Obama Reverses Policy As US-Turkey Set To Agree On Syrian No-Fly-Zone

With the apparent goal of 'protecting civilians' from ISIS and Syria's al-Assad, the US and Turkey appear to be close to agreeing on the creation of a no-fly-zone along a portion of the Syrian border. As WSJ reports, U.S. and Turkish officials have narrowed their differences over a joint military mission in Syria that would give the U.S. and its coalition partners permission to use Turkish air bases to launch strike operations against Islamic State targets across northern Syria. The no-fly-zone would provide sanctuary to Western-backed opposition forces and refugees. As Bloomberg notes, this is a significant reversal of Obama's earlier policy (fearing it would be a significant strain on the U.S. Air Force and put fliers in mortal danger) pushing US closer to outright proxy war with Russia via direct confrontation with al-Assad's airforce.

The Oil-Drenched Black Swan, Part 1

"Every sustained action has more than one consequence. Some consequences will appear positive for a time before revealing their destructive nature. Some will be foreseeable, some will not. Some will be controllable, some will not. Those that are unforeseen and uncontrollable will trigger waves of other unforeseen and uncontrollable consequences."

Key Events In The Coming Week

Following last week's holiday-shortened week, which was supposed to be quiet and peaceful and was anything but thanks to OPEC's shocking announcement and a historic plunge in crude prices, we have yet another busy week of macroeconomic reports to look forward to.

Oil-Producing Nations Currency Carnage Continues, Russia Intervening

The Nigerian Naira and Russian Ruble have been the hardest hit in the last few days as oil-producing nations across the world see their currencies come under increasing pressure. With both hitting new record lows against the USDollar (with the Naira at 184.5,  already exceeding the recently devalued currencies upper peg band at around 176 per USD), chatter this morning is that the Russian central bank is actively intervening in the Ruble market after it hit 53.9 in early US trading.

Frontrunning: December 1

  • Moody’s Downgrades Japan’s Credit Rating (WSJ)
  • China Factory Gauge Drops as Shutdowns Add to Slowdown (BBG)
  • Euro zone factory growth stalls in November as new orders sink (Reuters)
  • Espírito Santo Faces Money-Laundering Investigations (WSJ)
  • Oil at $40 Possible as Market Transforms Caracas to Iran (BBG)
  • Hong Kong warns protesters not to return after clashes close government HQ (Reuters)
  • Bond Secrets Decoded 9,539 Miles From Wall Street in Lot (BBG)
  • Ruble Rally Turns to Rout as Fortunes Tied to Sinking Oil (BBG)
  • Loans Made in Blink as Banks, Funds Vie for LendingClub Clients (BBG)

The Three Reasons Why Moody's Just Downgraded Japan From Aa3 To A1

1. Heightened uncertainty over the achievability of fiscal deficit reduction goals and containing debt
2. Economic growth policy uncertainties and challenges in ending deflation
3. Erosion of policy effectiveness and credibility could undermine debt affordability

Crude Carnage Goes Contagious As Brevan Howard Liquidates Underperforming Commodity Fund

The entire commodity complex is seeing major contagion-like price declines in early trading. WTI Crude is back below $65 for the first time since May 2010 - now down 16% since the initial leaks of OPEC's decision last Wednesday. Gold and Silver are getting whacked and copper has plunged below 300 - back at its lowest since June 2010. The news over the weekend that Brevan Howard is liquidating its $630 million commodity hedge fund following recent poor performance is also likely not helping as what looked like late-Friday margin call liquidations are extending notably this evening.

FBI Report Accidentally Exposes The Severity Of The Police State

A recently published FBI report accidentally proves that while the police claim cops face growing threats from rowdy populations – like in Ferguson – the opposite is true. The governemnt places a higher priority on their own than on the lives of those they claim to “serve,” “protect,” and “work for.” It cares more about exonerating the police of their crimes than providing justice to those they abuse. There is no justice when the criminal is the cop.

China Manufacturing PMI Drops To 8-Month Lows, Teeters On Brink Of Contraction

From exuberant credit-fueled cycle highs in July, China's official Manufacturing PMI has done nothing but drop as the hangover-effect from the credit-impulse weighs once again on the now commodity-collateral crushed nation. At 50.3 (missing expectations of 50.5 for the 2nd month in a row), this is the lowest print since March. All 5 components dropped led by notable weakness is outout and new orders (new export orders biggest MoM drop in 17 months) with medium- and small-enterprises heading deeper into contraction (at 48.4 and 47.6 respectively) as the Steel industry PMI craters to 43.3. Japan's PMI dropped marginally to 52 and then HSBC's China Manufacturing confirmed the government data and flash reading with a 50 print - the lowest since May as New Export Orders growth slowed for the 2nd month.