Category: zerohedge

Authored by Martin Armstrong via ArmstroingEconomics.com,

The New York Times cheered Stalin and constantly reported that this was the way to the future.

Their top journalist, Walter Duranty (1884-1957), was their man in Moscow. The New York Times promoted him to be awarded the Pulitzer Prize for that reporting.

When Gareth Jones (1905-1935) in March 1933 reported this was all a lie, the truth finally began to appear.

It took the New York Times until 1990 to admit to fault in failing to report that there was a famine in Ukraine where Stalin killed so many people.

The New York Times wrote that their reporting on the Russian Revolution constituted “some of the worst reporting to appear in this newspaper.”

Duranty was doing this also to support Roosevelt’s New Deal. He helped install drastic progressiveness in taxation.

In 1932, the top marginal tax rate was increased to 63% during the Great Depression under the Republicans. It steadily increased, finally reaching 94% in 1944 on an income of over $200,000. Under Socialism, President Franklin D. Roosevelt signed the 1935 Act, which introduced the payroll tax on everyone. However, the Socialists marketed it as the “Soak the Rich” tax, but payroll taxed everyone but the rich who did not work for a wage. Today, the majority of low-income earners pay more in Social Security than they do in taxes.

Are we supposed to trust these people again?

The leftist media is continuously supporting the overthrow of our democracy.

They remain dishonest propaganda artists who threaten our very way of life. Once again, we have the media trying to convince us to surrender all our freedoms to create a better world that they dream of along with all other Marxists. They are once again doing everything in their power to destroy our freedoms.

Yesterday we explained that much of the bizarre moves seen in the market in recent weeks can be explained as an unprecedented  gamma “battle” between one or more funds who were aggressively bidding up calls to the point that VIX was surging even as stocks hit 9 consecutive all time highs, while dealers were stuck “short gamma” and in their attempts to delta-hedge the ever higher highs, would buy stocks thereby creating a feedback loop where the higher the market rose, the more buying ensued.

And, as Goldman pointed out this morning following our own observations on the matter yesterday, “each new high for the SPX has come with a higher VIX, and at 26.6 [ZH: make that 32 now] the VIX is now higher than it was at the SPX peaks of March 2000.”

Ahead of today’s market action, Larry McDonald’s Bear Traps report made some follow through observations on this clash between gamma shorts and gamma long, saying that “as we learned with Lehman, greed breaks things. It’s “high-noon” – the only character missing is Gary Cooper. We are witnessing a battle of wills, high speculation where colossal call buyers are forcing the street to get long more and more stock to hedge their upside risk. It’s the March capitulation selling in reverse. Just the way the street had to BUY downside protection in late March (because put buyers outnumbered call buyers 10-1). Today, they are being forced to BUY upside protection in SIZE (call buyers outnumbered put buyers 10-1).””

Just one day later, it appears that this historic gamma squeeze has finally broken and Gary Cooper has finally showed up, with both tech names and the broader market tumbling so perhaps the dynamic that defined the market for much of August is now over.

What happens next? To quote the same PM who a few days ago said that only Tesla matters in this market, well, he hasn’t changed his mind as the following note before the market opened confirmed:

2 things to watch: For convexity selling, the closes in the red for AAPL and TSLA were important. However, watch for confirmation tomorrow morning, further weakness would  trigger new incremental option related selling. Just keep an eye on Tesla, it leads everything and has the highest beta. For a rotation signal, I think KO and PEP, etc tell you something real happening…

Yet as some loose ends have been resolve, the real questions emerge and first and foremost is who was it that led this furious gamma charge higher, taking on virtually every dealer?

Once again, we quote the Bear Traps report which first thing this morning may have identified the culrpit behind the most bizarre market action since the Feb 2018 volmageddon:

“one large buyer has made a colossal splash in the market and the scent of greed has drawn thousands of other market participants into the dangerous game. Several clients in our institutional chat on Bloomberg have cited SoftBank as the original size buyer. We have NO IDEA if this is true, just that highly credible clients have made this reference several times over the last week.”

It is hardly unreasonable to imagine SoftBank, the “brains” behind such catastrophic investments as WeWork, WireFraud WireCard, and countless other failed “unicorns” would desperately try to Volkswagen not just a handful of tech names, but the entire market in the process. After all, Masa Son is desperate to deflect attention from the fact that as we put it last October, “SoftBank is the Bubble Era’s “Short Of The Century.” And if there is one thing that can salvage the Japanese VC titan’s reputation it is a second tech bubble which blows out the valuation of his countless (otherwise worthless) investments which form the backbone of SoftBank’s “AI Revolution” whatever that means.

Yet as while we seek further proof about the identity of the gamma grabber, spare a thought for everyone else that jumped on the bandwagon only to see their “get rich quick” fortunes turn to smoke. Here again is Larry McDonalds with the anticlimax:

It’s a high-stakes game of musical chairs, the ultimate greater fool theory moment. The colossal call buyer has thrown meat in the water and drawn in the sharks, but unfortunately thousands of Robinhood minnows at the same time. When the large players’ exit, the little guy and gal will be left holding the bag. As my first boss told me at Merrill Lynch in 1990, “In options Larry, they show it to you (lush $$ green premium), and then they take it away.”

One final thought: the HFT(s) that frontrun Robinhood traders giveth and taketh away, and today’s elevator down action demonstrates just how furious the selling is – and will be – courtesy of the algos who sense that a tidal wave of retail selling is about to hit.

Authored by Steve Watson via Summit News,

A new video highlights how young people agree with Donald Trump’s second term agenda, just so long as they don’t know it’s the President’s.

Campus Reform told students that the plans, including going after human traffickers and terrorists, and ending wars to bring troops home.

“The fight on terrorism has always been important, especially in America. So getting rid of stuff that can harm American lives is perfect,” one student said, believing that the agenda was Biden’s.

“Human trafficking, especially in South Florida which is where I’m from, is a huge issue. So from what it sounds like, it sounds like a great idea,” another student responded.

“I mean, I still haven’t decided yet, but these things all sound great and they’re definitely making me lean more towards Biden,” one student said when told the agenda was the Democrat’s.

When they were finally told the plans were all Trump’s, some of the students admitted they should be looking beyond character.

“It surprised me a little bit because I don’t have the highest opinion of the president at the time, but I think that’s great,” one student said.

“I think everyone, including myself, could be a little bit more looking at the policies of the President rather than their character” another responded.

“In this time, not a lot of the good he does is heard. It does help knowing that he is doing these things,” a further student declared.

In another video shot by Campus Reform, most students admitted that if Biden refuses to debate Trump, it would be a “weak” move.

“I do believe that Trump would win the debates,” one student said, adding:

“I feel like Biden would struggle, and Biden, from what I’ve seen so far, doesn’t bring too many facts and tries more of an emotional argument.”

China remains the world’s largest importers of chips, and will spend some $300 billion to import semiconductors this year — the vital component for chips’ functionality in storing data and programs on computers and other devices — but the Trump administration’s blacklisting a who’s who of China’s tech companies has put into doubt the country’s continued access to the most advanced chips.

And now Bloomberg reports China is paving the way for an ambitious new program to establish a domestic semiconductor industry which new government policies are rapidly prioritizing in order to counter US sanctions and ultimately sever dependency on American tech in the near and long term. The report underscores the Beijing will confer “the same kind of priority on the effort it accorded to building its atomic capability.”

This as major Chinese firms long central in headlines related to the US-China showdown like Huawei, will lose access to chips based on new American regulations. In Huawei’s case, Taiwan Semiconductor Manufacturing Co. will be prohibited from doing business with the Shenzhen-based  telecommunications and electronics company.

“Beijing is preparing broad support for so-called third-generation semiconductors for the five years through 2025, said the people, asking not to be identified discussing government deliberations,” Bloomberg reports. “A suite of measures to bolster research, education and financing for the industry has been added to a draft of the country’s 14th five-year plan, which will be presented to the country’s top leaders in October, the people said.”

To drive forward these efforts President Xi Jinping earlier promised $1.4 trillion through 2025 to ensure rapid advance of domestic produced cutting edge technologies, central to which are semiconductors, which is vital to everything from wireless networks, to developing AI, to cellular phones.

“This is a sector about to see explosive growth,” Xin Capital Co.’s Alan Zhou, said last week at an industry event. He predicted the transition will likely see huge investment in Chinese semiconductor development, which could create a “world-class Chinese chip giant.”

However there’s still a technology gap in this area which Chinese developers have struggled to close over and ahead of more developed rivals in this area like the US, Japan, and Europe.

Beijing has had a benchmark in place since the start of the trade war to see at least 40% of China’s semiconductor needs met by local manufacturers by middle of next decade. But the question remains whether it can catch up to the cutting edge global leaders and original innovators in the industry responsible for breakthroughs centered in the West.

Authored by Charles Hugh Smith via OfTwoMinds blog,

So what can we do about all this when our politics, regulation and policies are all captured? We go directly to the source of value, which is demand.

Editor’s note: This is a guest post by my friend and colleague Zeus Yiamouyiannis, Ph.D., who has contributed essays to Of Two Minds since 2009.

This is part 4 of a 5 part series entitled When the World Market Itself Is Fake, Economic “Value” Loses Any Real Meaning.

Read Part 1 here…

Read Part 2 here…

Read Part 3 here…

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“The assumption I see everywhere in the alt financial media is the elite will do fine because they own the gold, land, factories, apartment complexes, etc. All true. However the Roman Elites owned all this too, but that didn’t save them from systemic collapse. They weren’t still fabulously rich once the Imperial structure collapsed.”

– Charles Hugh Smith, August 23, 2020 email to zeus@citizenzeus.com

The gravy train for a pampered and protected elite won’t last forever. It never does. But before these elites fall, just like those of Ancient Rome, there must be a combination of internal broken trust, opting out of the system, and independent, decisive rebellion by a critical mass of citizens as well as significant external pressures.

These citizens would have to start an exodus, aided by exterior forces, to decouple from the values, ethics, and imagination of the ruling elite which whispers, “You too, could be one of us.” Just like the bread and circuses of old Rome so have the entertainment spectacles and endless social media diversions kept our eyes off economic manipulation and abuse. The breakdown of the Ancient Roman spectacle was aided by the invasion by Visigoths from the North, who sacked Rome and brought the empire to its knees. It looks like American imperial delusions are beginning to be broken by Covid-19.

We see both internal and external forces interacting with the Covid-19 crisis and the eye-opening shift it has created in perspectives around the desirability of urban living, consuming, and tolerating unsatisfying work. Once the goodies have been removed (TV sports, nights at the bar, etc.) it is remarkable how much we realize we have been evicted from well-being by allowing our senses to be occupied rather than by inhabiting of our intelligence.

The external pressures also brought by Covid-19 have compelled a response that further reveals the fragility and exploitation (unequal bailouts, rigged medical system, no social safety net) rife in our system.

It is interesting that March 2020, during the Covid-19 shutdown, was the first March without a school shooting in nearly two decades not to mention 30% reduced pollution levels and a host of other neglected benefits of stopping or slowing consumption and “growth” and pursuing healthy, broadly popular policies!

On a whole host of policies, 80-90+% of Americans (and the entire world, for that matter) agree on basic issues–environmental protection, sensible background checks for gun ownership, working class protections, help for the middle and working class, greater taxes for the rentier and leisure classes, (and on and on) yet without a single policy change in sight.

On the other hand, corporations are given a deference quite reminiscent of Old Rome. Virginia, a state now controlled by supposedly “liberal” (read neo-liberal corporatist) Democrats, has the worst worker rights record in the United States. Its neo-liberal governor, Ralph Northam, is proposing to delay by four months even modest increase in wages and tepid boosts to collective bargaining, already passed into law and scheduled for January 2021.

In an Orwellian statement, Northam’s office claimed, “This will ensure workers get the support they need while allowing greater economic certainty in the wake of the COVID-19 pandemic.” What!? The very people most in need of aid and a raise, the most affected, are once again the last in line, just as with the recent 2.2 trillion dollar bailout? This a particular form of disaster capitalism, what I call extortion capitalism, aided and abetted by both major parties.

So what can we do about all this when our politics, regulation and policies are all captured by those who are determined to exploit us and extract ever higher rents from our labor, our talents, and our assets? We go directly to the source of value, which is demand. The organic food movement and the Covid-19 virus are showing us how.

When organic foods spread from a fringe subculture in the early 1970s to a conscious and viable desire for suburban soccer moms in the 2000s, big corporations had to respond or lose out. They spooned us cheap, high-fructose-corn-syrup garbage for decades that decimated our health and clouded our minds.

We rebelled successfully by moving to organic foods and conscious eating. They had to follow. We did not necessarily need any regulation or government mandate to change behavior. They tried to buy off regulation by making pesticide / sugar-laden food “natural”, but we did not buy it, and citizen-activist groups successfully kept the label “organic” from being watered down. Now, these corporations are trying to buy up family-owned organic businesses.

Currently Covid-19 is showing us how we can really call the shots with Big Oil and, perhaps, make them invest more in alternative energy. Oil futures plunged into the negative range for the first time in history during the pandemic (costing more to store than sell). If we take the lesson, and insist on working from home (and businesses find that productivity actually improves, as research shows), and demand stays depressed, Big Oil will have to adjust, just as Big Ag had to adjust with organic foods.

The present centralized capital economies (focused in cities) were constructed to do one thing: concentrate as much money and power in as few hands as possible. The opposite movement is needed, radical decentralization, regionalization, and localization of economy (as Charles Smith has written about extensively in his books and blogs).

Here is a summary starter list of ways to take on the big corporations (Big Everything) directly and accelerate the move toward decentralization:

Taking on Big Ag: By ramping up urban gardening, especially in inner city “food deserts,” patronizing farmers markets, and supporting organic farm-to-table, citizen consumers and take a big chunk out of the consolidation and monopolization created by corporate farms.

Taking on Big Oil: By radically reducing consumption, curtailing driving, downsizing houses, increasing energy efficiency, going solar (even though that has an environmental cost as well), and getting rid of plastics (8-10% of total oil output is used just for plastics), will put a significant ding in the demand for oil, and the power of oil producers. How much money would be saved and oil would be refused if we simply used bikes to get around to do our local shopping?

Taking on Big Pharma: Almost all of Big Pharma’s profits (in collaboration with Big Ag’s junk food agenda) come from pains, depressions, and chronic breakdowns of health created by entirely preventable lifestyle choices. By radically reducing consumption, unnecessary work, eating well, and using the extra time to get off the corporate hamster wheel and actually go for regular walks with our families, the physical, mental, and emotional health increase will put a serious dent into Big Pharma profits.

Taking on Big Rent and Housing: Housing prices have become completely extortionist. Lower-wage earners are paying upwards of 60-70% of income for rent and even “middle class” Millennials are paying 45%. Why not form cooperative communities, co-housing, or moving in with families as an act of liberation and rebellion? Again, demand, demand, demand. The rentier class cannot support extravagant rates if few people are wanting what they are selling.

Taking on Big Finance and Big Credit: Why do we need to get ripped off, getting absolutely zero interest rates on our savings, when we can peer-lend to each other and set up systems where both lender and borrower prosper from productive, healthy pursuits while cutting out the middleman? New Rule: You must add real value to an exchange to be valuable. To this end local currency becomes indispensable, a voluntary, community- based system of exchange that cuts out credit card fees and other premiums ginned up by predatory finance.

Taking on Big Government and Big Taxes: Why is it that the most profitable companies in the world, like Amazon, are not only paying 0% in income taxes, but getting tax rebates and subsidies to the tune of billions of dollars? Why is it that a successful, self-owned small business has the effective tax rate of 50% in California? Enough!

By bartering or gifting (which is completely legal up to 15,000 dollars per person in 2020), we can all lower our overheads and send less to the military industrial complex that dominates government spending.

By pooling our resources informally for necessities, like food, shelter, and clothing, we can live a lot better on a lot less, lowering our formal incomes and paying less to bureaucratic, technocratic, and militaristic state mechanisms.

Taking on Big Business: Support local businesses, even if they are a little more expensive. Even on Amazon (though Amazon does get a percentage), there are family-run businesses, who do great work and who don’t cost much more than foreign-made junk products. I ordered an organic bamboo, expandable silverware tray from Royal Craft Wood, a family run, American enterprise, owned by a single father and military vet. I now realize they ship free from their own site, and I will go directly there from now on.

Perhaps we can develop a nationwide directory, much like the Green Directory for small to medium, family-run businesses. To intensify the effect, why not divest from corporate stocks of all stripes, except those that run their companies in a conscious and community friendly way? Why not lobby your pension funds to do likewise?

Taking on Big Med and Big Insurance: It’s no secret that there is no profit in health and well-being for Big MedInsur. Sickcare is the name of the game. Scare the wits out of people, and bankrupt them with expensive procedures (gastric bypass) and drugs (for Diabetes 2, etc.) that could have been avoided entirely with exercise, good food, and decent preventive support in community health cooperatives. Not only would a single-payer Medicare for All save about 500 billion dollars a year (and about 65,000 lives), but easily a trillion dollars a year could be saved with a healthy populace (not to mention being far more microbe-resistant, and lower-risk when it comes to communicable diseases).

I could take on many more in the “Big Everything” category (i.e. Big Sports and Entertainment vs. local sports and artistic participation), and the boondoggle called Big Education (largely expensive and useless factory-style “higher” education vs. community learning and engagement) but let’s leave it at the main offenders for the time being.

These are ways to collectively rebel. There are also individual ways, which I will talk about, in my next essay, Plugging into Small Everything: Wake Up and Smell the 3 C’s: Community, Cash, and Coin (Coffee optional)!

copyright 2020 Zeus Yiamouyiannis

Part 5 will discuss healthy, pro-democratic, creative alternatives to the current rigged system.

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My recent books:

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World ($13)
(Kindle $6.95, print $11.95) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($6.95 (Kindle), $12 (print), $13.08 ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).

*  *  *

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

On May 12, during a webcast held by the Economic Club of New York, Stan Druckenmiller said the risk-reward calculation for equities was the worst he’d seen in his career.

The S&P 500 climbed almost 22% since then, as Druckenmiller later said he was “far too cautious.”

As the S&P reverses hard today, we thought it would be worthwhile reminding readers of another important story from the Tech Bubble about the infamous short-seller’s experience…

“So, I’ll never forget it. January of 2000 I go into Soros’s office and I say I’m selling all the tech stocks, selling everything.

This is crazy at 104 times earnings. This is nuts. Just kind of as I explained earlier, we’re going to step aside, wait for the next fat pitch. I didn’t fire the two gun slingers. They didn’t have enough money to really hurt the fund, but they started making 3 percent a day and I’m out.

It is driving me nuts. I mean their little account is like up 50 percent on the year. I think Quantum was up seven. It’s just sitting there…”

Druckenmiller pauses stoically before continuing…

“So like around March I could feel it coming. I just – I had to play. I couldn’t help myself. And three times during the same week I pick up a – don’t do it. Don’t do it. Anyway, I pick up the phone finally.

I think I missed the top by an hour. I bought $6 billion worth of tech stocks… and in six weeks I had left Soros and I had lost $3 billion in that one play.”

Everyone listening takes a breath as the hedge fund billionaire scans the audience, sips from a tall glass of water and states confidently:

“You asked me what I learned. I didn’t learn anything.

I already knew that I wasn’t supposed to that.

I was just an emotional basket case and couldn’t help myself.

So, maybe I learned not to do it again. but I already knew that.“

Of course, it’s totally different this time!

Totally different…

Authored by Ivan Pentchoukov via The Epoch Times,

The Department of Justice is conducting several “very big” voter fraud investigations in multiple states, Attorney General William Barr told CNN in an interview aired on Sept. 2.

“I know there are a number of investigations right now, some very big ones, in states,” Barr said in response to a question about how many voter fraud indictments the Department of Justice (DOJ) has brought on his watch.

Barr said he did not know the exact number.

At least 32 people have been criminally convicted of voter fraud in 2019, according to a database maintained by the conservative Heritage Foundation think tank.

The attorney general made the remarks as part of a tense exchange with CNN anchor Wolf Blitzer about mail-in voting. Barr has repeatedly said that mass mail-in voting is an invitation for voter fraud and coercion. Blitzer pressed the attorney general for evidence that this will be the case in 2020.

Barr pointed to a recent conviction in Texas over 1,700 fraudulent ballots and noted that widespread evidence isn’t available because the United States has never attempted an election with the kind of massive access to mail-in voting available in 2020.

At least 83 percent of American voters, or roughly 100 million people, will be able to vote by mail in the 2020 election, according to a tally by The Washington Post.

“We haven’t had the kind of widespread use of mail-in ballots as being proposed,” Barr said.

“We’ve had absentee ballots from people who request them from a specific address. Now what we’re talking about is mailing them to everyone on the voter list, when everyone knows those voter lists are inaccurate.”

Barr referenced the findings of a nonpartisan Commission on Federal Election Reform, co-chaired by former President Jimmy Carter and former Secretary of State James Baker, which determined in 2005 that mail-in voting creates the potential for voter fraud and opens the door to coercion if activists or party workers are allowed to handle ballots.

Carter recently issued a statement to point out that the commission’s key finding was that states should invest in more research on mail-in voting. The former president encouraged states to invest resources to expand voting by mail.

More than 43 percent of likely American voters would not trust in the integrity of an election if all voters automatically received ballots or ballot request forms by mail, according to an Epoch Times National Poll conducted in late August.

“This is playing with fire,” Barr said.

“We’re a very closely divided country here and people have to have confidence in the results of the election and the legitimacy of the government. And people trying to change the rules to this methodology—which as a matter of logic is very open to fraud and coercion—is reckless and dangerous,” Barr said.

President Donald Trump opposes a universal vote-by-mail election, arguing that it’s an invitation for fraud and opens the door to Election Day chaos due to the inefficiency of the U.S. Postal Service.

Democrats are waging a well-funded legal campaign across the nation to make it easier to vote by mail beyond absentee ballots. They are litigating at least 80 of the more than 100 vote-by-mail court cases across the nation.

Democratic presidential nominee Joe Biden said his party has more than 600 lawyers working on election-related cases.

Just days after we reported that New York Gov Andrew Cuomo and his army of bureaucrats were stonewalling a DoJ fact-finding mission into a policy that many suspect may have contributed thousands of undisclosed nursing home deaths (on top of the 6,000 who actually died in their long-term care homes), President Trump delivered an epic taunt.

Not long after Gov Cuomo delivered what some might describe as a “veiled threat”, saying that Trump would need to bring “an army” with him if he ever wanted to walk down Fifth Avenue safely, Trump tweeted that if Cuomo has so much time on his hands, he should go and find the data about nursing home deaths requested by the DoJ.

Trump blamed Cuomo’s “puppet” prosecutors for “illegally” going after Trump and his family for obviously political reason.

.@NYGovCuomo should get his puppet New York prosecutors, who have been illegally after me and my family for years, to investigate his incompetent handling of the China Virus, and all of the deaths caused by this incompetence. It is at minimum a Nursing Home Scandal – 11,000 DEAD!

— Donald J. Trump (@realDonaldTrump) September 3, 2020

But during a hastily arranged press conference on Wednesday evening – called so Cuomo could respond to threats about cutting federal funding to cities like NYC that protect rioters and looter and criminals in the name of “peaceful protesters”. Cuomo responded that New Yorkers “don’t want Trump here”.

But unfortunately, with so many wealthy people fleeing the state, Cuomo now needs this federal money more than ever, which was probably the inspiration for this latest tantrum.

“He can’t come back to New York. He can’t,” said Cuomo, a Democrat. “He’s going to walk down the street in New York? Forget bodyguards, he better have an army if he thinks he’s going to walk down the street in New York.”

A few minutes later, Cuomo clearly thought better of that comment, and sought to make a “clarification” that he doesn’t actually support violence.

“All I’m saying is that he is persona non grata in New York City and I think he knows that and he’ll never come back to New York because New Yorkers will never forget how gratuitously mean he has been to New Yorkers.”

The Gov also tweeted this.

President Trump has actively sought to punish NYC since day one.

He let COVID ambush New York.

He refuses to provide funds that states and cities MUST receive to recover.

He is not a king. He cannot “defund” NYC.

It’s an illegal stunt.

— Andrew Cuomo (@NYGovCuomo) September 2, 2020

Looks like Cuomo is forgetting “the Golden Rule”: He who has the gold, makes the rules.

VIX is back above 30 and its put-buying not call-buying this time…

The S&P is down over 3% and Nasdaq down 5%…

As yields plunge back to 60bps (10Y)…

Stocks catching down to bonds…

Gold is also dropping…

As the smell of liquidation is back.

it’s time pic.twitter.com/CLxessgchL

— zerohedge (@zerohedge) September 3, 2020

In a huge and surprising development, Russian warships will hold live-fire exercises in eastern Mediterranean waters claimed by Turkey starting next week, amid the ongoing and increasingly militarized dispute over maritime boundaries and hydrocarbon drilling rights which has put Turkey and Greece on a war footing.

Russia did not immediately confirm the announcement out of Ankara, subsequently reported by Turkey’s TRT World, which seized upon the news in relation to its controversial gas exploration claims: 

The announcement on Wednesday advises sailors not to enter the drilling zone and in areas where ships are conducting research, Turkish Naval Forces Hydrography and Oceanography Department said in a statement.

According to naval alerts, Russian forces will conduct two separate shooting exercises on both sides of Cyprus island.

The two-phased Russia’s shooting exercise in the eastern Mediterranean will take place from September 8-22 and the other from September 17-25.

It appears Turkey may be attempting to initially frame the development as in its favor, but that’s anything but certain, and actually appears the opposite. 

Associated Press noted that “It’s unclear why NATO-member Turkey would announce such drills on Moscow’s behalf” — recent limited military cooperation, for example the transfer of the S-400, notwithstanding.  

The drills are being interpreted as an attempt of Russia to remind NATO, locked as it is in a dispute between its two members Greece and Turkey, of its significant naval presence and influence in the eastern Mediterranean. 

Turkey’s navy is reportedly urging Moscow not to interfere in its ongoing seismic studies by ships near Greece’s easternmost islands as well as near Cyprus.

According to Bloomberg, this is in no way a signal in favor of Turkey’s maritime claims:

Russian Navy spokesman Igor Dygalo didn’t immediately respond to requests for comment. Igor Korotchenko, head of the Centre for Analysis of World Arms Trade in Moscow, said the exercises were a show of force by Russia against NATO and not an effort to back Turkey.

“We do have strong economic and defense ties with Turkey but our policy is to avoid backing either side in this dispute,” he said by phone. “Turkey is quite capable of looking after its own interests.”

It appears Turkey’s markets agreed, given the lira just dropped to a record low against the dollar, also following rapidly increased inflation in August (year-on-year inflation of 11.77 percent).

Reuters notes the lira “weakened some 0.25% to 7.4100 against the dollar at 0744 GMT, its weakest level on record, from a close of 7.3910 on Wednesday.”