WARNING: Huge Profit Drop Sees Deutsche Bank Mirroring Lehman Bros. Debacle

Deutsche Bank profits plummet 98%, CEO warns of further cuts

Germany’s biggest bank posted a net profit of €20 million in the second quarter of the year. This is down from €796 million in the same period in 2015.

Deutsche's share price fell by four percent on Wednesday after the announcement. Analysts’ predictions had varied from more than a billion euro loss to half a billion profit.

Deutsche Bank chief executive John Cryan warned about the possibility of further cuts.

"If the current weak economic environment persists, we will need to be yet more ambitious in the timing and intensity of our restructuring," he said on Wednesday.

Overall, Deutsche Bank’s shares have lost about 44 percent of their market value in 2016. This is partly due to increasing skepticism about the bank’s position in the market and $14 billion in fines.

Revenue is down 20 percent in the three months, partly because of the Brexit vote. The investment bank slid 28 percent. At the same time, revenue from Deutsche’s foreign exchange business was flat, even though there was increased client demand for currencies in the wake of the British decision to leave the EU.

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Negative Rates: We're Going To Need A Bigger Vault 

Thanks to Japan’s radical Abenomics stimulus efforts, Japan’s central bank buys up most of the government-issued debt anyway. In 2013, the central bank owned less than 15% of Japan’s government bonds. Today, it’s more than 30% … and rising.

And with interest rates (and bond yields) in negative territory, who in their right mind (besides those deluded central bankers) would want to buy Japanese government debt anyway? For financial institutions like Bank of Tokyo-Mitsubishi, why bother with staffing a bond desk to begin with?

Spread Thin: How The Fed Manipulates Financial Spreads  

Treasuries have a higher risk premium than cash because they’re subject to duration and inflation risks. This higher risk premium is what compels investors to exchange dollars for treasuries. The same goes for corporate debt, high-yield, real estate, and equities. The larger the spread between assets, the more investors are compensated for assuming greater risk (ie, selling bonds to buy equities).

The future of 'Made in China': Industrial robots replacing dwindling workforce  

The industrial robots might also solve a growing problem: China's dwindling supply of cheap, low-skilled labour. For three decades, that was the magic ingredient that pushed this economy to become the second biggest in the world. Millions of labourers left the countryside and flooded the industrial cities, lifting themselves out of poverty and their children into the middle class.

But now, there aren't enough of those children. The population is aging. The so-called demographic dividend is fading.

Faltering Oil Rally Boosts Leveraged Loan Defaults, Fitch Says

Templar, Stallion likely to miss interest payments, Fitch says The defaults would push energy default rate to nearly 18% The default rate for leveraged loans in the energy sector could spike close to 18 percent if Templar Energy LLC and Stallion Oilfield Services Ltd. are unable to make interest payments on their debt, Fitch Ratings said. The companies will likely be forced to default on the loans in August, according to Fitch, as weak oil and gas markets leave them short on cash. The July trailing 12-month energy leveraged loan default rate rose to nearly 14 percent from 11.3 percent in June, Fitch said. Officials at Templar, an oil and gas exploration company, and Stallion, which provides drilling support, didn’t immediately respond to requests for comment. “The impact of commodity price pressures has been the largest driver of defaults in the leveraged loan market this year,” said Eric Rosenthal, […]

 .bloomberg.com

Japan's Stagnation Sets Stage For Deep Economic Depression

Kyoki (Insanity)

Pondering the state of the global economy can elicit manic‐depressive‐obsessive‐compulsive emotions. The volatility of global markets – equities, bonds, commodities, currencies, etc. – are challenging enough without consideration of Brexit, the U.S. Presidential election, radical Islamic terrorism and so on. Yet no discussion of economic and market environments is complete without giving hefty consideration to what may be a major shift in the way economic policy is conducted in Japan.

The Japanese economy has been the poster child for economic malaise and bad fortune for so long that even the most radical policy responses no longer garner much attention. In fact, recent policy actions intended to weaken the Yen have resulted in significant appreciation of the yen against the currencies of Japan’s major trade partners, further crippling economic activity. The frustration of an appreciating currency coupled with deflation and zero economic growth has produced signs that what Japan has in store for the world falls squarely in to the category of“you ain’t seen nothin’ yet.” Assuming new fiscal and monetary policies will be similar to those enacted in the past is a big risk that should be contemplated by investors.

The Last 25 Years

The Japanese economy has been fighting weak growth and deflationary forces for over 25 years. Japan’s equity market and real estate bubbles burst in the first week of 1990, presaging deflation and stagnant economic growth ever since. Despite countless monetary and fiscal efforts to combat these economic ailments, nothing seems to work.

Any economist worth his salt has multiple reasons for the depth and breadth of these issues but very few get to the heart of the problem. The typical analysis suggests that weak growth in Japan is primarily being caused by weak demand. Over the last 25 years, insufficient demand, or a lack of consumption, has been addressed by increasingly incentivizing the population and the government to consume more by taking on additional debt. That incentive is produced via lower interest rates. If demand really is the problem, however, then some version of these policies should have worked, but to date they have not.

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Corporate Japan's pension obligations hit all-time high

The value of listed Japanese companies' future obligations to retiring workers reached a record 91.21 trillion yen ($860 billion) at the end of fiscal 2015, with the unfunded chunk growing to nearly 26 trillion yen amid depressed interest rates.

As Warnings Flash in Venezuela, Gold Holdings Sink Yet Again

As Venezuela’s crisis swells, its gold reserves are shrinking. The holdings fell again in May, sliding to 6.24 million ounces from 6.63 million ounces in April to post a fourth consecutive drop, according to data from the International Monetary Fund website. Over the past year, the country’s hoard has shrunk 36 percent, and since February 2015 it’s nearly halved.

Singapore Banks Facing Earnings Stumble as Bad Loans, Sibor Bite

Overall classified loan exposure, which includes debts that are unrecoverable as well as those unlikely to be repaid, rose to a seven-year high of 0.92 percent by March, according to Monetary Authority of Singapore data.

Shell misses expectations with 70 percent earnings plunge

Filled oil drums are seen at Royal Dutch Shell Plc’s lubricants blending plant in the town of Torzhok, north-west of Tver, November 7, 2014. Royal Dutch Shell ( RDSa.L ) reported a more than 70 percent fall in quarterly profit on Thursday, well below analyst estimates, blaming weak oil prices, poor refining profits and higher charges resulting from its $54 billion acquisition of BG Group. Shell’s current cost of supplies — its definition of net income — came to $1 billion in the second quarter, compared with analyst expectations of $2.2 billion and $3.8 billion achieved the same time last year. “Lower oil prices continue to be a significant challenge across the business, particularly in the upstream (business),” said Chief Executive Ben van Beurden, who said last month he wants to turn Shell into the best oil company for investor returns. Rivals BP ( BP.L ) and Statoil ( […]

 reuters.com 

Recession Hits Brazil Hard As Bankruptcies Surge

Record bankruptcies pressure Brazil banks as recession bites

 SAO PAULO, July 26 Brazil's harshest recession

in eight decades is prompting some of the nation's top banks to

reclassify some 90 billion reais ($27 billion) in problematic

doubling in bankruptcy protection filings.




Corporate loans, eroding profits as banks struggle with a

    Lenders face a deluge of requests to renegotiate existing

corporate borrowers of cash. Some companies, like rig leaser

loans and stretch out guarantees as the economic crisis deprives
Sete Brasil Participações SA and phone carrier Oi SA, have been

sole client Petróleo Brasileiro SA derailed plans to
forced to seek court protection from creditors.
      

Reuters

Singapore Banks Facing Earnings Stumble as Bad Loans, Sibor Bite

Overall classified loan exposure, which includes debts that are unrecoverable as well as those unlikely to be repaid, rose to a seven-year high of 0.92 percent by March, according to Monetary Authority of Singapore data.

Why Pensions’ Last Defense Is Eroding

Long-term returns for U.S. public pensions are expected to drop to the lowest levels ever recorded, portending deeper pain for states and cities as a $1 trillion funding gap widens.

China: Strikes, mass unemployment a growing worry for country's leaders

Prominent labour activist Zhang Ziru, who has been involved in much of the labour unrest in China's south, had a dire warning for the Government. "If China's system doesn't improve and the Government fails to make political reforms, the grievances and grudges will grow until society explodes," he said.

Analyst Warns of a Restaurant Downturn and Sees Harbinger of U.S. Recession

A downturn in dining could be implying a U.S. recession as soon as early 2017, he said, since "restaurants have historically led the market lower during the three to six-month periods prior to the start of the prior three U.S. recessions," Westra adds.

Oil Majors Lost One Engine; Now the Second One Is Sputtering

BP says second-quarter refining margins drop to 6-year low Downstream business was key last year in cushioning cheap oil If Big Oil was a two-engine airplane, you could say it’s been flying on a single engine since energy prices crashed in 2014. Now, the second motor is sputtering. The major integrated oil companies, including Exxon Mobil Corp., Total SA and BP Plc, have relied on their so-called downstream businesses, which include refining crude into gasoline, oil trading and gas stations, to cushion the losses on their upstream units, which pump crude and natural gas. “The crash in oil prices in late 2014 brought refineries worldwide a pleasant surprise: booming margins,” said Amrita Sen, chief oil analyst at consulting firm Energy Aspects Ltd. in London. “But now, the market is changing.” BP, the first major to report second-quarter results, showed the impact on Tuesday. The British company said its downstream […]

 bloomberg.com

US New Home Sales Surge To Record

New home sales rise to 7-year high as demand buoys builders

Sales of new homes are up 10% in the second quarter compared with the first as demand stays hot

New home sales jumped in June as sales data from prior months were revised upward, further signaling sturdy demand in the housing market.

June sales rose 3.5% to a seasonally adjusted annual rate of 592,000, the Commerce Department said Tuesday. That was the strongest since February 2008, beating the 560,000 forecast set by economists surveyed by MarketWatch.

The median price jumped to $306,700 in June, 6% higher than a year ago. Supply retreated to 4.9 months’ worth of homes at the current sales pace.

Read: Even sellers have to hustle as buyers vie for scarce homes

The regional breakdown was mixed. Sales dipped fractionally in the Northeast and South. But they surged by more than 10% in both the West and in the Midwest, where sales haven’t run so hot since November 2007.

Revisions to March, April and May data raised those months’ sales tallies by a net 22,000. Many economists prefer to look at multiple-month averages for new home sales data, which is often volatile and heavily revised. The average pace for the second quarter, 576,000, is 10% higher than the 524,000 for the first three months of the year.

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DealBook: One Thing Both Parties Want: Break Up the Banks Again  

Bernie Sanders and Donald Trump both called for the reinstatement of Glass-Steagall, a 1933 law that separated investment and commercial banks.

How Do We Make America Strong Again? Start Telling the Truth  

The Power Elite has also purposefully confused bullying with strength. Bullying fails because the bullied hate the bully with every fiber of their being. True strength flows from opt-in, mutually beneficial alliances that people and nations join out of self-interest. Such opt-in relationships can only endure if telling the truth is the core principle, for truth is the foundation of trust, and trust is the foundation of durable alliances and cooperative networks.

A Stark Nuclear Warning  

This was the moment when Perry concluded that there could be no acceptable defense against a mass nuclear attack, an opinion from which he has never deviated. Many political leaders, including several presidents, have disagreed with Perry and have sponsored various types of anti-missile defense systems, the latest being the ballistic missile defense system now being installed in Eastern Europe.

Russian Economy Recovering Slowly

With oil holding relatively stable, there are few restrictions on meeting inflationary goals by the end of next year, a Russian finance minister said. “Inflation [in 2016] will be in the range of between 5.5 percent and 6 percent,” Deputy Finance Minister Maxim Oreshkin said Monday. “This is how it is going now.” Crude oil prices moved from above $100 per barrel in 2014 to below $30 per barrel in early 2016 because the global economy was too slow to take on the excess supply on the market. That price collapse hurt economies like Russia that depend in part on oil for revenue. With oil prices holding relatively stable at around $45 per barrel since May, the Central Bank of Russia said […]

 .upi.com

Verizon Goes Yahoo For $4.8 Billion

Verizon to acquire Yahoo in $4.83 billion deal 

Verizon Communications Inc. VZ, -0.50% said early Monday that it has reached a deal with Yahoo Inc. YHOO, -1.42% to acquire the internet company's operating business. The agreement will see Verizon pay $4.83 billion in cash in a move to create a mega mobile media technology company, according to a news release. Under the deal, Yahoo will be integrated with AOL, which Verizon bought last year. Verizon shares were up less than a 1%, while Yahoo shares were halted for the news.

Market Watch

Retirement Dreams And Nightmares  

We can’t afford to retire – we have too much debt. We have lived beyond our means, just like our governments, for decades, by borrowing from the future – that is, going into debt to pay today’s expenses with tomorrow’s income. The official US national debt is approaching $20 trillion – a huge number, and do not believe that “deficits don’t matter.” For those approaching retirement, deficits and debt do matter because they suck cash from current retirement income to pay for yesterday’s expenses.

UK economy suffered ‘dramatic deterioration’ after Brexit vote – Markit (jdargis)

The PMI survey for Britain’s powerhouse services sector – which accounts for nearly 80 per cent of the economy – has dropped to a seven year low of 47.4 for July from 52.3 at the June survey. Any reading below 50 indicates contraction. The outcome was far lower than economists’ forecast of a reading of 48.8.

The manufacturing PMI has also dropped to 49.1 from 52.1 in June. The July reading is a 41-month low although economists had expected a slightly worse reading of 48.7. 

The Reasons Why Exhaustion And Burnout Are So Common  

There is no doubt that exhaustion is a pressing concern today, with some particularly startling figures emerging from emotionally draining sectors such as healthcare. A study of German doctors found that nearly 50% of physicians appeared to be suffering ‘burnout’, reporting, for instance, that they feel tired during every single hour of the day and that the mere thought of work in the morning left them feeling exhausted. Interestingly, men and women seem to deal with burnout in different ways: one recent Finnish survey found that male employees reporting exhaustion were far more likely to take extended sick leave than burned out women, for instance.

Next Week Is as Good as It Gets for Big Oil 

Several majors expected to post highest earnings in 3 quarters Strong performance may not last as oil seen easing back to $40 For oil companies, the second quarter might be as good as it gets. Shares gained more than in any other industry, thanks to crude rising from a 12-year low. Profits were the best in at least three quarters for majors including Royal Dutch Shell Plc, Chevron Corp. and BP Plc, helped by cost cuts, analysts say. The rest of the year might not be as rosy as supply holds near record levels. The combined market value of the world’s oil companies shrank by $2 trillion in the past two years following crude’s collapse. While analysts agree the worst of the oversupply is over, BNP Paribas SA and JBC Energy GmbH are among those forecasting a slide back to $40 a barrel as output rebounds in Canada, Iran, […]

 .bloomberg.com

Top Nuclear Physicist's - "Dream of Peace" (Part 1)

Special Op-Ed

(Part 1 of 3 )

 Special thanks to our friend and colleague, Yuji Ishiguro, for writing and sharing his thoughts and views on the present state of human affairs. There is little doubt that the human predicament is grave on many fronts, while the time and opportunities to remedy the situation are rapidly evaporating. In actuality this discourse is, by far, much more than a dream for peace -

"It is a call for Immediate Action! "

T. A McNeil

July 24, 2016

 

By Yuji Ishiguro, 

Instituto de Estudos Avançados 

São José dos Campos, SP, Brazil 

DREAM OF PEACE

Introduction

Part One

 I dream of the world without wars and indefinite evolution of Homo sapiens but the future seems dark. We all know that humanity faces a multitude of difficulties but few people seem to realize that all the problems have been caused by humans and need to be solved by humans. 

The biosphere is being destroyed and the equilibrium in the systems of the Earth has been disrupted. The current ways of civilization cannot be continued much longer. In some decades at most, I think, shortages of resources and social and ecological collapse will cause another world war, this time all-out with biological, chemical and nuclear weapons, causing an end to the civilization as we know it. Hiroshima and Nagasaki are just another episode in the long series of madness humanity has been committing throughout history and an appetizer for some people in positions of war decisions who, having known the taste, await the main course. The horrible images and statistics will not deter them. 

  

A large bomb in the current stock can devastate a largest megalopolis but still, if seen on a world map, it would be a tiny dot. Some seemingly rational people and societies are capable of extreme evils. 

In order to avoid this future, we need to transform our collective consciousness, recognizing the finiteness of the planet and our dependence on nature and acknowledging the existence of evil and irrationality in human mind. We have to accept that all ideals cannot be realized in the finite world: there are limits to ideals, including the so-called human rights. A fundamental error of humanity, since ancient times, is promoting population growth and countering it with wars on one hand and by ravaging the planet on the other, while clinging to impossible ideals. Humanity has been extremely short sighted and irrational. We need to see the whole in space and time and wake reason that may be dormant but must surely be extant in human mind. Without population control the current ideas and efforts for peace and for conservation and sustainability, such as the Paris Agreement, will be useless. Fundamental concepts of human existence need to change. 

I present what I call a framework for sustainability, summarized in twenty short sentences, then a brief review of the current situation and its causes, and finally discuss fertility and population control as the fundamental requirement for peace and for continuity of the environment and civilization.

Framework For Sustainability 

 1. The Earth is finite in space, resources and capacity of its systems; 

 2. Man is adapted to the current equilibrium in the systems of the Earth; 

 3. A healthy biosphere is essential for equilibrium in the habitats for man; 

 4. The biosphere is maintained by photosynthesis in plants;

 5. There is a limit to the size of the biosphere; 

 6. An increase of human population means a reduction of those of other species; 

 7. Perturbations in the biosphere as well as in other systems could break the equilibrium; 

 8. In a closed system the effective fertility rate of each species must be that of replacement; 

 9. There cannot be human rights that lead to the destruction of the community; 

10. The concept of community needs to include all humanity and the biosphere; 

11. Ultimately man will have to live with renewable resources; 

12. The principles of economy need to be modified; 

13. Equity requires a limit to personal wealth; 

14. The meaning of life must be found in something other than procreation or consumption; 

15. All ideals cannot be realized; 

16. Some new rationality needs to be added to the rules of community; 

17. Evolutionary success of Homo sapiens will be greater in a small permanent community; 

18. The Earth can support indefinitely an abundant lifestyle in a limited global civilization; 

19. Many wars were due to mismatches between available resources and human demands on them; 

20. Human population must be reduced. 

NEXT

DREAM OF PEACE

 Current Situation And Its Causes 

 Part  Two