Archive - Mar 13, 2014

The Real Reason Why Ukraine is Key

The PBOC issued a statement today, according to 21st Century Business Herald, that halts virtual credit card products and "face-to-face" payment services such as QR code payment:

*PBOC HALTS QR CODE PAYMENT; PBOC HALTS VIRTUAL CREDIT CARDS BY ALIPAY, TENCENT: 21ST HERALD

Tencent is down over 5% and Yahoo was dumped in morning trading in Japan (on the back of Alibaba's Alipay service being affected).

We provide this map showing the latest distribution of Russian military forces along the Ukraine borders so that readers can make up their own mind if, as John Kerry says, "Russia doesn't yet have forces for Ukraine Takeover."

The West will claim "everything Putin does is illegal," but while Ron Paul notes "he's no angel," the former congressman adds Putin "has some law on his side." America has a right of secession and Crimea should have it too - "it's such a facade," Paul explains, noting that "contracts, and agreements, and treaties" linked to the Sevastopol base provide Putin with a legal basis to militarily occupy Crimea, "Russia could accuse America of occupying Cuba because it, too, holds a lease on the land around the Guantanamo Bay prison."

The "good" news this evening is that Baoding Tianwei Baobian Electric Co (TBE), the company which as recently as two days ago was rumored to be the second "imminent" Chinese corporate bond default which sent copper to multi year lows, has issued a statement that it will not default on its upcoming interest payment (due July 11th - so how the delisted company is convinced it will have enough cash four months from now is a mustery). The "bad" news is that markets don't care. There is a slight whiff of positivity in Copper futures but aside from that, weakness continues in China's corporate bond and stock market. Simply put, the market gets it - this is no longer about the next idiosyncratic bond (or trust) to default; this is about Xi's renewed confidence in efforts to 'clean up' the mounting local government and corporate debts and shrink the shadow-banking bubble. This is systemic, and the markets know it.

Former HUD Assistant Housing Secretary and investment advisor Catherine Austin Fitts reveals her thoughts on the ever-rising debt ceiling... what Obamacare is really about (and that’s not socialized healthcare)... why over $4 trillion missing from federal programs may not be incompetence, but a covert strategy... how to protect yourself from the constant devaluation of the US dollar... and what exactly the Popsicle Index measures and why it matters... "are we going to create a society where one hundred percent of everything is digitized and under central control?”

"The best way to define the mood in the market right now is panic," warns one commodity broker, adding that "everyone understands why we are going down, but nobody can tell where the bottom is." As the WSJ notes, the economic slowdown in China is hammering prices of some raw materials, driving down industrial commodities from copper to iron ore and coal - exacerbated by the vicious cycle of credit-collateral-contraction. So what is the cheapest way to play continued stress (with potentially limited downside)? The diversified natural resources company Glencore has a huge $55 billion of debt, is drastically sensitive to copper (and other commodity) prices, and its CDS remains just off record tights...

Today, as a result of the Ukrainian crisis, U.S.-Russian relations have hit their lowest point since the invasion of Afghanistan in 1979 or of Czechoslovakia in 1969 — or perhaps even since they bottomed out during the Cuban Missile Crisis. The crisis escalated into a conflict between the U.S. and Russia after the West supported a coup, then lied by violating the Feb. 21 agreement when it recognized the formation of a new and illegitimate government of extremists. This conflict has the potential of sparking a new Cold War — something we never thought could happen in modern times since we believed it would have to be rooted in ideological differences. Moscow does not see the revolution in Ukraine as an attempt to create a more democratic or law-based society. Instead, it sees the events in Kiev as an attempt to make Ukraine as anti-Russian as possible.

...but the second half of the year is going to be great... (or 3rd or 4th)

The Indian government has imposed a duty of ~11.3% on gold imports. Additionally, they have created bureaucratic complexities, including a requirement from gold importers to export 20% of their imports. The government claims that this has resulted in a serious drop in imports, something they wanted, given consistently high, unsustainable current-account deficits. The spot price of gold is $1,300 per ounce. In India, however, it is trading at a premium of 18%, at a price of $1,534. One might ask who is pocketing this premium? Have imports really come to a stand-still? Let's look at the reality on the ground...

We've discussed margin debt records, the jump in earnings-less-IPOs, the massive surge in junk-debt-issuance, and the spike in penny-stock speculation - which we are told by Janet Yellen are no indication of a bubble in US equities. Given her perspective then we are sure the following two charts will doubly-confirm the lack of any exuberant activity...

Putin has warned that U.S. action over Ukraine would have a boomerang effect. With the situation anything but de-escalating (and the weekend's Crimea referendum set as a potential catalyst), it seems timely to consider what actions Russia could take against the United States if tensions were to spiral out of control. Clearly Vladimir Putin has a number of options to create significant havoc in multiple areas of American national interest—especially in Asia.

China is the reason so many companies tell you how great their prospects are. 

What You DON'T KNOW About CIA Fight with Congress

It seems if you can't beat the digital dickweeds, then you join 'em. Dennis Kneale, infamous for his exclamations regarding bloggers while working for CNBC, has finally been let go by Fox also... these are his tips on how to be unemployed (at age 56!) via his new blog...