US Issues Travel Alert For Russia, Warns Of "Potential Military Clashes (Either Accidental Or Intentional)"

Just out from the State Department, which in the aftermath of the most recent failure by John Kerry to resolve the Ukraine situation, appears to be escalating to populism and engaging the general public. The best part in the warning is the following clarification: "all U.S. citizens located in or considering travel to the border region, specifically the regions bordering Ukraine in Bryansk, Kursk, Belgorod, Voronezh, and Rostov Oblasts and Krasnodar Krai, should be aware of the potential for escalation of tensions, military clashes (either accidental or intentional)." Somehow we have a feeling we may be seeing a spike in "accidental military clashes" over the next week.

Friday (Un)Humor: Navy Warship 'Accidentally' Fires Torpedo At Nuclear Dockyard

"Had the thing been armed it would have let out a 200-metre blast...You could be talking about a major loss of life," one source noted as The Telegraph reports British military chiefs have launched a major investigation after a Royal Navy warship accidentally fired a torpedo at a nuclear dockyard. Workers watched in disbelief as the tube-shaped projectile flew through the air before blasting a hole in a security fence and slamming into a storage container. "Someone has obviously pushed the button, presumably by accident - the big question is who," as the Royal Navy stiff-upper-lippedly stated "during a training exercise, an inert Test Variant Torpedo unexpectedly jettisoned onto the wharf. There was no explosion and no casualties." Perhaps they should stay away from the Black Sea for a while - just in case.

5 Things To Ponder: Macro Investing Thoughts

This past week has seen the market struggle due to continued weak economic data, rising tensions between Russia and the Ukraine and an extended bull market run.  Market internals are showing some early signs of deterioration even though the longer term bullish trajectory remains intact.  Therefore, this week's "Things To Ponder" wades through some broader macro investment thoughts, from the safety of your investments to how market tops are made.

It Has Been A Horrible Week For The Secretariat Of State

If anyone ever said John Kerry - arguably the worst Secretariat of State in recent US history - didn't know how to look regal in photo ops of failure after epic failure, they obviously have never this picture. Such majesty, such posture, such a shiny coat. Just don't look him in the mouth.

Stocks Have Worst Week In 9 Month; Gold Hits 6 Month Highs

We started the week exuberant wearing the cleanest dirty shirt scoffing at the weakness of 'foreign' markets. By the end of the week, the Dow has dropped 5 days in a row in a week for the first time since May 2012 and the Nasdaq had its worst week in 9 months. The S&P dropped back into the red for 2014 - despite a late-day ramp effort - tracking AUDJPY all day long once again (and financials also red for 2014). VIX surged above 18% (and its term structure steepest since US downgrade) as credit spreads blew wider. Treasury yields tumbled 10-14bps on the week - the biggest drop since June 2012. Gold prices rose over 3% on the week to 6-month highs. Copper saw its biggest 2-week drop in 30 months. The USD slipped lower on EUR and JPY strength (JPY +1.9% - biggest surge in 7 months). YTD Gold +14.7%, S&P 500 -0.07%.

US Drone "Intercepted" Over Crimea By Russian 'Self-Defense' Forces

An American scout-attack drone, "almost invisible at a height of 4000 meters" has, according to AFP, been intercepted in the Crimean sky. Reports from the Russian state arms and technology group Rostec stated, judging by side-markings it was an MQ-5B drone - which is likely part of the 66th US Recon Brigade based in Bavaria. It was possible to break the drone’s link with its American operators with the help of the EW (electronic warfare) complex Avtobaza. As a result, the device made an emergency landing and passed into the possession of the self-defense forces almost unbroken." It is perhaps ironic that the US is complaining abouit Russia's military presence in Ukraine even as its own equipment is reportedly operating in the country.

Citi: Is This Gold's Breakout Week?

Precious metals (gold in particular) continue to push higher and along with copper (to the downside) hold 'center-stage' among world commodity markets. As Citi's FX Technicals group notes gold has traded above very strong resistance on the $1,350 to $1,362 range suggestng a test up to $1,434 and the next level at the 200-week moving average at $1,493. Gold is also getting close to the "golden cross" where the 50DMA will cross above the 200DMA. Such a move, if seen, would strongly suggest that the corrective low is in (at $1,182) and that a re-test of the all-time highs at $1,921 and beyond is highly likely.

Will The First $3 Billion Of A Ukraine Bailout Immediately Go To Russia?

While most understand that Ukraine owes Russia a few billion here or there for its energy bills that are past due, there is a more concerning issue. The Ukraine owes $3 billion to Russia in bonds that have been issued under UK law. One of the stipulations of the bonds is that if the Ukraine's debt-to-GDP ratio should exceed 60%, the bonds will become immediately callable. Once the Ukraine gets funding from the IMF, this is of course going to happen right away – its debt-to-GDP ratio will then most definitely exceed 60%, so the first $3 billion of any aid the Ukraine receives in the form of loans will right away flow into Russia's coffers. The American and European tax cows will no doubt be thrilled.

FBI Blocked In Harry Reid Corruption Probe

Utah state prosecutors have received accusations of wrongdoing and gathered evidence in a wide-ranging corruption scandal involving Majority Leader Harry Reid and rising Republican Senator Mike Lee. However, as The Washinton Times reports, FBI agents have been thwarted in their efforts to launch a full federal investigation by the Justic Department. "DOJ risks creating the perception of a cover-up," warned one senior FBI official.

Is The Deep State Fracturing Into Disunity?

History suggests that low-intensity conflict within the ruling Elite is generally a healthy characteristic of leadership in good times. As times grow more troubled, however, the unity of the ruling Elite fractures into irreconcilable political disunity, which becomes a proximate cause of the dissolution of the Empire if it continues. We recently proposed the idea that Wall Street now poses a strategic threat to national security and thus to the Deep State itself. Many consider it "impossible" that Wall Street could possibly lose its political grip on the nation's throat, but I suggest that Wall Street has over-reached, and is now teetering at the top of the S-Curve, i.e. it has reached Peak Wall Street.

Russia Crashes Into Bear Market As Europe Drops Most In 9 Months

Broad European stocks dropped 3.3% on the week - the biggest fall since June of last year. Despite a late-day surge on the back of surprising relief from Lavrov's comments on not invading Ukraine (well, he's hardly going to pre-announce) Germany has seen its worst 2-week drop in 28 months. Sovereign bond spreads rose 10-13bps on the week for the peripheral nations (which is actually notable given how tight they trade now). Russian stocks have plunged 22% from Feb 18th highs and Russian 10Y bond yields surged to near 10% yields. Ukraine's short-date bonds remain at yields around 50% and the Hyrvnia is losing ground.

Kerry Summary: "There Will Be Costs"

Kerry speaks. The punchline:

  • KERRY SAYS RUSSIA NOT PREPARED TO TAKE STEPS BEFORE REFERENDUM
  • KERRY SAYS U.S. AND INTERNATIONAL COMMUNITY WILL NOT RECOGNIZE OUTCOME OF CRIMEA REFERENDUM

And of course, the hollow threats - the costs are back.

  • KERRY SAYS THERE WILL BE COSTS IF RUSSIA DOES NOT CHANGE COURSE
  • KERRY SAYS IF RUSSIA DOES ESTABLISH FACTS ON THE GROUND THAT THREATEN UKRAINIAN PEOPLE 'THAT WILL BEG AN EVEN GREATER COST'

Everything else was superfluous.

"World's Greatest Hedge Fund In History" Generated $91 Billion Profit In 2013

While investors enjoy collecting and reading the monthly and year end letters by distinguished hedge fund managers, the only one that really matters is the annual report by the world's "greatest hedge fund in history" (not our words, those of Warren Buffet). It is here where we find that in 2013, the Fed generated a record $90.5 billion in Interest Income, surpassing the previous all time high of $88 billion set in 2011. But what is most disturbing is that the Fed is getting increasingly less bang for the buck courtesy of its own ZIRP policy. This is best manifest in the declining Return on Assets: recall that in 2013 the Fed's total assets rose by over $1 trillion from $2.9 trillion to $4.0 trillion as of December 2013, a 38% increase. And yet the profit boost was a fraction of this increase. Sure enough, ROA tumbled, and continues to drop: at 2.2% down from 2.8% in 2012, the Fed's "efficiency" is now the lowest since QE began in 2008, when ROA was just 1.9%.

Foreigners Sell A Record Amount Of Treasurys Held By The Fed In Past Week

A month ago we reported that according to much delayed TIC data, China had just dumped the second-largest amount of US Treasurys in history. The problem, of course, with this data is that it is stale and delayed. For a much better, and up to date, indicator of what foreigners are doing with US Treasurys in near real time, the bond watchers keep track of a far less known data series, called "Treasury Securities Held in Custody for Foreign Official and International Accounts" because it shows what foreigners are doing with their Treasury securities held, as the name suggest, in custody by the Fed. So here it goes: in the just reported latest data, for the week ended March 12, Treasurys held in custody by the Fed dropped to $2.855 trillion: a drop of $104.5 billion. This was the biggest drop of Treasurys held by the Fed on record, i.e., foreigners were really busy selling.

Massive Fraud Has Been Unveiled At The EPA (Again)

While we doubt anyone reading this will be shocked by major fraud at the Environmental Protection Agency (EPA), the potential extent of the fraud is huge, and we still have no idea how big it is. A report released by the EPA’s Inspector General found that over 90% of sampled transactions were for “prohibited, improper, or erroneous purchases.”

Crimea Prime Minister Says May Formally Join Russia Next Week

Crimea's Prime Minister Sergie Aksenov has been very vocal this morning with comments on nationalizing the region's banks, but the following few comments are sparking concerns:

  • *AKSENOV SAYS CRIMEA ISN'T TAKING ORDERS FROM RUSSIA
  • *AKSENOV SAYS DOESN'T ENVISAGE UKRAINIAN CIVIL WAR
  • *CRIMEA MAY FORMALLY JOIN RUSSIA NEXT WK, INTEGRATE IN 1 YR: PM

We will see what Obama, Merkel, and Ukraine's leadership has to say about that... Turchynov, for one, has warned to be "ready for a full-scale invasion at any moment."