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Market Melts Down After Opening Buying-Panic

Just when you thought it was safe to BTFD on absolutely no news just because the US equity market opened...

 

What started off weak, then spiked into awesomeness... ended ugly...

 

and from Payrolls...

 

As Cash markets surged at the open (apart from Trannies which played catch up) as Small Caps led... Dow lost 18,000, S&P lost 2,100, and Nasdaq lost 5,000 - NOT OFF THE LOWS

 

Financials led on the day ahead of earnings hope.. every other sector closed red...

 

Nasdaq topped 5000 out of the gate - ripping back to the pre-Durable Goods Collapse levels... then gave it all back and some...(outside reversal day)

 

At over 47x LTM earnings, Russell 2000 hit record highs early in the day...

 

VIX spiked over 11%...but note the smash at the close!!!

 

After we warned Friday that the VIX term structure was excessively steep...

 

 

Bonds never bought it at all...

 

With all yields lower on the day (led by front-end strrength)...

 

The US Dollar ended the day practically unchanged - giving back all its overnight gains during the US session)... USDJPY was weak following Hamada's comments...

 

 

Despite USD unch-ness, Gold, Silver, and Copper all slid lower on the day...

 

WTI Crude soared at the Asian close, running stops instantly to $53... that faed as Europe opened... re-ramped to test $53 stops ahead of US open... then dumped (following the biggest hedge fund buying week since the collapse began)

 

Charts: Bloomberg








Human Bond Traders Barely Show Up To Work As Machines Take Control

There’s nothing like a little complacency to make an already precarious situation even more precarious and if IG volumes are any indication, bond traders are getting mighty bored. As a reminder, the current environment in corporate credit — which Gundlach deputy Bonnie Baha recently described as offering one of the “most unattractive risk/return propositions” she’s ever seen — doesn’t offer much in the way of opportunities as central banks have succeeded in herding so many yield-starved investors into IG and HY (i.e. away from government debt which in the best case yields you nothing and in the worst case will guarantee you a loss) that spreads are pitiably low. 

Meanwhile, the new regulatory regime has done an admirable job of making the system “safer” by encouraging dealers to shrink their inventories, meaning that while we’re all safe from evil prop traders (because we’re sure prop trading is dead and the Goldmans of the world didn’t find a way around Volcker the very instant it was proposed), secondary market liquidity has evaporated, meaning the door to the proverbial crowded theater is getting smaller even as the number of yield seekers inside is getting larger so when someone finally yells fire, well, let’s mix our metaphors here and say we’re all up a creek. 

Given the above, it’s not terribly surprising that bond traders have, in Barclays’ words, made “Monday the new Friday.” Here’s more (from a Friday note): 

Activity in credit was muted this week. Investors were slow to return to trading from the Easter holiday, and volumes were sharply lower in the first part of the week. A slow start to the week has become customary, as Monday appears to have become the new Friday. According to year-to-date TRACE data, average investment grade volumes are the same on the first and last days of the week, and Friday volumes are actually 20% higher than Monday volumes for high yield. But the first three days of this week were extreme even in that context, as investment grade volumes were 21% lower than the year-to-date average for the first three days of the week and high yield experienced a 15% drop.

So basically, no one is trading, so why show up? 

And here’s more via Bloomberg:

Barclays says its analysts aren’t suggesting that traders aren’t coming to work or should work fewer days, but highlighting a problem that’s creating a lot of angst in credit markets.

 

Trading has generally been falling, and in some ways it reveals how the prolonged zero-rate environment is creating malaise from company boardrooms to trading floors. There aren’t real bargains to be had, there doesn’t appear to be a real imminent threat of runaway inflation, and -- aside from oil companies -- it doesn’t really look like corporate America is about to fall apart.

 

In other words, there isn’t a massive catalyst to prod investors into action.

While the humans are now taking four-day weekends, the robots do not rest and, as we showed earlier today, they have (in conjunction with the Fed) commandeered the entire Treasury market where liquidity has fallen to financial crisis lows according to Deutsche Bank. What this means (as Jamie Dimon will also tell you) is that events like last October’s Treasury flash crash are likely to occur more frequently going forward and when you combine the rise of the machines with shrinking dealer inventories and throw in the possibility that the dealers aren’t even coming to work anymore, you paint a rather disturbing (if hilarious in a surreal kind of way) picture of a market that’s been stripped of the human element and now runs on malfunctioning algos which are themselves slaves to Fed doublespeak and Tesla rumors.

It’s no wonder then that good people like Matthew Duch at Calvert Investments are hesitant to buy more of the high yield bonds that have been “shoved down their throats” by the Fed. Here’s Bloomberg again:

Calvert Investments money manager Matthew Duch said the mystery of the flash rally leaves him in a tough spot. He wants to buy more high-yield bonds, but said he’s worried about the possibility that a Treasury-market swing could spark broader volatility, making it tough to trade the speculative-grade debt.

Essentially, Matthew is worried that no one is home at bond desks and thinks that may be a very bad thing when (not “if”) the machines decide one day that some random data point or unduly hawkish/dovish soundbite out of an FOMC voter is cause for all the algos to chase down the same rabbit hole sending ripples through a fixed income market devoid of any real liquidity. His concerns are certainly not unfounded and indeed, when it comes to HY, the problem is even more acute. Here’s Barclays:

Within credit, high yield stands out due to its heavy retail ownership and correspondingly high demand for daily liquidity. The challenge of catering to these outsized liquidity needs is compounded by the fact that the high yield buyer base lacks an obvious source of liquidity in volatile times, something akin to the role played by insurance portfolios for investment grade credit and CLOs for loans.

 

So while it's "pretty quiet out there" now save for the hum of the machines, expect it to get a lot louder on the Tuesday morning when the humans return to their desks and find out everything collapsed on Monday.








Blinder Leading The Blind

Authored by Alan Blinder via WSJ Op-Ed,

The Fed Can Be Patient About Raising Interest Rates

As the Federal Reserve’s Open Market Committee prepared to meet last month, no one was wondering what the Fed would do. Everyone knew it would do nothing. There would be no rate hikes, no balance sheet shrinkage, nothing.

Instead, financial eyes were glued to what it would say. In particular, would the FOMC continue to characterize itself as “patient” about raising interest rates? Or would the word “patient” be dropped, sounding alarms of higher rates to come?

On Wednesday, March 18, the financial world got its answer: The Fed is still patient, in fact extremely patient. But it’s not going to use that p-word anymore. Instead its language is now more specific. “The Committee anticipates that it will be appropriate to raise the . . . federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective.”

The most important word in this sentence got little attention: and. The Fed wants to see two things before it is ready to raise interest rates: “further improvement in the labor market” (even though the unemployment rate is now back to spring 2008 levels), and convincing evidence that inflation (which has been running below target) is heading back to 2%. Waiting for both may require a lot of—well—patience.

Then why jettison the p-word? As devout Fed-watchers know, Chair Janet Yellen had defined being “patient” as waiting at least two more Fed meetings—roughly a quarter—before raising rates. She said “at least two,” but markets, craving concreteness, translated that to exactly two. So dropping “patient” in March would have been read as a signal that a rate hike was likely in June. The Fed did not want to send such a signal. So the p-word disappeared even though the p-concept remained.

How patient will the Fed be? Its latest forecast sees the unemployment rate dropping into its target range, now 5%-5.2%, by the fourth quarter. But the Fed keeps lowering that target range. And inflation is not forecast to reach 2% until 2017.

Are Yellen & Co. right or wrong to be so patient? I think they are right. Consider:

The so-called hawks, who have been calling for rate hikes since 2009, have constantly warned of high inflation lurking just down the road. It must be a long road. The Fed’s favorite measure of core inflation (which omits food and energy prices) has been stuck in a narrow range between 1.3% and 1.7% since mid-2012. Headline inflation, which includes food and energy prices, is roughly zero. If the rationale for interest-rate hikes is heading off inflation, this performance practically cries out for patience.

Most economists believe it is hard to sustain higher inflation unless wage increases, which have been flat for several years, also speed up. The impatience lobby is now seeing a glimmer of wage acceleration—for, say, the last quarter or two. But it’s just a glimmer: Wages now are rising about 2%-2.5% a year instead of 1.5%-2%. With even very modest growth in labor productivity, wage increases that low are consistent with price inflation below 2%. A Fed that wants to be “reasonably confident” that inflation is rising toward 2% needs to be patient.

A tight labor market could push up wages faster. Hawks look at today’s unemployment rate, which is 5.5% and falling, and see a labor market that is already tight and getting tighter. Ms. Yellen and the FOMC majority disagree. They patiently await “further improvement in the labor market”—meaning, among other things, unemployment below 5.2%. The many Americans who have been jobless for a long time are waiting with them.

Besides, the economy hit a speed bump this winter; indications are that the first quarter was very weak. And the appreciation of the dollar bodes ill for U.S. exports.

The impatience crowd once worried loudly and frequently about a different set of problems. Specifically, that near-zero interest rates and/or quantitative easing were allegedly causing financial-market “distortions” and “bubbles.” Distortions threaten the efficiency of the vaunted financial system. Bubbles might burst, causing untold damage to our economy.

Let’s see. The federal-funds rate has been near zero for over six years now, and the Fed’s balance sheet is roughly five times as large as when Lehman Brothers failed. Yet none of the hypothesized financial hazards have surfaced. So you don’t hear the scare stories much anymore. Here, too, the evidence suggests that patience is the right policy.

To be sure, the Federal Reserve will not maintain near-zero interest rates and a $4.5 trillion balance sheet forever. Monetary policy will eventually begin to normalize. But not in June, and maybe not in September. Timing, they say, is everything. This is a time for patience.








Einhorn Slams Bernanke's Blog, Says Fed Policy Is A "Destructive Force That Shouldn't Exist Outside Of Fiction"

It's getting serious for the academic hacks who meet every two months in Basel to drink $5000 bottles of wine and regale each other with their stupidity, most of whom have never held a job outside of academia, and for whom the only solution to the second great global depression is simply to buy assets and specifically stocks in a bid to restore confidence, oblivious that everyone now understands that the greater the central bank intervention, the greater the confidence destruction.

So serious, in fact, that the Fed is now on the defensive not only from tinfoil bloggers who said QE would ultimately lead to war, revolution, and global catastrophe, but

In fact, the only people who defend the Fed now are socialists who believe in Magic Money Trees, other career academics, E-trade babies who believe that BTFD and BTFATH is what investing is about, and of course, various sycophants and drama majors posing as financial journalists.

Meanwhile, in an attempt to cover up his criminal actions and exonerate his genocidal stupidity which will result in global conflict, revolution and/or war, the man responsible for the final Fed Bubble, Ben Bernanke, has taken on blogging.

Luckily there are many who have taken him to task, including the man who first compared Fed policy to eating jelly donuts, David Einhorn, and who during last week's Grant's Invesstment Conference, had this to say about the most disturbing thing written recently by Bernanke:

 

This is what Einhorn had to say:

In a recent blog post, Mr. Bernanke wrote: “the best way to improve the returns attainable by savers was to do what the Fed actually did: keep rates low, so that the economy could recover and more quickly reach the point of producing healthier investment returns.”

 

This is circular reasoning: He is assuming that which he seeks to prove, namely that ultralow rates actually help the economy. But, that is the open question.

Then again, by now it should be clear to everyone that Bernanke really is a very confused person whose only job was to preserve the illustion of confidnece while destroying the middle class, and making the banks and the 0.01% ultra wealthy (and if it isn't read this).

Which is why it was Einhorn's other observations from the confernce that were note worthy. Here are some select excerpts:

  • I last spoke here three years ago and talked about what I dubbed the Fed’s Jelly Donut monetary policy. I observed that accommodative policy has diminishing returns that had long?since passed the point of being productive and was now actually slowing the recovery. I compared it to eating a 36th Jelly Donut.
  • By keeping rates too low, the Fed sought to create a stock market wealth effect. I suggested that while this would increase income inequality, the wealth effect would not likely translate to enough additional consumption to offset the even bigger drain from lost income to savers.
  • Policy makers and mainstream economists are stuck in GroupThink that easy money always helps the economy, despite basic economic principles that suggest diminishing or negative marginal returns.
  • Swiss Re recently calculated that from 2008?2013, U.S. households lost $470 billion of income due to excessively low interest rates. Because savers perceive interest income as more recurring than volatile stock market gains, and because interest income is spread more broadly than equity gains, it’s fair to assume that a much greater proportion of interest income would be spent.
  • Low interest rates make workers save more, as they can’t anticipate earning safe income on savings. They also make retirees spend less, as they have less current and future income and need to stretch savings over their remaining lives. Both dynamics create less spending and a slower recovery.
  • The question is who benefits from the harm to savers? Of course, it is governments who are able to borrow more cheaply.
  • I remain of the view that higher rates will surprise by improving the economy on Main Street even though it is quite possible they would create some turbulence on Wall Street, as most equities are now highly priced and a select group are in a bubble.

There is more in the presentation whose selected slides we have shown below, but here is the punchline:

We have passed the point where Jelly Donut policy is merely slowing the recovery. Distortions are now adding risk to the banking and insurance markets and leading to poor incentives for the largest players in the financial system.

 

Monetary policy and regulations have combined like a failed chemistry experiment to create a potentially destructive force that should not exist outside of fiction. 

 

Einhorn's conclusion:

I think this adds to the ultimate attraction of holding gold instead of green.

We couldn't agree more.








What's Really Behind The U.S Crude Oil Build

Submitted by Leonard Brecken via OilPrice.com,

Last week we saw another 10MB massive crude oil build domestically at a time when US production is flattening, refinery capacity is rising and gasoline demand is growing (5% year over year vs. 3% or lower in the recent past). This divergence can be explained in part from the rising import of heavier oil which accounted for 6.1MB (869,000 B/D) of the 10MB build last week. Imports for the week rose a whopping 6.5% sequentially and 8.5% vs. the 4 week moving average!  Once again the chase to create sensationalistic headlines to drive down oil is self-evident as US production rose a meager 14,000B/D and was not the main cause of the rise. So why, month after month since 2014, have imports risen when there exists a “glut” in US oil inventories?

In 2014 according to the EIA, API Gravity (the weight of oil) steadily increased and rose 2.84% which is very significant in adding to the oversupply of US oil. In January 2015 that number rose to nearly 3.1% year over year, according to the latest data point we have from the EIA. Given the recent surge in imports last week the bet it has risen even more.

Source: EIA (Click Image To Enlarge)

Imports generally have a higher API vs. US lighter produced oil. If refinery capacity is skewed towards processing heavy imported oil vs. lighter US produced oil, as demand rises you will, as a result, be short heavy and long light. Not surprisingly this is exactly what occurred the past 6 months as demand is accelerating for gasoline at a time when US production in late 2014 was rising rapidly. This is only natural because refinery capital expenditures haven’t exactly been front and center for the majors given lackluster US gasoline demand and the fact that only until the last 2-3 years did it become evident that US shale would grow to such an extent. Add on regulations and its no wonder US refineries were slow to adjust to the oil mix.

In the next 2 years refineries plan to add 300-400,000 B/D in 2015 and 2016 (3% of daily output) or 125M-130M barrels per year in lighter refining capacity targeting the use of US production vs. imports. That alone will add nearly 2.5MB per week in demand for US oil as an input in the context of stock builds of 10MB recently. It should be noted once again crude oil stock builds occur seasonally until May as a result of refinery maintenance which peaked in February as capacity stands at roughly 90%. Refineries are enjoying record margins so expect that number to rise significantly. That too will assist in reducing oil stock builds as will the 5% year over year gasoline demand as we move towards the seasonally strong driving season.

It is just amazing to see the lack of real analysis being done on both Wall Street and in the media especially. In recent weeks the sell side analysts who cover energy have become so complacent that they merely plug in the current strip prices into their earnings models for E&P companies. Not one, except Mike Rothman at Cornerstone Analytics, is questioning the “why?” or “how?” of what is occurring. The 200 or so players who effectively control the oil futures market have changed behavior and expectations as the oil price curve has collapsed. Prices from late 2016 into 2018 are essentially flat in the low to mid 60s, believe it or not, which would essentially bankrupt most of OPEC, US conventional oil, part of US shale and deep offshore drilling. So ask where is the oil going to come from? Yet the madness continues until investors realize E&P companies need a higher price to justify investments in the space.








Foodstamp Financiers: Wells Fargo Workers Protest Re-Emergence Of Predatory Practices

One of America’s biggest banks is going to be protested by an unlikely group today: its employees. As The Guardian reports, Wells Fargo bankers are protesting the bank’s alleged predatory practices – mainly the sales quotas imposed on some of its workers (which have led to at least 30 employees opening duplicate accounts, sometimes without customers’ knowledge, in order to inflate their sales numbers). One worker warns, “it is not in Wells Fargo’s best interest for customers to purchase products and services they don’t use or need.” Now where have we seen this kind of activity before? Wells Fargo bank workers are not the only ones struggling to make ends meet without breaking ethical standards as bank tellers have collected as much as $105m in food stamps.

“Basically, what I do all day is look at people’s bank statements,” said Michael Lewis, 46, who works as a financial crime specialist at Wells Fargo in Chandler, Arizona... “I have kind of an unique experience knowing how America spends its money and knowing how broke everyone is.”

As The Guardian reports, the quotas, first exposed in a lawsuit filed by a long-term Wells Fargo customer, David Douglas, have led to at least 30 employees opening duplicate accounts, sometimes without customers’ knowledge, in order to inflate their sales numbers. The 30 employees have been fired, according to the Los Angeles Times. The quotas, however, persist.

While Lewis has no quotas to fill himself, he said he is affected by those imposed on the personal bankers.

 

“It does affect me in the sense that [the customers] will call and dispute an internal charge – like a travel insurance charge – that they never signed up for, and then we will have to address that,” he said. “People claim that they have been signed up for bank services that they never agreed to, like overdraft protection.”

 

Lewis has “no concrete proof” that bankers are signing up customers for these services without their knowledge in order to meet the quotas, but “that is the assumption”, he said.

 

A number of Lewis’s coworkers at the call center have previously worked at the banks and were subject to the quotas. “What I see a lot is a sense of relief that they have made it out of the bank,” said Lewis.

Back in 2013, when the reports of quotas and their effect on the behavior of tellers first came to lights, Wells Fargo created an ethics program office to “look at existing programs across the company to ensure consistency and a holistic approach”. The bank, the fourth largest in the US by assets, would not say what the creation of this office had accomplished, whether the quotas are still an issue nor whether the quotas had changed.

“We place a high priority on ethical business practices and a culture of doing what is best for our customers. It is in Wells Fargo’s best interest for customers to purchase only the products they need and benefit from – that’s what keeps them coming back for more for a lifelong relationship,” Richele Messick, the bank’s spokeswoman, told The Guardian.

Today, workers plan on holding a rally in front of the bank’s corporate office and demand a meeting with the bank’s executives to share their concerns around predatory practices and sales quotas.

Since December 2013, the workers have been collecting signatures on a petition calling for an end to sales goals. The workers plan to deliver the petition, which has a little over 10,000 signatures so far, on Monday. Among their other demands are better pay and full-time work.

These demands are highlighted by the following...

Prior to working at Wells Fargo, Lewis worked – in a similar capacity – at American Express for almost 10 years. By the end, he was earning almost $75,000 a year.

 

“One day, I was asked to go to India and train people there to do my job,” he said. Three months later, he came back and about half of his team – 15 people – got laid off, he said. Frustrated, Lewis quit and was soon hired by Wells Fargo.

 

“And now I am making half the money that I was at American Express,” he said. Working full time and earning $17.10 an hour, he makes about $35,000 a year. “I live paycheck to paycheck.”

 

The bank says that its workers’ wages are market-competitive and combine base pay with “a broad array of benefits and career-development opportunities”.

 

“All of our team members’ compensation levels significantly exceed federal minimums – in fact, all salaries are at least 50% above the federal minimum,” said Messick.

 

Wells Fargo bank workers are not the only ones struggling to make ends meet. In 2012, average pay for a bank teller was $11.59 an hour. Their median annual income was $24,940, according to US Department of Labor.

 

Thiago Marques, 26, lives in Newark, New Jersey, and works as a bank teller at Hudson Valley Bank, earning $9.50 an hour.

 

“The pay is not enough to survive on,” Marques, who lives with his parents, told the Guardian. “At least I am single and have no huge expenses. Imagine being my co-worker, who has two children and has to care for her house.”

 

To supplement their income, annually bank tellers have collected as much as $105m in food stamps, $250m in earned income tax credits and $534m in Medicaid and children’s health insurance, according to researchers at the labor center at the University of California at Berkeley.

*  *  *

We leave it to Khalid Taha, 27, who works as a personal banker in San Diego, to conclude:

“People see us wearing suits and sitting behind our desk and think we are bankers who make millions,”

 

“You don’t see our debt from these suits, from dry cleaning and from these shiny shoes that we are required to purchase from our pockets. We are not making enough to even rent our own house or apartment.”








"We Have Come To The End Of The Road" - Greece Prepares For Default, FT Reports

Update: as always is the case in Europe, nothing is confirmed until it is officially denied by officials, so here you go: GREEK GOVT OFFICIAL DENIES FT REPORT GREECE PLANNING DEFAULT

There was no explanation from the government official where Greece would get the €2.5 billion it needs to fund upcoming IMF interest and principal payments.

* * *

It should hardly come as a surprise that after the latest round of Greek pre-negotiation negotiations with the Troika, in which the Greek representative was said to behave like a taxi driver, who "just asked where the money was and insisted his country would soon be bankrupt" and in which the Eurozone members "were disappointed and shocked at Athens' lack of movement in its plans, and in particular its reluctance to talk about cutting civil servants' pensions" that the next Greek step is to fall back - yet again - to square zero: threats of an imminent default. Which is precisely what, according to the FT, has happened "Greece is preparing to take the dramatic step of declaring a debt default unless it can reach a deal with its international creditors by the end of April, according to people briefed on the radical leftist government’s thinking."

A word of advice: now that the Eurozone, foolishly, thinks it is insulated from the consequences of a Grexit due to the ECB's QE, it does not take to ultimatums or blackmail very well. In fact, it takes these very badly.

In any event, here again is the same old song, sung one more time, now by the FT:

The government, which is rapidly running out of funds to pay public sector salaries and state pensions, has decided to withhold €2.5bn of payments due to the International Monetary Fund in May and June if no agreement is struck, they said.

 

“We have come to the end of the road . . . If the Europeans won’t release bailout cash, there is no alternative [to a default],” one government official said.

 

A Greek default would represent an unprecedented shock to Europe’s 16-year-old monetary union only five years after Greece received the first of two EU-IMF bailouts that amounted to a combined €245bn.

Unfortunately for the Greeks, this threat has been used, abused, and denied so many times, nobody cares, or believes it will be used:

The warning of an imminent default could be a negotiating tactic, reflecting the government’s aim of extracting the easiest possible conditions from Greece’s creditors, but it nevertheless underlined the reality of fast-emptying state coffers.

Then again this time may be different because recall that as Reuters wrote over the weekend, "even if it survives the next three months teetering on the brink of bankruptcy, Greece may have blown its best chance of a long-term debt deal by alienating its euro zone partners when it most needed their support."

Indeed, it seems that the tone has changed dramatically in recent weeks and months, and at this point the rhetoric is one merely of managing expectations and avoiding deeper fallout once Greece is "let go."

Quote the FT: "Germany and Greece’s other eurozone partners say they are confident that the currency area is strong enough to ride out the consequences of a Greek default, but some officials acknowledge it would be a plunge into the unknown."

Negotiating tactic or not, the reality for Greece - which already has run out of money - is that it will run out of even the money it does not have (recall the government is now raiding public funds to avoid defaulting to the IMF) unless something changes:

The government is trying to find cash to pay €2.4bn in pensions and civil service salaries this month. It is due to repay €203m to the IMF on May 1 and €770m on May 12. Another €1.6bn is due in June.

 

The funding crisis has arisen partly because €7.2bn in bailout money due to have been disbursed to Greece last year has been held back, amid disagreements between Athens and its European and IMF creditors over politically sensitive structural economic reforms.

 

These included an overhaul of the pension system, including cuts in the payments received by Greek pensioners, and measures to permit mass dismissals by private sector employers.

One thing is certain: the biggest losers are - as always - ordinary Greeks, who are faced with certain capital controls in case of a Grexit and almost certain capital controls even if they do remain in the Eurozone.

In the short term, a default would almost certainly lead to the suspension of emergency European Central Bank liquidity assistance for the Greek financial sector, the closure of Greek banks, capital controls and wider economic instability.

 

Although it would not automatically force Greece to drop out of the eurozone, a default would make it much harder for Alexis Tsipras, prime minister, to keep his country in the 19-nation area, a goal that was part of the platform on which he and his leftist Syriza party won election in January.

More improtantly, a default would also afford Moscow (and Beijing) a territorial, political and financial presence in the European (Dis)union, now that Greece is being groomed to become the landing zone for the Southern Stream 2.0, a pipeline which has now terminally bypassed Bulgaria and instead will traverse Turkey and most likely Greece before entering Europe via Serbia, Hungary and Austria.

It will be ironic if soon all of Europe's gas requirements will be contingent on the benevolence of the same Greek government which Merkel and her peers have taken such delight to slam in recent months, which at this rate, is about to become another proxy pawn controlled by Putin.

As for what happens to Europe and where attention will focus next, two Bloomberg headlines from earlier today show the way:

  • PODEMOS WANTS TO HAVE DEBATE ON DEBT RESTRUCTURING: OFFICIAL
  • PODEMOS WANTS TALKS WITH CREDITORS ABOUT SPANISH DEBT







The Best And Worst Performing Hedge Funds In 2015

Any year in which two of the best performing hedge funds are two of our old-time favorites, the aptly named Keynes Leveraged Quantitative Strategies and even more aptly named Tulip Trend Fund, you know is going to be one of "those" years. Only this time joining them at the top after the first quarter is also the Russian Prosperity Fund, while making an unexpected and welcome appearance in the top 10 is none other than everyone's favorite outspoken, if rather timid in recent years, scot: Hugh Hendry's Eclectica, which has returned 14% YTD.

 

Here are the best performing hedge fund indices according to BofA: up top YTD are the CTAs returing over 6% while at the bottom continue to be Market Neutral funds who are barely above 1%.

 

HF performance down by strategy:

 

And here are the top marquee hedge fund names broken down by performance on a March/MTD basis...

 

... and YTD.

Source: HSBC, BofA








Nasdaq Tumbles Back Below 5,000 Amid Red AAPL, Crude Crumble, Grexit Concerns

Who could have seen that coming? With Treasury yields pressing lows of the day since the US open, and AAPL in the red; the stop-hunt in stocks this morning is now starting to fade back into reality as Crude oil prices gave up gains and went red and reports appear that Greece is preparing to default... The Dow and S&P are now red on the day.

 

AAPL red...

 

So Nasdaq tumbles...

 

As the entire equity complex fades...

 

Catching down to bonds...

 

Charts: Bloomberg








She's Back!!

Submitted by James H Kunstler via Kunstler.com,

And so, from the dormant volcano that is American politics, out flies Hillary, like Rodan the Flying Reptile pretending to be Granny Goose. Now that she is officially flapping around the electorate, the excitable mainstream press reports the initial caw-caw-cawing of her campaign: it will be “based on diversity, discipline and humbleness.” These are endearing qualities in any giant flying reptile, and reassuring to voters who might otherwise fear something a bit darker on the wing.

The Elmer Fudd in the piece at the moment, former Maryland Governor Martin O’Malley, did get off a clever first shot at the flying behemoth when he cracked that “the presidency of the United States is not some crown to be passed between two families,” but it seems to have only provoked a deeper show of humility from the target. She’ll be starting a “listening campaign” to detect rustles of discontent as she banks over the cornfields of Iowa cawing platitudes across the sky, e.g. “Americans have fought their way back from tough economic times.”

Point of fact: no they haven’t. They are still strewn over the landscape with the economic equivalent of sucking chest wounds, but perhaps a few of them have noticed with vicarious satisfaction the astounding rise of the S & P stock index as they lie in a roadside ditch scanning the skies. It must give them some comfort as their lights go out. Just maybe, their children will also have the chance to become Goldman Sachs employees as history marches on. The flying reptile wants to be their champion! She wants to earn their votes — the old fashioned way, by purchasing as much TV air-time as possible to put across the illusion of sincerity. On such campaigns is the decline of empire propelled.

More to the point, what does the flight of Hillary say about party politics in this land? That a more corrupt and sclerotic dominion has hardly been glimpsed since the last Bourbons cavorted in the halls of Versailles? Hence, my view that America will witness a very peculiar spectacle leading up to and perhaps beyond the 2016 election: the disintegration of seeming normality against a background of mounting disorder and insurrection. Hillary will go on caw-cawing platitudes about togetherness, diversity, and recovery while the economy sinks to new extremes of unravelment, and the anger of a swindled people finally boils over.

Neither party shows even minimal competence for understanding the actual crises facing this land, and indeed the project of techno-industrial civilization itself. If the people don’t overthrow them, and grind their pretenses underfoot, then events surely will. In the trying months leading up to the presidential election of 2016, Americans will witness the death of their “energy independence” fantasy — actually a meme concocted by professional propagandists. The shale oil “miracle” will go up in a vapor of defaulting junk bonds. Violence will escalate through North Africa and the Middle East, threatening the world oil supply more generally. I would give a low-percentage chance of survival to King Salman of Saudi Arabia, and to the Saud part of Arabia more particularly as civil war among the rival clans breaks out there, with an overlay of Islamic State mischief seeding even greater chaos, and the very likely prospect of sabotage to the gigantic oil terminal at Ras Tanura on the Persian Gulf. In comparison, the fiasco of Benghazi will look like a mere Three Stooges episode.

If a third party were to arise in all this turmoil, it might not be savior brigade, either. In 1856 the Republicans welled up as the Whigs expired in sheer purposelessness and the Democrats romanced slavery. The nation had to endure the greatest convulsion in its lifetime to get to the other side of that. This time, I’m not at all sure we’ll get to the other side in one piece.








The "Crude" Reality Of Oil Storage Capacity In Six Easy Charts

As the “revolver raids” gather steam and as the market prepares to digest what are likely to be a slew of writedowns as Q1 earnings begin to come in, the BTFD-ers of the world are keen on picking a bottom for crude. Unfortunately, the “crude” reality (to use a pun that becomes more of a cliche with each day that oil prices remain in the doldrums) is that a number of factors will likely conspire to keep prices depressed, not the least of which is storage capacity, something we’ve covered extensively and something which, geopolitical shocks notwithstanding, is likely to weigh on prices for the foreseeable future. Here, courtesy of Citi are all the visuals you need to comprehend the crude storage conundrum.

From Citi:

Already at record levels, US storage capacity may be tested in 2Q as production shows no signs of slowing yet. Prices should bottom if capacity limits are reached, then recover but in previous episodes such as shale gas when the market has expected the US to hit a wall, it hasn’t. Any price recovery will likely be short lived as higher prices should re-start shale drilling, once again increasing supply and sending prices back down…

 

US crude oil mid-continent inventories are expected to draw down mildly from May to August, and the next problem could well arise come fall when refinery maintenance begins with seasonally highest level stocks…

 

And by autumn, the US Gulf Coast could also see storage constraints when refiners go into what could be deeper and longer maintenance given the shallow maintenance this winter and spring.

*  *  *








Arizona Governor Ducey Vetoes Gold

This isn’t yet another in a long series of articles lamenting the Federal Reserve, power, politicians, corruption, and the hopelessness of fighting the status quo. What’s the marginal utility of the Nth plus one article reiterating these points? Nearly zero. No, this article is about something else.

It’s about you.

What would you do, if you were governor, and a fringe issue turned into a bill came to your desk? To all appearances, there is little popular support. The benefits, if any, seem far removed from the practical business of governing. Few people even cared.

What’s that, you say? Gold isn’t like that? There are many people who want gold, the benefits are important, and what could be more practical than honest money? I can’t hear you. I CAN’T HEAR YOU!

Neither could Governor Ducey.

Do you value honest money? Do you understand how and why the regime of the paper dollar is hurting us? If you care, please consider calling your legislators in Arizona or wherever you are. Please consider donating to the Gold Standard Institute. We can do a lot with a little, but we can’t change the monetary system without your support.








How NSA Surveillance Was Birthed From The Pre 9/11 Drug War

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

The now-discontinued operation, carried out by the DEA’s intelligence arm, was the government’s first known effort to gather data on Americans in bulk, sweeping up records of telephone calls made by millions of U.S. citizens regardless of whether they were suspected of a crime. It was a model for the massive phone surveillance system the NSA launched to identify terrorists after the Sept. 11 attacks. That dragnet drew sharp criticism that the government had intruded too deeply into Americans’ privacy after former NSA contractor Edward Snowden leaked it to the news media two years ago.

 

The similarities between the NSA program and the DEA operation established a decade earlier are striking – too much so to have been a coincidence, people familiar with the programs said. Former NSA general counsel Stewart Baker said, “It’s very hard to see (the DEA operation) as anything other than the precursor” to the NSA’s terrorist surveillance.

 

The extent of that surveillance alarmed privacy advocates, who questioned its legality. “This was aimed squarely at Americans,” said Mark Rumold, an attorney with the Electronic Frontier Foundation. “That’s very significant from a constitutional perspective.”

Holder halted the data collection in September 2013 amid the fallout from Snowden’s revelations about other surveillance programs.

 

– From today’s USA Today article: U.S. Secretly Tracked Billions of Calls for Decades

The drug war is something that wouldn’t even exist in a rational, mature and intelligent civilization. Not only is it ineffective, invasive and brutish, but we now know that the almost religious zealousness with which it has been pursued by its proponents has led directly to the current unconstitutional surveillance state. If not for our acquiescence to the “war on drugs,” would the authoritarian statists amongst us have been able to usher in the even more dangerous but similarly endless “war on terror?” Personally, I doubt it.

Oh, and while we’re on the topic of the DEA, let’s not forget the recent scandal: Government Report Finds DEA Agents Had “Sex Parties” With Prostitutes Hired By Drug Cartels

Moving along, today’s excellent article from USA Today is a must read. Here are some excerpts, but I strongly recommend reading the entire thing:

WASHINGTON — The U.S. government started keeping secret records of Americans’ international telephone calls nearly a decade before the Sept. 11 terrorist attacks, harvesting billions of calls in a program that provided a blueprint for the far broader National Security Agency surveillance that followed.

 

For more than two decades, the Justice Department and the Drug Enforcement Administration amassed logs of virtually all telephone calls from the USA to as many as 116 countries linked to drug trafficking, current and former officials involved with the operation said. The targeted countries changed over time but included Canada, Mexico and most of Central and South America.

 

The Justice Department revealed in January that the DEA had collected data about calls to “designated foreign countries.” But the history and vast scale of that operation have not been disclosed until now.

 

The now-discontinued operation, carried out by the DEA’s intelligence arm, was the government’s first known effort to gather data on Americans in bulk, sweeping up records of telephone calls made by millions of U.S. citizens regardless of whether they were suspected of a crime. It was a model for the massive phone surveillance system the NSA launched to identify terrorists after the Sept. 11 attacks. That dragnet drew sharp criticism that the government had intruded too deeply into Americans’ privacy after former NSA contractor Edward Snowden leaked it to the news media two years ago.

 

That data collection was “one of the most important and effective Federal drug law enforcement initiatives,” the Justice Department said in a 1998 letter to Sprint asking the telecom giant to turn over its call records. The previously undisclosed letter was signed by the head of the department’s Narcotics and Dangerous Drugs Section, Mary Lee Warren, who wrote that the operation had “been approved at the highest levels of Federal law enforcement authority,” including then-Attorney General Janet Reno and her deputy, Eric Holder. 

No wonder Eric “Too Big to Jail” Holder later got the promotion.

The data collection began in 1992 during the administration of President George H.W. Bush, nine years before his son, President George W. Bush, authorized the NSA to gather its own logs of Americans’ phone calls in 2001. It was approved by top Justice Department officials in four presidential administrations and detailed in occasional briefings to members of Congress but otherwise had little independent oversight, according to officials involved with running it.

 

The DEA used its data collection extensively and in ways that the NSA is now prohibited from doing. Agents gathered the records without court approval, searched them more often in a day than the spy agency does in a year and automatically linked the numbers the agency gathered to large electronic collections of investigative reports, domestic call records accumulated by its agents and intelligence data from overseas.

 

The result was “a treasure trove of very important information on trafficking,” former DEA administrator Thomas Constantine said in an interview.

All that spying, and guess what? Still plenty of drugs around.

The extent of that surveillance alarmed privacy advocates, who questioned its legality. “This was aimed squarely at Americans,” said Mark Rumold, an attorney with the Electronic Frontier Foundation. “That’s very significant from a constitutional perspective.”

 

Holder halted the data collection in September 2013 amid the fallout from Snowden’s revelations about other surveillance programs. In its place, current and former officials said the drug agency sends telecom companies daily subpoenas for international calling records involving only phone numbers that agents suspect are linked to the drug trade or other crimes — sometimes a thousand or more numbers a day.

 

The military installed the supercomputers on the fifth floor of the DEA’s headquarters, across from a shopping mall in Arlington, Va.

 

Instead of simply asking phone companies for records about calls made by people suspected of drug crimes, the Justice Department began ordering telephone companies to turn over lists of all phone calls from the USA to countries where the government determined drug traffickers operated, current and former officials said.

 

The DEA obtained those records using administrative subpoenas that allow the agency to collect records “relevant or material to” federal drug investigations. Officials acknowledged it was an expansive interpretation of that authority but one that was not likely to be challenged because unlike search warrants, DEA subpoenas do not require a judge’s approval. “We knew we were stretching the definition,” a former official involved in the process said.

One word comes to mind: Criminals.

Officials said a few telephone companies were reluctant to provide so much information, but none challenged the subpoenas in court. Those that hesitated received letters from the Justice Department urging them to comply.

 

At its peak, the operation gathered data on calls to 116 countries, an official involved in reviewing the list said. Two other officials said they did not recall the precise number of countries, but it was more than 100. That gave the collection a considerable sweep; the U.S. government recognizes a total of 195 countries.

 

At one time or another, officials said, the data collection covered most of the countries in Central and South America and the Caribbean, as well as others in western Africa, Europe and Asia. It included Afghanistan, Pakistan, Iran, Italy, Mexico and Canada.

 

To keep the program secret, the DEA sought not to use the information as evidence in criminal prosecutions or in its justification for warrants or other searches. Instead, its Special Operations Division passed the data to field agents as tips to help them find new targets or focus existing investigations, a process approved by Justice Department lawyers. Many of those tips were classified because the DEA phone searches drew on other intelligence data.

 

That practice sparked a furor when the Reuters news agency reported in 2013 that the DEA trained agents to conceal the sources of those tips from judges and defense lawyers. Reuters said the tips were based on wiretaps, foreign intelligence and a DEA database of telephone calls gathered through routine subpoenas and search warrants.

 

As a result, “the government short-circuited any debate about the legality and wisdom of putting the call records of millions of innocent people in the hands of the DEA,” American Civil Liberties Union lawyer Patrick Toomey said.

Why am I am not surprised in the least.

The similarities between the NSA program and the DEA operation established a decade earlier are striking – too much so to have been a coincidence, people familiar with the programs said. Former NSA general counsel Stewart Baker said, “It’s very hard to see (the DEA operation) as anything other than the precursor” to the NSA’s terrorist surveillance.

 

Officials said the DEA’s database was disclosed to judges only occasionally, in classified hearings.

 

For two decades, it was never reviewed by the Justice Department’s own inspector general, which told Congress it is now looking into the DEA’s bulk data collections.

Thanks for nothing DOJ, as usual.

Holder pulled the plug on the phone data collection in September 2013.

 

That summer, Snowden leaked a remarkable series of classified documents detailing some of the government’s most prized surveillance secrets, including the NSA’s logging of domestic phone calls and Internet traffic.

 

Officials said the Justice Department told the DEA that it had determined it could not continue both surveillance programs, particularly because part of its justification for sweeping NSA surveillance was that it served national security interests, not ordinary policing.

Notice that the DOJ knew what they were doing was shady, but kept doing it anyway until the very last moment when Snowden leaked NSA information to the public.TechDirt  poignantly weighed in about this story and current implications to freedom:

One of the big arguments trotted out repeatedly by surveillance state defenders concerning the NSA’s Section 215 program to collect records on all phone calls is that such a thing “would have prevented 9/11″ if it had been in place at the time. Here’s former FBI boss Robert Mueller making just that argument right after the initial Snowden leaks. Here’s Dianne Feinstein making the argument that if we had that phone tracking program before September 11th, we could have stopped the attacks. And here’s former NSA top lawyer and still top NSA supporter Stewart Baker arguing that the program is necessary because the lack of such a program failed to stop 9/11.

 

Except, it turns out, the feds did have just such a program prior to 9/11 — run by the DEA. As you may recall, back in January it was revealed that the DEA had its own database of phone call metadata of nearly all calls from inside the US to foreign countries. Brad Heath at USA Today came out with a report yesterday that goes into much more detail on the program, showing that it dates back to at least 1992 — meaning that the feds almost certainly had the calls that Feinstein and Mueller pretended the government didn’t have prior to 9/11.

 

And, also, as we are less than two months away from the big fight over renewing Section 215 of the PATRIOT Act, you can be sure that some surveillance state defender is going to cite 9/11 as a reason why we need to keep the program. Hopefully, people can remind them that it appears we had just such a program (which was even more widely used) at the time, and it did not stop 9/11. 

It is also important to be aware of the fact that the NSA metadata collection programs hasn’t stopped much of anything in the way of terrorist attacks since its implementation, as noted in the post: NSA Chief Admits “Only One or Perhaps Two” Terror Plots Stopped by Spy Program.

*  *  *

For related articles, see:

Meet the “Surveillance State Repeal Act” – A Bipartisan Bill to Fully Repeal the Patriot Act

Congress Guts Anti-NSA Spying Bill Beyond Recognition; Original Cosponsor Justin Amash Votes No

Apple Co-Founder Steve Wozniak Discusses The Constitution, NSA Spying and Torture

It’s Not Just Spying – How the NSA Has Turned Into a Giant Profit Center for Corrupt Insiders

 

 








China Trade Surplus Crashes As Exports & Imports Collapse In March

Forget the weather, it must be the smog. China just announced total carnage in its trade data for March:

  • CHINA'S MARCH IMPORTS FALL 12.3% Y/Y IN YUAN TERMS; EST. -11.3%
  • CHINA'S MARCH EXPORTS FALL 14.6% Y/Y IN YUAN TERMS; EST. +8.2%
  • CHINA'S MARCH TRADE SURPLUS 18.16 BILLION YUAN; EST 250B YUAN

So what exactly was the Chinese stock market 'discounting'?

Trade Surplus collapses... (economists knew about year-end and forecast +250bn!!!)

 

As Exports crash and Imports continues to slide for the 5th month...

 

In US Dollars the picture is worse...

  • *CHINA'S MARCH EXPORTS FALL 15.0% FROM YEAR EARLIER
  • *CHINA'S MARCH IMPORTS FALL 12.7% FROM YEAR EARLIER
  • *CHINA'S MARCH TRADE SURPLUS $3.08 BILLION

While year-end shenanigans will likely be blamed (and sure enough...)

  • *CHINA 1Q TRADE VOLATILITY MAINLY DUE TO SPRING FESTIVAL: HUANG
  • *UNCERTAINTIES EXIST IN CHINA'S 2Q EXPORTS MOMENTUM: HUANG

Which is odd that all the data massively missed expectations which we assume Economists were aware of the calendar?

We suspect - given the weakness in other recent data - that this clarifies the fact that Beijing will have to devalue and fast. Their economy is crashing...

Which means Moar QE... Which means stocks limit up?








One Of These Chinese Things Is Not Like The Other

China (and Hong Kong) stock markets opened gap higher and kept going (China Merchants Bank up over 20%) as The China Securities Depositary and Clearing Co. (CSDC) announced that investors will no longer be restricted to only one stock account in China's A-share market and each can have up to 20 accounts from Monday. Which makes perfect sense because what every elementary-school-educated housewife speculator needs is 19 more places to speculate in.

 

As Xinhua reports,

The reform means investors no longer face complicated procedures if they want to transfer their accounts to other brokerage firms.

 

All they need to do is to open new accounts with other firms and the information will be transferred under a new system launched by the CSDC in October.

*  *  *

Which leaves us with one question... WTF!!??

 

Is this just some giant Big Lie distraction designed to draw the "peoples' attention away from the crashing real estate market.








Gold-Backed SDR "Is Quite Likely To Happen", LSE's Lord Desai Warns

As many are increasingly coming to terms with the 'obvious failure of fiat currency', the inevitavble question arises "what next?" Earlier this year, we discussed the possibility of a Chinese- or Russian-currency backed by gold, amid the increasing calls (domestically and abroad) for an end to USD Reserve hegemony; but this weekend, as Bloomberg reports, Lord Meghnad Desai, chairman of The Official Monetary and Financial Institutions Forum, stated that IMF Special Drawing Rights (SDR) should contain some gold to help stabilize the currency.

 

As Bloomberg reports,

“A bit of gold” could help stabilize SDRs, Lord Meghnad Desai, chairman of Official Monetary and Financial Institutions Forum, says at precious metals conference in Dubai.

 

“We could ask that gold be nominated as part of the SDR. That is one thing I think is quite likely to happen”

 

This will be easier if China increases its official gold holdings.

*  *  *

This is not the first time such a suggestion has been made...(as JC Collins of PhilosophyOfMetrics.com detailed)

The Coming SDR Gold Standard

Sometimes what at first appears to be conflicting information is anything but, and what was originally considered to be opposing forces or ideals can quickly become unified for the greater good.

 

There has been much discussion and division over whether the world was moving towards a multilateral super-sovereign reserve currency by way of the Special Drawing Right of the International Monetary Fund or towards a new gold standard by which all currencies would be valued once again on gold.

 

Positions have taken up defense on both sides and all waited to see which side was going to be right.  Were the BRICS countries going to overthrow the western banking cabal?  Was the US dollar going to inflate into oblivion?  Was the SDR going to become the new reserve currency?  Was a new gold standard going to be implemented instead?

 

So many questions with no clear outline or determinations on what exactly was going to happen.

 

I have contested all along that the SDR was going to become the super-sovereign reserve currency of the emerging multilateral financial system.  The supporters of a new gold standard have found this idea unworkable because gold is considered to be the only method of creating stability within the larger architecture of the global financial system.

 

But what if everyone is right?  Or more correctly, what if all the obvious points and leverage of each potential system can be utilized to create the larger macro stability from which the multilateral will inevitably emerge?

 

In the post Renminbi is Already a De Facto Reserve Currency, I discussed how the Chinese currency was being internationalized and would be added to the SDR basket valuation.

 

This basket is currently made up of four currencies, being the US dollar, the Japanese yen, the Euro, and the British pound.  Adding the renminbi to the basket is both important and necessary for any changes to the global financial architecture.

 

But this theory has never accounted for the importance obviously placed on gold and the manipulation and mass movement of the precious metal which has taken place over the last few years.

 

No doubt the gold moving east has a lot to due with balancing old sovereign bond debts and building up reserves to support the renminbi denominated contracts which have just begun at the Shanghai Gold Exchange.

 

But this doesn’t fully explain the demand by other countries for gold, such as Russia and India, or even Germany demanding its gold back from the United States.

 

But nether does a gold standard fit the facts as all participating countries and economies have stated in official publications and speeches that a new gold standard is unworkable and the SDR provided the best opportunity moving forward to balance the financial structure of the world.

 

In posts such as:

The Rise of the World Empire

Everything Will Be SDR Compliant

The Days of July – BRICS Still Seek SDR Solution

The Arcane SDR Supra-Sovereign Asset

 

I have attempted to explain and describe how the BRICS countries are aligned with the larger macro mandates of the SDR multilateral system and do not plan on overthrowing the western banks.  It is in fact a situation where the western and eastern banks are all controlled by the Bank for International Settlements.

 

It is interesting that over the last few days even certain conspiracy theorists which have been promoting the overthrow of the western banking cabal are now stating that the BIS and its central bank system will remain.

 

In most of my more esoteric posts I explain how the human mind seeks out division and from that division is born conflict.  Once symbols of division have been established it is almost impossible to shift the thinking of each position to see or observe a larger or more unified macro picture.

 

But once that realization is made the conscious thought pattern of all things takes a leap forward and what was once hidden in plan site becomes clearly visible and clarity resumes.

 

As we move closer to the end of this year and the ultimate point of transition to the multilateral, it is important to continue studying and observing the patterns which are taking place on the micro level.  These proxy resource wars and attempts to consolidate resources under regional currencies before the larger macro consolidation takes place will likely taper off as agreements are made and positions relinquished.

 

The US Congress will pass the required legislation to enact the 2010 IMF Code of Reforms which will allow for the necessary changes to the Executive Board of the IMF to take place.  This will also allow for the SDR basket to be opened and the renminbi and gold will be added to the overall valuation.

 

So once completed, the SDR basket valuation will consist of the following stores of value:

 

US Dollar

Japanese Yen

British Pound

Euro

Renminbi

and Gold.

 

From this point we need to study and observe the massive amount of Sovereign Wealth Funds which litter the background of the international financial architecture.

 

Energy exporters and pacific rim economies which have undervalued currencies have been pouring investment into SWF’s.   These funds are in a perfect position to promote the use of the SDR as a unit of account and store of value.

 

In the coming months and years you will see Sovereign Wealth Funds begin to purchase large amounts of SDR denominated bonds and securities.  This is likely where the solution to the derivatives issue will be found.  Somewhere in between Sovereign Wealth Funds and SDRM – Sovereign Debt Restructuring Mechanism, will be found the answer.

 

This will be the “reserve dollar” exit strategy for central banks and national treasuries.

*  *  *

Interested readers can study the following paper published by the University of Glasgow, titled Adding Gold into the Valuation of the SDR.and Collins encourages a strong review of the following document on FINAL+Vision_Sovereign_Wealth_Funds.  Especially section three, titled Sovereign Wealth Funds, Special Drawing Rights, and the New Global Financial Architecture.

*  *  *
As we concluded previously,

Some argue that “no other global currency is ready to replace the U.S. dollar.” That is true of other paper and credit currencies, but the world’s monetary authorities still hold nearly 900 million ounces of gold, which is enough to restore, at the appropriate parity, the classical gold standard: the least imperfect monetary system of history.

As the global currency war escalates, we suspect the answer to "what comes next" will come sooner than many think.








Truth - The Cure For Cognitive Dissonance

Submitted by Jim Quinn via The Burning Platform blog,

“In a time of deceit telling the truth is a revolutionary act.” ? George Orwell

Every time the BLS puts out their monthly propaganda report on the wonderful state of the U.S. jobs market and states with a straight face the unemployment rate is a measly 5.5%, their corporate mouthpieces in the mainstream cheerleader media regurgitate the fake numbers and urge you to buy stocks. The millionaire talking heads on CNBC and the corrupt bought off politicians in D.C. make broad sweeping declarations about economic recovery, strong job growth, GDP advancement, record highs in the stock market, and soaring consumer confidence.

The people living in the real world know otherwise, but they want to believe the “experts” and “leaders”. This dichotomy between reality and what they are being told is causing a tremendous amount of mental stress. This cognitive dissonance of attempting to reconcile what they are experiencing in their every day existence and the propaganda being peddled at them on a daily basis from big media, big bankers, corporate titans, and captured politicians pulling the strings and running the show, is causing psychological discomfort. Most people want their lives to get better, so to reduce their cognitive dissonance they choose to believe the government and media reports about economic improvement.

It is only a small minority who want to know the unvarnished truth. They are drawn to alternative media websites, which the the captured corporate media refers to as doom sites. These critical thinking individuals understand the facts. The Deep State propaganda has no impact on these people because they have no cognitive dissonance. They know things are far worse than what is reported by the government and their media whores. Knowing the truth and seeing how the majority remain willfully ignorant results in rising anger among truth seekers. Huxley was right.

“You shall know the truth and the truth shall make you mad.” ? Aldous Huxley

When the BLS reports their monthly unemployment BS showing a 5.5% unemployment rate and Obama holds a press conference to pat himself on the back for the 10 million jobs he has created since 2009, the critical thinking truth seekers focus on the big lies in the numbers. The 10 million jobs added has been surpassed by the 13 million people who supposedly willingly left the workforce. The 148 million employed Americans is only 2 million more than were employed in 2008, but the government wants you to believe the unemployment rate is the same as it was in 2008 despite the fact the working age population has grown by 16 million people.

The truth is the labor participation rate has fallen dramatically since 2008 and now sits at a 38 year low of 62.7%. The rate consistently remained between 66% and 67% from 1988 through 2008. There are 250 million working age Americans and only 148 million Americans working and the powers that be expect you to believe only 8.5 million of the 102 million non-working Americans are actually unemployed. When the critical thinking doom websites point out the record low participation rate, the immediate response from the Wall Street propaganda machine is Baby Boomers retiring. Their co-conspirators in misdirection and misinformation in the media unquestioningly perpetuate this lie without an iota of journalistic credibility.

The Boomer retirement meme is obliterated by the data in the chart below. The labor force participation rate of those over 65 is at an all-time high and has grown by over 50% since 2000. Those in their prime working years between 25 and 64 have seen their labor force participation rate decline since 2000. The labor force participation rate decline has absolutely nothing to do with Boomers retiring. It is solely driven by younger workers unable or unwilling to work. The truthful labor participation rate should be 66%. That would force the BLS to admit at least another 9 million Americans are unemployed, pushing the unemployment rate to at least 10.7%.

The blatant perpetuation of the big lie began in earnest after the 2008 Wall Street created financial crisis. The number of jobs for those 54 years old and younger is still 1.2 million below 2007, while the number of jobs for those 55 and older is up by 6 million. Those over 55 working today stands at 33.1 million, an all-time high. This figure has doubled since 2000. The Boomer dream of a long luxurious retirement, living off their interest income, lying on a beach and drinking pina coladas has devolved into being forced to work as Wal-Mart greeters and McDonalds counter help until they die. Retirement isn’t an option after two Federal Reserve created bubbles burst, six years of zero interest rates, and three simultaneous bubbles on the verge of bursting.

The falsity of the jobs recovery meme is unequivocally proven by the fact real median household income is still 4.5% lower than it was at the 2001 and 2008 peaks. And this is using the ridiculously understated CPI figure. Using a true inflation rate would show real median household income to be 20% below 2000 levels. The last time I checked, workers live in households. How could the unemployment rate plunge from 10% in 2009 to 5.5% today with real median household income falling? Maybe the 21% decrease in manufacturing jobs since 2000 and the proliferation of low paying part-time service jobs, along with Federal Reserve created inflation, have resulted in the death of the middle class. Real people living in the real world have seen their standard of living steadily decline for the last 25 years. And they know it, deep inside, despite the propaganda echoing from their boob tubes.

There is a reason retail sales continue to stagnate. There is a reason credit card debt continues to decline. There is a reason you don’t hear your friends, family or neighbors talk about the improving economy. If you don’t hob nob with the ruling elite at Manhattan cocktail parties or summer at the Hamptons, you know the truth. Your real wages are lower than they were in 1989. The expenses you incur to live your everyday life like food, rent, transportation, health insurance, and tuition are rising at 5% to 10%, not the 1.7% reported by your government keepers. You own little or no financial stocks, so the record stock market highs have no impact on your financial well being. You may have money in a savings account, money market or CDs. Eight years ago you could earn 5%. Today you earn .15%, thanks to Bernanke, Yellen and their Federal Reserve cohorts. But at least you still get to pay the Wall Street banks 15% on your credit card balance.

The only way to relieve the tremendous mental stress caused by the conflict between what you know you are experiencing in your everyday life and what you are being told by bankers, politicians, government apparatchiks, and the corporate media, is to accept the truth and free yourself from the tyranny of the Deep State. Propaganda is a powerful tool in the hands of rich powerful psychopathic men bent on accumulating wealth, power and control over the bourgeois. Secrecy, censorship, data manipulation, and media messaging to mislead have worked for decades. Very little in the way of coercive techniques have been required, as the Bernays method  of conscious and intelligent manipulation of the organized habits and opinions of the masses has worked wonderfully to hoodwink and bamboozle the average person.

The mood of society in general continues to darken. War drums are beating around the globe. The imperial American Empire is fraying at the edges and using military force, intrigue, surveillance, and secrecy in an attempt to retain its power domestically and internationally. The truth is being suppressed, but the internet and proliferation of websites revealing the lies of those in power is slowly opening the eyes of more and more people whose cognitive dissonance has caused them too much discomfort. The Deep State is worried. Their wealth, power and control are in danger. The attempts to control the internet, the un-Constitutional surveillance of citizens, and the militarization of police forces across the land are a futile attempt to control us. But the truth will set us free. As Robert Heinlein describes, no amount of force can control a man who mind is free.

“Secrecy is the keystone to all tyranny. Not force, but secrecy and censorship. When any government or church for that matter, undertakes to say to its subjects, “This you may not read, this you must not know,” the end result is tyranny and oppression, no matter how holy the motives. Mighty little force is needed to control a man who has been hoodwinked in this fashion; contrariwise, no amount of force can control a free man, whose mind is free. No, not the rack nor the atomic bomb, not anything. You can’t conquer a free man; the most you can do is kill him.” – Robert A. Heinlein

It won’t take a majority to prevail. If we continue to set brush fires of truth, freedom and reason among the increasingly disillusioned masses, a tipping point will be reached and a revolution of truth will sweep across the land. So, if you have the opportunity to speak the truth to someone today….








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