Daily Digest 11/27 – Yield-Crazed Investors Pile Into U.S. Subprime Car Loans, The Lender Of Last Resort


Dallas Fed president believes ballooning debt could suddenly become a big issue for economy (Saxplayer00o1)

“We’re got a record level of corporate and to be specific BBB debt has tripled over the last 10 years,” he said on “Squawk Box.” “Leveraged loans as well as BB and B debt have grown dramatically.”

Total corporate debt has swelled from about $5 trillion in 2007 as the Great Recession was just beginning to $9.5 trillion halfway through 2019, quietly surging 90%, according to Securities Industry and Financial Markets Association data.

‘Cheap’ End-of-Year Funding Fuels Demand for Fed Repo Operation (Saxplayer00o1)

The central bank has been injecting liquidity into the funding markets since Sept. 17, when the rate on overnight general collateral repo jumped to 10% from around 2%. The Fed has also begun buying Treasury bills to add reserves into the system.
Even with the Fed’s commitment to continue providing liquidity to the financial system around year-end, the market is still showing some sign of concern.

Fed economists warn of ‘economic ruin’ if Modern Monetary Theory policies are ever adopted (Saxplayer00o1)

“A solution some countries with high levels of unsustainable debt have tried is printing money. In this scenario, the government borrows money by issuing bonds and then orders the central bank to buy those bonds by creating (printing) money,” wrote Scott A. Wolla and Kaitlyn Frerking. “History has taught us, however, that this type of policy leads to extremely high rates of inflation (hyperinflation) and often ends in economic ruin.”

Brazil real hits record low, central bank intervenes to ease pressure (Saxplayer00o1)

The dollar’s record high of 4.2689 reais was around two cents cent higher than the previous peak reached in 2015 when Brazil was mired in one of the deepest and most painful recessions in its history.

Argentina 2019 inflation seen at 55%, Treasury minister says (Saxplayer00o1)

Fernandez’s government, which takes office on Dec. 10, will inherit a roughly $100 billion pile of sovereign debt that needs to be restructured. It includes a $57 billion financing package with the International Monetary Fund (IMF).

Yield-crazed investors pile into US subprime car loans (Saxplayer00o1)

Still, concerns are mounting that consumers may have taken on more debt than they can handle. Data from the Federal Reserve Bank of New York show that the total proportion of consumer auto loans more than 90 days late — classed as “seriously delinquent” — has been steadily rising.

Westpac is now the main banking horror story and its financial pain is yet to come (ezlxq1949)

While Westpac management has failed to take AUSTRAC’s allegations seriously, everyone else has.

There are now investigations underway from the Federal Police, the corporate regulator (Australian Securities and Investments Commission) and the prudential regulator (Australian Prudential Regulation Authority).

Australia Talks: The most and least trusted professions revealed (ezlxq1949)

One Nation voters had less trust in scientists (79 per cent), judges (47 per cent), and particularly journalists (13 per cent) than other voters.

LNP voters trusted religious leaders, corporate executives and politicians more than other voters, while Greens and ALP voters trusted journalists and union leaders more.

Gold and the Lender of Last Resort (GE Christenson)

The Fed enabled the bailout of banks during the 2008 crisis. The audit disclosed over $16 trillion in bailouts, low-interest loans, and guarantees. Bankers prospered, debts increased, stocks and bonds levitated, and dollars purchased less every year. (Gold prices rise.)

NYC wants a chief algorithm officer to counter bias, build transparency (newsbuoy)

A strong public education and transparency program should be among those considerations, the report says. The city should not only explain in plain language what algorithmic systems are in place but also create processes in which individuals can request more information about the decisions made by those systems, why those decisions are made, and potentially challenge those decisions.

The great American labor paradox: Plentiful jobs, most of them bad (tmn)

So, what is this newfangled thing telling us? Right now the JQI is just shy of 81, which implies that there are 81 high-quality jobs for every 100 low-quality ones. While that’s a slight improvement from early 2012—the JQI’s 30-year nadir—it’s still way down from 2006, the eve of the housing market crash, when the economy regularly supported about 90 good jobs per 100 lousy ones.

U.S. Energy Emissions Rise For The First Time In Half A Decade (Michael S.)

In a major milestone, renewables held a larger share than coal in U.S. monthly electricity generation in April 2019, for the first time ever, reflecting seasonal factors and longer-term trends such as coal’s decline and renewables’ rise. Yet, renewables overtaking coal will be an April blip, as the EIA expected coal to provide more electricity than renewables in the United States for the remaining months of 2019.

Farmers are still managing to harvest crops in drought. Here’s how they’re doing it (Henry H.)

“It’s a whole range of things. It’s stubble retention, managing fallows over summer where we control weeds where we’re not growing crops, and it’s less disturbance of our soil,” he said.

“It’s also what goes on in the background, like breeding programs to improve the resilience of our seed varieties.”

Study: Less Tillage And More Surface Residue Doesn’t Crimp Yields (newsbuoy)

In 2014, studies on two farms near Barney, North Dakota, and Fergus Falls, Minnesota, and a third in 2015 near Mooreton, North Dakota, were established. These farms ranged in soil series with sandy, loamy, and clayey textures, providing local farmers with a realistic picture of low-tillage impacts on their own acreage. Full-scale equipment was used in farmers’ fields.

UN: The world has backed itself into a treacherous corner on climate change (tmn)

The UN’s climate science body, the Intergovernmental Panel on Climate Change, reported last year that limiting warming this century to 1.5 degrees Celsius, the more ambitious target in the Paris agreement, would require immediate, drastic changes to the global economy. The world would have to halve its emissions by as soon as 2030, reach net-zero emissions by 2050, and then pull more carbon dioxide out of the air than it emits thereafter.

If the world had gotten its act together in 2010, countries would only have to reduce their emissions 3.3 percent per year to reach the 1.5 degree Celsius target.

Gold & Silver

Click to read the PM Daily Market Commentary: 11/26/19

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