Jun 03

Today’s News 3rd June 2016

  • Delayed Consequences: Germany Angers Turkey With Genocide Vote

    Submitted by Michael Shedlock via MishTalk.com,

    A year ago, Germany’s Green Party wanted to hold a vote on responsibility for the Ottoman massacres, a systematic expulsion and annihilation of over 1 million ethnic Armenians in 1915.

    Germany delayed the vote, not wanting to upset Turkey… until yesterday, when Germany held the vote, upsetting Turkey much more.

    After a near-unanimous vote, Turkey recalled its ambassador to Germany calling the vote, “null and void”.

    Turkish Protest in Berlin

    Protest in Berlin

     

    Germany Angers Turkey with Genocide Vote

    Please consider Germany Angers Turkey with Genocide Vote.

    Germany’s parliament condemned the Ottoman massacres of ethnic Armenians as genocide on Thursday in a vote that could damage ties with Turkey and complicate handling of Europe’s migrant crisis.

     

    MPs voted almost unanimously for the motion despite the reservations of the government which battled for months for a delay for fear of the reaction of Recep Tayyip Erdogan, Turkey’s president, who is often criticised for authoritarianism.

     

    Ankara immediately recalled its ambassador for consultations in response to what the Turkish government described as a “null and void” vote.

     

    Mevlut Cavusoglu, foreign minister, said on Twitter: “The way to close dark pages in [Germany’s] own history is not to defame the history of other countries with irresponsible and baseless parliament decisions.”

     

    Mr Erdogan warned this week that passing the resolution would harm “all diplomatic, economic, trade, political, military and Nato relations”. He reacted to the vote by warning of a “serious impact on bilateral relations”, adding that Turkey would consider further actions soon.

     

    Ahead of the vote, Binali Yildirim, Turkey’s prime minister, described the debate as a “test of friendship”. The dispute also comes in the wake of a fragile EU-Turkey deal championed by Ms Merkel that has so far halted refugee flows across the Aegean.

     

    That pact could collapse because Mr Erdogan’s goal of visa-free travel for 80m Turks is mired in EU politics and unlikely to be delivered before October.

     

    The diplomatic arguments have resounded around Germany, prompting pro-Ankara demonstrations from the large ethnic Turkish community, and even death threats to MPs.

     

    More than 20 countries, including France and Russia, as well as Pope Francis, recognize the 1915 killings as genocide.

     

    The US has not, partly out of concern at alienating Turkey, a Nato ally and key Middle East partner.

    Lie of the Day

    German chancellor Angela Merkel immediately sought to limit the damage, saying ties with Turkey were “broad and strong”.

    As proof of the “strength” of the relationship, Turkey pulled its ambassador and Erdogan is “considering actions”.

    The “test of friendship” clearly failed.

    Will Turkey cancel its refugee agreement with the EU?

    If so, that would be a positive outcome for Europe, albeit one that would cause a lot of short term pain.

    The benefit is the EU would have to come up with a real solution to the refugee mess rather than making a bargain with the devil.

  • Trump Supporters "Terrorized" In Massive San Jose Street Brawl As Police "Lose Control"

    Shocking scenes are occuring on the streets of San Jose as anti-Trump supporters are chased, punched, kicked, and, as ABC News' Tom Llamas reports "terrorized" as the local police "appears to have lost control." Mobs of protestors, many carrying mexican flags, took over the streets ahead of a Trump rally branding tire irons and burning American flags.

    Full video of the chaotic situation…

     

     

    Social media is awash with videos of the events…

     

    And just general rioting…

    Anti-Trump rioters even burned American flags…

    No this is not the streets of Tehran… this is San Jose – the best city in America to get a job!!

  • Just How Shady is Hillary Clinton? This Shady…

    Submitted by Mike Krieger via Liberty Blitzkrieg blog,

    The American people are sick and tired of hearing about your damn emails.

     

    – Bernie Sanders, during the October 13, 2015 Democratic debate

    Boy was Bernie Sanders wrong about that. It turns out the Hillary Clinton email scandal is way more damaging and dishonest than even her harshest critics could have imagined.

    I’m sure that by now most of you are intimately aware of the scathing report issued by the State Department inspector general regarding Hillary Clinton’s unconscionable use of a private server for all her official government emails. It’s now clear that this was no honest mistake, but rather a deliberate attempt to shield her correspondence from the American people.

    Judge Andrew Napolitano has penned a must read piece about the whole affair at Reason titled, Inspector General’s Report Refutes All of Hillary Clinton’s Defenses For Using Private Email Server. Here are a few choice excerpts:

    The inspector general interviewed Clinton’s three immediate predecessors — Madeleine Albright, Colin Powell and Condoleezza Rice — and their former aides about their email practices. He learned that none of them used emails as extensively as Clinton, none used a private server and, though Powell and Rice occasionally replied to government emails using private accounts, none used a private account when dealing with state secrets.

     

    Clinton and her former aides declined to cooperate with the inspector general, notwithstanding her oft-stated claim that she “can’t wait” to meet with officials and clear the air about her emails.

     

    The inspector general’s report is damning to Clinton. It refutes every defense she has offered to the allegation that she mishandled state secrets. It revealed an email that hadn’t been publicly made known showing Clinton’s state of mind. And it paints a picture of a self-isolated secretary of state stubbornly refusing to comply with federal law for venal reasons; she simply did not want to be held accountable for her official behavior.

     

    The report rejects Clinton’s argument that her use of a private server “was allowed.” The report makes clear that it was not allowed, nor did she seek permission to use it. She did not inform the FBI, which had tutored her on the lawful handling of state secrets, and she did not inform her own State Department IT folks.

     

    The report also makes clear that had she sought permission to use her own server as the instrument through which all of her email traffic passed, such a request would have been flatly denied.

    All of that’s bad enough, but here’s the shadiest part of all.

    Here is what is new publicly: When her private server was down and her BlackBerry immobilized for days at a time, she refused to use a government-issued BlackBerry because of her fear of the Freedom of Information Act. She preferred to go dark, or back to the 19th-century technology of having documents read aloud to her.

    So how do the Clinton people plan on spinning this gigantic debacle?

    We know that Clinton’s own camp finally recognizes just how dangerous this email controversy has become for her. Over the Memorial Day weekend, John Podesta, the chairman of Clinton’s campaign, sent an email to her most important donors. In it, he recognizes the need to arm the donors with talking points to address Clinton’s rapidly deteriorating support with Democratic primary voters.

     

    The Podesta email suggests attempting to minimize Clinton’s use of her private server by comparing it to Powell’s occasional use of his personal email account. This is a risky and faulty comparison. None of Powell’s emails from his private account — only two or three dozen — contained matters that were confidential, secret or top-secret.

    Good ol’ John Podesta. You know, the brother of Tony Podesta of the Podesta Group, a major lobbyist for the terrorist state of Saudi Arabia. These guys make a living from putting lipstick on pigs.

    Recall: “Getting Things Done” – The Brother of Hillary Clinton’s Campaign Chair is a Major Lobbyist for Saudi Arabia

    If you are curious as to why the inspector general of the State Department during Clinton’s years as secretary did not discover all of Clinton’s lawbreaking while she was doing it, the answer will alarm but probably not surprise you.

     

    There was no inspector general at the State Department during Clinton’s tenure as secretary – a state of affairs unique in modern history; and she knew that. How much more knowledge of her manipulations will the Justice Department tolerate before enforcing the law?

    But hey…

    Screen Shot 2016-06-02 at 3.45.29 PM

  • "Dwayne Pimps 3 Ho's" – Alabama Math Quiz Veers Too Close To Real Life

    No, this is not from The Onion.

    In an apparent attempt to make math more relevant to the young people of Alabama, a teacher at Burns Middle School in Mobile, required eighth-graders to take a math quiz that drew complaints from parents about inappropriate themes and racist overtones.

    As The Washington Post reports, nearly 900 students are enrolled at Burns Middle School, about 50 percent of them black and 40 percent white, according to state data. Forty-three percent qualify for free or reduced-price lunch.

    “Dwayne pimps 3 ho’s,” reads one question on the quiz given to students at Burns Middle School in Mobile, Ala. “If the price is $85 per trick, how many tricks per day must each ho turn to support Dwayne’s $800 per day crack habit?”

     

    Other questions refer to stolen cars, murder-for-hire, cocaine deals and drive-by shootings.

     

    “Tyrone knocked up four girls in the gang,” the quiz says. “There are 20 girls in the gang. What is the exact percentage of girls that Tyrone knocked up?”

     

    Rena Philips, a spokeswoman for Mobile County Public School System, said a parent raised concerns about the assignment  Tuesday and the school immediately launched an investigation and placed the teacher on administrative leave. Philips declined to identify the teacher or offer more details, citing privacy concerns related to personnel matters.

     

    “We regret that this happened, especially so close to the end of the school year,” Philips said. “We have 7,500 employees in Mobile County public schools, and the vast majority of them are doing phenomenal work in our classrooms.”

    The teacher has been suspended.

    One of the students photgraphed the quiz, which is reportedly an internet meme dating back to the 1990s…

     

    It’s not clear why the Mobile teacher decided to hand it out Friday, just a few days before school let out.

    “I couldn’t believe it,” one student’s mother exclaimed, “she told them that it wasn’t a joke, and they had to complete it, and turn it in.”

    Of course, we assume the teacher that has been put on administrative leave will still receive full pay and pension…

  • Why Conscripting Women Into Combat Will Result In Cultural Disaster

    Submitted by Brandon Smith via Alt-Market.com,

    Each Memorial Day 2016, there are numerous articles published which examine the achievements and sacrifices of American veterans killed in action. With that subject thoroughly covered, I thought I might instead confront a topic that many people out there would rather not discuss. Get ready for the discomfort levels to increase dramatically, because we are going to tackle the problems surrounding women in combat.

    Now, it has been incredibly trendy the past five years or so to ride the warrior woman bandwagon, and to speak against it is to automatically earn accusations of “misogyny.”  With the third-wave feminist and social-justice agenda increasingly out in the open rather than remaining subtly subversive, you really can’t walk anywhere without stepping in a big steaming pile of propaganda.

    A large number of films and television shows released today, from Mad Max and Star Wars remakes to comic book movies and TV miniseries galore, all seem to be designed to promote the feminist ideology and the image of women "kicken' ass".  An important part of this ideology is the idea that men and women are "exactly"  the same in every capacity except genitals. That is to say, everything a man can do, a woman can do just as well or better, including fight and kill.

    I have to say, I find the spread of this delusion rather disturbing for several reasons. As a mixed martial arts instructor for over 14 years, I have worked with many men and women in combat training and combat mindset. I have never refused to train a woman based on her gender. That said, as training progresses and they reach a certain level of proficiency, I will always have every woman face off with a man for moderate sparring. From my observations, the experience for some of them can be rather shocking.

    For those who have never dealt with a violent assault in their lives, the mental concept of what women are capable of physically rarely matches reality. The sheer disparity in strength and speed between most men and most women is incredible. The average woman’s natural upper body strength alone is only 50% of the average man’s. If you want to witness this vast difference in action, I highly suggest you observe a rape prevention course in your area in which a man in a padded suit simulates an assault on the female students. Invariably, all the women are subdued and immobilized within seconds. When these women come out of training (far wiser than before), many of them purchase a firearm.  Even then, their safety in the face of a motivated male assailant with his own firearm is questionable.

    I have also trained women within various community preparedness team classes dealing with small arms combat tactics and movement, and of course, they have many limitations, but the biggest is simply being able to function physically at a similar level to male trainees.

    I realize that these are merely my own experiences and observations, and your average social justice warrior will argue that there are historical examples of women successfully operating in combat environments. This is not in dispute. I would point out, however, that these instances are the EXCEPTION, not the rule.

    To be clear, I am mostly supportive of the idea of women in the military, as long as they meet the same standards required of men, and that those standards are not artificially lowered in order to accommodate women who would otherwise fail. But, the maniacal feminists are driving to make everything in the world “equal” when it simply is not and never will be. If you cannot make men and women equal in every arena naturally, then you have to do it through force or dishonesty or bureaucracy.

    Also, it seems to me that the government may not be pushing for women in combat roles only to appease the political correctness cult. The fact that elements of Congress are attempting to add women to the draft (selective service) makes me think that they know something we do not. Is the federal government preparing for war on an even greater scale than is taking place today? If so, then the propaganda parade for women in combat makes perfect sense. Allowing the conscription of women would double the government’s pool of potential cannon fodder.

    In the meantime, women are bombarded with fantastical imagery in popular media of 100 pound girls pummeling hordes of 200 pound men and reigning victorious, giving them a false sense of invincibility that will lure them into combat service.

    The pressure from military brass and politicians in Washington is bearing down on recruitment and training centers. In 2013, General Martin E. Dempsey laid down an edict proclaiming that if women cannot meet current standards for combat roles, then senior commanders had better lower those standards.

    The “Dempsey rule” had its first test in 2015 when the Marines studied the success rate of 29 women in their Infantry Officers Course. Of the 29 women who entered the course, NONE passed the standards. Only four women made it through the first day’s combat endurance test.

    The 30th woman to attempt the Marines Infantry Officers Course dropped out after failing to complete a required hike.

    The Marines also undertook a nine-month-long experiment to form mixed-gender combat units and study performance rates. The results were dismal. Female participants were injured twice as often as men, were less accurate with infantry small arms and had trouble moving wounded troops from the battlefield.

    The Marine study also found that all male units had superior performance in 93 of 134 evaluated tasks compared to mixed gender units.

    Washington politicians and military brass have treated these results not as a practical warning, but as a threat to their agenda, claiming that current training standards are “no longer relevant on today’s battlefield”.

    As Gen. Dempsey later stated:

    “If we do decide that a particular standard is so high that a woman couldn’t make it, the burden is now on the service to come back and explain to the secretary, why is it that high? Does it really have to be that high?”

    So, now it becomes the burden of military commanders and trainers to argue the case for every single standard, standards which have been successful for decades but are now deemed “passé”. Meaning, standards that were always considered fair for men must now be treated as unfair for women. This is not only backwards thinking, it is pure insanity which puts all military personnel at risk.

    The U.S. Army has essentially already been forced to lower training standards in order to meet what some call “unspoken quotas” of female soldiers. As it turns out, the much lauded recent success of two women in the passage of the Army’s extremely difficult Ranger School was a bit of a farce.

    According to multiple sources within Fort Benning, the Ranger School was told that a woman WOULD GRADUATE the first gender integrated assessment of combat leadership; meaning, at least one would be passed regardless of performance.

    While 16 other women failed the course outright, Kristine Giest and Shaye Haver were pushed through to graduation. Special treatment included advantages like — women were given two weeks of extra training prior to men arriving at the school, and were acclimated to tests ahead of schedule while men had to attempt the same tests cold bore. Women were allowed multiple attempts to pass the program while men were given a strict pass/fail standard. Women were given extra nutritional counseling and a private Ranger tutor. Women were allowed to practice the land navigation course ahead of schedule; men had to approach the course cold. Women were allowed to repeat portions of the course until achieving a satisfactory score; men were not. A two star general was on the scene during training to cheer for women participants, truly revealing the political nature of the gender integrated assessment.

    Kristine Geist was even quoted as saying at a press conference before graduation:

    “I thought we were going to be dropped after we failed Darby [obstacle course] the second time… We were offered a day one recycle.”

    Clearly, in order for the cultural Marxists in our government to attain “gender equality” in the U.S. military, standards must be decidedly unequal and advantages must be stacked in favor of women. But what are the consequences of this?

    Some might argue that it really does not matter if standards are lowered for women; they deserve the same opportunities as men anyway. I disagree.

    The beauty of physical prowess, physical competition, mental toughness and yes, even combat, is that superior merit is the ONLY thing that matters. The best rise to the surface immediately, and the inadequate fall by the wayside, and there is no question or argument as to what is “fair” — two men enter, one man leaves — as they say in ‘Thunderdome’.

    The winners are the winners, and the results speak for themselves. Unfortunately, this is not the kind of world many Americans are used to living in anymore.

    In our increasingly collectivized society, merit is not even a factor anymore. Victim status groups are given special treatment everywhere, regardless of their lack of qualifications or performance. Universities hand out scholarships based on cultural identity rather than grades or test scores. Grants go to minorities and women regardless of credentials. Corporations maintain multicultural quotas due to affirmative action even if said people are less qualified.  Everywhere we look, standards are being erased in the name of political correctness and "fairness".

    This degrades our society as a whole and diminishes our competitive edge, our capacity for higher productivity, ingenuity and advancements that could improve the lives of millions. When the best people for the job are consistently overlooked in favor of mediocre people, a mediocre culture results. And mediocre cultures have a tendency to implode.

    It might be possible to argue that catering to the lowest common denominator in the civilian world will not result in outright death and carnage, but no one can argue that catering to the lowest common denominator in terms of military performance will result in anything but death and carnage.

    First, if female participants in training cannot meet the same standards as men and are passed anyway, they will not receive the respect or trust of those soldiers when they enter into combat. No male soldiers will feel safe within a mixed gender unit if the women are sub-par hacks that might get them killed.

     

    Second, lowering the standards for both men and women would result in a military loaded with weaklings.

     

    Third, women in combat through history are marginal and usually fight because of national desperation (the Soviet stand against the Nazi blitzkrieg is an example of such desperation, as well as the Kurdish women fighting ISIS today). A common example used by feminists to argue in favor of women in combat is the Israeli IDF, which conscripts women as well as men. But feminists and pro-female combatant advocates greatly misrepresent the level of participation IDF women have in combat roles. The IDF does not generally place women into special combat units or front line units, and women are confined to light battalions for nothing more than border security. Even the Israelis, with one of the most gender-mixed military’s in the world, knows better than to commit women to heavy combat.

     

    Fourth, military effectiveness usually depends on unit cohesion. This means that they operate best in teams and each member of the team represents a link in the chain. One weak link can result in the failure of the entire chain.

     

    Fifth, some argue that our military is now so "modernized" that the technology allows women combatants to achieve the same level of performance of male combatants.  The people who make this claim play too many video games and have obviously never marched 10 to 20 miles with a 50 pound (or more) rucksack on their back and a 8-10 pound rifle in their hands.  This is what soldiers do most of the time – move heavy gear into places no one wants to go.  Women are completely unequipped for this purely due to biology and current technology is not going to level the field.

     

    Finally, the safety of other soldiers is not the only risk. The women themselves also face extreme health hazards. According to the U.S. Army Institute Of Public Health, in basic combat training women suffer a 114% greater injury rate than men, and a 108% greater injury rate in medical and engineering training.

    At least one female Marine captain with considerable courage, Katie Petronio, has come out in opposition to women in combat roles, citing extreme health hazards including infertility, which she now suffers due to the dangerous physical damage incurred during training.

     

    While women are supposedly at no greater risk than men for PTSD, I have to voice one of my greatest concerns here. Military activities are not always in the service of that which is honorable; as Major General Smedley Butler famously said, “War is a racket!” When military personnel fight and die and witness their friends die for what they later discover is an unjust cause, PTSD as well as other disorders will result in higher frequency. The justness of various wars and even the draft is beyond the scope of this article, but a society at war, wrong or right, is basically sending their sons to be mentally battered. Some will make it back stable, and others will not. Now, we are talking about sending our daughters into the same psychological hellscape?

    What kind of culture will we have left when both fathers AND mothers are sent off to the meat grinder, perhaps both coming back scarred?

    For centuries, men have been going to war to keep women and children safe from witnessing the nightmare of combat at their doorstep. It’s not ideal (a standing army in the U.S. is not even constitutional), but sending women into the fray as well based on false pretenses of ability is even less ideal.

    Men and women are undeniably different — one is not better than the other, we just serve different roles in nature, and nature cannot be denied. Women are biologically inclined to bear children and to nurture families. Men are biologically inclined to protect and provide. Men are genetically designed for combat. Women are not. If a woman can meet the same standards as a man in military training, then she deserves the option of that role, but as recent studies have shown, this is not going to happen very often.

    Instead, an apparatus of cultural Marxism is forcefully opening a door to disaster; an entire generation of daughters and mothers will be duped into a role they are not built for or prepared for, ending in psychological and physical degradation they have no concept of, and weakening the very foundations of our nation for decades to come.

  • Sanders Takes LEAD Over Clinton In California

    The Los Angeles Times reports:

     A new USC Dornsife/Los Angeles Times poll has found … [Sanders] has battled Clinton to a draw among all voters eligible for the Democratic primary, with 44% siding with him to 43% for Clinton.

    ***

    Democratic primary election for president poll

    Does this mean that it’s time for Sanders supporters to celebrate?

    Not yet …

    Clinton still has a 10-point lead among likely voters:

    Democratic primary election for president poll

    So unless the Sanders campaign steps up its get-out-the-vote effort, he’ll lose.

     

  • Asia's Largest Commodity Trader Just Sold Stock At A 63% Discount

    We rang the alarm bell when on Sunday night, one of our “favorite” companies and Asia’s largest, junk-rated commodity trader, Noble Group, unexpectedly announced two jarring developments: the removal of its long-term, ex-Goldman CEO, Yusuf Alireza, as well as the sale of its top performing asset, Noble Americas Energy Solutions. The company said that as a result of the sale it will generate “significant cash proceeds”, which as we then said “is great since Nobel is desperately in need of cash; it also means that the company is losing one more of its star performing assets as it continues to asset strip itself of any potential future growth, and is merely scrambling to preserve solvency and liquidity.“

    It appears the cash proceeds raised just 4 days ago were not nearly enough!

    Moments ago, this scramble for liquidity hit another unprecedented low, when Noble announced that days after its CEO stepped down, Noble’s Chairman Richard Elman would also be leaving, at the same time as the company unveiled it would issue a massive $500 million rights offering at a whopping 63% discount to the market price, in a move which confirms just how little equity value insolvent, cash bleeding  commodity companies really have when push comes to shove and they have to pay down at all costs. It also begs the question why the company did not boost its $3 billion credit facility unveiled just three weeks ago by a token $500 million, which would have been available at a far lower cost of capital.

    There are two possible answers: either something went drastically wrong in just the past three weeks and a major need of cash emerged, or Noble is now so devoid of unencumbered assets that it can’t pledge anything to the banks from this point onward, and will be forced to dilute itself to death by a thousand cuts, until the company finally files for bankruptcy as we have been warning is the ultimately endgame since last summer.

    As for the rights offering, Bloomberg has the details: The Hong Kong-based company will offer 1 rights share for each existing share at 11 Singapore cents, a 63 percent discount from the close on Thursday, according to a statement on Friday. Of the total 6.54 billion shares to be issued, biggest holder Elman has agreed to take 625.5 million, while China Investment Corp., the third-largest, agreed to take 630.6 million. CIC will get a second seat on the board.

    This means that when the stock reopens for trading, its value, already at all time lows (our TERP math is a little rusty) will drop to an even more distressed, and far lower price.

    Which reminds us that we have been warning about this endgame since last summer, as first noted in “Noble Group’s Kurtosis Awakening Moment For The Commodity Markets.” The commodity market just had another jarring wake up call.

    For those who have missed the recent dramatic change in the company’s fortune (for the worse), here is a quick reminder: “Noble Group has endured another turbulent week after announcing the departure of CEO Yusuf Alireza on Monday and saying it planned to sell off a business, Noble Americas Energy Solutions, that less than a month ago he described as a core asset. The trader is seeking a turnaround after its shares collapsed amid the commodity rout and it faced allegations of improper accounting. China is the largest user of metals and energy, key commodities that Noble Group trades and supplies to mainland customers.”

    “Noble is still a major player in terms of global commodities and it makes sense strategically for Chinese interests to take a greater interest, given how much of a key player China is in global commodity markets,” said Tim Schroeders, a Melbourne-based portfolio manager at Pengana Capital Ltd., who helps oversee about $1.2 billion.

    Even better since there is nobody quite as skilled as China when it comes to throwing good money after bad.

    As for the Chairman, at Elman’s request, the board will set up a sub-committee to examine options for his succession, and will identify a replacement to assume the role of non-executive chairman. Elman wishes to step down as executive chairman within the next 12 months, it said. The search will be led by David Eldon, a non-executive director.

    The obligatory spin: “The rights issue, together with the sale of Noble Americas Energy Solutions announced last Monday and the previously announced sale of low-return assets and working-capital reduction measures will, in aggregate, generate $2 billion in additional liquidity over the next 12 months,” the company said. “This liquidity will be available to further reduce net debt, and will also significantly improve the group’s financial flexibility.”

    In other words, it cost the company its CEO, its Chairman and its most valuable asset, not to mention a massive dilution to existing stakeholders, to buy about year’s worth of operations and debt servicing.

    The new shares that aren’t underwritten either by Elman or CIC are being underwritten by a group of banks comprising HSBC Plc, Morgan Stanley, DBS Group Holdings Ltd., Societe Generale SA and ING Groep.

    According to data compiled by Bloomberg, Noble Group’s other major shareholders are Prudential Plc, with 9.9 percent; Orbis Group, which has a 9.6 percent holding; and Franklin Resources Inc., with 5.9 percent. They won’t be very happy after the company just took a chainsaw to their holdings.

    As noted above, the company obtained a fresh financing totaling $3 billion less than a month ago, while acknowledging some banks had cut credit facilities during the first quarter. It had net debt of $1.9 billion maturing over the next 12 months, Alireza said May 12.

    “It is clear from the decisive capital-raising actions that we have initiated post-refinancing that we have moved firmly to re-position our balance sheet.”

    Actually, no: the only thing you have succeeded in doing is admit that it was unable to obtain a secure line of credit for all the funds it desperately needed, forcing the cash-burning company into a blue light special liquidation. And if this: Asia’s largest commodity trader, had to give a 63% discount to investors to put more money into it, thereby it also succeeded in giving the world a glimpse of just how massively overvalued commodity-related companies are as a result of the recent historic short squeeze. Luckily, even record squeezes eventually end. For what happens next look no further than Noble.

  • Goldman Unveils The FX Doom Loop: Turns "Outright Negative" On Yuan Due To "Weak Link"

    When we first presented the so-called “Nightmarish Merry Go Round“, dubbed so by Bank of America because of the reflexive, recursive bond – and trap – that has formed between the Fed and markets…

    … in which neither can break free from the other, and yet each is more dependent on the other than ever, we said that instead of looking at the relationship as one between the Fed and the market, one can further simplify the relationship as one between the USD, a proxy for Fed tightening or easing intentions, and the Chinese Yuan, a proxy for the Chinese economy, capital outflows and general volatility.

    Today, Goldman has released a note which lays out precisely this relationship in what it calls the “RMB-FOMC Monetary Policy Loop”, but before we introduce yet another firm’s realization of just how circular the relationship between central banks and markets has become, here is Goldman’s abrupt reversal on what it think will happen to the Yuan in the near-future, because as Goldman’s Robin Brooks – who has been relentless bullish on the USD – now says that “we shift to an outright negative view on the RMB, in line with this week’s Asia Views and our bearish RMB forecast.”

    The reason for Goldman’s sudden bearishness is “because there is a weak link in China’s management of its currency.”

    This is how it explains the link:

    “To be sure, the government has clearly communicated a shift in focus to a trade-weighted currency basket, de-emphasizing the signal that the bilateral exchange rate versus the Dollar carries. But domestically, the only signal that matters is $/CNY, so that higher fixings could easily re-ignite capital flight, as households and firms anticipate a faster pace of depreciation.”

     One need look no further than the recent spike in bitcoin driven by Chinese buying to see this in action, as the local have been scared out of their wits by relentless PBOC intervention in the FX market. Gpldman goes on:

    Even though global markets have so far taken weaker fixings in their stride, one regularity over the past year has been that the SPX has fallen sharply within a week or two of $/CNY fixing meaningfully higher, as focus on capital outflows and RMB depreciation has built.  

     

     

    We believe that the risk of a repeat is rising, which in turn could have knock-on effects for the pace of Fed tightening and Dollar strength ahead. We call this the “RMB-FOMC Monetary Policy Loop,” where the importance of the bilateral $/CNY rate domestically may slow the pace of Fed monetary policy normalization, which our US team has also highlighted.”

    The implication: sliding CNY means risk off:

    [T]he shift to a trade-weighted exchange rate has a weak link, which is that the main signal for households and businesses within China remains the bilateral exchange rate versus the Dollar. As the $/CNY fix has moved higher again over the past month (Exhibit 1), the risk is that this re-ignites capital flight in the same manner it did in August (during the mini-devaluation) and around the turn of the year. This is because capital outflows are heavily expectation-based, such that weaker fixings inevitably fan anxiety that a bigger devaluation is in train. In short, while the shift to a trade-weighted regime certainly makes sense, China is saddled with the history of the bilateral exchange rate, which means that fixing $/CNY weaker is not as easy as it sounds. This matters for global markets because previous episodes when $/CNY has fixed materially higher have seen the SPX fall sharply within one to two weeks… 

     

     

    … with the DAX and NKY marching in lock-step (Exhibit 4). With the Fed approaching another hike over the summer (our US team puts a 70 percent probability on this), the risk of a repeat is growing, which via financial conditions could then loop back into US monetary policy.

    Which brings us to what may be the biggest topic of 2015: the collapse in China’s FX reserves, something which Goldman believes is about to be repeated:

    From the perspective of China’s policy makers, there is an implicit trade-off between the pace of reserve losses and keeping the exchange rate stable in trade-weighted terms. By way of illustration, capital outflows during the first quarter were -$155bn according to the balance of payments, so that they could amount to -$600bn for the year. Even allowing for continued improvement in the current account, this means that reserve losses could run between -$200bn and -$300bn this year and next, after reserve losses of -$343bn in 2015.

     

     

    We remain in the camp that the level of China’s reserves (currently around $3,200bn) is more than sufficient to deal with this pace of drawdown, but – realistically speaking – we see a good chance that markets will again speculate over the need for a one-off devaluation, even if the message from policy makers has been that this is not on the cards.

    Essentially, what Goldman is saying is that the same “risk off” wave that followed the sharp devaluation episodes of mid and late-2015 is about to return, even though so far the market has been largely sanguine as it still does not really believe that the Fed will follow through with another hike.

    Which brings up to the topic of Goldman’s monetary policy “doom loop“, which carries an uncanny resemblance to the “nightmarish merry go round” chart shown top. To wit:

    The Fed remains a wild card in all of this. Our base case has been that some tightening in financial conditions, including via the Dollar, is needed to offset strong underlying momentum in growth and inflation. But if financial conditions tighten again on an SPX fall, there is a risk the Fed could again shift dovish, in what we are calling the “RMB-FOMC Monetary Policy Loop,” an implicit recognition that US monetary policy has spillovers to China, which is struggling with the legacy of its bilateral exchange rate peg to the Dollar. The sensitivity of the SPX to RMB weakness is thus something of a stabilizer for the Dollar bloc, potentially preventing the Fed from moving too quickly. That said, our base case remains that the US economy is strong enough to withstand a tightening cycle that will take the Fed funds target to 3.4 percent in Q3 2019.

    And the chart.

     

    And there you have it: Goldman just went bearish on the one currency which can destabilize the entire house of cards.

    Which begs the question: is Goldman then quietly selling the USD and buying the Yuan, as it is has an alleged tendency of doing by frontrunning its clients… or is its reco genuine this time, and is actually seeking to cause the risk off avalanche. Recall that over the past month, Goldman has gotten both tactically and strategically bearish. It just needed the spark to unleash the fall. By telling clients to sell the Yuan, it may have just found it.

  • The CFPB Plans On Regulating Payday Lenders, But What Will The Unintended Consequences Be?

    The Consumer Financial Protection Bureau (CFPB) plans to crack down on payday lenders, moving to regulate high-interest, low dollar loans that are made by storefront lenders to an estimated 12 million lower-income households living paycheck to paycheck.

    The $38.5 billion market is currently left to the states to regulate, but now the government wants to get involved. The payday rule, proposed by the CFPB will impose a complex set of requirements on the payday industry, mandating that lenders assess a borrower's ability to repay and making it harder for lenders to roll over loans, a practice that often heads to escalating borrowing fees the WSJ reports. The rule will go through a 90-day public comment period, with a formal rollout expected early next year.

    From the WSJ

    Under the new rules, the CFPB imposes a series of “full payment tests” on lenders, customized to different types of loans, requiring the firms to do extensive due diligence to see if borrowers can repay their loans. Currently, few payday lenders do such underwriting, saying it is too costly.

     

    Lenders would be required to go through another review of borrowers’ finances if the borrower seeks to renew or extend the loan.

    Congress prohibited the CFPB from setting a direct interest rate cap for federal rules, so the agency is seeking to change the lending practices by other means. To regulate payday lending, the bureau is for the first time relying on its authority to prohibit "unfair, deceptive, or abusive acts and practices." Marking an area of regulation that is much more nuanced than where it had been given a clear mandate by congress such as mortgages and credit cards.

    Payday lenders of course oppose the pending rule, saying it would force many out of business and leave low-income borrowers without much needed credit. Opponents of the rule also cite a January survey by Bankrate.com showing that only 37% of adult Americans have the necessary savings to cover a $500 car repair or $1,000 emergency room bill.

    "Congress told the CFPB to regulate payday, not annihilate it, and so much of what they are proposing represents annihilation" said Dennis Shaul, chief executive of the Community Financial Services Association of America, the primary industry group of payday lenders.

    Even some advocates of new federal regulations on payday lending criticize the rules, saying the complexity and tight strings would discourage banks and others from entering the market, possibly leaving a void. "The CFPB proposal misses the mark" said Nick Bourke, director of small-dollar loan research at Pew Charitable Trusts, who was briefed on the proposal. Bourke added that the rules effectively lock out small-dollar loans from banks.

    CFPB Director Richard Cordray said that "too many borrowers seeking a short-term cash fix are saddled with loans they cannot afford and sink into long-term debt. It's much like getting into a taxi just to ride across town and finding yourself stuck in a ruinously expensive cross-country journey."

    Cordray is correct in his assessment, but the critical element here is how to help those low income earners if payday lending goes away. If those individuals get frozen out of financial institutions, where will they turn for short term cash in order to pay those one-off emergency items. This is the question that will ultimately have to play itself out throughout this process. It is a potential issue because as more and more of the only available jobs are on the lower end of the pay scale, or worse, the jobs for rural Americans disappear as we discussed previously, there will be a need for those individuals to access credit, and if it's not there, real social unrest will manifest itself.

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