Nov 17

Today’s News November 17, 2015

  • Authoritarian Leftist "Activists" Demand The End Of Free Speech, Extensive Re-Education

    Submitted by Alex Thomas bia,

    Hard left authoritarians at Amherst College have issued a series of demands, under the threat of civil disobedience, that include the complete end of free speech on campus as well as extensive re-education for offenders.

    The demands, issued in support of the so-called uprising at the University of Missouri, read like a literal fascist manifesto and are conclusive proof that the mainstream media supported protests at multiple colleges over the last few weeks are not about racial equality but rather are about totally and completely shutting down the speech of anyone who disagrees with the opinions of the protesters.

    The fact that the group is attempting to get the President of a major university to sign off on re-education classes and punishment for anyone who speaks about free speech or says all lives matter is a startling reminder of the extreme authoritarianism that runs through the veins of the college hard left.

    Here are the demands. Take note of the outright fascism.

    We, Students of Amherst College, refuse to accept the negative social climate created towards our peers of color and other marginalized groups. We have begun this movement, Amherst Uprising, in an effort to change the status quo for a more just and inclusive environment within our campus. We demand that Amherst become a leader in the fight to promote a better social climate towards individuals who have been systematically oppressed. Student leaders acknowledge and support the demands previously stated and currently being presented. Furthermore, we demand the College acknowledge its ethical and moral responsibilities as an institution and community of our world. Amherst College should not be complicit in oppressive organizations and systems, no less.


    We as a compassionate student body have gathered to address the legacy of oppression on campus. If these goals are not initiated within the next 24 to 48 hours, and completed by November 18th, we will organize and respond in a radical manner, through civil disobedience. If there is a continued failure to meet our demands, it will result in an escalation of our response.


    1.    President Martin must issue a statement of apology to students, alumni and former students, faculty, administration and staff who have been victims of several injustices including but not limited to our institutional legacy of white supremacy, colonialism, anti-black racism, anti-Latinx racism, anti-Native American racism, anti-Native/ indigenous racism, anti-Asian racism, anti-Middle Eastern racism, heterosexism, cis-sexism, xenophobia, anti-Semitism, ableism, mental health stigma, and classism. Also include that marginalized communities and their allies should feel safe at Amherst College.


    2.    We demand Cullen Murphy ‘74, Chairman of the Board of Trustees, to issue a statement of apology to students, alumni and former students, faculty, administration, and staff who have been victims of several injustices including but not limited to our institutional legacy of white supremacy, colonialism, anti-black racism, anti-Latinx racism, anti-Native American racism, anti-Native/ indigenous racism, anti-Asian racism, anti-Middle Eastern racism, heterosexism, cis-sexism, xenophobia, anti-Semitism, ableism, mental health stigma, and classism


    3.     Amherst College Police Department must issue a statement of protection and defense from any form of violence, threats, or retaliation of any kind resulting from this movement.


    4.   President Martin must issue a statement of apology to faculty, staff and administrators of color as well as their allies, neither of whom were provided a safe space for them to thrive while at Amherst College.


    5.    President Martin must issue a statement to the Amherst College community at large that states we do not tolerate the actions of student(s) who posted the “All Lives Matter” posters, and the “Free Speech” posters that stated that “in memoriam of the true victim of the Missouri Protests: Free Speech.” Also let the student body know that it was racially insensitive to the students of color on our college campus and beyond who are victim to racial harassment and death threats; alert them that Student Affairs may require them to go through the Disciplinary Process if a formal complaint is filed, and that they will be required to attend extensive training for racial and cultural competency.


    6.     President Martin must issue a statement of support for the revision of the Honor Code to reflect a zero-tolerance policy for racial insensitivity and hate speech.


    7.     President Martin must release a statement by Friday, November 13th, 2015 by 5:00pm that condemns the inherent racist nature of the unofficial mascot, the Lord Jeff, and circulate it to the student body, faculty, alumni, and Board of Trustees. This will be followed up by the encouraged removal of all imagery including but not limited to apparel, memorabilia, facilities, etc. for Amherst College and all of its affiliates via a phasing out process within the next year.


    8.     Dean Epstein must ask faculty to excuse all students from all 5 College classes, work shifts, and assignments from November 12th, 2015 to November 13th, 2015 given their organization of and attendance at the Sit-In.


    9.     Do not threaten the jobs of the faculty, staff, or administrators that support our list of demands. Such threats will result in an escalation of our response.


    10.   The Office of Alumni and Parent Programs must send former students an email of current events on campus including a statement that Amherst College does not condone any racist or culturally insensitive reactions to this information.


    11.   Dean Epstein must encourage faculty to provide a space for students to discuss this week’s events during class time.


    Please acknowledge that all of these statements of apology are not the end all – that they are only a part of short-term healing and by no means achieve all of the goals we will set forth. We are in the process of finalizing long-term goals which we hope to collaborate on regularly with all members of the community.

    While most of the demands are ludicrous in their own right, demand number five literally calls for punishing students who want all lives to matter and who displayed this horrific flyer on campus.

    free speech flyer

    There you have it. The demands of the “Amherst Uprising” include literally disciplining and then reeducating students for speaking out in support of free speech.

    There is simply no middle ground here. You are either an outright fascist who wants to institute a kind of leftist thought police on college campuses or you are fighting against this.

    Leftist news outlets such as Salon have spent the last week publishing article after article about how the student protests are not about censorship, claims that we now know to be transparent lies. Any organization or person that gets behind these demands must be exposed. This is not the time to play nice.

  • "It's Getting Worse" – Visualizing 14 Years Of Terror In Western Europe

    Who is really winning the “war on terror”?



    Chart: The Economist

  • Copper Is Crashing In China

    Shanghai Copper is down 4.6%, hitting fresh cycle lows not seen since March 2009. No clear catalyst is evident for now aside from stronger USDollar, Codelco’s cuts, and more chatter of CCFD unwinds. If COMEX Copper holds these losses, it will be down for 10 straight days – the longest on record from what we could tell.

    Copper is crashing in China…


    To lows not seen since March 2009…


    The USDollar is pushing higher, weighing broadly on commodities. Also continued forced liquidations in CCFDsis not helping as hope for a low evaporates. However, it appears the Codelco cuts are the most prescient…

    Concerns metals demand is ebbing deepened as Codelco, the biggest copper producer, cut its surcharge for sales to China by 26 percent next year, according to two buyers. The reduction highlighted waning consumption in the Asian country.


    Obviously the tragic developments in Paris have caused a capital flight out of metal and into safety. Secondly, collapsing physical premiums for metal being imported into China really underscores how anemic demand is there.”


    China is facing an unprecedented drop in refined copper imports as a slowing economy erodes demand, according to one of the country’s largest buyers. Shipments to the country will shrink 10 percent next year, Stephen Huang, chief executive officer of trading house Arc Resources Co., said in an interview.

    Charts: Bloomberg

  • What Did VIX Know? The Mysterious Link Between Terrorist Attacks & Rising Risk

    Correlation is, of course, not correlation; but following our earlier coincidental chart on the extraordinary drop (and recent rise) in VIX today – after the worst terrorist attack in a decade…




    We found some additionally 'odd' research by,showing that this is not the first time that VIX has 'predicted' a terrorist attack

    Earlier today we published an analysis by Nik Crepaldi highlighting the fact that the VIX Index rose in the week preceding the Paris Attacks. Hereafter I extended the analysis to cover some of the most notable Al-Qaeda/ISIS-related terrorist acts since 9/11.

    But firstly, let us briefly define the VIX Index. VIX is a trademarked ticker symbol for the CBOE Volatility Index, a popular measure of the implied volatility of S&P 500 index options; the VIX is calculated by the Chicago Board Options Exchange (CBOE). Often referred to as the fear index or the fear gauge, the VIX represents one measure of the market’s expectation of stock market volatility over the next 30-day period.

    Observed events

    • 13 November 2015: Paris Attacks
    • 7 January 2015: Charlie Hebdo Shootings, Paris
    • 7 July 2005: London Bombings
    • 11 March 2004: Madrid Train Bombings
    • 11 September 2001: World Trade Centre, New York


    As previously noted, VIX is intended to be a forward-looking index, predominantly focussing on US stocks. However, the author of this research observed the following:

    • in all the instances the Index increased in the 5 trading days prior to the terrorist event i.e. the VIX closing value on day -5 is always lower than the close on the day of the event;
    • with the except of 9/11, the VIX Index closed lower on the day following the attacks;
    • on 9/11 the VIX did not trade as the attacks struck the Twin Towers before the Chicago Stock Exchange opened. Additionally, normal trading activity did not resume until 17 September 2001.











    Preliminary conclusions

    The above mentioned patterns may indeed have happened by chance, i.e. other elements may have determined the VIX Index to increase prior to the terrorist acts (on the broad assumption that the markets, of course, could not possibly anticipate their occurrence)…

    Or not…

  • Japan's Problems Will Not Be Solved By More QE, RBS Warns

    One thing that became abundantly clear about QE long ago even if it hasn’t yet dawned on Mario Draghi or Haruhiko Kuroda, is that the practice of monetizing anything and everything that isn’t tied down (or that you can’t pry from the cold dead hand of an institutional investor), is subject to the law of diminishing returns. 

    Put simply: eventually it just stops working in terms of stimulating aggregate demand and/or boosting growth and inflation expectations.

    Unfortunately, the deleterious effects of QE are not subject to the same dynamic. 

    That is, when you print another say, €750 million to monetize everything from periphery EGBs to SSAs to munis, you invariably impair market liquidity on the way to creating the conditions for dangerous bouts of volatility (see the great bund VaR shock for instance). 

    Of course when you go full-Kuroda and simply corner the market for ETFs by stepping in to provide plunge protection at the first sign of Nikkei weakness, there’s no telling what kind of chaos you’ve set everyone up for once you step out of the market. Meanwhile, the mad dash to inflate the value of stocks and bonds has served to create enormous bubbles not only in those assets, but also in the things people who hold those assets are likely to buy when they get bored – like real estate and high end art. 

    In short, the drug addiction analogy (as cliche as it now is) still holds up remarkably well. For a drug addict, the benefits (i.e. the high) diminishes the more the addiction grows, but the harmful effects on the body do not. It’s the same thing with QE. The initial “high” wears off, but the asset bubbles only grow. 

    Nowhere is this more apparent than in Japan where just last night, we witnessed the unprecedented “quintuple recession”: 

    As if that wasn’t bad enough, Japanese business spending dropped 1.3% QoQ – its worst drop since Q2 2014.

    Of course the Nikkei is doing just fine, surging right alongside the BoJ’s balance sheet.

    In honor of Kuroda and his special brand of Peter Pan-inspired, neo-Keynesian madness, we present a bit of color from RBS’ Alberto Gallo on Japan and QQE.:

    QE infinity? Japan re-enters into recession; the Economy Minister suggests that labour unions are still stuck in a deflationary mind-set. The Japanese economy suffered a technical recession again in Q3, contracting -0.8% QoQ on an annualised basis, following a -0.7% drop in Q2.

    Inflation has also fallen back again, reaching 0% in September (below). One major reason for this is weak wage growth. 


    Why has QQE failed to boost growth and inflation for Japan? Cyclical tools are insufficient to tackle the country’s structural issues. Japan’s problem started in the 1980s, when firms increased debt by 14% of GDP per year to reach 130% of GDP by 1995 (BoJ). This was followed by two decades of slow corporate deleveraging, deflation/weak inflation, near-zero interest rates and compressed bond yields, albeit with few bond defaults. Under PM Abe, the Bank of Japan has stepped up monetary easing by initiating the Quantitative and Qualitative Easing (QQE) programme in April 2013 and expanding it in October 2014. 

    However, the issues faced by Japan are more structural, including an ageing population, low investment appetite for corporates and a widespread deflationary mindset as suggested by Amari. 


    Japan’s experience suggests that QE has its limits, and could bring a range of side effects, in our view. These include years of tepid growth (see below), the reduction in secondary trading liquidity, an increase in asset ownership by central banks (the BoJ now owns half of the national ETF market), potential formation of asset bubbles and social problems like inequality.



    Ok, so in other words: Kuroda isn’t going to be able cure the country’s structural problems which include the well worn issue of Japanese demographics as well the much maligned “deflationary mindset” which seems largely immune to the hum of the BoJ’s prinitng press. Nevertheless, Japan is all-in and is apparently prepared to keep the pedal to the floor until 2018 when, as we’ve documented extensively, the game will officially be up (see here for instance).

    In the meantime, as Gallo rightly points out, you can expect an impaired secondary market for JGBs, asset bubbles, and rising inequality (all outcomes we’ve discussed at great length) as Kuroda triples, quadruples, and quintuples down on policies that now seem to be producing around one recession per QE iteration. 

    Summed up…

  • The Saudis Are Stumbling (And They May Take The Middle-East Down With Them)

    Submitted by Conn Hallina via,

    For the past eight decades Saudi Arabia has been careful.

    Using its vast oil wealth, it’s quietly spread its ultra-conservative brand of Islam throughout the Muslim world, secretly undermined secular regimes in its region, and prudently kept to the shadows while others did the fighting and dying. It was Saudi money that fueled the Mujahedeen in Afghanistan, underwrote Saddam Hussein’s invasion of Iran, and bankrolled Islamic movements and terrorist groups from the Caucasus to the Hindu Kush.

    It wasn’t a modest foreign policy, but it was a discreet one.

    Today that circumspect diplomacy is in ruins, and the House of Saud looks more vulnerable than it has since the country was founded in 1926. Unraveling the reasons for the current train wreck is a study in how easily hubris, delusion, and old-fashioned ineptness can trump even bottomless wealth.

    Oil Slick

    The kingdom’s first stumble was a strategic decision last fall to undermine competitors by scaling up its oil production and thus lowering the global price.

    They figured that if the price of a barrel of oil dropped from over $100 to around $80, it would strangle competitors that relied on more expensive sources and new technologies, including the U.S. fracking industry, companies exploring the Arctic, and emergent producers like Brazil. That, in turn, would allow Riyadh to reclaim its shrinking share of the energy market. There was also the added benefit that lower oil prices would damage oil-reliant countries that the Saudis didn’t like – including Russia, Venezuela, Ecuador, and Iran.

    In one sense it worked. The American fracking industry is scaling back, the exploitation of Canada’s tar sands has slowed, and many Arctic drillers have closed up shop. And indeed, countries like Venezuela, Ecuador, and Russia have taken serious economic hits.

    But it may have worked a little too well, particularly with China’s economic slowdown reducing demand and further depressing the price – a result that should have been entirely foreseeable but that the Saudis somehow missed.

    The price of oil dropped from $115 a barrel in June 2014 to around $44 today. While it costs less than $10 to produce a barrel of Saudi oil, the Saudis need a price between $95 and $105 to balance their budget. The country’s leaders, who figured that oil wouldn’t fall below $80 a barrel – and then only for a few months – are now burning through their foreign reserves to make up the difference.

    While oil prices will likely rise over the next five years, projections are that the price per barrel won’t top $65 for the foreseeable future. Saudi debt is on schedule to rise from 6.7 percent of GDP this year to 17.3 percent next year, and its 2015 budget deficit is $130 billion.

    The country is now spending $10 billion a month in foreign exchange reserves to pay the bills and has been forced to borrow money on the international financial market. Recently the International Monetary Fund’s regional director, Masood Ahmed, warned Riyadh that the country would deplete its financial reserves in five years unless it drastically cut its budget.

    Buying the Peace (While Funding War)

    But the kingdom can’t do that.

    When the Arab Spring broke out in 2011, Saudi Arabia headed it off by pumping $130 billion into the economy, raising wages, improving services, and providing jobs for its growing population. Saudi Arabia has one of the youngest populations in the Middle East, many of whom are unemployed and poorly educated. Some 25 percent of the population lives in poverty. Money keeps the lid on, but – even with the heavy-handed repression that characterizes Saudi political life – for how long?

    Meanwhile they’re racking up bills with ill-advised foreign interventions. In March, the kingdom intervened in Yemen’s civil conflict, launching an air war, a naval blockade, and partial ground campaign on the pretense that Iran was behind one of the war’s factions – a conclusion not even the Americans agree with.

    Again, the Saudis miscalculated, even though one of their major allies, Pakistan, warned them they were headed for trouble. In part, the kingdom’s hubris was fed by the illusion that US support would make it a short war. The Americans are arming the Saudis, supplying them with bombing targets, backing up the naval blockade, and refueling their warplanes in midair.

    But six months down the line the conflict has turned into a stalemate. The war has killed 5,000 people (including over 500 children), flattened cities, and alienated much of the local population. It’s also generated a horrendous food and medical crisis and created opportunities for the Islamic State and al-Qaeda to seize territory in southern Yemen. Efforts by the UN to investigate the possibility of war crimes were blocked by Saudi Arabia and the US

    As the Saudis are finding out, war is a very expensive business – a burden they could meet under normal circumstances, but not when the price of the kingdom’s only commodity, oil, is plummeting.

    Nor is Yemen the only war that the Saudis are involved in. Riyadh, along with Qatar and the United Arab Emirates, are underwriting many of the groups trying to overthrow Syrian president Bashar al-Assad. When antigovernment demonstrations broke out there in 2011, the Saudis – along with the Americans and the Turks – calculated that Assad could be toppled in a few months.

    But that was magical thinking. As bad as Assad is, a lot of Syrians – particularly minorities like Shiites, Christians, and Druze – were far more afraid of the Islamists from al-Qaeda and the Islamic State than they were of their own government. So the war has dragged on for four years and has now killed close to 250,000 people.

    Once again, the Saudis miscalculated, though in this case they were hardly alone. The Syrian government turned out to be more resilient than it appeared. And Riyadh’s bottom line that Assad had to go just ended up bringing Iran and Russia into the picture, checkmating any direct intervention by the anti-Assad coalition. Any attempt to establish a no-fly zone against Assad will now have to confront the Russian air force – not something that anyone other than certain US presidential aspirants are eager to do.

    The war has also generated a flood of refugees, deeply alarming the European Union, which finally seems to be listening to Moscow’s point about the consequences of overthrowing governments without a plan for who takes over. There’s nothing like millions of refugees headed in your direction to cause some serious rethinking of strategic goals.

    The Saudis goal of isolating Iran, meanwhile, is rapidly collapsing. The P5+1 – the US, China, Russia, Great Britain, France, and Germany – successfully completed a nuclear agreement with Tehran, despite every effort by the Saudis and Israel to torpedo it. And at Moscow’s insistence, Washington has reversed its opposition to Iran being included in peace talks around Syria.

    Bills Coming Due

    Stymied in Syria, mired down in Yemen, and its finances increasingly fragile, the kingdom also faces internal unrest from its long marginalized Shia minority in the country’s east and south. To top it off, the Islamic State has called for the “liberation” of Mecca from the House of Saud and launched a bombing campaign aimed at the Kingdom’s Shiites.

    This fall’s Hajj disaster – a stampede that killed more than 2,100 pilgrims and provoked anger at the Saudi authorities for their foot dragging on investigating it – have added to the royal family’s woes. The Saudis claim just 769 people were killed, a figure that no other country in the world accepts. And there are persistent rumors that the deadly stampede was caused when police blocked off an area in order to allow high-ranking Saudis special access to the holy sites.

    Some of these missteps can be laid at the feet of the new king, Salman bin Abdulaziz Al Saud, and of a younger, more aggressive generation of Saudis he’s appointed to key positions. But Saudi Arabia’s troubles are also a reflection of a Middle East in transition. Exactly where it’s headed is by no means clear, but change is in the wind.

    Iran is breaking out of its isolation. With its large, well-educated population, strong industrial base, and plentiful energy resources, it’s poised to play a major regional, if not international, role. Turkey is in the midst of a political upheaval, and there’s growing opposition among Turks to Ankara’s meddling in the Syrian civil war.

    Saudi Arabia, on the other hand, is impaled on its own policies, both foreign and domestic. “The expensive social contract between the Royal family and Saudi citizens will get more difficult, and eventually impossible to sustain if oil prices don’t recover,” Meghan L. O’Sullivan, director of the Geopolitics of Energy project at Harvard, told the New York Times.

    However, the House of Saud has little choice but to keep pumping oil to pay for its wars and keep the internal peace. Yet more production drives down prices even further. And once the sanctions come off Iran, the oil glut will become worse.

    While it’s still immensely wealthy, there are lots of bills coming due. It’s not clear the kingdom has the capital or the ability to meet them.

  • Meet The 27-Year Old "Mastermind" Behind The Paris Attacks

    Behold! A terrorist “mastermind”: 

    That’s Abdelhamid Abaaoud, the 27-year old Belgian/ Moroccan that, as we outlined on Monday, is the alleged ringleader of the attacks that killed 129 in Paris last Friday. 

    Oh what a difference a decade makes. Compare and contrast: 

    But you know what they say, “you can’t judge a jihadist book by its cover,” and by all accounts, Abaaoud isn’t as friendly in person as he appears in the photos shown above – at least not if you’re an infidel. 

    Abaaoud apparently popped onto authorities’ radar screens after a January raid in Verviers, Belgium where police claimed to have disrupted an ISIS cell just prior to an attack. 

    “This was in the framework of an operation looking into an operational cell made up of people, some of whom coming back from Syria. The investigation made it possible to determine that the group was about to carry out major terrorist attacks in Belgium imminently,” prosecutor’s spokesman Thierry Werts said at the time. 

    Three people were targeted during the raid, two of whom were killed after a shootout with police. Here’s video footage shot by a neighbor:

    According to CNN, “Abaaoud, who lived at one point in Molenbeek — where several raids were conducted Monday — was apparently in touch by phone with the three ISIS fighters targeted in the January raid. In the weeks preceding that raid, Belgian counterterrorism agencies traced the calls to a cell phone in Greece that they believed was being used by Abaaoud.”

    Here is Abaaoud’s account of the battle as published in Dabiq (embedded below): 

    Dabiq: What happened on the day of the battle with the Belgian authorities? 


    Abaaoud: Abuz-Zubayr and Abu Khalid were together and had their weapons and explosives ready. The kuffar raided the place with more than 150 soldiers from both French and Belgian special forces units. After a gun battle that lasted about 10 minutes, both brothers were blessed with shahadah, which is what they had desired for so long. I ask Allah to accept them both.

    So commandos raided the safehouse and Abaaoud’s operatives were shot and killed. Got it. Here’s Abaaoud with the two men killed in Belgium:

    Anyway, Abaaoud was apparently the cell’s link to the ISIS senior command (the ones in Raqqa not the ones at Langley). According to Abaaoud (who quite possibly had delusions of grandeur at the time of the Dabiq interview), Belgium “gathered intelligence agents from all over the world” in a futile attempt to track him down after the Verviers raid.

    After being “chased by all those intelligence agents,” Abaaoud escaped to Syria after Allah “blinded [the authorities’] vision.”

    Shortly after the attacks, journalist Etienne Huver obtained Abaaoud’s cell phone (Abaaoud told Dabiq it was “lost” and later “sold” to a Western journalist). Huver aired the footage. Here it is:

    And here’s some color, Google translated from the original RTBF piece:

    An exceptional document 7 on A. The contents of the cell phone the most wanted man in Europe. Abdelhamid Abaaoud, the alleged sponsor of foiled attacks last week leading the jihad in Syria as if it were vacation. The fighting and atrocities and more.


    These images are not images of propaganda, it is the mobile phone of the contents of a jihadist wanted by all Europe, Abdelhamid Abaaoud, the alleged sponsor of foiled attacks last week in Belgium.


    The first images are uplifting banality. Around pictures, charming images, some cartoons … Well no wonder, rather, a fairly standard inventory the contents of a GSM young Belgian. But from January 7, 2014, the data from this device indicate that looking to rent spacious, fast cars, obviously for a long drive.


    We do not find pictures of the trip in his phone but early February snapshots show that has arrived in Syria. Selfies of which is often seen smiling, posing with other fighters.

    As The New York Times reported back in January, “when Abdelhamid Abaaoud, the Belgian-born son of an immigrant shopkeeper from Morocco, went to Syria a year ago to wage jihad, nobody paid much attention.” It was only when “a few months later” Abaaoud brought his own 13-year-old brother to Syria, that people took notice. 

     The younger brother -who is apparently now known as “the youngest jihadi in the world” – left Belgium just after Abbaoud was seen dragging a pile of mutilated bodies from the back of pickup truck (depicted in the video above). Here’s more from The Times:

    Yasmina Abaaoud, Mr. Abaaoud’s older sister, a professional woman who does not wear a veil and now lives in a more upscale area of Brussels, said neither of the brothers who went to Syria ever showed a zealous interest in religion before their departure. “They did not even go to the mosque,” she said.


    The whereabouts of Mr. Abaaoud, also known as Abou Omar Soussi, is not known. His sister Yasmina said the family received calls last fall from Syria saying he had become a “martyr,” meaning he had been killed in battle. She said the family has not heard from him or the younger brother, now 14, since.


    But investigators now believe the “martyr” report was a ruse to try to throw Western intelligence services off his scent so that he could try to re-enter Europe.

    Yes, indeed that now appears to have been a “ruse.” 

    Reports also indicate Abbaoud was behind the train attack that was famously foiled by American soldiers, winning one the medal of honor. “One French official with direct knowledge of the investigation told The Associated Press that Abaaoud is believed to have links to earlier terror attacks that were thwarted: one against a Paris-bound high-speed train that was foiled by three young Americans in August, and the other against a church in the French capital’s suburbs,” AP reported earlier today.

    Whatever his role in the Paris massacre or in any other attacks recently perpetrated in the name of ISIS, the interesting thing here is that this most certainly is not a battle-hardened Mujahideen who earned his stripes fighting the Soviets in Afghanistan.

    No, Abbaoud is just a kid from Belgium. He’s the son of an immigrant shopkeeper from Morocco, he wasn’t religious (according to his sister), and he spent a year at Collège Saint-Pierre, a prestigious Catholic school. Here’s his school picture: 

    With all of the above in mind, we close with two quotes, one from a former classmate, describing Abaaoud and one from Abaaoud himself. 

    From a classmate (translated): “…he liked to do small silly things, it trifouillait in our lockers to put a bit of a mess, but never any flights. He got along well with everyone, it was often with a group of boys who loved playing football, set of classroom atmosphere. It was even a little flirty which was related quite normal with the girls in the class.”


    From Abaaoud: “Are you satisfied with the life you lead, a humiliating life, whether you are in Europe, in Africa, in Arab countries or in America? Are you satisfied with this life, with this life of humiliation? Only violent jihad [can] restore [your] pride and honor. You will find this only in your religion, only in jihad. Is there anything better than jihad or a martyr?”

  • The Delirium Of Milliards – How Monetary Heroin Tempts Hyperinflation

    Submitted by Jefff Thomas via,

    Recently, I received an article by Alasdair Macleod, entitled “Economics of a Crash.” It’s an excellent overview of what’s to come over the next few years.

    In reading the article, I was particularly taken by this reference:

    …we can more easily imagine central bankers being drawn into repeating the mistaken policies of Rudolf Havenstein, president of Germany’s Reichsbank in 1921-1923. In predicting this final crisis for any country that treads down the path of government corruption of its money, the economist von Mises described its manifestation as a crack-up boom, the boom to end all booms, when ordinary people finally realise the worthlessness of government currency and dump it as rapidly as possible for anything they can get hold of.

    Herr Havenstein is a forgotten man today, but he should not be. What he did as President of the Reichsbank in his day should not be forgotten, as the same conditions that existed in Germany back then are just around the bend once again.

    With the coming market crash (what we’ve witnessed recently is just a preview of what’s yet to come), we shall see significant deflation. The central banks, particularly the U.S. Federal Reserve, have for years promised that if deflation rears its ugly head, as it did following the 1929 crash, they will not hesitate to print money unceasingly until the problem is solved. Money creation will be possible at a rate never before seen in history. In 1922-1923 Germany, it was necessary to physically print bank notes and distribute them. Today, all that’s necessary is to type credits into a computer. Billions can be created overnight.

    When this money creation first occurs, there will be prominent support from the media that the central banks are doing what’s necessary to combat deflation. Everyone will support the idea, just as they did in Germany in the 1920s. Trouble is, it won’t work.

    One reason deflation takes place is due to a fall in aggregate demand. An economic crash creates a fear of spending, resulting in lower prices for goods and services. A major crash creates major fear, one that’s unlikely to be overcome by increasing the money in circulation. People will praise the increase in money, whilst continuing to avoid major personal spending. They instead will focus their spending on necessities, such as food, fuel, clothing, etc. The less necessary an item is, the less likely there will be purchasers. As a result, the price of such items will fall.

    Any asset that’s a luxury – boats, motorcycles, luxury homes, etc. will become difficult to unload, causing repeated drops in the asking prices over time.

    Money creation will seem to be a good solution, as it suggests that people will have more of the stuff to spend, but overcoming the fear will take considerable money creation. And money creation has a habit of creating a greater increase in the prices of those goods that people are already focusing their spending on, like consumable commodities. Therefore, commodities will rise in price whilst assets will remain down.

    Since the problem of deflation has not been solved, the central banks will do the only thing they know how to do, create even more money, which in turn creates more price increases in those commodities. Along the way, wages will need to rise to allow people to pay the new, higher prices but, historically, wages never keep pace when dramatic money creation is undertaken.

    The net result is that the average individual will find it harder and harder to put food on the table and fuel in the car, and, in order to cope, will lower the asking price on the assets he’s still trying to unload, which of course signals the central banks that more money creation is needed.

    Historically, this cycle never ends well, but how bad can it get? If we’re fortunate, the fear will be broken at some point by the creation of money. But before we heave a sigh of relief, it’s important to recognise that this happens rarely. And, to my knowledge, it has never happened in an instance in which the cause of the problem was insurmountable debt.

    After World War I, under the Treaty of Versailles, the war’s victors forced Germany to accept a repayment burden for causing the war. The debt level, as it was assessed, was so great that it was virtually impossible to pay. The German people were taxed to a degree that made it difficult to afford necessities. They responded by offering for sale any assets they felt they could do without.

    Enter Rudolf Havenstein, new President of the Reichsbank. Herr Havenstein set about the creation of more money and was widely praised for his action. This caused price increases in commodities, so he created more Papiermarks (the name for the German currency at the time) so that people could pay the increased prices. But the cycle described above kicked in. He then did the only thing he knew how to do, he kept printing.


    Thus began “The Delirium of Milliards,” Milliard being a term for billions. Prices of goods and services rose more and more quickly, as more money was supplied. By mid-1923, hyperinflation was in full swing. Prices rose daily and workmen were paid several times a day to allow them to spend the money, to get rid of it, buying anything tangible, to avoid holding the rapidly inflating fiat currency. Even though bills were printed in ever-higher denominations, people eventually needed baskets, even wheelbarrows, of bank notes to pay for daily needs. Eventually, it took 200 Five Milliarden Mark notes like the one pictured above, issued in Berlin in 1923, to pay for a loaf of bread.

    It’s important to recognise that Herr Havenstein received full support from everyone for his actions, the government, the war’s victors, the communist party, Hitler’s growing contingent, and the people themselves all supported the printing, as it was clearly the most immediate approach to the problem.

    Unfortunately, just as more heroin is the most immediate approach to the problem of heroin addiction, the printing of Papiermarks was headed toward an overdose.

    But, along the way, the hyperinflation created chaos throughout society. It brought out the worst in everyone, fear, greed, panic, class hatred, and corruption.

    Farmers produced bumper crops, but were loath to accept Papiermarks for their goods. Storehouses were full, but people in cities starved. City-dwellers rode out to the farms on their bicycles in gangs, stealing food and killing farmers and any livestock that they couldn’t carry with them. Gluttony became a legally punishable offense. Unlimited fines were imposed upon anyone deemed to be hoarding.

    Demands rose from many factions for a redistribution of wealth, each group thinking that the others should pay more. Transfer of funds was made illegal without government authorisation. All German capital abroad was confiscated. Social entitlements received diminished increases until the amounts being paid became worthless. The taxation system broke down. No one knew what to charge or what to pay.

    New banknotes were being delivered daily in boxcar loads. In October 1923, banknote circulation amounted to 2,496,822,909,038,000,000 and everyone called for more.

    It is this last fact that is most telling, that every group believed that the solution was simply more money. They failed to grasp that what was needed was to simply cease all manipulation of the system and let the free market return. Their failure assured that the only possible outcome was the collapse of the system.

    And so, as crazy as the above seems, it’s likely to happen again, as human nature is the same today as in 1923. Whether the extreme of hyperinflation will occur, we can’t be sure. What is certain however, is that each of us should be prepared.

  • This Is What A Billionaire's Apocalypse Shelter Looks Like

    Back in June we presented the latest (and only) product from Vivos: a company which specializes in creating the ultimate in luxurious Doomsday bunkers – both in the US (Indiana) and Europe (Germany) – which, however, are not only for the world’s wealthiest (read billionaires only need apply) but also for those who Vivos founder, California entrepreneur Robert Vicino, deems worthy: anyone can apply for a spot in the post-apocalypse world but only a select few will be admitted.

    So to all those who did not make the list and are terrified that once the Fed and its central bank peers finally lose control and the apocalypse begins to unfold, they will burn with the mere peasants in the resulting mushroom clouds, we have good news: there is a backup option.

    As Forbes reports, in a quiet valley in the Czech Republic, stand a complex surrounded by high walls, which is not visible at ground level and from the air appears to be nothing more than a boring administration center.

    This is The Oppidum, a massive 323,000 square foot property. Construction on the secret facility began in 1984, at the height of the Cold War, as a classified joint venture between the governments of what were then Czechoslovakia and The Soviet Union. It was built between 1984 and 1994, at a time when global instability and the possibility of weapons of mass destruction were entirely real, just as they are again today.

    Because the construction of the facility occurred at a time of heightened world tension, the enormous level of resources used to develop it would be all but impossible to match today. It is extremely unlikely that any government would approve a non-military structure of this size to be built today.

    Aerial rendering of The Oppidum Complex

    What lies hidden beneath, carved deep in the mountain is the largest residential doomsday shelter in the world.

    Just like Vivos Europa One, the Oppidum will be more than an underground bunker for dangerous times. It provides an above-ground residential estate in which the owners can maintain a high standard of living in a secluded area above ground during times of potential danger.

    Terrain cut rendering of the Bunker below the estate

    Again, just like Vivos’ products, the entrance is hidden so that only billionaires who know the secret handshake can go back to their post-apocalyptic 5-star hotel. No zombies allowed:

    The residents can enter the shelter by descending through a secret corridor to the bunker, sealing it with a blast door in less than a minute. It enables inhabitants to return quickly to the above-ground residence once the threat has passed.


    The below-ground Bunker of The Oppidum will be the area in which inhabitants can be isolated and protected from the threat of war, disease, natural disasters, or personal threats ranging from terrorists to zombies.

    Did we mention that billionaire will live here? That means that while it may be 6,000 degrees Kelvin outside, the inside better be draped in luxury.

    And it will be: the planned luxurious underground compound on two levels includes a total space of 77,500 sf with 13 foot high ceilings. The layout features one large 6,750 sf apartment  and six 1,720 sf apartments.

    Among the luxury features are an underground garden with simulated natural light, as well as a spa, swimming pool, cinema, library, and other leisure facilities. There will be offices and a conference room as well as medical and surgical facilities and supplies. Custom private vaults will also be designed to store valuables and personal art collections.

    The Oppidum complex will provide its owner with a safe haven for family, friends, business partners, other professionals, and staff in an above-ground residential estate before disaster strikes.

    Interior bedroom of bunker

    Bunker swimming pool and garden using artificial lighting

    Underground bunker wine cellar

    As Forbes adds, the location of The Oppidum is the foundation of its security. The Czech Republic is in central Europe and is surrounded by mountains. “The country is not a target of aggression by any other countries or organizations.” Well maybe not right this moment, but there is a funny story about what happened in 1939

    In any event, the hopes is that any potential conflict in the world is likely to avoid the Czech Republic or, at the very least, reach it at a later stage, which would enable the owners of The Oppidum to arrive at the compound and make preparations.

    First floor of the underground shelter

    Second floor of the underground shelter

    The entire Oppidum complex can be operated from an underground control center, with exclusive access to communications networks internally and to the outside world.

    Then again why bother: if the world truly suffers an apocalyptic event, there won’t be an “outside world.”

    So what’s the point?

    Well, assuming a “less than global extinction event“, i.e., a less catastrophic situation, the bunker will allow the inhabitants to survive natural or man-made disasters, or long-term power outages. The bunker will also be able to provide long-term accommodation for residents – up to 10 years if necessary – without the need for external supplies. This would involve large-scale stocks of non-perishable food and water, along with water purification equipment, medical supplies, surgical facilities, and communication networks with the outside world.

    Even so, a question emerges: is it really necessary? Furthermore, the entire complex is still incomplete and needs an (even bigger billionaire) buyer:

    “the underground levels of The Oppidum are in a newly reconstructed shell-and-core state.  Communication and other technologies are not yet in place.  They will be incorporated during the customization process.


    The above-ground section of The Oppidum is in its original condition, also ready to be customized to the buyer’s wishes. The buyer will be able to choose whether to commission The Oppidum project team to customize the facility or to do the customization of some or all of it independently.”

    Still, with the amount of discretionary funds held by the world’s 0.01%, we are confident someone will step up and purchase the “boutique post-apocalyptic hotel.”

    Who is the seller of the Oppidium concept?

    A Czech entrepreneur Jakub Zamrazil, with a successful track record in real estate development, sales and marketing. When Mr Zamrazil first toured the unique former military facility, he was impressed by its massive scale. He saw its potential to be transformed into the ultimate life-assurance solution and named it The Oppidum, from the Latin word meaning the main settlement in an administrative area of ancient Rome. The word was derived from the earlier Latin op-pedum, an “enclosed space”, used to describe fortresses that were constructed in Europe as early as the Iron Age.

    Mr Zamrazil joined forces with top professionals in the fields of security and luxury development to put together the concept of the ultimate life-assurance solution for the modern age. General Andor Šándor (Retired) is the security director and guarantor of the Oppidum project. He is a former Chief of the Military Intelligence Service of the Czech Republic, with the rank of Brigadier General.


    According to General Šándor, “The uniqueness of the bunker lies in the fact that it combines state of the art security with luxury and comfort. It is the largest known such facility on earth.”

    Why concept? Because while billionaires may or may not have a luxurious transition into the post-apocalyptic world, what they are really needed for right now is their money. Because as of this moment the Oppidium is nothing more than a largely useless Cold War structure, with a few potential floorplans and 3D room designs.

    Then again, the true believers of a graceful transition into the “post-apocalypse” will have no qualms about being fleeced. After all, if the end of the world is really coming, nothing will be more worthless than fiat paper: one may as well spend it now.

    Plus, don’t forget – priorities…


    The full promotional video of the Oppidium is below:

  • Chuck Norris: World War III Started Last Friday In Paris

    If you know anything about Chuck Norris (or his alter ego Walker Texas Ranger), you know that he’s not one to take things lying down. 

    Just look at what happened over the summer when, after a number of Texans got worried about the US Spec Ops Command’s Jade Helm 15 “exercises,” Norris warned The Pentagon that the drills came “a little too close to the backdoor of [his] ranch.” 

    A few months later, after Norris became “exhausted” with Tehran’s nuclear “antics”, Walker suggested that if he were allowed to speak for and act on behalf of the entire international community, the Bahamas would never obtain a nuclear weapon, Iranian drug dealers would never be given a 90-day heads up to hide their stash, and most importantly, Iran’s nuclear ambitions would be “sniffed” out and “pre-emptive strikes” would be launched.

    Well, in the wake of the Paris attacks, Norris is out with a new missive titled simply, “World War III?”

    No, really. Just click the link, you’ll see.

    In it, we get a history lesson, a quantitative assessment of Islamic State’s power vis-a-vis other Sunni extremist groups, and all sorts of semantic shenanigans. Below, find some highlights and commentary. 

    First, Norris says this:

    ...if you weren’t convinced before, now you know what a disorganized World War III looks like from the six simultaneous Paris terror attacks by ISIS that killed at least 129 precious souls and injured more than 300 more. And to think just a year ago, President Obama called ISIS “a jayvee team.” In fact, on Friday morning just before the attacks in Paris, President Obama again minimized ISIS’ power as he shared on “Good Morning America,” “I don’t think they’re gaining ground. What is true is that from the start, our goal has been first to contain, and we have contained them. … We’ve [also] made some progress in trying to reduce the flow of foreign fighters…”


    Whoops. Another misdirected miscalculation.

    We’re not sure what a “misdirected miscalculation” is, and the word “convinced” doesn’t work with the phrase “now you know”, but Norris is correct that Obama had a rather unfortunate soundbite on Good Morning America and we think we understand what Chuck is trying to say. But just so we’re sure, let’s see if he can clear it up:

    I believe these coordinated murder sprees in Paris may go down in history like the Nazis’ invasion of Poland on Sept. 1, 1939, as the spark that lit the fuse for a wider European involvement in World War II. Though apples and oranges in warfare, the impact of ISIS in Syria and Iraq is comparable to Hitler’s annexation of Czechoslovakia and Austria, which caused great concern and condemnation but not greater European revolt.

    Ok, got it. ISIS taking territory in Syria and Iraq is a lot like Anschluss and the German occupation of Sudetenland. You see, late 1930s Germany was a rising industrial and military powerhouse capable of annexing entire states by decree. Much like ISIS, a ragtag group of desert bandits operating out of bombed out cities in the war-torn Middle East.

    But hey, at least Norris admits their style of warfare is “apples to oranges.” 

    It took the closer invasion of Poland to provoke a military battle from France and Great Britain. So, I believe, ISIS’ attacks on Paris will prompt Western nations and others to coalesce against ISIS like never before, especially for those countries whose victims lie among the dead and injured.

    Well, on that point we’d have to agree, although we think Chuck may be missing a thing or two when it comes to understanding the real motivation for Western troops going to Syria. 

    The expansion of ISIS’ footprint is undeniable. The jihadists possess a hundredfold the power of al-Qaida and, in their own estimation, are well on the way to Caliphate victory.

    Yes, they “possess a hundredfold the power of al-Qaeda.” We would love to know how Norris calculated that and we’d also like to know what “well on the way to Caliphate victory” means. Does that mean the Caliphate itself is nearly victorious? Or does that mean ISIS is soon to be victorious in realizing its goal of creating a Caliphate? Because if it’s the former, well, of course they’re going to say that – we’re sure that “by their own estimation”, ISIS is a lot of things. If it’s the latter, we suggest Norris take a look at a map of some real historical Caliphates and decide how close he thinks ISIS is to realizing their goal.

    In true Walker fashion, Norris goes out in a blaze of glory with four policy recommendations. 

    Number 1: Mr. President, we need you to quit sticking your head in the sands of cultural, military and religious ignorance and minimizing the power of ISIS. We need you to unleash the full force of the U.S. military and U.S. Intelligence to destroy it both domestically and abroad. We must triple the protection at all of our ports and borders. It is also imperative that nations around the globe join us in collectively stopping ISIS’ Caliphate.

    Right. It is imperative that nations around the globe “join in collectively stopping ISIS”, which is why it’s so damn curious that Washington steadfastly refuses to cooperate with Russia and Iran on doing just that.

    Number 2: We need the White House and major mainstream media to quit downplaying Islamic terrorism and playing politically correct cards by moving away from terms like terrorists and jihadists, and condoning Islamic extremism under the rubric of pacifying peaceful Muslims.

    Yeah, really. What’s with the lack of ISIS media coverage? Besides the fact that CNN has run nothing but ISIS coverage for 72 straight hours to the point that apparently, everyone other than Anderson Cooper and Erin Burnett just got to take three whole days off, and besides this…

    …it’s almost like no one cares. 

    Number 3: We do not need Washington to foolishly open its arms to Syrian refugees when we are in a war with ISIS. Are we naïve enough to believe that the jihadists aren’t packing the flood of Syrian refugees with their minions and importing their jihad into multiple nations around the world, including the U.S.?

    Honestly Chuck, who knows at this point and since we’ve covered it on any number of occasions, we’ll just leave it for now.

    Number 4: One year from now, we absolutely need a new (Republican) president who rebuilds and expands the U.S. military and U.S. Intelligence, fighting Islamic jihadists like never before, before they succeed in coordinated acts of terror in the U.S. that make Paris and even Sept. 11 seem like Islamic child’s play.

    Ah, yes and there it is. The obligatory political plug. Fair enough. Everyone is entitled to that every now and again we suppose.

    The irony here is that Norris’ premise may in fact be right. That is, what happened in Paris may very well be the spark that starts World War III and so on that point we have to give it to Walker: he seems to be drawing a plausible connection between Poland ca. 1939 and Paris 2015 although it’s not at all clear that he fully appreciates what might well be going on behind the scenes.

    If Norris is right and World War III did indeed start last Friday in Paris, the only question for ISIS now is this: will Walker be joining the fight? 

    Because if so, expect Raqqa to fall in about, oh, let’s just call it 14 minutes…

  • Nomi Prins: Crony Capitalism & Corruption – An Entirely Rigged Political-Financial System

    Via Jesse's Cafe Americain,

    Too big to fail is a seven-year phenomenon created by the most powerful central banks to bolster the largest, most politically connected US and European banks. More than that, it’s a global concern predicated on that handful of private banks controlling too much market share and elite central banks infusing them with boatloads of cheap capital and other aid.

    Synthetic bank and market subsidization disguised as ‘monetary policy’ has spawned artificial asset and debt bubbles – everywhere. The most rapacious speculative capital and associated risk flows from these power-players to the least protected, or least regulated, locales.

    There is no such thing as isolated 'Big Bank' problems. Rather, complex products, risky practices, leverage and co-dependent transactions have contagion ramifications, particularly in emerging markets whose histories are already lined with disproportionate shares of debt, interest rate and currency related travails.

    The notion of free markets, mechanisms where buyers and sellers can meet to exchange securities or various kinds of goods, in which each participant has access to the same information, is a fallacy. Transparency in trading across global financial markets is a fallacy. Not only are markets rigged by, and for, the biggest players, so is the entire political-financial system.

    The connection between democracy and free markets is interesting though. Democracy is predicated on the idea that every vote counts equally, and in the utopian perspective, the government adopts policies that benefit or adhere to the majority of those votes. In fact, it's the minority of elite families and private individuals that exercise the most control over America's policies and actions.

    The myth of a free market is that every trader or participant is equal, when in fact the biggest players with access to the most information and technology are the ones that have a disproportionate advantage over the smaller players. What we have is a plutocracy of government and markets. The privileged few don't care, or need to care, about democracy any more than they would ever want to have truly "free" markets, though what they do want are markets liberated from as many regulations as possible. In practice, that leads to huge inherent risk.

    Michael Lewis' latest book on high frequency trading seems to have struck some sort of a national chord. Yet what he writes about is the mere tip of the iceberg covered in my book. He's talking about rigged markets – which have been a problem since small investors began investing with the big boys, believing they had an equal shot.

    I'm talking about an entirely rigged political-financial system.

    *  *  *

    Nomi Prins explores bank conspiracy, collapse and the failure of the Federal Reserve



  • "Nothing Makes Sense Anymore" Traders Fear Debt Market Distortions Signal "Something Big Is Brewing"

    In the last few months we have warned of the "perversions" in US money markets (here, here, and most recently here) adding that "to ignore them at your own peril." And now, as Bloomberg reports, it appears the mainstream is beginning to recognize that something very strange is going on in debt markets. Across developed markets, the conventional relationship between ('risk-free') government debt and other 'more risky' assets has been turned upside-down. "Everybody in the fixed-income market should care about this," warns a rates strategist and in fact, it’s hard to overstate how illogical it is when swap spreads are inverted, as JPM warns the moves in swap-spreads "should be viewed as symptomatic of deeper problems."

    As we stated before, a negative swap spread holds no interpretative meaning, the very fact of which is the most important element.

    In other words, we don’t have to figure out what the “market” is saying about a negative spread because it isn’t saying anything other than “something” is wrong (and very wrong with so many and deeper negative and compressed maturities).



    There are numerous reasons for this "nonsense" – as we detailed here, and as Bloomberg adds,

    “These kinds of dislocations can be expected to grow over time,” said Aaron Kohli, a fixed-income strategist at Bank of Montreal, one of 22 primary dealers that trade directly with the Fed. “The market structure and regulatory structure has evolved in a period with very low volatility. Once you take that away, it’s not clear what the secondary implications of that will be.”



    As the phenomenon becomes more widespread, it adds to evidence that it’s not just a one-off, according to Priya Misra, the New York-based head of global interest-rate strategy at TD Securities, another primary dealer.


    “Everybody in the fixed-income market should care about this,” she said.


    In the U.K., where the Bank of England is also debating whether to raise rates, the swap spread reached minus 0.05 percentage points on Nov. 12, the least since December 2013. The difference between 10-year Australian notes and comparable swaps fell to a record last week as speculation diminished the central bank will cut borrowing costs.


    “Traditional pricing and relative-value rules are breaking down,” said David Goodman, head of global capital markets strategy at Westpac Banking Corp.



    “This is not really just a somewhat esoteric story about interest-rate derivatives,” JPMorgan strategists led by Joshua Younger wrote in a Nov. 6 report. “Moves in spreads should be viewed as symptomatic of deeper problems.”


    Another potential problem is that inverted swap spreads may ultimately cause investors and borrowers to lose confidence in the bond market’s ability to correctly price risk and provide capital to those who need it, according to Steve Major, head of fixed income research at HSBC Holdings Plc.

    *  *  *

    Alhambra's Jeffrey Snider detailss,

    That presents enormous potential problems for the future outlook in all things “dollar.” Again, with interest rates pinned against ZIRP already and any lingering expectations for a rate hike (or somehow a series of them) can only serve as aggravation on this “demand” side for the math. In terms of economic expectations, the growing sense of recession amounts to the same if not more so as it would continue to adversely impact against credit spreads generally. In other words, by far the most likely modeled path for the future direction of at least pension liability discounting (along with the same in insurance company mechanics) is higher in almost every case – the only one where that wouldn’t be true is where the Fed sticks to “lower for longer” as the economy actually strengthens considerably.


    From that current midpoint, we can reasonably assume that both sides of the dark leverage imbalance will remain in their current directions; eurodollar dealers keep looking to exit while swap and hedging demand continues to sharpen. The resulting compressing swap spreads thus act as quite visible signal of continuing and further financial irregularity that only reinforces both sides of the trend to begin with – just as 2008. It goes until the imbalance forces a full-scale break, like that of August 24, with widespread and forced systemic rebalancing.


    When I wrote back in September that you ignore swap spreads at your own peril, this is one part that I had in mind – but it is not the only channel. Pension funds and insurance companies represent massive, unthinkably so, pools of both assets and offsetting liabilities that are highly, highly attuned to this math absurdity. Negative swap spreads all over the place, and getting more so, tell us that these huge pools are highly perturbed, as those spread “prices” represent the increasing cost (and reduced availability) of hedging against very real liability upset. Such a condition is, quite simply, highly dangerous. Math is money; and where there is less reliable math, there is less money and then geometrically less patience.

    Finally, we leave it to Bloomberg to conclude,

    The role of the bond market is to provide funding at the right rates for the real economy,” Major said. “That’s why the bond market exists — to help efficiently finance projects, businesses etcetera. If that efficiency is undermined, it’s not going to be a positive thing for the economy.”


    Whatever the reason, the severity of the distortions is unnerving many investors.


    “What there doesn’t appear to be is any single smoking gun that says why swap spread changes have been so dramatic,” said Thomas Urano, a money manager at Sage Advisory Services Ltd., which oversees $11 billion. The big question remains whether there is “something bigger brewing under the surface that so far hasn’t been pinpointed yet.”

  • Guest Post: The Western Roots Of Anti-Western Terror

    Authored by Brahma Chellaney, originally posted at Project Syndicate,

    The Islamic State’s horrific attacks in Paris provide a stark reminder that Western powers cannot contain – let alone insulate themselves from – the unintended consequences of their interventions in the Middle East. The unraveling of Syria, Iraq, and Libya, together with the civil war that is tearing Yemen apart, have created vast killing fields, generated waves of refugees, and spawned Islamist militants who will remain a threat to international security for years to come. And the West has had more than a little to do with it.

    Obviously, Western intervention in the Middle East is not a new phenomenon. With the exceptions of Iran, Egypt, and Turkey, every major power in the Middle East is a modern construct created largely by the British and the French. The United States-led interventions in Afghanistan and Iraq since 2001 represent only the most recent effort by Western powers to shape the region’s geopolitics.

    But these powers have always preferred intervention by proxy, and it is this strategy – training, funding, and arming jihadists who are deemed “moderate” to fight against the “radicals” – that is backfiring today. Despite repeated proof to the contrary, Western powers have remained wedded to an approach that endangers their own internal security.

    It should be obvious that those waging violent jihad can never be moderate. Yet, even after acknowledging that a majority of the Free Syrian Army’s CIA-trained members have defected to the Islamic State, the US recently pledged nearly $100 million in fresh aid for Syrian rebels.

    France, too, has distributed aid to Syrian rebels, and it recently began launching airstrikes against the Islamic State. And that is precisely why France was targeted. According to witnesses, the attackers at Paris’s Bataclan concert hall – where most of the night’s victims were killed – declared that their actions were President François Hollande’s fault. “He didn’t have to intervene in Syria,” they shouted.

    To be sure, France has a tradition of independent-minded and pragmatic foreign policy, reflected in its opposition to the 2003 US-led invasion and occupation of Iraq. But after Nicolas Sarkozy became President in 2007, France aligned its policies more firmly with the US and NATO, and participated actively in toppling Libyan leader Muammar el-Qaddafi in 2011. And after Hollande succeeded Sarkozy in 2012, France emerged as one of the world’s most interventionist countries, undertaking military operations in the Central African Republic, the Ivory Coast, Mali, the Sahel, and Somalia before launching its airstrikes in Syria.

    Such interventions neglect the lessons of history. Simply put, nearly every Western intervention this century has had unforeseen consequences, which have spilled over borders and ultimately prompted another intervention.

    It was no different in the late twentieth century. In the 1980s, under President Ronald Reagan, the US (with funding from Saudi Arabia) trained thousands of Islamic extremists to fight against the Soviet Union in Afghanistan. The result was Al Qaeda, whose actions ultimately prompted President George W. Bush’s invasion of Afghanistan and provided a pretext for invading Iraq. As then-Secretary of State Hillary Clinton admitted in 2010, “We trained them, we equipped them, we funded them, including somebody named Osama bin Laden….And it didn’t work out so well for us.”

    And yet, disregarding this lesson, Western powers intervened in Libya to topple Qaddafi, effectively creating a jihadist citadel at Europe’s southern doorstep, while opening the way for arms and militants to flow to other countries. It was this fallout that spurred the French counter-terrorist interventions in Mali and the Sahel.

    Having barely stopped to catch their breath, the US, France, and Britain – with the support of Wahhabi states like Saudi Arabia and Qatar – then moved to bring down Syrian President Bashar al-Assad, fueling a civil war that enabled the Islamic State to seize territory and flourish. With the group rapidly gaining control over vast areas extending into Iraq, the US – along with Bahrain, Jordan, Qatar, Saudi Arabia, and the United Arab Emirates – began launching airstrikes inside Syria last year. France joined the effort more recently, as has Russia.

    Though Russia is pursuing its military campaign independently of the Western powers (reflecting its support for Assad), it, too, has apparently become a target, with US and European officials increasingly convinced that the Islamic State was behind October’s crash of a Russian airliner in the Sinai Peninsula. That incident, together with the Paris attacks, may spur even greater outside military involvement in Syria and Iraq, thereby accelerating the destructive cycle of intervention. Already, the danger that emotion, not reason, will guide policy is apparent in France, the US, and elsewhere.

    What is needed most is a more measured approach that reflects the lessons of recent mistakes. For starters, Western leaders should avoid playing into the terrorists’ hands, as Hollande is doing by calling the Paris attacks “an act of war” and implementing unprecedented measures at home. Instead, they should heed Margaret Thatcher’s advice and starve terrorists of “the oxygen of publicity on which they depend.”

    More important, they should recognize that the war on terror cannot credibly be fought with unsavory allies, such as Islamist fighters or fundamentalist-financing sheikhdoms. The risk of adverse unintended consequences – whether terrorist blowback, as in Paris, or military spillovers, as in Syria – is unjustifiably high.

    It is not too late for Western powers to consider the lessons of past mistakes and recalibrate their counterterrorism policies accordingly. Unfortunately, this appears to be the least likely response to the Islamic State’s recent attacks.

  • Austerity And Anarchy: Tying Budget Cuts To Riots, Assassinations, And Attempted Revolutions

    If you’ve been paying attention, you know that the PIIGS are restless.

    By PIIGS, we of course mean the EU periphery where over the past month or so, things haven’t exactly been playing out the way Brussels would prefer from a political perspective. 

    Take Portugal for instance where, earlier this month, after what amounted to inconclusive elections in October, Socialist leader Antonio Costa joined up with the Left Bloc and the Communists to overthrow the Passos Coelho government just days after the PM was reappointed by President Anibal Cavaco Silva. 

    Whatever you want to say about the likelihood that Portugal sticks by its explicit and implicit promises to the troika, the odds that some manner of break with Brussels over austerity, debt, or both occurs down the road are now exponentially higher.

    This is precisely what Brussels and Berlin were hoping to deter by adopting a hardline stance towards the Greeks over the summer and indeed we may have gotten the first shot across the bow last week when some analysts reminded the world that should Portugal lose its last investment grade rating at DBRS, the ECB could theoretically cut Lisbon off from PSPP. 

    Meanwhile, in Spain, PM Mariano Rajoy is attempting to negotiate the Catalan independence bid while prepping for elections next month. In short, he needs to strike a delicate balance between being firm and coming across as autocratic. Either way, the political situation is fractious to say the least and the Catalonia “problem” only muddies the waters as the political establishment looks warily towards Pablo Iglesias and an ascendant Podemos. 

    Finally, in Italy, a recent poll showed that if elections were held today, comedian Beppe Grillo’s 5-Star movement would actually win. Here’s how Reuters summarized the situation earlier this month: 

    An opinion poll by the EMG polling agency put 5-Star on 27.3 percent, about five points behind Prime Minister Matteo Renzi’s center-left Democratic Party (PD) on 32.2 percent, broadly in line with most other recent polls.



    But this would leave both the two leading parties below the 40 percent threshold needed to avoid a run-off. The EMG survey was the first to put 5-Star ahead of the PD in a second round of voting, finding that it would take 50.6 percent to the PD’s 49.4 percent.

    It’s not hard to trace the proximate cause here. The periphery electorate is sick and tired of enduring austerity and persistently high unemployment and if voters were tracking debt-to-GDP ratios, they’d probably be even more sick and more tired of it because as we never tire of mentioning, not only are the “recoveries” not real, the debt isn’t going down either.

    It’s the worst of all possible worlds.

    In light of the above, we bring you the following interesting commentary from RBS’ Alberto Gallo who has endeavored to put together a couple of interesting graphics, one of which depicts the incidence of social upheaval (described as either anti-government demonstrations, riots, assassinations, general strikes, and/or attempted revolutions) in Europe dating back to 1919 and broken down by depth of budget cut (i.e. how bad the austerity is/was). 

    *  *  *

    From RBS

    One question to ask is whether a link exists between economic stagnation and high unemployment with episodes of social unrest, both domestic and foreign. Research from VOX and CEPR analysing the occurrence of assassinations, riots, demonstrations and general strikes over the past 100 years suggests a link between social unrest and austerity and negative growth exists. 


    Even going by common sense, the story makes sense. Persistent low growth, high youth unemployment and increasing inequality have hurt Europe’s young generation. Youth unemployment is in double digits in most countries. The wealth gap between the haves and have-nots continues to grow: people below 35 years of age only own 5% of all financial assets, according to ECB data – putting them far away from the windfall of QE. Domestically, one symptom of this situation has been the radicalisation of European politics, with the protest vote rising in most countries, from Greece to Finland. 

    *  *  *

    Note in the last graphic shown above that not all “radical” parties are created equal. Podemos is one thing and Golden Dawn is entirely another.

    In fact, Golden Dawn’s rising popularity (they won nearly 17% among unemployed voters in Greece’s September snap elections) suggests that when the disaffected masses feel they have been let down by leaders who they thought promised change (i.e. Syriza), they will simply move further towards the end of the political spectrum in search of “salvation.” 

    What all of the above underscores is that this is a dangerous time for the EU. Not only is the periphery vulnerable to the type of political and social upheaval we saw in Greece over the summer, and not only is it exceedingly possible that sometime in the not-so-distant future, Brussels could find itself in yet another protracted debt negotiation with one of the PIIGS, but the entire dynamic is complicated immeasurably by the worsening refugee crisis and by the intense feelings that crisis now engenders as a result of the events that unfolded in Paris last Friday. 

    Get ready Europe, it’s going to be a bumpy ride.

  • Are 'We' Bombing The Wrong Country?

    Presented with no comment…



    h/t @ianbremmer

  • "What Are The Markets Telling Us" – The Hedge Funds' Favorite Newsletter Explains

    Kiril Sokoloff’s “13D” has over the past decade carved out a niche for itself as the most insightful newsletter available, and with a price tag to match, it is almost exclusively distributed among the hedge fund community (those hedge funds which actually are making money, which these days it not many).

    However, 13-D has always been relatively cautious when making bold predictions. Not so much this time, when in his latest note he is about as bearish as we have seen him in years.

    This is what he says in his most recent observations of “What Are The Markets Telling Us?”

    What can we learn from the downturn in U.S. retail stocks? Our experience, supported by market history, suggests that broad and sustained equity bull markets often feature rotational characteristics as the favorable impact from rising liquidity alternates from one industry to another, generating a healthy advance in the broader market and stimulating investor risk-appetite. Bear markets also tend to feature rotational characteristics. During a broadening downturn––as measured by many of the internal leading market-indicators and market divergences––the destructive fallout from receding liquidity causes capital flows to become much more discriminating as investor risk-appetite diminishes.


    This shift in the character of the price-action leads to an outcome that is the opposite of what is seen during a healthy market advance. In other words, receding liquidity and waning risk-appetite tend to cause sudden air-pocket declines in entire industries, which can come as a shock to many market participants. This is yet another painful and important lesson that came from the four-plus year bear market in commodities. In this regard, we are highly intrigued by the sharp equity market selloff last August, as well as the recent sharp selloffs in the healthcare and retail sectors, in addition to the previous selloffs in the high-yield bond market.


    These downdrafts appear consistent with the months of warnings signaled by the deterioration in numerous leading-indicators, bearish divergences and broad evidence of waning investor risk-appetite, and they appear to fit the historical model regarding the rotational nature of broad market advances and downturns.


    If these selloffs are any guide, and if the market has indeed entered a broader downturn, we fear that any further significant dislocations could catch many market participants off-guard. Weeks and months of sideways price-action in a particular industry or sector––which causes investors to become complacent––can suddenly be followed by a sharp selloff that wipes out many months or years of price-appreciation.

    * * *

    To substantiate his sense of pervasive market weakness, Sokoloff provides several charts, including the JNK-to-BND ratio, the RCD vs the RYE, the XLI vs the XLY, and others, including most notably this take on the SPX vs the OEX and the RSP vs the SPY.

    CHART 1: S&P 500 (SPX) vs S&P 100 (OEX) and S&P 500 Equal Weight ETF (RSP) vs S&P 500 SPDR (SPY) – Weekly. Falling lines indicate diminishing investor risk-appetite. The charts below have been excellent guides in determining the broad market’s risk/reward dynamics and illustrate the view regarding the receding tide of liquidity. It should be noted that the broader RSP-to-SPY ratio has been leading the relatively-narrower SPX-to-OEX ratio.

    It is noteworthy and ominous that despite the large recovery in the S&P 500 from the August selloff, both ratios have continued to plunge and have registered new lows for the move. Notably, the RSP-to-SPY ratio appears to have formed a broad topping-pattern that looks roughly similar to the previous topping-pattern formed from 2005 to 2007. In 2007, the downtrend in the ratio accelerated once the support line was breached. If a similar pattern develops again, an eventual acceleration in the current downturn could herald rapid and unexpected selloffs in the stocks in sectors or industries that have questionable fundamentals or poor technical conditions––or where perceptions of financial-excess during the previous up-cycle could result in greater scrutiny by investors.

    Close appraisal of relative performance trends and weakening technical conditions could provide important clues regarding industries or sectors that could be most vulnerable to selloffs––as suggested by the sudden downdraft in retail stocks.

  • War Is Bullish: Stocks, Oil Surge Off Paris Panic Lows After Dismal Economic Data

    Stocks End Green – The Terrorists Lose!!


    This just seemed appropriate… (WARNING – Highly NSFW!!)


    Because if one thing says Buy Stocks – it's ISIS showing just how ineffective Western governments and intelligence is in the new normal, raising uncertainty, an unprecedented 5th recession in 5 years in Japan and dismal US Empire manufacturing data…


    Cash indices perfectly bottom-ticked as Europe closed…


    The Dow and S&P recovered all of Friday's losses…


    Of course the real reason for the rally is 'Gartman'!

    Dow Futures are up over 400 points from the opening lows…


    SUNE Sucked…


    And Clovis was crapped on…


    *  *  *

    "123" was really all that mattered to the machines in charge of the manipulation…


    But it was crude that really ran the show…


    VIX was clubbed like a baby seal… with all sorts of noisy tails…biggest drop in 4 weeks


    VXX dropped over 10% – the biggest single-day drop since October 2013!!!!


    Sell Vol when the terrorists strike…


    Credit markets continue to get crushed (with loans back at 5 year lows)…


    Treasury yields were not as excited as stocks… 10Y ended the day unchanged…


    Decoupling from stocks once again…


    Perhaps this is why… (near record net spec shorts)


    The USDollar rallied notably on EUR weakness… (1.06 handle)


    Commodities were very mixed with copper and PMs drifting lower as the dollar strengthened…


    Most notably crude again as algos could not help themselves…


    As Copper plunged to fresh lows not seen since April 2009 – down 9 days in a row!


    Charts: Bloomberg

    Bonus Chart: SKEW (tail risk) is once again blowing out but VIX (normal risk) is relatively fearful perhaps signaling another abrupt drop in stocks is due…

  • France’s Answer To Terrorism: The "Law Of Suspects"

    Submitted by Simon Black from Sovereign Man

    France’s answer to terrorism: The Law of Suspects

    On April 5, 1793, decorated French military commander Charles Dumouriez caused a sensational panic in Paris when he fled the country and defected to Austria.

    It had been nearly four years since French peasants stormed the Bastille, the event that historians generally regard as the start of the French Revolution.

    And hardly a week had gone by since without some major crisis, emergency, or tragedy in France.

    There were regular violent riots across the country– in Paris, other major cities, and even the rural countryside. Widespread massacres were commonplace.

    And given that one of the key goals of France’s new revolutionary government was to eliminate Christianity from the nation, civil war between religious factions broke out as well.

    To cap things off, France was under constant threat of foreign invasion.

    Austria and Prussia were not only waging conventional war against France, but both nations had sent highly trained agents to infiltrate French borders to pursue violence and chaos from within.

    It was exhausting. French people were living in perpetual fear, and the wanton death of innocents had become an unfortunately normal part of life.

    So when it was found that Dumouriez (a French citizen) had defected to the enemy, people hit their breaking points. Enough was enough. And they cried out to the government to save them.

    The government listened.

    The very next day, on April 6, 1793, the new French government established the Committee of Public Safety (though it was originally known as the Danton Committee).

    The Committee was given broad, emergency powers since it was a time of such crisis.

    And under the leadership Maximilien Robespierre, the French people got their protection.

    Robespierre passed the ‘Law of Suspects’, allowing the government to essentially imprison anyone they wanted for any reason.

    It was impossible to tell friend from foe back then; you never knew if someone was a loyalist, or a Christian, or an Austrian spy, or any number of counter-revolutionaries.

    So people were required to carry special certificates indicating that they were good and dutiful citizens. Those without would be imprisoned, and potentially executed.

    The University of Chicago estimates that nearly 30,000 either died in prison or were executed as a result of this law.

    Then there was the Law of the Maximum, which attempted to stabilize an ongoing financial crisis by fixing the prices of goods and services in the country. The law also imposed the death penalty on those who did not follow the rules.

    They also passed the Law of 22 Prairial, which awarded the Committee even more power to arrest, try, and execute anyone deemed to be suspicious or disloyal.

    The law also prevented anyone accused of a crime from being able to call witnesses or have defense counsel.

    Plus it required that ALL citizens report potentially suspicious or disloyal neighbors to the Committee. If you see something, say something.

    As you are likely well aware, this period in French history became known as the Reign of Terror, or often simply ‘the Terror’.

    Coincidentally, this is where the first modern use of the word ‘terrorist’ is found.

    Except that it wasn’t used to describe the counter-revolutionaries. Or the rebels. Or the foreign agents.

    It turns out that “terrorist” was originally a term used to describe the government officials who created and executed these oppressive tactics under the guise of keeping people safe from their enemies.

    Governments have a dangerous tendency to never let a serious crisis go to waste.

    The US government spent trillions of taxpayer dollars to fight a War on Terror that made the world less safe and Americans less free, all to protect them from a threat that has a statistical likelihood of 0.0%.

    (You’re far more likely to be shot by a police officer than to ever even see a terrorist.)

    Yes, the desire for revenge runs deep. And that’s understandable.

    But the greatest thing to fear is not men in caves. It is the consequent loss of freedom and the never-ending cycle of costly, destructive war.

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