Saturday, December 16, 2017
Friday, December 15, 2017
Thursday, December 14, 2017
Wednesday, December 13, 2017
My third favorite economist but I don't agree with this,
Gary Shilling: Repatriated Earnings Will Not Lead to a Surge in Capital Outlays
Andrew McCarthy: FBI Strzok Texts Show Political Bias Infected Investigation & Disqualifying
Andrew C. McCarthyVerified account
Andrew C. McCarthy Retweeted Bret Baier
Obviously, this is not political banter. Clearly indicates professional duties infected by political viewpoints, which is disqualifying. I was going on the published accounts I'd seen, which didn't include this one. Should follow my own advice to wait til all facts in.
Bret Baier
Verified account
Text-from Peter Strzok to Lisa Page (Andy is Andrew McCabe): "I want to believe the path u threw out 4 consideration in Andy's office-that there's no way he gets elected-but I'm afraid we can't take that risk.It's like an insurance policy in unlikely event u die be4 you're 40"
On this day in 1862,
Burnside's orders that his troops repeatedly attempt to scale Marye's Heights directly into Confederate fire called "butchery".
Guess where the description "sideburns" came from?
Lee Inflicts Decisive, Bloody Defeat on Burnside at Fredericksburg
Burnside's orders that his troops repeatedly attempt to scale Marye's Heights directly into Confederate fire called "butchery".
Guess where the description "sideburns" came from?
Tuesday, December 12, 2017
Grant's Interest Rate Observer.
Inflation Coming?
Inflate gate
Take a bow, central bankers of the world! Evidence of the long-sought after return of measured inflationary pressures is accumulating. A trio of sovereign sightings in the past 24 hours:
Swedish underlying consumer price inflation (which adjusts for fluctuations in mortgage prices) for November logged at 2.0%, above the 1.8% economist consensus and the 1.7% expected by the Swedish central bank, the Riksbank. Jonas Goltermann, economist at ING Bank NV, wrote that: “The [Riksbank] policy committee will be pleased with the confirmation that inflation is back to target. But we think the dovish majority will want to keep policy accommodative for some time yet to avoid the risk that inflation falls back again.” The central bankers may be pleased, but someone should wake up Sweden’s sovereign creditors and let them know. The Swedish Government Bond 0 3/4s of May 2028 are trading at 100.72 cents on the krona, for a nominal yield-to-worst of 0.68%. If inflation holds at this level, those notes sport an annual real yield of negative 1.3%.
Mark Carney, governor of the Bank of England, has a new homework assignment. As a result of the 3.1% year-over-year increase in November’s CPI reading (the highest since March 2012), Carney will be compelled to write a letter to the chancellor of the exchequer explaining why inflation has deviated by more than 1% from the central bank’s 2% target. Food and energy prices rose by 4.0% and 6.8% year-over-year, respectively, but diverse categories such as clothing and footwear (+9.8%), household goods (+4.4%) and autos (+5.5%) demonstrated the relatively broad base of the price pressures.
So far, U.K. CPI has averaged 2.4% in the eleven monthly readings of 2017, compared to 0.6% year-over-year through 2016 and zero in 2015. Lucy O’Carroll, chief economist at Aberdeen Standard, wrote that: “It’s quite possible that inflation is now close to its peak.” For the sake of U.K. creditors’ prospective returns she had better be right. The 10-year gilt currently sports a 1.22% nominal yield (just a basis point above its simple average for 2017) and a negative 1.9% real yield, based on the November inflation reading.
Stateside, this morning’s release of the producer price index for November showed the same trend: up. The headline final demand component rose by 3.1% year-over-year and by 2.3% ex-food and energy (the highest and second highest readings in five years, respectively), bringing the average 2017 gain to 2.3% in the headline series with just one month remaining. In contrast, 2016 averaged a 0.4% year over year advance, while 2015 PPI declined by 0.9%. In this context, at least, investors in U.S. Treasurys are in slightly better shape than those in gilts or Swedish government bonds. The 10-year note yields a relatively superior 2.40%, while the Federal Reserve is expected to raise overnight interest rates at tomorrow’s meeting (futures price 100% odds).
The July 15, 2016 historical analysis in Grant’s (“Remember the Shell Union Oil 2 1/2s of 1971”) featured a cautionary tale for potential fixed-income accidents that involve no default or corporate distress.
Shell Union was a substantial and creditworthy borrower. In 1945, it showed net income of $28.7 million, cash and government securities of $118 million and a current ratio of 3:1. From balance sheet details as the press revealed, there appears to have been little net debt.
In the spring of 1946, any clairvoyant could have seen that credit risk was yesterday’s worry, particularly with so solid a citizen as Shell . . . Obviously, interest-rate risk was the coming thing. Only later, and at much higher yields, did this great truth penetrate the mind of the market.
Is the credit cycle, notorious for its generation-length (or longer) trends, finally turning? Maybe not, but it sure doesn’t hurt to consider the possibility.
I sure am glad I didn't say this.
Denise McAllister:Women love the sexual interplay they experience with men, and they relish men desiring their beauty.
The man who presaged Trumpism.
Pat Buchanan: Americans are not willing to go to war to promote the Beltway elites' idea of a new world order.
Monday, December 11, 2017
Grant's Interest Rate Observer
Canada Real Estate Crash Coming?
HELOCopter money
The adage that “trees don’t grow to the sky” is being put to the test in the Great White North. Despite a pullback in Toronto-area home prices in recent months, the Canadian housing market stands out even in this bull market-in-everything world: The Canadian Real Estate Association’s MLS Home Price Index has risen by 130% since the beginning of 2005, more than double the 53% rise in nominal GDP over that period.
As night follows day, rising prices are met with increased supply. Thus, Bloomberg reported on Friday that Canadian developers are undertaking a record number of multiple-unit construction projects as they seek to participate in the boom. Robert Kavcic, economist at BMO Capital Markets, commented that: “Canadian home building activity remains rock solid. Builders in the biggest cities appear to be responding to supply shortages as best as possible.” The severity of these shortages, in Toronto at least, is disputable. Supply of new listings in Canada’s largest metro area has jumped by 37% year-over-year in November.
Local regulators have likewise moved to slow down the housing market’s ascent. Canada’s Office of the Superintendent of Financial Institutions (OSFI) is introducing new regulations, set to take effect on Jan. 1, which aim to tighten lending standards. Among the new requirements is a mandate that borrowers who plunk down less than 20% of the value of the home must purchase mortgage insurance, a potentially significant additional cost. CBC News estimates that the insurance could cost buyers anywhere between 0.6% and 4.5% of the value of their home over the course of their loan.
It may come as no great surprise to learn that the great Canadian housing bull market has been built on a foundation of debt. Consumer debt as a percentage of disposable income has undergone a near-constant uptick since the turn of the century, reaching a fresh high water mark of 167.8% as of the end of the second quarter, compared to 144% in the U.S. in 2007. Seth Daniels, founding partner of JKD Capital in Boston, advises Grant’s via email that the encumbrances are particularly concentrated in home equity lines of credit, or HELOCS.
HELOCs, as a percentage of GDP [13.5% as of year-end 2016], are roughly three times higher in Canada then in the US at the peak of our housing bubble in 2006. In addition to consumption (“using your house as an ATM”) and borrowing to avoid delinquencies on other debt, Canadians have been using HELOCs to fund mortgages in the shadow banking market and buy additional speculative properties—I call them weapons of mass destruction.
In an echo of the 1980’s-vintage Japanese practice of “Zaitech,” Daniels also noted in an Oct. 16 interview with MoneyGeek.com that “People in Canada have been borrowing against their home equity line of credit - to lend to subprime borrowers directly.” Indeed, this linked piece from the Toronto Globe and Mail provides a detailed roadmap for readers who wish to use their home equity for investment purposes, in s ervice of “leveraging their real estate assets to increase their net worth.”
Back in June, executives at Home Capital Group, Inc. agreed to pay upward of C$30 million in settlements over alleged disclosure violations related to mortgage fraud in 2015. On Nov. 30, Reuters reported that “compliance officers at the Financial Services Commission of Ontario had evidence that syndicated mortgages were being marketed and sold in ways that broke the law . . . From 2011 to 2015, senior FSCO investigators rejected or ignored compliance officers’ multiple recommendations that the agency investigate or take action to rein in the marketing and sales of Fortress [Real Developments] syndicated mortgages.” Last week, Montreal-headquartered Laurentian Bank disclosed that it will need to buy back as much as $180 million of mortgages after discovering “documentation issues and client misrepresentations.”
François Desjardins, president and CEO of Laurentian, defended his bank: “We’re very different organizations and this is a very different situation than what happened at Home [Capital]. This, to us, is really a process and paperwork issue that we have to resolve.” This morning, Laurentian issued a follow-up press release stating that: “Given recent reports in the media, the Bank wants to clarify why it does not believe these matters are material to its business, capital, operations and funding.”
Daniels sees things differently, telling Grant’s that:
The mortgage inconsistencies reported at Laurentian Bank (the third major Canadian financial institution to fess up to this problem) underscores what we have long believed to be a systemic problem with Canadian underwriting practices.
Canada hasn’t seen a true credit cycle in nearly three decades, which warps the judgment of market participants and regulators alike.
Time for a refresher course?
Obama-voter Althouse: "CNN is hopeless."
Ann Althouse
@annalthouse
Saw in the @nytimes there was an explosion in NYC so I turned on @CNN to get a live-on-the-street report. But CNN was covering the fact that the NYT says @realDonaldTrump watches TV 4 hours a day. The NYT article came out 2 days ago. CNN is hopeless.
http://althouse.blogspot.com/2017/12/theres-news-of-explosion-in-subway-in.html …
6:19 AM - 11 Dec 2017
Sunday, December 10, 2017
On this day in 1967, during my sophomore year at UW-Madison:
Otis Redding Dies in Lake Monona Plane Crash
The memorable whistling verse in "(Sittin' on) The Dock of the Bay" was an unfinished verse intended to serve only as a placeholder.You Tube Video (Sittin' on) The Dock of the Bay
Subscribe to:
Posts (Atom)