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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.

Frontrunning: October 21

  • Total CEO de Margerie killed in Moscow as jet hits snow plough (Reuters)
  • China GDP Growth Rate Is Slowest in Five Years (WSJ)
  • Oil at $80 a Barrel Muffles Forecasts for U.S. Shale Boom (BBG)
  • Carney Faces Scrutiny on Worst Payments Outage Since 2007 (BBG)
  • Ebola crisis turns a corner as U.S. issues new treatment protocols (Reuters)
  • Gold Buying Rebounds in India on Diwali Jewelry Sales (BBG)
  • China-backed hackers may have infiltrated Apple's iCloud (Reuters)
  • Greece Said to Seek Recycling of Bank Funds for Exit (BBG)
  • Another merger-arb blows up: AbbVie to Pay Shire $1.64B Fee Over Nixed Merger (AP)
  • Because the market is unrigged: Forex-Rigging Fines Could Hit $41 Billion Globally (BBG)
  • Sears Seeks New Cash Via Two Paths (WSJ)
  • Oil Slump Rings Alarm Bells for Nigeria as Elections Loom (BBG)
  • SEC Is Steering More Trials to Judges It Appoints (WSJ)
  • Hong Kong leader indicates possible concession ahead of talks (Reuters)
  • Government Watchdog Recommends Review of Firm Facing Fraud Allegations (WSJ)
  • For More Teens, Arrests by Police Replace School Discipline (WSJ)
  • Staples says probing possible payment card data breach (Reuters)


Overnight Media Digest


* China's economy grew at its slowest pace for five years in the third quarter, suggesting the government's targeted easing measures to boost economic growth haven't yielded expected results. (

* French oil company Total SA said Chairman and Chief Executive Christophe de Margerie died Monday in a plane crash at a Russian airport. (

* The U.S. Government Accountability Office on Monday made a rare recommendation that the Department of Homeland Security consider stripping a $210 million contract from a major contractor, delivering a blow to the private company that once carried out most background security checks for the government. (

* Samsung Electronics Co said Tuesday the U.S. National Security Agency approved a number of its mobile devices for use by government officials to carry classified information, a positive step for the smartphone maker's struggling mobile division. (

* The Securities and Exchange Commission is increasingly steering cases to hearings in front of the agency's appointed administrative judges, who found in its favor in every verdict for the 12 months through September, rather than taking them to federal court. (

* Sears Holdings Corp is again turning to billionaire CEO Edward Lampert for funds, as the struggling retailer shores up its balance sheet ahead of the holiday season and seeks to reassure vendors worried about its health. (

* CVS Health Corp is offering a prescription-drug plan that charges patients more if they buy their medications at pharmacies that sell tobacco products, a plan that could benefit the company's own network of drugstores. (

* Inc and CBS Corp's Simon & Schuster publishing arm have reached a new multi-year print and digital contract, a pact that comes as the online retailer continues difficult negotiations with Hachette Book Group. (



Bank of England Governor Mark Carney launched an independent review on Monday into what is the worst disruption of Britain's banking payment system in seven years.

British Prime Minister David Cameron is under pressure by members of his own Conservative party and harried by the anti-EU UK Independence party to formulate a policy to tackle the issue  of curbing immigration - and fast. However, as the rest of Europe is in no mood to rip up the rules that allow freedom of movement within the European Union, the British prime minister risks angering everyone while pleasing no one.

An overnight fire at one of UK's biggest power stations has cut capacity to generate electricity, however the government on Monday insisted that there was no risk of blackouts during winter.
The head of U.S.-based pharma company AbbVie Inc, which had dropped its support last week for a $55 billion takeover of UK drugmaker Shire PLC, blamed the  U.S. Treasury for destroying the deal as both the companies took the final step to nullify the deal.



* A slowing in the pace of growth, partly by design, has made assessing the Chinese economy and predicting its prospects difficult. Chinese inflation is at its weakest levels in nearly five years and foreign investment is contracting. The overall economy, though, continues to chug along at a steady pace. (

* More than 14 million vehicles by 11 automakers that contain defective air bags made by Japan's Takata Corp have been recalled. At the heart of the defect is a faulty propellant that is intended to burn quickly and produce gas to inflate the air bag but instead is too strong and can rupture its container, shooting metal parts into the cabin. (

* Trinity Industries Inc, the highway guardrail maker accused of selling systems that can malfunction during crashes and slice through cars, was found by a Texas jury on Monday to have defrauded the federal government and as a result may need to pay $525 million in damages. (

* Wall Street's main regulator on Monday stepped up his campaign to improve the ethical culture of large banks. William C. Dudley, president of the Federal Reserve Bank of New York, told bankers assembled at the New York Fed that continued ethical lapses would be a sign that their institutions were too big to manage - and that they might need to be reduced in size. (

* Apple Inc's biggest cash cow, the iPhone, is gaining weight. Sales of iPhones, including the new, big-screen iPhone 6 models released last month, helped carry Apple to a record-breaking quarter and offset slowing sales of one of Apple's other major products, the iPad, the company announced Monday. (




** The Conservative government is weighing changes to its key income-splitting promise that would respond to critics who say the tax cut would mostly benefit well-off Canadians. Conservative sources say the notion of capping access to the tax cut so that it is less available to higher-income Canadians is under consideration. (

** A company's willingness to become a sponsor of the 2015 Toronto's Pan American/Parapan Games will be considered in the awarding of a new security contract, according to a request for proposals document issued by the TO2015 organizing committee. (

** Canada is looking at slapping duties on iconic U.S. products ranging from California wine to ketchup after the World Trade Organization found the country's meat-labelling laws offside for a third time in five years. (


** Toronto Mayor Rob Ford is once again accused of breaking city rules after he was kicked out of three advance polling stations late last week. (

** Evan Siddall, the president of Canada Mortgage and Housing Corp, acknowledges that there may be a "data gap" when it comes to the degree of foreign ownership in the marketplace, as debate swirls over whether overseas buyers are inflating house prices in markets like Vancouver and Toronto. (

** Questions from the progressive conservatives about the possible sale of public assets and a government loan to a charity to expand a medical research center dominated the return of the Ontario legislature on Monday. (




- Beijing Tongchuang Jiuding Investment Management Co Ltd, a private equity firm, recently said it invested 3.64 billion yuan ($594.43 million) in Tianyuan Securities, making Tongchuang the first PE company to hold stock in a brokerage in China.


- China plans to publish the first regulations on the online insurance industry by the end of this year, according to a document obtained by the newspaper from authorities who are familiar with the matter.


- Information transparency is of great importance for the accountability of the Chinese government and is fundamental to the rule of law, the newspaper said in an editorial.


- The dean of the Executive Master of Business Administration (EMBA) course at Fudan University said student enrolment has fallen 10 percent after the Chinese government rolled out a series of anti-corruption campaigns, including banning government officials from using public funding to take EMBA courses.


- The rule of law has the power to push China going forward. The ongoing fourth Plenary Session of the 18th Central Committee of the ruling Communist Party is a historically important moment to realize this goal, the government's mouthpiece said in an editorial on Tuesday.


The Times

SIGNALS OF DECLINE MOUNT FOR RAIL ROUTE The TransPennine Express is a microcosm of the British railway industry, at once enjoying unprecedented growth but with old, overcrowded trains that create a bar to economic progress. It is the railway that lives up to only half its name. Its core route is transporting people across the Pennines between Leeds and Manchester, but it does so at non-express average speeds of 40mph. ( CGI EXPANSION GIVES WALES HIGH-TECH JOBS BOOST The burgeoning Welsh high-tech sector is set for a major boost after CGI Group Inc, the Canadian company that bought Logica, announced plans to create 620 skilled jobs in south Wales. CGI, which is the largest tech employer in the region with 900 employees, has announced plans to create hundreds of positions over the next five years after receiving a 3.2 million pound grant from the Welsh Government. (

The Guardian


David Walker, appointed chairman of Barclays Plc in the wake of the Libor-rigging scandal in 2012 said on Monday that big fines on banks were making it harder for the industry to win back public trust. He also suggested fines were being levied for activities that in the past might have been regarded as acceptable, though he acknowledged past conduct issues needed to be dealt with. ( FORMER JJB SPORTS CHIEF FAILS TO GIVE EVIDENCE AT 1 MLN STG FRAUD TRIAL Christopher Ronnie, former chief executive of JJB Sports Plc, accused of a 1 million pounds ($1.62 million) fraud has chosen not to give evidence in his defence at his trial. Ronnie was warned by the judge that jurors may "draw such inferences as appear proper" by his failure to take to the witness box. Ronnie is accused of receiving three payments from two sporting goods companies and failing to declare them to JJB's board of directors. Southwark crown court heard he used some of the cash to buy property in Florida. It had been anticipated that he would give evidence in his defence, but his barrister, Jim Sturman QC, told the jury on Monday: "We are calling no evidence at all for Ronnie." (

The Telegraph PUBLIC VOTE ON EU MEMBERSHIP WOULD 'RESOLVE UNCERTAINTY' FOR BUSINESS, SAY CONSERVATIVES A referendum on Britain's membership of the European Union would end companies' concerns over the country's increasingly fractious relations with Brussels, according to Matthew Hancock, Business Minister. Speaking at a CBI event on Monday about Britain's industrial strategy, Hancock denied that the Conservatives' pledge to put the decision on EU membership to voters would create problems for companies. ( EUROZONE STARTS QE-LITE AS CURRENCY BLOC FACES FRESH CRISIS The European Central Bank (ECB) has begun purchases of some French assets, in an attempt to revive a flagging eurozone. Monday's purchases marked the start of the covered bond purchase programme (CBPP3), and is one of three new tools intended to stimulate the euro area economy. By buying covered bonds - bonds backed by underlying loans - the ECB intends to expand its balance sheet, and boost demand in the region. (

Sky News

ROYAL MAIL AND AMAZON CREATE 32,000 XMAS JOBS More than 30,000 temporary jobs are to be created for the Christmas postal rush, it has been announced. Royal Mail Plc said it would take on 19,000 additional workers and online retailer Amazon Inc wanted 13,000 staff. Privatised last October, Royal Mail said the jobs will start in the middle of November and end in January, with the peak staffing period in December. The roles will be in support of the company's 124,000 full-time sorting and delivery personnel. (

The Independent


Greene King and Spirit Pub Company Plc have agreed a 723 million pound takeover to create a pub company with the highest sales in Britain. Together the two will own just over 3000 pubs nationwide, which places them behind rivals Enterprise with 5500 and Punch with 4000. (

GOOGLE COMMITS EXTRA $25M TO EUROPE'S TECH START UPS Google Inc has committed a further $25 million to invest in Europe's tech start ups, with the head of the search giant's venture capital arm revealing the company could be on the verge of investing in a London start-up. Bill Maris, who founded Google Ventures in 2009, revealed that the size of Google Ventures Europe's inaugural fund has been raised from $100 million to $125 million. The European arm was announced in July and is based in Clerkenwell. (

SHIRE CFO LEAVES FOR SEVERN TRENT AFTER ABBVIE BUYOUT FALLS THROUGH FTSE 100 pharmaceuticals giant Shire Plc has had its finance director poached by water firm Severn Trent Plc, days after the collapse of its $55 billion by US rival AbbVie Inc. ( BALFOUR BEATTY WANTS 'EXTRA 50 MILLION STG' TO FINISH WEST HAM STADIUM CONVERSION Taxpayers could have to find tens of millions more to fund the conversion of the Olympic Stadium into West Ham United 's home as building firm Balfour Beatty Plc presses for more cash. Balfour Beatty - hit by a string of calamitous profit warnings and without a chief executive - won the deal to convert the stadium with a bid of 154 million pounds. But according to the industry website Construction Enquirer, Balfour has been pushing for around 200 million pounds to complete the deal due to the technical complexity of the contract in a series of meetings with the client. Sources told the Enquirer that builder Balfour Beatty is pushing for up to 50 million pounds more to complete the job. ( (


Fly On The Wall Pre-Market Buzz


Domestic economic reports scheduled for today include:
Existing home sales for September at 10:00--consensus up 1% to 5.1M rate



Belden (BDC) upgraded to Buy from Hold at Stifel
Brandywine Realty (BDN) upgraded to Outperform from Market Perform at Wells Fargo
Cabot Oil & Gas (COG) upgraded to Outperform from Market Perform at Bernstein
EOG Resources (EOG) upgraded to Buy from Neutral at Guggenheim
Eagle Materials (EXP) upgraded to Buy from Hold at Stifel
Halliburton (HAL) upgraded to Buy from Neutral at Guggenheim
Pioneer Natural (PXD) upgraded to Buy from Neutral at Guggenheim
Post Holdings (POST) upgraded to Buy from Neutral at Goldman
Rouse Properties (RSE) upgraded to Buy from Hold at MLV & Co.
TECO Energy (TE) upgraded to Equal Weight from Underweight at Barclays


AbbVie (ABBV) downgraded to Neutral from Buy at Guggenheim
BHP Billiton (BHP) downgraded to Hold from Buy at Jefferies
Bank of Marin (BMRC) downgraded to Market Perform from Outperform at Keefe Bruyette
Consolidated Edison (ED) downgraded to Underweight at Morgan Stanley
HCP (HCP) downgraded to Hold from Buy at Jefferies
IBM (IBM) downgraded to Hold from Buy at Evercore
Inland Real Estate (IRC) downgraded to Underperform from Neutral at BofA/Merrill
Universal Forest (UFPI) downgraded to Neutral from Buy at Sterne Agee


American Axle (AXL) initiated with a Neutral at Susquehanna
American Eagle (AEO) initiated with an Outperform at BlueFin
Autoliv (ALV) initiated with a Neutral at Susquehanna
BorgWarner (BWA) initiated with a Positive at Susquehanna
CONE Midstream (CNNX) initiated with an Overweight at Barclays
Dana Holding (DAN) initiated with a Neutral at Susquehanna
Delphi Automotive (DLPH) initiated with a Positive at Susquehanna
Ford (F) initiated with a Neutral at Susquehanna
General Motors (GM) initiated with a Neutral at Susquehanna
Lear (LEA) initiated with a Neutral at Susquehanna
Liberty TripAdvisor (LTRPA) initiated with an Outperform at Oppenheimer
Medley Management (MDLY) initiated with a Buy at Gilford Securities
Medley Management (MDLY) initiated with a Neutral at Goldman
Medley Management (MDLY) initiated with an Outperform at Keefe Bruyette
PC Connection (PCCC) initiated with a Neutral at B. Riley
PCM, Inc. (PCMI) initiated with a Buy at B. Riley
RealNetworks (RNWK) initiated with a Buy at B. Riley
Retail Opportunity (ROIC) initiated with a Market Perform at Wells Fargo
Rexford Industrial (REXR) initiated with a Buy at MLV & Co.
Tenneco (TEN) initiated with a Positive at Susquehanna
Textron (TXT) initiated with an Outperform at Wells Fargo
TripAdvisor (TRIP) initiated with an Outperform at Oppenheimer
Twitter (TWTR) initiated with a Neutral at Citigroup
Visteon (VC) initiated with a Positive at Susquehanna


AbbVie (ABBV), Shire (SHPG) announced termination of proposed merger. AbbVie will pay Shire a $1.64B break up fee
AbbVie (ABBV) announced new $5B stock repurchase program, raised dividend nearly 17% to 49c per share
Total (TOT) confirms death of CEO Christophe de Margerie. de Margerie was killed in a private plane crash at Vnukovo Airport in Moscow, following a collision with a snow removal machine
Chipotle (CMG) sees FY15 low to mid-single digits comparable restaurant sales gains
DISH Network (DISH) announced that Monday night Turner Networks (TWX) removed Boomerang, Cartoon Network, CNN, CNN en Español, HLN, truTV and
Turner Classic Movies from the DISH programming lineup. The two companies have been unable to negotiate the terms of a renewed distribution agreement
Rhino Resources (RNO) lowered quarterly dividend to 5c per share from 44c per share


Companies that beat consensus earnings expectations last night and today include:
Apple (AAPL), Customers Bancorp (CUBI), Lexmark (LXK), Regions Financial (RF), Carlisle (CSL), Signature Bank (SBNY), Steel Dynamics (STLD), First Defiance Financial (FDEF), Helix Energy (HLX), Celanese (CE), East West Bancorp (EWBC), BancorpSouth (BXS), Healthstream (HSTM), Texas Instruments (TXN), Rent-A-Center (RCII), Rambus (RMBS), Illumina (ILMN), Hexcel (HXL), Cadence Design (CDNS), Washington Trust Bancorp (WASH), ServisFirst (SFBS), Chipotle (CMG)

Companies that missed consensus earnings expectations include:
BBCN Bancorp (BBCN), GulfMark Offshore (GLF), Steel Dynamics (STLD), Potlatch (PCH), Kaiser Aluminum (KALU), Ultra Clean (UCTT), Zions Bancorp (ZION), Wilshire Bancorp (WIBC)

Companies that matched consensus earnings expectations include:
Brown & Brown (BRO), Packaging Corp. (PKG), Werner (WERN)


Staples (SPLS) may be latest retailer to be hacked, Krebs reports (TGT, HD)
Lawyers for Ackman, Valeant (VRX) say Allergan (AGN) CEO oversaw campaign to discredit Valeant, Reuters reports
Actavis (ACT), Sanofi (SNY) among bidders for Omega Pharma, Bloomberg reports (PRGO)
Yahoo (YHOO) in talks to acquire BrightRoll, TechCrunch reports
Apple (AAPL) iCloud may have been attacked by Chinese hackers, Reuters reports
Apple (AAPL) to supply more iPhone 6 Plus to satisfy China demand, DigiTimes reports
Investigators say plough driver in Total (TOT) crash was inebriated, Reuters says


CEL-SCI (CVM) announces proposed offering of common stock, warrants
Tesoro Logistics (TLLP) 20M share Secondary priced at $57.47

Latest Central Bank Sticksave Halts Futures Slide, Sends E-Mini Soaring After ECB Said "Looking To Buy Bonds"

Another day, another central bank sticksave.

Moments after Europe's open, when once again the equity futures complex was threatening to break the upward trendline, after USDJPY took out stops and sliding below 106.3, pushing bonds both in Europe and the US to intraday highs, and the ES to session lows just above 1890, and then... here comes the ECB rumor cavalry, this time in the face of Reuters which blasted the tape with:


And because in this centrally-planned market no amount of GPIF or ECB doing what everyone knows they are doing headlines can not surprise the algos, ES has soared over 20 points from the overnight lows and is now solidly above the 200 DMA which was the clear intention of this latest sticksave.

Ironically, this happens even as the "pundits" interpret yesterday's stronger than expected Chinese data as indicative of more China stimulus, not less! As Bloomberg summarized, "stronger-than-estimated economic data failed to convince analysts that China’s authorities will refrain from introducing more targeted measures."

So first it was China reported better than expected goalseeked GDP "data" (if still the worst since 2009) which was evidence of more stimulus, not less, and then Reuters leaked today's central bank "all green to buy stocks" headline.

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.

Because "fundamentals."

In other news,  Asian markets are broadly flat-to-down as we write, with the Shanghai Composite and Hang Seng posting moves of -0.7% and 0.1% respectively whilst Japanese equities are notably underperforming, and dropping 2%, following the 4% rise yesterday on news that the GPIF would increase its allocation to domestic equities. The other main event post the US market close last night was the impressive results from Apple with early hints at strong demand for the new iPhone 6 following earnings beats on revenues, profit and phone sales. Shares rose in afterhours trading.


Bund futures opened higher this morning in sympathy with the gains in T-notes overnight as Asia equities declined on the back of concerns over growth in China, and a pullback in yesterday’s sharp gains in the Nikkei 225. However, the release of latest source comments, which indicated that the ECB is considering buying corporate bonds, and that the buying is already well under way, saw bund futures spike lower in the best volumes of the day.
Goldman Sachs and JPMorgan have cut their 10yr Treasury yield forecast to 2.5% (Prev. 3%), and 2.45% (Prev. 2.7%) respectively. (WSJ)


Asian sentiment was weighed upon by the release of Chinese GDP, which although topped analysts’ forecasts, showed that the economy expand at its slowest pace since Q1 of 2009. In addition, Nikkei 225 (-2%) lost some of yesterday’s GPIF-inspired shine amid a bout of profit taking and JPY strengthening O/N. Furthermore, Japan's welfare minister Shiozaki, who oversees the pension fund, said he “absolutely has no knowledge” regarding yesterday’s GPIF reports, which was also attributed to the weakness in the index. UK and European markets trade in positive territory boosted by positive earnings reports with the likes of ASOS (+15.5%), Actelion (+7%) and Akzo Nobel (+4.5%) all trading sharply higher. Stocks in general, especially the periphery, got a further lift after the latest source comments suggest that the ECB may target corporate debt in addition to the covered and ABS programmes that have already been announced.


EUR weakness on the back of the latest ECB source comments have dictated the main moves in the FX market this morning. As such the USD has also recovered from its lows seen at the European open which in turn has pressured cable lower. Looking elsewhere the AUD is still holding onto gains seen overnight where the currency welcomed the release of Chinese GDP coming in higher than expected.


WTI and Brent crude futures are both trading higher into the North American open finding some solace that Chinese Q3 GDP and Industrial Production exceed expectations overnight. Meanwhile, spot gold traded around 5-week highs overnight but has since come off the highs as the USD has recovered off its lowest assisted by aggressive selling of EUR following the latest source comments.

Iran’s oil minister has reiterated that an emergency meeting is not necessary to discuss the slide in prices. (Shana)

JPMorgan has lowered gold and copper price forecasts, citing more muted global growth which is offset by lower supply growth

Bulletin Headline Summary from RanSquawk and Bloomberg

  • EU stocks seen higher after latest source comments suggest the ECB is looking at buying corporate bonds
  • Chinese GDP, which although topped analysts’ forecasts, showed that the economy expand at its slowest pace since Q1 of 2009
  • Apple (AAPL) traded higher after market, following a beat in expectations on revenues, earnings, and iPhone sales for Q4 ? Looking ahead we have tier 1 data from the US in the form of Existing Home Sales (Sep), with large cap corporate earnings to come from Coca-Cola, Verizon and McDonalds

DB's Jim Reid concludes the overnight event recap:

After the hostile skirmishes in financial markets last week the battle seems to have moved more onto a chess board this week. As central bankers started to become more dovish as last weekend approached, so markets stabilised. However this makes actual dovish action less likely as markets take some of the pressure off the authorities. Indeed following Bullard's recent conversion to the dovish side late last week we've subsequently seen Rosengren, Williams and yesterday Fisher all play down last week's volatility and its impact on the US economy. So we might be at a bit of a stalemate until newsflow allows one side to declare check!! It'll probably be a while before anyone can declare checkmate though as still weak global macro fundamentals battle it out with the probability of more liquidity to come.

The main focus overnight has been on China as the country released a host of economic stats. Q3 GDP came in at 7.3% YoY, a modest beat over expectations of 7.2% but still the lowest read seen since early 2009. China also reported strong September industrial production growth of 8% (7.5% exp.), rebounding off August lows whilst retail sales and fixed asset investment were slightly short of market consensus at 11.6% and 16.1% respectively.

In response Asian markets are broadly flat-to-down as we write, with the Shanghai Composite and Hang Seng posting moves of -0.3% and 0% respectively whilst Japanese equities are notably underperforming following the 4% rise yesterday on news that the GPIF would increase its allocation to domestic equities. The other main event post the US market close last night was the impressive results from Apple with early hints at strong demand for the new iPhone 6 following earnings beats on revenues, profit and phone sales. Shares rose in afterhours trading.

Before all this, yesterday saw the S&P 500 close up +0.9%, helped by a pre-earnings +2% gain in Apple. This gain came in stark contrast to some other big tech names yesterday as shares in SAP (down -5.8%) in Europe and IBM (down -7.2%) in the US both ended the day significantly lower after their Q3 earnings reports. US credit followed the lead from the equity markets and as CDX IG closed -1bp tighter whilst CDX HY tightened -11bps.

Over in Europe yesterday was another weak day even as US equities managed to rise for the third day in a row. The Stoxx 600 closed the day down -0.5% as the CAC and DAX fell -1% and -1.5% respectively. Credit also struggled with iTraxx Main and Crossover widening by +3bps and +11bps respectively. These moves came even as European data on the day beat expectations, with Italian August Industrial Orders MoM rising +1.5% (vs expectation of a -0.2% fall).

Staying in Europe, yesterday saw the ECB begin their purchases of covered bonds in the market. We will get their updated balance sheet numbers every Monday afternoon (starting next week) where we'll get a good idea how successful they are going to be at getting close to their soft target for the balance sheet. So every Monday's release will now be important in this regard but for now we had some early indications from the FT which suggested that the ECB purchases included Spanish, German and French issues. These purchases weren't enough to stabilise peripheral debt as Italian, Spanish and Portuguese 10Y yields rose +10bps, +9bps and +18bps respectively whilst German and US 10Y yields both fell slightly, by -1bp and -5bps respectively.

Looking to the day ahead we will get UK government borrowing data, with public sector net borrowing expected in at £9.4bn for September and also US September existing home sales data which consensus estimates put at 5.1M. Portugal’s finance minister is expected in Parliament this morning to speak about the 2015 budget proposal, whilst the EU, Russia and Ukraine’s energy ministers’ are holding Gas talks in Berlin. On these talks, yesterday, “a Russian government source close to gas talks” told Reuters that, “The devil is in the details. I don't think that Russian gas will be delivered soon to Ukraine.” In other news, as US earnings season continues we will get results from Coca-Cola, McDonald’s, Lockheed Martin and Verizon among others

A Caliph In A Wilderness Of Mirrors

Authored by Pepe Escobar, originally posted at Asia Times,

I'm aiming at you, lover
Cause killing you is killing myself

- Orson Welles (director), The Lady from Shanghai,1947

He's invincible. He beheads. He smuggles. He conquers. He's the ultimate jack-of-all-trades. No Tomahawk or Hellfire can touch him. He always gets what he wants; in Kobani; in Anbar province; with the House of Saud (which he wants to replace) trying to make Putin (who he wants to behead) suffer because of low oil prices.

If this was a remake of Orson Welles's noir classic The Lady from Shanghai, in the mirror sequence the lawyer (American?) and the femme fatale (Shi'ite?) would also get killed; but The Caliph of Islamic State would survive as a larger than life Welles, free to roam, plunder and "give my love to the sunrise" - as in a Brave Caliphate World shining in "Syraq" over the ashes of the Sykes-Picot agreement.

He's winning big in Iraq's Anbar province. The Caliph's goons are now closing in on - of all places - Abu Ghraib; Dubya, Dick and Rummy's former Torture Central. They are at a mere 12 kilometers away from Baghdad International. A shoulder-launched surface-to-air missile (or MANPAD) away from downing a passenger jet. Certainly not an Emirates flight - after all these are trusted sponsors.

Hit, in Anbar province, is now Caliph territory. The police forces and the province's operational command have lost almost complete control of Ramadi. The Caliph now controls the crucial axis formed by Hit, Ramadi, Fallujah; Highway 1 between Baghdad and the Jordanian border; and Highway 12 between Baghdad and the Syrian border.

The Caliph's goons are no less than taking over the whole, notorious Baghdad belt, the previous "triangle of death" in those hardcore days of American occupation circa 2004. Message to Donald Rumsfeld: remember your "remnants"? They're back. And they're in charge.

Both Ramadi and Fallujah have been reduced to an accumulation of bombed-out schools, hospitals, homes, mosques and bridges. Residential streets are virtually deserted. According to the United Nations, there are a least 360,803 internally displaced persons in Anbar, as well as 115,000 others in areas under The Caliph's control. At least 63% of the 1.6 million people living in the province are classified as "in need" - with hair-raising minimal access to water, food and health care, and receiving little to absolutely zero humanitarian support from that fiction, the "international community." US Ambassador to the UN Samantha Power is not screaming her lungs out for R2P ("responsibility to protect").

How could the Pentagon's spectacular Full Spectrum Dominance possibly not see any of this happening? Of course they see it. But they don't give a damn. The Pentagon occasionally uses AH-64 Apache helicopters to attack some of The Caliph's goons in Ramadi and Hit. But Apaches can be easily hit with MANPADS. They are stationed at Baghdad International and their only mission is to protect the airport. Who cares about local, civilian "collateral damage"?

Married to the Mob
In Kobani, the former third-biggest town in Syrian Kurdistan, in the far northeast, The Caliph also wins big. Another biblical exodus has reached 300,000 refugees - and counting, with over 180,000 headed to Turkey.

The Caliph counts on indirect help from The Sultan (or alternate Caliph), aka Turkish President Tayyip Erdogan. Tehran is - rightfully - furious, as it sees the "West" - and Turkey - betraying the Kurds all over again. It's no secret Sultan Erdogan is doing nothing because he wants to screw the guerrillas of the Kurdistan Workers' Party (PKK) and the Syrian-Kurdish Democratic Union Party (PYD); let them die instead of repelling The Caliph and then be strong enough to threaten Turkish domination of those huge, essentially Kurdish patches of Anatolia. Thus the only thing Sultan Erdogan does support is aimless bombing by the Pentagon cum coalition of the clueless-cowards.

Anybody who believes the US Central Command's spin that House of Saud and United Arab Emirates fighter jets conduct "bombing raids" on the outskirts of Kobani gets a one-way ticket to Oz. Imagine these clowns being able to deploy precision-guided bombs or trained laser spotters. To start with, the Pentagon has zero local intel - as in zero operatives able to paint lasers on targets. Thus the "coalition" can barely hit the odd tank (out of 25 around Kobani) or Humvee out of 2,000 crammed in a valley for almost two weeks now.

But the "coalition" certainly is able - miraculously! - to hit Syrian state infrastructure, as in energy installations. In June, the official Pentagon excuse was, "We don't have any drone assets in Iraq." Now there's no excuse for drones which can read a "Smoking Kills!" warning in a packet of Marlboros not hitting The Caliph's assets in Kobani - or in Anbar province for that matter. So it's down to a mix of incompetence and neglect. It was so much easier to hit Pashtun wedding parties in the Waziristans. Especially because no one was paying attention.

Erdogan's own goons, meanwhile, have instituted a curfew on all major towns and cities in southeast Anatolia, and are even gunning down peaceful Kurdish protesters. Fifteen million Kurds in Anatolia cannot be wrong; Erdogan wants Kobani to fall. Ankara remains for all practical purposes the top logistical hub for The Caliph's goons. The Sultan is using The Caliph as a proxy army to smash the Kurds.

Terminal evidence has been offered by the leader of the Kurdish PYD, Salih Muslim, meeting Turkish military intel and asking for help. Conditions: abandon any hope of self-determination for Syrian Kurds; give up all your self-governing towns and regions; and watch as we install a Turkish "buffer"/no-fly zone inside Syrian territory.

Don't expect the Obama "Don't Do Stupid Stuff/We Have No Strategy" administration to sentence, "Erdogan must go". Besides, the pathetic club of National Security Advisor Susan Rice and her deputy Ben Rhodes has no clue about what's goin' on.

To the Green Zone!
Tehran, for its part, has clearly identified Erdogan's nasty game. The Sultan knows monster B1-B bombers flying over Kobani are absolutely useless - while The Caliph's goons deploy massive car bombs and keep advancing. "Boots on the ground" will be needed. Enter NATO asset Turkey. But with one condition: regime change in Damascus, or at least a prelude, via that "buffer"/no-fly zone over Syria.

The Big Picture remains the same. Sultan Erdogan and the House of Saud want regime change in Damascus (Erdogan dreams of a Sunni puppet as a vassal of Ankara; the Saudis want their own Wahhabi schemer). Israel merrily agrees. And if that comes with a bonus - attacking the new Iraqi government, still supported by Iran, in the American-made Green Zone - even better. The lowdown: "Don't Do Stupid Stuff" translates as the Gulf Cooperation Council, Turkey and Israel using Washington to advance their quite explicit agenda.

Sultan Erdogan, as a Mob boss, does seem to heave learned a thing or two from watching Martin Scorsese's Goodfellas. He's extracting the maximum pound of flesh from the bewildered "Don't do Stupid Stuff" team. The Sultan is boldly aiming at Turkish boots on the ground gloriously invading Syria in NATO "humanitarian intervention" mode. And all this sold as NATO offering "protection" to a member-nation. NATO's new secretary-general, former Norwegian Prime Minister Jens Stoltenberg, has just been to Ankara. Saudi Arabia has already "voted" out loud for the "buffer"/no-fly zone. Same for General Francois Hollande, that pitiful excuse for President of France.

Once again, it's Tehran to the rescue. The Foreign Ministry has duly announced Iran is ready to liberate Kobani from The Caliph's goons (and they can do it) if Bashar Al-Assad says the word. Now that's how you work the chessboard; NATO is left with zero excuses to mount an invasion of Syria, whatever Mob Boss Erdogan comes up with.

Operation Hands Off My Toyota
The Caliph also wins big in the "bleeding the Pentagon" department. A single US "strike" against his goons - involving F-15s, F-16s or F-22s - costs up to US$500,000. The Pentagon has just revealed it has spent no less than $1.1 billion against The Caliph since June.

What for? Virtually all the assets being destroyed by American bombing are made in the USA, deployed to the Iraqi army and then duly captured during The Caliph's offensive. So here we have the Empire of Chaos spending a fortune from the US Treasury to smash tanks, Humvees and other gear already paid for by American taxpayers. No wonder taxpayers are fuming. Thus Operation Hands off My Toyota.

Additionally, the Pentagon does not have a clue on how to build its Obama-designed proxy "rebel" force to fight The Caliph (with no US soldiers or marines; only fanatic Wahhabis and assorted mercenaries).

To start with, they have no clue who the hell qualifies as a "moderate rebel". The rabble must be "vetted" - and then sent to, of all places, Saudi Arabia for training. There the guy in charge will be - who else - a Special Ops honcho, Major General Michael Nagata. Even under the most optimistic scenario, the Pentagon won't have its proxy "moderate rebel" army on the ground in Syria before the summer of 2015.

Hefty bottles of Chateau Margaux can be bet that all this prime US weaponized know how will ultimately end up captured by The Caliph's goons. Same applies to reliable "rebel" intel on the ground.

But the real Dadaist masterpiece is that first these "rebels" will be politely asked by the Pentagon to forget about getting rid of Assad to fight The Caliph. At least for a while. Re-enter Stoltenberg, the new NATO head: "Next year, at the ministerial meeting, we will take decisions regarding the so-called spearhead but, even before it is established, NATO has a strong army after all. We can deploy it wherever we want to." OK, tough guy; why not "Syraq"?

If this all sounds like a plot straight out of hit series Blacklist, that's because it is. Why not get Red (James Spader) to fight The Caliph? And then again, what if Red is The Caliph? He pretends to fight himself - and he wins, handsomely. Back to Welles' The Lady from Shanghai: "Killing you is killing myself". Yet nobody could possibly want The Caliph dead when he's such a smashing, undisputed box-office success.

*  *  *
Pepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007), Red Zone Blues: a snapshot of Baghdad during the surge (Nimble Books, 2007), and Obama does Globalistan (Nimble Books, 2009).


Do You Believe In Chinese Miracles? GDP, Industrial Production Beat; Retail Sales Miss

Whocouldanode? Chinese GDP managed (thanks to record-breaking credit creation and QE-lite) to beat expectations of +7.2% and come in at +7.3% (still its slowest growth since April 2009). Notably this was the biggest decoupling from Bloomberg's high-frequency economic data forecast (i.e. real data) since May 2010. Despite weakness in Cement and Steel output, Industrial Production also managed to beat and actually improve (another miracle). Retail Sales missed expectations, rose only 11.6% YoY - its weakest since Feb 2006. Initial kneejerk is a lift in USDJPY, AUDJPY, TSY yields, and S&P and NKY futures... but that has now faded...


Chinese GDP beat, falls to slowest since April 2009, and decouples from Bloomberg's "real data" estimate by themost since May 2010...


Industrial production rose and beat - breaking any historical correlation with Steel and Cement industries...


For the 5th month of the last 6, Retail Sales missed and dropped to the slowest growth since feb 2006...


The initial reaction - USDJPY jerked higher, S&P Futs followed along with TSY yields...


But that has now faded...


*  *  *

And here is JPMorgan's CIO Michael Cembalest explaining why it's not sustainable (absent moar inflationary credit impulses - and the concomittant hangover),

China is slowing, mostly due to a gradual, steady decline in private sector activity. One example: the decline in fixed asset investment (e.g., business capital spending) at private sector firms relative to firms that are state-controlled. Premier Li Keqiang’s reforms are aimed at making it easier for entrepreneurs to start private sector firms, but in the current climate, private sector investment growth continues to fall.



The Chinese central bank injected some liquidity into the domestic banking system recently, but it was only for 3 months and not meant to address the more structural issue of declining private sector demand. While export growth and job creation still look pretty good, the overall picture is one of an economy growing at 7%, and that’s with the contribution from government spending. Government spending is set to slow in the second half of the year; the authorities continue to reduce the size of the shadow banking system which extends credit; and the overheated housing market is still in decline as well when looking at national home sales and a 70-city home price average.

We expect continued weakness in Chinese data for the rest of 2014 and into next year as well.

Source: JPMorgan

*  *  *

And we know just how bad that nagover can be (unless the drip of liquidity - and not reforms) is left wide open...



Charts: Bloomberg

h/t @M_McDonough

Top Scientist Warns This Version Of Ebola Looks Like "A Very Different Bug"

Submitted by Michael Snyder via The Economic Collapse blog,

Barack Obama and the head of the CDC need to quit saying that we know exactly how Ebola spreads.  Because the truth is that there is much about this virus that we simply do not know.  For example, a top Ebola scientist that is working in the heart of the outbreak in Liberia says that this version of Ebola looks like it could be "a very different bug" from past versions.  Other leading scientists are echoing his concerns.  And yet Barack Obama and Thomas Frieden continue to publicly proclaim that we know precisely how this virus behaves.  Not only is that bad science, but it could also potentially result in the unnecessary deaths of a very large number of people.  For example, Obama has refused to implement an Ebola travel ban because he is greatly underestimating the seriousness of this virus.  This decision could turn out to be incredibly costly.  If what you will read about below is true, we could be dealing with some sort of "super Ebola" that nobody has ever seen before.

Peter Jahrling of the National Institute of Allergy and Infectious Disease is on the front lines fighting this disease in Liberia.  He is one of the top authorities in the world on Ebola, and what his team has been seeing under the microscope is incredibly sobering...

Now U.S. scientist Peter Jahrling of the National Institute of Allergy and Infectious Disease believes the current Ebola outbreak may be caused by an infection that spreads more easily than it did before.


Dr Jahrling explained that his team, who are working in the epicentre of the crisis in the Liberian capital of Monrovia, are seeing that the viral loads in Ebola patients are much higher than they are used to seeing.


He told 'We are using tests now that weren't using in the past, but there seems to be a belief that the virus load is higher in these patients [today] than what we have seen before. If true, that's a very different bug.


'I have a field team in Monrovia. They are running [tests]. They are telling me that viral loads are coming up very quickly and really high, higher than they are used to seeing.

'It may be that the virus burns hotter and quicker.'

Other top scientists are making similar observations.

The following comes from a recent article posted on Washington's Blog...

The head of the Center for Infectious Disease Research and Policy at the University of Minnesota – Dr. Michael Osterholm – is a prominent public health scientist and a nationally recognized biosecurity expert.


Dr. Osterholm just gave a talk shown on C-Span explaining that a top Ebola virologist – the Head of Special Pathogens at Canada’s health agency, Gary Kobinger – has found that the current strain of Ebola appears to be much worse than any strain seen before … and that the current virus may be more likely to spread through aerosols than strains which scientists have previously encountered.

I have posted video of that talk on C-Span below...

But even if we were dealing with the exact same strain of Ebola, that does not mean that our leaders are telling us the truth when they say that it is not an airborne virus.

Just check out the following quotes from top scientists about the spread of Ebola from a recent Los Angeles Times article

Dr. C.J. Peters, who battled a 1989 outbreak of the virus among research monkeys housed in Virginia and who later led the CDC’s most far-reaching study of Ebola’s transmissibility in humans, said he would not rule out the possibility that it spreads through the air in tight quarters.


“We just don’t have the data to exclude it,” said Peters, who continues to research viral diseases at the University of Texas in Galveston.


Dr. Philip K. Russell, a virologist who oversaw Ebola research while heading the U.S. Army’s Medical Research and Development Command, and who later led the government’s massive stockpiling of smallpox vaccine after the Sept. 11 terrorist attacks, also said much was still to be learned. “Being dogmatic is, I think, ill-advised, because there are too many unknowns here.

And I have written about this before, but so many people don't know about this that it bears repeating.  The following is an excerpt from a news story about a study that was conducted back in 2012 that demonstrated that the Ebola virus can be transferred from one animal to another animal without any physical contact whatsoever...

When news broke that the Ebola virus had resurfaced in Uganda, investigators in Canada were making headlines of their own with research indicating the deadly virus may spread between species, through the air.


The team, comprised of researchers from the National Centre for Foreign Animal Disease, the University of Manitoba, and the Public Health Agency of Canada, observed transmission of Ebola from pigs to monkeys. They first inoculated a number of piglets with the Zaire strain of the Ebola virus. Ebola-Zaire is the deadliest strain, with mortality rates up to 90 percent. The piglets were then placed in a room with four cynomolgus macaques, a species of monkey commonly used in laboratories. The animals were separated by wire cages to prevent direct contact between the species.


Within a few days, the inoculated piglets showed clinical signs of infection indicative of Ebola infection. In pigs, Ebola generally causes respiratory illness and increased temperature. Nine days after infection, all piglets appeared to have recovered from the disease.


Within eight days of exposure, two of the four monkeys showed signs of Ebola infection. Four days later, the remaining two monkeys were sick too. It is possible that the first two monkeys infected the other two, but transmission between non-human primates has never before been observed in a lab setting.

So when Barack Obama and Thomas Frieden get up and tell us that they know with 100% certainty that Ebola is not airborne, they are lying to you.

There is so much about this outbreak that we simply do not know.

Our public officials should be honest about that.

Instead, it seems like they are flying by the seats of their pants and just saying whatever they think will keep everyone calm.

We are potentially facing the greatest health crisis of this generation, and bad science and false assurances are not going to help anyone.

Sadly, Barack Obama just continues to make bad decision after bad decision.  This includes his very foolish decision to send thousands of U.S. troops right into the heart of the Ebola death zone.

It is being reported that these troops are only going to get just four hours of Ebola training, and the Pentagon is saying that they "will only need gloves and masks" to protect themselves...

Troops from the 101st Airborne Division leading the military response to Ebola in West Africa will only need gloves and masks to protect themselves from the deadly virus, so said Gen. David Rodriguez at a Pentagon briefing Wednesday.


“They don’t need the whole suit – as such – because they’re not going to be in contact with any of the people,” the commander of U.S. troops in Africa said.


Soldiers from the 101st Airborne will primarily be building hospitals, ultimately leading what could be a contingent of 4,000 American service members. They’ll be housed either in tent cities at military airfields or in Liberian Ministry of Defense facilities, Rodriguez said.


Soldiers’ health will be monitored through surveys and taking their temperature on their way in and out of camps. If a service member does get sick, Rodriguez said they will be flown home immediately for treatment.

Who is going to be held accountable when these young men and women start coming home sick?

So far the federal response to this Ebola crisis has been a parade of incompetence.

And yet we continue to be told that "everything is under control".

I don't know about you, but I have a bad feeling about all of this.

"It's Not Abenomics, It's The Weather" Japanese Econ Minister Admits Growth Is Weak

Amid two (notably female) resignations this weekend (Justice Minister Matushima and Trade Minister Obuchi for alleged misuse of political funds), Abenomics tilt towards women as a pillar of the Japanese recovery is taking yet another blow, removing "one of his ways of distracting people from his less popular policies." However,it is Japan's Economy Minister, Akira Amari, that went full economic retard this weekend - having learned well from his wise American central-planning brethren. Rather than face reality that Abenomics currency devaluation printfest has crushed the consumer beyond all expectations (as we noted since the start and Goldman just admitted), he blames 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."



As Bloomberg reports,

After nearly two years without a single resignation from Japanese Prime Minister Shinzo Abe’s cabinet, two female ministers stepped down on the same day.


Yuko Obuchi, trade and industry minister, resigned over allegations of improper use of political funds, and Justice Minister Midori Matsushima, 58, quit over claims she breached election laws. The resignations are a double blow to Abe who has made promoting women a pillar of his economic policy.


The resignation of the two ministers “one of his ways of distracting people from his less popular policies is no longer a distraction.”

But that's the least of Abe's worries as the economy flounders back towards recession and moar QQE is untenable... (as we explain here)

Akira Amari's official website explains...

“Including the effects of large typhoons and heavy rains in July and August, Japan’s 3Q economic situation is probably not a strong recovery,” Japanese Economy Minister Akira Amari writes in a post on his website.


Amari: “Unless there is really strong data in September, we will have to decide on a stimulus package to return the economy to the growth path, with this delinked from the decision on the sales-tax increase”


Amari: It’s better to decide on a further sales tax increase as early as possible so compilation of next year’s budget not left unfinished at the end of this year


Amari: Prime Minister Shinzo Abe’s advisory panel which will examine the current economic situation will be held over a few days before and after the announcement of preliminary 3Q GDP on Nov. 17

It appears the opposition party in Japan are simply reading straight from Zero Hedge and Goldman's script...

Opposition has pointed out miscalculation and misconceptions of Abenomics.


Exports does not extend to a weaker yen, real wages Toka are going down, and have contributed more negative than positive, rather than a break from the deflation, the depreciation of the yen has caused a recession, stagflation of inflation


Exports due to the depreciation of the yen has not yet been been growing as expected and is a miscalculation, to be sure

*  *  *

For those banking on moar flow from the BoJ, think again.

"Either You're The Butcher... Or The Cattle"

Submitted by Jim Quinn via The Burning Platform blog,

The Walking Dead reflect the darkening mood of this intensifying Fourth Turning. I wrote one of my more pessimistic articles called Welcome to Terminus in April regarding the season four finale of the Walking Dead series. I essentially argued we are approaching the end of the line and the world is going to get real nasty.

In the six short months since I wrote that depressing article, we’ve seen men beheaded on Youtube videos by terrorists no one had ever heard of at the beginning of this year. Somehow a ragtag band of 30,000 Muslim terrorists, using American military equipment supplied to fight Assad in Syria and taken from the Iraqi Army when they turned tail and ran away, have been able to defeat 600,000 Iraqi and Kurd fighters with air support from the vaunted U.S. Air Force. Syria, Iraq, Libya, and Afghanistan descend into never ending religious based warfare. We’ve even had passenger planes mysteriously disappear in Asia with no trace.

Crimea seceded from Ukraine and rejoined Russia, initiating a plan to punish Russia by the western powers. America supported and planned the overthrow of a democratically elected government in the Ukraine, with a predictable push back response by Russia, leading to a bloody civil war in the Eastern Ukraine. We’ve had a false flag shooting down of an airliner over the Ukraine by the Ukrainian government, blamed on Russia and Putin by Obama and his EU co-conspirators. The American corporate media mouthpieces have ignored the cover-up of missing controller transmissions, black box recordings, and physical evidence regarding the murder of hundreds of innocent people by western politicians. Israel and Hamas resumed their endless religious war in Gaza, with thousands of casualties and destruction.

UK fear mongering and financial threats barely averted the secession of Scotland from the UK. Cantalonia continues to push for a secession vote to leave Spain. Violent protests have broken out in Spain, Italy, France and even Sweden. Turmoil, protests and riots in Brazil, Venezuela, Argentina and Mexico have been driven by anger at political corruption, high inflation, and general economic dysfunction. Saber rattling between China and Japan has increased and young people in Hong Kong have been protesting the lack of democratic elections being permitted by China. The world economy, undergoing central bank monetary stimulus withdraw, is headed back into recession as Germany, China and the U.S. join the rest of the world in economic decline. And now the Western Africa outbreak of ebola has gone worldwide, with predictions of an epidemic potentially causing worldwide economic chaos.

What’s happening in the real world makes the dystopian zombie world of Walking Dead seem almost quaint. The writers of this show brilliant use of symbolism and imagery captures the violent, chaotic, inhumane, darkening, brutal world we inhabit as the Fourth Turning crisis period we entered in 2008 deepens on a daily basis. There is a good reason why the first episode of their fifth season drew the biggest cable TV audience in history. The show is clearly tapping into the mood of the masses. Early in the latest episode you realize Terminus has become a processing center run by cannibals. The line between victim and criminal, killer and prey, good and evil, madness and sanity, and moral and immoral is blurred. Everything is relative in the post-pandemic world of the Walking Dead.

Seeing Wall Street cannibals walk away unscathed after devouring the worldwide economic system in 2008 with their fraudulent financial schemes, corrupt politicians enriched by throwing taxpayers under the bus, militarized police forces trampling the Fourth Amendment, the NSA spying on every American, a private central bank enriching their owners by funneling trillions into their bank vaults, a president trampling on the Constitution by issuing executive orders to bypass the other branches of government, and billions of welfare and tax fraud from the urban ghettos to the penthouse suites in NYC, has convinced a large swath of Americans that everything is relative and nothing matters in our warped dystopian world. Right and wrong no longer matter. Morality is an antiquated concept. Adhering to the Constitution is an outmoded notion. Our society celebrates and condones our dog eat dog economic paradigm. Or zombie eats anything world in the case of Walking Dead.

The Terminus complex is reminiscent of the concentration camp in Schindler’s List. It is complete with railroad cars to hold the prisoners, gates with barbed wire, armed guards, and extermination facilities to “process” the prisoners. Thick black smoke belches into the air. There is a room stacked full of booty, teddy bears, watches, clothes – everything except the gold fillings.The Nazi like precision and attention to detail is reflected in the almost business-like method in which the Terminus administrators go about gutting their prey. The bone chilling efficiency and antiseptic processing facility evoke memories of the holocaust gas chambers. The opening sequence when Rick, Daryl, Glenn and Bob are among a group of men lined up to be gutted like pigs over a trough in place to collect their spilled blood, might have been the most brutal scene ever put on non-premium cable TV.

The callous and dispassionate way in which the prisoners (cattle) are lined up in front of a stainless steel trough is disconcerting and bone chilling. The victims are hit with a baseball bat and then their throats are slit over the trough by men in protective suits. They have become nothing but cattle to be butchered and consumed by the Terminus cannibals. You see another part of the processing plant where human remains are hanging from hooks like sides of beef. Gareth, the leader of Terminus, supervises the operation like a CEO, berating the butchers for not meeting quotas and following standard operating procedures. Not much different than how our mega-corporations are run today.

The other fascinating similarity between the dystopian “nightmare of want” setting of Terminus and our modern day dystopian “empire of excess” is the use of false advertising and propaganda to lure “customers” into their web. Their version of billboard advertising has plywood with the hand written messages of “Sanctuary for All”, “Community for All”, and “Those Who Arrive Survive”. The Terminus cannibals would have fit in well on Madison Avenue with the highly paid spin artists, propagandists, and whores for the corporate oligarchs.

The signs along train tracks and radio transmissions from a call center like facility showed the calculated business-like efficiency of the cannibals in systematically and methodically luring victims to their slaughterhouse. It is the same techniques used by the apostles of Edward Bernays to consciously and intelligently manipulate the habits, opinions, tastes, ideas and actions of the masses, in order to control and influence their buying habits, voting decisions, and support of their rulers. The unseen men who constitute the “invisible government” use these techniques to keep the cattle docile, fed, and ignorant, as they are led to slaughter.

The government and lack thereof is always lurking in the murky background of how and why the United States has devolved into an infected world of the walking dead. This episode provided some clues about government labs producing viruses as weapons to be used against some unexplained enemy. The insinuation is that the government somehow lost control of the virus and the ensuing pandemic destroyed our modern world and left the survivors to battle the biters and each other for the remaining scraps. The Federal government caused the societal collapse and is nowhere to be found in rebuilding the nation.

It is unclear how the apocalypse went down, but you can assume it began with fear, which led to panic, chaos, economic collapse, violent upheaval, war, and total breakdown of governmental authority and control. It is ironic that today fear of a worldwide ebola pandemic is coinciding with an inevitable economic implosion, wars raging in te Middle East, violent protests raging around the globe, and trust in governmental authority plunging to all-time lows. The Walking Dead has wittingly or unwittingly captured the ambiance of our turbulent times.

When you are faced with desperate circumstances you can either do whatever you need to survive or you can submissively accept your fate and die. Gareth and his cannibalistic cohorts had been in the same situation as Rick and his posse, but they had somehow turned the tables on their captors. Gareth’s survival of the fittest creed was “either you’re the butcher or you’re the cattle”. Human beings react to intense pressure and life threatening situations in different ways. Some people snap and turn into monsters, like Gareth. Some people snap and lose their minds. Others, like Rick and Carol, summon an inner strength to do whatever it takes to survive while barely maintaining their humanity. Others turn into blind followers of a strong forceful leader, not questioning the morality, legality or humanity of what they are ordered to do. The line between right and wrong, necessary versus unnecessary, vengeance versus justice, and butcher versus cattle is blurred in a world without rules, government or accepted norms.

I believe the “butcher or cattle” analogy is sadly a valid meme for the world we currently inhabit. In the Walking Dead world, individuals must choose to be butcher or cattle. It’s a Darwinian world of kill or be killed. Like minded individuals with common values and goals form communities to protect themselves, provide for themselves, and attempt to bring a semblance of order in a chaotic world. The community of Westbury, led by the governor and the community of Terminus, led by Gareth, are founded upon a foundation of evil and ultimately destroyed. Rick’s community of liberty minded freedom fighters do whatever is necessary to survive, but retain their humanity, decency and desire to create a better world.

Our present day world may not be as brutish as the Walking Dead world, though the line between reality and fiction is often indistinguishable when you turn on the news, but the distinction between butchers and cattle is clear. The elected and non-elected rulers of the deep state are the butchers, sending young men off to die for oil companies and arms dealers, impoverishing the masses through inflation and their control of the currency, and enriching themselves through their complete control of the political, financial, judicial, and economic systems. This establishment, or invisible government as Bernays described, is committed to its own enrichment and perpetuation. Its scope, financial resources, and global reach put it in a predator class all by itself.

The common people are the cattle being led to slaughter. We are kept docile with incessant propaganda from the mainstream media; marketing messages to consume from Madison Avenue; filtered, adjusted, manipulated economic data fed to us by government agencies; an endless supply of iGadgets and other electronic distractions; government education designed to keep us ignorant; 24/7 reality TV on six hundred stations to keep us entertained; corporate toxic processed food to keep us obese and tame; and an endless supply of Wall Street supplied debt to keep us caged in our pens with no hope of escape. The butchers of the deep state have maintained control for decades, but we’re entering a new era.

Fourth Turnings result in the tables being turned on the butchers. Some cattle are awakening from their stupor. They can see the bloody writing on the slaughterhouse wall. Anyone who isn’t sensing a dramatic mood change in this country is either a mindless zombie or a functionary of the deep state. The financial shenanigans of the ruling class are again being revealed as nothing but a Ponzi scheme built on a foundation of debt and propped up by delusions and ignorance. When the house of cards collapses in the near future, the tables will turn. When people have nothing left to lose, they will lose it. The butchers will become the cattle. There will be no sanctuary for these evil men. Their reign of terror will be swept away in a whirlwind of retribution, death and destruction. It might even make the Walking Dead look like a walk in the park.


"Anti-Petrodollar" CEO Of French Energy Giant Total Dies In Freak Plane Crash In Moscow

Three months ago, the CEO of Total, Christophe de Margerie, dared utter the phrase heard around the petrodollar world, "There is no reason to pay for oil in dollars,"  as we noted here. Today, RT reports the dreadful news that he was killed in a business jet crash at Vnukovo Airport in Moscow after the aircraft hit a snow-plough on take-off. The airport issued a statement confirming "a criminal investigation has been opened into the violation of safety regulations," adding that along with 3 crewmembers on the plane, the snow-plough driver was also killed.


CEO of France's Total dies in jet crash at Moscow’s Vnukovo Airport – report

— RT (@RT_com) October 20, 2014

De Margerie, 63, joined Total in 1974 after graduating from the École Supérieure de Commerce in Paris. He served in several positions in the Finance Department and Exploration & Production division. In 1995, he became President of Total Middle East before joining the Total's Executive Committee as the President of the Exploration & Production division in May 1999. In May 2006, he was appointed a member of the Board of Directors. He was appointed Chairman and Chief Executive Officer of Total on May 21, 2010.

*  *  *

As RT reports,

According to preliminary data, the light aircraft collided with a snow-cleaning machine on takeoff, a source at the capital’s airport told RIA.


The aircraft was sending distress signals while still in the air and reporting an engine fire and fuselage damage, LifeNews reports. Upon crashing on the runway, the aircraft was engulfed in flames, reportedly killing everyone on board.


While initials reports suggested four people died in the tragedy, officials report that five bodies were found at the crash site, one allegedly being the driver of the snow-cleaning vehicle.


Vnukovo Airport has temporarily suspended all flights following the incident.


“A criminal investigation has been opened into the violation of safety regulations after a light aircraft crash in the capital's Vnukovo airport,” transport official Tatyana Morozova told RIA.


An investigative group is working at the crash site, Morozova added. In addition to people who were on board the plane, she said, the driver snowplow was killed.


Debris from the aircraft was scattered up to 200 meters from the crash site, according to the rescue services. The engine was found some 50 meters from the crash site, while one of the landing gears was ripped off and discovered nearly 200 meters from the main mass of debris.

*  *  *

The plane he was aboard...

DEVELOPING: Passenger of crashed plane was head of French oil company - reports

— RT (@RT_com) October 20, 2014

*  *  *

Of course this could merely be a desparately sad accident... aside from the coincidence of this so recently...

Christophe de Margerie, the CEO of Total (the world's 13th biggest oil producer and Europe's 2nd largest), believes "There is no reason to pay for oil in dollars." Clearly, based onhis comments, that we have passed peak Petrodollar.

As Reuters reports,

Oil major Total's chief executive said on Saturday the euro should have a bigger role in international trade although it was not possible to do without the U.S. dollar.


Christophe de Margerie was responding to questions about calls by French policymakers to find ways at EU level to bolster the use of the euro in international business following a record U.S. fine for BNP.




"There is no reason to pay for oil in dollars," he said. He said the fact that oil prices are quoted in dollars per barrel did not mean that payments actually had to be made in that currency.

So even a major beneficiary of the status quo appears to see the end in sight for the Petrodollar.

*  *  *

Furthermore, despite Western-imposed sanctions on Russia that prohibit western financing and technology transfer to some Russian energy projects, Total is continuing to pursue a natural gas project in Yamal, a joint venture with Russia's Novatek and China's CNPC.

“Can we live without Russian gas in Europe? The answer is no. Are there any reasons to live without it? I think – and I'm not defending the interests of Total in Russia – it is a no,” the Total boss told Reuters back in summer.

*  *  *

And of course, it had to happen in Russia!

The Crocodile Jaws Spring Open Again, Preparing To Bite

And with that, the eternal (and rhetorical) question once again resurfaces: who is right - bonds or stocks?




Now where have we seen this before? And how did it end? (only at least 8 times in the last week)


CIA Warned Obama that Funding Rebels Doesn’t Work … But Obama Decided to Fund Syrian Rebels ANYWAY For Cynical Political Gain

Painting by Anthony Freda.


We’ve pointed out for years that arming the Syrian and Libyan rebels to topple leaders we don’t like is a really stupid idea.

It turns out that the CIA agrees with us.

The New York Times reports:

The Central Intelligence Agency has run guns to insurgencies across the world during its 67-year history — from Angola to Nicaragua to Cuba [to Syria].




An internal C.I.A. study has found that it rarely works.


The still-classified review, one of several C.I.A. studies commissioned in 2012 and 2013 in the midst of the Obama administration’s protracted debate about whether to wade into the Syrian civil war, concluded that many past attempts by the agency to arm foreign forces covertly had a minimal impact on the long-term outcome of a conflict. They were even less effective, the report found, when the militias fought without any direct American support on the ground.




The findings of the study, described in recent weeks by current and former American government officials, were presented in the White House Situation Room and led to deep skepticism among some senior Obama administration officials about the wisdom of arming and training members of a fractured Syrian opposition.




One of the things that Obama wanted to know was: Did this ever work?” said one former senior administration official who participated in the debate and spoke anonymously because he was discussing a classified report. The C.I.A. report, he said, “was pretty dour in its conclusions.




Mr. Obama made a veiled reference to the C.I.A. study in an interview with The New Yorker published this year. Speaking about the dispute over whether he should have armed the rebels earlier, Mr. Obama told the magazine: “Very early in this process, I actually asked the C.I.A. to analyze examples of America financing and supplying arms to an insurgency in a country that actually worked out well. And they couldn’t come up with much.”




Last month, Mr. Obama said he would redouble American efforts by having the Pentagon participate in arming and training rebel forces.

Dan Froomkin – an investigative journalist with the Washington Post, HuffPost and now First Look (and a Democrat) – slams Obama for deciding to arm Syrian rebels even after the CIA told him it wouldn’t work, in an article entitled “Obama Knew Arming Rebels Was Useless,  But Did It Anyway“:

He knew better, but he did it anyway.




Bush at least thought the war in Iraq would do some good.


He was incredibly wrong, mind you. He was both delusional — and actively manipulated by neocons like Dick Cheney (who believe the application of American power is always and inherently a good thing). He intentionally misled the public about his real reasons for going to war (the terrorist attacks of 9/11 were an excuse, not a reason; there were no Iraqi weapons of mass destruction). His eventual goal was both unachievable (a sudden flowering of pro-Western democracy in the Middle East) and perverse (American control of Iraqi oil fields). His methods (firing all the Baathists; trying to install a corrupt puppet) were spectacularly misguided. Much of the rest of his presidency was consumed with sectarian warfare in Iraq and new lies to  cover up the old ones at home. And the end result was a massive human rights catastrophe, including torture of U.S. detainees, a refugee crisis, mass casualties, social disorder and – finally – the Islamic State.


Bush also certainly saw – and exploited — the political upside of being a war president.


But [at least Bush] didn’t let loose the dogs of war simply because his political operatives told him it would poll well.

In response to embarrassment caused by the revelation that Obama agreed to arm the Syrian rebels after the CIA warned him it wouldn’t do any good, the U.S. military is now saying they won’t work with the Syrian rebels.

Specifically, General Allen – the head of America’s anti-ISIS campaign – now says that the administration now has no plans to ever coordinate with the Free Syrian Army (FSA) or any other of the existing rebel factions. He says they’ll only work with a new coalition of “moderate” rebels.

Sadly, there aren’t any moderate rebels in Syria (and see this).

Virtually all of the arms – and humanitarian aid – end up in the hands of the most brutal terrorists.


Santelli & Schiff: "A Messy Exit Is A Given... Ending QE Will Plunge US Into Severe Recession"

"Markets are slowly coming to grips with reality is not going to be as easy as everybody thought," Peter Schiff tells CNBC's Rick Santelli, noting the pick up in volatility across asset classes recently. What The Fed clearly does not understand, Schiff blasts, is that "you cannot end quantitative easing without plunging the US into a severe recession." Because of the Fed's extreme monetary policy and the mal-investment that flows from it, Schiff says, "The US economy is more screwed up now than it's ever been in history." Most prophetically, we suspect, Santelli agrees that "a messy exit is a given," and Schiff believes they know that and that is why QE4 is coming simply "because it hasn't worked and they can't admit it's been a dismal failure."


The two oddly-similar-tie-wearing skeptics go on to discuss the catalysts for slowdown aside from QE exit and the endgame...


The Tragedy Of NATO: "Beware Foreign Entanglements"

Submitted by Patrick Barron via Mises Canada,

The economic phenomenon known as the “Tragedy of the Commons” instructs us that commonly held resources that are insufficiently protected will be plundered to extinction. The phenomenon was recognized in the early nineteenth century to explain why the commons in England quickly came to be denuded by sheep. All sheepherders had an equal right to graze sheep on the commons. There often was no agreement as to how many sheep each could graze, so it was sheer rational self-interest for each to graze as many sheep on the common ground as possible. In short order the commons came to be overgrazed. What later came to be called “the tragedy of the commons” was a simple and imminently understandable explanation.


Is security an economic resource?

One can easily accept that grassland is an economic resource that must be protected, but what about security and, if security is held collectively, can collective security agreements also be vulnerable to the tragedy of the commons? Security is a service that usually requires economic resources. We secure our personal possessions when we take precautions such as padlocking our bicycles, locking our car doors and the house, buying monitored security systems, purchasing heavy safes, and the like. These are all economic goods to secure our personal property. But what about protecting our physical selves? It is on a somewhat different plane but the purpose is the same. We may carry concealed weapons, take personal self-defense courses, or hire personal body guards. All these things require the expenditure of time and money to acquire economic goods to make us more secure. On a more subtle level, we modify our behavior to avoid giving offense to complete strangers about whom we know nothing. We especially do not deliberately seek confrontations over minor things like the last parking spot in the lot. Similarly we avoid dangerous parts of town or parts of town that are dangerous at night or on special occasions. For example, my wife and I were in downtown Chicago in the late 1990’s when the Chicago Bulls professional basketball team was winning the NBA championship. We were not fans and gave little thought to the fact that there might be what we shall call “excessive celebrations” after the final victory. As we strolled downtown Chicago after dinner we were advised by a Chicago policeman to leave, because the “excessive celebrations” often became excuses for certain people to behave criminally. Rather than assert our right to window shop whenever and wherever we darned-well pleased and discretion being the better part of valor, we went home. This aspect of security–i.e., avoiding unnecessary confrontation– is often overlooked.


Collective security brings in economic problems

Ah, but would we have reacted the same way had we been in a group? Perhaps we would have felt more secure to window shop by assuming that others in the group would protect us. Our behavior would have changed to become a bit more willing to take risk due to an implicit assumption of collective security. This willingness to take more risk because others may bear some or even all of the cost is known as moral hazard.

So we see that providing our own personal security of our physical bodies and our possessions requires that we expend resources that perhaps we would rather employ elsewhere. We pay for these ourselves and we modify our behavior to avoid the necessity of employing them with uncertain result and to minimize the cost.

But all this changes under collective security agreements.

Moral hazard and socialism cause a tragedy of the commons in collective security

Under a collective security agreement, all who join are obligated to provide security to all others in the alliance. Each member must expend resources to provide such security, which naturally means sacrificing the satisfaction of other preferences.

However, since all contribute to the security pot, all know that their individual sacrifice may be claimed by others. Therefore, there will be a reluctance to spend resources on security that may be used by others, while encouraging, at least to some extent, claims upon security that one would not have made in the absence of the security agreement.

The latter phenomenon, the increased willingness to call upon alliance members, is moral hazard at work and the former phenomenon, the reluctance to expend resources that may be claimed by others, is a well-known consequence of socialism.

Mises explained that socialism discourages production while it increases demand. Why produce only to be forced to share with others when one can demand to share in the production of others without regard to having previously produced something of value to those same others? Eventually all altruism vanishes in a sea of cynicism and nothing is produced for anyone to share. The result is a tragedy of the commons fed by moral hazard and socialism.

The tragedy of NATO

Today we see the above destructive economic forces at work in NATO expansion. When the Soviet Union disintegrated in 1990, the reason for NATO’s existence vanished. But rather than declare NATO to have been a success in deterring war in Europe, possibly disbanding the alliance and building a new Concert of Europe that would include Russia, NATO bureaucrats set about to expand the alliance to the east. Whereas the Concert of Europe after the Napoleonic Wars had quickly embraced France as an important member, NATO expanded to isolate Russia by absorbing its former satellite nations.

The last NATO expansion prior to the disintegration of the Soviet Union had occurred in 1982 when Spain joined the alliance. At that point in time NATO was composed of sixteen nations. Starting in 1999 twelve countries have joined NATO, ten of them former members of the Warsaw Pact. The other two, Slovenia and Croatia, were previously part of Yugoslavia, officially a non-aligned nation, but a communist dictatorship all the same. With the possible exception of Poland, none of these new members contribute much to the alliance’s military capability, meaning that the older members are shouldering their security burden. Naturally expanding NATO to the east has resulted in isolating and antagonizing Russia, who feels its security threatened. So, NATO has succumbed to the socialist phenomenon by adding new members who demand security without much of an obligation and to the moral hazard phenomenon by adding new members whose territories could be used to house American nuclear weapons, a situation that may yet provoke a major world crisis with Russia, which is precisely what NATO was formed to avoid.

Ukraine and Finland as examples of moral hazard and socialist demands

Both Ukraine and Finland are lobbying NATO for membership. President Poroshenko of Ukraine is lobbying for membership in both the European Union and NATO. The fact that Russia already has taken the Crimea following anti-Russian riots apparently means nothing as long as Ukraine believes that mighty NATO will intervene on its behalf. If NATO did admit Ukraine, one wonders if Ukraine would invoke the collective security clause and demand that NATO go to war with Russia. Finland is already a member of the EU and now is openly lobbying for NATO membership. In a recent interview with der Spiegel, Finnish president Alexander Stubb was dismissive of Russia’s stated concerns about Finland joining NATO. His interview has to be read to be believed. Both presidents’ behavior illustrate the moral hazard nature of collective security agreements. And neither country would contribute anything to the security of current NATO members. On the contrary, Ukrainian and/or Finnish membership would cause an escalation in tensions in Europe and take us right back to the Cold War…or worse! Neither country considers the possibility that NATO might not honor its military commitment. It is one thing for NATO bureaucrats to admit new members. It is another thing for current members to expend blood and treasure, especially when the possibility of nuclear war is wafting through the air. Does anyone remember the Cuban Missile Crisis?


In conclusion, due to the inherent problems with collective security alliances–tragedy of the commons fed by socialism and moral hazard–nations should enter into them with great caution. George Washington’s farewell address has never sounded more prescient: Beware foreign entanglements.

The Fed's Comfort Zone (In 1 Simple Chart)

Communication... Transparency... Optimal Control? Or Schizophrenia, Paranoia, and Mass Confusion?


Welcome to the Dow-Data-DependentTM Fed


On the bright side - The Fed enters its blackout period tomorrow - so no more Williams/Bullard jawboning (for a week)

Apple Beats Top And Bottom Line, Repurchases Record $45 Billion In Stock In Fiscal 2014

With the AAPL EPS whisper number pointing to an EPS somewhere about 10-15 cents above the EPS consensus of 1.30, moments ago AAPL did not disappoint and reported Q4 EPS of $1.42, a solid 12 cent beat to expectations, a comparable beat to the top line beat, with $42.12 billion in revenue, also well above the $39.9 Bn estimate. The gross margin of 38% was right on top of expectations. In terms of product breakdown, AAPL sold 39.3 million iPhones, above the 38 million expected, with Mac unit sales of 5.52 million also above the 4.84 million expected, with only iPad sales of 12.3 million missing the 13.0 million estimate.

Here is AAPL's guidance for Q1 2014 :

  • revenue between $63.5 billion and $66.5 billion, Est. $63.5 billion
  • gross margin between 37.5 percent and 38.5 percent, Est. 38%.
  • operating expenses between $5.4 billion and $5.5 billion
  • other income/(expense) of $325 million
  • tax rate of 26.5 percent

For those looking at cash, in fiscal 2014, AAPL generated $59.7 billion in cash from operations, spending $22.6 billion on investing actvities (down from $33.8 billion a year ago), and the remainder was $37.5 billion spent on on common stock and dividends, offset by $12 billion in long-term debt and $6.3 billion in commercial paper. The last is interesting as in 2013 had zero under commercial paper.

Finally, those wondering how much stock AAPL bought back, the answer is $17 billion, which brings the total for 2014 to $45 billion, double the $22.9 billion repurchased in fiscal 2013. This was funded by a combination of cash on hand, which declined to $155 billion, or $9 billion from the previous quarter, even as net cash (excluding debt) declined to $120 billion, the lowest since Q3 2012.

Here is the visual breakdown.





Segment breakdown:


Total cash (keep in mind domestic cash is now a tiny fraction of the total):


And cash, net of long-term debt and commercial paper:


But the strangest chart of all: AAPL's short-term marketable investments, tumbled from $24.8 billion to $11.2 billion, the lowest since Lehman. Did AAPL just call a market top? The question is in what: Bills or whatever stocks it is that the "world's largest hedge fund you have never heard of" has invested in?