http://www.zerohedge.com/fullrss2.xml en Reuters Asks "Who Is More Of A Threat: Obama Or Putin", Surprised By The Answer http://www.zerohedge.com/news/2015-03-30/reuters-asks-who-more-threat-obama-or-putin-surprised-answer <p><strong>People in the United States feel under threat, both from beyond our borders and within them</strong> and as<a href="http://blogs.reuters.com/great-debate/2015/03/30/americans-see-putin-as-only-slightly-more-imminent-threat-than-obama/"> Reuters reports,</a> when asked about both U.S. President Barack Obama and Russian President Vladimir Putin, it was a pretty darn close call. <a href="http://www.theguardian.com/us-news/2015/mar/30/republicans-see-obama-as-bigger-threat-than-putin-and-assad-says-poll">A new Reuters/Ipsos poll finds</a> a third of Republicans believe<strong> President Barack Obama poses an imminent threat to the United States, outranking concerns about Russian President Vladimir Putin and Syrian President Bashar al-Assad</strong>.</p> <p><strong>The blame, according to one sociologist, <em>&quot;the TV media here, and American politics, very much trade on fears.&quot;</em> </strong></p> <p>On the bright side for the Administration, ISIS and Al Qaeda still outrank him as more imminent threats... so that&#39;s good (considering he is a Nobel Peace Prize winner).</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/03-overflow/20150330_threat.jpg"><img height="671" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/03-overflow/20150330_threat_0.jpg" width="600" /></a></p> <p>&nbsp;</p> <p><a href="http://blogs.reuters.com/great-debate/2015/03/30/americans-see-putin-as-only-slightly-more-imminent-threat-than-obama/">A recent Reuters/Ipsos poll</a> asked more than 3,000 Americans what they see as some of the biggest threats to themselves and the country. <strong>Overall it was close - 20% saw Putin as an imminent threat compared to 18% who said the same about Obama.</strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>I think it&rsquo;s safe to say that<strong> a national security expert might not agree with the public&rsquo;s choices.</strong></p> <p>&nbsp;</p> <p><strong>More people fear Boko Haram</strong>, a scary but ragged Islamic radical group in Nigeria that might have trouble paying for plane tickets to the United States, <strong>than Russia, which recently invaded a major European country.</strong> And a<strong> whopping 34 percent consider Kim Jong-un, the leader of impoverished North Korea, </strong>an imminent threat. Kim may have a couple of nukes, but otherwise his nation is a basket case, so poor that it relies on international aid to feed itself. Though considering how fast Sony Pictures pulled &ldquo;The Interview&rdquo; from theaters, I guess the public&rsquo;s not alone in being afraid of the young man with the unique hairstyle.</p> <p>&nbsp;</p> <p>Perhaps the most disturbing part, however, is how Americans view each other, simply because of the political party they favor.<strong> Thirteen percent of us see the Republican and Democratic parties as an imminent threat. That&rsquo;s the same number who think the Chinese might be.</strong></p> </blockquote> <p><a href="http://www.theguardian.com/us-news/2015/mar/30/republicans-see-obama-as-bigger-threat-than-putin-and-assad-says-poll">The Guardian</a> also notes,<strong><u> a third of Republicans believe President Barack Obama poses an imminent threat to the United States, outranking concerns about Russian President Vladimir Putin and Syrian President Bashar al-Assad.</u></strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>People who were polled were most concerned about threats related to potential terror attacks.</p> <p>&nbsp;</p> <p><strong>Islamic State militants were rated an imminent threat by 58% of respondents, </strong>and al Qaeda by 43%. North Korean Leader Kim Jong Un was viewed as a threat by 34%, and Iran&rsquo;s Ayatollah Ali Khamenei by 27%.</p> </blockquote> <p>*&nbsp; *&nbsp; *<br />Meanwhile, the world is certainly worried about the United States.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><u><strong>In a Gallup survey of people in 65 countries, about one quarter named the United States as the greatest threat to world peace.</strong></u></p> <p>&nbsp;</p> <p><u><strong>Maybe that should not be so surprising, as only about half of Americans know which country was the only one to ever drop a nuclear bomb.</strong></u></p> </blockquote> <p>*&nbsp; *&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="373" height="296" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150330_threat1.jpg?1427730158" /> </div> </div> </div> http://www.zerohedge.com/news/2015-03-30/reuters-asks-who-more-threat-obama-or-putin-surprised-answer#comments Barack Obama Gallup Iran KIM national security North Korea Reuters Vladimir Putin Mon, 30 Mar 2015 16:21:23 +0000 Tyler Durden 504018 at http://www.zerohedge.com How Many Slots Are Open In The Upper Middle Class? Not As Many As You Might Think http://www.zerohedge.com/news/2015-03-30/how-many-slots-are-open-upper-middle-class-not-many-you-might-think <p><a href="http://charleshughsmith.blogspot.com/2015/03/how-many-slots-are-open-in-upper-middle.html"><em>Submitted by Charles Hugh-Smith via OfTwoMinds blog</em></a>,</p> <p><span><i>Not only are there not that many slots in the upper middle class, the number of open slots is considerably lower.</i></span></p> <div>&nbsp;</div> <div><span><b>If America is the Land of Opportunity, why are so many parents worried that their princeling/princess might not get into the &quot;right&quot; pre-school, i.e. the first rung on the ladder to the Ivy League-issued &quot;ticket to the upper middle class&quot;?</b>&nbsp;The obsessive focus on getting your kids into the &quot;right&quot; pre-school, kindergarten and prep school to grease the path to the Ivy League suggests there aren&#39;t as many slots open as we&#39;re led to believe.</span></div> <div>&nbsp;</div> <div> <div><span><b>Let&#39;s set aside the endless debate over what qualifies a household to be &quot;middle class.&quot;</b>&nbsp;Most people define themselves as middle class, with little regard for their income. Let&#39;s cut to the chase and ask: how many young people aspire to joining this ill-defined middle class? Does this mean a rising standard of living and security? Not any more.</span></div> <div>&nbsp;</div> <div><b><span>If you want those things, you must aspire to join the upper middle class.</span></b></div> <div>&nbsp;</div> <div><span><b>So the more fruitful question is: what qualifies as upper-middle class? </b>Here&#39;s a handy line in the sand: Stanford University covers the tuition for all incoming undergraduates whose household income is less than $125,000.</span></div> <div>&nbsp;</div> <div><span>According to the U.S. Census Bureau data (here displayed on Wikipedia), $125,000 is right about the 85% line--only the top 15% households make $125,000 and up annually:<a href="http://en.wikipedia.org/wiki/Household_income_in_the_United_States" target="resource">Household income in the United States</a>.</span></div> <div>&nbsp;</div> <div><span>For context, median household income in the U.S. is around $52,000 annually.</span></div> <div>&nbsp;</div> <div><span>A few years ago, I calculated&nbsp;<a href="http://www.oftwominds.com/blogdec13/middle-class12-13.html" target="resource">What Does It Take To Be Middle Class?</a>&nbsp;(December 5, 2013) and came up with an absolute minimum of $111,000 for two self-employed wage earners, as this includes the cost of healthcare insurance and the employer&#39;s share of Social Security and Medicare taxes.&nbsp;<b>This was bare-bones.</b></span></div> <div>&nbsp;</div> <div><span>Since employees of the government or Corporate America receive healthcare and retirement benefits (matching contributions to employee 401K plans, etc.), these can be subtracted from the $111,000. But this didn&#39;t allow for vacations or any of the finer things in life, so if we are talking about a truly comfortable household income, around $105,000 for state/corporate employed people sounds right and $125,000 for self-employed people is more or less the minimum required.</span></div> <div>&nbsp;</div> <div><span>(Obviously, money goes further in the Midwest and not very far on the Left and Right coasts.)</span></div> <div>&nbsp;</div> <div><span><b>Stanford&#39;s cutoff of $125,000 isn&#39;t as outlandish as it might seem at first glance.</b>See where your household income fits in the spectrum with this online tool:&nbsp;<a href="http://politicalcalculations.blogspot.com/2013/09/what-is-your-us-income-percentile.html" target="resource">What Is Your U.S. Income Percentile Ranking?</a>&nbsp;(This confirms that an income of $125,000 puts the household in the top 15%.)</span></div> <div><span>Meanwhile, wages for every category of worker, from the highly educated to the high school graduate, have been declining:</span></div> <div>&nbsp;</div> <div><span><img align="middle" src="http://www.oftwominds.com/photos2015/declining-wages.png" style="border-width: 0px; border-style: solid; height: 571px; width: 600px;" /></span></div> <div>&nbsp;</div> <div><span><b>How many slots are there in this upper middle class?</b>&nbsp;A household income of $190,000 is in the top 5% nationally. According to the Social Security Administration data for 2013 (the latest data available),&nbsp;<a href="http://www.ssa.gov/cgi-bin/netcomp.cgi?year=2013" target="resource">Wage Statistics for 2013</a>, individuals who earn $125,000 or more are in the top 5% of all earners. Two such workers would earn $250,00 together. The 2.8 million households with incomes of $250,000 or more are in the top 2.5%. If we define the top few percent as&nbsp;<i>upper middle class</i>, then who qualifies as wealthy? Only the top 1%?</span></div> <div>&nbsp;</div> <div><span><b>I think it is reasonable to define the 10% of households earning between $125,000 (top 15%) and $190,000 (top 5%) as upper middle class.</b>&nbsp;This is around 12 million households, out of a total of 121 million households.</span></div> <div>&nbsp;</div> <div><span><b>Most of those jobs are already held by people with years of experience and abundant social and human capital.</b>&nbsp;Yes, there are plenty of wastrels living off trust funds and free-riders doing as little as possible in their guaranteed government jobs, but by and large the people earning these incomes are working hard and will do whatever it takes to maintain their current incomes for the sake of their kids and their own security.</span></div> <div>&nbsp;</div> <div><span><b>This explains the frantic drive to be one of the 2,100 students accepted by Stanford out of 42,000 applicants.</b>&nbsp;These low admission numbers reflect the admission realities in the upper crust of Ivy league universities, both public and private.</span></div> <div>&nbsp;</div> <div><span>The assumption is the few open slots in the upper middle class (or dare we hope, the 1%) will disproportionately go to those who have the&nbsp;<i>credentials that signal they have the social breeding and brains to fit the corporate culture</i>&nbsp;and they&#39;re willing to work hard and make their bosses lots of money.</span></div> <div>&nbsp;</div> <div><span><b>Meanwhile, the top 5% of households in San Francisco earn a whopping&nbsp;<a href="http://www.brookings.edu/research/reports2/2015/03/city-inequality-berube-holmes" target="resource">$423,000 annually.</a></b>&nbsp;(brookings.edu)</span></div> <div>&nbsp;</div> <div><span>This is enough to put those households in the top 1% of California residents, roughly $433,000 annually:&nbsp;<a href="http://www.cheatsheet.com/personal-finance/10-states-where-you-need-the-most-money-to-be-in-the-1-percent.html" target="resource">10 States Where You Need The Most Money to Be In the 1 Percent</a></span></div> <div>&nbsp;</div> <div><span><b>If you&#39;re curious what jobs those living in top 1% households have, check out this chart:</b>&nbsp;<a href="http://www.nytimes.com/packages/html/newsgraphics/2012/0115-one-percent-occupations/" target="resource">Explore the occupations and industries of the nation&#39;s wealthiest households</a>&nbsp;(NY Times).</span></div> <div>&nbsp;</div> <div><span><b>4,575 writers (out of 92,000 nationally) are in top 1% households. Where do I sign up?</b>&nbsp;Another 10,134 writers in &quot;other industries&quot; (out of 465,000 people claiming this employment category) are also in top 1% households. 15,000 retail clerks also live in top 1% households.</span></div> <div>&nbsp;</div> <div><span>Perhaps the trick is not to make a lot of money writing or selling accessories, but to marry a top-level attorney, doctor, business owner, dot-com millionaire, lobbyist or trust funder?</span></div> <div>&nbsp;</div> <div><em><span>(You can look up what qualifies as a 1% household income in&nbsp;<a href="http://www.cheatsheet.com/personal-finance/10-states-where-you-need-the-most-money-to-be-in-the-1-percent.html" target="resource">this link</a>, which has a chart of all 50 states and Washington D.C.)</span></em></div> <div>&nbsp;</div> <div><span><b>Not only are there not that many slots in the upper middle class, the number of open slots is considerably lower.</b>&nbsp;No wonder so many parents are desperate for an insider&#39;s pathway for their offspring. </span></div> </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="581" height="453" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150329_chs.jpg?1427717346" /> </div> </div> </div> http://www.zerohedge.com/news/2015-03-30/how-many-slots-are-open-upper-middle-class-not-many-you-might-think#comments Census Bureau Corporate America ETC Medicare Washington D.C. Mon, 30 Mar 2015 15:55:34 +0000 Tyler Durden 504017 at http://www.zerohedge.com Broke? You May Now Be Entitled To a Free Home http://www.zerohedge.com/news/2015-03-30/broke-you-may-now-be-entitled-free-home <p>It’s been seven years since the epic collapse of the US housing market, and there’s never been a better time to buy your first home. <strong>In Denmark for instance, the bank <a href="http://www.zerohedge.com/news/2015-01-30/denmark-you-are-now-paid-take-out-mortgage">will tax</a> depositors in order to pay you to take out a home loan. But before you move to a European country operating in NIRP-dom, consider Florida and New Jersey first because as Susan Rudolfi recently discovered, you can actually get a house for free by simply not making your mortgage payments. </strong>Here’s more via <em><a href="http://www.nytimes.com/2015/03/30/business/foreclosure-to-home-free-as-5-year-clock-expires.html?partner=socialflow&amp;smid=tw-nytimesbusiness&amp;_r=0">NY Times</a></em>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>She is like a ghost of the housing market’s painful past, one of thousands of Americans who have skipped years of mortgage payments and are still living in their homes.</em></p> <p>&nbsp;</p> <p><strong><em>Now a legal quirk could bring a surreal ending to her foreclosure case and many others around the country: They may get to keep their homes without ever having to pay another dime.</em></strong></p> <p>&nbsp;</p> <p><em>The reason, lawyers for homeowners argue, is that the cases have dragged on too long.</em></p> <p>&nbsp;</p> <p><em>There are tens of thousands of homeowners who have missed more than five years of mortgage payments, many of them clustered in states like Florida, New Jersey and New York, where lenders must get judges to sign off on foreclosures.</em></p> <p>&nbsp;</p> <p><em><strong>However, in a growing number of foreclosure cases filed when home prices collapsed during the financial crisis, lenders may never be able to seize the homes because the state statutes of limitations have been exceeded,</strong> according to interviews with housing lawyers and a review of state and federal court decisions.</em></p> </blockquote> <p>It should come as no surprise that the free house legal loophole comes courtesy of the always dangerous and extraordinarily unpredictable combination of government ineptitude and TBTF inefficiency, and thanks to the fact that the Fed-sponsored, investment bank securitization-fee-fueled real estate bubble was allowed to inflate to the point where it swallowed the entire US economy, tens of thousands of borrowers may ultimately become owners by virtue of remaining resolute when it comes to not making payments:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>It is difficult to know for sure how many foreclosure cases are still grinding through the court systems since the financial crisis. It is even harder to say how many of those borrowers are still living in their homes.</em></p> <p>&nbsp;</p> <p><strong><em>Bank of America, for example, has initiated the foreclosure process on roughly 20,000 mortgages that have not been paid in at least five years. The bank estimates that 90 percent of those homes are still occupied.</em></strong></p> <p>&nbsp;</p> <p><em>The courts are not the only source of delay. Over the years, the federal government has made 69 changes to its mortgage modification programs, forcing lenders repeatedly to scrap previous offers to homeowners and extend new terms.</em></p> <p>&nbsp;</p> <p><em>Of course, the banks have also dragged out this reckoning through shoddy paperwork, botched modifications and general dysfunction as they struggled to cope with a flood of soured mortgages. Many cases were passed among lawyers like hot potatoes and lay dormant on court dockets.</em></p> </blockquote> <p>This arrangement works out particularly well if the property you now own (because it’s cheaper to pay a lawyer than it is to pay the mortgage) can be used to generate rental income:&nbsp;</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>[Rudolfi’s] working-class neighborhood is a short drive from Coconut Grove, a wealthy waterfront enclave of Miami. Her bedroom opens up onto a pool, shaded by palm trees. <strong>Outside her house, she parks a small motorboat she named Mermaid. The property includes an adjoining house that she rents out…</strong></em></p> <p>&nbsp;</p> <p><em>In November 2009, her mortgage servicer at the time, Aurora Loan Services, a unit of the now-defunct Lehman Brothers, filed to foreclose on her house.</em></p> <p>&nbsp;</p> <p><em>Instead of making her roughly $1,300 monthly mortgage payment, she pays her lawyer $500 a month to represent her in court.</em></p> </blockquote> <p>&nbsp;* &nbsp;* &nbsp;*</p> <p>So a bit of poetic justice we suppose for an investment banking community and a complicit Federal Reserve who facilitated the creation of a modern day tulip mania which lined Wall Street’s pockets even as it put Main Street (which was itself all too eager to finance a McMansion and a Hummer) on a path to ruin. But in the end, the Susan Rudolfis of the world ask: <em>"What are you gonna do?"</em>...</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>“I screwed up and they screwed up, so now what?” she said.</em></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="496" height="253" alt="" src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/FreeHomes.png?1427729296" /> </div> </div> </div> http://www.zerohedge.com/news/2015-03-30/broke-you-may-now-be-entitled-free-home#comments Bank of America Bank of America Federal Reserve Florida Foreclosures Housing Market Lehman Lehman Brothers Main Street Real estate Mon, 30 Mar 2015 15:30:05 +0000 Tyler Durden 504016 at http://www.zerohedge.com The Titanic Sinks At Dawn http://www.zerohedge.com/news/2015-03-30/titanic-sinks-dawn <p>&nbsp;</p> <p>&nbsp;</p> <p><strong><em><span style="text-decoration: underline;"><a href="http://www.sprottmoney.com/sprott-news?mw_aref=d0d00a311961371d69bcc0f5d530833e">........Submitted and written by Gary Christenson - The Deviant Investor</a></span></em></strong></p> <p>(Independantly Written)</p> <p>&nbsp;</p> <p>What Titanic? The RMS Titanic, or any of the following:</p> <ul> <li><strong>A titanic quantity of derivatives</strong> – say 1,000 Trillion dollars. A derivative crash was at the center of the 2008 market meltdown. It could happen again since there is now more debt, leverage, and risk than in 2008.</li> </ul> <ul> <li><strong>A titanic accumulation of debt</strong> – global debt is approximately $200 Trillion. Global population is about 7,000,000,000 so there is about $28,000 in debt per living human being. If global debt were backed by all the gold mined in the history of the world, an ounce of gold would back $36,000 in debt. Gold currently sells for less than $1,200. Gold is undervalued and there is an excess of debt.</li> </ul> <ul> <li><strong>A titanic increase in debt</strong> in the past decade. Official US debt increased by over $10,000,000,000,000 in the past ten years. What did the US gain from the increase of $10 Trillion in debt? Are debt accumulation and expense policies materially different in Europe or Japan? Was the debt used to create productive assets or was it just flushed down the toilet into non-productive expenditures? <strong>THE BENEFIT IS GONE, BUT THE DEBT REMAINS</strong>. This debt accumulation policy is neither good business nor sustainable.</li> </ul> <ul> <li><strong>A titanic bond bubble. </strong>Since interest rates are currently at multi-generational lows, or 700 year lows in Europe, or perhaps all-time lows, that strongly suggests a bubble in bonds. Would you buy a bond from an insolvent government knowing the government will pay you next to nothing in interest over the next ten years? Further, the government is guaranteeing a devalued currency so any dollars, euros, or yen you eventually receive will be worth much less in purchasing power than today.</li> </ul> <ul> <li><strong>A titanic currency bubble </strong>in the US dollar, which just hit a 12 year high after a parabolic rise since May last year. Experience with parabolic rises suggests extreme caution.</li> </ul> <ul> <li><strong>A titanic collapse in the crude oil market. </strong>Supply is strong, demand is weak, and prices have fallen to about $45 from about $105 last June. The last time crude oil prices fell was from July to October 2008, a most difficult time.</li> </ul> <p>The titanic creation of paper assets such as bonds, currencies, and stocks has created substantial risk. That risk has spilled over into the crude oil, gold and silver markets since they are strongly influenced by the paper derivative markets – paper contracts for crude oil, paper gold, and paper silver. Leverage and derivatives magnify risk. The instability will eventually create a second version of the 2008 recession/depression.</p> <p>&nbsp;</p> <p>&nbsp;</p> <h3><strong>MORE SPECIFICS:</strong></h3> <p>&nbsp;</p> <p><strong>Business Inventories to Sales Ratio</strong> looks like 2008: This ratio is discussed <a href="http://wolfstreet.com/2015/03/11/last-time-this-ratio-spiked-like-this-stocks-crashed/">here</a>. When people and businesses are buying less inventories increase and that affects businesses down the chain including manufacturing, retail, and transportation.</p> <p><strong>More Crazy Stuff Coming:</strong> Read <a href="http://davidstockmanscontracorner.com/duck-this-dip-theres-more-crazy-stuff-coming/">David Stockman’s article</a>.</p> <p><strong>Margin Debt</strong> on US stock exchange: Margin debt peaks along with S&amp;P 500 index. See discussion <a href="http://www.advisorperspectives.com/dshort/updates/NYSE-Margin-Debt-and-the-SPX.php">here</a>.</p> <p><strong>Ten Year Yields</strong>: <a href="http://www.mauldineconomics.com/the-10th-man/the-crazy-mans-guide-to-the-bond-market">Yields are low in the United States and Europe</a>. <a href="http://www.sprottmoney.com/news/bizzaro-world-becomes-normality-germany-issues-five-year-negative-bond-nathan-mcdonald-sprott-money-news">German five year yields</a> went negative this week and ten year yields are less than 0.3%. Such negative yields would have been unthinkable a few years ago. I think a titanic disappointment is coming. Martin Armstrong discussed negative interest rates in his article, “<a href="http://armstrongeconomics.com/2015/03/10/negative-interest-rates-brain-dead-thinking-that-will-implode-the-world/">Negative Interest Rates – Brain-dead Thinking that Will Implode the World</a>.”</p> <p><strong>S&amp;P Earnings per Share versus price</strong>: Graham Summers discusses in his article, “<a href="http://news.goldseek.com/GoldSeek/1426171065.php">This Divergence is Worse Than That of The 2007 Top</a>.”</p> <p><strong>S&amp;P Prices up 200% in Six Years</strong>: The S&amp;P 500 Index has been levitated by central banks “printing” money. In March of 2009 the S&amp;P was below 680 and today it is above 2,000. See <a href="http://www.infowars.com/guess-what-happened-the-last-two-times-the-sp-500-was-up-more-than-200-in-six-years/">this article</a> for discussion and warning.</p> <p>Examine this monthly chart of the S&amp;P 500 for a 20 year perspective. The chart shows three massive tops in 2000, 2007, and 2015. I have circled the “over-bought” conditions shown in three technical indicators at the bottom. Note that all three have “rolled over” as they did in 1999-2000, and 2007. Perhaps the final peak has occurred or perhaps it is still a few months away, but regardless it is a time for caution.</p> <p><a href="http://www.sprottmoney.com/sprott-news?mw_aref=d0d00a311961371d69bcc0f5d530833e"><img src="http://deviantinvestor.com/wp-content/uploads/2015/03/U-SP-Monthly.jpg" alt="SP Monthly" width="1094" height="871" class="aligncenter size-full wp-image-6799" /></a></p> <p><strong> </strong></p> <p>&nbsp;</p> <p><strong>Bill Bonner has written about crash conditions</strong> and specifics surrounding the 2008 crash, <a href="http://bonnerandpartners.com/go-to-an-atm-and-the-last-thing-youll-get-is-cash/">here</a> and <a href="http://bonnerandpartners.com/what-can-you-trust-when-trust-disappears/">here</a>. Regarding September 15, 2008 he quoted</p> <p style="padding-left: 30px;">Representative Paul Kanjorski of the 11<sup>th</sup> congressional district of Pennsylvania:</p> <p style="padding-left: 30px;"><em>“<em>The Treasury opened up its window to help and pumped $105 billion into the system. And it quickly realized it could not stem the tide.</em></em><em> </em></p> <p style="padding-left: 30px;"><em>We were having an electronic run on the banks. They decided to close down the operation… to close down the money accounts. […]</em><em> </em></p> <p style="padding-left: 30px;"><em>If they had not done so, in their estimation, by 2 p.m. that day $5.5 trillion would have been withdrawn. That would have collapsed the US economy. Within 24 hours, the world economy would have collapsed.</em><em> </em></p> <p style="padding-left: 30px;"><em>We talked at that time about what would have happened. It would have been the end of our economic and political system as we know it.</em><em> </em></p> <p style="padding-left: 30px;"><em>People who say we would have gone back to the 16th century were being optimistic.”</em></p> <p>&nbsp;</p> <p><strong>CONCLUSIONS:</strong></p> <p>Our financial system has titanic problems, leverage and debt worse than 2008, and is vulnerable to a crash. Large icebergs lie ahead and I suspect that our financial ship has already been struck by several – crude oil price collapse, dollar parabolic rally, Greek exit from the Euro, and escalating war in the Ukraine. Ten minutes after the RMS Titanic struck the iceberg and began filling with water, the “party was still on” for almost all of the passengers on the Titanic. Less than three hours later the “unsinkable” Titanic was gone.</p> <p>Over 100 years later some items have been recovered from the Titanic. Three items that survived the icy depths were diamonds, gold, and silver.</p> <h3>Repeat: Lives were lost, paper stock certificates were gone, bonds did not survive, dollar bills were destroyed, but gold and silver endured the sinking of the Titanic over a century ago.</h3> <p>&nbsp;</p> <p>Are you prepared for the possibility of a titanic failure in our financial system?</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;</p> <p style="line-height: 20.7999992370605px;"><strong><em><span style="text-decoration: underline;"><a href="http://www.sprottmoney.com/sprott-news?mw_aref=d0d00a311961371d69bcc0f5d530833e" style="color: #000000;">........Submitted and written by Gary Christenson - The Deviant Investor</a></span></em></strong></p> <div><span style="line-height: 20.7999992370605px;">(Independantly Written)</span></div> http://www.zerohedge.com/news/2015-03-30/titanic-sinks-dawn#comments Bond Central Banks Crude Crude Oil Japan Martin Armstrong Meltdown Paul Kanjorski Purchasing Power Recession Technical Indicators Ukraine Yen Mon, 30 Mar 2015 15:29:09 +0000 Sprott Money 504015 at http://www.zerohedge.com LiBeRTY HaNDS UP... http://www.zerohedge.com/news/2015-03-30/liberty-hands <p style="text-align: center;"><iframe src="https://www.flickr.com/photos/expd/16963888062/player/" width="1024" height="683" frameborder="0"></iframe></p> http://www.zerohedge.com/news/2015-03-30/liberty-hands#comments Mon, 30 Mar 2015 15:11:59 +0000 williambanzai7 504014 at http://www.zerohedge.com They Are "Undermining People's Trust In Their Money" http://www.zerohedge.com/news/2015-03-30/they-are-undermining-peoples-trust-their-money <p><a href="http://kunstler.com/clusterfuck-nation/the-way-out/"><em>Submitted by James H. Kunstler via Kunstler.com</em></a>,</p> <p><strong>It’s not what most people think</strong>: a return to some hypothetical “normality,” with the ghost of Ronnie Reagan beaming down like a sun-god under his lopsided pompadour, and all the happy self-driving GM cars toodling back and forth from WalMart-to-home loaded to the scuppers with new electric pop-tart warmers and 3-D underwear printers. (Or drone deliveries of same from Amazon.com.)</p> <p>I mean, surely the thinking folk out there must be asking themselves: <strong>what is the way out of this Federal Reserve three-card-monte, one-percenter-stuffing, so-called “economy,” and what is the destination of this society when that mendacious model for living fails?</strong></p> <p><em>I digress for a moment: there was a chap named Richard Duncan on the pod-waves this weekend (FSN Network) putting out the charming idea that quantitative easing (QE — governments “printing” money to buy their own bonds) had the effect of “cancelling debt” and that it could continue for decades to come. I don’t doubt that there are Federal Reserve officers who believe this. The part they leave out — and Mr. Duncan also left it out until pressed — is that there are consequences. <strong>Consult the operating manual of the universe, and you will find that there really is no free lunch or get-out-of-jail card.</strong></em></p> <p><strong>The truth is, when you rig a money system with price interventions, distortions, and perversions, they will eventually express themselves in ways destructive to the system.</strong> In the present case of world-wide QE and central bank monkey business, these rackets are expressing themselves, finally, in wobbling currencies. In many nations, people are deeply unsure of what their money is worth, and how much it might be worth a month from now. This includes the USA, except for the moment our money is said to be magically appreciating in value compared to everyone else’s. Aren’t we special?</p> <p><span style="text-decoration: underline;"><strong>Get this: nothing is more hazardous than undermining people’s trust in their money.</strong></span></p> <p>All of this financial perfidy conceals the basic fact that the human race has reached the limits of techno-industrialism. <strong>There are too many people and not enough basic resources to grow more of them — oil, fishes, soil, ores, fertilizers — and there is no steady-state “solution” to keep that economy going.</strong> In other words, it must either grow or contract, and it can’t really grow anymore (despite the exertions of government statisticians), so the authorities are trying to provide a monetary illusion of growth, when instead we’re in contraction.</p> <p><strong>Yes, contraction. The way out is to get with the program, shed the dead-weight and go where reality wants to take you.</strong> In the USA that means do everything possible to quit supporting giant failing systems — Big Box shopping, mass motoring, GMO agribiz, TBTF banks — and get behind local Main Street integrated economies, walkable towns, regular railroads, smaller and more numerous farms, local medical clinic health care, artistry in public works, and community caretaking of the unfit. All this surely implies a reduced role for the national government, and maybe the states, too. You could call it a lower standard of living, or just a different way to live.</p> <p><strong>I don’t think we’ll go there via rational political discourse.</strong> The current instabilities around the world are so sinister that they are liable to lead to even more strenuous efforts at the top to pretend that everything’s working, and even war is one way to pretend you’re okay (and the “other guy” isn’t). Of course, war has already broken out, in the MidEast and Ukraine, and it has everything to do with the sequential failure of nations, in one way or another, to overcome the limits of techno-industrialism. <span style="text-decoration: underline;"><strong>America will be dragged kicking and screaming to the realization of what it needs to do. The 2016 election will be the convulsion point.</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="476" height="307" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150330_noexit.jpg?1427726999" /> </div> </div> </div> http://www.zerohedge.com/news/2015-03-30/they-are-undermining-peoples-trust-their-money#comments Federal Reserve Main Street Monkey Business Quantitative Easing Reality Ukraine Mon, 30 Mar 2015 15:06:42 +0000 Tyler Durden 504013 at http://www.zerohedge.com Dallas Fed Collapses At Fastest Pace Since Lehman, Lowest Since June 2011 http://www.zerohedge.com/news/2015-03-30/dallas-fed-collapses-fastest-pace-lehman-lowest-june-2011 <p><strong>Dallas Fed&#39;s Richard Fisher had his credibility (whatever is left) crushed for the 4th month in a row. </strong><a href="http://www.zerohedge.com/news/2015-02-14/texas-separating-fact-fed-fiction">After explaining carefully to no lessor status quo glad hand than Steve Liesman that the Texas economy will see a net positive from low oil prices, Dallas Fed data has utterly collapsed</a> - at its fastest pace since Lehman. Printing a stunning -17.5 (over twice as bad as expected -8.5), this is the 4th miss in a row (and increasingly worse misses). The Dallas Fed was <strong>last lower than this in Jun 2011</strong>. Across the board, the components were an utter disaster... <strong>employees contracted, prices paid and recoeved tumbled, production plunged, and new orders collapsed. </strong>More worryingly, furture capex tumbled once again.</p> <p>&nbsp;</p> <p>Collapsing-er...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/03-overflow/20150330_dallas.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/03-overflow/20150330_dallas_0.jpg" style="width: 600px; height: 318px;" /></a></p> <p>&nbsp;</p> <p>A reminder... low oil pries are net positive to the Texas economy... Liesman and Fisher....</p> <p><iframe allowfullscreen="true" bgcolor="#131313" height="298" src="http://player.theplatform.com/p/gZWlPC/cnbc_global?playertype=synd&amp;byGuid=3000354277&amp;size=530_298" type="application/x-shockwave-flash" width="530"></iframe></p> <p>*&nbsp; *&nbsp; *</p> <p>Who could have seen this coming?</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/03-overflow/20150330_dallas1.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/03-overflow/20150330_dallas1_0.jpg" style="width: 600px; height: 302px;" /></a></p> <p>&nbsp;</p> <p><em>Charts: Bloomberg</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="957" height="482" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150330_dallas1.jpg?1427726673" /> </div> </div> </div> http://www.zerohedge.com/news/2015-03-30/dallas-fed-collapses-fastest-pace-lehman-lowest-june-2011#comments Dallas Fed Fisher Lehman Richard Fisher Steve Liesman Mon, 30 Mar 2015 14:41:10 +0000 Tyler Durden 504012 at http://www.zerohedge.com Lynn Tilton Charged By SEC For CLO Fraud, As Warned Here Nearly Two Years Ago http://www.zerohedge.com/news/2015-03-30/lynn-tilton-busted-sec-clo-fraud-warned-here-nearly-two-years-ago <p>Back in September 2013 we wrote "<a href="http://www.zerohedge.com/news/2013-09-26/coming-soon-theater-near-you-mbias-1-billion-world-war-z">Coming Soon To A Theater Near You: MBIA's $1 Billion World War Z</a>" in which we explained why MBIA will soon have a substantial problem (amounting to just about around $600 million) with several CLOs which we dubbed "Zombie CLOs" or as they were actually known, Zohar, on which it had written insurance, and which would become evident sooner or later once someone took a long, hard look at the collateral manager of the CLOs, <strong>namely Lynn Tilton's Patriarch Partners.</strong></p> <p>First, a little background on the <a href="http://www.zerohedge.com/news/2013-09-26/coming-soon-theater-near-you-mbias-1-billion-world-war-z">Zohar CLO from our September 2013 article</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>MBIA’s most recent issue is not new <em>per se</em>, as it dates back to 2003/2005 - as far as we can tell, however - the water looks like it is just starting to boil over and MBIA does not seem to have reserved for what appears to be a rather meaningful problem.&nbsp; According to preliminary analyses, it does not appear that MBIA has ever really addressed this particular $1 billion of Zombie CLO insurance on their books, which looks to be coming due in short order (unlike their well-followed RMBS issues and long-dated future CMBS losses).</p> <p>&nbsp;</p> <p><strong>These freshly-surfacing problems stem from a particular pair of Zombie CLO’s – Zombie-I and Zombie-II (along with Zombie-III, illiquid/black box middle-market CLO’s).&nbsp; </strong>While information is (intentionally?) difficult to gather, we have heard that MBIA would be lucky to recover much more than $400 million from the underlying insured Zombie assets over the next three years, which would leave them with a nearly $600 million loss on their $1 billion of exposure which would materially and adversely impact the company's liquidity.&nbsp; And as it may take them a while to liquidate assets in a sure-to-be contentious intercreditor fight – <em><strong>their very own World War Z</strong></em> – MBIA may well have to part with the vast majority of the $1 billion in cash, before gathering some of the potential recovery.</p> <p>&nbsp;</p> <p>The CLO’s in question are actually called Zohar CDO 2003-1, Zohar II 2005-1, and Zohar III, but instead of paying royalties to the Kabbalah by continuing to invoke reference to it here, henceforth we will refer to each of the distressed “Zohar” CLO’s as “Zombie” I, II, and III, respectively. They full structures are shown below:</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/09/MBIA%20Zombies.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/09/MBIA%20Zombies_0.jpg" width="500" height="303" /></a></p> </blockquote> <p>This is what we warned:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Zombie CLO’s are not Paying-Down – Underlying “Loans” are not True Loans</strong></p> <p>&nbsp;</p> <p>With absolute power over the whole closed system, as the Zombie collateral manager also controls the equity in the Zombie CLO’s (so much for the purported benefit of the new risk retention rules) and is also the controlling shareholder (in some cases CEO) of nearly all borrowers of Zombie loans and is also the “Agent” on nearly all the Zombie “loans” &gt;&gt;&gt; the “loans” are not really loans.&nbsp; As both borrower and lender, any element of any “loan” can be amended at any time, as needed (maturity, covenants, interest rate, frequency of payment, etc.).&nbsp; Taken to the extreme, we have heard stories of (a) <strong>Patriarch Partners companies being liquidated/having substantial assets sold and leaving in-place Zombie collateral loans to a then shell entity devoid of meaningful assets </strong>and (b) companies with existing Zombie collateral loans filing for bankruptcy, then selling-to and being repurchased-via additional new Zombie loans, with both the old and new Zombie loans continuing to be held on the books of the Zombie funds.&nbsp; How can this be - who would let this type of circular arrangement without any checks-and-balances persist?</p> </blockquote> <p>And:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>39 Small/Middle-Market Private Portfolio Companies Listed on the Patriarch Partners Website May be Difficult to Sell/Liquidate</strong></p> <ul> <li>The <a href="http://www.patriarchpartners.com/">www.patriarchpartners.com </a>website lists 39 companies (some of which are essentially the same company by a few different names), which we believe contain nearly all of the Zombie funds’ collateral loans.</li> <li>Nearly all of these small/middle-market companies seem to be controlled by affiliates of the collateral manager – furthermore, many have limited franchises and continue to operate in distress; these companies&nbsp; may not weather the tumult of protracted uncertainty well (along with no ongoing funding), further limiting potential recoveries.</li> <li><strong>The following (also from the Patriarch Partners website) is not what one would expect to read about the portfolio of loans in a CLO:&nbsp; "Although comprised of individual private equity investments, our portfolio of assets is managed as a global conglomerate, with a continued focus on synergies and ventures between companies that will enhance value.&nbsp; The investment funds managed by Patriarch currently hold equity positions in more than 70 companies, approximately two-thirds of which are control positions, spanning almost a dozen industries."</strong></li> <li>We understand that nearly 100% of the capital for these 39 portfolio companies came from the Zombie funds, aside from a handful of true first-priority, third-party working capital facilities (asset-based loans/factoring lines, which will also tend to limit Zombie recoveries – a key question is therefore, how much of the meaningful (larger) companies’ equity is owned by each of the Zombie funds (vs. other/personal funds controlled by the collateral manager)?</li> </ul> </blockquote> <p>Well, finally someone did take a long, hard look and today, our warning comes full circle following a shocker out of the SEC accusing Lynn Tilton of fraud and of <strong>"hiding the poor performance of loan assets in three collateralized loan obligation (CLO) funds they manage.</strong>"</p> <p><a href="http://www.sec.gov/news/pressrelease/2015-52.html#.VRlazOH3SES">From the SEC</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>SEC Announces Fraud Charges Against Investment Adviser Accused of Concealing Poor Performance of Fund Assets From Investors</strong></p> <p>&nbsp;</p> <p>The Securities and Exchange Commission today announced fraud charges against an investment adviser and her New York-based firms accused of hiding the poor performance of loan assets in three collateralized loan obligation (CLO) funds they manage.</p> <p>&nbsp;</p> <p>The SEC’s Enforcement Division alleges that Lynn Tilton and her Patriarch Partners firms have breached their fiduciary duties and defrauded clients by failing to value assets using the methodology described to investors in offering documents for the CLO funds, which have portfolios comprised of loans to distressed companies.&nbsp; Instead, nearly all valuations of loan assets have been reported to investors as unchanged from the time they were acquired despite many of the companies making partial or no interest payments to the funds for several years.&nbsp; Investors have not only been misled to believe that objective valuation analyses were being performed, but Tilton and her firms allegedly have avoided significantly reduced management fees because the valuation methodology described in fund documents would have given investors greater fund management control and earlier principal repayments if collateral loans weren’t performing to a particular standard.&nbsp; Tilton and her firms also consequently have misled investors about asset valuations in fund financial statements.&nbsp;</p> <p>&nbsp;</p> <p>“<strong>We allege that instead of informing their clients about the declining value of assets in the CLO funds, Tilton and her firms have consistently misled investors and collected almost $200 million in fees and other payments to which they were not entitled</strong>,” said Andrew J. Ceresney, Director of the SEC’s Enforcement Division.&nbsp; “Tilton violated her fiduciary duty to her clients when she exercised subjective discretion over valuation levels, creating a major conflict of interest that was never disclosed to them.”</p> <p>&nbsp;</p> <p>According to the SEC’s order instituting an administrative proceeding, CLO funds raise capital by issuing secured notes and using proceeds to purchase a portfolio of collateral typically comprised of commercial loans.&nbsp; Investors are paid based on cash flows and other proceeds from the collateral.&nbsp; <strong>The three CLO funds managed by Tilton and the Patriarch Partners firms are collectively known as the Zohar funds, and more than $2.5 billion has been raised from investors.&nbsp; Tilton’s investment strategy for the Zohar funds has been to improve the operations of the distressed portfolio companies so they can pay off their debt, increase in value, and eventually be sold for a profit. </strong></p> <p>&nbsp;</p> <p>The SEC’s Enforcement Division alleges that under the contractual terms of the deals, Tilton and her firms are required to categorize the value of each loan asset in monthly reports by using a specific method set forth in deal documents.&nbsp; To be assigned the highest category, a loan has to be current in its interest payments to the Zohar funds.&nbsp; The category of each asset impacts the calculation of a fund’s “overcollateralization” ratio, which reflects the likelihood that investors will receive a return on their principal.&nbsp; If the overcollateralization ratio falls below a specific threshold, Tilton and her firms are not entitled to receive certain management fees and may be required to cede more control of fund management to investors.</p> <p>&nbsp;</p> <p>The SEC’s Enforcement Division alleges that rather than following the required methodology for valuing these loan assets, Tilton and her firms have maintained their control over the funds and preserved their management fees by not lowering an asset’s category until she decides to cease financial support of the distressed company.&nbsp; Thus the valuation of an asset simply reflects Tilton’s subjective assessment of the company’s future.&nbsp; Absent an actual overcollateralization ratio test, investors aren’t getting a true assessment of the actual values of their investments, which in reality have declined substantially.</p> <p>&nbsp;</p> <p><strong>The SEC’s Enforcement Division further alleges that Tilton and her firms were responsible for misstatements in the quarterly financial statements of the Zohar funds</strong>.&nbsp; When preparing these financial statements, they failed to conduct a required impairment analysis on the assets of the Zohar funds despite disclosures stating that such analysis had occurred.&nbsp; They also falsely stated that assets of the Zohar funds were reported at fair value.&nbsp; Tilton repeatedly and falsely certified that the financial statements were prepared in accordance with Generally Accepted Accounting Principles (GAAP).</p> <p>&nbsp;</p> <p><strong>The SEC’s Enforcement Division alleges that Tilton, Patriarch Partners LLC, Patriarch Partners VIII LLC, Patriarch Partners XIV LLC, and Patriarch Partners XV LLC violated Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206-4(8).&nbsp; Patriarch Partners LLC also is charged with aiding and abetting violations by the others.&nbsp; The matter will be scheduled for a public hearing before an administrative law judge for proceedings to adjudicate the Enforcement Division’s allegations and determine what, if any, remedial actions are appropriate. </strong></p> <p>&nbsp;</p> <p>The SEC’s investigation has been conducted by Amy Sumner, Amanda de Roo, and John Smith with assistance from Judy Bizu.&nbsp; Also contributing to the investigation were Allison Lee, Creola Kelly, and Brent Mitchell.&nbsp; The case has been supervised by Laura Metcalfe, Reid Muoio, and Michael Osnato.&nbsp; The Enforcement Division’s litigation will be led by Dugan Bliss, Nicholas Heinke, and Ms. Sumner.</p> </blockquote> <p>All just as we warned would happen (and yes, this is bad news for MBIA), to wit: "It appears that MBIA is entirely unreserved for the ~$600 million of potential losses on their Zombie insurance contracts and may have to come out-of-pocket for almost $1 billion over the next ~three years – at the Barclays financials conference just two weeks ago, MBIA explicitly stated that their $500 million of structured finance reserves are almost entirely intended to offset CMBS losses (as opposed to these Zombie High Yield Corporate CDO losses)."</p> <p>Finally, here is Lynn Tilton during better times, namely some time circa 1988 when she sent out the following "Dominatrix Santa" Christmas Cards to <a href="http://dealbreaker.com/2013/06/lynn-tilton-never-apologize-for-sending-near-naked-christmas-cards-to-your-clients-and-friends-on-wall-street/">her ten best clients</a>.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/03/tilton%20card.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/03/tilton%20card_0.jpg" width="562" height="407" /></a></p> <p>&nbsp;</p> <p>And here is CNBC's profile of the "super rich" Lynn Tilton:</p> <p><iframe src="https://www.youtube.com/embed/Kli1F8TB2jU" width="560" height="315" frameborder="0"></iframe></p> <p> Oh, and let's not forget the irony... </p> <blockquote class="twitter-tweet" lang="en"><p>It takes tremendous <a href="https://twitter.com/hashtag/courage?src=hash">#courage</a> to seek and speak the <a href="https://twitter.com/hashtag/truth?src=hash">#truth</a>. It takes strength of heart and a deep belief to fight battles to uncover truth.</p> <p>— Lynn Tilton (@LynnTilton) <a href="https://twitter.com/LynnTilton/status/578335161906941952">March 18, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script> <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="438" height="503" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/tilton%20teaser.jpg?1427726007" /> </div> </div> </div> http://www.zerohedge.com/news/2015-03-30/lynn-tilton-busted-sec-clo-fraud-warned-here-nearly-two-years-ago#comments B+ Barclays CDO Covenants ETC GAAP High Yield Lynn Tilton Patriarch Partners Private Equity Reality recovery Securities and Exchange Commission Structured Finance Mon, 30 Mar 2015 14:35:15 +0000 Tyler Durden 504011 at http://www.zerohedge.com Ben Bernanke Pens First Blog Post, Defends Fed, Says He "Was Concerned About Seniors" http://www.zerohedge.com/news/2015-03-30/ben-bernanke-pens-first-blog-post-defends-fed-says-he-was-concerned-about-seniors <p>It would appear the $250,000/hour speaking opportunities for Ben Bernanke have ground to a halt, and as such, the former Chairsatan has decided to dispense his wisdom for free to anyone who cares, by becoming a blogger at Brookings. And, not surprisingly, in his first post, the person who less than a decade ago said the following, in exactly those words...</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Well, I guess I don’t buy your premise. It’s a pretty unlikely possibility. <strong>We’ve never had a decline in house prices on a nationwide basis. </strong>So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.</p> </blockquote> <p>... is out and about defending the Fed and central banks from pushing rates so low, in Europe you are now paid to borrow money, and are charged to save.</p> <p>So, to those who are too lazy to click on the following link to the Brookings blog where Bernanke is now blogger emeritus, here is the punchline.</p> <p>In what can only be described as a litany of defensive insecurity, Bernanke launches a full-on assault on all those who accuse the Fed of crushing the economy, which now includes not only tin-foil fringe blogs of the Austrian economics persuasion, but such "very serious people" as Guggenheim's CIO Scott Minerd <a href="http://www.zerohedge.com/news/2015-03-28/finally-very-serious-people-get-it-qe-will-permanently-impair-living-standards-gener">who over the weekend said </a>"<strong>The long-term consequences of global QE are likely to permanently impair living standards for generations to come while creating a false illusion of reviving prosperity</strong>" and rhetorically asks "<em><strong>Why are interest rates so low? Will they remain low? What are the implications for the economy of low interest rates?</strong></em>"</p> <p>His response to this rhetorical question, is the following: "If you asked the person in the street, “Why are interest rates so low?”, he or she would likely answer that the Fed is keeping them low. That’s true only in a very narrow sense."</p> <p>Actually, it is true inn every sense. What is Bernanke's loophole? He introduces the concept of the equilibrium real interest rate. In Bernanke's words:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Except in the short run, real interest rates are determined by a wide range of economic factors, including prospects for economic growth—not by the Fed.</p> <p>&nbsp;</p> <p>To understand why this is so, it helps to introduce the concept of the equilibrium real interest rate (sometimes called the Wicksellian interest rate, after the late-nineteenth- and early twentieth-century Swedish economist Knut Wicksell). The equilibrium interest rate is the real interest rate consistent with full employment of labor and capital resources, perhaps after some period of adjustment. Many factors affect the equilibrium rate, which can and does change over time. In a rapidly growing, dynamic economy, we would expect the equilibrium interest rate to be high, all else equal, reflecting the high prospective return on capital investments. In a slowly growing or recessionary economy, the equilibrium real rate is likely to be low, since investment opportunities are limited and relatively unprofitable. Government spending and taxation policies also affect the equilibrium real rate: Large deficits will tend to increase the equilibrium real rate (again, all else equal), because government borrowing diverts savings away from private investment.</p> </blockquote> <p>He is absolutely right. What he just fails to notice is that the entire world is gripped in ZIRP, and increasingly NIRP, is that the current bubble implosion aftermath, now 7 years after the Lehman collapse, is merely the 3rd consecutive bubble burst in the past 15 years. In other words, the Fed may spout whatever mumbo jumbo it wants about why its response to the crisis was required, what it has zero defense against is why its only policy under the Greenspan "Great Moderation" paradigm has been to inflate bubbles, and replace a post-bubble vacuum with another bubble, ultimately leading to a complete and global economic halt, and a world in which central banks now have to monetize all net developed world issuance!</p> <p>In essence there is no Weimar state any more - <strong>the entire world has become Weimar, </strong>and the only reason why no currency is hyperinflating in isolation is because absolutely everyone is doing the same cardinal monetary sin at the same time.</p> <p>Of course, none of this will get much exposure. </p> <p>What will, however, is the former Chairman's surprisingly defensive pivot in which it is almost as if he sense what is coming over the horizon when he unexpectedly says it wasn't his fault the entire nation's senior population was decimated due to his and Greenspan's ludicrous policies.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>When I was chairman, more than one legislator accused me and my colleagues on the Fed’s policy-setting Federal Open Market Committee of <strong>“throwing seniors under the bus” </strong>(to use the words of one senator) by keeping interest rates low. The legislators were concerned about retirees living off their savings and able to obtain only very low rates of return on those savings.</p> </blockquote> <p>And the punchline:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><span style="text-decoration: underline;"><strong>I was concerned about those seniors as well. </strong></span></p> </blockquote> <p>Perhaps he is referring to seniors such as Omaha Octagenarians who had <em><strong>tens of billions in investments in a financial system that would have gotten insolvent overnight if he hadn't bailed it out? </strong></em></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>But if the goal was for retirees to enjoy sustainably higher real returns, then the Fed’s raising interest rates prematurely would have been exactly the wrong thing to do. In the weak (but recovering) economy of the past few years, all indications are that the equilibrium real interest rate has been exceptionally low, probably negative. A premature increase in interest rates engineered by the Fed would therefore have likely led after a short time to an economic slowdown and, consequently, lower returns on capital investments. The slowing economy in turn would have forced the Fed to capitulate and reduce market interest rates again. This is hardly a hypothetical scenario: In recent years, several major central banks have prematurely raised interest rates, only to be forced by a worsening economy to backpedal and retract the increases. Ultimately, the best way to improve the returns attainable by savers was to do what the Fed actually did: keep rates low (closer to the low equilibrium rate), so that the economy could recover and more quickly reach the point of producing healthier investment returns.</p> </blockquote> <p>Well thank you for the admission that there really is no getting out of a world in which three consecutive and ever larger bubbles has burst, and now with central banks <em>all-in </em>to support the last one, the final outcome will be a global catastrophe with a good global war thrown in for good measure, unlike any seen before.</p> <p>Yet the funniest part of Bernanke's diatribe is when he tacitly shifts away from the Fed as the culprit for all that is wrong, and implicitly blames the government.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>A similarly confused criticism often heard is that the Fed is somehow distorting financial markets and investment decisions by keeping interest rates “artificially low.” </strong>Contrary to what sometimes seems to be alleged, the Fed cannot somehow withdraw and leave interest rates to be determined by “the markets.” The Fed’s actions determine the money supply and thus short-term interest rates; it has no choice but to set the short-term interest rate somewhere. So where should that be? The best strategy for the Fed I can think of is to set rates at a level consistent with the healthy operation of the economy over the medium term, that is, at the (today, low) equilibrium rate. <strong>There is absolutely nothing artificial about that! </strong>Of course, it’s legitimate to argue about where the equilibrium rate actually is at a given time, a debate that Fed policymakers engage in at their every meeting. But that doesn’t seem to be the source of the criticism.</p> <p>&nbsp;</p> <p>The state of the economy, not the Fed, is the ultimate determinant of the sustainable level of real returns. This helps explain why real interest rates are low throughout the industrialized world, not just in the United States. What features of the economic landscape are the ultimate sources of today’s low real rates? I’ll tackle that in later posts.</p> </blockquote> <p>Let us guess: features such a Congress which is now completely and utterly incapable of passing even one law perhaps because the passage of any real reforms is vastly unpopular for any politician (just look at Greece), and after all why bother: <strong>"get to work, Mr. Chairman" </strong>has been the operative principle of the US Congress since 2009, a Congress which has had some $4 trillion in deficit funding to keep America going, monetized by Bernanke's own Fed.</p> <p>But don't expect any mention of that in Bernanke's blog. And likewise, don't expect your comment to appear on the Brookings blog.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><span style="text-decoration: underline;"><strong>Comments are welcome, but because of the volume, we only post selected comments</strong></span>.</p> </blockquote> <p>By selected they of course mean only those which praise the man who threw America's seniors under the bus, er pardon,<em><strong> didn't.</strong></em></p> <p>And certainly not any comments which remind the broader public of all previous Ben Bernanke greatest hits of whicht he following is a small sampling:</p> <p style="padding-left: 30px;"><strong>7/1/05 – Interview on CNBC</strong></p> <p style="padding-left: 30px;"><em><strong>INTERVIEWER</strong></em>: Tell me, what is the worst-case scenario? We have so many economists coming on our air saying ‘Oh, this is a bubble, and it’s going to burst, and this is going to be a real issue for the economy.’ Some say it could even cause a recession at some point. What is the worst-case scenario if in fact we were to see prices come down substantially across the country?</p> <p><em><strong>BERNANKE: </strong></em>Well, I guess I don’t buy your premise. <strong>It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit</strong>. I don’t think it’s gonna drive the economy too far from its full employment path, though.</p> <p><strong>10/20/05 – Testimony before the Joint Economic Committee, Congress</strong></p> <p style="padding-left: 30px;">House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals. </p> <p><strong>11/15/05 – Confirmation Hearing before Senate Banking Committee</strong></p> <p style="padding-left: 30px;"><em><strong>SEN. SARBANES</strong></em>: Warren Buffet has warned us that derivatives are time bombs, both for the parties that deal in them and the economic system. The Financial Times has said so far, there has been no explosion, but the risks of this fast growing market remain real. How do you respond to these concerns?</p> <p><em><strong>BERNANKE: </strong></em>I am more sanguine about derivatives than the position you have just suggested. <strong>I think, generally speaking, they are very valuable… </strong>With respect to their safety, derivatives, <strong>for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly. </strong>The Federal Reserve’s responsibility is to make sure that the institutions it regulates have good systems and good procedures for ensuring that their derivatives portfolios are well-managed and do not create excessive risk in their institutions.</p> <p><strong>3/6/07 – At bankers’ conference in Honolulu, Hawaii… as delinquencies in the subprime mortgage sector rise</strong></p> <p style="padding-left: 30px;">The credit risks associated with an affordable-housing portfolio need not be any greater than mortgage portfolios generally.</p> <p><strong>3/28/07 – Testimony before the Joint Economic Committee, Congress</strong></p> <p style="padding-left: 30px;">Although the turmoil in the subprime mortgage market has created severe financial problems for many individuals and families, the implications of these developments for the housing market as a whole are less clear…<strong>At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.</strong></p> <p><strong>5/17/07 – Remarks before the Federal Reserve Board of Chicago</strong></p> <p style="padding-left: 30px;">...<strong>we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. </strong>The vast majority of mortgages, including even subprime mortgages, continue to perform well. </p> <p><strong>8/31/07 – Remarks at the Fed Economic Symposium in Jackson Hole</strong></p> <p style="padding-left: 30px;"><strong>It is not the responsibility of the Federal Reserve--nor would it be appropriate--to protect lenders and investors from the consequences of their financial decisions</strong></p> <p><strong>1/10/08 – Response to a Question after Speech in Washington, D.C.</strong></p> <p style="padding-left: 30px;">The Federal Reserve is <span style="text-decoration: underline;"><strong>not currently forecasting a recession</strong></span>.</p> <p><strong>2/27/08 – Testimony before the Senate Banking Committee</strong></p> <p style="padding-left: 30px;">I expect there will be some failures [among smaller regional banks]… <strong>Among the largest banks, the capital ratios remain good and I don’t anticipate any serious problems of that sort among the large, internationally active banks that make up a very substantial part of our banking system.</strong></p> <p><strong>4/2/08 – New York Times article after the collapse of Bear Stearns</strong></p> <p style="padding-left: 30px;">“In separate comments, Mr. Bernanke went further than he had in the past, suggesting that the Fed would remain aggressive and vigilant to prevent a repetition of a collapse like that of Bear Stearns, <strong>though he said he saw no such problems on the horizon.”</strong></p> <p><strong>6/10/08 – Remarks before a bankers’ conference in Chatham, Massachusetts</strong></p> <p style="padding-left: 30px;">The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.</p> <p><strong>7/16/08 – Testimony before House Financial Services Committee</strong></p> <p style="padding-left: 30px;"><strong>[Fannie Mae and Freddie Mac are] adequately capitalized. They are in no danger of failing…</strong> [However,] the weakness in market confidence is having real effects as their stock prices fall, and it’s difficult for them to raise capital.</p> <p><em>Full Bern<a href="http://www.brookings.edu/blogs/ben-bernanke/posts/2015/03/30-why-interest-rates-so-low">anke blog post here.</a></em><a href="http://www.brookings.edu/blogs/ben-bernanke/posts/2015/03/30-why-interest-rates-so-low"></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="475" height="307" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/bernanke%20smiling_0.jpg?1427714613" /> </div> </div> </div> http://www.zerohedge.com/news/2015-03-30/ben-bernanke-pens-first-blog-post-defends-fed-says-he-was-concerned-about-seniors#comments Bear Stearns Ben Bernanke Ben Bernanke Central Banks Fannie Mae Federal Reserve Freddie Mac Greece House Financial Services Committee Housing Market Joint Economic Committee Lehman Money Supply New York Times None Real Interest Rates Recession Regional Banks Subprime Mortgages Testimony Washington D.C. Mon, 30 Mar 2015 14:24:56 +0000 Tyler Durden 503998 at http://www.zerohedge.com Earnings Have Peaked… and a Dropping For the First Time since 2008 http://www.zerohedge.com/news/2015-03-30/earnings-have-peaked%E2%80%A6-and-dropping-first-time-2008 <p>Earnings may very well have peaked.</p> <p>&nbsp;</p> <p>MarketWatch notes that adjusted profits (even after all of the accounting gimmicks), FELL last year. This is the first time this has happened since we entered the alleged &ldquo;recovery.&rdquo;</p> <p>&nbsp;</p> <p style="margin-left:.5in;"><strong><em><u>For the full year, adjusted profits slipped 0.8% to $2.09 trillion. The last time profits fell was in 2008 when a recession was in full swing.</u></em></strong><em> Banks and other finance companies showed lower earnings, while nonfinancial firms modestly increased profits. Profit figures are adjusted for depreciation and the value of inventories.</em></p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p> <p><em>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Source: Marketwatch</em></p> <p>&nbsp;</p> <p>Bear in mind&hellip; earnings are overstated. Indeed, a study performed by Duke University found that roughly 20% of publicly traded firms manipulate their earnings to make them appear better than they really are. <strong><u>The folks who were surveyed for this study about this practice were the actual CFOs at the firms themselves.</u></strong></p> <p>&nbsp;</p> <p>These practices have only worsened since the &ldquo;crisis ended.&rdquo; Corporations have been reducing loan loss reserves, buyback shares via debt, and axing jobs en masse in efforts to juice earnings as high as possible.</p> <p>&nbsp;</p> <p>This has resulted in the HIGHEST corporate profit/ GDP ratio since the Feds began tracking this metric in the 1940s:</p> <p>&nbsp;</p> <p><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user20289/imageroot/2015/03/fredgraph.png" style="width: 490px; height: 294px;" /></p> <p>&nbsp;</p> <p>Put simply, corporate profits are at a record high relative to the economy&hellip; and they just began to roll over.</p> <p>&nbsp;</p> <p>Take a look at the below chart showing current stock levels and changes in forwards Earnings Per Share (EPS). Note, in particular how divergences between EPS and stocks tend to play out (hint look at 2007-2008).</p> <p>&nbsp;</p> <p><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user20289/imageroot/2015/03/EPS-1.png" style="width: 500px; height: 322px;" /></p> <p>&nbsp;</p> <p>We all know what came next.</p> <p>&nbsp;</p> <p>If you&rsquo;ve yet to take action to prepare for the second round of the financial crisis, we offer a FREE investment report <strong><em>Financial Crisis &quot;Round Two&quot; Survival Guide </em></strong>that outlines easy, simple to follow strategies you can use to not only protect your portfolio from a market downturn, but actually produce profits.</p> <p>&nbsp;</p> <p>You can pick up a FREE copy at:</p> <p><a href="http://www.phoenixcapitalmarketing.com/roundtwo.html">http://www.phoenixcapitalmarketing.com/roundtwo.html</a></p> <p>&nbsp;</p> <p>Best Regards</p> <p>Phoenix Capital Research</p> <p>&nbsp;</p> <p>&nbsp;</p> http://www.zerohedge.com/news/2015-03-30/earnings-have-peaked%E2%80%A6-and-dropping-first-time-2008#comments Recession recovery Mon, 30 Mar 2015 14:17:40 +0000 Phoenix Capital Research 504010 at http://www.zerohedge.com