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Frontrunning: May 17

  • Mine union threatens to bring South Africa to 'standstill' (Reuters)
  • Russia Raises Stakes in Syria (WSJ) - as reported here yesterday 
  • Japan buys into US shale gas boom (FT)
  • Bill Gates Retakes World’s Richest Title From Carlos Slim (BBG) - so he can afford a Tesla now?
  • China Wages Rose Sharply in 2012 (WSJ)
  • Regulators Target Exchanges As They Ready Record Fine (WSJ)
  • Citi Takes Some Traders Off Bloomberg Chat Tool (WSJ)
  • After Google, Amazon to be grilled on UK tax presence (Reuters)
  • Apple CEO Cook to Propose Tax Reform for Offshore Cash (BBG)
  • French, German politicians to pressure Google on tax (Reuters)
  • Gold Bears Revived as Rout Resumes After Coin Rush (BBG)
  • A stretched Samsung chases rival Apple's suppliers (Reuters)


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Dull Overnight Session Set To Become Even Duller Day Session

Those hoping for a slew of negative news to push stocks much higher today will be disappointed in this largely catalyst-free day. So far today we have gotten only the ECB's weekly 3y LTRO announcement whereby seven banks will repay a total of €1.1 billion from both LTRO issues, as repayments slow to a trickle because the last thing the ECB, which was rumored to be inquiring banks if they can handle negative deposit rates earlier in the session, needs is even more balance sheet contraction. The biggest economic European economic data point was the EU construction output which contracted for a fifth consecutive month, dropping -1.7% compared to -0.3% previously, and tumbled 7.9% from a year before.  Elsewhere, Spain announced trade data for March, which printed at yet another surplus of €0.63 billion, prompted not so much by soaring exports which rose a tiny 2% from a year ago to €20.3 billion but due to a collapse in imports of 15% to €19.7 billion - a further sign that the Spanish economy is truly contracting even if the ultimate accounting entry will be GDP positive. More importantly for Spain, the country reported a March bad loan ratio - which has been persistently underreproted - at 10.5% up from 10.4% in February. We will have more to say on why this is the latest and greatest ticking timebomb for the Eurozone shortly.



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The View From The Highest Point In The Western Hemisphere

For those vertiginously challenged, look away; for everyone else, the fastest trip up the new World Trade Center... (or is this what it feels like to be the Nikkei?)



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Guest Post: The Trick To Suppressing Revolution: Keeping Debt/Tax Serfdom Bearable

Parasites must balance their drive to maximize what they extract from their host with the risk of losing everything by killing their host. This is the dilemma of the parasitic partnership of the central state and financial Elites everywhere: to extract the maximum possible in debt payments and taxes without sparking rebellion and revolution. The 30 million whose labor funds the parasitic status quo don't have to rebel; they simply have to stop going to work, stop starting enterprises, stop being productive. They just have to tire of being the host, tire of being debt-serfs, tire of being tax donkeys. The trick to suppressing revolution is to keep debt-tax serfdom bearable. The parasitic Elites are keeping the host going, but at a high cost in resiliency. Let's see how long the host lasts once a crisis hits.



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Austrian "Good" Banks Balk At Bad-Bank Bailout

Since 2009, when Hypo Alpe Adria was 'nationalized', the Austrian government has dumped more than EUR2 billion into the troubled bank. It remains on life-support but this time the government-proposed 'aid' being offered is running into a wall. The rest of Austria's banks (as creditors as well as forced levy-payers from other bailouts) dismiss the government's plan for a "bad-bank" model a la Ireland adding that they "will not allow themselves to be put under pressure by politicians." Reuters notes that the 'bad-bank' plan is up against a deadline at the end of May from the European Commission, and among others Unicredit Austria is clear on its role, "decidedly rule out a commitment on our part." The increasing tension between Vienna and Brussels is evident as a quick sale of the bank will lead to a EUR5-6 billion loss for taxpayers (hurting the government's budget plans) but it seems the rest of Austria's banks are unwilling to throw more good money after bad, "if we go this way, some persuasion will be needed". Is it time for more non-templates?



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10 Perspectives Into The Slow, Agonizing Death Of The American Worker

The middle class American worker is in danger of becoming an endangered species.  The politicians are not telling you the truth, and the mainstream media is certainly not telling you the truth, but the reality is that there is nothing but bad news on the horizon for workers in the United States. The American people inherited the greatest economic machine in the history of the world, and we have wrecked it.  Decades of very foolish decisions have resulted in the period of steady economic decline that we are experiencing now. Today, American workers are living in an economy that is rapidly declining, and their jobs are steadily being stolen by robots, computers and foreign workers that live in countries where it is legal to pay slave labor wages.  Politicians from both political parties refuse to do anything to stop the bleeding because they think that the status quo is working just great. So don't expect things to get better any time soon. The following are 10 charts that demonstrate the slow, agonizing death of the American worker...



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Peter Thiel Gets the Bitcoin Bug

We recently described in detail what a venture capitalist might see in Bitcoin and it appears that some of that message got through... Interesting news out today in the Bitcoin world.  As you may recall, last week I highlighted how the highly respected venture capital firm Union Square Ventures (Fred Wilson, early investor in Twitter) invested in Coinbase.  Today we learn that another very high profile investor has plunged into the Bitcoin pool.  In this case it’s Peter Thiel, and his investment is in BTC merchant processor Bitpay, a company I have highlighted previously on several occasions. Incredibly, the tremendous growth rate continues as they added another 1,900 merchants in April and are currently signing up around 100 additional merchants a day.



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Mystery Sponsor Of Weapons And Money To Syrian Mercenary "Rebels" Revealed

Previously, when looking at the real underlying national interests responsible for the deteriorating situation in Syria, which eventually may and/or will devolve into all out war with hundreds of thousands killed, we made it very clear that it was always and only about the gas, or gas pipelines to be exact, and specifically those involving the tiny but uber-wealthy state of Qatar. Needless to say, the official spin on events has no mention of this ulterior motive, and the popular, propaganda machine, especially from those powers supporting the Syrian "rebels" which include Israel, the US and the Arabian states tries to generate public and democratic support by portraying Assad as a brutal, chemical weapons-using dictator, in line with the tried and true script used once already in Iraq.On the other hand, there is Russia (and to a lesser extent China: for China's strategic interests in mid-east pipelines, read here), which has been portrayed as the main supporter of the "evil" Assad regime, and thus eager to preserve the status quo without a military intervention. Such attempts may be for naught especially with the earlier noted arrival of US marines in Israel, and the imminent arrival of the Russian Pacific fleet in Cyprus (which is a stone throw away from Syria) which may catalyze a military outcome sooner than we had expected. However, one question that has so far remained unanswered, and a very sensitive one now that the US is on the verge of voting to arm the Syrian rebels, is who was arming said group of Al-Qaeda supported militants up until now. Now, finally, courtesy of the FT we have the (less than surprising) answer, which goes back to our original thesis, and proves that, as so often happens in the middle east, it is once again all about the natural resources.



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Guest Post: The Empire's Next Effort To Extract Your Wealth

Since before the tech bust, we’ve been suggesting that while Americans “think” they’re getting richer... they’re actually heading in the other direction. They’re getting poorer. This proposition has been easier for folks to entertain since housing busted and the financial crisis reversed the “wealth effect” in 2008. With that in mind, let’s take a look at the logic of the American Empire and what you can expect in the year(s) ahead.



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Visualizing The Great Gold Rout

After a decade long rally, gold recroded its biggest two-day drop in 30 years during April. What caused this sudden decline? Is the gold cycle over, or is this just a dip in the market?



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Biderman Busts The 'Sustainable' Deficit Reduction Meme

While Tepper and his breathless team-mates celebrate a 'sustainable' euphoria-inducing drop in the deficit that heralds the new America, TrimTabs CEO Charles Biderman upsets the bull's apple-cart by explaining the three one-off items that created this smaller deficit and implicitly show its unsustainability. In his usual fact-based exclamations, he reminds us "do not confuse higher tax payments for liftoff." The bullish twist, he notes reported in the popular press, is "deficit reduction must mean we are having an economic liftoff," and has become an overnight "feel-good phenomenon for those long stocks and needing news to justify their positions." Sustainable? "If only it were true...", as he enthralls, "this is a tale of three one-off items masking a slow-growth economy." Here are the facts...



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JCPenney's Free Cash (Non) Flow

Ackman is in, so is Soros. Which means that the "top left to bottom right" trendline will reverse.... Soon.... Any minute now....

 



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This Is What Happens When You Ask Too Many (Or The Wrong) Questions

With the lies, cheating, and conspiracies running wild in the US, we thought it worth dusting off the archive and remembering Michael Burry. Burry, infamous for his 'Big Short' into the subprime crash that made him and his clients extremely wealthy, reflected on his ability to see this coming in an Op-ed at the time asking a broad swath of politicians, economists, and professional 'seers' why they didn't see 'It' coming? As he explains, soon after asking that uncomfortable question, things escalated rapidly for him and his firm... simply unbelievable in the context of the ongoing investigations currently... As he explains, "I bet against America, and won," and it seems 'America' didn't like that...



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Tepper Topped

It seems the words of Plosser and Williams are more powerful than the rumors of Hilsenrath for now. While the jury is still out for whether the 'Tepper Top' is in, today's equity sell-off (admittedly a mere 0.5%) appears to have stunned a few people back into the reality that stocks actually fall. Trannies were worst performers but broadly speaking this was the worst drop in 2 weeks (only 2nd down day in May) and it appears equity markets are beginning to play catch-down to the reality other risk asset classes have been warning about for a week or two. Homebuilders were the worst performers (as the data this morning was just horrible - US and Europe) and while Tech held us up for a little while, APPL's retest of its 50DMA saw sellers come back (and GOOG also lost ground from the open). Away from stocks, Treasuries closed -6bps (their best day in 5 weeks); credit continued to widen (weaken); VIX shifted higher still; shorts actually 'won' on the day (most-shorted -1% vs RUT -0.5%); and despite an early dip, the USD ended the day up another 0.25% (with AUD weakness the most obvious pain for carry traders).



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"America, The Dependent"

Perhaps instead of "America, The Brave", a more appropriate description of what the USA has become would be (judging by the following chart) "America, The Dependent".



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