CPI MANIPULATION

http://www.zerohedge.com/news/2014-11-06/magic-cpi-watch-how-economists-transform-400-price-increase-71-decline

India’s Food Agency for Poor Pays Laborers $7,250 a Month - Bloomberg

India’s Food Agency for Poor Pays Laborers $7,250 a Month - Bloomberg:



Unbelievable how deep cronyism goes and how far corruption will go.



Conscience optional....



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Carlyle Said to Seek $2 Billion for Mid-Market LBO Fund - Bloomberg

Carlyle Said to Seek $2 Billion for Mid-Market LBO Fund - Bloomberg:



This'll be a winner. Carlyle rarely misses.



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China's Next Export: Deflation - Bloomberg View

China's Next Export: Deflation - Bloomberg View:



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U.S. Regulators Approve Eased Mortgage Lending Rules - NYTimes.com

U.S. Regulators Approve Eased Mortgage Lending Rules - NYTimes.com: "The regulators left out the down payment requirement after a firestorm of criticism from bankers and consumer advocates. They asserted that such a measure could restrain the flow of housing credit, particularly to borrowers who would have to save for many years to afford a down payment.

But some financial experts are disappointed with the new rules. They contend that, over time, the exclusion of a down payment requirement could once again allow banks to stoke dangerous risks in the financial system — and then evade the pain when the losses pile up.

“This is unfortunate,” said Sheila C. Bair, former chairwoman of the Federal Deposit Insurance Corporation, another of the regulators that approved the so-called risk retention rules on Tuesday. “If the loan goes bad, you have much bigger losses with zero percent down than 20 percent down.”

The Office of the Comptroller of the Currency also adopted the rules on Tuesday, and the Federal Reserve and the Securities and Exchange Commission are expected to sign off on them on Wednesday.

The overhaul has its roots in the years leading up to the financial crisis of 2008. Banks and Wall Street firms packaged billions of dollars of shoddy mortgages and sold them to bond investors, who later suffered huge losses when the loans went bad. To guard against that happening again, the Dodd-Frank Act of 2010 required banks to hold on to a slice of the loans they sold. As a starting point, the new rules require banks to hold onto 5 percent of the loans they sell. But there are exemptions in the so-called risk retention rule that may enable the banks to hold less or nothing.

The biggest loophole applies to residential mortgages.

Specifically, Dodd-Frank said banks did not have to hold on to home loans if they had a low risk of default. The theory was that such mortgages would probably not end up causing high losses for investors, so the retention regulation did not need to apply to them.

In the first draft of the rule, issued in 2011, regulators identified a solid down payment as something that significantly reduced the likelihood of default on a mortgage. Citing data to support their case, the regulators proposed that the exempt mortgages needed to have a down payment of at least 20 percent of the purchase price of the house.

In the following months, however, housing advocacy groups, mortgage bankers and even some bond investors called upon the regulators to get rid of the 20 percent down payment feature. Instead, they wanted the overhaul to simply apply another new set of home loan requirements — called “qualified mortgage” rules — that do not demand any down payments."



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Google Invests Heavily in Magic Leap's Effort to Blend Illusion and Reality - NYTimes.com

Google Invests Heavily in Magic Leap's Effort to Blend Illusion and Reality - NYTimes.com: "But Magic Leap appears to have significantly broader aims, describing an ambitious vision for displaying rich interactive graphics alongside what people see naturally, using what it calls a dynamic digitized lightfield signal.

“Current technologies we use to access the digital world limit, or even take us away, from the real world,” Magic Leap’s website reads.

Google’s role as the lead investor is significant as it jockeys for position in a rapidly shifting technology industry."



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Another Conspiracy Theory Becomes Fact: The Fed's "Stealth Bailout" Of Foreign Banks Goes Mainstream | Zero Hedge

Another Conspiracy Theory Becomes Fact: The Fed's "Stealth Bailout" Of Foreign Banks Goes Mainstream | Zero Hedge: "Back in June 2011, Zero Hedge first posted:

"Exclusive: The Fed's $600 Billion Stealth Bailout Of Foreign Banks Continues At The Expense Of The Domestic Economy, Or Explaining Where All The QE2 Money Went"
which we followed up on various occasions, most notably with

"How The Fed's Latest QE Is Just Another European Bailout" and
"The Fed's Bailout Of Europe Continues With Record $237 Billion Injected Into Foreign Banks In Past Month.""



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Largest Public Pensions Face $2 Trillion Hole, Moody’s Says - Bloomberg

Largest Public Pensions Face $2 Trillion Hole, Moody’s Says - Bloomberg: "The 25 biggest systems by assets averaged a 7.45 percent return from 2004 to 2013, close to the expected 7.65 percent rate, Moody’s said in a report released today. Yet the New York-based credit rater’s calculation of liabilities tripled in the eight years through 2012, according to the report."





So I wonder what will happen once the Fed enhanced returns are no more ..... if they returned 7.45% while this was happening



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BestBuy issues $1.5Billion in unsecured debt in Q1 and uses $1Billion of it to buy back their own shares - CapEx unchanged to lower

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All joking aside, here's what happened: in Q1 BBBY issued $1.5 billion in Senior Unsecured Notes, and promptly used $1 billion of this to buyback its own shares. Because this time the credit bubble is different.

Thank you Bernanke.

Just 3 WTF Earnings Charts | Zero Hedge

Just 3 WTF Earnings Charts | Zero Hedge: "Chapter 2: Top-Down Hockey Sticks

Despite these chronic historical downward-revisions, Forward S&P 500 EPS estimates continue to surge (driven by large market cap effects and the hockey-stick hopes and dreams)"







Net earnings revisions have been positive only 12 times in the last 104 weeks...







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The Scotland Referendum: Who Voted How And Why? | Zero Hedge

The Scotland Referendum: Who Voted How And Why? | Zero Hedge: "he following post-referendum poll from Lord Ashcroft does a good summary of who voted how and why. However, the most telling distinction is the following:



Voters aged 16-17: YES: 71%; NO: 29%



Voters aged 65+:    YES: 27%; NO: 73% 



How will last night's vote look like in 5, 10 or 15 years when today's 17 year olds are Scotland's prime demographic?"



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Scotland, Scottish Independence, Scotland vote

Missing Men in U.S. Workforce Risk Permanent Separation - Bloomberg

Missing Men in U.S. Workforce Risk Permanent Separation - Bloomberg: "The pace of decline was among the fastest during the last two contractions and the drop has continued in the current expansion, according to data compiled by Bloomberg from Labor Department reports. This shows the labor-market recovery isn’t strong enough for some men to find jobs or even continue looking.

"



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Why Scotland Has All The Leverage, In One Chart | Zero Hedge

Why Scotland Has All The Leverage, In One Chart | Zero Hedge: "And yet, as always, the bottom line is about leverage and bargaining power. It is here that, miraculously, things once again devolve back to, drumroll, oil, and the fact that an independent Scotland would keep 90% of the oil revenues! As we showed several days ago, Scotland's oil may be the single biggest wildcard in the entire Independence movement.

It is this oil, and its interconnectedness within the UK economy, that as SocGen's Albert Edwards shows earlier this morning, is what gives Scotland all the leverage."



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Also-

The New York Times reports:

Scottish nationalists have long argued that being governed from London has deprived their country of its fair share of the wealth from Britain’s oil and natural gas fields, which mostly lie in North Sea waters off their shores.

“It’s Scotland’s oil” was the rallying cry in the 1970s that helped raise the profile of the Scottish Nationalist Party, which now leads the country and is pushing for a vote to secede in the referendum on Thursday. Alex Salmond, the politician leading the separatist movement, has pointed to North Sea energy as the treasure that would help finance an independent Scotland — ensuring that the country could continue the generous public spending, including free university tuition, that he is promising voters.

Al Jazeera notes:

Massive oil reserves in the North Sea are at the heart of the Scottish independence debate. Many are questioning whether the reserves are just for Scotland or if the rest of the United Kingodm should continue to benefit from their profits.

NBC writes:

The ‘Yes’ campaign … says Scots should have total control of their own affairs and that revenue from Scotland’s offshore oil fields would sustain the country’s economy.

In addition, as Max Keiser explained:

(1) The UK can now borrow cheaply using the giant Scottish oil reserves as collateral

(2) If Scotland leaves, the collateral (oil reserves) is no longer available

(3) So the cost of borrowing money for Britain skyrockets

SCOTTISH INDEPENDENCE, SCOTLAND, NORTH SEA OIL

BBC News - Economy tracker: Unemployment

BBC News - Economy tracker: Unemployment:



"Understanding unemployment:
A person is classed as unemployed if not only out of work, but also actively looking for work and available to start work within a fortnight"



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UK UNEMPLOYMENT, UNEMPLOYMENT CALCULATION, UNEMPLOYMENT RISING SINCE 2005

Unemployment Rate Set To Plunge As Bill To Restore Jobless Benefits Fails To Pass Senate | Zero Hedge

Unemployment Rate Set To Plunge As Bill To Restore Jobless Benefits Fails To Pass Senate | Zero Hedge: "Whatever the answer, it increasingly seems that no law, retroactive or otherwise, will pass before the end of the month, which also means that up to (a record) 1.4 million Americans will fall out of the labor force, in addition to the now traditional 200K-600K people who quietly exit the labor pool every month. Which also means that, as we explained previously, since the impact on the unemployment rate could be as high as 0.8% from just the EUC expiration alone, that the unemployment rate for January could crash to under 6% just as the economy is starting to really backslide, as shown by the recent horrendous data from retailers across the board."



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UNEMPLOYMENT , COMPONENTS OF UNEMPLOYMENT

Kohl's And The Rest Of The Retailers Are In Deep Trouble | Zero Hedge

Kohl's And The Rest Of The Retailers Are In Deep Trouble | Zero Hedge:

I didn’t get a chance to peruse the commerce department drivel until this morning. They put out unadjusted data and adjusted data. Shockingly, the adjusted data is always rosier than the unadjusted data. I wonder why? I can understand the rationale for adjusting month to month data due to holidays and calendar events. But I still don’t trust the adjustments. There should not be a major difference when comparing year over year data. The adjusted data should reflect the same relationship to the unadjusted data on a year over year basis. Well guess what? It appears our friendly government drones may be pumping the current data to give the appearance of recovery. Here are my observations after taking a look at the government propaganda report:

• The unadjusted retail sales were only 3.2% higher than last August. Considering government reported inflation of 2%, that is a pretty shitty result. But have no fear. The “ADJUSTED” retail sales for August were 5.0% higher than last August. WTF? Guess which number gets reported to the sheep?
• Hysterically, your government drones consider lending deadbeats $40,000 for seven years with no money down to drive away with a GM deathtrap SUV as a retail sale. The billions in subprime auto loans led to an 8.8% YoY surge in “ADJUSTED” auto sales. It seems the unadjusted number only went up 5.3%.
• When you back out the Federal Reserve/Wall Street pumped auto sales, which will ultimately result in billions of written off bad debt (you’ll pick up the tab), unadjusted retail sales were only 2.7% higher than last August. With real inflation of 5% or more, real retail sales are negative on a year over year basis.
• Despite financing deals of 4 years with no interest, furniture and electronics retail sales were flat versus last August. If there really is a housing recovery and 2.1 million more Americans are employed versus last August how could these discretionary sales be flat, and negative on an inflation adjusted basis?
• Grocery store sales were up only 2.1% over last year. Even the government is reporting 2.7% food inflation in the last year. We all know it is closer to 10%, so people are actually reducing the amount of food they are buying. That is a sure sign of an economic recovery.
• Clothing store sales were flat and department store sales were negative versus last August. So much for the back to school storyline. I do believe August is back to school time. The Sears and JC Penney Bataan Death March trudges toward bankruptcy.
• What did surge was sales at restaurants and bars. They soared by 6.8% versus last August. We already know Darden, Yum Brands and McDonalds have reported dreadful results, so either the government is lying, soaring food prices are being passed on to customers, or people are so depressed by this awesome economic recovery they are drinking themselves into a stupor.

As a side note on the accuracy of this government data, in a previous role at IKEA, when I was a much younger man, I was responsible for filling out the monthly government retail surveys for the Census Bureau. The government drones collecting this data do not check it. They do not require proof that it is right. It is self reported by retailers across the country. Filling out this crap for the government was about as low on my priority list as whale shit. If I was really busy, I’d make the numbers up, scribble them on the form and put it in the mail. The numbers the government are accumulating are crap. And then they massage the crap. And then they publish the crap as if it means something. It’s nothing but crap.

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Australians Face Repayment Shock on High-Risk Mortgages - Bloomberg

Australians Face Repayment Shock on High-Risk Mortgages - Bloomberg:





Driving the growth is demand for high-risk mortgages such as interest-only loans and financing to buy rental properties. 



Interest-only mortgages jumped to 43 percent of all new home lending in the three months through June 30, and credit to buy rental properties climbed to 38 percent, both record highs



Even as the jobless rate reached a 12-year high of 6.4 percent in July, RBA Governor Glenn Stevens has refrained from further rate cuts. The unemployment rate fell to 6.1 percent in August, drawing skepticism from economists at NAB, ANZ and Morgan Stanley who expect the number of jobs added to be revised downward.



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Why US Interest Rates Can Never Rise (In 1 Chilling CBO Chart) | Zero Hedge

Why US Interest Rates Can Never Rise (In 1 Chilling CBO Chart) | Zero Hedge: "Why US Interest Rates Can Never Rise"

To summarize:

The U.S. gross federal debt currently stands at $17.548 trillion, and net interest payments to our creditors are the fastest-growing item in the budget. In 2014, the Congressional Budget Office projects that the nation will spend $233 billion on interest payments. By the end of the budget window in 2024, however, CBO forecasts that interest payments will nearly quadruple to an astonishing $880 billion. Every dollar spent paying our creditors is a dollar wasted—money for which we get nothing in return. Interest payments threaten to crowd out every other budget item.

To put the $880 billion, single-year interest payment in perspective, here is what we currently spend on other budget items:

• Federal Courts – $7.4 billion

• Department of Education – $56.7 billion

• Secret Service – $1.8 billion

• Food Inspection – $2.3 billion

• Census Bureau – $1.0 billion

• Border Patrol – $12.3 billion

• National Parks – $3.0 billion

• NASA – $17.6 billion

• Centers for Disease Control – $7.1 billion

• Federal Prison System – $6.9 billion

• Workplace Safety Inspections – $0.9 billion

• Immigration and Customs Enforcement – $5.6 billion

• FDA – $2.6 billion

• Federal Highway Budget – $40.4 billion

• Coast Guard – $10.0 billion

• Small Business Loans – $0.9 billion

• Veterans’ Health Care – $55.3 billion

• FBI – $8.3 billion

Every debt incurred today will be paid off in the future. The graph above may be shocking to some, but it’s only a very small part of the picture. This is just interest on debt, and doesn’t even include the costs of repaying the principal. Of course, the principal never really gets repaid as the government just borrows afresh to paper over its old debts, but the interest must be covered lest savers stop lending money to the government.

Nor is this only a concern for the future. Last year the government spent more on interest payments (c. $700 bn.) than it did on Medicare (a little under $600 bn.).

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Quality Of Jobs Created In August 2014 Deteriorates Again | Zero Hedge

Quality Of Jobs Created In August Deteriorates Again | Zero Hedge: "Of the 142K jobs created, just under half came from the lowest paying jobs possible: education and health; leisure and hospitality; and temp-help. The best paying jobs, finance and information, added a whopping 4K jobs between them. Finally, about that much delayed US manufacturing renaissance: stick a fork in it - in August the number of manufacturing jobs created was exactly 0."



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Why Draghi's ABS "Stimulus" Plan Won't Help Europe's Economy | Zero Hedge

Why Draghi's ABS "Stimulus" Plan Won't Help Europe's Economy | Zero Hedge: "We leave it to Bloomberg to conclude...

The ECB initially plans to target the most senior and least-risky segment of the secured bond market. The central bank would only consider buying lower portions, such as the so-called mezzanine part, if governments provide a guarantee, Draghi said.
 
The ECB needs to buy the junior portions of the securities to have the desired effect, said Robert Wakiyama, who manages the $1.4 billion Credit Suisse Lux Global Securitized Bond Fund (CSSIFAB) from Zurich. That’s because banks and insurance companies that buy the bonds have to hold more capital to insure against losses on the junior portions of the securities.
 
“Buying senior ABS bonds is not the solution in our view as it doesn’t take the risk from the banks’ balance sheet,” Wakiyama said. “With the current regulation, banks have to retain the most junior part. As long as the ECB isn’t participating in those bonds, I don’t see either a capital relief for banks or the banks giving more credit to the real economy.”"



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Chinese Real Estate Purchases worldwide facilitated by this - Completely above the US SAFE regulations applicable to normal sale of Real estate here. As long as it's a cash buyer.

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Home > Finance > The State Administration of Foreign Exchange Promulgated the Provisions on the Administration of Foreign Exchange for Cross-Border Security

The State Administration of Foreign Exchange Promulgated the Provisions on the Administration of Foreign Exchange for Cross-Border Security

By King & Wood Mallesons on May 23, 2014Posted in Finance

By King & Wood Mallesons’ Banking & Finance Group

On 19 May 2014, the State Administration of Foreign Exchange (the “SAFE”) promulgated the Provisions on the Administration of Foreign Exchange for Cross-Border Security (Hui Fa [2014] No.29, the “New Provisions”). The New Provisions will, after it comes into force on 1st June 2014, replace twelve existing regulations that provide for cross-border security (collectively, the “Existing Provisions”) such as the Implementation Measures on the Administration of External Security Provided by Onshore Entities and the SAFE Circular on Issues Concerning the Administration of External Security Provided by Onshore Entities (also known as Circular 39).

Main Changes

The biggest highlight of the New Provisions is the streamlining of administration. By eliminating registration procedure completely for certain types of cross-border security or narrowing the scope of registration for the rest, the New Provisions defined the scope of administration and regulatory responsibilities of SAFE. More specifically:

• The New Provisions apply to and regulate all kinds of cross-border security structures and include the following three types: (i) Nei Bao Wai Dai (where the security provider is registered onshore, and the obligor and the creditor are both registered offshore, see Structure I); (ii) Wai Bao Nei Dai (where the security provider is registered offshore, and the obligor and the creditor are both registered onshore, see Structure II); and (iii) any other types of cross-border security (e.g. where the security provider and obligor are both registered onshore, and the creditor is registered offshore, see Structure III).

• The validity of any cross-border security agreement is no longer subject to SAFE approval, registration, filing, and any other SAFE administrative requirements.

• Quota management and pre-approval are replaced with subsequent registration management in relation to Nei Bao Wai Dai and Wai Bao Nei Dai.

• For any other types of cross-border security (for example, an onshore entity providing foreign security for its own foreign debt), no registration or filing is required.

• The distinction on the administrative schemes regarding the security for finance purpose and security for non-finance purpose is eliminated.

• Except for special cases such as offshore bond issue, the requirement for the affiliated relationship between security provider and the obligor, as well as the asset to debt ratio requirement imposed on the obligor are abolished.

• Individuals are explicitly permitted to provide Nei Bao Wai Dai with reference to the corresponding rules applicable to non-bank institutions.

• SAFE approval on the enforcement of security is abolished.

We have also noticed that the New Provisions have made further amendments compared to theProvisions on the Administration of Foreign Exchange for Cross-border Security (Draft for Comments)(the “Draft Provisions”) published by SAFE on 13 February 2014. For instance, the New Provisions no longer require financial institutions to comply with self-disciplinary ratio, nor require the form of cross-border security to comply with PRC laws.

Specific rules

The table below summarises the specific requirements imposed by the New Provisions:

 

In summary, the only approvals remain to be sought after the New Provisions come into force include:

• Under Nei Bao Wai Dai, funds borrowed offshore shall not be directly or indirectly repatriate and used onshore by means of loan, equity investment or securities investment without SAFE approval.

• If the security provider is a non-bank institution, without SAFE approval, it shall be refrained from entering into new Nei Bao Wai Dai security agreement before offshore obligor fulfiling all of its obligation owed to the onshore security provider arising out of security enforcement under Nei Bao Wai Dai.

• If the security is enforced under Wai Bao Nei Dai, prior to the onshore obligor fulfiling all of its obligation owed to the offshore security provider, without SAFE approval, the onshore obligor shall be refrained from entering into new Wai Bao Nei Dai security agreement. If the onshore obligor already executed Wai Bao Nei Dai security agreement but no draw-down has been made or has been made but not yet made in full, without local SAFE approval, the onshore obligor shall be refrained from making new draw-down.

Market implication

The promulgation of the New Provisions is a huge step forward by SAFE to regulate the cross-border security against the background of streamlining administration and capital account liberalisation. We expect the New Provisions will be warmly welcomed by market participants, as they offer increased flexibility, certainty and accessibility when using cross-border security. For example, in the past, keep-well deed or other quasi-security has been widely used in offshore bond issue or offshore debt financing deals. In the future however this may well be replaced by direct cross-border security provided by onshore parent.

Furthermore, with the promulgation of the New Provisions, banks may need to be more prudent in conducting financing business. For example, as other section of this news alert mentioned that under certain circumstances where no new security agreement under Nei Bao Wai Dai may be executed or new loan agreement secured by offshore security may be entered into without SAFE approval, banks are suggested to carefully examine whether the security provider or obligor is refrained from providing Nei Bao Wai and/or Wai Bao Nei Dai..

However, the New Provisions have also left a few points to be clarified. For example:

• It is uncertain whether individuals are allowed to provide cross-border security other than Nei Bao Wai Dai and Wai Bao Nei Dai.

• The New Provisions provide that when providing Nei Bao Wai Dai, onshore non-bank financial institutions are required to have the guarantee business qualification approved by relevant regulatory authorities. Nonetheless, the China Banking Regulatory Commission (“CBRC”) only grants guarantee business qualification to non-bank financial institutions under one narrow circumstance where financial leasing companies provide security for financing its holding subsidiaries or project companies. Any other guarantee business falls out of the above scope either by financial leasing companies or other non-bank financial institutions are not explicitly subject to CBRC approval. As a result, it is not clear how SAFE will determine whether a non-bank financial institution is qualified to provide Nei Bao Wai Dai in practice.

• Although the New Provisions provide that the validity of a cross-border security agreement is no longer subject to SAFE approval, registration, filing and any other relevant administrative requirements, article 6 of the Judicial Interpretation of the Supreme People’s Court on Certain Issues Concerning the Application of the Security Law of the People’s Republic of Chinastipulates that a security agreement shall be rendered invalid if no approval nor registration for the provision of cross-border security is obtained from the relevant regulatory authority. Furthermore, article 19 of the Regulations of the People’s Republic of China on Foreign Exchange Control stipulates that where foreign security is to be provided, an application shall be made to SAFE and SAFE will, taking the assets, liabilities and other circumstances of the applicant in consideration, make a decision to either approve or disapprove the application. Where the laws require the applicant to have its business scope approved by the relevant authority, the applicant shall obtain such approval before making such application. After the foreign security agreement is executed, the applicant shall conduct relevant SAFE approval. It remains to be seen the extent to which such legislative inconsistency could impact judicial adjudication.

                                                 

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DISCLAIMER: THIS CLIENT ALERT IS NOT A LEGAL ADVICE OR OPINION.