017/09/21/2017.09.21%20-%20City%20Home%20Price_0.jpg" style="width: 600px; height: 333px;" /></a></p> <p>Well, that and all of the <a href="http://www.zerohedge.com/news/2017-07-26/spot-outlier-seattle-home-prices-go-vertical-laundered-chinese-money-flows">Chinese money that needs to be laundered</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="649" height="413" alt="" src="http://www.zerohedge.com/sites/default/files/images/user230519/imageroot/Home%20Bubble_5.JPG?1505999678" /> </div> </div> </div> http://www.zerohedge.com/news/2017-09-21/are-these-two-companies-proof-housing-bubble-back#comments Airbnb Business Economy Finance Financial crises Financial markets Housing Bubble Housing Market Investment Money Mortgage loan Private Equity Real estate Real estate Real estate bubble Real estate economics Unison Home Ownership Investors Thu, 21 Sep 2017 18:20:23 +0000 Tyler Durden 603913 at http://www.zerohedge.com Bay Area Sues Big Oil For Billions http://www.zerohedge.com/news/2017-09-21/bay-area-sues-big-oil-billions <p><a href="http://oilprice.com/Latest-Energy-News/World-News/Bay-Area-Sues-Big-Oil-For-Billions.html"><em>Authored by Irina Slav via OilPrice.com,</em></a></p> <p>The cities of San Francisco and Oakland have <strong>filed lawsuits against Chevron, Exxon, ConocoPhillips, BP, and Shell </strong>for the effect of their activities on climate change: <strong><em>higher sea levels.</em></strong> The cities seek billions in damages <strong>to counteract the effects of the changing climate.</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_oil1.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_oil1_0.jpg" style="width: 600px; height: 322px;" /></a></p> <p>Reuters <a href="http://www.reuters.com/article/legal-us-usa-oil-climatesuits/california-cities-sue-big-oil-firms-over-climate-change-idUSKCN1BV2QM">quoted </a>San Francisco officials as saying that <strong>the five oil companies <em>&ldquo;knowingly and recklessly created an ongoing public nuisance that is causing harm now and in the future risks catastrophic harm to human life and property.&rdquo;</em></strong></p> <p><strong>The companies themselves were restrained in their comments</strong>, with Chevron saying the lawsuits would only serve special interests rather than effect a real change, and Exxon finding the claims made by the cities lacking in merit. Conoco and BP did not comment, and Shell said climate change should be addressed by government policy and cultural change rather than by litigation.</p> <p><strong>This is not the first time that communities decided to sue Big Oil like they sued Big Tobacco 30 years ago.</strong></p> <p>Louisiana&rsquo;s Plaquemines Parish is <a href="http://www.nola.com/environment/index.ssf/2017/09/oil_and_gas_companies_will_go.html">pursuing </a>21 different lawsuits against Big Oil for damage to the state&rsquo;s wetlands, which is causing coastal erosion. Five of the lawsuits have already been scheduled for 2019.</p> <p><strong>Chevron is the defendant in 19 of the 21 cases.</strong></p> <p>California itself is no stranger to such legal action.<strong> In July, three coastal communities&mdash;Marin and San Mateo Counties, and City of Imperial Beach&mdash;filed <a href="https://www.sheredling.com/wp-content/uploads/2017/07/Media-SLR-release-FINAL-PDF-071717.pdf">suits</a> against 37 oil, gas, and coal companies for damage done to the environment through carbon dioxide pollution. </strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_oil.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_oil.jpg" style="width: 600px; height: 325px;" /></a></p> <p><strong>The plaintiffs claim the companies have know for half a century that greenhouse gas emissions are conducive to climate change but have deliberately concealed this,</strong> leaving the local communities to pick up the check for remedial measures.</p> <p>In all likelihood, this is just the start of a flood of lawsuits as the debate about who should bear the costs of climate change heats up. <strong>The dominant opinion seems to be <a href="https://www.theguardian.com/commentisfree/2017/sep/07/big-oil-must-pay-for-climate-change-here-is-how-to-calculate-how-much">shifting </a>away from taxpayers and towards energy companies, as research-based evidence suggests that some of the emissions causing climatic change can be traced back to companies producing oil and gas.</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="982" height="527" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20170921_oil1.jpg?1506010160" /> </div> </div> </div> http://www.zerohedge.com/news/2017-09-21/bay-area-sues-big-oil-billions#comments Big Oil BP Business Chevron Corporation ConocoPhillips Disaster Economy Environment Exxon Exxon Fossil fuels lobby Petroleum industry Reuters Rockefeller family Royal Dutch Shell Shell Oil Company Thu, 21 Sep 2017 18:00:20 +0000 Tyler Durden 603923 at http://www.zerohedge.com Household Wealth Hits A Record $96.2 Trillion... There Is Just One Catch http://www.zerohedge.com/news/2017-09-21/household-net-worth-hits-record-962-trillion-there-just-one-catch <div class="content"> <p>In the Fed&#39;s <a href="https://www.federalreserve.gov/releases/z1/current/z1.pdf">latest Flow of Funds report</a>, today the Fed released the latest snapshot of the US &quot;household&quot; sector as of June 30, 2017. What it revealed is that with $111.4 trillion in assets and a modest $15.2 trillion in liabilities, <strong>the net worth of US households rose to a new all time high of $96.2 trillion</strong>, up $1.7 trillion as a result of an estimated $564 billion increase in real estate values, but mostly $1.23 trillion increase in various stock-market linked financial assets like corporate equities, mutual and pension funds, and deposits as the market soared to new all time highs thanks to some $2 trillion in central bank liquidity injections this year.</p> <p>Total household assets in Q2 rose $1.8 trillion to $111.4 trillion, while at the same time, total liabilities, i.e., household borrowings, rose by only $15 billion from $15.1 trillion to $15.2 trillion, the bulk of which was $9.9 trillion in home mortgages.</p> <p>The breakdown of the total household balance sheet as of Q2 is shown below.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/09/05/balance%20sheet%20Q2%20snapshot.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/09/05/balance%20sheet%20Q2%20snapshot_0.jpg" style="width: 500px; height: 420px;" /></a></p> <p>And the historical change of the US household balance sheet.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/09/05/Household%20net%20worth%20Q2%202017.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/09/05/Household%20net%20worth%20Q2%202017_0.jpg" style="width: 500px; height: 314px;" /></a></p> <p>And while it would be great news if wealth <em>across all of America </em>had indeed risen as much as the chart above shows, the reality is that there is a big catch: as shown <a href="http://www.zerohedge.com/news/2016-08-29/devastating-truth-behind-americas-record-household-net-worth">previously</a>, <strong>virtually all of the net worth, and associated increase thereof, has only benefited a handful of the wealthiest Americans.</strong></p> <p>As a reminder, from the CBO&#39;s latest <a href="https://www.cbo.gov/publication/51846">Trends in Family Wealth </a>analysis published last year, here is a breakdown of the above chart by wealth group, which sadly shows how the &quot;average&quot; American wealth is anything but.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/08/27/household%20net%20worth%20by%20wealth%20group.jpg"><img height="337" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/08/27/household%20net%20worth%20by%20wealth%20group_0.jpg" width="500" /></a></p> <p>While the breakdown has not caught up with the latest data, it provides an indicative snapshot of who benefits. Here is how the CBO recently explained the wealth is distributed:</p> <ul> <li><strong>In 2013, families in the top 10 percent of the wealth distribution held 76 percent of all family wealth, families in the 51st to the 90th percentiles held 23 percent, and those in the bottom half of the distribution held 1 percent.</strong></li> <li><strong>Average wealth was about $4 million for families in the top 10 percent of the wealth distribution, $316,000 for families in the 51st to 90th percentiles, and $36,000 for families in the 26th to 50th percentiles</strong>. On average, <strong>families at or below the 25th percentile were $13,000 in debt.</strong></li> </ul> <p>In other words, roughly 75% of the $1.8 trillion increase in assets went to benefit just 10% of the population, who also account for roughly 76% of America&#39;s financial net worth.</p> <p><strong>It also means that <u>just 10% of the US population is worth $73 trillion</u>, while half of the US population was worth just ~$9.6 trillion.</strong></p> <p>Even worse, when looking at how wealth distribution changed from 1989 to 2013, a clear picture emerges. Over the period from 1989 through 2013, <strong>family wealth grew at significantly different rates for different segments of the U.S. population. In 2013, for example:</strong>The wealth of families at the 90th percentile of the distribution was 54% greater than the wealth at the 90th percentile in 1989, after adjusting for changes in prices.</p> <ul> <li>The wealth of <strong>those at the median was 4 percent greater </strong>than the wealth of their counterparts in 1989.</li> <li>The wealth of <strong>families at the 25th percentile was 6 percent less </strong>than that of their counterparts in 1989.</li> <li><strong>As the chart below shows, nobody has experienced the same cumulative growth in after-tax income as the &quot;Top 1%&quot;</strong></li> </ul> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/08/27/Wealth%20growth%20by%20tier.jpg"><img height="282" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/08/27/Wealth%20growth%20by%20tier_0.jpg" width="500" /></a></p> <p>The above is particularly topical at a time when either party is trying to take credit for the US recovery. Here, while previously Democrats, and now Republicans tout the US &quot;income recovery&quot; they may have forgotten about half of America, but one entity remembers well: loan collectors. As the chart below shows, America&#39;s poor families have never been more in debt.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>The share of families in debt (those whose total debt exceeded their total assets) remained almost unchanged between 1989 and 2007 and then increased by 50 percent between 2007 and 2013. In 2013, those families were more in debt than their counterparts had been either in 1989 or in 2007. </strong>For instance, 8 percent of families were in debt in 2007 and, on average, their debt exceeded their assets by $20,000. <strong>By 2013, in the aftermath of the recession of 2007 to 2009, 12 percent of families were in debt and, on average, their debt exceeded their assets by $32,000</strong>.</p> <p>&nbsp;</p> <p>The increase in average indebtedness between 2007 and 2013 for families in debt was mainly the result of falling home equity <strong>and rising student loan balances. </strong>In 2007, 3 percent of families in debt had negative home equity: <strong>They owed, on average, $16,000 more than their homes were worth. In 2013, that share was 19 percent of families in debt, and they owed, on average, $45,000 more than their homes were worth. </strong>The share of families in debt that had outstanding student debt rose from 56 percent in 2007 to 64 percent in 2013, <strong>and the average amount of their loan balances increased from $29,000 to $41,000.</strong></p> </blockquote> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/08/27/families%20in%20debt.jpg"><img height="332" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/08/27/families%20in%20debt_0.jpg" width="500" /></a></p> <p>And there - as we say quarter after quarter- is your &quot;recovery&quot;: <strong>the wealthy have never been wealthier, while half of America, some 50% of households, own just 1% of the country&#39;s wealth, down from 3% in 1989</strong>, while <strong>America&#39;s poor have never been more in debt</strong>.</p> </div> <p>&nbsp;</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="1347" height="847" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/Household%20net%20worth%20Q2%202017.jpg?1506015804" /> </div> </div> </div> http://www.zerohedge.com/news/2017-09-21/household-net-worth-hits-record-962-trillion-there-just-one-catch#comments Business Distribution of wealth Economic inequality in the United States Economy Economy of the United States Great Recession Home Equity Real estate Reality Recession recovery Social inequality Structure US Federal Reserve Wealth Wealth inequality in the United States World economy Thu, 21 Sep 2017 17:50:41 +0000 Tyler Durden 603935 at http://www.zerohedge.com Public School Accuses 5 Year Old of Making Terrorist Threats http://www.zerohedge.com/news/2017-09-21/public-school-accuses-5-year-old-making-terrorist-threats <p><a href="http://www.thedailybell.com/news-analysis/public-school-accuses-5-year-old-of-making-terrorist-threats/">Via The Daily Bell</a></p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px; color: #303030; font-family: Georgia, &quot;Times New Roman&quot;, Times, serif;">When I was in kindergarten, I found a knife in the pocket of a hand-me-down jacket I was wearing for the first time. I gave it to my teacher, and I don’t remember her reacting at all. She gave the knife to my parents when they picked me up at the end of the day. And that was that.</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px; color: #303030; font-family: Georgia, &quot;Times New Roman&quot;, Times, serif;">I used to run around at recess at that age with the other kids, and use bent sticks as fake guns. We shot at each other, rolled down hills dying from fake bullet wounds, and used pinecones as grenades. Looking back that sounds a little bit morbid, but I think I ended up fine. I didn’t torture small animals nor did I become a serial killer. In fact, I never killed anything bigger than a bug until a few weeks ago when I slaughtered some chickens for the first time.</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px; color: #303030; font-family: Georgia, &quot;Times New Roman&quot;, Times, serif;">I’m pretty confident that some of my 5-year-old artwork in school included death and destruction. But that was decades ago. Now, kids are labeled terrorists for acting like kids.</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px; color: #303030; font-family: Georgia, &quot;Times New Roman&quot;, Times, serif;">It’s no wonder kids pretend the way they do with the violent focus of the media. You probably couldn’t insulate your kid from bombs and bloodshed if you tried. I wouldn’t be surprised if they discussed it in the kindergarten class.</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px; color: #303030; font-family: Georgia, &quot;Times New Roman&quot;, Times, serif;">Yet a 5-year-old was&nbsp;<a href="http://www.modbee.com/latest-news/article174321526.html" style="box-sizing: border-box; background: 0px 0px; color: #0c5b3c;">suspended for making a terrorist threat</a>. The tuition-free public charter school in Modesto California said the five-year-old&nbsp;intentionally made threats meant to intimidate and harass.</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px; color: #303030; font-family: Georgia, &quot;Times New Roman&quot;, Times, serif;">The kid, Jackson, told the teacher he couldn’t take off his backpack because there was a bomb in it, and it would explode if he did. Sounds like a hero to me.</p> <blockquote style="box-sizing: border-box; padding: 10px 20px; margin: 0px 0px 20px; font-size: 17.5px; border-left: 5px solid #eeeeee; color: #303030; font-family: Georgia, &quot;Times New Roman&quot;, Times, serif;"><p style="box-sizing: border-box; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px;">The school initially sent the Rileys a letter saying their son was suspended for his intent to “threaten, intimidate or harass others.” The family was told that was the school code violation that best fit what happened, Ian Riley said.</p> <p style="box-sizing: border-box; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px;">When the Rileys pointed out that code applied only to fourth- through 12th-graders, not kids as young as Jackson, the school agreed and so sent a second letter, changing the violation to one about making terrorist threats.</p> <p style="box-sizing: border-box; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px;">“My son never made a threat, never wanted to blow up the school,” Riley said. “He was almost victimizing himself in his imagination, making himself the hero” by keeping the backpack on.</p> <p style="box-sizing: border-box; font-size: 16px; line-height: 24px; padding-bottom: 8px;">Though it was “all in the world of pretend play,” Michelle Riley told Fox, his not wanting to take off the backpack meant Jackson didn’t want to hurt anyone. “Where was the threat?”</p> </blockquote> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px; color: #303030; font-family: Georgia, &quot;Times New Roman&quot;, Times, serif; text-align: center;"><span style="box-sizing: border-box; font-weight: bold;">Public Schools Are Trash</span></p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px; color: #303030; font-family: Georgia, &quot;Times New Roman&quot;, Times, serif;">Public schools are more than just a waste of time. Public schools are a threat to parents and a psychological liability to kids. As this case points out, they punish kids for pretending. Better watch that imagination! And watch what you say.</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px; color: #303030; font-family: Georgia, &quot;Times New Roman&quot;, Times, serif;">Public schools put kids in the presence of strangers that they and you do not know. It opens kids up to the influence of other kids they may never otherwise come into contact with.</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px; color: #303030; font-family: Georgia, &quot;Times New Roman&quot;, Times, serif;">Some people might think this is a good thing, but why? Why expose your kids to bullies and tiny thugs? If you want your kids to get some culture, you can certainly find groups that you can vet first. There is no psychological benefit to putting your kids in contact with questionable authorities and abusive peers.</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px; color: #303030; font-family: Georgia, &quot;Times New Roman&quot;, Times, serif;">“They’ll have to deal with it when they are older.” Maybe, maybe not. If so, let them deal with it when they are older. Then they will hopefully not be scarred by authority figures labeling them a terrorist for no reason. They should be secure in themselves by then to know their peers’ derision is not a reflection on them.</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px; color: #303030; font-family: Georgia, &quot;Times New Roman&quot;, Times, serif;">If they never come into contact with bullies and bigheaded authorities, great! You helped them avoid being around terrible people.</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px; color: #303030; font-family: Georgia, &quot;Times New Roman&quot;, Times, serif;">Homeschool your kid, find an alternative program, hire a tutor, send them to private school, or whatever. Do what you have to in order to insulate them from agents of the state and their asinine methods of dealing with children.</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px; color: #303030; font-family: Georgia, &quot;Times New Roman&quot;, Times, serif;">Otherwise, you are gambling with their wellbeing. You can’t control everything, but you can stop the state from programming your kid to be what they think is a perfect citizen. Obedient, only acting with permission, and having no imagination.</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px; color: #303030; font-family: Georgia, &quot;Times New Roman&quot;, Times, serif;">I’m not knocking all public school teachers. My mom has taught fifth grade for nearly twenty years. What has she witnessed?</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px; color: #303030; font-family: Georgia, &quot;Times New Roman&quot;, Times, serif;">Ballooning administration who&nbsp;get hired for their last two years before retirement to boost their pension. A growing focus on lessons to do well on state standardized tests in order to make the school look good. Being told she is not allowed to fail a kid, and that it is against policy to hold kids back a grade. And she works for probably one of the better public schools!</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px; color: #303030; font-family: Georgia, &quot;Times New Roman&quot;, Times, serif;">Last year she was blamed for a fifth grader being unable to read, and for her failure to bring it to the attention of administration and&nbsp;<em style="box-sizing: border-box; line-height: 24px; padding-bottom: 8px;">parents</em>. Yes, the&nbsp;<em style="box-sizing: border-box; line-height: 24px; padding-bottom: 8px;">parents</em>&nbsp;didn’t know that their kid couldn’t read, it was the teacher’s responsibility!</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px; color: #303030; font-family: Georgia, &quot;Times New Roman&quot;, Times, serif;">That is how much some of these people have abandoned their parental roles to the state.</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px; color: #303030; font-family: Georgia, &quot;Times New Roman&quot;, Times, serif;">Like my mom, plenty of teachers truly love teaching. Lucky for her, she will soon retire and be able to teach in the private sector without state pressure directing her methods.</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px; color: #303030; font-family: Georgia, &quot;Times New Roman&quot;, Times, serif;">Lucky for young teachers, there are many other private sector options if you want to teach kids, but not serve as a state behavior enforcer.</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px; color: #303030; font-family: Georgia, &quot;Times New Roman&quot;, Times, serif;">Parents can encourage these alternative schooling methods by finding unique programs, homeschooling, and supplementing specific classes and tutoring.</p> <p style="box-sizing: border-box; margin-top: 0px; margin-bottom: 10px; font-size: 16px; line-height: 24px; padding-bottom: 8px; color: #303030; font-family: Georgia, &quot;Times New Roman&quot;, Times, serif;">Don’t let the government mold the psychology of the next generation.</p> http://www.zerohedge.com/news/2017-09-21/public-school-accuses-5-year-old-making-terrorist-threats#comments Ballooning administration Education Fail Gambling Thu, 21 Sep 2017 17:21:06 +0000 TDB 603931 at http://www.zerohedge.com Government Regulation, Crony Capitalism Is Keeping 1000s In Florida Without Power http://www.zerohedge.com/news/2017-09-21/government-regulation-crony-capitalism-keeping-1000s-florida-without-power <p><a href="https://mises.org/blog/government-regulation-and-crony-capitalism-keeping-thousands-florida-without-power"><em>Authored by Tho Bishop via The Mises Institute,</em></a></p> <div class="body-content clearfix"> <p>Almost two weeks have passed since Hurricane Irma made landfall in South Florida, <strong><a href="http://www.news-press.com/story/weather/hurricane/2017/09/19/irma-update-over-38-000-customers-remain-without-power-lee-county/682846001/" target="_blank">yet tens of thousands remain without power</a>.</strong> With temperatures regularly eclipsing over 90 degrees, these outages are not only a grave inconvenience for Floridians cleaning up after the storm, but<strong> have <a href="http://www.tampabay.com/opinion/editorials/editorial-no-floridian-should-survive-hurricane-die-in-heat/2337537" target="_blank">proved to be deadly.</a></strong> Given the power of Irma, it is not surprising that it has left behind incredible devastation. <strong>Unfortunately it is also not surprising that it is a government-protected utility that has done the most to impede recovery. </strong>The pain and suffering currently being felt is the direct result of government policy and the perverse incentives of crony capitalism.</p> <p><a href="http://www.iflscience.com/policy/illegal-power-home-solar-panels-florida/" target="_blank">One of the talked about examples</a> of how bad policy is making things worse for Florida families are a variety of<strong> government policies that <a href="http://www.miaminewtimes.com/news/miami-frustrated-with-fpl-after-hurricane-irma-9666311" target="_blank">discourages the use of solar power in the Sunshine State</a>.</strong> Government policy dictates that Floridians are <strong>required to be connected to the central power grid, even if they have enough solar panels installed to power their entire house.</strong> Because of this requirement, a family stuck in areas without power with solar panels installed cannot use them now because doing so could endanger workers trying to restore power for their neighbors. Once again government&rsquo;s desire for centralized control has unintended consequences.</p> <p>Of course, even without such rules, it&rsquo;s unlikely that all of Florida would decide to go off the grid. Given that,<strong> it&rsquo;s important to understand how the legal monopoly granted to electric companies not only traps customers into being entirely reliant upon a single company, but actively incentivizes those companies to be reactive &ndash; rather than proactive</strong> &ndash; when it comes to natural disasters and other events that threaten service.</p> <p><strong>After all, companies like Florida Power &amp; Light will respond to Irma as they have done to hurricanes past, <a href="http://www.sun-sentinel.com/business/fl-bz-nsf-psc-oks-fpl-hurricane-surcharge-20170207-story.html" target="_blank">by increasing prices on their customers</a>. </strong>&nbsp;Unfortunately, the revenue reaped seems to have made little impact in FPL&rsquo;s preparedness for future storms. While the company has reported that its recovery efforts have moved faster this year than when Hurricane Wilma hit South Florida in 2005, more residents suffered outrages due to Irma &ndash; in spite of the fact that Wilma actually had higher sustained <a href="http://www.miaminewtimes.com/news/miami-frustrated-with-fpl-after-hurricane-irma-9666311" target="_blank">winds when it made landfall</a>. &nbsp;</p> <p>Along with the temporary wage hikes following storms, <strong>the company also charges annual &ldquo;storm fees&rdquo;</strong> meant to pay for tree maintenance around power lines. FPL is now facing a class-action lawsuit in the aftermath of Irma <a href="http://www.miamiherald.com/news/local/community/miami-dade/article174049616.html" target="_blank">over their apparent failure to do so</a>. &nbsp;Legal cases are certainly nothing new to FPL, as they have often legally <a href="http://www.miamiherald.com/news/local/community/miami-dade/article164142332.html" target="_blank">fought measures requiring</a> more of their powerlines to be buried underground, rather than be subjected to tropical storm winds above.</p> <p><strong>While FPL may be skimping on storm preparedness, they do make significant investments in the one resource that is truly vital to their business model: <u>government</u>.</strong></p> <p><a href="http://www.tampabay.com/news/politics/stateroundup/utilities-fpl-and-teco-in-florida-lead-pack-in-political-contributions/1045265" target="_blank">FPL and other power companies are regularly among</a> the largest political contributors in the state of Florida. In return, their lobbyists have been able to earn significant <a href="http://www.bradenton.com/news/local/article34872393.html" target="_blank">influence in writing</a> energy legislation in the state of Florida. Of course this is the inevitable result of government granting monopolies to private companies. Isolated from the competition of the market, a business has no need to satisfy the needs of the customer, they only need to protect the relationship they have with government. Mises summed it up well in <em>Human Action</em> when he wrote, <em><strong>&ldquo;Corruption is a regular effect of interventionism.&rdquo;</strong></em></p> <p>Now given the amount of heat companies like FPL are facing following Irma, it&rsquo;s possible the companies may finally have the political incentive to make some changes in the way they conduct business. Legislators may even be shamed into removing some of the restrictions on solar panels.</p> <p>What Florida really needs, however, is to do away with the entire concept of natural monopolies for public utilities. There should be no legislation arbitrarily awarding either private or public companies a commercial fiefdom by legally protecting them from competition. Doing so ensures that desires of customers will always take a back seat to the good will of politicians, and will stifle the ability of the market to innovate superior methods of delivering such important services.</p> <p>As Murray Rothbard wrote in <em><a href="https://mises.org/library/power-and-market-government-and-economy/html/pp/568">Man, Economy, and State</a></em>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p style="margin-left: .5in;">Regulation of public utilities or of any other industry discourages investment in these industries, thereby depriving consumers of the best satisfaction of their wants. For it distorts the resource allocations of the free market. Prices set below the free market create an artificial shortage of the utility service; prices set above those determined by the free market impose restrictions and a monopoly price on the consumers. Guaranteed rates of return exempt the utility from the free play of market forces and impose burdens on the consumers by distorting market allocations.</p> </blockquote> <p><strong>Hurricanes in Florida are as inevitable as Florida Man headlines.</strong> It is not a matter of if Florida will be hit with another powerful storm, but when will it happen next. <em><strong>If its state government wants to truly do everything it can to protect its citizens from the damage Mother Nature can wrought, it should free them from the devastation they face at the hands of government monopolies and crony capitalism.&nbsp;</strong></em></p> </div> <p>&nbsp;</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="234" height="142" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20170921_fl.jpg?1506006415" /> </div> </div> </div> http://www.zerohedge.com/news/2017-09-21/government-regulation-crony-capitalism-keeping-1000s-florida-without-power#comments Capitalism Corruption Crony capitalism Economic liberalism Economy Energy Florida Florida Power & Light Free market headlines Hurricane Wilma Market failure Mises Institute Mises Institute Monopoly Natural monopoly NextEra Energy recovery South Florida Thu, 21 Sep 2017 17:20:48 +0000 Tyler Durden 603917 at http://www.zerohedge.com What Catalyst Could Trigger A Credit Risk-Off Event? Here's The UBS Answer http://www.zerohedge.com/news/2017-09-21/what-catalyst-could-trigger-credit-risk-event-heres-ubs-answer <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>"What is THE catalyst?"</strong></p> </blockquote> <p>As all traders know, and as UBS repeats this morning in a new report by credit strategist Matthew Mish, one if not the mostly commonly asked questions is "<strong>what events could disrupt global corporate credit markets heading into year-end and early 2018." </strong></p> <p>Also, as traders may or may not also know, until August corporate credit markets had experienced a prolonged period of relative stability since February 2016; <strong>empirically, the last time markets experienced 18 months in which US high yield bond spreads m/m failed to widen materially was back in 1992-93</strong>. </p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/09/05/UBS%20credit%201_0.jpg" width="500" height="318" /></p> <p>So, in an attempt to answer this most frequently asked question, UBS utilize two approaches. </p> <p>First, it categorized historical bouts of widening going back 12 years (based on the US high yield synthetic spreads) to capture vol events in the largest higher beta segment of global corporate credit. Further, developed market spreads (US, European) are highly correlated across most time periods, suggesting this analysis is more broadly applicable.</p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/09/05/UBS%20credit%202_0.jpg" width="500" height="319" /></p> <p>Cumulatively, <strong>UBS observes approximately 42 months or 23% of the sample in which CDX.HY spreads widen more than 20bp </strong>(roughly equivalent to 3-month breakeven levels), with an average spread widening of 58bp. The Swiss bank then reviewed news headlines to approximately identify the root causes of the sell-offs. </p> <p><strong>In short, the key catalysts for prior sell-offs included US monetary policy tightening (#1), financial and sovereign crises (#2, 3), deterioration in US economic data and/or corporate profits (#4), geopolitical shocks (#5), oil price declines/ global growth weakness (#6), and credit-specific (more idiosyncratic) events.</strong></p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/09/05/ubs%20credit%203_0.jpg" width="500" height="275" /></p> <p>Mish's analysis then looks at the "qualitative perspective" of rising risk. Below the strategist discusses his core views across the key historical catalysts for spread widening episodes.</p> <p><strong>US monetary policy tightening: </strong>The Federal Reserve announced balance sheet tapering with implementation in October, but do not expect significant market volatility <strong>as UBS economists project a shorter and smaller unwind than consensus </strong>(with the balance sheet only declining from $4.5trn to $3.3trn in 2.7 years). However, <strong>Fed rate hikes are a bigger concern. </strong>UBS expects the Fed to hike in December and twice in 2018, while bond yields imply a ~60% chance of a December rate hike, and a similar likelihood of a second additional rate hike by December 2018. This is too low, given improving inflation dynamics (albeit from low levels) and easier financial conditions. This could pressure lower-quality US HY moderately (akin to the March sell-off) while reducing the attractiveness of US investment-grade credit for non-US investors (on a FX-hedged basis). Further, UBS also believes <strong>the nomination of a new Fed chair before year-end could create near-term volatility in markets. </strong>Mish notes that his client conversations suggest most are expecting little change in the status quo; that said, the nomination process has triggered material short-term vol previously (e.g., Bernanke's candidacy in 2005 triggered a 20-30bp rise in 10yr Treasury yields).</p> <p><strong>EU monetary policy tightening: </strong>UBS also expects the <strong>ECB to announce tapering on October 26th to being January 2018</strong>. While the pace of tapering may be less than initially expected, given Euro strength, the direction of travel is clear. With deflation risks having dissipated, <strong>the ECB will have to reduce its asset purchases as PSPP issuer limits become binding. </strong>That said, like with the Fed, ECB tapering is now well-flagged. Hence, while clearly not a positive for European credit markets, it no longer creates the cliff which was feared previously. The ECB is expected to remain accommodative, be present in credit markets well into 2018 and rate hikes are expected in 2019 at the earliest. </p> <p><strong>Credit-specific risks: </strong>As the US credit cycle matures micro or industry-specific credit risks are increasingly relevant to monitor (e.g., telecoms in '99, housing in '06). Here are some specific observations from the UBS credit team: </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>US high grade and high yield markets currently exhibit material dispersion among industries, and similar divergences, while imperfect, can foreshadow pressure points and potential broader market weakness (Figures 4, 5). In HY the laggards are all service sectors – retail (702bp, 2.6% market weight), broadcasting (637bp, 3.2%) and oil and gas (555bp, 6.7%) vs. the broader market (388bp, 100%), reflecting pressures due to significant debt/ leverage growth and/or secular fundamental headwinds. In IG the outliers include telecoms (160bp, 5.1%), gas pipelines (172bp, 3.7%), and cable media (147bp, 3.5%) vs. the overall index (109bp, 100%), representing a mix of significant (long-dated) debt issuance and releveraging related risks. </p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/09/05/UBS%20credit%204_1.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/09/05/UBS%20credit%204_1_0.jpg" width="500" height="360" /></a> </p> <p>&nbsp;</p> <p>In Europe, comparatively, IG spread dispersion is more compressed in part given the indiscriminate ECB bond buying across non-financial corporates (Figures 6, 7). While this could distort more idiosyncratic credit stresses, net leverage across bond market issuers is not overly concerning, especially given European issuers have had ample opportunity to re-gear balance sheets but thus far have not moved aggressively. We don't rule out increased shareholder activism and M&amp;A for IG firms, but we believe Europe is earlier in the credit cycle and more sector-specific events are less likely to be a primary catalyst for macro spread performance.</p> </blockquote> <p><strong>Oil price projections: </strong>UBS' energy analysts expect oil prices to trade sideways (WTI at $47, $51, and $49 in Q3, Q4 and Q1'18) as the rebound in US production and uncertainty around the OPEC agreement&nbsp; has counterbalanced stronger global demand. The key downside risks include weaker global growth and a breakdown in the current OPEC/non-OPEC production agreement. <strong>Both scenarios, while not the bank's base case, could push WTI back into the high $30s, triggering a material spread widening event</strong>.</p> <p><strong>China economic outlook: </strong>The material slowdown in <strong>China's credit impulse is contributing to a slowdown in the property sector and import demand. </strong>However, alternative definitions of the Chinese credit impulse look more benign and one has actually bottomed. Recent data suggests recent property activity rebounded across the board, while retail sales, IP and FAI all missed expectations; this is consistent with a stable albeit slower economic backdrop, with real GDP expected to soften slightly to 6.7-6.8% this quarter vs. 6.9% in Q2. Shadow loan books remain a sleeper issue that is highly concentrated in regional banks and smaller joint-stock banks; while these loans pose potential contagion risk between banks, UBS does not conclude a systemic event is imminent.</p> <p><strong>US economic/earnings outlook: </strong>Fundamentally, at least on paper, global economic data has improved in recent weeks while US consumer and business sentiment remain elevated, even as inflation remains largely missing. ISM surveys continue to make new highs while corporate profits, even in the (revised) Q2 GDP report, showed a stronger-than-expected rise. Dollar weakness will also create a tailwind to US earnings by Q4’17 and Q1’18, boosting multinational profits. <strong>That said, earnings growth is improving but has not been broad based (ex- resource firms), the USD tailwind will accrue less to domestically focused firms (84 and 78%, respectively, of US HY and IG revenues) and firms on balance are not de-levering materially from near peak levels (Figure 8). </strong></p> <p><strong>EU economic outlook: </strong>European economic data had a very strong performance in 1H17, and is expected to continue into 2H17, albeit at a slower pace. Eurozone GDP is to remain well above its trend in both 2017 and 2018 (Eurozone GDP is estimated to be 2.0% and 1.6% for 2017 and 2018 respectively), but slow from its highs of 2Q17 (0.6% q/q and 2.3% y/y). <strong>PMIs and corporate earnings momentum also peaked in May and are now stabilising and holding steady heading into 2H17 </strong>with 2017 on target to be the first solid profit growth in seven years (13% y/y consensus) but further Euro strength suggests potential downside risk to future earnings in non-domestic companies. Finally, <strong>European companies (excluding lower quality HY firms) are not re-levering balance sheets in similar fashion as seen in the US.</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/09/05/UBS%20credit%205.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/09/05/UBS%20credit%205_0.jpg" width="500" height="317" /></a></p> <p>Furthermore, <a href="http://www.zerohedge.com/news/2017-09-15/goldman-becoming-increasingly-bearish-junk-bonds">like Goldman last week</a>, UBS which has a decidedly cautious bias toward credit has shifted its allocations within the space, but unlike Goldman, UBS is rotating away from IG and into HY: "<em>we shift our preference for US high grade over high yield back to neutral on a total return basis as US yields normalize incrementally higher from current levels (YE targets: 10yr 2.4%). The narrowing in US high yield market vs. model spreads coupled with outperformance in US Treasury yields leaves us incrementally more positive on US high yield.</em>"</p> <p><em>In short: </em>anyone hoping for a "gotcha" and a specific date with risk-off destiny will be disappointed because while UBS points out risks in general are rising - especially on the monetary policy front - it does not see any one explicit catalyst as launching an imminent risk-off event in credit markets. While the recent low-vol regime is certainly an outlier, and is now the most extended in a quarter century, absent a notable change in the status quo the Swiss bank is confident the current path will continue.&nbsp; </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="782" height="498" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/UBS%20credit%201.jpg?1506012828" /> </div> </div> </div> http://www.zerohedge.com/news/2017-09-21/what-catalyst-could-trigger-credit-risk-event-heres-ubs-answer#comments Bond Bond Business China Corporate bond Economic bubbles Economy European Central Bank European Union Eurozone Federal Reserve Finance Financial crises Financial crisis headlines High Yield Investment Monetary Policy Money Nomination OPEC Organization of Petroleum-Exporting Countries Regional Banks Subprime mortgage crisis Systemic risk U.S. Treasury UBS US Federal Reserve Volatility Thu, 21 Sep 2017 17:03:23 +0000 Tyler Durden 603929 at http://www.zerohedge.com World's Richest Woman Dies Age 94 http://www.zerohedge.com/news/2017-09-21/worlds-richest-woman-dies-age-94 <p>Alice Walton, of Wal-Mart family infamy, is now the richest woman in the world, as <a href="https://www.ft.com/content/ee064507-824e-381c-a798-8e6db46752a3?emailId=59c3e8bb7d9e7600045afeef&amp;segmentId=3d08be62-315f-7330-5bbd-af33dc531acb">The FT reports</a> <strong>Liliane Bettencourt, the heiress of cosmetics giant L&rsquo;Oreal and world&rsquo;s richest woman, has died at the age of 94</strong>.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_rich1.jpg"><img height="364" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_rich1.jpg" width="600" /></a></p> <p><a href="https://www.ft.com/content/ee064507-824e-381c-a798-8e6db46752a3?emailId=59c3e8bb7d9e7600045afeef&amp;segmentId=3d08be62-315f-7330-5bbd-af33dc531acb"><em>The FT details </em></a>that<strong> Bettencourt was the daughter of chemist Eugène Schueller, who founded the company in 1909.</strong> According to Forbes magazine&rsquo;s ranking of global billionaires, she topped the list of the world&rsquo;s richest women for the second year in a row in 2017 with an estimated net worth of $39.5bn. She stepped down from L&rsquo;Oreal&rsquo;s board in 2012 following a 17-year tenure, and her shareholding has been under the guardianship of family members since 2011, when a court concluded that she was unfit to look after it herself.</p> <p><strong>Bettencourt was the richest woman in the world but only the 15th richest person in the world</strong>.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_rich3.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_rich3.jpg" style="width: 600px; height: 529px;" /></a></p> <p>And with Bettencourt&#39;s passing, Wal-Mart&#39;s Alice Walton (19th overall in the world) becomes the richest woman in the world...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_rich4.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/09/18/20170921_rich4_0.jpg" style="width: 600px; height: 480px;" /></a></p> <p>L&rsquo;Oreal chairman and chief executive Jean-Paul Agon said in a statement that<em><strong> Bettencourt &ldquo;personally contributed greatly&rdquo; to the company&rsquo;s success and &ldquo;was a great lady of beauty who has left us and whom we will never forget.&rdquo;</strong></em></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;We all had a great admiration for Liliane Bettencourt, who always looked after L&rsquo;Oreal, the company and its employees, and was very attached to its success and development.&rdquo;</p> </blockquote> <p><em>&nbsp;</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="488" height="296" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20170921_rich1.jpg?1506012284" /> </div> </div> </div> http://www.zerohedge.com/news/2017-09-21/worlds-richest-woman-dies-age-94#comments Alice Walton Bettencourt Business Economy Eugène Schueller French people Jean-Paul Agon L'Oréal Liliane Liliane Bettencourt Pornograffitti Thu, 21 Sep 2017 16:45:13 +0000 Tyler Durden 603927 at http://www.zerohedge.com