Tag: finance

As we observed yesterday, the market action over the past weeks can be summarized with one word: untaper. Specifically, in light of recent data, the Koolaid addicts had hoped that the crunch in the economy would be sufficient for the Fed to taper the taper, and slow down its removal of crutches, which ironically means that the media should have been focusing on the real causes of the winter swoon – i.e., the tapped out consumer and not blaming snow in the winter. Alas, for all those who had hoped that Yellen would promptly shift to Untaper mode, Fed uber dove Williams has just one present: a glass of (appropriately) ice cold water.

As expected:

• WILLIAMS SAYS ‘RECENT DATA HAS BEEN SOMEWHAT DISAPPOINTING’

However,

• WILLIAMS SAYS POLICY SHOULD TAKE MEDIUM TERM VIEW
  FED’S WILLIAMS SAYS ECONOMY LOOKING ‘REALLY SOLID’ FOR THIS YR

Which means:

• FED’S WILLIAMS: ‘HURDLE IS PRETTY HIGH’ FOR CHANGING TAPER PACE
  FED’S WILLIAMS SAYS NOW IS TIME TO FOR PULLING BACK QE

And keep in mind Williams is about as dovish as they come: there is hardly anyone on the FOMC who wanted the taper to taper more than Williams. End result: sharp pullback in stocks which after touching briefly unchanged for the year, have taken a sharp leg lower.

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

While we will have more to say about the disastrous December TIC data shortly, which was released early today, and which showed a dramatic plunge in foreign purchases of US securities in December – the month when the S&P soared to all time highs and when everyone was panicking about the 3% barrier in the 10 Year being breached and resulting in a selloff in Tsy paper – one thing stands out. The chart below shows holdings of Chinese Treasurys (pending revision of course, as the Treasury department is quite fond of ajdusting this data series with annual regularity): in a nutshell, Chinese Treasury holdings plunged by the most in two years, after China offloaded some $48 billion in paper, bringing its total to only $1268.9 billion, down from $1316.7 billion, and back to a level last seen in March 2013! 

This was the second largest dump by China in history with the sole exception of December 2011.

That this happened at a time when Chinese FX reserves soared to all time highs, and when China had gobs of spare cash lying around and not investing in US paper should be quite troubling to anyone who follows the nuanced game theory between the US and its largest external creditor, and the signals China sends to the world when it comes to its confidence in the US.

Yet what was truly surprising is that despite the plunge in Chinese holdings, and Japanese holdings which also dropped by $4 billion in December, is that total foreign holdings of US Treasurys increased in December, from $5716.9 billion to 5794.9 billion.

Why? Because of this country. Guess which one it is without looking at legend.

That’s right: at a time when America’s two largest foreign creditors, China and Japan, went on a buyers strike, the entity that came to the US rescue was Belgium, which as most know is simply another name for… Europe: the continent that has just a modest amount of its own excess debt to worry about. One wonders what favors were (and are) being exchanged behind the scenes in order to preserve the semblance that “all is well”?

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

In the last year, China has increased the military activity and actions in the South China Sea around the so-called Nine Dash Line — China’s expansive claim into the region which is in conflict with several other international claims.

China’s Nine-Dash Line

As USNI reports, Capt. James Fannell, deputy chief of staff intelligence and information operations for PACFLEET, notes that while China has long trained for an amphibious invasion of Taiwan during military exercises but has expanded its training to include a similar attack on Japanese holdings in the East China Sea. He concludes, “the PLA has been given the new task to be able to conduct a short sharp war to destroy Japanese forces in the East China Sea following with what can only be expected a seizure of the Senkakus or even a southern Ryukyu [islands].”

Via USNI,

As part of China’s Mission Action 2013 exercise — a massive exercise between the all branches of China’s People’s Liberation Army (PLA) — the military trained for taking the Senkaku Islands, said Capt. James Fannell, deputy chief of staff intelligence and information operations for PACFLEET.

 

…

 

 

…

 

“We witnessed the massive amphibious and cross military region enterprise — Mission Action 2013,” Fannell said at the West 2014 conference on Feb. 13 in San Diego, Calif.

 

“[We] concluded that the PLA has been given the new task to be able to conduct a short sharp war to destroy Japanese forces in the East China Sea following with what can only be expected a seizure of the Senkakus or even a southern Ryukyu [islands] — as some of their academics say.”

 

…

 

“As a senior U.S. government official recently stated, there is growing concern that China’s pattern of behavior in the South China Sea reflects an incremental effort by China to assert control of the area contained in the so-called 9-dash line despite the objections of its neighbors, and despite the lack of any explanation or apparent basis under international law.” Fannell said.

 

He then detailed a series of what he called aggressive actions taken by China against its neighbors over the past year. Some of those actions, including combat drills in the south Philippine Sea were described as China’s “protection of maritime rights.”

 

“By the way, protection of maritime rights is a Chinese euphemism for coerce seizure of coastal rights of China’s neighbors,” Fannell said.

 

…

 

“Tensions in the South and East China Seas have deteriorated with the Chinese Coast Guard playing the role of antagonist, harassing China’s neighbors while PLA Navy ships, their protectors, (make) port calls throughout the region promising friendship and cooperation.”

 

…

 

Fannell’s assessment of the Chinese lies seemingly in contrast to American efforts to forge close military-to-military ties with the country.

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

In the last year, China has increased the military activity and actions in the South China Sea around the so-called Nine Dash Line — China’s expansive claim into the region which is in conflict with several other international claims.

China’s Nine-Dash Line

As USNI reports, Capt. James Fannell, deputy chief of staff intelligence and information operations for PACFLEET, notes that while China has long trained for an amphibious invasion of Taiwan during military exercises but has expanded its training to include a similar attack on Japanese holdings in the East China Sea. He concludes, “the PLA has been given the new task to be able to conduct a short sharp war to destroy Japanese forces in the East China Sea following with what can only be expected a seizure of the Senkakus or even a southern Ryukyu [islands].”

Via USNI,

As part of China’s Mission Action 2013 exercise — a massive exercise between the all branches of China’s People’s Liberation Army (PLA) — the military trained for taking the Senkaku Islands, said Capt. James Fannell, deputy chief of staff intelligence and information operations for PACFLEET.

 

…

 

 

…

 

“We witnessed the massive amphibious and cross military region enterprise — Mission Action 2013,” Fannell said at the West 2014 conference on Feb. 13 in San Diego, Calif.

 

“[We] concluded that the PLA has been given the new task to be able to conduct a short sharp war to destroy Japanese forces in the East China Sea following with what can only be expected a seizure of the Senkakus or even a southern Ryukyu [islands] — as some of their academics say.”

 

…

 

“As a senior U.S. government official recently stated, there is growing concern that China’s pattern of behavior in the South China Sea reflects an incremental effort by China to assert control of the area contained in the so-called 9-dash line despite the objections of its neighbors, and despite the lack of any explanation or apparent basis under international law.” Fannell said.

 

He then detailed a series of what he called aggressive actions taken by China against its neighbors over the past year. Some of those actions, including combat drills in the south Philippine Sea were described as China’s “protection of maritime rights.”

 

“By the way, protection of maritime rights is a Chinese euphemism for coerce seizure of coastal rights of China’s neighbors,” Fannell said.

 

…

 

“Tensions in the South and East China Seas have deteriorated with the Chinese Coast Guard playing the role of antagonist, harassing China’s neighbors while PLA Navy ships, their protectors, (make) port calls throughout the region promising friendship and cooperation.”

 

…

 

Fannell’s assessment of the Chinese lies seemingly in contrast to American efforts to forge close military-to-military ties with the country.

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

Now that we have the full history of foreign Treasury purchases in 2013, we know the following: in December 2012 total US paper held by foreigners was $5,573.8 billion; one year later it rose to $5.794.9 billion or a $221 billion increase. So how does this look in the context of QE? In the past year, courtesy of the Fed’s $1 trillion in TSY and MBS purchases, Ben Bernanke purchases some $552 billion in Treasurys, or about 150% more than all foreigners combined! Suddenly the need for MyRA is becoming all too clear…

And as a bonus chart, here are the top holders of US paper as of December 31, 2013.

Thank you Fed (and Belgium) for continuing to monetize US deficit spending.

Source: TIC

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

Just as we warned earlier, the stealing of the weapons cache and labeling of the break-away region as having undertaken "terrorist acts" has led to the military getting involved:

• *UKRAINE ARMY GIVEN POWER TO CHECK CIVILIAN VEHICLES
• *UKRAINE ARMY GIVEN POWER TO USE WEAPONS ON UKRAINIANS: MINISTRY

Under the "anti-terrorist" operation, Ukraine is a close to civil war as it has been so far. As Martin Armstrong concludes: "there is no peaceful resolution" no matter how many sanctions and condemnations the West makes.

Live Feed:

Below is the Google-translated Government Statement which was posted on the Ministry of Defense website moments ago:

In connection with the decision to commence in Ukraine antiterrorist operation Ministry of Defense of Ukraine official statement:

 

According to Article 5 of the Law of Ukraine "On combating terrorism" Ministry of Defense of Ukraine, bodies of military management, formations and units of the Armed Forces of Ukraine to protect against terrorist attacks facilities of the Armed Forces of Ukraine, firearms, ammunition, explosives and poisonous substances that are in the army or stored in designated areas.

 

Under section 15 of the Act, in the area of ??counter-terrorist operations of the Armed Forces of Ukraine have the right to:

 

– use in accordance with the laws of Ukraine weapons and special means;

– apprehend and deliver to the internal affairs of persons who commit or committing an offense or other action;

– check of the citizens and officials of documents , identification, and in the absence of documents – to detain them for identification;

– to carry out in the area of counter-terrorism operation personal care nationals review things that are in them, vehicles and things that they carried;

– Provisionally restrict or prohibit the movement of vehicles and pedestrians on streets and roads.

 

Measures provided for in this Article shall comply with the applicable law and terminate immediately after the anti-terrorist operation.

 

Coordination of activities of entities involved in the fight against terrorism has antiterrorist center of the Security Service of Ukraine.Those involved in the fight against terrorism, are under state protection.

 

Disobedience or resistance to lawful demands of military officials who take part in anti-terrorist operations, incur liability as provided by law.

 

The main purpose of the anti-terrorist operation – stop extremism and illegal actions of radical groups that threaten the lives of millions of Ukrainian, to protect civilians, prevent civil war in Ukraine.

And as a reminder from Martin Armstrong – There Is No Peaceful Resolution

Russia wants to portray this as a coup organized by the USA, Europe wants to portray this as Ukraine wanted them, and the USA media spins this as US against RUSSIA.

This began as a movement against CORRUPTION and not a Europe v Russia confrontation. The more it has played out, then this has also developed into a fight for freedom. The Russian side of Ukraine is the East and south and they speak Russian. The West speak Ukrainian so there are even two languages spoken.

The Russian side has very strong RIGHT WING elements and they are anti-gay and want 7 years in prison for a girl who gets an abortion. So there is now a religious fever being thrown into the fire.

BY ABSOLUTELY NO MEANS did this begin merely over the refusal to join Europe. The corruption in Ukraine is massive. Much of the bureaucracy is buried still in communism with no rational explanation. Under communism, the state-owned everything. Therefore, your “papers” were a form of domestic passport not good for international travel. Inside that passport you had to have your PERMANENT address assigned to you by government since you were not allowed to move. To this day, although communism collapsed and you can move, your passport must still have your “official” address. If you want to move, it will take months to get a new passport and you have to pay a bribe to get it expedited that may still be 2 months. The law forced you to return to change any document. You cannot do anything on-line.

The bureaucracy has never been reformed. There is no law saying you need an address anymore, yet nobody can change anything because it is as if there is nobody really in charge. It is a chaotic mess. The police were extorting people like the Mafia, so this began as all other protests – against corruption. Simple as that. The mainstream media is playing to the propaganda on both sides.

It appears that civil war will erupt for the younger generation want their freedom. Russia will not allow that to happen for this is a strategic former possession that was once part of Russia and Kiev was the former capital of Russia  before Moscow. This is likely to fester and grow. There is no peaceful resolution.

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

Authored by Jan Winiecki, originally posted at Project Syndicate,

With the Winter Olympics underway in Sochi, Russia is again in the global spotlight – and President Vladimir Putin is taking the opportunity to present his country as a resurgent power. But, beneath the swagger and fanfare lie serious doubts about Russia’s future. In fact, long-term price trends for the mineral resources upon which the economy depends, together with Russia’s history (especially the last two decades of Soviet rule), suggest that Putin’s luck may well be about to run out.

Mineral-resource price cycles generally begin with a rise lasting 8-10 years, followed by a longer period of stable, relatively low prices. Given that prices have been on an upswing since the middle of the last decade, they should begin declining within two years, if they have not done so already. Moreover, the last price trough lasted more than 20 years, implying that Russia cannot expect simply to wait it out.

But, beyond acknowledging the need to cut spending – an obvious imperative, after the estimated $50 billion cost of the Sochi Olympics – Putin has not signaled any concrete plans to tackle Russia’s economic weaknesses.

Russia faced a similar challenge in the 1970’s and 1980’s – and, like Putin today, its leaders failed to do what was needed. According to former Prime Minister Yegor Gaidar, who led Russia’s only post-Soviet government that was oriented toward systemic change, the socialist command economy exhausted its growth potential by 1970.

Under non-totalitarian circumstances, the threat of stagnation would have generated strong pressure for systemic reform. But the Soviet Union’s aging communist leadership, encouraged by the OPEC-generated oil-price explosion and the discovery of massive hydrocarbon reserves in western Siberia, took a different tack, using natural-resource revenues to finance continued military expansion.

In an effort to appease the public, the Soviet leadership increased food imports – both directly (meat imports, for example, quintupled from 1970 to 1980) and indirectly (by increasing feedstock imports). While this strategy worked in the short term, it caused food consumption to increase far beyond what the economy could sustain.

As a result, the Soviet economy became even more dependent on resource revenues, making it extremely vulnerable to price fluctuations in international commodity markets. When mineral prices began to decline in the early 1980’s – reaching their lowest point in 1999 – the economy, which had already been stagnating for about five years, went into a free-fall.

Today, the Russian economy is no more resilient than it was in the late Soviet era, with commodities, especially oil and natural gas, accounting for around 90% of total exports and manufacturing for only about 6%. If anything, the economy’s dependence on exports of fuels and industrial minerals has increased, meaning that smaller price fluctuations have a greater impact on Russia’s fiscal and external position. Indeed, some observers – including the Central Bank of Russia (CBR) – have predicted that the country’s current account could slip into deficit as early as next year.

A lasting deficit would eliminate the major economic difference between Putin’s Russia and its Soviet counterpart during the 1980’s – namely, the financial buffer that has been accumulated over the last decade. It is this buffer – which amounted to $785 billion in the 2000-2011 period – that protected the economy from a larger shock when the global financial crisis erupted in 2009, and that has financed Russia’s foreign-policy initiatives, including its recent cooperation with Ukraine.

The CBR’s warning of twin fiscal and current-account deficits assumed that oil prices would remain steady, at $104 per barrel in 2015. But my expectation that oil prices will decline over the next 3-7 years suggests that Russia’s medium-term prospects are actually considerably worse.

In short, Russia will soon have to confront diminished macroeconomic health, with few options for restoring it. Russia’s uncompetitive manufacturing sector certainly cannot pick up the slack, and this is unlikely to change, given Putin’s unwillingness to pursue the needed shift to a more knowledge-intensive economy.

This new reality will not only affect Russia’s foreign-policy and imperial ambitions; it will also undermine the relative social and political stability that has characterized the last decade. Without resource revenues, the government will struggle to finance the policies and programs that are needed to placate ordinary Russians. In this context, the Sochi Olympics, intended to herald Russia’s triumphant return as a global power, may soon come to be regarded as a swansong.

[ZH – It seems pretty clear what Putin needs – higher oil prices… makes you wonder what his next plan is…]

via Zero Hedge http://ift.tt/1nNP7u9 Tyler Durden

Authored by Jan Winiecki, originally posted at Project Syndicate,

With the Winter Olympics underway in Sochi, Russia is again in the global spotlight – and President Vladimir Putin is taking the opportunity to present his country as a resurgent power. But, beneath the swagger and fanfare lie serious doubts about Russia’s future. In fact, long-term price trends for the mineral resources upon which the economy depends, together with Russia’s history (especially the last two decades of Soviet rule), suggest that Putin’s luck may well be about to run out.

Mineral-resource price cycles generally begin with a rise lasting 8-10 years, followed by a longer period of stable, relatively low prices. Given that prices have been on an upswing since the middle of the last decade, they should begin declining within two years, if they have not done so already. Moreover, the last price trough lasted more than 20 years, implying that Russia cannot expect simply to wait it out.

But, beyond acknowledging the need to cut spending – an obvious imperative, after the estimated $50 billion cost of the Sochi Olympics – Putin has not signaled any concrete plans to tackle Russia’s economic weaknesses.

Russia faced a similar challenge in the 1970’s and 1980’s – and, like Putin today, its leaders failed to do what was needed. According to former Prime Minister Yegor Gaidar, who led Russia’s only post-Soviet government that was oriented toward systemic change, the socialist command economy exhausted its growth potential by 1970.

Under non-totalitarian circumstances, the threat of stagnation would have generated strong pressure for systemic reform. But the Soviet Union’s aging communist leadership, encouraged by the OPEC-generated oil-price explosion and the discovery of massive hydrocarbon reserves in western Siberia, took a different tack, using natural-resource revenues to finance continued military expansion.

In an effort to appease the public, the Soviet leadership increased food imports – both directly (meat imports, for example, quintupled from 1970 to 1980) and indirectly (by increasing feedstock imports). While this strategy worked in the short term, it caused food consumption to increase far beyond what the economy could sustain.

As a result, the Soviet economy became even more dependent on resource revenues, making it extremely vulnerable to price fluctuations in international commodity markets. When mineral prices began to decline in the early 1980’s – reaching their lowest point in 1999 – the economy, which had already been stagnating for about five years, went into a free-fall.

Today, the Russian economy is no more resilient than it was in the late Soviet era, with commodities, especially oil and natural gas, accounting for around 90% of total exports and manufacturing for only about 6%. If anything, the economy’s dependence on exports of fuels and industrial minerals has increased, meaning that smaller price fluctuations have a greater impact on Russia’s fiscal and external position. Indeed, some observers – including the Central Bank of Russia (CBR) – have predicted that the country’s current account could slip into deficit as early as next year.

A lasting deficit would eliminate the major economic difference between Putin’s Russia and its Soviet counterpart during the 1980’s – namely, the financial buffer that has been accumulated over the last decade. It is this buffer – which amounted to $785 billion in the 2000-2011 period – that protected the economy from a larger shock when the global financial crisis erupted in 2009, and that has financed Russia’s foreign-policy initiatives, including its recent cooperation with Ukraine.

The CBR’s warning of twin fiscal and current-account deficits assumed that oil prices would remain steady, at $104 per barrel in 2015. But my expectation that oil prices will decline over the next 3-7 years suggests that Russia’s medium-term prospects are actually considerably worse.

In short, Russia will soon have to confront diminished macroeconomic health, with few options for restoring it. Russia’s uncompetitive manufacturing sector certainly cannot pick up the slack, and this is unlikely to change, given Putin’s unwillingness to pursue the needed shift to a more knowledge-intensive economy.

This new reality will not only affect Russia’s foreign-policy and imperial ambitions; it will also undermine the relative social and political stability that has characterized the last decade. Without resource revenues, the government will struggle to finance the policies and programs that are needed to placate ordinary Russians. In this context, the Sochi Olympics, intended to herald Russia’s triumphant return as a global power, may soon come to be regarded as a swansong.

[ZH – It seems pretty clear what Putin needs – higher oil prices… makes you wonder what his next plan is…]

via Zero Hedge http://ift.tt/1nNP7u9 Tyler Durden