Tag: finance

Is Turkey the support behind ISIS? A documentary released by RT lays out evidence that would lead to that conclusion… one we first exposed here, here, and here… and is interestingly timed given Europe's potential desire to regain some leverage over Erdogan.

The documentary takes place just days after the YPG took back the town of Shaddadi (a former ISIS stronghold), and what is revealed will most certainly go under reported, but is important nonetheless. The documentary points out that the connection between Turkey and ISIS is strong. Killed ISIS fighters left behind passports indicating that the fighters all came through Turkey, and by their own admission, interviewed ISIS fighters admit to coming through Turkey with no issue at all. The locals who were working under ISIS say that oil was refined and sold to Turkey in return for money and weapons, and YPG fighters who fight against ISIS find that much of the ISIS supplies come from Turkey.

Here are some key elements of the documentary:

Captured ISIS fighters admit that coming through Turkey was easy. The fighters believe this to be the case due to the fact that it has a common enemy with ISIS, the YPG (People's Protection Unit). The YPG is yet another rebel group fighting in the Syrian civil war, and Turkey views the YPG as an extension of the Kurdistan Workers' Party (PKK) who call for an independent Kurdish state within Turkey. The fighter alleges that Turkey's president Recep Erdogan wants ISIS to control Syria in order to grow the oil trade.

"The prophet told us to build a caliphate. I spoke with my friend about it, they told me to go to Istanbul. I went to Turkey, I got into the airport, went through passport control. The formalities were a breeze. Crossing the border wasn't hard either, it was like crossing the street. A man told me that Islamic State had erased the borders, that there were no borders. I'd heard of it, but I didn't quite get it until I saw it myself. If Turkey wanted to stop the refugee influx, it could have long ago."

Passports left behind by those killed during the battle show that the fighters came through Turkey.

The locals, and sadly, many of them children, spoke of the horror everyone had lived under during ISIS' two year control of the town.

 

 

The documentary then goes through a flat once occupied by what appears to be an ISIS accountant of some sort, the flat had all kinds of oil related documents.

ISIS would take oil from the Jabisah oil field near the town of Shaddadi in Northern Syria, to Raqqa, and ultimately to Turkey where they would sell it says Ghazi Hussein, a resident of Hasakah province, who witnessed the terrorists having Jabisah under their control.

One local estimated that ISIS made a million dollars a week.

YPJ (women's division of the YPG) fighters explained that all of the gear found on ISIS fighters is from Turkey, and are curious as to why nobody is connecting the dots yet.

One captured ISIS fighter even says that "Erdogan is the father of ISIS."

You can watch the full documentary below [warning: contains content that may be disturbing]

via http://ift.tt/1N8JQAm Tyler Durden

By Adventures in Capitalism

The Woodstock Of Crony Capitalism

It’s been a while since I’ve attended the Berkshire Hathaway (BRK:NYSE) annual meeting. Between the tedium of little kids asking questions about how to live life, to the feel-good nature of the thing, I simply got repulsed. Why do a bunch of hard-nosed capitalists choose to act like Ned Flanders for a weekend—in Omaha of all places? It’s illogical and completely artificial.

Then, a few weeks back, as friends asked if I was attending this year, I had a certain realization—all this play-acting is simply Buffett, the puppet-master at his most brilliant. As he plows capital into highly regulated industries, he has the upper hand because he has skillfully crafted the image of the Mid-Western grandfather that can do no wrong. He can cozy up to regulators and politicians and get what he wants—without the added costs and distractions of lobbyists and consultants. Who wouldn’t want to get their permits in half the time and with a fraction of the cost? Want to block a Canadian pipe-line that would compete with your cherished rail-road? Become the President’s “economic advisor.” Want to abuse tax loopholes? Bemoan that your secretary pays a higher tax rate than you. You want to obstruct solar energy in Nevada? Elon Musk is a foreigner, Omaha is as American as it gets. Your railroad has an atrocious safety record? Well, at least we don’t have to worry about global warming from that pipeline…

I can go on and on, but I went from disgusted to awestruck. In this horribly overregulated world of ours, Buffett has evolved into the apex predator. Why wouldn’t he? Over his career, he’s consistently gone where the opportunities were. He’s gone from investing in “cigar-butts” when few other investors knew how to look for companies trading for less than cash, to branded products with pricing power that could thrive during the increasing inflation of the 70’s and early 80’s to a diversified book of high return on capital businesses during the great bull market that began in 1982. Over this time, he realized that he could leverage his bets with an insurance business that not only gave him access to cheap capital, but removed the headaches associated with bond maturities and margin calls.

Over the past fifteen years, the US has undergone a massive increase in pernicious regulation. Therefore, it seems only natural that opportunities would exist in the most regulated sectors of the economy. If you can get your permits and deny those permits to others, if you can avoid environmentalists and NIMBYs, if you can dodge taxes, if you can charm the cliques in Washington, you have an opportunity to earn outsized profits—especially if you have an endless fire-hose of cheap insurance float to deploy.

Crony capitalism is highly lucrative and as a Berkshire shareholder, I’ve reaped the rewards. Now, I once again want to sit at the feet of the master. How do you make people like you to the point that they give you a free pass on whatever you want? When you call up a regulator, do you even talk about the issues? Or do you talk about your Ukulele skills and Omaha little league? You have to admire what he’s accomplished and I will be there to watch him amuse the petite bourgeoisie. I see a world that continues to become more regulated—where a cloistered elite uses special interest groups to crush opponents and destroy businesses. Either you’re calling the shots, or you’re getting abused like a peasant.

The Koch Brothers spend hundreds of millions on elections. Soros spends similarly on fringe groups that break windows and overturn cars. Neither really accomplishes his goals. Buffett gets what he wants. In Davos, they chug bottles of Chateau Lafite Rothschild and plot how to pillage small nations. At Berkshire, we will eat Dilly bars and plot how to pillage the middle class. Capitalism is beautiful and crony capitalism is the end product of politicians who prostitute the laws. I don’t have the power to change the current rules, but I can certainly learn to thrive within them.

This is a long-winded way of saying that after a few years of sitting out the meeting, I’ll be there. If you want to grab a drink, email me and I’ll tell you where I am. Beer with friends is fun—free beer at someone else’s party is the true definition of value investing.

via http://ift.tt/1TaTU86 Tyler Durden

For every dollar that you have in the bank there is actually 0.00061 dollars available…in other words, there's 6 cents for every $100 dollars of deposits that you have at the bank.

As Mike Maloney explains in this brief clip, we live in an economic system that is made complicated by design. Basically, it’s set up so most people don’t even try to understand it.

Got Gold?

 

via http://ift.tt/1N8BpoN Tyler Durden

Via EricPetersAutos.com,

Why the hard-sell for self-driving cars?

This week, Ford and Volvo announced they are forming a “coaliton” – along with Google – to push not only for the development of self-driving cars, but for federal “action” (their term) to force-feed them to us.

Why?

The reasons are obvious: There’s money – and control – in it.

To understand what’s going on, to grok the tub-thumping for these things, it is first of all necessary to deconstruct the terminology. The cars are not “self-driving.” This implies independence.

And “self-driving” cars are all about dependence.

The “self-driving” car does what it has been programmed to do by the people who control it. Which isn’t you or me. Instead of you controlling how fast you go, when to brake – and so on – such things will be programmed in by … programmers. Who will – inevitably- program in parameters they deem appropriate. What do you suppose those parameters will be?

“Safety” will be the byword, of course.

 

But the point being, you will no longer have any meaningful control over (ahem!) “your” car. You’ll pay for the privilege of “owning” it, of course. But your “ownership” will not come with the right to control what you “own.”

It will be a tag-team of the government and the car companies who control (and thereby, effectively own) “your” car.

And thereby, you.

Not only will how you drive (well, ride) be under their control, they will also know where and when you go. It will be easy to keep track of you in real time, all the time. And if they decide they don’t want you to go anywhere at all, that’s easy, too. Just transmit the code and the car is auto-immobilized.

You only get to go when you have their permission to go. It will be a very effective way of reducing those dangerous “greenhouse gas” emissions, for instance.

 

If this all sounds paranoid, consider the times we live in. Reflect upon what we know for a fact they are already doing.   

For instance, making the case – in court – that we (the putative “owners” of “our” vehicles) ought to be legally forbidden from making any modifications to them. The argument being that such modifications could potentially affect various “safety” systems and they do not want to be held liable for any resultant problems that may occur.

This argument easily scales when applied to the self-driving car, which we will be forced to trust with our lives at 70 MPH.

For at least 30 years now – since the appearance of anti-lock brakes back in the ‘80s – the focus of the car industry has been to take drivers and driving out of the equation. To idiot-proof cars. This is easier – and more profitable – than merely building cars that are fun to actually drive.

How much profit margin has been added to a new car via (6-8) air bags? We pay more for the car, more to repair the car (and so, more to insure the car).

This also scales.

 

The technology that will be necessary to achieve the “self-driving” car is very elaborate and very expensive.

Thus, very profitable.

Which by itself would be fine… provided we could choose. But we will be told. Like we’re told we must have 6-8 air bags and all the rest of it.

This is the “action” Ford and Volvo and Google are seeking.

I personally have no doubt that, in time, they will make it illegal to own a car that is not “self-driving.” Well, to actually drive the thing. Static museum displays may still be permitted.

Tesla, the state-subsidized electric car – already has the necessary “self-driving” technology and Elon Musk is pushing it, hard. He says it’s a gotta-have because people cannot be trusted to drive themselves. There’s a clue for you as to the mindset of our masters.

But the current price of the least expensive Tesla is just under $70,000.

This is not economically viable when the average family’s income is in the neighborhood of $50,000. And keep in mind, that means half the people to the left of average make less than $50,000.

They cannot afford to buy $25,000 cars.

But maybe they can afford to rent them.

This appears to be where we are headed. The perpetual rental. It makes sense, too – from an economic point-of-view. Why buy that which you don’t really own because it’s not under your control? It would be absurd to buy the bus that you ride to work in. It is arguably just as absurd to buy the car you are driven to work in, too.

 

The object of this exercise appears to be perpetual debt-servitude as well as placing almost everyone fully and finally under the complete control of the powers that be. Who are no longer just the powers in government. The distinction between state power and corporate power is so blurry now as to be almost impossible to parse. The two are effectively the same thing, working hand in hand for their mutual benefit.

Remember Il Duce:

All within the state, nothing outside the state, nothing against the state.

Sadly, there is no push back. Or doesn’t seem to be. The cattle appear to like the idea of being herded. It is depressing.

The passivity and acceptance of it all.

Must be something in the water.

via http://ift.tt/1SDNv5X Tyler Durden

As a natural consequence of the Manhattan luxury real-estate slowdown that we’ve documented previously (here and here), REIT’s that have exposure to the Big Apple are starting to feel the impact to their bottom line.

According to reports, REIT Equity Residential, the U.S.’s biggest publicly traded multifamily landlord, fully intended to increase net effective rents in Manhattan during the first quarter, but a glut of new supply provided renters some leverage, and ultimately the company was forced to not only scrap the rent increases, but to give an estimated $600,000 in concessions in order to secure tenants, reducing growth in the area by 50 basis points.

There is one word to describe the NY rental market right now: glut.

In March, Manhattan tenants were offered sweeteners, such as a month’s free rent or payment of broker’s fees, on 14 percent of all new leases, up from 4.8 percent a year earlier, according to a report by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. Bloomberg writes that property owners had to whittle an average of 2.2 percent from their asking rents to reach a deal, as the vacancy rate rose to 2.42 percent, the highest for March in nine years of record-keeping, the firms said.

“New York City just turned very quickly and more deeply than we expected. We had to join the concession party to close deals.” Chief Operating Officer David Santee said during the Q1 earnings call, also adding that with the city accounting for 20% of the firm’s revenue “if you can’t achieve 3 or 4 percent rate growth here, then it’s going to impact your bottom line.”

And it certainly is impacting the bottom line, as the firm lowered full year guidance for funds from operations to $3.05-$3.15 a share, down from an earlier forecast that had an upper range of $3.20.

 

A major culprit for the sudden cooling in the market appears to be the dropoff in well-paying, read banker, jobs and salaries: “The challenge in New York is the disparity between the luxury apartments that have been delivered and will be delivered” and the salaries paid in the city, Santee said. “There are many jobs in the $90,000 to $100,000 range, but it takes $130,000 a year in New York City to afford a one-bedroom apartment.”

Whatever the reason, EQR shares took a hit on the news.

As CFO Mark Parrell added on the call, the weaker-than-expected performance of New York City properties means the high end of the company’s original revenue guidance for the year is “unattainable.” He added that the real estate investment trust said in its earnings report that it expects revenue growth from properties open at least a year to be no higher than 5 percent, compared with the 5.25 percent upper limit it projected previously.

The good news: “other than New York, demand is very robust,” Santee said. Alas, with rent inflation soaring at over 8% now, or 4 times higher than wage growth…

 

… we doubt demand will be “very robust” for a long time.

Meanwhile, as more than 6,700 newly built apartments in Manhattan are listed for rent, with most of the units falling in the luxury, or top 10% tier of the market, where the median rent fell 3.5% in March from a year earlier, oversupply will continue to be an issue for developers and REIT’s alike.

At Equity Residential’s Prism building, a rental-and-condo tower near Madison Square Park built in partnership with Toll Brothers Inc. and completed last year, the new owner of a condo listed it for lease at $800 less than Equity Residential’s units there, Santee said.

“There’s some crazy stuff going on in New York” the COO concluded. We expect more “craziness” as the cooling of the entire US economy has finally entered the Tri-state area.

via http://ift.tt/24qtjvU Tyler Durden

When one month ago, Italy was scrambling to unveil a “last resort” bad bank bailout fund (which eventually received the name Atlante, or Atlas, for the Titan god who was condemned to hold up the sky for eternity, only in this case he is holding up Italy’s €360 billion in bad loans), many wondered why the rush? While the explicit purpose of the fund was to allow Italy to bailout insolvent banks without the involvement of the state which is expressly prohibited by the Eurozone, the scramble appeared erratic almost frentic, and was one of the reasons why Italian bank stocks tumbled in early February.

The question: “Does someone know something?”

It turns out the answer was yes, because as we learn today, “Atlas” is about to become the proud new owner of around 90% of Italy’s Popolare di Vicenza after investors only bought a fraction of the mid-tier bank’s €1.5 billion IPO, Reuters reports. 

Popolare di Vicenza, which was due to announce the outcome of the public share offer later on Friday, said earlier in the day that it had raised €4.25 billion, at the lower end of a 4-6 billion euro range it had initially targeted, from 67 mostly domestic financial institutions.

And if the low take-up for the Popolare di Vicenza share sale is confirmed, Atlas is about to see nearly a third of its fire-power invested in a single bank.

Alessandro Penati, chairman of the Quaestio investment firm which manages the fund, said Atlante would aim to sell any stake it may get in Vicenza after 18 months. Good luck with finding buyers unless the ECB is openly monetizing bank stocks by then, which at the rate Mario Draghi is going (and especially if he listens to advice from JPM) is a distinct possilbity.

“Atlante has the financial resources to fully support Popolare Vicenza’s capital increase,” said Penati. The fund will probably buy most of the shares as institutional investors showed little interest.

According to Reuters, it was not immediately clear whether Popolare di Vicenza, which must raise the cash to comply with capital requirements set by the European Central Bank (ECB), would have enough free float to list on the market next week as planned. The minimum free float required to list is 25 percent of the share capital, but the Milan bourse can make exceptions.

Meanwhile, Atlas’ Penati said his fund was set up as a backstop investor to avoid banks like Popolare di Vicenza being wound down and triggering a crisis for the whole industry. What he didn’t say is that “backstop investor” also means owning over 90% of the bank. 

The fund targets an annual return of around 6 percent and will spend 70 percent of its cash to invest in cash calls at ailing banks, he said. He added that the rest would be used to buy junior tranches of bad debt from banks at a higher price than that offered by funds specialised in distressed securities, but not at book value – meaning banks would have to book further writedowns.

Traders said that contributed to pushing bank share prices down on Friday, with UniCredit dropping 5 percent.

One big problem for Italian banks is that they are saddled with €360 billion of NPLs but are reluctant to sell them at a discount because that would erode their capital.

Another big problem is that the very same Atlante, announced earlier today that it has only manged to raise €4.25 billion from 67 Italian and international intuitions, a tiny fraction of what will ultimately be required.  While analysts say Atlante should have enough money to buy between 20 billion and 35 billion euros of gross non-performing loans, for now it has about one fifth to one ninth of that amount. And as of this moment it has €1.5 billion less.

via http://ift.tt/24qqn2p Tyler Durden

Submitted by Patrick Buchanan via Buchanan.org,

Whether the establishment likes it or not, and it evidently does not, there is a revolution going on in America.

The old order in this capital city is on the way out, America is crossing a great divide, and there is no going back.

Donald Trump’s triumphant march to the nomination in Cleveland, virtually assured by his five-state sweep Tuesday, confirms it, as does his foreign policy address of Wednesday.

Two minutes into his speech before the Center for the National Interest, Trump declared that the “major and overriding theme” of his administration will be — “America first.” Right down the smokestack!

Gutsy and brazen it was to use that phrase, considering the demonization of the great anti-war movement of 1940-41, which was backed by the young patriots John F. Kennedy and his brother Joe, Gerald Ford and Sargent Shriver, and President Hoover and Alice Roosevelt.

Whether the issue is trade, immigration or foreign policy, says Trump, “we are putting the American people first again.” U.S. policy will be dictated by U.S. national interests.

By what he castigated, and what he promised, Trump is repudiating both the fruits of the Obama-Clinton foreign policy, and the legacy of Bush Republicanism and neoconservatism.

When Ronald Reagan went home, says Trump, “our foreign policy began to make less and less sense. Logic was replaced with foolishness and arrogance, which ended in one foreign policy disaster after another.”

He lists the results of 15 years of Bush-Obama wars in the Middle East: civil war, religious fanaticism, thousands of Americans killed, trillions of dollars lost, a vacuum created that ISIS has filled.

Is he wrong here? How have all of these wars availed us? Where is the “New World Order” of which Bush I rhapsodized at the U.N.?

Can anyone argue that our interventions to overthrow regimes and erect democratic states in Afghanistan, Iraq, Syria, Libya and Yemen have succeeded and been worth the price we have paid in blood and treasure, and the devastation we have left in our wake?

George W. Bush declared that America’s goal would become “to end tyranny in our world.” An utterly utopian delusion, to which Trump retorts by recalling John Quincy Adams’ views on America: “She goes not abroad in search of monsters to destroy.”

To the neocons’ worldwide crusade for democracy, Trump’s retort is that it was always a “dangerous idea” to think “we could make Western democracies out of countries that had no experience or interest in becoming Western democracies.”

We are “overextended,” he declared, “We must rebuild our military.” Our NATO allies have been freeloading for half a century.

NAFTA was a lousy deal. In running up $4 trillion in trade surpluses since Bush I, the Chinese have been eating our lunch.

This may be rankest heresy to America’s elites, but Trump outlines a foreign policy past generations would have recognized as common sense: Look out for your own country and your own people first.

Instead of calling President Putin names, Trump says he would talk to the Russians to “end the cycle of hostility,” if he can.

“Ronald Reagan must be rolling over in his grave,” sputtered Sen. Lindsey Graham, who quit the race to avoid a thrashing by the Donald in his home state of South Carolina.

But this writer served in Reagan’s White House, and the Gipper was always seeking a way to get the Russians to negotiate. He leapt at the chance for a summit with Mikhail Gorbachev in Geneva and Reykjavik.

“Our goal is peace and prosperity, not war,” says Trump, “unlike other candidates, war and aggression will not be my first instinct.”

Is that not an old and good Republican tradition?

Dwight Eisenhower ended the war in Korea and kept us out of any other. Richard Nixon ended the war in Vietnam, negotiated arms agreements with Moscow, and made an historic journey to open up Mao’s China.

Reagan used force three times in eight years. He put Marines in Lebanon, liberated Grenada and sent FB-111s over Tripoli to pay Col. Gadhafi back for bombing a Berlin discotheque full of U.S. troops.

Reagan later believed putting those Marines in Lebanon, where 241 were massacred, to be the worst mistake of his presidency.

Military intervention for reasons of ideology or nation building is not an Eisenhower or Nixon or Reagan tradition. It is not a Republican tradition. It is a Bush II-neocon deformity, an aberration that proved disastrous for the United States and the Middle East.

The New York Times headline declared that Trump’s speech was full of “Paradoxes,” adding, “Calls to Fortify Military and to Use It Less.”

But isn’t that what Reagan did? Conduct the greatest military buildup since Ike, then, from a position of strength, negotiate with Moscow a radical reduction in nuclear arms?

“We’re getting out of the nation-building business,” says Trump.

“The nation-state remains the true foundation for happiness and harmony.” No more surrenders of sovereignty on the altars of “globalism.”

Is that not a definition of a patriotism that too many among our arrogant elites believe belongs to yesterday?

via http://ift.tt/1NGSRkc Tyler Durden

Amid pay cuts and sex-slave incentives, it appears not only is ISIS fighters' enthusiasm flagging but their IQ appears to be dropping too. As the following rather shockingly comical clip via VICE News shows a cluster of shambolic and frenzied ISIS extremists were 'caught on tape' as they struggle to fire rockets at Kurdish pashmerga troops near Mosul, Iraq.

As NY Post reports, the footage shows the chaos inside an improvised armored carrier as the fighters shout at each other while bullets fly.

 

“Careful not to shoot at our brothers!” one yells. “Where is my magazine?” another shouts.

One asks for a rocket launcher.

“The rockets for firing at people or armored vehicles?” one of the discombobulated men asks.

When someone on the vehicle fires his assault rifle, another yells at him: “The bullet casings are hitting us! Be careful, Abu Abdullah!”

When one finally fires a rocket, all hell breaks loose and debris lands inside the open-air carrier.

“Good job, but you roasted us, too!” one yells. “What is wrong with you, Abu Hajaar?”

“I need a rocket for firing at people!” one of them pleads.

Finally, their carrier is hit and the men jump out of the burning vehicle.

“The driver has died!” one yells.

The jihadist whose headcam caught the pandemonium is eventually mortally wounded by the enemy forces.

“I’ve been shot!” he yells as the rest of his comrades retreat.

Source: NYPost.com

via http://ift.tt/1r3wvPi Tyler Durden

Submitted by Lance Roberts via RealInvestmentAdvice.com,

Last week, I noted technical breakout of the market above the downtrend line from last May, such a move required an increase in exposure to equity risk. To wit:

“With the breakout of the market yesterday, and given that ‘short-term buy signals’ are in place I began adding exposure back into portfolios. This is probably the most difficult ‘buy’ I can ever remember making.”

I also stated that it was probably a trap and that I will be stopped out in fairly short order. But that is the risk of managing money.

Well, since then the markets have gone, as of this writing, roughly nowhere as the market traded between roughly 2075 and 2100 all week. However, the following chart is what has me worried. 

The chart of the volatility index measures the “fear of a correction” that currently exists in the market. As a contrarian indicator, the “time to sell” is when there is relatively little “fear” in the market.  As the yellow highlighted bars suggest, that time is likely now.

Is the recent turn higher in the VIX signaling a market correction as it has done in the past? Possibly. If so, the question will be the depth of that correction. Will it be a mild pullback as saw in early 2015, or a more major decline as seen in August of last year? My bet is that it will likely be the latter given the weakening fundamental backdrop.

However, given the ongoing Central Bank interventions, verbal easing by the Federal Reserve and an excessiveness of “bullish hope,” there is still no telling what the markets will do next. This is why in this upcoming weekend’s newsletter (subscribe for free e-delivery) I will be discussing the possibility of “shorting against the box.”

Keith Fitz-Gerald once wisely stated:

“Always sit in an exit row.” 

This weekend’s reading is focused primarily on the events from last week – The Fed and the markets. I suspect things are about to get much more interesting.

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CENTRAL BANKING

• Dumbest Idea Ever Interview With Jeff Gundlach via Finanz und Wirtschaft
• Will The Fed Move The Markets Up Or Down? by Anthony Mirhaydari via Fiscal Times
• Global Tensions To Increase Before June FOMC by Marc Chandler via Real Clear Markets
• Will The Fed Taint The Election by Heather Long via CNN Money
• The Would Be Crazy To Raise Rates by Stephen Kalayjian via CNBC
• The Madness Of Negative Rates by Richard Rahn via Washington Times
• Treasury, Fed & The Next Meltdown by Ike Brannon via Real Clear Markets
• Surprise, Fed Was Wrong Again by Scott Sumner via EconLog
• What The Fed Statement Signals & Why by Mohamed El-Erian via Bloomberg
• FOMC Demonstrates Firm Grasp Of Obvious by Marc Chandler via Real Clear Markets
• Central Bankers – Let Them Eat Rate by Danielle DiMartino-Booth via Money Strong

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THE MARKET & ECONOMY

• Is The S&P 500 About To Correct? by Brett Golden via MarketWatch
• Most Hated Rally Ready For A Correction? by Mark DeCambre via MarketWatch
• Smart Money Refuses To Buy by Tyler Durden via Zero Hedge
• Chart Says January Crash To Repeat by Ken Goldberg via The Street
• What’s Keeping This Market Up by Lucinda Shen via Fortune
• Mind The Stock/Bond Gap by Macro Man
• Troubling Signs For Big Tech by Michael Kahn via Barron’s
• The Slow Down Is Consumer Driven by Jeffrey Snider via Alhambra Partners
• Another Weak Quarter For US GDP by James Hamilton via Econbrowser
• The End Of A Golden Age by Brett Arends via MarketWatch
• Why Is Productivity So Weak? by Neil Irwin via NY Times
• This Indicator Is Still Flashing A Warning by Jesse Felder via The Felder Report
• Why The 10-Year Is Going Below 1% via Kessler

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MUST READS

• The Ugly Truth Of $15 Minimum Wage by Ed Rensi via Forbes
• How Have Stocks Fared Over Last 50 Years by Bill Barker via Motley Fool
• Echoes Of 1999 by Rob Arnott via Research Affiliates
• Teetering On The Edge Of Recession by Ironman via Political Calculations
• Where The Worst Declines Come From by John Hussman via Hussman Funds
• Q1 GDP – Weak & Why by Michael Lebowitz via 720 Global
• SEC Begins Crackdown On Non-GAAP Earnings by Tyler Durden via Zero Hedge
• Something To The Positive Skew by Dana Lyons via Tumblr
• Krugman’s Fiscal Equivalent Of War by David Stockman via Contra Corner

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“The market does what it should do, just not always when.” – Jesse Livermore

via http://ift.tt/1SDBpK6 Tyler Durden

While the US Treasury’s semi-annual report on the foreign-exchange policies of major U.S. trading partners has traditionally been, pardon the pun, a paper tiger, as the US has not named a single country as a currency manipulator since it did so to China in 1994, and it didn’t go so far as to blame any country as an outright manipulator in the just released April edition, there was a new addition to the latest report.

In an inaugural “monitoring list”, the US put five economies including China, Japan and Germany (as well as South Korea and Taiwan) on a new currency watch list, saying that their foreign-exchange practices bear close monitoring to gauge if they provide an unfair trade advantage over America.

This is what it said:

In determining the appropriate factors to assess these criteria, Treasury took a thorough approach, analyzing data spanning 15 years across dozens of economies, including all economies that have had a trade surplus with the United States during that period, and which in the aggregate represent about 80 percent of global GDP. The thresholds are relatively robust in that reasonable changes to the thresholds do not materially change the Report’s conclusions. Treasury will also continue to review the factors it uses to assess these criteria to ensure that the new reporting and monitoring tools provided under the Act meet the objective of indicating where unfair currency practices may be emerging. 

 

Pursuant to the Act, Treasury finds that no economy currently satisfies all three criteria, however, five major trading partners of the United States met two of the three criteria for enhanced analysis. Treasury is creating a new “Monitoring List” that includes these economies: China, Japan, Korea, Taiwan, and Germany. China, Japan, Germany, and Korea are identified as a result of a material current account surplus combined with a significant bilateral trade surplus with the United States. Taiwan is identified as a result of its material current account surplus and its persistent, one-sided intervention in foreign exchange markets. Treasury will closely monitor and assess the economic trends and foreign exchange policies of these economies.

 

As noted above, Treasury is creating a new “Monitoring List” that cites major trading partners that have met two of the three criteria specified in the Act. In this first Report, the Monitoring List includes China, Japan, Korea, Taiwan, and Germany.

This is about as direct a threat to the 3+2 nations not to engage in major currency devaluation whether through QE, NIRP or major interest rate changes as Jack Lew could come up with, and in some ways was to be expected in the aftermath of the G-20 meeting which as we found out this week, precluded any additional QE by the BOJ.

Recall that as part of the most recent G-20 accords, which many believe is what unleashed the steep slide in the dollar, the member nations agreed to refrain from FX intervention absent “disordely markets.” It also made clear what could push a country from merely the watch list to full blown manipulator status:

While no economy met all three of the criteria, this result is a reflection, in part, of the dynamics of the global economy during the past year, in which capital outflows from emerging markets have led a number of economies to engage in foreign exchange intervention to resist further depreciation of their currency (rather than appreciation). The extent of these flows was unusually high by historical standards, which underscores the possibility that more economies may trigger these thresholds going forward.

It added that “the Administration shares strongly the objective of taking aggressive and effective actions to ensure a level playing field for our workers and companies. The President has been clear that no economy should grow its exports based on a persistently undervalued exchange rate, and Treasury has been working aggressively to address exchange rate issues bilaterally, including through the U.S.-China Strategic and Economic Dialogue, and multilaterally through the G-7, G-20, and the International Monetary Fund.”

And specifically referring to the G-20 meeting, the Treasury notes the following:

The United States has secured commitments from the G-20 member countries to move more rapidly to more marketdetermined exchange rates, avoid persistent exchange rate misalignments, refrain from competitive exchange rate devaluations, and not target exchange rates for competitive purposes. Through Treasury’s leadership, the G-7 member countries, including Japan, have publicly affirmed that their fiscal and monetary policies will be oriented toward domestic objectives using domestic instruments. Treasury has also pushed for stronger IMF surveillance of the exchange rate policy obligations of its members. The IMF now publishes an exchange rate assessment for 29 economies, and is improving its exchange rate analysis in its Article IV reports on member countries. And through U.S. leadership, the Trans-Pacific Partnership countries have adopted—for the first time in the context of a trade agreement—provisions that address unfair currency practices by explicitly adopting G-20 exchange rate commitments and by promoting transparency and accountability.

In other words, the next country that dares to engage in wholesale currency devaluation with the US’ express prior permission gets it, although it is not quite clear what “it” is (we will have more thoughts on that tomorrow).

Finally, there was no comment by the US Treasury on the biggest FX manipulator of all, the US Treasury itself which courtesy of the Fed can move the value of the Dollar higher or lower by orders of magnitude in seconds. Why? Because for now the US “reserve currency” privilege allows it to do whatever it wants, plus as a reminder, the world remains synthetically short trillions of dollars. If the US wants to punish everyone else, all it needs to do is to increase the value of the dollar by 10-15% in a short period of time, and we will again witness the same events that led to the market swoon in late 2015 and early 2016.

via http://ift.tt/1QFKIaf Tyler Durden