Tag: news

Investors pulled $27 billion out of UK financial assets last month – the biggest capital outflow since the Lehman crisis in 2008 – as concern mounted about the economic and financial consequences if Scotland left the UK, according to Reuters. Furthermore, Morgan Stanley said daily equity flow data pointed to "some of the largest UK equity selling on record."

 

As Reuters notes,

Data compiled by London-based consultancy CrossBorder Capital said financial outflows from the UK totaled $27 billion in August, compared with inflows of $8.9 billion the same month last year.

 

That's the biggest monthly outflow since the white heat of the financial crisis in 2008, when giant U.S. bank Lehman Brothers went bust. It exceeded the selling of UK assets seen around the 2010 general election, when an inconclusive result led to several days of uncertainty.

 

"Sterling outflows have been an issue since the end of June, but they really gathered pace in August and now look like intensifying again with the possibility of Scottish independence coming to the front of investors' minds,", said Michael Howell, the managing director of CrossBorder Capital, which compiles the index.

 

The UK outflow was more than double the combined outflow from Germany and Australia. France, the United States, Canada and Japan all attracted net inflows.

 

Also on Friday, Morgan Stanley said daily equity flow data pointed to "some of the largest UK equity selling on record, demonstrating investor concerns ahead of the Scottish referendum next week."

 

Concern over the financial, economic and political effects if the UK breaks up has also weighed on sterling, triggering a surge in exchange rate volatility to its highest since the 2010 general election. In addition, selling pressure has mounted as speculation grew that the Bank of England would soon raise interest rates.

 

…

 

"The sterling index has effectively collapsed and the UK is second only to Japan in terms of financial market outflows," Howell said.

 

So far this year, there has been a net $206 billion outflow from the UK. Last year, there was a net annual inflow of $63 billion, Howell said.

While some respite in GBP-selling has occurred in thge last few days as boisy polls show a slight bias to a "no" vote, as we warned previously – With a “no” vote, the UK would still face rising political uncertainties.

The UK political landscape is in a state of extreme flux, with the enduring Scottish independence movement, the rise of UKIP as a political force and resultant change in UK party political dynamics, the moderate-to-high probability of a change of government in the 2015 elections and uncertainties over post-election fiscal policy, plus the non-negligible risk of a referendum on UK exit from the EU in 2017-18 or so. Even if the “no” camp prevails in September, we do not foresee a return to the pre-referendum political status quo in the UK. In our view, the outlook for UK political risks will remain elevated well beyond the referendum, and we suspect these UK political risks are underpriced in markets.

via Zero Hedge http://ift.tt/YE2bgE Tyler Durden

Lebanon’s Daily Star reports that so-called “moderate” Syrian rebels support ISIS terrorists:

“We are collaborating with the Islamic State and the Nusra Front [another extremist and hard-line Islamic terrorist group] by attacking the Syrian Army’s gatherings in … Qalamoun,” said Bassel Idriss, the commander of an FSA-aligned rebel brigade.

 

***

 

“A very large number of FSA members [in Arsal] have joined ISIS and Nusra,” Abu Fidaa [a retired Colonel in the Syrian army who is now the head of the Revolutionary Council in Qalamoun] said

The New York Times writes:

President Obama’s determination to train Syrian rebels to serve as ground troops against the Islamic State in Iraq and Syria leaves the United States dependent on a diverse group riven by infighting, with no shared leadership and with hard-line Islamists as its most effective fighters.

 

After more than three years of civil war, there are hundreds of militias fighting President Bashar al-Assad — and one another. Among them, even the more secular forces have turned to Islamists for support and weapons over the years, and the remaining moderate rebels often fight alongside extremists like the Nusra Front, Al Qaeda’s affiliate in Syria.

 

***

 

Analysts who track the rebel movement say that the concept of the Free Syrian Army as a unified force with an effective command structure is a myth.

 

***

 

The Syrian rebels are a scattered archipelago of mostly local forces with ideologies that range from nationalist to jihadist. Their rank-and-file fighters are largely from the rural underclass, with few having clear political visions beyond a general interest in greater rights or the dream of an Islamic state.

 

***

 

Some European allies remain skeptical about the efficacy of arming the Syrian rebels. Germany, for instance, has been arming and training Kurdish pesh merga forces in Iraq, but has resisted doing the same for any groups in Syria — partly out of fear that the weapons could end up in the hands of ISIS or other radical groups.

 

“We can’t really control the final destination of these arms,” said Peter Wittig, the German ambassador to the United States.

 

***

 

The fluidity of battlefield alliances in Syria means that even mainline rebels often end up fighting alongside the Nusra Front, whose suicide bombers are relied on by other groups to soften up government targets.

 

“Even the groups that the U.S. has trained tend to show up in the same trenches as the Nusra Front eventually, because they need them and they are fighting the same battles,” Mr. Lund said.

***

Current and former American officials acknowledge the government’s lack of deep knowledge about the rebels. “We need to do everything we can to figure out who the non-ISIS opposition is,” said Ryan C. Crocker, a former United States ambassador to Iraq and Syria. “Frankly, we don’t have a clue.”

This is – of course – another example of the “facts being fixed around the policy”,  just as in Iraq. In Iraq, we wanted regime change, so we made up the “weapons of mass destruction” and “Saddam backed Al Qaeda” myths.

Similarly, Washington wants regime change in Syria, so it’s making up a myth of the “moderate Syrian rebel” who hates Assad and ISIS.   But they “don’t have a clue” as to such a mythical unicorn actually exists (spoiler alert: it doesn’t).

The New York Times reported over a year ago that virtually all of the rebel fighters in Syria are hardline Islamic terrorists.  Things have gotten much worse since then … as the few remaining moderates have been lured away by ISIS’ arms, cash and influence.

Saudi Arabia – one of the main sources of Islamic terrorism, and one of ISIS’ main backers – is also going to train “moderate” Syrian rebels.

Of course, arming the “moderate” Syrian rebels is what created ISIS – and was the source of their weapons – in the first place.  And our prior policy of arming “moderate Syrian rebels is what allowed ISIS to take over much of Iraq.

The U.S. and our closest allies in the region – like Jordan – have also been training Islamic jihadists in Syria for years. And see this, this, this and this.  (And – underneath the partisan hackery – arming the Syrian rebels is what Benghazi was really about.)

Brilliant …

Michael Shank – Adjunct Faculty and Board Member at George Mason University’s School for Conflict Analysis and Resolution, and director of foreign policy at the Friends Committee on National Legislation – warned a year ago:

The Senate and House Intelligence committees’ about-face decision last week to arm the rebels in Syria is dangerous and disconcerting. The weapons will assuredly end up in the wrong hands and will only escalate the slaughter in Syria. Regardless of the vetting procedures in place, the sheer factionalized nature of the opposition guarantees that the arms will end up in some unsavory hands. The same militant fighters who have committed gross atrocities are among the best-positioned of the rebel groups to seize the weapons that the United States sends to Syria.

 

***

Arming one side of Syria’s multi-sided and bloody civil war will come back to haunt us. Past decisions by the U.S. to arm

insurgencies in Libya, Angola, Central America and Afghanistan helped sustain brutal conflicts in those regions for decades. In the case of Afghanistan, arming the mujahideen in the 1980s created the instability that emboldened extreme militant groups and gave rise to the Taliban, which ultimately created an environment for al Qaeda to thrive.

 

***

 

Arming the enemies of our enemies hasn’t made the U.S. more friends; it has made the U.S. more enemies.

 

***

 

Some armed opposition factions, including powerful Islamist coalitions, reject negotiation altogether. Yet these are the same groups that will likely seize control of U.S.-supplied weapons, just as they’ve already seized control of the bulk of the rebels’ weaponry.

 

***

 

When you lift the curtain on the armed groups with the most formidable military presence on the ground in Syria, you find the Al Nusra Front and Al Farough Brigades. Both groups are closely aligned with Al Qaeda and have directly perpetrated barbaric atrocities. The Al Nusra Front has been charged with beheadings of civilians, while a commander from the Al Farough Brigades reportedly ate the heart of a pro-Assad soldier.

Shank’s warning was ignored, and his worst fears came to pass.  And since the Obama administration is doubling-down on the same moronic policy, it will happen again …

Obama’s policy is like throwing weapons into a crowd of enemies … and hoping some good comes out of it.

It’s like throwing the ball to a midget surrounded by an entire team of 7-foot basketball players.

Who do you think will end up with the ball?

via Zero Hedge http://ift.tt/YE28Bs George Washington

With BofAML, Goldman, and now JPMorgan all bringing forward their 'liftoff' expectations for rates, US equity and bond markets are starting to quake a little. The Russell 2000 is now back in the red for 2014 and all but Trannies are red for September. The S&P is back to Aug 20 levels as 10Y yields push 15bps higher on the week to 2-month highs over 2.60%.

 

S&P loses 2,000 and slides to 4-week lows…

 

Pushing all but Trannies red for September…

 

and Russell red for 2014

 

But bonds and stocks have a long way to go to converge…

 

Charts: Bloomberg

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We already showed BofAML's warnings; here is JPMorgan's

Regarding our own Fed outlook, we now look for a first hike at the June meeting next year, which is both earlier, and more precise, than our prior call of Q3. As the timing of the first hike draws closer, it becomes appropriate to convey our outlook by meeting, rather than by quarter. The Fed has shown a propensity to make important decisions at meetings that are followed by press conferences. In next year's calendar such a meeting in Q3 does not occur until late September, which could be too late given the ongoing improvement in the labor market. (Of course, they could, and maybe should, switch to having press conferences at every meeting). Another factor motivating an earlier first move is the apparent revision to the exit principles. The old principles had halting reinvestments and large-scale reserve draining occurring prior to the first rate hike, both of which would have been "baby tightening steps." With those steps no longer likely to occur before the first rate hike, the timing of that hike should be pulled forward. Finally, Fed rhetoric has turned marginally more hawkish in recent months.

 

We see the first hike in June as a 25 basis point increase in the target funds rate corridor, to 25-50 basis points. We see subsequent moves in September and December bringing the corridor to 75-100 basis points by year-end. (Given the FOMC's convention of rounding the funds rate target up to the nearest quarter point, this would put our "shadow FOMC dot" at 100bp). Now that the public seems to be making its peace with the fact that rate hikes are coming, the question has increasingly become the pace of those hikes. We think the Fed can afford to stick with its plan the normalize rates gradually, at least initially. The first few hikes will involve some delicate issues for the plumbing of the interaction of the Fed balance sheet with the banking system, which should warrant caution. Moreover our economic forecast does not have enough inflation pressures next year to force them into a more aggressive tightening pace in 2015. We see a somewhat more aggressive pace in 2016, with the funds rate reaching 2.5% by year-end.

via Zero Hedge http://ift.tt/1sC6qEx Tyler Durden

1. Unveil strategy to “degrade and ultimately destroy” ISIS.

2. Unleash the Kerry.

3. …

4. Declare mission accomplished.

Source: WSJ

via Zero Hedge http://ift.tt/1sC6qEg Tyler Durden

Submitted by Ben Hunt via Salient Partners' Epsilon Theory blog,

A few brief thoughts on an Epsilon Theory connection between modern capital markets and the NFL (and between Central Bankers and Roger Goodell). The connection is solipsism – a pathological egocentrism where reality is defined by an individual’s mental perceptions and constructs.

For individuals like Goodell and Yellen we’re talking about good old-fashioned individual solipsism. These are people who have never been proven wrong about anything in their professional lives. I know that sounds weird to professional investors and allocators, because we are demonstrably wrong about something every single freaking day, and it’s a hard concept to describe effectively to someone who’s never lived within a sheltered organization where empirical outcomes are either pre-ordained or immaterial. But both Goodell and Yellen have spent their entire professional careers as the modern equivalents of cloistered monks or nuns, the former within the Holy Order of the National Football League and the latter within the High Church of UC Berkeley.

It’s wonderfully pleasant to live within these worlds without external consequence, where your mental constructs and pronouncements receive constant positive reinforcement, but the inevitable result is that you begin to believe that your mental constructs ARE reality. Roger Goodell truly believes that everything he has done and announced, most recently his appointment of an “independent” investigator, is obviously the right and correct course of action, and he has no idea why these actions and announcements are being questioned. He has no idea why his world is crumbling. Similarly, Janet Yellen is not being disingenuous when she talks about her ability to control “macroprudential” outcomes. In her mind (and in the minds of everyone else in today’s academic Fed), these theories ARE reality. Drain the $5 trillion in banking system reserves without market consequence? Sure, we’ve got a theory for that. No problem. As Yul Brynner would have put it in Cecil B. DeMille’s “The Ten Commandments”: So let it be written. So let it be done.  

For social constructions like markets or professional sports leagues or any self-contained social world, we’re talking about a different version of solipsism – collective solipsism. I’ve written about this idea in the Epsilon Theory note “A Dogmatic Slumber”, so I won’t repeat all that here. Collective solipsism is what overwhelming Common Knowledge looks like. It’s the annihilation of an individual’s perception of reality in favor of a group perception of reality. It’s an entirely natural reaction of the human social animal to certain strategic interactions, i.e., games. It’s what I mean when I say that we are at an asymptotic peak in the social influence of the Narrative of Central Bank Omnipotence. 

When does collective solipsism fail? When does the story break? When it comes into conflict with a larger external social structure, with a larger strategic interaction. The collective solipsism of the NFL crumbles when it runs headlong into the larger political and social structure of the United States, which – amazingly enough – has 300+ million citizens who don’t play Fantasy Football, who have no idea who Ray Rice is, who listen to owners Bob Kraft or John Mara and think they’re from Mars, and who don’t hang on every word of THE Commissioner. But they’ve all seen or heard about the video. They all care about the larger issue of domestic violence. They all think they’re being lied to. And there are powerful political and economic interests in the larger game who see this conflict as working to their advantage. That’s when the story breaks.

The collective solipsism of modern markets is a much bigger game still, and will require a much larger shock and external social structure to unwind the Common Knowledge structure at the heart of all this. I can’t tell you when any of this will happen, but there are only a few social structures large enough to fit the bill. There is no more important task for risk management than monitoring those structures, and that’s what I’m trying to do with Epsilon Theory.

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An invitation to attend a Salient Webinar I’ll be presenting next Thursday, September 18th at 2pm ET, titled: “The Game of Thrones and the Game of Markets”. I’ll be tying together various threads from past Epsilon Theory notes, with the goal of showing how to listen to financial news and analysts to detect Narratives. Please note that the presentation is geared for financial advisors, brokers, and investment professionals, and it qualifies for one hour of CFP/CIMA®, CIMC®, or CPWA® CE credit if you care about such things. Invitation attached and registration link here.

via Zero Hedge http://ift.tt/1AGXIp1 Tyler Durden