CME Sued For Giving “High-Frequency Traders Peek At Market” Since 2007

Now that both the FBI and the DOJ have woken up from a half-decade slumber realizing there was riggedness, RIGGEDNESS going on in these here stock markets courtesy of Michael Lewis’ book, it wasn’t long before those most impacted by the frontrunning strategies of HFTs spoke up – anyone who has lost money in the stock market since Reg NMS was conceived.

Of course, said loss could have been the loss of many other factors – such as the market being rigged by the Fed as opposed to vacuum tubes – but since nobody really know much if anything about how HFTs operate, it is rather convenient to scapegoat anything and everything that ever went wrong with one’s P&L on algorithms.

Sure enough, in a lawsuit that was just filed by lead plaintiff William Charles Braman, seeking class-action status, and filed on behalf of all users of real-time futures market data and futures contracts listed on the CBOT and CME from 2007 to now, the CME is allegd to have sold order information to high-frequency traders ahead of other market participants.

Specifically, from the lawsuit:

Throughout the Class Period, Defendants not only permitted the HFTs to see price and market data, including open orders, market  orders before all other market participants and trader saw the price and market data, they permitted the HFTs to execute trades using this same non public data and order information before all other traders and market participants. In so doing, the Defendants engaged  in a fraud on the marketplace, deceptive practice and failed to maintain a marketplace that is free from market disruption and market manipulation.

 

Throughout the Class Period, the Defendants concealed the fact that they were not providing a marketplace free of market manipulation because they were allowing the HFTs to trade based upon non-public information, specifically, the non-published and unexecuted orders of all other users of the CME and CBOT. In so doing, the Defendants failed to provide a marketplace that is free from market manipulation and established an unequal and two-tiered marketplace all the while inviting and soliciting the use of its financial trading instruments for profit.

Well, duh. Apparently it took the general public a Michael Lewis book to reread out post from October 2012 in which we showed that an estimated over 30% of CME revenues were made from HFT – in other words from selling proprietary data in direct feeds to high-paying subscribers, that hits collocated servers ahead of the consolidated tape.

But the punchline is that this is not illegal per se. Why? Because the regulators, in all their corrupted and captured brilliance, allowed it!

Bloomberg has more:

The Chicago-based company, owner of the Chicago Mercantile Exchange and the Chicago Board of Trade, offers futures based on interest rates, equity indexes, currencies, energy products and agricultural commodities. The plaintiffs, in their complaint against CME and CBOT, allege “a fraud on the marketplace” and seek class-action status on behalf of exchange users. CME denied their accusations in a statement.

 

Sometime after the start of 2007, the CBOT and CME began letting HFTs peek “at all orders to buy and sell futures contracts before they were reflected” to the rest of the market, according to the complaint filed April 11 in federal court in Chicago. That glimpse occurred “before the person or entity entering the buy or sell order received confirmation that their order was received — in other words before anyone other than the HFTs were privy to this information.”

 

The lawsuit alleges CME Group gave high-frequency traders early access and that trades from that exclusive advance notice changed prices for everyone else. The plaintiffs had paid for real-time data, according to the complaint.

 

CME Group “invited HFTs to make trades ahead of all other market participants and because the HFTs’ generally entered very large orders, they had the ability through their de facto inside trading to influence the price of financial futures artificially,” according to the complaint.

So does the NY Fed by trading through Citadel. And? One doesn’t see either Bill Dudley or Ken Griffin in court. Of course, the CME knows, sees, hears and certainly trades no evil.

“The suit is devoid of any facts supporting the allegations and, even worse, demonstrates a fundamental misunderstanding of how our markets operate,” CME Group said in an e-mailed statement. “It is sad when plaintiffs’ lawyers bring a suit based on a desire for publicity, and in the rush to file a suit fail to undertake even the most basic effort to determine if there is any basis for their allegations. The case is without merit, and we intend to defend ourselves vigorously.”

 

Anita Liskey, a CME Group spokeswoman, said that wasn’t true and that the exchange only offers one data feed with its prices that all investors get at the exact same time.

 

“We have only one data feed, no one can buy it to be faster than anyone else,” she said. “No trader can see any other person’s order until it hits the order book, when it is made public.”

Still, while this particular case will likely be promptly forgotten as rigged as it may be, the market and its HFT parasites operated largely in the confines of the law, we will be following Braman vs CME closely if only for discovery purposes – we eagerly look forward to finally getting a factual glimpse under the skirt of the vacuum tubes.

Full amended complaint below:




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Guest Post: If It’s Such A Privelege, Why Do They Have To Stick A Gun In Your Face?

Submitted by Simon Black of Sovereign Man blog,

Two. Billion. Hours.

That’s how much time people in the Land of the Free waste each year preparing and filing their tax forms to the IRS– roughly 13 hours for each of the ~150 million individual returns filed.

And if you’re doing your own taxes this weekend, it may certainly seem like you’ve spent that 2 billion hours yourself just preparing your 1040.

To put this number in perspective, two billion hours is roughly the time it would take to walk to Uranus and back… which is a bit ironic given where you’d probably like to tell Mr. Obama to go stick his tax forms right about now.

Now, I’m not going to tell you today that taxes are illegal. Nor will I tell you that you don’t have to file.

I think taxes are morally reprehensible. Taxes rob an entire population of its financial resources in favor of a tiny political elite that has a long-term track record of incompetence and deceit.

Unfortunately, though, this humiliating exercise is forcibly perpetrated at gunpoint. So not filing your taxes can lead to very bad consequences. Just ask Richard Hatch.

As you may recall, Richard was the very first winner of the reality show Survivor.

What you probably don’t know is that Richard spent several years in prison on charges of “attempted tax evasion.”

I was astounded when he told me that ATTEMPTED tax evasion is a crime in the Land of the Free. It sounds more like Thoughtcrime.

People are brainwashed into believing that taxes are a ‘privilege’, and the “price we pay for civilized society.”

But if the society is so civilized, and it’s such a privilege, then why do they have to threaten people at the point of a gun?

It’s because the value proposition is completely upside down. Whether in the US, France, England, Spain, or Italy, people pay out the nose for taxes… and get very little in return.

It’s like forking over fifty bucks for a Big Mac– it doesn’t make any sense. There has to be a balance between how much you pay and the value that you receive.

And everywhere you look these days, that value is in serious decline.

Increasing chunks of governments’ budgets are going just to pay interest on the debt… not to mention absurd domestic spying programs, or destructive wars to go (as George Carlin joked) “drop bombs on brown people” in foreign lands.

Think about it as you write that check to the government– are you getting any value?

A few hundred years ago, the Founding Fathers certainly didn’t think so. As Samuel Adams summed up in 1764, taxes made the colonists “tributary slaves” to the British government.

And the taxes that they were paying were almost nothing compared to what people pay today. They would be astounded to find citizens in “free societies” paying 40%, 50% of their -income-, plus property, estates, sales purchases, imports, etc. to a massively bloated government.

Let’s go back in time together and explore this further in this week’s Podcast Episode: Taxation without Consideration.

You can listen to or download it here:

http://ift.tt/OUitvZ




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“The Next America” – Two Dramas In Slow Motion

That America has – or perhaps more accurately that the administration is desperate to create – a wealth divide, gender divide, and certainly ethnic divide, is hardly a secret. Yet all of those may pale in comparison to the transformation that the US is undergoing currently, according to the most recent Pew research study, one which finds that the world’s one time superpower, is in the midst of two slow-motion dramas right now.

Our population is becoming majority non-white at the same time a record share is going gray. Each of these shifts would by itself be the defining demographic story of its era. The fact that both are unfolding simultaneously has generated big generation gaps that will put stress on our politics, families, pocketbooks, entitlement programs and social cohesion.

Let’s start with what demographers call an “age pyramid.” Each bar represents a five year age cohort; with those ages 0-4 on the bottom and those ages 85 and older on the top. In every society since the start of history, whenever you broke down any population this way, you’d always get a pyramid.

But from 1960 to 2060, our pyramid will turn into a rectangle. We’ll have almost as many Americans over age 85 as under age 5. This is the result of longer life spans and lower birthrates. It’s uncharted territory, not just for us, but for all of humanity. And while it’s certainly good news over the long haul for the sustainability of the earth’s resources, it will create political and economic stress in the shorter term, as smaller cohorts of working age adults will be hard-pressed to finance the retirements of larger cohorts of older ones.”

 

But it is not just young vs old: it is the dramatically shifting ethnic composition of America that may have an even greater role in shaping social, immigration and economic policies in the decades ahead. In fact, as the Pew projection below shows, some time around 2040, whites will become a minority to all other ethnic groups residing in the US:

From Pew:

At the same time our population is going gray, we’re also becoming multi-colored. In 1960, the population of the United States was 85% white; by 2060, it will be only 43% white. We were once a black and white country. Now, we’re a rainbow.

 

Our intricate new racial tapestry is being woven by the more than 40 million immigrants who have arrived since 1965, about half of them Hispanics and nearly three-in-ten Asians.

 

Because these tranformations happen tick by tock, without anyone announcing them with a drum roll or press conference, they are sometimes hard to perceive.

 

But every so often societies experience “aha” moments, when the change is right there in plain sight. We had several such moments in early 2014, as three iconic American brands, Coke, Chevy and Cheerios, rolled out ads during the Super Bowl and Olympics that were aimed at what one voice-over called “the new us.”

 

Product advertisers aren’t in the business of making political statements. They’re certainly not in the business of making enemies. They must have known some of their images – interracial families, same-sex parents, “America the Beautiful” sung in several languages – would disturb some of their customers. But they also do their market research and look at their numbers. They know how fast the country is changing.

Where is the bulk of the shifting ethnic landscape coming from? Not surprisingly, from what is a very hot political topic these days: immigration.

Our modern immigrants are different from the big waves of newcomers who came in the late 19th and early 20th centuries. Back then, about nine-in-ten immigrants were from Europe. Today only about 12% are from Europe.

 

But some things don’t change. No matter where they come from, immigrants are strivers. They’re optimists. And they tend to have a lot of kids. Our immigrant stock – that’s immigrants and their children – is projected to make up about 37% of our population by mid-century, the highest share in our history.

 

But understand: this isn’t new. We’ve always been a nation of settlers and immigrants. In this regard, the middle of the 20th century wasn’t the norm, it was the outlier.

Nowhere is the culmination of these two tectonic slow-motion “dramas” more evident than in the choice of America’s president.

In the past few elections, the young/old partisan voting gap has been the biggest since the voting age was lowered to 18 in 1972. As recently as the year 2000, there had been no difference in the way young and old in America voted. Now, there’s a chasm.

 

Six-in-ten young voters supported Barack Obama in his re-election bid in 2012, compared with just 47% of those in the age ranges of their parents (45 to 64) and 44% of their grandparents (65 and older). By race, six-in-ten white voters supported Republican candidate Mitt Romney, whereas more than nine-in-ten black voters supported Obama. Obama also captured more than 70% of the Asian-American and Hispanic vote.

When it comes to the age divide, the political split is clear: the youth are liberal, the elders conservative.

Millennials have voted more Democratic than older voters in the past five national elections. They came of age in the Bush and Obama eras and hold liberal attitudes on most social and governmental issues, as well as America’s approach to foreign policy.

 

Just as members of the Silent Generation are long-term backers of smaller government, Millennials, at least so far, are strong supporters of a more activist government.

 

In some social issues, such as legalizing marijuana and same-sex marriage, Millennials particularly stand out for their favorable views compared with other generations. Nearly seven-in-ten (68%) Millennials favor allowing gays and lesbians to marry, compared with just 48% of Baby Boomers and just 38% of the Silent Generation.

Yet while the youth may like its pot and gay marriage, the one place where it is most likely to opine on these topics is FaceBook.

Then there’s the technology revolution. Today’s young are history’s first generation of digital natives. The online world isn’t something they’ve had to adapt to — it’s all they’ve ever known, and it’s their indispensable platform for social interactions and information acquisition.

 

Today’s old have been playing catch-up online, some more enthusiastically than others, but they have a long way to go. The typical Millennial who uses social media has 250 Facebook friends — making them five times “friendlier” than the smaller number of Silents who use social media.

But the most concerning aspect in the age divide is the number of working individuals required to support every safety net beneficiary: from 16 workers supporting every retirees in 1950, this number is now down to just 3.

But the status quo is unsustainable. Some 10,000 Baby Boomers will be going on Social Security and Medicare every single day between now and 2030. By the time everyone in this big pig-in-the-python generation is drawing benefits, we’ll have just two workers per beneficiary – down from three-to-one now, five-to-one in 1960 and more than forty-to-one in 1945, shortly after Social Security first started supporting beneficiaries.

 

The math of the 20th century simply won’t work in the 21st. Today’s young are paying taxes to support a level of benefits for today’s old that they have no realistic chance of receiving when they become old. And they know it – just 6% of Millennials say they expect to receive full benefits from Social Security when they retire. Fully half believe they’ll get nothing.

In light of all this “math”, is it any wonder there is an increasing gap in the perceptions of not only the young versus old, but of America’s diverse ethnic groups – each with their specific needs, and wants – all thrown into a boiling cauldron of record debt insolvency, in which the economic growth of the 20th century – that one distraction that masked the social unsustainability of social trends in the US for decades – is simply no longer possible?

There is much more in the full Pew study, however perhaps the one party whose input would be most germane here is the group of economist central planners who believe they know how to do everything to fix this country. We are talking of course about the largely cluless economists and other people who have never encountered the real world, who inhabit the Federal Reserve’s Marriner Eccles building. Because if they too are as confused about how this all play out as the rest of us, then a crashing stock market is the least of our worries.




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Ukraine Mobilizes Military, Gives Ultimatum; Russia Slams Escalation As “Criminal”, Yanukovich Warns Of Civil War

If Russia’s intention was to give Ukraine enough “escalation” rope with which to hang itself once again, it may have succeeded when a little over an hour ago acting president Oleksander Turchinov said in a televized address that Ukraine has mobilized its armed forces to launch a “full-scale anti-terrorist operation” against pro-Russian separatists. Furthermore, knowing the only real escalation Kiev can engage in is in the war of words department, Ukraine set an 0600 GMT Monday deadline for pro-Russian separatists to give up their weapons and leave buildings they have occupied in the east of the country, a presidential decree said. It is unclear if this would be the catalyst to launch the military operation, but should Kiev indeed bring in the army it is certainly clear that Russia will respond in kind.

Reuters reports:

Angered by the death of a state security officer and the wounding of two of his comrades near the flashpoint eastern city of Slaviansk, Turchinov gave rebels occupying state buildings until Monday morning to lay down their weapons.

 

He blamed Russia, which opposed a pro-Europe uprising that forced Moscow-backed former president Viktor Yanukovich to flee, for being behind the rash of rebellions across Russian-speaking towns in eastern Ukraine.

 

“The blood of Ukrainian heroes has been shed in a war which the Russian Federation is waging against Ukraine,” he said in an address to the nation. “The aggressor has not stopped and is continuing to sow disorder in the east of the country.”

Russia promptly responded, alleging Ukraine’s planned operation is criminal:

Russia’s Foreign Ministry said on Sunday that an announcement by the authorities in Kiev that they will mobilise the army to put down a rebellion by pro-Russian militants in eastern Ukraine was a “criminal order”.

 

The ministry said the West should bring its allies in Ukraine’s government under control. “It is now the West’s responsibility to prevent civil war in Ukraine,” it said in a statement posted on Facebook.

 

It also said that Russia would put an urgent discussion of the situation in eastern Ukraine on the agenda of the United Nations Security Council.

 

“The situation in southeastern Ukraine is taking on an extremely dangerous character. The authorities in Kiev, who put themselves in power as a result of a coup d’etat, have set a course to use force to put down popular protests,” the statement said.

 

“We decisively condemn attempts to use brute force against protesters and activists … We are particularly indignant about the criminal order of (Ukrainian Acting President Oleksander Turchinov) to use the army to put down protest.”

 

The statement said the West had sponsored the rulers in Kiev and should now “rein in its out-of-control proteges, force them to distance themselves from neo-Nazis and other extremists, stop using armed force against the Ukrainian people, and immediately start a genuine dialogue”.

As usual, the only solace out of NATO was issuing wordy statements:

With East-West relations in crisis, NATO described the appearance in eastern Ukraine of men with specialised Russian weapons and identical uniforms without insignia – as previously worn by Moscow’s troops when they seized Crimea – as a “grave development”.

Adding even more fuel to what increasingly appear a civil war fire, was self-exiled president Yanukovich who said in a televized from Russia’s Roston-on-Don that Ukraine is a foot in the door to civil war. “Blood was spilt today,” Yankovich told journalists referring to the events in the eastern city of Slavyansk. “Now our country finds itself in a totally new situation – with one foot in the door of a civil war. Kiev junta has issued a criminal order to use military forces.”

Part of the responsibility for dragging the country into domestic war lays on the US, which brutally interfere in the situation and to point out what to do, Yanukovich said. The ousted president declared that CIA chief John Brennan visited Ukraine and it was after the meeting that the coup-imposed authorities in Kiev ordered a military operation in the country’s east.

 

Brennan “de facto sanctioned” the use of weapons and thus provoked the bloodshed, Yanukovich said.

 

Ukraine is now “inexorably” heading towards bankruptcy, Yanukovich also warned in his speech.

So according to the counter-West narrative, it is the CIA’s actions that have led to the escalation in the east, not Russian actions.  Bottom line: for now lots of enflamed words, yet no actual actions to resist the “pro Russia separatists.” And in the meantime the casualties mount:

Though the Ukrainian military did not resist the Russian takeover of Crimea with force, Turchinov threatened robust action against the rebels in the east. “The National Security and Defence Council has decided to launch a full-scale anti-terrorist operation involving the armed forces of Ukraine,” he declared.

 

Ukraine has repeatedly said the rebellions are inspired and directed by the Kremlin. But action to dislodge the armed militants risks tipping the stand-off into a new, dangerous phase as Moscow has warned it will protect the region’s Russian-speakers if they come under attack.

 

One Ukrainian state security officer was killed and five were wounded on the government side in Sunday’s operation in Slaviansk, interior minister Arsen Avakov said. “There were dead and wounded on both sides,” he wrote on his Facebook page.

Looking ahead in terms of immediate catalysts, 0600 GMT is in a few hours hours, and certainly well before the US market opens. What happens then, certainly nothing if Russian response to previous Ukraine ultimatums is any indication, may determine of last week’s sell off continues in earnest on Monday or if, by some surprising development, there is a relief rally.

Finally, this just in: SECURITY COUNCIL WILL MEET AT 8 PM NY TIME FOR EMERGENCY MEETING ON UKRAINE CRISIS – RUSSIA’S NEWS AGENCY CITING UN SOURCE.

Or just in time for the Nikkei open.




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

Diary Of A Phony Hedgeye Manager

I had heard of these guys but I never paid much attention to them.  They always seemed sketch especially once I noticed the Ivy league homoeratica…people like that are all the same.  One of the major issues I have with most Ivy Leaguers is their sense of entitlement and their persona’s that radiate the “my shit doesn’t stink like yours does” attitude.  Not even close to all Ivy league guys are like that but if I went to Yale, I would do what is possible to distance myself from people like the one’s you’re about to read about.

To be honest, I’m getting tired of these guys and aside from my snarky Twitter commentary, this may be the last time I write about this group of fraudsters non-trading investment research professionals (who find time to tweet all damn day), unless they shut down.  I never engaged Chief Keif either, I was brought into this when I became of a target of Hedgeye’s “Twitter Trend Attachment” process…this is where they find out what topic is “hot” and seek to inject themselves into.  For a recent example, see their attempts to converse intelligently on market micro-structure.  

After we finished the material for Wall Street Code and VPRO began making it public and promoting the film, Keith decided to come at me as part of FraudEyeGuy’s Hedgeye’s “Twitter Trend Attachment” process #Process.  Then, as usual and without any evidence, Hedgeye started to hurl libelous claims at me regarding basement living and some other generic shit these geriatrics spew in effort to get their next dopamine hit before the depression hits when they go home to that AARP application they’ve been procrastinating to fill out.  So that’s how I became involved in the shrewed marketing #process that is perpetrated by these Connecticut fraud eye hedgers, eye goobers, whatever the hell their name is (Ice Edge, Research Edge, Hedgeye…it’s all a charade).

What I really want to highlight is how this tight group of Yale chooches blatantly lie in a effort to enrich themselves through subscription sales, which actually makes them a fraud.  Let’s go back to the beginning though.

Hedgeye took a Connecticut loan that was part of broader cash disbursement from the CT government to local businesses.  The terms of the deal stated that of the $2.5 million Stinkeye received (at 2%), half would be forgiven if they hired 120 people (Page 20, last two paragraphs).  What kind of people were hired to reach the goal?  Make-up artists and cartoonists, that’s the kind.  No traders were brought on board…they don’t trade but one wouldn’t know that when the CEO Tweets misleading and fraudulent comments such as these:

Also, this one:

The “booked gains” tweet that came from the firm’s official Twitter handle:

These are heavily misleading comments.  Especially when you consider this:  we’re all real traders, either individually or with a firm.  No one in my circle would ever pay for someone elses trade idea.  So I’m going to assume those that would pay for someone elses trade ideas is either new to the game or just a tourist.  These are people who are easily mislead by Keith’s comments mostly because they don’t have the resources we have to do research.  Point and case, do Mom and Pops have Morningstar to look up AUMs and receive reports like this?:

How does one book gains when in their very CT complaint against Pirone (see below, number 3) they label themselves as “providing investment research and advice”.  I’m confused here.  Confused like most people who come across Hedgeye on Twitter and on their website.  Keith behaves in a very misleading way…probably because he realized no one gives a shit where you went to school.

Hedgeye is using the United States Government for personal and corporate enrichment.  Here’s Frau McCullough serving a blogger with a lawsuit…further tying up US judicial resources (what kind of tough guy can’t handle a little virtual portfolio analysis?)…what a Princess this Twitter thuggin’, mis-representing, non-trading research mooch is.

It’s shocking, appalling, and offensive how Hedgeye behaves.  They could just as easily stop implying they trade.  If they stuck with the research firm angel (something Keith won’t do because after his 1 year stint at a fund that closed down while he was employed, he realized how pathetic his “attribution” values are) they wouldn’t be getting heat from industry professionals willing to look out for the “little guys”, not so we can rob them of $29.95 per month but because we make enough money we can do this on an “integrity” claim. 

Now we have these guys preparing for what will be an investigation into their operation as they continue with the lawsuit.  Here’s one example:

And let’s not forget these statements publicaly made on Twitter that conflict with Hedgeye’s claims in the court document:

#STUDY:




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Obama On The Red Line And On The Rat Line

Submitted by David Stockman’s Contra Corner

Seymour Hersh’s Blockbuster: Obama On The Red Line And On The Rat Line

Read Seymour Hersh’s devastating account of Obama’s Red Lines and Rat Lines and weep for the Republic. It is no more.

For the first time in a half-century American voters actually elected the “peace candidate” in 2008 and sent Obama to the White House to end the interventionist foreign policy that had lead to disaster in Iraq, and, implicitly, to wind down the vast war machine that had been left over from the Cold War. The latter had  been converted  by the Bush’s and Clintons into an armada of invasion and occupation that had rained death and destruction from Bosnia to Baghdad to Kandahar for no reasonable or justifiable purpose of national security.  These aggressions were simply what a war machine does, making up rationalizations as it goes along.

But the Warfare State was not about to let peace happen. Soon Obama learned the Washington pivot, rehired the core of Bush’s War Cabinet and became enmeshed in the “national security” plots and schemes which were in the pipeline when he arrived at 1600 Pennsylvanian Avenue— much like JFK inherited the disastrous Bay Of Pigs invasion. Like the despicable Alan Dulles, he inherited ambitious scoundrels like so-called General David Petraeus, who soon had him convinced that the non-sensical and bloody “surge” in Anbar Province had been a roaring success, and that it should be exported to the quagmire in Afghanistan.

Indeed, after the Afghan surge was launched in 2009 there was no turning back. The peace candidate had already become co-opted—emerging as a pliant tool of America’s rogue Warfare State that functions almost entirely outside of the Constitution and often beyond statutory law, as well. Ironically, the former editor of the Harvard Law Journal and self-proclaimed constitutional expert apparently had no qualms whatsoever about any of this. The spy agencies were nourished with massive new resources and widened mandates; Rumsfeld’s disgraceful and illegal detention operation at Guantanamo Bay was not closed as he had promised; Bush’s cowardly and counter-productive drone wars were drastically escalated; and the defense budget grew by more than $100 billion from the already bloated levels he had inherited from the “decider”.

And this gets us to Hersh’s expose. By 2011 Obama had donned the full regalia of the imperial presidency. With not so much as even a casual nod to the War Powers Act—-the first piece of legislation I worked on 43 years ago as a young aide on Capitol Hill outraged by Johnson’s and Nixon’s immoral, illegal and genocidal war on Vietnam—-the peace candidate conducted an air war and subversion campaign in Libya because he could.

Upon the bloody end of the Gadhafi regime, Obama than turned to making war on the Assad regime in Syria—without a sliver of logic as to why intervention in an age old sectarian conflict between Sunnis and Alawites would make the citizens of Nebraska one wit safer. This time he did it through the establishment of a CIA annex in Benghazi to gather and accumulate the former Libyans dictator’s lethal arsenals for transfer to the Syrian rebels—many of whom where jihadists and terrorists of the type we were allegedly trying to erase from the earth.

Moreover, as Seymour Hersh explains, the Benghazi weapons were then transited by means of an illegal CIA “rat line” through Turkey to the rebels. And the rat line was absolutely illegal because all CIA covert operations since the 1970s have been required as a matter of law to be disclosed to the Congressional leadership—-for whatever that has become worth in the post Frank Church era where shaking down the military-industrial complex for campaign money, rather than thwarting its propensity for rogue operations, has become a bipartisan pursuit of choice.

But our constitutional scholar-in-chief apparently had no problem splitting hairs. The “rat line” was deemed a “liaison” operation with England’s MI6 and thereby exempt from reporting requirements. So when the rat line operation blew up in Benghazi during the middle of the Presidential campaign in September 2012 in the incident that lead to the death of Ambassador Chris Stevens, the Obama White House just lied. No, the consulate where the deadly attack occurred was not a CIA annex and weapons depot; and, no, we never supplied any weapons to any rebels in Syria. All a pack of lies.

But when you are knee deep in intrigue and covert operations and enmeshed in plots to overthrow governments with thugs like Prime Minister Erdogan of Turkey, one calamity soon leads to another. As Hersh explains, Barrack Obama in his usual manner had authorized an outright aggression, but than wimped out after the Benghazi fiasco and abruptly shutdown the rat line.

Needless to say, this left Prime Minister Erdogan and his chief of clandestine operations high and dry. By the fall of 2012, the latter were deeply committed to the overthrow of Assad and the establishment of a client regime in Damascus. But the tide of war had already turned—the squabbling gangs of rebels were in retreat, notwithstanding the substantial aid and support they had received from Saudi Arabia, Qatar,Turkey and the West. And from there emerges the main theme of Hersh’s expose.

Obama had foolishly drawn a “red line” on Syrian use of chemical weapons in a civil war which was already engulfed in bloody savagery from both sides.  So the Turks decided to call his bluff, and enable their main rebel ally, the jihadist al-Nusra Front, to stage a false flag attack with what was known to be the signature weapon in Assad’s Soviet supplied chemical weapons arsenal– the deadly sarin gas.

Seymour Hersh explains in chapter and verse, based on a DIA secret report among other high level sources, how this abomination unfolded, and became the horrific gas attack in Ghouta on August 21, 2013. But the gravamen of the piece is his description of how the Obama White House came within two days of launching a Bush style war on Syria after it had already been warned that the proof of Assad’s complicity was lacking; and that a weapons testing lab in England had already concluded that a sarin sample obtained on the scene was of a homemade variety and not of the military grade known to be in the Assad arsenal.

Despite all this, the White House apparatus pushed an increasingly resistant Joint Chiefs of Staff through more than 35 iterations of an attack plan that had nothing to do with spanking Assad for his alleged barbarity or surgically disabling his chemical weapons capacity. The attack was to involve an armada of British, French and American air strikes along with sea-based barrage of Tomahawk missiles to take out Assad’s entire military capacity.

In short, a power-drunk amateur in the White House came within two days of launching a massive military campaign to bring about regime change in Syria—-an action of stupendous folly which would have ignited  a cauldron of fire throughout the Middle East like never before:

In the aftermath of the 21 August attack Obama ordered the Pentagon to draw up targets for bombing. Early in the process, the former intelligence official said, ‘the White House rejected 35 target sets provided by the joint chiefs of staff as being insufficiently “painful” to the Assad regime.’ The original targets included only military sites and nothing by way of civilian infrastructure. Under White House pressure, the US attack plan evolved into ‘a monster strike’: two wings of B-52 bombers were shifted to airbases close to Syria, and navy submarines and ships equipped with Tomahawk missiles were deployed. ‘Every day the target list was getting longer,’ the former intelligence official told me. ‘The Pentagon planners said we can’t use only Tomahawks to strike at Syria’s missile sites because their warheads are buried too far below ground, so the two B-52 air wings with two-thousand pound bombs were assigned to the mission. Then we’ll need standby search-and-rescue teams to recover downed pilots and drones for target selection. It became huge.’ The new target list was meant to ‘completely eradicate any military capabilities Assad had’, the former intelligence official said. The core targets included electric power grids, oil and gas depots, all known logistic and weapons depots, all known command and control facilities, and all known military and intelligence buildings.

 

Britain and France were both to play a part. On 29 August, the day Parliament voted against Cameron’s bid to join the intervention, the Guardian reported that he had already ordered six RAF Typhoon fighter jets to be deployed to Cyprus, and had volunteered a submarine capable of launching Tomahawk missiles. The French air force – a crucial player in the 2011 strikes on Libya – was deeply committed, according to an account in Le Nouvel Observateur; François Hollande had ordered several Rafale fighter-bombers to join the American assault. Their targets were reported to be in western Syria.

 

By the last days of August the president had given the Joint Chiefs a fixed deadline for the launch. ‘H hour was to begin no later than Monday morning [2 September], a massive assault to neutralise Assad,’ the former intelligence official said.

At the eleventh hour Obama backed down when General Dempsey said flat out no—and then lied that he had changed his mind after a walk around the White House with his clueless chief of staff. The foolish incumbent in the White House and his clownish Secretary of State, the man with the big head of hair and self-evidently not much underneath, then had to suffer the indignity of being rescued from their disastrous schemes and misadventures by Vladimir Putin.

Does that not explain their subsequent insensible campaign to destabilize the Ukraine and then to provoke the current insane showdown with Russia that has resulted from the putsch against a legitimately elected government in Kiev? Does not Obama’s incredible follies and abuses of power here described provide a palpable warning that it is time to dismantle the Warfare State? That is, before still another election turns out to be a mere ratification of an American Imperium being conducted by a permanent rogue regime buried deep within the Warfare State that our national security no longer requires?

As I said, read Seymour Hersh’s devastating expose and think about it.

Seymour M. Hersh on Obama, Erdo?an and the Syrian rebels

In 2011 Barack Obama led an allied military intervention in Libya without consulting the US Congress. Last August, after the sarin attack on the Damascus suburb of Ghouta, he was ready to launch an allied air strike, this time to punish the Syrian government for allegedly crossing the ‘red line’ he had set in 2012 on the use of chemical weapons.[*]?? Then with less than two days to go before the planned strike, he announced that he would seek congressional approval for the intervention. The strike was postponed as Congress prepared for hearings, and subsequently cancelled when Obama accepted Assad’s offer to relinquish his chemical arsenal in a deal brokered by Russia. Why did Obama delay and then relent on Syria when he was not shy about rushing into Libya? The answer lies in a clash between those in the administration who were committed to enforcing the red line, and military leaders who thought that going to war was both unjustified and potentially disastrous.

 

Obama’s change of mind had its origins at Porton Down, the defence laboratory in Wiltshire. British intelligence had obtained a sample of the sarin used in the 21 August attack and analysis demonstrated that the gas used didn’t match the batches known to exist in the Syrian army’s chemical weapons arsenal. The message that the case against Syria wouldn’t hold up was quickly relayed to the US joint chiefs of staff. The British report heightened doubts inside the Pentagon; the joint chiefs were already preparing to warn Obama that his plans for a far-reaching bomb and missile attack on Syria’s infrastructure could lead to a wider war in the Middle East. As a consequence the American officers delivered a last-minute caution to the president, which, in their view, eventually led to his cancelling the attack.

 

For months there had been acute concern among senior military leaders and the intelligence community about the role in the war of Syria’s neighbours, especially Turkey. Prime Minister Recep Erdo?an was known to be supporting the al-Nusra Front, a jihadist faction among the rebel opposition, as well as other Islamist rebel groups. ‘We knew there were some in the Turkish government,’ a former senior US intelligence official, who has access to current intelligence, told me, ‘who believed they could get Assad’s nuts in a vice by dabbling with a sarin attack inside Syria – and forcing Obama to make good

 

The joint chiefs also knew that the Obama administration’s public claims that only the Syrian army had access to sarin were wrong. The American and British intelligence communities had been aware since the spring of 2013 that some rebel units in Syria were developing chemical weapons. On 20 June analysts for the US Defense Intelligence Agency issued a highly classified five-page ‘talking points’ briefing for the DIA’s deputy director, David Shedd, which stated that al-Nusra maintained a sarin production cell: its programme, the paper said, was ‘the most advanced sarin plot since al-Qaida’s pre-9/11 effort’. (According to a Defense Department consultant, US intelligence has long known that al-Qaida experimented with chemical weapons, and has a video of one of its gas experiments with dogs.) The DIA paper went on: ‘Previous IC [intelligence community] focus had been almost entirely on Syrian CW [chemical weapons] stockpiles; now we see ANF attempting to make its own CW … Al-Nusrah Front’s relative freedom of operation within Syria leads us to assess the group’s CW aspirations will be difficult to disrupt in the future.’ The paper drew on classified intelligence from numerous agencies: ‘Turkey and Saudi-based chemical facilitators,’ it said, ‘were attempting to obtain sarin precursors in bulk, tens of kilograms, likely for the anticipated large scale production effort in Syria.’ (Asked about the DIA paper, a spokesperson for the director of national intelligence said: ‘No such paper was ever requested or produced by intelligence community analysts.’)

 

Last May, more than ten members of the al-Nusra Front were arrested in southern Turkey with what local police told the press were two kilograms of sarin. In a 130-page indictment the group was accused of attempting to purchase fuses, piping for the construction of mortars, and chemical precursors for sarin. Five of those arrested were freed after a brief detention. The others, including the ringleader, Haytham Qassab, for whom the prosecutor requested a prison sentence of 25 years, were released pending trial. In the meantime the Turkish press has been rife with speculation that the Erdo?an administration has been covering up the extent of its involvement with the rebels. In a news conference last summer, Aydin Sezgin, Turkey’s ambassador to Moscow, dismissed the arrests and claimed to reporters that the recovered ‘sarin’ was merely ‘anti-freeze’.

 

The DIA paper took the arrests as evidence that al-Nusra was expanding its access to chemical weapons. It said Qassab had ‘self-identified’ as a member of al-Nusra, and that he was directly connected to Abd-al-Ghani, the ‘ANF emir for military manufacturing’. Qassab and his associate Khalid Ousta worked with Halit Unalkaya, an employee of a Turkish firm called Zirve Export, who provided ‘price quotes for bulk quantities of sarin precursors’. Abd-al-Ghani’s plan was for two associates to ‘perfect a process for making sarin, then go to Syria to train others to begin large scale production at an unidentified lab in Syria’. The DIA paper said that one of his operatives had purchased a precursor on the ‘Baghdad chemical market’, which ‘has supported at least seven CW efforts since 2004’.

 

A series of chemical weapon attacks in March and April 2013 was investigated over the next few months by a special UN mission to Syria. A person with close knowledge of the UN’s activity in Syria told me that there was evidence linking the Syrian opposition to the first gas attack, on 19 March in Khan Al-Assal, a village near Aleppo. In its final report in December, the mission said that at least 19 civilians and one Syrian soldier were among the fatalities, along with scores of injured. It had no mandate to assign responsibility for the attack, but the person with knowledge of the UN’s activities said: ‘Investigators interviewed the people who were there, including the doctors who treated the victims. It was clear that the rebels used the gas

 

In the months before the attacks began, a former senior Defense Department official told me, the DIA was circulating a daily classified report known as SYRUP on all intelligence related to the Syrian conflict, including material on chemical weapons. But in the spring, distribution of the part of the report concerning chemical weapons was severely curtailed on the orders of Denis McDonough, the White House chief of staff. ‘Something was in there that triggered a shit fit by McDonough,’ the former Defense Department official said. ‘One day it was a huge deal, and then, after the March and April sarin attacks’ – he snapped his fingers – ‘it’s no longer there.’ The decision to restrict distribution was made as the joint chiefs ordered intensive contingency planning for a possible ground invasion of Syria whose primary objective would be the elimination of chemical weapons.

 

The former intelligence official said that many in the US national security establishment had long been troubled by the president’s red line: ‘The joint chiefs asked the White House, “What does red line mean? How does that translate into military orders? Troops on the ground? Massive strike? Limited strike?” They tasked military intelligence to study how we could carry out the threat. They learned nothing more about the president’s reasoning.’

 

In the aftermath of the 21 August attack Obama ordered the Pentagon to draw up targets for bombing. Early in the process, the former intelligence official said, ‘the White House rejected 35 target sets provided by the joint chiefs of staff as being insufficiently “painful” to the Assad regime.’ The original targets included only military sites and nothing by way of civilian infrastructure. Under White House pressure, the US attack plan evolved into ‘a monster strike’: two wings of B-52 bombers were shifted to airbases close to Syria, and navy submarines and ships equipped with Tomahawk missiles were deployed. ‘Every day the target list was getting longer,’ the former intelligence official told me. ‘The Pentagon planners said we can’t use only Tomahawks to strike at Syria’s missile sites because their warheads are buried too far below ground, so the two B-52 air wings with two-thousand pound bombs were assigned to the mission. Then we’ll need standby search-and-rescue teams to recover downed pilots and drones for target selection. It became huge.’ The new target list was meant to ‘completely eradicate any military capabilities Assad had’, the former intelligence official said. The core targets included electric power grids, oil and gas depots, all known logistic and weapons depots, all known command and control facilities, and all known military and intelligence buildings.

 

Britain and France were both to play a part. On 29 August, the day Parliament voted against Cameron’s bid to join the intervention, the Guardian reported that he had already ordered six RAF Typhoon fighter jets to be deployed to Cyprus, and had volunteered a submarine capable of launching Tomahawk missiles. The French air force – a crucial player in the 2011 strikes on Libya – was deeply committed, according to an account in Le Nouvel Observateur; François Hollande had ordered several Rafale fighter-bombers to join the American assault. Their targets were reported to be in western Syria.

 

By the last days of August the president had given the Joint Chiefs a fixed deadline for the launch. ‘H hour was to begin no later than Monday morning [2 September], a massive assault to neutralise Assad,’ the former intelligence official said. So it was a surprise to many when during a speech in the White House Rose Garden on 31 August Obama said that the attack would be put on hold, and he would turn to Congress and put it to a vote.

At this stage, Obama’s premise – that only the Syrian army was capable of deploying sarin – was unravelling. Within a few days of the 21 August attack, the former intelligence official told me, Russian military intelligence operatives had recovered samples of the chemical agent from Ghouta. They analysed it and passed it on to British military intelligence; this was the material sent to Porton Down. (A spokesperson for Porton Down said: ‘Many of the samples analysed in the UK tested positive for the nerve agent sarin.’ MI6 said that it doesn’t comment on intelligence matters.)

 

The former intelligence official said the Russian who delivered the sample to the UK was ‘a good source – someone with access, knowledge and a record of being trustworthy’. After the first reported uses of chemical weapons in Syria last year, American and allied intelligence agencies ‘made an effort to find the answer as to what if anything, was used – and its source’, the former intelligence official said. ‘We use data exchanged as part of the Chemical Weapons Convention. The DIA’s baseline consisted of knowing the composition of each batch of Soviet-manufactured chemical weapons. But we didn’t know which batches the Assad government currently had in its arsenal. Within days of the Damascus incident we asked a source in the Syrian government to give us a list of the batches the government currently had. This is why we could confirm the difference so quickly.’

 

The process hadn’t worked as smoothly in the spring, the former intelligence official said, because the studies done by Western intelligence ‘were inconclusive as to the type of gas it was. The word “sarin” didn’t come up. There was a great deal of discussion about this, but since no one could conclude what gas it was, you could not say that Assad had crossed the president’s red line.’ By 21 August, the former intelligence official went on, ‘the Syrian opposition clearly had learned from this and announced that “sarin” from the Syrian army had been used, before any analysis could be made, and the press and White House jumped at it. Since it now was sarin, “It had to be Assad.”’

 

The UK defence staff who relayed the Porton Down findings to the joint chiefs were sending the Americans a message, the former intelligence official said: ‘We’re being set up here.’ (This account made sense of a terse message a senior official in the CIA sent in late August: ‘It was not the result of the current regime. UK & US know this.’) By then the attack was a few days away and American, British and French planes, ships and submarines were at the ready.

 

The officer ultimately responsible for the planning and execution of the attack was General Martin Dempsey, chairman of the joint chiefs. From the beginning of the crisis, the former intelligence official said, the joint chiefs had been sceptical of the administration’s argument that it had the facts to back up its belief in Assad’s guilt. They pressed the DIA and other agencies for more substantial evidence. ‘There was no way they thought Syria would use nerve gas at that stage, because Assad was winning the war,’ the former intelligence official said. Dempsey had irritated many in the Obama administration by repeatedly warning Congress over the summer of the danger of American military involvement in Syria. Last April, after an optimistic assessment of rebel progress by the secretary of state, John Kerry, in front of the House Foreign Affairs Committee, Dempsey told the Senate Armed Services Committee that ‘there’s a risk that this conflict has become stalemated.’

 

Dempsey’s initial view after 21 August was that a US strike on Syria – under the assumption that the Assad government was responsible for the sarin attack – would be a military blunder, the former intelligence official said. The Porton Down report caused the joint chiefs to go to the president with a more serious worry: that the attack sought by the White House would be an unjustified act of aggression. It was the joint chiefs who led Obama to change course. The official White House explanation for the turnabout – the story the press corps told – was that the president, during a walk in the Rose Garden with Denis McDonough, his chief of staff, suddenly decided to seek approval for the strike from a bitterly divided Congress with which he’d been in conflict for years. The former Defense Department official told me that the White House provided a different explanation to members of the civilian leadership of the Pentagon: the bombing had been called off because there was intelligence ‘that the Middle East would go up in smoke’ if it was carried out.

 

The president’s decision to go to Congress was initially seen by senior aides in the White House, the former intelligence official said, as a replay of George W. Bush’s gambit in the autumn of 2002 before the invasion of Iraq: ‘When it became clear that there were no WMD in Iraq, Congress, which had endorsed the Iraqi war, and the White House both shared the blame and repeatedly cited faulty intelligence. If the current Congress were to vote to endorse the strike, the White House could again have it both ways – wallop Syria with a massive attack and validate the president’s red line commitment, while also being able to share the blame with Congress if it came out that the Syrian military wasn’t behind the attack.’ The turnabout came as a surprise even to the Democratic leadership in Congress. In September the Wall Street Journal reported that three days before his Rose Garden speech Obama had telephoned Nancy Pelosi, leader of the House Democrats, ‘to talk through the options’. She later told colleagues, according to the Journal, that she hadn’t asked the president to put the bombing to a congressional vote.

 

Obama’s move for congressional approval quickly became a dead end. ‘Congress was not going to let this go by,’ the former intelligence official said. ‘Congress made it known that, unlike the authorisation for the Iraq war, there would be substantive hearings.’ At this point, there was a sense of desperation in the White House, the former intelligence official said. ‘And so out comes Plan B. Call off the bombing strike and Assad would agree to unilaterally sign the chemical warfare treaty and agree to the destruction of all of chemical weapons under UN supervision.’ At a press conference in London on 9 September, Kerry was still talking about intervention: ‘The risk of not acting is greater than the risk of acting.’ But when a reporter asked if there was anything Assad could do to stop the bombing, Kerry said: ‘Sure. He could turn over every single bit of his chemical weapons to the international community in the next week … But he isn’t about to do it, and it can’t be done, obviously.’ As the New York Times reported the next day, the Russian-brokered deal that emerged shortly afterwards had first been discussed by Obama and Putin in the summer of 2012. Although the strike plans were shelved, the administration didn’t change its public assessment of the justification for going to war. ‘There is zero tolerance at that level for the existence of error,’ the former intelligence official said of the senior officials in the White House. ‘They could not afford to say: “We were wrong.”’ (The DNI spokesperson said: ‘The Assad regime, and only the Assad regime, could have been responsible for the chemical weapons attack that took place on 21 August.’)

 

*

 

The full extent of US co-operation with Turkey, Saudi Arabia and Qatar in assisting the rebel opposition in Syria has yet to come to light. The Obama administration has never publicly admitted to its role in creating what the CIA calls a ‘rat line’, a back channel highway into Syria. The rat line, authorised in early 2012, was used to funnel weapons and ammunition from Libya via southern Turkey and across the Syrian border to the opposition. Many of those in Syria who ultimately received the weapons were jihadists, some of them affiliated with al-Qaida. (The DNI spokesperson said: ‘The idea that the United States was providing weapons from Libya to anyone is false.’)

 

In January, the Senate Intelligence Committee released a report on the assault by a local militia in September 2012 on the American consulate and a nearby undercover CIA facility in Benghazi, which resulted in the death of the US ambassador, Christopher Stevens, and three others. The report’s criticism of the State Department for not providing adequate security at the consulate, and of the intelligence community for not alerting the US military to the presence of a CIA outpost in the area, received front-page coverage and revived animosities in Washington, with Republicans accusing Obama and Hillary Clinton of a cover-up. A highly classified annex to the report, not made public, described a secret agreement reached in early 2012 between the Obama and Erdo?an administrations. It pertained to the rat line. By the terms of the agreement, funding came from Turkey, as well as Saudi Arabia and Qatar; the CIA, with the support of MI6, was responsible for getting arms from Gaddafi’s arsenals into Syria. A number of front companies were set up in Libya, some under the cover of Australian entities. Retired American soldiers, who didn’t always know who was really employing them, were hired to manage procurement and shipping. The operation was run by David Petraeus, the CIA director who would soon resign when it became known he was having an affair with his biographer. (A spokesperson for Petraeus denied the operation ever took place.)

 

The operation had not been disclosed at the time it was set up to the congressional intelligence committees and the congressional leadership, as required by law since the 1970s. The involvement of MI6 enabled the CIA to evade the law by classifying the mission as a liaison operation. The former intelligence official explained that for years there has been a recognised exception in the law that permits the CIA not to report liaison activity to Congress, which would otherwise be owed a finding. (All proposed CIA covert operations must be described in a written document, known as a ‘finding’, submitted to the senior leadership of Congress for approval.) Distribution of the annex was limited to the staff aides who wrote the report and to the eight ranking members of Congress – the Democratic and Republican leaders of the House and Senate, and the Democratic and Republicans leaders on the House and Senate intelligence committees. This hardly constituted a genuine attempt at oversight: the eight leaders are not known to gather together to raise questions or discuss the secret information they receive.

 

The annex didn’t tell the whole story of what happened in Benghazi before the attack, nor did it explain why the American consulate was attacked. ‘The consulate’s only mission was to provide cover for the moving of arms,’ the former intelligence official, who has read the annex, said. ‘It had no real political role.’

 

Washington abruptly ended the CIA’s role in the transfer of arms from Libya after the attack on the consulate, but the rat line kept going. ‘The United States was no longer in control of what the Turks were relaying to the jihadists,’ the former intelligence official said. Within weeks, as many as forty portable surface-to-air missile launchers, commonly known as manpads, were in the hands of Syrian rebels. On 28 November 2012, Joby Warrick of the Washington Post reported that the previous day rebels near Aleppo had used what was almost certainly a manpad to shoot down a Syrian transport helicopter. ‘The Obama administration,’ Warrick wrote, ‘has steadfastly opposed arming Syrian opposition forces with such missiles, warning that the weapons could fall into the hands of terrorists and be used to shoot down commercial aircraft.’ Two Middle Eastern intelligence officials fingered Qatar as the source, and a former US intelligence analyst speculated that the manpads could have been obtained from Syrian military outposts overrun by the rebels. There was no indication that the rebels’ possession of manpads was likely the unintended consequence of a covert US programme that was no longer under US control.

 

By the end of 2012, it was believed throughout the American intelligence community that the rebels were losing the war. ‘Erdo?an was pissed,’ the former intelligence official said, ‘and felt he was left hanging on the vine. It was his money and the cut-off was seen as a betrayal.’ In spring 2013 US intelligence learned that the Turkish government – through elements of the MIT, its national intelligence agency, and the Gendarmerie, a militarised law-enforcement organisation – was working directly with al-Nusra and its allies to develop a chemical warfare capability. ‘The MIT was running the political liaison with the rebels, and the Gendarmerie handled military logistics, on-the-scene advice and training – including training in chemical warfare,’ the former intelligence official said. ‘Stepping up Turkey’s role in spring 2013 was seen as the key to its problems there. Erdo?an knew that if he stopped his support of the jihadists it would be all over. The Saudis could not support the war because of logistics – the distances involved and the difficulty of moving weapons and supplies. Erdo?an’s hope was to instigate an event that would force the US to cross the red line. But Obama didn’t respond in March and April.’

 

There was no public sign of discord when Erdo?an and Obama met on 16 May 2013 at the White House. At a later press conference Obama said that they had agreed that Assad ‘needs to go’. Asked whether he thought Syria had crossed the red line, Obama acknowledged that there was evidence such weapons had been used, but added, ‘it is important for us to make sure that we’re able to get more specific information about what exactly is happening there.’ The red line was still intact.

 

An American foreign policy expert who speaks regularly with officials in Washington and Ankara told me about a working dinner Obama held for Erdo?an during his May visit. The meal was dominated by the Turks’ insistence that Syria had crossed the red line and their complaints that Obama was reluctant to do anything about it. Obama was accompanied by John Kerry and Tom Donilon, the national security adviser who would soon leave the job. Erdo?an was joined by Ahmet Davuto?lu, Turkey’s foreign minister, and Hakan Fidan, the head of the MIT. Fidan is known to be fiercely loyal to Erdo?an, and has been seen as a consistent backer of the radical rebel opposition in Syria.

 

The foreign policy expert told me that the account he heard originated with Donilon. (It was later corroborated by a former US official, who learned of it from a senior Turkish diplomat.) According to the expert, Erdo?an had sought the meeting to demonstrate to Obama that the red line had been crossed, and had brought Fidan along to state the case. When Erdo?an tried to draw Fidan into the conversation, and Fidan began speaking, Obama cut him off and said: ‘We know.’ Erdo?an tried to bring Fidan in a second time, and Obama again cut him off and said: ‘We know.’ At that point, an exasperated Erdo?an said, ‘But your red line has been crossed!’ and, the expert told me, ‘Donilon said Erdo?an “fucking waved his finger at the president inside the White House”.’ Obama then pointed at Fidan and said: ‘We know what you’re doing with the radicals in Syria.’ (Donilon, who joined the Council on Foreign Relations last July, didn’t respond to questions about this story. The Turkish Foreign Ministry didn’t respond to questions about the dinner. A spokesperson for the National Security Council confirmed that the dinner took place and provided a photograph showing Obama, Kerry, Donilon, Erdo?an, Fidan and Davuto?lu sitting at a table. ‘Beyond that,’ she said, ‘I’m not going to read out the details of their discussions.’)

 

But Erdo?an did not leave empty handed. Obama was still permitting Turkey to continue to exploit a loophole in a presidential executive order prohibiting the export of gold to Iran, part of the US sanctions regime against the country. In March 2012, responding to sanctions of Iranian banks by the EU, the SWIFT electronic payment system, which facilitates cross-border payments, expelled dozens of Iranian financial institutions, severely restricting the country’s ability to conduct international trade. The US followed with the executive order in July, but left what came to be known as a ‘golden loophole’: gold shipments to private Iranian entities could continue. Turkey is a major purchaser of Iranian oil and gas, and it took advantage of the loophole by depositing its energy payments in Turkish lira in an Iranian account in Turkey; these funds were then used to purchase Turkish gold for export to confederates in Iran. Gold to the value of $13 billion reportedly entered Iran in this way between March 2012 and July 2013.

 

The programme quickly became a cash cow for corrupt politicians and traders in Turkey, Iran and the United Arab Emirates. ‘The middlemen did what they always do,’ the former intelligence official said. ‘Take 15 per cent. The CIA had estimated that there was as much as two billion dollars in skim. Gold and Turkish lira were sticking to fingers.’ The illicit skimming flared into a public ‘gas for gold’ scandal in Turkey in December, and resulted in charges against two dozen people, including prominent businessmen and relatives of government officials, as well as the resignations of three ministers, one of whom called for Erdo?an to resign. The chief executive of a Turkish state-controlled bank that was in the middle of the scandal insisted that more than $4.5 million in cash found by police in shoeboxes during a search of his home was for charitable donations.

 

Late last year Jonathan Schanzer and Mark Dubowitz reported in Foreign Policy that the Obama administration closed the golden loophole in January 2013, but ‘lobbied to make sure the legislation … did not take effect for six months’. They speculated that the administration wanted to use the delay as an incentive to bring Iran to the bargaining table over its nuclear programme, or to placate its Turkish ally in the Syrian civil war. The delay permitted Iran to ‘accrue billions of dollars more in gold, further undermining the sanctions regime’.

 

*

 

The American decision to end CIA support of the weapons shipments into Syria left Erdo?an exposed politically and militarily. ‘One of the issues at that May summit was the fact that Turkey is the only avenue to supply the rebels in Syria,’ the former intelligence official said. ‘It can’t come through Jordan because the terrain in the south is wide open and the Syrians are all over it. And it can’t come through the valleys and hills of Lebanon – you can’t be sure who you’d meet on the other side.’ Without US military support for the rebels, the former intelligence official said, ‘Erdo?an’s dream of having a client state in Syria is evaporating and he thinks we’re the reason why. When Syria wins the war, he knows the rebels are just as likely to turn on him – where else can they go? So now he will have thousands of radicals in his backyard.’

 

A US intelligence consultant told me that a few weeks before 21 August he saw a highly classified briefing prepared for Dempsey and the defense secretary, Chuck Hagel, which described ‘the acute anxiety’ of the Erdo?an administration about the rebels’ dwindling prospects. The analysis warned that the Turkish leadership had expressed ‘the need to do something that would precipitate a US military response’. By late summer, the Syrian army still had the advantage over the rebels, the former intelligence official said, and only American air power could turn the tide. In the autumn, the former intelligence official went on, the US intelligence analysts who kept working on the events of 21 August ‘sensed that Syria had not done the gas attack. But the 500 pound gorilla was, how did it happen? The immediate suspect was the Turks, because they had all the pieces to make it happen.’

 

As intercepts and other data related to the 21 August attacks were gathered, the intelligence community saw evidence to support its suspicions. ‘We now know it was a covert action planned by Erdo?an’s people to push Obama over the red line,’ the former intelligence official said. ‘They had to escalate to a gas attack in or near Damascus when the UN inspectors’ – who arrived in Damascus on 18 August to investigate the earlier use of gas – ‘were there. The deal was to do something spectacular. Our senior military officers have been told by the DIA and other intelligence assets that the sarin was supplied through Turkey – that it could only have gotten there with Turkish support. The Turks also provided the training in producing the sarin and handling it.’ Much of the support for that assessment came from the Turks themselves, via intercepted conversations in the immediate aftermath of the attack. ‘Principal evidence came from the Turkish post-attack joy and back-slapping in numerous intercepts. Operations are always so super-secret in the planning but that all flies out the window when it comes to crowing afterwards. There is no greater vulnerability than in the perpetrators claiming credit for success.’ Erdo?an’s problems in Syria would soon be over: ‘Off goes the gas and Obama will say red line and America is going to attack Syria, or at least that was the idea. But it did not work out that way.’

 

The post-attack intelligence on Turkey did not make its way to the White House. ‘Nobody wants to talk about all this,’ the former intelligence official told me. ‘There is great reluctance to contradict the president, although no all-source intelligence community analysis supported his leap to convict. There has not been one single piece of additional evidence of Syrian involvement in the sarin attack produced by the White House since the bombing raid was called off. My government can’t say anything because we have acted so irresponsibly. And since we blamed Assad, we can’t go back and blame Erdo?an.’

 

Turkey’s willingness to manipulate events in Syria to its own purposes seemed to be demonstrated late last month, a few days before a round of local elections, when a recording, allegedly of a government national security meeting, was posted to YouTube. It included discussion of a false-flag operation that would justify an incursion by the Turkish military in Syria. The operation centred on the tomb of Suleyman Shah, the grandfather of the revered Osman I, founder of the Ottoman Empire, which is near Aleppo and was ceded to Turkey in 1921, when Syria was under French rule. One of the Islamist rebel factions was threatening to destroy the tomb as a site of idolatry, and the Erdo?an administration was publicly threatening retaliation if harm came to it. According to a Reuters report of the leaked conversation, a voice alleged to be Fidan’s spoke of creating a provocation: ‘Now look, my commander, if there is to be justification, the justification is I send four men to the other side. I get them to fire eight missiles into empty land [in the vicinity of the tomb]. That’s not a problem. Justification can be created.’ The Turkish government acknowledged that there had been a national security meeting about threats emanating from Syria, but said the recording had been manipulated. The government subsequently blocked public access to YouTube.

 

Barring a major change in policy by Obama, Turkey’s meddling in the Syrian civil war is likely to go on. ‘I asked my colleagues if there was any way to stop Erdo?an’s continued support for the rebels, especially now that it’s going so wrong,’ the former intelligence official told me. ‘The answer was: “We’re screwed.” We could go public if it was somebody other than Erdo?an, but Turkey is a special case. They’re a Nato ally. The Turks don’t trust the West. They can’t live with us if we take any active role against Turkish interests. If we went public with what we know about Erdo?an’s role with the gas, it’d be disastrous. The Turks would say: “We hate you for telling us what we can and can’t do.”’

 

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4 April




via Zero Hedge http://ift.tt/1p0tVXX Tyler Durden

Shape of the Investment Climate

he economic data due out in what for many will be a holiday-shortened week is unlikely to change macro-economic picture: 

 

• Even though the US economy is strengthening after a dismal first quarter, the peak in the Fed’s balance sheet is still the better part of six months out, and the first rate hike is more than a year away.

 

• China, the world’s second largest economy, has slowed, though the focus is just as much on the financial sector, where the yuan has weakened and financial conditions have tightened.

 

• The world’s third largest economy, Japan has instituted a retail sales tax, just as data shows that industrial production and household spending have turned down. Although first quarter growth likely accelerated from the 0.2% quarter-over quarter pace seen in Q3 and Q4 13, the economy may contract in Q2.

 

• The euro area economy has graduated from contraction to faint growth, but growth remains, as ECB President Draghi say, “weak, fragile and uneven.” Eonia is elevated, and there seems to be a strengthening consensus that more central bank action is required.

 

As the yield on 10-year US Treasuries recorded their biggest decline in a month and US 30-year yields fell to their lowest level since last July, investors learned that weekly initial jobless claims made new cyclical lows. Subdued price prices and inflation expectations (e.g., 5-year/5-year forward breakeven is just below 2.4%, more than 35 bp below the five-year average). Meanwhile, the US S&P 500 suffered its largest drop since 2012. This week’s data is likely to show the even without much use of credit cards (revolving credit), the household consumption (retail sales account for about 40% of consumption) is recovering after a soft start to the year. Industrial output also likely strengthened. Prices (CPI) are subdued. Housing starts are expected to jump back after some weather induced weakness.

 

Yellen’s speech to the NY Economics Club will be scrutinized for policy clues, but we suspect the pendulum of sentiment has swung nearly as far as it will.  Interest rates approaching important low levels, like 2.6% on the US 10-year, 30 bp on the US 2-year yield (assuming one 25 bp rate hike in 2015, we estimate fair value as no lower than 40 bp) and near 90 bp implied yield on the December 2015 Eurodollar futures contract. The S&P 500 is approaching an important retracement target just below 1800.

 

At the IMF gathering over the weekend, ECB President Draghi gave the strongest signal to date that the central bank is indeed preparing new unconventional measures to arrest the slide in inflation. He was quoted in the media confirming that the euro’s strength “requires further monetary stimulus.” However, while many observers have advocated quantitative easing, reports suggest that as Bundesbank President Weidmann and Bank of Finland’s Governor Liikanen may be speaking for an emerging consensus that if the problem is the euro’s strength is a major force depressing prices, then the most effective policy is a cut in interest rates rather than QE.

 

There does seem to be truth in IMF head Lagarde’s undiplomatic claim before the weekend that is was just a matter of time before the ECB takes unorthodox steps. Whatever the ECB is going to do is at least a month and a half away. Although officials play down the significance of any one CPI report, the preliminary April reading, due out at the end of the month, is understood to be critical. The ECB is counting the Easter-effect being unwound in April that will boost CPI from 0.5%, the lowest level in more than four years. This was thought to be necessary to give Draghi and others time to build a consensus for action in June, when the staff unveils new inflation forecasts (it has consistently erred in seeing more inflation that actually has materialized).

 

The incredible success of the Greek bond auction has many observers scratching their heads. The economy is 25% small than before the crisis and its debt is closer to 170% of GDP (from 120% on the eve of the crisis), yet some investors, reportedly a third of whom were hedge funds and a full 90% were non-domestic investors) seemingly could not get enough of the paper with a 4.95% coupon. We suspect there is a logic to this and not simply naive and over-the-top speculation as many pundits have intimated.

 

The reasoning is at least three-fold: First, the cost of servicing the country’s debt, which is largely in official hands, is likely to come from easing the conditions through officials reducing the interest rate and extending the maturities, making it easier to service the modest amount of debt in private hands. Second, the diminished risk of Greece dropping out of EMU means that the redenomination risk has all but evaporated. Third, although the bond auction was successful beyond belief, it is unlikely to be repeated often as the private sector funds are still relatively expensive compared with the official sector

.

China’s financial conditions are tightening, though this week’s data is expected to show that officials are still struggling to slow down lending. Last week China failed to sell the full amount of 1-year paper it offered. Only CNY20.7 bln of the note was bought compared to the CNY28 bln that was offered. The rate was nearly 25 bp higher than expected at 3.63%, and yields were closer to 3.32% for paper with the same residual maturity. The 7-day repo rate, which reflects interbank liquidity jumped 75 bp last week to 3.75%, despite the PBOC conducting its first liquidity injection via repos since January. Corporate tax payments have aggravated the existing pressure and speculation of a rate hike here in Q2 continues to be picked up by the media.

 

Tensions in Ukraine are escalating. Forces sympathetic to Russia, if Russia is to be believed that it is not their personnel , have taken over a couple of cities in the eastern part of Ukraine and have incited unrest in more. Even before this, the US and Europe were threatening more sanction as Russian forces remain amassed on the Ukraine border. The position and weapons of those forces (including surface to air missiles, according to reports) is leading NATO to conclude that Putin is seeking the full occupation of Ukraine. Separately, before the weekend Putin’s letter to European officials warning that Ukraine’s failure to pay for its oil and gas risks cut-offs and pre-payment requirements for further supplies. This got Europe’s attention of course, but there is a contractual dispute. Putin says that Gazprom is owed about $35.4 bln for past subsidies ($17 bln) and fines ($18.4 bln) under a take-or-pay scheme.

 

We conclude by identifying three additional events this week that investors should note: First, the UK’s data is likely to show that the labor market continues to heal and the unemployment rate may slip to 7.0%, the previous threshold in the BOE’s forward guidance. Earnings growth is expected to improve, but the CPI should eased, perhaps falling to 1.5%, which would be the lowest since the beginning of Q4 2009. Second, the Bank of Canada is not about to change rates at this week’s meeting, but it may recognize that the economy is likely to recover in Q2 from a poor Q1, helped by a stronger US economy and that this may help put a floor under prices. Finally, New Zealand reports Q2 CPI figures midweek and barring unexpected weakness, the Reserve Bank of New Zealand appears poised to hike rates on April 24 in Wellington.




via Zero Hedge http://ift.tt/1exPUB7 Marc To Market

31-Year-Old Hedge Fund Trader Made More Than The CEOs Of The Six Biggest Banks Combined

Over the weekend, there has been some consternation over the report that the CEOs of the 6 largest US banks: JPM, BAC, GS, MS, C and WFC, collectively made $96.1 million in 2013, more than $86.3 million the year before and the most since the financial crisis.

However, we are confident those same people would have an aneurism if they were to learn that James “Jimmy” Levin, a 31-year-old hedge fund trader – head of global credit and an executive managing director at Och-Ziff – last year made a whopping $119 million, or more than all of the CEOs of the six largest firms combined. 

rom Och-Ziff’s Proxy filing.

Just who is this trading wunderkind? WSJ’s Greg Zuckerman explains:

In 2012, James Levin, a then 30-year old trader at Och-Ziff Capital Management LLC, turned heads with a bet of more than $7.5 billion on “structured credit” debt investments, or about a quarter of the money the firm managed when the investments were made.

 

The wager was an enormous winner. Mr. Levin’s group scored gains of nearly $2 billion, according to people close to the matter. The trade was detailed in an earlier Wall Street Journal story.

 

* * *

 

James Levin, of Och-Ziff Capital Management made a wager in 2012 of more than $7.5 billion on “structured credit” debt investments. That amount represented about a quarter of the money the firm managed when the investments were made.

 

The bet paid off. Mr. Levin’s group scored 2012 gains of nearly $2 billion, or about 25%, before fees—likely making it one of the top trades on Wall Street last year. The credit team, with 14 members, accounted for more than half of the 468-person firm’s $3.4 billion trading gains last year, according to people close to the situation.

 

Mr. Levin and Och-Ziff aren’t the only boldfaced investors who scored large gains last year buying investments such as residential mortgage-backed securities and collateralized loan obligations, among others, many of which were crunched in the financial crisis.

 

The prices of these instruments rallied in 2012 amid the U.S. housing rebound and the hunger by investors for debt with sizable yields, and have risen further in 2013.

 

Seth Klarman’s Baupost Capital, Jeffrey Gundlach’s DoubleLine Capital LP and Greg Lippmann’s LibreMax Capital LLC are among those who saw hefty returns in 2012. Dozens of smaller hedge funds also racked up sizable gains, as did SkyBridge Capital, which invests in various funds.

 

* * *

 

In some ways, Mr. Levin’s strategy was riskier than some rivals’ because he did less hedging, or protecting against the downside, than some others, according to people close to the matter. Mr. Levin’s team was an especially big buyer of investments tied to residential and commercial mortgage-backed securities, traders say.

 

* * *

Mr. Levin, 31, who goes by Jimmy and is described as outgoing and thoughtful, works closely with David Windreich, Och-Ziff’s head of U.S. investing, and Daniel Och, the firm’s founder, according to people close to the matter. Mr. Levin first got to know Mr. Och when he taught Mr. Och’s son to water ski at summer camp several years ago, before Mr. Levin completed a degree in computer science at Harvard University.

Mr. Och helped him find his first job at Sagamore Hill Capital Management, according to someone familiar with the matter. After a stint as an analyst in the distressed debt and statistical-arbitrage group at Dune Capital, Mr. Levin joined New York-based Och-Ziff in 2006.

And something stunning: “Mr. Levin’s credit team, with just 14 members, accounted for more than half of the 468-person firm’s $3.4 billion trading gains in 2012, according to people close to the situation, as prices of the debt rallied amid a U.S. housing rebound.”

What housing rebound?

That said, $120 million on over $1.7 billion in firm profits sounds a little cheap to us. Still, we are confident young Jimmy will be more than happy to collect what amounts to over 2,300 median annual salaries. And all he had to do to facilitate yet another great example of the great US wealth divide in which the rich get super rich while everyone else, well, doesn’t, was to correctly forecast that the US economy would continue to deteriorate and that the Fed would continue injecting trillions of  liquidity into the stock market.

What better example of the “value added” activities that are most highly rewarded in US society.




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

Barclays Asks Is It Finally Time To Short Japanese Bonds?

For a decade or two, it’s been dubbed the widowmaker (though truth be told, the losses are more bleed than massive capital loss like those holding US growth stocks currently), but as Barclays notes the Japanese bond market ‘conundrum’ may finally be ready to be played. (or not as we conclude below)

Via Barclays,

A new bond-market ‘conundrum’ – In Japan?

Michael Gavin, Tal Shapsa

We are always on the lookout for asset prices that seem inconsistent with the more plausible economic and financial scenarios. Sometimes these discrepancies point toward necessary alterations of our fundamental world view. In other cases, they point toward investment opportunity. At the moment, one of the most glaring discrepancies between macro and markets is the long end of the Japanese curve, for which the 5y5y forward JGB interest rate is a perfectly good indicator. This is shown in Figure 1.

A couple of points emerge from Figure 1.

First, the downdraft in forward interest rates dates to the end of 2010, roughly two years before the election of Prime Minister Abe rocked Japanese currency and equity markets. The 5y5y interest rate continued during the subsequent months, perhaps reflecting the ramp-up in BoJ bond purchases that is an important part of ‘Abenomics’. But timing suggests that it cannot all be attributed to the more expansionary policies that were put in place during 2013.

Second, the forward rate is at a level that does not seem compatible with an economy that has recovered from recession and attained something like 2% inflation. The interest rate was, in fact, roughly 100bp higher during the heart of the deflationary period in the early and mid-2000s and during the deep recession (and resumption of deflation) that accompanied the global economic downdraft of 2008-09 (Figure 2).

Finally, until the end of 2012, the downdraft in long Japanese rates coincided with an equally impressive downdraft in global, and specifically US, rates. But the move in Japanese rates continued throughout the 2013 US and global bond market correction. This is not utterly surprising, given the strongly segmented (that is, predominantly domestic) ownership of Japanese bonds. In light of this segmentation, it is not very surprising that the BoJ’s massively expanded bond-buying program pushed rates even lower during 2013. But if this is the explanation, the 2013 US experience highlights the potential precariousness of bond valuations in the eventual normalization of BoJ policy.

Such normalization will likely be driven, if and when it occurs, by successful recovery in and reflation of the Japanese economy. In this context, it is important to remind ourselves that the 3-1/2 year downdraft in longer-term interest rates has coincided with a labor market recovery and (core) price reflation that has been fairly steady during the past decade (although interrupted, of course, by the 2008-09 global event) and is now rather well advanced.

As our Japanese macro team has recently written, the Japanese Phillips curve is alive and well, and it seems to be shifting up in response to the extraordinarily expansionary BoJ monetary policy. The emphasis there was on the finding that the curve has not yet shifted enough to generate 2% inflation at an output gap of zero. This supports our view that the BoJ will decide that it needs to announce further policy easing at its July meeting.

But if we are confronting the long end of the yield curve with the most likely economic scenarios, the next 6-18 months are not the key drivers; we need to move the scenario forward several years. Here, we think Figure 2 supports two important points.

First, after roughly a decade of improvement, the labor market recovery is quite far advanced. At 3.6%, the unemployment rate is now lower than it has been since the late 1990s. The persistence of recovery during the past decade suggests that a full (cyclical) recovery of the Japanese economy is well within sight. It is possible to identify headwinds that may temporarily slow the recovery, but recent experience would seem to argue against the plausibility of a stagnant, low pressure economy as a medium-term scenario that should be priced into the long end of the JGB curve.

Second, the historical experience illustrated in Figure 2 suggests, as our Japanese research team has emphasized, that a tightening of labor markets does eventually generate rising inflationary pressure. It does not take a PhD in econometrics to see this; it is visible to the naked eye in Figure 2, during the 2002-07 phase of the recovery and in its more recent, post-crisis phase.

So although the jury is out on whether inflation will rise to the desired 2% by 2015, if we look ahead a full five years, we would assign a high probability to full cyclical recovery and a normalization of inflation to the 2% range. Along with economic normalization would come, it seems to us, some degree of normalization of monetary policy and the yield curve.

The conundrum, as we see it, is that nothing like this is priced into the JGB curve, which is failing to price even a partial, eventual success of the Abe government’s reflationary agenda. Perversely, forward interest rates are even more depressed than they were in the mid-2000s, when deflation was substantially more entrenched, the economy much weaker, and monetary policy less reflationary.

In short, fundamental considerations seem to be at very strong odds with how markets are pricing the long end of the Japanese curve. For the moment, the BoJ’s support of the JGB market is the most powerful argument against adopting a sceptical position toward JGB duration. If, as we expect, the BoJ announces an intensification and/or extension of its QE framework, the disconnect between fundamentals and market pricing may be prolonged. But as US bond investors learned in 2013, a policy-induced mismatch between fundamentals and markets can last no longer than the rationale for extraordinarily easy monetary policy. As we have recently suggested , a sceptical position toward Japanese bonds seems like an increasingly sensible way to position for policy success in Japan.

+++++++++++++++++

So Is the JGB curve right to discunt now chance of Abe’s inflationary policy success? Perhaps that is why Japanese stocks are fading fast and catching on to the reality that printing money is not the solution…?




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

“A Triumphant Recovery”? A First-Person Perspective Of What Is Really Happening In Greece

In light of the recent “triumphant” return of Greece to the capital markets with its brand new 5 Year bond issuance (which much to the chagrin of the flippers is already trading below its breaking price), one of our Greek readers decided to provide his “on the ground” perspective on what is really happening in Greece.

To zerohedge team
Regarding the past two days in Athens, Greece

I follow your blog consistently. I am Greek and I trade on overseas (from my perspective) markets. I share a number of your views and would like to forward you my sincere thanks for revealing the ins and outs of algos all that time ago and managed to work my way around them. It was algos that caused to suffer a giant instant loss on “flashing Thursday”, which really awakened me as to the nature of the business and the markets. I doubt I would have ever progressed to get my head around certain concepts if it wasn’t for certain insights you provided.

I am writing you in an effort to get you to provide a more public and harsh(I mean realistic) description of what has been going on, for the past few days with relation to what’s left of my country. I doubt it will not take you long to discover its mostly spent on “political commissions” and interest payments (I’d bet only 6-7% actually flows through). I am sure you are aware that according to Greek law all political parties receive some kind of (substantial) financial support from the government budget. The government has not delivered. There are still over 900,000 people working for public and government related services, for a population of roughly 11 million. The banks still maintain negative real equity and have consistently defrauded investors over the past few years. In the second half of 2013, the recap programs they supposedly undertook, ended up causing even more losses or at least leaving the balances of investors enormously negative. No one stood up and said a thing, not even the Union of Greek Banks, whose job is essentially to help investors, not help banks defraud investors. The head of this organization actually happens to have an interesting history involving various scandals and frauds (I know what you are going to say, who isn’t at this point).

In all the panic and the lying, the current administration, a bunch of second generation hustlers who are professional politicians, (if there is such a thing…I think it was Plato that understood politics best. “leave politics to the philosophers” he said.) are parading our re-entry to the Fed sponsored EZ sovereign debt markets like it’s a triumph, when in fact what little is left of my age old country is being raped and levered. The guided media are applauding or better while the greater population which has no sense of what the difference between a stock and bond is, doesn’t know whether to cry or hang themselves.

But when Frau visits, the whole city has to stop what it’s doing. I think I saw several accidents on the way home. The entire traffic in the centre of the city has to come to a complete halt for over three and a half hours (I know because I was in the fucking car for two and a half and then another hour at least spent waiting at a single point in Zografou, some 3-4 kilometers away from the closed out area of the center.

Summoning as much naivety and faith as possible, I would love to see your stream of though and criticism concerning the true raping and pillaging being done in my country. And while we are “too small to matter”, sometimes all it takes is for someone to shed a speck of light in an otherwise blackened cave, in order to slowly find our way out, or in this case to show the true nature of things, which is lost in the eyes of the outside world, in what is effectively a third world society.

Sincerely and with Respect
G.K. Kolmer




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