Dec 07

FYI.


Peter-Schiff

Peter Schiff Warns: “The Whole Economy Has Imploded… Collapse Is Coming”:

Back before 2008 Peter Schiff was harshly criticized and laughed at for his predictions about a coming economic collapse. Among other things Schiff warned that consumer spending had hit a wall, stocks were overpriced and lax credit lending practices would lead to a detonation of the banking system. Rather than heed the warnings, the biggest names in mainstream media tried to discredit him for not toeing the official narrative. Shortly thereafter, of course, Schiff was vindicated and much of the doom he had forecast came to pass.

Today, Schiff continues to argue that the economy is on a downhill trajectory and this time there’ll be no stopping it. All of the emergency measures implemented by the government following the Crash of 2008 were merely temporary stop-gaps. The light at the end of the tunnel being touted by officials as recovery, Schiff has famously said, is actually an oncoming train. And if the forecast he laid out in his latest interview is as accurate as those he shared in 2007, then the the train is about to derail.

We’re broke. We’re basically living off of debt. We’ve had a huge transformation of the American economy. Look at all the Americans now on food stamps, on disability, on unemployment.

The whole economy has imploded… the bottom hasn’t dropped out yet because we’re able to go deeper into debt. But the collapse is coming.

Fundamentally, America is worse off now than it was pre-crash. With the national debt rising unabated and money being printed out of thin air without reprieve, it is only a matter of time. Continue reading »

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Dec 04

“QE2 moved Repo rates, on average, 2.7 basis points for every $100B in QE. So, one very rough estimate moved GC 8 basis points and the other 2.7 basis points per hundred billion. In order to move GC 25 basis points higher, in a very rough estimate, the Fed needs to drain between $310B and $800B in liquidity.”


GC repo

“But It’s Just A 0.25% Rate Hike, What’s The Big Deal?” – Here Is The Stunning Answer:

After today’s market plunge, the result of what even Goldman admitted may have been a major policy error by the ECB, suddenly the Fed’s determination to hike rates in two weeks lies reeling on the ropes. After all, what the ECB did was an implicit tightening of reverse QE1 proportions  (it is no accident that the EURUSD is soaring as much as it did in March 2009 when the Fed unleashed QE). Continue reading »

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Dec 03

Junk Bond Market - The Biggest Red Flag since the Great Recession

Junk Bond Market: The Biggest Red Flag since the Great Recession:

The junk bond market continues to show signs of cracking…

For months now, we’ve pointed to the decline of junk bond values as one of the biggest red flags in the entire market. The bond market is where companies, countries, and individuals go to borrow money. It’s far larger and more important than the stock market. The U.S. bond market, for instance, is about twice as large as the U.S. stock market.

If an economy, industry, or company is in trouble, warning signs usually appear in the bond market long before they show up in the stock market. We’ve focused specifically on the bond market’s riskiest offerings, junk bonds, which are bonds issued by companies with shaky balance sheets. They’re riskier than bonds issued by strong companies, so they pay higher yields.

When the economy slows down, companies in poor financial shape feel the pain first. That’s why junk bonds often point out problems before other assets do.

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Dec 01

Puerto Rico Avoids $354 Million Default With Absurd Revenue “Clawback”:

 Earlier today, we noted that it was decision time for Puerto Rico.

Staring down a $354 million debt payment, Governor Alejandro Garcia Padilla had to decide between defaulting on $273 million in GO debt (the portion of the payment guaranteed by the National Public Finance Guarantee Corp.) and holding onto cash the government needs to provide public services for the island’s citizens.  Continue reading »

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Dec 01

It’s D-Day For Puerto Rico As $354 Million Payment Comes Due, Padilla Heads To Capitol Hill For Help:

Puerto Rico has a problem. The commonwealth needs to make a $354 million bond payment on Tuesday and the government is basically out of money.

We previewed this rather precarious situation twice in the last two weeks (see here and here), noting that this time is indeed “different.” Why? Because unlike August when the island paid only $628,000 of a $58 million payment (so, just about 1%), a large portion of what’s due Tuesday is GO debt guaranteed by the National Public Finance Guarantee Corp. A default on that spells litigation.

A default “would likely trigger legal action from creditors, commencing a potentially drawn-out process absent swift federal intervention,” Moody’s warned last month.

As a refresher, here’s a bullet point summary of recent developments from BofAML: Continue reading »

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Nov 20

Flag_of_Ukraine

Ukraine Debt Owed to Russia: Prime Minister Yatsenyuk: “We Will Not Pay the Aggressor State our $3 Billion Debt”:

Kiev will not pay Russia the $3 billion debt owed to it, unless other conditions of the restructuring are applied. This was stated by Arseniy Yatsenyuk. 

“I said to other lenders there are other conditions to be met or you will not receive the debt. The basic condition is reducing debt by 20%, the transfer of all debts of four years. If you do not like this, then you will receive the decision of the government of Ukraine via a moratorium on paying Russia the $3 billion. It is very easy to explain to our neighbours and the aggressor state: we will not pay $3 billion “,— quotes “RIA Novosti” citing the Prime Minister of Ukraine Continue reading »

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Nov 13

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Nov 10

For The First Time Ever, Corporate Bond Inventories Turn Negative – What This Means:

As we noted previously, for the first time ever, primary dealers’ corporate bond inventories have turned unprecedentedly negative. While in the short-term Goldman believes this inventory drawdown is probably a by-product of strong customer demand, they are far more cautious longer-term, warning that the “usual suspects” are not sufficient to account for the striking magnitude of inventory declines… and are increasingly of the view that “the tide is going out” on corporate bond market liquidity implying wider spreads and thus higher costs of funding to compensate for the reduction is risk-taking capacity.

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Nov 10

Debt-Ceiling

Why the U.S. Debt Ceiling is a Farce:

The U.S. government just increased its credit limit…

On Monday, President Obama signed a budget deal that raised the debt ceiling from $18.5 trillion to $20 trillion.

In theory, the debt ceiling limits how much money the U.S. government can borrow. The debt ceiling is now twice as high as it was when Obama took office in 2008. Continue reading »

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Nov 07

What Janet Knows:

What Janet knows, as The Burning Platform’s Jim Quinn exclaims, is that a 1% increase in interest rates would increase the interest on the National Debt from $400 billion per year to $600 billion per year, a 50% increase.

Janet-Yellen-debt

Source: Ben Garrison

Interest rates back at NORMAL historical rates that we had as recently as 2007 would increase the interest on the National Debt to $1 trillion per year, a 150% increase.

Plus, the National Debt increases by $1.5 billion per day, so our interest bill goes up by $35 million per day already.

Do you really think Yellen is going to be increasing interest rates?

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Nov 06

Disaster

Former Reagan Administration Official Warns That Financial Disaster Is Dead Ahead:

Why won’t the American people listen to the warnings?  David Stockman was a member of the U.S. House of Representatives from 1977 to 1981, and he served as the Director of the Office of Management and Budget under President Ronald Reagan from 1981 to 1985.  These days, he is running a website called “Contra Corner” which I highly recommend that you check out.  Stockman believes that a global “debt super-cycle” that has been building for decades is now bursting, and he is convinced that the consequences for the U.S. and for the rest of the planet will be absolutely catastrophic.  His findings are very consistent with what I have been writing about on The Economic Collapse Blog, and if Stockman is correct the times ahead of us are going to be exceedingly painful. Continue reading »

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Oct 31

“The conditions in the economies of the rest of the world have undoubtedly proved weaker compared with a few months ago, in particular in the emerging economies. Global growth forecasts have been revised downwards. This slowdown is probably not temporary.”


Draghi Satan

Mario Draghi Admits Global QE Has Failed: “The Slowdown Is Probably Not Temporary”:

Undoubtedly, the most amusing this about the prospect of more easing from the ECB (as telegraphed by Mario Draghi last week) and the BoJ (where Haruhiko Kuroda just jeopardized his status as monetary madman par excellence by failing to expand stimulus) is that both Europe and Japan both recently slid back into deflation despite trillions in central bank asset purchases. 

In other words, the market expects both Draghi and Kuroda to double- and triple- down on policies that clearly aren’t working when it comes to altering inflation expectations and/or boosting aggregate demand. Indeed, both Goldman and BofAML said as much last week. For those who missed it, here’s Goldman’s take Continue reading »

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Oct 28

And yes, this will end badly.


Mario-Draghi-Just-Evil

NIRP Panic: Over Half Of European 2-Year Bonds Trade At Record Negative Yields; Italy Paid To Issue Debt:

Europe has unleashed yet another monetary panic, and nowhere is it more visible than in what happened today across the short end of Europe’s government curve.  As the table below shows, more than half of European sovereign issuers just saw the yield on their 2 Year Notes trade not only below zero, but hit never before seen negative yields!

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Oct 23

Yes, the US government really is bankrupt. Here’s proof:

I’ve long-stated that the government of the United States is completely insolvent.

And that is 100% true statement.

The government’s own numbers show that official liabilities, including debt held by the public and federal retirement benefits, total $20.7 trillion. Continue reading »

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Oct 22

WTF Chart Of The Day – Italian 2Y Bond Yields Collapse Below Zero For First Time Ever:

Presented with little comment aside to say… WTF!!!

Italy 2Y yields are -10bps to -0.6bps…

20151022_ITA1

Some context for that… Continue reading »

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Oct 19

In Latest Humiliation For Illinois, Fitch Downgrades State’s Credit Rating To BBB+:

Last week, beleaguered Illinois Comptroller Leslie Geissler Munger admitted that, thanks to the bitter budget battle going on in Springfield, the state would miss a $560 million pension payment in November. Now, in a move that shouldn’t exactly surprise anyone, Fitch has cut the state’s GO rating citing the budget impasse. The move affects some $27 billion in debt.

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Oct 17

China Officially Sold A Quarter Trillion Treasurys In The Past Year (Unofficially Much More) And What This Means:

While to many Quantitative Tightening is a novel concept, the reality is that China (+ Euroclear) have been dumping Treasurys and liquidating reserves since January when total holdings peaked at $1.6 trillion last summer, and have since declined to $1.38 trillion. It means that China has sold a quarter trillion dollars worth of Treasurys in the past year, in the process offsetting what would have been about 25% of the Fed’s QE3.

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Oct 15

Fitch Downgrades Brazil From BBB To BBB-, Outlook Negative – Full Text:

Brazil’s economic recession is likely to be deeper and longer than Fitch’s earlier expectations and its performance has diverged materially from those of its rating peers. Medium-term prospects also look weak compared to peers and most other large emerging markets. Fitch forecasts that Brazil’s economy will contract by 3% and 1%, respectively in 2015 and 2016 before recording modest growth in 2017, with risks skewed largely to the downside.

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Oct 11

Fed Quietly Revises Total US Debt From 330% To 350% Of GDP, After “Discovering” Another $2.7 Trillion In Debt:

The Fed has managed to kill two birds with one stone: it no longer provides a simple, one-stop-shop way to reconcile the total US credit stock, and it quietly boosted total US consolidated credit by $2.7 trillion to $62.1 trillion as of June 30, 2015.

 

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Oct 05

Treasury Sells 3-Month Bills At 0% Yield For First Time Ever:

“Investors” are so desperate to hold on to short-term paper that they paid $100 for a 3-month Treasury-bill at today’s auction. That is a 0% yield – for the first time ever – lower even than the auction right after Lehman’s bankruptcy in Nov 2008.

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Sep 30

Kuroda

Japanese Pension Funds Find New Ways To Lose Money, Will Blow Retirement Funds On Junk Bonds:

Following yesterday’s collapse in the Nikkei, when a 4% drop pushed it red for the year below 17,000, down 20% from a high of 21,000 hit just over a month ago, we had just one question for Japan’s pension fund “fudiciaries” who have been “greatly rotating” out of bonds for the past few years as the primary sources for BOJ debt monetization, dumping trillions in fixed income yen, and promptly buying up equities: equities which have gone nowhere in 2015, and which have posted massive losses in the third quarter.  The question was:

Less than 24 hours we got the answer, when moments ago Nikkei reported thatQ3 losses at (at least one) pension funds were just under JPY 10 trillion in the third quarter. Continue reading »

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Sep 24

Gen. David Petraeus in a photo with his biographer and mistress Paula Broadwell


David Petraeus, “Treasury Analyst”: Please Don’t Quit Your Day Job:

Moving on, but it only gets better because suddenly, out of the blue, a new Treasury bond market analyst emerges: none other than disgraced former CIA head David Petraeus, who somehow avoided treason charges when it was revealed that he had a mistress to whom he had leaked confidential material resulting in his prompt termination from the CIA, only to reemerge several years later…. as a Treasury market expert (as well as being recently hired by KKR, of course, just so the private equity company can scrub all of his formerly confidential knowledge before giving him the boot in the nearest future).

CNN introduces him as follows: “Petraeus is one of America’s brightest minds on matters of national security. He served as a top military commander in charge of troops in Iraq and Afghanistan before becoming director of the CIA in 2011.”

Leaving aside the laughable assertion of the first statement, after reading some of his comments we can only imagine he, as a member of the “intelligence community”, is a devoted subscriber of the abovementioned “Strategic Intelligence” newsletter.

Because here is the one statement from Petraeus that we read, read again, then kept rereading for one simple reason…

“There is no shortage of customers for the purchase of U.S. Treasuries,” said Petraeus…. “Given the relative strength of the U.S. economy and the prospect of the Fed raising interest rates at some point in the months ahead, I suspect there will continue to be very keen interest in U.S. Treasuries,” Petraeus said.

everything in it is dead wrong. Continue reading »

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Sep 23

time-man-of-the-year-helicopter-ben-bernanke

“And just like that Weimar 2.0 is born.


 

“The Government Is Literally Paying Itself” – Citi Calls For Money Paradrops:

Last Friday, we posted what we thought was a watershed report by Australia’s largest investment bank Macquarie, one which openly called for central bank funding of fiscal spending, aka “helicopter money”, by directly monetizing treasuries. Ironically, the bank made the call despite admitting that it would not work in the long run, leading to even more stagflation and deflation. This was the gist:

As velocity of money globally continues to fall, conventional QEs have to become exponentially larger, as marginal benefit declines. If public sector is not prepared to step aside, what other measures can be introduced to support nominal GDP and avoid deflation? Continue reading »

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Sep 19

Three Reasons Why The U.S. Government Should Default On Its Debt Today

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Sep 19

Moody’s Downgrades France, Blames “Political Constraints”, Sees No Material Reduction In Debt Burden

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Sep 16

China Liquidated A Record $83 Billion In Treasurys In July

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Sep 16

Kuroda

S&P Downgrades Japan From AA- To A+ On Doubts Abenomics Will Work – Full Text

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Sep 10

– “Junked” Brazil Is Falling Apart At The Seams; Cancels Bond Auction (ZeroHedge, Sep 10, 2015):

Exactly one month ago, in the aftermath of the Chinese devaluation announcement, we made a simple prediction. “Biggest immediate loser from China’s devaluation: Brazil” Today, following the overdue, long anticipated, and yet “shocking” downgrade of Brazil by the S&P to junk, this prediction is coming true.

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Sep 10

Brazil Cut To Junk By S&P, ETF Falls 5% Post-Mkt (ZeroHedge, Sep 9, 2015):

Brazil, whose economy officially slid into recession in Q2 – a quarter during which Brazilians suffered through the worst inflation-growth outcome (i.e. stagflation) in over a decade – and whose efforts to plug a yawning budget gap are complicated by political infighting and a growing public outcry against embattled President Dilma Rousseff, has been cut to junk by S&P.

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Sep 08

Mystery Buyer Of US Treasurys Revealed (ZeroHedge, Sep 8, 2015):

While we already knew that China was selling – and following the record selling of FX reserves in August, so does everyone else – an even more interesting question emerged: who is buying? Thanks to the WSJ we now know the answer: “A little-known New York hedge fund run by a former Yale University math whiz has been buying tens of billions of dollars of U.S. Treasury debt at recent auctions, drawing attention from the Treasury Department and Wall Street.

But the biggest risk by far is that now that the “mystery buyers” has been exposed, it won’t take long for the other, much bigger players – i.e., all the central banks who have been desperate to push yields lower to “confirm” the self-fulfilling narrative that the economy, and inflation, are growing – to inflict the proverbial “max pain” upon Element. In fact, if Talpins is indeed very long TSYs, and has lot of leverage embedded in the trade, one may expect a concerted shorting effort to find out just how much leverage is incorporate in the trades, and push it to the point of breaking. After all, hedge funds exposed with massive positions rarely survive an onslaught by their peers who seek to do just that – inflict “max pain” (see Ackman and Herbalife). Continue reading »

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