Category Archives: Other Views

The Appalachian Messenger, 5/27/16

This week’s Appalachian Messenger.

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The Appalachian Messenger, 5/20/16

Last week’s Appalachian Messenger, which was overlooked because SLL was on vacation.

The Great Fall Of China Started At Least 4 Years Ago, by Raúl Ilargi Meijer

From Raúl Ilargi Meijer at theautomaticearth.com:

Looking through a bunch of numbers and graphs dealing with China recently, it occurred to us that perhaps we, and most others with us, may need to recalibrate our focus on what to emphasize amongst everything we read and hear, if we’re looking to interpret what’s happening in and with the country’s economy.

It was only fair -perhaps even inevitable- that oil would be the first major commodity to dive off a cliff, because oil drives the entire global economy, both as a source of fuel -energy- and as raw material. Oil makes the world go round.

But still, the price of oil was merely a lagging indicator of underlying trends and events. Oil prices didn‘t start their plunge until sometime in 2014. On June 19, 2014, Brent was $115. Less than seven months later, on January 9, it was $50.

Severe as that was, China’s troubles started much earlier. Which lends credence to the idea that it was those troubles that brought down the price of oil in the first place, and people were slow to catch up. And it’s only now other commodities are plummeting that they, albeit very reluctantly, start to see a shimmer of ‘the light.’

Here are Brent oil prices (WTI follows the trend closely):

They happen to coincide quite strongly with the fall in Chinese imports, which perhaps makes it tempting to correlate the two one-on-one:

But this correlation doesn’t hold up. And that we can see when we look at a number everyone seems to largely overlook, at their own peril, producer prices:

About which Bloomberg had this to say:

China Deflation Pressures Persist As Producer Prices Fall 44th Month

China’s consumer inflation waned in October while factory-gate deflation extended a record streak of negative readings [..] The producer-price index fell 5.9%, its 44th straight monthly decline. [..] Overseas shipments dropped 6.9% in October in dollar terms while weaker demand for coal, iron and other commodities from declining heavy industries helped push imports down 18.8%, leaving a record trade surplus of $61.6 billion.

44 months is a long time. And March 2012 is a long time ago. Oil was about at its highest since right before the 2008 crisis took the bottom out. And if you look closer, you can see that producer prices started ‘losing it’ even earlier, around July 2011.

To continue reading; The Great Fall Of China started At Least 4 Years Ago

2007 Redux: Stock Market Parties——Even As Junk Debt Sounds The Alarm, by Pater Tenebrarum

From Pater Tenebrarum at davidstockmanscontracorner.com:

While the Stock Market is Partying …

There are seemingly always “good reasons” why troubles in a sector of the credit markets are supposed to be ignored – or so people are telling us, every single time. Readers may recall how the developing problems in the sub-prime sector of the mortgage credit market were greeted by officials and countless market observers in the beginning in 2007.

At first it was assumed that the most highly rated tranches of complex structured products would be immune, as the riskier equity tranches would serve as a sufficient buffer for credit losses. When that turned out to be wishful thinking, it was argued that the problem would remain “well contained” anyway. After all, sub-prime only represented a small part of the overall mortgage credit market. It could not possibly affect the entire market. This is precisely the attitude in evidence with respect to corporate debt at the moment.

A weekly chart of high yield ETF HYG (unadjusted price only chart)

The argument as far as we’re aware goes something like this: there are only problems with high yield debt in the energy and commodity sectors. This cannot possibly affect the entire corporate credit market. We should perhaps point out that in spite of this sectoral concentration, problems have recently begun to emerge in other industries as well (a list of recent victims can be found at Wolfstreet).

The argument also ignores the interconnectedness of the credit markets. Once investors begin to lose sufficiently large amounts of money in one sector, the more exposed ones among them (i.e., those using leverage, a practice that gains in popularity the lower yields go, as otherwise no decent returns can be achieved), will start selling what they can, regardless of its relative merits. This will in turn eventually make refinancing conditions more difficult for all sorts of industries.

It also overlooks that energy and commodities-related debt is simply huge and the losses are really beginning to pile up by now. The junk bond market has grown by leaps and bounds during the echo bubble, so a lot of money has become trapped in it. Many low-rated borrowers need to continually refinance their debt, otherwise they will simply fold. Once liquidity for refinancing dries up – and this is what growing losses in a big market segment will inexorably lead to – it will be game over.

To continue reading: Junk Debt Sounds The Alarm

Exploiting Emotions About Paris to Blame Snowden, Distract from Actual Culprits Who Empowered ISIS, by Glenn Greenwald

From Glenn Greenwald at informationclearinghouse.info:

Whistleblowers are always accused of helping America’s enemies (top Nixon aides accused Daniel Ellsberg of being a Soviet spy and causing the deaths of Americans with his leak); it’s just the tactical playbook that’s automatically used. So it’s of course unsurprising that ever since Edward Snowden’s whistleblowing enabled newspapers around the world to report on secretly implemented programs of mass surveillance, he has been accused by “officials” and their various media allies of Helping The Terrorists™.

Still, I was a bit surprised just by how quickly and blatantly — how shamelessly — some of them jumped to exploit the emotions prompted by the carnage in France to blame Snowden: doing so literally as the bodies still lay on the streets of Paris. At first, the tawdry exploiters were the likes of crazed ex-intelligence officials (former CIA chief James Woolsey, who once said Snowden “should be hanged by his neck until he is dead” and now has deep ties to private NSA contractors, along with Iran–obsessed Robert Baer); former Bush/Cheney apparatchiks (ex-White House spokesperson and current Fox personality Dana Perino); right-wing polemicists fired from BuzzFeed for plagiarism; and obscure Fox News comedians (Perino’s co-host). So it was worth ignoring save for the occasional Twitter retort.

But now we’ve entered the inevitable “U.S. Officials Say” stage of the “reporting” on the Paris attack — i.e., journalists mindlessly and uncritically repeat whatever U.S. officials whisper in their ear about what happened. So now credible news sites are regurgitating the claim that the Paris Terrorists were enabled by Snowden leaks — based on no evidence or specific proof of any kind, needless to say, but just the unverified, obviously self-serving assertions of government officials. But much of the U.S. media loves to repeat rather than scrutinize what government officials tell them to say. So now this accusation has become widespread and is thus worth examining with just some of the actual evidence.

One key premise here seems to be that prior to the Snowden reporting, The Terrorists helpfully and stupidly used telephones and unencrypted emails to plot, so Western governments were able to track their plotting and disrupt at least large-scale attacks. That would come as a massive surprise to the victims of the attacks of 2002 in Bali, 2004 in Madrid, 2005 in London, 2008 in Mumbai, and April 2013 at the Boston Marathon. How did the multiple perpetrators of those well-coordinated attacks — all of which were carried out prior to Snowden’s June 2013 revelations — hide their communications from detection?

This is a glaring case where propagandists can’t keep their stories straight. The implicit premise of this accusation is that The Terrorists didn’t know to avoid telephones or how to use effective encryption until Snowden came along and told them. Yet we’ve been warned for years and years before Snowden that The Terrorists are so diabolical and sophisticated that they engage in all sorts of complex techniques to evade electronic surveillance.

By itself, the glorious mythology of How the U.S. Tracked Osama bin Laden should make anyone embarrassed to make these claims. After all, the central premise of that storyline is that bin Laden only used trusted couriers to communicate because al Qaeda knew for decades to avoid electronic means of communication because the U.S. and others could spy on those communications. Remember all that? Zero Dark Thirty and the “harsh but effective” interrogation of bin Laden’s “official messenger”?

To continue reading: Exploiting Emotions About Paris to Blame Snowden

Police Civil Asset Forfeitures Exceed All Burglaries in 2014, by Martin Armstrong

From Martin Armstrong on a guest post at theburningplatform.com:

Between 1989 and 2010, U.S. attorneys seized an estimated $12.6 billion in asset forfeiture cases. The growth rate during that time averaged +19.4% annually. In 2010 alone, the value of assets seized grew by +52.8% from 2009 and was six times greater than the total for 1989. Then by 2014, that number had ballooned to roughly $4.5 billion for the year, making this 35% of the entire number of assets collected from 1989 to 2010 in a single year. According to the FBI, the total amount of goods stolen by criminals in 2014 burglary offenses suffered an estimated $3.9 billion in property losses. This means that the police are now taking more assets than the criminals.

The police have been violating the laws to confiscate assets all over the country. A scathing report on California warns of pervasive abuse by police to rob the people without proving that any crime occurred. Even Eric Holder came out in January suggesting reform because of the widespread abuse of the civil asset forfeiture laws by police.

Bloomberg News has reported now that Stop-and-Seize authority is turning the Police Into Self-Funding Gangs. They are simply confiscating money all under the abuse of this civil asset forfeiture where they do not have to prove you did anything. Prosecutors are now instructing police on how to confiscate money within the grey area of the law.

A class action lawsuit was filed against Washington DC where police were robbing people for as little as having $100 in their pocket. This is getting really out of hand and it has indeed converted police into legal criminals or “gangs” as Bloomberg News calls them.

http://www.theburningplatform.com/2015/11/17/police-civil-asset-forfeitures-exceed-all-burglaries-in-2014/

Bloodletting 8 Trading Days in a Row: Junk Bonds Go to Heck, by Wolf Richter

From Wolf Richter at wolfstreet.com:

“Large amounts of potential and realized losses”: Moody’s

The US junk-bond market, after years of record-breaking issuance, has nearly doubled to $1.8 trillion since late 2008, one of the miracles the Fed’s QE and ZIRP performed. Those were the good times. Now Fed-blinded investors are cracking open their eyes.

It didn’t help that the week was punctuated by some juicy bankruptcies, including steelmaker Essar Steel Algoma, which filed in the US and Canada – for the second time in two years and for the third in 25 years – as it struggles with over $1 billion in debt. And Millennium Health, a malodorous mess I wrote about in July [“Leveraged Loan” Time Bomb Goes Off, JP Morgan Did It].

Energy junk bonds are sinking deeper into the mire. For example, natural-gas driller Chesapeake Energy’s 6.625% notes due in 2020 fell 7 points last week to 58 cents on the dollar. Or the misbegotten Occidental Petroleum spin-off California Resources; according to S&P Capital IQ LCD, its 6.00% notes due 2024 dropped to 64.50 cents on the dollar.

Beyond energy, specialty chemicals maker Hexion’s 6.625% notes due 2020 fell to about 81 cents on the dollar. And Mallinckrodt Pharmaceuticals, based in Ireland, with its US headquarters in St. Louis, Missouri, got hit by a tweet from short-seller Citron Research, after it took a break from eviscerating Valeant. As Mallinckrodt’s shares plunged, its 5.625% notes due 2023 dropped from 94 before the tweet into “price discovery,” with quotes around 85.

When tire-maker Titan International reported sharply declining revenues, its 6.875% secured notes due 2020 fell three points to 82.25. Scientific Games, which caters to lottery and gambling organizations, also reported crummy quarterly results; its 10% notes due 2022 plunged six points early in the week, to about 81.

Then there was Men’s Wearhouse whose blood-soaked investors are ruing the day it acquired Jos. A. Bank. Its shares have been getting hammered relentlessly since Friday a week ago, and its bonds are now down to 85 cents on the dollar.

Sprint’s 7.88% notes due 2023 plunged over 5 points to 84.50 cents on the dollar. Satellite communications company Intelsat Jackson, the US subsidiary of Luxembourg-based Intelsat, is edging closer to the brink, with its 7.75% notes due 2021 dropping nearly 5 points to 53 cents on the dollar.

You get the idea. S&P Capital IQ in its LCD HY Weekly described the junk-bond debacle this way:

Bad news amid low-volume, jittery market conditions led to some big downside movers again this week. Broad momentum was also negative amid signs of retail cash outflows from the asset class and higher underlying US Treasury rates after the blow-out November jobs data skewered bonds.

To continue reading: Junk Bonds Go To Heck