Sunday, December 13, 2015

Updated; Pretty scary stuff which the local news industry overwhelmingly doesn't understand

And then there were three junk bond funds to shut down within a week;

Lucidus Has Liquidated $900 Million Credit Funds, Plans to Shut
"How Afraid Should You Be Of The High Yield Bond Market

The high yield bond market was hit hard on Friday, and the culprit was the Third Avenue Focused Credit Fund...

This was an open ended mutual fund, the type that investors expect to be able to sell during the day, get closed out at that night’s closing Net Asset Value (NAV)...

That changed.

...the fund effectively converted to a new entity that will liquidate over time and distribute proceeds to the investors.

"GPD: Man shot on Holt Ave., blocks from Thursday’s double shooting

GPD: Man shot and killed, 3622 Lakefield Drive

Alleged gang member charged with murder in Greensboro homicide

Person shot: 16th Street and Highway 29 North

Person shot: 902 Burbank Street

Person shot: 906 Martin Luther King Jr Drive

Drive-by shooting now a homicide

Police investigating double shooting on Beck Street

Man stabbed at Mother Tuckers on Spring Garden St., suspect arrested

Can you identify subject suspected of robbing English Street Market on Nov. 20?

Can you identify subject suspected of robbing subway at 1029 Alamance Church Rd. on Nov. 22?"


...This is something that I have never seen happen for a bond fund (including during the financial crisis) and it happened as the market debates the liquidity situation in the bond market.

...FINRA came out with a report just this week giving the [high yield] market a grade of “healthy by most measures“.

That is not consistent with the message many market participants have been sending.

...The High Yield ETF’s, HYG and JNK, combined for a groundbreaking $5.5 billion in volume.

The flapping of a single butterfly's wing today produces a tiny change…
…so, in a month's time,
a tornado that would have devastated the Indonesian coast doesn't happen,
or maybe one that wasn't going to happen does.

Ian Stewart
The Mathematics of Chaos

...The prior high for ETF volumes was Tuesday with $3.2 billion, and before that was $2.2 billion

So far more than $11.3 billion of risk changed hands in TRACE bonds and ETF’s on Friday.

...The obvious time to sell was in June."
"Stone Lion Capital Partners - the first hedge fund that gated investors as reported last night (Third Avenue's likewise gating high yield  fund was technically a mutual fund)
"Now, Stone Lion Capital suspends redemptions as junk-bond market fears accelerate

Hedge-fund suspends redemptions at oldest fund as junk-bond market comes under pressure

...after many investors asked for their money back.

The first rule is not to lose.

The second rule is not to forget the first rule.

Warren Buffett

It is the latest example of the sudden crunch facing traders across Wall Street looking to sell beaten-down positions...."
"Inventory Out of Control Everywhere

...Total wholesale sales fell by almost 6% in October Y/Y, making for the second worst month in sales of this “cycle”, beaten only by -6.9% in May. At -5.8%, October is worse than every month of the dot-com recession and its aftermath.

...Wholesale sales turned negative last November, meaning that sales have contracted for a full year already and inventories are still growing by nearly 4%...

...the current contraction is already slightly deeper and significantly longer than the whole of the dot-com recession. Not only is October’s contraction worse than any month in that past event, the 6-month average now is lower than the worst point registered in the economic aftermath of 2002.

...The only conclusion that can be drawn from all this is one that adds up to looming recession, far more than what has already been seen so far. The inventory imbalance has drawn on far longer than any historical precedence (especially compared to recession cycles before 1990) and has spread throughout the “goods economy”...

...we already have a contraction in sales worse than that entire period and still no inventory resolution. Quite the opposite, actually, as inventory has spun up to levels only seen just prior to the Great Recession’s full weight."
"Good Luck Getting Your Money Out When the Next Crisis Hits

Why is it that when a banking crisis hits, everyone acts surprised?

The reason is actually quite simple: everyone at the top of the financial food chain are highly incentivized to keep quiet about the problems.

Central Banks, [the press], Bank CEOs, politicians… all of these people are focused primarily on maintaining CONFIDENCE in the system, NOT on fixing the system’s problems. Indeed, they cannot even openly discuss the system’s problems because it would quickly reveal that they are a primary cause of them.

...Even middle managers and lower level employees won’t talk about it because A) they don’t know the truth concerning their institutions or B) they could be fired for warning others.

...You will not be warned of the risks to your wealth by anyone in a position of power in the political financial hierarchy (with the exception of folks like Ron Paul who are usually marginalized by the media).

Moreover, when the Crisis DOES hit, it will be much, much harder to get your money out.

Consider the recent regulations implemented by SEC to stop withdrawals from happening should another crisis occur....

A money market fund that imposes a gate 
would be required to lift that gate within 10 business days...


...if the system is ever under duress again, Money market funds can lock in capital (meaning you can’t get your money out) for up to 10 days. If the financial system was healthy and stable, there is no reason the regulators would be implementing this kind of reform.

A hedge fund just suspended redemptions… meaning investors cannot get their money out. Expect more and more of this to hit in the coming months...

The solution, as it was in 2008, will not be to allow the defaults/ debt restructuring to occur. Instead, it will be focused on forcing investors to stay fully invested at whatever cost...

Phoenix Capital Research
What is now emerging,
especially clear since the Turkish deliberate ambush o
f the Russian SU-24 jet inside Syrian airspace,
is that Russia is not fighting a war against merely ISIS terrorists,
nor against the ISIS backers in Turkey.

If a Sudanese terrorist organization 
whose stated goal is to eliminate Egypt, 
shoots rockets over the border 
without a Sudanese governmental military response,
 should Egypt use force to eliminate the threat?

What if Mexican militants targeted San Diego?

Russia is taking on...Saudi Arabia and its new monarch,
King Salman bin Abdulaziz Al Saud, together with his son,
the Defense Minister, Prince Salman.

Prince Salman is Defense Minister and led the Kingdom,
beginning last March, into “Operation Decisive Storm,”
in neighboring Yemen.

Saudis headed a coalition of Arab states
that includes Egypt, Morocco, Jordan, Sudan,
the United Arab Emirates, Kuwait, Qatar and Bahrain.

The Prince is also head of the Saudi Economic Council
which he created.

...The Saudi monarchy
is determined to control the oil fields of Iraq and of Syria using ISIS to do it.

They clearly want to control the entire world oil market,
first bankrupting the recent challenge from US shale oil producers,
then by controlling through Turkey the oil flows of Iraq and Syria.

I don't care if I follow your rules, if you can cheat, so can I.

I won't let you beat me unfairly, I'll beat you unfairly first.

Ender Wiggin
Fictional Military Strategist

In the true sense, ISIS is simply a “Saudi army in disguise.”

If we strip away the phony religious cover,
what emerges is a Saudi [/US] move
to grab some of the world’s largest oil reserves
"...the median income of middle class households declined by 4 percent from 2000 to 2014.

...median wealth for middle class households dropped by an astounding 28 percent between 2001 and 2013.

In 1970, the middle class took home approximately 62 percent of all income. Today, that number has plummeted to just 43 percent.

For the poorest 20 percent of all Americans, median household wealth declined from negative 905 dollars in 2000 to negative 6,029 dollars in 2011.

The top 0.1 percent of all American families have about as much wealth as the bottom 90 percent of all American families combined.

...49 percent of all Americans now live in a home that receives money from the government each month, and nearly 47 million Americans are living in poverty right now.

...The median net worth of families in the United States was $137, 955 in 2007. Today, it is just $82,756."

"The crew of the Russian "Smetlivy" destroyer was forced to use firearms on Sunday to prevent a collision with a Turkish seiner vessel in the northern part of the Aegean Sea, according to Russia's Ministry of Defense."

Junk-Bond Rout Deepens, Sending Shockwaves Through Stocks and Other Markets
Abrupt liquidation of Third Ave fund one factor behind Dow Industrial’s 300-point decline

China Steel Output Slumps to a One-Year Low as Prices Collapse

EU Powerless to Stop Nationalist Ascendancy as Terror Fears Rise

"Wall Street fund shutdown sparks fears of bond market crisis

INVESTORS are fleeing the bond market after the shutdown of two high-profile funds intensified fears of a fresh credit crisis.

The closure of the two New York funds last week spooked investors who were already fretting about the expected increase in US interest rates — the first for a nearly a decade.

Third Avenue Management barred investors from making withdrawals from a $788m (£518m) fund that invests in company debt, and Stone Lion Capital did the same with a $400m credit fund.

Third Avenue is the biggest retail fund to shut its doors since the 2008 crash, raising fears of a rout in the riskier parts of the bond market."