Jun 032022
 
 June 3, 2022  Posted by at 8:47 am Finance Tagged with: , , , , , , ,  36 Responses »


Carl Bloch The transfiguration c1865

 

The East Grows Stronger While The West Gets Weaker (ZH)
Zelensky Says Russia Controls A Fifth Of Ukrainian Territory (BBC)
Quo Vadis, Mr Johnson? (Batiushka)
US Engaged In “Offensive” Cyber Ops Against Russia In Ukraine: NSA Director (ZH)
Biden To Visit Saudi Arabia In Push To Lower Oil Prices And Punish Russia (G.)
Biden’s Inner Trudeau (Turley)
Arms Sent To Ukraine Will End Up In Criminal Hands, Says Interpol Chief (G.)
Voting Software Vulnerable In Some States (AP)
Bill Barr Applauds Durham For Showing Truth On Clinton Campaign, FBI (JTN)
The Decline and Fall of Davos Man (PS)

 

 

 

 

Inflation

 

 

Kat Lindley

 

 

Interesting graph. Qué pasa?

 

 

It’s like they do it on purpose.

The East Grows Stronger While The West Gets Weaker (ZH)

The latest agreement among member nations on export bans targeting Russia is largely oil focused, not natural gas focused, with the union demanding an immediate 70% decrease in Russian oil transferred BY SHIP. Oil transferred by pipeline will continue to flow into the EU for now. The ban is intended to expand to 90% of all shipborne Russian oil by the end of this year. Natural gas imports from Russia will also continue. While some European nations are more dependent on Russian energy than others, overall 40% of the EU’s needs are supplied by the country’s industry. It is not surprising that they are seeking an incremental approach to sanctions, they simply would not be able to survive another winter if they were to go cold turkey and block Russian imports completely. Of course, this does not mean that Russia has to operate on Europe’s timetable.

Russia is already reducing exports of natural gas to multiple EU countries, with Denmark, Netherlands and Germany being the latest to see losses. The EU’s ban was oil and ship focused because they cannot find an alternative source for natural gas that would resolve shortages if they banned everything. Germany in particular would be destroyed by the loss of natural gas supplies from Russia with its 42% dependency. The solutions offered by governments and in the mainstream media neglect certain realities. Namely, they claim that output can be increased or diverted to Europe to fill the gap. Joe Biden has suggested that the US is a “net exporter” of oil (this advantage has swiftly declined since he entered the White House according to the IEA) and that the US could help alleviate European demand. The IEA and OPEC members like Saudi Arabia have offered to increase market availability and output of oil if Russian exports are hit with sanctions.

The problem is that increased production is a fantasy stifled by the realities of labor shortages, increased drilling costs due to inflation and shortages in raw materials caused by supply chain disruptions. There is little chance that production capacity will ever be able to match EU demands, according to experts in the drilling industry. [..] Russia has shown considerable resilience to sanctions on oil as both China and India have increased purchases in tandem with Europe’s bans. The wider implication of this being that Europe and the West will be facing reduced global oil supplies and paying a premium while countries like China and India will be enjoying increased supplies and lower prices from Russia. The East grows stronger while the West gets weaker

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“Zelensky admits Russia now holds one-fifth of Ukraine, the largest country entirely within Europe. What he didn’t acknowledge is that Russia controls Ukraine’s industrial heartland, 90% of its energy resources (including all of offshore oil), and its critical ports and shipping.”

“BREAKING: Tribunal over Ukrainian warcrimes will be held in Mariupol. It will be called the Mariupol Tribunal. In addition to the Ukrainian Nazis who committed war crimes in Mariupol, foreign mercenaries and NATO instructors will also be tried there.”

Zelensky Says Russia Controls A Fifth Of Ukrainian Territory (BBC)

Ukraine’s President Volodymyr Zelensky says that Russian forces have seized 20% of his country’s territory, as Moscow’s invasion nears its 100th day. Addressing lawmakers in Luxembourg, he added that the front line extended for more than 1,000km (621 miles). “All combat-ready Russian military formations are involved in this aggression,” he told MPs via videolink. Russian forces have been intensifying attacks on the city of Severodonetsk in the eastern Donbas region. UK defence officials say Russia has seized most of the city and are making “steady local gains, enabled by a heavy concentration of artillery”.


Severodonetsk is the easternmost city under Ukrainian control and regional governor Serhiy Haidai said Russia was trying to break through defences in the city “from all directions”. However he said Ukrainian troops were carrying out counter-attacks, “pushing back the enemy on some streets and taking several prisoners”. Intense street-to-street fighting in the city had hampered evacuations, he said, describing such efforts as “extremely dangerous”. In a video address late on Thursday evening, Mr Zelensky said the situation in Donbas had not changed significantly that day but that Ukrainians had experienced “some success” in battles in Severodonetsk.

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“..Johnson regurgitates the old Victorian anti-Russian myths of ‘The Great Game’..”

Quo Vadis, Mr Johnson? (Batiushka)

Alexander Johnson, or to give him his full name, Alexander Boris de Pfeffel Johnson, was born to wealthy British parents in New York in June 1964, fifty years after the Sarajevo assassination in June 1914. Since 2019 Johnson has been the Prime Minister of the UK. Giving the impression of an elitist and snobbish aristocrat and distantly related to Queen Elizabeth II, he used to work as a right-wing journalist but is above all a renowned political opportunist. A man of the people he is not. Like so many other politicians, does he actually believe in anything, apart from in himself? Johnson is a biographer of his idol, the half-American Winston Churchill, whom he appears to imitate in his stoop and gait. His fawning book The Churchill Factor, clearly indicates who his model is.

He has five or six or seven children (he himself does not seem to be too sure how many he has fathered by various mothers) and enjoys drunken parties in Downing Street during and outside lockdowns. A highly divisive and controversial figure inside the UK, loved by a few and hated by most, the following quip is made about him: What is the difference between Zelensky and Johnson? Zelensky is a buffoon who became a politician, whereas Johnson is a politician who became a buffoon. More serious commentators ask the question: Is Johnson a natural buffoon, or does he just pretend to be a buffoon? Or, perhaps most likely of all, is he a natural buffoon who pretends to be an even greater buffoon? Of course, most people will admit that as regards Zelensky, he never became a politician, but remained a buffoon. But that is another story.

Despite his middle name of Boris (1), Johnson is a Russophobe to the core, as prejudiced as Sir Arthur Conan Doyle (given his title because he defended the indefensible Boer War) or any other old Imperialist. Like other blinkered representatives of the Norman-British Establishment, Johnson regurgitates the old Victorian anti-Russian myths of ‘The Great Game’ as well as the new ones. These latter include the 2006 poisoning of the British spy and traitor, Alexander Litvinenko (clearly not an act of the Russian secret services, who would have acted so as not to be identified), and the 2018 Skripal poisonings in the British Establishment military centre in Salisbury (and the subsequent censorship of the case and the father’s and daughter’s abductions carried out by MI5). These poisonings were due to a nasty substance to be found, perhaps uniquely on earth, at the highly secretive and evil Porton Down chemical weapons plant, just six miles from Salisbury. That MI5 and its SIS assassination arm (100 murders per year on average) with its many South African hirelings, could have been responsible would never be admitted by Johnson’s tiny mind.

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“..infrastructurally devastating cyberattacks..”

US Engaged In “Offensive” Cyber Ops Against Russia In Ukraine: NSA Director (ZH)

The US military has issued a stunning but perhaps not entirely unexpected admission that it has been conducting offensive cyber operations in support of Ukraine. It marks the first ever such acknowledgement, and suggests – as many observers have long suspected – a deeper Pentagon and US intelligence role in Ukraine against the Russian military than previously thought. National Security Agency (NSA) and US Cyber Command Director Gen. Paul Nakasone told the UK’s Sky News on Wednesday, “We’ve conducted a series of operations across the full spectrum: offensive, defensive, [and] information operations.” This includes “offensive hacking operations” he said.

Without offering specific details, he continued, “My job is to provide a series of options to the secretary of Defense and the president, and so that’s what I do.” Importantly, Gen. Nakasone gave the interview from allied Baltic country Estonia, from which other supporting operations including weapons transfers for Ukraine have come. He spoke of major attempts of the Russians to launch infrastructurally devastating cyberattacks on Ukraine, saying, “And we’ve seen this with regards to the attack on their satellite systems, wiper attacks that have been ongoing, disruptive attacks against their government processes.” “This is kind of the piece that I think sometimes is missed by the public. It isn’t like they haven’t been very busy, they have been incredibly busy.

“And I think, you know, their resilience is perhaps the story that is most intriguing to all of us,” he said, describing the Ukrainian response. As for support the US has given Ukraine in the lead-up to the Russian invasion, the NSA director referenced the following: Nakasone previously said his agency deployed a “hunt forward” team in December to help Ukraine shore up its cyber defenses and networks against active threats. But his latest remarks appear to be the first time that a U.S. official said publicly that the U.S. has been involved in offensive cyber operations in response to Russia’s invasion of Ukraine.

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Pick your enemies wisely.

Biden To Visit Saudi Arabia In Push To Lower Oil Prices And Punish Russia (G.)

Joe Biden will reportedly visit Riyadh later this month and meet Crown Prince Mohammed bin Salman, abandoning a campaign pledge to make Saudi Arabia “a pariah” for the murder of Washington Post columnist Jamal Khashoggi. The Riyadh trip, first reported by the Washington Post and New York Times, suggests Biden has prioritized his need to bring oil prices down and thereby punish Russia for its invasion of Ukraine, over his stand on human rights. The visit will be added on to an already planned trip to Israel, Germany and Spain. The White House said it had no new travel plans to announce, but made clear there was no barrier to Biden meeting the crown prince.

“If he determines that it’s in the interests of the United States to engage with a foreign leader and that such an engagement can deliver results, then he’ll do so,” a senior White House official said. “In the case of Saudi Arabia, which has been a strategic partner of the United States for nearly 80 years, there’s no question that important interests are interwoven with Saudi Arabia. And the President views the Kingdom of Saudi Arabia as an important partner on a host of initiatives that we are working on both in the region and around the world.” The end of the crown prince’s US isolation has looked likely since the Ukraine invasion began on 24 February. Seeking to cut off Russian revenue, Washington has sought an expansion of the global oil supply to bring down prices, which also represented a threat to already poor Democratic prospects in this year’s congressional elections.

The White House reportedly sought to set up a phone call between Biden and Mohammed in March, but was snubbed by the crown prince. However, the president’s top Middle East adviser, Brett McGurk, and his special envoy for energy issues, Amos Hochstein, have persevered in paving the way for a meeting with a string of quiet trips to Riyadh.

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“..politicians are once again ignoring what is constitutionally possible..”

Biden’s Inner Trudeau (Turley)

In our increasingly hateful and divisive politics, there are times when our nation seems incapable of coming together for a common purpose. Tragedies — moments of shared national grieving and mutual support — once were the exception. Yet one of the most chilling aspects of the aftermath of the school massacre in Uvalde, Texas, was how the moment of unity was quickly lost to political posturing. Politicians have long admitted that a crisis is an opportunity not to be missed — the greater the tragedy, the greater the opportunity. After the mass shooting at a Buffalo supermarket, New York’s Gov. Kathy Hochul (D) called for censorship to “silence the voices of hatred and racism.” After the Uvalde massacre, some Democrats renewed calls for everything from court packing to ending the Senate filibuster.

The most immediate response, however, was a call for gun bans. Vice President Kamala Harris got out front of the White House by demanding a ban on AR-15s, the most popular weapon in America. Then President Joe Biden created a stir by suggesting he might seek to ban 9mm weapons. Such calls are not limited to the United States. Canadian Prime Minister Justin Trudeau announced that his government is introducing legislation to “implement a national freeze on handgun ownership.” He said Canadians would no longer be able “to buy, sell, transfer or import handguns anywhere in Canada,” adding that “there is no reason anyone in Canada should need guns in their everyday lives.”

The difference between the push in the two countries is the existence of the Second Amendment in the United States — a constitutionally mandated “reason” why Americans are allowed to have guns; they don’t have to prove it to the government. While the White House subsequently tried to walk back his comments, Biden saying there’s “no rational basis” to own 9mms and AR-15s sounds like he’s channeling his inner Canadian.There is now a strong majority for gun control reforms. However, politicians are once again ignoring what is constitutionally possible by focusing on what is politically popular with their voting base.

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A strange difference between guns for Ukraine and guns in America.

Arms Sent To Ukraine Will End Up In Criminal Hands, Says Interpol Chief (G.)

Weapons sent to Ukraine after Russia’s invasion in February will end up in the global hidden economy and in the hands of criminals, the head of Interpol has said. Jürgen Stock says once the conflict ends, a wave of guns and heavy arms will flood the international market and he urged Interpol’s member states, especially those supplying weapons, to cooperate on arms tracing. “Once the guns fall silent [in Ukraine], the illegal weapons will come. We know this from many other theatres of conflict. The criminals are even now, as we speak, focusing on them,” Stock said.

“Criminal groups try to exploit these chaotic situations and the availability of weapons, even those used by the military and including heavy weapons. These will be available on the criminal market and will create a challenge. “No country or region can deal with it in isolation because these groups operate at a global level.” He added: “We can expect an influx of weapons in Europe and beyond. We should be alarmed and we have to expect these weapons to be trafficked not only to neighbouring countries but to other continents.” He said Interpol urged members to use its database to help “track and trace” the weapons.

“We are in contact with member countries to encourage them to use these tools. Criminals are interested in all kinds of weapons … basically any weapons that can be carried might be used for criminal purposes.” Ukraine’s western allies have sent shipments of high-end military weapons to Ukraine since the Russian invasion more than three months ago. On Tuesday, the American president, Joe Biden, announced the US would supply Kyiv with advanced missile systems and munitions. After the US pulled out of Afghanistan in 2021, following 20 years of war, huge amounts of often highly sophisticated military equipment was left behind and fell into the hands of the Taliban.

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Who wrote that headline? It’s Dominion, in 16 states!

Voting Software Vulnerable In Some States (AP)

Electronic voting machines from a leading vendor used in at least 16 states have software vulnerabilities that leave them susceptible to hacking if unaddressed, the nation’s leading cybersecurity agency says in an advisory sent to state election officials. The U.S. Cybersecurity and Infrastructure Agency, or CISA, said there is no evidence the flaws in the Dominion Voting Systems’ equipment have been exploited to alter election results. The advisory is based on testing by a prominent computer scientist and expert witness in a long-running lawsuit that is unrelated to false allegations of a stolen election pushed by former President Donald Trump after his 2020 election loss. The advisory, obtained by The Associated Press in advance of its expected Friday release, details nine vulnerabilities and suggests protective measures to prevent or detect their exploitation.


Amid a swirl of misinformation and disinformation about elections, CISA seems to be trying to walk a line between not alarming the public and stressing the need for election officials to take action. CISA Executive Director Brandon Wales said in a statement that “states’ standard election security procedures would detect exploitation of these vulnerabilities and in many cases would prevent attempts entirely.” Yet the advisory seems to suggest states aren’t doing enough. It urges prompt mitigation measures, including both continued and enhanced “defensive measures to reduce the risk of exploitation of these vulnerabilities.” Those measures need to be applied ahead of every election, the advisory says, and it’s clear that’s not happening in all of the states that use the machines.

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That’s all?

Bill Barr Applauds Durham For Showing Truth On Clinton Campaign, FBI (JTN)

Former Attorney General Bill Barr defended special counsel John Durham after the acquittal of ex-Clinton Campaign attorney Michael Sussmann, saying the prosecutor was able to shed light on the Hillary Clinton campaign’s “dirty trick” with the disproven Trump-Russia scandal and the related problems at the FBI. “No, I’m very proud of John Durham, and I do take responsibility for his appointment, and I think he and his team did an exceptionally able job, both digging out very important facts and presenting a compelling case to the jury,” Barr told Fox News host Jesse Waters on Wednesday. After Sussmann was acquitted of lying to the FBI, the jury forewoman told reporters that the case was a waste of time. “I don’t think it should have been prosecuted,” she said, according to The Washington Times.


“There are bigger things that affect the nation than a possible lie to the FBI.” Durham told Waters that while Durham “did not succeed in getting a conviction from the D.C. jury, I think he accomplished something far more important, which is he brought out the truth in two important areas. “First, I think he crystalized the central role played by the Hillary campaign in launching, as a dirty trick, the whole Russiagate Collusion narrative and fanning the flames of it,” Barr explained. “And second, I think he exposed really dreadful behavior by the supervisors in the FBI… who knowingly used this information to start an investigation of [former President Donald] Trump and then duped their own agents by lying to them and refusing to tell them what the real source of that information was,” Barr said, adding, “And that was appalling.”

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“..not a single aspect of globalization has been spared from the fallout of new geopolitical conflicts..”

The Decline and Fall of Davos Man (PS)

“Davos Man” has had a grim 14 years. The late Harvard University political scientist Samuel P. Huntington popularized the term in 2004 to describe a new overclass of evangelists for globalization. Davos Man, he claimed, wanted to see national borders disappear and the logic of politics superseded by that of the market. But since the 2008 global financial crisis, politics has increasingly trumped economics, a trend that reached its apotheosis in 2016 with Donald Trump’s election in the United States and the Brexit referendum. Both events represented a backlash against Davos Man’s vision of a frictionless world governed (not run) as efficiently as possible by “multi-stakeholder processes.”

Moreover, at this year’s annual gathering in Davos, attendees had to confront an even bigger challenge than national politics: the return of geopolitics. The World Economic Forum’s theme was “History at a Turning Point,” in recognition of the fact that we have reached the end of the “end of history.” Although the WEF’s ethos is to promote cooperation in the pursuit of “one world,” the new agenda is necessarily focused on conflict and division. Russian President Vladimir Putin’s war of aggression on Ukraine obviously loomed large at this year’s meeting. To open the event, Ukrainian President Volodymyr Zelensky – appearing virtually in his now familiar military fatigues – spoke of a world split along the fault lines of fundamental values. And Russia House, the facility where Russian delegations hosted parties and networking events in years past, was transformed by Ukrainian activists and donors into the Russian War Crimes House, with an exhibition calling attention to Russian atrocities in Ukraine.

After browsing this year’s program, it soon became clear that not a single aspect of globalization has been spared from the fallout of new geopolitical conflicts – between Russia and the West, China and the West, China and its neighbors, and so forth. Instead of panels discussing free-trade agreements, there were multiple sessions on economic warfare. Political and business leaders grappled with the fact that we now live in a world where central-bank reserves can be confiscated, commercial banks can be summarily disconnected from the SWIFT international payments system, and private assets can potentially be seized to pay for a country’s reconstruction.

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Fertilization
https://twitter.com/i/status/1532366041115938816

 

 

Crazy dog
https://twitter.com/i/status/1385955664506150913

 

 

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Jan 292018
 
 January 29, 2018  Posted by at 11:10 am Finance Tagged with: , , , , , , , , , , ,  11 Responses »


Fratelli Alinari Delphi c1920

 

German Carmakers Take Another Hit With Diesel Testing on Monkeys, Humans (BBG)
The Risks Facing Global Stocks As Money Printing Comes To An End (BI)
Fire Sale By The Treasury Could Send Shock Waves Through Bond Market (CNBC)
The Donald’s Davos Delusions (David Stockman)
ECB’s Knot Says QE Must End ‘As Soon As Possible’ (BBG)
The ECB And The Euro Are The Only Glue Holding Parts Of Europe Together (CNBC)
Trump Administration Ponders Nationalizing 5G Mobile Network (CNBC)
Facebook Makes Privacy Push Ahead Of Strict EU Law (R.)
Hundreds Of Thousands Living In Squalid Rented Homes In England (G.)
UK Brexit Bill ‘Constitutionally Unacceptable’ – House of Lords (Ind.)
Australia Unveils Plan To Become One Of World’s Top 10 Arms Exporters (G.)
Greek Debt Relief Will Depend On Continued Reforms – Regling (K.)

 

 

They get together to set up a testing group, but carefully far enough removed from their structures to deny any responsibility. “We paid millions into it, but we have no idea what they do”. And they will escape any real punishment. TBTF. Testing carcinogenics on people. In the past 10 years.

German Carmakers Take Another Hit With Diesel Testing on Monkeys, Humans (BBG)

The reputation of Germany’s auto industry took a fresh hit from revelations it sponsored tests that exposed humans as well as monkeys to diesel exhaust fumes, which can cause respiratory illness and cancer. The study, supported by a little-known group founded by Volkswagen, Daimler and BMW in 2007, had 25 people breathe in diesel exhaust at a clinic used by the University of Aachen, Stuttgarter Zeitung reported Monday. The story, citing annual reports from the European Research Group on Environment and Health in the Transport Sector, or EUGT, which closed last year, followed a New York Times report earlier that the organization also conducted tests using monkeys. Germany’s auto industry, which is still reeling from Volkswagen’s diesel-cheating scandal where the company rigged emissions tests, distanced itself from the organization.

“We are appalled by the extent of the studies and their implementation,” Daimler said Monday in an emailed statement, adding it didn’t have any influence over the study and promised an investigation. “We condemn the experiments in the strongest terms.” The revelations are another bombshell undermining diesel’s image. The technology remains a key profit driver for German automakers, even as demand gradually slips in Europe, the main market for the diesel models. The reports also weaken the carmakers’ position in its efforts to counter criticism of the technology as cities mull bans and German politicians weigh more stringent upgrades to lower pollution levels. In an additional twist, the VW Beetle model used in the test with animals was among the vehicles rigged to cheat on emissions tests, the New York Times reported. Volkswagen apologized for the misconduct and lack of judgment of some individuals, calling the trials a mistake. VW on Monday again distanced itself from the activities of the group.

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That rumbling roar in the distance.

The Risks Facing Global Stocks As Money Printing Comes To An End (BI)

“Correlation does not imply causation” is a vital principle of statistics and numerical models which reminds us that just because two things correlate doesn’t mean one causes the other. For many investors, they’ll be hoping that the correlation shown in the chart below is not a sign for things to come for stock market returns. Because if this correlation holds, things could be about to get nasty. The chart, from Citi, shows the rolling annual change in central bank asset purchases overlaid against annual returns for the MSCI World Stock Market Index since the depths of the global financial crisis back in early 2009. Clearly, as asset purchase levels have changed, so too has the performance of global stocks, tending to rise when asset purchases increase and fall when asset purchases decline.

Until recently that is. As shown in the red circle on the chart, despite a recent deceleration in central bank purchases, stock market returns have actually increased recently, bucking the trend seen over much of the past nine years. “In a world where the global CB taper is well underway — and in any case largely announced — stocks are seemingly starting to decouple from the bearish implication of [the chart],” says Citi. “As we had hoped, in a strong cyclical backdrop, with earnings coming in strong, markets can focus on underlying fundamentals rather than the reduction in central bank accommodation.” Central bank asset purchases set to slow sharply over the next year, as seen in the dotted black line in the chart. If the relationship between asset purchases and stock market returns were to snap back into place, it suggests that stocks could fall by close to 50% over the next year or so. 50%!

To be clear, Citi isn’t saying that’s going to happen, but it is a reminder that we’re entering uncharted territory for financial markets. Ultra-easy monetary policy settings are slowly being reversed, and no one is really certain as to how it will all play out. Adding to the intrigue, it’s clear from this other chart from Citi that while stocks recently disconnected from central bank asset purchases, corporate credit markets have not, with spread compression in investment grade debt starting to reverse in line with lower asset purchases.

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Bond yields are already soaring. Does the Fed have any control left, or is this it?

Fire Sale By The Treasury Could Send Shock Waves Through Bond Market (CNBC)

Wells Fargo’s head of interest rate strategy is detecting a major trouble spot in the bond market. Michael Schumacher’s chief concern right now: Who’s going to buy all those extra Treasury notes? “They [people] are worried about Treasury issuance going up, up, up. You could see an increase in 2018 of 50% — maybe more versus last year. That’s got a lot of people very concerned, myself included,” he said recently on CNBC’s “Futures Now.” He anticipates the Treasury Department will likely announce within days a “pretty significant change” in the way it issues bonds. It comes just as the Fed is shrinking its balance sheet. With less demand coming from the Fed, a fire sale of sorts would increase supply and emerge as the major catalyst causing yields to jump.

“You could see a pretty significant sell-off not just in the 10-year, which people focus on quite a bit, but also on 30-year bonds. We’re very concerned about that,” Schumacher said. “Being the bond nerd that I am, I’d say the market wants to climb a wall of worry like it does in stocks.” Right now, 10-year Treasury yields are bouncing around 2.6% — up nearly 40 basis points during the past six months. Schumacher’s year-end forecast on the note is 2.95%. But he believes it’s not unreasonable to expect rates to push 3.25%. “Something around that level probably does get people pretty worked up. And, it’s such a contrast versus last year when bonds did very, very little,” he said. Yields for 30-year Treasurys, essentially flat for the past six months, appear to be waking up. They’re up about 17 basis points this year.

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Too much swamp to be drained.

The Donald’s Davos Delusions (David Stockman)

[..] above all else, the Donald has whiffed entirely on what is really killing the American economy. That is, the nation’s out-of-control central bank. Via its massive falsification of financial asset prices, the Fed has turned Wall Street into a gambling casino, the corporate C-suites into financial engineering joints and Washington into a profligate den of debt addicts. Likewise, its idiotic pursuit of more inflation (2%) through 100 straight months of ZIRP (or near zero interest rates) has savaged retirees and savers, enriched gamblers and leverage artists, eroded the purchasing power of stagnant worker paychecks and unleashed virulent speculation and malinvestment throughout the warp and woof of the financial system.

Of course, we did not really expect the Donald to take on the money printers – notwithstanding his campaign rhetoric about “one big, fat, ugly bubble”. After all, Trump has always claimed to be a “low interest man” and he did spend 40 years getting the worst financial education possible. To wit, he rode the Fed’s easy money fueled real estate bubble to a multi-billion net worth, or so he claims, and pronounced himself a business genius – mostly by virtue of piling cheap debt upon his properties and reaping the windfall gains. Stated differently, the Donald came to office wholly unacquainted with any notion of sound money and free market financial discipline. And now he has spent a year proving he is completely clueless as to why Flyover America has been shafted economically.

Rather than the top-to-bottom housecleaning that the Eccles Building desperately needed, Trump actually appointed a pedigreed Keynesian crony capitalist Washington lifer, Jerome Powell, to chair the Fed. Then and there, and whether he understood it or not (he didn’t), the Donald surrendered to the permanent rulers of the Imperial City. That’s because at the end of the day, it was the Fed’s serial financial bubbles and massive monetization of the public debt that has enabled Washington’s imperial hegemony abroad, welfare state largesse at home and the egregious inflation of financial asset prices for the rich and the bicoastal elites coupled to them.

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Knot is from Holland, an export-dependent country that suffers from a strong euro.

ECB’s Knot Says QE Must End ‘As Soon As Possible’ (BBG)

The European Central Bank has to end its quantitative easing as soon as possible, according to ECB Governing Council member Klaas Knot, who said there’s not a single reason anymore to continue with the program. “The program has done what could realistically be expected of it,” Knot, who also heads the Dutch Central Bank, said in an interview on the television talk show Buitenhof on Sunday. The ECB is inching closer to unwinding unprecedented stimulus. At their December meeting, officials held out the prospect of a change in policy language early in the year, and some governors have since expressed their favor for taking a first step in March. While President Mario Draghi said Thursday that confidence in a sustained pickup in inflation has increased, patience and persistence are still warranted as progress so far remains muted.

“The program is fixed until September,” Knot said, with Draghi’s reasoning being that the central bank doesn’t have to commit yet to what will happen after that month. “We don’t have to communicate yet that it will be over after September, but I think that’s where we’re headed.” He said there is enough proof to make that clear. [..] Knot said the lack of commitment to any communication by the ECB as to what might happen to the QE program beyond September could have a dampening affect on the euro. A 6% surge in the euro since mid-December is threatening to become a thorn in the economy’s side if it curbs exports and damps prices.

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And that’s definitely not enough.

The ECB And The Euro Are The Only Glue Holding Parts Of Europe Together (CNBC)

Many German political observers estimate that, under the best circumstances, their country is unlikely to have a new three-party coalition government before Easter — April 1. They realize that this might be an optimistic forecast given the fundamental differences separating those who want a status quo stability (two right-wing parties) and a radical change of “governing culture” (the left-wing Social Democratic Party of Germany). Expectations are so dire, and so low, that the unfolding political events in Germany could mean the end of stability in the entire EU. In spite of that, the euro was soaring last Thursday to $1.2537 during the press conference at the European Central Bank. That was the highest reading since the middle of December 2014. And that had little to do with the talking down of the dollar by a U.S. delegation having fun in the Alps.

As of last Friday, the euro was up 16% against the dollar and 5.4% in trade-weighted terms since the Trump administration came to power a year ago. That puzzling paradox of a strong currency in a politically disintegrating economic system owes mainly to the euro area’s improving cyclical growth dynamics, engineered by a supportive monetary policy, and to trading bets ignoring the convulsions of the European project. The project in question has been a difficult work-in-progress for the past 59 years, as the relentless French-German rivalry failed to define mutually acceptable terms for a fairy tale called the European economic and political union. The euro is a result of such a political struggle between the two nations: Fearful of an overwhelming power of a reunited Germany, France insisted on a monetary union to dilute the influence of its erstwhile arch-enemy across the Rhine.

Reluctantly, Germany accepted to part with the Deutsche mark while imposing a legal and institutional infrastructure that would make the euro a clone of it. And to make sure that happened, Germany dictated the rules for the ECB — a supra-national institution and the world’s only genuinely independent monetary authority. Born out of fear of German domination, the euro is, arguably, the only major achievement of a project that was supposed to make another French-German war an impossibility. Still, a war by other means did happen, and France, Italy, Spain, Portugal, Ireland and Greece – 54% of the euro area GDP – have only the ECB to thank for rescuing them from an assault of disastrous German-imposed austerity policies.

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When will we talk about making Facebook a public utility?

Trump Administration Ponders Nationalizing 5G Mobile Network (CNBC)

National security officials in the Trump administration are looking at options where the U.S. government could take over a part of the country’s mobile network as a way of guarding against China, news outlet Axios reported. Axios, citing sensitive documents it obtained, said there are two options up for consideration: First, the U.S. government could pay for and build a single, super-fast mobile network and could then rent access to national carriers. The move, according to Axios, could see an unprecedented nationalization of infrastructure that has historically been privately-owned. But, the news outlet reported, a source familiar with the matter said a newer version of the document is neutral about whether the government should build and own such a network.

The alternative, according to Axios, is that wireless providers in the U.S. build their own 5G networks that would compete with one another — an option the document said could be costly and more time-consuming, but would be less commercially disruptive to the industry. The reason for even considering nationalization of part of the system is that China “has achieved a dominant position in the manufacture and operation of network infrastructure” and it’s “the dominant malicious actor in the Information Domain,” the document said, according to Axios. Reuters reported that a senior administration official on Sunday said that the government wants to build a secure 5G network and it’ll have to work with the industry to figure out the best way to do it. “We want to build a network so the Chinese can’t listen to your calls,” the official told Reuters.

“We have to have a secure network that doesn’t allow bad actors to get in. We also have to ensure the Chinese don’t take over the market and put every non-5G network out of business.” The matter was being debated at a lower level, the official said to Reuters, adding that it would take between six to eight months before it reaches President Donald Trump for consideration. The fifth generation (hence the 5G name) of mobile networks aims to provide faster data speeds and more bandwidth to carry ever-growing levels of web traffic. Late last year, the first specification for 5G was completed, which was considered a huge step toward commercializing the technology. Market watchers have predicted the technology will have more than one billion users by 2023, with more than half based in China. U.S. carriers are already working on deploying 5G networks.

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Facebook gets nervous.

Facebook Makes Privacy Push Ahead Of Strict EU Law (R.)

Facebook said on Monday it was publishing its privacy principles for the first time and rolling out educational videos to help users control who has access to their information, as it prepares for the start of a tough new EU data protection law. The videos will show users how to manage the data that Facebook uses to show them ads, how to delete old posts, and what happens to the data when they delete their account, Erin Egan, chief privacy officer at Facebook, said in a blog post. Facebook, which has more than 2 billion users worldwide, said it had never before published the principles, which are its rules on how the company handles users’ information.

Monday’s announcements are a sign of its efforts to get ready before the European Union’s General Data Protection Regulation (GDPR) enters into force on May 25, marking the biggest overhaul of personal data privacy rules since the birth of the internet. Under GDPR, companies will be required to report data breaches within 72 hours, as well as to allow customers to export their data and delete it. Facebook’s privacy principles, which are separate from the user terms and conditions that are agreed when someone opens an account, range from giving users control of their privacy, to building privacy features into Facebook products from the outset, to users owning the information they share. “We recognize that people use Facebook to connect, but not everyone wants to share everything with everyone – including with us. It’s important that you have choices when it comes to how your data is used,” Egan wrote.

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No-one can be surprised by this anymore: “..Rats, mouldy walls, exposed electrical wiring, leaking roofs and broken locks ..” and “..holes in external walls, insect-infested beds, water pouring through ceilings and mould-covered kitchens ..”

Hundreds Of Thousands Living In Squalid Rented Homes In England (G.)

Rented housing so squalid it is likely to leave tenants requiring medical attention is being endured by hundreds of thousands of young adults in England, an analysis of government figures has revealed. Rats, mouldy walls, exposed electrical wiring, leaking roofs and broken locks are among problems blighting an estimated 338,000 homes rented by people under 35 that have been deemed so hazardous they are likely to cause harm. It is likely to mean that over half a million people are starting their adult lives in such conditions, amid a worsening housing shortage and rising rents, which are up 15% across the UK in the last seven years. Visits by the Guardian to properties where tenants are paying private landlords up to £1,100 a month have revealed holes in external walls, insect-infested beds, water pouring through ceilings and mould-covered kitchens.

A 30-year-old mother near Bristol said her home is so damp that her child’s cot rotted. A 34-year-old woman in Luton told of living with no heating and infestations of rats and cockroaches, while a 24-year-old mother from Kent said she lived in a damp flat with no heating and defective wiring for a year before it was condemned. “Young adults have very little option but to rent from a private landlord, so we should at least expect a decent home in return for what we pay,” said Dan Wilson Craw, director of the Generation Rent campaign group. “Relying on cash-strapped councils to enforce our rights means that too many of us are stuck with unsafe housing.” The extent of the impact on young people emerged as a cross-party bid to give tenants new powers to hit back against rogue landlords gathers strength.

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And the House of Commons passed the bill without noticing?!

UK Brexit Bill ‘Constitutionally Unacceptable’ – House of Lords (Ind.)

An influential group of peers have warned Theresa May’s flagship Brexit legislation is “constitutionally unacceptable” and will need to be substantially rewritten. The stark warning comes as peers in the upper chamber gear up to begin the lengthy process of debating the legislation – passed with a seal of approval from the Commons earlier this month. The EU (Withdrawal) Bill seeks to transpose all existing EU law onto the UK statue book in time for Britain formally leaving the bloc in March 2019. More than 180 members are already lined up to speak during the two-day debate accompanying the legislation’s second reading this Tuesday and Wednesday, and there are likely to be impassioned interventions from both prominent Leave and Remain voices.

But peers on the Lords Constitution Committee warn in a report to be released on Monday that, while the legislation is necessary to ensure legal continuity after Brexit, it has “fundamental flaws” in its current state. The committee claims that at present the bill risks “undermining the legal certainty it seeks to provide” and gives “overly broad” powers to government ministers. Baroness Taylor of Bolton, who chairs the committee, said: “We acknowledge the scale, challenge and unprecedented nature of the task of converting existing EU law into UK law, but as it stands this bill is constitutionally unacceptable. “In our two previous reports we highlighted the issues this raised and we are disappointed that the Government has not acted on a number of our recommendations.

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Words fail.

Australia Unveils Plan To Become One Of World’s Top 10 Arms Exporters (G.)

Australia is set to become one of the world’s largest arms exporters under a controversial Turnbull government plan. The prime minister, Malcolm Turnbull, has unveiled a new “defence export strategy” setting out the policy and strategy to make Australia one of the world’s top 10 weapons exporters within the next decade. Hailing it a job-creating plan for local manufacturers, the Coalition says Australia only sells about $1.5bn to $2.5bn in “defence exports” a year and it wants the value of those exports to increase significantly. It has identified a number of “priority markets”: the Middle East, the Indo-Pacific region, Europe, the United States, the United Kingdom, Canada and New Zealand. It will set up a new Defence Export Office to work hand in hand with Austrade and the Centre for Defence Industry Capability to coordinate the commonwealth’s whole-of-government export efforts and provide a focal point for more arms exports.

A $3.8bn Defence Export Facility, to be administered by the Export Finance and Insurance Corporation, will provide the finance local companies need to help them sell their defence equipment overseas. A new Australian Defence Export Advocate position, set up to support the Australian Defence Export Office, will provide industry with the constant high-level advocacy needed to promote Australian-made weapons overseas. “It is an ambitious, positive plan to boost Australian industry, increase investment, and create more jobs for Australian businesses,” Turnbull said. “A strong, exporting defence industry in Australia will provide greater certainty of investment, support high-end manufacturing jobs and support the capability of the Australian defence force.”

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Them’s fighting words. Greece needs debt relief no matter what. Blackmailing the country with it is amoral.

Greek Debt Relief Will Depend On Continued Reforms – Regling (K.)

If Greece wants to see its debt burden lightened further it must ensure that it enacts agreed-to reforms and be prepared for the supervision of its foreign creditors to continue, European Stability Mechanism (ESM) Managing Director Klaus Regling told Sunday’s Kathimerini in an interview in which he also stressed that markets would like to see the IMF join the country’s third bailout. “If Greece wants additional debt relief, which means for creditor countries to grant something extra, there is the legitimate question that creditor countries would want to make sure that agreed policies are implemented and that there is no backtracking, on promises in relation to the primary surplus for instance, on future tax policies and on privatizations, or on the reduction of non-performing loans,” Regling said.

He added that there would be no additional conditions for further debt relief but that reforms must be fully implemented, noting that greater “ownership” of the bailout program will help achieve this. “Ownership has improved,” he said, adding however that, “sometimes there are still signals that it’s not fully there the way we would like. For example, on privatizations there are different voices.” As for continued foreign supervision of Greece after its scheduled exit from the third bailout in August, Regling said this was “normal,” noting that there is “post-program surveillance” in other countries that borrowed from the ESM. He added that “markets are always happy if a country is under the surveillance of its creditors.”

As for the potential participation of the IMF in Greece’s third bailout, Regling said it was “one of the elements that could play a positive role to further strengthen the good impression that the markets have.” He added, however, that the markets will also “look for statements by the Greek government that show there is real ownership of the program.”

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Jul 042016
 
 July 4, 2016  Posted by at 8:23 am Finance Tagged with: , , , , , , , , ,  3 Responses »


Walker Evans “Sidewalk scene in Selma, Alabama.” 1935

China Bank Bailout Calls Go Mainstream (BBG)
Deutsche: Probability Of US Recession Surges To 60% (ZH)
Druckenmiller, Soros, Spitznagel, Gross Warn Of Crisis (VW)
Oil Rally Threatened as Gasoline Supply Surge Swamps US Demand (BBG)
Brexit Is a Lehman Moment for European Banks (BBG)
Angela Merkel ‘To Oust Juncker’ As Europe Splits Deepen Over Brexit (Tel.)
Germany’s Schäuble Urges Post-Brexit Push to Curb EU Commission (BBG)
French Economy Minister Macron Claims Euro-Clearing Business for Paris (BBG)
Where Have Those Nice Britons Gone? (G.)
Brexit Voters Are Not Thick, Not Racist: Just Poor (Spec.)
German Arms Exports Almost Doubled In 2015 (R.)
Kaczynski May Divert Polish Pension Cash to State Projects (BBG)
Europe Puts Greece On Ebay (G.)
How To Fix A Broken Auckland? Crash Home Prices By 40% (Grimes)

 

 

“Non-performing loans jumped by more than 40% in the 12 months ended March to 1.4 trillion yuan ($210 billion)..” “..CLSA estimating NPLs were probably closer to 11.4 trillion yuan at the end of last year..” That would be well over $2 trillion….

China Bank Bailout Calls Go Mainstream (BBG)

Predictions of a Chinese banking system bailout are going mainstream. What was once the fringe view of permabears and short sellers is now increasingly being adopted by economists at some of the world’s biggest banks and brokerages. Nine of 15 respondents in a Bloomberg survey at the end of last month, including Standard Chartered and Commonwealth Bank of Australia, predicted a government-funded recapitalization will take place within two years. Among those who provided estimates of the cost, a majority said it will exceed $500 billion. While a bailout of that size would be a far cry from the $10 trillion forecast of U.S. hedge fund manager Kyle Bass in February, the responses reflect widespread concern that Chinese lenders will struggle to cope as bad loans surge.

Even as some analysts said a state recapitalization would put the banking system on a stronger footing, 80% of respondents predicted news of a rescue would weigh on Chinese markets – dragging down bank stocks and the yuan while pushing up government borrowing costs and credit risk. “A recapitalization will happen after the Chinese government comes clean with the true nonperforming loan figure,” said Kevin Lai at Daiwa Capital Markets. “That will require a lot of money creation.” [..] Chinese lenders are grappling with a growing mountain of bad debt after flooding the financial system with cheap credit for years to prop up economic growth.

Non-performing loans jumped by more than 40% in the 12 months ended March to 1.4 trillion yuan ($210 billion), or 1.75% of the total, according to government data. The figures are widely believed to understate the true scale of the problem, with CLSA estimating NPLs were probably closer to 11.4 trillion yuan at the end of last year.

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Reading the yield curve.

Deutsche: Probability Of US Recession Surges To 60% (ZH)

Over the weekend, following the latest collapse in long-term yields to new all time lows, Deutsche Bank looked at what implied recession odds are if one once-again adjust for Fed intervention. What it found, in the words of Deutsche Bank’s Dominic Konstam, is “worrisome.” From Deutsche Bank:

Since the UK referendum the US yield curve has flattened to new post-crisis lows. The 3m10y spread is now 115 bps compared to 210 bps at the start of the year, and the 2y10y spread is just 85 bps versus 120 bps on January 1. This relentless flattening of the curve is worrisome. Given the historical tendency of a very flat or inverted yield curve to precede a US recession, the odds of the next economic downturn are rising. In our probit model, the probability of a recession within the next 12 months has jumped to 60%, the highest it’s been since August 2008.

The model adjusts the 3m10y spread by the historically low level of short rates and it suggests that on an adjusted basis the curve has already appeared to be inverted for some time. The yield curve had successfully signaled the last two recessions when the model output rose above 70%. If 10y yields rally to 1.00% and the 3m rate is unchanged, the implied recession probability from our model will reach that number. At current market levels, the market is just 40 bps from that distinct possibility.

In other words, while the Fed is terrified of killing the recovery by “tightening” financial conditions, all that will take for the next recession to arrive is for the Fed and its central bank peers to ease just that much more to send the long end 40 bps lower, something which as we reported yesterday may happen even sooner than expected, now that pension funds are ready to throw in the towel and start buying 10Y and 30Y Tsys with wreckless (sic) abandon.

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“One of the best indicators showing how healthy is the economy is the velocity of circulation of money.”

Druckenmiller, Soros, Spitznagel, Gross Warn Of Crisis (VW)

Brexit referendum pushed financial markets into turmoil. Even if this is only the beginning of tough times the main reason behind this is definitely not the result of the UK referendum. What we see today is merely a result of financial markets being disconnected from the real condition of the global economy. The red flags signalling overpriced markets (especially in the case of the US) now are raised not only from statistical data but also from experienced investors having a good forecasting record.

From the start, I would like to focus on aforementioned statistical data. They can give us clear picture of the US economy and what happened after previous crisis until now. The financial situation of the US is crucial because it is the American stock exchange that delivers 44% of the global capitalisation of financial markets. American financial sector is responsible for setting trends and today those trends are pointing south. Developing markets are falling right behind the trendsetter. One of the best indicators showing how healthy is the economy is the velocity of circulation of money. The better the economy, the more money people and other participants of the economy spend – this increases money circulation.

At first glance, you can see that after 2008-09 crisis situation worsened. During official ‘post-crisis recovery’ velocity was slightly above 1.7 while during the first quarter of 20016 it fell below 1.5 (for comparison – before the crisis it around 2.0). The above chart is not the only data point. Low money velocity means also less consumption – this is visible in higher inventory-to-sales ratio. Below you can see a record of it. Today this indicator is above the Lehman level. What is more, it soon can match the levels of the worst phase of the 2008 meltdown. This clearly shows how American society is getting poorer.

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Low prices, but falling demand.

Oil Rally Threatened as Gasoline Supply Surge Swamps US Demand (BBG)

American drivers’ seemingly insatiable thirst for gasoline is running into a flood of supply. Refineries across the nation are operating full-out and imports are pouring into the East Coast, boosting gasoline supplies to a record. At the same time, consumption has turned out to be less robust than thought. That’s weighed on prices, threatening to stem oil’s rebound from a 12-year low. “Earlier this year there was a lot of hope that gasoline would lead crude higher,” said John Kilduff, partner at Again Capital, a New York hedge fund focused on energy. “That’s not turned out to be the case and gasoline will soon be a weight on the market.”

The Energy Information Administration said in a monthly report on June 30 that demand in April was 9.21 million barrels a day, down from 9.49 million seen in weekly data. “The monthly data for April raises doubts about the idea that we have reliably robust gasoline demand to support the entire complex,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. Gasoline stockpiles along the East Coast, which includes New York Harbor, the delivery point for U.S. futures contracts, surged to a record 72.5 million barrels in week ended June 24, EIA data show. Imports to the region jumped to a six-year seasonal high. Production climbed to a record in the previous week, as refiners typically run harder in the second quarter to meet summer peak driving season.

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“When the biggest bank in Europe’s biggest economy, with annual revenue of about €37 billion, is worth about the same as Snapchat – a messaging app that generated just $59 million of revenue last year – you know something’s wrong.”

Italy’s efforts at aiding its banks risk leading to a big problem with Germany, but Brexit makes the latter hesitant. But it can’t give in, it would set a precedent the EU can’t handle. So is Italy the next Greece?

Brexit Is a Lehman Moment for European Banks (BBG)

European banks are undergoing a real-life stress test in the wake of Britain’s vote to leave the European Union. Their share prices were already down 20% this year; since the referendum result was announced, they’ve doubled that decline. If the rot isn’t stopped soon, Europe will have found a novel solution to the too-big-to-fail problem — by allowing its banks to shrink until they’re too small to be fit for purpose. The answer is found in the adage never let a good crisis go to waste. The current situation should be both a motivation and an excuse to do what Europe failed to do after the 2008 collapse of Lehman Brothers brought the financial world to its knees: fix its banking system. Here’s a snapshot of this year’s drop in value of some of the region’s biggest institutions:

Deutsche Bank, which once had pretensions to be Europe’s contender on the global investment banking stage, is now worth just €17 billion. When the biggest bank in Europe’s biggest economy, with annual revenue of about €37 billion, is worth about the same as Snapchat – a messaging app that generated just $59 million of revenue last year – you know something’s wrong. No wonder the billionaire investor George Soros was betting against Deutsche Bank shares this month. Greece has recapitalized its banks three times, to almost no effect. Piraeus Bank, for example, is worth less than €1.5 billion, down from €4 billion in December after the last cash injection, and as much as €40 billion just two years ago.

UniCredit, Italy’s biggest bank, has suffered particularly badly this year. It has a market capitalization of just €12 billion, dwarfed by its non-performing loans worth €51 billion. Italian banks as a whole have non-performing debts worth €198 billion, a total that’s been rising ever since the financial crisis and is illustrative of Europe’s failure to tackle its banking problems. Add in so-called “sofferenze,” Italian for doubtful loans, and the total value of Italian debt at risk of non-payment rises to about €360 billion. That explains why Italy has seized upon Brexit to justify trying to shovel €40 billion of state aid into its banking system, much to the annoyance of Germany, which views the move as contravening rules on state aid.

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The end of the ever closer union.

Angela Merkel ‘To Oust Juncker’ As Europe Splits Deepen Over Brexit (Tel.)

Angela Merkel could move to oust Europe’s federalist chief Jean-Claude Juncker ‘within the next year’, a Germany government minister has said, in a sign of deepening European divisions over how to respond to Britain’s Brexit vote. The German chancellor’s frustration with the European Commission chief came as Europe split over whether to use the Brexit negotiations as a trigger to deepen European integration or take a more pragmatic approach to Britain as it heads for the exit door. “The pressure on him [Juncker] to resign will only become greater and Chancellor Merkel will eventually have to deal with this next year,” an unnamed German minister told The Sunday Times, adding that Berlin had been furious with Mr Juncker “gloating” over the UK referendum result.

Mr Juncker’s constant and unabashed calls for “more Europe”, as well as his reported drinking problem has led to several of Europe other dissenting members – including Poland, Hungary and the Czech Republic – to lay some of the blame for Brexit at his door. Since the June 23 vote both the Czech and Polish foreign ministers have called publicly for Mr Juncker to resign – moves that one senior EU official dismissed last week as “predictable”. However, the rumblings from Berlin now represent a much more serious threat to Mr Juncker’s tenure. The split also offers a glimmer of hope for British negotiators who are preparing for fractious EU-UK divorce talks and are desperate to avoid a repeat of February’s failed negotiations which – controlled as they were by Mr Juncker and the Commission – left David Cameron without enough ‘wins’ to avoid Brexit.

“Everyone is determined that this negotiation is handled in the European Council – i.e. between the 27 heads of government – and not by the Commission, the eurocrats and the EU ‘theologians’ in Brussels,” a senior UK source told The Telegraph. In a signal that battle has partly already been won, Mrs Merkel pointedly met with French and Italian leaders in Berlin last week, excluding Mr Juncker from the conversation. The Commission has also declined to fight the Council for the role of “chief negotiator”. British strategists hope that creating a much broader negotiation that includes the UK’s role in keeping Europe geopolitically relevant through its deep Nato ties, defence contributions and links to Washington, they can avoid a narrow tit-for-tat negotiation on trade where the UK has only very limited leverage.

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The problem with the end of the ever closer union is who will then decide. And that can only be Germany. The quintessential EU conundrum is unsolvable.

Germany’s Schäuble Urges Post-Brexit Push to Curb EU Commission (BBG)

Finance Minister Wolfgang Schaeuble signaled that Germany wants national governments to set the pace for future cooperation within the European Union, saying in a newspaper interview that they should sidestep the European Commission in Brussels if needed. Schaeuble’s comments to Welt am Sonntag outline the emerging response by Chancellor Angela Merkel’s government to the U.K. referendum on June 23 to leave the EU. It signals a looming clash with advocates of EU integration such as European Commission President Jean-Claude Juncker. EU countries must seek to reach agreements even if not all of the 27 non-U.K. members want to participate and should circumvent the commission, the EU’s executive arm, if it isn’t willing to cooperate, the newspaper quoted Schaeuble as saying.

“Now is the time for pragmatism,” Schaeuble told the newspaper. “If not all 27 want to pull together from the beginning, then we’ll just start with a few. If the Commission isn’t along, then we’ll take matters into our own hands and solve problems between governments.” Schaeuble expressed frustration that EU officials in Brussels took too long to respond to the refugee crisis last year. Many people’s dissatisfaction with the EU is because rules weren’t respected, including by the European Commission in its response to the sovereign-debt crisis, he was quoted as saying. The U.K. and the EU have a shared interest in starting exit talks quickly to limit the fallout and because “market pressure” may rise the longer it takes, Schaeuble told the newspaper.

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Another sociopath striving for power.

French Economy Minister Macron Claims Euro-Clearing Business for Paris (BBG)

Scruples be damned. The dust has barely settled on the June 23 British vote to take the U.K. out of the European Union, and the French Economy Minister Emmanuel Macron is claiming the euro-clearing business for Paris. Speaking Sunday in a Bloomberg interview, Macron laid out why the French capital is a contender for the business as other euro-area cities from Frankfurt to Dublin gear up for a battle for transactions currently done in London, Europe’s largest financial center. German officials have said Paris is dreaming if it thinks it can beat out Frankfurt, the home of the ECB and Deutsche Boerse’s Eurex operations. “On clearing, we will have a full discussion on a series of issues,” the 38-year-old French minister said.

“We have many more players now in Paris than in Frankfurt, and a much deeper market place.” London’s role in clearing trades in the $493 trillion derivatives market has returned as an issue since Britain voted to exit the 28-nation bloc. EU courts blocked a previous ECB effort to bring clearing under its regulatory control by shifting it to a euro-area country. But that was before the Brexit vote. While echoing President Francois Hollande’s insistence last week that euro-clearing won’t remain in London, Macron went further, saying that Paris may be the best place to move the process.

ECB Executive Board member Benoit Coeure warned his French compatriots to cool down on the prospect, insisting that London’s status as the biggest executor of euro financial transactions will depend on the kind of separation agreement the U.K. negotiates with the remaining 27 countries in the EU. “It is premature to have this type of discussion,” he said in Aix-en-Provence Saturday. “Everything will depend on the legal framework. This landscape, will it change? It depends on the relationship between the U.K. and the single market. Right now, we have no idea.” Separately, Macron also said he doesn’t rule out running for president next year, even though he insisted it was too early to declare.

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Hi hi. “The rest of the EU wanted to be able to restrain eastern Europeans for another seven years. Most of us did. You kept true to your word and did not.”

Where Have Those Nice Britons Gone? (G.)

Who are you and what have you done with those Britons I used to know and like so much? Have you no idea how disruptive uncertainty is for our countries, for business? Forgive me, of course you do – it’s you British who taught us that. The single market, for heaven’s sake, the EU’s largest and most formidably lucrative business venture, was very much down to you. It was your Lord Cockfield who worked out a plan, and if your then prime minister Margaret Thatcher had not used all her force to push it through in the face of reluctant protectionists on the continent, it might never had happened. Trade is your thing, after all and here it was: full freedom of movement for capital, goods, services and people. Yes, for people, including for eastern Europeans, not long after the Berlin Wall came down.

That happened because you British insisted on uniting the whole of Europe, the sooner, the better, while the French, the Italians and others all held back for as long as they could. They were so worried that the eastern European workers would come storming in their millions to the west, taking our jobs, pushing our wages down. But you insisted. Openness, inclusiveness, freedom – we have come to associate that with you. And you have, or had, such a way with words. You’re so gifted at persuasion, winning us over with your thoroughly prepared and elegant arguments. In the end, all agreed to do the enlargement your way. Except for the instant freedom of movement for all. The rest of the EU wanted to be able to restrain eastern Europeans for another seven years. Most of us did. You kept true to your word and did not.

You also have such a way with people. Your politicians are well schooled in parliament, aspiring to hold their own in any heated debate with their opponents. For decades, you have applied the brakes in the EU and watered down proposals to suit you. (Thanks by the way. You have never been an easy partner but the less-than-perfect compromise that is the EU has been improved by your hard work in Brussels.) And your Foreign Office comes better prepared than anyone else with numbers and facts, closely following what is going on in other countries, and sometimes managing diplomatic acrobatics that stun others into a deal. How on earth did Thatcher talk the others into giving one of the richest countries billions of pounds’ worth of a rebate to its EU fee? Permanently!

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Amen.

Brexit Voters Are Not Thick, Not Racist: Just Poor (Spec.)

The most striking thing about Britain’s break with the EU is this: it’s the poor wot done it. Council-estate dwellers, Sun readers, people who didn’t get good GCSE results (which is primarily an indicator of class, not stupidity): they rose up, they tramped to the polling station, and they said no to the EU. It was like a second peasants’ revolt, though no pitchforks this time. The statistics are extraordinary. The well-to-do voted Remain, the down-at-heel demanded to Leave. The Brexiteer/Remainer divide splits almost perfectly, and beautifully, along class lines. Of local authorities that have a high number of manufacturing jobs, a whopping 86% voted Leave. Of those bits of Britain with low manufacturing, only 42% did so.

Of local authorities with average house prices of less than £282,000, 79% voted Leave; where house prices are above that figure, just 28% did so. Of the 240 local authorities that have low education levels — i.e. more than a quarter of adults do not have five A to Cs at GCSE — 83% voted Leave. Then there’s pay, the basic gauge of one’s place in the pecking order: 77% of local authorities in which lots of people earn a low wage (of less than £23,000) voted Leave, compared with only 35% of areas with decent pay packets. It’s this stark: if you do physical labour, live in a modest home and have never darkened the door of a university, you’re far more likely to have said ‘screw you’ to the EU than the bloke in the leafier neighbouring borough who has a nicer existence.

Of course there are discrepancies. The 16 local authorities in Scotland that have high manufacturing levels voted Remain rather than Leave. But for the most part, class was the deciding factor in the vote. This, for me, is the most breathtaking fact: of the 50 areas of Britain that have the highest number of people in social classes D and E – semi-skilled and unskilled workers and unemployed people – only 3 voted Remain. Three. That means 47 very poor areas, in unison, said no to the thing the establishment insisted they should say yes to. Let’s make no bones about this: Britain’s poor and workless have risen up. And in doing so they didn’t just give the EU and its British backers the bloodiest of bloody noses. They also brought crashing down the Blairite myth of a post-class, Third Way Blighty, where the old ideological divide between rich and poor did not exist, since we were all supposed to be ‘stakeholders’ in society.

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Amoral.

German Arms Exports Almost Doubled In 2015 (R.)

German arms exports almost doubled last year to their highest level since the beginning of this century, a German newspaper said on Sunday, citing a report from the Economy Ministry that is due to be presented to the cabinet on Wednesday. Newspaper Welt am Sonntag said the value of individual approvals granted for exporting arms was €7.86 billion last year compared with €3.97 billion worth of arms exports in 2014. It said the Economy Ministry had pointed to special factors that boosted arms exports such as the approval of four tanker aircraft for Britain worth €1.1 billion.

It also pointed to the approval of battle tanks and tank howitzers along with munitions and accompanying vehicles worth €1.6 billion for Qatar – a controversial deal that the report said was approved in 2013 by the previous government. In February German Economy Minister Sigmar Gabriel said preliminary figures showed that Germany had given approval for around €7.5 billion worth of arms shipments in 2015. The Federal Office for Economics and Export Control (Bafa), a subsidiary of the economy ministry, is responsible for licensing arms export deals and Gabriel had promised to take a much more cautious approach to licensing arms exports, especially with regard to the Middle East. Germany is one of the world’s main arms exporters to EU and NATO countries and has been cutting its sales of light weapons outside those states.

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This happens everywhere: pensions being moved into risky and/or politically driven ‘assets’. That will be the end of pensions.

Kaczynski May Divert Polish Pension Cash to State Projects (BBG)

Poland is considering diverting funds from the country’s $35 billion pension industry and piling them into government-backed projects, ruling party leader Jaroslaw Kaczynski said. Poland’s privately run pension funds, set up in 1999 to provide long-term financing for the nation’s companies and make Warsaw into a regional capital hub, own a fifth of the shares traded on the Warsaw stock exchange. The proposed shift of money from the funds could help the eight-month-old government fulfill its election promises, including higher social benefits, cheap housing as well as state-backed investments into industries ranging from ship building to the production of coal and electric buses.

“We must think what to do with the money in the pension funds, there are already proposals,” Kaczynski, who was reappointed as head of the Law & Justice party on Saturday, said at the party’s congress. “That money is now losing its value,” while it could be the “basis for new, important investments, that will help build strong economic policy and support millions of Polish households.” Kaczynski said his party seeks to implement a new “economic order,” one based on redistributing wealth and rejection of free-market reforms. The Law & Justice government imposed the European Union’s highest levies on banks, rolled out unprecedented child benefits and is in a stand-off with the EU over democratic standards, which triggered the country’s first-ever credit rating downgrade and spooked investors.

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From May 30. Just loved the Simpsons’ image.

Europe Puts Greece On Ebay (G.)

In Greece today, government power comes with few trappings. Unable to tap capital markets and dependent wholly on international aid, the debt-stricken country’s senior officials are acrobats in a tightrope act. They are placating creditors, whose demands at times seem insatiable, and citizens, whose shock is never far away. Few know this better than Stergios Pitsiorlas, the head of Greece’s privatisation agency. The agency’s asset portfolio – readily available online – goes some way to explaining why. A catalogue of beaches, islands, boutique hotels, golf courses, Olympic venues and historic properties in Plaka on the slopes beneath the ancient Acropolis, it could be a shopping list for the scenery in a movie – rather than a list of possessions that Athens is under immense pressure to offload.

In the coming months, the list will grow as the contours of a “super fund” – established to expedite the sale of ailing utilities and state-owned properties – take shape. The fund, the product of last week’s agreement to disburse an extra €10.3bn (£7bn) in bailout loans in return for further reforms, takes the divestment of state holdings to new heights. More than 71,000 pieces of public property will be transferred to the umbrella entity in what will amount to the biggest privatisation programme on the continent of Europe in modern times. Seven years into Greece’s seemingly unstoppable financial crisis, lenders are not taking any chances. The EU and IMF, which to date have poured more than €250bn into Greece in the form of three bailouts, have demanded that the organisation operates for 99 years.

Greeks have reacted with anger and derision, viewing the fund as the lowest point in the country’s epic struggle to remain anchored to the eurozone. For many, it is the ultimate depredation, another dent to their dignity at a time of unprecedented unemployment, poverty and suffering. If this is the way, they say, then only the Acropolis will retain a patina of Greekness about it. “There is nothing we are not giving up,” splutters Maria Ethymiou, a small business owner encapsulating the mood. “The Germans are going to take everything. I hear that even beaches are up for sale. Is this the Europe that we want? Is this the united Europe of our dreams?”

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Absolutely right and horribly mistaken at the same time. Arthur Grimes is former chief economist of the Reserve Bank.

How To Fix A Broken Auckland? Crash Home Prices By 40% (Grimes)

In March 2016, the REINZ Auckland median house price reached $820,000. Four years previously, it was $495,000 – that’s a 66% increase in 4 years. What’s more alarming is that in 2012, many people considered that house prices were already getting of reach for most people. That was particularly the case for young people and low income earners. That extraordinary increase – coupled with the already high level in 2012 – was behind my call to a recent Auckland Conversations event that policy-makers should strive to cause a 40% collapse in house prices to bring the median back to around $500,000.

My call for policies to drive a house price collapse is driven by my personal value judgement that it’s great for young families and families on lower incomes, to be able to afford to buy a house if they wish to do so. My concern is not for older, richer families, couples or individuals who already own their own (highly appreciated) house. Others may have a different value judgement to mine – but rarely do they make such a judgement explicit. Or, they may argue that such a collapse would cause financial instability given banks’ loans to mortgage-holders. Luckily, New Zealand’s banks are well-capitalised and stress tests have shown that they can survive a large fall in house prices – mostly because the bulk of their loans pertain to older mortgages with plenty of equity behind them.

For those who share my wish to bring house prices back to a level at which ordinary people can afford, what is to be done? One possibility is to try and stem the demand. Many Aucklanders seem to want their city to remain something like a rural town. In world terms, however, Auckland is a smallish city; while in Australasian terms, it is a mid-sized city sitting between Adelaide and Perth in size, and well behind the big three (Sydney, Melbourne, Brisbane). If New Zealand is to have one city of moderate size where head offices, R&D facilities and other wealth-generating activities reside, Auckland needs to be that city. To curb its growth is tantamount to saying that development should take place in Australia, not here. I favour Auckland being competitive in attracting high-value activities at least within the Australasian context. So I am not in favour of curbing Auckland’s growth.

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Feb 222016
 
 February 22, 2016  Posted by at 9:54 am Finance Tagged with: , , , , , , , ,  4 Responses »


NPC People’s Drug Store, 11th & G streets, Washington DC 1920

NYSE Short Interest Nears Record – And We Know What Happened Last Time (ZH)
EU Chamber Urges China To Cut Excess Production (WSJ)
Biggest Banks’ Commodity Revenue Slid to Lowest in Over a Decade (BBG)
The Metals Crunch Is Forcing Miners To Reconsider Diversification (Economist)
The World’s Biggest Miner May Be About to Toast Its Oil Drillers (BBG)
New Market Storm Could Catch Eurozone Unprepared (Reuters)
Traders Would Rather Get Nothing in Bonds Than Buy Europe Stocks (BBG)
German Economy Takes a Blow From Weakening Global Demand (BBG)
Germany Isn’t Investing the Way It Used to and That’s a Problem (BBG)
China Yuan Bears Predict More Trouble Ahead (BBG)
Kyle Bass, A Sharpshooting Short-Seller (FT)
As US Shale Sinks, Pipeline Fight Sends Woes Downstream (Reuters)
Chinese Military Ambitions Fuel Asian Arms Race Amid Slowdown (WSJ)
Krugman and the Gang of 4 Need to Apologize (Bill Black)
Greek Attempt To Force Use Of Electronic Money Instead Of Cash Fails (ZH)
New Zealand Super Fund’s $200 Million Loss (NZ Herald)
Long Way To Go: 5th Anniversary of the Christchurch Earthquake (G.)
Macedonia, Serbia Close Borders To Afghan Refugees (AP)
Shadowing The Hellenic Coast Guard’s Refugee Rescues (CCTV)

We’re getting closer.

NYSE Short Interest Nears Record – And We Know What Happened Last Time (ZH)

In the last two months, NYSE Short Interest has risen 4.5%, back over 18 billion shares near the historical record highs of July 2008 (and up 7 of the last 9 months).

There are two very different perspectives on could take when looking at this data… Either a central bank intervenes, or a massive forced buy-in event occurs, and unleashes the mother of all short squeezes, sending the S&P500 to new all time highs, or .. Just as the record short interest in July 2008 correctly predicted the biggest financial crisis in history and all those shorts covered at a huge profit, so another historic market collapse is just around the corner. The correct answer will be revealed in the coming weeks or months… but we know what happened last time…

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Ask nicely. Prety pretty please. Look, China doesn’t want millions of unemployed workers. They’ll want to smear this out over years.

EU Chamber Urges China To Cut Excess Production (WSJ)

The European Union Chamber of Commerce in China urged Beijing to do more to tackle excess industrial production, saying that failed attempts to do so have created a flood of excess goods that threatens to destabilize the global economy. The call comes as Chinese manufacturers, hit by an economic slowdown, are sending products–from tires and steel to solar panels and chemicals–overseas that they can’t sell at home. The EU Chamber, which represents more than 1,600 members across China, said Monday that excess production is plaguing industrial sectors, such as steel, cement and chemicals, but is also spilling over into the consumer economy, including consumer electronics, pharmaceuticals and even food and apparel.

The usage rate for China’s steel in 2014 dropped to 71% from 80% in 2008, the EU Chamber estimated, based on China’s official data. Production increased to 813 million metric tons from 513 million tons during that time, the industry group said. Representatives from Europe’s steel industry, reeling from competition from cheap Chinese steel, last week took to the streets in Brussels to protest alleged unfair trade practices that they claim will worsen if the EU grants market-economy status to China later this year. Such a move would make it more difficult for Europe to impose steep tariffs on Chinese goods. London-based Caparo initiated bankruptcy proceedings in October for 16 of its 20 steel businesses, which employed 1,700 people. Tata Steel of India blamed overproduction in China when it said in January that it would cut 1,050 jobs from its U.K. operations, adding to cuts announced in October.

In a briefing Monday, the EU Chamber, which released a study on China’s industrial overcapacity, said China must act immediately to restructure its economy and overhaul state-owned companies that are pumping out excess goods. It must reduce negative impacts in China, such as job losses and bad debt, and fend off a crisis that could reverberate globally, the chamber said. Chinese leaders have prioritized party reform and anticorruption, but it is time to shift that focus to the economy, said Jörg Wuttke, president of the European Chamber. “The time spent on economic reforms is way down on the priority list.” said Mr. Wuttke.” We believe they have to act now, not wait.”

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Are they betting against their own clients yet?

Biggest Banks’ Commodity Revenue Slid to Lowest in Over a Decade (BBG)

Revenue from commodities at the largest investment banks sank to the weakest in more than a decade last year, laid low by a rout in prices for everything from metals to gas. Income at Goldman Sachs, Morgan Stanley and the 10 other top banks slid by a combined 18% to $4.6 billion, according to analytics firm Coalition. That was the worst performance since the London-based company began tracking the data 11 years ago, and a slump of about two-thirds from the banks’ moneymaking peak in 2008. Revenues are unlikely to return to the heights of $14.1 billion seen at the top of the market, according to George Kuznetsov at Coalition. “The competitive landscape is very different,” Kuznetsov said by phone.

“Financial institutions are now much more regulated. We have significantly less involvement of the banks in the physical commodities market, and banks do not take as much risk as they used to in 2008-09.” The Bloomberg Commodity Index, a measure of investor returns from 22 raw materials, slumped the most in seven years in 2015, led by a plunge in energy and metals. Banks including JPMorgan, Deutsche Bank and Barclays have also been scaling back commodities activity in the past three years amid rising regulatory scrutiny. Even as oil revenues improved last year on increased activity by corporate clients, U.S. curbs on proprietary trading meant banks couldn’t fully take advantage of a 35% plunge in crude by making speculative bets, unlike trading houses and big oil companies.

Last year was one of the best years of all time for trading oil and gas, BP Chief Financial Officer Brian Gilvary said this month. Trafigura’s oil-trading earnings surged to a record last fiscal year. A gauge of industrial-metals prices fell by 24% last year, the most since 2008. Income from energy markets also returned to normal levels after gains in 2014, according to Coalition. “A normalization of the U.S. power and gas markets and weakness in metals and investor products drove the overall decline,” the company said in a report released on Monday. Declining commodities revenues helped bring down the performance for banks’ overall fixed-income divisions, according to Coalition. The analytics company tracks commodities activities including power and gas, oil, metals, coal and agriculture.

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BHP Billiton looks to be in danger.

The Metals Crunch Is Forcing Miners To Reconsider Diversification (Economist)

At the pinnacle of the mining industry sit two Anglo-Australian companies, BHP Billiton and Rio Tinto, which are to iron ore what Saudi Arabia is to oil: the ones who call the shots. Their mines in Pilbara, Western Australia, are vast cash cows; with all-in costs below $30 a tonne, they still generate substantial profits even though prices have slumped from $192 a tonne in 2011 to about $44. They have increased iron-ore production despite slowing demand from China, driving higher-cost producers to the wall—an echo of the Saudis’ strategy in the oil market. But whereas Rio Tinto has doubled down on iron ore, BHP also invested in oil and gas—in which it has nothing like the same heft—at the height of the shale boom. Their differing strategies are a good test of the merits of diversification.

The China-led commodities supercycle encouraged mission creep. Many companies looked for more ways to play the China boom, and rising prices of all raw materials gave them an excuse to cling on to even those projects that were high-cost and low-quality. Now the industry is plagued with debts and oversupply. On February 16th Anglo American, a South African firm that was once the dominant force in mining, said it would sell $3 billion of assets to help pay down debt, eventually exiting the coal and iron-ore businesses that it had spent a fortune developing. That would leave it with a core business of just copper, diamonds and platinum. The day before, Freeport-McMoRan, the world’s largest listed copper producer, was forced to sell a $1 billion stake in an Arizonan copper mine to Sumitomo of Japan, to help cut debts racked up when it expanded into oil and gas.

With Carl Icahn, an American activist investor, agitating for a shake-up, analysts say its energy assets could follow—if there are any buyers. When BHP reports half-yearly results on February 23rd its misadventure in American oil and gas will be of particular concern because it has put the world’s biggest mining firm in the shadow of Rio for the first time. Since BHP merged with Billiton in 2001, its share price has outperformed Rio’s; it made an unsuccessful bid to merge with its rival in 2007. Yet in the past year its shares have done worse. Analysts expect that next week it will cut its annual dividend for the first time since 2001, thereby breaking a promise to raise the dividend year by year. Though Rio ended a similar “progressive dividend” policy this month, it did not cut the 2015 payout.

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And this is its last desperate call.

The World’s Biggest Miner May Be About to Toast Its Oil Drillers (BBG)

BHP Billiton’s shares began tracking oil prices more closely last year as they headed into the worst energy market downturn in a generation. It may not seem like it, but that could be good news for the world’s biggest miner. Unlike its rivals, BHP has a substantial petroleum unit, valued at about $25 billion by UBS. So while iron ore and most base metal prices are forecast to languish over the remainder of the decade as growth in China slows, the Melbourne-based company’s stock stands to benefit from a projected rebound in crude oil. BHP needs an edge. Its Sydney-traded shares sunk last month to the lowest since 2005 and it’s forecast to report a 86% drop in first-half earnings on Tuesday. On top of that, the producer’s ultimate liability for the deadly Samarco dam burst in Brazil late last year remains uncertain and it’s been warned by Standard & Poor’s that it may face a second credit rating downgrade this year.

An oil rebound could deliver a reboot with Schroders saying this month prices may rally almost two-thirds to as high as $50 a barrel in a few months. BHP has flagged it’s on the lookout for petroleum assets, and is likely to study adding more conventional assets, particularly in the Gulf of Mexico, if distressed competitors are forced to sell, according to Aberdeen Asset Management. BHP “follows oil a lot more closely than iron ore these days,” Michelle Lopez, a Sydney-based investment manager at Aberdeen, which holds BHP shares among the $428 billion of assets it manages globally, said by phone. “When you look at the forward curve, iron ore still looks like it’s going to be at these levels if not a bit lower, whereas there are expectations of a correction in the oil price.”

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Some people are still talking about a recovery. Get real.

New Market Storm Could Catch Eurozone Unprepared (Reuters)

Distracted by an unresolved migration crisis and negotiations on keeping Britain in the EU, euro zone leaders could be caught unprepared by a new storm on financial markets. Global market turmoil since the start of the year has helped set warning lights flashing in euro zone sovereign bond markets. In early February, the premium that investors charge to hold Portuguese, Spanish and Italian government debt rather than German bonds hit some of the highest levels since the euro zone crisis that peaked in 2011-2012. European bank shares have been badly hit by concerns over their high stock of non-performing loans, new regulatory burdens and a squeeze on profits due to sub-zero official interest rates. New EU banking regulations that force shareholders and bondholders to take first losses if a bank needs rescuing are further spooking the market, notably in Italy.

All this comes at a time when public resistance to further austerity measures has surged all over southern Europe, producing unstable results at the ballot box. Furthermore, the storm clouds are gathering above a tenuous and slow euro zone economic recovery – growth is officially forecast to reach 1.9% this year versus around 1.6% in 2015. Southern periphery countries all face budget problems that are fuelling political tension with Brussels. Inflation is also refusing to perk up despite the ECB’s bond-buying programme and negative interest rates, making it harder for heavily indebted euro zone countries to pay down debt. Yet euro zone governments transfixed by differences over sharing out refugees, managing Europe’s porous borders and accommodating British demands for concessions on EU membership terms have a huge amount on their hands already. One French government adviser said the EU had never faced such an accumulation of crises in the last 50 years.

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Yeah, sure: “We’re still looking for some confirmations for the economic growth outlook.”

Traders Would Rather Get Nothing in Bonds Than Buy Europe Stocks (BBG)

The cash reward for owning European stocks is about seven times larger than for bonds. Investors are ditching the equities anyway. Even with the Euro Stoxx 50 Index posting its biggest weekly rally since October, managers pulled $4.2 billion from European stock funds in the period ended Feb. 17, the most in more than a year, according to a Bank of America note citing EPFR Global. The withdrawals are coming even as corporate dividends exceed yields on fixed-income assets by the most ever. Investors who leaped into stocks during a similar bond-stock valuation gap just four months ago aren’t eager to do it again: an autumn equity rally quickly evaporated come December.

A Bank of America fund-manager survey this month showed cash allocations rose to a 14-year high and expectations for global growth are the worst since 2011. If anything, the valuation discrepancy between stocks and bonds is likely to get wider, said Simon Wiersma of ING. “The gap between bond and dividend yields will continue expanding,” said Wiersma, an investment manager in Amsterdam. “Investors fear economic growth figures. We’re still looking for some confirmations for the economic growth outlook.” Dividend estimates for sectors like energy and utilities may still be too high for 2016, Wiersma says. Electricite de France and Centrica lowered their payouts last week, and Germany’s RWE suspended its for the first time in at least half a century.

Traders are betting on cuts at oil producer Repsol, which offers Spain’s highest dividend yield. With President Mario Draghi signaling in January that more ECB stimulus may be on its way, traders have been flocking to the debt market. The average yield for securities on the Bloomberg Eurozone Sovereign Bond Index fell to about 0.6%, and more than $2.2 trillion – or one-third of the bonds – offer negative yields. Shorter-maturity debt for nations including Germany, France, Spain and Belgium have touched record, sub-zero levels this month.

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And Germany makes sure to transfer that blow to the rest of the eurozone.

German Economy Takes a Blow From Weakening Global Demand (BBG)

The German economy took a hit this month from weak global demand, with a manufacturing gauge dropping to a 15-month low. Markit Economics said its factory Purchasing Managers Index fell to 50.2, barely above the key 50 level, from 52.3 in January. A services gauge improved slightly, but a composite measure declined to the lowest since July. “The German economy appears to be in the midst of a slowdown,” said Oliver Kolodseike, an economist at Markit. Manufacturing is “near stagnation,” he said. While Germany weathered global headwinds through 2015, maintaining its pace of expansion in the fourth quarter, business confidence has weakened recently.

China’s slowdown is weighing on exports while the equity selloff this year threatens a fragile recovery in the euro area, the country’s largest trading partner. The OECD cut its global growth forecast last week and said both Germany and the euro region will expand less this year than previously estimated. Markit said the slowdown in German output led to increased caution on hiring, with the rate of job creation at the weakest in almost a year. France’s composite Purchasing Managers Index slipped to 49.8 from 50.2 in January. In the 19-nation euro area, both the factory and services measures probably declined this month, according to surveys of economists. Markit will publish those numbers at 9 a.m. London time.

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Germany’s surpluses keep on bleeding its neighbors dry. That is the problem.

Germany Isn’t Investing the Way It Used to and That’s a Problem (BBG)

All the pieces appear to be in place for a surge in corporate investment in Germany – except one critical element. While low borrowing costs, robust domestic consumption and capacity strains mean companies should be itching to spend, the confidence to do so is lacking. Market turmoil, signs of a weaker global demand and Germany’s own aging population are giving bosses plenty of reason to hold back, leaving capital spending as a share of output clinging stubbornly to a five-year low. That matters both for Germany, where the IMF says more capital spending is needed to ensure future growth, and the 19-nation euro area. The strength of the region’s largest economy could be key to whether the currency bloc’s fragile recovery can be sustained.

“Every year since 2013, most pundits including ourselves have been predicting that this is going to be the year that investment really picks up in earnest,” said Timo Klein, an economist at IHS Global Insight in Frankfurt. “But every year something unfolds that clouds the picture, from Ukraine to China, and investment is postponed again. The long-term consequence of this is a reduction in growth potential.” A report on Tuesday will shed more light on the role of investment in Germany’s economic expansion in the fourth quarter. Preliminary data showed gross domestic product rose 0.3%, matching the pace of the previous three months, with government and consumer spending leading the way.

While that’s unspectacular, France and Italy fared worse. The euro zone’s second and third-largest economies cooled, with the latter barely growing, increasing the burden on Germany to be the region’s engine. Yet investment as a share of German GDP fell to less than 20% last year from about 23% at the turn of the century, a Bundesbank study in January showed. Private investment slid to 11.5% from 13.4%, according to Eurostat. In its February bulletin, the Bundesbank said investment should increase because of an “above-average level of capacity utilization.” However, it also said a “key prerequisite” is that external demand picks up.

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One safe bet.

China Yuan Bears Predict More Trouble Ahead (BBG)

Before China’s devaluation in August roiled global markets and spurred some of the hedge fund industry’s biggest names to bet against the yuan, a small cohort of researchers saw the whole thing coming. Now, some of those same forecasters are warning that there’s more turmoil in store – and it’s not just China they’re worried about. Asianomics’s Jim Walker, who predicted the yuan’s four-year advance would end a month before the currency peaked in January 2014, is forecasting a U.S. recession and says 10-year Treasury yields will plunge to all-time lows. Raoul Pal, publisher of the Global Macro Investor report and a yuan bear since 2012, says European bank shares will tumble by half. John Mauldin of Millennium Wave Advisors, who has argued since 2011 that the Chinese currency should weaken, sees the risk of heightened geopolitical instability in the Middle East as lower crude prices strain the budgets of oil-rich countries.

While all three forecasters see scope for further declines in the yuan, they’re also emphasizing risks outside the Chinese economy as the outlook for world growth dims and commodities trade near the lowest levels in more than 15 years. Their bearish stance has gained traction in global markets this year, with share prices from New York to Riyadh and Sydney sliding as investors shifted into gold and sovereign bonds. “There’s a storm of troubles coming,” Pal, a former hedge-fund manager at GLG Partners whose clients now include pension plans and sovereign wealth funds, said in a phone interview from the Cayman Islands. “The risk of a very bad outcome in 2016 and 2017 remains the highest probability.”

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“What we are witnessing is the resetting of the largest macro imbalance the world has ever seen..”

Kyle Bass, A Sharpshooting Short-Seller (FT)

I’ve been to Beijing twice, I don’t care to go back,” Kyle Bass says. “I’m OK with that.” The subprime-shorting, sniper rifle-shooting, spearfishing hedge fund manager from Dallas, Texas, does not fear the ire of the Chinese authorities. He has a decade-long record of putting his mouth where his money is, and if his latest apocalyptic call — that the Communist government does not have the resources to prevent a banking crisis and a vicious currency devaluation — puts him at the centre of the angriest debate in financial markets, well, that is just fine by him. “Anyone who is invested in China, whether you are a pension fund or sovereign wealth fund or a large US or European institution — you better be thinking about this, and not with the reverence that people give to China,” he says.

“Everyone has this embedded belief that China can pull off the ‘triple lindy’ every time they want to do it,” says the former springboard diver, “but our view is they are going to have to have a reset.” Mr Bass is hardly the only hedge fund manager betting on a renminbi devaluation; when Beijing wanted to send a shot across speculators bows last month, it was George Soros who was singled out on the front of the People’s Daily, a government mouthpiece. Yet, thanks to a 12-page dissection of China’s banks, shadow banks and central bank reserves sent to investors in his $1.7bn hedge fund Hayman Capital last week, it is Mr Bass who has given the most strident, forensic and colourful voice to those who suspect China will be forced to revalue the currency sharply lower. “What we are witnessing is the resetting of the largest macro imbalance the world has ever seen,” he wrote.

Banking system losses could be four times as big as those on subprime mortgages in the US during the financial crisis, and the central bank does not have the reserves to plug the hole and defend its currency. “China’s back is completely up against the wall today” and the country is “on the precipice of a large devaluation”. Economists and Beijing have challenged the alarming analysis; Zhou Xiaochuan, the People’s Bank of China governor, gave a rare interview to insist capital outflows were evidence of economic rebalancing rather than capital flight. This is all of a piece with previous declarations by Mr Bass. Since the Great Recession he has predicted sovereign debt crises in Ireland, Greece, Portugal, Spain, the UK, Switzerland and France.

He has compared the Japanese economy to a “Ponzi scheme”. Armageddon does not always come — he admits he was wrong on Switzerland and the UK; and Japan is notably still standing, though a devaluation of the yen meant his bet eventually made money overall there. Hayman’s returns since the financial crisis have been modest by the standards of the greatest hedge fund investors and 2015 was, by his own admission, one of his worst. But enough of Mr Bass’s predictions have come true to justify taking him seriously. One manager of a fund of hedge funds says investing with Mr Bass is like funding a “think-tank” on how to navigate the global economy.

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Creative bankruptcies.

As US Shale Sinks, Pipeline Fight Sends Woes Downstream (Reuters)

Within weeks, two low-profile legal disputes may determine whether an unprecedented wave of bankruptcies expected to hit U.S. oil and gas producers this year will imperil the $500 billion pipeline sector as well. In the two court fights, U.S. energy producers are trying to use Chapter 11 bankruptcy protection to shed long-term contracts with the pipeline operators that gather and process shale gas before it is delivered to consumer markets. The attempts to shed the contracts by Sabine Oil & Gas and Quicksilver Resources are viewed by executives and lawyers as a litmus test for deals worth billions of dollars annually for the so-called midstream sector. Pipeline operators have argued the contracts are secure, but restructuring experts say that if the two producers manage to tear up or renegotiate their deals, others will follow.

That could add a new element of risk for already hard-hit investors in midstream companies, which have plowed up to $30 billion a year into infrastructure to serve the U.S. fracking boom. “It’s a hellacious problem,” said Hugh Ray, a bankruptcy lawyer with McKool Smith in Houston. “It will end with even more bankruptcies.” A judge on New York’s influential bankruptcy court said on Feb. 2 she was inclined to allow Houston-based Sabine to end its pipeline contract, which guaranteed it would ship a minimum volume of gas through a system built by a Cheniere Energy subsidiary until 2024. Sabine’s lawyers argued they could save $35 million by ending the Cheniere contract, and then save millions more by building an entirely new system. Fort Worth, Texas-based Quicksilver’s request to shed a contract with another midstream operator, Crestwood Equity Partners, is set for Feb. 26.

[..] So far, relatively few oil and gas producers have entered bankruptcy, and most were smaller firms. But with oil prices down 70% since mid-2014 and natural gas prices in a prolonged slump, up to a third of them are at risk of bankruptcy this year, consultancy Deloitte said in a Feb. 16 report. Midstream operators have been considered relatively secure as investors and analysts focus on risks to the hundreds of billions of dollars in equity and debt of firms most directly exposed to commodity prices. That’s because firms such as Enterprise Products, Kinder Morgan and Plains All American relied upon multi-year contracts – the kind targeted in the two bankruptcies – that guarantee pipeline operators fixed fees to transport minimum volumes of oil or gas.

Now, with U.S. oil output shrinking and gas production stalling, many of the cash-strapped producers entering bankruptcy will be seeking to rid themselves of pricey agreements, particularly those with so-called minimum volume commitments that require paying for space even if it is not used. “They will be probably among the first things thrown out,” said Michael Grande, director for U.S. midstream energy and infrastructure at Moody’s.

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Volatility writ large.

Chinese Military Ambitions Fuel Asian Arms Race Amid Slowdown (WSJ)

The rapid rise in Chinese military spending and a greater assertiveness in its territorial claims is fueling an arms race in the Asia-Pacific region even though many of the countries involved have been hit by an economic slowdown, new research reports suggest. Of the 10 biggest importers of defense equipment in the past five years, six countries were in the Asia-Pacific region, the Stockholm International Peace Research Institute, or SIPRI, said in an annual report on arms transfers. India was the largest buyer of foreign equipment, with China in third position after Saudi Arabia, the think tank said. Although a country’s spending power is often tied to its economic strength, buyers in the Asia-Pacific region aren’t slashing military budgets even as their economies have come under strain from falling commodity prices and lower growth in China.

“The slight moderation in economic activity had little effect on regional military spending in 2015,” the International Institute for Strategic Studies, or IISS, said in a new report. China, Japan, South Korea, and Indonesia last year were among the countries to announce plans for higher military spending, the IISS said. Lower economic output has driven up Asian military spending as a percentage of GDP to 1.48%, the London-based research organization said, its highest level since at least 2010. China leads the way, accounting for 41% of the region’s military spending, well ahead of No. 2 India at 13.5% and Japan with 11.5%.

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William K. Black: always a pleasure.

Krugman and the Gang of 4 Need to Apologize (Bill Black)

If you depend for your news on the New York Times you have been subjected to a drumbeat of article attacking Bernie Sanders – and the conclusion of everyone “serious” that his economics are daft. In particular, you would “know” that four prior Chairs of the President’s Council of Economic Advisers (CEA) (the Gang of 4) have signed an open letter to Bernie that delivered a death blow to his proposals. Further, you would know that anyone who dared to disagree with these four illustrious economists was so deranged that he or she was acting like a Republican in denial of global climate change. The open letter set its sights on a far less famous economist, Gerald Friedman, of U. Mass at Amherst. It unleashed a personalized dismissal of his competence and integrity.

Four of the Nation’s top economists against one non-famous economists – at a school that studies heterodox economics. That sounds like a fight that the referee should stop in the first round before Friedman is pummeled to death. But why did Paul Krugman need to “tag in” to try to save the Gang of 4 from being routed? Krugman proclaimed that the Gang of 4 had crushed Friedman in a TKO. Tellingly, Krugman claimed that anyone who disagreed with the Gang of 4 must be beyond the pale (like Friedman and Bernie). Indeed, Krugman was so eager to fend off any analysis of the Group of 4’s attacks that he competed with himself rhetorically as to what inner circle of Hell any supporter of Friedman should be consigned. In the 10:44 a.m. variant, Krugman dismissed Bernie as “not ready for prime time” and decreed that it was illegitimate to critique the Gang of 4’s critique.

In Sanders’s case, I don’t think it’s ideology as much as being not ready for prime time — and also of not being willing to face up to the reality that the kind of drastic changes he’s proposing, no matter how desirable, would produce a lot of losers as well as winners. And if your response to these concerns is that they’re all corrupt, all looking for jobs with Hillary, you are very much part of the problem.

The implicit message is that four famous economists had to be correct, therefore anyone who disagreed with them must be a conspiracy theorist who is “very much part of the problem.” Paul doesn’t explain what “the problem” is, but he sure makes it sound awful. Logically, “the problem” has to be progressives supporting Bernie. Two hours later, Paul decided that his poisoned pen had not been toxic enough, he now denounced Sanders as a traitor to the progressives who was on his way “to making Donald Trump president.” To point out the problems in the Gang of 4’s attack on Friedman was to treat them “as right-wing enemies.”

Why was Krugman so fervid in its efforts to smear Friedman and prevent any critique of the Gang of 4’s smear that he revised his article within two hours and amped up his rhetoric to a shrill cry of pain? Well, the second piece admits that Gang of 4’s smear of Friedman “didn’t get into specifics” and that progressives were already rising in disgust at Paul’s arrogance and eagerness to sign onto a smear that claimed “rigor” but actually “didn’t get into specifics” while denouncing a scholar. Paul, falsely, portrayed Friedman as a Bernie supporter. Like Krugman, Friedman is actually a Hillary supporter.

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Greece is a cash country. For one thing, there are still capital controls. People cannot get more than $420 a week or so out of their ATM. That is very limiting in many ways.

Greek Attempt To Force Use Of Electronic Money Instead Of Cash Fails (ZH)

While the “developed world” is only now starting its aggressive push to slowly at first, then very fast ban the use of physical cash as the key gating factor to the global adoption of NIRP (by first eliminating high-denomination bills because they “aid terrorism and spread criminality”) one country has long been doing everything in its power to ween its population away from tax-evasive cash as a medium of payment, and into digital transactions: Greece. The problem, however, is that it has failed. According to Kathimerini, “Greek businesses are not ready for the expansion of plastic money through the compulsory use of credit and debit cards for everyday transactions.” Unlike in the rest of the world where “the stick” approach will likely to be used, in Greece the government has been more gentle by adopting a “carrot” strategy (for now) when it comes to migrating from cash to digital.

The government has told taxpayers that they will have to spend up to a certain amount of their incomes via bank and card transactions in order to qualify for an annual tax-free exemption. This appears to not be a sufficient incentive however, as a large proportion of stores still don’t have the card terminals, or PoS (Points of Sale), required for card payments, while plastic is accepted by very few doctors, plumbers, electricians, lawyers and others who tend to account for the lion’s share of tax evasion recorded in the country. Almost as if the local population realizes that what the government is trying to do is to limit at first, then ultimately ban all cash transactions in the twice recently defaulted nation as well. It also realizes that an annual tax-free exemption means still paying taxes; taxes which could be avoided if one only transacted with cash.

For the government this is bad news, as the lack of tracking of every transaction means that the local population will pay far less taxes: a recent study by the Foundation for Economic and Industrial Research (IOBE) showed that increasing the use of cards for everyday transactions could increase state revenues by anything between 700 million and 1.6 billion euros per year, and that the market’s poor preparation means that the tax burden has been passed on to lawful taxpayers. As a reminder, in Greece, the term “lawful taxpayers” is not quite the same as in most other countries. What is more surprising is that according to data seen by Kathimerini, PoS terminals in Greece amount to just 220,000, and that despite the fact these were effectively forced on enterprises with the imposition of the capital controls, an estimated half of all businesses do not have card terminals. Almost as if the Greeks would rather maintain capital controls than be forced into a digital currency by their Brussels overlords.

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Some things are just plain weird. They invest $150 million in Espirito Santo in July -when everyone already knew something was fishy, but that’s not even the gist-, and then lose it all one month later?! That’s not fish I’m smelling, it’s a rat.

New Zealand Super Fund’s $200 Million Loss (NZ Herald)

Almost $200 million of taxpayer money invested through the Kiwi Superannuation Fund has been lost after a Portuguese bank where the money was invested, supposedly as a “risk free” loan, collapsed. The Super Fund, set up with public money to cover partly the retirement costs of baby boomers, has revealed it had been caught up in last year’s collapse of Banco Espirito Santo (BES) and a US$150m (NZ$198m) investment made in July had been completely wiped out. The investment was a contribution to a Goldman Sachs-organised loan to the Portuguese bank, but only weeks after the money was injected it imploded, with president and founder Ricardo Salgado arrested as part of a criminal investigation into tax evasion.

After disclosing billions of Euros in losses, and facing a run on funds by depositors, the bank collapsed in a heap and was broken up in August. Goldman Sachs, described by Rolling Stone as “the great vampire squid” for their sharp business practices in the run-up to the global financial crisis, today said it would “pursue all appropriate legal remedies without delay” in an attempt to recover the loans to BES. The company also announced that, alongside the Super Fund, they were suing the Central Bank of Portugal over their loans being excluded from the bailout of BES. Despite this legal action, Super Fund chief executive Adrian Orr conceded today the entire investment had been written off as a “conservative” precaution. Finance Minister Bill English, the minister responsible for the Super Fund declined to comment on the spectacular loss, but Green Party MP Russel Norman said Mr English should be demanding answers.

“They have to give some sort of explanation as to why they gambled US$150m in this case, and why it’s come unstuck,” he said. The episode also illustrated what the NZSF should try to avoid, Mr Norman said. “For a fund operating on behalf of the NZ taxpayer, taking these high-risk investments is probably not appropriate,” he said. Mr Orr denied the investment was high-risk and said the NZSF had been covered in the event of BES defaulting. “It was risk-free with insurance,” he said. However, an unusual retrospective rule change in Portugal had resulted in the insurance being voided. Orr added the Super Fund had withdrawn lending to banks in Portugal until the result was overturned. The Fund said the loss amounted to only 0.7% of the firm’s total pool of $27b in assets.

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“Christchurch, home to 366,000 people, who are still shaken daily by thousands of aftershocks..” (Nicole and I were there at the first anniversary)

Long Way To Go: 5th Anniversary of the Christchurch Earthquake (G.)

It was as the clock struck 12.51pm that the last of the 185 names were read out. Then, the 1,000 people who had gathered in the city’s botanic gardens to mark the anniversary of the 2011 Christchurch earthquake fell silent for a minute to remember the moment, five years ago, that the 6.3-magnitude quake struck. Earlier, posies of flowers had been laid in road cones and taped to the safety fences that still litter the city centre half a decade after the disaster turned it largely to rubble.Once the memorial ceremony had finished, talk turned – as it usually does – to the rebuilding of this once-rich, agricultural hub – and what the new Christchurch will look like when it finally rises from the ashes. “There is still some way to go until Christchurch is truly reborn,” said the governor-general, Jerry Mateparae.

His is a sentiment widely shared in Christchurch, home to 366,000 people, who are still shaken daily by thousands of aftershocks – including a significant 5.9 rumble on Valentines day this year and a 5.0-magnitude quake that hit in nearby Blenheim on the anniversary itself. Despite years of clean-up and a recent boom in construction, Christchurch is still in a state of flux, with hundreds of people waiting for insurance payouts and widespread concern about the pace of the rebuild, especially in the heart of the city. The health of Christchurch residents has also fared poorly since the quake. Suicide and domestic violent rates have risen sharply – as has illegal drug use and the spread of sexually transmitted diseases.

Mental health problems are a persistent concern – particularly widespread are incidences of depression, anxiety and post traumatic stress disorder. Waiting lists for state-funded counselling in Christchurch are long, and last week it was reported the government would significantly cut funding to community mental health providers – from $1.6m in 2015 to $200,000 this year. Yet in tandem with the trauma of the quake’s aftermath has come a remarkable flourishing of the creative arts in the garden city. Rachael Welfare, operations director for Gap Filler, a charitable organisation filling the “gaps” of Christchurch with pop-up creative projects, said: “Before the quake, people thought of Christchurch as quite conservative, but now the opportunities have given people a blank canvas, if nothing else, and people are very open-minded about what the spaces could be.”

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Who told them to do this and say damn the Geneva conventions?

Macedonia, Serbia Close Borders To Afghan Refugees (AP)

Former Yugoslav Republic of Macedonia (FYROM) closed its border to Afghan migrants early Sunday, Greek police said, slowing the admission of refugees to a trickle and leaving a growing bottleneck of people stuck at their shared border. A FYROM police spokeswoman denied there was any new prohibition regarding Afghans, blaming the problem on Serbia, the next nation along the Balkans migration route into Western Europe. By early afternoon, about 1,000 migrants were waiting at the Greek border camp in Idomeni – and at a gas station only 17 kilometers (11 miles) away, 80 buses with 4,000 more migrants were waiting to take them to the border. Greek police said FYROM refused to let Afghans through because Serbia made the same decision and officials feared the migrants would get stuck in FYROM.

“The authorities of the Former Yugoslav Republic of Macedonia informed us that, beginning at dawn Sunday, they no longer accept Afghan refugees because the same problem exists at their border with Serbia,” Petros Tanos, spokesman for Greek police’s Central Macedonia division, told The Associated Press. Despite the reports, about 500 migrants of all nationalities made the trek on foot from the gas station to the border Sunday. “I can no longer wait,” said 17-year-old Ali Nowroz, one of the trekkers from the Afghan city of Jaghori Zeba. “We have spent three nights in the cold, we are hungry. They told me that the borders have been closed to us. However, when I started from Afghanistan I knew borders were open for us. I am going to the Idomeni border crossing to find out and ask why they have closed it.”

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Every single day. Numbers are rising as borders are closing. Greece can’t be far away from becoming a failed state

Shadowing The Hellenic Coast Guard’s Refugee Rescues (CCTV)

As Europe tries to deal with the biggest refugee crisis since World War II, improving weather means the pace of migrants and refugees reaching Greece from Turkey will pick up again. On Feb 15., over 4,500 people were rescued across the Aegean Sea in Greece. Since last year, the Hellenic Coast Guard has rescued almost 150,000. CCTV’s Filio Kontrafouri went on patrol with the Hellenic Coast Guard off the Greek island of Lesvos and witnessed what happens after those dinghies, usually loaded with women and children, enter the Greek waters. “For us, all these people are like they are condemned to death,” said Sub-lieutenant Kyriakos Papadopoulos of the Hellenic Coast Guard. “You’ll see when we get to that boat, about which some other colleagues in the area have informed us, even with everyone on board, there is panic. People could move from one side to the other, these boats are not suitable for travel at sea, their life jackets are not suitable and at any moment their life is in danger.”

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Feb 042016
 
 February 4, 2016  Posted by at 9:26 am Finance Tagged with: , , , , , , , , ,  1 Response »


DPC Carondelet Street, New Orleans 1905

Oil Bears Closing $600 Million Triple-Short Fund Bet Adds To Tumult (Reuters)
Shell Confirms 10,000 Job Cuts as Profits Plunge 87% (BBC)
Bank Selloffs Replacing Oil Rout As Stock Market Pressure Point (BBG)
European Banks Near ‘Terrifying’ Crisis: Raoul Pal (CNBC)
Deutsche Bank’s Troubles Unmask Bigger Risks (AFR)
Kyle Bass: China Banks Months Away From ‘Danger Territory’ (CNBC)
Hugh Hendry: Major Chinese Devaluation Would Be Disastrous (CW)
The Great Skyscraper Bubble Is Ready to Pop! (Dent)
Investors Heading for Slaughter One More Time – David Stockman (Hunter)
US January Truck Orders Down 48% (Reuters)
Why The US Treasury Hides Its Saudi Investor (BBG)
Crippled EU Is No Longer The ‘Anarcho-Imperial Monster’ We Once Feared (AEP)
MPs Call For Immediate Halt Of UK Arms Sales To Saudi Arabia (Guardian)
Greek Pension Reform Sparks General Strike (BBG)
Drone Footage Reveals Extent of Devastation In Syria (Ind.)
EU Agrees Funding For Turkey To Curb Migrant Flows (Reuters)

Did oil soar on The Big Short?! Volatility, exposure, leverage, all the key words apply. Net asset value dropped $700 million in 2 days.

Oil Bears Closing $600 Million Triple-Short Fund Bet Adds To Tumult (Reuters)

This week’s roller-coaster ride in the global crude oil market was likely fueled in part by the sudden liquidation of a $600 million leveraged fund bet on falling prices, market sources said on Wednesday. Unknown investors in the VelocityShares 3x Inverse Crude Oil Exchange Traded Note (ETN) – which offers the ability to make a bearish bet on prices magnified threefold, with gut-churning ups and downs – bailed out early this week after jumping into the fund in January, ETN data show. Some 1.8 million shares worth more than $602 million were redeemed on Tuesday, the largest outflow from the ETN in the past year, according to data from FactSet Research.

The selloff suggests that at least some big investors are betting that the worst of an 18-month oil market rout is over after U.S. prices fell to $26 a barrel last month for the first time since 2003. Trading activity has also jumped to the highest levels on record. “Speculators are getting out of the down oil market. People start unwinding these positions because they think they have gotten their juice out of it,” David Nadig, vice president, director of exchange traded funds for FactSet, said. The DWTI note inversely tracks the S&P GSCI Crude Oil Index ER, which follows movements in the oil market. And because it offers investors three times the exposure, the impact on the underlying futures is magnified – as is the volatility in the ETN, whose price more than doubled in the first three weeks of January before halving again as oil futures rebounded.

The net asset value of the fund – one of a handful of exchange funds that allows investors to trade oil without the complexity of a futures exchange – fell from close to $1 billion to $417 million on Tuesday and to $322 million on Wednesday, according VelocityShares’ website. As a result, the mass exodus likely forced the ETN’s issuer, Credit Suisse, to quickly buy back short positions as investors redeemed shares.

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About to do the biggest takeover in its history. Who’s financing? Profit loss numbers are all over the place in different articles. Guardian said 87%, so being the sensationalist I am, I went with that.

Shell Confirms 10,000 Job Cuts as Profits Plunge 87% (BBC)

Royal Dutch Shell has confirmed it is cutting 10,000 jobs amid its steepest fall in annual profits for 13 years. It made $1.8bn (£1.23bn) for the fourth quarter of the year, compared with a $4.2bn profit for the same period the year before. Full-year 2015 earnings, excluding identified items, were $10.7bn, compared with $22.6 billion in 2014. The oil firm indicated it would report a massive drop in profits two weeks ago. The company reports earnings on a current cost of supplies (CCS) basis. Last week, shareholders in Shell, which is Europe’s largest oil company, voted in favour of its takeover of smaller rival BG Group. The company cut back hard on investment. Its capital spending for the year was slashed to $28.9bn, $8.4bn lower than in 2014. Shell sold $5.5bn worth of assets in the course of 2015.

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When can the bailouts start?

Bank Selloffs Replacing Oil Rout As Stock Market Pressure Point (BBG)

Breakdowns in financial stocks are becoming a little too routine for comfort of late. Dragged lower by falling interest rates and credit concern, the KBW Bank Index extended its three-day decline to as much as 7.5% earlier Wednesday — the fifth time this year a loss has exceeded 5% over such a stretch, data compiled by Bloomberg show. At times this week, losses from Bank of America to Citigroup have exceeded 10%. Daily drubbings in financials are rapidly supplanting anxiety over oil and its related shares as the equity market’s biggest headache. At 15.7% of the Standard & Poor’s 500, banks, brokerages and insurance companies are second only to technology companies as the biggest group and more than twice the size of energy producers.

“Crushing the banks like this is a macro narrative,” Michael Antonelli at Robert W. Baird & Co. in Milwaukee, said by phone. “It definitely puts a different tone on this selloff.” More than $350 billion have been erased in financial shares in 2016, the worst start to a year in data going back to 1990. The selloff in Goldman Sachs, Citigroup and Bank of America continued Wednesday, driving the industry down another 1.6% at 12:30 p.m. in New York. So far this year, the group has lost 13%, almost double the benchmark gauge’s decline. Volatility in bank shares is spiking to levels not seen since the financial crisis, deepening the rout that just sent stocks to the worst January in seven years.

Instances when the KBW Bank Index fell more than 5% over three days in 2016 have exceeded all the occurrences in the past three years combined. At 23% of trading days, the annualized frequency is greater than any year except 2008 and compares with a two-decade average of 4.4%. The losses came as the 10-year Treasury yield fell below 1.86% for the first time since April while credit rating agencies warned of rising debt defaults among American businesses. Moody’s on Wednesday said that the number of U.S. companies that have the highest risk of defaulting on their debt is nearing a peak not seen since the height of the financial crisis, just one day after S&P downgraded some of the biggest U.S. explorers, citing oil’s plunge.

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Deutsche. And then the French.

European Banks Near ‘Terrifying’ Crisis: Raoul Pal (CNBC)

With European banks sitting at multiyear lows, one widely followed market watcher said some of the biggest ones could go bankrupt. Former hedge fund manager and Goldman Sachs alumnus Raoul Pal said his scenario is one most investors aren’t looking at right now. Pal said the banking issues have the potential to overtake risks associated with China’s growth slowdown and cheap oil. “So many of these [bank stocks] are falling so sharply. I think people haven’t even caught up with what is going on, and that really concerns me,” the founder of Global Macro Investor told CNBC’s “Fast Money” on Tuesday. “I look at the big long-term share charts of them, and I think this looks very terrifying indeed. I have not seen anything like this for a long time.”

For Pal, negative interest rates are the chief reason why the bank stocks are in trouble. He said European banks have a tougher time coping in the environment than U.S. banks. The major European banks, he added, are already being stretched by global worries and issues within the banking system. He said the trouble could spread to U.S. banks. He suggested going short in this type of market despite a potential “free-fall” scenario.

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Deutsche’s derivatives holdings are so outsized they risk bringing the dominoes down in rapid sequence.

Deutsche Bank’s Troubles Unmask Bigger Risks (AFR)

At the Deutsche Bank annual meeting in Frankfurt in 2015 a disgruntled investor got up in front of the microphone and asked the board of directors if there was a financial scandal the bank wasn’t involved in. A month earlier, the bank had been fined $US2.5 billion by US and British authorities after a seven-year investigation for its part in rigging benchmark interest rates. Investors were baying for blood, as tougher regulatory requirements and litigation seemed to be taking their toll on the bank’s share price. At the time, stock in Deutsche Bank was closer to €30, well down from its pre-global financial crisis high of €177, while on Tuesday night shares in the bank fell to a fresh low of €15.54, prompting a new wave of worries. For a start, Deutsche Bank is trading on a price to book valuation of 0.34 times, which implies the market thinks that almost 70% of its loans are impaired and some nasty news is just around the corner.

The bank posted a €6.8 billion loss in 2015, thanks to a €12 billion write-down linked to litigation charges and restructuring costs, and it set aside more to cover any potential litigation. At a time when it seems like a cottage industry has sprung up in predicting the next financial crisis, there’s talk that although this current period of turbulence might not be the next crisis, it will certainly do until that next crisis does arrive. At the heart of these latest concerns is that investors are losing faith in what central banks can do. But the performance of big global bank stocks like Deutsche Bank has also sparked the selling. It was August 2014 when Paul Schulte, the chief executive of SGI Research, warned Australian investors that all was not well at Deutsche Bank and he still thinks the bank has several problems to deal with.

First, he said that more than any other global investment bank Deutsche had too many leftover assets from the global financial crisis – more than $US10 billion by his estimates – that are very illiquid and simply too hard to value. With regard to all the financial scandals mentioned at 2015’s annual meeting, he also thinks there are further fines to come, while Deutsche also seems to have a large book of commodity-related derivatives that are under stress from the collapses in most commodity prices. Schulte says there is still too much leverage at Deutsche and it is in the centre of a sclerotic system of Euro-paralysis, which prevents any dramatic sort of “TARP” program. “This has been brewing under everyone’s nose, because while people thought that the problem was periphery banks in Ireland or Spain, the actual problem is that Deutsche Bank, and the French banks with lots of toxic debt in commodities, are over-stretched, badly run, have no sense of risk management and are organs of state capitalism,” Schulte says.

So far this calendar year shares in Deutsche Bank have fallen 30% but it’s not flying solo. Citi is down 22%, Goldman Sachs is down 16%, JP Morgan is down 14%, Morgan Stanley is down 23%, BofA is down 22% and Credit Suisse 22%. Shares in UBS are also down 20% in 2106, slipping 7% on Tuesday night after its latest profit numbers implied its strategy of moving away from the volatile investment banking business to focus on steady business of wealth management wasn’t working so well. That compares to a 7% fall in the Dow Jones and S&P 500, a 5% decline in the FTSE 100 and 11% drop in the DAX.

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“You can’t grow your banking system 1,000% in 10 years and not have a loss cycle. And your currency won’t stay strong when you go to rectify that balance.”

Kyle Bass: China Banks Months Away From ‘Danger Territory’ (CNBC)

Hayman Capital Management founder Kyle Bass has been ringing the alarm bells about China’s banking system and the yuan for months, and now he says the day of reckoning could be just months away. The premise of Bass’ bet goes like this: China’s banking system has grown to $34.5 trillion, equal to more than three times the country’s GDP. The country is due for a loss cycle as cracks begin to show in its economy. When that happens, central bankers will have to dip into China’s $3.3 trillion of foreign exchange reserves to recapitalize the banks, causing a significant depreciation in the value of the yuan, according to Bass.

On Wednesday, he said China’s export-import industry requires China to maintain $2.7 trillion in foreign exchange reserves to continue operating smoothly, citing an International Monetary Fund assessment. “They’ll hit that number in the next five months,” he said in an interview on CNBC’s “Squawk on the Street.” “Those that think they can burn it to zero and they have many years ahead of them, they really only have a few months ahead of them before they get into a real danger territory.” Bass is best known for making a winning bet on the subprime mortgage crisis and later profiting from his call that the Japanese yen would fall in tandem with a projected round of monetary stimulus by the Bank of Japan.

Bass confirmed Wednesday he is devoting much of his fund to his bet the yuan will depreciate. He characterized shorts against the currency, including his, as totaling “billions.” The market will ultimately come to view a 10% yuan devaluation as “a pipe dream,” he said. “When you look at the size of the imbalance and the size of their economy, it’s going to go 30 or 40% in the end, and it’s going to be the reset for the world.” To be sure, China’s controlled devaluation of the yuan this year has sparked growth concerns that roiled equity markets around the world and contributed to the worst January for the Dow and S&P 500 since 2009. Bass said he has no doubt the People’s Bank of China has the ability to recapitalize the nation’s financial institutions should they need bailing out.

But the problem is that it will have to expand its balance sheet by trillions of dollars to do so, he explained. Right now, too few people are focused on China’s banking system, Bass said, but the narrative will swing that way this year. Bass ticked off a list of concerns about the Chinese economy, including industrial production at financial crisis lows and the lowest nominal fourth-quarter year-over-year GDP print in 40 years. “This isn’t an aberration. This isn’t a speed bump. This is China’s excess — let’s call it misallocation of capital — coming home to roost,” he said. “You can’t grow your banking system 1,000% in 10 years and not have a loss cycle. And your currency won’t stay strong when you go to rectify that balance.”

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‘China has already accumulated a large and growing share of global trade. A major devaluation would see this share expand further with the possible result of completely destroying manufacturing outside of China.’

Hugh Hendry: Major Chinese Devaluation Would Be Disastrous (CW)

China could potentially ‘destroy’ global manufacturing if it seeks to regain growth through further weakening its currency, hedge fund specialist Hugh Hendry has warned. In his latest market outlook, Hendry, who is founder and CIO of Eclectica Asset Management, said a move similar – or even beyond – what the Chinese undertook last summer would cause major ructions in global markets. ‘What could, should and is troubling the world is the potential for a substantial devaluation of the yuan: this would surely have disastrous outcomes for global diplomacy and economics,’ said the hedge fund specialist. ‘China has already accumulated a large and growing share of global trade. A major devaluation would see this share expand further with the possible result of completely destroying manufacturing outside of China.’

Hendry said this is purely a theoretical fear at this stage but, given the unexpected nature of some Chinese government policies, it cannot be discounted. ‘Even apportioning a small possibility to such an event has a significantly detrimental impact on the global economy via a reversion to protectionism and insular politics.’ A knock-on effect, Hendry said, is further extremist politics in the western world could come to the fore in response to the inevitable global downturn which a devaluation would cause. ‘At worst, we could see a mini-dark age of rampant protectionism, global trade coming to a halt, a significant decline in immigration and even restrictions on overseas travel.’

Hendry said this was the ‘extreme bearish’ view and one which would completely ruin the investment case for risk assets. While Hendry does not expect it to come to pass, he said it would not be wise to discount it entirely. One of the major reasons for this overarching concern, Hendry said, is the fact China has neither committed to full free-market economics and yet not overtly retained its fully-managed model. He said this has left many investors in an awkward middle ground. ‘In our minds the question is not one of capital flight but the extent to which commercial hedging of foreign trade has been brought into line. That is to say, to what extent Chinese exporters now hedge their overseas revenues into yuan,’ he said.

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Nice recount of one of our fave bubble tales.

The Great Skyscraper Bubble Is Ready to Pop! (Dent)

In 1928, construction on the world’s tallest building began in New York: the Bank of Manhattan Trust Building at 40 Wall Street. Today, it’s “The Trump Building.” When its developers learned that the Chrysler Building would be even taller, they added three stories to the Manhattan Building to secure the title of “world’s tallest.” Then the Chrysler Building came along and added a giant spire, beating it by just over a hundred feet. Of course, that didn’t last long either. Each of these buildings held the title for less than a year before the Empire State Building topped out at 1,454 feet, more than 400 feet taller than the other two. And then: the economy collapsed. The Great Depression hit. And it took decades for the global economy to recover – and it wasn’t until the 1970s before a taller building emerged.

Those buildings were the Twin Towers in the early 1970s, and the Sears Tower in Chicago in ’73. And then, right on cue, another major recession hit in the middle of the decade. Notice a pattern? It is no coincidence that in both cases, the construction of major buildings coincided with long-term economic peaks. It happened in the 1930s and again in the 1970s. Historically, there have been clear peaks in skyscrapers when the economy is at a high. It’s like when the party’s raging and the whole world thinks the economy will never go down, these mammoth hunks of steel pop out of the ground as if to say the high will go on forever! And I haven’t even said a word about where we are today… 106. That’s how many skyscrapers popped up around the world in 2015. It’s the largest number completed in a single year on record.

Before this decade, it was usually around 20 or 30. Now it’s up to five times that! Oh, but it gets better! The Council on Tall Buildings and Urban Habitat expects 135 skyscrapers to be finished in 2016, and another 140 in 2017. And get this: the Council says the number of “supertall” skyscrapers (300 meters or higher) has doubled from 50 in 2010… to 100 in 2015 – just five years in the most artificial global bubble in human history. No coincidence there, either! It should be pretty obvious: the more the global economy expands, the higher and greater the number of major buildings that go up. And they concentrate in the leading countries and regions of the world at the time. So it’s probably no surprise that China – a country that has overbuilt its infrastructure over a decade into the future, indebting themselves with tens of trillions of dollars – is dominating the current race for who will build the next tallest skyscraper in the world.

Right now, that title belongs to the Burj Khalifa in Dubai, standing at 2,717 feet. It was completed in 2010. The second highest – the Shanghai Tower in China, at 2,073 feet – finished last year. But now China has plans to complete another project in 2017 – the Phoenix Towers in Wuhan, south-central China. The tallest will be the first ever to stand one kilometer high, or 3,280 feet. Oh, and it’s going to be pink! China’s not the only one in the current race. Saudi Arabia has plans to complete their own 3,280-foot Kingdom Tower by 2019 – just as oil has been crashing and its government deficits are swelling. It’s just a big ego game to these up-and-coming countries!

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“..it is very hard to see how this Baby Boom generation, with 10,000 of them retiring a day, can afford one more devastating crash in their stock holdings..”

Investors Heading for Slaughter One More Time – David Stockman (Hunter)

Former Reagan White House Budget Director David Stockman says retail investors are going to take, yet, another very big hit. Stockman explains, “The retail investor waded in again. The sheep lined up and, unfortunately, are heading for the slaughter one more time. I think it is very hard to see how this Baby Boom generation, with 10,000 of them retiring a day, can afford one more devastating crash in their stock holdings. That is, unfortunately, what we are heading for. That’s why I say it’s dangerous. When the bubble breaks, it will spill and flow throughout the Main Street economy.”

Stockman warns the next crash will be bigger than any other in history. Stockman, the best-selling author of “The Great Deformation,” says, “I think we have been building a bubble year by year since the early 1990’s. The earlier crashes that we are so familiar with, Dot Com and the Housing Crash, were only interim corrections that were not allowed to work their way clear. The rot was not effectively purged from the system because central banks jumped back in within months of the corrections and doubled down in terms of the stimulus and liquidity that they pumped into the market.” Stockman contends that “you simply cannot fake your way in this market any longer.”

Stockman explains, “I have pointed out that Wall Street continually tells you that the market is not that overvalued. . . . I have pointed out . . . actual earnings are down 15%. The market is expensive, it is exceedingly expensive, and it’s really . . . 21 times earnings. Therefore, the whole bubble vision on valuations of the market is terribly misleading. Even the Wall Street version of earnings is going to be hard to maintain when the global recession sets in, and then investors are going to suddenly discover that the market is drastically overvalued. They are going to want to get out, and they are all going to want to get out all at the same time. That creates the kind of selling panics that can take the market down. We have kind of been in no man’s land for the last 700 days. The market is struggling to stay above 1870 on the S&P 500. It first crossed that level in late March 2014. It has had 35 efforts to rally and break to new highs. None of them have been sustained. My point about all that is that’s the way bull markets die.”

Stockman contends, “We are nearing the end. I think the world economy is plunging into an unprecedented deflation recession period of shrinkage that will bring down all the markets around the world that have been vastly overvalued as a result of this massive money printing and liquidity flow into Wall Street and other financial markets.”

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Tyler Durden’s comment: “It’s probably nothing”.

US January Truck Orders Down 48% (Reuters)

U.S. January Class 8 truck orders fell 48% on the year, preliminary data from freight transportation forecaster FTR showed, indicating that 2016 could be another weak year for truck makers. FTR estimated that orders for the heavy trucks that move goods around America’s highways totaled 18,062 units in January. This follows on from a full-year decline in 2015 of nearly 25% to 284,000 units from 276,000. “It is not looking to be a strong year,” for the market, FTR chief operating officer Jonathan Starks said in a statement. Amid uncertainty over U.S. economic growth and a lackluster performance for retailers in the fourth quarter, trucking companies have been holding back on buying new models.

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Interesting little piece of history. Worth a read.

Why The US Treasury Hides Its Saudi Investor (BBG)

As Bloomberg reported last month, the U.S. Treasury makes public the precise holdings of more than 100 countries, but those of Saudi Arabia are essentially kept secret, lumped together with 14 other nations. This arrangement, which conflicts with contemporary conventions of financial transparency, has a peculiar – and very controversial – origin in the oil crisis of the 1970s. Saudi Arabia’s special status took shape during the Arab-Israeli War of 1973. When the U.S. provided military supplies to Israel, the Organization of Petroleum Exporting Nations imposed an oil embargo on countries that supported the Jewish state, sending oil prices skyrocketing and wreaking economic havoc. In response, President Richard Nixon created the Federal Energy Office on Dec. 4, 1973, and installed William Simon, then deputy Treasury secretary, to be the nation’s first “energy czar.”

Simon, who rose to prominence trading bonds at Salomon Brothers, had acquired a reputation as a hothead. After the Shah of Iran claimed that the U.S. was still importing the same amount of oil after the embargo as it had previously, Simon described Iran’s leader as “irresponsible and reckless” and a “nut.” Although he grudgingly retracted these comments, Simon’s suspicion of Iran remained: He believed that the shah was a dangerous megalomaniac. This belief put him at odds with Nixon and Henry Kissinger, both of whom considered the Iranian strongman indispensable to U.S. interests in the Middle East. Simon’s sympathies lay instead with another oil-exporting nation: Saudi Arabia, which had reluctantly joined the embargo. As Simon sought to tame the oil crisis, the Watergate scandal engulfed Washington.

Then, in May 1974, Secretary of the Treasury George Schultz stepped down, and Nixon promoted Simon to the post. In the chaos of Nixon’s final days in office, Simon moved quickly and scheduled a trip to Saudi Arabia in August 1974, the month that Nixon resigned. Simon cooked up an ingenuous plan that aimed to achieve several objectives: It would find new buyers for U.S. debt in an era of rising budget deficits, ensure that so-called petrodollars would return to the U.S. and help cultivate a partnership with Saudi Arabia at the expense of Iran. The main component was a campaign to persuade Saudi Arabia to invest much of its surplus cash in Treasury bonds. The Saudis agreed, but with one caveat: The purchases had to remain secret, perhaps because they might call into question the kingdom’s loyalties to OPEC.

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The Brits think their EU thing is a big deal, for some reason.

Crippled EU Is No Longer The ‘Anarcho-Imperial Monster’ We Once Feared (AEP)

The point of maximum danger for British parliamentary democracy was 13 years ago, the high-water mark of EU hubris and triumphalism. Events moved with lightning speed from the Maastricht Treaty in 1992 until the rapturous closure of the EU’s “Philadelphia” Convention in June 2003, and always in the one direction of ever closer union. Whether or not you care to speak of a “superstate”, the thrust was entirely at odds with the principle of sovereign and self-governing nation states in Europe. Nobody can say the European elites lacked panache. In a fever of treaties they vaulted from the creation of the euro to a nascent foreign policy and defence union at Amsterdam in 1997. An EU intelligence cell and military staff were created in Brussels, led by nine generals and 57 colonels, with plans for a Euro-army of 100,000 troops, 400 aircraft and 100 ships to project power across the globe.

They launched a European satellite system (Galileo) so that Europe would no longer have to be a “vassal” of Washington, in the revealing words of French leader Jacques Chirac. They set up a proto-FBI (Europol) and an EU justice department, replicating the structures of the US federal government one by one. They were equipping the EU with the apparatus of full-blown state. When Ireland voted no to the Nice Treaty – legally rendering it null and void – the Irish were swatted away. Nothing would stop this juggernaut. The furthest reach was the EU Convention gathered to draft the Treaty to end all Treaties , the European Constitution. It was supposedly launched in order to bring Europe closer to its citizens after anti-EU rioters set fire to Gothenburg, and as we began to hear the first drumbeats of populist revolt.

The forum was immediately hijacked by EU insiders and used for the opposite purpose, a drama I witnessed first-hand as Brussels correspondent. The text asserted in black and white that “the Constitution shall have primacy over the laws of the member states”. The document was to bring all EU law – as opposed to narrow “Community law” – under the jurisdiction of the European Court (ECJ) for the first time, creating a de facto supreme court. The Charter of Fundamental Rights, described by one British minister as having no more legal authority than the “Sun or the Beano”, would become legally-binding, and with it Article 52, allowing all rights to be suspended in the “general interest” of the union – the Magna Carta be damned. It was to give the EU “legal personality”, enabling it to agree treaties in its own name.

It would create an elected president. It was the jump from a treaty club of sovereign nations to what amounted to a unitary state, or an “anarcho-imperial monster” in the words of ex-commission official Bernard Connolly. When the early drafts began to circulate I sent a message to Charles Moore, then editor of The Telegraph, alerting him that in my view Britain faced a national emergency. In hindsight, I need not have been so alarmed. It is now obvious that the EU had bitten off more than it could chew, and the Ode to Joy anthem at the closure of that giddy Convention marked the moment when the European Project flamed out as a motivating force in history and began descending into the existential crisis we see before us. The proposals were rejected by French and Dutch voters.

Although EU leaders slipped most of the text through later by executive Putsch under the guise of the Lisbon Treaty, this was a step too far. It has come back to haunt them. The refusal to accept the emphatic verdict of the people crystallized a long-simmering suspicion that the Project had escaped democratic control.

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Not going to happen

MPs Call For Immediate Halt Of UK Arms Sales To Saudi Arabia (Guardian)

An all-party group of MPs has called for an immediate suspension of UK arms sales to Saudi Arabia and an international independent inquiry into the kingdom’s military campaign in Yemen. The call from the international development select committee follows evidence from aid agencies to MPs warning that Saudi Arabia was involved in indiscriminate bombing of its neighbour. The UK government has supplied export licences for close to £3bn worth of arms to Saudi Arabia in the last year, the committee said, and has also been accused of being involved in the conduct and administration of the Saudi campaign in Yemen.

In their letter to the international development secretary, Justine Greening, it urged the UK to withdraw opposition to an independent international inquiry into alleged abuses of humanitarian law in Yemen. A leaked UN report last week said Saudi Arabia was involved in breaches of humanitarian law, and in response the Saudis set up an internal inquiry, a move welcomed by the Foreign Office. The committee said it was astonished to hear the extent to which the government had watered down calls for an independent inquiry proposed by the Netherlands last September at the UN.

“It is a longstanding principle of the rule of law that inquiries should be independent of those being investigated. Furthermore given the severity of the allegations that the Saudi-backed coalition has targeted civilians in Yemen, it is really unthinkable that any investigation led by coalition actors would come to the conclusion that the allegations were accurate.” It said it was shocked that the UK government could claim there had been no breaches of humanitarian law and had significantly increased arms sales to the Saudis since the start of its intervention in Yemen. “We received evidence that close to £3bn worth of arms licences have been granted for exports to Saudi in the last six months. This includes £1bn worth of bombs rockets and missiles for the three-month period from July to September last year – up from only £9m in the previous three months,” the MPs said.

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The real issue is that over half of all Greeks depend on a pension, of someone in the family, to live. That includes many of the young unemployed. See the graph I inserted below (not original with the article). Entire families forced to live on a €500-€600 pension are not an exception.

Greek Pension Reform Sparks General Strike (BBG)

Socrates Vrysopoulos is an unlikely militant. The 38-year-old Greek banking and commercial lawyer is part of a month-old bar-association boycott of the country’s courts, in protest against the government’s pension-reform plans. He says they cripple small businesses and the self-employed, raising the tax and social insurance for a young lawyer with annual income of €20,000 ($21,900) by 27% to €13,800. “A reform is supposed to be a new scheme that helps you improve an existing situation,” said Vrysopoulos, who started his own law firm in 2011. “This is not a reform at all. It’s a way to get more money to repay your loans as a country.” Farmers are blocking highways and workers are joining the protest on Thursday as unions hold the first one-day general strike of 2016 and stage rallies against Prime Minister Alexis Tsipras’s pension proposals.

Self-employed doctors, taxi drivers and civil engineers are throwing their lot in with the protesters, while traffic is set to be disrupted with metro, buses, ferries and flights within Greece affected. The pension reform, needed to fulfill demands of the country’s institutional creditors, is becoming a thorny issue for the 41-year-old premier elected by the Greeks just over a year ago for his anti-austerity promises. Hanging onto a thin parliamentary majority and facing a revived opposition party that has leaped ahead in opinion polls by electing a new leader last month, the reform poses the biggest test to Tsipras’s political survival since last year’s bailout negotiations threw Greece’s euro-area membership in doubt. “Pensions are the sacred cow of the Greek political system,” said Platon Tinios, an assistant professor at the University of Piraeus and visiting senior fellow at the London School of Economics.

While the current changes complete the series of reforms started with the country’s first bailout in 2010, they provide few assurances Greece won’t need a whole new pension system in a few years, he said. Greece has almost 2.7 million pensioners, and the average gross pension for retirees is about €960 per month, according to the most recent available Labor ministry data. The sum total of pensioners and unemployed is higher than the 3.7 million currently working in Greece, according to the latest Labor Force Survey published by the Hellenic Statistical Authority. Last year, the state spent 22.7% of its ordinary budget to plug the hole in pension funds, according to the country’s Parliamentary Budget Office. The non-partisan office said in a report published last month that public expenditure for pensions equals 14.9% of Greece’s GDP, versus an average of 7.9% among member-states in the OECD. “Without changes, the social security system is unsustainable,” the Parliamentary Budget Office said.

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In case anyone was still wondering what they flee.

Drone Footage Reveals Extent of Devastation In Syria (Ind.)

As attitudes and policies towards refugees harden across Europe, a video has emerged that exposes the utter devastation Syrians are fleeing from. Revealing in detail the consequences of the country’s five-year civil war, the drone footage shows the piles of rubble ruined buildings that Homs – previously Syria’s third largest city – has been reduced to. While the video reflects the utter desolation in a city that was once home to more than 650,000 people, peace talks aimed at ending hostilities remain frustratingly unproductive. Arguments over who should or should not attend the negotiations overshadowed the continuous damage wrought in a war that has seen over 11 million Syrians flee, more than half the country’s entire population. The video was shot by Alexander Pushin, a cameraman for Russian state television.

While his drone footage from Syria has been described as propaganda designed to promote Russia’s military involvement in the country, the startling scale of devastation it exposes is beyond question. Even as news emerged of nine people who died attempting to reach the relative safe haven of Europe, anti-refugee sentiment appears to be growing across the continent. Denmark recently introduced legislation that permits the seizing of refugees’ valuables, which drew comparisons to the treatment of Jews by Nazi Germany. Sweden is rejecting applications from 80,000 people who sought asylum in the Scandinavian country last year, while Finland also intends to expel 20,000 of the 32,000 applications received in 2015. Angela Merkel announced recently that Syrian refugees would be expected to return to the Middle East once the conflict is over, while British Prime Minister David Cameron dismissed those living in the squalor of Calais’ “Jungle” as “a bunch of migrants”.

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They want deals with Jordan, Egypt too. Anything to keep them out of Europe. Cattle trade.

EU Agrees Funding For Turkey To Curb Migrant Flows (Reuters)

European Union countries on Wednesday approved a €3 billion fund for Turkey to improve living conditions for refugees there in exchange for Ankara ensuring fewer of them migrate on to Europe. The EU is counting on the deal to lower the number of asylum seekers arriving in Europe after over a million streamed onto the continent in 2015, mainly by sea from Turkey, with figures indicating little sign of the flow ebbing so far this year. All 28 EU countries signed off on the proposal at a meeting in Brussels after Italy dropped its opposition to the plan, which was first agreed with Ankara in November. The bloc’s executive European Commission welcomed the decision on Turkey, currently home to an estimated 2.5 million refugees from the civil war in Syria next door.

“Turkey now hosts one of the world’s largest refugee communities and has committed to significantly reducing the numbers of migrants crossing into the EU,” said Johannes Hahn, Commissioner for Neighbourhood Policy and Enlargement. “The Facility for Refugees in Turkey will go straight to the refugees, providing them with education, health and food. The improvement of living conditions and the offering of a positive perspective will allow refugees to stay closer to their homes.” Prime Minister Mark Rutte of the Netherlands, the current holder of the EU’s rotating presidency, said cooperation with Turkey on the migration crisis would also focus on targeting human traffickers who have arranged passage for many people.

[..] Struggling with its own weak economy and large debt loads, Italy unblocked the funding only after Brussels said it would exempt contributions to the Turkey fund in calculating EU countries’ budget deficits. Under EU rules, countries must keep their budget shortfalls low or face disciplinary action. Italy wanted to exempt more migration-related spending from its budget gap and sought to agree a figure of about €3.2 billion this year. The European Commission refused to endorse a lump-sum up front and said that any such spending would be analyzed separately after it takes place. But on Wednesday, Rome secured an additional declaration before agreeing to the fund, in which it says it still “strongly expects” Brussels will exempt from its deficit figures “the full amount of costs” it incurred from 2011 when a conflict in its ex-colony Libya started and triggered higher migration to Italy.

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Dec 282015
 
 December 28, 2015  Posted by at 9:55 am Finance Tagged with: , , , , , , , ,  2 Responses »


DPC Gillender Building, corner of Nassau and Wall Streets, built 1897, wrecked 1910 1900

Japan Output, Retail Sales Slump, Dampen Recovery Prospects (Reuters)
Japan Business Lobby Head Won’t Commit To Higher Wages (Reuters)
China Industrial Profits Fall For Sixth Straight Month (Reuters)
Head Of China Telecom ‘Taken Away’ As Probe Launched (AFP)
World Steel Chief Calls Chinese Glut ‘Serious And Critical’ (USA Today)
Shale’s Running Out of Survival Tricks as OPEC Ramps Up Pressure (BBG)
End Of Easy Money For Mini-Refiners Splitting US Shale? (Reuters)
China Fines Eight Shipping Lines $63 Million for Price Collusion (BBG)
The Danger Of Safety (Tengdin)
Britain Needs Dutch-Style Delta Plan To Stem Tide Of Floods (Guardian)
US Sees Bearable Costs, Key Goals Met For Russia In Syria So Far (Reuters)
US Foreign Arms Deals Increased Nearly $10 Billion in 2014 (NY Times)
Britain’s New, Open Way to Sell Arms (BBG)
China Passes Antiterrorism Law That Critics Fear May Overreach (NY Times)
China Approves New Two-Child Birth Policy (WSJ)
Greek Construction Sector Shrinks By 63% Since 2011 (Kath.)
Germany Hires 8,500 Teachers To Teach German To 196,000 Child Refugees (AFP)
Refugee Crisis Creates ‘Stateless Generation’ Of Children In Limbo (Guardian)

Oh, sure: “Manufacturers surveyed by the trade ministry expect to increase production by 0.9% in December and raise it by 6.0% in January. Zero Hedge take: ” • Household Spending plunges 2.9% YoY – worst since March (post-tax-hike) • Jobless Rate jumps to 3.3% (from 3.1%) • Industrial Production drops 1.0% MoM – worst in 3 months • Retail Trade tumbles 1.0% YoY – biggest drop since March (post-tax-hike) • Retail Sales plunges 2.5% MoM – Worst drop since Fukushima Tsunami (absent tax-hike)

Japan Output, Retail Sales Slump, Dampen Recovery Prospects (Reuters)

Japan’s factory output fell for the first time in three months in November and retail sales slumped, suggesting that a clear recovery in the world’s third-largest economy will be delayed until early in 2016. While manufacturers expect to increase output in coming months, the weak data casts doubt on the Bank of Japan’s view that an expected pick-up in exports and consumption will help jump-start growth and accelerate inflation toward its 2% target. Industrial output fell 1.0% in November from the previous month, more than a median market forecast for a 0.6% decline, data by the trade ministry showed on Monday. Separate data showed that retail sales fell 1.0% in November from a year earlier, more than a median forecast for a 0.6% drop, as warm weather hurt sales of winter clothing.

“We’re finally seeing signs of pick-up in exports, but the economy has yet to make a clear turnaround,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “There’s a risk consumption will remain sluggish and prevent economic growth from picking up,” he said. Japan’s economy narrowly dodged recession in July-September and analysts expect only modest growth in the current quarter, as consumption and exports lack steam. Some analysts warn the economy may suffer a contraction in October-December if household spending remains weak. Taro Saito, senior economist at NLI Research Institute, expects consumption in the current quarter to have risen less than a 0.4% quarter-on-quarter increase in July-September.

Wary of soft growth, the government plans nearly $800 billion in record spending in the budget for the fiscal year that will begin on April 1. The BOJ has signalled readiness to expand stimulus if risks threaten Japan’s recovery prospects. The central bank fine-tuned its stimulus programme on Dec. 18 to ensure it can keep up or even accelerate its money-printing. While sluggish emerging market demand dims the export outlook, analysts expect output to gradually increase early in 2016 as automakers ramp up production of new models. Manufacturers surveyed by the trade ministry expect to increase production by 0.9% in December and raise it by 6.0% in January.

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Abe can still go nuttier. Just watch him. He has one policy only, has been pumping it for 3 years now, and it has failed miserably (as we always said it must). So that’s his career. Next: panic.

Japan Business Lobby Head Won’t Commit To Higher Wages (Reuters)

The head of an influential Japanese business lobby won’t pass on the government’s requests to its members to raise salaries next year, a worrying sign that real wages may not increase fast enough to boost consumption in the country. Higher wages are crucial to policymakers’ efforts to break a decades-long cycle of weak growth and deflation. Prime Minister Shinzo Abe has won modest wage gains from the largest firms, but this has been slow to filter through the economy. Renewed concern about a slowdown in emerging markets and weak overseas demand could make more companies reluctant to raise wages. This could in turn scupper the government’s efforts to increase consumption and put the Bank of Japan’s 2% inflation target out of reach.

“The government is hoping for higher wages, but the Keizai Doyukai, as an organization that corporate executives personally belong to, is not going to tell its members what to do,” said Yoshimitsu Kobayashi, chairman of the Keizai Doyukai, which regularly participates in the government’s corporate policy panels and is one of Japan’s top three business lobbies. “Companies that don’t have money obviously won’t raise wages.” Since taking office in late 2012, Abe has repeatedly asked big business lobbies to encourage their members to raise wages at annual spring salary negotiations with unions. Abe will also raise the minimum wage by about 3% from next fiscal year to encourage salaries to rise more broadly throughout the economy.

Many companies have enjoyed record profits recently, so there is room for these companies to offer their workers higher pay, Kobayashi said. Japanese companies also have the funds needed to increase domestic investment in plants, research and develop their workers’ skills, he said. However, around 65% of people work at small and medium-sized enterprises, many of which are losing money and are therefore unlikely to raise salaries or spend extra money on training employees.

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“Profits of state-owned enterprises among major industrial firms saw a 23% slump in the first 11 months this year..”

China Industrial Profits Fall For Sixth Straight Month (Reuters)

Profits earned by Chinese industrial companies in November fell 1.4% from a year earlier, marking a sixth consecutive month of decline, statistics bureau data showed on Sunday. Industrial profits – which cover large enterprises with annual revenue of more than 20 million yuan ($3.1 million) from their main operations – fell 1.9% in the first 11 months of the year compared with the same period a year earlier, the National Bureau of Statistics (NBS) said on its website. The November profits of industrial firms have seen some improvement from the previous month. In October, profits fell 4.6% from a year earlier. “The November industrial profit data matched earlier output data and they showed some signs of stabilizing, which are in line with recent data from other Asian countries,” said Zhou Hao at Commerzbank in Singapore, adding the figures were slightly better than market expectations.

The NBS said investment returns for industrial companies in November increased from a year earlier by 9.25 billion yuan ($1.43 billion). The jump in November profits from the auto manufacturing and electricity sectors, up 35% and 51% from a year earlier, respectively, helped narrow overall declines, the statistics bureau said. “Declines in industrial profits narrowed in November, but uncertainties still exist,” said He Ping, an official of the Industry Department at NBS. He added that inventory of finished goods grew at a faster pace last month. Profits of state-owned enterprises (SOEs) among major industrial firms saw a 23% slump in the first 11 months this year from the same period in 2014. Mining remained the laggard sector, with profits falling 56.5% in the same period. Aluminum producer China Hongqiao Group said in early December it would cut annual capacity by 250,000 tonnes immediately to curb supplies.

Eight Chinese nickel producers including state-owned Jinchuan Group, said they would cut production by 15,000 tonnes of metal in December and reduce output next year by at least 20% from this year, in a bid to lift prices from their worst slump in over a decade. China’s producer prices have been in negative territory for nearly four years due to weak domestic demand and overcapacity. The country’s top leader last week outlined main economic targets for next year after they held the annual Central Economic Work Conference, where it said the government will push forward “supply-side reform” to help generate new growth engines in the world’s second-largest economy while tackling factory overcapacity and property inventories.

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Hotshots keep disappearing over there. Think they have a luxury resort they all gather in?

Head Of China Telecom ‘Taken Away’ As Probe Launched (AFP)

The head of China Telecom, one of the nation’s big three telecoms firms, is under investigation for “severe disciplinary violations”, the government said Sunday, the latest high-profile target in a corruption crackdown. News of the probe into Chang Xiaobing, 58, was given in a statement on the website of the Central Commission for Discipline Inspection, the watchdog of the ruling Communist Party. The term is normally a euphemism for graft. Chang had been “taken away”, according to an article in the respected business magazine Caijing, which added that he disappeared just days before a meeting of the state-owned company planned for December 28. A memo saying the meeting would be postponed was issued on the evening of the 26th, the article said.

Chang’s phone was switched off and he had not responded to multiple calls, it added. In August, after 11 years as chairman and party secretary of China’s second largest telecoms provider China Unicom, Beijing announced Chang would head China Telecom. That decision, Caijing said, was made despite widespread rumours that the executive was under investigation. It sparked speculation about an imminent tie-up between the two industry leaders and the third major player, China Mobile. In April the state news agency Xinhua reported that China was considering merging scores of its biggest state-owned companies to create around 40 national champions from the existing 111.

Authorities have been pursuing a hard-hitting campaign against allegedly crooked officials since President Xi Jinping took office in 2013, a crusade that some experts have called a political purge. Several high-profile business leaders have been caught up in the web of graft investigations after authorities pledged they would turn their efforts to the state-owned enterprise system, a bulwark of graft that has resisted multiple attempts at reform. The campaign is seen as an attempt to force executives of state firms, who jealously guard their prerogatives, to toe the party line, reducing resistance to structural reforms intended to bolster the slowing economy. Beijing announced it had begun investigations into the country’s telecom industry earlier this year, while Chang was still at China Unicom.

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2016 looks like a black year for steel. And not only steel.

World Steel Chief Calls Chinese Glut ‘Serious And Critical’ (USA Today)

The global steel industry is reeling amid a plunge in steel prices, a flood of low-priced imports from China and other countries, and a collapse in investment in pipes for oil drilling as a result of tumbling crude prices. USA TODAY economics reporter Paul Davidson spoke about these challenges with Wolfgang Eder, chairman of the World Steel Association and CEO of Austrian steel giant Voestalpine. The company has 46,000 employees worldwide and 2,500 workers and nearly two dozen factories in the USA.

Q: U.S. steelmakers are awaiting decisions on trade cases against China for illegally dumping steel below cost in this country. Is this a global problem? A: The current Chinese overcapacity problem affects all parts of the world. Chinese plants (are selling) not only to the U.S. but also to Europe. It’s an intensive discussion of what should be the reaction and an ongoing discussion to what extent Europe should follow the U.S. (in filing trade cases). The problem at the moment is enormous. I do hope we will find some balance again in the next months, but at the moment, the situation is a very serious and critical one.

Q: What’s the long-term solution? A: In the long run, a solution to the problem can only come from the reduction of capacities. According to OECD (countries in the Organization for Economic Cooperation and Development ), there are 600 to 700 million tons of overcapacity (worldwide), the largest part in China. That means permanent pressure on margins and prices.

Q: Is the plunge in steel prices affecting your company, Voestalpine? A: We are not (selling) any material via the spot market. We do have only high-quality steel, and this steel is only sold based on contracts. We are, of course, the (supplier) for the German auto producers — BMW, Mercedes, Audi, Porsche. So we are one of the largest suppliers for these car producers. They are only buying really high-tech, high-quality material where we can differentiate. Two-thirds (of production) is downstream — we make complete automotive components, exteriors of cars, we produce complete rail tracks.

Q: Still, you do make some raw steel, and the drop in prices has affected you, hasn’t it? A: We have started additional cost-cutting measures. We try to avoid layoffs because we do not want to lose highly qualified people. So for the time being, we have (cut staff) in only a very few locations — some in Germany, some in Brazil. And, of course, we try to extend our product range. We intend to sell more automotive parts.

Q: Have you been affected by the downturn in oil and gas drilling? A: We have not yet been affected by the weakness in the oil and gas market, but we do expect, looking forward … the second half (of the fiscal year) will be a really more difficult period. Inventories are extremely high now, of oil and gas, but also inventories for all the production equipment are at very high levels. We cannot expect oil and gas levels will come down quickly over the winter as they have reached levels we have never seen before. So it’s unlikely we’ll see recovery of this segment before the summer of next year.

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The same people eager to claim OPEC no longer functions are just as eager to say OPEC kills US shale.

Shale’s Running Out of Survival Tricks as OPEC Ramps Up Pressure (BBG)

In 2015, the fracking outfits that dot America’s oil-rich plains threw everything they had at $50-a-barrel crude. To cope with the 50% price plunge, they laid off thousands of roughnecks, focused their rigs on the biggest gushers only and used cutting-edge technology to squeeze all the oil they could out of every well. Those efforts, to the surprise of many observers, largely succeeded. As of this month, U.S. oil output remained within 4% of a 43-year high. The problem? Oil’s no longer at $50. It now trades near $35. For an industry that already was pushing its cost-cutting efforts to the limits, the new declines are a devastating blow. These drillers are “not set up to survive oil in the $30s,” said R.T. Dukes at Wood Mackenzie in Houston.

The Energy Information Administration now predicts that companies operating in U.S. shale formations will cut production by a record 570,000 barrels a day in 2016. That’s precisely the kind of capitulation that OPEC is seeking as it floods the world with oil, depressing prices and pressuring the world’s high-cost producers. It’s a high-risk strategy, one whose success will ultimately hinge on whether shale drillers drop out before the financial pain within OPEC nations themselves becomes too great. Drillers including Samson and Magnum Hunter have already filed for bankruptcy. About $99 billion in face value of high-yield energy bonds are trading at distressed prices, according to Bloomberg Intelligence analyst Spencer Cutter.

The BofA Merrill Lynch U.S. High Yield Energy Index has given up almost all of its outperformance since 2001, with the yield reaching its highest level relative to the broader market in at least 10 years. “You are going to see a pickup in bankruptcy filings, a pickup in distressed asset sales and a pickup in distressed debt exchanges,” said Jeff Jones at Blackhill Partners. “And $35 oil will clearly accelerate the distress.”

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“They also question how the new landscape will affect traders such as BP and Trafigura, which signed long-term contracts to buy all the output from those facilities.”

End Of Easy Money For Mini-Refiners Splitting US Shale? (Reuters)

Energy companies and oil trading firms that teamed up to build several mini-refineries that convert a swelling surplus of ultra-light U.S. crude into fuels for export seemed like a pretty safe investment bet for a while. The bet was built on several converging dynamics: an ever-rising supply of condensate; a U.S. refining system built to run heavier crudes; and a longstanding ban on crude exports that appeared unlikely to unwind amid partisan paralysis in Washington, D.C. Now, as U.S. oil output reverses its five-year rise and after lawmakers ended the 40-year-old export ban this month, oil executives and analysts question the wisdom of nearly $1 billion worth of so-called condensate splitters built over the past year, and the future of another $1.2 billion planned.

Traders are wondering what will happen with existing splitters run by companies such as Kinder Morgan. They also question how the new landscape will affect traders such as BP and Trafigura, which signed long-term contracts to buy all the output from those facilities. Other pending projects without guaranteed buyers could be abandoned, experts say. The once-restricted domestic crude not only faces increased competition. It also is hurt by the inversion of the global oil market, where once-abundant U.S. production is declining while global supplies are rising. This has eliminated the price discount that underpinned their model.

“It’s a much different competitive environment now that we don’t have distressed condensate,” said Sandy Fielden, an analyst with RBN Energy. While the same can be said of the nation’s larger, older fleet of full-scale refineries, splitters may be most exposed to the sudden changes, given their dependence on the most deeply discounted variety of oil. “Why would you distill it here if you can distill it elsewhere? The only reason you want to do it here is when it’s cheaper, but now it doesn’t make sense,” said Nick Rados, global business director of feedstocks for IHS Chemical.

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Peanuts.

China Fines Eight Shipping Lines $63 Million for Price Collusion (BBG)

China fined eight shipping lines 407 million yuan ($63 million) in total after finding them responsible for price collusion in the transportation of vehicles and heavy machinery. Japan’s Nippon Yusen, Mitsui OSK lines, Kawasaki Kisen Kaisha and Eastern Car Liner, Korea’s Eukor Car Carriers, Norway’s Wallenius Wilhelmsen, Chile’s Cia. Sud Americana de Vapores and its shipping line were the eight indicted after a year-long investigation, the National Development and Reform Commission said in a statement on its website Monday. The companies acknowledge wrongdoing, the top Chinese economic planning agency said. The probe follows similar investigations by the European Union in 2013 and Japan’s Fair Trade Commission.

Japanese regulators raided the offices of five shipping lines in 2013 over allegations they discussed raising rates together for transporting cars, and imposed fines on Nippon Yusen and Kawasaki Kisen in January 2014. AP Moeller-Maersk, CMA CGMand MSC Mediterranean Shipping were among companies in the European Union probe. Eukor will accept the Chinese decision and pay a fine of 284.7 million yuan, the company said in a statement on its website. The company also has implemented a competition law compliance program and corrective measures including antitrust compliance training, it said. Nippon Yusen has fully cooperated with the investigation by the Chinese agency and consequently received an immunity from the fine, the Japanese company said in a statement.

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Re: Minsky.

The Danger Of Safety (Tengdin)

The US Forest Service was created in 1905. Teddy Roosevelt signed the bill in response to a series of disastrous forest fires, like the Great Hinckley Fire of 1894. These fires threatened future commercial timber supplies, and the Federal Government had begun to establish national forest reserves. Why create them, people wondered, if they were just going to burn down? So the Forest Service established a systematic approach to fire control, building a network of roads, lookout towers, ranger stations, and communications. They also offered financial incentives for states to fight fires. With new technology, like airplanes, smokejumpers, and chemicals, they established their 10 am policy: every fire should be suppressed by 10 am the day following its initial report.

But a funny thing happened: by eliminating fire from the forest ecosystem, a lot of dead wood and other fuel accumulated over time. This insured that when fires did break out, they would become far more destructive. Moreover, scientists noted that fire was an essential part of many plant and tree life cycles. The Forest Service changed its approach from fire control to fire management-letting naturally occurring fires burn, unless they threatened developed areas. Is this part of what led to the Financial Crisis of 2007-2009? During the 25 years prior, economists had noted that more effective bank regulation and monetary policy had led to a “Great Moderation”-a significant dampening of the business cycle in the US and other developed nations.

It’s possible that reduced economic volatility led investors, homeowners, and banks to take on greater risks. In essence, the Fed’s policy of fire suppression allowed toxic assets to be created and distributed throughout the financial ecosystem. Highly regulated (and insured) banks were replaced by (uninsured) shadow banks. These assumed particular risks and contributed to a culture of increased systemic risk. When some of their assets began to unravel, it was impossible to contain the damage. We find a sort of risk-homeostasis in other areas. Anti-lock brakes encourage more aggressive driving; better skydiving gear allows hazardous high-speed maneuvers close to the ground. This is sometimes called the Peltzman effect: people behave as if they want a certain level of risk in their lives.

This appears to be the case with ecosystems and economies, too. Are safety measures useless, then? Absolutely not! The rate of accidental fatalities has fallen dramatically over time, and there are also fewer bank failures. But like the US Forest Service, we need to focus on risk management rather than risk reduction. Don’t assume government regulators will control your financial risks. Diversification, analysis, and-above all-not paying too much are still crucial, and always will be. The biggest risk, after all, is believing that we aren’t taking any risk. In a dynamic world, that’s guaranteed to fail.

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Britain lost decades not acting on what was already obvious all those years ago.

Britain Needs Dutch-Style Delta Plan To Stem Tide Of Floods (Guardian)

When more than 1,800 people died in the wake of the 1953 North Sea flood in the Netherlands, the national reaction was: never again. The resulting Delta programme to close off the south-western river delta from the sea was so bold that its name became synonymous with dealing with a crisis. If an issue needs a major response, you can be sure that a Dutch politician will call for a “Delta plan to tackle X”. It is time that the UK took some of that attitude and got a Delta plan to tackle flooding. Flooding has become an almost annual event in the UK. We are waiting for the next storm and flash flood to hit, with another group – or even the same group – of people evacuated, all followed by the promise of some money for a bit of flood defence work. As a nation, we can no longer afford to accept that.

Consider the personal misery for those affected, even in areas not traditionally flood-prone like Manchester and Leeds. Consider that the financial cost of these events will continue to rise – and not only for the government. Every home insurance policy now includes a £10.50 Flood Re levy to subsidise insurance for homes with a high risk of flooding. With the climate changing and becoming more volatile, we can expect heavier rain and more severe storms. Water management systems in the UK, and in particular in England, are unable to deal with what lies ahead. After almost every flood, journalists and policymakers go to the Netherlands to learn how they are adapting to climate change and what lessons there are for the UK. We see Dutch projects in the news, such as a neighbourhood with floating homes that forms part of a major national programme to create space for the rivers.

But those lessons never seem to be taken on board. Come the next flood, off they all go to Holland again. For the Dutch, water management goes to the core of their national identity. The country was forged in the battle against water. This common fight led to the pooling of resources and decision-making in regional water authorities – among the oldest democratic institutions in the world – which continue that work today. The national habit of consensus decision-making in tackling major issues became known internationally in the 90s as the “polder model”, echoing its water-based roots. No Dutch politician wants to be part of the generation that fails in the common endeavour against water, and no voter would accept someone caught sleeping on their watch.

The Netherlands has adapted to the changing nature of the threat. Today, the biggest danger is not the sea swallowing the land but the rain overwhelming it. The main focus no longer is building higher dykes and bigger dams, like they did after the 1953 flood. Instead, the Dutch have spent the past decade deepening and widening rivers, creating new side canals that provide extra capacity, and setting aside land as dedicated flood plains. This €2.3bn project is still ongoing. All this so that when the water does come, the swollen rivers can expand without flooding homes and causing misery. In Britain, we need to start to realise and accept that flooding is becoming an equally existential issue. There can be no northern powerhouse or sustainable prosperity anywhere if it risks being swept away by the rain.

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Putin won.

US Sees Bearable Costs, Key Goals Met For Russia In Syria So Far (Reuters)

Three months into his military intervention in Syria, Russian President Vladimir Putin has achieved his central goal of stabilizing the Assad government and, with the costs relatively low, could sustain military operations at this level for years, U.S. officials and military analysts say. That assessment comes despite public assertions by President Barack Obama and top aides that Putin has embarked on an ill-conceived mission in support of Syrian President Bashar al-Assad that it will struggle to afford and that will likely fail. “I think it’s indisputable that the Assad regime, with Russian military support, is probably in a safer position than it was,” said a senior administration official, who requested anonymity. Five other U.S. officials interviewed by Reuters concurred with the view that the Russian mission has been mostly successful so far and is facing relatively low costs.

The U.S. officials stressed that Putin could face serious problems the longer his involvement in the more than four-year-old civil war drags on. Yet since its campaign began on Sept. 30, Russia has suffered minimal casualties and, despite domestic fiscal woes, is handily covering the operation’s cost, which analysts estimate at $1-2 billion a year. The war is being funded from Russia’s regular annual defense budget of about $54 billion, a U.S. intelligence official said. The expense, analysts and officials said, is being kept in check by plummeting oil prices that, while hurting Russia’s overall economy, has helped its defense budget stretch further by reducing the costs of fueling aircraft and ships. It has also been able to tap a stockpile of conventional bombs dating to the Soviet era.

Putin has said his intervention is aimed at stabilizing the Assad government and helping it fight the Islamic State group, though Western officials and Syrian opposition groups say its air strikes mostly have targeted moderate rebels. Russia’s Syrian and Iranian partners have made few major territorial gains. Yet Putin’s intervention has halted the opposition’s momentum, allowing pro-Assad forces to take the offensive. Prior to Russia’s military action, U.S. and Western officials said, Assad’s government looked increasingly threatened.

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Let’s all buy shares!

US Foreign Arms Deals Increased Nearly $10 Billion in 2014 (NY Times)

Foreign arms sales by the United States jumped by almost $10 billion in 2014, about 35%, even as the global weapons market remained flat and competition among suppliers increased, a new congressional study has found. American weapons receipts rose to $36.2 billion in 2014 from $26.7 billion the year before, bolstered by multibillion-dollar agreements with Qatar, Saudi Arabia and South Korea. Those deals and others ensured that the United States remained the single largest provider of arms around the world last year, controlling just over 50% of the market. Russia followed the United States as the top weapons supplier, completing $10.2 billion in sales, compared with $10.3 billion in 2013.

Sweden was third, with roughly $5.5 billion in sales, followed by France with $4.4 billion and China with $2.2 billion. South Korea, a key American ally, was the world’s top weapons buyer in 2014, completing $7.8 billion in contracts. It has faced continued tensions with neighboring North Korea in recent years over the North’s nuclear weapons program and other provocations. The bulk of South Korea’s purchases, worth more than $7 billion, were made with the United States and included transport helicopters and related support, as well as advanced unmanned aerial surveillance vehicles. Iraq followed South Korea, with $7.3 billion in purchases intended to build up its military in the wake of the American troop withdrawal there.

Brazil, another developing nation building its military force, was third with $6.5 billion worth of purchase agreements, primarily for Swedish aircraft. The report to Congress found that total global arms sales rose slightly in 2014 to $71.8 billion, from $70.1 billion in 2013. Despite that increase, the report concluded that “the international arms market is not likely growing over all,” because of “the weakened state of the global economy.”

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What better sign is there of our collective insanity?

Britain’s New, Open Way to Sell Arms (BBG)

Champion cyclist Ryan Perry, a British army captain, was uncharacteristically tipsy the night of Nov. 25, but no one could blame him for enjoying the Champagne. Standing on the stage of a grand 15th century hall in London, the 28-year-old cradled a crystal plaque naming him the army’s sportsman of the year. Seated in front of him was one of the British military’s most influential officers, the chief of the general staff, or CGS. “Yesterday I was riding around Burnley in the wind and rain,” Perry told the crowd, referring to his seaside hometown. “Tonight I’m drinking Champagne with CGS.” Attending the banquet were executives from at least 20 contractors for the U.K.’s Ministry of Defence—including U.S.-based arms manufacturers Boeing, Lockheed Martin, and Raytheon.

They raised glasses with senior military officials, many of whom are directly involved in spending some of the $268 billion in defense procurement the U.K. has planned for the next decade. The contractors paid for the black-tie dinner in the historic Guildhall. The corporations are sponsoring the dinner through Team Army, a charity established in 2011 after an antibribery law went into effect in the U.K. The law was enacted following a string of high-profile corruption cases, including some in defense deals. Team Army’s role is to be in the middle of what were once unofficial big-dollar transactions between generals and defense companies. “It’s as clean as we can make the damn thing,” says Lamont Kirkland, a general who ran the army’s boxing, rugby, and winter sports programs before retiring to lead the charity.

Arms makers and other contractors pay Team Army as much as £70,000 ($104,000) for memberships. The members sponsor tables or buy tickets for Champagne receptions and other fêtes. Corporate suites at premier soccer games, rugby matches, and horse races are also used to raise money. Contractors are invited to spend time at the events with the top brass who buy their wares. The charity uses money from the contractors to fund military sports programs, Paralympics, and elite military athletes. Top-draw competitions, including the annual army-navy rugby match at London’s 82,000-seat Twickenham Stadium, are used for more fundraising. Although the official numbers won’t be public until 2016, Team Army raised a record amount this year, Kirkland says. Since 2011 the charity has amassed about $4.5 million for military sports.

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China, US, France, what’s the difference?!

China Passes Antiterrorism Law That Critics Fear May Overreach (NY Times)

China’s legislature approved an antiterrorism law on Sunday after months of international controversy, including criticism from human rights groups, business lobbies and President Obama. Critics had said that the draft version of the law used a recklessly broad definition of terrorism, gave the government new censorship powers and authorized state access to sensitive commercial data. The government argued that the requirements were needed to prevent terrorist attacks. Opponents countered that the new powers could be abused to monitor peaceful citizens and steal technological secrets. Whether the complaints persuaded the government to dilute the bill was not clear: State news media did not immediately publish the text of the new law.

But an official who works for the Standing Committee of the National People’s Congress indicated that at least some rules authorizing greater state access to encrypted data remained in the law. “Not only in China, but also in many places internationally, growing numbers of terrorists are using the Internet to promote and incite terrorism, and are using the Internet to organize, plan and carry out terrorist acts,” the official, Li Shouwei, told a news conference in Beijing. Mr. Li, a criminal law expert, said the antiterrorism law included a requirement that telecommunication and Internet service providers “shall provide technical interfaces, decryption and other technical support and assistance to public security and state security agencies when they are following the law to avert and investigate terrorist activities.”

The approval by the legislature, which is controlled by the Communist Party, came as Beijing has become increasingly jittery about antigovernment violence, especially in the ethnically divided region of Xinjiang in western China, where members of the Uighur minority have been at growing odds with the authorities. Chinese leaders have ordered security forces to be on alert against possible terrorist slaughter of the kind that devastated Paris in November. Over the weekend, the shopping neighborhood of Sanlitun in Beijing was under reinforced guard by People’s Armed Police troops after several foreign embassies, including that of the United States, warned that there were heightened security risks there around Christmas.

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“..Chinese people over the age of 65 will jump 85% to 243 million by 2030..”

China Approves New Two-Child Birth Policy (WSJ)

China’s lawmakers will allow all couples to have two children from the beginning of next year, implementing a new birth policy aimed at mitigating a potential demographic crisis. In a congressional meeting Sunday, Chinese lawmakers approved the new birth policy, which will take effect Jan. 1, 2016, Xinhua reported. Top Communist Party leaders had previously approved the new policy. The announcement sets a timeline for a policy that will replace the country’s controversial 35-year-old one-child policy. The National Health and Family Planning Commission, which implements China’s reproduction policy, said at the time it would move slowly to avoid population spikes. Demographers have warned China’s leaders for the past decade that falling birthrates in the nation may cause a future labor shortage that would endanger economic growth.

China has the world’s largest population at 1.37 billion, but its working-age population -those aged 15 to 64- is shrinking. The United Nations projects the number of Chinese people over the age of 65 will jump 85% to 243 million by 2030, up from 131 million this year. Many health experts say that while the new policy will likely enable up to 100 million couples to have additional children, they don’t expect a baby boom. Many Chinese couples say the cost of having children is prohibitive, and some will opt to have only one child. A previous relaxation of China’s one-child policy did not lead to a significant increase in baby numbers. Health officials previously said they are moving to simplify the birth application procedures for couples, who currently have to go through a complicated procedure that can often take months.

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This is actually an article on some grand projects that do still get built. I like the other side of the coin better.

Greek Construction Sector Shrinks By 63% Since 2011 (Kath.)

As construction continues to slump, the prevalent impression is that all building activity has come grinding to a halt. Yet this is only one side of the coin and mainly concerns private projects. According to data from the Hellenic Statistical Authority (ELSTAT), construction activity (measured by the number of permits issued) throughout the country dropped by 63.47% in the period from 2011 to 2014. Attica has been hit hardest by the economic crisis, with construction nosediving 73.10%, while the greatest losses have been seen in the residential property market. Up until the start of the crisis, 75% of investments in construction went toward residential property. In the third quarter of 2014, this had shrunk to 31%, with losses of €23.29 billion.

This is the “big picture” as a walk around any neighborhood in the Greek capital will attest. But there are also the shining exceptions, projects that were started well before the crisis or that defied the circumstances and forged ahead. The most important similarity between these projects is that they have progressed enough so they are no longer at risk of remaining on paper. And, irrespective of their scale, they are all important, if only on a symbolic level because they create a sense that something is happening, that there is movement in the works.

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Where did they find them?

Germany Hires 8,500 Teachers To Teach German To 196,000 Child Refugees (AFP)

Germany has recruited 8,500 people to teach child refugees German, as the country expects the number of new arrivals to soar past the million mark in 2015, Die Welt daily reported on Sunday. About 196,000 children fleeing war and poverty will enter the German school system this year, and 8,264 “special classes” have been created to help them catch up with their peers, Die Welt said, citing a survey carried out in 16 German federal states. Germany’s education authority says 325,000 school-aged children reached the EU country in 2015 during Europe’s worst migration crisis since the second world war.

Germany expects more than a million asylum seekers this year, which is five times more than in 2014. It has put a strain on its ability to provide services to all the newcomers. “Schools and education administrations have never been confronted with such a challenge,” Brunhild Kurth, who heads the education authority, told Die Welt. “We must accept that this exceptional situation will become the norm for a long time to come.” Heinz-Peter Meidinger, head of the DPhV teachers’ union, said Germany would need up to 20,000 additional teachers to cater for the new numbers. “By next summer, at the latest, we will feel that gap,” he said.

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Better solve this fast.

Refugee Crisis Creates ‘Stateless Generation’ Of Children In Limbo (Guardian)

Europe’s refugee crisis is threatening to compound a hidden problem of statelessness, with experts warning that growing numbers of children are part of an emerging “stateless generation”. Gender-biased nationality laws in Syria combined with ineffective legal safeguards in the EU states mean that many children born to Syrian refugees in Europe are at high risk of becoming stateless – a wretched condition of marginalisation that affects 10 million people worldwide. Under Syrian law, only men can pass citizenship on to their children. The UN estimates that 25% of Syrian refugee households are fatherless. “A lot of those who are resettled to Europe are women whose husband or partner was killed or lost and are being resettled with their kids or are pregnant at the time, so that is becoming a bigger problem,” said Zahra Albarazi of the Institute on Statelessness and Inclusion, based in the Netherlands.

Sanaa* is a 35-year-old single mother who gave birth to her daughter, Siba*, in Berlin last year. “I went to the Syrian embassy and explained my situation but they said they cannot give Siba a passport because the father should be Syrian, and the father and mother married,” Sanaa said. Germany, in common with the rest of Europe, does not automatically grant citizenship to children born there. This means Siba does not have citizenship of any country. Under international treaties including the UN convention on the rights of the child, governments are obliged to grant nationality to any child born on their soil who would otherwise be stateless. But few EU countries have adopted this principle into domestic law and those that have consistently fail to implement it.

The UNHCR refugee agency estimates that at least 680,000 people in Europe are without citizenship of any country, although experts say the true figure is likely to be far higher because stateless people are hard to count. The statelessness problem is particularly bad in south-east Asia: in Myanmar alone the UN estimates there are more than 810,000 stateless people. But the situation in Europe is about to get much worse as a result of the unprecedented migration. Up until now, groups such as the Roma and Russian-speaking people from the Baltics have been most affected, although the UN blames statelessness on a “bewildering array of causes”, with people from a wide range of backgrounds finding they are not legally entitled to citizenship of any country.

No research has been done into the scale of statelessness among the children of Syrian refugees in Europe, but it is thought that many are likely to be in the same position as Siba. Statelessness in Europe can pose huge problems. Experts say many parents are unaware that their children are stateless. Often the children realise they do not have legal citizenship only when they reach adulthood and find they cannot legally work, marry, own property, vote or even graduate from school. [..] The UN says more than 30,000 babies born to Syrian refugees in Lebanon are at risk of statelessness. And research by Refugees International (RI) this year found that many of the 60,000 children born to Syrian refugees in Turkey since 2011 could be in the same position.

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Nov 282015
 
 November 28, 2015  Posted by at 11:26 am Finance Tagged with: , , , , , , , , ,  8 Responses »


Sign on Greece/FYROM border Nov 2015

How black would you like your Thanksgiving Friday slash weekend? Many Americans don’t even appreciate the term, or the events, at all anymore (or so they say), but the idea of getting what you don’t need, or want, on the cheap, will still prove irresistible. But then, when all of your desires have been fulfilled, food wise and gadget wise, and you’re still feeling empty, maybe we can help and offer a sweeping redefinition of the term Black Friday.

Since we live in times that see many other things on the verge of being sweepingly redefined, too, and imminently so, perhaps that’s only fitting. How about this, for starters? Black enough for you?

Six Migrant Children Drown On Way To Greece

Turkish state media say six children have drowned when boats carrying migrants to Greece sank in two incidents off the Turkish coast. A wooden boat smuggling some 20 people to the island of Kos capsized in bad weather off the Aegean resort of Bodrum early on Friday. The state-run Anadolu Agency says most of the migrants made it to shore with the help of rescuers, but two sisters aged 4 and 1 drowned. Their nationalities were not immediately known. The agency says a second boat carrying as many as 55 migrants from Syria and Afghanistan sank hours later off the town of Ayvacik, further north. Four Afghan children drowned in that incident, Anadolu reported. Ayvacik is a main crossing point for migrants trying to reach the island of Lesvos.

Or have we already all gotten too blasé about those dead babies by now? They’ve been washing up on those beaches for half a year or so, after all. How about those who survive the seas, and then get stuck behind a razor wire fence halfway to their preferred destinations?

Remember the men who had sewn their lips shut? Not even that is enough for more than a few hours of media attention anymore. Not nearly as much as being suspected of terrorism; that sells much better than desperation. So, presumably, will being in the way of goods of ‘important’ companies like Sony and HP’s goods reaching their destination, even if you can’t reach yours. Life is all about priorities.

Migrants At FYROM Border Crossing Block Trains

A protest by migrants on Greece’s border with the Former Yugoslav Republic of Macedonia (FYROM) is putting railway operator Trainose at risk of losing major international clients. Migrants have over the last few days been protesting FYROM’s decision not to let them cross from Greece. Many migrants have camped on the railway lines connecting the two countries, which means that no trains have come in or out of Greece for the last week. This means that the freight Trainose is responsible for carrying has not been able to reach its destinations. The railway company serves major international clients such as Hewlett Packard and Sony.

Is there a better way to sum it up than this sign at the Greece/FYROM (Macedonia) border? We doubt it.

Or perhaps there is a better way after all. The absolute cluelessness of Europe’s ‘leaders’. Here’s a brilliant example of the gap between them and the real world:

Refugee Influx Threatens Fall Of EU, Warns Dutch PM

The EU risks suffering the same fate as the Roman empire if it does not regain control of its borders and stop the “massive influx” of refugees from the Middle East and central Asia, the Dutch prime minister has warned. Mark Rutte, whose government assumes the EU’s rotating presidency in January, said southern EU countries had yet to implement policies agreed to stem the flow [..] Mr Rutte said Greece, where more than 700,000 have landed this year, might have to increase its “reception capacity” to at least 100,000. Athens has so far committed to about half that, insisting that it does not want to become a giant refugee camp.

“As we all know from the Roman empire, big empires go down if the borders are not well-protected”, said Mr Rutte in an interview with a group of international newspapers. “So we really have an imperative that it is handled.” [..] Mr Rutte said the EU needed to act quickly to stem the migrant flow, adding that he was optimistic that Sunday’s summit in Brussels between President Recep Tayyip Erdogan of Turkey and EU leaders would help ease conditions by providing €3 billion to improve refugee camps in Turkey and disrupting the “business model” of human smugglers channelling migrants in boats to Greece.

It’s all still about ‘stemming the flow’. Actually, it’s more about that by the day, and that’s precisely because ‘stemming the flow’ doesn’t work. The idea is that the Greeks do more .. yeah, what exactly? Tell dinghies loaded with desperate refugee families, half of whom suffer from hypothermia, that they should turn around? What, to get back to Turkey? So Turkey can send them back to Syria?

That’s just nonsense, of course, the product of malfunctioning neurons. Then again, there’s too much of those going around Europe to mention. The above quote is more remarkable for a few other things. First, to claim that the Roman empire went down because it didn’t protect its borders is so contentious no serious historian would want to claim it as his/her own.

And that’s without asking how the Romans should have implemented that protection. Second, say we take Mr. Rutte’s assertion at face value, then the only peoples those borders should have been protected from, the ones who actually sacked Rome, were the Barbarians. Rutte, ergo, compares the Syrian refugees to Barbarians. And that doesn’t look all that smart.

And now that the article mentions Erdogan, and the €3 billion he’s been promised by Europe, as well as the fast track route into EU membership, let’s see what he has to contribute to Black Weekend.

First off, he had two prominent journalists arrested on espionage and related charges for publishing an article way back in May about his own secret service people smuggling arms across Turkey’s border with Syria. And Brussels is going to reward this interpretation of ‘freedom of the press’ with €3 billion?

Then of course he had a Russian jet shot down this week, maybe just as a patsy to the US -or others-, maybe to avenge Russian bombs falling on transports such as that conducted by those same secret services, or oil deliveries from ISIS managed by his son. That’s Erdogan’s Thanksgiving Turkey: Arms out, oil in.

What should be clear is that shooting down a Russian plane, and under questionable pretext to boot, is not done. Whether you do it to please someone else or just yourself. Turkey will lose a lot more than those €3 billion in tourism and trade with Russia once Putin gets on Erdogan’s case for real (and Russia will not forgive this no matter what other policies need attention), so Brussels can figure out where the money will go. Russian tourism in Turkey alone brings in $2.7 billion a year. And it’s been halted.

Turkey claims it gave 10 warnings to a plane that might have been in its airspace for 17 seconds (a highly contested claim), only to shoot it in Syrian airspace?! It claims it hadn’t recognized the plane as being Russian? Since they apparently fire at anything that moves, what do we think would have happened if this had been an American plane? Or a French one? There doesn’t seem to be anything Turkey has said about the incident that rings true.

But then, that’s the case for so many things so many people say. In the meantime, our morality -let alone the high ground- is washing up on Greek beaches with those babies whose lives our societies don’t deem worth saving, the lives we judge to be not worthy of living.

Our honesty, our sense of fairness, our decency, basically all things that various prophets have proclaimed are the most important qualities in life, are washing up lifeless on cold deserted patches of sand. And ‘we’ are seeking to further vilify Russia and tempt it into acts we ‘must’ respond to. We are aligning ourselves to that end with Erdogan and Saudi Arabia, the main supporters of those we claim in public to be at war with.

Here’s how this works: If the end justifies the means, and we make sure there never is an end to this, then arms will continue to be traded, profits will continue to be made, and lies will be told till no-one can tell up from down, since all means are justified until the end of time.

That this leaves us morally utterly rudderless then becomes just another one of those justified means. Anything goes.