Today’s News 13th February 2016

• Paul Craig Roberts: Are Americans Too Insouciant To Survive?

  Authored by Paul Craig Roberts,

  When one looks at the deplorable state of the world, one cannot help but wonder at the insouciance of the American people. Where are they? Do they exist or are they a myth? Have they been put to sleep by an evil demon? Are they so lost in The Matrix that they cannot get out?

  Ever since Clinton’s second term the US has been consistently acting internationally and domestically as a criminal, disregarding its own laws, international laws, the sovereignty of other countries, and the US Constitution. A worse criminal government has never existed. Yet, Americans remain subservient to the criminals that they have placed in power over themselves.

  According to polls, Hillary Clinton and Senator Bernie Sanders are splitting the Democratic vote 50-50 as preferred Democratic presidential candidate. This is extraordinary.

  Hillary Clinton represents the interests of Wall Street and the mega-banks, the Israel Lobby, and the interests of the military/security complex. These interests are totally opposed to the interests of the American people.

  In his book, What’s the Matter with Kansas, Thomas Frank raised the question of why Americans vote against their own interests? Why do Americans go to the voting both and do themselves in?

  Whether you agree with Thomas Frank’s answer or not, Americans do, on a regular basis, harm themselves by voting for people who are agents of vested interests diametrically opposed to the interests of American citizens.

  How is it possible, if Democrats are informed people, that half of them prefer Hillary Clinton? Between February 2001 and May 2015 Bill and Hillary collected $153 million in speaking fees. The fees averaged $210,795 per speech.

  I can remember when Bill and Hillary were in public office when their speeches were free. No one wanted to listen to them when the speeches were free. Clearly, Bill is being paid off for his past services to the powerful interest groups that control the United States, and Hillary is being paid off for her future service to the same groups.

  How then is it possible that half of Democrats would prefer Hillary? Is it because she is a woman and women want a woman president more than they want their civil liberties, peace, and employment for themselves, their spouses and their children?

  Or is it because, given the presstitute character of the American media, the people haven’t a clue?

  If you vote for Hillary, you are voting for someone who has been paid off to the tune of $153 million by powerful vested interests who have no concern whatsoever for your interests. In addition, Hillary has the necessary campaign funds from the powerful interest groups for her presidential nomination campaign. As if this isn’t damning enough, Hugh Wharton writes that the National Democratic Committee is in league with Hillary to steal, if necessary, the nomination from Sanders and the voters.

  In contrast, the interest groups who rule America are not contributing to Sanders.

  Therefore, the choice of Sanders is obvious, but 50% of Democrats are too braindead to see it.

  Although Hillary is a substantial threat to America, the threat of nuclear war is much greater, and the Democratic Obama regime in the hands of neoconservatives has just greatly amplified the threat of nuclear war.

  The United States government, or perhaps we should say the exploiter and deceiver of the American people, has announced a three-fold increase in its military presence on Russia’s borders. The excuse for this great boost in the profits and power of the US military-security complex is “Russian aggression.”

  But there is no sign of this aggression. So Washington and its servile presstitutes in the Western media make it up. They proclaim a lie.

  “Russia invaded Ukraine” proclaims the propaganda. No mention is made of Washington’s coup in Ukraine that overthrew a democratically elected government and began a war against the Russian populations of eastern and southern Ukraine, former provinces of Russia added to the Ukrainian Soviet Republic by Soviet leaders. In the presstitute media, no mention is made of Washington’s intention of seizing Russia’s only warm water port in Crimea on the Black Sea. http://www.fort-russ.com/2016/02/us-control-over-crimea-aim-of-coup-in.html

  Having created a nonexistant Russian invasion in place of the real US coup in Ukraine in the minds of the indoctrinated Americans, Washington now claims that Russia is going to invade the Baltics and Poland. Nothing could be further from the truth, but this lie from the Obama regime now determines that the US military presence on Russia’s borders will increase three-fold.

  The escalation of the US/NATO threat on Russia’s borders forces a Russian response. Considering that the Russophobic governments in Poland and the Baltic States have unstable judgement, military buildups bring risks of miscalculations.

  There is a limit to the level of threat that the Russian government can tolerate. The impotent Obama is in the firm grip of the neoconservatives and the military-security complex. The neoconservatives are motivated by their ideology of American world hegemony. The military-security complex is motivated by power and profit. These motives bring the United States and its vassals into conflict with Russia’s (and China’s) sovereign existence.

  Within the councils of American foreign policy there is not sufficient weight to counter the neoconservative drive to war with Russia and China. In conventional war, the US is not a military match for the Russian/Chinese strategic alliance. Therefore, the war would be nuclear. The power of hydrogen bombs is immensely more powerful that the atomic bombs that the US dropped on Japan. Nuclear war means the end of life on earth.

  Americans can know that democracy has failed them, because there is no check on the neoconservatives’ ability to foment war with Russia and China.

  The neocons control the press, and the press portrays Russia as “an existential threat to the United States.” Once this fiction is drilled into the brains of Americans, it is child’s play for propagandists to create endless fears that deplete taxpayers of income in order to create profits for the military-security complex by relaunching the Cold War and an armaments race.

  That is what is currently going on. The inability of Americans to realize that they are being taken into a conflict that benefits only the profits and power of the military-security complex and the ideology of a small group of crazies demonstrates the impotence of American democracy.

  Universities and think tanks are replete with ambitious people who, chasing grants and influence, fuel the Russophobic hysteria. For example, on February 9 the Washington Post published an article by Michael Ignatieff, the Edward R. Murrow professor at Harvard University’s Kennedy School, and Leon Wieseltier, the Isaiah Berlin Senior Fellow at the Brookings Institution in Washington. The article is a complete misrepresentation of the facts in Syria and called for US measures that would result in military conflict with Russia. It was irresponsible for the Washington Post to publish the article, but the decision is consistent with the Post’s presstitute nature.

  The propaganda line maintained by the US government, the neoconservatives, the military/security complex, the presstitutes, and fiction-writers such as Ignatieff and Wieseltier is that Russia is not bombing the Islamic State jihadists who are attempting to overthrow the Syrian government in order to establish a jihadish state that would threaten the Middle East, Iran, and Russia herself. The official line is that the Russians are bombing the democratic “rebels” who are trying to overthrow an alleged “brutal Syrian dictator.” The conflict that the US government started by sending ISIS to Syria to overthrow the Syrian government is blamed on the Russian and Syrian governments.

  Ignatieff and Wieseltier say that the US has put its “moral standing” at risk by permitting the Russians to bomb and to starve innocent women and children, as if the US had any moral standing after destroying seven countries so far in the 21st century, producing millions of dead and displaced persons, many of whom are now overrunning Europe as refugees from Washington’s wars.

  The recently retired head of the Defense Intelligence Agency, Michael Flynn, has said that the Obama regime made a “willful decision” to support ISIS and use ISIS against the Assad government in Syria. That the violence in Syria originated in a US/ISIS conspiracy against Syria is ignored by Ignatieff and Wieseltier. Instead, they blame Russia despite the fact that it is Russia’s air support for the Syrian Army that has rolled back ISIS.

  Where were Ignatieff and Wieseltier when Washington and its vassals destroyed Iraq, Libya, Somalia, Afghanistan, Yemen, much of Pakistan, overthrew the first democratically elected government in Egypt, overthrew the government in Ukraine and started a war against the Russian population, and supplied Israel with the weapons and money to steal Palestine from the Palestinians? Where were they when Clinton destroyed Yugoslavia and Serbia? Where are they when ISIS murders Syrians and eats the livers of its executed victims?

  It would be interesting to know who financed the professorship in Edward R. Murrow’s name and the fellowship in Isiah Berlin’s name and how these positions came to be staffed with their current occupants.

  Reagan and Gorbachev brought the Cold War to an end. The George H.W. Bush administration supported the end of the Cold War and gave further guarantees to Russia. But Clinton attacked Serbia, a Russian ally and broke the agreement that NATO would not expand into Eastern Europe to Russia’s border. When the neoconservatives’ plans to invade Syria and to attack Iran were frustrated by Russian diplomacy, the neocons turned on Russia with fury.

  In 1961 President Eisenhower warned the American people of the threat posed by the military-security complex. That was 55 years ago. This complex is so strong today that it is able to divert massive taxpayer resources to its coffers while the living standard and economic prospects of the American people decline.

  The military/security complex requires an enemy. When the Cold War ended, the “Muslim Threat” was created. This “threat” has now been superceded by the “Russian Threat,” which is much more useful in keeping Europe in line and in scaring people with prospective invasions and nuclear attacks that are far beyond the power and reach of jihadists.

  Superpower America required a more dangerous enemy than a few lightly armed jihadists, so the “Russian threat” was created. To drive home the threat, Russia and her president are constantly demonized. The conclusion is unavoidable that the insouciant American people are being prepared for war.

  

  

  

  

  

• Why Most Investors Hate Gold

  The move in gold, up 17% year to date, is important, according to ConvergEx's Nick Colas…

  

   

  We’ll be blunt: most financial asset investors really hate gold.

   

  Anything – even leaving money in the bank – is better than owning gold since at least society has access to your capital through the banking system.  Once you buy physical gold, no one has access to that sliver of your portfolio.

   

  Of course, that’s actually a feature for the owner since physical gold is no one else’s liability. 

   

  So the notable rally in gold is essentially a protest vote against the global financial system, the equivalent of taking your ball and going home.

   

  This only happens when investors think central banks have lost their way, and that’s not good news.  Think of gold as a super-duty dive watch.  It can go places humans can’t actually even dive.  The watch will outlive the person wearing it.  Kind of cool, but you don’t necessarily want to test it yourself.

  Finally, Colas adds…There are three reliable signs of a market bottom, where things get so bad it is safe to step in.

  First, when the S&P 500 drops 5% or more in one day.

   

  Second, when the CBOE VIX Index tops 40.

   

  And third, when everything sells off for a few days and correlations for all equities approaches one.

   

  None of these events have yet occurred.

  And so we wait…

  

  

  

  

  

• Is This Debt's Last Rattle?

  Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

  What we see happening today is why we called our news overview the “Debt Rattle” 8 years ago. The last gasps of a broken system ravished by the very much cancer-like progress of debt. Yes, it took longer than it should have, and than we thought. But that’s pretty much irrelevant, unless you were trying to get rich off of the downfall of your own world. Always a noble goal.

  There’s one reason for the delay only: central bank hubris. And now the entire shebang is falling to bits. That this would proceed in chaotic ways was always a given. People don’t know where to look first or last, neither central bankers nor investors nor anyone else.

  It’s starting to feel like we have functioning markets again. Starting. Central bankers still seek to meddle where and when they can, but their role is largely done. It’s hard to pinpoint what exactly started it, but certainly after Kuroda’s negative rate ‘surprise’ fell as flat on its face as it did, and then fell straight through the floor and subsequently shot up through the midnight skies, a whole lot more ‘omnipotence credibility’ has disappeared.

  Kuroda achieved the very opposite of what he wanted, the yen soared up instead of down -big!-, and that will reflect on Yellen, Draghi et al, because they all use the same playbook. And the latter so far still got a little bit of what they were shooting for, not the opposite. Still, one could also make a good case that it was Yellen’s rate hike that was the culprit. Or even Draghi’s ‘whatever it takes’. It doesn’t matter much anymore.

  Though what should remain clear is that it was in their interference in markets to begin with, as extremely expensive as it has been extremely useless and dumb, that the real guilt resides. Or we could take it even a step further back and point to the credit bubbles blown in the west before 2008. Central banks could have let that one go, and allow it to run its natural course. Instead, they decided they should inflate their own balance sheets. What could go wrong?

  Then again, these inane policies concocted by a bunch of bankers and bookworm academics who don’t even understand how their own field works, as Steve Keen once again explained recently, would have blown up in their faces long before if not for China’s decision to join in and then some. Some $35 trillion, that is.

  Money, debt, spent on ghost cities and on what now turn out to be ghost factories. Ghost jobs, ghost prosperity,a ghost future. Makes us wonder all the time what people thought when they saw China used as much cement in 2011-2013 as the US did in the entire 20th century. Did anyone think that would continue for decades, even grow perhaps? Have we lost all sense of perspective?

  

  How much cement or steel can one country need, even if it’s that large? How much coal and oil can it burn, let alone store? Blinded as we were, apart from the financial shenanigans, much of what the ‘developed nations’ engaged in since 2008 was overleveraged overinvestment, facilitated by ultra-low rates, in industries that would feed China’s hunger for ever more forever. Blind? Blinded?

  And now we’re done. If Elon Musk doesn’t come back soon with a zillion little green Martians to pick up China’s slack, we’re all going to be forced to face just how distorted our media-fed visions of our economic futures have become, and how much pain it will take to un-distort them.

  Which is what we’re watching crash down to mother earth now. And the central bankers’ loss of ‘omnipotence credibility’ is not something to be underestimated. It encourages people like Kyle Bass to dare the PBoC to show what it’s got left, even if, as Bass said, he’s got maybe a billion to go up against the multi-trillion Chinese state windmills of Beijing. It shouldn’t matter, but it does. Because the windmills are crumbling.

  Bass won’t be alone in challenging global central banks. And that’s probably good. Without people like him, we would never see proper checks and balances on what the formerly omnipotent are up to. Kuroda has next to nothing left -or even less that that. Draghi and Yellen only have negative territory left to plow into, and at the very least that means putting positive spins on any economic numbers becomes exceedingly hard to do -and be believed.

  Granted, they can still all go for helicopter money -and some will. But that will be the definite last step, and they know it. Dropping free money into a festering cesspool of debt is as useless and deadly as all previous QEs put together.

  As we watch the world crash down to earth in epic fashion -and it ain’t even the 1st inning- people are already looking for a bottom to all of this (a waste of time). But if there’s one law in economics, it’s that when a bubble pops it always ends up below where it started. So look at where levels were before the bubble was blown, and then look out below.

  Want to argue that this is not a bubble? Good luck. This is the mother of ’em all.

  

  The Lunar New Year, and the breather it brings for Beijing -though we’re sure there’s not a lot of family time off for PBoC personnel- seems like a good moment to take stock of the multiple crises that simultaneously and in concert accelerated head first into the new year. And boy, the rest of the world decided not to wait for China, did it now? For those who’ve seen this coming and/or have no skin in the game, it’s an amusing game of whack-a-mole. For others perhaps not so much.

  To take a few steps back, if you ever believed there was a recovery after 2008, or even that it was theoretically possible for that matter, you’re going to have a much harder time understanding what is happening now. If you’ve long since grasped that all that happened over the past 8 years of QE infinity-and-beyond, was nothing but “debt passed off as growth”, it’ll be much easier.

  It’s stunning to see for everyone at first blush that the “book value” of global proven oil reserves is down by $120 trillion or so since summer 2014. And it certainly is a big number; the S&P has lost ‘only’ $2 trillion in 2016. But what counts is the speed with which that number sinks in, and that speed depends on one’s reference frame. In the same vein, what’s perhaps most important about all the seemingly separate crises developing before your eyes is how they feed on each other.

  Or, rather, how they all turn out to be the same crisis, kind of like in the perfect whack-a-mole game, where there’s only one mole and you still can’t catch it. So try and whack these. Or better still, try and imagine central bankers doing it, or finance ministers, spin doctors. They’re all so out of their leagues it would be funny if they didn’t have the power to make you pay for their incompetence.

  

  

  

  

  

• The Recognition Of China's NPLs Has Begun: A Chinese Bad Loan Is Trying To Find A U.S. Buyer

  After repeated warnings about China’s soaring non-performing loans on this site (here, here and here), which have underscroed the basis of Kyle Bass’ “big trade for 2016”, namely shorting China’s currency in the bet it will have to massively devalue in order to address its incipient default cycle, virtually everyone is aware that China has a big Non-Performing Loan problem, a problem whose size we first quantified as much as $3 trillion, or the same amount as all of China’s FX reserves.

  However, very few know that while the rest of the world is assuming that China will simply sit there and hold in its imploding NPLs which could well rip it apart from the inside in a massive wave of defaults, some of these bad loans have quietly found their way to the US, where they hope to find a buyer courtesy of the DebtX platform.

  The offering:

  DebtX is pleased to announce the sale of a RMB 556 million non-performing loan relationship. The offering includes two non-performing loans secured by real estate in Southern China. The collateral includes a petrochemical wharf and an office building that serves one of China’s largest petroleum storage houses, as well as land use rights and additional business assets of the borrowing entities. The loans have strong loan to values, an in-place lease through 2025, and a full guaranty.

  

   

  The details:

  

   

  So, to summarize, a Chinese loan worth RMB556 billion collateralized by RMB1.2 trillion in the form of a petrochemical wharf, or a paltry 46% LTV, and which has a tiny cost of capital of 4.5%, is not only no longer performing in China, but is hoping to find a buyer in the U.S.

  Incidentally, this is what a typical Sinopec oil wharf looks like:

  

  One can’t help but wonder how many trilions (in US dollars) of assets are about to be wiped out when the NPL wave is finally recognized, and more to the point, since Chinese bad loans are already quietly trying to find a buyer in “long investment horizon” hands, does this mean that the trillions (in US dollars) in NPLs are about to finally flood the mainland?

  To all those who miss this opportunity to own a piece of Chinese “assets”, fear not – many more such NPLs are rapidly coming your way.

  

  

  

  

  

• The Hidden Agenda Behind Saudi Arabia’s Market Share Strategy

  Submitted by Dalan McEndree via OilPrice.com,

  Do the Saudis have an oil market strategy beyond pumping crude to defend their market share? Are they indifferent to which countries’ oil industries survive? Or, alternatively, are they targeting specific global competitors and specific national markets? Did they start with a particular strategy in November 2014 when Saudi Petroleum and Mineral Resources Minister Ali al-Naimi announced the new market share policy at the OPEC meeting in Vienna and are they sticking with it, or has their strategy evolved with the evolution of the global markets since?

  And, of course, what does the Saudi strategy beyond pumping crude portend for the Saudi approach to some OPEC members’ calls for coordinated production cuts within OPEC and with Russia?

  Conventional Wisdom

  Conventional wisdom has it that the Saudis are focused primarily on crushing the U.S. shale industry. In this view, the Saudis blame the U.S. for the supply-demand imbalance that began to make itself felt in 2014. U.S. production data seems to support this. Between 2009 and 2014, U.S. crude and NGLs output increased nearly 4 million barrels per day, while Saudi Arabia’s increased only 1.64 million barrels per day, Canada’s 1.06 million, Iraq’s 0.9 million, and Russia’s 0.7 million (Saudi data doesn’t include NGLs).

  

  In addition, the Saudis, among many others, believed that U.S. shale would be the most vulnerable to Saudi strategy, given relatively high production costs compared to Saudi production costs and shale’s rapid decline rates and the need therefore repeatedly to reinvest in new wells to maintain output.

  Yet, if the Saudis were focused on the U.S., their efforts have been unsuccessful, at least in 2015. As the table below shows, U.S. output growth in 2015 outstripped Saudi output growth and the growth of output from other major producers in absolute terms. In addition, many observers also came to believe that U.S. shale production will recover more quickly than production in traditional plays once markets balance due to its unique accelerated production cycle and that this quick recovery will limit price increases when markets balance.

  

  Is the U.S. Really the Primary Target?

  The above considerations imply the Saudis—if indeed they primarily were targeting U.S. shale—embarked on a self-defeating campaign in November 2014 that could at best deliver a Pyrrhic victory and permanent revenues losses in the US$ hundred billions.

  Is the U.S. the primary target? U.S. import data (from the EIA) suggests the U.S. is not now the Saudis’ primary target, if it ever was. Like other producers, the Saudis operate within a set of constraints. Domestic capacity is one. In its 2015 Medium Term Market Report (Oil), the IEA put Saudi Arabia’s sustainable crude output capacity at 12.34 million barrels per day in 2015 and at 12.42 million in 2016. Export capacity—output minus domestic demand—is another.

  Rather than maintaining crude output at 2014’s level in 2015, the Saudis steadily increased it after al-Naimi’s announcement in Vienna as they brought idle capacity on line (data from the IEA monthly Oil Market Report):

  

  This allowed them to increase average daily crude exports by 460,000 barrels in 2015 over 2014 average export levels—even as Saudi domestic demand increased—and exports peaked in 4Q 2015 at 7.01 million barrels per day (assuming the Saudis keep output at average 2H 2015 levels in 2016, and domestic demand increased 400,000 barrels per day, as the IEA forecasts, the Saudis could export nearly 7 million barrels per day on average in 2016):

  

  The Saudis did not ship any of their incremental crude exports to the U.S.—in other words, they did not increase volumes exported to the U.S., did not directly seek to constrain U.S. output, and did not seek to increase U.S. market share. Based on EIA data, Saudi imports into the U.S. declined from 1.191 million barrels per day in 2014 to 1.045 million in 2015—and have steadily declined since peaking in 2012 at 1,396 million barrels per day. (OPEC’s shipments also declined from 2014 to 2015, from 3.05 million barrels per day to 2.64 million, continuing the downward trend that started in 2010). Canada, however, which has sent increasing volumes to the U.S. since 2009, increased exports to the U.S. 306,000 barrels per day in 2015:

  

  Also, the Saudi share of U.S. crude imports declined 1.9 percentage points in 2015 from 2014, and has declined 2.6 percentage points since peaking at 16.9 percent in 2013; during the same two periods, Canada’s share increased 4.5 and 9.9 percentage points respectively (and has more than doubled since 2009):

  

  Other Markets

  The Saudis presumably exported the incremental 606,000 barrels per day (460,000 from net increased export capacity plus 146,000 diverted from the U.S.) to their focus markets. Since other countries’ import data generally is less current, complete, and available than U.S. data, where these barrels ended up must be found indirectly, at least partially.

  In its 2015 Medium Term Market Report (Oil), the IEA projected that the bulk of growth from 2015 to 2020 will come in China, Other Asia, the Middle East, and Africa, while demand will remain more or less stagnant in OECD U.S. and OECD Europe:

  

  The Saudis find themselves in a difficult battle for market share in China, the world’s second largest import market and the country in which the IEA expects absolute import volume will increase the most through 2020—1.5 million barrels per day (it projects Other Asia demand to increase 2.0 million). The Saudis are China’s leading crude supplier. However, their position is under sustained attack from their major—and minor—global export competitors. For example, through the first eleven months of 2015, imports from Saudi Arabia increased only 2.1 percent to 46.08 million metric tons, while imports from Russia increased 28 percent to 37.62 million, Oman 9.1 percent to 28.94 million, Iraq 10.3 percent to 28.82 million, Venezuela 20.7 percent to 14.77 million, Kuwait 42.6 percent to 12.68 million, and Brazil 102.1 percent to 12.07 million.

  As a result of the competition, the Saudi share of China’s imports has dropped from ~20 percent since 2012 to ~15 percent in 2015, even as Chinese demand increased 16.7 percent, or 1.6 million barrels per day, from 9.6 million in 2012 to 11.2 million in 2015. Moreover, the competition for Chinese market share promises to intensify with the lifting of UN sanctions on Iran, which occupied second place in Chinese imports pre-UN sanctions and has expressed determination to regain its prior position (Iran’s exports to China fell 2.1 percent to 24.36 million tons in the first eleven months of 2015).

  Moreover, several Saudi competitors enjoy substantial competitive advantages. Russia has two. One is the East Siberia Pacific Ocean pipeline (ESPO) which directly connects Russia to China—important because the Chinese are said to fear the U.S. Navy’s ability to interdict ocean supplies routes. Its capacity currently is 15 million metric tons per year (~300,000 barrels per day) and capacity is expected to double by 2017, when a twin comes on stream. The second is the agreement Rosneft, Russia’s dominant producer, has with China National Petroleum Corporation to ship ~400 million metric tons of crude over twenty-five years, and for which China has already made prepayments. Russia shares a third with other suppliers. Saudis contracts contain destination restrictions and other provisions that constrain their customers’ ability to market the crude, whereas those of some other suppliers do not.

  Marketing flexibility will be particularly attractive to the smaller Chinese refineries, which Chinese government has authorized to import 1 million-plus barrels per day.
  While they fight for market share in China, the Saudis also have to fight for market share in the established, slow-growing or stagnant IEA-member markets (generally OECD member countries). Saudi exports to these markets declined 310,000 barrels per day between 2012 and 2014, and 490,000 barrels per day between 2012 and 2015’s first three quarters. Only in Asia Oceania did Saudi export volumes through 2015’s first three quarters manage to equal 2012’s export volumes. During the same period, Iraq managed to increase its exports to Europe 340,000 barrels per day (data from IEA monthly Oil Market Report).

  

  It is therefore not surprising that the Saudis moved aggressively in Europe in 4Q 2015—successfully courting traditional Russian customers in Northern Europe and Eastern Europe and drawing complaints from Rosneft.

  As with China, the competition will intensify with Iran’s liberation from UN sanctions. For example, Iran has promised to regain its pre-UN sanctions European market share—which implies an increase in exports into the stagnant European market of 970,000 barrels per day (2011’s 1.33 million barrels per day minus 2015’s 360,000 barrels per day).

  Might the U.S. be an Ally?

  Without unlimited crude export resources, the Saudis have had to choose in which global markets to conduct their market share war, and therefore, implicitly, against which competitors to direct their crude exports.

  Why did the Saudis ignore the U.S. market?

  First, U.S. crude does not represent a threat to the Saudis’ other crude export markets. Until late 2015, when the U.S. Congress passed, and President Obama signed, legislation lifting the prohibition, U.S. producers, with limited exceptions, could not export crude. Even with the prohibition lifted, it is unlikely the U.S. will become a significant competitor, given that the U.S. is a net crude importer. Therefore, directing crude to the U.S. would not improve the Saudi competitive position elsewhere.

   

  Second, the U.S. oil industry is one of the least vulnerable (if not the least vulnerable) to Saudi pressure—and therefore least likely and less quickly to crack. Low production costs are a competitive advantage, but are not the only one and perhaps not the most important one. Financing, technology, equipment, and skilled manpower availability is important, as are political stability, physical security, a robust legal framework for extracting crude, attractive economics, and access and ease of access to markets. The Saudis major export competitors—Russia, Iran, and Iraq—are far weaker than the U.S. on all these areas, as are its minor export competitors, including those within—Nigeria, Libya, Venezuela, and Angola—and outside OPEC—Brazil.

   

  Third, in the U.S. market, the Saudis face tough, well-managed domestic competitors, and a foreign competitor, Canada, that enjoys multiple advantages including proximity, pipeline transport, and trade agreements, the Saudis do not enjoy.

   

  Finally, the Saudis may be focused on gaining a sustainable long term advantage in a different market than the global crude export market—the higher value added and therefore more valuable petroleum product market. Saudi Aramco has set a target to double its global (domestic and international) refining capacity to 10 million barrels per day by 2025. Depressed revenues from crude will squeeze what governments have to spend on their oil industries and, presumably, they will have to prioritize maintaining crude output over investments in refining.

  In this Saudi effort, the U.S. could be an ally. The U.S. became a net petroleum product exporter in 2012 (minus numbers in the table below indicate net exports), and net exports grew steadily through 2015. Growth continued in January, with net product exports averaging 1.802 million barrels per day, and, in the week ending February 5, 2.046 million. U.S. exports will lessen the financial attractiveness of investment in domestic refining capacity, both for governments and for foreign investors in their countries’ oil industries (data from EIA).

  

  Saudi Intentions

  The view that the Saudi market share strategy is focused on crushing the U.S. shale industry has led market observers obsessively to await the EIA’s weekly Wednesday petroleum status report and Baker-Hughes weekly Friday U.S. rig count—and to react with dismay as U.S. rig count has dropped, but production remained resilient.

  In fact, they might be better served welcoming resilient U.S. production. It may be that the Saudis will not change course until Russian output declines, Iraq’s stagnates, Iran’s output growth is stunted—and that receding output from weaker countries within and outside OPEC would not be enough. If this is case, the Saudis will see resilient U.S. production as increasing pressure on their competitors and bringing forward the day when they can contemplate moderating their output.

  NOTE: Nothing in the foregoing analysis should be understood as denying that the U.S. oil industry has suffered intensely or asserting that this strategy, if it is Saudi strategy, will succeed.

  

  

  

  

  

• "Exceptional" America Is Number 1 Again

  …but this is a list you do not want to be at the top of…

   

  

   

  As The Burning Platform's Jim Quinn so eloquently exclaims…

  Thank God for the Department of Education and Common Core.  

   

  No child is being left behind in our quest for idiocy.

   

  I’m sure paying union teachers more money will solve our problems.

   

  Free college for morons who can’t add 2 + 2 will be the answer.

  We're gonna need moar free stuff.

  

  

  

  

  

  

• The Complete Idiot's Guide To Being Right About Donald Trump

  By Eddie Zipperer, originally published in The Hill

  The complete idiot's guide to being right about Donald Trump

  If you operate under the assumption that helium is heavier than the air around you, you're going to lose your balloon. If you're smart, you won't lose many balloons before you change your assumption. If you don't change your assumption, you're going to keep losing balloons and start to look pretty stupid in the process.

  But it looks like you can't teach old pundits new paradigms. After presidential candidate Donald Trump finished in second in the Iowa Republican caucus, the media went straight to work picking out a coffin for his campaign, battling it out to see who could write the most definitive obituary. After months of being wrong about Trump, something finally happened to make them look right: All the Iowa polls were wrong — Trump lost! Sure, he scored more Iowa votes than anyone ever — excepting Sen. Ted Cruz (Texas), who won Iowa — but he lost. Trump is a loser and this proves it.

  It's hard to blame them for trying to spike the ball in Trump's face. You’ve seen it before. Your favorite NFL team is down by 50 points. The team finally gets a first down, and the halfback celebrates like he just won the Super Bowl. Everyone except him just laughs and shakes their head. That's what opinion writers like David Brooks — who wrote a piece declaring that "Donald Trump Isn't Real" in the aftermath of Iowa — looked like last week. CNN ran a piece by Michael D'Antonio headlined "Donald Trump is a loser." And the list of similar sentiments is long.

  The pressure of being wrong about Trump over and over was building, so when it appeared they were finally right about something, the release was earthshaking.

  Last July, I asked a political science professor at an Ivy League university how Trump would appeal to the electorate in a general election. He told me that "It's a moot point" because "Trump has no chance of surviving the primaries."

  I predicted Trump's demise more than once myself since last summer. The difference between me and the rest of them is that I threw out my broken election assumptions and started holding tight to the string of my balloon. For anyone interested, below is a guide on how to be right about Trump next time. It all starts with rejecting the bad assumptions and embracing the good ones.

  Bad assumption: Manners are of the utmost importance. Every time Trump utters a naughty word, the media go nuts. The story was everywhere on Tuesday (you know the one; he repeated an audience member's use of the word "pussy"). I heard more than one talking head predict that Trump would lose the New Hampshire primary when voters found out. Didn't happen; never will. Trump doesn't do manners, and his supporters don't want him to.

  Good Assumption: Every time Trump says something that no other politician ever would, he scores points. Politicians are well-mannered in front of voters and employ others to do their dirty work. Take former Florida Gov. Jeb Bush (R), for instance. He talks a big game about the president being mature and the presidency as being above Trump's behavior. Sounds nice, but then consider the truth lurking behind Bush. According to Larry Sabato, "Jeb Bush is Meaner Than He Looks." Or recall former presidential candidate Sen. Rand Paul (R-Ky.) lecturing us on maturity during the same debate where his communications director, Sergio Gor, tweeted a copy of Carly Fiorina's closing statement that had been left in the hotel copier.

  Bad assumption: An ideological misstep will dissolve Trump's support. Most Republican voters despise eminent domain. I despise eminent domain. In Saturday night's debate, Trump defended eminent domain. He didn't try to "Rubio" his way out of it with prepared sound bites. He didn’t try to muddy the water and make people question whether he actually supported it. He was totally straight about it.

  Good assumption: Honesty transcends ideology. Voters would rather disagree with a straight-shooter than agree with a political wind-tester. We've seen too many politicians run as conservatives and then prove not to be. Voters have become suspect of politicians with ideologies that try too hard to match the electorate.

  Bad assumption: Trump is unelectable in November. Uh-huh. Just like he could never win the primaries. Every time a pundit says Trump is unelectable in November, there's a good chance he or she also wrote him off in the GOP primary a few months ago and at every step along the way. Repeating something over and over doesn't make it true. Just ask Sen. Marco Rubio (R-Fla.).

  Good assumption: Trump is a winner.

  

  

  

  

  

• The Chinese Yuan Countdown Is On

  Submitted by SaxoBank's Dembik Christopher via TradingFloor.com,

  • Currency stability is a prerequisite for China's economic transition
  • Defending the yuan is prohibitively expensive – China cannot beat the market
  • Progressive devaluation managed by PBoC is the most probable scenario for 2016
  • Remember that the country is on the capitalism learning curve
  • Exchange rates will inevitably be a key discussion point at Shanghai G20
  • China has moved from being a net importer to a net exporter of capital

  

  Shoring up a currency ad infinitum is impossible. The market always wins.

  The undervalued Chinese yuan is nothing but a bad memory. In the context of competitive devaluations throughout the world, the yuan is now significantly overvalued compared to its main counterparts, primarily the dollar and the euro.

  If it is to pull off its economic transition, China needs a stable currency, hence its repeated interventions on the exchange markets over the past few months. Over the last year $513 billion was drawn from the foreign exchange reserves without stemming any of the downwards market pressures on the yuan. Over the period is actually lost 5% against the US dollar. This is a significant depreciation for a currency that is used to fluctuating between narrower markers. By way of comparison, the euro, which floats freely on the market, lost almost 6% of its value against the US dollar last year.

  The increasingly credible assumption of a devaluation before this summer:

  

   

  Three possible scenarios exist for the Chinese yuan in 2016:

  • The progressive devaluation managed by the People's Bank of China
  • Continued defence of the currency on the markets
  • New Plaza-type Accord

  The progressive devaluation managed by the PBoC is the most probable scenario for 2016. This will not interfere with the process of internationalising the yuan, quite the reverse, since it would make it possible to have an exchange rate that is more in line with Chinese fundamentals. The successive devaluations of last August (1.9% on 11 August, 1.6% on 12 August and 1.1% on 13 August) sent an important signal to the market which will therefore not be taken by complete surprise the next time should China repeat the operation.

  If this is to succeed, the PBoC must open communication channels with the market by adopting the methods used by central banks in developed countries. The country is on the capitalism learning curve. Consequently, this revolution will not be without teething problems, but it is certainly a necessary step so that investors can gain a better understanding of China’s monetary policy and its optimal exchange rate.

  The G20, due take place in Shanghai on 26 and 27 February, could represent an important step in the yuan’s devaluation. The issue of exchange rates will inevitably be a key discussion point. This forum could be the ideal opportunity to provide China with the necessary expertise and could potentially give it free rein to devalue, as has been the case in the past for Japan. In the short term, the main flaw in this scenario would be an increase in monetary disorder, but the market impact would remain limited and would be nothing like the electric shock precipitated by the Swiss National Bank abandoning the EURCHF ceiling, almost exactly one year ago.

  If the yuan is not devalued, the PBoC could be forced to continue to defend the yuan on the markets. This is the counterproductive scenario. The interventions on the forex markets come at a cost that is increasingly prohibitive, given their ineffectiveness in stabilising the yuan. China cannot beat the market. At the current path (close to 100 billion dollars per month), the currency reserves could reach the minimum threshold of 2,800 billion dollars recommended by the IMF by the end of June.

  The country cannot afford to let its reserves fall much below this ceiling since it provides PBoC with real flexibility to intervene in the event of an external crisis. Were this to happen, China would sooner or later be forced to throw in the towel and let market forces decide the exchange rate of the yuan. PBoC’s credibility would be permanently damaged. China is therefore aware that such an eventuality is unthinkable, which seems to give even more credence to the scenario of the progressive devaluation of the yuan by this summer.

  A new Plaza Accord. This is the dream scenario for economists, but certainly the least likely in the medium term, given the lack of monetary policy coordination between developed and emerging countries. Starting from the premise that exchange rate volatility is too high and competitive devaluations that are not signed off at the global level have recessionary effects on economic activity, new Plaza accords could be signed under the auspices of the G20. These would aim to counter the major problems of the world economy: high exchange rate volatility, overvaluation of the yuan and the strength of the American dollar which heightens the risk of recession due to the debt explosion of market players in USD since 2008.

  Following the example of 1985, signatory countries could accept to intervene on the currency markets to depreciate the market price of the dollar and the yuan. Swap agreements between the Fed and the central banks of emerging countries could also be set up, as was the case in 2008, between the main central banks of developed countries, in order to ease tensions on the financial markets. However, for such a scenario to be possible, the countries in question must recognise that they have convergent interests and accept the need to act in concert, which is not yet the case.

  The thorny problem of capital outflows:

  
   
  The fall of the yuan is closely correlated with capital outflows. This is difficult to measure precisely given the opaque way in which Chinese statistics are calculated. Our low estimate leads us to conclude that almost 650 million dollars in capital have flowed out of the economy since 2010, based on the change in the "net errors and omissions" in the trade balance. The actual total amount is certainly much higher, but this estimate confirms that contrary to what was commonly admitted, China has moved from being a net importer to net exporter of capital. Despite the 4,000 billion yuan recovery plan presented at the end of 2008, China has not managed to sufficiently strengthen its economy. Regardless of which is PBoC's preferred scenario, when it comes to stabilising the exchange rate for the yuan, capital outflows must inevitably be restricted.

  It would not be a good idea to implement the capital controls alluded to, since this would send a very negative message to foreign investors at the worst possible time. In addition, past experience shows that gaps can always be found in such measures in order to transit capital out of the country through indirect means, such as via Hong Kong, in China's case. For true effectiveness, strict controls are required which would result in the economy being completely stifled. This makes absolutely no sense in this case. China will have no other choice in the years to come, but to offer liberalisation guarantees to foreigners for the domestic capital market and strengthen its financial regulations, which are still very inadequate.

  This long process does not exclude new significant corrections on the Chinese stock market or even business bankruptcies that will result in reducing the moral hazard. Nevertheless, what is certain is that a stable exchange for the yuan after devaluation could help reassure market players. This is after all, the simplest and quickest way to proceed. China does not have any other credible, effective levers to restore balance to its economy in the short-term.

  
  Curiously, progressive devaluation would actually aid the internationalisation of the yuan.
   

  

  

  

  

  

• Baby Boomers Are Drowning In Loans: Debt Of Average 67-Year-Old Soared 169% In Past 12 Years

  For those who follow the monthly consumer credit report released by the Fed there was nothing surprising in today’s release of the latest Household Debt and Credit Report by the New York Fed. It reports that total household debt rose to $12.12 trillion in Q4, up from $11.83 trillion a year ago…

  

   

  …mostly as a result of soaring student and auto debt, both trends we have observed on various occasions in the recent and not so recent past.

  

  There is more in the report (a notable discussion focuses on why housing credit has stagnated as much as it has with the Fed seemingly unable to grasp that the bulk of housing purchases in the US in recent years have been by offshore oligarchs using all cash transactions to park money in US luxury housing), but what is the topic of this post is another finding by the Fed, namely that Americans in their 50s, 60s and 70s – the Baby Boom generation – are carrying unprecedented amounts of debt, a shift which according to the WSJ “reflects both the aging of the baby boomer generation and their greater likelihood of retaining mortgage, auto and student debt at much later ages than previous generations.”

  Debt held by Americans aged 50-80 increased by 59% from 2003 to 2015 https://t.co/EVx3ojT9OH pic.twitter.com/vqHUSiIwmE

  — New York Fed News (@NYFed_News) February 12, 2016

  Incidentally, those debt “retention” are entirely thanks to the Fed which has only itself to thank for: with deposits yielding nothing, an entire generation of Americans 50 and older has been fored to resort increasingly to more and more debt, until this happens:

  

  What this chart shows is that while per capita debt at age 30 fell by 12%; per capita debt at age 65 grew by 48%!

  Worse, as the chart below show, while aggregate debt of Gen-Xers has admirably declined by 12% in the past 12 years, the aggregate debt of the average Baby Boomer has soared by an unprecedented 169%!

  

  The biggest shocker: an 886% increase in student loan debt of Americans aged 65 and older.

  

  Some more details from the WSJ: the average 65-year-old borrower has 47% more mortgage debt and 29% more auto debt than 65-year-olds had in 2003.

  Some more observations:

  Just over a decade ago, student debt was unheard of among 65-year-olds. Today it is a growing debt category, though it remains smaller for them than autos, credit cards and mortgages. On top of that, there are far more people in this age group than a decade ago.

   

  The result: U.S. household debt is vastly different than it was before the financial crisis, when many younger households had taken on large debts they could no longer afford when the bottom fell out of the economy.

   

  The shift represents a “reallocation of debt from young [people], with historically weak repayment, to retirement-aged consumers, with historically strong repayment,” according to New York Fed economist Meta Brown in a presentation of the findings.

  Why is this a problem in a world in which cash flow is increasingly scarce? “Older borrowers have historically been less likely to default on loans and have typically been successful at shrinking their debt balances. But greater borrowing among this age group could become alarming if evidence mounted that large numbers of people were entering retirement with debts they couldn’t manage. So far, that doesn’t appear to be the case. Most of the households with debt also have higher credit scores and more assets than in the past.”

  Assets mostly in the form of equities and bonds, however, those assets will need to be liquidated one way or another to repay what is a record debt load as the Baby Boomer generation grows even old and ever more in debt.

  For now, however, the debt repayment cliff has not been hit as banks allow creditors to roll over existing obligations. This means that while debt among the elderly is at record levels, the percentage of this debt that is in some stage of delinquency has been steadily dropping. The NY Fed founds that only 2.2% of mortgage debt was in delinquency, the lowest since early 2007. Credit card delinquencies also declined, while auto loan and student loan delinquencies were unchanged.

  “The household sector looks much better positioned today than in 2008 to absorb shocks and continue to contribute to the economic expansion,” said New York Fed President William Dudley in prepared remarks.

  Actually, the most debt-sensitive part of the household sector, the Baby Boomers, has never been more vulnerable, and only low rates have allowed this generation to ignore the elephant in the room; with the Fed now hiking rates, this will change drastically in the coming years.

  There was some good news in the report: by contrast the overall debt balances of most young borrowers haven’t grown or have declined. The average 30-year-old borrower has nearly three times as much student debt as in 2003. But these borrowers have so much less home, credit card and auto debt that their overall debt balances are lower.

  Which also explains why not only are Millennials locked out of purchasing homes, but have become the “renting generation”, one where everything is based on the principle of a “sharing economy”, where little to no actual asset purchases are required, and where a la carte renting of goods and services for instant needs has become the new norm.

  Indeed, as NY Fed economist Meta Brown admits, this shift for young borrowers could have “consequences in terms of both foregone economic growth and young consumers’ welfare.” Sadly, with few well-paying jobs for Millennials available, and with little ability to build up an asset or savings base, these trends will continue until they too hit a plateau of unsustainability.

  * * *

  The full NY Fed report is below (pdf link)

  

  

  

  

  

• Assad Plans To Retake "All Syria," Will "Confront" Saudis, Turks If Invaded

  Nine months ago, things weren’t look good for Syria’s Bashar al-Assad.

  Four years into his country’s bloody civil war, he found himself fighting a multi-front war against a long list of largely Sunni extremist elements and the government’s forces were stretched thin. The rebels enjoyed the support not only of the US, but of Saudi Arabia, Qatar, and Turkey. That meant that their resources were essentially unlimited.

  It had taken longer than expected, but by summer of last year, the plan that was revealed in a leaked diplomatic cable from 2006 penned by Deputy Chief of Mission in Syria William Roebuck had materialized. The West and its regional allies had managed to engineer a Sunni uprising against the Alawite government by fomenting sectarian discord and within months, Assad would either flee (likely to Russia) or end up like Gaddafi – executed by an angry mob.

  Russia’s intervention changed all that by giving Hezbollah an advanced air force to back ground offensives and now, four months since Russia first begun flying combat missions from Latakia, Assad is poised to recapture Aleppo, securing his grip on the country’s main urban centers.

  Assad has given several interviews since the end of last summer. We’ve documented most of them here. In September for instance, he had the following advice for the West, which suddenly became acutely aware of the “problem” in Syria when the indelible image of three-year-old Aylan Kurdi drowned on a Turkish beach was plastered all over the nightly news: “If you are worried about them, stop supporting terrorists. That’s what we think regarding the crisis. This is the core of the whole issue of refugees.”

  Then, in the wake of the Paris attacks, Assad condemned the assaults as “savage” but reminded the media that “what France suffered from terror is what the Syrian people have been enduring for over five years.” “We said, don’t take what is happening in Syria lightly. Unfortunately, European officials did not listen,” he added.

  Then, in December, Assad invited Die Presse to Damascus for a sweeping interview in which the President described the country’s infrastructure as “pretty much destroyed” and blamed Turkey, Saudi Arabia, and Qatar for turning Syria into a “hotbed for terrorists.”

  Now, with Iran and Russia set to rout the rebels at Aleppo, Assad sat down with AFP and said from Damascus that pro-government forces would “without any hesitation” look to retake the entire country from the rebels. Below, find excerpts from the interview in which Assad also touches on the possibility of a Saudi or Turkish ground invasion, and on Europe’s culpability in vis-a-vis the conflict.

  *  *  *

  Highlights from AFP and al-Arabiya

  Speaking Thursday in Damascus, Assad said his armed forces would try to retake all of Syria “without any hesitation,” but that the involvement of regional players “means that the solution will take a long time and will incur a heavy price.”

  “The main battle is about cutting the road between Aleppo and Turkey, for Turkey is the main conduit of supplies for the terrorists,” he said in an interview conducted Thursday in Damascus.

  He warned that the French government should change its “destructive policies” in support of extremists.

  France has implemented “destructive policies extending direct support to terrorism… It is France’s duty to reverse or change its policies,” Assad said.

  “We have fully believed in negotiations… however, if we negotiate, it does not mean that we stop fighting terrorism. The two tracks are inevitable in Syria,” he said.

  But he said he sees a risk that Saudi Arabia or Turkey could launch a military intervention in his country.

  He said he “doesn’t rule out” such an intervention, but said that his armed forces “will certainly confront it.”

  On the issue of the refugee crisis he said Europe was a “direct cause” of Syrians fleeing their homeland and must stop “giving cover to terrorists” before people return.

  He called on European governments “which have been a direct cause for the emigration of these people… to help in making Syrians return to their country.”

  “I would like to ask every person who left Syria to come back,” he said.

  “They would ask ‘why should I come back? Has terrorism stopped?‘”

  Full transcript

  Question 1: How do you feel when you see tens of thousands of your citizens starving, running away from hunger, from their areas which are being shelled by your Russian allies, and trying to cross the borders to Turkey? And how do you feel when you see the pictures of them drowning in their attempt to cross the seas?

  President Assad: If we talk about emotions, I belong to this people; and it is self-evident that I have the same feelings my people have. Any scene of suffering is painful to all of us as Syrians. But as an official, the question for me is less about emotions than about what I, as an official, should do, being responsible before my people.

  However, when the cause of this suffering is the terrorists, not the Russian shelling as claimed by Western media, and when one cause for migration is the almost five-year-old embargo against the Syrian people, naturally my, and every Syrian official’s first task is to fight terrorism essentially using Syrian capabilities, but also using our friends’ support in the fight against terrorism. That’s why I say the problem of Syrian refugees abroad, as well as the problem of hunger inside Syria, as you referred to it, is a problem caused by terrorism, Western policies, and the embargo imposed on the Syrian people.

  Question 2: Mr. President, can we talk about the possibility of putting an end to shelling civilian populations and also lifting the blockade imposed on certain areas?

  President Assad: The conflict has been, since the beginning of the crisis in Syria, about who wins the support of the people in Syria. Consequently, it doesn’t make sense for us to shell civilians if we want to win them to our side. This is in theory. Practically, while moving around in Syria, you will find that in any area under the control of the state, all sections of Syrian society, including the families of the militants, are being cared for by the state. What is more is that in a city like Raqa, which is under the full control of Daesh (ISIS), the state continues to pay the salaries of employees and send vaccines for children. So it doesn’t make sense for the state to shell civilians while doing all the above, unless we are talking about mistakes which happen in every battle. The general rule is that there are innocent victims in every war. This is a rule of thumb in wars, but this is definitely not the Syrian state’s policy.

  Question 3: Mr. President, what do you say to those emigrating to Europe? Do you ask them to come back?

  President Assad: I would like to ask every person who left Syria to come back. That’s natural but not enough. Emotions are not enough. They would ask: “Why should I come back? Has terrorism stopped? Have the basic requirements for life been restored?” Many of those who have emigrated are neither against the Syrian state or with the terrorists, but sometimes there are circumstances which force people to emigrate. So, my answer to this question is: when terrorism recedes, and things are better, they will return of their own volition without any invitation. So, instead of asking these people to return, I’ll call on the European governments, which have been a direct cause for the emigration of these people, by giving cover to terrorists in the beginning, and through the sanctions imposed on Syria, to help in making the Syrians return to their country.

  Question 4: Mr. President, will the Syrian state regain control over Aleppo in the next few days? If so, what is next?

  President Assad: The battle in Aleppo now is not about regaining control over Aleppo, because the Syrian state is there; but the main battle is about cutting the road between Aleppo and Turkey; for Turkey is the main conduit of supplies for the terrorists. The battle is going on now on more than ten fronts at the same time, from north to south, to the east, to the far east too, and to the west in Latakia. It was going on in Homs, and now it’s over. So, all these stages are moving in parallel.

  Question 5: Do you think, Mr. President, that you can regain control over all Syrian territory?

  President Assad: Regardless of whether we can do that or not, this is a goal we are seeking to achieve without any hesitation. It makes no sense for us to say that we will give up any part. The timeframe is dependent on two scenarios. Suppose that the problem is purely Syrian, i.e. that Syria is isolated from its surroundings, we can put an end to this problem in less than a year by moving on two fronts: fighting terrorism and political action. The second scenario — which is the case now — taking the shape of continuing supplies to terrorists through Turkey, Jordan, and partly from Iraq ? because Daesh (ISIS)exists in Iraq with Saudi, Turkish, and Qatari support -? naturally means that the solution will take a long time and will incur a heavy price. So it is difficult to give a precise answer about the timeframe.

  Question 6: Can’t you say precisely how many years you need to restore peace to Syria?

  President Assad: The question is: for how many years will Turkey and Saudi Arabia continue to support terrorism? That is the question. And when will the West put pressure on these countries to stop supporting terrorism?

  Question 7: Who is your main enemy? Is it the so-called moderate opposition and the Islamists, or is it Daesh (ISIS)?

  President Assad: I don’t think that the term “opposition” can be used, in France or anywhere else in the world, to describe somebody carrying a weapon. Opposition is a political act. Suppose that you mean to say “moderate terrorists”, this is a different term. Saying that, you mean that they do not belong to Daesh (ISIS), Al-Nusra, or to these extremist groups. Obama said that the moderate opposition is a fantasy. Biden said the same thing. But what’s more important is reality which says that such an opposition is non-existent. Most of the militants belong to extremist groups, such as Daesh (ISIS), Al-Nusra, Ahrar al-Sham, and others. So, my answer is that every terrorist is an enemy. We respect every political opposition; and we do have political opposition inside Syria. They adopt tough positions against the state, and we are not attacking them.

  Question 8: You see no difference between these armed groups and Daesh (ISIS), Al-Nusra, and others?

  President Assad: Legally speaking, there is no difference. The state will confront all those who carry weapons. It will not ask them about their ideology. But the difference is that the extremist groups refuse to have any dialogue with the state. They believe that they will fight, die, and go to heaven. This is their doctrine. The other groups are not ideological. Most of them have been misled. They got involved in dialogue with the state later. Some of them have laid down their weapons, and some are actually fighting with the Syrian Army today. We grant them amnesty in return for laying down their weapons.

  Question 9: Mr. President, what do you think of Jaish al-Islam and Ahrar al-Sham? They did negotiate with you, and went to Geneva.

  President Assad: They went as part of the opposition formed by Saudi Arabia, because it is Saudi Arabia which supports terrorism worldwide. So it is only natural for the representatives of Saudi Arabia to be terrorists, not politicians.

  Question 10: So you will not negotiate with those?

  President Assad: In principle, direct negotiations were not supposed to take place in Geneva 3. They were supposed to take place through de Mistura. And here we should be precise: we are not negotiating with Syrians, but with representatives of Saudi Arabia, France, the UK, and others. So, if you mean Syrian-Syrian dialogue, the answer is naturally no. Dialogue with these people is not a Syrian-Syrian dialogue at all. A Syrian dialogue is that conducted with Syrian groups which have grassroots in Syria, like the political opposition in Syria, for instance. Any persons calling themselves opposition but belong to foreign states or foreign intelligence services do not represent Syrians in the dialogue, and simply we do not consider them Syrian.

  Question 11: All those who went to Geneva were based outside Syria. Can you explain?

  President Assad: No, some of them are based inside Syria, and some live outside Syria but they are involved in politics and have supporters in Syria. I’m not talking only about terrorists, I’m talking about people who have been formed in a foreign state and act on behalf of a foreign state.

  Question 12: Don’t you think that had you been more tolerant in dealing with this opposition in the past, you would have avoided this conflict? Don’t you bear part of the responsibility?

  President Assad: We do not claim that we did not make mistakes in Syria. This is natural in any state. And we do not claim that we, in the Middle East, have reached a stage of significant political openness. We were moving in that direction, not very quickly, and maybe slowly. Back to your question, the more radical segments of the opposition inside Syria, which attack the state, have not been imprisoned or prosecuted by the state, neither before or after the crisis. So, I don’t know what is meant by tolerance in this case.

  Question 13: Maybe it was difficult for the opposition inside Syria before. Maybe they did not have a margin for movement?

  President Assad: You are talking about a general condition in the Middle East. This is partly true, particularly in the Arab world. But the question in this case is not that of tolerance. The question has to do with individuals rather than institutions. The question is: what is the institutional action that we should take in order to move forward. This has legal, social, or cultural aspects, because democracy is more of a culture than a law. You cannot proceed with laws while remaining culturally in your place.

  Question 14: Mr. President, do you think that there might be a Turkish intervention in Syria now? And do you think the Saudi threats are serious?

  President Assad: Logically, intervention is not possible, but sometimes reality is at odds with logic, particularly when there are irrational people leading a certain state. That’s why I don’t rule that out for a simple reason: Erdogan is a fanatical person with Muslim Brotherhood inclinations. He is living the Ottoman dream. For him, the collapse which took place in Tunisia, Libya, Egypt and Syria is something personal. This threatens his political future, on the one hand, and his fanatical Islamist ambitions, on the other. He believes that he has an Islamist mission in our region. The same applies to Saudi Arabia. The collapse of the terrorists in Syria is a collapse of their policies. I tell you that this process is surely not going to be easy for them, and we will certainly confront it.

  Question 15: Mr. President, are you prepared to give northern Syria to the Kurds for self-rule after the crisis?

  President Assad: This question is directly related to the Syrian constitution; and as you know, the constitution is not given by the government, all sections of Syrian society have a say in it, and it is put to public referendum. That’s why this should be a national question, not a question put to any Syrian official, whether it has to do with self-rule, federalism, decentralisation, or any similar thing. All these things are part of the political dialogue in the future; but I would like to stress that the Kurds are a Syrian national group.

  Question 16: Is it true that the Russians tried to persuade you to step down? Don’t you fear a Russian-American deal on this issue?

  President Assad: If we look at Russian policies and Russian officials in the same way we look at unprincipled Western officials and policies, this is a possibility. But the fact is the exact opposite, for a simple reason: the Russians treat us with great respect. They do not treat us as a superpower dealing with a minor state, but as a sovereign state dealing with a sovereign state. That’s why this issue has not been raised at all in any shape or form.

  Question 17: Mr. President, are you prepared to give Russia and Iran permanent bases on your territory? Do you fear that Syria will become a satellite to these powers?

  President Assad: Having military bases for any country in Syria does not mean that Syria will become a satellite state to these countries. They do not interfere in issues related to the law, the constitution, nor to politics. In any case, the Russian base exists already, while the Iranians have not asked to have one. But in principle, we do not have a problem.

  Question 18: So if the Iranians raise this possibility, will you accept?

  President Assad: The issue hasn’t been raised, and consequently this is hypothetical. But as I said, when we accept it in the case of Russia, it means the principle is acceptable. But this also depends on the capabilities of every state and their role on the regional and international arena.

  Question 19: Has Russia asked your permission to build new bases on your territory?

  President Assad: No.

  Question 20: The American elections are still at the primaries stage. Are you, personally, with candidate Trump or Clinton or is there a third person who might be in the interest of the region?

  President Assad: We have never placed our bets on any American president. We always bet on policies; and these policies are not controlled only by the president, but by the establishment in general, and by the lobbies operating in the United States. If you look at the competition between many candidates, now or in the past, you will find that it revolves around who is more inclined to start wars, and this doesn’t bode well. The problem with American politicians is that they say something and do the exact opposite, before and after the elections.

  Intervention: So, the promises made by Trump do not frighten you?

  President Assad: No. As I said, since I don’t build on what the American candidates say, I see no reason why I should comment on any of them, i.e. they are all alike to me.

  Question 21: Mr. President, do you intend to be a president for life? And if you don’t, are you in the process of grooming a successor, perhaps one of your sons?

  President Assad: First, the presidency is not a hobby that we enjoy. It is a responsibility, particularly in these circumstances. As to my selecting a successor, this country is neither a farm nor a company. If I want to remain president, that should be dependent on two factors: first, my desire to be president, and second, the desire of the people. When the next elections come and I feel that the people don’t want me, I shall not stand. That’s why it’s too early to talk about this. We still have years before the next elections.

  Question 22: Mr. President, you know that there have been many accusations made about your government and you personally, most recently by the UN investigation committee which accused you of genocide, which is a crime against humanity. Aren’t you concerned that you will one day face an international court?

  President Assad: First, you know that UN institutions express balance among the superpowers and the conflict among them. And these organisations are now basically controlled by Western powers. That’s why most of their reports are politicised and serve a political agenda. The evidence is that these organisations haven’t said anything about clear massacres perpetrated by terrorist groups against innocent civilians in Syria. What refutes the reports of these organisations is that, first, they do not provide any evidence, and this is the case in general. Second, there is a logic for things: if Western states and rich Gulf states are against an individual, and this individual is killing his people, how would he withstand for five years in these circumstances? That’s why I’m not concerned about these threats or these allegations.

  Question 23: But don’t you believe that these reports are correct? There are eyewitnesses in this case.

  President Assad: No, there is a difference between individual crimes having been committed and having a state policy of systematic killing. I said that innocent people die in the war. That is true, but war crimes are committed when orders are given to follow a policy of committing massacres for certain purposes. Had this been true, people would have fled from state-controlled areas to the areas controlled by armed groups. What is happening is the exact opposite — everybody moves to the state-controlled areas.

  Question 24: Mr. President, how do you think you will figure in history: as a man who saved Syria or a man who destroyed it?

  President Assad: This depends on who will write the history. If it is the West, it will give me all the bad attributes. What’s important is how I think. Certainly, and self-evidently, I will seek, and that is what I’m doing now, to protect Syria, not to protect the chair I’m sitting on.

  Question 25: Mr. President, do you still really intend to negotiate?

  President Assad: We have fully believed in negotiations and in political action since the beginning of the crisis; however, if we negotiate, it does not mean that we stop fighting terrorism. The two tracks are inevitable in Syria: first, through negotiations, and second through fighting terrorism. And the two tracks are separate from each other.

  Question 26: What is your comment on the resignation of French Foreign Minister Laurent Fabius? Do you believe that this will change French policy?

  President Assad: Changing personnel is not that significant. What’s important is the change of policies. The French administration changed almost completely between Sarkozy and Hollande, but for us the policies have not changed. They have been destructive policies extending direct support to terrorism. That’s why we should not assume that the foreign minister makes the policies. They are made by the whole state, headed by the president. As to what we can do in Syria, I don’t think that Syria has to do anything towards France. It is France which should do something towards fighting terrorism. So far, it supports terrorists, albeit politically, and in some cases it supported them militarily. It is France’s duty to reverse or change its policies in order to fight terrorism, particularly after hundreds of French citizens paid with their lives for their wrong policies.

  

  

  

  

  

• Jose Canseco Says "Everyone Should Be In Gold", Predicts $1,500 By Memorial Day

  In the aftermath of the BOJ’s stunning NIRP announcement in late January, virtually everyone had an opinion on what this move of sheer desperation means.

  Actually scratch the “virtually” part: as we reported one week ago, none other than famous baseball slugger Jose Canseco opined when he tweeted that “Negative interest rates in Japan is blowing my mind”, rhetorically asking “Who is advising Japan? Forcing banks to lend all ¥ will not get 2% inflation. It creates loanees market with even lower rates. Dumb move” and slamming the BOJ: “Bank of Japan should call them willie wonka bonds “YOU GET NOTHING. yOU LOSE!””

  A few short days later, Jose took a firm stance on JPM’s forecast that NIRP could go as low as -4.5% in Europe (as well as -3.45% in Japan and -1.3% in the US).

  @zerohedge udder lunacy

  — Jose Canseco (@JoseCanseco) February 10, 2016

  Today, this latest and perhaps most popular entrant to financial twitter took on a topic that is even more sensitive, and divisive, to the financial arena: gold.

  This is what he tweeted moments ago:

  not a surprise but everyone should be in gold

  — Jose Canseco (@JoseCanseco) February 12, 2016

  $1500+ by Memorial dAY

  — Jose Canseco (@JoseCanseco) February 12, 2016

  Mock him? Sure go ahead, but with an opinion validated by such commentary…

  With gold minus storage cost becoming greater than cash returns could be a long rally. what else is there, bitcoins? think about it

  — Jose Canseco (@JoseCanseco) February 12, 2016

  … it is clear that the famous baseball slugger has done far more homework than 90% of the anti-gold crowd.

  His conclusion is one we, and incidentally JPM’s head quant Marko Kolanovic, wholeheartedly with:

  Plus Psychology For Gold index growing with euro bank mess, nirP, falling oil, tanking stock markets, yellens slowdown hints.

  — Jose Canseco (@JoseCanseco) February 12, 2016

  Will Jose be right? And can this sport celebrity stir up “animal spirits” among the population and force a rush into physical gold ahead of NIRP’s arrival in the US?

  We’ll find out, but for now, this is what Jose being right would look like.

  

  

  

  

  

  

• Americans Have Never Been Fatter: Obesity Rate Rises To Highest Level On Record

  Americans are fat. And they’re getting fatter all the time.

  It was just last month when we showed you a series of graphics that demonstrated how it came to this. In short, average calories available to Americans jumped 25 percent to 2500, between 1970 and 2010. And it wasn’t because the US added a fourth meal to the day.

  It was all added fats and grains (which include oils and fats in processed foods and flour) which used to make up 37% of America’s diet, but now comprise something like 46%. The biggest contributor to the trend was cost. The increasingly more caloric foods have become progressively cheaper which means lower and middle class people are more inclined to eat them, leading directly to a worsening obesity epidemic.

  

  As we noted back in October, America’s obesity problem has resulted in a rather shocking development researchers uncovered when they analyzed data from the National Health and Nutrition Examination Survey: “This generation of Americans is the first that will have a shorter life expectancy than the previous generation, and obesity is one of the biggest contributors to this shortened life expectancy because it is driving a lot of chronic health conditions.”

  Against this rather disconcerting backdrop we present new numbers from Gallup which show that America’s obesity rate climbed to a record high of 28% in 2015. 

  

  That’s right, America. A third of you are grossly overweight. As it turns out, whites have seen the sharpest uptick, with obesity rates climbing 2.8% since 2008. 

  

  “In addition to the 28.0% who are obese, another 35.6% of adults are classified as overweight, with 34.6% normal weight and 1.8% underweight, as reported in 2015,” Gallup goes on to report, before noting that the incidence of diabetes has trended upwards as well. Here’s more: 

  These results are based on more than 175,000 interviews conducted each year from 2013 to 2015 and more than 350,000 interviews conducted each year from 2008 to 2012 as part of the Gallup-Healthways Well-Being Index. Unlike some government estimates of obesity, the Well-Being Index uses respondents’ self-reported height and weight to calculate body mass index (BMI). It does not involve in-home clinical measurements that typically result in higher obesity estimates.

  Across racial and ethnic groups, increases in obesity and diabetes rates since 2008 have been uneven. Both rates have increased much more among whites than among blacks, Asians and Hispanics. Blacks have the highest obesity rate by far of the major racial and ethnic groups, followed by Hispanics, but these two groups have had comparatively modest increases in obesity since 2008, and have shown little to no change in diabetes diagnoses during this time.

   

  The obesity rate has continued to rise in the U.S. after leveling off from 2011 to 2013, and has done so despite rising public concern. Past research has demonstrated that obesity and its associated chronic conditions including diabetes cost the U.S. economy $153 billion per year in unplanned absenteeism due to poor health, a figure that has increased since the time of that study. And while blacks suffer disproportionately from chronic conditions associated with obesity, the sharp increase in obesity measured among whites since 2008 signifies that this is not a problem isolated to one racial or ethnic group.

   

  Obesity affects all elements of well-being, not just physical wellness. It is associated, for example, with lower financial and social well-being. While obesity can diminish overall well-being, the relationship can also work in reverse; high well-being can reduce the chances of being obese. Those who have high or improving well-being across all five elements — purpose, social, financial, community and physical — are less likely to be obese or to become obese in the future than those who do not.

  

  

  

  

  

• THe DeuTSCHe LoCKeR…

  

  

  

  

  

• America's Corrupt Media – How Reporters Took Direct Orders From Hillary's Staff

  Submitted by Mike Krieger via Liberty Blitzkrieg blog,

  It is the job of the Fourth Estate to act as a check and a restraint on the others, to illumine the dark corners of Ministries, to debunk the bureaucrat, to throw often unwelcome light on the measures and motives of our rulers. ‘News’, as Hearst once remarked, ‘is something which somebody wants suppressed: all the rest is advertising’. That job is an essential one and it is bound to be unpopular; indeed, in a democracy, it may be argued that the more unpopular the newspapers are with the politicians the better they are performing their most vital task.

  – Brian R. Roberts from a October 29, 1955 article in the London periodical “Time & Tide”

   

  A newspaper is a device for making the ignorant more ignorant and the crazy crazier.

  – H.L. Mencken

  If you really want to know how weak Hillary Clinton is as a candidate, you merely have to appreciate that the U.S. media essentially acts as her own personal PR firm, yet the public still recognizes her as a dishonest crook. Brace yourself for the following story, it’s huge.

  Earlier this week, we learned from Gawker that at least one U.S. reporter traded content in his article for information from Hillary Clinton’s staff while she was Secretary of State. In what is an almost hard to believe exchange, Marc Ambinder of The Atlantic,  agreed to insert specific words and imagery into his article in return for a copy of Hillary’s upcoming speech at the Council on Foreign Relations.

  We have the exact exchange thanks to emails released from a 2012 Freedom of Information Act Request (FOIA). Gawker reports:

  The emails in question, which were exchanged by Ambinder, then serving as The Atlantic’s politics editor, and Philippe Reines, Clinton’s notoriously combative spokesman and consigliere, turned up thanks to a Freedom of Information Act request we filed in 2012 (and which we are currently suing the State Department over). The same request previously revealed that Politico’s chief White House correspondent, Mike Allen, promised to deliver positive coverage of Chelsea Clinton, and, in a separate exchange, permitted Reines to ghost-write an item about the State Department for Politico’s Playbook newsletter. Ambinder’s emails with Reines demonstrate the same kind of transactional reporting, albeit to a much more legible degree: In them, you can see Reines “blackmailing” Ambinder into describing a Clinton speech as “muscular” in exchange for early access to the transcript. In other words, Ambinder outsourced his editorial judgment about the speech to a member of Clinton’s own staff.

   

  On the morning of July 15, 2009, Ambinder sent Reines a blank email with the subject line, “Do you have a copy of HRC’s speech to share?” His question concerned a speech Clinton planned to give later that day at the Washington, D.C. office of the Council on Foreign Relations, an influential think tank. Three minutes after Ambinder’s initial email, Reines replied with three words: “on two conditions.” After Ambinder responded with “ok,” Reines sent him a list of those conditions:

   

  

  

  Ambinder made good on his word. The opening paragraph of the article he wrote later that day, under the headline “Hillary Clinton’s ‘Smart Power’ Breaks Through,” precisely followed Reines’ instructions.

  This is literally the first paragraph from Ambinder’s article:

  When you think of President Obama’s foreign policy, think of Secretary of State Hillary Clinton. That’s the message behind a muscular speech that Clinton is set to deliver today to the Council on Foreign Relations. The staging gives a clue to its purpose: seated in front of Clinton, subordinate to Clinton, in the first row, will be three potentially rival power centers: envoys Richard Holbrooke and George Mitchell, and National Security Council senior director Dennis Ross.

  If nothing else, Ambinder is very good at following instructions. Journalism, not so much.

  Now back to Gawker.

  Reines didn’t respond when we asked if he engaged in similar transactions with other reporters covering the State Department. But on the day of his trade with Ambinder, at least one other journalist used Reines’ preferred adjective—“muscular”—to describe the speech at the Council on Foreign Relations. That reporter was none other than Mike Allen of Politico.

   

  We can’t say for sure that Reines implored Allen to describe Clinton’s speech as “muscular” and emphasize where particular audience members were seated, but that kind of request would hardly be out of the ordinary. As we noted above, Allen allowed Reines to ghost-write an item for his Playbook newsletter; and, in the course of attempting to secure an interview with Chelsea Clinton, told Reines he was prepared to submit interview questions to Clinton’s team in advance for their approval.

   

  In any case, Reines’ strategy worked out nicely. For an article aggregating Allen’s piece, New York magazine quoted his use of “muscular” in the headline, and even commissioned an illustration of Clinton wearing the arms of a body builder.

  Can you believe this? And you wonder why the public is so ignorant. Much of the press is not doing its job. 

  Meanwhile, there’s a lot more good stuff in the Gawker article, so I suggest you read the entire thing.

  Of course, this is something I’ve been saying for a while. For example, as I wrote in the recent article, A Detailed Look at The New York Times’ Embarrassing, Deceitful and Illogical Endorsement of Hillary Clinton:

  The New York Times’ endorsement of Hillary Clinton against Bernie Sanders in the Democratic primary consists of an unreadable, illogical piece of fiction. In this post, I will critique the paper’s position in detail, but first I want to take a step back and explain to people what I think is going on in the bigger picture.

   

  In its endorsement of Hillary, the New York Times editorial board did such a sloppy job I can’t help but think it may have done permanent damage to its brand. Upon reading it, my initial conclusion was that the editorial board was either suffering from Stockholm syndrome or merely concerned about losing advertising revenues should they endorse Sanders. Then I thought some more and I realized my initial conclusions were wrong.

   

  Something else is going on here, something far more subtle, subconscious and illuminating. The New York Times is defending the establishment candidate simply because the New York Times is the establishment.

   

  One of the biggest trends of the post financial crisis period has been a plunge in the American public’s perception of the country’s powerful institutions. The establishment often admits this reality with a mixture of bewilderment and erroneous conclusions, ultimately settling on the idea people are upset because “Washington can’t get anything done.” However, nothing could be further from the truth. When it comes to corruption and serving big monied interests, both Congress and the President are very, very good at getting things done. Yes it’s true Congress doesn’t get anything done on behalf of the people, but this is no accident. The government doesn’t work for the people.

   

  With its dishonest and shifty endorsement of Hillary Clinton, I believe the New York Times has finally come out of the closet as an unabashed gatekeeper of the status quo. I suppose this makes sense since the paper has become the ultimate status quo journalistic publication. The sad truth is the publication has been living on borrowed time and a borrowed reputation for a long time. Long on prestige, it remains very short on substance when it comes to fighting difficult battles in the public interest. Content with its position of power and influence within the current paradigm, the paper doesn’t want to rock the boat. What the New York Times is actually telling its readers with the Hillary Clinton endorsement is that it likes things just the way they are, and will fight hard to keep them that way. It is as much a part of the American establishment as any government institution.

  As I mentioned at the beginning of this post, the U.S. press basically acts like a PR firm for Hillary Clinton, yet the public still can’t stand her. That’s how bad she really is.

  For related articles on the shadiness of American media, see:

  A Detailed Look at The New York Times’ Embarrassing, Deceitful and Illogical Endorsement of Hillary Clinton

  “Non-Official Cover” – Respected German Journalist Blows Whistle on How the CIA Controls the Media

  
  HBO and Snapchat are Actively Working with the U.S. Government to Create Propaganda

  20-Year CBS News Veteran, Sharyl Attkisson, Details Massive Censorship and Propaganda in Mainstream Media

  

  

  

  

  

• Welcome To Obama's Recovery: Carrier Moving 1400 Jobs To Mexico

  In his final state-of-the-union address, President Obama famously accused anyone who dares to question the strength of the US economic “recovery” of “peddling fiction.”

  Shortly thereafter, we learned that the US economy grew at a paltry 0.69% in Q4. Below estimates. 

  Perhaps the most disturbing thing about the state of the economy – well, besides the fact that healthcare spending is essentially driving “growth” – is that the labor market has becoming a waiter and bartender creation machine. That’s come at the expense of manufacturing jobs, where skilled workers can actually earn a decent living.

  Here’s what the disparity looks like since 2007:

  

  No fiction “peddling” there. Just numbers. 

  Additionally, we’ve noted the fact that foreign born workers account for the vast majority of job creation in America since the crisis:

  

  On Wednesday, United Technologies decided to reinforce both of these trends all at once, when the company announced it would be eliminating 1,400 jobs at a Carrier plant in Indianapolis in favor of hiring some new “foreign-born” employees – only these “foreign-born” workers will be hired in Mexico.

  “Two Indiana plants that make products for the heating, ventilating and air conditioning industry are shifting their manufacturing operations to Mexico, which will cost about 2,100 workers their jobs,” The Indianapolis Star reports. “Carrier is shuttering its manufacturing facility on Indianapolis’ west side, eliminating about 1,400 jobs during the next three years [and] United Technologies Electronic Controls said that it will move its Huntington manufacturing operations to a new plant in Mexico, costing the northeastern Indiana city 700 jobs by 2018.”

  Watch below as 1,000 soon-to-be Donald Trump voters react to the announcement: 

  Economists called the move “highly unusual.” “Today’s surprise announcement was without warning,” the mayor said.

  Actually, it’s neither “highly unusual” or “surprising.” Here’s why (again from The Star): “Carrier’s workers are separated into a two-tier wage system. A quarter of the workers make about $14 an hour, or about $30,000 a year. The rest make about $26 an hour, or about $55,000, but make well above $70,000 a year with overtime.”

  Something tells us labor costs will be “slightly” lower south of the border.

  Who’s “peddling fiction” now?

  

  

  

  

  

• The 8 Principles Of The Newer Normal

  Is this what we have to look forward to?

  1. Ban cash
  2. All-digital currency
  3. No more crime
  4. -10% rates
  5. 70% deposit tax
  6. 20% “Bail-In” Charge
  7. You’re broke
  8. Unicorns

  Because less (freedom) is more, right?

  h/t @RudyHavenstein

  

  

  

  

  

• The World's Top Performing Hedge Fund Just Went Record Short, Explains Why

  Last month, in our latest profile of the $2.8 billion Horseman Capital, we said that not only has that fund which some have called the “most bearish in the world” generated tremendous returns almost every single year since inception (except for a 25% drop in 2009 after returning 31% during the cataclysmic 2008), but more notably, it has been net short – and quite bearish on – stocks ever since 2012. In that period it has consistently generated low double-digit returns, a feat virtually none of its competitors have managed to replicate. In fact, its performance has put it in the top percentile of all hedge funds in recent years.

  Furthermore, in a year most other hedge funds would love to forget, the fund “crushed it”, with a 20.45% return for 2015 and 5.6% in the tumultuous month of December. 

  Today, we got Horseman’s latest numbers and they are a doozy: in what was one of the worst Januarys in stock market history, the fund returned a whopping 8%, putting it in the 99%+ percentile of returns for the month (and the year).

  

   

  Indeed, “crushing it” is hardly new to Horseman: it has been doing so for four years in a row, and not surprisingly, 2015 was its best year since 2008. 2016 is starting off just as good as the prior year.

  

  How did Horseman generate another month of phenomenal returns? In its own words:

  This month strong gains came from the short equity book, in particular from the automobile, real estate and EM financials sectors while the long portfolio incurred a loss.

  This is what Horseman’s sector allocation looks like as of this moment:

  Headlines were made last year by the clampdown of the Chinese authorities on the Macau casinos, who had been allowing Chinese residents to move their winnings out of China. However, despite the clampdown and the following fall in casino revenues by some 34% in 2015 (source: Macau’s Gaming Inspection and Coordination Bureau), capital outflows have continued via other channels.

   

  Imports from Hong Kong to China jumped 64% year on year in December, but the same numbers released in Hong Kong showed a 0.9% increase (sources: China and Hong Kong customs data). This could be explained by the practice of over-invoicing of Chinese imports from Hong Kong with trading partners that agree to inflate the cost of goods before a letter of credit is issued.

   

  Chinese companies were involved in foreign acquisitions worth a total of $656bn last year and already this year, four of the biggest cross-border deals have involved Chinese groups bidding for US and European assets worth $61.7bn in total (source: FT).

   

  Over the past few years Chinese companies have issued a large amount of US dollar denominated debt (see Russell Clark’s market note entitled ‘Spotting property Bubbles in East Asia’), in 2015 they sold a total of $60.3 billion worth of dollar-denominated bonds, more than six times the 2010 figure (source: Thomson Reuters data). In August last year, as China’s monetary authorities gave the signal that the Renminbi was not immune to devaluations, companies started to reduce their dollar exposure. Recently China SCE Property Holdings Limited said that it would redeem its $350 million senior note due 2017, while another real estate company, SUNAC China Holdings Limited said it had completed the redemption of its dollar note due next year.

   

  China’s currency reserves declined by $420bn over the past 6 months and in January they plunged by $99.5bn (source: PBOC). The fund maintains a short exposure to sectors exposed to a renminbi devaluation such as luxury brands and Chinese property developers, and to other Asian currencies that would also have to devalue, such as the Korean Won and Singapore dollar.

  In other words, another adherent to the “China will blow up” philosophy, which it may, however unlike Kyle Bass and a cohort of other China-bearish hedge funds, Horseman is instead betting on select Chinese sector shorts, as well as China’s currency devaluation although not by shorting the Yuan, and instead is bearish on the Won and the SGD.

  What was the fund most bearish on? Pretty much everything, but a few sectors in particular:

  

  However, what is most remarakable about the hedge fund, is that while it has maintained its gross exposure, as of January 31, the fund’s net short exposure has risen to a whopping 76%, an all time high, even for one of the world’s most bearish hedge funds.

  

   

  Finally or those seeking to glean some wisdom from the Horseman’s inimitable Chief Investment Manager, Russell Clark, here is his latest letter.

  * * *

  My wife and I went see to the “The Big Short” the other day. It was certainly very amusing, and explained difficult financial concepts well. I will put it up there in my top three finance based films, along with “Trading Places” and “Margin Call”. I found Margin Call to be the least appreciated of these films, and yet for me most closely matches up to life in an investment bank in the 21st century.

  For those that have not seen it, the film centres on a junior risk analyst, who discovers that the potential losses on the bank’s holding of mortgage assets were larger than its market capitalisation. He immediately informs his colleagues, who then pass it onto senior management. One of the recurring themes of the movie, is that the junior low paid staff are all maths and excel spreadsheet gurus, and the upper management are luddites. The junior risk analyst shows his excel model to management, and is constantly told “You know I don’t like these spreadsheets, just tell me what’s going on”. The analyst is eventually introduced to the Chairman of the Board, who asks him to “please, speak as you might to a young child. Or a golden retriever. It wasn’t brains that brought me here; I assure you that.”

  If you were unfamiliar with the world of finance, you would think this grossly unfair. The brainboxes of the world toil endlessly, while their know-nothing bosses take home the big bucks. However, I think this is wrong. As the Chairman of the Board elaborates, the reason he earns the big bucks is, “I’m here for one reason and one reason alone. I’m here to guess what the music might do a week, a month, a year from now. That’s it. Nothing more.” The music in this case would be market prices.

  The crux of the matter is that anyone telling you what the market is doing now, what the value of something is now, is providing you a freely available commodity; even if, in the cases of some derivative products, you need to be a rocket scientist to be able to give a valuation today. The real value add in markets is to be able to see what future values might be; that is to live in the future, not in the present.

  I spend most of my time, while looking at current prices, thinking about and trying to live six months to one year in the future. Thinking about what will be the reaction to what is happening now, and then thinking about what that means future prices might look like. Generally that has worked well for me.

  What I can see now is that US growth is slowing, and that the market is likely to price in reduced monetary tightening.

  This should lead to a weaker dollar. This makes shorting Europe and Japan very appealing. Theoretically, this should make commodities and emerging markets (‘EM’) attractive, particularly if you are of the view that US dollar strength is the reason emerging markets and commodities have been so weak. However, I think we have chronic oversupply of commodities, and real financial issues in China that cannot be resolved easily. This makes commodity related areas very unattractive, despite the prospect of renewed monetary easing by the Federal Reserve. Furthermore, the reaction to reduced tightening by the Federal Reserve, would almost certainly be more easing by every other central bank in the world. But as we have seen recently with both the ECB and BOJ, monetary activism is not always effective.

  I also worry about the prospects of a trade war, as populism becomes the new normal in politics globally. The future for me is now more uncertain than at any time I can remember. Or to fully quote the Chairman of the Board from Margin Call, “I’m here to guess what the music might do a week, a month, a year from now. That’s it. Nothing more. And standing here tonight, I’m afraid that I don’t hear – a – thing. Just… silence.”

  Your fund remains long bonds, short equities.

  

  

  

  

  

• Gold Soars, Stocks Sink Despite Biggest Oil Rally In 7 Years

  And all of this on a Dudley statement (that said nothing), an oil rumor (repeatedly uttered with no actual news), a billionaire bank CEO buying some more stock in his firm, and a seasonal adjustrment (which made retail sales 'appear positive')… 

  Public Service Announcement:

   

  Crude is the headline of the day…WTI RISES 12% TO $29.44/BBL, BIGGEST PCT GAIN SINCE FEB. 2009

   

   

  With what appears like another major liquidation in the triple-inverse ETF DWTI…

   

  

   

  And a major compression of the roll…

  

   

   But gold is the winner on the week… The last time Gold soared this much so fast was in the middle of the Lehman collapse…

  

   

  And while everyone crowed about Jamie Dimon's share purchase – which had the stink of Lehman-esque time when every bank CEO trotted out his own brand of confidence inspiring headlines – and that ramped financial stocks… but once again credit wouldn't play along… in cash markets…

  

   

  and even less so in CDS (hedging)

  

   

  *  *  *

  Gold wins the week, bonds second best…

  

  *  *  *

  Today's ripfest stalled at 1130ET when Europe closed but the incessant ramp in crude oil lifted everything as algos latched on…

  

   

  Nasdaq desperately wanted to "get back to even" for the week in today's ramp but only Trannies closed the week green…

  

   

  With today's ramp led by Jamie Dimon's financials… (which still closed lower by 2.4% on the week – worst of all sectors)

  

   

  But just look at the mess that is VIX in the last 2 days…

  

   

  Does this look like financials are fixed?

  

   

  When stocks took off at around 1300ET (as Oil spiked on rig count data), HY credit did not want to play…

  

   

  Still could be worse… could be Japan…

  

   

  A stunning roundtrip in US Treasury yields this week with 10Y swinging to down 30bps at Thursday's lows befoere faxce-ripping higher by over 20bps in the last 24 hours…

  

   

  The USD rallied modestly today as sellers reappeared in Yen and EUR weakened…

  

   

  The USD Index collapsed 3.7% in the last 2 weeks – the biggest drop since October 2010…to 4-month lows…

  

   

   

  Despite all the algos and liquidation-fueled craziness, crude ended the week down over 5% – the 5th losing week in the last 7; as gold had its best week since dec 08…

  

   

  You decide if you trust this rally in crude (and thus every risk asset pinned off it)

  

   

  Charts: Bloomberg

  Bonus Chart: Meanwhile these two developed markets now have inverted yield curves…

  

   

  

  

  

  

• Weekend Reading: Bull Struggles & NIRP

  Submitted by Lance Roberts via RealInvestmentAdvice.com,

  

  Wow…things are certainly happening faster than I expected. As January kicked off the new year, I posted my outlook for 2016 in which I discussed why, despite views of Goldman Sachs and many others, interest rates were going lower rather than higher.

  “With the Federal Reserve raising interest rates on the short-end (Fed Funds), it will likely push the long-end of the curve lower as the economy begins to slow from the effects of monetary policy tightening.

   

  From a purely technical perspective, rates have been in a long-term process of a tightening wedge. A breakout to the upside would suggest 10-year treasury rates would soar to 3.6% or higher, the consequence of which would be an almost immediate push of an economy growing at 2% into recession. The most likely path, given the current economic and monetary policy backdrop, will be a decline in rates toward the previous lows of 1.6-1.8%. (Inflation will also remain well below the Fed’s 2% target rate for the same reasons.)”

  

  “Of course, falling rates means the ongoing “bond bull market” will remain intact for another year. In fact, if my outlook is correct, bonds will likely be one of the best performing asset classes in the next year.”

  Here is that same chart today:

  

  With interest rates now at my target levels in February, and bonds now extremely overbought, this is an opportune time to take some profits out of interest rate sensitive investments.

  However, what the plunge in rates also suggests is that the economy is FAR weaker than Ms. Yellen, the mainstream financial media or the bullish blogosphere realize. Unfortunately, by the time the economic data is revised to reveal what rates are already telling you, it will be far too late to protect your investment capital.

  But that is just my view. This weekend’s reading list, as usual, is a compilation of reads that provide both sides of the market and economic debate. Our job, as investors, is to reduce our confirmation bias in order to make more logical decisions with our money even though our emotions may be trying to lead us elsewhere. Hope, optimism and greed are all emotions that have led to far greater destructions of capital than negativity and fear ever have. 

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  1) The Greatest Bull Market Of All Time by Ben Carlson via Wealth Of Common Sense

  “How many hedge fund managers would kill for the following performance characteristics over a 40-year time frame?

  • Annual Returns: 7.7%
  • Volatility: 6.9%
  • Number of Up Years: 37
  • Number of Down Years: 3
  • Annual Win %: 93%
  • Worst Annual Loss: -2.9%
  • Average Annual Loss: -1.9%
  • Max Drawdown: -12.4%”

  

  But Also Read: Equity Bubble Update by Jeremy Grantham via GMO

  2) I Was Too Bullish by Matthew Belvedere via CNBC

  “I was far too bullish last December,” Siegel admitted, referring to his call on “Squawk Box” that “valuations can stay on the high side.” He also had predicted on CNBC in November that Dow 20,000 was a “real possibility” in 2016. It was above 15,900 on Monday.

   

  The Wharton School finance professor on Monday summed up his view on the headwinds to the market. “Those deflationary forces … from China, from commodities are really, in the presence of debt that so many of these energy and other companies have, … causing the market turmoil right now.”

  Also Read: Just A Bullish Pause by Avi Gilburt via MarketWatch

  Opposing View: Deteriorating Liquidity by Luke Kawa via Bloomberg

  And Also: America’s Earning Recession Deepens by Alex Rosenberg via CNBC

  3) Global Growth Fraying At The Edges by Gavyn Davies via FT

  “The weakness in global risk assets that started in May 2015 raises a major question for macro-economists. Is market turbulence foreshadowing – or perhaps causing – a much broader weakening in global economic activity than anything seen since 2009?

   

  Until now, the Fulcrum activity nowcasts have failed to identify a major turning point in global growth. This conclusion is still just about intact, but is subject to much greater doubt in this month’s report. There are some signs that growth in the advanced economies may be fraying at the edges, and China may be embarking on another mini downturn.”

  

  Also Read: Clueless Economists & The Coming Recession by Aaron Layman

  4) EVERYTHING YOU NEED TO KNOW ABOUT NIRP

  • An Explanation Of Negative Rates by Econobrowser
  • Negative Rates: A Giant Policy Failure by Narayana Kocherlakota
  • The Fed May Follow Japan’s Path by John  Mauldin via Fortune
  • The Futile Negative Rates Club by Daniel Gross via Project Syndicate
  • Why Japan Went NIRP by Jeffrey Snider via Alhambra Partners
  • Bizarro World Of Negative Rates by Marc Chandler via Real Clear Markets
  • The New Frontier Of NIRP by Clive Crook via Bloomberg
  • NIRP Confirms QE Failure by Jeffrey Snider via Real Clear Markets

  5) Why Stocks Could Fall By 10-20% by Jack Bouroudjian via CNBC

  “The market tone began to shift in December — and the warning signals started to flash red.

   

  We started to witness a contraction in earnings for a couple of quarters in a row, which resulted in the price-to-earnings ratio of the S&P 500getting rich. We watched crude oil have a parabolic move to the downside as producers couldn’t pump fast enough. And we started to see the Federal Reserve move rates at a time when all the other central banks were doing the exact opposite which created risk aversion.

  As it turns out, this became an I.O.U. market: interest rates, oil and uncertainty.”

  But Also Read: 16 Charts The Explain The Market by Sam Ro via Business Insider

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  MUST READS

  • Markets Disappointed By Fed by Louis Woodhill via Real Clear Markets
  • Wall Street Strategist Still Full Of Bull by Salil Mehta via Statistical Ideas
  • 5 Questions To Ask Yellen by Mohamed El-Erian via Bloomberg
  • Fed Made Recession Worse by David Beckworth & Ramesh Ponnuru via Bloomberg
  • Why You Can’t Afford To Buy A House by Joel Kotkin via The Daily Beast
  • Faster Growth Is A Panacea by Steve Chapman via Reason
  • Easy Money No Help by John Hussman via Hussman Funds
  • KISS – Applying It To Investing by Joe Calhoun via Alhambra Partners
  • Jobs Report Full Of Oddities by John Crudele via New York Post
  • 70% Of Obama’s Budget Is Writing Check To Individuals by Editorial Staff via IBD
  • Recession Ahead by David Stockman via Contra Corner
  • Pro’s Are Just Like Us by Meb Faber via Faber Research
  • Comparing Yields To Rates Is Stupid by Jesse Felder via The Felder Report
  • Shades Of 2000 & 2007 via Dana Lyons via Tumblr
  • Effects Of Buybacks Exposed by Michael Lebowitz via 720 Global Research

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  “A good player knows when to pick up his marbles.” – Anonymous

  

  

  

  

  

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