Summarizing the latest updates in the rapidly changing Syria story.
Update: it appears the photos posted on twitter are fake. Hopefully that means there are no B-2 in the vicinity of Syria.
Back in May, with the release of the quarterly TBAC presentation, we penned "Desperately Seeking $11.2 Trillion In Collateral, Or How "Modern Money" Really Works" in which we described in detail Wall Street's lament that as a result of upcoming changes and regulations of the shadow market, that there may be a dramatic shortage in collateral over the next several years, which in addition to other factors, may hit over $10 trillion. Well, we can scratch the collateral concerns off.
- G20 TASK FORCE SAYS NEW SHADOW BANKING RULES EXPECTED TO BE IN PLACE BY 2015
- WON'T IMPLEMENT GLOBAL MINIMUM 'HAIRCUT' ON REPOS, SECURITIES LENDING UNTIL MARKET CONDITIONS RIGHT
Said otherwise, Wall Street looked at the shadow banking abyss, and promptly ran away when the abyss looked back.
Gold Confisaction Imminent? Or Does India Simply Have An Offer For Its Citizens They Can't Refuse...Submitted by Tyler Durden on 08/29/2013 10:08 -0400
Even as the Indian capital outflows and current account exodus may be threatening to shut down the economy altogether (except for the three oil companies that received a last ditch USD infusion from the RBI yesterday), the central bank is planning and strategizing. And it appears to have come up with more of precisely the same that has led it to its current unprecedented predicament: prevent the population from converting their wealth into hard money, i.e., gold. But while the government's attempts to impose capital controls on gold purchases have been well documented, the latest foray is just a headspinner. Reuters reports that India is now considering a "radical plan to direct commercial banks to buy gold from ordinary citizens and divert it to precious metal refiners in an attempt to curb imports and take some heat off the plunging currency." Here we can safely assume that the commercial banks will pay for the gold in... Rupees which just hit an all time low?
- UN Insecptors to leave Syria early, by Saturday morning (Reuters)
- Yellen Plays Down Chances of Getting Fed Job (WSJ)
- JPMorgan Bribe Probe Said to Expand in Asia as Spreadsheet Is Found (BBG)
- No Section 8 for you: Wall Street’s Rental Bet Brings Quandary Housing Poor (BBG)
- Euro zone, IMF to press Greece for foreign agency to sell assets (Reuters)
- Brothels in Nevada Suffer as Web Disrupts Oldest Trade (BBG)
- U.S., U.K. Face Delays in Push to Strike Syria (WSJ); U.S., U.K. Pressure for Action on Syria Hits UN Hurdle (BBG)
- Renault Operating Chief Carlos Tavares Steps Down (WSJ)
- Vodafone in talks with Verizon to sell out of U.S. venture (Reuters)
- Dollar Seen Casting Off Euro Shackles as Fed Tapers (BBG)
"Banging the close," is hardly a new 'event' but the ubiquity with which it is occurring around 4pm GMT (when major FX market benchmarks known as 'WM/Reuters rates' are set) is prompting authorities to investigate potential abuse of these benchmarks by the major banks. From Libor to ISDAFix and from base-and-precious metals to energy markets, adding the largest markets in the world - foreign exchange - to the banks' pernicious manipulations does not seem like a stretch. Critically, benchmark providers base daily valuations of indexes spanning different currencies on the 4 p.m. WM/Reuters rates (which in turn drives derivative settlements and triggers). Stunningly, the same pattern - a sudden surge minutes before 4pm in London on the last trading day of the month, followed by a quick reversal - occurred 31% of the time across 14 FX pairs over 2 years, according to data compiled by Bloomberg. For the most frequently traded pairs, such as EURUSD, it happened about half the time! U.S. regulators have sanctioned firms for banging the close in other markets; we await the results of the current probe...
While most of the country is obsessing over Miley Cyrus, the Obama administration is preparing a military attack against Syria which has the potential of starting World War 3. In fact, it is being reported that cruise missile strikes could begin "as early as Thursday". The Obama administration is pledging that the strikes will be "limited", but what happens when the Syrians fight back? What happens if they sink a U.S. naval vessel or they have agents start hitting targets inside the United States? Then we would have a full-blown war on our hands. Could this be the beginning of a chain of events that could eventually lead to a massive global conflict with Russia and China on one side and the United States on the other? Of course it will not happen immediately, but we fear that what is happening now is setting the stage for some really bad things... Let us hope that cooler heads prevail before things spin totally out of control.
Nigeria, Africa's top oil-producing nation, has a problem - too much money in its sovereign wealth fund and no idea what to do with it. Have no fear though, for as Reuters reports, Goldman Sachs, UBS, and Credit Suisse have kindly responded (to emails from long-lost cousins?) and will be allowed to managed 20% of Nigeria's $1 billion fund (which is meant to cushion against oil price shocks - good timing?) This should come as no surprise to Zero Hedge readers as we have been discussing Africa as the only place left in the world capable of incremental debt capacity (and therefore growth). There are consequences (the boom-bust cycle) to this politically-motivated capital inflow; but for now the Nigerian Sovereign Investment Authority (NSIA) states (in a reassuring manner) that the banks will invest "the fund's assets conservatively, with capital preservation in nominal terms being of primary importance," which 'nominally' fits with UBS managing their Treasury exposure and GS and CS their corporate debt exposures.
If Syria is invaded by the West, then we should be getting ready for a hike in the price of Brent that some say may reach a much as $150 since it will escalate into a regional problem and affect supplies coming out of Iraq.
Astute investor, Jim Rogers has warned overnight in an interview with Tara Joseph of Reuters that "oil and gold will go much, much higher" due to "market panic" regarding Syria and the coming end of free money... "when this artificial sea of liquidity ends we're gonna see panic in a lot of markets, including in the US, including in West developed markets."
- Merkel Blames SPD’s Schroeder for Letting Greece Into Euro (BBG)
- U.S. Bank Legal Bills Exceed $100 Billion (BBG)
- U.K. to Request U.N. Action to Protect Syrians From Chemical Weapons (WSJ) - and Russia to veto any decision
- U.N. inspectors in new Syria mission as West prepares to strike (Reuters)
- Emerging-Market Rout Intensifies on Syria Jitters (WSJ)
- Rebels Without a Leader Show Limit to U.S. Role in Syria War (BBG)
- Anger at IRS Powers Tea-Party Comeback (WSJ)
- China has much at risk but no reach in Middle East (Reuters)
- 'London Whale' Penalties Put at $500 Million to $600 Million (WSJ)
- U.S. lawmaker says 'compelling' evidence of Syrian chemical attack (Reuters)
The increasing likelihood of some form of limited US led military action in Syria is compounding concerns about the stability of the world’s key oil producing region and Barclays warns that it will likely exert upward pressure on prices until the nature of the possible military intervention becomes apparent. But the bigger risk for the oil market is the potential for the Syrian conflict to spread to neighboring producing countries and imperil regional output, as the Syrian conflict is fueling broader sectarian tensions across the entire Middle East and has become something of a proxy war. The problem for global oil prices is that all of this Middle East volatility is taking place against the backdrop of a recent rise in unplanned outages in the oil market outside Syria. In sum, Barclays is concerned that with geopolitical tension and physical outages on the rise, crude oil markets are at an inflection point.
A flurry of Reuters headlines climaxing with:
WESTERN POWERS TELL SYRIAN OPPOSITION TO EXPECT STRIKE WITHIN DAYS - SOURCES WHO ATTENDED MEETING BETWEEN ENVOYS, SYRIAN COALITION
MILLER SAYS CHANCE OF U.S. STRIKE ON SYRIA ‘VIRTUALLY 100%’
has sent investors scrambling for cover and added war premia to risk assets. Gold is now up over 20% from its 6/28 lows to $1,418.90; WTI jumped to over $108.50 - its highest since early March - collapsing the Brent-WTI spread back to $4. S&P futures are at their overnight lows -12pts (as all-important AAPL loses the $500 level and Icahn's dreams); 10Y yields have slid to 2.76%; and the JPY is surging back to 97.50 as carry-unwinds escalate.
While the world is gripped in yet another great distraction over the great "will he, won't he" start World War III debate, things that are unsustainable remain unsustainable. Such as Japan's debt, and specifically the amount of cash interest that the nation with the 230% debt/GDP (and rising interest rates) will have to pay to service its gargantuan balance sheet. According to a document seen by Reuters, Japan expects to spend a record $257 billion to service its debt during the next fiscal year. The amount to be allocated for debt-servicing for the year that will begin on April 1 is nearly as large as the gross domestic product of Singapore, which the World Bank put at $275 billion at the end of 2012. More disturbing, this is a 14% increase in the debt interest cost in just one year. And yes, it is unsustainable absent an epic inflationary episode to "inflate away the debt", something that Abenomics has so far failed in achieving despite some hopeful early glimmers in crushing the Yen.
- Opposition figure: major decisions on Syria expected within hours (Al Arabiya)
- Syria challenges U.S. to "produce the evidence" that Assad regime launched chemical attack (CBS)
- British PM says world must act on Syria, weighs response (Reuters)
- U.S. Treasury to Hit Debt Limit in Mid-October (WSJ)
- U.S. could look beyond U.N. Security Council in any Syria strike (Reuters)
- Nasdaq, NYSE at odds on outage cause as SEC seeks facts (Reuters)
- Ackman’s J.C. Penney Sale Ends Failed Saga to Agitate for Change (BBG)
- Zandi, LaVorgna, Blinder, Rattner all is one con puff piece (BBG)
- Best Buy Founder Schulze Plans Stock Sale to Diversify Assets (BBG) - "diversify assets" = dump overpriced junk
- Zero Worship: Credit-Card Firms Compete With No-Interest Transfers (WSJ)
- Len Blavatnik wins $50m in JPMorgan lawsuit (FT)
- Danone Finds Yogurt’s All Greek as Oikos Chases Chobani (BBG)