Tag: finance

An American scout-attack drone, "almost invisible at a height of 4000 meters" has, according to AFP, been intercepted in the Crimean sky. Reports from the Russian state arms and technology group Rostec stated, judging by side-markings it was an MQ-5B drone – which is likely part of the 66th US Recon Brigade based in Bavaria. It was possible to break the drone’s link with its American operators with the help of the EW (electronic warfare) complex Avtobaza. As a result, the device made an emergency landing and passed into the possession of the self-defense forces almost unbroken."

Via AFP,

An American scout-attack drone was intercepted in the Crimean sky, the Rostec state corporation reports. "Judging by side marking, the MQ-5B drone was part of the 66th US brigade of military intelligence with the main location in Bavaria," the report on the website of the corporation reads.

 

According to the report, at the beginning of March, the American brigade was relocated to the Ukrainian Kirovohrad, from where drones commit reconnaissance raids in the direction of Crimea and Russian border areas.

 

Earlier, they reportedly appeared in the Kherson region, in the area of the Crimean roadblock Chongar. "According to some data, the American reconnaissance brigade had 18 MQ-5B drones in its arsenal. This is the second time the American UAV is intercepted over Crimea," the report says.

 

"The drone was at the height of about 4 thousand meters and was practically invisible from the earth. It was possible to break the drone’s link with its American operators with the help of the EW (electronic warfare) complex Avtobaza. As a result, the device made an emergency landing and passed into the possession of the self-defense forces almost unbroken," the report says.

"Self-defense" it would appear does not cross a red-line (until Sunday).

It is perhaps ironic that the US is complaining abouit Russia's military presence in Ukraine even as its own equipment is reportedly operating in the country.

What next: CIA spooks in Kiev inciting a violent coup, oh wait, that would be Libya or Egypt. And everyone knows what a success that way.

And as expected, the Pentagon promptly denied the drone belonged to the US. It denied it not the biblical three times, but four. They must really mean it.

Seeking expert opinion on who else has UAV MQ-5B drones. Pentagon say not playing semantics "No truth" its US. Asked four times, four ways.

— Peter Foster (@pmdfoster) March 14, 2014

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Precious metals (gold in particular) continue to push higher and along with copper (to the downside) hold 'center-stage' among world commodity markets. As Citi's FX Technicals group notes gold has traded above very strong resistance on the $1,350 to $1,362 range suggestng a test up to $1,434 and the next level at the 200-week moving average at $1,493. Gold is also getting close to the "golden cross" where the 50DMA will cross above the 200DMA. Such a move, if seen, would strongly suggest that the corrective low is in (at $1,182) and that a re-test of the all-time highs at $1,921 and beyond is highly likely.

Via Citi's FX Technicals group,

Gold weekly chart: Is this the breakout week?

Gold has traded above very good resistance in the $1,350 to $1,362 range
– $1,350: 55 week moving average
– $1,353: Top of channel from the 2012 peak
– $1,362: Peak of bounce seen in October 2013.

A weekly close above this range would open up the way for a test of the pivotal double bottom neckline at $1,434. A weekly close above this latter level would complete the double bottom and suggest extended gains towards $1,680-1,685. Such a move would take us back above both the 200 week moving average at $1,493 and the horizontal resistance (previously support) from 2011-2012 at $1,523-1,527.

Such a move, if seen, would strongly suggest that the corrective low is in (At $1,182) and that a re-test of the all-time highs at $1,921 and beyond is highly likely.

Silver is so far lagging the Gold move

Surprisingly Silver has, to date, been lagging Gold in this last move higher. Good resistance stands overhead and needs to be broken to signal the next leg higher:
– $21.94: Downward sloping trend line.
– $22.16: 55 week moving average.

A weekly close above this range would open up the way for a test of the double bottom neckline at $25.10.

A weekly close above that latter level would open up the way for gains towards $31+.

Interim resistance is met at:
– $26.08-26.40: Major horizontal supports (Now resistance) in 2011/2012 that gave way in April 2013.
– $28.27: 200 week moving average
 

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Submitted by Pater Tenebrarum of Acting-Man blog,

This is really too funny. Apparently, the Ukraine owes $3 billion to Russia in bonds that have been issued under UK law. One of the stipulations of the bonds is that if the Ukraine's debt-to-GDP ratio should exceed 60%, the bonds will become immediately callable.

Once the Ukraine gets funding from the IMF,  this is of course going to happen right away – its debt-to-GDP ratio will then most definitely exceed 60%, so the first $3 billion of any aid the Ukraine receives in the form of loans will right away flow into Russia's coffers.

Of course there may be litigation first, but as Greek bondholders have found out, all those who held bonds issued under UK law were actually paid in full, while everybody else had to accept the 'PSI' and could basically go pound sand.

Of course it was all 'voluntary', but funny enough, the holders of Greek bonds issued under UK law didn't turn out to be as altruistic as all the other ones. At least we have not heard of any 'voluntary' contributions made by them. It seems rather doubtful that Mr. Putin will be eager to become a voluntary contributor to bailing out a government which he deems illegitimate. Instead he's going to take his money and run – or alternatively, make as-of-yet unspecified demands.

According to NBC:

As Western leaders prepare a bailout package for embattled Ukraine, they face a startling irony: Thanks to the almost bizarre structure of a bond deal between Ukraine and Russia, billions of those dollars are almost certain to go directly into the coffers of the Putin government.

 

As CNBC has reported, some aid money is bound to go into Russia as a result of energy trade and other economic factors. But the situation is actually much more acute than just that: An existing agreement between the two countries makes an immediate, direct transfer from Ukraine to Russia legally enforceable.

 

In December, Russian President Vladimir Putin agreed to lend Ukraine $15 billion. Few details were released at the time, except that Ukraine would issue bonds and Russia would buy them in installments through 2014.

 

The first and only installment occurred in late December, while then-Ukrainian President Viktor Yanukovych was still in charge in Kiev. The second installment was slated to happen in late February, but it never occurred, because the pro-Russian president had fled Ukraine and a new government was in place.

 

That first installment was $3 billion — in U.S. dollars, as dictated by the terms of the deal — issued on Dec. 24. It carries a lenient interest rate considering the shattered state of Ukraine's economy: a coupon of only 5 percent, payable semi-annually on June 20 and Dec. 20. It is short-term debt, maturing on Dec. 20, 2015.

 

Startlingly, the notes are governed by U.K. law and subject to the exclusive jurisdiction of British courts. And most crucially, there is an odd clause in the bonds that has a direct impact on European and American taxpayers, as CNBC learned through a review of the bond agreement:

 

Paragraph 3 (b) under Covenants:

 

(b) Debt Ratio So long as the Notes remain outstanding the Issuer shall ensure that the volume of the total state debt and state guaranteed debt should not at any time exceed an amount equal to 60 percent of the annual nominal gross domestic product of Ukraine.

 

The implications of that clause are that the minute the West or the International Monetary Fund extends a large loan to Ukraine, that country will almost certainly have a debt-to-GDP that exceeds 60 percent, immediately putting the Russian loan into default. That gives Russia the right to demand immediate repayment. And because the bonds are governed by British courts — which, presumably, neither Ukraine nor Russia can manipulate — it would be extremely difficult for Ukraine to avoid making the payment, using its new bailout money.

(emphasis added)

The American and European tax cows will no doubt be thrilled.

Gimme!!!   Putin unexpectedly sees his money reappear via IMF magic.

(Photo source unknown – The Web)

If he doesn't get it right away, he will look like this.

via Zero Hedge http://ift.tt/1fFV6kW Tyler Durden

Everyone knows that after years of kicking the can and resolutely sticking its head in the sand, China is finally on the verge, if hasn’t already crossed it, of a major credit event, confirmed by the first ever corporate bond default which took place a week ago. Few, however, know just why China is in this untenable position. If we had to select one data point with which to explain it all, it would be the following: just in the fourth quarter of 2013, Chinese bank assets rose from CNY147 trillion to CNY151.4 trillion, or, in dollar terms, an increase of almost exactly $1 trillion!

By comparison, US bank assets in the same period rose by just over $200 billion, a number which consists almost entirely of the reserves injected by the Fed.

And if we had to show it in one chart, it would be the following comparison of total Chinese and US bank assets: the two lines shown below are on the same axis, and at the end of 2009, the US had just a fraction more assets than China. Since then the US has added $2.3 trillion in bank assets, exclusively thanks to the Fed’s reserve creation. As for China… total bank assets more than doubled from $11.5 trillion to a record $25 trillion! This is a number that is nearly double that of the US, and represents a pace of $3.5 trillion per year – or nearly four concurrent QEs – a rate of “financial asset” addition five times greater than in the US!

Another way of showing just the past three years:

What’s worse: China is now hooked to a “flow” pace of $3.5 trillion each and every year, just to generate an annual GDP of about 8% and declining with every passing year. Any reductions in the pace of monetary flow will have magnified implications on China’s growth, and from there, social, and globa, stability.

But what does this really mean? Simple: in this epic, unprecedented, feverish pace to “grow” the economy and create hot, if worthless, money out of assets, all assets, even “magic” assets (i.e. thin air), the following took place:

CITIC Trust tried to auction the collateral but failed to do so because the developer has sold the collateral and also mortgaged it to a few other lenders.

Until now nobody cared because defaults were prohibited in China and nobody really cared what was underneath the hood. Now, defaults are allowed and, in fact, are encouraged. Which is why suddenly everyone is starting to cast curious glances into the dark shadows where the engine is supposed to be.

They won’t like what they find.

Curious for more: read Chart Of The Day: How China’s Stunning $15 Trillion In New Liquidity Blew Bernanke’s QE Out Of The Water, and Some Stunning Perspective: China Money Creation Blows US And Japan Out Of The Water

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Utah state prosecutors have received accusations of wrongdoing and gathered evidence in a wide-ranging corruption scandal involving Majority Leader Harry Reid and rising Republican Senator Mike Lee. However, as The Washinton Times reports, FBI agents have been thwarted in their efforts to launch a full federal investigation by the Justic Department. "DOJ risks creating the perception of a cover-up," warned one senior FBI official.

Via The Washington Times,

FBI agents working alongside Utah state prosecutors in a wide-ranging corruption investigation have uncovered accusations of wrongdoing by two of the U.S. Senate’s most prominent figures — Majority Leader Harry Reid and rising Republican Sen. Mike Lee — but the Justice Department has thwarted their bid to launch a full federal investigation.

 

The probe, conducted by one Republican and one Democratic state prosecutor in Utah, has received accusations from an indicted businessman and political donor, interviewed other witnesses and gathered preliminary evidence such as financial records, Congressional Record statements and photographs that corroborate some aspects of the accusations, officials have told The Washington Times and ABC News.

 

But the Justice Department’s public integrity section — which normally handles corruption cases involving elected figures — rejected FBI agents’ bid to use a federal grand jury and subpoenas to determine whether the accusations are true and whether any federal crimes were committed by state and federal officials.

 

The information involving Mr. Reid and Mr. Lee is not fully developed but centers on two primary issues:

 

Whether both or either politician sought or received money or other benefits from donors and/or fundraisers in connection with doing political favors or taking official actions.

 

Whether Mr. Lee provided accurate information when he bought, then sold a Utah home for a big loss to a campaign contributor and federal contractor, leaving his mortgage bank to absorb large losses.

 

“There are allegations, but they are very serious allegations and they need to be looked at by somebody,” Sim Gill, a Democrat who is the elected chief prosecutor in Salt Lake County, told The Times. “If true, or even if asserted, they truly should be investigated and put to rest, or be confirmed.”

Paging Frank Underwood?

Spokesmen for both senators denied their bosses engaged in any wrongdoing and said the lawmakers were unaware of the investigations.

But the rabbit-hole goes deeper…

The investigative efforts have been further complicated by the fact that Mr. Reid worked to get Mr. Lee’s chief counsel, David Barlow, confirmed in 2011 as the U.S. attorney in Salt Lake City. That action — a Democratic Senate leader letting a Republican be named to a key prosecutor’s position in the Obama administration — raised many eyebrows and angered some Democrats.

 

Subsequently, the entire office of federal prosecutors in Utah was forced to recuse itself from the corruption case after questions surfaced about a conflict of interest involving one prosecutor and a subject of the probe. After the recusal, state prosecutors secured a court order transferring the federal evidence gathered up to that point to their possession.

However, it appears, the local FBI office got a tap on the shoulder…

People familiar with the probe said both FBI agents and local investigators have been frustrated for months by the Justice Department’s inaction on the initial accusations and evidence against the two senators, and those concerns were recently elevated to FBI headquarters.

 

The special agent in charge of the Utah office was summoned earlier this month to Washington to meet with senior FBI officials, and the bureau’s Utah office has been instructed that the FBI agents working the case may only assist in the state probe and cannot pursue federal criminal investigative leads — unless Justice finally approves a corruption probe.

 

…

 

“But in this case, DOJ risks creating the perception of a cover-up rather than let agents use the normal tools and follow the evidence wherever it leads — Republican, Democrat, Senate or not,” the senior FBI official said.

Ya think!?

“Based upon what we know today, we were surprised that the DOJ ran away,” he said.

Read more here

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Submitted by Charles Hugh-Smith of OfTwoMinds blog,

I recently discussed the Deep State and "throwing Wall Street under the bus" with my friend and colleague Jim Kunstler.

When we speak of The Powers That Be or the Deep State, this ruling Elite is generally assumed to be monolithic: of one mind, so to speak, unified in worldview, strategy and goals.

In my view, this is an over-simplification of a constantly shifting battleground of paradigms and political power between a number of factions and alliances within the Deep State. Disagreements are not publicized, of course, but they become apparent years or decades after the conflict was resolved, usually by one faction winning the hearts and minds of decision-makers or consolidating the Deep State's group-think around their worldview and strategy.

History suggests that this low-intensity conflict within the ruling Elite is generally a healthy characteristic of leadership in good times. As times grow more troubled, however, the unity of the ruling Elite fractures into irreconcilable political disunity, which becomes a proximate cause of the dissolution of the Empire if it continues.
I recently proposed the idea that Wall Street now poses a strategic threat to national security and thus to the Deep State itself: Who Gets Thrown Under the Bus in the Next Financial Crisis? (March 3, 2014)

Many consider it "impossible" that Wall Street could possibly lose its political grip on the nation's throat, but I suggest that Wall Street has over-reached, and is now teetering at the top of the S-Curve, i.e. it has reached Peak Wall Street.

Consider what the extremes of Wall Street/Federal Reserve predation, parasitism, avarice and power have done to the nation, and then ask if other factions within the Deep State are blind to the destructive consequences:

How The Fed Has Failed America, Part 2 (March 12, 2014)

The Fed Has Failed (and Will Continue to Fail), Part 1 (March 11, 2014)

Can anyone not in Wall Street or the Fed look at this chart and not see profound political disunity on the horizon?

source: Poll Shows Why QE Has Been Ineffective (STA Wealth Mgmt)

I recently discussed the Deep State and "throwing Wall Street under the bus" with my friend and colleague Jim Kunstler: here's the resulting podcast, which you can download or listen to on whatever device you are using at the moment: KunstlerCast 250 — Chatting with Charles Hugh Smith

Jim's trademark wit and clarity guide the discussion, and he kindly lets me blather on about the Deep State. I think you'll find the discussion of interest; you certainly won't hear this topic being aired elsewhere.

I have covered the Deep State and profound political disunity for many years:

Going to War with the Political Elite You Have (May 14, 2007)

The Shape of Things To Come (July 8, 2011)

The Master Narrative Nobody Dares Admit: Centralization Has Failed (June 21, 2012) 
 

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