Sharp USDJPY Overnight Sell Off Pushes US Equity Futures Into The Red

Yesterday’s market action was perfectly predictable, and as we forecast, it followed the move of the USDJPY almost to a tick, which with the help of a last minute VIX smash (just when will the CFTC finally look at the “banging the close” in the VIX by the NY Fed?) pushed the DJIA to a new record high, courtesy of the overnight USDJPY selling which in turn allowed all day buying of the key carry pair. Fast forward to today when once again we have a replica of the set up: a big overnight dump in USDJPY has sent the dollar-yen to just over 102.000. And since Nomura has a green light by the BOJ to lift every USDJPY offer south of 102.000 we expect the USDJPY to once again rebound and push what right now is a weak equity futures session (-8) well above current levels. Unless, of course, central banks finally are starting to shift their policy, realizing that they may have lost control to the upside since algos no longer care about warnings that “volatility is too low”, knowing full well the same Fed will come and bail them out on even the tiniest downtick. Which begs the question: is a big Fed-mandated shakeout coming? Could the coming FOMC announcement be just the right time and place for the Fed to surprise the market out of its “complacency” and whip out an unexpected hawk out of its sleeve?

Around the world, overnight Chinese equities pulled back from yesterday’s inflation-inspired gains (Hang Seng -0.25%), with outperformance in the Nikkei 225 (+0.50%) after the MSCI decided not to reclassify Taiwan and South Korean equity markets as ‘developed’, which has allowed Japanese equities to continue their  dominance of east Asian market share. Deutsche wonders if perhaps Chinese authorities have shifted from weakening the RMB as a form of stimulus to more targeted measures such as RRR cuts. This shift in policy bias likely stems from the fact that the objectives set out by the authorities in the beginning of the squeeze are gradually being achieved. Speculative flows are reducing and corporates are starting to hedge their risk more appropriately. The Nikkei is higher on the back of more headlines around corporate tax reforms and GPIF asset re-allocation.

In Europe, Deutsche Lufthansa was notable underperformer in Europe this morning, after the company cut forecast, in turn dragging the rest of the sector lower. Allied with this, Vallourec’s profit warning dampened sentiment, with losses observed across the continent. Absence of any positive catalysts meant that heading into the North American open, stocks are broadly lower, with the more defensive sectors such as healthcare outperforming.

Turning to the day ahead, there’s very little on the data docket outside of weekly US mortgage applications and the monthly budget statement. The US treasury’s 10 year auction will be closely watched today, following a fairly lacklustre 3 year auction yesterday and with 10 year yields at around 1 month highs.

Bulleting Headline Summary from RanSquawk and Bloomberg

  • European equities retreat from recent highs, with a spate of profit warnings from Germany’s Deutsche Lufthansa and France’s Vallourec hitting sentiment
  • EUR/GBP hits 18-month lows after the UK unemployment rate unexpectedly fell to Jan’09 lows
  • Session ahead remains quiet, however the 10yr yield still lies close to 2.65% ahead of the 10yr Note auction today


Overnight, Chinese equities pulled back from yesterday’s inflation-inspired gains (Hang Seng -0.25%), with outperformance in the Nikkei 225 (+0.50%) after the MSCI decided not to reclassify Taiwan and South Korean equity markets as ‘developed’, which has allowed Japanese equities to continue their dominance of east Asian market share.


There was little evidence of demand for core EU paper picking up, with Bunds yet again failing to benefit from lower stocks due to the 2016 Schatz auction by Buba today. Still, weaker stocks saw Bunds come off the worst levels of the session, with short-covering bring the German 10yr yield off the day’s highs. Nonetheless, they remain in negative territory, with peripheral bond yield spreads also marginally tighter.

Prices were also dragged lower by Gilts following the release of better than expected UK jobs report.


PIMCO’s Gross has raised his holdings of Treasuries and government related debt in May to half his flagship fund’s total. (BBG)


Deutsche Lufthansa was notable underperformer in Europe this morning, after the company cut forecast, in turn dragging the rest of the sector lower. Allied with this, Vallourec’s profit warning dampened sentiment, with losses observed across the continent. Absence of any positive catalysts meant that heading into the North American open, stocks are broadly lower, with the more defensive sectors such as healthcare outperforming.


GBP continued to outperform EUR this morning, amid monetary policy divergence and also the release of better than expected UK jobs report which showed that the unemployment rate has hit a new five-year low, but at the expense of shrinking real wages. Ongoing EUR weakness saw EUR/GBP fall to its lowest level since Dec-2012 and consequent JPY strength saw USD/JPY below the 100 and also its 50DMA lines.

Elsewhere, AUD and NZD benefited from expectations that the recently introduced monetary policies by the ECB will buoy demand for higher yielding currencies via carry trade. Antipodean FX now looks ahead to the RBNZ rate decision this evening, where the central bank are expected to hike rates by 25bps for the third consecutive meeting.


OPEC ministers unsurprisingly reached a consensus to keep the output ceiling unchanged at 30mln bpd, with energy market focus now shifting to the weekly DoE crude oil inventories in what looks to be a muted session ahead.

Gold outperformed its peers this morning, as expectations of a resurgence in physical demand in Singapore, together with somewhat cautious sentiment continued to support prices. Also of note, volumes for the benchmark spot contract in China rose to a two-week high, further supporting growing view prices trying to establish a base.

* * *

We conclude with the overnight recap by DB’s Jim Reid

Perhaps it’s the usual post-payrolls lull, but already the anticipation appears to be building towards the next FOMC even though it’s still more than a week away (June 18th). To be fair the June FOMC will be a fairly interesting one for a number of reasons so there are good reasons to speculate on the outcome. Firstly we get to hear from Yellen again in her second post-FOMC press conference as Fed Chair. Her first press conference in March certainly caused a stir in markets whether intentional or not, and since that time US yields have taken a round trip to a low of 2.44% in late May, followed by a 20bp upwards retracement to our current levels of around 2.64%. Next week’s FOMC will also include new economic projections, as well as an update to the Fed officials’ “dot plot” Fed Funds forecasts. So there’s plenty to look forward to at this meeting.

There also seems to be a growing chorus of market participants who think that we’re starting to see a gradual shift in the Fed’s tone given the recent run of stronger US economic data. Perhaps these views may be reflected in the updated Fed Funds dot plot, but there’s also a growing number who say that the Fed is “behind the curve” in terms of shifting its policy. The WSJ and Harvard University’s Martin Feldstein argues that inflation is a more serious threat than the Fed recognises. Feldstein argued in a WSJ opinion piece on Monday that the Fed’s preferred measure of inflation, CPI excluding food and energy, rose 1.4% yoy in May but has increased since February at a 2.1% seasonally adjusted rate. Producer prices for the same goods and services has been rising over the same time period by 3.6%. From a labour market perspective, Feldstein argues that wage pressures are more closely linked with short term unemployment than long term unemployment, and given that the unemployment rate for those out of work for less than six months was only 4.1% in May, wages may soon begin to rise more rapidly. These views continue to be challenged by those who argue that we’re in a lower for longer “new neutral” environment. The conclusion to this debate could be one of the most important themes of H2 2014.

Speaking of US data, yesterday’s releases provided more fuel for the bond bears and perhaps explained some of the 4bp cheapening in US 10yr bonds. The NFIB small business optimism index printed at 96.6 which was about 0.8pts higher than the consensus estimate and a 1.4pt improvement over the April number. The May reading was also the highest print since September 2007. However in its commentary, the NFIB was more downbeat saying that the index remains “below average” and “far from what is considered to be an expansion level”. The four components most closely related to GDP and employment growth (job openings, job creation plans, inventory and capital spending plans) collectively fell 1 point in May. So the entire gain in optimism was driven by soft components (sales expectations and business conditions) according to the NFIB. Also marking a post-financial crisis high was the BLS JOLTS job openings report which showed that the number of job openings (4.455m vs 4.050m) was at its highest level since September 2007. The April  number was significantly higher than the March outturn of 4.017m. In addition, the ratio of unemployed compared to job openings fell to 2.19 in April, compared to the 2.51 in March and the lowest reading since June 2008. One of the key metrics watched by Yellen, the quit rate, also seemed to improve but showed a more mixed picture. Quits rose slightly in April by 12k to 2.47m but the quits rate remained at 1.88% which is less than the pre-recession average. In terms of inventories, a larger than expected wholesale inventory build (+1.1% vs +0.6% expected) was recorded in April which led some Street economists to raise their Q2 GDP estimates.

The Asian session has been relatively lacklustre with the most notable move being a further 0.10% drop in EURUSD to 1.353. CNH and CNY are trading a little weaker against the greenback today (-0.1% apiece) with the PBOC setting a weaker reference rate for the first time in 4 days. This follows three days of sharp gains. Perhaps Chinese authorities have shifted from weakening the RMB as a form of stimulus to more targeted measures such as RRR cuts. Our EM strategists think that FX policy seems to be transitioning to a more neutral stance after four months of turmoil in the RMB complex. This shift in policy bias likely stems from the fact that the objectives set out by the authorities in the beginning of the squeeze are gradually being achieved. Speculative flows are reducing and corporates are starting to hedge their risk more appropriately. Elsewhere in the region, Asia Pacific government bonds are trading lower in price and Asian equities are trading around a quarter to half a percent lower which largely follows the price action that we saw in the US and Europe yesterday. The Nikkei (+0.3%) is the main exception on the back of more headlines around corporate tax reforms and GPIF asset re-allocation.

Yesterday was the first negative post-ECB trading session. However the S&P500 closed only 0.02% lower and if we look at the sectoral composition it was actually the higher beta stocks such as tech (+0.18%), consumer goods (+0.08%) and basic materials (+0.06%) which outperformed while the defensives such as telcos (-0.14%) and utilities (-0.31%) dragged the overall index lower. The consolidation was more obvious in European rates where Spanish and Italian bond yields added 7bp and 10bp respectively, partially unwinding some of the rally since the ECB’s latest policy announcements, while Bunds added 2bp. The stronger US data flow helped the US dollar index add 0.19% and notch up a four month high. EURUSD continued to trade lower post-ECB, now firmly below its 200D moving average as the impact of the ECB’s negative deposit rates take effect. Higher UST yields weighed on EM with Russia, South Africa and Turkey 5yr CDS widening by around 5-10bp.

Turning to the day ahead, there’s very little on the data docket outside of weekly US mortgage applications and the monthly budget statement. The US treasury’s 10 year auction will be closely watched today, following a fairly lacklustre 3 year auction yesterday and with 10 year yields at around 1 month highs.

via Zero Hedge Tyler Durden

Top 10 Universities With The Richest Alumni

As student loan bailouts rain down from Washington, we thought it may be useful to consider where the world's wealthiest University alumni are. As Private Wealth reports, following a survey of 70,000 millionaires around the world, eight of the top ten universities with the highest number of rich alumni are based in the U.S., with the U.K. home to the other two. Engineering degrees produced the most millionaires, although most engineering grads made money as entrepreneurs, the study revealed. MBAs, law, accounting, and finance degrees also led to financial success.


The universities with the richest alumni are as follows, with number one producing the most.

No. 10 – University of Pennsylvania

Billionaire Warren Buffett is an alumni of this university as is businessman and investor Ronald Perelman.


No. 9 – University of Cambridge

Famed physicist Stephen Hawking earned a degree here, as did journalist and entrepreneur Arianna Huffington.


No. 8 – New York University

Actor and director Woody Allen graduated from NYU, as did actor Billy Crystal and fashion designer Tom Ford.


No. 7 – Massachusetts Institute of Technology

MIT-educated astronauts have been included in more than a third of the nation's space flights, including Edwin "Buzz" Aldrin and Catherine Coleman. Alfred Sloan, former chairman of General Motors, earned his degree here in 1895.

No. 6 – University of Oxford

Twenty-six British prime ministers graduated from this institution. King Abdullah II of Jordan earned a degree here, as did 50 Nobel Prize winners.


No. 5 – Columbia University

Hollywood producer David O. Selznick and fashion designer Mary McFadden graduated from this New York City university.

No. 4 – University of California

Former chief justice of the U.S. Supreme Court Earl Warren and Tom Anderson, co-founder of Myspace, are among the notable graduates of the Berkeley, Calif., campus.


No. 3 – Stanford University

The founders of Internet search site Google — Sergey Brin and Larry Page — are alums of Stanford, as is actress Sigourney Weaver.


No. 2 – Harvard Business School

Michael Bloomberg, former New York City mayor and founder of Bloomberg LP, earned a degree here, as did David Rockefeller, who went on to become the CEO of Chase Manhattan Bank.


No. 1 – Harvard University

The oldest university in the country claims President Barack Obama and former President John F. Kennedy among its graduates. Famous dropouts include billionaires Bill Gates, co-founder of Microsoft, and Mark Zuckerberg, founder of Facebook.


Source: Private Wealth

via Zero Hedge Tyler Durden

How Japan Blew Its Savings Surplus: What A Keynesian Dystopia Looks Like

Submitted by David Stockman of Contra Corner blog,

Financially speaking, Japan is fast becoming a Keynesian dystopia. Its entire economy is now hostage to a fiscal time bomb. Namely, government debt which already exceeds 240% of GDP and which is growing rapidly because even the recent traumatic increase in the sales tax from 5% to 8% does not come close to filling the fiscal gap. Moreover, even at today’s absurdly low and BOJ rigged bond rate of 0.6% nearly 25% of government revenue is absorbed by interest payments.

Now comes the coup de grace. Japan’s savings rate has collapsed (see below) and its vaunted current account surplus is about ready to disappear. This means Japan’s accounts with the rest of the world will cross-over into a “financial no man’s land”; it will be forced to steadily liquidate its overseas investments to pay its current bills—an investment surplus built up over the course of 50 years. But this will also reduce foreign earnings and thereby expand Japan’s growing deficit on current account.

Accordingly, to finance its  “twin deficits” it will have to attract massive amounts of foreign capital for decades to come—an imperative which will require a devastating rise in interest rates, perhaps as high as 4% according to one expert :

The yield on Japan’s benchmark 10-year government bond, now around 0.6 percent, could rise to 4 percent – a level unseen since March 1995 — should the current-account balance drop into deficit as public debt eclipses the nation’s savings, said Toshihiro Nagahama, chief economist at Dai-ichi Life Research Institute.

Needless to say, were the carry-cost of Japan’s towering fiscal debts to rise by even half that much it would be game over. Interest expense would absorb virtually 100% of current policy revenue, forcing the government to raise taxes over and over.  One expert quoted in the Bloomberg article below says that a sales tax of 20%—-nearly tripple the recently enacted level—-would be required to wrestle down the fiscal monster that would result from interest rate normalization.

Unless the government raises the sales tax to 20 percent or makes drastic reform on social welfare spending, this scenario is highly likely,” said Ogawa. “Higher interest rates will discourage domestic capital investment and spur the shift of production abroad, increasing the number of people unemployed.”

The above quote strongly hints why Keynesian dystopia is an apt description of what is emerging in Japan; and why that descriptor is also reflective of the financial horror show that is coming to our own financial neighborhood a decade or two down the road.

As indicated above, the alternative to an economy killing 20 sales tax is “drastic reform of social welfare spending”. But the latter is not even a remote possibility. Japan’s population is both shrinking and also aging so rapidly that its fast on its way to become an archipelago of old age homes.

Japan savings rate as shown below has dropped from in excess of 20% during its 1970s and 1980s heyday as a mercantilist export power to only 3% today. When Japan’s retired population reaches nearly 40% of the total in the years ahead, this rate will obviously go negative as households liquidate savings in order to survive.

What happened to Japan’s huge savings surplus?  The government borrowed it! And wasted it on massive Keynesian stimulus projects that kept the LDP in power for decades but produced bridges and highways to nowhere that will be of no use to Japan’s retirement colony as it ages.

And the adverse demographic tide is indeed powerful as shown by the curve below on Japan’s working age population. In a few short years what was a working age population that peaked at 88 million has dropped to 79 million; and it will plunge to below 50 million persons in the next two decades.

What the Keynesian witch-doctors who advised Japan to bury itself in fiscal stimulation after its financial crisis of 1989-1990 did not explain was how this inexorably shrinking working population could possibly shoulder the tax burden needed to carry Japan’s massive public debt.

Yet there is no other way out of the Keynesian debt trap in which Japan is now impaled. As the current account, also shown below, continues to worsen, the need to import capital to fund the gap will drive interest rates sharply higher. The burden on Japan’s remaining taxpayers will become crushing.

So the graph below should be pasted on every US Congressman’s forehead.  When the debt spiral goes too far—it becomes a devastating financial trap.  And it cannot ultimately be solved with money printing because if carried to an extreme—even for the so-called reserve currency—it will destroy the monetary system entirely.

It should also never be forgotten that the drastic degeneration of Japan’s public finances happened in real time—–within less than two decades after its leadership was bludgeoned into one fiscal spasm after the next by Keynesian officialdom in the US Treasury, the IMF, the OECD and elsewhere.  And this is clearly a case of bad ideas imported from abroad. The generation of officials who lead Japan’s post-war miracle may have been hopelessly addicted to unsustainable models of mercantilist export promotion and currency pegging, but they were not believers in Keynesian borrow and spend.

I know that from personal experience of dealing with Japanese financial officialdom during the early days of the Reagan administration. Quite simply, they were shocked that America was about to take such an immense fiscal gamble by drastically cutting taxes before the inherited domestic spending had been curtailed and the huge defense build-up had been funded.

That was then—at a time when Japan’s debt was under 50% of GDP notwithstanding two decades of government directed internal economic development. Yet just a decade latter— after being bludgeoned to drastically appreciate the yen after the Plaza Accord of 1985—their export mercantilism model broke-down in a vast financial bubble and bust engineered by the BOJ.

Thus, left completely at sea, they were sitting ducks for visiting Keynesian fireman like Professors Bernanke and Summers. Japan then launched upon the greatest experiment in Keynesian fiscal stimulus ever imagined. The catastrophic results speak for themselves and are a potent remainder that bad ideas can wreak immense  damage once they are embraced by the machinery of the state.

via Zero Hedge Tyler Durden

Tonight’s Biggest Losers: Meet Eric Cantor’s Largest Donors

Following Eric Cantor’s historic primary loss from a tea party challenger nobody expected to win, the real biggest losers are listed below.

Courtesy of OpenSecrets, here are the Top 20 2014 Donors by company:


And for Cantor’s entire career, here are the biggest industry donors:


It would appear the biggest loser tonight is Wall Street and the NAR, especially if the latter was to be compensated by Blackstone for becoming America’s biggest landlord.

via Zero Hedge Tyler Durden

Things That Make You Go Hmmm… Like Conscious Uncouplings

Across the world, the number of people who say the economic situation in their country is "bad" is climbing – despite the much-vaunted recovery we all keep hearing about from politicians.



It seems though, as Grant Williams explains in great detail, that the voice of the people is on the rise. This is a problem, because whilst the anti-EU bloc failed to get enough seats to derail the bureaucracy of Brussels, they did win enough to create some serious waves and make it far harder to railroad through policy the next time the wheels on the wagon start to wobble… and wobble it is.

The other interesting thing to come out of the EU elections is the sheer level of antipathy towards being one big, happy European family that rages right across the continent.

A desire to NOT be part of the greater whole is hardly something new or unexpected in Europe — far from it. A quick look at the map below will tell you all you need to know.

The map shows all the currently active separatist movements in Europe, from the more widely known Basques and Catalans in Spain that both seek secession from Spain proper to the citizens of Venice, who want out of Italy (the word ballot actually originates from the Venetian word ballotta or “little ball”), and the Cornish Nationalist Party of Southwest England, who demand independence for Cornwall.

Shameless politicians who are willing to put aside technicalities such as the truth and a voting population that is tired of the status quo and looking for a change?

The conscious uncouplings may have only just begun.

Full Grant Williams Letter below…


via Zero Hedge Tyler Durden

Activist Investors In Retail Stocks Show Negligible Beneficial Impacts

Following the news of Carl Icahn’s stake in Family Dollar (NYSE: FDO), it would be worth wild to consider the value added to retailers that have activist investors.  The case has been for the surge in Merger & Acquisition activity being driven by low rates, tax incentives, and an appetite from the big money for alternative assets.  CLO pricing through the month of May buoyed leveraged loan prices to a 10-week high. 

Aside from making headlines and being Wall Street Cowboys, what real benefit does a concentration of activists who stand on soap-boxes and state their actions are merely designed to increase shareholder value?  Apparently only 50 bps in 2014 when focusing upon the retail sector.

Looking across retailers with at least $1B in market cap, the top 20 of those with the highest concentration of activist investors has under-performed a leading retail composite index.  The S&P 500 Retail Composite Index has lost 4.71 percent since the start of 2014 while the 20 leading retailers basket lost 4.21 percent, a spread of 50 bps.  This performance is another shining example that the misunderstood hedge funds are being squeeze for performance ever since volatility fell to recent lows

Using Family Dollar since it is the most recent headline, let us look at it’s institutional holders. 

Taking the number one stock when organized by Activist Investor Ownership percentages, Family Dollar leads the pack with 25.48 percent.  Of the company’s top five institutional holders, three of them are activist investors:

  1. Icahn Enterprises (NASDAQ: IEP) – 9.393%
  2. Trian Fund Management LP – 7.35%
  3. Paulson & Co – 5.68%

Participants and observers will continue to be exposed to content covering how Icahn and his buddies are doing everything for the shareholders even though the benefits of these guys, specifically in the retail sector, is negligible overall.  45% or 9 of the 20 retailers with at least $1B in market cap & a high concentration of activist investor holdings have posted positive performance for the year.

via Zero Hedge CalibratedConfidence

15 Quotes From The Founding Fathers About Economics, Capitalism And Banking

Submitted by Michael Snyder of The Economic Collapse blog,

Why have we turned our backs on the principles that this nation was founded upon?  Many of those that founded this nation bled and died so that we could experience "life, liberty and the pursuit of happiness".  And yet we have tossed their ideals aside as if they were so much rubbish.  Our founders had experienced the tyranny of big government (the monarchy) and the tyranny of the big banks and feudal lords, and they wanted something very different for the citizens of the new republic that they were forming.  They wanted a country where private property was respected and hard work was rewarded.  They wanted a country where the individual was empowered, and where everyone could own land and start businesses.  They wanted a country where there were severe restrictions on all large collections of power (government, banks and corporations all included).  They wanted a country where freedom and liberty were maximized and where ordinary people had the power to pursue their dreams and build better lives for their families.  And you know what?  While no system is ever perfect, the experiment that our founders originally set up worked beyond their wildest dreams.  But now we are killing it.  Why in the world would we want to do that?

Most people are under the illusion that the United States has a "capitalist economy" today, but that simply is not accurate.  At best, we have a "mixed economy" that is becoming a little bit more socialist with each passing day.  We pay dozens of different types of taxes each year, and some Americans actually end up giving more of their earnings to the government than they keep themselves.  But that is still not enough, and so our state governments have accumulated astounding amounts of debt, and our federal government has amassed the largest single debt that the world has ever seen.  If future generations of Americans get the chance, they will curse us for the chains of debt that we have placed upon their shoulders.

So what do our government officials do with all of this money?

Well, today approximately 70 percent of all federal government activity involves taking money from some Americans and giving it to other Americans.

Despite this unprecedented wealth-redistribution program, poverty is absolutely exploding in this country and 49 million Americans are dealing with food insecurity.

Meanwhile, the bankers have been getting fabulously wealthy from all of this debt.  The Federal Reserve system was designed to trap the U.S. government in an endless spiral of debt from which it could never possibly escape, and that mission has been accomplished.  In fact, the U.S. national debt is now more than 5000 times larger than it was when the Federal Reserve was first created a little more than 100 years ago.

Most people like to think of big banks as "capitalist" institutions, but that is not really accurate.  In the end, giant corporate banks like we have in the United States are actually collectivist institutions.  They tend to greatly concentrate wealth and power, and socialists find those kinds of banks very useful.

In fact, Vladimir Lenin once said that "without big banks, socialism would be impossible."

While there may be a bit of animosity between big government and big banks once in a while, the truth is that they are usually very closely tied to one another.  We saw this close relationship very clearly during the financial crisis of 2008, and it is no secret that there is a revolving door between the boardrooms of Wall Street and the halls of power in Washington.  The elite dominate both spheres, and it is not for the benefit of the rest of us.

In America today, government just keeps getting bigger and the banks just keep getting bigger.  Meanwhile, the percentage of self-employed Americans is at an all-time low and the middle class is steadily dying.

What we are doing right now is clearly not working.

So why don't we go back and do the things that we were doing when we were extremely successful as a nation?

In case you don't know what those things were, here are some clues…

#1 "A wise and frugal government… shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government." — Thomas Jefferson, First Inaugural Address, March 4, 1801

#2 "A people… who are possessed of the spirit of commerce, who see and who will pursue their advantages may achieve almost anything." – George Washington

#3 "Government is instituted to protect property of every sort; as well that which lies in the various rights of individuals, as that which the term particularly expresses. This being the end of government, that alone is a just government which impartially secures to every man whatever is his own." – James Madison, Essay on Property, 1792

#4 "Banks have done more injury to the religion, morality, tranquility, prosperity, and even wealth of the nation than they can have done or ever will do good." – John Adams

#5 "To take from one, because it is thought his own industry and that of his fathers has acquired too much, in order to spare to others, who, or whose fathers, have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, the guarantee to everyone the free exercise of his industry and the fruits acquired by it." — Thomas Jefferson, letter to Joseph Milligan, April 6, 1816

#6 "The moment the idea is admitted into society that property is not as sacred as the laws of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence. If ‘Thou shalt not covet’ and ‘Thou shalt not steal’ were not commandments of Heaven, they must be made inviolable precepts in every society before it can be civilized or made free." — John Adams, A Defense of the Constitutions of Government of the United States of America, 1787

#7 "I place economy among the first and most important virtues, and public debt as the greatest of dangers to be feared. To preserve our independence, we must not let our rulers load us with perpetual debt. If we run into such debts, we must be taxed in our meat and drink, in our necessities and in our comforts, in our labor and in our amusements." – Thomas Jefferson

#8 "Beware the greedy hand of government thrusting itself into every corner and crevice of industry." – Thomas Paine

#9 "If we can but prevent the government from wasting the labours of the people, under the pretence of taking care of them, they must become happy." – Thomas Jefferson to Thomas Cooper, November 29, 1802

#10 "All the perplexities, confusion and distress in America arise not from defects in the Constitution or Confederation, not from a want of honor or virtue so much as from downright ignorance of the nature of coin, credit and circulation." – John Adams, at the Constitutional Convention (1787)

#11 "The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale." – Thomas Jefferson

#12 "Liberty must at all hazards be supported. We have a right to it, derived from our Maker. But if we had not, our fathers have earned and bought it for us, at the expense of their ease, their estates, their pleasure, and their blood." – John Adams, 1765

#13 "If ever again our nation stumbles upon unfunded paper, it shall surely be like death to our body politic. This country will crash." – George Washington

#14 "I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government to the genuine principles of its Constitution; I mean an additional article, taking from the federal government the power of borrowing." – Thomas Jefferson

#15 "When the people find that they can vote themselves money, that will herald the end of the republic." — Benjamin Franklin

via Zero Hedge Tyler Durden

House Majority Leader Cantor Loses Virginia Primary To Tea Party’s Brat

While The Tea Party had been relatively aggressive in the race, it is still quite shocking to the establishment that the second-highest House Republican just got unseated (despite outspending Brat by a ratio of 5-to-1) by a local tea-party-backed economics professor:


Echoing Europe’s dissatisfaction with the status quo, it appears the announcement of the death of the Tea Party was a little premature. Cantor was elected to Congress in 2000… looks like we have to add one to initial jobless claims this week.



Meet The Man Who Just Crushed Eric Cantor (via ABC)

Brat, who admits that he has supported several Cantor candidacies over the years, says he mounted his improbable primary campaign because the House GOP’s No. 2 leader has lost touch with his constituents, “veering from the Republican creed.”

“Years ago he had a good conservative track record, but now he’s veered off,” Brat told ABC News during an interview on Capitol Hill. “If you go to Heritage and look at their score, I think he’s at about a 53 right now. I mean, that’s an F-minus.”

Heritage Action’s scorecard tracks Republican votes, co-sponsorships and other legislative activity to gauge how conservative members of Congress are performing. Cantor actually receives a 52 percent, which ranks seventh among eight Virginia House Republicans.

While a recent profile of the race in the Washington Post characterized Brat as “a potential threat,” the quirky challenger knows he has a tough road to victory in the June 10 primary.

“Most of these [primary] races don’t kick in until about 30 days prior,” he said. “Now everyone’s looking, what’s the race? It’s an open primary and it’s just Eric and I on the ticket.”

Brat, 49, isn’t the first primary challenger Cantor has faced. The Richmond Republican smoked primary challenger Floyd Bayne in 2012 by nearly 60 percentage points before cruising to a 17-point victory in the general election.

But with low primary turnout (just 47,000 voters turned out in the primary two years ago) and anti-incumbency fervor at an all-time high, Cantor’s team says they aren’t overlooking Brat, although they “don’t see him getting a great deal of traction.”

“We’re on the ground, running the campaign,” Cantor campaign spokesman and senior strategist Ray Allen said in a phone interview. “We take every figure seriously and do our own due diligence. It is what it is.”

Brat claims “the money is flowing in right now,” expanding an underwhelming campaign war chest that he last reported contained just $40,000.

“The race was once viewed as a long-shot, [but] it’s tightening now,” Brat said. “We’re well over double, triple what we had on the books just a month ago and so now we’re getting the national attention I always hoped.”

Brat complained that Cantor, 50, has a “crony-capitalist mentality” to take care of the corporate sector ahead of the interests of small businesses.

“On the conservative scorecard, on the free market votes, he’s doing everything wrong,” Brat said. “He’s not following what folks in his district want him to do and it’s hurting the country.”

Allen described Brat as “a weird duck” and criticized him for serving on then-Democratic Gov. Tim Kaine’s Joint Advisory Board of Economists.

“Eric Cantor is a conservative leader,” Allen, who has advised Cantor’s campaigns since 1991, said. “[Brat] doesn’t like being called a liberal college professor, but that’s what he is and what he’s always been. Tea Party conservatives don’t serve as an economic adviser to Tim Kaine.”

Brat calls himself as a “free market guy,” and says he wants to repeal the Affordable Care Act. He also pledged never to increase taxes and to stick to a five-year promise not to vote to increase the debt limit.

“This isn’t a personal race. I’m not running against Eric,” he stressed. “I’m just running on the founding principles that Adam Smith and free markets – they made us the greatest nation on the Earth. All right? It’s no mystery. Our rights, tradition, along with free markets and the Judeo-Christian tradition all together made us the greatest nation on the face of the Earth. I think we’re veering off course a little bit there and I want to get us back on that course that brought us to greatness.”

If Brat ultimately wins the primary and is seated in the 114 th Congress, he would not commit his vote for speaker to House Speaker John Boehner, but offered his support to any contender who’s “more free market and more fiscally responsible.”

“I’d have to take a good look at what they’re doing but I support people who follow the Republican creed, and so it doesn’t look like the leadership is doing a good job on that right now,” Brat said.

“They’re not free market at all, right? They do not take free market seriously and they’re off on fiscal responsibility.”

via Zero Hedge Tyler Durden

Al Qaeda Militants Capture US-Made Black Hawk Helicopters In Iraq

Just when one thought US foreign policy couldn’t sink any deeper into the hole of its embarrassment, it takes out a shovel and starts digging. Overnight, in what AP describes as a stunning assault that exposed Iraq’s eroding central authority, Al Qaida-inspired militants from ISIS, or the Islamic State of Iraq and al-Sham, overran much of Mosul on Tuesday, seizing government buildings, pushing out security forces and capturing military vehicles as thousands of residents fled the second-largest city.

For those who may have forgotten, Iraq was one of those countries “liberated” by the the United States, which unlike Afghanistan where the opium trade is still important, did pull out its troops two and a half years ago.

Ths shocking takeover of Mosul took place months after Al Qaeda-linked fighers took over another Iraqi town, Fallujah, earlier in the year and which they have successfully defended against government attempts to reclaim it. 

That however, was just the appetizer: Mosul is a much bigger, more strategic prize. The city and surrounding Ninevah province, which is on the doorstep of Iraq’s relatively prosperous Kurdish region, are a major export route for Iraqi oil and a gateway to Syria.

“This isn’t Fallujah. This isn’t a place you can just cordon off and forget about,” said Michael Knights, a regional security analyst at the Washington Institute for Near East Policy, cited by AP. “It’s essential to Iraq.”

The WSJ adds that hours after government forces fled Mosul in disarray following four days of fighting, Prime Minister Nouri al-Maliki declared a nationwide “state of maximum preparedness” but didn’t indicate whether government forces were mobilizing to retake the Iraqi city, 220 miles north of the capital Baghdad.

The capture of Mosul by rebels linked to the Islamic State of Iraq and al-Sham, or ISIS, is the latest evidence of the weakness and disorganization that have beset Iraq’s security forces since the U.S. forces withdrew from the country in December 2011.

Residents of Mosul said they were shocked at the ease of the rebel takeover of government buildings, television stations and military installations where U.S.-supplied fighter airplanes, helicopters and other heavy weaponry are based.

“The whole of Mosul collapsed today. We’ve fled our homes and neighborhoods, and we’re looking for God’s mercy,” said Mahmoud Al Taie, a dentist. “We are waiting to die.”

Videos showed victorious insurgents waving black flags emblazoned with an Islamic script—the standard brandished by al Qaeda militants world-wide.

The biggest irony here is that while the US is arming “rebels” in neighboring Syria, among which numerous Al-Qaeda rebels, the weapons and the trained “fighters” then promptly make their way across the border and continue fighting the US-blessed government in Iraq!

Jessica Lewis, a former U.S. Army intelligence officer, said ISIS fighters won a notable victory in Mosul.

“ISIS is designing its campaign around the state that it believes it has already created,” said Ms. Lewis, currently research director for the Institute for the Study of War in Washington, D.C.

“I think that means that Iraq is going to start to look more like Syria. It’s a gauge of the severity of the conflict and the trajectory that it’s on. That’s a very bad sign.”

The ISIS-controlled areas of Iraq.

And to think none of this could have been accomplished without the assistance of the US state department.

The Obama administration, responding to the fall of Mosul, said ISIS “is not only a threat to the stability of Iraq but a threat to the entire region.”


State Department spokeswoman Jen Psaki said the group has drawn strength from the Syrian civil war, where it can acquire recruits, weapons and other resources for its fight in Iraq.

Perhaps miss Psaki should have answered questions about where the ISIS force was getting its weapons. The U.S.-trained and equipped Iraqi security forces, which have floundered since the U.S. pullout, haven’t succeeded in thwarting ISIS’s emergence as a formidable paramilitary force.

Below is a detailed narrative of just how Al-Qaeda managed to take over yet another garrison in the middle east:

Despite the security precautions, ISIS fighters raided the western half of Mosul early Friday, forcing military personnel and federal police forces to retreat over bridges to the eastern bank of the Tigris River, which divides the city.


For three days, residents in the eastern half of the city huddled in their houses and parceled out their ever-dwindling supply of food and other staples, as authorities tried to secure the city.


Mosul governor Atheel Nujaifi, appearing Monday evening on national television, made a desperate call for city residents to form ad hoc committees to defend themselves. But he fled on Monday night.


In the early-morning darkness of Tuesday, local resistance dissolved, as insurgents poured across the bridges separating east from west. According to witnesses, government soldiers fled on foot, leaving the streets littered with abandoned army vehicles, weapons and uniforms.


The vanquished soldiers knocked on doors and begged for civilian clothes, so they could escape without being identified, said Ahmed Khaza’al, a cosmetic dealer.


The victory by ISIS and its allies means they control sizable regions in at least three of Iraq’s 18 provinces. Upon news of Mosul’s fall, fears of more fighting rippled across the country.

The US has pledged to help Iraqi leaders “push back against this aggression” as the government of Prime Minister Nuri al-Maliki asked parliament to declare a state of emergency that would give him extraordinary powers to tackle the crisis. The rampage by the black banner-waving insurgents was a heavy defeat for Prime Minister Nouri al-Maliki as he tries to hold onto power, and highlighted the growing strength of the Islamic State of Iraq and the Levant. The group has been advancing in both Iraq and neighboring Syria, capturing territory in a campaign to set up a militant enclave straddling the border.

But the battle, for the time being, seemed to be over. Some police were discarding uniforms and weapons and fleeing a city where the black flag of ISIL now flew over government buildings.

“We have lost Mosul this morning,” said a colonel at a local military command center. “Army and police forces left their positions and ISIL terrorists are in full control.

“It’s a total collapse of the security forces.”

This is the aftermath in clips and images:




Assyrian church set ablaze…


Iraqi troop uniforms left behind…


Smoke everywhere…


As the roads are full amid the mass exodus…


* * *

But the worst news by far for the US is that as a result of the takeover of Mosul by ISIS forces, an unknown number, and at least one, US ultramodern Blackhawk and Kiowa helicopters parked at the Mosul airport, are now in, you guessed it, Al Qaeda hands.

Mosul airport viewed through Google maps: grounded helicopters can be easily seen just east of the main airstrip:


Thank you US State Department: once again, this smashing Al-Qaeda success could not have been achieved without your help.

via Zero Hedge Tyler Durden