Baltic Dry Index. 764 +50 Brent Crude 40.59
Spot Gold 1730
Coronavirus Cases 11/6/20
World 7,502,991
Deaths 421,835
“It is not often that nations
learn from the past, even rarer that they draw the correct conclusions from
it.”
Henry Kissinger
Does history
repeat, as in a Collateralised Debt Obligation crisis bringing down Lehman Brothers?
Well stick around, it might later this year as a great wave of corporate
bankruptcies unfolds. Something
unpleasant about fans comes to mind.
The Banksters
created a new round of CDOs but called them Collateralised Loan Obligations,
lending hundreds of billions of dollars to dodgy already credit distressed B corporations,
and then Sars-Cov-2 hit generating all the national lockdowns.
As the Atlantic
Magazine reports below this new wave of corporate bankruptcies threatens to
blow-up the banks CLOs, and with them the parasitic banksters. Stocks anyone?
But first this. Chairman
Powell leads the Fedsters and the US nation on the Road to Zimbabwe. Note: no
guest appearances by Bob Hope, Bing Cosby or Dorothy Lamour. This is a tragedy
not a comedy.
Dow closes 280 points lower,
Nasdaq above 10,000 after Fed says it’ll keep buying bonds and interest rates
near zero
Published: June 10, 2020 at 4:53
p.m. ET
U.S. stocks finished mostly lower Wednesday even though the
Federal Reserve pledged to hold interest rates unchanged at near zero through
2022, while keeping up at least its current pace of bond buying to support
credit markets through the pandemic. The Dow and S&P 500 closed lower for a second day,
while the Nasdaq Composite booked its first finish
above the 10,000 level The Dow Jones Industrial Average DJIA, -1.03% SPX, -0.53% COMP, +0.66% On Tuesday Stocks mostly ended lower Wednesday, even though the Federal Reserve vowed The central bank wasn’t expected to make any significant
changes to interest rates or its current batch of programs. “I think this is par for the course for this Fed,” Peter
Essele, head of portfolio management at Commonwealth Financial Network, told
MarketWatch. “They have been really reluctant to take the punch bowl away from
the party. They’d rather let things get overheat.” Powell said the path of the economy still looks “highly
uncertain,” but also that “we are going to learn a whole lot” over the next few
months as businesses more fully reopen “We’re not thinking about raising rates, we’re not even
thinking about thinking about raising rates,” Powell said, while warning that
“many millions of people” will likely need further government support in the
coming months. For the Fed’s part, its policy update included rationale
for recent tweaks made to its more than $2 trillion raft of emergency credit
facilities to backstop financial markets. The central bank’s briefing also
provided insights on the employment front, after Friday’s U.S. jobs report showed that 2.5 million jobs were created in
May “The key thing people need to understand,” Powell said, is
that there remains “a lot of work” to do with millions still out of jobs. Meanwhile, Fed’s balance sheet has ballooned from about $4
trillion in March to $7.21 trillion as of last week, while its policy interest
held steady at a range of 0% and 0.25%.
More
Now back to CDO history
repeating. The long complicated article is a must read article for all with any
wealth at risk from the highly dodgy bankster system.
Hello, operator ! Give me the number for 911 !
Fed Chairman
Powell, with apologies to Homer Simpson.
The Looming
Bank Collapse
The U.S. financial system could be on the
cusp of calamity. This time, we might not be able to save it.
Frank Partnoy
June 9, 2020.
After months of living with the coronavirus pandemic,
American citizens are well aware of the toll it has taken on the economy:
broken supply chains, record unemployment, failing small businesses. All of
these factors are serious and could mire the United States in a deep, prolonged
recession. But there’s another threat to the economy, too. It lurks on the
balance sheets of the big banks, and it could be cataclysmic. Imagine if, in
addition to all the uncertainty surrounding the pandemic, you woke up one
morning to find that the financial sector had collapsed. You may think that such a crisis is unlikely, with memories
of the 2008 crash still so fresh. But banks learned few lessons from that
calamity, and new laws intended to keep them from taking on too much risk have
failed to do so. As a result, we could be on the precipice of another crash,
one different from 2008 less in kind than in degree. This one could be worse. The financial crisis of 2008 was about home mortgages.
Hundreds of billions of dollars in loans to home buyers were repackaged into
securities called collateralized debt obligations, known as CDOs. In theory,
CDOs were intended to shift risk away from banks, which lend money to home
buyers. In practice, the same banks that issued home loans also bet heavily on
CDOs, often using complex techniques hidden from investors and regulators. When
the housing market took a hit, these banks were doubly affected. In late 2007,
banks began disclosing tens of billions of dollars of subprime-CDO losses. The
next year, Lehman Brothers went under, taking the economy with it. The federal government stepped in to rescue the other big
banks and forestall a panic. The intervention worked—though its success did not
seem assured at the time—and the system righted itself. Of course, many
Americans suffered as a result of the crash, losing homes, jobs, and wealth. An
already troubling gap between America’s haves and have-nots grew wider still.
Yet by March 2009, the economy was on the upswing, and the longest bull market
in history had begun.
---- The reforms were well intentioned, but, as
we’ll see, they haven’t kept the banks from falling back into old, bad habits.
After the housing crisis, subprime CDOs naturally fell out of favor. Demand
shifted to a similar—and similarly risky—instrument, one that even has a
similar name: the CLO, or collateralized loan obligation. A CLO walks and talks
like a CDO, but in place of loans made to home buyers are loans made to
businesses—specifically, troubled businesses. CLOs bundle together so-called leveraged
loans, the subprime mortgages of the corporate world. These are loans made to
companies that have maxed out their borrowing and can no longer sell bonds
directly to investors or qualify for a traditional bank loan. There are more
than $1 trillion worth of leveraged loans currently outstanding. The majority
are held in CLOs.
---- So what sort of debt do you find in a
CLO? Fitch Ratings has estimated that as of April, more than 67 percent of the
1,745 borrowers in its leveraged-loan database had a B rating. That might not
sound bad, but B-rated debt is lousy debt. According to the rating agencies’
definitions, a B-rated borrower’s ability to repay a loan is likely to
be impaired in adverse business or economic conditions. In other words,
two-thirds of those leveraged loans are likely to lose money in economic
conditions like the ones we’re presently experiencing.
---- Banks do not publicly report which CLOs they
hold, so we can’t know precisely which leveraged loans a given institution
might be exposed to. But all you have to do is look at a list of leveraged
borrowers to see the potential for trouble. Among the dozens of companies Fitch
added to its list of “loans of concern” in April were AMC Entertainment, Bob’s
Discount Furniture, California Pizza Kitchen, the Container Store, Lands’ End,
Men’s Wearhouse, and Party City. These are all companies hard hit by the sort
of belt-tightening that accompanies a conventional downturn.
We are not in the midst of a conventional downturn.
More, much, much more.
AMC has ‘substantial doubt’ that
it can survive coronavirus outbreak shutdown
Published
Wed, Jun 3 202010:21 AM EDT Updated Wed, Jun 3 202010:48 PM EDT
The
world’s largest movie theater chain said Wednesday it has “substantial doubt”
it can remain in business after shuttering all of its locations during the coronavirus pandemic . AMC Theaters said
a new debt offering would allow the company to withstand these
closures until a partial reopening ahead of Thanksgiving.
However, in a filing with the Securities and Exchange Commission the company
disclosed concerns about liquidity, its ability to generate revenue and the
timeline of reopening its theaters.
Bracing for the next phase of the
coronavirus recession: Bankruptcies
By Khristopher J. Brooks June 9, 2020 / 3:30 PM /
MoneyWatch
Art Van Furniture, Bar Louie and True Religion all sell
different products, but they all have one thing in common: Each has gone
bankrupt this year, as the coronavirus-induced recession that started in February flattens businesses large and small. Recent data show 722 companies sought bankruptcy protection around the U.S.
last month, a 48% increase from the year-ago period. Chapter 11 filings also
jumped in April and March, as states started imposing business restrictions
amid the coronavirus outbreak.
"This is a sign that already weak companies are
succumbing to the lockdown recession," Chris Kuehl, an economist with the
National Association of Credit Management, which tracks bankruptcies, said in a
research note. Businesses that were struggling before the pandemic "are
starting to get in some real trouble," he added
More
Cerberus demands changes at
'disastrous' Commerzbank
June 10, 2020 /
10:19 AM
FRANKFURT (Reuters) - U.S. activist
investor Cerberus is calling on Commerzbank ( CBKG.DE ) to appoint two
of its nominees to the supervisory board, cut costs and adopt a new strategy,
as it battles to make a success of a big bet on German banks.
In a letter to Commerzbank’s chairman on Tuesday, Cerberus complained
the bank had failed to heed its advice after more than 70 meetings. Shares in
Germany’s second-biggest bank have fallen about 60% since Cerberus bought a 5%
stake in 2017.
The investor, describing Commerzbank’s performance as “disastrous”,
demanded it appoint two “highly qualified individuals to be identified by us”
to its supervisory board.
Cerberus said shareholders would be highly supportive of “significant
change” to the supervisory board, management board and strategy, but did not
give details on what the new strategy should be.
“The window of opportunity to address the challenges faced by Commerzbank
is rapidly closing,” Cerberus wrote in the five-page letter, seen by Reuters.
Commerzbank said in a statement it was focused on costs and efficiency.
“The bank takes careful note of shareholders’ opinions - including critical
ones,” it said.
The bank’s shares, which have hit record lows this year, were last up 1%
after shedding some earlier gains.
Such public shareholder campaigns are rare in Europe, and in Germany
activist investors are often viewed warily - as shareholders focused on
short-term profits rather than what is best for companies in the long term. The
German government is the largest shareholder in Commerzbank with a 15% stake.
“In my view, state ownership does not make it any easier for Cerberus to
achieve its strategic goals,” said Klaus Nieding of shareholder lobby group
DSW.
---- Just months after buying into Commerzbank, Cerberus also took a 3%
stake in Deutsche Bank (DBKGn.DE ).
The investor was behind a push to merge the two banks last
year, people told Reuters at the time, though the effort failed and both banks
embarked on separate restructuring measures. “The precarious situation of Commerzbank requires swift and
decisive action now,” Cerberus wrote, demanding a reply by June 12.
Inditex to close up to 1,200
stores by 2021
Published: June 10, 2020 at 4:14 a.m. ET
--Inditex plans to close stores as part of a new strategy that will more
closely integrate its brick-and-mortar and online businesses
--The Zara owner swung to a first-quarter loss as the coronavirus
pandemic hurt sales
--Inditex said sales trends started to improve in May with the easing of
lockdowns
Industria de Diseno Textil SA, known as Inditex, said Wednesday that it
swung to a first-quarter loss as the coronavirus dealt battered its sales, and
that it will close at least 1,000 stores over this year and next in an effort
to make its store network more efficient.
The Spanish fashion giant reported a net loss of 409 million euros
($462.5 million) for the quarter ended April 30 compared with net profit of
EUR736 million the year prior and analysts' expectations of a EUR161 million
net loss, according to FactSet.
Inditex said the loss was exacerbated by a EUR308 million provision for
its store-optimization program. The company said it will complete this drive
and "absorb between 1,000 and 1,200 stores in the years 2020 and
2021." It will focus on closing stores whose sales can be recaptured in
nearby stores and online, it said.
The decision to close between 13% and 16% of its total store network is
part of a 2020-22 strategy that Inditex outlined Wednesday along with its
first-quarter results.
---- The owner of Zara said its first-quarter
sales fell to EUR3.3 billion from EUR5.93 billion the year prior, roughly
meeting analysts' expectations of EUR3.35 billion, according to a FactSet
consensus estimate.
The coronavirus pandemic hit Inditex hard during the quarter, with
lockdowns forcing it to close the majority of its stores around the world. But
the company said trends started to improve in May as most markets began to
gradually reopen.
Store and online sales fell 51% in local currencies in May compared with
a year earlier, Inditex said. For the June 2-8 period, store and online sales
fell 34% in local currencies compared with a year earlier.
A little more than half of Inditex's stores around the world are now
open, the company said.
More
Fools rush in
where ….
Robinhood traders cash in on the
market comeback that billionaire investors missed
Published Tue, Jun 9 20207:04 AM EDT
Updated Tue, Jun 9 202010:43 AM EDT
Retail investors capitalized
on the market comeback, unlike the billionaire hedge fund managers who
said stocks would retest their lows. Millennial-favored stock
trading app Robinhood saw new investors piling into stay-at-home stocks
and those most beaten down by the economic shutdown, like airlines,
casinos and hotels.
One 26-year-old Robinhood trader made $1,500 in less than
24 hours betting on a beaten-down airline stock, while many so-called experts
on Wall Street warned about buying into an overvalued stock market that was
bound to tumble again amid the coronavirus
pandemic . Last Thursday, Lequon Godbolt, purchased a call option for American Airlines that made
him $200 on the millennial-favored stock trading app. After seeing reports that the airline was increasing domestic flying for
summer travel, Godbolt bought another call option minutes before the close.
When the market opened higher last Friday after a surprisingly positive jobs report ,
Godbolt raked in his profits.
More
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can rise and fall over time and you may get back less than what you started
with.
Finally,
how will GB pay off all the coronavirus borrowing? My guess is it won’t. But on
an iffy fiat currency, and with negative interest rates, GB could try 100 year
bonds and perpetuals. But who would buy them? The BOE?
Explainer: How will Britain pay
for coronavirus borrowing?
June 9, 2020 /
7:11 AM
LONDON
(Reuters) - British government borrowing is soaring to levels not seen since
World War Two, something Prime Minister Boris Johnson and his finance minister
Rishi Sunak will try to fix once the worst of the coronavirus crisis has
passed.
Government forecasters think the budget deficit could jump
five-fold to 300 billion pounds this year or around 15% of annual economic
output. By comparison, after the global financial crisis the
deficit peaked at 10% and it took almost a decade of spending cuts to bring it
down to around 2% last year. (Graphic: here )
Johnson has suggested that more spending is on the way by
promising to “double down” on his plans for more public infrastructure
investment. Sunak has said little about how he might tackle the surge
in public debt estimated to hit 2.2 trillion pounds this year, beyond hinting
that self-employed workers might see their tax bills rise.
HOW IS BRITAIN FUNDING ITS
BORROWING?
Helped by the Bank of England’s huge bond-buying programme
and its record low interest rates, Britain is selling bonds to investors at an
unprecedented pace, with 225 billion pounds of issuance planned between April
and July. The government feels under less pressure than in 2010, when
it feared a Greece-style loss of confidence among investors. Last month it sold a three-year bond with a negative yield.
In the short run, the OBR expects debt servicing costs to
fall as lower interest rates outweigh the burden of the extra borrowing.
HOW WILL BRITAIN CUT THE DEFICIT
AFTER THE CRISIS?
Much of the borrowing surge is caused by programmes that
the government hopes will be temporary. Its income support programmes for
workers are likely to cost more than 100 billion pounds but they are due to end
by October. The government hopes its unprecedented support will allow
the economy to revive after coronavirus restrictions are lifted. Initial forecasts from Britain’s budget forecasters and the
BoE assumed little long-term economic damage. But policymakers now see a risk of so-called scarring to
hotels, airlines, bars and restaurants due to changed customer behaviour and
reduced demand for city-centre office space.
More
“That is the key to history. Terrific energy is expended -
civilizations are built up - excellent institutions devised; but each time
something goes wrong. Some fatal flaw always brings the selfish and the cruel
people to the top and it all slides back into misery and ruin.”
C. S.
Lewis
Covid-19 Corner
Though
hopefully, we are passing/have passed the peak of new cases, at least of the
first SARS-CoV-2 outbreak, this section will continue until it becomes
unneeded.
EU says China behind 'huge wave'
of Covid-19 disinformation
Brussels shifts position by accusing Beijing for first time
of running false campaigns Wed 10 Jun 2020 11.16 BST China has been accused by Brussels of running
disinformation campaigns inside the European Union , as the bloc set
out a plan to tackle a “huge wave” of false facts about the coronavirus
pandemic. The European
commission said Russia and China were running “targeted influence
operations and disinformation campaigns in the EU, its neighbourhood, and
globally”. While the charge against Russia has been levelled on many occasions,
this is the first time the EU executive has publicly named China as a source of
disinformation. French politicians were furious when a Chinese embassy
website claimed in mid-April, at the height of Europe’s pandemic, that care
workers had abandoned their jobs leaving residents to die. The unnamed Chinese
diplomat also claimed falsely that 80 French lawmakers had used a racist slur
against the head of the World Health Organization, Tedros Adhanom Ghebreyesus. “I believe if we have evidence we should not shy away from
naming and shaming,” Vĕra Jourová, a European commission vice-president, told
reporters. “What we also witnessed is a surge in narratives undermining
our democracies and in effect our response to the crisis, for example the claim
there are secret US biological laboratories on former Soviet republics has been
spread by both pro-Kremlin outlets, as well as Chinese officials and state
media.” “I strongly believe that a geopolitically strong EU can
only materialise if we are assertive,” Jourová said, alluding to the aim of the
European commission’s president, Ursula von der Leyen, for the body to have
more clout on the world stage. The more assertive stance marks a change in tone from a
report
in March which merely described Chinese media narratives, while focusing
the spotlight on disinformation from Kremlin-backed sources. It comes after
lawmakers in the European parliament accused
the commission of watering down an earlier report on disinformation under
pressure from China – charges EU officials strongly
denied . More https://www.theguardian.com/world/2020/jun/10/eu-says-china-behind-huge-wave-covid-19-disinformation-campaign
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.
New material, modeling methods
promise advances in energy storage
Work offers promise for
lightweight materials for energy technologies
Date:
June 4, 2020
Source:
University of Houston
Summary:
The explosion of mobile electronic devices, electric vehicles, drones and other
technologies have driven demand for new lightweight materials that can provide
the power to operate them.
The explosion of mobile electronic devices, electric vehicles, drones
and other technologies have driven demand for new lightweight materials that
can provide the power to operate them. Researchers from the University of
Houston and Texas A&M University have reported a structural supercapacitor
electrode made from reduced graphene oxide and aramid nanofiber that is
stronger and more versatile than conventional carbon-based electrodes.
The UH research team also demonstrated that modeling based on the
material nanoarchitecture can provide a more accurate understanding of ion
diffusion and related properties in the composite electrodes than the
traditional modeling method, which is known as the porous media model.
"We are proposing that these models based on the nanoarchitecture
of the material are more comprehensive, detailed, informative and accurate
compared to the porous media model," said Haleh Ardebili, Bill D. Cook
Associate Professor of Mechanical Engineering at UH and corresponding author
for a paper describing the work, published in ACS Nano .
More accurate modeling methods will help researchers find new and more
effective
nanoarchitectured materials that can provide longer battery life and
higher energy at a lighter weight, she said.
The researchers knew the material tested -- reduced graphene oxide and
aramid nanofiber, or rGO/ANF -- was a good candidate because of its strong
electrochemical and mechanical properties. Supercapacitor electrodes are
usually made of porous carbon-based materials, which provide efficient
electrode performance, Ardebili said.
While the reduced graphene oxide is primarily made of carbon, the aramid
nanofiber offers a mechanical strength that increases the electrode's
versatility for a variety of applications, including for the military. The work
was funded by the U.S. Air Force Office of Scientific Research.
In addition to Ardebili, co-authors include first author Sarah Aderyani
and Ali Masoudi, both of UH; and Smit A. Shah, Micah J. Green and Jodie L.
Lutkenhaus, all from A&M.
The current paper reflects the researchers' interest in improving
modeling for new energy materials. "We wanted to convey that the
conventional models out there, which are porous media-based models, may not be
accurate enough for designing these new nanoarchitectured materials and
investigating these materials for electrodes or other energy storage
devices," Ardebili said.
That's because the porous media model generally assumes uniform pore
sizes within the material, rather than measuring the varying dimensions and
geometric properties of the material.
"What we propose is that yes, the porous media model may be
convenient, but it is not necessarily accurate," Ardebili said. "For
state-of-the-art devices, we need more accurate models to better understand and
design new electrode materials."
There can be few fields of human endeavour in which history
counts for so little as in the world of finance. Past experience, to the extent
that it is part of memory at all, is dismissed as the primitive refuge of those
who do not have the insight to appreciate the incredible wonders of the
present. John Kenneth Galbraith.
The Monthly Coppock Indicators
finished May
DJIA: 25,383 +12 Down. NASDAQ: 9,490 +178 Up.
SP500: 3,044 +83 Down.
The NASDAQ has remained up.
The S&P and the DJIA still remain down despite the best efforts of the Fed
to get them to higher.
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