Investors have yanked nearly $20 billion from bond mutual funds and exchange traded funds so far in August. That’s the fourth highest pullback ever, according to TrimTabs data. In June, investors took out $69.1 billion — the highest on record.#3 The sell-off of U.S. Treasuries is being led by foreigners. In particular, China and Japan have been particularly aggressive in selling off bonds…
China and Japan led an exodus from U.S. Treasuries in June after the first signals the U.S. central bank was preparing to wind back its stimulus, with data showing they accounted for almost all of a record $40.8 billion of net foreign selling of Treasuries.#4 Thanks to rapidly rising bond yields, some of the largest exchange-traded bond funds are getting absolutely hammered right now…
The sales were part of $66.9 billion of net sales by foreigners of long-term U.S. securities in June, a fifth straight month of outflows and the largest since August 2007, U.S. Treasury Department data showed on Thursday.
China, the largest foreign creditor, reduced its Treasury holdings to $1.2758 trillion, and Japan trimmed its holdings for a third straight month to $1.0834 trillion. Combined, they accounted for about $40 billion in net Treasury outflows.
• The $18 billion iShares iBoxx $ Investment Grade Corporate Bond fund (ticker: LQD) has fallen 7.94% since May 2, according to S&P Capital IQ. That’s including reinvested interest from the fund’s bond holdings.#5 In recent weeks we have witnessed the largest cluster of Hindenburg Omens that we have seen since prior to the last financial crisis.
• The 3.7 billion iShares Barclays 20+ Year Treasury Bond (TLT) has plunged 15.9% the same period. Longer-term bonds typically get hit harder when rates rise than shorter-term bonds. For example, the iShares Barclays 3-7 Year Treasury Bond fund (IEI) has fallen 3.2% since May 2.
• PowerShares Emerging Markets Sovereign Debt (PCY), which invests in government bonds issued in developing countries, has fallen 12.7%. The fund has $1.8 billion in assets.
The exuberant mood comes as margin debt on Wall Street hovers near $377bn, just below its all-time high and well above peaks before the dotcom crash and the Lehman crisis.#9 The growth rate of new commercial bank loans and leases is now the slowest that it has been since the end of the last financial crisis.
“Investors have rarely been more levered than today,” said Deutsche Bank, warning that the spike in margin debt is a “red flag” and should be watched closely.
After last week’s bloody crackdown by the Egyptian army, fears of a disruption of oil supplies to the West have boosted the oil price. Brent crude prices werepropelled to a four-month high of $111.23 on Thursday. If the turmoil gets worse – or unrest spreads to other countries – the risk premium currently factored into the price of crude is likely to increase further.#15 European stocks just experienced their biggest decline in six weeks.
What’s going to cause the next crisis? Rickards says,“The problem in 2008 was too-big-to-fail banks. Well, those banks are now bigger. Their derivative books are bigger. In other words, everything that was wrong in 2008 is worse today.” Rickards goes on to warn, “The last time, in 2008 when the crisis started, the Fed’s balance sheet was $800 billion. Today, the Fed’s balance sheet is $3.3 trillion and increasing at $1 trillion a year.” Rickards contends, “You’re going to have a banking crisis worse than the last one because the banking system is bigger without the resources because the Fed is tapped out.” As far as the Fed ending the money printing, Rickards predicts, “My view is they won’t. The economy is fundamentally weak. We have 50 million on food stamps, 24 million unemployed and 11 million on disability, and all these numbers are going up.”We never even came close to recovering from the last financial crisis and the last recession.
"include[s] new rights for the big pharmaceutical companies to expand, to raise medical prices, expand monopoly patents; [there are] limits on Internet freedom, penalties for inadvertent noncommercial copying, [like] sending something to a friend. There are the same rules that promote off-shoring of jobs that were in NAFTA that are more robust [and] that literally give privileges and protections if you leave. There is a ban on "buy American" and "buy local" or "green" or sweat-free procurement. There are limits on domestic financial stability regulations. There are limits on imported food safety standards and product standards. There are limits on how we can regulate energy towards a more green future - all of these things are what they call "Behind the Borders" agenda. And the operating clause of TPP is: "Each country shall ensure the conformity of its domestic laws, regulations and administrative procedures with these agreements." That's to say, that we're told to conform all of our domestics laws - including all the important public interest laws fought for so hard by people around the country - for these corporate dictates, and it's strongly enforceable. If we do not conform our laws, another country can challenge us and impose trade sanctions until we do, but this one is even privately enforceable by the corporations themselves.What is being constructed secretly, bit by bit, is a global governance structure in which corporations are the citizens and globalized states are the local administrative structures that enforce corporate dictates and maintain order. This is a world without popular sovereignty and without democracy. It is a world ruled by an insulated technocratic elite serving the interests of global capital.
Egypt plays a vital role in
international energy markets through the operation of the Suez Canal and
the Suez-Mediterranean (Sumed) pipeline. These are vital pieces of
infrastructure in the global oil market. Several years ago, state attorneys general and others involved in consumer protection began to notice a marked increase in a range of predatory lending practices by mortgage lenders. . . . These and other practices, we noticed, were having a devastating effect on home buyers. In addition, the widespread nature of these practices, if left unchecked, threatened our financial markets.Less than a month after publishing this editorial, Spitzer had been exposed, disgraced, and was out of office. Greg Palast pointed to the fact that Spitzer was the single politician standing in the way of a $200 billion windfall from the Federal Reserve, guaranteeing the toxic mortgage-backed securities of the same banking predators that were responsible for the subprime debacle. While the Federal Reserve was trying to bail them out, Spitzer was trying to regulate them, bringing suit on behalf of consumers.3 But he was quickly silenced, and any state attorneys general who might get similar ideas in the future would be blocked by the federal “oversight” then being imposed on state regulation.
Even though predatory lending was becoming a national problem, the Bush administration looked the other way and did nothing to protect American homeowners. In fact, the government chose instead to align itself with the banks that were victimizing consumers. . . . [A]s New York attorney general, I joined with colleagues in the other 49 states in attempting to fill the void left by the federal government. . . .
Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye. . . . The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). . . . In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government’s actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules. But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation.
Suddenly, the Masters of the Universe were staring at their worst nightmare: the prospect of a comeback by the only major politician in the U.S. whose deeds — and not simply words —prove that he does not think corporate titans are too big to jail.Yves Smith, writing on her blog Naked Capitalism on July 25th, expanded on this threat. She noted that private equity [PE] investment managers had persuaded their clients that their limited partnership agreements [LPAs] were a form of “trade secret,” and that nobody was looking closely at whether PE firms were complying with the fee and expense provisions of their agreements:
Who, when the Justice Department, Congress, and the Securities and Exchange Commission all defaulted in the wake of a tidal wave of financial frauds, creatively used New York State’s Martin Act to go where they wouldn’t and subpoena emails and corporate records of the malefactors of great wealth, winning convictions and big settlements.
Who in 2005, as New York State Attorney General, actually sued AIG instead of thinking up ways to hand it billions of dollars of taxpayers’ money. . . .
And who in 2013 with business as usual once again the order of the day, is promising to review how the Comptroller’s Office, which controls New York City’s vast pension funds, does business with Wall Street and corporate America.
Public pension fund investors have almost universally acceded to the demands of PE firms to exempt the LPAs and cash flow reports from state FOIA laws, which keeps the eyes of the press and the public off the documents.Hence also the $1.5 million ad campaign against Spitzer brought by a coalition of business leaders, labor unions and women’s groups.
. . . However, the New York City Comptroller has access to this critical information. Hence the freakout at the prospect that Spitzer might get the job.
Do we want an elected official who has broken the law and who has participated in sustaining an industry that we all know has a long history of exploiting women and girls?The speaker lumped Spitzer with Anthony Weiner, who is running for mayor after sending out sexually explicit tweets, and Vito Lopez, who is running for City Council after resigning from the Assembly over sexual harassment allegations. She asked whether these men would address the issues that matter to women, “or are they just going to see us as objects?”
Obama's housing solutions is filled with doomed-to-fail private sector initiatives [AFP]
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| It
was one of those steamy Saturday mornings in August, a time usually
called "a dog day," because so little is happening. Yet on this day cars
were packed into a parking lot in the back of a shopping center where
the Meadowlands Exposition Hall is based. The vast center was housing a
"Save The Dream" event for distressed homeowners facing foreclosure
organized by one of America's most aggressive housing rights group, NACA
(NACA.com) or the Neighborhood Assistance Corporation of America. Don't let its benign name fool you. NACA and its CEO Bruce Marks, a former employee of the Federal Reserve Bank, is more than a service organization. With over 350 employees in 40 offices across the country, they call themselves "bank terrorists" because of the militant protests they mount against banks that engage in predatory practices and overcharge customers. They offer counseling, budget preparation, and direct help in negotiating affordable deals. They also provide advice on how bank lending works, and how to work with banks without getting exploited. Their direct action campaigns have won results, and now leading banks, perhaps in fear of becoming targets, have begun to work with NACA in processing loans, modifying mortgages and even cutting interest rates that offer better terms. Founded in 1968, NACA operates in a highly business-like manner -- unlike most well-intentioned but poorly organized community activists while boasting of victories for their members: "NACA's aggressive confrontation advocacy has yielded numerous victories against some of the country's largest and most power financial institutions," they claim on their website. "NACA was the worst nightmare for a number of huge institutions and powerful individuals." Behind the website's take-no-prisoners advocacy is a proprietary online system for processing loan applications and tracking the cases of homeowners facing foreclosure. NACA says they have over a hundred thousand members and their own mortgage sales program with over $10bn to offer. Their system does not rely on credit scores; charges no down-payment, and offers below market rates for long-term mortgages. All their services are free, although the members have to pledge to take part in direct action to benefit NACA was not what President Obama had in mind when he recently proposed yet another initiative to solve the protracted housing crisis that helped demolish the economy. While the business sections of major newspapers report on the many lawsuits against illegal practices by banks and other lenders -- most leading to large cash settlements without any admissions of guilt -- the foreclosure crisis goes on with little relief. Obama's greatest failure Many see this as the Obama administration's greatest failure -- the foreclosure crisis continues to hurt the poor and struggling middle class. Obama's solution consists of more private sector iniatives -- the very same polices that brought these crises in the first place. In a recent speech he made in Phoenix, Obama said: "I believe that our housing system should operate where there's a limited government role and private lending should be the backbone of the housing market."The New York Times noted that "there is little sign of progress" in fixing the housing crisis. NACA's Bruce Marks went further by telling me that Obama has betrayed most of his promises to homeowners, and has sided with the banks with subsidies and incentives. He also supports the need for government financing since the private sector only funds 13 percent of mortgages through lenders like Fannie Mae and Freddie Mac that Obama now wants to phase out. Limiting government involvement will hurt the poorest Americans, he argues, even as he acknowledges the need for more efficiency, accountability, and transparency in private sector and public sector lending programs. The Atlantic Monthly agrees that critiquing government support may play well with the right but distorts the larger truth. "The US government and taxpayers did rescue these agencies in 2009 (to the tune of nearly $200bn) and, after injecting them with capital and essentially nationalizing them, these companies started to turn a profit as the housing market slowly recovered," writes Zachary Karabell. "This month, they contributed more than $15bn to the US Treasury, and have been one factor in sharply reducing government deficits." Black Americans hit hardest A new book by Laura Gottesdiener, A Dream Foreclosed: Black America and the Fight for a Place to call Home, offers deeper context in the socio-economic effects of the housing crash. She shows how foreclosures have devastated America's black community while banks profit. Incredulously, nearly every African American has seen their income decrease -- all under the watch of our first black president. She offers first-person reports on the trauma and tragedies of families who bought homes with deceptive loans offered by hustlers and conmen who knew they would not be able to afford their payments but sold the properties anyway. These are the people who made large fees from subprime loans even when borrowers qualified for lower interest loans. Her reporting from the frontlines of this battle humanizes the issues and highlights the injustices that most of the business media glosses over. Her insights conflict with the president's, most of the media and the banks. "We've already tried policies that benefit Wall Street and massive corporations, and all we've ended up with is more financial consolidation, speculation and criminal activity," she concludes. "If we really want to benefit the majority of Americans, let's focus on proposals like implementing widespread principal reduction and creating structures of collective local ownership like Community Land Trusts." Fortunately, as Gottesdiener documents, and Marks affirms, community groups are not waiting for the government to act, but are taking action to save homes and stop often illegal evictions. When President Obama speaks at the 50-year anniversary of The March on Washington on August 24, I doubt he will do much boasting about how he helped black American families hold onto their greatest assets and dreams of home ownership. |
