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luni, 27 octombrie 2014

Seth's Blog : Munchausen by Proxy by Media

Munchausen by Proxy by Media

MBP is a particularly tragic form of child abuse. Parents or caregivers induce illness in their kids to get more attention.

The thing is, the media does this to us all the time. (Actually, we've been doing it to ourselves, by rewarding the media for making us panic.)

It started a century ago with the Spanish American War. Disasters sell newspapers. And a moment-by-moment crisis gooses cable ratings, and horrible surprises are reliable clickbait. The media rarely seeks out people or incidents that encourage us to be calm, rational or optimistic.

Even when they're not actually causing unfortunate events, they're working to get us to believe that things are on the brink of disaster. People who are confident, happy and secure rarely stay glued to the news.

The media is one of the most powerful changes we've made to our culture/our lives (I'd argue that the industrial revolution and advances in medicine are the other two biggest contenders). And yet because we're all soaking in it, all the time, we don't notice it, don't consider it actively and succumb to what it wants, daily.

Steven Pinker's brilliant book makes it clear that the world is safer than it's ever been. A large reason his thesis feels wrong to so many is that the media wants us to think that we're on a precipice, every day. Paradoxically, the cultural-connection power of the media is one reason why things are actually safer. [Check out Matt Ridley's optimistic take as well].

I'm fascinated by this paradox. By connecting us, by integrating cultures and by focusing attention on injustice, the media has dramatically improved the quality of life for everyone on the planet. At the same time, by amplifying the perception of danger and disaster, the media has persuaded us that things are actually getting worse. It creates a reason for optimism and then makes a profit by selling pessimism.

I don't think the media-industrial complex has earned the pass we give it. They built what we wanted, they built what worked, but the race for attention often is conflated with a race to the bottom. It takes guts to say, "no, we're not going to go there, even if the audience is itching for it."

We're the media now, and we can do better.

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duminică, 26 octombrie 2014

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Mish's Global Economic Trend Analysis

Another Unbelievable Stress-Free Test; Whitewash Math and Deferred Tax Assets

Posted: 26 Oct 2014 09:36 PM PDT

In an effort to fool the public into believing the latest round of bank stress tests were actually designed to find stress, the ECB found 25 scapegoats, with the biggest losers in Italy and Greece.

Interested parties may wish to slog through the full 178 page Stress Test Report.

Capital Shortfalls

Reuters reports ECB Fails 25 Banks in Health Check but Problems Largely Solved.

Roughly one in five of the euro zone's top lenders failed landmark health checks at the end of last year but most have since repaired their finances, the European Central Bank said on Sunday. Italy faces the biggest challenge with nine of its banks falling short and two still needing to raise funds.

"This seems as if it has been pretty unstressful," said Karl Whelan, an economist with University College Dublin.

"The real issue is the size of the capital shortfall and that is very, very small. I don't feel a whole lot more reassured about the health of the banking system today than last week."

€48 Billion Shortfall

The Financial Times reports ECB Says Banks Overvalued Assets by €48bn.

The European Central Bank's dissection of the books of the eurozone's biggest banks has found lenders overvalued their assets by €48bn.

The results of the ECB's examination of balance sheets worth €22tn, known as the Asset Quality Review, will require the 130 lenders who took part in the exercise to adjust the value of their assets in their accounts or prudential requirements.

A quarter of the reduction, €12bn, will fall on Italian lenders, an amount just short of 1 per cent of their risk-weighted assets. Greek banks will have to lower their asset values by €7.6bn, or almost 4 per cent of their risk-weighted assets.

Philippe Legrain, an economist and former adviser to then European Commission president José Manuel Barroso, described the tests as a "whitewash".

"The ECB singles out less important banks in less important countries and gives the German banks a clear bill of health," Mr Legrain said.

German lenders will have to lower the value of their assets by €6.7bn and their French counterparts by €5.6bn.

The AQR reviewed 800 portfolios, which together made up more than 57 per cent of banks' risk-weighted assets. The ECB said they examined 119,000 borrowers and valued 170,000 items of collateral. Supervisors also built 765 models to challenge banks' estimates of their provisions.

The 130 banks account for 81.6 per cent of all eurozone assets.

Whitewash Math

Of the 130 banks, 25 failed, which seems like a lot. However, the total amount of under-capitalization is a mere €48 billion out of balance sheets that total €22 trillion.

That is an overall asset overvaluation of 0.218%.

Anyone seriously believe that with France, Italy, and Spain in or near recession? I don't. It's not even a generous rounding error.

Have Spanish banks written off 100% of their bad property loans? What about sovereign bonds assumed to be 100 percent risk-free? Didn't Greece prove bonds payments are not sacrosanct?

When the eurozone splinters, German banks are going to take a massive hit.

Deferred Tax Assets

Huky Guru has some interesting figures about Spanish banks.

About a year ago, Guru reported that a Reclassification of DTAs (Deferred Tax Assets) provided an extra €30 billion capital for Spanish banks.

Guru brought up the subject again today in Putting the Stress Tests in Context.

Paraphrasing Guru ... Accounting magic and government decree has allowed banks to compute an extra €30 billion in capital for Spanish banks via DTAs. Without that €30 billion, the average Tier 1 capital for Spanish banks would have fallen from 9.1% to 7.1%. More than one bank would have failed the test.

Spanish Banks Plow Into Spanish Sovereign Bonds

Guru notes "Spanish banks hold Close to €231.519 billion in Spanish bonds, almost twice around the capital of the Spanish banking system."

At least six Spanish banks have massive leverage in bonds. Catalunya Banc and NCG are particularly exposed.

The entire exercise was another stress-free farce.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

What Do Seven Billion People Do? Top 10 Mega-Cities by Population 2014 vs. 2030 Estimate

Posted: 26 Oct 2014 11:20 AM PDT

Reader Bran who lives in Spain sent some interesting charts of population, expected population growth, the world's largest cites, and what people do for a living. I don't have links for the charts, but most show the origin.

Seven Billion People

Breakdown

4.30 Billion Work
1.90 Billion too Young to Work
0.43 Billion Unemployed
0.58 Billion 65 or Older

Total about 7.2 Billion people

Cities With Projected 2030 Population of 10+ Million

Top 10 Mega-Cities by Population

Anyone have any concerns over these numbers in regards to jobs, food, housing, cost of education, healthcare costs, or retirement?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Seth's Blog : Pitchcraft

Pitchcraft

When you present to a board, to potential investors, they ask themselves some questions about your new project:

Is there a problem?

Do I like the solution—is it free, instant and certain, or at least close enough to be interesting?

Are you the one to take this problem on and create this solution?

Is the way you’re doing it the way I would do it?

And, is it urgent, or can I wait?

Note that the order of the questions matters a lot. If you bring me a solution for a problem I haven't been sold on, you lose. And if your solution is risky and difficult, I'm almost certainly going to work hard to begin diminishing the problem in my mind, because no one finds it easy to walk around with a difficult problem.

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sâmbătă, 25 octombrie 2014

Mish's Global Economic Trend Analysis

Home Prices Drop in 69 of 70 Chinese Cities; Did the Pool of Greater Fools Run Out?

Posted: 25 Oct 2014 10:25 AM PDT

China eased purchase restrictions last month ending its four-year campaign to contain home prices. And what a ridiculous campaign it was. Prices are down less than 1% this month and less then 1% year-over-year.

Bloomberg reports China Home-Price Drop Spreads as Easing Doesn't Halt Fall.

Prices dropped in 69 of the 70 cities in September from August, the National Bureau of Statistics said in a statement today, the most since January 2011 when the government changed the way it compiles the data. They fell in 68 cities in August.

The central bank on Sept. 30 eased mortgage rules for homebuyers that have paid off existing loans, reversing course after a four-year campaign to contain home prices as Premier Li Keqiang seeks to prevent economic growth from drifting too far below the government's 7.5 percent annual target. Home sales slumped 11 percent in the first nine months of this year.

Developers will keep prices attractive as they open more projects toward the end of the year to meet sales targets, boosting supply and increasing competition, Ping An Securities Co. Shenzhen-based analyst Yang Kan wrote in an Oct. 14 report.

New-home prices fell 0.7 percent from August in Beijing and 0.9 percent in Shanghai, according to the government. The port city of Xiamen in southern Fujian province was the only city where prices didn't fall, remaining unchanged from the previous month.

Prices in Shanghai fell 0.8 percent from a year earlier, the first annual decline since December 2012, compared to a 17.5 percent jump in January this year. Hangzhou, the capital of southeastern Zhejiang province, had the biggest decline among all cities, with 7.6 percent.

The average new-home price in 100 cities tracked by SouFun Holdings Ltd. fell 0.9 percent in September from August, dropping for the fifth consecutive month. The price rose 1.1 percent from a year earlier, narrowing for a ninth month in a row, China's biggest real estate website owner said.

The People's Bank of China's new rules give homeowners who have paid off their mortgages and want a second property the same advantages as first-time buyers, including a 30 percent minimum down payment, compared to at least 60 percent previously, and interest-rate discounts of as much as 30 off the central bank's benchmark. The PBOC also eased a ban on mortgages for people without home loan debt who want to buy a third home, allowing banks determine down payments and rates.

Home sales in September jumped 40 percent from August, the biggest increase this year, according to Bloomberg News calculations, based on a government report earlier this week.

Did the Pool of Greater Fools Run Out?

All it took for china to reverse course was a .8% year-over-year decline.

Home sales are down 11% this year, but that may not last long if September is any indication. Then again, the easing of restrictions may have suckered in the last remaining greater fools.

Either way, I laugh at the assessment analyst Yang Kan who says "developers will keep prices attractive as they open more projects toward the end of the year to meet sales targets".

The only thing that will make prices attractive is a 50% decline in price. That's how big China's property bubble is.

Even in China the pool of greater fools will eventually run out. Perhaps it already has.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com