ZeroHedge RSS Feed

Stocks Erase Draghi "Moar QE" Gains As USDJPY Tumbles

Draghi - we have a problem. They hoped, he came, they sold. US stocks and bonds knee-jerk rallied on the "expanding QE" promise from Draghi thi8s morning but all those gains have been erased now as USDJPY 'fun-durr-mentals' drag it lower. If not even the latest reduction in European economic forecasts can push stocks higher, we central banks may have a real problem on their hands.



Charts: Bloomberg

West Point Professor Calls For Military Strikes On Journalists Critical Of War On Terror

Submittted by Cassius Methyl via,

An assistant professor from the U.S. Military Academy at West Point recently declared that professionals critical of the “War on Terror” constitute a “treasonous” opposition that should be subject to military force.

He believes the U.S. should have the right to attack people who are critical of U.S. military operations — specifically, professionals, legal scholars, journalists, and other people effectively spreading ideas that oppose war.

Professor William C. Bradford went as far as to publish a long academic paper in the National Security Law Journal that aggressively promotes suppressing dissent about military force, civilian casualties, and expanding military operations in the Middle East.

Using the excuse that victims would be “lawful targets,” Bradford argues that “law school facilities, scholars’ home offices and media outlets where they give interviews” should be targeted with military force to suppress dissent. He asserted that the war on terror should be expanded, “even if it means great destruction, innumerable enemy casualties, and civilian collateral damage.”

He further suggested that the U.S. should wage “total war” on “Islamism,” using “conventional and nuclear force and [psychological operations]” to “leave them prepared to coexist with the West or be utterly eradicated.”

He said that “Threatening Islamic holy sites might create deterrence, discredit Islamism, and falsify the assumption that decadence renders Western restraint inevitable.”

Despite his self-description as an “associate professor of law, national security and strategy,” a representative of the National Defense University has tried to distance the school from Bradford by saying he wasn’t part of the staff, but rather a contracted professor.

Sporting a long history of exaggeration and pro-military extremism, “He resigned from Indiana University’s law school in 2005 after his military record showed he had exaggerated his service,” according to The Guardian.

Though the man seems to be held in high esteem by the military, he spoke with such disregard for human rights that the National Security Law Journal had to apologize.

The NSLJ released a statement on the front page of its website, saying it “…made a mistake in publishing [the] highly controversial article…”

“The substance of Mr. Bradford’s article cannot fairly be considered apart from the egregious breach of professional decorum that it exhibits,” it admitted.  “We cannot ‘unpublish’ it, of course, but we can and do acknowledge that the article was not presentable for publication when we published it, and that we therefore repudiate it with sincere apologies to our readers.”

Ironically, Bradford has a Master of Laws (LL.M.) degree from Harvard University with a focus in Human Rights Law.

This is a man who is apparently incorporating his violent philosophy into his teaching at West Point. He started on August 1st 2015 — after he published his article.

This is only the tip of the iceberg in forming a complete understanding of the ideological fabric held by many of the war hawks in U.S. Military.

The Bigger-est Hockeystick Ever: Presenting The ECB's Latest Inflation Expectations

Back in March, we mocked the ECB's inflation forecasts with a post titled "Mario Draghi Reveals Biggest. Hockeystick. Ever!", which highlighted the ECB's ridiculous expectation that inflation would soar from 0.0% in 2015 to 2016. We though no other hockeystick could possibly surpass this.

We were wrong.

Behold the ECB's latest inflation expectations. Something to note: in March 2014, full year inflation for 2015 was expected to be 1.3%. 18 months later it is 0.1%. But don't worry, the ECB will be spot on with its forecast of 1.1% inflation in 2016 (this was 1.5% 6 months ago), and 1.7% in 2017. Just you wait.

Source: the former Goldman vice chairman currently in charge of the ECB's money printer

Stocks Surge As ECB Expands QE Monetization Limits, Boost Purchase Threshold From 25% to 33% Per Issue

ABN Amro was right: moments ago Mario Draghi announced that, just as the Pavlovian Dogs were salivating, the ECB would not leave markets hanging, and while not boosting QE in size, announced he would increase the amount of monetizable assets, i.e., the ECB's share limit per CUSIP equivalent, from 25% to 33%. The result: an immediate surge in both stocks (ES jumping 21 points) and bonds (the 10Y dropping to 2.156%).


Which has snapped EURUSD 100pips lower - erasing all the post-FOMC Minutes gains...


But wait, that's not all: as was clear to all but the most tenured economists, Draghi also just cut Europe's GDP outlook across the board.


And here is why more QE, also in absolute terms, is also assured:


Expect the stock surge to continue, because there is nothing more bullish for risk that confirmation what sent risk higher in the first place isn't working, so even more will have to be used.

“No Safe Assets Anymore” So “Focus On Precious Metals” – Faber

Today’s Gold Prices: USD1130.05, EUR 1005.88 and GBP 739.63 per ounce.
Yesterday’s Gold Prices: USD 1140.00, EUR 1010.73 and GBP 746.46 per ounce.

“No Safe Assets Anymore” So “Focus On Precious Metals” – Faber

Respected economist and historian and the editor of the ‘Gloom, Boom & Doom Report’ Marc Faber warned on Bloomberg TV’s Market Makers yesterday that there are now “no safe assets” including deposits and said that he is focusing “on precious metals.”

In another informative and interesting interview, Faber spoke about dangerous central bank policies and the stupidity of QE, the cause of inequality including competitive currency devaluations and warned that even deposits are no longer safe.

Marc Faber – There Is No Safe Asset Anymore (via Bloomberg TV)

“I think that because of modern central banking and repeated interventions with monetary policy, in other words, with QE, all around the world by central banks there is no safe asset anymore. When I grew up in the ’50s it was safe to put your money in the bank on deposit. The yields were low, but it was safe.”

“But nowadays, you don’t know what will happen next in terms of purchasing power of money. What we know is that it’s going down.”

He was trenchant in his criticism of central bank monetary policies:

“In my humble book of economics, wealth is being created through, essentially, a mixture of capital spending, and land and labor. And if these three production factors are used efficiently, it then creates a prosperous society, as America became prosperous from its humble beginnings in 1800, or thereabout, to the 1960s, ’70s. But it’s ludicrous to believe that you will create prosperity in a system by printing money. That is economic sophism at its best.”

Faber said that investors should “focus on precious metals” and gold and precious metal mining shares.

“I would rather focus on precious metals, gold, silver, platinum because they do not depend on the industrial demand as much as base metals, as industrial commodities.”

Marc Faber is a long-time advocate of owning physical gold which action he describes as being “your own central bank” and he believes that Singapore is the safest place to store gold internationally.


Global stocks enjoy relief rally ahead of ECB, but investors wary – Reuters
Five Chinese ships in Bering Sea as Obama visits Alaska – Reuters
In Dramatic Escalation, China Sends Five Navy Ships Off Alaska Coast For First Time Ever – Zero Hedge
Gold slips on firmer dollar; U.S. jobs data eyed for cues – Reuters
Gold Holds Loss as Investors Seek Fed Rate Clues From Jobs Data – Bloomberg


Gold Keeps Its Gleam Long After The Last Gold Standard – Forbes
Eleven Crazy Days — Many More Coming –
SILVER MARKET OUTBREAK: Surging Physical Demand & Falling Inventories – SRSRocco Report
Central Banks Nervous As Alternative Currency With David Bowie’s Face Goes Viral – Zero Hedge
Why A Londoner Became a Backwoods California Gold Prospector – National Geographic

Read more News & Commentary

Watch: Marc Faber Video on Storing Gold in Singapore
Download: Essential Guide To Storing Gold In Singapore
Downnload: Essential Guide To Storing Gold Offshore


Initial Jobless Claims Jumps Most In 2 Months - Unchanged Since End Of QE3

Initial jobless claims have risen for 5 of the last 6 weeks with the last week showing a 12k rise to 282k. This is the biggest weekly rise in 2 months and raises the claims print overall to 2-month highs. Perhaps most remarkable is that initial jobless claims are now back up to unchanged since the end of QE3.



Charts: Bloomberg

Mario Draghi's Panic Button, Birthday Presser - Live Feed

Now that the formalities are out of the way with rates unchanged, the fireworks can begin as Mario Draghi gets set for his post-meeting presser where markets hope to hear that the ECB is set to expand QE in the face of collapsing EMU inflation expectations, mounting global headwinds, rising volatility, and EM chaos. 


Full preview is here, watch live below.

(live feed)


*  *  *

Full opening remarks:

Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. We will now report on the outcome of today’s meeting of the Governing Council. As usual, let me start with the decisions taken.

Based on our regular economic and monetary analysis, and in line with our forward guidance, the Governing Council decided to keep the key ECB interest rates unchanged.

Our asset purchase programme continues to proceed smoothly. Regarding non-standard monetary policy measures, following the announced review of the public sector purchase programme’s issue share limit after the first six months of purchases, the Governing Council decided to increase the issue share limit from the initial limit of 25% to 33%, subject to a case-by-case verification that this would not create a situation whereby the Eurosystem would have blocking minority power, in which case the issue share limit would remain at 25%.

Underlying our monetary policy assessment was a review of recent data, new staff macroeconomic projections and an interim evaluation of recent market fluctuations. The information available indicates a continued though somewhat weaker economic recovery and a slower increase in inflation rates compared with earlier expectations. More recently, renewed downside risks have emerged to the outlook for growth and inflation. However, owing to sharp fluctuations in financial and commodity markets, the Governing Council judged it premature to conclude on whether these developments could have a lasting impact on the outlook for prices and on the achievement of a sustainable path of inflation towards our medium-term aim, or whether they should be considered to be mainly transitory.

Accordingly, the Governing Council will closely monitor all relevant incoming information. It emphasises its willingness and ability to act, if warranted, by using all the instruments available within its mandate and, in particular, recalls that the asset purchase programme provides sufficient flexibility in terms of adjusting the size, composition and duration of the programme.

In the meantime, we will fully implement our monthly asset purchases of €60 billion. These purchases have a favourable impact on the cost and availability of credit for firms and households. They are intended to run until the end of September 2016, or beyond, if necessary, and, in any case, until we see a sustained adjustment in the path of inflation that is consistent with our aim of achieving inflation rates below, but close to, 2% over the medium term.

Let me now explain our assessment of the available information in greater detail, starting with the economic analysis. Real GDP in the euro area rose by 0.3% in the second quarter of 2015, which was somewhat lower than previously expected. The latest survey indicators point to a broadly similar pace of real GDP growth in the second half of this year. Overall, we expect the economic recovery to continue, albeit at a somewhat weaker pace than earlier expected, reflecting in particular the slowdown in emerging market economies, which is weighing on global growth and foreign demand for euro area exports. Domestic demand should be further supported by our monetary policy measures and their favourable impact on financial conditions, as well as by the progress made with fiscal consolidation and structural reforms. Moreover, the decline in oil prices should provide support for households’ real disposable income and corporate profitability and, therefore, private consumption and investment. However, economic growth in the euro area is likely to continue to be dampened by the necessary balance sheet adjustments in a number of sectors and the sluggish pace of implementation of structural reforms.

This assessment is also broadly reflected in the September 2015 ECB staff macroeconomic projections for the euro area, which foresee annual real GDP increasing by 1.4% in 2015, 1.7% in 2016 and 1.8% in 2017. Compared with the June 2015 Eurosystem staff macroeconomic projections, the outlook for real GDP growth has been revised down, primarily due to lower external demand owing to weaker growth in emerging markets.

The risks to the euro area growth outlook remain on the downside, reflecting in particular the heightened uncertainties related to the external environment. Notably, current developments in emerging market economies have the potential to further affect global growth adversely via trade and confidence effects.

According to Eurostat’s flash estimate, euro area annual HICP inflation was 0.2% in August 2015, unchanged from June and July. Compared with the previous month, this reflects a further decline in energy price inflation, compensated for by higher price increases for food and industrial goods. On the basis of the information available and current oil futures prices, annual HICP inflation rates will remain very low in the near term. Annual HICP inflation is expected to rise towards the end of the year, also on account of base effects associated with the fall in oil prices in late 2014. Inflation rates are foreseen to pick up further during 2016 and 2017, supported by the expected economic recovery, the pass-through of past declines in the euro exchange rate and the assumption of somewhat higher oil prices in the years ahead as currently reflected in oil futures markets. However, this increase in annual inflation rates is currently expected to materialise somewhat more slowly than anticipated thus far.

This assessment is also broadly reflected in the September 2015 ECB staff macroeconomic projections for the euro area, which foresee annual HICP inflation at 0.1% in 2015, 1.1% in 2016 and 1.7% in 2017. In comparison with the June 2015 Eurosystem staff macroeconomic projections, the outlook for HICP inflation has been revised down, largely owing to lower oil prices. Taking into account the most recent developments in oil prices and recent exchange rates, there are downside risks to the September staff inflation projections.

In this context, the Governing Council will closely monitor the risks to the outlook for price developments over the medium term. We will focus in particular on the pass-through of our monetary policy measures, as well as on global economic, financial, commodity price and exchange rate developments.

Turning to the monetary analysis, recent data confirm robust growth in broad money (M3). The annual growth rate of M3 was 5.3% in July 2015, compared with 4.9% in June. Annual growth in M3 continues to be increasingly supported by its most liquid components, with the narrow monetary aggregate M1 growing at an annual rate of 12.1% in July, compared with 11.7% in June.

Loan dynamics continued to improve. The annual rate of change of loans to non-financial corporations (adjusted for loan sales and securitisation) increased to 0.9% in July, up from 0.2% in June, continuing its gradual recovery since the beginning of 2014. Despite these improvements, the dynamics of loans to non-financial corporations remain subdued. They continue to reflect the lagged relationship with the business cycle, credit risk, credit supply factors, and the ongoing adjustment of financial and non-financial sector balance sheets. The annual growth rate of loans to households (adjusted for loan sales and securitisation) increased to 1.9% in July 2015, after 1.7% in June. Overall, the monetary policy measures we have put in place since June 2014 provide clear support for improvements both in borrowing conditions for firms and households and in credit flows across the euro area.

To sum up, a cross-check of the outcome of the economic analysis with the signals coming from the monetary analysis indicates the need to firmly implement the Governing Council’s monetary policy decisions and to monitor closely all relevant incoming information as concerns their impact on the medium-term outlook for price stability.

Monetary policy is focused on maintaining price stability over the medium term and its accommodative stance contributes to supporting economic activity. However, in order to reap the full benefits from our monetary policy measures, other policy areas must contribute decisively. Given continued high structural unemployment and low potential output growth in the euro area, the ongoing cyclical recovery should be supported by effective structural policies. Further product and labour market reforms, and particularly actions to improve the business environment, including an adequate public infrastructure, are vital to increase productive investment, boost job creation and raise productivity. The swift and effective implementation of these reforms, in an environment of accommodative monetary policy, will not only lead to higher sustainable economic growth in the euro area but will also raise expectations of permanently higher incomes and accelerate the benefits of reforms, thereby making the euro area more resilient to global shocks. Fiscal policies should support the economic recovery while remaining in compliance with the Stability and Growth Pact. Full and consistent implementation of the Pact is crucial for confidence in our fiscal framework.

We are now at your disposal for questions.

For The Average American, A Modest 10% Correction Is Now A "Market Crash"

To most Wall Street pundits and strategists, the recent 10% correction in all three US key indices can be summarized with one word, or rather, acronym: BTFD. After all, someone has to pay those year-end bonuses, and that becomes problematic if the S&P is down on the year. Nevermind that none of these pundits actually predicted the correction, even though as we warned repeatedly, with the vol of all other products screaming, equity VIX was in its own little world for most of 2015 until two weeks ago, when reality finally caught up with it.

But what about the average American: how does Joe Sixpack feel about the recent 10% drop in the S&P? For the answer we went straight to the source - google trends. What it revealed was disturbing.

As the chart below shows, in the age of artificially supressed volatility, even a plain vanilla market correction now generates the type of emotional shock comparable to the biggest market collapse since the Great Depression, and judging by the Google Trends chart, searches for "market crash" are on par with those recorded during late 2008!

Worse, due to SEO optimizing algos which seek to give readers precisely what they are looking for, many websites which have algo-written headlines and news, have been perpetuating the shock from the market drop, by blasting headlines that while seeking to be click bait, merely encourage the fear witnessed in the recent two weeks, thus exacerbating the impact of the market drop.

One wonders what would happen if there is a bear market, or worse: a real crash, comparable to the 60% plunge witnessed when Lehman failed?

Source: google trends

Total 2015 Job Cuts To Be Biggest Since 2009: Challenger

Moments ago Challenger reported August job cuts, which at 41,186 were a 60% drop from the 115,730 reported last month (the highest since September 2011), which however was driven by a one-time mass layoffs last month in military staffing. Putting August in its correct perspective, the number was 2.9% higher than the same month a year ago, when 40,010 planned job cuts were announced.

What is troubling is that this marks the seventh month this year that the job-cut total was higher than the comparable month from 2014.

What is worse is that for all the euphoria about initial claims printing at or near record lows, the reality as measured from the bottom-up, is far different and as Challenger notes, so far in 2015 employers have announced 434,554 job cuts: that is up 31 percent from the 332,931 planned layoffs in the first eight months of 2014.

What is worst, and what reveals the true picture of the economy, is that with monthly totals averaging 54,319, 2015 job cuts are on track to exceed 650,000 for the year, which would be the highest year-end tally since 2009 (1,272,030).

In other words, not only is the economy no longer growing at its previous pace, but due to the ongoing oil rout, tens of thousands of highly-paid workers mostly in the oil space are getting pink slips just as the Fed is preparing to tighten. Putting a number to that estimate, Challenger says that "since the beginning of the year, oil prices have been blamed for 82,268 layoffs, mostly in the energy sector, but also among industrial goods manufacturers that supply equipment and materials for oil exploration and extraction."

Curiously, the biggest culprit for August job cuts was not the energy sector (expect many more layoffs here), but retail. The retail sector saw the heaviest job cutting in August, with 9,601 planned layoffs reported during the month. Most of those were related to bankruptcy of east coast supermarket chain A&P, which is closing more than 100 stores and laying off a reported 8,500 workers by Thanksgiving.

The retail sector has announced 57,363 job cuts so far this year, which is a 90 percent increase over the 30,109 job cuts announced by this point in 2014.

“Overall, retail is relatively healthy, but we have seen some big layoffs this year, particularly from long-time players that simply have not been able to keep up with changing consumer trends. These retailers somehow manage to survive, but only through multiple bankruptcies, such as A&P. Earlier this year RadioShack announced 5,400 job cuts,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.

The industrial goods sector saw the second heaviest downsizing activity in August, announcing 7,949 layoffs during the month. That is the largest number of job cuts for this sector since March, when 9,163 job cuts were announced.

Finally, going back to oil, Challenger was optimistic, however this optimism is misplaced. This is what it said:

“The stream of job cuts related to oil prices appears to be ebbing. The majority of these cuts came in the first four months of 2015, when we saw more than 68,000 layoffs related to oil. Since May, fewer than 14,000 job cuts have been attributed to oil prices,” noted Challenger.

There is a problem: as ConocoPhillips just announced two days ago when it fired 10% of its global workforce, oil companies which had been betting on an oil rebound, all got flatfooted by the second drop in oil price. This will lead to tens of thousands of more highly paid jobs being pink slipped in the coming months.

“It is too soon to say if we have seen the last of the big oil cuts. As we head into the final months of 2015, there are definitely some red flags that suggest we may see more layoffs from the energy sector, as well as in other areas of the economy. The problems that China is facing could send shockwaves throughout the global economy, including the United States,” Challenger continued.

Finally, one thing that is certain: of all states, Texas continues to bear the brunt of the layoff pain. And if oil continues trading in the $30/$40 range, the pain is far from over.

ECB Keeps Rates Unchanged, Focus Turns To Draghi Press Conference

As expected, there was no change in the ECB's three key interest rates, with the main refi, lending and deposit rates staying where they were at 0.05%, 0.30% and -0.20%, respectively.

From the press release:

At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.05%, 0.30% and -0.20% respectively.


The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.

This is not a surprise. The question is whether Draghi will hint at, or outright boost, QE in 45 minutes, how much he will cut Europe's GDP and inflation outlook, and whether there will be another confetti shower.

Stay tuned

In Risky Move, Riksbank Holds Rates But Warns Will Cut If ECB Boosts QE

In July, Sweden’s Riksbank did a funny thing - they doubled down on QE even after it became clear that QE had failed. And we don’t just mean "failed" in the somewhat abstract sense that all global QE has failed when it comes to bringing about a robust recovery and shaking the global economy out of the demand doldrums. We mean it actually failed. As in, the Riksbank sucked up so much of the available high quality collateral that 10Y yields and the krona started moving in the wrong direction in a very non-accommodative self-feeding loop. 

Be that as it may, not everyone was convinced that demonstrable evidence of failure would be enough to deter further easing at Thursday’s meeting, but lo and behold, the Riksbank stood pat. 


Of course in a world where everyone has been forced to adopt an overwhelming easing bias, being complacent can be a death sentence, so we can only assume that the Riksbank might be simply hoping against hope that everyone else also remains on hold so that it’s not forced to triple down on the first official QE failure and indeed, the consensus seems to be that the bank’s perceived complacency will be temporary - very temporary. Here’s a look at some analyst commentary courtesy of Bloomberg:  

Nordea sticks to forecast of a Riksbank rate cut in Oct. for now, but says the odds of further easing have diminished. SEK developments remain crucial, Nordea says in note. Says Riksbank on the optimistic side on inflation forecast longer out; together with the easing bias in the rate path this suggests that Riksbank is not done yet.


Riksbank Will Need to Do More This Year: Danske Bank. Bank could cut rates further in December, and “it’s also quite likely they’ll need to do more in terms of QE,” Michael Grahn, analyst at Danske Bank, says by phone.


SEB Sees High Likelihood of Riksbank Rate Cut in Oct. Risk for krona strength if Riksbank doesn’t confirm determination to do more increases probability for more action, as market expectations for another rate cut continue to be high, SEB says in note.

You get the idea. 

And of course, after the policy announcement, the krona rocketed to a 5-week high against the euro.

Swedish krona rises as much as 0.72% vs EUR to 9.4002, highest since July 24 after Riksbank holds key rate unchanged at -0.35%.

Note that this looks to have been a particularly risky thing to do ahead of today’s ECB decision, especially in light of expectations for Draghi to announce an expansion of PSPP. And the Riksbank is well aware of the potential pitfalls. From Bloomberg again: 

Riksbank Governor Stefan Ingves says any rapid strengthening of krona would pose risk to inflation rise. Riksbank won’t be passive if ECB makes big changes in its policy, Riksbank Governor Stefan Ingves says at press conference.

And at the punchline to the whole charade is that, as predicted by Morgan Stanley, and as predicted here when we noted in July that Sweden is undoubtedly a proponent of the post-crisis central banker mantra of "if it’s broken, break it some more," the Riksbank effectively acknowledged that QE had broken the market but instead of taking that as a warning, it will simply move on to breaking other markets:


And finally, as tipped above, the currency wars will continue unabated:

*  *  *  Because no Riksbank post is complete without it...

Frontrunning: September 3

  • U.S. Treasury's Lew says China will be held accountable on currency (Reuters) ... but not Japan
  • Bank of Japan Not Convinced of Need for Further Easing (WSJ)
  • Stocks Advance With Commodities on Signs of European Revival (BBG)
  • ECB Said to Seek 645 Million Euros of Dutch, Irish Mortgage Debt (BBG)
  • IMF Says China Slowdown, Other Risks Threaten Global Outlook (WSJ)
  • Xi Says China No Threat, Announces Military Cuts at Parade (BBG)
  • China holds massive military parade, to cut troop levels by 300,000 (Reuters)
  • Migrants leave Budapest for Austrian frontier; pressure builds for EU action (Reuters)
  • Inside Uber’s Fight With Its Chinese Nemesis, Didi Kuaidi (WSJ)
  • Apple’s Latest Challenge: Topping Its Own Success (WSJ)
  • Troubling image of drowned boy captivates, horrifies (Reuters)
  • Market Bets Abound, but Where Are the Banks? (WSJ)
  • Foreigners Flee Japan Stocks at Fastest Pace Since at Least 2004 (BBG)
  • Another 57 Clinton email threads contain foreign governments' information (Reuters)
  • Guatemala's President Perez resigns over graft scandal (Reuters)
  • Selfie madness: too many dying to get the picture (Reuters)
  • FBI has kept tabs on Nevada's Burning Man festival, documents say (Reuters)


Overnight Media Digest


- Five Chinese navy ships are currently operating in the Bering Sea off the coast of Alaska, Pentagon officials said Wednesday, marking the first time the U.S. military has seen them in the area. The officials have been tracking the movements in recent days of three Chinese combat ships, a replenishment vessel and an amphibious landing ship after observing them moving toward the Aleutian Islands, which are split between U.S. and Russian control. (

- As Apple Inc prepares to introduce its latest iPhones next week, the company's biggest challenge is one of its making: how to top its own success. Apple's iPhone 6 and iPhone 6 Plus reignited sales growth for the smartphone but analysts predict muted growth for its latest models due out next week. (

- The United Auto Workers union is pitching Detroit auto makers on a proposed health-care purchasing cooperative as a way to lower employee costs and potentially raise funds to finance worker salary increases. (

- The group backing Wisconsin Governor Scott Walker hopes focusing on the Palmetto State and Iowa can help the candidate gain traction after he fell out of the top tier of Republican presidential candidates. (

- Many small businesses aren't racing to update their checkout systems ahead of an Oct. 1 shift that will put merchants on the hook for some fraudulent card charges. That is the date when retailers are expected to begin using new security technology that accepts credit and debit cards with microchips, and for banks to have replaced their magnetic stripe cards with cards that use chip-enabled technology. (

- The giants of Silicon Valley are bulking up in the European Union's de facto capital, hiring lobbyists and jostling for the favor of the Web's most ambitious regulators. (

- China's multibillion-dollar ride-hailing market has erupted into a brawl between Uber and Beijing startup Didi Kuaidi. Uber and Didi Kuaidi are fighting to raise funds for expansion while they compete to woo drivers to their private-car-hailing services and navigate China's tough regulatory environment. (



Rebekah Brooks, cleared last year of orchestrating a criminal campaign that damaged the British establishment, will return to her old job running the News Corp's British newspapers on Monday.

The executive committee of Volkswagen AG's supervisory board has proposed extending Martin Winterkorn's contract as chief executive until the end of 2018, the company said on Tuesday, opening the door to the appointment of a new chairman.

Natalie Massenet, founder and executive chairman of online fashion group Net-A-Porter (NAP) abruptly resigned on Wednesday ahead of its planned acquisition by Italy's Yoox .



- Eurozone growth has improved since the central bank began its stimulus program, but there are new uncertainties in European and global economies. (

- Petco <IPO-PTAS.N> has drawn takeover interest from private equity shops including Kohlberg Kravis Roberts & Company as it continues preparing for an initial public share offering, a person briefed on the matter said on Wednesday. (

- Natalie Massenet, the founder of Net-a-Porter and the woman who persuaded high fashion that it had a home online, is leaving the British luxury e-commerce group she built, just five months after announcing a merger with its Italian archrival, Yoox.

- Puerto Rico has secured a first foothold in its struggles with a towering $72 billion mountain of debt. The island's electric power authority and a group of big investors agreed late Tuesday on terms for restructuring as much as $5.7 billion of bonds. (

- The board of the California State Teachers' Retirement System, known as Calstrs, is discussing whether it would be best to shift as much as $20 billion of its portfolio out of stocks and even out of some fixed-income positions, in favor of something new, a "risk mitigation strategy." (



The Times

Net-A-Porter founder quits before merger

Natalie Massenet has stepped down from Net-A-Porter, the online luxury fashion retailer that she founded 15 years ago. Yoox SpA, which bought Net-A-Porter in March, said on Wednesday Massenet had tendered her resignation. It said that she would not join the board of the enlarged company when the sale is completed next month. (

Juke box jury rules in favour of Sunderland

Nissan Motor Co Ltd has given the green light to produce the next generation of its successful Juke model in Britain. The Nissan plant at Sunderland, Britain's biggest car factory, fought off competing claims from within the Japanese manufacturer's group, including its Barcelona operations, and from underutilised facilities around France that are owned by Renault, its alliance partner. (

Eggborough coal plant to close at cost of 240 jobs

One of Britain's biggest power stations is to close, with the loss of 240 jobs. The planned closure of Eggborough, a coal-fired plant in North Yorkshire that produces 4 percent of Britain's electricity, was announced as the owner of the nearby Drax plant said that it was suing the government over George Osborne's removal of a green tax break. (

The Guardian

Broadgate Quarter sale collapses as Chinese investor pulls out

A major City property sale has collapsed after a Chinese investor abruptly pulled out of its 455 million pounds purchase of Broadgate Quarter. The joint owners of the building in the heart of London's Square Mile, the U.S. property developer Hines and HSBC Alternative Investments, had been close to completing the sale after weeks of due diligence. (

265 Phones 4u stores still vacant a year after collapse

At least 265 former Phones 4u stores are still empty almost a year after the company collapsed, as Britain's struggling high streets fail to attract replacement tenants. The large number of unoccupied stores reflects the damage caused by the controversial administration, which led to the loss of 3,500 jobs. (

The Telegraph

South African tycoon Christo Wiese eyes UK supermarkets

The South African billionaire who has recently snapped up Virgin Active, the gym chain, and New Look, the high-street retailer, is now training his sights on Britain's struggling supermarket industry, it can be revealed. Christo Wiese said there were parallels between the grocery sector in his home country, where he has built up the ShopRite empire into the continent's largest food retailer, and the highly competitive UK market. (

Sky News

Brooks Back At News UK As Sun Gets New Editor

Rebekah Brooks is to return to her job running News Corp's British newspaper arm after being cleared of involvement in the phone hacking scandal. The company said she would resume her role as News UK chief executive from Monday, four years after she stood down from the role at News International following the closure of the News of the World. (

3i Review To Spark 275 mln stg Tommee Tippee Bids

The owner of the Tommee Tippee range of baby products, Mayborn Group, is close to being put up for sale in a move that will underline the revival of 3i, the British private equity group. Mayborn is understood to be valued by 3i at roughly 275 million pounds including debts, with a number of unsolicited approaches said to have been made by potential bidders in recent months. (

All Eyes On The ECB: Fearful Markets Pray Mario Draghi "Panicks"

"Markets stop panicking when policy makers start panicking" - BofA strategist Michael Hartnett

All eyes will be on Mario Draghi on Thursday as expectations for something big from the former Goldmanite have grown over the past two weeks. More specifically, some now think the odds of QE expansion have increased considerably in light of recent events. Here's what we said on Wednesday:

Why would the ECB expand QE you ask? Well, first because if we're going by inflation, PSPP really hasn't worked as evidenced by collapsing expectations.



And second because the only thing that can offset the synthetic inverse QE that China and/or the rest of the EMs embarked on, is more quite tangible QE conducted elsewhere, ideally at the ECB (which is currently 6 months into its first QE episode), or Japan (although the ceiling to debt monetization there may have been already hit with the BOJ already monetizing more than 100% of all gross issuance) but not the Fed, whose rate hike intentions are what started this entire global reserve liquidation fiasco in the first place.


So in short, the deflationary bogeyman still lurks, as does more than a $1 trillion in expected EM FX reserve draw downs spearheaded by China with Saudi Arabia right behind Beijing. That will serve to remove liquidity from markets and put upward pressure on core rates, effectively working at cross purposes with DM central bank easing.

And then there's the outright turmoil in China's financial markets, the confusion wrought by the yuan deval, heightened volatility across the globe and chaos in emerging markets from LatAm to AsiaPac. Put simply, Draghi's famous jawboning might not do the trick this time especially with everyone casting a wary eye towards the Fed.

Bottom line: nothing calms the market like a panicked central banker.

On EUR/USD via Bloomberg:

  • EUR/USD is little changed at 1.1225 within tight range today as traders wait for ECB rate decision at 1:45pm CEST and press conference afterwards. 
  • Traders currently in wait-and-see, headline-trading mode, and they aren’t pre-committing to cash positions
  • All eyes on whether Draghi will talk down the euro and/or signal a possible expansion of ECB’s QE if needed
  • Dovish stance will see EUR testing 21-DMA support at 1.1194 ** Pair has been trading above that lvl since Aug. 10
  • Next support at 1.1102/07 21-DMA/Aug. 20 low
  • Bids seen at 1.1185/90 and 1.1150, a trader in London says
  • Should Draghi disappoint EUR bears, pair may test offers at 1.1275/80: trader
  • Daily trendline resistance since Aug. 27 at 1.1308 and 1.1364 high on that day may cap reaction initially
  • Any knee-jerk response might be short lived as all important NFP data expected tmrw
  • Probability of a Sept. Fed liftoff now at 32%
  • Below, find some color on today's pivotal ECB decision from everyone you might care to hear from.

*  *  *

From Bloomberg's Richard Breslow:

With China closed, global equities are having a calm up day which perhaps gives some insight into the broader view of risk without Shanghai panic, Bloomberg’s Richard Breslow writes. By and large it has been a quiet day as we await the ECB and nonfarm payrolls. No one is looking for the ECB to move on rates. The market is looking for the staff projections to be cautious with any outlook change and the heavy lifting to be done by Draghi at the press conference with a ready-to-act statement on unwarranted tightening. Any sign of cautiousness could be a mistake as global markets need bold actions. The economy needs it, the currency needs it.

  • The five year/five year inflation gauge that Draghi has said the ECB watches very carefully remains at very depressed levels. There is no sign from the swaps market that inflation is expected to hit target as far as the eye can see. Say what you will about the market being wrong, but the market has had a better track record on predictions than many central bankers. Germany is not the euro zone. Isn’t that the message we are meant to have learned throughout the financial crisis? I would certainly ask Draghi if this swap still figures highly in their forecasts
  • At the other end of the spectrum, bund yields are staying elevated. (Yikes, I can’t believe I am calling 80bps elevated.) Much has been written about why bund yields are higher despite the equity turmoil, but the reality remains. From a technical level 80 bps has been interesting. The ECB wouldn’t want yields to break higher. And the last thing the rest of Europe needs is higher yields. This week three euro- zone countries will have sold bonds at yields that have been moving higher since their last go rounds
  • The euro remains in the middle of its YTD range with the USD. As long as EUR/USD remains above 1.1100-1.1150, let alone its 55-day moving average, technicians view it as a buy. The euro zone, again Germany aside, can’t afford a strengthening currency. This includes the rest of the core as well as the peripherals. It’s not currency war to get the EUR down, it’s economics if they want to strengthen the economy. EUR/GBP poking its head above the 200-DMA won’t have gone unnoticed
  • The IMF which has continued its serial downgrading of global growth forecasts has said so again. After cutting its growth forecasts in July, IMF Managing Director Lagarde said earlier this week that, “the global expansion outlook is worse than the lender anticipated less than two months ago,” with advanced and Asian economies growing more slowly than expected. Ahead of this week’s G-20 meeting the IMF argues that “Advanced economies should maintain supportive policies. In most advanced economies substantial output gaps and below-target inflation suggest that the monetary stance must stay accommodative”
  • Global equity markets have been in a panic. Volatility has spiked. A strongly dovish ECB will help. If volatility is the supposed enemy of a central banker then here you go. The PMIs have not been spectacular. Even the Spanish economic miracle took a breather this week with employment data described as showing a deceleration in the economy by Miguel Cardoso, chief Spain economist at Banco Bilbao Vizcaya Argentaria SA.
  • This really isn’t the time for the ECB to go small. It is an opportunity for them to exert some leadership

From Deutsche Bank:

We expect the ECB to respond to recent events with verbal intervention. Our new market-based Financial Condition Index (FCI) has tightened sharply in the last couple of weeks. But the ECB sees gradual spillovers from its accommodative policy stance into bank credit counterbalancing tighter financial market conditions. Euro area GDP growth expectations remain largely static, with lower oil prices and easy credit conditions offsetting a stronger euro and slower global growth. This facilitates a “steady hand” on policy. However, we expect the ECB staff inflation forecast for 2017 to be revised marginally lower. Although we believe that fears of a hard landing in China are overdone, capital outflows could put upward pressure on the euro or — through falling FX reserves — on long-term government bond yields. We expect the ECB to reiterate its readiness to act, if necessary.

From Citi:

The review of financial, economic and monetary developments is likely to highlight some growing uncertainty about the state of health of the global economy at a time of increased financial market volatility related to the deterioration in Chinese economic prospects and possibility of a first rate hike by the US Federal Reserve. The assessment of the euro area economy will likely be similar to previous iterations, in our view, acknowledging an ongoing but moderate recovery. From an inflation perspective, we suspect that the ECB will take heart from the slight increase in core inflation rates. However, we expect that the probable lowering of inflation mid-points, and of the longer-dated estimates, together with the sizeable correction in market-based inflation expectations, could lead to some strengthening in the ECB’s language about the need to maintain an accommodative monetary policy stance.

From Goldman:

Compared with the July meeting, the immediate risk of a systemic event on the back of developments in Greece has declined significantly. However, the external risks for the Euro area seem to have increased. In particular, questions regarding the momentum of the Chinese economy are likely to weigh on the minds of Governing Council members. Judging from the accounts of the last meeting, the Governing Council was already concerned in July about the negative impact on the Euro area from a potential slowdown of the Chinese economy.    

We think the sharp decline in the oil price (around EUR10 since the July meeting) will be another focal point of the discussion in the Governing Council. While a lower oil price is clearly positive for the growth outlook of the Euro area, the negative short-term effect on inflation - given the still low overall level of annual inflation rates - will be a cause for concern, at least for some Governing Council members. The decline of around 20bp observed in 5-year-forward inflation-linked swap rates to below 1.7% since the July meeting will add to these concerns. After all, the rationale given for the introduction of the expanded asset purchase programme in January this year was the risk that the oil price decline "could adversely affect medium-term price developments" and that "this assessment is underpinned by a further fall in market-based measures of inflation expectations over all horizons and the fact that most indicators of actual or expected inflation stand at, or close to, their historical lows".

Overall, we expect the Governing Council (GC) to acknowledge the continuing uncertainty regarding the economic and inflation outlook. We also expect a signal similar to the July statement that the GC is willing to act should clear evidence emerge that the ECB's baseline scenario of a moderate recovery is at risk: "If any factors were to lead to an unwarranted tightening of monetary policy, or if the outlook for price stability were to materially change, the Governing Council would respond to such a situation by using all the instruments available within its mandate."

From BofA:

Events colliding with the ECB's yearning for plain sailing In an interview with Boersen Zeitung last week, ECB board member Benoit Coeuré stated that “we do not wake up every morning and look at the economic indicators in order to decide whether to raise or lower interest rates or whether to stop or expand QE”, conveying a sense that QE should be allowed time to work through the economy and is not designed to “micro manage” the cycle. The decision to reduce the frequency of the Governing Council meetings – announced in July 2014 – also signalled the ECB’s willingness to wean the market off speculating on how the central bank would react to short-term “noise”. Finally, we also believe that with QE, as it was designed in January, the central bank has found a delicate internal compromise, and that the bar for any material tweaking is quite high. Still, the ECB has been “asymmetric” for quite some months, firmly dismissing any tapering of the programme before September 2016, but open to more action. Draghi noted in July that it was ready to do more “if any factor were to lead to an unwarranted tightening in monetary conditions or if the outlook for price stability were to materially change”. The issue then is whether the China-related turmoil would qualify as a “material change”. We believe there is enough room for more dovish talking, but not – yet – for action, even if the latest developments sit well with our view that the ECB, by year-end, will have to make a continuation of QE after September 2016 a baseline and not a possibility, given a deteriorating inflation outlook.

During his July press conference, Draghi mentioned in the prepared statement that “market based inflation expectations have, on balance, stabilised or recovered further since our meeting in early-June”. This no longer holds with “5 year/5 year” down to 1.62%. It is always tempting for central banks to dismiss market-based inflation expectations, given their tendency to over-react to the latest developments, but even before the materialisation of the Chinese turmoil, we had reservations about the ECB’s inflation trajectory. On the basis of the move in oil prices alone, we estimate the central bank will have to revise down its forecasts by 0.3 pp in 2015 and by 0.2 pp in 2016. Because of the quirk in the slope of the oil futures curve, the central bank should be able to claim that 2017 will still be consistent with their definition of price stability, but this comes at a cost in terms of price level gap. 

From Credit Suisse:

The ECB will present its new staff projections for inflation and growth. Our economists expect that the ECB will lower its 2017 inflation forecast from 1.8% in the March and June forecasts to 1.7% in the September forecasts. This could indicate that QE is unlikely to end before September 2016 and run potentially longer. However, our economists do not expect a firm extension. We believe the market will take the lowering of the 2017 forecasts as moderately dovish and we would expect a small rally on this. If the ECB only lowers its forecasts to 1.7% for 2017, it would still be significantly more optimistic about inflation than our economists or the market (see Exhibit 22). Our economists' baseline scenario for inflation is an increase to 1.5% by year-end 2017 and an average inflation of 1.35% for the same year. While they expect 2016 inflation to be significantly driven by oil and currency moves, the 2017 number is approximately unchanged in each of their risk scenarios. The market, however, is significantly more bearish on inflation for 2017. The market based average inflation in 2017 is approximately 0.75%, which would still be close to 1% below the ECB's new forecast.

From Credit Agricole:

The ECB should worry in our view about a potential China-induced global demand shock which could hurt the Eurozone recovery (exports account for more than a quarter of Eurozone’s GDP) and inflation outlook (the recent EUR TWI appreciation and lower commodity prices should drag the Eurozone headline inflation lower still).

There are several ways in which the ECB could telegraph its dovish message:

1/ Downward revision of inflation and growth forecasts - of particular importance will be the new HICP mid-point projections for 2016 and 2017 (that stand at 1.5%YoY and 1.8%YoY currently). A forecast downgrade seems widely anticipated by now and the real question is more about the magnitude of the correction. A significant downward revision (eg a new inflation forecast of close to or below 1.2% for 2016 and 1.5% for 2017) would signal that the current QE program could extend beyond September 2016. In addition, indications that the Governing Council is now less optimistic about the Eurozone growth over longer term (GDP growth forecasts are 1.9% for 2016 and 2.1% for 2017) should be seen as a dovish surprise, strengthening the ECB’s commitment to QE for longer.

2/ Verbal intervention in EUR – EUR has been one of the biggest beneficiaries from the China-induced market turmoil with the TWI index at one point appreciating by more than 5%. The ECB President is fully aware of the fact that if the latest FX appreciation is left unaddressed, EUR could extend its gains broadly. We therefore think that EUR could feature prominently during the press conference with Draghi highlighting the importance of the currency as driver of inflation in the environment of persistent downside pressure on global commodity prices.

From Barclays:

Since the last policy meeting in July, there have been several macroeconomic and financial factors that have reduced the near- and medium-term inflation outlook and tightened overall financial conditions. The ECB staff macroeconomic projections are likely to show a downward revision in inflation forecasts for both 2015 and 2016, resulting from a stronger euro and weaker oil price futures. Therefore, we expect President Draghi to maintain an accommodative stance during his introductory statement, likely insisting that the Governing Council still has tools available should monetary and financial conditions tighten further. We now expect further easing to be announced before year-end as we believe inflation is unlikely to return to levels consistent with the ECB’s objective of price stability over the next two years. A time extension of the asset purchase programme to beyond September 2016 is the most likely option, in our view, and we think it could be decided as early as next week. Other options include an extension of the size and the scope of asset purchases and a cut in the deposit rate – the latter would be the most effective against a strong euro, in our view, but we do not expect such announcements next week, although the Governing Council will probably start discussing these options. 

Bonus: Barclay's QE tracker

And one more thing: Can the ECB actually do anything to offset FX reserve drawdown when EM flows only seem to track the Fed? 

With China's Market Chaos Offline, Futures Levitate On ECB Easing Hopes

With China closed today, the usual overnight market manipulation fireworks out of Beijing were absent but that does not meant asset levitation could not take place, and instead of the daily kick start out of China today it has been all about the ECB which as we previewed two days ago, is expected - at least by some such as ABN Amro - to outright boost its QE, while virtually everyone else expects Draghi to not only cut the ECB's inflation forecast, which reminds us of the chart which in March we dubbed the biggest hockeystick ever (we knew it wouldn't last)...


... but to verbally jawbone the Euro as low as possible (i.e., the Dax as high as it will get) even if the former Goldmanite does not explicitly commit to more QE.

Elsewhere in Asia, stock markets traded mostly higher amid a rebound in the recent global stock market rout, with Chinese markets closed for Victory Day. The Nikkei 225 (+0.5%) outperformed as risk on sentiment saw all sectors trade in the green, driven by another burst of USDJPY levitation early in the session. ASX 200 (-1.4%) bucked the trend after Myer (-16.81%) fell the most on record following reports of a share sale, while a miss on Australian retail sales also weighed on sentiment. 10yr JGBs traded lower as strength in Japanese equities dampened demand for safer assets, while a well-received enhanced liquidity auction failed to spark demand.

Despite the looming risk events, most notably tomorrow's NFP payrolls which is the September rate hike make-or-break event, stocks in Europe traded higher (Euro Stoxx: 1.5%) as market participants used the decrease in volatility amid the close of markets in China for Victory Day parade as an opportunity to re-establish longs. Nevertheless, the upside was led by health care sector, underpinning the fragility of the latest bounce. In terms of notable equity movers, EasyJet (+5.3%) shares surged higher after the carrier raised its FY pre-tax view, on the other hand EDF (-4.2%) shares traded lower since the open after the company announced that their new nuclear plant in Normandy is being pushed back until the end of 2018 and will run USD 2.2bIn over budget.

In terms of fixed income, Bunds head into the North America crossover in modest positive territory ahead of the risk event of the day in the form of the ECB rate decision, with market participants looking out for any indications of a possible extension to ECB QE.

In FX, EUR gained across the board, albeit modestly, as market participants positioned for the upcoming ECB policy meeting and reduced carry trade allocation. This in turn saw shorter-dated vols collapse, however there is a risk of another leg higher in case the President of the ECB delivers a dovish statement, which in widely expected to focus on the developments surrounding China and Eurozone inflation.

Despite the recovery in riskier assets overnight, AUD remains under selling pressure, with the selling driven by less than impressive Australian retail sales data which printed its 1st decline in 3 months which saw AUD/USD fall below 0.7000 level.

Going forward, market participants will get to digest the ECB rate decision and accompanying press conference as well as the release of the latest US weekly jobs report and ISM non-manufacturing.

With China offline, another asset class missed its usual acrobatis: oil. The energy complex heads into the NYMEX pit open fairly flat after light newsflow overnight, while the metals complex sees an unwind of recent trends, with gold lower on the day, while palladium underperforms after the recent pressure on the metal given that China makes up 20% of global palladium consumption.

Market Wrap

  • Europe’s Stoxx 600 rises 1.6%
  • DAX up 1.9%, FTSE 100 up 2%
  • V2X down 9.3% at 30.5
  • Euro up 0.05% at $1.1232
  • LME 3m Nickel up 2.1%, LME 3m Copper up 2.1%
  • S&P 500 futures up 0.4% at 1955.70
  • Credit: iTraxx Main down 1.7 bps to 72.51, iTraxx Crossover down 4.8 bps to 336.07
  • Chinese markets closed for 2-day holiday

Bulletin Headline Summary from Bloomberg and RanSquawk

  • Despite the looming risk events, stocks in Europe traded higheras market participants used the decrease in volatility amid the close of markets in China for Victory Day parade as an opportunity to re-establish longs
  • EUR gained across the board, albeit modestly, as market participants positioned for the upcoming ECB policy meeting and reduced carry trade allocation
  • As well as the ECB rate decision, market participants will get to digest the release of the latest US weekly jobs report, ISM non-manufacturing and EIA natural gas storage change data
  • Treasuries steady before ECB rate decision, Draghi press conference; market focus on tomorrow’s August payrolls report, est. 217k, unemployment rate 5.2%.
  • Weaker commodity prices, slowing trade and a rout in global equities make it likely the ECB will downgrade its quarterly inflation forecasts at his press conference on Thursday
  • The ECB is seeking to acquire as much as EU645m ($725m) of Dutch and Irish mortgage bonds as it increases efforts to buy asset-backed securities, according to three people familiar with the matter
  • Bill Gross says if the Fed raises rates in September, policy makers are likely to wait at least six months before a second hike. Market measures indicate the wait may be twice that long
  • The war of words between Republican presidential candidates Donald Trump and Jeb Bush took another personal turn on Wednesday when Trump admonished his rival for not speaking English on the campaign trail
  • Chinese hedge fund Shanghai Chaos Investment Co. apologized to investors for losses from a deepening rout in the country’s financial markets
  • As fighter jets streaked through the skies of Beijing and tanks rolled through Tiananmen Square to commemorate the end of World War II, Chinese President Xi Jinping told the world that the nation was committed to peace and announced the biggest cuts to the army in almost two decades
  • One IG deal, a SSA, priced $1b yesterday, first in 11 sessions. No HY since August 19. BofAML Corporate Master Index -1bp to +169; reached +172 last week, widest since Sept 2012; YTD low 129. High Yield Master II OAS -5bp to +573; reached +614 last week, widest since July 2012; YTD low 438
  • Sovereign 10Y bond yields mostly higher. Asian stocks mostly higher, European stocks gain, U.S. equity-index futures rise. Crude oil falls, gold lower, copper gains

US Event Calendar

  • 7:30am: Challenger Job Cuts y/y, Aug. (prior 125.4%)
  • 8:30am: Initial Jobless Claims, Aug. 29, est. 275k (prior 271k)
    • Continuing Claims, Aug. 22, est. 2.255m (prior 2.269m)
  • 8:30am: Trade Balance, July, est. -$42.2b (prior - $43.8b)
  • 9:45am: Markit US Composite PMI, Aug. F (prior 55)
    • Markit US Services PMI, Aug F, est. 55 (prior 55.2)
  • 9:45am: Bloomberg Consumer Comfort, Aug. 30 (prior 42)
  • 10:00am: ISM Non-Mfg Composite, Aug., est. 58.2 (prior 60.3)
    • Central Banks
  • 7:45am: ECB Main Refinancing Rate, est. 0.05% (prior 0.05%)
  • 8:30am: ECB’s Draghi holds news conference
  • 9:00pm: Fed’s Kocherlakota speaks in Missoula, Mont.
  • 11:00am: U.S. to announce plans for auction of 3M/6M bills, 3Y/10Y notes, 30Y bonds

DB's Jim Reid completes the overnight recap

With China off on holidays for the rest of the week, one source of recent volatility will be off the table until Monday at least. However before you relax and put your feet up remember that its ECB meeting day today and payrolls tomorrow, the latter being the most important economic print left before one of the most eagerly anticipated FOMC meetings in a decade 10 days later.

With regards to the ECB, Draghi’s press conference will be closely watched. DB’s Mark Wall expects the council to, as a minimum, highlight downside risk, reiterating its commitment to QE and signaling its ‘readiness’ to act. However Mark thinks that this may not be enough and instead the rhetoric may go further than in the last meeting. In particular, the Governing Council and Draghi could explicitly mention that there is an increased likelihood that the ECB will have to do more to achieve a sustainable inflation path towards 2%. This could eventually include extending the duration or increasing the monthly target of asset purchases. Also worth watching will be the staff inflation forecasts where Mark expects the 2017 forecast to be revised marginally lower. This fits in with our view that central banks will likely be forced to do more for some time to come.

We'll fully preview payrolls tomorrow but it’s been interesting reading Joe LaVorgna's work over the last few weeks. He thinks there is a negative seasonal bias in the August report that if repeated again tomorrow could be the final nail in the coffin for a September hike. So his forecast is 170k on payrolls versus 217k on the street.

In a prelude to Friday’s report, there was a fair degree of attention on yesterday’s ADP employment change reading, which while coming in slightly below expectations at 190k (vs. 200k expected), was sufficient enough to keep payrolls forecasts unchanged for the most past. July’s reading was revised down a touch (to 177k from 185k) while gains last month - with the exception of the energy industry - were said to be largely broad based. The data saw 10y US Treasury yields nudge up 4bps to an intraday high of 2.197%, before paring all of that move following some weak July factory orders data (+0.4% mom vs. +0.9% expected), only to then move higher into the close again to finish up 3.2bps on the day at 2.185%. A decent rebound in US equity markets with the S&P 500 closing up 1.83% was the other notable highlight yesterday, seemingly on the back of some relief out of China as bourses there rebounded off the day’s lows following some more reports of state intervention ahead of the two-day holiday.

With China out, it’s been a decent start to trading in Asia and one that’s felt a lot calmer relative to recent sessions. Markets in Japan in particular are following the lead from the US yesterday with the Nikkei (+1.40%) and Topix (+1.64%) enjoying a strong session. The Kospi (+0.09%) has seen some more modest gains while the ASX is down -1.03% as we to print. S&P 500 futures are more or less unchanged and 10y Treasuries are down around a basis point. In the FX space it’s been a relatively mixed start across most EM currencies, while DM currency moves are highlighted by more weakness for the Aussie Dollar which has fallen 0.3% and pushing close to breaking through $0.70 following a softer than expected retail sales print this morning.

Back to markets yesterday. One source of volatility which continues to plague markets at the moment is the Oil complex where yesterday we saw WTI (+1.85%) bounce back after the heavy losses on Tuesday. That closing level masked a steep decline of some 6% yesterday afternoon following the latest US supply numbers out of the EIA which showed supplies last week rose 4.7m and the most since April after expectations for a rise of just 900k. However after the falls, a late-afternoon rally helped the complex close back in positive territory.
The rest of the US dataflow was a tad more mixed meanwhile. Nonfarm productivity for Q2 surprised to the upside with a 3.3% qoq saar reading (vs. +2.8% expected) although unit labour costs for the same quarter surprised to the downside (-1.4% qoq saar vs. -1.2% expected). There seemed to be more attention than usual on the Fed’s Beige Book however (although perhaps a sign of just a quieter day all round for news-flow) after the findings revealed that 11 out of the 12 Fed districts reported moderate or modest growth while several districts were said to have reported increasing wage pressure as a result of labour market tightening. Of interest also were the notable mentions of China by some of districts in various contexts including as a source of slowdown in certain industries. The country was mentioned eleven times in all having not been mentioned in the July release. All told though there’s been no change to the current pricing for a September liftoff relative to this time yesterday with it staying at 32%.

It was a pretty quiet session closer to home in Europe yesterday. After reasonably muted moves during the session, most European equity markets closed up with the Stoxx 600 (+0.27%) in particular snapping a two-day losing run. European credit markets finished more or less unchanged while 10y Bunds ended 1.5bps lower in yield at 0.780% and trading in a fairly tight range with very little data in the region to react to. An in-line Euro area PPI print for July (-0.1% mom) the only notable release yesterday.

Of more interest in Europe was Greece and specifically with regards to the latest GPO opinion poll which showed New Democracy taking a small lead over Syriza. The poll showed Syriza gaining 25% of the total votes which was behind New Democracy at 25.3%. These polls will take on more importance as we run closer to the September 20th election date, but for now it’s interesting to see the first signs of ND taking a (albeit marginal) lead over Syriza. Expect to see more and more polls out over the next couple weeks.

Turning over to today’s calendar now. It’s set to be a busier session this morning for data in Europe with the final August services and composite PMI readings for the Euro area, Germany, UK and France as well as employment data in the latter. Euro area retail sales data is also expected before the ECB meeting at lunchtime. Elsewhere and over in the US this afternoon we’ve got more employment data in initial jobless claims and Challenger job cuts although the highlight may well be the ISM non-manufacturing reading and employment component in particular. The final services and composite PMI prints will also be due along with the July trade balance.

Hyperinflation Cannot Be Prevented By Debt/Deflation


Hold your real assets outside of this system in a private non-government controlled facility   -->



Hyperinflation Cannot Be Prevented By Debt/Deflation

Written by Jeff Nielson   (Click For Original)








A repetitive flaw continues to circulate throughout much of the media – mainstream and Alternative, alike. This flawed analysis contends that we are heading for a deflationary crash, and reflects a fundamental misunderstanding of economic dynamics.

This fundamental (and unforgivable) error comes from a failure to recognize the definition of deflation: it is when the currency in which a particular jurisdiction is denominated rises in value. It is with this basic fact in mind that we can now view a simple hypothetical example, which resolves the phony “inflation/deflation debate” once-and-for-all.

Imagine two economies which are identical in every way, except for one, important difference. They have the same GDP, the same sized population, and a similar set of identical, economic parameters (except for that one difference). Both economies recklessly decide to hyperinflate their currencies, as represented in the “hypothetical” chart above.

This is not a chart of a potential hyperinflation. Rather, it is a chart of a currency which has already been hyperinflated (past tense). For readers who can’t “see” this already, just imagine a chart even more ridiculously extreme requiring a much larger page.

Both Economy A and Economy B have hyperinflated their currencies (i.e. driven the value of those currencies down to zero). Now we come to the key difference between the two economies – and the obvious folly of the Deflationists: Economy A is totally solvent, without a single penny of debt, while Economy B has a $50 trillion national debt, and is obviously bankrupt.

According to the nonsense of the Deflationists, the currency of Economy A which has ‘only’ hyperinflated its currency will fall to zero, while the currency for Economy B which has hyperinflated and bankrupted itself will rise in value – due to the “deflationary crash” about which the Deflationists are continually jabbering.

We thus arrive at the Idiot Principle of Deflation. A nation which only hyperinflates itself will see the value of its currency fall to zero, but a nation which hyperinflates and bankrupts itself will cause that currency to rise in value. The bankruptcy supposedly does more than merely “cancel out” the hyperinflation, it completely overwhelms it.

By now, it should be patently obvious to anyone with two synapses to rub together that the Idiot Principle of Deflation is utter gibberish, and cannot possibly add up, when one simply views the economic dynamics (and definitions) in their proper context. But the mind-numbing idiocy of the Deflationists becomes even more obvious when we add some empirical evidence from the real world.

What makes the hypothetical example above totally unrealistic? Economy A, the solvent economy, would have absolutely no reason to engage in the recklessness and suicide of hyperinflation. Solvent nations never hyperinflate their currencies. Thus every one of the (numerous) regimes throughout history whose currencies exploded into hyperinflation was also already insolvent/bankrupt. It is only such insolvency which creates the extreme desperation necessary for a government to invoke such economic suicide(hyperinflation).

According to the Idiot Principle of Deflation, this is impossible. Because these nations went bankrupt, their currency should have risen in value, rather than collapsed to zero. But there is another principle of idiocy at work here.

As has been pointed out to readers, but apparently ignored by the Deflationists, until our governments embarked upon the even more-reckless fraud of “quantitative easing” (monetizing debt), our governments literally borrowed every unit of currency into existence. This means that these units of currency are/were literally the IOU’s of our governments – our bankrupt governments.


What is the value of an IOU issued by a bankrupt Deadbeat? Zero. The currency of Economy B was already worthless, even before it began it began its hyperinflationary money-printing. The currency of Economy A only became worthless as a result of the money-printing. The currency of Economy A is worthless. The currency of Economy B is doubly worthless.

However, according to the Idiot Principle of Deflation, when you render a currency doubly worthless, it rises in value.

Sadly, this infantile error in logic/arithmetic of which all the Deflationists are guilty cannot be attributed to mere ignorance. It is (has been) nothing less than abject stupidity. The reason why such a harsh verdict is absolutely warranted can be summarized in two words (and one name): John Williams.

It is now a full decade since the esteemed Mr. Williams (of first published his brilliant essay (and analysis) “The Hyperinflationary Depression” (updated on numerous occasions), where he explained why bankruptcy does not (and would not) prevent the value of a currency from falling to zero if that governments pursues a hyperinflationary monetary policy (i.e. hyperinflationary money-printing).

Put simply, a government can destroy the value of its currency and implode into bankruptcy, simultaneously. Empirically, this is precisely what we have seen with every hyperinflationary episode in history. The deflationary crash of bankruptcy occurs (more or less) simultaneously with the hyperinflationary plunge-in-value of the currency. The former never “cancels out” the latter.

This is the true “principle” at work with these dynamics, and it is one which the Deflationists have either ignored (for ten years) or simply lack the capacity to grasp. Individual facets/sectors within an economy can implode in a “deflationary crash” (within that niche). Not only does this fail to negate any overall hyperinflation at work, it must accelerate it. Obviously a nation whose currency is “doubly worthless” should/must plunge to zero even more rapidly than the currency of a nation which is ‘merely’ worthless.

To repeat, every nation in history which has engaged in the suicidal monetary policy of hyperinflation had already succumbed to the fiscal folly of insolvency. Not only is it “possible” to simultaneously have a nation hyperinflate its currency to zero and have a so-called “deflationary” debt-default crash, it is the onlymanner in which hyperinflation ever occurs.


The Deflationists don’t understand economics. They have ignored all of our economic history (where not a single nation has ever “warded off” hyperinflation by going bankrupt). And (apparently) they have never even heard of “John Williams”. They can be, and should be, totally ignored.



Please email with any questions about this article or precious metals HERE


Hold your real assets outside of this system in a private non-government controlled facility   -->



Move Over Entrepreneurs, Make Way for Speculation!

by Keith Weiner


Once upon a time, before banks and before even private lending, there was only one way to prepare for retirement. People had to hoard something durable. Every week, they would set aside part of their wages to buy salt (later, it was silver). Assuming it didn’t get wet, the salt accumulated until they couldn’t work any longer. Then, they would begin selling it off to buy groceries.

This was the best they could do. By modern standards, it wasn’t a very good method. Stockpiling a commodity does not finance business growth, so the hoarder contributed no capital to the economy. And, it carries a very big risk: what if you run out before you die?

The development of lending was a revolutionary breakthrough. Lending allowed the retiree to do business with the entrepreneur. The retiree has wealth, but no income. The entrepreneur is the opposite, with income but not wealth. The retiree lets the entrepreneur use his wealth, in exchange for an income. The entrepreneur is happy to pay interest, in order to grow his business and increase profits.

At times throughout the centuries, governments prohibited lending at interest. They called it a pejorative name—usury. Sometimes, people could work around the law, but when they had to obey lending ceased. No one will risk his wealth, or even forego possession of it, without getting something in return.

Today lending is not illegal, but the Fed has been driving down interest for over three decades. Its administered short-term rate is basically zero. Central bank apologists assert that this will help the economy. It hasn’t yet, and it never will. However, the main concern by both Fed defenders and foes alike is the worry that prices might rise. Well, prices aren’t rising now. So the former are smug and the latter are frustrated.

They miss the real harm of zero interest.

The Fed can force the rate to zero, but it cannot change economic law. As it chokes off interest, the sacred relationship between the saver and entrepreneur is breaking down. Lending to entrepreneurs is dying, and with it growth, opportunities, jobs, and new products. Our horribly weak economy is not in spite of the Fed’s policy. It is because of it. Leaches never cured a fever, and zero interest is not curing the global financial crisis.

If an exchange of wealth and income is not possible, what’s left? It’s replaced with the conversion of wealth to income. Move over, entrepreneur. We don’t need you anymore. Make way for the speculator. Instead of financing productive business, speculation is now the best way to make a profit.

The successful speculator receives someone else’s nest egg. He does not get this as a loan which has to be repaid. He gets it as income, as a profit on his winning trades. He can spend and consume that precious capital, something its previous owner would never do.

It’s a perverse outcome, replacing lending with speculation. However, zero interest makes it necessary, desirable, and easy to bet on asset prices. Without adequate compensation, credit flows to Treasury bonds and major corporations who are performing financial arbitrages like share buybacks. There is always a credit gradient between a large corporation and a small business. However, the lower the interest rate, the steeper the gradient becomes.

Speculation has become very desirable. People need bigger returns than they can get in normal lending. Speculation seemingly offers great returns. I don’t blame the player, I blame the Fed’s perverse game.

Speculation has become too easy. A falling yield is equivalent to rising asset prices, so speculators are simply betting on the Fed’s trend. If I had a penny for every financially unsophisticated person who earnestly told me that I don’t understand the market, well, then I would be richer than most speculators.

Whole generations now believe they will be able to speculate their way to a golden retirement. This is impossible, because they are not investing but consuming.


This article is from Keith Weiner’s weekly column, called The Gold Standard, at the Swiss National Bank and Swiss Franc Blog

America - Good, Bad Or Ugly? Part 1: The Bad

Submitted by Thad Beversdorf via,

I wanted to start with The Bad and then move on to The Ugly so that I can end on a positive note with The Good.

So over the past couple days I’ve read several articles in which someone who is publicly an adamant proponent of righteous behaviour was exposed as being a complete hypocrite (think essentially any politician).  And this really got me to thinking about the epidemic that has befallen America.  We no longer have anyone in positions of trust acting with any sense of integrity.  Our policymakers, bankers, corporations, unions, etc., all of these institutions have become nothing but a mechanism to enhance the personal positions of those who have the ability to directly or indirectly control the actions of those institutions.

By the late 1990’s the world was in the most prolonged period of global peace since WWII.  Accordingly, military budgets around the world were being slashed.  And so those with the powers that be decided the world therefore required some new wars to ensure peace continued (not kidding that is exactly what they argued), as I evidenced in an article last year, The Most Essential Lessons of History that No One Wants to Admit.  Now the thing is, it’s not just politicians and policymakers that are devoid of any common decency these days but those who can manipulate every facet of our society.

Let’s look at central bankers for instance.  The other day David Stockman wrote a great article highlighting the ridiculousness of statements by the Fed Vice Chair, Stanley Fischer.  The point is Fischer is either out of touch, out of his mind or lying to us.  But it’s not just at the highest levels that we see this type of human decay.  Not at all.  Let’s look to an area that so many of us know intimately, the financial services sector.  Now there are a lot of examples we could use here but let’s look at a particularly interesting firm infamous for its culture of indiscretions.  Jefferies LLC, which used to be Jefferies & Company Inc., is a mid tier investment bank, similar to Goldman Sachs in that it has no retail branches.

In 2012 Richard Handler, CEO of Jefferies, was actually the highest paid banker on Wall Street.  And not to be left out in the cold, Handler’s number two, Brian Friedman also topped the charts as discussed in a Bloomberg article from 2013 which explored the credit risk such payouts create.  Now making absurd amounts of money may or may not be ethical but what I find more interesting is the blatant hypocrisy of guys like Richard and Brian.  As has been written about many times (e.g. here and here) is the fact that Richard and Brian put out a monthly company wide letter with words of ‘wisdom’ that are to guide and encourage their employees to rise above the fray.  They look something like this from a recent monthly letter…

“…By the way, the capitalism concept really never took hold in Russia because the only way lasting, open markets work is through transparency, a culture of integrity and rule-following, and a true legal system.”

Now that sounds admirable on the surface, however, the reality when we look at the culture at Jefferies is anything but above the fray.

Remember Jesse Litvak?  He’s the only banker that has been personally prosecuted, convicted and sent to prison for fraud related to TARP and was a Jefferies Managing Director at the time.  Now for those of you that don’t remember, Litvak was caught lying to a customer when an employee of his accidentally sent that client an email exposing the lie.  In the end, Litvak tried to explain away his actions to the court by saying it was common practice at Jefferies.  The government agreed according to a quote from a bloomberg report, “Litvak wasn’t the only employee who lied to his customers, the government said.

Now some might feel well one example doesn’t prove a corrupt culture, right?  And I only wish it were but a fleeting example, unfortunately though isn’t.  Perhaps the most outrageous banking scandal of all time was Sage Kelly, Head of Global Health Care Investment Banking, for Jefferies.  Sage Kelly is the real deal.  He is Wall Street anthropomorphized in all its glory as depicted in a classic article by the boys at ZeroHedge.  And again it appears that it wasn’t just poor behaviour by one man but a culture taken on by several top investment bankers at Jefferies.  And surely the severely outlandish culture adopted by these bankers is not the type of behaviour that goes unnoticed.  For unlike artists, legends in banking are known, not in death, but in the here and now.

What is less known is that Jefferies was actually sued by UBS for the way in which they acquired Sage and his Investment banking group from UBS, as this article by the NYT describes.  But it appears that for Richard Handler and his executive officers, being called out for inappropriate behaviour is not a deterrent as some 3 years later Jefferies was sued by Newedge for the very same thing, as described in this FT article.  It’s beginning to seem that despite Richard and Brian’s monthly words of moral and ethical enlightenment to their employees, it is them that have failed to live up to the benchmark they preach.

Now when a CEO is making $58M a year he should be held to a higher standard of accountability.  But what we find is quite the opposite, as we regularly see now in America those in positions of notable status are exempt from consequences.  The Rich Handlers, Donald Rumsfelds, Hilary Clintons of the world reap all the upside and zero downside.  Similar to the market having a Fed put, members of America’s upper class have a legal put.  They simply are not held to the same standard to which the rest of us are held.  And so if Litvak had the letters CEO in front of his name surely he would have been spared any prison time.  Instead a large fine would have been paid into the Treasury’s General Fund and all would have been forgiven.

And so the consequences are worn by the non-elites, that is, the rest of us.  The Rumsfeld lies that took us to Iraq and all of the subsequent continued fallout (now ISIS) are worn by soldiers fighting a synthetic enemy created in a social laboratory to perpetually expand defense industry contracts.  The selling of favours and foreign policy deals by Hillary are worn by the families that lost loved ones in Benghazi.  The multiple failures of Handler to properly manage risk and culture inside his firm led to rising legal and regulatory costs and declining business further leading him to shut down, only three years after purchasing, Pru Bache, a 130 year old company that had weathered the worst of storms.  His failures are worn by thousands of non-six-figure income financial services sector employees that lost their jobs when he closed the doors on the 130 year old company but while he continues to receive his 8 figure compensation.

We can all think of literally a hundred examples of the legal put provided to those in the American upper class.  And while any single example has a story of tragedy behind it, it is the assumed immunity we give across the board to those with a notable status that perpetuates their self serving indifference to those for which their duties are naturally responsible but now unaccountable.   Yet we give them immunity, in part, because they do a fantastic job of portraying themselves as having concern for right and wrong and falling on wrong only due to circumstances outside of their control.

This really pinpoints the issue.  While we listen to politicians, central bankers and CEO’s preach publicly about doing what’s right, ensuring economic stability, protecting the middle class and watching out for our employees and customers, it’s all absolute bullshit now isn’t it.  That is, while guys like Rich and Brian pretend to be angelic proponents of good behaviour their firm is clearly an absolute disgrace in an industry already known for its lack of integrity.  And it’s surely not just Jefferies but the general corporate and political culture in this nation that suffers from a lack of accountability and a lack of character.  Apologies and fines are great but they don’t deter the bad behaviour that always lands on the rest of us, that much is clear.

This nation has become a land where character and integrity are secondary to profits for the few and self serving interests of the powerful.  And as we are seeing already for the third time in this millennium’s infancy, stability and prosperity can be but short lived for even the highest paid CEO’s in such a world.

In Part II, I am going to expose The Ugly by releasing a recorded conversation of perhaps, contextually, the ugliest example of just how callous and inhumane our banking executives have become.  Watch for it.

China's "Historic" 70th Victory Day Parade: Live Webcast

For those wondering why Chinese futures aren't crashing as of this moment, only to surge in the last hour of trading like plunge protected clockwork, the reason (and also the patriotic alibi behind China's "National Team" valiant, if failed, attempts to get a green Shanghai Composite close the past three days) is shown below: this is what Tiananmen Square looked like moments ago before the start of China's "historic" 70th V-day parade celebrating the anniversary of the end of the second world war as well as China's victory over Japan, not necessarily in that order (it is still unclear if those five Chinese ships parked off of Alaska are in any way related to today's festivities).

Here, via Xinhua, is a list of China's contributions in the war effort:

  • 1 million -- Since the July 7 Incident in 1937, when full-scale war against Japanese aggression broke out, the Chinese battlefield tied up about 1 million Japanese troops, or two thirds of the total Japanese army.
  • This allowed the Soviet Union to deploy more than half a million troops from the Far East to the country's major battlefield with the German Nazis, thus accelerating its victory against Germany.
  • 1.5 million -- As the major battlefield of the Pacific War, China inflicted heavy casualties on the Japanese aggressors, costing them 1.5 million troops, which makes up more than 70 percent of total Japanese military casualties in the war.
  • 1.28 million -- After the war, more than 1.28 million Japanese troops surrendered their weapons to China, accounting for about 50 percent of those who surrendered overseas.
  • 35 million -- China was one of the crucial fighters in WWII and made tremendous sacrifices during the war. According to incomplete statistics, Chinese military and civilian casualties added up to approximately 35 million.
  • That accounts for one third of the total casualties suffered by all countries during WWII.

What makes this year's parade unique is that for the first time in addition to the countless participants from the People's Liberation Army, nearly 1000 troops from 17 countries will participate in the parade.

The preparations started early as this video of downtown Beijing confirms. Alternatively, this is what China's capital will look like once the SHCOMP is back to 2000:

China's #VDay parade military vehicles move to downtown Beijing.

— China Xinhua News (@XHNews) September 3, 2015

Then the troops starting arriving:

Video: Troops gather near Tian'anmen Square, ready for China #Vday parade that marks 70th anniv of WWII end

— China Xinhua News (@XHNews) September 3, 2015

Troops are all lined up along Chang'an Street in #Beijing, all prepared for the grand #VDay parade.

— People's Daily,China (@PDChina) September 2, 2015

All Set to Go: Troops are standing by near #Tiananmen Square for the kick off of the #VDay parade.

— People's Daily,China (@PDChina) September 2, 2015

... then the foreign soldiers:

Replay: Foreign soldiers from 17 countries train in Beijing for today’s #VDay parade

— China Xinhua News (@XHNews) September 3, 2015

... and the people:

Audience are arriving at the scene for the grand #VDay military parade, which is starting in an hour and a half.

— People's Daily,China (@PDChina) September 3, 2015

... the occasional celebrity:

Kungfu star @EyeOfJackieChan is seen at the scene of #Beijing #Vday military parade among other spectators

— China Xinhua News (@XHNews) September 3, 2015

... then the generals:

Chinese troops and foreign military are preparing for the kick off of the #VDay parade in #Beijing.

— People's Daily,China (@PDChina) September 3, 2015

Until finally Xi himself showed up:

#VDay President Xi Jinping and his wife Peng Liyuan take photo with heads of foreign delegations and their spouses.

— People's Daily,China (@PDChina) September 3, 2015

Chinese President #XiJinping and his wife welcome S. Korean President #ParkGeun-hye ahead of #VDay parade.

— China Xinhua News (@XHNews) September 3, 2015

And, naturally, the guests of honor among which none other than Vladimir Putin:

Live: President #XiJinping & first lady Peng Liyuan greet #Putin ahead of China's #VDay parade @KremlinRussia_E

— China Xinhua News (@XHNews) September 3, 2015


Finally, for those sitting in front of their computer in Chinese stock market rollercoaster withdrawal, here is a live feed from Beijing to fill the transitory void in your lives:

"It's A Tipping Point" Marc Faber Warns "There Are No Safe Assets Anymore"

Markets have "reached some kind of a tipping point," warns Marc Faber in this brief Bloomberg TV interview. Simply put, he explains, "because of modern central banking and repeated interventions with monetary policy, in other words, with QE, all around the world by central banks - there is no safe asset anymore." The purchasing power of money is going down, and Faber "would rather focus on precious metals because they do not depend on the industrial demand as much as base metals or industrial commodities," as it's now "obvious that the Chinese economy is growing at nowhere near what the Ministry of Truth is publishing."


Faber explains more... "I have to laugh when someone like you tries to lecture me what creates prosperity"

BPlayer(null, {"id":"794gXpiFRAmY4s7kObv70g","htmlChildId":"bbg-video-player-794gXpiFRAmY4s7kObv70g","serverUrl":"","idType":"BMMR","autoplay":false,"log_debug":false,"ui_controls_popout":false,"wmode":"opaque","share_metadata":{"canonical_url":""},"use_share_overlay":true,"video_autoplay_on_page":false,"use_js_ads":true,"ad_code_prefix":"","ad_tag_gpt_preroll":true,"ad_tag_gpt_midroll":true,"ad_tag_sz_preroll":"1x7","ad_tag_sz_midroll":"1x7","ad_tag_sz_overlay":"1x7","ad_network_id_preroll":"5262","ad_network_id_midroll":"5262","ad_network_id_overlay":"5262","ads_vast_timeout":10000,"ads_playback_timeout":10000,"use_comscore":true,"comscore_ns_site":"bloomberg","comscore_page_level_tags":{"bb_brand":"bbiz","bss_cont_play":0,"bb_region":"US"},"use_chartbeat":true,"chartbeat_uid":"15087","chartbeat_domain":"","vertical":"business","ad_tag_overlay":"business/videooverlay","use_parsely":true,"source":"BBIZweb","module_conviva_insights":"enabled","conviva_account":"c3.Bloomberg","zone":"video","ad_tag_cust_params_preroll":"","width":640,"height":360,"ad_tag":"","ad_tag_midroll":"","offsite_embed":true});


Some key exceprts...

On what central banks hath wrought...

I think that because of modern central banking and repeated interventions with monetary policy, in other words, with QE, all around the world by central banks there is no safe asset anymore. When I grew up in the '50s it was safe to put your money in the bank on deposit. The yields were low, but it was safe.


But nowadays, you don't know what will happen next in terms of purchasing power of money. What we know is that it's going down.

On the idiocy of QE...

in my humble book of economics, wealth is being created through, essentially, a mixture of capital spending, and land and labor. And if these three production factors are used efficiently, it then creates a prosperous society, as America became prosperous from its humble beginnings in 1800, or thereabout, to the 1960s, '70s. But it's ludicrous to believe that you will create prosperity in a system by printing money. That is economic sophism at its best.

On the causes of iunequality...

unfortunately the money that was made in U.S. stocks wasn't distributed evenly. And we have precise statistics, by the way published by the Federal Reserve, who actually benefited from the stock market boom post-2009. This is not even one percent of the population. It's 0.01 percent. They took the bulk.


And the majority of Americans, roughly 50 percent, they don't own any shares anyway. And in other countries, 90 percent of the population do not own any shares. So the printing of money has a very limited impact on creating wealth.

On China's lies... and its commodity contagion...

I indicated on this program already a year ago, the Chinese economy was decelerating already then. It's just that the fund managers didn't want to accept it.


And now it's obvious that the Chinese economy is growing at nowhere near what the Ministry of Truth is publishing in China, but more likely either no growth at all or maybe around two percent, but no more than that.


So that has a huge impact on commodity prices, and in turn it has a huge impact on the economies of all the raw material producers around the world from Latin America, to Australasia, Russia, Middle East, Africa and so forth. And these countries then with falling commodity prices have less money to buy, also less money to buy American goods.

On Asian currency devaluation... and a Chinese economic collapse...

Yes. These countries just followed the example of what Mr. Draghi and Kuroda tried to achieve with lowering the value of their currencies, which is actually to create a depression in real incomes and a contraction of world GDP in dollar terms, and a contraction of world trade in dollar terms, which is of course negative for economic growth around the world.


Well, I mean, we have to put the achievements of China and also of President Xi in the context of what China was 20, 30 years ago, and what it is today. And it's a remarkable change. Now will China have a very serious setback? And don't forget, the U.S. after 1800 had numerous financial crises, and depressions, and the Civil War, and went through World War I, and through the depression years, and World War II and so forth. And the country continued to grow.


I think China is, from a cyclical point of view now, in a very serious downturn, serious. And from a secular point of view, I think there is still tremendous growth opportunity in China in the long run. But, as I said, cyclically I think they're going to have a tough time

On where to invest...

I would rather focus on precious metals, gold, silver, platinum because they do not depend on the industrial demand as much as base metals, as industrial commodities.


If I had to turn anywhere, where, as you say, the opportunity for large capital gains exists, and the downside risk is in my opinion, limited, it would be the mining sector, specifically precious metals, mining companies, in other words, gold shares.


I would buy mining stocks. I am not saying they will go up, but I think they will go down less than a lot of other shares. And by the way, if you ask me about relative value, I think emerging markets are not yet cheap, cheap, but I think the return expectation I would have over the next seven to 10 years by investing in emerging markets would be much higher than, say, in U.S. stocks. The U.S. market is overhyped and is expensive in terms of valuations from a historical perspective. Emerging markets are no longer terribly expensive.

Who Would Win World War 3? The Infographic

For those unaware, China is conducting a massive military parade on Wednesday to commemorate the 70th anniversary of the end of World War II.

The event - which is accompanied by a three-day public holiday - is important for Xi Jinping, who is keen to project China’s strength to the world, especially in the wake of the country’s economic deceleration and highly publicized stock market meltdown. 

Of course the parade also comes amid heightened tensions between Washington and Beijing.

China’s land reclamation efforts in the South China Sea - where the PLA has constructed nearly 3,000 acres of new sovereign territory atop reefs - has regional US allies on edge. The dispute came to a head earlier this year when China effectively threatened to shoot down a US spy plane carrying a CNN crew over the Spratlys. 

It’s against this backdrop that we recently brought you infographics demonstrating China’s South China Sea naval superiority on the way to asking who would win a maritime conflict. Below, courtesy of CNN, is a simple infographic which puts the militaries of the US and China side by side on the way to making a comparison that may well become increasingly relevant in the new bipolarity.