- All Quiet On The Eurasian Front
Submitted by Pepe Escobar via SputnikNews.com,
So now Iran is back to being demonized by the West as “provocative” and “destabilizing”. How come? Wasn’t the nuclear deal supposed to have brought Iran back to the Western-concocted “concert of nations”?
Iran will once again be discussed at the UN Security Council. The reason: recent ballistic missile tests, which according to the West, are “capable of delivering nuclear weapons” – an alleged violation of the 2015 UN Security Council Resolution 2231.
This is bogus. Tehran did test-launch ballistic missiles in early March. Supreme Leader Ayatollah Khamenei stressed missiles were key to Iran's future defense. Ballistic missiles have nothing to do with Iran’s nuclear program; and yet Washington kept bringing it to the table during the manufactured nuclear crisis.
Russia knows it, of course. The head of the Russian Foreign Ministry’s Department for Non-Proliferation and Arms Control, Mikhail Ulyanov, once again had to go on the record saying the ballistic missile tests did not breach the UNSC resolution.
What else is new? Nothing. Washington will keep pressure on Tehran for a fundamental reason; the US did not get the natural gas commitments they were expecting after the nuclear deal. Iran privileges selling natural gas to Asian – and European – customers. Eurasian integration is the key.
South US Sea, anyone?
Pressure also runs unabated over China related to the South China Sea. Beijing is not exactly worried. As much as Washington and Tokyo ratchet it up, Beijing increases its footprint in the Paracels and the Spratlys. The meat of the matter though is further south.
For China, the key is non-stop smooth trade and energy flows through a maritime highway that happens to contain crucial choke points. These choke points – most of all the Malacca Strait – are supervised by Indonesia, Malaysia and Singapore.
There’s absolutely no incentive for Indonesia to confront China. And Beijing for its part characterizes Jakarta as a peacemaking power. What matters for Jakarta is actually to boost maritime trade ties with Beijing. Same for Kuala Lumpur – even if Malaysia and China do have their not exactly apocalyptic South China Sea quarrels.
The (rhetorical) pattern from Washington spells out the usual, well, torrent of words. But what is the Empire of Chaos to do? A naval takeover of the South China Sea? Order Indonesia and Malaysia not to further improve their own – mutually beneficial — economic ties with Beijing?
Let’s keep rotating
Then there’s NATO. Many a key player across the Beltway is absolutely fed up with turbulent “NATO ally” Sultan Erdogan. Yet the impression is being created – by the Masters of the Universe lording over the lame duck Obama administration – that they are turning to Turkey to reinforce an already anti-Russian NATO, with the whole process covered up in “terrorist” rhetoric. The fact that Ankara is for all practical purposes blackmailing the EU is dismissed as irrelevant. This is a classic misdirection policy.
Yet it’s still unclear how “NATO ally” Turkey will keep acting in Syria, considering that Washington and Moscow may – and the operative word is “may” — have struck a grand bargain.
This does not mean that the pressure over Russia will be relaxed any time soon. The Pentagon announced it will be spending $3.4 billion on deploying hardware and hundreds of “rotating” US troops to Eastern Europe to counter – what else – “Russian aggression”. This after the Pentagon announced it will quadruple the funds for the so-called European Reassurance Initiative in fiscal year 2017, pending Congress approval, which is all but inevitable.
Moscow is not exactly worried. The US brigade will have about 4,500 troops. Then there will be a few Bradley fighting vehicles, Humvees,
Paladin self-propelled howitzers and perhaps, by 2017, a Stryker brigade. No air force. Perhaps the odd Warthog. This is basically window dressing to appease hysterical Baltic vassals.Now let’s sing Under Pressure
Pressure over Iran. Pressure over China. Pressure over Russia – which included the (failed) plot to destroy the Russian economy using the oil production of the GCC petrodollar gang even if that would mean the destruction of the US oil industry, against US national interests.
Syria has graphically demonstrated Russian military capabilities to the real rulers of the Empire of Chaos – and that has left them dazed and confused. Up to the Syrian campaign, the whole focus was on China, especially Chinese missiles that could hit US guidance satellites for ICBMs and cruise missiles, as well as Chinese ability to shoot down an incoming foe traveling at a speed faster than an ICBM. A silent Chinese submarine surfacing undetected next to American aircraft carriers compounded the shock.
Now the Masters have realized the Pentagon is even more incapacitated compared to Russia. So Russia, and not China, is now the top “existential threat”.
Certainly if Poland, Hungary, Bulgaria, Turkey, not to mention France and the UK had any idea how far behind the Russians the US really is, then NATO might collapse for good, and the entire “West” would eventually shift away from Empire of Chaos hegemony. And if that was not dramatic enough, reality TV entertainer Donald Trump is emitting signs that the US should disassociate itself from NATO – imagine it dissolving under Trump rule, in parallel to the implosion/disintegration of the EU.
It may be enlightening to go back to what happened nine years ago, at the Munich security conference. Vladimir Putin already could see it coming, if not in detail at least conceptually. The inevitable geo-economic expansion of China via the One Belt, One Road (OBOR), the official denomination of the New Silk Roads – which are bound to unify Eurasia. The steady progress of the Shanghai Cooperation Organization (SCO), evolving from a sort of Asian economic/trade community towards a sort of Asian NATO as well. The success of the “4+1” coalition in Syria should be read as a precursor to the SCO’s increased international role.
What’s left for the Empire of Chaos in the Eurasian front is the wishful thinking of attempting to encircle both Russia and China, while both keep actually expanding all across the Eurasian Heartland, shedding US dollars and buying gold, signing a flurry of contracts in yuan and selling oil and gas to all and sundry. Under Pressure? Well, call it a song by Queen and David Bowie; It's the terror of knowing/What this world is about/Watching some good friends/Screaming, "Let me out!"
- Shots Fired: Wikileaks Accuses Panama Papers' Leaker Of Being "Soros-Funded, Soft-Power Tax Dodge"
Earlier today, for the first time we got a glimpse into some of the American names allegedly contained in the “Panama Papers”, largest ever leak. “Some”, not all, and “allegedly” because as we said yesterday, “one can’t help but wonder: why not do a Wikileaks type data dump, one which reveals if not all the 2.6 terabytes of data due to security concerns, then at least the identities of these 441 US-based clients. After all, with the rest of the world has already been extensively shamed, it’s only fair to open US books as well.”
The exact same question appeared in an interview conducted between Wired magazine and the director of the organization that released the Panama Papers, the International Consortium of Investigative Journalists, or ICIJ, Gerard Ryle.
This is what Ryle said:
Ryle says that the media organizations have no plans to release the full dataset, WikiLeaks-style, which he argues would expose the sensitive information of innocent private individuals along with the public figures on which the group’s reporting has focused. “We’re not WikiLeaks. We’re trying to show that journalism can be done responsibly,” Ryle says. He says he advised the reporters from all the participating media outlets to “go crazy, but tell us what’s in the public interest for your country.”
Question aside about who it is that gets to decide which “innocent private individuals” are to be left alone, Wikileaks clearly did not like being characterized as conducting “irresponsible” journalism – and to the contrary, many in the public arena have called for another massive, distributed effort to get to the bottom of a 2.4TB treasure trove of data which a handful of journalists will simply be unable to dig through – and moments ago, on Twitter, accused the ICIJ of being a “Washington DC based Ford, Soros funded soft-power tax-dodge” which “has a WikiLeaks problem.”
Washington DC based Ford, Soros funded soft-power tax-dodge “ICIJ” has a WikiLeaks problem #PanamaPapers https://t.co/xEXlmGg0fG
— WikiLeaks (@wikileaks) April 5, 2016
Moments later, in a subsequent tweet it added that the “Putin attack was produced by OCCRP which targets Russia & former USSR and was funded by USAID & Soros.“
#PanamaPapers Putin attack was produced by OCCRP which targets Russia & former USSR and was funded by USAID & Soros. pic.twitter.com/tgeKfLuROn
— WikiLeaks (@wikileaks) April 5, 2016
#PanamaPapers: WikiLeaks’ Kristinn Hrafnsson calls for data leak to be released in full https://t.co/5FAOtaO2Ix
— WikiLeaks (@wikileaks) April 5, 2016
Should we release all 11 million #PanamaPapers so everyone can search through them like our other publications?
— WikiLeaks (@wikileaks) April 3, 2016
And so, a new contest is born: one between the “old” source of mega leaks, and the new one. We wonder if and when Edward Snowden and/or Glenn Greenwald will also chime in.
But we are far more interested if now, that there appears to be a war brewing between Wikileaks and ICIJ, who what “information” will be released next, and whether whatever comes out will put the entire Panama Papers project in a different perspective, one which, as even Bloomberg has hinted, may have been to benefit the last remaining global tax haven around, the United States itself, as well as the most notorious provider of “tax haven” services in in said country: Rothschild.
- The 50 Most Murderous Cities In The World
Brazil has been in crisis for some time now.
The country’s economy shrunk -3.8% last year, and its President, Dilma Rousseff, is holding on for dear life. Once chairman of Petrobras, the state-run oil giant currently engulfed in a colossal political scandal, she is now being threatened with impeachment just 15 months into her second four-year yerm.
Her approval remains at an all-time low of just 11%. The currency has halved in value since 2011, and the country’s credit has been downgraded to junk status.
However, as VisualCapitalist's Jeff Desjardins explains, it’s not only the economic and political spheres that are troubling in Brazil. The country also has the dubious distinction of being the world center for homicides. Today’s chart, from The Economist, shows the 50 most murderous cities in the world – and Brazil is home to a mind-boggling 32 of them.
The good news is that key cities, such as Rio de Janeiro, are on the lower side of the spectrum. That said, the host of the 2016 Olympic Games is barely safer than Compton, with a murder rate of 18.6 per 100,000 people each year.
The bad news is that Brazil now has more than 10% of all the world’s murders. While the murder rate has fallen in the largest cities around the country, it has picked up in many of the smaller ones. Cities such as Fortaleza or Natal are among the most violent in the world, with rates above 60 murders per 100,000.
Courtesy of: Visual CapitalistOther Notes on the Study
The United States made the list with two of the 50 most violent cities: Baltimore and St. Louis.
Latin America was home to 44 of 50 of the cities. The only cities not in Latin America: Baltimore, St. Louis, Kingston (Jamaica), and Cape Town (South Africa).
Venezuela was omitted from these rankings because of highly inaccurate data, but Caracas and other cities in the country are known to be some of the most dangerous cities in the world.
- The ECB’s Monetary Policy Is Now Creating a Rush Into Derivatives
Submitted by Mike Krieger of Libertyblitzkrieg
The ECB’s Monetary Policy Is Now Creating a Rush Into Derivatives
One of the most catastrophic things central banks have done in the post financial crisis period is destroy financial markets. Investors are no longer investors, they’re merely helpless rats running around the lunatic central planning maze desperately attempting to survive by front running the latest round of central bank purchases.
While actual macroeconomic and corporate fundamentals do still exert influence on financial asset prices from time to time, the far bigger driver of performance over the past several years is central bank policy. To understand just how destructive this is, recall what we learned in last month’s post, Japan’s Bond Market is One Gigantic Joke – “No One Judges Corporate Credit Risks Seriously Anymore”:
TOKYO — Fixed-income investors in Japan are increasingly assessing bonds based on their likelihood of being bought by the central bank, rather than the creditworthiness of the issuers.
Still, the fund manager desperately wanted to get hold of the bond because he bets that debt issued by Mitsui and other trading houses will be picked up by the Bank of Japan in its bond purchase program.Even if an investor buys a bond with a subzero yield, the investor could sell it to the central bank for a higher price, the thinking goes.
“It goes to show that no one judges corporate credit risks seriously anymore,” said Katsuyuki Tokushima at the NLI Research Institute.
As insane as it may be, investors now acknowledge that fundamental analysis is merely an afterthought when compared to the far bigger influence of central bank buying. While this destroys free markets, fuels malinvestment bubbles and rewards cronyism, it doesn’t stop central planners — it merely emboldens them. The latest example of such hubris was on full display last month when the ECB’s Mario Draghi increased QE by a third. Here’s some of what’s happened since.
From Bloomberg:
A rush for credit exposure in Europe is manifesting in the swaps market because investors are struggling to find enough bonds to satisfy their demand.
The European Central Bank’s plan to purchase corporate bonds is fueling demand for securities in anticipation of a rally when the purchases start. Investment-grade bond funds in euros had inflows each week since the ECB said on March 10 that it would expand measures to stimulate the economy. That’s already suppressed yields and made it harder to obtain the notes, making credit derivatives more attractive.
Wagers on European credit-default swap indexes have more than doubled since the ECB’s announcement. Investors had sold a net $25 billion of protection as of March 25, near the highest since at least December 2013 and up from $11 billion as of March 4, according to Bank of America’s analysis of data from the Depository Trust & Clearing Corp.
“There’s a dearth of bonds investors can get their hands on,” said Mitch Reznick, the London-based co-head of credit at Hermes Investment Management, which oversees $33 billion. “In this liquidity vacuum, managers can use credit-default swaps as a proxy for the bonds that they can’t obtain in order to get longer in credit.”
This behavior is a lot of things, but “investing” is not one of them.
“The quickest way to go long credit is by selling contracts tied to indexes in large size,” said Roman Gaiser, who oversees 3.5 billion euros ($4 billion) of assets as the Geneva-based head of high yield at Pictet Asset Management SA. “That’s easier than buying lots of individual bonds. It’s a quick way of getting exposure to credit.”
Gaiser said he increased a long position in European credit-default swap indexes after the ECB announcement.
Though the ECB hasn’t said which bonds it plans to buy, some investors are holding onto securities they expect to be on its list, according to Rik Den Hartog, a portfolio manager at Kempen Capital Management in Amsterdam. Kempen, which oversees about $5.5 billion of credit, sold bonds and derivatives on Italian utility Enel SpA last month because the default swaps paid almost three times the spread on the notes, Den Hartog said.
So “investing” has morphed into simply front-running the decisions of unelected central planners. That’s all there is to it, and while that’s disturbing enough, there may be another unappreciated angle to this mess. When QE was rolled out by Bernanke, many of us assumed that printing money to buy bonds would be immediately devastating for the currency in question. The current state of affairs makes me question whether this assumption still works going forward.
If investors are merely looking to front run central banks, you could make an argument that QE can strengthen a currency, at least in the short run, as global fund managers move into the QE producing nation’s currency in order to front run central bank purchases.
So in the short-term, will further QE weaken a nation’s currency or strengthen it? It’s an important question to ask in this increasingly twisted world of global finance.
- Wisconsin Primary: Cruz, Sanders Win – Live Webcast
Live (if voice-overed) feed from CNN:
It’s official: Ted Cruz and Bernie Sanders win:
#Breaking: CNN projects Bernie Sanders will win the Democratic #WIPrimary https://t.co/DkPyle0Wrv #CNNElection pic.twitter.com/V25kMzaRm0
— CNN Politics (@CNNPolitics) April 6, 2016
#Breaking: CNN projects Ted Cruz will win the Republican #WIPrimary https://t.co/DkPyle0Wrv pic.twitter.com/UYXkIfgRSj
— CNN Politics (@CNNPolitics) April 6, 2016
The early but decisive results are out, and Cruz and Sanders have a commanding lead (from CNN):
First exit poll results out:
That’s that. pic.twitter.com/xTTK6nqQYO
— Philip Bump (@pbump) April 6, 2016
* * *
Exit Poll questions:
Early Fox News exit polls for #Moderates in #Wisconsin: pic.twitter.com/CbBgWYv3TJ
— FOX Business (@FoxBusiness) April 5, 2016
Some samples of exit polling from Politico:
A majority of voters casting their ballots in the Wisconsin Republican primary on Tuesday said the party’s nominee should be the candidate who receives the most delegates, regardless of whether that person clinches the 1,237 majority outright, according to an NBC News exit poll.
While 56 percent said the nomination should go to the candidate with the most votes, 42 percent said the delegates should be able to choose anyone they prefer at July’s Republican National Convention in Cleveland. More than eight-in-ten of those who said they supported Donald Trump (83 percent) said they preferred the nomination go to the person with the most votes, while just 42 percent of those backing another candidate said the same.
* * *
Preview
When the 2016 race kicked kicked off last year, few pundits would have predicted Wisconsin’s April primary might be a game changer on both sides of the aisle. But the Badger state, which heads to the polls today, could be key in determining if the Republicans head to a contested convention and if Bernie Sanders retains momentum after five straight victories.
Polls close at 9 p.m. EDT. Results could be known shortly after the polls close.
Before we show what’s at stake, here is a reminder of what the current delegate breakdown looks like.
First the Democrats:
And the GOP:
Ahead of tonight’s primary, Trump has 737 of the 1,237 delegates needed to sew up the Republican nomination, and Mr Cruz 475. Clinton has 1,243 delegates to Mr Sanders’ 980, with 2,383 required for the Democratic nomination.
A Wisconsin victory for Cruz, who is leading in the polls, would raise the odds of the Republican nomination being wrested from Mr Trump in a contested convention, which could tear the party apart. Trump would need to elevate his game and reap 57% of remaining delegates to win outright before July’s party conference, according to the Associated Press.
The Real Clear Politics polling average put Cruz ahead of Trump, 35 percent to 32 percent, while Kasich trailed wilth 23 percent. On the Democratic side, Clinton led in the poll average, 48 percent to 47 percent.
Trump unleashed his wife Melania in Milwaukee on Monday as he sought to shore up his support among female voters. “No matter who you are, man or a woman, he treats everyone equal,” said 45-year-old Mrs Trump in a rare speech.
Among the Democrats, former Secretary of State Mrs Clinton is saddled with persistent questions about her honesty and trustworthiness.
Grassroots enthusiasm for Mr Sanders remains high, but the self-proclaimed democratic socialist needs to win at least 60% of all remaining delegates.
Both Clinton and Trump look likely to perform better in New York’s upcoming primary and five northeastern states that vote on 26 April. Wisconsin is the first of several midwestern and northeastern states voting in April. New York holds its primary on April 19. Connecticut, Delaware, Maryland, Pennsylvania and Rhode Island hold their primaries on April 26.
Cruz and Mr Trump are calling for Ohio Governor John Kasich, the only other Republican still hanging on in the race, to drop out. But he has refused.
Raising the stake for Trump is that according to a just released Reuters/Ipsos poll Cruz has pulled into a statistical dead heat with front-runner Donald Trump. Cruz received 35.2 percent of support to Trump’s 39.5 percent, the poll of 568 Republicans taken April 1-5 found. The numbers put the two within the poll’s 4.8 percentage-point credibility interval, a measure of accuracy. Cruz and Trump were also briefly in a dead heat on March 28.
Trump has led almost continually in national Reuters/Ipsos polling since last July. Ohio Governor John Kasich, the only other Republican still in the race for the party’s nomination, placed third in Tuesday’s Reuters/Ipsos poll, with 18.7 percent.
* * *
Here’s a rundown of everything at stake today:
GOP
State voting: Wisconsin
Delegates up for grabs: 42
Delegate Allocation explained: Of the 42 delegates, 24 are in Congressional districts, (3 in each of the 8 districts) and 18 are at-large delegates. The at-large delegates are winner-take-all and based on the statewide vote. Whoever wins the statewide vote gets all 18 delegates. The Congressional districts are winner-take-all based on district. So, for example, if Ted Cruz wins one Congressional district, he will get all 3 of the delegates there. If he wins all 8 districts, he will get all 24 delegates.
Why it matters: The setup makes it possible for the winner to sweep all 42 delegates, and makes it even more likely they will amass a majority. This presents an ideal opportunity for Cruz and John Kasich, who are trying to stop Donald Trump from clinching the 1,237 delegates needed for the nomination. The latest Marquette University Law School poll showed Cruz with 40-30 lead over Trump. Trump leads Cruz by 262 delegates, but Trump still needs to win 57 percent of the remaining delegates to get to 1,237. If Cruz wins big in Wisconsin, he makes Trump’s path to that number more complicated. And if John Kasich manages to win one or 2 congressional districts, that would set Trump back even further.
However, Trump does have one advantage: Wisconsin is an open primary, where he tends to perform better than in caucuses and closed primaries.
DEMOCRATS
State voting: Wisconsin
Delegates up for grabs: 86 pledged, and 10 superdelegates, former and current Democratic leaders and elected officials, who can select the candidate of their choosing, wherever they want and whenever they want, and can switch at any time.
Delegate Allocation explained: As is standard for the Democrats, both candidates have to get a minimum of 15 percent of the vote to amass any delegates. Both Clinton and Sanders are virtually certain to hit that threshold.
Why it matters: Sanders has proven he can play in the Midwest, beating Clinton in Michigan and coming in close behind her in Missouri and Illinois. According to a recent Marquette University Law School poll, he has a four point lead over her. Clinton leads Sanders by 263 pledged delegates, and her lead widens to 701 delegates when incorporating the superdelegates who have committed to her. Even if Clinton loses in Wisconsin, Sanders is unlikely to make a dent in that delegate lead; If the race is as close as the polls are forecasting, the Vermont senator is unlikely to gain many more delegates. And while Clinton needs to win 42 percent of the remaining pledged delegates, Sanders needs to win 57 percent. When factoring in superdelegates, Clinton need to win 36 percent and Sanders needs to win 73 percent.
But while math may be on her side, a loss in Wisconsin would mean Clinton heads into her adopted home state of New York having lost six states in two weeks — a fact Sanders is well aware of.
“I don’t want to get Hillary Clinton any more nervous than she already is,” he said at a campaign stop Monday in Wisconsin. “So don’t tell her this, but we win here, we win in New York State, we are on our way to the White House.”
- The Recovery-less Recovery
It appears that Ed Yardeni's market-driven global growth barometer is peddling more fiction about the so-called 'recovery'…
Can you see where perception diverged from reality? (and why…)
Source: Yardeni.com
Just remember, the market is NOT the economy (unless it is going up).
- BOJ's Kuroda Threatens More Easing, Stocks Tank, Absurdity Reigns
Submitted by Wolf Richter via WolfStreet.com,
“Negative interest expense” or some such absurdity yet to be coined.
“For now, the effect of negative interest rates is very strong, so we’d like to steadily proceed with this policy,” Bank of Japan Governor Haruhiko Kuroda told parliament today, to reassure the nervous politicians that the economy was on the right track under his fearless and wise leadership.
Alas, the BOJ’s “tankan” survey, released on Friday, showed that confidence plunged among manufacturers to the lowest point since 2013, while inflation expectations weakened further. The economy in the January-March quarter is likely to shrink again, after having already shrunk in the prior quarter, to form another technical recession. Despite government and BOJ exhortations, wage increases remain elusive, now an imperceptibly small 0.4% from a year ago.
But just in case the BOJ’s scorched-earth policies of negative interest rates and asset purchases – mostly Japanese Government Bonds, Japanese REITs, and equity ETFs – haven’t accomplished the desired miracles yet, the BOJ would be willing to accelerate the same failed policies, such as pushing interest rates deeper into the negative, and try some new things too, such as diving into riskier assets, he said.
But it won’t be predictable. The BOJ could mix and match the next policy steps, depending on the economy, prices, and “market moves, particularly those in Japan,” he said. At least, he’s admitting that the BOJ is slave to the financial markets.
“We won’t necessarily choose a rate cut just because it’s easier to do so,” he said. It could be anything.
Turns out, Japan Inc., which has been coddled and favored by Abenomics even more so than by prior administrations, is not investing enough in Japan despite tax incentives for investments, but instead is focusing capital investments on its projects in other countries. Capital expenditures in Japan, which would boost the economy, are lagging.
So the BOJ has kicked off yet another way to coddle and favor Japan Inc. with a special incentive: another stock market pump-up scheme that is now coming to fruition.
Back in December it promised to buy shares of ETFs that would have to be created for just this purpose. They would incorporate shares of companies that follow the BOJ’s dictum: boost wages, employment, and capital spending.
So Daiwa Asset Management in partnership with index provider MSCI will develop a special stock index for these anointed companies. Nomura Asset Management and other firms in the Nomura group plan to put their own index together. It’s up to them to decide which companies are doing what the BOJ wants them to do to the extent that they deserve being included. And the special ETFs will track those indices.
Nomura Asset Management and Daiwa Asset Management have now completed setting up their ETFs that fit this mold. On April 1, both asset managers filed applications with the Tokyo Stock Exchange for listing these ETFs. They’re expected to make their debut on the TSE in mid-May. Nikko Asset Management, DIAM, and Mitsubishi UFJ Kokusai Asset Management are also working on ETFs to that effect.
Once they start trading, the BOJ will buy shares of these newfangled ETFs at a rate of ¥300 billion ($2.7 billion) a year with the explicit goal of driving up the stock prices of the companies in the ETF. If it works out that way, which is doubtful since practically nothing in the Japanese stock market has worked the way the BOJ had planned, it would be the reward for those companies that asset managers deem obedient to the BOJ’s wishes.
So just how helpful is all this?
Stocks tanked, again. There’s a reason why the Japanese stock market has become a hedge-fund hotel, and why Japanese retail investors try to stay away from it. The Nikkei dropped 2.4% today to 15,733. It has plunged 24.6% from its recent peak in June and is sinking deeper into its bear-market mire.
One thing is clear: While the BOJ has failed in propping up stocks, it has totally succeeded in suffocating the once vast Japanese Government Bond market by buying up every JGB that isn’t nailed down. It’s a marvel, actually. The BOJ’s primary dealers buy the JGBs when the government issues them at a negative yield, knowing that they will soon sell them to the BOJ at an even greater negative yield and thus make a guaranteed profit on the difference.
The 10-year JGB yield is -0.07%. Pension funds, insurance companies, banks, and money managers have begun to unload their JGB holdings. Only the BOJ is buying.
It seems that the BOJ will not stop until it owns most of the JGBs out there. It’s paying the government the negative yield, actually paying the government to borrow money to fund its gargantuan deficits. If this farce continues long enough and more of the older JGBs are rolled over, interest expense in the Japanese budget will turn to income, called “negative interest expense” or some such absurdity yet to be coined. Someday this is going to end in tears. But not tomorrow. Kuroda knows this, hoping that the “after tomorrow” won’t be under his watch. After me the deluge!
All 11 Japanese asset managers that offer money market funds are planning to scuttle them after returning their remaining assets to investors. This marks another big accomplishment of negative interest rates. And the bitter irony? Read… NIRP Kills Off All Money Market Funds in Japan
- Who Are The Best Paid Bank CEO: The One Chart Summary
If you ever wondered what Jamie Dimon meant by “That’s why I’m richer than you”, this summary from the Financial Times explains.
- As Pfizer-Allergan Sinks, These "Inversion" Deals Could Be Next
While the surge in Q1 market volatility has had a dramatic impact on asset prices, and led to some unprecedented central bank interventions to stabilize markets, one product that has seen a dramatic hit and has yet to rebound, is M&A.
According to BofA, North American M&A volumes declined again in March, falling to $107bn from $140bn in February, $157bn in January and the recent peak of $410bn in November of last year.
The implication of the above is that investment banking revenues from M&A advisory work, which had been steadily rising over the past two years, are about to see a sharp decline. And, after a year which saw a record $5 trillion in global M&A, this will be a bitter pill to swallow for the banking community. The top M&A deals of 2015 are shown below.
However, that may be just the beginning of bankers’ headaches.
It is no secret that over the past several years, one of the primary drivers behind M&A activity was tax inversions, which however as yesterday’s striking announcement by the US Treasury made clear, are now effectively over, and with them goes much of the impetus for companies to merge.
And while the Pfizer-Allergan $160 billion merger may be the most notable casualty of the Treasury’s decree, there are various other deals working on corporate inversion deals or who have carried out inversions in the past. They are shown in the list below, courtesy of Bloomberg:
Progressive Waste-Waste Connections
Texas-based Waste Connections Inc. agreed to buy fellow garbage-hauling company Progressive Waste Solutions Ltd. in January, and announced plans to move its tax domicile to Canada. The new company would have an effective tax rate of about 27 percent, down from the 40 percent rate that Waste Connections pays now, it said in a statement at the time.
The proposed regulations would have an impact of less than 3 percent of the new company’s adjusted free cash flow, which is expected to be more than $625 million, the companies said in a joint statement Tuesday. “The two companies remain committed to the strategic merger.”
Waste Connections shares fell as much as 7.2 percent. Progressive Waste dropped 9.3 percent.
Terex-Konecranes
Terex Corp., a U.S. crane and construction-machinery maker, agreed to combine with Finnish competitor Konecranes Oyj last year to create a group with a combined $10 billion in sales, incorporated in Finland.
While the companies described the transaction as a merger of equals, Terex stockholders would own 60 percent of the combined business.
Since then, China’s Zoomlion Heavy Industry Science & Technology Co. has made a counteroffer for Terex. Still, with the U.S. closely scrutinizing deals that put American technology into Chinese hands, that deal would have its own regulatory hurdles.
Terex shares closed 2.3 percent down in New York.Johnson Controls-Tyco
Auto-parts maker Johnson Controls Inc.’s planned merger with Ireland-based Tyco International Plc was targeted by Hillary Clinton’s campaign ads. Clinton called the plan to move Johnson Controls’s address to tax-friendly Cork “an outrage.”
Tyco itself got a foreign tax address in the late 1990s through an inversion, as part of a takeover of the security company ADT, which was incorporated in Bermuda. Tax inversions seem to be one of the few things the presidential candidates can agree on, with Bernie Sanders, Donald Trump and Clinton all targeting the practice in their campaigns.
Tyco shares declined 3 percent in New York. Johnson Controls fell 2.2 percent.
Mylan-Meda
Drugmaker Mylan NV said Tuesday it’s “comfortable moving forward” with a $7.2 billion deal to buy Sweden’s Meda AB, in response to concerns about the impact of Treasury rules.
Mylan moved its headquarters from Pittsburgh to the Netherlands in 2015 after buying Abbott Laboratories’ generic drug business in overseas markets like Europe. In February this year, the company agreed to buy Meda.
Mylan shares fell 2.8 percent in Nasdaq trading while Meda declined 1 percent in Stockholm.
IHS-Markit
IHS Inc., which provides data analysis, agreed to buy London-based Markit Ltd. for about $5.5 billion last month with plans to relocate to the U.K. The Englewood, Colorado-based company and Markit said in a regulatory filing Tuesday that they don’t expect the merger to be subject to the new rules.
“Based on our preliminary review at this time, we also believe that the other U.S. Treasury rule changes will not impact the combined company’s adjusted effective tax rate guidance of a low to mid-twenties percentage range.”
IHS shares declined 2.6 percent in New York Stock Exchange trading while Markit declined 2.6 percent.
* * *
It remains to be seen how much of a hit on the future M&A backlog the Treasury’s announcement will have, but even if banks suffer a drop in revenue, there is one silver lining: tens if not hundreds of thousands of workers who would have been otherwise “synergized” aka laid off as part of the merger process, will keep their jobs that much longer, because instead of boosting shareholder equity and requiring the cutting of overhead to accomodate the new debt, many of the companies that would have otherwise merged will continue as standalone entities. As such they will need all the support they can get.
The chart below shows the combined employees of the top 10 M&A deals of 2015, and what our estimate is of the combined layoffs between them.
- Year Of The Outsider: Why Bernie Sanders' Democratic Rebellion Is So Significant
2016 was supposed to have been the year of Jeb Bush versus Hillary Clinton: the year when the established Bush dynasty confronted the upstart rival Clinton Dynasty. But the year of the insider has turned into the year of the outsider. On both sides, voters have unexpectedly given vent to thirty years of accumulated anger with neoliberalism which has downsized their incomes and hopes.
Though the Republican rebellion has been more clear-cut in its dismissal of insider candidates, it is Bernie Sanders’ Democratic rebellion that is of potentially far greater historic significance.
The Republican rebellion is of much less significance
The Republican uprising has undoubtedly exhibited greater anger. If Donald Trump or Ted Cruz triumph in the November general election, they threaten an uglier more intolerant politics that could even become tinged with American black-shirtism.
However, absent the darkest of outcomes, the Republican rebellion is of less lasting political significance for two reasons.
First, it does not fundamentally challenge the neoliberal economic model that is the root cause of popular anger on all sides. Nationalism, racism, evangelism, and cultural atavism scratch the scapegoat itch, but they do not challenge Corporate America’s and Wall Street’s domination which sustains neoliberalism.
Second, and more importantly, the Republican rebellion does not change the party’s pre-existing political trajectory and relies on electoral forces that are peaking out.
That contrasts with Sanders’ Democratic rebellion which explicitly challenges the neoliberal economic model, and is also about defining the political character of the coming Democratic electoral majority.
Viewed in this light, the Republican rebellion is an eruption from an angry electoral base whose political power is waning, whereas the Democratic rebellion is an eruption from a rising base whose political agenda awaits definition.
Trump and Cruz are a logical extension of Republican politics
The Republican elite has been profoundly taken aback by the dismissal of Crown Prince Jeb Bush and the Boy Scout Senator Marco Rubio, but both Trump and Cruz represent a logical extension of Republican politics rather than a break.
Long ago, Richard Nixon unleashed the politics of hate with his “southern strategy”, aimed at exploiting animosity toward President Johnson’s civil rights legislation to convert the South (i.e. the Confederacy) from Democrat to Republican.
Trump and Cruz have discarded the dog whistle and explicitly articulated a level of racism and xenophobia the establishment is strategically uncomfortable with. Other than that, they have towed the line on tax cuts for the rich, and Cruz was orthodox on trade until Trump started making hay with the issue.
Despite Cruz’s odious personality, the Republican establishment prefers him as he has been more orthodox on trade and Social Security, while Trump is also loathed for humiliating Jeb Bush with his taunt of “low energy”.
That said, if Trump wins the nomination, a rapprochement is likely. For the Republican establishment, tax cuts and preserving neoliberal globalization are preeminent, and Trump is an opportunistic businessman who trumpets deal-making.
Trump and Cruz accelerate Republicans’ demographic destiny
The rise of Trump and Cruz has merely accelerated Republicans’ date with demographic destiny. The party of dog whistle racism and immigrant bashing always faced a difficult future because of demographic trends making minorities an increasing share of the electorate.
Republicans hoped to postpone that difficult future by a combination of voter suppression policies (e.g. making voter registration difficult; reducing polling booth access; and excluding minority voters via “new Jim Crow” laws denying voting rights to convicted felons) and gerrymandering congressional districts in states like Texas, Wisconsin and Michigan. That has already given Republicans control of the House of Representatives despite receiving far fewer total votes.
The undemocratic construction of the US constitution, which gives two Senate seats to both small states like Wyoming (population 580k) and large states like California (population 38.5 million), also means Republicans have remained competitive in the Senate. That is because of their relative strength in the comparatively under-populated interior states.
These features could delay electoral developments, but the prognosis was always an outlook in which Republicans were going to be increasingly uncompetitive nationally. Trump’s and Cruz’s hate politics has simply accelerated and cemented that prognosis.
Wall Street will need a new senior political partner: Democrats for sale?
That electoral prospect implies Republicans can no longer reliably deliver for Corporate America and Wall Street, which means Corporate America and Wall Street need to find another sure political partner. Therein lies the greater significance of the Sanders – Clinton contest.
Over the last thirty years, Wall Street has had little difficulty working with and funding Democrats, and the Clintons have been especially cooperative. For many years, Goldman Sachs has been happy to split its political contributions, sending 55% to the Republicans and 45% to the Democrats. Now, Goldman can make a small recalibration and send a little bit more to the Democrats.
If Hillary Clinton wins, the Democratic Party will remain squarely within the orbit of Wall Street and Corporate America. The Democrats will become the ruling party, but their rule will substantially continue what we have had, perhaps supplemented by an extra spoonful of compassionate economic policy.
If Sanders wins, there is a chance the Democratic Party can rediscover its modern roots of New Deal social democracy via expanded Social Security, single payer health insurance, debt-free college, the end of neoliberal trade policies, and reining in of corporate power.
The Democrats: party of identity politics or party of New Deal social democracy?
These features mean it is the choices of Democrats that will set the political course for the next generation. Demographics imply Democrats will be the majority of the future, but the party’s political identity and agenda is up for grabs.
If the Clinton vision prevails, the Democratic Party stands to become a party of neoliberal economics, headlined by identity politics. A Clinton-led Democratic Party will also continue President Obama’s tactical appeals to “bi-partisanship”. The goal would be to enlist moderate upper-middle class Republican-leaning professionals into a corporate controlled Democratic Party franchise.
If the Sanders vision prevails, the Democrats will pivot toward their New Deal social democratic roots. In that case, economic solidarity and inclusion become the headline. And the party again aspires to be a mass movement rather than an awkward stitching together of corporate money, social liberals, and minority voters.
The curse of money
However, as long as unlimited money is allowed in politics, there is a perennial danger of a backdoor Wall Street takeover. That is because a New Deal Democratic Party would still need money to compete in elections, leaving an opening for Corporate America and Wall Street to take back control.
That is why limits on money contributions and repealing the Citizens United decision are so important. It also explains why Sanders has made that the central focus of his political revolution, while Clinton has persistently sought to diminish the issue.
- The Nattering Naybobs Of Normalization (A Tale Of 3 Fed Heads)
Authored by Bill Bonner of Bonner & Partners (annotated by Acting-Man.com's Pater Tenebrarum),
Leaning Into the Wind
During our lifetime, three Fed chiefs have faced a similar challenge.
Each occupied the chairman’s seat at a time when “normalization” of interest rates was in order.
Recently, we remembered William McChesney Martin, head of the U.S. Fed under the Truman, Eisenhower, Kennedy, Johnson, and Nixon administrations. Today, we compare Martin with two of his successors, Mr. Paul Volcker and Ms. Janet Yellen. We allow you to draw your own conclusion.
Punchbowl theft alert!
In 1951, the Fed and the Treasury clashed over “normalizing” interest rate policy after almost 10 years of tight control. In 1942, after the U.S. entered World War II, and at the request of the Treasury, the Fed pegged interest rates at a low level to make it easier for the government to finance the war. Come peacetime, it had to finesse a return to market-set rates.
Of course, the Fed can never fully shirk its responsibilities or ignore its influence. Its voting committee, the Federal Open Market Committee (FOMC), has the ultimate say on setting short-term rates. But its hand on the controls can be heavy… or light. It can allow the market to express itself. Or it can shut the market up and do the talking itself.
After the troops came home, Martin developed two metaphors to describe his views on central banking. The first was that the central bank should neither set rates high nor low, but instead “lean into the wind.” The idea was to moderate market forces by exerting a little counter-cyclical pressure.
If the economy were running hot, the central bank would maintain its funds rate a little higher than usual. If the economy were cooling off, it would aim for a slightly lower rate. That brings us to the second of Martin’s metaphors.
The job of the Fed, he said, was to “take away the punch bowl just as the party gets going.” In other words, raise interest rates just when the economy starts to enter an unsustainable boom.
Times Change
Mr. Martin was not necessarily less intelligent than those who succeeded him. But times change. Fashions evolve. Today, Truman’s appointee as Fed chief might as well be wearing spats.
In February 1951, the annual consumer price index, or CPI – the most common measure of inflation – was running at almost 8% a year. President Truman summoned the entire FOMC to the White House – with Martin as the principal negotiator – to extract a pledge from them to keep interest rates pegged at low levels.
But the Fed dug its heels in and refused to “maintain the existing situation.” Martin then announced that he would allow interest rates to rise. And rise they did. From just under 1% when Martin took over as Fed chief, short-term rates stood at almost 4% at the start of the 1960s.
Frontal Assault
The next challenge came at the end of the 1970s. Paul Volcker, appointed by Jimmy Carter, was the man for the job. When Volcker took over the Fed, in August 1979, short-term rates and the CPI were somewhere north of 11%. And he aimed to bring both down to more normal levels.
But then as now, inflation had its friends. And everyone knew that bringing it under control would be painful. In 1980, Mr. Volcker spoke directly to the challenge:
After decades of inflation, many of us, more or less comfortably, have adapted our business and personal lives to the prospect of more inflation.
We count on capital gains from inflating house and land values as a substitute for real savings. We assume our competitors will match our aggressive pricing policies, and will also accede to high wage demands. We take comfort in our purchases of precious metals, art, and more exotic “collectibles” – or envy those who did buy – and are tempted to project essentially speculative price movements into the great beyond.
But none of this sense of accommodation to inflation can be a valid excuse for not acting to deal with the disease.
Anguish alert!
Getting inflation under control meant taking away not only the punch bowl, but also the entire buffet and open bar of money and credit on which the markets feasted.
But Volcker did not back away. He said what he meant and meant what he said. In June 1981, he dosed the economy with a 19.1% federal funds rate; in a few months, the fever was broken.
No Return to Normal
And now, we have Ms. Janet Yellen at the Fed’s helm, her firm grip on the wheel… her steely eye on the horizon. The situation is nothing like that which Mr. Volcker faced. Instead of a CPI in double-digits, today, the Fed is worried that consumer prices are not going up fast enough.
“An important concern about persistently low inflation,” is how Fed governor Lael Brainard described what was disturbing her sleep. And $7 trillion of developed-country government debt now trades at yields below zero – providing governments around the world with free money.
Getting back to normal is never easy, especially when you don’t want to get there. On March 27, 2015, Ms. Yellen spoke to her challenge.
The creature from the punchbowl!
Photo credit: Pablo Martinez Monsivais / Keystone / AP
“Normalizing Monetary Policy: Prospects and Perspectives” was the title of her speech. But both the content and the consequences were very different from those of either Mr. Volcker or Mr. Martin.
Where Mr. Martin had insisted that dictating interest rates was “inconsistent with… a private enterprise system,” Ms. Yellen saw no inconsistency at all. Where Mr. Martin saw the need in a great emergency – World War II – to depart from market-set interest rates, Ms. Yellen is ready to leave the market behind at the drop of the Dow.
And where Mr. Martin and Mr. Volcker both went resolutely about their work, Ms. Yellen seems unsure. A year ago, she said she would normalize rates “only gradually”… and that, although she had the “macro-prudential regulatory and supervisory tools” to do the job, investors should not expect miracles.
Nor did they receive any. In the 12 months that have gone by since her speech, only 25 basis points (even sparrows refuse to bend to pick up such trivial morsels) is the total of her niggardly gift to savers. As for “normal”… it is still nowhere in sight.
- MoSSaCK FoNSeCa SeaRCH
- Tuesday Humor: The Paperclip Is Back With Year-End Tax Planning Advice
The infamous Microsoft help paperclip makes a timely appearance, providing options for all of your year-end tax planning needs.
h/t @ebitdad
- California Gov. Signs Minimum Wage Hike: Admits It "Doesn’t Make Economic Sense" As Locals Flee For Texas
As we discussed previously states such as California are saying to hell with economics in their efforts to appease their voting base. Yesterday, both New York and California signed legislation to raise the minimum wage to $15 an hour. New York will phase in the $6 an hour increase over three years, and California will phase in their $5 an hour increase over the next six years.
The irony of the situation, which will most certainly go under reported, is that even California’s Governor Brown knows that it’s not the right decision to make economically. Regarding the actual economic impact, California’s Governor Brown was quoted as saying that “economically, minimum wages may not make sense.”
This is clear.
As we noted before, it is even clear to the locals businesses owners like the Marmalade Café which has seven locations. “First, you have to raise prices, otherwise you’ll be out of business,” owner Selwyn Yosslowitz told the Times. So higher prices for diners. That’s “first.” We imagine you can guess what’s “second.” “We will try to re-engineer the labor force,” Yosslowitz said. “Maybe try to reduce the number of bus boys and ask servers to bus tables.” In other words: “Maybe” we’ll fire some folks and the people who keep their jobs will have to be more efficient.
Yosslowitz also worries about the dynamic we’ve discussed over the course of documenting Wal-Mart’s experience with wage hikes: namely that you have to preserve the wage hierarchy. You can’t hike wages for the lowest paid workers and then expect those further up the pay ladder to be satisfied with what they made before. “The other big worry [is] that employees already making $15 an hour will demand a raise as well”, Yosslowitz said. “It’s a chain reaction.”
Indeed, the problems with haphazard wage hikes are now readily apparent even to those who stand to benefit the most from the new legislation. Take Miguel Sanchez of Highland Park who works two jobs making tortillas. “It’s good for workers, but I imagine this is not going to be good news for employers and small businesses,” he says. “Will the cost of things go up?” he asks. “Are employers going to cut back hours because they can’t afford it? I worry.”
So even tortilla makers get it, but like Wal-Mart, “some folks” will need to actually see the layoffs before they’ll concede that you can’t cheat economic truisms and that’s really a shame for the people who will lose their jobs in the meantime.
* * *
But back to CA Governor Brown who after that brief epipharny he quickly forgot about reality, and told the truth about why he was signing the legislation.
“Morally and socially and politically, they (minimum wages) make every sense because it binds the community together and makes sure that parents can take care of their kids in a much more satisfactory way.”
Ah yes, as long as you and your political party get votes in the upcoming elections, the actual impact on the people you claim to represent and care about is irrelevant – noted.
After all, this is what seems to get votes, and as we said previously: “Of course how much you earn and even whether or not you have a job at all only matters to the extent that “shit” costs money, which is why it might be a good idea to just go ahead and vote for “A Future To Believe In”
However, in perhaps the most poetic cause and effect scenario, once the people realize that items such as minimum wage actually do nothing but hurt their chances for gaining employment or starting a small business, they leave the state in droves.
Based on a study of IRS tax returns, over 250,000 California residents moved out of the state between 2013-2014.
It’s no better in the other “minimum wage hiking state”, New York, where United Van Lines data shows that out of all of their relocation contracts, New York comes in second for “high outbound.”
Now that higher minimum wages are a reality, we’re certain these numbers won’t get any better in future years.
- Porn Star Explains Why You Are A Scumbag Who "Gets In The Way Of Justice"
Submitted by Simon Black via SovereignMan.com,
The Internet practically exploded this weekend after a detailed report was published proving that dozens of corrupt politicians around the world have been stealing public funds and hiding the loot overseas.
In other news, the Pope is Catholic.
Not to make light of this, but this hardly comes as a surprise. There’s some Grade A filth in positions of power who routinely funnel public funds into their own pockets.
Whether they secret the funds offshore, buy expensive flats in London, purchase Bitcoin, or stuff cash under their mattresses seems hardly relevant.
The real issue is that systems of government routinely put morally bankrupt individuals in control of trillions of dollars of cash.
Seriously, what do people expect is going to happen?
Yet this never seems to be concern. The media outcry always seems to focus on the manner in which public officials hide their assets, not the fact that the funds were stolen to begin with.
This report targets the illicit use of offshore corporations, specifically those set up by a single law firm in Panama.
In reality, this issue hardly boils down to one firm.
There are thousands of law firms all around the world, including in the UK and the United States, that register companies for their clients.
Some of those companies end up being used for nefarious purposes, including fraud and theft.
But it’s crazy to presume that corrupt officials and con artists are the only ones who would ever need a company in one of these “shady” jurisdictions.
(Those “shady” jurisdictions, by the way, include Wyoming, South Dakota, and Delaware.)
Alongside the report is a video with a scantily clad porno actress named Lisa Ann, star of “Who’s Nailin’ Paylin,” a satire in which Ms. Ann spoofs former Vice Presidential candidate Sarah Palin engaged in sexual… congress.
No I am not making this up…
In her video, the porn starlet explains that only arms dealers and scumbags set up asset protect vehicles like anonymous shell companies, which can include something like a Delaware LLC.
Never mind that people in the Land of the Free are living in the most litigious society in human history.
Or that last year the US government stole more money and private property from its citizens through civil asset forfeiture than all the thieves and felons in the country combined.
Given such obvious realities, you’d have to be crazy to NOT take steps to protect your savings.
But if a porn star says that you’re a scumbag who ‘gets in the way of justice’ by setting up a Delaware LLC to safeguard your assets and reduce your legal liability, it must be true.
So let it be written.
Look, the anger and disgust of seeing corrupt people getting away with a crime is understandable, particularly when that crime is stealing from taxpayers.
But nobody ever seems to attack the real problem– that these people are ever put in positions enabling them to steal taxpayer funds to begin with.
Instead the spotlight is always on how they hide it. That’s like focusing on what color T-shirt the ax murderer was wearing.
My concern is that is if corrupt officials shift tactics and start buying gold, there will be calls to outlaw gold. Or if they start holding cash, there will be even louder calls to ban cash.
These reports are incredibly damning for the dozens, even hundreds or thousands of bad actors who abuse the system.
But at the same time they create a mass hysteria that puts law-abiding taxpayers who value their financial privacy into the same category as some corrupt African dictator.
Listen in to today’s podcast as we discuss this trend even more, what I call the “New Dark Ages”.
We’ve entered a time where privacy and personal freedom are trivial inconveniences rather than the bedrock cultural values they used to be.
For example, I question when our society degenerated to the point that a porn star gets to tell us what we should and should not be able to do with our own private property. . .
I’d advise you to turn DOWN the volume. This podcast is probably the most intense I’ve ever done. Listen in here.
(click image for link to podcast)
- 'Economic Models' Forecast GOP White House (With Or Without Trump)
Despite bookies' odds at 66% that The Democratic Party will win The White House in November, economic models predict a Republican victory (with or without Trump).
As The Hill reports, Republicans are expected to win the White House under two economic models that have accurately forecast presidential elections for decades. A third model run by Moody’s Analytics predicts Democrats will win the White House, in part because of President Obama’s rising approval rating.
“As economists this is a very unusual election and there’s a lot more uncertainty introduced this time around that could upset the balance and the historical relationship of how marginal voters vote,” said Dan White, an economist with Moody’s Analytics who oversees the firm’s monthly election model.
Ray Fair, a Yale professor who launched his model in 1978, told The Hill that while all elections include unruly features that an economic model can’t pick up, “this one seems particularly unusual.”
“If there’s any time in which personalities would trump the economy it would be this election,” Fair said.
Fair’s model has correctly forecast all but three presidential races since 1916 but was wrong in 2012, when it predicted a narrow loss for Obama to Mitt Romney.
It relies on just three pieces of information: per capita growth rate of gross domestic product in the three quarters before an election, inflation over the entire presidential term and the number of quarters during the term growth per capita exceeds 3.2 percent.
Given the sluggish economy, his model doesn’t show enough growth under Obama to predict a Democratic win in the election. In his most recent forecast from January, his model predicted a 45.66 percent share of the presidential vote for the Democratic candidate, less than the 49 percent it predicted in 2012.
The other two models, unlike Fair’s, consider the incumbent president’s approval rating. In both cases, Obama’s improving favorability helps his party’s chances of winning the White House. But only one of those models predicts a Democratic win.
White said that one of the most frequently asked questions he gets is whether a Trump variable could be added into the model to test out how his brand of fireworks factors in.
No way, he said.
“The model doesn’t know or care if there are two or 10 candidates,” he said. “It knows the economics and whether marginal swing voters will keep the incumbent party in or not.”
In fact, their models are designed to sweep away the effects of boisterous personalities and the usual ebbs and flows of a long presidential campaign season and instead track specific economic factors that voters deem most important.
"So the logic that says that these models should have worked over the past few decades also says that they should work in this election cycle, too,” he told The Hill.
“There's no reason to think the models should do better or worse in 2016,” he said.
- Oil Will Be Over $50 a Barrel by July 4th (Video)
By EconMatters
A strong API Report reporting over a 4 million barrel drawdown in Oil inventories, and a report out of Kuwait saying that an output freeze deal by major oil producers would proceed without Iran will be bullish for the oil market. We expect the short covering to begin tonight, tomorrow and for the next 8 days before the Doha Meeting.
© EconMatters All Rights Reserved | Facebook | Twitter | YouTube | Email Digest | Kindle
- As Seen On One Billboard: The San Francisco Housing Bubble
That San Francisco, ground zero of the second tech – this time private (and currently bursting) – bubble, has a housing market that is “just a little frothy” is no surprise to anyone, but even we had to chuckle when we saw this billboard making the twitter rounds.
As Marketwatch notes, real estate is so frothy in the San Francisco Bay Area that a new development in the city’s Lake Merced neighborhood felt the need to advertise its townhomes on a billboard as million-dollar deals – get in now while the price is right!
This is what the “low $1,000,000s” will buy you: a 1,547 square foot, 3-bedroom, 2-bath townhome (listed on real estate site Redfin for $1,012,000+).
Feel like hunting for better bargains? Then how about this 3-bedroom, 3.5-bathroom, 2,393 square foot townhome listed for $1,649,900+.
“You’ll take in the lifestyle of the city but leave all the limitations of San Francisco behind,” according to the development’s website. “So, when your day is done, you’ll pull into the garage, hit the button and walk into a place that’s different from the start.”
Translation: these aren’t located near the hustle and bustle. The Lake Merced area is located in the city’s southwest corner, far from downtown and other popular neighborhoods in the central parts of the city.
For some context, here’s a look at the rest of the San Francisco housing market. This shack was listed for $350,000 and sold in September 2015 for $408,000, nearly 17% above the asking price. The real-estate agent referred to the “home” as “above and beyond distressed.”
If that didn’t sufficiently impress (or exasperate) you, take a look at some listings in the city’s more central areas, which may leave you thinking “low 1,000,000s” in Lake Merced is a deal after all.
This 1-bedroom, 2-bath home is located near the baseball stadium AT&T Park. It’s 1,428 square feet and is listed for $1,950,000, plus $563.36 in monthly homeowners association dues.
This 3-bedroom, 2-bath home is located in hipster enclave Mission Dolores and is larger at 2,580 square feet. It is listed with the words “huge price reduction” for just $2,599,000.
As a reminder, according to Case Shiller, home prices in San Francisco rose 10.5% over the past year. U.S. house prices overall rose 5.7% compared with a year ago in January, or about three times more than average wages. Since 2012, median housing prices in San Francisco have more than doubled, hitting $1.225 million in February 2016, as the following dramatic charts demonstrate.
And here is the problem: to be able to purchase a house in San Francisco, a prospective buyer should make on average over quarter million dollars per year, nearly 6 times more than for the broader U.S.
Much more on the San Fran housing market in the Paradon “March 2016 San Francisco Real Estate Report”
- Here Are Some Of The Americans In The "Panama Papers"
With media attention squarely falling on the foreigners exposed by the Panama Papers offshore tax haven scandal, everyone has been asking for more information on who are the Americans involved in this biggest data leak in history. After all, as we showed, Mossack Fonseca had over 400 American clients. But who are they?
Today, courtesy of McClatchy, we get some answers: while there are no politicians of note are in files but plenty of others. Among them: Retirees, scammers, and tax evaders, all of whom found a use for secrecy of offshore companies.
As the news paper reports, “the passports of at least 200 Americans show up in this week’s massive leak of secret data on secretive offshore shell companies.”
And yet, the following release may prompt merely more questions: given the high-profile nature of some of the foreign names in the leaks “many of the Americans may seem like small fish.”
Perhaps few Americans used Panama to hide their shady dealings; perhaps that was as intended.
In any event, here are some of the findings courtesy of McClatchy:
Determining a precise number of Americans in the data is difficult. There are at least 200 scanned individual U.S. passports. Some appear to be American retirees purchasing real estate in places like Costa Rica and Panama. Also in the database, about 3,500 shareholders of offshore companies who list U.S. addresses. And almost 3,100 companies are tied to offshore professionals based in Miami, New York, and other parts of the United States.
Further complicating matters, some U.S. citizens enjoy dual citizenship and open accounts under foreign passports. Others appeared to be American retirees purchasing real estate in places like Costa Rica and Panama.
Among the cases McClatchy and its partners found:
Robert Miracle of Bellevue, Wash., is in the files. He was indicted for a $65-million Seattle-area Ponzi scheme involving investment in Indonesian oilfields, with new investors’ money allegedly used to pay off past investors. Miracle was sentenced on May 13, 2011, to 13 years in prison after pleading guilty to wire fraud and tax evasion.
Miracle’s company was called Mcube Petroleum, and it remained an active shareholder in several offshore companies in the British Virgin Islands up until he pleaded guilty. The offshores were created by Mossack Fonseca.
Benjamin Wey is a U.S. citizen and president of New York Global Group. He was indicted last year, along with his Swiss banker, Seref Dogan Erbek, on securities fraud charges. Wey’s alleged scheme to conceal a true ownership interest in publicly traded companies was at the heart of the charges. Wey is accused of using offshores set up with Mossack Fonseca to disguise complicated transactions between Chinese operating companies and publicly traded U.S. shell companies.
The two “are believed to have profited in the tens of millions, while victim shareholders were left holding the bill,” Diego Rodriguez, an FBI official involved in the case, said in a statement at the time of indictment.
Florida billionaire Igor Olenicoff, a commercial real estate mogul, appears in the data as a shareholder of Olen Oil Management Limited. He raised a national stir in 2007 after being sentenced to just two years of probation for tax evasion. He paid a $52 million fine after not declaring more than $200 million in offshore shell companies. More recently, he was found guilty in 2014 for making replicas of a pricey sculpture and was ordered to make restitution to the sculptors whose work he had copied.
There’s Anthony J. Gumbiner, the Dallas-area chairman of Hallwood Group Inc. He’s a British national with deep Texas ties who settled an insider trading case in 1996 with the Securities and Exchange Commission, paying $1.7 million in penalties at the time.
A jetsetter in the 1980s, Gumbiner was known for his lavish lifestyle in Monte Carlo. More recently, he’s been tied up in litigation over oilfield investments. His Hallwood Energy filed for Chapter 11 bankruptcy protection in 2009.
It wasn’t until 2015 that the law firm seemed to catch on to Gumbiner’s legal problems and started to conduct enhanced background checks. By then his offshore companies had been inactive since 2011.
And there’s John Michael “Red” Crim, author of the self-published books “From Here to Malta,” and “I’ve Been Arrested, Now What?”
Federal jurors in Philadelphia in January 2008 convicted Crim and two associates in a plot to have investors use phony trusts to cheat the IRS out of roughly $10 million in tax revenue.
In an interview with McClatchy’s project partner Fusion, at a halfway house in Los Angeles last February, Crim described how he brought business to Mossack Fonseca and other registered corporate agents.
“My responsibility is to set-up the documentation, hand it over to the client, and now they’re in business,” Crim said. “I don’t even know sometimes what that business is about, and I didn’t want to spend all my time investigating what they’re doing. I mean, some of (them) just flat out would tell you it was none of your business.”
In a separate case, federal authorities were unaware that a defendant in a fraud case had an offshore account with Mossack Fonseca. Internet phone company executive Jonathan Kaplan pleaded guilty in Bridgeport, Conn., in 2007 to accepting more than $400,000 in a commercial bribery scheme.
Kaplan received probation. A law enforcement source, speaking on condition of anonymity because of pending legal matters, confirmed that prosecutors did not know that Kaplan had established an offshore company in the British Virgin Islands in 2004 called SGA Wireless. It remained active until May 2010.
Reached by phone in New Jersey, Kaplan was asked whether he told authorities about SGA Wireless. He stammered, “I’m going to have to decline. I’ll talk to you.” He then abruptly hung up.
* * *
As we said, the surprising lack of any high profile names could merely stoke speculation of list scrubbing, or alternatively, we hope it will force the broader population to shift its attention to the true real locus of “offshore tax evasion”, perhaps the biggest in the world: the United States of America itself.
Digest powered by RSS Digest
Saving...