Olympics In Doubt As Brazil Sports Minister Quits, Rio Governor Says “This Is The Worst Situation I’ve Ever Seen”

In less than five months, Brazil is expected to host the Summer Olympics.

If you follow LatAm politics, you know that that is an absolute joke. Last summer, the country descended into political turmoil and the economy sank into what might as well be a depression. Nine months later, inflation is running in the double digits, output is in freefall, and unemployment is soaring. On Wednesday, the government reported its widest primary budget deficit in history and less than 24 hours later, the central bank delivered a dire outlook for growth and inflation.

Meanwhile, VP Michel Temer’s PMDB has split with Dilma Rousseff’s governing coalition, paving the way for her impeachment and casting considerable doubt on the future of the President’s cabinet.

On Thursday, we learn that sports minister George Hilton has become the latest casualty of the political upheaval that will likely drive Rousseff from office in less than two months. “Brazil’s sports minister is resigning four months before the country hosts the Olympics, amid continuing uncertainty over the fate of six other cabinet ministers,” The Guardian wrote this afternoon, before noting that earlier this month, “Hilton left his party in an apparent bid to hold onto his job.”

Hilton had been sports minister for just over a year and although we’re sure any and all Brazilian cabinet positions come with lucrative graft opportunities, we imagine Hilton won’t end up regretting his decision to distance himself from the government and from this year’s Summer Olympics.

After all, there are quite a few very serious questions swirling around the Rio games. For instance: Will the water be clean enough for athletes to compete in? Will there be enough auxiliary power to keep the lights on? And, most importantly, will the games take place at all?

Millions of Brazilian citizens have recently taken to the streets to call for Rousseff’s ouster and to protest the return of former President Luiz Inacio Lula da Silva to government. It’s exceedingly possible that if House Speaker Eduardo Cunha can’t manage to get the impeachment job done, the populace will simply march on the Presidential palace.

How any of the above is compatible with hosting the largest sporting event in the history of the world is beyond us and George Hilton apparently has reservations himself. As does Francisco Dornelles, acting governor of Rio de Janeiro. “This is the worst situation I’ve seen in my political career,” Dornelles said this week, referencing the state’s finances. “I’ve never seen anything like it.” Here’s more from AP

Dornelles didn’t provide numbers, but he said plunging tax income is behind the state’s financial crisis.


Much of Rio’s tax income comes from the Petrobras oil company, which is embroiled in a big corruption probe that has snared several top politicians and businessmen. Last week, Petrobras reported a record quarterly loss of $10.2 billion due to a large reduction in the value of some assets amid lower oil prices.


Dornelles said that it would take a “large effort” for the state to meet all its obligations and that it was looking for credit and other measures to add to diminishing revenues. He suggested that selling state property was one option.

Yes, it will take “a large effort” for Rio to get back on track. Which probably means it’s going to take a similarly “large effort” for Brazil to figure out how to fund the already over budget Olympic Games in August amid an outright economic collapse. Indeed, the country doesn’t even have any idea who the President is going to be when the Olympic torch is lit in August. 

At this juncture, the only thing we can say is that we hope the lawyers for all of the advertising partners who just spent a total of $1 billion with NBC’s executive vice president of advertising sales Seth Winter took a good look at the fine print before signing on the dotted line and cutting the checks.

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

John McCain Linked Nonprofit Received Million Dollar Donation From Saudi Arabia

Submitted by Mike Krieger via Liberty Blitzkrieg blog,


Former Democratic Sen. Bob Graham, who in 2002 chaired the congressional Joint Inquiry into 9/11, maintains the FBI is covering up a Saudi support cell in Sarasota for the hijackers. He says the al-Hijjis’ “urgent” pre-9/11 exit suggests “someone may have tipped them off” about the coming attacks.


Graham has been working with a 14-member group in Congress to urge President Obama to declassify 28 pages of the final report of his inquiry which were originally redacted, wholesale, by President George W. Bush.


“The 28 pages primarily relate to who financed 9/11, and they point a very strong finger at Saudi Arabia as being the principal financier,” he said, adding, “I am speaking of the kingdom,” or government, of Saudi Arabia, not just wealthy individual Saudi donors.


Sources who have read the censored Saudi section say it cites CIA and FBI case files that directly implicate officials of the Saudi Embassy in Washington and its consulate in Los Angeles in the attacks — which, if true, would make 9/11 not just an act of terrorism, but an act of war by a foreign government.


– From the post: The New York Post Reports – FBI is Covering Up Saudi Links to 9/11 Attack

For just and obvious reasons, it’s illegal under U.S. law for foreign governments to finance individual candidates or political parties. Unfortunately, this doesn’t stop them from bribing politicians and bureaucrats using other opaque channels.

A perfect example is the shady, influence peddling slush fund known as The Clinton Foundation, which entered the public consciousness last year and was the central topic of multiple posts here at Liberty Blitzkrieg. Although they remain the reining champions of cronyism, being a shameless, corrupt fraud isn’t limited to the Clintons. It shouldn’t surprise anyone that a John McCain linked nonprofit has been found accepting million dollar contributions from the most barbaric, backwards nation on planet earth: Saudi Arabia. Naturally, the absolute monarchy remains a very close ally of the U.S. government.

Bloomberg reports:


A nonprofit with ties to Senator John McCain received a $1 million donation from the government of Saudi Arabia in 2014, according to documents filed with the U.S. Internal Revenue Service.


The Arizona Republican has strictly honorary roles with the McCain Institute for International Leadership, a program at Arizona State University, and its fundraising arm, the McCain Institute Foundation, according to his office. But McCain has appeared at fundraising events for the institute and his Senate campaign’s fundraiser is listed in its tax returns as the contact person for the foundation.

Forget John McCain for a moment. How appropriate is it for so-called “institutions of higher learning” to be accepting million dollars contributions from an absolute monarchy where women can’t drive and with obvious ties to 9/11?

Though federal law strictly bans foreign contributions to electoral campaigns, the restriction doesn’t apply to nonprofits engaged in policy, even those connected to a sitting lawmaker.

This law/loophole obviously needs to be changed.

Groups critical of the current ethics laws say that McCain’s nonprofit effectively gives Saudi Arabia — or any other well-heeled interests — a means of making large donations to politicians it hopes to influence.


“Foreign governments are prohibited from financing candidate campaigns and political parties,” Craig Holman, the government affairs lobbyist for ethics watchdog Public Citizen, said. “Funding the lawmakers’ nonprofit organizations is the next best thing.”


The Saudi donation to the McCain Institute Foundation may be the first congressional instance of that trend coming to light.


“The extent of this practice is difficult to gauge, of course,” Holman said, “because we only know about it when a nonprofit or foreign government voluntarily reveals that information.”

While it’s commendable that the McCain Institute Foundation came clean in this instance, the law should definitely be changed to make disclosure a requirement. The last thing this country needs are additional channels for special interests to bribe politicians.

The institute didn’t originally disclose the 2014 donation from the Royal Embassy of Saudi Arabia. After an inquiry from Bloomberg News, the website was updated to note that the institute received more than $100,000 from the Saudi embassy. Documents filed with the IRS state that the donation totaled $1 million.


Since its launch in 2012, the institute has been “guided by the values that have animated the career” of McCain and his family, its mission statement says. It focuses on advancing “character-driven global leadership,” and runs an internship program, a debate series and hosts events on national security, human trafficking and other issues.

“Guided by the values that have animated the career of McCain and his family?” Let’s take a look at a few of these “values.”

Video of the Day – John McCain Threatens Protesters with Arrest, Calls them “Low-Life Scum”

Incredible Tweets from John McCain on Libya and Syria from 2009 and 2011

Saudi Arabia Sentences Journalist to Five Years in Prison for Insulting the Kingdom’s Rulers

The New York Post Reports – FBI is Covering Up Saudi Links to 9/11 Attack

Saudi Arabia Sentences Poet to Death for “Renouncing Islam”

Saudi Arabia Prepares to Execute Teenager via “Crucifixion” for Political Dissent

The institute’s executive director is Kurt Volker, a former ambassador to the North Atlantic Treaty Organization who also serves as a senior international adviser to lobbying firm BGR Group. BGR Group’s clients include Chevron, Raytheon Co. and the Center for Studies and Media Affairs at the Saudi Royal Court. Its nonprofit arm, the BGR Foundation, also donated at least $100,000 to the institute, according to its website.

It’s starting to make sense now isn’t it.

“It’s only natural that a longtime and vocal supporter of the Saudi-U.S. alliance might be embraced by them this way,” said David Andrew Weinberg, a senior fellow with the conservative think tank Foundation for the Defense of Democracies. Weinberg estimates that Persian Gulf countries alone have contributed more than $100 million to presidential libraries and charities promoted by former presidents.

Nothing to see here. Move along peasants.

But such contributions usually don’t have to be disclosed, so it’s unclear how much money from the Saudi embassy or other foreign sources has gone to groups with ties to current and former U.S. officials or lawmakers.


But the foundation did receive its initial funding — about $8.6 million — from money left over from McCain’s 2008 presidential run, in a transaction permitted under campaign finance laws.


McCain has appeared at events for the institute, including its fundraising efforts and its annual, invitation-only conference held in Sedona, Arizona. The annual conference has also featured Vice President Joe Biden and a 2014 appearance by Clinton before she was officially a presidential candidate. CEOs from GE, Chevron, Wal-Mart, Freeport and FedEx — all of whose companies or charitable arms have contributed more than $100,000 to support the institute — have also spoken.


Some of the institute’s larger donors, including hedge fund manager Paul Singer and investor Ron Perelman, also contributed $100,000 to Arizona Grassroots Action PAC, a super-PAC that’s supporting McCain as he seeks his sixth term in the Senate.

Paul Singer, John McCain and the Saudis. Sure makes you feel all warm and fuzzy.

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

China Unveils ‘Trumpian’ Tariffs On All Foreign Goods

Having glad-handed with President Obama just this morning, and complained of a "sluggish global economy," that ironically his credit-fuelled mal-investment maelstrom enabled via its deflationary forces, Chinese President Xi appears to have moved on from currency wars to protectionism as WSJ reports China is tightening its grip on cross-border e-commerce, imposing a new tax system on all overseas purchases. While Trumpian tariffs are dismissed as crazy talk by America's establishment, it seems China took first-mover advantage to boost "Made-in-China" products at the expense of the rest of the world.

As The Wall Street Journal reports,

The changes, announced by the Finance Ministry last week, include raising the so-called parcel tax that is currently imposed on overseas retail products that e-commerce firms ship into China. On top of that, such goods sent directly to consumers will now be treated as imports and will be subject to tariffs and value-added and consumption taxes, whose rates vary depending on the type and value of goods.


The ministry said the changes, which become effective April 8, are intended to put foreign and domestic products on an equal footing. But industry analysts said the move seems designed to give a boost to “made-in-China” products and could dent a small, but growing market for foreign goods sold by Alibaba Group Holding Ltd., JD.com Inc. and other e-commerce players.



The new levies could dampen some demand, just as an increasing number of retailers world-wide are hoping to sell into China, says Charles Whiteman, senior vice president of client services for MotionPoint, a technology company that helps international retailers sync their e-commerce websites across languages and currencies.


“Increases in prices always have the effect of driving demand down,” but the effect will be “modest,” Mr. Whiteman said. “It probably won’t be too noticeable for branded products,” which consumers are willing to pay a premium for.

The changes in taxes come as the Chinese economy is slowing down and the deceleration is crimping tax revenues. Tax revenues grew 4.8% last year, compared with 7.8% in 2014. Beijing is looking for new sources of growth and revenue, and is trying to guide the economy to rely more on consumption and less on investment and industry. At the same time, Beijing is anxious to build up domestic businesses to provide jobs.

Calculating the impact of the changes on merchandise is difficult given that different categories of goods carry different rates. A company that sells infant formula milk, for example, will pay nearly 12% more in taxes if the sale is under 500 yuan because previous exemptions don’t apply, according to Mr. Tan, the analyst.


Luxury goods like jewelry will see extra taxes between 9% and 17%, while some levies on personal-hygiene and cosmetic products could fall since the changes rescind the previous heavier parcel tax on those products.

So President Obama – what will you do now? Perhaps Mr. Trump is worth talking to for some ideas?

via Zero Hedge http://ift.tt/1SpY1x3 Tyler Durden

The Reason Anbang Pulled The Starwood Offer: It Couldn’t Prove It Has The Funds

Several days ago, we explained how China’s bizarro M&A scramble was nothing more than a rushed attempt to park as much capital in the US (and offshore) as possible before Beijing gets wise enough and cracks down on this latest loophole to evade Chinese capital controls, we had this to say about the farcical, and now pulled, $14 billion Anbang offer for Starwood, owner of the W Hotels, Sheraton and St Regis brands:

Seen in this light the recent deal in which a Chinese insurer is seeking to buy one of the world’s biggest hotel chains makes all the sense in the world: big Chinese investors are not seeking to actually generate profits on future M&A, they are merely looking to preserve capital and are doing so by overpaying for acquisitions around the globe.

As such the biggest question, and wildcard in this, and all other Chinese megadeals in the recent record splurge for US assets, was what is the source of financing: after all the last thing Anbang and peers was for the government to start cracking down on just how they were funnelling funds offshore.

As the FT reported moments ago, “Wu Xiaohui, Anbang’s chairman, this week brushed away questions about the source of his funding and warnings from the Chinese insurance regulator by assuring Caixin, a respected Chinese business publication, that Anbang had Rmb1tn in assets.

Furthermore, Anbang’s pursuit of Starwood came into question last week after a Chinese news outlet reported the country’s insurance regulator may invoke a rule that restricts domestic companies from investing more than 15 per cent of their total assets abroad.

That may have been the gamechanger.

And, as was announced late this afternoon, Anbang unexpectedly pulled its Starwood offer, and for a very specific reason. According to the FT, an investor consortium led by China’s Anbang Insurance has lost the bidding war for Starwood Hotels & Resorts, after failing to demonstrate that it had the financing in place to back up its latest $14bn offer, according to a person directly involved.

This means that either the entire hostel (sic) bid was a sham from the beginning, or Anbang’s chairman Wu Xiaohui and his various “related party” co-owners got a tap on the collective shoulder from the government who told it the jig was up.

Worse, this means that not only is Anbang out of the game and that Starwood has to go back crawling to Marriott hoping the terms of the latest purchase proposal are still valid, but that suddenly China’s M&A spree may be over as fast as it started.

FT adds that the end of Anbang’s pursuit of Starwood “marks the sharpest setback for Chinese bidder who have accounted for a record share of global merger and acquisition activity in 2016.”

It also risks reviving long-held questions in the minds of sellers and their advisors about the seriousness of some Chinese suitors. Anbang’s consortium had shared no details in public about the sources of its financing, and offered no comment on Thursday about whether it had fully funded its offer.

We now know it had no financing in place whatsoever, and either it was the government that stepped in, or Starwood’s stakeholders said they do not accept suitcases full of recently laundered cash as a form of payment.

In any event, those eight items we listed last night in “8 Things The Chinese Are Scrambling To Buy In America“, are now 7, and may soon be 6, 5, 4 and so on.

* * *

There is, of course, a far simpler explanation why Anbang pulled the deal: the entire company is a fraud, as the following NYT profile of its shady internal dealing strongly hints:

He is often compared in the media to Warren E. Buffett. Like the American billionaire, he is leveraging his control of an insurance company to become one of the biggest names in global finance. Like Mr. Buffett, he looks to be acquiring an immense personal fortune. But that is where the comparisons between Wu Xiaohui, the chairman of the Anbang Insurance Group of China, and Mr. Buffett come to a halt.



Mr. Wu has links to some of the most powerful families in China. He married Zhuo Ran, the granddaughter of Deng Xiaoping, China’s former paramount leader in the 1980s and much of the 1990s. That name, uncommon in Chinese, appears in corporate records tied to at least two of the 37 holding companies.


His exact holdings in Anbang are not clear. A close examination of Anbang’s shareholding structure shows that the 37 companies control more than 93 percent of Anbang, while two Chinese state-owned companies own the rest. The 37 shareholders are linked by common phone numbers, email addresses and interlocking ownership, according to company records filed with the Chinese government and available online.


* * *


One Anbang shareholder — a coal mining company in China’s western region of Xinjiang — is owned by another mining company, Zhongya Huajin, that listed a Zhuo Ran as its first legal representative, though that person has since resigned.


Zhongya Huajin shares an official website address with a different Anbang shareholder, a Beijing real estate company. Collectively, those companies own nearly 4.6 billion shares of Anbang, or more than 7 percent. The companies could not be reached for comment, and their common website now contains only links to pornography and gambling services.


Five shareholders list the same legal email address in government filings. Phones at those companies rang unanswered, and a message to that address was not returned.


Calls to Anbang’s listed phone number were not answered. Nobody replied to a list of questions delivered to its Beijing headquarters, with its enormous lobby — the size of several basketball courts — and its large chandelier. An Anbang employee said the company did not answer media questions.

But aside for China’s “legitimate” financial mega-companies being borderline fraud, the country with the $35 trillion in bank “assets” has everything else under control. We promise.

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

Maybe You’re Confused By The Fed – But Wall Street Isn’t

Authored by Mark St.Cyr,

As I type this the “markets” are once again sprinting higher to the highest levels of 2016. At the rate they are going it’s theoretically possible we could take out the all time high by lunch. After all – “it’s a great time to buy stawks,” no?

Everyone seems to have been caught off guard by Janet Yellen’s speech at the Economic Club of New York™. Why this is so alludes me. The reason? This is a gathering of “her” people. i.e., Wall Street. Too think she would intone anything of a hawkish nature at this highly publicized event was ludicrous. Especially after her comments at the latest FOMC presser where she defensively professed prudence in choosing inaction – as action, once again.

However, there was one striking change in both tone and demeanor from that conference of only a few weeks ago to this one: The palpable ebullience displayed by all..

The difference was absolutely striking. Lots of grins and smiles everywhere which also included not only the Chair woman herself, but especially from her colleague N.Y. Fed. president William Dudley who introduced her. Again, don’t take my word. Find a rerun on-line in your search engine of choice and see for yourself. One thing is very, very, very, (did I say very?) apparent. There wasn’t a dry eye in the house. I’d wager tears of joy flowed like the cocktails: freely and frequent.

The dulcet tones that caused such bliss? I believe there were two verses followed by a table thumping chorus that stood out far above any others. (and if not for cameras the participants attending might have stood up on the tables and danced in unison.)

The first verse contained the words everyone with a month ending quarter wanted to hear when it came to where the Fed. stands on raising further (if at all) “proceed cautiously.”  The second was a reiteration of “international developments” was first and foremost. “Data dependent” not so much. However, it was the chorus, that too my ears was really the highlight for Wall Street. It’s when Ms. Yellen stated:

“Financial market participants appear to recognize the FOMC’s data-dependent approach because incoming data surprises typically induce changes in market expectations about the likely future path of policy,…” (You can read the transcript in its entirety here. And I suggest you do as to draw your own conclusions)

Why would such be as I implied “a thumping chorus?” Here’s how I put it in a recent article that many brushed aside as coincidence not causation. To wit:

“The “markets” and its real players (i.e., HFT’s along with their headline reading algo’s and stop running programs etc., etc.) not only know this. I believe – they now know how to front run it with deadly efficiency.”

Now some will say “It was a private event, you can’t compare the two! You’re just nitpicking.” And that’s fine, it’s a fair response. However, being someone who has made speeches for a living, and, has had to be the bearer of bad news or directives that many participants in the audience were surely not going to want to hear (even if they had too.) I can tell you from first hand experience participants have quite the clue on what the tenor and tone of what you’re about to say before you ever hit the podium. And my speeches aren’t released beforehand unlike the Chairwoman’s was with a released transcript prior. (And the markets took off higher in unison precisely when that transcript was released. Coincidence? Or HFT, headline reading algorithmic front running causation? You be the judge.)

Don’t let that point be lost, for it is a very subtle yet important insight for those looking for clues. Do you think that audience would have been all smiles and laughter before, during, or after had she been there to reiterate any of the “hawkish” commentary coming out of subsequent Fed. officials at other venues over the past week or so? Again, truly ponder that point for it’s not as trivial of an insight as it may seem at first blush.

(On an aside. For those wondering if I’m trying to be coy when using my own example inferring they were probably the local bridge club, as opposed to, some conference or meeting on par with the participants at some “Economic Club” as to negate my thesis. All I’ll say is at one in particular that fit that bill, the “participants” in attendance were the C-suite of many a national brand; with global reach and markets; with annual sales in the multi-billion dollar club. I say this only for clarification – nothing more. So take it as you will.)

I’ve heard analysts and many others of late comment how this Fed. official, or that Fed. official has said this, when they just did that! Hawkish tones from this one, dovish tones from that one. I’m sorry, there shouldn’t be any more confusion. If you’re up around 2050ish SPX you’re going to hear “chirps” to give an illusion that maybe, just maybe, the Fed. might move towards normalization. i.e., As I’ve stated previously “fortitude central.” So expect it. However: At 1810ish SPX? Welcome to that other term I coined “capitulation central.” Here is where the only thing you’ll hear is how good (green) the Fed. is going to turn all that bad (red) with its toolbox of __________(fill in the blank.) Rinse – repeat.

However, I will say there has been one defining point from The Chair she first iterated at the latest FOMC presser, and reiterated once again at this latest speech. Personally I felt this would remain an unspoken truth rather, than openly admitted to. This point and moment was when Ms. Yellen, in fact, set the tone as for anyone who was truly listening (and Wall Street was all ears!) that the Federal Reserve has decided via its own directive and initiative: to put its U.S. congressional mandated directives (e.g., employment and inflation) secondarily to “international developments” whenever it decides. And it has decided that time is now.

To my ears – this was brazenly breathtaking in its implied scope and reach, with implication that are now truly up for grabs in everything we once took or believed to have known in both free markets, as well as capitalism itself.

This is not some misunderstanding or confused inference on my part. This point has been realized (and the list is growing) by many with far more gravitas in the world of finance than I have. If you now listen, read, or watch many a financial pundit, what you are now hearing is their own astonishment at the realization Ms. Yellen declared by both current policy direction, and implied statements: the Fed. is now “Central Bank of the world.” And that is the phrase they are using – not me implying.

“International developments” everyone now knows and takes as central bank parlance to mean: China. And the chairwoman in her speech made it quite clear “international developments” are what now drives Fed. policy action. Again, don’t take my word for it. You can find a transcript or watch the speech for yourself and draw your own conclusions.

Besides, if this is not the case; then how does one square the circle of the Fed’s mandate? For all intents and purposes the congressional mandated raison d’ être have now been reached within any tolerant measurement. The U.S. stock market is once again within spitting distance of it’s never before seen in human history high. So: how is it that all this “good” causes not even the modest of follow through as implied via the December 2015 rate hike decision with its explanations and certitude. But rather: the normalization schedule (inferred via the Dot Plot) in-turn gets reduce by half only 3 months later? And…the Chair herself implies that to may be too many? Something doesn’t square here if we’re doing so well does it.

That said: there is an inherent, overarching, problem within this now stated “international development” meme that I’m not sure the Fed. has really thought through. And it’s this…

If “international developments” (i.e. China) have now taken first position over U.S. data, one can only summarize that the Fed. is now following, as well as, instituting a policy as the self-anointed mop-up team for the sins and/or consequences of spill over of a communist run economy.

Capitalism, free markets, and everything else associated with it such as U.S. savers, insurance companies, bond holder, etc., etc., will take a back seat: Not lead. Nor – do anything that may hurt or foster any harmful effects caused by the mal-investment or debt crisis inherent caused by a nation following communistic policies and interventions within its own market, economy, and currency.

In other words: China will continue to be allowed to make a mess. The Fed. will play “janitor” of the monetary policy world. Talk about “leading from behind.” Actually, don’t talk about it: That’s not good for Wall Street. As if you were still confused.

Now there may be no more confusion as to exactly where the Fed. now stands. But confidence they can actually manage all this with positive consequential follow through? Without it all turning into some iteration resembling the Sorcerer’s apprentice? That’s a whole ‘nother matter entirely.

via Zero Hedge http://ift.tt/1q6VVM7 Tyler Durden

Copper Continues To Crumble Amid Record China Inventories

Having bounced miraculously off the early January lows – despite no significant fundamental shift – scrambling all the weay up to its 200-day moving-average, copper prices have been tumbling for the last 7 days, the longest losing streak since early Jan. “Worries over Chinese demand is still weighing on the market,” warns one analyst and rightly so as, just like the oil complex, copper inventories (in China) just hit a record high.

Miracle ramp…


Is fading now as stockpiles soar…


Rising supply of late-cycle commodities, including copper and aluminum, together with uncertain Chinese demand may continue to weigh on metal prices this year, according to Bloomberg Intelligence analyst Zhu Yi. Copper inventories tracked by the Shanghai Futures Exchange are at a record.

“Worries over Chinese demand is still weighing on the market,” Robin Bhar, an analyst at Societe Generale SA in London, said by phone.


Of course much of this ‘inventory’ is collateral for China’s crazy CCFDs enabling smaller players to get loans and stay alive considerably longer than they should. If any liquidation occurs of these zombies then prices will accelerate lower as CCFDs are unwound.

via Zero Hedge http://ift.tt/1M48pxX Tyler Durden

Change Your “Tone” – Hillary Clinton Caught on Tape Erupting at Greenpeace Activist

Screen Shot 2016-03-31 at 4.34.50 PM

Just the other day, the Clinton campaign shamelessly suggested there may not be a debate in New York unless Bernie Sanders changes his “tone.”

Interestingly enough, Clinton lost it earlier today when questioned by a Greenpeace activist.

Finger pointing, irritated, that’s some pleasant tone you’ve got there Hillary.

Of course, Hillary Clinton is quite famous for her “tone.” It’s known for being abrasive, phony and generally unpleasant.

Here’s another recent example of her “tone.”

continue reading

from Liberty Blitzkrieg http://ift.tt/1VcvK1Q

Comeback Kid – Sanders Slashes Clinton’s New York Primary Lead to 12 Points

Screen Shot 2016-03-31 at 3.31.05 PM

Nothing would please me more than to see Bernie Sanders defeat Hillary Clinton in the state of my birth, and where I spent most of my life: New York.

While it’s not going to be easy, the latest poll from Quinnipiac shows Sanders narrowing her lead to only 12 points. There’s a little less than three weeks until the April 19th primary, which means plenty of time to further close the gap.

Mother Jones reports:

Sanders is slowly gaining on Clinton in New York ahead of the April 19 primary. Clinton now leads Sanders by 12 points in New York’s Democratic primary, according to a Quinnipiac Poll released Thursday. A poll in February showed Sanders 21 points behind Clinton in New York, and another in March showed him 48 points behind.

continue reading

from Liberty Blitzkrieg http://ift.tt/1Sq1vzs

For Canada’s Banks This Is “The Next Shoe To Drop”, And Why It Will Drop This Spring

Roughly around the time the market troughed in early February, we asked “After The European Bank Bloodbath, Is Canada Next?” The reason for this question was simple: we said that “when compared to US banks’ (artificially low) reserves for oil and gas exposure, Canadian banks are…not.


Stated otherwise, we warned that the biggest threat facing Canada’s banking sector is how woefully underreserved it is to future oil and gas loan losses.

We added that unlike their US peers, “Canadian banks like to wait for impairment events to book PCLs rather than build reserves, in effect throwing the entire process of reserving for future losses out of the window.”

We then cited an RBC analysis according to which a 7% loss reserve would be sufficient to offset loan losses in what is shaping up as the biggest commodity crash in history. We disagreed:

We wish we could be as confident as RBC that this is sufficient, however we are clearly concerned that if and when Canada’s banks finally begin to write down their assets and flow the impariments though the income statement, that things could go from bad to worse very quickly, and not necessarily because Canada’s banks are under or over provisioned, but for a far simpler reason – once the market focuses on Canadian energy exposure, it will realize just how little information is freely available, and if European banks are any indication, it will sell first and ask questions much later if at all.


However, indeed assuming a worst case scenario, one in which the banks will have to “eat” the losses and suffer impairments, then the question emerges just how much capital do these banks truly have, which in turn goes back full circle to our post from the summer of 2011 which led to much gnashing of teeth at the Globe and Mail.


We wonder what its reaction will be this time, and even more so, what its reaction will be if the market decides that when it comes to “the next domino to fall”, it was indeed Canada which courtesy of a generous global central bank regime which flooded the world with excess liquidity, and which China is now actively soaking up, allowed Canada’s banks to quietly skirt under the radar for many years; a radar that has finally registered a ping.

We were, of course, referring to the Globe and Mail’s reaction to our post from 2011 that despite the sterling facade, Canadian banks are really woefully undercapitalized.

And while we still await for the G&M to note this ping, here is Canada’s Financial Post, confirming everything we said almost a month ago, and explaining what the “next shoe to drop” for Canadian banks will be. The Post’s answer: “Relatively low oil loan provisions.”

Sounds familiar?

Here are the FP’s details which are already well known to our readers.

Canadian banks are taking lower provisions for oil and gas related credit losses than their U.S. counterparts, prompting observers to dig into the reasons behind the trend.


Reserves related to oil and gas loans held by U.S. banks are four to five times higher than those held by the Canadian banks, according to analysts at TD Securities, who believe accounting treatments and interpretations are, at least in part, behind the striking difference.


In a note Tuesday, the TD analysts led by Mario Mendonca said loan quality within the portfolios could also be another reason, with historical loss trends suggesting Canadian banks are more conservative lenders. Still, they said there is more to than that, including how aggressive each country’s regulators are, and interpretations under two different accounting regimes: U.S. Generally Accepted Accounting Principles (GAAP), and IFRS.


A close reading “reveals what we view as a material difference in loss recognition,” the analysts wrote.




It appears Canadian banks are… different.

Under U.S. GAAP, they said, a loan is impaired when it is probable a credit will be unable to collect on all amounts due, based on current information and events. IFRS accounting considers a loan impaired based on “objective evidence” surrounding a financial asset or group of financial assets.


“We believe that either there is a very significant difference in the two accounting regimes or the standards are being interpreted in very different ways,” the TD analysts wrote.


In addition, they said U.S. banks are more likely than their Canadian counterparts to use a special form of provisioning known as a collective allowance because there is a greater acceptance in the United States of releasing these reserves in the future if conditions improve.

Like, in the case of a global financial system bailout. Of course, nothing prevents Canadian banks to release these reserves too. The problem is that one has to take them first, and doing so would soak up so much capital it may expose the bank’s balance sheet as a hollow sham.

That said, now that everyone is finally pointing the finger at their gaping reserve holes, Canadian banks have begun to increase provisions for credit losses, reflecting the early impact of low oil prices.

It is too late.

The TD analysts said they expect “the next shoe to drop” in Canada when second-quarter results are posted this spring. “Despite the recent move in oil, futures are flat year-to-date and prices are still down materially since the fall 2015 determinations,” they wrote. “This should result in further pressures on borrowing bases and the potential for covenant breaches.”


Combined with expected “prodding” from the Office of the Superintendent of Financial Institutions (OSFI), Canada’s key bank regulator, “we expect impairments and credit losses to climb,” the analysts said.

All of this could have been avoided if Canada’s banks did not try to be just a little “too clever.” Instead, now they have a bleak future to look forward to, one where, in just a few months, the European bank bloodbath will shift over, as we first warned nearly two months ago, to Canada, something which both the mainstream media and “respected” analysts now admit.

via Zero Hedge http://ift.tt/1RO6HQm Tyler Durden

Fed Levitation & The Looming Liquidity Trap

Submitted by Lance Roberts via RealInvestment Advice.com,

Fed Levitation

What is going on at the Federal Reserve? On Tuesday, Janet Yellen comes out and announces that despite inflation being on the rise and employment below 5%, she is not going to raise the Fed Funds rate 4-times this year, nor even two times this year, but rather most likely none. Of course, this “one and done” scenario is what I suggested back in December following the first rate hike given the ongoing deterioration in the underlying economic backdrop. 

However, on Wednesday, Chicago Federal Reserve President Charles Evans comes out and suggests he would support another interest rate increase in June.

So what is it? Are we “data dependent” or are we more concerned about “global economic weakness?”  Or, is this just part of the Fed’s careful orchestration to support asset markets?

I think it may just be the latter as the Fed comes to the realization they have gotten themselves caught in a “liquidity trap.”  Here is their dilemma?

  • Low interest rates have failed to spark organic economic growth which would lead to an inflationary pressure build.
  • While QE programs fueled higher asset prices, the “wealth effect” did not transfer through the real economy as the programs acted as a “wealth transfer” from the middle-class.
  • The Fed cannot afford to have a major reversion in asset prices which would crush consumer confidence pushing the economy into a recession.
  • The unintended consequence of announcing rate hikes was a surge in the U.S. dollar, as discussed earlier this week, as foreign funds chased higher yields. This surge in the dollar crushed corporate profits and oil prices putting a further strain on economic growth.
  • Further monetary policy accommodations would risk a surge in asset prices that expands the current over-valuation of markets and magnify the eventual reversion.

The Federal Reserve has carefully orchestrated a very balanced messaging process to support asset markets but taper enthusiasm by sending contradictory messages. Yellen suggests ongoing “accommodation” which pushed liquidity into “risk” assets. That excitement is immediately tapered by a contradictory message that “less accommodation” is still likely. 

The Federal Reserve is trying very clearly to accomplish several goals through their very confusing “forward guidance:”

  1. Keep asset prices above the recent lows to avoid triggering a rash of potential “margin calls” that would fuel a more rapid price reversion in the markets.
  2. Talk down the “dollar” to provide a boost to exports (which makes up roughly 45% of corporate profits) and commodity prices. The Fed-assisted boost in oil prices also gives TBTF banks the room necessary to off-load bad energy-related debt exposure before the next price decline and run of defaults.
  3. The Fed also realizes they cannot allow market prices to overheat to the upside and, therefore, use offsetting language to quell expectations.


It’s genius.

Like the “little Dutch boy,” the Fed currently has a finger stuck in every hole of the dike. The only question is how long is it before the Federal Reserve runs out of “fingers” to plug the next leak?


Employment Not All That It Seems

A couple of weeks ago, I hosted a presentation for a packed ballroom discussing the outlook for the markets and economy over the rest of the year. (I will be posting the video next week.)

Since all eyes are on the “employment report” tomorrow, I thought I would share with you two slides from that presentation on the real state of employment in the U.S.

For example, take a look at the first slide below.


This chart CLEARLY shows that the number of “Births & Deaths” of businesses since the financial crisis have been on the decline. Yet, each month, when the market gets the jobs report, we see roughly 200k plus jobs created as shown in the chart below.


Included in those reports is an “ADJUSTMENT” by the BEA to account for the number of new businesses (jobs) that were “birthed” (created) during the reporting period. This number has generally “added” jobs to the employment report each month.

The chart below shows the differential in employment gains since 2009 when removing the additions to the monthly employment number though the “Birth/Death” adjustment. Real employment gains would be roughly 4.43 million less if you actually accounted for the LOSS in jobs discussed in the first chart above. 


The chart above assumes that ZERO jobs were created through the start of new businesses since 2009. However, as both Gallup and the data above show, we have been LOSING roughly 70,000 jobs a year due to “deaths” outnumbering “births” making the numbers above even worse. 

Think about it this way. IF we were truly experiencing the strongest streak of employment growth since the 1990’s, should we not be witnessing:

  1. Surging wage growth as a 4.9% unemployment rate gives employees pricing power?
  2. Economic growth well above 3% as 4.9% unemployment leads to stronger consumption?
  3. A rise in imports as rising consumption leads to demand for goods.
  4. Falling inventories as sales outpace production.
  5. Rising industrial production as demand for goods increases.

None of those things exist currently.

The issue lies with the “seasonal adjustment” factors which run through the entirety of economic data published by the various government agencies. Many of these seasonal adjustments have been skewed since the financial crisis due to the economic ramifications following the crash. Furthermore, due to El Nino and La Nina, winter weather patterns have swung from extremely warm (2012 and 2015) to extremely cold (2013 and 2014) which have wrecked havoc with reporting.

All of these seasonal adjustment factors have led to an overstating of headline economic data. Unfortunately, when digging below the surface, the truth is ultimately revealed.

Is it intentional? Probably Not.  Is it relevant? Absolutely. 


The Savings Rate Conundrum

Interesting take from Tom McClellan on the savings rate:

“When money market funds were created in the mid-1970s, Americans were suddenly confronted with the opportunity to earn a more appropriate reward for deferring their compensation, and for instead saving their money.  But curiously, Americans did not do as B.F. Skinner would have suggested they would do.


They did not increase their savings behavior in response to the greater reward for doing so.  Instead, they started a long downward trend in the savings rate, saving less and less of their income even though they could earn more in real terms for doing so.  And that downward trend in the savings rate just happened to coincide with a secular bull market for stock prices.


But since 2005 we are seeing the monthly savings rate data show an upward trend.  This change in behavior makes complete sense.  Baby Boomers are facing imminent retirement, and thus they are mounting a last-minute campaign to save up enough to live off of without eating cat food, or turning to their formerly helicoptered children for support.  At the same time, the “Millennials” or “Echo-Boomers” are just now moving out of their parents’ basements, and have not yet become a major economic force.  So the Echo-Boomers are not yet making up in consumption for what their parents are saving.”


“One problem is that episodes of this behavior of people saving more tend to be associated with negative growth rate periods for stock prices.  That’s a bummer for stock market bulls.  So what you should do as a prudent bullish rat is to save your own food pellets while simultaneously encouraging your neighbors to eat all of theirs, and thus make the stock market indices rise.  Good luck with that plan.”

Tom is correct in his assessment about what is currently happening with savings. However, he missed one very important component about what happened in the 80-90’s as savings fell – the rise in consumer leverage.

Savings rates didn’t fall just because consumers decided to just spend more. If that was the case economic growth rates would have been rising on a year-over-year basis. The reality, is that beginning in the 1980’s, as the economy shifted from a manufacturing to service-based economy, productivity surged which put downward pressure on wage and economic growth rates. Consumers were forced to levered up their household balance sheet to support their standard of living. In turn, higher levels of debt-service ate into their savings rate.

The problem today is not that people are not “saving more money,” they are just spending less as weak wage growth, an inability to access additional leverage, and a need to maintain debt service restricts spending. For Millennials, yes, they may be emerging from their parents basements, but they are also tasked with trying to pay-off student loan debt with a low-wage-paying service job. 


It is indeed a “new economy.” 

Just some things to think about.

via Zero Hedge http://ift.tt/1Vc7Q6C Tyler Durden