Month: January 2016

On January 19, representatives from Libya’s rival factions negotiating in Tunis announced they had formed a unity government comprised of a new 32-member cabinet.

Yay.

Six days later, lawmakers for the country’s internationally-recognized Parliament in Tobruk rejected the proposal.

Damn.

“The Parliament rejected the 32-member cabinet out of concern that it was too large, and that its members had been chosen not for their competency but to satisfy various regional factions,” The New York Times said on Monday.

As a reminder, there are two governments in Libya, an internationally recognized body operating out of Tobruk in the country’s east (where the House of Representatives was exiled in 2014 after elections produced an outcome that wasn’t agreeable to Islamist elements in the west) and another group in Tripoli which claims to be the only legitimate authority.

The country’s inability to come to some manner of political consensus has opened the door for ISIS which recently mounted a series of assaults on the country’s oil infrastructure. Earlier this month, Libya’s National Oil Corp issued a “cry for help” in the midst of the fighting. “Pray for us,” a spokesman for Ibrahim Jadhran (the militia leader who controls the forces tasked with guarding the nation’s oil) said.

“[Islamic State’s] objective is to prevent the new government from stabilizing the economy, and unless they are stopped, they might succeed in their aims,” Mustafa Sanalla, the head of Libya’s state oil company warned on Sunday.

Even if officials in Tobruk manage to float a proposal that’s agreeable to their rivals in Tripoli, there’s little chance the fledgling government will be able to consolidate in time to halt the ISIS advance which means it’s time once again for the Western powers to get involved. Here’s The New York Times:

The Pentagon is ramping up intelligence-gathering in Libya as the Obama administration draws up plans to open a third front in the war against the Islamic State. This significant escalation is being planned without a meaningful debate in Congress about the merits and risks of a military campaign that is expected to include airstrikes and raids by elite American troops.

 

That is deeply troubling. A new military intervention in Libya would represent a significant progression of a war that could easily spread to other countries on the continent. It is being planned as the American military burrows more deeply into battlegrounds in Syria and Iraq, where American ground troops are being asked to play an increasingly hands-on role in the fight.

 

Gen. Joseph Dunford Jr., the chairman of the Joint Chiefs of Staff, told reporters on Friday that military officials were “looking to take decisive military action” against the Islamic State, or ISIS, in Libya, where Western officials estimate the terrorist group has roughly 3,000 fighters.

Administration officials say the campaign in Libya could begin in a matter of weeks.

 

They anticipate it would be conducted with the help of a handful of European allies, including Britain, France and Italy. The planning is unfolding amid political chaos in Libya, which continues to reel from the aftermath of the 2011 civil war that ended with the killing of the country’s longtime dictator, Col. Muammar el-Qaddafi.

“Unchecked, I am concerned about the spread of ISIL in Libya,” Dunford told reporters on Friday, before saying that “military leaders owe [Defense Secretary Ash Carter and President Barack Obama] a way ahead for dealing with the expansion of ISIL in Libya.”

And so, the US now finds itself in a familiar situation.

Washington toppled a dictator leaving a power vacuum that still has not been filled five years later and now, with the country in chaos, the US is headed right back to Libya to fight off ISIS which, in an irony of ironies, was a tool Washington and its regional allies used to topple another dictator in Syria.

In other words, the US-backed effort to bring about regime change in Syria has now spilled over into Libya, a failed state that had already descended into lawlessness thanks to a previous regime change effort by America. 

Washington’s individual efforts to meddle in Mid-East affairs have now seemingly all melded into one giant, bloody melee and incredibly, America’s solution is to go right back in and meddle some more. 

What could possibly go wrong?

via Zero Hedge http://ift.tt/1Qt3G6T Tyler Durden

As readers will recall, one of the bullish catalysts that pushed the market off its August 24 ETFlash Crash lows was an email sent by Tim Cook to Jim Cramer of all people (one which still hasn’t been 8-K’ed), in which AAPL’s CEO said the following:

“I get updates on our performance in China every day, including this morning, and I can tell you that we have continued to experience strong growth for our business in China through July and August. Growth in iPhone activations has actually accelerated over the past few weeks, and we have had the best performance of the year for the App Store in China during the last 2 weeks.”

As we subsequently showed using channel check data from GfK looking at AAPL Chinese sell-throughs, the realty was vastly different.

Five months later, Tim Cook was forced to finally admit the truth when on last night’s conference call he said that “we began to see some signs of economic softness in Greater China earlier this month, most notably in Hong Kong.”

Alas, Cook was once again disingenuous by saying that softness appears only “earlier this month” because as we again showed in early in November, AAPL had cut component orders with its core suppliers by as much as 10%, a clear indication it was well aware of Chinese weakness ahead of time.

But all that is in the past, and what AAPL longs want now is some clarity that the future is not only stable but improving. Alas, they won’t get it.

According to Brightwire, one of China’s top online vendors, JD.com, has just cut the prices of Apple products by “as much as 17% in sale ahead of Chinese New Year” or precisely the time when there should be no need for heavy discounting.

As Brightwire adds, “JD.com cut prices of Apple products on the internet marketplace by as much as 17%, according to information on the JD website. Customers can also purchase Apple products in 12 monthly installments with no interest charges and no downpayment.”

Among the discounts, iPad Air tablet with 16GB memory is priced at CNY 2,399 (USD 365), compared with CNY 2,888 on the Apple online store in China. The iPhone 6s Plus handset with 64GB memory is priced at CNY 6,288, compared with the official price of CNY 6,888.

 

The special sale ahead of the Chinese New Year holiday will span from Jan. 27 to Feb. 5, according to JD.com. The internet company also gives out cash coupons for purchases of a certain amount.

The question is whether once the discount period runs out and the much neded demand fails to materialize, how much greater will AAPL’s margin-crushing discounts have to get for already waning top-line momentum to persist.

For many former AAPL bulls, the answer is irrelevant and with the stock now 30% from its all time highs, they have decided to pack up and leave.

via Zero Hedge http://ift.tt/1SbKVJ4 Tyler Durden

Detailed analysis of economic data is a dying art.

 

As Bloomberg's Mark Cudmore notes, confirming the detailed and depressing reality of Citi's Matt King, all that investors seem to care about is the performance of financial assets and the related reaction of central banks.

The past seven year bull-market has largely justified the logic of such an approach, but the frenzied panic of the last month raises the question of whether investors will know how to adapt if the framework changes again.

It’s worth debating whether recent market ructions offer the first evidence that central banks may be near the limit of their ability, or their willingness, to keep pumping up asset prices. An affirmative answer to either would be scary for investors.

The scale of stimulus from the Bank of Japan is already unprecedented, yet an increasing number of analysts are crying out for even more. Many are hoping the Fed will support markets by acknowledging their rate-hiking plans have been overly aggressive.

There’s a lot of raucous concern about a correction that is focused around "Wall Street." However, on "Main Street," unemployment isn't rocketing, house prices aren’t collapsing and even a small recession looks unlikely in any Group of 10 economy.

Some emerging-market economies are suffering greatly, but they’ve been doing so for a couple of years, and it didn’t seem a major concern when the S&P 500 was making record highs.

To be sure, the real economy isn’t in a wonderful place. Main Street’s still feeling the hangover from the pre-crisis boom years. The war against deflation is far from over. And financial market chaos won’t help.

But let’s not confuse a drop in asset prices with a real- economy meltdown. It was global central-bank policies that significantly reduced the correlation between the two during the last seven years –- and the link won’t immediately revert the moment speculators don’t get their way.

*  *  *

As Matt King so eloquently opined previously,

Ever since markets seemed to stop following fundamental relationships back in 2011, we have sought to discover what has been driving them instead. For a long time, developed markets QE seemed to provide the answer: correlations between changes in credit spreads or equities and global QE were, although not perfect, still much stronger than might have been expected for such a purely technical indicator, implemented largely not through equities and credit themselves but through government bond markets. The factor seemed to seep from one market to another: even from a US perspective, the global aggregate did a better job than looking at Fed QE alone.

 

But in March last year, the correlation which had been almost the sole guide to our positioning recommendations broke down: the ECB and BoJ were continuing to make the equivalent of over $300bn of asset purchases per quarter, yet rather than rallying 10% – as had been the relationship in the past for both credit and equities – markets sold off (figure 11).

 

One way the correlation could be made to work again was to expand the metric from pure QE to include all central bank liquidity injections – including emerging markets (Figure 12). The expansion of FX reserves previously was, after all, both another form of price-insensitive buying of DM government bonds, and (since it was financed almost entirely by an expansion of the EM domestic monetary bases) a form of global money printing.

 

We were initially, and remain, somewhat cautious as to whether this is the ‘right’ metric, especially in € where the QE is actually taking place. Now, of course, EMFX reserves are contracting rather than expanding (even when adjusted for exchangerate movements), and the exact mechanism by which this affects risky assets in developed markets is not entirely clear. And yet the quality of the correlation over the last few data points would seem to argue in this direction (Figure 13 & Figure 14).

 

 

Not only does including EMFX reserve changes help explain the sell-off in markets in the second half of last year; more powerfully, the temporary recovery in October and renewed relapse seem also to coincide, both in credit and in equities.

 

* * *

 

As we have argued for a while, it is not that we are straight bearish, and that these developments can only be resolved in a new crisis. Rather, it is the profound uncertainty, which comes in part from the potential for a regime change, and in part from the circular feedback loops at work in markets, which we have found it so hard to reflect in point forecasts and yet argued should be the central feature of investors’ portfolio positioning. What is concerning at present is that some policymakers still seem in denial about how interlinked everything is.

We hope that after they see the following chart, which shows not only DM net liquidity injections (i.e., q-easing), but also EM net liquidity outflows (i.e., quantitative tightening) and which explains not only the recent selloff, but also shows how to trade global central bank and sovereign wealth fund and reserve manager flows, all confusion and denial will end.

Or perhaps not. As King himself pessimistically concludes, "Perhaps if this sell-off fizzles out by itself, as it did last October, central banks will again be spared the need to face up to the distortive effect they have had upon markets, and can continue the pretence that markets are still following fundamentals. After all, for many of them, this has been the sell-off which ‘isn’t supposed to be happening’."

We couldn't have said it better ourselves.

via Zero Hedge http://ift.tt/1PF7IfD Tyler Durden

Fed Funds futures now imply the next rate hike will not occur until at least H2 2016 and this level of fear about the economy appears to have spooked stocks and crude and put a bid under bonds and bullion… VIX is chaos as the machines try desperately to get stocks higher…

 

Not Dovish Enough…

 

Bonds & Bullion bid…

 

And VIX is going crazy…

 

Someone do something!!

via Zero Hedge http://ift.tt/1ZTkt5K Tyler Durden

Well here we are, a month after liftoff and the world’s on fire again, just as it was in late August.

So far in 2016 we’ve seen continued pressure on crude and just as we saw late last summer, there’s big trouble in little China.

Meanwhile, US markets got off to an inauspicious start in 2016 logging what for a time was the worst start to a year in market history.

The last times things were this uncertain, Janet Yellen eschewed a planned September rate hike in favor of the ultra-dovish “clean relent” as the Fed admitted that its reaction function did indeed include not just financial markets, but foreign financial markets. 

On Wednesday, the FOMC stayed put at its no presser meeting (we know, we know, they’re all “live” meetings now days) and here to decipher the statement is Yellen mouthpiece and seer of seers, Jon Hilsenrath.

From WSJ

The Federal Reserve signaled renewed worry about financial market turbulence and slow overseas economic growth, but didn’t rule out raising short-term interest rates in March.

 

The central bank said in a statement released Wednesday it would hold its benchmark rate steady for now, between 0.25% and 0.5%, and is “closely monitoring” developments in global economies and markets.

 

The Fed said officials still believed the economy is on track to grow, produce jobs and gradually lift inflation to their 2% target, despite worries about falling stock and oil prices and uncertainty about overseas growth. However officials were agnostic on whether the outlook has fundamentally shifted in light of developments since the last meeting, a sign of some lack of conviction about their economic forecasts.

 

“The (Fed) is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook,” the Fed said in a statement released after the two-day meeting.

 

The statement amounted to an acknowledgment the Fed could alter its plans for more rate increases this year if market turbulence and slowing global growth continue or worsen. But officials aren’t ready to commit to holding off on rate rises.

 

The Fed in December penciled in four quarter-percentage-point interest-rate increases this year. Investors and traders believe it will be less. If the Fed follows through on its plan, rates would rise to 1.375% by year-end; futures markets put the expected rate at 0.605% in December, meaning just one more rate increase, and even that isn’t a sure thing.

 

Fed Chairwoman Janet Yellen now faces a busy calendar. She is slated to testify before Congress in February. And there is a policy meeting scheduled for March 15-16, when officials will weigh whether to raise the benchmark rate again.

 

The Fed’s policy statement pointed to the mixed economic backdrop that officials see now.

 

“Labor market conditions improved further even as economic growth slowed late last year,” the Fed said. While job gains were strong, it said, consumer spending and business investment were just moderate, inventory drawdowns a drag and net exports soft.

 

The Fed is also trying to assess a shifting inflation outlook. Officials said they expected it to remain low in the near term, thanks to declines in energy and import prices, but to gradually rise. One worry is market expectations for future inflation are shifting down, a development officials acknowledged in their statement.

 

Ms. Yellen won a unanimous vote, her second straight meeting at which nobody dissented.

 

One challenge for officials at their meeting was deciding how to signal their degree of concern about stock-market and oil-price declines and uncertainty about a shifting growth outlook in China, the world’s second-largest economy.

After concerns about China roiled markets in late summer and early fall, Fed officials said in September that the developments could restrain economic activity and push down inflation.

 

On Wednesday, they stopped short of repeating that language, which would have suggested their economic forecasts were souring in light of the latest market developments.

 

Instead they said they were watching events closely, an echo of language they used in October. This effectively keeps their options open for the

 

March meeting. In declining to say whether risks to the outlook had shifted in light of market and overseas developments, officials made clear that they are struggling to assess a shifting landscape.

 

The Fed will update its forecasts for growth, inflation, unemployment and interest rates in March, and officials likely want to assess the tone of economic data and market developments between now and then before deciding what signal to send about the path of rates.

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

Surging bonds and bullion and slumping stocks was not what Janet had in mind so she had some 'splaining to do. Hopes for a "passive hawkish" note appear to be met as confirmation of dismal data dependence offers just enough dovishness for the stock bulls and just enough hawkishness for economy bulls.

• *FED REPEATS ECONOMY EXPECTED TO WARRANT ONLY GRADUAL RATE RISES
• *FED ASSESSING GLOBAL DEVELOPMENTS FOR ITS BALANCE-OF-RISK VIEW
• *FED CLOSELY MONITORING GLOBAL ECONOMIC, FINANCIAL DEVELOPMENTS

Treading a fine line between losing all credibility and exposing their total devotion to the stock market, it appears The Fed is maintaining its delusion that everything will be fine as they unwind the largest and most experimental monetary policy of all time.

Pre-Fed: S&P Futs 1901.75, 10Y 2.04%, Gold $1115, WTI $31.95, EUR1.0875

Before the statement hit, rate odds this year were as follows:

 

Since the last meeting – and the historic rate hike – things have not panned out for The Fed…

 

Nanex explains the liquidity situation right before the statement:

 

Further headlines:

• FOMC: REMOVES 'REASONABLY CONFIDENT' RE 2% MED-TERM INFL

*  *  *

Full Redline Statement below:

 

 

*  *  *

Even Steve Liesman knows it's over…

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Submitted by Rachel Blevins via TheAntiMedia.org,

Democratic presidential candidate Hillary Clinton has been under investigation by the FBI for several months, and former U.S. House Majority leader Tom DeLay said Monday that the FBI is “ready to indict” her for using a private email server to conduct government business.

During an interview on “The Steve Malzberg Show,” DeLay, a Republican from Texas, said he has friends in the FBI who tell him “they’re ready to indict” the former Secretary of State.

“They’re ready to recommend an indictment and they also say that if the attorney general does not indict, they’re going public,” DeLay said.

Clinton’s use of personal email on a private server during her tenure as Secretary of State was revealed in March 2015, and while she has maintained that she never sent or received any classified information on the server, her claims have been contradicted by the Intelligence Community.

Intelligence Community Inspector General I. Charles McCullough III sent a letter to Congress on Jan. 14, revealing that not only did “several dozen” of Clinton’s emails contain classified information, but some of the information was classified as SAP or “special access programs,” which is beyond top secret.

“To date, I have received two sworn declarations from one [intelligence community] element,” McCullough wrote. “These declarations cover several dozen emails containing classified information determined by the IC element to be at the confidential, secret, and top secret/sap levels. According to the declarant, these documents contain information derived from classified IC element sources.”

DeLay said he believes Clinton is “going to have to face these charges” eventually, whether it’s through an FBI indictment or through the “public eye.”

“One way or another either she’s going to be indicted and that process begins, or we try her in the public eye with her campaign,” DeLay said. “One way or another she’s going to have to face these charges.”

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