Category: zerohedge

By Chris at http://ift.tt/12YmHT5

Who would have guessed that US Patent No. 3,906,166, granted in 1975 to Martin Cooper of Motorola would completely change the world?

My kids tell me that was a long time ago, which I suppose it was….

Here’s global cell phone penetration over the last decade. Not bad…

With hindsight we can look at this adoption phase and marvel, but let’s not miss some key points.

Specifically, how radically phones have infiltrated so many aspects of our lives. And no, I’m not talking about Sally who’s addicted to the endorphin rush she gets from hitting refresh on Instagram to see how many “likes” her stupid photo of her chicken-avocado salad is getting. I’m talking about real isht. Life changing isht.

Like the millions of Africans who now receive anti-malaria texts from football hero Didier Drogba:

It’s 9pm, are you and your family safe under nets? This is Didier Drogba, sleep well.

Ah… the humble mobile phone — doing more to fight Malaria than the UN, the WHO, or any government ever has. Power distributed and decentralised.

Or…

The Indonesian midwives’ mobile phone project, which has drastically reduced infant mortality rates as villagers place more trust with midwives who can now talk to obstetricians and gynaecologists in the cities and provide better care.

Or…

Farmers, who prior to the mobile phone used to walk in blazing heat for up to two weeks to get to market, where they’d sell their livestock…. and sometimes wouldn’t because demand wasn’t there.

Those same farmers now use mobiles to determine ahead of time market prices for their goods before deciding where best to trade their livestock or crops. Not only that, but receiving live pricing of livestock and crops allowing them to more accurately plan and run their farming practices. Power distributed and decentralised.

And speaking of farmers in the third, world it was back in 2003 or 2004 — I can’t remember exactly — when my lovely lass (before she succumbed to my charms and became Mrs. Chris) and I were traveling in Kashmir, and I vividly remember realising then just how powerful the mobile phone really was.

We were chatting to a peasant rice farmer, I’ll call him Ranjeet. Because his father had done it before him, and his fathers father before him, and he himself had been at it for over 30 years since, Ranjeet was doing the only thing he knew: He was growing rice.

And like his forefathers before him, Ranjeet simply took whatever price was offered by the Delhi traders when they turned up at harvest time. Together with his fellow rice farmers in the village Ranjeet had no way of knowing whether the price he got from the traders from Delhi was fair or not.

Enter the mobile phone.

He, together with fellow farmers, had all clubbed together and bought a WAP phone. Remember those?

It was man’s first crack and connecting a mobile phone to the internet.

Ranjeet and his buddies would huddle around the phone, getting live pricing from the rice market in Delhi. And whoo… boy, had it made them mad. Ignorance, they say, is bliss.

Try telling that to Ranjeet, and he’d have punched you in the face. So when those slimy rice traders from Delhi rolled into town to buy Ranjeet and his buddies’ rice, these dirt poor peasant farmers could no longer be hoodwinked into selling it at deeply discounted, “kill my family, make me starve” prices any longer. Power distributed and decentralised.

For most of us, we’re lucky enough to live in a developed country where we don’t think about this stuff.

The mobile phone helps us do many of the things we were already doing, but now we just do it without getting off the sofa.

But for those in emerging and submerging markets mobile phones help people do things they could never do before. They are, in other words, not a luxury but a necessity.

Ask folks today, and I’ll bet they’d sooner leave home without their underpants on than leave home without their phone.

What else?

Education. The mobile phone has revolutionised that, too. I was reading that in Vietnam 75% of the kids use their phones for educational purposes. This is good news because it means that Brangelina and Brangelina wannabes won’t have to adopt starving illiterate Vietnamese orphans any longer.

It was Malcolm Gladwell, the author, journalist, and speaker, who said:

Poverty is not deprivation. It is isolation.

I’m going to put my neck out and say that the mobile phone has probably done more to break isolation and reduce poverty than almost anything else in the last 50 years.

So What?

Well, the mobile phone is similar to how to think about blockchain, and of course the most powerful (to date) blockchain is Bitcoin, which I spoke about last week. One changed the world. The other will change is changing our world.

Like the impact of the mobile phone before it, it’s going to be HUUUGE!

HUUUGE! I tell you!

Now, I’m going to suggest that Martin Cooper was an amateur, compared with Satoshi Nakamoto, whoever the hell she is. This is because blockchain technology has the potential to do what the mobile phone has already done but on steroids.

Applications are already being built in: Asset management (trade and processing settlement), insurance (claims processing), payments, title registry, deed registries, personal identification, distributed cloud storage, and an entire squadron of other applications far too long to mention here.

Many will scoff and laugh at it… and many do. This is how it must be, but I warn you. To ignore this is like ignoring the impact mobile phones were going to have on society when the first mobile handset went on sale in 1973. Completely revolutionary and disruptive technology would be neither revolutionary nor disruptive if it didn’t… how do I say this… disrupt.

And it’ll be fought hammer and tongs, especially by those who see it as a threat to their own business models. Hello Jamie 🙂

But ultimately new technologies become overwhelming, and even those who poo poo it will be dragged kicking and screaming into its clutches because the utility function is too powerful.

And we should all be as happy about this as these guys.

Because power in the hands of many is always everywhere better than power in the hands of the few.

To the future… and a jolly fine weekend. Thanks as always for reading!

– Chris

“Disruption is a process, not an event, and innovations can only be disruptive relative to something else.” — Clayton M. Christensen

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Liked this article? Then you’ll probably like my other missives on

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via http://ift.tt/2zY1R3l Capitalist Exploits

As we detailed yesterday, ABC was forced to retract an epic mistake in their reporting that claimed contact between Trump staff (Flynn) and Russian officials 'druing the campaign' – correcting it to point out that it was in fact 'during the transition'.

President Trump tweeted his perspective, confirming the new 'facts' from ABC…

I had to fire General Flynn because he lied to the Vice President and the FBI. He has pled guilty to those lies. It is a shame because his actions during the transition were lawful. There was nothing to hide!

— Donald J. Trump (@realDonaldTrump) December 2, 2017

    CNN   were quick to mock the White House for saying that the Obama administration approved Flynn's contacts   (and found someone all too eager to go on TV and attack their claims)… (via The Hill)

The White House said on Friday that it was the Obama administration that authorized former national security adviser Michael Flynn's contacts with Russian Ambassador Sergey Kislyak during President Trump's transition, according to CNN.

 

Flynn pleaded guilty on Friday to lying to the FBI about his contacts with Kislyak in the month before Trump took office, the first current or former Trump White House official brought down by special counsel Robert Mueller's investigation into Russia's election meddling.

 

James Clapper, who served as the Director of National Intelligence under Obama, said that the claim that the Obama administration authorized Flynn's contacts with Kislyak was "absurd," adding that the administration was concerned by the communications at the time.

“That’s absurd. That’s absolutely absurd," Clapper said on CNN.

 

Okay, James Clapper seems pretty clear that the Obama White House did not okay Flynn's shenanigans. http://pic.twitter.com/lEmGHJhquN

— Josh Marshall (@joshtpm) December 1, 2017

Confused yet?

So, given all the confusion, here is a clarifying source free of all possible bias – the Obama administration's State Department – confirming Trump and Flynn's story, and crushing Clapper's continued lies…from the archives:

Obama State Dept: We have no problem with General Flynn and the incoming administration contacting foreign officials http://pic.twitter.com/FwZDaHU8lO

— Jack Posobiec ???????? (@JackPosobiec) December 2, 2017

Transcript for the hard of hearing:

REPORTER: "This building [the Obama State Department] doesn't see anything necessarily inapprorpiate in contact between members of the incoming [Trump] administration and foreign officials, no matter what country they're from?"

 

OBAMA STATE DEPT SPOKESPERSON: "No, no…and again this has been ongoing. We have no problem with them doing such on their own."

Well, that's going to ruin a few talking points for tomorrow's Sunday morning political shows.

via http://ift.tt/2jE9Zee Tyler Durden

Authored by Darius Shahtahmasebi via TheAntiMedia.org,

As Israel prepares for yet another war directly on its border, the truth about Israel’s vast military capabilities has been largely absent in the corporate media.

However, if one were to be fortunate (or unfortunate) enough to be able to travel to Israel’s border with Syria in the north and the Gaza strip in the south, they might see what looks more or less like a scene from RoboCop.

Israel is the first country in the world to use unmanned ground vehicles (UGVs) to not only patrol its borders but also to replace soldiers on missions, as well. The new Border Patroller model can be armed with remote-controlled weapons, reconnaissance means, and additional components that cannot be fitted on the traditional Guardium model it had been using for years prior.

The robot is also able to patrol underground and gather information for units that are present on the surface. For example, it can help soldiers avoid booby-trapped tunnels.

These robots can be given pre-designated routes for their patrol, making them more or less autonomous.

According to the New York Post:

“The increasing use of robots by the Israel Defense Forces is part of a larger strategy to minimize risk to soldiers when possible. In addition, soldiers require breaks, food and water. All a Guardium needs is a full tank of gas. Other UGVs in use by the IDF include the Segev, which is based on a Ford F-350 pickup truck.”

However, this is only the beginning of Israel’s robotic capabilities. As the Post notes, the same thing is happening in the water, too.

Israeli defense contractor Rafael has developed an unmanned patrol ship that is currently defending Israel’s strategic ports and patrolling the coastline.

Israel also has advanced a “drone that can reach Iran,”  an unmanned aerial vehicle that can stay airborne for 24 hours and is believed to be capable of launching air-to-surface missiles. Israel has also deployed satellites far smaller than American ones that can discern objects as small as 20 inches from hundreds of miles away.

If that wasn’t enough, the small nation has also developed a tank that more or less comes with its own personal missile defense system.

Earlier this year, Defense News reported that Israel is readying its Iron Dome defense system for its first intercept test in the U.S., which is aimed at selecting an interim solution for a medium and short-range air defense system.

Not to mention that according to former Secretary of State Colin Powell’s leaked emails, the country has at least 200 nuclear weapons “all targeted on Tehran.”

So why is Israel going to such great lengths to modernize its army far beyond that of any other country?

As the New York Post explains:

“Due to Israel’s small size and lack of territory, all ballistic missiles deployed in the region — Syria, Iraq and Iran — can reach anywhere within the country and pose a strategic and possibly even existential threat. Israel, the developers argued, needed a system that could shoot down enemy missiles over neighboring countries and provide overall protection for the tiny Jewish state.”

In fact, a top Israeli general has already admitted that the country cannot fight Iran alone and would instead seek to rely on American help to take on the Islamic Republic if a direct conflict should ever arise.

So, are Israel’s advances in military technology purely defensive and for deterrence purposes only, or does the country’s leadership have something far more preemptive in mind in the coming years under the Trump administration?

Only time will tell, but one way or the other, these vast technological developments will be frightening for the civilians caught in the middle, to say the least.

via http://ift.tt/2ArK1CQ Tyler Durden

Matt Lauer’s long-suffering wife has finally had enough of the former Today Show host’s notorious philandering. According to Fox News, former model Anne Roque.

Roquet reportedly jetted to her native country the Netherlands amid the bombshell sexual misconduct allegations. Before leaving, Roque, a former model, was last spotted at their home in the Hamptons, Long Island, Wednesday, the same day NBC News announced that Lauer had been fired for “inappropriate sexual behavior.”

Roque has left for her family’s home near Amsterdam. It was not clear if the couple’s three children went with their mother or remained in New York.

Roque, who has been married to Lauer for 20 years, the same amount of time that Lauer spent at the helm of Today, has not released a statement regarding her husband’s termination and alleged sexual misconduct.

Lauer’s representatives have not commented on the state of the former anchor’s marriage.

Lauer and Roque’s marriage has been rocky since 2006. Roque filed for divorce in 2006 but did not follow through, People reported. A source told Page Six the TV host offered Roque a post-nuptial agreement as she filed for divorce.

He reportedly offered the former model $5 million to stay in the marriage.

At least eight women have shared their stories about the harassment they experienced by Lauer’s hand

“Matt needed to stay in the marriage to keep his reputation as America’s nicest dad. He is in fact a great, and very doting dad to his kids, but he is also a terrible husband,” a source told Page Six.

As Variety explained earlier in the week, Lauer’s paranoia about being spotted by tabloid reporters inspired him to pursue relationships with employees at the network. Disturbing details about Lauer’s conduct have been seeping into mainstream media reports since his firing. In one particularly harrowing story, a former colleague recounted an incident that took place in 2001 in Lauer’s secluded office in the NBC Newsroom.

Earlier this week, People published a story accusing Lauer of being a serial cheater. Lauer issued an apology on Thursday admitting there is "enough truth" in the allegations against him to justify his departure from the network.

via http://ift.tt/2BEOX7g Tyler Durden

Authored by Charles Hugh Smith via OfTwoMinds blog,

What constitutes an impeachable offense?

Yesterday in The Internecine Deep State Conflict Moves to Stage Two I suggested that the conflict was heating up, a move confirmed by former Trump advisor Michael Flynn's guilty plea that he lied to the F.B.I. regarding his contact with Russian officials.

The case for impeachment now becomes clear: prosecutors will attempt to prove that Trump made contact with the Russians in violation of the Logan Act, which forbids private citizens from dealing in matters of state with foreign governments.

According to the Wikipedia entry on The Logan Act, To date, only two people have ever been indicted for violating the Act's provisions. However, no person has ever been prosecuted for alleged violations of the Act.

(There are of course other potential charges, which we will learn more about as legal commentators across the spectrum weigh in.)

Question #1: can prosecutors provide evidence that shows beyond reasonable doubt that Trump violated the Logan Act before taking office?

Question #2: is this an impeachable offense? That will be decided by the House of Representatives, which can pass a motion of impeachment on a simple majority: Impeachment of the president, explained.

The case then goes to trial in the Senate, where impeachment requires a 2/3 majority.

Clearly, impeachment is not only a legal process, it is a political process in which partisanship plays a role. The definition of what constitutes an impeachable offense is not well-defined in the Constitution, with treason and accepting bribes being two examples.

It's not too difficult to imagine the Supreme Court being called upon to issue a ruling, given the history of political/legal crises raising issues that must be addressed by the Supreme Court. Examples include the 2000 presidential election/ballot-counting controversy in Florida, and the 1973 Saturday Night Massacre in the Watergate scandal.

Question #3: Can Trump be caught in a lie like Flynn?

It's common knowledge that public figures are often felled not by their initial misdeeds but by the lies and cover-ups issued to cloak the original misdeeds. If prosecutors can pin lies on Trump that are equivalent to what they pinned on Flynn, then we return to Question #2: is this an impeachable offense?

Impeachment has been in the political winds since the 2016 election. Opinions on the likelihood and the consequences of impeachment are of course varied, for example, What’s worse than leaving Trump in office? Impeaching him. (WaPo)

Meanwhile, stories that Trump is becoming increasingly erratic are opening another path to Trump's removal via charges of mental instability: Trump Is Cracking Up (New York Times).

All of which leads to Question #4: to what degree does governance grind to a halt should the crisis become the dominant focus of the nation?

Those of us who lived through the Watergate years recall that the crisis (more a process than an event) crippled governance and policy on many levels and led to sweeping reforms of numerous federal institutions.

Question #5: who benefits from the crisis, regardless of its ultimate outcome? Certainly those within the Deep State who cannot abide Trump at the head of the Executive Branch have accomplished a major goal, which is bringing legal culpability (guilty pleas, etc.) into Trump's inner circle, where maximum damage can be done, up to and including impeachment.

Another camp might benefit from the chaos, seeing opportunity as Trump partisans and opponents wage war on each other.

Clearly, the Trump administration has just absorbed a salvo of torpedoes, and secondary explosions are still cooking off below decks. The goal of the Deep State supporters of the administration can't be mere political survival; the goal must be to reach a resolution quickly enough to maintain some measure of consent of the governed.

The anti-Trump camp knows the damage done by the passage of time: the longer Trump and his circle are on the defensive, the greater the damage inflicted, even if his presidency survives more or less intact.

In my view, the most cogent context is not partisan politics, but the battle for the upper hand in the Deep State. Those of us on the outside of these opaque, for-all-the-marbles battles only see the shadows cast by the media circus; we are left with the unenviable task of attempting to read between the lines of scripted PR spin from every Deep State camp with a stake in the outcome, which means all of them.

Just for reference, here is my first essay on the topic: Is the Deep State Fracturing into Disunity? (March 14, 2014)

*  *  *

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via http://ift.tt/2AqvmaM Tyler Durden

Elon Musk’s reliance on shock-and-awe tactics and unjustifiably lofty performance projections is creating serious problems for the so-called visionary as a growing number of experts have come forward to explain that many of his claims would defy the laws of physics.

The latest group to call bulls— is Aurora Energy Research, a European consultancy which estimated that Tesla’s electric haulage truck will require the same energy as up to 4,000 homes to recharge – a stunning claim that would seem to raise serious questions about the projects viability, according to the Financial Times.

According to these scientists, modern battery technology is incapable of supporting anything close to the 30-minute charging time Musk has promised for the new Tesla semi-truck.

The US electric carmaker unveiled a battery-powered truck earlier this month, promising haulage drivers they could add 400 miles of charge in as little as 30 minutes using a new “megacharger” to be made by the company.

 

John Feddersen, chief executive of Aurora Energy Research, a consultancy set up in 2013 by a group of Oxford university professors, said the power required for the megacharger to fill a battery in that amount of time would be 1,600 kilowatts.

 

That is the equivalent of providing 3,000-4,000 “average” houses, he told a London conference last week, 10 times as powerful as Tesla’s current network of “superchargers” for its electric cars. Tesla declined to comment on the calculations.

 

Elon Musk, Tesla’s chief executive, has previously said the megachargers would be solar-powered but the company has not confirmed whether they will also have a grid connection for when it is not sunny.

 

Many of Tesla’s current superchargers are powered in part by renewable energy. The company is also experimenting with storage batteries to ease demands on the grid.

Tesla has promised to begin delivering its trucks in late 2019. Electric battery capacity has been improving at a rate of roughly 8% per year – and some have posited that Musk’s lofty claims are merely just him trying to anticipate what will be possible as the first batch of trucks are being assembled. However, if Aurora’s assessment is accurate, then the technological advancements needed to enable a 30-minute charging time for a semi-truck are still years, if not decades, off.

Furthermore, Musk has said little about the enhancements to the power grid that would be needed to power fleets of Tesla’s semi-trucks.

“There are smart and dumb ways to incorporate this level of capacity requirement into the system, but either way, fully electrified road transport will need a large amount of new infrastructure,” Feddersen told the Financial Times.

National Grid, which oversees Britain’s electricity system, has suggested that in the most extreme scenario, electric vehicles could create as much as 18 gigawatts of additional demand for power at peak times in the UK by 2050.

This is the equivalent capacity of nearly six nuclear power stations on the scale of the Hinkley Point project under construction in the south-west of England.

Aurora posits that Tesla could try an engineering solution called segmenting – but that approach would come with technological hurdles of its own.

“The fastest chargers today can support up to around 450kW charging, so it’s not clear yet how Tesla will achieve their desired charging speeds,” said Colin McKerracher, head of advanced transport at Bloomberg New Energy Finance, a consultancy.

 

“One option may be to segment the battery somehow and actually charge different segments simultaneously. This adds additional costs and we haven't seen anything like that done at anywhere near this power output.”

via http://ift.tt/2jEPBd6 Tyler Durden

Authored by Saxo Bank's Head of Macro Strategy, Dembik Christopher, via TradingFloor.com,

The year 2018 starts with four main questions:

Will inflation ever come back?

Lowflation has been one of the main macroeconomic issues in recent years and it is expected to remain a thorn in the foot of central bankers for longer yet. Since September 2016, China – the main exporter of deflation – has started to export inflation along with higher global commodity prices (up 3% in October 2017 year-on-year, based on data from the World Bank), but global inflation still remains subdued.  

Central bankers, and particularly European Central Bank president Mario Draghi, consider that low inflation is only a transitory phenomenon linked to hysteresis and underemployment and that job gains will eventually push inflation to target. Those elements certainly play a role in the short and medium terms but as pointed out by Benoit Coeuré, the problem is that the Phillips curve is “flatter, non-linear, mid-specified”. 

We don’t expect that inflation will significantly pick up next year since, in our view, lowflation is primarily a structural phenomenon. More and more economists are agreeing with that take, including outgoing Federal Reserve chair Janet Yellen who recently confirmed that we don’t properly understand inflation dynamics. 

Monetarists explain low inflation by the slow rate of growth in broad money since the great recession. This might be part of the problem, but it is not completely convincing since the money stock has not been constant and has started to decrease since 1997 in the United States.

Contrary to common belief, an exit from lax monetary policy does not mean an end to the bond market madness. The most striking financial event of end-year, though one of the less commented-upon, is that the French BBB Veolia is getting paid to borrow. 

This is not a normal market condition at all. We are in "la la land". Tighter monetary conditions are not expected to change this situation to any significant degree since central banks are actuallynot the main drivers of low yields.

Three factors are highly significant in explaining this phenomenon: the drop in inflation expectations, ageing, and Basel III. 

From our viewpoint, ageing is a key long-term structural trend that pushes yields quite low for a prolonged period of time. In most developed countries, the largest population cohort is associated with baby boomers (net savers) while the cohorts behind are relatively smaller than in the past (predominantly net borrowers). The consequence is that there are fewer opportunities for savers to deploy their abundant savings. 

The borrowers hold the cards in today’s lending market, so the cost of capital can only remain low to encourage more borrowing. This trend is particularly noticeable in countries that are in an advanced phase of demographic decline such as Japan as well as some CEE countries. 

If the explanation of ageing is correct, as we believe, the fear of a global bond market crisis is over-exaggerated. Low yields are here to stay.

What could go wrong?

Geopolitical risk is still on the radar in 2018 due to the upcoming elections in Italy and in the US, the complicated Brexit process, and persistent tensions in the Middle East and in the Korean peninsula.

 

However, geopolitical risk has faded since the French presidential election and we expect this trend to continue next year. It usually creates a lot of market noise but it has moderate impact in the medium-term, as proved again this year by the limited negative effect of the Catalonian referendum on the IBEX which recovered its losses in just 10 days.

 

In fact, geopolitical risk should be considered by investors as an opportunity to buy the dips in order to take advantage of the inevitable price rebound. Our geopolitical risk index based on Caldara and Iacoviello’s working paper of 2017 does not indicate any significant near-term tension and is still well below its highest level reached in March 2003 at 450 points on the occasion of the Iraqi war.

 

What may cause market consolidation, though, are the factors that have not been yet well-priced in, such as the uncertainty around the regional strategy of Saudi Arabia’s Mohammed bin Salman, increasing political tensions between Western and Eastern Europe (and Austria’s adhesion to Visegrad Four), and finally a midterm meltdown for Trump and the GOP.

 

On this last point, there is a strong historical relation between the president’s popularity and the mid-term elections. Considering that Trump’s popularity is not exactly stellar (his approval rating felt from 45% in January to 37% recently), the risk is high that he will need to deal for the rest of his mandate with a reinvigorated Democratic Party and a Republican Party that holds him responsible for its electoral failure.

 

In this tricky political context, it is almost certain that Trump won’t be able to deliver on his promises.

 

We are in a world of excess liquidity leading to the creation of bubbles. This is the most dangerous financial and macroeconomic risk for the debt-driven recovery. A market is in a bubble situation when prices become super-exponential, which is currently happening in many markets all over the world: property, virtual currency, FANG, and the negative-yielding part of the bond market that accounts for around $8 trillion.

 

The technology behind Bitcoin is undeniably promising but the interest in Bitcoin is mostly driven by liquidity excess. It is economic nonsense that Bitcoin’s market cap is just above that of General Electric, one of the largest companies in the world with more than $123 billion US in revenue.

 

In a tighter monetary policy environment, investors would have been much more reluctant to invest in this asset which has all the characteristics of a speculative bubble. However, the Bitcoin bubble burst, which could be triggered by the exit from accommodative monetary policy, is not expected to have any significant financial consequences.

 

The most dangerous bubbles are actually the ones we have experienced in the past, especially in the property market. Bubbles in financial assets are worrying but they affect a smaller part of the population than bubbles in the property market. The most risky markets we see are Australia, London, and Hong Kong but the trends in Sweden and Norway are also extremely concerning.

 

Since 2007, the housing price index has increased by 90% in Sweden and by 70% in Norway. We are slowly entering into a very risky period where bubbles keep growing while the credit impulse is negative and central banks are returning to a more orthodox monetary policy.

 

We know quite well how bubbles work… what looks at first glance like a non-event can often cause the burst. Therefore, it is impossible to correctly predict the timing.

 

What we are saying is that 2018 is certainly the most favourable occasion for a bubble burst since 2007. The end of the year is especially risky since the Fed will have significantly hiked rates and the ECB will stop injecting liquidity through QE, leading to a higher cost of capital and more realistic market valuations. 

via http://ift.tt/2BG4DYg Tyler Durden

After the Party Congress finished in October and China’s centrally planned markets were released (somewhat) from the vice-like grip which had prevailed during the proceedings, we noted the comment from Huachuang Securities that China’s bond holders may be about to get hit by “daggers falling from the sky”, referring to deleveraging. They were right, to some extent, as first the government bonds, then corporate bonds sold off during November. This was driven by the authorities tightening credit conditions and redemptions in Wealth Management Products, which led to some unravelling in the latter Ponzi scheme. However, as Bloomberg explains, another factor has been at work, a rise in short-selling, which might not please the central planners.

While the nation’s debt market has no official measure of short sales, analysts say a surge in bond lending has been partially fueled by rising bearish bets. A record 1.82 trillion yuan ($274 billion) of notes has been lent out this year, 18 percent more than the total for all of last year, according to clearinghouse ChinaBond. Short sellers profit from falling bond values by selling borrowed notes and buying them back after prices fall.

"This creates a vicious feedback loop — when institutions think bonds will fall, they borrow and sell, causing a plunge in the securities, which then drags futures down, and thus there’s more shorting," said Wang Wenhuan, an analyst at Huachuang Securities Co. in Shanghai. "As investors are still quite cautious, there will likely be more bond borrowing in the near term as yields climb."

As Bloomberg notes, not all bond borrowing is used for short-selling, it can be used to access funding in the repo market.

Still, not all bond borrowing is for shorting. It’s also used by traders seeking financing when cash supply is tight. For example, a financial institution could lend out its corporate bonds in exchange for more liquid government notes, then pledge them in the repo market for funding, according to Becky Liu, head of China macro strategy at Standard Chartered Plc.

However, the consensus seems to be that it’s largely for short-selling, especially as banks can’t sell via derivatives…

Market participants have borrowed 960 billion yuan of sovereign bonds and 710 billion yuan of policy bank notes this year. They like such securities for short selling and hedging because they’re the most liquid, said David Qu, a market economist at Australia & New Zealand Banking Group Ltd.

The amount of overall bond lending started picking up late last year, when policy makers began intensifying their deleveraging campaign. Financial institutions borrowed 170 billion yuan of notes every month on average in the past year, compared with 92 billion yuan in 2015, when the bond market was stronger.

Commercial banks may be borrowing securities to short, rather than selling government bond futures, because they aren’t allowed to trade the derivatives.

…recent examples of bond sell offs point towards heavy short-selling.

Several recent cases suggest short sales may have exacerbated losses. On Nov. 22, when the yield on China Development Bank’s 10-year debt surged to a high of 5.04 percent for the year, traders more than doubled their borrowing of policy bank bonds from the previous day. A similar jump in borrowing occurred amid a selloff of sovereign notes on Oct. 30.

"The increase in bond borrowing undoubtedly shows the market expects the yields to climb further," ANZ’s Qu said. "We still think the yields will rise, so against this background, the transaction volume of borrowing could continue to climb, accelerating the drop in bonds and even resulting in some overshooting."

Having broken the 4.0% level in November, the benchmark 10-year Chinese government bond yield has retreated in recent days to 3.92%. This is 86 points higher than the level it started the year and is the worst sell-off since 2013. Bloomberg notes that although “Chinese regulators have a history of clamping down on bearish wagers in the stock and currency markets, they haven’t taken any major measures to curb short-selling of bonds”. If none are forthcoming, we expect to see more of the cascading sell-offs in Chinese government bond, corporate bond and equity markets that were a feature of trading in November.  
 

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Syrian state television has confirmed that Israel attacked a military base outside of Damascus overnight on Friday, which Israeli media reports involved both surface-to-surface missiles and airstrikes, while Syria says its air defense systems were engaged and intercepted two missiles. Like other recent strikes inside Syria, the Israeli jets reportedly fired from over Lebanese airspace, in order to avoid both Syrian anti-aircraft missile systems and provoking a Russian response. Though the extent of the damage or casualties is not yet known, Syrian media has confirmed material damage to the base, and other reports indicate mass power outages in some of parts of Damascus occurred immediately after the attack, which SANA says happened at 12:30am local time. 

It appears the base is likely the same one featured in a November BBC report which showed satellite images detailing the purported construction and renovation of an "Iranian military base" near El-Kiswah, which lies 14 km (8 miles) south of Damascus. As we've noted before, the BBC report was dubiously sourced to "a Western intelligence source" and the story was quickly utilized by Israeli leaders to ratchet up rhetoric in preparing its case before the international community for further attacks on the supposed Iranian targets. Israel has long justified its attacks inside Syria by claiming to be acting against Hezbollah and Iranian facilities and arms depots. 

Image source: SANA

#Syria Another Video allegedly showing Syrian Anti Air Defense intercepting one of the Israeli Missiles launched towards the countryside of Damascus http://pic.twitter.com/xIeS4MTjJI

— Ivan Sidorenko (@IvanSidorenko1) December 1, 2017

Indeed, BBC itself used ambiguous language in saying the satellite images "seem to show" construction activity at the site referenced by the intelligence source between January and October this year. However, the images don't actually show much at all related to an Iranian military presence, but merely a series of two dozen large low-rise buildings – likely for housing soldiers and vehicles, which would be expected of any state army or sovereign nation.

Furthermore, the very title of the November piece – "Iran building permanent military base in Syria – claim" – underscores the complete lack of evidence for such a claim, which the BBC notes in the article is "impossible to independently verify."

Yet in reporting last night's Israeli strike on Syria, the BBC uncritically referenced its own prior unconfirmed "claim" to paint a picture that Israel is actually taking action against Iran and Hezbollah: "Israel has hit weapons sites before, in a bid to prevent arms being transferred to Syria's Lebanese ally Hezbollah. Arms convoys in particular have been singled out by the Israeli air force." 

And the BBC followed this with:

Last month the BBC revealed a claim that Iran was building a permanent military base near the town. A series of satellite images showed construction at the location of the alleged base, which was made known to the BBC by a western intelligence source.

 

Israeli Prime Minister Benjamin Netanyahu has previously warned that Israel would not allow Iran to establish any military presence in Syria.

So it appears the BBC is playing war propagandist for Israel, instead of including any level of critical inquiry regarding Israel's unprovoked act of aggression against its neighbor. In short, the BBC spread what it acknowledged to be a mere "claim" based solely on an unnamed "Western intelligence source". Then Israel used that claim to attack Syria, after which the BBC in circular fashion justified the attack based on its own original dubious "claim".

Israeli media and politicians are currently using BBC published satellite images as "proof" that Israel attacked an "Iranian base" in Syria last night. Image source: BBC

Meanwhile, just about every major Israeli newspaper in today's reporting is prominently featuring the prior BBC report as justification for the latest attack on Syria. The Times of Israel provides one such example among many when it says:

The alleged Israeli attack came three weeks after the BBC reported that Iran was building a permanent military base in Syria just south of Damascus. The British broadcaster commissioned a series of satellite pictures that showed widespread construction at the site.

Or see this op-ed in the Jerusalem Post today which references the BBC report as a watershed moment:

The attack raises several questions. Why wait so long to strike the Iranian base? What did “western intelligence sources” hope to accomplish by publishing information on the Iranian base? Why were the Iranians at the site given time to leave by their base becoming so public? The month’s activity appear to be part of a complex game being waged by Iran to entrench itself in Syria and Israel’s attempts to warn the Iranians off. Whatever was taking place at El-Kiswah had plenty of time to be wrapped up and moved if the Iranians were concerned about it being struck. If the reports about Israel’s threats to target sites between 40-60km from the Golan are accurate then it would indicate that the warnings have been manifested.

And nearly every major Israeli media source is also republishing the BBC satellite images as part of their reporting on the overnight strikes.

As we've long pointed out, anytime that Israel carries out acts of aggression against Syria, it can just blame Iran or Hezbollah and escape international criticism or condemnation. International media and Western governments have already demonstrated a penchant for towing the Israeli line whenever Iran can be conceivably blamed as a culprit – evidence or no evidence – this as Prime Minister Benjamin Netanyahu has made it official Israeli policy to oppose Iranian presence in Syria. 

Yet what key facts do the BBC and others leave out?

On Tuesday Israel's own Defense Minister Avigdor Lieberman said that there are no Iranian military forces in Syria, but instead merely stuck to acknowledging "Iranian experts and advisers". In comments to Israel's Ynet news, Lieberman admitted, "It is true that there are a number of Iranian experts and advisers, but there is no Iranian military force on Syrian land."

Clearly, Defense Minister Lieberman's statement flies in the face of claims made by Netanyahu in his speech before the UN General Assembly this year when Netanyahu said, "We will act to prevent Iran from establishing permanent military bases in Syria for its air, sea and ground forces. We will act to prevent Iran from producing deadly weapons in Syria… And we will act to prevent Iran from opening new terror fronts against Israel along our northern border."

In other words, Israel's top military chief very publicly contradicted both Netanyahu's and the BBC's claims of Iranian military bases on Syrian soil, yet the BBC neglected to mention such essential information. Thus, it appears that the mainstream media is preparing us for war… but sadly, this is nothing new.

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Via Dana Lyons' Tumblr,

Despite the S&P 500's jump to new all-time highs, trading in the short-term volatility market is signaling elevated levels of fear.

We mentioned yesterday that some strange developments were afoot in the stock market lately. Well, the strangeness continued through yesterday's market action. Today we look at unusual activity in the volatility market – specifically, in the S&P 500 Short-Term Volatility Index, a.k.a., the VXST. Similar to the VIX, the VXST measures volatility expectations over the next 9 days, versus the VIX’s duration of 1 month. And like the VIX, the VXST typically moves counter to the movement of the S&P 500 (SPX). That hasn’t been the case this week.

Already up some 30% on the week, despite the S&P 500′s solid gain through Wednesday, the VXST hit another gear yesterday. While the SPX followed through to the upside on Thursday, gaining more than 0.8%, the VXST did not back off. In fact, it was up over 12%, despite the gain in the SPX.

How unusual is that, you ask? Since the inception of the VXST in 2011, it is just the 21st gain on any day the SPX rose by at least 0.8% – and easily the largest of those gains.

Not only has the 9-Day VXST been on the rise on an absolute basis, it has also been moving higher relative to the 1-Month VIX. When we see near-term volatility indices rising faster than the further out indices, it is typically a manifestation of heightened fear. Again, this is fairly unusual given the fact that the SPX closed at an all-time high yesterday.

In fact, since 2011, yesterday was just the 18th time the VXST closed higher than the VIX (i.e., the VXST:VIX ratio closed > 1.0) on a day that the SPX closed at a 52-week high.

So we see unusually fearful behavior in the volatility market given the S&P 500′s firm action of late. But what does it mean? Is it signaling something in particular going forward in the stock market?

Typically, we like to fade extreme moves in the markets, especially when they do not conform to normal patterns. So that would suggest bullish overtones for stocks. That said, if there is one market that we have observed as having a better track record than others of actually being “smart money” on a temporary basis, it would be the volatility market.

We are not saying that extreme or consensus moves in the volatility market are normally correct – it is the same as any other market. However, at times we have seen unusual action in the volatility market, in particular in the VXST, that has turned out to be well timed on a limited-term basis. Perhaps we are seeing the payoff of this recent VXST strength here today with the stock market experiencing a rare bout of weakness.

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