http://www.zerohedge.com/fullrss2.xml/wp-content/plugins/uBillboard/Korean%20Buying%20Spree%20Boosts%20Brent%20Price en Do Share Buybacks Create Value? (Spoiler Alert: No) http://www.zerohedge.com/news/2015-07-03/do-share-buybacks-create-value-spoiler-alert-no <p><a href="http://omidmalekan.com/do-share-buybacks-create-value/"><em>Submitted by Omid Malekan via OmidMalekan.com</em></a>,</p> <p>Stock buybacks have been in the news lately, as their growing size has lead to criticism, especially from politicians who believe they contribute to economic inequality. <strong>But the simplest critique of the practice of buybacks can be made on economic grounds, in terms of value created or destroyed</strong>.</p> <p>If you ask a seasoned investor to boil success down to one sentence, they&rsquo;ll probably say &ldquo;buy low and sell high.&rdquo; Ask them to simplify even more, and they&rsquo;ll say &ldquo;buy value&rdquo; &ndash; which usually correlates with buying something when its cheap. If we flip these maxims around then the worst kind of investing is to buy high. <strong>Expensive things do occasionally become more expensive &ndash; &nbsp;but with greater risk.</strong></p> <p><u><em>I have always been weary of buybacks, going all the way back to the last buyback boom before the financial crisis. My concern then was that by purchasing shares management was making a declaration, that this is a good time to buy our stock, as opposed to the past or the future. But if management knows that then it knows how to time the market, and if management knows how to time the market, then it&rsquo;s better off running a hedge fund. Since management is instead running a company, it should focus on what it was hired to do and leave the stock market alone.</em></u></p> <p><strong>Taking the practice to a more extreme measure, many large companies today are tapping the debt markets, borrowing money at record low rates and using the proceeds for buybacks. </strong>The practice is popular among blue chip companies like Apple and Microsoft, who despite their cash heavy balance sheets prefer the tax efficiency of financing buybacks with debt. The old me would find such a practice even more unwise, as it entails timing <em>two</em> markets at once, a feat even a seasoned hedge fund manager would have trouble pulling off. But the old me didn&rsquo;t understand how buybacks really work.</p> <p><strong>To call an action market timing is to imply participants care about price. </strong>They are buying today because today offers a good price whereas tomorrow might not. But executives doing buybacks don&rsquo;t care about price. We know this because new buybacks are not announced with any limitations on share price. <em>We are going to buy back $2 Billion worth of shares in the next quarter. </em><strong>What happens if share prices rises drastically beforehand? Management doesn&rsquo;t care.</strong></p> <p><u><strong>We also know this because currently, with the stock market at all time highs, new buyback announcements have gone parabolic to amounts never seen before. </strong></u>The current level of buying recently surpassed that of 2007, at the previous peak of the market.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/07/20150703_buy.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/07/20150703_buy.jpg" style="width: 605px; height: 391px;" /></a></p> <p>&nbsp;</p> <p>But the buying has not been continuous, as companies took an extended break during the financial crisis while stock prices fell drastically.<strong> If you chart buybacks versus the overall stock market in the past 10 years you&rsquo;ll find a neat correlation.</strong></p> <p><u><strong>For over a decade now corporate management has been doing the exact opposite of what constitutes good investing.</strong></u> If you include the fact that some of the companies buying back shares before the crisis were selling shares to raise capital during the crisis, and are now buyers again, then management has been buying high to sell low to buy high again.</p> <p><u><em><strong>If you acted similarly in any other walk of life you would be the subject of ridicule and featured in finance books on what not to do. Imagine walking into a dealership and saying &ldquo;I am going to buy this car, regardless of what price you quote me.&rdquo; Then imagine selling that car at half the price, only to eventually buy it back at a premium.</strong></em></u></p> <p><strong>On Wall Street however such behavior is now the norm. </strong>Take the example of Royal Dutch Shell, which recently announced the acquisition of BG Group. The deal is mostly financed by Shell issuing new shares. It&rsquo;s said to be accretive next year, as in increasing the company&rsquo;s earnings and presumably its stock value. It also comes with a plan by Shell to buy back millions of its own shares in 2 years. So the company has promised to sell something today, drive up its value tomorrow and then buy it back next week.</p> <p><strong>All of this would be laughable if not for the consequences. </strong>The net amount of buybacks executed in recent years has now surpassed $2 trillion. That&rsquo;s $2 trillion in capital spent on an activity that at best creates no value and historically has destroyed it. <u><strong>As our business leaders continue to speculate on why the current recovery refuses to kick into high gear, they should look at wasteful buybacks as one possible impediment.</strong></u></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="605" height="391" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150703_buy.jpg?1435935880" /> </div> </div> </div> http://www.zerohedge.com/news/2015-07-03/do-share-buybacks-create-value-spoiler-alert-no#comments Apple Market Timing recovery Fri, 03 Jul 2015 18:40:00 +0000 Tyler Durden 509223 at http://www.zerohedge.com US Pushed For IMF Greek Haircut Study Release After Euro 'Allies' Tried To Block http://www.zerohedge.com/news/2015-07-03/us-pushed-imf-greek-haircut-study-release-after-euro-allies-tried-block <p><strong>The timing of<a href="http://www.zerohedge.com/news/2015-07-02/imf-bolsters-greek-no-vote-says-country-needs-debt-haircut"> the release of The IMF's 'Greece needs a debt haircut no matter what' report</a> this week was odd to say the least</strong>. Being as it confirmed everything the Greek government has been saying and provided the perfect ammunition for Tsipras to spin Sunday's <em>Greferendum</em> as a Yes/No to debt haircuts - something everyone can understand (and get behind). It is understandable then that, <a href="http://www.reuters.com/article/2015/07/03/us-eurozone-greece-imf-idUSKCN0PD20120150703">as Reuters reports, </a><strong>Greece's eurozone allies tried to block the release of the damning report</strong> this week but <strong><span style="text-decoration: underline;">the Europeans were heavily outnumbered and the United States, the strongest voice in the IMF, was in favor of publication</span></strong>, sources said. While The IMF concluded, "Facts are stubborn. You can't hide the facts because they may be exploited," one wonders if this move merely <a href="http://www.zerohedge.com/news/2015-07-02/goldman-conspiracy-theory-validated-ecb-expands-qe-program">reinforces Goldman's concpiracy theory</a>.</p> <p>&nbsp;</p> <p><strong>Euro zone countries tried in vain to stop the IMF publishing a gloomy analysis of Greece's debt burden which the leftist government says vindicates its call to voters to reject bailout terms</strong>, sources familiar with the situation said on Friday. <a href="http://www.reuters.com/article/2015/07/03/us-eurozone-greece-imf-idUSKCN0PD20120150703">As Reuters reports</a>, publication of the draft Debt Sustainability Analysis <span style="text-decoration: underline;"><strong>laid bare a dispute between Brussels and the Washington-based global lender</strong></span> that has been simmering behind closed doors for months...</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>At a meeting on the International Monetary Fund's board on Wednesday, <strong>European members questioned the timing of the report which IMF management proposed at short notice</strong> releasing three days before Sunday's crucial referendum that may determine the country's future in the euro zone, the sources said.</p> <p>&nbsp;</p> <p>There was no vote but <span style="text-decoration: underline;"><strong>the Europeans were heavily outnumbered and the United States, the strongest voice in the IMF, was in favor of publication</strong></span>, the sources said.</p> <p>&nbsp;</p> <p>The Europeans were also concerned that the report could distract attention from a view they share with the IMF that the Tsipras government, in the five months since it was elected, has wrecked a fragile economy that was just starting to recover.</p> <p>&nbsp;</p> <p>"It wasn't an easy decision," an IMF source involved in the debate over publication said. <span style="text-decoration: underline;"><strong>"We are not living in an ivory tower here. But the EU has to understand that not everything can be decided based on their own imperatives."</strong></span></p> <p>&nbsp;</p> <p>The board had considered all arguments, including the risk that the document would be politicized, but the prevailing view was that all the evidence and figures should be laid out transparently before the referendum.</p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>"Facts are stubborn. You can't hide the facts because they may be exploited,"</strong></span> the IMF source said.</p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p><strong>Quite simply this should be horrifying to not just The Greeks</strong> <em>(who just discovered their supposed 'allies' tried to hide the truth from them and in fact negotiated in bad faith)</em> but to all Europeans who by now must realize the union is not for them, it is for the few ruling elite and their corporate and banking overlords. </p> <p>Isn't it time to Just Say No?</p> <p>*&nbsp; *&nbsp; *</p> <p>Of course, taking a step back from the table, it is clear that a forced decision by Washington against the interests of its European allies - that is likely to engender more chaos and strengthen Greece's ability to destabilize Europe - must have been done for 'another reason'. Perhaps after all is said and done, the powers that be <strong>need</strong> chaos, need instability, need panic <a href="http://www.zerohedge.com/news/2015-07-02/goldman-conspiracy-theory-validated-ecb-expands-qe-program"><strong>in order to ensure the public <em>gratefully </em>accept the all-in QE-fest that they want.</strong></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="250" height="176" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150630_auto_1.jpg?1435948226" /> </div> </div> </div> http://www.zerohedge.com/news/2015-07-03/us-pushed-imf-greek-haircut-study-release-after-euro-allies-tried-block#comments Eurozone Reuters Fri, 03 Jul 2015 18:34:37 +0000 Tyler Durden 509242 at http://www.zerohedge.com Massive "No" Demonstration Floods Athens' Syntagma Square As Tsipras Speaks - Live Webcast http://www.zerohedge.com/news/2015-07-03/police-fire-tear-gas-stun-grenades-ahead-tspiras-speech-live-feed <p>With Greek PM Tsipras due to speak any moment, scuffles in the crowds of protesters have broken out and <strong>police have resorted to stun grenades and tear gas.</strong></p> <p><a href="http://www.reuters.com/article/2015/07/03/eurozone-greece-violence-idUSA8N0ZC01K20150703?feedType=RSS&amp;feedName=bondsNews"><em>As Reuters reports,</em></a></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Greek police threw stun grenades and scuffled with protesters in central Athens on Friday,</strong> as a rally got under way in support of a 'No' vote in a Sunday referendum on whether to endorse an aid deal with creditors.</p> <p>&nbsp;</p> <p>The scuffles involved a <strong>few dozen people, many dressed in black and wearing helmets</strong> but quickly appeared to calm.</p> </blockquote> <p>Luckily, the violence was scattered and promptly disspitated.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/07/20150703_Greece1.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/07/20150703_Greece1_0.jpg" width="559" height="359" /></a></p> <p>&nbsp;</p> <p>Instead it has been replaced with one of the biggest gatherings on Syntagma square in history:</p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en">I've stood on this roof a few times over the years - and this is as big a crowd as I can remember. <a href="https://twitter.com/hashtag/oxi?src=hash">#oxi</a> <a href="https://twitter.com/hashtag/greece?src=hash">#greece</a> <a href="http://t.co/1vzUlEd2FH">pic.twitter.com/1vzUlEd2FH</a></p> <p>— Mark Lowen (@marklowen) <a href="https://twitter.com/marklowen/status/617038027567857664">July 3, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><p>&nbsp;</p> <p>Live Feed:</p> <p><iframe src="https://www.youtube.com/embed/fcz3NXhbSKw" width="560" height="315" frameborder="0"></iframe></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="598" height="261" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/syntagma.jpg?1435948711" /> </div> </div> </div> http://www.zerohedge.com/news/2015-07-03/police-fire-tear-gas-stun-grenades-ahead-tspiras-speech-live-feed#comments Creditors Greece Reuters Twitter Twitter Fri, 03 Jul 2015 18:25:21 +0000 Tyler Durden 509238 at http://www.zerohedge.com Greeks Split On Greferendum As Credit Suisse Says "No" Vote Defies "Rationality" http://www.zerohedge.com/news/2015-07-03/greeks-split-greferendum-credit-suisse-says-no-vote-defies-rationality <p>With just two days to go until Greeks decide their fate in the eurozone, the country is split down the middle, a new poll shows. The survey, <a href="http://www.bloomberg.com/news/articles/2015-07-03/greeks-split-down-middle-before-bailout-referendum-poll-shows">commissioned by Bloomberg</a> and conducted by the University of Macedonia Research Institute of Applied Social and Economic Studies, shows that “43 percent intend to vote ‘no’ to reject the austerity demanded by creditors in exchange for financial aid, while 42.5 percent back a ‘yes’ to accept the conditions.”&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/06/BloombergGreferendum.png"><img src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/06/BloombergGreferendum_0.png" width="600" height="536" /></a></p> <p>Bloomberg goes on to say that support for a ‘no’ vote has dwindled since Tsipras first announced the plebiscite last week, which seems to suggest that the bite of capital controls has quickly forced many Greeks to reconsider whether the benefits of standing firm in the face of overbearing creditors truly outweigh the economic costs of an EMU exit.&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/06/BloombergGreferendum2.png"><img src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/06/BloombergGreferendum2_0.png" width="600" height="374" /></a></p> <p>The narrowing lead for the “no” side comes as IMF research appears to support Tsipras and Varoufakis’ contention that any feasible Greek deal should include debt relief. </p> <p>As <a href="http://www.zerohedge.com/news/2015-07-02/imf-bolsters-greek-no-vote-says-country-needs-debt-haircut">we said on Thursday</a>, the report (which was prepared prior to capital controls and the banking sector meltdown) shows that any deal which includes creditor concessions on fiscal reforms would mean Greece's debt load would have to be written down, as the country would need at least €60 billion in new financing. Subsequently, the media and sell side chimed in. Here’s Barclays for instance:&nbsp;</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>The IMF released yesterday a document with a revised debt sustainability analysis for Greece. The document basically argues that OSI is a necessary condition in order to secure sovereign solvency with a high probability. This means that before the IMF re-engages in any lending activities with Greece, OSI will be required in the form of NPV debt relief.</em></p> <p>&nbsp;</p> <p><em>The timing of the publication of this report it is very important. Debt relief is something that the Greek authorities have repeatedly demanded; <strong>therefore, in a way this report can be interpreted as the IMF backing the Greek government's demands. By extension, it could also be interpreted as supportive of a 'No' vote, which is what the Greek government is campaigning for.</strong></em></p> </blockquote> <p>We’ll see over the weekend, if the “no” vote is bolstered by the IMF’s findings.&nbsp;</p> <p>Meanwhile, Wall Street continues to speculate on what happens in the event of a “no” or worse, a tie. The following is excerpted from Credit Suisse "Greece: A Thread In The Labrynth."</p> <p>* &nbsp;* &nbsp;*</p> <p><strong>The Result Of A "No": A Live Test</strong></p> <p>We believe that in the case of a ”No” vote in the referendum that the creditors will reject any further deal with near certainty and the only outcomes are either a systemic crisis or a contained idiosyncratic crisis.</p> <p>A particularly bad scenario for Greece would be some sort of split vote, e.g., 51% voting “No”. We think Tsipras would likely claim to have won the backing of his policy by the electorate – assuming he campaigns for a “No” till the end – while nearly half the population would have voted in favor of the creditors’ deal. T<strong>his could cause unrest domestically in Greece, while the creditors would probably be less inclined to acknowledge Tsipras’ “victory” under such circumstances. </strong>A relatively low participation rate would further reduce the credibility of a marginal “No” vote, in that regard.</p> <p>We again want to be clear: “leaving EMU” is not a policy choice and, if enforced by referendum, materially reduces Greece’s freedom of action. <strong>Introducing a new currency is a pipe dream</strong> and the likely result is a broken financial system reliant on a neighbor’s currency (the euro) and banking system.&nbsp;</p> <p>If the result of the Greek referendum is a “No” and the situation is not immediately remedied (which we would not expect), the Greek people will probably have taken the opportunity to illustrate how illusory the whole idea of “exit” actually is. How that unfolds determines whether the situation systematizes immediately. <strong>This is because the choice is not “do you accept the core’s terms your government has rejected?” Rather, it is “do you want Greek banks to function independently?” and, de facto, do you want to be able to use the cash machine tomorrow? This is the nature of “Grexit”; it is not a choice to circulate a shiny new devaluation mechanism, it is a decision to reject the (local, to begin with) financial system and start again.&nbsp;</strong></p> <p>We have always pointed out that the new “currency” mismatches involved in any attempt to exit the euro would be so "toxic" for the banking system as to make it not a practical alternative. It is certainly not a way to avoid default. Rather, an attempt to exit is a way to default, at the expense of making that default systemic and so more costly. We are seeing this right now, with anecdotes of large dislocations and the reality of a closed banking system.&nbsp;</p> <p>This fact seems to get less than its fair share of attention. The Greek banking system is closed. How does it reopen given a “No”? So “No” should be a dominated policy option and a properly informed Greek public should rationally vote “Yes”. Yet we cannot confidently give it more than a 50:50. The closed banking system imposes real pressure and a deadline. The 20 July date we have always pointed to now has real teeth; three weeks is the absolute maximum we would expect Greece to be able to function in this state.&nbsp;</p> <p>The “loss of sovereignty” resulting from this dilemma could be a dominant consideration leading to an irrational outcome (“better a day as a lion…”). As always, we have to be VERY careful with the “rational player hypothesis” in these situations. <strong>And the core pointing out that the question can be reframed as “do you want a banking system”? and “do you want to stay in the euro” could be criticized as "moral blackmail", but it is the reality of the implications of having joined a currency area. </strong>The time for these concerns was in the run-up to 2001. We are all learning about these realities and Greece could again be an illustrative test case. We stick to our view that “nobody leaves” and any new drachma (which we strongly doubt) would effectively be a transitory default mechanism on the way to an economy that was euro-ized without the votes on the ECB GC. We could call it the “Panamization” of Greece. But where is the 13%-capitalized banking system which is required going to come from? At a minimum we would see €40 billion of untainted capital being required. Some of it could come from the existing capital structure under resolution but we believe that the balance could not come from Greece itself (a state in a serious state of default) without triggering immediate collapse and returning to the path of the new arrangements being a default vehicle on the way to euro-ization only now without a domestic banking system at all).&nbsp;</p> <p><strong>The far more likely outcome, in our view, of an attempt to leave (i.e., of a “No”) is a banking system that can only open under foreign (nationalized) ownership. This seems to be a very likely step given the apparent intention of the core to honor guaranteed deposits.</strong> But all of this would of course be contingent on some form of cooperative outcome. In the absence of that—and relations are already manifestly more strained; a change of government may help—we would have to suspect that Greece’s EU membership would be under threat. And as this situation becomes ever more political, that would be a huge issue well beyond our scope but which highlights our view that the mechanism for systematizing this situation is political not financial. It seems unlikely that the 13% capitalization needed to rebuild a banking system could come from a non-Western power, but the concern obviously exists.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/06/CSGreeceDecisionTree.png"><img src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/06/CSGreeceDecisionTree_0.png" width="600" height="458" /></a></p> <p>* &nbsp;* &nbsp;*</p> <p>Summing up, Credit Suisse believes a "no" vote is effectively a vote for economic catastrophe. The banks would, for all intents and purposes, have to be nationalized by Germany (which, given the Greek banking sector's complete reliance on the Eurosystem for funding, and given Berlin's TARGET2 position relative to the rest of the EU, would simply be to make official what has already been going on for years), and the (re)introduction of the drachma would not only be a disaster, but is in fact an unworkable "pipe dream." </p> <p>In short, the bank says that if Greeks were "properly informed", they would not, in their right mind, vote "no." </p> <p>So perhaps we have a new way to characterize Sunday's vote: a sanity check for the Greek populace.</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="878" height="670" alt="" src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/CSGreeceDecisionTree.png?1435940775" /> </div> </div> </div> http://www.zerohedge.com/news/2015-07-03/greeks-split-greferendum-credit-suisse-says-no-vote-defies-rationality#comments Barclays Credit Suisse Creditors default Eurozone Germany Greece Meltdown Reality Fri, 03 Jul 2015 18:15:00 +0000 Tyler Durden 509232 at http://www.zerohedge.com What Choice Do We Have? http://www.zerohedge.com/news/2015-07-03/what-choice-do-we-have <p><a href="http://www.oftwominds.com/blogjuly15/private-solutions7-15.html"><em>Submittted by Charles Hugh-Smith of OfTwoMinds blog</em></a>,</p> <p><em>As systemic solutions fall short, we must grasp the nettle of making our own arrangements in a time characterized by burgeoning demands and diminishing resources, capital and security.</em></p> <p><strong>The idea that our large-scale problems could be fixed with systemic reforms is enticing:</strong> replace the thousands of pages of tax code with a simple flat tax without deductions, for example, or the replacement of <em>too big to jail/fail</em> banks with community-owned banks that served the public, not shareholders.</p> <p><strong>But the attraction of reforms is a siren song, because our system is run by vested interests for vested interests, period.</strong> Any real reform is Dead On Arrival (DOA) because any real reform threatens the swag and security of vested interests.</p> <p>One person&#39;s livelihood is another person&#39;s vested interest.</p> <p>Toss in <a href="http://www.oftwominds.com/blogjune15/magical-thinking6-15.html" target="resource"> The Enchanting Charms of Cheap, Easy Credit</a> and <a href="http://www.oftwominds.com/blogjuly15/spoiled-brat7-15.html" target="resource"> Our Spoiled-Brat Economy</a> and we have a toxic resistance to systemic reforms that require any <em>degrowth, direct democracy, writedowns of debt, devolution of centalized power</em>, i.e. any real reforms of the unsustainable status quo.</p> <p><strong>So where does that leave us? With no choice but to submit? No, it leaves us with <em>private solutions</em></strong>, by which I mean arrangements made on the individual and household level that do not assume the unsustainable status quo will magically continue to issue us our &quot;we wuz promised&quot; share of the swag.</p> <p><strong>Private solutions subdivide into practicalities</strong> (securing multiple income streams, choosing where to live, arranging access to healthcare, food and energy, proximity to friends and family, like-minded colleagues, etc.) <strong>and what we might term self-fulfillment:</strong> aligning our internal goals, priorities, personality traits, values and skills with the practical externalities of daily life.</p> <p>Longtime correspondent Bart D. recently responded to an email in which I expressed the all-too common sense of being overwhelmed--by work, duties, responsibilities. <strong>His response gives us a starting place for choosing our priorities and goals:</strong></p> <p><em>&quot;At the suggestion of a 93-year old relative, I spent a bit of time thinking of myself as being on my death-bed and considering what I&rsquo;d wished I&rsquo;d spent more time doing in my life. Then I went out and did it (and still am). That way, hopefully, when I eventually get there, I won&rsquo;t have any need to ask myself that question because I&rsquo;ve already resolved it. (It&rsquo;s a minor form of &lsquo;time travel&rsquo; in my way of thinking.) </em></p> <p><em>After that, I stopped worrying about lots of mundane life things and focused on the next really excellent thing I wanted to do. For me, that meant doing a great holiday with the kids, taking them (and myself) to an interesting and inspiring place, getting out into the wild. As a result of that first inspiration we travelled 3200km across the continent and spent days swimming and soaking in a thermal river in the top end of the Northern Territory. I ended up talking to heaps of people from all over the world as they drifted past &lsquo;our spot&rsquo;. Each had a little piece of wisdom to pass on. </em></p> <p><em>During that time I completely forgot to think about any of my mundane life troubles and I remained changed after returning home. </em></p> <p><em>Holidays are now my stepping stones through mundane existence. It&rsquo;s the great luxury I wanted but never had as a child. </em></p> <p><em>Where once I was an ardent &lsquo;saver&rsquo; I&rsquo;m now a moderate spender on things that provide a good life experience. I&rsquo;ve also cut back on my sense of &lsquo;duty&rsquo; to achieve certain things for others. My outlook now is that I&rsquo;m a part of a greater social machine and there are others in that machine that can (or should) take a turn in bearing the load. I will now let others fail if they don&rsquo;t want to share the load. We can&rsquo;t keep everyone happy all of the time. Just some people happy some of the time. And that includes our own selves.&quot; </em></p> <p><strong>This reassessment of duty and what is possible is especially critical in times of decline/decay,</strong> as the process of decline is essentially one of <em>burgeoning demands and diminishing resources:</em> there simply won&#39;t be enough to meet everyone&#39;s demands.</p> <p>This means we have to pick our priorities wisely, so we 1) don&#39;t get dragged into the abyss by over-committing our limited time and resources in a vain effort to meet the demands of everyone around us, and 2) by keeping our expectations realistic, i.e. within the boundaries of what is possible without extraordinary effort, wealth and luck.</p> <p><strong>This process of reassessment implicitly holds the promise of a fulfilling life even in times of turmoil, instability and diminishing resources.</strong> As author Michael Grant noted in his history (referenced in <a href="http://www.oftwominds.com/blogjune15/collapse-Rome6-15.html" target="resource">Part 2 of my Collapse series last week</a>) <a href="http://www.amazon.com/gp/product/0760769990?ie=UTF8&amp;tag=charleshughsm-20&amp;linkCode=as2&amp;camp=1789&amp;creative=9325&amp;creativeASIN=0760769990" target="resource">The Fall of the Roman Empire</a>, many people opted-out of the decaying Imperial system by joining monasteries that were by design self-reliant and self-supporting. It was not an easy life, as the religious organizations operating the monasteries demanded piety and plenty of hard work. But the order provided security and purpose--precisely the qualities lost as the Empire frayed at the edges.</p> <p>Some families of great wealth exited Rome and set up self-sustaining private fiefdoms in the countryside--manor houses supported by farms. Tradespeople and merchants impoverished by rising taxes found refuge as laborers on these sprawling estates. Once again, it was not the ideal setting, but it offered security, protection and purpose.</p> <p><strong>In our era, the questions that present themselves are:</strong> where shall we devote our limited resources of time, capital and effort? What is the payoff of our choices, and what are the opportunity costs, that is, what other choices must be abandoned to pursue this path? What trade-offs are we making, explicitly and implicitly? What must we forego to pursue our primary objectives? What is the balance between practicality, duty, risk, security and fulfillment?</p> <p><strong>Modern life in advanced economies implicitly promises order and security stretching on into the future.</strong> That order and security might fray is troubling, for it upsets the foundation of our decision-making and prioritizing.</p> <p>This calls to mind the wry advice, <a href="http://www.oftwominds.com/blogsept11/dessert-cart-Titanic-9-11.html" target="_blank">&quot;Don&#39;t let the dessert cart on the Titanic pass you by.&quot;</a></p> <p><strong>I place Bart&#39;s family vacations in this category.</strong> We cannot assume limitless growth, security, wealth, resources, etc. Rather, we should align life today with what we have concluded (after much consideration) to be our life&#39;s work, purpose, priorities, goals, limits and yes, pleasures, for the essential characteristic of fulfillment is a sense of doing what is most meaningful, what Ralph Waldo Emerson referenced in his famous phrase, <em>&ldquo;Trust thyself: every heart vibrates to that iron string.&quot;</em></p> <p>Yes, we must make a living, or have the means of a living. Yes, we must care for others as well as for ourselves. <strong>But as systemic solutions fall short, we must grasp the nettle of making our own arrangements in a time characterized by burgeoning demands and diminishing resources, capital and security.</strong> Fulfillment is not precluded by decline; rather, it gains in importance with each passing day.</p> <p><em>The Mobile Creative credo: trust your network, not the corporation or the state.</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="191" height="183" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150703_CHS.jpg?1435927289" /> </div> </div> </div> http://www.zerohedge.com/news/2015-07-03/what-choice-do-we-have#comments ETC Fail fixed Roman Empire Swag Fri, 03 Jul 2015 17:40:00 +0000 Tyler Durden 509221 at http://www.zerohedge.com US Equity Futures Give Up Early Gains, Nasdaq Biggest Loser http://www.zerohedge.com/news/2015-07-03/us-equity-futures-give-early-gains-nasdaq-biggest-loser <p>On what is obviously a quiet day, with US cash markets closed, US equity futures drifted quite notably weaker from overnight highs. Aside from <strong>total chaos in the last second of trading today</strong>, Nasdaq futures were down 0.3% (having been up over 0.2% at Europe opened) and The Dow dropped 80 from the highs. It appears the <strong>machines forgot it was a holiday</strong> as the standard US open to EU close trend reversal occuurred before dropping after Europe closed.</p> <p>Notice the chaotic meltup into the close...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/07/20150703_stocks.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/07/20150703_stocks_0.jpg" width="600" height="377" /></a></p> <p>&nbsp;</p> <p>It all went a bit "Simple Jack" in the last few seconds...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/07/20150703_stocks1.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/07/20150703_stocks1_0.jpg" width="600" height="376" /></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="1377" height="866" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150703_stocks.jpg?1435943182" /> </div> </div> </div> http://www.zerohedge.com/news/2015-07-03/us-equity-futures-give-early-gains-nasdaq-biggest-loser#comments Meltup NASDAQ Fri, 03 Jul 2015 17:07:21 +0000 Tyler Durden 509237 at http://www.zerohedge.com FDIC Sounds Alarm On Insolvent, "Zero Hedged" Oil & Gas Producers http://www.zerohedge.com/news/2015-07-03/fdic-sounds-alarm-insolvent-zero-hedged-oil-gas-producers <p>On Thursday, we outlined how America’s heavily indebted E&amp;P companies are about to be “<a href="http://www.zerohedge.com/news/2015-07-02/shale-drillers-about-be-zero-hedged-loss-protection-expires">zero hedged</a>” when the downside protection that accounted for some 15% of Q1 revenue for nearly half of North American O&amp;G operations rolls off.&nbsp;</p> <p>In short, the hedges that had, until now anyway, helped to forestall a terminal cash crunch are set to expire, which will have the knock-on effect of making it more difficult for the companies to maintain crucial credit lines with banks.</p> <p> As discussed yesterday, the payments from the hedges were the last line of defense for a sector that has been kept afloat in part by artificially suppressed borrowing costs and investors’ hunt for yield.&nbsp;<span style="font-size: 1em; line-height: 1.3em;">These otherwise insolvent companies have tapped wide open equity and credit markets allowing them to keep producing, which in turn has contributed to the very same depressed prices and global deflationary supply glut that bankrupted the sector in the first place.&nbsp;</span></p> <p>Now, even the regulators (who are, as a rule, always behind the curve when it comes to assessing risk) are “sounding the alarm bells”. WSJ <a href="http://www.wsj.com/articles/banks-facecurbs-onoil-gaslending-1435866277">has the story</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong><em>U.S. regulators are sounding the alarm about banks’ exposure to oil-and-gas producers, a move that could limit their ability to lend to companies battered by a yearlong slump in prices.</em></strong></p> <p>&nbsp;</p> <p><em>The Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. are telling banks that a large number of loans they have issued to these companies are substandard, said people familiar with the matter, as they issue preliminary results of a joint national examination of major loan portfolios.</em></p> <p>&nbsp;</p> <p><em>The substandard designation indicates regulators doubt a borrower’s ability to repay or question the value of the assets that back a loan. The designation typically limits banks’ ability to extend additional credit to the borrowers.</em></p> <p>&nbsp;</p> <p><strong><em>The move could add an extra obstacle to companies struggling with high debt loads amid lower prices for the oil and natural gas they produce. Banks have been flexible with troubled energy companies to avoid triggering a flood of defaults and bankruptcy filings, but regulatory pressure could force them to tighten the purse strings.</em></strong></p> <p>&nbsp;</p> <p><em>This year’s Shared National Credit review process contrasts with those in prior years, when regulators didn’t broadly disagree with the banks’ own ratings of credit facilities known as reserve-based loans, the people said. But regulators are paying closer attention to these loans amid worries that a sustained slump in energy prices could lead to big losses for banks, they added.</em></p> <p>&nbsp;</p> <p><em>Twice a year, banks themselves review the value of oil and gas deposits that companies have the right to extract and use as collateral for bank loans. Declines in commodity prices can prompt lenders to reduce their commitments to companies. The effects of such reductions can cascade through energy companies’ capital structures and require them to look elsewhere for funds.</em></p> <p>&nbsp;</p> <p><strong><em>Earlier this year, a number of energy producers sold bonds, took out term loans or sold new shares to replace shrinking reserve-based loans. While some of those moves were forced, others were pre-emptive.</em></strong></p> <p>&nbsp;</p> <p><em>Banks may turn to equity or bonds to supply additional financing to borrowers with the substandard designation, some of the people said, though both are costlier for companies than loans.</em></p> <p>&nbsp;</p> <p><em>The analysts also said the prolonged period of lower revenue could push more companies closer to violating agreements with creditors to maintain certain profitability levels, and that they expect <strong>stock investors to be “more discerning” when offered new shares from heavily indebted companies.</strong></em></p> </blockquote> <p>In other words, if the BTFD-ers get wise to the fact that these companies are insolvent and that throwing money at equity and debt offerings only serves to allow them to lumber around, zombie-like in a desperate attempt to wait out what they hope is a temporary slump in crude prices rather than a fundamental commodity reset in the face of depressed global demand, the sucker bid will dry up just as HY spreads blow out and the hedges roll off, leaving Wall Street to clean up the mess.&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/06/20150703_HYENERGY.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/06/20150703_HYENERGY_0.jpg" width="600" height="338" /></a></p> <p>And as for waiting out the crude price slump, well, things aren't moving in the right direction...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/06/20150703_crude.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/06/20150703_crude_0.jpg" width="600" height="326" /></a></p> <p>...which means that in the absence of the home gamer, E*Trade bid, a buyer of last resort may have to double down...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/06/SNB.png"><img src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/2015/06/SNB_0.png" width="600" height="337" /></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="891" height="503" alt="" src="http://www.zerohedge.com/sites/default/files/images/user92183/imageroot/20150703_HYENERGY.jpg?1435941220" /> </div> </div> </div> http://www.zerohedge.com/news/2015-07-03/fdic-sounds-alarm-insolvent-zero-hedged-oil-gas-producers#comments Borrowing Costs Comptroller of the Currency Creditors Crude Federal Reserve Natural Gas Office of the Comptroller of the Currency ratings Fri, 03 Jul 2015 17:05:00 +0000 Tyler Durden 509234 at http://www.zerohedge.com The Fourth Turning – An Interview With Neil Howe http://www.zerohedge.com/news/2015-07-03/fourth-turning-%E2%80%93-interview-neil-howe <p><em>Submitted by Erico Matias Tavares of <a href="https://www.linkedin.com/pulse/fourth-turning-interview-neil-howe-erico-matias-tavares">Sinclair &amp; Co.</a></em><a href="https://www.linkedin.com/pulse/fourth-turning-interview-neil-howe-erico-matias-tavares"></a></p> <p><strong>The Fourth Turning – An Interview With Neil Howe</strong></p> <div class="article-body" dir="ltr"> <p><em>Neil Howe is a historian, economist and demographer who writes and speaks frequently on generations, the economy and social change. He is America’s leading thinker on who today’s generations are, what motivates them and how they will shape the nation’s future. </em></p> <p><em>He has authored nine books on American generations, many co-authored with William Strauss, including Generations (1991), The Fourth Turning (1997), Millennials Rising (2000) and, most recently, Millennials in the Workplace (2010). In relation to The Fourth Turning, the Boston Globe wrote “If Howe and Strauss are right, they will take their place among the great American prophets.”&nbsp;</em><em>He has also authored numerous books and policy reports on demographics, most recently The Graying of the Great Powers (2008).</em></p> <p><em>He is a senior associate at the Center for Strategic and International Studies, where he helps lead the Global Aging Initiative. He holds graduate degrees in history and economics from Yale University. </em></p> <p><strong>Erico Tavares: Neil, we are delighted to be speaking with you today. Your work has influenced many people over the years, including us. We read the “Fourth Turning” many years ago, and had almost forgotten about it. Then 2008 happened and we felt that this time was indeed different. Upon re-reading your book we were stunned by many of the things you had predicted over a decade ago. For the people less familiar with your work, could you briefly describe what a Fourth Turning is, which as we understand it results from a specific generational sequence that you have identified?</strong></p> <p>Neil Howe: A turning, as you define it, is a unit of history which is roughly the length of a social generation, about 20-23 years long. We identified these units looking deeply at the history of America and of other countries around the world, and originally discovered this idea of turnings by analyzing the generational history over many centuries. What we noticed is that not only social generations are very different, they also tend to arrive in a certain pattern, a certain order. Certain types of generations always follow other types. And this in turn is connected to a certain order and rhythm in history itself.</p> <p>For example, America’s great crises – certainly our greatest total wars – have arrived in our history roughly at intervals of a long lifetime, including the War of the Spanish Succession, the American Revolution, the Civil War all the way to the Great Depression and World War II. That’s kind of the sequence.</p> <p>These are the great Fourth Turnings of American history. And we call them so because of where they are in a cycle of different mood shifts that we observe. The Second Turnings by contrast happen almost in between these crises, and that’s when you get the great awakenings in American history. These are the great cultural upheavals.</p> <p>So in a Fourth Turning we remake the outer world: the economy, politics, empire, technology, infrastructure… In Second Turnings we remake the inner world: religion, values, art… This basic yin and yang of looking at a multiplicity of social trends is something you don’t notice unless you are looking at all of it. And once you do, you can see how these intergenerational patterns move to the same beat.</p> <p>I should also add that within this cycle there is an interaction between how different generations are shaped in childhood, coming of age when they are young. They then become parents and leaders as they reach mid-life and then go on to shape history, which in turns shapes the youth of a younger generation. You can see how that works. It’s a fully integrated and complete cycle.</p> <p>And it's one of the few cycles – whether you are talking about war, realigning elections, cycles in family life or the long cycle in the economy – whose periodicity is strictly determined by the phases of life of a human being. One of the problems that long cycle theorists have had, be it 60-year or 100-year cycles or whatever, is that they often wonder what governs these cycles. Why isn’t it 2 years or 5 years?</p> <p>So our research shows&nbsp;a connection with the biology of human life.</p> <p><strong>ET: Yes, many historians, economists and even politicians have studied the cycles of history, and you are correct, they tend to link these cycles with nature and in some cases more obscure things like planetary movements. What your work has revealed in some fascinating detail is that they are in many cases driven by the different generations as they come and go. Each generation tends to be different from the one that preceded it. We tend to think of society as a continuation but this is generally not the case, as you point out... </strong></p> <p>NH: Yes, each generation tends to be different not only because they are so encouraged by their parents but also as a reaction against the world created by the mid-life generation in charge. And that leads to a constant turning in the direction of each new generation. We actually identified four different kinds of generations, each coming of age in one of these different turnings we talked about. The ageing of each generation into a new phase of life is what gives each of these turnings its distinct mood and emotional feel.</p> <p><strong>ET: In fact you were the first to coin the term “Millennials”, which groups that generation of people born from the 1980s onward...</strong></p> <p>NH: Yes, that’s correct. That was in our 1991 book “Generations”. The oldest millennial alive then was only about 8 years old. It is interesting to remember that at that point Gen X-ers did not even have a name. The book that named that generation, Doug Coupland’s “Generation X”, was still a year away from being published.</p> <p>And so, if Gen X-ers already don’t feel bad enough about their lives, they can reflect on the fact that the generation that came after them was named before theirs was!</p> <p><strong>ET: That’s right! As Gen X-ers ourselves we had never thought about that…</strong></p> <p>NH: Well, they did a study a few months ago on which generation was referred to the most in corporate earnings calls over a certain recent time period. The #1 was Boomers, right behind them were the Millennials – in fact only just behind them, and #3 were Gen X-ers – way, way behind.</p> <p>I get this complaint a lot from Gen X-ers and I think it is legitimate. People have never quite paid attention to their generation coming in between.</p> <p><strong>ET: Do Fourth Turnings always occur after Third Turnings, or are we merely speculating about a potential generational outcome? </strong></p> <p>NH: Historically the answer is “yes”, it always comes in that order. In fact, the regular nature of the order is really striking. I’m not an historical determinist, in the sense that certain events or catastrophes have greatly shaped turnings in the past – for instance, in the 19th century we had a very quick turning during the Civil War, and we see similar patterns in other countries as well – so we are not saying that the length and the order of the turnings is exact. But the overall pattern is overwhelming.</p> <p>I think that today most Americans are aware that we are in a social mood much more similar to the 1930s – and we can go through many other parallels – than the 1950s, the 1960s or&nbsp;even the 1970s.</p> <p><strong>ET: And typically how long can such a turning last? You mentioned about 20-23 years. </strong></p> <p>NH: Well, that has the same variability as the generations themselves. They can vary from 18 years to maybe about 23 years. It can be longer or shorter depending on the accidents of history, but overall it is aligned with the basic cycle of life of most people. It keeps coming back to that governor of time. So it can vary, kind of like the seasons. Spring can come a little earlier one year, Winter late in another.</p> <p>When we talk about periodicity, this is not a simple physical system like a planet orbiting around the Sun, which is very exact. This is more like a complex system which has different factors at play, regressing or being attracted to a certain kind of periodicity. This is typical of such complex systems. And obviously human society is a complex system.</p> <p><strong>ET: Within the limitations that you just described, we can reasonably predict when those “turnings” are likely to occur, but not the magnitude of the turning in terms of socioeconomic changes. When we look back at history some turnings were very profound, others less so. Is this correct?</strong></p> <p>NH: Yes, and I also think that the sense of urgency of a Fourth Turning and how the outer world and the world of institutions is reconstructed, can differ from one turning to another.</p> <p>Now, it is true that all the major wars in American history have always arrived in a Fourth Turning, but I don’t see it as necessary that a Fourth Turning requires a total war. It could be some other sense of urgency pushed by, for instance, economic necessity.</p> <p>The sense of collective urgency to solve a dire problem which is perceived to threaten the very future existence of this society is something that Fourth Turnings do have in common. That is not necessarily a war, but I think it will be something with a strong collective incentive for society to act in a way that it wouldn’t otherwise have in other turnings.</p> <p><strong>ET: What type of economic conditions are typically associated with Fourth Turnings? You established a parallel with the 1930s which was a very challenging time with the Great Depression and the like. In addition to that societal objective, that urgency, are there any economic factors that tend to occur in a Fourth Turning?</strong></p> <p>NH: We looked very broadly at this. The 1930s was a decade of deflation, competitive trade wars, chronic underemployment of workers and capital, all of which are being experienced today. Alvin Hansen, who was the great popularizer of John Maynard Keynes in America, in 1937 coined the term “secular stagnation”, which has been recently revived by Larry Summers today.</p> <p>And you look too at some of the demographic phenomena going on: declining migration rates – we’re certainly seeing declining immigration in the US over the last few years, declining fertility rates, declining mobility (people moving around)...</p> <p>And some of them are not negative at all. Some of them are positive in fact. One of the things we’ve noticed is that from the early 1930s into the 1940s there was a pretty dramatic decline in crime. That is something that we have experienced over the last 15 or 20 years, in fact a very substantial decline in youth violence, which is one of the hallmarks of the Millennial generation – how risk averse they are and how little violence we see from this generation.</p> <p>You can go across a long list. Another interesting parallel is really an incredible shift that we see in America over the last 20 years towards the great strengthening of the extended family. Back in 1980 only 11% of 25-34 year-olds lived with their parents or other older family members. Today it is 23%. We have tens of millions of young people living in extended families. This is something that we also saw in the 1930s. In both cases it is partially motivated by the economy, but also because the generations personally got along very well.</p> <p>It is a complete closing of the generation gap on values. This is something we have always seen in Fourth Turnings.</p> <p><strong>ET: That is fascinating! So based on everything that you are describing, are we already in a Fourth Turning? And when did it start?</strong></p> <p>NH: 2008 is when it started. We had many readers and people who came up to us and said, “Well, it actually started in 2001” and we’ve always said “No!”</p> <p>Part of the reason is that we can time turnings by looking at generational ageing, and typically a turning begins just after each generation reaches a certain age because they enter a new phase of life. In 2001 that’s too early because Millennials weren’t really coming of age into their adulthood, Boomers weren’t fully retiring and Gen X-ers weren’t entering mid-life. So we thought the timing was off.</p> <p>We believe 2008 is a much better political and economic divide and will eventually be perceived as such. We perceive these turning points in history better in retrospect than we do up close.</p> <p><strong>ET: We understand why many people think that 2001 is the critical turning point because after 9/11 America was never the same again, both domestically and abroad…</strong></p> <p>NH: I think that mainly abroad. But in terms of the differences since 2001, we still had a bubble psychology in the economy very much alive and it did not take much to come back to that by 2003-04-05-06... And we also had almost like a celebrity circus, kind of a roaring 1990s tone in our household finances and how people were looking to the future.</p> <p>I think all of that has really shifted. It’s only after 2008 that issues like standard of living growth, income inequality and fundamental doubts about the ability of America’s economy to recover, came to the forefront, as well as much longer term questions about geopolitical anarchy.</p> <p>By the way, here’s another interesting parallel with the 1930s: a world that no longer has any great power or congress of powers ruling over it anymore. Back then this happened after the collapse of the League of Nations. We see that today nobody is running the world any more. We see authoritarian regimes doing what they want in their own neighborhoods.</p> <p>This has come back to cast a great shadow of doubt to both political leaders and investors.</p> <p><strong>ET: The commonalities are indeed striking when we look at history from your vantage point. Today we benefit from insightful research that people like yourself have conducted over many years, so we can get a sense of what’s potentially&nbsp;ahead; perhaps people back then were much less aware. And yet we still seem incapable of changing course. There is just too much momentum, too much political bickering and too many opposing forces preventing us from reaching a consensus, or so it seems. This may make all the ramifications of a Fourth Turning even more likely. Do you agree with this?</strong></p> <p>NH: Yes, in fact one of the aspects of a Third Turning is that nothing much really happens in public life. You look back at the 1990s, certainly after the end of the Cold War, what happened politically and legislatively that was really important? Even up until the Great Recession, what happened?</p> <p>But after 2008 we saw last minute measures being implemented with desperate expedience, to keep the economy afloat. It’s amazing if you look back at the prior 20 years how little we have done in any way to legislate and form a collective public policy to change even the basic direction, or just adjust the direction, of our country.</p> <p>This is typical. We have seen eras like that before in American history and what happens – and what people forget – is that public history does not always move in the same way. Decades go by and then suddenly certain events hit, and everything changes on a dime. Huge changes occur! And it’s almost like a seismic event, you know, suddenly the tectonic plates collide…</p> <p><strong>ET: A tipping point is reached…</strong></p> <p>NH: Right. And suddenly too. You often find that one generation’s power – its senior leaders – ebbs and another generation takes over the day after. What we will see now is a time when Boomers ebb and Millennials suddenly discover that they are actually running things, setting agendas and the like. And I really think that is the next major change for the country we are going to see.</p> <p>Millennials are much more collective in their orientation and they are much more optimistic about the future. We do a lot of surveys on political attitudes by age and Boomers are by far the most pessimistic of all generations and the most apocalyptical in their values and orientation. Whereas Millennials are much more practical, collectivist and much more optimistic about how things are going to turn out.</p> <p>This is the kind of generation that typically rises right around the time a Fourth Turning occurs. And again the last time this happened was in the 1930s. What was the new generation that everyone saw coming of age? It was the G.I. generation which was chronically optimistic. As kids they went to see Mickey Rooney in Hollywood movies; they accentuated the qualities of their own generation.</p> <p>After World War II ended, their Boomer kids eventually began to hate the positivism of their fathers, the G.I.s... But we forget that during the 1930s it was that generation that added hope for the future and held the nation together through that period of crisis.</p> <p><strong>ET: It seems that Millennials will have a very busy schedule indeed, given our current predicaments... We talked a lot about the US, but you have also looked at other countries around the world. Is Europe in a cycle consistent with that of the US from a generational standpoint? </strong></p> <p>NH: Yes, we see Europe reaching as far as Russia, the English-speaking world and East Asia all having strong generational parallels.</p> <p>They all had their World War II generation – probably because that and the Great Depression were global events. And they all had their silent generation, the little kids of World War II, which gave birth to leaders like Jacques Delors in Europe who constructed the European Union as a way to contain war. That was something which that generation never wanted to see again.</p> <p>We have Boomers in America, who were certainly huge in Europe – the 68-ers in France and Germany and the euro communism youths – which embodied the clashes and terrific problems with their parents. In China this is the Red Guard generation…</p> <p><strong>ET: So even China is following the same cycle?</strong></p> <p>NH: Yes, think about it. Our G.I.s were their Long March generation which was a huge civic generation, our Boomers were their Red Guards, which basically tried to destroy 2000 years of culture and replace it with something new. It is very similar.</p> <p>Today, we talk about our Millennials, China talks about their Little Emperors, you know, the generation which never tasted bitterness, who are incredibly positive about the future and who trust their parents to educate them and wanting to join something big – the China Dream.</p> <p>We’re seeing this play out in the Far East in ways that are both fascinating and at times a little disquieting. Every major Asian power is now governed by a leader who has no memory of World War II. That’s true for Modi in India, Shinzo Abe in Japan, Xi Jinping in China and Park Geun-hye in South Korea.</p> <p>And this is the old lesson of Arnold Toynbee, of what he calls the great war cycle that arose every 80 years or so: it’s when the generation who doesn’t remember the last great catastrophe finally become the senior leaders.</p> <p>You look at what is going on in Asia and you sense a lack of that collective risk aversion that you saw with older leaders who did remember some of the terrible things that happened earlier in the 20th century.</p> <p><strong>ET: That’s an incredible insight. Is there any country or region right now that is in more optimistic turnings at this point?</strong></p> <p>NH: I don’t see it as more or less optimistic. You know, a Fourth Turning is necessary, it’s both good and bad. I like to emphasize that to people. In some ways it is like a forest fire: it burns away the brush and allows new seedlings to grow.</p> <p><strong>ET: Well, you are talking to a Gen X-er who by definition are pessimistic…</strong></p> <p>NH: Well, look at it this way! If the S&amp;P500 were to come down by 50% - and, my God, if we have a reversion to the mean in corporate earnings as well as a decline in some of these lofty PE valuations this might actually happen – look at the bright side. The Millennial generation can finally buy into America’s future at a good price. Look at what they are facing right now: very little return on their savings and very lofty prices that they have to pay to invest in their future.</p> <p>So we often forget that these wrenching dislocating financial events, particularly for older generations, can create opportunities for the young, and often create space for something more durable for the times to be built.</p> <p>I think we are going to see a lot of creative destruction both politically and socially. In fact we are seeing it this week with Grexit becoming widely recognized as more probable than not. I think this will lead to an unravelling of Southern Europe from the Euro and I think that the heightened tensions – from the Middle East to Putin’s Russia to the Far East – and again the fact that nobody is in charge, not even pretends to be in charge, will create problems.</p> <p>For those of us remembering earlier times, this is disquieting, disorienting... I think better things will grow out of it, in fact they have to. Right now the youth of the world in the midst of these tensions are not happy. Their needs are not being met from the systems that are in place.</p> <p>So I’ll just summarize it with Schumpeter’s phrase: creative destruction. That’s how I prefer to see what happens in a Fourth Turning.</p> <p><strong>ET: Actually another field that we believe urgently needs some creating destruction is mainstream economic thinking. One thing that is striking about your work is how accurate you have been so far in advance. And yet – not wanting to pick on anyone in particular – very few mainstream economists could see 2008 coming, if any. Is a deeper understanding of demographics and this generational interplay what is lacking in mainstream economics today?</strong></p> <p>NH: Oh, there’s so much to talk about mainstream economics, I really would not know where to begin…</p> <p><strong>ET: If you had to pick one thing...</strong></p> <p>NH: I would say in general the narrowness of the way economics is now taught and published and its inability to embrace a much more multidisciplinary way of bringing in the other social sciences is a big limitation the longer it comes to looking into the future.</p> <p><strong>ET: One of your companies publishes research which is widely read by top hedge funds and institutional investors. Is this based on the work that you have done over the years to enhance our understanding of possible economic, financial and societal outcomes, particularly in light of the limitations of mainstream economics? </strong></p> <p>NH: Yes, our company <a rel="nofollow" href="http://www.saeculumresearch.com/" target="_blank">Saeculum Research</a> publishes research to institutional investors.</p> <p>By the way “saeculum” is the Latin word for century, but in this derivation not so much referring to 100 years but rather the Etruscan meaning which is a long human life. And we introduced that word in our book The Fourth Turning to describe the full cycle. You can sort of get my picture – the four seasons of a person’s life.</p> <p>To our clients at Saeculum what we focus on is – more important to them than the long cycle – insights into how breaking generational changes at this moment are reshaping individual industries, from airlines to hospitality to artificial intelligence to big data. So we are looking very closely at people’s behavior, consumers, workers and investors, and looking at how a longer view helps us get a much more accurate fix on how things are changing this year and impacting the various brands and companies that they are investing in.</p> <p><strong>ET: That’s fascinating work. In addition to your books, which we vividly recommend, is there a site where people can go to get your latest insights and updates on your thinking?</strong></p> <p>NH: They can go to our <a rel="nofollow" href="http://www.saeculumresearch.com/" target="_blank">website</a> and sign up to a free newswire, where we are constantly alerting people, daily or weekly at their wish, on demographical and generational events and news and reports that we find interesting. There are also a number of links to publications that we have done, my own opeds and other things that we have written. So it’s a very important portal for entering into our world.</p> <p><strong>ET: Neil, this has been fantastic. Thank you very much for taking time off your busy schedule to talk to us. All the best with your work – hopefully the Fourth Turning will turn out to be OK!</strong></p> <p>NH: We certainly hope so! Thank you.</p> </div> <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="469" height="400" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/neil%20howe.jpg?1435939484" /> </div> </div> </div> http://www.zerohedge.com/news/2015-07-03/fourth-turning-%E2%80%93-interview-neil-howe#comments China Demographics European Union Four Seasons France Germany Great Depression India Institutional Investors Japan John Maynard Keynes Larry Summers Maynard Keynes Middle East Recession Social Mood Trade Wars Fri, 03 Jul 2015 16:29:22 +0000 Tyler Durden 509231 at http://www.zerohedge.com This Is What It Looks Like When Central Banks Lose Control http://www.zerohedge.com/news/2015-07-03/what-it-looks-when-central-banks-lose-control <p>In the utopian world of US equities - where every dip is a buying opportunity and &quot;The Fed&#39;s got your back,&quot; - it is blasphemous for anyone to suggest this state of affairs cannot go on forever is extreme. However, as China encountered an accelerated version of the farce that the US has experienced in the past few years, the same &quot;The PBOC&#39;s got your back&quot; mentality dominated every fundamental fact and <strong>central bank omnipotence was doctrine</strong>. That is until 2 weeks ago... when <strong>modest efforts to rein in exponentially-growing leverage pricked the new normal&#39;s narrative</strong>. Now every &quot;save&quot; by the government and every plunge protected is sold into by a desperate population burned...</p> <p>&nbsp;</p> <p>This is what it looks like when a central bank loses control...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/07/20150703_China.jpg"><img height="319" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/07/20150703_China_0.jpg" width="600" /></a></p> <p>&nbsp;</p> <p>Couldn&#39;t happen here? That&#39;s what the Chinese said 2 weeks ago!</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/07/20150703_China1.jpg"><img height="318" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/07/20150703_China1_0.jpg" width="600" /></a></p> <p>&nbsp;</p> <p>And by the way - it already did happen in America - twice...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/07/20150701_EOD12_1.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/07/20150701_EOD12_1_0.jpg" style="width: 600px; height: 323px;" /></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="1508" height="803" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150703_China.jpg?1435926971" /> </div> </div> </div> http://www.zerohedge.com/news/2015-07-03/what-it-looks-when-central-banks-lose-control#comments Central Banks China New Normal Fri, 03 Jul 2015 16:05:00 +0000 Tyler Durden 509219 at http://www.zerohedge.com Crude Carnage Continues - WTI Hits $55 Handle, Brent Tests $60 http://www.zerohedge.com/news/2015-07-03/crude-carnage-continues-wti-hits-55-handle-brent-tests-60 <p>Trading at its lowest since early April, WTI Crude has re-tumbled again today to a $55 handle as Greferendum deleveraging and Iran chatter send futures down 2.5%... Brent crude neared a break below the crucial $60 level in early trading.</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/07/20150703_crude.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/07/20150703_crude_0.jpg" width="600" height="326" /></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="1592" height="866" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150703_crude.jpg?1435938981" /> </div> </div> </div> http://www.zerohedge.com/news/2015-07-03/crude-carnage-continues-wti-hits-55-handle-brent-tests-60#comments Crude Iran Fri, 03 Jul 2015 15:56:48 +0000 Tyler Durden 509230 at http://www.zerohedge.com