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Merkel Furious With Trump After “Unprecedented” G-7 Failure To Reach Consensus On Climate Change

Merkel Furious With Trump After “Unprecedented” G-7 Failure To Reach Consensus On Climate Change

In the end it was not mean to be. As discussed on Friday, during Trump’s first G-7 summit, world leaders including German Chancellor Angela Merkel and new French President Emmanuel Macron, had hoped to persuade the the US president to endorse the Paris Agreement climate pledge to fight global warming. By the end of the summit – held at a luxury hotel in Taormina, Sicily that was once a Dominican monastery and base for the Nazi air force during World War Two – they realized they had failed, as Trump “underscored his determination to break the global mold” by refusing to follow the Group of Seven line not only on global warming but also by resisting measures on trade.

Furthermore, in what was described as an “unprecedented step“, the final G-7 communique gave the U.S. its own section to say that it is “undergoing a review process” and is unable to join in the discussion, an official cited by Bloomberg said. As a result while the US will remain excluded from the final affirmation, the other six, call it the G-6, will recommit to the Paris Agreement on climate change, which Trump tweeted Saturday he’d come to a decision on next week.

Needless to say, Merkel who had hoped to leave the Saturday summit with the G-7 agenda endorsed by everyone, including Trump, was furious at the US president.

“The whole discussion about climate has been difficult, or rather very unsatisfactory”  German Chancellor Angela Merkel told reporters Saturday. “Here we have the situation that six members, or even seven if you want to add the EU, stand against one. That means there are no signals until now whether the U.S. will remain in the Paris Agreement or not.

…click on the above link to read the rest of the article…

US Deploys Third Aircraft Carrier Toward North Korea

US Deploys Third Aircraft Carrier Toward North Korea

One month ago, when we first discussed that in addition to the CVN-70 Carl Vinson aircraft carrier group, the US was deploying two more carriers toward the Korean peninsula, some took the Yonhap-sourced report skeptically: after all, what’s the incremental symbolic impact of having three, or even two aircraft carriers next to North Korea when just one would more than suffice. Then, two weeks ago, the report was proven half right when US officials announced that in addition to the first US carrier already on location, the US Navy is moving the USS Ronald Reagan aircraft carrier to the Korean Peninsula, where it would conduct dual-carrier training exercises with the USS Carl Vinson.

Aircraft carrier CVN-76 Ronald Reagan

After completing its maintenance period in Yokosuka, Japan, the USS Ronald Reagan departed for the Korean Peninsula on Tuesday, according to the Navy. “Coming out of a long in-port maintenance period we have to ensure that Ronald Reagan and the remainder of the strike group are integrated properly as we move forward,” Rear Adm. Charles Williams said in a press release.  Once it arrives in the region, the carrier will conduct a variety of training exercises but primarily focus on certifying its ability to safely launch and recover aircraft, the service said. In other words, training for combat missions involved the North Korean capital.

We concluded our report from mid-May by saying that the US Navy may soon “further deploy the CVN-68 Nimitz, which was the third carrier reported to be eventually making its way toward Korea.”

We didn’t have long to wait, because on Friday the Kitsap Sun confirmed what we reported initially over a month ago, namely that the USS Nimitz will depart Naval Base Kitsap-Bremerton on Thursday on its first deployment since 2013.

…click on the above link to read the rest of the article…

China Accuses US Warship Of “Trespassing” In Disputed Waters, Warns It To “Leave Immediately”

China Accuses US Warship Of “Trespassing” In Disputed Waters, Warns It To “Leave Immediately”

In the first unofficial challenge to Beijing over China’s domination of disputed waters in the South China Sea since President Trump took office, a US navy warship sailed within 12 nautical miles of an artificial island built up by China in the South China Sea according to the WSJ.  The navy vessel, the USS Dewey, traveled close to the Mischief Reef in the Spratly Islands, among a string of islets, reefs and shoals over which China has territorial disputes with its neighbors.


The USS Dewey

The “freedom of navigation” operation which in the past has infuriated Beijing, comes as Trump is seeking Beijing’s cooperation to rein in ally North Korea’s nuclear and missile programs. Territorial waters are generally defined by U.N. convention as extending at most 12 nautical miles from a state’s coastline. China’s claims to the South China Sea, which sees about $5 trillion in ship-borne trade pass every year, are challenged by Brunei, Malaysia, the Philippines, and Vietnam, as well as Taiwan.


Mischief Reef in the disputed Spratly Islands in the South China Sea

The U.S. patrol, the first of its kind since October, marks the latest attempt to counter what Washington sees as Beijing’s efforts to limit freedom of navigation in the strategic waters. One official said it was the first operation near a land feature which was included in a ruling last year against China by an international arbitration court in The Hague. The court invalidated China’s claim to sovereignty over large swathes of the South China Sea.

 

…click on the above link to read the rest of the article…

Angry China Slams Moodys For Using “Inappropriate Methodology”

Angry China Slams Moodys For Using “Inappropriate Methodology”

The market may have long since moved on from Moody’s downgrade of China to A1 from Aa3 (by now even long-only funds have learned that in a world with $18 trillion in excess liquidity, the opinion of Moodys is even more irrelevant), but for Beijing the vendetta is only just starting, and in response to Tuesday’s downgrade, China’s finance ministry accused the rating agency of applying “inappropriate methodology” in downgrading China’s credit rating, saying the firm had overestimated the difficulties faced by the Chinese economy and underestimated the country’s ability to enhance supply-side reforms.

In other words, Moody’s failed to understand that 300% debt/GDP is perfectly normal and that China has a very explicit exit strategy of how to deal with this unprecedented debt load which in every previous occasion in history has led to sovereign default.

The Ministry of Finance reaction came after Moody’s first, and very, very long overdue, downgrade of China since 1989 citing concerns about risks from China’s relentlessly growing debt load as shown below.

“China’s economy started off well this year, which shows that the reforms are working,” the ministry said in a statement on its website.  Actually, it only shows that China had injected a record amount of loans into the economy at the start of the year, and nothing else. And now that the credit impulse is fading, the hangover has arrived.

Moody’s on Wednesday also downgraded the ratings of 26 Chinese government-related non-financial corporate and infrastructure issuers and rated subsidiaries by one notch. It also downgraded the ratings of several domestic banks, including the Agricultural Bank of China Limited’s long-term deposit rating from A1 to A2.  It also eventually downgraded Hong Kong and said credit trends in China will continue to have a significant impact on Hong Kong’s credit profile due to close economic, financial and political ties with the mainland.

…click on the above link to read the rest of the article…

Brazil Deploys Troops To Protect Government Buildings As Protesters Set Ministries On Fire

Brazil Deploys Troops To Protect Government Buildings As Protesters Set Ministries On Fire

Update 2: Physical confrontation erupts in Brazil’s Congress between Temer’s supporters & opponents after he deploys the military against protesters.

Deputados da base e da oposição se agridem durante sessão após Presidência decretar Forças Armadas na rua para garantir a ordem


pdate 1: Reuters reports that Temer has deployed troops to protect government buildings::

  • BRAZIL DEFENSE MINISTER JUNGMANN SAYS PRESIDENT TEMER HAS ORDERED ARMY TROOPS TO PROTECT GOVT BUILDINGS FROM PROTESTERS

* * *


ERRATA: The protesters set on fire the Brazilian “IRS” federal buildings in Brasília th

rasília the capital of Brazil and the Ministry of Agriculture

$100 Increase In Monthly Mortgage Payment Would Sink 75% Of Canadian Homeowners

$100 Increase In Monthly Mortgage Payment Would Sink 75% Of Canadian Homeowners

According to a new survey from Manulife Bank, nearly 75% of Canadian homeowners would have difficulty paying their mortgage every month if their payments increased by as little as 10%.  And, given that the average house in Canada costs roughly $200,000 and carries a monthly mortgage payment of $1,000, that means that most Canadians couldn’t incur and $100 hike in their monthly mortgage payments without possibly going under.  Per CBC:

The bank polled 2,098 homeowners — between the ages of 20 to 69 with household incomes of $50,000 or higher — online in the first two weeks of February.

Fourteen per cent of respondents to Manulife’s survey said they wouldn’t be able to withstand any increase in their monthly payments, while 38 per cent of those polled said they could withstand a payment hike of between one and five per cent before having difficulty. An additional 20 per cent said they could stomach a hike of between six and 10 per cent before feeling the pinch.

Add it all up, and that means 72 per cent of homeowners polled couldn’t withstand a hike of just 10 per cent from their current record lows.

Of course, such a huge sensitivity to small budget fluctuations isn’t a great sign when we’re in the midst of record-low interest rates and about to enter a period of sustained hikes.

“What these people don’t realize is that we’re at record low interest rates today,” said Rick Lunny, president and CEO of Manulife Bank.

 If mortgage rates increase by as little as one percentage point, some borrowers could be facing a hike of 10 per cent on their monthly bills. A bigger mortgage rate hike would bring more pain.

Meanwhile, 45% of millennials in the same survey said they had to borrow money from their parents to purchase their home and 25% admitted they have no savings.

…click on the above link to read the rest of the article…

Yuan Tumbles As Moody’s Cuts China’s Credit Rating To A1, Warns “Financial Strength Will Worsen”

Yuan Tumbles As Moody’s Cuts China’s Credit Rating To A1, Warns “Financial Strength Will Worsen”

Offshore Yuan tumbled as Moody’s cut China’s credit rating to A1 from Aa3, saying that the outlook for the country’s financial strength will worsen, with debt rising and economic growth slowing. This leaves the world’s hoped-for reflation engine rated below Estonia, Qatar, and South Korea and on par with Slovakia and Japan.
 “While ongoing progress on reforms is likely to transform the economy and financial system over time, it is not likely to prevent a further material rise in economy-wide debt, and the consequent increase in contingent liabilities for the government,” the ratings company said in a statement Wednesday.

And the most obvious reaction was Yuan selling…

Full Statement: Moody’s Investors Service has today downgraded China’s long-term local currency and foreign currency issuer ratings to A1 from Aa3 and changed the outlook to stable from negative.

The downgrade reflects Moody’s expectation that China’s financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows. While ongoing progress on reforms is likely to transform the economy and financial system over time, it is not likely to prevent a further material rise in economy-wide debt, and the consequent increase in contingent liabilities for the government.

The stable outlook reflects our assessment that, at the A1 rating level, risks are balanced. The erosion in China’s credit profile will be gradual and, we expect, eventually contained as reforms deepen. The strengths of its credit profile will allow the sovereign to remain resilient to negative shocks, with GDP growth likely to stay strong compared to other sovereigns, still considerable scope for policy to adapt to support the economy, and a largely closed capital account.

…click on the above link to read the rest of the article…

In Emerging Markets, It’s Time To Dump Most Central Banks, And Their Currencies Too

In Emerging Markets, It’s Time To Dump Most Central Banks, And Their Currencies Too

On March 16th, the New York Times carried reportage by Peter S. Goodman, Keith Bradsher and Neil Gough, which was titled “The Fed Acts. Workers in Mexico and Merchants in Malaysia Suffer.” The theme of their extensive reportage is that U.S. monetary policy is the elephant in the room. It is the elephant that swings exchange rates and capital flows to and fro in emerging-market countries, causing considerable pain.

The real problem that all of the countries mentioned in the New York Times reportage face is the fact that they have central banks that issue half-baked local currencies. Although widespread today, central banks are relatively new institutional arrangements. In 1900, there were only 18 central banks in the world. By 1940, the number had grown to 40. Today, there are over 150.

Before the rise of central banking the world was dominated by unified currency areas, or blocs, the largest of which was the sterling bloc. As early as 1937, the great Austrian economist Friedrich von Hayek warned that the central banking fad, if it continued, would lead to currency chaos and the spread of banking crises. His forebodings were justified. With the proliferation of central banking and independent local currencies, currency and banking crises have engulfed the international financial system with ever-increasing severity and frequency. What to do?

The obvious answer is for vulnerable emerging-market countries to do away with their central banks and domestic currencies, replacing them with a sound foreign currency. Panama is a prime example of the benefits from employing this type of monetary system. Since 1904, it has used the U.S. dollar as its official currency. Panama’s dollarized economy is, therefore, officially part of the world’s largest currency bloc.

The results of Panama’s dollarized monetary system and internationally integrated banking system have been excellent (see accompanying table).

…click on the above link to read the rest of the article…

“This Is Probably Just The Beginning” – Chinese Banks Are In Big Trouble

“This Is Probably Just The Beginning” – Chinese Banks Are In Big Trouble

That’s not supposed to happen…

With the crackdown on financial system leverage underway, Chinese banks (and securities firms) are in big trouble. As we noted previously, China’s bond curve is inverted, yields are surging, and Chinese regulatory decisions shutting down various shadow-banking pipelines has crushed securities firms’ stocks. However, as Bloomberg points out, as China’s deleveraging efforts cut into banks’ profit margins, rising base funding costs and interbank credit risk concerns have pushed banks’ cost of borrowing beyond the rate they charge customers for loans for the first time in history.

As the chart above shows, the one-year Shanghai Interbank Offered Rate has exceeded the Loan Prime Rate, the first time this has happened since the latter was introduced in 2013.

“This is probably just the beginning” and interbank funding costs will rise further amid the drive to reduce leverage, said Xu Hanfei, chief fixed-income analyst at China Merchants Securities Co. in Shanghai.

Sergey Lavrov Says US Media Reminds Him of Soviet Union’s “Pravda”

Sergey Lavrov Says US Media Reminds Him of Soviet Union’s “Pravda”

Russian Foreign Minister Sergey Lavrov had a few choice words for the U.S. media during a press conference in Cyprus a few days after the NYT and WaPo unleashed a pair of dubiously sourced accusations about what was said between President Trump and the minister during a meeting in the Oval Office.

As Russia Insider reports:

“I sometimes get the impression that many U.S. media outlets work according to a principle which was common in the Soviet Union. Back then, people used to joke that the newspaper Pravda Truth] had no truth in it, and the Izvestia [News] paper has no news in it. I get the impression that many U.S. media operate in the same way.”

U.S. media were barred from Lavrov’s meeting with Trump in the Oval Office, but that didn’t stop WaPo from reporting that Trump allegedly shared classified information with Lavrov about the source of intelligence that inspired the U.S. to ban travelers from 10 airports in the Middle East and North Africa from storing laptops in carry-on luggage. The report added that the decision to share that information jeopardized the source in the process. Meanwhile, the NYT reported that Trump said he fired Comey because the FBI director was a “nut job” and that the decision had eased pressures from the FBI’s investigation into collusion between Russia and the Trump campaign.

Lavrov has denied that any classified information was shared during the meeting. Though it’s important to remember that, even if Trump did share classified intelligence, doing so wouldn’t be a violation of U.S. law.

…click on the above link to read the rest of the article…

Greek Authorities To Launch Mass Confiscation Of Safe Deposit Boxes, Securities, Homes In Tax-Evasion Crackdown

Greek Authorities To Launch Mass Confiscation Of Safe Deposit Boxes, Securities, Homes In Tax-Evasion Crackdown

Last week, the Greek parliament once again approved more austerity to unlock withheld Greek bailout funds in Brussels: a symbolic move, which has little impact without any actual follow through, like for example, actually imposing austerity. And while Greeks have been very good in the former (i.e. promises), they have been severely lacking in the latter (i.e. delivery).

That may be changing. According to Kathimerini, Greek Finance Ministry inspectors are about to start seeking out the owners of all local undeclared properties, while the law will be amended to allow for financial products and the content of safe deposit boxes to be confiscated electronically. The plan for the identification of taxpayers who have “forgotten” to declare their properties to the tax authorities is expected to be ready by year-end, according to the timetable of the Independent Authority for Public Revenue.

What follows then will be a wholesale confiscation by the government of any asset whose source, origins and funding can not be explained.

The Greek tax authorities will receive support from the Land Register to that end, as by end-September IAPR inspectors are set to obtain access to the company’s database to draw details on properties. Any taxpayers identified as having skipped the declaration of their assets to the tax authorities will be asked to comply and declare them, along with paying the tax and fines dictated by law. Should taxpayers fail to do so, the asset will be “sequestered.”

Kathimerini also notes that the IAPR is also waiting for Parliament to pass regulations permitting the mass confiscation of safe deposit box contents and financial assets such as securities.

…click on the above link to read the rest of the article…

Centralized “Truth” – 13 Ways To Fight Fake News (And The Big Problem With All Of Them)

Centralized “Truth” – 13 Ways To Fight Fake News (And The Big Problem With All Of Them)

Will humans or computer algorithms be the future arbiters of “truth”?

The following infographic from Futurism sums up the ideas that academics, technologists, and other experts are proposing that we implement to stop the spread of fake news.

Below the infographic, Visual Capitalist’s Jeff Desjardins raises concerns about each of these methods.

Courtesy of: Visual Capitalist

While fake news is certainly problematic, the solutions proposed to penalize articles deemed to be “untrue” are just as scary.

By centralizing fact checking, a system is created that is inherently fragile, biased, and prone for abuse. Furthermore, the idea of axing websites that are deemed to be “untrue” is an initiative that limits independent thought and discourse, while allowing legacy media to remain entrenched.

…click on the above link to read the rest of the article…

Lower 48 Production Nears Cycle Highs As Rig Count Rises For 18th Straight Week

Lower 48 Production Nears Cycle Highs As Rig Count Rises For 18th Straight Week

While much was made of this week’s drop in US crude production, it was driven by an Alaskan supply drop, not the Lower 48 whose production is at Aug 2015 highs. WTI back above $50 on the back of more OPEC jawboning appears to have everyone convinced this time is different, but for the 18th week in a row US oil rig counts rose (by 8 to 720).

  • *U.S. OIL RIG COUNT +8 TO 720 , BAKER HUGHES SAYS :BHI US
  • *U.S. GAS RIG COUNT 180 , BAKER HUGHES SAYS :BHI US

The 18th weekly oil rig count rise…

Production from the Lower 48 continues to soar…

And WTI dipped a little on the print…

And while prices hover above $50, OilPrice.com’s Brian Noble warns that as breakeven prices converge an oil price crash nears…

No one should underestimate the impact of AI (artificial intelligence) on the future of the entire capital markets complex. The LinkedIn group, Algorithmic Traders Association, has recently been running a series of articles warning of the seismic shift that is and will continue to be felt in the global hedge fund industry as machines take over from people on trading desks.

But what intelligent human being would ever suddenly have turned bullish on the morning of Monday 15 May 2017 just because of renewed jawboning from Saudi Arabia and Russia, indulging in the same old two-step as they did at Doha in April 2016 and Vienna in November of last year. That is however precisely what the machines did. Hallelujah.

…click on the above link to read the rest of the article…

Meanwhile… In Greece

Meanwhile… In Greece

You know it’s bad when the police are rioting against the new austerity measures assigned from Brussels…

As KeepTalkingGreece reports, tension between protesters from police, fire brigades and coast guard on one side and riot police on the other side broke out shortly after 8 o’ clock in the evening on Wednesday when the angry protesters tried to break the police cordon and enter the Greek Parliament.

Riot policemen and protesters pushed and shouted at each other, with protesters shouting “Disgrace! Disgrace!”

Members of of the Greek Police, the Fire Brigades and the Coast Guard marched to the Parliament on the general strike day protesting the new austerity package that will be voted on Thursday at the Parliament.

Three squads of riot police were deployed outside the Parliament to prevent their colleagues to enter the House.

…click on the above link to read the rest of the article…

Both ECB And BOJ Are Just Months Away From Running Out Of Bonds To Buy

Both ECB And BOJ Are Just Months Away From Running Out Of Bonds To Buy

With the Fed contemplating whether to hike again next month and start “normalizing ” its balance sheet before the end of 2017, the two other major central banks are facing far bigger problems.

* * *

Two months after the BOJ quietly started tapering its QE program, when it also hinted it may purchase 18% less bonds than planned…

… Governor Haruhiko Kuroda admitted last week that the Bank of Japan’s bond holdings are currently growing at an annualized pace of only ¥60 trillion ($527 billion), 25% below the bottom-end of its policy range, and confirming that without making any formal announcement, the BOJ has quietly followed the ECB in aggressively tapering its bond buying program.

Under questioning from opposition party lawmaker Seiji Maehara, who noted that the pace of bond accumulation by the BOJ had slowed, Kuroda said the trend could continue, without elaborating. He noted that the central bank’s target is to control interest rates rather than the amount of bond purchases. “This development signals to me that they are going with rates without talking about a quantitative target,” said Atsushi Takeda, an economist at Itochu Corp. in Tokyo. “That will be better when they think about an exit.”

While the BOJ’s purchase slowdown has been visible for months in data released by the central bank, Kuroda’s confirmation of this reality in parliament last Wednesday marks a stark change. As Bloomberg notes, until now he’d struggled to emphasize that the annual pace could vary from an indicative 80 trillion yen, depending on the state of the economy and financial markets. He now appears to have thrown in the towel.  Meanwhile, investors are watching for any hint of tightening in monetary policy amid speculation that the central bank’s bond purchase regime is unsustainable and as consumer prices in Japan are expected to pick up later this year. 

…click on the above link to read the rest of the article…

Olduvai II: Exodus
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Olduvai
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Olduvai II: Exodus
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Olduvai III: Cataclysm
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