THESE ARE SOME OF THE THINGS TO WATCH FOR AND THINK ABOUT THESE NEXT MONTHS AS THE BOND MARKET PREPARES TO COLLAPSE. I WANT PEOPLE TO KNOW THAT AS WITH THE SUBPRIME MORTGAGE LOAN COLLAPSE YOUR POLS NOT ONLY KNOW IT IS GOING TO HAPPEN----THEY ARE CREATING THE CONDITIONS FOR THE CRASH. THAT IS BECAUSE THEY WORK FOR GLOBAL CORPORATIONS AND PROFIT. GET RID OF THEM!
Keep in mind the entire financial system of frauds is based on tricking people, or allowing others to trick people into taking on more debt than they can handle knowing the end result will be a collapse in market that leaves people/government unable to pay the debt. With the subprime mortgage fraud the banks targeted low-income homeowners not only to gain control of real estate in urban areas but to target the Federal Housing Authority and its taxpayer payments of fees and loans. This coming municipal/sovereign debt fraud collapse targets again government coffers and taxpayers as corrupt neo-liberal politicians load the states and cities with debt knowing this crash in 2015 is a sure thing. Public officials take an oath to serve and protect the Constitution and citizens and none of this meets this oath. They are aiding and abetting a crime by knowingly placing the public in harms way. Remember, we can build Baltimore schools by simply ending the billion in fraud and corruption each year so there is plenty of taxpayer money for these infrastructure projects. It is the leverage needed to implode the state and city economy.
AGAIN, WE CAN REVERSE THIS----WE SIMPLY NEED TO ELECT POLS THAT REBUILD RULE OF LAW AND OVERSIGHT AND ACCOUNTABILITY. EASY PEASY.
I want to make sure people understand that all of this was known years ago---below you see in 2011 financial analysts were advising to prepare for the collapse. During that time think how many credit bond and leveraging deals have been made in Maryland and Baltimore---including the big $1 billion deal to rebuild public schools. I was shouting and writing to show the public knew this was malfeasance so we are under no obligation when the crash comes to hand everything to investment firms as they plan. We must have Rule of Law to provide that protection. This is why these elections are critical these next few election cycles and it is why Maryland was willing to allow systemic election violations for Governor to make sure the right person was in place to protect the fraud when this collapse comes.
Keep in mind the FED controls when this crash occurs to the extend of ending QE and allowing the manufactured inflation be replaced by real inflation numbers . This will create the environment for mass exodus from the bond market and she has no way to stop this as it has maxed and is now unable to be contained. She may delay it, but it will come and it appears likely 2015 will be the longest she can delay. Inflation which is now thought to be 5% or so will jump to some of the highest levels in US history and it is all because of FED policy and Congress and Obama passing laws that made municipal bond markets artificially attractive. They sold our bond market to the world just as they sold toxic subprime mortgage loans to the world. They earned trillions and the American people lost everything as will happen this time around.
This article refers to the last time the FED considered ending QE in 2011.... as we know Bernanke decided to extend the death sentence and allow Yellen to handle the collapsing economy.
SHE WILL HAVE NO CHOICE AS THE FED IS MAXED IN DEBT AND INFLATION IS NOT CONTAINABLE. IT'S ONE BIG PONZI SCHEME.
O'Malley and the Maryland Assembly sold citizens out statewide and Rawlings-Blake and Baltimore City Hall sold citizens out locally as they did during the subprime mortgage loan fraud.
The Coming Bond Market Crash: The Three Moves Every Investor Must Make
- By Martin Hutchinson, Global Investing Specialist, Money Morning · July 1, 2011
Since last November, the U.S. Federal Reserve has been buying U.S. Treasury bonds at a rate of about $75 billion a month. That's part of Fed Chairman Ben S. Bernanke's "QE2" program, under which the central bank was to buy $600 billion of the government bonds.
But QE2 ended yesterday (Thursday), meaning the Fed will no longer be a big buyer of Treasury bonds.
So starting today (Friday), the U.S. Treasury needs to sell twice as many Treasury bonds to end investors as it had been.
But the problem is, who's going to buy them?
Not China, which is diversifying its trillions in assets to get as far away from the U.S. dollar as fast as it can.
Not Japan, which is trying to rebound from its March 11 earthquake, tsunami and nuclear disaster - and is focusing all its spending on reconstruction.
And - as we've seen -neither is the Bernanke-led Fed.
I'm telling you right now: We are headed for an epic bond market crash. If you don't know about it, or don't care, you could get clobbered.
But if you do know, and are willing to take steps now, you can easily protect yourself - and even turn a nice profit in the process.
Let me explain ...
A Timetable for the Coming Crash I'm an old bond-market hand myself - my experience dates back to my days at the British merchant bank Hill Samuel in the 1970s - so I see all the signs of what's to come.
Having the two biggest external customers of U.S. debt largely out of the market is a huge problem. Unfortunately, those aren't the only challenges the market faces. The challenges just get bigger from there - which is why I'm predicting a bond market crash.
Latest Comment^ It is 2013, QE3 is out so maybe his timing is off but with all the printed mon…
Steadily rising inflation is one of the challenges. Inflation is a huge threat to the bond markets, and is almost certain to create a whipping turbulence that will ultimately infect the stocks markets, too.
Many pundits will tell you that if investor demand for bonds declines, and investor fear of inflation increases, bond-market yields could increase in an orderly fashion.
But I can tell you that the bond markets don't work like that. Price declines affect existing bonds as well as new ones, so the value of every investor's bond holdings declines. And with many of those investors heavily leveraged - especially at the major international banks - the sight of year-end bonuses disappearing down the Swanee River as bonds are "marked to market" will cause a panic. That's especially true when end-of-quarter or end-of-year reporting periods loom.
That's why we can expect a bond market crash at some point. If you ask me to make a prediction, I'd say that September or December were the most likely months for such a crash.
A Boxed-In Bernanke One sad - even scary - fact about what I'm predicting is that Fed Chairman Bernanke won't be able to do much about it ... though he'll certain try.
Consumer price inflation is now running at 3.6% year-on-year while producer price inflation is running at 7.2%. In that kind of environment, a 10-year Treasury bond yielding 3% is no longer economically attractive. Since monetary conditions worldwide remain very loose, inflation in the U.S. and worldwide will trend up, not down.
The bottom line: At some point, the "value proposition" offered to Treasury bond investors will become impossibly unattractive. When that happens, expect a rush to the exits.
If Bernanke attempts "QE3" - a third round of "quantitative easing" - he will have a problem. If other investors head for the exits, Bernanke may find that the U.S. central bank is as jammed up as the European Central Bank (ECB) currently is with Greek debt: Both will end up as the suckers that are taking all the rubbish off of everyone else's books.
There's a limit to how much Treasury paper even Bernanke thinks he can buy. And if everyone else is selling, that "limit" won't be high enough to save the bond market.
With Bernanke buying at a rapid rate, the inflationary forces will be even stronger, so every Bureau of Labor Statistics report on monthly price indices will be marked by a massive swoon in the Treasury bond market.
Eventually, there has to be a new head of the Fed - a Paul A. Volcker 2.0 who is truly committed to conquering inflation. Alas, it won't be Volcker himself since, at 84, he is probably too old.
But it might be John B. Taylor, who invented the "Taylor Rule" for Fed policy. The Taylor Rule is actually a pretty soggy guide on running a monetary system. But it has been flashing bright red signals about the current Fed's monetary policy since 2008.
However, since a Fed chairman who is actually serious about fighting inflation would be a huge burden for current U.S. President Barack Obama to bear - and could badly hamper his chances for re-election, any such appointment is unlikely before November 2012.
How to Profit From the Bond Market Crash
Given that reality, it's likely that Bernanke will attack any bond market crash that occurs ahead of the presidential election just by printing more money; there won't be any serious attempt to rectify the fundamental problem, meaning inflation will continue to accelerate.
For you as an investor, this insight leads to two conclusions that you can put to work to your advantage. The scenario I've outlined for you will be:
Very good for gold and other hard assets. Challenging for Treasury bonds; prices will remain weak no matter how vigorously Bernanke attempts to support them.
So what should you do with this knowledge? I have three recommendations.
First and foremost, if Bernanke were not around, I would expect gold prices to fall following a bond market crash. But since he's still at the helm at the Fed, I expect him to do "QE3" in the event of a crash. And that means gold - not Treasury bonds - would become an investor "safe haven."
You can expect gold prices to zoom up, peaking at a much higher level around the time Bernanke is finally replaced. Silver will also follow this trend. So make sure you have substantial holdings of either physical gold and silver or the exchange-traded funds (ETFs) SPDR Gold Trust (NYSE: GLD) and iShares Silver Trust (NYSE: SLV).
Second, if you want to profit more directly from the collapse in Treasury bond prices, you could buy a "put" option on Treasury bond futures (TLT) on the Chicago Board Options Exchange (CBOE). The futures were recently trading around 94, and the January 2013 80 put (CBOE: TLT1319M80-E) was priced around $4.50, which seems an attractive combination of low price and high leverage.
Finally, if you don't already own a house, you should buy one - and do so with a fixed-rate mortgage. A U.S. Treasury bond market crash will send mortgage rates through the roof, so today's rates of about 4.8% will represent very cheap money, indeed. Even if house prices decline by 10%, a 2% rise in mortgage rates would increase the monthly payment (even accounting for a 10% smaller mortgage), by a net 11.8% (the payment on a $100,000 mortgage at 4.8% is $524.67; that on a $90,000 mortgage at 6.8% is $586.73).
Needless to say, the same benefits apply to rental properties financed by fixed-rate mortgages: With lower home ownership and rising inflation, rents are tending to rise significantly.
There's a storm coming in the Treasury bond market. But by recognizing its approach, we can turn the bond market crash to our advantage.
HMMMMMM.....reduce reserve funds and raise public debt.....all to augment the billions of dollars lost to the Maryland economy to fraud each year.
The debt takes the form of state leverage for projects and services----they have even leveraged the public pension funds all with no indication that 2015 will bring a major recession/depression. DIDN'T SEE THAT COMING YOUR NEO-LIBERALS AND NEO-CONS WILL SAY!
All that leverage supposedly balanced the state budget and O'Malley pretended to be saving public sector jobs and pensions all while knowing this economic crash will lead to huge layoffs and end public sector pensions. Labor union leaders know this dynamic and still go with the neo-liberals doing it! As we all know each year since this 2010 article the public debt and leverage has increased. Again, Republicans in other states are doing the same thing so do not listen to Maryland Republicans playing this card---they would do the same.
Maryland Governor’s Budget Cuts Reserve Payments, Boosts Debt
by Patrick Temple-West JAN 20, 2010 8:44pm ET Bond Buyer
WASHINGTON — Maryland Gov. Martin O’Malley yesterday released a proposal for the state’s fiscal 2011 budget that would reduce reserve fund contributions and increase public debt by 7.1% over fiscal 2010.
Below you see what is only the tip of the iceberg with tax credits that commit a level of tax forgiveness for decades that starves our government coffers. O'Malley cut higher education aid and public transportation funding to pay for just a few of these corporate subsidies all in the name of jobs. Well, when the bond market crash comes and the jobs are gone because of the recession global corporations will still be receiving tax breaks as they do business/make profits overseas.
WHO CARES ABOUT LEVERAGE AND STATE DEBT WHEN THE IDEA IS TO MAXIMIZE PROFITS FOR GLOBAL CORPORATIONS.
We'll just cut more services, programs, sell public assets, and let global corporations handle the business of government that now has no revenue.
I'm not going to format since one can just look down very quickly to see all of the development is done with tax credits. They all are supposed to create jobs and help low-income people all of which will be killed by the coming economic crash from the credit leverage in these very policies. Attracting global corporations to Maryland is the answer to jobs and a strong economy say neo-liberals-----only it does the opposite. Most of these tax breaks will go to large corporations.
$2 million in tax credits for creating 10 poverty jobs......hmmmmmm.
Maryland Department of Business & Economic Development
economic development and the creation of jobs. MVF targets emerging technology-based businesses including biotechnology, information technology, telecommunications, software development and advanced materials.• Challenge Investment Program – $650,000 to ten start-up firms.• Enterprise Investment Fund – $2.2 million – three new firms and follow-on funding to five companies.Federal IncentivesCommunity Development Block Grant Program – Economic DevelopmentThis program assists local governments in implementing commercial and industrial economic development projects. Approved program funds are disbursed to eligible local jurisdictions as conditional grants and used for public improvements for business start-up or expansion or business loans. Projects must create jobs with the majority targeted to individuals from low to moderate income or eliminate blight conditions that impede commercial and industrial development. Fund uses include acquiring fixed assets, infrastructure and feasibility studies. • CDBG-ED funds of $2.2 million supported seven closed projects to create or retain 185 full-time jobs. Three projects worth $1.3 million were approved, representing 129 new or retained jobs.Maryland Economic Adjustment FundMEAF assists small businesses with upgrading manufacturing operations, developing commercial applications for technology, or entering new economic markets. Eligible businesses include manufacturers, wholesalers, service companies and skilled trades. Funds can be used for working capital, machinery and equipment, building renovations, real estate acquisition and site improvements. •Four Maryland Economic Adjustment Fund projects totaling $703,000 were approved and five transactions totaling $726,500 were closed.Tax Credit ProgramsOne Maryland Tax Credit Program Businesses can qualify for up to $5.5 million in income tax credits under the program when they invest in an economic development project in a “qualified distressed county.” Qualified Distressed Counties currently include: Baltimore City, Allegany, Dorchester, Garrett, Caroline, Somerset and Worcester. The business must create at least 25 new full-time positions at the project within 24 months of the date the project is placed in service. The business must be engaged in an eligible activity and incur eligible project or start-up costs. • FY2009 – 3 final certificates of eligibility issued for businesses that created 219 new jobs.Job Creation Tax CreditEncourages businesses to relocate to or expand in a Maryland Priority Funding Area by providing income tax credits based on new jobs created. Subject to various restrictions and conditions including location, wage levels and number of jobs created the credit may be for 2.5% up to $1,000 per job or 5% of annual wage up to $1,500 per job. • FY2009 – 7 final certificates of eligibility issued for businesses that created 307 new jobs.Enterprise Zone ProgramBusinesses located in a maryland enterprise Zone may receive income and real property tax credits in return for creating jobs. Local governments apply to the Department to designate Enterprise Zones. The ten-year real property tax credit reduces taxes on property improvements for ten years. The income tax credit for creating new jobs is$1,000 per new worker; for hiring economically disadvantage employees, up to $6,000 per new employee (over three years).• As of June 2009, there were 29 Enterprise Zones and two focus areas. • FY2010– 753 businesses will receive property tax credits totaling $26.3 million.– State share to reimburse localities will be $13.1 million, assuming the State’s full obligation is met.– Credits are based on real property investments totaling $1.945 billion.AGENCY MISSION & ACTIVITIES (contintued)
Here you see for whom neo-liberals and neo-cons in Maryland work---as they say we do not need to bring money home to pay taxes and build infrastructure---we have plenty of business overseas thanks to O'Malley's 8 years of sending all of Maryland's revenue to building global structures for development. We are exporting education and health care businesses none of which grows jobs in Maryland.
This is why neo-liberals are not concerned about the coming economic crash----it will not hurt these global corporations and it will provide excuses to hand more public operations/assets to these global corporations. Dulaney and neo-liberals are trying as hard as they can to repatriate global tax requirements in schemes to build infrastructure. Remember, if they paid taxes we would have the money for infrastructure. Domestic businesses pay taxes so the answer is GET RID OF GLOBAL CORPORATE CONTROL OF YOUR ECONOMY! Dulaney is a Clinton investment banker who knows banks owe tens of trillions of dollars in fraud but does not seem to want to offer that solution. Buying Treasury bonds when the bond market is preparing to collapse? REALLY MR DULANEY?
Raise your hand if you know the answer is to get rid of global corporations from the Maryland economy rather than pretending to need to beg them for their taxes!!!!! EVERYONE. Raise your hand if you understand that tax breaks in exchange for bond purchases just when the bond market is ready to collapse will simply allow corporations to enter a bond market at the bottom for tremendous profits just as happened in 2008 with the stock market crash. THAT'S WHAT THESE POLICIES ARE ALL ABOUT!
Everyone knows as well that the main avenue for recovering those tens of trillions of dollars in corporate fraud is HIGHER CORPORATE TAXES but as this article shows neo-liberals and neo-cons only intend to lower corporate taxes....you know, its all about job creation.
Md. Companies Have Billions in Assets Overseas Business Top News — 28 March 2014 By Fola Akinnibi
Capital News Service
6 WASHINGTON – The president’s budget, released in early March, called for the creation of a national fund to finance repair of the nation’s crumbling roads, bridges and other infrastructure — an idea also proposed by a freshman Maryland congressman.
Rep. John Delaney, D-Potomac, wants to fund infrastructure repair by bringing home billions of dollars in foreign earnings from U.S.-based corporations. The congressman said he has been long concerned about decaying infrastructure.
Delaney’s Partnership to Build America Act would create a new way to pay for these repairs. Corporations would provide the money by buying bonds in The American Infrastructure Fund.
In exchange, they would be allowed to bring back money locked up overseas without paying the full 35 percent corporate tax rate.
Delaney’s bill could come as a relief to corporations with large foreign operations that have deferred paying U.S. corporate taxes on their overseas earnings indefinitely. For example, 10 Maryland-based multinational corporations, including Columbia-based MICROS Systems Inc. and Baltimore-based Under Armour Inc., are holding a combined $3.5 billion overseas, according to filings with the Securities and Exchange Commission.
While it would mean a major tax savings, none of the 10 publicly held Maryland companies contacted would comment on the proposed legislation.
One expert said there’s little incentive to bring the funds back with so much business opportunity overseas. Instead, it makes sense for U.S. companies to let the overseas funds stay put and postpone a U.S. tax bill.
“It’s better to defer,” said Michael Faulkender, a finance professor at the University of Maryland’s Smith School of Business.
Further, the Delaney proposal is out of sync with many plans to overhaul the U.S. tax code, he said. “Every proposal on the table is for the corporate tax rate to go down, not up.”
Rich Badmington, W.R. Grace & Co.’s vice president of global communications, said most of the Columbia chemical company’s revenue comes from international operations. The company plans to continue investing in those operations.
“We are able to do that without bringing cash back to the U.S. because we are continuing to invest,” Badmington said. “(Research and development) is a function that requires continuing investment and we have quite a lot of that outside the U.S.”
President Barack Obama’s latest budget plan called for the creation of a government-owned entity to finance infrastructure projects. Delaney said the president’s support for something similar to his bill was “great,” and said it shows how much momentum the bill has.
“We’re very optimistic about it, we have strong bipartisan support,” Delaney said.
The bill has 57 co-sponsors in the House and 12 in the Senate, including Sens. Lindsey Graham, R-S.C., and Michael Bennet, D-Colo., head of the Senate Finance Committee’s Taxation and IRS Oversight subcommittee. Hearings have not been scheduled for the bill.
Under the tax code, corporations can avoid paying taxes on foreign earnings as long as the money is being permanently reinvested overseas. When the corporations decide to bring these funds back home, a process called “repatriation,” the money then is subject to U.S. taxes.
Originally, the tax exemption was meant to help U.S. corporations compete overseas, said Mitchell Kane, a tax professor at New York University’s School of Law. Companies claimed paying taxes in two countries would put them at a disadvantage and the government responded with the exemption, he said.
The plan was to have the companies pay foreign taxes, which in many cases are lower than the U.S. tax rate, and then pay U.S. taxes when the money was repatriated. After this process, the company would receive a credit for any foreign taxes paid, Kane said.
Allowing such an exemption has created an incentive for companies to keep their money overseas and defer the U.S. corporate tax, said Jane Gravelle, an economist with the Congressional Research Service. But parking money offshore isn’t a long-term solution for companies, she added.
“They may think they can hold their breath forever and borrow money,” Gravelle said. “How long are they going to be able to do that? Shareholders eventually want dividends.”
This exemption could result in $265.7 billion in lost revenue for the federal government through 2017, according to a 2013 report by Congress’ Joint Committee on Taxation.
For now, however, companies aren’t likely to repatriate without a major tax discount.
W.R. Grace has more than $1.1 billion held overseas and would have to pay $149.7 million in taxes if it was repatriated, according to SEC filings. That money will remain overseas, except in instances where repatriation would result in minimal or no U.S. taxes, the company said in its most recent SEC filing.
MICROS Systems, a Maryland-based computer hardware and software producer, has about 61 percent of its cash and cash equivalents, $385.8 million, held internationally with no plans to repatriate, according to the company’s most recent filings with the SEC.
Maryland-based apparel company Under Armour has $95.2 million, or 27 percent, of its cash and cash equivalents held overseas with no plans to bring it back.
Spokespersons from MICROS and Under Armour could not be reached for comment.
Other companies have begun to repatriate their foreign funds, which Kane said could help cover corporate expenses. McCormick & Company, a spice, herbs and flavoring manufacturer, repatriated $70 million in 2012, according to the company’s most recent SEC filings. Even still, most of the company’s cash is held in foreign subsidiaries, the filings said.
A spokesperson for McCormick and Co. could not be reached for comment.
Some of the largest U.S. corporations make about half of their money internationally, Delaney said. The bill is just a way to get some of it back.
“It creates a way for some of that money to come back, which is good for our economy,” Delaney said. “And it creates this large-scale infrastructure fund, which is good for our country.”
Instead of government funding, the American Infrastructure Fund would raise cash through a $50 billion bond offering. Companies would buy the bonds at a 1 percent fixed interest rate and a 50-year term, in exchange for a chance to repatriate a certain portion of overseas earnings tax-free for every dollar spent on bonds.
A bond to repatriation ratio would be determined by an auction and could result in companies paying an effective 12 percent tax rate, Delaney said. Money raised in the bond sale could then be leveraged and loaned to state and local governments for projects.
The auction process will benefit both the infrastructure fund and the corporations, which will be able to find a price that is right for them, Delaney said.
“We’ve talked to them and they’re very supportive of it,” he said.
The American Business Conference, Associated Equipment Distributors and Terex Corporation are among those supporting the bill.
Tech giants and pharmaceutical corporations have lobbied for a repatriation holiday since the 2004 American Jobs Creation Act allowed them to repatriate at a discounted rate. Because of the intellectually-based capital that these companies thrive on, it is sometimes easier for them to keep assets overseas.
For example, Apple has $124.4 billion held overseas, according to the company’s most recent SEC filing.
The 2004 bill reduced repatriation taxes to 5.25 percent if corporations promised to invest the money at home. The one-year holiday is widely regarded as a failure because it spurred an increase in repatriation, but not an increase in jobs or investments, according to a report by the Congressional Research Service.
“The argument was that it would be a stimulus” to the U.S. economy, Gravelle said. “Most people who studied this found out it was being used to repurchase shares.”
Share repurchases are a common way to boost stock prices.
Corporations used the money to pay stockholders dividends and pay off debts, which doesn’t make for a good stimulus, she continued. Instead, the holiday created a “moral hazard” and companies have parked money overseas, waiting for the next holiday, Gravelle said.
Delaney’s bill has short-term benefits but doesn’t address the larger problems with the tax code, Faulkender said. Corporations will want to move more and more operations overseas if they can find discounts on U.S. taxes, he added.
“If you signal that firms are going to realize a lower tax rate, even after repatriation, on their foreign operations than on their domestic operations, you’re going to incentivize even more offshoring,” he said.
“I don’t think that’s good for the U.S. economy.”