Today’s News October 13, 2015

• The Rise of the Sharing Economy

  Everyday I hear new stories of friends and family offering
  rides through Uber, renting out rooms in their home on AirBnB, Uber or selling product on Framestr. while it’s a fairly new way of making money, it’s here to stay. There are obvious changes in consumer practices and
  an opportunity for new market entrants to support a sharing economy in Canada.

  Why is this happening? It’s pretty clear that Canadians have
  become stretched. Debt-to-income hovers at record levels, contract positions
  have increased (at the detriment of full-time work), and housing becomes as unaffordable
  as ever.

  According to a study conducted by PWC, the sharing industry itself is projected
  to rake in $15 billion of revenue in 2015, compares to $240 billion for traditional rental services, and $335 billion by 2025.

  Such “collaborative consumption” is a good thing for several reasons. Owners are able to leverage what was previously an unused asset, in some cases, even a liability. According to Airbnb, “The typical Airbnb host in
  Montreal earns $280 a month, renting out their home 52 nights per year.” Even
  more pronounced are the benefits to the city, “Airbnb activity contributed
  $55-million to the Montreal economy over 12 months ending last March 2014.”
  Research illustrates that travellers using the service stay longer in the city
  and spend more money than typical visitors as they roam well past the city
  centre.

  However, regulators and traditional service sector
  businesses are struggling to adapt to the new economy. For example, should
  room-renters be subject to hotel taxes? In Amsterdam, officials previously used
  Airbnb
  listings to track down unlicensed hotels. In some American cities,
  peer-to-peer taxi services, such as Uber and Lyft, have been banned after
  lobbying by traditional taxi firms. The danger is that although some rules need
  to be updated to protect consumers from harm, incumbents will try to destroy
  competition. People who rent out rooms should pay tax, of course, but they
  should not be regulated like a Ritz-Carlton hotel. The lighter rules that
  typically govern bed-and-breakfasts are more than adequate.

  In addition to regulation, there are also complex insurance issues at stake.
  Take the case of Tawfiqul Alam, an UberX driver in Toronto, who was T-boned by
  a re-right runner while transporting a passenger. The accident sent both him
  and his passenger to the hospital and his vehicle was totaled. The real shock
  came after; Alam’s claim through his personal insurance company was invalid
  because the vehicle was being used for commercial use.

  According to Isaac Zisckind, a Toronto personal injury lawyer at Diamond & Diamond, personal auto insurance
  policies don’t cover drivers who are transporting passengers for commercial
  purposes. Taxi drivers are required to get a special kind of commercial
  insurance that is significantly more expensive than personal insurance, but the
  vast majority of UberX drivers — Zisckind estimates 95 per cent — don’t have
  any coverage beyond their personal insurance.

  Like any new disruptive technology, there are growing pains.
  It’s hard to imagine where we’d be as a society if we consistently derailed new
  technologies created by greater connectivity around the world.

  However, the sharing economy is the latest example of the
  internet’s value to consumers and it’s hear to stay. Canadians are forced to become more efficient with their assets to make ends meet and the sharing economy will play a large part. This emerging model is
  growing up and is a large enough force for regulators and companies to take
  notice. That is a sign of its immense potential. Start sharing.

  

  

  

  

• 8 Cities That Have Replaced Columbus Day With Indigenous Peoples Day

  Submitted by Claire Bernish via TheAntiMedia.org,

  As tensions boil on the international stage, eight U.S. cities in two months abolished a federal holiday that has long insulted and infuriated the indigenous population and many others — Columbus Day — but that’s not all. These eight cities (including three just last week) then replaced much-maligned October 12 “holiday” with one long overdue: Indigenous Peoples Day.

  Here’s the rundown of U.S. cities that decided a brutal imperialist might not be an appropriate figure to celebrate:

  1. Albuquerque, New Mexico

  In an official declaration of the transformation of the second Monday in October to Indigenous Peoples Day, the city made “an effort to reveal a more accurate historical record of the ‘discovery’ of the United States of America” by recognizing “the occupation of New Mexico’s homelands for the building of our City.” This year, Albuquerque is encouraging businesses and individuals to “reflect upon the ongoing struggles” of the indigenous population “and to celebrate the thriving culture and value” of their societal contributions.

  2. Lawrence, Kansas

  Haskell University students — representing 151 tribal nations — have been trying since September for implementation of Indigenous Peoples Day. Their endeavor finally paid off on October 6th at a City Commission meeting, where Mayor Mike Amyx announced that in order to observe “that the city of Lawrence was built upon the homelands of the Kansa and Osage people” and that “Indigenous peoples’ intellectual, spiritual, and deep cultural contribution has enhanced the character of the City of Lawrence.”

  Haskell Indian Nations University’s Student Senate President Christopher Sindone called the transformation a move toward unity. Expressing surprise, he said, “For them to pass something like this, as a city, from being at Haskell, that’s 180 years of resiliency by Native Americans recognized.”

  3. Portland, Oregon

  Portland City Council last week announced an outcome tribal leaders had pursued for over six decades: Instead of Columbus Day, by a declaration, October 12, 2015 will be Indigenous Peoples Day. In an interview with local station KOIN-6, tribal chairman of the Confederated Tribes of Grand Ronde, Reyn Leno, said of the largely symbolic declaration:

  “We’ve been here for hundreds of thousands of years, and we’ve been shy about telling our story. I think that has led the public to have a lot of interest in what we do. We’ve been working hard to tell our story and the story of all Native Americans, and this is just one more movement toward getting that accomplished. You can pour all your concrete and lay all your gravel and blacktop, but these are still the lands that our people walked.”

  4. St. Paul, Minnesota

  In August, St. Paul City Council passed a resolution intended to “reaffirm the commitment to promote the well-being and growth of St. Paul’s American Indian and Indigenous community” by celebrating Indigenous Peoples Day instead of Columbus Day on the traditionally designated second Monday in October.

  With language similar to other cities’ resolutions of the holiday, city officials recognize that St. Paul was built “on the homelands of the Dakota people” and that “indigenous nations have lived upon this land since time immemorial.”

  5. Bexar County, Texas

  On Tuesday last week, the Bexar County Commissioners Court resolved to designate October 12th as Indigenous Peoples Day — a move to be inclusive of Native American history that recently helped the San Antonio Missions garner UNESCO World Heritage status.

  City Councilman Ray Saldaña and indigenous advocate Antonio Diaz are now collaborating on a council consideration request to formally bring the same measure before San Antonio City Council.

  6. Anadarko, Oklahoma

  “The city of Anadarko strongly supports the proposition that Indigenous Peoples Day shall be an opportunity to celebrate the thriving cultures and values of the Indigenous Peoples of our region,” stated Mayor Kyle Eastwood in a mid-September meeting in Anadarko City Hall’s council chambers. Apache, Choctaw, Delaware, Wichita, and affiliated tribe members and leaders attended the reading of the full proclamation to replace Columbus Day with Indigenous Peoples Day — a proposal originally brought by Chamber of Commerce Executive Director and Choctaw Nation member, David Scott.

  “We are only able to learn from our past when we learn the facts,” said Eastwood. “I hope this step will be the beginning of our learning from history when it comes to the role indigenous peoples played and still play in the creation of this wonderful country.”

  He added this was an opportunity to put past differences aside because “Anadarko does best when we work together.”

  7. Olympia, Washington

  Replacing that contentious federal holiday’s spot on October’s second Monday, Indigenous Peoples Day will henceforth be celebrated by the City of Olympia, answering a request filed in October last year. An August 17th rally at Heritage Park saw member representation from the Squaxin, Nisqually, Quileute, and Quinault Nations deliver speeches and join in traditional songs to an audience of nearly 150 people standing in support of the measure.

  Mayor Stephen Buxbaum’s proclamation, read by Mayor Pro Tem Nathaniel James, in part noted the city’s responsibility to “oppose the systemic racism toward Indigenous People in the United States, which perpetuates poverty and income inequality, and exacerbates disproportionate health, education, and social stability.”

  Indigenous Peoples Day is meant to celebrate the contributions of the Squaxin, Nisqually, Quinault, Puyallup, Chehalis, Suquamish, and Duwamish tribal nations and their influence on the city.

  The City of Olympia does not recognize or celebrate Columbus Day.

  8. Alpena, Michigan

  At the beginning of September, Alpena Mayor Matt Waligora proclaimed October 12th would be called Indigenous Peoples Day to facilitate a productive relationship based on mutual respect and trust between the city, the Saginaw Chippewa Tribe, and all indigenous people in the region.   

  The proclamation was to be read during the celebration of the cultural and societal contributions of the area’s indigenous peoples, taking place over what is traditionally Columbus Day weekend, October 9th through the 12th.

  *  *  *

  These eight cities follow Minneapolis and Seattle in creating official recognition for Indigenous Peoples Day. Oklahoma City attempted to pass a similar measure unsuccessfully in September, but plan to try again on October 13th — the day after Columbus Day.

  *  *  *
  Meanwhile, in Detroit, someone took an ax to the forehead of a Christopher Columbus bust (with fake blood spilling out).

  

  

  

  

  

  

• AsiaPac Stocks Tumble After Chinese Trade Data Signals Growing Global Growth Scare

  After an initial knee-jerk reaction (perhaps on better-than-expected exports – signalling perhaps the devaluation 'worked), AsiaPac stocks are tumbling rapidly as the 11th monthly decline in imports (down a stunning 17.7% YoY in Yuan terms) signaling significant domestic weakness (and thus a larger drag on global growth).

  

  As Bloomberg reports,

  China’s imports extended the longest losing streak in six years, underscoring the headwinds to global growth from a rebalancing in the world’s second-largest economy and declining commodity prices.

   

  Imports plunged 17.7 percent in yuan terms in September, widening from a 14.3 percent decrease in August and an 11th straight decline. Overseas shipments fell 1.1 percent in September in yuan terms, the customs administration said Tuesday, compared with a 6.1 percent drop in August. The trade surplus was 376.2 billion yuan ($59.4 billion).

   

  

   

  The import slide reflects the pressure China’s economic slowdown is having on global growth and this year’s plunge in commodity prices. On the export side, signs of stabilization suggest improved external demand and offers the first indication that the People’s Bank of China’s surprise devaluation of the yuan in August is giving a boost to competitiveness.

   

  "Import growth remained sluggish, suggesting weakening domestic demand, particularly investment demand," said Yang Zhao, China economist at Nomura Holdings Inc. in Hong Kong. "We maintain our view that GDP growth will decline to 6.7 percent in the third quarter.”

  Of course, policymakers are out with more promises…

  • *DJ China Customs Spokesman: Weaker Yuan to Help Boost Exports

  Which we are sill sound an awful lot like currency manipulation to The US Congress.

  

  

  

  

  

• Inspired By Game Of Thrones, TEPCO Resumes Building "Ice Wall" Around Fukushima

  14 Months after abandoning the "Game of Thrones"-esque frozen-water-wall containment plan for Fukushima, Bloomberg reports that TEPCO expects to begin freezing a soil barrier by the end of the year to stop a torrent of water entering the wrecked Fukushima nuclear facility, moving a step closer to fulfilling a promise the Japanese government made to the international community more than two years ago. Officials noted, rather uninspiringly, the frozen wall, along with other measures, "should be able to resolve the contaminated water issues before the Olympic games."

   

  When they unveiled this "Pacific-Rim-like' 1.4km long ice-wall a year ago, we snarkily wished them luck, questioning their sanity. Of course, we got a hint when TEPCO admitted that "we have yet to form an ice plug because we can’t get the temperature low enough to freeze the water."

  

   

  At the time, there was no Plan B – though we noted that 'wasting' JPY 32 billion on the project so far was likely helping GDP.

  But now Plan B appears to be the same as failed Plan A… (as Bloomberg reports)

  “In the last half-year we have made significant progress in water treatment,” Akira Ono, chief of the Fukushima Dai-Ichi plant, said Friday during a tour of the facility north of Tokyo. The frozen wall, along with other measures, “should be able to resolve the contaminated water issues before the Olympic games.”

   

  Solving the water management problems would be a major milestone, but Tokyo Electric is still faced with a number of challenges at the site. The company must still remove highly radioactive debris from inside three wrecked reactors, a task for which no applicable technology exists. The entire facility must eventually be dismantled.

   

  Currently, about 300 metric tons of water flow into the reactor building daily from the nearby hills. Tepco, as the nation’s biggest utility is called, has struggled to decommission the reactors while also grappling with the buildup of contaminated water.

   

  Even four years after the meltdown and despite promises from policymakers, water management remains one of Tepco’s biggest challenges in coping with the fallout of Japan’s worst nuclear disaster.

   

  The purpose of the ice wall — a barrier of soil 30 meters (98 feet) deep and 1,500 meters long which is frozen to -30 Celsius (-22 Fahrenheit) — is to prevent groundwater from flooding reactor basements and becoming contaminated.

   

  …

   

  “It is a very important issue for the public, and good water management is needed for Tepco to restore the public’s trust.”

   

  The proposed ice wall has never been done on such a scale, and there could be operational issues due to the complicated nature of the project, according to Lake Barrett, former head of the U.S. Department of Energy’s Office of Civilian Nuclear Waste Management.

  *  *  *

  Prime Minister Shinzo Abe promised in 2013 that the government would take the lead in resolving the water management issues at the Fukushima site ahead of the 2020 Tokyo Olympics. Two years later, hundreds of tons of water continue to pour into the reactor building, while tainted water at other parts of the site overflows into the ocean.

  

  

  

  

  

• Paul Craig Roberts: A Decisive Shift In The Power Balance Has Occurred

  Submitted by Paul Craig Roberts,

  The world is beginning to realize that a seachange in world affairs occured on September 28 when President Putin of Russia stated in his UN speech that Russia can no longer tolerate Washington’s vicious, stupid, and failed policies that have unleashed chaos, which is engulfing the Middle East and now Europe.

  Two days later, Russia took over the military situation in Syria and began the destruction of the Islamic State forces.

  Perhaps among Obama’s advisors there are a few who are not drowning in hubris and can understand this seachange. Sputnik news reports that some high-level security advisors to Obama have advised him to withdraw US military forces from Syria and give up his plan to overthrow Assad. They advised Obama to cooperate with Russia in order to stop the refugee flow that is overwhelming Washington’s vassals in Europe. The influx of unwanted peoples is making Europeans aware of the high cost of enabling US foreign policy. Advisors have told Obama that the idiocy of the neoconservatives’ policies threaten Washington’s empire in Europe.

  But Washington’s impulsive use of power is a danger to America and to the world. Arrogant Washington politicians and crazed neoconservatives are screaming that the US must shoot down Russian aircraft that are operating against the US-supplied forces that have brought death and destruction to Syria, unleashing millions of refugees on Europe, in Washington’s effort to overthrow the Syrian government.

   

  Even my former CSIS colleague, Zbigniew Brzezinski, normally a sensible if sometimes misguided person, has written in the Financial Times that Washington should deliver an ultimatum to Russia to “cease and desist from military actions that directly affect American assets.” By “American assets,” Brzezinski means the jihadist forces that Washington has sicced on Syria.

   

  Brzezinski’s claim that “Russia must work with, not against, the US in Syria” is false. The fact of the matter is that “the US must work with, not against Russia in Syria,” as Russia controls the situation, is in accordance with international law, and is doing the right thing.

   

  Ash Carter, the US Secretary for War, repeats Brzezinski’s demand. He declared that Washington is not prepared to cooperate with Russia’s “tragically flawed” and “mistaken strategy” that frustrates Washington’s illegal attempt to overthrow the Syrian government with military violence.

   

  Washington’s position is that only Washington decides and that Washington intends to unleash yet more chaos on the world in the hope that it reaches Russia.

   

  I guess no one in hubristic and arrogant Washington was listening when Putin said in his UN speech on September 28: “We can no longer tolerate the state of affairs in the world.”

   

  The intolerable state of affairs is the chaos that Washington has brought to the Middle East, chaos that threatens to expand into all countries with Muslim populations, and chaos from which millions of refugees are flooding into Europe.

   

  Not satisfied with threatening Russia with war, Washington is preparing to send US Navy ships inside the 12-nautical-mile territorial limit of islands created by China’s land reclamation project. The Navy Times reports that three Pentagon officials have said on background that “approval of the mission is imminent.”

   

  So here we have the US government gratuitously and provocatively threatening two nuclear powers. The Washington warmongers try to pretend that land reclamation is “an act of regional aggression” and that Washington is just upholding international law by protecting “freedom of navigation.”

   

  By “freedom of navigation,” Washington means Washington’s ability to control all sea lanes. After all of Washington’s violations of international law and war crimes during the last 14 years, Washington’s claim to be protecting international law is hilarious.

   

  Lt. Gen. Michael Flynn, a former director of the US Defense Intelligence Agency, the Pentagon’s intelligence organization, said that Washington needs to understand that “Russia also has foreign policy; Russia also has a national security strategy” and stop crossing Russia’s “red lines.”  Gen. Flynn thus joins with Patrick J. Buchanan as two voices of sense and sensibility in Washington. Together they stand against the arrogance and hubris that will destroy us.

  Several commentators, such as Mike Whitney and Stephen Lendman, have concluded, correctly, that there is nothing that Washington can do about Russian actions against the Islamic State. The neoconservatives’ plan for a UN no-fly zone over Syria in order to push out the Russians is a pipedream. No such resolution will come out of the UN. Indeed, the Russians have already established a de facto no-fly zone.

  Putin, without issuing any verbal threats or engaging in any name-calling, has decisively shifted the power balance, and the world knows it.

  Washington’s response consists of name-calling, bluster and more lies, some of which is echoed by some of Washington’s ever more doubtful vassals. The only effect is to demonstrate Washington’s impotence.

  If Obama has any sense, he will dismiss from his government the neoconservative morons who have squandered Washington’s power, and he will focus instead on holding on to Europe by working with Russia to destroy, rather than to sponsor, the terrorism in the Middle East that is overwhelming Europe with refugees.

  If Obama cannot admit a mistake, the United States will continue to lose credibility and prestige around the world.

  

  

  

  

  

• "Now Is Not The Time To Raise Rates" China Demands The Fed Live Up To Its "Global Responsibilities"

  With all eyes on China's Trade Data (due out shortly), propagandists aplenty are out en masse to explain a) China's slowing economy is a "healthy rebalancing" (in other words, please do not pull your capital, or this will get very serious), b) The Fed should not raise rates (or we will bury them in Treasury selling and force QE4), and c) Credit demand is extremely weak (in other words, no matter what supply is jammed down the banks' throats, it won't reach the real economy).

   

  The PBOC fixed the Yuan massively stronger (+0.28% – the most since Nov 2014)

  • *CHINA SETS YUAN REFERENCE RATE AT 6.3231 AGAINST U.S. DOLLAR
  • *CHINA STRENGTHENS YUAN FIXING MOST SINCE NOV. 2014

  

   

  and injects more liquidty:

  • *PBOC TO INJECT 40B YUAN WITH 7-DAY REVERSE REPOS: TRADER

  After 8 straight days of stronger fixes, On- and Off-shore Yuan is trading back at 2-month highs (having retraced most of the August devaluation) and notably erased all of the spread between the two rates…

  

   

  Technicians note that CNY has broken below the 50DMA and retraced 50% of the August rally, targeting 6.30 as the next support….

  

   

  The USD is notably stronger (against Asian FX) once again as Asia opens

  

  *  *  *

  As Reuters reports, The Fed just got its marching orders from China…

  Now is not the right time for the United States to raise interest rates, given the global economic situation, China's Finance Minister Lou Jiwei said in an interview published in the China Business News on Monday.

   

  Speaking on the sidelines of the annual meeting of the World Bank and International Monetary Fund in Lima, Lou said developed economies were to blame for the global economic malaise because their slow recoveries were not creating enough demand.

   

  "The United States isn't at the point of raising interest rates yet and under its global responsibilities it can't raise rates," Lou was quoted as saying.

   

  The finance minister said the United States "should assume global responsibilities" because of the dollar's status as a global currency.

  But for those hoping (and praying) for moar stimulus from China to save the world, think again. As Bloomberg reports, while the QE-esque CAR program announced overnight may free up some lending "room" – there is no end-demand at anything but off-market rates (as the Chinese reach peak debt saturation like the rest of the developed world.

  PBOC Academic Warns of Falling Borrowing Demand in Real Economy

   

  Some manufacturers in China are cutting capacity and reducing borrowing demand amid increasing downward pressure in economy, Wang Yong, a professor at the People’s Bank of China’s Zhengzhou training school, writes in Securities Times.

   

  Weak demand in credit market has “severely” affected lendings and some banks are forced to reduce credit lines

   

  Policies should work on both credit supply and demand

   

  Chinese central bank’s expansion in re-lending program could increase commercial banks’ lending ability

   

  Regulators need to build confidence in cos. to boost investment and borrowing demands

  Despite The PBOC demanding yesterday that "China's market correction is nearly over" which was 'confirmed' by panic-manipulation in Chinese stocks yesterday…

  

   

  But are sliding modestly in the pre-open…

  • *FTSE CHINA A50 INDEX FUTURES FALL 0.2% IN SINGAPORE
  • *CHINA'S CSI 300 STOCK-INDEX FUTURES FALL 0.3% TO 3,420

  Earnings expectations continue to collapse…

  

   

  As SCMP reports, as the authorities on the mainland moved to project confidence in the country's economy and stock markets, investors yesterday picked up on the positive stance and bought shares to move the markets more than 3 per cent higher.

  Hopes are high for more official measures to boost the country's economy after the Communist Party said it would be holding a key meeting from October 26 to 29 to map out the 13th five-year plan.

   

  …

   

  A Politburo statement said the plenum would develop a strategy for building a well-off society and set the direction for the nation's socioeconomic development.

   

  …

   

  But analysts said the mini rally would not be sustained without significant policy support in the new five-year plan.

   

  "Personally, I do not see much room for further growth in the share market," said Eric Wu, an analyst in Shanghai. "It is crucial to see if this meeting will break through the reform strategies laid out since the plenum in 2012."

   

  …

   

  "We need to see a more detailed ownership reform plan for the state-owned enterprises, or a tax-reduction plan for emerging industries. If neither of the two catalysts comes into being after the party plenum, the current rebound will be small in size and unsustainable," the note said.

  ut all the excitement and re-promises from the leadership has done nothing but drive the bloody chinese to relever!!

  • *SHANGHAI MARGIN DEBT BALANCE RISES TO ONE-MONTH HIGH
  • Balance rose 3%, biggest gain since Dec. 8

  

   

  And finally, just in case you were still believing the mainstream media mantra that "China doesn't matter" – it does!!

  

   

  On a side note, Aussie miners are taking it on the chin again (just a shame their rugby team didn't last weekend)

  

   

  Charts: JPMorgan and Bloomberg

  

  

  

  

  

• The Fingerpointing Begins: House Armed Services Chairman Slams Obama's Syria Policy

  Yesterday we showed the full transcript of Barack Obama’s surreal, confrontational, stuttering 60 Minutes interview, specifically the part dealing with the US foreign policy fiasco in Syria, and by implication, with Vladimir Putin.

  For those who missed it, please watch it here. Below we have transcribed the key section which is must read for anyone curious what it looks like when the president of a formerly undisputed superpower of a unipolar world, is clutching at straws (or as far left website Vox put it, delivering “sick burns“), and in this case, clutching at the place where the teleprompter stood for advice on how to make Putin appear to be the loser in two conflicts which have either expanded Russia’s geographic territory or have boosted Russian sphere of influence by orders of magnitude in the middle ease.

  Steve Kroft: A year ago when we did this interview, there was some saber-rattling between the United States and Russia on the Ukrainian border. Now it’s also going on in Syria. You said a year ago that the United States– America leads. We’re the indispensible nation. Mr. Putin seems to be challenging that leadership.

   

  President Barack Obama: In what way? Let– let’s think about this– let– let–

   

  Steve Kroft: Well, he’s moved troops into Syria, for one. He’s got people on the ground. Two, the Russians are conducting military operations in the Middle East for the first time since World War II–

   

  President Barack Obama: So that’s–

   

  Steve Kroft: —bombing the people– that we are supporting.

   

  President Barack Obama: So that’s leading, Steve? Let me ask you this question. When I came into office, Ukraine was governed by a corrupt ruler who was a stooge of Mr. Putin. Syria was Russia’s only ally in the region. And today, rather than being able to count on their support and maintain the base they had in Syria, which they’ve had for a long time, Mr. Putin now is devoting his own troops, his own military, just to barely hold together by a thread his sole ally.

  And in Ukraine–

   

  Steve Kroft: He’s challenging your leadership, Mr. President. He’s challenging your leadership–

   

  President Barack Obama: Well Steve, I got to tell you, if you think that running your economy into the ground and having to send troops in in order to prop up your only ally is leadership, then we’ve got a different definition of leadership. My definition of leadership would be leading on climate change, an international accord that potentially we’ll get in Paris. My definition of leadership is mobilizing the entire world community to make sure that Iran doesn’t get a nuclear weapon. And with respect to the Middle East, we’ve got a 60-country coalition that isn’t suddenly lining up around Russia’s strategy. To the contrary, they are arguing that, in fact, that strategy will not work.

   

  Steve Kroft: My point is– was not that he was leading, my point is that he was challenging your leadership. And he has very much involved himself in the situation. Can you imagine anything happening in Syria of any significance at all without the Russians now being involved in it and having a part of it?

   

  President Barack Obama: But that was true before. Keep in mind that for the last five years, the Russians have provided arms, provided financing, as have the Iranians, as has Hezbollah.

   

  Steve Kroft: But they haven’t been bombing and they haven’t had troops on the ground–

   

  President Barack Obama: And the fact that they had to do this is not an indication of strength, it’s an indication that their strategy did not work.

   

  Steve Kroft: You don’t think–

   

  President Barack Obama: You don’t think that Mr. Putin would’ve preferred having Mr. Assad be able to solve this problem without him having to send a bunch of pilots and money that they don’t have?

   

  Steve Kroft: Did you know he was going to do all this when you met with him in New York?

   

  President Barack Obama: Well, we had seen– we had pretty good intelligence. We watch–

   

  Steve Kroft: So you knew he was planning to do it.

   

  President Barack Obama: We knew that he was planning to provide the military assistance that Assad was needing because they were nervous about a potential imminent collapse of the regime.

   

  Steve Kroft: You say he’s doing this out of weakness. There is a perception in the Middle East among our adversaries, certainly and even among some of our allies that the United States is in retreat, that we pulled our troops out of Iraq and ISIS has moved in and taken over much of that territory. The situation in Afghanistan is very precarious and the Taliban is on the march again. And ISIS controls a large part of Syria.

   

  President Barack Obama: I think it’s fair to say, Steve, that if–

   

  Steve Kroft: It’s– they– let me just finish the thought. They say your–

   

  President Barack Obama: You’re–

   

  Steve Kroft: —they say you’re projecting a weakness, not a strength–

   

  President Barack Obama: –you’re saying “they,” but you’re not citing too many folks.

  While there’s much more humiliation piled upon embarrassment for the president (or as a ranked democrat put it previously, handing over Syria to Putin on a silver platter is “letting him hang himself”) we’ll stop there and instead cite one highly placed “folk” who in the aftermath of Obama’s gruesome performance, decided to provide Russian media with just the soundbites they will need to make Putin’s triumph complete, when the Chairman of the House Armed Services, Mac Thornberry, slammed the Obama administration’s policy on Syria in an interview published Monday. 

  Thornberry called the White House’s recently canceled $500 million program to train and equip 5,400 Syrian rebels “a complete failure”, The Hill reports, and said the president has not yet presented any plan that has any signs of making a difference in the region. 

  “As a matter of fact, it’s going the other way,” he told the Times Record News. “As time goes on, the options for Syria get worse and worse. I think it’s getting harder and harder to see a way forward here.”

  Furthermore, as we have repeatedly warned, the chairman is concerned about Russian airstrikes in Syria to shore up Syrian President Bashar Assad and the possibility of an accident escalating into something bigger, the paper reported.

  He said Russia’s involvement in the conflict would only worsen sectarian fighting in the region.  “It is only going to inflame the Sunni versus Shia aspects of this conflict and may drive some of the Sunni countries to ratchet it up,” he said.

   

  But the peak in embarrassment came with Thornberry told the paper that he could not recall anytime during his 20 years in Congress where Russia or any other country told the U.S. when and where American forces could fly in another country.

  There  is always a first time for everything, and just in case Mac didn’t read our article from Friday, the same week as Russia telling the US where to fly, China told the US not only are US warships not welcome next to the disputed islands in the South China Sea, but that China will not tolerate any provocations on its territorial waters. 

  Perhaps the only left way for Obama to save face will be to start World War III? Just think of the upside in the S&P – all those broken Keynesian windows…
   

  

  

  

  

  

• Meet The Ghostly Iranian Spymaster Running Every Mid-East Proxy War: "He Is Everywhere But Nowhere"

  Everyone likes a good ghost story every now and again and as it turns out, at the other end of the rabbit hole that is Syria’s bloody civil war, you come face to face with a shadowy Iranian general the mere mention of whom is enough to send chills down the spines of intelligence operatives the world over.

  Earlier in September, conservative talk show host Hugh Hewitt had an awkward exchange with Donald Trump on air:

  Hewitt: Are you familiar with Gen. Soleimani?

  Trump: Yes, but go ahead, give me a little, go ahead, tell me.

  Hewitt: He runs the Quds Forces.

  Trump: Yes, okay, right.

  Hewitt: Do you expect his behavior..

  Trump: The Kurds.. have been horribly mistreated by us.

  Hewitt: No, not the Kurds, the Quds Forces, the Iranian Revolutionary Guard Quds Forces.

  Trump: Yes, yes.

  Hewitt: The bad guys.

  Trump: Right.

  Here’s how The New Yorker describes Hewitt’s “bad guys”: “The force is the sharp instrument of Iranian foreign policy, roughly analogous to a combined C.I.A. and Special Forces.”

  Their commander is Gen. Qassem Soleimani and if you believe the legend, he is a spy among spies – a general among generals – a kind of ghost story that intelligence agents might tell their kids around a campfire.

  Weeks ago, we began to suggest that it was Soleimani who orchestrated the Russian-Iranian incursion in Syria. That now looks to have been the case as we explained in “Mid-East Coup: As Russia Pounds Militant Targets, Iran Readies Ground Invasions.” But before we delve further into the General’s role in Syria, we’ll first give you a taste of the backround story behind a man who many Iranians look upon with near religious reverence.

  There are competing accounts regarding Soleimaini’s birthplace. Consider the following from the American Enterprise Institute: 

  “According to the US Department of State, Suleimani was born in the city of Qom on March 11, 1957. Persian-language sources contest this claim, identifying the village of Rabord in Kerman Province in south-eastern Iran as Suleimani’s place of birth[9]–which has significant implications for understanding Suleimani. Qom’s population is centered around religion, including theologians and seminary students from all over the world, along with pilgrims and those who make their living from the pilgrimage industry. In contrast, the mountain village of Rabord in remote Kerman–closer to the Afghan border–has a tribal structure, which would have prepared Suleimani for operating in tribal societies such as those in Afghanistan and Iraq.” 

  Keep that last bolded passage in mind. 

  When Soleimani was a child, he and a relative left home to earn money for their fathers who they feared would be arrested in connection with money their families owed to the Shah. Soleimani worked menial jobs until 1979 when, after the Shah was overthrown by Ayatollah Ruhollah Khomeini, he joined the newly-created Revolutionary Guard. When Saddam invaded Iran, Soleimani was sent to the frontlines as a water boy (literally) and ended up staying there until the end of the war. Here are a few excerpts from The New Yorker’s account:

  Suleimani earned a reputation for bravery and élan, especially as a result of reconnaissance missions he undertook behind Iraqi lines. He returned from several missions bearing a goat, which his soldiers slaughtered and grilled. “Even the Iraqis, our enemy, admired him for this,” a former Revolutionary Guard officer who defected to the United States told me. On Iraqi radio, Suleimani became known as “the goat thief.” In recognition of his effectiveness, Alfoneh said, he was put in charge of a brigade from Kerman, with men from the gyms where he lifted weights.

   

  The Iranian Army was badly overmatched, and its commanders resorted to crude and costly tactics. In “human wave” assaults, they sent thousands of young men directly into the Iraqi lines, often to clear minefields, and soldiers died at a precipitous rate. Suleimani seemed distressed by the loss of life. Before sending his men into battle, he would embrace each one and bid him goodbye; in speeches, he praised martyred soldiers and begged their forgiveness for not being martyred himself. When Suleimani’s superiors announced plans to attack the Faw Peninsula, he dismissed them as wasteful and foolhardy. The former Revolutionary Guard officer recalled seeing Suleimani in 1985, after a battle in which his brigade had suffered many dead and wounded. He was sitting alone in a corner of a tent. “He was very silent, thinking about the people he’d lost,” the officer said.

  Iran, bitter at the West’s role in helping Saddam during the war (yes, that’s right, the US has been using the same flawed Mid-East foreign policy for decades wherein the only thing that matters is expediency, leading directly a disastrous brand of geopolitical myopia) but having come away with a lesson in the futility of open warfare, set out (again in The New Yorker’s words) to “build the capacity to wage asymmetrical warfare—attacking stronger powers indirectly, outside of Iran.” The Quds Force was born.

  You can read more details of Soleimani’s exploits in the articles cited and linked above including how he battled the Taliban on the Afghan border, but for brevity’s sake, suffice to say he became the Quds commander in 1998. From then on, he capitalized on various opportunities to build the alliances that Tehran needed in order to ensure that the regional balance of power didn’t tip too far in the direction of Riyadh and the Sunnis. In one famous case, he allegedly tried to orchestrate the assassination of the Saudi ambassador in a Washington DC restaurant. From Wikileaks:

  Designated today pursuant to Executive Order (E.O.) 13224 for acting for or on behalf of the IRGC-QF were: Manssor Arbabsiar, a naturalized U.S. citizen holding both Iranian and U.S. passports who acted on behalf of the IRGC-QF to pursue the failed plot to assassinate the Saudi ambassador; IRGC-QF commander Qasem Soleimani.

  He also coordinated heavily with the US in the wake of 9/11 before Bush’s “axis of evil” comment soured the relationship at which point the General purportedly began sponsoring attacks on US troops. He formed stronger relations with Hezbollah and developed powerful Shiite militias in Iraq on the way to becoming what one former Iraqi official described as “the most powerful man in the country, without question.” He is even feared by the Peshmerga, who aren’t exactly known for cowardice. Sound far fetched? Consider the following short clip: 

  Don’t forget that Russia and Syria just recently sealed an intelligence sharing deal which is almost invariably the precursor to Russian bombing raids in support of Iraq’s Shiite militias as they battle ISIS.

  And as for who’s arming the Shiite Houthis in Yemen against the Saudis: you guessed it, Soleimani.

  As for Syria, he has quite simply been running the show for years. As one American official told The New Yorker two years ago, “he’s running the war [in Syria] himself.” Here’s an excerpt from a 2009 secret diplomatic cable (again, via Wikileaks):

  The public showcasing of these three visits  contrasted with the secrecy with which Iranian Revolutionary  Guard Commander/al-Quds Force Ghassem Soleimani conducted  his.  Reportedly accompanying Jalili, Soleimani returned to  Damascus after a long absence, perhaps a reflection of  lingering tensions between Iran and Syria that erupted after  the February 2008 assassination of Hizballah military  strategist Imad Mugniyah in the Syrian capital.  Al Hayat  Bureau Chief Ibrahim Hamidi (strictly protect) spoke very reluctantly about Soleimani’s presence in Damascus, saying  only that “he was here,” and “when he visits, it’s usually  significant.” 

  The problem, in Soleimani’s own words, is that “the Syrian Army is useless!” And so in light of that rather blunt assessment, the General appears to have gotten fed up with SAA incompetence leading directly to the following:

  Back in June, the commander of Iran’s Quds Force, Qasem Soleimaini, visited a town north of Latakia on the frontlines of Syria’s protracted civil war. Following that visit, he promised that Tehran and Damascus were set to unveil a new strategy that would “surprise the world.” 

   

  Just a little over a month later, Soleimani – in violation of a UN travel ban – visited Russia and held meetings with The Kremlin. The Pentagon now says those meetings were “very important” in accelerating the timetable for Russia’s involvement in Syria. The General allegedly made another visit to Moscow in September.

  Here is Reuters with more color on what exactly took place when Soleimani flew to Moscow:

  At a meeting in Moscow in July, a top Iranian general unfurled a map of Syria to explain to his Russian hosts how a series of defeats for President Bashar al-Assad could be turned into victory – with Russia’s help.

   

  Major General Qassem Soleimani’s visit to Moscow was the first step in planning for a Russian military intervention that has reshaped the Syrian war and forged a new Iranian-Russian alliance in support of Assad.

   

  As Russian warplanes bomb rebels from above, the arrival of Iranian special forces for ground operations underscores several months of planning between Assad’s two most important allies, driven by panic at rapid insurgent gains.

   

  Senior regional sources say Soleimani has already been overseeing ground operations against insurgents in Syria and is now at the heart of planning for the new Russian- and Iranian-backed offensive.

   

  That expands his regional role as the battlefield commander who has also steered the fight in neighboring Iraq by Iranian-backed Shi’ite militia against Islamic State.

   

  His Moscow meeting outlined the deteriorating situation in Syria, where rebel advances toward the coast were posing a danger to the heartland of Assad’s Alawite sect, where Russia maintains its only Mediterranean naval base in Tartous.

   

  “Soleimani put the map of Syria on the table. The Russians were very alarmed, and felt matters were in steep decline and that there were real dangers to the regime. The Iranians assured them there is still the possibility to reclaim the initiative,” a senior regional official said. “At that time, Soleimani played a role in assuring them that we haven’t lost all the cards.”

   

  Three senior officials in the region say Soleimani’s July trip was preceded by high-level Russian-Iranian contacts that produced political agreement on the need to pump in new support for Assad as his losses accelerated.

   

  The decision for a joint Iranian-Russian military effort in Syria was taken at a meeting between Russia’s foreign minister and Khamenei a few months ago, said a senior official of a country in the region, involved in security matters.

   

  “Soleimani, assigned by Khamenei to run the Iranian side of the operation, traveled to Moscow to discuss details. And he also traveled to Syria several times since then,” the official said.

   

  The Russian government says its Syria deployment came as the result of a formal request from Assad, who himself laid out the problems facing the Syrian military in stark terms in July, saying it faced a manpower problem.

   

  Khamenei also sent a senior envoy to Moscow to meet President Vladimir Putin, another senior regional official said. “Putin told him ‘Okay we will intervene. Send Qassem Soleimani’. 

  And the rest, as they say, is history in Syria.

  That, in brief, is the story of Iran’s spymaster general who not only controls Iraqi politics and serves as the supreme commander for the country’s various Shiite militias, but who is also the puppet master for the Houthis and Hezbollah. Now, he’s orchestrated Russian air support for Iran’s ally in Damascus. 

  Everything laid out above would obviously be intriguing enough on its own but consider one last excerpt, this one from BBC:

  Switch on the television in Iran these days and it won’t be long before you see General Qasem Soleimani.

  The once reclusive head of the Revolutionary Guards’ elite Quds Force has emerged from a lifetime in the shadows directing covert operations abroad, to achieve almost celebrity status in Iran.

   

  The man who, until a couple of years ago most Iranians would not have recognised on the street, is now the subject of documentaries, news reports and even pop songs.

   

  One music video widely shared in Iran was made by Shia militia fighters in Iraq. It shows soldiers spray-painting the general’s portrait on a wall and parading in front of it while stirring music plays in the background.

   

  Inside Iran a campaign has started among conservative bloggers for Gen Soleimani to go into politics. They have dubbed him Iran’s most honest and least corrupt politician and are calling for him to put his uniform aside and stand for president in 2017.

  Is Soleimani set to make a play for the Iranian presidency? And if so, what comes next? That is, what use is the Ayatollah in the face of the most revered general in the country who all at once embodies everything the Supreme Leader stands for while also possessing a steely resolve and measured (or maybe “calculated” is the better word) approach to diplomacy? Finally, what happens if the man who, in the West anyway, is generally considered to be the number one agent for state sponsored terror becomes president shortly after the nuclear deal?

  Perhaps this is simply an example of a decorated war verteran around which a legend has grown that bears no resemblance to reality. 

  Or perhaps – just perhaps – there’s something bigger going on and between all of the Moscow versus Washington, East Vs. West, Cold War 2.0 headlines everyone simply missed it. And if there is a bigger picture here, will we even get to see it play out, or will Soleimani simply recede back into the shadows to run the show from behind the curtain?

  And on that note, we close with one quote, and one clip…

  A senior US official in 2011: “He is indeed like Keyser Soze. He is everywhere, but nowhere.”

  

  

  

  

  

• "We've Never Seen Anything Like This" – Dumbfounded Central Bankers Brace For "Rolling Series Of Crises"

  One of the most important things to grasp about the Fed’s September (in)decision is that the FOMC had no viable options when it came to emerging markets. 

  The combination of low commodity prices, falling demand, slumping global trade, a decelerating China, and the yuan devaluation have all served to accelerate capital outflows for EM and there’s certainly an argument to be made for the contention that a Fed hike and a subsequent spike in the dollar would be just about the last thing EM needs when it comes to stopping the bleeding. 

  That said, there’s another line of argumentation which says the Fed missed its window to hike long ago and so now, all they’re doing in the Eccles Building is fostering continued uncertainty which is also causing capital to flow out of EM. 

  In the simplest terms possible: no one really has any idea whether it’s best to rip the band-aid off or not, and adding to the confusion is the fact that the Fed has now telegraphed its own uncertainty by explicitly acknowledging the reflexivity problem, meaning EMs (and everyone else for that matter) are desperately trying to figure out how to incorporate themselves into their own outlook for what the Fed may or may not do. 

  Here’s how one former Treasury economist framed the latter argument:

  ”Short-end rates move higher as the Fed gets closer to hiking, and that causes the dollar to strengthen, and that causes global funding stresses. They are creating the conditions that are causing the external environment to be weak, and then they say they can’t hike because of those same conditions that they have created.” 

  Obviously this is an impossible quagmire. There’s no way out and the decision is just going to get more difficult with each passing FOMC meeting. It’s made all the more convoluted by the fact that not hiking sends a negative message about the US economy, thus imperiling domestic risk assets but hiking could send EM over the edge … or maybe not… or who knows. 

  The wording there is no accident. It’s literally that indeterminate.

  That’s the problem facing the world’s EM central bankers and as you can see from the following, everyone is simply dumbfounded. 

  Via The New York Times:

  After a week of discussions [in Lima], bankers and policy makers agreed that stemming the rush of investments from emerging markets was one of the most important challenges facing the global economy. But there was little agreement on how to actually do that.

   

  On official panels, in closed-room sessions and over drinks in Lima restaurants, market participants struggled to come to grips with the persistent flows of money escaping emerging-market stocks and bonds in search of safer investment shores.

   

  “We have never seen something like this,” said Hung Tran, a senior executive at the Institute of International Finance, a trade group for global banks. Mr. Tran said that he was expecting net outflows from emerging markets to be around $800 billion for this year and next — by far the largest amount since institutions began investing in these markets in the late 1980s.

   

  The fear is that these numbers could increase substantially, especially if China’s currency weakens further. That could result in a rolling series of emerging-market crises.

   

  At the root of the debate has been whether the Federal Reserve’s decision last month to hold interest rates near zero has increased investor confidence in emerging markets or hurt it.

   

  Those on the front lines of the outflows of funds from the emerging markets — central bankers in countries like Brazil, Turkey, Malaysia and Mexico — are beginning to say that the Fed’s decision to hold back has actually made their job more difficult. That is because instead of staying put, or making new investments, investors are rushing out all the faster, spooked that the Fed has larger fears about China and other emerging markets.

   

  “I heard time and again this week from governors of emerging-market central banks that it’s not the hike itself that worries them,” said Jacob A. Frenkel, the chairman of J.P. Morgan Chase International and the former head of Israel’s central bank. “It’s how much and when it occurs.”

   

  “Delaying an increase in rates only increases volatility and uncertainty in emerging markets,” said David Fernandez, a currency and bond specialist at Barclays in Singapore. “Emerging markets will continue to see outflows.”

  As indicated above, there’s really no telling if these bankers’ assessments are correct. That is, it could very well be that when the hike actually comes – even if it’s a paltry and largely “symbolic” 25 bps – the resultant “tantrum” (so to speak) will be far worse than the what would have occurred if the Fed had just remained on hold and left everyone in suspense. But again, we won’t know until it’s too late. 

  Meanwhile, it’s important to remember that the fundamentals are awful across EM and at the end of the day, that’s the problem. The obsession with the Fed is unhealthy for any number of reasons, but when you’ve got a commodity space that’s in freefall, declining global growth and trade, and acute political crises that include a civil war in one key market (Turkey) and an intractable legislative stalemate in another (Brazil), it’s not entirely clear that even if the Fed were to somehow get everything just right going forward that the picture would materially change for the world’s emerging economies.

  

  

  

  

  

• US Paradrops 50 Tons Of Ammo To Syrian Rebels

  As we noted over the weekend, the US has now thrown in the towel on the ill-fated (and that’s putting it lightly) strategy of training Syrian fighters and sending them into battle only to be captured and killed by other Syrian fighters who the US also trained. 

  The Pentagon’s effort to recruit 5,400 properly “vetted” anti-ISIS rebels by the end of the year ended in tears when the entire world laughed until it cried after word got out that only “four or five” of these fighters were actually still around. The rest are apparently either captured, killed, lost in the desert, or fighting for someone else. 

  This has cost the US taxpayer somewhere in the neighborhood of $40 million over the last six months.

  Because this latest program was such a public embarrassment, the Pentagon had to come up with a new idea to assist Syria’s “freedom fighters” now that they are fleeing under bombardment by the Russian air force only to be cut down by Hezbollah.

  The newest plan: helicopter ammo. No, really. The US has now resorted to dropping “tons” of ammo into the middle of nowhere and hoping the “right” people find it. 

  No, really. 

  Here’s CNN:

  U.S. military cargo planes gave 50 tons of ammunition to rebel groups overnight in northern Syria, using an air drop of 112 pallets as the first step in the Obama Administration’s urgent effort to find new ways to support those groups.

   

  Details of the air mission over Syria were confirmed by a U.S. official not authorized to speak publicly because the details have not yet been formally announced.

   

  C-17s, accompanied by fighter escort aircraft, dropped small arms ammunition and other items like hand grenades in Hasakah province in northern Syria to a coalition of rebels groups vetted by the US, known as the Syrian Arab Coalition.

  And here’s a bit more color from GOP mouthpiece Fox News:

  The ammunition originally was intended for the U.S. military’s “train and equip” mission, the official said. But that program was canceled last week. 

   

  “So now we are more focused on the ‘E’ [equip] part of the T&E [train & equip],” said the official, who described equipping Syrian Arabs as the focus of the new strategy against ISIS. 

   

  The Defense Department announced Friday that it was overhauling the mission to aid Syrian rebel fighters. After the program fell far short of its goals for recruiting and training Syrian fighters, the DOD said it would focus instead on providing “equipment packages and weapons to a select group of vetted leaders and their units so that over time they can make a concerted push into territory still controlled by ISIL.” 

   

  The shift also comes as Russia continues to launch airstrikes in Syria, causing tension with the U.S. amid suspicions Moscow is only trying to prop up Bashar Assad. 

   

  Col. Steve Warren, spokesman for the U.S.-led anti-ISIS coalition, confirmed that coalition forces conducted the airdrop on Sunday. 

   

  “The aircraft delivery includes small arms ammunition to resupply counter-ISIL ground forces so that they can continue operations against ISIL. All aircraft exited the drop area safely,” he said in a statement. All pallets successfully were recovered by friendly forces, a U.S. official said.

  Yes, “friendly forces.”

  Just let the hilarity of that sink in.

  The US just paradropped 50 tons of ammo on pallets into the most dangerous place on the face of the planet with no way of ensuring that it falls into the “right” hands (it goes without saying that the term “right” is meaningless there). Meanwhile, the Russians are dropping bombs on the same extremists who are set to receive the guns the US is dropping. 

  Of course if it does somehow fall into the “wrong” hands, it wouldn’t be the first time (see Mosul and recall the $500 billion worth of weapons Washington “misplaced” in Yemen) and as we said a few days ago, this is at least great news for the military-industrial complex. It means more “terrorist attacks” on U.S. “friends and allies”, and perhaps even on U.S. soil – all courtesy of the US government supplying the weapons – are imminent.

  

  

  

  

  

• The Monetary Policy Dead-End

  Submitted by Christopher Dembik via SaxoBank,

  The Federal Reserve’s September status quo proved how difficult it is for central bankers to bring an end to the emergency measures they adopted in the aftermath of the 2007 crisis. Fed chief Janet Yellen’s hesitations and the market turmoil since August seem to validate that it is impossible to stop the accommodative monetary policy, unless you accept that doing so would trigger a new global crisis.
   
  Markets have been used to living in a protracted low rate environment, which led to a $57 trillion increase in public and private debt between 2008 and 2015. The surge of public debt represents almost half of this growth. It is the result of the fiscal stimulus and rescue measures taken to save the global banking system. In most advanced countries, household debt has also increased, except in the US where the financial situation of households has improved due to the default on real estate loans.
   
  The Fed is aware that raising interest rates too fast and too high could have the same effect as pressing the nuclear button. The whole system could collapse and it cannot be taken for granted that the central banks would be able to extinguish the fire this time. Their strike force has weakened because their balance sheets are exposed to market fluctuations and their credibility was seriously damaged because the measure they have taken have failed to strengthen the economy.
   
  The comeback of financial excesses
   
  The same mistakes that led to the financial crisis are now happening again worldwide. Access to credit, hardened for some time, is softening, leading to over-indebtedness and speculative bubbles. In the United States, first-time buyers can get loans covering the equivalent of  97% of their purchase. In the UK, the housing market moves the same way thanks to a first-purchase aid programme launched in 2012. It met such success that first-time buyers now account for half of real estate loans, a proportion not seen since 2000.
   
  David Cameron’s ambition to make the United Kingdom a country of owners is about to be achieved. An easier access to credit, particularly for first-time buyers, was systematically the political answer to favour the forgotten ones of globalisation.
   
  During the past 20 years, only two parts of the world’s population have seen their income grow: the Chinese and the top 1%. At the opposite end of the spectrum, the middle and working classes in western countries, as well as the poorer, have benefited sparsely from the economic spinoffs of the increasing commercial exchanges and trade restrictions removals.
   
  Their stagnating incomes urged them to borrow at attractive rates to maintain their living standards which, until now, allowed social peace. Nevertheless, this patch found by the political authorities is illusive. Should even a slight rise occur in interest rates, the most fragile households will prove unable to make their loan repayments, with consequent negative effects on demand and economic activity.
   
  Increasing income inequality
   
  Even if European GDP rises at 2% per year in the next few years, leading to a decrease of the unemployment rate, this growth would be nothing but a flash in the pan as the financial system hasn’t actually been drained and no serious anti-inequality fight has started. We live in the middle of a huge speculative bubble, possibly bigger than in 2007 because of the rise of shadow banking and quantitative easing by central banks.
   
  We can credit economist Thomas Piketty for picking on the figure of the rentier, as John Maynard Keynes did decades before, but his long-term analysis forgets the misdistribution of incomes, despite the fact that this element is enough to explain the last crisis and the one we are leaning towards.
   
  The 1914-1950 period enabled an unprecedented decrease of income inequality, but that movement was then brutally stopped. The wage differential between those who have access to knowledge and technology and those whose instruction is insufficient for highly qualified jobs is increasing and will increase with the digitalisation and robotisation of the economy. This increasing income inequality explains why demand, a traditional supporting factor in the advanced economies, is no longer sufficient to restart growth.
   
  There is no readymade solution available to impulse a better wealth distribution. Everyone knows that keeping interest rates low longer is not the solution. It prepares the ground for a new financial crisis. From this perspective, we certainly have to get used to the idea that capitalism will suffer more and more frequent upheavals, given the fact that households are not ready to accept a reduction of their consumption and that politicians are reluctant to focus on the core issues.

  

  

  

  

  

• Dennis "Every Futures Broker's Best Friend" Gartman Does It Again (Again)

  While we haven’t heard the term “churn ’em and burn ’em” for a while, we can only assume that world-renowned newsletter-writer Dennis Gartman is long futures brokers (in commission terms) as in the space of just 3 trading days he has flip-flopped (once again) from “the most bullish I’ve been” to “you have to fade the oil market here” with WTI trading at almost the exact same price level. If you listen carefully, even CNBC’s Melissa Lee is starting to get the joke…

  October 7th 1226ET… “This Is The Most Bullish I’ve Been On Crude”

   

  October 12th 1700ET… “Fade The Crude Oil Market”

   

  Or in more visual terms…

  

   

  A glimpse at the following images is all one needs to know…

  

   

  Chart: Bloomberg

  

  

  

  

• Thousands Of Angry Unpaid Chinese Workers Protest Shocking Bankruptcy Of Major Telecom Supplier

  When two weeks ago we reported what may have been the biggest layoff announcement in China’s current economic turmoil, after the second largest coal company Longmay Group announced it would lay off 100,000 – or about 40% of its entire workforce – while dramatic, the news did not shock too many. After all, China’s commodity fiasco (as a reminder, as we first reported, at current commodity prices more than half of Chinese companies do not generate enough cash flow to even cover their interest expense) is known to most and as such rationalization of this kind are only just starting: it is not exactly clear how China will deal with millions of suddenly unemployed workers, but it will only cross that bridge when it comes to it.

  Far more disturbing was today’s news from China’s prosperous, and far more high-tech, city of Shenzhen, and specifically major telecom supplier Fu Chang Electronic Technology Co. (also known as Fosunny), which supplies parts to domestic telecommunication giants such as Huawei Technologies Co and ZTE Corp. as well as international telecom companies like Vodafone and AT&T.

  The company made headlines last week after reports that it had told clients it was planning to list on the stock exchange. The news couldn’t have been more wrong because on Thursday, instead of going public, the company announced it would be going dark, when it issued a statement saying it was ceasing operations due to liquidity problems resulting from legal and debt issues.

  Even more surprising is that Fu Chang wouldn’t be the first – Fosunny is the third supplier of plastic parts to the telecom industry to go bankrupt in the past month, the Global Times said.

  The immediate outcome of the announcement, according to IBtimes, was that thousands of factory workers and suppliers staged protests outside the company’s Shenzhen office, where China Business News showed pictures of a line of police in helmets confronting a group of protesters.

  The Global Times says that protests started after the Thursday announcement and continued through the weekend, with thousands of people gathered outside the company in the Longgang District of Shenzhen, demanding compensation, according to Chen Li, whose company supplied packaging materials for Fu Chang.  Chen told the Global Times on Sunday that the impact on his company may be severe.

  “It might even lead to liquidity problems for our company and we might end up going out of business,” he said, adding that Fu Chang owes his company 2.51 million yuan ($395,600).

  Fu Chang owes banks 190 million yuan in debt and suppliers 270 million yuan, and it is two months behind on pay for its employees, the National Business Daily reported on Friday. The newspaper also said the shutdown would affect more than 3,800 employees and more than 300 suppliers. 

  In a troubling sign for China’s supposedly thriving telecom sector, Global Times cited experts as saying such firms “have seen their profit margins squeezed by rising labor costs in southern China, and a slowdown in both international and domestic demand. China’s smartphone sales contracted in the first half of this year, for the first time since 2009, while the country’s overall exports fell more than 8 percent in August, and more than 4 percent in September, compared to last year.”

  Labor experts told International Business Times recently that factory workers’ wages have risen in southern Guangdong province in particular, not least because the new generation of better-educated rural migrant workers — the mainstay of China’s labor force over recent decades — is less willing to do mindless production line work. As a result, Guangdong has seen some of its lower value-added companies close, and others move out to cheaper parts of Southeast Asia or inland parts of China.

  It is troubling (not so much for the business cycle which demands it but for China’s increasing lack of centralized control) that what was once taboo, namely Chinese corporations defaulting, has now become a practically daily occurrence.

  It is even more troubling that China’s cash flow weakness appears to have spread far more rapidly and broadly than even we anticipated, and is impacting industries which most had though would be immune from a hardish landing, if only in the beginning.

  But where it is most troubling, is that what recently became the largest market for Apple’s iPhones suddenly appears to be stuttering. And while the Fed can pretend all it wants that there are no substantial and direct connections between China and the US (just don’t tell that to Bravo TV’s Millon Dollar Listing which while thoroughly fake would absolutely not exist without Chinese buyers), if and when the world’s largest company by market cap admits just how bad the Chinese reality is, not even the US government secretly buying up all of AAPL’s excess inventory (remember: Apple is the NSA’s best friend) will save the gargantuan gadget maker which simply can not exist in a world where the marginal consumer, whether in Boston or Beijing, has tapped out.

  

  

  

  

  

• Obama Won't Back Down After Chinese Threat, Sends U.S. Warships To Contested Islands In "Matter Of Days"

  On Friday, we reported the latest provocation in what has truly become a very dangerous, if largely pointless, staring contest between Beijing and Washington over China’s reclamation of land in The South China Sea. 

  Responding to suggestions that the US was set to sail warships around the islands Beijing has constructed atop reefs in the Spratlys, China served noticed that it would “never allow any country to violate China’s territorial waters and airspace in the Spratly Islands, in the name of protecting freedom of navigation and overflight.” This was simply a formalized version of the more concise phrasing the PLA navy used when they instructed the pilots flying a US spy plane to “Go now!” when it ventured too close to Fiery Cross earlier this year. 

  It’s not immediately clear what China intends to do with the islands and further, it’s not entirely clear why anyone should necessarily care if Beijing wants to build “sand castles” in the middle of the ocean, but then again, for America’s regional allies the land reclamation efforts look a lot an attempt to build a series of military outposts by creating sovereign territory where there was none thereby effectively redrawing maritime boundaries and so, big brother in Washington is set to step in in order to protect vital shipping lanes. 

  Of course having already said that the navy plans to sail ships into the waters around the islands, the US can ill-afford to allow China’s “we won’t tolerate that” pronouncement to deter the Pentagon because the optics around that would be terrible at a time when the world is already questioning the strength and resolve of the US military. So the ships will indeed sail. Here’s WSJ:

  The U.S. determination to challenge China with patrols near Chinese-built islands in the South China Sea will test Xi Jinping’s recent pledge that Beijing doesn’t intend to “militarize” the islands, an announcement that took U.S. officials by surprise.

   

  The Chinese leader made the commitment during a news conference with President Barack Obama at the White House late last month, though he left it unclear how the pledge would affect China’s activities in the disputed area of the South China Sea.

   

  If Mr. Xi’s goal was to discourage the U.S. from conducting patrols near the artificial islands, he doesn’t appear to have succeeded. After months of debate in the U.S. government, there is now a consensus that the U.S. Navy should send ships or aircraft within 12 nautical miles of the artificial islands to challenge China’s territorial claims there, according to people familiar with internal discussions.

   

  
  

   

  A U.S. official confirmed Sunday that a decision had been made to conduct such patrols but said it was unclear when that might happen or where exactly. “It’s just a matter of time when it happens,” the official said. Another U.S. official indicated that the operation could come within days.

   

  The question now is whether China will respond to such operations by reining in its plans to develop the islands or backing away from the commitment not to militarize them, pointing to the U.S. patrols as a provocation.

  Anyone who knows anything about how China generally prefers to respond in situations like these knows that Beijing will almost certainly call any US naval presence a “provocation” and they’ll be exactly right. After all, there’s something rather ironic about claiming that China is in the process of militarizing the South China Sea and then deciding that the best way to de-escalate the situation is to sail warships to the area. Here’s WSJ again:

  The Pacific Fleet has been ready to conduct “freedom of navigation operations,” or Fonops, around China’s artificial islands for months after being asked to draw up options by U.S. Defense Secretary Ash Carter earlier this year. The decision to begin the patrols appears to have been delayed to avoid disrupting the summit, people familiar with internal discussions say.

   

  “A U.S. Fonop gives China an opportunity to assert that the United States is the country ‘militarizing’ the South China Sea and, if China chooses, such a Fonop provides a rationale for China to further militarize or develop the features it occupies,” said Taylor Fravel, an expert on the Chinese military at the Massachusetts Institute of Technology.

  So in reality, the real question is this: now that Russia has moved to effectively reclaim the Mid-East from US influence, and now that China is in the process of using its island building efforts to establish what we’ve called a kind of Sino-Monroe Doctrine, how long will it be before someone actually challenges the US military by shooting down a plane in the desert or firing on a ship in the Spratlys just to test Washington’s resolve?

  * * *

  Finally here again, as a reminder, are the satellite images which demonstrate the extent to which Beijing is “changing the landscape”, so to speak, in the South China Sea.

  Subi:

  

  

  Fiery Cross:

  

  

  Mischief: 

  

  

  

  

  

  

  

• Democracy Uber Alles (But Only When It Goes Our Way)

  Submitted by Tibor Machan via Acting-Man.com,

  Democracy – but only when it goes your way!

  Over the years of watching the democratic process I’ve noticed something important.  People tend to reject democracy, indeed, fight it tooth and nail, when it doesn’t go their way.  But when it does, well, it is the tops.

  Consider the case of California’s Proposition 187.  Then governor Gray Davis of California was maneuvering to essentially gut this referendum, one that won with over 60% of the votes.  So let us recognize that the leader of the Democratic Party in California has no problem rejecting what the majority of the people want when he and his friends believe that the people are wrong.

   

  

  Former California governor Gray Davis, a typical representative of the cronyism prevalent in the US merchant State. What eventually tripped him up wasn’t his attempt to gut prop. 187 by legal maneuvering, but his perceived poor performance during California’s energy crisis. Many of his energy advisors were the very speculators who benefited the most from the crisis. It was one affront too many. Davis was the first member of California’s ruling caste to fall prey to a recall, after 117 previous recall attempts throughout California’s history had failed, and only the 2^nd politician in US history to suffer this ignominious fate. During the boom of the 1990s, Davis had greatly expanded government spending, landing California with a near $35 bn. deficit when the bust inevitably struck.

  Now if you believe in democracy regarding the handling of certain problems in society, whether people actually have signed up for that process, you will go along with the verdict regardless of whether you like the outcome.  That is a principled defense of democracy.

  During all the health (Obama) care reform debates it is liberal Democrats who said, repeatedly, that their demand for a government supervised health care system merely expresses the will of the public and thus has ample legitimacy behind it.

  That is why there is so much polling, too, by the media — it is widely believed that if “the people” want something, then it is OK. What, then, makes for a good law for champions of democracy is whether the majority wants it to be enacted.  (One reason that most Democrats used to oppose a balanced budget amendment is that they believe it would place undue obstacles before the will of the people.  Surely if they people want to go into debt [read: if that’s what the majority wants], we ought all to comply and go into debt.)

   

  

  A couple of well-known affordable health-care act zingers. #Grubered is a well-known scandal (see “Dr. Gruber, wie geht’s dir?” and “#Grubered” for the highly amusing details) which was however at least marked by a truly candid assessment on the part of the good doctor/government advisor, who described the obfuscation tactics and the reliance on the “stupidity of the American voter” that were so instrumental in passing the law. What is perhaps less well known is that Ms. Pelosi channeled mid 1930s and mid 1940s satirists and cartoonists when she made her infamous remark about having to “pass the law so that you can find out what’s in it” – more on this below this post.

   

  The people — the public interest, the general will, the greatest satisfaction of the greatest number, the will of the people, etc. — have been the objects of adoration of the leading lights of the Democratic Party.  Until the people no longer like what Democrats want, that is.

  Consider prop 187.  The people of California wanted it.  But the Democrats did not.  Some years back they did want to make people in business stop hiring illegal aliens, so they enacted legislation and claimed, again, that they impose such restrictions and delegate such police powers as this requires on businesses because, well, the people demand it.

  But if you keep fighting the outcome, via law suits and such, you testify to your dismissal of democracy in favor of something else — say, judicial intervention, some kind of higher law that democracy must not abridge, whatever.

  Not that there is that much wrong with judicial intervention, as far as I can tell.  After all, the US Supreme Court interferes often when Congress or some other political body acts in defiance of the US Constitution, thus testifying to the conviction that there are some things that are way beyond the reach of the democratic process.

  And few folks think it would be OK to, say, vote the Mooney church out of existence or to vote to shut down the New York Times.  That is because the US Constitution protects church and press from democratic meddling, no matter how eager the majority of the people are to meddle.

   

  Leaving Matters to Popular Vote – When Convenient

  One of the mainstays of the liberal democrats, mainly members of the Democratic Party of the United States of America, has been that in most matters we should leave decisions up to a vote.

  We should vote on whether smoking is to be allowed in restaurants, how much money is too much when given to political candidates, whether zoning ordinances are to be enacted, how high taxes should be, how to run public schools, and so forth and so on.

  Not OK by me, of course, but notice that it isn’t OK even by those who champion the “democracy uber alles” theme.  The process seems to be kosher only until things don’t quite go the liberal democratic way.

  The flack over Proposition 187 was a wonderful case in point.  Just how hypocritical can you get!  Be a fervent supporter of people power except when people do not like what you like.  Then suddenly people power sucks.

  I guess California’s majority will have to pick and choose some other issue on which to unite in order to fend off the duplicitous legalism of liberal Democrats.  I am sure there will be no problem with voting away private property rights, voting for massive government intervention in practically any area of human life, voting for extensive government regulation of business, medicine, and so on.

   

  

  Frederic Bastiat had the right idea about socialist statism and the associated legalism. Generally speaking one could state that statism gives you “laws”, but not justice. To the extent that State power expands, the power of society is diminished.

   

  But if there is a successful vote to rid the community of the expanding tyranny of government, the liberal democrats suddenly aren’t democrats any more.

  It just goes to show you.  In their hearts of hearts most democrats are never really democrats at all but merely opportunists who make use of the power of the majority over the minority’s rights.  But should the majority not wish to go along with this plan, well down with democracy — it is the enemy of higher principles in which democrats believe only sporadically, however.

  *  *  *

  Addendum by PT:

  As noted above, Ms. Pelosi, presumably unwittingly, channeled satirists and cartoonists of the 1930s and 1940s. In a joke appearing in the August 14, 1937 issue of the New Yorker, an anonymous author wrote (hat tip to Ben Zimmer of the Language Log):

  “The wages-and-hours bill has become so complicated that it is a mystery to everybody in Washington. Congress will have to pass it to find out how it works.”

   

  

  Copy of the actual “Of All Things” joke as it appeared in the New Yorker, Aug 14, 1937

   

  The joke made a reappearance in a “Grin and Bear It” cartoon by George Lichty in the Mar. 12, 1947 issue of the Los Angeles Times:

   

  

  “I admit this new bill is too complicated to understand….we’ll just have to pass it to fin out how it works!” – the “senate committee on new legislation” in action.

  The problem is that Ms. Pelosi didn’t intend to make a joke. There is actually a serious background to the joke – as George Madison once said:

  “It will be of little avail to the people that the laws are made by men of their own choice if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood.”

  Unfortunately the entire body of law is these days “so voluminous it cannot be read” and “so incoherent it cannot be understood” – characteristically, not even by those passing the laws. One suspects this is by design, as it is the easiest way to make sure that a potential criminal is made out of everybody (sometimes, as in Dennis Hastert’s case, this can lead to poetic justice being delivered).

  

  

  

  

  

• Cyberwars Escalate With US NSA As "Crown Creators Of Cyberespionage"

  Those who follow the constant barrage of geopolitical headline hockey might have noticed that this has been the year of the cyberattack. 

  As we’re fond of chronicling, what started with an alleged attempt on the part of Kim Jong Un to sabotage a James Franco and Seth Rogen premier and what took a turn for complete absurdity when Penn State claimed Chinese hacker spies had taken control of the engineering department, turned rather serious with the OPM breach, the scope of which is still not fully understood. 

  The incessant cyber espionage talk along with the creation (by Washington) of a kind of cyber “axis of evil” that of course includes all of the usual suspects including China, Russia, North Korea, and Iran, has led directly to discussions of how to effectively conduct cyber warfare. The Pentagon laid out a somewhat vague strategy earlier this year and now WSJ has more on what’s being billed as a “digital arms race”: 

  A series of successful computer attacks carried out by the U.S. and others has kicked off a frantic and destabilizing digital arms race, with dozens of countries amassing stockpiles of malicious code. The programs range from the most elementary, such as typo-ridden emails asking for a password, to software that takes orders from a rotating list of Twitterhandles.

   

  The proliferation of these weapons has spread so widely that the U.S. and China—longtime cyber adversaries—brokered a limited agreement last month not to conduct certain types of cyberattacks against each other, such as intrusions that steal corporate information and then pass it along to domestic companies. Cyberattacks that steal government secrets, however, remain fair game.

   

  In total, at least 29 countries have formal military or intelligence units dedicated to offensive hacking efforts, according to a Wall Street Journal compilation of government records and interviews with U.S. and foreign officials.

   

  Some 50 countries have bought off-the-shelf hacking software that can be used for domestic and international surveillance. The U.S. has among the most-advanced operations.

   

  In the nuclear arms race, “the acronym was MAD—mutually assured destruction—which kept everything nice and tidy,” said Matthijs Veenendaal, a researcher at the NATO Cooperative Cyber Defence Centre of Excellence, a research group in Estonia. “Here you have the same acronym, but it’s ‘mutually assured doubt,’ because you can never be sure what the attack will be.”

   

  Governments have used computer attacks to mine and steal information, erase computers, disable bank networks and—in one extreme case—destroy nuclear centrifuges.

   

  Nation states have also looked into using cyberweapons to knock out electrical grids, disable domestic airline networks, jam Internet connectivity, erase money from bank accounts and confuse radar systems, experts believe.

  Amusingly, WSJ got a shot in at the Assad government because after all, now that anti-regime forces are on the run, it’s all hands on deck with the Western media propaganda campaign:

  “It’s not like developing an air force,” in terms of cost and expertise, said Michael Schmitt, a professor at the U.S. Naval War College and part of an international group studying how international law relates to cyberwarfare. “You don’t need to have your own cyberforce to have a very robust and very scary offensive capability.”

   

  For example, hackers aligned with the Syrian government have spied into the computers of rebel militias, stolen tactical information and then used the stolen intelligence in the ongoing and bloody battle, according to several researchers, including FireEye Inc.

  Then there is the obligatory shot at the Russians:

  Russian hackers have targeted diplomatic and political data, burrowing inside unclassified networks at the Pentagon, State Department and White House, also using emails laced with malware, according to security researchers and U.S. officials.

   

  They have stolen President Barack Obama’s daily schedule and diplomatic correspondence sent across the State Department’s unclassified network, according to people briefed on the investigation. A Russian government spokesman in April denied Russia’s involvement.

   

  “Russia has never waged cyberwarfare against anyone,” Andrey Akulchev, a spokesman for the Russian Embassy in Washington, said in a written statement Friday. “Russia believes that the cybersphere should be used exclusively for peaceful purposes.”

  And finally, there’s a reference to the hilarious incident documented here earlier this year wherein Obama spied on Netanyahu only to discover that Netanyahu was spying on Obama:

  Even Israel, a U.S. ally, was linked to hacking tools found on the computers of European hotels used for America’s diplomatic talks with Iran, according to the analysis of the spyware by a top cybersecurity firm. Israeli officials have denied spying on the U.S.

  Here’s an inforgraphic that shows which countries employ which specific types of cyber sabotage:

  

  But the good news, as WSJ cheerfully reminds us, is that “many cybersecurity experts consider the U.S. government to have the most advanced operations [and the NSA to be] the crown creator of cyberespionage.”

  Which is great. Unless it’s you they’re spying on…

  

  

  

  

  

• Oct 13th – Fed's Evans's expects 3 hikes by end of 2016

  EMOTION MOVING MARKETS NOW: 44/100 FEAR

  PREVIOUS CLOSE: 44/100 FEAR

  ONE WEEK AGO: 32/100 FEAR 
  ONE MONTH AGO: 14/100 EXTREME FEAR

  ONE YEAR AGO: 1/100 EXTREME FEAR

  Put and Call Options: NEUTRAL During the last five trading days, volume in put options has lagged volume in call options by 29.76% as investors make bullish bets in their portfolios. This is a lower level of put buying than has been the norm during the last two years and is a neutral indication.

  Market Volatility:  NEUTRAL The CBOE Volatility Index (VIX) is at 16.17. This is a neutral reading and indicates that market risks appear low.

  Stock Price Strength: FEAR The number of stocks hitting 52-week lows exceeds the number hitting highs and is at the lower end of its range, indicating fear.

   

  PIVOT POINTS

  EURUSD | GBPUSD | USDJPY | USDCAD | AUDUSD | EURJPY | EURCHF | EURGBP| GBPJPY | NZDUSD | USDCHF | EURAUD | AUDJPY 
  

  S&P 500 (ES) | NASDAQ 100 (NQ) | DOW 30 (YM) | RUSSELL 2000 (TF) | Euro (6E) |Pound (6B)

  EUROSTOXX 50 (FESX) | DAX 30 (FDAX) | BOBL (FGBM) | SCHATZ (FGBS) | BUND (FGBL)

  CRUDE OIL (CL) | GOLD (GC) | 10 YR T NOTE | 2 YR T  NOTE | 5 YR T NOTE | 30 YR TREASURY BOND| SOYBEANS | CORN

   

  MEME OF THE DAY – NO HIKE! TOLD YOU FOOL!

   

  UNUSUAL ACTIVITY

  MCK OCT 190 CALLS 2k+ @$1.66-1.70

  CI OCT 140 Call Activity 1500 @ 0.40 on the offer

  RIT 10% Owner P    4,860  A  $ 12.6705   P    16,700  A  $ 12.8423

  FXCM .. SC 13G .. Franklin Resources .. 13.5%

  NSR .. SC13G Filed .. William Blair Investment Management, LLC .. 11.38%

  More Unusual Activity…

  HEADLINES

   

  S&P sees 2015 U.S. growth at 2.5%, 2016 at 2.8%, and 2017 at 2.7%

  S&P sees U.S. Q3 15 CPI at -0.2%, +0.5% in Q4, +2% in Q1 and Q2

  Fed’s Evans’s expects 3 hikes by end of 2016

  Fed’s Lockhart repeats: Appropriate to hike in 2015, but Fed data-dependent

  Fed’s Fischer says central bank ‘cautious’ about next rate hike

  US NABE Outlook Survey: Expect 2.5% to 2.8% Growth Though 2016

  PBOC’s Yi: China’s Stock-Market Correction Almost Over

  PBOC to let commercial banks use loan assets as collateral

  ECB’s Coeure Says Too Early To Decide On More Stimulus

  ECB’s Vasiliauskas: For the Moment, No Need to Fine-Tune QE

  BoC Poloz: BoC examining ties between financial stability and monpol

  BOE Weale Optimistic Western European Productivity To Rebound

  Opec: Oil Market To Rebalance As US Supply Hit

  Vix tumbles in longest losing streak since ’09

  AB InBev raises bid for SABMiller to $103bn

  Dell agrees $67bn EMC takeover

  Italy plans EUR2.2bn rescue of three small banks

   

  GOVERNMENTS/CENTRAL BANKS

  Fed’s Evans’s expects 3 hikes by end of 2016 –ForexLive

  Fed’s Lockhart repeats: Appropriate to hike in 2015, but Fed data-dependent –Rtrs

  Fed’s Fischer says central bank ‘cautious’ about next rate hike –MW

  S&P sees 2015 U.S. growth at 2.5%, 2016 at 2.8%, and 2017 at 2.7%

  S&P sees U.S. Q3 15 CPI at -0.2%, +0.5% in Q4, +2% in Q1 and Q2

  US NABE Outlook Survey: Expect 2.5% to 2.8% Growth Though 2016 –MNI

  ECB’s Coeure Says Too Early To Decide On More Stimulus –CNBC

  ECB’s Vasiliauskas: For the Moment, No Need to Fine-Tune QE –WSJ

  EU: Spain’s Budget Plans Would Break Spending Rules –WSJ

  BoC Poloz: BoC examining ties between financial stability and monpol –Rtrs

  BOE Weale Optimistic Western European Productivity To Rebound –MNI

  UK draws up plan of key demands to stay in EU –Tele

  HSBC sees BOE hiking rates by 0.5% in 2016 –ForexLive

  U.K. Europe Minister Casts Doubt on Late-2017 Referendum Date –BBG

  Riksbank’s Floden: Not certain that inflation will rose as forecast –DI via BBG

  FIXED INCOME

  Bonds biding time for Fed interest rate hike –FT

  Dell to add $50bn in debt to acquire EMC –BBG

  FX

  USD: Fed keeps US dollar on the defensive –Rtrs

  GBP: Pound Gains Versus Dollar as Traders Await Signs From BOE, Data –BBG

  EUR: Euro Approaches 1.14 vs the dollar –WSJ

  AUD: Aussie rises for ninth day on commodities rebound –Age

  COMMODITY FX: Resurgent commodity prices push dollar down –Livemint

  ENERGY/COMMODITIES

  CRUDE: WTI futures settle 5.1% lower at $47.10 per barrel

  CRUDE: Brent futures settle 5.3% lower at $49.86 per barrel

  CRUDE: Opec: Oil Market To Rebalance As US Supply Hit –FT

  CRUDE: Kuwait Oil Minister Says No Calls Within OPEC For Policy Change –CNBC

  METALS: Rio Tinto won’t follow Glencore in cutting copper output –Australian

  METALS: Chile Mining Minister: Not enough copper output cuts to balance the market –BBG

  NATGAS: Natural Gas Prices Rise on Colder Forecasts –WSJ

  NATGAS: Gazprom Restarts Gas Deliveries to Ukraine –WSJ

  EQUITIES

  VOL: Vix tumbles in longest losing streak since ’09 –FT

  M&A: Dell agrees $67bn EMC takeover –BBC

  M&A: AB InBev raises bid for SABMiller to $103bn –FT

  M&A: SABMiller’s fourth largest investor rejects AB InBev offer –Rtrs

  M&A: GE nears deal to sell over $30 billion of loans to Wells Fargo –Rtrs

  M&A: Allianz sells vending machine operator Selecta to KKR –Rtrs

  C&E: Oil Price Slide Puts a Lid on Gains in Other Sectors –WSJ

  BANKS: Barclays Close To Naming Jenkins Successor –Sky

  BANKS: Italy plans EUR2.2bn rescue of three small banks –Rtrs

  BANKS: Three groups bid for $20 bln book of ex-Northern Rock loans –Rtrs

  BANKS: DB plans Abbey Life sale to focus on core biz –WSJ

  AUTOS: Volkswagen has announced the recall of 1,950 diesel vehicles in China –Sky

  AUTOS: S&P Downgrades Volkswagen?s Credit Rating –WSJ

  PHARMA: Eli Lilly and China’s Innovent Expand Partnership –WSJ

  PHARMA: Fitch Affirms Roche at ‘AA’; Outlook Stable

  Twitter Slides After Report of Potential Layoffs

  CON DISC: Tobacco Firms Tried to ‘Delay and Derail’ UK Plain Packaging Law –WSJ

  TECH: Facebook launches new advert gizmo –Rtrs

  EMERGING MARKETS

  PBOC’s Yi: China’s Stock-Market Correction Almost Over –MW

  PBOC to let commercial banks use loan assets as collateral as a way to boost lending –WSJ

  Chinese FinMin Lou Says US Shouldn’t Raise Rates Yet –MW

  Fitch Affirms Roche At ‘AA’; Outlook Stable

  

  

  

  

  

• Leaving The Eye Of The Hurricane

  Submitted by Jeff Thomas via InternationalMan.com,

  In the early 2000’s, there were those economists and investors who believed that the U.S. was headed for an economic fall – that the repeal of the Glass-Steagall Act in 1999 would allow the financial institutions to enter into widespread reckless loan practices that would lead to a housing crash. And that that crash would lead to a stock market crash that would herald in The Great Unravelling – The Greater Depression.

  Most of us who made these predictions hypothesized that the initial collapse would be significant, but not severe – that the governments of the world would come to the rescue with bailout programmes that would stave off the symptoms of the problem, but would do nothing to cure the disease itself – that of massive debt.

  We suggested that there would be a false recovery, resulting in the easing of symptoms. There would be repeated claims by both governments and the media that “recovery is nigh.” However, underneath all the folderol, the disease would worsen considerably, eventually reaching the point at which the patient (the economy) could not be saved. At some point, public confidence in the leaders’ abilities to resuscitate the body would fade. This would be triggered by some event or events, such as a crash in the stock or bond market, a dumping of debt back into the U.S. by creditor nations, debt default by Greece or some other nation, commodity price spikes, backlash from sanctioned nations, the imposition of protective tariffs – any one of a dozen possible triggers would do the trick. From that point on, each of the other triggers would eventually occur, as toppling dominoes, fulfilling the prediction of Depression.

  Only in this latter period would the dreaded “D-word” be acknowledged by the governments and media.

  Most prognosticators (myself included) went on the general assumption that the initial collapse would last two to three years and that the following “suspension” period of bailouts and other attempts to paper over the problem might last another three years or so. During this period, conditions would not be good, but they would be better than the conditions during the initial crash and far better than the conditions that would follow the suspension period. Not surprisingly, many of us came to refer to this period as “the eye of the hurricane,” an apt term, as the eye of a hurricane is a period of relative calm after the first onslaught of the storm and just prior to the inevitable and often more devastating second half.

  The second half of the economic storm will prove to be far more devastating than the first, since the fact that its onset will mean that the governments of the world have already thrown everything they have at the problem and will be out of ammunition in the second half.

  In a sense, we could suggest that governments have done a good job in staving off the inevitable, since the eye of the hurricane has lasted more than five years (longer than most of us had expected). Unfortunately, the level of debt created in the attempt to postpone the inevitable assured that every month of postponement meant that the eventual crash would be that much worse, and that the recovery would be that much more prolonged.

  But, if the assumption is correct that there will be a second, more devastating, half of the storm, when will it be? Well, an actual date would be impossible to predict with accuracy, but we can look at the possible triggers and ask ourselves if we’re getting closer. Recently, we’ve observed a very near miss on debt default by Greece. We’ve witnessed a crash in the Chinese stock market, coupled with several downgradings of the yuan, causing a significant drop in the U.S. stock market. Further, although it hasn’t received the media attention it should receive, China has been dumping U.S. Treasuries back into the U.S. in a significant way. One prominent candidate in the U.S. presidential elections is calling for the imposition of protective tariffs and has received cheers from voters for his “courageous” position. (The reader might study the Smoot-Hawley Tariff Act of 1930 if he is uncertain of just how disastrous protective tariffs can prove to be.)

  Readers of this column will already be aware of what may be heading their way, economically, politically, and socially, as we once again enter the hurricane. (Others may check the International Man archive to learn more.)

  In past generations, when folks observed warning signs of an approaching storm, they would often ask Grandpa if his arthritis was giving him trouble, as any dramatic change in barometer pressure is both an irritation to arthritis and a warning of dramatic change in weather.

  Today, in questioning whether we’re reaching the far side of the hurricane, we might do much the same. There are a number of old-timers out there who have tracked economic trends for decades. Those who have developed a reputation for successful prediction tend to go as much by “feel” as by analysis.

  For several months, in communicating with the economic “Grandpas” around the world, the reaction I’ve received from them has been as though they’re all sitting in their rockers on the same porch together. Every one of them is saying the same thing – “It’s really beginning to ‘feel’ close. The first major event could happen anytime now.”

  But, rather than be alarmist, it can also be said that the magicians who run the world’s governments may yet come up with another delay or two. The question for the reader is whether he wishes to put off dealing with the coming hurricane until it’s on his doorstep or whether he’d rather be prepared when the time comes. As it is, the palm fronds are blowing and Grandpa’s joints are getting stiff.

  This might be a good time to get the lawn furniture in and to close up the shutters.

  For those who wish to be the least impacted by the hurricane, this would be the time to (if possible) prepare an overseas bolthole, move funds away from any jurisdiction that’s likely to confiscate or impose capital controls, and move investments out of stocks and bonds and into real estate in a jurisdiction that’s at lesser risk, and into precious metals – to be stored in a jurisdiction where the government has a reputation for low taxation and non-invasiveness into private wealth.

  The coming storm promises to be the largest of our lifetime. We shall all be affected by it. A few will profit from it. Some will be mildly negatively impacted; most will be hit hard, due to being unprepared.

  Those who choose to distance themselves (and their wealth – however large or small) geographically from the centre of the hurricane will fare best.

  

  

  

  

  

• The Dummy's Guide To The Syrian Conflict

  Russia’s intervention has made the complex pattern of alliances and enmities in Syria still more intricate. As The Guardian notes, the Assad regime and its local opponents are backed to differing degrees and in different configurations by military powers from near and far, so here is your cocktail-party-napkin-sized guide to who supports/opposes whom in Syria.

  Consider it the Middle East’s own “dot plot”

   

  

   

  All “dots” subject to change.

  Source: The Guardian

  

  

  

  

  

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