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More Official Reactions To Summers' Stunner

"This is a good move by Larry. This is a short-term plus for the bond market.".... "If it's almost anybody but Larry, I think bonds will rally." ...  "I do think there will be less for investors to worry about as there will be more policy continuity at the Fed." ...  "Larry Summers' past decisions to deregulate Wall Street and do the bidding of corporate America has made the lives of millions of Americans more acrimonious. He would have been an awful Fed Chair. President Obama should appoint someone to lead the Fed who has not accepted millions in payments from Wall Street, and who will prioritize an economy that works for the little guy above further enrichment for the big guy."

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Saudi Hypocrisy? Prince Owns $300 Million Of "Threat To National Unity" Twitter

Just four short months ago, the Saudi religious police said "anyone using social media sites – and especially Twitter – “has lost this world and his afterlife." This followed Saudi Arabia’s grand mufti, the kingdom’s most senior Muslim cleric, dismissing Twitter users as "fools". So it is perhaps odd that Saudi Prince Alwaleed bin Talal (who previously noted that "ethics to me are very important") announced his vociferous support ahead of its IPO as he has invested $300 million in Twitter. "With the 300 million customers they have and half a billion tweets a day, the growth potential is tremendous," Alwaleed excitedly commented adding that, he's "totally against anybody who tries to control or censor Twitter or any other social media, even if it is governments. It's a losing war." Which seems a little strange given the imam of the Grand Mosque's public TV appearance warning the Saudi people that "Twitter was a threat to national unity."

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Merkel Wins Bellwether Vote As Coalition Partner Founders; Anti-Euro Party Ascent Could Derail Coalition

There was good and bad news for Angela Merkel as today's exit polls from the Bavaria (GDP of $619 billion, bigger than the output of Poland or Austria) state elections - the bellwether vote ahead of next weekend's federal elections (previewed here) - were released. On one hand, the CDU's sister party, the Christian Social Union or CSU, was set to win a majority in Bavarian state elections (where the CDU does not contest the ballot), giving the incumbent a boost as she heads into the final week of her campaign before a national vote Bloomberg reports.  But the surprise of the day was the strong showing of the The Free Voters, who want Greece to exit the euro, oppose euro-area bailouts and want to trim the power of the European Union, won 8.5 percent, the ZDF projection showed. It is precisely the ascent of anti-Euro powers that could upset the final election "arithmetic" in jeopardy. As Reuters reports, "a new anti-euro party could enter Germany's national parliament after an election next week, pollsters said on Sunday, potentially upsetting Chancellor Angela Merkel's hopes of returning to power with her current coalition partner."

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Syria Says Agreement Between US And Russia Is "Victory" For Damascus, Praises "Russian Allies"

While Obama and Kerry were both backpedalling furiously even as they were taking full credit for pulling Syria from the brink of war where they took it, it was Syria who was rejoicing: Syria's Minister for National Reconciliation said on Sunday that the chemical weapons agreement between Russia and the United States was a "victory" for Damascus, won by its Russian allies, and had taken away the pretext for war. U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov called on Saturday in Geneva on Syrian President Bashar al-Assad to account for his chemical weapons within a week. The deal may avert U.S. military strikes.

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India Test Fires Nuclear-Capable Missile

With global trigger-finger tensions still running on full blast following the recent Syrian near-war episode, the last thing the jittery world needed is yet another "test fire" of a very lethal weapon, yet that is precisely what it got just after 8:40 am on Sunday when India test fired a nuclear-capable missile, with a range of 5,000 km, capable of reaching Beijing and Europe, bringing it a step closer to production of a nuclear deterrence agent. Why is India doing this now is unclear, although it has been suggested that India is merely trying to keep up with China's growth military strength and "wants to have a viable deterrent against its larger nuclear-armed neighbor." It is also a move targeting the rapidly growing nuclear arsenal of Pakistan, which has been increasing its inventory of nuclear warheads and developing short-range, tactical nuclear weapons, raising concern about an escalating South Asian arms race, the International Institute for Strategic Studies said on Thursday. The think-tank said in a report the race with Pakistan was increasing the risk of a nuclear exchange during a conventional conflict, perhaps sparked by an act of terrorism. Or a false flag act perhaps?

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Syrian Rebels Furious At U.S.-Russian Deal

With major (red)deadlines now pushed off until next year and Assad appearing to come out smelling of (slightly tarnished) roses with his 'compromise' agreement with Russia (and the US) to join the chemical weapons treaty, not only is Israel now a major focus but the Syrian rebels - as one might expect - are not happy. As Reuters reports, the head of the opposition Syrian Supreme Military Council said on Saturday a U.S.-Russian agreement to eliminate Syria's chemical weapons was a blow to the two-and-a-half-year uprising to remove President Bashar al-Assad from power. Crucially, General Salim Idris notes that this allows Assad "to escape being held accountable," and, while unverified for now, Idris added, "we have told our friends that the regime has begun moving a part of its chemical weapons arsenal to Lebanon and Iraq. We told them do not be fooled." But another military council official, Qassim Saadeddine, was a little more aggressive: "Let the Kerry-Lavrov plan go to hell. We reject it and we will not protect the inspectors or let them enter Syria."

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Head of Syrian Rebels Calls for Terrorist Attacks On America

Why Are We Supporting Guys Who Want to Blow Us Up?

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Frontrunning: September 13

  • U.S., Russia to push for new Syria peace talks (Reuters)
  • Elite Syrian Unit Scatters Chemical Arms Stockpile (WSJ)
  • Obama to nominate Summers as Fed chief: Nikkei (Reuters)
  • Boehner Wants Joint Talks on Debt, Budget (WSJ)
  • House Republicans go for broke in fiscal battles (Reuters)
  • Pimco, BlackRock Together Received More Than a Quarter of Verizon's $49 Billion Bond Deal (WSJ)
  • Insane financial system lives post-Lehman (Gillian Tett)
  • JPM to add $2.5 billion to its litigation reserves in the second half of the year (WSJ)
  • Goldman’s Zurich offices visited over working-hours complaint (FT)
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Friday 13th Markets Jolted By News Summers Appointment Coming As Early As Next Week

Overnight asset classes got a jolt following a report by Nikkei that Obama was moving toward naming Summers the next Fed chairman, citing “several close US sources,”  pushing stocks modestly lower in Europe, with bond yields higher. According to the report, Obama is to name Summers as next Fed chairman as early as late next week, after the Federal Open Market Committee meeting. Otherwise, risk is still digesting the news of the confidential Twitter IPO, as it is becoming quite clear that some of the largest names (Hilton also announced yesterday) are seeking to cash out in the public markets. Is this the top?

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Three Killed In Attack On US Consulate In Afghanistan

Two years after insurgents attacked the main U.S. embassy and NATO headquarters in the heart of Kabul, killing at least nine people in a battle lasting several hours as attackers fired from a partially constructed building, and one year after the infamous Benghazi consulate attack which resulted in the deaths of Americans, overnight yet another attack was staged against US property in Afghanistan, this time the US consulate in Herat, western Afghanistan's main city, where detonated a powerful bomb outside the front gates and launching a gunbattle with security forces. At least three people were killed, however none of them Americans. The attack began at about 6 a.m. (0150 GMT). A Reuters witness said he saw flames in front of the compound rising from the wreckage of the vehicle and could hear the gunbattle as the attack unfolded.

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The Next-To-Last Mistake

As opposed to the "pixie dust tout of fairy tales forever" that is trotted out by the herd every day, the fllowing brief look at Taper realities, 'manufactured' numbers unreality, systemic Muni bonds concerns, and of course, political risk provide color for what was described this morning on CNBC as a market bereft of 'bear market theses. As Tartakower once wrote, "The winner of the game is the player who makes the next-to-last mistake;" until then ts all foreplay.

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The "Great Rotation" Into Verizon: Where Did The Money Come From?

Yesterday's record Verizon bond offering, which to some had an eerie sense of deja vu to the TXU 2007 mega-LBO just before the market blew up, caught many by surprise: not only did the underwriters have no problem obtaining over $100 billion in orders to oversubscribe demand for the $49 billion offering, but following the break the bond immediately proceeded to trade a whopping 40-70 bps tighter implying yield pricing could have been done well lower, but the CDS also ripped 11bps tighter. Because nothing says less default risk like $49 billion more in debt. But where did all this demand come from? Did accounts simply have $100 billion in cash lying around? The answer is no, and as the following breakdown of the post-break action in VZ from Deutsche demonstrates, what happened yesterday was a great rotation into the NSA-favorite company and the Telecom space in general, and out of virtually every other credit in the market.

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Frontrunning: September 12

  • Syrian Rebels Hurt by Delay (WSJ), U.S. seeks quick proof Syria ready to abandon chemical weapons (Reuters)
  • Lavrov Brings Acerbic Pragmatism to Syria Meet With Kerry (BBG)
  • Five years after Lehman, risk moves into the shadows (Reuters)
  • U.S. shares raw intelligence data with Israel, leaked document shows  (LA Times)
  • Japan to raise sales tax, launch $50 bln stimulus (AFP) - so 1) lower debt by sales tax, then 2) raise debt through stimulus.
  • Blackstone’s Hilton Files for $1.25 Billion U.S. Initial Offer (BBG)
  • Second Life Bankers Thrive in Dubai as Boutiques Boost Fees (BBG)
  • Brussels probes multinationals’ tax deals (FT)
  • Wall Street's Top Cop: SEC Tries to Rebuild Its Reputation (WSJ) ... and fails
  • Tablet sales set to overtake PCs (FT)
  • The end of angst? Prosperous Germans in no mood for change (Reuters)
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Guest Post: The American Public's Foreign-Policy Reawakening

Political analysts over the next year or so, and historians well into the future, are likely to point to the fall of 2013 as a fundamental inflection point in American politics. That period, they will say, is when the American people forced a major new direction in American foreign policy. Before the events of this fall, the country’s electorate largely delegated foreign policy to its political elite—and largely supported that elite as it projected American military power with more abandon than the country had ever before seen. Even as the government steadfastly expanded the range of international problems that it said required U.S. military action, the electorate accepted that expanded international role and that increasingly promiscuous use of force. Those days are gone now.

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