- Dead Hand: Russian Real-Life Doomsday Machine
Dead Hand: Russian Real-Life Doomsday Machine
Submitted by SouthFront,
The existing system of international relations and arms control treaties is slowly, but steadily crumbling. The Intermediate-Range Nuclear Forces Treaty is dead, with both Washington and Moscow publicly developing previously banned short-to-medium range missiles. The New START (Strategic Arms Reduction Treaty) is also moving towards its end in 2021, and it is likely that New START will not be renewed. The United States, China and Russia are developing hypersonic weapons, which are not limited by any existing arms control treaties. The major powers are preparing for a possible global conflict. The dismantlement of the system of international treaties is another factor increasing military tensions around the world.
Russia is actively working towards restoring lost Soviet capabilities and developing new strategic deterrence projects. One of them is the Dead Hand, also known as the Perimeter. This Cold War-era automatic nuclear weapons-control system is one of the most protected secrets and most important deterrence tools of the USSR and Russia.
The Dead Hand is the last line of deterrence in the event of a crippling nuclear strike. It entered into service in 1985, shortly after a major escalation in 1983, which had almost led to war between the US and the Soviet Union. It has been likened to a real-life doomsday machine. Upon activation and determination of an ongoing nuclear strike, the system sends out command missiles with special warheads that pass encrypted launch commands to all nuclear weapon carriers of the sea, air and ground components of the Russian Strategic Nuclear Forces.
In peacetime conditions, the system slumbers, waiting for a turn-on command or an alarm signal from the missile attack early-warning system. It has a human “firewall,” for example, an on-duty officer who would switch it into the fully automated mode. Therefore, there is no risk of an accidental or unauthorized missile launch. Having received a command or signal about missiles being launched from the territory of other countries, this Dead Hand goes into an automated combat mode. Through a wide-scale sensor network, it monitors signs of an incoming nuclear strike.
The decision to launch command missiles is made by an autonomous control and command system – a complex pseudo-artificial intelligence system. The system receives and analyzes a variety of information about seismic activity, radiation, atmospheric pressure, and the intensity of chatter on military radio frequencies. It monitors telemetry from the observation posts of the strategic missile force and data from early warning systems.
Before launching, the system reportedly checks for four conditions:
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Once the system is activated it first determines if a nuclear explosion has taken place on Russian territory;
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If this is determined, the system will then check the communication link with the General Staff operation center;
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If a connection is established the system will After some time – from 15 minutes to 1 hour – passing without any further signs of an attack, it will assume that a number of the officials with the authority to give the order to strike are still alive and the system will shut down;
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If the General Staff operation center does not respond, the system sends a request to Kazbek, the automatic system for command and control of the Strategic Nuclear Forces. If there is no response there either, the system automatically transfers launch authority to the command bunker personnel and launches the retaliatory strike.
All of the channels through which the Dead Hand receives its information are backed up multiple times, to remove the possibility of false information being fed to it.
According to openly available data, the Dead Hand is an integral part of the “Zveno” system of air command posts, the development of which was carried out in the Soviet Union. The “Zveno” includes the airborne command and control post on the Il-86VKP aircraft, airborne radio relay on the Il-76RT aircraft, silo-based command missiles ‘Perimeter’ and mobile command missiles ‘Gorn’. In a period of threat, three Il-86VKPs would have the Supreme Commander-in-Chief of the Armed Forces, the Defense Minister and the Chief of the General Staff respectively on board. The Il-86VKP is able to launch an 8 km long antenna, which not even impulses from nuclear explosions can affect. Using this antenna the aircraft can transmit commands to launch all the country’s intercontinental missiles even if all underground command posts are destroyed by the aggressor’s nuclear strike. The radio relay aircraft Il-76RT would transmit commands to launch missiles in distant regions, including those deployed on submarines. In this way, the Dead Hand guarantees a devastating retaliatory strike in the event of communications disruption and the destruction of command posts after the first-strike surprise nuclear attack by the enemy. Its command missiles launch their warheads into space, where no hostile satellite or nuclear explosions can reach them and from there “wake up” nuclear forces to strike the aggressor.
The dissolution of the USSR in 1991 led to a deep social and economic crisis on the territory of the former Soviet republics. The Russian Armed Forces also entered a period of crisis. In 1995, the Dead Hand was removed from combat duty. After the start of the ‘Putin era’ and the restoration of proper funding for the Russian Armed Forces in the 2000s, national security once again became one of the key priorities of the Russian leadership. In 2011, it was officially confirmed that the Dead Hand had been put on combat duty. The successful test launch of the 15Yu75 missile took place in Plesetsk in 2016. Furthermore, the Dead Hand is also being modernized. In December 2019, the Russian Ministry of Defense announced plans to sign a contract for the new Sirena-M missile complex. The Sirena-M is the most modern variant of the “command missile system” and “command missile” for the Dead Hand. The tests of the Sirena-M missile, which is based on the first version of the Topol intercontinental ballistic missile, began in 1990. All of them were carried out successfully. The Sirena-M system will enter service in the period up to 2025.
Tyler Durden
Sun, 01/26/2020 – 23:25 -
- CIA Waterboarding Architect Confirms Sadistic Role Of 'The Preacher'
CIA Waterboarding Architect Confirms Sadistic Role Of ‘The Preacher’
One of the architects of the US government’s waterboarding program, known as “enhanced interrogation techniques,” confirmed the role of a CIA officer known only as “the Preacher,” who would provoke detainees on a deeply religious level while working to extract information from them.
According to James Mitchell – one of three men authorized by the CIA to conduct waterboarding during America’s war on terror – said last Thursday during a pre-trial hearing at Guantánamo Bay, that the Preacher “would at random times put one hand on the forehead of a detainee, raise the other high in the air, and in a deep Southern drawl say things like, ‘Can you feel it, son? Can you feel the spirit moving down my arm, into your body?’“
According to The Guardian, Mitchell confirmed the chilling description written in his memoir, Enhanced Interrogation – confirming the Preacher’s role at CIA black sites during testimony at a pre-trial hearing in the case against five defendants charged in the September 11, 2001 attacks, including mastermind Khalid Sheikh Mohammed.
Mitchell, together with his friend and business partner, Bruce Jessen – who is due to testify next week – have been the public face of the US torture programme for five years, settling out of court in 2017 in a civil suit brought by the American Civil Liberties Union on behalf of three prisoners.
Almost everyone else involved in the extensive programme, involving a network of black sites around the world, has remained in the shadows. In terms of legality, it is still the dark side of the moon.
Defence lawyers at the Guantánamo military commission hearings have asked to examine 52 witnesses. They have so far been permitted to question only two, Mitchell and Jessen.
James Connell, representing defendant Ammar al-Baluchi, lost his patience on Thursday when prosecutors objected that he was asking Mitchell about events he had not directly witnessed.
“He’s the only witness we’ve got. The government has blocked all the CIA witnesses,” Connell complained. –The Guardian
According to the report, government prosecutors changed classification rules four days before the current pre-trial hearing, amending them on Monday in order to reclassify facts which defense attorneys were forced to scramble to reframe before the next day of questioning. The Guardian suggests that “The longer the hearings have continued, the clearer it has become that the Mitchell and Jessen partnership was just a small part of the infrastructure of torture, with its own bureaucracy and personal rivalries. In his testimony, Mitchell railed repeatedly against the “middle management” who he believed was plotting against him.”
Giving evidence at a military commission on Guantánamo Bay, James Mitchell gave a detailed account of the 2002 decision to interrogate suspected al-Qaida leaders using water boarding and other techniques. Mitchell became embroiled in a vicious turf war with a rival, the CIA chief of interrogations, for mastery of the “enhanced programme”. Each sought to use their links to CIA headquarters in Langley, Virginia, to get the other removed from their post. In that struggle the detainees were used as bargaining counters. The two men had them tortured for training or demonstration purposes.
In the courtroom this week, the interrogations chief has been referred to by the code NX2. Mitchell calls him the “new sheriff”, but it has been reported his real name was Charlie Wise, who had honed his craft carrying out interrogations for the Contra rebels in Nicaragua in the 1980s. He apparently died of a heart attack in 2003, just weeks after being dismissed.
According to declassified cables and courtroom testimony, Wise set up his own training programme, and took his students to a black site in Afghanistan, codenamed Cobalt, to practise their techniques on Ammar al-Baluchi and other prisoners. During that training, Baluchi was repeatedly slammed against a wall, suffering brain trauma as a result. –The Guardian
The CIA used an unsanctioned waterboard at the Cobalt site, according to defense attorneys, who say it was used on at least one detainee.
After the existence of the CIA’s main interrogation center was revealed by the New York Times, it was forced to close down in 2002 – after which “high value detainees” were transferred to a new site in Poland, codenamed Blue, and which was run by Wise.
Tyler Durden
Sun, 01/26/2020 – 23:00 - Virtue Signaling Is A Cheap Investment For Goldman Sachs
Virtue Signaling Is A Cheap Investment For Goldman Sachs
Authored by Tim Kirby via The Strategic Culture Foundation,
Goldman Sachs has made a major stand for diversity by declaring that they are going to start “refusing IPOs if all directors are white straight men”. This is unusual because most diversity pushes come from the mainstream media or companies that offer concrete consumer products and need to market themselves by connecting feelings or political leanings to their product. Normally, big international finance and banking stays as neutral as possible, having to work with actually diverse groups of people across the globe. Finance does not demand any sort of emotional bond with the public at-large for positive brand recognition. So, this bold move by Goldman Sachs is a huge leap forward for proponents of race-based employment but ultimately it appears to be a means of distracting mainstream journalists from the company’s questionable past.
Firstly, when talking about corporations taking moral stands we should never forget the dirty past of these multinational giants. Volkswagen for example, was a creation of the Nazis that went on to “fight” on the side of a Democratic West Germany as a symbol of how great capitalism is. Now they are more than happy to show themselves as an SJW/LGBT organization. Why is this so? Because businesses serve any master who comes to them with money and if the current status quo in Germany is rainbow gay then VW will orient its sexuality to said status quo. If there was to be a Nationalism/Nazi takeover of Germany in the upcoming years VW would somehow “find the courage” to remember their “heritage”. This is not to demonize Volkswagen as all big multinationals do exactly the same thing. This logic, of course, applies to Goldman Sachs as well.
In fact, for the foreseeable future this new diversity policy only applies to the Western World. Ikea catalogues in the West are full of gay couples, in Russia they have only nuclear families and in Saudi Arabia they feature only men. When push comes to shove and money is at play morality in business becomes flexible. Goldman Sachs even admitted that “it intends to eventually expand its board-diversity mandate beyond the U.S. and Europe”. By eventually they mean, at the point in time when being diverse becomes cool/trendy in those countries, which could be the day after never. Goldman Sachs with this move is just trying go play ball in the West where their financial world currently sits.
Secondly, it is always best to be skeptical of any sort of corporate philanthropy and morality not just because they will lick any boot presented to them but because their hypocrisy is rampant. If we remember back to the Greek Debt Crisis of just a few years ago, our TV screens were filled with images of young people fighting with police in Athens as employment for those in their 20s was approaching zero. Furthermore, the elderly and many state employees were seeing a lot of their social securities/guarantees dry up right in front of their eyes and it is very possible that Goldman Sachs is directly to blame for all this.
As The Nation writer Robert B. Reich put it
“The investment bank (Goldman Sachs) made millions by helping to hide the true extent of the debt, and in the process almost doubled it.“
Additionally, and also relatively recently, the US Department of Justice found Goldman Sachs liable for their role in the 2008 (subprime) financial crisis in the United States, which had a lot of international blowback as well affecting economies globally. According to Business Insider up to 10,000,000 homes were lost between 2006-2014 as a result of the crisis that Goldman Sachs bears partial responsibility for.
Meaning that when it comes to the real life suffering of millions of Americans and Greeks (and beyond) who lost their jobs, homes, or social safety net, Goldman Sachs doesn’t give a damn. Forcing a handful of diversity hires (even if these were demonstrably proven to be a boon for society) would be one drop of generous blessing in a canyon of financial sins.
Large companies and media organizations are quick to throw relatively tiny amounts of money at charity, but completely unwilling to do anything to actually help society. This attempt at mandating diversity (only in the West) is a 21st century means of playing ball and playing up to certain people’s current moral absolutes of the month. If they really and truly wanted to put a human face to a massive financial giant they could at least pull some sorts of stunts or projects that would get thousands of Greek youth into the workforce, better the lives of an untold number of Greek elderly or try to find a viable way to get millions of Americans into homes they can afford thus partially undoing the 2008 crisis.
But that will never happen. Diversity is a word used for virtue signaling, which costs nothing and impresses the exact type of people who don’t care about the millions of diverse Americans who lost their homes. Diversity is our strength because it gets results while requiring zero actual action.
Tyler Durden
Sun, 01/26/2020 – 22:35 - Elizabeth Holmes, Too Broke To Pay Her Lawyers, Phones In Her Defense In Fraud Lawsuit
Elizabeth Holmes, Too Broke To Pay Her Lawyers, Phones In Her Defense In Fraud Lawsuit
How quickly the tables can turn…
Disgraced former Theranos CEO Elizabeth Holmes literally phoned in her defense in an Arizona fraud lawsuit after her civil lawyers quit due to non-payment.
Holmes still maintains a team of “high caliber” attorneys for her criminal case in San Jose federal court, according to Bloomberg. But in the concurrent civil suit taking place in Phoenix, Holmes was forced to dial into an audio feed without a lawyer on Thursday, telling the judge she wouldn’t make any arguments.
The hearing, which ended without a decision, was to try and determine whether or not the case should advance as a class action. The judge asked Holmes at the beginning of the hearing if she wanted to make any arguments and Holmes said she was relying on the arguments made by attorneys for her co-defendants.
The lawyers representing her in Arizona quit back in September, claiming Holmes hasn’t paid them. As Bloomberg notes, “it’s highly unusual for a defendant of Holmes’s stature in such a suit to not be represented by an attorney, prompting some speculation on her financial situation.”
After Theranos collapsed, Holmes agreed to a $500,000 fine to resolve a civil securities fraud case and also settled an investor suit for an undisclosed sum. On top of that, she had to shell out for legal fees.
Bill Portanova, a former prosecutor turned defense lawyer, speculates that Holmes is likely trying to create a warchest of resources for her criminal case, stating: “If there’s only so much money to go around, staying out of prison is always priority number one, period. Lawsuits seek only money, not imprisonment.”
Holmes hasn’t let on publicly about any financial hardships. However, her former lawyer in Arizona, John C. Dwyer, said he was concerned about her finances when he withdrew from the case.
Dwyer wrote in a filing: “Ms. Holmes has not paid Cooley for any of its work as her counsel of record in this action for more than a year. Given Ms. Holmes’s current financial situation, Cooley has no expectation that Ms. Holmes will ever pay it for its services as her counsel.”
Experts suggest Holmes may have had to put down a sizeable down payment to retain a top-flight criminal defense team.
“It’s possible that she paid Williams & Connolly a large retainer up front that its lawyers are now ‘earning,’” one former federal prosecutor said.
In San Jose, she is fighting charges that she knew the company’s blood tests were inaccurate and unreliable and that she misrepresented the capabilities of the company’s testing machines to doctors, patients and investors.
In the Arizona case, customers are claiming that Theranos and one-time partner Walgreens, took samples of their blood when they knew the testing was still in development. As a result, some customers received unnecessary or potentially harmful treatments or didn’t see medical help for treatable illnesses.
Holmes had an estimated net worth of $4.5 billion before the collapse of Theranos.
Tyler Durden
Sun, 01/26/2020 – 22:10 - PPE For A Pandemic: A Guide To Personal Protective Equipment And Masks
PPE For A Pandemic: A Guide To Personal Protective Equipment And Masks
Authored by Cat Ellis via The Organic Prepper blog,
One of the problems with prepping for a pandemic is getting accurate information. When there’s a potential for a highly contagious and potentially deadly disease, people panic. Governments do what they can to minimize panic. This includes protective measures, like restricting travel. It can also mean controlling the release of information. We saw this with the West African Ebola outbreak, and we may be seeing it again with the Wuhan coronavirus.
Daisy reported on this earlier in her article, The Numbers for the Wuhan Coronavirus Outbreak Just Don’t Add Up. The official numbers released from China on confirmed infected and the low number of fatal outcomes compared to government response of locking down entire cities of millions of people under quarantine and health care workers seen in full hazmat gear seems incongruous.
Governments try to manage pandemic panic
Ebola was a top media story in 2014, as it spread from Guinea to Liberia and Sierra Leone. The public tuned in to hear the regular CDC updates from then CDC Director, Tom Frieden.
There was huge public outrage when several health care providers and volunteers from the US became ill and were transported back to the US for medical care. A nurse from Maine was quarantined in New Jersey before being released to Maine. Maine also sought to keep her in quarantine for observation. However, she was ultimately permitted to remain at home during her observation, in spite of the protests from her neighbors.
Then, it happened. The first case of Ebola in the US was confirmed in a traveler from Liberia, Thomas Eric Duncan. Two nurses contracted Ebola while caring for Mr. Duncan. One nurse had even boarded a plane for a vacation before being diagnosed. Tensions rose steeply as President Obama appointed Ron Klain, as his Ebola Response Coordinator. The media dubbed Klain Obama’s “Ebola Czar”.
Klain, a Fannie Mae lobbyist with had no medical background, was known for his unique ability to circumnavigate government bureaucracy and government regulations. Within weeks of Klain’s appointment to Ebola Czar, the Associated Press released a statement that was sent to editors that there would be no more stories on Ebola cases unless it also involved a major upset or delay, as happened with a cruise ship being turned away from port. Ebola was, essentially, out of the news.
Of course, that Ebola outbreak continued for over a year. But, you wouldn’t have known that by watching your regularly scheduled evening news.
Is China downplaying the Wuhan Coronavirus threat?
Downplaying the seriousness of a threat is nothing new. It’s much easier to manage information than to manage a panicked population. Unfortunately, it also puts people at risk. Saudi Arabia is a perfect example of this. When the Middle East Respiratory Syndrome (MERS) first broke out, Saudi Arabia minimized the risk in its official reports. This led to a spread of MERS that didn’t need to happen.
A lot of questions surround the Wuhan coronavirus. There are the usual questions, such as how fast it is spreading, and how deadly it is. Then, there are other questions. Questions about why are millions of people under quarantine if there isn’t a significant threat? Why are health care workers being photographed moving patients wearing full-on hazmat gear? How legitimate are these photos anyway? Are they even from this outbreak?
We can’t know for sure, and uncertainty is the problem. Speculation is often a pointless exercise at best, and fear-mongering at worst. However, it is fair to have a certain amount of skepticism when it comes to anything to do with the Chinese government. They are already masters at manipulating and controlling their media.
As reported in Daisy’s article mentioned above, there are currently 900 confirmed cases worldwide with 26 fatalities. This is a mortality rate of just 2.88%. This is up by less than 1% from my article 2 days ago, Wuhan Virus Hits the US, What Preppers Need to Know. The overwhelming majority of these fatalities are reported to have been older men with a host of serious pre-existing conditions. Today, there was one fatality in a previously healthy man in his 30s.
Maybe I’m missing something, but if the risk of death from Wuhan coronavirus is still under 3%, that’s just not scary. Sure, it’s highly contagious. But, “highly contagious” does not automatically mean “highly fatal.” However, the response we have seen by the Chinese government, such as putting over 20 million people in quarantine, (now it’s 30 million) seems to be a bit of overkill.
There is, however, some precedence for these measures. China is opting to treat this outbreak as a Grade A infectious disease, as it did with SARS, because it is more effective to prevent its spread.
Currently, however, the new virus will be treated as a Grade A infectious disease, which requires the strictest prevention and control measures, including mandatory quarantine of patients and medical observation for those who have had close contact with patients, according to the commission.
At present, only two infectious diseases — bubonic plague and cholera — are classified as Grade A infectious diseases in China.
Wang Yuedan, an immunology professor at Peking University, said managing the new disease as Grade A will greatly help in its control and prevention. Some other serious infectious diseases, such as SARS, are also classified as Grade B infectious diseases, but have been managed as Grade A infectious diseases during their outbreaks, Wang said.
This is prudent, since we do not yet know if that relatively low mortality rate is accurate, or if it will continue to increase. And if it does, we certainly do not know by how much. The rationale at work here is that it is better to take extreme precautions now, rather than wait for proof that this virus is far more deadly than it appears at the moment.
I would love to believe that the Chinese government has taken these actions simply out of an abundance of caution. At the same time, this is China we’re talking about. A little, healthy skepticism is warranted.
Regardless of whether China is just being proactive, or if China actually is hiding the real risk, there will eventually be another major pandemic. Rather than wait for a deadly disease to visit your neighborhood, you should get prepped for a pandemic in advance.
Personal Protective Equipment
One easy thing you can do to prepare for a deadly pandemic is to have a solid supply of Personal Protective Equipment (PPE) on hand. PPE prevents the spread of disease. These are items like facemasks, protective gloves, and so on that act as a barrier between you and pathogens.
The following PPE will allow you to create your own DIY hazmat suit. Please pay attention to sizing. All of these products were in stock and available within two to ten days from Amazon at the time of publication but please be aware that products are selling out extremely quickly right now.
Apron – Disposable Polypropylene
This goes on over everything else. If you just have scrubs, put this over your scrubs. If you have a suit, put this on over your suit. You want multiple layers of protection, and this is an easy-to-dispose option. (Disposal and decontamination options are important to consider.)
Base layer (Scrubs)
This is your base layer. Scrubs are made from durable fabric that stands up to the extra-harsh laundry chemicals used in hospitals. The fabric used is often treated to be antimicrobial.
Boot/Shoe Protectors
Shoe covers can protect shoes an boots from spills, if they are waterproof. Not all are. The boot/shoe protectors linked to above are waterproof.
Duct Tape
Duct tape has so many uses, I’m sure you already have some. You should, however, also keep some duct tape in your medical supplies. Use duct tape to tape down all seams of your chosen suit (example, where wrists meet gloves, where hood meets goggles, etc)
Encapsulated Suit
An encapsulated suit completely covers the body. While it covers the face, it still requires a respirator. It acts as a barrier against air, moisture, and water vapor, and it has taped seams to protect against spills. This was intended for industrial purposes, such as spraying pesticides. It isn’t cheap either. However, it offers more protection than either the Tyvek or Tychem suits.
Goggles
In the absence of a complete face shield, goggles will protect your eyes from being splashed with infected fluids, as well as from disinfectant chemicals. Goggles can fog up, so make sure you get some that resist fogging.
Nitrile Protective Gloves
These nitrile gloves are 9-mil thick and provide greater protection to your hands than cheaper, 4-mil gloves. However, it is better to wear a two-pair thickness.
Outer Protective Gloves
These go over your nitrile gloves. These provide another layer of protection but could impede any fine work you might need your fingertips for. Wear these when lifting a contagious person to move to another bed, stripping a bed of soiled linens, etc.
Protective Hood
This hood provides extra protection to the face. It can be worn over or underneath a mask but does not replace a respirator. Wear goggles over this hood and tape all along the seams between the goggles and the hood.
Respirator masks: N95 or P100 and extra P100 filters
N95 filters are disposable masks that will filter out particulates and aerosols. This level of protection was used by doctors working with SARS. Make sure you are using them correctly.
The P100 mask is a reusable mask. The P100 filters are an even more secure filter than the N95 filters. Here’s an article on selecting the right respirator masks.
Rubber Boots
Rubber boots will protect your feet and lower legs against standing in or being splashed by contaminated fluids.
Tyvek Suit
Tyvek suits offer more protection than scrubs, but less protection than a Tychem or encapsulated suit. These protect against many irritants and chemicals, and is often worn when doing pest extermination, asbestos removal, etc. They may not provide as much protection as other suits, but they are a cost effective way to add more protection.
Tychem Suit
This type of coverall offers more protection than the Tyvek suit. It is designed to withstand more caustic chemicals than a Tyvek suit. However, like Tyvek suits, it was intended for chemical and industrial applications, not medical. Still, it offers another layer of protection from potentially infected fluids.
For more specific information of PPE and preparing for a pandemic, please check out my book, Prepping for a Pandemic. That link is to the kindle version, as Amazon has been having a near impossible time keeping the paperback version in stock.
Is All That PPE Stuff Necessary?
My current opinion, which is subject to change as newer data becomes available, is that a full DIY hazmat suit is probably overkill for the Wuhan coronavirus. If we get better information and find out that 2019-nCoV has a much higher mortality rate than the current 3%, I’ll be dusting off my PPE supplies.
For now, carrying an N95 mask on you to prevent inhaling the virus if you thought you were at risk should be sufficient. Handwashing, hand sanitizers (if handwashing is not available), and nitrile gloves would also go a long way to reducing the spread of this or any contagious illness.
The idea here is, however, not to prep for just one possible pandemic disease, but for a range of potential pandemics. We don’t know what kinds of new and emerging diseases we might face. PPE, however, provides us with extra physical barriers between us and potentially deadly pathogens, whatever they may be.
And even if this coronavirus ends up not living up to all the media hype, still, by all means, stock up on PPE. It’s not like there’s a shelf life on things like rubber boots, goggles, or scrubs. At some point, even if it isn’t 2019-nCoV, there will be some emerging disease that does become the next great pandemic. When that happens, these supplies will be hard to come by and 10 times the price.
Tyler Durden
Sun, 01/26/2020 – 21:45 - US Confirms At Least 1 Injured In Missile Attack 'Direct Hit' On Embassy In Baghdad
US Confirms At Least 1 Injured In Missile Attack ‘Direct Hit’ On Embassy In Baghdad
update: A US offical has confirmed to CNN that a total of three rockets struck the US Embassy in Baghdad Sunday evening. And importantly, the US has further confirmed one injured in the attack.
There’s still been no claim of responsibility, however the State Department pointed the finger at Iran-backed militias, following over a dozen similar prior rocket attacks on the diplomatic compound since September: “The security situation remains tense and Iranian-backed armed groups remain a threat. So, we remain vigilant,” a spokesperson said. Other regional outlets are citing US defense officials to say one of the Katyusha rockets scored a direct hit on a dining facility or cafeteria at the embassy, which would be a first.
There are unconfirmed reports that more US personnel may be injured from the attack:
The attack injured some embassy staff, Al Arabiya reported. One rocket hit an embassy cafeteria at dinner time while two others landed near by, a security source said.
UPDATE : US Embassy, #Iraq Attack
• At least one staff injured (AFP)
• Multiple injured + taken in choppers out of Baghdad (Arabiya)
• No word yet from Pentagon https://t.co/nUzO3BYkUM— Joyce Karam (@Joyce_Karam) January 26, 2020
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Local media reports claimed a US military response against Iran-backed Shia Iraqi militias is imminent, yet this is also unconfirmed.
Meanwhile, an Al Jazeera correspondent observed that US jets were active over Baghdad in the hours following the attack, but that the uptick in flyovers has since ceased.
BREAKING: Jets flying over Baghdad right now after reports of expected #US response to earlier rocket attacks that slammed in embassy in Baghdad. #Iraq
— Arwa Ibrahim (@arwaib) January 27, 2020
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Former Deputy Prime Minister Hoshyar Zebari called it an act of an “unruly militia” and confirmed the following details in a Tweet, though the Pentagon has yet to give official statement: “The Embassy restaurant or canteen was damaged and burned. This is a very dangerous game by #PMF uncontrolled factions to galvanize the tense situation. It must stop,” he stated, in reference to the pro-Iran Popular Mobilization Forces (PMF).
Needless to say, the potential for the White House ordering a significant response in the coming hours or days remains high.
* * *
At least three rockets slammed into the US Embassy in Baghdad’s Green Zone during the night hours of Sunday, the AFP news agency reported.
In total five Katyusha rockets were launched on the heavily fortified embassy compound, with three reportedly making a direct hit on the embassy campus, and at least one scoring a direct hit on the embassy dining hall. It’s unclear whether there are any casualties, which have not been reported. Iraq’s caretaker prime minister denied that there were any casualties.
Personnel at the compound were given “duck and cover” and “seek shelter” inbound projectiles warning during and following the attack, which is suspected to have been conducted by Iraqi Shia Popular Mobilization Forces (PMF).
#BREAKING at least one rocket lands close to the US embassy in #Baghdad @BBCNews pic.twitter.com/co5rZsRUpJ
— Martin Patience (@martinpatience) January 26, 2020
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There were initially conflicting reports of the actual extent of the damage, or whether the unguided rockets reached the embassy itself.
At least one Iraqi official said there was a direct hit of one of the missiles on the US embassy, which some reports said ignited a fire in the dining hall; however, US sources did not immediately issue a confirmation or denial.
US embassy inside Baghdad’s Green Zone, via the AFP. Iraqi sources have confirmed the attack, but not the US diplomatic officials themselves:
Later Iraq’s security forces said in a statement that five rockets hit the high-security Green Zone with no casualties. It did not mention the US embassy.
BREAKING: Rocket Attack on US Embassy in #Iraq
• Katyusha 🚀 hit Emb. in Baghdad
• 3 rockets inside Embassy (AFP)
• One hit Emb. dining hall (@GebeilyM)
• No deaths, but injuries unclear (BBC)
• Iraq Gov, PM condemn
• First Direct hit at embassy, others missed— Joyce Karam (@Joyce_Karam) January 26, 2020
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Iraq’s prime minister confirmed 5 rockets were launched and hit inside the Green Zone:
“Five Katyusha rockets hit the Green Zone without causing any casualties,” the Iraqi military communications center said in a statement. The Green Zone is a fortified area in the capital where diplomatic offices, as well as government buildings, are located.
The Iraqi Commander in Chief, caretaker Prime Minister Adil Abdul Mahdi, issued a separate statement shortly after, condemning the act of “aggression,” noting that the missiles fell “inside the US embassy compound.”
Though not the first time the US Embassy in Baghdad has been target of Iran-backed militia rocket fire in the country, the incident comes as tensions and anti-American sentiment are ready to explode.
Over the past days hundreds of thousands of Iraqis, possibly over a million, have demonstrated in the streets demanding all US forces exit.
Tyler Durden
Sun, 01/26/2020 – 21:26 - "Had She Picked Bernie Sanders It Would Have Been Tougher": Trump In 2018 Audio
“Had She Picked Bernie Sanders It Would Have Been Tougher”: Trump In 2018 Audio
Authored by Jon Queally via CommonDreams.org,
A nearly 90-minute audio recording of a private dinner that took place with numerous individuals and President Donald Trump in 2018 was made public Saturday evening by the legal team of Lev Parnas, a close associate of the president’s personal attorney Rudy Giuliani, in which the president can be heard saying “take her out” in reference to former U.S. Ambassador to Ukraine Marie Yovanovitch — a key witness in the impeachment trial now in the U.S. Senate.
Trump also says in the recording that he was relieved that he didn’t have to face off against Sen. Bernie Sanders (I-Vt.) in the 2016 election. “Had she picked Bernie Sanders it would have been tougher. He was the only one I didn’t want her to pick,” Trump is heard saying.
Trump on secret recording:
“If Bernie would have been VP it would have been tougher…I got 20% of Bernie vote because of trade. He’s a big trade guy…
Had she picked Bernie Sanders it would have been tougher. He is the only one I didn’t want her to pick.”#BernieBeatsTrump https://t.co/n27miR67kT pic.twitter.com/pJUpwGcHxm
— 🔥A NobodyforBernie2020🔥VoteForBernie🔥 (@BernForBernie20) January 25, 2020
https://platform.twitter.com/widgets.js
The recording, according to CNN,
was made by another Giuliani associate, Igor Fruman, and shared with Parnas shortly after the dinner, according to Bondy. Fruman’s attorney declined to comment.
Only the first three minutes of the tape include visuals, and Trump can be seen briefly when he approaches the rectangular dining table set with red bouquets of flowers. The remaining portion of the recording is only audio.
The conversation involving Ukraine begins about 40 minutes into the 1-hour-and-24-minute recording. During that discussion, Trump asks a person who appears to be Parnas how long Ukraine would “last in fight against Russia.” Parnas says “without us, not very long,” and another person chimes in, “about 30 minutes.” Months later, Trump would try to cut off military aid to Ukraine.
In its reporting, VICE notes the “five wildest things” Trump had to say during the conversation — a discussion at one point he can clearly be heard saying is “off the record.”
Among the items deemed the wildest was a comment Trump made about current 2020 Democratic candidate Sen. Bernie Sanders (I-Vt.). In the recording, Trump said he was glad former Secretary of State Hillary Clinton didn’t pick Sanders as her 2020 running mate — citing his tough stance on U.S. trade policy.
“Because [Sanders’] a big trade guy,” said Trump. “You know he basically says we’re getting screwed on trade. And he’s right.”
“Had she picked Bernie Sanders it would’ve been tougher. He’s the only one I didn’t want her to pick,” Trump told the people in the room.
* * *
The full audio recording as released by VICE (Trump begins speaking at approximately 2:28):
Tyler Durden
Sun, 01/26/2020 – 21:20 - Das Warns 'Prepare For Turbulence In Emerging Markets'
Das Warns ‘Prepare For Turbulence In Emerging Markets’
Authored by Satyajit Das, op-ed via Bloomberg.com,
Encouraging trends in emerging markets belie their volatility since the taper tantrum of 2013, when the Federal Reserve signaled it was pulling back on quantitative easing. Further turbulence is likely, despite the improving outlook for advanced economies, easing trade tensions and accommodative monetary policy.
The International Monetary Fund estimates that growth in developing countries fell to 3.7% last year, the slowest pace since 2009 and well below the IMF’s July 2019 forecast of 4.1%. An expected rebound to 4.4% this year assumes highly uncertain recoveries in stressed economies such as Argentina, Iran and Turkey, as well as in countries where growth has slowed significantly — China, Brazil, India, Russia and South Africa among them.
Rising friction in the Middle East, if sustained, could result in higher energy prices and supply disruptions for developing countries. India, which recently downgraded growth for the 2020-21 fiscal year to 5%, the slowest pace in a decade, imports more than 70% of its oil needs. A price rise of $10 per barrel widens the current account deficit by 0.4 % of gross domestic product. Every increase of 10% adds 0.2% to the rate of inflation, which is already above the Reserve Bank of India’s 4% target.
Higher borrowing costs and a stronger U.S. currency due to haven demand would hurt developing countries. Between 2010 and 2018, low exchange-rate volatility and high interest-rate differentials caused non-bank financial institutions in emerging markets to double their U.S. dollar-denominated debt to $3.7 trillion. Much of this is unhedged.
Further geopolitical risks include North Korea’s missile-rattling, challenges in Hong Kong and Taiwan to Beijing’s assertions of authority, and China’s territorial maritime disputes with its neighbors. Japan and South Korea are contesting matters arising from World War II. India’s proposed changes to citizenship laws and the status of Kashmir is fomenting domestic unrest and tensions with predominantly Muslim Pakistan and Bangladesh.
Meanwhile, the spread of a new virus that originated in China threatens to depress retail sales and tourism in Asia, helping to bring a global stock rally to a halt last week.
These stresses exacerbate long-term structural problems. The early 2000s and the period immediately following the global financial crisis saw a synchronized acceleration of growth across the world. But advanced economies have slowed and their long-term potential rate of expansion has fallen.
The latest IMF estimates released last week have growth in advanced economies stabilizing at 1.6% in 2020-21, compared with 2.3% in 2018 and 0.1 percentage point lower than in its October forecast. Underlying this stagnation is the flagging potency of debt-fueled growth, flat productivity, limited policy options, and unfavorable demographics. Emerging economies cannot rely on historic demand for exports to drive future expansion.
Despite the U.S.-China phase one trade agreement, conflicts won’t abate. Sino-American trade tensions alone will cumulatively reduce the level of global GDP by 0.8% by 2020. The Trump administration also has trade disputes with the European Union, Australia, India and Vietnam, among others. France and the U.S. are trying to de-escalate threatened tariffs on champagne and cheese in retaliation for a digital tax affecting Alphabet Inc.’s Google and Amazon.com Inc.
Trade volume growth fell to about 1% in 2019, the weakest level since 2012. The retreat from a rules-based trade system and the weaponizing of trade interdependence will damage everyone.
In the past 20 years, China, a crucial driver of emerging markets, went from a 10th to two-thirds the size of the U.S. economy, assisted by trade within the WTO framework. Today, China’s blacklisted Huawei Technologies Co. relies on chips designed in America while advanced economies benefit from its cheaper and often cutting-edge 5G technology. Three-quarters of the world’s smartphones, mostly made in emerging markets, use Google’s Android mobile operating system. American restrictions hurt developing nations as well as consumers in advanced economies.
In a world of limited demand, irrespective of leadership or ideology, governments everywhere face a mounting anti-globalization backlash. Nationalist agendas and a shift to autarky – closed economies – will persist. A return to strong growth in trade and cross-border capital flows seems unlikely.
This affects developing-world economic models. Lower-income nations focused on export-oriented industries, such as textiles and manufacturing, exploiting cheap costs. Now, weak demand and trade disputes limit this option. Higher-income developing countries face technology transfer restrictions that affect improvements in productivity.
Meanwhile, automation decreases the advantages of low-skilled, cheap labor and offshoring. Bringing manufacturing home to advanced economies decreases companies’ exposure to disruption, currency fluctuation and political interference. The failure of Prime Minister Narendra Modi’s “Make in India” strategy reflects these shifts. India has failed to produce the 1 million new jobs per month needed to absorb new entrants into the workforce. Indian Railways recently received 23 million applications for 90,000 vacancies.
Slower growth creates a dangerous feedback loop. Dissatisfaction with improving ordinary lives can prompt civil unrest. Countries rich in scarce resources, or having large internal markets such as China, India, and Indonesia, may muddle through.
Others will struggle. Rising nationalism and protectionism are likely outcomes, and will only deepen the wedge between advanced and emerging economies. It will make an interesting if rough ride ahead for investors.
Tyler Durden
Sun, 01/26/2020 – 20:55 - Schiff 'Demands' Bolton As Witness After "Explosive Revelation" Manuscript Leaked To NYT
Schiff ‘Demands’ Bolton As Witness After “Explosive Revelation” Manuscript Leaked To NYT
Surprise!
After White House lawyers’ brief rebuttal (less than 3 hours) managed to tear apart Rep. Schiff and the House Managers’ 20-plus-hour ‘odyssey’ in the Senate impeachment trial, is anyone surprised that – right at the last minute – a ‘bombshell’ is leaked to the media that promises – as always – “this time we got him.”
This time, The New York Times reports that President Trump’s former national security adviser John Bolton alleges in his forthcoming book that the president explicitly told him”
“[Trump] wanted to continue freezing $391 million in security assistance to Ukraine until officials there helped with investigations into Democrats including the Bidens.”
Bolton also wrote that several top cabinet officials had knowledge of Trump’s demands, including Secretary of State Michael Pompeo and Attorney General William Barr, as well as acting White House Chief of Staff Mick Mulvaney, according to NYT.
The leak – if true – contradicts Trump’s claim that he never tied the hold-up of Ukrainian aid to his demands for investigations into Burisma corruption surrounding Hunter Biden’s exorbitant pay for doing sweet F.A.
Of course, Senate Minority Leader Chuck Schumer instantly responded to the NYT story, tweeting:
“John Bolton has the evidence. It’s up to four Senate Republicans to ensure that John Bolton, Mick Mulvaney, and the others with direct knowledge of President Trump’s actions testify in the Senate trial.”
And The House Managers were even stronger in tone, demanding Bolton as witness…
House Managers Statement on New York Times Report on John Bolton Washington, DC
Today, the House Managers in the impeachment trial of the President of the United States, Donald J. Trump – Adam Schiff, Jerrold Nadler, Zoe Lofgren, Hakeem Jeffries, Val Demings, Jason Crow, and Sylvia Garcia– issued the following joint statement:
“Today’s explosive revelation that President Trump personally told former National Security Advisor John Bolton that he would continue the freeze on military aid to Ukraine until that country agreed to his political investigations confirms what we already know. There can be no doubt now that Mr. Bolton directly contradicts the heart of the President’s defense and therefore must be called as a witness at the impeachment trial of President Trump.
“Senators should insist that Mr. Bolton be called as a witness, and provide his notes and other relevant documents. The Senate trial must seek the full truth and Mr. Bolton has vital information to provide. There is no defensible reason to wait until his book is published, when the information he has to offer is critical to the most important decision Senators must now make — whether to convict the President of impeachable offenses.
“During our impeachment inquiry, the President blocked our request for Mr. Bolton’s testimony. Now we see why. The President knows how devastating his testimony would be, and, according to the report, the White House has had a draft of his manuscript for review. President Trump’s cover-up must come to an end.
“Americans know that a fair trial must include both the documents and witnesses blocked by the President – that starts with Mr. Bolton.”
Sarah Tinsley, a Bolton spokeswoman, declined to comment on the accuracy of the report regarding the ambassador’s manuscript.
“The ambassador transmitted a hard-copy draft of his manuscript to the White House for pre-publication review by the National Security Council,” she said in an telephone interview.
“The ambassador has not passed the manuscript to anyone else, only the NSC.”
So another internal White House leak?
And this comes just hours after Schiff proclaimed magnanimously that while their witness calls were all relevant, White House lawyers’ call for Hunter Biden as a witness would never stand, because he was “irrelevant.”
Schiff told NBC’s Chuck Todd that the president’s defense “doesn’t have the right” to call “irrelevant witnesses or witnesses who aren’t fact witnesses” within the trial, again signaling that he is unwilling to trade testimony from Joe Biden’s son, Hunter, in exchange for other administration witnesses.
“It’s not a question of what I’m afraid of. I’m not afraid of anything. It’s a question of: Should the trial be used as a vehicle to smear his opponent … or is it to get to the truth?” Schiff added.
Which is odd given Ukraine’s meddling in the 2016 election – which is a “debunked conspiracy theory” according to Schiff et al.
There’s just one thing – it’s not, as none other than Politico noted in Jan 2017…
Ukrainian government officials tried to help Hillary Clinton and undermine Trump by publicly questioning his fitness for office. They also disseminated documents implicating a top Trump aide in corruption and suggested they were investigating the matter, only to back away after the election. And they helped Clinton’s allies research damaging information on Trump and his advisers, a Politico investigation found.
So will there be a ‘quid pro quo’ or Biden’s testimony for Bolton’s testimony?
Trump on Wednesday told reporters in Davos, Switzerland, that he didn’t want Bolton to testify before the Senate.
“The problem with John is it’s a national security problem,” Trump said.
“He knows some of my thoughts. He knows what I think about leaders. What happens if he reveals what I think about a certain leader and it’s not very positive and then I have to deal on behalf of the country?”
He added:
“It’s going to be very hard. It’s going to make the job very hard.”
And cue the “Donald Trump is done” proclamations…
Tyler Durden
Sun, 01/26/2020 – 20:30 - China Futures Crash, Oil & Yuan Plunge As CoV-Contagion Spreads
China Futures Crash, Oil & Yuan Plunge As CoV-Contagion Spreads
Update (2020ET): China’s FTSE A50 Futures have collapsed over 5% in early trading and Hong Kong’s Hang Seng is collapsing…
Source: Bloomberg
And Treasury yields are plunging…
Source: Bloomberg
* * *
While gold is spiking higher and stocks are getting hammered lower after a weekend of ugly headlines surrounding the lethality and spread of the novel coronovirus, the Saudis are desperately talking down the crash in crude oil prices…
Brent is back below $60 and WTI has crashed to almost a $51 handle…
Saudi Arabia is “closely monitoring” the impact of the coronavirus outbreak on oil markets, but so far sees the crisis having a “very limited impact” on global demand, Energy Minister Prince Abdulaziz bin Salman says in a statement.
Current market impact on oil, “primarily driven by psychological factors and extremely negative expectations adopted by some market participants, despite its very limited impact on global oil demand.”
It seems that “psychological” impact is sending gold higher…
And stocks lower… Dow futures down over 300 points, back below 29,000…
And S&P futures back below the key 3,300 level…
And while cash Treasury markets remain closed, long bond futures are spiking higher (implying around a 7-9bps plunge in yields)…
And Yuan is plunging too…
Source: Bloomberg
We assume futures will all be green by tomorrow’s cash open as soothing words and excess liquidity are spread liberally across the so-called markets all night.
But, as we noted earlier, while the headlines may all sound very pessimistic, history has shown that a subsequent market recovery from such events is V-shaped and sudden. How soon that happens though will depend on how long the uncertainty lasts before the outbreak is contained and fears of a global pandemic subside. It’s clear we’re still at least a few days away from that upturn in sentiment, and potentially a few weeks.
Tyler Durden
Sun, 01/26/2020 – 20:27 - Some Practical Questions About The Coronavirus Epidemic
Some Practical Questions About The Coronavirus Epidemic
Authored by Charles Hugh Smith via OfTwoMinds blog,
Restrictions that allow a significant number of people to move about, either with official approval or unsanctioned “black market” activity, cannot stop the spread of contagious diseases.
Like everyone else, I’ve been reading the mainstream media reports on the Coronavirus epidemic. I haven’t found any information about the practicalities that immediately occur to me, such as:
1. When public transportation is halted and commerce grinds to a halt as people avoid public places and gatherings, thousands of employees no longer go to work. Who pays their wages while the city is locked down? The employers? Then who compensates the employers, since their income has also gone to zero?
Does China have a universal unemployment insurance system that can quickly issue payments to all people who are no longer going to work and getting a paycheck from an employer?
What about the thousands of migrant workers who don’t have regular employers? Who pays them? If they’re technically not officially sanctioned residents of the city, they don’t exist in government records.
2. If people idled by the lockdown are supposed to live off savings, what about all the marginal workers with few resources? What are they going to live on once their meager savings are gone?
3. Given the choice of obeying the lockdown rules and starving or slipping out of the city to find paid work somewhere else, how many migrant workers will choose to slip away?
4. Unlike the developed West, many people in China still have ancestral villages to return to, rural towns where their grandparents or or other close relatives live. If work has dried up and you’re fearful of catching a potentially lethal virus, wouldn’t it make sense to slip out of the city and make your way back to the village where you can hunker down until the epidemic blows over?
Since people who caught the virus may not know they’re a carrier, how will this migration not spread the disease to rural areas with few medical resources?
5. The typical city has about a week’s supply of food, fuel, etc. at best. If the lockdown runs longer than a few days, scarcities of essentials will ignite hoarding, and remaining supplies will be snapped up.
Since the city’s residents need food, fuel, etc., it must be brought in regardless of the lockdown. This brings outside workers into the city and provides residents desperate to flee avenues to escape the lockdown. Every individual involved in this system is potentially exposed to the virus or is a potential asymptomatic carrier of the virus leaving the city.
These realities leave officials with an impossible choice: either truly isolate the city, which isn’t possible for more than a few days, or allow the stupendous flow of goods required to sustain millions of city residents, thereby creating uncontrollable avenues for the virus to spread beyond the city as transport workers and those fleeing the lockdown travel to other cities.
6. The only way to end a contagion is to identify every carrier of the disease and immediately isolate them in full hazmat mode, and then track down every individual they had contact with during the incubation/asymptomatic period of the disease–up to two weeks–and isolate all these individuals until they either develop the disease or pass through the crisis unharmed.
This was the basic procedure used to end the SARS epidemic in 2003. As this article from the The New England Journal of Medicine explains (Another Decade, Another Coronavirus, (via correspondent Cheryl A.), the Wuhan Coronavirus shares characteristics with SARS and cannot be dismissed as just another run-of-the-mill flu virus.
During this process of isolating / quarantining everyone with the disease and everyone they had close contact with, all healthcare workers caring for these people must also remain isolated from the general populace lest they become infected and spread the disease outside the quarantine.
Treating people in crowded hospitals where hundreds of people are coming and going and moving freely into the rest of the city won’t stop a contagion from spreading.
If the only way to end a contagion is to identify every carrier of the disease and immediately isolate them, and then track down every individual they had contact with during the incubation/asymptomatic period of the disease–is this even possible in China now?
Please study the map below before claiming it’s still possible.
7. China is making a big show about sending 1,000 doctors to Wuhan, but precisely what medical treatments are available for this virus, how effective are these treatments, and do they require a physician to be administered? If the answers are: there are no effective targeted medical treatments for this virus, and doctors are not required to administer what is available, then why expose a scarce resource–physicians–to the disease since they really can’t do much to halt it or heal the patients?
Isn’t sending 1,000 doctors to Wuhan more a PR move than anything else? And if it’s basically a PR stunt to appear to be “doing something,” doesn’t that call the entire official response into question?
If there is no targeted treatment available, then the recovery of the patient is a function of their immune system. Building tent hospitals that are porous–healthcare workers returning home after their shift, relatives visiting the stricken, workers moving supplies in and out of other facilities, etc.–will do little to isolate carriers and potential carriers. And since complete isolation is the only way to stem the contagion, these porous tent hospitals won’t do much to limit the contagion.
8. Are the travel bans on tours and other travel restriction measures 100%, in other words, not a single individual is being allowed in or out? If the travel restrictions are haphazard, then what’s stopping asymptomatic carriers of the virus from traveling freely around the world?
There are many other practical questions about the epidemic and China’s response that aren’t being addressed in the conventional media. While we don’t know precisely how contagious and lethal the virus is at this point–and it could mutate into a more contagious and lethal variation within a carrier at any moment–we do know complete isolation of every carrier and everyone they had close contact with is the only way to end the contagion.
We also know cities can’t truly be isolated for longer than a few days, and we know people can’t live without food, water, fuel, etc. and money to buy these essentials. We also know that restrictions that allow a significant number of people to move about, either with official approval or unsanctioned “black market” activity, cannot stop the spread of contagious diseases.
* * *
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Tyler Durden
Sun, 01/26/2020 – 20:05 - Senate Dems Slam Pompeo's "Insulting & Contemptuous" Comments About NPR Reporter
Senate Dems Slam Pompeo’s “Insulting & Contemptuous” Comments About NPR Reporter
A group of five Senate Democrats – including one who was nearly jailed for corruption – have written a letter to Secretary of State Mike Pompeo condemning his “insulting and contemptuous” off-the-record comments to NPR reporter Mary Louise Kelly.
Kelly broke the story on Friday after she decided to ignore her commitment to keeping Pompeo’s comments off the record because he was mean to her. On her podcast and radio program, she shared the recorded interview with Pompeo, as well as her account of their post-interview off-the-record meeting, where purportedly swore at her for asking questions about his handling of the Ukraine situation when the interview was supposed to be about Iran. At one point, Pompeo had an aide confront Kelly with a blank map and ask her to correctly identify Ukraine. She claims she identified it correctly, while Pompeo claims she pointed to Bangladesh.
Sen. Bob Menendez
New Jersey Sen. Bob Menendez, whose initial corruption trial in late 2017 was deadlocked after a jury couldn’t reach a verdict, prompting the DoJ to drop its prosecution, tweeted a copy of the mercifully brief letter Saturday afternoon.
At a time when journalists around the world are being jailed for their reporting, Sec Pompeo’s insulting and contemptuous comments to NPR’s @NPRKelly are beneath the office of the Secretary of State.
Read our letter 👇 pic.twitter.com/x3qaRrUXTM
— Senator Bob Menendez (@SenatorMenendez) January 25, 2020
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Not only did they condemn Pompeo’s initial alleged conduct, they also expressed “profound disappointment and concern” over the “irresponsible” statement issued by the State Department refuting Kelly’s claims. They even went so far as to bring up Jamal Khashoggi, and by doing so, implicitly compared the Trump Administration to the Saudi regime regarding its treatment of the press.
Aside from Menendez, the letter was also signed by Sens. Tim Kaine, Ed Markey, Jeff Merkley and Cory Booker.
While it’s true that journalists are routinely jailed and killed around the world for their reporting, it’s also true that journalist murders are virtually nonexistent in the US.
That is, unless you believe the ‘conspiracy theories’ about Michael Hastings.
The most high-profile killing of an American journalist happened when a former news station employee shot her on camera as an act of deranged vengeance for perceived slights.
But sure, Pompeo’s decision to drop a couple of f-bombs in front of a female reporter is absolutely tantamount to the vicious slaying of Jamal Khashoggi inside the Saudis consulate in Istanbul. Sounds reasonable to us.
Tyler Durden
Sun, 01/26/2020 – 19:40 - Containing The Huawei 'Virus'?
Containing The Huawei ‘Virus’?
Authored by James Gorrie via The Epoch Times,
The deadly virus originating out of the central Chinese city of Wuhan is making headlines, and well it should. There’s the potential for this new coronavirus to spread rapidly from China to the rest of Asia and the West.
The virus attacks victims’ immune systems, compromising their health and threatening their very existence. At this writing, there are over 600 confirmed cases of the coronavirus, with at least one in the state of Washington in the United States, and 17 deaths in China.
The Huawei Contagion
But there’s another high-risk contagion that has spread much further and deeper into many nations of the world, with very serious consequences as well. I’m talking about Huawei, of course, and its drive to be the main source of 5G telecommunication equipment for the world.
As I’ve written before, the China-based company is the biggest network equipment and phone infrastructure provider on earth. Its equipment is at the very heart of communications systems in countries across Europe and Asia, as well as in several Western states in the United States.
Unfortunately, as many are aware, Huawei gear itself is the infection, compromising networks and phone systems with built-in spyware. This enables the company to record, gather, and alter data of all stripes, from the mundane to the top secret, and send it home to Beijing.
The global equipment provider’s violations range far and wide in their damage to the national security, as well as economic viability, of every nation in which their network equipment operates. In medical terms, the “Huawei virus” undermines nations’ immune system, lowers its ability to defend itself in a variety of critical areas, including trade and foreign policy.
In fact, Huawei was the catalyst of the U.S.–China trade war and the threat it poses to U.S. sovereignty is reflected in President Donald Trump’s very hard line against it. That also explains why Washington identified Huawei as a national security threat last November.
There Are No Coincidences
Of course, Huawei’s behavior isn’t breaking news. Meng Wanzhou, the CFO and daughter of the company’s founder Ren Zhengfei, has been under house arrest in Canada since late 2018. She was taken into custody for allegedly violating U.S. trade sanctions against Iran through a shell company based in Hong Kong.
Coincidentally, Meng’s arrest in Canada at the request of the U.S. government was the same day that Trump was in talks with Chinese leader Xi Jinping.
Was the timing of Meng’s arrest coincidence? Perhaps, but probably not. “In politics,” as the saying goes, “there are no coincidences.”
It’s much more likely, therefore, that Trump wanted to let Beijing know just how serious the United States is about stopping its predatory practices.
Imagine the words that must have passed between them as Beijing learned of the arrest of one of the top officers of its flagship company. The conversation must have been quite animated, to say the least. It’s also probable that in that moment, the Chinese Communist Party (CCP) leadership realized that it wasn’t dealing with Barack Obama anymore.
That’s also why Beijing’s detention of two Canadians shortly thereafter can only be seen in the context of retaliation against Canada for Meng’s arrest.
Blacklisting Huawei
Although Meng, her father, and even the Chinese regime continue to deny the charge of Iran sanctions violations, investigations by both the legislative and executive branches of the U.S. government have found, without doubt, that such is the case. Those investigations, which confirmed that Huawei acts as an agent of the CCP, resulted in the U.S. Commerce Department blacklisting Huawei from buying parts from U.S. companies without special permission.
This is the context behind Meng’s trial for extradition to the United States, which began this month. If China was expecting the United States to drop the charges against Huawei if they signed the Phase One deal, they’re likely to be disappointed.
Leveraging such quid pro quos is business as usual for Beijing. However, as China is finding out, that’s not how the Trump administration works. The United States is determined to rollback Huawei’s—that is, China’s—penetration and influence in the world, and especially with regard to U.S. allies.
More to the point of the matter, Meng’s extradition to the United States would almost certainly result in a conviction. It would have to. If she were to be acquitted, it would discredit the global campaign against Huawei and Beijing’s predatory trade practices that the United States is so ardently pursuing.
The Cost of Banning Huawei
If a conviction occurs, how serious will Beijing be about fulfilling its side of the Phase One deal? It wouldn’t be a surprise if China backed out of the deal; doubts of its ability to meet the terms already exist.
If that happened, the United States could ban Huawei from the American banking system, severely hindering its ability to do business. That option is already been considered and remains on the table.
China, on the other hand, may be engaged in bit of messaging as well. Huawei’s legal department issued what looks like a thinly veiled threat when chief legal officer Song Liuping stated that, “Banning a company like Huawei, just because we started in China—this does not solve cyber security challenges.”
The meaning of this statement seems rather clear: Beijing is threatening cyberattacks against the United States if the case against Meng goes forward and/or results in a conviction and further actions against Huawei.
The cost of containing Huawei may well be the unwinding of Phase One, which may have been Beijing’s plan all along.
Tyler Durden
Sun, 01/26/2020 – 19:15 - Iran Declares It's Passed Low Uranium Enrichment Threshold For A Nuke
Iran Declares It’s Passed Low Uranium Enrichment Threshold For A Nuke
Iran’s Deputy Atomic Energy Organization Director Ali Asghar Zarean made a key, provocative announcement on Saturday, saying the Islamic Republic has now passed the low uranium enrichment threshold for a nuke.
“At the moment, if (Iranian authorities) make the decision, the Atomic Energy Organization, as the executor, will be able to enrich uranium at any percentage,” Ali Asghar Zarean said, according to Reuters.
Specifically he declared the agency had surpassed 1,200 kg. of low level enriched uranium, following early last month Iran’s leaders declaring they consider the program under “no limitations” following the Qassem Soleimani assassination.
Nuclear power plant in Iran. Image source: Tasnim News Agency via Wikimedia Commons The Saturday announcement also comes nearly two weeks after European signatories to the 2015 nuclear deal – Germany, France and Britain – said they are moving to trigger the JCPOA’s dispute resolution mechanism formally declaring Tehran is in breach, which could bring UN sanctions.
A report in The Jerusalem Post underscores how dire the situation is after this latest threshold has been reached:
If true, the news could substantially accelerate the point at which Israel and the US might need to decide if they will intervene militarily before Iran develops a nuclear weapon.
However, none of this necessarily means Iran has moved to take the final step of weaponizing and delivering the material. Leadership in Tehran has continually emphasized its nuclear program is for peaceful energy purposes.
The 1,200kg would still have to be enriched to 90% weaponized uranium for a weapon. Combined with the challenges of a delivery method, Israeli defense officials say it could take up to a year to develop a nuke if the Iranians were to move on it now, according to The Jerusalem Post.
To compare to pre-2015 nuclear deal levels, Iran had much more uranium yet never enriched it past the 20% level. It remains to be seen whether Iran’s newest announcement is a possible bluff, or an attempt at sowing disinformation to intimidate Washington — still a distinct possibility which awaits IAEA or other international scientific confirmation.
Tyler Durden
Sun, 01/26/2020 – 18:50 - Romney Sides With Democrats: 'Very Likely I'll Be In Favor Of Witnesses'
Romney Sides With Democrats: ‘Very Likely I’ll Be In Favor Of Witnesses’
Utah Sen. Mitt Romney (R) says it’s “very likely” that he will side with Congressional Democrats over calling witnesses in the Senate impeachment trial against President Trump – however he says he will table the decision until Trump’s defense team has concluded their opening arguments.
“I think it’s very likely I’ll be in favor of witnesses, but I haven’t made a decision finally yet and I won’t until the testimony is completed,” Romney said Saturday following the first full day of Trump’s team’s arguments, according to CNN.
The Utah Senator was mum on whether he thought Trump’s team was effective, saying “I just don’t have any comments on the process or the evidence until the trial is over.”
Three weeks ago Romney expressed interest in hearing testimony from former National Security Adviser John Bolton, saying earlier this month “I would like to hear from John Bolton and other witnesses, but at the same time I’m comfortable with the Clinton impeachment model when we have opening arguments first and then we have a vote on whether to have witnesses.”
Democrats need four Republicans to vote with them in favor of subpoenas for witnesses or new evidence in order to extend the trial and gather new information.
There are only maybe four, realistically, who would vote in favor of calling witnesses who could testify against the President. That short list includes Romney, relative moderates Sens. Susan Collins of Maine and Lisa Murkowski of Alaska, and endangered senators up for reelection like Sen. Cory Gardner of Colorado.
Collins and Murkowski have also signaled that they’re open to hearing from witnesses, should they feel it’s needed after opening arguments. –CNN
According to the report, Senate Majority Leader Mitch McConnell has blocked efforts by Democrats to push for an initial deal on witnesses and documents until after opening statements and questioning.
McConnell now says that calling witnesses would raise constitutional concerns – suggesting that he’s in lockstep with Sen. Lindsey Graham (R-SC), who says “this needs to end.”
Tyler Durden
Sun, 01/26/2020 – 18:25 - CTA And Managed Futures Primer
CTA And Managed Futures Primer
Authored and courtesy of Ryan Fitzmaurice and Christian Lawrence of Rabobank
Summary
- Global markets are becoming increasingly intertwined as systematic flows from CTAs and passive investments gain more and more market share from active discretionary managers.
- Equity markets have passed an inflection point with passive investing AUM surpassing active investments for the first time in history. This has major ramifications for asset price action.
- CTAs typically implement similar trend and momentum strategies across asset classes using liquid futures contracts in fixed income, equity, commodities, and FX markets
- The majority of CTAs are doing the same thing but perhaps on different timeframes or with different leverage profiles.
The “Long and short of it” rationale…
On these pages is the first release of “The long and short of it“ – a new series of reports from RaboResearch focusing on cross asset and systematic investing. Given this is the first cross-asset report of its kind from RaboResearch, we will begin the series with a number of primers covering a range of topics from systematic CTA flows to factor investing and beyond. Of course, cross-asset analysis is nothing new but shifts in the structure of the market and the rise of systematic trading and passive investment have major implications for more traditional forms of asset management and in turn for market price action.
In short, the idea behind our cross-asset reports is to tie together different asset classes in a world where no market is an island and reflexivity and interconnectedness are key. The core thesis behind our analysis is that global markets are becoming increasingly intertwined as systematic flows from more ‘rules based’ investors such as CTAs (Commodity Trading Advisors) and passive investments such as index funds and smart beta ETFs gain more and more market share from active discretionary managers. In fact, as of summer of last year, passive investments surpassed active investments in the equity space for the first time in history and this trend shows no sign of letting up. We are certainly not suggesting that active management is disappearing altogether, but discretionary management is certainly losing market share and the rise of passive investment is shaping the structure of markets. While it is not the case that the rise of passive investment is the root cause of the continued decline of volatility over recent years, it has been a key part of the vicious/virtuous cycle that continues to compress financial market volatility despite rising real world risks. Indeed, a flood of liquidity from central banks and monetary policy that seemingly provides somewhat of a backstop to asset prices, coupled with a changing regulatory landscape are probably the main drivers behind the structural short volatility dynamic we see across markets. That environment, alongside advances in technology and computing power, have helped the proliferation and success of passive investment which in turn has helped suppress volatility further.
That said, while passive investment has risen, so has systematic ‘rules based’ investing and it is in this area that we can extract some valuable insights that allow for more accurate forecasting and more successful risk management.
It is not just equity markets that have undergone this transformation – other asset classes have followed suit, and given the rules-based nature of these funds and strategies, trading behavior and market flows are becoming more predictable for astute market practitioners. While our aim is to cover the wide universe of systematic strategies – our initial focus will be on CTAs given our deep understanding and knowledge of this particular “strategy”.
In our view, forecasting and understanding market flows from CTAs can provide a strong edge in today’s highly systematized markets and our goal here is to help our readers understand these dynamics to help navigate market risks more effectively. As the name suggests, CTAs have long been key in understanding price action in commodity markets but their role in other asset classes is still important. Even for markets such as the government bonds and FX, while at first glance it might appear the futures market is so small in comparison to the cash market as to be irrelevant, in fact, the futures market is highly leveraged and so the volumes at stake are much larger than the notional amounts imply – at the margin there can be some valuable information gleaned from CTA positioning and flows. Of course, the US Treasury market and the FX market are two of the deepest, most liquid markets in the world and US Treasuries are heavily impacted by structural dynamics such as regulatory requirements, but at the margin, even in this market, CTA flows can provide some interesting insights. These two markets are the most extreme example but for smaller markets, the role of CTA flows can be significant. Furthermore, CTAs are one of the most dynamic categories of traders in their approach and therefore can be a powerful force on the margin and especially when looking at shorter term moves where there is no clear fundamental catalyst at play. At the very least, readers should understand what it is that CTAs do, the strategies that they employ, and their potential market impact across sectors and asset classes.
To that end, in “The long and short of it” reports we will look to highlight “crowded” trades, forecast weekly flows using a theoretical CTA model, and identify key market inflection points where we expect the herd of CTAs will likely reverse positions.
CTAs and Managed Futures
As previously noted, CTA stands for commodity trading advisor, however, that is a bit of a misnomer given that CTAs trade not only commodities but also other major asset classes spanning the global futures markets. CTAs or “Managed Futures” programs as they are also known, are often dressed up as a magic black box full of secret sauce but they typically implement similar trend and momentum strategies across fixed income, equities, commodities, and FX markets. Indeed, despite fancy pitch books suggesting otherwise – most CTAs are doing the same thing but perhaps on different timeframes or with different leverage profiles. While a full understanding of CTA strategies is well beyond the scope of this primer – what we will say is that the strategies generally trigger off of price movements such as moving average crossovers or percentage returns over a predetermined lookback period and no fundamental inputs or information is taken into account. The fact of the matter is that there is only so many ways to trade trend or momentum which results in herd-like behavior. This is very apparent when looking at the correlation of publicly available CTA funds and Managed Futures programs which is quite high as is clear from the chart below. It is precisely this herd-like behaviour that can move markets in the short-term and especially in a “short” covering or “long” liquidation scenario when the “crowd” is caught wrong-footed in the market and forced to reverse positions. We will look to capitalize on this behaviour in our new “Long and short of it” report and we detail in the pages below exactly how we intend to do that.
The Rise and Fall
While CTAs have been around for decades, they rose to the forefront after the global financial crisis of 2008 when they performed extremely well in the face of sharply falling markets and then gained further fanfare in 2014 after another standout year. Since then, however, market conditions have been sub-optimal for this type of strategy given the low interest rate environment, central bank intervention, and a host of other factors which have led to poor performance and investor outflows. Further compounding the struggle for CTAs has been the fact that global equity markets have performed extremely well over this same period. This steady increase in equities with very little in the way of sustained pullbacks has led investors to pull money out of actively managed funds and into passive index funds that generally cost a fraction of the fees that active managers charge. While this strategy has largely worked up until now, it is worth remembering that most of these passive investments have only existed during periods of low interest rates, low volatility, and generally stable markets while CTAs, on the other hand, have traded through many market cycles. The real test for passive investing will come when the current trading regime changes, as it always does. When it does in fact change, we suspect CTAs will rise to the forefront yet again and investor dollars will follow as they have in the past. For this reason, we see CTAs as a powerful force with the potential to gain more market share and influence as we look ahead and especially if the slowdown in US and global economic activity that our own Philip Marey, Rabobank’s Senior US Strategist, is forecasting for 2020 is realized.
Market flows
Despite the reduction in assets under management in recent years, CTAs and “Managed Futures” programs continue to play a very dominant role in terms of speculative positioning in global futures markets which is quite apparent from the charts included below. Figure 6 overlays the positioning from our theoretical CTA trading model for both WTI Crude oil and Soybeans with the corresponding positioning data from the “Managed Money” category of the CFTC’s Commitment of Traders report.
For clarity – our theoretical CTA trading model is a proprietary quantitative model that is run in real-time across asset classes. The model incorporates various asset-weighted trend and momentum strategies that include volatility adjusted position sizing and daily rebalancing – modelling the behaviour of real-money CTA funds. The model uses historical price data for signal generation and no fundamental inputs are incorporated.
Back-testing our model has shown it to be a good fit to reality and it has performed especially well at key inflection points. To be clear, the CTA model is not expected to account for all of the variations in positioning from the “Managed Money” crowd given that CTAs only make up a portion of the traders included in the category but the fit implies that the role of CTAs in this category is absolutely critical. Perhaps unsurprisingly, this is especially true in commodities markets where our CTA model tracks the speculative positioning data extremely well as can be seen in Figure 6 below. The same can be said for other asset classes as well, however, the data can be a bit noisier given the large number of players involved as well as the nuances of each sector.
Given that our CTA model is a good fit to the realized behavior of “Managed Money” futures traders, we can use it to predict weekly trading flows, identify “crowded” trades, and perhaps most importantly, detect key areas where CTAs are likely to reverse direction. On top of our CTA model, we will also use other tools such as correlation analysis to identify key positions that CTAs currently hold. An example of this can be seen in Figure 7 below, running correlations of CTA performance against equity indices implies that CTAs accumulated a sizable “long” position through November and December of 2019 and are now starting the new year off with outsized exposure to global equities given the strong positive correlations to the aggregate CTA index.
Looking Forward
We have focused on providing a primer on the role CTAs play in financial markets and how they can be used to provide insights as to potential direction of price action across asset classes. This is just the first in a series of primers that cover topics we think can provide additional insight into market dynamics and give our readers an edge in navigating financial markets. Going forward, we will publish more primers covering our new toolkit including risk premium strategies, factor investing, volatility strategies, smart Beta ETFs, as well as other systematic trading programs. More importantly, we will of course update our readers with the results of our models both in terms of forecasts and risk signals.
Tyler Durden
Sun, 01/26/2020 – 18:13 - Kobe Bryant Dies In Helicopter Crash
Kobe Bryant Dies In Helicopter Crash
Update (1745ET): The local sheriff has confirmed that the death toll from the helicopter crash that killed Bryant has been raised to nine
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Update (1600ET): According to TMZ, Bryant’s daughter Gianna was aboard and perished in the crash near Las Virgenes Rd. and Willow Glen St. around 10 a.m, behind the home of Kourtney Kardashian. ESPN reports that they were on their way to a basketball game.
Bryant is survived by his wife Vanessa and their three other daughters, Natalia, Bianca and newborn Capri.
President Trump has offered his condolences on Sunday.
Reports are that basketball great Kobe Bryant and three others have been killed in a helicopter crash in California. That is terrible news!
— Donald J. Trump (@realDonaldTrump) January 26, 2020
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Meanwhile, it appears that Bryant’s helicopter was in a holding pattern before crashing.
Flight path of N72EX, the S-76 owned by Island Express, that crashed this morning with #Kobe It appears the helicopter flew a holding pattern before proceeding to what would soon be its tragic fate. pic.twitter.com/zl4H969IU3
— Bob Randall (@roosterjames) January 26, 2020
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Update (1540ET): Just hours after the crash, false rumors are already being reported as facts. Reports that all of Bryant’s four daughters were with him in the helicopter have been confirmed to be untrue.
Whoever “reported” Kobe’s daughters were with him should be ashamed. No way do you run something like that out there unless you have it 100 percent confirmed
— Paul Zeise (@PaulZeise) January 26, 2020
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This is why journalists need to confirm their information with multiple sources instead of just running with whatever somebody tells them.
* * *
TMZ has confirmed that basketball legend Kobe Bryant – one of the biggest sports stars in the world – died Sunday morning in a helicopter crash over Calabasas, a tiny city in LA County known as a haven for celebrities. He was 41.
Though many online wished that news of his death was fake or some kind of sick joke…
TMZ said Kobe Bryant died in a Helicopter crash. I’m calling bull shit on this Fake news pic.twitter.com/3vH21lMxaZ
— Gutta Ball (@Larellj) January 26, 2020
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…several local news outlets have confirmed the story.
The cause of the crash is under investigation.
Per TMZ, Kobe has famously used a helicopter to travel for years, even when he was still playing with the LA Lakers. He was known for commuting from his home in Newport Beach to the Staples Center in his Sikorsky S-76 chopper. Kobe was traveling with at least three other people in his private chopper when it went down.
Local news reported that Malibu deputies responded to what appears to be the scene of the crash, though both TMZ and the LA County Police Twitter feed described the crash as occurring over Calabasas. The tweets didn’t name any of the victims.
#Update Downed aircraft is a helicopter. Flames extinguished. #Malibu deputies at crash site looking for survivors, 4200 blk Las Virgenes Rd #Calabasas #LASD pic.twitter.com/eixLhGhLyE
— LA County Sheriffs (@LASDHQ) January 26, 2020
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Five people confirmed deceased, no survivors in #Calabasas helicopter crash. #LASD #Malibu deputies remain with #LA County Fire personnel. Investigation ongoing.
Avoid the area until further notice.
— LA County Sheriffs (@LASDHQ) January 26, 2020
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The LA Times confirmed that the crash happened at around 10 am PT (1 pm ET). The crash ignited a brush fire that made it nearly impossible for rescue personnel to reach the aircraft. They also confirmed that the model of the chopper was a Sikorsky S-76, the same model as Kobe’s private chopper.
Many have turned to Bryant’s twitter account, hoping he’ll fire off a tweet letting the world know it was just a hoax. But his last tweet, sent 16 hours ago (before this morning’s crash), praises Lebron James, the new star of Bryant’s old team, the Lakers. Bryant was a huge part of what made the Lakers one of the most dominant franchises in the NBA. On Saturday, James passed Bryant on the NBA’s all-time scoring list.
Continuing to move the game forward @KingJames. Much respect my brother 💪🏾 #33644
— Kobe Bryant (@kobebryant) January 26, 2020
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Bryant is survived by his wife Vanessa, and their four daughters, Gianna, Natalia and Bianca and their newborn Capri.
2020 has been one incredibly strange year – and it’s still January.
Tyler Durden
Sun, 01/26/2020 – 17:46 - "The Fed Is Trying To Stop Global Economic Contagion", Martin Armstrong Warns
“The Fed Is Trying To Stop Global Economic Contagion”, Martin Armstrong Warns
Via Greg Hunter’s USAWatchdog.com,
Legendary geopolitical and financial analyst Martin Armstrong says, “The Fed is trapped. If it stops (injecting money into the repo market by billions of dollars daily), interest rates will rise.”
Armstrong goes on to explain,
“The Bank of Japan came out and said we’re going to buy government bonds unlimited. They, too, are trying to prevent interest rates from rising…
The ECB cannot afford rates to go up…
This is a global contagion that’s developing, and it’s pretty serious. The rise in interest rates has tremendous implications all the way around the globe…
Interest rates are rising because there is increased risk – period.”
The big risk, according to Armstrong, is global governments, including the U.S. Armstrong says,
“You have to understand, at some point in time, capital begins to figure out who is the greatest risk, and the risk is government. At that stage in the game, when that point is reached, then you have shifts. The capital will move from public types of investments, such as government bonds and things of that nature, and then will move into the private sector. That’s equities, and that can be gold and real estate in different places. You try to go to tangible assets.”
So, what could go wrong with the Fed trapped in the repo market and cannot stop liquefying bad debt? Armstrong says,
“What can go wrong is that they lose the game. They are doing this to try to prevent interest rates from rising. If they did not do this, the short term rate would be up dramatically.”
What could go wrong is the Fed can continue to fuel the repo market with cheap money and interest rates can rise anyway? Armstrong says,
“Correct. They have already lost control, otherwise they wouldn’t be doing this…
They are trying to keep rates down. If the Fed loses, rates are going to go up, and you are going to see this in the Treasury auctions. Then it won’t matter what the Fed is trying to do in the repo market. You will see this stress in the Treasury auctions, and the government will have to start paying higher prices. This is what’s going to take place.”
In closing, Armstrong says, “The central banks are losing power…”
“That’s what my new book “Manipulating the World Economy” is all about. It’s about all the manipulations. Governments have tried to control it, and they are losing it on every possible level.
This is like the last ditch effort, the last hurrah or last battle for the central banks. If the Fed loses, you are talking about central banks can no longer function in controlling the economy, inflation or anything.”
Join Greg Hunter as he goes One-on-One with renowned financial and geopolitical analyst Martin Armstrong.
* * *
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There is some free information, analysis and articles on ArmstrongEconomics.com. Armstrong’s new book “Manipulating the World Economy” is temporarily sold out. If you want to know when the stock of Armstrong’s new book is replenished, you can keep checking by clicking here. There is also other research and analysis you can purchase by Martin Armstrong by clicking here.
Tyler Durden
Sun, 01/26/2020 – 17:35 - Is The Market Underestimating Euro Area Inflation?
Is The Market Underestimating Euro Area Inflation?
Authored by Tony Small, Morgan Stanley strategist
Core and headline inflation data in the euro area finished 2019 above the ECB’s forecasts, as seasonally adjusted measures of underlying inflation climbed to their highest levels since 2013. Many leading indicators suggest that the upside evident in underlying inflation at the end of last year could continue in 2020. Early January commentary from multiple ECB officials suggests that optimism is slowly building within the Governing Council.
Despite the near-term improvement and cautious optimism from some within the ECB, markets remain decidedly sceptical that the move is sustainable. The ECB’s preferred market-based measure, the five-year five-year euro inflation swap, remains stuck near 1.3% (below seasonally adjusted underlying measures for only the second time since the GFC).
And according to Bloomberg, median and average forecaster expectations for end-2020 euro area GDP growth, CPI and 10-year Bund yields stand at or near 18-month lows.
Now we know you’re probably saying to yourself, not another euro area reflation story. We get it, we promise – but give us a few to make our case.
We think there’s a real possibility in 2020 that the markets’ expectations for a rebound in euro area growth and a steady move higher in core inflation measures may prove too pessimistic. This could lead markets to reassess everything – from bank stocks to the outright levels of both inflation breakevens and Bund yields and finally the ECB’s current monetary policy stance.
Over the last couple of years, core inflation has been running well below what existing levels of wage growth and the European Commission future price expectation series for the consumer, services, retail and construction sectors would normally imply. At the same time, a softer manufacturing sector has offset resilient domestic demand and services inflation, but some of that drag may be starting to subside.
In recent months our European and global economics teams have been highlighting the stabilisation and improvement in euro area manufacturing PMIs, upside data surprises across many regions of the globe and an acceleration in European soft data indicators, particularly in Germany, where the latest ZEW expectations survey rose to its highest level since 2015 and the manufacturing and services PMIs surprised strongly to the upside in January.
The better-than-expected data, especially in the euro area, have prompted our European economists to note potential upside risks to their forecast for just a soft rebound in euro area growth in 2020. Importantly, they’re not alone.
The account of the ECB Governing Council’s December 2019 monetary policy meeting had perhaps the most cautiously optimistic tone beneath the surface that we’ve seen in the last couple of years. Members highlighted the reduced uncertainty associated with geopolitical and trade tensions, a significant reduction in euro area recession probabilities, a notable rise in euro area surprise indices and a “solid upward move in underlying inflation” (when excluding volatile package holiday prices in the euro area’s largest economy and measures incorporating the cost of owner-occupied housing, which aren’t included in the Harmonised Index of Consumer Prices). At the recent January 2020 Governing Council meeting, the cautious optimism continued, as the ECB softened its assessment of downside risks to growth from “somewhat less pronounced” to “less pronounced”.
Many of our strategy teams at Morgan Stanley have embraced the idea that markets may be priced for too much pessimism in Europe. Our European equity strategists turned positive on European and UK equities in 4Q19, our European bank strategists initiated a high-conviction overweight on the SX7E banks index towards the end of 2019, and our cross-asset strategy team sees greater value in European equities relative to US equities. Finally, we on the European rates strategy team have been biased towards higher Bund yields since the end of 3Q19.
We realise that many investors will look askance at the idea of European reflation given how often it has failed to materialise. Something to keep in the back of one’s mind, however, is that a new wave of leaders has emerged across the continent, with non-traditional attitudes towards fiscal spending and a strong desire to thoughtfully and thoroughly consider issues including climate change, a banking union and broader euro area fiscal integration.
Policies like the European Commission’s Green New Deal could lead to a wave of investment, lifting Europe’s productivity, potential GDP and nominal growth and inflation. In the meantime, there just may be some signs that euro area reflation is finally on its way.
Tyler Durden
Sun, 01/26/2020 – 16:45
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