ZeroHedge RSS Feed

The Last Straw? Venezuela Runs Out Of Fake Breasts

Venezuelan women are revolting complaining. While the citizens of the socialist utopia can withstand shortages of food, toilet paper, and now even news paper, in a nation thought to have one of the world's highest plastic surgery rates, AP reports beauty-obsessed Venezuelans face a scarcity of brand-name breast implants, and women are so desperate that they and their doctors are turning to devices that are the wrong size or made in China, with less rigorous quality standards. No one is giving the frustrated women much sympathy, especially not the government where late President Hugo Chavez called the country's plastic surgery fixation "monstrous," and railed against the practice of giving implants to girls on their 15th birthdays. However, many have taken to Twitter under the hashtag "Without Boobs, There's No Paradise."

As AP reports,

Venezuelans once had easy access to implants approved by the U.S. Food and Drug Administration. But doctors say they are now all-but impossible to find because restrictive currency controls have deprived local businesses of the cash to import foreign goods. It may not be the gravest shortfall facing the socialist South American country, but surgeons say the issue cuts to the psyche of the image-conscious Venezuelan woman.


"The women are complaining," said Ramon Zapata, president of the Society of Plastic Surgeons. "Venezuelan women are very concerned with their self-esteem."


Venezuela is thought to have one of the world's highest plastic surgery rates, and the breast implant is the seminal procedure. Doctors performed 85,000 implants here last year, according to the International Society of Aesthetic Plastic Surgery. Only the U.S., Brazil, Mexico and Germany — all with significantly larger populations — saw more procedures.

However, no one is giving the frustrated women much sympathy, especially not the government.

The consumerism of plastic surgery has always jibed awkwardly with the rhetoric of socialist revolution. The late President Hugo Chavez called the country's plastic surgery fixation "monstrous," and railed against the practice of giving implants to girls on their 15th birthdays.


On social media, some Venezuelans take a judgmental tone, saying the panic over implants shows the real shortage here is values. Others joke that the scarcity will force Venezuelan women to start developing their personalities, using a Twitter hashtag that riffs on the Colombian telenovela "Sin Tetas, No Hay Paraiso" ("Without Boobs, There's No Paradise").

So - Venezuelan women are going global...

In the absence of U.S. brands, plastic surgery has become an area dominated by Venezuela's chief trading partner, China, whose goods are often given priority for import over those from other countries. They're also a lot cheaper. While a pair of implants approved by European regulators can cost as much as $600 — about the same as the annual minimum wage here — the Chinese equivalent goes for a third of that. Some Venezuelan doctors refuse to use the Chinese devices, which are not subjected to random government inspections or clinical studies.



"I'm not saying they're not safe, but I've removed more than a few ruptured Chinese implants. I just don't feel comfortable with them," Slobodianik said.

We leave it to 46 year old Lisette Arroyo to sum up Venezuela's socialist utopia...

"This country is not what it used to be," she said earlier this month as awaited surgery in a blue paper gown.

No indeed it's not.

*  *  *

Frankly we think it's "fair" that Venezuelan women should have the right to fake boobs...

and $15 an hour minimum wage...

Ron Paul Asks "Will The Swiss Vote To Get Their Gold Back?"

Submitted by Ron Paul via The Ron Paul Institute For Peace & Prosperity,

On November 30th, voters in Switzerland will head to the polls to vote in a referendum on gold. On the ballot is a measure to prohibit the Swiss National Bank (SNB) from further gold sales, to repatriate Swiss-owned gold to Switzerland, and to mandate that gold make up at least 20 percent of the SNB's assets. Arising from popular sentiment similar to movements in the United States, Germany, and the Netherlands, this referendum is an attempt to bring more oversight and accountability to the SNB, Switzerland's central bank.
The Swiss referendum is driven by an undercurrent of dissatisfaction with the conduct not only of Swiss monetary policy, but also of Swiss banking policy. Switzerland may be a small nation, but it is a nation proud of its independence and its history of standing up to tyranny. The famous legend of William Tell embodies the essence of the Swiss national character. But no tyrannical regime in history has bullied Switzerland as much as the United States government has in recent years.
The Swiss tradition of bank secrecy is legendary. The reality, however, is that Swiss bank secrecy is dead. Countries such as the United States have been unwilling to keep government spending in check, but they are running out of ways to fund that spending. Further taxation of their populations is politically difficult, massive issuance of government debt has saturated bond markets, and so the easy target is smaller countries such as Switzerland which have gained the reputation of being “tax havens.” Remember that tax haven is just a term for a country that allows people to keep more of their own money than the US or EU does, and doesn't attempt to plunder either its citizens or its foreign account-holders. But the past several years have seen a concerted attempt by the US and EU to crack down on these smaller countries, using their enormous financial clout to compel them to hand over account details so that they can extract more tax revenue.
The US has used its court system to extort money from Switzerland, fining the US subsidiaries of Swiss banks for allegedly sheltering US taxpayers and allowing them to keep their accounts and earnings hidden from US tax authorities. EU countries such as Germany have even gone so far as to purchase account information stolen from Swiss banks by unscrupulous bank employees. And with the recent implementation of the Foreign Account Tax Compliance Act (FATCA), Swiss banks will now be forced to divulge to the IRS all the information they have about customers liable to pay US taxes.
On the monetary policy front, the SNB sold about 60 percent of Switzerland's gold reserves during the 2000s. The SNB has also in recent years established a currency peg, with 1.2 Swiss francs equal to one euro. The peg's effects have already manifested themselves in the form of a growing real estate bubble, as housing prices have risen dangerously. Given the action by the European Central Bank (ECB) to engage in further quantitative easing, the SNB's continuance of this dangerous and foolhardy policy means that it will continue tying its monetary policy to that of the EU and be forced to import more inflation into Switzerland. 
Just like the US and the EU, Switzerland at the federal level is ruled by a group of elites who are more concerned with their own status, well-being, and international reputation than with the good of the country. The gold referendum, if it is successful, will be a slap in the face to those elites. The Swiss people appreciate the work their forefathers put into building up large gold reserves, a respected currency, and a strong, independent banking system. They do not want to see centuries of struggle squandered by a central bank. The results of the November referendum may be a bellwether, indicating just how strong popular movements can be in establishing central bank accountability and returning gold to a monetary role.

Newsflash To Fed: 122 Billion Bottles Of Beer On The Wall Is About Asset Bubbles, Not Jobs

Submitted by David Stockman via Contra Corner blog,

While Janet Yellen and her band of money printers work themselves into a tizzy over whether two buzz words - “considerable time” -  should be dropped from their post-meeting word cloud, they might be better advised to just read the newspapers. This morning’s WSJ brings word that the lending boom which our monetary central planners are eager to stimulate is apparently off-to-the-races.

Well, sort of. The item in question is a $122 billion globally syndicated loan to facilitate an M&A deal between the world’s two largest beer companies—AB InBev with a 20% global market share and SABMiller with 10%.  Needless to say, the only possible reason for creating a monstrosity with $60 billion in sales spread among scores of highly differentiated regional and national beer markets is the “synergy” euphemism—-that is, the “savings” from thousands of job terminations especially in those two paragons of job growth known as North America and Europe.

So the purpose is self-evidently the opposite of the Fed’s intent—whether the sweeping job cuts which Wall Street will peddle to justify the deal actually happen or not. In any event, the deal has virtually nothing to do with real market economics.

Both companies are already giant M&A roll-ups representing a string of mergers that have been going on for two decades, including the $52 billion InBev purchase of Anheuser-Busch six years ago. But you don’t have to be an expert in the beer industry to realize that these rollups were mainly the product of cheap debt and financialization, not free market economics. Recall that the beer industry ran out of true economies of scale 30 years ago when world class breweries reached their maximum efficient size in terms of production and distribution.

What has been happening in the business since then is nearly the opposite—that is, the rise of diseconomies of scale in marketing and branding. The latter is surely attested to by the explosion of specialty premium brands and micro-breweries.

Stated differently, in the absence of drastic financial repression by the world’s central banks there would be no case whatsoever for the globe-spanning beer merger now at hand. The latter will only create more dis-economies of scale as all the pieces and parts from two decades of financially driven M&A create another artificial, discombobulated enterprise which is too big to manage and wrong-sized for the nature of the market which it serves.

But since cheap debt always trumps expensive labor, Wall Street’s M&A machinery will create another giant malinvestment. And having once again shot themselves in the foot, our monetary central planners will bray that the labor market is still too weak and that it must therefore keep rates lower for longer.

Just maybe, however, the Fed’s new financial stability monitoring group might note something suspicious about this mega-debt deal percolating up through the deal machinery. Namely, that both companies are already vastly over-valued momentum plays that can be explained only by the fact that the financial markets have been turned into gambling casinos based on zero cost carry trades, the availability to speculators of sub-economic downside insurance protection and the triumph of “buy-the-dips” one-way trade.

Specifically, the TEV (total enterprise value of debt plus market equity) of the two beer giants combined is currently around $340 billion, yet in the most recently reported LTM period InBev generated just $19 billion of free cash flow (EBITDA less CapEx) and SABMiller under $6 billion. In sum, their combined number for that crucial valuation metric is just $25 billion, meaning that they are trading at 14X free cash flow.

Folks, these two momo plays are in the suds business, not social media! The overwhelming share of their cash flow is generated in Europe and North America were volume has been flat for two decades, as shown below. Even on a global basis, industry growth over the last 17 years has averaged only 2% per annum; and most of that is attributable to China where competition is plentiful, prices cheap, profits scare and the government is increasingly unfriendly to foreign companies.

So what we have here is a giant overvaluation bubble in the suds business. Yet the result of current central bank policy is just more of the same. In fact, at the rumored $122 billion, the loan now brewing would amount to 6.5X free cash flow. In a no-growth business in a world where interest rates must eventually normalize–that is sheer lunacy. But it well explains why our monetary politburo is so reluctant to let interest rates normalize and is so deathly afraid of a Wall Street hissy fit.

None of this would happen in a world with honest interest rates and stable two-way capital markets for the simple reason that the financing could not be raised; boards and CEOs would have no momentum driven stock market inducing them to engage in patently irrational mergers; and, in any event, short sellers would swiftly punish serial roll-up machines that destroy rather than create sustainable economic value.

So here is a news flash for the Fed’s financial stability monitoring committee. The combined beer companies today have about $60 billion of net debt. The merger deal in question would thus double the new company’s debt in order to destroy several thousand breadwinner jobs.  You think that might suggest that there are some bubbles out there after all?





Happy Birthday Lehman Bankruptcy: Silver +71%, Gold +61%, S&P +58%

Three charts... "The West is done, it's over! We screwed it all up. Do you want your great-grandchildren speaking Chinese?"


Market Performance (from the close before Lehman BK) - Silver +71%, Gold +61%, S&P +58%


Federal Reserve Balance Sheet - Plus $3.5 Trillion


And The Recovery? From 62% of the nation employed to less than 59%...



Bonus Movie: forward to 7:30 - "The West is done, it's over! We screwed it all up. Do you want your great-grandchildren speaking Chinese?"

Why China's Latest Mini-Stimulus Failed Again, In One Chart

It was over a year ago, when we wrote about "The True Chinese Credit Bubble" and we showed the following chart which succinctly explains everything that happens in China's economy:

... by "everything" we mean the now traditional feedback mechanism of "boosting growth", which starts with a monetary easing impulse i.e., a credit shock, which boosts GDP by up to 1% annualized, and then promptly fades to subtract from growth in quarters 2 and onward since the credit injection, and then when the response goes from euphoric to depressed, it forces the PBOC and the SOEs to inject even more credit to offset not only the initial weakness but the subsequent stimulus response, and so on.

Which is why we warned a few months ago that the joy from the latest "mini-stimulus" that took place in China would be very short-lived. Over the weekend, we were again proven right when virtually every metric of China's economy missed expectations. Which in turn unleashed the usual suspects who one after another, have once again had to admit that contrary to prevailing mass delusions, such a thing as an escape velocity stimulus event as far as China's economy is concerned, simply does not exist.

And, as a result, we get blurbs such as this one from Evergreen GaveKal who now, after the fact, are Monday-morning quarterbacking as follows:

"So Much For China's Mini-Stimulus"

So much for the ‘mini-stimulus’. The data on China’s economic performance in August released over the weekend were dismal, showing a significant and unexpected decline in growth. The boost from the government’s suite of supportive policies was always going to be temporary, but renewed weakness is appearing much sooner than expected. We had previously thought that policy could keep growth stable for a couple of quarters (see Fears For China’s Growth Postponed), but it only really worked for two months (May and June). So it looks as if the government has already lost its bet that it could keep GDP growth near its 7.5% target with only minimal intervention. With China transitioning out of its high investment phase, growth is on a downward trajectory. To alter that trajectory would require large scale monetary easing, but the government does not yet look inclined to support such a big shift in strategy. All of which points to more of the same: modest policy support and weaker growth.

The August numbers were dire: growth of industrial value-added slumped to 6.9% year-on-year, from 9% in July, to give the lowest reading since 2009. Official statisticians blamed a high base effect for the slowdown, since growth was 10.4% last August. But their explanation is hardly convincing, as growth on a sequential basis was also extremely weak. Meanwhile fixed asset investment growth declined to 14% in August from 16% in July, as the private sector remained cautious and the pickup in spending by state-owned enterprises ended. The brightest spot was the external sector, where export growth accelerated and the trade surplus hit record highs in both July and August. There is also good news from the labor market: new urban jobs have increased by 9.7mn in the first eight months of the year, almost achieving the full year target of 10mn.

Why did domestic growth slow so sharply after a decent second quarter? Fundamentally, China’s growth is slowing because private sector investment sentiment is weak: fixed asset investment by non-state companies has been steadily decelerating since 2010. In part this reflects a necessary adjustment of companies’ growth expectations—no one expects GDP of 10% growth anymore—but there is also much uncertainty about how the transition away from the investment-driven model will play out. The government has used state sector investment to smooth this slowdown, and the latest boost led to a slight rebound in the second quarter. But the support from state investment did not last, as monetary policy did not get looser, and fiscal spending was forced to slow to stay within budget guidelines.

So the weak growth ultimately derives from a failure to sustain the pickup in credit growth that began in May and June. Our estimate of total credit growth slowed to 15% year-on-year in August, after reaching 17% in June, as loan growth was only modest and shadow financing has collapsed. Both bankers’ acceptances and trust loans declined outright in July and August—a simultaneous sustained decline that has never happened before. The People’s Bank of China has traditionally been more hawkish than the rest of the government, and its support for ‘selective easing’ was half-hearted at most (see The Risks Of Selective Easing). While it did inject more liquidity into the traditional banking system, it also rolled out new regulations on interbank borrowing that contained the growth of shadow finance. At the same time, banks are getting much more cautious about lending, given the increase in their own bad loans, the poor state of corporate balance sheets, the deteriorating property market and falling commodity prices. It is likely the crackdown on fraud in trade finance in Qingdao has also made banks more risk-averse. Given all this, banks are unwilling to accelerate lending without very strong support from the central bank—support which so far has not been on offer.

So will policymakers change their mind and deliver a bigger easing in monetary policy to arrest the slowdown in growth? China’s GDP growth has been on a mostly downward trajectory since 2007, and short term growth is greatly dependent on credit. So policymakers are facing a tough choice: accept higher debt in order to get higher short term GDP growth—which brings longer term risks—or accept slower growth in the near term. The signals have been extremely inconsistent this year, but at the World Economic Forum last week, Premier Li Keqiang said the government is comfortable with growth “a bit lower” than its target. At the time Li was clearly aware of the weak August data, yet he said the government would not engage in major monetary stimulus. The central bank also still seems unwilling to loosen monetary policy as it is worried about China’s rising debt. Therefore we believe that the government will just continue with its ‘selective easing’ policies, and will not take more radical measures such as an interest rate cut, or at least not in the near term. With the help of net exports GDP growth in 2014 can stay slightly above 7%. Nevertheless, it will miss the government’s 7.5% target.

* * *

At least GaveKal is correct in observing that a massive stimulus here will do nothing to boost the long-term trendline higher. Which is much more than we can say about most other sellside penguins, for whom the failure of the latest mini-stimulus is simply the catalyst China needs to launch... a maxi-stimulus.

Or, as Einstein would call it, insanity.

High Beta And Yield Celebrate Lehman 6 Year Anniversary By Plunging

It appears today's weakness in stocks (most notably high-beta momo) and bonds (HY credit weakness) was triggered by two "ma"s - grandma Yellen and grand-poohbah BABA's Ma. Hawkish FOMC concerns took the shine off HY credit (and stocks) but Treasury bonds rallied modestly (5Y -3bps, 10Y -2bps). However, high-beta momo stocks dragged Nasdaq and Russell lower as 'smart money' proclaimed this was making room for the Alibaba IPO (which raises the question - if there is so much pent-up demand money on the sidelines just dying to be lost in the stock market, then why were so many high-beta, high-growth, momo names being sold today, theoretically in order to make room for the BABA IPO?) The USDollar ended marginally higher (GBP weakness, EUR strength) but most commodities gained on the day (Copper down on China) with WTI back to $93. Stocks did have a mini-melt-up on absolutely no news whatsoever into the last hour but gave most back. The Russell 2000 is -0.5% in 2014.

A look at the futures market reaction to the good news (Empire Fed) and bad news (Industrial Production) shows neither had any impact on stocks.

High-beta stocks led the Nasdaq and Russell lower on the day (and Dow 'safety' higher)...right from the US open... The Energy sector was the leader on the day (as oil rose) and Chevron added 12 points to The Dow alone...

As is clear here...


Notably The Russell 2000 once again broke its major technical support and bounced (50-, 100-, and 200-DMA)

And "Most Shorted" was weak but squeezed late on...NOTE - the buying panic that occurred around 1400ET...

HY Credit broke early - squeezed with everything else - then reverted wider again...


VIX also decoupled into the close - after being abused for the ramp...

FX markets were relatively calm - modest weakness in GBP (after 38.2% retracement bounce of Scottish poll weakness) and EUR strength


AUDJPY seemed in some control over stocks - but correlations to JPY carry are breaking down in general...

Treasury yields fell on the day (short-end outperformed) after weak industrial production data

Commodities rose despite small gains in the dollar, WTI over $93 and Gold $1235, Copper slipped further after China weakness

Charts: Bloomberg

Bizarre Japanese "Respect Old People Day" Holiday Is Sign of The Times

Submitted by Simon Black via Sovereign Man blog,

Today is a rather peculiar public holiday in Japan: “Respect Old People Day”.

And judging by the official demographics, an increasing proportion of the population should be revered today.

One in eight Japanese is aged 75 or older. People over 65 will reach 33 million, the largest ever, roughly 25.9% of the population.

The thing about demographic trends is that they’re like a huge oil tanker - once they’re on their course it’s very hard to steer them around in another direction.

These are monumental, generational changes that are very hard and slow to reverse.

By today’s trend, Japan’s population will dwindle from 127 million today to around 100 million by 2050. It’s the worst possible demographic nightmare.

People stopped having as many babies decades ago. It was too damned expensive.

Then the big collapse came in the late 80s, and the economy has been dragging it heels ever since.

When prosperity is low, people consequently delay having children. They have fewer children. Or they don’t have them at all.

This has enormous long-term implications for the country and its fundamentals. Fewer people of working age means fewer jobs, less productivity, less consumption and less government tax revenue.

On the other hand, a bulging group of older people means more spending for medical care and pensions.

In the recently proposed budget for fiscal year 2015, the Japanese government earmarked 31.7 trillion yen for social security, welfare and health spending.

This is the largest item in the budget, consuming 31.2% of all planned government spending.

And it’s only getting larger.

It doesn’t help that Japan is essentially already bankrupt.

The second largest item in Japanese government’s budget is interest.

While social security, welfare and health spending has increased by 3% from the current budget, debt servicing is up by 11% and now amounts to 25.8 trillion yen, or an incredible 25% of Japan’s budget.

So just between pensions and interest, they’re spending 57.5 trillion yen. Last year they only collected 50 trillion in tax revenue.

So before they spend a single yen on anything else in government… anything at all… they’re already 7 trillion yen (about $70 billion) in the hole. They have to borrow the rest.

Bear in mind, this is coming at a time when interest rates for 10-year Japanese bonds are 0.5%, and even closer to zero on shorter notes.

If interest rates rise to just 1%, which is historically still very low, Japan will spend almost all of its tax revenue just to service the debt!

You can’t make this stuff up. It’s a screaming indicator that this system can’t possibly last.

Europe, the US and Japan, three of the biggest economies in the world, are all on a similar inevitable trend—they’re in debt up to their eyeballs, with absolutely no arithmetic possibility of ever getting out of the hole unscathed.

Japan is just worst of them all.

And history is so full of examples of what governments do when countries get into this position: as reality beckons, they become even more careless and destructive.

The question of when will it happen is irrelevant. What difference does it make if Japan collapses tomorrow or two years from now?

This is not a credible and sustainable system that is worth tying up all your livelihood and life savings with.

Nobody is going to send you an advanced notice that the banks will remain closed tomorrow and all deposits will be frozen.

That’s why we always say to buckle up and put your seatbelt on ahead of time.

Just like William Shakespeare said in The Merry Wives of Windsor: “Better three hours too soon, than a minute too late.”

20% Chance Of Ebola In USA By October; 277,124 Global Cases By Year-End, Model Predicts

"There's nothing to be optimistic about," warns the professor who developed the Global Epidemic and Mobility Model to assess outbreaks, "if the number of cases increases and we are not able to start taming the epidemic, then it will be too late. And then it requires an effort that will be impossible to bring on the ground." As FredHutch reports, the deadly Ebola epidemic raging across West Africa will likely get far worse before it gets better, more than doubling the number of known cases by the end of this month, predicting as many as 10,000 cases of Ebola virus disease could be detected by Sept. 24 – and thousands more after that. “The cat’s already out of the box – way, way out," as the analysis of global mobility and epidemic patterns shows a rougly 25% chance of Ebola detection in the UK by the end of September and 18% it will turn up in the USA. "I hope to be wrong, he concludes, but "the data points are still aligned with the worst-case scenario."


Via FredHutch,

The next three weeks will be crucial to determining whether the Ebola outbreak is tamed or rages out of control, the experts agreed.




WHO officials have predicted as many as 20,000 cases of Ebola and laid out a “road map” for the outbreak response that calls for stopping the outbreak within six to nine months. But that’s only if a “massive” global response is implemented.


The scenario modeled in the new paper suggests that the actual number of cases could far exceed the WHO estimate – and far sooner. Vespignani said he and his colleagues are calibrating the model every couple of weeks to see whether there’s any change. So far, the answer is no.


“The data points are still aligned with the worst-case scenario,” Vespignani said. “It’s a bad feeling. I hope to be wrong.”


That’s a sentiment echoed by Longini, who said that he and other disease modelers are dismayed by what they see.


“There’s nothing to be optimistic about,” he said. “It’s frustrating. It feels like there should be a more concentrated international effort to help these countries.”

The latest counts Monday from the Centers for Disease Control and Prevention, which include WHO and Ministry of Health reports, put the total at 4,061 cases and 2,107 deaths.

The deadly Ebola epidemic raging across West Africa will likely get far worse before it gets better, more than doubling the number of known cases by the end of this month.


That’s the word from disease modelers at Northeastern University and the Fred Hutchinson Cancer Research Center, who predict as many as 10,000 cases of Ebola virus disease could be detected by Sept. 24 – and thousands more after that.


“The epidemic just continues to spread without any end in sight,” said Dr. Ira Longini, a biostatistician at the the University of Florida and an affiliated member of Fred Hutch’s Vaccine and Infectious Disease and Public Health Sciences divisions. “The cat’s already out of the box – way, way out.”


It’s only a matter of time, they add, before the virus could start spreading to other places, including previously unaffected countries in Africa and developed nations like the United Kingdom -- and the U.S., according to a paper published Sept. 2 in the journal PLOS Currents Outbreaks.


There’s a roughly 25 percent chance Ebola will be detected in the United Kingdom– and as much as an 18 percent chance it will turn up in the U.S. – by the end of September, the analysis of global mobility and epidemic patterns shows. The new paper includes the top 16 countries where Ebola is most likely to spread.


Though concerning, a spread to Western nations is not the biggest threat. At most, there would be a cluster of a few cases imported to the U.S., probably through air travel.




“We are at a crucial point,” Vespiginani said. “If the number of cases increases and we are not able to start taming the epidemic, then it will be too late. And then it requires an effort that will be impossible to bring on the ground.”

*  *  *
As we noted previously, this is anything but "contained"

*  *  *

As another epidemiolgist (and federal advisor) - Dr. Michael T. Osterholm of the University of Minnesotta - warns:

I’ve spent enough time around public health people, in the US and in the field, to understand that they prefer to express themselves conservatively. So when they indulge in apocalyptic language, it is unusual, and notable.


When one of the most senior disease detectives in the US begins talking about “plague,” knowing how emotive that word can be, and another suggests calling out the military, it is time to start paying attention.

There are two possible future chapters to this story that should keep us up at night.

The first possibility is that the Ebola virus spreads from West Africa to megacities in other regions of the developing world. This outbreak is very different from the 19 that have occurred in Africa over the past 40 years. It is much easier to control Ebola infections in isolated villages. But there has been a 300 percent increase in Africa’s population over the last four decades, much of it in large city slums…


The second possibility is one that virologists are loath to discuss openly but are definitely considering in private: that an Ebola virus could mutate to become transmissible through the air… viruses like Ebola are notoriously sloppy in replicating, meaning the virus entering one person may be genetically different from the virus entering the next. The current Ebola virus’s hyper-evolution is unprecedented; there has been more human-to-human transmission in the past four months than most likely occurred in the last 500 to 1,000 years. Each new infection represents trillions of throws of the genetic dice.

And finally, as Wired reports, the professor extrapolates:

In a worst-case hypothetical scenario, should the outbreak continue with recent trends, the case burden could gain an additional 77,181 to 277,124 cases by the end of 2014.

Stocks Go Vertical, Just Because

Sometimes you just have to laugh... S&P green, check; catch up with AUDJPY, check; squeeze "most shorted", check... It appears the algos got the 330RAMP timing a little off. FX markets - no change; TSY markets - very small reaction, credit reacted but roundtripped.


Up - just because...


With the S&P going vertical


to catch up to AUDJPY


As Shorts are squeezed



And credit gives up its blip gains


Charts: Bloomberg

JPM Previews Rising Rates: "In The Short Term, Investors Sell What They Can"

Over the weekend, JPM addressed the question of whether "asset price inflation, produced by 7 years of zero interest rates, has to morph into asset price deflation when the Fed starts hiking rates." It further adds: "We have for years argued that the driving force pushing up all asset prices has been falling uncertainty in the presence of no return on cash. Does this logic then not imply that the coming end of easy money must turn asset price inflation into price deflation, or a generalized bear market?" Unlike Goldman, which is so terrified of the rate hike it takes every opportunity to assure its few remaining flow clients that the only thing more bullish of ZIRP are rising rates, JPM covers every base: "the answer is Yes, No, and Depends."

Here is the breakdown:

On the No side, we see improved US growth (a 3% pace instead of the 2% of the first five years of the recovery), no real pick up in inflation and only a relatively slow pace of tightening by historic standards -- 250bp over the first 18 months. This is not 1994 when the Fed did 300bp in less than one year. In addition, the Fed will likely only be joined by the BoE in hiking while the ECB and BoJ look set to remain in easing mode. This means that global liquidity will likely remain plenty and that the resulting dollar appreciation can substitute for higher rates in tightening monetary policy.

All of this, of course, assumes it doesn't snow in 2015, or 2016, or 2017, etc. It also assumes that the "improved growth", which right now is tracking at the lowest annualized GDP for 2014 since Lehman, doesn't flip on the back of Europe's triple-dip, or China's suddenly crashing economy, which over the weekend posted the weakest metrics since Lehman. So yeah, two of the three biggest economies in the world grinding to a halt, while Japan just posted an nightmarish -7.1% GDP print. What can possibly go wrong for the US "improved growth" thesis?

Which brings us to...

On the Yes side, raising the return on cash creates an alternative to other assets. In addition, raising rates after seven years of zero-return-on-cash increases uncertainty, as we all assume that some asset classes and investors could have become overly dependent on easy money. The evidence we have on past tightening cycles, reviewed last week, cannot be directly extrapolated to this one as the Fed has never held rates at zero or for such a long time. On average, there were only 15 months between the last cut and the first hike since the 1960s, with the longest lasting 37 months (early 1960s). This week shows that investors intuitively pull back from all assets into cash when pricing in earlier rate hikes.

Or, to summarize, since the Fed's central planning has never lasted longer, JPM has no clue what will happen. Moving on...

On the Depends side, we mentioned last week that higher growth as a reason for higher rates is much less disturbing to markets than higher inflation. In addition, there remains the open question of whether the market can organize an orderly transfer of OTC risk assets, primarily credit, in the absence of easy-to-expand bank balance sheets, when shorter-term oriented investors try to exit. The hope of many is that yield-oriented insurers and pension funds will effortlessly scoop up any better-yielding bonds discarded by retail and hedge funds. The risk is, though, that the former will take their time when they see the falling knife of falling bond prices and will only enter at rock-bottom prices.

Which brings us to JPM's conclusion: "we anticipate that the start of US rate hikes will do damage to markets in the short term" although only early on, because obviously that's when the PPT will kick in, or as JPM puts it "there will be greater differentiation over a more medium term between liquid and less liquid assets."

That's the good cop. 

Here is bad cop again: "In the short term, investors sell what they can, making liquid assets more vulnerable."

And since no bank can end on a dour tone, here, to conclude, is good cop: "But over a matter of months, we think liquid risk assets, such as equities, will fare better than less liquid credit, adjusted for their normal volatility."

Translated: JPM will be selling "more liquid" stocks to "investors", while buying less liquidity debt. After all, remember: the Fed's definition of "high quality collateral" is, debt. Not equity.

And it is precisely debt that all the banks are desperately trying to load up on as they sell every last stock in their possession to what little is left of the retail investor as possible.

Gazprom Says Kiev Should Blame Warsaw For Gas Supply Cut

Submitted by Andy Tully via,

No one disputes that the amount of Russian gas being piped through Ukraine has been cut by at least 20 percent. But who’s responsible?

Poland said Sept. 10 that the amount of gas coming from the Kremlin-run gas monopoly Gazprom was down by at least one-fifth, feeding a growing suspicion in much of Europe that Moscow is using energy as leverage in its continuing dispute with the West over its actions in Ukraine.

Poland’s state-controlled gas company PGNiG says gas deliveries from Gazprom through Ukraine and neighboring Belarus were down by 20 percent on Sept. 8 and by 24 percent on Sept. 9. It says it’s investigating the shortfall.

Meanwhile, Ukrtranzgaz, Ukraine’s pipeline monopoly, said Gazprom was reducing shipments to Poland to prevent “reverse flows” of gas, where Warsaw diverts 4 million cubic meters of gas daily headed for Western Europe southward to serve Ukrainian homes and businesses.

Uktransgaz CEO Igor Prokopiv said Russia is trying to “derail” this reverse-flow agreement. Ukraine is getting no gas directly from Russia in a dispute over outstanding debt for previous gas deliveries.

Gazprom says its flow of gas hasn’t changed and that if there is a reduction, it’s Poland’s fault, not Russia’s.

“Reports by news agencies on the reduction of volumes of gas supplies by Gazprom to Poland’s PGNiG are incorrect,” Gazprom spokesman Sergey Kupriyanov said, according to RT, quoting Itar-Tass. “The same volume of gas as in previous days – 23 million cubic meters a day – is being supplied to Poland now.”

No matter who is responsible for the reduction in the flow of gas, the consequences of the dispute go far beyond Poland and Ukraine. EU nations get one-third of their gas supplies from Russia, and half of that amount flows through Ukraine. Similar disputes led to interruptions in the supply of gas to Europe twice before, in 2006 and 2009.

Nevertheless, there was no evidence that the current shortage was affecting any Western European customers. Slovakia, a major transit point for Russia gas exports to Europe, said volumes had not changed, and operators in Hungary, Bosnia and Serbia said the same.

And in Austria, a spokesman for the energy company OMV told Reuters, “The supply situation in Austria is normal. Deliveries from our Russian partner come within the range of normal fluctuations.”

Petrodollar Panic: EU Officials Admit Buying Oil From ISIS

We recently explained how ISIS remains so well funded but what was unclear was who exactly what purchasing their 'recently-provisioned' oil reserves? The assumption being some desperate third-world nation or some scheming offshore hedge-fund arbitrageur; however, as reports, a senior European Union official has revealed that some EU member states have purchased oil from ISIL Takfiri militants despite their rhetoric against the group. The official declined to disclose any names but Turkey remains a front-runner (having already shunned President Obama) and potentially France (after their recent anti-Petrodollar comments).


As The Daily Signal's Kelsey Harkness ( @kelseyjharkness ) notes,

According to the Iraq Energy Institute, an independent, nonprofit policy organization focused on Iraq’s energy sector, the army of radical Islamists controls production of 30,000 barrels of oil a day in Iraq and 50,000 barrels in Syria.


And now we know who is buying... (as reports)

A senior European Union official has revealed that some EU member states have purchased oil from ISIL Takfiri militants despite their rhetoric against the group.


In a briefing to the European Parliament Foreign Affairs Committee, EU Ambassador to Iraq Jana Hybas-kova said some European countries have purchased crude from the ISIL.


She, however, refused to disclose any names despite pressure by some Parliament members to do so.


The EU official also warned against any support by the West for separatist Kurdish groups who, she said, would destabilize the Middle East.


Earlier reports accused Turkey of buying and transporting oil from both the ISIL and Qaeda-linked Nusra Front. According to the reports, Western intelligence agencies could track ISIL oil shipments as they moved across Iraq and Turkey.


ISIL reportedly controls eleven oil fields in northern Iraq as well as Syria's Raqqa province.


US intelligence officials estimate that the Takfiri militants earn more than USD 3 million a day from oil profit, theft, human trafficking and ransom. They say the militants sell oil and other products via established networks in Turkey, Jordan and Iraq's Kurdistan region. ?Turkey has denied reports of involvement in ISIL's oil smuggling operations.

*  *  *
How long before US places sanctions directly on these European nations (instead of implicitly through Russia)?

Global Fragmentation: Crying Wolf Again?

There is a specter haunting the op-ed pages. It is not the specter of creeping socialism that many observers worried about as the Great Financial Crisis broke.  It is the end of globalization.

This has been a recurring theme that has its present roots in the immediate post-9/11 world.  Some argued that the increased security risks raise the cost of international trade.

A decade later the doomsayers were still at it.  In January 2011, the Financial Times asked five leading thinkers/policy makers to weigh-in on whether that year would see the "once-unstoppable force of economic, financial and cultural globalisation begins to reverse.  On September 4, the FT's Stephens pushed the argument further.  He takes the up the charge that the sanctions against Russia undermine the "open international system."  Stephens argues that globalization has been unraveling since the onset of the financial crisis.  He attributes it to America's "steady retreat from global engagement."


This is a derivative of the hegemonic stability crisis.  One school of thought in political science and international relations argues that capitalism works best when there is one country sufficient strong and willing to devise and enforce the rules of the game.  "Without a champion," writes Stephens, "globalization cannot but fall into disrepair."

Stephens frets about what he calls the "Balkanisation" of the internet and the fragmentation of the global trading system bemoaning the collapse of the Doha Round.  He records the BRICS launch of their own financial institutions.  However, he does recognize that both China and India are unwilling to step into the void created by a withdrawing US, which Stephens argues no longer sees its national interest in "upholding an order that redistributes power to its rivals." He  concludes that the new powers (BRICS) show little enthusiasm for multi-lateralism.

In a weekend interview with Financial Times Gillian Tett, the IMF's Lagarde shares more nuanced observations.  She is concerned about the tension between the economic system, which she judges to be increasingly integrated, and the political system that she judges to be increasingly fragmented.  She is sensitive to the "backlash against the way that globalization is hurting some people."    Unlike Stephens, who concludes that  "the world is marching away from globalization, Lagarde is less conclusive, “It is not clear which of these trends [for economic integration or political fragmentation] will win. I am worried. Very worried." 

While Lagarde sees continued economic integration, Stephens plays up the opposite.  It is true that merchandise trade is not growing much faster than world GDP, and direct investment flows are well off the 2012 peak.  McKinsey studies point to only a slow recovery in cross border capital flows after the collapse in 2008-2009.


On one hand, it is not clear how much this is a structural break and how much is cyclical in nature.  Some observers offer to square the circle by making it part of the Summers' revived-Hansen thesis of secular stagnation. A prolonged period of slow growth with test the commitment to multilateralism and globalization.  Others eschew the secular part of the thesis and meld it with a decade of loss growth associated with the financial crisis.

On the other hand, previously many argued that the global imbalances (essentially the US current account deficit and China's surplus) was a major threat to the world, and to globalization, as it spurred protectionism.  Both these external imbalances have been sharply reduced.  But the price of the reduction makes it look like less globalization.    The US is a bit less dependent on foreign energy, and the shift in the global division of labor and cost structure has seen some manufacturing move back onshore.    For its part, China seems less dependent on exports (at least until recently) and more reliant on domestic investment (which in practice has also meant debt-financed). 

This is to say that part of what appears to be a retreat from globalization has been the reduction of imbalances and a consequence of cyclical forces, which may or may not be projected into the future.  Slower growth after a financial crisis would not be surprising given the historical record.  At the same time, to the extent that growth is a function of labor force growth and productivity, the prospects also do not look particularly favorable.  Many countries, not just high income countries, but many developing economies in parts of Asia, including China, and eastern and central Europe, like Russia, also have  deteriorating demographics.  

The first wave of globalization ended with the World Wars.  By some measures, it took most of the last half of the 20th century to recoup the level of integration achieved on the eve of WW1.  It is possible that the post-WWII globalization is over, but it does appear to be a done deal.  The financial crisis disrupted capital and trade flows.  The reduction of the US and China imbalances also give the appearance of a reduction in globalization.  High levels of unemployment and domestic social stress may also fan nationalistic tendencies.

Kissinger warned in his  2002 book "Does America Need a Foreign Policy?" (which he of course answers in the affirmative) of a crisis of the Westphalia Treaty.  This 1648 agreement provided the broad framework of the sovereignty of the nation-state.  What Kissinger had in mind was the rise of multinational states, like Russia, China and the US. However, now, with Scotland about to vote on its 300-year union with England and Catalonia pushing for its own referendum some fear a more generalized crisis of the nation-state.  It is possible that an independent Scotland is not able to maintain its territorial integrity.  Many see an independent Scotland bolstering the independent movements in Spain (not just Catalonia, but also the Basque Country), and adding to the centrifugal forces in Belgium.

Throughout Europe, the anti-integrationist forces find expressed.  The UKIP has enjoyed some electoral success and appears to be enjoying some favorable momentum.  In Germany, the AfD, which wants Germany to pullout of EMU, has won representation in three state government elections over the past two months.  Le Pen is on the march in France.  In Sweden's election yesterday, the anti-immigration Democrats garnered 13% of the vote.  It Italy, the 5-Star movement tapped into similar sentiment.


What is striking is that the main assault on globalization and integration are taking place from the political right, not the left.   Fukuyama's 2012 Foreign Affairs essay,  "The Future of History,"  notes that there was not surge of populism from the political left in response to bank bailouts, the  increased disparity of wealth and income.  The Occupied Movement was the closest, but it has been overshadowed by the populist right response in both the US and Europe.

He explains this: "There are several reasons for this lack of left-wing mobilization, but chief among them is a failure in the realm of ideas. For the past generation, the ideological high ground on economic issues has been held by a libertarian right. The left has not been able to make a plausible case for an agenda other than a return to an unaffordable form of old-fashioned social democracy."

Simply put, Fukuyama argues that it has been several decades since the left articulated a coherent analysis and promoted a politically realistic program of protecting and expanding middle class society.   At the same time, it is not clear that the anti-immigration, anti-integrationist populist right has a compelling vision either.  Yet its ability to say "no" and propose a narrative that blames the Other, is potent.

This implies that the liberal world order may be durable and flexible than the naysayers suggest.   Nowhere has the populist right come to power.  The force facilitating global integration, like multinational companies and NGOs have not been weakened by the crisis.  The IMF has been revised by the financial crisis and Lagarde's leadership.  Efforts to promote greater coordination of the regulation of financial institutions have been enhanced.  While there are some notable exceptions, there has not been wholesale protectionism, nor beggar-thy-neighbor type of policies that materialized before and after the Great Depression.

At nearly any point over the last half century, many could and did issue similar warnings about the coming breakdown of the post-WWII order.  In 1971, the economist Raymond Vernon published "Sovereignty at Bay," which told how multinational companies were challenging the legitimacy and power of the nation-state.  These arguments have many faces:  the limits on sovereignty, the demise of the United States, the decline of the role of the dollar, the rise of the rest, G-zero, the return of sphere of influence, etc, etc.    When Russia acquired nuclear weapons, when the US lost the war in Vietnam War, when Nixon resigned, the prevalence of voluntary export restrictions (VERs) and orderly market agreements (OMAs) in the 1980s, the rise of China and its push for the internationalization of the RMB all were cited as heralding the end of the post-WWII order. 


The globalization at the end of the nineteenth century ended because of nationalism and militarism.  It is possible that this wave of globalization ends by the same forces.  But it seems that it is too early to deliver its eulogy.  There is still another chapter (at least) to be written.   Globalization has always been a work in progress.  Let's not confuse its ebb and flow, and transformation, with certainty over its demise. 

Why Worry? The Two Scariest Charts In The World

Submitted by Erico Matia Tavares via Sinclar & Co,

There are plenty of things to worry about these days. A cursory look through today’s (13 Sep 14) sets the tone: the Pope says WWIII is underway; a senior Democrat accuses the Republicans of endangering civilization; drones are invading the privacy of citizens; militias are blocking traffic in the Mexican border; Feds run a US$589 billion budget deficit; the UK might fall apart; the Ebola epidemic is getting serious in Africa; a mystery virus spreads to NY and CT (and we could not resist adding this one: Hillary Clinton is doing yoga).

With all of this in our minds it is easy to forget, or at least put in proper context, the extraordinary progress that mankind has achieved over the centuries against remarkable odds. World population has steadily increased, proving Malthus wrong. Serious diseases like polio and smallpox, which affected even monarchs and presidents over the centuries, have been eradicated. We can crisscross the planet in less than 24 hours and put satellites in deep space. The baby boomers and their offspring are the most prosperous generations the world has ever seen.

This shows that with enough intelligence, political will, common sense and perseverance most challenges we face as a species can be overcome. This should provide a decent amount of hope that we can tackle whatever we are facing right now.

So why worry?

Well, what will happen if we start losing those qualities and values as a global society? Which is why we believe that the following graphs are the scariest in the world today:



Source: MailOnline, University of Hartford.




Source: SIPRI.

(a) Based on NATO expenditures (in 2011 constant US$), the longest data series publicly available.

The average world citizen is getting dumber while our means of doing harm are increasing. This trend is clearly not our friend.

Consider the following.

Countries around the world today spend over US$1.7 trillion on weaponry - more than the total global investment in energy supply. Beyond the manufacturers and suppliers downstream, this produces zero economic benefits (weapons become obsolete very quickly and do not generate any returns; on the contrary as, well, they blow stuff up) and the associated costs add to already bloated government debt levels. And that’s US$1.7 trillion less available each year to improve world education, food and fuel availability, the environment and shifting global demographics, all critical issues of the 21st century.

Also concerning is the fact that control over these weapons can be quickly lost, creating the prospect of blowbacks, never ending conflicts and major tragedies.

Prior to 1991, the Soviet Union had more than 27,000 nuclear warheads and plenty of weapons-grade uranium and plutonium to triple that number. While there have been no confirmed reports of missing or stolen former-Soviet nuclear weapons (astonishing given all the political and economic turmoil since then), there is ample evidence of a significant black market in nuclear materials. How long before someone in that rapidly expanding pool of idiots gets a hold of some is anybody’s guess.

Note: accidents can happen as well, adding to the unease of handling this type of firepower. For instance, in 1961, a B-52 carrying two nuclear bombs broke up in mid-air, dropping its nuclear payload very close to Goldsboro in North Carolina. Five of the six fuses designed to prevent a detonation failed in one of the bombs, with only the last one averting a nuclear explosion. That was an unbelievable close call.

And now turmoil is spreading across the Middle East yet again. With all the conflict going on, anyone showing up and volunteering to fight for one of the sides will be given free food and weapons, courtesy of the associated regional and international powers. Will those weapons stay there, concerning as that might already be for local populations, or will they be used elsewhere, even if the conflict is contained or resolved? As we all know fundamentalists – probably the most idiotic of the bunch – are ready to do anything.

Humanity cannot risk its future falling into the hands of increasingly lethal buffoons. The stakes are just too high now. Hopefully our leaders are paying attention, but this should concern us all. Let’s try to be smart about it – while the smart is still going.

A Heatmap Of Global CapEx In An Ex-CapEx World

Back in 2012 we accurately predicted that in the Brave New Normal World, where zero cost debt-issuance is used to immediately fund stock buybacks instead of being reinvested in growth and expansion, in the process boosting management pay through equity-performance linked option payout structures, that with every passing year CapEx spending would decline first in relative then in absolute terms, even as free cash flow use of funds is spent on other "here-and-now" shareholder-friendly activities such as buybacks and dividends would grow exponentially (which also explains the unprecedented emergence of shareholder "activists" who demand that in an Ex-CapEx world they get paid right here, right now).

That much has been proven and now, year after year, strategists keep telling us that the long overdue CapEx spending boom is just around the corner (as is the so-called recovery), because as of this moment in the all important industrial and construction segments, CapEx is running a whopping 30% below trend...

... and yet, the "boom" never comes.

And here is why it never will, because while waiting for CapEx is reminiscent of waiting for the proverbial Godot, nowhere is it more evident that CapEx is not coming back, in any terms, than in the following chart from Goldman showing both historical and forecast CapEx, created on a bottoms-up basis and showing that global CapEx will decline sequentially both next year and the year after that.


And yet companies which have no choice but to continue their existence, even if they are forced to pay out all incremental cash to their loud-mouthed shareholders simply because there really is no global economic growth which can soak up the incremental growth spending, they still spend money on (mostly) maintenance and (to a tiny extent) growth capital spending.

So for those curious where this spending ends up (because everyone knows where dividends and buybacks go), here is a global heatmap of all capex spending broken down by region and segment:

Record Highs? 47% Of Nasdaq Stocks In Bear Market, Down 24% On Average

With the S&P 500 hitting fresh record highs day after day (apart from last week), everything must be great, right? Wrong! As we have noted previously, the leadership in this market is becoming more and more narrowly focused as stunningly 47% of Nasdaq Composite stocks are down at least 20% from their highs with the average stock in the index in a bear market (down 24%). The same is true for the Russell 2000, with over 40% of stocks in bear market and an average drop from recent highs of 22%. By contrast only 31 names in the S&P 500 have seen drops of 20% or more this year. It appears, just as there has been an up-in-quality rotation in credit markets, so stock investors appear to have rotated into momentum winners, chasing returns in an ever-more narrow group of extreme beta stocks.



Source: Bloomberg

Key Events In The Coming Week: Fed Votes, Scotland Votes, And More

US Industrial Production and the NY Fed Empire State Manufacturing survey are the two main releases for the US. In Europe, the euro area trade balance will be the notable print. Beyond today, US PPI, German ZEW and UK CPI are the main economic reports tomorrow. Wednesday will see the release of BOE’s meeting minutes, the US CPI, and the Euro area inflation report. On Thursday, President Obama will host Poroshenko and on the data front we have Philly Fed, initial claims, and building permits to watch out for, but the biggest market moving event will surely be the Scottish independence referendum. German PPI will be the key release on what will otherwise be a relatively quiet Friday.

And a detailed breakdown from Goldman:

In DMs, highlights of next week include US FOMC, Philly Fed, CPI and IP; MP Decisions in Norway and Switzerland; Australia, Sweden, and UK Minutes.

  • [Monday] US IP (expect 0.10%, below consensus).
  • [Tuesday] UK CPI, Australia Minutes.
  • [Wednesday] US FOMC (expect no change in forward guidance, retain language on "considerable time", mildly hawkish shift in SEP) and CPI (expect flat), Euro area CPI (final in line with flash at 0.3%), Sweden and UK Minutes.
  • [Thursday] US Philly Fed (expect 24.0 vs. consensus 23.4), MP Decisions in Norway and Switzerland (expect no change from either).
  • [Friday] Results from Scottish referendum for independence.

In EMs, highlights of next week include MP Decisions in Thailand, Malaysia, South Africa, and Nigeria; Mexico and Poland Minutes.

  • [Monday] CPI in Israel and Poland.
  • [Tuesday] Israel GDP, Poland CPI.
  • [Wednesday] Thailand MP Decision (expect rates on hold), CPI in Malaysia and South Africa.
  • [Thursday] MP Decision in Malaysia (expect rates on hold) and South Africa (expect rates on hold), Poland Minutes, Ukraine IP.
  • [Friday] Mexico Minutes; Nigeria MP Decision.

Monday, September 15

Events: Speech by Germany’s Finance Minister Schaeuble.

  • United States | [MAP 2] Industrial Production MoM (Aug): GS 0.10%, consensus 0.30%, previous 0.40%
  • United States | [MAP 2] Empire Manufacturing (Sep): Consensus 16, previous 14.69
  • United States | Capacity Utilization (Aug): GS 79.20%, consensus 79.30%, previous 79.20%
  • Israel | CPI YoY (Aug): GS 0.40%, consensus 0.20% (0.10% MoM), previous 0.30% (0.10% MoM)
  • Poland | CPI YoY (Aug): GS -0.30%, consensus -0.30% (-0.40% MoM), previous -0.20% (-0.20% MoM)
  • Colombia | [MAP 4] Industrial Production YoY (Jul): GS 0.00%, consensus 2.20%, previous -0.60%
  • Peru | [MAP 5] Economic Activity YoY (Jul): GS 2.50%, previous 0.30%
  • Also interesting: [DM] US Empire Manufacturing; Canada Existing Homes Sales; Euro area Trade Balance; Norway Trade Balance; United Kingdom Rightmove House Prices Singapore Unemployment and Retail Sales [EM] India Trade Balance and Wholesale Prices; Philippines Overseas Remittances; CA in Czech Republic and Poland; Unemployment in Turkey and Peru; Colombia Retail Sales.

Tuesday, September 16

[Number of MAP releases = 0; Average MAP relevance = 0.0]

  • Events: Speeches by BOJ’s Kuroda, ECB’s Liikanen, Bank of Canada’s Poloz, RBA’s Kent and Australia’s Treasurer Hockey, UN General Assembly.
  • United Kingdom | CPI Core YoY (Aug): Previous 1.8%
  • Australia | Minutes from MP Decision: We expect the minutes to continue to signal that the RBA remains firmly on the sidelines, balancing the significant degree of spare capacity in the labour force against the longer run risks to financial stability from rising house prices.
  • Israel | GDP Annualized (2Q P): Previous 1.70%
  • Nigeria | CPI YoY (Aug): GS 8.40%, consensus 8.50%, previous 8.30%
  • Poland | CPI Core YoY (Aug): GS 0.50%, consensus 0.40% (-0.10% MoM), previous 0.40% (0.00% MoM)
  • Also interesting: [DM] US PPI and Total Net TIC Flows; Euro area ZEW Survey Expectations; Spain Labour Costs; United Kingdom ONS House Price; Australia Roy Morgan Consumer Sentiment [EM] Poland Employment and Wages.

Wednesday, September 17

Events: Speeches by Fed’s Yellen and ECB’s Mersch.

  • United States | MP Decision: We expect no change in the forward guidance, and we expect the Fed to retain language pertaining to the “considerable time” and “significant underutilization” of labor market resources. We expect the content of the Summary of Economic Projections (SEP) to show a mildly hawkish shift. As noted in the US weekly (link), we expect the "considerable time" forward guidance to stay in the September statement. Removing the language at this time would be a substantial hawkish surprise, in our view. "Significant underutilization" of labor market resources will also likely remain in the statement, despite some discomfort with this phrase apparent in the July minutes. The pace of asset purchases will be tapered by a further $10bn per month to $15bn. We expect the content of the Summary of Economic Projections (SEP)—released coincident with the FOMC statement—to show a mildly hawkish shift. Core inflation projections for 2014 may move up slightly, while unemployment projections move down. The median 2015 "dot" may shift up a hair to 1.25%. We expect the 2017 fed funds rate median—which will be released for the first time in the September SEP—to stand at 3.5%, still slightly below participants' longer-run consensus of 3.75%. The SEP may include a clarification regarding how the dots should be interpreted in light of the Committee's desire to maintain a target range for the fed funds rate in the future.
  • United States | CPI MoM (Aug): GS 0.00%, consensus 0.00% (1.90% YoY), previous 0.10% (2.00% YoY)
  • United States | Current Account Balance (2Q): Consensus -$114.0B, previous -$111.2B
  • Euro area | CPI Core YoY (Aug F): GS 0.30%, consensus 0.90% (0.10% MoM), previous 0.90% (-0.70% MoM)
  • Sweden | Minutes from MP Decision
  • United Kingdom | Minutes from MP Decision
  • Malaysia | CPI YoY (Aug): Consensus 3.2%, previous 3.2%
  • Thailand | MP Decision: We expect rates on hold (Benchmark Interest Rate at 2.00%, in line with consensus) as the incremental information available on economic activity since the last meeting has been positive. At the last BOT meeting on the sixth of August the monetary policy committee voted unanimously to keep rates on hold, and we expect this to remain the case for the rest of the year.
  • Poland | [MAP 3] Sold Industrial Output YoY (Aug): Consensus 0.30% (-5.80% MoM), previous 2.30% (2.00% MoM)
  • South Africa | CPI YoY (Aug): GS 6.40%, consensus 6.20% (0.30% MoM), previous 6.30% (0.80% MoM)
  • Also interesting: [DM] US MBA Mortgage Applications and NAHB Housing Market Index; Euro area Construction Output; Trade Balance in Italy and Spain; United Kingdom Unemployment; Australia Westpac Leading Index; New Zealand Balance of Payments; Singapore Exports [EM] Russia Unemployment; Retail Sales in Russia and South Africa.

Thursday, September 18

Events: Speeches by BOJ’s Kuroda, FDIC Chairman Gruenberg and Vice Chairman Hoenig, RBA Bulletin, ECB Announces TLTRO Allotment, Scotland Referendum on Independence (results announced Friday, September 19).

  • United States | [MAP 4] Philadelphia Fed Business Outlook (Sep): GS 24.0, consensus 23.4, previous 28
  • United States | Housing Starts MoM (Aug): GS -5.00%, consensus -4.90%, previous 15.70%
  • Norway | MP Decision: We expect rates on hold (at 1.50%) and for the Norges Bank to revise up its policy rate path by 30-50bp.
  • Sweden | GDP QoQ (2Q F): Previous 0.20% (1.90% YoY wda)
  • Switzerland | MP Decision: We expect rates on hold (SNB 3-Month Libor Target Rate at 0.00%) and for the SNB to reconfirm its minimum exchange rate target against the Euro.
  • Japan | Trade Balance (Aug): GS -¥1063.0B, consensus - ¥1027.5B, previous (r) -¥962.1B
  • New Zealand | GDP SA QoQ (2Q): GS 0.6% (3.8% YoY), consensus 0.6% (3.8% YoY), previous 1.0% (3.8% YoY)
  • Malaysia | MP Decision: We expect rates on hold (Overnight Policy Rate at 3.25%, in line with consensus), pausing before a further 25bp rate hike in November. Since the last meeting in July, inflation has continued to moderate, and at 3.2% YoY remains at the low end of BNM’s forecast range of 3%-4% for 2014.
  • Poland | Minutes from MP Decision
  • South Africa | MP Decision: We expect rates on hold (repo rate at 5.75%, in line with consensus). This is primarily based on our expectation for August inflation (on Wednesday, September 17) and the recent rates/FX market dynamics. This contrasts with our view of what would be required to address the current risk of stagflation. Hence, we expect the SARB to be more cautious but to continue to stress that it would not hesitate to hike if inflation or inflation expectations were threatened.
  • Ukraine | Industrial Production MoM (Aug): Consensus (-18.00% YoY), previous -2.20% (-12.10% YoY)
  • Colombia | [MAP 5] GDP YoY (2Q): GS 4.60%, consensus 4.70% (0.80% QoQ), previous 6.40% (2.30% QoQ)
  • Also interesting: [DM] US Initial Jobless and Continuing Claims and Building Permits; Euro area Construction; Italy CA; Switzerland Trade Balance; United Kingdom Retail Sales and CBI Trends Total Orders; Japan Machine Tool Orders (Aug F); Australia New Zealand CA [EM] Hong Kong Unemployment and Composite Interest Rate.

Friday, September 19

Events: ECB Announces 3-Year LTRO Repayment.

  • Nigeria | MP Decision
  • Brazil | IBGE Inflation IPCA-15 MoM (Sep): GS 0.35% (6.58% YoY), previous 0.14% (6.49% YoY)
  • Mexico | Aggregate Supply and Demand (2Q): Previous 2.40%
  • Mexico | Minutes from MP Decision: We expect the minutes to preserve a neutral rate bias going forward but to contain slightly more hawkish language on the balance of risks for both domestic growth and short-term inflation.
  • Also interesting: [DM] US Leading Index; Canada CPI; Euro area CA; Japan Leading Index, Coincident Index and Foreign Buying Stocks/Bonds; New Zealand ANZ Consumer Confidence and Job Advertisements [EM] Philippines CA; Colombia Trade Balance.

Source: Bank of America, Goldman Sachs

Empire Fed Spikes To 5-Year Highs; Employment Plunges To Worst Since Dec 2013

Following last month's biggest plunge in 2 years to 4-month lows, it is likely no surprise that the soft-survey-based Empire Fed index exploded to 27.5 (smashing 15.71 expectations) to its highest since October 2009. Of course - away from the headline exuberance, employment plunged to its lowest since 2013, the average workweek slipped, capex expectations plunged, and new orders barely rose (while Prices Received soared). Seems like seasonal adjustments played a strong hand in this exuberance... given hardly any sub indices jumped.

Headlines hits 5-year highs...


as employment pluinges to 2013 lows...


Chart: Bloomberg

Why Scotland Has All The Leverage, In One Chart

As Scotland prepares to vote for or against Independence from the Union on Thursday, it appears everyone has an opinion on what may, what should and what will happen. At the basis of every such opinion is some basis in fact, misguided as it may be in most cases, about who has all the leverage, with the dominant one being that Scotland would make a horrendous mistake if it says goodbye to the UK and puts a border around what is currently a third of UK's landmass.

Some, such as Deutsche Bank, the bank that has the single greatest derivative exposure in the world and is therefore most leveraged to maintaining the status quo, saw its "Chief Economist & Member, Group Executive Committee, Deutsche Bank AG" David Folkerts-Landau personally put pen to paper on Friday and in rambling, demagogic terms, explain why it would be a "Wrong Turn" for Scotland to seek self-determination.

He says that, "A "Yes" vote for Scottish independence on Thursday would go down in history as a political and economic mistake as large as Winston Churchill's decision in 1925 to return the pound to the Gold Standard or the failure of the Federal Reserve to provide sufficient liquidity to the US banking system, which we now know brought on the Great Depression in the US. These decisions – well-intentioned as they were – contributed to years of depression and suffering and could have been avoided had alternative decisions been taken." Sure, there could have been no gold standard and the Fed could have gone full-Bernanke, and it would only have kicked the can a few years leading to an even greater depression, as the recent paradigm of "bubble to bubble" transitions, described by none other than Deutsche Bank, is where the world finds itself. In fact, it is DB that admitted last week that without a bubble, the western financial way of life is finished.

DB's Landau concludes with the following outright propaganda:

Most importantly, the world as it is evolving in the 21st century is a highly uncertain place with unstable geopolitics and a stressed economic and financial outlook. Why anyone would want to exit a successful economic and political union with a G-5 country – a union which another part of Europe so desperately seeks to emulate – to go it alone for the benefit of... what exactly, is incomprehensible to this author.

Well, maybe let's ask what is increasingly a majority of Europeans across the ill-fated and artificial Eurozone, whose fixed currency means the only devaluation possible is internal, read crashing wages. But of course, the head of something or another at Deutsche Bank has nothing to worry about in this regard.

And yet, as always, the bottom line is about leverage and bargaining power. It is here that, miraculously, things once again devolve back to, drumroll, oil, and the fact that an independent Scotland would keep 90% of the oil revenues! As we showed several days ago, Scotland's oil may be the single biggest wildcard in the entire Independence movement.

It is this oil, and its interconnectedness within the UK economy, that as SocGen's Albert Edwards shows earlier this morning, is what gives Scotland all the leverage.

From Edwards:

it is increasingly likely that it too it will be joining Scotland in permanently exiting the EU club. First of all, consider the vulnerability of sterling after a Yes vote for Scottish independence. Even without North Sea oil revenues, the UK current account situation is a mess. The left-hand chart below is one I put up at the end of our flagship conference in January this year. The point I made was it is absolutely extraordinary for the UK to be beginning an economic cycle with a current account deficit of around 5-6% of GDP. Normally this is a level the UK or any other developed countries get to at a height of a boom after years of overspending on consumer imports. I think I described the UK position as an economic abomination of the highest order and that this economic cycle was likely to end some years from now in a calamitous sterling crisis - just like we used to have in the past.



Our specialist macro salesperson, Richard Walker, thinks that it is in the rUK's economic interest to retain some sort of currency union with Scotland after independence as he points out Ireland did after its own independence in 1922 until 1979. He believes the maths for the rUK just don't add up - on the basis of an independent Scotland keeping 90% of the oil revenues the rUK current account deficit for the full year would have been around 7% of GDP instead of 4½% (also see right-hand chart above).

There's that pesky "mathematics" again. Here is what the math reveals:

Personally I don't believe that the rUK will conceive it possible that any continued currency union is feasible after independence having observed the eurozone mess. That means the yawning fault line in the UK's economic situation will be revealed for all to see. Indeed since we used that chart of the UK's current account mess in January this year, the deficit in Q3 last year was revised from 5% to 6% of GDP! That horrendous deficit persisted in Q4 at just under 6% of GDP but improved somewhat in Q1 of this year to 4.4% of GDP. That improvement though to me looks erratic and liable to reverse, most especially as the trade deficit through July continued to deteriorate. So, if rather than the 2013 full-year UK current account  deficit of 4½% of GDP; the underlying situation is more reflective of the almost 6% deficit seen in H2, then the rUK current deficit will be nearer to 8 1/2% of GDP! The UK is due to release its 2014 Q2 Current Account data on 30 Sept.


For the UK as a whole the current account deficit is awful. For the rUK it is simply untenable. If investors are selling sterling in anticipation of a Yes vote, the economic reality of a rump rUK will see sterling quite rightly plunge into the abyss way before the end of the economic cycle (where we previously expected the turmoil would come).

Which also means that contrary to the UK's fire and brimstone, it is the UK that has much more to lose in a world in which Scottish oil output is suddenly unavailable to plug current account deficit gaps, something the US has been able to do in the past 5 years courtesy of the transitory shale boom.

The vulnerability of sterling in a rUk world is made much worse as investors come to grips with the increasing prospect that the rUK will be leaving the EU. Capital will not be moving from north of the Scottish border to the south. It will be moving out of the UK altogether. And, with the rUK needing to attract capital at an unprecedented avaricious rate for this point in the cycle, this ain't going to be pretty. Interest rates, which are probably set to rise next year anyway, may be set to rise a whole lot faster than anticipated if we get a good old-fashioned sterling crisis, with the good old-fashioned inevitable recessionary consequences thrown in.

The bottom line, at least to Edwards, is that Thursday's vote will set in motion the independence not only for Scotland, but for the UK from the EU club:

So in the event of a Yes vote in the imminent Scottish referendum I would expect both Scotland (involuntarily) and the rUK (voluntarily) to find themselves outside of the EU club.

And should that happen, all bets are off for the continued existence of the greatest "unionization" experiment in modern history: Europe itself.

We saw similar trends towards political extremes to a greater or lesser extent in the beleaguered GIIPS (Greece, Italy, Ireland, Portugal and Spain) during the crisis. As Dylan has previously explained, political extremism becomes a very attractive proposition when a country comes under stress. Europe has a long history of such tendencies. Separatist and nationalist movements throughout Europe are gaining a stronger foothold with nationalist fault lines previously thought dormant awakening in unison right across Europe - see for example this interesting article from Ambrose Evans-Pritchard - link. The outcome of a Yes vote in Scotland may have as unpredictable consequences as did events in Eastern Europe in the late 1980s. A yes vote will send the EU bicycle (or if you prefer, shark) into reverse for the first time since the 1957 Treaty of Rome, with wholly unpredictable consequences.

Good luck, Scotland. The fate of a century of globalization and wealth-transfer efforts suddenly lies on your shoulders.

Frontrunning: September 15

  • Snow is coming: OECD Cuts Economic Growth Forecasts (WSJ)
  • World waits for white smoke from U.S. Fed (Reuters) - Understandable error: they meant "green"
  • Scots Breakaway at 45% Odds as Economists Warn of Capital Flight (BBG)
  • Ukraine President Poroshenko Faces Backlash Over EU Trade Deal Delay (WSJ)
  • German Anti-Euro Party Advances in Merkel Homeland Voting (BBG)
  • Clinton Hints at 2016 Run as Super-PAC Packs Iowa Steak Fry (BBG)
  • Air France, Lufthansa Hit by Strikes in Fight for Future (BBG)
  • U.S. sees Middle East help fighting IS, Britain cautious after beheading (Reuters)
  • Ex-Billionaire Charged by Brazil With Financial Crimes (BBG)
  • Record S&P 500 Masks 47% of Nasdaq Mired in Bear Market (BBG)
  • Heineken confirms, rebuffs SABMiller bid (Reuters)
  • Alibaba Said to Plan Boosting IPO Price Amid Interest (BBG)
  • A minimum-wage hike finds hope in U.S. heartland (Reuters)
  • Western sanctions are testing Russia's strength: Medvedev (Reuters)
  • Phones 4u Bonds Plummet After Losing Mobile Contracts (BBG) and it was just a year ago that it did a "successful" dividend recap deal...


Overnight Media Digest


* International support for the U.S.-led military campaign against Islamic State gathered strength with the United Kingdom vowing to destroy the group after it killed a British aid worker, Arab States agreeing to participate in air strikes and Australia pledging forces. (

* President Barack Obama plans to dramatically boost the U.S. effort to mitigate the Ebola outbreak in West Africa, including greater involvement of the U.S. military, people familiar with the proposal said. (

* Heineken NV said Sunday that U.K.-based rival SABMiller Plc has approached it about being acquired but that Heineken's controlling family intends to keep the company independent. (

* A firm run by former AIG boss Hank Greenberg is suing the U.S. government over its bailout of AIG six years ago. A trial set to start late this month poses a risk for the insurer.(

* As vice chairwoman of the Federal Reserve, Janet Yellen was an unabashed advocate of easy money who pressed colleagues to embrace her view. As chairwoman she has taken a much different approach, becoming a restrained consensus seeker modeled after her predecessor, Ben Bernanke. (

* U.S. investigators have turned multiple bank employees into informants in a far-reaching probe of possible manipulation of currency markets, and are preparing to seek criminal charges against individual traders as early as next month. (

* U.S. Treasury Secretary Jacob Lew warned his Chinese counterpart in a recent letter that a spate of antimonopoly investigations against foreign companies could have serious implications for relations between the two countries, according to people briefed on its contents. (



Silicon Valley's top executives and investors have agreed that the U.S. tech industry has failed to appreciate the growing global concern over its record on online privacy and security and must act immediately to prevent deeper damage to its image.

SABMiller Plc made a preliminary offer for rival brewer Heineken that was rejected by its controlling shareholders. This deal would have brought the two companies together and helped SABMiller resist a takeover bid from rival Anheuser-Busch InBev

After many years in which dealmakers have been standing firmly in the shadows of their profit-churning trading colleagues, a resurgent market for takeovers and public listings has fostered bigger pay cheques for advisory bankers.

Former chief executive of BP Plc, Tony Hayward, warned that U.S. and EU sanctions against Moscow are threatening to turn around and bite the West by hindering global oil supplies and driving up prices in coming years.

Eike Batista, a Brazilian business magnate, was accused of market manipulation, and prosecutors sought to freeze millions of dollars worth of properties that he had transferred to his family. The accusations were part of a criminal action against Batista, whose empire collapsed last year in Latin America's largest bankruptcy, with prosecutors attempting to take hold of 1.5 billion Brazilian reais ($641.30 million) in assets.


* People keep texting when they are behind the wheel, so an engineer has found a technological solution. The problem: He can not do it on his own. (

* An investigation by the New York Times into the National Highway Traffic Safety Administration's handling of major safety defects over the past decade found that it frequently has been slow to identify problems, tentative to act and reluctant to employ its full legal powers against companies. (

* Parent groups and privacy advocates are challenging the practices of an industry built on data collection, and California has passed wide-ranging legislation protecting students' personal information. (

* Barry Diller's IAC/InterActiveCorp - owner of, OkCupid and other sites - has been increasing its presence in the terrain that combines technology and romance in the last 10 years, but the market has become crowded. (

* The smartphone offerings of Apple Inc, Inc, Microsoft Corp and Samsung Electronics Co Ltd have a lot to say about the companies' approach to most everything. (

* Activist investor William Ackman's new fund, Pershing Square Holdings, is expected to be listed on the Amsterdam Stock Exchange. (

* Heineken, the Dutch brewer, said on Sunday it had rejected a takeover approach made by SABMiller, putting on ice what would have been a multibillion-dollar beer deal. With a valuation of about $44 billion, Heineken is one of the last big independent brewers in the world, remaining autonomous in an era of global consolidation. (




** The newly formed British Columbia LNG Developers Alliance, representing four of the largest proponents of liquefied natural gas exports from the West Coast is lobbying Ottawa for tax relief, arguing that it is in the national interest to launch LNG sales to Asia and reduce Canada's dependence on energy exports to the United States. The alliance's four members are Kitimat LNG, the Pacific NorthWest LNG project led by Malaysia's state-owned Petronas, Shell Canada Energy-led LNG Canada and BG Group's Prince Rupert LNG. (

** Royal Canadian Mounted Police analysts have warned government and industry that environmental extremists pose a "clear and present criminal threat" to Canada's energy sector, and are more likely to strike at critical infrastructure than religiously inspired terrorists. (

** Talks between the union representing British Columbia teachers and their employer continued through the weekend, as the two sides and a mediator work to end the bitter strike that has kept 500,000 public school students out of the classroom. Negotiators spent the weekend at a hotel near the Vancouver airport, but would not say what progress had been made. (


** Days after being diagnosed with an abdominal tumour, Toronto Mayor Rob Ford withdrew his candidacy for a second term Friday, opening the door in the process for his brother Doug to take his place. (

** More than 400 academics are demanding the Canada Revenue Agency halt its audit of a think-tank, saying the conservative government is trying to intimidate, muzzle and silence its critics. In an open letter, the group defends the Canadian Centre for Policy Alternatives, a left-leaning think-tank that was targeted for a political-activity audit partly because it was deemed by the agency to be biased and one-sided. (

** While Keurig Green Mountain Inc is trying to knock competitors out of its massive single-serve coffee ring, an Ottawa startup, Single Cup Coffee is using new technology to secure a spot and, so far, it's paying off. Single Cup Coffee, which offers nearly 100 new flavours made in so-called XBold cups re-engineered to give every hot beverage a bolder taste, is already brewing C$12 million in sales after one year of operations. (


Hong Kong


-- The de facto head of Shanghai's free-trade zone is expected to step down, five separate sources said, likely dealing another blow to the already struggling economic project ahead of its first anniversary. Dai Haibo, the zone's executive deputy director overseeing daily operations, was suspected of disciplinary violations, said the sources. (

-- Russian money is fleeing Western sanctions and into Hong Kong, but running into obstacles at banks nervous about money laundering, analysts say. (

-- Cathay Pacific, one of the world's largest cargo carriers, is hoping the Christmas season will start a little earlier this year. The last quarter may signal the start of a real recovery for the sluggish global cargo market thanks to new hi-tech consumer product launches and recovery in the U.S. economy, said Cargo Director James Woodrow. (


-- Hong Kong food authorities on Sunday ordered a massive recall and ban on all 25 lard and lard products imported from Chang Guann at the centre of the "gutter oil" scandal in Taiwan, and banned all food made with the products. (

-- The new racing season got off a golden start at the Sha Tin track in Hong Kong in more ways that one. The first-day crowd and turnover were the highest in more than 20 years. Attendance was 74,281, 12 percent higher from last year's opener, while turnover rose more than 10 percent to HK$1,139 billion ($147 billion). (

-- Jiashili Group opens its retail book today, seeking to raise up to HK$320 million. The Guangdong-based biscuit manufacturer is offering 100 million shares at HK$3.70 each. (


-- Some 700 staff from casino operator SJM Holdings Ltd staged a protest over the weekend demanding better pay. The workers warned that they would hold a strike in the golden week in October if the management continued to ignore their demand.



The Times


Hundreds of business owners affected by Royal Bank of Scotland's "turnaround" division for struggling companies are planning to sue the bank through a group legal action. (

PHONES 4U CRASHES TO PUT JOBS IN JEOPARDY Nearly 6,000 jobs on the High Street were in jeopardy on Sunday as Phones 4u collapsed into administration. All 550 of its shops are to close with immediate effect, pending a decision by administrators at PricewaterhouseCoopers on whether a long-term solution can be found for the business. (

The Guardian

FROM BANKING TO TEACAKES: WHAT HAPPENS IF IT'S A YES IN THE REFERENDUM If Thursday's vote is a yes, bank customers will want to know on Day One if their money is safe and what currency an independent Scotland will use - even if, in reality, it would be 18 months before any real change occurs. Bank of England Governor Mark Carney is cutting short a trip to Australia, where G20 finance ministers and central bank governors are gathering, to ensure he is in the UK in case the contingency plan he has drawn up needs to be implemented. The Treasury insists Chancellor George Osborne - who is not going to Cairns - has no contingency plan. (

2014 COULD SET RECORD FOR VALUE OF IPOS ON LONDON STOCK EXCHANGE MAIN MARKET This year could see a record amount of cash raised by companies joining the London stock exchange's main market. By the end of August, about 7.4 billion stg ($12.01 billion) had been raised, according to Capita Asset Services, and on current trends this could reach 11.7 billion stg by the end of the year, well above the record 8.7 billion stg set in 2011. (

The Telegraph QUEEN WARNS SCOTS TO THINK 'VERY CAREFULLY' ABOUT REFERENDUM VOTE The Queen has broken her silence about the potential break-up of the United Kingdom by warning Scots to think "very carefully about the future" before casting their votes in the independence referendum. With only four days to go to the polls and the contest on a knife edge, the monarch made a hugely significant intervention by stating she hoped Scots would consider closely what their "important" votes would mean. ( SAMSUNG ACCUSES RIVAL OF SABOTAGING WASHING MACHINES Samsung Electronics Co Ltd has accused the head of rival LG Electronics Inc's home appliances business of damaging its washing machines at retail stores in Germany. The firm, in a statement on Sunday, said it had asked the Seoul Central District Prosecutors' Office to investigate LG employees who the company says were seen deliberately destroying several of its premium washing machines on display at two stores earlier this month ahead of the IFA electronics show in Berlin. (

Sky News

MERGERS WATCHDOG PAVES WAY FOR 'CABLE FINES' Vince Cable, the merger watchdog, will on Monday pave the way for a crackdown on companies that break pledges on jobs and investment made during major corporate takeover deals. (

SCOTLAND REFERENDUM RESULT 'TOO CLOSE TO CALL' The latest opinion polls show the Scottish referendum campaign is "on a knife-edge" - with the "Yes" and "No" campaigns ahead in different surveys. Three polls - all of which exclude undecided voters - give the "No" campaign the advantage on the final weekend of campaigning, but pro-Independence campaigners will be boosted by another which shows them ahead by a large margin. (

The Independent


Unions are warning of an impending British engineering skills crisis, as yet another major public sector project is set to be awarded to a huge U.S. firm. The three bids involving UK firms have been removed in the running for the 485 million stg, 10-year Environment Agency deal to shore up the River Thames' flood defences. The contract covers an area from Teddington in west London to Sheerness and Shoeburyness in Kent and Essex. (

SCOTTISH INDEPENDENCE: STERLING ON KNIFE-EDGE AS CITY BRACES FOR SCOTS VOTE The City is bracing for "a major reaction" to sterling and shares following the Scottish independence result as the London market faces what could be its most turbulent week since the 2008 banking crisis. Bank of England Governor Mark Carney is returning early from this week's finance meeting of G20 countries in Australia to monitor the markets in person from Thursday and Chancellor George Osborne has cancelled his trip entirely. (



Fly On The Wall Pre-Market Buzz

Domestic economic reports scheduled for today include:
NY Fed Empire State survey for September at 8:30--consensus 15.9
Industrial production for August at 9:15--consensus up 0.3%
Capacity utilization rate for August at 9:15--consensus 79.3%



AMC Entertainment (AMC) upgraded to Overweight from Equal Weight at Barclays
Abaxis (ABAX) upgraded to Buy from Hold at Canaccord
Acuity Brands (AYI) upgraded to Buy from Neutral at Goldman
Barrick Gold (ABX) upgraded to Neutral from Underweight at HSBC
CVS Health (CVS) upgraded to Outperform from Market Perform at Cowen
Chuy's (CHUY) upgraded to Buy from Hold at KeyBanc
Conversant (CNVR) upgraded to Neutral from Sell at Goldman
Danske Bank (DNSKY) upgraded to Buy from Hold at Deutsche Bank
DigitalGlobe (DGI) upgraded to Overweight from Neutral at JPMorgan
Pebblebrook Hotel (PEB) upgraded to Buy from Hold at ISI Group
Sunstone Hotel (SHO) upgraded to Buy from Hold at ISI Group
Veeco (VECO) upgraded to Neutral from Sell at Goldman


Brady (BRC) downgraded to Market Perform from Outperform at Wells Fargo
Cree (CREE) downgraded to Neutral from Buy at Goldman
Douglas Dynamics (PLOW) downgraded to Neutral from Outperform at RW Baird
Marten Transport (MRTN) downgraded to Outperform from Strong Buy at Raymond James
Posco (PKX) downgraded to Neutral from Overweight at HSBC
Rackspace (RAX) downgraded to Neutral from Overweight at JPMorgan
Symantec (SYMC) downgraded to Sector Perform from Outperform at RBC Capital
TransCanada (TRP) downgraded to Sell from Neutral at Goldman


American Realty (ARCP) initiated with an Overweight at JPMorgan
Capital Product (CPLP) initiated with a Buy at Jefferies
Continental Resources (CLR) initiated with a Buy at Canaccord
Costco (COST) initiated with a Buy at Citigroup
NRG Yield (NYLD) initiated with an Outperform at RBC Capital
PTC Therapeutics (PTCT) initiated with a Buy at Deutsche Bank
Power Solutions (PSIX) initiated with an Outperform at Northland
Target (TGT) initiated with a Neutral at Citigroup
Wal-Mart (WMT) initiated with a Neutral at Citigroup
Whiting Petroleum (WLL) initiated with a Buy at Canaccord
Winnebago (WGO) initiated with an Outperform at BMO Capital


Heineken (HEINY) said SABMiller (SBMRY) acquisition proposal non-actionable
Cognizant (CTSH) agreed to acquire TriZetto for $2.7B
Danaher (DHR) to acquire Nobel Biocare Holding for CHF 17.10 per share
HSBC (HSBC) confirmed $550M settlement agreement with FHFA
Oracle (ORCL) acquired Front Porch Digital, terms undisclosed
AT&T (T) said it had the 'biggest iPhone, pre-order launch day ever' (AAPL)
Hudson City Bancorp (HCBK) announced passing of chairman, CEO Ronald Hermance, named Denis Salamone as CEO, effective immediately

No notable earnings this morning.


Apple (AAPL) CEO says working on products that haven't been rumored yet, Re/code reports
Amazon (AMZN) faces tax obstacle in India, FT reports
Herbalife (HLF) near settlement with former distributors, NY Post reports
Netflix (NFLX) to face competition in France from Numericable Group , WSJ reports
Citigroup (C) said to plan OneMain IPO by month-end, Bloomberg says
Home Depot (HD) took steps to up defenses, but hackers moved faster, WSJ reports
JPMorgan (JPM) could have difficulty repelling hackers, NY Times reports
Lam Research (LCRX) shares could return 20%, Barron's says
Popular (BPOP) shares could rise 30%, Barron's says
Pfizer (PFE) shares look cheap, Barron's says
Starbucks (SBUX) shares could fall, Barron's says
Don't listen to bears about Apple (AAPL), Barron's says


American Assets Trust (AAT) sells 400K shares at $33.76 in a private placement
InnerWorkings (INWK) files to sell 4.84M shares for holders
Marathon Patent Group (MARA) files to sell 1.32M shares for holders
Smith Micro (SMSI) files to sell 6.85M shares for holders