Monthly Archives: January 2016

10 Charts on Emerging Market Corporate Debt

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“Corporate debt levels in emerging markets are spooking both economists and investors. Not that this debt burden came out of nowhere, of course. But, admittedly, there are a couple of catalysts to explain why the EM debt pile is causing some headaches just now. First, the growth of emerging corporate debt is accelerating, and, second, the massive depreciation of EM currencies is exaggerating elevated debt levels. This blog contains 10 (familiar) graphs (taken from familiar institutions like BIS and IMF) to portray these trends.”

http://jeroenbloklandblog.com/2015/10/14/10-charts-on-emerging-market-corporate-debt/

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Gold Is Back in Fashion After a $15 Trillion Global Selloff

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“The $15 trillion rout in global equity markets since May is reawakening the lure of gold for investors seeking safety.  Hedge funds more than doubled their net-long position in bullion last week, just three weeks after they were the most-bearish ever. Investor holdings of gold through exchange-traded products are expanding at the fastest pace in a year, and the value of the ETPs has jumped by $3 billion in 2016.  Fed Bank of Boston President Eric Rosengren said this month that the central bank’s projected path for more policy tightening is at risk, citing falling estimates for U.S. economic growth. Gold reached a five-year low in December as the dollar strengthened and U.S. inflation stayed stagnant.”

http://www.bloomberg.com/news/articles/2016-01-24/gold-is-back-in-fashion-after-15-trillion-global-equity-decline

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Social Security Trust Fund’s Fall Is First Since 1983

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“The Social Security Trust Fund just suffered its first annual decline since Congress shored up the retirement program in 1983.  The unexpected $3 billion decline is an indication of the precarious state of Social Security’s finances. Since 2010, the program has been paying out more in benefits than it gets in tax revenue, but the trust fund, which earns about $95 billion a year in interest, had kept growing, though a little less each year. Social Security’s cash shortfall is expected to rapidly escalate from $74 billion a year to $361 billion in 2025 alone, the Congressional Budget Office projects. Under current policies, the CBO says the trust fund will be gone by 2029.”

http://www.investors.com/social-security-trust-fund-ends-32-year-streak/

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Audit the Fed Legislation Sinks: Plan Accordingly

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“Rand Paul and Ron Paul, the dynamic duo of anti-Fed forces, invested a lot of time and money trying to get that legislation passed. But even if it reached Barack Obama’s desk, it would have been vetoed.  Of course, the Fed pushed back against the legislation. Fed Chairman Janet Yellen penned a letter to senators before the vote claiming that the legislation would deprive the Fed of necessary independence. She also noted that passing the legislation might generate an inflation scare and cause interest rates to rise. One wonders if this was a subdued threat.”

http://www.thedailybell.com/news-analysis/36736/Audit-the-Fed-Legislation-Sinks-Plan-Accordingly/

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Iran to be hooked up to global banks in weeks; U.S. investors still banned

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“A nuclear deal between world powers and Iran led to the removal of the curbs on Tehran’s banking, insurance and shipping sectors last weekend, as well as restrictions on oil exports.  But for Iran to resume business with the global banking world – for the first time since 2012 – its banks need to be linked to overseas lenders on SWIFT. The system is used to transmit payments and letters of credit. Many international sanctions relating to Iran’s nuclear program were lifted but most involving U.S. measures remain in place. Non-U.S. banks may trade with Iran without fear of punishment in the United States but U.S. banks may not do so, directly or indirectly.”

http://www.reuters.com/article/us-iran-middleeastbank-idUSKCN0V0239

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U.S. bailout places ‘Puerto Rico’s democracy at risk’

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“The U.S. Senate is considering a bill called the Puerto Rico Assistance Act of 2015. It offers minor assistance: a temporary reduction in payroll taxes and a ‘development fund’ of $3 billion.  But the real purpose of this bill is the installation of a six-member Financial Control Authority. That authority, if it gets the chance, will rule over Puerto Rico. Completely. What this legislation contemplates is beyond extraordinary; it is essentially the destruction of whatever semblance of genuine democracy currently rules the island. According to the bill, five members will be appointed by the U.S. President. The sixth will be the Secretary of the U.S. Treasury, who will also serve as Chairman.”

http://www.nydailynews.com/opinion/nelson-denis-puerto-rico-democracy-risk-article-1.2498482

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Only in Argentina: Where Minus 3% Bond Yields Are All the Rage [2015]

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“While the bonds yield minus 3.1 percent, it’s a small price to pay in a country where capital controls have caused multiple black-market exchange rates to proliferate and rampant inflation has eroded the value of peso deposits. Foreign companies, prevented from repatriating dividends because of the controls, are also buying the securities as a hedge against a potential devaluation, which has become more likely as trading partners from Brazil to China weaken their own currencies, said Eduardo Levy-Yeyati, director of economic consultant Elypsis. The government sold the equivalent of $1.1 billion of dollar-linked bonds due in 2017 on Tuesday, the first such sale in nine months.”

http://www.bloomberg.com/news/articles/2015-08-20/only-in-argentina-where-minus-3-bond-yields-are-all-the-rage

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State of emergency declared as Hollande unveils €2bn job creation plan

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“French President Francois Hollande has warned that his country is in a state of economic emergency and has unveiled a €2b two-year job creation plan. The proposal aims to offer subsidies to small firms in a bid get them to take on more employees.  Speaking at an annual speech to business leaders, Hollande said: ‘Our country has been faced with structural unemployment for two to three decades and this requires that creating jobs becomes our one and only fight.’ He warned that France was facing an ‘uncertain economic climate and persistent unemployment’. France was in a state of economic and social emergency, he said. France’s unemployment rate is 10.6%.”

http://www.ibtimes.co.uk/france-state-economic-emergency-hollande-unveils-2bn-job-creation-plan-1538652

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Mexican Peso’s Surprising Drop Spurs Speculation Banxico to Act

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“The peso is this year’s second-worst performing major currency, as investors use Mexico’s highly liquid peso as a proxy for global emerging markets. Investors are also concerned that the outlook for higher interest rates in the U.S. will lessen Mexico’s appeal for bondholders chasing the country’s steeper yields. The currency slipped 0.4 percent Tuesday after touching a record-low.  Since November, the central bank has been selling $200 million on days the peso weakens at least 1% and an additional $200 million if the drop is more than 1.5%. The policies to support the peso have contributed to an erosion in the country’s foreign reserves, which are near a one-year low at about $175 billion.”

http://www.bloomberg.com/news/articles/2016-01-19/mexican-peso-s-surprising-drop-spurs-speculation-banxico-to-act

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Canadians Panic As Food Prices Soar On Collapsing Currency

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“As Bloomberg reminds us, Canada imports around 80% of its fresh fruits and vegetables. When the loonie slides, prices for those goods soar. ‘With lower-income households tending to spend a larger portion of income on food, this side effect of a soft currency brings them the most acute stress’ Bloomberg continues.  Of course with the layoffs piling up, you can expect more households to fall into the ‘lower-income’ category where they will have to fight to afford things like $3 cucumbers, $8 cauliflower, and $15 Frosted Flakes.  Some now fear that the hardest hit parts of the country may experience a spike in obesity rates as Canadians resort to cheap, unhealthy foods.”

http://www.zerohedge.com/news/2016-01-13/canadians-panic-food-prices-soar-collapsing-currency

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