Tag: finance

It appears the complete decoupling from economic reality of the so-called US equity 'market', combined with the collapse in a data-dependent Fed's credibility – topics we have extensively covered – has reached the mainstream. Barron's always-insightful Randy Forsyth exposes the ugly reality that this is a "Bullard" market and we are just living in it as the flip-flopping Fed head is "the most visible telltale of the shifting winds of Fed expectations. Investors navigating the choppy waters of the financial markets are forced to change tacks accordingly."

Only one thing matters..

Macro-economy? Nope…

 

Micro-economy? Earnings expectations… Nope!

 

Bullard-economy… Yep!

 

Excerpted from Barron's – Is it a bull market or a bear market? Or maybe just a Bullard market?

That is, as in James Bullard, the president of the Federal Reserve Bank of St. Louis. Not only is he among the voters this year on the policy setting Federal Open Market Committee, he is also perhaps the most vocal member of the panel's adjunct, the Federal Open Mouth Committee.

 

…

In his habit of speaking early and often, Bullard has developed a nearly unequaled ability to move markets, which was on display last week. In various appearances, he suggested that the central bank's next interest-rate increase could come as soon as the FOMC's meeting on April 26 and 27.

…

Bullard's point last week was that the conditions that let the FOMC make its long-awaited initial increase in its short-term interest-rate target in December — to 0.25%-0.5%, 25 basis points (a quarter-percentage point) above the near-zero level where it had been held for seven years since the dark days of the financial crisis — were present. That is, unemployment had met the Fed's target, at just under 5%, while inflation was closing in on the central bank's goal of 2%.

But that was far different from what the St. Louis Fed chief was saying just last month

• On Feb. 17, he contended in a speech that it would be "unwise to continue a normalization strategy" — read, rate hikes — while inflation expectations were declining.
• So, in five weeks, Bullard has gone from arguing to hold off on higher interest rates, as the FOMC opted to do at the March 15 and 16 meeting, to putting them on the table as soon as next month.

What has changed so radically in that span?

The market-based measure of inflation forecasts did advance. According to the St. Louis Fed's own charting, five-year forward inflation expectations ( derived from the spread on Treasury inflation protected securities, or TIPS, versus regular Treasury notes) did tick up to 172 basis points on Wednesday, when Bullard made his comments to the New York Association for Business Economics. They had been at 152 basis points on Feb. 17, when he cautioned against rate hikes.

That's a mere 20-basis-point uptick over that span, and 30 basis points from the low touched on Feb. 11. Arguably, what has really changed since then has been the stock market, which rallied sharply, with the Standard & Poor's 500 index jumping more than 12% above its February low to last week's peak. After Bullard made his comments on Wednesday, stocks retreated in tandem with a renewed slide in crude-oil prices and a pop in the dollar, ending their five-week winning streak.

In that period, the world's central banks all got on board with accommodative policies: Interest rates plumbed deeper into negative territory, the European Central Bank expanded its stimulus, and the Fed stepped back from its previous timetable of four rate hikes in 2016. The last suggestion helped spur the 11% correction from the end of 2015 through February, amid the ongoing slide in oil, a toxic deflationary combination.

This was far from Bullard's first market-moving flip-flop. In October 2014, as stocks were sliding ahead of the well-advertised end of the Fed's quantitative-easing program, Bullard suggested that the central bank could continue its bond purchases, again citing too-low inflation expectations. On the date of those comments, Oct. 16, the S&P 500 made its lows, and went on to rally some 14% to its peak last May.

The circumstantial evidence also suggests that Bullard's comments coincided with swings in stocks as much as inflation expectations. With the S&P 500 having mostly corrected its early-year correction, if you will, and the index solidly north of 2000, the St. Louis Fed head adopted a hawkish tone. But he was distinctly dovish when the S&P 500 was in retreat in the low 1800s, most recently in February and previously in October 2014.

This doesn't suggest that the Fed is explicitly targeting the stock market. The causality arguably runs in the other direction. Expectations of more rate hikes result in a stronger dollar; weaker prices for crude oil and other commodities; a flatter yield curve — all disinflationary indicators — and retreats in risk assets, such as high-yield bonds and equities. When rate-increase expectations subside, those markets reverse.

At this point, the federal-funds futures market is definitively pricing in only one 25-basis-point hike this year, with odds of 60% by September and 73% by December, according to Bloomberg. For April, when Bullard thinks an increase should be considered, the futures market's probability is just 6%. Those low odds seem justified by persistently tepid gross-domestic-product growth. The GDPNow tracking model from the Atlanta Fed was lowered last week to a real annual rate of just 1.4%, about half the estimate in early February, and no better than the revised final fourth-quarter GDP report released on Friday.

Bullard seems to be the most visible telltale of the shifting winds of Fed expectations. Investors navigating the choppy waters of the financial markets are forced to change tacks accordingly.

read more here…

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

Fascism… Communism… Socialism… Democratic Socialism… They are all evil!

Spot The Difference…

Source: The Burning Platform

 

Democratic Socialism – like Fascism, Communism, and Socialism – are all rooted in envy and rely on force.

In summary, they are all evil.

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

Submitted by Claire Bernish via TheAntiMedia.org,

Following Portugal’s model, Hawai`i could become the first state in the U.S. to decriminalize all drugs — including cocaine and even heroin.

“[D]espite a longstanding policy that enforces illicit drug prohibition and imposes some of the world’s harshest penalties for drug possession and sales, illicit drug use in the United States has been increasing,” states a resolution that passed, amended by the Hawai`i House Judiciary Committee on Thursday.

Now that it’s been approved, the study’s findings will be due later this year, “no later than 20 days prior” to the convening of the legislature’s 2017 session.

According to testimony from the Legislative Reference Bureau Acting Director, Charlotte A. Carter-Yamauchi, the study will reference Portugal’s successful decriminalization with the caveat of recognizing Hawai`i’s obligation to follow federal law. But the state recognizes the numerous failures and pitfalls of the national war on drugs and its policies, beginning with passage of the Harrison Narcotics Act of 1914.

“Addicts are still considered to be violating the law by possessing drugs and have no legal way of obtaining them. The war on drugs most problematic effects are in its pursuit of dealers and traffickers. This is what has made the business lucrative and violent, caused addicts to steal to obtain drug money, and burdened the tax payers [sic] and criminal justice system,” Libertarian Party of Hawai`i Chair, Tracy Ryan, submitted in support of the study, with the recommendation to examine pre-1914 U.S. drug policy.

Among others offering testimony, the Drug Policy Forum of Hawai`i issued a statement in “strong support” of studying the issue, as well as a recommendation the LRB carry out a “twin study” on “the effects of legalization of marijuana for adult use.” Noting the Supreme Court’s refusal to intervene in a dispute between Colorado, Nebraska, and Oklahoma — stemming from Colorado’s cannabis legalization — the Forum claimed it would be an “opportune time” to conduct the parallel study.

Policymakers in Hawai`i decided to turn to Portugal’s across-the-board decriminalization, which became law on July 1, 2001, for consideration, after the CATO Institute issued a report touting the policy’s success. Cited in testimony by Kat Brady, Coordinator of Community Alliance on Prisons, the report’s conclusion stated:

“None of the fears promulgated by opponents of Portuguese decriminalization has come to fruition, whereas many of the benefits predicted by drug policymakers from instituting a decriminalization regime have been realized. While drug addiction, usage, and associated pathologies continue to skyrocket in many EU states, those problems — in virtually every relevant category — have been either contained or measurably improved within Portugal since 2001 […]

 

“By freeing its citizens from the fear of prosecution and imprisonment for drug usage, Portugal has dramatically improved its ability to encourage drug addicts to avail themselves of treatment. The resources that were previously devoted to prosecuting and imprisoning drug addicts are now available to provide treatment programs to addicts.”

Also noted by Brady in bold from the CATO study as being of particular importance, “Drug policymakers in the Portuguese government are virtually unanimous in their belief that decriminalization has enabled a far more effective approach to managing Portugal’s addiction problems and other drug-related afflictions.”

Numerous individuals, groups, and organizations submitted written testimony in support of Hawai`i’s proposal to study sweeping decriminalization, chiefly because a policy like Portugal’s would view addiction as a health, rather than criminal, issue.

Hawai`i will study virtually every facet of drug policy and its countless repercussions in the state to determine if Portugal’s model, or some variation of it, would be feasible and beneficial to implement. Simply undertaking such research in the United States highlights recent foundational shifts toward ambivalence from government and civilians concerning the failed Drug War — which insider reports indicate may have been largely fueled by the desire to quash dissent and incite division.

Portugal’s decriminalization policy, though not perfect, stands as a solid testament to the benefits triggered when government reframes citizens as people rather than criminals. Whether Hawai`i ultimately follows that country’s lead or not, the study will almost certainly find decriminalization to be worth a try.

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

Benevolent leader. Military genius. Consensus builder. Renaissance man.

These are all descriptions of someone who will quite possibly go down in history as the greatest statesman of the 21st century:

North Korea’s Kim Jong-Un is struggling to stay relevant in a world that has generally forgotten that Pyongyang exists.

Pressing matters of global concern such as the proliferation of ISIS cells in Western Europe, the intractable conflict in Syria, still fraught relations between the West and a resurgent Iran, the return of Russia to the forefront of global politics, and the rise of the Chinese juggernaut have all conspired to permanently relegate Kim’s reclusive nation to the geopolitical backburner. And the young leader isn’t happy about it.

That’s why he’s ratcheted up the nuclear rhetoric over the past six months and sought to convince the international community that the next nation to insult the North will be wiped off the face of the planet by weapons “unknown to the world” (to quote the DPRK).

Of course Kim, like Venezuela’s Nicolas Maduro, depends for political survival on convincing the beleaguered masses that the country is engaged in an epic ideological struggle with the United States. The public has no idea how little anyone in Washington actually cares about the proclamations of the Supreme Leader and if they did, they’d revolt immediately. But as it stands, Pyongyang has managed to preserve the illusion in the five years since Kim Jong-il’s death.

On Saturday, we get a look at a new propaganda video out of the North in which the DPRK warns “American imperialists” against provocations. 

The video is called “Last Chance,” and it contains a series of hilarious warnings from the North to the “gang of cruel robbers” – as Kim is fond of calling US officials – in Washington. “If the American imperialists provoke us a bit, we will not hesitate to slap them with a pre-emptive nuclear strike,” the clip cautions. “The United States must choose! It’s up to you whether the nation called the United States exists on this planet or not.”

Enjoy.

via Zero Hedge http://ift.tt/1XUPXZ9 Tyler Durden

Submitted by Eugen von Bohm-Bawerk via Bawerk.net,

Get beyond endless Latin American headlines burning column inches and you come to far broader strategic conclusion: The seven ‘ugly Latino sisters’, namely Brazil, Venezuela, Ecuador, Bolivia, Colombia, Mexico and Argentina are all deep political trouble from collapsed benchmark prices. It’s merely a case of who’s in more advanced states of political decay where left leaning governments’ can’t hang on much longer vs. those trying to buy a bit of time with more ‘centrist’ positions. In either case, it’s going to be a classic example of too little too late where the seven ugly sisters have committed at least seven deadly sins when it comes to resource mismanagement over the past decade. This isn’t about whether crisis can be avoided, but how bad the impacts will be. Another ‘lost Latino decade’ beckons.

The ugliest twins are obviously Brazil and Venezuela right now. We firmly expect Rousseff to be impeached next month on the back of endless corruption scandals, and the drastically ill-judged return of Lula that poured far more oil on corruption cover up flames. Watch for Michel Temer to take over the reins of a coalition PMDB government, busily negotiating posts behind closed doors with other players to tee up a formal Worker’s Party split to form a caretaker government through to 2018. How much Temer can get done depends on how far the outstanding ‘car wash’ scandal still rubs off on PMDB factions for major economic reforms, where the rot still runs pretty deep. Initial rhetoric (and inevitable market lifts) on supposed ‘structural reforms’ and far broader liberalisation measures remain unlikely to play through. Although it’s possible Petrobras might push through 2017 licencing rounds purely for political appearances, it’s not going to deliver tangible results in current price environments. Dig just ‘under the salt’, and Petrobras leverage will remain high; local content even higher. Until Brazil can properly clear its electoral decks in 2018 Mr. Temer is going to have a very limited mandate. If anything, his core challenge is trying to make sure his caretaker outfit doesn’t end up ‘washed out’ day one, given Temer is by no means beyond political reproach, with the PMDB basically as corrupt as the ruling PT. The smart move for Brazil would actually be calling fresh elections with the TSE (electoral authority) invalidating the entire Rousseff-Temer 2014 ticket to put a line under what currently shapes up to be the worst commodity driven economic crash Brazil has ever experienced. Regrettably, Brazilian politics has nothing to do with national interests at this stage, and everything to do with narrow self-preservation societies.

 

Right on cue, that points us towards Venezuela where exactly the same PSUV dynamics are in play. Rather than trying to kick Maduro out of office, the PSUV is desperately trying to keep him in to take the interim pain (see Can Maduro Mayhem Last to 2017). The last thing they want is splintered opposition MUD forces launching a five month ‘recall referendum’ half way through Maduro’s term to remove him by the end of 2016. Not when the Party can actually ‘Constitutionally’ replace Maduro out of their own accord into early 2017 without needing a national election before 2019 to do so. As we’ve previously flagged, rear-guard PSUV tactics will include leaning heavily on the National Election Board (CNE) and various courts to undermine any referendum ballot. And continuing to extend ‘emergency rule’ for Maduro without the National Assembly’s (Parliamentary) blessing to do so. That debunks any notion Venezuela is even pretending to run its affairs by Constitutional strictures at this stage. Good old fashioned PSUV power grabs are back in vogue. But whether the Party can realistically drag things out that far depends on how much Chinese cash keeps coming Caracas’s way given $50bn sunk PSUV costs – and more importantly – whether economic collapse sparks mass social unrest. Short term power plant outages are getting Venezuela headlines as a potential supply problem of late, but the broader concern remains complete state collapse, and associated ‘transitional military rule’ for the generals to safeguard whatever’s left of dwindling economic rent, without being put behind MUD bars. Given structural default is now inevitable in Venezuela where the ‘government’is spending 90% of all oil exports purely to service debts, supply side losses are almost certain to accrue under Maduro’s remaining rule. Venezuela isn’t just ugly, it’s the proverbial ‘elephant man’ of Latino politics.

Ecuador doesn’t look all that much better as the ‘surrogate sister’ of the Latino left. The OPEC minnow has seen a spate of public protests against the Correa presidency amid bloating deficits, tighter payments and dire need to find new forms of external funding. Correa himself can’t stand in 2017 after serving three terms since 2006, and appears willing to go relatively quietly without attempting Constitutional coups to extend his terms any further having unsuccessfully played that card in 2014. That said, he’ll look to current VP, Lenin Moreno to protect AP interests that isn’t going to make for a particularly ‘free or fair’ ballot in 2017 for more centrist candidates, Guillermo Lasso to contend. Petroecuador will be the cash cow of choice to keep the AP in control, with an injudicious mix of poor governance and Chinese loans about all Quito has left in the locker.

Bolivia is obviously more of a gas story, but exactly the same political direction of travel applies to Evo Morales in La Paz where the aging leader lost a referendum to eliminate presidential term paving the way for his exit in 2019. The result will see fierce internal infighting across the Movement for Socialism Party for a prospective replacement, with Morales trying to secure his rentier interests behind the scenes. The fact he’s come under intense criticism for ongoing corruption around his office, including embezzlement and awarding of contracts to Chinese companies where he has ‘personal links’ remain a far broader trend across the Americas. When money runs out, the dirty linen starts to show. The only question for Bolivia is whether Morales will ultimately go smoothly, and whether the MAS can start charting more credible policy paths post-2019. Prospects for that aren’t particularly good in our view.

That duly gets us onto some of the supposedly politically prettier sisters of Colombia, Mexico and Argentina that are already on a more centrist path. The problem here isn’t whether they start making smarter political choices, but whether they’re going to be able to stay the course under lower price pressures.

Being fair, President Santos hasn’t done much wrong in Colombia beyond staking allhis political capital on securing a peace agreement with FARC up to 2018. That might ultimately come good given Santos can’t stand for re-election third time round, but broader militant activities from the ELN (National Liberation Army) has already becoming an additional problem. Parse that to the corrosive effect of bandas criminales, and Santos needs to make a critical choice whether he keeps going ‘all in’ on peace deals towards 2018, or starts pulling back to give his own Partido de la Unidad Nacional candidates a better electoral chance in a couple of years’ time. Everyone knows even if Santos strikes a FARC deal to cut the head of the ‘paramilitary snake’, splinter groups will almost certainly proliferate as a result, continuing to hit Ecopetrol operations across the board. Previous attacks on the flagship Bicentennial pipeline gives us a decent proxy for why the national champion will struggle to get much beyond 1mb/d production, irrespective of more stringent contractual terms on the table. Once Santos is gone, the chances of Colombia taking a hard-line turn for the worse back against paramilitary organisations actually remains acute. Under all core political scenarios, the 2000s Colombian supply growth story has had its day.

Meanwhile President Nieto has staked his entire house on PEMEX opening up along a more centrist path. Despite PEMEX still registering massive $30bn year on year losses, depletion setting in fast, with major midstream gaps and massive (circa $830bn) investment deficits, the prospects of this sticking over the longer term look increasingly slim. Beyond price collapse, the fundamental problem is Nieto can’t stand again in 2018 under six year limits, with broader PRI support for longer term openings far from secure. So called round zero in 2014 and P2 (probable) reserves (2015) might be enough to steady the ship on PEMEX depletion. But whether that’s really going to follow through onto Deep Water Gulf of Mexico acreage or the complex Chicontepec formations towards 2018 simply isn’t going to happen given Nieto won’t be around to see PRI initiatives through. If anything, the lower oil prices go, the more likely it becomes that Andres Manuel Lopez Obrador stands a serious chance of winning the 2018 election on a far left PRD ticket that’s going to ward off any prospective investment from 2017 on, given the clear political risk entailed. Nieto was brave jumping through a narrow window of political opportunity to open PEMEX up; but it’s looking increasingly likely to close long before his six year tenure is up.

All that just leaves Argentina as the final Latino‘sister’ that’s applied plenty of Cambiemos (Let’s Change) lipstick under Mauricio Macri, who finally managed to overhaul incumbent FPV advantages to ease Kirchner out of Presidential office in October 2015. The problem is that Argentina’s problems now run so deep, Mr. Macri’s room for manoever is relatively limited. Congress is still stashed full of Peronist hardliners that will cling on for all their worth in 2017 mid-terms to stave off majority Cambiemos rule. Any initial economic medicine applied by Macri is also likely to plunge Argentina further into contraction, not growth. Measures that will come with blowback political consequences. More likely than not, YPF’s core task will be looking at restoring self-sufficiency once more sensible domestic pricing structures are in place, not going after dead, Vaca Muerta cows in the foreseeable future.

We could probably go on with even more Latino examples, but bring that all together, and ‘seven ugly sisters’ is probably a bit unfair on Latin America. Seven dwarfs is probably a more fitting epithet, without snow white commodity prices to commodity prices to fall back on.

via Zero Hedge http://ift.tt/1Ukgf94 Tyler Durden

Several weeks ago, Chinese President Xi Jinping paid a visit to CCTV and People’s Daily to tell them what a great job they’re doing. The feeling, The Shanghaiist quipped, was mutual.

The media, Xi said while making the rounds, should “reflect the will of the Party, mirror the views of the Party, preserve the authority of the Party, preserve the unity of the Party and achieve love of the Party, protection of the Party and acting for the Party.”

So what you’re saying is that it’s all about the Party?

As unequivocal as that might sound, someone at Wujie News, which is jointly owned by SEEC Media Group, Alibaba and the government of Xinjiang, didn’t get the message because on March 4, an open letter signed by “loyal Communist party members,” was published to Wujie’s website. Among other things, it accused Xi of “indulging in a personality cult,” criticized the President’s handling of the economy, and, perhaps most notably, contained threats against the Party leaders family.

“We are loyal communist. On the occasion of the “two sessions” held, we write this letter to you, asking you to resign from all party and state leadership positions,” the letter reads. “Made this request, out of consideration of the Party’s cause, out of the country and nation’s future to consider, too, it is out of consideration for you and your family own security.”

Needless to say, the letter was taken down immediately. Shortly thereafter, the “disappearances” began, starting with a 35-year-old political reporter called Jia Jia. Jia, who has nearly 100,000 twitter followers, vanished from a Beijing airport en route to Hong Kong on March 15. When he didn’t show up for a business luncheon the next day, his friends began to worry.

Jia’s lawyer Yan Xin would later confirm that his client had indeed been arrested. “There were police officers from the airport branch assisting in the case, so they could confirm Jia was taken away,” Yan said last Sunday. Jia told friends before departing for Hong Kong that he suspected he may be detained.

Today, Yan confirmed that Jia has been released by authorities.  

“Jia Jia, who was taken away by police on March 15 from a Beijing airport, on Friday night informed friends in a private social media group of his safety,” AP reports. “His lawyer Yan Xin confirmed that Jia was free, had met his wife and  although he was staying in a hotel could return home any time.”

“Thank you, everyone,” Jia posted in the social media. “I dare not forget your concerns.“

Right. And Xi isn’t about to “forget” that someone, even it wasn’t Jia, threatened his wife and, probably worse in his eyes, the Party. As AP goes on to note, the “disappearances” have continued. “The president of Watching.cn, Li Wanhui, two top editors ” including Editor-in-Chief Ouyang Hongliang “, two site technicians, and nine other technicians working for a technology firm that provides support to the site are all reported missing.

That’s not all. “A New York-based Chinese Internet activist said on Friday that China’s authorities have detained three members of his family in connection with an open letter calling for the resignation of President Xi Jinping,” Reuters reports, adding that “in an interview in New York where he lives, Wen Yunchao said his parents and younger brother were ‘taken away’ by the authorities on Tuesday and have disappeared, days after the government ‘harassed’ his family to investigate his suspected involvement in distributing the letter.”

“There is no reasonable excuse for them to take away my parents and my brother, no matter how you look at it,” Wen said. “I’ve told them very clearly I’m not the author of the letter, I did not aid anyone in broadcasting the letter, and third, that I did not post the letter on any website,” he added.

But Xi isn’t buying it. Or if he is, he’s not buying that Wen doesn’t know who’s ultimately behind the publication of the lengthy missive. “Wen said his parents told him by phone earlier this month that the authorities promised to stop harassing them if Wen disclosed to the government who wrote the letter and how it was published,” Reuters goes on to recount.

In other words: “Just tell us who we should shoot and we’ll give you your family back.”

The problem for Xi and the Party here is that this comes at a particularly sensitive time. The public is already restless over the threat of a severe economic contraction and millions of layoffs loom large on the horizon as Beijing looks set to eliminate excess capacity in the industrial sector by winding down and/or restructuring the country’s collection of inefficient, elephantine SOEs. Those job losses are already creating social unrest and just about the last thing Xi needs is for the public to rally behind a political martyr. Amnesty International isn’t helping the politburo by making statements like this: “The authorities should call off the political hounding of those suspected to be behind the open letter and release all those detained in connection with it.”

So stay tuned to see who ultimately gets the blame for this and how the Chinese media – which, as you can see from the image shown above, are absolutely terrified of thrilled with Xi – convey the story to the increasingly disaffected masses. 

For those who missed it, the letter at the center of the controversy is reprinted below in its entirety. While we’re reasonably sure the politburo is no match for Tyler Durden, if we turn up missing, you’ll know who to blame…

*  *  *

Xi Jinping, hello.

We are loyal communist. On the occasion of the “two sessions” held, we write this letter to you, asking you to resign from all party and state leadership positions. Made this request, out of consideration of the Party’s cause, out of the country and nation’s future to consider, too, it is out of consideration for you and your family own security.

Xi Jinping, you since 2012 since the party’s “eighteen” was elected the new general secretary of the Central Committee, determined to fight corruption tiger, party corruption and other malpractices improved. You personally served more than one team leader of the Central Leading Group for comprehensive deepening reform, but also a lot of work for economic development, got some people’s support, which we see in the eyes.

However, Xi Jinping, we have to point out that it is precisely because this way you will be fully caught up power into their own hands, direct decision-making in all areas of political and economic ideology and culture, have caused unprecedented problems and crisis.

Politically, you abandoned the party’s fine tradition, in which the most significant is to have leaders at all levels to support your position as the core, abandoned the democratic system as the core set of the main principle of collective leadership of the Standing Committee, excessive concentration of power. You strengthen the functions of the NPC and the CPPCC Council committee at the same time, weakening the independence of the national authorities of each, including Premier Li Keqiang and other comrades, including the terms of reference has been greatly affected. Meanwhile, the Central Discipline Inspection Commission departments and units stationed in the patrol group and state-owned enterprises has become a new system of power, leading to unclear responsibilities party committees at all levels of government decision-making chaos.

Diplomatically, you abandoned Deng Xiaoping’s “low profile” consistent policy of blind shots, not only failed to create a good surrounding international environment, but also to the DPRK successfully conducted an atomic bomb and test missiles, forming a huge threat to China’s national security; also the United States successfully return to Asia, with South Korea, Japan, the Philippines and Southeast Asian countries formed a united front to jointly contain China. In dealing with Hong Kong, Macao and Taiwan issues, fails to comply with Comrade Deng Xiaoping wise “one country two systems” concept, dilemma, leading Democratic Progressive Party won power in Taiwan, Hong Kong and the rise of independent forces. Especially in the issue of Hong Kong, in an irregular way back to the mainland to Hong Kong booksellers, on the “one country two systems” pose a direct injury.

Economically, you pass the Central Financial and Economic Leading Group, directly involved in the formulation of macro and micro-economic policies, leading to a huge upheaval China’s stock and property markets, hundreds of thousands of people of wealth vanished, devastated. Supply-side capacity to reform and policy, resulting in a large number of state-owned central enterprises laid off workers; private business failures blunts, large numbers of people unemployed. “Along the way” strategy, large foreign exchange reserves into chaos countries and regions, but no return. Excessive consumption of foreign exchange reserves, the depreciation of the RMB into the cycle, everyone’s confidence in a decline in the national economy is about to collapse into a situation, people wanted change.

On the ideological and cultural, you stressed that “the media surname Party”, while ignoring the people of the media, the whole nation was stunned; you support lower Zhou Xiaoping Hua Qianfang this level of people to become the representative of the literary front, so many writers and artists chilling; you condone singing the praises of cultural institutions directly to you, your wife Peng Liyuan sister CCTV Spring Festival Gala served as producer, director, so that we would have loved to be your personal Spring Festival a propaganda tool.You condone these cult of personality, and not to “jump Yee central”, to engage in “a party statement” approach, let those of us who experienced the “Cultural Revolution” can not help but secretly worried – our party, the state and the nation can no longer afford new Shinianhaojie! .

Xi Jinping, you carry out anti-corruption high pressure, to correct unhealthy tendencies in the party’s helpful role, but because there is no supporting measures to keep up, the objective, but also led to the current government at all levels slack phenomenon, officials do not act timid, people complaining It has further exacerbated the deterioration of the economic situation. We also see that the current anti-corruption, target only focus on the struggle for power. We fear that this practice intensified power struggle within the party, also may give you and your family bring risks of personal security.

Therefore, we believe that Xi Jinping, you do not have to lead the party and the country into the future ability, no longer suitable for the post as general secretary. We ask you for the Party cause, for long-term stability and security for you and your family, resigned from all positions of the party and the country, so that the CPC Central Committee and the National People’s alternative elite, aggressive lead us into the future.

Loyal Communists

March 2016

via Zero Hedge http://ift.tt/22CL8uf Tyler Durden

Following yesterday’s breakdown of 2015 GDP growth components, there was little surprise that the biggest source of “growth” for the US economy in the past year was healthcare growing at an absolute dollar pace nearly double that the second highest category (recreational vehicles of all things, because in the eyes of the BEA the US has gone on unprecedented Winnebago spending spree).

It was also no surprise that the biggest source of “growth” within healthcare was the tax known as the “Affordable Care Act”, which of course is woefully named: as we reported yesterday, a recent report from Freedom Partners Health found that health insurance premiums have increased faster than wages and inflation in recent years, rising an average of 28 percent from 2009 to 2014 despite the enactment of Obamacare, “or rather “because of.”

Ironically, without the Obamacare tax, US growth in 2015 would have been as much as 0.5% lower, pushing GDP down from the upwardly revised 2.4% to 1.9% or lower.

But while we knew that on the margin the biggest source of growth in the US economy is now a tax cleverly masked as “discretionary spending”, how does healthcare stack up in absolute dollar terms.

It is here where we were genuinely surprised because what we found was disturbing.

It has long been known that of the real $16.5 trillion in US GDP, some 70% is due to personal consumption and spending (68.8% to be precise), and that the single biggest component of US consumer spending has for decades been housing. After all there is a reason why the saying “American Dream” implies the purchase of a house (sadly this has been downgraded to renting in recent “New Normal years). And, in Q4 this was still the case: some $1.973 trillion of the total annualized spending (aka growth) came from outlays on housing and utilities.

What was troubling is that over the past 5 years there has been virtually no growth when it comes to spending on housing.

What was even more troubling is that the second highest spending category, Health Care at $1.9 trillion, has been soaring in recent years, more than offsetting the housing weakness, and as the chart below shows, the US economy is within 2-3 quarters of the moment when outlays on healthcare (and Obamacare) will surpass spending on Housing.

Which means that some time in 2017 (if not this year), the components of US GDP will be such that the biggest source of “growth” will be a mandatory tax, if only for “Supreme Court purposes”, while appearing in the GDP calculation as the biggest component in both absolute and growth terms when it comes to discretionary consumer spending.

To this we can only say: well done to the “free market economists” in charge of US growth.

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

Hours after brothers Khalid and Ibrahim El-Bakraoui and two other men (one of whom may or may not have been bombmaker Najim Laachraoui) detonated explosives-laden vests and luggage at the Brussels airport and metro murdering nearly two dozen people and wounding scores more, we were alarmed but not entirely surprised to see Belgium evacuate the Tihange nuclear power plant.

We say we weren’t entirely surprised because way back on November 30, a raid on an Auvelais home rented by Mohamed Bakkali – who was arrested four days earlier and may have used the residence to shelter the Paris attackers including the supposed leader of the Brussels cell Abdelhamid Abaaoud – turned up an hours-long (some reports had suggested it was a mere 10 minutes long, an apparently incorrect assessment) surveillance tape that appeared to show a top Belgian nuclear official (see here).

“A small video camera stashed in a row of bushes silently recorded the comings and goings of the family of a Brussels-area man with an important scientific pedigree last year, producing a detailed chronology of the family’s movements,” Foreign Policy wrote, late last month. “At one point, two men came under cover of darkness to retrieve the camera, before driving away with their headlamps off, a separate surveillance camera in the area revealed later.”

If, as some suspect, those two men were the Bakraoui brothers, it would suggest that the Brussels cell which is now well on its way to going down in jihadist lore as the most “successful” sleeper cell in the history of radical Islam, was in the advanced stages of trying to procure the materials needed to build a dirty bomb.

Belgian lawmakers were beside themselves when they learned of the video, as it was apparently kept secret for months. “Your services possessed this videotape since Nov. 30, and the nuclear control agency was informed immediately,” said Jean-Marc Nollet, a Parliament member from Ecolo, told interior minister, Jan Jambon. “So I don’t understand how you could have been in possession of this video since Nov. 30, but on Jan. 13, when I questioned you on this, you answered, ‘There is no specific threat to the nuclear facilities.’”

We don’t really understand that either, but we imagine Belgian authorities will be discussing the issue quite a bit in the weeks and months ahead because it’s now emerged that on Thursday, Didier Prospero was shot and killed while walking his dog in Charleroi (about an hour drive from Brussels). Why should you care about Didier? Well, because he is (or “was”) a security guard at Tihange. His security pass was stolen as he lay dying.

“The murder was completely ignored and was committed on Thursday night in the judicial district of Charleroi,” Derniere Heure reported. “A security guard, accompanied by his dog, was shot in the early evening. His badge was stolen.”

The badge itself was immediately deactivated. It’s as yet unclear whether this is connected to Belgian jihadists, but it would certainly be difficult to write it off as a coincidence. Well, it would be difficult to write it off as a coincidence unless you are a Belgian prosecutor. In that case it would be easy. “”A terrorist track is not considered in the case,” the Charleroi prosecutor’s office told TASS on Saturday.

Meanwhile, the mainstream media is beginning to sound the alarm bells on the threat to Belgium’s nuclear infrastructure. Here, for instance, is The New York Times:

The investigation into this week’s deadly attacks in Brussels has prompted worries that the Islamic State is seeking to attack, infiltrate or sabotage nuclear installations or obtain nuclear or radioactive material. This is especially worrying in a country with a history of security lapses at its nuclear facilities, a weak intelligence apparatus and a deeply rooted terrorist network.

 

On Friday, the authorities stripped security badges from several workers at one of two plants where all nonessential employees had been sent home hours after the attacks at the Brussels airport and one of the city’s busiest subway stations three days earlier. Video footage of a top official at another Belgian nuclear facility was discovered last year in the apartment of a suspected militant linked to the extremists who unleashed the horror in Paris in November.

 

Asked on Thursday at a London think tank whether there was a danger of the Islamic State’s obtaining a nuclear weapon, the British defense secretary, Michael Fallon, said that “was a new and emerging threat.”

 

While the prospect that terrorists can obtain enough highly enriched uranium and then turn it into a nuclear fission bomb seems far-fetched to many experts, they say the fabrication of some kind of dirty bomb from radioactive waste or byproducts is more conceivable. There are a variety of other risks involving Belgium’s facilities, including that terrorists somehow shut down the privately operated plants, which provide nearly half of Belgium’s power.

 

The fears at the nuclear power plants are of “an accident in which someone explodes a bomb inside the plant,” said Sébastien Berg, the spokesman for Belgium’s federal agency for nuclear control. “The other danger is that they fly something into the plant from outside.” That could stop the cooling process of the used fuel, Mr. Berg explained, and in turn shut down the plant.

 

The revelation of the video surveillance footage was the first evidence that the Islamic State has a focused interest in nuclear material. But Belgium’s nuclear facilities have long had a worrying track record of breaches, prompting warnings from Washington and other foreign capitals.

 

Some of these are relatively minor: The Belgian nuclear agency’s computer system was hacked this year and shut down briefly. In 2013, two individuals managed to scale the fence at Belgium’s research reactor in the city of Mol, break into a laboratory and steal equipment.

 

Others are far more disconcerting. In 2012, two employees at the nuclear plant in Doel quit to join jihadists in Syria, and eventually transferred their allegiances to the Islamic State. Both men fought in a brigade that included dozens of Belgians, including Abdelhamid Abaaoud, considered the on-the-ground leader of the Paris attacks.

 

One of these men is believed to have died fighting in Syria, but the other was convicted of terror-related offenses in Belgium in 2014, and released from prison last year, according to Pieter Van Oestaeyen, a researcher who tracks Belgium’s jihadist networks. It is not known whether they communicated information about their former workplace to their Islamic State comrades.

The reference there is to Ilyass Boughalab, a 26-year old Moroccan man who worked at Doel before travelling to Syria. After passing a background check in 2009 he was given a job inspecting welds. He had access to highly secure areas of the reactor. He was, according to employer AIB-Vincotte, an efficient employee whose work was “flawless.”

One can only assume that Boughalab discussed his time workinig at Doel with other members of Islamic State and it seems entirely likely that someone in the organization would have conveyed his specialized experience up the chain of command. It’s easy to imagine that he may very well have met with more senitor members of the group if they indeed learned about his employment history.

Whatever the case, it’s fairly clear that there are any number of ways for jihadists to exploit Belgium’s notoriously lax nuclear security apparatus and although one would think that the more straightforward approach would be to simply bomb the facilities or have an insider sabotage something, the threat of a dirty bomb is quite real. We’ll close with a short quote from Laura Holgate, the National Security Council’s senior director for weapons of mass destruction: “I’m surprised it hasn’t happened yet.“

*  *  *

As an aside, Belgian authorities have identified the third suspect in the airport bombings. The man is one Faycal Cheffou, a freelance journalist. He was reportedly detained outside the prosecutor’s office with two other men on Thursday in the sweeping raids that led to 6 arrests.

via Zero Hedge http://ift.tt/1q7BcaA Tyler Durden

Back in October when we first looked at ground zero of the commodity price collapse, we found something striking: as of the end of 2014, half of Chinese commodity-linked companies with corporate debt were totally insolvent – based on Macquarie data they were unable to cover even one interest payment (let along debt maturity) with existing cash creation.

And since in the intervening time period, both commodity prices have dropped far lower, while Chinese corporate debt has proceeded to soar exponentially, we said it was “safe to assume that up to two-third of Chinese commodity companies are now at imminent danger of default, as they can’t even generate the cash to pay down the interest on their debt, let alone fund repayments.”

We concluded that “we fully expect this to be the source of the next market freakout: when the punditry turns its attention away from macro China, which has more than enough problems to begin with, and starts to focus on the cash flow devastation in China at the micro, or corporate, level.“

To be sure, the Chinese government has done everything in its power to delay this day of reckoning and mask just how extensive the devastation at the local level is, by focusing its entire recently concluded People’s Congress on the topic of sustainability and debt leverage, going so far as to propose a wholesale, and utterly mind-boggling, debt-for-equity exchange at the bank level, one which would involve the nationalization of China’s insolvent commodity enterprises. Alas, we along with most rational observers, are skeptical this plan would ever get off the ground, as it would mean encumbering banks not with secured if impaired loans, but with unsecured equity in still insolvent companies, in the process making China’s solvency problems even worse.

That said, the punditry has indeed started to focus away from macro China and to the “devastation at the corporate level”, most notably in a recent Reuters article which suggested that “China’s campaign to slim down its bloated industries could be derailed by more than $1.5 trillion of debt in its steel, coal, cement and non-ferrous metal sectors, which threatens to overwhelm local banks.“

The story is well known: China is providing more than 100 billion yuan ($15 billion) in the next two years to handle layoffs from coal and steel, but that will only be made available once debts have been settled. Critics say there is no clear mechanism for tackling the debt burden, which will put huge strain on the weakest sections of the banking sector.

The debt figures, revealed in papers submitted to China’s parliament this month, highlight the dilemma facing state firms grappling with surplus capacity and how difficult it will be to pull off this central plank of Beijing’s economic reform plans.

 

Costs for the estimated 1.3 million coal-sector layoffs alone are as much as 195 billion yuan, and coal industry delegates attending parliament urged government to provide more support to deal with the mounting debts of hundreds of stricken “zombie” firms.

 

* * *

 

A lawyer who handles steel industry non-performing loans for mid-sized Chinese banks said: “Banks’ fear is not without reason. The steel sector’s continued slump increases the difficulty of disposing of outstanding non-performing loans.”

The four sectors targeted in the battle against overcapacity owe around 10.2 trillion yuan ($1.56 trillion), according to documents submitted to parliament by Wang Mingsheng, head of Anhui-based coal firm Huaibei Mining.

China’s statistics bureau puts coal and steel debts alone at 8 trillion yuan, of which about a third is bank debt. If 20 percent of that were to go bad in 2016, which industry analysts say is not unrealistic, it would raise Chinese banks’ non-performing loans by nearly half.

Therein, as the bard said, lies the rub, and explains why China will continue jawboning and talking instead of taking any decisive action as there is simply no effective way out: once the debt starts being marked to something resembling fair value, it will unleash a tsunami of insolvencies which Beijing will be helpless to stop, which would then lead to mass layoffs in the tens of millions, social unrest and possibly culminating with civil war as tens of millions of angry workers are no longer able to make enough money to feed their families.

* * *

And while Beijing dithers, and does its best to kick the can as far as it can without doing anything, it was too late for one person: on Friday morning, Dongbei Special Steel Group reported that the company’s Chairman Yang Hua, 53, was found dead after hanging himself in his residence. 

We tried to find if the company is at or near insolvency and were unable to confirm this suspicion until last night, when a Chinese news report confirmed that as we expected, the company is indeed insolvent and will most likely be unable to make a 800 million yuan bond payment. To wit:

Dongbei Special Steel announced on the evening of March 25 that, due to tight liquidity, deposit principal and interest payment uncertainty, 800 million yuan bonds maturing 27 15 Eastern Steel CP001 (called the Northeast special steel Group Co., Ltd. 2015 year the first phase of short-term bonds) or face default.

 

It is reported that the current short margin issue size of 800 million yuan, 6.5% interest rate, the total amount of principal and interest payable of 852 million yuan, the lead underwriter for the China Development Bank.

 

Joint credit 25 afternoon announcement in Chinese currency network, in view of the Northeast Special Steel, chairman of death by hanging and 15 Eastern Steel CP001 is about to expire payment of principal and interest, will be included in the Northeast Special Steel lowered the credit rating watch list.

 

At 13:20 on the 24th, the Dalian City Public Security Bureau received a report, found that the chairman Dongbei Special Steel Group Co., Ltd., party secretary Yang Hua (male, 53 years old) Death by hanging at his residence. At present, the authorities are conducting investigations.

But why is this a problem: historically the Chinese government, either directly or indirectly through state-owned banks has mostly bailed out insolvent companies, especially those in the commodity sector. Has something changed this time? It appears the answer is yes.

Earlier this week, Caixin reported that Guangxi Nonferrous Metals Group Co., a state-owned enterprise in the southern region of Guangxi, said in a statement given to the Shanghai Clearing House, on February 22 that it filed an application for bankruptcy in Nanning Intermediate People’s Court in December. What makes this bankruptcy particularly notable is that Shanghai Clearing House is a state-backed financial institution for the interbank market. In other words, the government is now allowing even state-backed companies to go under, a radical departure from its recent bailout ways.

Guangxi Nonferrous owed 14.51 billion yuan to 108 creditors, namely subsidiaries, financial institutions, suppliers, construction companies and private bondholders. The largest creditors are a subsidiary named Guangxi China Tin Group Co. Ltd., which is owed 1.63 billion yuan, and China Development Bank, which holds a debt of 1.60 billion yuan.

 

The firm has received government subsidies but still reported a loss of 2.29 billion yuan from 2012 to 2014, its financial reports show. In June last year, Guangxi Nonferrous said it was having difficulty repaying its bonds, citing excess capacity and falling prices.

 

Guangxi Nonferrous was founded in 2008 in Nanning by the State-owned Assets Supervision and Administration Commission, a central government agency that oversees state-owned enterprises, with registered capital of 1.16 billion yuan. The Guangxi government wants to protect its nonferrous metals industry.

 

“The nonferrous industry is facing downward pressure and the company had limited return on new investments in the past few years,” a person close to Guangxi Nonferrous said. “These factors have resulted in tight cash flow.”

All of this was expected and is proceeding just as we warned last October: after all there is only so far you can stretch reality before the lack of cash flow catches up to you.

But what makes this default especially curious, in addition to the fact that the bankrupt company is an SOE, is that the lender in the case of Guangxi is the same as that behind the imminent, and now tragic bankruptcy, of Dongbei: China Development Bank.

The problem was solved when China Development Bank agreed to help, a bank employee told Caixin. But Guangxi Nonferrous defaulted on two other bond payments that were due in November and February, he said. The company is being restructured, several people with the knowledge of the matter said.

 

Guangxi Nonferrous’ executives met with creditors on March 18 to discuss restructuring, but no detailed plans were drawn up, the sources said. The management team said at the meeting that the Guangxi government promised to see that the restructuring was done in six months.

And while we lament that there is no way to buy CDS on China Development Bank, these two defaults hint at big trouble ahead for insolvent corporate China.

For the past four years China had effectively bailed out and otherwise “saved” all of its insolvent companies, but that period of wholesale rescues now appears to be over: are these two defaults confirmation that the tipping point in how Beijing handles bankruptcies, has finally arrived.

If so, how many more suicides by hanging (or otherwise) are imminent for China’s commodity, and financial, sectors. One thing we know is that courtesy of $36 trillion in Chinese bank “assets”, amounting a whopping 367% of GDP…

 

…. the short answer is “a lot.”

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When it comes to predicting the future, there has traditionally been a stealthy contest between economists and weathermen as to who is the worst predictor of coming events. Lately, there was some confusion when economists – this includes central bankers and market “strategists” –  tired of being humiliated in public for their terrible predictions, decided to become Monday Morning weathermen (ironically, none more so than those who competed with Groundhog Phil and lost) and blame their lack of foresight on the weather.

This led to even more humiliation for said economisseds (sic) and entertainment for everyone else.

But there is little confusion about what may have been the worst economic forecast of all time. For the answer go to Japan, and back 30 years in time, just after Japan’s mega asset bubble burst when in their desperation to preserve the myth that “all is well”, economists were “predicting” how little Japan’s growth would be impacted as a result of the burst bubble.

They were all wrong.

As HSBC’s Stephen King points out, nowadays, Japan’s “lost decades” are seen to be a blindingly-obvious consequence of the bursting of Japan’s late-1980s stock market and land price bubbles (ahem China). At the time, however, few managed to predict what was apparently so obvious in hindsight.

Which brings us to what probably is the worst economic forecast of all time: in the mid-1990s, the forecasting consensus had every confidence that nominal Japanese GDP would rise 25% over the next five years. Consensus was wrong: by 2000, nominal GDP was more than 24% lower than had been projected five years earlier.

Did the forecast humiliation end there? Oh no. 

The gap between forecast and reality got bigger and bigger thereafter. In fact, over 30 years later, Japan’s nominal GDP and GDP per capital now is where it was 30 years ago even as Japan has piled up a total debt load that is now over 400% of GDP.

Finally, as a consequence, bond yields fell further and further, continuously undershooting forecasts.

 

Does this look familiar? If not, recall this chart?

And this:

Comical economists aside, “Japanification” is precisely what is happening to the rest of the “developed world” as global growth continues to deteriorate, global debt grows and the only short-term resolution is to keep rates as low as possible… and now, negative across 28% of the entire world.

This weekend we will lay out HSBC’s thoughts on what “turning Japanese” means for the rest of the world. Spoiler alert: only bad things.

In the meantime we ask, when will “economists” be finally laughed off the global stage for the charlatan comedians they all are?

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