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╬ ミ d a r k w i n t e r ミ ╬ – Millions Of Americans Are Expected To Lose Their Homes

dark covid winter is descending on the working-poor of America as millions of adults face eviction or foreclosure in the next few months. Bloomberg, citing a survey that was conducted on Nov. 9 by the U.S. Census Bureau, shows 5.8 million adults face eviction or foreclosure come Jan. 1. That accounts for 32.5% of the 17.8 million adults currently behind rent or mortgage payments. 

On Monday, we noted that on Dec. 31 many of the key provisions in the CARES Act are set to expire if there is no action from Congress. This could be catastrophic for 12 million America who will lose access to their Emergency unemployment benefits activated in the aftermath of the covid pandemic, which alone could be a drag of up to 1.5% to growth in 1Q, according to a recent Bank of America report. 

Additionally, the expiration of eviction moratorium, mortgage forbearance programs, and suspension of student loan payments could compound the working poors’ financial stresses, many of whom, about 21 million of them, are unemployed and receiving benefits from the government.

The survey points out at least half of households in Arkansas, Florida and Nevada are not current on rent and mortgage payments – equating to 750,000 could face an eviction come early 2021. 

On a city by city basis, New York City, Houston, and Atlanta had the greatest threat of evictions come early next year. 

The most concerning part about the expiration of various CARES programs starting on Jan. 1 is that it removes safety nets for the working poor. A lapse from when expirations hit to Congress and the new Biden administration expected to strike a stimulus deal is expected be short-lived.

https://www.brighteon.com/embed/75c5786b-75ae-4287-beaf-8b45b7672f94

Source: ZeroHedge

CA Tax Revenue Windfall Creates Political Dilemma: What to do with it

California has an unexpected and welcome revenue windfall, but it creates a dilemma on what to do with it.

(Dan Walters) As Gov. Gavin Newsom makes the final decisions on writing a 2021-22 budget, he’s receiving some good revenue news from his bean counters.

During the first four months of the 2020-21 budget cycle, which began on July 1, state general fund revenues were more than $11 billion higher than the apocalyptic estimates on which the budget was based. Moreover, the windfall could easily double to $26 billion in the first months of 2021, according to the Legislature’s budget analyst, Gabe Petek.

What happened?

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L.A. Home Sales Soar As California’s Housing Market Defies Pre-Great Reset COVID Plandemic

L.A. Home Sales Soar as California’s Housing Market Defies Covid

(Alex Tanzi) — When it comes to L.A. real estate, “Sunset” is still selling — even nine months into the pandemic.

With interest rates at some of their lowest levels ever, many renters are reassessing their housing options, said Jason Oppenheim, star of “Selling Sunset,” a Netflix reality series featuring a team of brokers and the glitzy properties they’re selling across Los Angeles.

“Let’s face it, the 1% are doing very well right now, with markets at all-time highs and interest rates extremely low,” said Oppenheim, who runs his Oppenheim Group brokerage along Sunset Boulevard, which the show’s built around. “Houses are affordable right now and people want to get out of their cramped apartments.”

Los Angeles isn’t alone. Since Covid-19 was declared a public health emergency in March, home-buyers across California’s biggest cities have shown no let-up when it comes to betting on real estate.

Along with Los Angeles, San Jose, San Diego, Sacramento and San Francisco were the U.S. markets with the biggest jump in new mortgages during the third quarter, according to research by ATTOM Data Solutions, which tracked metro areas nationwide with at least 1 million people. And that happened in the three months that saw a record increase in the number of residential purchase mortgage originations in the country.

What Pandemic?

Nationally, lenders issued roughly 1.05 million home-purchase mortgages in the third quarter, up 25% from the same period in 2019, ATTOM’s data showed. New home loans accounted for about 34.5% of total mortgage activity last quarter.

“The housing market is still operating as if the recession brought on by the pandemic didn’t exist,” said Todd Teta, ATTOM’s chief product officer. “Buyers and owners, lured by low mortgage rates, kept lining up for loans at levels not seen in more than a decade.”

Along with renters, younger buyers are entering the market.

“The simple fact is that millions of well-qualified millennials are seriously shopping for houses, and they are competing for a shortfall of homes for sale,” said Jeff Tucker, senior economist at the real estate company Zillow.

Intense demand in a tight market has pushed month-over-month and quarterly home-value growth to levels not seen since 2005, according to Zillow.

Low Inventory

The tight supply is reflected in many California markets, where “for sale” signs quickly disappear from front yards. Listings in Los Angeles were down 17.5% from a year ago for the week ending Nov. 14. In San Diego, they’re 33% lower, and listings dropped 37.2% in Sacramento. In Riverside, east of Los Angeles, they declined by almost half, Zillow’s data showed.

Some of the new buyers are going straight for high end after amassing fortunes from the technology boom. The tech-heavy Nasdaq Composite Index reached a record in the third quarter and is hovering near that level, while the S&P 500 Index hit a new high earlier in the week.

“Instagram, TikTok, YouTube, young people are killing it out here,” Oppenheim said. “I am selling a ton of $5 million to $10 million dollar homes to people on social media.”

Still, not all markets are outperforming, as job losses from the pandemic continue to weigh on consumer confidence elsewhere in the U.S. Teta at ATTOM cautioned that “the pandemic and other factors could come together and halt the market boom.”

Pittsburgh, Upstate New York’s Rochester and Buffalo, Detroit, and New York City are among the large metro areas that registered declines in mortgages from a year earlier.

Despite the mixed signals, Zillow anticipates 2021 will be the best year for home sales since 2006.

“People have zero apprehension about buying into this market,” said Oppenheim. “We’re probably going to see a few good years ahead of us.”

For more articles like this, please visit us at bloomberg.com

©2020 Bloomberg L.P.

Source: by Alex Tanzi, Bloomberg | reposted by MSM

Commercial Loan Demand Plunges To New Post-Lehman Low Even As Lending Standards Ease

(ZeroHedge) Last quarter, amid the bank panic resulting from surging loan loss provisions, we observed that the heart of the debt-addicted US economy was hit especially hard by the double whammy of collapsing consumer loan supply, with the August Senior Loan Officer Survey finding that banks reporting tighter loan conditions had surged to the highest level since the Lehman bankruptcy, while consumer demand for most loan types had tumbled, in some cases to record low levels.

However, in the subsequent three months much has changed, following the latest round of bank earnings which saw a collapse in loan loss provisions across the US banking sector, which miraculously plunged from near all time highs back to pre-covid levels in the span of just a few weeks.

This dramatic turnaround in bank outlooks on future loan losses also had a profound impact on loan issuance standards.

Specifically, the Q3 SLOOS found that lending standards for commercial and industrial (C&I) loans again tightened in 2020 Q3, but improved from the devastation observed in Q2. 38% of banks on net tightened lending standards for large and medium-market firms, which was a nearly 50% improvement from the 71% in the previous quarter, while 31% of banks on net tightened lending standards for small firms vs. 70% on net in the previous quarter.

There was also an improvement in pricing with 13% of banks increasing spreads of loan rates over the cost of funds for large firms vs. 59% last quarter, but a smaller share of banks on net reported tightening terms in Q3 on maximum size of credit lines (7% vs 41% in Q2) and for premiums on riskier loans (29% vs 59% in Q2).

Among the banks that tightened credit standards or terms for C&I loans or credit lines, 26% cited a deterioration in the bank’s capital position as playing a role, 95% cited worsening industry-specific problems, 91% cited a less favorable or more uncertain economic outlook, 69% cited a reduced tolerance for risk, 18% cited decreased liquidity in the secondary market for loans, 11% cited a deterioration in the bank’s own liquidity position, and 9% cited increased concerns about the effects of legislative changes, supervisory actions, or changes in accounting standards.

Other loan types saw a similar improvement, with standards for commercial real estate (CRE) loans also tightening on net in Q3, but at a far smaller net share of banks compared to last quarter. 57% (a 24% improvement) of banks on net reported tightening credit standards for construction and land development loans, 55% (vs 78%) reported tightening standards for loans secured by nonfarm nonresidential properties, and 45% (-19pp) on net reported tightening lending standards for loans secured by multifamily residential properties.

A similar picture was seen in the real estate loan sector, as far fewer banks on net tightened standards for mortgage loans compared to in Q2, a move facilitated by the tremendous inflow of capital to the housing market. Lending standards for GSE-eligible (-43pp to 12%), non-jumbo non-GSE eligible (-45pp to 14%), Qualified Mortgage jumbo (-49pp to 20%), non-Qualified Mortgage jumbo (-51pp to 19%), non-Qualified Mortgage non-jumbo (-44pp to 20%), and subprime (-10pp to 33%) mortgages all tightened.

Completing the supply side, banks’ willingness to make consumer installment loans was basically unchanged after sharp decreases in the previous two quarters; credit standards for approving credit card applications tightened further (27% on net vs. 72% previously), while a modest share of banks also tightened standards for auto loans (14% vs. 55% previously).

However, while supply clearly is thawing, it was the demand side that was troubling, especially in the key – for the US economy – Commercial & Industrial (C&I) loan category, where demand from large-and medium-sized firms, weakened further in Q3 as 35% of banks on net reported weaker demand for C&I loans for large and medium-market firms, compared to 23% on net reporting stronger demand in the previous survey. This was the lowest net demand in this series since the financial crisis.

That said, there were some signs of recovery in other loan classes: demand for CRE loans fell on net across all three categories, but by less than in Q2. And while demand for mortgage loans increased further in Q3, it was credit card loan demand that saw a major reversal, with demand for credit card loans virtually unchanged at 2% on net vs. a collapse of -65% in Q2, while demand for auto loans picked up at a small share of banks (8%) after steep declines the previous two quarters.

In summary, while Americans aggressively took out loans which serve merely to satisfy their own personal consumption needs and prefund that next car or TV purchase, and which merely pull demand from the future,  when it comes to the all important C&I loans which result in capex spending and overall economic growth, here the picture continues to deteriorate despite an easing in loan issuance standards. This simply means that for the vast majority of Americans, the economic environment remains so dismal that demand for C&I loans is now at levels last seen just around the Lehman crisis. And since the consumption-funding loans which are going gangbusters will soon re-freeze following the next round of covid closures, we doubt it will take too long before this translates into a sharp swoon in the broader economy.

Which, as we explained in another post earlier today, is precisely what the Fed needs in order to launch its next QE…

… one where the Fed will end up monetizing all of 2021’s bond issuance.

Source: ZeroHedge

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Is Another “Crisis” Imminent: The Fed Must Double QE In 2021 But It Needs A Catalyst

The Great Reset Plan Revealed

America Resists Potential Residential Foreclosure Wave Under COVID Thus Far

Mortgage Delinquencies Fall To 7.65% While Mortgage Foreclosures Decline To 0.59% (Covid /= Disaster For Mortgage Markets)

(Anthony B. Sanders) ‘Covid-19 has been a disaster TEMPORARILY for the US economy, but the US economy is resilient.’ According to the Atlanta Fed’s GDPNow real time GDP is now at 3.514%, higher than GDP before the Covid outbreak.

While the US mortgage market saw a rapid increase in mortgage delinquencies thanks to Covid, it did not materialize into a foreclosure wave as did during the financial crisis.

The reason why? Forbearance. And loans in forbearance has been gradually declining.

So unless states and cities continue their Covid lock downs, we should see a normalization in mortgage delinquencies.

Source: by Anthony B. Sanders | Confounded Interest

JPMorgan: ‘Orderly’ Trump Win Is The Most Favorable Outcome For Equities

LONDON (Reuters) – U.S. investment bank JPMorgan expects the S&P500 index to surge to 3,900 points if U.S. President Donald Trump is re-elected next week, calling such an outcome the most favorable for stock markets.

A rise to 3,900 would mark a 12.6% jump from Friday’s closing level.

A clean sweep by Democrats would be “mostly neutral” for markets, JPM said in a note received on Monday, adding: “We see an ‘orderly’ Trump victory as the most favorable outcome for equities.”

The odds of a “blue wave” have narrowed slightly since mid-October. Former vice president Joe Biden has a substantial lead in national opinion polls, although the contest is closer in battleground states likely to decide the race.

JPMorgan said several of its data gatherings, such as voter registration, Twitter sentiment, point to a “tightening race”. The bank sees a gridlock in the election as a “net positive” for stocks.

Within sectors, JPM sees beaten down energy and financial stocks to likely be key beneficiaries of a Trump victory, while a Biden win could trigger a rotation from U.S. growth stocks to non U.S. growth stocks, given the risk of higher taxes.

“We find that energy, financials and healthcare sectors could likely see the most outsized moves as they have been explicitly referenced by each candidate on the campaign trail,” the bank added.

Source: by Thyagaraju Adinarayan | Reuters

How We Got Surging Home Prices

Terminal (Money) Velocity? The Missing Existing Home Sales Inventory And Collapsing Money Velocity

(Anthony B. Sanders) Have you ever wondered why the inventory of existing home sales have crashed since the housing bubble of the early/mid 2000s?

If I overlay the median price of existing home sales with low inventory and low money velocity, we get surging prices.

Poor Kristy Swanson.

Source: by Anthony B. Sanders | Confounded Interest

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New Home Sales Tumble In September As Average Price Hits Record High

U.S. new home sales drop; record low mortgage rates underpinning demand

BofA: Fed Will Use Digital Dollars To Unleash Inflation, Universal Basic Income And Debt Forgiveness

When we recently described the upcoming “Unprecedented monetary overhaul” which will come in the form of the Fed sending out digital dollars directly to “each American”, we explained that “absent a massive burst of inflation in the coming years which inflates away the hundreds of trillions in federal debt, the debt tsunami that is coming would mean the end to the American way of life as we know it. And to do that, the Fed is now finalizing the last steps of a process that revolutionizes the entire fiat monetary system, launching digital dollars which effectively remove commercial banks as financial intermediaries, as they will allow the Fed itself to make direct deposits into Americans’ “digital wallets”, in the process enabling truly universal basic income, while also making Congress and the entire Legislative branch redundant, as a handful of technocrats quietly take over the United States.”

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Half Of Europe’s Small Businesses Face Bankruptcy As CCP Virus Cases Spike

European equities slumped to near one-month lows on Thursday, as soaring COVID-19 cases across the continent weighed on sentiment. In recent months, virus cases have spiked across Europe, with Spain becoming the first country on the continent to surpass the one million infection mark. At the same time, Italy has just set a record increase in daily cases.

The surge in European coronavirus cases has shifted sentiment lower for businesses, with downside risks emerging for the continent’s economy in the fourth quarter. 

Bloomberg, citing a new McKinsey & Co. survey conducted in August, describes a particularly gloomy outlook for Europe’s small and medium-sized businesses, warns that at least half of them could enter into bankruptcy proceedings in the next year if revenues continue to stagnate

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U.S. Existing Home Sales Soar To Highest Since 2006

Existing home sales soared 9.4% MoM in September, almost double the +5.0% expectation.

This is the highest level of sales since May 2006…

Now that’s a ‘V’…

Median home prices soared 14.8% from last year to $311,800 amid a tumble in inventory to just 2.7 months supply.

Source: ZeroHedge

Wisconsin Confirms Foxconn’s Taxpayer-Backed LCD ‘Factory’ Isn’t Real

Days before the State of Wisconsin denied Foxconn’s request for state tax credits – in the form of direct payments from the state to Foxconn’s bank account – related to the “factory” built by the world’s largest contract tech manufacturer in Mount Pleasant, Wisconsin. The project was announced shortly after President Trump’s upset election victory, but quickly ran aground as reporters complained that the facility being built by Foxconn bore little resemblance to the enormous Gen 10.5 LCD factory the company had promised.

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Fed Lays Out Why They Want To Flip The World Into Digital Dollars

(ZeroHedge) In what remains the most under covered financial topic of the year, if not century, we remind readers that starting about a year ago, central banks around the world launched an unprecedented if stealthy attempt to overhaul the entire monetary architecture of fiat money by implementing digital dollars, a transformation to a cashless society which in recent months has also received the tacit support of Congress, which is actively drafting bills to send “digital dollars” to the unbanked. For those just catching up, read the following recent articles:

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San Fran’s New Normal: Third Walgreens In A Year Is Closing Due To “Rampant Shoplifting”

The effects of allowing chaos to prevail in liberal run cities across America might not be obvious to liberals now, but when their cities empty out completely, it’s going to become crystal clear.

Such is the case in San Francisco, where the city’s new normal of shoplifting and chaos has driven another Walgreens pharmacy out of the city. 

The move to close the Walgreens at Van Ness and Eddy came after “months of seeing its shelves repeatedly cleaned out by brazen shoplifters”, according to the SF Chronicle. The location served “many older people” who lived in the area. 

One customer told the paper: “All of us knew it was coming. Whenever we go in there, they always have problems with shoplifters.”

The same customer photographed someone in the store, days prior, “clearing a couple shelves and placing the goods into a backpack”. Because when there’s no police and politicians are afraid to enforce the law – why not?

The penalty for shoplifting is a “nonviolent misdemeanor” that carries a maximum sentence of 6 months. But in most cases, for simple shoplifting, the criminal is simply released with conditions.

The customer, who lives a block away, said: “I feel sorry for the clerks, they are regularly being verbally assaulted. The clerks say there is nothing they can do. They say Walgreens’ policy is to not get involved. They don’t want anyone getting injured or getting sued, so the guys just keep coming in and taking whatever they want.”

American Home Builder Sentiment Soars To New Record High

Well, you have to laugh really. Amid the greatest economic contraction in US history, rising social unrest, ongoing extreme unemployment, and demands for further trillions in handouts from the government (or the world will come to an end), there is one group that is ‘loving it’!

According to the National Association of Home Builders, home builder sentiment has surged to a new record high at 85 in October…

The October reading was stronger than the expected 83, and marked the sixth straight month builder sentiment has exceeded the consensus estimate.

By region, builder sentiment in the West and Northeast rose to the highest levels on record, while confidence eased in the South and Midwest.

The NAHB’s gauge of current single-family home sales rose by 2 points to a record 90 in October, while a measure of the outlook for purchases climbed 3 points to an all-time high of 88. The group’s index of prospective buyer traffic held at 74.

“The concept of ‘home’ has taken on renewed importance for work, study and other purposes in the Covid era,” Chuck Fowke, chairman of NAHB, said in a statement.

“However, it is becoming increasingly challenging to build affordable homes as shortages of lots, labor, lumber and other key building materials are lengthening construction times.”

Home buyer sentiment has rebounded but remains drastically below previous peak levels…

Does make one wonder…maybe we should have pandemics (and riots) more often?

Source: ZeroHedge

“Americans Must Wake Up To The Ugly Reality” – China Is Now The World’s Largest Economy

(by Graham Allison) China has now displaced the U.S. to become the largest economy in the world. Measured by the more refined yardstick that both the IMF and CIA now judge to be the single best metric for comparing national economies, the IMF Report shows that China’s economy is one-sixth larger than America’s ($24.2 trillion versus the U.S.’s $20.8 trillion). Why can’t we admit reality? What does this mean?

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China Tells Local Mills To Stop Using Australian Cotton And Ore, On Heels Of CCP Flu Probe

While the rapid deterioration in diplomatic relations between the US and China has been put on hiatus until after the election, at which point Beijing hopes that a Biden administration would promptly restore amicable relations between Beijing and DC, trade relations within the Pacific Rim region are getting worse by the day, with nobody getting more impacted by China’s desire to flex its muscles than Australia: escalating bilateral tensions have resulted in China’s “unofficially” asking cotton and ore traders to stop buying products from Australia.

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U.S. Industrial Production Unexpectedly Tumbled In September

After slowing its rebound dramatically in August, analysts expected another small lift in September, but Industrial Production disappointed gravely, falling 0.6% MoM (against expectations of +0.5%)…

The big driver of the plunge in industrial production was utilities (plunging 5.6%) as demand for air conditioning fell by more than usual in September. Mining production increased 1.7 percent in September; even so, it was 14.8 percent below a year earlier….

US manufacturing also dropped in September, sliding 0.3% MoM (against expectations for a 0.6% rise)…

This leaves US Industrial Production unchanged since May 2006…

The “V” recovery is over!

Source: by ZeroHedge

China Sells Dollar Bonds Directly To US Buyers For The First Time, Gets Record Demand

On Thursday, China for the first time sold dollar-denominated bonds directly to US buyers and with the Chinese 10Y offering a record 2.5% pickup in yield compared to 10Y Treasuries, it’s hardly a surprise that demand was off the charts.

The $6 billion bond offering which took place in Hong Kong, drew record demand, in part due to the attractive yield offered by Chinese paper and in part due to China’s impressive recovery from the coronavirus, with an orderbook more than $27 billion, or roughly $10 billion more than an offering of the same size last November, according to the FT, which added about 15% of the offering went to American investors.

The $6BN USD-denominated bond offering was as follows:

  • $1.25BN in 3-year dollar bonds at 0.425%
  • $2.25BN 5-year dollar bonds at 0.604%
  • $2BN 10-year dollar bonds at 1.226%
  • $500MM 30-year dollar bonds at 2.310%

The yield on the 10-year bond was about 0.5% above the equivalent US Treasury, and helped the bond sales receive “a strong reception from US onshore real money investors”, said Samuel Fischer, head of China onshore debt capital markets at Deutsche Bank, which helped arrange the deal. Other arrangers of the bond sale included Standard Chartered, Bank of America, Citigroup, Goldman Sachs and JPMorgan.

What was unique about today’s offering is that unlike previous issuance, “the debt was sold under a mechanism that gave institutional investors in the US the chance to buy in.”

Somewhat surprising is that frictions between Beijing and Washington had no impact “at all” on demand from US buyers, which included an American pension fund, one banker told the FT. In fact, the strategic timing of the bond sale which was arranged by the Chinese government just weeks before Americans head to the polls for the presidential election was meant to show “how tightly the financial systems of the two countries are linked, despite a trade war and tensions over technology and geopolitics.”

“This is the investor community showing confidence in [China’s] recovery,” said another banker on the sale, who added that “US investor participation in Chinese paper is not reduced by any means.”

Analyst responses were broadly enthusiastic about the offering:

Hayden Briscoe, head of fixed income for Asia Pacific at UBS Asset Management, said the bonds would help “set the benchmark” for Chinese corporates such as petrochemical groups Sinopec and Sinochem, which also borrow in dollars.  “A lot of their expenses are in US dollars, and they borrow in the dollar market to match funds to that.”

He added that the bonds benefited from strong demand partly due to their scarcity value. “There’s so few of them and they suit sovereign wealth fund type buyers — they tend to just disappear.”

Source: ZeroHedge

Goodbye Middle Class: Half Of All American Workers Made Less Than $34,248.45 Last Year

If you are making less than $3,000 a month, you have plenty of company, because about half of the country is in the exact same boat.  The Social Security Administration just released new wage statistics for 2019, and they are pretty startling.  To me, the most alarming thing in the entire report is the fact that the median yearly wage was just $34,248.45 last year.  In other words, half of all American workers made less than $34,248.45 in 2019, and half of all American workers made more than $34,248.45.  That isn’t a whole lot of money.  In fact, when you divide $34,248.45 by 12 you get just $2,854.05. 

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Mortgage Rates Hit Record Low For 10th Time This Year

In a world where over $16 trillion in debt now trades with negative yields…

… the US remains one of the outliers where nominal yields are still positive (if not for too long). Still, with rates in the US remaining caught in a tight range, and as bank funding conditions increasingly normalize, it means that yields on mortgages continue to shrink, and sure enough according to the latest Freddie Mac data, the average yield for a 30-year, fixed loan dropped to 2.81%, down from 2.87% last week, which was not only the lowest in almost 50 years of data-keeping, but also the 10th record low this year.  The previous all time low – 2.86% – held for about a month.

The availability of record cheap loans – which is unlikely to change with the Fed signaling it will hold its benchmark rate near zero through at least 2023 – has fueled a home buying spree which while bolstering the pandemic economy, has resulted in yet another bubble (for more details see Visualizing The U.S. Housing Frenzy In 34 Charts)

Meanwhile,  the surging demand for the scarce supply of properties on the market is pushing up prices, putting home ownership out of reach for many Americans, and leading to even greater wealth inequality which, as a reminder, is how we got here in the first place. Adding insult to injury, lenders have tightened credit standards to near record levels, presenting another potential obstacle for would-be buyers.

“It’s important to remember that not all people are able to take advantage of low rates, given the effects of the pandemic,” Sam Khater, Freddie Mac’s chief economist, said in the statement.

Source: ZeroHedge

Wells Fargo Fires Over 100 Employees For Stealing Virus Relief Funds

First JPMorgan admitted that over 500 of its generously paid employees had “illegally pocketed” covid-relief funds and then summarily fired most of them – and now it’s chronic lawbreaking recidivist Wells Fargo’s turn.

The bank, whose stock tumbled today after reporting dismal results and then was hit with even more selling after cutting its net interest income outlook, has fired more than 100 employees for illegally getting covid relief funds which were meant to help small businesses, Bloomberg reported citing a person familiar.

 

Warren Buffett’s favorite bank uncovered dozens of employees who defrauded the Small Business Administration “by making false representations in applying for coronavirus relief funds for themselves,” according to an internal memo reviewed by Bloomberg. Similar to JPMorgan, the abuse was tied to the Economic Injury Disaster Loan program and was outside the employees’ roles at the bank, according to the memo.

“We have terminated the employment of those individuals and will cooperate fully with law enforcement,” David Galloreese, Wells Fargo’s head of human resources, said in the memo. Wells Fargo’s actions follow JPMorgan Chase & Co.’s finding that more than 500 employees tapped the EIDL program which hands out as much as $10,000 in emergency advances that don’t have to be repaid, and dozens did so improperly.

The bank “will continue to look into these matters,” Galloreese added, saying the employees’ abuse didn’t involve customers… for once. “If we identify additional wrongdoing by employees, we will take appropriate action.”

As Bloomberg notes banks were urged by the SBA to look out for suspicious deposits from the EIDL program to their customers and even their own staff, after an analysis identified that at least $1.3 billion was sent out from the SBA for suspicious payments. While the program offers loans to businesses, much of the concern has focused on its advances of as much as $10,000 that don’t have to be repaid.

Wells Fargo is best known for its role in a massive account fraud scandal in which the bank created millions of fraudulent savings and checking accounts on behalf of Wells Fargo clients without their consent over a 14-year period. The fallout led to the bank paying $3 billion to settle criminal charges and former CEO John Stumpf losing his job after a historic Congressional grilling, while also agreeing pay a personal $17.5 million fine. In 2018, Wells Fargo agreed to an unprecedented consent order from the Fed which capped the size of its balance sheet and limited how many loans the bank can issue, one of the factors behind the dismal performance of its stock in recent years, which even prompted Warren Buffett to finally dump some of his Wells Fargo holdings.

Source: ZeroHedge

Bankrupt Restaurant Chains Are Handing Keys To Their Lenders

With few buyers willing to take a risk, credit bids become far more common in bankruptcy sales, says RB’s The Bottom Line.

Shutterstock

(Jonathan Maze) Last week, California Pizza Kitchen canceled its auction after no worthy bidders came forward to buy the casual-dining chain. The result: The company will likely end up in the hands of its lenders.

That came the same week that Ruby Tuesday started its bankruptcy process with a plan that hands the keys to the chain to its lenders.

Such deals are far from uncommon and totally understandable. But it’s indicative of the state of the business that once-venerable chains can’t even scrounge up bidders to help fuel bankruptcy auctions.

Indeed, several companies that have filed for bankruptcy since the pandemic have ended up sold in credit bids. CraftWorks, the owner of Logan’s Roadhouse and Old Chicago that declared bankruptcy before the pandemic, was sold through a credit bid in May. Aurify Brands acquired both Le Pain Quotidien and Mayson Kaiser by first acquiring the debt for the two brands and then using that to take over the company.

To get an idea of why this is happening now, we asked Petition, a journalist who covers corporate bankruptcies and restructuring, to get an idea of what’s going on.

“With too many restaurants per capita pre-pandemic and uncertainty about COVID-19 heading into winter, strategic buyers are scurrying to their foxholes to avoid the shakeout,” they said. “Existing lenders have no choice but to play out their option, hoping that less competition, strong digital adoption and execution, a slimmer balance sheet, a reduced footprint and focused management will bridge them to an industry comeback.”

To be sure, the companies above occupy some of the most challenging sectors or sub-sectors during the pandemic.

Both Le Pain Quotidien and Maison Kayser, for instance, are bakery-cafe concepts in urban areas. Those types of concepts face an uncertain future thanks to empty offices as consumers work from home, along with a potential flight of residents toward the suburbs.

Ruby Tuesday has been struggling and shrinking for more than a decade. It has closed nearly half of its units since 2017 and is less than a third of the size it was back in 2008. Bar and grill casual dining itself faces significant questions—TGI Fridays, once the leading casual-dining chain, is also shrinking.

California Pizza Kitchen is another casual-dining chain. But it was built around pizza. Consumers have shifted much of their pizza consumption to delivery, leaving full-service pizza concepts behind.

Buyers simply aren’t ready to take the plunge on those types of concepts. The business for dine-in sales is weak. It is also expected to remain weak for some time. That leaves the companies with little choice but to hand the keys to the lenders and walk away.

Any buyer of such chains will want that company reduced to only the most profitable locations. And they’re going to want that company for a considerably smaller price than the face value of the secured debt.

A lot of investors live to buy concepts through credit bids. They buy the secured debt on the secondary market, often for considerably discounted prices—lenders, believing they’ll be unlikely to get their money back and eager to get an unworkable loan off the books, will sometimes sell the debt at a discount.

Investors step in and buy the debt cheap. That can give them the inside track when a company ends up in bankruptcy. If a buyer willing to pay the face value of the debt emerges during an auction, the investor can make money based on the discount they paid for that debt. If not, they get the chain and can run it until the situation improves.

But such sales can often prolong the life of a chain that wouldn’t survive on its own, extending the life of “zombie” chains that aren’t growing and aren’t innovating and simply exist. The pandemic, of course, is creating zombies in all sorts of industries. Restaurant chains included.

Source: by Jonathan Maze | Restaurant Business 

San Francisco Sales Tax Revenue Plunge “Worst In The State” Amid COVID Exodus

ZeroHedge observed many times throughout the pandemic that the coronavirus-related lock downs, especially as impacting restaurants, bars, theaters and other night venues, have made living in already expensive big cities like New York much less attractive

It appears this trend of people ‘escaping’ the big cities as the prime lure of being there has largely evaporated — also after a summer of chaotic race and police shooting related protests and mayhem  is poised to hit San Francisco, despite it previously witnessing steady population growth over the past three decades. New tax numbers freshly out suggest a major exodus is already in progress.

But for the first time in recent history, and as the city’s large tech employers like Google, Facebook and Uber have kept their employees at home working remotely, city data shows that “Sales tax data shows San Francisco’s population likely declined during the coronavirus pandemic,” according the city’s chief economist Ted Egan.

The San Francisco Chronicle reports a whopping shortfall in revenue, detailing that “From April to June, the city’s sales tax revenue dropped to $30.8 million, down 43% from the prior year.” 

While this is the kind of thing other cities have naturally also experienced over the course of pandemic closures of venues, many have been able to close the gap given simultaneous growth in taxable online sales as households turned to Amazon, Wal Mart and other home delivery services. 

Not so with San Francisco, however, the report underscores:

San Francisco’s taxable online sales were up only 1% in that three-month period compared to the same period a year ago, while other California cities saw gains over 10% as people ordered more home deliveries. The modest increase likely shows that residents left the city entirely and weren’t at home to receive packages, Egan said.

“We’re the worst in the state,” he said. “That’s a sign to me that people aren’t here.”

No doubt compounding the trend is the past years of perhaps the most left-wing city policies in the country, a reflection of what conservatives derisively write off as “San Francisco values” and what even NPR has lately dubbed “San Francisco Squalor”.

After all, who really wants to pay a million dollars for some posh condominium in the city, only to walk out into needle and feces strewn streets?

Restaurant and bar sales were down 65% as indoor dining was prohibited, while food and drug store sales were down 8%. (Food staples at grocery stores aren’t taxed but prepared meals and other items are.)

Other metrics like falling apartment rents and busy moving companies suggest the population decline, though it’s too early to tell how many people have left, Egan said.

Considering too that major tech companies like Microsoft are using the pandemic to make dramatic changes like allowing most employees to work from home on a permanent basis, it doesn’t look like those making a recent ‘escape’ from San Francisco will be moving back anytime soon.

Source: ZeroHedge

Las Vegas Tops U.S. in Rise of Apartment Tenants Not Paying Rent

With COVID-19 tanking tourism, Las Vegas saw the biggest jump in apartment tenants who have stopped paying rent.

In September, 10.6% of Vegas tenants missed a rent payment, up from 4.1% a year earlier, the largest increase in the U.S., according to data on the top 50 metropolitan areas from RealPage Inc. New Orleans, also heavily dependent on tourism, had the highest overall share of people not paying, at 12.9%, up from 8.6%.

Tenants are most likely to stop paying in areas with the hardest-hit economies, including expensive cities from Los Angeles and Seattle to New York, where unemployment benefit payments aren’t enough to cover high rents and living expenses.

“There’s more stress in hospitality-focused and expensive markets,” said Greg Willett, chief economist at RealPage. “The wild card in everything is what happens in the economy and what happens in the economy is dependent on what happens with the pandemic.”

Across the U.S., rent payments have remained relatively stable, with 7.8% failing to pay in September, up 1.5 percentage points from a year ago, according to the National Multifamily Housing Council.

The data covers tenants who still occupy their units and doesn’t include single-family rentals. It’s from professionally managed buildings and more representative of large landlords. Smaller ones tend to own older buildings with poorer tenants more vulnerable to job loss.

Source: NewsMax

Las Vegas Home Prices Hit All Time High

(Bryan Horwath) The median sale price of existing homes in the Las Vegas area grew to record high $337,250 in September, according to a monthly report from Las Vegas Realtors.

That’s an increase of 9% from September of last year, and a bump of about $2,000 from August.

The median price for September sets a new all-time for the region, though a shortage of inventory has led to an unbalanced market despite near all-time low mortgage rates.

The continued rise of home prices has come despite a global pandemic that has decimated the region’s tourism-based economy.

“Local home prices keep setting records, which is remarkable when you think about the challenges we’re facing,” said Tom Blanchard, president of Las Vegas Realtors and a longtime area agent. “The pause during the beginning of the pandemic seems to have pushed the traditional summer sales season into the fall.”

For town homes and condominiums, the median sale price for a unit in September was $195,500, which represented a 14% increase from September 2019.

With Gov. Steve Sisolak’s order that allowed open houses to resume earlier this month, Blanchard said he envisions the potential for market activity in the coming weeks and months.

“We’ll see if we can sustain this momentum heading into next year,” Blanchard said. “We’re also dealing with a housing shortage, with no signs of that changing anytime soon.”

The number of homes available for sale remains “well below” the six-month supply that’s generally considered to represent a balanced market. At the end of last month, just under 4,800 homes — not including condos or town homes — were listed for sale without an offer, down 35% from September 2019.

Source: by Bryan Horwath | Las Vegas Sun

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Cantillion Effect Explained:

 

Negative Returns Are Now In US Mortgages

(Christopher Whalen) Watching the talking heads pondering the next move in US interest rates, we are often amazed at the domestic perspective that dominates these discussions. Just as the Federal Open Market Committee never speaks about foreign anything when discussing interest rate policy, so too most observers largely ignore the offshore markets. Yen, dollar and euro LIBOR spreads are shown below.

Zoltan Pozsar, the influential money-market strategist at Credit Suisse (NYSE:CS), warns that the short-end of the US money markets are likely to be awash in cash over the end-of-year liquidity hump. Unlike the unpleasantness in 2018, for example, we may see instead a surfeit of lending as banks scramble for yield in a wasteland bereft of duration. Would that it were so.

The Pozsar view does not exactly fit well with the rising rate, end of the world scenario popular in some corners of the financial media ghetto. The 10-year note is certainly rising and with it the 30-year mortgage rate. Indeed, Pozsar reminds CS clients that yen/$ swaps are now yielding well-above Treasury yields for seven years. Hmm.

We believe short-term rates will remain low in the US, even as offshore demand for dollars soars. If the 10-year Treasury backs up much further, then we’d look for the FOMC to act on some calls by governors to buy longer duration securities. That is, a very direct and large scale increase in QE and particularly on the long end of the curve.

We expect that Chairman Powell knows that underneath the comfortable blanket of low interest rates lie some truly appalling credit problems ahead for the global economy, the US banking sector and also for private debt and equity investors. We expect the low interest rate environment to drive volumes in corporate debt and residential mortgages, even as other sectors like ABS languish and commercial real estate gets well and truly crushed.

“The pandemic is putting unprecedented stress on CMBS markets that even the Fed is having difficulty offsetting,” writes Ralph Delguidice at Pavilion Global Markets.

“Limited reserves are being exhausted even as rent collection and occupancy levels remain serious issues… Bondholders expecting cash are getting keys instead, and in our view, ratings downgrades and significant losses are now only a formality.”

We noted several months ago that the resolution of the credit collapse in commercial mortgage backed securities or CMBS will be very different from when a bank owns the mortgage. As we discussed with one banker this week over breakfast in Midtown Manhattan, holding the mortgage and even some equity in a prime property allows for time to recover value.

With CMBS, the “AAA” tranche is first in line, thus the seniors have no incentive to make nice with the subordinate investors. The deals will liquidate, the property will be sold and the junior bond investors will take 100% losses. But as Delguidice and others note with increasing frequency, this time around the “AAA” investors are getting hit too. More to come.

Manhattan

Meanwhile, over in the relative calm of the agency collateral markets, large, yield hungry money center banks led by Wells Fargo & Co are deploying liquidity to buy billions of dollars in delinquent government loans out of MBS pools.

The bank buys the asset and gives the investor par, with a smidgen of interest. Market now has more cash, but less cash than it had before buying the mortgage bond in the first place. Why? Because it likely took a loss on the transaction. Buy at 109. Prepayment at par six months later. You get the idea.

In fact, if you look at the Treasury yield curve, rates are basically lying flat along the bottom of the chart out to 48 months. Why? Because this nice fellow named Fed Chairman Jerome Powell, along with many other buyers, are gobbling up the available supply of risk free assets inside of five years.

Spreads on everything from junk bonds to agency mortgage passthroughs are contracting, suggesting that the private bid for paper remains strong. When you look at the fact that implied valuations for new production MBS and mortgage servicing rights (MSR) have been rising since July, this even though prepayment rates are astronomical, certainly implies that there is a great deal of cash sitting on the sidelines.

Remember that the price of an MSR is not just about cash flows and prepayments, but it’s also about default rates and the relationship with the consumer. We described in our last missive for The IRA Premium Service (“The Bear Case for Mortgage Lenders”), that a rising rate environment could generate catastrophic losses for residential lenders, particularly in the government loan market. We write:

For both investors and risk professionals operating in the secondary mortgage market, the next several years contain both great opportunities and considerable risks. We look for the top lenders and servicers to survive the coming winter of default resolution that must inevitably follow a period of low interest rates by the FOMC. The result of the inevitable consolidation will be fewer, larger IMBs.”

Don’t get distracted by the rising rate song from the Street. We don’t look for short or medium term interest rates to rise in the near term or frankly for years. Agency 1.5% coupons “did not find a place in the latest Fed’s purchase schedule. It is possible (they) are included in the next update,” writes Nomura this week. This seems a pretty direct prediction of lower yields. But as one veteran mortgage operator cautions The IRA: “Not just yet.”

We don’t think that the Fed is going to take its foot off the short end of the curve anytime soon, in part because the system simply cannot withstand a sustained period of rising rates. In fact, we note that our friends at SitusAMC are adding 1.5% MBS coupons to forward rate models this month. But that does not necessarily mean that mortgage rates will fall any time soon.

We hear that the Fed of New York has bought a few 1.5s in recent days, but supply is sorely lacking. You see, the mortgage industry is not quite ready to print many new 1.5% MBS coupons and will not do so anytime soon. As the chart above suggests, mortgage rates are in fact rising. Why? Is not the FOMC in charge of the U.S mortgage market?

No, the market rules. Today you can make more money selling a new 1-4 family residential mortgage into a 2.5% coupon from Fannie, Freddie or Ginnie Mae at 105. You book a five point gain on sale and are therefore a hero. And a year from now, after the liquidity does in fact migrate down to 1.5s c/o the beneficence of the FOMC, you can again be a hero.

Specifically, you call up that same borrower and refinance the mortgage into a brand new 1.5% Fannie, Freddie or Ginnie Mae at 105. You take another five point gain on sale. Right? And who paid for this blessed optionality? The Bank of Japan, Peoples Bank of China, and PIMCO, among many other fortunate global investors.

These multinational holders of US mortgage bonds may not like negative returns on risk free American assets, but that’s life in the big city. And thankfully for Chairman Powell, it’s not his problem. Many years ago, a friend in the mortgage market said of loan repurchase demands from Fannie Mae: “What do you want from me?”

Source: ZeroHedge

Number of Homeowners in COVID-19-Related Forbearance Plans Declined Sharply

(Calculated Risk) Note: Both Black Knight and the MBA (Mortgage Bankers Association) are putting out weekly estimates of mortgages in forbearance.

This data is as of October 6th.

From Forbearances See: Largest Single Week Decline Yet

After a slight uptick last week, active forbearance volumes plummeted over the past seven days, falling by 649K from the week prior. An 18% reduction in the number of active forbearances, this represents the largest single-week decline since the beginning of the pandemic and its related fallout in the U.S. housing market.

New data from Black Knight’s McDash Flash Forbearance Tracker shows that as the first wave of forbearances from April are hitting the end of their initial six-month term, the national forbearance rate has decreased to 5.6%. This figure is down from 6.8% last week, with active forbearances falling below 3 million for the first time since mid-April.

This decline noticeably outpaced the 435K weekly reduction we saw when the first wave of cases hit the three-month point back in July.

As of October 6, 2.97 million homeowners remain in COVID-19-related forbearance plans, representing $614 billion in unpaid principal.

… Though the market continues to adjust to historic and unprecedented conditions, these are clear signs of long-term improvement. We hope to see a continuation of the promising trend of forbearance reduction in the coming weeks, as an additional 800K forbearance plans are slated to reach the end of their initial six-month term in the next 30 days.

Source: Calculated Risk

Central Banks Layout Framework For Global Digital Currency Standards

Central banks are weighing their own digital currencies – this is what they could look like

(Ryan Browne) LONDON — After Facebook shocked policymakers with its plan to launch a digital currency last year, central banks have been forging ahead with discussions on how they could create their own virtual money.

Now, they’ve come up with a rough framework for how such a system could work. On Friday, the Bank for International Settlements and seven central banks including the Federal Reserve, European Central Bank and the Bank of England published a report laying out some key requirements for central bank digital currencies, or CBDCs.

Among the recommendations the central banks made were that CBDCs compliment — but not replace — cash and other forms of legal tender, and that they support rather than harm monetary and financial stability. They said digital currencies should also be secure, as cheap as possible — if not free — to use and “have an appropriate role for the private sector.”

The report on CBDCs comes as various central banks around the world consider their own respective digital currencies. Blockchain, the technology that underpins cryptoc urrencies such as bitcoin, has been touted as a potential solution. However, crypto currencies have drawn a lot of scrutiny from central bankers, with many concerned they open the door to illicit activities like money laundering.

In China, a country where digital wallets like Alipay and WeChat Pay have seen widespread adoption, the central bank is already partnering with a handful of private sector companies to trial an electronic currency it’s been working on for years. Meanwhile, Sweden’s central bank is working with consulting firm Accenture to pilot its proposed “e-krona” currency.

“A design that delivers these features can promote more resilient, efficient, inclusive and innovative payments,” said Benoit Coeure, the former European Central Bank official who now leads BIS’ innovation efforts.

“Although there will be no ‘one size fits all’ CBDC due to national priorities and circumstances, our report provides a springboard for further development of workable CBDCs.”

It’s worth emphasizing that these central banks aren’t taking a stance yet on whether they and other institutions should issue digital currencies; they’re still looking into whether such virtual currencies are feasible. Advocates for digital currencies say they could enhance financial inclusion by on boarding people without access to a bank account. But there are concerns this could leave out commercial banks.

Central bank work around digital currencies appeared to gather steam last year after Facebook introduced its own version — libra — which is backed by a coalition of companies including Uber and Spotify. The troubled project was met with an intense regulatory backlash as well the departure of high-profile backers like Mastercard and Visa. The group overseeing the initiative, called the Libra Association, has since scaled back its approach, opting for multiple currency-pegged cryptocurrencies instead of the previously proposed single digital coin backed by multiple currencies.

Source: by Ryan Browne | CNBC

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Related:

The pending BANKING FOR ALL ACT… and you

U.S. Restaurant Spending Almost Back To Pre-COVID Levels

Something odd happened to the US economy in the past two months as many in the media, the political establishment and even various Fed hacks (recall on August 3 Neel Kashkari Saying Only Way To “Save Economy” Is To Lock It Down “Really Hard” For 6 Weeks), were feverishly counting the daily new US covid cases and warning that only a new shutdown could spare the US from imminent disaster: it has almost fully reopened and according to real-time indicators, it is now recovering at a far faster pace than most had expected (as the Fed’s latest economic projections confirmed).

And nowhere is this more visible than in the US restaurant space where with various exceptions – most notably across Manhattan where policy seems to change on a daily if not hourly basis – spending appears to be almost back to pre-covid levels.

In an analysis conducted by BofA analysts looking at daily restaurant trends through September 26th, the Bank of America aggregated credit and debit data showed national restaurant spending improving another 1.7% to down 8% (for the seven days ended September 26th) from a down 9% (from the week prior). While the BofA analysts note that performance on weekends continues to lag weekdays by about 1%-2%, the trend is clear: we are almost back to normalcy.

RIP

Source: ZeroHedge

 

 

Love & Hip Hop: Atlanta Star Maurice Fayne Back Home Following Arrest For Blowing $2,000,000 PPP Wuflu Loan On Luxury Goods And Child Support

Love & Hip Hop: Atlanta star Maurice Fayne is back home after he was arrested for allegedly using a $2 million PPP coronavirus loan to buy luxury items and make child support payments.  

The reality star, 37, was pictured taking a phone call outside of his home in Georgia over the weekend. 

Fayne was sitting upon a slick red BMW and drinking a soda as he pressed the phone against his ear, appearing deep in thought. 

Fayne was dressed comfortably in a white T-shirt and flashy red sweatpants. 

Fayne was sipping from the soda bottle as he listened intently to the call, before eventually returning back inside his house. 

Authorities say Fayne used an emergency loan from the federal government to lease a Rolls Royce, make child support payments and purchase $85,000 worth of jewelry.

Fayne, who goes by Arkansas Mo on the VH1 show ‘Love & Hip Hop: Atlanta,’ was arrested Monday on a charge of bank fraud, the Department of Justice said in a news release.

Fayne is the sole owner of transportation business Flame Trucking and in April he applied for a loan that the federal government was offering to small businesses decimated by the coronavirus pandemic, officials said. 

In his application, Fayne stated his business employed 107 employees with an an average monthly payroll of $1,490,200, the release said. 

Fayne requested a Paycheck Protection Program loan for over $3,000,000 and received a little over $2,000,000, officials said.

He used more than $1.5million of the loan to purchase jewelry, including a Rolex Presidential watch and a 5.73 carat diamond ring, the release said. 

Fayne also leased a 2019 Rolls Royce Wraith and paid $40,000 in child support.

‘At a time when small businesses are struggling for survival, we cannot tolerate anyone driven by personal greed, who misdirects federal emergency assistance earmarked for keeping businesses afloat,’ said Chris Hacker, Special Agent in Charge of FBI Atlanta.

When he met with investigators last week, Fayne denied spending the loan on anything besides payroll and business expenses.

But last Monday, federal agents searched Fayne’s home and seized the jewelry and around $80,000 in cash, including $9,400 Fayne had in his pockets, the release said.

Fayne’s attorney Tanya Miller said there was ‘considerable confusion’ about PPP guidelines and over whether owners could ‘pay themselves a salary’ when asked about the charges by CNN.

She added that she hopes these ‘issues’ will be better explained in the near future.    

He was released on $10,000 bond. 

Fayne appeared on several episodes of ‘Love & Hip Hop: Atlanta’ as the love interest of Karlie Redd, a longtime cast member, news outlets reported.

Source: By CHRISTINE RENDON and RYAN FAHEY FOR MAILONLINE and ASSOCIATED PRESS

The Rolling Stones – Living In A Ghost Town

Lyrics to “Living In A Ghost Town”:

I’M A GHOST
LIVING IN A GHOST TOWN
I’M A GHOST
LIVING IN A GHOST TOWN

YOU CAN LOOK FOR ME
BUT I CAN’T BE FOUND
YOU CAN SEARCH FOR ME
I HAD TO GO UNDERGROUND
LIFE WAS SO BEAUTIFUL
THEN WE ALL GOT LOCKED DOWN
FEEL A LIKE GHOST
LIVING IN A GHOST TOWN

ONCE THIS PLACE WAS HUMMING
AND THE AIR WAS FULL OF DRUMMING
THE SOUNDS OF CYMBALS CRASHING
GLASSES WERE ALL SMASHING
TRUMPETS WERE ALL SCREAMING
SAXOPHONES WERE BLARING
NOBODY WAS CARING
IF IT’S DAY OR NIGHT

I’M A GHOST LIVING IN A GHOST TOWN
I’M GOING NOWHERE
SHUT UP ALL ALONE

SO MUCH TIME TO LOSE
JUST STARING AT MY PHONE

EVERY NIGHT I AM DREAMING
THAT YOU’LL COME AND CREEP IN MY BED
PLEASE LET THIS BE OVER
NOT STUCK IN A WORLD WITHOUT END

PREACHERS WERE ALL PREACHING
CHARITIES BESEECHING
POLITICIANS DEALING
THIEVES WERE HAPPY STEALING
WIDOWS WERE ALL WEEPING
THERE’S NO BEDS FOR US TO SLEEP IN
ALWAYS HAD THE FEELING
IT WOULD ALL COME TUMBLING DOWN

I’M A GHOST
LIVING IN A GHOST TOWN
YOU CAN LOOK FOR ME
BUT I CAN’T BE FOUND
WE’RE ALL LIVING IN A GHOST TOWN
LIVING IN A GHOST TOWN
WE WERE SO BEAUTIFUL
I WAS YOUR MAN ABOUT TOWN
LIVING IN THIS GHOST TOWN
IT ISN’T ANY FUN
IF I WANT A PARTY
IT’S A PARTY OF ONE

From My Sister…

My Self-Isolation Quarantine Diary

Day 1 – I Can Do This!! Got enough food and wine to last a month!
Day 2 – Opening my 8th bottle of Wine. I fear wine supplies might not last!
Day 3 – Strawberries: Some have 210 seeds, some have 235 seeds. Who Knew??
Day 4 – 8:00pm. Removed my Day Pajamas and put on my Night Pajamas.
Day 5 – Today, I tried to make Hand Sanitizer. It came out as Jello Shots!!
Day 6 – I get to take the Garbage out I’m So excited, I can’t decide what to wear.
Day 7 – Laughing way too much at my own jokes!!
Day 8 – Went to a new restaurant called “The Kitchen”. You have to gather all the ingredients and make your own meal. I have No clue how this place is still in business.
Day 9 – I put liquor bottles in every room. Tonight, I’m getting all dressed up and going Bar hopping.
Day 10 – Struck up a conversation with a Spider today. Seems nice. He’s a Web Designer.
Day 11 – Isolation is hard. I swear my fridge just said, “What the hell do you want now?”
Day 12 – I realized why dogs get so excited about something moving outside, going for walks or car rides. I think I just barked at a squirrel.
Day 13 – If you keep a glass of wine in each hand, you can’t accidentally touch your face.
Day 14 – Watched the birds fight over a worm. The Cardinals lead the Blue Jays 3–1.
Day 15 – Anybody else feel like they’ve cooked dinner about 395 times this month? 

IS THIS YOU, yet? 

In March, U.S. Deaths From COVID-19 Totaled Less Than 2% Of All Deaths… Hmm

About 2.9 million people die in the United States each year from all causes. Monthly this total ranges from around 220,000 in the summertime to more than 280,000 in winter.

In recent decades, flu season has often peaked sometime from January to March, and this is a major driver in total deaths. The average daily number of deaths from December through March is over eight thousand.

So far, total death data is too preliminary to know if there has been any significant increase in total deaths as a result of COVID-19, and this is an important metric, because it gives us some insight into whether or not COVID-19 is driving total death numbers well above what would otherwise be expected. 

Indeed, according to some sources, it is not clear that total deaths have increased significantly as a result of COVID-19. In a March 30 article for The Spectator, former UK National Health Service pathologist John Lee noted that the current number of deaths from COVID-19 does not indicate that the UK is experiencing “excess deaths.” Lee writes:

The simplest way to judge whether we have an exceptionally lethal disease is to look at the death rates. Are more people dying than we would expect to die anyway in a given week or month? Statistically, we would expect about 51,000 to die in Britain this month. At the time of writing, 422 deaths are linked to Covid-19—so 0.8 per cent of that expected total. On a global basis, we’d expect 14 million to die over the first three months of the year. The world’s 18,944 coronavirus deaths represent 0.14 per cent of that total. These figures might shoot up but they are, right now, lower than other infectious diseases that we live with (such as flu). Not figures that would, in and of themselves, cause drastic global reactions.

How do these numbers look in the United States? During March of 2020, there were 4,053 COVID-19 deaths according to Worldometer. That is 1.6 percent of total deaths in March 2019 (total data on March 2020 deaths is still too preliminary to offer a comparison). For context, we could note that total deaths increased by about four thousand from March 2018 to March 2019. So for March, the increase in total deaths is about equal to what we already saw as a pre-COVID increase from March 2018 to March 2019. 

As Lee notes, total COVID-19 deaths could still increase significantly this season, but even then we must ask what percentage of total deaths warrants an international panic. Is it 5 percent? Ten percent? The question has never been addressed, and so far, a figure of 1 percent of total deaths in some places is being treated as a reason to forcibly shut down the global economy.

Meanwhile there is a trend toward to attributing more of those pneumonia deaths to COVID-19 rather than influenza, although this doesn’t actually mean the total mortality rate has increased. The CDC report continues: “the percent of all deaths with Influenza listed as a cause have decreased (from 1.0% to 0.8%) over this same time period. The increase in pneumonia deaths during this time period are likely associated with COVID-19 rather than influenza.” This doesn’t represent a total increase in pneumonia deaths, just a change in how they are recorded.

This reflects an increased focus on attributing deaths to COVID-19, as noted by Lee:

In the current climate, anyone with a positive test for Covid-19 will certainly be known to clinical staff looking after them: if any of these patients dies, staff will have to record the Covid-19 designation on the death certificate—contrary to usual practice for most infections of this kind. There is a big difference between Covid-19 causing death, and Covid-19 being found in someone who died of other causes. Making Covid-19 notifiable might give the appearance of it causing increasing numbers of deaths, whether this is true or not. It might appear far more of a killer than flu, simply because of the way deaths are recorded.

Given this rush to maximize the number of deaths attributable to COVID-19, what will April’s data look like? It may be that COVID-19 deaths could then indeed number 10 or 20 percent of all deaths. 

But the question remains: will total deaths increase substantially compared to April 2019 or April 2018? If they don’t, this will call into question whether or not COVID-19 is the engine of mortality that many government bureaucrats insist it is.After all, if April’s mortality remains “about the same” as the usual total and comes in around 230,000–235,000, then obsessive concern over COVID-19 would be justified only if it can be proven April 2020 deaths would have plummeted year-over-year had it not been for COVID-19.

Update:

Meanwhile the CDC is instructing medical staff to report deaths as COVID-19 deaths even when no test has confirmed the presence of the disease. In a Q and A on death certificates published by the CDC on March 24, the agency advises:

COVID-19 should be reported on the death certificate for all decedents where the disease caused or is assumed to have caused or contributed to death. Certifiers should include as much detail as possible based on their knowledge of the case, medical records, laboratory testing, etc. If the decedent had other chronic conditions such as COPD or asthma that may have also contributed, these conditions can be reported in Part II. [emphasis in original.]

This is extremely likely to inflate the number of deaths attributed to COVID-19 while pulling down deaths attributed to other influenza-like illnesses and to deaths caused by pneumonia with unspecified origins.  This is especially problematic since we know the overwhelming majority of COVID-19 deaths occur in patients that are already suffering from a number of other conditions. In Italy, for example, data shows 99 percent of COVID-19 deaths occurred in patients who had at least one other condition. More than 48 percent had three other conditions. Similar cases in the US are now likely to be routinely reported simply as COVID-19 cases.  

Source: Total death and flu/pneumonia death data via National Center for Health Statistics (www.cdc.gov/flu/weekly/weeklyarchives2019-2020/data/nchsData12.csv). COVID-19 totals via Worldometer COVID stats.

Unfortunately, because total death data is not reported immediately, we have yet to see how this plays out.

We do know historically, however, that deaths attributed to flu and pneumonia over the past decade have tended to make up around five to ten percent of all deaths, depending on the severity of the “season.”  Last week (week 14, the week ending April 4) was the first week during which COVID-19 deaths exceeded flu and pneumonia deaths, coming in at 11 percent of all death for that week. The prior week, (week 13, the week ending Mar 28) COVID-19 deaths made up 3.3 percent of all deaths. 

Until we have reliable numbers on all deaths in coming weeks, it will be impossible to know the extent to which COVID-19 are “cannibalizing” flu and pneumonia deaths overall. That is, if the COVID-19 totals skyrocket, but total deaths remain relatively stable, than we might guess that many deaths formerly attributed simply to pneumonia, or to flu, are now being labeled as COVID-19 deaths. Potentially, this could also be the case for other patients, such as those with advanced cases of diabetes.

Source: by Ryan McMaken | ZeroHedge

Another Doctor Reports Dramatic Improvement In COVID-19 Patients Using Trump-Touted Treatment

As pro-establishment mouthpieces downplay the efficacy of hydroxychloroquine to treat COVID-19 as “anecdotal” with “little evidence that the treatment is effective,” yet another doctor treating has claimed dramatic improvement in coronavirus patients within hours of taking the anti-malaria drug in combination with two other medications.

Los Angeles doctor Anthony Cardillo says he’s seen very promising results when the Trump-touted drug is combined with zinc for severely-ill coronavirus patients.

Every patient I’ve prescribed it to has been very, very ill and within 8 to 12 hours, they were basically symptom-free,” Cardillo told Eyewitness News, adding “So clinically I am seeing a resolution.”

Cardillo, CEO of Mend Urgent Care, says that the drug must be used in conjunction with Zinc, as the hdroxycholoroquine opens a ‘channel’ for the mineral to enter cells and prevent the virus from replicating.

Commonly used for lupus and arthritis, hydroxychloroquine has been approved by the FDA for limited emergency authorization to treat COVID-19 patients.

That said, Cardillo warns that the treatment should only be reserved for those with moderate to severe symptoms due to concerns over shortages.

“We have to be cautious and mindful that we don’t prescribe it for patients who have COVID who are well,” he said, adding “It should be reserved for people who are really sick, in the hospital or at home very sick, who need that medication. Otherwise we’re going to blow through our supply for patients that take it regularly for other disease processes.”

Source: ZeroHedge

Wake Up: The War is Now Here in America!

This coronavirus fraud is being labeled a war by the ruling powers, but this is no war on any virus, it is war against humanity. How many obvious signs are necessary before the frightened American sheep will pull their heads out of the sand? Because the general population hides from the truth in order to avoid reality, a governing takeover of epoch proportions is being implemented at a lightening pace. Every single day brings forth more tyrannical measures, and these measures are meant to be permanent. Are Americans really as ignorant as this government thinks they are?

Please look around at what is happening. Consider that this is no virus, but a false flag event long planned in order to facilitate an economic collapse that was already imminent due to corrupt banking and government policies. This might be the reason the reaction by so many countries is in concert with one another, as all major countries have destroyed their economies by monetary expansion, debt creation, and redistribution of wealth, which placed the bulk of assets in the hands of a concentrated few. In this country, there has also been perpetual indoctrination and aggressive war, and these factors combined have led to class separation, division, and enhanced dependence on government. Because of this, control over society is becoming a reality, and this control is necessary in order for those now so powerful to retain that power and more importantly, to expand and retain control of an obedient proletariat.

What has happened in just a few weeks is staggering to say the least, but this top-down takeover is just beginning. This tyranny was allowed to escalate due to fear of a so-called flu strain in China that allegedly killed 3,322 out of 1.45 billion people. That is a mortality factor of .00000229, or to put that in perspective, 1 death out of every 436,000 Chinese people.  From Global Times:

“An analysis led by Chinese scientists published in the Lancet Public Health in September 2019 found that there were 84,200 to 92,000 flu-related deaths in China each year, accounting for 8.2 percent of all deaths from respiratory diseases.”

So the average number of common flu deaths in China is 26 times the number of deaths due to this so-called coronavirus, or Covid-19, but pneumonia deaths alone as of 2010 in China were an additional 125,000. Why is there panic and why is there chaos? The answer to this question is obvious if any logic is considered. This panic was not due to any virus strain, but to the purposeful political and media hype of a planned event meant to frighten the general population into believing that some fake pandemic was a threat to all life on earth. Approximately 3 million people die every year in the U.S., or 8,000 every day, with alleged total deaths due to coronavirus being 6,000 for the entire season. This is even with what are certainly vastly overstated numbers of deaths due to this “virus.” That is less than the number of deaths in one day in this country.

So what is really going on here? This is a planned takeover of people, and the fake virus scare is the excuse being used to advance a new totalitarian state that can monitor every aspect of our lives, monitor movement, surveil everything, control all monetary processes, behavior, travel, communication, and social contact. This dystopia is already here, but can get much worse if not stopped.

Travel and movement is becoming less possible every day. Most of this country has voluntarily locked themselves up in home prisons. Fear is rampant, and neighbors have become the eyes of the very police and security forces bent on controlling them. There is talk and plans to digitize all money, which in and of itself would destroy freedom. Distancing mandates have been implemented, but are also being promoted for the future. The entire economy is virtually shut down with no end in sight, food shortages are evident, and psychological and health problems are increasing at an alarming rate. Necessary surgeries are being cancelled even though many hospitals are empty. Mortgages are defaulting, and millions will lose their homes, this while unemployment will most likely affect a third or more of the people in this country.

In addition to all this, GPS tracking devices are being ordered in some areas for any who have tested positive for coronavirus, and Google is releasing location data to “authorities” so they can check and monitor all those in state mandated lock downs. Calls for forced vaccination abound, with all the social scoring and embedded devices to prove vaccination history not only being discussed, but also planned for the near future. Those like the evil eugenicist and population control advocate Bill Gates that have the ear of powerful politicians, are promoting full shutdowns, forced vaccination, tracking of all, and at the same time Gates is funding seven new vaccine factories, and tattoo ID tracking at MIT, and those conflicts are obvious and criminal.

The bottom line is that a massive plan to build a new monetary, economic, and social structure worldwide is being advanced. A new global order is being constructed that will replace our current system with a technocratic rule that will be all encompassing at every level of life. The financial systems due to fraud and corruption will fail and that failure will be blamed on this fake pandemic. This economic collapse will break the back of this country, and then the promise of universal income, universal healthcare, increased automated production, and smart living will be pursued, along with totalitarian rule.

None of this is accidental, and none of this is due to this virus. This coup has been planned for a long time, and those plans were exposed on many occasions in the past. Most thought that the ideas of prescient thinkers were far-fetched and that the loss of all freedom was not possible. Therefore, those that recognized the scope of this plot long ago were ignored and cast aside as conspiracy theorists, when in fact they were right all along. One look around today will bring to light that truth.

The threat of absolute rule is upon us, and little time is left to stop the onslaught of this dictatorial regulation of society by government and its masters. The decimation of freedom is at hand, so dissent by every able-bodied man is necessary to halt this terror. Political remedies are no longer possible in my opinion, so a real revolution is now necessary. An apocalypse is coming, and hell is coming with it.

“Disobedience is the true foundation of liberty. The obedient must be slaves.”
~ Henry David Thoreau, Thoreau and the Art of Life: Precepts and Principles

Source: Is the coronavirus a false flag? Undoubtedly. From Gary D. Barnett at lewrockwell.com

Largest US mall owner, Simon Property, Furloughs 30% Of Workforce, Adding To Avalanche Of C19 Related Retail Layoffs

The biggest U.S. mall owner, Simon Property Group, has furloughed about 30% of its workforce, CNBC has learned, as the company copes with all of its properties being temporarily shut because of the coronavirus pandemic.

The furloughs impact full- and part-time workers, at its Indianapolis headquarters and at its malls and outlet centers across the U.S., a person familiar with the situation told CNBC. The person asked to remain anonymous because the information has not been disclosed publicly.

Simon permanently laid off some employees also, but the exact number could not be immediately determined.

CEO David Simon will not receive a salary during the pandemic, the person said. Salaries of upper-level managers at the real estate company will be cut by up to 30%.

As of Dec. 31, Simon had roughly 4,500 employees, of which 1,500 were part time, according to its latest annual filing. About 1,000 of those people worked from Simon’s Indianapolis headquarters, it said.

A representative from Simon did not immediately respond to CNBC’s request for comment.

Wave of retail furloughs

To date, hundreds of thousands of workers in the retail industry have been furloughed because of COVID-19, between recent announcements from J.C. PenneyMacy’sKohl’sGap, Loft-owner Ascena and others. 

Luxury retailer Neiman Marcus is furloughing most of its about 14,000 workers. 

With a $4.3 billion debt load, Neiman Marcus has been on many analysts’ so-called bankruptcy watch lists, as it is in more financial distress than some of its peers. The coronavirus will prove to be a bigger burden for these companies already fighting to stay in business. 

“Unlike past recessions, this does not seem like companies are trying to figure out how to run their businesses on lighter operations … or adjust their expense structure to their revenue base,” BMO Capital Markets analyst Simeon Siegel told CNBC. “This seems like companies are trying to press pause on the world.” 

Department store chain Macy’s said Monday it is moving to the “absolute minimum workforce needed to maintain basic operations.” It has furloughed the majority of its workforce, which is roughly 130,000 people. 

“While the digital business remains open, we have lost the majority of our sales due to the store closures,” a Macy’s spokeswoman told CNBC in an emailed statement. 

Kohl’s, meantime, said Monday it will be furloughing about 85,000 of its approximately 122,000 employees. 

Penney announced Tuesday it is furloughing the majority of its hourly store workers, effective Friday. Starting Sunday, the company said a “significant portion” of workers at its headquarters in Texas will be furloughed. It had previously started furloughing workers for its supply chain division and at its logistics centers. And Penney said Tuesday that these furloughs will continue. 

Apparel maker Gap is furloughing the majority of its store teams in the U.S. and Canada, or roughly 80,000 people, pausing pay but continuing to offer “applicable benefits” until stores reopen, it said. 

Ascena Retail Group, which owns Ann Taylor and Loft, said it is furloughing all of its store workers and half of its corporate staff. As of Aug. 3, Ascena employed 53,000 people. 

Tailored Brands, which owns Men’s Warehouse and Jos. A. Bank, has furloughed all of its store workers in the U.S., in addition to a “significant portion” of workers in its distribution centers and related offices. 

Urban Outfitters said Tuesday it is furloughing a “substantial” number of store, wholesale and home office employees for 60 days, effective this Wednesday. 

Nordstrom, Victoria’s Secret parent L Brands, David’s Bridal, Steve Madde and Designer Brands are among the other retailers that have announced their plans to furlough workers, amidst the coronavirus pandemic, where already so far at least 164,610 cases have been reported in the U.S., according to the latest data from Johns Hopkins University. 

As retailers are working to slash costs, the furloughs are more akin to “Band-Aids” than a “structural shift” in these retailers’ business models, Siegel said. “Ultimately Band-Aids don’t heal.” 

The layoffs and furloughs at Simon show the commercial real estate industry is not immune to this, either. 

Similar cuts are expected to happen at other U.S. mall owners in the coming weeks, or days. Simon on March 18 announced it would be closing all of its properties temporarily, to try to help halt the spread of COVID-19. Others, such as Taubman CentersWashington Prime Group and Unibail-Rodamco-Westfield, have followed suit. 

Rent is due

These landlords are grappling with the fact that countless retailers and restaurants, with their stores temporarily shut, will not be able to pay April rent. High-end mall owner Taubman, however, has sent a letter to its tenants saying they must still meet their lease obligations. 

Talks between many tenants and their landlords remain ongoing, as some are trying to work out abatements or deferrals. Mall owners still have their own obligations, such as utility bills and mortgage payments, that must be met. 

The Cheesecake Factory, which has 294 locations in North America, has already said publicly that it will not be paying rent in April. Simon has 29 Cheesecake Factory locations, more than any of its peers, according to an analysis by RBC Capital Markets and CoStar Realty. 

Simon on March 16 announced it had amended and extended its $6 billion revolving credit facility and term loan, giving it additional liquidity. 

Simon shares have fallen more than 60% this year. It has a market value of about $17.3 billion. 

Source: by Lauren Thomas | CNBC

***

Coronavirus job losses could total 47 million, unemployment rate may hit 32%, Fed estimates

J.C. Penney furloughs most of its 90,000 workers as stores remain closed until further notice

Macy’s will furlough the majority of its 125,000 employees

Kohl’s to keep its stores closed indefinitely, plans to furlough store employees

Gold Silver Ratio Spikes Through 100 Year High

The gold / silver ratio. It’s simple: Take the price of an ounce of gold and divide it by the price of an ounce of silver. Presto; the resulting number is the gold / silver ratio.

104 Gold Silver ratio

The ratio is most useful at its extremes. When the ratio has topped 80, it has signaled a time when silver was relatively inexpensive relative to gold. Silver went on to rally 40%, 300%, and 400% the last three times this happened.

Likewise, the three times the gold / silver ratio has fallen below 20 in the past, it has marked a period when gold was relatively inexpensive compared to silver.

This is the best of savvy investment strategy; take a simple mathematical equation and track historical price behavior. When relative valuations hit extremes and then revert to historical means time and time again, we seek to buy these temporary under valuations and wait for their inevitable pendulum swing in the opposite direction.

Adapted from GoldSilver.com

Bullion Shortages Hit As Price Of Physical Decouples From Paper Precious Metals

(BullionStar.com) In the last month, from 14 February 2020 to 14 March 2020, we have seen a record number of orders, record order revenue and a record number of visits to our newly renovated and extended bullion centre at 45 New Bridge Road in Singapore.

For the above-mentioned period, we have served 2,626 customers with a sales revenue of more than SGD 50 M, which is 477% higher compared to the same period last year.

The last few days have been our busiest days of all time. Our staff members have been doing a fantastic job in going out of their way to serve as many customers as possible.

Gold & Silver Shortages – Supply Squeeze

The enormous increase in demand is straining our supply chains. BullionStar has supplier relations with most of the major refineries, mints and wholesalers around the world. Most of our suppliers don’t have any stock of precious metals and are not taking orders currently. The U.S. Mint for example announced just this Thursday that American Silver Eagle coins are sold out. The large wholesalers in the U.S. are completely sold out of ALL gold and ALL silver and are not able to replenish.

We are already sold out of several products and will sell out of additional products shortly if this supply squeeze continues. All products listed as “In Stock” on our website are available for immediate delivery. For items listed as “Pre-Sale”, the items have been ordered and paid by us with incoming shipments on the way to us.

Paper Gold vs. Physical Gold

As we have repeated frequently over the years, only physical gold is a safe haven.

It’s noteworthy that the paper price of gold, although up 5.7% Year-to-Date denominated in SGD, has been trading downward in the last few days.

Paper gold is traded on the unallocated OTC gold spot market in London and on the COMEX futures market in New York. Both of these markets are derivative markets and neither is connected to the physical gold market.

This means that the physical gold market is a price taker, inheriting the price from the paper market, and that the derivative markets are the exclusive and dominant price makers. The entire market structure of this financialized gold trading is flawed. So while there is unprecedented demand for physical gold, this is not reflected in the gold price as derived by COMEX and the London unallocated spot market.

By now it is abundantly clear that the physical gold market and paper gold market will disconnect.

If the paper market does not correct this imbalance, widespread physical shortages of precious metals will be prolonged and may lead to the entire monetary system imploding.

And with progressive central banks in Eastern Europe and Asia having stocked up on gold in the last three years, gold will likely be the anchor of the new monetary system arising out of the ashes.

Mainstream media assertions that “Gold has been stripped of its Safe Haven Status” are utterly ridiculous and distorted beyond belief, when in fact the complete opposite is true. Unbacked paper gold and silver may be stripped of safe haven status, but certainly not real physical gold bullion.

Physical Premiums & Spreads

The current supply squeeze and physical bullion shortage has caused and is causing an increase in price premiums. It’s currently difficult and expensive for us to acquire any inventory. We have therefore had to increase premiums on products to compensate for the constraints. We have endeavored to also raise our prices offered to customers selling to us, but with the extreme volatility and wild price fluctuations, the spread between the buy and sell price may temporarily be larger than normal. It is regrettable that premiums and spreads are larger than normal but it is outside our control that the paper market is not reflecting the demand and supply of the physical market. As many of you know, we are one of the largest critical voices of the LBMA run paper market and its bullion bank members in London.

Please note that premiums are likely to be higher on weekends when the markets are closed compared to weekdays.

We do not take lightly the decision to alter premiums but feel that it is a better alternative than to stop accepting orders altogether during weekends. Likewise it is a better alternative than to stop accepting orders when the paper gold market is in turmoil and failing to reflect the demand and supply realities of the physical bullion market.

Currently, we are completely sold out on BullionStar Gold BarsBullionStar Silver Bars and are running low on several other products which we are not able to replenish for now. Several stock items will therefore likely go out of stock shortly. This is despite us having been aggressively buying bullion to create a buffer reserve inventory.

Source: ZeroHedge

Megxit Over: Harry, Meghan Reach Deal To Quit Royal Life

One family’s crusade to break from the unbearable bondage of royalty is finally over, or in other words, Megxit is a done deal.

Prince Harry and Meghan Markle, also known as the Duke and Duchess of Sussex, will no longer use the titles His and Her Royal Highness “as they are no longer working members of the Royal Family” Buckingham Palace announced Saturday, as part of an agreement that lets them build a life away from intense media scrutiny as members of the royal family.

“Following many months of conversations and more recent discussions, I am pleased that together we have found a constructive and supportive way forward for my grandson and his family,” Queen Elizabeth II said in a statement.

“Harry, Meghan and Archie will always be much loved members of my family,” she said. ” I recognize the challenges they have experienced as a result of intense scrutiny over the last two years and support their wish for a more independent life.”

As disclosed in the agreement, Harry and Meghan “understand that they are required to step back from Royal duties, including official military appointments. They will no longer receive public funds for Royal duties.”

They also shared their wish to repay Sovereign Grant expenditure for the refurbishment of Frogmore Cottage, which will remain their UK family home.

Frogmore House, a modest wedding gift from the Queen to Harry and Meghan

With Brexit no longer dominating the British press, the announcement that the couple wished to step back from the royal family had thrown Britain’s monarchy into turmoil and dominated the headlines. Even though Harry has only a remote prospect of becoming king – he’s sixth in line, behind his father, brother, nephews and niece – there was outrage that, with his wife, he wanted to become financially independent and “carve out” a “progressive new role.”

Still, as the following chart summarizing the net worth of UK’s royalty shows the former “Duke and Duchess” should be just fine.

According to Statista, Prince William and Prince Harry have similar incomes and net worth, and reportedly earn $6.6 million annually from the Sovereign Grant, which they split, and each have an estimated net worth that ranges around $40 million. Prince Harry’s income could fluctuate once his title is renounced. Rumors claimed Markle, who had a net worth of about $5 million before marrying Harry thanks to her acting career, was already inking up a deal with Disney to do voiceovers for future projects, though the money will reportedly go to charity.

In a separate statement, earlier this week the queen discussed the wishes of Harry and Meghan, a former actress, with her immediate family. The queen at the time described the talks as “very constructive.”

The Queen said the recent discussions led to a “supportive way forward for my grandson and his family.” She said she was “particularly proud of how Meghan has so quickly become one of the family.”

It now appears that it took Meghan even less time to leave the family.

Source: ZeroHedge

China’s Central Bank Crypto Currency Is “Ready”, After 5 Years Development

A senior official at China’s central bank announced at the China Finance 40 Group meeting today that the country will soon roll out its central bank digital currency (CBDC.)

Mu Changchun, Deputy Chief in the Payment and Settlement Division of the People’s Bank of China (PBOC,) stated that the CBDC prototype exists and the PBOC’s Digital Money Research Group has already fully adopted the blockchain architecture for the currency. China’s CBDC will not rely entirely on a pure blockchain architecture, as this would not allow the currency to achieve the throughput required for retail usage.

According to Changchun, the currency has been in the research and development phase since 2014. At the meeting on Saturday, he said, “People’s Bank digital currency can now be said to be ready.”

The CBDC will employ a two-tier operational structure, per Changchun:

 The People’s Bank of China is the upper level and the commercial banks are the second level. This dual delivery system is suitable for our national conditions. It can use existing resources to mobilize the enthusiasm of commercial banks and smoothly improve the acceptance of digital currency.

 

A two-tier system is preferable due to China’s complex economy, vast territory and large population. “From the perspective of improving accessibility and increasing public willingness to use, a two-tier operational framework should be adopted to deal with this difficulty,” Changchun said. He also welcomed the resources, talent and innovation capabilities of commercial businesses who will partner with the PBOC to roll out the currency. Finally, this system will help avoid concentration of risk and financial disintermediation.

At the same meeting, China UnionPay Chairman Shaofu Jun said that the goals of China’s CBDC would be difficult to achieve. While a CBDC could solve issues related to cross-border transactions, long lag times and legacy inefficiencies, the lack of clear operational processes and a detailed regulatory framework across countries will be challenging to overcome.

Choosing The Right Words

A lawyer, who had a wife and 12 children, needed to move because his rental agreement was terminated by the owner, who wanted to reoccupy the home.

When he said he had 12 children, no one would rent a home to him because they felt that the children would destroy the place.

So he sent his wife for a walk to the cemetery with 11 of their kids.

He took the remaining one with him to see rental homes with the real estate agent.

He loved one of the homes and the price was right. The agent asked, “How many children do you have?”

He answered, “Twelve.”

The agent asked, “Where are the others?”

The lawyer, with his best courtroom sad look, answered, “They’re in the cemetery with their mother.”

MORAL: It’s not necessary to lie; one has only to choose the right words. And don’t forget, most politicians are lawyers.

***

Over-Taxed: The Middle Class Is Being Wiped Out, NJ Residents Flee In Droves

New Jersey residents are fleeing their state in droves thanks to the over taxation and immense financial burden placed on them by their socialist state government. In addition to the already sky-high federal tax that we are all forced to pay, those in New Jersey are struggling to make enough money to live after the state also steals a cut of their income.

The SALT (state and local tax) cap has hit high-tax states like New York, California, and New Jersey particularly hard because these states steal a higher portion of an individual’s income. As a result, affected residents have begun to move to other states – a trend that experts expect to accelerate, according to Fox Business.

They can’t tax us anymore, the middle class is getting wiped out,” former “Saturday Night Live” cast member and New Jersey resident Joe Piscopo told FOX Business’ Neil Cavuto on Friday, adding that wealthy individuals are leaving the state “in droves.” This is always the case, as governments all seek to find ways to steal more from the producers to fund their corruption. This problem is only going to get worse too and New Jersey Democrats are attempting to pass a state wealth tax.

Democratic Governor Phil Murphy renewed a push to implement the state tax (with a top rate of 10.75 percent) on people with incomes over $1 million. However, amid disagreements with the state legislature, which threatened to shut down the state government, Murphy said he will sign a budget over the weekend. State Democrats sent Murphy a budget proposal last week, which did not include the tax increase on people with more than $1 million. Murphy, however, has been a strong advocate for implementing the tax and it has been one of his top campaign promises.

Therefore, most residents have a difficult time believing that the issue has been completely put to rest. So instead, they’ve taken action and made the decision to leave the state entirely taking their wealth with them rather than having it stolen by tyrannical fascists.

New Jersey Rep. Josh Gottheimer was one of several lawmakers from states including New York, Illinois, and California who took to Capitol Hill on Tuesday to air out their grievances against the new SALT cap. Gottheimer called the cap a “double-taxation grenade” that was “lobbed at New Jersey and other high-tax states” by so-called “moocher states.” The average SALT deduction claimed in Bergen County, New Jersey, was more than $24,700 before the implementation of the cap-Fox Business

Piscopo says that a handful of states in the U.S. are already socialist.  And those are the states people continue to flee in droves and are facing homeless epidemics.

“I’m telling you right now, If Gov. Murphy, if Steve Sweeney does a primary, and I don’t mean inside around the rest of the country, but this is huge in Jersey because Jersey, New York, and California are now socialist states,” he told FOX Business‘ Neil Cavuto on Friday.

In “Parasites on Parade,” Larken Rose (author of “The Most Dangerous Superstition” and “The Iron Web”) uses his own direct experiences with bureaucratic and judicial stupidity, intrusion and corruption to illustrate why, everywhere and at all times, in every situation and at every level, government sucks!

This snarky, flippant look at the mentality and tactics of various state busybodies also provides an important lesson regarding the true nature of political “authority,” and the problems and abuses it naturally creates. –  Parasites on Parade

Source: by Mac Salvo | ZeroHedge

The Silver Supply / Demand Crunch In Charts And Video

(by Jeff Clark) The data is in: based on a review of reports from multiple consultancies, the silver market has officially entered a supply/demand imbalance. The structure now in place sets up a scenario where a genuine crunch could occur.

The silver price has been stuck in a trading range for five years now. But behind the scenes, an imbalance has been forming that could potentially lead to price spikes based solely on the inability of supply to meet demand.

That statement isn’t based on some far-out projection or end-of-world scenario. It comes solely from the latest supply and demand data. As you’ll see, it demonstrates just how precarious the state of the silver market is. And as a result, how easily the price could ignite.

Here’s a pictorial that summarizes the current state of supply and demand for the silver market. See what conclusion you draw…

Silver Supply: It’s Fallen and It Can’t Get Up

Annual supply is in a major decline. And the downtrend is getting worse.

Check out how the amount of new metal coming to market has rolled over and continues to fall.

https://s3-us-west-2.amazonaws.com/gs-live/uploads%2F1557400273774-image5.png

Continue reading

The Biggest Home Price Drops Are In These 10 Cities

As the US housing market deteriorates, the shift to a buyer’s market accelerates, says Knock, a home trade-in online service. The 2Q19 National Knock Deals Report predicts that U.S. markets will have the highest percentage of homes that sell at discount versus the list price, in many years.

https://www.zerohedge.com/s3/files/inline-images/price%20cuts%20sign.jpg?itok=TsLLIrmQ

Knock projects that 75% of current listings will sell below their list price within the current quarter. While this is slightly lower than the 1Q19 forecast of 77%, it reflects a significant y/y increase (7% y/y) as the housing market starts to turn.

“The Q1 Forecast, which may have seemed to be a big jump over 2018, was actually much closer to the reality of home sales in Q1 2019 than home sales at the same time last year, or even at the end of 2018,” said Jamie Glenn, Co-Founder and COO at Knock. “It’s clear that we’re at an inflection point in the shift to more of a buyer’s market, and the Q2 Forecast provides insights into where and how buyers can capitalize on that.”

Six out of the ten cities on the list were located in Southern markets. Knock said the increase of Southern markets is a 40% increase over the last quarter.

Providence, RI; Cleveland, OH; New York, NY; and Chicago, IL were the other four markets that made the list.

The report noted that the four markets in Florida ( Miami, Tampa, Jacksonville, and Orlando) were hit the hardest by price reductions.

In Miami, the report says about 88% of single-family home sales in 1Q19 sold below original list prices. Average days on the market of Miami homes sold in 1Q19 were 82, which plays a significant role in discounting.

https://www.zerohedge.com/s3/files/inline-images/home%20price%20cuts%202q.png?itok=S3qDz-xT

“This seems like an interesting telltale that the market is shifting in favor of buyers,” Knock Chief Executive Officer Sean Black told Bloomberg in a phone interview. “Florida is a popular secondary home destination so it tends to drop faster in a downward market because it’s losing buyers, both domestically and internationally. Everybody needs a primary home. Not everybody needs a second home.”

Back in September, we outlined that “existing home sales have peaked, reflecting declining affordability, greater price reductions, and deteriorating housing sentiment.”

https://www.zerohedge.com/s3/files/inline-images/Screen-Shot-2018-09-22-at-7.20.10-PM_1.png?itok=rTP3ODfl

Greater price reductions, more inventory, and more days on the market is a recipe for a significant downward impulse in home prices across the country.

So if you haven’t called your realtor – maybe now is the time before the market goes bust.

Source: ZeroHedge

HUD Is Preparing To Address Rising FHA Loan Portfolio Risk With Tighter Credit

https://www.scotsmanguide.com/uploadedImages/ScotsManGuide/News/News/2018/11/FHAloan.1.jpg

(Source: by Victor Whitman | Scotsman Guide) Changes are likely to come soon that will make it harder for prospective borrowers to obtain Federal Housing Administration (FHA) loans. It’s all part of an effort to dial back loosening credit standards that have seen FHA borrower debt loads and cash-out refinancing activity rise to record levels, top officials with the U.S. Department of Housing and Urban Development (HUD) told reporters on Thursday.

“We will be making some additional changes soon,” said FHA Commissioner Brian Montgomery during a morning conference call. HUD released its fiscal 2018 annual report to Congress on the health of the FHA insurance fund.

“I couldn’t give you an exact date, but again we want to find that critical balance between providing people with the opportunity for sustainable home ownership, but again we have to maintain the right balance and protect taxpayers against risk.”  

Montgomery didn’t reveal any specific plans on where the tightening may occur, but indicated cash-out refinancing activity was in the cross-hairs of the agency.

In a year where refinances dropped dramatically, FHA’s cash-out counts rose 6percent, to 150,883, in fiscal 2018.

“Cash-out refinances, both as a percentage of our over all business and our refinance endorsement volume, are growing astronomically,”Montgomery said. Cash-out refinances comprised nearly 63 percent of all refinance transactions in fiscal 2018, up from nearly 39 percent last year, he said.

“The increase in cash-outs presents a potential future risk for us, but also challenges the core tenants of FHA’s taxpayer-backed mission.”

Montgomery said rising debt-to-income (DTI) ratios are another major concern.

“Almost a quarter of our forward-purchase business was comprised of mortgages in which a borrower had a DTI ratio above 50 percent,”he said. “That is the highest percentage since 2000. When you couple that with a trend of decreasing average credit scores — 670 this year versus 676last year and the lowest average since 2008 — most underwriters and housing-finance experts will say that managing this type of risk without corresponding scrutiny becomes problematic.”

Montgomery also said HUD has concerns about the jurisdictional right and the extent to which government entities, such as state housing-finance agencies, provide down payment assistance to FHA borrowers.  

Montgomery also indicated that HUD will not be cutting FHA insurance rates in the near future.

“While the [insurance] fund is sound at this point in time,I think we are still far away from being in a position to consider any reduction in our mortgage-insurance premium,” he said.

HUD’s insurance fund ended the 2018 fiscal year in September in better shape than the end of fiscal 2017. The net worth of the fund increased to $34.9 billion, up $8.12 billion at the end of fiscal 2017. The fund’s capital ratio, a closely watched metric that compares the net worth of the fund to the dollar balance of all active insured loans, stood at a 2.76 percent, up from 2.18 percent at the end of fiscal 2017. This was the fourth-consecutive year that the capital ratio has been above Congress’s mandated 2 percent threshold, a level it considers sufficient to sustain losses without government intervention.

The overall fund, however, was once again dragged down by FHA’s reserve-mortgage program, known as the Home Equity Conversion Mortgage (HECM). Reverse mortgages are loans that allow seniors to tap their home equity and remain in their homes for life. They represent a small portion of all FHA-insured loans, but have had an out sized impact on the risk to the fund.

The FHA portfolio of HECM-insured mortgages was estimated to have a negative value of $16.3 billion. The reverse portfolio also had a negative capital ratio of 18.83 percent.

By contrast, FHA’s regular forward-loan portfolio — loans commonly taken out by first-time home buyers  — had an estimated positive value of $46.8 billion and a healthy positive capital ratio of 3.93 percent.  

Montgomery and HUD Secretary Ben Carson, who also joined the morning call with reporters, said that elderly borrowers in the reverse program are being subsidized to an unsustainable degree by the typically lower-income,often minority, first-time home buyers in the FHA’s forward-loan program.

“We are committed to maintaining a viable HECM program, so seniors can continue to age in place, but we can’t continue to see future HECM books being subsidized by our forward-mortgage programs,” Montgomery said. “It is not beneficial to anyone, including taxpayers.”

HUD has taken steps to tighten the program already,including most recently requiring a second appraisal on homes where the value could have been inflated. Montgomery said FHA is working on a plan to conduct a census of all families who live in homes with a HECM mortgage.

Mortgage Bankers Association President Robert Broeksmit said HUD’s scrutiny of FHA’s credit standards was “prudent.” 

“We are glad to see that FHA is closely monitoring the increasing risk in the forward portfolio, indicated by rising debt-to-income ratios, declining credit scores, and the increasing use of down payment-assistance programs,” Broeksmit said. “While current FHA delinquencies are quite low, it is prudent to keep an eye on these trends to ensure the program does not face undue challenges if, and when, the economy and job market cool.”

Broeksmit also noted that MBA has previously drawn attention to the HECM portfolio’s drain on the fund, and supported recent tightening moves.

“Policy makers should continue considering ways to insulate the forward program from the volatility in the reverse program,” he said.  

That HUD might crack down on FHA-lending standards is worrisome for non-banks, however. Non-banks are now originating the bulk of FHA loans today. Reacting to the report,  non-bank trade group the Community Home Lenders Association (CHLA) said HUD should loosen restrictions on the program by eliminating an Obama-era requirement that borrowers hold FHA insurance for the life of the loan.

“CHLA also renews its call for a cut in annual premiums, a move justified by FHA’s strong financial performance,” CHLA Executive Director Scott Olson said.

Chinese Fetanyl Kingpins Laundered Over $5BN Through Vancouver Homes Since 2012

https://www.zerohedge.com/sites/default/files/inline-images/Vancouver%20skyline.jpg?itok=Ur85d6IyDowntown Vancouver Skyline

A new “secret” police study has found that Chinese crime networks could have laundered over $1B through Vancouver homes in 2016 alone, and that a surge in the city’s home prices are simultaneously tied to a surge in opioid deaths. 

The report examined over 1,200 luxury real estate purchases in British Columbia’s Lower Mainland during that year, and concluded that over 10% were tied to buyers with criminal records. Crucially 95% of those transactions could be definitively traced by police intelligence back to Chinese crime networks.

While the study only looked at property purchases in 2016, an analysis by Global News suggests the same extended crime network may have laundered about $5-billion in Vancouver-area homes since 2012Fentanyl: Making a Killing

Since 2016 we’ve chronicled the “dark side” behind the Vancouver real estate bubble, which it turns out has long been a bubbling melange of criminal Chinese oligarch “hot money”, desperate to get parked offshore in any piece of real estate, but mostly in British Columbia regardless of price.

A number of investigations have since uncovered extensive links – including money laundering and underground banking – between China’s criminal underworld and British Columbia drug and casino cash and VIPs, as well as their connections to China, Macau and the notorious triads. These investigations have found much of the B.C. real estate bubble can be explained as nothing more than the “layering” and “integration” aspect of a giant money laundering scheme involving billions of dollars of Chinese hot money and the criminals behind it.

On Monday the new bombshell study revealed just how extensive and growing this Chinese underworld racket remains and how it continues to impact average citizens and regular home buyers, as well as fueling the continuing opioid crisis across the US and Canada, which has claimed tens of thousands of lives across North America, including nearly 4,000 Canadians in 2017 alone. The figures are so stunning that what is “known” years after the story first came to light could merely be the tip of the iceberg. 

The study published by Canada’s Global News begins by painting a disturbing scenario that suggests some of Vancouver’s priciest homes are nothing more than a new “Swiss bank account” of sorts providing the promise of an anonymous store of value and retaining the cash equivalent value of the original capital outflow from initial criminal transactions overseen for Chinese crime syndicates — all the while fueling Metro Vancouver’s housing affordability crisis.

The ultimate end result of the sophisticated and massive money laundering scheme is that middle-class families have been priced out of the city, per the report:

The stately $17-million mansion owned by a suspected fentanyl importer is at the end of a gated driveway on one of the priciest streets in Shaughnessy, Vancouver’s most exclusive neighborhood.

A block away is a $22-million gabled manor that police have linked to a high-stakes gambler and property developer with suspected ties to the Chinese police services.

Both mansions appear on a list of more than $1-billion worth of Vancouver-area property transactions in 2016 that a confidential police intelligence study has linked to Chinese organized crime.

https://www.zerohedge.com/sites/default/files/inline-images/Vancouver%20properties.jpg?itok=CDpjoivaNine Vancouver properties subject of a prior Globe and Mail investigation linking them to fentanyl laundering. Via The Globe and Mail

Previous investigations had quoted concerned residents describing that: “Vancouver seems to be evolving from a residential city into almost like a lockbox for money… but I have to live among the empty houses. I’m a resident, not just an investor.”

The snapshot that the new police study provides is based on analysis of a sample of about 1,200 high-end sales in 2016. Investigators cross-referenced databases of criminal records and confidential police intelligence with those high-end property records, which revealed the shocking 10% organized crime ties figure. 

But the implications for prior years going all the way back to the early 2000’s and even into the 1990’s, when Canadian police believe the current kingpins of fentanyl  which is the powerful and extremely addictive narcotic added to heroin to increase its potency (said to be 100 times more potent than morphine)  began to dominate Canada’s heroin markets, are equally as startling.

For starters, the report finds, fentanyl-related money laundering which funnels illicit funds through the luxury housing market has been so pervasive that researchers “didn’t have the time or resources to study the over 20,000 transactions”. During the course of these some 20,000 transactions home prices in Vancouver have tripled since 2005

From the new “Fentanyl: Making a Killing” extensive report

https://www.zerohedge.com/sites/default/files/inline-images/Vancouver%20Fentanyl%20crisis%20report.jpg?itok=-QljNhJV

And further illustrating just how extensive the whole scheme remains, there is this bombshell section from the report:

While the study only looked at property purchases in 2016, an analysis by Global News suggests the same extended crime network may have laundered about $5-billion in Vancouver-area homes since 2012.

At the centre of the money laundering ring is a powerful China-based gang called the Big Circle Boys. Its top level “kingpins” are the international drug traffickers who are profiting most from Canada’s deadly fentanyl crisis.

The crime network, according to police intelligence sources, is a fluid coalition of hundreds of wealthy criminals in Metro Vancouver, including gangsters, industrialists, financial fugitives and corrupt officials from China.

The report is so full of specific examples of multi-tens of million dollar homes that are actually money laundering conduits for fentanyl drug kingpins that it puts President Trump’s recent accusations against China for fueling the opioid crisis into fresh perspective.

At that time Trump attempted to lay out the case that Chinese suppliers had been fueling America’s opioid crisis, saying in part “It is outrageous that Poisonous Synthetic Heroin Fentanyl comes pouring into the U.S. Postal System from China.”

However judging by breadth and depth of figures merely from one major North American city (some American cities have been named in other investigations), it appears that Trump’s words actually understated the role of China and Chinese organized crime, of which it appears Beijing authorities have long been only too happy to look the other way while it takes deep roots on the American continent. 

After all we can’t imagine China’s all-pervasive advanced surveillance systems and powerful domestic intelligence apparatus could miss this: “Police say that almost every drug seizure they now make in Vancouver turns up some form of synthetic opioid produced at factories in China,” according to the report.

Source: ZeroHedge

***

Fentanyl kings in Canada allegedly linked to powerful Chinese gang, the Big Circle Boys

 

 

U.S. Mint Runs Out Of Silver Eagle Bullion Coins Following Demand Spike

https://www.govmint.com/media/catalog/product/cache/59c770a61d95489145d19fac4c100131/3/1/317101_1.jpg

Recent downturns in gold prices and silver prices have spurred a dramatic increase in both old and new bullion buyers snapping up physical precious metals at perceived low valuations.

For many decades now, the US Mint American Silver Eagle coin has remained the #1 choice for most physical silver bullion buyers worldwide.

In terms of annual sales volumes and total US dollars sold versus other silver bullion government mint and private mint competitors, the 1 oz American Silver Eagle coin is still the most highly purchased form of silver bullion worldwide (find updated US Mint sales data here).

Not surprising, with this recent downturn in precious metal prices, available silver bullion inventories are beginning to sell out and back order.

We foresaw and wrote about this shrinking silver bullion supply situation coming a weeks ago in SD Bullion’s new research blog.

Thus today, the following communication issued by the US Mint’s Branch Chief was not surprising to us:

Date: Wed, 5 Sep 2018

Subject: 2018 American Eagle Silver Bullion Coins Temporarily Sold Out

This is to inform you that due to recent increased demand, the United States Mint has temporarily sold out of its inventories of 2018 American Eagle Silver Bullion Coins.

All orders received prior to this communication shall be honored and settled according to pre-agreed upon value date arrangements.

The United States Mint is in the process of producing additional 2018 American Eagle Silver Bullion Coins. We will make these coins available for sale shortly.

Please let me know if you have any additional questions.

Jack A. Szczerban

Branch Chief, Bullion Directorate

United States Mint

Of course this latest US Mint sell out only pertains to Silver Eagle coins.

US Mint American Gold Eagle coin supplies still stand at reasonable, albeit recently lightened levels.

For seasoned bullion buyers, this latest sell out of US Mint 1 oz American Silver Eagle Coins is not a new phenomenon.

We have seen this happen in various years past, including periods of bullion product rationing, sell outs, etc.

What is different this time around is the low Silver Eagle coin volumes being sold by the US Mint month on month, compared to somewhat recent years of 2009 through 2016.

See below,

https://www.silverdoctors.com/wp-content/uploads/2018/09/US-Mint-silver-eagle-coin-sale-sellout-Silver-Doctors.png

It appears like much of our industry, perhaps the US Mint has cut down on staffing, even silver planchet inventory levels, and other resources required to meet this latest spike in silver bullion product demand.

Typical to past US Mint silver sell outs and coin rationings, product and price premiums usually also increase in order to meet the silver bullion supply demand equilibrium. Smart bullion dealers are not going to sell out of their shrinking inventories without a reasonable profit to match. 

You can see various 1 oz American Silver Eagle coin premium price over spot spikes in the following chart below.

https://www.silverdoctors.com/wp-content/uploads/2018/09/US-Mint-silver-eagle-sellout-coin-premiums-Silver-Doctors.png

The price premiums spike coincide with the fall 2008 fiasco where virtually any and all bullion dealers ran out of bullion inventories, the early 2013 allocation rationing, and the middle 2015 sell out and order shut down.

Historically price premium spikes for American Silver Eagles tend to flow into other silver bullion product premiums. In other words, if the price premiums for Silver Eagles pops higher, you can expect various price increases and sellouts in competing silver bullion products to also ensue.

US Mint American Eagle Bullion Program 2010 Amendment

Yet even most industry onlookers and bullion buyers do not know that a small change to US law was made in 2010. It allows the Secretary of the US Treasury by fiat, and not outright public demand per say, to alone determine what quantities of American Silver Eagle coin supplies are sufficient to meet ongoing demand.

Pre 2010 amendment and law change:

(e)Notwithstanding any other provision of law, the Secretary shall mint and issue, in quantities sufficient to meet public demand,

Post 2010 law change:

(e)Notwithstanding any other provision of law, the Secretary shall mint and issue, in qualities and quantities that the Secretary determines are sufficient to meet public demand,

We do not expect the recent sell out of Silver Eagle coins to the be the highest priority of Secretary of the Treasury at the moment.

Bullion buyers should expect further silver bullion supply constraints both currently and ahead, especially if silver spot prices dip into the $13 or $12 oz zone some respected technical analysts have been calling for weeks / months in advance.

The following US Mint Silver Eagle coin annual sales chart encompassed the entire history of the US Mint American Eagle Bullion Coin Program. As you can see, the 2008 global financial crisis took the program to another level entirely.

https://www.silverdoctors.com/wp-content/uploads/2018/09/US-Mint-Silver-Eagle-sellout-annual-silver-eagle-coin-sales-1986-2018-Silver-Doctors.png

Even 10 years after the greatest financial crisis started, the worst since the 1929 depression, there are still both new and an already established base of silver bullion buyers who continue to aggressively buy silver bullion on spot price dips.

This recent US Mint sell out is just one example of that fact.

The following US Mint tour video was cut in 2014, but it’s still applicable to the way in which the American Silver Eagle coins are produced today. The only real difference is that the US Mint is currently selling less than ½ the volume it was then, yet still having issues meeting demand spikes in the short term.

More than likely the US Mint is currently dealing with a shortfall of silver planchets on hand.

The silver used in the program does not have to be mined in the USA as that law too was amended many years back. The US Mint does use silver coin planchet suppliers from Australia as well as domestic suppliers like the Sunshine Mint.

In terms of silver bullion on hand, don’t expect the Secretary of the US Treasury to have any available as they rely on private silver planchet suppliers and ‘just in time’ delivery for their program.

As most bullion buyers know, en masse the US government figuratively sold silver out in 1964.

The fact that the US government’s often clunky silver bullion coin program remains the largest in the world, illustrates just how tiny the silver bullion industry remains in the grand scope of global finance and economic financialization.

Sneaky law amendments aside, it does not take much silver bullion demand to break the industry’s small supply demand equilibrium.

Source: by James Anderson | SilverDoctors.com

 

Disaster Is Inevitable When America’s Stock Market Bubble Bursts – Smart Money Is Focused On Trade

(Forbes) Despite the volatility and brief correction earlier this year, the U.S. stock market is back to making record highs in the past couple weeks. To many observers, this market now seems downright bulletproof as it keeps going higher and higher as it has for nearly a decade in direct defiance of the naysayers’ warnings. Unfortunately, this unusual market strength is not evidence of a strong, organic economy, but of an extremely unhealthy, artificial bubble economy that will end in a crisis that will be even worse than we experienced in 2008. In this report, I will show a wide variety of charts that prove how unsustainable the current bull market is.

Since the Great Recession low in March 2009, the S&P 500 stock index has gained over 300%, taking it nearly 80% higher than its 2007 peak:

https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fjessecolombo%2Ffiles%2F2018%2F08%2Fsp500-2-3.jpg

The small cap Russell 2000 index and the tech-heavy Nasdaq Composite Index are up even more than the S&P 500 since 2009 – nearly 400% and 500% respectively:

https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fjessecolombo%2Ffiles%2F2018%2F08%2Fpercentincrease-1.jpg

The reason for America’s stock market and economic bubbles is quite simple: ultra-cheap credit/ultra-low interest rates. As I explained in a Forbes piece last week, ultra-low interest rates help to create bubbles in the following ways:

  • Investors can borrow cheaply to speculate in assets (ex: cheap mortgages for property speculation and low margin costs for trading stocks)
  • By making it cheaper to borrow to conduct share buybacks, dividend increases, and mergers & acquisitions
  • By discouraging the holding of cash in the bank versus speculating in riskier asset markets
  • By encouraging higher rates of inflation, which helps to support assets like stocks and real estate
  • By encouraging more borrowing by consumers, businesses, and governments

The chart below shows how U.S. interest rates (the Fed Funds Rate, 10-Year Treasury yields, and Aaa corporate bond yields) have remained at record low levels for a record period of time since the Great Recession:

https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fjessecolombo%2Ffiles%2F2018%2F08%2FUSRates-2.jpg

U.S. monetary policy has been incredibly loose since the Great Recession, which can be seen in the chart of real interest rates (the Fed Funds Rate minus the inflation rate). The mid-2000s housing bubble and the current “Everything Bubble” both formed during periods of negative real interest rates. (Note: “Everything Bubble” is a term that I’ve coined to describe a dangerous bubble that has been inflating in a wide variety of countries, industries, and assets – please visit my website to learn more.)

https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fjessecolombo%2Ffiles%2F2018%2F08%2FRealFedFundsRate.jpg

The Taylor Rule is a model created by economist John Taylor to help estimate the best level for central bank-set interest rates such as the Fed Funds Rate. If the Fed Funds Rate is much lower than the Taylor Rule model (this signifies loose monetary conditions), there is a high risk of inflation and the formation of bubbles. If the Fed Funds Rate is much higher than the Taylor Rule model, however, there is a risk that tight monetary policy will stifle the economy.

Comparing the Fed Funds Rate to the Taylor Rule model is helpful for visually gauging how loose or tight U.S. monetary conditions are:

https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fjessecolombo%2Ffiles%2F2018%2F08%2FTaylorRule1-1.jpg

Subtracting the Taylor Rule model from the Fed Funds Rate quantifies how loose (when the difference is negative), tight (when the difference is positive), or neutral U.S. monetary policy is:

https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fjessecolombo%2Ffiles%2F2018%2F08%2FTaylorRule2-1-1.jpg

Low interest rates/low bond yields have enabled a corporate borrowing spree in which total outstanding non-financial U.S. corporate debt surged by over $2.5 trillion, or 40% from its peak in 2008. The recent borrowing boom caused total outstanding U.S. corporate debt to rise to over 45% of GDP, which is even worse than the level reached during the past several credit cycles. (Read my recent U.S. corporate debt bubble report to learn more).

U.S. corporations have been using much of their borrowed capital to buy back their own stock, increase dividends, and fund mergers and acquisitions – activities that are known for boosting stock prices and executive bonuses. Unfortunately, U.S. corporations have been focusing on these activities that reward shareholders in the short-term, while neglecting longer-term business investments – hubristic behavior that is typical during a bubble. The chart below shows how share buybacks and dividends paid increased dramatically since 2009:

https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fjessecolombo%2Ffiles%2F2018%2F08%2Fbuybacks-1.jpg

Another Federal Reserve policy (aside from the ultra-low Fed Funds Rate) has helped to inflate the U.S. stock market bubble since 2009: quantitative easing or QE. When executing QE policy, the Federal Reserve creates new money “out of thin air” (in digital form) and uses it to buy Treasury bonds or other assets, which pumps liquidity into the financial system. QE helps to push bond prices higher and bond yields/interest rates lower throughout the economy. QE has another indirect effect: it causes stock prices to surge (because low rates boost stocks), as the chart below shows:

https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fjessecolombo%2Ffiles%2F2018%2F08%2FFedBalanceSheetvsSP500-2.jpg

As touched upon earlier, low interest rates encourage stock speculators to borrow money from their brokers in the form of margin loans. These speculators then ride the bull market higher while letting the leverage from the margin loans boost their returns. This strategy can be highly profitable – until the market turns and amplifies their losses, that is.

There is a general tendency for speculators to use margin most aggressively just before the market’s peak, and the current bull market/bubble appears to be no exception. During the dot-com bubble and housing bubble stock market cycles, margin debt peaked at roughly 2.75% of GDP. In the current stock market bubble, however, margin debt is nearly at 3% of GDP, which is quite concerning. The heavy use of margin at the end of a long bull market exacerbates the eventual downturn because traders are forced to sell their shares to avoid or satisfy margin calls.

https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fjessecolombo%2Ffiles%2F2018%2F08%2FSP500vsMarginGDP.jpg

In the latter days of a bull market or bubble, retail investors are typically the most aggressively positioned in stocks. Sadly, these small investors tend to be wrong at the most important market turning points. Retail investors currently have the highest allocation to stocks (blue line) and the lowest cash holdings (orange line) since the Dot-com bubble, which is a worrisome sign. These same investors were the most cautious in 2002/2003 and 2009, which was the start of two powerful bull markets.

https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fjessecolombo%2Ffiles%2F2018%2F08%2Fallocation.jpg

The chart below shows the CBOE Volatility Index (VIX), which is considered to be a “fear gauge” of U.S. stock investors. The VIX stayed very low during the housing bubble era and it has been acting similarly for the past eight years as the “Everything Bubble” inflated. During both bubbles, the VIX stayed low because the Fed backstopped the financial markets and economy with its aggressive monetary policies (this is known as the “Fed Put“).

https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fjessecolombo%2Ffiles%2F2018%2F08%2FVIX-1.jpg

The next chart shows the St. Louis Fed Financial Stress Index, which is a barometer for the level of stress in the U.S. financial system. It goes without saying that less stress is better, but only to a point – when the index remains at extremely low levels due to the backstopping of the financial markets by the Fed, it can be indicative of the formation of a dangerous bubble. Ironically, when that bubble bursts, financial stress spikes. Periods of very low financial stress foreshadow periods of very high financial stress – the calm before the financial storm, basically. The Financial Stress Index remained at extremely low levels during the housing bubble era and is following the same pattern during the “Everything Bubble.”

https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fjessecolombo%2Ffiles%2F2018%2F08%2Ffinancialstress-1.jpg

High-yield (or “junk”) bond spreads are another barometer of investor fear or complacency. When high-yield bond spreads stay at very low levels in a central bank-manipulated environment like ours, it often indicates that a dangerous bubble is forming (it indicates complacency). The high-yield spread was unusually low during the dot-com bubble and housing bubble, and is following the same pattern during the current “Everything Bubble.”

https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fjessecolombo%2Ffiles%2F2018%2F08%2FJunkSpread.jpg

In a bubble, the stock market becomes overpriced relative to its underlying fundamentals such as earnings, revenues, assets, book value, etc. The current bubble cycle is no different: the U.S. stock market is as overvalued as it was at major generational peaks. According to the cyclically-adjusted price-to-earnings ratio (a smoothed price-to-earnings ratio), the U.S. stock market is more overvalued than it was in 1929, right before the stock market crash and Great Depression:

https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fjessecolombo%2Ffiles%2F2018%2F08%2FCAPE-3-2.jpg

Tobin’s Q ratio (the total U.S. stock market value divided by the total replacement cost of assets) is another broad market valuation measure that confirms that the stock market is overvalued like it was at prior generational peaks:

https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fjessecolombo%2Ffiles%2F2018%2F08%2FTobinsQRatio-1.jpg

The fact that the S&P 500’s dividend yield is at such low levels is more evidence that the market is overvalued (high market valuations lead to low dividend yields and vice versa). Though dividend payout ratios have been declining over time in addition, that is certainly not the only reason why dividend yields are so low, contrary to popular belief. Extremely high market valuations are the other rarely discussed reason why yields are so low.

https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fjessecolombo%2Ffiles%2F2018%2F08%2FDividend-1.jpg

The chart below shows U.S. after tax corporate profits as a percentage of the gross national product (GNP), which is a measure of how profitable American corporations are. Thanks to ultra-cheap credit, asset bubbles, and financial engineering, U.S. corporations have been much more profitable since the early-2000s than they have been for most of the 20th century (9% vs. the 6.6% average since 1947).

Unfortunately, U.S. corporate profitability is likely to revert to the mean because unusually high corporate profit margins are typically unsustainable, as economist Milton Friedman explained. The eventual mean reversion of U.S. corporate profitability will hurt the earnings of public corporations, which is very worrisome considering how overpriced stocks are relative to earnings.

https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fblogs-images.forbes.com%2Fjessecolombo%2Ffiles%2F2018%2F08%2FProfitMargins.jpg

During stock market bubbles, the overall market tends to be led by a smaller group of high-performing “story stocks” that capture the investing public’s attention, make early investors rich, and light the fires of greed and envy in practically everyone else. During the late-1990s dot-com bubble, the “story stocks” were tech stocks like Amazon.com, Intel, Cisco, eBay, etc. During the housing bubble era, it was home builder stocks like Hovanian, D.R. Horton, Lennar, mortgage lenders, and alternative energy companies like First Solar, to name a few examples.

In the current stock market bubble, the market is being led by a group of stocks nicknamed FAANG, which is an acronym for Facebook, Apple, Amazon, Netflix, and Google (now known as Alphabet Inc.). The chart below compares the performance of the FAANG stocks to the S&P 500 during the bull market that began in March 2009. Though the S&P 500 has risen over 300%, the FAANGs put the broad market index to shame: Apple is up over 1,000%, Amazon has surged more than 2,000%, and Netflix has rocketed over 6,000%.

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After so many years of strong and consistent performance, many investors now view the FAANGs as “can’t lose” stocks that will keep going “up, up, up!” as a function of time. Unfortunately, this is a dangerous line of thinking that has ruined countless investors in prior bubbles. Today’s FAANG phenomenon is very similar to the Nifty Fifty group of high-performing blue-chip stocks during the 1960s and early-1970s bull market. The Nifty Fifty were seen as “one decision” stocks (the only decision necessary was to buy) because investors thought they would keep rising virtually forever.

Investors tend to become most bullish and heavily invested in leading stocks such as the FAANGs or Nifty Fifty right before the market cycle turns. When the leading stocks finally fall during a bear market, they usually fall very hard, as Nifty Fifty investors experienced in the 1973-1974 bear market. The eventual unwinding of the FAANG stock boom/bubble is going to burn many investors, including institutional investors who have gorged on these stocks in recent years. 

How The Stock Market Bubble Will Pop

To keep it simple, the current U.S. stock market bubble will pop due to the ending of the conditions that created it in the first place: cheap credit/loose monetary conditions. The Federal Reserve inflated the stock market bubble via its record low Fed Funds Rate and quantitative easing programs, and the central bank is now raising interest rates and reversing its QE programs by shrinking its balance sheet. What the Fed giveth, the Fed taketh away.

The Fed claims to be able to engineer a “soft landing,” but that virtually never happens in reality. It’s even less likely to happen in this current bubble cycle because of how long it has gone on and how distorted the financial markets and economy have become due to ultra-cheap credit conditions.

I’m from the same school of thought as billionaire fund manager Jeff Gundlach, who believes that the Fed will keep hiking interest rates until “something breaks.” In the last economic cycle from roughly 2002 to 2007, it was the subprime mortgage industry that broke first, and in the current cycle, I believe that corporate bonds are likely to break first, which would then spill over into the U.S. stock market (please read my corporate debt bubble report in Forbes to learn more).

The Fed Funds Rate chart below shows how the last two recessions and bubble bursts occurred after rate hike cycles; a repeat performance is likely once rates are hiked high enough. Because of the record debt burden in the U.S., interest rates do not have to rise nearly as high as in prior cycles to cause a recession or financial crisis this time around. In addition to raising interest rates, the Fed is now conducting its quantitative tightening (QT) policy that shrinks its balance sheet by $40 billion per month, which will eventually contribute to the popping of the stock market bubble.

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The 10-Year/2-Year U.S. Treasury bond spread is a helpful tool for determining how close a recession likely is. This spread is an extremely accurate indicator, having warned about every U.S. recession in the past half-century, including the Great Recession. When the spread is between 0% and 1%, it is in the “recession warning zone” because it signifies that the economic cycle is maturing and that a recession is likely just a few years away. When the spread drops below 0% (this is known as an inverted yield curve), a recession is likely to occur within the next year or so. 

As the chart below shows, the 10-Year/2-Year U.S. Treasury bond spread is already deep into the “Warning Zone” and heading toward the “Recession Zone” at an alarming rate – not exactly a comforting thought considering how overvalued and inflated the U.S. stock market is, not to mention how indebted the U.S. economy is.

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Although I err conservative/libertarian politically, I do not believe that President Trump can prevent the ultimate popping of the U.S. stock market bubble and “Everything Bubble.” One of the reasons why is that this bubble is truly global and the U.S. President has no control over the economies of China, Australia, Canada, etc. The popping of a massive global bubble outside of the U.S. is enough to create a bear market and recession within the U.S.

Also, as the charts in this report show, our stock market bubble was inflating years before Trump became president. I believe that this bubble was slated to crash to regardless of who became president – it could have been Hillary Clinton, Bernie Sanders, or Marco Rubio. Even Donald Trump called the stock market a “big, fat, ugly bubble” right before the election. Concerningly, even though the stock market bubble is approximately 30% larger than when Trump warned about it, Trump is no longer calling it a “bubble,” and is actually praising it each time it hits another record.

Many optimists expect President Trump’s tax reform plan to result in a powerful boom that creates millions of new jobs and supercharges economic growth, which would help the stock market grow into its lofty valuations. Unfortunately, this thinking is not grounded in reality or math. As my boss Lance Roberts explained, “there will be no economic boom” (Part 1Part 2) because our economy is too debt-laden to grow the way it did back in the 1980s during the Reagan Boom or at other times during the 20th century.

As shown in this report, the U.S. stock market is currently trading at extremely precarious levels and it won’t take much to topple the whole house of cards. Once again, the Federal Reserve, which was responsible for creating the disastrous Dot-com bubble and housing bubble, has inflated yet another extremely dangerous bubble in its attempt to force the economy to grow after the Great Recession. History has proven time and time again that market meddling by central banks leads to massive market distortions and eventual crises. As a society, we have not learned the lessons that we were supposed to learn from 1999 and 2008, therefore we are doomed to repeat them.

The purpose of this report is to warn society of the path that we are on and the risks that we are facing. I am not necessarily calling the market’s top right here and right now. I am fully aware that this stock market bubble can continue inflating to even more extreme heights before it pops. I warn about bubbles as an activist, but I approach tactical investing in a slightly different manner (because shorting or selling too early leads to under performance, etc.). As a professional investor, I believe in following the market’s trend instead of fighting it – even if I’m skeptical of the underlying forces that are driving it. Of course, when that trend fundamentally changes, that’s when I believe in shifting to an even more cautious and conservative stance for our clients and myself.

Source: by Jesse Colombo | Forbes

Learn about Trumps latest moves on trade negotiations with Canada and Mexico…

Starter Homes Are Most Expensive Since Just Before The Last Housing Crash

There is a simple reason why the US housing market is headed for its “broadest slowdown in years“: prices for housing are just too high, a new report suggests. Which is odd considering the conventionally accepted narrative that “rising prices are better for everybody.”

According to a new report from the National Association of Realtors, prices for starter homes are the highest they have been since 2008, just prior to the collapse of the housing market, and when Ben Bernanke infamously said that there is no housing bubble and that “we’ve never had a decline in house prices on a nationwide basis” and therefore we’ll never have one. The housing market suffered its worst crash on record shortly after.

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In the second quarter, first time buyers needed 23% of their income in order to afford a typical entry-level home; this was up from 21% in the year prior, and the highest in the past decade.

This, of course, should surprise nobody as price gains in the housing market have long outpaced wages; in fact in most markets the average home price increase is double the growth in hourly earnings.

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Now, with the housing market starting to show signs of cooling off, those bearing the brunt of the increases are buyers at the low-end of the market and in areas where supplies are the tightest. This has probably not been helped along by the volatile cost of commodities like lumber which have been impacted by Canadian tariffs, among others.

On top of that, rising interest rates are making mortgage prohibitively expensive for a broad section of the population.

“When prices go up at the entry level, that’s where the affordability issue is most acute,” Wells Fargo economist Charles Dougherty told Bloomberg. “People are hesitant to stretch the amount they’re willing to pay.”

The most expensive markets in the United States were San Francisco and New York City, where Bloomberg reported that the median household needed 65% of its income to buy a house in the second quarter of this year. Similar statistics followed in Los Angeles and Miami, where those numbers were 59% and 55%, respectively.

Perhaps a better way of saying this is that no mere mortal can actually afford to buy there, and the only buyers are members of the 0.01% or those who have an extremely generous mortgage lender.

None of this housing information is discussed at length by the FOMC or the government, which find no problem with a near record number of people getting priced out of the market. Nobody will be surprised when, as prices continue to rise, we are “surprised” by the next housing crisis.

This news comes just days after we reported layoffs taking place at Wells Fargo as a result of the slumping housing market and slower mortgage applications, as a result of collapsing mortgage loan demand. Last Friday, Wells Fargo announced it was cutting 638 mortgage employees as the nation’s largest home lender is hit by a crippling slowdown in the business.

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“After carefully evaluating market conditions and consumer needs, we are reducing to better align with current volumes,” Wells Fargo spokesman Tom Goyda said in an emailed statement according to Bloomberg.

As we reported back in March that the “Bank Sector Is In Peril As Refi Activity Crashes Amid Rising Rates” and as interest rates have continued to rise, Wells Fargo has been contending with the end of a refinancing boom that helped push profits to a record.

Source: ZeroHedge

Kushner Family Sells 666 Fifth Avenue Office Tower To Brookfield

Brookfield Asset Management has agreed to purchase the lease the office portion of 666 Fifth Ave. in midtown Manhattan from the Kushner family, the WSJ reported.

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“Given Brookfield’s experience in successfully redeveloping and repositioning major office assets in New York and other cities around the world, we are well placed to capitalize on that opportunity,” Ric Clark, Brookfield Property Group’s chairman, said in a statement.

The infamous “devil” tower with the “666” sign on the entrance, has been under scrutiny because Jared Kushner is married to Ivanka Trump, and is a senior adviser to the president. When the Kushner Cos acquired the building in 2007 for $1.8 billion, it represented a New York commercial real estate record and was made when Kushner was taking a leadership role in the business. It remained precarious for years, and potential deals became complicated after Mr. Kushner took the senior White House job.

While terms of the deal weren’t disclosed in a statement Friday, the WSJ notes that the proceeds would give the family enough to pay off the more than $1.1 billion of debt on the building and buy out its partner, Vornado Realty Trust, for $120 million so it can transfer 666 Fifth to Brookfield unencumbered.

The sale means that the Kushner family likely won’t make any money on its investment in 666 Fifth Ave.

In recent years, the building hasn’t been generating enough money to pay its debt service. Jared Kushner had already sold his stake in 666 Fifth to a trust controlled by other family members to avoid potential conflicts. Still, the talks between Anbang and his father ignited criticism that Kushner might use his position to help his family salvage its investment.

Brookfield, which is buying the property through one of its private-equity funds, also plans to invest more than $600 million in overhauling the 39-story building, giving it a new lobby, façade and mechanical systems, according to a person familiar with the matter.

The building has seen its rental payments suffer in recent years due to a relatively high vacancy rate but is viewed in real-estate circles as having potential due to its prime location on Fifth Avenue between 52nd and 53rd Streets.

The structure of the deal is different from what Brookfield and Kushner Cos. discussed in the spring. Back then, Brookfield was considering a deal in which it would essentially acquire Vornado’s 49.5% stake in the property and become partners with the Kushner family.

One of the uncertainties about the Brookfield purchase of the 99-year lease is how much of the current debt on the building is going to be repaid. In the 2011 restructuring, the debt was carved into two pieces—a senior piece and a junior piece. The senior piece is worth $1.1 billion and the junior piece has increased since 2011 to over $300 million, because interest on it has been accruing.

Kushner executives have been arguing that only the senior debt on the building has to be repaid, partly because 666 Fifth isn’t worth the total $1.4 billion of debt on the building.

The recent history of the building is remarkable.

The property has taken numerous twists, both financial and political. Kushner Cos. sold a controlling stake in the retail space for more than $500 million a few years after it purchased the tower in 2007, using most of the proceeds to repay debt.

But that wasn’t enough to shore up the property in the post-crash years. In 2011, Kushner Cos. renegotiated what was then $1.2 billion in debt and brought in Vornado as a 49.5% partner.

In 2017, soon after Mr. Trump took office, Mr. Kushner’s father, Charles Kushner, was negotiating with Anbang Insurance Group, a Chinese insurer with connections to Beijing government. The elder Mr. Kushner’s plan at the time was to use Anbang’s capital in a $7.5 billion plan to convert 666 Fifth Ave. into a 1,400-foot-tall mixed use skyscraper with retail, hotel and condominiums.

Soon after, the Anbang talks soon collapsed. Since then, Kushner Cos. has steered clear of any deals with sovereign funds, a decision which has made the firm rein in its ambitious plans for the site. The family also faced a deadline: the debt on the building needs to be repaid next year.

And thanks to Brookfield, that will no longer be Jared’s problem any more.

Source: ZeroHedge

The Exorbitant Cost Of Getting Ahead In Life

Some 84 percent of Americans claim that a higher education is a very or extremely important factor for getting ahead in life, according to the National Center for public policy and Higher Education.

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So, it’s worth the exorbitant cost, but not everyone can pay, and outsized costs in the U.S. are giving much of the rest of the developed world the higher education advantage.

According to the U.S. Bureau of Labor Statistics (BLS), people with a Bachelor’s Degree earn around 64 percent more per week than those with a high school diploma, and around 40 percent more than those with an Associate’s Degree. In turn, those with an Associate’s degree earn around 17 percent more than those with a high school diploma.

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The Federal Reserve Bank of New York says that college graduates overall earn 80 percent more than those without a degree.

There’s also job security to consider.

Individuals with college degrees have a lower average unemployment rates than those with only high school educations. Among people aged 25 and over, the lowest unemployment rates occur in those with the highest degrees.

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From this perspective, it’s no surprise that students are willing to bite the bullet and take on a ton of debt to finance education.

About three-fourths of students who attend four-year colleges graduate with loan debt. And this number is up from about half of students three decades ago.

The average student loan debt for Class of 2017 graduates was $39,400, up 6 percent from the previous year. Over 44 million Americans now hold over $1.5 trillion in student loan debt, according to Student Loan Hero.

According to College Board, the average cost of tuition and fees for the 2017–2018 school year was $34,740 at private colleges, $9,970 for state residents at public colleges, and $25,620 for out-of-state residents attending public universities.

The U.S. is one of the most expensive places to go obtain a higher education, but there are pricier venues, too.

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If you want a free higher education, try Europe—specifically Germany and Sweden. Denmark, too, doles out an allowance of about $900 a month to students to cover their living expenses. But don’t try to study in the UK on the cheap. The UK is the most expensive country in Europe, with college tuition coming in at an average of $12,414.

In Australia, graduates don’t pay anything on their loans until they earn about $40,000 a year, and then they only pay between 4 percent and 8 percent of their income, which is automatically deducted from their bank accounts, reducing the chances of default.

For Japan—a country that sees more than half of its population go to college—the highly respected University of Tokyo only costs about $4,700 a year for undergraduates, thanks to government subsidies. The Japanese government spends almost $8,750 a year per student because it sees the massive value in having a highly educated citizenry.

For Americans, while student loans may still be a good investment overall, the idea of taking a lifetime to pay off the debt may become increasingly unattractive. And it’s only going to get worse, according to JPMorgan, which predicts that by 2035 the cost of attending a four-year private college will top $487,000.

Source: ZeroHedge

Bank of America Contributed To $102 Million Ponzi Scheme: lawsuit

Plaintiffs charged that BofA lent the scheme an air of legitimacy and provided critical support

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Bank of America Corp. was accused in a lawsuit of providing more than 100 accounts used to perpetrate what the U.S. regulators called a $102 million Ponzi scheme.

The class-action suit filed on behalf of people who lost money follows a complaint last week by the Securities and Exchange Commission alleging that five men and three companies defrauded more than 600 investors.

One of the alleged ringleaders once commissioned a song about himself for a party in Las Vegas with lyrics celebrating his $10,000 suits and his partner’s affinity for champagne, according to Monday’s complaint in federal court in Ocala, Florida.

The brother and sister who sued to recover losses from their late father’s investment claim the fraudsters “could not have perpetuated their scheme without the knowing assistance of their primary banking institution, Bank of America, which lent the scheme an air of legitimacy and provided critical support, including at times when the scheme would have otherwise collapsed,” according to the complaint.

Bank of America spokesman Bill Halldin had no immediate comment on the suit.

The lender is accused of failing to spot suspicious activity, including deposits of hundreds of thousands of dollars into accounts with relatively small, negative or nonexistent balances, followed by transfers within the same week to other accounts or investors seeking to cash out.

The architects of the scheme promised they would put investor funds into profitable and perhaps dividend-paying companies, according to the SEC. But they spent $20 million from the investment pool to enrich themselves, made $38.5 million in “Ponzi-like payments” and transferred much of the rest away from the companies that were supposed to receive the money, the regulator said.

Source: Investment News

Soros Backs Personal Injury Lawsuits in Market With 20% Returns

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(Bloomberg) — The billionaire George Soros has found a new way to make money from personal-injury lawsuits.

Soros Fund Management is pushing into a branch of litigation finance that few hedge funds have entered. His family office is bankrolling a company that’s creating investment portfolios out of lawsuits, according to a May regulatory filing.

The development is the latest twist on the litigation funding market, which has drawn criticism for monetizing and encouraging the lawsuit culture in the U.S. The firm Soros is backing, Mighty Group, bundles cash advances that small shops extend to plaintiffs in personal injury suits in return for a cut of future settlements. Mighty Group’s approach opens the door to another potential development: securitizing individual lawsuit bets for sale to other investors.

“There are all the ingredients there to securitize these things,” said Adrian Chopin, a managing director at legal finance firm Bench Walk Advisors. “A diversified, granular pool with predictable outcomes. The problem is, you can’t yet get these things rated” by credit agencies.

20% Returns

Wall Street has been betting for a while on commercial litigation, which provides financing of big corporate suits with millions or even billions of dollars at stake. Soros is focused on the consumer side, where plaintiffs receive advances of $2,000 on average for legal claims typically tied to auto and construction accidents. The advances are used to cover personal expenses, such as medical bills and rent.

Soros along with Apollo Capital Management are among the first money managers to jump into this niche of the lawsuit-funding market. It offers steady and predictable returns, which historically have averaged about 20 percent a year at relatively low risk, said Chopin of Bench Walk.

“Everybody is looking for yield, and people are also looking for assets that are not correlated with the major equity and debt markets,” said Christopher Gillock, a managing director at Colonnade Advisors, an investment bank that specializes in financial services. “Litigation funding falls into that category.”

Joshua Schwadron, a co-founder of Mighty, declined to comment on the firm’s investors. Michael Vachon, a spokesman for Soros Fund Management, the billionaire’s New York-based family office, declined to comment.

Political Risk

The investments come with risk from both sides of the political spectrum. The U.S. Chamber of Commerce and the insurance industry criticize litigation financing for clogging the courts with frivolous lawsuits and driving up the costs of settlements. Regulators, on the other hand, have taken the side of consumers, moving to rein in the advances, casting them as loans subject to usury laws.

Industry proponents say the funding helps people win appropriate payouts instead of settling for pennies on the dollar under the pressure of medical bills or missed income from work. In addition, plaintiffs don’t have to pay back the advances if they lose their cases.

“These funding companies are allowing the folks who are injured through some accident to be able to stick around long enough to get paid,” said Joel Magerman, chief executive officer of Bryant Park Capital, an investment bank.

The funding companies don’t always get fully paid since other claims on settlements, such as attorney fees, have priority. This risk of underpayment makes advances difficult to bundle into securities, said Eric Schuller, president of the Alliance for Responsible Consumer Legal Funding, an industry trade group. In contrast to advances, most securitizations are backed by tangible items like a home or car.

“If the case goes south, there is nothing there to go after,” Schuller said. “It’s just a piece of paper.”

Apollo’s Investment

Mighty, originally a software provider, announced in March it had raised more than $100 million from major institutional investors to help litigation finance firms access capital. The May filing shows that a Soros affiliate agreed to provide Mighty with financing, which can also be used to back lawyers’ contingency fees and medical bills slated to be paid when cases settle.

Soros’s move into consumer legal funding is somewhat akin to another investment his family office made last year. It participated in a joint deal to buy as much as $5 billion of loans from Prosper Marketplace, a pioneer in peer-to-peer lending.

Although this form of litigation financing dates back to the mid-1990s, hedge funds had mostly steered clear because the advances and firms that issued them are so small. Only the largest players have been able to obtain financing from big investment firms. For example Leon Black’s Apollo Capital, through its MidCap Financial affiliate, backs Golden Pear Funding of New York, one of the biggest providers of advances.

Magerman anticipates that more investors will jump in the market. “It’s a small niche asset class,” he said. “There is a lot of additional money that can come in.”

***

Here’s your need to know about George Soros…

Host

You’re a Hungarian Jew who escaped the holocaust by posing as a Christian.

Soros

Right.

Host

And you watched lots of people get shipped off to the death camps?

Soros

Right, I was 14 years old and I would say that’s when my character was made.

Host

In what way?

Soros

That one should understand and anticipate events… It was a tremendous threat of evil. It was a very personal experience of evil.

Host

My understanding is that you went out with this “protector” of yours who swore that you were his adopted godson.

Soros

Yes.

Host

… went out, in fact, and helped in the confiscation of property of the Jews.

Soros

That’s right. Yes.

Host

That sounds like an experience that would send lots of people to the psychiatric couch for many, many years. Was it difficult??

Soros

Uh. Not at all, not at all. Maybe as a child you don’t see the connection but it created no problem at all.

Host

No feeling of guilt?

Soros

No.

Host

For example, “I’m Jewish and here I am watching these people go. I could just as easily be there. I should be there.” None of that?

Soros

Well. Of course I could be on the other side. I could be the one from whom the thing is being taken away, uh, but there was no sense I shouldn’t be there because there was – Well, actually, (in a) funny way it’s just like in markets that if I weren’t there (of course I wasn’t doing it) somebody else would be taking it away anyhow. Whether I was there or not (I was only a spectator) the property was being taken away. So – I had no role in taking away that property so I had no sense of guilt.

Host

Are you religious?

Soros

No.

Host

Do you believe in God?

Soros

No.

Source: By Miles Weiss | Bloomberg

 

“By Securing The Border, Trump Is Threatening Money-Flow For Lots Of Connected Interests”

President Trump doubled-down on his plan for “immediate” deportation of illegal immigrants this morning, explaining in a tweet that “hiring many thousands of judges, and going through a long and complicated legal process, is not the way to go,” adding that this deterrence approach “is the way to go to stop illegal immigration in its tracks.”

But, as NBC News reports, that hasn’t stopped civil rights attorneys from flocking to the Texas border to ‘protect’ the rights of illegal immigrant parents not to be separated from their children – the exact same policy that is utilized on American parents when they commit a crime with children in tow.

Attorneys have become a lifeline for migrants in detention, responding as would clergy to a disaster or tragedy, as the legal labyrinth of immigration has become more complicated.

Although many are accustomed to the immigration system’s complexities, attorneys are finding the situation created by the Trump “zero-tolerance” prosecutions full of never-before-seen hurdles and restrictions that hamper their access to children and parents and are making their work to ensure those with valid asylum and other claims get to stay more difficult.

Ali Rahnama, an immigration attorney from Washington, D.C. who works on public policy and high impact litigation, said he woke up last Monday and felt he needed to be on the border. He found a private donor to pay for him and a few colleagues to fly to the border.

Another attorney, Sirine Sheboya, is choking back emotion over the lengths mothers and fathers are going to be reunited with their children.

“We have people in there who are considering not continuing on with really strong asylum claims,” she said stopping to catch her breath as the emotion breaks through, “because they think that maybe they will get reunified with their kids faster if they give up their claim. That’s just wrong.

“We have men and women saying, ‘My 5- and 6-year-old was holding my leg and was taken away,'” said Rahnama, who visited parents and guardians being held in the Port Isabel Detention Center. “They go to court and are told their child will be there when they come back and they come back and there is no child,” he said.

Of course, it’s not just attorneys, Democratic politicians are descending for their moment of social justice and never-Trump warrior glory.

Sen. Elizabeth Warren, D-Mass., spent 2½ hours in the Port Isabel Detention Center on Sunday night. After the visit, she told reporters stationed outside the center that officials of Immigration and Customs Enforcement told her that the center isn’t where parents and children will come together as federal officials have said.

“The [immigration] officials made clear this is not a reunification center. There will be no children brought here. There will be no families brought together in this place,” Warren said. “All that’s happening here is the detention of mothers and fathers who lost their children.”

Warren said she spoke to nine mothers and none the whereabouts of their children or had spoken to them.

“They are crying they are weeping,” she said. “They have said they will do anything … just, please, let them have their babies back.”

One quick question to Ms.Warren – what would you do with the children of an American parent, who took his children along with him as he committed a crime? Do they deserve better or worse treatment under the law than an illegal immigrant – who crosses the border not at a port of entry and then proclaims they are seeking asylum?

NBC News reports that DHS said late Saturday that some of the more than 2,000 children – about 522 – have been reunited with parents. Officials said Port Isabel would be its reunification center.

Sometimes it’s not just children who attorneys have to locate, but some of the parents as well. Efrén Olivares of the Texas Civil Rights Project can no longer find three clients who were part of a group of five parents who complained in a petition filed with the Inter-American Human Rights Commission, part of the Organization of American States, about the child separations.

They were either released to the U.S. with notice to appear (at a court at a later date) or were deported. We are looking diligently to contact them. We gave them a number and asked them to contact us if they were released,” Olivares said.

“We have not heard from them.”

Surprise!

Here is immigration expert Steve Cortes corrected host Fredricka Whitfield on the reality of family separation at the U.S. southern border during CNN’s Newsroom Sunday (via The Daily Caller)…

The U.S. Border Patrol does not separate immigrant families who claim asylum if they appear at a legal point of entry to the U.S., Cortes, the former head of President Donald Trump’s Hispanic Advisory Council, said.

Until recently, only the families that tried to come into the country outside a point of entry – making them illegal immigrants – were separated.

Trump issued an executive order Wednesday that directed the Border Patrol to detain illegal immigrant families together and to begin reuniting children with their detained parents.

Whitfield asked Cortes how he thought Trump’s plan to reunite “immigrant families” would work out.

“Look, it will be a difficult process, but here’s the thing. The best way for — when you say immigrant families, by the way, it’s important to say illegal immigrant families,” Cortes responded, pointing out the omission. “That’s a very, very important adjective to add in there. Immigrant families have never been separated.”

“Illegal immigrant families have been separated, and I would say separated for a very good reason,” Cotez continued. “Why? Because their parents, unfortunately, or guardians … decided to commit a crime with children in tow. Much like an American committing a crime with children in tow, you get separated from you children. And that’s a terrible consequence for the kids.”

Whitfield defended her characterization of immigrants crossing the border illegally, pointing out that many were crossing the border seeking asylum.

“If you show up to a port of entry in the United States with your children and request asylum lawfully, you are not separated from your family,” Cortes shot back, referring to the difference between applying for affirmative and defensive asylum.

Affirmative asylum applies to immigrants entering the U.S. at a port of entry, or immigrants who apply within a year of entering the U.S., whether or not their entry was legal. Immigrants entering the country illegally can apply for defensive asylum while they are being processed for deportation.

“It’s not [legal]. You have to come to a check point, raise your hand and say, ‘I’m here for asylum,’” Cortes said.

“You can’t sneak across the border and then say, once you’re caught, ‘Oh, I meant to apply for asylum. That’s just not correct.”

Finally, we note another of President Trump’s tweets this morning that sums the state of America and its media up very well…

And while we are well aware that comprehending the facts behind this sudden maelstrom of migrant misery headlines, here is the reality of how this all started courtesy of ‘The Last Refuge’ excellent twitter thread

1. Once you see the strings on the marionettes you can never watch the pantomime the same way you did before you noticed them.

https://www.zerohedge.com/sites/default/files/inline-images/DgfAj4PVMAAiSPS.jpg?itok=ZSYEMgF9

2. DATELINE – May 2011 – President Obama travels to the Rio Grande sector of the border to push for his immigration platform (ie. Amnesty). He proclaims the border is safe and secure and famously attacks his opposition for wanting an “alligator moat”.

3. November 2012 – Election year campaign(s). Using wedge issues like “War on Women”, and “Immigration / Amnesty”, candidate Obama promises to push congress for “amnesty”, under the guise of “Comprehensive Immigration Reform”, if elected. 

President Obama wins reelection.

4. December 2012 – Immediately following reelection President Barack Obama signs an Executive Order creating the “Deferred Action Program“, or DACA. Allowing millions of illegal aliens to avoid deportation.

5. According to White House own internal documents and research, this Deferred Action Program is what the Central American communities immediately began using as the reason for attempted immigration.

6. In both (A) Border Control Study; and (B) DHS intelligence report; the DACA program is mentioned by the people apprehended at the border in 2013 and 2014.

7. May 2013 – President Barack Obama visits South America. Following a speech for Mexican entrepreneurs, Obama then traveled to Costa Rica, his first visit as president.

8. cont.. In addition to meetings with Costa Rican President Laura Chincilla, President Obama attended a gathering of leaders from the Central American Integration System, (CAIS).

9. The regional network includes the leaders of Belize, El Salvador, Guatemala, Honduras, Nicaragua and Panama. President Obama meets with the leaders of the Central American Countries.

10. Summer 2013Numbers of Illegal Unaccompanied Minors reaching the Southern U.S. border from El Salvador, Guatemala, Honduras, Nicaragua doubles. 20,000+ reach U.S. Southern border by travelling through Mexico. Media primarily ignores. fpc.state.gov/documents/orga…

11. October 2013 – At the conclusion of the immigrant travel season. White House receives notification that tens of thousands of illegal Unaccompanied Minors should be anticipated to hit the Southern U.S. border the following Summer [2014].

https://www.zerohedge.com/sites/default/files/inline-images/DgfEoDPU0AAm573.jpg?itok=djOhuZSM

12. An estimated 850% increase in the number of Unaccompanied Alien Children (UAC’s) were reported to the White House. fpc.state.gov/documents/orga…

[In 2012 less than 10,000 were projected]

13. January 2014 – In response to the projections, the Department of Homeland Security (DHS) posts a jobs notification seeking bids to facilitate 65,000 Unaccompanied Alien Children. fbo.gov/index?s=opport…

14. IMPORTANT. This job posting was January 2014. The Obama administration was *planning for* 65,000 childhood arrivals. In January 2014 they were taking contractor bids for services to be used later in year. Almost no-one noticed.

15. On January 29, 2014, the federal gov. posted an ad seeking bids for a vendor contract to handle “Unaccompanied Alien Children“. Not just any contract mind you, a very specific contract – for a very specific number of unaccompanied minors: “65,000.” fbo.gov/index?s=opport…

https://www.zerohedge.com/sites/default/files/inline-images/DgfGvRTU0AE_TAW.jpg?itok=ZG0I5KqE

16. [*Two Weeks Later*] February 2014 – President Obama visits Mexico for “bilateral talks”, in an unusual and unscheduled one day visit:

https://www.zerohedge.com/sites/default/files/styles/inline_image_desktop/public/inline-images/DgfHRh0V4AA7aW1.jpg?itok=2h9B55vU

17. Spring 2014 – With a full year of DACA, successful transport and border crossing without deportation – DHS begins to notice a significant uptick in number of criminal elements from El Salvador, Guatemala, Honduras and Nicaragua; which have joined with UAC’s to gain entry.

18. Additionally, 2014 internal administration DHS documents reveal the “refugee” status is now being used by both criminal cartels, and potentially by Central American government(s) to send prison inmates into the U.S.

https://www.zerohedge.com/sites/default/files/inline-images/DgfI_6KUwAAbR21.jpg?itok=G1L6B7tx

19. June 2014 – Tens-of-thousands of UAC’s from El Salvador, Guatemala, Honduras and Nicaragua hit the border and the headlines. Despite the known planning, and prior internal notifications, the White House claims it did not see this coming.

https://www.zerohedge.com/sites/default/files/inline-images/DgfI7EhVAAAEc-l.jpg?itok=R7jkVlqY

20. Internal documents including a –DHS Border Security Alert– show that in March, 2014, fully three months earlier, the White House was aware of what was coming in June.

21. June 20th 2014 – Congressional leadership and key Latino Democrats from the Democrat Hispanic Caucus meet with representatives from El Salvador, Guatemala, Honduras and Mexico. kfgo.com/news/articles/…

22. June/July 2014 – By the end of June the media have picked up the story and it’s called “A Border Crisis”. However, the White House is desperate to avoid exposure to the known criminal elements within the story.

23. July 3rd, 2014 – President Obama requests $3,700,000,000 ($3.7 billion) in supplemental budget appropriations to deal with the border crisis. Only $109 million is for actual border security or efforts to stop the outflow from El Salvador, Guatemala, Honduras, and Nicaragua.

https://www.zerohedge.com/sites/default/files/inline-images/DgfKaN4U8AAO-ug.jpg?itok=cBEKpmzZ

24. Hidden inside the massive budget request is Obama seeking legal authorization to spend taxpayer funds for lawyers and legal proceedings on behalf of UAC’s and their families. Congress is being asked to approve/fund executive branch’s violation of immigration law (DACA).

https://www.zerohedge.com/sites/default/files/inline-images/DgfKfd9VMAAE20m.jpg?itok=4Fv49Bs8

25. Section 292 of Immigration and Nationality Act prohibits representation of aliens “in immigration proceedings at government expense“. President Obama was seeking authorization to use taxpayer funds to provide Illegal Aliens with government lawyers.

26. July 10th, 2014 – Facing pushback from congress as well as sticker shock at the amount he is requesting, President Obama sends his DHS team to Capitol Hill to ramp up anxiety, and threats of consequences: politico.com/story/2014/07/…

27. “We are preparing for a scenario in which the number of unaccompanied children apprehended at the border could reach up to 90,000 by the end of fiscal 2014,” Johnson’s testimony reads: politico.com/story/2014/07/…

https://www.zerohedge.com/sites/default/files/inline-images/DgfMjJrUwAUT170.jpg?itok=LNgF8qgb

28. Not only did the White House know what was going to happen (as far back as 2012), but White House actually constructed events to fall into a very specific pattern and intentionally did NOTHING to stop the consequences from the DACA executive order issued in December 2012.

https://www.zerohedge.com/sites/default/files/inline-images/DgfNMStVQAAJF6T.jpg?itok=ZHr2dZAt

29. This is the origin of the crisis. It all started with DACA. Having tracked this issue so closely through the years it often feels futile to discuss. It is an ongoing insufferable political game/scheme within the issue of illegal immigrants and “children”.

https://www.zerohedge.com/sites/default/files/inline-images/DgfOdKjX0AYs2GT.jpg?itok=B9jto1Nv

30. Massive illegal immigration is supported by both sides of the professional political machine. There are few issues more unifying for the K-Street purchased voices of DC politicians than keeping the borders open and the influx of illegal aliens as high as possible.

31. The U.S. Chamber of Commerce pays politicians to keep this system in place. All Democrats and most Republicans support mass immigration. Almost no DC politicians want to take action on any policy or legislation that stops the influx.

32. There are billions at stake. None of the GOP leadership want to actually stop illegal immigration; it’s a lucrative business. Almost all of the CONservative groups and politicians lie about it.

33. The religious right is also part of the problem. In the past 15 years illegal immigration and refugee settlement has been financially beneficial for them.

https://www.zerohedge.com/sites/default/files/inline-images/DgfPmztX0AAScdi.jpg?itok=BMEl7HKm

34. There is no greater disconnect from ordinary Americans on any singular issue than the policy positions of Democrats and Republicans in Washington DC surrounding immigration.

President Donald Trump is confronting their unified interests.

35. All political opposition to the Trump administration on this issue is structured, planned & coordinated. The issue is a valuable tool for the professional political class to sow chaos amid politicians. The resulting crisis is useful for them; therefore they fuel the crisis.

https://www.zerohedge.com/sites/default/files/inline-images/DgfQLg1WAAAVX7R.jpg?itok=eZsuGL3g

36. Washington DC and the activist media, are infested with illegal immigration supporters; the issue is at the heart of the UniParty. Follow the money. It’s the Acorn business model:

https://www.zerohedge.com/sites/default/files/inline-images/DgfQX3mWAAEC_fU.jpg?itok=cSzFwZjY

37. Southwest Key has been given $310,000,000, in taxpayer funds so far in 2018. And that’s just one company, in one part of a year. Prior CTH research showed this specific “Private Company” nets 98.76% of earnings from government grants. taggs.hhs.gov/Detail/RecipDe…

https://www.zerohedge.com/sites/default/files/inline-images/DgfQryhW4AIEqr7.jpg?itok=ziRo33yd

38. Lutheran Immigration and Refugee Service, which provides foster care and other child welfare services to migrant children. “Faith Based Immigration Services” is a code-speak for legalized human smuggling. taggs.hhs.gov/Detail/RecipDe…

https://www.zerohedge.com/sites/default/files/inline-images/DgfROYJWkAIl1RY.jpg?itok=SIo3cckF

39. The “faith-based” crew don’t want it to stop, because facilitating illegal alien import is now the financial bread and butter amid groups in their base of support. taggs.hhs.gov/Detail/RecipDe…

https://www.zerohedge.com/sites/default/files/inline-images/DgfRot2W4AMpqJi.jpg?itok=mIiXPmYz

40. The man/woman in the pew might not know; but the corporation minister, preacher or priest (inside the process) surely does. BIG BUSINESS !! taggs.hhs.gov/Detail/RecipDe…

https://www.zerohedge.com/sites/default/files/inline-images/DgfR-aMW4AIR6RF.jpg?itok=-c04PP92

41. These immigration groups, get *MASSIVE* HHS grants and then pay-off the DC politicians and human smugglers. Billions of dollars are spent, and the business end of immigration has exploded in the past six years.

https://www.zerohedge.com/sites/default/files/inline-images/DgfSkf3WkAAAzQP.jpg?itok=kmccb9_5

42. It’s a vicious cycle. Trafficked children are more valuable than adults because the organizations involved get more funding for a child than an adult. Each illegal alien child is worth about $56,000 in grant money. The system is full of fraud.

https://www.zerohedge.com/sites/default/files/inline-images/DgfTBZ6WkAIjUfQ.jpg?itok=a0x0Y48o

43. Approximately 65% of the money HHS provides is spent on executive pay and benefits, opaque administrative payrolls, bribes, kick-backs to DC politicians and payoffs to the South American smugglers who bring them more immigrants.

https://www.zerohedge.com/sites/default/files/inline-images/DgfTgq_WAAIp45G.jpg?itok=yV8wKz5V

44. As best it can be determined, approximately 35% ($19,000) of HHS funds are spent on the alien/immigrant child; maybe. It gets really sketchy deep in the accounting.

45. All of those advocates gnashing their teeth and crying on television have no idea just who is controlling this process; and immigration idiots like Ted Cruz are only adding more fuel, more money, to the bottom line:

46. By threatening to secure the border, President Trump is threatening a Washington DC-based business model that makes money for a lot of connected interests.

https://www.zerohedge.com/sites/default/files/inline-images/DgfUzgZWkAEMGyM_0.jpg?itok=EZrr88DQ

47. Beyond enrichment schemes, the entire process of immigration, and Washington-DC legalized human smuggling, has side benefits for all the participants; child sexploitation, child labor, and yes, much worse (you can imagine).

48. So the next time you see this type of terribly misplaced “crying girl” corporate propaganda:

https://www.zerohedge.com/sites/default/files/inline-images/DgfV6X8XcAYSfl4.jpg?itok=rjd3DF55

49. Maybe, just maybe, we can remember the *real* consequences of actual legalized human smuggling that has been created -within the business- by U.S. political policy.  This “crying girl”:

https://www.zerohedge.com/sites/default/files/inline-images/DgfWh9SXUAE_zmK.jpg?itok=_NJsSFDB

50. /END

https://www.zerohedge.com/sites/default/files/inline-images/DgfW6l8WsAA3X6J.jpg?itok=BVZYlmB0

Source: ZeroHedge

 

Did Trump’s SALT Deduction Limit Trigger A New Housing Glut In NYC?

In April, an op-ed in The Wall Street Journal titled “So Long, California. Sayonara, New York,” published by conservative economists Arthur Laffer and Stephen Moore, warned about a provision within the brand- new tax bill that could trigger a mass migration of roughly 800,000 people — fleeing California and New York for low-tax states over the next several years.

https://www.zerohedge.com/sites/default/files/inline-images/manhattan-real-estate-market.png?itok=Qn9jr73s

Now that the SALT subsidy is passed, how bad will it get for high-tax blue states, and more specifically New York?

New evidence suggests that New York City could be the first visible region where the mass migration could begin. Take, for example, the number of homes listed for sale in Manhattan, Brooklyn, and Queens had a parabolic spike in May, with inventory across 60 percent of the boroughs reaching all-time highs, according to the latest StreetEasy Market Report. While residential inventory traditionally peaks at the end of May, this year — the supply set new record highs and could continue through summer.

Laffer and Moore’s prophecy (above) of the great migration from New York – triggered by Trump’s new tax bill could be the most logical explanation of why NYC homeowners are rushing all at once to sell their homes.

Housing inventory in Manhattan rose 16.7 percent compared to last year, the largest y/y increase on StreetEasy record. Brooklyn and Queens saw similar spikes, with inventory up 23.4 percent and 42.8 percent, respectively.

https://www.zerohedge.com/sites/default/files/inline-images/Screen-Shot-2018-06-22-at-9.07.17-AM.png?itok=N4jLv7Tg

With housing inventory piling up across much of the boroughs, the total number of sales declined for the third consecutive month. StreetEasy said sales plummeted in every submarket across Brooklyn, Manhattan, and Queens; with more significant declines visible in the Upper East Side, Midtown and the Rockaways. Despite the flood of new inventory threatening to stall the market, the StreetEasy Price Index advanced in all three boroughs since last year.

“Sellers are betting on a wave of demand from the peak shopping season, but this summer’s market has turned out to be a crowded one,” says StreetEasy Senior Economist Grant Long.

“However, prices are high and continue to rise. More affordable homes are the hardest to find, and are sure to sell quickly. But higher-end homes, particularly those joining the market from the ongoing stream of new development, will be pressured to lower prices or linger on the market.

This summer is poised to offer an excellent negotiating opportunity for buyers with big budgets.”

As Bloomberg notes, the abnormal amount of supply hitting the NYC residential markets is not sufficiently being met with demand, which could eventually be problematic for prices and serve as a potential turning point. Recently, the mainstream media cleverly changed their narrative and called the ‘housing shortage,’ a ‘housing affordability crisis,’ as it sure seems that the housing bubble, or whatever you want to call it, is in the later innings.

May 2018 Key Findings — Manhattan

  • Sale prices rose in all submarkets but one. The StreetEasy Manhattan Price Index increased 0.6 percent to $1,157,995. Prices rose in four of the five submarkets, led by an increase in the Upper East Side, where the median home price rose 1.9 percent to $1,038,046. Prices in Downtown Manhattan remained flat at $1,691,204.
  • Inventory rose at a record pace. Sales inventory in Manhattan rose 16.7 percent year-over-year. The Upper East Side experienced the largest increase, with inventory up 20.2 percent since last year.
  • One out of every six homes received a discount. Sixteen percent of homes for sale were discounted, an increase of 3.6 percentage points year-over-year.
  • For-sale homes spent less time on the market. Units in the borough spent a median of 55 days on the market, a three-day dip from last year. The Upper East Side and Upper West Side were the only submarkets where homes lingered longer — up 10 days and 17 days, respectively.
  • Rents rose in every Manhattan submarket. The StreetEasy Manhattan Rent Index [iv] rose 1.4 percent to $3,183. Rents in Upper Manhattan rose the most — up 2.5 percent to $2,307.
  • Fewer rentals offered a discount. Sixteen percent of rentals in Manhattan were discounted in May, a decrease of 1.6 percentage points from last year.

May 2018 Key Findings — Brooklyn

  • Prices reached new highs in North Brooklyn. The StreetEasy North Brooklyn Price Index increased 11.1 percent to $1,229,838, a record high for the submarket despite the looming L train shutdown. Borough-wide, prices rose by just 1.1. percent since last year, to $720,555.
  • The number of homes with a price cut reached an all-time high. The share of sales with a price cut reached an all-time high of 12.4 percent, a rise of 3.3 percentage points from May 2017.
  • Sales inventory continued to climb, except in North Brooklyn. Sales inventory in the borough reached a record high — up 23.4 percent over last year. Inventory rose the most in South Brooklyn, which saw a 44.7 percent increase over last year. North Brooklyn was the only submarket where inventory dropped, by 6.7 percent since last year.
  • Brooklyn homes spent more time on the market. Homes stayed on the market for a median of 53 days in the borough, 6 more days than last year. North Brooklyn homes are coming off the market after an average of 43 days — 26 days faster than last year.
  • Rents rose in all submarkets except North Brooklyn. The StreetEasy Brooklyn Rent Index increased 1.4 percent year-over-year to $2,562. South Brooklyn experienced the largest spike: up 2.6 percent to a median rent of $1,885. North Brooklyn was the only submarket where rents stagnated, likely because of the L train shutdown starting in April 2019. Rents in the submarket remained flat at $3,062.

May 2018 Key Findings — Queens

  • Price cuts rose to an all-time high. The share of homes with a price cut reached a new high in Queens at 11.1 percent, an increase of 3.5 percentage points over last year.
  • Sales inventory swelled. Queens saw the largest year-over-year increase in inventory, rising 42.8 percent. All five submarkets in the borough saw a surge in inventory.
  • Queens homes are selling slightly faster than last year. The median number of days on market for Queens homes was 56, down 2 days from last year. Homes in Northeast Queens and Northwest Queens took longer to sell than last year, with an increase of 12 days and 6 days on the market, respectively.
  • Rents remained flat. The StreetEasy Queens Rent Index held at $2,113. But rents in South Queens rose 6.9 percent year-over-year, to a median of $1,775.
  • Queens was the only borough with an increase in the share of discounted rentals. Seventeen percent of Queens rentals offered discounts: up 2.9 percentage points over last year, and the highest share of the three boroughs analyzed.

Source: ZeroHedge

Truffles: The Most Expensive Food in the World

What Are Truffles and Why Are They So Expensive?

Truffles, the darling of the food scene, are not the chocolate treats that bear the same name. Not dessert truffles, true truffles are a rare delight and not an opportunity to be missed. While they are typically considered expensive food, there are ways to get your truffle fix in the United States through avenues such as truffle oil.

There are white and black truffles, and they’re as different as night and day. There are some similarities – they’re both a subterranean fungus that grows in the shadow of oak trees. However, there are over seven different truffle species found all over the world, from the Pacific Northwest to China to North Africa and the Middle East.

Truffles can be found concentrated in certain areas around the world, with the Italian countryside and French countryside being rich places of growth. Black truffles grow with the oak and hazelnut trees in the Périgord region in France. Burgundy truffles can be found throughout Europe in general, like the black summer truffle.

White truffles are typically found in the Langhe and Montferrat areas of northern Italy around the Piedmont region. Additionally, the countrysides of Alba and Asti are popular truffle hunting areas. White truffles are also found in the hill regions of Tuscany in Italy near certain trees.

Not just localized to Europe, however, New Zealand Australia also see truffles growing. The first black truffle produced in the Southern Hemisphere was in New Zealand in 1993. In Australia, Tasmania was the origin of the first truffle harvests and the largest truffle from Australia, weighing in at 2 pounds, 6 ounces) was harvested by Michael and Gwynneth Williams.

In the Pacific Northwest of the U.S., four species of truffles are commercially harvested: the Oregon black truffle, the Oregon spring white, Oregon winter white truffle, and the Oregon brown truffle.

In the South, the pecan truffle is often found alongside fallen pecans. While farmers once discarded them, the gourmet food scene is slowly starting to incorporate them into seasonal dishes.

Depending which country they hail from, they’re sniffed out by specially trained dogs or pigs, then dug up by the “hunter”. They’re located through the natural aroma they release when they interact with certain plants, mammals, and insects. These interactions also encourage new colonies of the truffle fungus to appear through spore dispersal.

https://i2.wp.com/cdn0.wideopeneats.com/wp-content/uploads/2016/08/Croatia-London-5452-1024x1024.jpgWhite Truffle fresh from the hunt

Both white and black truffles share the same appearance, that of a lumpy potato, but it’s in taste and shelf-life they differ.

Each kind of truffle is firmly in the “umami” category of taste – very earthy and doesn’t need a lot of salt to trip your tastebuds.

The black truffle is far more common, even in haute cuisine. Available for six to nine months a year, it has a stronger taste and pungent aroma that often needs acquiring. I’ve experienced a black truffle-and-olive tapenade, a perfect use for it, because it evokes a black olive-type taste.

Because of the long season and easier odds of being found, black truffles are more affordable. They’re also freezable, making a less-risky purchase for a restaurant, further enabling them to keep prices down.

On the flip-side are white truffles, Earth’s gold. Typically valued at as much as $3,000 per pound, they inspire a big black market. Even legally, they can be outrageous in price. The Atlantic writes“In 2010, Macau casino tycoon Stanley Ho spent $330,000 on two pieces that weighed 2.87 pounds.”

Internationally, white truffles are big industry. Autumn may yield a truffle experience for you even here. The USA is currently third world-wide for truffle harvest volumes. Stick to truffle towns where restaurants hunt their own, and you maybe be surprised at bargains you find. I was shocked to only spend $20 for my white truffle meal in Croatia.

White truffles cannot be frozen and have a short shelf-life, up to about 10 days. They’re best devoured as soon as possible. Their season is short too – only three to four months each year, September through to as late as January.

I’ve heard of their seasons ending as early as November, though. They’re more elusive to find, often in different forest clusters than their black counterparts. All this computes to costing big bucks.

Even if you dislike black truffles, try fresh white truffles if you ever can. They’re a completely different flavor profile. Instead of black olives, think Parmesan cheese meets mushrooms. It’s a delicate, aromatic flavor – still earthy, but far from overbearing.

Wine and food pairings must let the white truffle take center stage, lest they overpower it. Think polenta with lots of Parmesan and excessive shavings on top.

If you can’t have the real truffle experience, you can buy truffle products flooding the market. These include truffle-infused oils, jams, tapenades, and so forth. Some will use extracts, which are as authentic to the real thing as any extract is. Think orange or lemon or almond extracts. Are they true to the real experience? Not really, but they have their own appeal.

With a growing popularity on the world market, cunning agriculturalists and truffle hunters are trying to farm truffles with mixed results. So far it seems truffles are Earth’s alchemy – a rare treat to remain rare.

Speaking for myself, I was sure I’d hate the pungent fungus, but I felt obligated to try them. Black truffles were a taste I could grow to appreciate, but I’m not a big fan of black olives either. I had decadently expensive dark chocolate-and-black truffle ice cream, though, and that was tasty.

Still, I long for the day I cross paths with white truffles again. The simple dish of polenta and white truffles stands as one of the greatest meals of my life.

There’s a reason they’re sometimes literally worth more than their weight in gold.

Source: By Steffani Cameron | Wide Open Eats

 

Gold Surges Against Emerging Market Currencies

Gold Surges To Record In Turkey and Other Emerging Markets as Currencies Collapse

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  • Turkey’s election angst, geopolitical risk and collapse of the lira is driving up demand for gold
  • Turkish lira has collapsed versus gold and now the lowest on record (see chart)
  • Significant demand for gold coins in Turkey and central bank has repatriated gold and added to gold reserves
  • “Having the gold physically at home allows countries to feel like they are in control of their reserves” Dr Brian Lucey
  • Gold acting as a hedge and has been “expensive” not to own gold in Turkey, Syria, Venezuela, Argentina, Angola, Russia and many other countries in the Middle East, Asia, South America, Africa and Europe (see table of worst performing currencies in 2018 including the Swedish krona)

from Bloomberg:

With just a month until elections, shopkeepers at Turkey’s biggest bazaar say they’re seeing a jump in demand for gold coins.

“Turkish people have an interesting behavior — they buy gold when the prices are rising, they think it’s gonna rise more,” said Gokhan Karakan, 32, who runs a gold exchange office in the heart of Istanbul’s Grand Bazaar. “People think there is a trend here and choose to buy gold until uncertainty is out of the way.”

On Friday afternoon, at the Grand Bazaar — one of the world’s oldest covered markets — shopkeepers said more customers were buying gold, instead of selling it, in hopes that the metal will keep its worth as the value of the lira plunges.

Gold priced in lira is more “expensive” than ever, but that’s not deterring buyers, who are looking for a safe haven.

“Turkish people love gold,” said Tekin Firat, 30, who owns and runs a gold store the bazaar. “People think that it will never lose in the long run.”

Citizens are buying up gold as the lira plunges in latest currency crisis. Recep Tayyip Erdogan, who’s about to launch a re-election campaign that may provide the toughest electoral test of his 15 years in power, is an outspoken advocate of cheap money. He’s up against investors demanding higher returns to fund an economy beset by inflation and a swollen current account deficit.

Gold has a special importance in Turkey. The country is to home the ancient kingdom of Lydia, where the earliest known gold coinage originated in the 7th century B.C.

Turkey imported 118 metric tons of bullion, worth $5 billion at today’s prices, in first four months of this year, the most over that period, according to data going back to 1995 from the Istanbul Gold Exchange. Last year, imports reached a record.

It’s not just consumers that are snapping up gold. Official reserves have also increased over the past year. The central bank doesn’t comment on its gold strategy, but previously said the changes in its holdings are part of an effort to diversify its reserves.

The reported figure may be misleadingly high because the central bank allows commercial banks to deposit gold as part of their reserves. The government last year launched a campaign to get more “under-the-pillow gold” into the formal banking system. About half of the 216 ton inflow since the start of 2017 can be attributed to this alternative source, according to Matthew Turner, a strategist at Macquarie Group Ltd. in London.

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Even so, the purchases have happened a year after Erdogan urged Turks to convert their foreign currency savings into liras and gold, and tensions with the U.S. reached a new low.

“The central bank certainly has been more active in the gold market,” said Turner. “It seems the government would like a larger share of its reserves in assets that’s not related to the U.S. dollar.”

In 2017, the central bank withdrew of its 28.7 tons of gold, worth about $1.2 billion, from Federal Reserve vaults. It didn’t say where the gold went, but holdings increased at Borsa Instanbul, the Bank of England and Bank of International Settlements, according to a report released in April.

The decision for any country to withdraw gold from U.S. vaults is rare — happening only a handful of times in the past decade. Since 2011, Germany, the Netherlands, Hungary and Venezuela have repatriated their gold holdings from the U.S.

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Turkey’s decision to withdraw gold may have been a reaction to U.S. court cases against Turkish banks for alleged deals struck with Iran, said Cagdas Kucukemiroglu, a Middle Eastern gold analyst at research firm Metals Focus.

“Having the gold physically at home allows countries to feel like they are in control of their reserves,” said Brian Lucey, a professor of finance at Trinity Business School in Dublin.

Source: ZeroHedge

Gold Demand Slumps to a 10-Year Low

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A Fox Business report states demand for gold is at a 10-year low. What’s the real story?

For gold investors, the rising market volatility is no match for the currently growing economy, with gold holdings slumping to a decade low, according to the World Gold Council (WGC).

The WGC reported that global gold demand fell to its lowest first-quarter level since 2008, falling to 973 metric tons in the first quarter of 2018, a 7% drop compared to the 1,047 metric tons in the first quarter of 2017.

More Luster in Stock Markets

U.S. retail investors are losing their appetite for physical gold as buoyant stock markets offer tempting alternatives, sending sales of newly minted coins to their lowest in a decade.

More and more coins are also being sold back onto the market, further eroding demand for newly minted products.

Gold American Eagle bullion coin sales from the U.S. Mint slumped to a third of the previous year’s level in 2017, their weakest since 2007.

They were down nearly 60 percent year on year in the first quarter. Sales so far this month, at 2,500 ounces, are less than half last April’s total, and a fraction of the 105,500 ounces sold in April 2016.

Contrary Indicator

For starters. retail investors dumping gold coins is a contrary indicator. And if they are dumping gold coins to buy Bitcoin or stock that is a contrary indicator for Bitcoin and Stocks.

What About Demand?

Actually, demand for gold bottomed in December of 2015.

How do I know? By looking at the price.

Gold Demand

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As noted by the chart, demand for gold peaked in September of 2011. Demand bottomed in December of 2015.

Wait a second, you say, those are prices!

Yes, exactly.

Unlike silver, which is used up industrially, nearly every ounce of gold ever mined is available for sale.

Someone has to own those ounces. The price of gold represents the demand for gold.

Gold Up 31%, Retail Selling

Gold is up 31% but retail investors are selling their coins. That’s a major contrary indicator.

Driver for Gold

The primary driver for the price of gold is faith in central banks. In 2011, there were worries the Eurozone would break up.

In 2012, ECB president Mario Draghi made a famous speech, declaring, “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”

Curiously, he did not do a thing at the time. The speech restored faith.

Gold vs. Faith in Central Banks

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Faith on the Wane

Some believe the Fed is way behind the curve. Others thinks a deflationary bust is coming and the Fed will engage in more QE.

Pick your reason, but faith in central banks is on the wane.

Deflationary Bust

Given the amount of global financial leverage, I strongly suggest a deflationary bust is the most likely outcome looking ahead.

If I were trying to create a deflationary bust, I would do exact exactly what the world’s central bankers have been doing the last six years,” said Stanley Druckenmiller.

For details of Druckenmiller’s excellent speech, please see Can We Please Try Capitalism? Just Once?

How will the Fed respond to a deflationary bust?

The obvious answer is more printing and more QE. I expect a move higher in gold similar to the move from 2009-2011.

Tesla Is Being Sued Again, For Allegedly Not Paying Workers

It wouldn’t be another day in April 2018 if there wasn’t yet another negative Tesla headline hitting the wire.

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That’s right – Tesla has once again been sued, this time as it relates to contract workers at its Fremont factory. Tesla is party to a lawsuit that was also aimed at Balance Staffing, a company responsible for staffing workers at Tesla’s Fremont factory. These workers have alleged not only that they are due additional overtime pay, but also that the service that placed them at Tesla encouraged them to accept debit cards instead of paychecks when it came time to get paid.

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The article continues, citing the temp agency’s standards for overtime pay:

Nezbeth-Altimore points to Balance Staffing’s policy to illustrate her claims over failure to pay necessary overtime wages and provide proper rest periods. California law requires employees to be paid one-and-a-half times their regular rate of pay if they work more than eight hours a day or 40 hours total in a week. After 12 hours in a day, workers are entitled to double their pay.

In its handbook, Balance Staffing only mentions overtime pay for workers who put in more than 8 hours in a work day or 40 hours in a week, the suit says. It makes no mention of working 12 hours a day, according to the suit, something known to happen at Fremont in the past. (CEO Elon Musk said this week that Tesla will be hiring several hundred workers as part of an effort to run Fremont 24/7 to build more Model 3 sedans.) 

“During the relevant time period, Defendants willfully failed to pay all overtime wages owed to Plaintiffs and class members,” the suit says.

Finally, the article notes additional litigation that is outstanding dealing with Tesla’s working conditions, and the obligatory statement from the company, denying it has anything to do with this lawsuit, despite being named a defendant:

Tesla is facing several lawsuits from contract workers over alleged racial bias and abuse at Fremont. One of those cases is moving toward trial, Bloomberg reported last week, as the contract workers aren’t required to settle disputes through binding arbitration, customary for full-time Tesla workers.

In a statement, a Tesla spokesperson said the automaker “goes above and beyond the requirements of California and federal law in providing workers meal and rest breaks and appropriate overtime pay.”

“This is a dispute between a temporary worker and her employer staffing agency, which is responsible for payment of her wages,” the statement said. “There is no specific wrongdoing alleged against Tesla. Regardless, whether Tesla or a staffing agency, we expect employers to act ethically, lawfully and do what is right.”

Is it even possible that both the cash crunch – and the legal issues – at Tesla are getting worse instead of getting better? Regardless, as it relates the company’s finances, those on the short side are starting to smell blood. 

Late last week we did a report on Vilas Capital Management – which has a majority of its short book dedicated to Tesla – and its recent reasoning for making its Tesla short such a large percentage of its capital:

We added meaningfully to our Tesla position in the first quarter at prices in the $340 range. We continue to believe that Tesla is extremely overvalued and that it will experience significant financial difficulties over time.

All companies in a capitalistic system need to earn profits and those profits need to be attractive relative to the amount of shareholder capital employed. Tesla has never earned an annual profit. Along with digital currencies and Unicorns, Tesla appears to be caught up in a gold-rush-fever type of emotional response, both from a “they will take over the world” and a “they will save the world” combination of hopes, instead of their owners looking at the numbers.

Tesla bulls will argue that their production will rise to 5000 Model 3’s per week soon and, therefore, the stock will trade meaningfully higher. Given that the company lost $20,000 per Model S and X sold for roughly $100,000 each last year, due to the fact that it cost more to build, sell, service, charge and maintain these cars than they collected in revenue, as it is important to include all costs when evaluating a business, we predict it will impossible for Tesla to make a profit on a $35,000 to $50,000 car.

As anyone with automotive experience knows, profit margins are far higher on bigger, more expensive cars. Therefore, the faster Tesla makes Model 3’s, the more money they will lose.

Vilas continued:

Roughly five institutions make up nearly 50% of Tesla’s freely floating shares. All it will take is for one of them to realize the likely fact that the company won’t ever earn an annual profit, has been overly optimistic, at best, or quite dishonest, at worst, with their projections of cash flow and profit and Tesla’s shares should fall precipitously. We believe that the CEO’s recent tweet that the company will be profitable and will generate positive cash flow in the second half of the year are likely attempts to artificially inflate the stock and keep creditors at bay.

Given that our calculations show that Tesla needs to raise at least $5 billion of equity, if not closer to $8 billion, to stay solvent in the next 14 months, the company needs to find at least another dozen Ron Baron sized investors.

We do not believe that this will be possible given their expected future losses, working capital and capital expenditure needs, lousy execution with the Model 3, falling demand for their somewhat stale Model S and Model X, tax rebates of $7,500 per car that will start going away shortly, impending competition from Jaguar, Mercedes, Porsche, BMW, Audi, etc., the credit rating downgrade by Moody’s to Caa+ while leaving the credit on watch for further downgrades (Caa+ is basically defined as impending default), the NTSB investigation into the accident caused by the “Full Self Driving” option that they collected $3000 for (which may create a class action lawsuit, fines and the disabling of the feature), the fact that they have had 85 letters and investigations back and forth with the SEC (a very unusual pattern), the fact that their three top finance executives (CFO, Chief Accounting Officer, and Director of Finance) have left the company over the last 18 months leaving huge amounts of awarded by unvested shares on the table, a highly suspicious pattern, and the fact that the company owes suppliers roughly $3 billion of unsecured payments, which could be “called” at any time, similar to a run on a bank.

If Tesla’s suppliers simply asked for their past invoices to be paid and to be paid in cash at the time of their next parts delivery, a likely outcome the worse Tesla’s balance sheet gets, it is clear that Tesla would need to file for protection from creditors. Further, the banks lending Tesla money cannot ignore the balance sheet. They have strict rules that regulators enforce about lending to companies with increasingly negative working capital.

The company’s story about further drawing down lines of credit to finance operating losses and capital expenditure needs may seem plausible to novice investors but, in our opinion, not to suppliers and regulated lenders. In a game of financial musical chairs, it is important to sit down quickly.

Who in their right mind would continue to finance this money losing operation? Up to this point, it has been from growth investors who have likely never owned an auto stock before. Once they figure out the industry and the truth about Tesla’s future, we doubt it will continue.

This second lawsuit and continued scrutiny comes at a time when Tesla is publicly under some of the worst pressure its been under since its founding. The media narrative on the company has certainly has certainly become slightly more skeptical and this has, in turn, triggered Elon Musk to set bigger goals and larger milestones for the future.

The tally of bad press, lawsuits and investigations of recent relating to Tesla is starting to pile up.

  1. NTSB investigation that put the company at a public feud with the NTSB
  2. An initial workplace safety investigation by the state of California
  3. A second reported workplace safety investigation, reported on Friday
  4. A securities fraud class action lawsuit against Musk claiming he knew he was going to miss Model 3 targets for 2017
  5. This contract worker lawsuit
  6. CNBC article detailing poor vetting of suppliers, leading to a pile up of malfunctioned parts
  7. Reports of the company cutting corners as it relates to their pre-owned vehicles
  8. Reveal article alleging the company is under reporting its safety incidents at its Fremont factory
  9. Recent massive recall of 125k Model S sedans

Despite this, we’ve been promised by Elon himself that Tesla:

  1. Will be cash flow positive in Q3 and Q4 of this year
  2. Will not need to do another capital raise in 2018
  3. Will produce 6,000 Model 3’s per week, starting this summer

Critics of the company believe that Elon Musk should be a target by the SEC if these goals – once again, easy to promise, not as easy to deliver – aren’t met. They have been the only thing that has kept Tesla’s stock price from falling well below the $300 mark over the last couple of weeks, despite all of the negative press. This new lawsuit is just another negative to add to that pile. 

Source: ZeroHedge

***

In Bizarre Tweet, Elon Musk Threatens Shorts With “Unreal Carnage”

“The sheer magnitude of short carnage will be unreal. If you’re short, I suggest tiptoeing quietly to the exit … “

 

It’s Not Just Analysts: Musk Reportedly Also Hung Up on the NTSB


… It turns out that it is not just analysts that Elon Musk likes hanging up on.

 

Morgan Stanley: “Tesla’s Call Was The Most Unusual I Have Experienced In 20 Years

We were not the only ones who were left speechless by Thursday’s Tesla Tanturm: Elon Musk’s bizarre, childish, perhaps intoxicated, meltdown during Tesla’s conference call, in which he interrupted an analysts, cutting him off in the middle of the question for being “boneheaded, boring and dry”

Feds Seize 100 NorCal Residential Pot Grow Houses

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Federal and local law enforcement officials said this week they have seized around 100 Northern California houses they say were being used to grow cannabis tied to criminal organizations based in China.

The raids conducted Tuesday and Wednesday focused on Chinese nationals living in other states who bought homes in seven California counties, the Associated Press reported. Most of the home buyers were legal residents of the United States. They lived as far away as Georgia, Illinois, New York, Ohio and Pennsylvania. The harvested and processed product was shipped back east to those states for distribution.

None of the home owners have been arrested yet. The U.S. Department of Justice called the bust one of the nation’s largest residential forfeiture seizures. None of the homes were in the San Francisco Bay Area, presumably because it’s cheaper to buy a home more inland, the AP report said.

“This criminal organization has put a tremendous amount of equity into these homes through these wire transfers coming in from China and elsewhere,” U.S. Attorney McGregor Scott said in an interview with AP. “We’re going to take it. We’re going to take the houses. We’re going to take the equity.”

More details from the AP:

  • More than 500 law enforcement officials were used in the raids, which also hit two real estate businesses in Sacramento.
  • Agents from the Internal Revenue Service, the Drug Enforcement Agency and the Federal Bureau of Investigation were deployed with Sacramento sheriff deputies.
  • Money for home down payments were wired from China’s Fujian Province and stayed below the $50,000 limit restrictions in that country.
  • Sacramento real estate agents were used as well as straw buyers who represented the homeowners.

The Justice Department said the houses tended to use very high amounts of electricity for grow lights and fans. It’s no wonder the sweep was dubbed “Operation Lights Out.”

It said in addition to the homes, agents hauled in 61,000 marijuana plants, 400 pounds of processed buds (worth $600,000 wholesale) and 15 guns.

Worries about competition from a thriving black market in the state have continued to increase since California legalized recreational, retail cannabis and started taxing it at high rates last January.

A report earlier this week found that state and federal taxes on legal cannabis are so high in California that they may be helping the black market thrive, as consumers look for cheaper sources for cannabis and retail businesses scramble to keep in line with regulations while still making a profit.

By Riley McDermid | San Francisco Times

What CalPERS On The Brink Of Insolvency Means

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The largest public pension fund in the United States is the California Public Employees Retirement System (CalPERS) for civil servants. California is in a state of very serious insolvency. We (Martin Armstrong) strongly advise our clients to get out before it is too late. I have been warning that CalPERS was on the verge of insolvency. I have warned that they were secretly lobbying Congress to seize all 401K private pensions and hand it to them to be managed. Mingling private money with the public would enable them to hold off insolvency a bit longer. Of course, CalPERS cannot manage the money they do have so why should anyone expect them to score a different performance with private money? Indeed, they would just rob private citizens to pay the pensions of state employees and politicians.

CalPERS has been making reckless investments with retiree capital to be politically correct with the environment rather than looking at projects that are economically based. Then, CalPERS has been desperate to cover this and other facts up to deny the public any transparency. Then, because stocks they thought were overpriced last year, they moved to bonds buying right into the Bond Bubble. Clearly, California’s economy peaked right on target and ever since there has been a steady migration of residents out of the state.

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Meanwhile, Governor Jerry Brown has been more concerned about bucking the trend with Trump effectively threatening treason against the Constitution. The insolvency at CalPERS has exceeded $100,000 owed by every private citizen in California to government employees. It was $93,000 that every Californian owed back in 2016 for their state employees. In January 2017, Jerry Brown wanted a 42% increase in gas taxes to bailout CalPERS. California is an extremely liberal state – but that means they are also LIBERAL in spending the FUTURE earning of residents on public employees.

The pension crisis at CalPERS is getting worse by the day. The State looks to be totally bankrupt by 2021-2022. CalPERS has just decided to increase the contribution of local governments and cities to their fund. The cities say they are approaching bankruptcy because of rising subsidies, but CalPERS itself is approaching insolvency. The problem is that there really is no honest reform in sight. The choice is clear – CUT pension benefits of government employees or RAISE TAXES! 

CalPERS simply needs a bailout and very soon. It looks like they are hunting for it by sharply increasing taxes where ever they can get away with it, for state employees to grab whatever they can of your future income for themselves. This is a trend that will bring down Western society as a whole – a Sovereign Debt Crisis of untold proportions.

Board Member Steve Westly even told The Mercury News that a bailout was needed and soon. Currently, CalPERS manages approximately $350 billion of future pension claims of its members. Recently, CalPERS passed an amendment to the statutes, which resulted in higher contributions for the California municipalities. The amount of contributions has been increased several times over the past few years and this time the cities do not appear to be able to handle the increased costs. With the Trump tax reform, the real incompetence of local government is coming to a head.

Once CalPERS was 100% funded with assets under management. In fact, they had a surplus in the good old days before Quantitative Easing. Right now, the system no longer has more than two-thirds of future claims covered. CalPERS itself expects an annual return of 7% on its financial investments when it needs 8% minimum. Most pension funds run by the States are insolvent or on the brink of financial disaster. This is what I have been warning about that the Quantitative Easing set the stage for the next crisis – the Pension Crisis. The Illinois Pension Fund needs to borrow up to $107 billion to meet its payment obligations with no prayer of repayment. Promises to state employees are over the top and off the charts. This is why Janet Yellen at the Fed kept trying to raise rates stating that interest rates had to be “normalized” for this was the crisis she knew was coming. And guess what – Europe is even worse and Draghi will not raise rates for fear that government will be unable to fund themselves. The ECB is creating a vast European Pension Crisis while trying to keep member state governments on life-support. It has purchased 40% of all sovereign debt and appears trapped and cannot reverse this process. The choice is pensions collapse or state collapse.

There is NO WAY OUT of this crisis. The portfolio would have to be completely restructured and benefits reduced. Lame Duck Jerry Brown will do everything in his power to raise taxes and fees to try to hold CalPERS together. That is by no means a long-term solution. If you can transfer to one of the 7 states without state income tax – do it NOW before it is too late.

Source: Martin Armstrong | Armstrong Economics

Most People Can Tell If You’re Rich Just By Looking At Your Face

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A new study published in the Journal of Personality and Social Psychology posits there’s a good chance you can tell if someone is rich or poor just by looking at them.

“The relationship between well-being and social class has been demonstrated by previous research,” R. Thora Bjornsdottir, a graduate student at the University of Toronto and co-author of the study, tells CNBC Make It. In general, people with money tend to live happier, less anxious lives compared to those struggling to make ends meet. She and her team demonstrated “that these well-being differences are actually reflected in people’s faces.”

Bjornsdottir and her co-author, psychology professor Nicholas O. Rule, had undergraduate subjects of various ethnicities look at gray-scale photographs of 80 white males and 80 white females. None showed any tattoos or piercings. Half of the photos were of people who made over $150,000 a year, which they designated as upper class, and the other half were people who made under $35,000, or working class.

When the subjects were asked to guess the class of the people in the photos, they did so correctly 68 percent of the time, significantly higher than random chance.

“I didn’t think the effects would be quite as strong, especially given how subtle the differences are” in the faces, Rule told The Cut. “That’s the most surprising part of the study to me.”

“People are not really aware of what cues they are using when they make these judgments,” Bjornsdottir told the University of Toronto. “If you ask them why, they don’t know. They are not aware of how they are doing this.”

But the researchers wanted to know, so they zoomed in on facial features. They found that subjects were still able to guess correctly when they just looked at the eyes, and the mouth was an even better clue. But neither isolated part was as a reliable an indicator as the whole face.

The effect is “likely due to emotion patterns becoming etched into their faces over time,” says Bjornsdottir. The chronic contraction of certain muscles can actually lead to changes in the structure of your face that others can pick up on, even if they aren’t aware of it.

When the researchers showed the undergrads photos of people looking visibly happy, they could not discern socioeconomic status any better than chance. The expressions needed to be neutral for the subtle cues to have an effect.

“Well-being differences are actually reflected in people’s faces.”

“Over time, your face comes to permanently reflect and reveal your experiences,” Rule told the University of Toronto. “Even when we think we’re not expressing something, relics of those emotions are still there.”

Finally, to show how these kinds of first impressions could come into play in the real world, they asked the undergrads to decide who in the photos would be most likely to land a job as an accountant. More often than not, they went with people from the upper class, showing how these kinds of snap judgment can create and reinforce biases.

“Face-based perceptions of social class may have important downstream consequences,” they concluded.

“People talk about the cycle of poverty,” Rule said, “and this is potentially one contributor to that.”

Source: Jonathan Blumberg | CNBC

Corporate America Joins Banker War On Cash

Apple CEO Tim Cook has one big hope for the future – that he lives to see the end of money.

“…I’m hoping that I’m still going to be alive to see the elimination of money.”

Speaking at a meeting for Apple shareholders in Cupertino, California earlier this month, Cook made it clear that he is firmly on the side of the war-on-cash establishment.

“Because why would you have this stuff! Why go through all the expense of printing this stuff and then some people steal it, and you’ve got to worry about counterfeits and all these things,” he continued.

As Apple’s CEO talked about the downsides of cash, BI reported your credit card ripped off, I’m sure a lot of you have, I have, it’s not a good experience.”that he became more animated, revealing his real passion about the topic…

“We can provide a solution for the customer that’s simpler, more convenient, you don’t carry around a wallet with a bunch of cards in it, or a purse with a bunch of cards in it,” Cook said.

“And it’s more secure, if you’ve ever had your credit card ripped off, I’m sure a lot of you have, I have, it’s not a good experience.”

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Until now, it has tended to be politicians and central bankers leading the call for a cashless society… for your own good.

The enemies of cash claim that only crooks and cranks need large-denomination bills.

Except when the Obama Administration flew $400M in cash to Iran

They want large transactions to be made electronically so government can follow them. Yet these are some of the same European politicians who blew a gasket when they learned that U.S. counter terrorist officials were monitoring money through the Swift global system. Criminals will find a way, large bills or not.

The real reason the war on cash is gearing up now is political: Politicians and central bankers fear that holders of currency could undermine their brave new monetary world of negative interest rates. Japan and Europe are already deep into negative territory, and U.S. Federal Reserve Chair Janet Yellen said last week the U.S. should be prepared for the possibility. Translation: That’s where the Fed is going in the next recession.

Negative rates are a tax on deposits with banks, with the goal of prodding depositors to remove their cash and spend it to increase economic demand. But that goal will be undermined if citizens hoard cash. And hoarding cash is easier if you can take your deposits out in large-denomination bills you can stick in a safe. It’s harder to keep cash if you can only hold small bills.

So, presto, ban cash. This theme has been pushed by the likes of Bank of England chief economist Andrew Haldane and Harvard’s Kenneth Rogoff, who wrote in the Financial Times that eliminating paper currency would be “by far the simplest” way to “get around” the zero interest-rate bound “that has handcuffed central banks since the financial crisis.” If the benighted peasants won’t spend on their own, well, make it that much harder for them to save money even in their own mattresses.

All of which ignores the virtues of cash for law-abiding citizens. Cash allows legitimate transactions to be executed quickly, without either party paying fees to a bank or credit-card processor. Cash also lets millions of low-income people participate in the economy without maintaining a bank account, the costs of which are mounting as post-2008 regulations drop the ax on fee-free retail banking. While there’s always a risk of being mugged on the way to the store, digital transactions are subject to hacking and computer theft.

Cash is also the currency of gray markets—amounting to 20% or more of gross domestic product in some European countries—that governments would love to tax. But the reason gray markets exist is because high taxes and regulatory costs drive otherwise honest businesses off the books. Politicians may want to think twice about cracking down on the cash economy in a way that might destroy businesses and add millions to the jobless rolls. The Italian economy might shut down without cash.

By all means people should be able to go cashless if they like. But it’s hard to avoid the conclusion that the politicians want to bar cash as one more infringement on economic liberty. They may go after the big bills now, but does anyone think they’d stop there? Why wouldn’t they eventually ban all cash transactions much as they banned gold and silver as mediums of exchange?

Beware politicians trying to limit the ways you can conduct private economic business. It never turns out well.

But the swing to America’s corporatocracy calling for a war on cash is not for your own good ‘Murica.

All of this anti-cash angst from Cook can be summed up in 3 short words – Use Apple Pay – and follows Visa’s Andy Gerlt, who last year proclaimed: “We are declaring war on cash.”

As we detailed previously, the shots fired in the war on cash may have several unintended casualties:

1. Privacy

  • Cashless transactions would always include some intermediary or third-party.
  • Increased government access to personal transactions and records.
  • Certain types of transactions (gambling, etc.) could be barred or frozen by governments.
  • Decentralized cryptocurrency could be an alternative for such transactions

2. Savings

  • Savers could no longer have the individual freedom to store wealth “outside” of the system.
  • Eliminating cash makes negative interest rates (NIRP) a feasible option for policymakers.
  • A cashless society also means all savers would be “on the hook” for bank bail-in scenarios.
  • Savers would have limited abilities to react to extreme monetary events like deflation or inflation.

3. Human Rights

  • Rapid demonetization has violated people’s rights to life and food.
  • In India, removing the 500 and 1,000 rupee notes has caused multiple human tragedies, including patients being denied treatment and people not being able to afford food.
  • Demonetization also hurts people and small businesses that make their livelihoods in the informal sectors of the economy.

4. Cybersecurity

  • With all wealth stored digitally, the potential risk and impact of cybercrime increases.
  • Hacking or identity theft could destroy people’s entire life savings.
  • The cost of online data breaches is already expected to reach $2.1 trillion by 2019, according to Juniper Research.

As the War on Cash accelerates, many shots will be fired. The question is: who will take the majority of the damage?

Source: ZeroHedge

Housing Starts, Permits Surge On Spike In Rental Units

Another day, another confirmation that the US economy is heating up just a little more than most expected.

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With Wall Street expecting housing starts and permits of 1.234MM and 1.300MM, respectively, moments ago the US Census reported number that blew away expectations, with starts printing at 1.326MM in January, a 9.7% increase relative to the 3.5% expected, while permits jumped by 7.4% from 1.300MM to 1.396MM, on expectations of an unchanged print.

What is notable in today’s number is that single-family units were largely in line, declining for Permits from 881K to 866K, while single-family Starts rose from 846K to 877K, still well below November’s 946K.

So where did the bounce come from? The answer: multi-family, or rental units, which surged for Permits from 382K to 479K, while multi-family Starts surged from 360K to 431K, the highest number since December 2016.

Here is the visual breakdown, first Starts:

https://www.zerohedge.com/sites/default/files/inline-images/housing%20starts%20jan%202018.jpg?itok=lb-HjIWq

then Permits:

https://www.zerohedge.com/sites/default/files/inline-images/housing%20permits%20jan%202018.jpg?itok=IO5Vk_Jp

While it is very early to infer causality, the jump in rental unit construction could potentially add a modest disinflationary pressure to rents, which in recent months have seen declines across some of America’s largest MSAs. Whether or not this impacts Fed policy is too early to determine.

Source: ZeroHedge

The Fed Has Run Out Of Road, In Three Charts

Critics of “New Age” monetary policy have been predicting that central banks would eventually run out of ways to trick people into borrowing money.

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There are at least three reasons to wonder if that time has finally come:

Wage inflation is accelerating

Normally, towards the end of a cycle companies have trouble finding enough workers to keep up with their rising sales. So they start paying new hires more generously. This ignites “wage inflation,” which is one of the signals central banks use to decide when to start raising interest rates. The following chart shows a big jump in wages in the second half of 2017. And that’s before all those $1,000 bonuses that companies have lately been handing out in response to lower corporate taxes. So it’s a safe bet that wage inflation will accelerate during the first half of 2018.

https://i0.wp.com/dollarcollapse.com/wp-content/uploads/2018/02/Wage-inflation-Feb-18.jpg?ssl=1

The conclusion: It’s time for higher interest rates.

The financial markets are flaking out

The past week was one for the record books, as bonds (both junk and sovereign) and stocks tanked pretty much everywhere while exotic volatility-based funds imploded. It was bad in the US but worse in Asia, where major Chinese markets fell by nearly 10% — an absolutely epic decline for a single week.

https://i1.wp.com/dollarcollapse.com/wp-content/uploads/2018/02/NASDAQ-Feb-18.jpg?ssl=1

Normally (i.e., since the 1990s) this kind of sharp market break would lead the world’s central banks to cut interest rates and buy financial assets with newly-created currency. Why? Because after engineering the greatest debt binge in human history, the monetary authorities suspect that even a garden-variety 20% drop in equity prices might destabilize the whole system, and so can’t allow that to happen.

The conclusion: Central banks have to cut rates and ramp up asset purchases, and quickly, before things spin out of control.

So – as their critics predicted – central banks are in a box of their own making. If they don’t raise rates inflation will start to run wild, but if they don’t cut rates the financial markets might collapse, threatening the world as we know it.

There’s not enough ammo in any event

Another reason why central banks raise rates is to gain the ability to turn around and cut rates to counter the next downturn.

But in this cycle central banks were so traumatized by the near-death experience of the Great Recession that they hesitated to raise rates even as the recovery stretched into its eighth year and inflation started to revive. The Fed, in fact, is among the small handful of central banks that have raised rates at all. And as the next chart illustrates, it’s only done a little. Note that in the previous two cycles, the Fed Funds rate rose to more than 5%, giving the Fed the ability to cut rates aggressively to stimulate new borrowing. But – if the recent stock and bond market turmoil signals an end to this cycle – today’s Fed can only cut a couple of percentage points before hitting zero, which won’t make much of a dent in the angst that normally dominates the markets’ psyche in downturns.

Most other central banks, meanwhile, are still at or below zero. In a global downturn they’ll have to go sharply negative.

https://i1.wp.com/dollarcollapse.com/wp-content/uploads/2018/02/Fed-funds-rate-Fed-18.jpg?ssl=1

So here’s a scenario for the next few years: Central banks focus on the “real” economy of wages and raw material prices and (soaring) government deficits for a little while longer and either maintain current rates or raise them slightly. This reassures no one, bond yields continue to rise, stock markets grow increasingly volatile, and something – another week like the last one, for instance – happens to force central banks to choose a side.

They of course choose to let inflation run in order to prevent a stock market crash. They cut rates into negative territory around the world and restart or ramp up QE programs.

And it occurs to everyone all at once that negative-yielding paper is a terrible deal compared to real assets that generate positive cash flow (like resource stocks and a handful of other favored sectors like defense) – or sound forms of money like gold and silver that can’t be inflated away.

The private sector sells its bonds to the only entities willing to buy them – central banks – forcing the latter to create a tsunami of new currency, which sends fiat currencies on a one-way ride towards their intrinsic value. Gold and silver (and maybe bitcoin) soar as everyone falls in sudden love with safe havens.

And the experiment ends, as it always had to, in chaos.

https://www.zerohedge.com/sites/default/files/inline-images/2018-02-11_8-32-30.jpg?itok=dLAzsuZw

Source: ZeroHedge

“This Isn’t A Drill” Mortgage Rates Hit Highest Level Since May 2014


A housing bust may be just around the corner. Rates have climbed to a level last seen in May of 2014.

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The chart does not quite show what MND headline says but the difference is a just a few basis points. I suspect rates inched lower just after the article came out.

 

For the past few weeks, rates made several successive runs up to the highest levels in more than 9 months. It was really only the spring of 2017 that stood in the way of rates being the highest since early 2014. After Friday marked another “highest in 9 months” day, it would only have taken a moderate movement to break into the “3+ year” territory. The move ended up being even bigger.

From a week and a half ago, most borrowers are now looking at another eighth of a percentage point higher in rate. In total, rates are up the better part of half a point since December 15th. This marks the only time rates have risen this much without having been at long term lows in the past year. For example, late 2010, mid-2013, mid-2015, and late 2016 all saw sharper increases in rates overall, but each of those moves happened only 1-3 months after a long term rate low.

Not a Drill

So far this month, MBS have stunningly dropped over 200 bps, which easily translates into a .5% or more increase in rates. I’ve been shouting “lock early” for quite a while, and this is precisely why, This isn’t a drill, or a momentary rate upturn. It’s likely the end of a decade+ long bull bond market. LOCK EARLY. -Ted Rood, Senior Originator

Housing Bust Coming

Drill or not, if rising rates stick, they are bound to have a negative impact on home buying.

In the short term, however, rate increases may fuel the opposite reaction people expect.

Why?

Those on the fence may decide it’s now or never and rush out to purchase something, anything. If that mentality sets in, there could be one final homebuilding push before the dam breaks. That’s not my call. Rather, that could easily be the outcome.

Completed Homes for Sale

https://s3-us-west-2.amazonaws.com/maven-user-photos/mishtalk/economics/zmfATcSa4EegwR7v_znq6Q/_fdE0Pr4Z0S3TWc8qCyW3Q

Speculation by home builders sitting on finished homes in 2007 is quite amazing.

What about now?

Supply of Homes in Months at Current Sales Rate

https://s3-us-west-2.amazonaws.com/maven-user-photos/mishtalk/economics/zmfATcSa4EegwR7v_znq6Q/bMlHtJTWr0yQwhkos7lauA

Note that spikes in home inventory coincide with recessions.

A 5.9 month supply of homes did not seem to be a problem in March of 2006. In retrospect, it was the start of an enormous problem.

In absolute terms, builders are nowhere close to the problem situation of 2007. Indeed, it appears that builders learned a lesson.

Nonetheless, pain is on the horizon if rates keep rising.

Price Cutting Coming Up?

If builders cut prices to get rid of inventory, everyone who bought in the past few years is likely to quickly go underwater.

The Fifth-Largest Diamond In History Was Just Discovered

Shares of Gem Diamonds surged +15% on Monday after the miner said it had unearthed one of the biggest diamonds in history. According to Bloomberg, Gem Diamonds Ltd. discovered a massive 910-carat diamond, about the “size of two golf balls” from the Letseng mine in Lesotho, the highest dollar per carat diamond mine in the world.

https://www.zerohedge.com/sites/default/files/inline-images/biggest%20diamond.jpg

The diamond is the largest ever recovered from Letseng and is classified as a D color Type IIa diamond, which means it has very few impurities or nitrogen atoms. More importantly, the diamond is the fifth-biggest ever found.

“Assuming that there are no large inclusions running through the diamond, we initially estimate a sale of $40m,” said Richard Knights at Liberum, citing the 1,109-carat Lesedi la Rona discovered in 2015, and it sold for $53 million.

“This would imply a $43m price tag for the Letseng diamond, but we place large caveats on this estimation, given that the pricing is rarely linear,” he added.

https://www.zerohedge.com/sites/default/files/inline-images/Screen-Shot-2018-01-15-at-10.30.31-AM.png

Clifford Elphick, Gem Diamonds’ Chief Executive Officer, commented in Monday’s press release:

Since Gem Diamonds acquired Letseng in 2006, the mine has produced some of the world’s most remarkable diamonds, including the 603 carat Lesotho Promise, however, this exceptional top quality diamond is the largest to be mined to date and highlights the unsurpassed quality of the Letseng mine. This is a landmark recovery for all of Gem Diamonds’ stakeholders, including our employees, shareholders and the Government of Lesotho, our partner in the Letseng mine.

The Letseng mine resides in the kingdom of Lesotho, located inside South Africa, and at an elevation of 10,000 feet, it is the world’s highest mine. Perhaps, there is a correlation between the elevation and diamond size and quality since Letseng is famous for its high-quality diamonds.

The company’s official press release on Monday gave very little information surrounding the value of the diamond, or if there was even a buyer.

Its value will be determined by the size and quality of the polished stones that can be cut from it. Lucara Diamond Corp. sold a 1,109-carat diamond for $53 million last year, but got a record $63 million for a smaller 813-carat stone it found at the same time in 2015.

Shares of Gem, which list in London, advanced 14.25%, valuing the company around £126.59M. Since 2012, a lack of significant discoveries coupled with deteriorating financials has declined London shares more than -78%. Monday’s press release of the discovery could bolster the company’s cash position upon the sale of the diamond.

“The successful sale of this stone will be supportive for Gem’s balance sheet and push the company into a free cash flow positive position this year,” said Richard Hatch of RBC Capital Markets.

Last week, the company recovered 117-carat and 110-carat rocks from its mine. The three significant discoveries back-to-back could be an upward turn for the company and allow investors to ‘b-t-f-d’.

Here are some diamonds recovered by Gem include:

  • 2006 – Lesotho Promise (603 carat)
  • 2007 – Lesotho Legacy (493 carat)
  • 2008 – Leseli La Letseng (478 carat)
  • 2011 – Letseng Star (550 carat)
  • 2014 – Yellow (299 carat)
  • 2015 – Letseng Destiny (314 carat)
  • 2015 – Letseng Dynasty (357 carat)
  • 2018-  Letseng (910 carat)

Bloomberg identifies the world’s largest diamond finds:

The biggest diamond discovered is the 3,106-carat Cullinan, found near Pretoria, in South Africa, in 1905. It was cut to form the Great Star of Africa and the Lesser Star of Africa, which are set in the Crown Jewels of Britain. Lucara’s 1,109-carat Lesedi La Rona is the second-biggest, with the 995-carat Excelsior and 969-carat Star of Sierra Leone the third- and fourth-largest.  

Weaker demand for diamonds, coupled with a growing supply glut, has pushed the IDEX diamond index lower and lower. With the industry in free-fall, has Gem with its monstrous 910-carat rock produced an artificial bottom or is this a head fake?

https://www.zerohedge.com/sites/default/files/inline-images/Screen-Shot-2018-01-15-at-11.34.52-AM-1024x726.png

Source: ZeroHedge

 

China Plans To Break Petrodollar Stranglehold Advance

Beijing to set up oil-futures trading in the yuan which will be fully convertible into gold on the Shanghai and Hong Kong exchanges

https://i1.wp.com/www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/01-overflow/20160121_petroyuan2_0.jpg

Petrodollars have dominated the global energy markets for more than 40 years. But now, China is looking to change that by replacing the word dollars for yuan.

Nations, of course, have tried this before since the system was set up by former US Secretary of State Henry Kissinger in tandem with the House of Saud back in 1974

Vast populations across the Middle East and Northern Africa quickly felt the consequences when Iraq’s Saddam Hussein decided to sell oil in euros. Then there was Libya’s Muammar Gaddafi’s pan-African gold dinar blueprint, which failed to create a splash in an oil barrel.

Fast forward 25 years and China is making a move to break the United States petrodollar stranglehold. The plan is to set up oil-futures trading in the yuan, which will be fully convertible into gold on the Shanghai and Hong Kong foreign exchange markets.

The Shanghai Futures Exchange and its subsidiary, the Shanghai International Energy Exchange (INE), have already run four simulations for crude futures.

It was expected to be rolled out by the end of this year, but that looks unlikely to happen. But when it does get off the ground in 2018, the fundamentals will be clear – this triple oil-yuan-gold route will bypass the mighty green back.

The era of the petroyuan will be at hand.

Still, there are questions on how Beijing will technically set up a rival futures market in crude oil to Brent and WTI, and how China’s capital controls will influence it.

Beijing has been quite discreet on this. The petroyuan was not even mentioned in the National Development and Reform Commission documents following the 19th National Congress of the Communist Party last October. 

What is certain is that the BRICS, the acronym for Brazil, Russia, India, China and South Africa, did support the petroyuan move at their summit in Xiamen earlier this year. Diplomats confirmed that to Asia Times.

Venezuela is also on board. It is crucial to remember that Russia is number two and Venezuela is number seven among the world’s Top 10 oil producers. Beijing already has close economic ties with Moscow, while it is distinctly possible that other producers will join the club. 

“This contract has the potential to greatly help China’s push for yuan internationalization,” Yao Wei, chief China economist at Societe Generale in Paris, said when he hit the nail firmly on the head.

An extensive report by DBS in Singapore also hits most of the right notes, linking the internationalization of the yuan with the expansion of the grandiose Belt and Road Initiative.

Next year, six major BRI projects will be on the table. 

Mega infrastructure developments will include the Jakarta-Bandung high-speed railway, the China-Laos railway and the Addis Ababa-Djibouti railway. The other key projects will be the Hungary-Serbia railway, the Melaka Gateway project in Malaysia and the upgrading of Gwadar port in Pakistan.

HSBC has estimated that the expansive Belt and Road program will generate no less than an additional, game-changing US$2.5 trillion worth of new trade a year.

It is important to remember that the “belt” in BRI is a series of corridors connecting Eastern China with oil-gas rich regions in Central Asia and the Middle East. The high-speed rail networks, or new “Silk Roads”, will simply traverse regions filled with, what else, un-mined gold.   

But a key to the future of the petroyuan will revolve around the House of Saud, and what it will do. Should the Crown Prince, Mohammad bin Salman bin Abdulaziz Al Saud, also known as MBS, follow Russia’s lead? If it did, this would be one of the paradigm shifts of the century. 

Yet there are signs of what could happen. Yuan-denominated gold contracts will be traded not only in Shanghai and Hong Kong but also in Dubai. Saudi Arabia is also considering issuing so-called Panda bonds, with close ally, the United Arab Emirates, taking the lead in the Middle East for Chinese interbank bonds. 

Of course, the prelude to D-Day will be when the House of Saud officially announces it accepts the yuan for at least part of its exports to China. But what is clear is that Saudi Arabia simply cannot afford to alienate Beijing as one of its top customers.

In the end, it will be China which will dictate future terms. That may include extra pressure for Beijing’s participation in Aramco’s IPO. In parallel, Washington would see Riyadh embracing the petroyuan as the ultimate red line.

An independent European report pointed to what might be Beijing’s trump card – “an authorization to issue treasury bills in yuan by Saudi Arabia” as well as the creation of a Saudi investment fund and a 5% share of Aramco.

Nations hit hard by US sanctions, such as Russia, Iran and Venezuela, will be among the first to embrace the petroyuan. Smaller producers, such as Angola and Nigeria, are already selling oil and gas to the world’s second largest economy in Chinese currency.

As for nations involved in the new “Silk Roads” program that are not oil exporters such as Pakistan, the least they can do is replace the dollar in bilateral trade. This is what Pakistan’s Interior Minister Ahsan Iqbal is currently mulling over.

Of course, there will be a “push back” from the US. The dollar is still the global currency, even though it might have lost some of luster in the past decade.

But the BRICS, as well as the Shanghai Cooperation Organization, or SCO, which includes prospective members Iran and Turkey, are increasingly settling bilateral and multilateral trade by bypassing the green back.

In the end, it will not be over until the fat (golden) lady sings.  When the beginning of the end of the petrodollar system becomes a fact, watch out for a US counter punch.

By Pepe Escobar | Asia Times

 

California Is Running Out Of Prisoners To Fight Their Wildfires

While many on the left have celebrated California’s push to legalize marijuana as a victory for a progressive, harm-reduction approach to combating addiction and crime, the pullback in the number of low-level prisoners entering the state’s penal system is leaving the California Department of Forestry and Fire Protection.

Court mandates to reduce overcrowding in the state’s prisons – combined with the legalization of marijuana, the most commonly used drug in America (aside from alcohol, of course) – have led to a sharp drop in the number of prisoners housed at state facilities in recent years. Interestingly, one byproduct of this trend is it’s creating headaches for the state officials who are responsible for coordinating the emergency wildfire response just as California Gov. Jerry Brown is warning that the severe fires witnessed this year – the most destructive in the state’s history – could become the new status quo.

To wit, since 2008, the number of prisoner-firemen has fallen 13%.

https://i1.wp.com/www.zerohedge.com/sites/default/files/images/user245717/imageroot/2017/11/20/2017.12.10firefightersprison.JPG

As the Atlantic reports, California has relied on inmates to help combat its annual wildfires since World War II, when a paucity of able-bodied men due to the war effort forced the state to turn to the penal system for help. More than 1,700 convicted felons fought on the front lines of the destructive wildfires that raged across Northern California in October.

While communities from Sonoma to Mendocino evacuated in the firestorm’s path, these inmates worked shifts of up to 72 straight hours to contain the blaze and protect the property residents left behind, clearing brush and other potential fuel and digging containment lines often just feet away from the flames. Hundreds more are on the fire line now, combating the inferno spreading across Southern California.

But over the course of the last decade, their ranks have begun to thin. As drought and heat have fueled some of the worst fires in California’s history, the state has faced a court mandate to reduce overcrowding in its prisons. State officials, caught between an increasing risk of wildfires and a decreasing number of prisoners eligible to fight them, have striven to safeguard the valuable labor inmates provide by scrambling to recruit more of them to join the force. Still, these efforts have been limited by the courts, public opinion, and how far corrections officials and elected leaders have been willing to go…

With dry conditions expected to persist for the foreseeable future, California will need to adjust to this new reality. Meanwhile, the fate of the inmate-firefighting program lies in the balance between two trends: the increasing need for cheap labor, and the pending decline in incarceration.

The push to reduce overcrowding is a reaction to the rising incarceration rates of the 1990s, when President Bill Clinton declared gangsters and criminals “superpredators” and authorized stiff penalties for relatively minor drug offenses.

For inmates, the reduction in state prison populations that first nudged that balance was long overdue. In the 1990s and 2000s, increasingly severe overcrowding in California prisons compromised medical services for prisoners and led to roughly one preventable death each week. A federal court ruled in 2009 that the inadequate health care violated the Eighth Amendment’s embargo against cruel and unusual punishment, and ordered the state to reduce its prison population by just shy of 27 percent – a cut of nearly 40,000 prisoners at the time of the ruling. California appealed the decision, but the Supreme Court upheld it in May 2011.

As one might expect, the push to reduce overcrowding has had the greatest impact on the population of inmates in minimum security prisons. Typically, state officials prefer to recruit minimum security inmates who are already serving relatively light sentences and thus have the most incentive to cooperate and not cause problems (like disappearing into the wilderness).

Also, state guidelines prohibit the recruitment of certain violent criminals and, of course, sex offenders.

The pool of potential recruits was limited long before the courts’ mandate. It comprises only inmates who earn a minimum-custody status through good behavior behind bars and excludes arsonists, kidnappers, sex offenders, gang affiliates, and those serving life sentences. To join the squad, inmates must meet high physical standards and complete a demanding course of training. They also have to volunteer.

“But,” cautioned David Fathi, the director of the ACLU’s National Prison Project, “you have to understand the uniquely coercive prison environment, where few things are clearly voluntary.” In the eyes of criminal-justice reformers, corrections officials recruit inmates under duress. “In light of the vast power inequality between prisoners and those who employ them,” Fathi continued, “there is a real potential for exploitation and abuse.”

Aside from the shrinking inmate population, a handful of inmate deaths this year while battling the NorCal wildfires is causing some low-level offenders to reconsider whether the incentives being offered by the state – credit toward parole, and a generous wage (at least by prison standards) – are really worth the risks.

Many inmates join the force to escape unpalatable prison conditions. In doing so they take on great personal risk, performing tasks that put them in greater danger than most of their civilian counterparts, who work farther from the flames driving water trucks and flying helicopters, among other activities. By contrast, inmates are often the first line of defense against fires’ spread, as they’re trained specifically to cut firebreaks—trenches or other spaces cleared of combustible material—to stop or redirect advancing flames. The work can be fatal: So far this year, two inmates have died in the line of duty, along with one civilian wildland-firefighter. The first, 26-year-old Matthew Beck, was crushed by a falling tree; the second, 22-year-old Frank Anaya, was fatally wounded by a chainsaw.

“Obviously this is not something that everyone is willing to volunteer for,” said Bill Sessa, a CDCR spokesman. “We’ve always been limited by the number of inmates who were willing to volunteer for the project.” Even when state prisons were at their most crowded, the camps where inmate firefighters live weren’t filled to capacity. And as the pool of qualified prisoners has contracted, he said, corrections officials have had to “work harder now than we did before to bring the camp to the inmates’ attention.”

In an effort to entice more recruits to join up, state officials are trying to emphasize the benefits of volunteering to fight the blazes: Volunteer firefighters can receive visits from family out in the open, instead of behind a thick pane of glass. It also allows them to escape the confines of the prison – for a brief time at least.

But with legal marijuana rapidly draining the ranks of low level offenders, a sizable shortfall will likely to persist in the years to come.

And after the death and devastation wrought by this year’s fires, many inmates have good reason to reconsider.

After all, you can’t enjoy visits with family and friends when you’re dead.

Source: ZeroHedge

California Residents Increasingly Ditching Their Massive Tax Bills And Unaffordable Housing For Las Vegas

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Newport Beach looking north toward Los Angeles. Photo by Ramey Logan via Wikimedia Commons

Los Angeles residents have apparently had just about enough of their city’s excessive home prices, un-affordable rents, crushing personal and corporate tax rates, overly burdensome regulations, polluted air, etc. and are increasingly leaving for a better life in Sin City.  As Los Angeles Times columnist Steve Lopez puts it, “the rent steals so much of your paycheck, you might have to move back in with your parents, and half your life is spent staring at the rear end of the car in front of you.”

As Jonas Peterson points out, his family made the move from LA to Las Vegas in 2013 and were able to double the size of their house while lowering their mortgage payment all while enjoying the added benefits of moving from one of the most over-taxed states in America to one of the lowest taxed.

Las Vegas is one of the most popular destinations for those who leave California. It’s close, it’s a job center, and the cost of living is much cheaper, with plenty of brand-new houses going for between $200,000 and $300,000.

Jonas Peterson enjoyed the California lifestyle and trips to the beach while living in Valencia with his wife, a nurse, and their two young kids. But in 2013, he answered a call to head the Las Vegas Global Economic Alliance, and the family moved to Henderson, Nev.

“We doubled the size of our house and lowered our mortgage payment,” said Peterson, whose wife is focusing on the kids now instead of her career.

Part of Peterson’s job is to lure companies to Nevada, a state that runs on gaming money rather than tax dollars.

“There’s no corporate income tax, no personal income tax…and the regulatory environment is much easier to work with,” said Peterson.

Of course, while many residents of metropolitan areas like Los Angeles get addicted to the ‘large’ salaries they can earn in big cities, others, like Michael Van Essen who recently made a move from LA to Mason City, Iowa, realize that the purchasing power of your income is far more important that the nominal dollars printed on the front of your paycheck.

You’d like to think it will get better, but when? All around you, young and old alike are saying goodbye to California.

“Best thing I could have done,” said retiree Michael J. Van Essen, who was paying $1,160 for a one-bedroom apartment in Silver Lake until a year and a half ago. Then he bought a house with a creek behind it for $165,000 in Mason City, Iowa, and now pays $500 a month less on his mortgage than he did on his rent in Los Angeles.

“If housing costs continue to rise, we should expect to see more people leaving high-cost areas,” said Jed Kolko, an economist with UC Berkeley’s Terner Center for Housing Innovation.

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Of course, Los Angeles isn’t the only place where residents are increasingly fleeing in search of greener pastures.  As we’ve pointed out before, there is a growing wave of domestic migrants that are abandoning over-taxed and generally unaffordable metropolitan areas like San Francisco, New York, Chicago and Miami in search of better lifestyles in the Southeast and Texas.

https://i1.wp.com/www.zerohedge.com/sites/default/files/images/user230519/imageroot/2016/11/03/2016.11.03%20-%20Migration%203.jpg

Not surprisingly, the dark areas on the map above seem to match perfectly with the dark areas on this map which indicate those with the highest state income tax rates.

https://i2.wp.com/www.zerohedge.com/sites/default/files/images/user230519/imageroot/2016/11/03/Taxes%20by%20State_0.png

Tack on a rising violent crime rate and things in Illinois have grown so unbearable that the state is losing 1 resident every 4.6 minutes.

https://files.illinoispolicy.org/wp-content/uploads/2016/12/OUT-MIGRATION_12-2016_4-1024x506.png

Of course, while liberal politicians often bemoan the existence of the Electoral College, these domestic migration trends could spell disaster for their opponents in national elections over the long-term as pretty much every major migratory pattern involves a mass exodus from blue states, like New York and California, into Red or Purple states like Texas, Florida, Arizona and Nevada.

Source: ZeroHedge

How The Individual Creates Value When Knowledge Is Almost Free

Educational Credentials Are Over-Supplied Yet Problem-Solving Skills Remain Scarce.

How do we create value in an economy that is increasingly dependent on knowledge? The answer is complicated by the reality that knowledge is increasingly digital and “unkownable” and therefore almost free.

Financialization as a substitute for creating value has run its course.

https://i1.wp.com/www.oftwominds.com/photos2016/financialization-curve2016.jpg

The crony-capitalist answer is always the same, of course: bribe the government to create and enforce private monopolies. This process has many variations, but a favored one is to deepen the regulatory moat around an industry to the point that competition is virtually eliminated and innovation is shackled.

Businesses protected by the regulatory moat can charge whatever they wish, becoming monopolistic rentiers that are parasites on the consumer and economy.

State-crony-capitalism destroys democracy and the economic vitality of the nation. I’ve covered this many times, and there is no solution to this oppressive marriage of state and monopoly other than innovations that open wormholes in the monopoly.

This is where knowledge comes in, as new forms of knowledge (not just technical innovations, but new business models), once digitized, can be distributed at near-zero cost.

This almost-free knowledge creates another problem: how do we create value in a knowledge economy when knowledge is increasingly free?

Correspondent Dave P. offered one answer: static knowledge is indeed increasingly free, but dynamic information (such as market conditions) generates value to those who need actionable, timely information.

One example of this might be a Bloomberg terminal, which delivers a flood of information for a monthly fee.

Another source of value is generated by firms offering a warehouse of free knowledge–for example, YouTube. The instructional videos are free to the user, but YouTube skims an advertising income from every view.

I would add a third type of value: curation of almost-free knowledge/ information. What is the value proposition in blogs and media outlets, when “news” is essentially free? The value is created by the curation of insightful commentary, charts, histories, etc.

Anyone who successfully curates the overwhelming torrent of free info/knowledge into useful, manageable troves has provided a very valuable service.

A fourth type of value is created by systems such as bitcoin which are structured to keep transactional information transparent: add in that there are a limited number of bitcoins that can be mined, and this digital information (the blockchain) becomes valuable.

Correspondent Bart D. recently described another source of value in a world in which knowledge is nearly free: the social capital of who you know, and what all the people in your social-capital circle know.

A person could perform well in school and obtain a university degree signifying acquisition of knowledge, but their successful leveraging of that new knowledge often boils down to the social and cultural capital they acquired in their home, neighborhood, city and wider social circles.

Disadvantaged people tend to stay disadvantaged not just from a lack of knowledge but from a lack of cultural and social capital–habits of work, ability to sacrifice today to meet long-term goals, and access to a successful circle of people who can act as mentors or collaborators in a knowledge-based economy.

I describe the eight essential skills needed to build social and cultural capital in my book Get a Job, Build a Real Career and Defy a Bewildering Economy.

So How do we create value in an economy that is increasingly knowledge-based? There is no one size fits all answer, but we know this:

1. Value flows to what’s scarce. Unskilled labor and financial capital are both abundant, and hence have near-zero scarcity value: cash in the bank earns nothing.

2. Experiential knowledge that cannot be digitized will retain scarcity value even as knowledge and expertise that can be digitized become essentially free.

This is the basis of my suggestion to acquire skills, not credentials. Credentials are increasingly in over-supply; problem-solving skills remain scarce.

By Charles Hugh Smith | Of Two Minds

 

Here Is The Full Text And Summary Of The Amended House GOP Tax Bill

While we await the full details of the Senate bill, moments ago the House Ways and Means Committee released the Amended House GOP tax bill, as well as its summary.

Here are the key highlights from the Amendment (link), first in principle:

Amendment to the Amendment in the Nature of a Substitute to H.R. 1 Offered by Mr. Brady of Texas The amendment makes improvements to the amendment in the nature of a substitute relating to the maximum rate on business income of individuals, preserves the adoption tax credit, improves the program integrity of the Child Tax Credit, improves the consolidation of education savings rules, preserves the above-the-line deduction for moving expenses of a member of the Armed Forces on active duty, preserves the current law effective tax rates on C corporation dividends subject to the dividends received deduction, improves the bill’s interest expense rules with respect to accrued interest on floor plan financing indebtedness, modifies the treatment of S corporation conversions into C corporations, modifies the tax treatment of research and experimentation expenditures, modifies the treatment of expenses in contingent fee cases, modifies the computation of life insurance tax reserves, modifies the treatment of qualified equity grants, preserves the current law treatment of nonqualified deferred  compensation, modifies the transition rules on the treatment of deferred foreign income, improves the excise tax on investment income of private colleges and universities, and modifies rules with respect to political statements made by certain tax-exempt entities.

And the details, from the summary (link):

  • Maximum rate on business income of individuals (reduced rate for small businesses with net active business income)

The amendment provides a 9-percent tax rate, in lieu of the ordinary 12-percent tax rate, for the first $75,000 in net business taxable income of an active owner or shareholder earning less than $150,000 in taxable income through a pass-through business. As taxable income exceeds $150,000, the benefit of the 9-percent rate relative to the 12-percent rate is reduced, and it is fully  phased out at $225,000. Businesses of all types are eligible for the preferential 9-percent rate, and such rate applies to all business income up to the $75,000 level. The 9-percent rate is phased in over five taxable years, such that the rate for 2018 and 2019 is 11 percent, the rate for 2020 and 2021 is 10 percent, and the rate for 2022 and thereafter is 9 percent. For unmarried individuals, the $75,000 and $150,000 amounts are $37,500 and $75,000, and for heads of household, those amounts are $56,250 and $112,500.

  • Maximum rate on business income of individuals (eliminate provisions related to Self-Employment Contributions Act)

The amendment preserves the current-law rules on the application of payroll taxes to amounts received through a pass-through entity.

  • Repeal of nonrefundable credits

The amendment preserves the current law non-refundable credit for qualified adoption expenses.

  • Refundable credit program integrity

The amendment requires a taxpayer to provide an SSN for the child in order to claim the entire amount of the enhanced child tax credit.

  • Rollovers between qualified tuition programs and qualified able programs

The amendment would allow rollovers from section 529 plans to ABLE programs.

  • Repeal of exclusion for qualified moving expense reimbursement

The amendment preserves the current law tax treatment for moving expenses in the case of a member of the Armed Forces of the United States on active duty who moves pursuant to a military order.

  • Reduction in corporate tax rate

The amendment lowers the 80-percent dividends received deduction to 65 percent and the 70- percent dividends received deduction to 50 percent, preserving the current law effective tax rates on income from such dividends.

  • Interest

The amendment provides an exclusion from the limitation on deductibility of net business interest for taxpayers that paid or accrued interest on “floor plan financing indebtedness.” Full expensing would no longer be allowed for any trade or business that has floor plan financing indebtedness.

  • Modify treatment of S corporation conversions into C corporations

The amendment provides that distributions from an eligible terminated S corporation would be treated as paid from its accumulated adjustments account and from its earnings and profits on a pro-rata basis. The amendment provides that any section 481(a) adjustment would be taken into account ratably over a 6-year period. For this purpose, an eligible terminated S corporation means any C corporation which (i) was an S corporation on the date before the enactment date, (ii) revoked its S corporation election during the 2-year period beginning on the enactment date, and (iii) had the same owners on the enactment date and on the revocation date.

  • Amortization of Research and Experimentation Expenditures

The amendment provides that certain research or experimental expenditures are required to be capitalized and amortized over a 5-year period (15 years in the case of expenditures attributable to research conducted outside the United States). The amendment provides that this rule applies to research or experimental expenditures paid or incurred during taxable years beginning after 2023.

  • Uniform treatment of expenses in contingent fee cases

The amendment disallows an immediate deduction for litigation costs advanced by an attorney to a client in contingent-fee litigation until the contingency is resolved, thus creating parity throughout the United States as to when, if ever, such expenses are deductible in such litigation. Under current law, certain attorneys within the Ninth Circuit who work on a contingency basis can immediately deduct expenses that ordinarily would be considered fees paid on behalf of clients, in the form of loans to those clients, and therefore not deductible when paid or incurred. This provision creates parity on this issue throughout the United States by essentially repealing the Ninth Circuit case, Boccardo v. Commissioner, 56 F.3d 1016 (9th Cir. 1995), which created a circuit split on this issue.

  • Surtax on life insurance company taxable income

The amendment generally preserves current law tax treatment of insurance company deferred acquisition costs, life insurance company reserves, and pro-ration, and imposes an 8% surtax on life insurance income. This provision is intended as a placeholder.

  • Nonqualified deferred compensation

The amendment strikes Section 3801 so that the current-law tax treatment of nonqualified deferred compensation is preserved.

  • Modification of treatment of qualified equity grants

The amendment clarifies that restricted stock units (RSU) are not eligible for section 83(b) elections. Other than new section 83(i), section 83 does not apply to RSUs.

  • Treatment of deferred foreign income upon transition to participation exemption system of taxation

The amendment provides for effective tax rates on deemed repatriated earnings of 7% on earnings held in illiquid assets and 14% on earnings held in liquid assets.

  • Excise tax on certain payments from domestic corporations to related

foreign corporations; election to treat such payments as effectively connected income. The amendment modifies the bill’s international base erosion rules in two respects. First, the provision eliminates the mark-up on deemed expenses. Second, the amendment expands the foreign tax credit to apply to 80% of foreign taxes and refines the measurement of foreign taxes paid by reference to section 906 of current law rather than a formula based on financial accounting information.

  • Excise taxed based on investment income of private colleges and universities

The amendment ensures that endowment assets of a private university that are formally held by organizations related to the university, and not merely those that are directly held by the university, are subject to the 1.4-percent excise tax on net investment income.

See The full bill here (link): Source: ZeroHedge

The Most Important Charts For Wine Lovers

While everyone continues to focus on stocks, a much larger, far more important situation is fermenting for wine lovers: global wine production crashes to 50-year low.

New data from the International Organization of Vine and Wine (OIV) indicates total world output is projected to hit 246.7 million hectoliters in 2017– an 8% drop compared with 2016 “one of the lowest levels for several decades”.

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According to the drinks business,

Global wine inventories were already slightly tight going into 2017, but the decline in production in these key European producers will mean that the global wine industry is going into 2018 with inventories that are likely to be at least 20m hectolitres lower than they were going into 2017 – equivalent to nearly 8% of total global wine consumption. Wine available for consumption around the world will be at its lowest point in decades.

Why is there a global wine shortage? 

A new report issued from OIV indicates lower production levels were blamed on ‘extreme weather’ in Italy, France, and Spain– top 3 producers in the world. Meanwhile, Portugal, Romania, Hungary, Austria, the U.S. and countries in South America have seen a rise in production compared with 2016.

  • Very low production in Europe: production levels were at a historic low in Italy (39.3 mhl), France (36.7 mhl) and Spain (33.5 mhl). Germany (8.1 mhl) also recorded low production. Portugal (6.6 mhl), Romania (5.3 mhl), Hungary (2.9 mhl) and Austria (2.4 mhl) were the only countries to see a rise compared with 2016.
  • An even higher level of production was recorded in the United States (23.3 mhl).
  • In South America, production increased compared with the low levels of 2016, particularly in Argentina (11.8 mhl) and Brazil (3.4 mhl). In Chile (9.5 mhl), vinified production remained low.
  • Australian production (13.9 mhl) grew and New Zealand production (2.9 mhl) maintained a very good level despite a slight decline.

BBC indicates wildfires in California occurred after the harvest and will have minimal impact besides a 1% drop in production.

Output in the US – the world’s fourth-largest producer and its biggest wine consumer – is also due to fall by only 1% since reports indicate wildfires struck in California after the majority of wine producers had already harvested their crops.

2017 Wine production in the main producing countries

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The VINEX is an independent web-based exchange connecting major buyers and sellers who trade bulk wine in high producing countries. VINEX Global Price Index (VGPI) shows bulk wine prices soaring in the past 1.5-years.

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In addition to skyrocketing wine prices, world wine consumption (demand) continues to weaken from a 2008 peak, along with printing underneath the mean. Estimated wine consumption for 2017 is in the range 240.5 to 245.8 mhl.

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The bottom line for wine lovers is higher prices in the future. You’re witnessing one item a central bank cannot control = food price inflation. Just remember, food price inflation has toppled empires. You’ve been warned.

Source: StockBoardAsset.com

IRS Awards Multimillion-Dollar (no bid) Fraud-Prevention Contract to Equifax

Say what?

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Former Equifax CEO Richard Smith, who stepped down after the breach, endured a bipartisan shaming Tuesday at a hearing of a House Energy and Commerce subcommittee. | Chip Somodevilla/Getty Images

The no-bid contract was issued last week, as the company continued facing fallout from its massive security breach.

The IRS will pay Equifax $7.25 million to verify taxpayer identities and help prevent fraud under a no-bid contract issued last week, even as lawmakers lash the embattled company about a massive security breach that exposed personal information of as many as 145.5 million Americans.

A contract award for Equifax’s data services was posted to the Federal Business Opportunities database Sept. 30 — the final day of the fiscal year. The credit agency will “verify taxpayer identity” and “assist in ongoing identity verification and validations” at the IRS, according to the award.

The notice describes the contract as a “sole source order,” meaning Equifax is the only company deemed capable of providing the service. It says the order was issued to prevent a lapse in identity checks while officials resolve a dispute over a separate contract.

Lawmakers on both sides of the aisle blasted the IRS decision.

“In the wake of one of the most massive data breaches in a decade, it’s irresponsible for the IRS to turn over millions in taxpayer dollars to a company that has yet to offer a succinct answer on how at least 145 million Americans had personally identifiable information exposed,” Senate Finance Chairman Orrin Hatch (R-Utah) told POLITICO in a statement.

The committee’s ranking member, Sen. Ron Wyden (D-Ore.), piled on: “The Finance Committee will be looking into why Equifax was the only company to apply for and be rewarded with this. I will continue to take every measure possible to prevent taxpayer data from being compromised as this arrangement moves forward.”

The IRS defended its decision in a statement, saying that Equifax told the agency that none of its data was involved in the breach and that Equifax already provides similar services to the IRS under a previous contract.

“Following an internal review and an on-site visit with Equifax, the IRS believes the service Equifax provided does not pose a risk to IRS data or systems,” the statement reads. “At this time, we have seen no indications of tax fraud related to the Equifax breach, but we will continue to closely monitor the situation.”

Equifax did not respond to requests for comment.

Equifax disclosed a cybersecurity breach in September that potentially compromised the personal information, including Social Security numbers, of more than 145 million Americans — data that security experts have described as the crown jewels for identity thieves. The company is one of three major credit reporting bureaus whose data determine whether consumers qualify for mortgages, auto loans, credit cards and other financial commitments.

The company has subsequently taken criticism for issuing confusing instructions to consumers, which contained language that appeared aimed at limiting customers’ ability to sue, as well as tweeting out a link to a fake website instead of its own security site. The Justice Department later opened a criminal investigation into three Equifax executives who sold almost $1.8 million of their company stock before the breach was publicly disclosed, Bloomberg has reported.

Former Equifax CEO Richard Smith, who stepped down after the breach, endured a bipartisan shaming Tuesday at a hearing of a House Energy and Commerce subcommittee. The full committee’s Republican chairman, Greg Walden of Oregon, proclaimed: “It’s like the guards at Fort Knox forgot to lock the doors.”

Reps. Suzan DelBene (D-Wash.) and Earl Blumenauer (D-Ore.) separately penned letters to IRS Commissioner John Koskinen demanding he explain the agency’s rationale for awarding the contract to Equifax and provide information on any alternatives the agency considered.

“I was initially under the impression that my staff was sharing a copy of the Onion, until I realized this story was, in fact, true,” Blumenauer wrote.

The IRS, which has suffered its own embarrassing data breaches as well as a tidal wave of tax-identity fraud, has taken steps to improve its outdated information technology with the help of $106.4 million that Congress earmarked for cyber security upgrades and identity theft prevention efforts.

Hatch questioned the agency’s security systems in a letter to Koskinen last month. Hatch said he was concerned that the IRS lacked the technology necessary “to safeguard the integrity of our tax administration system.”

NFL Seriously Concerned With Empty Stadiums

League’s attendance, viewership dropping while SJW’s ruin pro football.

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Second half kick off.

Week 1 of the NFL season had plenty of important stories worth following, but maybe the most entertaining was the mostly empty stadiums in Los Angeles and Santa Clara.

Both the Los Angeles Rams and San Francisco 49ers had sparse crowds for their home openers, and that has not gone unnoticed by the NFL.

Ian Rapoport’s reports on twitter that the league is clearly worried about the optics of half-filled stadiums. And they should be. It’s embarrassing for the league. Read more here.

Latest discussion on how the SJW’s are destroying pro football below …

Source: Infowars

BRICS Bombshell Exposed: A “Fair Multipolar World” Where Oil Trade Bypasses The Dollar

Putin reveals ‘fair multipolar world’ concept in which oil contracts could bypass the US dollar and be traded with oil, yuan and gold…

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The annual BRICS summit in Xiamen – where President Xi Jinping was once mayor – could not intervene in a more incandescent geopolitical context.

Once again, it’s essential to keep in mind that the current core of BRICS is “RC”; the Russia-China strategic partnership. So in the Korean peninsula chessboard, RC context – with both nations sharing borders with the DPRK – is primordial.

Beijing has imposed a definitive veto on war – of which the Pentagon is very much aware.

Pyongyang’s sixth nuclear test, although planned way in advance, happened only three days after two nuclear-capable US B-1B strategic bombers conducted their own “test” alongside four F-35Bs and a few Japanese F-15s.

Everyone familiar with the Korean peninsula chessboard knew there would be a DPRK response to these barely disguised “decapitation” tests.

So it’s back to the only sound proposition on the table: the RC “double freeze”. Freeze on US/Japan/South Korea military drills; freeze on North Korea’s nuclear program; diplomacy takes over.

The White House, instead, has evoked ominous “nuclear capabilities” as a conflict resolution mechanism.

Gold mining in the Amazon, anyone?

On the Doklam plateau front, at least New Delhi and Beijing decided, after two tense months, on “expeditious disengagement” of their border troops. This decision was directly linked to the approaching BRICS summit – where both India and China were set to lose face big time.

Indian Prime Minister Narendra Modi had already tried a similar disruption gambit prior to the BRICS Goa summit last year. Then, he was adamant that Pakistan should be declared a “terrorist state”. The RC duly vetoed it.

Modi also ostensively boycotted the Belt and Road Initiative (BRI) summit in Hangzhou last May, essentially because of the China-Pakistan Economic Corridor (CPEC).

India and Japan are dreaming of countering BRI with a semblance of connectivity project; the Asia-Africa Growth Corridor (AAGC). To believe that the AAGC – with a fraction of the reach, breath, scope and funds available to BRI – may steal its thunder, is to enter prime wishful-thinking territory.

Still, Modi emitted some positive signs in Xiamen; “We are in mission-mode to eradicate poverty; to ensure health, sanitation, skills, food security, gender equality, energy, education.” Without this mammoth effort, India’s lofty geopolitical dreams are D.O.A.

Brazil, for its part, is immersed in a larger-than-life socio-political tragedy, “led” by a Dracula-esque, corrupt non-entity; Temer The Usurper. Brazil’s President, Michel Temer, hit Xiamen eager to peddle “his” 57 major, ongoing privatizations to Chinese investors – complete with corporate gold mining in an Amazon nature reserve the size of Denmark. Add to it massive social spending austerity and hardcore anti-labor legislation, and one’s got the picture of Brazil currently being run by Wall Street. The name of the game is to profit from the loot, fast.

The BRICS’ New Development Bank (NDB) – a counterpart to the World Bank – is predictably derided all across the Beltway. Xiamen showed how the NDB is only starting to finance BRICS projects. It’s misguided to compare it with the Asian Infrastructure Investment Bank (AIIB). They will be investing in different types of projects – with the AIIB more focused on BRI. Their aim is complementary.

‘BRICS Plus’ or bust

On the global stage, the BRICS are already a major nuisance to the unipolar order. Xi politely put it in Xiamen as “we five countries [should] play a more active part in global governance”.

And right on cue Xiamen introduced “dialogues” with Mexico, Egypt, Thailand, Guinea and Tajikistan; that’s part of the road map for  “BRICS Plus” – Beijing’s conceptualization, proposed last March by Foreign Minister Wang Yi, for expanding partnership/cooperation.

A further instance of “BRICS Plus” can be detected in the possible launch, before the end of 2017, of the Regional Comprehensive Economic Partnership (RCEP) – in the wake of the death of TPP.

Contrary to a torrent of Western spin, RCEP is not “led” by China.

Japan is part of it – and so is India and Australia alongside the 10 ASEAN members. The burning question is what kind of games New Delhi may be playing to stall RCEP in parallel to boycotting BRI.

Patrick Bond in Johannesburg has developed an important critique, arguing that “centrifugal economic forces” are breaking up the BRICS, thanks to over-production, excessive debt and de-globalization. He interprets the process as “the failure of Xi’s desired centripetal capitalism.”

It doesn’t have to be this way. Never underestimate the power of Chinese centripetal capitalism – especially when BRI hits a higher gear.

Meet the oil/yuan/gold triad

It’s when President Putin starts talking that the BRICS reveal their true bombshell. Geopolitically and geo-economically, Putin’s emphasis is on a “fair multipolar world”, and “against protectionism and new barriers in global trade.” The message is straight to the point.

The Syria game-changer – where Beijing silently but firmly supported Moscow – had to be evoked; “It was largely thanks to the efforts of Russia and other concerned countries that conditions have been created to improve the situation in Syria.”

On the Korean peninsula, it’s clear how RC think in unison; “The situation is balancing on the brink of a large-scale conflict.”

Putin’s judgment is as scathing as the – RC-proposed – possible solution is sound; “Putting pressure on Pyongyang to stop its nuclear missile program is misguided and futile. The region’s problems should only be settled through a direct dialogue of all the parties concerned without any preconditions.”

Putin’s – and Xi’s – concept of multilateral order is clearly visible in the wide-ranging Xiamen Declaration, which proposes an “Afghan-led and Afghan-owned” peace and national reconciliation process, “including the Moscow Format of consultations” and the “Heart of Asia-Istanbul process”.

That’s code for an all-Asian (and not Western) Afghan solution brokered by the Shanghai Cooperation Organization (SCO), led by RC, and of which Afghanistan is an observer and future full member.

And then, Putin delivers the clincher;

“Russia shares the BRICS countries’ concerns over the unfairness of the global financial and economic architecture, which does not give due regard to the growing weight of the emerging economies. We are ready to work together with our partners to promote international financial regulation reforms and to overcome the excessive domination of the limited number of reserve currencies.”

“To overcome the excessive domination of the limited number of reserve currencies” is the politest way of stating what the BRICS have been discussing for years now; how to bypass the US dollar, as well as the petrodollar.

Beijing is ready to step up the game. Soon China will launch a crude oil futures contract priced in yuan and convertible into gold.

This means that Russia – as well as Iran, the other key node of Eurasia integration – may bypass US sanctions by trading energy in their own currencies, or in yuan.

Inbuilt in the move is a true Chinese win-win; the yuan will be fully convertible into gold on both the Shanghai and Hong Kong exchanges.

The new triad of oil, yuan and gold is actually a win-win-win. No problem at all if energy providers prefer to be paid in physical gold instead of yuan. The key message is the US dollar being bypassed.

RC – via the Russian Central Bank and the People’s Bank of China – have been developing ruble-yuan swaps for quite a while now.

Once that moves beyond the BRICS to aspiring “BRICS Plus” members and then all across the Global South, Washington’s reaction is bound to be nuclear (hopefully, not literally).

Washington’s strategic doctrine rules RC should not be allowed by any means to be preponderant along the Eurasian landmass. Yet what the BRICS have in store geo-economically does not concern only Eurasia – but the whole Global South.

Sections of the War Party in Washington bent on instrumentalizing  India against China – or against RC – may be in for a rude awakening. As much as the BRICS may be currently facing varied waves of economic turmoil, the daring long-term road map, way beyond the Xiamen Declaration, is very much in place.

Punch Line: The U.S. Dollar Index (DXY) Chart

By Pepe Escobar | ZeroHedge

New Study Finds Facebook Page Reach has Declined 20% in 2017

It’s not just you and your Page – according to new research by BuzzSumo, the average number of engagements with Facebook posts created by brands and publishers has fallen by more than 20% since January 2017.

BuzzSumo analyzed more than 880 million Facebook posts from publisher and brand Pages over the past year, noting a clear decline in engagements since early 2017.

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That’s likely no surprise to most Facebook Page managers – organic reach on Facebook has been in decline since late 2013, according to various reports, with continual changes to the News Feed algorithm re-aligning the priority of what users see.

Indeed, in the past year, Facebook’s News Feed algorithm has seen a range of updates which could contribute to this decline:

  • In August last year, Facebook announced a News Feed update focused on improving the individual relevance of the stories shown to each user
  • In January, Facebook released a News Feed update which sought to better identify and rank authentic content
  • In May, the News Feed got another tweak, this time to reduce the reach of links to sites covered with ads
  • Also in May, Facebook released a News Feed change which aimed at reducing the reach of clickbait
  • And earlier this month, Facebook re-iterated the need for mobile optimization but announcing that links to non-mobile optimized pages would be penalized.

But then again, none of those changes individually correlates to the decline noted by BuzzSumo, which, as you can see, shifts significantly in January.

As listed above, the January News feed update focused onauthentic contentis not likely to have been the cause of this drop – that was more aimed at weeding out posts that artificially seek to game the algorithm by asking for Likes, and on pushing the reach of real-time content. Maybe Facebook’s increased focus on live, real-time material has had some impact, but it would seem unlikely that it’s the cause of that January drop.

What’s more likely is actually another News Feed update introduced in June 2016, which put increased emphasis on content posted by friends and family over Page posts. Facebook’s always looking to get people sharing more personal updates, and those updates generate more engagement, which keeps people on platform longer, while also providing Facebook with more data to fuel their ad targeting.

In terms of News Feed shifts, this one appears to be the most significant of recent times, but then again, the impacts of that would have been evident earlier in BuzzSumo’s chart. Maybe Facebook turned up the volume on this update in January? It’s obviously impossible to know, and Facebook’s doesn’t reveal much about the inner workings of their News Feed team.

 In terms of which posts, specifically, are driving engagement (or not), BuzzSumo found that:

“The biggest fall in engagement was with image posts and link posts. According to the data video posts had the smallest fall in engagement and videos now gain twice the level of engagement of other post formats on average.”

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Again, video is king – if you’re concerned about declines in your Facebook reach, then video is where you should be looking. Of course, video posts are also seeing reach declines in line with the overall shift, but they’re outperforming all others, and are likely to be your best bet in maximizing your reach on the platform.

So what can you do? However you look at it, Facebook is a huge driver of referral traffic for a great many websites, with many now having an established reliance on The Social Network to push their numbers.

For one, these figures again underline why putting too much reliance on Facebook is a strategic risk. Diversifying your traffic sources and building your own e-mail list is sometimes easier said than done, particularly given Facebook’s scale, but the figures do underline that it’s important to consider how you can maximize your opportunities outside of The Social Network.

In terms of how to improve your Facebook performance, specifically, there are no definitive answers.

Some brands have seen success in posting less often – back in May, Buffer explained that they’ve been able to triple their Facebook reach while reducing their output by 50%. Less is more is an attractive strategy, but whether that’ll work for your business, it’s impossible to say.

Others have switched to posting more often, something Facebook recommends in their own documentation on how journalists can make best use of the News Feed.

“Post frequently – Don’t worry about over-posting. The goal of News Feed is to show each person the most relevant story so not all of your posts are guaranteed to show in their Feeds.”

In fact, Facebook notes that some Pages post up to 80 times per day, which seems excessive, but when you consider both the reach restrictions (less than 5% of your audience will see each of your posts) and the fact that most people will see your content in their News Feed, as opposed to coming to your Facebook Page, the chances of you spamming fans by over-posting or re-posting are far more limited than they used to be.

If you post more often, and you get less engagement per post, that could still average out to increasing your overall numbers – though you need to watch your negative feedback measures (unfollows and unlikes).

Really, no one has the answers, because it’ll be different for each Page, each audience. The only real way to counter such declines is to experiment, to encourage engagement, to spark conversation and generate more reach through interaction. That takes more work, of course, and you then have to match that additional time investment with return.

Again, it’ll be different for every business, there’s no magic formula. But Facebook reach is clearly declining. Worth considering how that impacts your process. 

By Andrew Hutchinson | Social Media Today

This Time, It’s a Bubble in Rentals

https://mises.org/sites/default/files/styles/slideshow/public/static-page/img/4814951522_b8c96d4201_z.jpg?itok=712iRtzSSin City’s projected 5,000 new apartment units for this year makes no noise nationally in the latest real estate craze. “In 2017, the ongoing apartment building-boom in the US will set a new record: 346,000 new rental apartments in buildings with 50+ units are expected to hit the market,” writes Wolf Richter on Wolf Street. That is three times the number of units that came on line in 2011.

Richter continues, “Deliveries in 2017 will be 21% above the prior record set in 2016, based on data going back to 1997, by Yardi Matrix, via Rent Café. And even 2015 had set a record. Between 1997 and 2006, so pre-Financial-Crisis, annual completions averaged 212,740 units; 2017 will be 63% higher!”

I’ve written before about the high-rise crane craze in Seattle, but that’s nothing compared to New York and Dallas, that are adding 27,000 and 25,000 units, respectively. Chicago is adding 7,800 units despite a shrinking population and rents decreasing 19 percent.

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Not surprisingly, Fannie Mae and Freddie Mac are financing this rental housing boom. I wrote recently, the GSEs made 53% of all apartment loans in 2016, down from their combined 68% market share in 2012. “So, their conservator, The Federal Housing Finance Agency (FHFA), recently eased the GSE’s lending caps so they can crank out even more loans.”

Mary Salmonsen writes for multifamilyexecutive.com, “Currently, Fannie and Freddie are particularly dominant in garden apartments [and] in student housing, with 62% and 61% shares, respectively. The two remain the largest mid-/high-rise lenders but hold only 35% of the market.”

Mr. Richter warns us, “Government Sponsored Enterprises such as Fannie Mae guarantee commercial mortgages on apartment buildings and package them in Commercial Mortgage-Backed Securities. So taxpayers are on the hook. Banks are on the hook too.”

But, for the moment, it’s build them and they will come; first renters, then complex buyers. Wall Street giant “The Blackstone Group acquired three Las Vegas Valley apartment complexes for $170 million, property records show,” writes Eli Segall for the Las Vegas Review Journal. “Overall, it bought 972 units for an average of $174,900 each.”

Sales like this has developers going as fast as they can. I heard an apartment developer say Vegas has at least four more good years left in this cycle and is scrambling for new sites. In the land of Starbucks, Microsoft and Amazon, it’s thought the boom will never end. Richter writes, “the new supply of apartment units hitting the market in 2018 and 2019 will even be larger. In Seattle, for example, there are 67,507 new apartment units in the pipeline.”

However, while no one was paying attention, “the prices of apartment buildings nationally, after seven dizzying boom years, peaked last summer and have declined 3% since,” Richter writes. “Transaction volume of apartment buildings has plunged. And asking rents, the crux because they pay for the whole construct, have now flattened.”

As usual, cheap money entices developers to over do it, and the fall will be just as painful.

Source: Mises Institute 

Develop Self Discipline Like A Roman Emperor,

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When you arise in the morning, think of what a precious privilege it is to be alive, to breathe, to think, to enjoy, to love.

–Marcus Aurelius–

Why is it so hard to do the things that are in line with our goals but not with our desires at that moment? How can we harness the power of our minds to create a steady fountain of self-discipline each day?


Dealing with Negative People: Advice from a Roman Emperor

I believe happiness is 10% circumstances and 90% attitude.

How you react to your circumstances makes the biggest impact – and the way you choose to deal with negative people is no exception.

As the ruler of a vast empire, Marcus Aurelius had to deal with negative people on a daily basis. In his writings – the self-addressed Meditations – Aurelius provides us with a quote about dealing with negative people that I find to be an incredibly helpful reminder for setting my attitude.

Source: Wisedrugged

Seattle Has Most Cranes In Country For 2nd Year In A Row — And Their Lead Is Growing

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With about 150 projects starting this year or in the pipeline just in the core of the city, construction is as frenzied as ever.

(The Seattle Times) For the second year in a row, Seattle has been named the crane capital of America — and no other city is even close, as the local construction boom transforming the city shows no signs of slowing.

Seattle had 58 construction cranes towering over the skyline at the start of the month, about 60 percent more than any other U.S. city, according to a new semiannual count from Rider Levett Bucknall, a firm that tracks cranes around the world.

Seattle first topped the list a year ago, when it also had 58 cranes, and again in January, when the tally grew to 62.

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The designation has come to symbolize — for better or worse — the rapid growth and changing nature of the city, as mid-rises and skyscrapers pop up where parking lots and single-story buildings once stood.

And the title of most cranes might be here to stay, at least for a while. The city’s construction craze is continuing at the same pace as last year, while cranes are coming down elsewhere: Crane counts in major cities nationwide have dropped 8 percent over the past six months.

During the last count, Seattle had just six more cranes than the next-highest city, Chicago. Now it holds a 22-crane lead over second-place Los Angeles, with Denver, Chicago and Portland just behind.

Seattle has more than twice as many cranes as San Francisco or Washington, D.C., and three times as many cranes as New York. Seattle has more cranes than New York, Honolulu, Austin, Boston and Phoenix combined.

At the same time, Seattle’s construction cycle doesn’t look like it’s letting up. Just in the greater downtown region, 50 major projects are scheduled to begin construction this year, according to the Downtown Seattle Association. An additional 99 developments are in the pipeline for future years. And that’s on top of what is already the busiest-period ever for construction in the city’s core.

“We continue to see a lot of construction activity; projects that are finishing up are quickly replaced with new projects starting up,” said Emile Le Roux, who leads Rider Levett Bucknall’s Seattle office. “We are projecting that that’s going to continue for at least another year or two years.”

“It mainly has to do with the tech industry expanding big time here in Seattle,” Le Roux said.

Companies that supply the tower cranes say there’s a shortage of both equipment and manpower, so developers need to book the cranes and their operators several months in advance. It costs up to about $50,000 a month to rent one, and they can rise 600 feet into the air.

Most cranes continue to be clustered in downtown and South Lake Union, but several other neighborhoods have at least one, from Ballard to Interbay and Capitol Hill to Columbia City.

By Mike Rosenberg | The Seattle Times

 

You Can Now Buy Weed-Infused Wine In CA

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(True Activist) As consumers become more educated on the benefits of marijuana — both recreational and medicinal, it continues to be decriminalized at an increasing pace. So far, 29 states (and DC) in the United States have legalized cannabis for medicinal use and eight for recreational. With the freedom to cultivate the herb and utilize it in numerous ways, entrepreneurs have started experimenting with cannabis and infusing it into a variety of edibles — such as baked goods, candies, soda and now… wine.

That’s right, cannabis-infused wine (otherwise known as Canna Vine) is finally available for sale in California. According to the Los Angeles Times, the beverage is made from organically grown marijuana and bio-dynamically farmed grapes. Because the product is low in THC — the primary psychoactive compound found within cannabis — it delivers a mellow “body high” without large effects.

The innovative wine was developed by cancer survivor Lisa Molyneux, who owns the dispensary Greenway in Santa Cruz, and Louisa Sawyer Lindquist, who owns Verdad Wines in Santa Maria. Molyneux, particularly, was inspired to invent the wine to aid fellow cancer survivors.

 

There’s a reason Canna Vine costs anywhere from $120 to $400 for half a bottle. The process to make the product begins with one pound of marijuana. After the weed is wrapped in cheese cloth, it is added to a barrel of wine where it sits for approximately one year to ferment and repose.

Though the concept of cannabis-infused wine is nothing new (in ancient China, it was prescribed for pain relief), the fact that it can be legally procured in the modern age is.

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The founders of Canna Vine are presently experimenting with the green wine (literally) to find the best balance of Sativa and Indica. Their ultimate aim is to sell a wine that creates “uplifting and relaxing sensations.”

Said Molyneux,

“What’s nice about it is how subtle it is. There’s a little flush after the first sip, but then the effect is really cheery, and at the end of the night you sleep really well. It really is the best of both worlds; you get delicious wines with medicinal benefits.”

Melissa Etheridge, — a prominent advocate of Canna Vine — credits the beverage with helping her through chemotherapy. She said,

“When I was in my deepest, darkest, last throes of chemo,” says Etheridge, “I couldn’t smoke or use a vaporizer — and I was never really an edibles eater; I didn’t want to be ‘out of it.’”

“It lands in a really beautiful place,” she added.

What’s the catch?

First of all, the infused wine is only legal to purchase in California. Second, one needs a medical marijuana license to purchase the product.

California is presently the only place one can procure alcohol infused with weed. Even states like Washington, Oregon, and Colorado don’t allow the combination to be produced or sold.

Presently, both Molyneux and Lindquist seek to refine the wine to position themselves in the market of high-quality cannabis-infused products. Said Lindquist,

“Cannabis wine has been so effective as a stress reliever, as a mood elevator, and as a medicineI have no idea what the market will be like for it, but whatever I make I want to be safe, made from pure ingredients and, hopefully, delicious.”

Source: New World Order Report

Ethereum Forecast To Surpass Bitcoin By 2018

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Back on  February 27, when bitcoin was trading in the mid-teens, we wrote Step aside bitcoin, there is a new blockchain kid in town.”

In recent days, the world’s second most popular digital currency, Ethereum, has been surging (despite its embarrassing hack last June when some $59 million worth of “ethers” were stolen forcing the blockchain to implement a hard fork to undo the damage), prompting many to wonder if some big announcement was imminent. It appears that yet again someone “leaked” because on Monday, an alliance of some of the world’s most advanced financial and tech companies including JPMorgan Chase, Microsoft, Intel and more than two dozen other companies teamed up to develop standards and technology to make it easier for enterprises to use blockchain code Ethereum – not bitcoin – in the latest push by large firms to move toward the holy grail of a post-central bank world in which every transaction is duly tracked: a distributed ledger systems.

Commenting on the sharp – for the time – rise in ETH price (which had moved from $13 to $15), we said “the move may be just the beginning if most corporations adopt Ethereum as the distributed ledger standard: Accenture released a report last month arguing that blockchain technology could save the 10 largest banks $8 billion to $12 billion a year in infrastructure costs — or 30 percent of their total costs in that area.” Since then most corporations have indeed adopted Ethereum as the distributed ledger standard.

* * *

Three months later, and with Ethereum 15x higher at $230, Bloomberg today writes: “Step aside, bitcoin. There’s another digital token in town that’s winning over the hearts and wallets of cryptocurrency enthusiasts across the globe.”

It’s not just the lede that is familiar, it’s everything else too, especially the forecast.

The value of ether – the digital currency linked to the ethereum blockchain – could surpass that of bitcoin by the end of 2018, according to Olaf Carlson-Wee, chief executive officer of cryptocurrency hedge fund Polychain Capital who was interviewed by Bloomberg.

What we’ve seen in ethereum is a much richer, organic developer ecosystem develop very, very quickly, which is what has driven ethereum’s price growth, which has actually been much more aggressive than bitcoin,” said Carlson-Wee, in an interview on Bloomberg Television Tuesday.

As we previously reported, while Ethereum suffered an embarrassing hack last summer resulting in the theft in millions of ether, the cryptocurrency has drawn the interest of industries from finance to health care because its blockchain does far more than let bitcoin users send value from one person to another. “Its advocates think it could be a universally accessible machine for running businesses, as the technology allows people to do more complex actions in a shared and decentralized manner.

Which is why ethereum is gaining increasingly more converts. Carlson-Wee wasn’t the first to forecast a bright future for ethereum. Fred Wilson, co-founder and managing partner at Union Square Ventures, laid out an even more ambitious timeline for the cryptocurrency in an interview earlier this month.

“The market cap of ethereum will bypass the market cap of bitcoin by the end of the year,” said Wilson, who is also chairman of the board at Etsy.

In fact, if one looks at the relative market share of various cryptocurrencues, and extrapolates current trends, ethereum could surpass bitcoin in just a few months.

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Bitcoin currently dominates a little less than half of the digital currency market, down from almost 90 percent three months ago, according to Coinmarketcap.com data. Meanwhile, ethereum has quadrupled its share, which now represents more than a quarter of the pie.

Indicatively, as of this moment, the market cap of Bitcoin is $37 billion, 75% higher than Ethereum. If the optimsitic forecasts are accurate, Ethereum, which is currently offered at $230, will cost roughly $400 next time we look at  it, if not more. What is more interesting is that while bitcoin hit an all time high of approximately $2900 one week ago, it has failed to recapture the highs, even as ethereum has continued surging ever higher, perhaps a sign of a broad momentum shift from the legacy “cryptocoin” to the “up and comer.”

“We’re absolutely still in the infrastructure building phase,” Carlson-Wee said. “But I do think within one to two years, we’ll start to see the first viral applications that are user facing.”

In any case, for readers interested in putting money into either extremely volatile crypto, be prepared, in fact assume, a complete loss of your investment as chasing such speculative manias rarely has a happy ending. Then again, trying to time the peak of any bubble is a fool’s endeavor. Just look at the S&P.

Bitcoin’s growth has started to catch up to its fundamentals, which is likely what has been driving its astronomical gain as of late, he said. Others have attributed the surge to speculation, as well as increased interest in Asia and adoption by established companies.

Impressive performance aside, more than $150 has been knocked off bitcoin’s price since late last week amid concerns about transaction speed, safety and a possible price bubble.

Source: ZeroHedge

Arizona Passes Bill To End Income Taxation On Gold And Silver

https://s15-us2.ixquick.com/cgi-bin/serveimage?url=http%3A%2F%2Fwww.kitco.com%2Fnews%2F2016-05-09%2Fimages%2F0509016NC_dollars_Gold_001.jpg&sp=0129c0b6b0e488a962759a385e0c6bf5Sound money advocates scored a major victory on Wednesday, when the Arizona state senate voted 16-13 to remove all income taxation of precious metals at the state level. The measure heads to Governor Doug Ducey, who is expected to sign it into law.

Under House Bill 2014, introduced by Representative Mark Finchem (R-Tucson), Arizona taxpayers will simply back out all precious metals “gains” and “losses” reported on their federal tax returns from the calculation of their Arizona adjusted gross income (AGI).

If taxpayers own gold to protect themselves against the devaluation of America’s paper currency, they frequently end up with a “gain” when exchanging those metals back into dollars. However, this is not necessarily a real gain in terms of a gain in actual purchasing power. This “gain” is often a nominal gain because of the slow but steady devaluation of the dollar.  Yet the government nevertheless assesses a tax.

Sound Money Defense League, former presidential candidate Congressman Ron Paul, and Campaign for Liberty helped secure passage of HB 2014 because “it begins to dismantle the Federal Reserve’s monopoly on money” according to JP Cortez, an alumnus of Mises University.

Ron Paul noted, “HB 2014 is a very important and timely piece of legislation. The Federal Reserve’s failure to reignite the economy with record-low interest rates since the last crash is a sign that we may soon see the dollar’s collapse. It is therefore imperative that the law protect people’s right to use alternatives to what may soon be virtually worthless Federal Reserve Notes.” In early March, Dr. Paul appeared before the state Senate committee that was considering the proposal.

“We ought not to tax money, and that’s a good idea. It makes no sense to tax money,” Paul told the state senators. “Paper is not money, it’s a substitute for money and it’s fraud,” he added, referring to the fractional-reserve banking practiced by the Federal Reserve and other central banks.

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After the committee voted to pass the bill on to the full body of the Senate, Dr. Paul held a rally on the grounds of the state legislature, congratulating supporters of the measure and of sound money.

Paul told the crowd that “they were on the right side of history” and that even though those working to restore constitutional liberty to Arizona and all the states “had a great burden to bear,” there are “more than you know” working toward the same goal.

Referring to the bill’s elimination of capital gains taxes on gold and silver, the sponsor of the bill, State Representative Mark Finchem, said, “What the IRS has figured out at the federal level is to target inflation as a gain. They call it capital gains.”

Shortly after the vote in the state Senate, the Sound Money Defense League, an organization working to bring back gold and silver as America’s constitutional money, issued a press release announcing the good news.