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In a “60 Minutes” interview set to air on Sunday, the de facto leader of Saudi Arabia, Crown Prince Mohammed bin Salman, said his country would quickly obtain a nuclear bomb – if arch rival Iran successfully develops its own nuclear weapon.

The Saudi crown prince, currently on a whirlwind global PR tour to relieve his western allies of the bitter aftertaste that resulted from last year’s unprecedented extortion crackdown on Saudi Royals, which left many of them imprisoned in the Riyadh Ritz Carlton for months until they “agreed” to hand over their loot to the cash-depleted government, said that “Saudi Arabia doesn’t want to own a nuclear bomb. But without a doubt, if Iran develops a nuclear bomb, we will follow suit as soon as possible.”

This is not surprising: last month we reported  that Saudi Arabia is moving swiftly to become the next country in the Middle East with nuclear power. The Kingdom is on the verge of striking a deal with the US for the purchase of nuclear reactors despite concerns over its refusal to accept stringent restrictions against the proliferation of nuclear weapons. Although the Saudis have insisted that their programme will be peaceful, they have also refused to rule out the right to enrich uranium to weapons grade. A senior Saudi official was quoted by the Wall Street Journal admitting as much: “I’m not saying Saudi would want to enrich uranium tomorrow or anytime soon but they don’t want to be committed to anything that bans them from doing it. It is quite political,” the unnamed senior official said.

His comments have stirred speculation that one of the purpose of the nuclear program is to compete with Iran and maintain an option to develop nuclear weapons.

Today’s MbS comments confirm that the nuclear arms race between Iran and Saudi Arabia is officially on, even as much of the Middle East is rapidly breathing down their neck.

Meanwhile, the spin from the western media is not that Saudi Arabia remains a rather barbaric country that encourages torture and beheadings, as well as mass arrests of “non-compliantes” is that bin Salman has “ushered in significant changes for women in the conservative Sunni Muslim kingdom, including granting them the right to drive for the first time.” Because women driving offsets everything.

And, to top it off, the 32 year old once again confirmed that Godwin’s law is alive and well, saying that Iran’s Supreme Leader Ayatollah Ali Khamenei “wants to expand,” and that “He wants to create his own project in the Middle East, very much like Hitler… Many countries around the world and in Europe did not realize how dangerous Hitler was until what happened, happened. I don’t want to see the same events happening in the Middle East.“

The interview will be the first with a Saudi leader for a U.S. television network since 2005.

Below is a preview of O’Donnell’s conversation with the crown prince in which Mohammed explains why, in his view, Iran’s supreme leader is nothing less than the second coming of Adolf Hitler.

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Take your pick…

Empire Fed had fallen 4 straight months until today when March printed 22.5 (15.0 exp, 131. prior) with prices paid and new orders higher but employment and outlook lower.

Philly Fed has drifted lower in a zig-zag pattern and March continued that with a downturn to 22.3 (23.0 exp, 25.9 prior) with prices paid lower, new orders higher, employment higher, and outlook higher.

So everything’s opposite.

Empire up, Philly down… both the same now…

 

But as we have noted previously, Soft data is once again diverging higher from the declining real hard data in the US economy…

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Following a mixed bag from CPI and PPI data, both import and export price inflation slowed YoY in February.

While import prices rose more than expected from January (+0.4% MoM vs +0.2% exp), export prices rose less than expected.

China’s ‘export’ prices appear to have bottomed…

Which means China is now sparking an inflationary (albeit very modest) push to the world…

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Back in 2014, Ukrainian member of parliament Nadezhda Savchenko was lauded as a hero for her role in the Donbass military campaign and her prosecution in Russia. She is now accused of plotting to blow up the national parliament in Kiev.

According to local press, the Kiev General Prosecutor’s Office requested that the Ukraine parliament, the Verkhovna Rada, strip Savchenko of legal immunity and allow her arrest. While MPs in Ukraine normally enjoy protection from prosecution, General Prosecutor Yury Lutsenko filed the request on Thursday after Savchenko failed to show up for a scheduled questioning.

Lutsenko threatened he would do so earlier this week while Savchenko was on a visit to Europe in her official political capacity. Savchenko responded by accusing Lutsenko of covering up the involvement in the deadly 2014 Maidan shooting, which escalated mass protest into an armed coup and ultimately brought the current Ukrainian government into power.

“Lutsenko called to go on offensive from the podium. He promised weapons. I saw armed people arriving in a blue van. Those people are now in the parliament,” she said, adding that she saw “[current Rada Speaker Andriy] Parubiy leading the snipers to the hotel ‘Ukraine’, from which shots were later fired.”

Her story confirms what many had speculated previously, namely that the entire violent coup was staged as a “false flag” affair, meant to draw western ire at the then-pro Russian president Yanukovich who was subsequently overthrown with US assistance.

She added that she gave her testimony on these events to people investigating the mass killings, but that led nowhere.

As RT notes, prosecutors want to question Savchenko over alleged links to a man named Vladimir Ruban, who was earlier arrested while trying to smuggle a large cache of weapons from the rebel-controlled part of eastern Ukraine into territory that remains under Kiev’s control. The Ukrainian authorities claim Ruban was planning an armed coup in central Kiev.

Lutsentko told the Rada that the Maidan “Icon” Savchenko was part of the “terrorist” plot, arguably in retaliation for her earlier statements:

“The prosecution has proof that Nadezhda Savchenko, a member of parliament, personally planned, recruited and directed a terrorist attack in this very hall. She wanted to destroy two balconies with grenades and make the dome collapse by mortar fire. The survivors would have been finished off with firearms.”

Responding to the accusation, Savchenko did not deny, but downplayed Lutsentko’s accusations.

“Ukrainians, just think about it. Who of you never thought about taking down that government just like they were calling on us to do at all the Maidan protests? Who didn’t think about blowing up [the president’s administration] or [the Parliament]? Are we living in 1937, Stalin’s times, when thinking about such things is a crime? Talking about it in the street? Only a lazy person now does not say such things,” she told journalists.

Of course, with events in 2014 now a distant memory, we doubt that history textbooks – and countless pro-Ukraine articles written by the western press to justify the stoking of a proxy war between Russia and Ukraine – will be rewritten.

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Via Global Macro Monitor,

You need to sit down for this one.

The JFK-Trump S&P500 analog is only three bps apart on Day 338 after election day.  That is only a one S&P500 point difference, folks.  Absolutely stunning.

We had almost given up on the analog after the Goldilocks wage and employment data last Friday.

The two S&P indices have been tighter only twice, on Day 38 and Day 320.

The Night Before The Big Roll

Today is significant in that it is Day 338, which marked the eve of the big rollover of the S&P500 in 1962.

Current headlines also look similar to those in 1962.  Inflationary pressures leading to a growth scare.   Big steel and nuclear missiles in the spotlight.

Other factors are at play today, including politics, especially after last night’s Democratic win in Deep Red Steel Country.

Then there’s today appointment of Larry Kudlow as head of the N.E.C. to replace Gary Cohn.  Kudlow uses the JFK economic model as a template for economic policy in his latest book, JFK and the Reagan Revolution.   Oddly,  JFK never had the chance to cut marginal taxes.

See here for background on the analog.

Right Here, Right Now

It is now make or break time for the analog.

If it is a true tracker, the S&P500 should rollover hard in the next week or two.

Stay tuned…

 

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Submitted by Bill Blain of Mint Partners

The Ides of March, 10-yrs after Bear Stearns can it happen again? Doh!

The World is a curiously circular place. 10-years ago the collapse of Bear Stearns and its subsequent rescue by JP Morgan ushered in the panic stage of the Global Financial Crisis. The cataclysm came 6 months later when Lehman went down. Yesterday, Donald Trump appointed CNBC Commentator Larry Kudlow to Gary Cohn’s job as director of the NEC. Kudlow was chief economist of Bear when I joined the firm in the early 1990s.

I’m kind of bemused at Kudlow’s appointment, but it proves what an adaptable crow Bear alumni are. Bear was a fantastic place to work. We lacked the glib polish of Goldman Sachs, the white-shoe smoothness of Morgan Stanley, the mighty balance sheets of Citi or JP Morgan, and the depth and range of Merrill, but we were united as the smart yappy mammals snapping round the ankles of the Wall Street dinosaurs. Over the next 10 years we stole a mighty share of their lunches! We did it with aplomb, style and underlying honesty – we were brutally open with our clients: we would succeed by making their deals successful. It was the best of times, and I’m still in touch with many of my clients from these days.

When I was there, the mantra of Ace Greenburg ran the firm – absolute honesty on the trading floor and instant death to anyone skirting the rules. His “Memos from the Chairman” was classic: look after the pennies and the dollars will come, hire PSD graduates: “poor, smart and a deep desire to get rich”, and whenever you receive a paperclip in the post, save it up to send back to a client. We calculated not buying paperclips saved Bear about $100 per annum, but, heck, it worked!

The question today is could it all happen again? Bear Stearns was brought down by the same collapse in confidence caused by the mortgage shock that sank so many of other financial institutions. Back in 2007 the banks were loaded to the gills with leveraged product on the back of the “originate to sell” model – RMBS, CDOs and the many leveraged derivatives of these “toxic” investments.

Today? The world has changed.

Draconian capital regulations and the “hunt for yield”, (caused by central bank ZIRP and NIRP unconventional monetary policy), means most of the risk is more broadly spread across the whole financial environment. Ultimately all the risks laid off by banks and other originators resides somewhere – in insurance companies, hedge funds, credit funds and our pension savings. Risk does not disappear. It just gets spread around – meaning everyone hurts.

10-years of unconventional monetary policy has changed the investment equation – yields are low and spreads between risk asset classes are compressed to levels that simply don’t make risk-sense to those of us who remember the 1980s and 90s. QE has caused inflation – just not where you were looking for it. Its abundantly visible in inflated stock and bond prices. On the other hand – unconventional monetary policy in the form of QE and Low interest rates worked. It kept the financial markets functional.

Now we have synchronous global growth. Estimates all point to continued strength through the next few years. We expect 20% GNP growth over the next 5 years – in theory more than enough to justify current investment valuations. Unconventional is the watchword for the next few years – when else have you seen a nation slashing taxes at the same time as its central bank is considering hiking rates? Or when else has an economy like China successfully moved from export led to a consumption driven model? Populism – the like of which elected Trump – means fiscal policy is back in vogue – infrastructure spend even as the economy recovers?

Yet there are significant risks – liquidity is a major one. Yesterday I read that not a single JGB traded on the Japan bond market. Back when I were young we were trading trillions of yen per day. Now the BOJ owns most of the market. There is no guaranteed liquidity in any bond market – the banks don’t take market-making risk if they don’t have to. Capital can be arbitraged far more cleanly away from underwriting market risks. Once more let me remind you: the New York Stock Exchange has 27 doors saying “Entrance”. There is only one market “Exit”.

Then there is geo-politics.

While Trump is getting away with it thus far, at what point do roadblocks arise as he tries to discipline multiple countries from a USA perspective? What are the risks the Chinese stage a Treasury firesale and buyer-strike (Clue: its far less likely than feared as there is literally nowhere else to park their dosh, but its still a fear).

Then there is politics – what are the implications of populism and the long-term threat of increasing income inequality.

These are just the known threats. What about the “no-see-ums”? Every 10-yrs or so something whaps markets like a well wielded wet-kipper across the face. Maybe it’s a regional crisis, or a financial instrument class exploding, a taper-tantrum, an investment bubble like dot-coms or tulips, or a deeper than expected bear reversal. Confidence is a very fickle thing.

There are a number of known-market truths – like “countries can’t go burst” that have been brutally exposed over the centuries. Maybe it will be European Sovereign Credits? Who knows? What else is wobbling and we just ain’t aware of it yet?

What I do know is people who say: “this time its different”, are invariably wrong. I shall have a quiet toast to Bear later today.

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On Thursday, iHeartMedia – the largest radio conglomerate in the US – finally succumbed to its enormous debt burden and filed for a long-anticipated Chapter 11 bankruptcy protection (iHeartMedia Inc., 18-31274, U.S. Bankruptcy Court, Southern District of Texas) after the company and a majority of its creditors reached an agreement for a prepack deal to eliminate tens of billions in debt while the company continues to operate.

After trying to negotiate a deal with creditors since last March, the company said in a statement that it had reached an agreement in principle with investors holding more than $10 billion of its debt, along with its private equity owners. The pact, intended to give the company a framework for a speedier reorganization, would cut iHeart’s debt by more than $10 billion, it said.

“The agreement … is a significant accomplishment, as it allows us to definitively address the more than $20 billion in debt that has burdened our capital structure,” Chief Executive Bob Pittman said.

Based in San Antonio, iHeart controls 856 US radio stations and employs 17,000 workers worldwide, along with Clear Channel Outdoor Holdings, the largest billboard company in the world. iHeart’s traditional businesses – the radio stations and the Clear Channel Outdoor billboard unit – contribute the bulk of the company’s revenue. The Chapter 11 filing didn’t include the billboard unit.

iHeartMedia said it believes it has enough cash on hand, and will earn enough through regular business operations to keep its business running through the restructuring talks, although in light of the recent Toys “R” Us liquidation which took place six months after that particular Chapter 11, we doubt many existing employees will stay there long.

Given the enormity of the debt, Bain Capital and Thomas H Lee who LBOed the company on the eve of the financial crisis in a massive $27 billion deal which was troubled from the start, will surrender most of their ownership stake per the WSJ.

Recent talks had centered on a plan to hand 94% of the equity in iHeartMedia’s radio business and all of the equity in Clear Channel Outdoor to senior creditors led by Franklin Mutual Advisers Inc. The company and its creditors had been haggling for weeks over how much of the remaining 6% of equity in the radio business should go to the company’s junior bondholders and private-equity sponsors.

Equity stakes had been a key sticking point in recent talks, with creditors demanding almost all of iHeart and 100 percent of its healthy Clear Channel unit according to Bloomberg. Malone’s Liberty Media sought to break the logjam late in February by offering $1.2 billion in new loans in return for a 40% stake. JCDecaux SA, the world’s biggest outdoor-advertising agency, also has expressed interest in buying some of Clear Channel’s assets.

To be sure, bankruptcy was only a matter of time: over the past five years iHeartMedia has spent more on debt payments than it earns. With more than $8 billion in debt maturing next year, the company began talks with creditors on a deal to swap a big chunk of debt for some of its equity. This isn’t the first piece of depressing news for the waning radio industry in recent months: The iHeart filing comes three months after Cumulus Media, the No. 2 radio broadcaster, filed for bankruptcy.

Meanwhile, there are questions about the company’s ultimate viability.

Radio still has enormous reach, but like print, the advent of digital advertising has siphoned off a reliable revenue stream, and left advertisers unwilling to pay the premiums they once happily accepted. iHeart’s broadcast stations still reach a staggering 265 million Americans, more than any other media company (including Google and Facebook). However, newer media such as Spotify’s streaming service and SiriusXM’s satellite broadcasts have cut into the audience and put a damper on sales. IHeart, led by Chief Executive Officer Robert Pittman, countered with its own streaming services and a live-events business offering concerts and awards shows.

iHeart’s most valuable asset – in the eyes of its creditors – is Clear Channel Outdoor Holdings, a subsidiary to focuses on billboards. Two years ago, the company rolled out a couple of on-demand subscription services to try and compete with Spotify and Apple Music, which were eating into radio’s revenues. They have not lived up to the company’s hopes.

As Variety points out, among the music companies listed as creditors on the iHeart docket are Nielsen, owed $20 million, SoundExchange, owed $6.4 million, Warner Music Group, $3.9 million, Universal Music Group, $1.3 million, and Spotify, $2.1 million. Performance-rights organizations ASCAP and BMI are each owed slightly over $1.4 million while Global Music Rights is looking at a $2 million debt.

As Bloomberg notes, the bankruptcy caps a yearlong standoff with lenders and bondholders on its latest debt-cutting plan. The deadline was extended more than 20 times as negotiators exchanged proposals and iHeart sweetened the terms. The current attempt at an accord followed at least a dozen debt revisions over the past decade.

The full bankruptcy filing is below.

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