Saturday 30 July 2016

Weekend Update 30/07/2016 – In Other News.

"On the whole human beings want to be good, but not too good, and not quite all the time.”

George Orwell.

While the world’s media was being mildly amused and entertained by the week’s events in Philadelphia, busy promoting the idea that all’s well, and about to get better if only all American voters will get with team Wall Street, Hollywood and the BBC, the reality was quite different. Oil and the Baltic Dry (shipping) Index resumed their bear markets again. Japan opted to speed up its version of national economic suicide, due to Abenomics failing again. Europe’s banks barely passed their latest stress tests, except for those that didn’t, but those that didn’t as usual in the EUSSR, are all in the process of being given some sort of walk.

In the insane asylum aka the EU, nothing ever gets fixed, liquidated, or written down.  In the world of Brussels, tomorrow will just be like today, which was like yesterday. Except of course it won’t be. We are deep into a central bankster fantasy land, where each unorthodox economic experiment keeps going wrong, performing nothing like as billed by the banksters. Last month in their annual update, even the Gnomes of Basel at the Bank for International Settlements, began to despair and panic. Our Great Nixonian Error of fiat money, communist money, keeps morphing into the old failed USSR.

Below, some of the week just past, other news.

No clean bill of health for EU banks in stress test

Fri Jul 29, 2016 6:18pm EDT
Banks from Italy, Ireland, Spain and Austria fared worst in the latest European Union stress test, which the region's banking watchdog said on Friday showed there was still work to do in order to boost credit to the bloc's economy.

Eight years since the collapse of Lehman Brothers sparked a global banking meltdown, many of Europe's banks are still saddled with billions of euros in poorly performing loans, crimping their ability to lend and putting off investors.

"While a number of individual banks have clearly fared badly, the overall finding of the European Banking Authority - that Europe's banks are resilient to another crisis - is heartening," Anthony Kruizinga at PwC said.

Italy's Monte dei Paschi (BMPS.MI), Austria's Raiffeisen (RBIV.VI), Spain's Banco Popular (POP.MC) and two of Ireland's main banks came out with the worst results in the EBA's test of 51 European Union (EU) lenders.

"Whilst we recognize the extensive capital raising done so far, this is not a clean bill of health," EBA Chairman Andrea Enria said in a statement. "There remains work to do."

Italy's largest lender, UniCredit (CRDI.MI), was also among those banks which fared badly, and it said it will work with supervisors to see if it should take further measures.

Germany's biggest banks, Deutsche Bank (DBKGn.DE) and Commerzbank (CBKG.DE), were also among the 12 weakest banks in the test, along with British rival Barclays (BARC.L).

Monte dei Paschi, Italy's third largest lender, had been scrambling to pull together a rescue plan and win approval for it from the European Central Bank ahead of the test results.

The Italian bank confirmed less than an hour before the results that it had finalised a plan to sell off its entire portfolio of non-performing loans and had assembled a consortium of banks to back a 5 billion euro capital increase.

ECB approves rescue plan for Italian bank Monte dei Paschi: sources

Fri Jul 29, 2016 3:12pm EDT
The European Central Bank has approved a privately funded rescue of Italy's third-largest lender, Monte dei Paschi di Siena (BMPS.MI), three sources said on Friday, staving off the risk that regulators would be forced to wind up its business.

Under the bailout plan to be unveiled later in the day, Monte dei Paschi, struggling under a mountain of bad debts and accumulated losses, will raise 5 billion euros ($5.58 billion) in new shares and sell off soured loans to ensure its stability.

---- The Italian government is keen to avoid having to inject public funds to recapitalize the bank. Under European rules, this would entail politically unpalatable losses for Monte dei Paschi's bond-holders and depositors above 100,000 euros.

The bailout plan, drafted by advisers JP Morgan (JPM.N) and Italy's Mediobanca (MDBI.MI), was approved by the Monte dei Paschi board after it rejected a rival recapitalization proposal put forward by investment bank UBS(UBSG.S), sources said.

IMF admits disastrous love affair with the euro, apologises for the immolation of Greece

Ambrose Evans-Pritchard28 July 2016 • 8:38pm
The International Monetary Fund’s top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory. 

This is the lacerating verdict of the IMF’s top watchdog on the Fund’s tangled political role in the eurozone debt crisis, the most damaging episode in the history of the Bretton Woods institutions. 

It describes a “culture of complacency”, prone to “superficial and mechanistic” analysis,  and traces a shocking break-down in the governance of the IMF, leaving it unclear who is ultimately in charge of this extremely powerful organisation.

The report by the IMF’s Independent Evaluation Office (IEO) goes above the head of the managing director, Christine Lagarde. It answers solely to the board of executive directors, and those from Asia and Latin America are clearly incensed at the way EU insiders used the Fund to rescue their own rich currency union and banking system.

The three main bail-outs for Greece, Portugal, and Ireland were unprecedented in scale and character. The trio were each allowed to borrow over 2,000 percent of their allocated quota – more than three times the normal limit – and accounted for 80pc of all lending by the Fund between 2011 and 2014.

In an astonishing admission, the report said its own investigators were unable to obtain key records or penetrate the activities of secretive "ad-hoc task forces". Mrs Lagarde herself is not accused of obstruction.

“Many documents were prepared outside the regular established channels; written documentation on some sensitive matters could not be located. The IEO in some instances has not been able to determine who made certain decisions or what information was available, nor has it been able to assess the relative roles of management and staff," it said.

---- “Before the launch of the euro, the IMF’s public statements tended to emphasize the advantages of the common currency, “ it said. Some staff members warned that the design of the euro was fundamentally flawed but they were overruled.

“After a heated internal debate, the view supportive of what was perceived to be Europe’s political project ultimately prevailed,” it said.

This pro-EMU bias continued to corrupt their thinking for years. “The IMF remained upbeat about the soundness of the European banking system and the quality of banking supervision in euro area countries until after the start of the global financial crisis in mid-2007. This lapse was largely due to the IMF’s readiness to take the reassurances of national and euro area authorities at face value,” it said.

The IMF persistently played down the risks posed by ballooning current account deficits and the flood of capital pouring into the eurozone periphery, and neglected the danger of a "sudden stop" in capital flows.

---- At root was a failure to grasp the elemental point that currency unions with no treasury or political union to back them up are inherently vulnerable to debt crises. States facing a shock no longer have sovereign tools to defend themselves. Devaluation risk is switched into bankruptcy risk.

“In a monetary union, the basics of debt dynamics change as countries forgo monetary policy and exchange rate adjustment tools,” said the report. This would be amplified by a “vicious feedback between banks and sovereigns”, each taking the other down. That the IMF failed to anticipate any of this was a serious scientific and professional failure.

In Greece, the IMF violated its own cardinal rule by signing off on a bail-out in 2010 even though it could offer no assurance that the package would bring the country’s debts under control or clear the way for recovery, and many suspected from the start that it was doomed.

The organisation got around this by slipping through a radical change in IMF rescue policy, allowing an exemption (since abolished) if there was a risk of systemic contagion. “The board was not consulted or informed,” it said. The directors discovered the bombshell “tucked into the text” of the Greek package, but by then it was a fait accompli.
More. Sadly, much, much more.

Scots back remaining in UK despite Brexit vote: poll

Fri Jul 29, 2016 7:05pm EDT
Most Scots still back remaining in the United Kingdom despite Britons voting to leave the European Union, a move which was opposed by the majority in Scotland, according to an opinion poll published on Saturday.
Scotland's nationalist First Minister Nicola Sturgeon has said the June 23 vote for Brexit had put Scottish independence back on the agenda just two years after it was rejected in a referendum.

While Britons backed leaving the EU by 52-48 percent, Scots voted by 62-38 percent to remain in the bloc, an outcome Sturgeon argues has changed the political landscape regarding possible Scottish secession.

However according to Saturday's YouGov survey, 53 percent of Scots wanted to stay part of the United Kingdom with 47 percent backing independence.

Even when asked if they would rather stay in the EU but leave the UK, 46 percent of the 1,006 respondents said they wanted to remain in the UK and only 37 percent preferred Scotland becoming an independent nation within the bloc.

"Inevitably, some will suggest that the high-water mark of Scottish independence has now passed, especially as it was thought that leaving the EU might persuade 'No' voters to change their minds and vote against the Union," said Joe Twyman, YouGov's Head of Political and Social Research.

Below, why Wall Street, loves Hillary. Below, the moral hazard on Wall Street of life after the 1987 stock market crash, and the Greenspan “miracle recovery” bailout.  “God’s work,” gets more “unorthodox” with each passing Fedster guru, but someone’s got to do it I suppose. Still it pays on Wall Street to have very influential friends in the District of Crooks.
If the financial system goes down, our business is going down and, trust me, yours and everyone else's is going down, too.
Lloyd Blankfein’s CEO Goldman Sachs, threat 2008.

The Mystery Behind Wall Street's Wildest Party

by Stacy Perman @stacyperman July 28, 2016, 4:27 PM EDT

Who is Omar Amanat, why was he arrested—and what did he have to do with a Hamptons bacchanal?

Tales of Wall Street excess reliably outrage—and titillate—readers. This summer’s exemplar so far: a “wild” Hamptons party earlier this month. “Awash,” as the New York Post put it, “with champagne, scores of bikini-clad women and costumed gun-toting midgets,” 1,000 boisterous attendees of a bacchanal known as “Sprayathon” allegedly “wrecked a $20 million mansion.” The mansion’s furious owner, who the Post didn’t name, was reportedly planning to file a $1 million suit.

The party generated headlines in publications ranging from Vanity Fair to Bloomberg to U.K.’s the Telegraph and resulted in the firing of a Moore Capital hedge fund trader, Brett Barna, who hosted the affair. The story had enough legs that the New York Times published an article two weeks later offering Barna’s side of the imbroglio and identifying the owner of the party house as Omar Amanat.

Amanat’s name may be familiar to readers of Fortune—and his tale is far wilder than the goings-on at a Hampton’s party mansion. When he last appeared in the publication, it was September 2014 and Amanat was embroiled in a bitter and colorful fight with Russian property mogul Vladislav Doronin over the ownership of the ultra-luxury hotel chain Aman Resorts. Within weeks of joining forces to buy the chain, the pair’s business partnership had shattered in spectacular fashion. The resulting conflict necessitated a small population of lawyers, spanning courtrooms in three countries.

Fast-forward to July 13, 2016. At 6:00 AM, federal agents arrested Amanat at the $4.75 million home he was renting in Short Hills, N.J. The following day, a federal judge unsealed a grand jury indictment. It charged Amanat with wire fraud, aiding and abetting investment adviser fraud, and conspiracy to commit securities fraud. According to the indictment, Amanat helped an investment firm hide losses, and helped inflate the value of shares of Kit Digital, a bankrupt video technology company. In a press release, U.S. attorney Preet Bharara charged that Amanat cheated investors “of millions of dollars through years of lies and deceit.”

Amanat’s arrest triggered considerable schadenfreude. “It is very satisfying to see that Omar Amanat’s chequered past is catching up with him, although I am surprised it has taken this long,” Doronin said in a statement to Fortune. Michael Kimelman, who served 15 months for insider trading, tweeted: “I could swing a cat & hit half a dozen people he owes money: Omar Amanat can’t afford to make bail #conman #karma.”
Amanat has pleaded not guilty and, after sitting in a federal correctional center for six days, he was released on $2.5 million bail. Finding there was a “significant risk of flight here,” a judge ordered Amanat to surrender his passport, restricted his travel, and ordered him to wear an electronic monitoring device. (Amanat’s attorneys did not respond to requests for comment or to a detailed list of questions emailed to them and to Amanat. Fortune also contacted the press representatives for Amanat in the past, but they said they no longer represent him.)

For Amanat, a Rumi-quoting entrepreneur, film producer, and investor in media, finance, and technology, his indictment was a humiliating public bludgeoning. He is accustomed to gallivanting around the globe, talking big deals, dropping the names of headline-making movers and shakers, and rubbing elbows with celebrities and supermodels (one of whom, Helena Houdova, was his second wife). Amanat was someone who boasted that at age 29, he had “already experienced a heady amount of worldly success” and touted that he had been named one of Wall Street’s “Top Ten Most Influential Technologists.” Now, a decade and a half later, he is facing possible prison time.

The story of the party house emerged a week before Amanat’s arrest on fraud changes. As Barna describes it to Fortune, the tale began innocently. He was seeking a rental house at which to hold a charity bash. A broker introduced him to Amanat, who was offering a large property in Sag Harbor, N.Y. (which is actually near, rather than in, the Hamptons). Barna says Amanat presented himself as a hyper-connected, wealthy entrepreneur, but then expressed what Barna describes as “an extreme need for money.” He asserts that Amanat asked for $25,000 in cash to rent the house (which, according to property records, is owned by someone other than Amanat) for five days. Barna says he told Amanat that he didn’t have that sort of cash on him and planned to pay for the rental with a credit card through Airbnb. At one point in their negotiations, he asserts, Amanat responded by asking whether Barna could go to an ATM, withdraw $4,000, and pay that portion in cash.

With America’s ever more bizarre and costly, comic soap opera, convention season over for another 4 years, the hors d'oeuvres over it’s time at long last for the main feast. In the red corner, the outsider challenger, real estate mogul, reality TV star, wall builder and generally all round loose cannon, Donald Trump.  In the blue, Wall Street, Hollywood and BBC corner, commodities trader extraordinaire, 21st century professional politician and serial bungler, Hillary Clinton, Billy Clinton’s less talented other half.  The Democrats version of the Republican’s G. W. Bush to G. H. W. Bush of yesteryear. This promises to be by far the most entertaining election romp to early November, probably since Harry Truman last ran for president.

Must watch viewing from London to Beijing. Stay tuned for more Democratic Party hacks. Everyone it seems, from President Putin down to 8 year olds with internet access and a smart phone, seem able to hack into American computers run by the Democrats! And we know it’s true, because they say so. Where’s the NSA when you really need them? Still it will be interesting to see what  "President Putin" releases the weekend before November 8th.

Richard Nixon is a no good, lying bastard. He can lie out of both sides of his mouth at the same time, and if he ever caught himself telling the truth, he'd lie just to keep his hand in.

Harry Truman on Richard Nixon.

And the view from America itself. 

The Best of Times, The Worst of Times? American Voters United Only in Terms of Television Viewership
N. Jason Jencka July 30, 2016 3:15 am ET

Both the Democratic and Republican party conventions are over, and so the time has come upon us to reflect on what has been learned. But before that it is essential to address the topic by which all entertainment productions live or die: T.V. ratings. By this measure, both parties made an admirable showing but Donald Trump’s former career as a television personality proved an insurmountable hurdle for Hillary Clinton to overcome. Trump’s headline speech drew 34.9 million viewers while Hillary Clinton drew 33.8 million. For context, these figures are just slightly less than the population of Canada, and slightly more than the total turnout of the U.K Brexit referendum.

As to the content of their speeches, Trump drew an image in Cleveland of an America in decline, facing myriad threats at home and abroad and a victim of ineffective leadership. Merely one week later and several hundred miles distant, Hillary Clinton told Americans to stay the course and trust in incremental progress. The contrasting narratives are akin to two ship captains discussing whether a looming iceberg represents certain disaster or merely an opportunity to resupply the ship with fresh water and ice to keep the champagne properly chilled. Meanwhile, the ship passengers (representing the American voters) are so entertained by antics of the crew that they neglect to look out from the nearest window and make their own assessment. As the ship drifts ever closer to the mass on the horizon and the radio squawks with concern being voiced by captains of nearby ships (representing concerned allies), the U.S.S. Election powers full steam ahead to its destination, burning fiat currency at an alarming rate all the while to push it steadily onward.  Estimated time of arrival: November 8th, 2016.


Andrew Soergel- US News

N. Jason Jencka is presently studying Finance and Economics at Sierra Nevada College, located near the shores of Lake Tahoe on the border of California and Nevada.His interests include the interplay between world markets and the global political sphere, with a focus on developments of both sides of the Atlantic in North America and Europe.In his leisure time he enjoys connecting with those people that have an interesting story to tell and a genuine desire to make an impact in the world.