ECONOMY | WHAT REALLY HAPPENED

ECONOMY

Jul 14 07:34

Banks Use COVID As Cover To Shutter Branches Across America

The Office of the Comptroller of the Currency (OCC) acting head Brian Brooks said banks should not use the cover of the virus pandemic to shrink branch footprints across cities and towns, the Financial Times reported.

Jul 14 07:31

Fed Releases POMO Schedule For Next Two Weeks; Will Buy $9BN In Treasuries And MBS Each Day

Now that the Fed's release of POMO is more of a periodic affair than every Friday, moments ago the NY Fed published its latest POMO schedule for both Treasurys and MBS for the next two weeks, covering the period July 14 - July 27.

In line with the recent Fed disclosure that the central bank will purchase about $80 billion in Treasurys monthly, the latest schedule shows an average daily purchase of about $4.5 billion, or $40.2 billion spread over 9 days; for MBS the average daily is nearly identical, at $4.6 billion daily, or $46BN spread over 10 days.

Here is the latest summary of Treasury POMOS. Of note: the biggest POMOs will take place on July 14 and July 24, when the Fed will monetize $12.825BN and $8.825BN worth of US debt.

Jul 14 07:25

The "Biblical" Default Wave Arrives: Here Is The Avalanche Of Bankruptcies Unleashed By Coronavirus

Two months ago, we said that it was just a matter of time before a "biblical" wave of bankruptcies was about to be unleashed on the US as a result of the coronavirus pandemic...

Jul 14 07:24

Key Events In The Coming Week: Here Comes The Worst Earnings Season Since The Crisis

In looking at the week's main events, DB's Jim Reid writes that the week's highlight is the EU summit on Friday where leaders will gather to discuss the recovery fund. In addition to this, we’ll also see the ECB, the Bank of Japan and others make their latest monetary policy decisions. Meanwhile, earnings season kicks off, including a number of US financials reporting. Economic data includes China’s Q2 GDP reading along with a number of June releases out from the US.

Jul 14 07:01

The Six-Year Jobs Recession

Jul 14 06:26

THE U.S. ECONOMY HASN’T EXPERIENCED ANYTHING LIKE THIS SINCE THE GREAT DEPRESSION OF THE 1930S

The recession of 2008 and 2009 was bad, but it was nothing like this. Even though this new economic downturn is only a few months old, we are already seeing numbers that we haven’t seen since the worst parts of the Great Depression of the 1930s.

More than 48 million Americans have filed new claims for unemployment benefits over the past 15 weeks, well over 100,000 businesses have permanently closed their doors, and civil unrest has turned quite a few of our major cities into war zones. But not all areas of the country are being affected equally. For example, there are rural areas that haven’t really seen a lot of COVID-19 cases where life seems to have changed very little from six months ago. On the other hand, some urban areas that have been hit really hard by COVID-19 have been absolutely devastated economically. For example, the New York Times is reporting that a million jobs have been lost in New York City, and the unemployment rate for NYC “is hovering near 20 percent”…

Jul 14 04:57

Iran-China deal to ditch dollar, bypass US sanctions: Leader’s advisor

An advisor to Leader of the Islamic Revolution Ayatollah Seyyed Ali Khamenei says a pending roadmap for strategic partnership between Iran and China is to help ditch the dollar in bilateral trade and bypass illegal and unilateral US sanctions.

Ali Aqa-Mohammadi said the 25-year document is more than an “agreement” which usually encompass just a certain issue.

The official said the partnership roadmap solidifies the two countries’ economic and defensive cooperation by protecting their dealings from “third-party intervention.”

It would “close up and eliminate the key spots,” where sanctions, including those targeting defense cooperation between the two countries, could be implemented, he noted.

Jul 13 14:26

China Inks Military Deal With Iran Under Secretive 25-Year Plan

Last August, Iran’s Foreign Minister, Mohammad Zarif, paid a visit to his China counterpart, Wang Li, to present a roadmap on a comprehensive 25-year China-Iran strategic partnership that built upon a previous agreement signed in 2016. Many of the key specifics of the updated agreement were not released to the public at the time but were uncovered by OilPrice.com at the time.

One of the secret elements of the deal signed last year is that China will invest US$280 billion in developing Iran’s oil, gas, and petrochemicals sectors.

Jul 13 12:20

US Warns Iran and China Against Major Investment and Security Deal

The exact terms haven’t been announced, but Iranian officials are reporting that they are close to finalizing a major deal with China that would expand security ties, and greatly expand economic ties, including in the all-important banking sector.

This stands to benefit both China and Iran considerably, but runs counter to US interests in isolating both of them internationally, leading the State Department to oppose the deal and threaten to impose more costs on Iran and China if they try to make the deal.

Despite US anger, Iran keeps looking to make deals with other nations the US is hostile toward. Recent trade with Venezuela has been met with a furious US backlash. Similar anger can be expected with this new deal with China.

Jul 13 11:31

"Tsunami" Of Evictions Could Make 28 Million Americans Homeless This Summer Alone

With the pandemic continuing to sink its claws into the United States, economic conditions have also failed to improve for millions of people. As a result, nearly one-third U.S. households – representing 32 percent – have still not made their full housing payments for the month of July, according to a survey from online rental platform Apartment List.

Jul 13 05:09

AOC blames NYC crime spike on parents shoplifting food for their hungry families

Crime spike? What crime spike?

Rep. Alexandria Ocasio-Cortez shrugged off New York City’s frightening rise in crime, suggesting that tough times are forcing parents into committing petty theft to feed their kids.

Jul 13 05:08

It Takes 3 Weeks to Escape Illinois

Why 3 weeks? That's how long it takes to reserve a one-way U-Haul outbound.
"Everyone is leaving. No one is coming," a U-Haul agent told us a few weeks ago.

Jul 13 04:58

The "Too Big To Fail" Banks Are Getting Ready For Their Worst Quarter Since The Financial Crisis

U.S. banks could be setting up for their worst quarter in more than a decade as loan loss provisions and the pandemic are set to wreak havoc on bottom lines.

Next week, many of the "too big to fail" banks are set to report earnings and are likely going to show that a drop in consumer spending and higher loan losses were not offset by better trading gains. Loan-loss provisions should reach their highest levels since the financial crisis, Barclay's predicts.

Kyle Sanders, an analyst at Edward Jones, told Bloomberg: “We’ve got a full three months of the pandemic coming through the numbers now. The first quarter was rough, but it really only reflected a couple of weeks in March.”

Webmaster's Commentary: 

With these numbers coming up, it is only a matter of time before credit, even for companies and people with excellent credit histories, becomes darned near impossible to find, even at the most usurious of rates.

Jul 13 04:45

Will Economics Fall to Politics?

The intense pressure to politicize every aspect of academia will not spare economics, and why would it? A society willing to topple statues is hardly one to worry about pulling down a body of knowledge, especially one skillfully characterized by the Left as a political program rather than an actual social science.

Jul 13 04:44

Be a Trader, not a Gambler with Nick Santiago

Jul 13 04:18

Restrictions Are Back: Consumer Loses Steam

Jul 13 03:52

Rent Control, Jobs, Marriage

If society really has the best interests of tenants, of employees, and, also, of spouses, it will not in effect charge higher “prices” for them. The very opposite policies would be pursued.

Jul 13 03:45

Why I believe the markets will crash soon...

Jul 12 19:29

How The “Great Reset” Is Targeting Our Children & Plans To “Reimagine” Humanity

By Spiro Skouras

In this episode, Spiro is joined by John Klyczek, an Adjunct Professor, researcher, contributor to Activist Post as well as several other alternative news sites, and the author of the book School World Order: The Technocratic Globalization of Corporatized Education.

For generations the social engineers have used the strategy of indoctrination to target society’s most impressionable minds, our children, through many avenues but primarily through our education systems. In this interview, Spiro and John Klyczek break down how this longstanding and effective tactic is being “reimagined” by the usual suspects, to reshape the future of humanity.

Jul 12 14:20

“Tsunami” of Evictions Could Make 28 Million Americans Homeless This Summer Alone

With the pandemic continuing to sink its claws into the United States, economic conditions have also failed to improve for millions of people. As a result, nearly one-third U.S. households – representing 32 percent – have still not made their full housing payments for the month of July, according to a survey from online rental platform Apartment List.

Jul 12 05:07

Epochalypse Now: How Deep is Your Depression?

Jul 11 06:56

Danielle Park: Are Higher Taxes Inevitable?

Jul 11 05:52

Double Dip Or Prolonged Recession?

Jul 11 04:25

The Bottom’s Falling Out

Jul 11 04:00

Goldman Sachs Is Loading Up On Gold

Jul 11 02:45

Risk Seems to be Everywhere

Jul 10 12:24

Travel Virus Strikes Economy

Jul 10 09:10

Has the Dollar Peaked with Eric Hadik

Jul 10 07:54

Second Coronavirus Stimulus Check May Only Benefit 131 Million Americans Earning $40,000

Republicans are targeting Americans making $40,000 or less a year as the main beneficiaries of the fourth stimulus package still held-up at the Senate, but which they now intend to pass before August 15. This will leave out more than 25 million middle-class Americans who benefitted from the first stimulus payments.

An indication of the GOP's priorities in their version of the Democrats' HEROES Act is majority leader Mitch McConnell, R-Ky., pushing this amount.

"I think the people who have been hit the hardest are people who make about $40,000 a year or less," said McConnell. "Many of them work in the hospitality industry. The hospitality industry, as all of you know, just got rim-racked -- hotels, restaurants -- and so (more stimulus checks) could be part of it."

Jul 10 05:58

"Almost $1 Million Disappeared": A Robinhood Horror Story 

It certainly doesn't help when President Trump, overlooks the downturn in the economy, nevertheless permanent job loss and deep economic scarring, by tweeting out to the tens of millions, just how well the stock market is doing.

As the Nasdaq soars to record highs - Sentiment Trader shows Trump's tweeting about the stocks increases.

Jul 10 05:55

The Strangest Recession In History

"Recessions don’t usually result in personal income soaring, but this one has thanks to government support around the world" Deutsche Bank's Jim Reid writes bringing attention to the following chart.

Jul 10 05:54

Stocks Slide As Biden Vows To "End Shareholder Capitalism", Raise Corporate Tax Rate To 28%

Biden can't get through a speech without making at least one major error. Today, it was the amount of money he was responsible for "administering" under TARP.

Jul 10 05:52

S&P Forecasts $2.1 Trillion In Global Bank Credit Losses Over Next Two Years

Three months ago, when US commercial banks reported a surge in loan losses in Q1 earnings as a result of the covid pandemic, we said that the banks have a "big problem", because while the largest US banks did anticipate a nearly 4x surge in loan losses from a year ago...

... this was nowhere near enough to account for the deluge of total losses that we coming.

Jul 10 05:48

Record Foreign Demand For Spectacular 30Y Treasury Auction

If yesterday's 10-Year reopening auction was blockbuster, then today's just concluded sale of $19BN in 30Y paper was spectacular.

Pricing at a high yield of 1.330%, the auction stopped through by a whopping 2.7bps, the most in at least four years. And while it wasn't the lowest yield ever for a 30Y auction unlike yesterday's 10Y, it was just 1 basis point higher than the all time low 30Y auction hit in March when the auction priced at 1.32%.

The Bid to Cover saw an impressive jump from both the June and recent auction, rising to 2.50, above June's 2.265, and above the six auction average of 2.37%; it was also the highest bid to cover since January.

Jul 10 05:48

"What Were You Thinking?" Part Deux

A couple of years ago I wrote a blog post titled, ‘What Were You Thinking?’ in reference to a famous Scott McNeely quote from the aftermath of the Dotcom bust:

At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?

Jul 10 05:47

Nearly Two Dozen New Tesla Owners Sign Onto Lawsuit Alleging Unintended Acceleration In Model 3s

Nearly two dozen Tesla owners have signed onto a lawsuit in the Bay Area that alleges the company's Model 3 vehicles can dangerously accelerate on their own.

The suit was filed originally in January by eight plaintiffs in six states and the suit has now expanded to include 23 plaintiffs in 11 different states, according to the East Bay Times. The company “has been intentionally overlooking a dangerous problem while rushing its vehicles to market,” the lawsuit claims.

The unintended acceleration issued had been brought to light in the Model X and Model S and is now appearing in the Model 3, the suit says. We have reported on an array of Model S accidents over the last few years where cars have driven through the front of shops. In fact, two of them happened in one week back in March.

Jul 10 05:46

Wells Now Demands Clients Who Refi Jumbo Mortgages Have At Least A $1 Million Balance

The virus-induced recession has mortgage lenders quickly steering away from traditional clients, as fears abound that lost income could result in a massive wave of mortgage defaults. So that's why Wells Fargo is tightening mortgage standards for new clients and laying off thousands of jobs.

More specifically, sources told CNBC that Wells Fargo is now requesting new clients who want to refinance jumbo mortgages to have at least a $1 million balance, up from the previous threshold of $250,000.

"The change came in a July 1 overhaul of lending guidelines that broadly lowered barriers to the product for existing customers, while making it far harder for new ones to qualify," said the source.

Wells Fargo, the largest U.S. mortgage lender, has been pressured by the economic downturn and a Federal Reserve cap on its balance sheet to rein in operations. The bank hasn't been able to expand its balance sheet due to regulatory constraints tied to scandals in 2016.

Jul 10 05:45

Elon Musk Claims Tesla Is Very Close To Fully Autonomous Car (Again)

Tesla is very close to having the Level 5 autonomous driving technology that doesn't require human input, chief executive Elon Musk said in a video message to the World Artificial Intelligence Conference (WAIC) in Shanghai on Thursday.

"I remain confident that we will have the basic functionality for level 5 autonomy complete this year," Musk said in a pre-recorded message, as carried by Reuters.

"I'm extremely confident that level 5 or essentially complete autonomy will happen and I think will happen very quickly," Tesla's chief executive noted.

Jul 10 05:45

Dumbfounded By Tesla, Morgan Stanley's Jonas Cites "The Power Of Hope", Issues $1800 Price Target Range

It's been a running joke for as long as we can remember that sell side analysts are behind the eight ball. They are notorious for upgrading and downgrading stocks after a large move has already taken place.

But at least they used to do their best to try and spin a yarn explaining the move so their bank's investment banking clients wouldn't feel like total idiots for missing the move after paying tons of money for research - just slightly less than total idiots for at least having an explanation.

Well apparently that bar for sell side analysts has been lowered again. And for proof, look no further than Morgan Stanley's Adam Jonas' last note on Tesla. Jonas, who has watched Tesla blow through most of his price targets for the last few months, continues to try and play catch up: he has raised his Tesla target to $740 (which would represent downside of almost 50% at this point) and has pinned the stock's move on "the power of hope".

Jul 10 05:43

Rabobank: Central Banks Need To Get The Grannies To Dive Into Stocks

“There’s no way I can lose.” That is the title of a Bloomberg article today looking “Inside China’s Stock-Market Frenzy”. It notes ‘Leo Li, a 28-yar old freelance screenwriter in southern city of Kunming, says he’s “pretty much all-in” on stocks but isn’t borrowing to maximize returns – yet. “With leverage, it only makes sense to add it when you can be 100% certain of gains,” said Li, adding that his family sold property last year to buy stocks, “That usually happens when the old grannies start rushing in during the mid-to late stage of a rally. We are not there yet, but when the time comes I will be ready.”’ It’s nice to see young investors with such a keen understanding of the fundamentals of this rally – which are not related to Chinese CPI and PPI at 2.5% y/y (as expected) and -3.0% y/y (slightly better than the consensus), which is a very bad combination for many firms.

Jul 10 05:42

Stocks Slide: US Finalizing Federal Contract Ban For Companies Using Huawei, Other Chinese Tech Giants

Another day, another escalation in US-China trade, tech, diplomatic, financial - you name it - relations, and this time stocks noticed.

Moments ago, Reuters reported that in its latest crackdown on Chinese reverse-engineering tech giants, the Trump administration plans to finalize regulations this week that will bar the U.S. government from buying goods or services from any company that uses products from five Chinese companies including Huawei, Hikvision and Dahua, a U.S. official said.

Jul 10 05:38

Almost 50 Million Americans Have Now Filed For First-Time Jobless Benefits Since Lockdowns Began

Despite the hope-restoring nonfarm payrolls "recovery" and the over-hyped bounce in retail sales (ignoring the lack of 'V' in industrial production) and 'soft' sentiment surveys (which are biased by their nature as diffusion indices to bounce back hard), for the sixteenth week in a row, over 1 million Americans filed for unemployment benefits for the first time (1.314mm was slightly better than the 1.375mm expected).

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