Month: August 2014

Costs indeed…

 

 

Source: Cagle

h/t Sunday Funnies

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With all of England on edge because the ISIS executioner of James Foley, known as “Jihadi John” sported a British accent, and who may or may not have been identified as Abdel-Majed Bary, although UK government sources have not yet officially revealed his identity, one person has decided it is time to not waste yet another crisis. The person: London mayor Boris Johnson who as the Guardian reports, has called for the presumption of innocence to be reversed in cases where Britons travel to Iraq or Syria and said he wants the jihadist who beheaded an American journalist to be killed in a bomb attack. If Johnson’s proposal for a “swift and minor” law change passes, any Brit traveling to Iraq or Syria will automatically be branded a terrorist and suffer the appropriate consequences.

More on this stunning attempt to overhaul the most basic right of law:

The Mayor of London, who has overall responsibility for the Metropolitan Police, said legislation should be introduced so that anyone visiting those countries would be automatically presumed to be terrorists unless they had notified the authorities in advance, and joined growing calls for Britons fighting abroad to be stripped of their citizenship.

 

Johnson said Britain must take on the Islamic State (Isis) and “try to close it down now”, warning that doing nothing would mean a “tide of terror will eventually lap at our own front door”.

 

Writing in his Daily Telegraph column, Johnson said most Britons wanted “someone to come along with a bunker buster” and kill the man, reported to be British, “as fast as possible”.

Johnson had no comment on whether ISIS would have ever arisen as a credible, terrorist force had the grand “liberating” western alliance not come along with a bunker buster (or few thousand) against the Assad regime 2 years ago, and in the process funded the very Syrian “rebels” who subsequently morphed into the bloodthirsty sect which is too extreme even for al-Qaeda.

Johnson said those who “continue to give allegiance to a terrorist state” should lose their British citizenship and called for a “swift and minor change” to the law so there was a “rebuttable presumption” that those visiting war areas without notifying the authorities had done so for a terrorist purpose.

 

“We need to make it crystal clear that you will be arrested if you go out to Syria or Iraq without a good reason,” he wrote. “At present the police are finding it very difficult to stop people from simply flying out via Germany, crossing the border, doing their ghastly jihadi tourism, and coming back.”

 

The mayor said that while Britain’s recent military interventions had left the nation reluctant to wade into overseas conflicts, “doing nothing is surely the worst of all” and warned that the Isis “wackos” must be tackled.

 

“What is the point of having a defence budget, if we don’t at least try to prevent the establishment of a terrorist ‘caliphate’ that is profoundly hostile to civilised values?” he wrote.

Of course, all of the above is beyond ironic, because let’s flash back to that Reuters report from July 2013, in which we read that ‘Britain has granted billions of pounds worth of military export licences for countries such as Syria, Iran and Libya despite proclaiming deep concerns about their human rights records, the British parliament said on Wednesday. In a critical report, parliament’s Committees on Arms Export Controls said Britain had approved licences for weapons exports to 27 countries worth 12.3 billion pounds highlighting the “inherent conflict” between its arms exports policy and its human rights policy.”

“The government should apply significantly more cautious judgements when considering arms export licence applications for goods to authoritarian regimes ‘in contravention of the government’s stated policy’,” said John Stanley, the chairman of the committees.

 

[The report] said such exports might contravene the government’s own policy not to supply goods to countries on its list of human rights concerns where any items exported “might be used to facilitate internal repression”.

 

The report gave details of 3,074 licences for the export of “strategic controlled goods”, which can have dual military and civilian use. The products covered by the licences ranged from communications equipment to body armour and sniper rifles.

One can only assume that UK arms exporters will be exempt from this “swift and minor” law change.  After all, how else can the UK create the very “humanitarian” crises it then seeks to abuse by crushing basic civil liberites.

And a follow up question: if and when the UK is successful in passing a law that brands one a terrorist simply for flying to a designated country, how long before other “humanitarian, democratic” stalwarts such as the US do the same? And how long before the list of deisgnated countries expands from just Syria and Iraq and encompasses any nations that dare to opine against a world in which the existing western superpower status is rapidly eroding.

We fear we will know the answer soon enough.

via Zero Hedge http://ift.tt/1p9pNEI Tyler Durden

Authored by Scott Minerd via Guggenheim Investments,

Don’t Fight the U.S. Treasury Bond Rally – U.S. Interest Rates Could Head Significantly Lower.

The consensus among market watchers last September was that, with U.S. interest rates so low and the U.S. Federal Reserve (the Fed) about to withdraw stimulus, interest rates would trend higher. I took a different view, writing in a commentary that “10-year rates may be heading back to 2.25 percent or lower.”

When 10-year Treasury yields ended 2013 at 3.02 percent, some may have thought I had taken the wrong end of the bet. But in early August, 10-year Treasury yields went as low as 2.35 percent and I believe the path of least resistance on interest rates is still lower.

A number of factors have helped push Treasury yields lower. With yields on German 10-year Bunds dipping under 1 percent for the first time and Japanese government bonds yielding around 50 basis points, Treasuries look comparatively attractive. Add to that the perception that both the yen and euro are a one-way bet toward depreciation and it is reasonable to expect that international capital will continue flowing toward the U.S., pressuring Treasury yields down as quantitative easing draws to an end.

Tensions from Ukraine to Iraq have added to a flight-to-quality trade, boosting demand for U.S. Treasuries. With the size of incremental U.S. government borrowing also expected to decline because of shrinking federal budget deficits, Treasury yields could move lower.

Reduce Rate Risk

My original forecast of 2.0 to 2.25 percent still seems reasonable. Nevertheless, markets do not move in straight lines, so yields could retrace to 2.5 percent in the near term. Ultimately, as rates head back toward 2 percent portfolio managers should use the rally to reduce interest rate risk.

As anyone experienced in investing in the U.S. mortgage market knows there is a phenomenon that traders call the “refi bid.” When interest rates fall, a larger percentage of mortgages become economically attractive to refinance at a lower interest rate.

Whenever a threshold is breached where a large amount of mortgages make attractive refinancing candidates, prepayments spike up dramatically and portfolios that own mortgages have a sudden surge in cash. This causes portfolio duration to shorten and leads to a need to buy longer duration assets in order to maintain the target portfolio duration. This demand surge can result in a sudden and dramatic decline in rates.

Currently, I estimate that the next “refi level” will hit when the 10-year Treasury yield drops to about 2.25 percent.

An unusual feature of this potential wave of mortgage refinancing is that the vast majority of U.S. mortgages are on the cusp of being candidates for refinancing, given the relative stability of mortgage rates over the past year or so.

Additionally, there is one dominant holder of these mortgage securities that has vowed to reinvest in new mortgages as prepayments come in—the Fed.

Traditionally, in a refinancing rally, spreads on mortgage-backed securities (MBS) widen due to increased prepayment risk and expected increases in supply. Spreads will not widen on this occasion to the same extent as during previous refi rallies for a number of technical reasons.

Among those reasons is that the Fed, the biggest mortgage investor on the block, has made clear it will reinvest principal repayments dollar for dollar. Normally, the widening in mortgage spreads mutes the impact of the rate decline on mortgage rates, slowing the pace of refinancing.

This time, advertised mortgage rates are likely to fall more rapidly than in prior refi experiences.

Selling Opportunity

Given the likely rapidity of the interest rate decline, the potential for shortening in the duration of fixed-income investment portfolios could further intensify the current rally and lead to a more extreme decline in rates than would normally be anticipated.

Declining mortgage rates will also give a lift to housing affordability, which could help clear unsold inventories of homes and support new construction activity. This would further support the U.S. economy.

Ultimately, this expected run-up in bond prices and the associated decline in interest rates should prove unsustainable once the refinancing bid is past. For the near term, risks favor lower interest rates – perhaps sharply lower. In the medium term, as the economy strengthens further, this rally will reverse itself and will have proven to be a selling opportunity.

It is premature to sell now, but as 10-year U.S. Treasury yields approach 2 percent it should provide an opportunity for rebalancing portfolios. In other words, don’t chase the rally, but don’t fight it either. The opportunity to sell bonds is coming – but not just yet.

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Mt Gox may be long gone in the annals of bankruptcy, but its founder refuses to go gentle into that insolvent night. And, as CoinDesk reports, the disgraced former CEO of the one-time premier bitcoin trading platform has decided to give it a second try by launching new web hosting service called Forever.net and is registered under both Karpeles’ name and that of Tibanne, the parent company of Mt Gox.

From the company profile:

“TIBANNE Co.Ltd. is a Tokyo, Japan-based corporation founded in 2009 by talented technopreneurs. TIBANNE specializes in web hosting, IP transit, VoIP, software development and network administration. We are currently engaged in the reserch and development of new and existing services to produce innovative solutions for our clients.”

As CoinDesk notes, while Mark Karpeles has managed to keep a relatively low profile following the collapse of Mt Gox, he is willing to talk about other projects.

“Unlike other subjects, I am able to discuss Forever.net,” he told NewsBTC’s Eric Calouro.

 

In an email exchange with Calouro, Karpeles said Tibanne has been in the web hosting business for years. “We’ve been doing this since 2009, and even before founding Tibanne I help found a couple other hosting companies,” he said.

 

Going into details on his new company’s offerings, Karpeles said Forever.net will offer cluster-backed VPS servers with RAID1 on top of RAID 5 physical storage with hot spare drives on standby.

Here’s to hoping that unlike his most famous previous venture the data stores on Karpeles’ new servers won’t just… disappear.

And speaking of bitcoin, so far there is no mention of this electronic currency anywhere on the site. This may change though:

Karpeles explained that Tibanne experienced a substantial loss of revenue due to the collapse of Mt Gox, coupled with an increase in legal costs. Now Tibanne is focusing on controlling expenses and generating revenue in an effort to “do its part in the Mt Gox bankruptcy process”, he said

 

“We are also considering accepting payments in BTC/LTC/etc.” said Karpeles. “Tibanne’s other hosting service KalyHost.com has been accepting BTC since Sept. 2010 and generated since then a total revenue of over 13,000 bitcoins.” Karpeles added that Tibanne will soon be releasing a new version of KalyHost.com as well.

 

The collapse of Mt Gox was caused by the alleged theft of about 850,000 BTC, although 200,000 BTC was recovered from an outdated wallet following the collapse.

Which also means that some 650,000 BTCs are still “out there” somewhere, despite bitcoin’s much vaunted ability to track down and reverse any public theft. What it means about Karpeles ability to run a business in which every bit matters we leave up to readers.

As for Forever.net, somehow we feel that the irony of Karpeles’ attempt to return to the spotlight starts with the name itself.

via Zero Hedge http://ift.tt/1vfxfQY Tyler Durden

As Iran continues to negotiate with world powers over its controversial (but purely for peaceful purposes, of course) nuclear program – with hard-liners demanding more concessions from the West – The Telegraph reports that a brief video, which aired on the Arabic-language Al-Alam TV, shows what the channel says are parts of an Israeli drone, scattered in an unidentified desert area. Text accompanying the footage says the drone was downed on Saturday and identifies it as a Hermes 450, a known Israeli model. The Iranian TV station also says the model is dubbed “Spy Goddess.” However, as The Telegraph adds, there were no visible Israeli markings in the footage and Israel’s military has declined comment on the matter… and Iran will sue Israel legally over its alleged violation of Iran’s air space.

The Iran State TV footage…

 

Read more here…

But then…

Iran will sue Israel legally over its alleged violation of Iran’s air space, Iranian Foreign Ministry spokeswoman Marzieh Afkham said here on Monday following reports that Iran had downed an Israeli stealth drone in its airspace.

 

“We will take a proper defensive measure over the clear violation of our country’s integrity, and we preserve the right to follow up the issue in the legal and international bodies,” Afkham was quoted as saying by official IRNA news agency.

 

Iran will give a crushing response to any enemy aggression against its soil, Iranian military officials also said on Monday.

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Now that Q2 earnings season is over, here is a summary of how all those hundreds of billions in stock buybacks have done.

According to Deutsche Bank, in Q2 EPS, or rather non-GAAP EPS, for S&P 500 stocks rose to $29.50, an impressive increase of 7.9% from the $27.23 a year earlier. This follows a not too shabby 4.4% increase in Q1’s Y/Y increase from $26.76 to $27.95.

The problem, as we showed last quarter in “The Truth About First Quarter S&P 500 Earnings“, is that virtually all of this increase is due to non-GAAP adbacks, in effect nullifying the impact of the major drop in shares outstanding as companies scramble hand over fist to issue debt and buyback their float. In fact, as we showed last quarter, GAAP EPS declined 2.2% Y/Y.

So what about GAAP Q2 EPS: the answer – a nearly meaningless 1.8% increase, or over four times less than the non-GAAP increase.

So how does the GAAP vs non-GAAP change compare for Q1 and Q2? We show it in the chart below.

Finally, now that we can compile the first half data using the first two quarter data for both 2013 and 2014, we can conclusively state that if it weren’t for the accounting magic behind non-GAAP, which includes such addbacks as tens of billions in litigation costs for the TBTBF utilities, pardon banks, pension addbacks, and not to mention hundreds of billions in restructuring addbacks resulting from the mass termination of hundreds of thousands of workers who miraculously fail to trickle through to the BLS’ own “survey” data, things would hardly be as rosy as portrayed by the sellside. In fact, EPS growth in the first half was either 6.5%… or 0.2%. Depending on whether or not one believes in accounting magic.

 

Finally, those wondering what the benefit from buybacks to the bottom line has been, here is the breakdown, as well as the EPS growth by sector.

In other words, excluding buybacks, GAAP EPS in the first half would have been negative.

To summarize: for all your non-GAAP adjusted “magical” accounting, “growth” propaganda, there is the mainstream media. For everything else, there is Fed-induced multiple expansion.

Source: Deutsche Bank

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