Tuesday 18 July 2017

Rising Trouble in La-La-Land.



Baltic Dry Index. 912 +12     Brent Crude 48.44

“The state is that great fiction by which everyone tries to live at the expense of everyone else.”

Frédéric Bastiat

We open with a pause in Asian markets, or is it a sign of something more? Is the Great Rig of 2017, starting to falter, or worse? Did global stock markets just run out of Greater Fools to offload stocks to? If we’ve reached Peak Fools, what happens next?

Asian markets fall on dollar’s weakness

Published: July 17, 2017 11:24 p.m. ET
Asian shares were broadly weaker Tuesday, with Chinese stocks stabilizing after Monday’s slump and

Japanese stocks falling in reaction to the dollar’s weakness.

Tokyo investors returned from their Monday holiday and sold shares in reaction to the slide in the dollar on Friday after disappointing U.S. economic data added to skepticism about more Federal Reserve rate increases this year.

The dollar has continued to weaken with the euro getting above $1.15 for the first time in 14 months in Asian trading.

The Nikkei NIK, -0.57%   fell 0.9% to below the psychologically-important 20,000 level as the dollar JPYUSD, +0.502396%   slid to ¥112.20 Tuesday morning, from ¥112.63 in late New York trading on Monday. Exporters were among the biggest decliners in Japan because their offshore earnings are eroded by the yen’s strength.

The Wall Street Journal Dollar Index fell 0.3%.

----Market participants are looking to policy statements on Thursday from both the Bank of Japan and the European Central Bank.

Investors are expecting hawkish comments from the ECB, says Hisao Matsuura, chief strategist at Nomura Japan. A hawkish ECB could hurt Tokyo stocks as it could keep the dollar weak and lift the yen, as well as widen the gap between the European and Japanese bond yields, making it more difficult for the BOJ to keep rates low. “I don’t see any upside [for stocks] for now,” he added.

Meanwhile, Chinese stocks were holding up after sharp declines on Monday which saw the Shenzhen Composite Index closing down 4.3% and Shanghai Composite Index down 1.4%. The Shanghai Composite SHCOMP, -0.62%   was recently down 0.3% while the Shenzhen Composite 399106, -0.72%   was up 0.1%.

Australian stocks, which lagged the stock gains seen in much of Asia Pacific on Monday, were the worst performing in the region Tuesday morning. The S&P/ASX 200 index XJO, -1.20%   was down 1%, as the country’s big banks, which are heavily weighted on the index, weakened over 2%.

Up next, rising trouble in La-La-Land. Only in America? Here we go again?

New U.S. Subprime Boom, Same Old Sins: Auto Defaults Are Soaring

By Gabrielle Coppola
It’s classic subprime: hasty loans, rapid defaults, and, at times, outright fraud.

Only this isn’t the U.S. housing market circa 2007. It’s the U.S. auto industry circa 2017.

A decade after the mortgage debacle, the financial industry has embraced another type of subprime debt: auto loans. And, like last time, the risks are spreading as they’re bundled into securities for investors worldwide.

Subprime car loans have been around for ages, and no one is suggesting they’ll unleash the next crisis. But since the Great Recession, business has exploded. In 2009, $2.5 billion of new subprime auto bonds were sold. In 2016, $26 billion were, topping average pre-crisis levels, according to Wells Fargo & Co.

Few things capture this phenomenon like the partnership between Fiat Chrysler Automobiles NV and Banco Santander SA. Since 2013, as U.S. car sales soared, the two have built one of the industry’s most powerful subprime machines.

Details of that relationship, pieced together from court documents, regulatory filings and interviews with industry insiders, lay bare some of the excesses of today’s subprime auto boom. Wall Street has rewarded lax lending standards that let people get loans without anyone verifying incomes or job histories. For instance, Santander recently vetted incomes on fewer than one out of every 10 loans packaged into $1 billion of bonds, according to Moody’s Investors Service. The largest portion were for Chrysler vehicles.

Some of their dealers, meantime, gamed the loan application process so low-income borrowers could drive off in new cars, state prosecutors said in court documents.

Through it all, Wall Street’s appetite for high-yield investments has kept the loans -- and the bonds -- coming. Santander says it has cut ties with hundreds of dealerships that were pushing unsound loans, some of which defaulted as soon as the first payment. At the same time, Santander plans to increase control over its U.S. subprime auto unit, Santander Consumer USA Holdings Inc., people familiar with the matter said.

----For investors, the allure of subprime car loans is clear: securities composed of such debt can offer yields as high as 5 percent. It might not seem like much, but in a world of ultra-low rates, that’s still more than triple the comparable yield for Treasuries. Of course, the market is still much smaller than the subprime-mortgage market which triggered the credit crisis, making a repeat unlikely. But the question now is whether that premium, which has dwindled as demand soared, is worth it.

“Investors seem to be ignoring the underlying risks,” said Peter Kaplan, a fund manager at Merganser Capital Management.
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“The boom can last only as long as the credit expansion progresses at an ever-accelerated pace. The boom comes to an end as soon as additional quantities of fiduciary media are no longer thrown upon the loan market.”

Ludwig von Mises.

There Has Been Just One Buyer Of Stocks Since The Financial Crisis

When discussing Blackrock's latest quarterly earnings (in which the company missed on both the top and bottom line, reporting Adj. EPS of $5.24, below the $5.40 exp), CEO Larry Fink made an interesting observation: “While significant cash remains on the sidelines, investors have begun to put more of their assets to work. The strength and breadth of BlackRock’s platform generated a record $94 billion of long-term net inflows in the quarter, positive across all client and product types, and investment styles. The organic growth that BlackRock is experiencing is a direct result of the investments we’ve made over time to build our platform."

While the intention behind the statement was obvious: to pitch Blackrock's juggernaut ETF product platform which continues to steamroll over the active management community, leading to billions in fund flow from active to passive management every week, if not day, he made an interesting point: cash remains on the sidelines even with the S&P at record highs.

In fact, according to a chart from Credit Suisse, Fink may be more correct than he even knows. As CS' strategist Andrew Garthwaite writes, "one of the major features of the US equity market since the low in 2009 is that the US corporate sector has bought 18% of market cap, while institutions have sold 7% of market cap."

What this means is that since the financial crisis, there has been only one buyer of stock: the companies themselves, who have engaged in the greatest debt-funded buyback spree in history.

Why this rush by companies to buyback their own stock, and in the process artificially boost their Eearning per Share? There is one very simple reason: as Reuters explained some time ago, "Stock buybacks enrich the bosses even when business sags."  And since bond investor are rushing over themselves to fund these buyback plans with "yielding" paper at a time when central banks have eliminated risk, who is to fault them.

More concerning than the unprecedented coordinated buybacks, however, is not only the relentless selling by institutions, but the persistent unwillingness by "households" to put any new money into the market which suggests that the financial crisis has left an entire generation of investors scarred with "crash" PTSD, and no matter what the market does, they will simply not put any further capital at risk.

As to Fink's conclusion that "investors have begun to put more of their assets to work", we will wait until such time as central banks, who have pumped nearly $2 trillion into capital markets in 2017 alone, finally stop doing so before passing judgment.

“But it [the boom] could not last forever even if inflation and credit expansion were to go on endlessly. It would then encounter the barriers which prevent the boundless expansion of circulation credit. It would lead to the crack-up boom and the breakdown of the whole monetary system.”

Ludwig von Mises.

We close for the day with the never-ending fiasco, known as the wealth and jobs destroying, EUSSR. Poor Italy faces yet another lost decade. Italy’s youth better head to London and prospects, while they still can.

July 17, 2017 / 1:38 PM / 17 hours ago

Italian banks may take 10 years to fix bad debt issue - Morgan Stanley

(Reuters) - Italian banks could take 10 years to reduce their level of non-performing loans (NPLs) to the European average, Morgan Stanley said on Monday, adding that setting up a "bad bank" could help.

A recession that ended in 2014 saddled Italian banks with 349 billion euros (305.94 billion pounds) in impaired debts, one third of Europe's total, while a clogged judicial system and sluggish economic growth made it tough to recover non-performing debts.

But a series of state-led steps involving capital injections and a plan to bailout Monte dei Paschi, the world’s oldest bank, have provided some relief.

"We believe progress has been made but vulnerabilities remain, with 60 billion-70 billion euros of non-performing loan disposals still in the pipeline and almost 10 years to reach European NPL levels at the current rundown rate," Morgan Stanley said.

----The idea of a bad bank is backed by European Union institutions, including the central bank and regional banking authority, but it faces opposition in Germany which balks at the prospect of a tax-payer funded bailout.

Last week, Bank of Italy Governor Ignazio Visco welcomed a European Union proposal to set up state-backed vehicles to buy bad loans from banks but said participation should be voluntary.

Ireland, Spain and Austria have all seen their financial systems and economies emerge healthier after choosing to set up a bad bank in the aftermath of the euro zone debt crisis.

Morgan Stanley remained cautious on Italian banking shares <.FTIT8300 >, which have risen more than 80 percent in the past year.

It said the "pathway to normalization of loan losses will be 'bumpy' with only a gradual reduction in cost of risk.”

Bank Of Italy Warns Citizens Against "Creating Your Own Currency"

Jul 18, 2017 1:15 AM
Authored by Louis Cammarosano via Smaulgld.com,

Citizens Claim Right to Create Scriptural Euros.

Citizens conjure Euros out of thin air, just like banks.

Because the top cryptocurrencies, Bitcoin and Ethereum are open source, any one can create their own cryptocurrencies.

While the proliferation of cryptocurrencies has central banks concerened, another more insidious and perhaps greater threat to central banks’ monopoly on money creation is the issuance of scriptural euros by citizens.

Scriptural Euros are Euros issued by citizens under a “theory of the autonomous creation of scriptural currency” based on the idea of collective property of money that affirms the right of every citizen to autonomously create “scriptural” money (Euros) via their own accounting records. The theory of autonomous creation of scriptural currency holds that just as banks can conjure debt based money out of thin air, so can citizens.

Money thus created by citizens can then be used to extinguish their own debts.

Apparently, citizen-created euros have been accepted as payment. @marcosabait (Marco Saba) shared his experience on twitter whereby his scriptural Euros were accepted by Facebook as payment for advertising. This correspondence between @marcosabait and Facebook shows how @marcosabait created 25 Euros as payment to Facebook and Facebook accepted the citizen issued Euros as payment.

In the correspondence, @marcosabait informs Facebook Italy (in English) that banks AND citizens can create new Euro in electronic form and that he had just done so in the amount of 25 Euros and was submitting it as payment. He also referred Facebook to his Facebook page for more information on citizen created scriptural Euros.

Facebook responded in Italian by accepting @marcosabait payment of his self-created scriptural Euro, while noting his payment was being accepted this time, but such payments may not be honored in the future.

According to @marcosabait, Italian citizens have created more than 1 billion scriptural Euros since October 2016.
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"The history of paper money is an account of abuse, mismanagement, and financial disaster."

Richard M. Ebeling

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
Presented without need for comment.

Haiti Official Who Exposed The Clinton Foundation Is Found Dead

Jul 16, 2017 10:48 AM
The mainstream media’s silence over Klaus Eberwein’s death is deafening.

Eberwein was a former Haitian government official who was expected to expose the extent of Clinton Foundation corruption and malpractice next week.

He has been found dead in Miami at the age of 50.

The circumstances surrounding Eberwein’s death are also nothing less than unpalatable. According to Miami-Dade’s medical examiner records supervisor, the official cause of death is “gunshot to the head.“ Eberwein’s death has been registered as “suicide” by the government. But not long before his death, he acknowledged that his life was in danger because he was outspoken on the criminal activities of the Clinton Foundation. 

Eberwein was a fierce critic of the Clinton Foundation’s activities in the Caribbean island, where he served as director general of the government’s economic development agency, Fonds d’assistance économique et social, for three years. “The Clinton Foundation, they are criminals, they are thieves, they are liars, they are a disgrace,” Eberwein said at a protest outside the Clinton Foundation headquarters in Manhattan last year. Eberwein was due to appear on Tuesday before the Haitian Senate Ethics and Anti-Corruption Commission where he was widely expected to testify that the Clinton Foundation misappropriated Haiti earthquake donations from international donors. But this “suicide” gets even more disturbing…

Eberwein was only 50-years-old and reportedly told acquaintances he feared for his life because of his fierce criticism of the Clinton Foundation.  His close friends and business partners were taken aback by the idea he may have committed suicide. “It’s really shocking,” said friend Gilbert Bailly. “We grew up together; he was like family.”

During and after his government tenure, Eberwein faced allegations of fraud and corruption on how the agency he headed administered funds. Among the issues was FAES’ oversight of the shoddy construction of several schools built after Haiti’s devastating Jan. 12, 2010, earthquake.  But, according to Eberwein, it was the Clinton Foundation who was deeply in the wrong – and he intended to testify and prove it on Tuesday.

According to Eberwein, a paltry 0.6 percent of donations granted by international donors to the Clinton Foundation with the express purpose of directly assisting Haitians actually ended up in the hands of Haitian organizations. A further 9.6 percent ended up with the Haitian government. The remaining 89.8 percent – or $5.4 billion – was funneled to non-Haitian organizations. –WND

Eberwein was expected to testify against the Clinton Foundation in court and ends up committing suicide shortly before.  Where have we heard this before?

Untimely deaths seem to follow the Clinton’s around, and this one especially is probably something – considering since the mainstream media is silent about this death.
Technology Update.
With events happening fast in the development of solar power and graphene, I’ve added this section. Updates as they get reported. Is converting sunlight to usable cheap AC or DC energy mankind’s future from the 21st century onwards? DC? A quantum computer next?

Signature analysis of single molecules using their noise signals

Date: July 12, 2017

Source: Osaka University

Summary: Unique noise signatures have been obtained from single molecules interacting with carbon nanotube-based electronic devices.

Noise is low-frequency random fluctuation that occurs in many systems, including electronics, environments, and organisms. Noise can obscure signals, so it is often removed from electronics and radio transmissions. 
The origin of noise in nanoscale electronics is currently of much interest, and devices that operate using noise have been proposed. Materials with a high surface-to-volume ratio are attractive for studying the noise produced by nanoscale electronics because they are very sensitive to changes of their surfaces. A representative material of this type is carbon nanotubes, which are rolled sheets of the graphene hexagonal network, which is only one carbon atom thick.

A Japanese collaboration led by Osaka University has explored the ability of single molecules to affect the noise generated by carbon nanotube-based nanoscale electronic devices. The team fabricated simple devices consisting of a carbon nanotube bridging two electrodes. The devices were exposed to different large molecules, causing some to bind to the carbon nanotube surface. It was found that different molecules gave unique noise signals related to the properties of the molecules. The strength of the interaction between the carbon nanotubes and molecules was able to be predicted from the obtained noise signals.

"The signal generated by the carbon nanotube device changed following the adsorption of specific single molecules," says first author Agung Setiadi. "This is because the adsorbed molecule generated a trap state in the carbon nanotube, which changed its conductance."

What this means is that the carbon nanotube-based devices were so sensitive that the researchers were able to detect unique signature from single molecules. The ability to characterize single molecules using highly sensitive nanoelectronics is an exciting prospect in the field of sensors, particularly for neuro- and biosensor applications.

"Use of noise signals to identify molecular activity ((interaction) or (active orbital)) is attractive for developing advanced sensing devices," explains corresponding author Megumi Akai-Kasaya. "We demonstrated that noise can be exploited to improve the signal detection ability of a device." The results of this successful demonstration will be published in the near future in a follow-up article.

Signal detection sensitivity may be increased through controllable noise generation. These carbon nanotube-based devices illustrate that it is possible to detect single molecules through their unique noise signatures in the device current signals. Improved knowledge of the molecular-level origin of noise should lead to the development of electronics that use noise to improve their performance rather than degrade it.

The monthly Coppock Indicators finished June

DJIA: 21,350 +196 Up. NASDAQ:  6,140 +235 Up. SP500: 2,423 +166 Up.

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