Sancho Panza

Sibanye taking over Lonmin platinum operation. https://www.reuters.com/article/platinum-week-sibanye-gold/platinum-week-sibanye-ceo-confident-of-lonmin-takeover-despite-cash-burn-idUSL5N1SO6K0

The increasingly excellnet Wolf St-I'm virtually spamming it at the minute-has another good piece on movement at the margins in US credit card markets.Worth reading the whole thing. https://wolfstreet.com/2018/05/18/credit-card-delinquencies-spike-past-financial-crisis-peak-at-smaller-us-banks/ 'Credit Card Delinquencies Spike Past Financial-Crisis Peak at the 4,788 Smaller US Banks by Wolf Richter • May 18, 2018 • 66 Comments Subprime is calling. In the first quarter, the delinquency rate on credit-card loan balances at commercial banks other than the largest 100 – so at the 4,788 smaller banks in the US – spiked in to 5.9%. This exceeds the peak during the Financial Crisis. The credit-card charge-off rate at these banks spiked to 8%. This is approaching the peak during the Financial Crisis. A sobering set of numbers the Federal Reserve Board of Governors released this afternoon. But the surge in charge-offs at these banks points at something fundamental: Credit problems at the margin. The consumer spending binge in recent years has been funded not by surging incomes at the lower 60% of the wage scale, where real wage stagnation has reigned, but by borrowing – particularly via credit cards and auto loans. Both of them have turned sour at the margins. And these are still the best of times.

I'm doing the bulk of my chart work at the minute on the UK housebuilders. I think a good few are in the topping out process.And a good few have had an exponential rise over the last two years.Chart work is a highly individual thing and there are no set rules that guarantee successful trades in my expereince.That being said,they have incredible value and some combinations work incredibly well for some sectors.Some rules are timeless eg ' the more a resistance is tested the more likely it is to break'. Building land moves at 3 times the rate of change to house prices,given prices appear to be on the verge of dropping,a lot of assets may not be worth what was paid in a year or two. As I've stated previously,the builders dropped hard before Northern Rock in 2007,with Lehman,Bear,RBS,A&L,B&B going in 2008.... Intersting times will start if the builders break south imho. Edit to add-LCP/LSL Acadata come out over the next two weeks,and the LCP data does include new builds which is where the action lies at the moment

https://wolfstreet.com/2018/05/16/but-who-the-heck-bought-the-1-2-trillion-in-new-us-debt-over-the-past-12-months/ 'Here are the top holders of Treasuries, after China and Japan – many of them tax havens and alleged money laundering centers, and tiny countries or jurisdictions with inexplicably huge balances. For example, Ireland, which is in overall third position behind China and Japan, holds $318 billion of Treasuries, higher than its GDP ($304 billion in 2016). Ireland: $318 billion Brazil: $286 billion United Kingdom (“City of London!”): $264 billion Switzerland: $245 billion Cayman Islands: $243 billion Luxembourg: $222 billion Hong Kong: $196 billion Taiwan: $170 billion India: $157 billion Saudi Arabia: $151 billion Belgium: $125 billion Note that Germany, a country with a massive trade surplus with the US and the rest of the world, and the fourth largest economy in the world, only holds $76 billion in Treasuries. In total, foreign holdings edged up by $2.3 billion In March, to $6.294 trillion. Over the past 12 months, these holdings gained $220 billion. Over the same 12-month period through March 31, 2018, the US gross national debt surged by mind-boggling $1.24 trillion with a T to an even more mind-boggling $21.1 trillion. This is split in two ways: Debt held internally by US government entities has risen by $185 billion to $5.66 trillion Debt that is publicly traded has soared by $1.06 trillion to $15.4 trillion. This publicly traded debt of $15.4 trillion is held by these entities: 15.6% or $2.4 trillion by the Fed as part of its QE 41.0% or $6.3 trillion by foreign official entities (see above). 49.4% or $6.7 trillion by, well, mostly Americans, directly or indirectly. It’s mostly Americans directly and indirectly, via bond funds pension funds, and other ways, along with some “unofficial” investors from other countries. For them, Treasuries have become more attractive as yields have now risen sharply – though they remain relatively low. These “risk free” Treasury yields from three month and up now even exceed the S&P 500 dividend yield, and they practically blow away the yields in the twisted NIRP regions of Europe and Japan. So that’s a deal. '

Worth considering as well the possibility that credit inflation rates and price inflation rates diverge markedly over the next ten years.

Super post Beary,I really like that terms highlighted.Well put.

It's worth separating CB rates from other rates due to the fact that rates at commercial institutions can be a function of balance sheet weakness. Also worth noting that the BoE has effectively ignored inflation for the last ten years when setting the base rate.

Fascinating to watch.I live a couple of miles from that school. In Leicester all the CoE and Catholic schools have kids in them who are Muslim,Sikh,Hindu,Agnostic etc as well as their own.How can I put this....you won't find many Sikhs,Hindu's or Christians there.That whole section of Leicester around Highfields is becoming-despite all the multicultural publicity published by the media-a relatively monocultural place. Very depressing. Edit to add-a couple of miles may not sound like much but in places like Leicester crossing a road is sometimes like crossing a border between different areas.

That's a good balance and means there'll be parents knocking aorund the shcool all the time which I think really reduces the scope for excesses to creep into the school.At my boarding school, you arrived at the start of term and quite a few kids wouldn't see thier parents until the end of it as they didn't go home for half term.

Not surprised at all.I went to a comp in Leicester before boarding at a well known public school.I hated it. The bullying was widespread but of a different nature to that which I expereinced at my comp.At the latter it was physical with the rough kids giving the middle class kids a kicking once in a while. At boarding school it was far more mental and perisistent-lots of snobbery from the nouveau riche kids from the SE,lots of arrogance towards the locals, some quite racist incidents and some emotionally isolated kids suffered in silence as they just didn't have the wherewithal to fight back.As it was boarding,there was no going home for respite. I think day school isn't so bad but after my expereinces things would have to be really bad (possibly in terms of illness) for me to send one of the bambino Panza's boarding.

As previously discussed on here, Powell's tenure at the Fed is a real departure from those who've perceded him.Here's a guy whom isn't imprisoned by the Neo Classical constraints of his forebears. Not only has the cost/benefit been realistically assessed,but they clearly quwation whether the Fed is creating a moral hazard intervening in the MBS markets/Corporate credit markets Interesting times.If ten year yields rise,I'm not sure Powell is going to mind. https://wolfstreet.com/2018/05/16/will-the-new-fed-shed-all-its-mortgage-backed-securities-that-seems-to-be-the-plan/ 'Will the New Fed Get Rid of All its Mortgage-Backed Securities? That Seems to be the Plan by Wolf Richter • May 16, 2018 • 42 Comments The Fed shouldn’t be getting into “allocating credit.” Chairman Jerome Powell is a lawyer, not an economist. So for balance, the vice chair is going to be a tried-and-true economist. Clarida fits the bill. But when he testified before the Senate Banking Committee on Tuesday, his views seemed to be a mirror image of Powell’s views. And that’s why what Clarida said about mortgage-backed securities on the Fed’s balance sheet is so interesting – even if he doesn’t make it through the Senate confirmation process – because it likely shows the direction of Powell’s thinking as well. First things first. Like Powell, Clarida said he “absolutely” supports the Fed’s normalization of interest rates and the balance sheet. Like Powell, he said that the normalized balance sheet should be “a lot smaller,” and that Powell’s suggestion of a range of $2.4 trillion to $2.9 trillion, down from its peak-level of $4.5 trillion, “makes sense.” Like Powell, he said stock market volatility itself – that’s downward volatility, the only volatility that matters on Wall Street – shouldn’t determine the Fed’s policy decisions. On banking regulation too he mirrored Powell. So in this sense, what he said about mortgage-backed securities on the Fed’s balance sheet is fascinating: The Fed should shed them entirely, down to zero. Clarida explained that there are “benefits and costs” of QE, and that as more layers of QE were piled on, “the benefits of QE diminished and the costs went up.” And as vice chairman, he’d “have to take a serious look at the costs of QE.” Then he was asked about “non-Treasury instruments, like mortgage-backed securities,” for QE – that the Fed, when selecting non-Treasury securities, would be getting into something that it shouldn’t, namely “allocating credit.” “Yes, absolutely,” Clarida replied: “My preference would be for the Fed to end up with a Treasury-only portfolio.” He then added that, “as a general proposition, my preference would be to have the balance sheet as much as possible in Treasury securities.” Shedding MBS from the balance sheet entirely and keeping them off could have a big impact. Currently, the Fed holds $1.74 trillion of MBS. That’s about 26% of all residential mortgage-backed securities outstanding. The Fed is the elephant in the MBS room. Over the years, given the magnitude, the Fed’s MBS purchases and holdings have been a big force in the mortgage market, helping to push down yields of residential MBS, and thereby helping to push down mortgage rates. That Clarida is thinking about shedding them entirely appears to be unrelated to mortgage rates per se, and all about what types of decisions the Fed should stay out of – and in this case, that the Fed should stay out of “allocating credit,” which would give one type of private-sector bond a competitive advantage over other types that are not being selected. This was perhaps also a veiled criticism of the ECB’s QE program, which very specifically and publicly is “allocating credit” by buying (in addition to government bonds) corporate bonds, asset-backed securities, and covered bonds. The individual corporate bonds the ECB has acquired can be viewed in its public data base. For a company, having its bonds acquired by the ECB is deemed a stamp of approval and has pushed the yields of those bonds, and thus the cost of borrowing, way down. In other words, the ECB decides on a daily basis that certain types of private-sector credits, such as bonds of specific companies, will get preferential treatment, and others will not. Clarida seemed to be saying that the Fed shouldn’t get into these decisions of preferential treatment in the private sector, that at first it might be MBS, but then, like the ECB, the Fed might slither into other credits, such as corporate bonds. Hence, stick to Treasuries only. And given that he and Powell are on the same page on just about all other issues brought up, it’s likely that this view is shared as well. The Treasury Department reported that foreign holdings of Treasury securities rose by $220 billion over the 12 months through March 31. Over the same period, the US gross national debt surged by $1.24 trillion. Japan systematically dumped US Treasuries while China hung on. So who bought those Treasuries? Read… But Who the Heck Bought the $1.2 trillion in New US Debt Over the Past 12 Months? '

Add in the downward pressure on rents as bookies vacate the High St,all that's left is coffee shops,EA's and chairddee shops....UK High St could be emptying soon. https://wolfstreet.com/2018/05/17/brick-mortar-meltdown-pummels-these-stores-the-most/ 'Entire “under-attack” sectors will, like music stores and video stores before them, essentially disappear over the next many years. It’s a slow process. It took 20 years of e-commerce sales to reach this point. And in a way, this is just the beginning. Every year, the environment for brick-and-mortar retailers and the malls they’re in will get relentlessly tougher, ending in many more bankruptcies and liquidations. Each liquidation makes it easier for the remaining brick-and-mortar competitors, but only briefly. Then the process continues. Other brick-and-mortar retailers will thrive by building a vibrant online presence, as their brick-and-mortar operations continue to shrivel. Macy’s is an example of that. They’re all trying. They all know that e-commerce has turned into an irreversible disruption of how consumers do business. Those that can get on top of it and those that figure out how to offer services or experiences that consumers cannot get online will thrive. The others will disappear.'

Intersting to see Intu back at it's mid 1993 price I've been saying for some time the big box LL's are going to get slaughtered when the footfall drops below the critical mass that sustains the heating/aircon bill. The wife and I do everything but food shopping online these days,from doing all our non food instore five years ago...we clearly aren't the only ones.

Thanks for putting this up Errol.I've read him before when you've posted his stuff. Interesting that he says ' The homebuilders are already in a bear market, like the one that started in mid-2005 in the same stocks about 18 months before the stock market started heading south in 2007. My Short Seller’s Journal subscribers and I are raking in a small fortune shorting and buying puts on homebuilder stocks. As an example, I recommended shorting Hovnanian (HOV) at $2.88 in early January. It’s trading at $1.78 as I write this – a 38.2% ROR in 4 months. Anyone get that with AMZN in the last 4 months? You can learn more about the SSJ here: Short Seller’s Journal. ' Very much coincides with my view on Uk building stocks

Cheers Barnsey.Interesting discussion re yield inversion-something discussed on here about 50 or so sides back.I think of late,people-including me-have gotten that obsessed with the 10yr note that we've forgotten about the flattening curve.Can't see the wood for the trees etc. Interesting to note his timeline for inversion is before early 2019.......

It gets wrose Shaun Richards https://notayesmanseconomics.wordpress.com/2018/05/15/uk-real-wages-fell-again-in-march/ 'UK Real Wages In the rather odd world of Mark Carney and the Bank of England those are excellent figures especially if you look at the March figures alone which showed 3% growth on a year before. Let us continue on that sort of theme for a moment. Latest estimates show that average weekly earnings for employees in Great Britain in real terms (that is, adjusted for price inflation) increased by 0.4% excluding bonuses, but were unchanged including bonuses, compared with a year earlier. This has been copied and pasted across the media as showing real wage growth yet that is somewhat misleading. This is because if you actually look at what people get in they pay packets March actually showed a slowing to an annual rate of 2.3%. Now at absolute best the UK inflation rate was 2.3% according to the CPIH measure but that of course relies on imputed rents to bring it down from the 2.5% of CPI and is lower than the 3.3% of the RPI. According to the official data which you have to look up as it is not ready for copy and pasting real wages fell by 0.1% on the most friendly measure which is using CPIH. Let me put this another way UK single month wage growth has now gone 3.1%, 2.8%, 2.6% and now 2.3%. I will not insult you by pointing out the trend here but will show you how this is being reported with the one strand of hope being that February has been revised up by 0.3% and fingers crossed for March on that front. From @katie_martin_fx ING: “Rising UK wage growth points to summer rate hike” Meanwhile the back picture is along the lines of this. But the big picture on pay is that real average earnings remain £14 a week – or £730 a year – lower than they were a decade ago pic.twitter.com/hOoqOFGxBZ — ResolutionFoundation (@resfoundation) May 15, 2018 Actually it is worse than that in the longer-term because for some reason they use an inflation measure with imputed rents in it ( CPIH) which lowers the numbers. Secondly they are using regular pay which as I have explained above flatters wage growth at the moment.'

I was talking to an old buddy today who's ex BT and he was saying a lot of the exchanges aren't that big, are in awkward places in terms of access and that with many,you'd struggle to find an alternative use that doesn't cost an unfeasible amount of time and money. Agreed more generally though, BT is badly run.Quite what they were thinking twhen they started bidding on fussball,I'll never know.

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The place for a ton is incredible...............

Intersting to see that all put together The big banks are spending a small fortune at the minute on historical compliance issues......

There are new readers of this thread who may not be aware.There's often media talk of 'foreign cash buyers' when quite clearly they may not be all they seem.

Worth noting that foreign buyers withcommercial loans sourced abroad appear as cash buyers even though they're not.

France is incredible value if you want to live inland but there's been a large depopulation ongoing of younger people out o rural areas from what I believe.There's also significant social upheavel looming in some of the urban areas. It's alarming how little you get for your cash in the UK which likely tells you where we're headed longer term-Switzerland we ain't.

Certainly felt like that up here in Leicester-lot of monthly movement in these figures though LE2 RM sales data Jan 02 £80k Dec 04 £171k Worth noting Jan 18 is £208k.......gone nowhere in 14 years.

London is heavily subsidized by base rates, HTB 1+2, FLS etc etc.I'm agnostic about the place,but you can't ignore the back door subsidies it gets from everywhere else in the UK. Nice chart.. http://www.rightmove.co.uk/overseas-property/property-61782929.html Quick gander and E240k gets you a nice 5 bed detached with lake and huge garden.