The Wall Street Examiner » Must Read http://wallstreetexaminer.com Get the facts. Sat, 04 Jul 2015 16:33:46 +0000 en-US hourly 1 Will Greek Banks Give 30 Percent Haircuts To Depositors? http://wallstreetexaminer.com/2015/07/will-greek-banks-give-30-percent-haircuts-to-depositors/ http://wallstreetexaminer.com/2015/07/will-greek-banks-give-30-percent-haircuts-to-depositors/#comments Sat, 04 Jul 2015 13:59:59 +0000 http://confoundedinterest.wordpress.com/?p=41974 This is a syndicated repost courtesy of Confounded Interest - Online Course Notes For Financial Markets. To view original, click here.

Twas the day before the Greek referendum … and all hell is breaking loose in Athens.

The Financial Times reports “Greek banks prepare plan to raid deposits to avert collapse” which was met with denial by Greek Finance Minister Yanis Varoufakis. In other words, Greek banks may be considering a Cyprus solution, where Cyrus levied a 47.5% haircut (aka, taking) of deposits with more than 100,000 euro in Cyprus’ two largest banks.

Greek banks are preparing contingency plans for a possible “bail-in” of depositors amid fears

The plans, which call for a “haircut” of at least 30 per cent on deposits above €8,000, sketch out an increasingly likely scenario for at least one bank, the sources said.

A Greek bail-in could resemble the rescue plan agreed by Cyprus in 2013, when customers’ funds were seized to shore up the banks, with a haircut imposed on uninsured deposits over €100,000.

It would be implemented as part of a recapitalisation of Greek banks that would be agreed with the country’s creditors — the European Commission, International Monetary Fund and European Central Bank.

“It [the haircut] would take place in the context of an overall restructuring of the bank sector once Greece is back in a bailout programme,” said one person following the issue. “This is not something that is going to happen immediately.”

Greek deposits are guaranteed up to €100,000, in line with EU banking directives, but the country’s deposit insurance fund amounts to only €3bn, which would not be enough to cover demand in case of a bank collapse.

With few deposits over €100,000 left in the banks after six months of capital flight, “it makes sense for the banks to consider imposing a haircut on small depositors as part of a recapitalisation. . . It could even be flagged as a one-off tax,” said one analyst.

If the rumor is true, a 30% haircut is better than Cyprus’ 47.5% haircut; at the same time, Greece would be going after the small fish.

greek-mardes-small-fried-fish-large

The Bloomberg poll on the Greek referendum is about 50-50. When banks open on Tuesday after the referendum, Greeks may be in for a BIG surprise, that is, the ones that haven’t already withdrawn their pensions and savings already.

greekdeposits

Of course, many private creditors have flown the coup since 2009,

greek-debt6-15

leaving global taxpayers on the hook.

greek-debt6-15a

Have a Happy US Independence Day!

Wall Street Examiner Disclaimer: The Wall Street Examiner reposts third party content with the permission of the publisher. I curate these posts on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. No promotional consideration has been offered or accepted. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler and no endorsement of the content so provided is either expressed or implied by our posting the content. Some of the content includes the original publisher's promotional messages. The Wall Street Examiner is not familiar with the services offered and makes no endorsement or recommendation regarding them. Do your own due diligence when considering the offerings of third party providers.

This is a syndicated repost courtesy of Confounded Interest - Online Course Notes For Financial Markets. To view original, click here.

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Here’s A Timeline To Follow For Next Steps for Greece http://wallstreetexaminer.com/2015/07/heres-a-timeline-to-follow-for-next-steps-for-greece/ http://wallstreetexaminer.com/2015/07/heres-a-timeline-to-follow-for-next-steps-for-greece/#comments Sat, 04 Jul 2015 10:19:00 +0000 http://wallstreetexaminer.com/?guid=b9ea1e6b5a859862ed64229f922254c1
Greece timeline for the weekend:

Greece has missed the IMF and ECB payments this week with both non-payments having potential for triggering a mother of all defaults for Greece: the ESM/EFSF loans call-in (EUR145bn worth of debt).

The EFSF/ESM decision so far has been to 'ignore' the arrears, noting that non-payment to IMF qualifies as "an event of default":

"The Board of Directors of the European Financial Stability Facility (EFSF) decided today to opt for a Reservation of Rights on EFSF loans to Greece, after the non-payment of Greece to the International Monetary Fund (IMF). Following the IMF Managing Director's notification of the IMF Executive Board, this non-payment results in an Event of Default by Greece, according to EFSF financial agreements with Greece."

Greece owes the EFSF EUR109.1bn in "Master Financial Assistance Facility Agreement" loans, plus EUR5.5bn in "Bond Interest Facility Agreement" loans and EUR30bn more in "Private Sector Involvement Facility Agreement" loans.

For now, EFSF decided not to call in loans, preferring to wait for Sunday vote outcome. Per EFSF statement: "In line with a recommendation by the EFSF's CEO Klaus Regling, the EFSF Board of Directors decided not to request immediate repayment of its loans nor to waive its right to action – the other two possible options. By issuing a Reservation of Rights, the EFSF keeps all its options open as a creditor as events in Greece evolve. The situation will be continuously monitored and the EFSF will consider its position regularly."

A 'No' vote in the Sunday referendum can change that overnight.

This adds pressure on Greece to pass a 'Yes' vote - a pressure that is most publicly crystallised in the form of ECB refusal to lift ELA to Greek banks. Athens imposition of capital controls (limiting severely cash withdrawals from the banks) has meant that the current level of ELA (CHART below) is still sufficient to hold the bank run, but the ELA cushion remaining in Greek banks was estimated at EUR500mln at the start of this week. Even with capital controls in place, this would have dwindled to around EUR250-300mln by the week end.

Again, a 'No' vote in the referendum risks crashing Greek banks as ECB will be unlikely to lift ELA any more. In an indirect sign of this, the ECB appears to be setting up swap lines and euro credit lines for EU member states outside the euro area. For example, as reported by Bloomberg, "European Central Bank is set to extend a backstop facility to Bulgaria and is ready to assist other nations in the region to ward off contagion from Greece, according to people familiar with the situation". Such a move is a clear precautionary measure to put into place firewalls around Greek system.


Meanwhile, here is a report suggesting that Greek banks are preparing for an aggressive bail-in of deposits in the case of a 'No' vote (assuming ELA cut off):


The Government denied the reports of preparations of bail-ins, and continues to insist that the banks will reopen on Tuesday, a day after the referendum results are published, but it is hard to imagine how this can be done (unless the banks start trading in drachma) without ECB hiking ELA, and it is even harder to imagine how ECB can hike ELA in current conditions.

Source: TheodoreZ

So far, public opinion polls in Greece show very tight vote for Sunday. The latest GPO poll has the "Yes" vote at 44.1% and "No" at 43.7%. Alco poll puts the “Yes” figure at 41.7% against 41.1% for “No”. All together, four opinion polls published yesterday put the 'Yes' vote marginally ahead, another poll fifth put the 'No' camp 0.5 percent in front. All polls results were well within the margin of error. At the same time, majority of polls also show Greeks favouring remaining in the euro by a roughly 75 percent margin.

REFERENDUM TIMELINE
Sunday 5th July:
Polls open – 0500BST/0000EDT
Polls close – 1700BST/1200EDT

First exit poll – Shortly after 1700BST/1200EDT

~20% of votes counted – 1900BST/1300EDT
~50% of votes counted – 2100BST/1600EDT
~70% of votes counted – 2200BST/1700EDT (markets open)
~90% of votes counted – 0000BST/1900EDT

Timeline source: Trading Signal Labs

The build up of tension ahead of the Sunday poll has been immense. Even international bodies are being convulsed by the potential for a 'No' vote. So much so, that, as reported by a number of media outlets, there was a major cat fight between European members of the IMF and other IMF board members.

As reported by Reuters at Wednesday board meeting of the IMF, European members of the board attempted to block IMF from publishing its analysis of debt sustainability for Greece.

Quoting from the report: ""It wasn't an easy decision," an IMF source involved in the debate over publication said. "We are not living in an ivory tower here. But the EU has to understand that not everything can be decided based on their own imperatives." The board had considered all arguments, including the risk that the document would be politicized, but the prevailing view was that all the evidence and figures should be laid out transparently before the referendum. "Facts are stubborn. You can't hide the facts because they may be exploited," the IMF source said."

If only European members of the IMF Board were as concerned with the reality of the Greek crisis on the ground as they are concerned with the appearances and public disclosures of that reality.

A neat reminder of how bad things are in Greece today, via @RBS_Economics

Source: @RBS_Economics

As numbers tell, Greece has posted one of the worst collapses in economy for any advanced economy since 1870, fourth worst for periods outside WW1 and WW2.


So what to expect?

  • In the event of a 'Yes' we are likely to see a significant bounce in the markets from the current levels, with euro strengthening on the news in the short run. But real re-pricing will only take place when there is more clarity on post-referendum bailout agreement. The key risk to that outlook is that a 'Yes' vote can trigger early elections - which will (1) extend the current mess for at least another 1-2 months, and (2) put new sources of uncertainty forward - as outcome of such elections will be highly unpredictable. I do not expect the EU to re-start new deal negotiations until after the elections, which means that there will be mounting, not abating pressures on the Greek voters to vote in 'the right' Government, acceptable to the Troika.
  • In the event of a 'No' we are likely to see serious run on the markets in Greece and some 'peripheral' states, especially Italy. Greek capital controls will have to be stepped up significantly. Euro is likely to weaken in the short run, especially if ECB aggressively moves to monetise risks via both accelerated QE purchases and lending to non-euro banks.

Beyond these two possible scenarios, everything else is in the realm of wild speculation.

]]>
This is a syndicated repost courtesy of True Economics. To view original, click here.

Greece timeline for the weekend:Greece has missed the IMF and ECB payments this week with both non-payments having potential for triggering a mother of all defaults for Greece: the ESM/EFSF loans call-in (EUR145bn worth of debt).

The EFSF/ESM decision so far has been to ‘ignore’ the arrears, noting that non-payment to IMF qualifies as “an event of default”:

“The Board of Directors of the European Financial Stability Facility (EFSF) decided today to opt for a Reservation of Rights on EFSF loans to Greece, after the non-payment of Greece to the International Monetary Fund (IMF). Following the IMF Managing Director’s notification of the IMF Executive Board, this non-payment results in an Event of Default by Greece, according to EFSF financial agreements with Greece.”

Greece owes the EFSF EUR109.1bn in “Master Financial Assistance Facility Agreement” loans, plus EUR5.5bn in “Bond Interest Facility Agreement” loans and EUR30bn more in “Private Sector Involvement Facility Agreement” loans.

For now, EFSF decided not to call in loans, preferring to wait for Sunday vote outcome. Per EFSF statement: “In line with a recommendation by the EFSF’s CEO Klaus Regling, the EFSF Board of Directors decided not to request immediate repayment of its loans nor to waive its right to action – the other two possible options. By issuing a Reservation of Rights, the EFSF keeps all its options open as a creditor as events in Greece evolve. The situation will be continuously monitored and the EFSF will consider its position regularly.”

A ‘No’ vote in the Sunday referendum can change that overnight.

This adds pressure on Greece to pass a ‘Yes’ vote – a pressure that is most publicly crystallised in the form of ECB refusal to lift ELA to Greek banks. Athens imposition of capital controls (limiting severely cash withdrawals from the banks) has meant that the current level of ELA (CHART below) is still sufficient to hold the bank run, but the ELA cushion remaining in Greek banks was estimated at EUR500mln at the start of this week. Even with capital controls in place, this would have dwindled to around EUR250-300mln by the week end.

Again, a ‘No’ vote in the referendum risks crashing Greek banks as ECB will be unlikely to lift ELA any more. In an indirect sign of this, the ECB appears to be setting up swap lines and euro credit lines for EU member states outside the euro area. For example, as reported by Bloomberg, “European Central Bank is set to extend a backstop facility to Bulgaria and is ready to assist other nations in the region to ward off contagion from Greece, according to people familiar with the situation”. Such a move is a clear precautionary measure to put into place firewalls around Greek system.

Meanwhile, here is a report suggesting that Greek banks are preparing for an aggressive bail-in of deposits in the case of a ‘No’ vote (assuming ELA cut off):

The Government denied the reports of preparations of bail-ins, and continues to insist that the banks will reopen on Tuesday, a day after the referendum results are published, but it is hard to imagine how this can be done (unless the banks start trading in drachma) without ECB hiking ELA, and it is even harder to imagine how ECB can hike ELA in current conditions.

Source: TheodoreZ

So far, public opinion polls in Greece show very tight vote for Sunday. The latest GPO poll has the “Yes” vote at 44.1% and “No” at 43.7%. Alco poll puts the “Yes” figure at 41.7% against 41.1% for “No”. All together, four opinion polls published yesterday put the ‘Yes’ vote marginally ahead, another poll fifth put the ‘No’ camp 0.5 percent in front. All polls results were well within the margin of error. At the same time, majority of polls also show Greeks favouring remaining in the euro by a roughly 75 percent margin.

REFERENDUM TIMELINE
Sunday 5th July:
Polls open – 0500BST/0000EDT
Polls close – 1700BST/1200EDT

First exit poll – Shortly after 1700BST/1200EDT

~20% of votes counted – 1900BST/1300EDT
~50% of votes counted – 2100BST/1600EDT
~70% of votes counted – 2200BST/1700EDT (markets open)
~90% of votes counted – 0000BST/1900EDT

Timeline source: Trading Signal Labs

The build up of tension ahead of the Sunday poll has been immense. Even international bodies are being convulsed by the potential for a ‘No’ vote. So much so, that, as reported by a number of media outlets, there was a major cat fight between European members of the IMF and other IMF board members.

As reported by Reuters at Wednesday board meeting of the IMF, European members of the board attempted to block IMF from publishing its analysis of debt sustainability for Greece.

Quoting from the report: “”It wasn’t an easy decision,” an IMF source involved in the debate over publication said. “We are not living in an ivory tower here. But the EU has to understand that not everything can be decided based on their own imperatives.” The board had considered all arguments, including the risk that the document would be politicized, but the prevailing view was that all the evidence and figures should be laid out transparently before the referendum. “Facts are stubborn. You can’t hide the facts because they may be exploited,” the IMF source said.”

If only European members of the IMF Board were as concerned with the reality of the Greek crisis on the ground as they are concerned with the appearances and public disclosures of that reality.

A neat reminder of how bad things are in Greece today, via @RBS_Economics

Source: @RBS_Economics

As numbers tell, Greece has posted one of the worst collapses in economy for any advanced economy since 1870, fourth worst for periods outside WW1 and WW2.

So what to expect?

  • In the event of a ‘Yes’ we are likely to see a significant bounce in the markets from the current levels, with euro strengthening on the news in the short run. But real re-pricing will only take place when there is more clarity on post-referendum bailout agreement. The key risk to that outlook is that a ‘Yes’ vote can trigger early elections – which will (1) extend the current mess for at least another 1-2 months, and (2) put new sources of uncertainty forward – as outcome of such elections will be highly unpredictable. I do not expect the EU to re-start new deal negotiations until after the elections, which means that there will be mounting, not abating pressures on the Greek voters to vote in ‘the right’ Government, acceptable to the Troika.
  • In the event of a ‘No’ we are likely to see serious run on the markets in Greece and some ‘peripheral’ states, especially Italy. Greek capital controls will have to be stepped up significantly. Euro is likely to weaken in the short run, especially if ECB aggressively moves to monetise risks via both accelerated QE purchases and lending to non-euro banks.

Beyond these two possible scenarios, everything else is in the realm of wild speculation.

Wall Street Examiner Disclaimer: The Wall Street Examiner reposts third party content with the permission of the publisher. I curate these posts on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. No promotional consideration has been offered or accepted. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler and no endorsement of the content so provided is either expressed or implied by our posting the content. Some of the content includes the original publisher's promotional messages. The Wall Street Examiner is not familiar with the services offered and makes no endorsement or recommendation regarding them. Do your own due diligence when considering the offerings of third party providers.

This is a syndicated repost courtesy of True Economics. To view original, click here.

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Doug Noland’s Credit Bubble Bulletin: The Triad http://wallstreetexaminer.com/2015/07/doug-nolands-credit-bubble-bulletin-the-triad/ http://wallstreetexaminer.com/2015/07/doug-nolands-credit-bubble-bulletin-the-triad/#comments Sat, 04 Jul 2015 04:34:00 +0000 http://wallstreetexaminer.com/?guid=a3f7d326daf765cf5040ae0d87288140 This is a syndicated repost courtesy of Credit Bubble Bulletin. To view original, click here.

So how big of a deal is the Triad of Turmoil unfolding in Greece, China and Puerto Rico? Thus far, general contagion has been minimal. Bullish sentiment remains resilient. In Europe, investors have been encouraged by relative market stability throughout “peripheral” bond markets (Spain, Italy, Portugal, etc.). Emerging markets have so far been largely immune to the dramatic 29% three-week Chinese stock market pummeling. In the U.S., investors have yawned at the prospect of a Puerto Rico debt restructuring. Big yawn (except for the stocks of the Credit insurers!)

I am reminded of how the VIX (equity volatility) index sank heading right into the 2008 financial crisis. After the spring of 2007 subprime bust, it took a full 15 months for market turmoil to erupt into a systemic crisis. By September 2008, a series of policy moves (including rate cuts and the Bear Stearns bailout) had engendered deeply ingrained market complacency. In the face of evolving Credit system fragility, market perceptions solidified that government policymakers had the situation well under control. This complacency was integral to crisis vulnerability.

The conventional view holds that the Lehman collapse was the pivotal crisis catalyst. Policymakers failed to appreciate the consequences of allowing a major financial institution to fail. Having learned this agonizing lesson, policymakers will ensure that such mistakes – and such crises – are not repeated. Market participants these days do not question global policymakers resolve to eradicate crises. QE infinity.

I have always contended that an ugly collapse of the mortgage finance Bubble was inevitable. Trillions of mispriced debt circulated in the markets. This epic mispricing (i.e. widening divergence between inflating securities prices and deteriorating fundamental prospects) would begin surfacing with the unavoidable slowdown in system Credit growth (and attendant decline in house prices/spending). Policy responses intended to “stabilize” the financial system and economy only prolonged “Terminal Phase” excesses, ensuring greater financial and economic dislocation.

From my analytical perspective, Greece, China and Puerto Rico offer important evidence of the ongoing spectacular failure of the global financial “system”/infrastructure – additional support for the view of the abject failure of inflationism (inflationary policies). From the perspective of Credit excess; market excesses, mispricing and distortions; and economic maladjustment, today’s global government finance Bubble puts the mortgage finance Bubble to shame.

In general, policies to inflate out of debt problems only exacerbate Bubble excesses. Measures that postpone necessary financial and economic adjustment – “kicking the can” – prove only to exacerbate fragilities. Importantly, there is no inflating out of deep structural maladjustment globally, maladjustment currently coming home to roost in Greece, China and Puerto Rico. The Triad offer a warning of the stormy seas ahead.

It is now going on seven years of recurring bouts of “post-crisis” market scares, anxious policy responses and inflating securities prices. There’s no mystery surrounding today’s deep complacency. Yet is it crucial to appreciate that the current round of market unrest occurs in the face of zero rates, subsequent to Trillions of QE/“money” printing and generally large government deficit spending. More than $10 TN of global central bank Credit (“money”) has been created out of thin air. Larger quantities of non-productive government debt have been issued. This monetary inflation has spurred securities and asset price inflation that has stimulated spending and economic activity.

When a desperate Mario Draghi resorted to “whatever it takes” central banking back during the 2012 European financial crisis, I wrote that the latest effort to kick the can was “a pretty good wallop.” I still believe it would have been better to cut Greece loose, restructure the euro currency and commence the healing process. European and global policymakers instead pushed forward with unprecedented inflationary measures.

Well, three years of the loosest monetary policy imaginable – including ECB and concerted global QE – certainly did not resolve Greece’s dire predicament. Indeed, even the IMF admits – after repeated bailouts over the past five years – the situation has only worsened. In their Thursday report, the IMF stated that Greece needs another $70 of new aid.

“Black hole” Greece remains the poster child for dysfunctional global finance. The country is hopelessly insolvent. As with any bankrupt entity, salvaging economic value requires debt restructuring/forgiveness. Extend and pretend has run its fateful course. Yet because of European financial integration and monetary union – not to mention the age-old blunder of throwing so much “good money” after bad – there is no turning back from a failed policy course. A tragic predicament has fallen upon the Greeks, a humiliated people fuming at their loss of dignity and sovereignty. Of course they will push back against European integration and Capitalism. This could turn really ugly.

Eminent German economist and a founding father of the ECB Otmar Issing (quoted by Bloomberg’s Jeff Black): “The illusion was, and is, that, having joined the euro, it is irreversible. Mutual trust is certainly not there any more and it will be very difficult to restore it… If the Greeks can get away with the violation of all promises, commitments, then I think it will have a contagion effect on other countries. Then we’ll be entering into a monetary union very different from what was intended. It will be the end of the zone of fiscal solidity.”

“Yes” or “No” Sunday, there will be no near-term resolution to the “Greek” crisis. On both sides, trust has been irreversibly broken. Starved of finance, the economy is on a death spiral. I don’t see how the Greeks and Germans continue to share a common currency. And, at the end of the day, I don’t see how the Italians and Germans share the euro either.

Despite Draghi’s aggressive backstop, periphery spreads widened meaningfully this week. Portuguese spreads to bunds surged 33 bps, Italian bonds to bunds 23 bps and Spanish yields to bunds 23 bps. Major Spain and Italy equity indexes were clobbered for more than 5.0%. European corporate bonds were bolstered by the ECB’s inclusion of corporate bonds on its list of securities eligible for QE purchases.

On the other side of the globe, Chinese policymakers are as well succumbing to desperate measures, as they attempt to control evolving financial and economic crises. The Chinese Bubble has been epic. Its collapse will be spectacular and frightening. Chinese stocks sank almost 30% in just three weeks. In the past, global markets would have been unnerved. Not these days, in this phase of terminally deep-rooted complacency.

Ominously, a series of Chinese policy measures has failed to stabilize stock prices. Confidence has been badly shaken, as one of history’s great manias falters. Yet for global markets, the perception that Chinese policymakers have things under control persists. After all, China has $3.7 Trillion (after declining another $113bn in Q1) of international reserves to use at official discretion. The central government as well has control over a massive state-sponsored financial apparatus, ensuring Credit expansion on demand.

Chinese officials have made a series of fateful errors. “Terminal Phase” Credit Bubble excess has been stoked to unprecedented extremes. While the central government certainly maintains the capacity to print, spend, cajole lending, intervene in markets, manipulate and stimulate – it has nonetheless lost control of the Bubble. There are Trillions – and counting – of bad loans. Malinvestment has been unprecedented – and counting.

Considerable study notwithstanding, the Chinese repeated key mistakes from the Japanese Bubble period. And whether they appreciate it or not, they are also replaying dynamics similar to those of the U.S. in the late-1920s. They have resorted to loose finance as a remedy to stabilize a system under the spell of Bubble Dynamics. Policy measures have been used to sustain rapid Credit expansion. They hoped their stimulus measures would drive productive investment, system reflation and reform. Predictably, as was the case preceding the 1929 Crash, liquidity flowed in stunning overabundance to an increasingly out-of-control speculative Bubble throughout the securities markets.

Closer to home, loose finance is also coming home to roost in Puerto Rico. This little island has accumulated enormous amounts of debt. This can has also been kicked down the road about as far as possible, yet another victim of dysfunctional financial markets.

I have posited that the global government finance Bubble has been pierced. In Greece, Chinese stocks and Puerto Rico I find confirmation. It’s worth noting that crude (WTI) was hammered almost 7% this week. Iron ore prices declined seven straight sessions. Brazilian stocks were hit for almost 3%. Commodity currencies were taken out to the woodshed.

The global leveraged speculating community had placed decent bets in Greece, China and Puerto Rico, seeing opportunities at the fringes in a world of zero rates, aggressive QE and determined central bank market backstops. So between the leverage in Greek and Puerto Rican bonds, and the unwind in margin debt in China, there’s now a catalyst for some self-reinforcing globalized de-risking/de-leveraging.

Typically, I would expect waning liquidity and mounting contagion effects to immediately begin their journey from the “periphery” to the “core.” There is, however, nothing normal about this cycle. Never before have global central bankers worked in concert to sustain financial Bubbles. I expect air to continue to come out of the global Bubble. I expect de-risking/de-leveraging and contagion to gain momentum, though near-term market prospects are clear as mud.

I find the degree of bullishness in the U.S. almost difficult to fathom. Silicon Valley is back in full-fledged mania mode. Manhattan is not far behind. Throughout the country, there are pockets of boom and plenty of stagnation. Economic imbalances are conspicuous – upshots of now decades of flawed policies and dysfunctional finance.

Importantly, even after six years of recovery I still do not see the backdrop for a sustainable U.S. Credit up cycle. In fact, Credit growth slowed sharply during Q1 (to 2.8% annualized from 4.9%). The Credit slowdown is consistent with weakening corporate profits. Stock buybacks and financial engineering have lost much of their previous punch. For now, with financial conditions so loose, M&A booms, as asset prices generally maintain an inflationary bias. Things look somewhere between ok and good only so long as asset markets remain inflated.

I believe enormous amounts of leverage continue to accumulate throughout the securities markets. Actually, I view borrowings to finance M&A, stock buybacks, and leveraged speculation in bonds and stocks as the prevailing (unrecognized) source of Credit fuel inflating this Bubble. This type of Credit is inherently susceptible to reversals in asset prices. I suspect as well enormous amounts of finance continue to flow into U.S. asset markets from faltering Bubbles (and currencies) around the globe (China, Europe, Latin America and the Middle East). This flow of finance is similarly unstable.

As such, I discern a much greater degree of market vulnerability than the complacent consensus. Greece and China could easily become catalysts for the most serious bout of market risk-off since the financial crisis. There will come a point when markets come face-to-face with the reality that policymakers do not have things under control.

For the Week:

The S&P500 dropped 1.2% (up 0.9% y-t-d), and the Dow fell 1.2% (down 0.5%). The Utilities gained 1.1% (down 7.5%). The Banks lost 1.8% (up 4.2%), and the Broker/Dealers gave back 1.5% (up 7.6%). The Transports fell 1.5% (down 11.1%). The S&P 400 Midcaps dropped 1.8% (up 3.7%), and the small cap Russell 2000 sank 2.5% (up 3.6%). The Nasdaq100 declined 1.1% (up 4.7%), and the Morgan Stanley High Tech index dropped 1.8% (unchanged). The Semiconductors were hit 1.8% (down 0.2%). The Biotechs lost 1.7% (up 20.5%). With bullion down $7, the HUI gold index fell 2.2% (down 9.2%).

Three-month Treasury bill rates ended the week at zero. Two-year government yields dropped nine bps to 0.63% (down 4bps y-t-d). Five-year T-note yields sank 13 bps to 1.63% (down 2bps). Ten-year Treasury yields fell nine bps to 2.38% (up 21bps). Long bond yields declined five bps to 3.19% (up 44bps).

Greek 10-year yields surged 317 bps to 14.01% (up 427bps y-t-d). Ten-year Portuguese yields jumped 19 bps to a 2015 high 2.91% (up 29bps). Italian 10-yr yields gained nine bps to 2.24% (up 35bps). Spain’s 10-year yields rose 19 bps to 2.20% (up 59bps). German bund yields dropped 14 bps to 0.79% (up 25bps). French yields declined six bps to 1.24% (up 41bps). The French to German 10-year bond spread widened eight to a one-year high 45 bps. U.K. 10-year gilt yields sank 19 bps to 2.00% (up 25bps).

Japan’s Nikkei equities index declined 0.8% (up 17.7% y-t-d). Japanese 10-year “JGB” yields were little changed at 0.47% (up 15bps y-t-d). The German DAX equities index was hit for 3.8% (up 12.8%). Spain’s IBEX 35 equities index sank 5.2% (up 4.9%). Italy’s FTSE MIB index fell 5.4% (up 18.4%). Emerging equities were mostly lower. Brazil’s Bovespa index was smacked for 2.8% (up 5.0%). Mexico’s Bolsa declined 1.1% (up 4.4%). South Korea’s Kospi index added 0.7% (up 9.9%). India’s Sensex equities index gained 1.0% (up 2.2%). China’s Shanghai Exchange sank 12.1% (up 14.0%). Turkey’s Borsa Istanbul National 100 index dropped 2.8% (down 5.3%). Russia’s MICEX equities index slipped 0.8% (up 16.8%).

A reversal of junk funds flows this week saw inflows of $800 million (from Lipper).

Freddie Mac 30-year fixed mortgage rates rose six bps to 4.08% (up 21bps y-t-d). Fifteen-year rates gained three bps to 3.24% (up 9bps). One-year ARM rates added two bps to 2.52% (up 12bps). Bankrate’s survey of jumbo mortgage borrowing costs had 30-yr fixed rates up two bps to 4.24% (down 4bps).

Federal Reserve Credit last week dropped $19.3bn to $4.441 TN. Over the past year, Fed Credit inflated $110bn, or 2.5%. Fed Credit inflated $1.630 TN, or 58%, over the past 138 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt jumped $10.8bn last week to $3.379 TN. “Custody holdings” were up $86bn y-t-d.

M2 (narrow) “money” supply surged $40.9bn to a record $12.005 TN. “Narrow money” expanded $629bn, or 5.5%, over the past year. For the week, Currency increased $1.2bn. Total Checkable Deposits jumped $29.2bn, and Savings Deposits gained $10.5bn. Small Time Deposits slipped $1.8bn. Retail Money Funds added $1.9bn.

Money market fund assets rose $13bn to $2.614 TN. Money Funds were down $118bn year-to-date, while gaining $44bn y-o-y.

Total Commercial Paper dropped $28.3bn to $952bn. CP declined $102bn over the past year, or 9.6%.

Currency Watch:

The U.S. dollar index increased 0.6% to 95.95 (up 6.3% y-t-d). For the week on the upside, the yen increased 0.9%. For the week on the downside, the New Zealand dollar declined 2.4%, the Canadian dollar 2.1%, the Norwegian krone 1.9%, the Swedish krona 1.8%, the Australian dollar 1.7%, the British pound 1.1%, the Mexican peso 1.1%, the South African rand 0.9%, the Swiss franc 0.8%, South African rand 0.9% and the Brazilian real 0.2%.

Commodities Watch:

The Goldman Sachs Commodities Index slipped 0.4% (up 3.8% y-t-d). Spot Gold lost 0.6% to $1,169 (down 1.4%). September Silver declined 0.7% to $15.66 (up 1%). August Crude sank $4.11 to $55.52 (up 4%). August Gasoline fell 2.3% (up 36%), while August Natural Gas traded little changed (down 4%). September Copper declined 0.7% (down 7%). September Wheat jumped 4.0% (unchanged). September Corn surged 9.2% (up 8%).

Greece Crisis Watch:

July 3 – Financial Times (Kerin Hope): “Greek banks are preparing contingency plans for a possible ‘bail-in’ of depositors amid fears the country is heading for financial collapse, bankers and businesspeople with knowledge of the measures said… The plans, which call for a ‘haircut’ of at least 30% on deposits above €8,000, sketch out an increasingly likely scenario for at least one bank, the sources said. A Greek bail-in could resemble the rescue plan agreed by Cyprus in 2013, when customers’ funds were seized to shore up the banks, with a haircut imposed on uninsured deposits over €100,000. It would be implemented as part of a recapitalisation of Greek banks that would be agreed with the country’s creditors — the European Commission, International Monetary Fund and European Central Bank.”

July 2 – Financial Times (Shawn Donnan and Claire Jones): “Greece needs more than €60bn in new financial help over the next three years and faces decades under a daunting mountain of debt that will make it vulnerable to future crises, the International Monetary Fund has warned. In a new analysis that lays out Greece’s economic dilemma in stark terms, the IMF on Thursday called for Europe to grant the country ‘comprehensive’ debt relief, arguing for the doubling of the maturities on its debts from 20 to 40 years. The fund’s assessment is likely to provide succour to the Syriza-led government which is campaigning for a No vote in a referendum on Sunday. But the IMF also blamed it for the country’s deteriorating situation.”

July 2 – Reuters (Renee Maltezou and David Chance): “The International Monetary Fund delivered a stark warning on Thursday of the huge financial hole facing Greece as angry and uncertain voters prepare for a referendum that could decide their country’s future in Europe. Days after Greece defaulted on part of its IMF debt, the Fund, part of the lenders’ ‘troika’ behind successive international bailouts, said Greece needed an extra 50 billion euros over the next three years, including 36 billion from its European partners, to stay afloat. It also needed significant debt relief… Prime Minister Alexis Tsipras’ rejection of what he terms the “blackmail” of EU and IMF creditors demanding spending cuts and tax hikes has so angered Greece’s partners that there is no hope of reconciliation before Sunday.”

China Bubble Watch:

July 2 – Financial Times (Gabriel Wildau): “Chinese shares fell again on Thursday despite moves by regulators to buoy the market, reinforcing growing concerns about the volatility of Chinese stocks. China Securities Regulatory Commission moved late on Wednesday to relax collateral rules on margin loans. But that failed to staunch market losses on Thursday, with the Shanghai Composite Index closing down 3.5% and the Shenzhen stock exchange finishing the day down 5.6%… China has now entered a bear market, with its two main indices recording a more than 20% drop over the last three weeks. The move to loosen rules on margin finance — using borrowed money to trade shares — represents something of a climbdown by the regulator, which had previously tried to curb leveraged bets. Margin lending has been a major driver of the rally that propelled China’s main stock index to a seven-year high on June 12.”

June 30 – Reuters (Nathaniel Taplin and Umesh Desai): “Despite reassurances by regulators that margin debt in China’s stock markets remains manageable, total leverage could be as much as $645 billion – magnifying risks not just for retail investors, but also the thinly stretched corporate sector. Margin debt… has officially roughly doubled since the beginning of 2015. That rapid run-up in leveraged trading was brought into sharp focus last week as China’s benchmark CSI 300 index tumbled 14%, raising fears of forced selling that could trigger broader financial instability. But the official numbers only tell part of the story. While margin debt with brokerages stood at 2.2 trillion yuan ($354bn) in late June…, analysts say that money borrowed to speculate on stocks from largely unsanctioned ‘shadow lenders’ such as trusts could have reached nearly twice that amount, taking total debt to up to 20% of free float. ‘No matter how much you want to borrow, we can give it to you,’ said a so-called grey market lender based in Shenzhen. ‘If you want to borrow 100 million yuan for example, we need seven days because we need to issue a (wealth management) product for you. If you want to borrow a few million, we can give you the money right away.’”

July 1 – Financial Times (Gabriel Wildau): “At a stock trading hall for retail investors near People’s Square in Shanghai on Wednesday, the mood is glum. Shenyin Wanguo, like other Chinese brokerages, maintains its hall for investors to hang around, make a few trades and share tips. Among the mostly elderly investors there, zest for market speculation goes hand-in-hand with the socialist conviction that the government can and should protect them from risk. ‘Even I, an old party member who started playing the market in the 1990s — I don’t believe the regulators any more,’ says Ms Xu, 76-year-old retiree. China’s main stock index lost 5% on Wednesday, shrugging off an interest-rate cut by the central bank over the weekend. The market has now tumbled 22% since hitting a seven-year high on June 12. Ms Xu blames the securities regulator for approving too many initial public offerings, siphoning demand away from existing shares… She also lost money punting on internet stocks amid pledges by top leaders to promote the technology sector. ChiNext, the Shenzhen-based start-up index, had more than tripled in the year to early June but has since plummeted 30%. ‘The country is promoting ‘internet plus’ so I bought some internet-themed stocks,’ she says. ‘Their results looked good. But then came a few days of limit-down. Now I’m stuck,’ she says… Reflecting the surge of retail investors into the market, trading accounts holding at least some stock hit 68m by the end of May, up 27% from a year earlier…”

June 30 – Bloomberg (Fox Hu and Kyoungwha Kim): “China’s financial industry joined the nation’s securities regulator in moving to shore up the nation’s $7.7 trillion stock market, spurring the biggest rally in more than six years. Money managers should avoid panic selling because a ‘structural rally is brewing,’ the Asset Management Association of China said in a letter to its members… Guotai Junan Securities Co., the country’s second-largest brokerage, said it would ease restrictions on margin trading. Investors should have ‘confidence’ and ignore ‘irresponsible rumors,’ China Securities Regulatory Commission spokesman Zhang Xiaojun said…, while the Ministry of Finance said it may allow the nation’s pension fund to invest in equities.”

June 30 – Bloomberg: “Zhang Minmin is one of tens of thousands playing in one of the riskier corners of China’s stock market, borrowing money at high interest rates through unregulated online lenders to amplify his bets on potential equity gains. ‘Sometimes when the market is good, I would make profits enough to buy an Audi in just a week or two. However, when the market is down, it’s also possible to lose half an Audi very quickly,’ said Zhang, a 32-year-old who works in the financial industry in Hangzhou… As more Chinese jumped into the market in the hope of instant wealth, peer-to-peer websites offering loans for stock investing have mushroomed. They are among a multitude of sources of leverage outside of traditional margin financing that threaten to complicate any efforts to prevent an unruly reversal of China’s stock market boom, which is already faltering.”

Fixed Income Bubble Watch:June 30 – New York Times (Mary Williams Walsh): “When Puerto Rico’s governor told lawmakers and citizens on Monday that the commonwealth could not pay its $72 billion in debt, many wondered how a small, seemingly low-key American island in the Caribbean could have amassed a debt big enough to crush it. The answer lies in a confluence of factors, including American investors’ desire to avoid taxes; the mutual fund industry’s practice of competing on the basis of yield; complacency about the practice of long-term borrowing to plug holes in budgets; and laws that supposedly give bond buyers ironclad guarantees. That brew of incentives has produced truly staggering numbers. On a per-capita basis, Puerto Rico has more than 15 times the median bond debt of the 50 states, according to Moody’s… The governor, Alejandro García Padilla, said on Monday that at the rate the debt situation is developing, every man, woman and child on the island would owe creditors $40,000 by 2025… ‘We cannot allow the heavy weight of the debt to bring us to our knees,’ the governor said in a live televised address, proposing a debt restructuring. For years, investors were lining up to lend Puerto Rico money, so it was easier to borrow than to fix any number of financial or structural shortcomings.”

June 30 – New York Times (Michael Corkery and Alexandra Stevenson): “Hedge funds like Appaloosa Management, Paulson & Company and Blue Mountain Capital gathered in a conference room at the Barclays offices in Midtown Manhattan last September to talk about what was then the hottest trade: Puerto Rico. An hour into the conversation, however, it became clear that if things started going bad, not everyone in the room was going to get along. Some had wagered on real estate, while others had bought up the debts of the central government and its troubled electric utility. Those divisions intensify an increasingly contentious battle the hedge funds are beginning to wage to salvage an investment that, less than a year ago, looked like a sure thing. This week’s announcement by Gov. Alejandro García Padilla of Puerto Rico that the commonwealth may seek to delay debt payments has thrown the hedge funds’ investment strategies into turmoil. Even debts that appeared to be secure now seem in jeopardy, sending hedge funds and other investors scrambling to re-examine their legal rights and potential remedies should the government push for a restructuring.”

July 3 – New York Times (Lizette Alvarez): “It’s the lunch hour at Baker’s Bakery, a fixture in Río Piedras, one of Puerto Rico’s oldest neighborhoods, but the bustle at the counter is long gone. The front door opens and shuts only a few times an hour as customers, holding tighter than ever to their money, judiciously pick up some sugar-sprinkled pastries and a café con leche. On the first day of the new sales tax, which jumped to 11.5% from 7%, the government’s latest rummage for more revenue, Puerto Rico’s malaise was unmistakable. ‘People don’t even answer you when you tell them, ‘Buenos dias,’’ said Ibrahim Baker… ‘Everyone is depressed.’ After nearly a decade of recession, Puerto Rico’s government says it cannot pay its $73 billion debt much longer. Gov. Alejandro García Padilla warns that more austerity is on the way, a necessity for an island now working feverishly to rescue itself. With so many bracing for another slide toward the bottom, the sense of despair grows more palpable by the day.”

July 2 – Bloomberg (Michelle Kaske): “As Puerto Rico confronts a worsening fiscal crisis, its troubled electric company made a critical bond payment, buying time to negotiate with creditors. The $415 million installment Wednesday from the Puerto Rico Electric Power Authority provided a small break from the financial storm that’s provoked worry in Washington and on Wall Street, where mutual funds and hedge funds for years snapped up the commonwealth’s debt… While investors pushed up the price of its bonds Wednesday, officials are still working to renegotiate $9 billion of debt to free up cash needed to turn the utility around.”

July 1 – Wall Street Journal (Maria Armental): “Moody’s… on Wednesday cut Puerto Rico’s ratings one notch further into junk territory, citing the commonwealth’s declaration that it cannot pay its debt. Gov. Alejandro García Padilla said… Monday that Puerto Rico’s debts were ‘unpayable’ and called for concessions from creditors. The cut to Caa2—the seventh downgrade in five years, underscoring Puerto Rico’s long-running financial woes—applies to about $55.5 billion in bonds, including debt from the Puerto Rico Aqueduct & Sewer Authority. Puerto Rico has about $72 billion in debt outstanding, nearly 70% of its economic output and is struggling with high unemployment and a declining population.”

U.S. Bubble Watch:

July 2 – Bloomberg (Jennifer Kaplan and Joseph Ciolli): “For five years, U.S. companies have dodged the ignominy of falling profits, often by beating analysts’ estimates by just enough to push earnings higher than they were the previous year. Repeating the trick will be their biggest challenge to date. Six days before the start of earnings season, Wall Street forecasters predict profits will fall 6.5% in the second quarter, the most bearish estimate of the bull market… U.S. earnings have been under pressure for nine months as falling oil prices cut results at energy providers and the dollar’s ascent curbed demand for American exports. While one quarter of declining profits isn’t the end of the recovery, it’s more ammunition for bears who say equity valuations are too high.”

July 2 – Bloomberg (Asjylyn Loder and Bradley Olson): “The insurance protecting shale drillers against plummeting prices has become so crucial that for one company, SandRidge Energy Inc., payments from the hedges accounted for a stunning 64% of first-quarter revenue. Now the safety net is going away. The insurance that producers bought before the collapse in oil — much of which guaranteed minimum prices of $90 a barrel or more — is expiring. As they do, investors are left to wonder how these companies will make up the $3.7 billion the hedges earned them in the first quarter after crude sunk below $60 from a peak of $107 in mid-2014… The hedges staved off an acute shortage of cash for shale companies and helped keep lenders from cutting credit lines, many of which are up for renewal in October. With drillers burdened by interest payments on $235 billion of debt, $89 billion of it high-yield, a U.S. regulator has warned banks to beware of the ‘emerging risk’ of lending to energy companies.”

June 30 – New York Times (Michelle Higgins): “After flirting with records for more than a year, the average sales price of a Manhattan apartment hit a new high in the second quarter… A strong local economy, combined with high demand and not enough listings, pushed the average sales price up 11%, to $1.87 million, compared with the same period in 2014, surpassing the previous peak of $1.77 million reached in the first quarter of last year, according to Jonathan J. Miller, the president of the appraisal firm Miller Samuel… ‘It’s like everyone revved up their engines again,’ said Pamela Liebman, the chief executive of the Corcoran Group… ‘We saw continuous demand across all price points, buoyed by some exciting new developments that have come on the market and a continued influx of buyers from China.’ ‘In all my years of doing this,’ she added, ‘I have never seen such a hunger for New York City real estate.’”

Central Bank Watch:

July 2 – Bloomberg (Amanda Billner and Saleha Mohsin): “Sweden’s central bank lowered its main interest rate deeper into negative levels and expanded its bond purchases to the end of the year as the turmoil in Greece raises the specter of further krona gains. The repo rate was cut to minus 0.35% from minus 0.25%… The bank expanded its bond purchasing program by 45 billion kronor ($5.3bn) to the end of year, adding to the 80 billion kronor to 90 billion kronor already announced.”

Global Bubble Watch:

June 30 – New York Times (Peter Eavis): “There are some problems that not even $10 trillion can solve. That gargantuan sum of money is what central banks around the world have spent in recent years as they have tried to stimulate their economies and fight financial crises. The tidal wave of cheap money has played a huge role in generating growth in many countries, cutting unemployment and preventing panic. But it has not been able to do away with days like Monday, when fear again coursed through global financial markets. The main causes of the steep declines in stock and bond markets were announcements out of Greece and Puerto Rico. And in China, the precipitous declines in its stock market were also a sobering reminder that stubborn problems lurked in the global economy.”

June 30 – Reuters: “Mergers and acquisitions (M&A) worldwide in the second quarter of 2015 almost matched the record set in the second quarter of 2007, according to preliminary Thomson Reuters data, as big companies turned to deals to boost their market share. Low interest rates and stronger confidence among chief executives have led to a steady rise in M&A activity in the last two years to close to pre-2008 financial crisis levels. The second quarter of 2015, however, stands out for the number of mega deals that were clinched or attempted… Such large deals drove M&A volumes globally in the second quarter of 2015 up by 34.6% year-on-year to $1.33 trillion as of June 26, shy of the record $1.41 trillion seen in the second quarter of 2007.”

Europe Watch:

July 2 – Reuters (Laura Benitez and Abhinav Ramnarayan): “The European Central Bank took the market by surprise on Thursday when it added three Italian corporates to the list of names eligible for purchase under its quantitative easing programme…. While the central bank was rumoured to be considering adding corporates to its QE list in October last year, it only included governments, supranationals, agencies and covered bonds – all considered to carry little risk. ‘I suspect it’s driven by the ECB’s struggle to find the liquidity on pure sovereign names over the summer, remembering they front-loaded purchases in June anticipating net redemptions in July and August,’ one corporate syndicate banker said. ‘They’re also sending a message that they have firepower if needed to help markets in the face of the Greece saga.’”

June 30 – Bloomberg (David Goodman and Anchalee Worrachate): “The European Central Bank’s first full quarter of quantitative easing hasn’t stopped the region’s government bonds from heading for their worst performance on record. The rout started in April after the ECB’s purchases helped send yields on more than $2 trillion of euro-area sovereign debt below zero… ECB President Mario Draghi added fuel to that fire this month when he said markets must get used to periods of higher volatility. The latest turmoil in Greece further undermined bonds from Europe’s periphery, even as it revived some demand for the relative safety of German debt. Euro-area sovereign securities handed investors a 5.7% loss this quarter through June 29… That was led by a 16% decline in Greek securities, with German bonds dropping 4.7% and Spain’s 6.4%.”

June 30 – Bloomberg (Katie Linsell and Sally Bakewell): “Measures of risk in Europe’s credit markets surged after Greek debt talks broke down, rising the most since Lehman Brothers Holdings Inc. failed in 2008. A benchmark of credit-default swaps rose by as much as 20% to the highest in more than a year, according to data compiled by Bloomberg. Greek bank bonds dropped to their lowest levels on record and contracts insuring the Mediterranean nation’s sovereign debt indicated a 91% probability of default.”

July 1 – Bloomberg (Jeff Black): “Trust between euro-area countries has deteriorated so badly that the idea that the single currency can’t be undone is now dead, former European Central Bank Executive Board member Otmar Issing said. ‘Mutual trust is certainly not there any more, and it will be very difficult to restore,’ Issing, 79, said… ‘The idea — you might now say the illusion — was and is that having joined the euro, it is irreversible.’ Seventeen years after Issing began as the chief economist of the brand-new ECB in Frankfurt, the currency zone is wracked by turmoil surrounding Greece and its possible exit from the bloc. Still, while today’s policy makers insist the region can cope from the fallout of a country leaving, Issing said such an event may even strengthen the resolve of remaining members. ‘I would be quite confident that if governments and people in other European countries see the mess, the chaos, which will accompany Greece for some time to come, they will undertake the utmost efforts to avoid repetition of such a situation,’ he said. ‘All the others have to really commit themselves.’”

EM Bubble Watch:

June 30 – Bloomberg (David Biller): “As the world nervously watches the Greek debt talks break down, there’s another corner of the planet that’s struggling. Growth in most of Latin America and the Caribbean is coming to a screeching halt, dragged down by Argentina, Brazil and Venezuela. Economists expect the region (excluding Mexico) to expand an almost nonexistent 0.1% this year, a forecast that would mean faring worse than the U.S. for a second straight year. It’s a reversal of fortunes…”

Brazil Watch:

July 2 – Financial Times (Joe Leahy and Aline Rocha): “Brazilian prosecutors on Thursday said that Petrobras’ official estimates for losses it had suffered from corruption were too low, suggesting that the state-owned oil company may have to adjust its 2014 financial statements. Petrobras in April told investors during the release of its 2014 financial statements that it estimated losses directly related to a vast corruption scandal at the company at R$6.2bn. But one of the prosecutors working on the case, Carlos Fernando dos Santos Lima, said ‘We have no doubt that the losses are significantly larger than the R$6bn that was announced.’”

Geopolitical Watch:

July 2 – New York Times (Paul Mozur): “When a draft of China’s new national security law was made public in May, critics argued that it was too broad and left much open to interpretation. In the final form of the law… Beijing got more specific, but in a way that is sending ripples through the global technology industry. New language in the rules calls for a ‘national security review’ of the technology industry — including network and other products and services — and foreign investment. The law also calls for technology that supports key sectors to be ‘secure and controllable,’ a catchphrase that multinationals and industry groups say could be used to force companies to build so-called back doors — which allow third-party access to systems — provide encryption keys or even hand over source code. As with many Chinese laws, the language is vague enough to make it unclear how the law will be enforced, but it suggests a new front in the wider clash between China and the United States over online security and technology policy.”

Russia and Ukraine Watch:

July 1 – Bloomberg (Natasha Doff): “Ukraine’s Eurobonds dropped for a fourth day as Bank of America Merrill Lynch warned the nation is underestimating the repercussions of default and investors awaited the outcome of Tuesday’s debt talks in Washington. The country’s $2.6 billion of bonds maturing in July 2017 fell 0.97 cent to 47.53 cents on the dollar…, extending this week’s drop to 1.95 cents. The government might be shut out of international debt markets if it continues to take a hard line with creditors that leads to a debt moratorium, Bank of America Merrill Lynch economist Vadim Khramov wrote… Ukraine has threatened to stop paying its international creditors if they don’t accept a proposal that includes a writedown to the face value of about $19 billion of bonds.”

Wall Street Examiner Disclaimer: The Wall Street Examiner reposts third party content with the permission of the publisher. I curate these posts on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. No promotional consideration has been offered or accepted. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler and no endorsement of the content so provided is either expressed or implied by our posting the content. Some of the content includes the original publisher's promotional messages. The Wall Street Examiner is not familiar with the services offered and makes no endorsement or recommendation regarding them. Do your own due diligence when considering the offerings of third party providers.

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Big Trouble In Big China http://wallstreetexaminer.com/2015/07/big-trouble-in-big-china/ http://wallstreetexaminer.com/2015/07/big-trouble-in-big-china/#comments Fri, 03 Jul 2015 14:33:31 +0000 http://confoundedinterest.wordpress.com/?p=41967 This is a syndicated repost courtesy of Confounded Interest - Online Course Notes For Financial Markets. To view original, click here.

China’s stock markets are having a bad second half of June and beginning of July. The Shanghai stock exchange has lost 1479.435 points (or 29%) since June 12.

shanghaicomposite

It’s a shame that even Jack Burton can’t save Big China from plummeting stock prices.

11-fun-facts-about-big-trouble-in-little-china

On a side note, I had the privilege of sitting across the aisle on a plane trip from Phoenix to Los Angeles from actor James Hong (who played David Lo Pan in the movie “Big Trouble in Little China). What a nice person!

vlcsnap-2013-05-03-01h24m11s143

Wall Street Examiner Disclaimer: The Wall Street Examiner reposts third party content with the permission of the publisher. I curate these posts on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. No promotional consideration has been offered or accepted. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler and no endorsement of the content so provided is either expressed or implied by our posting the content. Some of the content includes the original publisher's promotional messages. The Wall Street Examiner is not familiar with the services offered and makes no endorsement or recommendation regarding them. Do your own due diligence when considering the offerings of third party providers.

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Add ECB to IMF and Greek arrears can get ugly… http://wallstreetexaminer.com/2015/07/add-ecb-to-imf-and-greek-arrears-can-get-ugly/ http://wallstreetexaminer.com/2015/07/add-ecb-to-imf-and-greek-arrears-can-get-ugly/#comments Fri, 03 Jul 2015 11:17:00 +0000 http://wallstreetexaminer.com/?guid=e39121685c1879f3682a33bae81689f5 This is a syndicated repost courtesy of True Economics. To view original, click here.

Ah, remember Brodsky’s “Urania is old than sister Clio” bit? Well, not in finance. Apparently, or allegedly, as reported in press, Greece is now in arrears (err… default, or not or whatever) not only on IMF, but also on ECB. See this.

Which relates to 1993 loans, last repayment of which was due in June this year and amounted to EUR470mln. And which were not paid.

The gyrations of Greek and Troika positions are out of the league of the ordinary.

We had a threat to take EU to court over threats of forcing Grexit (see here). Which is quite bizarre (on the EU side), given the Institutions have already said that the very subject of the referendum is non-sensical as no deal exists to carry out referendum over (see here), though such statements did not preclude the EU leaders from calling for a ‘Yes’ vote in the referendum (see here).

And the EU and some internal Greek concerns about constitutionality of the Greek referendum (see here).

In simple terms, we have a mash of contradictions: a referendum that has no grounds in terms of its outcome is nonetheless of questionable constitutionality, though the voters should vote ‘yes’ regardless, because, presumably, an outcome that is not an outcome is preferred to a different outcome that is not a outcome… [someone should stop spinning the world around us]…

We also have IMF that was forced (by a leak) to release its (preliminary – aka… “we say so, but we don’t say so”) analysis of Greek debt sustainability (see simplified version here and full version from the source here). Surprise, surprise… those of us not paid lavish salaries by the IMF turned out to be right: Greek debt sustainability thesis is nonsense, a pipe dream made up of flour, feathers and water…

Meanwhile, the ECB – not to be outdone by the fellow jostlers or jousters – is entering a probabilistic game of guessing Greek banks solvency (condition for accessing ELA is solvency of the banks, which, until today was a concept of 0=insolvent, 1=solvent and is now 0.1%=solvent 49.9%=’something of sorts’ and the rest… err… well, we await holding our breath for a technical paper from the ECB staff on that one) on the basis of referendum outcome (see here).

Next turn will be for the EU or may be ESM/EFSF as ECB (rumoured above) default trigger for EFSF default is “Very Likely” and can only be ‘corrected’ for via a new deal agreement (see here).

Have fun deciphering the torrent of news, views and leaks that the Greek crisis has unleashed. In the mean time, the only conclusive statement to be made is that we are in a situation where headless chickens are trying to round up legless lambs… all performed in a quicksand pit…

Wall Street Examiner Disclaimer: The Wall Street Examiner reposts third party content with the permission of the publisher. I curate these posts on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. No promotional consideration has been offered or accepted. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler and no endorsement of the content so provided is either expressed or implied by our posting the content. Some of the content includes the original publisher's promotional messages. The Wall Street Examiner is not familiar with the services offered and makes no endorsement or recommendation regarding them. Do your own due diligence when considering the offerings of third party providers.

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Barrack Obama Tells Another Whopper—–He Did Not Create 12.8 Million Jobs http://wallstreetexaminer.com/2015/07/barrack-obama-tells-another-whopper-he-did-not-create-12-8-million-jobs/ http://wallstreetexaminer.com/2015/07/barrack-obama-tells-another-whopper-he-did-not-create-12-8-million-jobs/#comments Fri, 03 Jul 2015 00:26:19 +0000 http://davidstockmanscontracorner.com/?p=58654 This is a syndicated repost courtesy of David Stockman's Contra Corner » Stockman’s Corner. To view original, click here.

America is better off when President Obama is out on the stump bloviating and boasting rather than in Washington actively doing harm. But the whoppers he just told the students at the University of Wisconsin are beyond the pale. Said our spinmeister-in-chief:

 And the unemployment rate is now down to 5.3 percent. (Applause.) Keep in mind, when I came into office it was hovering around 10 percent. All told, we’ve now seen 64 straight months of private sector job growth, which is a new record — (applause) — new record — 12.8 million new jobs all told.

That’s a pack of context-free factoids. There is still such a thing as the business cycle, and only economically illiterate hacks—-like those who work on the White House speech writing staff—-would measure anything from the deep V-shaped but momentary bottom that happened to occur during Obama’s second year in office. What counts is not that we’ve had a bounce after a terrible bust, but where we are now on a trend basis.

The answer is absolutely nowhere!

We are now 29 quarters from the pre-crisis peak and total non-farm labor hours utilized by the US economy are no higher than they were in Q4 2007. In other words, if you use a common unit of measure—–labor hours rather than job slots which treat coal-miners and part-time pizza delivery boys alike—–there have been no new units of employment at all. Our teleprompter reading President is actually tooting his own horn about recycled hours and “born again”  jobs and doesn’t even know it.

And, no, he can’t take credit for digging us out of the hole created by the Great Recession, either. The long, slow climb back to square one shown in the chart above was due to the natural resilience of our capitalist economy—notwithstanding the tax, regulatory and massive debt hurdles that Washington policies have thrown at it.

The truth of the matter is that America’s employment machine has been failing for this entire century. As shown below, the number of non-farm labor hours utilized during the most recent quarter was only 1% higher than in the spring of 2000—-way back when Bill Clinton still had his hands on things in the Oval Office.

In short, we have gone through two business cycles and have essentially added zero new employment inputs to the US economy.  And that marks a sharp and devastating reversal of previous trends. In fact, the BLS’ own data convey an out-and-out crisis that the President should have been lamenting, not a cherry-picked simulacrum of growth based on born-again, apples-and-oranges jobs slots.

Thus, during the comparable 29 quarters after the 1990 business cycle peak (Q2 1990 to Q3 1997) non-farm labor hours had increased by 12%and during the same period of time after the 1981 peak (Q3 1981 to Q4 1988) labor hours expanded by 17 percent.  That’s what employment growth used to look like, and absolutely nothing like that has happened on Obama’s watch.

When you get right down to it, however, even labor hours do not fully capture the actual jobs disaster happening in America. That’s because we keep shedding high productivity hours in the full-time  jobs sector in favor of low-skill, low-pay gigs in bars, restaurants, Wal-Marts and temp agencies.

So notwithstanding another month of 200,000 plus headline job gains, here’s where we actually are. The number of breadwinner jobs—–full-time positions in energy and mining, construction, manufacturing, the white collar professions, business management and services, information technology, transportation/distribution and finance, insurance and real estate—-is still 1.7 million below the level of December 2007; in fact, it is still lower than it was at the turn of the century.

Breadwinner Jobs- Click to enlarge

There is no mystery as to how the White House and Wall Street celebrate year after year of “jobs growth” when the long-term trend of full-time, family-supporting employment levels is heading south. Its called “trickle-down economics”, and not of the good kind, either.

What is happening is that the Keynesian money printers at the Fed are fueling serial financial bubbles. This generates a temporary lift in the discretionary incomes of the top 10% of households, which own 85% of the financial assets, and the next 10-20% which feed off the their winnings. Accordingly, the leisure and hospitality sectors boom, creating a lot of job slots for bar tenders, waiters, bellhops, etc.

I call this the “bread and circuses economy”, but it has two problems. Most of these slots generate only about 26 hours per week and $14 per hour. That’s about $19,000 on an annual basis, and means these slots constitute 40% jobs compared to the breadwinner category at about $50,000 per year. Besides that, a soon as the financial bubble goes bust, these jobs quickly disappear.

Bread and Circuses Jobs - Click to enlarge

This is reason enough for Obama to pipe down on the boasting, but he actually went in the opposite direction claiming a big recovery in manufacturing jobs.

And after a decade of decline, thanks to some of the steps we took…….we’ve added nearly 900,000 new manufacturing jobs. Manufacturing is actually growing faster than the rest of the economy. (Applause.)

But that one is not even a whopper; its a bald-faced lie. There has not been one “new” manufacturing job created during Obama’s term in office; and, in fact, the 12.3 million manufacturing jobs reported for June was still 10% below the level of December 2007, and nearly 30% lower than the 17.3 million manufacturing jobs reported in January 2000.

So the actual facts are not evidence of a trend reversal; they’re an exercise in political hogwash.

Indeed, if you take the entire high-productivity, high-pay goods production sector—-energy, mining, manufacturing and construction—the trend is even worse. As shown below, the 19.6 million goods producing jobs in June was 5 million lower than in January 2000. Is there any wonder that the median real household income has declined by 7% over the last 15 years?

Goods Producing Jobs - Click to enlarge

Here’s the real truth beneath the bloviation issuing from stumping politicians and Wall Street stock touts alike. The June BLS report showed that the HES Complex (health, education and social services) generated another 48,000 jobs in June. This figure is nearly dead on the 42,000 monthly average for this sector since the turn of the century.

The minor problem with that trend is these jobs pay on average only $35,000 per year—–a level that does not remotely support a middle class standard of living, especially after payroll and income taxes are extracted from this gross pay figure.

The much bigger skunk in the woodpile, however, is that these jobs are almost entirely “fiscally dependent”. Yet the public sector in America is broke, and the total public debt just keeps on climbing higher.

To wit, the 32.2 million jobs in the HES Complex are funded by $1.5 trillion annually of Medicare, Medicaid and other health and social services entitlements. On top of that there is also about $1 trillion of public sector education funding, $200 billion per year of government guaranteed student loans and $250 billion annually in tax subsidies for employer provided and individual health insurance plans and Obamacare tax credits.

HES Complex Jobs - Click to enlarge

In effect, the public sector borrows and taxes to create low productivity jobs within the nation’s highly inefficient, wasteful and monopolistic health and education cartels—- but in the process squeezes everything else. In fact, there have been virtually no new jobs—even on a headcount basis—–outside of the HES Complex during the entirety of the 21st Century to date!

Nonfarm Payrolls Less HES Complex Jobs - Click to enlarge

One of these days the public sector is going to exhaust its capacity to tax and borrow, and to thereby finance job growth even in the HES Complex. Needless to say, Washington and Wall Street will be as clueless then as they are now.

Meanwhile, the White House whoppers will keep on coming.

Wall Street Examiner Disclaimer: The Wall Street Examiner reposts third party content with the permission of the publisher. I curate these posts on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. No promotional consideration has been offered or accepted. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler and no endorsement of the content so provided is either expressed or implied by our posting the content. Some of the content includes the original publisher's promotional messages. The Wall Street Examiner is not familiar with the services offered and makes no endorsement or recommendation regarding them. Do your own due diligence when considering the offerings of third party providers.

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Here’s Another Reason Why TPP Supporter Rationale Was Moronic http://wallstreetexaminer.com/2015/07/heres-another-reason-why-tpp-supporter-rationale-was-moronic/ http://wallstreetexaminer.com/2015/07/heres-another-reason-why-tpp-supporter-rationale-was-moronic/#comments Thu, 02 Jul 2015 20:50:42 +0000 http://alantonelson.wordpress.com/?p=3087 This is a syndicated repost courtesy of RealityChek. To view original, click here.

Now that Washington’s big fight over the fast track bill is over, the national media will surely return to its norm of almost completely ignoring trade policy until a new trade deal like a Trans-Pacific Partnership (TPP) comes before Congress. The only likely exceptions will be the extent that trade comes up in the intensifying presidential campaign.

This neglect is even more of a shame than usual, and not just because America’s relentlessly growing trade deficits keep slowing its already slow-enough semblance of a recovery. It’s a shame because the main justifications for the TPP keeping falling apart – most recently with the release of a new survey of international opinion from the Pew Research Center.

As will be recalled by those whose memories exceed the short term, a major set of arguments for concluding the TPP pretty much as it stands sprung from geopolitics. One especially prominent claim was that the agreement was vital for maintaining and strengthening America’s preeminence in the fast-growing Asia-Pacific region.

No one should be surprised that President Obama himself insists that the fast track legislation that will ease TPP’s journey through Congress “will reinforce America’s leadership role in the world -– in Asia, and in Europe, and beyond.” (The wisdom of a national leader suggesting that his country’s position needs strengthening is another subject entirely.) Somewhat more surprising is how completely the national chattering class accepted this view. Thus even someone as remote from trade (and foreign policy) issues as senior CNN politics reporter Stephen Collinson felt comfortable presenting as a fact, “Had the fast-track provision crashed,” the TPP would have died, likely taking U.S. credibility in Asia and Obama’s pivot to the region with it.”

As I have repeatedly pointed out, such assertions are (take your pick) moronic or deceptive on their face. Examining America’s role as the leading final consumption market for export-dependent Asia, and its role as the only conceivable source of protection against a rising China, makes its centrality beyond legitimate dispute. But since doubters will always remain – and especially self-interested ones – it’s great that Pew has just made clear that the populations of the Asia-Pacific region itself clearly understand America’s importance economically.

Pew asked publics in several first-round TPP countries (and many other countries) to “name the world’s leading economic power” and gave them the choice of the United States, China, the European Union, Japan, or “Other/None/Don’t Know.” Although there was some country-by-country variation, the Asia-Pacific region was the one that most often awarded the United States the top spot – with solid majorities.

Specifically, respondents in Japan, Malaysia, and Vietnam considered the United States to be Number One by majorities of 59 percent, 53 percent, and 50 percent, respectively. The share of their populations that believed China had gained the lead? Twenty-three, 33, and 14 percent, respectively. Only one TPP first-round country placed China atop the world economy – Australia, by a whopping 57 percent to 31 percent over the United States. These results indicate that Australians know that their economy has relied heavily on exporting raw materials to China – but also that Australians need to learn about where much of China’s own growth comes from.

Indeed, the Chinese are apparently well-positioned to instruct the Aussies. They named the United States as the world’s leading economy over their country by 44 percent to 34 percent.

In fairness, another Pew survey reveals some evidence of America’s perceived top dog status slipping between 2014 and 2015. At the same time, this decline could have resulted from several months of Mr. Obama and other American leaders warning about China’s rise and thereby implicitly poor-mouthing their own country.

In fact, the only main TPP-related question surrounding the Pew results concerns timing: Why did the Center wait to release them four days after fast track’s final passage by the House?

Wall Street Examiner Disclaimer: The Wall Street Examiner reposts third party content with the permission of the publisher. I curate these posts on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. No promotional consideration has been offered or accepted. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler and no endorsement of the content so provided is either expressed or implied by our posting the content. Some of the content includes the original publisher's promotional messages. The Wall Street Examiner is not familiar with the services offered and makes no endorsement or recommendation regarding them. Do your own due diligence when considering the offerings of third party providers.

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The Best Demographic Trends of the Century http://wallstreetexaminer.com/2015/07/the-best-demographic-trends-of-the-century/ http://wallstreetexaminer.com/2015/07/the-best-demographic-trends-of-the-century/#comments Thu, 02 Jul 2015 20:30:37 +0000 http://economyandmarkets.com/?p=36897 This is a syndicated repost courtesy of Economy and Markets. To view original, click here.

Greece is not the place to be right now.

Its citizens are capped out at $67 a day on the ATM. Its pensioners are pinching pennies. Its doctors are leaving in droves. Its long-term demographics are deplorable, making the chances for recovery more and more abysmal. It’s a nightmare!

I’ve already explained that large-scale debt deleveraging will be one of the triggers that sends the global economy back into crisis. Now that Greece has defaulted on its $1.7 billion IMF payment, they’re looking more and more like the beginning of the end.

If Greece kicks the bucket, it could spill over to the other weak euro zone members — namely, Portugal, Italy, and Spain. Lance explained yesterday that investors who are fearing the worst from Greece dropped out of not only Greece debt but those other lower quality bonds as well.

With so many developed countries already sitting on the brink, and with the worst yet to come, it’s important to consider which countries will be hit the hardest… and which will fare the best going into the next recovery.

The truth is that, with the lower birth trends that come from increasing urbanization, wealth, and education, almost all developed countries have sideways (at best) to falling demographic trends for decades to come.

But there are a few exceptions…

And they are, in order: 1) Australia… 2) Israel… 3) Switzerland… 4) Norway… 5) Sweden… and 6) New Zealand.

In these countries, the millennials or “Echo Boomers” will ultimately bring them to new heights.

They’re the few countries that, unlike the U.S., saw a larger generation following their baby boom. These demographics are partially due to higher birth rates but mostly because of strong immigration policies.

When you consider how the stronger demographics in a country like Australia translates into more spending, you understand why they’re at the top! Here’s a look at their spending wave from the middle of last century to the end of this one:

Australia Spending Wave and Demographic Trends 1950 to 2100

It’s been flat from 2010 to 2015, but after this, it’s the only developed country with slightly positive trends into 2018.

But in the first stage of the next global boom, from 2023 to 2036, Australia will have the strongest surge of any developed country. It’ll have a minor downtrend into 2045, but then another boom later on in the century, around 2065 to 2070.

Right now, Australia has the highest immigration per capita of any major, wealthy, developed country. It’s greater than even Canada or the U.S., which are immigration magnets. And it could continue to enjoy good immigration levels at times, even in the coming depression, as the wealthy flee countries such as China.

The bottom line is that Australia simply has the best demographic trends of any wealthy, developed country. While the bubbles in China, commodities, and their own real estate will hurt them especially in the next global financial crisis, there isn’t a country with lower debt, or one better positioned for the next boom.

The other five have similar patterns. They’ll see (or are already seeing) demographic downturns into the middle or end of next decade. After that, they’ll enjoy a surge going into 2040.

Unfortunately, in the grand scheme of things, those six are only smaller countries.

Australia only has a population of 23 million people. Sweden has even fewer at 9.5 million. And the others even less: Israel at 8.3 million, Switzerland at 8.1 million, Norway at 5 million, and New Zealand the lowest at 4.5 million.

Combined, these countries contain less than a sixth of the U.S. population.

The greatest demographic growth of all will come out of the emerging world, between 2023 and 2070. Those are the countries that will experience a boom due to greater urbanization and a growing middle-class consumer population (though they won’t become as affluent as their developed-world counterparts).

That’s when we could see the greatest commodity boom and bubble in history, as emerging countries dominate growth. And Australia, with its strong commodity exports, is perfectly set to ride the wave.

Harry Dent
Harry Dent
Founder, Dent Research

Follow me on Twitter @harrydentjr

Wall Street Examiner Disclaimer: The Wall Street Examiner reposts third party content with the permission of the publisher. I curate these posts on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. No promotional consideration has been offered or accepted. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler and no endorsement of the content so provided is either expressed or implied by our posting the content. Some of the content includes the original publisher's promotional messages. The Wall Street Examiner is not familiar with the services offered and makes no endorsement or recommendation regarding them. Do your own due diligence when considering the offerings of third party providers.

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Why Did Alibaba’s Jack Ma Just Buy 28,100 Acres in Upstate New York? http://wallstreetexaminer.com/2015/07/why-did-alibabas-jack-ma-just-buy-28100-acres-in-upstate-new-york/ http://wallstreetexaminer.com/2015/07/why-did-alibabas-jack-ma-just-buy-28100-acres-in-upstate-new-york/#comments Thu, 02 Jul 2015 19:15:05 +0000 http://moneymorning.com/?p=187609 Chinese billionaire Jack Ma just shelled out $23 million for a property in New York's Adirondacks that was once owned by William A. Rockefeller, Jr.

But that's no dent in Ma's overstuffed wallet. The co-founder and acting chairman of Alibaba is both the richest man in China and the 18th richest in the world.

Here's a look at Ma's latest expansion into the U.S. - 28,100 acres in one of America's most beautiful nature preserves - and what he intends to do with it...

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This is a syndicated repost courtesy of Money Morning - We Make Investing Profitable. To view original, click here.

Chinese billionaire Jack Ma just shelled out $23 million for a property in New York’s Adirondacks that was once owned by William A. Rockefeller, Jr.

But that’s no dent in Ma’s overstuffed wallet.

His company Alibaba Group Holding Ltd. (NYSE: BABA) drew worldwide attention last September when its initial public offering (IPO) of $25 billion shattered the world record for the largest IPO in history. Now Jack Ma’s net worth is around $29.7 billion, according to the latest numbers from the Bloomberg Billionaires Index. The co-founder and acting chairman of Alibaba is both the richest man in China and the 18th richest man in the world.

Here’s a look at Ma’s latest expansion into the United States — beyond the New York Stock Exchange…

Jack Ma’s New Stake in an American Nature Wonderland

Ma’s spokesman Jim Wilkinson confirmed the upstate New York purchase, which was first reported by The Wall Street Journal on June 24.

jack ma land

The 28,100-acre estate, called Brandon Park, is roughly 30 miles northwest of Lake Placid. It includes more than nine miles of the St. Regis River. It comes with vast woodlands, a white-tailed deer preserve, a maple-syrup operation, and “perhaps the finest brook trout fishery in the eastern United States.”

“The land was originally part of neighboring Bay Pond, a private nature preserve created around the turn of the last century by William A. Rockefeller, Jr., a co-founder of Standard Oil,” according to WSJ‘s Sarah Tilton.

In 1939, the family of Wilhelmina du Pont Ross (an heiress of the Du Pont Co. fortunes) bought Brandon Park. The Rosses transferred the property into Brandon LLC in 1999. Then in 2012, it was listed for sale with an asking price of $28 million. Two years passed, and the asking price was lowered to $22.5 million.

In May 2015, Jack Ma swooped in. He purchased Brandon Park through an entity called New Brandon LLC.

According to Wilkinson, Ma will primarily use the beautiful sprawling acres for conservation.

“Mr. Ma plans to form a nonprofit entity to manage Brandon Park,” Wilkinson told WSJ. “The land is Ma’s first investment in conservation land outside of China, where he is a prominent supporter of conservation efforts.”

jack ma

Ma’s track record shows he does indeed value the environment. He chairs the China board of the Nature Conservancy and sits on its global board. He co-founded the Sichuan Nature Conservation Foundation and the Laohegou Nature Reserve in Sichuan. In 2014, he created a charitable trust that now has an endowment of $3 billion. Alibaba itself has directed 0.3% of its annual operating revenue to a foundation for environmental protection since 2010.

“Protecting the environment in China will always be Jack’s first and foremost priority, and he will continue his strong efforts here,” Wilkinson said to WSJ. “This international land purchase reflects Jack’s belief that we all inhabit the same planet and we all breathe the same air, so we are dependent on each other for our collective future.”
Wilkinson added, “Mr. Ma was drawn to the Adirondacks partly because of the area’s history of overcoming environmental threats.”

You see, New York State created the 6 million-acre Adirondack Park in 1892 — of which Brandon Park is a component — to combat natural resource depletion. Logging, mining, and other activities in the area had begun negatively affecting wildlife, caused erosion, and more.

Jack Ma will continue to protect the land.

However, he does appear to have at least a few selfish reasons for his purchase. One might posit the nonprofit will provide some tax relief. And Wilkinson said Ma will occasionally use Brandon Park as a personal retreat.

Who can blame him?

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Disclaimer: © 2015 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.

 

The post Alibaba’s Jack Ma Just Bought 28,100 Acres in Upstate New York – Here’s Why appeared first on Money Morning. Reposted with permission.

Wall Street Examiner Disclaimer: The Wall Street Examiner reposts third party content with the permission of the publisher. I curate these posts on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. No promotional consideration has been offered or accepted. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler and no endorsement of the content so provided is either expressed or implied by our posting the content. Some of the content includes the original publisher's promotional messages. The Wall Street Examiner is not familiar with the services offered and makes no endorsement or recommendation regarding them. Do your own due diligence when considering the offerings of third party providers.

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Goldman Sachs (NYSE: GS) Is Going to Work for You http://wallstreetexaminer.com/2015/07/goldman-sachs-nyse-gs-is-going-to-work-for-you/ http://wallstreetexaminer.com/2015/07/goldman-sachs-nyse-gs-is-going-to-work-for-you/#comments Thu, 02 Jul 2015 19:01:32 +0000 http://moneymorning.com/?p=187603 It's true! Starting sometime next year, Goldman Sachs Group Inc. (NYSE: GS) is going to start lending money to the 99%.

But don't bother getting all suited up with hat in hand for a visit to a local branch of Goldman Sachs Bank USA (with its $73 billion in deposits) - there won't be one.

Here's how to capitalize on something we've seen coming for a while...

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About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.

Disclaimer: © 2015 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.

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This is a syndicated repost courtesy of Money Morning - We Make Investing Profitable. To view original, click here.

It’s true. Starting sometime next year, Goldman Sachs Group Inc. (NYSE:GS) – the poster child Wall Street investment bank of the 1% of the 1% of the superrich – is going to lend money to the remaining 99% of consumer borrowers.

Don’t bother getting all suited up with hat in hand for a visit to a local branch of Goldman Sachs Bank USA (with its $73 billion in deposits) – there won’t be one.

And don’t even think about walking into the bank’s office at 200 West Street in New York City – you won’t get past security.

Goldman SachsHowever, with Goldman’s new lending strategy, that walk-in access won’t be required.

Goldman Sachs, you see, is getting into online banking.

This new venue of borrowing was known as P2P, or peer-to-peer lending – until big money transformed the P2P moniker into “power-to-profit.”

And as we’ve been predicting for some time, P2P lending is creating a big moneymaking opportunity for you…

We Predicted This

I told you about P2P here back in April and explained how the original peer-to-peer model was being papered over by institutional money and banks getting into the game. I also showed you several great ways to profit.

Just to remind you, in the peer-to-peer arena, little folks make loans to other little folks through an intermediary site like LendingClub Corp. (NYSE: LC).

Borrowers seeking money to consolidate credit card debt, pay for a home renovation, or pay for school can be funded by creditors like you and me who have some cash to lend and want to collect a higher interest rate than we can get anywhere else.

Of course, as lenders, we’d face “repayment risk.”

And that’s where institutions stepped in – in a big, big way.

All Knowing… and All Powerful

If you or I fund a personal loan and we get stiffed, we’re going to feel the sting. One way to not feel it so much is to have a lot of money to lend, to make lots of loans, and to be diversified across a wide spectrum of borrowers. That way, the high interest rates you earn as a lender – across a large loan book – will tend to offset a small-but-expected number of defaults… generating a still-high rate of return on your investment.

Goldman Sachs knows that. More importantly, Goldman knows how to assess risk – and is even creating newfangled models that are designed to calculate all the risks of this new lending market. It also has access to enough money to make billions of dollars in new consumer loans. And it has access to the technology needed to create lending platforms in cyberspace.

Add all this together and it’s clear Goldman Sachs believes it has the muscle to become a serious player in the consumer lending business.

Make no mistake: This isn’t a kinder, gentler Goldman Sachs bending over backward to help little borrowers.

Truth be told, if you want a truly accurate picture, consider this…

Matt Taibbi of Rolling Stone famously wrote about Goldman back in 2009: “The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

And it’s clear that right here… Goldman Sachs smells money.

Lots of money.

The multi-tentacled bank recently hired Harit Talwar, the former chief marketing officer of Discover Financial Services (NYSE: DFS), and bestowed upon him the coveted Goldman Sachs’ “partner” status. Talwar’s mission: Build the investment bank’s online lending business.

While the unit is expected to hire as many as 100 people and be up and running next year, there’s no indication that Goldman will attach its storied-and-disparaged corporate name to the venture.

Getting Your Share

Goldman Sachs has never been a “retail” bank. And achieving meaningful success in a hard-scrabble business that makes personal loans at relatively high interest rates to consumers who are often consolidating numerous credit card bills will be a challenge. The fact that these customers – and the organizations that “protect” them – aren’t afraid to poke their lenders in the eye will make this initiative an even greater challenge.

But thanks to Goldman’s research, the company’s leaders smell money. Of the $843 billion in outstanding consumer loans, Goldman Sachs says about $209 billion worth of personal loans – creating $4.6 billion in profits – is there for the taking by new online lenders.

And Goldman wants its piece.

Goldman Sachs Bank USA will more than likely make loans directly to borrowers through the venture’s online platform. Eventually, the investment-banking firm plans to fund billions’ worth of loans by selling certificates of deposit (CDs) to investors that are backed by Goldman’s balance sheet and overall creditworthiness. Low-interest-rate CDs are a cheap means of financing loan growth and will have little impact on the Goldman Sachs’ reserve requirements.

In short order, for fat fees, Goldman will securitize and structure its loans and sell the various “tranches” to institutional investors.

The magic elixir Goldman expects to mix into its new business is its technology and risk-management prowess. If Goldman can create risk measures – in other words, its own proprietary ratings metrics – to accurately assess risk profiles of the borrowers it lends to, it can manage every aspect of financing, lending, and collections, perhaps better than its competitors, and own a big chunk of the online lending business.

Why else venture down the path of the masses of unwashed borrowers?

Back in April when I wrote about P2P lending and how it’s a better deal for borrowers on those sites than individual lenders, I recommended a couple of high-yielding alternative investments for would-be “mom and pop” lenders.

Both of these profit plays are “business development corporations,” or BDCs, which I explained in my report to you. One was Apollo Investment Corp. (Nasdaq: AINV), with a 10.2% “pass-through yield.”

And the other was Goldman Sachs BDC Inc. (NYSE: GSBD), with an 8% yield.

Why do I like the Goldman Sachs BDC? Because Goldman knows how to make money.

I have no doubt – whatsoever – that if Goldman brands its online-lending venture properly, and markets it extensively, it will add to Goldman’s revenue, net profits, and probably stock price.

And what will a successful Goldman venture do to existing online lending platforms like LendingClub?

Stay tuned: I’m closely watching all the players in the space – and am analyzing their businesses and their stocks – and will let you know which ones are worth your investment dollars and which ones you’re better off borrowing from.

No, we’re not talking about a “kinder, gentler” Goldman Sachs.

But we are talking about the investment bank so good at what it does that it all but prints profits.

And with this foray into online lending, it’s going to print some profits for you.

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