dangers & warning signs: Dirty Secret of $1 Trillion Loans Is When Do You Get Money Back - Bloomberg

Dirty Secret of $1 Trillion Loans Is When Do You Get Money Back - Bloomberg

Imagine a trillion-dollar market that runs on faxes and phone calls while routinely tying up investors’ money for months before they get any return.

That’s not fiction: It’s the unregulated market for leveraged corporate loans....seeking yield...

The antiquated structure of a market that’s ballooned from a mere $35 billion in 1997 poses a growing threat, raising the odds of gridlock in a downturn when investors expect to get their money back with a click of a button. As of yet, no regulators have taken responsibility for fixing the deficiency....

Some of the worst delays in settlement times can be found in the market for new loans, where Pimco’s MacLean said it’s not uncommon for months to pass before a purchase is completed....

...Investors committed $1.2 billion in October to fund a loan for junk-rated Huntsman Corp. For about 10 months, they didn’t receive a dime.

Salt Lake City-based Huntsman obtained the financing to help pay for its purchase of Rockwood Holdings Inc.’s titanium dioxide business. The merger has taken longer than anticipated because of an antitrust holdup....

While buyers and sellers can trade stocks and bonds among themselves, they need the approval of corporate borrowers before they can exchange loans. Clerks must then update loan documents to reflect new lenders.....

The concern is that there may be a mass exodus from mutual funds that could strain the loan market as investors anticipate rising borrowing costs and defaults. Mutual funds and exchange-traded funds settle investors’ redemption requests within three to seven days, according to Moody’s Investors Service data.

“There’s kind of a liquidity mismatch,” the University of Michigan’s Gordon said. When investors try to redeem and can’t get their money back right away, more will try to pull cash, risking a run, he said.

U.S. Health System Among Least Efficient Before Obamacare - Bloomberg

U.S. Health System Among Least Efficient Before Obamacare - Bloomberg



...There’s a lack of accountability among Americans, according to policy experts. “We keep protecting individuals from the health-care costs that come from the fact that we don’t have healthy lifestyles,” Cindy Gillespie, a senior managing director at the law and policy firm McKenna Long & Aldridge LLP. “We haven’t accepted that people have an element of personal responsibility around their health.”...



...For example, Singapore hospital wards are classified by amenities and level of government subsidy provided, according to the book Affordable Excellence, the Singapore Healthcare Story by William Haseltine, president of the consulting group Access Health International. The wards range from A, where there are private rooms and a choice of doctors, to C, where as many as nine people share a room and doctors are assigned. People in A wards don’t get a subsidy while those in C wards get 80 of their care paid for by the government....

A Better Future Needs a Bit of a Push - Bloomberg View

A Better Future Needs a Bit of a Push - Bloomberg View



...Thiel identifies one big problem as stagnation in energy. For centuries, we kept getting better energy sources -- first coal, then oil. That powered faster transportation, cheaper construction, bigger appliances and better materials....

...Another important Thiel point is that our public infrastructure is decaying. This is partly a result of stagnant spending, but we’re also getting less bang for our buck. ...

...Bringing down high infrastructure costs will involve taking on a lot of entrenched interests -- government contractors, property owners and unions. ...

...A third good point by Thiel is that regulation may already be slowing progress dramatically in the field of biosciences. 

Thoughts from the Frontline - Scotland Allowing 16-year- olds to vote in the election

What’s on Your Radar Screen? By John Mauldin | Sep 14, 2014

Scotland. What has not been widely discussed is that the voting age was changed in Scotland just a few years ago. For this election, anyone in Scotland over 16 years old is eligible. Think about that for a second. Have you ever asked 16-year-olds whether they would like to be more free and independent and gotten a “no” answer? They don’t think with their economic brains, or at least most of them don’t. If we can believe the polls, this is going to be a very close election. The winning margin may be determined by whether the “yes” vote can bring out the young generation (especially young males, who are running 90% yes) in greater numbers than the “no” vote can bring out the older folks. Right now it looks as though it will be all about voter turnout.

BlackRock Money Market Funds Refuse to Lose Value - Bloomberg View

Sort of proof that the well-intentioned benevolence of regulators shouldn't be one-sided in its approach. If the broader market wants something that the regulators are prohibiting, the market will find a way. Highlights below:



BlackRock Money Market Funds Refuse to Lose Value - Bloomberg View

See, the way it normally works is, if you have $10,000 in a money market fund, you have 10,000 shares each worth $1.2 When the fund pays interest, it does it by distributing shares: You had 10,000 shares, it paid 0.1 percent interest, now you have 10,010 shares each worth $1.

BlackRock's innovation is: When the fund pays negative interest, it does it by distributing negative shares. You had 10,000 shares, it paid negative 0.1 percent interest, now you have 9,990 shares each worth $1. But your shares never lost value. Some of them just disappeared is all. It's a reverse distribution.3

The Most Profound Revolution in World Affairs in Almost Four Centuries (from Bloomberg 8 Sept. 2014)

Toxic Stew of New Technology, Old Hatreds in World Crises - Bloomberg (excerpts)

...The crises that dominate today’s news -- Ukraine, Islamic State, Libya, Ebola, Gaza, cyber-attacks -- are symptoms of the most profound revolution in world affairs in almost four centuries.

A toxic stew of new technologies, old hatreds, eroding boundaries, tattered alliances, environmental dangers and independent groups are making the world more interconnected and less stable at an accelerating rate, forcing the U.S. and other nations to re-invent their approaches to defending their borders, populations and economies.

“We need to look at the world as it is, not as it used to be,” 

Epochal events of the past century, from two world wars and the Holocaust to the rise and fall of the Soviet Union and China’s emergence on the world stage, all have taken place within the architecture of nation-states.

Kissinger and others say that swelling urban populations, masses of underemployed youth, dwindling food and water supplies and social media’s quicksilver connections are eroding the western European, state-based system that was ushered in 366 years ago next month by the Peace of Westphalia.

“When you look at the world today, there are whole countries where there are 60 percent of the population under the age of 30, 50 percent under the age of 21, and 40 percent under the age of
18,” Secretary of State John Kerry said at the State Department in Washington on Sept. 3.

“We know that all of these young people in today’s interconnected globalized world, with the media that’s available to them -- just look at the numbers in sub-Sahara Africa of young people walking around with smartphones -- they don’t have a job, they don’t have an education, but they’re connected,” Kerry said.

“We know that all of them are, as a result, demanding opportunity and dignity,” he said. “We also know that a cadre of extremists -- nihilists, people like ISIL -- are just waiting to seduce these people into accepting the dead end.”

…“The economic system has become global, while the political structure of the world remains based on the nation-state,” … “Economic globalization, in its essence, ignores national frontiers.”...

VW Says: Stay Just Three Years Behind

Toyota’s fuel-cell car going on sale next year, initially in California, will cost about $50 to fill up for about 300 miles of range, Bob Carter, senior vice president at Toyota’s U.S. operations, said Aug. 12 at a JPMorgan Chase & Co. conference. The cost will eventually fall to about $30 based on Energy Department estimates, he said.

Toyota partnered with the University of California to model the specific locations that would be needed to handle a population of more than 10,000 fuel cells and believes it needs only 68 stations initially, Carter said last month. The state plans to spend $200 million to build at least 100 stations by 2024, with 40 ready by the end of 2016, he said.

“There are still a lot of questions lingering about how practical it is even though Toyota launches next year,” said Maruta, the Volkswagen spokesman. “By the time it gets very usable by the normal customers, it’s maybe still a decade or two decades away.”

Still, Volkswagen is hedging its bets. The company is monitoring Toyota’s progress with the aim of staying within no more than three years of development work behind its Japanese rival in matching its fuel cell technology, Shoji said.



VW Says Fuel-Cell Cars Doomed to Struggle Beyond Japan - Bloomberg