Sunday, September 25, 2016

$8 Trillion in Corporate Bond Junk

When you "buy debt" in the form of bonds, you ostensibly give your money to a company, with the view they will pay it back in time with interest.

Once upon a time, such deals were made with companies that actually make things, and they used the money to upgrade factories, or make products more efficiently, or perhaps buy a company from which they bought 100% of what a company made, like a shoe company that bought 100% of the shoelaces a shoelace company made.  Well, they might as well buy the shoelace company.

Today people are buying debt from companies that make nothing, but there is a symmetry here, they are paying for the debt with ex nihilo credit, so nothing is actually happening except people are blowing up bubbles and making claims on the productive capacity for themselves..

Now the problem is some of these buyers are using ex nihilo credit allied to your pension account.  So?
But it's important to keep an eye on the growing influence of tech companies over U.S. debt markets. While many of the borrowers will likely stick around and repay investors, some inevitably will not. And this will have a bigger effect on anyone who owns a piece of the $8 trillion U.S. corporate-debt market, which is more investors than ever before. 
Well, do you see $8 trillion in productivity and manufacturing advances in the last few years?  No?  Well, neither did I or anyone else.  What you did see was bond traders who made commissions on $8 trillion in placements.  And they are set, who cares what happens after that.  When most of that goes "poof" so does your tally of ex nihilo credit to your account.  You no longer can draw on the tally of your ex nihilo credit to make a house payment, or buy food for that matter, because it no longer exists.  Since the obligation to you is gone, country got more wealthy, under an ex nihilo credit regime, because nobody owes you a pension any more.

Best to get self employed.

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Examples of Surviving In Small Business

Wih ex nihilo credit, there is no rational limit to what can be "financed."  The USA can "afford" to put in its credit tab wars, as when USA trespasses in other peoples' back yards, and picks fight.  For example, the war in Syria is a USA gig.  If you say that it was started by people protesting the Syrian government, then you know nothing about how the USA works, or Syria.

What goes around comes around.  So learn from those who are enduring the woes attendant to ex nihilo credit.
Syrian shoppers and foreign backpackers have been replaced by war-weary troops, and colorful souvenir stands have given way to checkpoints dividing the ancient market into rebel- and government-held zones.
"I am the only tailor left in Aleppo's Old City," says Mosuli in his modest shop in a regime-controlled street of the district.
The photo shows an industrial sewing machine,  A daughter of mine has one like that.  The means of production. They are cheap in USA right now.  Buy a half dozen apparel construction machines and store them, or better yet, rent out a workshop where people can use them.

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Saturday, September 24, 2016

October 15 San Francisco Import Export Start Up Boot Camp

Join us in San Mateo, California Saturday, October 15, 2016, from 9am to 5 pm for a all-day, in person, intensive boot camp import export start-up seminar.

Here is the link to the registration and information,  and feel free to email me directly anytime regarding the seminar.  My email is on the upper right under "Have a question for John? Ask him here..."

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Bankers Relieved: Court Says Student Loan Usury Good Public Policy

The Marxist Harvard Professor Morton Horwitz wrote a splendid review of the development of law in USA, called  Transformation of American Law, 1780-1860.  As usual, Marxists gets their facts straight.  he shows, case by case how capitalism and our legal structure produced every ill we now decry as a nation.  Even something like pollution, case by case, inexporably, how USA became, and is, the worse polluter mankind has ever known.  (Want to argue that with me?)

Here is another example for a future book, where the courts went outside the law, again, to back bankers.  As if trapping students for life in unbankruptable loans was not enough, overcharging interest on those loans contrary to state law is OK, say Federal Appellate Courts:
Additionally, as noted above, the court analyzed possible public policy considerations. Unlike other federal and state courts that have recently decided true lender cases, including the Second Circuit in Madden v. Midland Funding, 786 F.3d 246 (2nd Cir. 2015), the court explicitly acknowledged that making it difficult for banks to assign or sell their commercial property to the secondary market impedes, versus promotes, good public policy.
That's right, good public policy! Ka-ching!  Read Horvitz and improve your mind (just know his recommendations are no good, but they take just a page at the end of the book.)

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Specialty Stores That Eat Dinosaur Food

I decried Skeecher's retail moves here, and it seems that prestige shopping mall is losing its cachet before it is even full.  Five leaseholders are being sued for pulling out.
Edward Beiner is just the latest WTC tenant Westfield has sued since June, including fashion retailers, Dune London, Bebe and True Religion and coffee shop Fika. Westfield claimed in court papers that the retailers are contractually obligated to take the space before Westfield finds a replacement tenant. Three of the tenants countersued and True Religion settled the matter out of court.
The move to the 365,000-square-foot WTC mall would have been Edward Beiner’s first location outside Florida.
Westfield’s World Trade Center mall, located inside the soaring Santiago Calatrava-designed Oculus, opened on Aug. 16 with just 60 percent of its more than 100 retail shops open for business. Westfield has said the complex is “fully leased” and claims it will be fully occupied by Christmas.
These specialty retailers are all backed by ex nihilo credit, when that is drying up.  What do they know?

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Friday, September 23, 2016

Fukushima: Let's Do Six More In India

With ex nihilo credit there is no rational limit to the crazy things you can do, like sell extremely unsafe nuclear power plants, which result in such events as the Fukushima meltdown.  While ex nihilo credit can advance an insanely dangerous project, there is the problem of liability.  Well, the reason Fukushima happened in the first place is Westinghouse had no liability.  Of course not.  Who would stand behind and insanely dangerous project?  Westinghouse will only do the work if they cannot be liable not if, but when, the thing blows up.
Both US President Barack Obama and Prime Minister Narendra Modi have been promoting the nuclear deal, which was stuck for years because of an Indian law that made nuclear equipment suppliers liable in case of an accident, and not just the plant operators as is the global norm. 
And when, in the case of Fukushima and Chernobyl and Three Mile island... and so on, when these go bad, no one is held responsible.  So people do it again.  And the taxpayers pay the cost, Westinghouse takes the profits.

Westinghouse also cannot sell these unless the USA taxpayers fork over the money to India to buy them.  That's right, there are no customers for these, unless USA gives the "customer" the finance to buy the product.  All of our huge corporations are unable to survive unless the taxpayer gives their "customers" the funding to buy USA products.

This is another example of ex nihilo credit calling forth goods and services that would never exist in a authentic market.  This is a case of malinvestment.  It is also an example of misallocation, since these mega-dangerous projects with "free money" crowd out the safe, sane affordable micro-nukes that Toshiba has developed.

The micro nukes are kept away by regulations.  The regulations makes sure only Westinghouse can be in the business.  The financing is sure to fail, because USA lends far more than can ever be paid back.  Then we own India.  No one in power in India or USA wants that to change.

Ex nihilo credit, at interest, destroys the authentic market.

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Rules Reveal Weaknesses

Prof. Joseph Salerno is an Austrian scholar who made a donation to his school's athletic program and received a brochure on what he could not longer do, according to the NCAA.  His point is o lay out how the NCAA is quite marxist in structure, which is entertaining, to see communism actually working.

But I was struck about the rules that now apply to him.  They say our rules reveal our weakness.  And what is forbidden below is precisely what happens in such fields a big Pharm when they want to influence say doctors:
To my surprise, the brochure informed me that I am a “representative of athletics interest” for the university. One comes by such a clumsy designation by making a donation to any of BC’s athletic programs, holding membership in any donor, booster, or alumni group, employing or helping to arrange employment of student-athletes, being either the parent of an enrolled student-athlete or a former varsity athlete, or helping to promote BC athletics in any way. As a “representative,” I am “prohibited” from providing “extra benefits” to any “enrolled student-athlete.” These benefits include cash, loans, and co-signing for loans in any amount. Also prohibited are gifts of any kind to student-athletes or their families including holiday gifts, clothing, and even birthday cards. I am also barred from providing special discounts for goods and services or rent-reduced or free housing to student-athletes or their relatives; nor am I permitted to pay a student-athlete an honorarium for a speaking engagement or allow him or her to use my cell phone to make a call without charging a fee.
Big Pharm does all these things with doctors.  It's how they bribe doctors without getting caught.  it's expensive, and so medicine has to carry all these costs to create a market that would otherwise not exist, that is to say, we'd have a different array of medicines if we did not have this corruption.

And that last one, i's illegal to let a kid use a cell phone without charging him...  In Islam, it is forbidden to stand in shade of a wall of someone to whom you lent money, for it might be taken as interest on a loan.

Our rules reveal our weaknesses.

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Thursday, September 22, 2016

USA Policy: Food as a Weapon

This is the first I've ever heard of this fellow, but apparently he is a prolific writer.  And here again, example 729,015,991, of Marxists getting their facts straight.  
While leading US corporate executives look to China’s dynamic growth as a source of investments for US elites, Obama warns of Chinese ’security threats’. While former Treasury Secretary Paulson editorializes in favor of greater commercial linkages with Beijing as a vehicle for continued US business growth, Obama works to provoke military hostilities against China among second and third tier Asian countries.
And their analysis is excellent as well. Where Marxists fall down is their prescriptions.  Well, you can't have everything.

Capitalists ac as though Marxism is the source of all evil.  You gotta take the good with the bad, and sort the two out.  Half the world would not have adopted Marxism if it was all evil.  Marxism was so convincing because it was correct on its facts (generally).  But when it came time for a plan, the Monty Python Life of Brian scene in which the Marxists are formulating a plan is spot on.

This writer laments de-regulation.  Ungh!  Each horror he details is precisely grounded in regulations.  These malefactors put massive amounts of money into regulations, which benefit themselves.  It is called regulatory capture, a well-known phenomena (and how!)  The malefactors also pour massive amounts of money into social conditioning, in this case, a achieving a pavlovian response among Americans to wet their pants when someone mentions the word "de-regulation."  In this way, he malefactors will never have to fear for change.

Marxist prescription for change is government action.  No, really, that is what they call for.  I am not making this up.  This writer wants better regulatory oversight to control the demonic forces afoot on our planet.  This will work, they believe, because people become angelic when they ascend to the regulatory commanding heights.

Pynchon said get them to ask the wrong question and the answer will no matter.  "What is the correct regulation?"  At that point, it truly does not matter what regulation is established, the Hegemon wins with regulation.

None of the malefactors would exist in the first place with regulations.  The market will produce the necessary regulations, it always does.  International trade is grounded in Lex Mercatoria, a free market, anarchistic set of rules that work whenever allowed to blossom.  When suppressed, like today, we get chaos.

Look where there is chaos and poverty, and you'll see a regulatory rich environment.  Overcome your social conditioning, embrace free markets.  De-regulate everything.  Watch the malefactors wither on the vine.

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Belt and Road and Tang

People imagine dread of being in places like Afghanistan and Kurgystan, but once these places were as safe and lovely as Marin County or Savannah, Georgia. What changed is trade lanes.  The Tang Dynasty was China's golden era, and those countries thrived with China in the Tang Dynasty because of trade.  China is deliberately restoring the trade lanes.

We trespass in those country's back yards and pick fights.  The Chinese have an advantage over us in policy.

Check out this remnant from long ago.

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Wednesday, September 21, 2016

Step Back: Deutsche Bank Derivatives

As controlled as the press is, when bad news comes out, assume it is well-timed.
The bank would like us to take it on faith, that the positive value of its derivatives book is €615 billion while the net positive value of its book is around around €18 billion.
So Mish does interesting analysis, and as usual his commenters are very good.  So questioning Deutsche Bank health, on top of USA seeking $14 billion in fines for causing the USA subprime loan bust (?!?!), what to make of this when so may others did as bad or worse.

Well, step back a little further.  The Germans asked for their gold back from its storage in USA.
When trying to move gold from New York in 2014, the Bundesbank met obstacles from US authorities when officials tried to inspect the German gold kept in US vaults.
Hmmm... if we say Germany owes us the money, and they do not pay...well, maybe we just impound the gold we have, or as the case may be, don't have.  It's what I would do.  If I didn't have it.

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