Category: zerohedge

A risk-off mood dominated the overnight session amid growing concern over the turmoil engulfing the Trump administration, as fresh allegations add to deepening political scandals in Washington, the latest coming from Tuesday’s NYT report citing former FBI director Comey’s memo which raises possibility of obstruction of justice, an impeachable offense. The dollar, already in retreat after a report that the U.S. president shared terrorism intelligence with Russian officials, decline again and the Bloomberg Dollar Spot Index dropped for a sixth day, while the VIX index surged over 10% in early trading.

Still, we can’t help but wonder ho wlong until the BTFD algos emerge from their mini dormancy and take futures back to unchanged.

The reason is that while the move lower in S&P futures does not appear overly dramatic, the 12 point drop has wiped out the past month’s market gains and more importantly, for the first time since his inauguration, a scandal impacting Trump has spilled over into the broader market as the probability of Trump passing virtually any legislation in the foreseeable future now appears virtually non-existant.

The political chaos is finally shifting to markets

— zerohedge (@zerohedge) May 17, 2017

This morning Bloomberg agreed with our Twitter-take from last night, writing that “after a protracted period of dormancy, financial markets are beginning to react to developments in Washington in a more unified manner. With stock and bond volatility muted, investors have looked for a clearer reaction to the political din in currency markets. The U.S. currency now sits at its lowest level since the day of Trump’s shock win, a retracement some blame on perceptions his legislative agenda faces deeper challenges.”

And after recently crashing to record lows, and staying below 11 for the longest stretch on record, global volatility appears to be stirring.

The US futures selloff has been broadly in line with major index movements in Europe and Asia. In other assets, T-note futures rally while the Bloomberg Dollar Index slumped for a sixth consecutive day, falling to lowest since November. Meanwhile, over in China the PBOC continues to add liquidity injecting 140 billion yuan with reverse repos, setting the CNY fixing at the strongest level since February. WTI crude drops one percent; iron ore futures gain on hope for an imminent Chinese rebound.

“If he’s preoccupied defending himself and if it goes a lot further, then any hope of his legislative agenda coming to the fore is going to be reduced,” John Stopford, the London-based head of fixed-income at Investec Asset Management Ltd., said in an interview with Bloomberg TV. “Clearly at the margin it’s a negative. At the moment there’s a classic environment for yields to rally a bit further and for the dollar to sell off.”

So far, broadly upbeat global growth has underpinned risky assets and supported the multi-year lows in measures of market volatility. But the retreat in the dollar which has now given up all the gains it made since Trump’s election and a pull-back from record highs for world stocks points to investor unease about this week’s headlines, Reuters writes.

“The Trump issue seems to come in waves, and now we have another wave,” said Hans Peterson, global head of asset allocation, at SEB Investments.

“I have been asked if he is going to be impeached. I think that is the type of discussion some (investors) are having,” Peterson said, pointing out that institutional clients are turning cautious.

Meanwhile, the euro zone economy started the year with robust growth that outstripped that of the United States and set the stage for a strong 2017. “At the moment everyone is focusing on the political relief in Europe and the political unrest in the U.S.,” ING’s senior rates strategist Martin van Vliet said.

This is how SocGen’s Kit Juckes summarizes today’s action”

In ‘market Top Trumps’ the US President trumps just about everything else, at least in the very short term. “Comey memo says Trump asked FBI Chief to drop Flynn probe” is the FT headline on the story doing the damage overnight, though we do also have softer oil prices after the release of strong US inventory data. 10-year Treasury yields are 4bp lower than when markets closed yesterday evening, 10bp lower than they were on Thursday before the US CPI and retail sales data releases. European yields are opening lower too, but the 10year has narrowed to 189bp, and the Treasury/JGB spread to 226bp.

Then there is the Fed: while traders continue to price in two interest rate increases by the Federal Reserve this year, speculation is rising that European counterparts are preparing to withdraw their own stimulus measures. “The only political calibration the Fed has is how much Trumponomics we were going to get that they can’t see yet,” Neil Dwane, global strategist at Allianz Global Investors, said in an interview with Bloomberg TV. Even so, U.S. policymakers “are in the mindset to raise as long as the markets are prepared for it.”

To be sure, pressure on the ECB rose as Eurozone Core CPI jumped to a 3 year high of 1.2%. Inflation ex energy and  food showed notable rise across countries, adding to Draghi’s list of reasons why a taper, and eventual rate hike, appear inevitable.

Looking at global stocks, the Stoxx Europe 600 Index fell 0.3 percent, after ending little changed in the previous session. Futures on the S&P 500 Index fell 0.5 percent, after the underlying gauge on Tuesday touched an all-time high of 2,405.77. The MSCI All-Country World Index fell 0.1 percent from a record, with banks having the biggest impact across all regions.

In commodity markets, safe-haven gold hit a two-week high, climbing 0.6 percent to $1,243.31. The precious metal has risen for five straight days.

Data showing an increase in U.S. crude investors hit oil prices as concerns about oversupply despite efforts by top producers Saudi Arabia and Russia to extend output cuts once again weighed.

The yield on 10-year Treasuries slipped four basis points to 2.29 percent after dropping two basis points Tuesday. Benchmark yields in France lost two basis points to 0.87 percent, while those in Germany declined two basis points to 0.42 percent.

MBA Mortgage Applications data due, along with earnings from companies including Target and Cisco.

Global Market Snapshot

• S&P 500 futures down 0.5% to 2,384.75
• STOXX Europe 600 down 0.3% to 394.7
• MXAP down 0.3% to 151.42
• MXAPJ down 0.5% to 494.57
• Nikkei down 0.5% to 19,814.88
• Topix down 0.5% to 1,575.82
• Hang Seng Index down 0.2% to 25,293.63
• Shanghai Composite down 0.3% to 3,104.44
• Sensex up 0.3% to 30,659.65
• Australia S&P/ASX 200 down 1.1% to 5,786.03
• Kospi down 0.1% to 2,293.08
• German 10Y yield fell 2.7 bps to 0.408%
• Euro up 0.08% to 1.1092 per US$
• Brent Futures down 0.4% to $51.45/bbl
• Italian 10Y yield fell 3.9 bps to 1.943%
• Spanish 10Y yield fell 1.4 bps to 1.614%
• Gold spot up 0.5% to $1,243.73
• U.S. Dollar Index down 0.05% to 98.06

Top Global News from Bloomberg

• Comey memo says Trump asked him to drop FBI’s Flynn investigation
• Donald Trump is facing the deepest crisis of his presidency after a memo written by then-FBI Director James Comey surfaced Tuesday, alleging that the president asked him to drop an investigation of former National Security Adviser Michael Flynn.
• Republicans in Congress are increasingly dispirited over the chaos surrounding Donald Trump, with several saying the nonstop revelations are imperiling their legislative agenda and the top Senate Republican signaling he would go his own way on some of the president’s top priorities.
• The terms of debate between the ECB’s 25 Governing Council members over announcing and implementing an exit from unconventional stimulus have coalesced around the pace. In one camp are those who want to move slowly. In the opposite camp: those who want to move extremely slowly.
• Merkel, Macron plan road map for harmonized corporate taxation, Bild reports
• Brexit talks can’t be secret, negotiating documents will be made public: EU draft
• S&P affirms Australia AAA sovereign credit rating; outlook remains negative
• API inventories according to people familiar w/data: Crude +0.9m; Cushing -0.5m; Gasoline -1.8m; Distillates +1.8m
• No Matter What Trump Does, Big Cities Pressing for Cleaner Cars
• Turkey’s Erdogan Met Company Executives in Washington, DC: AA
• Marc Faber Says Invest in Europe Stocks Over ‘High- Priced U.S.’
• Meitu Falls After MSCI Decides Against Adding to Indexes
• IATA Says Wider Laptop Ban Could Impose $1B Costs on Passengers
• Philip Morris Japan to Raise Prices of Marlboro From Sept.
• Dexia, Cognizant in Talks for Long-Term Pact on Info Technology
• Elbit Subsidiary Wins $166m Contract for U.S. Army Platform
• Cheniere Says 9 of Its U.S. LNG Exports Have Gone to China
• 3SBio Gains on Eli Lilly Insulin Distribution Rights in China
• DuPont Wins Patent-Infringement Jury Verdict Against Unifrax
• AbbVie Loses Ruling on Validity of One Patent for Humira

Asian equities traded cautious amid weakness in energy and US political concerns after reports of a memo from former-FBI Director Comey which stated that President Trump urged him to drop the investigation into former National Security Adviser Flynn. This pressured US equity futures across the board and set the negative tone for both the ASX 200 (-1.1%) and Nikkei 225 (-0.6%), while touted profit taking by pension funds and poor Machinery Orders added to the disappointment in Japan. Shanghai Comp. (-0.3%) and Hang Seng (-0.2%) traded choppy, although somewhat outperformed their regional counterparts after the PBoC injected CNY 140bIn via open market operations and regulators approved the Bond Connect scheme which would allow foreign investors access to mainland China’s USD 9.5tIn bond market. 10yr JGBs were initially supported alongside gains in T-notes as the risk averse sentiment spurred a flight to safety, while the BoJ were also in the market for a total of JPY 1.03fin of JGBs with 1yr-10yr maturities. However, JGBs then failed to sustain the upside, with prices retreating throughout the session. Mainland China and Hong Kong regulators approved the cross-border link that will allow overseas investors access to the mainland’s USD 9.5tIn bond market. The program will run alongside the 2 connect schemes already in place and will begin with ‘northbound’ trading first, with the official launch date of the scheme and timing for `southbound’ trade to be announced at a later date.

Top Asian News

• Hong Kong Sells Car Park to Developer for Record $3 Billion
• Webb’s Caution List Sinks Dozens of Hong Kong Small-Cap Stocks
• Caution Reigns as U.S. Politics Takes Center Stage: Markets Wrap
• Citi to Bolster Brokerage Business for Hedge Funds in Japan
• Lumen Capital Hires Pictet’s Fluri, Trident’s Lim in Singapore
• Reports on Trump Weigh on Japanese Equities as Yen Strengthens
• HSBC Sees 6% Upside for Emerging-Market Stocks Through End-2017

Likewise in Europe, sentiment for riskier assets soured this morning amid an escalation of US political uncertainty. Amid reports that Trump asked former FBI Director Comey to end investigation into ties between former White House national security adviser Flynn and Russia. This comes days after reports that Trump discussed sensitive national security information with Russian Foreign Minister Lavrov. In turn, this has led to broad based selling across major EU bourses (Eurostoxx -0.4%) with some suggesting that this may fuel fears over Trump’s economic agenda. Energy names sag following the slip in crude prices as the latest API showed unexpected build of over 800k, which comes ahead of weekly DoE’s. EGB’s supported by FTQ trade, although there has been a mild pull back in recent trade, additionally underperformance seen in the German 2yr with the curve showing some mild flattening.

Top European News

• Brexit Talks Can’t Be Secret, EU Says in Transparency Push
• Britons See First Drop in Real Wages Since 2014 as Prices Bite
• European Bonds’ Populism Lull Proves Short as Austria Vote Looms
• EU Financial Transaction Tax Said to Overcome Pensions Rift
• Russia Plans Biggest Debt Sale in Four Years as Yields Decline
• Treasuries Lead European Bonds Higher as Trump’s Woes Mount
• VW CE0 Mueller Probed Over Porsche-Shares, Prosecutors Confirm
• EU-U.K. FTA Won’t Be the Same As Single Market Access, Tusk Says
• Euro Long-Term Bearish Bets Versus Dollar Hit Lowest Since 2009

In currencies, the Bloomberg Dollar Spot Index was little slightly down in early trading, bacl to the lowest level since Nov. 8. The yen rose 0.7 percent to 112.35 per dollar, after climbing 0.6 percent on Tuesday. The euro added 0.1 percent to $1.1094, extending Tuesday’s 1 percent surge  An active 24 hours in the FX markets as fresh revelations of president Trump’s ‘involvement’ in the Flynn probe has set off a fresh wave of risk aversion. USD/JPY has fallen through 113.00 as a result, but fresh demand ahead of 112.00 as arrested the move for now, but stronger support not seen until 111.20-35 lower down. The USD based moves sent the EUR up to the initial resistance area at 1.1120-25, and this has held so far, but the pullback has been shallow as yet. The final reading of EU wide inflation confirmed yoy Apr CPI at 1.9%, so this may underpin the uptrend to a degree, but we have some large 1.1000 expiries today and tomorrow (much larger tomorrow — in excess of 3.5 yards), which could rein in the move.
This has seen EUR/GBP pierce the 0.8600 level, but with the UK wage date this morning more or less in line with expectations, Cable bulls are pressing on the highs again in the quest to push on 1.3000. We did see the claimant count rise, but the unemployment rate in to 4.6%, so all in all, the market feels comfortable with this as we look to the retail sales number tomorrow.

In commodities, there has been some decent price action over the last 24 hours, with focus on the precious metals in light of the latest news on Trump. Impeachment fears are back ‘on the table’ and this has lifted Gold up to levels just shy of USD1245.00, while Silver is now eying a move on USD17.00. Elsewhere, Oil prices are struggling against some notable levels, and USD50.00 is proving a tough obstacle for WTI. USD48.00 is the initial point of support, while Brent is looking comfortable as the backdrop of the output cut extension serves as a prop. Metals all meandering in well-worn territory, with little negative impact from the risk off mood this morning. Copper off better levels though, and in line with modest losses seen across the board with the exception of Platinum.

Looking at the day ahead, the NY Fed is due to the release its Q1 household debt and credit report, while this afternoon former Fed Chair Ben Bernanke is scheduled to speak at a conference. German Chancellor Merkel also speaks at a labour conference. Earnings reports due in the US today include Target and Cisco. It’s likely that US political developments will continue to be a big focus for markets also today.

US Event Calendar

• 7am: MBA Mortgage Applications, prior 2.4%
• 11am: New York Fed to Release 1Q Household Debt and Credit Report
• 11:10am: Former Fed Chairman Bernanke to Speak at Conference

DB’s Jim Reid concludes the overnight wrap

Markets have displayed a level of trepidation over the last 24 hours with politics being the dominant theme. The Trump headlines concerning the revealing of sensitive information to Russian officials were initially at the forefront of that. That was largely attributed to the big drop in the US Dollar yesterday with the Dollar index falling -0.81% and to the lowest level since November 8th. Trump’s national security advisor H.R. McMaster addressed the reports in a press conference downplaying the security leak by saying that the disclosure was “wholly appropriate” and also calling the Washington Post article “false”. Treasuries were a little firmer with the 10y yield down just under 2bps to 2.327% while equities had actually kicked off in positive territory for the first hour or so, before fading into the close with the S&P 500 ending down a modest -0.07%.

There are more developments to report this morning though, and perhaps more serious for markets. After markets closed last night, a story emerged in the NY Times (and now being reported in other press outlets) suggesting that the President had attempted to get former FBI Director James Comey to end the FBI’s investigation into former Trump aide and national security advisor Michael Flynn. The story concerns a memo written by Comey back in February following a conversation with Trump at the White House. Trump’s administration is denying that the President asked Comey to  end the investigation. The Chairman of the House Oversight Committee has now requested all documents from all meetings between Trump and Comey. The Chairman also said that the reports in the press “raise questions as to whether the President attempted to influence or impede the FBI’s investigation as it relates to Flynn”. The question of this being an impeachable offense through obstructing justice has been raised in several news reports and by members of the Democratic Party.

That news has sparked a wave of risk off moves in markets since it broke. Gold (+0.53%) has rallied along with US Treasuries (10y yield down 2.6bps) while S&P 500 futures have dropped -0.60%. The Yen is  also +0.60% firmer versus the Dollar. In Asia major bourses are lower with the Nikkei (-0.63%), Hang Seng (-0.27%), Shanghai Comp (-0.10%), Kospi (-0.33%) and ASX (-0.90%) all in the red. It’s worth noting that China equity markets have been choppy this morning and this follows a dramatic u-turn for China bourses yesterday when after we went to print the Shanghai Comp turned a decline of as much as -0.95% at one stage into a gain of +0.74% by the closing bell. That followed the news that the PBoC had injected 170bn of yuan liquidity into the system, the biggest injection in four months. So worth keeping an eye how markets finish up there.

Back to yesterday where, away from the politics, the US retail sector was back in the spotlight too with a few earnings releases. TJX (-4.08%) delivered a disappointing outlook for Q2 despite Q1 earnings coming in slightly ahead of market expectations. Staples (-3.54%) was a similar story although there was better news to come from Home Depot’s (+0.61%) latest quarterly report. Target and L Brands are next to report today, while Wal-Mart is scheduled to release results tomorrow. Over in Europe yesterday it wasn’t much more exciting for equity markets with the Stoxx 600 (-0.02%) ending the day more or less unchanged following a raft of economic data which for the most part was relatively solid. Credit spreads were however a bit tighter (iTraxx Main 0.5bps,  iTraxx Crossover -4bps). The big news in bond markets was the bumper demand for the 40y Gilt and 30y OAT new issues. The latter attracted over €31bn of orders with the final size coming at €7bn while the Gilt issue attracted £26bn of orders for a £5bn deal. With the French election now in the past there was similarly strong demand for French corporate issuance yesterday too with Rallye attracting €3bn of orders for a €350m bond and LVMH taking in €14bn of orders for its €4.5bn multi-tranche bond deal. Bloomberg was in fact reporting that yesterday was the strongest day for Euro primary issuance volumes since at least 2014 which probably makes it one of the strongest days on record.

Digging through the economic data yesterday, in Europe there was no change in the second reading of Q1 GDP for the Euro area at +0.5% qoq and +1.7% yoy. Germany’s ZEW survey revealed an increase in the both the current situations index (+3.8pts to 83.9) and expectations index (+1.1pts to 20.6) in May. Meanwhile in the UK the April inflation data docket was released. Headline CPI was confirmed as rising +0.5% mom in April (vs. +0.4% expected) with the annual rate nudging up to +2.7% yoy from +2.3% and to the highest level since September 2013. The core rate also rose six-tenths to +2.4% yoy which is the joint highest since March 2013. The timing of Easter holidays was largely cited as explaining the large surge in inflation in April and while we saw Sterling trade in a decent 0.70% range through the day, it closed up a much more modest +0.16% by the end of the day.

In the US the data was a lot more mixed. On the positive side, industrial production was confirmed as rising a much better than expected +1.0% mom in April (vs. +0.4% expected) which was the biggest monthly rise since February 2014. Capacity utilization also bounced to a 20-month high of 76.7% (from 76.1%) with a boost in auto production seemingly being the biggest contributor to the surge. On the other hand data in the housing sector was soft. Housing starts unexpectedly fell in April (-2.6% mom vs. +3.7% expected) along with building permits (-2.5% mom vs. +0.2% expected). It’s worth noting that the Atlanta Fed now have their Q2 GDP growth forecast at 4.1%, up from 3.6% last week.

Looking at the day ahead now. With little of note in the US this afternoon, the focus datawise will be in Europe this morning where we receive the March and April employment indicators in the UK (unemployment rate expected to hold at 4.7%) and the final CPI revisions for the Euro area. Away from the data, the NY Fed is due to the release its Q1 household debt and credit report, while this afternoon former Fed Chair Ben Bernanke is scheduled to speak at a conference. German Chancellor Merkel also speaks at a labour conference. Earnings reports due in the US today include Target and Cisco. It’s likely that US political developments will continue to be a big focus for markets also today.

via http://ift.tt/2qrvfJd Tyler Durden

From “Blain’s Morning Porridge – May 17″ by Bill Blain of Mint Partners

* * *

Talking to accounts yesterday I was struck by a sense of resignation: stocks seem determined to go stratospheric despite the fact many people think a correction/reset is coming. Bond spreads are at all time tights – and everyone seems to be chasing them down. Investors are frustrated they aren’t catching the returns, and its human nature to find reasons to talk these gains down.

For instance, I’m told stock market gains are due to “passive” investments like indices and ETFs rather than active management, and tight yields are unsustainable as and when Central Banks normalise and interest rates climb higher. (Actually, I think rising interest rates are further away than many think!)

But, the bottom line is financial asset prices continue to rise despite our disbelief! Should you buy into the story at this stage in the game? The rule remains – don’t join the last 5% of a rally just so you can catch the first 25% of the subsequent crash!

There are other games to play – and that’s to look for real value opportunities out there. There are many stories – some of which are risk and obvious, some of which require a little more imagination.

For instance, financials have become a real “catch a falling knife” sector in recent years. Everyone is very aware of capital risk – the risk a central bank or regulator might decide a bank’s capital position is unsustainable and bail-in debt investors across the curve. It’s only happem with a number of basket case Olive-belt banks thus far.

Banco Popular is an interesting one – back in the pre-crisis days it was one of my top European bank stocks. It had a superb cost/income ratio, stuck to the retail businesses it knew well, had management focused on the bottom line and even a AAA rating for a long while. Now its in serious trouble with a massive Euro 37 bln NPL book – mainly from real estate. Its Capital COCO Perps are trading around 18% plus. Is it a buy?

Its put itself on the block to sell, sell assets or restructure. The stories are Bankia, Santander and BBVA are all keen to look, but we also know Sabadell and Caixa already decided it’s a “no-way Jose” story. The price is likely to remain highly volatile on any news – like another bank pulling out or rumours of an ECB capital discussion.

I’d be interested in any client views on POPSM.

And, also in banking, hats off to Lloyds – the last of the UK governments stake will be sold today, netting us taxpayers a modest £900 mm profit. Lloyds was a superb bank before the Global Financial Crisis (again sticking to its knitting and never pretending to be what it patently was not), but got hoisted on the petard of buying the toxic HBOS.

Put Lloyds in context of the RBOS bailout. The government put $46 bln into a bank that has subsequently managed to lose a further £56 bln, and is still essentially unfixed and unresolved. I must giggle at a chum of mine working there who thinks changing the name of their investment bank to Natwest will somehow make them more palatable…  Or how about Scotland? As the risk of Indyrep2 reduces, how do fancy buying Scottish debt at a considerable spread over gilts, when the risk is exactly the same.. (unless of course Scotland ever does get itself chucked out the UK!)

via http://ift.tt/2rex0KL Tyler Durden

A brawl erupted blocks from the White House at a protest outside of the Turkish Ambassador’s residence in Washington D.C. on Tuesday, several hours after a meeting between President Trump and Turkish president Erdogan. Nine people were injured in the Sheridan Circle skirmish, two seriously – and two have been arrested including one charged with assaulting a police officer.

About two dozen protesters showed up with signs and a bullhorn in opposition of the Turkish President’s visit.

We are protesting (Erdogan’s) policies in Turkey, in Syria and in Iraq

–Flint Arthur, Baltimore, MD

Arthur reported Erdogan supporters crossing police lines at least three times to attack the protestors. In video of the incident, several attackers can be seen kicking a protester with a bullhorn who had fallen, as well as a woman lying on the ground. Metropolitan police drove the pro-Erdogan contingency back with batons.

That’s it!

Aftermath: 

While the aggressors were initially reported as pro-Erdogan (pro-government) supporters, Voice of America reports that Erdogan’s guards participated in the violence as well. If so, it would be the second time the Turkish President’s security detail was involved in a dustup on US soil – having been accused last year of “kicking, shoving and verbally abusing” Turkish journalists attempting to enter an Erdogan speech.

Human Rights

Turkey has been criticized by Human Rights advocates over it’s attack on Syrian Kurdish populations in the Northern border town of Jarablus, as well as bombings of US allies in Iraq and Syria – and there have been massive protests of the government’s sweeping crackdown on all forms of dissent following a July 2016 coup attempt to unseat Erdogan. Over 100,000 people have been fired or suspended from work, and over 37,000 have been arrested – including journalists, academics, judges, prosecutors, military officials, prison guards, police officers, and civil servants.

In other words, Erdogan sent his goons throughout Turkey to purge and silence any and all who oppose him. The equivalent in the United States would be Trump immediately firing and /or arresting most MSM journalists, the majority of teachers, that pussyhat judge, Rosie O’Donnell, and anyone wearing Crocs. Antifa thugs would be professionally steamrolled by militarized police led by based stick man. Facebook and Twitter would become govt. entities, and Hollywood would be run by Mark Burnett while Bill Nye identifies as whatever gender his cellmate wants him to.

And just last month, Erdogan narrowly won a hotly contested referendum which concentrated his power through an “executive presidency.” All executive and administrative authority will effectively transfer to the Turkish President, and the position of Prime Minister will be eliminated after 2019. Furthermore, Erdogan will also have the power to appoint top public officials, intervene in the judiciary, and decide when the country is in a state of emergency. Despite winning the referendum, Turkey’s largest cities – Istanbul, Ankara, and Izmir all voted no to the changes, resulting in country-wide protests.

For a much deeper look into the current situation in Turkey, here’s a great look into Erdogan’s current footing in international affairs.

Content originally generated at iBankCoin.com * Follow on Twitter @ZeroPointNow

via http://ift.tt/2qvi5ZE ZeroPointNow

Authored by Michael Snyder via The Economic Collapse blog,

The recklessness of the “too big to fail” banks almost doomed them the last time around, but apparently they still haven’t learned from their past mistakes.  Today, the top 25 U.S. banks have 222 trillion dollars of exposure to derivatives.  In other words, the exposure that these banks have to derivatives contracts is approximately equivalent to the gross domestic product of the United States times twelve.  As long as stock prices continue to rise and the U.S. economy stays fairly stable, these extremely risky financial weapons of mass destruction will probably not take down our entire financial system.  But someday another major crisis will inevitably happen, and when that day arrives the devastation that these financial instruments will cause will be absolutely unprecedented.

During the great financial crisis of 2008, derivatives played a starring role, and U.S. taxpayers were forced to step in and bail out companies such as AIG that were on the verge of collapse because the risks that they took were just too great.

But now it is happening again, and nobody is really talking very much about it.  In a desperate search for higher profits, all of the “too big to fail” banks are gambling like crazy, and at some point a lot of these bets are going to go really bad.  The following numbers regarding exposure to derivatives contracts come directly from the OCC’s most recent quarterly report (see Table 2), and as you can see the level of recklessness that we are currently witnessing is more than just a little bit alarming…

Citigroup

Total Assets: $1,792,077,000,000 (slightly less than 1.8 trillion dollars)

Total Exposure To Derivatives: $47,092,584,000,000 (more than 47 trillion dollars)

JPMorgan Chase

Total Assets: $2,490,972,000,000 (just under 2.5 trillion dollars)

Total Exposure To Derivatives: $46,992,293,000,000 (nearly 47 trillion dollars)

Goldman Sachs

Total Assets: $860,185,000,000 (less than a trillion dollars)

Total Exposure To Derivatives: $41,227,878,000,000 (more than 41 trillion dollars)

Bank Of America

Total Assets: $2,189,266,000,000 (a little bit more than 2.1 trillion dollars)

Total Exposure To Derivatives: $33,132,582,000,000 (more than 33 trillion dollars)

Morgan Stanley

Total Assets: $814,949,000,000 (less than a trillion dollars)

Total Exposure To Derivatives: $28,569,553,000,000 (more than 28 trillion dollars)

Wells Fargo

Total Assets: $1,930,115,000,000 (more than 1.9 trillion dollars)

Total Exposure To Derivatives: $7,098,952,000,000 (more than 7 trillion dollars)

Collectively, the top 25 banks have a total of 222 trillion dollars of exposure to derivatives.

If you are new to all of this, you might be wondering what a “derivative” actually is.

When you buy a stock you are purchasing an ownership interest in a company, and when you buy a bond you are purchasing the debt of a company.  But when you buy a derivative, you are not actually getting anything tangible.  Instead, you are simply making a side bet about whether something will or will not happen in the future.  These side bets can be extraordinarily complex, but at their core they are basically just wagers.  The following is a pretty good definition of derivatives that comes from Investopedia…

A derivative is a security with a price that is dependent upon or derived from one or more underlying assets. The derivative itself is a contract between two or more parties based upon the asset or assets. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes.

Those that trade derivatives are essentially engaged in a form of legalized gambling, and some of the brightest names in the financial world have been warning about the potentially destructive nature of these financial instruments for a very long time.

In a letter that he wrote to shareholders of Berkshire Hathaway in 2003, Warren Buffett actually referred to derivatives as “financial weapons of mass destruction”…

The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear. Central banks and governments have so far found no effective way to control, or even monitor, the risks posed by these contracts. In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.

Warren Buffett was right on the money when he made that statement, and of course the derivatives bubble is far larger today than it was back then.

In fact, the total notional value of derivatives contracts globally is in excess of 500 trillion dollars.

This is a disaster that is just waiting to happen, and investors such as Buffett are quietly positioning themselves to take advantage of the giant crash that is inevitably coming.

According to financial expert Jim Rickards, Buffett’s Berkshire Hathaway Inc. is hoarding 86 billion dollars in cash because he is likely anticipating a major stock market downturn…

Far from a bullish sign, Buffett’s cash hoard could mean he’s preparing for a market crash. When the crash comes, Buffett can walk through the wreckage with his checkbook open and buy great companies for a fraction of their current value.

 

That’s the real Buffett style, but you won’t hear that from your broker or wealth manager. If Buffett has a huge cash allocation, shouldn’t you?

 

He knows what’s coming. Now you do too.

Warren Buffett didn’t become one of the wealthiest men in the entire world by being stupid.  He knows that stocks are ridiculously overvalued at this point, and he is poised to make his move after the pendulum swings in the other direction.

And he might not have too long to wait.  In recent weeks I have been writing about many of the signs that the U.S. economy is slowing down substantially, and today we received even more bad news…

Despite high levels of economic confidence expressed by business owners and consumers, one key indicator shows that it has not translated into much action yet.

 

Loan issuance declined in the first quarter from the previous three-month period, the first time that has happened in four years, according to an SNL Financial analysis of bank earnings reports filed for the period. The total of recorded loans and leases fell to $9.297 trillion from $9.305 trillion in the fourth quarter of 2016.

This is precisely what we would expect to see if a new economic downturn was beginning.  Our economy is very highly dependent on the flow of credit, and when that flow begins to diminish that is a very bad sign.

For the moment, financial markets continue to remain completely disconnected from the hard economic data, but as we saw in 2008 the markets can plunge very rapidly once they start catching up with the real economy.

Warren Buffett is clearly getting prepared for the crisis that is ahead.

Are you?

via http://ift.tt/2rpBc7F Tyler Durden

Authored by Michael Snyder via The Economic Collapse blog,

The recklessness of the “too big to fail” banks almost doomed them the last time around, but apparently they still haven’t learned from their past mistakes.  Today, the top 25 U.S. banks have 222 trillion dollars of exposure to derivatives.  In other words, the exposure that these banks have to derivatives contracts is approximately equivalent to the gross domestic product of the United States times twelve.  As long as stock prices continue to rise and the U.S. economy stays fairly stable, these extremely risky financial weapons of mass destruction will probably not take down our entire financial system.  But someday another major crisis will inevitably happen, and when that day arrives the devastation that these financial instruments will cause will be absolutely unprecedented.

During the great financial crisis of 2008, derivatives played a starring role, and U.S. taxpayers were forced to step in and bail out companies such as AIG that were on the verge of collapse because the risks that they took were just too great.

But now it is happening again, and nobody is really talking very much about it.  In a desperate search for higher profits, all of the “too big to fail” banks are gambling like crazy, and at some point a lot of these bets are going to go really bad.  The following numbers regarding exposure to derivatives contracts come directly from the OCC’s most recent quarterly report (see Table 2), and as you can see the level of recklessness that we are currently witnessing is more than just a little bit alarming…

Citigroup

Total Assets: $1,792,077,000,000 (slightly less than 1.8 trillion dollars)

Total Exposure To Derivatives: $47,092,584,000,000 (more than 47 trillion dollars)

JPMorgan Chase

Total Assets: $2,490,972,000,000 (just under 2.5 trillion dollars)

Total Exposure To Derivatives: $46,992,293,000,000 (nearly 47 trillion dollars)

Goldman Sachs

Total Assets: $860,185,000,000 (less than a trillion dollars)

Total Exposure To Derivatives: $41,227,878,000,000 (more than 41 trillion dollars)

Bank Of America

Total Assets: $2,189,266,000,000 (a little bit more than 2.1 trillion dollars)

Total Exposure To Derivatives: $33,132,582,000,000 (more than 33 trillion dollars)

Morgan Stanley

Total Assets: $814,949,000,000 (less than a trillion dollars)

Total Exposure To Derivatives: $28,569,553,000,000 (more than 28 trillion dollars)

Wells Fargo

Total Assets: $1,930,115,000,000 (more than 1.9 trillion dollars)

Total Exposure To Derivatives: $7,098,952,000,000 (more than 7 trillion dollars)

Collectively, the top 25 banks have a total of 222 trillion dollars of exposure to derivatives.

If you are new to all of this, you might be wondering what a “derivative” actually is.

When you buy a stock you are purchasing an ownership interest in a company, and when you buy a bond you are purchasing the debt of a company.  But when you buy a derivative, you are not actually getting anything tangible.  Instead, you are simply making a side bet about whether something will or will not happen in the future.  These side bets can be extraordinarily complex, but at their core they are basically just wagers.  The following is a pretty good definition of derivatives that comes from Investopedia…

A derivative is a security with a price that is dependent upon or derived from one or more underlying assets. The derivative itself is a contract between two or more parties based upon the asset or assets. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes.

Those that trade derivatives are essentially engaged in a form of legalized gambling, and some of the brightest names in the financial world have been warning about the potentially destructive nature of these financial instruments for a very long time.

In a letter that he wrote to shareholders of Berkshire Hathaway in 2003, Warren Buffett actually referred to derivatives as “financial weapons of mass destruction”…

The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear. Central banks and governments have so far found no effective way to control, or even monitor, the risks posed by these contracts. In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.

Warren Buffett was right on the money when he made that statement, and of course the derivatives bubble is far larger today than it was back then.

In fact, the total notional value of derivatives contracts globally is in excess of 500 trillion dollars.

This is a disaster that is just waiting to happen, and investors such as Buffett are quietly positioning themselves to take advantage of the giant crash that is inevitably coming.

According to financial expert Jim Rickards, Buffett’s Berkshire Hathaway Inc. is hoarding 86 billion dollars in cash because he is likely anticipating a major stock market downturn…

Far from a bullish sign, Buffett’s cash hoard could mean he’s preparing for a market crash. When the crash comes, Buffett can walk through the wreckage with his checkbook open and buy great companies for a fraction of their current value.

 

That’s the real Buffett style, but you won’t hear that from your broker or wealth manager. If Buffett has a huge cash allocation, shouldn’t you?

 

He knows what’s coming. Now you do too.

Warren Buffett didn’t become one of the wealthiest men in the entire world by being stupid.  He knows that stocks are ridiculously overvalued at this point, and he is poised to make his move after the pendulum swings in the other direction.

And he might not have too long to wait.  In recent weeks I have been writing about many of the signs that the U.S. economy is slowing down substantially, and today we received even more bad news…

Despite high levels of economic confidence expressed by business owners and consumers, one key indicator shows that it has not translated into much action yet.

 

Loan issuance declined in the first quarter from the previous three-month period, the first time that has happened in four years, according to an SNL Financial analysis of bank earnings reports filed for the period. The total of recorded loans and leases fell to $9.297 trillion from $9.305 trillion in the fourth quarter of 2016.

This is precisely what we would expect to see if a new economic downturn was beginning.  Our economy is very highly dependent on the flow of credit, and when that flow begins to diminish that is a very bad sign.

For the moment, financial markets continue to remain completely disconnected from the hard economic data, but as we saw in 2008 the markets can plunge very rapidly once they start catching up with the real economy.

Warren Buffett is clearly getting prepared for the crisis that is ahead.

Are you?

via http://ift.tt/2rpBc7F Tyler Durden

Presented with no comment…

Source: Branco

via http://ift.tt/2pJk7II Tyler Durden

Authored by Paul Craig Roberts,

There is no such thing as cyber security. The only choice is more security or less security, as the recent hack of the National Security Agency demonstrates.

Hackers stole from NSA a cyber weapon, which has been used in attacks (at time of writing) on 150 countries, shutting down elements of the British National Health Service, the Spanish telecommunications company Telefonica, automakers Renault and Nissan, Russia’s Interior Ministry, Federal Express, the energy company PetroChina, and many more.

The news spin is to not blame NSA for its carelessness, but to blame Microsoft users for not updating their systems with a patch issued two months ago. But the important questions have not been asked: What was the NSA doing with such malware and why did NSA not inform Microsoft of the malware?

Clearly, NSA intended to use the cyber weapon against some country or countries. Why else have it and keep it a secret from Microsoft?

Was it to be used to shut down Russian and Chinese systems prior to launching a nuclear first strike against the countries? Congress should be asking this question as it is certain that the Russian and Chinese governments are. As I previously reported, the Russian High Command has already concluded that Washington is preparing a nuclear first strike against Russia, and so has China.

It is extremely dangerous that two nuclear powers have this expectation. This danger has received no attention from Washington and its NATO vassals.

Microsoft president Brad Smith likened the theft of the NSA’s cyber weapon to “the US military having some of its Tomahawk missiles stolen.” In other words, with cyber weapons, as with nuclear weapons and short warning times, things can go wrong in a big way. http://ift.tt/2pzDcNc

What if the hackers had successfully attacked the Russian Ministry of Defense or radar warning systems, would the Russian High Command have concluded that the cyber attack was Washington’s prelude to incoming ICBMs?

The fact that no one in Washington or any Western government has stepped forward to reassure the Russian government and demand the removal of the US missile bases surrounding Russia indicates a level of hubris or denial that is beyond comprehension.

In my May 12 posting I wrote: “The costs of the digital revolution exceed its benefits by many times. The digital revolution rivals nuclear weapons as the most catastrophic technology of our time.” In response, Robert Henderson wrote to me from England that he had addressed the enormous costs of the digital revolution in 2010. Here is the link to his article, “Men and Machines: Which is Master Which is Slave?” 

Reading his article will raise your awareness. When you add up the vast financial costs, the depersonalization of human relationships, and the complete loss of individual privacy and security, the benefit of being connected is vastly outweighed by the costs.

Paper files are far more secure. Malware cannot be introduced into them. To steal a person’s information required knowing the location of the information, breaking into the building, searching file cabinets for the information, and copying the information. To intercept a voice communication required a warrant to wiretap a specific telephone line.

People born into a world where the ease of communication comes at the price of the loss of autonomy never experience privacy. They are unaware that a foundation of liberty has been lost.

In our era of controlled print and TV media, the digital revolution serves for now as a check on the ruling elite’s ability to control explanations. However, the same technology that currently permits alternative explanations can be used to prevent them. Indeed, efforts to discredit and to limit non-approved explanations are already underway.

The enemies of truth have a powerful weapon in the digital revolution and can use it to herd humanity into a tyrannical distopia. The digital revolution even has its own Memory Hole. Files stored electronically by older technology can no longer be accessed as they exist in an outdated electronic format that cannot be opened by current systems in use.

Humans are proving to be the most stupid of the life forms. They create weapons that cannot be used without destroying themselves. They create robots and free trade myths that take away their jobs. They create information technology that destroys their liberty.

Dystopias tend to be permanent. The generations born into them never know any different, and the control mechanisms are total.

And the digital screen serves as Soma.

via http://ift.tt/2pVpBLH Tyler Durden

Despite the elites’ desperate hope that recent ‘losses’ in Holland France ‘prove’ the anti-establishment movement is fading (although they all saw soaring popularity), with Europeans ready to protest, there are still numerous regions urging secession…

There have been 486 military conlicts in Europe in the last 2000 years and while the last decade or two has been ‘peaceful’, we suspect that will not last.

As BofAML’s Transforming World Atlas details, many areas in Europe have strong secessionist movements (e.g. Scotland, Catalonia, Basque, Flanders, Veneto) or have political parties agitating for greater ruling autonomy.

European political union remains elusive, so does fiscal union, and monetary union is tarred by the fact that nine EU countries – soon to be eight – (Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Poland, Romania, Sweden, and The UK) do not use the Euro.

via http://ift.tt/2rp4e6C Tyler Durden

Authored by M.K.Bhadrakumar via The Strategic Culture Foundation,

When President Donald Trump received President Recep Erdogan on Tuesday at the White House, his legendary deal-making prowess was be on trial.

Trump has not been in a tearing hurry to receive Erdogan. During the first 100 days of his presidency, Trump received the leaders of Israel, Egypt, Saudi Arabia, UAE, Jordan (twice), Iraq and Palestine. Yet, none of them belongs to a Nato member country and or is a crucial “swing” state in Trump’s messianic war against ISIS, as Turkey is.

Or, was it Erdogan’s growing friendship with Russian President Vladimir Putin that discouraged Trump? But then, Trump greeted Egypt’s President Abdel Fattah el-Sisi in the White House as an old ally.

Clearly, the only good reason could be that Trump deliberately decided that there is a time for everything – even for meeting Erdogan. Trump thoughtfully let the Turkish referendum on constitutional reform run its course first. Trump now has the answer.

Erdogan extracted a “yes” vote in the referendum alright, and is set to concentrate executive power in his hands, but, paradoxically, he is a wounded man, having lost the referendum vote in all major cities, especially Istanbul, which has been his citadel. Erdogan barely scraped through.

On the other hand, an invigorated German-French axis following the resounding election victory of Emmanuel Macron means that a consolidated EU pressure is building on Erdogan to curb his authoritarian drift. Erdogan knows that a rupture of Turkey’s ties to the West would have grave economic and political consequences.

Meanwhile, if Erdogan had calculated that he could play off the US and Russia, that is also not to be. Trump simply outflanked him by opening a line to Putin regarding Syria before he met Erdogan.

Erdogan has been naïve. The Kremlin won’t risk annoying Trump. Détente with the US is an overriding concern for Russia.

All things taken into account, therefore, Trump did the right thing to meet Erdogan in the fullness of time. Trump’s decision to sign the executive order allowing the Pentagon to transfer heavy weapons to the Kurdish militia on the eve of Erdogan’s visit underscores it.

Trump is looking for a quick victory in Raqqa. The liberation of Raqqa will be prime time news in America. Who’d pay attention anymore to “a showboat” such as James Comey when the pictures are beamed from Raqqa into the living rooms of America?

The Pentagon commanders estimate that the Kurdish militia with US air support will liberate Raqqa successfully and swiftly. Indeed, latest reports suggest that the Kurdish militia has reached within two kilometers of Raqqa city limits.

Simply put, Erdogan who was hoping to dissuade Trump from aligning with the Kurds will now have to discuss concerns over post-liberation Raqqa. The ground beneath Erdogan’s feet has dramatically shifted.

He still can resort to strategic defiance by resorting to air strikes against the Kurdish militia, similar to the attacks staged by the Turkish air force on April 25 on the town of Sinjar (Iraqi Kurdistan) and on targets in the Karachok Mountains (northeastern Syria).

However, the US and Russian deployments to the Kurdish cantons in northern Syrian show that both Washington and Moscow have factored in such a possibility and have a tacit understanding that only their physical presence might act as a deterrent against Erdogan’s adventurism.

This opens up a tantalizing prospect – US and Russia having an unwritten division of labor to “tame” Erdogan. The Russian diplomacy has shown masterly skill in shepherding Turkish policies away from covert backing for extremist groups toward new directions that help to end the fighting in Syria. The Russia-US cooperation in Syria drastically curbs Erdogan’s elbow room.

What are Erdogan’s options? Trump has put him out of business since the US is no longer using Turkish proxies to push the “regime change” agenda in Syria. American retrenchment affects Saudi and Qatari policies, too.

Besides, Erdogan will be wary of provoking Trump. Apart from the discord over the extradition of Islamist preacher Fetullah Gulen, the US is keeping under detention the top executive of Halkbank Mehmet Hakan Attila whom it implicates in the sensational criminal case (which is also linked to Erdogan’s immediate family members) regarding abuse of the US financial system to conduct fraudulent transactions on behalf of Iranian entities.

Will Erdogan retaliate by shutting down Incirlik air base? Such a possibility exists, but remains unlikely. At any rate, Washington is focused on the liberation of Raqqa, and access to Incirlik is a secondary issue at the moment.

The bottom line is that Erdogan is running out of options and may be coming under pressure, finally, to (re)open his own channels to the Kurdish groups. Indeed, Turkey got along well with the leadership of Iraqi Kurdistan and a similar deal can be worked out with Syrian Kurds.

Being the consummate pragmatist that he is, Erdogan may well decide to pick up the threads of the peace process with the Kurds from where he summarily left them in 2015 due to compulsions over forthcoming electoral battles culminating in the March referendum to transform Turkey into a presidential system.

Significantly, Erdogan has reacted with extraordinary restraint to the Pentagon move to arm Kurds in Syria. He is mulling over his options. Trump can encourage him to seek a deal with Kurds. It may not be the mother of all deals, but a historic deal nonetheless, which will go a long way to stabilizing Syria and the wider Middle East.

via http://ift.tt/2pT576O Tyler Durden

Authored by Jeremiah Johnson, nom de plume of a retired Green Beret of the United States Army Special Forces, via SHTFplan.com,

In previous articles, I mentioned the importance of the midterm elections, and how (to run the country effectively and to be reelected) the President needs success within his first six months in office.  Although he is more than willing to make changes and has demonstrated his good intentions, the battle with the ensconced Marxists labeling themselves as either “progressives” or “centrists” is being lost.  Why is it being lost?  It is because these prior Obama appointees in the Circuit courts and the Supreme Court, along with the innumerable holdovers within the administration’s machinery effectively amount to a “fifth column,” bent on sabotaging the President’s efforts.

The successful derailment is well under way.  As I wrote in other articles, all that is needed for the Democrats to take the Senate and the House of Representatives in the upcoming Midterm elections is for the President to not make visible and productive changes within the first six months of his term.  The stultified public will perceive it as a failure, and with the RINO (Republicans In Name Only) Republican party to help with a “shove” here and there, the President will fall right into the pool.

The planned border fence will not be built, the repeal of Obamacare will not take place, the flood of illegals will neither be stopped or reversed, and financial measures to stimulate the domestic economy are being implemented at glacial speed.  All the President’s executive orders are being struck down by the Obama-appointed judges in the courts.  There is not much time remaining before the Midterm congressional elections. We are a year out, and even before the campaigning has begun, it appears it will be up for grabs.

Obamacare is the best example of what has been outlined.  Aetna recently bowed out and pulled out of the machinery as far as private insurance companies run.  They stated that the arena was “untenable” and that the firm could no longer underwrite with the budgetary shortfalls and the nebulosity that lacked a demarcation of where government responsibility was to pick up what the company did not underwrite.  From an economic perspective, everyone with a brain knew that Obamacare would not function properly and would be a financial and administrative disaster.

That is why Obamacare is a success: it was meant to collapse the system and the insurance companies, forcing into existence a single-payer system and a government “exchange” that intruded on the lives of every citizen…pure “Cloward and Piven” at its finest.

The Republican Party is responsible for the continuance of Obamacare.  Nobody is focusing upon this fact.  Right now, everyone is focused upon Comey and a potential tie-in with Flynn and any connection to Russia regarding pre-election campaign communiques between then-candidate Donald Trump and the Russian leadership.  Obamacare is all but forgotten.

With the Republicans in control of both the Senate and the House of Representatives, at this point, the bill to repeal Obamacare should have already passed both houses of Congress and been on the President’s desk to sign: this was not done, and the Republican Party is to blame.

If the President is unable to make a change while he has both houses of Congress under Republican control, what will happen after the Midterm election changes the complexion of Congress and makes it Democrat?  How will he be reelected, and if so, to what end?  He waited too long to fire Comey…a name that will torment us in the news even more than that of Natalie Holloway…and now it is turning around to bite him.  What is the solution?

War.  War is the means an administration uses to sway public opinion and garner the Congress and the other nabobs into lockstep under the guise/choice of “you’re either patriotic or unpatriotic,” forced upon all of them in the court of public opinion and on the media’s stage.  War is supported by the Congress, who is bought by the MIC (Military Industrial Complex) and the oligarchy and their army of lobbyists.

The administration is not accomplishing anything effectively, but a war can “rescue” it from its difficulties and divert the public’s attention.  There are several theaters that can easily metastasize into a full-blown conflict and then draw in other nations for an all-out war.  To catalyze such actions would be a simple feat for any administration with the resources of the United States backing it.  The question remains to be answered whether the administration will take such a step to save itself.

History proves out a high probability that an administration will do such: 

Carter with Desert One (the failed Iranian hostage rescue attempt),

 

Reagan with Grenada,

 

Margaret Thatcher of Great Britain with the Falkland Islands,

 

Bush Sr. with Iraq (I),

 

Clinton with the bombing of Serbia and the war in Bosnia,

 

and Bush Jr. with Iraq (II). 

Will this administration take similar measures in any of the “powder keg” theaters of Ukraine, North Korea, or Syria?  The question remains to be answered, and the probability is high that the answer will be “yes.”

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