The very first question many people ask is: do I absolutely require a lawyer? There are resources centers that are online and do it yourself divorce kits which may be used if your partner as well as you have consented to truly have a no-fault divorce and have previously settled property division problems or any custody. Nevertheless, you should at least consult using a divorce lawyer who’s not affiliated together with your partner, to make sure that that which you are thinking of doing actually is in your very best interests, and you understand all your choices.

There’s an old adage among attorneys which says: He who represents himself has a fool for a client. It is because people trained to exercise professional space have trouble seeing objectively when the problems involve their particular lives. In fact, it is extremely difficult to get to the multitude of feelings attached to it, as well as the logical, indifferent mindset needed to efficiently handle legal problems when you are coping with your personal divorce, even whenever partying is an amicable one.There are a number of important factors for choosing the right divorce solicitors to help in your divorce before you choose a divorce solicitor and a few of these should be given careful consideration.

Furthermore, you should take into account what you need your lawyer to do for you. All divorces are not same. In case your divorce is uncontested, as an example, you might need a person who can provide straightforward guidance and support through the divorce or arbitration proceeding. For those who have complicated monetary and property departments, or kids, you will want an individual that has experience in working with sophisticated or guardianship strength problems. you need to ensure your attorney has experience with all the divorce laws in your own state. Local divorce lawyers may differ dramatically from state to state, therefore it is better to keep your search criteria restricted to local divorce attorneys. Not only will they be comfortable with conditions and your state’s divorce laws, it is always easier on one to cope with someone local. Having face to face time and having the ability to connect of residing in the exact same place on the fundamental amount is a huge element in establishing the trust you must get the very best experience possible during this tough time.

Make out an inventory of questions it is possible to ask about monetary concerns. They could not be difficult to overlook when you begin discussing your case. Request the way the bill works: when you’ll be charged, and how much the divorce will cost? Can the statement break into payments? Ask about any additional fees which services are charged. Some cost for phone messages or phone calls.

Moreover, It’s possible for you to try to ask family, friends, and family, or co-workers to get a referral list. Don’t forget, it is easier to have representation that is unbiased, thus ensure that your lawyer is not akin for your partner. Contacting the local Bar Association or having an internet resource like Local-Attorneys is just another good strategy to locate local divorce, lawyers. Take some time to interview several lawyers in order to find the best one for you. Obtaining a divorce is a significant life event, and you also need to be helped by somebody qualified that will help you make the best choices over the way


Smart Suggestions For Handling A Payday Advance

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Fiscal difficulty is an extremely challenging issue to go through, and if you are dealing with these situations, you may need fast cash. For many buyers, a payday advance might be the way to go. Continue reading for a few beneficial ideas into online payday loans, what you need to consider and the ways to make the most efficient decision.

Don’t select the first lender you can come with. Each and every payday loan location is unique, some with decrease interest levels yet others with a lot more cash to lend you. Some shops can loan money out instantly. Others, even so, might make you wait a couple days and nights to confirm your records. Should you some looking around, you can get that loan for your personal specific circumstance.

Payday cash loans is one quickly strategy to entry money. Do not join a payday loan if you do not completely understand the phrases. Interest rates are huge along with the charges it can be hard to purchase the repayments.

A greater alternative to a payday loan is to start off your personal crisis bank account. Invest a bit money from each paycheck till you have a good volume, for example $500.00 or so. Rather than building up the high-attention charges that a pay day loan can incur, you could have your own cash advance right on your lender. If you want to take advantage of the funds, commence protecting again right away in the event you need to have urgent money later on.

Before finalizing your payday advance, go through each of the fine print from the deal. Online payday loans could have a great deal of lawful terminology hidden within them, and sometimes that lawful words is used to mask invisible costs, great-priced late charges and also other stuff that can kill your wallet. Before you sign, be clever and understand specifically what you will be putting your signature on.

Should you not know very much in regards to a pay day loan however they are in eager necessity of one, you might want to talk to a personal loan skilled. This might even be a pal, co-personnel, or family member. You need to make sure you will not be receiving cheated, so you know what you will be getting into.

Pay day creditors really are picking up with regards to locations and even loan options, so they might be very luring for yourself. This type of personal loan is extremely small, and typically does not demand a long procedure in becoming authorized. This sort of bank loan is a which can be quick-named. These personal loans must be viewed as short term and only employed in an actual situation scenario.

Should you not have ample money on your examine to repay the money, a payday loan company will motivate anyone to roll the exact amount around. This only is perfect for the pay day loan organization. You are going to end up capturing on your own and not having the ability to pay back the loan.

You won’t instantly be denied a pay day loan due to a low credit score. There are lots of people that could benefit from paycheck lending that don’t even try mainly because they think their credit rating will disaster them. Most payday advance firms will allow you to obtain a loan as long as you possess some form of earnings.

Tend not to use the services of a payday loan company except if you have exhausted all of your current other choices. When you do take out the loan, be sure to can have cash available to repay the money after it is expected, otherwise you could end up paying out very high interest and costs.

Paying down a payday loan immediately is definitely the easiest way to go. Having to pay it off instantly is definitely the best thing to accomplish. Funding your loan via many extensions and income cycles gives the interest rate time for you to bloat the loan. This could quickly cost many times the sum you lent.

You can easily get found in a cycle of debt that by no means generally seems to finish and merely gets worse. In no way take out a payday loan to payoff one more. You must get out of the routine though you might have to go without the need of cash for some time. You are able to end the snowball result by discovering a way to quit it from rolling. This can be high-priced after a while.

There’s no doubt that online payday loans possess a valuable area in society. You need to recognize this kind of personal loan before you decide to apply. Use the advice with this piece, which will be simple to perform.

The Best Way To Market With Success On Shopify

Have you been looking to sell on the web with achievement? In the event if you have tried sites like eBay, Amazon, and Etsy, perhaps it’s time to make the most of a free trial offer shop with Shopify to to combine things up a bit. To sell on Shopify, you only need to choose an item to market, as well as a charge card you can use to fund your shop after the demo expires. Seems simple enough, right? By visiting the site of one can attain some helpful info on the product.

When you open your shop, it is time to get serious about enticing customers with excellent layout components. You don’t have to worry about learning a programming language to design your shop, as your Shopify subscription comes loaded with 100 different shop layouts that you can choose from. The designs can be personalized with ease by using the graphic software. What’s more is that new structure designs are always being added, so you’ve access to fresh designs all of the time. By visiting the homepage of one can obtain some helpful info on the product.

As a fresh consumer of Shopify, you will get help together with discover new tips and tricks from experienced customers. Veteran vendors on Shopify are eager to share their understanding with beginner sellers, so you could make the most of their prevalent understanding.

Do not forget to to advertise your new-store online to get more publicity. Take advantages of the latest social media marketing and in the event that you have a good customer-base, make them find out about your shop.

Once you have the fundamentals down, you will also need to think about a payment processor to permit your customers to look at. After each and every item you sell, you are going to be sent an e-mail or text to inform you that your item was purchased. After payment, you’ll be able to bundle them and send it on its way. Promoting on Shopify is somewhat simple, but you have to study all of the useful instructions available for your use.

Essential Advice And Tips Regarding Online Payday Loans

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Many people depend on payday loans to acquire them by means of financial urgent matters which have depleted their standard family budget a payday advance can transport them via up until the next income. It is crucial for individuals who are thinking about which makes this selection before going witha payday loan. Read more to find out what the situation is crucial to keep in mind in relation to receiving a speedy personal loan.

Anyone that is considering taking a payday advance should have a great notion of when it might be repaid. The rates connected to this type of loan is absolutely great and it also could get considerable expenses if not paid out on time.

Plenty of firms provide online payday loans. Carefully investigation a loan company firm before taking out financing. Find out how their previous consumers sense. Begin by performing a search on the Internet and browse above any critiques that you simply get.

Be extremely careful moving more than any type of payday advance. Typically, men and women believe that they will spend around the pursuing spend time period, however loan ultimately ends up getting larger and bigger right up until they can be kept with very little funds coming in from the paycheck. They are caught in the cycle where by they are unable to shell out it rear.

Keep in mind that if you have to use the services of a pay day loan company, only do it in the most intense emergency or problems. Once you take out that loan, you might never get back on your own ft. You won’t have the maximum amount of funds monthly because of service fees and passions and you might at some point end up not capable to pay off the money.

When you have any valuable items, you may want to take into account consuming them anyone to a cash advance provider. Occasionally, pay day loan service providers allows you to safe a cash advance from a priceless object, say for example a bit of great jewelry. A guaranteed cash advance will usually use a reduce interest, than an unprotected pay day loan.

Before taking out that cash advance, be sure you do not have other options available to you. Online payday loans can cost you a lot in service fees, so every other option might be a greater option to your total finances. Turn to your friends, household and in many cases your banking institution and lending institution to ascertain if there are every other potential choices you may make.

See the small print prior to getting any personal loans.

Generally, the normal payday loan quantity differs involving $100, and $1500. It might not look like a lot of money to numerous consumers, but this quantity needs to be repaid in almost no time. Typically, the payment will become because of inside 14, to thirty days using the program for resources. This could find yourself jogging you shattered, in case you are not mindful.

Reduce your payday loan credit to fifteen-5 percent of the complete paycheck. Many individuals get financial loans for further cash compared to what they could actually dream about paying back with this simple-phrase style. By obtaining merely a quarter of the paycheck in bank loan, you are more inclined to have sufficient resources to pay off this loan when your paycheck lastly is available.

Don’t ever obtain more income than you may pay back. Numerous lenders gives you a lot more than was requested, considering that you will be more prone to incur late fees. They are doing this to get as much funds on your part as you can.

Should you be contemplating employing a payday loan support, be aware of the way the company expenses their fees. Usually the financial loan cost is provided like a level sum. Nevertheless, in the event you determine it a share level, it could exceed the proportion price you are simply being billed on the a credit card. A flat charge may sound inexpensive, but will cost around 30Per cent from the initial loan sometimes.

Should you be getting concerns paying back your payday advance, enable the loan provider know without delay. These creditors are employed to this example. They can work together with anyone to develop a regular transaction option. If, as an alternative, you disregard the loan provider, you will find on your own in series before you realize it.

Even if you should never use payday loans like a main approach to pay out your debts because of the high rates of interest, they can be a great support if you want funds quickly and have hardly any other alternatives. Keep in mind the tips in this article, in order to use payday loans sensibly.

Employees Provident Fund and Miscellaneous Provisions Act 1952: Meaning, Contribution, Salary for Employees Provident Fund and Benefits and purpose of Employees Provident Fund

Employees provident fund

Meaning of provident fund:

Provident fund means the fund which is created by employer and employee together for the benefit of employee. In provident fund contributions are made by employers as well as employees and contributions are invested in investments. From the inv incomes are received and incomes are also reinvested. The total amount of provident fund will be given to employee on their retirement. This amount can be given to the family of employee on his death.

Provident Fund Contribution: Section – 6

  • Employer’s contribution in the P. Fund must be at least 10% of salary of employee however the contributions may be more.
  • The Employer’s contribution depends upon the will of employer
  • The employee’s contribution must be at least equal to employer’s contribution however it may be more than that.
  •  The contributions may be different hence the employee and the employer may contribute different amounts.

Meaning of Salary for Employees Provident Fund:

For the purpose of Employees Provident Fund Act contributions are calculated on the basis of basic salary and dearness allowance the salary does not include any other payment for the purpose of Employees Provident Fund Act.

Benefits and purpose of Employees Provident Fund and Miscellaneous Provisions Act:

Employees Provident Fund Act was passed by the parliament to provide following three benefits:

  • Employee’s provident fund.
  • Pension fund for employees.
  • Deposit link insurance.


The Employees Provident Fund Act provides above three benefits to those employees who are covered under Employees Provident Fund Act.

Meaning of Loss

Loss. One word. Four letters. Thousands of reasons. And yeah, millions of meanings.

Nowadays, I’ve been very aware that almost every single thing in life is unexpectable. Then, this word “loss” is a word which is very affecting myself right now.

Now let me ask you one thing,

“Have you ever lost someone?”

Well that question, ladies and gentlemen, to me (and i believe to everyone as well) is a question that doesn’t need to be answered. Then why did I just write those words above?

To tell you the truth, I kinda like psychological things. I like to guess what others are feeling, to analyze and predict how people would react to something in several cases, and so on.
I wrote that question above because i know someone would probably read it.

Nobody’s really a big fan of my blog, but hey, readers, if you were really paying attention to that particular sentence i wrote above,

“Would those memories of you and people you lost suddenly come back and grab your emotion, even just for a slightest second?”

We’ve ever lost people we love(d). No doubt about it.
Family, friends, lovers, or anyone who really means a lot to us.

Some people can’t accept loss, some people can. Some people are still wondering why it happened. Hurt, it does. We lose people because of many things. Death, misunderstanding, tiredness, anger, confusion, depression, pressure, lies, and bunch of other things.

“Why does it keep happening?”

is the question that people might have in their mind the most.

Now, I hope while you’re reading this post, you’re not hoping that i can give you the answers to those questions, cuz I can’t (you can stop reading if you are :P).
I’m just going to share a bit about how I deal with loss.

I’ve lost people I love the most. Through many kinds of way.
As time flows, going through those breaking heart moments, unaccepting feelings, and such,
I realize that actually loss gives me a lot of meanings. Positive ones.
By losing people I love, it doesn’t mean life’s over. It tells me that I’m actually stronger than I thought I was.
I’m not saying that loss is a good thing. It’s hard to go through, and it leaves wounds, no matter how small or big they are.

Firstly, losing people we love will turn us into a more grateful person.
We’ve had someone very meaningful in your life.
When we lose that someone, we’re being taught and told how people sometimes can mean everything to us,
and i guess you already knew that nothing lasts forever, right?
Be grateful for what you have right now, and take care of it, because it doesn’t last forever.

Secondly, by losing people we love, we learn how to be a better person. Sometimes we end up blaming ourselves because we think, we lose people we love because of our mistakes.
Let me tell you what I think. Mistakes are not there to be regretted.
Don’t waste your life by regretting your mistakes and blaming yourself for what happened to you.
Be a much better person than before, because if everything seems to turn bad after you’re facing a loss, it’s not that loss which has caused it. It’s yourself.

“Everything happens for a reason and everything has its own good”

Loss might be a bad memory for you, but memories you have are meant to change yourself into someone good, not anything else.

So those are my thoughts. How about you? :)

Divorce vs. Legal Separation

Excerpt taken from Divorce in Illinois – The Legal Process, Your Rights, and What to Expect by Steven N. Peskind, Esq.

People with marital problems sometimes consider a legal separation rather than a divorce because a separation seems less permanent, less drastic. Some look at a legal separation as “divorce-lite.” If you and your spouse want to just separate or take a “time out” from each other, work out an informal agreement regarding payment of bills and child-related matters, and then just separate without going to court. A legal separation is a formal court proceeding with the costs and expenses that go along with any court case.

If you do file a petition for legal separation, the judge will enter orders for maintenance, support, and custody. If you both agree, you can also divide your assets.

Once the court enters a decree of legal separation, you are still married. You can file joint taxes as a married couple and may be eligible for health insurance and retirement benefits as any other spouse. If your spouse dies, you are considered a surviving spouse for the purposes of inheritance and probate laws. Any assets or debts that either of you acquire after the decree of legal separation remain your separate property or debt, in the event you later decide to divorce.

Today people rarely use legal separations. The procedure is temporary and provides no real closure of the relationship. Since you are legally married, even if legally separated, you will need to get a divorce if you want to remarry or later decide to end the marriage with finality.

Most commonly today, people file legal separations to protect assets from creditors if one of the spouses needs long-term care. Sometimes people use this procedure if they anticipate a long-term separation and want to benefits from tax deductions for the payment of maintenance. A legal separation status of their marriage, but isn’t ready to “pull the trigger” for the divorce. Separate and get a good counselor. Don’t incur the unnecessary cost of the legal separation. If the marriage can’t be salvaged through counseling, proceed with a divorce at that point.

Hacking California Family Law

Cool title, huh?

Anyway, having over the past few years gone through the entire process of drafting and filing a legal separation, and then a divorce, in the state of California, without lawyers involved, I wanted to share something with y’all who might be thinking about this. And if you are, then you must be wondering about the same things I was wondering about, namely:

Can a legal separation be subsequently “converted into” a divorce?

Good luck finding the answer to this one out there. In fact, I can tell you what you will find: a lot of negatives, no, you can’t, you have to go through a divorce.

But then, you might well be asking yourself, what is the purpose of legal separation? after all, the state pretty clearly describes this as a “divorce lite”, wherein you go through the entire divorce process, including things like a settlement and custody agreement.

So, which is it? is a legal separation really like a divorce, or isn’t it? and if it is, then why do all these people – including the ones giving free advice in the courthouse, who at least aren’t lawyers with a vested interest in telling you whatever generates the most fees – tell you that you can’t simply convert it to a divorce later?

None of it makes sense. So I figured, like my posts about Ubuntu for the stupid user, I will make another post about family law for the simple man (and woman).

Obligatory part of the post: I am not a lawyer. If you take anything I say as legal advice, you’re being silly. I’m just an anonymous blogger on the interwebs.

What I am, however, is someone with very relevant recent experience. What I am about to share is completely real, true and easy to prove (court filings being public matter).

So there you go: yes, from a practical standpoint, you can very easily “convert” a legal separation to a divorce in the state of CA. It’s quick, it’s simple, and there is no proper legal definition for it. I don’t know why the courts find it necessary to muddle the waters around this issue so much, because it doesn’t need to be that way.

The points that need to be made:

1) a legal separation is exactly like a divorce. You follow the same exact process, only you check a different checkbox on a couple of the forms. This means that it does, indeed, include full settlement and custody agreements. Community property ceases to exist once you’re done, and it takes effect immediately.

2) there is no “legal option” to FILE a “conversion” from a legal separation to a divorce. That is the part that is so confusing. To subsequently divorce, you do indeed need to go through the entire process again.


3) assuming nothing changes between the two of you when you file for the divorce, the process is greatly simplified. You do not need a new settlement agreement, a new custody agreement, or in fact, a new anything. You can literally use the same forms you used previously, changing the checkbox and dates. You don’t even have to submit the agreements again. In other words, you will be going through an exercise in paperwork, and that’s all.

So, how to effect a “conversion”?

Simple. Use the same forms you went through for the legal separation. Refill them the same way, except change to “divorce”. Update the dates. File the same way.

THEN, when you get the final forms – the ones about settlement (FL180) – instead of filing a new agreement, you only need to file a one-pager, that says the following (I am highlighting the important portion, the one that creates the “conversion” effect; the rest is just boilerplate):


AGREEMENT made on this __ day of __, 20__, by and between __ (hereinafter referred to
as “Wife”), residing at ____, and __ (hereinafter referred to as “Husband”), residing at ____

1. This Court exercises jurisdiction under Family Code Sections 3421-3424.
2. Notice and opportunity to be heard were given under Family Code Section 3425.
3. A clear description of the custody and visitation rights of each party is set forth herein.
4. Violation of the order may subject the party in violation to civil or criminal penalties, or both.
5. The habitual residence of the child/ren is the United States of America.

WHEREAS, we were married on the __ day of __, 20__, in ____, State of ____, and we now mutually desire to dissolve our marriage and mutually agree to live permanently separate and apart from
each other, as if we were single;

WHEREAS, we each have exercised good faith and have made fair, accurate, and complete disclosure to each other regarding all financial and property matters pertaining to this marital settlement agreement;

WHEREAS, we mutually desire to settle by agreement all matters regarding our marital affairs, child custody and visitation, personal and real property, and finances;

WHEREAS, we mutually intend this agreement to be a final disposition regarding the marital issues addressed herein and intend that this agreement be incorporated into any subsequent FINAL JUDGEMENT OF DISSOLUTION OF MARRIAGE.

THEREFORE, in exchange for the mutual promises herein contained, we agree to live separately and to divide our property and finances according to the following mutually agreed upon terms and conditions:


Husband and Wife are already legally separated.

To settle all matters of this dissolution of marriage, Husband and Wife both agree that the terms outlined in the legal separation case, previously entered and approved by the court, also known as California Family Law Case No. ____ are all to remain fully intact, without change in either terms or associated timelines.


Husband and Wife acknowledge that each has entered into this agreement in good faith, without any duress or undue influence. Each understands his or her right to seek independent counsel regarding this agreement, and each has had the opportunity to seek independent counsel prior to signing this agreement.


Husband and Wife agree that this agreement shall be governed and construed in accordance with the laws of the State of California.

Signed and dated this __________ day of _______________________, 20_____.

________________________________ ________________________________
Wife Husband

Presto! you have converted your legal separation into a divorce. Sure, you didn’t technically “convert” anything, but doesn’t this sound a whole lot easier than “filing a new divorce case”? in other words, all the effort you put in the legal separation is not for naught. When the time comes to effect a divorce, assuming you’re still agreeing on the same things the way you did before, it is very easy to go through.

I am legally separated, how do I get divorced. . .

Dear Famularo & Associates

My husband and I have a judgment for legal separation. I no longer want to remain married to him, and want to get a divorce. How do I turn my judgment for legal separation into a divorce?

Dear CM-
A legal separation in the state of California is similar to a divorce in that it is a court action which alters a parties’ legal relationship. A lawsuit for legal separation includes orders for child custody, child support, visitation, spousal support, division of property and division of debts. All of the same orders in a divorce are made in a legal separation, except at the end of the lawsuit the parties are not divorced. All property and all debts accumulated after the date of separation are not shared by the parties, but are owned solely by the party who accumulated that asset or debt.

After a judgment for legal separation has been entered, you can still obtain a divorce. However, that divorce judgment is obtained depends on the terms of the legal separation. If the judgment for legal separation specifically reserves jurisdiction over the status of your marriage, you can simply file a motion to terminate your marital status and submit a divorce judgment to the court. If, however, status was not reserved in the judgment for legal separation, you must file a whole new divorce action. The new divorce action will be for status only, and you will not have to relitigate the terms of the legal separation. Thus, all orders made in the judgment for legal separation will not be affected by the filing of a request for a status only divorce.

Financial Credit, Wall Street Syndicated Bank Lending, and Confidence

Excerpts from June 15th speech by J. Alfred Broaddus, Jr., President, Federal Reserve Bank of Richmond: “…many “new economy” adherents apparently believe that rising labor productivity growth has restrained increases in labor costs and hence reduced the risk of a renewal of inflation and reduced the need for preemptive monetary restraint by the Fed. It is true that accelerated productivity growth temporarily limits labor cost increases in the interval before increased demand for workers forces wages up, and the initial increase in the output of goods and services can temporarily restrain price increases. I don’t believe, however, that new economy advocates have thought this matter through fully…” “The long bull market in U.S. stocks reflects higher expected future business earnings growth. And I can assure you that my two grown sons and their friends and associates expect lifetime incomes and living standards well above their parents’. Again, neither my sons, other households, or business firms typically think explicitly of their expected higher future income as the result of an increase in trend productivity growth. But their expectations and – as I will indicate momentarily – the actions they take based on these expectations make it clear that they perceive the increase implicitly. What do all these developments in the “real” economy have to do with monetary policy? The answer is that U.S. households are now borrowing quite liberally against their higher expected future incomes to consume today. They are buying new homes, adding on to existing homes, and buying consumer durables such as new cars, furniture and electronic equipment. Similarly, firms are borrowing against their higher expected future earnings to invest in new plant and equipment. The problem posed for monetary policy by all this is that the higher expected future income driving the increased current demand for goods and services is not yet available in the form of increased current output of goods and services. This mismatch between expected future resources and currently available resources, in my view, is the principal factor creating the present aggregate demand-supply imbalance in the U.S. economy I discussed earlier. The excess demand has been satisfied to date by imports and progressively tighter labor markets. But demand is now rising more rapidly here in Europe and elsewhere around the world, which may soon put upward pressure on the dollar prices of imports. And labor shortages are now widely reported in a number of sectors and industries. On their present course, U.S. labor markets will eventually tighten to the point where competition for workers will cause wages to rise more rapidly than productivity, which sooner or later would induce businesses to pass the higher costs on in higher prices. As I suggested earlier, there is evidence in some of the latest U.S. price and labor cost data that an inflationary process of this sort may now be beginning. The implication of this analysis, as I indicated at the outset, is that the apparently higher trend productivity growth in the U.S. economy – whether one labels it a “new paradigm” or not – requires higher real interest rates to maintain macroeconomic balance. In order to prevent a reemergence of inflationary pressures and, in doing so, to sustain the expansion, U.S. monetary policy must allow short-term real interest rates to rise to induce households and business firms to be patient and defer spending until the higher expected future income is actually available, in the aggregate, in the form of higher domestic output.” It was another disjointed week, although one that ended bearishly. For the day, the Semiconductors added more than 2%, while the S&P Bank index dropped 6%. For the week, the Dow dropped about 1% and the S&P 500 added less than 1%. The economically sensitive stocks were hit hardest, with the Morgan Stanley Cyclical index dropping almost 3% and the Transports sliding 4%. Both the Morgan Stanley Consumer index and the Utilities were largely unchanged. Technology stocks were mixed, as the NASDAQ100 added 1%, while the Morgan Stanley High Tech index and the Semiconductors declined less than 1%. The Internet index dropped 5% and the NASDAQ Telecommunications index was unchanged. The Biotech index increased 2%, and the small cap Russell 2000 declined about 2%. The financial stocks were strange, with the AMEX Broker/Dealer index gaining 4% while the S&P Bank index was clobbered for a 10% loss on bad news from Wachovia. Gold stocks showed a bit of life this week, rising almost 3% as the commodity jumped almost $5. The dollar had another poor week, dropping about 2% against the Swiss franc and 1% versus the euro. The bond market had a positive week and swap spreads narrowed, in some case sharply. The key 10-year dollar swap narrowed 8 basis points to 120, and mortgage-back spreads generally narrowed about 6 basis points. The TED spread was the exception, as it was largely unchanged for the week as it continues to signal heightened systemic risk. It is certainly our contention that the present state of the U.S. credit system is absolutely unsustainable. And with credit bubble dynamics dominating, continued strong debt growth is necessary to prolong the dreadfully unsound U.S. economic boom. At the same time, it is our view that truly enormous financial credit growth must be maintained to sustain liquidity throughout the U.S. financial system. At present, there are over $26 trillion of credit market instruments outstanding and another $14 trillion or so in stock certificates. The insurmountable dilemma is that the degree of credit creation necessary to keep the bubble inflated is today highly inflationary, as well as highly distorting to the real economy as it feeds overconsumption and a historic misallocation of resources. Amazingly, few appreciate the acute fragility of the current credit bubble – particularly the “new era” adherents. In fact, if you began a discussion with a group of mainstream economists by posing the basic question – how much did credit grow last year? – most if not all would likely respond “about $1.12 trillion” – the increase in “domestic non-financial debt.” Of this amount, business borrowings were the largest component, increasing $596 billion. This was closely followed by household mortgage debt that increased $411 billion; consumer credit expanded $94 billion; and state and local government added $53 billion. The Federal government actually paid down $71 billion of publicly held debt. And since these are the sectors whose borrowing and spending power the “real” economy, it has traditionally made sense to focus on this component of credit growth. Furthermore, with “domestic non-financial debt” growing at a rate of about 7% last year, mainstream analysts were not taken aback by any obvious signs of dangerous excess. This traditional analysis, however, completely fails to recognize a most critical component of credit growth – financial credit. This type of credit is created by borrowers comprising the “financial sector,” including the banks, savings institutions, finance companies, security broker/dealers, insurance companies, the GSEs, and the mortgage and asset-backed pools that are credit vehicles, etc. Financial sector borrowings are enormous, having increased by almost $1.09 trillion last year, or 17%, and ended the first quarter at almost $7.8 trillion. The vast majority of this financial credit is created as financial sector entities borrow funds enabling the purchase of additional holdings of financial assets. And while traditional analysts largely ignore these borrowings, it is certainly our view that the explosion of financial credit – debt created through the leveraging of the financial sector – is at the heart of the U.S. financial and economic bubble. And while the banking system remains a key player within the financial sector, it should be recognized that the preponderance of financial credit is generated by non-banks borrowing in the money and capital markets, as well as by bank loans that are not held on bank balance sheets (thus not a part of traditional “bank credit”). Interestingly, traditional analysts focus on the corporate and household sectors’ taking on additional “domestic non-financial debt,” while at the same time believing that banks have a virtual monopoly on credit creation. This is the only explanation we can muster for why the explosion of financial credit has been completely off the radar screens for most within the economic community. Looking at the data, the momentous expansion of financial credit began in earnest during 1997. During the final three years of the decade, financial sector borrowings – financial credit – increased almost $2.8 trillion, or an astonishing 58%. To put the enormity of this expansion in perspective, during the same period (but including the first quarter of 2000), Federal Reserve credit expanded by about $110 billion. Commercial banks expanded borrowings by about $1.33 trillion, or 28%. And while the banks were lending aggressively, the non-bank credit providers were involved in an historic leveraging and lending melee, as a new credit structure took hold. Over this three-year period, GSEs increased borrowings $765 billion, or 77%, “Federally-related mortgage pools” $610 billion, or 36%, “Issuers of Asset-backed securities” $802 billion, or 94%, and Security Broker/Dealers $503 billion, or 79%. These numbers should make it clear that those focusing only on traditional bank credit data have missed the bubble. Admittedly, there may be some double counting that occurs when looking at financial sector borrowings in aggregate. However, the key point to recognize is that much of financial sector borrowings are used directly to fund holdings of financial assets – mortgage loans in the case of the GSEs and mortgage pools, and security credit and other speculations in the case of the brokerages. Recognizing that credit creation is all about creating additional purchasing power, almost by definition, credit excess directed in one area will create price distortions. In the case of financial credit, unprecedented credit excess has fueled enormous inflation in housing and stock prices. Accordingly, financial credit is immensely seductive as it works to raise asset prices and stoke the illusion of endless financial system liquidity, with what at the time seem like very limited negative side effects. However, after several years of unprecedented financial credit excess, dangerous imbalances and distortions are unmistakable to both the financial system and economy. For one, historic asset inflation has fueled endemic resource misallocation that is becoming increasingly obvious and problematic. On another key front, it is clear that financial credit excess has become increasingly inflationary for the real economy. And, importantly, the bubble in financial credit has created an acutely fragile financial structure. Recognizing the vulnerability on both the financial and economic fronts, we have of course been keenly focused on spreads and other indications of heightened systemic stress. During the first quarter, spreads widened sharply and credit market liquidity waned. But at the same time, this dislocation has yet to develop into “1998/LTCM-style” market tumult. With first quarter financial sector data now available, there are definitely some interesting clues that help to explain both what transpired within the credit system and what may be in store going forward. First, and not surprisingly, throughout much of the financial sector, credit growth slowed sharply during the quarter. Commercial bank holdings of financial assets increased by $53 billion, or at an annualized rate of 4%. The GSEs, after expanding credit by more than $300 billion during each of the previous two years, increased credit by $33 billion during the quarter, or at an 8% annualized rate. The “Federally-related mortgage pools” increased credit by $30 billion, or 5% annualized, and the “Issuers of asset-backed securities” extended $35 billion of credit, or 9% annualized. Importantly, however, moderated growth by key financial credit providers was offset by a huge increase in credit provided by Wall Street – the Security Brokers and Dealers. According to Federal Reserve data, the brokerage firms increased holdings of financial assets by a staggering $140 billion, or at an annualized rate of 56%, to $1.1 trillion. Holdings of “credit market instruments” jumped $42 billion to $210 billion, growing at an annualized rate of 107%. Elsewhere, security credit increased $59 billion to $282 billion, “misc. assets” increased $32 billion to $556 billion, and equity holdings increased $8 billion to $74 billion (note the relatively minor role of “equities” as a percentage of total financial assets – that is precisely why we refer to this as a Credit Bubble!). Digging a bit deeper into the astounding growth in “credit market instruments,” we see that while corporate and foreign bond positions increased about $16 billion, or 16% during the quarter, the largest change in positions was a dramatic reduction in a short position in Treasury securities that had been growing over the past few years. In fact, a short position of $43.5 billion was reduced to $4.7 billion during the first quarter, certainly in response to spread trades “blowing up.” If there was confusion as to the true dynamics behind the dramatic out-performance of Treasuries, the securities firms apparently purchased almost $39 billion during the first quarter. In some respects, this year’s financial dislocation has been a replay of 1998. Burned by the dramatic widening of spreads, the leveraged speculators were forced to “unwind” trades. But there appear to have been a most critical difference: When LTCM and other hedge funds were stung by spread speculations gone wrong, they not only covered their shorts but were also forced to sell longs – or at least a problematic liquidation was in process before the Fed was forced to orchestrate a bailout/reliquefication. This time around, however, things have thus far progressed differently. Wall Street apparently covered much of its Treasury short but chose to ADD to its long position. We see this as the key factor that has thus far kept a market dislocation from developing into a full-scale liquidity crisis. Keep in mind that the financial sector – through financial credit creation – is the dominant supplier of lendable funds. This works fine and dandy when the financial sector is aggressively leveraging, but doesn’t work well at all if financial credit growth slows. Moreover, as was certainly the case with the hedge funds in 1998, credit system liquidity vanishes abruptly at any point when key players within the financial arena are forced to liquidate positions. When the financial sector is forced to “liquidate,” the game is over. Let’s get back to the Brokerages’ extraordinary first quarter. After covering their Treasury short that had been financing higher-yielding securities, instead of liquidating longs (a situation that would have certainly led to market liquidity problems and heightened systemic risk), the brokerages instead turned into aggressive creators of financial credit. In fact, they added to net financial asset holdings to the tune of $140 billion. To finance this extraordinary growth of financial credit, the security firms found alternative means of financing to their Treasury short. During the quarter, “repos” increased $46 billion to $293 billion, borrowings from customers expanded $49 billion to $368 billion, bank borrowings increased $19 billion to $143 billion, and “due to affiliates” increased $25.4 billion to $395 billion. It is now clearer to us why the credit system maintained a semblance of liquidity, particularly in the securitization marketplace, despite a problematic market dislocation. Expanding on our analysis, let’s now ponder some of the possible consequences and ramifications after such a dramatic move by Wall Street. First, Wall Street appears to have taken on significant risk in response to problematic market conditions. This is not a positive development for our financial system. Securities firms were clearly behind the dramatic out-performance of Treasury securities, as well as likely major factors behind the unusual yield curve inversion. Importantly, Wall Street’s move to increase holdings of financial assets created additional financial credit that certainly helped mitigate the unfolding dislocation. We see this as a reasonable explanation as to why something akin to 1998’s system-wide deleveraging has not yet transpired – there has been no real liquidations of risky debt securities from the financial sector. Moreover, if Wall Street tapped foreign borrowing sources (European bank loans? – “due to affiliates” in Europe?) to fund Treasury purchases and expanding positions, this could do much to explain the dollar’s peculiar resiliency in the face of the dislocation in the swaps market and financial instability generally. Yet, such borrowings are unsustainable and only increase exposure to a declining dollar; another key source of greater risk acceptance by the financial sector. Likely, firms with foreign exchange exposure have strategies in place to simply “hedge” this risk in the event of dollar weakness. Of late, it appears that such weakness has commenced, so we would expect that “dynamic hedging” programs could now weigh on the dollar for some time. Such strategies only increase the already significant risk of a precipitous dollar decline. The fact that Wall Street appears to have taken on considerable risk during the first quarter is quite important in our overall credit bubble analysis. After first quarter maneuvers, we now expect it less likely that Wall Street remains in a position to aggressively leverage and create financial credit over the coming months. As such, the Wall Street firms could soon join the GSEs in a group of previously aggressive institutions now under heightened market scrutiny. And if the GSEs and Wall Street firms are increasingly tempered by market discipline, this leaves the banks and the “mortgage-back pools” and “issuers of asset-back securities” to take up the slack; certainly a very tall order. So far this quarter, as has been noted in recent commentaries, the banks have been expanding credit very aggressively, certainly a critical factor in sustaining the credit system throughout recent market dislocation. The key question becomes: can this be maintained? With the previous question in mind, it is our view that yesterday’s negative announcement by Wachovia takes on significant importance. “Bellwether Wachovia Girds for Credit Thump – Expects 30% jump in nonperforming loans” was the decidedly nonbullish headline from the American Banker. Wachovia stated that revenues from capital markets, mortgage banking and brokerage would all be below expectations. The shocker, however, was the big jump in problem loans from a bank with “a squeaky clean reputation for managing credit risk.” Importantly, it appears at least some of Wachovia’s credit problems are emanating from bank loan syndications; hence this is in no way specific to Wachovia. Indeed, we have for some time expected that previous lending excesses in this area would in time turn quite problematic. It certainly appears that Wachovia’s announcement is a key inflection point – the first of many “shoes to drop.” Going forward, we would expect both credit issues and the mega-market for syndicated bank loans to come under heightened scrutiny. And as market participants become increasingly concerned with credit issues, we expect increasingly risk-averse investors to demonstrate much more caution toward the asset-backed security marketplace generally. Moreover, the banking system and Wall Street have also created hundreds of “funding corporations” and other structures/entities comprising $100’s of billions of assets that are now much more susceptible to changing market perceptions. We don’t think it a coincidence the stocks of JP Morgan, Chase Manhattan, and Bank of America have been under intense selling pressure the past two days. These three are leading players in both bank syndications and “structured finance.” So, to answer the question from above: can the banks continue to “take up the slack,” aggressively creating the degree of financial credit necessary to keep the bubble inflated? We don’t think so. Certainly, if the syndicated bank loan market and other bank-related financing arrangements falter, this would be a major “domino” to fall – one we don’t think the already impaired U.S. credit system could absorb. Perhaps, this is precisely what the recent rally in the bond market is signaling and, quite possibly, these developments are also a factor in recent dollar weakness. After all, when the credit system finally buckles, the acutely vulnerable economy will falter and there will be a rush to sell dollar assets. As such, we expect that the dollar will be a key issue going forward. At the end of the first quarter, “The rest of the World” owned $6.4 trillion of U.S. financial assets, including $2.8 trillion of credit market instruments and almost $1.4 trillion of U.S. equities. Foreigners were also aggressive buyers of both U.S. debt and equity securities during the first quarter. This was a week of decidedly bearish fundamental developments. Can the confidence game withstand these developments for much longer?
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