How An Anbang Default Could Rock The Market: Wall Street Explains

Last June, when looking at the most unstable of China’s mega conglomerates Anbang Insurance (the others are HNA, China Evergrande and Dalian Wanda), we said that “Anbang’s troubles could soon become systemic.”  Half a year later, that’s exactly what happened when in a “surprising” twist, the $315 billion insurer was bailed out by Beijing, just days after we pointed out the tremendous surge in the yield on its bonds.

And while the market has so far blissfully ignored the potential consequences of this admission by China that all is not well with its biggest corporations, that may soon change.

For starters, there is HNA’s massive debt: according to Bloomberg data, HNA Group’s dollar debt dwarfs that of other stressed Asian borrowers such as Noble Group Ltd. and India’s Reliance Communications. S&P Global Ratings recently lowered HNA Group’s credit profile to ccc+ from b earlier this month, saying it is unclear if existing access to capital markets and some apparent bank support is sufficient for meeting its upcoming obligations. One look at the chart above should confirm that any hope HNA may have had of accessing markets is now gone, leaving only the government as a lender of last resort.

And while there’s no indication – yet – that HNA is facing such financial difficulties that a default is in the offing, some market participants are starting to game plan scenarios, and a variety of takes have emerged.

For one, the amount of dollar bonds outstanding for the conglomerate and its units, at $13.7 billion, accounts for more than 1% of Asian high-yield bonds outside of Japan, and raises the question of the impact on the broader market. While many see little wider impact in the event of a default, the case of China’s most popular, to date, debt default – that of Kaisa Group Holdings three years ago, when Asian dollar junk bond premiums widened considerably – should serve as a warning.

Below is a summary of some initial views from analysts on how any default scenario for HNA would impact the Asian bond market. What is remarkable is just how optimistic every single analyst is that a default won’t result in contagion. Which, if history is any indication, means that precisely the opposite will happen. Courtesy of Bloomberg:

HSBC (Glenn Ko) – Isolated case

  • HNA is more of idiosyncratic case rather than systemic. Institutional clients and even China-based investors are not involved. Therefore the impact should be contained. Of course, if this happens on top of other negative news flow in the market, the situation could be different

Lombard Odier (Homin Lee) – Situation manageable

  • HNA is a well-known story right now, so the impact of its bond fallout will be limited. Other BB names in Asia still have a strong tailwind behind them, such as real estate names amid macro stability. Single name facing some default issues will be manageable in the credit markets in Asia
  • “I don’t doubt there could be some intra-day moves reflecting this worry. But in terms of the overall trend, can it make a difference? I doubt it”

ANZ (Owen Gallimore) – Default digestible

  • Isolated Chinese non-state-owned junk bond defaults will be digested, even if it is HNA
  • In many ways non-rated state-owned firms and LGFV dollar bond issuance has replaced the traditional China HY market of developers and industrials, so one needs to see problems in these sectors for a broader market correction

Haitong International (Ray Wepener) – Contained contagion

  • “The impact of an HNA default on the wider market would depend on a number of factors. I would expect a knee jerk reaction, mostly isolated to recently (overseas) acquisitive companies”
  • While HNA spreads more than doubled in 2017, Asian HY spreads tightened by 100 basis points from the wides
  • The market has seen for some time now that ‘buy the dip’ has provided a floor, which should contain any widespread contagion

UBS – Spread surge

  • A default scenario would increase funding costs for high-yield issuers, mainly Chinese property companies and LGFVs, and could push out spreads on junk bonds in the region by 160-240 basis points, according to a Feb. 6 equity strategy note
  • UBS said in the report it doesn’t cover HNA and hasn’t done due diligence on the company, so it cannot comment on the likelihood of a default

* * *

Finally, here an interesting take from Bloomberg Markets Live commentator, Andrew Cinco, who sees the Anbang blowup as eerily similar to the Japanese bubble peak.

I guess the NYC Landmark signal still works. Anbang goes wobbly just a few short years after its splashy purchase of a trophy Manhattan property, the Waldorf-Astoria Hotel. It brings to mind the Japanese real-estate bubble in the late 80s, and one has to wonder whether China will suffer the same retreat eventually.

The height of Japan’s property-market glory was marked by Mitsubishi Estate’s acquisition of Rockefeller Center in October 1989 (NB: the Nikkei Index peaked just two months later, on Dec. 29). Mitsubishi walked away from the iconic property almost exactly six years after announcing the deal. The NY Times reported the end of the deal this way:

“Mitsubishi’s sudden decision to exit Rockefeller Center is the most striking in a string of recent retreats from the trophy properties stretching from New York to Honolulu that Japanese companies acquired during a real estate binge in the 1980s.”

via Zero Hedge http://ift.tt/2FpVghA Tyler Durden

Mnuchin’s Most Bizarre Claim Yet: “There Is No Link Between Rising Wages And Inflation”

Treasury Secretary Steven Mnuchin has a degree from one of the most prestigious universities in the world (Harvard grads may dispute this); He was the CIO of Goldman Sachs; He launched a successful hedge fund; He is now Treasury Secretary. Yet he appears to barely grasp basic economic concepts (not to mention his apparent fondness for fake math).

Last night, Mnuchin transparently tried to sooth markets by telling a crowd of reporters who accompanied him to the US Mint in Philadelphia that investors shouldn’t worry about rising inflation and Treasury yields – even with the 10-year yield so close to crossing into the “danger zone” above 3%.

Neuman

Quoted by Bloomberg, Mnuchin swatted away the suggestion that investors are worried about rising prices, even as the average hourly wage number for January soared the most since 2009, triggering this month’s “volocaust”.  Why? Because in Mnuchin’s mind, wage inflation and rising consumer prices have only a tenuous link – if that.

“There are a lot of ways to have the economy grow,” Mnuchin said in an interview aboard a train to Philadelphia on Thursday, where he toured the U.S. Mint. “You can have wage inflation and not necessarily have inflation concerns in general.”

If that’s true – it’s certainly news to us. And judging by the tone of these dismayed Jeffrey Gundlach tweets, we’re not alone.

Mnuchin added that he isn’t concerned about foreign investment in new US debt, which analysts expect could exceed $1.2 trillion this year (with all the latest bells and whistles) as the Trump tax cuts force the federal government to issue more debt, saturating the market and probably driving yields higher.

Of course, Mnuchin has fallen in line behind his boss and repeatedly asserted that the US would make up for lost tax revenue by boosting economic growth to 3% over the coming decade, something that would result in one of the longest and most powerful economic expansions in modern history.

Instead, the suggestion that the Trump tax cuts would boost government revenues through growth has been widely debunked.

As Trump’s chief economic cheerleader, Mnuchin has consistently deflected any suggestion that the president’s policies could have a downside. He sidestepped the idea that tax cuts and increased federal spending Trump has signed into law amount to an economic stimulus.

“Is it very good for the economy? Absolutely,” Mnuchin said of the tax cuts. “One of the reasons why the president won the election is because most middle-class Americans had very little wage growth.”

Turning to the problem of rising crude oil prices, Mnuchin asserted that higher energy costs wouldn’t drive up the price of goods because the US is producing more of its own oil thanks to the shale boom, and is relying less on exports which… wait, what? That makes absolutely no sense: Higher oil prices are higher oil prices, period, and will impact the cost of goods from every conceivable angle, raising the cost of production and distribution, not to mention gas.

But perhaps even more concerning than his comments about inflation were his remarks about the $20 trillion pile of federal government debt, which is about to swell further. Foreigners held $6.3 trillion of that by the end of last year, something that leaders of the US intelligence community have referred to as a security threat.

Much of the new U.S. debt will be bought by foreign investors. Foreign holdings of U.S. Treasuries stood at $6.3 trillion as of the end of last year, hovering near a record amount and almost double the level when the recession ended in 2009. China alone holds about a fifth of foreign-held debt, making it the U.S.’s largest creditor.

The director of national intelligence, Dan Coats, told the Senate Intelligence Committee on Feb. 13 that the U.S. debt, now at $20.8 trillion, is “unsustainable” and “represents a dire threat to our economic and national security.”

“I would urge all of us to recognize the need to address this challenge and to take action as soon as possible before a fiscal crisis occurs that truly undermines our ability to ensure our national security,” Coats said.

But Mnuchin said that foreign investors in U.S. debt don’t worry him.

“I’m not concerned about that for national security risks,” he said, adding that what’s important is that the U.S. can afford to finance its military and intelligence operations.

Already, both energy and higher wages are having a discernible impact on prices: Consumer prices in January were 2.1% higher than a year earlier, up from 1.6% in June. With unemployment at an all-time low, tightness in the labor market SHOULD lead to rising wages and, by extension, higher consumer prices (this is a basic economic concept called the Phillips curve) – though often during her final year in office the former Fed Chairwoman Janet Yellen would suggest that this relationship has unraveled to a degree during the post-crisis period.

But many investors believe this dynamic is back in play: Persuading them otherwise will be one of Mnuchin’s more burdensome responsibilities during the coming months.

via Zero Hedge http://ift.tt/2Cj8SfM Tyler Durden

Traders Puzzled By Pound Flash Crash

Traders are scratching their heads over the latest flash crash in the pound, a currency which over the past 2 years has had more than its share of bizarre, sharp moves lower, when just as 6am ET, GBPUSD plunged 64 pips in seconds on no news (note that May’s big Brexit speech was announced for next Friday after the move).

hitting fresh day low at 1.3905, versus day high at 1.3995.

Ahead of the move, traders had reported another typical low liquidity Friday, with volumes on the light side, as such as large block could have weighed on the pound.

To explain the move, Bloomberg quotes an unnamed trader who suggests that it may have been “triggered by an incorrect amount input for the 11am fix” when “just under GBP700m was sold on one platform alone.”

Here, however, Citi warns to take this with a pinch of salt given the report cites an anonymous trader; the bank also notes that other UK assets did not follow the move, and that “given the quick retracement of the move, there is speculation that this was probably related to flows/orders as early NY wakes up.”

Ultimately, trading GBP continues to depend on broader markets, with your usual dose of those pesky Brexit headlines.

And confirming that it is now officially a robo-market, just an hour after today’s unexplained flash crash, cable was trading at session highs, wiping out the entire drop, and back to session highs of 1.3999, approaching the 21DMA at 1.4010.

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US Futures Hold To Gains In Nervous, Jittery Session Following Anbang Bailout

After a second consecutive disappointing cash session close, in which futures spiked at the open only to close at the lows, we are set for day 3 as S&P index futures again point to a sharply higher open after Asian stock gains despite some mixed trading in Europe. Will they once again fade what is set to be a 150 point higher open in the Dow and if so, will we finally see selling next week?

What is most surprising about the overnight session is how little attention the market paid the the collapse and bailout of Chinese’ mega conglomerate and offshore M&A titan, insurer Anbang Insurance, which as we reported last night was effectively nationalized. A quick recap for those who missed it:

When New York’s Waldorf Astoria hotel was sold for $1.95 billion in 2014, it shot the Chinese buyer – Anbang Insurance Group Co. – and its chairman Wu Xiaohui to international prominence. That was the first deal in a $13.4 billion acquisition spree that lifted Anbang’s profile while raising questions about its ownership and financing. Those questions only deepened after Wu was detained last year by Chinese authorities investigating the firm’s acquisitions funding, market manipulation by insurers and unspecified “economic crimes.” Now, Wu is being prosecuted and China’s insurance regulator is taking over the company.

And yet, despite this critical development, which effectively confirms that China’s conglomerates are insolvent, the Shanghai Composite closed in the green and S&P futures are well well bid.

Commenting on the market’s bizarre reaction, Stock-market gains in China and Hong Kong today provide a fairly revealing insight into the market’s view of Xi Jinping’s policies. Gone are the days when something like the seizure of insurer Anbang would rattle investors, when every yuan fixing was highly anticipated and when fears of leverage, inflated property prices or military activity in the South China Sea were at the back of everyone’s minds.

Now, something like Anbang is being seen as a positive. When I talk about China with investors these days, the perspective is a lot more positive. The belt and road initiative is viewed favorably, as are the efforts to get debt under control.

Maybe… or maybe China’s halting the local VIX yesterday was an indication that something big was coming. And what better way to prevent panic from spreading than blocking the one indicator measuring panic. Although Bloomberg’s point is noted: in China, there was no panic; maybe that’s because in China there is also no longer a market?

* * *

In any case, back to the rest of the world, where the Stoxx Europe 600 Index edged lower as declines in car makers offset gains in telecom shares. n. terms of sector specific moves, telecoms are the clear outperformer with BT Group (BT/A LN) shares at the top of the FSTE 100 following a positive broker upgrade at Berenberg. The biggest story in the UK equity space comes from RBS (-4.5%) who are one of the notable laggards in the FSTE 100 as a return to profit for the Co. was not enough to soothe investor concerns over restructuring costs and a lack of clarity from the DoJ investigation. Other notable movers include Valeo (-9.5%), IAG (-4.7%), Swiss Re (+1.8%) and Pearson (+1.1%) post-earnings, while Standard Life Aberdeen (+2.2%) have been granted some reprieve after offloading their insurance unit to Phoenix (+5.4%).

Asia was decidedly more bullish, with the MSCI Asia Pacific Index rising 1%, underpinned by gains in Tokyo, Hong Kong, Sydney and Seoul equity markets. The Nikkei 225 (+0.7%) edged higher with the gains led by defensive stocks with investors seemingly content to shrug off the notion of a more aggressive Fed unwinding stimulus more rapidly than expected. Chinese markets had been positive for much of the session with the Hang Seng (+1%), while the Shanghai Comp (+0.6%) had a somewhat choppy session. JGB yields dipped overnight, with the curve modestly flatter.

As noted above, US equity futures seemed to forget Thursday’s pitiful close and spiked ahead of the European open, only to fade most of the gains: the E-mini was up +7 at last check, but back to bottom of overnight range, as European equity markets led lower. It seems one piece of bad news today and the house of cards could topple for the 3rd consecutive day.

Indeed, as Bloomberg notes markets have been creeping into risk-off mode across the board; sentiment not helped by a sudden GBP clash crash cited to incorrect trade value.

Elsewhere, credit spreads continue widen, iTraxx Crossover back within range of widest levels seen during VIX-related volatility. USD holds small gains; apart from sharp GBP move, most pairs stay in tight range. SEK weaker after Riksbank minutes highlight inflation worries.

Yields on Treasury 10-year notes fell, though were still near their highest since 2014, while those on German bunds, the benchmark for European debt, dropped to the lowest since January, while the common currency slipped.

The dollar came under pressure following the Tokyo fix, in a repeat of Thursday’s price action. The greenback’s correlation with U.S. yields seems to be back, as Treasuries extended recent gains with the 10-year yield steadying around 2.9%. Volumes were below recent averages in the majors, with unwinds of short-term positions in typical Friday fashion.

In bunds, flows spiked after futures broke the 159 threshold. European stock markets traded mixed and commodities retreated.

In the commodities complex, WTI and Brent crude futures have seen a mild pullback from yesterday’s post-DoE surge, albeit in close proximity to yesterday’s best levels. Energy newsflow remains light with traders awaiting today’s Baker Hughes release which has recently seen a trend of climbing rig counts. In metals markets, gold prices are marginally softer alongside the firmer USD and remains on track for its worst weekly performance since late last year. Elsewhere, Chinese steel futures staged a rebound overnight as traders eye a potential pick-up in demand next week as Chinese participants fully return to market.

US is said to announce new sanctions on North Korea later today, according to sources. Federal Reserve releases semi-annual monetary policy report to Congress. Fed officials John Williams, Bill Dudley and Eric Rosengren speak. European Central Bank Executive Board member Benoit Coeure and Cleveland Fed President Loretta Mester participate in panel discussion.

Market Snapshot

  • S&P 500 futures up 0.2% to 2,718.00
  • STOXX Europe 600 up 0.02% to 380.42
  • MSCI Asia Pacific up 1% to 177.79
  • MSCI Asia Pacific ex Japan up 1.1% to 582.45
  • Nikkei up 0.7% to 21,892.78
  • Topix up 0.8% to 1,760.53
  • Hang Seng Index up 1% to 31,267.17
  • Shanghai Composite up 0.6% to 3,289.02
  • Sensex up 1% to 34,149.05
  • Australia S&P/ASX 200 up 0.8% to 5,999.79
  • Kospi up 1.5% to 2,451.52
  • German 10Y yield fell 2.5 bps to 0.681%
  • Euro down 0.2% to $1.2312
  • Brent Futures down 0.5% to $66.07/bbl
  • Italian 10Y yield rose 2.5 bps to 1.805%
  • Spanish 10Y yield rose 7.6 bps to 1.594%
  • Brent Futures down 0.5% to $66.07/bbl
  • Gold spot down 0.3% to $1,328.59
  • U.S. Dollar Index up 0.1% to 89.85

Top Overnight News

  • China Seizes Anbang, Charges Dealmaking Founder With Fraud; Billions of Dollars of Anbang Assets That Could Go on the Block
  • U.S. regulators are scrutinizing this month’s implosion of investments that track stock-market turmoil, including whether wrongdoing contributed to steep losses for VIX exchange-traded products offered by Credit Suisse Group AG and other firms, several people familiar with the matter said
  • The Trump administration plans to announce on Friday what is said to be the largest package of sanctions against North Korea, Reuters says, citing a senior govt official it didn’t identify
  • The Trump administration’s policies will raise U.S. wages without causing broader inflation, Treasury Secretary Steven Mnuchin said in an interview, brushing aside signs that investors are growing nervous about rising prices
  • Japan’s key inflation gauge stalled at 0.9%, highlighting the challenge ahead for BOJ Governor Haruhiko Kuroda as he starts another five-year term.
  • The European Union is set to oppose turning Theresa May’s pledge to avoid a border in the Irish Sea after Brexit into a legal guarantee, according to a diplomat familiar with the matter; Prime Minister Theresa May gathered her top ministers for an eight-hour session to get them to back her Brexit strategy, as the European Commission preempted the outcome by saying that what it’s heard of her plan won’t work.
  • Barnaby Joyce quit as Australia’s deputy prime minister after having an extramarital affair with his former media adviser.
  • President Xi Jinping will convene a Communist Party meeting within days to select China’s next government.
  • ECB’s Smets says the events we’ve seen in the past few weeks are unlikely to affect the economic fundamentals, which are sound, on condition political leaders stay the course and continue to enact policies that are adequate for their own economies
  • U.K. Prime Minister Theresa May won the backing of her divided Brexit “war cabinet” to ask for an ambitious trade deal with the European Union after a marathon eight-hour meeting at her country house, but the EU isn’t buying it

Asian equities closed the week on a positive note as major bourses traded in the green amid the uptick in crude prices. ASX 200 (+0.8%) had been buoyed by energy and material names, moving within closing just shy of 6,000. Miners were led by BHP (+1.5%) and South 32 (+5%), while oil prices rose throughout the US session after the latest DoE crude inventory data showed US oil output had dropped. Elsewhere, the Nikkei 225 (+0.7%) edged higher with the gains led by defensive stocks with investors seemingly content to shrug off the notion of a more aggressive Fed unwinding stimulus more rapidly than expected. Chinese markets had been positive for much of the session with the Hang Seng (+1%), while the Shanghai Comp (+0.6%) had a somewhat choppy session. JGB yields dipped overnight, with the curve modestly flatter.  Japanese inflation data:

  • Japanese CPI, Ex Food and Energy YY (Jan) 0.4% vs. Exp. 0.3% (Prev. 0.3%)
  • Japanese CPI, Core Nationwide YY (Jan) 0.9% vs. Exp. 0.8% (Prev. 0.9%)
  • Japanese CPI, Overall Nationwide (Jan) 1.4% vs. Exp. 1.3% (Prev. 1.0%); Highest since March 2015

Top Asian News

  • As Volatility Returns, This Is How Emerging Markets Stack Up
  • Hong Kong Moves Closer to Dual-Class Shares With New Rules
  • India Is Said to Plan Asking PNB to Pay Banks for Jeweler Fraud

European bourses are trading on the back foot (Eurostoxx 50 -0.3%) despite calls for a slightly firmer open. In terms of sector specific moves, telecoms are the clear outperformer with BT Group (BT/A LN) shares at the top of the FSTE 100 following a positive broker upgrade at Berenberg. However, the biggest story in the UK equity space comes from RBS (-4.5%) who are one of the notable laggards in the FSTE 100 as a return to profit for the Co. was not enough to soothe investor concerns over restructuring costs and a lack of clarity from the DoJ investigation. Other notable movers include Valeo (-9.5%), IAG (-4.7%), Swiss Re (+1.8%) and Pearson (+1.1%) post-earnings, while Standard Life Aberdeen (+2.2%) have been granted some reprieve after offloading their insurance unit to Phoenix (+5.4%).

Top European News

  • May’s Cabinet Backs the Brexit Plan the EU Is Poised to Reject
  • RBS’s Female Employees Paid 37% Less on Average Than Men
  • Riksbank Inflation Caution Sends Krona to 15-Month Low
  • Bund Futures Jump in Large Volumes After Breaking Key Threshold
  • What to Watch for in Gadgets, Deals From the Biggest Mobile Show

In FX, the DXY has slipped further below the 90.000 level, and it remains a very close call whether the Greenback can continue its recent ‘winning’ run to make it 5 out of 5 trading days and a first complete week of gains this year. Technically, the index needs to close above 90.500-600, so quite a bit above the upper end of the 90.060-89.750 range thus far, and much may depend on the overall tone that emerges from the latest round of Fed rhetoric via a slew of speakers and Powell’s first semi-annual monetary policy report. However, Usd/Jpy still looks pivotal for the Dollar’s overall direction with the pair now heavy around 107.00 having failed to rebound to 108.00 at the height of its rebound from 105.55 lows. Note also, a large 107.00 option expiry strike for next Monday (1.6 bn) may act like an anchor. Eur/Usd straddles 1.2300, with no reaction to final Eurozone CPI and Cable continues to be drawn towards 1.4000 while holding in above solid support ahead of 1.3800 on Brexit-related weakness (similarly 0.8800 is a pivot in Eur/Gbp). In terms of crosses, Eur/Sek has been a mover in wake of cautious and dovish Riksbank minutes as several Board members registered concerns about weak inflation at the January policy meeting, and the pair has eclipsed the 10.0333 peak  from 2017, with the previous year’s high at 10.0833 next on the charts. Back to G10s, the Nzd gained little lasting traction from better NZ retail sales overnight, with a breakdown revealing discretionary items providing a major boost, and Aud/Nzd stop-buying also working against the Kiwi.

In the commodities complex, WTI and Brent crude futures have seen a mild pullback from yesterday’s post-DoE surge, albeit in close proximity to yesterday’s best levels. Energy newsflow remains light with traders awaiting today’s Baker Hughes release which has recently seen a trend of climbing rig counts. In metals markets, gold prices are marginally softer alongside the firmer USD and remains on track for its worst weekly performance since late last year. Elsewhere, Chinese steel futures staged a rebound overnight as traders eye a potential pick-up in demand next week as Chinese participants fully return to market.

Looking at the day ahead, there is the final revisions to Q4 GDP in Germany and also the final revisions to January CPI in the Euro area. The Fed’s Williams, Mester and Dudley are due to speak, along with the ECB’s Coeure. Away from that, EU leaders are scheduled to hold an informal meeting in Brussels to discuss the composition of the European Parliament and also the bloc’s next budget. Finally the Fed is expected to publish its semi-annual monetary policy report to Congress.

US Event Calendar

  • Nothing major scheduled
  • 10:15am: Fed’s Dudley and Rosengren Speak on Panel on Fed Balance Sheet
  • 11am: Fed Releases February 2018 Monetary Policy Report to Congress
  • 1:30pm: ECB’s Coeure, Fed’s Mester Participate in Panel in New York
  • 3:40pm: Fed’s Williams Speaks on Outlook for U.S. Economy

DB’s Jim Reid concludes the overnight wrap.

Markets lacked a bit of leadership yesterday as the S&P 500 couldn’t hang onto 1% gains for the second day but just about ended higher (+0.1%). It appears the initial gains were spurred by a rebound in the WTI oil price (+1.77%) and the Fed’s Bullard’s more dovish words on the rates outlook. He told CNBC that raising rates too quickly could restrict economic growth and that market expectations of four rate hikes this year would be “priced to perfection”. Further he added “100bp (rate increase) in 2018 seems a lot to me” while there was a “way to go” in terms of sustainable upward move on inflation. Within the S&P, gains were led by the real estate, energy and materials sectors with partial offsets from financials. The VIX fell for the second day to 18.72 (-6.5%).

Staying in the US, Matt Luzzetti and others in the US economics team published an update to DB’s analysis that looks at the parallels between the current period and the 1960s in the US. This is work we’ve often referred to in our work. Similar to today, inflation was subdued for a protracted period during the first half of the 1960s even as the unemployment rate fell sharply. Inflation then jumped in 1966.

Recent developments – most importantly a replay of the 1960s fiscal expansion – have increased the similarities with the 1960s episode. Their updated analysis suggests that while we are unlikely to see a spike in inflation as large as the 1960s, the risks around DB’s inflation view are likely titled to the upside. As such, we would not downplay the possibility that core inflation hits 2.5% or above in the coming years, exceeding the last cycle’s peak and rising to the highest level since the early 1990s.

Turning back to Europe and the latest ECB minutes. They broadly reiterated a wait and see approach. On rates, the minutes indicated “changes in communication were generally seen to be premature” and that “monetary policy would continue to develop….with a view to avoiding abruptly or disorderly adjustments at a later stage”. On QE, “some members expressed a preference for dropping the easing bias…but it was concluded that such adjustment was premature”. On FX, “there was broad agreement among members that the recent volatility in…..the Euro was a source of uncertainty that required monitoring”. Looking ahead, “the language pertaining to the monetary policy stance could be revisited early this year as part of the regular assessment at the forthcoming policy meetings”.

Over in government bonds, core 10y bonds yields were 1-3bp lower while peripherals modestly underperformed (1-3bp higher), in part reversing the prior day’s gains. 10y Bunds and Gilts yields fell 1.6bp and 0.9bp respectively while UST 10y also fell 2.9bp. Elsewhere, the US treasury sold $29bn of 7 year notes at a yield of 2.839% with a bid-to-cover ratio of 2.49x (vs. 2.73x previous).

This morning in Asia, markets are in positive territory with the Kospi (+1.23%), Hang Seng (+0.89%), Nikkei (+0.71%) and China’s CSI 300 (+0.02%) all up as we type. Datawise, Japan’s January core CPI (ex-food) was above expectations at 0.9% yoy (vs. 0.8%) but flat for the third consecutive month. Staying with inflation, the US Treasury Secretary Mnuchin has discussed prices overnight and believes rising US wage gains may not cause broader inflation. He noted that “you can have wage inflation and not necessarily have inflation concerns in general”.

Now recapping other markets performance from yesterday. Key European bourses weakened modestly, with the Stoxx 600 (-0.20%), DAX (-0.07%) and FTSE (-0.40%) all lower. In FX, the US dollar index fell for the first time in five days (-0.28%), while the Euro and Sterling gained 0.37% and 0.27% respectively. Over reiterated that three rate hikes seems appropriate but his views could change if there was greater evidence of rising inflation or employment. Elsewhere, he noted “the Fed’s policy is accommodative, but the path to neutral may be flatter and not as far away as some think”. Finally, the Fed’s Quarles noted “with a strong labour market and likely only temporary softness in inflation, I view it as appropriate that monetary policy should continue to be gradually normalized.”

Back in Europe and ahead of the Italian election on 4thMarch, the EC President Juncker warned “we have to brace ourselves for the worst scenario….(which) could be no operational government” and that he was “more worried by the result of Italian election than the result of the vote by SPD members” in Germany. Later on in a statement, he did softened his message and noted “whatever the outcome, I’m confident that we’ll have a government that makes sure that Italy remains a central player in Europe”.

Staying in politics, the Times reported that the UK may allow EU citizens who arrives during the Brexit transition period to stay permanently. Elsewhere, before PM May outlines her vision for a post-Brexit trade deal, a presentation on the European Commission website has reiterated the potential difficulties she faces with the stance her cabinet seem to be moving towards. It noted the “UK’s views on regulatory issues in the future relationship including the three basket approach are not compatible with the principles in the EC guidelines”.

Before we take a look at today’s calendar, we wrap up with other data releases from yesterday. In the US, the January Conference board leading index was above market at 1% (vs. 0.7% expected) with large positive contributions from the firming of the ISM new orders index and building permits in the month. The Kansas Fed manufacturing index was slightly below at 17 (vs. 18 expected).

Elsewhere, the weekly continuing claims (1,875k vs. 1,935k expected) and initial jobless claims (222k vs. 230k expected) were both below expectations, with the latter near a c44 year low and adds to the view that the labour market is tightening further.

In Germany, the February IFO Business Climate Index fell to 115.4 from its record high in January (117.6). The drop was driven by a fall in business current assessment (126.3 vs. 127 expected) and the expectations index (105.4 vs. 107.9 expected). Overall DB’s Marc Schattenberg believes a pull-back was not surprising and the sentiment surveys are still at very high levels, signaling a continued strong economic expansion in Q1. In France, the February manufacturing confidence (112 vs. 113 expected) and business confidence (109 vs. 110 expected) were both softer than expectations. The final reading of France’s January CPI was unrevised at 1.5% yoy, while Italy’s print was revised 0.1ppt higher to 1.2% yoy. Finally, the UK’s 4Q GDP was revised down 0.1ppt to 0.4% qoq and 1.4% yoy (vs 1.5% expected).

Looking at the day ahead, there is the final revisions to Q4 GDP in Germany and also the final revisions to January CPI in the Euro area. The Fed’s Williams, Mester and Dudley are due to speak, along with the ECB’s Coeure. Away from that, EU leaders are scheduled to hold an informal meeting in Brussels to discuss the composition of the European Parliament and also the bloc’s next budget. Finally the Fed is expected to publish its semi-annual monetary policy report to Congress.

via Zero Hedge http://ift.tt/2EOONLW Tyler Durden

“A Critical Juncture”: Why One Trader Thinks An Equity Meltdown And Dollar Surge Is Imminent

For everyone watching the paradoxical dance between rising bond yields and higher stocks with great interest, wondering when the correlation will finally snap, and what happens then, then the latest thoughts from Bloomberg macro commentator, and Lehman veteran Mark Cudmore, will make for a very interesting read.

From Mark Cudmore’s latest Macro View

Tactically Bullish Dollar and Bearish U.S. Equities: Macro View

Treasury yields are not in equilibrium at current levels. If they go higher, the dollar will rise and equities will fall. If they go lower, what happens to other assets will probably depend on what the catalyst for the move was.

This day last year, U.S. two-year yields closed at 1.18% and the 10-year was at 2.37%. At that time, consensus CPI forecasts for 2017 and 2018 stood at 2.4% and the 2019 projection was 2.2%.

Since then the inflation outlook has dropped across the curve. It’s not just that 2017 inflation missed those expectations by 0.3 percentage points. More importantly, we now expect less inflation in 2018 and 2019 than we did a year ago, at 2.3% and 2.17% respectively.

So the inflation outlook has deteriorated and yet two-year yields are more than 100 basis points higher, with the 10-year up more than 50bps. That’s an extraordinary rise in real yields. It was reflected by TIPs yields closing at the highest level in more than four years earlier this week.

Ignoring whether Treasuries are sustainable at this level, one thing is certain: the climb in yields isn’t justified by inflation dynamics.

Coming into February, tax reform, global growth, Trump impacts and fiscal deficits were all being used to explain how equities could continue to roar and the dollar slump even as real yields tightened. All those things have now had a chance to be fully priced in.

Real yields now stand at a critical technical juncture. A break up and there’s nothing left to stop the dollar roaring and equities melting.

  • What happens if yields go lower? If the move is led by a retreat in equities, then that’ll cause P&L-destruction that will also squeeze dollar shorts.
  • If yields fall because there’s a technical failure at 3% that squeezes Treasury shorts or because investors give up on this idea of accelerating inflation, then expect equities to drop and the dollar to benefit from haven flows.
  • The only scenario where equities benefit is one where real yields fall because inflation and growth get rapidly revised up. That would be bad for the dollar.

But where is this sudden, massive boost to inflation and growth going to come from?

So summing it all up: the most likely outcome is a stronger dollar combined with lower equities. Controversially for some, this may be accompanied by lower yields as well.

 

via Zero Hedge http://ift.tt/2CDSUbQ Tyler Durden

Are Germany’s Energy Transition Plans Working?

Authored by Ryan Opsal via OilPrice.com,

Considering the established political imperatives underpinning the German energy transition (Energiewende) and the overall push toward greater use of renewables in the energy mix, let’s look at some of the outcomes of this transition – specifically natural gas imports from Russia and fossil fuel consumption.

A boost in renewables would carry these two ostensible goals, and it’s worthwhile to gauge progress in both areas.

In these scenarios, it’s beneficial to look at the end-use of primary sources of energy, to understand how Germany is ultimately using its energy. So instead of production data, the focus will be on consumption.

For example, as we’ll cover later, Germany produces a lot of renewable energy, but it doesn’t consume all that energy, and therefore will not have any fundamental impact on the consumption mix.

BP’s statistical workbooks (data used in this article is sourced from BP’s 2017 Statistical Workbook unless otherwise noted) provide good time-series data that can be used to understand Germany’s transition in this context.

The following graph draws on BP’s data and furnishes a good look at energy consumption in Germany, going back to 2000.

(Click to enlarge)

In specific areas, Germany has been successful in meeting its objectives, and this appears to be at least partially due to increases in the production and consumption of renewable sources of primary energy.

Since 2000, renewables consumption in Germany, including biomass, solar, and wind (excluding hydroelectricity) has grown over 1,000 percent. This growth represents a substantial increase, bringing consumption from 3.2 Mtoe (14.3 Twh) in 2000 to 37.9 Mtoe (167.4 Twh) in 2016.

There is still quite a discrepancy, however, between Germany’s production of renewable energy, and its consumption…

Around one-third of the energy produced in Germany in 2016 was from renewable sources, but only 12 percent of the energy consumed in the same year was from renewables, creating a gap of 23 percent. This is attributed to both exports and waste, as the distribution network simply cannot keep up with production surges, although progress is being made on this issue.

For instance, it was recently reported that on January 1, 2017, Germany met, for the first time, 100 percent of its consumption needs through renewable sources of energy, with wind providing approximately 85 percent of national demand.

As noted in both the graph above and the pie charts below, the other notable change since 2000 is the reduction in the use of nuclear power.

The data demonstrate a dramatic 23 percent decline in nuclear power consumption from 2010 to 2011 from 31.8 Mtoe to 24.4 Mtoe, following the immediate closure of several nuclear power plants throughout the country, and reduced output from the remaining plants.

After the CDU and FDP agreed to extend the use of nuclear plants in 2009, the decision was immediately reversed following the disaster at the Fukushima power plant in Japan, closing several plants within a month, and reducing the output of the remaining plants.

The general population in Germany has been wary of operating nuclear power plants since the Chernobyl disaster, and the recent shuttering of these facilities has enjoyed widespread public and political support. Over this entire period, from 2000 to 2016, nuclear power consumption dropped by a full 50 percent.

Following nuclear energy, the second most significant reduction in power generation over this period is from petroleum, although it still makes up the largest share of the energy consumed in Germany since 2000 and has maintained relatively stable levels over the 17-year period.

Over 50 percent of the increase in renewables over this time has gone to cover reduced generation and consumption of nuclear power, and the rest of that growth covers the reductions in the use of petroleum.

Overall, the data demonstrate slight decreases in coal and petroleum consumption, while the use of natural gas is mostly flat.

(Click to enlarge)

Due to the significant drop in nuclear power consumption, Germany has been unable to reduce fossil fuel consumption as much as previously hoped. This shortfall is especially the case with natural gas, which has been a central cause for concern given the political leverage held by massive Russian exports to Germany, and to the European Union more broadly. On this issue, progress has been limited, and seems to be getting worse.

As the table below demonstrates, Russian natural gas exports to Germany are only increasing, and show no signs of abatement, mirroring anecdotal reports and the steady progression of the Nord Stream 2 pipeline.

Total imports, including those from Russia (except a 2011-2012 decrease due to supply diversions resulting from extreme cold weather), have increased while both domestic production and consumption have decreased.

In 2016, Germany sourced over 46 percent of its natural gas imports from Russia, up from 40 percent in 2006. The other two key suppliers, Norway, and the Netherlands, both maintained relatively stable exports over the period examined.

Receiving outsized amounts of energy imports from a single source, even aside from political considerations, is fraught with risk. If anything occurs along the entire supply chain — from source to consumer — to disrupt the gas flow, it heralds a potential crisis that could not be sustained indefinitely. Add in the politically contentious relationship between the European Union and Russia (over a host of issues), and the energy supply situation has the potential to become a significant problem.

Sustained increases in gas imports from Russia should worry German politicians since it will reduce political operating space in the case of any future disagreements.

(Click to enlarge)

However, something else interesting does show up in the data: the significant and growing increase in natural gas imports over domestic consumption.

Beginning in 2009, a noticeable jump in natural gas imports compared to domestic consumption occurs, with the country importing 7 percent more gas than it consumed. Before this year, Germany roughly imports enough to cover the difference between consumption and production, as one would expect.

After 2009, trend of excessive imports is maintained, and then accelerates in 2013 with imports over 13 percent of what is required, and then 27 percent over in 2015.

The amount settles to 17 percent in 2016, meaning Germany is systematically importing more natural gas than is necessary for domestic consumption. This discrepancy appears to be due to its central location within Europe and its developed natural gas network, which seems to be taking on a redistribution role for European markets.

Perusing Germany’s natural gas re-export data confirms this, with gas exports going primarily to Belgium, Netherlands, France, Austria, Poland, Switzerland, Italy, and the United Kingdom.

These exports represent a relatively new development that appears to be a sustained effort toward making Germany a European gas hub.

In the two critical areas outlined, Germany has had mixed results. The government has been able to slightly reduce energy consumption overall but hasn’t had much success in the reduction of fossil fuel use. However, the impressive gains in renewables consumption have allowed the country to wean itself off large amounts of nuclear power successfully.

Renewables generation is increasing, with more wind and solar power ultimately finding its way to consumers, whether through more effective distribution networks or storage. However, anyone that had hopes of diversification of natural gas supplies away from Russia will be sorely disappointed at the progress made so far, and by the current trajectory of Germany sourcing.

Quite the opposite, Russian gas exports will continue to grow, and form a larger part yet of the consumption mix.

Aside from the negatives, the growth in renewables and the parallel development of flexible power systems should be viewed as an investment in a more favorable, sustainable future energy mix — something very close to fruition.

via Zero Hedge http://ift.tt/2HELusB Tyler Durden

“It Was A Good Laugh” – German Newspaper Publishes Embarassing “Russian Meddling” Hoax

It had all the trappings of a bombshell report. The German socialists turning against their conservative former allies – and running headlong into the open arms of Russia’s Vladimir Putin. There were secret meetings, armies of Internet trolls and “targeted” social media attacks.

Still, despite the fusillade of juicy details, a story containing salacious allegations of Russian interference in German politics published by Bild, one of Germany’s most well-read newspapers, has been revealed to be a hoax organized by a German satirical magazine, which noticed that German media had been much more hesitant to blame Russia for election hacking than media in other Western countries.

Germany’s Bild – which has a well-known anti-SPD stance and roots in the tabloid world – ran with the story, despite failing to double-check and verify claims that a leader in Germany’s Social Democratic Party had engaged in a conspiracy with a shadowy Russian hacker to organize a coordinated Russian disinformation campaign targeted at SPD leader Martin Schulz.

Bild

Applying all their creativity, they forged a chain of fake emails resembling an exchange between Kevin Kuehnert, head of the Social Democratic Party (SPD) youth wing Jusos (and a prominent critic of the new coalition government with Angela Merkel’s conservative bloc), and a shadowy Russian bot master by the name of “Juri.” The fake material was then fed to Bild. Schulz, a former president of the European Parliament, stepped down from the leadership of the SPD earlier this month after announcing a controversial coalition deal with German Chancellor Angela Merkel’s Christian Democrats and their Bavarian allies the Christian Social Union.

Schulz had also recently abandoned a bid to serve as Germany’s foreign minister following heavy criticism from his party.

Given all the drama, the writers and editors at Titanic, a Germany monthly satirical magazine, found it odd that the German media had hesitated to blame Russia for meddling in their country’s political process – particularly given the strong showing of Germany’s Alternative for Germany far-right party that has advocated closer ties to Russia. So the editors decided to capitalize on the growing global hysteria about Russia and see if they could entice Bild – which they frequently criticize for having sub-par editorial standards – into publishing an embarrassing hoax with details seemingly cribbed from a spy novel, as RT reports.

Editors of Titanic, a German monthly satirical magazine with a circulation of approximately 100,000, found it odd and amusing that the German media, including the top-selling Bild daily, for some reason hesitated to blame Russia for meddling in their country’s political process too. Capitalizing on the global ‘Russian meddling’ hysteria, they devised a ‘spy movie’ plot, a storyline that would feature a Russian ‘troll factory’ using social media bots to target German politicians.

“There were no rumors of Russian meddling and we thought – ‘this cannot be’ – we have to make an alliance with the Bild tabloid and push a story of Russian meddling. And as we see now, it works perfectly,” Moritz Hürtgen, editor of Titanic, told RT.

Applying all their creativity, they forged a chain of fake emails resembling an exchange between Kevin Kuehnert, head of the Social Democratic Party (SPD) youth wing Jusos (and a prominent critic of the new coalition government with Angela Merkel’s conservative bloc), and a shadowy Russian bot master by the name of “Juri.” The fake material was then fed to Bild.

“What we did was we came up with a story that was tacky and like in a spy movie. And we had a good feeling that this would work especially with Bild as they already ran a campaign against the SPD, the Social Democratic Party which Kevin Kuhnert is a part of,” Hürtgen recalled. “Our intent was to spin this story further.”

Upon receiving the forged emails, the editors at Bild apparently thought that they had finally stumbled upon hard proof of Russian meddling – a first among the German press. So what did they do? Instead of vetting the information, they rushed to press, publishing a story about the “new smear campaign inside the SPD” on Friday.

It wasn’t until Wednesday that the paper retracted the story. It’s also now facing a lawsuit from Kevin Kuehnert, head of the SPD youth wing, who was identified as a conspirator in the story.

Bild’s sizzling Russia ‘scoop’ documents Juri’s offer to use social media bots to target former SPD leader Martin Schulz.  Citing the ‘sensational’ messages, it explains that Juri stood ready to pump between €4,000 and €5,000 into Kuehnert’s campaign against a new “grand coalition.” The hoax has Kuehnert readily accepting the mysterious Russian meddler’s generous proposal, as long as Juri can ensure that it looks like the money came from his youth organization.

However, on Wednesday, the satirical magazine confessed that it had fabricated the entire email exchange, mocking Bild for its sub-WordPress-blog journalistic standards. “The readers of Bild [are] just like the editors of Bild – they are hopeless cases. So you can’t help them,” Hürtgen told RT. “It was a good laugh. And I think that is worth something.”

Although Bild is Germany’s most widely-read daily with a circulation over one million, ordinary Germans were unsurprised by the tabloid’s extremely lax standards. “I don’t believe that the Russians really do that, because the BZ and the Bild publish fake news very often. We here in Berlin know that already and that happens constantly,” Mohamed, a Berlin resident, told Ruptly.

Many Germans expressed a complete lack of surprise upon learning that the Bild story was a hoax.

“I’m used to that. Bild publishes without checking, I mean, Bild is for entertainment, not for something serious,” another Berliner said.

Now, imagine if somebody had pulled a similar stunt in the US? How do you think the Washington Post would react?

 

 

 

 

 

via Zero Hedge http://ift.tt/2HEdyMR Tyler Durden

Oxfam’s ‘Aid For Sex’ Scam Exposed

Authored by Raul Ilargi Meijer via The Automatic Earth blog,

Oxfam. I’m wondering if I should warn this is not for the faint of heart, or say don’t read on an empty stomach. If so, hereby. I know I found it hard.

The first and foremost thing the BBC last week felt its audience should know about the sleaziest scandal to come out of Britain in quite some time -and that’s saying something- is that an actress had turned her back on the aid organization. Your news in bite-size pre-chewed headlines.

While a guy who ‘served’ Oxfam in Bosnia claims it’s nobody’s business if he visited the local hookers in his spare time. The head office even specifically refuses to ban staff from doing that. Not violating a staff member’s civil liberties trumps a question like what drives desperate women -girls- into prostitution that same staff member pays for with money donated to aid desperate people.

Someone at the Dutch Oxfam/Novib office complained that his British colleagues should have provided more information, sooner, because now his branch suffers from the scandal (fewer donations). A branch that knew about it at least as far back as 2012, and passed on the info to the Dutch Foreign Ministry and Accounting Office. Who looked at potential -financial- damage in their country, found none, and located a carpet to sweep it under.

The only right choice for us, and our governments, would seem to be to cancel all donations to Oxfam, because apparently nobody connected to the organization is able to figure out who the actual victims are here. They instead portray themselves as the victims.

Of all people, its own chief executive feels a need, when responding to accusations of child sex abuse concerning his organization, to paint himself -and Oxfam- as victims. ‘Anything we say is being manipulated. We’ve been savaged’ . How does that guy hold on to that job?

Charities like Oxfam receive donations to help those people who have fallen victim to the conditions that exist where they live, be they manmade or due to natural disaster. Obviously, if Oxfam cannot (will not) even correctly identify these victims, it has no reason to exist.

Of course Oxfam announces more internal investigations when these accusations come out, but it’s too late. They’ve hush-hushed all previous such investigations, and there’s no reason to believe that won’t happen again. Oxfam has covered up the issues for a long time, likely decades, and if they can no longer cover things up -like now-, they try and make things look like incidents, stand-alone occurrences. This is a pattern.

Of course there are many people involved in international aid who are pure -enough- souls with the best intentions, but that’s simply not enough: sexual predation has infiltrated its ranks to such a degree, and management has refused to take the only appropriate steps against its perpetrators for so long, that sex abuse has become Oxfam’s middle name. And that very much includes child sex abuse.

I’ve been reading a lot about the story over the past 10 days, and one of the things that stand out is that the typical first reaction is to cover up whatever nastiness it is that surfaces, out of fear that donations would suffer. Instead of thinking about the people Oxfam is supposed to help, for which it receives those donations, and put their interests first. That is a death sentence for any aid organization. And rightly so.

It’s quite simple when you think about it: if we allow Oxfam to continue to exist, we accept that the aid we pay for through donations is sold to victims for sex. If you say, as many people do, that shutting down Oxfam will ‘only’ be bad for those in need who rely on it for aid, then that’s what you promote: aid for sex.

Through the many articles I’ve read I’ve seen people finger Oxfam for sex abuse in Haiti, Chad, South Sudan, Ivory Coast, the Philippines, Bangladesh and Nepal. Ten to one that is but a partial list. Other aid organizations cover even more territory. There are specific accusations, just through these articles, from 1999, 2004, 2012, 2015 and 2017. That too is but a partial list.

Let’s see if I can make a coherent story of all this without turning it into an entire book (would not be a problem). Here’s from The Independent, with a headline that takes us right where we need to be:

Oxfam Told Of Aid Workers Raping Children In Haiti A Decade Ago

Aid agencies including Oxfam were warned that aid workers were sexually abusing children in Haiti a decade ago, The Independent can reveal. Children as young as six were being coerced into sex in exchange for food and necessities, according to a damning report by Save the Children, which called for urgent action including the creation of a global watchdog. Its research exposed abuse linked to 23 humanitarian, peacekeeping and security organisations operating in Haiti, Ivory Coast and what was then Southern Sudan. “Our own fieldwork suggests that the scale of abuse is significant,” the report concluded.

“Every agency is at risk from this problem … existing efforts to keep children safe from sexual exploitation and abuse are inadequate.” It identified “every kind of child sexual abuse and exploitation imaginable”, including rape, prostitution, pornography, sexual slavery, assaults and trafficking. One 15-year-old girl in Haiti told how “humanitarian men” exposed themselves and offered her the equivalent of £2 to perform a sex act. “The men call to me in the streets and they ask me to go with them,” said another Haitian girl. “They do this will all of us young girls.”

A six-year-old girl described being sexually assaulted and a homeless girl was given a single US dollar by a “man who works for an NGO” before being raped and severely injured, while boys were also reportedly raped. When asked why the abuse was not reported, children said they feared losing aid, did not trust local authorities, did not know who to go to, felt powerless or feared stigma and retaliation. “The people who are raping us and the people in the office are the same people,” said one girl in Haiti.

Ironically, that report is from Save the Children. Ironic because just today the Telegraph had this:

The former chief executive of Save the Children resigned after he admitted making “unsuitable and thoughtless” comments to three young female members of staff, it emerged on Tuesday. Justin Forsyth, who is now deputy executive director at Unicef, “apologised unreservedly” to the women after sending them text messages commenting on how they looked and what they were wearing. Mr Forsyth’s resignation from Save the Children came just four months after Brendan Cox, a friend of Mr Forsyth and former chief strategist at the charity, quit following separate allegations of sexual misconduct.

Mr Forsyth and Mr Cox worked together at Oxfam and later again as advisors to Gordon Brown in Downing Street. Mr Cox, the widower of the late Jo Cox who was murdered in 2016, admitted at the weekend that he had caused the women “hurt and offence”. Neither Mr Forsyth nor Mr Cox were subject to a formal disciplinary hearing. Save the Children said on Tuesday night that trustees had carried out two internal investigations into the complaints against Mr Forsyth in 2011 and 2015.

Save the Children admitted on Tuesday that it dealt with 193 child protection and 35 sexual harassment cases last year, which led to 30 dismissals.

It’s by no means just Oxfam. But they’re a major player. In more ways than one, unfortunately. Oxfam has some 2,500 staff and 31,000 volunteers through the world. Its annual budget is about half a billion dollars.

Another ‘interesting’ pattern to emerge is that the perpetrators, even if they are penalized, seemingly seamlessly float between aid organizations: get kicked out in one place, start afresh a few months later at the next. This article from IRIN is about the Belgian guy with whom the latest scandal surfaced.

He lived in a splendid $2000 a month Oxfam-sponsored villa in Haiti right after the 2010 earthquake, when most locals didn’t even have a roof over their heads, and threw sex-parties there. None of that hurt him much; he lost his Oxfam job, though only after many years of complaints, but just kept going (and denies just about all):

The man at the centre of a sexual exploitation scandal at aid agency Oxfam was dismissed by another British NGO seven years earlier for similar misconduct, IRIN has found. A former colleague reveals that Roland van Hauwermeiren was sent home from his job in Liberia in 2004 after her complaints prompted an investigation into sex parties there with young local women. Despite this, van Hauwermeiren was recruited by Oxfam in Chad less than two years later and went on to work for them in Haiti, and then in Bangladesh for Action contre la Faim.

The Swedish government’s aid department, alerted in 2008, also missed an opportunity to bring his behaviour to light and even went ahead that year to fund Oxfam’s Chad project, under his management, to the tune of almost $750,000. [..] Seeing the Times article about van Hauwermeiren, Swedish civil servant and former aid worker Amira Malik Miller was shaken to read about the Haiti case, which pertained to alleged parties and orgies in 2011, seven years after her own experiences of him in Liberia. She couldn’t believe he was still active in the aid world, especially after she had blown the whistle on him and his colleagues, not once but twice.

“Oh my God, he’s been doing this for 14 years,” she remembers thinking. “He just goes around the system… from Liberia to Chad, to Haiti, to Bangladesh. Someone should have checked properly,” she told IRIN. On two previous occasions, she thought she had done enough to stop his predatory behaviour. Malik Miller told IRIN how her initial complaints way back in 2004 led to van Hauwermeiren being pushed out of his job as Liberia country director of UK charity Merlin, a medical group now merged with Save the Children. An internal investigation into sexual exploitation and misconduct led to his departure, several Merlin staff members confirmed.

And that was just for warming up. An interesting voice in the whole narrative is that of Australian professor Andrew MacLeod, who worked with the Red Cross in Bosnia and the UN Emergency Co-ordination Centre in Pakistan. From the Times:

UN Staff Responsible For 60,000 Rapes In A Decade

Andrew MacLeod, who was chief of operations at the UN’s Emergency Co-ordination Centre, said that “predatory” abusers used development jobs to get to vulnerable women and children. He estimated that 60,000 rapes had been carried out by UN staff in the past decade, with 3,300 paedophiles working in the organisation and its agencies. “There are tens of thousands of aid workers around the world with paedophile tendencies, but if you wear a Unicef T-shirt nobody will ask what you’re up to,” he told The Sun. “You have the impunity to do whatever you want. It is endemic across the aid industry across the world.”

More Andrew McLeod, via the Daily Mail:

I was first alerted to it in 1996 while working in former Yugoslavia with the International Committee of the Red Cross. People would talk about a nightclub called Florida 2000, in the Bosnian city of Zenica, where girls of 14 and 15 were working as prostitutes. These children were being trafficked into Bosnia from neighbouring Moldova by individuals working for the UN and Bosnian police. They were used exclusively for the sexual gratification of UN staff. Such lurid rumours seemed difficult to credit at first, but when a UN peacekeeper called Kathryn Bolkovac tried to investigate, she was swiftly demoted and then fired. Her story was turned into a film, Whistleblower, in 2010, starring Rachel Weisz.

There is so much opportunity for abuse and so little to stop it that jobs in international aid actively attract sexual predators who benefit from the artificial power the aid industry confers upon them. [..] Senior figures in the UN and some of our best known charities have known for decades that this problem was rampant. They should have put in place systems for training, prevention, protection and prosecution. By failing to do so they were committing an offence. They were party to child sex crime. They did nothing, and they should face charges. If they’re not worried – they should be.

From the same article:

A middle-aged man who persistently hangs around the gates of a British primary school as children are leaving will attract the wary attention of teachers, parents and, pretty soon, the police. But the same man lurking outside a school in the Democratic Republic of Congo, for example, will be quite safe. Especially if he is wearing a T-shirt bearing the logo of Unicef, Save the Children, Oxfam or any other internationally-renowed aid organisations. Almost 20 years ago, the UK’s National Criminal Intelligence Service, warned that due to better policing and safe-guarding strategies and an international crackdown on child sex tourism, predatory paedophiles were turning their attention to the developing world.

And the best way of gaining access to children? Work for a children’s charity in some place where paedophilia is ignored or difficult to police. Everyone working in the international aid industry needs to be aware of the scale of sexual abuse – happening on their watch and often involving their personnel – of vulnerable people, especially children. Those who deny it are either lying through their teeth, or have their heads buried so far in the sand that their ignorance is deliberate.

And if you think government investigations would solve anything, here’s how Britain’s Charity Commission deals with things:

The Charity Commission has been forced to defend its own investigations after Oxfam’s former head of safeguarding claimed she told the watchdog women were being coerced into sex for aid. Helen Evans said she was “extremely concerned” by the response to concerns she raised while heading the charity’s global efforts to protect staff and beneficiaries from 2012 to 2015.

While appealing for more resources from management to deal with a rising number of allegations, Ms Evans told how in a single day she was told of a woman being coerced into sex in exchange for aid, another aid worker having sex with a beneficiary and a member of staff being struck off for abuse. “There has been a lot of coverage about Oxfam and how shocking and surprising this is – it isn’t,” she told Channel 4 News.

“I went in 2015 to the Charity Commission, I went back again in 2017. Everything I’m saying today, the Charity Commission knew, so why is the Government saying this is a surprise?” Ms Evans had emailed Oxfam’s chief executive, Mark Goldring, warning that data being gathered from staff “increasingly points to a culture of sexual abuse within some Oxfam officers” but a face-to-face meeting was cancelled in 2014.

So far we’ve encountered Oxfam, Save the Children, Doctors without Borders (MSF) and the UN (including its children’s fund Unicef). But that’s by no means the whole story. Try this on for size from Agence France Presse:

Oxfam is not the first non-governmental organisation to be accused of abuse. Previous revelations spurred the United Nations in 2002 to issue special measures for all its staff and others, including aid workers under UN contract, based on a policy of zero tolerance. The issue came to public attention in 2002 after allegations of widespread abuse of refugee and internally displaced women and children by humanitarian workers and peacekeepers in West Africa.

In refugee camps in Guinea, Liberia, and to a lesser extent Sierra Leone, dozens of male aid workers, often locals, were suspected of having exchanged money or gifts for sex with young refugee girls aged between 13 and 18. “It’s difficult to escape the trap of those (NGO) people, they use the food as bait to get you to have sex with them,” an adolescent in Liberia was quoted as saying in a report from the UN refugee agency. More than 40 agencies and organisations and nearly 70 individuals were mentioned in the testimonies taken from 1,500 children and adults for the UN report [..]

It’s everywhere, the pedophile rot. And the cover-ups, the industry approach, the aid as big business. And that can only lead to ever more misery. Because aid should never become an industry.

I touched on that about a year ago in one of many articles on our efforts for refugees and homeless in Greece. When it comes to scrutiny of aid organizations, you shouldn’t expect much if anything from governments. They’re part of the same industry.

Politicians find it much easier to fork over their constituents’ cash to ‘recognized’ aid organizations than to investigate them. They have a vested interest in letting the system roll on without disturbing it.

The Automatic Earth Still Helps Greeks and Refugees

[..] NGOs, as I’ve written before, have become an industry in their own right, institutionalized even. As someone phrased it: we now have a humanitarian-industrial complex. Which in Greece has received hundreds of millions of euros and somehow can’t manage to take proper care of 60,000 desolate souls with that.

I’ve even been warned that if I speak out too clearly about this, they may come after Konstantinos and his people and make their work hard and/or impossible. This is after all an industry that is worth a lot of money. Aid is big business. And big business protects itself.

Still, if we’re genuinely interested in finding out how and why it is possible that hundreds of millions of taxpayer euros change hands, and people still die in the cold and live in subhuman conditions, we’re going to have to break through some of the barriers that the EU, Greece and the iNGOs have built around themselves.

If only because European -and also American- taxpayers have a right to know what has made this ongoing epic failure possible. And of course the first concern should be that the refugees have the right, encapsulated in international law, to decent and humane treatment, and are not getting anything even remotely resembling it. Refugees Deeply quotes ‘a senior aid official’ (they don’t say from what) anonymously saying that €70 out of every €100 in aid is wasted.

But the Oxfam scandal, spreading as it is across the entire aid’ industry’, is many times worse than letting refugees freeze on islands. Or is it? Isn’t it perhaps the exact same thing, that changes appearance between places but remains always the same in essence?

Oxfam must go. It’s been found painfully wanting for too long and on too many occasions. It’ll be a useful deterrent for all other groups. The managers of which, who often make hundreds of thousands of dollars if not more, must also go. They’ve all either known or should have known for many years. The buck stops with them.

The aid itself may stop too in some places, at some times, but when you can only hand out aid when you’re ready to accept that it will be traded for sex with often underaged children, you’re losing big time, and you’re never going to turn that around. Institutionalization can only be halted when walls are broken down, up to and including their foundations.

The aid organizations that cause all these problems have one thing in common: they’re large, large enough to become like, look like, industries. The ones that have expensive offices in A locations because that’s where their major donors are, and executives who make salaries like the executives at those donors.

That’s simply the wrong scale. In all the countries where these organizations operate, and where they bring their depraved sex-crazed staff, there are other, smaller, local organizations too. Who most often don’t have anything like those issues, who often exhibit the exact opposite behavior: people helping people without looking for anything in return. I know this from my experiences in Greece since 2015.

It’s when you scale up the humanity that exists in many, if not most, people, that things go awry and the vermin creeps in. When things become so large that managers are hired, you can be sure that most of the money donated for aid will be burned in a bonfire of politicians, businessmen and, as we now know, pedophiles.

Oxfam gets $500 million a year or so. The EU has pumped over €1 billion into Greece, and probably as much into Italy as well, to ‘solve’ the refugee situation. That Brussels doesn’t want to solve, and neither do Athens or Rome, for fear that it will encourage more refugees to come.

So they make the people they purport to help, miserable, and they put a huge price sticker on that misery posing as help, for the taxpayer to pay. Like this, for instance -from my same article above:

[..] every refugee who, before the EU-Turkey deal, passed through Greece on his/her way to Europe, cost the EU €800. For a family of 5 that adds up to €4,000, which would have been more than enough to pay for transport, stay at decent hotels and eat in normal restaurants for the duration of their trip (7-10 days). Suffice it to say, that was not what they got.

After the EU-Turkey deal made it impossible for refugees to leave Greece, €15,000 has been spent per capita. That is €75,000 per family of 5, more than enough to rent a villa on the beach, hire a butler and eat gourmet food for 8 months. Instead, the refugees are stuck in old abandoned factories with no facilities, in old tents in the freezing cold and in the rain, and forced to eat a dirt poor version of rice with chickpeas and lentil soup.

It won’t be easy to stop this insanity, but it can be done. Refuse to dole out money to organizations that have been accused of abuse. Refuse to give any organization more than $1 million. Support many small organizations instead. Humanitarian aid does not scale up well. To say the least.

It’ll be cost-effective as well. It’ll take more effort to locate the right people, but given that $70 out of every $100 in donations is wasted by large aid organizations today, there’s a huge win lurking right there. You just need to find people who are better at all this than the ones who made that disaster possible.

Then, fire any manager who has not acted in the past on complaints. Establish a system that promises to put anyone in jail against whom credible complaints have been filed.

There are thousands of those walking around right now working for organizations funded by you and me directly, and by our taxes too, free to abuse another girl or little boy, and then another one tomorrow, or a mother who needs to feed her child(ren) because her home has been swept away by floods or bombs.

And make this the number one issue for the UN (yeah, I know, that same UN), to discuss and control as per tomorrow morning. Get multiple countries’ military to deliver what Oxfam did before, and make sure all soldiers understand what’ll happen to them at the first sign of abuse, of money, of people, anything at all.

There are many things out there that we can’t control, but this one we can. Because, as I said, in all locations where aid is needed, there are local people available to deliver it without trying to abuse, centralize, institutionalize it, profit from it, or turn it into a business. Just keep aid donations so small it’s not interesting to do any of those things.

At the UN level, I’m thinking Jimmy Carter. He’s the only man I can conjure up who has the integrity to clean up this mess. I know, one is a very small number. But Carter will know others. Big job, but doable. After all, we can’t very well have the worst of our own societies run rampant in places where people are defenseless against them.

Oh wait, that right there is another reason why our governments like the way things are going, just fine, isn’t it? Oxfam allows them (us) to export their perverts.

Well, screw that. We’re better than our governments.

To summarize: right now, your donation to Oxfam literally pays for pedophiles to go rape children across the world. Not every penny or dollar (they need their shiny offices too), but that’s not the point: your dollars keep the aid industry, the system, and therefore the opportunity for the abuse going. Is that what you want?

via Zero Hedge http://ift.tt/2sQoV0A Tyler Durden

All Work & No Play… Makes Jack A Turk?!

Finding a suitable balance between work and daily living is a challenge that all workers face.

Families are particularly affected. The ability to successfully combine work, family commitments and personal life is important for the well-being of all members in a household.

1 in every 8 employees in the OECD works 50 hours or more per week, but, as Statista’s Dyfed Loesche notes, people in Turkey don’t have a work-life balance, according to the Organisation for Economic Co-operation and Development (OECD). Mexicans aren’t really in the balance either…

Infographic: Countries With the Worst Work-Life Balance | Statista

You will find more infographics at Statista

The United States and the United Kingdom also perform pretty poorly, out of all 35 OECD member countries (plus Russia, Brazil and South Africa) covered in the Better Life Index for 2017.

The most important aspect for a healthy work-life balance is the amount of time people spend (not) at work. The authors of the Better Life Index note that “evidence suggests that long work hours may impair personal health, jeopardise safety and increase stress.”

And the Dutch are apparently the people who enjoy the best work-life balance.

via Zero Hedge http://ift.tt/2CEqtuj Tyler Durden

Israel And Iran: Inching Toward Armed Conflict

Authored by Peter Korzun via The Strategic Culture Foundation,

Can you hear the drumbeat of war? It is getting louder.

Prime Minister Benjamin Netanyahu declared on the final day of the Munich Security Conference that Israel might go a step beyond striking the proxy powers and instead take direct action against Iran. He was especially concerned about the possibility of a land bridge stretching from Iran to the Mediterranean Sea. According to the PM, Iran represents an existential threat and its permanent military presence in Syria is unacceptable to Israel.

The Feb. 10 incursion of what Israel called an Iranian drone from Syria into Israeli airspace has spiraled into a major fight, resulting in the downing of an Israeli jet and a broad wave of strikes against military targets in Syria alleged to be linked to Iran. This was the first time Israel has used force directly against Iran.

If Iran itself is attacked, its sites related to its nuclear program will top the list of the prime targets for Israel’s F-35, F-15, F-16, and Kfir fighters, drones, and intermediate-range Jericho missiles. There are different routes they could take, but all of them would require flying through the airspaces of Jordan, Saudi Arabia, Iraq, Syria, or Turkey. None of these Muslim countries will openly allow Israel to use their airspace, but anti-Iran sentiments are strong in the Sunni-dominated Arab states. Some of them might be willing to look the other way. A clandestine agreement to tacitly allow Israeli aircraft to cross their air space is entirely possible. Anger could be vented publicly once the mission has been completed.

Iraq is not focused on monitoring its airspace – it has many other problems to deal with and Israel could take advantage of that. The route through Iraq looks like it might be the best option.

The distance that would need to be covered would be between 1,500 km (930 miles) and 1,800 km (1,120 miles). The aircraft will also have to make a return trip, so in-flight refueling will be a necessity. Israel is only believed to own between eight and ten large tanker aircraft (such as Boeing 707s). That will hardly be enough. The Israeli military is not particularly adept at aerial refuelling. If the aircraft have to fly undetected, the F-35s will have to forgo their externally mounted weapons in order to preserve their stealth capabilities. Then their payload will be reduced to only two JDAM-guided bombs in the internal bay. Pretty underwhelming.

Then Iran’s radars will have to be spoofed, and its air defenses, especially the Russian-made S-300, will have to be knocked out. It won’t be easy.

Israel has a few dozen laser-guided bunker buster bombs (the GBU-28). The Jericho III is an Israeli three-stage solid propellant missile with a payload of more than a ton and capable of carrying multiple low-yield independently targeted reentry warheads. All the targets in Iran fall within its range of up to 6,500 km (4,038 miles). These missile strikes are capable of destroying every command and control site, as well as all major nuclear facilities.

The Heron-2 and Eitan drones can hover in the air for more than 20 consecutive hours to provide guidance and intelligence and to jam Iranian communications and confuse its radar.

Israel would wage electronic warfare against Iran’s military and civilian infrastructure, such as its electric grids and Internet, creating interference with Iran’s emergency frequencies.

After the war has begun, Israel will come under rocket and missile attack from Iran’s proxies: Hamas in the Gaza Strip and Hezbollah in Lebanon. Hezbollah has up to 150,000 rockets that can reach anywhere in Israel. It is true however, that Israel possesses a sophisticated, multilayer, air-defense shield. A first-class intelligence and early-warning system will mitigate the fallout, but substantial damage will be unavoidable.

Israeli troops will have to deploy in the Strip and move across the Lebanese border. But the Shia group will have to fight on two fronts: in Syria to prop up the Assad government, and in Lebanon against Israel. Syria is likely to find itself involved in combat operations. Israel will go to any length to keep Iran and Hezbollah away from its border.

Iran may try to block the Strait of Hormuz. But even if it does not, global oil prices would go up. Iran or its proxies might attack US forces in the Middle East, primarily in Syria and Iraq. Should that happen, Iraq would likely become a battleground between US forces and Iranian proxies, with American reinforcements rushing in. Iran could punish the Americans for their support of Israel in Afghanistan.

A conflict between Israel and pro-Iranian forces would douse the light at the end of the tunnel so recently kindled as a result of the diplomatic initiatives in Syria by Russia, Turkey, and Iran. Once the shooting starts, all that work will go down the drain. This scenario could be prevented. As we have seen in some other situations, Russia is the only actor capable of effectively mediating. The US has become openly hostile toward Tehran and may have a hidden agenda in which peace is not the goal. There may be forces interested in sparking any conflict that would exacerbate the situation in Syria and bring a large-scale war against Iran even closer.

via Zero Hedge http://ift.tt/2GFtBbT Tyler Durden