Saudi Arabia

Less than four months into his reign, Bloomberg reports that Saudi Arabia’s King Salman is consolidating power with a major reshuffle of succession lines and government officials. "The new king has proved consistent in his determination to elevate members of his close family to key positions," noted one analyst. As the world’s top oil exporter plays a more prominent role in the region’s power struggles, it apears Salman wants family close. Oil policy is unlikely to change, notes Bloomberg's Julian Lee, as this brings younger men into top government positions, paving way for transfer of power to new generation of princes.

• Police enforce curfew in Baltimore, disperse protesters (Reuters)
• Saudi king resets succession to cope with turbulent times (Reuters)
• Euro-Area Bank Lending Increases for First Time Since 2012 (BBG)
• Riksbank Increases Bond Purchases as Key Rate Left Unchanged (BBG)
• Greek Banks Get More Funds as ECB Weighs Collateral Discount (BBG)
• Greek bank deposits drop 1.36 pct in March for sixth month in a row (Reuters)
• Sarao Remains in Jail After Failing to Pay Bail at Hearing (BBG)

Warfare today (and in the future) is (and will be) fought differently.  In the 1950’s with the creation of more destructive bombs and weaponry, the idea was ‘Mutually Assured Destruction’ (MAD).   The movie War Games helped us learn that there are no winners.  The warfare ideology today is ‘Multilateral Unconstrained Disruption’ (MUD).  This unrestrictive warfare is meant to disrupt societal functioning; to ‘poison’ information to elevate distrust of all computer information. Cyber-activity is the new ‘cold war’.

USA USA USA #15? Despite aerial bombardment, growing tensions with every neighbor, and the almost ubiquitous daily car-bombs, Israelis are "happier" than Americans according to Bloomberg's world happiness index. Happiness, it appears, is most abundant a long way from the equator with Switzerland, Iceland, Denmark, Norway, and Canada all topping the list; whereas the unhappiest nations are all in Saharan or sub-Saharan Africa (apart from war-torn Syria and Afghanistan).

Even though no rational person expected that the Greek situation would be resolved at today's talks in Riga, Latvia, apparently the algos were so caught up in spoofing each other to new record highs that futures, after surging once more overnight following the latest Google miss which sent the company and the Nasdaq soaring, actually dipped modestly into the red following headlines that the latest Greek talks have broken down after a "hostile" Troika "hammered" the Greek finmin, who was accused by European finmins of "being a time-waster, a gambler and an amateur."

There is mounting evidence that oil prices are poised to rebound from a historic bust. But what if the bust is not over yet? Despite the signs of a rebound, ExxonMobil’s CEO Rex Tillerson has a much more bearish take on oil prices. Speaking at the IHS CeraWeek conference in Houston, Tillerson predicted that oil prices would remain subdued for the next several years.

The Saudi bombing of Yemen is another flash point and will deepen tensions between the U.S., NATO allies and Russia and indeed China. Geopolitical risk remains high and the region remains a powder keg that is likely to explode as has already been seen in Syria and much of North Africa.

Whether it is in sympathy with the now relentless surge in the Shanghai Composite which tacked on another 2.44% overnight to close at a fresh multi-year high just shy of 4400, well more than double from a year ago, or because Mrs Watanabe was unable to read the latest Japan trade data whose first trade surplus in 3 years hinted that there will be no new easing by the BOJ any time soon, but overnight the Nikkei closed above 20,000 for the first time in 15 years, with "makers of chocolate, mayonnaise, potato chips and household appliances" helping lift the Tokyo market according to the WSJ. The now daily Asian euphoria however did not last long in the European session, and after opening higher, the Stoxx Europe 600 slipped into negative territory just an hour into trading, and was down 0.4% by midmorning, lead by a near 1% decline on Athens' mains stock index, which has since recouped losses stemming from the overnight report that the ECB is considering an up to 50% haircut on Greek bank collateral, a move that would wipe out the Greek financial sector with ease.

Saudi Arabia is not trying to crush U.S. shale plays. Its oil-price war is with the investment banks and the stupid money they directed to fund the plays. It is also with the zero-interest rate economic conditions that made this possible. Saudi Arabia intends to keep oil prices low for as long as possible.

Saudi Arabia said its campaign of airstrikes in Yemen have succeeded in removing threats to the kingdom and other regional countries, bringing to an end Operation "Decisive Storm." As Bloomberg reports, the Saudi Defense Ministry said a coalition of mostly Sunni Muslim nations has “successfully eliminated the threat to the security of Saudi Arabia and neighboring countries,” by destroying the heavy weaponry and ballistic missiles held by the Shiite Houthi rebels. This comes one day after Gulf envoys told The United Nations that Yemen strikes won't end soon. Saudi Arabia hopes to restart a Yemeni political process and will begin "Operation New Hope," which appears to mean Saudi National Guard ground troops.

Over the better part of the past month, the only entities actively involved in the proxy war in Yemen against the local Houthi rebel force have been air force units, mostly under Saudi command as part of Operation "Decisive Storm." Which probably explains why there has been little if any progress to note in pushing back said rebellion which, armed heavily thanks to the US government, has successfully managed to push the current president into an indefinite exile. That changed hours ago, when Saudi Arabia's King Salman ordered the Saudi Arabian National Guard, widely regarded as the kingdom's best equipped military ground force, to take part in Riyadh's campaign against Iran-allied Houthi rebels in Yemen.

While some journalists here in the US have started to notice the strange series of opposition killings in Ukraine, the US government has yet to say a word.

Compare this to the US reaction when a single opposition figure was killed in Russia earlier this year.

The built-up tensions and fragilities are begging for release. The unfortunate consequence of not allowing the process of “creative destruction” to occur in banking and Big Business is that the historic forces behind it will seek expression elsewhere in the realm of politics and governance. The desperate antics of central banks to cover up financial failure can’t help but provoke political upheaval, including war.

It is only fitting that the next business day following a headline that "Global Futures Slide China Tumbles On Short Selling Boost" we would see China, in an apparent panic, not only cut its RRR by 100 bps to 18.5% - far more than expected and the most since 2008 - but, more importantly, hinted that the Friday regulatory decision to encourage short sales and tighter margin rules on "umbrella trusts" was in no way meant to pop that the Chinese stock bubble, ridiculous as it may be. End result: after Chinese futures crashed by up to 6% on Friday after the Shanghai close, overnight the SHCOMP was down just 1.64%, erasing the bulk of the futures loss. More importantly, US equity futures have seen a strong bid this morning in yet another attempt to defend not only the Apple Sachs Industrial Average from going red on the year but the all important 100 DMA technical levels.

In order to maintain a grip on market share by pushing U.S. shale producers out of the market, Saudi Arabia (and OPEC) is willing to use up its spare capacity. That could lead to a price spike.