Month: March 2018

Laura Ingraham Takes Week Off Air As Advertisers Flee Amid David Hogg Feud

Fox News host Laura Ingraham is talking a week off the air after 18 advertisers dumped her for calling Parkland shooting survivor David Hogg a whiner. The ordeal began after 17-year-old Hogg publicly complained several times about having been rejected from four UC colleges (UCLA, UCSD, UCSB and UC Irvine) despite his 4.2 GPA. 

Ingraham tweeted a Daily Wire article detailing Hogg’s dismay, in which she called him a whiner – but said it was “totally predictable given acceptance rates.”

Hogg then took aim at Ingraham’s advertisers.

Despite an apology from Ingraham, which Hogg did not accept, he then instead encouraged his followers to tweet at brands which advertise on her show – resulting in a groundswell of advertisers pulling their support of the Fox host’s show.

Hogg said he does not accept her apology. “She’s only apologizing after a third of her advertisers pulled out, and I think it’s really disgusting that she basically tried promoting her show after ‘apologizing’ to me. I think it’s wrong and if she really wants to do something, she can cover things like inner city violence and the real issues that we have in America. I know she’s a talk show host, but she also has a responsibility to show both sides of a story,” he said during an interview on CNN’s New Day. –Yahoo

While Hogg’s supporters have cheered young David wielding his newfound power in the wake of his 17 dead classmates and teachers, others such as The Hill’s Joe Concha say it’s setting a dangerous precedent. 

So what is this boycott about exactly? Ingraham immaturely mocking a public figure in the form of Hogg around some schools that rejected him? Or is it about Ingraham’s career as a conservative talk radio and television opinion host overall?  

Either way, we’ve entered some dangerous territory here, if boycotts like this one succeed. And not many are speaking out against said danger for two reasons: 

1) Fear of reprisal for criticizing Hogg, who has the benefit of being protected from any criticism while being free to level it. 

2) Fear of being seen as “the person attacking a mass-school-shooting survivor,” regardless of whether there’s a basis for such criticism or not. –The Hill

Concha even commended Hogg on his “professionalism and lucidity” after the Parkland shooting.

He may be 17 but should be treated like an adult after entering the arena and becoming a prominent voice in what has become the biggest story of the year thus far…

…Hogg has played loose with more than a few facts and has leveled the same kind of personal attacks on which he’s basing this boycott. And, through it all, almost all anchors and reporters have allowed him to go unchallenged out of that same fear of being seen as monsters for going after “the kid with the just cause.”

There are exceptions to those not willing to challenge Hogg, starting first and foremost with conservative writer/commentator and podcast/radio host Ben Shapiro. “I look forward to Hogg’s apologies to Republicans (‘sick f***ers’), Dana Loesch (she was ‘hypocritical and disgusting’ for criticizing Broward Sheriff Scott Israel), and Marco Rubio (he said Rubio was bribed by the NRA to give away children’s lives),” Shapiro wrote in the online publication he founded, The Daily Wire.

“You may not like what Ingraham said. You may disagree with it. I did. But it isn’t remotely CLOSE to the level of viciousness with which Hogg has attacked people who disagree with him,” Shapiro added. 

Conservative Parkland survivor Kyle Kashuv echoed Shapiro’s sentiment:

“The media took interest in [Hogg] to push an agenda… They’ve propped people up and have turned them into shields. I am not doubting anyone’s sincerity, but people have certainly been hiding behind my classmates to push an agenda.”

“And therein lies the rub,” Concha writes. “As stated, Hogg should be treated as an adult. It’s the arena he chose to enter and had every right to do so, given his abilities and what he experienced. But if a boycott succeeds here, it sets the kind of precedent that will forever change what the First Amendment is supposed to stand for.”

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So What Blows Up Next: Investor Psychology Shifts To The Dark Side

Authored by John Rubino via DollarCollapse.com,

Facebook is an epic growth story. It now has an astounding 2 billion active users and a stock that – from an already richly-valued level – rose by 53% in the previous year. In February its market cap peaked at $560 billion, a number that exceeds the GDP of many countries. Over 90 percent of Wall Street analysts covering it rated it a “buy.”

Everyone knew that it had data privacy issues but no one cared in the face of that massive subscriber growth.

Then, like flicking a light switch, everyone began to care after all. A data scandal that was simple enough for investors and politicians to understand broke out, and now high-profile users like Elon Musk (who deleted his Tesla and SpaceX Facebook accounts), big investors, and of course spotlight-seeking politicians around the world are all reacting.

Facebook’s market cap is down by $100 billion in the past week.

Before this month, investors were looking for the next Facebook. They still are, but with a completely different set of criteria. Where previously they were seeking companies with soaring popularity and addictive products, now they’re looking for malfeasance and other potential landmines. Does Google have data privacy issues that will come back to bite it? Has Amazon antagonized the president enough to be slapped with a national sales tax? Did Apple over-price its latest phone to the point that customers don’t want it?

Virtually no one outside of a tiny, long-suffering group of short sellers had been asking these questions. Now everyone is.

And that, in a nutshell, is how markets morph from bull to bear. It’s not about fundamentals, but about which fundamentals are seen to matter. And generally it takes a high-profile object lesson to shift investor psychology from one extreme to the other. During the 2000s housing bubble, for instance, stock prices held up even as mortgage defaults were surging. Then Lehman Brothers collapsed and all anyone wanted to know was “which bank is next.” From CNN in 2008:

Lehman Brothers collapse stuns global markets

NEW YORK — Global markets were reeling Monday after a historic day on Wall Street that saw two famous names become the latest victims of the credit crunch.

The leading U.S. investment bank Lehman Brothers filed for bankruptcy and brokerage Merrill Lynch was the subject of a $50 billion buyout by Bank of America.

The fate of other big name financial institutions remained in doubt and stock prices plunged in Asia, Europe and the United States. In New York, the Dow Jones Industrial Average closed 504 points down, or about 4.4 percent. The Nasdaq composite lost 3.6 percent, its worst single-session percentage decline since March 24, 2003. It left the tech-fueled average at its lowest point since March 17 of this year.

In Europe, FTSE index in London declined 3.92 percent while the Paris CAC 40 was down 3.78 percent. It was the worst day for the index since the 9/11 terror attacks in 2001. Major Asian indexes were closed but India’s Sensex fell 5.4 percent, Taiwan’s benchmark dropped 4.1, Australia’s key index dropped 2 percent and Singapore fell 2.9. Check markets

The turmoil at Merrill Lynch and Lehman is bound to mean job losses in the already hard-hit financial services industry, but so far neither company has indicated how many will be cut. “This crisis is clearly deeper than anybody had imagined only a short time ago,” Peter Stein, an associate editor at the Wall Street Journal in Asia, told CNN.

Of course the only way the markets could have been “stunned” in September 2008 is if they were willfully blind in August 2008.

Now fast forward to the current bull market, in which FANG companies put up massive growth numbers that convinced the world that growth would overcome all obstacles. But those companies (as big, fast-growing companies tend to do) have apparently cut some serious corners, and suddenly the consequences of those mistakes are what matter.

Now the question is whether a “Lehman moment” is coming that pushes the market’s mood from “anxiously watching” to full-on panic. That’s unknowable before-hand, but the potential candidates are numerous. Tesla, for instance, is an easy target, since it’s running out of cash just as its bonds are tanking, which means its next financing is going to be brutal (full disclosure: Members of the DollarCollapse staff are short this and several other Big Tech stocks).

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“I’ve Never Seen Anything Like It” – Russia Declares ‘Unusual’ Missile Drill, Just Miles From Sweden

Rather than exercising caution after the nerve gas attack in the United Kingdom and a tidal wave of Russian diplomatic expulsions from Washington, Eurozone, and other countries, Moscow is upping the ante which has surprised the Eurozone and the West on Thursday. Besides the tit-for-tat expulsions of Russian and American diplomats, President Vladimir Putin has chosen to flex his war muscles next week with an unusual missile exercise in international waters, but close enough to Sweden and Latvia that it will shut down commercial airspace.

The Russian cruiser Marshal Ustinov, assigned to the 43rd Missile Ship Division of the Russian Northern Fleet, has been deployed to the Baltic Sea for a live firing exercise in international waters near Sweden and Latvia on April 06 through 08, TASS reported, citing the Russian Navy’s press release.

According to Sweden’s Aftonbladet, the Swedish Civil Aviation Administration received a Russian telegram on Tuesday alerting officials that “rocket test firings in the southern part of the Baltic Sea” will take place in proximity to Karlskrona, Sweden. The test area is known as “Russia 1”, from April 4 at 6:00 to 6 April at 18:00.

“Russia has announced that they are planning some sort of launch next week. It is an area of international water but in Swedish airspace, “says Sofia Bergström, communications officer at the Civil Aviation Administration.

During the missile exercise, the Swedish Civil Aviation Administration will refer to the D-area, as “Dangerous Area,” and all air traffic and civilian aircraft will be rerouted during the exercise.

“The rocket launches mean that air traffic will be led around this area and it will mean delays for civil aviation,” says Sara Eriksson, Press Manager at Transportstyrelsen. 

Aftonbladet indicates that “Russia has not practiced this far west on the Baltic Sea in the past.”

“I have never before seen another nation carry out bouts in the Swedish FIR except during a coexercise with Sweden. Clearly outside the normal,” tweets Defense Commander Wiseman, Lieutenant Colonel Carl Bergqvist, on Twitter (Translated from Swedish by Microsoft via Bing).

“This is very rare,” a source within the Swedish Armed Forces told Expressen.

A curator for various social media channels monitoring Russian military exercises tweeted: “Bloody hell. Russian navy just reserved missile firings area for 4-6 April up to 18000m in intl waters real close to Sweden. How provocative you can go?”

A political editor for BILD raised an interesting point, “Two days after Germany issued the final permit to realize NordStream2, the Russian Army flexes its muscles exactly above the planned course of the pipeline. Missile tests to take place from April 4 to April 6. A clear sign to Denmark and #Sweden.#PutinAtWar.”

Sweden’s public service radio broadcaster said, “Russian missiles will be tested in international waters unusually close to Sweden next week. Air traffic near Öland and Bornholm will have to be redirected.

“I’ve never seen anything like it” said flight traffic chief Jörgen Andersson to @MatsEriksson7.”

Relations between Washington and Moscow have plunged to lows not seen since the gloomy days of the Cold War — following the nerve gas attack in the United Kingdom. In response to the West’s anti-Russian campaign along with a barrage of Russian diplomat expulsions, President Vladimir Putin has ordered a new wave of war drills across the Russian Federation.

Western elites/media who have conditioned the American people with 24/7 anti-Russian propaganda could eventually get their wish of the Cold War 2.0 turning hot, as Moscow will be forced to deploy an even greater deterrence pushing the region toward a point of no return.

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Gold And 2018: A Perfect Storm?

Submitted by Alex Deluce of Gold Telegraph

Gold prices hit a five-week high of $1,351.20 per ounce last Monday amidst reports of escalating threat of a trade war between the US and China, forcing investors rush to the safe haven gold. The gold prices also rallied on the back of Goldman Sachs analysts turning bullish on the yellow metal for the first time in over five years. The price increase was also fuelled by the appointment of John Bolton as the new national security adviser by Donald Trump, as the new adviser is considered a foreign policy “hawk”, accentuating geopolitical tensions.

The recent upsurge in gold prices is also attributed to the United States’ expulsion of 60 Russian diplomats for a nerve agent attack on a former Russian spy in Britain. Though the precious metal is always considered as the “go-to asset class” during times of political upheaval, it will be interesting to see whether the recent precipitous slide in the stock market will further fuel the surge in gold prices.

Four fundamental attributes of gold in a portfolio

Before we dwell deep into the relationship between stock prices and the yellow metal, let us consider how gold is positioning itself as a must-have in anyone’s portfolio, including large institutional investors.

First gold can be considered as a true and effective diversifier, particularly during times when other asset classes witness heightened volatility. Though other asset classes such as broad commodities, real estate, hedge funds were claimed to be a true diversifier, they failed to pass the test during the 2008-2009 financial crisis, as prices in all these asset classes dropped in tandem with stocks and other risky assets. However, gold has been consistently proved to be a real diversifier both during times of economic expansion and contraction:

Second, gold has been providing consistent returns over an extended period of time. The yellow metal’s price increased by an average of 10 percent per year since 1971. 

Gold’s performance would be more pronounced during volatile times. For instance, during the recent stock market sell-off on February 5th, the yellow metal rallied strongly and posted higher returns than the short term treasuries:

Gold’s effectiveness in times of uncertainty was evident last month when the yellow metal turned out to be one of the best-performing asset classes year-to-date, outperforming even treasuries and corporate bonds:

Third, gold offers immense liquidity as it is traded in large global markets. According to World Gold Council Report, the precious metal clocks anywhere between $150 billion and $220 billion worth of trades per day through spot and derivative contracts over-the-counter. As gold offers both size and liquidity, the yellow metal figures among the strategic holding for large buy-and-hold institutional investors:

Fourthly, gold buttresses portfolio performance through enhanced risk-adjusted returns. Data points for the 10-year period from 2006 reveal, by adding even 2% in gold, one could have achieved enhanced returns with reduced volatility, resulting in higher risk-adjusted returns. The following graph highlights how someone having higher risk in his portfolio can achieve enhanced risk-adjusted portfolio returns by allocating a higher portion to gold, as the yellow metal offset the risk from other asset classes.

Why Gold Now?

Gold posted record gain of 30 percent in 2010 and since then the price of gold just showed some technical rebounds, with its price hovering in the tight range of $1,050 to $1,350 over the past few years.

On February 5th, stock markets witnessed one of the most substantial drops in recent years, while gold rallied strongly on that day. This scenario revived strong view that gold can deliver strong returns and reduce portfolio risk when the prices of other asset classes drop precipitously. It is felt in the present backdrop of a strong correction in the stock market, rising inflation, geopolitical unrest and the likely end to the low-interest rate regime; gold would turn out to be the go-to-asset class to preserve wealth.

Amidst the recent geopolitical unrest emanating from US-China trade war and expulsion of Russian diplomats, there are lots of headwinds pointing towards gold. Historical data reveal gold’s correlation to stocks typically becomes more negative during market pullbacks. The “pet rock” turned out to be more effective as a hedge when a market correction has been broader as witnessed during Black Monday, the 2008-2009 financial crisis, and the European Sovereign Debt crisis:

Gold has also proved to be a hedge against inflation. It has been shown that over a long period, gold returns have outpaced the US Consumer Price Index. As is evident from the following chart, in years when inflation has been higher than 3%, on average gold prices have increased by over 14%.

Gold demand has grown considerably during the recent past thanks to economic development witnessed in emerging markets, especially China and India and advent of exchange-traded products offering lower cost of ownership of gold. Investors’ attitude towards gold changed after the 2008-2009 financial crisis, as they started showing increasing interest in gold as risk management tool. Various central banks, led by emerging markets too have expanded foreign reserves, resulting in increased net gold demand.

Echoing positive sentiment, the World Gold Council in its 2017 Annual Review forecast four themes would drive gold demand in 2018. The four identified factors are:

  1. strong growth in global economy,
  2. rising interest rates,
  3. frothy asset prices, and
  4. market transparency such as the launching of LME precious by London Metal Exchange facilitating the efficient transaction in London wholesale market.

During the post-crisis era, investors have been uttering “Tina” implying “There is no alternative” to investing in equities since bond yields have offered limited yield or income. However, following gradual interest rate hike by the Fed, the three-month Treasury bill yield rose to 1.66%, just trailing the current US equity dividend yield of 1.88%. Similarly, for the first time since late 2008, the 3-month Libor rate rose last month above the dividend yield and is surging.

As the stock market turning more volatile and geopolitical tensions escalating each day, global investors would look at gold as an able ally to their preserve wealth. Hence, 2018 could turn out to be the “perfect storm” for gold.

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Drone Footage Reveals Stunning Size Of Palestinian “Great Return March” Protests Just Before “Bloodbath” Ensued

We previously reported the deadly encounter along the Israeli-Gaza border on Friday afternoon during a series of massive protests which took place near the security fence surrounding the Hamas-controlled Gaza strip. By the day’s end an astounding casualty toll hit world headlines after Israel used live bullets to quell what it called “rioting”: the BBC reports 16 Palestinians dead and over 400 wounded by live Israeli fire. 

And hundreds of others were reported wounded by rubber bullets, tear gas canisters, and in the general ensuing chaos. The Israeli Defense Forces (IDF) have admitted to using live ammunition – and not just the rubber bullets more commonly used to disperse protests – claiming that marchers entered a declared “a closed military zone” and threatened Israeli security positions.

At that point the IDF said it commenced “firing towards the main instigators” to disperse the “rioting” crowd that including stone throwing and the hurling of petrol bombs toward Israeli positions. Among those killed by Israeli live fire was a 16-year old boy, according to Palestinian health officials.

There were an estimated 17,000 Palestinians in five locations along the border fence. Image source: Times of Israel.

New footage continues to emerge of what Gazans dubbed “Great Return March” protests which were originally envisioned to span six weeks – though it’s unclear how Friday’s events and Israel’s ongoing crackdown, which activists are calling a massacre, will affect Gazans’ and Palestinians’ ability to organize. UN Security Council members met in New York to call for an investigation into the violence.

Drone footage of the early part of Friday’s march shows a massive column of Palestinian protesters moving toward the border. According the BBC, citing the IDF, there were about 17,000 Palestinians in five locations along the border fence. Some Israeli sources have cited 20,000 marchers. 

New drone footage shows the extent to Friday’s “Great Return March” in Gaza:

Further footage published online by Palestinian activists circulated widely late Friday and early Saturday, and appear to show instances of Palestinians shot down in cold blood. 

These included scenes of protesters running through open fields without any identifiable weapons, and one instance of a man shot while praying (warning: mature content):

Israeli media, including the Israeli daily Haaretz, has confirmed instances of Palestinians being shot in the back while running away from the Israeli security zone.

In a now deleted tweet posted Friday, the official IDF twitter account admitted Israeli forces shot live rounds toward Israelis along the border fence. The tweet stated, “Nothing was carried out uncontrolled; everything was accurate and measured, and we know where every bullet landed.”

Likely, the rising death toll throughout the day and immediate international media attention covering the voilence caused the IDF to delete the statement. 

During the State Department’s daily press briefing on Thursday – a day before the border violence – spokesperson Heather Nauert was asked about the possibility of a “bloodbath” unfolding based on widely circulating reports that Israel would deploy snipers in response to the planned protests.

Nauert objected to the word choice of the possibility of a “bloodbath” – though ironically that is exactly what happened the following day.

Nauert said, “I certainly hope you’re wrong. We don’t like to hear excessive language in conjunction with an area that is so sensitive… Overall Israel has a right to defend itself… we hope things remain calm.”

* * *

Friday’s demonstrations mark the beginning of the Palestinians’ return to all of Palestine, Hamas leader Ismail Haniyeh declared in a speech at the scene of the mass protests in the Gaza Strip.

“We are here to declare today that our people will not agree to keep the right of return only as a slogan,” he said and added that the March of Return was also aimed at sending a message to US President Donald Trump to the effect that the Palestinians will not give up their right to Jerusalem and “Palestine.”

Previously Palestinians have also demanded, along with sovereignty in the West Bank, Gaza, East Jerusalem and the Old City, a “right of return” to Israel for Palestinian refugees who left or were forced out of Israel when it was established. The Palestinians demand this right not only for those of the hundreds of thousands of refugees who are still alive — a figure estimated in the low tens of thousands — but also for their descendants, who number in the millions.

Khaled al-Batsh, the leader of the Iran-backed Islamic Jihad group, which is also among the planners of the protest, said tents would be located 500 meters from the border, just outside the buffer zone between Gaza and Israel. The protest comes amid rising tensions as the United States prepares to move its embassy in Israel to Jerusalem.

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Russia’s Game-Changing Weapons That Were Not Mentioned In Putin’s Speech

Authored by Arkady Savitsky via The Strategic Culture Foundation,

Not all of Russia’s game-changing weapons were mentioned in the president’s landmark speech that the mainstream media keep writing so much about. The president’s address simply could not include all the numerous breakthroughs in military technology Russia has achieved recently.

Some cutting-edge systems exist but are not yet operational.  A few are already part of the Russian arsenal, although in rather small numbers. But that’s just a start. Many achievements have flown under the media’s radar and deserve more exposure. The information available from public sources is worth discussing to get an idea of where things seem to be headed. 

The military added Kh-32 air-to-surface missiles in 2016 to advance the operational capabilities of the Tu-22M3 Backfire. The weapon was created on the basis of radical updates to the Kh-22.  After being launched, the Kh-32 climbs up to the stratosphere, reaching an altitude of 40 km (130,000 ft) for the midcourse phase of its flight. As it nears its target, it goes into a steep dive. The attack is too fast and the missile too maneuverable for the enemy to mount an air defense.

The approach can be flown at an altitude as low as five m, going undetected by a ship’s defense systems until a distance of about 10 km.  This leaves a reaction window of roughly 10 seconds before this extremely agile target is hit.  It doesn’t have a chance. This deadly weapon is a threat to any ground target.

The weapon boasts an inertial navigation system and a seeker head. It needs no navigation satellites for guidance and is impossible to jam. Its primary mission is to knock out aircraft carriers and large surface ships, as well as ground-based assets.

The Kh-32 has a range of roughly 1,000 km (620 mi) and a speed of over 5,400 kilometers per hour (1,500 meters per second). Its 500-kilogram (1,102 lb.) warhead can be either nuclear or conventional.  

The US doesn’t have anything comparable to the Kh-32, nor does it have an effective system to protect its assets from it. Even the speed and altitude of the famous Aegis (SM-6) are useless against this new weapon. The Kh-32 does not breach the 1967 Outer Space Treaty, as its trajectory does not envisage going into orbit. And this is not the only breakthrough worth talking about.

On March 15, Russian Defense Chief Sergey Shoigu made quite a splash when he claimed that mass production of combat robots would begin this year.  The military had 160 unmanned aerial drones a few years ago, but today operates about 1,800 of them. The trials of the robots designed for land operations are almost complete. Robotic mine-clearing vehicles have also been successfully developed.

Combat, transport, and artillery-reconnaissance variants of the Nerekhta robot exist. The system consists of a compact, light-tracked chassis, and a hull for mounting special equipment. It is used to take on armored weapons.  The robot can also be used for transportation and reconnaissance. The Nerekhta can operate alongside drones. The suite of weapons can include a Kord or Kalashnikov machine gun, an AG-30M automatic grenade launcher and an anti-tank missile system.

The biomorphic (four-legged) 400-kg Lynx robot will be equipped with a machine gun and anti-tank guided missiles, and can operate in urban and industrial areas, on asphalt, marble, wood, sand, and unpaved roads. Almost no terrain would be off-limits, even ice, grass, snow, or shallow waters. The Lynx can travel up to 15 km/h on flat terrain, and 10 km/h on uneven surfaces.

Russia uses robotic security guards to keep its strategic sites safe, including ICBM silos.  These vehicles, armed with a machine gun and an automatic grenade launcher (both with a kill range of about 400 meters), can detect targets at night while remaining invisible and moving around the perimeter of the site. Since 2017, strategic nuclear missile sites have been guarded with the Mobile Robotics Complex (MRC), designed to detect and destroy stationary and moving targets. There are many more robots at different stages of development that are close to becoming operational. The robotization of the Russian armed forces is one clear trend and it’s not the only one. 

Five Udaloy Project 1155 destroyers are being refurbished to be armed with Kalibr long-range cruise missiles, providing them with anti-ship as well as deep land strike capability.  The prestigious Russian newspaper Izvestia has just reported on the installation of weapon systems on the ships, which has already started and will be completed by 2022.  The program will greatly increase the Navy’s strike power and power projection capability.

Russia’s radar-invisible bombs are already in service, striking terrorist targets in Syria. The Drel (Drill) gliding bomb cartridge delivers 15 self-guided killing elements, each weighing about 20 kilograms. The weapon does not breach the international convention banning the use of cluster bombs. With no engine, the bomb can glide for dozens of miles.  It boasts an operational range of more than 30 km after separating from the carrier. A single sub-munition can take out up to ten tanks – almost twice as many as its closest competitor, the US AGM-154. It can detect targets while producing no infrared emissions. The Drel’s friend-or-foe identification system prevents it from striking the wrong targets.

This year, the Army-2018 exhibition will see a light aircraft powered by a hydrogen-air engine.  The forum is slated to be held August 21-26. The concept behind this engine is known as “Electric Aircraft,” which uses fuel cells as a power source to produce electrical energy without the combustion process. The fuel used is hydrogen, which is transformed into electricity. Such a plane could stay in the air for a very long time and would be very inexpensive. No other country has managed to make such an aircraft operational. It could be used for a multitude of various missions by the military and other security agencies.

Since Moscow launched its operation in Syria, the most frequently asked question among military wonks and pundits has been “Does Russia really have superior military technology?”  And the answer often heard was, “No, it does not, it is unsophisticated and is clearly lagging behind.”  More and more evidence has emerged recently to illustrate that Russia is actually the leader in military technology and more information arrives almost every day confirming this fact.

Can the cutting-edge breakthroughs, which are such a feather in the military’s hat, that are being produced by the defense sector of the economy be isolated from the remaining sectors?  Impossible nowadays, especially given how much is being done to transfer the achievements of the defense industry over to the civilian sectors of the economy. The West’s sanctions have helpfully expedited the process of replacing Western technology with “made-in-Russia” solutions. Military technologies targeted for the civilian sector will inevitably invigorate Russia’s economy.

The West wanted to turn Russia into a backward country on its knees. This was a strategic mistake that instead encouraged it to stand tall and lead the way in the state-of-the-art technology race, forcing the US and its allies to lag behind.

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France To Send Military Forces To Syria As Trump Prepares To Withdraw; Turkey Furious

On the same day that Trump made his unexpected announcement that US troops would be “coming out of Syria very soon,” French President Emmanuel Macron reportedly pledged to send a French military force into northern Syria in support of US-backed Kurdish forces near Afrin – now under Turkish control.

News of Macron’s promise to Kurdish officials in a closed door meeting was met with a swift and harsh response from Turkey: “If it’s accurate, the statement on mediation between Turkey and SDF amounts to crossing the line,” President Recep Tayyip Erdogan said on Friday. “Those who yesterday hosted terrorists at the highest level once again should know this is only an expression of enmity against Turkey,” Erdogan added, essentially calling France a ‘state sponsor’ of terror. 


Emmanuel Macron and Recep Tayyip Erdogan in Jan 2018. Image source: AFP via Getty images.

Though the French Presidency did not immediately confirm the news Thursday, reports circulated widely after Macron met with a delegation of Syrian Kurdish officials on Thursday representing the self-declared autonomous region of Rojava, of which the Syrian Kurdish People’s Protection Units (YPG/YPJ) are the prime defense forces on the ground.

Turkey’s Erdogan has repeatedly denounced the YPG as a terrorist extension of the PKK, and after successfully capturing the largely Syrian Kurdish Afrin canton following a bloody two-month cross border operation, has vowed to continue pushing deeper into Syrian territory toward Manbij and Tal Rifaat. Early this week Erdogan put the US on notice while addressing a crowd in the Black Sea province of Trabzonin: “the U.S. needs to transfer the control of Manbij to its real owners from the terrorist organization as soon as possible,” Erdogan brazenly declared, while adding, “of course we will not point gun to our allies, but we will not forgive terrorists.”

Such an expansion would undoubtedly put Turkish troops and Turkey’s proxy FSA forces face to face with US-backed forces – as Syrian Democratic Forces (SDF) are present in both places. Days after Erdogan’s speech on Sunday, Turkish forces began clashing with SDF fighters in Tal Rifaat, in the northern Aleppo countryside – thus it appears the Turkish president is making good on his promise. 

Kurdish regional media, Kurdistan24 described Thursday’s meeting at the the Élysée as follows: 

A delegation representing the Kurdish, Arab, and Christian components of Syrian Kurdistan (Rojava) held talks with the French Presidency on Thursday to discuss the situation in the country’s north…

Accompanied by his special chief of staff, Admiral Roger, Macron announced that he would send French Special Forces to Manbij in coordination with the US, another report by Le Parisien said.

An unidentified number of French troops will be deployed “very quickly,” Macron assured the Rojava delegation, according to a Kurdish representative who attended the meeting.

Multiple reports identified the initial deployment of French troops to northern Syria as special forces – though it’s likely that French special forces who are already present in the region or in Syria itself would simply be relocated to take a more direct advisory role alongside the Kurdish YPG and SDF. 

In statements reported by Reuters, Macron appeared to confirm the headlines of French deployment, however, stopped short of outright confirming direct military deployment: 

“The president … paid tribute to the sacrifices and the determining role of the SDF in the fight against Daesh,” Macron’s office said in a statement.

“He assured the SDF of France’s support for the stabilization of the security zone in the north-east of Syria, within the framework of an inclusive and balanced governance, to prevent any resurgence of Islamic State.”

Macron has been seen as less hawkish regarding France’s Syria policy, which recently led former president Francois Hollande to level the accusation of Macron’s abandoning the Syrian Kurds. 

Meanwhile, Turkey’s National Security Council on Wednesday repeated Erdogan’s prior threats that Ankara would “take action” to eradicate all Syrian Kurdish groups from northern Syria. 

With Trump pledging to withdraw all US troops from Syria “very soon” it appears that France and other coalition allies are declaring their willingness to step in and replace US occupying forces in Syria.

On Friday Trump confirmed to senior aides that US forces will be exiting Syria.  In statements carried by Reuters, Trump said, “Let the other people take care of it now. Very soon, very soon, we’re coming out. We’re going to get back to our country, where we belong, where we want to be.”

Trump’s initial announcement of US troop withdrawal came the same day two US coalition soldiers were reported killed in Syria (overnight Thursday). According to early reports, confirmed by the Pentagon, an American & British soldier were killed by an improvised explosive device in Manbij where US personnel are stationed. 

With this news and with Turkey’s latest bellicose rhetoric aimed at France, Macron is likely already second-guessing his willingness to jump straight into northern Syria’s quagmire of actors just as the US may be in the process of exiting.

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In Unprecedented Move, China To Pay For Oil Imports With Yuan Instead Of Dollars

Just days after Beijing officially launched  Yuan-denominated crude oil futures (with a bang, as shown in the chart below, surpassing Brent trading volume) which are expected to quickly become the third global price benchmark along Brent and WTI, China took the next major step in the challenging the Dollar’s supremacy as global reserve currency (and internationalizing the Yuan) when on Thursday Reuters reported that China took the first steps to paying for crude oil imports in its own currency instead of the US Dollars.

A pilot program for yuan payment could be launched as soon as the second half of the year and regulators have already asked some financial institutions to “prepare for pricing crude imports in the yuan”, according to Reuters.

According to the proposed plan, Beijing would start with purchases from Russia and Angola, two nations which, like China, are keen to break the dollar’s global dominance. They are also two of the top suppliers of crude oil to China, along with Saudi Arabia.

A change in the default crude oil transactional currency – which for decades has been the “Petrodollar”, blessing the US with global reserve currency status – would have monumental consequences for capital allocations and trade flows, not to mention geopolitics: as Reuters notes, a shift in just a small part of global oil trade into the yuan is potentially huge. “Oil is the world’s most traded commodity, with an annual trade value of around $14 trillion, roughly equivalent to China’s gross domestic product last year.” Currently, virtually all global crude oil trading is in dollars, barring an estimated 1 per cent in other currencies. This is the basis of US dominance in the world economy.

However, as shown in the chart below showing the first few days of Chinese oil futures trading, this status quo may be changing fast.

Superficially, for China it would be a matter of nationalistic pride to see oil trade transact in Yuan: “Being the biggest buyer of oil, it’s only natural for China to push for the usage of yuan for payment settlement. This will also improve the yuan liquidity in the global market,” said one of the people briefed on the matter by Chinese authorities.

There are other considerations behind the launch of the Yuan-denominated oil contract as Goldman explains:

  • A commercial benchmark and hedging tool. Until now, Chinese oil imports were based on FOB benchmarks, with long-term procurement contracts settling off Platts Oman/Dubai or Dated Brent. The INE contract has therefore the potential to become the pricing reference for CIF China crude oil, enabling corporate financial hedging. Its warehouse structure is however likely to limit its use for physical crude delivery and may in fact at times reduce its hedge efficiency.
  • A new investment vehicle for onshore investors. The majority of China commodity futures trading volumes are from retail investors, yet these had until now little ability to trade oil futures. China’s capital control was the main bottleneck  to trading contracts like Brent as authorities only allow $50,000 outflow a year per person. While several petrochemical and bitumen contracts already trade in China, INE will be the first contract for crude oil, likely drawing significant interest.
  • Direct access to China’s commodity markets for offshore investors. China offers deep and liquid commodity markets to its onshore investors. Due to China’s tight capital controls, however, foreign investors have so far only been able to trade these through qualified onshore subsidiaries. The INE contract opens up the first channel for offshore investors to trade in its onshore commodity market, with both the USD deposit and capital gains transferable back to offshore accounts. The government further announced last week that it would waive income taxes for foreign investors trading these new contracts for the first three years. The obligation to trade in Yuan will also add a currency risk exposure to offshore investors. We illustrate in Exhibit 6 a likely template (amongst others) of how overseas investors will be able to access INE liquidity.

The danger, of course, is that such a shift would also boost the value of the Yuan, hardly what China needs considering it was just two a half years ago that Beijing launched a controversial Yuan devaluation to boost its exports and economy.

Still, in light of the relative global economic stability, Beijing may be willing to take the gamble on a stronger Yuan if it means greater geopolitical clout and further acceptance of the renminbi.

Which is why restructuring oil fund flows may be the best first step: as of this moment, China is the world’s second-largest oil consumer and in 2017 overtook the United States as the biggest importer of crude oil; its demand is a key determinant of global oil prices.

If China’s plan to push the Petroyuan’s acceptance proves successful, it will result in greater momentum across all commodities, and could trigger the shift of other product payments to the yuan, including metals and mining raw materials.

Besides the potential of giving China more power over global oil prices, “this will help the Chinese government in its efforts to internationalize yuan,” said Sushant Gupta, research director at energy consultancy Wood Mackenzie. In a Wednesday note, Goldman Sachs said that the success of Shanghai’s crude futures was “indirectly promoting the use of the Chinese currency (which, however as noted above, has negative trade offs as it would also result in a stronger Yuan, something the PBOC may not be too excited about).

Meanwhile, China is wasting no time, and Unipec, the trading arm of Asia’s largest refiner Sinopec already signed a deal to import Middle East crude priced against the newly-launched Shanghai crude futures contract, which incidentally is traded in Yuan.

The bottom line here is whether Beijing is indeed prepared and ready to challenge the US Dollar for the title of global currency hegemon. As Rueters notes, China’s plan to use yuan to pay for oil comes amid a more than year-long gradual strengthening of the currency, which looks set to post a fifth straight quarterly gain, its longest winning streak since 2013.

In a sign that China’s recent Draconian capital control crackdowns have sapped market confidence in a freely-traded Yuan, the currency retained its No.5 ranking as a domestic and global payment currency in January this year, unmoved from a year ago, but its share among other currencies fell to 1.7 percent from 2.5 percent, according to industry tracker SWIFT.

A slew of measures put in place in the last 1-1/2 years to rein in capital flowing out of the country amid a slide in yuan value has taken off some its shine as a global payment currency.

But the yuan has now appreciated 3.4 percent against the dollar so far this year, with solid gains in recent sessions.

“For PBOC and other regulators, internationalization of the yuan is clearly one of the priorities now, and if this plan goes off smoothly then they can start thinking about replicating this model for other commodities purchases,” said a Reuters source.

Still, it will be a long and difficult climb before the Yuan can challenge the dollar and for Beijing to shift the bulk of its commodity purchases to the yuan because of the currency’s illiquidity in forex markets. According to the latest BIS Triennial Survey, nearly 90% of all transactions in the $5 trillion-a-day FX markets involved the dollar on one side of a trade, while only 4% use the yuan.

* * *

Still, not everyone is convinced that the new Yuan-denominated contract will create a “petro-yuan” as the following take from Goldman highlights:

The launch of the INE contract is not just about oil, as it will also be the first Yuan denominated commodity contract tradable by offshore investors. Such a set-up meets the PBOC’s monetary policy committee goal to raise the profile of its currency in the pricing of commodities. It has raised however the question of whether the INE contract is an incremental step in achieving the currency reserve status for the Yuan. We do not believe so.

While the INE launch does represent an additional step in the CNY internationalization, the CNY denomination of the INE contract does not in itself imply CNY investments. The INE contract does not represent an opening of China’s capital accounts since foreign deposits operate in a closed circuit, deposited in designated accounts and not to be used to purchase other domestic assets. In practice, the collateral deposit and any capital gains can be transferred back to offshore accounts. The potential for greater foreign ownership of Chinese assets is therefore not impacted by CNY oil invoicing and would require instead oil exporters to recycle their proceeds in local assets, for example. The incentive to do this has not changed with the introduction of the INE contracts. In particular, most Middle East oil producers still have currencies pegged to the dollar and limited ability to hedge CNY exposure.

Whether or not Goldman is right remains to be seen, however it is undeniable that a monumental change is afoot in global capital flows, where the US – whether Beijing wants to or not – will soon be forced to defend its currency status as oil exporters (and investors in this highly financialized market) will now have a choice: go with US hegemony, or start accepting Yuan in exchange for the world’s most important commodity.

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Israel Will Respond “Inside Gaza Strip” If “Organized Terrorist Operations” Continue

As Israel inches ever-closer to an all-out war against Hezbollah in Syria (a war that could expand to encompass southern Lebanon), the IDF this week also mercilessly crushed yet another massive Hamas-organized border protest in Gaza, deploying drones to shower thousands of demonstrators with tear gas while firing live rounds and rubber-coated steel pellets into the crowd. By the time yesterday’s border clashes had ended, at least 15 Palestinians were dead and over 500 were wounded.

Of course, a spokesman for the IDF – a Brig. Gen. Ronen Manelis – denied allegations of excessive use of force. He said the men killed by the IDF belonged to a violent, militant faction of Hamas, and that several dozen people – at most – were injured by live fire while the rest were merely impacted by the tear gas and other crowd-control responses. Gaza’s Shifa Hospital received 284 injured people Friday – most of them with bullet wounds. Of those, 70 were under the age of 18. And 11 were women, per the Associated Press.

Gaza

Already Saturday, several hundred people returned to the five makeshift tent encampments several hundred meters from the border; the encampments were meant to be a launch point for the marches. But if demonstrators try to rush the border fence again, Manelis said Israel would have no choice but to “expand” its response beyond the border area – echoing the extremely deadly assault unleashed on Gaza City during the summer of 2014. That episode left nearly 2,000 Palestinians dead. Of those, nearly 500 were civilians, per AP.

He said that Hamas and other Gaza militant groups are using protests as a cover for staging attacks. If violence continues, “we will not be able to continue limiting our activity to the fence area and will act against these terror organizations in other places too,” he said.

Indeed, just like during the runup to the IDF’s Operation Protective Edge, the IDF labeled Palestinians efforts to “breach” the border fence “organized terrorist operations.”

Sure enough, on Saturday Israeli troops fired warning shots toward Palestinian youths gathered at the Gaza-Israel border on Saturday, wounding 13 people, health officials said according to Reuters.

And, as we previewed last week, it is only a matter of time before Israel decides to retaliate not on the border but inside the Gaza Strip itself, potentially sparking yet another regional war.

“We won’t let this turn into a ping-pong zone where they perpetrate a terrorist act and we respond with pinpoint action. If this continues we will not have no choice but to respond inside the Gaza Strip,” Manelis told reporters in a phone briefing.

Separately, during a series of tweets, an IDF spokesperson said the army is “only interested in terrorists who are trying to disrupt Israeli life; we only act against them.” The army also claimed that “nothing was carried out uncontrolled” and that the IDF “knows where every bullet landed.” The IDF also touted its successful thwarting of an infiltration attempt by three terrorists in northern Gaza.

Curiously, those tweets by the Israeli army were then swiftly deleted.

Friday’s demonstrations were meant to be part of a six-week long campaign calling for a “right of return” for Palestinian refugees to what is now Israel. The protests are set to culminate in May when Israel celebrates the 70th anniversary of its independence – a day that Palestinians call Nakba (catastrophe) day.

The United Nations Secretary-General Antonio Guterres is calling for an “independent” investigation of what happened on Friday. The UN Security Council urged restraint on both sides following the clashes, but didn’t decide on any concrete actions.

Since seizing control of Gaza back in 2007 and splitting with the more moderate Fatah party, Hamas has been involved with several deadly clashes with the IDF, as a border blockade imposed by Israel and Egypt has made it increasingly more difficult for Hamas to govern.

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In Angry Tweetstorm, Trump Renews Attack On Amazon, Demands “Fake Washington Post” Register As Lobbyist

President Trump’s obsession and escalating feud Jeff Bezos and bringing Amazon to heel before it destroys what’s left of America’s crumbling brick-and-mortar retail industry was on display Saturday morning when he fired off a series of angry tweets claiming the Bezos-owned Washington Post should register as a lobbyist and that the Post Office should jack up its parcel rates to stick it to Amazon.

“While we are on the subject, it is reported that the U.S. Post Office will lose $1.50 on average for each package it delivers for Amazon,” Trump tweeted.

“That amounts to Billions of Dollars. The Failing N.Y. Times reports that ‘the size of the company’s lobbying staff has ballooned,’ and that does not include the Fake Washington Post, which is used as a ‘lobbyist’ and should so REGISTER. If the P.O. ‘increased its parcel rates, Amazon’s shipping costs would rise by $2.6 Billion.’ This Post Office scam must stop. Amazon must pay real costs (and taxes) now!”

Trump’s latest salvo follows several attack tweets earlier this week, where Trump accused Amazon of paying “little or no taxes” while putting “thousands of retailers out of business.”

His angry tweets have sent the company’s shares plunging, extending a drop that began with an Axios report saying Trump is fixated on containing Amazon’s inexorable expansion, potentially by invoking anti-trust measures and breaking down the company. In total, Amazon founder Jeff Bezos saw his net worth plunge by $13 billion during the selloff

As slumping Amazon shares weighed on the broader market last week, the White House clarified that the White House had no actions planned against Amazon.

“The president has expressed his concerns with Amazon,” White House spokeswoman Lindsay Walters told the press pool on Air Force One. “We have no actions at this time.”

As Politico points out, Trump’s $1.50 number comes from a WSJ op-ed which cited a Citigroup analysis that the Postal Service loses about $1.46 for every package it delivers for Amazon. But part of this is due to a law that prevents the limits the chronically money-losing USPS ability to compete with for-profit private sector peers such as FedEx and UPS.

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