STOCK MARKET WATCH -- Wednesday, 16 September 2015

[Tansy_Gold]

[font size=3]STOCK MARKET WATCH, Wednesday, 16 September 2015[font color=black][/font]

SMW for 15 September 2015

AT THE CLOSING BELL ON 15 September 2015
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Dow Jones 16,599.85 +228.89 (1.40%)
S&P 500 1,978.09 +25.06 (1.28%)
Nasdaq 4,860.52 +54.76 (1.14%)


[font color=red]10 Year 2.29% +0.09 (4.09%)
30 Year 3.07% +0.10 (3.37%) [font color=black]


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[font size=2]Market Conditions During Trading Hours[/font]
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(click on link for latest updates)
Market Updates
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[font size=2]Euro, Yen, Loonie, Silver and Gold[center]

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[font color=black][font size=2]Handy Links - Market Data and News:[/font][/font]
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Economic Calendar
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[font color=black][font size=2]Handy Links - Economic Blogs:[/font][/font]
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The Big Picture
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[font color=black][font size=2]Handy Links - Essential Reading:[/font][/font]
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Matt Taibi: Secret and Lies of the Bailout


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[font color=black][font size=2]Handy Links - Government Issues:[/font][/font]
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LegitGov
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[font color=black][font size=2]Handy Links - Videos:[/font][/font]
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Charlie Rose talks with Roubini
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William Black: This Economic Disaster
Bill Moyers with Kevin Drum and David Corn
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[font color=red]Partial List of Financial Sector Officials Convicted since 1/20/09 [/font][font color=red]
2/2/12 David Higgs and Salmaan Siddiqui, Credit Suisse, plead guilty to conspiracy involving valuation of MBS
3/6/12 Allen Stanford, former Caribbean billionaire and general schmuck, convicted on 13 of 14 counts in $2.2B Ponzi scheme, faces 20+ years in prison
6/4/12 Matthew Kluger, lawyer, sentenced to 12 years in prison, along with co-conspirator stock trader Garrett Bauer (9 years) and co-conspirator Kenneth Robinson (not yet sentenced) for 17 year insider trading scheme.
6/14/12 Allen Stanford sentenced to 110 years without parole.
6/15/12 Rajat Gupta, former Goldman Sachs director, found guilty of insider trading. Could face a decade in prison when sentenced later this year.
6/22/12 Timothy S. Durham, 49, former CEO of Fair Financial Company, convicted of one count conspiracy to commit wire and securities fraud, 10 counts of wire fraud, and one count of securities fraud.
6/22/12 James F. Cochran, 56, former chairman of the board of Fair, convicted of one count of conspiracy to commit wire and securities fraud, one count of securities fraud, and six counts of wire fraud.
6/22/12 Rick D. Snow, 48, former CFO of Fair, convicted of one count of conspiracy to commit wire and securities fraud, one count of securities fraud, and three counts of wire fraud.
7/13/12 Russell Wassendorf Sr., CEO of collapsed brokerage firm Peregrine Financial Group Inc. arrested and charged with lying to regulators after admitting to authorities he embezzled "millions of dollars" and forged bank statements for "nearly twenty years."
8/22/12 Doug Whitman, Whitman Capital LLC hedge fund founder, convicted of insider trading following a trial in which he spent more than two days on the stand telling jurors he was innocent
10/26/12 UPDATE: Former Goldman Sachs director Rajat Gupta sentenced to two years in federal prison. He will, of course, appeal. . .
11/20/12 Hedge fund manager Matthew Martoma charged with insider trading at SAC Capital Advisors, and prosecutors are looking at Martoma's boss, Steven Cohen, for possible involvement.
02/14/13 Gilbert Lopez, former chief accounting officer of Stanford Financial Group, and former controller Mark Kuhrt sentenced to 20 yrs in prison for their roles in Allen Sanford's $7.2 billion Ponzi scheme.
03/29/13 Michael Sternberg, portfolio mgr at SAC Capital, arrested in NYC, charged with conspiracy and securities fraud. Pled not guilty and freed on $3m bail.
04/04/13 Matthew Marshall Taylor,fmr Goldman Sachs trader arrested, charged by CFTC w/defrauding his employer on $8BN futures bet "by intentionally concealing the true huge size, as well as the risk and potential profits or losses associated."
04/04/13 Matthew Taylor admits guilt, makes plea bargain. Sentencing set for 26 June; faces up to 20 years in prison but will likely only see 3-4 years. Says, "I am truly sorry."
04/11/13 Ex-KPMG LLP partner Scott London charged by federal prosecutors w/passing inside tips to a friend in exchange for cash, jewelry, and concert tickets; expected to plead guilty in May.
08/01/13 Fabrice Tourré convicted on six counts of security fraud, including "aiding and abetting" his former employer, Goldman Sachs
08/14/13 Javier Martin-Artajo and Julien Grout charged with wire fraud, falsifying records, and conspiracy in connection with JP Morgan's "London Whale" trade.
08/19/13 Phillip A. Falcone, manager of hedge fund Harbinger Capital Partners, agrees to admit to "wrongdoing" in market manipulation. Will banned from securities industry for 5 years and pay $18MM in disgorgement and fines.
09/16/13 Javier Martin-Artajo and Julien Grout officially indicted on charges associated with "London Whale" trade.
02/06/14 Matthew Martoma convicted of insider trading while at hedge fund SAC (Stephen A. Cohen) Capital Advisors. Expected sentence 7-10 years.
03/24/14 Annette Bongiorno, Bernard Madoff's secretary; Daniel Bonventre, director of operations for investments; JoAnn Crupi, an account manager; and Jerome O'Hara and George Perez, both computer programmers convicted of conspiracy to defraud clients, securities fraud, and falsifying the books and records.
05/19/14 Credit Suisse, which has an investment bank branch in NYC, agrees to plead guilty and pay appx. $2.6 billion penalties for helping wealthy Americans hide wealth and avoid taxes.
09/08/14 Matthew Martoma, convicted SAC trader, sentenced to 9 years in prison plus forfeiture of $9.3 million, including home and bank accounts
08/03/15 Former City (London) trader Tom Hayes found guilty of rigging global Libor interest rates. Each fo eight counts carries up to 10 yr. sentence.
08/21/15 Charles Antonucci Sr, former pres. Park Ave. Bank sentenced to 2.5 years in prison for bribery, fraud, embezzlement, and attempt to steal $11MM in TARP bailout funds, as well as $37.5MM fraud on OK insurance company. To pay $54MM in restitution and give up additional $11MM.







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[font size=3][font color=red]This thread contains opinions and observations. Individuals may post their experiences, inferences and opinions on this thread. However, it should not be construed as advice. It is unethical (and probably illegal) for financial recommendations to be given here.[/font][/font][/font color=red][font color=black]

[Demeter]

1. Looks like the PPT is building a cushion

for Thursday's breathless announcement of Fed Reserve's decision on interest rates.

I'd better fill the gas tank myself before Thursday. Goddess knows what kind of convulsions any hard decision will set off, regardless of its impact.

[Demeter]

2. Yellen's Former Aide Says a Rate Hike Would Be a Serious Error

http://www.bloomberg.com/news/articles/2015-09-15/yellen-s-former-aide-says-a-rate-hike-would-be-a-serious-error

There's labor supply out there that isn't measured by the jobless rate...The U.S. is probably about two years away from achieving full employment, no matter what the jobless rate suggests and Federal Reserve officials think.

That's the view of Andrew Levin, who served as a special adviser to former Fed Chairman Ben S. Bernanke and then-Vice Chair Janet Yellen from 2010 to 2012. "We're not even close to full employment,'' he said in an interview.

Levin, who is now a professor at Dartmouth College in Hanover, New Hampshire, maintains that it would be a big mistake for the Fed to raise interest rates this week and said the central bank should hold policy steady until well into 2016.

At 5.1 percent, joblessness is in line with the level that most Fed policy makers reckoned in June was the equivalent of full employment. (They'll be releasing updated estimates Thursday after a two-day meeting). That suggests that wage increases will start to accelerate—and inflation begin to rise—as employers find it increasingly difficult to hire the workers they want without paying them higher salaries.

Yet Levin said the headline unemployment rate doesn't capture all the slack left in the labor market, an argument that Yellen herself has made at various times since becoming Fed chair in February of last year...Millions of Americans working part time would take full-time employment if they could get it. And many others out of the labor market might be induced back in if they felt they had a chance at a job. Putting it all together, Levin calculates the amount of slack at 2.2 percent of the potential labor force, equivalent to around 3.5 million full-time jobs. While that's down from 7.8 percent at the end of 2009, it's still higher than the 2 percent average since 1994. And it's well above the 1.1 percent rate that prevailed in June 2004, when the Fed last started raising rates...

BUT IT ISN'T WHAT JANET THINKS...IT'S WHAT FISCHER'S MARCHING ORDERS FROM HIS PUPPETMASTERS SAY....WHEN THEY SAY "JUMP", THE FED ASKS "HOW HIGH?"

[Demeter]

3. Oil Traders Hire Tanks on Tiny Island to Profit From Global Glut

http://www.bloomberg.com/news/articles/2015-09-15/oil-traders-hire-tanks-on-tiny-island-to-profit-from-global-glut

To see how oil traders are profiting from the longest-lasting glut in three decades, look at the tiny Caribbean island of St. Lucia.

Glencore Plc hired tanks at the island’s only oil terminal to stow crude, joining Vitol Group, people familiar with the matter said last week. They’re responding to the market’s deepening contango, a situation where prices today are lower than those in future months, allowing traders with access to storage to lock in a profit. From St. Lucia to South Africa to Rotterdam, they’re seizing the opportunity.

“Contango opportunities are emerging,” Ian Taylor, chief executive officer of Vitol, the world’s largest independent oil trader, said in an interview earlier this month.

While the oil market has been in contango since August 2014, in the last month prices have moved in a direction that makes the trade more profitable. The price difference between a Brent oil contract for immediate delivery, the global benchmark, and one-year forward stood at minus $7.82 a barrel on Tuesday, more than double its level in mid-July...

[Demeter]

4. Hewlett-Packard to Cut Up to 30,000 More Jobs in Restructuring

SO SAD TO SEE THE KING LAID LOW

http://www.bloomberg.com/news/articles/2015-09-15/hewlett-packard-to-cut-up-to-30-000-more-jobs-in-restructuring

Hewlett-Packard Co., the technology company splitting into two separate entities, said it will cut 25,000 to 30,000 more jobs as part of a $2.7 billion restructuring, primarily focused on its enterprise-services division.

The company will incur a charge of about $2.7 billion, Hewlett-Packard said Tuesday at a meeting with analysts. The company had previously disclosed $2 billion in probable cost cuts at the services division within Hewlett Packard Enterprise, and has found an additional $700 million in savings across the business, said Tim Stonesifer, chief financial officer of Hewlett Packard Enterprise.

The additional cuts will "be things such as site closures and the reductions of those, and further reductions of workforce across the broader portfolio," Stonesifer said at the event. The cuts announced Tuesday, in addition to 54,000 that have already taken place, are the most among North American companies this year, according to data compiled by Bloomberg.

Hewlett-Packard is scheduled to break into two distinct entities in November, with one named Hewlett Packard Enterprise supplying businesses with high-end technology, and the other, HP Inc., selling personal computers and printers. The split, announced last October, is designed to enable each company to be better positioned in their respective markets...

[Demeter]

5. Second Circuit Rules That Dodd-Frank Whistleblower Protections Protect … Whistleblowers

http://www.nakedcapitalism.com/2015/09/second-circuit-rules-that-dodd-frank-whistleblower-protections-protect-whistleblowers.html

The Omnibus nature of Dodd-Frank has led many important provisions to go un or under-noticed even five years later. One of these provisions to my mind has been the whistleblower provisions in Dodd-Frank. Under Dodd-Frank “eligible” Whistleblowers can receive a percentage of the monetary fines charged for wrongdoing they uncover as long as the total fine equals or exceeds one million dollars. Additionally, the act explicitly forbids retaliation from employers and gives employees the right to sue their employers based on the law ( what is referred to as a “private cause of action”).

The “rub” so to speak is that the definition of “eligible whistleblower” can be interpreted narrowly or more broadly. The law itself refers to whistleblowers as reporting to the SEC. Does that mean that those who issue internal reports are not whistleblowers under Dodd Frank? On Thursday the Second Circuit court ruled on just such a case, claiming by a 2-1 vote that the definition of whistleblower is expansive in Dodd Frank.

Superficially this might look as a sort of non-issue. After all, how difficult is it to report to the Securities Exchange Commission rather than your boss? This framing is misleading. First it directly impacts the case itself. If a whistleblower discovers fraud and/or insufficient internal controls and decides to bypass their bosses and go directly to the SEC, his/her bosses could argue that the employee in question was part of their controls against fraud and had they acted “properly” it would never have been a court case. In other words, the obvious counterfactual of reporting internally creates reasonable doubt.

In practical terms, this narrow definition also means to get legal benefits conferred to you, you must alienate your employer even if it was an issue they would potentially be open to remedying. In other words, who wants to piss off their boss if it can be avoided and you are trying to build a career.The above also ignores that the people most likely to be whistleblowers, lawyers and accountants, have legal responsibilities to their employers that require them to report problems internally before seeking external remedy. In short, to be eligible for the legal benefit of being a whistleblower under a narrow interpretation of Dodd Frank would mean those most likely to be whistleblowers would be violating the law to fit the legal definition. This is obviously nonsensical....MUCH MORE

[Demeter]

6. Lehman Anniversary: A Reminder That the SEC Needs Someone a Lot Better Than Mary Jo White as Chairma

http://www.nakedcapitalism.com/2015/09/lehman-anniversary-a-reminder-that-the-sec-needs-someone-a-lot-better-than-mary-jo-white-as-chairman.html

By Becky Bond, CREDO Vice President and Political Director
The collapse of Lehman Brothers seven years ago today was the signature moment in a financial crash brought on by recklessness, greed, and outright fraud. Every year since, the anniversary of the Lehman collapse has offered us the opportunity to ask whether we have learned this lesson.

In the case of Securities and Exchange Commission (SEC) Chair Mary Jo White, the answer is clearly, “no.” Today, Mary Jo White represents a pre-Lehman mentality of deference to Wall Street – and it is long past time for her to go.

In an era when we need strong regulators reining in corrupt and out-of-control companies, White’s SEC is most famous for its dysfunction and for granting “get out of jail free” waivers to criminal banks.

The Project on Government Oversight (POGO), a respected government watchdog group, recently sent a letter to President Obama requesting that he ask Mary Jo White to step down as chair of the SEC, and designate a new head of the agency. As POGO put it, “White’s views have often aligned with those of her former Wall Street clients.” Sen. Elizabeth Warren penned White a scathing letter expressing deep disappointment and accusing the SEC chair of deliberately misleading her in a meeting....MORE

[Demeter]

7. Corbynomics 101: A Guide to People’s QE (PQE)—It’s the Deficit, Stupid!

http://neweconomicperspectives.org/2015/09/corbynomics-101-its-the-deficit-stupid.html

By Scott Fullwiler, Associate Professor of Economics and James A. Leach Chair in Banking and Monetary Economics at Wartburg College.

As anyone who’s followed the discussion has seen, the proposal from the newly-elected leader of the British Labor Party, Jeremy Corbyn, to implement “People’s Quantitative Easing” or PQE, has created a lot of controversy (Richard Murphy’s blog is a good place to see the PQE defense against these arguments). The basics of the proposal are that the government would create a public bank for financing infrastructure (National Investment Bank, or NIB), which the Bank of England (BoE) would then lend to directly in order to fund. The NIB would then carry out infrastructure projects to jumpstart the economy, create public capital, and create jobs.

The proposal obviously counters the austerity mantras going around in British politics (not to mention most other places), though Corbyn himself has paid lip service to balancing the budget, as well. The controversy, beyond the typical concerns with greater government spending of austerians, are fairly predictable for anyone who has taken a standard macroeconomics course (usually with a textbook written by someone who didn’t see the financial crisis coming)—

• first, the often heard QE = “printing money” = massive inflation argument is pervasive here with regard to PQE, as well;
  
  
• second, there are substantial concerns being voiced that “forcing” the BoE to finance the NIB will undermine the “independence” of the central bank and monetary policy;
  
  
• third, PQE gives the government free reign to spend by eliminating the need to fund its deficits in the financial markets.

So, here I want to look at the accounting and some basic operational realities of this proposal in order to understand how PQE does or does not do what the naysayers say it will. For PQE, consider a NIB that is essentially an arm of the government carrying out its spending, so we can include it as part of the government simply spending from the government’s account at the central bank, while its purchases of infrastructure show up as government assets....

[Demeter]

8. One last push to stop Medicare premium increases

http://www.reuters.com/article/2015/09/10/us-column-miller-medicarepremium-idUSKCN0RA1R420150910

Should 30 percent of Medicare beneficiaries shoulder a 52 percent premium hike next year while the other 70 percent pay no more at all? Advocates for seniors do not think so, and they are making a push to convince Congress to stop it from happening. The Medicare population vulnerable to shouldering the larger premium includes some federal and state government employees, people who sign up for Medicare for the first time next year, low-income seniors whose premiums are paid by state Medicaid plans and high-income seniors who already pay premium surcharges.

For these 16.5 million enrollees facing the stiff increase, monthly premiums would rise to $159.30 from $104.90, according to the recent annual report of the Medicare trustees (reut.rs/1MPkYeN).

Meanwhile, 36 million Medicare Part B enrollees would have their premiums hold steady at $104.90 because increases are tied to Social Security cost-of-living adjustments as part of a "hold harmless provision" in the Social Security Act. Because no COLA is expected next year due to extraordinarily low inflation this year, the Part B premium will stay flat. Some costs will go up for almost everyone, however, as trustees forecast a big increase in the Medicare Part B deductible, to $223 from $147, with the exception of those who have first-dollar Medigap supplemental policies and Medicare Advantage plan enrollees.

WHAT CAN BE DONE

Advocates for the 30 percent are swinging into action, trying to convince Congress to pass a one-time fix that would hold off on cost of living increases for everyone. Legislation that extended the hold harmless provision to those not covered by it passed the House of Representatives when a similar situation occurred in 2009, but never received a vote in the Senate.

This time, the fix is being pushed by a broad coalition of advocates and organizations representing federal and state government workers. No official figures are available, but a back-of-the-envelope calculation suggests a fix would cost the federal government $10 billion.

[wordpix]

28. yes, put more on backs of low income seniors so billionaires won't be hit with higher taxes

BErnie!

[Demeter]

9. Prospect of shutdown grows

http://thehill.com/policy/finance/253443-prospect-of-shutdown-grows

The prospect of a second government shutdown in two years is growing as House conservatives pledge to oppose any funding measure that includes money for Planned Parenthood.

GOP leaders face a familiar problem. A measure that blocks funding for Planned Parenthood would almost certainly lack the votes to pass the Senate, and would be vetoed by President Obama. But Republicans in the House don't have enough GOP votes to approve a funding measure that continues funding for Planned Parenthood, and don't want to negotiate with Democrats. Conservatives headed to their districts on Friday expressing certainty that they would force GOP leaders to include a hold on Planned Parenthood funding. And as in past funding fights, they insisted it would be the Democrats and President Obama who would be blamed for a shutdown.

“Will the president shut down and defund the troops in order to fund Planned Parenthood?” said Rep. Tim Huelskamp (R-Kan.). “I don't think he's that politically stupid, but we shall see.”

Rep. Walter Jones (R-N.C.), another conservative, sounded a similar theme.

“I’ve seen too many times up here that a threat of a shutdown is why you compromise your principles, and I am sick and tired of compromising my principles,” he said.

HATRED AND STUPIDITY ARE NOT PRINCIPLES, THEY ARE CHARACTER FLAWS, REP. JONES.

[wordpix]

29. repuklicans' nvestments will tank again due to their actions

They're so bright they'll do another shutdown and risk a downgrade of US credit rating. That will cause the market to tank. Haven't we seen this movie before?

[Demeter]

10. MUSIC, WHILE WE WAIT FOR THE FEDERAL RESERVE (AND/OR CONGRESS)

[MattSh]

11. bne:Chart - Kyiv one of the world's most unliveable cities, survey finds | Business New Europe

NOTE: From reading the story, the headline seems to be off. Apparently this is measuring the biggest decreases in liveablility, not which cities are the most unliveable. And although it covers a 5 year period, I can definitely tell you most of Kiev's fall occurred the last year and a half. Kiev has fallen further than Tripoli Libya, but not as much as Damascus, Syria!

Posted the whole thing because this will fall behind a firewall later this week. Also because you might have to register just to see it now.

Oh, and Kyiv is how the local language police want you to spell Kiev. Just so you know!

------------

Kyiv is one of the worst cities in the world to live in, according to the Economist Intelligence Unit’s annual Liveability Ranking.

The Ukrainian capital recorded the second-biggest fall in its liveability score over the last five years out of all 140 countries measured in the study, with a 25.8-point fall in its score since 2010. Its overall rank of 132nd placed it eighth-from-bottom overall.

Despite the ongoing conflict with pro-Russian separatists taking place on the opposite side of the country in eastern Ukraine, the disruption of last years’s sometimes violent Euromaidan street protests that ousted former president Viktor Yanukovych and worsening economic hardship pushed Ukraine’s liveability score down.





Russia’s recent economic hardship as a result of low oil prices and Western-led sanctions were enough to see Moscow and St Petersburg enter the top 10 of cities with the biggest score decreases.

Ranking 77th out of 140 in the overall city ranking, St Petersburg’s score was down by 4.4 points since 2010. 74th-ranked Moscow fell 5.6 points in the same period.

While the survey spelt bad news for Ukraine and Russia, the results showed that Warsaw, Poland’s capital, was the fifth-highest climber over five years, with a score increase of 2.5 points. The period saw Poland’s GDP grow faster than any other EU nation, no doubt contributing to the increase in its liveability score.

Other notable improvers were Bratislava in Slovakia, and Azerbaijan’s capital Baku, the eighth- and ninth-highest climbers over the last five years.





Complete story at - http://www.bne.eu/content/story/bnechart-kyiv-one-worlds-most-unliveable-cities-survey-finds

[Demeter]

19. The Central Bank With No Currency, No Interest Rates, But ATMs DONETSK!

http://www.bloomberg.com/news/articles/2015-09-15/the-central-bank-with-no-currency-no-interest-rates-but-atms

The Republican Central Bank has a governor, a couple of thousand employees and a glass-and-steel headquarters. It also has a bunker in its basement.

Here’s what the nascent, self-proclaimed Donetsk People’s Republic in eastern Ukraine is missing: a financial system. Absent from the central bankers’ toolkit are a currency and interest rates.

Set up 11 months ago, the fledgling institution is the first building block by pro-Russian rebels to manage the economy in the vacuum created by the war to break away from Ukraine. Dependent on almost $40 million a month from their patrons in Moscow just to pay pensions and on a circuitous transfer system via another Russian construct in northern Georgia, the Donetsk officials say they’re making progress.

“We are proud that our bank is working, that we made a processing center,” chairwoman Irina Nikitina, 47, a former chief executive officer at a local bank. She spoke in her office at a building the rebels took over from Ukraine’s Eximbank. “We built the system, we want to improve it.”

INTERESTING!

[MattSh]

21. Actually, the headline is more accurate than I saw it to be...

Kiev ranks 132 out of 140. So it is one of the world's most unliveable cities.

I was wondering about their criteria. According to the Economist, who actually did the rankings....

The ranking, which considers 30 factors related to things like safety, healthcare, educational resources, infrastructure and environment in 140 cities, shows that since 2010 average liveability across the world has fallen by 1%, led by a 2.2% fall in the score for stability and safety. Ongoing conflicts in Syria, Ukraine and Libya have been compounded by terrorist shootings in France and Tunisia as well as civil unrest in America. In Athens, austerity rather than unrest has weighed on the provision of public services, while Kiev saw the sharpest fall over the last 12 months and is now among the ten least liveable cities ranked.

Must add link..... http://www.economist.com/blogs/graphicdetail/2015/08/daily-chart-5

[Fuddnik]

12. Got gas for less than $2.00 a gallon today.

$1.99 everywhere!

Of course, I had that gas hog hybrid. In 4 months, I haven't used 6 gallons in that Volt!!


the Harley has the worst mileage out of 3 vehicles.

[Demeter]

13. Yanis Varoufakis on Jeremy Corbyn and capitalism

[Demeter]

14. European Bankers Can't Catch a Break as Firings Keep Coming

POOR BABIES!

http://www.bloomberg.com/news/articles/2015-09-15/european-bankers-can-t-catch-a-break-as-firings-keep-coming?cmpid=yhoo

Seven years after the collapse of Lehman Brothers Holdings Inc., Europe’s largest banks are poised for more bloodletting.

New management teams at Deutsche Bank AG, Barclays Plc and Standard Chartered Plc are among executives contemplating reorganizations that could involve thousands of job reductions. Deutsche Bank, which runs Europe’s biggest investment bank, may trim 8,000 positions across its businesses, a person familiar with the matter said this week.

Banks are weighing some of the deepest revamps since the financial crisis as stricter capital rules erode trading income and record-low interest rates squeeze margins in consumer banking. That contrasts with the U.S., where banks were quicker to raise capital levels and reduce costs after the 2008 credit crunch and are now profiting from a rebound in the economy.

“The top line at banks is under pressure in the low-yield environment and regulators are taking a relatively severe stance on capital,” said Dirk Sebrechts, who helps manage more than 200 billion euros ($226 billion) at KBC Groep NV in Brussels. “They have to look into their options on costs.”

[Demeter]

15. China's 'scary' problem is coming: Kyle Bass

http://finance.yahoo.com/news/chinas-scary-problem-coming-kyle-154230327.html

While many are watching its stock market, China's real problem may lie with its banking system, according to one hedge fund manager. Kyle Bass, Hayman Capital Management founder and managing partner, told CNBC's "Squawk on the Street" on Tuesday that Chinese banks will likely experience losses that may affect the country as a whole.

"Those that are watching whether Chinese stocks go up or down aren't paying attention, in my opinion, to what the real problem is," Bass said. "And the real problem is the loans in this banking sector."

The hedge fund manager said that Chinese bank assets rose about 400 percent since 2007, and are now about $31 trillion against an economy with a gross domestic product of $10 trillion.

"When you run a bank expansion that aggressively, that quickly, you're going to have some losses," he said, adding that "the scary thing about that" is a "likely" 10 percent asset loss in that banking sector would amount to $3 trillion.

Such losses would force China to use much of its foreign exchange reserves (which stand at about $3.6 trillion) and sell bonds to recapitalize the banking system, he said.

MORE

[Demeter]

18. No Escape for China Hedge Funds Overwhelmed by Stocks Crash

http://www.bloomberg.com/news/articles/2015-09-15/no-escape-for-china-hedge-funds-overwhelmed-by-stocks-collapse

It’s about to get even uglier for China’s hedge funds.

The newfangled industry, short on expertise and ways to protect itself from market declines, has seen almost 1,300 funds liquidate amid China’s $5 trillion stocks selloff, and a similar number may be at risk, according to Howbuy Investment Management Co. Now, a government crackdown on short selling and other hedging strategies have made prospering in a bear market difficult.

It’s an inglorious turn for China’s on-again, off-again love affair with stocks, which saw the number of hedge-fund-like vehicles explode in past years as the government made it easier to register funds and introduced new financial instruments. The market rout -- and the regulatory response to it -- has revealed cracks in the industry that suggest it may need years to recover. In the most devastating blow to domestic hedge funds, China has imposed new restrictions on trading in stock-index futures, a key investment strategy to dampen volatility and avoid big losses.

“It spells the end, at least temporarily, for China domestic hedge funds,” Hao Hong, chief China strategist at BOCOM International Co. in Hong Kong, said in an interview.

MORE

[Demeter]

16. The Doomsayer's Guide to the Fed, Rates and What Could Go Wrong

http://www.bloomberg.com/news/articles/2015-09-15/the-doomsayer-s-guide-to-the-fed-rates-and-what-could-go-wrong

...So if the Federal Reserve finally does raise rates this week, what could possibly go wrong?

Plenty it seems. Some market watchers such as former U.S. Treasury Secretary Larry Summers are warning that financial markets still aren’t ready and could easily be caught off-guard. As Summers and others have pointed out, futures traders are pricing in just a 28 percent chance of an increase this week, based on the assumption that the effective fed funds rate will average 0.375 percent after liftoff.

Even those who are relatively optimistic say there are weak spots that investors need to be wary of.

“It’s like a glass that has a crack in it,” said Aaron Kohli, an interest-rate strategist at BMO Capital Markets. “Predicting where that crack is going to spread is difficult to do.”

The pessimists have some ideas, though.

1) Short-End Tantrum

2) Emerging Contagion

3) Imperiled Borrowers

4) Structural Seizures

5) Risk of Standing Pat

“The worst case for me is that they don’t go and we have to do this all over again,” said John Briggs, the head of strategy for the Americas at RBS Securities Inc.

DETAILS AT LINK

[Demeter]

17. Fed Liftoff Fears Spark Surging Demand for Higher Rate Hedges

http://www.bloomberg.com/news/articles/2015-09-15/fed-liftoff-fears-spark-surging-demand-for-higher-rate-hedges

Traders on Tuesday appeared to decide that the risks of the Federal Reserve surprising them with an unexpected interest rate liftoff this week were too great.

That triggered a surge in demand for options -- known as puts and shown in the chart below -- that profit if yields implied by Eurodollar futures rise. These contracts, the world’s most actively traded of all money market derivatives, are settled at expiration at the London interbank offered rate and have also for decades been used to speculate on changes in Fed policy. As the futures, which are quoted in price terms, fall, their yields rise.

That option demand came as investors dumped two-year Treasury notes, due to the same concern about the start of the first monetary policy tightening since 2006. Yields on U.S. government debt reached 0.80 percent on Tuesday, the highest Tuesday since 2011.

“This is about concern that for the first time in many years there is a chance the Fed will actually hike,” said Thomas Simons, government-debt economist in New York at Jefferies Group.

MORE

[Demeter]

26. Low Unemployment with Falling Capacity Utilization… Not a Good Sign for Fed Liftoff

http://angrybearblog.com/2015/09/low-unemployment-with-falling-capacity-utilization-not-a-good-sign-for-fed-liftoff.html?utm_source=feedly&utm_medium=rss&utm_campaign=low-unemployment-with-falling-capacity-utilization-not-a-good-sign-for-fed-liftoff

Should the Fed raise the base interest rate? They really shouldn’t at this point. Will they? They probably will because they still see years of growth. I do not see years of growth ahead… Let me explain.

Almost one year ago I wrote that capacity utilization would start falling. (link) It has fallen since that time, even until today’s report that capacity utilization in August was 77.6%. This number was below expectations but perfectly in line with a limit line in a model that I use.

The model plots the movement of capacity utilization and unemployment. The model has two limit lines that act upon the increasing utilization of labor and capital. One for Effective Demand (basically labor share) and one for Profit Maximization (equation in graphs). The utilization of labor and capital moves toward the limits during a business cycle to increase profits. Once the movement hits the limits, profits are further increased by only moving downward along the limits, which means that capacity utilization will decrease as unemployment falls. This pattern has existed for decades before a recession. When the plot starts to pull away from the limits, a recession is beginning...

Yves here. The premise I disagree with in this post is that the Fed is primarily concerned about the real economy in its decision as to whether to raise interest rates. The central bank is instead desperate to back out of its ZIRP corner. It appears to recognize that negative real interests rates are helping speculators and allowing corporations to prop up the stock market by funding share buybacks. But loan demand remains slack, a clear sign that more stringent rate policy is not warranted out of any concern of real economy pressures. The Fed instead appears to want to latch on to any semi-good run of economic data to increase rate levels, so it will have wriggle room to drop them in the event of a crisis.

[Demeter]

20. Austerity Success Stories PAUL KRUGMAN

I THOUGHT IT MIGHT BE A BLANK COLUMN...BUT THIS IS EVEN BETTER

http://krugman.blogs.nytimes.com/2015/09/14/austerity-success-stories/

One thing you encounter a lot in Europe these days are assertions that the “success” of Spain and Portugal proves that the critics of austerity were all wrong. To make this sort of claim, however, you have to do two things. First, you need to define success way, way down. Second, you have to willfully misread what Keynesians have been saying from the beginning about about the process of internal devaluation.

Let’s look at what passes for success in Spain, which has, somewhat incredibly, been elevated as a role model:



We see an awesome slump that leaves Spain far below its pre-crisis level of output, and even further below its pre-crisis trend, followed by an upturn that, even if it continues at the current pace, will take many years to recover the lost ground. This is a vindication of policy? But isn’t any kind of recovery a refutation of what people like me have been saying? Sigh. Here’s what I wrote three years ago, drawing on standard international macro theory:

So over time gradual deflation (or deflation relative to trading partners) increases competitiveness, leading to recovery toward full employment; this implies a period of above-normal growth and, implicitly, above normal growth in exports as well. So if you see these things it isn’t a refutation of the approach, it’s actually what the model predicts.

The point, however, is that it may take a long time — and there’s massive pain along the way.

This is exactly the point Milton Friedman was making in his case for flexible exchange rates:

Unemployment produces steady downward pressure on prices and wages, and the adjustment will not have been completed until the deflation has run its sorry course.

If you ask me, it’s telling that defenders of current policies and attackers of their critics have to invent false claims the critics never made.

[Demeter]

22. After Creating Migration Flood Merkel Throws Up Emergency Dikes

http://www.moonofalabama.org/2015/09/after-creating-migration-flood-merkel-throws-up-emergency-dikes.html

The German chancellor Merkel tried to gain some points with her neoliberal friends and with big companies and donors by suddenly opening the border for "refugees" of all kinds, even for those who come from safe countries. These migrants would help to further depress German wages which, after years of zero growth, slowly started to increase again.

But neither she nor her allies ever prepared the German public for a sudden influx of several hundred thousand foreigners. Changes in immigration policy were sneaked in without any public discussion. Suddenly 800,000 foreign people are expected to arrive this years and many more over the next years. People who neither speak German nor readily fit into the national cultural and social-economic environment. Most of these do not come out of immediate dangers but from safe countries.

While Merkel was lauded by all kinds of Anglo-american neoliberal outlets, from the Economist over FT and Newsweek to the Washington Post the backlash in Germany was brewing. In Who Runs The Migrant Media Campaign And What Is Its Purpose? I predicted:

There will be over time a huge backlash against European politicians who, like Merkel, practically invite more migrants. Wages are stagnant or falling in Europe and unemployment is still much too high. The last thing people in Europe want right now is more competition in the labor market. Parties on the extreme right will profit from this while the center right will lose support.

Despite a major campaign of pro-migrant propaganda in Merkel friendly media the German population in general is furious with her stunt. The backlash comes from all sides but especially from her own conservative party. Additionally many European leaders point out that Merkel, who insistent on sticking to the letter of law in the case of Greece, is now openly breaking European laws and agreements. The flood of migrants Merkel, and the publicity over her open border policies, released seriously endangers her position in the next elections. The flood now needs to be stopped. Urgently. Merkel is pulling the emergency break:

Germany is preparing to reintroduce some form of controls along its border with Austria, according to local media reports.

The German newspaper Bild said Bavarian officials were set to "close" the border with Austria, in what it described as a "dramatic shift in refugee policy".
...
Germany's interior minister, Thomas de Maizière, has scheduled a press conference for 6pm local time (5pm BST), when he is expected to announce further details of the planned move.

I predict that in a week or two German borders will be tightly controlled and new migrants will have difficulties to be accepted. Many, if not most of them, will be send back to either their home country or the country they came from.

On this issue Merkel had lost her feeling for German political realities. This might well cost her a reelection. That would then be the only positive effect of this affair.

[Demeter]

23. How Merkel Went From Greek Crisis Pariah to Refugee Crisis Hero ANOTHER VIEWPOINT

http://www.bloomberg.com/news/articles/2015-09-15/how-merkel-went-from-greek-crisis-pariah-to-refugee-crisis-hero

It was when the numbers became faces that German Chancellor Angela Merkel made a decision that could make or break her political legacy.

As she toured a refugee center in the eastern German town of Heidenau on Aug. 26, hearing stories from Syrians about traumatic journeys to flee their civil war, protesters against their arrival jeered and shouted abuse. Some called her a “traitor to the nation.” The experience left her shaken but determined to act, according to two close Merkel aides.

What ensued was a strategy for dealing with a flood of refugees by simply letting them come. While her open-door policy transformed her image almost overnight from the scourge of the Greeks into the conscience of Europe, it threatens to split the continent and presents a domestic high-wire balancing act even more dramatic than the euro crisis.

“If we now have to start apologizing for showing a friendly face in response to an emergency situation, then that’s not my country,” Merkel said at a press conference in Berlin on Tuesday.

MORE

THE CHICKENS HAVE COME HOME TO ROOST--BIG TIME

[Demeter]

24. The Hottest Commodity Asset Right Now Is a 35,000-Ton Steel Ship

http://www.bloomberg.com/news/articles/2015-09-15/the-hottest-commodity-asset-right-now-is-a-35-000-ton-steel-ship

At a time when commodity producers are writing down billions in asset values and canceling projects around the world, one niche area of the gas market is booming.

Hybrid ships, called Floating Storage and Regasification Units, or FSRUs, offer emerging nations from Egypt to Pakistan a cheaper, quicker way to attack power shortages by importing liquefied natural gas. They cost about $300 million to build, or half as much as an onshore import terminal, and are up and running as much as six times faster, sometimes within as little as a year, according to owners Hoegh LNG Holding Ltd. and Excelerate Energy LLC.

NIFTY! WHAT'S THE CATCH?

[Demeter]

25. Five Charts Show Tough Job Facing Next Greek Prime Minister ELECTION IS SUNDAY!

http://www.bloomberg.com/news/articles/2015-09-15/five-charts-show-tough-job-facing-next-greek-prime-minister

Whoever wins the elections in Greece on Sunday faces an unenviable task. Far from the spoils of victory, the country’s next prime minister -- likely to be either Syriza’s Alexis Tsipras or New Democracy’s Evangelos Meimarakis -- will be rewarded with a damaged economy, near-record unemployment and crippled banks.

The first review of Greece’s third aid program, signed by Tsipras last month just before he called the ballot, begins in October. The new premier will have to oversee the recapitalization of banks and keep the budget and state-asset sales program on track. He’ll have to do this against the backdrop of an economy that will probably be feeling the squeeze from the imposition of capital controls at the end of June.

While Greece’s economy showed surprising resilience in the second quarter, growing 0.9 percent, manufacturing and economic sentiment surveys suggest it could crash in the second half of the year.

“Most of the monthly indicators are pointing to a pretty sharp contraction in the third quarter,” said Nick Kounis, head of macroeconomic research at ABN Amro Bank NV in Amsterdam. “Historically, we also know from capital controls that they tend to have quite negative and long-lasting effects on activity.”

MORE

[Demeter]

27. In other news: UAW and Fiat-Chrysler have tentative agreement

now the union votes...