Lyth0s' Economic Troubles Thread

[lyth0s]

Here's google translate of a Denmark bank introducing negative .5 deposit rates for some customers

"For the first time in the history of Denmark is it going to cost money to have a regular bank account in a bank.

Thus introduces FIH from next month minus interest on customers' bank accounts. This brings the bank's customers continue to fork out for funds deposited in an account at FIH.
The new system applies to the bank's day -to-day account, which is what you might call a regular salary account - minus interest rate of 0.5 per cent . shall enter into force on 9 March and will both apply to residential and business customers .
not surprisingly,
According to one expert , it is far from surprising that FIH introduces less interest .
- FIH is about to close their bank down , and by introducing less interest forcing some existing customers out . So if someone were to do it, it was them , said John North, director of Mybanker .
FIH justify the step with the bank pays money to funds deposited in the National Bank.
It happens after three hectic weeks in which National Bank has reduced the deposit rate four times - most recently yesterday afternoon , when it was lowered by a further 0.25 basis points to -0.75 percent .
- It is expensive for FIH , but you could say that it comes at an opportune time . But it is also a proof that it is bad business , customers are the acidic , says John Norden .
Calls for calm
Although FIH now has taken the historic step and introduced less interest , there are no indications according to John Norden that other banks will follow suit.
- We are in a very unusual situation with low interest rates , but I do not think it gets other banks to do the same. It is clear that there is a pain threshold , but it is difficult to say when it is reached, explains John parts."

"Low interest rates" is a clear understatement to "negative interest rates". And there are starting to be more and more cases of these negative interest rates, take the German banks for additional examples.

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[lyth0s]

News 2/7/15


Ukraine’s currency just collapsed 50 percent in two days

Ukraine has no money and barely any economy. It's already talking to the IMF about a $15 billion bailout and what's euphemistically being called a debt "restructuring"—i.e., default—as its reserves have dwindled down to $6.42 billion, only enough to cover five weeks of imports.

The hyrvnia fell from 16.8 to 24.4 per dollar, and then again to 25.3 on Friday, on the news that the government wouldn't intervene it in anymore.

--Just goes to show how fast the "value" of fiat currencies can fall once people realize their true worth....zero.

[dunchy]

Nice thread Lyth0s ! Please keep us posted when you have time...

[lyth0s]

News 2/9/15

Oil may drop by more than $30 a barrel from current levels

In a note Monday, analysts at Citigroup raised the possibility that West Texas Intermediate oil prices may fall to as low as the $20 range. Prices on the New York Mercantile Exchange already suffered a loss of 46% last year.

But the recent rally looks more like a “head-fake than a sustainable turning point,” said Citi analysts, lead by Edward Morse.

The oil market should bottom sometime between the end of the first quarter and beginning of the second quarter, with oversupply being a key factor, Citi analysts said.

--Not that Citi ever really knows what they are talking about....but oil was in the $30's range in 2003 prior to the beginning of the oil bubble that burst in 2008 and may still be "bursting".


Greenspan on Greece: Exit from the euro is ‘just a matter of time’

I don’t think it will be resolved without Greece leaving the eurozone...

A defiant Tsipras told lawmakers Sunday that he would be unwinding several austerity measures that were conditions of its international bailout. He said he’d be raising minimum wage, dropping a property tax, and a few other goodies Europe’s leaders are sure to be flipping out over right now

The country’s €240 billion (roughly $272 billion) rescue runs out at the end of the month, and Greece’s government has warned that the money could run out in a few weeks. Analysts at Bank of America Merrill Lynch said in a note Monday that the country probably can get through International Monetary Fund payments in March, but not likely past May.

--Tsipras is giving a much F* you to Germany by essentially stating that it is going to increase spending in certain sectors. Germany and the ECB won't give further aid. Predicting the conclusion of all this mess is tough. On one side if Greece leaves the Euro other countries that are in debt may follow suit and we could have a complete collapse of the European Union. On the other hand greece only makes up a very small part of the Euro's economy (somewhere around 2%) which may lead one to believe that them leaving the EU would have a very small effect.

I personally think if Greece leaves the EU 1-2 years down the road more countries will follow suit eventually just leaving behind Germany

[tabnloz]

Sweden joins the NIRP brigade

http://www.zerohedge.com/news/2015-02-12/sweden-central-joins-nirp-club-lowers-interest-rate-01-launches-qe

[aantonopoulis]

Negative interest rates are pretty cool and all.  However I want to see even more fiat accounting innovation. 

We aren't using the whole complex plane here people!  Imaginary interest rates are the next big thing, you heard it here first . 

[lyth0s]

Sweden joins the NIRP brigade

http://www.zerohedge.com/news/2015-02-12/sweden-central-joins-nirp-club-lowers-interest-rate-01-launches-qe

Good Find! I think Norway, Japan or the USA is next.

[lyth0s]

News 2/12/15

China to state companies: No profit growth, no pay raise

SASAC notified centrally administered SOEs on Feb. 9 that they “must not increase the total amount of salaries” if their profit target this year is lower than last year’s profits

It's all about profit and shareholders nowadays, even in these chinese government sponsored companies, which should really be more worried about at least creating products that industries need that potentially could not be handled by the private sector on its own...

One big fear with a strong dollar: a stock market bubble

“We are already at the level where stocks are simply expensive. If markets rise from this level significantly due to foreign demand or lack of alternatives - this will form a bubble,” Smith said.

Article talks about already having 4% growth this year, compared to a total of about 9% stock market growth last year. Anyone know any stats about stock price acceleration before a bubble bursts? I assume that the burst occurs just as the acceleration (instantaneous rate of change of price) occurs, but can anyone provide some numbers on this? It's been a while since I've busted out any calculus.

Retail sales slump again, as Americans pocket savings at pump

Yet retail sales excluding gas were still flat compared to December, a sign that Americans aren’t using their fuel bonanza to spend more on other goods and services. Instead they are saving more.

Saving more? Or they owe it to their debtors?

[johnyj]

Negative interest rates are pretty cool and all.  However I want to see even more fiat accounting innovation. 

We aren't using the whole complex plane here people!  Imaginary interest rates are the next big thing, you heard it here first . 

Next step will be directly confiscating money from accounts: -10% interest means your money at banks get a hair cut by 10%

Obviously, if they print more money, there will be more deflation (more money means more debt, thus more austerity  and less spending), a low inflation rate will make banks keep printing until they bought every assets out there

[lyth0s]

Negative interest rates are pretty cool and all.  However I want to see even more fiat accounting innovation. 

We aren't using the whole complex plane here people!  Imaginary interest rates are the next big thing, you heard it here first . 

Next step will be directly confiscating money from accounts: -10% interest means your money at banks get a hair cut by 10%

Obviously, if they print more money, there will be more deflation (more money means more debt, thus more austerity  and less spending), a low inflation rate will make banks keep printing until they bought every assets out there

How do you figure if more money is printed that leads to deflation?

[johnyj]

Negative interest rates are pretty cool and all.  However I want to see even more fiat accounting innovation.  

We aren't using the whole complex plane here people!  Imaginary interest rates are the next big thing, you heard it here first .  

Next step will be directly confiscating money from accounts: -10% interest means your money at banks get a hair cut by 10%

Obviously, if they print more money, there will be more deflation (more money means more debt, thus more austerity  and less spending), a low inflation rate will make banks keep printing until they bought every assets out there

How do you figure if more money is printed that leads to deflation?

FED print 100 dollar, and bought 100 dollar worth of government bonds, and then government have 100 dollar to spend. However, they must make back that 100 dollar plus interest, means the total money in the society will lose $2 when they return that 102 dollar to central bank. So, for each 100 dollar FED print and retrieve, the society as a whole will lose 2 dollar, a temporary stimulation is followed by a even deeper deflation due to less money to spend in future

Even there is no interest charged, this temporary stimulation will increase the incoming and spending of the society for a while, but when it stopped, people are staying at a much higher living cost of everything, with same amount of money in society, thus quickly fall back into recession

The only way out of this deflation spiral is to expand the debt forever exponentially, but then the ballooning interest cost will cut more and more into the income and eventually income will start to shrink no matter how much more debt is raised

[lyth0s]

Negative interest rates are pretty cool and all.  However I want to see even more fiat accounting innovation.  

We aren't using the whole complex plane here people!  Imaginary interest rates are the next big thing, you heard it here first .  

Next step will be directly confiscating money from accounts: -10% interest means your money at banks get a hair cut by 10%

Obviously, if they print more money, there will be more deflation (more money means more debt, thus more austerity  and less spending), a low inflation rate will make banks keep printing until they bought every assets out there

How do you figure if more money is printed that leads to deflation?

FED print 100 dollar, and bought 100 dollar worth of government bonds, and then government have 100 dollar to spend. However, they must make back that 100 dollar plus interest, means the total money in the society will lose $2 when they return that 102 dollar to central bank. So, for each 100 dollar FED print and retrieve, the society as a whole will lose 2 dollar, a temporary stimulation is followed by a even deeper deflation due to less money to spend in future

Even there is no interest charged, this temporary stimulation will increase the incoming and spending of the society for a while, but when it stopped, people are staying at a much higher living cost of everything, with same amount of money in society, thus quickly fall back into recession

The only way out of this deflation spiral is to expand the debt forever exponentially, but then the ballooning interest cost will cut more and more into the income and eventually income will start to shrink no matter how much more debt is raised

I don't think I agree with this. If the $100 is printed and we now owe $102 to the fed, then we have even more money printed to pay our debts back and this cycle repeats. Yes debt forever increases (and at a faster rate than the money supply), but all of this printing leads to inflation (dollar becomes cheaper and it takes more of them to buy the same good)...It's only if we stop printing that we would start to have deflation and economic collapse.

Please tell me if I'm wrong or missing something.

Found a quote from that article that i like

Innovators are eager to try new ideas, to the point where their venturesomeness almost becomes an obsession. Innovators’ interest in new ideas leads them out of a local circle of peers and into social relationships more cosmopolite than normal.  Usually, innovators have substantial financial resources, and the ability to understand and apply complex technical knowledge.  While others may consider the innovator to be rash or daring, it is the hazardous risk-taking that is of salient value to this type of individual.

[lyth0s]

News 2/17/15


The banking industry’s biggest cyber fears

Cybercriminals have stolen up to $1 billion since late 2013 from banks across 30 countries, including the U.S., Russia, Europe and China, a computer security company says in the latest report to draw a red circle around the financial sector as a vulnerable target for hackers.

The majority of brokerages (88%) and financial advisers (74%) said they “have experienced cyberattacks directly or through one or more of their vendors.” But only a small portion of the more than 100 firms surveyed — 15% of broker dealers and 9% of advisers — guarantee they’ll reimburse clients for losses related to a cyberattack, the Securities and Exchange Commission found.

--88% of brokerages have been victim of cyberattacks, only 15% admitted that they will guarantee funds lost to attacks
--74% of financial advisers have experienced attacks. 9% gaurantee funds.
Peachy

Greece intends to ask for extension Wednesday, says official

Greece will seek an extension to its loan agreement from the rest of the eurozone Wednesday, an official with knowledge of the situation said...
The Greek government has so far insisted that budget cuts and economic overhauls mandated by the current rescue deal are hurting its economy and society and that the currency union’s finance ministers haven’t offered sufficient leeway on implementing those measures.

--Sounds like a rumor to me. I'm not 100% convinced that all the sudden Tsipras will reconsider the extension without a restructuring of their debt.


7 charts that suggest the rising stock market may be wrong

But as the above chart, joined by the following charts, shows, investors often ignore disappointing economic information as a bull market progresses, just as they did before the previous two recessions. And when market prices just start building rapidly on themselves, without a strong economic platform or continued stimulus from the Federal Reserve, the market bubble that is created should eventually pop

--Retail sales are down, many commodities are down, corporate profits are down (post-tax), hourly wages for production workers are down, personal consumption expenditures (leaving out food and gas) are down which may or may not be signalling more deflation (which is terrible in fiat based currencies and leads to bankruptcy)

[rondalark]

News 2/17/15


The banking industry’s biggest cyber fears

Cybercriminals have stolen up to $1 billion since late 2013 from banks across 30 countries, including the U.S., Russia, Europe and China, a computer security company says in the latest report to draw a red circle around the financial sector as a vulnerable target for hackers.

The majority of brokerages (88%) and financial advisers (74%) said they “have experienced cyberattacks directly or through one or more of their vendors.” But only a small portion of the more than 100 firms surveyed — 15% of broker dealers and 9% of advisers — guarantee they’ll reimburse clients for losses related to a cyberattack, the Securities and Exchange Commission found.

--88% of brokerages have been victim of cyberattacks, only 15% admitted that they will guarantee funds lost to attacks
--74% of financial advisers have experienced attacks. 9% gaurantee funds.
Peachy

Greece intends to ask for extension Wednesday, says official

Greece will seek an extension to its loan agreement from the rest of the eurozone Wednesday, an official with knowledge of the situation said...
The Greek government has so far insisted that budget cuts and economic overhauls mandated by the current rescue deal are hurting its economy and society and that the currency union’s finance ministers haven’t offered sufficient leeway on implementing those measures.

--Sounds like a rumor to me. I'm not 100% convinced that all the sudden Tsipras will reconsider the extension without a restructuring of their debt.


7 charts that suggest the rising stock market may be wrong

But as the above chart, joined by the following charts, shows, investors often ignore disappointing economic information as a bull market progresses, just as they did before the previous two recessions. And when market prices just start building rapidly on themselves, without a strong economic platform or continued stimulus from the Federal Reserve, the market bubble that is created should eventually pop

--Retail sales are down, many commodities are down, corporate profits are down (post-tax), hourly wages for production workers are down, personal consumption expenditures (leaving out food and gas) are down which may or may not be signalling more deflation (which is terrible in fiat based currencies and leads to bankruptcy)

nice thread. keep up the good work! cant wait for todays news post

[aantonopoulis]

News 2/17/15

Cybercriminals have stolen up to $1 billion since late 2013 from banks across 30 countries, including the U.S., Russia, Europe and China, a computer security company says in the latest report to draw a red circle around the financial sector as a vulnerable target for hackers.

The majority of brokerages (88%) and financial advisers (74%) said they “have experienced cyberattacks directly or through one or more of their vendors.” But only a small portion of the more than 100 firms surveyed — 15% of broker dealers and 9% of advisers — guarantee they’ll reimburse clients for losses related to a cyberattack, the Securities and Exchange Commission found.

Wow, it's nice to hear some good news for a change.  Keep up the good work boys!

[lyth0s]

News 2/23/15

10 reasons U.S. stocks may see a 10%-20% correction by July

1. Business cycle: The current business cycle is 67-month-old, prompting worries that it is soon to expire and lead to a recession. But given that the U.S. economy is still performing at below potential and the typical signs of imbalances aren't apparent, the current cycle will remain intact for now.

2. Strong U.S. dollar: A firm dollar hurts U.S. exports and weakens American products’ competitiveness but it alone won't trigger a recession or a bear market.

3. The Federal Reserve: The Fed turning hawkish is a worry but given the current composition of the Fed, the possibility of an ill-timed interest rate hike is limited.

4. Weak Oil: Lower oil prices is more of a boon than a bane as less money spent on gas and fuel will mean more cash for consumers and businesses.

5. Earnings: “This is a serious problem,” said Kostohryz. The S&P 500 earnings per share risk is flat to negative in 2015 and PE ratios are peaking, limiting the market’s upside.

6. Valuation: Although some experts believe the market is overvalued based on the “Shiller PE10,” the indicator isn't foolproof. “PE ratios are at levels that have historically served as a peak in valuations, but aren't yet at levels that can be considered to constitute a ‘bubble.’”

7. Greece: Investors are underestimating the possibility of a negative outcome in Greece’s debt crisis. But the Eurozone is sufficiently prepared to deal with any fallouts.

8. Ukraine: The West and Russia won't go to war over Ukraine. The situation in the Eastern European country may deteriorate in the coming months but it will have limited impact on U.S. markets.

9. China: The Asian powerhouse is slowing but the Chinese government is expected to deploy aggressive fiscal and monetary measures to prevent a “hard-landing.”

10. Geopolitical instability: Oil-dependent regimes such as Venezuela are likely to face greater instability while rising Muslim extremism in the Middle East could lead to political and social upheaval in the region.

Is OPEC ready to announce an output cut?

So far, “crude-oil supplies remain strong, and OPEC is showing no signs of cutting in the immediate future,” said Kevin Kerr, president of Kerr Trading International. “That is all putting pressure on [WTI] crude around the $50 mark.”

--In short, doubtful.

1 in 3 Americans on verge of financial ruin

According to a survey released Monday by Bankrate.com of more than 1,000 adults, 37% of Americans have credit card debt that equals or exceeds their emergency savings.

4 things to know as the Nasdaq nears 5,000

The Nasdaq only crossed the 5,000 mark once before. This was back on March 9, 2000, just before the collapse of the so called dot-com bubble.

With the burst of the bubble, the Nasdaq went on to fall 78% to a then-six-year low of 1,114.11 on October 9, 2002. The ensuing bull run elevated the index back as high as 2,859.12 on Halloween 2007. That marked a 157% gain from the October 2002 low, but still 43.37% off the 2000 record close. But the financial crisis soon halted the advance.

--Breaks 5,000->Crash->2,800->crash->5,000->?

--Also for the S&P 500...  what do you think comes next?

[Wilford01Brennan]

News 2/23/15

10 reasons U.S. stocks may see a 10%-20% correction by July

1. Business cycle: The current business cycle is 67-month-old, prompting worries that it is soon to expire and lead to a recession. But given that the U.S. economy is still performing at below potential and the typical signs of imbalances aren't apparent, the current cycle will remain intact for now.

2. Strong U.S. dollar: A firm dollar hurts U.S. exports and weakens American products’ competitiveness but it alone won't trigger a recession or a bear market.

3. The Federal Reserve: The Fed turning hawkish is a worry but given the current composition of the Fed, the possibility of an ill-timed interest rate hike is limited.

4. Weak Oil: Lower oil prices is more of a boon than a bane as less money spent on gas and fuel will mean more cash for consumers and businesses.

5. Earnings: “This is a serious problem,” said Kostohryz. The S&P 500 earnings per share risk is flat to negative in 2015 and PE ratios are peaking, limiting the market’s upside.

6. Valuation: Although some experts believe the market is overvalued based on the “Shiller PE10,” the indicator isn't foolproof. “PE ratios are at levels that have historically served as a peak in valuations, but aren't yet at levels that can be considered to constitute a ‘bubble.’”

7. Greece: Investors are underestimating the possibility of a negative outcome in Greece’s debt crisis. But the Eurozone is sufficiently prepared to deal with any fallouts.

8. Ukraine: The West and Russia won't go to war over Ukraine. The situation in the Eastern European country may deteriorate in the coming months but it will have limited impact on U.S. markets.

9. China: The Asian powerhouse is slowing but the Chinese government is expected to deploy aggressive fiscal and monetary measures to prevent a “hard-landing.”

10. Geopolitical instability: Oil-dependent regimes such as Venezuela are likely to face greater instability while rising Muslim extremism in the Middle East could lead to political and social upheaval in the region.

Is OPEC ready to announce an output cut?

So far, “crude-oil supplies remain strong, and OPEC is showing no signs of cutting in the immediate future,” said Kevin Kerr, president of Kerr Trading International. “That is all putting pressure on [WTI] crude around the $50 mark.”

--In short, doubtful.

1 in 3 Americans on verge of financial ruin

According to a survey released Monday by Bankrate.com of more than 1,000 adults, 37% of Americans have credit card debt that equals or exceeds their emergency savings.

4 things to know as the Nasdaq nears 5,000

The Nasdaq only crossed the 5,000 mark once before. This was back on March 9, 2000, just before the collapse of the so called dot-com bubble.

With the burst of the bubble, the Nasdaq went on to fall 78% to a then-six-year low of 1,114.11 on October 9, 2002. The ensuing bull run elevated the index back as high as 2,859.12 on Halloween 2007. That marked a 157% gain from the October 2002 low, but still 43.37% off the 2000 record close. But the financial crisis soon halted the advance.

--Breaks 5,000->Crash->2,800->crash->5,000->?

--Also for the S&P 500...  what do you think comes next?
https://i.imgur.com/fvfy6d1.png

The current scenario indicates not only a correction but a minor or major crash in near future. The stock market is sorely hyped. That much talked about U.S. recovery may have helped make Wall Street, but it couldn’t help Main Street get wealthier. The U.S. economy isn’t as strong as it seems. And as we already have discussed here that the global economy is a mess. I could see strong chances of economic collapse in 2015.

I believe that U.S. economy is likely to suffer a major crash by early 2015 and another between late 2017.

[lyth0s]

Good article find Wildford. Here it is if anyone else wants to read it: http://www.profitconfidential.com/economic-analysis/economic-collapse-2015/

It is a good quick read on the disconnect between the US stock market and the US economic fundamentals.

[lyth0s]

News 2/26/15

Stock-market crash of 2016: The countdown begins

It’s time to start the countdown to the crash of 2016. No, this is not a prediction of a minor correction. Plan on a 50% crash.

--Lots of people are putting their name out there on this 2015-2016 market crash, many more than prior to the 2008 crash. Only time will tell if they are correct.

4 things to watch for in Warren Buffett’s 50th annual letter

Cash hoard

Berkshire Hathaway is flush with cash, sitting on $62.4 billion as of Sept. 30.

--I've found it interesting that in the past 6 months many billionaires and large hedge funds are sitting on way more cash than they usually do. The main question here would be why sit on so much cash when the market is currently putting out excellent annual returns?

--The Great Depression created MANY new millionaires from people buying up large sums of stocks at dirt cheap prices after the stock market collapse occurred. I think this tactic is what these billionaires are waiting for.....crash->buy->profit.

--Keep your cash handy!


Inflation trend turns negative for first time since 2009

In January, the consumer price index sank by a seasonally adjusted 0.7%, the biggest one-month drop since the end of 2008, the Labor Department reported Thursday.

--I don't need to tell you all what happens when deflation occurs in a debt based monetary system...

[johnyj]

I don't think I agree with this. If the $100 is printed and we now owe $102 to the fed, then we have even more money printed to pay our debts back and this cycle repeats. Yes debt forever increases (and at a faster rate than the money supply), but all of this printing leads to inflation (dollar becomes cheaper and it takes more of them to buy the same good)...It's only if we stop printing that we would start to have deflation and economic collapse.

Please tell me if I'm wrong or missing something.

Printing does not necessary leads to inflation, since the inflation indicator does not include capital goods, more money will just raise the asset price and bond price. And now more money means more debt, means more of the income will be used to pay the debt, and less money will be used to pay the daily consumption, so there will be deflation even the money printing is accelerating

Of course when banks receive the interest, they will spend, which put those interest money back into circulation, but their spending is very limited and could not create much jobb