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113 Federal Reserve Staff Members Make $250,000 Annually

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

Just in case you need another reason to dislike the thieving Federal Reserve. From Reuters:

(Reuters) – The top 113 earners among staff at the Federal Reserve’s Washington headquarters make an average of $246,506 per year, excluding bonuses and other benefits – more than Fed Chair Janet Yellen and nearly double the normal top government rate.

Don’t worry Janet, once you leave, you can earn $250k per speech like your hero Banana Ben Bernanke.

The details on Fed pay were provided to Reuters in response to a Freedom of Information Act request for data on all employees of the U.S. central bank’s board whose salaries outstrip $130,810, which is the top of the government’s pay scale in most areas.


Republicans in the U.S. House of Representatives have sponsored a bill that would require the Fed to divulge that information publicly.


“It certainly bolsters the case for more oversight,” said Maggie Seidel, a spokeswoman for New Jersey Republican Scott Garrett, a co-sponsor of the bill.


As of July 31, the Fed’s inspector general led the list with an annual salary of $312,000, followed by the central bank’s four division directors, its general counsel and its chief operating officer, who each earn a base of $265,000.

Not a bad gig. All you have to do is be complicit in the destruction of the American middle class.

Russia Deploys Troops, Robots Along Entire "2nd Middle East" Arctic Belt

On the heels of Sweden's military deployment (following the discovery of a damaged Russian sub), it appears Russia is taking no chances with its access to Arctic resources.As Reuters reports, the Russian defense minister announced today that Russian military units will be deployed along the entire Arctic border from Murmansk to Chukotka in 2014.




Interfax adds that combat robots are also being deployed to protect Russian oil and gas infrastructure in the harsh environment of the Arctic. This should be no surprise as The Guardian notes, the Arctic’s hydrocarbon resources nevertheless exert a powerful pull. It has been compared to "a second Middle East", with oil and gas reserves thought to represent 17% and 30%, respectively, of the global total.



This of course, is nothing new...

On 11 October, in an attempt to forestall such criticism, the Russian defence ministry announced plans to build “a regional environmental centre [...] to prevent pollution in areas where Russian forces are deployed”. Russian troops systematically receive “training and briefings on environmental safety and compliance with legislation”, deputy minister Dmitry Bulgakov added. But it will take more than this to reassure the western powers.

But is a major escalation along such a massive border...


*  *  *

And finally, Interfax reports, Combat robots to protect Russian oil and gas infrastructure in Arctic

Undersea combat robots will be protecting Russian oilrigs and transportation networks in the Arctic region at some point, Deputy General Director of the Russian Foundation for Advanced Research Projects, Chairman of the Foundation's Scientific and Technological Board Vitaly Davydov told Interfax-AVN.


"The Foundation is not designing robotic sharks but it is working on undersea robots and autonomous gadgets capable of protecting infrastructure, controlling the waters and detecting, tracking and, if necessary, destroying a potential enemy. The prospective machinery may be deployed on the sea bottom and specialized submersibles," he said.


So far, the Foundation is focused not so much on defense issues as on mineral development projects, Davydov said.


"The rivalry in this region will be centered on its natural resources. A key task to be solved in the Arctic is access to mineral resources, first and foremost, hydrocarbons. This goal can be achieved through the completion of numerous tasks in the discovery, production and transportation of resources, sub-glacial operations and infrastructural security. This is the target of the Foundation's research programs," he said.

*  *  *

As The Guardian concludes, The Arctic, which is governed by international maritime law, is also the focus of other disputes. Canada regularly carries out military exercises in its Arctic territory. Relations between Ottawa and Moscow have cooled significantly since the start of the Ukraine crisis.

Subprime Bubble Pop 2.0? Department Of Financial Services Slams America's Largest Subprime Servicer

Once upon a time, in the distant 2005 and 2006, the world just couldn't get enough of such subprime mortgage superstars as New Century Financial. In fact, some may have forgotten, but none other than David Einhorn was a director of New Century until March 2007, when suddenly everything fell apart and a few weeks later the company was bankrupt. The subprime collapse that followed, which contrary to Ben Bernanke's promises was "not contained", is what according to most catalyzed the plunge of the US economy into the greatest depression since 1929, led to the default of Lehman Brothers and nearly ended the financial system. 

Fast forward to 2014, when the US has a new subprime servicing superstar, which just like in 2006, also happens to be a hedge fund darling. The company: Ocwen Financial (a name which originated when some drunk banker or executive spelled Newco in reverse) which currently is responsible for servicing over $106 billion in subprime mortgages. A darling so prominent among the hedge fund community, it was one of the most beloved hedge fund hotel stocks in late 2012 and 2013, and judging by its current list of holders, still has a plethora of who-is-who hedge and mutual fund holders.

Well, in what may be a resounding echo of March 2006, moments ago the New York Superintendent of Financial Services said that Ocwen had engaged in abuses that could potentially harm hundreds of thousands of borrowers. As AP reports, the state regulator issued a letter Tuesday to Ocwen Financial Corp., documenting the same kinds of suspicious actions that worsened the housing crisis and the Great Recession.

Ocwen inappropriately backdated foreclosure warnings and letters that denied mortgage loan modifications, making it nearly impossible for borrowers to appeal the company's decision, according to the letter from Benjamin Lawsky, New York's Superintendent of Financial Services.


The letter refrains from saying whether the backdating was intentional or the result of poor oversight by Ocwen. The company managed $106 billion worth of subprime mortgages at the start of 2014, according to Inside Mortgage Finance.

Here is the full letter:


Moments ago Ocwen replied. Its explantion - nothing is criminal here, it was a glitch, see?


See: "software errors", i.e., glitches. So you must acquit

The full laughable statement:

Ocwen Financial Corporation (NYSE:OCN), the nation's largest independent mortgage servicer, today made the following statement in response to a letter it received from the New York Department of Financial Services ("DFS") related to erroneously dated borrower correspondence, and subsequent media coverage of the DFS's letter.


"Ocwen regrets that, due to software errors in our correspondence systems, we inadvertently sent improperly dated letters to some borrowers. As always, our goal is to avoid foreclosure. In the case of the 283 borrowers in New York who received letters with incorrect dates, 281 are currently borrowers with us. We are continuing to review the rest of the cases. We believe that we have resolved the letter dating issues that have been identified to date, and we continue our investigation as to whether there are additional letter dating issues that need to be resolved. We are working with and fully cooperating with DFS and the Monitor to address their concerns."

So will the US Superintendent of Financial Services, Benjamin Lawski, let this too be swept under the rug or will he inevitably fold, and pretend that nothing has happened, instead chosing to believe the company that it has now "fixed the glitch."

For now OCN's investors are not too happy and OCN was down some 15% after being unhalted. Down, that is, at least until the BTFD crew - completely oblivious of the fundamental reality - comes in, and bids the stock back into the green again. Because in the New Normal, the fraud is not in just one stock: it is the entire market.

In Uncharted Waters

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

What I see as extremes that must necessarily end badly, others see as mere extensions of recently successful policies and trends.

A long-time reader recently chastised me for using too many maybe's in my forecasts. The criticism is valid, as "on the other hand" slips all too easily from qualifying a position to rinsing it of meaning.

That said, given that we're in uncharted waters, maybe's become prudent and certainty becomes extremely dangerous. I have long held that the financial policy extremes that are now considered normal are unprecedented in the modern era: extremes in debt, leverage, risk, complexity and willful obfuscation of these extremes.
  Consider the extent to which sky-high asset valuations and present-day "prosperity" depend on extremes of leverage: autos purchased with no money down, homes purchased with 3.5% down payments and FHA loans, stocks bought on margin, stock buybacks funded by loans, student loans issued with zero collateral, and so on--an inverted pyramid of "prosperity" resting precariously on a tiny base of actual collateral.
  Since we have no guide to the future other than the past, we extrapolate past trends. Human nature hasn't changed over the short time-frames of civilizations (i.e. the past few thousand years), so in terms of human drives, emotions and responses, the past is an excellent guide to the range of human responses to crisis, euphoria, greed, fear, etc.
  But extending trends is a shifting foundation for forecasts, as trends end and reverse, generally without telegraphing the end of an era. Few in 1639 China foresaw the collapse of the status quo Ming Dynasty a mere five years hence.
  With the hindsight of history, we can discern the cracks in the Ming Dynasty before its collapse, but once we shift to our own era, things become less certain.
  In my view, we're drifting in uncharted seas.
  I have covered the dangers of certainty before: Certainty, Complex Systems, and Unintended Consequences (February 14, 2014)
  What I see as extremes that must necessarily end badly, others see as mere extensions of recently successful policies and trends. Let's review a few of the many extremes that we now accept as ordinary and harmless.
  Consider how much new debt is now required to lift GDP ("growth") off the flat line:     The slightest pause in the expansion of credit nearly collapsed the entire global economy:   Extraordinary central state and bank policies have boosted the wealth of those closest to the Federal Reserve's money spigot and left everyone else poorer:
    It's not just real income that's declined--so has household wealth.
    Incentives to borrow money to obtain a college degree are declining while student loan debt hits astounding extremes:
    Feel free to extend this line of Federally funded student debt: where does it end?
    The Federal Reserve has pushed astonishingly extreme policies for six years. Now that the Fed owns significant chunks of the Treasury bond and mortgage bond markets, it's being forced to limit these easing programs:   All the Fed money-printing and bond buying has sent money velocity in the real economy into a tailspin: this is good, right? No, actually it's a calamity. Money has slipped into a coma.

Extend the trendlines in these charts, and then ask yourself: where do they end? What will they trigger as they push ever deeper into uncharted waters?

The Most 'Distrusted' News Sources In America

You know there's a problem with the media when Al-Jazeera is trusted more than NBC, CNN, and MSNBC. As Pew research's Journalism Project shows in the following table, the study attempted to measure not just whether people had heard of a variety of news sources, but which ones they really trusted when it came time to get straight info about politics and governments.

From "most distrusted" to least...


As Pew Research's Journalism Project reports,

There is not a single news source distrusted by at least half of all panelists or those with mixed or mostly conservative views. Six sources are distrusted 50% or more of consistent conservatives distrust and four are distrusted by most consistent liberals.

 It's worth keeping in mind when reading the table that the 'distrust' numbers may be low for some less well known outlets mainly because most respondents have never heard of them, rather than because most respondents do trust them.

*  *  *

An alternative way to look at the data...

Homeland Security To Restrict West Africa Travelers Entry To America

While President Obama has declared his experts say banning travel from the Ebola-stricken West African nations is not the optimal route to stopping the deadly virus' spread in the US, Homeland Security has a different plan as Rep. John Conyers comments:


Good thing Ron Klain is involved in the decision-making process... oh wait...


As Bloomberg reports,

Homeland Security Dept will require airline passengers originating from Liberia, Sierra Leone and Guinea to enter U.S. through airports with Ebola-screening measures, according to statement from Rep. John Conyers.


U.S. enhanced-screening airports: New York’s John F. Kennedy International, Newark Liberty, Washington Dulles, Chicago O’Hare, Atlanta Hartsfield; about 94% of fliers from affected areas fly through those airports


Conyers is ranking Democrat on House Judiciary Cmte

*  *  *

But in irony of ironies, Rwanda has started screening US and Spanish arrivals fo Ebola too... (as WaPo reports)

According to the U.S. Embassy in Rwanda, the tiny land-locked East African nation has begun screening passengers from the United States and Spain for the deadly virus.

From a note on the embassy's Web site:

Visitors who have been in the United States or Spain during the last 22 days are now required to report their medical condition — regardless of whether they are experiencing symptoms of Ebola — by telephone by dialing 114 between 7:00 a.m. and 8:00 p.m. for the duration of their visit to Rwanda (if less than 21 days), or for the first 21 days of their visit to Rwanda. Rwandan authorities continue to deny entry to visitors who traveled to Guinea, Liberia, Senegal, or Sierra Leone within the past 22 days.

Battleships And Helicopters Join Hunt For Missing Submarine: Sweden Prepares To "Use Weapons To Surface Sub"

The hunt for missing October continues.

Recall that over the weekend, one of the less reported stories was that Sweden had deployed its various army, navy and air force units to hunt down what was reportedly a damaged Russian sub that had sunk in the Stockholm archipelago, something which Russia vehemently denied.

Since then, things have escalated and as both the FT and RIA reported, Swedish authorities declared a safety distance of 10,000 meters (5.4 nautical miles) from all military vessels taking part in the search for the alleged foreign sub. 

According to the Swedish Expressen newspaper, air traffic over the search area has been suspended. Such a large area of Swedish airspace has not been cordoned off since the '80s, the newspaper added. The fly ban will not affect passenger flights.

Swedish Navy vessels have reportedly sealed off a channel between Nynashamn and the island of Nattaro south of Stockholm. A large number of military vessels and helicopters are reported to be moving southward.


The Swedish Armed Forces first launched a major operation off the coast of Stockholm on Friday after receiving information, reportedly from a civilian, about the presence of an unknown underwater object in the region.


According to the Swedish Armed Forces, there have been three "very credible sightings" of an unknown object off the Swedish coast, suspected to be "foreign underwater activity." Swedish Prime Minister Stefan Lofven stressed Monday that the ongoing operation is "not a submarine hunt," but an "underwater investigation."

But the key question remains, just whose sub is it that is missing? Earlier on Monday, a Russian Defense Ministry source told RIA Novosti that the unidentified object in Sweden could be a submarine belonging to the Dutch Navy. 

A spokesperson for the Royal Netherlands Navy told RIA Novosti that a Dutch submarine had recently visited Stockholm, but stated that it was no longer in Swedish waters when the "suspicious object" was first observed in the Stockholm archipelago.

Additionally, Bloomberg reported that a distress call caught in Swedish territorial waters on Oct. 17 has been incorrectly linked to presence of Dutch submarine, citing His Majesty’s Bruinvis, Karen Loos-Gelijns, spokeswoman for Defense Ministry says in e-mailed statement. She said the submarine went to Tallinn on Friday morning, stayed there over the weekend. She added that Dutch navy ships Tromp, Amsterdam, Evertsen, Zealand, submarine Bruinvis participated this month in international exercise Northern Archer in the Baltic Sea.

In other words, the Netherlands is refusing to take blame for the sub. As it Russia - recall that previously a spokesperson for the Russian Defense Ministry denied that the damaged sub belongs to Russia, stating that "there have been no extraordinary, let alone emergency situations involving Russian military vessels."

But while the originating nation of the offending sub, if there is indeed one, refuses to step up, Sweden is starting to lose patience. According to an update by, battleships, minesweepers, helicopters and more than 200 troops continue to scour the area where they believe the sub is located.

Sweden's military has now been out on the hunt for five days, with the operation moving "across the archipelago" on Tuesday.


Jesper Tengroth, press officer for the Swedish military, told The Local that the focus had switched from just the southern islands on Monday.


Swedish military vessels are now also patrolling open seas in the Danziger Gatt strait, news agency TT said.  But Tengroth would not give any further details about where Swedish ships and military units were stationed for "operational reasons".


After three civilian sightings of suspicious activity in the Stockholm archipelago, Sweden's Armed Forces have launched a full-scale investigation. 

In fact it has gotten to the point where Sweden may simply blow up the offending military equipment just to make the point that "The most important value of the operation - regardless of whether we find something -- is to send a very clear signal that Sweden and its armed forces are acting and are ready to act when we think this kind of activity is violating our borders," Supreme Commander General Sverker Göranson said.

As a result, Sweden's military has announced that if it finds a suspect foreign vessel in the Stockholm archipelago, it is prepared to force it to the surface "with weapons if necessary".

 "Our aim now is to force whatever it is up to the surface... with armed force, if necessary," he added.

He added that submarines are "extremely difficult" to find, and that Sweden has never succeeded in the past when it came to tracking them down.

"And no one else has either," he added.

If the sub is indeed Russian, it would be quite a hit for Sweden, which in more than a decade of hunting Russian U-boats in the 1980s and early nineties, never succeeded in capturing one, except in 1981 when the U137 ran aground several miles from one of Sweden's largest naval bases, triggering an embarrassing diplomatic stand-off for Russia.

Early Tuesday afternoon, at least five naval ships were stationed for more than two hours in an area east of Ingarö, the closest reported point to the Swedish mainland since the operation began. DN reported that one of the ships had "made contact" with something, but General Göranson denied the claim.


Göranson's comments to the Swedish media came after a nearly two-hour long meeting with Sweden's defence committee behind closed doors.


They also followed reports in the Dagens Nyheter newspaper that there had been more than 100 reported sightings of a suspect vessel from members of the public in the past day  or so. "We're still getting more reports, and I want to underline the fact that we're happy about this," Göranson added. 

Here is a cross-section of what has been alleged to be a Russian X-Ray/AC-12 class submarine, the Losharik.

In any event with every passing day, the surfacing of the damaged sub gets closer, assuming of course one exists. And if, as the local Swedish media reports allege, the sub does belong to Russia and the result if a major political humiliation for the Kremlin, will Putin just sit idly by, especially since what is going on close to Stockholm has become a regional spectacle. As the FT reported, "the Swedish military operation is being followed around the region. Edgars Rinkevics, Latvia’s foreign minister, wrote on Twitter at the weekend: “Closely following events in the Swedish territorial waters, may become a game changer of the security in the whole Baltic sea region."

It may indeed, and the answer will be forthcoming. After all there is only so much air a sub can store.

According To Goldman, This Is Why China's GDP Was Better Than Expected (Spoiler Alert: Weather)

It is now beyond ridiculous.

Recall yesterday we reported that according to Japan's Economy Minister, Akira Amari, who over the weekend went full economic retard - rather than face reality that Abenomics currency devaluation printfest has crushed the consumer beyond all expectations, he blamed the weather for economic weakness: "including the effects of large typhoons and heavy rains in July and August, Japan’s 3Q economic situation is probably not a strong recovery."

Of course, it is not his fault: he is merely piggybacking on what the US did in early 2014 when it blamed the collapse in China's credit expansion which reverberated across the globe, crushing US GDP on "snow in the winter."

And since everyone had been wrong about Q1 GDP (not to mention Treasury yields) and was thus willing to look the other way and "accept" a grossly ridiculous explanation (because only idiots would believe that $100 billion in potential GDP was wiped out as a result of several winter storms) over fears that they too be exposed as grossly incompetent pattern-chasing penguins, blaming the weather stuck as the excuse for everything that happened since January which was somewhat unexpected, and for which the true explanation, namely that there is no global recovery, was just too unpalatable.

So fast forward to last night, when instead of the much hoped for Chinese GDP drop - because it would certainly unleash the greatly delayed Chinese liquidity firehose so hoped for by all the BTFDers who need at least once central bailout per day to keep up the charade - China reported GDP which beat expectations, leading to many sad faces on Wall Street, and forcing Reuters to leak the infamous ECB buying corporate bonds article, since refuted, which served as the overnight ramping catalyst.

So what is the "explanation" for this unpleasant, for once, economic beat? Why, the weather of course! From Goldman"

3Q GDP data was better than our and market expectations. The seasonally adjusted, non-annualized qoq growth calculated by the NBS showed a modest slowdown from 2.0% to 1.9% while our estimate of qoq annualized growth accelerated from 6.9% to 8.5%.


September IP growth surprised the market on the upside and was mostly in line with our forecast. Among IP components, electricity production increased to 4.1% yoy, from -2.2% yoy in August. Cement production fell to -2.2% yoy, from 3.0% yoy in August. 


We believe the rebound was mainly because of the disappearance of the temperature distortion which could have lowered August IP by 1 ppt or more , see EM Macro Daily - China: Cool weather likely contributed to weak August activity growth, Oct 9, 2014.

Ah, the new normal, where every time central planning fails one can, and always does, just blame the weather. Because it is not reality.xls that is wrong. It is reality itself that is at fault.

Existing Home Sales Jump To Highest Since Sept 2013. Midwest Tumbles 5.3%

Existing Home Sales bounced back from the worst miss in 2014 in August to print 5.17mm SAAR - the highest since September 2013. Of course the surge is driven by Condos/Co-Ops (up 5.2%) rather than single-family homes (up 2.0%) and median home prices are the highest ever for a September at $209,700. It was not all ponies and unicorns though as Midwest saw sales plunge 5.6%. NAR's Larry Yun has some crucial insight for why home sales are rising..."Economic instability overseas is leading to volatility in the stock market and is causing investors to seek safer bets [in housing]," so we assume he is disappointe dby the 1000s of Dow points we have surged off last week's lows?



Lawrence Yun , NAR chief economist, says the improved demand for buying seen since the spring has carried into the fall. “Low interest rates and price gains holding steady led to September’s healthy increase, even with investor activity remaining on par with last month’s marked decline,” he said.

“Traditional buyers are entering a less competitive market with fewer investors searching for available homes, but may also face a slight decline in choices due to the fact that inventory generally falls heading into the winter.”

*  *  *

Regional Breakdown

In the Midwest, existing-home sales declined 5.6 percent to an annual level of 1.17 million in September, and remain 4.9 percent below September 2013. The median price in the Midwest was $165,100, up 4.9 percent from a year ago.


In the Southsales increased 5.0 percent to an annual rate of 2.12 million in September, and are now 1.4 percent above September 2013. The median price in the South was $180,900, up 5.1 percent from a year ago.


In the West existing home sales jumped 7.1 percent to an annual rate of 1.20 million in September, but remain 4.0 percent below a year ago. The median price in the West was $294,200, which is 4.0 percent above September 2013.

Inventories, Supply, Demand

Properties typically stayed on the market in September longer (56 days) than last month (53 days) and a year ago (50 days). Short sales were on the market for a median of 116 days in September, while foreclosures sold in 59 days and non-distressed homes typically took 55 days. Thirty-five percent of homes sold in September were on the market for less than a month.

And there is no return of the 'normal' homebuyer yet...

The percent share of first-time buyers continues to underperform
historically, remaining at 29 percent for the third consecutive month.
First-time buyers have represented less than 30 percent of all buyers in
17 of the past 18 months.

All-cash sales were 24 percent of transactions in September, up slightly from August (23 percent) but down from 33 percent in September of last year. Individual investors, who account for many cash sales, purchased 14 percent of homes in September, up from 12 percent last month but below September 2013 (19 percent). Sixty-three percent of investors paid cash in September.

And finally, some more from Yun:

“Economic instability overseas is leading to volatility in the stock market and is causing investors to seek safer bets, which will likely keep interest rates in upcoming weeks hovering near or below where they are now,” said Yun. “This is welcoming news for consumers looking to buy, although they could temporarily become more cautious by less certain economic conditions.” 

So let's hope stocks crash?

And The NYSE Breaks...

Well it wouldn't be the US equity market if something didn't break...



Another day another ramp that disable retail from selling...



Hong Kong Chief: Can't Have Democracy Or The Poor Will Have A Say

Clearly, Leung Chung-Ying, Hong Kong's embattled leader, did not get the Jean-Claude Juncker memo that "when things are bad, you have to lie." As The NY Times reports, Leung - rather stunningly - said overnight that it was unacceptable to allow his successors to be chosen in open elections, in part because doing so would risk giving poorer residents a dominant voice in politics. Instead, rather unsurprisingly, he backed Beijing's position that all candidates to succeed him as chief executive, the top post in the city, must be screened by a "broadly representative" nominating committee appointed by Beijing, and offered several thinly veiled warnings on Monday that it was risky for the protesters to try the patience of the national authorities.



As The NY Times reports,



Mr. Leung’s blunt remarks reflect a widely held view among the Hong Kong elite that the general public cannot be trusted to govern the city well. His statements appeared likely to draw fresh criticism from the democratic opposition, and to inflame the street struggle over Hong Kong’s political future.


Representatives of his government are scheduled to hold televised talks with student leaders of the protests, who have said that Mr. Leung was defending a political system stacked against ordinary citizens.


Mr. Leung said that if “you look at the meaning of the words ‘broadly representative,’ it’s not numeric representation.”


“You have to take care of all the sectors in Hong Kong as much as you can,” he said, “and if it’s entirely a numbers game and numeric representation, then obviously you would be talking to half of the people in Hong Kong who earn less than $1,800 a month.”


“Then you would end up with that kind of politics and policies,” he continued.

*  *  *
Finally, we also note, Leung comments on the drivers of the pro-democracy movement...

He also raised again the suspicions of his government and of Beijing that “foreign forces” had played a role in the street protests, although he declined repeatedly to identify those forces or provide any examples.


“I didn’t overhear it in a teahouse, and it’s something that concerns us,” he said. “It’s something that we need to deal with.”

*  *  *
Mr. Leung offered several thinly veiled warnings on Monday that it was risky for the protesters to try the patience of the national authorities.

McDonalds Sales Plunge In Worst Month Since 2003 Following Dollar Meal "Sticker Shock"

Moments ago, McDonalds not only released earnings and revenues, both of which missed - something which was largely expected since the backward looking data had been telegraphed by MCD's recent global selling collapse - blanketed by atrocious commentary, but it disclosed its September global retail sales which were for lack of a better word, a disaster, after reporting global sales which dropped 3.8%, below the 3.2% expected, and the worst global month since at least 2003. The pain was everywhere, with Europe plunging 4.2% (est -0.9%), Asia down 7.5%, and the US down a whopping 4.1%, far below the 2.8% expected, and also the worst month in over a decade.


In fact, McDonalds sales in the US have have now gone a whopping 11 months without posting a positive sales month, the longest stretch on record!


But while collapsing MCD sales are a combination of both the insolvent US consumer, who can no longer afford to buy either MCD or Coke (as we commented earlier) especially after purchasing the latest and greatest iThing on credit, as well as shifting tastes and eating the "cool food du jour", things are only going to get worse from here.

Because in a world that is allegedly flooded with deflation, the one place where everyone considered safe for "dollar meals", just got more expensive. Bloomberg reports:

Mike Hiner used to take his grandsons to McDonald’s (MCD) when they wanted a treat. With higher wage and food costs pushing up prices at the Golden Arches, he’s increasingly taking them to IHOP, Denny’s and Chili’s instead.


The loss of bargain-seeking customers like Hiner underscores a growing challenge for McDonald’s Corp.: While the company still offers several items for $1, its menu is quietly getting more expensive. McDonald’s said its prices were up about 3 percent through the end of June compared with 12 months earlier. That’s more than the 2.5 percent gain in prices for food Americans purchased away from their homes in the year through August, according to the Bureau of Labor Statistics.


The chain’s diminishing appeal among budget diners -- coupled with rising meat costs -- are projected to take a bite out of third-quarter earnings due to be reported tomorrow. Analysts estimate that McDonald’s revenue fell 1.8 percent to $7.2 billion in the period. Net income, which also were hurt by a food-safety scare in China, slid 11 percent to $1.36 billion, according to the projections.

And sure enough, see the charts above. But that is only the beginning:

Some Americans are extremely price sensitive, and any increases may send them elsewhere, said John Gordon, principal at San Diego-based Pacific Management Consulting Group, an adviser to restaurants and franchisees.


If you encourage and kind of seed the notion that you can come in for a couple bucks and get some food -- and then you can’t do that anymore -- there’s bound to be a reaction,” he said.

There is also bound to be a reaction when the already broke US consumer maxes out their credit card on a telephone and forgets to eat.

The result has been that fast-food chains, long thought of as the cheapest place to grab a quick bite, may now have that reputation working against them, said Joel Cohen, president of Cohen Restaurant Marketing Group in Raleigh, North Carolina. The higher prices may be driving some customers to seek alternatives either at fast-casual chains like Panera Bread Co. (PNRA) or even at sit-down places, he said.


“It’s sticker shock,” Cohen said. “You’re up at price where you could just about be dining at a casual-dining restaurant.”

And when you hear the phrase "sticker shock" in the same sentence as a McDonalds dollar meal, you know the end is in sight.

Snow-Plough Driver In Total CEO Plane Crash Was Drunk, Investigators Say

The awful news overnight of Total CEO Christophe de Margarie's death in a freak plane crash caused by the jet hitting a snow-plough on the runway has taken a darker twist. As RT reports, Russian prosecutors claim the driver of the snowplough was drunk, and the air traffic controller for the jet was an intern. However, his lawyer, however, says he was completely sober, due to a heart condition preventing him from drinking claiming "he was so sober at the time of the crash," adding "we don't want the blame for the accident falling on an ordinary man." Investigators added that "bad weather conditions and the possibility of a mistake by the pilot will also be considered." ITAR-TASS reports that Putin has sent his condolences and reached out to Francois Hollande, "Vladimir Putin has long known de Margerie and had a close working relationship with him."


The snowplough driver survived (while reports last night said he perished) - If proven guilty, the sentence for the driver under Russian law could be up to seven years in prison.


Video from the terible accident scene:


As RT reports,

Russian prosecutors claim the driver of the snowplow which crashed with Total CEO Christophe de Margerie’s jet was drunk. His lawyer, however, says he was completely sober, due to a heart condition preventing him from drinking.


“My client is suffering from an acute heart condition; he does not drink at all and his relatives and friends can testify to that,” Aleksandr Karabanov, the lawyer, said.


“He was sober at the time of the crash,” he also said, adding that a number of lawyers will be involved in Martynenkov’s defense. “We don’t want the blame for the accident to fall on an ordinary man,” he added.


Karabanov also made clear that he will insist on an independent expertise to determine the presence of alcohol in his client's bloodstream.


Russia’s Investigative Committee Vladimir Markin also told the reporters on Tuesday adding “there is a possibility that a number of airport staff will be suspended from carrying out their duties pending criminal investigation.” He also did not rule out the possibility of new arrests being made during the course of the investigation.




It has also been determined that the taxiing shortly before the crash was being coordinated by a traffic control intern, RIA Novosti was told by a source inside Vnukovo. The official spokesman for the airport has declined to comment. Air traffic control personnel will be tested for alcohol and drugs, the investigators said.


The black boxes have been uncovered and are being processed at this time.

And Putin has expressed condolences...

Russian President Vladimir Putin has expressed his condolences over the Total CEO's death. TASS cited his spokesman as saying that "Vladimir Putin has long known de Margerie and had a close working relationship with him."


“I am shocked at the news,” the Russian leader conveyed to French President Francois Hollande.


“I ask that you offer my sincerest wishes and condolences to the friends and families of Christophe de Margerie – a renowned French entrepreneur, who has helped spearhead a great number of join projects, which have been the source of a long and fruitful partnership between Russia and France in the energy sphere,” Putin continued.


“When we lost Christophe de Margerie, we lost a real friend to our nation, and we shall hold his memory very dear.”

*  *  *

Additionally, Interfax reports that the black box flight recorders from the Falcon jet will not be opened before French experts' arrival...

Experts of the Interstate Aviation Committee (IAC) will open the flight recorders of the Falcon plane which crashed at the Vnukovo airport late on Monday after French experts' arrival, an IAC spokesman said.


"The IAC has made the decision not to open the flight recorders before French experts' arrival. Further investigation will proceed in cooperation with French colleagues, in compliance with the ICAO standards and with an agreement between the IAC and France's BEA air accident investigation bureau, and on the basis of long-established cooperation," the spokesman said.


He said the BEA has appointed a commissioner for investigating the Falcon crash and five advisors, representing the BEA, Dessault - the plane's developer, and the air company Unijet. They are expected to arrive in Moscow late on Tuesday.


The BEA said that three experts would be sent to Moscow on Tuesday.




The flight recorders have been retrieved and taken to the IAC's research and technical center.

*  *  *


Oil Tops $83, Gold Over $1255 As Commodities Spike Higher & Riyal Slides To 2009 Lows

It is unclear what the catalyst is - aside from the bounce back from The FT's rejection of Reuters rumor-spreading about ECB corporate bond buying but instead of the usual morning smackdown, precious metals are spiking higher. Gold hit $1255 - its highest in over 5 weeks). Oil is also spiking higher, WTI just broke above $83 (so much for that consumer tax cut?)



And oil is spiking too...


For now its unclear what is driving this BUT we do note that Saudi's Riyal has tumbled notably away from its peg in recent days... weakest since Jan 2009



Charts: Bloomberg

First Swiss Gold Poll Shows Pro-Gold Side In Lead At 45%

First Swiss Gold Poll Shows Pro-Gold Side In Lead At 45%

The first poll of how the Swiss people will vote in the “Save Our Swiss Gold” initiative on November 30th shows that the Swiss are leaning towards voting for the pro-gold initiative. 

Gold Initiative Poll Results -  20 Minuten

The poll had quite a large sample of 13,397 people from all over Switzerland who participated in the first phase of the 20 Minuten online survey on October 15. 

The poll shows that 45% approve the Swiss gold initiative and 39% are against. There are 29% firm yes voters and 28% firm no voters (see graph). The poll shows 16% are leaning towards a yes or are “more yes” and 11% are leaning towards a no or are “more no.” 

20 Minuten or 20 Minutes in English, is a very popular German language free daily newspaper and online paper in Switzerland, published in a tabloid format and online.

Swiss Flag

The political scientist Lucas Leeman and Fabio Wasserfallen organised the survey according to demographic, geographic and political variables and it is weighted so that the sample corresponds as closely as possible the structure of the voting population according to 20 Minuten.

There are a lot of swing voters with 16% undecided and not wanting to commit themselves.

The poll suggests that the Swiss gold initiative remains tightly in the balance and may be much closer than is commonly expected.

Swiss Gold Reserves

Some have suggested that as this was an online poll, caution may be needed as the 13,397 people polled are likely to be more digital savvy and younger. However, it is still believed to give a good barometer of sentiment just five weeks before the poll and before there has been concerted campaigning by either side.

20 Minuten is distributed to commuters at over 150 train stations across the country. Since September 2004, the German language edition has been the most widely read daily newspaper in Switzerland, surpassing Blick. The audited distribution in 2004 was 329,242 (WEMF AG) and it had a readership of an estimated 782,000 according to Wikipedia.

The three key measures of the “Save Our Swiss Gold” initiative are the following:

* an increase in gold holdings of the SNB to reflect an allocation of 20% of total reserves (today gold accounts for 7.7% of total reserves)
* and a moratorium on the sale of Swiss gold reserves
?* the repatriation of Swiss gold reserves - some of which are believed to be in the UK and Canada

See Essential Guide To Gold Bullion Storage In Switzerland


Today’s AM fix was USD 1,251.75, EUR 978.85 and GBP 774.17 per ounce.
Yesterday’s AM fix was USD 1,241.00, EUR 972.65 and GBP 769.71 per ounce.
Gold climbed $8.30 or 0.67% to $1,246.10 per ounce. Silver rose $0.16 or 0.93% to $17.44 per ounce yesterday. 

Gold in U.S. Dollars - YTD, 2014 (Thomson Reuters)

Gold in Singapore rose above $1,250/oz, after rising 0.7%  in the previous session, prior to capping once London opened. At the open in London, gold soared to the highest in over five weeks as the greenback pulled back.

Gold for immediate delivery rose 0.4% t to $1,251.63 an ounce by 9:46 a.m. in London, according to Bloomberg generic pricing. It hit $1,253.85, the highest since September 10. Gold for December delivery gained 0.6% to $1,251.60 on the Comex in New York.

The dollar dropped for a second day, reaching the lowest level in nearly a week. 

Markets are adjusting estimates back for when the U.S. Federal Reserve may raise interest rates. 

Futures traders put the odds of a U.S. rate increase at 46% by October 2015, down from 50% at the end of last week. 

Despite very robust global demand, particularly from China and India, gold ETF holdings fell to a five-year low yesterday.

There are a number of gold friendly factors supporting prices including geopolitical and economic uncertainty and still dovish Fed and other central bank policies.

Get Breaking News and Updates on the Gold Market Here

We previously covered this the Swiss gold initiative here and here

Europe Demands Banks Hand Over Their Lunch Money Following Swiss Franc Libor Rigging

...And don't do it again!

Having confirmed that RBS, UBS, JPMorgan,,and Credit Suisse operated a cartell to manipulate bid-ask spreads of Swiss Franc libor, the European Commission has unleashed unmerciless vengeance on these law-breaking institutions:

JPMorgan fined EUR 72.2 Million, UBS fined EUR 12.7 Million, Credit Suisse fined EUR 9.17 Million, & RBS Nothing (for whistle-blowing).

The commission found that these four entities 'influenced' interest rate derivatives prices between March 2008 and July 2009 - probably the most volatile and price-sensitive period of American financial history.. and they get fined "an hour's pay?"

Nothing ever changes...


Another oldie but goodie.

— Rudolf E. Havenstein (@RudyHavenstein) October 16, 2014

FT Rejects Reuters Unsourced Trial Balloon About ECB Buying Corporate Bonds, Futures Refuse To Plunge

Precisely half an hour ago, we mocked the overnight Reuters trial balloon about ECB corporate bond buying, whose only purpose was to send futures higher, when not only did we question the credibility of the report based on "one person familiar with the work inside the ECB, speaking on condition of anonymity" and said that now "we await Germany to throw up all over what is a clear Reuters trial balloon floated by "one person familiar with the work inside the ECB, speaking on condition of anonymity" to see what the market reaction is to even more stimulus (as if it is unclear)." Well, it wasn't Germany. At least not yet. It was Reuters' competitor in the coverage of ECB rumors and innuendo, the FT, which moments ago blasted this, via Bloomberg:


So just in case anyone forgot how credible the Reuters rumor mill is when bailing out European risk (think summer of 2011 and 2012), here is a stark reminder.

More from the FT:

The European Central Bank has not yet put the issue of buying corporate bonds on the agenda for its December policy meeting, according to two people familiar with the matter.


The euro weakened and shares rose in Italy, Spain and Germany jumped after Reuters reported two sources as saying that the policy making governing council could discuss the possibility of buying the assets at its final meeting of 2014, reports Claire Jones.


While corporate bond purchases are an option that policy makers have discussed in recent months, one of the people familiar with the matter said preparations for buying the debt have not intensified in recent weeks.


However, the person said corporate bond purchases are being considered, along with other ideas, as a possible means to extend the ECB's programme of private sector asset purchases - which at the moment are confined to asset-backed securities and covered bonds - should inflation and growth in the eurozone continue to disappoint.

Of course, in a normal world, the entire overnight ES gain would evaporate in seconds, even as the origianl "source" has long since sold out of their risk. In this centrally-planned market, however, the ramp will stick. Just because.

Coke Blows Up Guidance, Is Latest Consumer Bellwether And Buffett Favorite To Disappoint, Stock Stumbles

Yesterday it was IBM, today it is the turn of that other Buffett favorite and consumer-spending bellwether, Coke, to disappoint and push the stock lower, when not only did KO miss on the top line, reporting $11.98 billion in sales, below the Estimate $12.12 billion, but utter some unpleasant words about the future, guiding "below its long-term EPS growth target for 2014." And because nothing says strong consumer like one of the biggest consumer staples blowing, we will merely wait for MCDs to come out next and complete the "recovery" picture.

And while elow we present some of the most amusing tidbits from the KO report, nothing beats "structural changes" as in:

  • Reported net revenues were even in the quarter and declined 2% year to date. Excluding the impact of structural changes, comparable currency neutral net revenues grew 1% in the quarter and 2% year to date.
  • Reported operating income increased 10% in the quarter and 2% year to date. Excluding the impact of structural changes, comparable currency neutral operating income grew 5% in both the quarter and year to date, while the Company continued to invest for growth in its brands with its global system partners.
  • After adjusting for structural changes, the Company delivered comparable currency neutral net revenue growth of 1% in the quarter, capturing global price/mix of 1%. On a year-to-date basis, comparable currency neutral net revenues grew 2% after adjusting for structural changes.

Is "strucutral changes" anothera name for "everything that lost us money"?

And yes, FX is becoming a headwind:

  • Third quarter reported EPS was $0.48, a decline of 13%, and comparable EPS was $0.53, even with the prior year quarter. Comparable currency neutral EPS increased 6%.
  • Reported operating income [for Eurasia and Africa] grew 15% in the quarter, which included a 9 point headwind from foreign currency
  • Reported operating income [for Latin America] decreased 9% in the quarter, which included a 6 point headwind from foreign currency

Talk to the Fed, guys. Talk to the Fed.

Moving on to the impact from Russia, which is about to wreak havoc on MCD as well:

  • Volume grew 5% in the Eurasia and Africa Group in the quarter leading to volume and value share gains in NARTD beverages.... with the exception of the Russia, Ukraine and Belarus business unit, where volume declined 3%.

Surprisingly, no FX impact in North America but...

Reported net revenues decreased 2% in the quarter, which included a 2 point headwind from structural items related to refranchised territories and changes to our process of buying and selling recyclable materials. Positive price/mix of 1% was offset by a decrease in volume. Reported operating income decreased 5%, which included items impacting comparability, principally net gains/losses related to economic hedges. Comparable currency neutral operating income decreased 1%, primarily driven by increased brand investments and the impact of structural items, partially offset by gross margin expansion.

The bottom line: the "structurally adjusted" "FX-excluding" future is so bright... if only it wasn't for reality:

  • We expect the impact of structural items to be a 1 to 2 point headwind on net revenues and an approximate 2 point headwind on operating income during the fourth quarter of 2014.
  • We continue to expect fluctuations in currency exchange rates to have an unfavorable impact on our reported results in 2014. Based on current spot rates, our existing hedge positions, and the cycling of our prior year rates, we expect an approximate 7 point headwind on operating income during the fourth quarter of 2014. We now estimate currency will be a 6 point headwind on our full-year operating income, which is at the high end of the outlook we provided last quarter.
  • We continue to expect operating leverage to be flat to slightly positive for the full year.
  • We are now targeting full-year 2014 net share repurchases of $2.5 billion.
  • Given the above, the Company expects to be below its long-term EPS growth target for 2014.

Bottom line: when one excludes reality, everything is great.

A Closer Look Why Futures Bounced 30 Points Off The Lows On Today's ECB BTFD Bailout

As commented previously, the reason for today's 30 point rip in emini futures from the lows hit just 4 hours ago, was a test of the ECB emergency BTFD service, today provided courtesy of Reuters which, just after the European close, gave what is ever more incorrectly called the "market" its dose of upward momentum ignition, when it reported that, in addition to the previously announced "private QE" which includes ABS and covered bond purchases, that Goldman's head of the European central bank would also go ahead and monetize corporate bonds, taking a step even further than the Fed, which at least is confined to public securities, and directly influencing private asset prices.

The reason is well-known: in Europe there is a scarcity of unencumbered public debt, something we observed years ago...

... and certainly ABS...

... which means that for Draghi's intervention to be felt, if only in the markets if not the economy, he will be forced to go down the capital structure until finally the ECB has no choice but to monetize equities.

Because when it comes to fixing the economy, helping the poor and "fixing inequality", nothing succeeds like artificially inflating the EuroStoxx 50 higher yet again.

In any event, here is the catalyst for today's market move, which Reuters attributes to "several sources familiar with the situation " and "one person familiar with the work inside the ECB, speaking on condition of anonymity" :

The European Central Bank is considering buying corporate bonds on the secondary market and may decide on the matter as soon as December with a view to begin buying early next year, several sources familiar with the situation told Reuters.


The ECB has already carried out work on such purchases, which would widen out the private-sector asset-buying programme it began on Monday - stimulus it is deploying to try to foster lending to businesses and thereby support the euro zone economy.


"The pressure in this direction is high," said one person familiar with the work inside the ECB, speaking on condition of anonymity.


Asked about the possibility of making such purchases, an ECB spokesman said: "The Governing Council has taken no such decision." The ECB's policymaking Governing Council could discuss the possibility of making such purchases at its December meeting, two of the four sources Reuters spoke to said. All four said such plans were being discussed.


The policymakers could decide at the December meeting to go ahead with the purchases, but such a step is not certain. Should the Council decide in December to proceed, the purchases on the secondary market could begin in the first quarter of 2015, one of the sources said.


The ECB began buying covered bonds on Monday, part of a private-sector asset-purchase programme that will also see it buy bundled loans known as asset-backed securities (ABS) later this year.


However, there is concern at the ECB that these measures may have an insufficient impact to help support the economy. "In the view of many Governing Council members, the economic picture has recently taken a turn for the worse," one of the sources told Reuters.

And while we await Germany to throw up all over what is a clear Reuters trial balloon floated by "one person familiar with the work inside the ECB, speaking on condition of anonymity" to see what the market reaction is to even more stimulus (as if it is unclear), here is what we said before when we observed the "new normal" market drivers which have pushed the E-mini 100 points higher in the past week:

To summarize: the S&P 500 is now almost 100 points higher from last Tuesday as the global central bank plunge protection team of first Williams and Bullard hinting at QE4, then ECB's Coeure "ECB buying to start in a few days", then China's latest $30 billion "targeted stimulus", then the Japanese GPIF hinting at a 25% stock rebalancing in the pension fund, and finally again the ECB, this time "buying of corporate bonds on secondary markets", rolls on and manages to send stocks into overdrive. Even as absolutely nothing has been fixed, as Europe is still tumbling into a triple-drip recession, as Emerging Markets are being slammed by a global growth slowdown and the US corporate earnings picture is as bleak as it gets.