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Goldman
Sachs Accused of “Aiding and Abetting” Venezuela’s “Dictatorial Regime” - (www.wolfstreet.com) It
didn’t take long for sparks to fly after the Wall Street Journal reported on Sunday that, “according to
five people familiar with the transaction,” the asset management division of
Goldman Sachs had bought Venezuelan bonds with a face value of $2.8 billion
from the Central Bank of Venezuela that it had held as part of its
international reserves. The sale of the bonds – issued by state-owned oil
company Petróleos de Venezuela S.A. (PDVSA) in 2014 and due in 2022 – was
completed on Thursday, according to the sources. That day and on Friday, the
central bank’s international reserves jumped by $749 million, to around $10.86
billion, Reuters reported
today. According to Reuters’s sources, including one at Goldman – oh my, all
these leaks – the negotiations took place via middlemen in Europe.
Bitcoin
correction sees nearly $4 billion wiped off value of the cryptocurrency as
price falls 19% - (www.cnbc.com) Nearly
$4 billion has been wiped off of the value of bitcoin in
the past four days after a correction that has seen the cryptocurrency's price
fall almost 19 percent from its recent record high. On May 24, bitcoin hit an
all-time high of $2.791.69. But on Monday, the digital currency was trading at
an intra-day high of $2,267.73, marking a more than $520 drop or 18.7 percent
decline since the record high, according to data from CoinDesk. "The
correction was actually quite brief, the prices today are still higher than
that of a week ago," Bobby Lee, CEO of BTCC, a major bitcoin exchange,
told CNBC by phone.
Hong
Kong's Throngs of Thousands Defy Bid to Cool Housing Market - (www.bloomberg.com) Snaking
queues of thousands of prospective apartment buyers in Hong Kong signaled
authorities have made no progress in cooling a red-hot property market, where
prices are at records. People were lining up on Friday and over the weekend at
Victoria Skye, a luxury project at the former airport site of Kai Tak, and at
the Ocean Pride development by Cheung Kong Property Holdings Ltd. and MTR Corp. “Successive moves by the
government in recent memory to cool the property market only resulted in it
becoming crazier,” The Standard newspaper said in an editorial on Monday. “The
result is a sea of madness.”
Italian
bank worries leak into second week - (www.reuters.com) Concern
over Italy's banks and Britain's national election dominated holiday-thinned
European financial markets on Monday, pushing stock markets lower after Asian
share indices fell back off two-year highs. Sterling, hammered by a slump for
Prime Minister Theresa May's Conservatives in opinion polls last week,
recovered after weekend polls confirmed the trend but showed her still on
course to win next week's vote. European share prices were lower [.EU] overall,
but Italian banks and blue chips fell as worries over recapitalisations of
regional Italian lenders bled over into a second week.
Fed's
Williams Sees 'Much Smaller' Balance Sheet in Five Years - (www.bloomberg.com)
Fed's
Williams Sees Gradual Policy Tightening of Three Hikes - (www.bloomberg.com)
Sears
Revenues Plunge, to Hit Zero in 3 Years, Shares Jump - (www.wolfstreet.com) The
ingenious strategy of cost-cutting and store-closing your way out of trouble:
Pretty soon, it leads to zero. Sears reported first quarter earnings today.
“Earnings” has been a bad joke with Sears, which has lost money every one of
the past six years, $10 billion in total. First things first. Revenues plunged
20% year-over-year to $4.3 billion. Some of that plunge was caused by the
endless series of store closings with which Sears is trying to keep itself out
of bankruptcy for as long as possible. And some of it was caused by
same-store sales which plunged 12% at the surviving stores. That was about
twice the decline a year ago. So the downfall is picking up critical momentum.
Chinese
Money Funneled to Far-Flung Homes Heralds Bubble Trouble - (www.bloomberg.com) When
a 59-year-old accountant in Shanghai wanted to invest for her looming
retirement, she bought two cheap apartments -- on the other side of the
country. “When friends told me about a chance to buy properties in Xishuangbanna,
I thought ‘why not?”’ said Yuan Junxi, talking of the steamy, subtropical
region in Yunnan province, bordering Laos and Myanmar. “No buying limits;
cheap, easy mortgages; and maybe property prices will jump over there too.” Buyers
such as Yuan, a mother-of-one who borrowed to help fund her purchases of
280,000 yuan ($41,000) each in the city of Jinghong last month, are spreading
the risk of bubbles to ever-smaller places in China’s provinces, after a
crackdown by the government took some of the froth out of the property market
over the past 14 months.
Arizona
Governor Signs Bill To Repeal State Capital Gains Taxes On Gold & Silver - (www.zerohedge.com) "If you’re for less government, you want sound
money. The people who want big government, they don’t want sound money.
They want to deceive you and commit fraud. They want to print the money.
They want a monopoly. They want to get you conditioned, as our schools
have conditioned us, to the point where deficits don’t matter." Good news for precious metals investors in Arizona.
On Monday, Gov. Doug Ducey signed
a bill into law that eliminates states capital gains taxes on gold and silver
specie. It's tax repeal will not only benefit Arizonans who invest in gold
and silver, it will also facilitate their use as currency and undermine the
Federal Reserve’s monopoly on money. Rep. Mark Finchem (R-Tucson)
sponsored HB2014.
The legislation eliminates state capital gains taxes on income “derived from
the exchange of one kind of legal tender for another kind of legal tender.” The
bill defines legal tender as “a medium of exchange, including specie, that is
authorized by the United States Constitution or Congress for the payment of
debts, public charges, taxes and dues.” “Specie” means coins having precious
metal content.
The
great London property squeeze sees spillover into substandard housing - (www.theguardian.com) The
shortage of affordable housing has given rise to a range of problems in private
rented accommodation, from slum landlords and "beds in sheds" to
middle-class Londoners under the age of 45 who can no longer afford to live in
the city. A generation is being affected and our essential services, such as
hospitals and schools, and the majority of our small and medium-sized
businesses, are being undermined. .. Although it is notoriously difficult to
get accurate figures, a 2013 report by the Migrants' Rights Network concluded
that Ealing may have as many as 60,000 occupants in illegal structures, and
Slough borough council, which deployed planes equipped with thermal imaging
equipment in an effort to spot them, may have as many as 6,000 beds in sheds.
In 2013 a BBC investigation found estate agents renting out beds in sheds in
Willesden Green and Harrow.
All
Heck Breaks Loose in Toronto’s House Price Bubble - (www.wolfstreet.com) During
the first two weeks in May, according to preliminary data from Toronto Real
Estate Board, home listings surged 47% from the same period last year even as
sales plunged 16%. The average selling price dropped 3.3% from April – and
this, after a 33% year-over-year spike in home prices in March and a 25% surge
in April. Something is happening to Toronto’s blistering house price
bubble. Canada’s largest alternative mortgage lender, Home Capital Group, which
focuses on new immigrants and subprime borrowers turned down by the banks, is melting down after a run on
its deposits that
crushed its funding sources. The industry is worried about contagion. At the
same time, the provincial government of Ontario announced a slew of drastic measures, including a 15% tax on purchases by
non-resident foreign investors to tamp down on the housing market insanity that
left many locals unable to buy even a modest home.
NYC
Landlords Slash Retail Rents to Ward Off Vacancies - (www.jewishvoiceny.com) The
poshest parts of Bleecker Street between Seventh Avenue and Hudson Street have
fared the worst of all the Manhattan markets. Rents there tumbled 27 percent
from $513 per foot to $373 per foot since last spring, and nine vacancies
remain. On Broadway in the Flatiron, rents dropped 22 percent to $348 per foot,
a decline that served to fill most of the vacancies. Rents also fell 18 percent
in both Herald Square and the now less-pricey Times Square to $734 and $1,930
per foot, respectively. In Tony Madison Avenue between 57th and 72nd Streets
building owners lowered the asking rents by 12 percent to $1,446 per foot, down
from $1,644 last spring. Nonetheless, there are still 33 vacancies in this
area.
70%
Of Millennials Have Less Than $1,000 Saved For Buying A House - (www.zerohedge.com) A new survey has revealed that despite almost
every millennial dreaming of home ownership, nearly 70% of young American
adults have saved less than $1,000 for a down payment. One of the frequent
reasons cited for the failure of the US housing sector to rebound to its
pre-recession levels, is the lack of household formation among young American
adults and specifically the unwillingness, or inability, of Millennials, which last year overtook Baby Boomers as America's largest generation... ... to move
out of their parents' basement, or stop renting, and purchase their own home.
Now, a new study from Apartment List confirms the underlying problem: nearly
70% of young American adults, those aged 18 to 34 years old, said they have
saved less than $1,000 for a down payment. This is similar to what a
recent GoBanking Survey found last year, according to which 72% of "young
millennials"- those between 18 and 24 years old - had $1,000 in their
savings accounts and 31% have $0; a sliver (8%) have over $10,000 saved. Of the
"older millennials", those between 25 and 34, 67% had less than
$1,000 in their savings accounts, 33% have nothing at all, and 15% have over
$10,000.
China's
Rating Cut Exposes Companies Hooked on Dollar Borrowing - (www.bloomberg.com) China’s
first credit rating downgrade by Moody’s Investors Service since 1989 couldn’t
have come at a worse time for the nation’s companies, which have never been
more reliant on the overseas bond market for funding. While Chinese companies’
foreign-currency debt is only a fraction of the $9 trillion local bond
market, China Inc. is on pace for record dollar bond sales this year after
the authorities’ crackdown on financial leverage drove up borrowing costs at
home. Overseas borrowing has also been part of the government’s strategy to
encourage capital inflows in a bid to ease the depreciation pressure on the
yuan.
Warning
Signs Flashing in Korea as Investors Dump Stock ETFs - (www.bloomberg.com) Cracks
are emerging in South Korea’s stock market, which has been showing remarkable
resilience to a range of pressures, not least tension with the North. Global
investors have pulled $2.17 billion from equity exchange-traded funds focused
on South Korea this year, even as those securities have returned 12 percent on
average, according to data compiled by Bloomberg. About half the outflows are
from the Samsung Kodex 200 Securities ETF,
which aims to closely track the Kospi 200 Index. Net outflows from the fund
total $1.15 billion in 2017 even though it’s posted a 16 percent gain. That’s
the most outflows for any Asia Pacific ETF this year and more than double the
next closest fund, the data show.
Freezing
State Employees' Wages Could Save Connecticut $1.5 Billion - (www.dailycaller.com) A
tentative concessions deal from public employees unions in Connecticut
could save the state $1.5 billion over the next two years. Concessions from
public employees unions is widely viewed as a crucial step in solving the
state’s projected $2.3 billion deficit in the first year of a two-year budget.
The deficit is predicted to rise to $2.7 billion in the second year, according
to U.S. News & World Report. The potential deal would save the state
$712.6 million next year and $849.4 million the following year, totaling $1.56
billion in savings over two years, according to the Connecticut Mirror. Democratic Gov. Dannel Malloy has called for
$1.59 billion in concessions in order to solve the state’s financial mess.
Under the tentative deal, state employee wages would be frozen for two years,
retroactively starting in 2016. In the third year of the proposal, some workers
would be eligible for a $2,000 lump sum bonus, but short of a pay raise.
Used
Vehicle Trade-in Values Sink, Hit New Vehicle Sales - (www.wolfstreet.com) This
is just relentless: Wholesale prices of used vehicles up to eight years old
going through auctions across the US dropped another 1.5% in April from the
prior month. It pushed the seasonally adjusted Used Vehicle Price Index by J.D. Power Valuation Services (formerly known as NADA Used Car Guide)
down to 109.9. The 10th month in a row of declines. The index is down 7.1%
year-over-year and down over 13% from its peak in mid-2014. It’s at the lowest
level since September 2010, when prices were still spiking from the
cash-for-clunkers program which had eliminated a whole generation of often
perfectly good cars. In that sense, values are just now beginning to normalize (chart
by J.D. Power Valuation Services): According to the report, “the used market
continues to experience negative pressure from a struggling new market.”
Ford
to cut North America, Asia salaried workers by 10 percent: source - (www.reuters.com) Ford
Motor Co plans to shrink its salaried workforce in North America and Asia by
about 10 percent as it works to boost profits and its sliding stock price, a
source familiar with the plan told Reuters on Monday. A person briefed on the
plan said Ford plans to offer generous early retirement incentives to reduce
its salaried headcount by Oct. 1, but does not plan cuts to its hourly
workforce or its production. The move could put the U.S. automaker on a
collision course with President Donald Trump, who has made boosting auto
employment a top priority. Ford has about 30,000 salaried workers in the United
States. The cuts are part of a previously announced plan to slash costs by $3
billion, the person said, as U.S. new vehicles auto sales have shown signs of
decline after seven years of consecutive growth since the end of the Great
Recession.
Indian
solar power prices hit record low, undercutting fossil fuels – (www.theguardian.com) Wholesale
solar power prices have reached another record low in India, faster than
analysts predicted and further undercutting the price of fossil fuel-generated
power in the country. The tumbling price of solar energy also increases the
likelihood that India will meet -- and by its own predictions, exceed -- the
renewable energy targets it set at the Paris climate accords in December 2015. Analysts
called the 40% price drop "world historic" and said it was driven by
cheaper finance and growing investor confidence in India's pledge to
dramatically increase its renewable energy capacity. It reduces the market
price of solar tariffs well past the average charged by India's largest thermal
coal conglomerate, currently around 3.20 rupees per kWh . Wholesale price bids
for wind energy also reached a record low of 3.46 rupees in February.
Bitcoin
Surge Is Driven by People Leaving Riskier Digital Currencies, Say Execs - (www.bloomberg.com)
Bitcoin’s dramatic surge may be more than just a speculative frenzy. The recent
rally is being driven partially by enthusiasts rotating out of riskier digital
assets and into the more established cryptocurrency, according to industry
executives. "A lot of the volume into bitcoin right now is actually not
dollar or yen or euro into bitcoin, but is rather alt digital assets,"
said Peter Smith, co-founder and CEO of digital asset software platform Blockchain,
at an industry conference Tuesday that brought in 2,700
people on the first day. “People do view a lot of these newer assets as more
risky, and so when they make big gains there, they’re selling down those gains
and rotating into bitcoin." Numerous alternative cryptocurrencies, or
"altcoins" such as ripple, have emerged since
bitcoin broke into public consciousness in 2013. Companies can sell new tokens
through initial coin offerings, or ICOs. While the cost of one bitcoin has
skyrocketed to more than $2,000 from just 8 cents in 2010, you can buy one litecoin for about $30.
Noble
Group Halted After 32% Plunge as S&P Sees Default Risk - (www.bloomberg.com) Noble Group Ltd.’s crisis deepened after S&P Global Ratings
flagged a risk of default for the commodity trader within a year, triggering a
rout in the company’s shares before they were suspended in Singapore ahead of a
company statement. The 2020 bonds fell to a record low. “Noble is
fighting for its life now,” said Owen Gallimore, head of credit strategy at
Australia & New Zealand Banking Group Ltd., who’s been covering Noble Group
since 2008 and has been underweight on the bonds since 2015. “We’re not sure
how long it can sustain without a white knight.”
Catalonia
Threatens Spain with “Financial Bloodbath” - (www.wolfstreet.com) On
Monday El Pais published leaked
excerpts from what it claims to be the Catalonian regional government’s road
map to independence. The secret document includes a plan for the region to unilaterally
break away from Spain should its citizens be prevented from holding a
referendum on independence in the fall. It provoked a fierce backlash from
Madrid. “This proposal is an unacceptable attempt to blackmail the state,”
Spain’s Prime Minister Mariano Rajoy said in a hastily convened press
conference. Spain’s defense minister María Dolores de Cospedal likened the plot
to a coup d’état. In the meantime, Madrid continues to refuse to even entertain
the idea of allowing a referendum on Catalan independence, despite the fact
that in just about every survey of the last few years 80% of Catalans,
including many unionists, have requested one.
Bitcoin
Explodes Above $2400 After China Downgrade, Scaling Agreement Reached - (www.zerohedge.com)
Following comments from DoubleLine's Jeff Gundlach tieing the surge in virtual
currencies to the demise of China (right before that nation is
downgraded), Bitcoin surged overnight, breaking above $2400 for the first time. It
is now up over 150% year-to-date. Bitcoin is up fopr the 26th day in the last
29 sessions, doubling in price in that period... Wednesday's gain comes after
a bitcoin scaling agreement was reached by the Digital Currency
Group, representing 56 companies in 21 countries, at the Consensus 2017
conference in New York, which reduced some of the fears surrounding the
so-called 'hard fork' in Bitcoin's code. The agreement states: "We
agree to immediately support the following parallel upgrades to the bitcoin
protocol, which will be deployed simultaneously and based on the original Segwit2Mb proposal:
Interest-only
loans could be 'Australia's sub-prime' - (www.afr.com) High-risk
mortgage loans to young families, professionals and other over-extended
borrowers amounting to more than six times household
incomes could wipe out 20 per cent of the major banks' equity base,
institutional investment fund JCP Investment Partners has warned. In a
proprietary study of the nation's record high-and-growing household debt
mountain, the Melbourne-based fund said Irish-style housing losses for the
bigger-than-recognised pool of riskier borrowers could wipe out half of the
banks' equity capital. Interest-only loans, said JCP -- which is one of three
Australian equities managers appointed by the Future Fund -- could be
"Australia's sub-prime".
Brazil
Selloff Resumes as Temer's Graft Defense Falls Flat - (www.bloomberg.com) Brazilian
assets resumed a selloff Monday as investors fled what had been one of the most
popular trades in emerging markets. The real and local stocks were among the
world’s worst performers as President Michel Temer’s support deteriorated further over the weekend, days after an
audio recording emerged in which he appeared to endorse illegal bribes to a
disgraced lawmaker. The losses have been magnified because so many global
investors had piled into Brazilian assets on bets that Temer would push through
measures to shore up the country’s finances.
Subprime
Liar Loans Dog Auto-Loan-Backed Securities - (www.wolfstreet.com) Santander,
top subprime auto lender, verified income on only 8% of loans: Moody’s. “Liar
loans” were a factor in the housing bust during the Financial Crisis that
brought down the banks. Bank regulators now require lenders to verify income
and employment of mortgage applicants and take other steps to make sure buyers
can afford the mortgage payment. But in auto loans, no such requirement exists.
So here we go again… Moody’s Investors Service analyzed $1 billion of Asset
Backed Securities (ABS) backed by subprime auto loans that Santander Consumer
USA Holdings, one of the largest subprime auto lenders, had issued. “Subprime”
means the borrower has a credit score of 620 or below. Turns out, Santander had
verified the income of the borrowers on only 8% of the subprime loans.
A
Quarter Of American Adults Can't Pay All Their Monthly Bills; 44% Have Less
Than $400 In Cash - (www.zerohedge.com) Not
surprisingly, the highest percentage, or 92%, of those who responded they were
"living comfortably" was among the group with more than $100,000 in
family income. For Americans making less than $40,000 the breakdown was almost
evenly split with 49% saying they are "just getting by." According to
the same study, 28% of respondents said that their income in the last 12 months
was less than $25,000, and 40% report that their income was less than the key
$40,000 cutoff, which suggests that roughly 4 in 10 Americans are "finding
it difficult to get by." ... Nearly eight years into an economic recovery,
nearly half of Americans didn't have enough cash available to cover a $400
emergency. Specifically, the survey found that, in line with what the Fed had
disclosed in previous years, 44% of respondents said they wouldn't be able to
cover an unexpected $400 expense like a car repair or medical bill, or would
have to borrow money or sell something to meet it.
Car
loans, low rates, second mortgages: all the ingredients for a new credit crunch - (www.theguardian.com) A
credit crunch is brewing and when it happens, the UK is going to get hurt. That
is the message emerging from senior executives in the financial services
industry, who do not think Britain has changed that much since the 2008 credit
disaster and the devastating crash that followed. Three developments lie at the
heart of this disturbing analysis: spectacular growth in the sale of second
mortgages, car loans and credit cards. ... Officials at the Bank have a growing
list of concerns. Not only is there the second mortgage problem and the number
of car loans: figures show consumer spending on unsecured credit has also
rocketed in the last year. In March alone, the amount UK consumers owed on
loans and cards grew by £1.9bn, the highest figure in 11 years.
Commodities
Bust Hits Farm Lenders, Delinquencies Surge 225% - (www.wolfstreet.com) When
it comes to agricultural debt, the numbers aren’t huge enough to take down the
global financial system. But this shows how much pain the commodities rout is
producing in the farm belt just when the farmland asset bubble that took three
decades to create is deflating, and what specialized lenders and the
agricultural enterprises they serve – some of them quite large – are currently
struggling with in terms of delinquencies. This is what delinquencies on loans
for agricultural production – not including loans for farmland, which we’ll get
to in a moment – look like: From Q4 2014 to Q1 2017, delinquencies have soared
by 225% to $1.4 billion, according to the Board of Governors of the Federal
Reserve, which just released its report on delinquencies and charge-offs at all
banks. This is the highest amount since Q1 2011, as delinquencies were falling
after the Financial Crisis. That amount was first breached in Q4 2009.
American
Small Business Owner Rages At Politicians: "Quit Your Job And Try The Real
World" - (www.zerohedge.com) This
morning I read a stinging open letter written by a small business owner in the
Land of the Free named Don Chernoff. Chernoff imports and sells luggage,
and he pulled no punches in voicing his disgust for the phony support and
failed policies that constantly make his life more difficult. I’ve edited his
letter for length below; the full version is available here. You all love to talk about how much you
support small business; the reality is the opposite. The economy is
changing rapidly and is vastly different than just a few years ago. Many of the
factory jobs in this country have gone and will not return. Computer
technology and automation will soon eliminate thousands more jobs (think truck
drivers, taxi drivers, office workers, etc…). Because there will be fewer
middle-class jobs, many people who never considered working for themselves will
be forced to become sole proprietors or open a small business. It is therefore
critically important that you make it easier for these people to do so.
