en What Is Causing China's Yield Curves To Invert: UBS Answers <p>Something strange is taking place in China, and we are not talking about the largely optical, mostly irrelevant first downgrade of China by Moody's since 1989 (which still managed to <a href=";utm_medium=social&amp;;utm_campaign=buffer">unleash diplomatic hell in Beijing</a>), and in which the rating agency simply admitted what everyone else already knew about the 300% debt/GDP economy. </p> <p>The bigger issue, as we noted previously, is that <a href="">both the short-term</a>...</p> <p><strong>&nbsp;</strong> </p> <p><a href=""><img src="" width="499" height="232" /></a></p> <p>and <a href="">conventional Chinese funding </a>market appears to be breaking... </p> <p><img src="" width="499" height="260" /></p> <p>... because as of this week, not only has the one-year Shanghai Interbank Offered Rate, or SHIBOR, exceeded the Loan Prime Rate for the first time ever, meaning Chinese banks' cost of borrowing is now <strong>above </strong>the rate they charge customers, but the Chinese government bond yield curve has inverted in not just one, <strong>but two places, </strong>with both the 3s5s and the 7s10s negative.</p> <p>&nbsp;</p> <p><img src="" width="499" height="261" /></p> <p>The question everyone wants answered is <em><strong>why.</strong></em> One attempt at just that, came today from UBS which first give the blow by blow of how we got there: </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>As market concerns about financial regulation continued in the first half of May, bond yields kept rising, with the 10-year CGB yield reaching 3.69% on 10 May. The People's Bank of China (PBoC) renewed MLFs and increased net liquidity injection through OMOs. April economic data, such as FAI released by NBS, came in weaker than market expectations. More importantly, there were media reports that the China Banking Regulatory Commission (CBRC) showed a soft tone in requirements for banks to reach standards. Besides, the central bank's statement on strengthening coordination in financial regulations eased market concerns about financial regulation. </p> </blockquote> <p>As a result of these factors, <strong>the back end of the yield curve declined while the front end to continued rising moderately. </strong>According to Chinabond yield curves, as of 19 May 2017, 1-year, 5-year and 10-year CGB yields were 3.48%, 3.68% and 3.63%, respectively, up 9bp, 20bp and 7bp compared with 5 May 2017. Yields of 1-year, 5-year and 10-year policy financial bonds (CFBs; we use the bonds issued by the Export and Import Bank of China as examples) were 4.11%, 4.45% and 4.51%, respectively, up 21bp, 10bp and 6bp compared with 5 May 2017.</p> <p><a href=""><img src="" width="500" height="206" /></a></p> <p>UBS notes that from the historical data of term spreads, we can see that inversion of 7-year and 10-year has happened more often, which could be attributed to better liquidity in the secondary market for 10-year bonds, <strong>but the recent greater than 10bp spread between 7-year and 10-year yields is still the first time that has happened over the past few years. </strong>The inverted 3s/10s and 5s/10s curve is also rare to see. </p> <p>And while liquidity may be a factor, UBS concedes that liquidity gaps have always existed and may not be the main reason for the recent curve inversion. As such, the Swiss bank admits that "<strong>we need to consider some other factors.</strong>"</p> <p>Below are some of the incremental factors besides liquidity:</p> <ul> <li>In terms of CGB issuance in the primary market, auction results in May showed that <strong>auction rates were all higher than market expectations</strong>, except for the 50-year CGB auction, which came in lower than the market's expectation. Also, the spread between auction results and market expectations was larger for the less liquid tenors. </li> <li><strong>That indicates that during weak market sentiment, a negative feedback loop formed between the primary market and secondary market. </strong>Besides, from an allocation demand perspective, insurance companies have shown increased demand for CGBs in recent months, in addition to banks, the major buyers of CGBs, which may provide support to long-tenor bonds.</li> </ul> <p><a href=""><img src="" width="500" height="424" /></a></p> <p>More importantly, however, UBS notes that the inverted curve <strong>also reflects a contradiction between market expectations on policies and economic fundamentals. </strong></p> <p><strong>&nbsp;</strong>On one hand, <strong>the slowdown of economic growth may prevent the back end of the yield curve from further going up. </strong>On the other hand, financial institutions' <strong>funding costs have kept rising but the financing costs for the real economy measured by loan rates have not risen that much. </strong>And investors can hardly expect the monetary policy to ease in the current circumstances. </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <ul> <li>We think the rise in financial institutions' funding costs shows their intention to maintain the current asset/liability scale. From this perspective, the deleveraging process may continue for a longer period, while the change in economic fundamentals has not been enough to trigger a reversal of the monetary policy tone. We think in the short term, the yield curve is more likely to repair by having the back end go up again when the gap between market expectations and implementation of financial regulations appears again. Among long-tenor CGBs, the spread between 7-year and 10-year yields is quite large, which has made the relative value of 7-year CGBs rise much higher, in our view. We think when market sentiment calms temporarily, the yield of 7-year CGBs may adjust downward and provide a tactical trading opportunity. However, we expect the 10-year CGB yield to fluctuate at a high level, with a short-term cap around 3.7-3.8%. Although economic fundamentals may put some limit on the rise of the 10-year level, we don't think there is much room for downside adjustment. Over a longer period, considering the progress of deleveraging, we think investors still need to pay attention to the renewal of banks' funds that are under management of non-bank financial institutions in H2. </li> <li><strong>Regarding the front end of the yield curve, </strong>although we think room for money market rates to go lower is limited in the short term, market expectations about liquidity conditions could stabilize, given PBoC's recent tone, and that may create room for the front end of the CGB curve to go a bit lower. Over a longer period, we think <strong>if a more apparent economic slowdown happens in H2 and forces monetary policy to adjust, a larger opportunity for the front end to move down may appear.</strong> </li> </ul> </blockquote> <p>The above not only why the CGB curve is inverted, but also why SHIBOR1Y is now above the LPR.</p> <p><a href=""><img src="" width="500" height="393" /></a></p> <p>And while that may answer why both the CGB and the short-term funding yield curves are inverted, another, just as pressing question emerges: assuming UBS is right, and these yield oddities are merely "contradictions" between market reality and hopes, what happens when this divergence between fundamentals and expectations converges, and more importantly, what will such a mean reversion look like for China's already bizarrely trading financial assets.</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="597" height="469" alt="" src="" /> </div> </div> </div> Banking Regulatory Commission Bond Bond Business Central bank China Chinese government Economy Finance Financial markets Financial Regulation Fixed income analysis Fixed income market Insurance Companies Market liquidity Market Sentiment Mean Reversion Monetary Policy Money People's Bank Of China Primary Market Rating Agency Reality Recession UBS Yield Curve Yield curve Thu, 25 May 2017 03:03:58 +0000 Tyler Durden 596606 at Comey 'Friend' Warns Trump "If I Were You, I'd Be Scared" <p>First it was anonymous colleagues, then his dad, and now it&#39;s a &#39;friend&#39; of Jim Comey that CNN reports the fired FBI director has a story to tell, adding that he would be scared if he were President Trump.</p> <p><img height="307" src="" width="549" /></p> <p><a href=""><em>As The Hill reports,</em></a> Benjamin Wittes, who describes himself as a Comey confidant, said on CNN when asked how Comey was doing.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;He&#39;s going to be fine. <strong>He&#39;s not somebody who spends time feeling sorry for himself,&quot; </strong></p> <p>&nbsp;</p> <p>&quot;I thought it was interesting and very telling that he declined an opportunity to tell his story in private. He clearly wants to do it in a public setting,&quot;</p> <p>&nbsp;</p> <p><strong>&quot;I think that&#39;s a reflection of the fact that this is a guy with a story to tell. I think if I were Donald Trump that would scare me a lot.&quot;</strong></p> </blockquote> <p>This comes days after a report said Comey is expected to testify that he believes Trump was deliberately trying to meddle in the FBI&#39;s investigation of Russian interference in the presidential election.</p> <p>One wonders how long until Ray Dalio, Comey&#39;s former boss, and until <a href="">recently a fan of Donald Trump</a>, is also asked to comment (off the record) on the upcoming Pay Per View show&nbsp; of the century, as Comey finally sits down to &quot;clear the air.&quot;</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="549" height="307" alt="" src="" /> </div> </div> </div> Director of the Federal Bureau of Investigation Dismissal of James Comey Dismissal of United States Attorneys controversy Donald Trump Donald Trump Entertainment FBI Federal Bureau of Investigation Federal Bureau of Investigation Human Interest James Comey Ray Dalio Russian interference in the 2016 United States elections United States United States intelligence agencies Thu, 25 May 2017 02:57:30 +0000 Tyler Durden 596543 at Angry China Slams Moodys For Using "Inappropriate Methodology" <p>The market may have long since moved on from Moody's downgrade of China to A1 from Aa3 (by now even long-only funds have learned that in a world with $18 trillion in excess liquidity, the opinion of Moodys is even more irrelevant), but for Beijing the vendetta is only just starting, and in response to Tuesday's downgrade, China's finance ministry accused the rating agency of applying "<strong>inappropriate methodology" </strong>in downgrading China's credit rating, saying the firm had <strong>overestimated the difficulties faced by the Chinese economy and underestimated the country's ability to enhance supply-side reforms.</strong></p> <p>In other words, Moody's failed to understand that 300% debt/GDP is perfectly normal and that China has a very explicit exit strategy of how to deal with this unprecedented debt load which in every previous occasion in history has led to sovereign default. </p> <p>The Ministry of Finance reaction came after Moody's first, and very, very long overdue, downgrade of China since 1989 citing concerns about risks from China's relentlessly growing debt load as shown below. </p> <p><a href=""><img src="" width="500" height="365" /></a></p> <p>"China's economy started off well this year, which shows that the reforms are working," the ministry said in a statement on its website.&nbsp; Actually, it only shows that China had <a href="">injected a record amount of loans into the economy</a> at the start of the year, and nothing else. And now that the credit impulse is fading, the hangover has arrived.</p> <p><strong>&nbsp;</strong> </p> <p><a href=""><img src="" width="500" height="314" /></a></p> <p>Moody's on Wednesday also downgraded the ratings of 26 Chinese government-related non-financial corporate and infrastructure issuers and rated subsidiaries by one notch. It also downgraded the ratings of several domestic banks, including the Agricultural Bank of China Limited's long-term deposit rating from A1 to A2.&nbsp; It also eventually downgraded Hong Kong and said credit trends in China will continue to have a significant impact on Hong Kong's credit profile due to close economic, financial and political ties with the mainland. </p> <p>So how did China defend its position? The same way US companies fabricate their own numbers to confuse shareholders: with "pro forma" arguments.</p> <p>For example Moody's noted that the importance Chinese authorities have attached to maintaining robust growth would result in sustained policy stimulus, and such government spending would contribute to rising debt across the economy. "We expect the government's direct debt burden to rise gradually toward 40 percent of GDP by 2018 and closer to 45 percent by the end of the decade," Moody's noted. </p> <p>To this, the <a href=";utm_medium=social&amp;;utm_campaign=buffer">MOF responded that government </a>bonds reached 27.33 trillion yuan ($3.97 trillion) at the end of 2016, or about 37% of the country's GDP. The proportion is much lower than the 60% picket line delimited by the EU, the ministry said.&nbsp; Liu Xuezhi, a senior analyst at the Bank of Communications, said that the proportion of government bonds to GDP has been continuously dropping since peaking in 2013, largely due to the government efforts to manage debt.</p> <p>"I think Moody's reasons are debatable," he said. </p> <p>Of course, what the MOF forgot to mention is the roughly <strong>200% in corporate debt issued in large part by entities that are State-owned enterprises</strong>, and which the government for mostly refuses to go bankrupt over fears of mass riots, civil disobedience and even war.&nbsp; As a result <strong>virtually all of China's corporate debt is effectively sovereign.</strong></p> <p>That did not prevent China from spinning more propaganda. </p> <p>Zheng Xinye, associate dean of the School of Economics at the Renmin University of China, also told the Global Times on Wednesday that the government has taken effective measures, such as bond swaps and perfecting the issuance and management system of local government debt, to rein in bond risks.&nbsp; Liu added that China's fiscal revenue has been rising since 2009. "Besides, the Chinese government has income channels which other countries don't, such as land transfer money and State assets. Therefore, I don't think China would be facing serious financial pressure, at least not in the next few years," he told the Global Times on Wednesday. </p> <p>Zheng also said that the government wouldn't need to use fiscal measures to stimulate growth, as the effects of supply-side reforms would sustain the economy's momentum.&nbsp; He may have even said it with a straight face. </p> <p>Additionally, China took offense at Moody's forecast that China's growth will slow to 5% in five years, because of a smaller working-age population and continuing production slowdown.&nbsp; </p> <p>To this, Liu said the chances are very slim for China's economy to slip to 5 percent in the next five years. "I believe China's GDP growth will remain above 6.5 percent at the end of 2020, as China has abundant room for policy adjustments to support economic growth," Liu said. It has even more abundant room to goalseek its data to whatever it wants, however, without the benefit of "creating" 40% of GDP in the form of new credit, China's economy will implode. </p> <p>Zheng disagreed, and said the economy has not shown any signs of sliding. </p> <p>One place where China's apparatchiks were right is that Moody's downgrade would hurt overseas investor confidence in the Chinese market or collaborations with domestic companies. </p> <p>"It would also make it more difficult for domestic companies to seek financing in overseas markets," Liu noted.&nbsp; But Liu said domestic financial markets would not be affected as much, because they're not entirely open. And for a good, if scary, explanation of what happens as China's debt issuance shift domestically, read this morning Bloomberg piece "<a href="">China's Downgrade Could Lead to a Mountain of Debt</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="500" height="300" alt="" src="" /> </div> </div> </div> Bond BRIC Business China China Chinese government Credit rating agencies default Economy Economy of China European Union Finance Hong Kong Ministry of Finance Money Moody's Investors Service National debt of China Rating Agency ratings Renmin University of China School of Economics Sovereign Default Standard & Poor's United States federal government credit-rating downgrades Yuan Thu, 25 May 2017 02:55:33 +0000 Tyler Durden 596607 at The Trump Collapse Scapegoat Narrative Has Now Been Launched <p><a href=""><em>Authored by Brandon Smith via,</em></a></p> <p><a href=""><em><img alt="" src="" style="width: 485px; height: 303px;" /></em></a></p> <p>Last week was a rather crazy one for the news feeds, with cyber attacks and &ldquo;Comey memos&rdquo; and a host of other wild mayhem, it may have been difficult for many people to keep track of it all. <strong>That said, there was one event that I think went partly under the radar, and I think it is an important signal for anyone concerned with the ongoing process of economic collapse in the U.S.</strong></p> <p>Generally, the American public holds very little vigilance when it comes to economics. They are distinctly unaware of fundamental indicators such as commodities demand, energy usage, manufacturing, imports, exports and international shipping, etc. <strong>What they do take note of, and what the mainstream news will tell them about in 30 second blurbs, is the state of unemployment and whether stock markets were down for the day or up for the day. These two &ldquo;indicators&rdquo; are the extent of the average person&rsquo;s exposure to fiscal health.</strong></p> <p>This is why the Federal Reserve and the<strong> establishment have been meticulous over the past several years in their efforts to keep employment statistics highly manipulated to the positive side </strong>and why they have been injecting untold trillions into stocks around the world through various measures including no cost overnight loans.</p> <p><strong>However, over the past couple of years something has changed. </strong>As I warned they would do in 2015 in my article <a href="" rel="noopener noreferrer" target="_blank">The Real Reasons Why The Fed Will Hike Interest Rates</a>, central banks including the Fed have been backing off of stimulus measures and they have now begun a series of interest rate hikes. Look at it this way &mdash; imagine the economy has a terminal disease and the only thing keeping it alive is a highly addictive drug called &ldquo;free money.&rdquo; It&rsquo;s a rather terrible life, barely worth living, but the economy still has a faint pulse as long as the drug is administered. Now, what would happen if the Fed suddenly cuts off the drug supply? Well, the economy will die in a very frantic and horrible way.</p> <p>Low interest rates and Federal Reserve loans represent the purest form of the free money drug, even more so than the bailouts and QE. And now, those interest rates are rising, and the drug is being taken away.</p> <p>These marginal rate hikes might not seem like much&nbsp;&mdash; .25 basis points here and .25 basis points there. <strong>And they are not much, unless you are a corporation borrowing billions of dollars at a time</strong> so that you can stave off your exposure to quadrillions in derivatives debt and so that you can purchase massive shares in your own stock to keep its value artificially elevated. Cycling this borrowed cash and paying the Fed back is rather easy for such corporations as long as the loans are essentially free. But when they have to start paying interest on that cash, even at a low rate, the costs add up at lightning speed.</p> <p><strong>ANY<em> </em>interest rate hikes in this environment make borrowing from the Fed untenable for corporations seeking to prop up their stocks and the stock market at large.</strong></p> <p>In my estimation, based on previous Fed measures such as the removal of QE from the system in 2014,<strong> it takes around six to eight months for the effects of policy shifts by the Fed to become visible on the main street economy and in equities. </strong>I believe we are about to see the effects of interest rate hikes on our system within the next couple of months.</p> <p><em><u><strong>I put very little value in stock markets as an indicator of anything. In reality, stocks are a fraudulent circus based on perceived value and perceived demand rather than true value and demand. </strong></u></em>In most cases, stocks crash in the FINAL<em> </em>phase of an economic collapse, not in the beginning phase. If you decide to start preparing for a crisis after a stock market decline then you are probably too late.</p> <p>I am revisiting this topic here because I want to remind people that the full and tantamount blame for any economic crisis (and the final phase market crash) in the near future is placed on the Federal Reserve and international banks. All future shocks to the financial system were made possible because the establishment and the Fed have gutted our economy, stuffed it with the fluff of fiat stimulus and left it to lumber aimlessly since 2009.</p> <p><strong>Now, because of the Fed&rsquo;s efforts, stocks have been rising for quite some time with only a few moments of obstruction, due again, to their policy shifts. These efforts have conjured a 20,000 point Dow Jones, but nothing else positive for the economy. The one constant, though, has always been low interest rates.</strong></p> <p>With interest rates increasing, I would point out that market behavior has changed. The meteoric rise has stalled. In the past few months stocks have barely budged 1 percent either up or down per week. Except for last week when something strange happened; markets suddenly dropped nearly 400 points in a single day. Why? Well, that is a subject up for debate, but the majority of mainstream news outlets will tell you that it was all Donald Trump&rsquo;s fault.</p> <p>I have been warning since long before the election that Trump&rsquo;s presidency would be the <strong>perfect vehicle for central banks and international financiers to divert blame for the economic crisis</strong> that would inevitably explode once the Fed moved firmly into interest rate hikes. Every indication since my initial prediction shows that this is the case.</p> <p><strong>The media was building the foundation of the narrative from the moment Trump won the election.</strong> Bloomberg was quick to publish its rather hilariously skewed propaganda on the matter, asserting that Trump was lucky to inherit an economy in ascendance and recovery because of the fiscal ingenuity of Barack Obama. This is of course utter nonsense. Obama and the Fed have created a zombie economy rotting from the inside out, nothing more. But, as <a href="" rel="noopener noreferrer" target="_blank">Bloomberg noted rightly</a>, any downturn within the system will indeed be blamed on the Trump administration.</p> <p><a href="" rel="noopener noreferrer" target="_blank">Fortune Magazine</a>, adding to the narrative, outlined the view that the initial stock rally surrounding Trump&rsquo;s election win was merely setting the stage for a surprise market crash.</p> <p><strong>I continue to go one further than the mainstream media and say that the Trump administration is a giant cement shoe designed (deliberately) to drag conservatives and conservative principles down into the abyss as we are blamed by association for the financial calamity that will occur on Trump&rsquo;s watch.</strong></p> <p>Last week&rsquo;s sudden market bloodletting is important in this regard; <a href="" rel="noopener noreferrer" target="_blank">400 points down</a> is hardly a flesh wound to a 20,000 point Dow, but the media&rsquo;s reaction to it was very revealing on what the future has in store. Multiple news outlets responded by immediately connecting the drop to Trump and the absurdity surrounding the &ldquo;Comey memo&rdquo;&nbsp;&mdash; a memo which no one in the public has seen proof of. The claim is that this level of <a href="" rel="noopener noreferrer" target="_blank">turmoil around Trump</a> might lead to impeachment and that the threat of impeachment would kill the stock market bounce which the media also claims was driven by Trump&rsquo;s promises of corporate tax cuts. It&#39;s a lie built on another lie.</p> <p><strong>It is interesting to me that the mainstream media never said the market drop was caused by &ldquo;Comey&rsquo;s turmoil,&rdquo; or by &ldquo;The Washington Post and The New York Times&rsquo; turmoil.&rdquo; No, they called it &ldquo;Trump&rsquo;s turmoil.&rdquo; Last week&rsquo;s stock dive was, in my opinion, the official launch of the Trump collapse narrative. </strong>The establishment was beta testing it for months, but now, the program has gone live.</p> <p><strong>Every single stock decline from now on, as well as the ultimate economic crash, which will become visible to the public in short order, will be blamed on Donald Trump and conservatives by extension. As I said, he is the perfect scapegoat.</strong></p> <p>I have been very critical of Donald Trump recently, and it is my view, according to the evidence and his swift retraction of nearly every promise he made to the voters during his campaign, that Trump is controlled opposition. But, I would never lay the blame for our fiscal decline at his feet. Trump does not have the power to create that kind of disaster; only the global banks have that power. I&rsquo;ll say it again&nbsp;&mdash; the Federal Reserve is raising interest rates into a major financial downturn. This will be the trigger for the next phase of collapse, not<em> </em>any drama surrounding Donald Trump. Everything else, from Comey to North Korea, is distraction.</p> <p>The Fed has done this before. In fact, the Fed has a habit of raising interest rates at the onset of economic instability or right in the middle of a downturn, as it did in 1928-1929 triggering the Great Depression, and in 1931, adding fuel to the fire of financial catastrophe. These particular catalyzing policy actions are partly what Ben Bernanke was referring to on Nov. 8, 2002, <a href="">in a speech</a> given at &quot;A Conference to Honor Milton Friedman, the Paul Snowden Russell Distinguished Service Professor Emeritus, On the Occasion of his 90th Birthday.&rdquo;</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>&ldquo;In short, according to Friedman and Schwartz, because of institutional changes and misguided doctrines, the banking panics of the Great Contraction were much more severe and widespread than would have normally occurred during a downturn.</strong></p> <p>&nbsp;</p> <p><strong>Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You&rsquo;re right, we did it. We&rsquo;re very sorry. But thanks to you, we won&rsquo;t do it again.&rdquo;</strong></p> </blockquote> <p>Ben Bernanke finished his astonishingly honest assessment with a lie. They are indeed doing it again&hellip; but this time they have made sure they have a president and an entire political ideal to blame it on.</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="485" height="303" alt="" src="" /> </div> </div> </div> Barack Obama Ben Bernanke Ben Bernanke Business Business Central Banks Donald Trump Donald Trump Economic policy of Donald Trump ETC Federal Reserve Federal Reserve System First 100 days of Donald Trump's presidency Free Money Great Depression Interest rate James Comey Main Street Market Crash Milton Friedman New York Times North Korea Presidency of Donald Trump Reality recovery Stock market crash SWIFT Trump Administration Unemployment United States US Federal Reserve Thu, 25 May 2017 02:40:00 +0000 Tyler Durden 596601 at Another Insurer Quits Obamacare Leaving 25 Counties In Missouri With No Healthcare Options <p>Blue Cross Blue Shield of Kansas City (Blue KC) has just joined the growing ranks of insurers across the country that have decided they've lost just about enough money on Obamacare.&nbsp; According to a <a href="">press release</a> issued earlier today, Blue KC's CEO said the <strong>company has lost $100 million on the Obamacare exchanges since 2014, a fact that prompted their decision to exit their 32-county service area.</strong></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Blue Cross and Blue Shield of Kansas City (Blue KC) today announced the company’s decision to not offer or renew individual Affordable Care Act (ACA) plans in the company’s 32-county service area in Kansas and Missouri for 2018.</strong> This decision will affect Blue KC members with both on- and off- exchange individual plans but does not affect individual plans that were purchased on or prior to October 1, 2013.</p> <p>&nbsp;</p> <p>“Since 2014, we’ve expended significant resources to offer individual ACA plans to increase access to quality healthcare coverage for the Kansas City community,” said Danette Wilson, President and CEO of Blue KC. <strong>“Like many other health insurers across the country, we have been faced with challenges in this market. Through 2016, we have lost more than $100 million. This is unsustainable for our company.</strong> We have a responsibility to our members and the greater community to remain stable and secure, and the uncertain direction of this market is a barrier to our continued participation.”</p> <p>&nbsp;</p> <p><strong>“This decision is necessary at this time, but we’ll continue to work with federal and state legislators to identify solutions that will stabilize the individual market and bring costs down for our members, the community and Blue KC,” </strong>said Wilson.</p> </blockquote> <p>The move will leave residents in 25 Missouri counties, or roughly 19,000 Obamacare enrollees, with no healthcare options in 2018.&nbsp; </p> <p><a href=""><img src="" alt="Missouri" width="600" height="568" /></a></p> <p>&nbsp;</p> <p>Of course, this follows similar developments in both Iowa (see "<a href="">Obamacare Implosion: Last Major Healthcare Provider Pulls Out Of Iowa Leaving No Options In 2018</a>") and Tennessee (see "<a href="">Knoxville, TN Could Be Ground Zero For The Obamacare Explosion</a>") in the past several weeks.&nbsp; To be fair, after Humana’s exit from Obamacare left 16 counties surrounding Knoxville with no health plans, Blue Cross Blue Shield of Tennessee stepped in to cover that area, though it's unknown whether someone would step up to do the same in Missouri.</p> <p>But sure, Republicans are ruining healthcare in America.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="600" height="568" alt="" src="" /> </div> </div> </div> Blue Cross and Blue Shield of Kansas City Blue Cross Blue Shield Association Health Health Internal Revenue Code Kansas City metropolitan area Obamacare Patient Protection and Affordable Care Act Statutory law United States Thu, 25 May 2017 02:20:00 +0000 Tyler Durden 596584 at Fragile Markets? US Equity Futures Flash-Smash... For No Good Reason <p>First VIX dumped-n-pumped this morning, then Russell 2000 (ETF and Futures) flash-crash at lunch time, and now, amid heavy volume, <strong>someone decided it was the perfect time to panic-buy S&amp;P, Dow, and Nasdaq futures...</strong></p> <p><a href=""><img height="356" src="" width="600" /></a></p> <p>&nbsp;</p> <p>Very heavy volume for early asia trading...</p> <p><a href=""><img height="391" src="" width="600" /></a></p> <p>&nbsp;</p> <p>Some contest to Russell 2000&#39;s and VIX&#39;s earlier flash crash...</p> <p><a href=""><img height="297" src="" width="600" /></a></p> <p>&nbsp;</p> <p>As BofAML so eloquently pointed out...</p> <p><a href=""><img alt="" src="" style="width: 602px; height: 112px;" /></a></p> <p>The hunt for a narrative to explain this utter farce has started... Did Bitcoin algos just get switched on to trade S&amp;P minis? Bitcoin just topped $2500!</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="1981" height="1291" alt="" src="" /> </div> </div> </div> Bitcoin Bitcoin Business Disaster Economy Finance flash Flash Futures contract Futures markets Mathematical finance Money NASDAQ NASDAQ futures Russell 2000 Russell 2000 Technical analysis VIX Thu, 25 May 2017 02:15:40 +0000 Tyler Durden 596604 at The 5 Possible Outcomes Of The OPEC Meeting <p><a href=""><em>Authored by Nick Cunningham via,</em></a></p> <p><strong>The highly-anticipated OPEC meeting is taking place this week, but unlike the last few meetings, the hype and excitement is much less palpable.</strong> That is largely because the end result is thought to be a foregone conclusion.</p> <p><a href=""><img height="273" src="" width="515" /></a></p> <p>Last week, Saudi Arabia and Russia telegraphed the events of the May 25 meeting, <a href="">announcing support</a> for a nine-month extension of the existing production cuts &ndash; 1.2 million barrels per day (mb/d) from OPEC plus 558,000 barrels per day (bpd) from a group of non-OPEC countries. With the two most important oil producers in agreement, the meeting should be quick and easy.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>&quot;The decision seems to be almost a done deal,&quot;</em> said Bjarne Schieldrop, chief commodities analyst at SEB Markets. <em>&quot;There seems to be a very high harmony in the group.&quot;</em></p> </blockquote> <div class="banner_ad_after_para_2"> <div class="banner--inPageMobile"> <div class="banner--inPage__container" style="text-align: center;"> <div id="bannerzone21"> <div class="banner" id="banner493">&nbsp;</div> </div> </div> </div> </div> <p>But if we have learned anything from the OPEC meetings over the last several years, it is that nothing should be taken for granted. Time and again the cartel seems to surprise the markets. Saudi Arabia&rsquo;s energy minister hinted over the weekend that the OPEC meeting could have more drama than many analysts currently expect.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>&quot;Everybody I talked to... expressed support and enthusiasm to join in this direction, but of course it doesn&rsquo;t preempt any creative suggestions that may come about,&quot;</em> Saudi energy minister Khalid al-Falih <a href="">said</a>&nbsp;at a news conference in Riyadh.</p> </blockquote> <p>So <span style="text-decoration: underline;"><strong>even as a consensus has formed on one particular outcome, here are several possible &ldquo;surprise scenarios&rdquo; that could come out of the OPEC meeting this week, ordered by least to most bullish for oil prices.</strong></span></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>1.<strong> No extension.</strong> This would be the most disastrous for oil prices, as OPEC abandons its collective action and returns to full production. With the oil market still suffering from oversupply, a return to higher output would cause WTI and Brent to meltdown, crashing into the $40s or quite possibly lower. However, this most extreme bearish scenario is also probably the least likely outcome.</p> <p>&nbsp;</p> <p>2. <strong>6-month extension.</strong> A rollover of the existing cuts for another six months. This had been the most widely-assumed scenario until only recently. Global inventories remain elevated, and extending the cuts through the end of the year probably won&rsquo;t be enough to bring inventories back into the five-year average range. With the markets wanting more, a six-month extension would, at this point, be seen as a disappointment and would likely push oil prices down.</p> <p>&nbsp;</p> <p>3. <strong>9-month extension.</strong> Extending the cuts through the end of the first quarter of 2018 is now the market&rsquo;s working assumption, and will be met with a sigh of relief. But since it has become the new baseline, a strong rally in prices is probably unlikely.</p> <p>&nbsp;</p> <p>4. <strong>9-month extension plus more countries join in.</strong> Khalid al-Falih hinted that new additions to the pact could be forthcoming. &quot;We believe that continuation with the same level of cuts, plus eventually adding one or two small producers,&rdquo; he said over the weekend. The addition of a couple marginal producers would add a little bit of a psychological punch to the agreement, but probably wouldn&rsquo;t alter the supply/demand balance in any fundamental way. This outcome probably would be met with a rise in oil prices by a few dollars per barrel.</p> <p>&nbsp;</p> <p>5. <strong>9-month extension with deeper cuts.</strong> This scenario is the one to watch out for, as many analysts see the odds of much more aggressive cuts growing. An OPEC source recently told Reuters that the group was considering making deeper output reductions. <em>&quot;All options are open,</em>&quot; the source <a href="">said</a>. Deeper cuts could come in several different forms. The collective output quota of 32.5 mb/d could be lowered, with country-specific limits tightened. This would be a heavy lift, but if agreed to, would lead to a much stronger price impact, immediately pushing up crude benchmarks substantially. Another way to make deeper cuts would be to remove the exemptions given to Libya and Nigeria. Both countries were not subject to any limits in the initial six-months, and both have added output and signaled more production growth in the near future. It is not clear that they would agree to limits, given their serious economic and security troubles.</p> </blockquote> <p><strong>OPEC has a tendency to surprise, so any of these outcomes &ndash; or others &ndash; are possible.</strong> Still, an extension of the existing cuts for nine months appears to be the most likely scenario. At the same time, OPEC has sort of backed itself into a corner &ndash; it has raised expectations to such a degree that anything less would be considered a major disappointment.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="515" height="273" alt="" src="" /> </div> </div> </div> Benchmark Business Cartels Chronology of world oil market events Crude Economy Energy crisis Energy economics Meltdown OPEC OPEC Organization of Petroleum-Exporting Countries Petroleum industry Petroleum politics Price of oil Reuters Saudi Arabia World oil market chronology Thu, 25 May 2017 02:00:00 +0000 Tyler Durden 596565 at Polls: Americans Don’t Want Trump to Be Impeached <p>The majority of Americans don&rsquo;t think Trump should be impeached.</p> <p>The Hill <a href="" target="_blank" title="reports">reports</a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>A majority of American voters say there is no evidence of collusion between members of President Trump&rsquo;s campaign and Russia and most are doubtful that investigations into the matter will lead to impeachment.</p> <p>&nbsp;</p> <p>Those are the results of the new <a href="" target="_blank" title="Harvard-Harris survey">Harvard-Harris survey</a>, provided exclusively to The Hill, which found that 54 percent of voters said they have not seen evidence to suggest that Trump campaign officials conspired with Moscow to influence the 2016 election.</p> <p>&nbsp;</p> <p>Respondents were largely split along partisan lines, with 80 percent of Republicans saying there is no evidence of collusion and 74 percent of Democrats saying there is. Only 38 percent of independents said there is evidence of collusion.</p> <p>&nbsp;</p> <p>When voters were asked, irrespective of the evidence, whether they believe that Trump campaign officials had coordinated with Moscow, 52 percent said no and 48 percent said yes. A majority of independents, 54 percent, didn&rsquo;t think there was any collusion.</p> <p>&nbsp;</p> <p>***</p> <p>&nbsp;</p> <p>Fifty-nine percent of those surveyed said they expect the [special prosecutor&rsquo;s] investigation, now led by former FBI Director Robert Mueller, will lead to the end of the Russia inquiry, while 41 percent said it would lead to Trump&rsquo;s impeachment.</p> </blockquote> <p>But Americans don&rsquo;t buy Trump&rsquo;s claim that he&rsquo;s &ldquo;draining the swamp.&rdquo;</p> <p>Politico <a href="" target="_blank" title="writes">writes</a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Less than a quarter of Americans surveyed in a new <a href="" target="_blank" title="Monmouth University poll ">Monmouth University poll </a>released Wednesday said President Donald Trump is making progress on his promise to &ldquo;drain the swamp&rdquo; of Washington corruption.</p> <p>&nbsp;</p> <p>Thirty-two percent of those polled said Trump is actually making the &ldquo;swamp&rdquo; worse, while just 24 percent said he is draining it. Thirty-five percent of respondents said the president has done nothing to change Washington&rsquo;s culture.</p> </blockquote> <p>Indeed, the real problem with Trump isn&rsquo;t that he&rsquo;s a Ruskie-lover &hellip; it&rsquo;s that he&rsquo;s <a href="" title="just as much of a sell out">just as much of a sell out</a> as our other recent presidents.</p> Alt-right American people of German descent Climate change skepticism and denial Corruption Donald Trump Donald Trump Donald Trump presidential campaign FBI Federal Bureau of Investigation Harvard Monmouth University Politics Politics of the United States The Apprentice United States WWE Hall of Fame Thu, 25 May 2017 01:22:49 +0000 George Washington 596603 at "When It Comes To Trading, Romance Is For Losers" <p><a href=""><em>Authored by Kevin Muir via The Macro Tourist blog,</em></a></p> <p><strong><em>A few readers have asked me to tell more stories about trading. They encouraged me to share more of my experiences throughout the years.</em></strong></p> <p>After giving it some thought, I decided that instead of taking the easy road and recounting a tale of when I was fortunate enough to nail some trade, I would approach from the opposite direction. In keeping with my theme that <em>all I bring to the party is 25 years of mistakes</em>, I have decided to recount a losing trade. And not only that, instead of just picking one losing episode, I will confess a weakness I still struggle with today.</p> <p><strong>But before I do that, I would like to talk about a book.</strong> I have always been a big Michael Lewis fan. Ever since reading Liar&rsquo;s Poker as a young kid trying to make it onto a trading desk, it has held a special place in my development. Throughout the years, as Michael has published more books, I have devoured them with a ferocity reserved for just a handful of authors.</p> <p><strong>Yet when Lewis published his most recent book, The Undoing Project, I did not rush out to buy it. The story of two psychologists and their relationship throughout the years? It sounded hokey and not at all interesting. Deciding Michael had finally jumped the shark, I ignored the new release.</strong></p> <p><a href=""><img alt="" src="" style="width: 327px; height: 404px;" /></a></p> <p>Lucky for me, my old man is retired and has more time on his hands. More importantly, he did not suffer the same prejudices. He bought it. After reading it, he plopped it in my hands and encouraged me to give it a whirl.</p> <p><u><em><strong>Was I ever wrong about my initial impressions. </strong></em></u>Michael Lewis&rsquo; The Undoing Project could be one of his finest books. <u><strong>As traders and investors, we should all be forced to read it.</strong></u></p> <p>The psychological concepts the two main characters discovered are essential to understanding the constant battle we are all fighting when we trade. The themes throughout the book are complex and become more nuanced, bu<strong>t at its heart, the book is about the understanding that human beings do not act rationally with anywhere near the frequency that most of us believe.</strong></p> <p>Specifically, humans have trouble with statistics. There are tendencies embedded within us that are difficult to overcome. In fact, the story&rsquo;s two heroes developed experiments designed to exploit these biases. It was no surprise that the average person failed to overcome this human flaw. But more importantly, even professors who were trained in statistics were unable to correct for this bias.</p> <p>In their breakthrough paper, the two psychologists concluded;</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em><strong>&ldquo;People&rsquo;s intuitive expectations are governed by a consistent misperception of the world.&rdquo;</strong></em></p> </blockquote> <p>This observation has profound ramifications for almost all social sciences. Economists especially, base their entire framework on people behaving rationally. Yet these two psychologists had just proven that this was not always the case.</p> <p><strong>There was one part of the book that really hit home. It was when a statistics professor explained that he understood what was happening with the experiment, yet he felt the pull to go the other way. His logical brain was telling him one thing, but another part was telling him something different.</strong></p> <p>And for me, this is <strong><u>the perfect analogy to one of my biggest trading weaknesses.</u></strong></p> <p><em><strong>Do you know those days when something dramatic happens in the market and stocks rocket up 1% or more at the open? Maybe it is a big employment report, or maybe some Central Bank eases.</strong></em></p> <p>Either way, the market opens at 9:30 and you are staring at a big gap open. Everyone is all bulled up, and excitement fills the air.</p> <p>Let me assure you, I know the statistics.<strong> By far and away, on those days, the most likely outcome is for the market to chop around for the first half hour, fake a couple of sell offs, then start grinding higher.</strong> At lunch, the grind might slow down, but then at 1pm, the buying resumes. At 2:30pm there is often a decline, and it looks like it might roll over. Yet that dip is met with more buying, and the market proceeds to rip into the close, finishing at the highs of the days as the shorts cover. Although this doesn&rsquo;t always happen, this is the correct bet. In fact, it&rsquo;s better than the correct bet, it&rsquo;s a great setup.</p> <p><u><strong>But I find it extremely difficult to trade this scenario</strong></u>. In my mind, I have glorified the handful of times (most likely one hand) that the gap open proved to be an &ldquo;all baked in situation.&rdquo; I distinctly remember a couple of days on the program trading desk where my floor partner and I stood in there, shorting futures to locals and ETFs to institutional clients, taking the other side of the buying panic. Before we could figure out how short we were, the buying dried up, and then next thing we knew, the market rolled over, and we were deep into sell programs, buying back our position while hammering stocks lower in the cash market with our sell baskets.</p> <p>Even as I write this, there is a smile on my face. I loved being right while everyone else was wrong. It was almost romantic.</p> <p><strong>Yet I can&rsquo;t tell you how much money I have wasted over the years trying to replicate these romantic dreams in my head.</strong> It is enormous, and it has cost me so much mental and actual physical capital. Springsteen wrote about the old deadbeat sitting at the bar thinking &lsquo;bout it, and I now understand a little better what he meant.</p> <p><u><strong><em>When it comes to trading, romance is for losers.</em></strong></u></p> <p><a href=""><img height="497" src="" width="600" /></a></p> <p>I struggle with these different tugging forces. My logical brain knows I shouldn&rsquo;t be shorting that open, but the other side desperately wants to relive those glory days.</p> <p>And this is what trading is all about. We are constantly battling what we <em>want to do</em>, and what we <em>should do</em>. Even those who understand the game exceptionally well, are constantly battling their own inner demons.</p> <p>Everyone&rsquo;s demons take a different form, but make no mistake, we all have them.</p> <p><strong>Michael Lewis&rsquo; book told the story of the psychologists who proved they exist. We are not rational actors. Our brains are not wired to make consistent correct statistical calculations. The sooner we understand that reality, the better our trading will be.</strong></p> <p>I have by no means conquered my affliction. <u><em><strong>A little part of me worries that by writing this piece, I have almost assured the next big gap open will fail and roll over. Maybe I should just try shorting the gap higher one more time&hellip;</strong></em></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="545" height="382" alt="" src="" /> </div> </div> </div> Fail Michael Lewis program trading Program Trading Reality Share trading Thu, 25 May 2017 01:20:00 +0000 Tyler Durden 596595 at John McAfee's New Company is Making a Killing in Bitcoins, But No One Gives a Damn <p>Crazy John McAfee from the jungles of Belize is running a tiny company, specializing in cyber-security and mining bitcoins.</p> <p>Revenues for the last quarter eclipsed $300k, based solely on mining activities.<br /> <img src="" width="600" height="361" class="alignnone size-full wp-image-68831" /></p> <p>The stock has been stuck in retard range, thanks to a pending SEC execution.</p> <p><img src="" width="600" height="450" class="alignnone size-full wp-image-68832" /></p> <p>Nevetheless, McAfee says his little offal of a company will be profitable by year end -- all thanks to bitcoins. </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>"We will definitely be profitable before the end of the year," McAfee said in a phone interview Wednesday. "From bitcoin mining, we will get the experience and expertise to apply the blockchain to our security products."</p></blockquote> <p> Their bitcoin mining operations are located deep in the mountains of Washington state, manned by two lads whose only task is to ensure the air conditioners are operating efficiently, in order to protect the mining machines from overheating.</p> <p>There's digital gold in them hills.</p> <p>&nbsp;</p> <p>On Monday, the company said it got&nbsp;financing to acquire 1,000 mining computers from Bitmain Tech, a Chinese based firm. With these new computers, MGT will have a total of 1,300 mining for bitcoins. McAfee's goal is to become the biggest bitcoin miner in the world.</p> <p>With the new mining capacity, McAfee intends to generate 225 bitcoins per mo, up from the current 100.</p> <p>The blockchain has taken on an absurd amount of 'alternative currencies.' One of the hot one's now is based on <a href="">RARE PEPE art</a>, designated as PEPE CASH, backed by rare Pepe art. You can't make this stuff up. McAfee insists we're not in a crypto-bubble. </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>"No matter how much government and regulators may scream and complain, there will be a world standard alternative currency," McAfee said. "Bitcoin appears to be the one... It cannot possibly be a bubble."</p></blockquote> <p> Aside from suing Intel for the right's to rename their company John McAfee Global Technologies, McAfee's employees, 12 in total, are focused on cyber-security. They've developed a product dubbed 'Sentinel', which is an anti-hacking software, and they're developing a 'privacy phone' that has a kill switch on it.</p> <p>&nbsp; </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>"I don’t know anyone more capable than me," said McAfee. "I have never lost in terms of business and I certainly don’t intend to start now."</p></blockquote> <p> &nbsp;<br /> Content originally published at <a href=""></a></p> <p>&nbsp;</p> Alternative currencies Bitcoin Bitcoin Blockchains Business California Computing Cryptocurrencies Currency Fugitives John McAfee McAfee Technology U.S. Securities and Exchange Commission Thu, 25 May 2017 01:09:24 +0000 The_Real_Fly 596602 at