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marmar's Journal
marmar's Journal
February 25, 2016

Brexit Panic Sets In

Brexit Panic Sets In
by Don Quijones • February 24, 2016

The Dreaded Contagion Effect
By Don Quijones, Spain & Mexico, editor at WOLF STREET.

Referendums are tricky in the EU. This time around, a referendum will be held in the UK, the EU’s second biggest net provider of funds — and most importantly, not a member of the single currency. The vote in all likelihood represents the biggest political decision British voters will make in their lifetime.
Feeding the Fear

The fear on both sides of the English Channel is palpable. Brexit panic has sent the pound sterling spiraling to 2009 lows against the dollar. It didn’t take long for the UK’s business elite to begin sounding the alarms: 200 CEOs, chairmen and chairwomen, representing 1.2 million employees and 33 FTSE 100 firms, put their names to a letter warning that “British business needs unrestricted access to the European market of 500 million people in order to continue to grow, invest and create jobs.” Or else.

The fear mongering has only just begun. In the coming months all manner of doom and gloom scenarios will be paraded to cajole British voters into voting the right way. Almost all of Britain’s elite institutions, including the two main political parties and, most importantly, the City of London Corporation want Britain to remain in the EU.

But the genie is already out of the bottle. Now it’s just a question of waiting to see how the popular mood in Britain evolves over the next five months of intense electioneering. By this stage in proceedings, with Europe facing rising political divisions and instability, economic upheaval, a refugee crisis and possibly even a full-blown banking meltdown, the only emotion the EU has left to play on is fear.

That’s not to say that Brits don’t have reason to fear the potential consequences of leaving the EU. For example, pro-EU pundits have argued that trade with the EU could suffer a heavy setback, meaning lower growth and fewer jobs. But the argument ignores a glaring fact: the UK has a large and growing trade deficit with its EU partners. Hence, companies “on the continent” will be even worse affected, at a time when global trade is already slowing. ...............(more)


February 25, 2016

Citi: Here Comes a Global Recession

Citi: Here Comes a Global Recession
Growth is likely to fall apart.

(Bloomberg) After a few years of reasonably calm markets and stable growth around the world, Citigroup Inc. says the chances of a global recession are already high and only going up.

"In our view, global growth is at a highly precarious point, after 2-3 years of relative calm," the team of economists led by Willem Buiter said in their note, which is likely to exacerbate concerns about the world's ability to withstand a pause in China's stunning economic growth.

"The long-standing fragilities in the world economy relate to the structural and cyclical slowdowns in China and its unsustainable exchange rate regime, the excessive level of debt across many countries and sectors and ongoing regional and geopolitical uncertainty," the economists said. The economists have accordingly revised their forecast for growth this year in advanced economies, from a 2.4 percent in January 2015 to 1.6 percent currently, and warned that the 2016 figure "could well be lower."

When they adjust for what they call "true Chinese growth," the Citi team finds that global growth might have been as low as 2 percent year-over-year in the final quarter of 2015. ................(more)


February 25, 2016

Ugly, Scary and Not Getting Better

(Bloomberg) It's tough to be an emerging-markets fund manager these days. And it's not looking like it will get better anytime soon, at least not before the first quarter is over. For those in doubt, examine the five biggest developing world stock funds in the U.S. by assets.

Combined, Vanguard's FTSE Emerging Markets ETF and Emerging Markets Stock Index Fund, Oppenheimer's Developing Market Fund, American Funds' New World Fund and the iShares MSCI Emerging Markets ETF have lost $34.9 billion of assets under management over the past year, bringing their holdings to multi-year lows. The net asset values of all five touched the lowest in at least five years in January and remain close to that level. They have also had their worst first eight weeks since 2009.

That's on top of last year's performance, which, for the Vanguard FTSE EM ETF, the biggest in its class by assets, was the worst since 2011 based on the fund's price. While some of the others had a worse year in 2011, the prices of four of them fell more than 10 percent. Prices are usually equal to or track the net asset value closely.
Price Pain

Blame it on the main benchmark for stocks in the developing world, the MSCI Emerging Markets Index, which was down more than 7 percent year-to-date as of Wednesday and is officially in bear territory. Unfortunately, the prospects for the index are hardly looking rosy.

For starters, volatility remains high and is trending up, judging by the Chicago Board Options Exchange's emerging markets exchange-traded fund volatility index. This is the closest proxy for the fear gripping money managers and investors..........(more)


February 25, 2016

How the US Went Fascist: Mass Media Make Excuses for Trump Voters

How the US Went Fascist: Mass Media Make Excuses for Trump Voters
Trump's racism and xenophobia violates America's core beliefs — yet the media and many Americans are okay with it.

By Juan Cole | February 24, 2016

The rise of Donald Trump to the presumptive Republican standard bearer for president in 2016 is an indictment of, and a profound danger to, the American republic.

The Founding Fathers were afraid of the excitability of the voters and their vulnerability to the appeal of demagogues. That is the reason for a Senate (which was originally appointed), intended to check those notorious hotheads in Congress, who are elected from districts every two years.

But it isn’t only the checks and balances in government that are necessary to keep the republic. It is the Fourth Estate, i.e. the press, it is the country’s leaders and it is the general public who stand between the republic and the rise of a Mussolini.

The notables have been shown to be useless. Donald Trump should have been kicked out of the Republican Party the moment he began talking about violating the Constitution. The first time he hinted about assaulting the journalists covering his rallies, he should have been shown the door. When he openly advocated torture (“worse than waterboarding”), he should have been ushered away. When he began speaking of closing houses of worship, he should have been expelled. He has solemnly pledged to violate the First, Fourth and Eighth Amendments of the Constitution, at the least. If someone’s platform is unconstitutional, it boggles the mind that a major American party would put him or her up for president. How can he take the oath of office with a straight face? The party leaders were afraid he’d mount a third-party campaign. But who knows how that would have turned out? Someone with power needs to say that Trump is unacceptable and to define him out of respectable politics, the same way David Duke is treated (Trump routinely retweets Duke fellow-travellers).

Then there is the mass media. As Amy Goodman has pointed out, corporate television has routinely pumped Trump into our living rooms. They have virtually blacked out Bernie Sanders. Trump seems to have connived to have 10 or 15 minutes at 7:20 every evening on the magazine shows. Chris Matthews of Hardball obligingly cut away to Il Duce II’s rants and gave away his show to him on a nightly basis. .................(more)


February 25, 2016

Nina Turner on Switching from Clinton to Sanders: He's Been a "Constant Champion" of Civil Rights

Published on Feb 23, 2016

http://democracynow.org - As Hillary Clinton and Bernie Sanders campaign ahead of the South Carolina primary, we speak to former Ohio state Senator Nina Turner. She made headlines in November when she switched her support from Clinton to Sanders. Turner is now a national surrogate for the Vermont senator.

Democracy Now! is an independent global news hour that airs weekdays on nearly 1,400 TV and radio stations Monday through Friday. Watch our livestream 8-9AM ET: http://democracynow.org

February 25, 2016

Is This the Beginning of the Next Recession?

Is This the Beginning of the Next Recession?
by Wolf Richter • February 24, 2016

[font color="blue"]“Significant risk” of “falling into contraction” with “worse to come.”[/font]

The US economy is largely service based. So when the “manufacturing renaissance” and “on-shoring” that everyone had been waiting for turned into no-shows, and when instead manufacturing started slowing in early 2015, it was no big deal, according to the meme.

OK, it was terrible for the folks who lost their jobs. But manufacturing accounts for only 12% of the US economy and employs only about 9% of the workforce. So overall, it’s not the end of the world, we heard constantly. And besides, we could always make it up with fast food.

Manufacturing alone can’t drag the US into a recession, we were assured. And the service economy would continue to be strong. That was the meme.

Then, a few days ago, Evan Koenig, Senior Vice President at the Dallas Fed, gave a presentation that showed that manufacturing contractions preceded service contractions in the run-up of the past two recessions. When service sector growth begins to dwindle – so still growth, but slower growth – after the manufacturing sector has already begun to shrink, that’s the point he called “prelude to recession.” And when the service sector begins to actually shrink, that event marks what will later be official called the beginning of the recession [read… “Prelude to Recession”: the Dallas Fed’s Unsettling Charts].

That “prelude to a recession” happened a few months ago. At the time, manufacturing was already shrinking; and the services index had just started heading south. But now the services index entered a contraction as well. So this could mark the beginning of what will much later be officially called a recession. ................(more)


February 24, 2016

San Francisco: “Baghdad by the Bay” for People of Color

By Rebecca Gordon, who teaches in the Philosophy department at the University of San Francisco. She is the author of Mainstreaming Torture: Ethical Approaches in the Post-9/11 United States and the forthcoming American Nuremberg: The U.S. Officials Who Should Stand Trial for Post-9/11 War Crimes (Hot Books, April 2016). Originally published at TomDispatch

In the photo, five of Beyoncé’s leather-clad, black-bereted dancers raise their fists in a Black Power salute. The woman in the middle holds a hand-lettered sign up for the camera, bearing three words and a number: “Justice 4 Mario Woods.” Behind them, the crowd at Levi’s Stadium, home of the San Francisco 49ers, is getting ready for the second half of Super Bowl 50, but the game’s real fireworks are already over.

The women in the photo had just finished backing Beyoncé’s homage to the Black Panthers and Malcolm X during her incandescent halftime appearance, when two San Francisco Bay Area Black Lives Matter activists managed to grab a few words with them. Rheema Emy Calloway and Ronnisha Johnson asked if they’d make a quick video demanding justice for Mario Woods. “From the look on the faces of the dancers, they’d already heard about the case,” Calloway told the Guardian.

Who was Mario Woods and why did Calloway and Johnson want the world to know that his life mattered? The answer: on December 2, 2015, Mario Woods was executed in broad daylight by officers of the San Francisco Police Department (SFPD) and the event was filmed.

Woods was a 26-year-old African American, born and raised in San Francisco’s Bayview district, one of the city’s few remaining largely black neighborhoods. (In 1980, right before I moved to San Francisco, African Americans made up almost 13% of the city’s population. Today, the figure is around 6% and shrinking.) Woods died when police attempted to arrest him because they believed that, earlier in the day, he had stabbed another man in the arm. Like many victims of police violence, Woods had mental health problems. Indeed, his autopsy’s toxicology report showed that, when he died, his system contained a powerful mix of medications (both prescribed and self-administered) including anti-depressants, speed, and marijuana.

But it was the way he died that brought Mario Woods a brief bit of posthumous notoreity. His death was, like Beyoncé’s dancers, captured on video. A crowd of people watched as what CNN described as “a sea of police officers” surrounded Woods and shot him dead. At least two people recorded cell-phone videos of what looks eerily like an execution by firing squad. .............(more)


February 24, 2016

Another Oil Crash Is Coming, and There May Be No Recovery

(Bloomberg) It’s time for oil investors to start taking electric cars seriously.

In the next two years, Tesla and Chevy plan to start selling electric cars with a range of more than 200 miles priced in the $30,000 range. Ford is investing billions, Volkswagen is investing billions, and Nissan and BMW are investing billions. Nearly every major carmaker—as well as Apple and Google—is working on the next generation of plug-in cars.

This is a problem for oil markets. OPEC still contends that electric vehicles will make up just 1 percent of global car sales in 2040. Exxon's forecast is similarly dismissive.

The oil price crash that started in 2014 was caused by a glut of unwanted oil, as producers started cranking out about 2 million barrels a day more than the market supported. Nobody saw it coming, despite the massively expanding oil fields across North America. The question is: How soon could electric vehicles trigger a similar oil glut by reducing demand by the same 2 million barrels?

That's the subject of the first installment of Bloomberg’s new animated web series Sooner Than You Think, which examines some of the biggest transformations in human history that haven’t happened quite yet. Tomorrow, analysts at Bloomberg New Energy Finance will weigh in with a comprehensive analysis of where the electric car industry is headed. ..............(more)


February 24, 2016

U.S. service-sector economic gauge hits lowest level in 28 months


A reading of services activity in the U.S. in February indicated contraction, a worrying sign that the blues that have hurt manufacturing may have spread to more domestically-oriented industries.

The Markit flash U.S. services purchasing managers index fell to a seasonally adjusted reading of 49.8 from 53.2 in January, marking the worst reading since the government shutdown in October 2013.

Any reading below 50 indicates more respondents said conditions were getting worse than getting better.

Markit said softer new-order growth, uncertainty about the economic outlook and disruptions from heavy snowfall on the east coast weighed on the index.

February 24, 2016

It Starts: Subprime Auto Loans Implode (in Your Bond Fund)

It Starts: Subprime Auto Loans Implode (in Your Bond Fund)
by Wolf Richter • February 23, 2016

[font color="blue"]“Fears of an impending liquidity crunch in that asset class.”[/font]

“What is happening in this space today reminds me of what happened in mortgage-backed securities in the run-up to the crisis,” U.S. Comptroller of the Currency Thomas Curry warned in October about the auto loan bubble.

And his warning is now becoming reality.

Subprime auto loans aren’t big enough to take down our megabanks, the way subprime mortgages had done. But they’re big enough to take down specialized auto lenders and cause a lot of tears among investors that bought the highly rated structured securities backed by subprime and deep-subprime auto loans that are now defaulting at a rate last seen during the days of the Financial Crisis.

And they’re big enough to knock the auto industry, one of the few booming sectors in the otherwise lackadaisical economy, off its record perch. An auto-loan implosion would start at subprime and work its way up, just like mortgages had done.

The business of “repackaging” these loans, including subprime and deep-subprime loans, into asset backed securities has also been booming. These ABS are structured with different tranches, so that the highest tranches – the last ones to absorb any losses – can be stamped with high credit ratings and offloaded to bond mutual funds designed for retail investors. ..........(more)


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