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.

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?

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....

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).

Fed Unleashes Another Taper Hint... Or Not

Last week it was Fed's WSJ lapdog hinting at a tapering. Now it is up to the Fed's own John Williams to provide an even stronger hint at what may be coming as soon as this summer. From Bloomberg:

• WILLIAMS SAYS FED MAY REDUCE QE IN SUMMER, HALT BY YEAR END

However, promptly following this is the following headline which we can only hope has a typo in it:

• WILLIAMS: UNEMPLOYMENT WON'T FALL BELOW 6.5% UNTIL MID-2105 (er, sic?)

And just to confuse everyone, as the Fed enjoys doing, here is the conclusion:

• WILLIAMS SAYS SLOWING QE WOULDN'T MEAN TIGHTENING IN POLICY

Bottom line: nothing will change.

Bill Gross: "We See Bubbles Everywhere"

It is only logical that when one of the smarter people in finance warns that he "sees bubbles everywhere" that he should be roundly ignored by those who have no choice but to dance. Because Bernanke and company are still playing the music with the volume on Max, and if not for POMO there is always FOMO. However, if there is any doubt why this "rally is the most hated ever", here are some insights from the Bond King from an interview with Bloomberg TV earlier today: "We see bubbles everywhere, and that is not to be dramatic and not to suggest they will pop immediately. I just suggested in the bond market with a bubble in treasuries and bubble in narrow credit spreads and high-yield prices, that perhaps there is a significant distortion there. Having said that, it suggests that as long as the FED and Bank of Japan and other Central Banks keep writing checks and do not withdraw, then the bubble can be supported as in blowing bubbles. They are blowing bubbles. When that stops there will be repercussions. It doesn't mean something like 2008 but the potential end of the bull markets everywhere. Not just in the bond market but in the stock market as well and a developing one in the house market as well."

Morgan Stanley: "Most Of The Buying Has Come From Shorts Covered Rather Than Longs Bought"

Confirming what we explained recently, Morgan Stanley explains that among its equity long-short fund activity, the short activity (the net of shorts added and shorts covered) reached a minus-2 z-score indicating massive covering over the past 20 days. The last 3 times this occurred were April 2010 (S&P then fell 13% in 8 days), July 2011 (S&P then fell 19% in 23 days), and Oct 2011 (S&P then fell 10.5% in 20 days). Across sectors, Consumer Discretionary has been the most covered over the past week and month. Due to heavy covering, Discretionary short activity fell below a minus-3 z?score as of yesterday (now the highest long/short ratio of all sectors). It is worth keeping in mind, MS add, that historically speaking, the sector with the highest long/short ratio has often gone on to underperform over the following 6?12 months. This covering has driven median net leverage up to 64% (its 97th percentile of post crisis levels). Money-on-the-sidelines!! not so much... Massive short-covering rally - yes...