IEHI Feed: The Bank Implode-o-Meter http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-65075 Thu, 14 Nov 2019 05:53:04 GMT The SoftBank Effect: How $100 Billion Left Workers in a Hole http://bankimplode.com/viewnews/2019-11-14_TheSoftBankEffectHow100BillionLeftWorkersinaHole.html Mr. Solankey is one of millions of workers and small-business people who worked with start-ups financed by the biggest venture capital fund in history, the $100 billion Vision Fund run by the Japanese conglomerate SoftBank. The fund was part of a flood of money that has washed over the world in the past decade -- and that has upended people's lives when the start-ups broke their promises.

Masayoshi Son, SoftBank's chief executive, was hailed as a kingmaker in 2016 when he unveiled the Vision Fund. Using the cash hoard, Mr. Son poured money into fledgling companies across the world, many of which have a business model of hiring contractors who deliver their services. Above all, he urged these start-ups to grow as fast as possible.

Many of the young companies used SoftBank's cash to dangle incentives and other payments to quickly attract as many workers as they could. But when they failed to make a profit and SoftBank changed its tune on growth, the companies often slashed or reneged on those same incentives.

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iehi-feed-65073 Tue, 12 Nov 2019 20:54:12 GMT Trump, In Foamy-Mouthed Rant, Calls For Negative Interest Rates To "Boost Stock Market Another 25%" http://bankimplode.com/viewnews/2019-11-12_TrumpInFoamyMouthedRantCallsForNegativeInterestRatesToBoostStock.html iehi-feed-65072 Mon, 11 Nov 2019 15:05:25 GMT Warren Would Take Billionaires Down a Few Billion Pegs http://bankimplode.com/viewnews/2019-11-11_WarrenWouldTakeBillionairesDownaFewBillionPegs.html Forbes counts 607 American billionaires. A handful have stated that they support a moderate wealth tax. George Soros, Liesel Pritzker Simmons, Ian Simmons, Chris Hughes, Nick Hanauer and 13 other wealthy individuals signed a letter over the summer in support of such a tax.

"I definitely understand how that would make lots and lots of extremely rich people uncomfortable," said Mr. Hanauer, co-founder of a Seattle-based venture capital firm and an early investor in Amazon. "But I'm more worried about our democracy."

"Don't get me wrong," he added. "I would prefer 3 percent." But even at 6 percent, he said, "we would all survive and continue to be rich and fly around in our planes."

He pointed out that most Americans had been living with meager income growth for decades, while the silk-thin layer at the top shoveled in enormous gains, cumulatively more than 400 percent since 1980.

"All you're doing is saying to the richest percent of Americans that the rate of growth of your assets and wealth will now match what has happened to other Americans over the last 40 years," Mr. Hanauer said.

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iehi-feed-65071 Sat, 09 Nov 2019 17:32:32 GMT Elon Musk fires back at Tesla detractor: 'Allow us to send you a small gift of short shorts' http://bankimplode.com/viewnews/2019-11-09_ElonMuskfiresbackatTesladetractorAllowustosendyouasmallgiftofsho.html For years, Einhorn has decried Musk's controversial leadership style and called for him to be ousted from the CEO seat at Tesla. His October 30 letter to shareholders rails against Musk's handling of the SolarCity takeover, which Tesla acquired for $2.6 billion in 2016. SolarCity, which was run by Musk's cousin, has been the target numerous lawsuits and fraud allegations stretching back to before the acquisition.

One lawsuit filed by Tesla shareholders alleges Musk engineered the purchase of SolarCity, in which he was the majority shareholder, as a a bailout of the troubled solar panel company. That case is heading for trial in March.

Over the past two years, Tesla's electric car business has been beleaguered with manufacturing problems related to its rollout of the new Model 3 sedan. The company's latest earnings report signals the firm may be at a turning point. It posted a $342 million profit, indicating it's making bigger margins on car sales.

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Musk also invited Einhorn to tour the Tesla factory and learn more about the company, adding "I'm certain your investors would appreciate you getting smart on Tesla."

Einhorn responded Friday, in an open letter challenging Musk to identify inaccuracies in Greenlight's shareholder letter and accepting the invitation to visit Tesla factories, writing, "I think facility visits would be fun (can we start in Buffalo?). I might learn the difference between your alien dreadnought factory and cars made by hand in a tent."

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iehi-feed-65070 Sat, 09 Nov 2019 16:31:10 GMT Wells Fargo Banker Pleads Guilty for Helping Fake Movie Producers http://bankimplode.com/viewnews/2019-11-09_WellsFargoBankerPleadsGuiltyforHelpingFakeMovieProducers.html iehi-feed-65069 Fri, 08 Nov 2019 14:26:58 GMT TD Bank Customers Sue Canadian Owned TD Bank Over Overdraft Fees http://bankimplode.com/viewnews/2019-11-08_TDBankCustomersSueCanadianOwnedTDBankOverOverdraftFees.html iehi-feed-65065 Wed, 06 Nov 2019 23:47:20 GMT Founder of world's biggest hedge fund says ‘world has gone mad' with easy money and ‘system is broken' http://bankimplode.com/viewnews/2019-11-06_Founderofworldsbiggesthedgefundsaysworldhasgonemadwitheasymoneya.html iehi-feed-65064 Wed, 06 Nov 2019 23:40:37 GMT Why the prospective $70 billion buyout of Walgreens may signal the stock-market rally is about to end http://bankimplode.com/viewnews/2019-11-06_Whytheprospective70billionbuyoutofWalgreensmaysignalthestockmark.html Walgreens Boots Alliance shares surged Wednesday amid speculation that the U.S.-listed drugstore group has been considering a $70 billion take-private deal. If private equity can pull it off, it would be the biggest leveraged buyout ever, dwarfing the $45 billion transaction in which energy group TXU was taken private in 2007, just a year before the financial crisis rocked global markets and prompted unprecedented intervention by global central banks.

For one, Walgreens WBA, already has $15 billion in debt on its balance sheet. A potential bidder would need to add more leverage to fund the purchase. That would leave the drugstore chain particularly vulnerable when the credit cycle turns -- which is looking increasingly likely.

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the share of new leveraged loans with no maintenance covenants -- requiring the borrower to maintain certain financial buffers such as a debt-to-Ebitda ratio, or earnings before interest, tax, depreciation and amortization, of less than five times -- has tripled since 2007, the U.K. central bank said.

Banks are already struggling as investors steer clear of hefty private-equity debt package. Take Bain Capital's $4 billion buyout of market-research firm Kantar in July. The U.S. private-equity firm lined up 11 banks to assemble a $3 billion debt package.

But after an underwhelming reaction from the market, the banks had to restructure the debt package to make it more palatable to investors. This included raising the pricing on the loans and tightening the covenants.

Secondly, Walgreens finances aren't looking so good. The company's profit in the fourth quarter plunged 55% to $677 million, compared with the same quarter in 2018.

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iehi-feed-65063 Wed, 06 Nov 2019 01:53:02 GMT The Self-Defeating Effects of New York's Redoubled Rent Control http://bankimplode.com/viewnews/2019-11-05_TheSelfDefeatingEffectsofNewYorksRedoubledRentControl.html ``Rent regulation has insidious consequences. Unable to recoup their costs, landlords invest less. Conditions in buildings, especially those with lower-income tenants, worsen. Higher-income renters spend their own money on upkeep, and the additional costs wipe out much of the money they save from cheaper rent. "The benefits of rent control, from the tenant's standpoint, are likely to decline steadily over time," a 1997 study by the Department of Housing and Urban Development found.

What we're most concerned about is how rent regulation harms the very class of person it is designed to help -- the renter. (It's not so fundamentally bothersome that property values don't soar to endless heights -- after all, homes are ultimately places to live, first and foremost).

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iehi-feed-65062 Tue, 05 Nov 2019 22:23:38 GMT 'We created a monster,' SoftBank CEO Masayoshi Son reportedly said of WeWork http://bankimplode.com/viewnews/2019-11-05_WecreatedamonsterSoftBankCEOMasayoshiSonreportedlysaidofWeWork.html iehi-feed-65061 Tue, 05 Nov 2019 19:00:06 GMT Worst May Be Over for Global Economy Amid Signs of Stabilization http://bankimplode.com/viewnews/2019-11-05_WorstMayBeOverforGlobalEconomyAmidSignsofStabilization.html One key reason for the potential turn is the wave of interest-rate cuts from global central banks. Of the 57 institutions monitored by Bloomberg, more than half cut borrowing costs this year with the Fed doing so three times and the European Central Bank pushing its deposit rate further into negative territory. Rate cuts also operate with a lag so the positive effects of easier monetary policy have yet to fully flow through, meaning a further impulse likely awaits.

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Also driving sentiment is that President Donald Trump and President Xi Jinping are on the cusp of signing "phase one" on a trade deal, which could be enough for global commerce to find a footing. China is reviewing locations in the U.S. where Xi would be willing to meet with Trump to sign a pact.

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"If the U.S.-Chinese trade escalates again, or if the U.S. starts a new trade war against the only other economy of almost equal size, the EU, it could all still go wrong," said Holger Schmieding, chief economist at Berenberg Bank. "But in the absence of such new political shocks, chances are that the global downturn could peter out in early 2020 and make way for a modest upturn thereafter."

Back on the "no recession ever" yellow brick road... all it takes is financial meltdown-level central bank intervention...

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iehi-feed-65060 Tue, 05 Nov 2019 18:15:37 GMT Study: Income Inequality Is Masking Inflation At The Bottom http://bankimplode.com/viewnews/2019-11-05_StudyIncomeInequalityIsMaskingInflationAtTheBottom.html ``In an era of wild inequality, sputtering wages, and rising rents and health-care costs, the American working class has had one consistent financial respite: "stuff," broadly defined, is cheap. Sure, workers might not be able to afford a decent apartment, a college education, or sufficient elder care for an infirm relative, or to ever, ever get sick. But burgers, leggings, yard tools, bicycles, dishes, smartphones, soda--these items have become less expensive, thanks to big-box stores and internet retailers and imports from abroad.

Or perhaps not. A new analysis from a prominent group of economic researchers suggests not only that rising prices have been quietly taxing low-income families more heavily than rich ones, but also that, after accounting for that trend, the American poverty rate is significantly higher than the official measures suggest. Call it "inflation inequality," a subtle, pernicious way that the fortunes of the rich and the poor have diverged.

... the London School of Economics found that from 2004 to 2015, the prices of the products purchased by the bottom income quintile increased faster than the prices of the products purchased by the top income quintile. As a result, low-income families experienced an annual rate of inflation conservatively estimated at 0.44 percentage points higher than that of high-income families... such changes compound over time, wedging apart the welfare of struggling households and flourishing ones. Rich families get competitive prices on organic groceries and athleisure and better-and-better electronics; poor families end up paying more for worse-quality alternatives.

Jaravel suggested a mechanism behind the finding: Rising wealth and income inequality mean that richer people have ever more disposable income, creating a market incentive for retailers to cater to the needs of lawyers in Chicago and tech analysts in Boston over child-care workers in the Mississippi Delta and part-time retail workers in California's Central Valley.

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Accounting for differential changes in prices would bump up the 2018 poverty rate by 8 percent--adding 3.2 million people to the ranks of the officially poor, and 836,000 people to the ranks of those in deep poverty. According to standard government measures, the real household income of the bottom quintile fell 1 percent from 2004 to 2018; using the new, inflation-sensitive accounting, it fell more than 7 percent... "It's not just that inflation is not uniform across income groups," says Michael Linden of the Groundwork Collaborative ... "It's that it's not uniform across income groups because of inequality itself."

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iehi-feed-65058 Tue, 05 Nov 2019 15:07:59 GMT NYC's Fifth Avenue Sees Steep Rent Decline as Tenants Struggle http://bankimplode.com/viewnews/2019-11-05_NYCsFifthAvenueSeesSteepRentDeclineasTenantsStruggle.html Lower Fifth Avenue, an area between 42nd and 49th streets, saw the biggest asking rent decline among Manhattan's prominent retail corridors in the third quarter, falling 25% from the same period last year

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Manhattan-wide, rents fell an average of 8.1%. The Meatpacking District, which has benefited from tourist traffic on the High Line, was the only submarket where rents climbed.

Rents on upper Fifth Avenue had surged in recent years, pushing out many of the street's luxury retailers whose sales hadn't kept pace. The cost increases have leveled out a bit, Smith said. On lower Fifth, some landlords who created oversized spaces in a bid to attract major chains are now struggling to fill those stores.

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iehi-feed-65057 Mon, 04 Nov 2019 14:36:47 GMT Climate Change Will Break The Housing Market Says David Burt http://bankimplode.com/viewnews/2019-11-04_ClimateChangeWillBreakTheHousingMarketSaysDavidBurt.html iehi-feed-65049 Fri, 01 Nov 2019 13:37:07 GMT 7-Year Car Loans Are Hitting Americans In Their Wallets http://bankimplode.com/viewnews/2019-11-01_7YearCarLoansAreHittingAmericansInTheirWallets.html Adjusted for inflation, "real-dollar spending on new cars and trucks has gone up by $5,299 over the past 10 years," says Grimes, "while the real annual wage has gone up by $3,646."

So, Grimes says, seven-year car loans appear to be encouraging many Americans to overspend. These longer-term loans are also helping dealers pack in more pricey extra

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For new-car purchases with a trade-in, about a third of people are now rolling over an average of $5,000 of debt from their old car loan into their new car loan, according to the Edmunds site. In other words, they're still paying for a car they no longer own.

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iehi-feed-65048 Thu, 31 Oct 2019 19:38:50 GMT Fed Unveils Plan to Expand Balance Sheet In New "I Can't Believe It's Not QE(TM)" Program http://bankimplode.com/viewnews/2019-10-31_FedUnveilsPlantoExpandBalanceSheetInNewICantBelieveItsNotQETMPro.html While the amount could change, buying $60 billion in Treasury bills over a month is substantial, even by the Fed's standards. For context, the Fed bought about $85 billion in bonds each month during its final round of quantitative easing, which started in 2012.

Yet the new purchases are different from those postcrisis packages.

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Mr. Powell and his colleagues have repeated, time and again, that the current balance sheet expansion should not be confused with quantitative easing.

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To drive home the point that there is no broader policy signal this time, officials made the new package look unique. The Fed is buying only Treasury bills, for one thing. The Fed's recession-era buying focused on bonds, in a bid to make mortgages and car loans cheaper by pushing down longer-term interest rates. By concentrating this effort on short-term debt, the Fed is forgoing that sort of stimulus.

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Still, some onlookers were skeptical that the Fed would manage to convince investors that this was not an attempt to bolster the economy, given the size of the purchases.

"When it swims like a duck and quacks like a duck, it's hard to prove your intentions aren't fowl," Paul Ashworth, chief economist at Capital Economics, wrote in research note.

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It is important that the Fed's message sticks. The Fed will be short on room to cut interest rates when the next recession hits, because they are already at just 2 percent -- leaving the central bank with far less than the five percentage points of cuts it made in the 2007 to 2009 downturn. That means bond-buying will be an essential part of the Fed's future easing packages, and one to be used in case of emergency.

"They want to keep Q.E. as something special," said Laura Rosner, a co-founder of MacroPolicy Perspectives. "I don't think they want to send a signal that things are bad."

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Officials had decided this year that they wanted to continue setting interest rates in what they called an "ample reserve" framework. In such an approach, the central bank keeps its balance sheet holdings big enough to leave plenty of cash in the financial system. Banks keep their extra cash on deposit at the central bank, and the Fed adjusts interest rates by changing how it pays on those excess holdings, commonly called reserves.

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iehi-feed-65047 Tue, 29 Oct 2019 19:30:56 GMT 2 Owners Of Large NYC Rent-Regulated Portfolios Fall Delinquent Under Strict New Tenant-Protective Law http://bankimplode.com/viewnews/2019-10-29_2OwnersOfLargeNYCRentRegulatedPortfoliosFallDelinquentUnderStric.html Investors are starting to feel pain from the state's new rent regulations, with two landlords of those kinds of units now behind on their debt obligations.

Emerald Equity Group and Sugar Hill Capital Partners fell behind on loans issued by LoanCore Capital over the last few months, The Wall Street Journal reports.

The loans, backed by a collection of more than 600 rent-regulated units in Upper Manhattan that the companies separately own, were for more than $200M and packaged into securities. The firms had purchased the properties with the hope of moving units out of rent stabilization, per the WSJ.

Under the new laws, passed in July, landlords' ability to increase rents on stablized units and take units out of regulation and into the free market has been significantly reduced.

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Isaac Kassirer's Emerald Equity is delinquent on $86M in loans on East 117th Street buildings and on $85M in mortgages on an apartment building in Manhattan Valley. Sugar Hill has missed payments on properties along Central Park West. Emerald and LoanCore are discussing resolving the issue, and one possible outcome is that the lender will take the properties over, a source told the WSJ.

Generally speaking, lenders will likely seek to renegotiate loans with their sponsors over foreclosure, Ariel Property Advisors President Shimon Shkury said.

Investment sales in the city have been sliding, particularly among multifamily properties, which many say is a direct result of the rent regulation reform and a disaster for the city. In the third quarter of the year, multifamily sales volume in Manhattan dropped some 60% year over year, according to data from Ariel

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iehi-feed-65046 Tue, 29 Oct 2019 18:44:58 GMT WeWork employees don't think Adam Neumann's $1.7 billion exit package is fair http://bankimplode.com/viewnews/2019-10-29_WeWorkemployeesdontthinkAdamNeumanns17billionexitpackageisfair.html iehi-feed-65044 Tue, 29 Oct 2019 14:22:53 GMT WeWork's Savior Doesn't Have Such Deep Pockets http://bankimplode.com/viewnews/2019-10-29_WeWorksSaviorDoesntHaveSuchDeepPockets.html SoftBank Group Corp.'s $9.5 billion bailout has rescued WeWork from the threat of bankruptcy. But make no mistake: The unicorn's free-spending days are over. Its savior is far from a bottomless pit of money.

While WeWork had an eye-watering $22 billion of debt at the end of June plus $47 billion of looming lease-payment obligations, its rescuer isn't in such great shape either. SoftBank is a junk-rated issuer, with the equivalent of $62 billion in net debt. From now on, founder Masayoshi Son will have to manage his cash pile carefully.

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iehi-feed-65042 Mon, 28 Oct 2019 15:54:18 GMT Barclays PLC CEO Jes Staley Says Garbage Corporate Loans Are Eye-Openers http://bankimplode.com/viewnews/2019-10-28_BarclaysPLCCEOJesStaleySaysGarbageCorporateLoansAreEyeOpeners.html