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Strawboss

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@Scorp - would you agree that both inflation and deflation are ultimately monetary phenomenon?
 

Scorpio

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already answered Straw,
 

BarnacleBob

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Scorpio

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economy in peril,

jobless claims came in at 3.28M, all time records

metals catching a bid on the news
 

Scorpio

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after being down 600 pts, now up 600 pts as the $2T of fresh cash gets drooled over by fall street

metals arguing about it currently with gold catching a bid, down from the highs, while silver flops around unchanged for now
 

BarnacleBob

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JayDubya

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This Is the Fear Chart that the Smart Money on Wall Street Is Watching

https://wallstreetonparade.com/2020...t-the-smart-money-on-wall-street-is-watching/


By Pam Martens and Russ Martens: March 24, 2020 ~
The chart that tells you how all of today’s economic troubles are going to end is not the bar graph of new deaths from coronavirus in Italy versus deaths in the U.S. It’s the chart that shows the number of potential deaths among the banks and insurance companies that have gorged themselves on risky derivatives and serve as counterparties to each other in a daisy chain of financial contagion.

The chart above is why the Federal Reserve is throwing unprecedented sums of money in all directions on Wall Street. Because despite being a primary regulator to these massive bank holding companies, the Fed has no idea who is actually in trouble on derivative trades, other than looking at a chart like the one above.

The chart above also justifies the Democrats refusing to sign off on the fiscal stimulus legislation that would have given U.S. Treasury Secretary Steve Mnuchin a $500 billion slush fund where the names of the recipients of bailouts could be withheld from the public.

In January 2007, prior to the last financial crisis, Citigroup’s stock was trading at the split-adjusted level of $550 a share. At yesterday’s stock market close, Citigroup’s stock price was $35.39. If you are a long-term shareholder in Citigroup, you’re still down 94 percent on your principal, not including dividends. After receiving the largest taxpayer and Federal Reserve bailout in banking history during the Wall Street financial crash of 2007 to 2010, Citigroup did a 1-for-10 reverse stock split to dress up its share price. In other words, if you owned 100 shares of Citigroup previously, you now owned just 10 shares at the adjusted price. If Citigroup had not done that, you would have seen a closing price yesterday of $3.54 cents instead of $35.39.

Citigroup is the poster child for everything that is wrong with the banking structure in the United States today. After blowing itself up with derivatives in 2008, in December 2014 it got the repeal of a key component of the Dodd-Frank financial reform legislation that would have forced derivatives out of federally-insured banks. Then in 2016, it went full speed into the very derivatives that were at the heart of the financial crisis in 2008, Credit Default Swaps. (See Bailed Out Citigroup Is Going Full Throttle into Derivatives that Blew Up AIG.)

Citigroup is not alone in loading up on derivatives again. Together with JPMorgan Chase, Morgan Stanley, Goldman Sachs and Bank of America, these five bank holding companies now control a notional (face amount) of derivatives amounting to $230 trillion, representing 85 percent of all derivatives held by U.S. banks.

And their counterparties are just as questionable as they were at the peak of the crisis in 2008, which led to the biggest Wall Street bailout in U.S. history.

The 2017 Financial Stability Report from the Office of Financial Research (whose budget and staff have now been gutted by the Trump administration) included this cautionary text:

“…some of the largest insurance companies have extensive financial connections to U.S. G-SIBs [Global Systemically Important Banks] through derivatives. For some insurers, evaluating these connections using public filings is difficult. Insurance holding companies report their total derivatives contracts in consolidated Generally Accepted Accounting Principles (GAAP) filings. Insurers are required to report more extensive details on the derivatives contracts of their insurance company subsidiaries in statutory filings, including data on individual counterparties and derivative contract type. But derivatives can also be held in other affiliates not subject to these statutory disclosures, resulting in substantially less information about some affiliates’ derivatives than required in insurers’ statutory filings.”

Insurance counterparties named in the report were Lincoln National Corp., Ameriprise Financial, Prudential Financial, Voya Financial and (wait for it), AIG, the insurance company that blew itself up with Wall Street derivatives in September 2008 and required a $185 billion bailout – with more than half of that sum going out its backdoor to pay off Wall Street and foreign global banks that had saddled it with derivatives that were structured bets that things would blow up. (Some of those funds were also used to settle securities lending programs with Wall Street banks and hedge funds.)

The 2016 Financial Stability Report from the Office of Financial Research provided more granular detail, noting the following:

“At the end of 2015, U.S. life insurers’ derivatives exposure, as reported in statutory filings, totaled $2 trillion in notional value. This $2 trillion does not include derivative contracts held in affiliated reinsurers, non-insurance affiliates, and parent companies that do not have to file statutory statements. Details on these entities’ derivatives positions are not publicly available.”

The report further indicates that a dangerous interconnectedness with a high potential for contagion has grown between U.S. life insurers and Wall Street banks:

“According to statutory data on insurance company legal entities, nine large U.S. and European banks are counterparties to about 60 percent of U.S. life insurers’ $2 trillion in notional derivatives. These data show that despite central clearing, derivatives interconnectedness between the U.S. life insurance industry and banks remains substantial.”

Deutsche Bank, whose share price has been regularly setting historic lows, is one of the European banks that is heavily intertwined with Wall Street’s derivatives. (See related article below.)

As Treasury Secretary Steve Mnuchin repeats ad nauseum that this is a health crisis not a financial crisis, just remember when the financial crisis actually started: September 17, 2019 – five months before the first death from coronavirus in the U.S. (See our more than five dozen articles on this latest financial crisis here.)
 

BarnacleBob

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JayDubya

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The latest from Simon Black

The ‘Small’ Business Administration is now bigger than Walmart

As you’ve probably already heard, the US government unleashed a giant tsunami of money on Friday, passing a $2 trillion stimulus bill to help boost the economy during the Covid pandemic.

Let’s put that number in context:

  • $2 trillion is more than it cost to wage 18+ years of war in Afghanistan and Iraq.
  • It’s nearly THREE times the size of the bailout from 2008.
  • It exceeds ALL corporate and individual income tax revenue collected by the IRS last year

We are clearly living in unprecedented times… and this bailout is equally unprecedented.

Among the bailout’s many provisions (which go on for more than EIGHT HUNDRED pages!) is a whopping $350 billion to the Small Businesses Administration.

The Small Business Administration is ordinarily a tiny federal agency. But this funding exceeds the budgets of the Army and Navy COMBINED. It’s 8x the size of the United States Marine Corps. It’s more than the entire market capitalization of Walmart.

You get the idea. The SBA just became one of the biggest organizations in the world.

Now, in normal times, the SBA’s mission is to help startups and small businesses obtain bank loans; it’s usually pretty difficult for a startup to borrow money from a bank loan because the business is too risky, and banks don’t want to lend.

So the SBA’s role is to provide a guarantee for the loan. They’re essentially telling the bank that if the business fails and doesn’t pay back the loan, the federal government (i.e. American taxpayers) will make up some of the difference.

This guarantee doesn’t make a small business loan risk-free for banks-- there are still things that can go wrong. But the guarantee helps reduce the risk.

But typically, in order to receive an SBA guarantee, business owners have to provide their own ‘personal guarantee’ to the government. In other words, if the business owner defaults, the government can seize their assets in order to recover loan losses.

That’s the way SBA loans normally work. But these times are not normal.

According to this new bailout legislation, “no personal guarantee shall be required,” and the government “shall have no recourse against any individual shareholder, member, or partner . . . for nonpayment”.

In other words, the legislation implies that these loans don’t have to be paid back.

Moreover, the law also states that “no collateral shall be required for the covered loan.”

So you don’t even need any assets to qualify. In fact you need barely anything to qualify… except a pulse.

According to the legislation, “any business concern, nonprofit organization, veterans organization, or Tribal business. . . shall be eligible to receive a covered loan” as long as you have fewer than 500 employees.

Honestly the only real requirement is that you have to keep paying your employees. That’s the entire point of the legislation-- lawmakers wanted to provide funds so that small businesses could continue paying workers.

The maximum loan amount is equal to your payroll costs over the last 12 months multiplied by 2.5.

*Payroll costs include salaries, wages, and payments paid to employees and independent contractors, including yourself, up to $100,000 each. It also includes medical insurance payments, retirement benefits, state/local tax, and payments for sick leave, family leave, or vacation.

*Payroll costs do NOT include federal income or unemployment tax withholdings, or compensation for employees based outside of the United States.

So if you had, say, $400,000 of qualifying payroll costs over the past year, your maximum loan amount is $1 million.

And the maximum interest rate (according to the legislation) is just 4%.

[If you have a qualifying business and you want to apply for a loan, you can do so here: https://covid19relief.sba.gov/]

Now, I’m sure that plenty of people will use these loans as intended-- to stay in business, continue paying workers, etc. And eventually they’ll do the honorable thing-- pay the loans back, with interest.

But let’s be honest. Countless people are going to completely abuse this. They’ll borrow as much money as they can with absolutely no intention of paying back a single penny.

This means there’s going to be a ton of loan losses.

Remember-- banks are the ones who will be making these loans, using their depositors’ money. YOUR money.

And even with the SBA guarantee, there are still things that can go wrong. If the paperwork was wrong, if the loan wasn’t made in the prescribed way, if the business didn’t actually qualify, etc. the banks can still suffer losses.

(Taxpayers will obviously suffer huge losses as well.)

But despite these risks, the legislation specifically tells banks that “a covered loan shall receive a risk weight of zero percent.”

Translation: banks should count these small business loans as ‘risk free’ even though there’s a strong chance that tons of people will never pay them back.

The legislation also says that banks “shall not be required to comply” with accounting rules that require them to disclose when their loans go bad.

So the government is essentially telling banks to make loans to everyone, with no personal guarantee, no recourse, and no collateral… and to maintain these loans on their books as risk free. And even when these loans default, to continue reporting them as risk-free.

What could possibly go wrong???

It’s clearly a great time to be a borrower. That’s one thing we learn from bailouts—they’re always going to take care of people in debt, and help people go into more debt.

But it’s more concerning to be a depositor.

Even with the SBA guarantee, it’s obvious that banks are riskier than they want you to believe.

To your freedom,



Simon Black,
 

Uglytruth

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Honestly the only real requirement is that you have to keep paying your employees. That’s the entire point of the legislation-- lawmakers wanted to provide funds so that small businesses could continue paying workers.
With so many "corporations" nothing but an empty shell and a few token employees pedaling the Chinese made crap will they qualify?
Until they are able to get more crap to sell they are dead in the water. If everyone understand there is a cost to cheap will they try to buy better quality?
Will corps be forced to bring mfg back to the US or even North America?
 

Scorpio

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usd chart,

you can see where it peaked out, then rapidly declined as the stock markets turned,

crazy ain't it? stocks way up since tramp was installed, even after all of this boo hoo flu stuff

I get it, the story is still playing out, so call it a floating comment

1.png
 

Scorpio

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sp500 chart,

note how it has bounced off the lows,
but also note the volume has been declining,
as in it is a tepid response to the lows so far,

it is going to need further impetus to giddy on up, or it is coming down to test the lows again IMO

sc.png
 

Au-myn

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it is going to need further impetus to giddy on up, or it is coming down to test the lows again IMO
You are correct, Scorpio. This rally may push the SPX to 2800 where Bearish resistance pressure will be applied. Note that the Bearish Signal Reversed pattern DID issue a sell signal at 2250, under its Bullish support line turning the trend bearish.

spx2.png
 

Scorpio

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nice recovery in gold in the overnights,

after the drubbing yesterday, went into the night session and took another $20 hit before reversing, and moving back to unchanged or so, then this am back up 10 over 1600 again to 1607

here you can see the exaggerated movements in gold, note how the sellers are giving it the business at 1700 area

1.png
 

ErrosionOfAccord

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US power sector coal stockpiles total 134 million st in January: EIA
  • US stockpiles reach 26-month high
    Subbituminous days of burn reach 120
Houston — US power sector coal stockpiles totaled 134 million st in January, up 4.6% on month and 35.2% on year, US Energy Information Administration data showed Tuesday.

From January 2019, stockpiles showed the largest year-on-year build since August 2009. US stocks also reached their highest point since November 2017.
From the five-year average for the month of January, which was 144 million st, stocks were at a deficit of 6.9%, the smallest since April 2017.
Bituminous stockpiles totaled about 56.3 million in January, up 2.1% from December and up 39.2% from the year-ago month.
Bituminous stocks were also at a 6.9% deficit from the five-year average of 60.4 million st for January.
Days of burn, according to EIA data, were 137 days in January, up 17 from December and up 47 days from the year-ago month. Additionally bituminous stockpiles reached its peak, for the second consecutive month, since S&P Global Platts began reporting the data in 2009.
The five-year average for January is 88 days of burn.
December subbituminous stockpiles totaled 74.6 million st, up 6.5% from the month before and up 33.4% from the year-ago month.
From the five-year average of 79.6 million st, subbituminous stocks were at a deficit of 6.4%.
Days of burn for subbituminous coal were 120 days, up 23 from December and up 12 days from the year-ago month. The five-year average for the month is 93 days. Days of burn also reached a peak, according to available data.
Lignite stocks totaled 3.3 million st in January, up 5.9% from the previous month. Stocks were up 14.7% from the year-ago month.

  • 煤炭
Platts Global Coal Alert
  • 煤炭
Platts Global Coal Alert

https://www.spglobal.com/platts/zh/...tockpiles-total-134-million-st-in-january-eia
 

Scorpio

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ErrosionOfAccord

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The piles are full at about 200 million. I've never seen them above that level that I can recall. I used to watch this stuff much closer but I had access to better sources back then. I think the stockpiles are a good barometer for how the economy is doing but with coal falling by the wayside and nat gas being consumed for power like never before it's probably not a great indicator. The generators might burn some just to comply with contracts written last year but at this point I think they would prefer to burn gas. I'm curious as to how much electricity is being sent down the lines with so many businesses closed over the beer virus. Are people couped up inside the house taking up the slack? I doubt it. the EIA numbers will look interesting a couple of quarters from now.

Here's a chart with total kilowatt hours going back to 2010. Might be interesting to keep an eye on it.
https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_1_01

Interestingly you can see a jump in power consumption after the Kenyan was kicked out of office.
 
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Scorpio

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especially when you factor in gas availability,
the only thing holding back more supply of gas is the ptb and infrastructure, as the drillers flare the heck out of it
 

Scorpio

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stocks, gold, silver, oils all up this am

everybody in the pool............for now

job report coming out later, and all expecting a whopper again
 

Scorpio

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6.6M is the number of jobless claims

stocks flopping back and forth around unchanged now,

metals hold their gains along with oil with the phony tramp/saud/russia deal
 

Scorpio

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big disconnect in metals,

futures show gold at 1637 and silver at 1455

spot shows gold at 1612 and silver at 1441

been seeing quite a bit of that over the past couple of months