Citi, Goldman FX Heads Leaving In "Entirely Unrelated To FX Probe" Departures

When Reuters reported earlier today that Anil Prasad, the global head of foreign exchange at Citigroup, the world’s second largest currency trader, is leaving the bank, our ears perked up. The reason is the news overnight that according to the British financial watchdog, Martin Wheatley, the allegations for FX manipulation, “are every bit as bad as they have been with Libor” which supposedly means they are taking them seriously. Could this departure have anything to do with a probe that has already snared head FX trades at JPM, Deutsche and countless other banks? Well, Reuters promptly clarified that Prasad’s departure is not related to the global investigation into allegations of currency market manipulation, a source familiar with the matter said. “Anil’s decision is his own and entirely unrelated to the on-going FX investigations,” the source said.

So we had little reason to believe that Prasad’s departure is tied to the probe… Until we read this:

  • GOLDMAN SACHS HEAD OF FX TRADING STEVEN CHO TO LEAVE, DJ SAYS

Specifically, Cho was the global head of spot and forward FX trading.

And right on its heels, this:

  • LAWSKY SAID TO OPEN CURRENCY PROBE OF MORE THAN ONE DOZEN BANKS
  • LAWSKY SEEKING DOCUMENTS FROM BANKS INCLUDING DEUTSCHE BANK, GOLDMAN SACHS, BARCLAYS, CREDIT SUISSE-SOURCE
  • BANKS IN LAWSKY PROBE INCLUDE LLOYDS, STANDARD CHARTERED, SOCIETE GENERALE, RBS-SOURCE

And while we are willing to believe for now that these two shocking top-level departures by the key FX traders at the two most important banks have nothing to do with such chat rooms as the “The Cartel,” “The Bandits’ Club,” “One Team, One Dream” and “The Mafia”, we sadly have our doubts.We will reserve judgment until the final Lawsky report is released of course.

One thing is certain: manipulating the USDJPY and its most important derivative: the S&P 500, suddenly became much more difficult.


    



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UN Report Details Abuse of Children By Rebels and Government Forces in Syria

A United Nations report
released online yesterday highlights the awful suffering that
children in Syria have endured throughout that country’s ongoing
civil war. Writing in the report, U.N. Secretary-General Ban
Ki-moon
said
, “The suffering endured by the children in the Syrian Arab
Republic since the outset of the conflict, as documented in this
report, is unspeakable and unacceptable.”

The report details how government forces have been torturing
children allegedly associated with rebel groups:

Multiple accounts of children and adult witnesses indicate that
the majority of children were held in the same cells as
adults, and that children as young as 11 years old suffered
ill treatment and acts tantamount to torture to extract confessions
or humiliate them or to pressure a relative to surrender or
confess. Ill treatment and acts tantamount to torture
reportedly included beatings with metal cables, whips
and wooden and metal batons; electric shocks, including to the
genitals; the ripping out of fingernails and toenails; sexual
violence, including rape or threats of rape; mock executions;
cigarette burns; sleep deprivation; solitary confinement; and
exposure to the torture of relatives. Reports indicate that
children were also suspended from walls or ceilings by their
wrists or other limbs, were forced to put their head, neck and
legs through a tire while being beaten, and were tied to a board
and beaten.

The U.N. report is the latest to exposes the extent of the Assad
regime’s brutality. Last month,
a report
was released detailing the slaughter of thousands of
detainees carried out by government forces.

While the scale of the Assad regime’s barbarism is always worth
highlighting, it should be noted that the U.N. report also mentions
that rebels associated with the Western-backed Free Syrian Army
(FSA) have been recruiting children to be used in combat. The FSA
does not have children recruitment as a policy, but some boys feel
pressured to join the fight against Assad:

The FSA Code of Conduct of August 2012 did not mention or
prohibit the recruitment and use of children. However, monitoring
and verification activities indicated that it was not conducted as
a policy or systematically. Interviews with children and their
parents indicated that the loss of parents and relatives, political
mobilization and peer pressure from families and communities,
contributed to the involvement of children with FSA-affiliated
groups. Many boys stated that they felt it was their duty to join
the opposition.

More from the report on the FSA’s recruitment:

13. Boys aged 12 to 17 years were trained, armed and used as
combatants or to man checkpoints. For instance, a 15-year-old
boy reported having been recruited in April 2012 by FSA in
Tall Kalakh (Tartus governorate), and having participated
in military operations.

The report also mentions reports of Syrian government forces
recruiting child soldiers:

The United Nations did not receive reports of children having
been formally recruited by Government forces. However, Government
forces, including the Shabiha militia and the popular
committees/National Defence Forces, reportedly intimidated and
seized young males, including those under the age of 18, to join
their ranks at checkpoints and during raids in pro-Government and
contested areas. In one instance in July 2012, a man reported to
the United Nations that the Syrian Armed Forces had tried to
recruit his 16-year-old son while they were passing a checkpoint in
Deir ez-Zor governorate.

The FSA is not the only rebel group mentioned in the report. The
report refers to rebel groups, such as the jihadist group Jabhat
al-Nusra, which have allegedly killed children. The report claims
that “Armed opposition groups” summarily execute children.

28. Children were the victims of mass killings in Latakia
governorate that were committed by a coalition of armed opposition
groups allegedly including Ahrar al-Sham, ISIS, Jabhat al-Nusra,
Jaish al-Muhajireen wal-Ansar and Suqour al-Izz during the
so-called Barouda offensive against Alawite villages on 4 August
2013. At least 18 children, including boys and girls under the age
of 10, were killed and an unknown number of children were maimed.
Most children were shot in their houses or while trying to flee
with family members. In some instances, civilians reported that
armed opposition groups tried to relocate civilians before
launching operations. In most incidents, however, FSA-affiliated
and other armed groups conducted military operations in densely
populated areas, leading to the displacement and civilian
casualties, including children. Armed opposition groups reportedly
used snipers, mortars, rockets and improvised explosive devices in
residential areas.

29. Armed opposition groups also engaged in the summary
execution of children. Lack of access, including for security
reasons, has prevented the United Nations from systematic
documentation. Trends are believed to be much higher than the
number of recorded cases. For instance, in 2011 in Damascus
governorate, FSA elements reportedly killed a 16-year-old boy, who
had allegedly been coerced to work with the Government when his
father was detained by Government forces. The United Nations also
received reports of children killed by Jabhat al-Nusra, including,
a 16-year-old boy who was shot dead in April 2013 in Al Hassakeh
governorate. Also in Al Hassakeh governorate, a 14-year-old boy was
reportedly shot dead by elements of Syrian Kurdish armed groups
associated with PYD during a demonstration of another Kurdish
faction.

Unsurprisingly, the first round of peace talks in Switzerland
between the Syrian government and some opposition representatives

did not amount to much
. As the war in Syria goes on and
interventionists continue to make the case for increased foreign
involvement in the war it is worth bearing the recent U.N. report
in mind. As awful as the Assad regime is, opposition groups are
also responsible for abuses.

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The GOP’s Suicide Pact on Immigration

By many accounts, the
Republican leadership (at least in the House, where Speaker John
Boehner bestrides the chamber like a leather-skinned Colossus), is
working to pull together some sort of “immigration reform” that
will doubtless go poorly. Already one wing of the GOP is clamoring
that “Amnesty=Suicide” and the other is…saying that newcomers are
welcome but only after we finish building a 10,000-foot-tall fence
that stretches along the coast from San Diego to Boston’s Logan
Airport.


In my latest Daily Beast col
, I suggest that, if the
GOP is actually serious about its limited-government rhetoric, it
should use the immigration issue as a way to talk about reducing
the size, scope, and spending of the federal government –
especially on welfare programs for the native-born folks who have
become increasingly dependent on such handouts since George W. Bush
increased spending on food stamps, disability claims, and unfunded
extensions of long-term unemployment benefits.


Snippets:

Republicans insist that the federal government is too
inefficient and incompetent to deliver the mail or to oversee
health care, but it’s nonetheless qualified to police thousands of
miles of borders and run employment checks on hundreds of millions
of workers? Come on guys, get your story straight.

The simple fact, one that Republicans should embrace, is that
governments don’t really control aggregate immigration flows any
more than they control aggregate consumer demand. Immigration is
the result of far larger forces than even totalitarian governments
can control, including economic opportunity in the destination
country and material conditions in the home country….

In late 2008 and early 2009 – a period in which spending
authority was shared by Presidents Bush and Obama – real federal
outlays shot up to around
$10,000 per capita
 and show no signs of coming down
anytime soon. Indeed, budget deals these days seem to be little
more than bi-partisan raids on proposed spending reductions such as
the sequester.

If Republicans are really the party of free trade and limited
government – and if they really believe in American exceptionalism
and the lure of the Shining City Upon a Hill – they’ll take this
opportunity to welcome immigrants while rolling back the welfare
state.


Read the whole thing.

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The GOP's Suicide Pact on Immigration

By many accounts, the
Republican leadership (at least in the House, where Speaker John
Boehner bestrides the chamber like a leather-skinned Colossus), is
working to pull together some sort of “immigration reform” that
will doubtless go poorly. Already one wing of the GOP is clamoring
that “Amnesty=Suicide” and the other is…saying that newcomers are
welcome but only after we finish building a 10,000-foot-tall fence
that stretches along the coast from San Diego to Boston’s Logan
Airport.


In my latest Daily Beast col
, I suggest that, if the
GOP is actually serious about its limited-government rhetoric, it
should use the immigration issue as a way to talk about reducing
the size, scope, and spending of the federal government –
especially on welfare programs for the native-born folks who have
become increasingly dependent on such handouts since George W. Bush
increased spending on food stamps, disability claims, and unfunded
extensions of long-term unemployment benefits.


Snippets:

Republicans insist that the federal government is too
inefficient and incompetent to deliver the mail or to oversee
health care, but it’s nonetheless qualified to police thousands of
miles of borders and run employment checks on hundreds of millions
of workers? Come on guys, get your story straight.

The simple fact, one that Republicans should embrace, is that
governments don’t really control aggregate immigration flows any
more than they control aggregate consumer demand. Immigration is
the result of far larger forces than even totalitarian governments
can control, including economic opportunity in the destination
country and material conditions in the home country….

In late 2008 and early 2009 – a period in which spending
authority was shared by Presidents Bush and Obama – real federal
outlays shot up to around
$10,000 per capita
 and show no signs of coming down
anytime soon. Indeed, budget deals these days seem to be little
more than bi-partisan raids on proposed spending reductions such as
the sequester.

If Republicans are really the party of free trade and limited
government – and if they really believe in American exceptionalism
and the lure of the Shining City Upon a Hill – they’ll take this
opportunity to welcome immigrants while rolling back the welfare
state.


Read the whole thing.

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A. Barton Hinkle Says Obama’s Progressive Mirage Has Faded

Progressive America is crestfallen. It
had hoped for better things from President Obama, and he has not
delivered. The dashing of those expectations also ought to serve as
a cautionary tale. The vast gulf between the imagined Obama
presidency and the actual Obama presidency should leave
progressives wondering what a future Democrat might do in the Oval
Office. A. Barton Hinkle asks: Do they really expect another
president to govern more liberally? To show more regard for the
Constitution, for civil liberties, for executive restraint? Do they
think some other Democrat could surpass Obama?

View this article.

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A. Barton Hinkle Says Obama's Progressive Mirage Has Faded

Progressive America is crestfallen. It
had hoped for better things from President Obama, and he has not
delivered. The dashing of those expectations also ought to serve as
a cautionary tale. The vast gulf between the imagined Obama
presidency and the actual Obama presidency should leave
progressives wondering what a future Democrat might do in the Oval
Office. A. Barton Hinkle asks: Do they really expect another
president to govern more liberally? To show more regard for the
Constitution, for civil liberties, for executive restraint? Do they
think some other Democrat could surpass Obama?

View this article.

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ISM Services, Immune To Snow And Cold, Beat Expectations

Weather affected jobs; weather affected manufacturing; and weather affected the global outlook for the economy… but weather did not affect the US ISM Services index which modestly beat expectations. However, at 54.0 (vs a 53.7 expectation), ISM Services remain notably below the three-year average and while new orders rose modestly, they remain a smidge above 5 year lows… Today we saw how bad weather is used to explain away the bad January numbers (ADP), but when the number is better than expected, the weather spin is ignored and it is a “reflection of the stronger economy” as was the case with the just released Services ISM number – and that is how you pick and choose the components that fit your narrative… and the tapering trend can continue.

 

 

A small beat but well below the average of the “recovery”…

 

Spot the bounce in new orders…

 

Full table:

 

What the respondents said…

Some of the respondents indicate that weather conditions have impacted their business. There remains a bit of uncertainty about the overall economy for some of the survey respondents; however, the majority feel positive about continued economic growth.

“Slight increase in business being seen currently.” (Management of Companies & Support Services)

“Business conditions continue to improve.” (Information)

“Activity picking up on new-year projects.” (Finance & Insurance)

“All phases of the business seem to be getting stronger and have good first half-year outlooks and booked business.” (Professional, Scientific & Technical Services)

“Sales has shown signs of improvement, but lack a sustained pattern to build confidence.” (Retail Trade)

Casual dining remains challenging, tends to slow after the holidays.” (Accommodation & Food Services)

Intense weather in several areas of the country is perceived to have contributed to a slow start in what otherwise is historically a strong month.” (Wholesale Trade)


    



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BNP Warns “The Run On Ukrainian Deposits May Have Already Started”

“It is absolutely impossible to forecast” Ukraine’s exchange rate, BNP Paribas notes in an ominous report today. Considering Ukraine’s huge need to cover its current account deficit, the country is increasingly reliant on financial inflows – and these will be difficult to secure. The Hyrvnia has collapsed this morninng to 9.00 back near December 2008 lows as BNP warns “The NBU faces a difficult task: let the FX rate devalue to a ‘new fair level’ without triggering a run on hryvnia retail deposits, which might have already started.” Relying on external support amid a forced devaluation “increases risks of disorderly adjustement,” and that appears to happening.

 

Ukraine’s currency – the Hyrvnia has collapsed to 9.00 this morning…

 

BNP’s warnings today (via Bloomberg):

It is absolutely impossible to forecast” hryvnia’s exchange rate, BNP Paribas analysts Serhiy Yahnych and Yevgeniy Orudzhev in Kiev write in report today.

 

Ukraine’s current-account gap, unstable funding and anti-govt protests have “created a dangerous Molotov cocktail, which now seems to turn into a currency crisis:” BNP

 

“The National Bank of Ukraine conducted only a minor intervention yesterday, which led to increased demand for dollars this morning:” BNP

 

The NBU faces a difficult task: let the FX rate devalue to a ‘new fair level’ without triggering a run on hryvnia retail deposits, which might have already started. Furthermore, it is forced to conduct devaluation having no external support package, which increases risks of disorderly adjustement:” BNP

BNP comments seem extremely accurate from last year…

rebalancing of the current account has been virtually zero over the last few months.

 

Considering Ukraine’s huge need to cover its current account deficit, the country is increasingly reliant on financial inflows. These will be difficult to secure,

 

 

We expect FX reserves to nosedive to USD 18bn by the end of 2013, underlining the case for a weaker local currency. Ukraine badly needs to rebalance its current account, with calls for a more flexible (and weaker) FX rate getting louder.


    



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BNP Warns "The Run On Ukrainian Deposits May Have Already Started"

“It is absolutely impossible to forecast” Ukraine’s exchange rate, BNP Paribas notes in an ominous report today. Considering Ukraine’s huge need to cover its current account deficit, the country is increasingly reliant on financial inflows – and these will be difficult to secure. The Hyrvnia has collapsed this morninng to 9.00 back near December 2008 lows as BNP warns “The NBU faces a difficult task: let the FX rate devalue to a ‘new fair level’ without triggering a run on hryvnia retail deposits, which might have already started.” Relying on external support amid a forced devaluation “increases risks of disorderly adjustement,” and that appears to happening.

 

Ukraine’s currency – the Hyrvnia has collapsed to 9.00 this morning…

 

BNP’s warnings today (via Bloomberg):

It is absolutely impossible to forecast” hryvnia’s exchange rate, BNP Paribas analysts Serhiy Yahnych and Yevgeniy Orudzhev in Kiev write in report today.

 

Ukraine’s current-account gap, unstable funding and anti-govt protests have “created a dangerous Molotov cocktail, which now seems to turn into a currency crisis:” BNP

 

“The National Bank of Ukraine conducted only a minor intervention yesterday, which led to increased demand for dollars this morning:” BNP

 

The NBU faces a difficult task: let the FX rate devalue to a ‘new fair level’ without triggering a run on hryvnia retail deposits, which might have already started. Furthermore, it is forced to conduct devaluation having no external support package, which increases risks of disorderly adjustement:” BNP

BNP comments seem extremely accurate from last year…

rebalancing of the current account has been virtually zero over the last few months.

 

Considering Ukraine’s huge need to cover its current account deficit, the country is increasingly reliant on financial inflows. These will be difficult to secure,

 

 

We expect FX reserves to nosedive to USD 18bn by the end of 2013, underlining the case for a weaker local currency. Ukraine badly needs to rebalance its current account, with calls for a more flexible (and weaker) FX rate getting louder.


    



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The $VIX Report: The Trend in Price is Down But Look for the Bounce

Figure 1 is a weekly chart of the SP500 with the $VIX data hidden. The indicator in the lower panel assesses the current value of the $VIX relative to pass swing points in that data. There are two points worth making.

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WEEKLY

Since April, 2013 the indicator has been diverging negatively from the price action. (I have been making this point since September, 2013; see this video.) The failure of the $VIX to break below a value of 12 and the failure of the indicator to confirm the highs in price are noteworthy. These distortions are now being corrected. The indicator is rolling over, and a bottom in prices won’t be achieved until the indicator hits bottom as well. This is several weeks away. Thus the trend in prices is down.

(For the record this is what I said on January 14: “The $VIX has failed to break 12 or rather more importantly, a level of 12 continues to be where selling in the equity markets takes place. I have contended that the inability of the $VIX to break below the 12 level is a sign that the current market rise is not sustainable, and this divergence has been going on for over 6 months now. In essence, the $VIX has failed to confirm the price action. More importantly, it appears that the rocky start by the equity markets this week will see the $VIX close above a prior key pivot point. This always suggests caution as the possibility of a trend change in the equity markets is very real.”)

Figure 1. $VIX/ weekly

vix.1

DAILY

But there is hope!!

Figure 2 is a daily chart of the SPY with the $VIX data in the lower panel. The $VIX is sitting at a level where 4 out of the 6 short term/ intermediate term bottoms took hold in 2013. Will 2014 be the same? This is the test for the $VIX and the markets. Look for the markets to put up a fight, but from this perspective, the tide has already turned.

Figure 2. $VIX/ daily

vix.2

tag

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