Bloomberg

Meet Janet Cowell – The North Carolina Treasurer Desperately Pushing to Keep Criminal Public Pension Fees Secret

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Screen Shot 2014-06-30 at 11.07.57 AMOne of the most important revelations to emerge in 2014 to-date, is the fact that public pensions are taking on an increasing amount of irresponsible risk in order to meet return targets. The primary way they are doing this is by investing a larger and larger percentage of assets with “alternative investment” managers such as hedge funds and private equity firms.

Specifically, states have increased allocations to alternatives to $460 billion, or 15.3%, from only 3.3 percent in 2001, according to the National Association of State Retirement Administrators. However, this is just the tip of the iceberg. What is really shocking, and extraordinarily disturbing, is the fact that the deals these public pensions enter into, and associated fees paid, are intentionally kept secret from the public, and the people’s whose assets are at stake have absolutely no idea how their money is being invested.

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How the CEO of HFT Firm Virtu Financial is Demanding a Taxpayer Bailout in Florida

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What the financial crisis, subsequent taxpayer bailouts, zero prosecutions of financial industry participants and further consolidation of the economy by oligarchs has taught us more than anything else is that the super rich and politically connected are not allowed to fail. Apparently, this may also apply to the head of one of the largest firms in what is quickly becoming the most despised “industry” in the nation.

By now, pretty much everyone in America knows about Michael Lewis’ book Flash Boys, which exposes the high frequency trading (HFT) industry for the money-sucking parasite it is. However, what will really get your blood boiling, particularly if you live in Florida, is how the CEO of one of the biggest players in the HFT space, Virtu Financial, is looking for taxpayers to bail-out his poorly performing investment in the Florida Panther NFL hockey franchise. This takes having “some nerve” to a whole new level of absurdity.

From Bloomberg:

Vincent Viola, whose high-frequency trading firm plans to raise millions of dollars in an initial public offering next month, is seeking tax dollars to help cover the bills for the Florida Panthers hockey team he bought six months ago.

Viola asked lawmakers in South Florida’s Broward County to use $64 million in taxpayer funds for arena bond payments owed by the team, which says it’s losing money as attendance has fallen to a 14-year low. Officials in Broward, which encompasses Fort Lauderdale on the Atlantic Coast, disagree on how to proceed, with some saying that if they don’t pick up the tab, the team may move and leave taxpayers with $225 million in debt and an empty arena.

Sounds a lot like the nonsense we all head that went something like “we must bail-out and not regulate banking criminals otherwise they will leave the U.S.” Oh the horror, these crooks might take their organized crime elsewhere…

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The Spanish Government is Preparing Another Bailout of Billionaire Oligarchs

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Over the weekend, I covered the extraordinarily disturbing new law that just passed in Spain which essentially criminalizes protests and allows for up to 30,000 euro fines for simply wearing a mask. It’s all starting to make sense now, as the country’s Prime Minister Mariano Rajoy prepares a new oligarch bailout, this time of the country’s highway operators who of course must be saved at all costs. They know the protests are coming and they want to be able to deal with uppity peasants when they feel the need to get out into the streets. Truly despicable. From Bloomberg:

Spanish taxpayers have bailed out banks and power companies. Next up are highway operators and their billionaire owners.

Prime Minister Mariano Rajoy’s government is considering a 5 billion-euro ($6.7 billion) plan to take over and guarantee the debt of about 364 miles (585 kilometers) of roads, according to two people familiar with the matter who declined to comment because no final decisions have been made.

“This is another repeat of ‘too big to fail’,” Jose Garcia Montalvo, an economics professor at Pompeu Fabra University in Barcelona, said in a telephone interview. “You don’t need to worry if something goes wrong, the government will come to the rescue.”

Oligarch rules.

The roads are controlled by some of Spain’s biggest companies, including the Del Pino family’s Ferrovial SA, the Koplowitz family’s Fomento de Construcciones & Contratas SA, Sacyr SA and Actividades de Construccion y Servicios SA, run by Real Madrid Chairman Florentino Perez. They’re entitled to the rescue through a law passed under General Francisco Franco in 1972, which stipulates that when a private highway goes bust, the state has to repay its owners for the cost of the land and the construction.

Well sure, if a former fascist dictator says it’s the right thing to do…

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A Bull Market in $1,000 Faucets as Home Equity Loans Soar

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“People don’t want granite countertops — they want marble costing at least 25 percent more,” said Mroz, owner of Michael Robert Construction in Westfield, an affluent town less than an hour’s commute to Manhattan. “Money is so cheap today, people can splurge on $1,000 faucets.”

– From today’s Bloomberg News article: Faucets at $1,000 Abound as Home Equity Spigot Opens

It’s interesting, disturbing and pathetic that this article emerged so shortly after I highlighted the fact that there is about to be a huge, and potentially disruptive reset in home equity loans over the next several years. So while we are still dealing with the ramifications of the prior housing bubble and the HELOCs associated with that debacle, we are right back at it. Extracting additional equity from another phony housing bubble to remodel homes that likely aren’t worth anywhere near what people think once private equity and money laundering oligarchs are done with their binge buying.

As I have said many times before, QE makes a society lose its mind. From Bloomberg:

A year ago, New Jersey contractor Michael Mroz’s customers were focused on saving money when renovating kitchens and baths, he said. Now, with a resurgence of home equity lending, they’re ready to pay for the best.

“People don’t want granite countertops — they want marble costing at least 25 percent more,” said Mroz, owner of Michael Robert Construction in Westfield, an affluent town less than an hour’s commute to Manhattan. “Money is so cheap today, people can splurge on $1,000 faucets.”

Spending on home renovations is rising to records as banks such as Wells Fargo & Co. and JPMorgan Chase & Co. increase lending for home equity lines of credit, or Helocs, after property prices this year gained at a pace not seen since the last housing boom. Heloc originations could rise 16 percent this year and reach another five-year high in 2014, according to Mustafa Akcay, an economist for Moody’s Analytics, powering the earnings of Home Depot Inc. and boosting the economic expansion.

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A Broken, Corrupt and Immoral Criminal Justice System

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You know that the rule of law has essentially vanished when the Attorney General himself feels compelled to state: “America’s legal system, we must face the reality that, as it stands, our system is in too many respects broken.” That is precisely what Eric Holder stated earlier this week, while seemingly taking no responsibility for that fact despite being the top lawyer in the nation. Guess he was too busy protecting his banker masters from prosecution to notice.

In any event, the broken criminal justice system really took center stage earlier this year when the federal prosector Carmen Ortiz drove child prodigy Aaron Swartz to his death by piling on overzealous charges in an attempt to advance her career. Instead she drove a gentle genius to an untimely death. Kudos Ortiz.

In light of Holder’s comment, Bloomberg columnist Clive Crook wrote an excellent article outlining some of the main attributes of out increasingly Kafkaesque legal system. Here are some key excerpts:

“As a prosecutor, a judge, an attorney in private practice, and now, as our nation’s attorney general, I’ve seen the criminal justice system firsthand, from nearly every angle. While I have the utmost faith in — and dedication to — America’s legal system, we must face the reality that, as it stands, our system is in too many respects broken.”

In a widely reported speech this week, Eric Holder delivered that assessment of U.S. criminal justice. Many commended his frankness, but if you ask me he’s confused. A broken system of justice shouldn’t command the utmost faith; it should arouse the utmost skepticism. And his appraisal was actually too generous. America’s criminal-justice system is not “in too many respects broken”: It’s a national disgrace, from top to bottom.

According to a forthcoming report from the American Civil Liberties Union, 2,074 federal inmates are serving sentences of life imprisonment without possibility of parole for nonviolent crimes. Think about that.

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Two Powerful Videos on Physical Gold Supply Tightness

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If the physical gold market is anywhere near as tight as these two market observers indicate, get ready for some serious fireworks in the precious metals markets. The first video is one that has been making the rounds in recent days. It’s an interview with Mihir Dange, co-founder of commodity trading firm Grafite Capital from the … Read more

Beef Supply at 21-Year Low: Get Ready to Pay Up

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I don’t follow the commodity markets as closely as I used to, but the following article related to beef prices really caught my eye. Last year’s drought and consequent spike in grain prices led to negative margins for cattle producers, who subsequently culled their herds. As expected, this has resulted in tighter supply today. We see this evidenced in the fact that retail ground beef prices were up 13% year-over-year in June, and the CEO of Ruth’s Chris mentioned during a recent presentation that they were forced to raise prices in February. While grain prices are much lower today, which should encourage expansion in cattle supply, this process will actually cause even more tightness in the near-term as more animals are set aside for breeding rather than slaughtered.

Don’t worry, you can always just eat the S&P 500.  From Bloomberg:

U.S. beef production is plunging to a 21-year low after surging feed costs spurred ranchers to cut herds, signaling record prices for consumers and higher costs for buyers from McDonald’s Corp. to Ruth’s Chris Steak House.

Production in the U.S. will decline 4.9 percent to 10.93 million metric tons in 2014, retreating for a fourth year, the government says. The herd on July 1 was the smallest for that date since at least 1973, according to the average of four analyst estimates compiled by Bloomberg.

Retail ground-beef prices in June were up 13 percent from a year earlier and near a record set in January.

Beef costs for Ruth’s Hospitality Group Inc., the Heathrow, Florida-based steakhouse owner, climbed 17 percent over two years, Chief Financial Officer Arne Haak said during a presentation on June 25. The restaurant raised its prices in February. Next year and 2015 will still be tough because of the lack of supply, Chief Executive Officer Michael O’Donnell said in a presentation June 18.

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Chinese Malls Waive Rents Due to Soaring Vacancies

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I was writing about the ultimate pain coming to China’s crony, liquidity fueled, ponzi economy way before it was cool.  In fact, all the way back in 2009 when I was still working on Wall Street I wrote a piece for clients titled “The Emerging China Risk.”  Last year, I highlighted some of the country’s fraudulent “wealth products” in the post: China to Boost the Global Economy? Nope it’s also a Total Ponzi.  Well now we see that the overbuilding of ghost malls in the middle of nowhere is finally coming home to roost.  We learn from Bloomberg that:

Chinese landlords are forgoing rent and paying to outfit stores for mass-market fashion brands including Zara and H&M, a bid to blunt the impact of a boom in shopping-mall construction that threatens to push up vacancies.

Chinese developers built more malls and expanded into smaller cities as consumer spending and incomes grew, elevating China’s economy to the largest in the world after the U.S.

Half of the 32 million square meters (344 million square feet) of shopping centers under construction around the world are in China, according to CBRE Group Inc. (CBG) About 21 million square meters of retail space is expected to be completed by next year, a 38 percent increase in supply, according to broker Cushman, which tracks 20 cities in China.

Vacancy rates in some less affluent cities could surge to more than 30 percent by next year from as low as 6.8 percent in the first quarter this year, Cushman forecasts.

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Meet the Military-Industrial-Wall Street Complex: Blackstone Hires General Wesley Clark

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So how’s a private equity company snatching up homes all across America, pushing average citizens out of the market and then renting these homes back to the once middle class, but now indentured servitude masses supposed to hedge itself against future backlash?  Simple, put a former General and NATO Supreme Allied Commander in Europe on your payroll.  That’s exactly what Blackstone has just done.

According to Bloomberg, Blackstone has hired General Wesley Clark to “to advise on its investments in energy companies.”  This makes perfect sense since General Clark may be privy to information regarding which countries’ oil wells and refineries may be next in line or liberation by America.  From Bloomberg:

Blackstone Group LP hired Wesley Clark, the former NATO Supreme Allied Commander in Europe and a one-time U.S. presidential candidate, to advise on its investments in energy companies.

Private-equity firms hire high-ranking executives and former officials to expand relationships with corporations and governments worldwide, as well as to benefit from their industry experiences. KKR & Co., the buyout company run by Henry Kravis and George Roberts, hired former CIA director David Petraeus last month to run a new unit for public policy and economic research at the New York-based firm.

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Carrington Bails: More Smart Money Leaves the “Buy to Rent” Game

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“Buy to rent” has been one of my favorite topics to write about as of late, since the creation of this “asset class,” combined with the total madness that follows from money printing, has once again created a major housing bubble in many markets in these United States.  In recent months, I’ve noted how some of the earliest participants in this market have pulled back.  Most notably Och Ziff, but now Carrington as well.

The signs are everywhere that this market is not only overheated, but downright filled with insanity, and as Carrington’s head Bruce Rose states “stupid money.”  Las Vegas is a prime example of this, where 8% of single family homes are vacant, yet new construction permits are up 50%.  More from Bloomberg:

Hedge fund manager Bruce Rose was among the first investors to coax institutional money into the mom and pop business of single-family home rentals, raising $450 million last year from Oaktree Capital Group LLC. 

Now, with house prices climbing at the fastest pace in seven years and investors swamping the rental market, Rose says it no longer makes sense to be a buyer.

“We just don’t see the returns there that are adequate to incentivize us to continue to invest,” Rose, 55, chief executive officer of Carrington Holding Co. LLC, said in an interview at his Aliso Viejo, California office. “There’s a lot of — bluntly — stupid money that jumped into the trade without any infrastructure, without any real capabilities and a kind of build-it-as-you-go mentality that we think is somewhat irresponsible.”

No joke, I actually heard an ad on local Boulder radio that explained how you could “get in” on buy to rent schemes.

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