France

It is only logical that a day after the S&P500 surged, hitting Goldman's 2016 target of 2,100 more than a year early because the US manufacturing sector entered into a recession, that Europe would follow and when Eurostat reported an hour ago that European headline inflation of 0.1% missed expectations of a modest 0.2% increase (core rising 0.9% vs Exp. 1.1%), European stocks predictably surged not on any improvement to fundamentals of course, but simply because the EURUSD stumbled once more, sliding by 40 pips to a session low below the 1.06 level.

“Russia’s installation of their anti-aircraft missile-defense system increases that possibility of — whether it’s intentional or even an accidental event — where one side may shoot down the other side’s plane. And that’s really where the potential is for this devastating nuclear war."

While the populations of Europe and the US are fed raw propaganda about the regional aims involved, the reality is far different. While we might be tempted to sit in our Western environs, secure in the idea that at least we aren’t ‘over there’ where all the bad things are happening, it would be a mistake to think that this turmoil will not impact you.

"... Gladio, amongst others, is just a perfect example of how governments used oppression against their own citizens to shape the mindset of the public to unify them towards a common goal and objective, which in our case is: counter-terrorism. The problem, however, is that by giving this support, the public indirectly relinquishes many freedoms and liberties."

With Jeremy Corbyn's divided Labour MPs free to break party rank in Wednesday's key vote, "RAF crews could be bombing the Isis headquarters in Raqqa by the end of the week." Meanwhile, "German Chancellor Angela Merkel’s Cabinet approved deploying warplanes over Syria in the fight against Islamic State."

There was something for everyone in last night's much anticipated Chinese PMI data, with the official number sliding to the lowest in over 3 years, suggesting the PBOC will need to do more stimulus and is thus bullish, while the unoffocial Caixin print rising to the highest since June, suggesting whatever the PBOC is doing is working, and is also bullish. Not unexpectedly, global stocks decided to take the bullish way out, and have risen across the globe led by Asia, where stocks rose as much as 1.8%, Europe also green and US equity futures up 10 points as of this writing.

What should the rational investor do in an environment of ongoing financial repression? If you wanted to trigger a bank run, this is certainly how you might go about it.

A false capitalism reigns based on false capital - notional wealth where there is really no wealth; value where there is no value. Moments like this in history beat a path straight to currency collapse, and that will open the door to a greater collapse of all our familiar arrangements.

"Today, Russian Su-34 fighter-bombers have made their first sortie equipped not only with high explosive aviation bombs and hollow charge bombs, but also with short- and medium-range air-to-air missiles The planes are equipped with missiles for defensive purposes."

This is not the end of the war on cash. Ultimately it will culminate in efforts to impose a carry tax on physical cash if not ban cash outright.

As noted earlier, after last week's snoozefest, this week starts off with a bang when the IMF announces in a few hours it will accept the Chinese Yuan in the pantheon of world reserve currencies alongside the USD, EUR, GBP and JPY the only question being what the alotted weighing of the currency will be. Things then progress to tomorrow's global PMI numbers, Yellen speeches on the economy to the Economic Club of Washington and Congress (Weds/Thurs), the eagerly anticipated ECB meeting on Thursday and finally Friday's OPEC meeting and US payroll print - the last before the FOMC in 2 weeks time.

Without a rerun of last Friday's Chinese stock market rout, European traders could focus on what "really matters", namely how much of the ECB's upcoming 20 bps rate cut and €20 billion QE expansion (with Commerzbank saying Draghi may even hint at Europe's QE3) is priced in, and whether the ECB's actions are just modestly priced in, or more than fully, and just how big the "sell the news" event will be.The result: the Euro falls to a new 7 month low, the dollar spot index hits a new all time high, and European stocks and US futures stage another remarkable overnight comeback on the usual low volume levitation and central bank intervention.

"First, the Islamic world has been the victim of terror and brutality to a larger extent territorially, to greater amount quantitatively and for a longer period in terms of time. Second, that unfortunately this violence has been supported by certain great powers through various methods and effective means."

Americans today are blissfully distracted by their iGadgets, plotting out their holiday shopping strategies, leasing new cars, eating out, and buying advance tickets to the new Star Wars movie. They don’t see the wicked winter squalls ahead which will try their souls. We are experiencing the lull before the storms, but the storms are surely coming. The potential for catastrophe is high and burying our heads in the sand is not a strategy.

The recent attacks in Paris evoke strong emotions for many people, but investors need to look through those feelings to the short, medium, and long-term implications. We believe Paris may mark an important turning point for Europe and the global business cycle... but for different reasons than you may think. There is a chance that the slow disintegration of Europe will drive more capital onto US shores, boosting valuations and fueling a blow-off top in the US equity market; but beware global shocks and take any rally as a chance to get defensive.