Fitch

On Monday, we got some color on Hillary Clinton’s $350 billion plan to make college more affordable. Students and former students across the country owe more than $1.2 trillion in college loans, and as Bill Ackman so eloquently put it earlier this year, "there’s no way they’re going to pay it back." Now, one Boston-based hedge fund is building a short position on what it says is "runaway inflation in post-secondary education."

Did you take out a $245,000 loan to pay for your degree? Good news, the Department of Education wants you to know that "your payment could be as low as $0 a month!"

Elements of the financial media are either unbelievably lazy or completely complicit in helping to maintain the illusion of success for the Centralized powers (large governments and Central Banks).

• July job gains may favor September interest rate rise (Reuters)
• It's all about Trump at raucous Republican debate (Reuters)
• The 5 Most Important Takeaways From the First Debate of 2016 (BBG)
• Republican presidential candidate Carly Fiorina wins the Web (Reuters)
• Hedge Fund Losses From Commodity Slump Sparking Investor Exodus (BBG)
• Winners and losers from the first Republican presidential debate (WaPo)
• Bush turns in workmanlike debate performance, but will it be enough? (Reuters)

According to a transcript of an internal meeting of the China Banking Regulatory Commission, bad loans jumped CNY322.2 billion in H1 to CNY1.8 trillion, a 36% increase. Meanwhile, The PBoC will include loans made to CSF, China’s plunge protection vehicle, in its monthly loan data, meaning Beijing will pretend that the state-directed effort to artificially shore up the country’s stock market represents real, organic demand for credit.

We have lived through a credit hyper-expansion for the record books, with an unprecedented generation of excess claims to underlying real wealth. In doing so we have created the largest financial departure from reality in human history. Bubbles are not new – humanity has experienced them periodically going all the way back to antiquity – but the novel aspect of this one, apart from its scale, is its occurrence at a point when we have reached or are reaching so many limits on a global scale. The retrenchment we are about to experience as this bubble bursts is also set to be unprecedented, given that the scale of a bust is predictably proportionate to the scale of the excesses during the boom that precedes it. Deflation and depression are mutually reinforcing, meaning the downward spiral will continue for many years. China is the biggest domino about to fall, and from a great height as well, threatening to flatten everything in its path on the way down. This is the beginning of a New World Disorder…

With every passing day that Greece maintains its capital controls, the already dire funding situations is getting even worse, as Greek bank NPLs are rising with every day in which there is no normal flow of credit within the economy. This has led to a massive bank funding catch-22: the longer capital controls persist, the less confidence in local banks there is, the longer the bank run (capped by the ECB's weekly ELA allotment), the greater the ultimate bail out cost, and the greater the haircut of not only equity and debt stakeholders but also depositors.

Now you see it: "The chances that that data is real is very low," said Alicia Garcia Herrero, Natixis's chief economist for the Asia-Pacific region. "Would you publish GDP data that looks south at this point in time? I don't think so."

Now you don't.

Moody's and Fitch are taking a hard look at student loan-backed ABS and they don't necessarily like what they see. Fortunately, Citi has some pointers on how the ratings agencies might go about avoiding downgrades.

At an annualized return of approximately 20,622,184,553,370,800,000,000,000,000,000,000,000,000,000%, Greece just gave everyone the best trade opportunity of the year...

It’s happening. As expected, dynastic politics is prevailing in campaign 2016. After a tease about as long as Hillary’s, Jeb Bush (aka Jeb!) officially announced his presidential bid last week. Ultimately, the two of them will fight it out for the White House, while the nation’s wealthiest influencers will back their ludicrously expensive gambit. And here’s a hint: don’t bet on Jeb not to make it through the Republican gauntlet of 12 candidates (so far). After all, the really big money’s behind him.

The fact that Moody's and Fitch are beginning to reevaluate student loan ABS is indicative of an underlying shift in the market. Between the proliferation of IBR and the Department of Education's recent move to open the door for debt forgiveness in the wake of the Corinthian collapse, financial markets are beginning to see the writing on the wall. Perhaps Bill Ackman said it best: "there's no way students are going to pay it all back."

While China is rather proud of the fact that it hasn't yet implemented outright QE, Beijing has now put in place a bewildering hodge-podge of hastily construed easing measures that can't seem to get out of their own way.

In the wake of the Chicago downgrade, state and local governments are moving away from Moody's as the ratings agency questions pension fund return assumptions. 

Looking back at the Lehman Brothers collapse of 2008, it’s amazing how quickly it all happened. In hindsight there were a few early-warning signs, but the true scale of the disaster publicly unfolded only in the final moments before it became apparent that Lehman was doomed. Could this happen to Deutsche Bank?