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Trump's Decision To Debate Sanders In California Is His Most Genius Move Yet

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

Here, a Clinton match-up is highly likely to be an unmitigated electoral disaster, whereas a Sanders candidacy stands a far better chance. Every one of Clinton’s (considerable) weaknesses plays to every one of Trump’s strengths, whereas every one of Trump’s (few) weaknesses plays to every one of Sanders’s strengths. From a purely pragmatic standpoint, running Clinton against Trump is a disastrous, suicidal proposition.


– From the February article: Why Hillary Clinton Cannot Beat Donald Trump

If the Trump/Sanders debate proceeds as planned in California, you’re about to witness one of the most important moments of a 2016 general election that hasn’t even begun yet. To say such a debate would be an unmitigated disaster for Hillary Clinton would be the understatement of the century. Let’s explore why.

First of all, Hillary Clinton outright rejected a debate request from Bernie Sanders ahead of the June 7th California primary. Given Sanders’ recent momentum, as well as her need to persuade a significant number of his supporters to back her in November; such a denial was not only arrogant, it was highly insulting to voters in America’s largest state. From team Clinton’s perspective there was little upside to agreeing to a debate, versus easily manageable downside from a few days of negative media coverage.

Or so they thought…

The above strategic thought process would’ve worked in almost every other election season and against any other candidate. Unfortunately for her, it doesn’t work in 2016, and it certainly doesn’t work against Donald Trump.

Trump understands human nature as well as anyone I’ve ever observed. He’s also likely the most skilled natural politician of my lifetime, with perhaps the exception of Bill Clinton in his prime. Under conventional thinking, Trump would also certainly deny a Sanders debate request for the same reasons Clinton declined it. There’s little to gain in publicly battling a guy with nothing to lose, and you’ve already wrapped up the Republican nomination anyway. That said, Trump is far too savvy to fall victim to such straightforward thinking. He understands that debating Sanders in California ahead of the primary presents a once in a lifetime opportunity to embarrass and belittle Clinton in front of the whole world before the general election even begins.

Think about it for a second. Who cares what happens during the debate itself. Think about what the media will be saying. Think about how weak, irrelevant and stupid a Trump/Sanders contest will make Hillary Clinton look. As the largest state in the union heads to the voting booths Hillary Clinton can’t be bothered to have a discussion with Bernie Sanders, yet Donald Trump is more than willing. I can see the headlines already:

Hillary MIA in California?


Where in the World is Hillary?


Hillary Nowhere to be Found in California Primary.

You get the point. Trump will appear Presidential, while Hillary will look like a discredited Goldman Sachs crook hiding from a 74-year-old socialist. Which, by the way, is exactly what she’s doing.

Naturally, the whining hordes of Clinton sycophants and paid online trolls who don’t think they should have to work to secure the Presidency, will bitch and moan at Sanders. They’ll blame him for all her problems, when the truth is this disaster, like most of her disasters, is entirely of her own making. Hillary Clinton was offered the opportunity to debate Sanders in California. She declined. You can’t blame Trump for jumping on the opportunity to make her look extraordinarily stupid. That’s just politics.

"We Come To Mourn The Dead" - Obama Is First Sitting President To Visit Hiroshima, Offers No Apology

Ealier today, Barack Obama became the first sitting US president to visit the memorial of the American atomic bombings of Japan in Hiroshima, however without offering no apology for the attacks. The trip comes amid Japanese protests over alleged crimes committed by US troops stationed in Japan.

"We have a shared responsibility to look directly in the eye of history. We must ask what we must do differently to curb such suffering again," Obama said in a speech at the memorial. Some of the speech highlights:

"We’re not bound by our genetic codes to repeat the mistakes of the past. We can tell our children a different story. Those who died, they are like us. Ordinary people understand this I think. They do not want more war. The world was forever changed here. But today, the children of this city will go through their day in peace. What a precious thing."

Obama placed a wreath in front of a cenotaph at Hiroshima
Peace Memorial Park in Hiroshima

Japanese Prime Minister Shinzo Abe said Obama’s visit opened a new chapter of reconciliation for the US and Japan, and praised the president for his courage in coming to Hiroshima.

White House press corps board Marine helicopter at #Iwakuni. Next stop for us and @POTUS: Hiroshima

— David Nakamura (@DavidNakamura) May 27, 2016

Somber mood. There are hundreds of journalists here & everyone's been silent as we await the start of the memorial.

— Elise Hu (??? ?) (@elisewho) May 27, 2016

President Obama on his way to the peace park in Hiroshima. Every second of this trip is being broadcast on NHK

— Anna Fifield (@annafifield) May 27, 2016

All the way along the route to the peace park in Hiroshima, people are lined up to see President Obama

— Anna Fifield (@annafifield) May 27, 2016

A solemn Obama and Abe are walking into the peace park on Hiroshima

— Anna Fifield (@annafifield) May 27, 2016

Obama talks about the need to limit nuclear weapons, to prevent conflict through diplomacy. Abe is at his side

— Anna Fifield (@annafifield) May 27, 2016

Obama visits Hiroshima, more than seven decades after the world’s first atomic strike

— Anna Fifield (@annafifield) May 27, 2016

As a reminder, the US is the only nation to have used nuclear weapons in warfare. The two bombs dropped on Hiroshima and Nagasaki in 1945 killed thousands, with the death toll reaching 140,000 by the end of the year. The majority of Japanese disagree with the American justification that it was necessary to drop the bombs in order to bring an end to the war.

As noted in the comments from survivors below, some had expected an apology from the US president "to help ease their suffering." They did not get it. Instead they got more of the token Obama specialty, rhetoric:

"We come to ponder the terrible force unleashed in a not-so-distant past," Obama said after laying a wreath at the memorial. "We come to mourn the dead."

For many, that was not enough. "I want Obama to say 'I'm sorry.' If he does, maybe my suffering will ease," Eiji Hattori, 73, who survived the bombing of Hiroshima, told Reuters before the ceremony. His parents and grandparents, rice traders, all died in the years following the attack. Hattori has three types of cancer. On hearing the speech, he said: "I think [the speech] was an apology."

"If Obama were to apologize as the representative of the United States, then Japan's military needs to apologize too,” said Mieko Koike, a 67-year-old Hiroshima resident, which would be only fair.

Others were less intent on hearing an apology, and instead saw the mere arrival of the US president as an important step.

“An apology doesn’t matter. I just want [President Obama] to come and visit Hiroshima and see real things and listen to the voice of survivors,” Sunao Tsuboi, 91, a bombing survivor and anti-nuclear activist, told AFP. He suffered burns from the blast and developed cancer.

Obama’s visit to Japan is marred not only by historical legacy but also by fresh strains in bilateral relations. Last week, a former Marine working at a US military base in Okinawa was arrested by the Japanese police for allegedly killing a Japanese girl in April. On Friday, just as Obama was visiting the Hiroshima memorial, a US sailor pleaded guilty to raping an intoxicated Japanese woman in Okinawa’s capital Naha in March.

Okinawa, which was the scene of fierce battles in wartime, hosts roughly half of all American troops deployed in Japan. The presence of US bases and problems associated with them, including crimes committed by US personnel, have been a source of constant resentment among Okinawans.

* * *

Meanwhile, courtesy of Reuters, here are some comments from local Hiroshima residents.


"I want Obama to say 'I'm sorry.' If he does, maybe my suffering will ease."

Hattori's parents and grandparents, who sold rice near where the bomb fell, all either died that day or in the years that followed. He has been told he was riding a tricycle when the bomb exploded, and now has three types of cancer.

"If Obama apologized, I could die and meet my parents in heaven in peace. I can tell them it happened."


"A sitting U.S. president visiting Hiroshima is just the first step. We're still 10 years from the possibility of a president issuing an apology."

Born two years after the bomb was dropped, Ishida remembers growing up with bomb survivors whose skin was scarred.

"Japan has to apologize for Pearl Harbour, too, if we're going to say the U.S. must apologize ... That's not possible, given the countries' current situations. In America, people say the war ended early because they dropped the atomic bomb. If a president apologized for this, it would raise hell in the U.S.

"We can't tell North Korea not to have nukes when the U.S. has them, but the U.S. developed them first ... It's not possible to get rid of nuclear weapons when they're being used as deterrence."


"If Obama were to apologize as the representative of the United States, then Japan's military needs to apologize too ... The best thing is for both (Obama and Japanese Prime Minister Shinzo Abe) to apologize together.

"I want Obama to visit the (memorial) museum, I want him to feel the shock ... It's not something humans would do. The bomb harmed so many innocent civilians, especially the weak, like women and babies."


"For 70 years, my family has been fighting with the risks of radiation."

The driver, who was born before the bomb fell and declined to give his name, said his parents were irradiated. His younger siblings, born after the bombing, fear they may one day show symptoms.

"In all the years I've been alive, I've never once attended the memorial on Aug. 6 ... My family avoids thinking about it as much as possible, we're trying so hard to forget.

"Many people in Hiroshima feel the same way."

Bitcoin Surges To 2016 Highs On Rising Chinese Demand; Decouples From Gold

Ever since last September, when we explained that as a result of China's crackdown on capital controls, the one clear winner (in addition to Vancouver real estate) would be bitcoin, the digital currency has more than doubled in dollar terms, rising from $230 and surging as high as $500 a few months later. Overnight bitcoin, which had traded in a stable range with little of its characteristic volatility in recent months, made its latest breakout, surging nearly 5% from a $440-level, to a fresh 2016 high of $480, and has since retracted the move modestly, trading at $475 at last check.



This pushed bitcoin's price to the highest since its sharp breakout in early November, when it breifly topped $500.


The rally started late last night, with bitcoin trading at around $450 when a 30-minute jump saw bitcoin price trading at $461. Before long, bitcoin price was hovering near the $470 mark.

According to Cryptcoinnews, the increase in price can be attributed to the growing demand from the Chinese market, as predicted here almost a year ago when the price was 50% lower, as a result of the recent Yuan devaluation. CCN elaborated on the BTC/CNY exchange charts in yesterday’s analysis piece, speculating that the price will eventually strike out for $500.

The last rally in bitcoin occurred last month to this very day, with trading hitting a high of $470 in the days following the release of the Segregated Witness (SegWit) code by developers.

A notable observation about the recent breakout in bitcoin is that the digital currency, which for a period had tracked moves in gold, now appears to have officially decoupled from the precious metal.

Frontrunning: May 27

  • Oil prices ease from seven-month high to below $49 (Reuters)
  • Wall Street Waits for Yellen Before Taking Off for a Long Weekend (BBG)
  • Donald Trump Celebrates Clinching GOP Delegate Race (WSJ)
  • Trump vows to undo Obama's climate agenda in appeal to oil sector (Reuters)
  • Japan Fails in Bid to Have G-7 Warn of Global Crisis Risk (BBG)
  • Valeant Rejected Joint Takeover Approach From Takeda, TPG (WSJ)
  • Activist William Ackman, Valeant Investor, Tries Life as an Inside Man (WSJ)
  • Islamic State drives Syria rebels from near Turkish border (Reuters)
  • Singapore court revokes bail decision for ex-BSI wealth manager (Reuters)
  • CEO Bonuses: How Pro Forma Results Boost Them (WSJ)
  • French fuel blockade lifted, Hollande says won't let protesters choke economy (Reuters)
  • Hollande Vows to Press New French Labor Law as Unions Resist (BBG)
  • U.S. futures regulator adds hedging exemptions to position limit proposal (Reuters)
  • California’s Recovery Loses Luster as Tax Increases Set to Lapse (BBG)
  • Russian demining experts return from Syria-Ifax cites defense ministry (Reuters)
  • Miami’s Condo Frenzy Ends With Inventory Piling Up in New Towers (BBG)
  • Automakers recall 12 million U.S. vehicles over Takata air bags (Reuters)


Overnight Media Digest


- Donald Trump on Thursday secured the delegates he needs to become the Republican Party's presidential nominee, and immediately showed what an unpredictable general-election candidate he will be. (

- A federal jury found that Google's use of Oracle Corp's Java software in its mobile products didn't violate copyright law, a verdict cheered by many in Silicon Valley who believe it will protect how they write and use software. (

- Sears Holdings Corp is losing its finance chief, as the company remains mired in red ink and explores strategic alternatives for some of its most-prized brands. (

- LendingClub Corp is in talks with Citigroup Inc about the New York bank buying or providing financing for future loans made by the online platform, people familiar with the discussions said. (



* Donald Trump, the presumptive Republican presidential nominee, promised on Thursday to roll back some of America's most ambitious environmental policies, actions that he said would revive the ailing U.S. oil and coal industries and bolster national security.

* A U.S. jury handed Google a major victory on Thursday in a long-running copyright battle with Oracle Corp over Android software used to run most of the world's smartphones.

* A top Apple executive had raised the prospect of the company buying Time Warner, according to three people briefed on the matter.



- In new court documents filed Wednesday, directors of National Amusements added Sumner Redstone's two great-grandchildren as so-called nominal defendants to their suit challenging his mental capacity. They also added Phyllis Redstone, 91, as a nominal defendant. She was the first wife of Redstone, the ailing media mogul. (

- Snapchat, the disappearing message service with big media ambitions, has finished raising $1.8 billion, according to a Wednesday filing with the Securities and Exchange Commission. (

- Security researchers have tied the recent spate of digital breaches on Asian banks to North Korea, in what they say appears to be the first known case of a nation using digital attacks for financial gain. (

- McDonald Corp's French headquarters have been raided by financial investigators, the latest salvo a campaign by President François Hollande's government to make multinational corporations pay more in taxes. (

- Philips, the Dutch electronics giant, said on Thursday that the initial public offering of its lighting unit valued the business at 3 billion euros, or about $3.3 billion, based on market capitalization. (




** Canadian companies suffered their least-profitable quarter in more than five years in the first quarter, as the damage from the oil crash reached new depths. Statistics Canada's quarterly survey of private-sector, for-profit corporations said countrywide operating profits totalled C$73.1-billion ($56.09 billion)- their lowest since Q4 2010. (

** Toronto homeowners may get a shock later this month when they open their property assessment notices to find the value of their home has jumped nearly 50 percent. The latest assessment data released by the Municipal Property Assessment Corp show property values in Toronto have appreciated 30 percent on average over the past four years. (

** Donald Trump's hold on an eponymous Toronto hotel is slipping away, as one-time partner Alex Shnaider and his bank attempt to sell Trump International Hotel & Tower Toronto or put the troubled property into creditor protection and sever their management contract with Trump's company. (


** Canadian PM Justin Trudeau got an "unequivocal" commitment from other G7 countries on Friday to not pay terrorist groups to release kidnapped hostages and got some backing for Canada's position that the world's leading economies most do more to empower women. (

** The Trans Mountain pipeline expansion project will not face multi-year delay, Kinder Morgan Canada president Ian Anderson said on Thursday. Anderson said his company would begin construction work on Trans Mountain next summer, assuming it receives final federal approval in December. (

** Three of Canada's big banks disclosed higher impaired loans and loan loss provisions related to weakness in the oilpatch on Thursday, but the financial damage was not as extensive as many had feared, with one bank suggesting a "high water mark" may have been reached. (



The Times

The government's proposal to save Tata Steel UK could set a dangerous precedent, ultimately costing millions of pension savers up to 200 billion pounds in lost retirement incomes, experts warned yesterday. (

Accrol Papers said yesterday that it planned to list on the AIM in a deal expected to value the business at about 100 million pounds. The flotation is expected to take place on June 10 in defiance of City nervousness ahead of the European referendum just two weeks later. (

The Guardian

Government plans to overhaul the pension scheme behind Tata Steel have been supported by the trustees despite warnings that the move would set a dangerous precedent. (

MPs investigating controversial business practices at Sports Direct have told its founder, Mike Ashley, they will not visit the company's headquarters before next month's select committee hearing and made it clear they still expect him to show up at Westminster. (

The Telegraph

Rolls-Royce is understood to have lost out on a contract, to supply a version of EJ200 jet it produces through its membership of the Eurojet consortium, to power a new generation of combat jets for the South Korean military. (

Debenhams has appointed an Amazon executive to replace its outgoing chief executive as the department store focuses on the growth of its online sales. (

Sky News

The barrel price of Brent Crude oil, which is seen as the global benchmark of oil industry performance, has reached $50 for the first time in 2016 as supply problems due to wildfires in Canada continue to have an impact. (

Ministers have drawn up secret plans to sell the Government's entire shareholding in its 4 billion pounds Green Investment Bank (GIB) in an attempt to secure a bigger-than-expected windfall from the privatisation. (

The Independent

McDonald' French headquarters were searched on 18 May as part of an ongoing tax probe, according to police sources. (

Starbucks CEO said the company's China's business could one day outgrow that of the United States as it opens its first coffee roaster outside of the country. (


Gundlach Predicts Yellen Will Be Dovish Today; Is "Quite Sure" Oil Prices Are Going Down Again

With verious Fed presidents having whipping up the market into a hawkish frenzy in the past two weeks, leading to a dramatic repricing in summer rate hike odds with expectations for a July rate hike now over 50%, many can be "disappointed" by Yellen's speech today, at least according to Jeff Gundlach who said Yellen appears to be more cautious on raising interest rates and he expects her comments to be dovish again on Friday, when she is scheduled to speak at an event in Harvard-Radcliffe.

Specifically, during a DoubleLine event in Bevely Hills, he said said the Fed is "a bit stuck" given that it will not have ammunition available for the next recession unless it raises rates, despite continued lackluster economic growth. He noted that some developed countries, including Australia and Sweden, tried to raise interest rates in 2010, but ended up having to reverse course. "The Fed seems hell bent on raising interest rates until something breaks, which is what happened in these countries," he said.

On the other hand, Gundlach also said inflation is coming, though it’s a long way away. Perhaps he was envisioning the analysis we presented yesterday where according to BofA just the base effect in gasoline prices will be enough to send headline CPI as high as 3.5%  by year-end.

With U.S. inflation at 2 percent and unemployment at 5 percent, the Fed is "in kind of a conundrum," he said, estimating that there is up to about a 75 percent chance that rates will be raised this year, based on the yield curve for U.S. Treasuries.

Gundlach also commented on other markets, including oil, saying that he is "quite sure" oil prices will go down again according to Reuters. He also said that if the Standard & Poor's falls below 2,000 points, it will be headed toward 1,600.

Gundlach also warned that he thinks "commercial real estate has bubbly characteristics."

He said sectors that look cheap include emerging market debt, mortgage-backed securities and junk bonds, although he said junk bonds look "dicey."

All Eyes On Yellen: Global Markets Flat On Dreadful Volumes, Oil Slides

In a world where fundamentals don't matter, everyone's attention will be on Janet Yellen who speaks at 1:15pm today in Harvard, hoping to glean some more hints about the Fed's intentionas and next steps, including a possible rate hike in June or July. And with a long holiday in both the US and UK (US bond market closes at 2pm today), it is no surprise overnight trading volumes have been dreadful, helping keep global equities poised for the highest close in three weeks; this won't change unless Yellen says something that would disrupt the calm that’s settled over financial markets.

Traders are now predicting a higher than 50% chance of an increase in July, so a misstep by Yellen risks upsetting a lull that has sent currency volatility to the lowest since January.

Looking at global markets, stocks were poised for the steepest weekly advance in more than a month on speculation financial risks around the world have eased. The dollar rose versus most peers, pushing oil lower with WTI falling below $49 after rising above $50 for the first time since NOvember yesterday. The British pound was the biggest gainer among major currencies this week on growing confidence the U.K. will remain in the European Union. As emerging markets rebounded, Russia and Qatar returned to international debt markets for the first time in at least three years.


Opinions about what Yellen would say varied from one extreme to the other.

"It will be a difficult task for Yellen," said Ulrich Leutchmann, head of currency strategy at Commerzbank AG in Frankfurt. “The discussion today will center around her past achievements and not on actual monetary policy, but if she doesn’t give any hawkish signal, many in the market will interpret this as dovishness given recent hawkish comments" by other Fed officials.

Elsewhere, Ralf Zimmermann, a strategist at Bankhaus Lampe, said that "today certainly all investors’ eyes will be on Yellen,” said “The Fed is obviously willing to increase rates. But it is more a risk than a chance for stocks. I was surprised with the recent strength.”

Also chimed in Mark Lister, head of private wealth research at Craigs Investment Partners, who said that "wwe are still a little cautious. Yellen is likely to continue with the rhetoric of wanting to hike and that’s their plan. Equity markets still offer value on a medium-term basis and it’s certainly the only place where you’re getting any sort of yield. We’d welcome a pullback because that would give us a chance to do some buying at more reasonable prices.”

Others, most notably Jeff Gundlach, disagreed with expectations for a hawkish Yellen. The DoubleLine CEO said he expects a dovish speech from Yellen and predicts the Fed will refrain from raising interest rates in June unless traders in the futures market assign a probability of at least 50 percent to such a move.

In short: nobody has any clue as usual what happens next, and certainly not the Fed.

As nothed above, market moves have been subdued. The MSCI AC World Index rose 0.1% in early trading, leaving it up 2.1 percent for the week. The Stoxx Europe 600 Index slipped 0.2% trimming a third weekly advance, with trading volumes 37 percent below the 30-day average before holidays in the U.K. and U.S. on Monday. Futures on the S&P 500 rose 0.1%, with the index up 1.8% this week, its biggest increase in more than two months.

Market Snapshot

  • S&P 500 futures down less than 0.1% to 2089
  • Stoxx 600 down less than 0.1% to 349
  • FTSE 100 up less than 0.1% to 6268
  • DAX down less than 0.1% to 10264
  • S&P GSCI Index down 0.7% to 368.9
  • MSCI Asia Pacific up 0.6% to 128
  • Nikkei 225 up 0.4% to 16835
  • Hang Seng up 0.9% to 20577
  • Shanghai Composite down less than 0.1% to 2821
  • S&P/ASX 200 up 0.3% to 5406
  • US 10-yr yield down less than 1bp to 1.83%
  • German 10Yr yield down 2bps to 0.12%
  • Italian 10Yr yield down 3bps to 1.34%
  • Spanish 10Yr yield down 2bps to 1.49%
  • Dollar Index up 0.14% to 95.3
  • WTI Crude futures down 1.3% to $48.86
  • Brent Futures down 1.6% to $48.78
  • Gold spot up less than 0.1% to $1,221
  • Silver spot down 0.2% to $16.29

Top Global News

  • KKR Buckles Up for Wild Ride Chasing Air-Bag Outcast Takata: Scope of recall creates ‘really high’ hurdle to sale: Aoki. Private equity bets in auto industry have had mixed success
  • Valeant Rejected Takeda-TPG Takeover Bid in Spring, WSJ Says: No acquisition talks under way for the drugmaker. Takeda-TPG approach made before new Valeant CEO Papa arrived
  • Axa Says U.K. Divestments to Generate Loss of EU400m: Co. will sell Sunlife to Phoenix Group
  • Abe Fails in Bid to Have G-7 Leaders Warn of Global Crisis Risk: Statement says G-7 has strengthened resilience to avoid crises. Brexit would be risk to global growth, communique says
  • Gundlach Says Yellen Remarks to Be Dovish as Treasury Bid Soars: Fed will hold off in June if odds below 50%, Gundlach says. Yellen to speak at Harvard University at 1:15pm local time

Looking at regional markets, we start in Asia where equities ignored yesterday's flat US close to trade mostly higher, although China lagged following slower growth in industrial profits. Nikkei 225 (+0.4%) was underpinned by the latest set of reports (now the 3rd or 4th) PM Abe could delay the sales tax hike as soon as next week while a continued decline in CPI data further added to calls for BoJ action. ASX 200 (+0.5%) was also upbeat led by defensive stocks and climbed above the 5400 level. Elsewhere, Chinese markets bucked the trend with the Shanghai Comp (-0.1%) and Hang Seng (+0.9%) with the Shanghai composite in negative territory following a slowdown in industrial profits growth which tumbled from 11.1% to 4.2%. 10yr JGBs traded higher despite the increased risk-appetite in Japan, underpinned by the BoJ's presence in the market for a total JPY 460b1n of government debt including inflation-linked bonds. Because there is nothing quite like free, central-bank free "markets."

Top Asian News

  • Goldman Sees 0.2% China Bond Default Rate as Zombies Kept Alive: Global note default rate is 0.8% and U.S. 0.9%: Moody’s says
  • Terex Ends Chinese Suitor Talks, Proceeds With Konecranes Deal: Zoomlion had made an unsolicited offer at $30/share in Jan.
  • Abe to Decide on Japan Sales Tax Increase Before Summer Election: Abe says parallels between global economy and time of Lehman crisis
  • Japan CPI Falls 0.3%, Raising Pressure on BOJ for More Stimulus: Core inflation rate declines for 2nd month in April
  • Yuan Bears Once Compared to Soros in His Prime Now Look Subdued: Options, offshore trading show bears are reluctant to pile in

Like in Asia, European trading has been very light this morning as participants look towards the UK bank holiday and US Memorial Day, leading to very thin volumes. European equities initially traded in modest negative territory but have since pared this loses (Euro Stoxx 0.2%) with the IBEX (0.1%) yet again underperforming amid the extension of losses in Banco Popular shares, while the likes of Credit Agricole (-7%) and Natixis (-7.3%) weigh on French equities as they go ex-div. Elsewhere, the SMI notably outperforms led by Roche (+3.6%) in the wake of reports of a successful trial with their blood cancer drug.

Top European News

  • Axa Sells SunLife, Appoints Harlin CFO of Chief Buberl’s Team: Axa SA sold its SunLife unit in the U.K. to Phoenix Group Holdings and announced the top-management team
  • Philips Lighting Shares Soar After $839m Dutch IPO: Shares sold at EU20 each, near midpoint of marketed range. Spinoff underscores shift by Philips to health-care market
  • Barclays Said to Raise Severance Offer Again for Tokyo Employees: Bank asked about 100 equity staff to leave in January: people familiar. Original offer was below market standards, union says
  • Anglo Appoints Cleaver as De Beers CEO as Mellier Steps Down: Diamond producer resumes tradition of promoting from within. Bruce Cleaver has held strategy roles at Anglo, De Beers
  • Oil Price Surge Can Trigger Writebacks, Dong Energy CEO Says: Writebacks in energy sector are rare: Bloomberg Intelligence. Chairman says oil unit now worth keeping after sale dropped
  • Currency Traders Look Beyond the Pound to Combat Brexit Turmoil: Unigestion buys franc, krona options to hedge risk of EU exit. Aberdeen Asset Management sees euro as best sterling proxy

In FX, the BBG Dollar Spot Index climbed 0.2% after losing 0.2% in each of the last two trading sessions. The MSCI Emerging Markets Currency Index rose 0.3 percent this week, snapping a run of three weekly losses. Turkey’s lira and Russia’s ruble led gains, climbing more than 1 percent in the period. The currencies of oil-exporting nations pared their weekly advance on Friday as oil retreated. The Canadian dollar, Norwegian krone and the ruble weakened at least 0.3 percent. The pound strengthened 1 percent this week. A poll by former Conservative lawmaker Michael Ashcroft showed almost 65 percent of voters believe the U.K. will remain in the European Union after a June 23 referendum.

In commodities, oil trimmed its third weekly advance as Canadian energy producers moved to resume operations after wildfires eased. West Texas Intermediate dropped 1% to $49 a barrel, paring the weekly gain to 2.5 percent. Brent slid 1.6 percent to $48.84. Prices climbed above $50 a barrel on Thursday for the first time in more than six months as a decline in U.S. crude stockpiles and production accelerated. The Organization of Petroleum Exporting Countries may stick to its strategy of prioritizing market share over prices when it meets next week.

Iron ore futures in Dalian rebounded from the lowest level since February as authorities in China said there’s room to boost growth. Group of Seven leaders pledged to fix excess industrial capacity and a global glut of the metal caused by government subsidies and support. Industrial metals also advanced, with copper heading for its first weekly gain this month. The metal rose 0.7 percent, bringing the gain the week to 2.5 percent. Nickel climbed 0.7 percent and zinc advanced 1.1 percent. Gold was little changed at $1,221.77 an ounce. The precious metal is heading for the biggest monthly loss since November as investors anticipate higher borrowing costs in the U.S.

n the US event calendar, the focus will be on that aforementioned second revision to Q1 GDP and Core PCE, while there will also be some attention paid to the final May reading for the University of Michigan consumer sentiment data. The data comes before what may or may not be an important speech by Fed Chair Yellen this evening.

Bulletin Headline Summary from RanSquawk and Bloomberg

  • This morning has been a rather light affair as participants look towards the UK bank holiday and US Memorial Day, with European equities initally trading in modest negative territory
  • FX markets have largely been in favour of the USD, and that of minor losses in commodities and stocks
  • Looking ahead, today will see data highlights in the form of the secondary US GDP reading and University of Michigan sentiment
  • Treasuries little changed in overnight trading as global equities rally and oil sells off; G-7 meeting ends “amid discord over the best policy mix of fiscal spending, monetary stimulus or structural reforms.”
  • U.S. fixed income markets early close today (2pm ET) and closed Monday for the Memorial Day holiday
  • FX, interest rate futures trading floors early close (1pm ET) and closed Monday
  • It’s one of the biggest dilemmas facing currency managers: how to protect against the fallout from the U.K. leaving the European Union without losing money should it vote to remain
  • Italian business and consumer confidence unexpectedly declined this month, signaling growing pessimism among executives and households over the strength of the recovery in the euro region’s third-biggest economy
  • Jeffrey Gundlach said he expects Janet Yellen will “be dovish” today and the Fed will refrain from raising interest rates in June unless traders in the futures market assign odds of at least 50% to the move
  • Japan’s consumer prices dropped for a second month as central bank Governor Haruhiko Kuroda struggles to spur inflation with record asset purchases and negative interest rates
  • Japanese PM Shinzo Abe is getting closer to a potential announcement on delaying an increase in the sales tax after his warning at a Group of Seven leaders meeting that the global economy faces significant risk of another crisis
  • Miami’s crop of new condo towers, built with big deposits from Latin American buyers and lots of marketing glitz, are opening with many owners heading for the exits. A third of the units in some newly built high-rises are back on the market
  • Sovereign 10Y yields mixed; European, Asian equities higher; U.S. equity-index futures rise; WTI crude oil, precious metals lower

US Event Calendar

  • 8:30am: GDP Annualized q/q, 1Q S, est. 0.9% (prior 0.5%)
    • Personal Consumption, 1Q S, est. 2.1% (prior 1.9%)
    • GDP Price Index, 1Q S, est. 0.7% (prior 0.7%)
    • Core PCE q/q, 1Q S, est. 2.1% (prior 2.1%)
  • 10:00am: U. of Mich. Sentiment, May F, est. 95.4 (prior 95.8)
    • Current Conditions, May F (prior 108.6)
    • Expectations, May F (prior 87.5)
    • 1 Yr Inflation, May F (prior 2.5%)
    • 5-10 Yr Inflation, May F (prior 2.6%)

Central Banks

  • 1:15pm: Fed’s Yellen speaks in Cambridge, Mass.

DB's Jim Reid concludes the overnight wrap

Today would normally be very quiet given it’s the Friday before Memorial Day in the US and Bank Holiday Monday in the UK. Indeed the US bond market closes early today. However we do have Yellen speaking at Harvard University at 6.15pm BST (shortly after lunch in NY) so it'll be slightly busier than it could have been. It's not clear whether she'll mention current policy but it will delay a few in the US from leaving early. That speech will aHer appearance a week on Monday June 6th when she is due to
address the World Affairs Council in Philadelphia has been billed as a
bigger event so that's the more likely venue for her to validate her
FOMC colleagues' recent hawkish bias or to put a more dovish spin on
future policy.
lso come with the added benefit of the May employment report which is the highlight of what’s set to be a busy calendar next week.

Before that though and also in focus today will be the second revision to Q1 GDP in the US due out this afternoon. Current expectations are for an upward revision from the first estimate of +0.5% qoq to +0.9%, while the Core PCE reading is expected to be unchanged at +2.1% qoq. We'll also get a first sight at corporate profits which given recent weakness is an important sub complement. So something else to keep markets busy into the long weekend.

It was the data yesterday which was the main talking point for investors in what was a relatively lacklustre day of price action with the rally in risk assets coming to a stuttering halt. Indeed the S&P 500 (-0.02%) closed little changed by the end of play after failing to move with much conviction either way during the session. Markets in Europe had largely closed in positive territory (Stoxx 600 +0.10%, DAX +0.66%) although the rally for banks which had been driving moves this week abated somewhat. Spanish banks in particular were under the most pressure with Banco Popular slumping 26% and to the lowest in 26 years following the announcement of a rights issue plan to cover losses. Spanish equities (-0.50%) were the notable underperformers as a result and it was a reminder that the sector is still a long way from being out of the woods just yet.

With regards to that data it was bit of a mixed bag in the US, with the latest durable and capital goods orders in April getting most of the attention. Headline durable goods orders were up a bumper +3.4% mom last month, well exceeding the +0.5% consensus although that number was boosted by a huge rise in the volatile aircraft and parts orders series. Excluding transportation orders, durable goods orders rose more in line with expectations (+0.4% mom vs. +0.3% expected) although the concerning trend was in the core capex orders which declined -0.8% mom after expectations had been for a modest +0.3% rise. Our US economists noted that the three-month annualized change in core durable goods orders, which was slightly below +1% in March, plunged to -11% this month. That being said, the overall report was however enough for the Atlanta Fed to revise up their Q2 GDP forecast to 2.9% from 2.5% previously which is the highest forecast we’ve seen so far for the quarter.

Meanwhile, there was more bumper US housing market data to report with pending home sales in April rising a much better than expected +5.1% mom (vs. +0.7% expected). Elsewhere, initial jobless claims were down 10k last week to 268k and down for the second consecutive week following that huge spike up in the first week of the month. Finally the latest regional manufacturing data provided for further evidence of what’s been another difficult month for the sector. The Kansas City Fed’s manufacturing activity index was down 1pt this month to -5 after expectations had been for a modest 1pt rise. New orders extended their move lower into negative territory. Staying in the US we also heard from Fed Reserve Governor Powell (moderately hawkish usually) who said that a rate hike would be appropriate soon but that there is no reason ‘to be in a hurry’. Powell also echoed (Reuters) some of the comments from his colleagues in highlighting that the upcoming UK referendum vote is a reason for caution in tightening next month. It’s worth highlighting that we don’t hear from Powell too often so his comments are noteworthy.

Switching over to the latest in markets this morning where bourses in Asia are ending on a bit of a mixed note to finish the week. Leading the way is Japan where the Nikkei is +0.44%. That’s come after the April CPI report revealed a two-tenths of a percent drop in headline inflation to -0.3% yoy. While that was a little higher than expected (-0.4% expected) it still marks a move further into deflation for the second consecutive month. The ex-fresh food reading (-0.3% yoy vs. -0.4% expected) matched the headline and was unchanged from March. The so called core-core reading (ex food and energy) held steady at +0.7% yoy as expected. Nevertheless the data may have raised hopes that it could spark further action from the BoJ. Elsewhere we’ve also seen the ASX (+0.53%) gain overnight along with the Kospi (+0.32%), while the Hang Seng (-0.31%) and Shanghai Comp (-0.14%) are both lower. The latter perhaps on the back of the latest industrial profits data in China which showed profits of +4.2% yoy in April, down from the +11.1% yoy March reading. Elsewhere there was little interesting to report out of the conclusion of the G7 meeting in Japan this morning.

Meanwhile, there’s also been some interesting newsflow concerning Valeant overnight, with the WSJ reporting late last night that the pharma company rejected a takeover offer from Takeda and investment firm TPG in the spring. No price was quoted and the article states that there are no current talks, but it is another interesting twist in the long running saga for the company.

Moving on. Most of the interesting price action yesterday was reserved for rates markets where Treasuries in particular were well bid from the off. Indeed 10y yields ended the session just shy of 4bps lower in yield at 1.829% meaning they are lower now than where we closed last Friday. 2y yields were down even more (5bps lower) at 0.869% and much of the commentary is attributing this to another strong auction yesterday. Indeed such was the demand for investors at the 7y Treasury auction that primary dealers were left with just a 19% share of the allocation which is the second lowest on record. That actually follows a similar trend at 2y and 5y auctions earlier in the week with Bloomberg reporting that investors took down 80% of the $88bn across the three auctions. Despite the possibility of the Fed tightening as soon as this summer, the auctions are evidence that there’s still a decent hunt for yield in a world where global yields are so low.

Meanwhile, over in commodity markets it was Oil which had been generating the early headlines after WTI and Brent both broke through the $50/bbl level. Those moves faded however as the day wore on with both finishing below that at $49.48/bbl and $49.59/bbl respectively – a smidgen lower on the day although the moves were largely put down to some profit taking. It was a much better day for base metals though with Zinc (+2.32%), Copper (+0.15%) and Aluminium (+0.74%) all up, however the exception was Iron Ore which was down another couple of percent yesterday and tumbled back below $50/tn for the first time since February. It is now in fact nearly 30% off the highs for 2016 made just a month ago.

Looking at the day ahead, this morning in Europe the only data of note is the various confidence indicators which we’ll receive out of France and Italy. This afternoon in the US the focus will be on that aforementioned second revision to Q1 GDP and Core PCE, while there will also be some attention paid to the final May reading for the University of Michigan consumer sentiment data. The data comes before what may or may not be an important speech by Fed Chair Yellen this evening.


Gold Prices Should Rise Above $1,900/oz -“Get In Now!”

Gold prices are likely to rise above $1,900/oz in the next phase of the bull market and investors should “get in now,” Chief Market Analyst of the Lindsey Group, Peter Boockvar told CNBC’s “Futures Now” yesterday.

“This is just the beginning of a new bull market in the metals,” Boockvar believes.

Ultimately, Boockvar believes that the 2011 highs of around $1,900 for gold are not only reachable, but surpassable, as he reasoned that bull markets historically exceed the previous bull market peak at some point.

As Boockvar sees it, it’s just a matter of when.

“In order to be bearish on gold, you have to believe that the Fed is going to embark on 100 to 200 basis points of hikes over the next couple of years, which I think is completely unrealistic,” added Boockvar. “This is an ideal opportunity for those who have not gotten in.”

Citing the relative strength index (RSI), Boockvar said that gold is the most oversold it has been since mid-December. He also added that global interest rates have given trillions of dollars’ worth of sovereign bonds a negative yield. Coupled with rising Fed rates, this development would theoretically provide gold investors with positive carry on gold. 

For additional context, Boockvar highlighted the mid-2000s, when the Fed raised the Federal funds rate from 1 percent to 5 percent. During that time, gold went from $400 to $700. The analyst also cited the start of 2016, when Bank of Japan Governor Haruhiko Kuroda adopted negative interest rates. However, the move failed to help the nation achieve stability in its currency.

Watch Boockvar’s interview on CNBC here

Recent Market Updates
– Gold and Silver “Bottom Is In” – David Morgan tells Max Keiser
– World’s Largest Asset Manager Suggests “Perfect Time” For Gold
– Gold As “Extremely Low-Risk Asset” – Rogoff Advises Creditor Nations
– Silver – “Best Precious Metals Trade”
– Bank Bail-Ins Pose Risks To Depositors, Investors & Economies
– Take Delivery of Gold and Silver Coins, Store Gold Bars – Hobbs
– George Soros Buying Gold ETF And Gold Shares In Q1

Gold and Silver News
Gold edges up, but stays near 7-wk low on Fed rate hike outlook – Reuters
Gold Snaps Six-Day Losing Streak as Rally in the Dollar Pauses – Bloomberg
Oil prices top $50, Asian shares struggle as China sags – Reuters
Pound Could Lose Its Reserve Currency Status on Brexit, S&P Warns – Bloomberg
Brexit Could Force UK to Extend Austerity by Two Years – Bloomberg

Greece’s “breakthrough” agreement is another “extend and pretend” – Telegraph
Why Strategas’ Chris Verrone Wants to Buy Gold (Video) – Bloomberg
Global Monetary System Has Devalued 47% Over The Last 10 Years – Zero Hedge
The Billionaires Are Wrong On Gold – Barisheff via Seeking Alpha
Dominick Frisby interviews James Rickards – Frisby’s Bulls & Bears
Read More Here

First Photos Of US Soldiers In Syria Released

Following the propagandist double-speak gushing forth from the Obama administration over when a "boot on the ground" in Syria is a "boot on the ground," the following photographs via Agence France-Presse confirm US special operation forces in a rural village 40 miles from Raqqa. As The Guardian reports, the Pentagon press secretary, resisted commenting on the photographs and would only describe the US special operations forces’ mission in generic terms, despite the fact that these troops are at the frontline of fighting when President Obama assured America that forces are consistently behind the forward lines.

In April, State Department spokesman John Kirby attempted to change the narrative in a stumbling proposterous way denying President Obama had ever said "no boots on the ground" in Syria...

And here’s the relevant transcript:

“Kirby: there was never this – there was never this, “No boots on the ground.” I don’t know where this keeps coming from.


Question: But yes there – well, yes, yes, there was.


Kirby: There was no – there was – no there wasn’t. There was –


Question: More than –


Question: What?


Kirby: We’re not going to be involved in a large-scale combat mission on the ground. That is what the President has long said.”

To anyone who has been following this, Kirby’s argument is patently absurd. The President told the BBC less than twenty-four hours previously that there would be “no boots on the ground” – and then his administration announced that 250 more booted US soldiers would be treading Syrian ground. Not only that, but prior to the summer of last year, the President assured the American people there’d be no “boots on the ground” a total of sixteen times.

As George Orwell dramatized in Nineteen Eighty-Four, and also in this memorable essay, the degeneration of language into an instrument of concealment is one of the hallmarks of the modern age. In the novel, there is a vast apparatus concerned solely with erasing the past in order to justify the actions of the present: the Obama administration doesn’t have the power to do that, and yet thinks it can achieve the same ends by simply denying what everyone knows to be true, as shown by Kirby’s surreal exchange with reporters.

And now, as The Guardian reports, we have proof that not only was Kirby lying about the president's words, but the boots on the ground are far closer to the frontlines than Obama had ever admitted to the American public...

Elite US military forces have been photographed for the first time in Syria as they join largely Kurdish forces on an advance toward, Raqqa, the Islamic State terror group’s capital.



A photographer with Agence France-Presse captured US special operations forces with Kurdish forces known as the YPG, part of the US-mentored Syrian Democratic Forces, in a rural village less than 40 miles from Raqqa. Some US troops wear the insignia of the YPG in an apparent show of support.

Peter Cook, the Pentagon press secretary, resisted commenting on the photographs and would only describe the US special operations forces’ mission in generic terms... More lies....

Barack Obama announced last month that he would increase US special operations forces in Syria to 300, for what the Pentagon has consistently described as merely an advisory mission. AFP described the troops as “near the frontline” north of Raqqa, despite the Pentagon’s frequent claims that the forces are consistently behind the forward lines.



Cook denied any mission creep had occurred, saying the “advise-and-assist role has not changed”, and that the elite forces, the only ones thus far acknowledged in Syria, conduct “meetings” with indigenous forces “that are taking the fight to Isil”, another term for Isis.



“They are not on the forward line. They are providing advice and assistance,” Cook said.

*  *  *

So once again - do we believe a photographer's images and knowledge of the region or an Obama administration spokesman?

It's Over: Even MSNBC Turns On Hillary - "Stop Lying, Stop Digging"

To say that Hillary did not react properly to the damning State Department Inspector General report which yesterday found that she broke numerous government rules by setting up her own email server, would be a gruesome understatement.

As a reminder, Hillary's kneejerk response was to plead ignorance and claim that she was merely doing what her predecessors had done before, a claim that was promptly refuted, which was followed by her spokesman Brian Fallon appearing on CNN and saying that the Obama appointed IG had an "Anti-Clinton" bias by releasing the report.

Things however turned decidedly worse for Hillary when even the rabidly pro-Clinton channel MSNBC decided to tear Hillary apart for what is now an insurmountable mountain of lies.

It took place early today when MSNBC host Joe Scarborough slammed Hillary Clinton, calling on the Democratic presidential front-runner to "stop lying" about her personal email account.

"It’s pretty remarkable," he said on "Morning Joe" of Clinton’s response to a watchdog report that found Clinton and her top aides did not comply with policy while she served as secretary of State as cited by The Hill. "I don’t understand why you put out a statement like that,” Scarborough added. "Stop lying, stop digging."

Instead she should have said "I screwed up. I’m terribly sorry" according to the MSNBC anchor which he offered as alternate responses. "'I hope the American people will forgive me and I hope they will let us move on to the issues that matter.'"

Scarborough continued his take down on Thursday saying that the issue remains a major concern for her campaign. "The biggest concern is security," he said. "A lot of people act like, ‘ooh, there’s much ado about nothing here."

"Well, actually, there was a lot of classified documents, a lot of classified materials going through this server. The great fear all along [was] that a home-brewed server in Chappaqua, N.Y., was going to be broken into."

And then there is the "Guccifer" wildcard. Recall that as we reported previously, the extradited Romanian hacker Marcel Lazar who allegedly hacked into Hillary's server just pled guilty and has promised to fully comply with the ongoing investigation. He has previously claimed that he had access to the former Secretary of State's "completely unsecured" server. "It was like an open orchid on the Internet," Lazar told NBC News. "There were hundreds of folders."

If he provides the evidence that he has done just that, and we are confident that is precisely why he was so eager to plea with the Feds, Hillary's troubles are about to skyrocket.

Full clip below:

And Another Week Of Selling: "In 2016, Equity Funds Have Lost The Largest Ever Outflow For The Asset Class"

For many weeks in a row now we have been asking, mostly jokingly, how with everyone else (both retail and "smart money") selling, and with stock buybacks sharply lower in recent months, is the market higher. Specifically, who is buying?

This question is no longer a joke. After this week's 17th consecutive outflow by "smart money" funds (mostly on the back of surging hedge fund redemption), moments ago we got the latest Lipper fund flow data. It was, as BofA put it, "unambiguous risk-off weekly flows."

As BofA also put it: "Equities continued to experience outflows and lost $3.32bn (-0.1%) last week, their 4th consecutive decline. Year-to-date, equity funds have lost $58.6bn (-0.6%), the largest ever dollar outflow in any 22 week period for the asset class"

And yet, despite record retail outflows, despite record smart money selling, despite slowing buybacks, the S&P is not only higher on the year, but just shy off all time highs. At this rate the central banks will really need to reassess their strategy before they lose what little credibility they have left.

Here are the fund flow details from BofA's Michael Contopoulos:

Equities continued to experience outflows and lost $3.32bn (-0.1%) last week, their 4th consecutive decline. Year-to-date, equity funds have lost $58.6bn (-0.6%), the largest ever dollar outflow in any 22 week period for the asset class.




Global high yield saw a 4th consecutive week of outflows, led by non-US HY’s $2.2bn (-0.9%) outpour and partially offset by a minor $131mn (+0.1%) inflow into US domiciled high yield funds. The divergence is likely a result of US HY’s outperformance since the February 11th lows, outpacing its European counterpart by 6.5% over the 3.5 month span. Also a contributing factor is the ECB announcement of its Corporate Sector Purchase Program, which has caused European investors to pull money out of EU high yield and invest in ECB-eligible high grade corporates. Within the US, ETFs led the inflows (+$180mn, +0.5%) compared to a $49mn outflow (-0.0%) from non-ETFs.



Meanwhile, loans gained $94mn (+0.1%) in net inflows, driven by the greater odds of a summer rate hike. Investment grade corporates continued to benefit from sizeable inflows, gaining $1.29bn (+0.1%) last week for the 14th straight inflow. Other asset classes we track reporting flows last week include EM Debt (-$324mn, -0.1%), munis (+$1.23bn, +0.3%), money markets (+$7.41bn, +0.3%), and commodities (-$271mn, -0.3%). As a whole, fixed income funds recorded a $2.53bn inflow, or +0.1% of AUM

And the global flow details from Michael Hartnett

  • Equities: $9.2bn outflows (7 straight weeks) (note $11.1bn mutual fund outflows partially offset by $1.9bn ETF inflows)
  • Bonds: $2.6bn inflows (inflows in 12 of past 13 weeks)
  • Precious metals: tiny $32mn outflows (only the second week of outflows in 20 weeks)
  • Money-markets: $12.2bn inflows

Fixed Income Flows (Chart 2)

  • First inflows to Govt/Tsy funds in 14 weeks ($0.6bn)
  • Largest outflows from HY bond funds in 15 weeks ($2.1bn)
  • Largest outflows from EM debt funds in 14 weeks ($0.3bn)
  • $2.5bn inflows to IG bond funds (12 straight weeks)
  • $1.2bn inflows to Munis (36 straight weeks)
  • Inflows to TIPS funds in 14 of past 15 weeks ($0.3bn)

Equity Flows (Table 2)

  • Japan: $0.9bn outflows (first outflows in 3 weeks)
  • Europe: $3.3bn outflows (16 straight weeks)
  • EM: $2.0bn outflows (4 straight weeks)
  • US: $1.1bn outflows (outflows in 6 of past 7 weeks)
  • By sector, first outflows from REITs in 14 weeks ($0.2bn); largest financials inflows in
  • 5 months ($0.5bn); 6 straight weeks of tech outflows ($0.4bn)

To summarize: everything except ETFs was sold in the past week; while global equity outflows in 2016 are now at a record high $105 billion for the 22 week period.

"We’re Moving To Tackle Systemic Risk" - India Cracks Down On HFT Scourge

While the corrupt and criminal US regulators are unable to do anything to stifle the market domination of algos which have totally destroyed the US equity market, and sucked up enough liquidity where neither buy nor sellsiders can generate a profit, India is already well on its way to crushing the parasitic - and perfectly legal - frontrunners of virtually ever trade. It will do so by increasing penalties on high-speed trading firms that flood exchanges with orders that don’t result into actual transactions, as part of steps aimed at strengthening its oversight of computerized trading.

According to Bloomberg, India's regulator, the Securities & Exchange Board or SEBI, has also borrowed a page out of the IEX playbook and is considering checks on super fast strategies by using a fraction-of-a-second speed bump and minimum resting time to delay orders so that all participants see the market at the same speed, Chairman U. K. Sinha said in Mumbai on Wednesday.

In other words, what IEX wants to implement on its exchange, to unprecedented opposition from not only the HFT lobby but its muppet, the SEC, India will implement marketwide. 

Why is India doing the right thing by cracking down on HFTs? The proposals came amid a growing chorus calling for the market regulator to take action against high-frequency traders gaining preferential access at the country’s biggest exchange. A report by one of SEBI’s own advisory panels recently called for a full investigation into claims of collusion between the National Stock Exchange of India Ltd. and a high-frequency trading firm. The report was the only example among major global markets to identify probable collusion between an exchange and a high-speed firm. 

"We’re moving to tackle systemic risk as well as issues of unfair access in HFT trading,” Sinha said. “We’re also asking the exchanges to ensure that HFT traders don’t misuse the system.”

That's odd: such collusion between exchanges (BATS) and HFT firms (Citadel) in the US are not only perfectly known to everyone, but are collusive in broad daylight.

And yet nobody will touch them. Or at least not in the banana republic that is the US. Because India's market is about to become far more honest and trustworthy.

Among the proposals being considered include separation of co-location orders and adoption of auction system that blunts the edge of the fastest traders. Broadcast of order-book information is being looked into to ensure there’s no preferential treatment, Sinha said. The measures will be released in the next three to four months, he said.

“We need to see whether the changes ultimately bring a level-playing field or impede the market’s growth,” Manoj Nagpal, chief executive officer at Mumbai-based Outlook Asia Capital Pvt., an investment consulting and wealth management firm, said by phone. “Markets globally are grappling with ways to regulate HFT without disrupting the system.”

Actually, no. NOt in the US. Here every regulator is corrupt and purchased by the HFT lobby. Sorry.

Meanwhile, the US joke of a market continues: for every 27 orders placed on U.S. exchanges, about one is filled, data from the U.S. Securities and Exchange Commission show. In other words, approximately 96 percent of all orders sent to U.S. equity markets are canceled.

In India, quote stuffing is already penalized. India’s BSE Ltd. charges up to 0.1 rupee per order when a brokerage’s order-to-trade ratio falls between 250 and 500, according to the exchange’s website. “While SEBI is among the first regulators to have some kind of regulations in place on HFT, there is a need to make it more stronger,” he said.

India’s high-frequency and algorithmic transactions now account for 40 percent of total volumes, the highest proportion in the developing world and up from the low single digits five years ago, according to Danielle Tierney, senior analyst at Aite Group, a Boston-based consulting firm. SEBI, which issued broad guidelines on HFT in 2012 and 2013, said in December it’s considering new restrictions, but has so far taken no action.

It will soon, and when it does that 40% will promptly collapse to the single digits or 0, because once the quote stuffing and churning ecosystem of the algo parasites is interrupted, it disintergates.

Now if only the US regulator would pretend to do its job (even if that means permanently recusing Mary Jo White, one of Wall Street's staunchest defenders) and at least feign some interest in how India is winning a war with HFTs that the US lost long ago, we would be content. Alas, that will never happen.

Peak Petro-State - The Oil World In Chaos

Submitted by Michael Klare via,

Pity the poor petro-states. Once so wealthy from oil sales that they could finance wars, mega-projects, and domestic social peace simultaneously, some of them are now beset by internal strife or are on the brink of collapse as oil prices remain at ruinously low levels. Unlike other countries, which largely finance their governments through taxation, petro-states rely on their oil and natural gas revenues. Russia, for example, obtains about 50% of government income that way; Nigeria, 60%; and Saudi Arabia, a whopping 90%. When oil was selling at $100 per barrel or above, as was the case until 2014, these countries could finance lavish government projects and social welfare operations, ensuring widespread popular support.  Now, with oil below $50 and likely to persist at that level, they find themselves curbing public spending and fending off rising domestic discontent or even incipient revolt.

At the peak of their glory, the petro-states played an outsized role in world affairs.  The members of OPEC, the Organization of the Petroleum Exporting Countries, earned an estimated $821 billion from oil exports in 2013 alone. Flush with cash, they were able to exert influence over other countries through a wide variety of aid and patronage operations. Venezuela, for example, sought to counter U.S. influence in Latin America via its Bolivarian Alliance for the Peoples of Our America (ALBA), a cooperative network of mostly leftist governments. Saudi Arabia spread its influence throughout the Islamic world in part by financing the efforts of its ultra-conservative Wahhabi clergy to establish madrassas (religious academies) throughout the Islamic world. Russia, under Vladimir Putin, used its prodigious oil wealth to rebuild and refurbish its military, which had largely disintegrated following the collapse of the Soviet Union. Lesser members of the petro-state club like Angola, Azerbaijan, and Kazakhstan became accustomed to regular fawning visits from the presidents and prime ministers of major oil-importing countries.

That, of course, was then, and this is now. While these countries still matter, what worries these presidents and prime ministers now is the growing likelihood of civil violence or even state collapse. Take, for example, Venezuela, long an ardent foe of U.S. policy in Latin America, but today the potential site of a future bloody civil war between supporters and opponents of the current government. Similar kinds of internal strife and civil disorder are likely in oil-producing states like Algeria and Nigeria, where the potential for the further growth of terrorist violence amid chaos is always high.

Some petro-states like Venezuela and Iraq already appear to be edging up to the brink of collapse. Others like Russia and Saudi Arabia will be forced to reorient their economies if they hope to avoid such future outcomes. Whatever their degree of risk, all of them are already experiencing economic hardship, leaving their leaders under growing pressure to somehow alter course in the bleakest of circumstances -- or face the consequences.

A Busted Business Model

Petro-states are different from other countries because the fates of their governing institutions are so deeply woven into the boom-and-bust cycles of the international petroleum economy. The challenges they face are only compounded by the unnaturally close ties between their political leaderships and senior officials of their state-owned or state-controlled oil and natural gas industries. Historically, their rulers have placed close allies or even family members in key industry positions, ensuring continuing government control and in many cases personal enrichment as well. In Russia, for example, the management of Gazprom, the state-controlled natural gas company, and Rosneft, the state-owned oil company, is almost indistinguishable from the senior leadership in the Kremlin, with both groups answering to President Putin. A similar pattern holds for Venezuela, where the government keeps the state-owned company, Petróleos de Venezuela, S.A. (PdVSA), on a tight leash, and in Saudi Arabia, where the royal family oversees the operations of the state-owned Saudi Aramco.

In 2016, one thing is finally clear, however: the business model for these corporatized states is busted. The most basic assumption behind their operation -- that global oil demand will continue to outpace world petroleum supplies and ensure high prices into the foreseeable future -- no longer holds.  Instead, in what for any petro-state is a nightmarish, upside-down version of that model, supply, not demand, is forging ahead, leaving the market flooded with fossil fuels.

Most analysts, including those at the International Monetary Fund (IMF), now believe that increases in energy efficiency, the spread of affordable alternative energy sources (especially wind and solar), slowing worldwide economic growth, and concern over climate change will continue to put a damper on fossil fuel demand in the years ahead.  Meanwhile, the oil industry -- now equipped with fracking technology and other advanced extractive techniques -- will continue to boost supplies. It’s a formula for keeping prices low. In fact, a growing number of analysts are convinced that world oil demand will in the not-so-distant future reach a peak and begin a long-term decline, ensuring that large reserves of petroleum will be left in the ground. For the petro-states, all of this means persistent pain unless they can find a new business model that is somehow predicated on a permanent low-oil-price environment.

These states vary in both their willingness and ability to respond to this new reality effectively. Some are too deeply committed to their existing business model (and its associated leadership system) to consider significant changes; others, increasingly aware of the need to do something, find almost insuperable structural roadblocks in the way; and a third group, recognizing the desperate need for change, is attempting a total economic overhaul of its oil economies. In recent weeks, examples of all three types – Venezuela for the first, Nigeria the second, and Saudi Arabia the third -- have surfaced in the news.

Venezuela: A Nation on the Brink


Venezuela claims the world’s largest proven reserves of petroleum, an estimated 298 billion barrels of oil. In past decades, the exploitation of this vast fossil fuel patrimony has ensured incredible wealth for foreign companies and Venezuelan elites alike. After assuming the presidency in 1999, however, Hugo Chávez sought to channel the bulk of this wealth to Venezuela’s poor and working classes by forcing foreign firms to partner with the state-owned oil firm PdVSA and redirecting that company’s profits to government spending programs. Billions of dollars were funneled into state-directed “missions” to the poor, lifting millions of Venezuelans out of poverty. In 2002, when the company’s long-serving managers rebelled against these moves, Chávez simply replaced them with his own party loyalists and the diversion of funds continued.


In the wake of the ousting of that original management team, the country’s oil production began to decline.  With prices running at or above $100 per barrel, this initially seemed to make little difference as money continued to pour into government coffers and those missions to the poor kept right on going. What Chavez didn’t do, however, was create the national equivalent of a rainy-day fund.  Little of the oil money was channeled into a sovereign wealth fund for more problematic moments, nor was any invested in other kinds of industries that might in time have generated streams of non-fossil-fuel income for the government.


As a result, when prices began to drop in the fall of 2014, Chavez’s presidential successor, Nicolás Maduro, faced a triple calamity: diminished revenues for social services, scant savings to draw upon, and no alternative sources of income. Not surprisingly, as a new impoverishment spread, many former Chavistas lost faith in the regime and, in last December’s parliamentary elections, voted for emboldened opposition candidates.


Today, Venezuela is a nation living under an officially declared “state of emergency,” politically riven, experiencing food riots and other violence, and possibly on the brink of collapse. According to the IMF, the economy contracted by 5.7% in 2015 and is expected to diminish by another 8% this year -- more, that is, than any other country on the planet. Inflation is out of control, unemployment and crime are soaring, and what little money Venezuela had in its rainy-day account has largely been spent. Only China has been willing to lend it money to pay off its debts. If Beijing chooses to hold back when the next payments come due this fall, the country could face default. Opposition leaders in the National Assembly seek to oust Maduro and move ahead with various reforms, but the government is using its control of the courts to block such efforts, and the nation remains in a state of paralysis.


Nigeria: Continuing Disorder


Nigeria possesses the largest oil and natural gas reserves in sub-Saharan Africa. The exploitation of those reserves has long proved immensely profitable for foreign companies like Royal Dutch Shell and Chevron and also for well-connected Nigerian elites.  Very little of this wealth, however, has trickled down to those living in the Niger Delta region in the south of the country where most of the oil and gas is produced. Opposition to the central government in Abuja, the capital, to which the oil income flows, has long been strong in the Delta, leading to periodic outbursts of violence. Successive federal administrations have promised a more equitable allocation of oil revenues, but a promise this has remained.


From 2006 to 2009, Nigeria was wracked by an insurgency spearheaded by the Movement for the Emancipation of the Niger Delta, a militant group seeking to redirect oil revenues to the country’s impoverished southern states.  In 2009, when President Umaru Musa Yar’Adua offered the militants an amnesty and monthly cash payments, the insurgency died down.  His successor, Goodluck Jonathan, a southerner, promised to respect the amnesty and channel more funds to the region.


For a while, high oil prices enabled Jonathan to make good on some of his promises, even as entrenched elites in Abuja continued to pocket a substantial percentage of the country’s petroleum income. When prices began to plummet, however, he was confronted with mounting challenges.  Pervasive corruption turned people against the government, feeding recruits into Boko Haram, the terror movement then growing in the country’s northern reaches; money intended for soldiers in the Nigerian army disappeared into the pockets of military elites, subverting efforts to fight the insurgents. In national elections held a year ago, Muhammadu Buhari, a former general who vowed to crack down on corruption, rescue the economy, and defeat Boko Haram, took the presidency from Jonathan.


Since assuming office, Buhari has demonstrated a grasp of Nigeria’s structural weaknesses, especially its overwhelming dependency on oil monies, along with a determination to overcome them. As promised, he has launched a serious crackdown on the sort of corruption that is a commonplace feature of petro-states, firing officials accused of blatant thievery.  At the same time, he has stepped up military pressure on Boko Haram, for the first time putting a crimp in that group’s brutal activities. Crucially, he has announced plans to diversify the economy, placing more emphasis on agriculture and non-fossil-fuel-related industries, which might, if pursued seriously, help diminish Nigeria’s increasingly disastrous reliance on oil.


In the cold light of day, however, the country still needs those oil revenues for the lion’s share of its income, which means that in the current low-price environment it has ever less money to fight Boko Haram, pay for social services, or pursue alternative investment schemes. In addition, Buhari has been accused of disproportionately targeting southerners in his fight against corruption, sparking not just fresh discontent in the Delta region but the rise of a new militant group -- the Niger Delta Avengers -- that poses a threat to oil production. On May 4th, the Avengers attacked an offshore oil platform operated by Chevron and the Nigerian National Petroleum Corporation, forcing the companies to shut down production of about 90,000 barrels per day. Add that to other insurgent attacks on the country’s oil infrastructure and the Nigerian government is expected to lose $1 billion in May alone.  If repairs are not completed on time, it may lose an equal amount in June.  It remains a nation on edge, in danger of devastating impoverishment, and with few genuine alternatives available.


Saudi Arabia: Seeking a New Vision


With the world’s second largest reserves of oil, Saudi Arabia is also the planet’s leading producer, pumping out a staggering 10.2 million barrels daily. Originally, those massive energy reserves were owned by a consortium of American companies operating under the umbrella of the Arabian-American Oil Company (Aramco). In the 1970s, however, Aramco was nationalized and is now owned by the Saudi state -- which is to say, the Saudi monarchy. Today, it is the world’s most valuable company, worth by some estimates as much as $10 trillion (10 times more than Apple), and so a source of almost unimaginable wealth for the Saudi royal family.


For decades, the country’s leadership pursued a consistent political-economic business plan: sell as much oil as possible and use the proceeds to enrich the numerous princes and princesses of the realm; provide lavish social benefits to the rest of the population, thereby averting popular unrest of the “Arab Spring” variety; finance the ultra-conservative Wahhabi clergy so as to ensure its loyalty to the regime; finance like-minded states in the region; and put aside money for those rainy-day periods of low oil prices.


Saudi leaders have recently come to recognize that this plan is no longer sustainable. In 2016, the Saudi budget has, for the first time in recent memory, moved into deficit territory and the monarchy has had to cut back on both its usual subsidies to and social programs for its people. Unlike the Venezuelans or the Nigerians, the Saudi royals socked away enough money in the country’s sovereign wealth fund to cover deficit spending for at least a couple of years. It is now, however, burning through those funds at a prodigious rate, in part to finance a brutal and futile war in Yemen. At some point, it will have to sharply curtail government spending. Given the youthfulness of the Saudi population -- 70% of its citizens are under 30 -- and its long dependence on government handouts, such moves could, in the view of many analysts, lead to widespread civil unrest.


Historically, Saudi leaders have been slow to initiate change. But recently, the royal family has defied expectations, taking radical steps to prepare the country for a transition to what’s being termed a post-petroleum economy. On April 25th, the powerful Deputy Crown Prince, Mohammed bin Salman, unveiled “Saudi Vision 2030,” a somewhat hazy blueprint for the kingdom’s economic diversification and modernization. Prince Mohammed also indicated that the country will soon begin to offer public shares in Saudi Aramco, with the intention of raising massive funds to invest in and create non-oil-related Saudi industries and revenue streams. On May 7th, the monarchy also abruptly dismissed its long-serving oil minister, Ali al-Naimi, and replaced him with the head of Saudi Aramco, Khalid al-Falih, a figure deemed more subservient to Prince Mohammed. Falih’s job title was also changed to minister of energy, industry, and mineral resources, which was (so the experts speculated) a signal from the monarchy of its determination to move beyond exclusive reliance on oil as a source of income.


This is all so unprecedented that there is no way of predicting whether the Saudi royals are actually capable of bringing anything like Saudi Vision 2030 to fruition, no less moving away in a serious fashion from its reliance on oil. Many obstacles remain, including the possibility that jealous royals will push Prince Mohammed (and his vision) aside when his father, King Salman, now 80, passes from the scene. (There are regular rumors that some members of the royal family resent the meteoric rise of the 31-year-old prince.) Nevertheless, his dramatic statements about the need to diversify the kingdom’s economy do show that even Saudi Arabia -- the petro-state par excellence -- now recognizes that some kind of new identity is now a necessity.

The Stakes for Us All

You may not live in a petro-state, but that doesn’t mean you don’t have a stake in the evolution of this unique political life form. From at least the “oil shock” of 1973, when the Arab OPEC members announced an “oil boycott” against the U.S. for its involvement in the Yom Kippur War, such countries have played an outsized role on the world stage, distorting international relations, and -- in the Greater Middle East -- involving themselves (and their financial resources) in one conflict after another from the Iran-Iraq War of 1980-1988 to the wars in Yemen and Syria today.

Their fervent support for and financing of favored causes -- whether it be Wahhabism and associated jihadist groups (Saudi Arabia), anti-Westernism (Russia), or the survival of the Assad regime in Syria (Iran) -- has provoked widespread disorder and misery. It will hardly be a tragedy if a lack of funds forces such states to pull back from efforts of this sort. But given the centrality of fossil fuels to our world for the last century or more, the chaos that could ensue in the oil heartlands of the planet from low oil prices and high supply is likely to create unpredictable new nightmares of its own.

And the greatest nightmares of all lurk not in any of this but in the inability of these states and those they supply to liberate themselves from reliance on fossil fuels fast enough.  Looking into the future, the demise of petro-states as we’ve known them could have a profound impact on the struggle to avert catastrophic climate change. Although these states are not primarily responsible for the actual combustion of fossil fuels -- that’s something we in the oil-importing countries must take responsibility for -- their pivotal role in fueling the global petroleum economy has made them largely resistant to international efforts to curb emissions of carbon dioxide. As they try to repair their busted business model or collapse under the weight of its failures, we can only hope that the path they follow will entail significantly less dependence on oil exports as well as a determination to speed up the conclusion of the fossil fuel era and so diminish its legacy of climate disaster.

Meanwhile In China, Cow-Collateralized Stock Buybacks

Over the past few years, we have written many strange stories about China's often-ridiculous, perpetually-bubbly, always on the precipice financial system. The story about China's literal "cash cows", however, is by far the strangest.

As everyone knows by now, the primary reason the global equity market, taking its cues from the US, is where it is now is due to a relentless stream of debt-funded stock buybacks. Earlier this year Bloomberg stumbled on the same thing we have written since 2013, namely that "there is only one buyer keeping the bull market alive."

And, as it turns out, even China figured it out. There is only one problem... well two:

  • The first is that to buyback your own stock, a company needs to generate a substantial amount of cash flow which can then be used to directly buyback your own shares (making management/shareholders who use corporate cash flows to make themselves wealthier in the process). Unfortunately most Chinese companies, many of which are stunning case studies in fraud, have a glaring problem when it comes to actual profitability and generating cash flows.
  • The second problem is that unlike in the US, following the recent (and now largely burst) corporate bond bubble, issuing bonds to fund buybacks - and in general lending to risky companies - appears to now be rather frowned upon in China.

So in the absence of these two necessary conditions, how is a Chinese company to boost its stock price by buying back its stock? The answer, as it turns out is cows, and specifically a cow sale-leaseback transaction.

That's precisely what China Huishan Dairy Holdings, which operates the largest number of dairy farms in the country, has done.

According to Bloomberg, the company is selling about a quarter of its herd, about 50,000 animals, to Guangdong Yuexin Finance Lease Co. for 1 billion yuan ($152 million) and then renting them back. The reason: to obtain urgently needed cash (let some other sucker CEO worry about paying the coupon on the lease), so it can repurchase glorious amounts of its stock.

And yes, cows were used as collateral. "It’s not very common to use cows as collateral," said Robin Yuen, an analyst at RHB OSK Securities Hong Kong Ltd. "The value of a cow would fluctuate depending on milk prices and other factors, so it’s a risky asset for lenders. It would be hard to do forced selling - there’s no liquid market for a large number of cows."

Puns intended.

To be sure, there is a politically correct spin on the situation, and that's what the Bloomberg story focuses on. It writes that "with an estimated $1.3 trillion of risky loans in the country, Chinese banks are becoming more cautious about lending, forcing some companies to look for new ways to borrow." As a result finance leasing has been growing in popularity, especially for purchases of equipment. "In Huishan Dairy’s case, the story is an increasingly common one in China of rising debts, slumping commodity prices and the propensity of Chinese executives to use their shares as collateral for private loans."

And then there is the truth: "Huishan Dairy seems to be selling cows and leasing them back in order to raise money now, because they’ve been using cash to buy back shares," said RHB’s Yuen, who has a “sell” rating on the stock. "The chairman wants to prop up the share price for reasons that are unclear. It could be a way to get better terms for share pledged-based loans, which he’s done before."

Usually the reasons why any chairman would want to prop up their share price by engaging in activities that are ruinous in the long-run are simple, and they are really one: to cash out in the fastest possible way.

Only in this case, something is off - of only for the time being - because as Bloomberg adds, the company Chairman Yang Kai has been building up his stake in the company to almost 74 percent, according to the latest disclosure of interests to the stock exchange. Even uodder,Yang pledged shares he owned to Ping An Bank Co. to finance the buybacks, RHB said in a research note on Jan. 28.

Meanwhile, going back to "problem 1" above, the company spent HK$1.93 billion ($249 million) buying back 820.2 million shares in the six months ended September, equivalent to almost twice its cash from operations for the same period. This explains the drastic need to find outside funding.

In retrospect, there is nothing surprising about the structure: just like Hanergy manipulated its shares by hammering the close and inciting massive short squeezes in the process briefly making its CEO the richest man in China, the chairman of Huishan has decided to leverage - literally - his equity exposure to the company, and boost the stock prices in the process, before eventally unloading everything on unsuspecting buyers.

It appears that moments hasn't arrived yet, however judging by the stock price it will, and very soon. The share buybacks helped Huishan Dairy’s share price jump 72% since the beginning of July, even as Hong Kong’s benchmark Hang Seng Index fell 22%.


The fraud becomes even more obvious when observing how the rest of the balance sheet has been transforming over the past year: keeping the stock price buoyant drained cash as milk prices were slumping and the company’s debts were rising. Huishan had 10.4 billion yuan of bank loans at the end of September, with more than half needing to be repaid within a year. The value of short-term bank loans had more than doubled compared to six months earlier.

Here's a guess: the debt won't be repaid and Huishan will join the rapidly rising list of bankrupt Chinese companies, but not before the Chairman manages to either sell his company to the public or to the company's own buyback program.

To be sure, for a while the company's stock price was rising on its own. However, recently whole milk powder prices plunged, with the latest GlobalDairyTrade auction price of $2,252 a metric ton on May 17 down 57 percent from a peak in April 2013.

So the company turned some of its cows into cash, leasing them back through a unit at an annualized interest rate of as much as 6.2 percent, with an option to repurchase the cattle at the end of the five years.

Of course, Huishan was delighted to provide whatever terms the naive lenders wanted, if it meant the buyback circle jerk could continue. One was a "culling covenant" - as dairy cows are typically slaughtered after about five years, when their production declines, the agreement included provisions to cull and replace animals regularly.

"Huishan Dairy’s gearing was more than 60 percent last year, so it’s not a bad idea for the company to get a loan for working capital," said Anson Chan, an analyst at Daiwa Capital Markets, who also recommends investors “sell” the shares. "The interest rate for the finance lease is lower than the company’s current bank loans."

Which makes us wonder who the (shadow) bank is that issue the sale-leaseback loans. They may be a prime shorting candidate.

Sale-leasebacks, once unheard of locally, have become a generic way for "asset-rich" Chinese companies to fund themselves.

The growth of finance leasing in China is partly a reflection of the broadening of the nation’s banking system. Most contracts involve the leaseback of equipment, said Shujin Chen, a banking analyst at DBS Vickers Hong Kong Ltd. They totaled about 4 trillion yuan at the end of last year, with the percentage of equipment purchased by finance leasing at about 7 percent to 8 percent, compared to only 1 percent in 2008, she said. “Finance leases offer tax advantages, asset flexibility and cash flow certainty,” Chen said in an e-mail. In China they account for around 4 percent to 5 percent of bank loans, compared with about 22 percent in 2013 in the U.S., where as Bloomberg sarcastically adds, "cow leasing has fallen out of favor."

Even more odd, this is not the first bovine-collaterlized obligation done in China: the first registered cow lease plan was last July, when CreditEase Leasing took ownership of 200 cattle from Hebei Luan County Junying Pastures, a supplier to Inner Mongolia Yili Industrial Group. Huishan Dairy’s lease-back is 250 times the size. The company’s 190,911 dairy cows, valued at 5.73 billion yuan in September, are spread across 78 farms in Liaoning, a province in northeastern China between Inner Mongolia and North Korea.

Still, others are scratching their heads when confronted with the striking details of the cow sale-leaseback transaction.

"The environment just isn’t right for the practice with low interest rates, balance sheets generally in good shape, plenty of heifers and milk prices are low," said Mark Stephenson, director of Dairy Policy Analysis at the University of Wisconsin, who said it was more common in the 1990s. "Why would anyone want to lease what they could own?"

Especially cows.

"It might take a while for this to turn into a trend," Daiwa’s Chan said. "It won’t be easy at first for banks and other financial institutions to accept this kind of arrangement, because of the risk of holding animals as collateral."

But this is China, where increasingly more insane financial transactions have now become a routine event. And who knows, maybe if Huishan Chairman Yang Kai refuses to sell his overinflated stock, this scheme will catch on. But that begs the question: what's the point to propping up the stock price in an unviable company, and not to sell to the greatest fool? Especially since if there is one thing Chinese capital markets have a lot of, it's the latter.

A Spirit Of Violence And Civil Unrest Is Rising In America

Submitted by Michael Snyder via The Economic Collapse blog,

It was only a matter of time before our deeply divided nation was going to start coming apart at the seams.  Waves of anger, frustration, violence and civil unrest are starting to sweep across the United States, and political rallies for Republican presidential candidate Donald Trump have become a focal point for releasing some of that energy.  The angry mob that threw rocks, bottles and burning T-shirts at police and Donald Trump supporters on Tuesday night wanted to get the attention of the national media, and they got it in droves.  Now that the election is less than five months away, this kind of scene is going to be repeated over and over, and this is something that I warned about back in MarchMillions upon millions of our young people have fully embraced the radical left, and they have already made it exceedingly clear that they are not afraid to use violence to advance their cause.

Never before in my lifetime have I seen America so divided.  Our politicians and the mainstream media have been endlessly pitting various groups against one another for years, and wherever you look hearts are growing very cold.

I have said it before, and I will say it again.  I believe that this is going to be the most chaotic election season that we have ever experienced, and the chaos and violence that are going to be unleashed over the next five months are going to shock the entire world.

On Tuesday night, the angry mob that gathered outside of the Albuquerque Convention Center didn’t seem to care who they hurt as they unleashed their anger.  According to Fox News, some of the protesters even tried to set police horses on fire…

The rampaging gang was made up of anti-Trump goons — waving the Mexican flag and burning a Trump banner.


“Viva Mexico,” protesters shouted, according to the Albuquerque Journal.


The rioters even targeted police horses — knocking one down – and throwing burning T-shirts at others. Who tries to burn down a horse?

How sick and twisted do you have to be to try to set a horse on fire?

But this is what happens when a spirit of violence descends on a group of people.  The consequences can quickly spiral out of control in unexpected ways.

Here is how CNS News described the chaotic scene outside of the Albuquerque Convention Center…

In one of the presidential campaign year’s more grisly spectacles, protesters in New Mexico opposing Donald Trump’s candidacy threw burning T-shirts, plastic bottles and other items at police officers, injuring several, and toppled trash cans and barricades.


Police responded by firing pepper spray and smoke grenades into the crowd outside the Albuquerque Convention Center.

According to at least one report, rocks thrown by some of the rioters were actually flying through the convention center windows, and a number of innocent people got hurt.

What would make people act like that?  This isn’t what America is supposed to look like.  But when fundamental institutions such as the family and the church start to crumble, this is how people start to behave.  You can see a clip that includes footage of protesters jumping on police cars last night in Albuquerque right here

And of course the spirit of violence and civil unrest that is rising in America is not limited to Donald Trump rallies.

In major cities all over the nation, violent crime is rising by double digit percentages.  In Chicago, the number of people that have been shot so far in 2016 is 50 percent higher than during the same period last year

This past weekend in Chicago saw another five killed and 40 wounded in shootings, slightly down from Mother’s day weekend when eight people were killed and 42 wounded. The two weekends are indicative of what’s taking place in the homicide riddled city, in which the number of people shot so far this year is running an astonishing 50% above this time last year – what’s worse, summer is not even here yet, which is traditionally the city’s most violent period.


Other big cities are seeing similar spikes in violent crime.  The following is an excerpt from a recent article in the New York Times

Experts cannot agree on what to call a recent rise in homicides, much less its cause, but new data on Friday that showed a sharp spike in homicide rates in more than 20 cities rekindled debate over whether it was time for alarm.


The data showed particularly significant increases in homicides in six cities in the first three months of the year compared with the same period last year — Chicago, Dallas, Jacksonville, Fla., Las Vegas, Los Angeles and Memphis.

If this is happening now, with the stock market soaring and unemployment a bit lower than it was during the depths of the last recession, what is going to happen when things start getting really bad in this country?

Desperate people do desperate things, and if people are willing to hurl rocks and set horses on fire because they are upset at a political candidate, what are they going to do when there is no food for their families?

Just look at what is happening down in Venezuela.  People are hunting down dogs and cats because they don’t have anything to eat.  There have been at least 107 mass looting events so far in 2016 alone, and crime is completely and utterly out of control.

What is happening down there is eventually coming to America too, and the chaos and violence that we will see during the coming months will be a small preview of that.

The funny thing is that none of these political protests are going to matter anyway.  It remains my contention that the elite will move heaven and earth to do whatever is necessary to keep Donald Trump out of the White House.  They have already spent tens of millions of dollars against him and they have continuously had their media outlets put out “hit pieces” in an attempt to destroy him.

But their bag of tricks goes a lot deeper than that, and this is not a game to them.

I know that a lot of people out there have some very high hopes for Donald Trump, and we should be praying for him and for his family.

However, the time when the people determined the direction of this nation is long past, and the elite guard their monopoly over the political process very zealously.

The SEC's Latest Investigative Tactic: Bar Hopping With Wall Street

The SEC is taking a new approach to uncovering nefarious dealings within the financial markets: bar hopping.

In its new strategy to root out any underhanded dealings, the SEC is making an effort to attend more Wall Street conferences. The overall plan: catch Wall Streeters with their guard down at the bar in hopes that after a few drinks everyone will begin to ramble on about just how much screwing of the general public they are doing. Of course, nobody from the SEC is drinking at these conferences, that's against policy.

Like a skunk at a garden party, the SEC has been moving in on the fun-loving Wall Street conference circuit in hopes of getting a better handle on who’s up to no good in the world of finance. Officials scour attendee lists to spot the biggest players in advance and, properly wearing name tags, schmooze over drinks. Of course, they don’t accept any - that’s a no-no under SEC policy.

The current focus has been on bond conferences, specifically ABS East and ABS Vegas according to Bloomberg. Which is telling, because that's what helped to spark the last financial crisis.

The SEC has focused on bond conferences including ABS East and ABS Vegas, said people with knowledge of the matter who asked not to be named because the regulator’s efforts aren’t public. Held at luxury hotels in Miami as well as Las Vegas, the four-day conferences bring together investors and originators of debt backed by everything from car loans to jewelry.

The SEC also trolls online networks where people go to discuss who will be in attendance at such conferences, sometimes even spoiling all of the bar scene fun and emailing attendees to try and carve out time to chat at the conference.

Most industry gatherings have online networks where participants can communicate with each other and see who plans to attend. The SEC has used those lists to e-mail attendees, asking whether they might be free to chat at the conference, said the people.

As the SEC steps up its "efforts" by flying around to nice conferences and schmoozing over drinks waters, it is also having closed door meetings with investors from companies such as Vanguard Group and BlackRock, trying to get them to feel comfortable sharing information with regulators, particularly when they strike them as inappropriate.

With those covert operations going on at the SEC, the CFTC is taking a stab at the conference scene as well, only it is more open about it. Amusingly, in an apparent attempt at making people take regulators even less seriously than they already do, it hands out whistles and mouse pads with a toll-free number on it from a booth set up right at the conference.

Of course, the concern that more frequent interaction between regulators and Wall Street will lead to relationships that potentially mean overlooking some elements of what is learned in exchange for a job at the higher paying firm down the line, or perhaps even more interesting, lead to a double revolving door as we saw when Buddy Donohue went from the SEC, to Goldman, and back to the SEC.

Where will all of this lead? Well, aside from the aforementioned revolving door issues, based on history even if critical information is learned by these investigative tactics it won't be prosecuted. At best, a scapegoat will be jailed and banks will simply pay a fine and admit no wrongdoing a la Fabrice Tourre and Goldman. There is also the minor issue of the government not willing to even go after big banks at all, as they are simply "too big to prosecute."

Confirming just this was an article from the WSJ overnight which found that even on those rare occasions when the SEC does get its perp, proceedings against individual bank employees are rare, and authorities have had difficulty winning cases

The Wall Street Journal examined 156 criminal and civil cases brought by the Justice Department, Securities and Exchange Commission and Commodity Futures Trading Commission against 10 of the largest Wall Street banks since 2009. In 81% of those cases, individual employees were neither identified nor charged. A total of 47 bank employees were charged in relation to the cases. One was a boardroom-level executive, the Journal’s analysis found.

The analysis shows not only the rarity of proceedings brought against individual bank employees, but also the difficulty authorities have had winning cases they do bring.


Most of the bankers who were charged pleaded guilty to criminal counts or agreed to settle a civil case, with those facing civil charges paying a median penalty of $61,000. Of the 11 people who went to trial or a hearing and had a ruling on their case, six were found not liable or had the case dismissed. That left a total of five bank employees at any level against whom the government won a contested case.

We assume corruption, manifesting itself in the infamous "revolving door" between the SEC and Wall Street is the reason for the SEC's woeful record in prosecuting banker crime.

As for the CFTC, and why crime is rampant in the trading of commodities - and especially oil - the reason is even more absurd. As Reuters wrote last week, the financial regulator charged with overseeing U.S. commodity markets has just one specialist examining oil trades. The reason? It does not have enough money to hire any more, according to U.S. Commodity Futures Trading Commission Chairman Timothy Massad.

We won't even bother to ask how much time that lone, solitary CFTC oil regulator spend at bars with oil traders.

This Is How Much Your Health Insurance Payment Is About To Jump By

It's official: years of warnings that Obamacare will lead to dramatic increases in healthcare premiums are about to be validated.

As the WSJ writes, big health plans stung by losses in the first few years of the U.S. health law’s implementation are seeking hefty premium increases for individual plans sold through insurance exchanges in more than a dozen states.

To be sure, we have extensively covered the imminent danger of rising healthcare prices as a result of Obamacare's intrusive intervention in the insurance sector; however now that this is about to become mainstream information, we expect consumers to hunker down and save even more in anticipation of what is about to be a shock price increase for millions of middle-class American families.

As the WSJ reports, the insurers’ proposed rates for individual coverage in states that have made their 2017 requests public largely bear out health plans’ grim predictions about their challenges under the health-care overhaul. According to the insurers’ filings with regulators, large plans in states including New York, Pennsylvania and Georgia are seeking to raise rates by 20% or more.

In states such as Florida and Maryland, insurers are seeking to raise premiums by percentage averages that are markedly above 10%. Among those that have published so far, only in Vermont do big insurers’ requests fall below 10%.  Proposals still have to be approved by state regulators, and a full picture of final approved rates across the entire country likely won’t be known until shortly before and state equivalents reopen for the law’s fourth main enrollment window on Nov. 1.

Nonetheless, the proposed average increases that are available are a vivid indicator this year of how insurers are adapting to the 2010 Affordable Care Act’s transformation of the way health coverage is priced and sold in the U.S.

So for all those currently enrolled in healthcare plans administered in the following states, this is how much, on average, your plans will go up by.


The silver lining? Since this effective tax goes straight to "boosting US GDP", we look forward to a year of "above trendling" GDP growth thanks to this forced reallocation of consumers' disposable income into the infamous "healthcare" category.

It's Official: Trump Has Enough Delegates To Win The Republican Nomination

The presumptive Republican presidential candidates is now the official Republican presidential candidate.


Moments ago, AP calculated that Donald Trump on Thursday reached the number of delegates needed to clinch the Republican nomination for president, completing an unlikely rise that has upended the political landscape and sets the stage for a bitter fall campaign.

Trump was put over the top in the Associated Press delegate count by a small number of the party's unbound delegates who told the AP they would support him at the convention. Among them is Oklahoma GOP chairwoman Pam Pollard.

 "I think he has touched a part of our electorate that doesn't like where our country is," Pollard said. "I have no problem supporting Mr. Trump."

It takes 1,237 delegates to win the Republican nomination for president. Trump has reached 1,238. With 303 delegates at stake in five state primaries on June 7, Trump will easily pad his total, avoiding a contested convention in Cleveland in July.

As AP adds, "millions of grassroots activists, many who have been outsiders to the political process, have embraced Trump as a plain-speaking populist who is not afraid to offend."

Steve House, chairman of the Colorado Republican Party and an unbound delegate who confirmed his support of Trump to AP, said he likes the billionaire's background as a businessman. "Leadership is leadership," House said. "If he can surround himself with the political talent, I think he will be fine."

Others were less enthusiastic in their support of Trump. Some said they are supporting him out of a sense of obligation because he won their state's primary.

Cameron Linton of Pittsburgh said he will back Trump on the first ballot since he won the presidential primary vote in Linton's congressional district. "If there's a second ballot I won't vote for Donald Trump," Linton said. "He's ridiculous. There's no other way to say it."

An interesting side note from the wire service:

Trump's path to the Republican presidential nomination began with an escalator ride. Trump and his wife, Melania, descended an escalator into the basement lobby of the Trump Tower on June 16, 2015, for an announcement many observers said would never come: The celebrity real estate developer, who had flirted with running for office in the past, would announce that he was launching his campaign for the GOP presidential nomination.


That speech set the tone for the candidate's ability to dominate the headlines with provocative statements, insults and hyperbole. He called Mexicans "rapists," promised to build a wall between the U.S. and Mexico and ban Muslims from the U.S. for an indeterminate time.


He put down women based on their looks. And he unleashed an uncanny marketing ability in which he deduced his critics' weak points and distilled those to nicknames that stuck. "Little Marco" Rubio, "Weak" Jeb Bush and "Lyin' Ted" Cruz, among others, all were forced into primarily reacting to Trump. They fell one-by-one — leaving Trump sole survivor of a riotous Republican primary.


His rallies became must-see events and magnets for free publicity. Onstage, he dispensed populism that drew thousands of supporters, many wearing his trademark "Make America Great Again" hat and chanting, "Build the wall!"


The events drew protests too— with demonstrators sometimes being forcibly ejected from the proceedings. One rally in Chicago was cancelled after thousands of demonstrators surrounded the venue and the Secret Service could no longer vouch for the candidate's safety.

When voting started, Trump was not so fast out of the gate.


He lost the Iowa caucuses in February, falling behind Cruz and barely edging Rubio for second. He recovered in New Hampshire. From there he and Cruz fiercely engaged, with Trump winning some and losing some but one way or another dominating the rest of the primary season — in votes or at least in attention — and ultimately in delegates.


All the while, Republican leaders declared themselves appalled by Trump's rise. Conservatives called the onetime Democrat a fraud. But they failed, ultimately, to block him. Republican leaders slowly, warily, began meeting with Trump and his staff. And he began winning endorsements from a few members of Congress.


As with other aspects of his campaign, Trump upended the traditional role of money in the race.

He also upended virtually every norm and tradition about the presidential race. The outcome: he is now the official Republican candidate.

Caption Contest: Spot The Odd G-7 Leader Out

The G-7 "committee to think and talk about saving the world but which will actually end up doing nothing at all" meet in Sendai this weekend. Can you spot the odd one out?


While Merkel chose not to wave... or smile; it is Jean-Claude Juncker that appears to be having trouble with his salute...


And then this.

Peak Idiocracy? Students Demand End To Midterms, Abolish Grades 'C' Or Below

Students on liberal arts college campuses may have just jumped the shark for special-snowflakedness. As The Week reports, students at Oberlin College are asking the school to put academics on the back burner so they can better turn their attention to activism.

More than 1,300 students at the Midwestern liberal arts college have now signed a petition asking that the college get rid of any grade below a C for the semester, and some students are requesting alternatives to the standard written midterm examination, such as a conversation with a professor in lieu of an essay.


The students say that between their activism work and their heavy course load, finding success within the usual grading parameters is increasingly difficult. "A lot of us worked alongside community members in Cleveland who were protesting," Megan Bautista, a co-liaison in Oberlin's student government, said, referring to the protests surrounding the shooting death of 12-year-old Tamir Rice by a police officer in 2014. "But we needed to organize on campus as well — it wasn't sustainable to keep driving 40 minutes away. A lot of us started suffering academically."


The student activists' request doesn't come without precedence: In the 1970s, Oberlin adjusted its grading to accommodate student activists protesting the Vietnam War and the Kent State shootings, The New Yorker reports. But current students contend that same luxury was not granted to them even though the recent Rice protests were over a police shooting that took place just 30 miles east of campus.


"You know, we're paying for a service. We're paying for our attendance here. We need to be able to get what we need in a way that we can actually consume it," student Zakiya Acey told The New Yorker. "Because I'm dealing with having been arrested on campus, or having to deal with the things that my family are going through because of larger systems — having to deal with all of that, I can't produce the work that they want me to do. But I understand the material, and I can give it to you in different ways."


Read the full story on the ongoing battle at Oberlin over at The New Yorker.

As The Burning Platform's Jim Quinn so eloquently put it...

These morons are too funny. Idiocracy in all its glory. It ain’t a movie anymore. It’s the real thing on college campuses across the U.S.

In conclusion, as we noted previously, there are no safe space and no matter where you go in life, someone will be there to offend you.

 Maybe it’s a joke you overheard on vacation, a spat at the office, or a difference of opinion with someone in line at the grocery store. Inevitably, someone will offend you and your values. If you cannot handle that without losing control of your emotions and reverting back to your “safe space” away from the harmful words of others, then you’re best to just stay put at home. Remember, though: if people in the outside world scare you, people on the internet will downright terrify you. It’s probably best to just accept these harsh realities of life and go out into the world prepared to confront them wherever they may be waiting.

Chart Of The Day: May Registrations For The Libertarian Party Jump 20-Fold

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

People are going to be pissed off no matter who wins this election and that is a very important social dynamic I believe is vastly under appreciated by the majority of mainstream pundits and analysts out there.  This is also very distinct from the environment that prevailed in 2008.  Four years ago, the financial markets were crashing and the economic future of America was circling the toilet bowl, yet a majority of Americans embraced the potential of a young, inexperienced biracial politician from Illinois who was saying all of the right things.  Despite the gigantic disappointment he has proven to be as President, there is no denying that he had all of the Democrats and most Independents under his spell on this day four years ago.


Fast forward to 2012 and the county isn’t “divided” as mainstream media talking heads like to say.  The country is pissed off.  Genuine and legitimate frustration permeates the land from sea to shining sea and rightly so.  Ever since the banker coup of 2008, crony capitalism has been institutionalized as the only real way to make money.  If you aren’t connected or “too big to fail,” sorry but America isn’t the place for you.  What makes the economic nightmare so much worse is that it is being coupled with a complete and total decimation of civil liberties.  One by one the Bill of Rights is being ignored and indeed trampled on systemically by the political and economic oligarchs emboldened by their successful takeover of the executive, legislative and for the most part judicial branches of government.


– From the 2012 post: The Seventy Percent

The following data points are simple incredible.

From The Hill:

The Libertarian Party has seen a sustained surge of new members joining, with first-time registrants in May on pace to increase 20-fold over the same period from last year. New data obtained by The Hill shows that the Libertarian National Committee averaged around 100 new members a month last year, bottoming out with just 74 first-time registrants last May.


But beginning in early 2016, as the contours of the Republican and Democratic races began took shape, new membership began creeping upward to 148 in January, 323 in February, 546 in March, 706 in April, and now 1,292 in the first three weeks of May alone.

From 74 registrants to 1,292 in a year. While the absolute numbers remain small, that’s an extraordinary increase. Here’s what it looks like in chart form:

For the last year the Libertarian Party would get about 100 new members a month. Then, starting in January...

— Jonathan Easley (@JonEasley) May 25, 2016



The Libertarian National Committee has also seen a spike in fundraising, bringing in $205,000 in April, its largest monthly haul since 2004.


A party operative told The Hill they are on pace to double that figure in May, estimating a $400,000 haul.


Those figures come against a backdrop of polls that find the two likely major party candidates, Donald Trump and Hillary Clinton, suffer from historically low approval ratings.


The Libertarian Party will hold its nominating convention this weekend in Orlando.


Gary Johnson, the former two-term Republican governor of New Mexico, is favored to win. He was also the party’s standard bearer in 2012, when he won about 1.3 million votes – a party record.


Several recent polls found Johnson taking 10 percent in a three-way match-up against Trump and Clinton. 

I voted for Gary Johnson in 2012, and I’m probably going to vote for him again in 2016. And don’t tell me that I’m “throwing my vote away.” Throwing my vote away would be checking a box next to a name I don’t believe in and have very little agreement with just to stop the other person. I have too much self-respect to play that game. More importantly, how has the lesser of two evils worked out for America over the past several decades?

Of course, it’s not just people with libertarian sensibilities who appear finally fed up with politics as usually. Liberal-leaning supporters of Bernie Sanders feel the same way (see Bernie or Bust), and many have pledged to vote for Green Party candidate Jill Stein instead of Hillary Clinton.

She could recently be found making a whole lot of sense in an interview with The Hill:

Stein, who was the Green Party nominee in 2012 and is the near-certain standard-bearer this time as well, told The Hill that the likelihood of Trump and Clinton being the major-party nominees “creates a very propitious situation for the American people to actually have some choices.”


She insisted that the majority of people backing Clinton, the Democratic presidential front-runner, are doing so in order to keep Trump, the presumptive GOP nominee, out, rather than out of any real love for the former secretary of State and her policies.


“How about we allow the public to view the legitimate alternative to that?”


Asked what she would say to a voter who was sympathetic to Green Party policies but feared gifting the White House to Trump, Stein replied: “The first thing I would say is that Trump was created by the politics of the Clintons. Putting the Clintons in power will only fan the flames. Hillary is not a solution to Trump; the Clintons are the cause of Trump.”


She added, “The second thing I would say is, ‘Don’t be talked out of your own power.’… We need a policy of courage, not cowardice. We need to bring that courage into the voting booth. To adopt a position of cowardice in the voting booth is to surrender to a predatory political system on all fronts.”


“You have got to fix the rigged political system,” she said. “If you only have choices that are funded by the big banks, fossil fuels and the war profiteers, that’s what you’re going to get.”

For some of my thoughts on Gary Johnson and the 2012 election generally, see the following posts published four years ago:

My Thoughts on the Election: The Devil You Know

The Seventy Percent

Meet Gary Johnson: The Libertarian for President Polling at 7% in Colorado

Who is Gary Johnson and Why is the GOP So Mad at Him?