Nov 28

Today’s News November 28, 2015

  • Taxation As A Severe Insult

    Submitted by Tibor Machan via Acting-Man.com,

    Who is Best Qualified to Decide how How Your Wealth Should be Used?

    I have noted before that my fellow citizens and I are the best wealth redistributors one can find. We know quite well, with only rare exceptions, where the wealth we obtained should go – how we should spend or invest or save our earnings, etc.

    But vast numbers of political thinkers and players disagree.  They hold that our resources must be taken from us and they, not we, should be the ones who decide what to do with them.  Why?  Who are these folks to butt in and remove us from the driver’s seat and place themselves and their chosen few in there instead?

     

    spooner

    Spooner had the right idea. As Joseph Schumpeter remarks in Capitalism, Socialism and Democracy: “… the state has been living on a revenue which was being produced in the private sphere for private purposes and had to be deflected from these purposes by political force. The theory which construes taxes on the analogy of club dues or of the purchase of the services of, say, a doctor only proves how far removed this part of the social sciences is from scientific habits of mind.”

    Consider how insulting it is! Why is the president of the country better qualified than we are to determine where our resources will do the most good?  Why are members of Congress or local politicians? Who on earth do these folks think they are?

    In the past it used to be thought that certain folks in society had special qualifications to allocate the wealth that has been produced as well as to make most of the important decisions in need of being made.  Kings, lords, barons, and such knew better than the paeans – you and I – as to what our labors ought to fund.  Ergo, taxation and other takings!

     

    government-imposed-compassion

    Government – enforced compassion

     

    Don’t you see how nasty this is, how it impugns our capabilities to be prudent, careful, sensible, wise and so forth?

    Advocates of government wealth redistribution blatantly insult the rest of us by denying us the good sense it takes to spend our wealth.  Wealth redistribution means exactly that.  Somehow we need to be coerced – or nudged or intimidated – into doing what these bullies have decided needs to be supported with our wealth.

    Why?  Who are these people?

    In the past there was an excuse – by sheer birth certain folks, coming from certain families or classes or whatever – had the qualification to manage our wealth and indeed us as well.

     

    Tax-quote-from-Bastiat

    That has certainly happened – from the moment the State has come into being (i.e., shortly after the violent conquest phase).

     

    But that is sheer prejudice!  They really have no more clue than you or I about where to spend the funds we have come by!  Indeed, as the tragedy of the commons demonstrates, the more folks are involved in spreading the wealth, the less well the wealth is likely to be spent. Most will be wasted instead of well spent, even when the intention is to do the right thing with it.

    We ought to regard wealth redistribution and it’s source, taxation, not only forced taking but a serious insult toward the citizenry and reject it wherever possible.

     

    tax-cartoon

    A well-worn ritual…

    *  *  *

    Addendum: Bernie Sanders Has Already Won

    Senator Bernie Sanders is aiming to become the democratic party’s nominee for the presidency of the United States of America.  He considers himself a democratic socialist.  But his mission is actually superfluous.

    In fact, Senator Sanders has already succeeded.  America has for a long time been governed according to the principles of democratic socialism, as have many other Western countries.

    This became clear to me as I was attempting to “go solar”. In order to install solar power at my home in Silverado, CA, I needed to submit the plan to the county planning commission.  Their approval was necessary to go forward with the plan.

     

    Business_Process_for_Solar-1-201408201025

    Solar permit application process for businesses – click to enlarge.

     

    Any other substantial alteration of one’s property — the addition of a garage or new section — must be approved by such commissions. Indeed, throughout the country to undertake an installation such as I was contemplating, proprietors must obtain permission from various commissions, all of which are supposed to have been established by democratic means!

    As I see it, this means that the country is being governed by the principles of democratic socialism.

     

    solar-permitting-study-US

    There are now even “studies on the solar permitting process”, as absurd as this seems.

  • "On The Cusp Of A Staggering Default Wave": Energy Intelligence Issues Apocalyptic Warning For The Energy Sector

    The Energy Intelligence news and analysis creator and aggregator is not one to haphazradly throw around hyperbolic claims and forecasts. So when it gets downright apocalyptic, as it did this week in a report titled “Is Debt Bomb About to Blow Up US Shale?”, people listen… and if they are still long energy junk bonds, they panic.

    The summary:

    “The US E&P sector could be on the cusp of massive defaults and bankruptcies so staggering they pose a serious threat to the US economy. Without higher oil and gas prices — which few experts foresee in the near future — an over-leveraged, under-hedged US E&P industry faces a truly grim 2016. How bad could things get?”

    The full report by Paul Merolli, a senior editor and correspondent at Energy Intelligence:

    Debt Bomb Ticking for US Shale

    The US E&P sector could be on the cusp of massive defaults and bankruptcies so staggering they pose a serious threat to the US economy. Without higher oil and gas prices — which few experts foresee in the near future — an over-leveraged, under-hedged US E&P industry faces a truly grim 2016. How bad could things get and when? It increasingly looks like a number of the weakest companies will run out of financial stamina in the first half of next year, and with every dollar of income going to service debt at many heavily leveraged independents, there are waves of others that also face serious trouble if the lower-for-longer oil price scenario extends further.

    “I could see a wave of defaults and bankruptcies on the scale of the telecoms, which triggered the 2001 recession,” Timothy Smith, president of consultancy Petro Lucrum, told a Platts energy conference in Houston last week. Much has been made about the resiliency of US oil production in the face of low prices, but the truth is that many producers are maximizing their output — even unprofitable volumes — because they need the cash flow to service their debt (related). “As an industry, we’re at the point where every dollar of free cash flow now goes to paying back debt,” Angle Capital’s Steve Ilkay told the same conference. Ilkay, who advises North American producers on asset management, said during the boom years of 2012-14 about 55% of the sector’s free cash flow, which is calculated by subtracting capital expenditures from operating cash flow, was allocated toward debt repayment.

    With West Texas Intermediate (WTI) stuck below $50 per barrel since August — and closer to $40 recently — the industry has responded with deeper cuts to capex and a greater focus on efficiency (EIF Nov.4’15). However, experts say this won’t be enough to avoid a bloody reckoning with persistent low oil and gas prices, as the sector grapples with some $200 billion-plus in high-yield debt, which it absorbed to finance the shale oil boom. Credit quality has been steadily deteriorating since June 2014, when WTI peaked at $108/bbl. Standard and Poor’s says there have been 19 defaults so far in 2015 across the US oil and gas industry, while another 15 companies have filed for bankruptcy. Besides those that have missed interest or principal payments, the default category also includes companies that have entered into “distressed exchanges” with their creditors, including Halcon, SandRidge, Midstates, Goodrich, Warren, Exco, Venoco and Energy XXI (EIF Jul.8’15).

    Of the 153 oil and gas companies that S&P applies credit ratings to, roughly two-thirds are E&P firms. Among these E&Ps, 77% now have high-yield or “junk” ratings of BB+ or lower. 63% are rated B+ or worse, and 31% — or 51 companies — are rated below B-. What does this all mean in layman’s terms? “Quite frankly it’s a lot of gloom and doom,” says Thomas Watters, managing director of S&P’s oil and gas ratings. “I lose sleep over what could unfold.” He says companies with ratings of B- or below are “on life support,” while those further down the ratings scale at C+ or lower are “maybe looking at a year, year-and-a-half before they default or file for bankruptcy.” While capital markets were still open to struggling E&P firms in the first half of the year, they are closing fast as investors accept a “lower-for-longer” oil price scenario. High-yield E&P firms raised $29 billion from 44 issuances of public debt in 2014. So far in 2015, $13 billion in junk-rated debt been raised from 23 issuances — but only two have come after June (EIF Jul.29’15).

    After posting negative free cash flow of $24 billion in 2015, capex cuts and efficiency measures should help the industry post positive free cash flow of $8 billion in 2016, S&P reckons. However, the high-yield E&Ps are expected to see negative free cash flow of $10 billion, so the group that can least afford a cash crunch will get just that. Better hedging could have helped, but data from IHS Energy shows a woefully under-hedged E&P sector in 2016. Small producers have 27% of their oil production hedged at an average price of $77/bbl; midsized firms have 26% hedged at $69; and large producers have just 4% hedged at $63. That is much less protection than E&P firms had in place for 2015 (EIF Aug.19’15).

    Small and midsized producers, which rely heavily on revolving lines of credit with banks, have not yet seen these liquidity lifelines cut off. Some analysts were shocked after banks reduced lines to credit to E&Ps by just 10% on average during October redetermination negotiations (EIF Oct.14’15). Banks appear to be putting off the inevitable in hopes of a price rebound. Many have been using price forecasts above the average 12-month forward strip — suggesting the pain could extend to energy lenders if markets don’t recover as they expect. Heading into October redeterminations, Macquerie Tristone’s energy lending survey showed banks using an average 2016 WTI price outlook of $54. That has since dropped to around $47 this quarter — closer to the $46 indicated by the Nymex strip.

    Yet another source of concern for E&Ps and their lenders are price-related impairments and asset write-downs (EIF Nov.11’15). Year-to-date, there has been $70.1 billion in asset write-downs in 2015, approaching the $94.3 billion total for the previous 10-year period of 2005-14, according to Stuart Glickman, head of S&P Capital’s oil equities research. And he expects even more write-downs and impairments to emerge at year-end. “Companies are putting this off for a long as they can. You don’t want to be negotiating in capital markets with a weakened hand,” says Glickman. This will be a problem up and down the E&P sector, not just for the little guys. Chesapeake Energy, one of the largest US independent producers, shocked earlier this month by indicating a $13 billion reduction in the so-called PV-10, or “present value,” of its oil and gas reserves to $7 billion. Had Chesapeake used 12-month futures strip prices — instead of Securities and Exchange Commission-mandated trailing 12-month prices for PV values — the value would’ve fallen to $4 billion. “That’s staggering, just alarming to me,” said Watters, noting that E&P firms’ borrowing capacity is contingent on such measures (EIF Jul.22’15).

    Many believe all of these issues will come to a head in first-half 2016, as the effect of fewer hedges is felt and banks once again reassess credit lines in April. Pitifully low natural gas prices could also play a big factor, especially if the US experiences a mild winter. The confluence of these factors could be the catalyst that finally spurs a long-awaited tidal wave of mergers and acquisitions throughout the sector (EIF Oct.28’15). News of rampant defaults, bankruptcies and write-downs, combined with closed capital markets, might be enough to lower upstream asset valuations to the point where buyers and sellers can more easily agree to deals. Watters describes an “M&A playland” for strong companies with investment-grade credit ratings, noting that the six largest integrated majors together hold a war chest of some $500 billion. Smith says it could be a great opportunity for majors to improve their positions in US shale, where they were famously late in the game. “Some of the best shale acreage is held by companies with poor balance sheets. It seems like a natural fit,” he says.

    But there’s also some $100 billion in private equity sitting on the sidelines, meaning majors and large independents may face stiff competition (EIF Oct.28’15). Anadarko has openly complained about being outbid for assets by management teams backed by private equity. “Does that mean we’re overpaying? No,” insists one private equity executive. “It means we’re willing to pay a bit more because we think our guys can run the assets better than some larger outfits, who can struggle with cost structures.”

  • And The 'Fakest' Country In The World Is…

    If America is so ‘exceptional’ why is it the world’s leader in needing to ‘change’…

    When it comes to plastic surgery, the United States is still the country with the most procedures worldwide.

    Infographic: The World's Love Affair With Plastic Surgery | Statista
    You will find more statistics at Statista

    In 2014, there were a total of 4.1 million procedures, 20 percent of the world’s total, according to data compiled by The International Society of Aesthetic Plastic Surgery (ISAPS).

    Business is also booming in Brazil and Japan where there were 2.1 and 1.3 million procedures last year respectively.

     

    Source: The Burning Platform

  • Mark Dice Confronts America's Zombie Shoppers

    Unlike on previous occasions when Mark Dice either mocks the stupidity of Americans for having zero clue about the true worth of precious metals, or mocks the stupidity of Americans for having absolutely no understanding of politics (yet supporting Hillary Clinton among others), in his latest clip, the notorious lampooner takes a stroll at 4:30 pm on Thanksgiving night in front of the Best Buy in San Diego where he finds a massive line.

    What follows is Mark, armed with just a bullhorn, taking on several hundred consumption zombies waiting in line at Best Buy, armed with just their overdrawn credit cards, or as he calls them “enemies of America. A symptom of this failed country. When this country is bankrupt, and it will be soon, you look in the mirror and that’s who you blame.”

    Number of zombies impacted by his preaching? Zero. Why, because there is a TV for $99.95 to be bought proving the hedonically-adjusted deflationary wave sweeping the world is “all too real” and only much more QE and far more negative rates, making the merely billionaires into trillionaires, can save the global economy.

  • The Videos Are In: US Shoppers Go Wild, Beat Each Other Up To Celebrate Black Friday Sales

    It’s Black Friday which means the US is flooded with videos of its favorite pastime: mauls in the malls, as vicious brawls and fights break out among total strangers across across America’s countless retail outlets.

    The first videos trickle in:

     

    And yet, this year there may be a shift.

    Moments ago IBM Watson Trend released the latest Thanksgiving online sales which rose 26% from 2014, with mobile traffic reaching nearly 60% of all online traffic, an increase of 14.8% over 2014. According to IBM, consumers spent $123.45/order with 40% of all online sales came from mobile devices, an increase of 24% over Thanksgiving 2014.

    Some other notable findings:

    • Smartphones accounted for 47% of all Thanksgiving online traffic vs tablets at 13.7%; smartphones also surpassed tablets in sales, driving 24% of online sales vs tablets at 16%
    • IBM Watson predicts Black Friday online sales up more than 14.5% y/y
    • Consumers indicate top products incl. Apple Watch, Samsung, Sony, LG TVs, Microsoft Surface Pro 4

    And while this is good news for the Amazons of the world as consumers continue to migrate to online shopping platforms, this is bad news for traditional brick-and-mortar retailers for whom today was supposed to be the one day when sales are solidly in the “black.”

    As Bloomberg summarizes, the online rush comes as Wal-Mart Stores Inc., Macy’s Inc. and other chains roll out their Black Friday specials, aiming to get more shoppers into stores. About 135.8 million Americans are expected to shop in stores or online over the four-day weekend, according to the National Retail Federation, the largest U.S. retail trade organization. The amount they’ve spent has declined over the past two years, dropping 11 percent to $50.9 billion in 2014.

    Though consumers are benefiting from lower fuel prices and unemployment rates, retailers have their challenges. Mall traffic is in the midst of a long-term slowdown, and shoppers are spending more on experiences and less on stuff. More recently, a warm autumn has curtailed sales of seasonal merchandise, leaving stores with excess inventory. All those factors point to a need for heavy discounting — good for consumers, but not so great for retailers’ profits.

     

    “From the perspective of the amount of discounting that’s going on, the over-inventory situation, it seems like there are going to be a lot of great deals in the next 45 days,” said Bob Drbul, a retail analyst at Nomura Securities International.

    The NRF’s traffic forecast represents a 1.6 percent increase from last year although in a zero-sum market, “there’s a risk that fewer shoppers than expected may show up.” Last year, the NRF had forecast 140.1 million consumers would hit stores and e-commerce sites, 4.8 percent more than actually turned out, according to its post-weekend shopping survey. Expect more of the same as the transition to online shopping accelerates.

    Furthermore increasingly more stores are pulling back on their Thanksgiving weekend hours this year and electing to spread more of their specials throughout the month. Wal-Mart said it expects record crowds on Friday, even though it’s putting most of its discounts online first.

    So videos of the occasional brawl the best evidence of the demise of traditional retailer comes from in person “channel checks” such as what  TheStreet’s correspondent Brian Sozzi has been doing all night. Here are some of his “ghost town” findings.

  • He Lived Through Hyperinflation, Devaluation And Confiscation: This Is His Advice

    Nearly four months ago, when bitcoin was still languishing in the low $200s, we explained why in the post-Yuan devaluation regime, where all Chinese capital outflows are now scrutizined through a microscope, bitcoin will inevitably see substantial appreciation as the local population scrambles to transfer funds out of China and into more traditional end markets, such as the US, Canada and western Europe, using such still largely unregulated mediums as bitcoin and other digital currencies.

    Why not gold?

    This is what we said in the beginning of September: “China’s propensity for gold is well-known. We would not be surprised to see a surge of gold imports into China, only instead of going to the traditional Commodity Financing Deals we have written extensively about before, where gold is merely a commodity used to fund domestic carry trades, it ends up in domestic households. However, while gold has historically been the best store of value in history and has outlasted every currency known to man, it is problematic when it comes to transferring funds in and out of a nation – it tends to show up quite distinctly on X-rays.“

    Which is why we would not be surprised to see another push higher in the value of bitcoin: it was earlier this summer when the digital currency, which can bypass capital controls and national borders with the click of a button, surged on Grexit concerns and fears a Drachma return would crush the savings of an entire nation. Since then, BTC has dropped (in no small part as a result of the previously documented “forking” with Bitcoin XT), however if a few hundred million Chinese decide that the time has come to use bitcoin as the capital controls bypassing currency of choice, and decide to invest even a tiny fraction of the $22 trillion in Chinese deposits.

    Two months after we wrote this, bitcoin more than doubled to $500 before retracing some of its recent gains, and has resumed its rise again.

    Why? This time the answer is Argentina, where as we reported two days ago, the new president admitted that “there are no more dollars in rhe central bank” which means that the days of the country’s capital controls are numbered, and because as Citi said president-elect Macri wants to unify the official and parallel exchange rates (~9.60 and 15.50 ARS/USD, respectively) that will entail a substantial devaluation. Just how overvalued is the peso, you ask? “Grossly.”

    In other words, another major currency collapse is in store for Argentina, its fourth major one in recent decades.

    It also means that as yet another country is about to take currency warfare to the next level, bitcoin is posed for another sharp move higher (even as Chinese demand for the fiat alternative continues to grow).

    And since the topic is Argentina’s upcoming latest currency collapse, courtesy of Raoul Pal’s RealVision, here is an interview by Dan Morehead, Ex-Head of Macro Trading at Tiger Management and now CEO of Bitcoin investment firm Pantera with Wences Casares, an Argentinian Founder of Xapo and one of the pioneers of bitcoin.

    Wences, an Argentinian, has seen his family’s wealth evaporate not once, not twice but three times due to hyperinflation, devalulation and confiscation and that has led him to bitcoin. His driving philosophy: “There are more people in the world who need a currency they can trust, than there are people in the world who can trust their currency.”

    More from the person who knows all about currency destruction in the excerpt below…

    … and as usual, the full interview can be seen on the RealVision website (which boasts dozens of other interviews with financial luminaries) and where a bitcoin subscription discount is available.

  • Diversification Is For Dummies – The Nifty Nine Never Mattered More

    From the 4-horsemen of the dotcom exuberance (and apocalypse), to today's so-called FANG and NOSH stocks, and now 'Nifty Nine', investors could be forgiven for ignoring the benefits of stock market diversification that every commission-taking, fee-gathering asset-collector promotes and going all-in on a few 'easy to select' stocks to make the quick buck that everyone believes is their right as an American taxpayer. While the S&P languishes unchanged in 2015, these small groups of overwhelmingly propagandized stocks are up on average over 60%, but with a collective P/E of 45, they are not cheap (and perhaps should remember that when buying this momo, we are all Thanksgiving turkeys).

    As The FT reports,

    The long bull market in US stocks now in its seventh year, has grown much narrower. Previously dominated by smaller companies (which tend also to do better in the longer run), it is now being led by a handful of large stocks that are beginning to earn their own acronyms.

     

    Some talk about the Fang stocks — Facebook, Amazon, Netflix and Google — while Ned Davis Research refers to the Nifty Nine, which adds Priceline, Ebay, Starbucks, Microsoft and Salesforce. (Note that Apple appears on neither list.) If made into indices, research by the FT statistics group shows that either of these groupings would have gained about 60 per cent for this year, while the S&P 500 is up about 1 per cent.

     

    …

     

    What are the implications? The success of the Fangs is a symptom of the rise of a new model for the economy that revolves around services rather than manufacturing.

     

    But it is best not to get carried away. All these companies are richly valued (Ned Davis puts the Nifty Nine’s collective price/earnings ratio at 45, double that of the S&P 500). They also look expensive when compared with their sales.

     

    Hype and excitement around a few big companies, and eclipse for riskier small companies, are classic symptoms of the top of a bull market. For comparison, look at the “Nifty Fifty” companies of the early 1970s, or the first wave of web companies during the dotcom boom of the late 1990s — when it was fashionable to talk of a “new economic paradigm”.

    *  *  *

    Of course, the exuberant upside of the FANGs or Nifty Nines is always obvious after the matter…

    image

     

    But why let that worry you – you are all smarter than the average investor, right? Just don't forget the lesson from The Thanksgiving Day Turkey… (via SHTFPlan.com),

    The Black Swan Theory is used by Nassim Nicholas Taleb to explain the existence and occurrence of high-impact, hard-to-predict, and rare events that are beyond the realm of normal expectations. One example often put forth by Taleb is the life and times of the Thanksgiving Turkey.

     

     

    The turkey spends the majority of its life enjoying daily feedings from a caring farmer. Weeks go by, and it’s the same thing day-in-day-out for the Turkey. Free food. Open range grazing. Good times all around.

     

    The thinking turkey may even surmise that the farmer has a vested interest in keeping the turkey alive. For the turkey, it is a symbiotic relationship. “The farmer feeds me and keeps me happy, and I keep the farmer happy,” says the turkey. “The farmer needs me, otherwise, why would he be taking care of me?”

     

    This goes on for a 1,000 days.

     

    Then, two days before Thanksgiving on Day 1,001, the farmer shows up again.

     

    But this time he doesn’t come bearing food, but rather, he’s wielding an ax.

     

    This is a black swan event — for the turkey.

     

    By definition, it is a high-impact, hard-to-predict, and rare event for the turkey, who not only never saw it coming, but never even contemplated the possibility that it could occur.

     

    For the farmer, on the other hand, this was not a black swan event. The farmer knew all along why he was feeding the turkey, and what the end result would be.

    The very nature of black swan events make them almost impossible to predict. The point of this parable is to put forth the idea that sometimes we are the Thanksgiving turkey and understanding this may make it easier to begin to, at the very least, contemplate the possibility of far-from-equilibrium events.

  • "Mysterious" Fire Hits Argentine Ministry Of Finance, Destroys Years Of Prior Regime's Files

    "If you play with fire, you get burned," apart from if you are an official in the Argentine government it would appear. Just days after Argentina threw out the Peronists, who have ruled almost non-stop in the three decades since the end of military rule, The Ministry of Finance suffered a mysterious fire in its computer center, catastrophically (and coincidentally) destroying the prior-regime's files.

     

    As Perfil reports (via Google Translate)

    The weekend came a mysterious fire at the Ministry of Economy , in the area of data center located on the fourth floor of the Economy Ministry.

     

    The fire began on Sunday afternoon at the site containing the computers on which cost control files of the ministry.

     

    The fire, reported Clarín , led to a police report .

     

    On the fourth floor lies the entire operational area of Juan Carlos Pezoa, the head of the Ministry of Finance. It was in a small office on this floor, although far from the clerk's office, located in the Directorate General Information Systems Financial Management to the entrance of Balcarce 186, where the incident occurred.

     

    According to the official version, which led to the fire was a short circuit in one of the air conditioners that refrigerate the room.

     

    However, he noticed that the complaint was filed at the police station second day after the loss occurred by the head of the area, Maria Eva Sanchez. 

     

    According to ministry employees, all computers that burned were in the room where it is kept cost control portfolio dependent commands Pezoa the secretariat.

     

    This runs counter to the official version which speaks of "the ignition of the fire in the live-testing are of software developments."

    This is not the first time a fire has destroyed government records – or second, or third, or even fourth…

    With this new fire, and this year there are four key areas in the state.

     

    In February, there were fires in the Pink House and Senate and last month in the Libertador Building.

    And then there was last February's deadly fire which destroyed the central bank's records just days after a planned crackdown on the banking system.

    While we are sure it is a very sad coincidence, on the day when Argentina decrees limits on the FX positions banks can hold and the Argentine Central Bank's reserves accounting is questioned publically, a massive fire – killing 9 people – has destroyed a warehouse archiving banking system documents.

     

     

     

    As The Washington Post reports, the fire at the Iron Mountain warehouse (which purportedly had multiple protections against fire, including advanced systems that can detect and quench flames without damaging important documents) took hours to control and the sprawling building appeared to be ruined. The cause of the fire wasn’t immediately clear – though we suggest smelling Kirchner's hands…

    *  *  *
    The bottom line is simple – where there's 5 fires in government offices in 18 months, there is smoke and mirrors and the lies and corruption of Kirchner and her operatives will hopefully one day be exposed.

  • Chief Of Russian Air Force Accuses Turkey Of Coordinated Ambush On Downed Jet

    By now everyone is aware of the Turkish side of the story of how a Russian Su-24 was downed by a Turkish F-16 on Tuesday morning, when it allegedly crossed into Turkish airspace for a grand total of 17 seconds, with Turkey supposedly warning the Russian bomber which had been targeting alleged jihadists in the region no less than “ten times.” Turkey even produced an alleged recording of said warning, which Russia implied was faked as the surviving pilot made it very clear no actual warning had been received by the Russian warplane.

    So now that Russia has had three days to go through the evidence and assemble the pieces of what it thinks happened, here is the summary as presented earlier today by the Commander in Chief of the Russian air force, Viktor Bondarev, which however presents a very gloomy picture with dire consequences for the peaceful geopolitics of the middle east.

    In summary, what Col. Gen. Bondarev said is that Turkey actively sought to ambush and bring down the Russian jet starting long before the actual missile was fired, which can be confirmed by the flight patterns of Turkish warplanes which had taken off well in advance, otherwise they would not have had enough time to reach the battlezone.

    The Russian ministry of defense made this grave accusation quite explicit on Twitter an hour ago, when it said that Turkey had engaged in a choreographed ambush.

    Here are the details of the Su-24’s final hour as recounted by RT which notes that a pair of tactical bombers took off from Khmeimim airbase in Latakia at 06:15 GMT, with an assignment to carry out airstrikes in the vicinity of the settlements of Kepir, Mortlu and Zahia, all in the north of Syria. Each bomber was carrying four OFAB-250 high-explosive fragmentation bombs.

    Ten minutes later, the bombers entered the range of Turkish radars and took positions in the target area, patrolling airspace at predetermined heights of 5,800 meters and 5,650 meters respectively. Both aircraft remained in the area for 34 minutes. During this time there was no contact between the crews of the Russian bombers and the Turkish military authorities or warplanes.

    Some 20 minutes after arriving at the designated area, the crews received the coordinates of groups of terrorists in the region. After making a first run, the bombers performed a maneuver and then delivered a second strike.

    Immediately after that, the bomber crewed by Lieutenant-Colonel Oleg Peshkov and Captain Konstantin Murakhtin was attacked by a Turkish F-16 fighter jet operating from the Diyarbak?r airfield in Turkey. The time needed to get the aircraft ready at the Diyarbak?r airfield and travel to the attack zone is an estimated 46 minutes.

    ?

    “The radar surveillance data confirms that two F-16 fighter jets were patrolling the flight zone for an hour an 45 minutes at an altitude of 2,400 meters [some 7,800 feet], which speaks of a deliberate action and their readiness to attack from an ambush over the Turkish territory,” Bondarev told reporter.

    In order to attack the Russian Su-24 with a close-range air-to-air missile, Bondarev said that the Turkish fighter jet had to enter Syrian airspace, where it remained for about 40 seconds. “According to radar tracking data, it was the Turkish warplane that crossed into the Syrian airspace for about 40 seconds to a depth of 2 kilometers [6,560 feet], while the Russian fighter-bomber never violated the Turkish border“, he said.

    Having launched its missile from a distance of 5-7 kilometers, the F-16 immediately turned towards the Turkish border, simultaneously dropping its altitude sharply and disappearing from the range of Russian radars at the Khmeimim airbase.

    The Russian general again reiterated that at no point preceding the attack did the Russian bomber violated Turkish airspace.

    One of Turkish F-16Cs stopped its maneuvers and began to approach the Su-24M bomber about 100 seconds before the Russian aircraft came closest to the Turkish border, which also confirms the attack was pre-planned, said Bondarev.

    “At 10.24 Moscow time the crew carried out bombing and after it the plane was shot down by an air-to-air missile launched by a Turkish Air Force F-16 that had taken off from the 8th Diyarbakir airbase on the Turkish territory.”

    The launch of a missile was confirmed by the crew of the second Russian Su-24. “[The crew] observed a plume of a white smoke and reported it.”

    And this is where the narrative gets even more convoluted because according to Bondarev the Turkish F-16 was guided to its intended target from the ground and launched an air-to-air missile while the Russian warplane was readying to carry out a second attack on terrorist positions.

    “The method of guidance of F-16 aircraft into effective engagement zone directly, but not along the pursuit course curve shows that the fighter jet was directed from a ground control station,” Bondarev told reporters.

    The fighter jet stopped maneuvers in the area of patrolling and commenced missile launching a minute and 40 seconds before the Su-24 maximum proximity to the Syrian-Turkish border, Bondarev added.

    Furthermore, it appears that the jihadist groups on the ground were anticipating an event of this kind playing out above them.

    Bondarev called attention to the readiness of the Turkish media, which released a professionally-made video of the incident recorded from an area controlled by extremists a mere 1.5 hours after the Su-24 was downed.

    Furthermore, the operation to rescue the surviving navigator took several hours and eventually recovered Konstantin Murakhtin, although one Russian Marine in the team was killed when the rescue helicopter was destroyed by a US-made tank missile launched by the extremists – an incident they filmed and published online within hours of the attack.

    He also mentioned the memorandum of understanding regarding the campaign in Syria, signed by Moscow and Washington on October 26. In accordance with this agreement, the Russian side informed its American counterparts about the mission of the two bombers in the north of Syria on November 24, including the zones and heights of operation.

    “Taking this into account, the Turkish authorities’ statement on not knowing which aircraft were operating in the area raises eyebrows.“

     

    Finally, Bondarev also mentioned the memorandum of understanding regarding the campaign in Syria, signed by Moscow and Washington on October 26. In accordance with this agreement, the Russian side informed its American counterparts about the mission of the two bombers in the north of Syria on November 24, including the zones and heights of operation.

    This is perhaps the most important accusation, as it ties in with the incendiary remark lobbed by Putin at US “protocols” yesterday:

    We told our US partners in advance where, when at what altitudes our pilots were going to operate. The US-led coalition, which includes Turkey, was aware of the time and place where our planes would operate. And this is exactly where and when we were attacked. Why did we share this information with the Americans? Either they don’t control their allies, or they just pass this information left and right without realizing what the consequences of such actions might be. We will have to have a serious talk with our US partners.

    To summarize, here is what Russia has implied: the US shared the flight path details of the Russian Su-24 with Turkey in advance of the flight, which then Turkey used to ambush and take down the Russian bomber, with the implicit blessing of the Pentagon. Turkey may have further shared data with “Syria Free Army” US-armed jihadists on the ground, who not only recorded the downing of the bomber and the execution of its parachuting pilot, but also were prepared to attack a Russian rescue helicopter (with US weapons) which led to a second casualty – an attack which was also captured on clip and promptly uploaded!

    * * *

    If Putin is in indeed onboard with this version, he will deem – perhaps not diplomatically, but certainly in internal circles – Turkey’s aggression to be an act of war, and not only by Turkey but by NATO and the US, which provided Turkey with the data it needed to lead to a Russian loss of life.

    What Russia’s next steps will be is unclear, however as we reported previously, we expect far more aggressive provocations on the Syria-Turkey border by both sides, especially now that every Russian bombers will have air support, and now that Russian S-400 missiles can reach any provoking Turkish jet in minutes, in effect Russia establishing a “No Fly Zone” above Syria.

  • China's Plunge Protection Team Now Owns 6% Of The Entire Chinese Stock Market

    Two weeks ago, in “The Cost Of China’s ‘Manipulated Market Stability’ May Be Too High, BofAML Warns,” we revisited Beijing’s plunge protection national team, which during Q3 bought an astounding CNY1.5 trillion in stocks. 

    For those who might have forgotten exactly how this worked, the PBoC effectively transformed CSF into a giant, state-run, margin lending, prop desk and before you knew it, the government was stepping in just prior to the close on a near daily basis to keep the bottom from falling out. Every time CSRC attempted to step out of the market, chaos ensued. Indeed, even rumors that the government was preparing to scale back the plunge protection were enough to spook investors as we saw in late July when futures sank after a Caijing reporter suggested that the national team was set to rein in its purchases (that reporter was later arrested and charged with causing “panic and disorder”). 

    As August wore on, the cost of propping up the market (which desperately wanted to fall further as legions of semi-literate Chinese day traders who three months earlier had been willing to buy any and all dips suddenly had a mind to sell any and all rips in a frantic attempt to salvage their severely depleted life savings) simply became unbearable and so, Beijing decided to just start arresting anyone who was suspected of being a “malicious” seller. The crackdown – named “kill the chicken to scare the monkey” after a Chinese proverb – was designed to essentially make market participants believe that selling or worse, shorting, could land you in jail. 

    Subsequently, the market stabilized but by the time the waters calmed, China was left with an enormous stock portfolio, nearly a quarter of which was purchased at multiples above 40X. 

    Here’s a look at the paper losses the government had incurred by the end of September (note that most of the CNY224 billion hit had been recouped as of mid-November):

    BofAML’s conclusion was that given concerns about what incessant stock buying might convey about both the future course of the yuan and about China’s commitment to liberalizing capital markets, the PBoC may not be inclined to remain active in the market going forward. 

    Indeed, when the SHCOMP plunged on Friday in the aftermath of a new round of broker probes, a poor read on industrial profits, and the revelation that two more companies are set to default, the national team appeared to have stayed on the sidelines and maybe that’s a good thing because as FT reports, the government now owns 6% of the entire mainland stock market. 

    “China’s ‘national team’ owns at least 6 per cent of the mainland stock market as a result of the massive state-sponsored rescue effort this year to prop up share prices following the summer equity market crash,” FT wrote on Thursday, adding that “China Securities Finance Corp, the main conduit for the injection of government funds, owned 742 different stocks at the end of September, up from only two at the end of June.” Here’s more:

    The figures are compiled from quarterly financial statements of listed companies, which are required to disclose their 10 largest shareholders. The actual size of national team holdings is probably larger, given that some likely hold stakes that are too small to rank among the top 10.

     

    The estimate of the shareholdings of the national team covers positions held by CSF, which is the state-owned margin lender, and by Central Huijin Investment, the holding company for shares in state-owned financial institutions and a subsidiary of China’s sovereign wealth fund.

     

    The market value of CSF’s holdings increased from only Rmb692m ($108m) at the end of June to Rmb616bn three months later. However, the market value of Huijin’s holdings fell by Rmb167bn in the third quarter to Rmb2tn, mostly reflecting mark-to-market losses on shares it previously held. This fall came despite Huijin’s additional share purchases in the period.

     


     

    The significant role of the national team in propping up the market has raised concerns about the sustainability of the recent share rally, and about what would happen if the government unwound its holdings.

    Yes, “what would happen if the government unwound its holdings?” That’s difficult to say, but it might very well be that the psychological effect national team selling would have on market participants would end up doing more damage than the selling itself.

    As we discussed earlier today, it looks like China may be trying to offset a rollback of the draconian measures imposed on markets over the summer by throwing more people in jail. That is, in an effort to dispel the idea that the Politburo controls what goes on in markets, Beijing is lifting some restrictions. But that means losing control and so, officials hope a renewal of the “malicious” market manipulator witch hunt will be able to keep things in check. Here’s an example of what we mean: just days ago, Beijing lifted selling restrictions on brokerages’ prop desks, but simultaneously, authorities launched investigations into at least three brokerage houses for alleged “rules violations.” As we put it earlier: so you can technically be a net seller again, it’s just that you might end up being arrested for it if the Party thinks your selling was particularly malicious or otherwise ill-timed. 

    This all comes as the country is facing its “Minsky Moment” wherein heavily indebted corporates will no longer be able to borrow money to pay interest on money they borrowed in the past. Once that threshold is crossed, the defaults begin. 

    Throw in rapidly decelerating growth and an acute over capacity problem and there’s the very real potential for concurrent crashes in stocks, bonds, and the overall economy. 

    So time will tell whether Beijing will ultimately be satisfied with 6% of the equity market if things start to go south again as they did today and whether, when missed principal and interest payments are happening six times per week instead of six times per year, Xi will be able to keep his cool and refrain from bailing out the entire commodities and industrial complex at the expense of China’s international reputation.  

  • How The Scots Welcome 'Visitors'

    William Wallace would be proud…

    Larkhall is a town in South Lanarkshire, Scotland and is around 14 miles southeast of Glasgow. Traditionally a mining, weaving and textile area, most of Larkhall’s traditional industries have now shut, including the Lanarkshire iron and steel works… and now they have a message for the new invaders…

  • The Death Of Damascus: Images From Syria's War-Torn Capital

    Last month, as the IRGC and Hezbollah rallied their ground troops to prepare for an assault on Aleppo, we brought you a series of stark images from a city deciminated by years of  war. A week later, we highlighted new, high-def drone footage of Syria’s eerily desolate urban landscapes rendered barren by mortar fire, barrel bombs, and airstrikes. 

    If you follow the war closely, it’s easy to get swept up in the World War III, global conflict hysteria. After all, what’s more intriguing from a geopolitical perspective than the distinct possibility that Moscow and NATO may be headed for an armed conflict after Turkey became the first alliance member to engage a Russian or Soviet aircraft in some six decades. Throw in the fact that at the center of it all is a wealthy, brazen terrorist organization funded by Saudi Arabia and Qatar, whose mission is to rid the Arabian Peninsula of Iranian influence and you have the recipe not only for a renewal of Cold War hostilities, but also for an explosive sectarian conflict. 

    Lost in all of this is the human toll that five years of civil war has exerted upon Syria’s beleaguered populace. To be sure, the mass exodus from the Mid-East and subsequent flow of migrants into Germany, France, Sweden, and Austria (to name but a few) is representative of the struggle, but in the minds of many Europeans, the Paris attacks have served to turn a humanitarian crisis into a symbol of a dangerous and imminent Islamization of Western Europe. That, in turn, has to a certain extent dehumanized Syrian refugees. That’s not to say that terror groups have not sought to take advantage of the discord by embedding militants in the crowds of asylum seekers flooding into Europe. It’s just to say that thanks to the massacre in France, Syrian refugees have become more a symbol of terror than they have a symbol of suffering. 

    It’s with that in mind that we bring you the following images (via Reuters) from the Syrian capital and excerpts from “The Slow Death of Damascus”, by Thanassis Cambanis as originally published in Foreign Policy.

    Few supporters of the government are switching sides to the opposition these days, but many are simply exhausted by the immense toll exacted by the war. Half the country’s people have been pushed from their original homes. The infrastructure is creaking. Even some supporters of Assad say they feel that government-held Syria is hollowing out, running on fumes.

    Over the course of a recent 10-day visit, Damascus residents said they feel less embattled than they did a year ago, but the war is still an inescapable reality of everyday life. Every night, dozens of mortars still land in the city center, sending wounded and sometimes dead civilians to Damascus General Hospital. From the city’s still-busy cafés, clients can hear the thuds of outgoing government guns and the rolling explosions of the barrel bombs dropped on the rebel-held suburb of Daraya.

    Army and militia checkpoints litter the city. In some central areas, cars are stopped and searched every two blocks. Still, rebels manage to smuggle car bombs into the city center. According to residents, explosions occur every two or three weeks, but are rarely reported in the state media.

     

    “The government doesn’t care if people leave. It can’t stop them,” one middle-class Syrian, who has chosen so far to remain in Damascus, said of the exodus. “The war seems like it will go on forever. People see no future for their children. The only people who are staying are the ones who have it really good here or the ones who aren’t able to leave.”

    The fight has become an integral part of daily life, directly affecting almost every family from every type of background. Throughout the coast, photographs of the war’s casualties adorn every block. Each neighborhood has a wall of martyrs, some of them featuring hundreds of dead — part of an effort to build a martyrdom culture not unlike that which sustains loyalists of Iran’s ayatollahs and Lebanon’s Hezbollah, both of which provide key support to the Syrian government.

    “This is our destiny,” said Ahmed Bilal, an Alawite cleric who was circulating in a shiny white robe and chatting with the assembled families. A long line of fighters predating the establishment of modern Syria had resisted foreign invaders, he said, and gave inspiration to today’s soldiers.


    “Even if we lose one-third of our young men, we will still have the rest to live,” Bilal said. “They died so that the others should have life.”


  • Dirty Connecticut Mayor (Sentenced To Prison For Corruption) Reelected In Landslide

    After East Chicago re-elected an accused drug dealer and murderer as councilman, we thought the bar had dropped as low as it gets for the ignorance of an electorate. But, no! Bridgeport, Connecticut residents just took the proverbial biscuit by re-electing Mayor Joseph P. Ganim – who during his last 'reign' was convicted of 16 felonies including racketeering, extortion, and bribery.

    As TheAntiMedia.org's Lou Colagiovanni details, Ganim spent seven years of his life in federal prison as a result of the convictions.

    Political pundits originally saw Ganim’s candidacy as a sideshow with no hope of electability, but the joke was on them. In September, Ganim defeated Bridgeport’s incumbent mayor, Bill Finch, by 400 votes during the Democratic primary.

     

    Mary-Jane Foster, the Vice President of the University of Bridgeport, was Ganim’s closest opponent and lost the election by a landslide margin of almost 2 to 1. Imagine that—the voters prefered a convicted felon known for making backroom deals over an illustrious member of the community who has dedicated her life to education.

     

    Foster was stunned by Ganim’s victory. “I couldn’t be more surprised. I expected that I would be elected the next mayor of Bridgeport. Voters were clearly willing to give Joe Ganim a second chance,” she commented.

     

    Connecticut Governor Dannel P. Malloy acknowledged Ganim’s triumph. “The voters have spoken, and I want to congratulate Joe Ganim on his victory. I am committed to moving Bridgeport forward, and, as I have said, I will continue to put the best interests of the community first,” he said.

     

    Though unusual, a mayor being convicted of a felony does not automatically mean the candidate cannot win reelection. Marion S. Barry Jr., the former Mayor of Washington, D.C., was convicted of smoking crack cocaine in 1990 and sentenced to six months in prison. Barry’s arrest meant he could not run for reelection, but the voters brought him back to the mayoralty from 1995 to 1999.

     

    In a showing of sheer political gamesmanship, Ganim was able to convince one of the FBI agents who originally arrested him in 2003 to endorse his campaign. Ganim was also endorsed by the local police union.

     

    Ganim was gracious in victory. “We not only made history, we’ve defined a new course for this great city. Some will call this a comeback story, but for me, this is a city I feel I never left. I never stopped caring,” he said.

    Time will tell if Ganim will go back to his old tricks, but for now, it seems the voters of Bridgeport prefer a man who admits to twisting arms over a more politically correct, docile candidate.

  • Goldman's Meteoronomists Have A Dire Forecast: "Winter Is Coming"

    What little credibility the shamanistic voodoo religion that is economics had, it lost over the past 2 years when even the most modest downtick in economic activity was blamed on the “weather.” It appears that as part of their conversion from “economist” to pure-play weathermen, nobody advised Wall Street’s if not best and brightest, then certainly dumbest Keynesians, that adjusting for the seasons, is precisely what seasonal adjustments are for, and why they spend hundreds of hours goalseeking every data point with Arima-X-13 models until they get the result they want.

    It was not enough, and in the winter of 2013 and 2014, the farce was indeed complete, when none other than the Bureau of Weather Economic “Analysis” incorporated double seasonal adjustments, to smoothe away what to most was an “inexplicable” slowdown in the US economy, and which was simply a function of two consecutive credit crises hitting China in the latter part of 2013 and 2014.

    However, instead of modeling how two consecutive years of China’s slowing credit impulse slammed US growth, the economisseds instead decided to blame it all on the unprecedented events of cold and snow in the winter as they relied on their favorite forecasting tool…

     

    So with the winter of 2015 so far shaping up to be what some have dubbed “abnormally hot”, we thought that at least this year the weatherconomists would keep their mouth shut: after all, if you blame cold weather for an underperforming economy, you better say nothing at all if the weather is warmer than usual as it has been in October and November.

    Alas, it was not meant to be, and so, without further ado, here are everyone favorite economweathermen from Goldman Sachs, warning everyone that, drumroll, yes, Winter Is Coming.

    No really, that’s the title.

    Here is the full 2000-word “explanation” from Goldman’s team of merry weathermen:

    Winter is Coming

    • Growth decelerated sharply in Q1 in 2014 and 2015, and we suspect that unusually harsh winter weather contributed. With the winter season now upon us, we revisit old lessons learned and develop new rules of thumb for estimating the economic impact of weather fluctuations.
    • We focus on two weather indicators that measure temperature and snowfall. The first is the deviation of “heating degree days” (HDD), a measure of cold temperatures, from seasonal norms. The second is the Regional Snowfall Index, a measure of the societal impact of snowfall that includes scores for hundreds of major snowstorms.
    • We draw three sets of conclusions about the impact of weather on the economy. First, we find that both temperatures and snowfall matter for growth. In particular, we estimate that a 1 standard deviation (SD) increase in HDD is associated with a 0.4 percentage point (pp) reduction in GDP growth and a 0.1pp reduction in our current activity indicator (CAI), while a 1SD snowstorm is associated with about a 0.3pp reduction in both. Admittedly, there is considerable uncertainty around our estimates due to both collinearity between temperatures and snowstorms and the limited sample size at the aggregate level.
    • Second, we find that weather effects have a “tell” in the form of an uneven pattern of impact across the economy. Comparing the effect of weather variables across top-tier indicators, across sectors in the Gross State Product data, and across industries in the payrolls report, we find that weather typically has the largest impact on construction, retail trade, leisure and hospitality, foreign trade, and manufacturing.
    • Third, we find that weather variables have an important but somewhat more nuanced effect on the payrolls report during the winter months. Using state-level data, we find that the intra-month pattern of weather conditions is important, with conditions during the reference week carrying the greatest weight. We estimate that a 1SD colder month and 1SD of snowfall during the reference week are each associated with a roughly 35k reduction in payroll growth.

    The sharp deceleration of Q1 GDP growth in both 2014 and 2015 has provoked some anxiety about what to expect this winter. At the time, both we and Fed officials pointed to unusually severe winter weather as one contributor to the first-quarter slowdowns. To some skeptical investors, economists who attributed weak Q1 growth to weather effects sounded a bit like Peter Sellers’ Chance the Gardener promising that “there will be growth in the spring.” But in both years, growth did rebound strongly in Q2, suggesting that weather effects had in fact contributed to the weak Q1 performance. While we certainly do not claim to be able to predict this winter’s weather, we can estimate the impact of weather deviations from seasonal norms once they occur. In this week’s Analyst, we revisit some old lessons learned and develop some new rules of thumb for assessing the impact of weather conditions on growth and employment.

    Why Weather Matters

    Most economic data are seasonally adjusted to account for weather patterns as well as other calendar effects such as holidays. But weather can still affect economic data when it departs significantly from seasonal norms. For indicators such as housing starts normal seasonal fluctuations are very large and mostly weather-driven, meaning that even moderate deviations from normal seasonal weather patterns can have large effects not captured by seasonal adjustment.

    We focus on two weather variables that capture temperature and snowfall. We measure temperature effects using the deviation of the number of heating degree days from a trailing 10-year average. Heating degree days (HDD) are a measure of cold temperatures that we have found in past research help to predict a range of economic data. We use both state-level and national population-weighted series constructed by the National Oceanic and Atmosphere Administration (NOAA). We measure snowstorms using the Regional Snowfall Index (RSI), a measure designed to capture the societal impact of major snowstorms. The RSI provides dates and scores for over 600 storms since 1900 across six regions of the US, and we construct a monthly national index—shown in Exhibit 2—by aggregating the regional indices using relative population weights. We also convert the regional series into state series by assuming that the impact of a given storm is equal across all states in a region.

    Weather and Growth

    We start by estimating the growth effects of weather deviations. Exhibit 3 shows suggestive evidence that at least in the most severe deviations from normal weather patterns—in this case, the 25 months with the greatest snowfall since 1972—our current activity indicator (CAI) has dipped by a bit more than 0.5pp during the month of the storm before rebounding the next month. The average dip in the 25 coldest months as measured by HDD (nine of which also had top-25 snowfall) is more modest at about 0.25pp.

    We next use simple models to estimate the impact of the weather variables on both quarterly GDP growth and the CAI. Using data since 1985, we regress each growth variable on its own lag as well as both contemporaneous and lagged weather variables. We impose on the models the constraint that the coefficients on the several HDD and snowfall variables, respectively, must sum to zero, so that there is no permanent effect of weather fluctuations on the level of output. Exhibit 4 shows the resulting estimates.

    The models imply that a 1 standard deviation increase in HDD relative to the trailing 10-year average (calculated as the standard deviation among only cold-weather months, equal to roughly 150 in a quarter in the case of GDP or 70 in a month in the case of the CAI) is associated with a 0.4pp reduction in GDP growth and a 0.1pp reduction in the CAI. The models also imply that 1 standard deviation of additional snowfall subtracts about 0.3pp from both the CAI and GDP growth. Our top-down finding of a smaller impact on the CAI is in line with our previous bottom-up analysis of weather effects on the CAI and is also consistent with the more modest deceleration of the CAI seen over the last two winters.

    We caution that that there is considerable uncertainty around our estimates. In particular, collinearity between temperatures and snowstorms and the limited sample size at the aggregate level, especially for GDP, mean that the results are sensitive to model specification. That said, the models imply that snow and temperature deviations combined subtracted about 0.8pp from GDP growth in both 2014Q1 and 2015Q1, and we think they provide reasonable rules of thumb for the growth impact of weather fluctuations.

    The Weather “Tell”

    Investors are sometimes skeptical of alleged weather effects on the economy, viewing them as simply excuses to explain away weak data. How can we be confident that we are seeing the effect of weather conditions as opposed to weak growth caused by other factors?

    While it is impossible to be certain, weather effects have a “tell” in the form of an uneven pattern of impact across sectors of the economy. Exhibit 5 shows our estimates of the impact of temperatures and snowfall on a number of top-tier indicators. We find that weather tends to have the largest impact on economic data related to housing and construction, retail spending, and trade. We also assess the relative impact on different sectors of the economy using state-level panel data on Gross State Product by sector, available quarterly since 2005. We find that the most weather-sensitive sectors include construction, mining, manufacturing, retail trade, and accommodation.

    Finally, we can also look at the cross-sectional or category-level data within a particular report for typical weather patterns. For example, we have shown in past research that the impact of harsh winter weather differs across categories of retail sales, with the largest effects on building materials, vehicle sales, and furniture, and a positive impact on non-store sales, which include online purchases.

    Weather and the Payrolls Report

    We conclude by assessing the impact of weather conditions on payrolls. The impact of weather on the employment report is more nuanced because the precise timing of the payrolls reference week is important. We construct a state panel that includes payrolls and weekly HDD, recording for each month the degree days deviation during the reference week and the three previous weeks. We include all weekly variables for both the current and prior month in an initial regression in order to estimate the optimal relative weighting of the weekly weather observations. We find that the reference week is about twice as important as any other week, and we use the regression coefficients—shown in Exhibit 6—to calculate optimally-weighted HDD summary variables for the current and prior months.

    We next add other weather data to our panel to see if those series are important too. We find that while the snowfall variable again has an economically and statistically significant impact, a parallel temperature measure called cooling degree days does not. We also find that the effect of precipitation is statistically significant, but quite small.

    The richness of the state-level payrolls data enables us to address several more subtle questions that are difficult to answer convincingly with aggregate national time series:

    1. Do weather effects matter year-round? We find that the effect of HDD deviations is not statistically significant in single-month samples from June to October.
    2. Is the impact asymmetric between warmer-than-usual and colder-than-usual months? By splitting the sample, we find that the per-degree day impact of colder deviations is about double that of warmer deviations.
    3. Is the effect linear? We find that a quadratic degree days term is not statistically significant. While there are an endless number of ways one could specify thresholds, we think that assuming linear effects is reasonable.
    4. Do weather effects reverse? In unconstrained regressions, the coefficients on the contemporaneous and two lagged weather terms usually sum to roughly zero, suggesting that a nearly full rebound usually occurs within a couple of months.

    While these conclusions do not necessarily apply to all economic indicators, we think they offer valuable broader lessons. Based on these findings, we construct both aggregate and industry-level models using the optimally-weighted HDD deviation and a version of the snowstorm index adjusted for the timing of the payrolls reference week. Exhibit 7 summarizes the model estimates.

    In aggregating industry effects to produce a bottom-up estimate of the total impact, we only include industries whose temperature or snowstorm effects are statistically significant. We find that a 1 standard deviation colder month (about 70 HDD) is associated with a roughly 35k reduction in payroll growth, while 1 standard deviation of snowfall during the reference week is associated with a reduction of 25-45k. Once again, the weather impact leaves a familiar pattern, weighing primarily on employment in construction, leisure & hospitality, and retail & wholesale trade.

    Slightly more favorable temperatures in the weeks leading into the November reference period should make a small positive contribution to payrolls this month. The employment components of business surveys have been mixed so far, and the labor differential included in the consumer confidence report declined. We therefore expect a gain of 200k in November, a bit softer than the 215k average gain over the last six months.

    * * *

    Yes, Goldman really spent a few days writing this.

    And after that nearly 2000 words of worthless drivel, here is the punchline: if poor Q1 in 2014 and 2015 was blamed on the cold weather, then how many points of GDP in Q1 2016 (and Q4 2015) will be the result of abnormally warm weather (just don’t ask the retailers who blame both hot and cold weather when their sales keep on declining) and will this be the first case in monetary policy history when a Fed hiked rates because it thought the economy was improving only to realize after the fact that it was merely ignoring the weather effect it had dissected so extensively in the prior two years, simply because this time it was in reverse and had been “boosting” the economy?

  • Why China Hit The Panic Button On Metals Traders (In 1 Simple Copper Chart)

    Within the last week China appears to have hit the panic button with regards the seemingly unstoppable collapse of commodity prices. First, desperate Chinese producers began to demand a QE-for-commodities bailout; then, following the well-trodden (and failing) path of China's equity market maipulation, authorities began to crackdown on "malicious" commodity short-sellers. So why now? Why focus attention on the commodity markets? Perhaps this chart holds the key…

    Having suddenly lost control of the stock market again…

     

    Maybe commodities are a renewed focus as, we showed earlier in the week, there is "No End In Sight For Commodity Carnage As Chinese Fear Fed Hike Blowback", a post which can be summarized with the following chart showing that at least for nickel, copper, zinc, iron ore and aluminum it will be a very unhappy holiday season:

     

    The one-word reason for this condition, as we explained here: China, which as documented extensively in the past, has clammed down on its unprecedented credit creation now that its debt/GDP is well over 300% and as a result conventional industries are dying a fast and violent death. In fact, months ago we, jokingly, suggested that what China should do, now that it has scared sellers and shorters to death, is to launch QE where it matters – the commodity space.

    Which led to demands for a bailout…

    That joke has become a reality according to Reuters, which reports that China's aluminum and nickel producers have asked Beijing to buy up surplus metal, sources said, the first coordinated effort since 2009 to revive prices suffering their worst rout since the global financial crisis.

    And a crackdown on speculators (the selling ones, not the buying ones)…

    So as a plan B, the same metals industry group that is reeling and understands it is one foot in the grave unless commodity prices pick up and which earlier this week demanded a government bailout, or "QEmmodity" soaking up all excess production, has doubled down and according to Bloomberg the China Nonferrous Metals Industry Association has submitted a request to Chinese regulators to probe "malicious" short-selling in domestic metal contracts amid recent price declines.

    What is even more insane, is that China will do just that, in the process breaking what little is left of a domestic commodity market next.

    Regulators have begun to collect some records of trading activity following a request from the China Nonferrous Metals Industry Association, according to the people, who asked not to be identified because they aren’t authorized to speak publicly on the matter. Nobody answered calls to the industry association’s general office.

    Remember: it is always the "malicious" sellers who are the cause of all the world's problems, never the "malicious" buyers, especially when said buyers are the central banks themselves.

    *  *  *

    So why now? Why all of a sudden pay attention to what until now has been a never-ending collapse across all commodities…

     

    Well perhaps we have the answer… For thre first time since the commodity super-cycle began (read credit-fueled malinvestment mania), copper prices are set to close below the critical 200-month moving average.

    The last time copper prices crossed this historical level was in 2008/9 and QE was immediately unleashed to reflate that bubble back to some state of debt-supporting fallacy…

     

    On that occasion, the metal rallied hard at month-end to close above.

    As Bloomberg notes, LME copper 3-mo rolling forward, currently trading at 4626, needs to rally 9% by Nov. 30 close to finish above 200-MMA, at ~5055, to avoid bearish technical signal.

     

    However, some analysts say it is the 233-MMA, linked to the Fibonacci number 233 and currently at ~4610, that may be the more important support to watch, and which looks likely to hold.

     

    And as if to runb more salt in the wounds, very recent Chinese data has not been bullish for copper as demand for use in appliances falls 4.6% y/y in October.

    *  *  *

    So are the momentum-chasing Chinese hitting the panic button on copper (and other metals) because the last level of price support is about to break exposing an entire nation's growth fallacy to the world? Who knows… but it will certainly indicate yet again just how omnipotent central planners are (or are not).

  • How Turkey Exports ISIS Oil To The World: The Scientific Evidence

    Over the course of the last four or so weeks, the media has paid quite a bit of attention to Islamic State’s lucrative trade in “stolen” crude. 

    On November 16, in a highly publicized effort, US warplanes destroyed 116 ISIS oil trucks in Syria. 45 minutes prior, leaflets were dropped advising drivers (who Washington is absolutely sure are not ISIS members themselves) to “get out of [their] trucks and run away.” 

    The peculiar thing about the US strikes is that it took The Pentagon nearly 14 months to figure out that the most effective way to cripple Islamic State’s oil trade is to bomb… the oil.

    Prior to November, the US “strategy” revolved around bombing the group’s oil infrastructure. As it turns out, that strategy was minimally effective at best and it’s not entirely clear that an effort was made to inform The White House, Congress, and/or the public about just how little damage the airstrikes were actually inflicting. There are two possible explanations as to why Centcom may have sought to make it sound as though the campaign was going better than it actually was, i) national intelligence director James Clapper pulled a Dick Cheney and pressured Maj. Gen. Steven Grove into delivering upbeat assessments, or ii) The Pentagon and the CIA were content with ineffectual bombing runs because intelligence officials were keen on keeping Islamic State’s oil revenue flowing so the group could continue to operate as a major destabilizing element vis-a-vis the Assad regime. 

    Ultimately, Russia cried foul at the perceived ease with which ISIS transported its illegal oil and once it became clear that Moscow was set to hit the group’s oil convoys, the US was left with virtually no choice but to go along for the ride. Washington’s warplanes destroyed another 280 trucks earlier this week. Russia claims to have vaporized more than 1,000 transport vehicles in November. 

    Of course the most intriguing questions when it comes to Islamic State’s $400 million+ per year oil business, are: where does this oil end up and who is facilitating delivery? In an effort to begin answering those questions we wrote: 

    Turkey’s role in facilitating the sale of Islamic State oil has been the subject of some debate for quite a while. From “NATO is harbouring the Islamic State: Why France’s brave new war on ISIS is a sick joke, and an insult to the victims of the Paris attacks“, by Nafeez Ahmed:

    “Turkey has played a key role in facilitating the life-blood of ISIS’ expansion: black market oil sales. Senior political and intelligence sources in Turkey and Iraq confirm that Turkish authorities have actively facilitated ISIS oil sales through the country. Last summer, Mehmet Ali Ediboglu, an MP from the main opposition, the Republican People’s Party, estimated the quantity of ISIS oil sales in Turkey at about $800 million—that was over a year ago. By now, this implies that Turkey has facilitated over $1 billion worth of black market ISIS oil sales to date.”

    Here’s what former CHP lawmaker Ali Ediboglu said last year: 

    “$800 million worth of oil that ISIS obtained from regions it occupied this year [the Rumeilan oil fields in northern Syria — and most recently Mosul] is being sold in Turkey. They have laid pipes from villages near the Turkish border at Hatay. Similar pipes exist also at [the Turkish border regions of] Kilis, Urfa and Gaziantep. They transfer the oil to Turkey and parlay it into cash. They take the oil from the refineries at zero cost. Using primitive means, they refine the oil in areas close to the Turkish border and then sell it via Turkey. This is worth $800 million.”

    Earlier this month, Ediboglu told Russian media that “ISIL holds the key to these deposits and together with a certain group of persons, consisting of those close to Barzani and some Turkish businessmen, they are engaged in selling this oil” (“Barzani” is a reference to Masoud Barzani, President of the Iraqi Kurdistan Region). 

    But even as Turkey’s ties to the ISIS oil trade have been hiding in plain sight for the better part of two years, the Western media largely ignores the issue (or at least the scope of it and the possible complicity of the Erdogan government) because after all, Turkey is a NATO member. 

    Unfortunately for Ankara, Erdogan’s move to shoot down a Russian Su-24 near the Syrian border on Tuesday prompted an angry Vladimir Putin to throw Turkey under the ISIS oil bus for the entire world to see. Here’s what Putin said yesterday after a meeting in Moscow with French President Francois Hollande: 

    “Vehicles, carrying oil, lined up in a chain going beyond the horizon. The views resemble a living oil pipe stretched from ISIS and rebel controlled areas of Syria into Turkey. Day and night they are going to Turkey. Trucks always go there loaded, and back from there – empty. We are talking about a commercial-scale supply of oil from the occupied Syrian territories seized by terrorists. It is from these areas [that oil comes from], and not with any others. And we can see it from the air, where these vehicles are going.”

    “We assume that the top political leadership of Turkey might not know anything about this [illegal oil trade although that’s] hard to believe,” Putin continued, adding that “if the top political leadership doesn’t know anything about this, let them find out.”

    Obviously, Putin is being sarcastic. He very clearly believes that the Erdogan government is heavily involved in the transport and sale of ISIS crude. In the immediate aftermath of the Su-24 incident, Putin said the following about Ankara:

    • PUTIN: OIL FROM ISLAMIC STATE IS BEING SHIPPED TO TURKEY
    • PUTIN SAYS ISLAMIC STATE GETS CASH BY SELLING OIL TO TURKEY

    As part of our continuing effort to track and document the ISIS oil trade, we present the following excerpts from a study by George Kiourktsoglou, Visiting Lecturer, University of Greenwich, London and Dr Alec D Coutroubis, Principal Lecturer, University of Greenwich, London. The paper, entitled “ISIS Gateway To Global Crude Oil Markets,” looks at tanker charter rates from the port of Ceyhan in an effort to determine if Islamic State crude is being shipped from Southeast Turkey. 

    *  *  *

    From “ISIS Gateway To Global Crude Oil Markets“

    The tradesmen/smugglers responsible for the transportation and sale of the black gold send convoys of up to thirty trucks to the extraction sites of the commodity. They settle their trades with ISIS on site, encouraged by customer friendly discounts and deferred payment schemes.  In this way, crude leaves Islamic State-run wells promptly and travels through insurgent-held parts of Syria, Iraq and Turkey. 

    Since allied U.S. air-raids do not target the truck lorries out of fear of provoking a backlash from locals, the transport operations are being run efficiently, taking place most of times in broad daylight. Traders lured by high profits are active in Syria (even in government-held territories), Iraq and south-east Turkey.

    The supply chain comprises the following localities: Sanliura, Urfa, Hakkari, Siirt, Batman, Osmaniya, Gaziantep, Sirnak, Adana, Kahramarmaras, Adiyaman and Mardin. The string of trading hubs ends up in Adana, home to the major tanker shipping port of Ceyhan. 


    Ceyhan is a city in south-eastern Turkey, with a population of 110,000 inhabitants, of whom 105,000 live in the major metropolitan area. It is the second most developed and most populous city of Adana Province, after the capital Adana with a population of 1,700,000. It is situated on the Ceyhan River which runs through the city and it is located 43 km east of Adana. Ceyhan is the transportation hub for Middle Eastern, Central Asian and Russian oil and natural gas (Municipality of Ceyhan 2015).

    The port of Ceyhan plays host to a marine oil terminal that is situated in the Turkish Mediterranean and has been operating since 2006. It receives hydrocarbons for further loading in tankers, which carry the commodity to world markets.

    Additionally, the port features a cargo pier and an oil-terminal, both of 23.2m depth that can load tankers of more than 500 feet in length (Ports.com 2015). The annual export capacity of the terminal runs as high as 50 million tonnes of oil. The terminal is operated by Botas International Limited (BIL), a Turkish state company that also operates the Baku-Tbilisi-Ceyhan pipeline on the territory of Turkey. 

    The quantities of crude oil that are being exported to the terminal in Ceyhan, exceed the mark of one million barrels per day. Putting this number into context and given that ISIS has never been able to trade daily more than 45,000 barrels of oil (see Section 2, ‘The Upstream Oil Business of ISIS’, page 2), it becomes evident that the detection of similar quantities of smuggled crude cannot take place through stock-accounting methods. However, the authors of the present paper believe that there is another proxy-indicator, far more sensitive to quantities of ultracheap smuggled crude. This is the charter rates for tankers loading at Ceyhan.

    The Baltic Exchange (2015 a) tracks the charter rates on major seaborne trading routes of crude oil. To render its service more efficient and easily understood, it uses the system of Baltic Dirty Tanker Indices (Baltic Exchange 2015 b). One of these indices used to be the BDTI TD 11, 80,000 Cross Mediterranean from Baniyas, Syria to Laveras, France (see Map VI). Route 11 was discontinued in September 2011, due to Syria’s civil war and soon thereafter, it was replaced by BDTI TD 19 (TD19-TCE_Calculation 2015), of exactly the same technical specifications as BDTI TD 11, with the exception of the loading port of Ceyhan instead of Baniyas.

    From July 2014 until February 2015, the curve of TD 19 features three unusual spikes that do not match the trends featured by the rest of the Middle East trade-routes (see Graph IV): 

    1. The first spike develops from the 10th of July 2014 until the 21st, lasting approximately ten days. It coincides with the fall of Syria’s largest oil field, the AlOmar, in the hands of ISIS (Reuters 2014); 
    2. The second spike takes place from the end of October until the end of November 2014, lasting one month. It happens at the same time with fierce fighting between fundamentalists and the Syrian army over the control of the Jhar and Mahr gas fields, as well as the Hayyan gas company in the east of Homs province (International Business Times 2014; Albawada News 214); 
    3. The third spike lasts from the end of January 2015 until the 10th of February, stretching roughly ten days. It happens simultaneously with a sustained US-led campaign of airstrikes pounding ISIS strongholds in and around the town of Hawija east of the oil-rich Kirkuk (Rudaw 2015);

     

    The authors of this paper would like to make it clear from the very beginning that this has not been the case of a ‘smoking gun’. The evidence has been inconclusive. But even if volumes of ISIS crude found their way, beyond any reasonable doubt, to the international crude oil markets via the Ceyhan terminal, this fact would not conclusively point to collusion between the Turkish authorities and the shadow network of smugglers, let alone ISIS operatives.

    However, having clarified such a politically sensitive issue, the authors believe that there are strong hints to an illicit supply chain that ships ISIS crude from Ceyhan. Primary research points to a considerably active shadow network of crude oil smugglers and traders (see section 2.1, page 3), who channel ISIS crude to southeast Turkey from northeast Syria and northwest Iraq. Given the existence of Route E 90, the corresponding transportation of oil poses no unsurmountable geographic and topological challenges.

    An additional manifestation of the invisible nexus between Ceyhan and ISIS became evident through the concurrent study of the tanker charter rates from the port and the timeline of the terrorists’ military engagements (see section 3.4 on this page). It seems that whenever the Islamic State is fighting in the vicinity of an area hosting oil assets, the 13 exports from Ceyhan promptly spike. This may be attributed to an extra boost given to crude oil smuggling with the aim of immediately generating additional funds, badly needed for the supply of ammunition and military equipment. Unfortunately, in this case too, the authors cannot be categorical.

    *  *  *

    No, it can’t be categorical and frankly, if the authors claimed to have discovered indisputable proof, we would be immediately skeptical. What they have done however, is identify a statistical anomaly and develop a plausible theory to explain it.

    The key thing to note, is that this is a state-run terminal and it certainly seems as though charter rates spike around significant oil-related events involving Islamic State. Indeed, the fact that the authors mention collusion between Turkish authorities and ISIS operatives (even if they do so on the way to hedging their conclusions) indicates that the researchers think such a partnership is possible. 

    Finally, note that Ceyhan is less than two hours by car from Incirlik air base from which the US is flying anti-ISIS sorties. In other words, ISIS oil is being shipped to the world right down the road from Washington’s preferred Mid-East forward operating base.

    Now that we can add what looks like quantitative evidence that ISIS oil is shipped from Turkey to the voluminous qualitative evidence supplied by ex-Turkish lawmakers, investigative reporters, and the Russian government (to name just a few sources), we can now proceed to consider one final question: where does the crude that helps to fund Bakr al-Baghdadi’s caliphate ultimately end up? More on that over the weekend.

  • US Ally Saudi Arabia's New King Likes Beheading People More Than His Predecessor

    Saudi Arabia is planning to execute dozens of people in a single day, according to Amnesty International who warn that "it is clear that the Saudi Arabian authorities are using the guise of counter-terrorism to settle political scores." As The BBC reports, 55 people were awaiting execution for "terrorist crimes", while a now-deleted report by al-Riyadh said 52 would die soon; which is on top of the "at least 151 people" who have been put to death since Saudi Arabia's current King Salman rose to power after the death of King Abdullah in January 2015, dramatically higher than the total of 90 in 2014.

    As Vice News reports Amnesty International criticized the wave of executions, calling it "a grim new milestone in the Saudi Arabian authorities" use of the death penalty.

    "The Saudi Arabian authorities appear intent on continuing a bloody execution spree which has seen at least 151 people put to death so far this year — an average of one person every two days," said James Lynch, deputy Middle East and North Africa director at Amnesty International. "The use of the death penalty is abhorrent in any circumstance but it is especially alarming that the Saudi Arabian authorities continue to use it in violation of international human rights law and standards, on such a wide scale, and after trials which are grossly unfair and sometimes politically motivated."

     

    The last time Saudi Arabia executed more than 150 people in a single year was when 192 executions were recorded in 1995. No one at Saudi Arabia's Justice Ministry was immediately available to comment on the surge in the numbers of executions.  But diplomats have speculated it may be because more judges have been appointed, allowing a backlog of appeals cases to be heard.

     

    Saudi Arabia's current King Salman rose to power after the death of King Abdullah in January 2015, and has moved to consolidate authority among his own branch of the royal family. Upon assuming power, he shook up the cabinet, appointed a new minister of justice, and placed functionaries loyal to him in positions of power throughout the state bureaucracy.

    Saudi Arabia has long been ranked among the top five countries to use capital punishment. It ranked number three in 2014, after China and Iran, and ahead of Iraq and the United States, according to figures from Amnesty International. The same five countries executed the most prisoners in the first six months of 2015.

    However, things are about to get even crazier, as The BBC reports, Amnesty International has expressed alarm at reports that the authorities in Saudi Arabia are planning to execute dozens of people in a single day.

    The newspaper Okaz said 55 people were awaiting execution for "terrorist crimes", while a now-deleted report by al-Riyadh said 52 would die soon.

     

    They are thought to include Shia who took part in anti-government protests.

     

    Amnesty said that given the spike in executions this year, it had no option but to take the reports very seriously.

     

    The Saudi newspaper reports said those facing execution in the coming days included "al-Qaeda terrorists" and people from the Awamiya area.

     

    The alleged al-Qaeda militants were accused of attempting to overthrow the government and carry out attacks using small arms, explosives and surface-to-air missiles, Okaz reported.

     

    The Awamiya residents were meanwhile convicted of sedition, attacks on security personnel and interference in neighbouring Bahrain, it said.

     

    Awamiya is a town in the Qatif region of oil-rich Eastern Province. Since 2011, it has been the centre of protests by Saudi Arabia's Shia minority, which has long complained of marginalisation at the hands of the Sunni monarchy.

    Among those at imminent risk of execution were six Shia activists from Awamiya "who were clearly convicted in unfair trials", according to Amnesty.

    "It is clear that the Saudi Arabian authorities are using the guise of counter-terrorism to settle political scores," said James Lynch, Amnesty's Middle East and North Africa deputy director.

     

    "Three of those six activists were sentenced for 'crimes' committed while they were children and have said that they were tortured to confess."

    US ally Saudi Arabia argues that death sentences are carried out in line with Sharia and with the strictest fair trial standards and safeguards in place. Here are 10 sobering facts from Amnesty International’s research:

    1. CRUEL, INHUMAN AND DEGRADING PUNISHMENT

    Saudi Arabia’s courts continue to impose sentences of flogging as punishment for many offences, often following unfair trials. Besides Raif Badawi, in the past two years the human rights defenders Mikhlif bin Daham al-Shammari and Omar al-Sa’id were sentenced to 200 and 300 lashes, respectively, and Filipino domestic worker Ruth Cosrojas was sentenced to 300. Amputations and cross-amputations are also carried out as punishment for some crimes.

    2. SPIKE IN EXECUTIONS

    Saudi Arabia is among the world’s top executioners, with dozens of people being put to death annually, many in public beheadings. So far this year 40 people have been executed– almost four times the equivalent number for this time last year.

    3. CRACKDOWN ON ACTIVISTS

    Besides Raif Badawi, dozens more outspoken activists remain behind bars, simply for exercising their rights to freedom of expression, association and assembly. The authorities have targeted the small but vocal community of human rights defenders, including by using anti-terrorism laws to suppress their peaceful actions to expose and address human rights violations.

    4. NO SPACE FOR DISSENT

    All public gatherings, including demonstrations, remain prohibited under an order issued by the Interior Ministry in 2011. Those who defy the ban face arrest, prosecution and imprisonment on charges such as “inciting people against the authorities”.

    5. SYSTEMATIC DISCRIMINATION AGAINST WOMEN

    Women and girls remain subject to discrimination in law and practice, with laws that subordinate their status to men, particularly in relation to family matters such as marriage, divorce, child custody and inheritance. Women who supported a campaign against a de facto ban on women drivers face the threat of arrest and other harassment and intimidation.

    6. ROUTINE TORTURE IN CUSTODY

    Former detainees, trial defendants and others have told Amnesty International that the security forces’ use of torture and other ill-treatment remains common and widespread, and that those responsible are never brought to justice.

    7. ARBITRARY ARREST AND DETENTIONS

    Scores of people have been arrested and detained in pre-trial detention for six months or more, which breaches the Kingdom’s own criminal codes. Detainees are frequently held incommunicado during their interrogation and denied access to their lawyers. Some human rights activists have been detained without charge or trial for more than two years.

    8. ENTRENCHED RELIGIOUS DISCRIMINATION

    Members of the Kingdom’s Shi’a minority, most of whom live in the oil-rich Eastern Province, continue to face entrenched discrimination that limits their access to government services and employment. Shi’a activists have received death sentences or long prison terms for their alleged participation in protests in 2011 and 2012.

    9. MASS DEPORTATION OF MIGRANT WORKERS

    According to the Interior Ministry, a crackdown on irregular foreign migrant workers in November 2013 led to the deportation of more than 370,000 people. Some 18,000 were still being detained last March. Thousands of people were summarily returned to Somalia, Yemen or other states where they were at risk of human rights abuses.

    10. WHAT HAPPENS IN THE KINGDOM, STAYS IN THE KINGDOM

    The Saudi Arabian authorities continue to deny access to independent human rights organizations like Amnesty International, and they have been known to take punitive action, including through the courts, against activists and family members of victims who contact us.

  • Active Shooter Barricaded At Colorado Springs Planned Parenthood, Multiple People Shot

    If there are two things that could unleash progressive hell across the nation, it is the combination of “active shooter” and “Planned Parenthood” in the same sentence, which is exactly what happened moments ago.

    Moments ago the Colorado Springs police responded to a call of an active shooter in the parking lot of a Planned Parenthood clinic, adding that the area has not been secured, the department said, warning the media not to stage in the area.

    The Colorado Springs Fire Department said fire crews were called in to assist for reports of a possible active shooter and fire at the Planned Parenthood address at 3480 Centennial Boulevard.

    According to Twitter reports, the shooter has shot one officer shot and is currently “barricaded in planned parenthood & multiple victims.”

    The Gazette adds that according to the police scanner, at least 4 are injured in the ongoing active shooting situation and that multiple people have been shot.

    The shooter has been described as a white male, 40 yrs. of age, with a black coat, wearing a hat with flaps.

    Live webcast:

  • 2015: The Year Of The American Identity Crisis

    Via SeanKerrigan.com,

    Race and sexual identity now make up a good portion of all media distractions. According to political activists, “symbols of oppression” now include Halloween costumes, the Confederate flag, and the color of Starbucks coffee cups. So shallow is our collective identity, that this now defines our most passionate debate. While the global economy deteriorates and our government pursues endless conflict across the planet, this is what Americans are most concerned about.

    Identity issues make the perfect media story. For the 24-hour TV and internet rage business, these symbolic, but mostly linguistic fights generate strong emotional responses while being non-threatening to advertisers or to the government.

    These relatively innocuous symbols have become lightning rods for attention, while real issues go ignored. We wrote in a previous article back in June: “[R]eal problems like mass incarceration, torture, endless war, the end of privacy, and widespread poverty are ignored. This is more than just a corrupt media distracting us with meaningless trivia. Americans literally cannot tell the difference between symbols and reality.”

    I have long maintained that these sham fights are a symptom of a society that collectively no longer has any sense of identity. What makes life worth living? Family? That hardly seems true for many Americans. Family cohesion has been disintegrating for some time. A few of us try to define ourselves by hard work and material gain. Maybe that works for some, but how far does that go in an economy with 46 million people on food stamps and a shrinking middle class?

    Of course, many of us do cling to the material aspects of life we hope will fill the void in our lives. Consider Black Friday, now practically a national holiday of consumer excess. Where employees once took off of work to spend time with family, they now schedule time to stand in lines and acquire larger — and “smarter” — television sets.

    I remember when I was growing up, the terrible Jingle All The Way movie starring Arnold Schwarzenegger parodied toy crazed shoppers willing to step over one another to get a popular toy in time for Christmas. Watching it today, the scenes of barbarity in the toy stores seems more like a subdued documentary than parody.

    Still, despite the increasing depravity of Americans who are willing to pummel, stab, shoot and pepper spray fellow shoppers, Black Friday sales still seem to disappoint retailers every year. It seems many of us can no longer afford to define our lives solely by electronic gadgets and other pieces of useless shit. For a while, naked consumerism was our god; now we don’t even have that.

    In the past, Americans have had a strong sense of what sociologists call “negative identity” — we define ourselves by what we are not. For example, “We are not Nazis” or “We are not Communists.” The advantage of this kind of thinking is that it fortifies the national psyche against external enemies. Ultimately, it’s an unsatisfying way to live. When those enemies disappear, we seek out new villains to hate and destroy, the only meaning in life being found in death.

    Historian and social critic Morris Berman writes that a negative identity “can never tell you who you actually are, in the affirmative sense. It leaves an emptiness at the center, such that you always have to be in opposition to something, or even at war with someone or something, in order to feel real.”

    And, if our enemies are not sufficiently threatening, what’s left? As Chuck Palahniuk once wrote, “When we don’t know who to hate, we hate ourselves.”

    The terrorist attack in Paris which killed 128 people prompted a tense reaction across the western world. If there is a similar attack in the United States with hundreds dead, we will pounce on whatever new scapegoat is offered. It will be tremendously frightening.

    The government will easily rally a bloodthirsty and directionless public into supporting changes to the law that practically eliminate free speech, privacy, trial by jury and the few other protections the Constitution still provides. The security state is salivating at the potential to eliminate the last vestiges of civil liberties and envelope the nation in constant surveillance and eventually total tyranny. The key to their success is not that they promise security from terrorists, but rather they offer struggling Americans a reason to be alive — a fight against the “other.”

    Usually, an identity crisis is temporary. Eventually, people discover a healthy identity for themselves and a sense of stability returns to their lives. But, under such constant political mismanagement and widespread criminality, what chance is there for a stable future? Very little it seems.

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