Tag Archives: What Could Possibly Go Wrong

The New Subprime Meltdown

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“Now, everyone calls them, ahem, ‘non-prime.’  A few subprime (excuse me — non-prime) mortgage bond offerings started trickling out in recent quarters. But the one that caught everyone’s attention came out earlier this month: 368 mortgages packaged into a bond with a total principal balance of nearly $162 million.  Many of the senior executives who led those companies are back in today’s non-prime ball game, too — once again aiming to capitalize on today’s Fed-induced low mortgage rates and re-inflated housing bubble.”

http://thesovereigninvestor.com/us-economy/new-subprime-meltdown/

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John Hussman: Over-Adaptation and Market Drawdowns

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“The worst market losses across history have been associated with relatively low short-term interest rates during the collapse and the absence of any material hike in interest rates at all as the collapse unfolds. Investors have convinced themselves to tolerate historic valuation extremes, confident that stocks can’t fall unless interest rates rise. They’ve walked right into this setup because they don’t recognize it, and neither central bankers nor the investment profession appear interested in admitting the increasingly pressing risks that they themselves have been complicit in creating.”

http://www.hussmanfunds.com/wmc/wmc160606.htm

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How the Top 5 PC Makers Open Your Laptop to Hackers

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“As bad as Acer was, however, Asus was worse. Its updater was so bad the researchers called it ‘remote code execution as a service’—essentially a built-in service for hackers to do remote-code execution. Asus transmits unsigned manifests over HTTP instead of HTTPS. And although the manifest file was encrypted, it was encrypted with an algorithm known to be broken, and the key to unlock the file was an MD5 hash of the words ‘Asus Live Update.’ As a result, attackers could easily intercept and unlock the list to make changes. Asus update files weren’t signed, either, and they were also transmitted via HTTP.”

https://www.wired.com/2016/05/2036876/

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John Hussman: The Coming Fed-Induced Pension Bust

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“What’s quite unfortunate, in my view, is that the strong realized past returns of the past 25 years are now actually being taken as a justification of current, unrealistically high pension return assumptions. This, in turn, encourages continued underfunding. This inclination appears to be wholly encouraged by Federal Reserve policies, and threatens to amplify an inevitable pension crisis in the coming years. The realized past returns of this period have been strong precisely because they have robbed from future expected returns. The tide will turn, as it always has in complete market cycles across history, and as investors discovered during the market collapses of 2000-2002 and 2007-2009.”

http://www.hussmanfunds.com/wmc/wmc160523.htm

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Billionaire Soros Cuts U.S. Stocks by 37%, Buys Gold Miner Barrick

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“The firm disclosed owning bearish options contracts on 2.1 million shares of the SPDR 500 ETF Trust, an exchange-traded fund that tracks the Standard & Poor’s 500 Index, with a face value of $431 million as of March 31.  Soros also bought bullish options contracts on 1.05 million shares in the SPDR Gold Trust, which tracks the price of bullion. What’s more, the fund took a stake in the world’s biggest producer of the metal, Barrick Gold Corp., worth $264 million at the end of March, the filing showed. Soros acquired 1.7 percent of Barrick, making it the fund’s biggest U.S.-listed holding.”

http://www.bloomberg.com/news/articles/2016-05-16/billionaire-soros-cuts-u-s-stocks-by-37-buys-gold-producer

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A century bond? Just think what can happen in 100 years

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“Who would you lend money to for 100 years? Your children? Your best friend? Perhaps. But the Irish government? Or the Belgian or French government? They all seem to think they are worth a loan for this kind of duration.  Ireland last month launched the first 100-year bond, raising €100m. If you hang around to 2116, you will earn 2.35pc on your cash. Last August, Belgium blazed that trail, with its own century-long debt issue. Mexico has also issued one. The Spanish and the Italians have both gone above 45 years, and will probably join the century club as soon as they think they can get away with it. Even the UK has already dipped its toe in the water.”

http://www.telegraph.co.uk/business/2016/04/15/a-century-bond-just-think-what-can-happen-in-100-years/

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John Hussman: Bearishness Is Strictly For Informed Optimists

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“When the primary use of fiscal policy is to wipe up the catastrophe of weak productivity, lost income, unemployment, and malinvestment created in the repeated aftermath of collapsed financial bubbles, the endgame is going to be stagnant living standards and a debased currency.  Ultimately, QE may finally create inflation by provoking a loss of fiscal control.  Central banks have risked just that by encouraging yet another speculative bubble, heavy issuance of low-grade debt, and the diversion of savings toward unproductive investment. The inevitable fiscal consequences are likely to include bailouts, income-replacement and transfer payment programs as the third bubble since 2000 collapses.”

http://www.hussmanfunds.com/wmc/wmc160314.htm

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Highway Bill Compromise Funded By Expropriating Big U.S. Banks

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“The highway measure would be financed in part by a one-time use of Federal Reserve surplus funds and by a reduction in the 6 percent dividend that national banks receive from the Fed. The dividend would be reduced by an amount tied to yields on 10-year U.S. Treasuries, currently about 2.2 percent. If Treasury yields rose higher than 6 percent, the Fed wouldn’t pay the banks more. Banks with $10 billion or less in assets would be exempt from the cut.  The Fed’s surplus capital comes from the 12 reserve banks. The highway bill would allow for a one-time draw of $19 billion from the surplus, which totaled $29.3 billion as of Nov. 25.”

http://www.bloomberg.com/news/articles/2015-12-01/highway-bill-compromise-reached-by-u-s-congress-negotiators

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Italy bank runs: the ‘Northern Rock’ signal of global financial meltdown?

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“On Jan. 21, the oldest surviving bank in the world, Banca Monte dei Paschi di Siena SpA, reported that depositors have been initiating a series of bank runs which have put the financial institution on the precipice of collapse, with all attempts to calm account holders having so far failed.  Since last Monday the share price of Banca Monte dei Paschi di Siena SpA has fallen over 46%.  Back in 2007, bank runs on the British financial institution known as Northern Rock ushered in the start of the global financial crisis that culminated in a collapse that would require taxpayer bailouts, and tens of trillions in central bank liquidity.”

http://www.examiner.com/article/italy-bank-runs-could-be-the-northern-rock-signal-of-global-financial-meltdown

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Hedge Funds Suffer First Quarterly Net Outflows in 4 Years

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“Investors pulled a net $1.52 billion from the $2.9 trillion industry in the fourth quarter of last year, Chicago-based Hedge Fund Research said Wednesday. The typical hedge fund lost 1 percent in 2015, even after rising 0.8 percent in the fourth quarter, according to the firm’s HFRI Fund Weighted Composite Index.  Investors are ‘looking for strategies that will help preserve capital’ in a volatile market environment, Hedge Fund Research president Ken Heinz said at a press briefing in London. ‘They are positioning for anything but the S&P 500 Index making 30 percent in 2016.'”

http://www.bloomberg.com/news/articles/2016-01-20/hedge-funds-suffer-their-first-quarterly-net-outflows-in-4-years

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