"The West is afraid of a major war and Putin is exploiting that," says one former Kremlin adviser, adding that "his end goal is a Ukraine that is a buffer state between Russia and the West." After the recent rebel offensive, it's now militarily possible to gain full control of Donetsk and Luhansk and to create a 'land bridge' to Crimea, and "without help, Russian troops can roll ever-deeper into Ukraine." As Bloomberg reports, Vladimir Putin will continue his shadow war until he's created quasi statelets in Ukraine’s easternmost regions with veto power over the country’s future, five current and former Russian officials and advisers said. As they ominously conclude, "Ukraine's only way out is to admit defeat... the longer Ukraine waits, the more territory it will lose and the harsher demands it will face." However, as Gavekal explains, Putin may have staved off an immediate defeat but the stakes have undoubtedly been hugely raised - here are 3 scenarios.
Context is king. Week-in, week-out, we are reassured by whoever the next talking-head is that the recovery-meme is alive-and-well (despite consensus GDP expectations continued to slide for 2014), and that housing is back. The fact that mortage applications inched 0.2% higher on the week (as mortgage rates briefly dropped below 4% for a day - back at 4.20% now) is extrapolated into full recovery when the following chart perhaps provides a little clearer picture of just what has happened in this 'recovery'.
Back in 2009 we first warned that the market is now just a "market" where between the direct manipulation of all asset-prices by the firehose Fed and its peers, and the explicit rigging of stock prices by the HFTs, there is no such thing as a market left. Back then, we were called tinfoil something or another. Now that everyone admits the Fed's only purpose is to push asset prices higher, and the topic of HFT's rigging of markets is now a blockbuster book, those accusations have grown silent. In fact, the only thing that remains are the very loud screams as increasingly more often, some unknown or well-known trader and/or investor, with a several year delay, stumbles on our conclusion and realizes that the game (i.e., market) is so rigged, manipulated and broken, that the only winning move was not to play in the first place. Today's case in point Andrew Cunagin, the founder of Rinehart Capital Partners LLC, a hedge fund backed by hedge-fund veteran Lee Ainslie and specialized in emerging-markets stock-picking, and who as the Wall Street Journal reported earlier, is closing. The closure is not news: what Cunagin blames the closure on, however, is.
Some believe that actions today were jointly agreed to by the Fed and ECB to allow the stimulus baton to be passed from one major central bank to another. Could this be to help ease the risk-off fallout that is likely to ensue in anticipation of the first Fed hike? Maybe the price action in US equity markets today should serve as an early warning signal.
A recent Fed paper reports that the Fed's wild money printing orgy has failed to produce much CPI inflation because “consumers are hoarding money”. It is said that this explains why so-called "money velocity" is low. Sadly, they are misinformed: In short, “hoarding” cannot possibly harm the economy. The same, alas and alack, cannot be said of money printing.
Borrowing more money at cheaper rates might provide short-term liquidity, but it does nothing to reduce your leverage in the real world. This is why, generally speaking, all Central bank policy is failing to generate growth: Central Banks can’t really do anything to remedy the situation!
Even as the NATO summit began hours ago in Wales, conveniently enough (for Obama) at the venue of the 2010 Ryder Cup, so far today geopolitics has taken a backseat to the biggest event of the day - the ECB's much hyped and anticipated announcement. So anticipated in fact that even as it has been priced in for the past month, especially by BlackRock which is already calculating the Christmas bonus on its "consultancy" in implementing the ECB's ABS purchasing program and manifesting itself in record low yields across Europe's bond market, Reuters decided to milk it some more moments ago with the following blast: "Plans to launch an asset-backed securities (ABS) and covered bond purchase programme worth up to 500 billion euros are on the table at Thursday's European Central Bank policy meeting..." The notable being the size of the program, which at €500 billion, is precisely what Deutsche Bank said a week ago the size of the ABS program would be. Almost as if the bank with the world's biggest derivative exposure is helping coordinate the "Private QE"...
Icahn, Soros, Druckenmiller, And Now Zell: The Billionaires Are All Quietly Preparing For The PlungeSubmitted by Tyler Durden on 09/03/2014 23:03 -0400
"The stock market is at an all-time, but economic activity is not at an all-time," explains billionaire investor Sam Zell adding that "I don't remember any time in my career where there have been as many wildcards floating out there that have the potential to be very significant and alter people's thinking." Zell concludes that "this is the first time I ever remember where having cash isn't such a terrible thing." Zell's calls should not be shocking following Soros. Druckenmiller, and Icahn's warnings that there is trouble ahead.
Labor unions are a dying breed. According to the Pew Research Center, union membership in America “is at its lowest level since the Great Depression.” In 1983, there were approximately 17.7 million union workers. Today, that number stands at 14.5 million, with every estimate showing a continued downward trajectory. Clearly, the Norma Raes of the world are going extinct. But as Samuel Johnson quipped, one should never dismiss the triumph of hope over experience. With economic growth still staggering, the decline of union membership can’t come soon enough. Freed from the demands of overpaid bargainers, innovation and productivity inevitably rise. Increasing numbers of Americans are migrating to states with less strenuous union laws. When given a choice, workers go where the money is; not where there’s tough talk about bargaining rights. Ayn Rand had unions pegged best when she declared their purpose has never been to empower the average worker. “Unions and trade associations,” she wrote, “are not directed against employers or the public but against the best among their own members.” The goal has never been about “raising the weak in any way whatever, but simply forcing the strong down to the level of the moron.”
30 Million Americans On Antidepressants And 21 Other Facts About America's Endless Pharmaceutical NightmareSubmitted by Tyler Durden on 09/03/2014 22:35 -0400
Has there ever been a nation more hooked on drugs than the United States? And we are not just talking about illegal drugs – the truth is that the number of Americans addicted to legal drugs is far greater than the number of Americans addicted to illegal drugs. They trusted that their doctors would never prescribe something for them that would be harmful, and they trusted that the federal government would never approve any drugs that were not safe. And once the drug companies get you hooked, they often have you for life. Very powerful people will often do some really crazy things when there are hundreds of billions of dollars at stake. The following are 22 facts about America’s endless pharmaceutical nightmare that everyone should know...
The dismaying reality: the only purpose of central bank monetary policy is to keep the bloated, corrupt, inefficient and self-liquidating vested interests of the state-cartel crony capitalism from having to suffer the consequences of real reforms. Japan ably serves as Exhibit #1 of this core dynamic.
The financial market stimulus chorus is now universal - virtually identical from Hong Kong to London to New York, despite ostensibly deep differences in policy regimes. At the end of the day, however, there is not really a dimes worth of difference between the Bush/Obama/Bernanke model and the economic model employed by the politburo overlords in Beijing. Its all about insensible, contagious, addictive credit expansion, and the phony wealth and temporary prosperity which it breeds. All it takes is just another shot of “stimulus”.
Just three months ago, everyone was a believer: bonds traded well above par, Europe's recovery was on track, and Portugal's banking system was a shining example of how Europe's bailout program worked (and Goldman was pitching SPVs full of this crap to any and all greater fools). Today - the ugly truth is exposed as Bloomberg reports, Espirito Santo International debt attracted potential buyers at just 2% of face value. Of course, the words "contained" are trotted out to explain how this is a one-off and not at all representative of the rest of the European banking system. But... Howard Marks' Oaktree Capital seems to disagree - "We continue to think Europe will provide a substantial quantum of attractive investment opportunities for all of our strategies and in particular distressed debt," as a record amount of bad loans are being offloaded by European banks ahead of the stress tests.
“Everyone in the country was in shock. People’s net worth had devalued more than 53% overnight.”
Looking back, it was so obvious. But most people ignored the warning signs following the government's reassurances that all would be well... It’s human nature to want to believe that everything is going to be OK. Are we so different today?
For the past five years there has been a very clear and significant cycle to US macro data.. A year ago, we explained this cycle appears to be created by government agencies need to spend, spend, spend their budgets out ahead of fiscal year-end (Sept). This year has been no different... As in past years, this spike in activity is extrapolated by the smartest people in the room, leaving the reality to miss expectations for the rest of the year. A glance at the chart below might suggest, we just jumped the shark once more in US macro data for 2014...