When the rumor first hit two day ago that Egyptian president Hosni Mubarak would be released from prison by the new administration, many were incredulous: would Egypt truly risk such a vicious slap in the face of US foreign policy which so carefully orchestrated his ouster during the Arab spring of 2011? The answer is yes: moments ago an Egyptian court ordered the release of the deposed president saying there were no legal ground to hold the 85-year-old under allegations of corruption, which as the WSJ reports, ushers in "yet another potential flash point of anger in a country already reeling from unprecedented political violence." Which, by the way, is just what the deficit spending-starved USA wants.
UK Government "Pulverizes" Guardian Hard Drives In Snowden Retaliation, Says "No Need To Write Any More"Submitted by Tyler Durden on 08/19/2013 22:28 -0400
The general manager of Fanxin, China's largest insurance dealer, has been arrested (after fleeing the coutry with CNY 500 million) and the entire industry is now under close scrutiny after regulators found that the company was selling unauthorized fixed-income financial agreements. Fanxin offered huge commissions to its staff to sell 'wealth management products' that were merely used to buy more insurance products in what appears a ponzi-like scheme. Investors were 'encouraged' to purchase these with promises of yields up to 20%. As Caixin reports, "such a high yield promise is definitely unsustainable," as Fanxin customers "thought they were buying the normal wealth management products like the ones offered by banks," but actually these products were made by Fanxin and funds were put into higher risk insurance products. In an unsurprising echo from the 'liar loans' of the US, the documentation was often forged or had fake contact information that could have been easily detected, but insurance companies ignored the problems for the sake of premium revenues.
While we recognize that JCPenney currently has adequate liquidity, we anticipate that this liquidity will diminish in FY14. We estimate that JCPenney will produce negative free cash flow of $399 million during 2H13 and produce negative free cash flow of $394 million in FY14. We believe that the company still has potential options to increase its liquidity, including selling equity or modest sale/leasebacks. We believe that liquidity of $1.5 billion at year end is sufficient, but leaves little room for error in a turn-around. Therefore, we are reducing our rating on all JCP Sr Unsecured Notes to UW-70%.
With Carney due to step up QE even moar, following the path of least resistance in the mind of a central banker, we can't help but wonder why it would be that UK financial services firms paid an "unsually high" amount of bonuses in April - even as the top rate sof income tax was cut from 50% to 45% that month. As Bloomberg notes, bonus payments in finance were 1.3 billion pounds in April compared with 600 million pounds a year earlier; begging the question of whether these British bankers know something we don't and want their money now?
First it was China whose affair with "tapering" was short and sweet, and after the banking system nearly chocked in June on the PBOC's telegraphed tightening, the central bank has once again released the spigots with reverse repos galore. Then overnight, fighting a collapsing market, it was India's turn to "flip-flop" on its recent tightening drives, when in an attempt to stop the Rupee's implosion, the central bank announced it would purchase $1.2 billion in long-term bonds, along with other measures, in its first QE-like foray to stabilize markets. And while it did manage to prevent another rout to the bond and stock markets, with the 10 Year bond yield falling below 9% and the Bombay Stock exchange bank index jumping more than 5%, the currency initially pushed higher only to tumble to a fresh record low of 64.59 as foreign investors continue to pull out capital. Such concerns will not be ameliorated by what is now seen as outright confusion by the RBI which is tightening one day, easing the next, and generally unsure what it wants to focus on: inflation, rates, equities, a functioning banking sector or last but not least, the currency.
The NSA - which possesses only limited legal authority to spy on U.S. citizens - has, according to the Wall Street Journal, built a surveillance network that covers more Americans' Internet communications than officials have publicly disclosed, current and former officials say. The system has the capacity to reach roughly 75% of all U.S. Internet traffic. The NSA's filtering, carried out with telecom companies, is designed to look for communications that either originate or end abroad, or are entirely foreign but happen to be passing through the U.S. But the WSJ reports that officials say the system's broad reach makes it more likely that purely domestic communications will be incidentally intercepted and collected in the hunt for foreign ones. Details of these surveillance programs were gathered from interviews with current and former intelligence and government officials and people from companies that help build or operate the systems, or provide data. Most have direct knowledge of the work. Here is how the system operates...
- Obamacare, tepid U.S. growth fuel part-time hiring (Reuters)
- Cameron was behind UK attempt to halt Snowden reports (Reuters), Britain defends detention of journalist's partner (Reuters)
- Goldman Options Error Shows Peril Persists One Year After Knight (BBG)
- China expresses 'shock' as Japan's nuclear crisis deepens (Reuters)
- Inquiry into China insurance firm rattles industry (Caixin)
- Cheaper rivals eat into Apple’s China tablet share (FT)
- Exporting fast food: Subway Targets Europe With as Many as 1,000 New Outlets in 2014 (BBG)
- Reserve Bank of India boosts liquidity to ease pressure on banks (FT)
- Justice Department Plans New Crisis-Related Cases (WSJ) - Holder doing his cutest attempt to pretend the TBTProsecute aren't
- Syrian Opposition Alleges Gas Attack, Which Government Denies (WSJ)
More of the same downward drift this overnight trading session, with early Asian outflows coupled with a fresh record low in the Indian currency, driven in part by reports the Fukushima leak severity had been raised from Level 1 to Level 3, which however subsequently reversed following a weakening in the JPY and pushed the Nikkei from a steep early drop to a modest green close. China was unchanged even as Fan Jianping, chief economist at the State Information Center, said that a new reasonable range for China’s growth is 7%-9%, Xinhua said and ongoing liquidity additions by the PBOC. In Europe, newsflow was dominated early on by a Suddeutsche report that the third Greek bailout would be likely financed in part by EU budget as the reality that nothing is fixed in Europe slowly returns and fears that the latent and non-existent OMT will eventually have to be used. US futures have seen a modest risk off bias in part driven by concerns what today's key event, the FOMC minutes due out at 2 pm, would reveal (if anything new). Also on deck are Existing home sales at 10:00 am which expect a slight pick up to 5.15 million from a 5.08 million prior print. Moments ago the latest weekly MBA Mortgage Applications number came out and, to nobody surprise, it posted the last weekly decline, dropping another 4.6% with conventional refis dropping for the 10th consecutive week.
FLASH: Japan raises severity of latest Fukushima leak to level 3 ("serious" radiation "incident") on international scale
— Reuters India (@ReutersIndia) August 21, 2013
"While many of you have asked what our plans are for this holding, as with our other investments, we do not disclose in advance what we intend to do in the future for obvious reasons. After our failed proxy contest at Target, we held our investment for more than 19 months until the price rose to a level where we found better uses for capital. We may choose to exit J.C. Penney after more or less time depending on developments at the Company, the stock price, and the availability of other investment opportunities." - Bill Ackman, August 20
As Australia's Leading economic index data hit, printing 0.0% for its lowest level in 13 months, AUDJPY fell out of bed with a thump and snapped carry-trades that were holding Asian stocks near unch early on. The Nikkei 225 fell over 250 points from its post-US close highs. The Aussie data combined with news that Fukushima was being raised to a Level 3 'incident' is escalating the JPY move (and dragging Nikkei -11.5% from its 7/18 dead-cat-bounce highs). Asian FX is fading once again (though KRW and TWD are modestly bid) led by IDR and THB. Indonesian stocks are also suffering as the currency has devalued almost 7% in the last 4 days and dropped by its most since Lehman tonight. Chinese stocks are siding fast led by Everbright which has now fallen 17% since it re-opened for trading yesterday. S&P futures are -3 from the US close (down over 9 points from the intraday highs) and Treasury futures have rallied back to unch from a modest dip earlier in the Asian session.
As we previously reported, using TIC data, in the month of June the international community did something it has not done in years - it sold US Treasurys with passionate zeal and reckless abandon. In fact, in that one month alone, $57 billion in total Treasury holdings (from $5.657 trillion to $5.601 trillion) was dumped in order to avoid major and accelerating losses. And yet there was one entity that was buying, on a virtually matched dollar-for-dollar basis, all that the foreign entities had to sell. The distribution of June sales among the select largest holders of US paper, and the sole, solitary buyer, is shown on the chart below. Guess who this Mystery Buyer X is, who boldly bought everything that no other man, woman or child wanted to buy in the month of June.
On the heels of President Obama’s signing of a measure keeping federally subsidized student loans at a relatively low rate through 2015, Rolling Stone's Matt Taibbi exposes how the high price of U.S. college tuition and the federal expansion of student debt to pay for it pose a major threat to the economy. In his new article, Taibbi writes: "The dirty secret of American higher education is that student-loan interest rates are almost irrelevant. It’s not the cost of the loan that’s the problem, it’s the principal - the appallingly high tuition costs that have been soaring at two to three times the rate of inflation, an irrational upward trajectory eerily reminiscent of skyrocketing housing prices in the years before 2008." As Democracy Now notes, during the following interview with Taibbi, "...throw off the mystery and what you’ll uncover is a shameful and oppressive outrage that for years now has been systematically perpetrated against a generation of young adults." The federal government is poised to make $185 billion over the next 10 years on student loans, with no way out for the young borrowers: "Even gamblers can declare bankruptcy, but kids who enter into student loans will never, ever be able to get out of this debt."