Tag: finance

I don’t trust this rally.

 

Few analysts realize that the sharpest, most aggressive rallies occur during bear markets. The reason for this is that during bear markets, investors tend to go short (borrow shares to bet on a collapse).

 

So when the market rallies even a little bit, it often will go absolutely vertical as these individuals panic and cover their shorts (which increases the buying).

 

Consider the Tech Bubble. When it burst, we had THREE monster rallies of 17%, 33% and 16% in just SIX months time!

 

 

Anyone who bought into these moves for the long-term ended up get crushed as the market soon rolled over and worked its way down. The below chart gives some perspective on just how much further stocks would fall relative to these traps.

 

 

Smart investors, however, used those rallies to prep for the next round of the drop. They didn’t get suckered into believing that it was the beginning of the next bull market.

 

They took action to prepare to protect their wealth from the bear market.

Smart investors are preparing now.

We just published a 21-page investment report titled Stock Market Crash Survival Guide.

 

In it, we outline precisely how the crash will unfold as well as which investments will perform best during a stock market crash.

 

We are giving away just 1,000 copies for FREE to the public.

 

To pick up yours, swing by:

http://ift.tt/1HW1LSz

 

Best Regards

 

Graham Summers

Chief Market Strategist

Phoenix Capital Research

 

 

via Zero Hedge http://ift.tt/1R03kCf Phoenix Capital Research

Last October, BofA looked at Europe’s €2.6 trillion in negative-yielding debt and discovered something “stunning”: Savings rates were going up not down.

Don’t believe us, just have a look at these three charts:

But how could that be? By all accounts – or, should we say, by all conventional Keynesian/ textbook accounts – negative rates should force people out of savings and into higher yielding vehicles or else into goods and services which “rational” actors will assume they should buy now before they get more expensive in the future as inflation rises or at least before the money they’re sitting on now yields less than it currently is.

Well inflation never rose for a variety of reasons (not the least of which was that QE and ZIRP actually contributed to the global disinflationary impulse) and nothing will incentivize savers to keep their money in the bank like the expectation of deflation.

Well, almost nothing. There’s also this (again, from BofA): “Ultra-low rates may perversely be driving a greater propensity for consumers to save as retirement income becomes more uncertain.”

Why that’s “perverse,” we’re not entirely sure. Fixed income yields nothing, and rates on savings accounts are nothing. Which means if you’re worried about your nest egg and aren’t keen on chasing the stock bubble higher or buying bonds in hopes that capital appreciation will make up for rock-bottom coupons (i.e. chasing the bond bubble), then as Gene Wilder would say, “you get nothing.” And that makes you nervous if you’re thinking about retirement. And nervous people don’t spend. Nervous people save.

Deutsche Bank has figured out this very same dynamic. In a note out Friday, the bank remarks that declining rates have generally managed to bring consumption forward.

The impact of interest rates (nominal or real) on consumption is generally derived from a two-period consumption model. Under a given budget constraint, declining interest rates front-load consumption in the current period at the expense of the second-period consumption (inter-temporal substitution effect). Japan’s household saving rate has been constantly falling since the early 1990s.

 

 

But, there’s a limit.

Essentially, the bank argues that NIRP may be the shocker that wakes the public up to the fact that if negative rates exert a negative (no pun intended) effect on long-term household balance sheets, they will stop spending. To wit:

Even if inter-temporal consumption substitution occurs from now on, if the introduction of negative interest rates reminds households of a slower pace of their future accumulation of financial assets, namely suggesting a worsening of lifetime household budget constraints, households would be forced to cut back on consumption in both the current and next periods.

So there it is again. More evidence that Europe’s (and soon to be Japan’s) adventures in NIRP are destined to fail. Surprise, surprise.

But double-, triple-, and quadruple- down they most certainly will (starting this week with Draghi) until either one of two things happens: 1) they eliminate physical cash and take rates so punitively low that saving money in a bank will wipe out your nest egg in the space of a year, or 2) they drop money from the sky in a desperate attempt to inflate away all of this debt, a move which will be swiftly followed by the ultimate Keynesian endgame or, as one might call it, “a triumphant return to Weimar.”

via Zero Hedge http://ift.tt/1R03jyb Tyler Durden

Submitted by Rakesh Upadhyay via OilPrice.com,

Russia has played a master stroke in the current oil crisis by taking the lead in forming a new cartel, but it’s a move that could spell geopolitical disaster.

The meeting between Russia, Qatar, Saudi Arabia and Venezuela on 16 February 2016 was the first step. During the next meeting in mid-March, which is with a larger group of participants, if Russia manages to build a consensus—however small—it will further strengthen its leadership position.

Until the current oil crisis, Saudi Arabia called the crude oil price shots; however, its clout has been weakening in the aftermath of the massive price drop with the emergence of US shale. The smaller OPEC nations have been calling for a production cut to support prices, but the last OPEC meeting in December 2015 ended without any agreement.

Now, with Russia stepping in to negotiate with OPEC nations, a new picture is emerging. With its military might, Russia can assume de facto leadership of the oil-producing nations in the name of stabilizing oil prices.

Saudi Arabia has been a long-time U.S. ally, but that, too, is changing. Charles W. Freeman Jr., a former U.S. ambassador to Riyadh, recently noted that “We've seen a long deterioration in the U.S.-Saudi relationship, and it started well before the Obama Administration.”

U.S.-Saudi relations further soured due to the Iran nuclear deal that ended in January with the U.S. lifting sanctions—a move the Saudis vehemently opposed. The Saudis had to look for a new ally to safeguard their interests in the Gulf, considering the threats they face from the Islamic State (ISIS) and Iran. Though both Russia and Saudi Arabia are on opposing ends in Syria, with Russia supporting Syrian leader Bashar al-Assad and the Saudis supporting the Sunni rebels, the large drop in prices seems to have opened a window of opportunity for Russia to ally with Saudi Arabia.

This is not the first time that Russia and Saudi Arabia have sought a close partnership. Even in 2013, The Telegraph had reported an attempt to form a secret deal, which did not go through. Iran has been a trusted ally of Russia for a long time, and if Russia can broker a deal between Iran and Saudi Arabia, it can also push through some sort of secret OPEC deal.

The production freeze to January levels that was bandied about last month carries no significance in concrete terms because Russia, Saudi Arabia and most other nations on board are pumping close to their record highs. Barclays’ commodity research chief Kevin Norrish said it was “vital to note” that there was not much incremental production expected from Russia, Qatar or Venezuela this year anyway. It was the Saudi’s that really mattered, as reported by Forbes.

Though Iran hasn’t committed to a production freeze, since it wants to ramp up production to pre-sanction levels, Russian Energy Minister Aleksander Novak has noted that "Iran has a special situation as the country is at its lowest levels of production. So I think, it might be approached individually, with a separate solution."

With all the major Gulf nations agreeing, Iraq, which is without a credible political leadership, will also likely follow suit if Russia assures them of stronger support against ISIS.

If the above scenario plays out, Russia will emerge as the de facto leader of the major oil producing nations of the world, accounting for almost 73 percent of the global oil supply.

Along with this, Russia has been in the forefront of plans to move away from Petrodollars, and Moscow has formed pacts with various nations to trade oil in local currencies. With this new cartel of ROPEC (Russia and OPEC nations), a move away from petrodollars will become a reality sooner rather than later.

Russia is smart. Vladimir Putin is genius. Moscow senses the opportunity that is almost tangibly floating about in the low crude price environment and appears to be ready to capitalize on it in a way that would reshape the geopolitical landscape exponentially.

Though a solution in Syria is welcome, a large cartel of major oil producing nations of the world with Russia as the head would be a major upset to the current balance of power. With this potential in mind, the mid-march meeting should be very interesting for the global oil patch—well beyond talk of production cuts and supply gluts.

via Zero Hedge http://ift.tt/1W3aEl6 Tyler Durden

Now that Q4 EPS is almost in the history books with 494 S&P500 companies reporting, we can look at the numbers: blended 4Q EPS is $29.49 (-2.9% y/y) with GAAP EPS of $19.92. As DB admits, a 67% GAAP-to-non GAAP ratio is well below the normal ~90% ex. recessions, exacerbated by asset impairments and restructuring costs especially at Energy.

This is how DB shows this almost unprecedented divergence between GAAP and non-GAAP:

 

This is merely a recreation of charts we first showed one week ago, when we commented on the widest spread between GAAP and non-GAAP since the financial crisis:

 

The chart below shows where the GAAP to non-GAAP divergence is most acute.

 

Ok, we get it: on a GAAP basis it is not a recession any more, it is a depression, just as that Houston CEO letter explained.

But what if we only look at adjusted, gimmicky non-GAAP? Even when looked at purely “pro forma”, things are bad. Recall that in the middle of 2015 when the full severity of the oil collapse was finally becoming apparent, the sellside was absolutely certain that the clouds would blow away by 2016, and as a result as recently as December 31, consensus expected Q1 EPS to post a modest 0.3% rise. That is not going to happen. Instead, as aof this moment, Q1 EPS is expected to collapse by a near record 8.0%, which would be the biggest annual decline since Q3 2009.

To all those saying “it’s all just energy”, we would say “yes… and 6 other sectors” as shown in the chart below. In fact, as of this moment, the only industries which are expected to post an EPS increase in Q1 are Telecom, Consumer Discretionary and Healthcare.

As Factset summarizes:

The estimated earnings decline for Q1 2016 is -8.0%. If this is the final earnings decline for the quarter, it will mark
the first time the index has seen four consecutive quarters of year-over-year declines in earnings since Q4 2008
through Q3 2009. It will also mark the largest year-over-year decline in earnings since Q3 2009 (-15.7%). Three
sectors are projected to report year-over-year growth in earnings, led by the Telecom Services and Consumer
Discretionary sectors. Seven sectors are projected to report a year-over-year decline in earnings, led by the Energy,
Materials, and Industrials sectors.

So four consecutive quarters of declining earnings, or two earnings recessions back to back: recall what JPM said last night: “periods of consecutive EPS contractions are often followed by
(or coincide with) economic recessions (~80% of the time over the past
~120 years).” What about periods of two consecutive earnings recessions?

Don’t answer that, because it gets worse:

During the first two months of Q1 2016, analysts lowered earnings estimates for companies in the S&P 500 for the
quarter. The Q1 bottom-up EPS estimate (which is an aggregation of the estimates for all the companies in the index)
dropped by 8.4% (to $26.69 from $29.13) during this period. How significant is an 8.4% decline in the bottom-up EPS
estimate during the first two months of a quarter? 

 

During the past ten years, (40 quarters), the average decline
in the bottom-up EPS estimate during the first two months of a quarter has been 3.6%. Thus, the decline in the
bottom-up EPS estimate recorded during the first two months of the first quarter was larger than the 1-year, 5-year,
and 10-year averages.

 

In fact, this was the largest percentage decline in the bottom-up EPS estimate over the first two months of a quarter
since Q1 2009 (-24.0%).

As the WSJ summarizes it “Wall Street’s earnings estimates for S&P 500 companies are falling at the fastest pace since the height of the financial crisis.”

As for the guidance, it is is just as abysmal:

Guidance: Negative EPS Guidance (79%) for Q1 above Average
At this point in time, 115 companies in the index have issued EPS guidance for Q1 2016. Of these 115 companies,
91 have issued negative EPS guidance and 24 have issued positive EPS guidance. Thus, the percentage of
companies issuing negative EPS guidance to date for the first quarter is 79% (91 out of 115). This percentage is
above the 5-year average of 72%.

In other words, we are about to have our 4th consecutive annual decline in S&P earnings. And here we make a bold prediction: while Wall Street traditionally expects a sharp hockeystick into outer quarters, which explains why consensus expects a 1.8% increase in ful year earnings (down from 4.3% at the start of the year), we on the other hand are clling Q2, Q3 and Q4: the next three quarters are all about to post EPS declines, leading to an unprecedented 8 consecutive quarters in declining S&P500 EPS. Actually precedented: the last time it happened was during the Great Depression.

Only this time it’s not even a recession, because when you “exclude energy”, add a near record number of non-GAAP addbacks, and hockeystick the result, everything is quite ok.

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

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Since stock markets are ultimately underpinned by corporate profits, let's ask: What factors could crush profits in 2016?

The basic idea of a balance sheet recession (attributed to Richard Koo) has been well-publicized: when the liability (debt) side of household and business ledgers reach danger heights, stakeholders respond by reducing debt and increasing savings rather than increasing spending and debt.

The result is a slowdown, a balance sheet recession.

What do we call a recession triggered by a collapse in profits? Corporate profits have soared to unprecedented heights in the "recovery" of 2009-2015: it's certainly been more than a recovery in terms of corporate profits:

What's left to push profits even higher? The mainstream answer is: just more of the same: more global growth, more expansion in emerging markets (EM), renewed monetary and fiscal stimulus in the developed markets (DM), and the tailwind of lower energy costs.

The possibility that the era of unprecedented profits might have been an aberration and is now drawing to a close does not register in the mainstream financial media. If we look at the red line I drew on the chart, it's easy to see the incredibly abnormal rise in corporate profits in the era of rapid globalization and financialization, both driven by cheap-money policies of central banks.

Note that profits literally exploded once central banks opened the credit spigots, and lending standards were loosened to the point there were no real standards (2002 onward).

This globalized flood of nearly-free money pushed asset valuations to absurd heights everywhere. These insanely high asset valuations supported additional debt, which then fueled higher asset prices, a virtuous cycle of expanding debt pushing asset prices higher, when then enabled more debt, and so on.

The problem with bubble valuations is revealed when participants must sell to pay down debt. When the debt-monkey can't be dislodged from the debtor's back, assets must be sold. And in the thin, rarefied air of most markets, any real selling quickly crashes valuations, which were predicated on more buyers, not more sellers.

The initial wave of selling assets to pay down debt has already crushed emerging markets. Relatively modest selling in developed markets pushed many markets into Bear territory (down 20% or more).

Since stock markets are ultimately underpinned by corporate profits, let's ask: What factors could crush profits in 2016?

1. stronger U.S. dollar: as many of us foresaw, the stronger USD has pummeled U.S. corporate profits, much of which are earned overseas in other currencies:

The USD Bull in the Global China Shop (February 4, 2015)

Anyone who thinks the USD will give up its gains is dreaming:

Why the Dollar May Remain Strong For Longer Than We Think (September 17, 2014)

2. Emerging markets consumption is weakening. Crush a nation's currency and stock market, and spending atrophies. When spending sags, so do profits.

3. Oil exporters are reducing their spending. Tightening belts means fewer imported luxury goods and fewer profits for exporters who feasted off oil-exporting wealth for years.

4. China. Imports to China are cratering. Profits will crater, too.

5. Diminishing returns on cost-cutting. All the low hanging fruit has been plucked; shipping manufacturing overseas–done. Reducing head-count: done. Buying software to increase productivity: done. What's left: slash payroll (again), cancel company 401K contributions, etc.–in a word, devastate employment.

6. Diminishing returns on lower interest rates. Refinancing old debt at super-low rates boosted profits wonderfully the first time around, now, not so much: rates have been low for so long, there's no juice left in that lemon.

7. Energy savings have been banked. Airlines have feasted on record profits resulting from plummeting fuel costs, but the big gains have already been banked. If oil drops below $30/barrel, a few dollars can be picked up, but they won't match the gains reaped when oil fell from $100 to $30/barrel.

8. Risk-on borrowing is drying up. The global booms from 2002 – 2008 and 2009- 2015 were both driven by trillions of dollars of new (borrowed) money being dumped into risk-on assets–real estate development, stocks, junk bonds, shadow banking loans, etc.

This tide is now receding.

9. Much of the profit was accounting gimmickry. Jim Quinn recently dismantled the illusory nature of corporate "profits," drawing upon John Hussman's analysis: Corporate Profits Vaporizing: (excellent job, John and Jim):

Elevated corporate profits since 2009 have largely reflected mirror image deficits in the household and government sectors, as households have taken on debt to maintain consumption despite historically low wages as a share of GDP, and government transfer payments have expanded to fill the gap, with 46 million Americans now on food stamps – a five-fold increase in expenditures since 2000.

Essentially, corporations are selling the same volume of output, but paying a smaller share in wages, with deficits in the household and government sectors bridging the gap. As households and government have shoveled themselves further into the hole, corporate profits have climbed higher on the adjacent pile of earth. Deficits of one sector emerge as the surplus of another.

If you think all this is a solid foundation for ever-higher profits, by all means go buy stocks with all four feet. But don't be surprised if the rest of the market disagrees at some point–for example, when even flim-flam accounting can't hide the fact that profits are in a free-fall back to "normal" levels 60% below current levels.

via Zero Hedge http://ift.tt/1nrhq86 Tyler Durden

'Efficient' markets at their very best once again. Following a 19% spike overnight, analysts and traders alike are stunned by "the departure from fundamentals" as "the iron ore and steel markets have gone berserk." On the heels of home price surges, sent soaring after government suggestions that they will support growth, "investors are expecting further monetary easing by the Chinese government to boost steel demand," but as Bloomberg notes there has been no "corresponding increase in physical orders."

Seriously…

 

As Bloomberg reports, Monday’s surge was accompanied by a rally in producer stocks. Australia’s Fortescue Metals Group Ltd. jumped 24 percent in Sydney trading, where Rio Tinto Group and BHP Billiton Ltd. also climbed. Rio, the second-biggest mining company, rebounded from an earlier decline in London trading and was up 0.4 percent by 12:15 p.m. local time.

“There may be some short-covering in the futures markets today,” said Xu Huimin, an analyst at Huatai Great Wall Futures Co. in Shanghai, referring to investors closing bets on declines.

 

“The crazy surge in futures prices has surprised traders and steel mills, as they haven’t seen a corresponding increase in physical orders.”

 

“The recent boom of the real estate market and price has positive influence on the steel price,” Michael Zhu, president of Hong Kong-based trader Millennia Resources Ltd. and former global sales director of Vale SA, said by e-mail. The “market believes the demand for steel will be increased with the recovery of real-estate market.”

However, while at the annual National People’s Congress at the weekend, the authorities said they’d allow a record high deficit and higher money-supply target to support growth of 6.5 percent to 7 percent; they also vowed to help cut overcapacity in steel, potentially curbing demand for iron ore.

“We expect the current rally to be short-lived,” analysts Christian Lelong and Amber Cai said in a note predicting further growth in iron ore supply in the quarters ahead.

 

“The causality will revert sooner rather than later, and steel raw materials will one again drive steel prices rather than the other way around.”

Recent gains in iron ore probably won’t last, Goldman Sachs Group Inc. said in a report received on Monday, forecasting a drop back to $35 a ton in the final quarter. This year’s rally has been driven by rising steel prices in China, a reversal of the normal relationship seen between the raw material and the manufactured product, Goldman said.

via Zero Hedge http://ift.tt/21gRaLd Tyler Durden

On Thursday, after 7 years of having an overweight or at least neutral stance on equities, JPM “for the first time this cycle” went underweight stocks. This is what JPM’s Jan Loeys said:

Equities, credit and commodities have all rallied in the last three weeks, as some of the immediate threats to the world economy have faded from attention, possibly only because the bad earnings season has wound up. But, to us, the fundamentals of growth, earnings and recession risk have not improved, and if anything have worsened. We remain wary of the near-empty ammo box of policy makers.

 

Our 12-month-out US recession odds have risen to 1/3, while equity-implied odds have instead fallen to near 1/5. But even with no recession this year or next, we see US earnings rising only slowly by low single digits and see little to boost multiples. The eventual recession should bring US stocks down some 30%, creating a strong downward risk skew to returns over the next few years.

It added the following:

• We go Underweight Equities for the first time in this cycle.
• Equity bearish forces include poor macro valuation vs. our recession risk for this year; negative fundamental momentum; and limited profit and return upside relative to the downside we see from the eventual recession.
• The limited upside we see on stocks under our no-recession modal forecast is driven by still dismal productivity growth and the inability/unwillingness of monetary and fiscal policy makers to stimulate growth.

And just in case it is unclear what “Underweight” means, overnight JPM’s Chief US equity strategist, Mislav Matejka explained: “We have on 15th Feb called for a tradeable market rebound. Now, following the 13% SX5E and 10% SPX upmove, we think that one should start to re-enter the shorts.“

Here are the reasons why JPM is now selling:

Technicals are now closer to overbought than to oversold territory. VIX is at ytd lows – a degree of complacency might be creeping in again. Global P/E is up on the year. PMIs remain under pressure everywhere, with services converging with manufacturing. The Chinese labour component of PMI is the lowest since Jan ’09. Q1 results are likely to be weak again. DXY is not falling, Fed is back in the picture, politics could be very messy – German regional elections on March 13th are important to watch. Finally, we are soon entering poor seasonals, where April-May and onwards saw an increased volatility in the past few years. We take advantage of the bounce to reduce equity weight to an outright UW, in a balanced portfolio. This is the first time since ’07 that we are UW stocks, and follows our 30th Nov cut to our structural equity OW stance. We note that US median ND/E ratio is at 20-year highs, as are Buybacks/EBIT ratios. Eurozone is at an earlier stage of the cycle, but it is unlikely to decouple. UK stays the top regional pick globally, despite Brexit risk. Utilities and Telecoms remain the top global sector OWs. Stay with Defensives and FCF basket”

It goes without saying that if this recommendation If this was Goldman or Gartman, we would of course recommend mortgaging one’s mother and buying deep OTM calls on the S&P.

However, with JPM’s equity team which boasts such actually correct forecasters are Marko Kolanovic, we would be far more careful to fade anything coming out of the Park Avenue bank; in fact, JPM just may be right, especially after Kolanovic’s revelations last night about what the fate of the short squeeze may be, to wit:

What is the fate of this market rally? In terms of technical flows, more inflows would come if 3M and 12M momentum turn positive, which would happen at ~2025 and ~2075, respectively (the precise level depends on the timing of potential moves). If volatility stays subdued, volatility-managed strategies could also increase equity exposure. However, equity momentum is also vulnerable to the downside and a move lower could be accelerated by 6M and 1M momentum unraveling at ~1950 and ~1900, respectively. From the perspective of systematic strategies, downside and upside risks are balanced. However, equity fundamentals remain a headwind. In our recent strategy note, we showed that historically, periods of consecutive quarterly EPS contractions are often followed by (or coincide with) economic recessions (~80% of the time over the past ~120 years). EPS recoveries that follow 2 consecutive EPS contractions (~20% of times) were typically triggered by some form of stimulus (fiscal, monetary or exogenous). We expect market volatility to stay elevated and investors to remain focused on macro developments such as the Fed’s rates path, developments in China, and releases of US Macro data. Elevated volatility and EPS downside revisions will provide a headwind for the S&P 500 to move significantly higher (via multiple expansion). While investors need to have equity exposure, we think there are better opportunities in Value stocks, International and EM equities (as compared to broad S&P 500 exposure)

Now if only Goldman would also go short the S&P500 then the confusion about what is really going on would be eliminated instantly.

via Zero Hedge http://ift.tt/21gRaL5 Tyler Durden

On Monday, officials from the EU and Turkey are gathered in Brussels to do some talking about the refugee crisis that threatens to tear Europe apart at the seams. And make no mistake, “talk” is probably all they’ll do.

Last year, Europe and Turkey agreed on a so-called “joint action plan” which essentially amounted to Turkish President Recep Tayyip Erdogan extorting €3 billion from Brussels in exchange for a promise to curb people smuggling and stem the flow of migrants into Western Europe. As The Guardian notes, “several months on, the pact remains little more than a piece of paper.”

Although the check has been cut, it’s not entirely clear where the money went (surprise) and now that the effective closure of the Balkan route has created a severe bottleneck of refugees in Greece, Athens is very near to losing its mind.

As of Sunday, as many as 14,000 men, women, and children were stranded on Macedonia’s border which has been sealed and which migrant men have at various times tried to breach with homemade battering rams.

Now, Macedonia wants to extend the 19-mile, Orban-style razor wire fence to a 200-mile barrier complete with guards armed with tasers, a plan unveiled in Brussels over the weekend detailed.

Needless to say, Alexis Tsipras is at wit’s end.

First Brussels forced Athens to accept a third sovereign bailout that carried draconian terms and all but guaranteed the country will remain a debt serf of Berlin for the next five decades. Now, Austria has effectively conspired with the Balkan countries to close the route north to Germany leaving Greece on its own to handle the influx. “Europe is in the midst of a nervous crisis, primarily for reasons of political weakness,” said he said on Sunday.

(A man looks at the Greek island of Lesbos from the Turkish coastline)

“About 13,000-14,000 people are trapped in Idomeni, while another 6,000-7,000 are being housed in refugee camps around the region,” Al Jazeera reports, citing Apostolos Tzitzikostas, governor of Central Macedonia province.

“It’s a huge humanitarian crisis. I have asked the government to declare the area in a state of emergency,” he said during a visit to Idomeni on Saturday to distribute aid to the Red Cross and other non-governmental organisations.

For her part, the Iron Chancellor claims “rumors” that the Balkan route has been closed “do not conform to the facts” (to quote China’s NBS):

#BREAKING Closure of Balkans refugee route ‘speculation’: Merkel spokeswoman

— AFP news agency (@AFP) March 7, 2016

Coming back to Monday’s summit, “the crucial point is to know if Turkey is a player on our side, because up to now they declare they are on our side, but they don’t do anything to prove that,” Miltiadis Kyrkos, a Greek MEP who is the vice-chair of the European parliament’s joint committee with Turkey, said.

As for Turkey, you can say what you will about Erdogan’s belligerence, but the country is not only on the frontlines of the refugee crisis, but on the frontlines of the war itself. The pressure is palpable to say the absolute least.

Take the tiny town of Kilis for instance, which has more than doubled in size from the refugee influx. Incidentally, the town (which WSJ notes was previously “best known as a place for truckers to pick up pistachio-encrusted pastries before crossing the nearby Syrian border”), is up for a Nobel Peace Prize for its efforts.

“To encourage refugees to stay, Ankara is now allowing millions of Syrians to legally work in Turkey, ending a policy in place since the start of the war. But the new regulation comes with restrictions,” WSJ goes on to document. “The restrictions, along with the often-convoluted bureaucratic challenges, make it hard for Syrian families to stay.”

In other words, some Turkish towns with big hearts are doing their part (and more), but Ankara hasn’t even begun to implement the type of measures that will stop refugees from fleeing to Western Europe and besides, Turkey isn’t that much safer than Syria these days. “Using Turkey as a ‘safe third country’ is absurd,” said Amnesty’s director for Europe and Central Asia, Gauri van Gulik. “Many refugees still live in terrible conditions; some have been deported back to Syria and security forces have even shot at Syrians trying to cross the border.” And that’s if they don’t get blown up by the very same groups blowing them up in Syria, groups that are armed and funded by Erdogan.

As The Guardian goes on to say, “resettlement was Angela Merkel’s last gambit for solving the refugee crisis. In mid-February, the German government confidently presented a plan in which a “coalition of the willing” – including Austria, Germany, Sweden and the Benelux trio – would take 300,000 refugees from Turkey a year [but] the renegade actions of Austria and the western Balkan states have forced Merkel into a rethink.”

“It’s our damned duty,” she insisted last week. “And no I don’t have a Plan B.”

Well, she had better get one, before the German electorate goes with “Plan B” for chancellor.

As for whether Erdogan will suddenly step up to the plate – don’t hold your “damned” breath. “Turkey’s diplomacy [is like] an eastern bazaar,” the aforementioned Miltiadis Kyrkos said. And it’s not just money Ankara wants. Turkish PM Ahmet Davutoglu is looking to trade concessions on migrants for fast-track membership to the EU. “I am sure these challenges will be solved through our cooperation and Turkey is ready to work with the EU,” Davutoglu said. “Turkey is ready to be a member of the EU as well. Today I hope this summit will not just focus on irregular migration but also the Turkish accession process to the EU.”

But Europeans aren’t exactly thrilled about Ankara’s latest move away from democratic norms. “Media freedom is a non-negotiable element of our European identity,” European Parliament President Martin Schulz said he had told the Turkish Premier, referring to Erdogan’s move to seize control of The Daily Zaman.

And sure enough, as FT reports, Turkey is asking for more concessions: “Ahead of crunch summit between EU leaders and the Turkish prime minister on Monday, Ankara has called for an increase on the €3bn in aid previously promised by the EU, faster access to Schengen visas for Turkish citizens and accelerated progress in its EU membership bid.” One imagines a long list of eleventh hour demands could well cause the whole thing to collapse.

Although for another EUR3 Billion in EU cash we’ll try hard https://t.co/wRyTeED6gW

— zerohedge (@zerohedge) March 6, 2016

Perhaps Dutch prime minister, Mark Rutte put it best: “[This] is not the summit that will change anything.”

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• Oil jumps as sentiment boosted; analysts warn of glut (Reuters)
• The Odd Couple: Merkel, Tsipras Fate Tied Over EU Refugees Deal (BBG)
• As covered here last week: The Treasury Market’s Big Short Is in 10-Year Notes, Repos Show (BBG)
• China angered by planned U.S. export restrictions on ZTE (Reuters)
• Europe Faces Pension Predicament (WSJ)
• The ETF Files: How the U.S. government inadvertently launched a $3 trillion industry (BBG)
• Draghi Aims ECB’s Killer Blow in 11th Round Versus Deflation (BBG)
• European Central Bank Faces Questions Over Which Bonds to Buy (WSJ)
• Russia offers access to its Syria bases to help deliver aid (Reuters)
• In JPMorgan Fintech Bunker, Coders Are Too Focused for Foosball (BBG)
• BASF shares fall after report it is weighing DuPont bid (Reuters)
• Wall Street vets battle BP in fallout over Canada refinery (Reuters)

 

Overnight Media Digest

WSJ

– Donald Trump’s success in attracting white, working-class voters is raising the prospect that the Republican Party could attempt to take an unexpected path to the White House that would run through the largely white and slow-to-diversify upper Midwest. (http://on.wsj.com/1TCNAfn)

– Nancy Reagan, the former actress who brought grace and style to her role as first lady in the Ronald Reagan White House, has died in her home in Los Angeles due to congestive heart failure at age 94. (http://on.wsj.com/1U5OShm)

– The Democratic presidential contenders clashed sharply over economic policy in a debate Sunday, with front-runner Hillary Clinton attacking rival Bernie Sanders for his opposition to a federal auto bailout and Sanders charging that Clinton-backed trade deals had helped destroy American cities like Detroit. (http://on.wsj.com/21R94d1)

– Record vehicle leasing could pinch new auto margins by creating a glut of good-condition used cars and adding pressure on new-vehicle margins after years of pricing gains. (http://on.wsj.com/1W1dd7b)

– The European Central Bank’s expected move to further reduce a key interest rate is likely to drive down government-bond yields, further reducing borrowing costs that are already near record lows in many nations, according to analysts and investors. (http://on.wsj.com/1npS7U1)

– China’s leaders made clear they are emphasizing growth over restructuring this year, but suggested they are trying to avoid inflating debt or asset bubbles as they send massive amounts of money coursing through the economy. (http://on.wsj.com/1QA51uf)

– United Continental Holdings Inc said President and Chief Executive Oscar Munoz plans to return to the carrier on a full-time basis on March 14. (http://on.wsj.com/1QEBtZ1)

 

FT

French utility EDF’s chief financial officer, Thomas Piquemal, has resigned over the company’s plan to build nuclear reactors in Britain.

The Pension Protection Fund is in talks with Philip Green and British Home Stores that could see the agency take on responsibility for 20,000 pensioners of the lossmaking department store chain.

The British Chambers of Commerce said on Sunday its director general, John Longworth, had resigned after calling for Britain to leave the European Union despite the business lobby group taking a neutral stance on an upcoming referendum.

The Bank of England is going to lay its focus on reviewing operations of the market risk managers as average daily trading payments held at the utilities topped 8 billion pounds ($11.37 billion) last year.

 

NYT

– The Obama administration, responding to consumer complaints, says it will begin rating health insurance plans based on how many doctors and hospitals they include in their networks. (nyti.ms/1TkOkW1)

– The Philippines will become the first country to enforce tough new United Nations sanctions on North Korea when it begins formal procedures on Monday to impound a cargo vessel linked to the reclusive nation, a government spokesman said on Sunday. (nyti.ms/1TkP8KA)

– For the first time, a law school will stand trial on charges that it inflated the employment data for its graduates to lure prospective students. On Monday, Anna Alaburda will tell a story that has become all too familiar among law students in the United States: Since graduating from the Thomas Jefferson School of Law in 2008, she has yet to find a full-time salaried job as a lawyer. (nyti.ms/1TkQ55B)

– As some tech sectors show signs of slowing, cloud services have created remarkable demand for highly educated engineers and mathematicians. And they are being compensated very well. (nyti.ms/1TkROrM)

– In an interview, Margrethe Vestager, the European Union’s competition commissioner, discusses the issues underpinning her current investigations and whether she unfairly targets U.S. companies. (nyti.ms/1TkSfCi)

 

Canada

THE GLOBE AND MAIL

** Prime Minister Justin Trudeau’s official visit to the White House this week should result in a new border pact that will remove a series of barriers hindering the flow of travellers and trade while improving security, says Public Safety Minister Ralph Goodale.(bit.ly/1X6kWkp)

** In a new paper called Augur: Mining Human Behaviors from Fiction to Power Interactive Systems, a group of Stanford University computer science researchers revealed that they used the Wattpad “corpus” – a collection of almost two billion words (or 600,000 chapters) written by regular people – to help a computer understand the world around it. The team intends to make the program they built, Augur, into an open-source tool that other researchers can build on.(bit.ly/1ROFfla)

NATIONAL POST

** Nancy Reagan, the helpmate, backstage adviser and fierce protector of Ronald Reagan in his journey from actor to president – and finally during his 10-year battle with Alzheimer’s disease – has died. She was 94. (bit.ly/1QFn5zM)

** The son of a former Ottawa cleric who encouraged Libyans to “take part in jihad” was reportedly killed in an armed clash with government forces in Benghazi over the weekend. The death of Owais Egwilla, described as a former Ottawa university student, was announced on social media accounts affiliated with Libyan fighters.(bit.ly/1W2HlPn)

 

Britain

The Times

* Npower’s German owner to cut 2,500 UK workers

(http://thetim.es/1Qw0pE9)

The owner of npower, RWE AG plans to cut more than a fifth of its British workers as it braces itself for a fresh attack by the consumer watchdog.

* Business leader quits in Brexit row

(http://thetim.es/1U5whC7)

John Longworth was suspended on Friday after making a speech in favour of leaving the EU despite the British Chambers of Commerce’s decision to remain neutral in the referendum campaign.

The Guardian

* EU referendum: British exit would be ‘poison’, says German finance minister (http://bit.ly/1Yi2xCE)

A British decision to leave the European Union would be “poison” for the UK, European and global economies that would last for years, the German finance minister has said.

* Grexit back on the agenda again as Greek economy unravels

(http://bit.ly/21fRvxA)

European finance ministers will once again deliberate over how to treat Greece’s ongoing debt crisis this week despite the country desperately grappling with refugees pouring across its borders.

The Telegraph

* England’s water market poised for M&A wave

(http://bit.ly/1X5sUKE)

Water utilities in England are braced for a market shake- up, with analysts expecting a wave of mergers, acquisitions and new entrants within the next three months to tap the increasingly competitive business supply market.

* UK manufacturing has hit bottom, says EEF

(http://bit.ly/1Qw1nAg)

Industry trade group EEF said that “rays of light” have begun to cut through the gloom which in 2015 caused the UK’s manufactured output and orders to hit their lowest point in six years.

Sky News

* FTSE-100 giant Old Mutual plots 9 billion pounds break-up

(http://bit.ly/1ULqPVE)

The FTSE-100 financial services group Old Mutual Plc is plotting an audacious nine billion pounds ($12.79 billion) break-up which could spark a takeover battle for some of the City’s most prominent wealth management operations.

The Independent

* Local employers take fight to Gatwick over second runway plan (http://ind.pn/1OX2kgY)

Gatwick airport’s claims that a 7.8 billion pounds second runway would boost business and create 120,000 jobs have been challenged by owners of local companies who fear expansion could damage them badly.

* Female retail bosses fall out of fashion

(http://ind.pn/1X5u3BW)

The number of female chief executives appointed at UK retailers fell by 40 percent last year despite pressure to improve the number of women in senior positions, according to a new report.

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