Saturday, 9 April 2016

Weekend Update 09/04/2016 – America, The Ugly Reality.

Brexit Countdown Clock.

Brexit Quote of the Day.
“It is hard to be brave, when you're only a very small Prime Minister.”

Dodgy Dave Cameron, with apologies to A.A. Milne, and Winnie-the-Pooh.

As goes America, so goes the world, goes the old 1960s saying, and in a 21st century more global economy world, involving China and the EU still including Britain, it might be less applicable today, but it’s not yet obsolete. With the EUSSR mired in migrants, virtually economically dead in the water, and just embarking on a Panama Papers, anti-bankster witch hunt, together with a collapsing malinvestment bubble in China, and a deepening industrial commodities depression running across the planet, that old saying from the past, has extra relevance today. Worryingly, America seems to be on the cusp of a new recession, if not actually already in one. Is the Panama Papers scandal enough of a “Black Swan” to actually push the world into a new recession? 

In a new recession, how long before the “next Lehman” hits, and where?

19 Facts That Prove Things In America Are Worse Than They Were Six Months Ago

Tyler Durden
----With all that being said, the following are 19 facts that prove things in America are worse than they were six months ago…
#1 U.S. factory orders have now declined on a year over year basis for 16 months in a row.  As Zero Hedge has noted, in the post-World War II era this has never happened outside of a recession…
In 60 years, the US economy has not suffered a 16-month continuous YoY drop in Factory orders without being in recession. Moments ago the Department of Commerce confirmed that this is precisely what the US economy did, when factory orders not only dropped for the 16th consecutive month Y/Y, after declining 1.7% from last month

#2 Factory orders have now reached the lowest level that we have seen since the summer of 2011.

#3 It is being projected that corporate earnings will be down 8.5 percent for the first quarter of 2016
compared to one year ago.  This will be the fourth quarter in a row that we have seen year over year declines, and the last time that happened was during the last recession.

#4 Total business sales have fallen 5 percent since the peak in mid-2014.

#5 S&P 500 earnings have now fallen a total of 18.5 percent from their peak in late 2014.

#6 Corporate debt defaults have soared to the highest level that we have seen since 2009.

#7 The average rating on U.S. corporate debt has fallen to “BB”, which is lower than it has been at any point since the last financial crisis.

#8 The U.S. oil rig count just hit a 41 year low.

#9 51 oil and gas drillers in North America have filed for bankruptcy since the beginning of last year, and according to CNN we could be on the verge of seeing the biggest one yet…
Shale oil driller SandRidge Energy (SD) warned there was “substantial doubt” it would survive the oil downturn. The Oklahoma City company said this week it is exploring a potential Chapter 11 bankruptcy filing.

Based on its $3.6 billion of debt, SandRidge would be the biggest North American oil-focused company to go bust during the current downturn, according to a CNNMoney analysis of stats compiled by law firm Haynes and Boone.

#10 According to Challenger, Gray & Christmas, job cut announcements by major firms in the United States were up 32 percent during the first quarter of 2016 compared to the first quarter of 2015.

#11 Consumers in the United States accumulated more new credit card debt during the 4th quarter of 2015 than they did during the entire years of 2009, 2010 and 2011 combined.

#12 Existing home sales in the U.S. were down 7.1 percent during the month of February, and this was the biggest decline that we have witnessed in six years.

#13 Subprime auto loan delinquencies have hit their highest level since the last recession.

#14 The Restaurant Performance Index in the U.S. recently dropped to the lowest level that we have seen since 2008.

#15 Major retailers all over the country are shutting down hundreds of stores as the “retail apocalypse” accelerates.

#16 If you take the number of working age Americans that are officially unemployed (8.1 million) and add that number to the number of working age Americans that are considered to be “not in the labor force” (93.9 million), that gives us a grand total of 102 million working age Americans that do not have a job right now

#17 Since peaking during the 3rd quarter of 2014, U.S. exports of goods and services have been steadily declining.  This is something that we never see outside of a recession…
More + Charts.

"It's Probably Nothing": Truck Orders Plunge 37% As Unsold Inventories Soar Most Since 2007

Tyler Durden
When we last looked at order of heavy, or Class 8, truck one quarter ago - that all-important, forward looking barometer of domestic trade - we said that even with 2015 in the history books, and as we start 2016 where the base effect was supposed to make the annual comps far more palatable, the latest, January data, as abysmal: "the drop continues to be one of Great Recession proportions, manifesting in yet another massive 48% collapse in truck orders in the first month of the year as demand appears to have gone in a state of deep hibernation."

Fast forward one quarter when we now have another three months of Class 8 truck data, and unfortunately the orderbook has gone from bad to worse. As the WSJ reports, orders for new big rigs plunged and inventories of unsold trucks soared to their highest levels since just before the financial crisis, as uncertainty about future demand and a weak market for freight transportation weighed on truck manufacturers.

About 67,000 Class 8 trucks are sitting unsold on dealer lots, after sales in March dropped 37% from a year earlier to 16,000 vehicles, according to ACT Research. Class 8 trucks are the type most commonly used on long-haul routes. Inventories haven’t been this high since early 2007, said Kenny Vieth, president of ACT.

The number of March orders was the lowest since 2012.

The problem according to the WSJ? Simply not enough freight, or as some may call it, trade: "It boils down to, at present, there are too many trucks chasing too little freight,” Mr. Vieth said.

As the Journal adds, companies that placed large orders in late 2014, only for customers to move less freight than expected last year, are reluctant to buy more vehicles now, analysts said. Online freight marketplace DAT Solutions reported last month that spot market rates for dry vans, or the box trucks that are ubiquitous on U.S. highways, fell 18% between February 2015 and February 2016, an indication of weak demand.

“Fleets are being very cautious in the current uncertain economic environment,” wrote Don Ake, a vice president with FTR Transportation Intelligence, which reported similar order numbers for March. “Freight has slowed due to the manufacturing recession, so they have sufficient trucks to meet current demand.”

Elsewhere, the commodities depression and its effects, just keeps getting worse.

Banks at Risk of Bad-Debt Blowout as Aussie Steelmaker Collapses

April 8, 2016 — 3:23 AM BST
Commonwealth Bank of Australia and its competitors are staring at a potential blowout in bad-debt expenses as they try to claw back a combined A$1 billion ($753 million) of loans to steel and iron ore supplier Arrium Ltd., underscoring the looming threat to lenders from the commodities bust.

The banks may recoup less than 50 cents on the dollar they lent to the Sydney-based company, which handed control to an administrator Thursday after lenders rejected its $927 million recapitalization plan with Blackstone Group LP’s GSO Capital Partners.

The turn in the commodities cycle is impacting companies from miners to oil explorers and causing trepidation for banks that have lent them billions of dollars across the world. Bad-debt provisions at Australia’s largest lenders are set to rise to their highest in eight years by 2018, as the chances of defaults in the mining, agricultural and dairy sectors increase, according to a survey by Bloomberg last month.

“It’s a negative for the four big banks given they are unsecured creditors,” said Omkar Joshi, a Sydney-based investment analyst at Watermark Funds Management, which manages A$1 billion. “It is also negative because it looks like the banks wouldn’t even get the 50-55 cents on the dollar that was expected under the GSO proposal.”

Commonwealth Bank, Westpac Banking Corp. and National Australia Bank Ltd. each had lent A$250 million to Arrium, according to people familiar with their exposure to the stricken steelmaker. Australia & New Zealand Banking Group Ltd., which is Arrium’s transaction bank, has a facility of more than A$200 million, one of the people said.

Spokesmen at the four lenders declined to comment.

Italy To Miss Previous Debt Load Target, Draft Budget Shows

April 8, 2016 — 2:05 PM BST
taly will fail to reduce its debt load this year as much as previously targeted due to lower than expected economic growth.

The debt ratio, the euro region’s second-highest, will slip to 132.4 percent of gross domestic product this year from 132.7 percent in 2015, according to a draft of the government budget obtained by Bloomberg. That’s higher than the 131.4 percent target for 2016 published by Prime Minister Matteo Renzi’s administration in September.

Finance Minister Pier Carlo Padoan, who is struggling to speed up growth after a record-long recession, has staked the government’s credibility on reducing Italy’s debt. This might prove to be difficult due to lower-than-expected economic expansion.

"In a certain sense it’s better for the government to be honest because the previous number seemed optimistic," said Marc Ostwald, a strategist at ADM Investor Services International Ltd in London. Still, "there are a lot of people who will doubt whether it will be achieved," he said.

The budget plan, to be discussed at a meeting of Renzi’s cabinet later on Friday, shows the government targeting economic growth of 1.2 percent this year and 1.4 percent in 2017, down from previous projections of 1.6 percent for both years.

It targets a decline in the budget deficit to 2.3 percent of GDP this year from 2.6 percent in 2015, according to the draft. For next year, the government aims to narrow the gap to 1.8 percent of GDP.

Last year, Italy emerged from its longest recession since World War II as both domestic demand and exports increased. To keep up, and counter a slowdown in global trade, the Italian economy will have to be more competitive and investments will have to accelerate, Padoan said in an introduction to the budget draft.

Finally China. The end of the anti-corruption campaign?

China foreign minister says clarification needed on Panama Papers

Fri Apr 8, 2016 7:45am EDT
China needs clarification on a massive leak of documents from a Panamanian law firm that revealed the offshore financial arrangements of some of the world's rich and powerful, including family members of China's top leaders, Foreign Minister Wang Yi said on Friday.

The Foreign Ministry has denounced accusations arising from the release of the so-called "Panama Papers" as groundless after their leak this week revealed offshore companies linked to the relatives of Chinese President Xi Jinping and other powerful current and former Chinese leaders.

Wang's comments, made at a joint press briefing with the visiting German foreign minister, makes him the most senior Chinese official to acknowledge the matter. The ministry has repeatedly said it will not comment when asked if Beijing would investigate.

"We have noted that the Panama side is making some explanations and clarifications. I'm afraid we first must get clarity and understand what it's really about," Wang said.

Panama's government has said it will form an independent commission to review the country's financial practices and work with other countries over the leak.

Wang did not elaborate on the documents or say if China was in touch with the Panama government about them. He said China's anti-corruption fight would continue.

"With the broad support of the Chinese people, China's anti-corruption struggle is continuing to move forward. As our leaders have said, we will always be on the path of anti-corruption," Wang said.

    China is in the midst of a massive crackdown on corruption overseen by Xi, but the government has repeatedly had to swat away criticism that the campaign is more about an internal power play than actually tackling graft.

    State media have largely avoided any reporting of the documents, which also revealed financial arrangements of prominent global figures, including friends of Russian President Vladimir Putin, relatives of the prime ministers of Britain and Pakistan, as well as Ukraine's president.

---- Hu Dehua, the son of China's late reformist leader, Hu Yaobang, was the first Chinese relative named in the documents to say he had an offshore company, telling Hong Kong media that he had nothing to hide.

    Hu said the registration was "above board" and that he used his own passport and real name, the South China Morning Post reported on Friday.

"Start buying gold now, regardless of the price. By acting now, you will not have to react when it's too late. Too late will be when the majority of the public finally figures out what is happening to paper money and frantically tries to get aboard. Remember, if you're one of the ones holding paper in the end, you will have given away your products and services for nothing."

Robert Ringer

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