en Chinese Stocks Drop, End Worst Month Since August 2009; US Equity Futures Flat <p>In a repeat of Thursday's action, Chinese stocks which had opened about 1% lower, remained underwater for most of the session before attempting a feeble bounce which took the Shanghai Composite fractionally into the green, before the now traditional last hour action which this time failed to maintain the upward momentum and the last day of the month saw a surge in volume which dragged the market to its lows before closing roughly where it opened, -1.13% lower, dragged down by energy and industrial companies. </p> <p><a href=""><img src="" width="511" height="577" /></a></p> <p>The drop took place even as 505 companies were still halted on the Shanghai and Shenzhen exchanges on Friday, or 18% of all listings. Energy and industrial stocks dropped before Saturday’s manufacturing data. PetroChina Co., the biggest oil producer, slid 5.3 percent. Air China Ltd. dropped 10 percent; as these companies were among the mostly supported by the government it appears that the Chinese plunge protection team took today off.</p> <p>This caps the worst month for Chinese stocks since since August 2009, as the government struggles to rekindle investor interest amid a $3.5 trillion rout, one which has sent the Shanghai market lower by 15% - the biggest loss among 93 global benchmark gauges tracked by Bloomberg, as margin traders cashed out and new equity-account openings tumbled amid concern valuations are unsustainable.</p> <p><img src="" width="512" height="342" /></p> <p>As Bloomberg <a href="">notes</a>, "while unprecedented state intervention spurred a 18 percent rebound by the Shanghai Composite from its July 8 low, volatility returned on Monday when the gauge plunged 8.5 percent. Outstanding margin debt on mainland bourses has fallen about 40 percent since mid-June, while the number of new stock investors shrank last week to the smallest since the government started releasing figures in May. Individuals account for more than 80 percent of stock trading in China. <strong>“The support measures may have been less effective than what Beijing imagined,” </strong>said Bernard Aw, a strategist at IG Asia Pte. in Singapore.</p> <p>Worse for China, people's fascination with the equity bubble appears to be fading as demonstrating by tumbling volumes: turnover has fallen as volatility surged. <strong>The value of shares traded on the Shanghai exchange on Thursday was 53 percent below the June 8 peak, </strong>while a 100-day measure of price swings on the Shanghai Composite climbed to its highest level in six years on Friday.</p> <p>And while the Chinese government continues to crack down on "malicious sellers", the latest target are local Nav Saraos, and anyone using spoofing. Spoofing, which involves placing then canceling orders to move prices, is suspected in 24 accounts on the Shanghai and Shenzhen stock exchanges, the China Securities Regulatory Commission said on its microblog.</p> <p>Elsewhere, the Hang Seng China Enterprises Index of mainland shares in Hong Kong tumbled 14 percent this month, its worst loss since September 2011. The gauge lost 0.1 percent Friday, while the Hang Seng Index advanced 0.6 percent. The CSI 300 Index was little changed. The Nikkei 225 (+0.3%) pared initial losses following a bout of strong corporate earnings <strong>after the headline Japanese CPI figure grew at its slowest pace in 2-yrs</strong>. Finally, JGB's rose tracking gains in bunds amid month-end buying.</p> <p>The only notable data from the European morning came in the form of Eurozone CPI (Core Y/Y 1.00% vs. Exp. 0.80%) and unemployment rate (11.10% vs. Exp. 11.00%), with the higher than expected core CPI seeing move higher in EUR , which had outperformed GBP throughout the morning, with some desks attributing the move to month end demand. Elsewhere, CHF has outperformed today after the SNB reported their earnings, which showed a record loss in H1, bringing into question the central bank's ability to continue their intervention policy.</p> <p>Bunds have underperformed USTs heading into the North American crossover after the better than expected Eurozone CPI data, while USTs remain relatively flat on the day. Also of note, there is a large amount of bond redemptions in Europe presently, with Spain seeing EUR 27.6bIn redeemed yesterday and Italy set for EUR 31.4bIn worth of redemptions on Monday.</p> <p>The USD trades flat on the day (USD-Index: 0%) with Asia-Pacific hours seeing NZD as the session's laggard, with the latest ANZ business confidence reading showed sentiment among large companies slumped to a 6-year low (-15.3 vs. -2.3) consequently seeing NZD/USD break below the 0.6600 handle.</p> <p>No firm direction has been found (Euro Stoxx: -0.1%) in European equities today amid the light newsflow, while today's notable earnings reports have included BNP Paribas (+2.8%), Airbus (+3.3%) and Lloyds (-0.5%). Energy names were the worst performers during the European morning, weighed upon by weak energy prices, while todays large cap US earnings include Chevron, Exxon Mobil and Phillips 66 pre market, while separately Berkshire Hathaway are schedule to report aftermarket. </p> <p>US equity futures are unchanged at this moment.</p> <p>Commodities continue their recent downtrend today with gold is heading for its largest monthly decline since 2013 after the yellow metal fell lower overnight to continue its recent weakness, while copper remains near six year lows . The energy complex also remains near its lows with WTI on course for its largest monthly fall this year, with sentiment dampened after reports that OPEC Secretary General El¬Badri stated the cartel has no plans to cut oil output.</p> <p>Key events on the US calendar today: U.S. Chicago purchasing manager, Michigan confidence, ISM Milwaukee, employment cost index due later.</p> <p><strong>Bulletin Headline Summary from Bloomberg and RanSquawk</strong>:</p> <ul> <li>EUR has seen strength this morning along with weakness in Bunds after Eurozone CPI Core printed higher than expected</li> <li>Commodities continue their downward trend as WTI heads into the NYMEX pit open down around USD 1.00, while gold is down over USD 7.00</li> <li>Looking ahead, today's data includes Chicago PM! and University of Michigan Sentiment as well as earnings from Chevron, Exxon Mobil and Phillips 66</li> <li>Treasuries decline, 5/30 spread on track to flatten for a fourth week after auctions and 2Q GDP estimate that bolstered view Fed may begin raising rates in Sept.</li> <li>China’s stocks fell, capping the benchmark index’s biggest monthly drop since August 2009, as the government struggles to rekindle investor interest amid a $3.5t rout</li> <li>Greek PM Tsipras staved off an immediate challenge to his premiership, though failure to appease his party’s hard-left fringe brought early elections into view</li> <li>Euro-area consumer prices rose an annual 0.2%, same pace as in June and in line with median forecast in Bloomberg survey; core inflation unexpectedly accelerated to 1%, fastest in 15 months </li> <li>Deutsche Bank is seeking to recover internal electronic chat transcripts that were left out of disclosures to regulators during a probe into interest-rate rigging, according to people briefed on the matter</li> <li>Swiss National Bank had a loss of CHF50.1b in the six months through the end of June, which is a record, according to SNB spokesman Walter Meier</li> <li>Obama said opponents of the nuclear accord with Iran are “putting the squeeze on Congress” as the administration works to keep supporters in line</li> <li>Assailants scribbled “revenge” and other Jewish nationalist slogans on two West Bank homes before setting them on fire early Friday, killing a Palestinian infant and critically wounding four family members, Israel’s army said</li> <li>The State Department is set Friday to post online its next batch of e-mails that Hillary Clinton sent and received on a personal account while she was secretary of state</li> <li>Sovereign 10Y bond yields mostly higher. Asian stocks mostly higher; European stocks, U.S. equity- index futures lower. Crude oil, copper and gold lower</li> </ul> <p><strong>US Event Calendar</strong></p> <ul> <li>8:30am: Employment Cost Index, 2Q, est. 0.6% (prior 0.7%)</li> <li>9:00am: ISM Milwaukee, July, est. 50 (prior 46.55)</li> <li>9:45am: Chicago Purchasing Manager, July, est. 50.8 (prior 49.4)</li> <li>10:00am: U. of Mich. Sentiment, July F, est. 94 (prior 93.3) <ul> <li>U. of Mich. Current Conditions, July F (prior 106)</li> <li>U. of Mich. Expectations, July F (prior 85.2)</li> <li>U. of Mich. 1 Yr Inflation, July F (prior 2.8%)</li> <li>U. of Mich. 5-10 Yr Inflation, July F (prior 2.7%)</li> </ul> </li> </ul> <p><strong>DB's Jim Reid completes the market warp as customary:</strong></p> <p>Another month ticks by with July drawing to a close today. With the Fed potentially in play in September I suspect August will be busier than normal. As we approached month-end, there were a number of factors having an influence on markets yesterday. Macro-wise the main focus was on the US data flow where we saw an above market Core PCE print, slightly below market Q2 GDP reading and a host of various historical revisions including downward revisions to prior year growth. Greece also rumbled away in the background, firstly in an FT article which suggested that the IMF is unwilling to provide a third bailout package to Greece unless more debt relief is provided, and then late last night and post market close when the Syriza Central Committee voted for an emergency September congress. Added to all this was a relatively mixed day for corporate earnings. The end result was a flat day for the S&amp;P 500, paring an early loss as the session wore on, while the Treasury curve saw reasonable flattening, reflecting perhaps the view of a slower trend rate of growth after the various historical revisions (which we’ll touch on shortly). 2y Treasuries weakened with yields moving 2.4bps higher to 0.729%, while 10y (-2.7bps) and 30y (-5.5bps) yields fell to 2.260% and 2.943% respectively. The Greenback caught a reasonable bid on the back of the PCE print with the Dollar index closing +0.60% and higher for its third consecutive daily gain. Gold (-0.74%) continued to march lower however and is on track for its worst month since June 2013 while oil markets were relatively well behaved with Brent finishing down 0.13%.</p> <p>Digging into the data first of all. The advance estimate for Q2 GDP came in at 2.3% saar which was slightly below market expectations of 2.5%, although driven by a strong contribution from personal consumption (2.9% saar vs. 2.7% expected). At the same time, Q1 GDP was revised up to 0.6% from -0.2% previously. There was much focus on the historical annual revisions also. 2014 real GDP growth was revised up 0.1% to 2.5% however the 2012 and 2013 readings were revised down 0.3% and 0.6% to 1.3% and 2.6% respectively. On the inflation front, the Q2 Core PCE report came in above consensus at 1.8% saar qoq (vs. 1.6% expected) while the Q1 reading was revised up to 1.0% from 0.8%.</p> <p>Taking into account the historical revisions to growth now in the US, DB’s Joe Lavorgna notes that the implied annualized growth in productivity from 2012 to present is now 0.3% compared to 0.5% previously. Joe estimates potential GDP growth at just 1%. He notes that if the US sustains GDP gains in the low 2s, the unemployment rate will continue to fall. However weaker productivity readings will further the argument for the doves that the neutral fed funds rate is lower and so the Fed will not need to tighten very much. This will ultimately depend on inflation pressure however, especially in the context of a lower potential growth rate than what was previously assumed meaning there could be a smaller output gap. So an interesting set of revisions with notable implications for trend growth. We still struggle to see how the Fed can be too aggressive in this cycle and expect a very low terminal funds rate.</p> <p>Having said that, Fed Funds contracts did shift up in the aftermath (Dec15 +2bps and Dec16 +4bps) of the data yesterday along with an increase in the implied probability of a September move to 48%. Before we move on, labour market data yesterday came in the form of initial jobless claims which rose 8k last week to 267k (vs. 270k expected).</p> <p>Over in Europe equity markets managed to recover from a sudden shift lower after an FT article on Greece and the IMF created some noise. The Stoxx 600 eventually recovered to finish +0.57% while the DAX (+0.40%) and CAC (+0.58%) both finished up. The same couldn’t be said in credit markets however where indices failed to recover from a move wider with Crossover and Main closing +2bps and +1bp wider respectively. The FT story suggested that the IMF’s board has been told that Athens high debt levels and poor record of implementing reforms will disqualify Greece from a third bailout from the IMF. The article then went onto say that the Fund will only decide to take part in the bailout agreement after European nations have ‘agreed on debt relief’ suggesting that the headline was somewhat overplayed. DB's George Saravelos thinks the article was slightly overplayed and that negotiations continue. Elsewhere on Greece, post the closing bell and after another long session in parliament we heard that the Syriza Central Committee backed PM Tsipras’ call for an emergency Congress in September and in turn potentially lifting the near term political pressure which would have arisen in the event of an ordinary congress being called.</p> <p>Looking at the follow up in Asia this morning, bourses are generally mixed with losses being led out of China as we reach the midday break with the Shanghai Comp (-0.98%) and Shenzhen (-0.42%) both down – the latter on course for a double digit decline this week – while the Kospi (-0.10%) is also lower. Reuters meanwhile is reporting that the China Securities Regulator has suspended 24 stock trading accounts for suspected trading irregularities. Elsewhere, the Hang Seng (+0.40%) and ASX (+0.49%) are both firmer on the other hand while the Nikkei (+0.08%) is more or less unchanged. We’ve also had inflation data out of Japan this morning where the headline CPI rate ticked down one-tenth of a percent to 0.4% yoy (vs. 0.3% expected) which was the lowest monthly reading since June 2013 while the core (+0.1% yoy vs. 0.0% expected) remained unchanged and the core-core ticked up two-tenths to +0.6% yoy (vs. +0.4% expected). The jobless rate for Japan meanwhile ticked up to 3.4% from 3.3% previously. Elsewhere, S&amp;P 500 futures are unchanged while 10y Treasuries are -0.5bps lower.</p> <p>As mentioned it was a relatively mixed day on the earnings front yesterday. Facebook and Whole Foods were notable decliners having reported after the closing bell on Wednesday while Proctor &amp; Gamble and ConocoPhillips also saw their share prices slump following the latest respective quarterly reports – the latter in particular lowering full year capex guidance and highlighting the potential for exceeding cost cutting guidance as more evidence of stress ahead for the energy space. Western Digital and Mondelez helped to offset some of the weakness however while Expedia and Amgen rose 8% and 2% respectively in post market trading with their earnings reports. At the latest count with 341 of the S&amp;P 500 companies having reported, earnings beats have ticked down to 74% (from 76% on Wednesday) while sales beats are back down to 50%.</p> <p>Looking at the remainder of the data flow in Europe yesterday, over in Germany we saw the July CPI reading print in line at +0.2% mom, although the annualized rate did tick down slightly below expectations to +0.2% yoy (from +0.3%). Over in Spain we saw the Q2 GDP reading print in line for the quarter at +1.0% qoq however there was some weakness in the CPI report where we saw a -1.0% mom fall for July, dragging the annualized rate down to 0.0% yoy (vs. +0.1% expected). Confidence indicators for the Euro area were generally encouraging however. Economic (104.0 vs. 103.2 expected), business climate (0.39 vs. 0.19 expected), industrial (-2.9 vs. -3.4 expected) and services (8.9 vs. 8.0 expected) prints all saw jumps for the month of July, taking them above expectations with the Economic sentiment reading in particular reaching a four-year high. Sovereign bond yields ticked down over the course of yesterday’s session, led by 10y Bund yields which fell 6.7bps to 0.648% and just shy of the MTD lows.</p> <p>Onto the day ahead now and what’s set to be another busy one for data. We start this morning in Germany where we get the June retail sales print before we then get PPI and consumer spending data in France. The first estimate of the July inflation report for the Euro area follows this (with current expectations for no change in the headline and core at 0.2% yoy and 0.8% yoy respectively). Unemployment data for the Euro area and Italy, as well as CPI in the latter round off the data this morning. In the US this afternoon there will be much focus on the Q2 employment cost index while the Chicago PMI for July will also be closely watched. The University of Michigan consumer sentiment print and ISM Milwaukee are the other releases. Corporate earnings will continue to remain a focus with Berkshire Hathaway, Chevron and Exxon Mobil the notable highlights.</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="512" height="342" alt="" src="" /> </div> </div> </div> 8.5% Berkshire Hathaway Bond Chicago PMI China Consumer Prices Consumer Sentiment Copper Core CPI CPI Crude Crude Oil Deutsche Bank Equity Markets Eurozone Exxon France Germany Greece Hong Kong Initial Jobless Claims Iran Italy Japan Jim Reid Lloyds Michigan Nikkei NYMEX OPEC Output Gap Personal Consumption RANSquawk Reuters Shenzhen Unemployment University Of Michigan Volatility Fri, 31 Jul 2015 10:52:59 +0000 Tyler Durden 510745 at Liar Loans Pop up in Canada’s Magnificent Housing Bubble <p>Wolf Richter&nbsp;&nbsp; <a href=""></a>&nbsp;&nbsp; <a href=""></a></p> <p>For a long time, the conservative mortgage lending standards in Canada, including a slew of new ones since 2008, have been touted as one of the reasons why Canada’s magnificent housing bubble, when it implodes, will not take down the financial system, unlike the US housing bubble, which terminated in the Financial Crisis.</p> <p>Canada is different. Regulators are on top of it. There are strict down payment requirements. Mortgages are full-recourse, so strung-out borrowers couldn’t just mail in their keys and walk away, as they did in the US. And yada-yada-yada.</p> <p>But Wednesday afterhours, Home Capital Group, Canada’s largest non-bank mortgage lender, threw a monkey wrench into this theory.</p> <p>Through its subsidiary, Home Trust, the company focuses on “alternative” mortgages: high-profit mortgages to risky borrowers with dented credit or unreliable incomes who don’t qualify for mortgage insurance and were turned down by the banks. They include subprime borrowers.</p> <p>So it disclosed, upon the urging of the Ontario Securities Commission, the results of an investigation that had been going on secretly since September: “falsification of income information.” Liar loans.</p> <p>Liar loans had been the scourge of the US housing bust. Lenders were either actively involved or blissfully closed their eyes. And everyone made a ton of money.</p> <p>So Home Capital <a href="" target="_blank"><span style="text-decoration: underline;"><span style="color: #0009c4;">revealed</span></span></a> that it has suspended “during the period of September 2014 to March 2015, its relationship with 18 independent mortgage brokers and 2 brokerages, for a total of approximately 45 individual mortgage brokers,” who’d together originated nearly C$1 billion in single-family residential mortgages in 2014. That’s 5.3% of the company’s total outstanding loan assets, and 12.5% of its total single-family mortgage originations in 2014.</p> <p>That’s a big chunk. The company, however,&nbsp;didn’t disclose why it took so long to disclose this.</p> <p>It said an “external source” had warned it about income falsification on mortgage applications submitted by a number of brokers. Its investigation did not find any evidence of falsified credit scores or property values, it said.</p> <p>It’s not hard for a lender to require income verification. Not requiring it is precisely what US lenders had done before the Financial Crisis. Add a little encouragement from a broker, and that’s how you get perfect liar loans.</p> <p>Home Capital had already announced on July 10 (Friday afterhours!) that in Q2, originations of high-margin uninsured mortgages had plunged 16% and originations of lower-margin insured single-family mortgages had plummeted 55% because it had axed some brokers. Its shares plunged 20% the following Monday and another 4% the next day [read… <a href=""><span style="text-decoration: underline;"><span style="color: #0009c4;">Largest “Alternative” Mortgage Lender in Canada Plunges, Denies “Systemic Problem” in Housing Market</span></span></a>].</p> <p>At the time, HCG was the fourth most shorted stock in Canada. By July 29, the day before the current announcement, HCG had risen to the <a href=""><span style="text-decoration: underline;"><span style="color: #0009c4;">second most shorted</span></span></a> stock. Today, massive short-covering set in, and shares soared 13%, but remain 42% below where they’d been during the halcyon days last November.</p> <p>“Everyone had their ideas about what transpired in the past six months; this corroborates some suspicions but dispels some others,” Shubha Khan, an analyst at National Bank Financial told the <a href=""><span style="text-decoration: underline;"><span style="color: #0009c4;">Financial Post</span></span></a>, adding – with Canadian understatement – that there were “still some questions.”</p> <p>Among them, whether these insured liar loans would continue to be insured; and whether this was an isolated problem, rather than an industry issue in the Canadian housing market. In other words, is it just the tip of the iceberg?</p> <p>Housing bubbles are money generators. Temptations are huge. Falsifying mortgage applications is easy if no one checks them. It’s a mad scramble to extract as much money as possible for as long as possible – but with a devastating aftermath.</p> <p>Now liar loans are coming out of the Canadian woodwork. The much touted down-payment requirements in Canada have already fallen apart. Don’t have the money for even 5% down? Solutions are <a href=""><span style="text-decoration: underline;"><span style="color: #0009c4;">openly</span></span></a> promoted, for example:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>It is not a problem anymore!!! Canada Mortgage &amp; Financial Group (CMFG) has a new product that now allows you to borrow your down payment from any source…. The only amount you need to show on your own is 1.5% of the purchase price….</p> </blockquote> <p>With regulators breathing softly down their necks, banks might have become more careful in lending to people to buy homes that are among the most overpriced in the world. What has that accomplished? The rise of alternative lenders in the shadow banking system. They’re not subject to the same regulations as banks.</p> <p>“There’s a lot more that can be hidden from the public, things that are not right could not be noticed early on,” Michael Dolega, a senior economist at TD Economics, told the <a href=""><span style="text-decoration: underline;"><span style="color: #0009c4;">Huffington Post</span></span></a> of Canada. “The quality is slipping, and it’s far more questionable for some of these smaller lenders, but at the same time I think it’s still better than it was in the U.S., when it went south pretty quickly.”</p> <p>Yes, this time it’s different.</p> <p>But the patterns are crystallizing: Home Capital Group with liar loans on its books, CMFG with ultra-low down-payment loans on its books…. In banking, bad deals are made in good times.</p> <p>Even the Bank of Canada, in its most recent <a href=""><span style="text-decoration: underline;"><span style="color: #0009c4;">Financial System Review</span></span></a> in June, fretted over the risks in the shadow banking system due to its “less regulated nature” and outright “opacity,” and considered it a “particularly important vulnerability” to financial stability. While the sector is still relatively small, it would impact the overall economy, it said.</p> <p>But it’s not so small anymore – estimated at 10% of Canada’s mortgage market and growing rapidly: A report by CIBC (Canadian Imperial Bank of Commerce), cited by the Huffington Post, found that lending by alternative lenders had <em>doubled</em> since 2012, and as of the Q3 last year, was still growing 20% year-over-year.</p> <p>This comes at the worst possible time for Canada. The economy likely&nbsp;shrank in the first half. Hence, the <a href=""><span style="text-decoration: underline;"><span style="color: #0009c4;">Conference Board of Canada</span></span></a> just downgraded growth to 1.6% in 2015, worst since 2009. It sees some deep problems, after a 15.5% plunge in business investment in Q1:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Oil and gas firms are expected to chop their investment by almost one-third…. Outside the energy sector, firms remain hesitant to invest. Purchases of machinery and equipment suffered a substantial decline in the first quarter of the year, and a decline in building permits suggests a downturn in commercial construction in 2015. Overall, business investment will drop by close to 7% this year.</p> <p>Household spending is also expected to weaken, despite savings for consumers at the gas pump and federal tax cuts. Soft employment growth, weak wage gains, high level of household debt and job losses in oil producing provinces will combine to limit growth in consumer spending to 2.1% in 2015.</p> </blockquote> <p>That would be the optimistic scenario. It assumes that the magnificent housing bubble can be maintained; but all bets are off if it takes liar loans, among other underwriting schemes,&nbsp;to maintain it. And when the housing bubble deflates, all these schemes that are forgiven as long as prices rise will turn into an unappetizing mess. </p> <p>The problems are already spreading in the Canadian real estate sector. Read… <a href=""><span style="text-decoration: underline;"><span style="color: #0009c4;">Epic Glut of Office Space Crushes Hope in Canadian Oil Patch </span></span></a></p> Conference Board Federal Tax Housing Bubble Housing Market Real estate Shadow Banking Fri, 31 Jul 2015 03:58:54 +0000 testosteronepit 510744 at Donald Trump's Soaring Popularity "Is The Country's Collective Middle Finger To Washington" <p><a href=""><em>Submitted by Paul Brodsky, via</em></a>,</p> <p>Donald Trump’s ascendance as the early GOP front-runner is symbolic of a greater global trend: <strong><em>growing pushback against institutional political and economic power. </em></strong></p> <p><strong>To many centrist politicians and mainstream political observers, Donald Trump is a boastful, insensitive egomaniac spouting populist rhetoric. </strong>Whether such a characterization is true is not worthy of debate, which may explain why the rantings of enraged career political pundits have no impact on Mr. Trump’s popularity among Republican voters in Iowa, New Hampshire, and across America. It seems no amount of ink or air time spent tarring and feathering Trump’s reputation sticks; in fact it seems to help Teflon Don in the polls, where he leads a crowded field of career politicians.</p> <p>Donald Trump is a threat not only to the nattering nabobs in the press corps and the Republican Party. <strong>His day in the sun may be symbolic of a broader dynamic: the declining power held by historically powerful institutions.</strong> Ask yourself if Trump’s campaign is making a mockery of the political process or exposing the mockery that the political process has become. A not-insignificant percentage of Americans away from the coasts, are looking past his utter lack of decorum and political savvy to hitch their wagons to his outrage.</p> <p><em>Let’s forget, for a moment, about our personal politics, preferred policies, and individual candidates we may be excited to elect. Are we supposed to forget that the Supreme Court, through its 2010 decision that corporate donors should be treated legally as individual donors under the First Amendment, effectively subordinated individual voters into mere supporting targets to which political aspirants have to appeal? Most importantly, <strong>are we supposed to nod our bobble heads in agreement with the heads of the national parties to choose a candidate they find acceptable</strong> based on which will appeal to the best funded special interests?</em></p> <p><span style="text-decoration: underline;"><strong>Is anyone really polling in favor of Donald Trump or is he conveniently filling the role of the not-so-quiet counterfactual?</strong></span></p> <p>I recently texted one of the premier Sunday morning political pundits with these thoughts and he texted back:</p> <p><span style="text-decoration: underline;"><em><strong>“That's what I am arguing internally. This is the country's collective middle finger to Washington.”</strong></em></span></p> <p>As an investment strategist and consultant observing our current global economy and markets, <strong>it is difficult not to extrapolate this sense of helplessness against powerful institutions.</strong> <em>Tell us again why six years of central bank financial repression is serving the interests of the greater factors-of-production?</em> As investors, should we care about widening wealth and income gaps that are clearly part-and-parcel with central bank policies devoted to maintaining asset values (see <a href="">here</a> and <a href="">here</a>)?</p> <p><em><strong>Should we expect free, democratic markets that create, form and price capital efficiently - not that treat financial assets as balance sheet collateral for credit?</strong></em></p> <p><span style="text-decoration: underline;"><strong>Who can voters elect to again have an economy that puts producers over rentiers, or to have markets that price value?</strong></span> I’m sure it’s not Donald Trump (a rentier’s rentier!), but I’m also sure it’s not the heads of the Democrat and Republican Parties. Who can investors elect to keep the rentier thing going? Is that really what investors should want? It’s complicated.</p> <p><a href=""><em>Read more here...</em></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="208" height="171" alt="" src="" /> </div> </div> </div> Donald Trump First Amendment Global Economy Fri, 31 Jul 2015 03:30:00 +0000 Tyler Durden 510737 at Debt Slaves: 7 Out Of 10 Americans Believe That Debt "Is A Necessity In Their Lives" <p><a href=""><em>Submitted by Michael Snyder via The End of The American Dream blog</em></a>,</p> <p><strong>Could you live without debt?&nbsp; Most Americans say that they cannot.</strong>&nbsp; According to a <a href="" target="_blank" title="brand new Pew survey">brand new Pew survey</a>, approximately 7 out of every 10 Americans believe that &ldquo;debt is a necessity in their lives&rdquo;, and approximately 8 out of every 10 Americans actually have debt right now.&nbsp; Most of us like to think that &ldquo;someday&rdquo; we will get out of the hole and quit being debt slaves, but very few of us ever actually accomplish this.&nbsp; That is because <strong>the entire system is designed to trap us in debt before we even get out into the &ldquo;real world&rdquo; and keep us in debt until we die</strong>.&nbsp; Sadly, most Americans don&rsquo;t even realize what is being done to them.</p> <p><strong>In America today, debt is considered to be just part of normal life.</strong>&nbsp; We go into debt to go to college, we go into debt to buy a vehicle, we go into debt to buy a home, and we are constantly using our credit cards to buy the things that we think we need.</p> <p><strong>As a result, this generation of Americans is absolutely swimming in debt.&nbsp;</strong> The following are some of the findings of <a href="" target="_blank" title="the Pew survey">the Pew survey</a> that I mentioned above&hellip;</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>*&rdquo;8 in 10 Americans have debt, with mortgages the most common liability.&rdquo;</p> <p>&nbsp;</p> <p>*&rdquo;Although younger generations of Americans are the most likely to have debt (89 percent of Gen Xers and 86 percent of millennials do), older generations are increasingly carrying debt into retirement.&rdquo;</p> <p>&nbsp;</p> <p>*&rdquo;7 in 10 Americans said debt is a necessity in their lives, even though they prefer not to have it.&rdquo;</p> </blockquote> <p><strong>Most of us wish that we didn&rsquo;t have any debt, but we have bought into the lie that it is a necessary part of life in America in the 21st century.</strong></p> <p>It has been estimated that 43 percent of all American households spend more money than they make each month, and U.S. households are <a href="" target="_blank" title="more than 11 trillion dollars in debt">more than 11 trillion dollars in debt</a> at this point.</p> <p>When it comes to government debt, that is easy for us to blame on someone else, but all of this household debt is undoubtedly something that we have done to ourselves.</p> <p><strong>It all starts at a very early age for most of us.&nbsp;</strong> When we are still in high school, we are endlessly told about how important a college education is.&nbsp; All of the authority figures in our lives insist that we should just try to get into the best school that we possibly can and to not even worry about how much it will cost.</p> <p>So many of us go into staggering amounts of debt before we even get out into the working world.&nbsp; We had faith that the &ldquo;good jobs&rdquo; that were being promised to us would be there when we graduated.</p> <p>Unfortunately, in this day and age those &ldquo;good jobs&rdquo; end up being a mirage more often than not.</p> <p>But whether or not we can find a good job, we still have to pay off all that debt.</p> <p>According to new data that was recently released, the total amount of student loan debt in the United States has risen to a grand total 1.2 trillion dollars.&nbsp; If you can believe it, that total has&nbsp;<a href="" target="_blank" title="more than doubled">more than doubled</a> over the past decade.</p> <p><strong>Right now, there are approximately <a href="" target="_blank" title="40 million">40 million</a> Americans that are paying off student loan debt.&nbsp; For many of them, they will keep making payments on this debt until they are senior citizens.</strong></p> <p>Another way that they get you while you are still in school is with credit card debt.</p> <p>I got my first credit card while I was in college, and nobody ever taught me about the potential dangers.</p> <p><strong>Today, the average U.S. household that has at least one credit card has approximately <a href="" target="_blank" title="$15,950">$15,950</a> in credit card debt.</strong></p> <p>So let&rsquo;s say that you have that much credit card debt and you are paying an annual interest rate of 17 percent.&nbsp; If you only pay the minimum payment each month, it will take you 229 months to pay your credit card off, and during that time you will have paid $13,505.82 in interest charges.</p> <p>In other words, you will almost have paid twice as much for everything that you originally bought with your credit card by the time it is all said and done.</p> <p>This is why banks love to give you credit cards.&nbsp; If they can get back nearly twice as much money as they originally give you, they get rich and you get poor.</p> <p>Most of us get loaded down with even more debt when we go to buy a vehicle.&nbsp; Instead of saving up and getting what we can afford, many of us end up getting the largest loans that we can qualify for.</p> <p>In a <a href="" target="_blank" title="previous article">previous article</a>, I discussed the fact that<strong> the average auto loan at signing in America today is&nbsp;<a href="" target="_blank" title="approximately $27,000">approximately $27,000</a>.&nbsp; In order to get the monthly payments down to a level where we can afford them, many of these auto loans are now being stretched out for six or seven years.</strong>&nbsp; In fact, the number of auto loans that exceed 72 months <a href=";PID=4003003&amp;SID=iaf74qnctr008cyw00dth" target="_blank" title="is at an all-time high">has hit at an all-time high of 29.5 percent</a>.</p> <p><strong>It is the same thing with home loans.</strong></p> <p>In the old days, it was extremely rare for a mortgage to be stretched over 30 years, but today that is pretty much the standard.</p> <p>Sadly, most people don&rsquo;t understand how much money this is costing them.</p> <p>If you take out a $300,000 mortgage at 3.92 percent and stretch it over 30 years, you will end up paying back a grand total of $510,640.</p> <p><strong>In other words, you will pay for two houses by the time you are done.</strong></p> <p>Yes, we all need somewhere to live, and there are definitely negatives to renting as well.&nbsp; But it is very important that we all understand what is being done to us.</p> <p><u><em><strong>And I haven&rsquo;t even discussed one of the most insidious forms of debt yet.</strong></em></u></p> <p>Have you noticed that most doctors and most hospitals will never tell you how much something is going to cost in advance?</p> <p>They get us when we are at our most vulnerable.&nbsp; When there is something wrong with us physically, we are often desperate to get help.&nbsp; So we don&rsquo;t ask too many questions and we just go along with whatever they say.</p> <p>But then later we get the bill and we are often <a href="" target="_blank" title="completely shocked">completely shocked</a> by what they have charged us.</p> <p>If you are completely unethical, it is a great business model.&nbsp; People that are extremely desperate and needy come to you and you don&rsquo;t even have to tell them how much your services are going to cost.&nbsp; And then once they leave, you send them an absolutely outrageous bill for whatever you feel like charging.</p> <p>Frankly, I don&rsquo;t know how a lot of people working in the medical field live with themselves.&nbsp; In their extreme greed, they are ruining the lives of millions of ordinary American families.</p> <p>One very disturbing study found that <a href="" target="_blank" title="approximately 41 percent">approximately 41 percent</a> of all working age Americans either currently have medical bill problems or are paying off medical debt.&nbsp; And collection agencies seek to collect unpaid medical bills from about <strong>30 million</strong> of us each and every year.</p> <p><u><em><strong>Most of us will spend our entire lives paying off debt.</strong></em></u></p> <p><u><em><strong>That is why we are called debt slaves &ndash; our hard work makes others extremely wealthy.</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="247" height="188" alt="" src="" /> </div> </div> </div> Fri, 31 Jul 2015 03:00:00 +0000 Tyler Durden 510740 at Secret Memo Reveals US Was Aware Of Americans Killing Zimbabwe Lions; Only Concern Was Getting Caught <p>Over the past 3 days, it appears that the only thing Americans can talk about, whether around the watercooler, in the office or during prime time TV, is the tragic death of Cecil the Zimbabwe lion, and his "monster" killer, Minnesota dentist Walter Palmer. The reality, of course, is that despite engaging in the rather anachronistic pursuit of self-gratification through shooting at animal prey, in this case a bow and arrow, in a day and age of online apps and cyberspace, Palmer, a self-professed avid big-game hunter, did nothing illegal in his opinion having relied on local guides and was said to believe the hunt was legal. </p> <p>"I have not been contacted by authorities in Zimbabwe or in the U.S. about this situation, but will assist them in any inquiries they may have," Palmer said but by then the witch hunt was on: not only were crowds of people stalking out his office but investigators <a href="">have knocked on the front door of Palmer's house</a>, stopped by his dental office, called his telephone numbers and filled his inbox with e-mails. There is even a petition, with <a href="">over 155,000 signatures</a>, demanding Palmer be extradited to Zimbabwe where he would "face justice" alongside his two guides who are already said to be in custody.</p> <p>Not surprisingly, Palmer has prudently disappeared until tempers cool off and/or an arrest warrant is issued for his arrest. </p> <p>In the grand scheme of things, this is yet another grand, and convenient distraction <em>du jour </em>for the US public to rally around with a cry of fake (or in some TV talk show hosts, <em>almost </em>real) indignation while preaching moral superiority (killing one lion is apocryphal but killing millions of hamburgers and pork burritos every year is, well, meh) while the US economy continues to disintegrate under everyone's feet.</p> <p>However, where this particular episode rapidly crossed the surreal threshold, is when news hit overnight that Obama administration officials <a href="">are offering to help the Zimbabwean government investigate </a>the high-profile killing. </p> <p>Yes, the president would show the American people just what a humanitarian he is, and do what he does best: dispense "fairness" and "justice."</p> <p>Only... this being the US government, what really happened is another grotesque instance of unparalleled hypocrisy promptly backfiring.</p> <p>Presenting "<a href="">QUIET DIPLOMACY" SUSPENDS ELEPHANT HUNTING IN NATIONAL PARKS - FOR NOW</a>" - a Confidential memo sent on October 23, 2008 by the current US ambassador to Zimbabwe, James D. Mcgee, to the CIA, and released by Wikileaks. </p> <p>In it we read that, as usual, there is none more culpable of the recent event in Zimbabwe, which incidentally is and has been quite permitted by the local authorities as long as everyone's palms are appropriately greased, than the US government, <strong>which years ago was fully aware that Americans were killing lions in Hwange National Park, but that its concern was not with the dead animals - no matter how hard the administration tries to feign empathy for the beheaded lion here and now - but with Americans getting caught in the act. </strong>As has just happened.</p> <p>But first, here is some background on how legal local poaching, whether it is for lions or elephants is. From the formerly classified memo:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Meeting with poloff and conoff on October 10, Bown said that it was unclear "how legal" these hunting operations were, <strong>since it appeared the hunters had permits issued by Parks to kill the animals, despite the provision in the National Parks Act that prohibits commercial hunting.&nbsp; </strong>The photographic safari operators indicated Parks had given several local and South African hunting companies concessions to kill elephants in Hwange if they met specific criteria: (1) total ivory weight less than 30 pounds, (2) young/adolescent males, (3) isolated areas (i.e. away from watering holes and main roads), and (4) controlled by Parks staff.&nbsp; <strong>Parks has never publicly stated these criteria or explained the operation.&nbsp; </strong>Frustrated photographic safari operators weighed and photographed many of the tusks at the Park's ivory store in Hwange and found that many were over 30 pounds each.&nbsp; <span style="text-decoration: underline;"><strong>In one case, an operator claimed an American hunter killed an elephant with tusks weighing over 120 pounds.&nbsp; </strong></span>Photos also show some elephants were killed very near main roads and close to watering holes.&nbsp; <strong>In at least one reported case, a vehicle drove around the animal before the hunter killed it at close range.&nbsp; </strong>In emails to Mtsambiwa and Nhema, safari operators decried the unethical hunting both in terms of the detrimental ecological impact and the negative impact it would have on their own businesses.</p> <p>&nbsp;</p> <p>... the safari operators also&nbsp; reported that some of the hunting guides had been issued <strong>hundreds of hunting permits for elephants in Hwange and other national parks in mid-to-late August</strong>.&nbsp; Normally, hunting permits are offered in an auction to all professional hunting guides.&nbsp; In contrast, <strong>Bown said these recent permits were issued through a non-transparent process to professional hunters of ill-repute, including some South African operators</strong>. </p> </blockquote> <p>So both the Zimbabwe ambassador and the CIA knew Zimbabwe was permitting and flaunting its own "regulations" when it comes to poaching if the fee is good enough. And, since American citizens were involved, the fee most certainly was:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Despite Mtsambiwa's assurances at our August meeting that Parks was only planning a management/training exercise for Parks staff, in early September poloff received an email&nbsp; <strong>from an American citizen in California, asking about an advertisement for an elephant hunt in Zimbabwe to hunt five elephants over ten days for USD 6,000 as part of a culling exercise</strong>.&nbsp; The meat from the animals would go to local villagers and hunters were expected to help with on-site butchering of the animals.&nbsp; This price is significantly less than most elephant hunting packages.&nbsp; Normally, elephant hunting excursions in Zimbabwe cost about USD 1,000 per day, plus a fee for each animal killed.&nbsp; <strong>The hunting operation was to be led by Zimbabwean Headman Sibanda and was arranged by Thomas Powers Internationale, based in Colorado</strong>. </p> </blockquote> <p>Where was the disgust then? Oh yes, elephants are not cute animals about which Broadway musicals are written. </p> <p>However, there is a problem, because reading on we find that not only did the government know about everything that was going on involving US poachers, quite legal and paying very well, involving the hunting of elephants, but also, drumroll, lions.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Bown, Save Valley Conservancy Director Clive Stockil and other conservationists opined in conversations with us that hunting permits were issued by Parks under intense pressure from its politicized board and ZANU-PF.&nbsp; Bown believed this frantic last grab at hunting revenue was one more aspect of ZANU-PF insiders' efforts to strip assets and fill their pockets before losing power to the MDC.&nbsp; She said that the same small group of hunters involved in this operation had been consistently involved in unethical and marginally legal hunting.&nbsp; Bown had no evidence that they were involved specifically with sanctioned individuals within the Mugabe regime, but believed such connections were likely.&nbsp; According to Bown, the Zimbabwean professional hunters involved include Guy Whitall, Tim Schultz of African Dream Safaris, Headman Sibanda and Wayne Grant of Nyala Safaris, Evans Makanza, Alan Shearing, Buzz Charlton and James Macullam of Charlton Macullum Safaris, A.J. Van Heerden of Shashe Safaris, Barry Van Heerden of Big Game Safaris, and Lawrence Boha.&nbsp; (COMMENT: Numerous conservationists have suggested the Van Heerden brothers are involved in suspicious hunting and land deals with the Director of the Central Intelligence Organization, Happyton Bonyongwe, although none have provided proof of the relationship.&nbsp; END COMMENT.) <strong>&nbsp;</strong></p> <p>&nbsp;</p> <p><strong>Additionally, one safari operator accused an American, by name, of killing a lion illegally and then smuggling its hide out through South Africa.&nbsp; Given the rampant smuggling of other animal products across Zimbabwe's southern border (reftel), this is not unlikely</strong>.&nbsp;<span style="text-decoration: underline;"><strong> As reported in reftel, American hunting dollars are vital to Zimbabwe's conservation efforts, but there are also serious risks that Americans could be implicated in smuggling and poaching operations</strong></span>.</p> </blockquote> <p>And there you have it: while blaming Walter Palmer is easy, the truth is that at its core, the death of Cecil, as well as countless other lions, elephants, rhinos and other animals, is solely as a result of the Zimbabwe government's corruption. A corruption, which the US government knew all about, and which also knew that US hunters were killing not only elephants but lions. </p> <p>The government's only real concern: the <strong>"serious risks that Americans could be implicated in smuggling and poaching operations."</strong></p> <p>And now that an American has been implicated in poaching, what does the government do? It generously offers to "help the Zimbabwe government investigate the killing" of Cecil. Even though both Zimbabwe <em><strong>and the US government</strong></em> have tacitly approval of just this kind of behavior for years. Until something went wrong.</p> <p>Come to think of it, that's precisely what happens in the US capital markets too: as long as stocks go up, nobody cares about criminal behavior and bubble blowing (just don't get caught spoofing an ES sell orders). But once the real selling begins...</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="645" height="363" alt="" src="" /> </div> </div> </div> Capital Markets Corruption None Obama Administration Reality Fri, 31 Jul 2015 02:24:54 +0000 Tyler Durden 510743 at Chinese Stocks Extend Yesterday's Plunge Despite Regulators "Asking" Insurers To Stop "Net Sales" <p>Following last night&#39;s afternoon session plungefest (with ChiNext&#39;s biggest drop in a month), as it appeared the government experimented with &#39;free&#39; markets briefly, <strong>regulators have &quot;asked&quot; insurance companies to be &quot;net sellers&quot; of stocks going forward</strong>. With margin debt dropping for the 4th day in a row (to fresh 4-month lows), Markit noted that <span><strong>accusations of foreigners short selling shares is &ldquo;overblown&rdquo; by Chinese market regulators and not the cause of a recent rout in the stock market</strong>, according to the SCMP. The requests and threats appear to not be working as <strong>CSI-300 futures open down 0.7%.</strong></span></p> <p>As a reminder, this is how things ended last night...</p> <p>&nbsp;</p> <p><a href=""><img src="" style="width: 600px; height: 309px;" /></a></p> <p>*&nbsp; *&nbsp; *</p> <p><strong>And tonight we are seeing losses extend...</strong></p> <ul> <li><strong>*CHINA&#39;S CSI 300 INDEX SET TO OPEN DOWN 1% TO 3,777.15</strong></li> <li><strong>*CHINA SHANGHAI COMPOSITE SET TO OPEN DOWN 1.4% TO 3,655.67</strong></li> </ul> <p><a href=""><img height="309" src="" width="600" /></a></p> <p>&nbsp;</p> <p>*&nbsp; *&nbsp; *</p> <p>More measures...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>China Insurance Regulatory Commission asked insurers to try their best to avoid net sales of equities in near future, </strong><span>Shanghai Securities News</span><span> reports, citing an unidentified person from an insurer.</span></p> </blockquote> <p>And refutations to China&#39;s claims that foreign sellers were &quot;waging economic war&quot;</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><span><strong>Accusations of foreigners short selling shares is &ldquo;overblown&rdquo; by Chinese market regulators and not the cause of a recent rout in the stock market, </strong>South China Morning Post cites financial data co. Markit analyst Relte Stephen Schutte as saying.</span></p> <ul> <li><strong>Official data shows minimal short selling of individual shares with shorting of domestic ETFs at only 1.2% of total domestic ETFs</strong> under management, Schutte is cited as saying</li> </ul> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>On a more sombre note, the first major casualty of the Chinese stock market disaster has happened as<a href=""> Caixin reports</a> <u><strong>well-known fund manager, Liu Qiang, a 36-year-old fund manager at Ruilin Jiachi,&nbsp; jumped to his death from a high-rise in downtown Beijing,</strong></u> angry the government intervened in the stock market rout, people who knew him say...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Several people close to Liu said he suffered from depression and returned to work in April after spending three years in the southwestern province of Yunnan where he was seeking treatment for depression. <strong>&quot;He has had a very tough time in recent years,&quot;</strong> one of Liu&#39;s friends said.</p> <p>&nbsp;</p> <p><a href=""><img alt="" src="" style="width: 454px; height: 300px;" /></a></p> <p>&nbsp;</p> <p>Some of Liu&#39;s friends said <strong>he had been very frustrated by the government&#39;s efforts to&nbsp;<a href="" target="_blank">support the bourse</a>&nbsp;amid recent turmoil because he believed this upset market order. </strong>He thought that &quot;the rules and order of the market had been broken &hellip; and was desperate, feeling that he was at his wit&#39;s end,&quot; one of his friends said.</p> <p>&nbsp;</p> <p><strong>Publicly available data show that the fund he managed, which invests in stocks and futures, had lost about 18 percent of its value this year and would be liquidated if losses exceeded 20 percent</strong>. But a person close to Liu said most of the fund&#39;s investors were his friends who agreed with his belief in long-term investment. They were not eager to liquidate the fund, he said.</p> <p>&nbsp;</p> <p>In a blog dated July 7, Liu wrote:<u><em><strong> &quot;The stock market disaster has turned many of my investment principles upside down &hellip; and made me doubt many times whether I&#39;m still suitable for the market.&quot;</strong></em></u></p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>&nbsp;</p> <p>&nbsp;</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="970" height="500" alt="" src="" /> </div> </div> </div> China Insurance Companies Markit Fri, 31 Jul 2015 01:20:54 +0000 Tyler Durden 510742 at "Greed Is King" - What We Learned Talking To Chinese Stock Investors <p><em><a href="">Authored by J.J. Zhang, originally posted at</a>,</em></p> <p>Though Greece has dominated the news recently, its overall market impact has been surprisingly muted. Instead, the real market mover and shaker for the last couple of months has been China.</p> <p>By now, many are familiar with the facts and numbers of the Shanghai market situation. But recent events have also shed a light on a less well known dynamic &mdash; the individual behavioral habits and viewpoints of Chinese market participants.</p> <p>During a short stay in Shanghai a few weeks ago on unrelated business, I had an opportunity to witness the ground zero of the China market frenzy at its peak and its nascent plunge. <strong>Chinese retail investors make up 85% of the market, a far cry from the U.S. where retail investors own less than 30% of equities and make up less than 2% of NYSE trading volume for listed firms in 2009.</strong></p> <p>Combined with the highest trading frequencies in the world and one of the lowest educational levels, <strong>describing China&rsquo;s market as immature is an understatement. </strong>As many readers know, mental irrationality is often cited as the No. 1 cause of poor returns.</p> <p>Using the opportunity to interview some China market participants, both in Shanghai and elsewhere, here are a few observations of how they think and act &mdash; and the potential lessons that await.</p> <p><u><strong>Bubbles can be surprisingly predictable</strong></u></p> <p>During the housing bubble run-up and subsequent recriminations, a common excuse was the impossibility of predicting and diagnosing bubbles. However, bubbles can often be characterized by several irrational behaviors and metrics and the recent China bubble is no exception. Almost everyone in the financial industry knew the Shanghai market was in a bubble. Interestingly, from my interviews with everyday participants, they knew it as well, many agreed that the market was crazy and was likely in a bubble. It was not a question of if, but when, the bubble would pop.</p> <p><u><strong>Chasing bubbles in China isn&rsquo;t new</strong></u></p> <p>An interesting counterpoint to the bubble awareness is that, frankly, Chinese participants are used to chasing bubbles. Whether a cultural phenomenon or something else, over the last decade there&rsquo;s been a continual hopping of investment from one big money-making scheme to the next. Whether it was real estate a decade ago, gold half a decade ago or wealth-management products a few years ago, there&rsquo;s a continual cycle of money rotation into the &ldquo;hot&rdquo; investment, with each failing eventually in some way. It&rsquo;s simply stock&rsquo;s turn. As one interviewee said: &ldquo;The Chinese market is not for investing, it&rsquo;s for gambling.&rdquo;</p> <p><strong><u>Early birds get the worms</u></strong></p> <p>This goes completely against most prudent and established norms. While the standard advice is to avoid &ldquo;hot&rdquo; bubbly assets, in China the experience has actually been to jump in early and fully instead. Many of the bubbles or &ldquo;hot&rdquo; investments mentioned earlier have in truth made many of the people I&rsquo;ve talked to a lot of money. China real estate today is a poor investment but those who got in early doubled or tripled their investments. Similarly with wealth-management products, more people have benefited from their high-interest-rate payouts than have suffered. While the Shanghai market has dropped 20%-30% from its peak a few weeks ago, it still represents a 100% gain from a year ago and a 30% gain over the last 6 months. Those participants who jumped in early are still more than happy.</p> <p><u><strong>Greed is king</strong></u></p> <p>Despite recognizing it&rsquo;s a bubble, almost everyone was still all-in on stocks. Why? Quite simply &mdash; greed with a dash of jealously. Seeing constant market gains in the news along with daily sharing and boasting from friends and family getting rich is simply too tempting and thus caution was thrown to the winds. Subsequently, this fueled a massive amount of equity exposure followed by leveraging and margin borrowing to go even more all-in.</p> <p><u><strong>But fear is the emperor</strong></u></p> <p>The only emotion more powerful than greed is fear. Almost everyone I talked to was still all-in on stocks but everyone had a foot halfway out the door, ready to bolt at the first sign of trouble. While not uniquely a China problem &mdash; market drops are almost always more violent than the initial rise &mdash; in China, it&rsquo;s several times more volatile. Look no further than solar-panel firm Hanergy&rsquo;s Hong Kong listed stock, which lost 47% in one hour, or the numerous days the Shanghai market rose or dropped by 5% or more.</p> <p><u><strong>Moral hazard in government rescues is real</strong></u></p> <p>During the most chaotic moments of the financial crisis, bailout discussions always raised the specter of moral hazard. While it didn&rsquo;t play a major role in the subsequent U.S. recovery, moral hazard in China is fast becoming a deep problem. Many market participants I talked to said they were confident in the Chinese government to step in eventually to maintain order and prevent mass panic. They know the government&rsquo;s legitimacy relies heavily on economic progress and fear any contraction. So far, they&rsquo;ve been right &mdash; the government has announced a never-ending stream of interventions over the last few weeks to stem the selloff and panic, with the latest being the implementation of a half-trillion-yuan fund to purchase stock and shore up the market. Of course, the question is: When does a problem become too big for the government to control?</p> <p><u><strong>Maturity takes time</strong></u></p> <p>Perhaps the last lesson I took away from my Shanghai experience: Maturity takes time. Just as kids grow from naïve adolescence to rowdy teenage years to eventual maturity, so will China and its market participants. While stocks have been a part of U.S. culture and wealth creation for several generations now, in China this is really the first generation where participants both have the money and the ability to invest in stocks.</p> <p><strong>Perhaps in another generation, after several years of painful lessons and surprising opportunities, it&rsquo;ll look completely different.</strong></p> <p><strong>*&nbsp; *&nbsp; *</strong></p> <p><strong>[ZH: Just like US investors have learned...</strong></p> <p><a href=""><img alt="" src="" style="width: 600px; height: 660px;" /></a></p> <p>]</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="387" height="303" alt="" src="" /> </div> </div> </div> China Gambling Greece Hong Kong Housing Bubble Moral Hazard Real estate recovery Fri, 31 Jul 2015 01:00:00 +0000 Tyler Durden 510736 at Why Do So Many Working Age Americans Choose Not To Enter The Workforce? <p><em>Via ConvergEx&#39;s Nick Colas,</em></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em><strong>Today we look at a unique dataset &ndash; Gallup&rsquo;s annual poll of job satisfaction &ndash; to see what it can tell us about secular trends in employment, consumer confidence and spending.</strong></em>&nbsp; This annual survey of +1,000 people active in the U.S. workforce goes back to the late 1980s, so it is a <strong>useful lens with which to consider issues like labor force participation rates that have shifted unexpectedly over the period</strong>.</p> <p>&nbsp;</p> <p>Most surprising news first: <strong><span style="text-decoration: underline;">Americans express a broad satisfaction with their jobs, regardless of economic conditions</span></strong>. The very worst reading since 1989 was in 2011 when &ldquo;Only&rdquo; 83% of respondents said they were either &ldquo;Somewhat&rdquo; or &ldquo;completely&rdquo; satisfied with their jobs.&nbsp; The peak was in 2007 at 94%, and last year (August 2014) it was 89%.</p> <p>&nbsp;</p> <p><strong>The key takeaway is that declining labor force participation rates since the year 2000 (67% then, 62.6% now) aren&rsquo;t because of any systemic disaffection with the American workplace.&nbsp;</strong></p> <p>&nbsp;</p> <p>The other notable takeaway: <strong>workers are (strangely, we must say) satisfied with what they earn</strong>. Those expressing &ldquo;Complete&rdquo; satisfaction with their paystub hit a high last year (31%) not seen since 2010 and 2006&hellip;&nbsp; Wage inflation?&nbsp; What for?</p> </blockquote> <p><span style="text-decoration: underline;"><strong>You could call it the &ldquo;Mystery of the Missing Worker&rdquo; &ndash; why do so many people of working age chose not to enter the workforce?</strong></span>&nbsp; Here are the numbers, as of the most recent Employment Situation report:</p> <ul> <li>250 million: the total number of people of working age in the United States.&nbsp;</li> <li>149 million: the total number of people in that population that have a job.</li> <li>8 million: the number of people who want a job but do not have one.</li> <li>93 million: the number of people who don&rsquo;t work, and don&rsquo;t want work.</li> </ul> <p><strong>To put some context around that last number, it is 30% of the entire U.S. population.</strong>&nbsp; This is the same as the current population of the entire West Coast (CA, OR, and WA) AND New York State AND Florida.&nbsp; Plus another 10 million people.&nbsp; Economists measure this with the Labor Force Participation rate, and it has been in decline since February 2000, when it peaked at 67.3%.&nbsp; It is now 62.6% and last month was a new low back to the 1970s. People of working age increasingly do not consider themselves part of the labor force.&nbsp; Most economists chalk this up to the demographics of an aging workforce even though virtually all the literature on the topic in the early 2000 predicted participation would continue to increase.&nbsp;</p> <p><strong>We recently took a long look at a dataset that doesn&rsquo;t often see the light of day but does provide some useful takes on how workers view their jobs.&nbsp; </strong>It comes from the Gallup organization and is an annual survey of +1,000 employees since 1989 on their perceptions of job satisfaction in all its forms, from health and safety concerns to compensation to job security.&nbsp; <a href="">The complete data set can be found here</a>, and the charts below highight the trends...</p> <p><a href=""><img height="576" src="" width="600" /></a></p> <p>But here are the important takeaways.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>#1: Americans are consistently satisfied with their jobs, although the readings vary slightly through a given economic cycle.&nbsp;</strong>The highest ever combined responses of &ldquo;Completely Satisfied&rdquo; and &ldquo;Satisfied&rdquo; was in 2007 at 94%. The worst since the start of the survey in the late 1980s was 2011, at 82%.&nbsp; Last year &ndash; the results come out every August &ndash; the combined reading was 58% &ldquo;Completely&rdquo; and 31% &ldquo;Somewhat&rdquo; Satisfied, for a total of 89%.</p> <p>&nbsp;</p> <p><strong>#2: They also feel relatively secure in their positions.&nbsp;</strong> Last year some 88% reported being &ldquo;Completely&rdquo; (58%) or &ldquo;Somewhat&rdquo; (31%) satisfied by the security offered by their jobs and, implicitly, their employers.&nbsp; The worst readings were in 2009 at 80% total and in the early 1990s at 79%.</p> <p>&nbsp;</p> <p><strong>#3: Workers also report high levels of satisfaction with what they receive in terms of compensation.</strong>&nbsp; Back in 1991 &ndash; the worst year in terms of general reported satisfaction for this question &ndash; &ldquo;only&rdquo; 66% of respondents were completely or somewhat satisfied with their pay stubs.&nbsp; Even during the Financial Crisis and its aftermath that number troughed at 70% in 2011. Last year a total of 75% of respondents were satisfied with what they received for compensation.</p> <p>&nbsp;</p> <p><strong>#4: Workers who respond to the Gallup survey last year have the biggest gripes about health insurance benefits (only 61% satisfied), retirement planning (only 63% satisfied) and chances for promotion (68%). </strong></p> <p>&nbsp;</p> <p><strong>#5: Conversely, workers reported exceptionally high levels of satisfaction in their relations with co-workers (95% completely or somewhat satisfied), physical safety (93%) and the flexibility of their hours (90%).</strong></p> </blockquote> <p><strong>Frankly, when we started to look at these numbers we expected to see a mirror of the volatility common in consumer confidence surveys.</strong>&nbsp;&nbsp;A few points here:</p> <ul> <li>Consumer confidence as measured by the Conference Board peaked in 1966/67 and again in the late 1990s at readings of +140.&nbsp;</li> <li>Troughs occurred in the early 1970s, late 1970s/early 1980s and post&nbsp;<span>September 11</span>&nbsp;at readings of 50 or so.&nbsp;</li> <li>The Financial Crisis took us down to below 30 in 2008 and readings struggled to get past 70 until 2013.&nbsp;</li> </ul> <p><strong>We therefore thought that Americans would feel broadly the same about their work situations as they did the economy as a whole - that things are still pretty bad and the past was much better than the present.&nbsp; </strong>This turned out not to be the case.&nbsp; Yes, they express some marginal disaffection when times are hard, but the trough reading during and after the Financial Crisis was 83% satisfied with their jobs.&nbsp; Hardly a pitchforks and barricades kind of number.&nbsp;&nbsp;</p> <p><strong>In short, we can&rsquo;t blame lower participation rates on the nature of work &ndash; broadly speaking &ndash; offered in the American economy.&nbsp;</strong> In Internet parlance, the American workplace gets 4 &frac12; stars and a lot of recommendations.&nbsp; Perhaps, in the words of Yogi Berra: &ldquo;No one goes to that restaurant any more.&nbsp; It&rsquo;s too crowded&rdquo;.</p> <p>*&nbsp; *&nbsp; *</p> <p><a href=""><strong>Of course, when work is punished in the Entitlement State Americans live in...</strong></a> what else should we expect but 30% of the employable to sit at home? <a href=""><em>As we previously explained,</em></a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><u><strong>This isthe painful reality in America: for increasingly more it is now more lucrative - in the form of actual disposable income - to sit, do nothing, and collect various welfare entitlements, than to work.</strong></u></p> <p>&nbsp;</p> <p>This is graphically, and very painfully confirmed, in the below chart from Gary Alexander, Secretary of Public Welfare, Commonwealth of Pennsylvania (a state best known for its broke capital Harrisburg). As quantitied, and explained by Alexander, <strong>&quot;the single mom is better off earnings gross income of $29,000 with $57,327 in net income &amp; benefits than to earn gross income of $69,000 with net income and benefits of $57,045.</strong>&quot;</p> <p>&nbsp;</p> <p><a href=""><img height="449" src="" width="600" /></a></p> <p>&nbsp;</p> <p>We realize that this is a painful topic in a country in which the issue of welfare benefits, and cutting (or not) the spending side of the fiscal cliff, have become the two most sensitive social topics. Alas, none of that changes the matrix of incentives for most Americans who find themselves in a comparable situation: either being on the left side of minimum US wage, and relying on benefits, or move to the right side at far greater personal investment of work, and energy, and... have the same disposable income at the end of the day.</p> </blockquote> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="248" height="191" alt="" src="" /> </div> </div> </div> Conference Board Consumer Confidence Demographics Employment Situation Report Florida Gallup New York State None Reality The Matrix Volatility Fri, 31 Jul 2015 00:30:00 +0000 Tyler Durden 510725 at China Says US "Militarization" Of South China Sea Shows Washington "Wants Nothing Better Than Chaos" <p>If you follow geopolitics you’re well aware that China has become a magnet for maritime conflict and controversy over the past six or so months.&nbsp;</p> <p>It all started earlier this year when satellite images <a href="">showing the construction</a> of what appeared to be a 10,000 foot runway (long enough to accommodate military aircraft) atop a newly constructed island in the contested waters of the South China Sea touched off an international firestorm as the US and its allies accused Beijing of seeking to redraw maritime boundaries and expand its naval capabilities at the expense of regional security.</p> <p> China vigorously denied the accusations, pointing to the fact that other nations had undertaken similar land reclamation efforts in the Spratlys.&nbsp;</p> <p>The situation escalated meaningfully when the PLA threatened a US spy plane, prompting Washington to remind Beijing that artillery stationed on "sand castles" would certainly not be enough to deter the US Navy from navigating wherever it chooses whenever it chooses to do so. </p> <p>The "conflict" subsided briefly after a propaganda campaign by Beijing put a humorous spin on the entire ordeal, but China found itself right back in the spotlight last week after Japan <a href="">essentially accused</a> it of stealing natural gas by positioning rigs too close to a demarcation line that separates the two countries' exclusive economic zones.&nbsp;</p> <p>For the latest on China’s seaborne exploits we go to Reuters, who notes that Washington and Beijing are back at each other’s throats over the Spratly issue, only this time it’s China which is accusing the US of militarizing the region. Here’s <a href="">more</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong><em>China's Defence Ministry on Thursday accused the United States of "militarizing" the South China Sea by staging patrols and joint military drills there, ramping up the rhetoric ahead of a key regional security meeting in Malaysia next week.</em></strong></p> <p>&nbsp;</p> <p><em>China has been angered by U.S. navy and air force forays through waters it claims as its own, especially this month, when U.S. Navy Admiral Scott Swift said he joined a routine surveillance flight.</em></p> <p>&nbsp;</p> <p><em>The United States has also stepped up military contacts, including drills, with regional allies such as the Philippines, which also has claims in the South China Sea.</em></p> <p>&nbsp;</p> <p><em>The United States was hyping up the "China threat" and attempting to sow discord between China and other claimant countries, Defence Ministry spokesman Yang Yujun told a news briefing.</em></p> <p>&nbsp;</p> <p><strong><em>"China is extremely concerned at the United States' pushing of the militarization of the South China Sea region," he said.</em></strong></p> <p>&nbsp;</p> <p><strong><em>"What they are doing can't help but make people wonder whether they want nothing better than chaos."</em></strong></p> </blockquote> <p>Well yes, one "can’t help but wonder" that about a lot of what Washington does foreign policy wise (especially in the Middle East), although we suspect that this particular issue can be chalked up to a combination of curiosity and the irresistible temptation on the part of the Pentagon to prove to China that no matter what Beijing says, the US will continue to fly, sail, and conduct war games in the region if for no other reason than to spite Xi Jinping.&nbsp;</p> <p>But the atmosphere isn't completely hostile because as Reuters also notes, China is fine with "certain U.S. officials taking civilian flights over the South China Sea to enjoy its beauty."</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="499" height="273" alt="" src="" /> </div> </div> </div> China Japan Middle East Natural Gas Reuters SPY SWIFT Fri, 31 Jul 2015 00:00:21 +0000 Tyler Durden 510741 at Least Transparent Ever: IRS Used "Wholly Separate" Message System To Hide Communications <p><a href=""><em>Submitted by Mike Krieger via Liberty Blitzkrieg blog</em></a>,</p> <p><a href=""><img src="" width="600" height="422" /></a></p> <p>Barack Obama promised to have the “most transparent administration ever,” but as with pretty much every other promise he’s made over the years, the exact opposite is what has occurred.</p> <p>From Hillary Clinton using her own private email server while Secretary of State, to the latest revelations that the IRS (which <strong><a href="">intentionally targeted American citizens</a></strong> based on their political views), used a “wholly separate” instant messaging system in order to conceal their internal communications. Of course, not only is there no transparency, but as is the case with all shady and undemocratic&nbsp;“elite” behavior, there is no accountability.</p> <p>In the latest bit of information to emerge, we learn <a href="">from <em>Americans for Tax Reform</em> </a>that:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>The IRS used a “wholly separate” instant messaging system that automatically deleted office communications, according to&nbsp;<a href="">documentation&nbsp;</a>released by the House Oversight Committee on Monday. <strong>The system appears to have been purposefully used by agency officials responsible for the targeting of conservative non-profits, in order to evade public scrutiny.</strong></em></p> <p>&nbsp;</p> <p><em>The system, known as “Office Communication Server” or OCS was used by IRS officials, including many in the Exempt Organizations (EO) Unit, which was headed by Lois Lerner.</em></p> <p>&nbsp;</p> <p>As the Oversight Committee report states, the instant messaging system did not archive any communications, so it is not possible to know what employees of the EO unit discussed on it.</p> </blockquote> <p>However, in an email uncovered by the Committee Lerner warns her colleagues about evading Congressional oversight:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>“I was cautioning folks about email and how we have had several occasions where Congress has asked for emails and there has been an electronic search for responsive emails – so we need to be cautious about what we say in emails.”</p> <p>&nbsp;</p> <p><strong><em>Lerner then asks whether OCS is automatically archived. When informed it was not, Lerner responded “Perfect.”</em></strong></p> <p>&nbsp;</p> <p><em><strong>While it is possible to set the instant messaging system to automatically archive messages, the IRS chose not to do so,</strong> according to one employee interviewed by the Committee.</em></p> </blockquote> <p>This is not what freedom looks like.</p> Barack Obama House Oversight Committee Transparency Thu, 30 Jul 2015 23:30:00 +0000 Tyler Durden 510731 at