http://www.zerohedge.com/fullrss2.xml/wp-content/plugins/uBillboard/Korean%20Buying%20Spree%20Boosts%20Brent%20Price en Seth Klarman: "We Are Recreating The Markets Of 2007" http://www.zerohedge.com/news/2014-09-17/seth-klarman-we-are-recreating-markets-2007 <p><em>Exceprted from Seth Klarman's Baupost letter to investors,</em></p> <p><strong>We don’t know now (nor do we ever know) what the overall market will do.</strong> As we’ve discussed in recent letters, there are reasons for investors to be frightened but also numerous individual opportunities worth seizing. Today’s limited opportunity set means that <strong>we are still holding sizable cash balances</strong>, about 35% of the portfolio at June 30. This dry powder will become more valuable if the markets become more turbulent.</p> <p>Equity markets continue to hit successive record highs, volatility remains strikingly low in equity and most other markets, and inflation is ticking higher. <strong>Investors have clearly grown weary of worrying about risky scenarios that never seem to materialize or, when they do, don’t seem to matter to anyone else</strong>. U.S. GDP, for example, was recently restated to minus 2.9% for the first quarter of 2014. Normally, this magnitude drop signals recession. Equities, nevertheless, marched relentlessly higher.</p> <p>...</p> <p><strong>In today’s ebullient markets, we see many investors ratcheting up their own risk levels--buying substandard credits and piling up leverage are two favorite methods--in an attempt to generate near-term performance.</strong></p> <p>...</p> <p><strong>The financial markets could be getting closer to an inflection point, where the economic weakness that the bond market seems to be reflecting derails the more optimistic equity market.</strong> Or perhaps things can go on forever exactly as they are: a “Goldilocks” stock market resulting from a tepid economy, dampened volatility, and relentlessly low interest rates. Amidst the market rally, complacent investors continue to ignore a growing array of global trouble spots. Contrary to claims from the Obama Administration, the world is not a tranquil place at present. As such, risks facing investors seem to be rising but are not yet priced into the markets.</p> <p>...</p> <p><strong>Late in a market cycle--when bargains are increasingly hard to find, valuations are lofty, and most investors have been scoring handsome gains for a number of years--we can say from experience that history tends to rhyme.</strong> Money becomes more freely available to pursue even the most marginal of opportunities. Dollars pour into venture capital, and the largest buy-side firms take strategic stakes in hot, late-stage private investments just prior to an expected big money IPO. Specialized funds are raised, regularly and easily, to invest in things like Greek private investments, Spanish real estate, or European non-performing loan pools. Willing investors abound for these. It doesn’t matter that market prices have mostly rebounded, prospective returns are thereby limited, and the capital in those funds is likely to be put to work whether or not prices warrant and even if conditions on the ground deteriorate. With investment bankers and hedge fund executives canvassing Europe today to bet on recovery, <strong>you have the increasingly common circumstance of proliferating “opportunity funds,” absent only the investment opportunity.</strong> Some clients of hedge funds today are, in a sense, disintermediating themselves, funding new entities to bid higher for the same sort of assets their other, more disciplined managers are already bidding more judiciously for. The discipline problem in this case is not that of the legacy managers; it may just be that of the clients.</p> <p><strong>The pressure to reach for return virtually ensures that many investors will take greater and greater risk for less and less potential reward at market peaks.</strong> If you can’t find bonds that yield 8%, better grab those offering 6%. Or 4%. If you need 8% to meet your bogey (assumed pension fund returns, for example, or promised returns to investors), then you will be prone to own increasingly risky assets or leverage up the safer ones. These pressures, as much as any indicator, are today signaling danger. Investors today are bidding ever higher amidst frenzied competition to buy pools of non-performing loans, and then leveraging them up to get double-digit returns. Mortgage securities backed by questionable loans issued to dicey borrowers now trade close to par and yield a downright stingy 3-5% where they once yielded a generous 15-20%. <span style="text-decoration: underline;"><strong>A recent brokerage report excitedly touted the new HoldCo PIK Toggle notes of a Croatian consumer goods retailer. Nearly every word of that description is a flashing red light to seasoned investors.</strong></span></p> <p>To put it a bit differently, writer and investor John Mauldin is right when he says that <strong>there is “a bubble in complacency.”</strong> Fear has effectively been banished. <strong>The members of the Fed know it. Stock traders who chase the market to new highs almost daily know it.</strong> Implied volatilities (and realized volatilities) are historically low (the VIX Index recently hit a seven-year low), and falling. The Bank for International Settlements recently cautioned that financial markets are euphoric and in the grip of an aggressive search for yield. The S&amp;P has gone over 1,000 days without a 10% decline, according to Birinyi Associates. Dutch and French 10-year government bond yields are at 500 and 250 year lows, respectively; Spain, 225 years. Spanish debt yields were recently inside of U.S. levels. </p> <p><strong>Increasingly, hopes and dreams are being capitalized as if the future is certain and nothing can go wrong, as if up cycles such as the present one don’t inevitably sow the seeds of the next decline. </strong>The European Central Bank recently cut its deposit rate to an unprecedented minus 0.1%, and Mario Draghi assured that he isn’t finished. Can this be done without consequence? Investors have become numb to risk because such policies continue, seemingly forever, and new measures (such as European and now even Chinese QE) are regularly threatened and claimed to be costless and reliably effective. We are far from convinced of this; indeed, the higher the level of valuations and the greater the level of complacency, the more there is to be concerned about. Even as reported inflation remains quite subdued, signs of incipient cost increases are increasingly evident. We are seeing them, for example, in apartment rents, construction costs, and salaries of newly minted engineering graduates and oilfield workers.</p> <p><strong>Like global equity markets, credit markets have been surprisingly resilient, and our worry meter is high here, too.</strong> Ecuador recently issued $2 billion of ten-year bonds, as the market shrugged off its 2008 default. Kenya also completed a $2 billion offering, the largest ever debt sale by an African country, according to The Wall Street Journal. That offering attracted $8 billion worth of bids. In the U.S., issuance of low-grade credit is at record levels, as is covenant-lite issuance. Yields are at or near historic lows, which is especially nutty for junk credits, including the hideously risky CCC-rated issues. June CLO issuance set a record. Given changes in regulation, Wall Street has far less capital available to support the trading of this burgeoning junk issuance and the corresponding surge in debt ETFs. <strong>A sudden change in rates or sentiment could lead to serious market instability. When is harder to predict than if. While we are not predicting imminent collapse (market timing is not our thing), we are saying that a selloff, greater volatility, and investor losses would hardly be surprising from today’s levels.</strong></p> <p>In markets, it’s always hard to tell, in the words of the old commercial starring Ella Fitzgerald, Is it real or is it Memorex? <strong>Is the market nearly triple its spring 2009 level because things are better, or do things feel better because the market has nearly tripled? </strong>Indeed, we can do a simple thought experiment that might be revealing: How would everything feel if the S&amp;P 500 were suddenly cut by one-third or one-half? Would such a drop drive astonishing bargains, or would the U.S. economy soon falter, with festering problems such as unemployment, the federal, state and local deficits, the long-term fiscal situation, and the creditworthiness of most sovereigns suddenly seeming ominous?</p> <p><span style="text-decoration: underline;"><strong>It’s not hard to reach the conclusion that so many investors feel good not because things are good but because investors have been seduced into feeling good—otherwise known as “the wealth effect.” We really are far along in re-creating the markets of 2007, which felt great but were deeply unstable when shocks started to pile up. Even Janet Yellen sees “pockets of increasing risk-taking” in the markets, yet she has made clear that she won’t raise rates to fight incipient bubbles. For all of our sakes, we really wish she would.</strong></span></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="239" height="238" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140917_red.jpg?1410994336" /> </div> </div> </div> http://www.zerohedge.com/news/2014-09-17/seth-klarman-we-are-recreating-markets-2007#comments Bond default Equity Markets European Central Bank Janet Yellen Market Timing non-performing loans Obama Administration Real estate Recession recovery Seth Klarman Sovereigns Unemployment Volatility Wall Street Journal Wed, 17 Sep 2014 23:58:01 +0000 Tyler Durden 494490 at http://www.zerohedge.com The "It Doesn't Matter Until It Matters" Chart Of The Day http://www.zerohedge.com/news/2014-09-17/it-doesnt-matter-until-it-matters-chart-day <p>Growing concerns about the weakness of breadth in the stock &#39;market&#39; where, <a href="http://www.zerohedge.com/news/2014-09-15/record-highs-47-nasdaq-stocks-bear-market-down-24-average">as we noted here</a>,<em> 47% of Nasdaq Composite stocks are down at least 20% from their highs with the average stock in the index in a bear market (down 24%)</em>, continue to be ignored by a market that cares nothing for fundamentals. NewEdge&#39;s Brad Wisack adds another &quot;it doesn&#39;t matter until it matters&quot; chart to the list of worrisome indicators today by noting that <strong>&quot;we haven&#39;t seen this before...&quot;</strong></p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_COTD.jpg"><img height="314" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_COTD_0.jpg" width="600" /></a></p> <p>&nbsp;</p> <p>As Wisack notes - one thing that is clear is that <span style="text-decoration: underline;"><strong>we have not seen this extent of breadth deterioration before...</strong></span> where the market goes straight up while the # of stocks trading ABOVE the 200 dma trends straight down...</p> <p>*&nbsp; *&nbsp; *<br />Seems like pent-up demand to us... BTFATH, cash on the sidelines, stocks are cheap, Fed has your back... etc. etc...</p> <p><span style="text-decoration: underline;"><strong>Until it matters!!!</strong></span></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="961" height="503" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140917_COTD.jpg?1410994192" /> </div> </div> </div> http://www.zerohedge.com/news/2014-09-17/it-doesnt-matter-until-it-matters-chart-day#comments 200 DMA Bear Market BTFATH ETC NASDAQ NASDAQ Composite Wed, 17 Sep 2014 23:33:03 +0000 Tyler Durden 494489 at http://www.zerohedge.com Paul Krugman Explained http://www.zerohedge.com/news/2014-09-17/paul-krugman-explained <p>Presented with no comment...</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_krug.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_krug_0.jpg" width="600" height="389" /></a></p> <p>&nbsp;</p> <p><a href="http://www.coyoteblog.com/coyote_blog/2014/09/prices-paul-krugman-and-consistency.html"><em>h/t Coyote Blog</em></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="877" height="568" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140917_krug.jpg?1410994126" /> </div> </div> </div> http://www.zerohedge.com/news/2014-09-17/paul-krugman-explained#comments Krugman Paul Krugman Wed, 17 Sep 2014 23:01:15 +0000 Tyler Durden 494488 at http://www.zerohedge.com How Germany Defines, And Deals With, HFT Market Abuse http://www.zerohedge.com/news/2014-09-17/how-germany-defines-and-deals-hft-market-abuse <p>The CME may have <a href="http://www.zerohedge.com/news/2014-09-08/these-kinds-market-rigging-practices-will-no-longer-be-allowed-cme">finally adopted Rule 575 </a>to curb "disruptive market practices" (one wonders <strong>why did it take the CME 6 years after we first explained the market-rigging threat of HFTs to take action</strong>, one also wonders just how does one check if Rule 575 is being implemented and followed), but when it comes to sterilizing the market from the biggest manipulator, aside from central banks of course, Germany has been way ahead of the US in this regard.</p> <p>This is how Germany's HFT ACT defines HFT market abuse:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The HFT Act will add the following clarification to the rules specifying the prohibition of market abuse: <strong>The placing of purchase or sale orders to a market by means of a computer algorithm which automatically determines the parameters of the order could be considered market abuse provided the placing of orders occurs without a trading intention, but (a) to disrupt or delay the functioning of the trading system, (b) to make it more difficult for a third party to identify genuine purchase or sale orders in the trading system, or (c) to create a false or misleading signal about the supply of or demand for a financial instrument.</strong></p> </blockquote> <p>And h<em>ere is the full background on Germany's HFT Act, courtesy of <a href="http://www.freshfields.com/uploadedFiles/SiteWide/Knowledge/35608.pdf">freshfields.com</a></em><a href="http://www.freshfields.com/uploadedFiles/SiteWide/Knowledge/35608.pdf"></a></p> <p>On 28 February 2013 the German Parliament adopted the High Frequency Trading Act (Hochfrequenzhandelsgesetz, the HFT Act). The HFT Act introduces a license requirement for high frequency traders, imposes conduct of business rules and organisational requirements for algorithmic trading and specifies the definition of market abuse. To a large extent these regulatory requirements anticipate regulations that are currently discussed on the European level in the context of the revision of the Markets in Financial Instruments Directive (MiFID II) and the Market Abuse Directive. Most of the provisions in the HFT Act will come into force following its publication in the German Federal Gazette which we expect within the next weeks.</p> <p><strong>License requirement for high frequency traders</strong></p> <p>High frequency traders, irrespective of their location, will be licensable by the German Federal Financial Services Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) if they are a direct or indirect participant of a German regulated market or MTF. The licensable service is described as buying or selling financial instruments for own account as a direct or indirect participant of a domestic regulated market or MTF by a high frequency algorithmic trading technique characterised by the use of infrastructure intended to minimise latencies, by automated order initiation, generating, routing or execution without human intervention for individual trades or orders and by a high volume of intraday messages which constitute orders, quotes or cancellations.</p> <p>The HFT Act does not define under which circumstances a person qualifies as an indirect participant of a German regulated market or MTF. According to the explanatory memorandum of the German government this refers to persons that have a direct electronic access through a member or participant of a German regulated market or MTF. Electronic access means an agreement with such a member or participant that allows a person to use the trading ID of the member or participant for direct electronic order transmission to the trading venue. The explanatory memorandum does not contain any further distinctions of electronic access arrangements like Direct Market Access and Sponsored Access which are mentioned by ESMA.</p> <p>Also persons or entities not having a physical presence in Germany can be subject to the obligation to obtain a license from the BaFin. Foreign high frequency traders authorised as a credit institution or investment firm in the EU/EEA could rely on a MiFID passport provided their license includes dealing on own account as defined in Annex I A 3 of the MiFID. On a case by case basis the BaFin may waive the license requirement for entities that cannot rely on a MiFID passport or that are domiciled outside the EU/EEA, if in the view of the BaFin the entity, due to the nature of its business and comparable regulation in its home country, does not require a supervision by the BaFin. Entities that are domiciled outside Germany and cannot rely on a MiFID passport or a waiver regarding their high frequency trading activity have to apply for the license within nine months following publication of the HFT Act in the German Federal Gazette. These entities will have to establish a German branch or a German subsidiary to apply for the licences. German entities that are subject to the license requirement have to submit their application within six months. Entities that apply for a license for high frequency trading must have an initial capital of at least €730,000. They must appoint at least one reliable and appropriately qualified managing director.</p> <p><strong>Conduct of business and organisational rules</strong></p> <p>The HFT Act introduces conduct of business rules and organisational requirements both for algorithmic traders and operators of German trading venues.<br />Algorithmic trading is defined as trading in financial instruments where a computer algorithm automatically determines the individual parameters of orders, excluding systems that are only used for the purpose of routing orders to one or more trading venues or for the confirmation of orders. Individual parameters of orders include in particular decisions whether to initiate the order, the timing, price or quantity of the order or how to manage the order after its submission, with limited or no human intervention.</p> <p><strong>Requirements for algorithmic traders</strong></p> <p>Domestic investment firms, fund management companies and investment corporations that engage in algorithmic trading have to comply with additional organisational requirements regarding their trading systems (including business continuity systems) and risk management. <em><strong>They shall ensure that their systems do not create or contribute to market disruptions and cannot be used for activities violating European or domestic market abuse prohibitions or rules of the trading venue. Changes of computer algorithms used for trading must be documented.</strong></em></p> <p><strong>Requirements for trading venues</strong></p> <p>Operators of German regulated markets and MTFs have to update their rules to ensure that participants earmark orders generated by algorithmic trading including the relevant trading algorithm. They shall impose special fees for an extensive use of the systems for transmissions, amendments and cancellations of orders. Moreover, appropriate measures have to be taken to ensure orderly fixing of prices in case of significant volatility.</p> <p><em>Participants of German regulated markets and MTFs must ensure an adequate ratio between their orders and executed transactions</em>. The order-transaction ratio will be determined separately for each financial instrument based on the volume of orders and transactions per month. <em>The order-transaction ratio is considered appropriate if it is ‘economically comprehensible’ in light of the liquidity of the respective financial instrument, the specific market conditions or the function of the participant.</em><br />Operators of regulated markets and MTFs must introduce appropriate minimum tick sizes for each financial instrument. A comparable duty is imposed on systematic internalisers. The requirement shall stop a current trend to further reduce minimum tick sizes which goes along with an increased splitting of orders.</p> <p><strong>Enforcement powers of supervisory authorities</strong></p> <p>The introduction of new conduct of business rules for participants of German trading venues is accompanied by an enhancement of the enforcement powers of supervisory authorities. The information rights of exchange supervisory authorities are extended to indirect participants of German regulated markets. They include the right to request detailed information on algorithmic trading. The BaFin is granted similar information rights vis-à-vis investment firms that engage in algorithmic trading. <em><strong>To ensure orderly trading an exchange supervisory authority may also prohibit the use of an algorithmic trading strategy.</strong></em></p> <p>* * * </p> <p>Meanwhile, what happens in the US? This happens (<a href="https://twitter.com/nanexllc/status/512361108779175936/photo/1">courtesy of Nanex</a>):</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/BxxFtoJCAAEQPkC.png%20large.png"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/BxxFtoJCAAEQPkC.png%20large.png" width="653" height="711" /></a></p> <p>That's right: Latour Trading, which first gained <a href="http://www.zerohedge.com/news/who-latour-trading-and-how-dare-they-upstage-goldman">prominence on these pages back in 2011</a>, and which is a front for Tower Research Capital, <a href="http://www.sec.gov/litigation/admin/2014/34-73125.pdf">was just fined a record amount </a>for once again attempting to circumvent regulations in the endless HFT bid to gain an advantage, i.e., rig the market. </p> <p>Who is Tower Research Capital? Why a founding member of the Modern Market Intiative, a lobby group created to prove that HFTs are all about fair and efficient markets. </p> <p>One really couldn't make it up.</p> http://www.zerohedge.com/news/2014-09-17/how-germany-defines-and-deals-hft-market-abuse#comments Algorithmic Trading B+ Central Banks Germany HFT High Frequency Trading High Frequency Trading Market Conditions Risk Management Sponsored Access Trading Systems Volatility Wed, 17 Sep 2014 22:36:36 +0000 Tyler Durden 494487 at http://www.zerohedge.com Guest Post: The US-EU-Russia Sanctions Puzzle http://www.zerohedge.com/news/2014-09-17/guest-post-us-eu-russia-sanctions-puzzle <p><em>Submitted by <a href="http://rt.com/op-edge/188432-eu-usa-sanctions-on-russia/">Pepe Escobar via Russia Today Op-Ed</a>,</em></p> <p><strong>Whatever Russia does, doubt does not even enter the equation. The answer is sanctions.</strong> So here we go again. The US Treasury-EU latest sanction package targets Russian banking, the energy industry and the defense industry.</p> <p><strong><span style="background-color: initial;">The sanctions are mean. The sanctions are nasty. And there&rsquo;s no euphemism to describe them; they amount to a declaration of economic war.</span></strong></p> <p>Sberbank, Russia&rsquo;s largest won&rsquo;t be able to access Western capital for long-term funding, including every kind of borrowing over 30 days. And the current 90-day lending bans affecting six other large Russian banks &ndash; a previous sanctions package - will also be reduced to 30 days.</p> <p>On the energy front, what the US-EU want is to shut down new Russian exploration projects in Siberia and the Arctic, barring Western Big Oil from selling equipment and technology to offshore, deepwater or shale gas projects.</p> <p>This means Exxon and Shell, for instance, are frozen in their operations with five top Russian oil/gas/pipeline companies: Gazprom, Gazprom Neft, Lukoil, Surgutneftegaz, and Rosneft.</p> <p>No one ever lost money betting on the stupidity of the usual, unknown <em>&ldquo;senior US officials&rdquo;</em> &ndash; who are now spinning the latest sanction package is to force Moscow to <em>&ldquo;respect international law and state sovereignty.&rdquo;</em> A cursory examination of the historical record allows this paragraph to be accompanied by roaring laughter.</p> <p>And then there&rsquo;s the US Treasury&rsquo;s Under Secretary for Terrorism and Financial Intelligence, David Cohen, who insists the package will further <em>&ldquo;isolate&rdquo;</em> Russia from the global financial system.</p> <p>&nbsp;</p> <div class="article_img" style="float: none; margin-left: 0px; margin-right: 0px;"><img alt="Members of the European Parliament stand to applaud during a voting session on the EU-Ukraine Association agreement at the European Parliament in Strasbourg, September 16, 2014. (Reuters/Vincent Kessler)" src="http://rt.com/files/opinionpost/2e/01/00/00/euuuuuuuuuuuk-1.jpg" style="margin: 0px; height: 445px; width: 600px;" /><br /> <p class="article_img_footer"><em>Members of the European Parliament stand to applaud during a voting session on the EU-Ukraine Association agreement at the European Parliament in Strasbourg, September 16, 2014. (Reuters/Vincent Kessler)</em></p> </div> <p>The package was also described by Western corporate media as capable of <em>&ldquo;unnerving already jittery financial markets.&rdquo;</em> Well, they were not exactly <em>&ldquo;unnerved.&rdquo;</em> In Russia, the stocks of companies on the sanctions list went up. In the US, energy stocks went down. Short translation; the &ldquo;unnerved&rdquo; markets interpreted the latest package as yet another own goal by Washington and Brussels.</p> <h2 style="font-family: Arial, Helvetica, Verdana, Tahoma, sans-serif;"><u>Splitting up Eurasia</u></h2> <p>As for Russia&rsquo;s <em>&ldquo;isolation&rdquo;</em>, companies are barred from, in Washington-Wall Street newspeak, <em>&ldquo;important dollar-denominated funding sources.&rdquo;</em> Or, euphemistically, <em>&ldquo;Western capital.&rdquo;</em> This means the US dollar and the euro. Anyone following superimposed moves towards a multipolar world knows Russia does not need more US dollars and euro.</p> <p>Moscow might use both to cross-purchase goods and services in the US and the EU. Yet these goods and services may be bought elsewhere around the world. For that, you don&rsquo;t need <em>&ldquo;Western capital&rdquo;</em> &ndash; as Moscow is fast advancing the use of national currencies with other trade partners. The Atlanticist gang assumes Moscow needs goods and services from the US and the EU much more than the other way around. That&rsquo;s a fallacy.</p> <p><span>Russia can sell its abundant energy resources in any currency apart from US dollars and euro. Russia can buy all the clothing it needs from Asia and South America. On the electronics and high-tech front, most of it is made in China anyway.</span></p> <p>Crucially, on the energy front, it would be no less than thrilling to watch the EU &ndash; which still does not even have a common energy policy - trying to come up with alternative suppliers. Azerbaijan, Turkmenistan and Qatar, for a number of complex reasons &ndash; ranging from insufficient gas to be committed, to an absence of pipelines &ndash; are out of the picture.</p> <p>The Obama administration, for its part, simply won&rsquo;t allow the EU to start importing energy from Iran like, virtually, tomorrow. Even with a now quite wobbly nuclear deal reached before the end of 2014 - presumably opening the way to an end to sanctions.</p> <p>The <em>&ldquo;irrational&rdquo;</em> markets see what&rsquo;s really goin&rsquo; on; they are not <em>&ldquo;irrational&rdquo;</em> but moved by profit derived from realpolitik.</p> <p>And all this while Moscow has not even counterpunched. And that could be quite lethal &ndash; targeting EU exporters to Russia and even energy supplies from Russia. Then the EU will retaliate. And Russia will counter-counterpunch. That&rsquo;s exactly what Washington wants: a trade/economic war ravaging and splitting up Eurasia.</p> <p>&nbsp;</p> <div class="article_img" style="float: none; margin-left: 0px; margin-right: 0px;"><img alt="United States President Barack Obama (Reuters/Gary Cameron)" src="http://rt.com/files/opinionpost/2e/01/00/00/oba-1.jpg" style="margin: 0px; height: 380px; width: 600px;" /><br /> <p class="article_img_footer"><em>United States President Barack Obama (Reuters/Gary Cameron)</em></p> </div> <h2>About that $20 trillion&hellip;</h2> <p>On the political front, Ukraine and EU had initially agreed to <em>&ldquo;postpone the EU Association Agreement until the end of 2016.&rdquo;</em> You can&rsquo;t make this stuff up; that&rsquo;s exactly what Yanukovich did last November, as he knew Kiev could not allow itself to lose most of its certified trading with Russia in favor of a vague <em>&ldquo;free trade&rdquo;</em> with the EU. This agreement to <em>&ldquo;postpone&rdquo;</em> the agreement was in fact overseen by astonishing mediocrity and outgoing European Commission (EC) President Jose Manuel Barroso.</p> <p>But then the European Parliament, during a plenary session in Strasbourg, hurried up to ratify Ukraine&rsquo;s <a href="http://rt.com/business/188128-ukraine-eu-association-agreement-parliament/" target="_blank">Association Agreement</a> as President Petro Poroshenko simultaneously submitted it to the Ukrainian Parliament. This does not mean the agreement goes immediately into effect. Economic <em>&ldquo;integration&rdquo;</em> with the EU &ndash; a euphemism for a one-way invasion of Ukraine by EU products - will start only in January 2016. And there&rsquo;s no way a crisis-hit EU will incorporate Ukraine anytime soon &ndash; or ever.</p> <p>On Thursday, Poroshenko meets his master, US President Barack Obama, and addresses a joint session of the US Congress. Expect <em>&ldquo;evil empire&rdquo;</em> rhetoric to reach interstellar levels.</p> <p>But it&rsquo;s on Saturday in Berlin that the real thing starts unfolding; energy negotiations between Russia, the EU and Ukraine. Needless to say, Moscow holds all the key cards.</p> <p>Washington&rsquo;s humongous debt is reaching almost $20 trillion &ndash; and counting. With a monster crisis approaching like a tsunami from hell, no wonder Washington had to resort to the perfect diversionary tactic; the return of the <em>&ldquo;evil empire.&rdquo;</em> It&rsquo;s the Marvel Comics school of politics all over again.</p> <p>Russia has a huge surplus of foreign capital - and is able to weather the storm. Germany &ndash; the EU&rsquo;s top economy &ndash; on the other hand, is already suffering. Growth is already at a negative 0.2%. This is the way the hysterical sanction wind is blowing &ndash; further derailing EU economies. And no one is betting the EU will have the balls to stand up to Washington. Not in vassal-infested Brussels.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="341" height="210" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140917_sanctions.jpg?1410981974" /> </div> </div> </div> http://www.zerohedge.com/news/2014-09-17/guest-post-us-eu-russia-sanctions-puzzle#comments Barack Obama China Cohen Exxon Germany Guest Post Iran Obama Administration Reuters Turkmenistan Ukraine Wed, 17 Sep 2014 22:16:45 +0000 Tyler Durden 494486 at http://www.zerohedge.com Goldman's Former Head Of Housing Research Predicts Housing Crash, Recession Within Three Years http://www.zerohedge.com/news/2014-09-17/goldmans-former-head-housing-research-predicts-housing-crash-within-three-years <p>It's one thing for contrarian financial websites to accurately predict the transitory phase and housing price dead cat bounces which are only sustained by the unholy trinity of foreclosure bottlenecks (which are simply supply-side subsidies), offshore money laundering into US real estate (thanks to the NAR's AML requirement exemption) and Wall Street-as-a-Landlord (through REO-to-Rent and other Fed-funded programs): after all the point of such correct analyses is to be ignored and blasted as conspiracy theories until they are proven, inevitably, correct. </p> <p>But when a former Goldman executive and the previous head of its housing research team comes out with a shocking analysis so contrary to what the same individual would do in his "former life" when he would be extolling the inevitably rise of home prices from here to eternity and beyond, and also throw in an open letter to none other than president Obama, predicting at least a 15% crash in home prices in the next three years, a move which would without debt catalyze the next US recession, it is time for everyone to pay attention. </p> <p>Meet <a href="https://www.linkedin.com/pub/joshua-pollard/4/9a7/36b">Joshua Pollard</a>, who in February 2009 took over coverage of US Housing at Goldman Sachs at the tender age of 24. We can only assume he was given the responsible position because everyone else in his team who had, bullishly, covered housing right into the Lehman crash, was fired.&nbsp; But regardless of Pollard's career and how he got to where he is now, what is more important is that in a report released today, the former Goldmanite has cautioned Obama on the economic impact of an imminent 15 % decline in home prices over the next three years.</p> <p>In short. the former Goldmanite says that "<strong>House prices are 12% overvalued today. They have already started to decline. Today’s misvaluation matches the excess of 2006-07, just before the Great Recession... </strong><strong><strong>5 of the last 7 US recessions were led by a weakening housing market... </strong>I am lamentably confident that home prices will fall by 15% within three years.</strong>" Or, as some may call it, crash.</p> <p>* * * </p> <p>While we provide his entire extended analysis of just how this crash will take place, here is the punchline, which incidentally is spot on: when all is said and done, it will be "<strong>never-before-seen public policy reactions that determine when and where prices eventually trough.</strong>"</p> <p>In other words, if the timing of Pollard's forecast is correct, the last thing on anyone's mind in mid-2015 will be a rate hike. Instead, what people will be talking about, if and when the housing market crash begins, is how to finally engage in Bernanke's favorite para-dropping activity...</p> <p>Here is how Pollard classifies the three stages of home price decline:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>3 Stages of the home price decline</strong></p> <p>&nbsp;</p> <p>Unless the calculus of history is a poor guide, there is a 60% chance that home values decline materially, in fact, the correction is already underway. This probability rises when new negative shocks emerges. The home price decline will be defined by 3 Stages:</p> <p>&nbsp;</p> <p><strong>Stage I: Hot to Cool: </strong>Active since Summer 2013*, Price growth is slides across the country as flippers lose money outright in the red-hot investor markets (NYC, San Francisco and Las Vegas); New home absorption rates - sales per community - are declining; investors slow their home purchases; total home sales decline year over year; developers lose pricing power, press outlets shift from positive to mixed about the health of the housing market.</p> <p>&nbsp;</p> <p><strong>Stage II: Demand to Supply: </strong>Small shocks convert demand pools into supply ripples. A first wave of investors begin trimming prices to get ahead of future declines; discounts increase to incentivize purchasers as purchasers increase their delays for better deals; developers reduce land budgets as cancellations tick up; major financial press outlets take a more negative tone toward housing lowering confidence overall.</p> <p>&nbsp;</p> <p><strong>Stage III: Deflation &amp; Response: </strong>Falling home prices create a negative deflationary feedback loop that foreshadows a once-in-a-lifetime policy response. Deflationary economics take full hold; leveraged bets on real estate unwind in quarterly ripples due to the public reporting cycle &amp; asset manager redemption schedules; willingness to lend shrinks; the broader consumer finally understands it is a bad time to buy a home, a shrinking housing market negatively impacts jobs causing recession; the estimated effects of never-before-seen public policy reactions determine when and where prices eventually trough.</p> </blockquote> <p>Some details on timing and where we are now:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Rates &amp; Shocks</strong></p> <p>&nbsp;</p> <p><strong>We are 16 months into Stage I</strong>. A sooner-than-expected rise in mortgage rates - or other adverse shocks - will domino the decline into Stage II unintentionally. Because financial markets rely heavily on Federal Open Market Committee (FOMC) communication and the fed funds rate is near zero, “forward guidance” shifts have as much impact as yesteryear’s rate increases. To that end, two recent policy communications raise immense concern that Stage II of the home price decline could be incited soon: the first public speech of Loretta Mester and a recent letter from the ranks of the Federal Reserve Bank of San Francisco.</p> <p>&nbsp;</p> <p><strong>September 5, 2014</strong>: Loretta Mester, President and CEO of the Federal Reserve Bank of Cleveland, in her first public address since becoming a FOMC voting member welcomed and expects increased volatility following future Fed guidance and rate changes. Mrs. Mester, the FOMC’s newest communication sub-committee appointee, described volatility as a “necessary part of price discovery.” Her personal view is that forward guidance should be tied to actual progress, anticipated progress and the speed at which progress is being achieved (volatility); progress toward full employment and 2% inflation has occurred faster than she and the Fed expected. While stock market volatility has hovered near all-time lows during the Fed’s most recent communication expansion, home price volatility is at extremely elevated levels.</p> <p>&nbsp;</p> <p><strong>September 8, 2014: </strong>A letter from Jens Christensen, a senior economist at the Federal Reserve Bank of San Francisco, highlighted a concerning expectation gap between investors and the Federal Reserve regarding future interest rates. In the letter titled Assessing Expectations of Monetary Policy, the author showed that public investors are expecting a more rate-accommodative policy than the Federal Reserve and these investors are more confident than the Fed in this stance.</p> <p>&nbsp;</p> <p>As public policy makers debate seminal decisions on “forward guidance” and unconventional monetary stimulus we note that each 1% increase in mortgage rates drops home values by 4%. <strong>At a 2% fed funds rate, where Fed officials and investors expect to be by the end of 2016, today’s over-valuation of 12% grows to 20%. Respectfully, the United States can not afford another housing driven recession.</strong></p> <p>&nbsp;</p> <p>With home price volatility at an all time high, the escalation from Stage II to Stage III is difficult to predict today. At Stage III, the virtuous cycle of housing, a unique mix of causal financial and social relationships, breaks. <strong>At these points in history unique governmental intervention provided the only spark that reignites demand</strong>. Price discovery is volatile around each new catalyst of information, and the trough will emerge as consumer and investor confidence rebuilds at lower prices. I believe confidence rebuilds at 15% lower valuations without premptive positive shocks.</p> </blockquote> <p>Unless, of course, the momentum ignition mentality, made so prevalent in capital markets thanks to HFTs in recent years, takes over and the 15% threshold to "rebuild confidence" and BTFD is really 30%, or 40% or more...</p> <p>Taking a step back, here is the analysis that Pollard uses to base his opinion that housing is due for a 15% crash within three years:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>House prices are 12% overvalued today. They have already started to decline. Today’s misvaluation matches the excess of 2006-07, just before the Great Recession</strong>. Since World War II home prices have been tightly correlated to income and mortgage rates (R2 = 96%). Investors/cash purchasers, which make up 50% of home sales, have driven real estate volatility to unrivaled levels in trackable history. As public policy makers debate seminal decisions on “forward guidance” and&nbsp; unconventional monetary stimulus we note that each 1% increase in rates drops home valuations by another 4%; at a 2% fed funds rate, where fed ocials and investors expect to be by the end of 2016, the overvaluation equals 20%. Respectfully, the United States can not aord another housing driven recession. The facts and correlations - the tenets of probabilities - suggest it is more likely than not that home prices fall 15% in the next three years.</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/house%20price%20GS%201.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/house%20price%20GS%201_0.jpg" width="600" height="472" /></a></p> </blockquote> <p><em>Drilling down into Pollard's "three stages:"</em></p> <p><strong>The home price decline will occur in three distinct stages: I. Hot to Cool, II. Demand to Supply and III. Deflation &amp; Response.</strong><em><br /></em></p> <p><strong>Stage I,</strong> "Hot to Cool", has been underway for 16 months, ignited by a Summer 2013 interest rate spike while prices were rising double digit percentages. Another rate shock, driven by unexpectedly hawkish Fed language, would likely stoke the decline from Stage I to Stage II.</p> <p><em>Homebuilder absorption rates precede a home price decline</em></p> <p>Homebuilder absorption rates have been a unique leading predictor of new and existing home prices. Changes in gross absorption rates - the number of homes sold per community for the largest homebuilders - have historically led home prices by four quarters. Gross absorption rates have been declining for four quarters in a row.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/house%20price%20GS%204.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/house%20price%20GS%204_0.jpg" width="600" height="482" /></a></p> <p>&nbsp;</p> <p><em>Home price growth slows with outright drops in some places</em></p> <p>As of June 2014 prices are already falling outright in 7 of the 10 largest markets. In standardly quoted stats home prices are up 8% over last year, but with the most recent sequential price drops price will be down 1% yoy if prices simply stay the same until next year. Downward pressure is more likely to continue than not given the 12% overvaluation and home price autocorrelation.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/house%20price%20GS%206.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/house%20price%20GS%206_0.jpg" width="600" height="383" /></a></p> <p>&nbsp;</p> <p><em>Investor demand slows</em></p> <p>The number of homes flipped in the US has declined 50% in the last four quarters alongside slowing home price growth. <strong>In fact for the first time since the Great Recession home flippers lost money, before taking re-hab costs into account, in some of the largest real estate markets in the country, namely Las Vegas, New York and San Francisco</strong>. Generally, investor demand is only a complement to larger trends in home-buying, however, with all-cash sales being roughly half of total closed sales their impact has been magnified.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/house%20price%20GS%207.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/house%20price%20GS%207_0.jpg" width="600" height="465" /></a></p> <p>&nbsp;</p> <p>Negative homebuilder absorption rates, in conjunction with slowing average selling prices are the clearest signs of a weakening housing environment in Stage I. Economists and management teams acknowledge these early weaknesses but remain positive until a “trend” emerges because the data is volatile. When the “trend” properly surfaces we are already in Stage II</p> <p>* * * </p> <p>In <strong>Stage II </strong>investors stop buying and immediately start selling. This activity increases inventory and home prices fall year-over-year. Recent buyers are remorseful. Negotiating buyers begin waiting to see if better prices are ahead until prices slide and cause Stage III to begin.</p> <p>Because home price values drop 4% for every interest rate point increase, there are not many shocks as powerful as unexpected interest rate lifts. In a concerning letter from economists at the Federal Reserve Bank of San Francisco, Jen Christensen shows that investors are more optimistic than the Federal Reserve Board of Governors about the path of interest rates.<strong> Over the last 25 years home sales have never increased when mortgage rates rise by more than 50 basis points in a month</strong>. In 2 out every 3 such cases volumes declined by 3-4% that same month. Interest rate shocks this deep into Stage I have the highest probability of forcing Stage II.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/house%20price%20GS%207.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/house%20price%20GS%208_0.jpg" width="600" height="549" /></a></p> <p>Small shocks have outsized impact with high investor demand and high valuations. Investors are naturally unemotional about assets, focused squarely on cash returns. An investor buyer of 100 homes (demand) can quickly become a seller of 100 homes (supply) without having to solve for speed-limiting consumer issues like finding another place to live, switching school districts or missing neighbors.</p> <p>If investors reduce their demand by 50% and put half of last year’s purchases on the market, which is not unreasonable when home prices fall, total months of supply jump to 7.5 months from a healthy 5-6 months today. Similarly if 15% of aggregate demand converts to supply a comparable increase in the months supply can occur. <strong>5 of the last 7 US recessions were led by a weakening housing market, with greater than 8 months of supply.</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/house%20price%20GS%209.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/house%20price%20GS%209_0.jpg" width="600" height="592" /></a></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/house%20price%20GS%2010.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/house%20price%20GS%2010_0.jpg" width="600" height="695" /></a></p> <p>&nbsp;</p> <p>The velocity of Stage II is extremely difficult to predict. Home prices (if you think about them like living things) mock what they see. “If Billy across the street goes up $50,000 then Bobby down the block wants to go up $50,000.” In statistics-speak home prices are autocorrelated in the short term partially because the US appraisal system forces Billy and Bobby to stay close. The transition from Stage II to Stage III is set up to happen quicker than ever because Billy and Bobby (individual home prices) go up and down two times faster than normal.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/house%20price%20GS%202_0.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/house%20price%20GS%202_0_0.jpg" width="600" height="421" /></a></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/house%20price%20GS%203.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/house%20price%20GS%203_0.jpg" width="600" height="440" /></a></p> <p>A material financial imbalance is aggravated when home prices decline. Homes make up 24%, or $23 trillion, of consumers’ total assets. An uneven 69% of consumers’ liabilities are the mortgages tied to those same homes. <strong>This tilted financial position means a 5% reduction in home prices equates to a 8.6% decline in consumer net worth. <span style="text-decoration: underline;">At 15% home price deflation consumers‘ real estate net worth drops 26% or $3.4 trillion.</span></strong></p> <p>$3.4 trillion of wealth destruction impacts homeowners financially and future buyers psychologically. Unfortunately the Millenials early-adulthood real estate appetite was handicapped by the Great Recession. <strong>With a 45% underemployment rate for recent college graduates, elevated student debt and increased home price volatility the willingness/ability to own will likely shrink among the country’s next major wave of consumership.</strong></p> <p>* * * </p> <p>The drivers of housing are structurally recursive. The shift from a good market to a bad market occurs quickly, exaggerated by the circular currents of confidence from consumers, investors and lenders in unison. When unnatural levels of demand or supply impact the market prices are pushed in lockstep. </p> <p><strong>Unnatural demand from investors has created a mismatch relative to long term drivers - income and rates. </strong>Arguably, the upward price movement driven by investor demand has helped to restore the confidence of consumers and lenders in housing as an asset class, <strong>however, this shifts quickly</strong>. Home prices are already declining and the probability of a more severe decline becomes too high to ignore if new negative shocks force Stage II and Stage III of home price declines.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/house%20price%20GS%2011.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/house%20price%20GS%2011_0.jpg" width="600" height="596" /></a></p> <p>&nbsp;</p> <p>* * *</p> <p>With all that said, what are Pollard's suggestions and/or recommendations to offset what will surely be the catalyst for the next recession? He has three:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Public policy suggestions:</strong></p> <p>&nbsp;</p> <p>Formulate and preemptively communicate a forward-looking monetary policy that balances the risk of raising interest rates from a very low base six years into an economic cycle. If the impact of “forward guidance” changes cause housing weakness and a reduction in corporate profits how will monetary policy spur a weakening economy? Does language simply reverse? Because we are near the end of monetary easing with rates near 0%, <strong>will new monetary stimulus be more likely? Could rates be lifted while the stimulus is being increased? </strong>Are shadow rates worth considering? An early address of the new cyclical policy toolkit will ease investor volatility when economic slowdowns eventually occur.</p> <p>&nbsp;</p> <p>Create a skilled trade externship program for the laborers that lose jobs because of lower housing investments. This will lower the multiplier effect of a housing downturn by directly supporting the things that the laborers drive in booms and crash in busts. Simultaneously use this program to train younger Americans in specialized trades while boosting the infrastructure in the country.</p> <p>&nbsp;</p> <p>Forcefully rebalance number of homes to the number of households. <strong>Reduce new builds</strong>: Have federal and state regulators reclaim building permit powers from municipalities and localities and limit building to some reasonable percentage of expected household growth. <strong>Demolition</strong>: Shrink the number homes that can force prices down, particularly those that are already vacant, unsafe and expensive to rehabilitate. Increase migration to the country with a preference toward household headship.</p> </blockquote> <p>Of course, none of these will be taken seriously until it is too late. And furthermore, one can wonder if it will even be too late: after all some can say that all Pollard is trying to do is pitch his latest company, now that he has left the sell and buy-side: what better way to do that than with a loud call for a housing crash by a former member of the status quo establishment and a letter to Obama.&nbsp;</p> <p>None of that, however, diminishes the validity of Pollard's observations and forecasts, and if anything, he is likely optimistic as to the severity of the coming housing crash. Then again, if and when housing has finally tumbled, it will mean that the Fed's loss of control of its micromanagement experiment in central-planning is now official. Which will also mean that that far greater repository of household wealth, financial assets, which is where <a href="http://www.zerohedge.com/news/2014-06-05/rich-get-richest-household-net-worth-rises-all-time-high-courtesy-67-trillion-financ">nearly $70 trillion of US assets are parked</a>, will be on its way to a long-overdue "fair value", ex-Fed repricing.</p> <p>When that happens, whether a 15% or 51% drop in US housing, will be the least of anyone's concerns. </p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="871" height="865" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/house%20price%20GS%2011.jpg?1410990112" /> </div> </div> </div> http://www.zerohedge.com/news/2014-09-17/goldmans-former-head-housing-research-predicts-housing-crash-within-three-years#comments Capital Markets Federal Reserve Federal Reserve Bank Goldman Sachs goldman sachs Housing Market Las Vegas Lehman Market Crash Monetary Policy None President Obama Real estate Recession Volatility Wed, 17 Sep 2014 21:48:11 +0000 Tyler Durden 494485 at http://www.zerohedge.com California Is Burning: Postcards From The Inferno http://www.zerohedge.com/news/2014-09-17/california-burning-postcards-inferno <p>As if the drought was not disastrous enough for California, a consequence of the state&#39;s dryness is that nearly <strong>6,000 firefighters are battling 12 separate wildfires raging across the Golden State</strong>.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_inferno.jpg"><img height="668" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_inferno_0.jpg" width="600" /></a></p> <p>&nbsp;</p> <p>As the Cal Fire chief notes, &quot;We&#39;ve seen a lot more fires, and with those fires, more and more people are at threat. Every day we continue to see new fires ignite, forcing hundreds to evacuate,&quot; and the following images from the infernos suggest there is no end in sight as &quot;we <strong>start to see winds pick up and conditions are at their driest</strong>.&quot;</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_inferno1.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_inferno1.jpg" style="width: 601px; height: 411px;" /></a></p> <p>Firefighters battling the King Fire watch as a backfire burns along Highway 50 in Fresh Pond, California</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_inferno2.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_inferno2.jpg" style="width: 599px; height: 374px;" /></a></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_inferno3.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_inferno3.jpg" style="width: 600px; height: 400px;" /></a></p> <p>Flames and smoke from the King Fire fill the sky above Fresh Pond, California</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_inferno4.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_inferno4.jpg" style="width: 600px; height: 420px;" /></a></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_inferno5.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_inferno5.jpg" style="width: 600px; height: 400px;" /></a></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_inferno6.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_inferno6.jpg" style="width: 600px; height: 400px;" /></a></p> <p>Inmate firefighters battling the King Fire watch for flying embers</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_inferno7.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_inferno7.jpg" style="width: 599px; height: 377px;" /></a></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_inferno8.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_inferno8.jpg" style="width: 600px; height: 414px;" /></a></p> <p>A jet drops retardant on the King Fire near Fresh Pond, California</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_inferno9.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_inferno9.jpg" style="width: 600px; height: 400px;" /></a></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_inferno10.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_inferno10.jpg" style="width: 600px; height: 398px;" /></a></p> <p>A helicopter drops water while battling the King Fire near Fresh Pond, California</p> <p>&nbsp;</p> <p><a href="http://www.reuters.com/news/pictures/slideshow?articleId=USRTR46KET#a=1"><em>Source: Reuters</em></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="620" height="390" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140917_inferno7.jpg?1410973813" /> </div> </div> </div> http://www.zerohedge.com/news/2014-09-17/california-burning-postcards-inferno#comments Reuters Wed, 17 Sep 2014 21:22:31 +0000 Tyler Durden 494484 at http://www.zerohedge.com Goldman's Yellen Press Conference Post-Mortem: "Few Surprises" http://www.zerohedge.com/news/2014-09-17/goldmans-yellen-press-conference-post-mortem-few-surprises <p><em>Via Goldman Sachs' Jan Hatzius,</em></p> <p><strong>BOTTOM LINE:</strong> There were few surprises from Fed Chair Yellen's post-FOMC press conference.</p> <p><strong>MAIN POINTS:</strong></p> <p><strong>1. Yellen made two slightly dovish remarks on labor market developments.</strong> First, she stated directly that she felt the slow increase in wages was indicative of labor market slack. Second, she said that her own personal view was that there was a "meaningful" cyclical shortfall in participation, when asked about a recent paper by some Fed authors indicating otherwise.</p> <p><strong>2. On the topic of "considerable time," Yellen declined to provide any specificity</strong> on what the phrase means with regard to calendar duration, and instead noted that the guidance should not be viewed as calendar-based or mechanical in nature. She stated that in her personal view, it was not "completely clear" that there was a gap between market pricing and participants' projections for the fed funds rate apparent in the SEP. For example, the discrepancy could be due to the difference between modal forecasts (reflected in the SEP) and average expectations (reflected in market pricing).</p> <p><strong>3. Yellen also took the opportunity to downplay the move up in the SEP dots</strong>, stating that she "would describe the change in the projections as quite modest."</p> <p><strong>4. Finally, she stated that two dissents was not an "abnormally large number,"</strong> suggesting that she is not particularly uncomfortable with the current degree of dissention on the Committee.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="487" height="532" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140917_dove.jpg?1410987446" /> </div> </div> </div> http://www.zerohedge.com/news/2014-09-17/goldmans-yellen-press-conference-post-mortem-few-surprises#comments Jan Hatzius Wed, 17 Sep 2014 20:57:45 +0000 Tyler Durden 494483 at http://www.zerohedge.com House Votes To Fund Arms To Moderate (For Now) Syrian Rebels (And Ex-Im Bank) - Live Feed http://www.zerohedge.com/news/2014-09-17/house-begins-vote-funding-arms-moderate-now-syrian-rebels-and-ex-im-bank <p><strong>UPDATE: *HOUSE HAS VOTES FOR U.S. AID TO SYRIAN REBELS; VOTE CONTINUING</strong></p> <p>&nbsp;</p> <blockquote class="twitter-tweet" lang="en"><p>Final count: 273-156, amdt to arm Syrian rebels passes easily</p> <p>— Robert Costa (@costareports) <a href="https://twitter.com/costareports/status/512348217464193024">September 17, 2014</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><p>&nbsp;</p> <blockquote class="twitter-tweet"><p>Yes, Rs are the hawkish party. House Rs support authorizing aid to Syrian rebels, 157-71. Ds back only 113-85 desp WH lobbying.</p> <p>— Josh Kraushaar (@HotlineJosh) <a href="https://twitter.com/HotlineJosh/status/512347369686323200">September 17, 2014</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><p><strong><br /></strong></p> <p>&nbsp;</p> <p>&nbsp;</p> <p>Those sneaky politicians... The House has just begun voting on whether to amend the US Spending Bill to enable funding for Obama's grand strategy of training "moderate Syrian rebels. </p> <ul> <li><strong>*SYRIAN REBEL AID IS PROPOSED AS AMENDMENT TO U.S. SPENDING BILL</strong></li> <li><strong>*HOUSE BEGINS VOTE ON U.S. AID TO SYRIAN REBELS SOUGHT BY OBAMA</strong></li> </ul> <p>However, what few have also noticed is that the bill also<strong> includes an extension for funding the Export-Import bank</strong>.</p> <p><a href="http://www.nytimes.com/2014/09/17/us/politics/house-expected-to-vote-on-training-syrian-rebels-to-fight-isis.html?_r=0"><em>As The NY Times reports,</em></a></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>The House will vote on Wednesday on whether to grant President Obama the authority to train and equip Syrian rebels to battle the Islamic State</strong>, but Republicans will insist on a detailed accounting of how the program fits into a broader strategy to defeat the militants, Republican leaders said Tuesday.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><strong>The bipartisan effort to aid Mr. Obama’s campaign against the group, also known as ISIS, is colliding with a separate fight among Republicans over the Export-Import Bank, which guarantees loans to overseas customers of American exporters but which conservatives denounce as crony capitalism. </strong>Some conservative Republicans in the House are eager to oppose any measure that extends the agency’s life but reluctant to vote against the ISIS measure. They had hoped the two issues would be broken into separate bills.</p> <p>&nbsp;</p> <p>But Republican leaders, eager to get their candidates back on the campaign trail, rebuffed their conservative colleagues. They argued that Senate Democratic leaders would have rolled the authorization for the Syrian rebels into the funding and Export-Import Bank bill anyway, then sent the package back to the House for yet another vote.</p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>Live Feed via C-Span (click image for link - no embed)</p> <p><a href="http://www.c-span.org/video/?321488-2/us-house-debate-isis-authorization-amendment&amp;live" target="_blank"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_vote.jpg" width="600" height="404" /></a></p> <p>* * *</p> <blockquote class="twitter-tweet" lang="en"><p>Some R no votes on Syria amdt: Massie, Lummis, Mulvaney, Rothfus, Westmoreland, Wolf, Jones, Huelskamp, Gowdy...</p> <p>— Robert Costa (@costareports) <a href="https://twitter.com/costareports/status/512344852395069440">September 17, 2014</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><blockquote class="twitter-tweet" lang="en"><p>More R no votes on Syria amdt: Amash, Bentivolio, Broun, Duncan, Gingrey, Jordan</p> <p>— Robert Costa (@costareports) <a href="https://twitter.com/costareports/status/512345208369844224">September 17, 2014</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><blockquote class="twitter-tweet" lang="en"><p>Boehner votes yes</p> <p>— Robert Costa (@costareports) <a href="https://twitter.com/costareports/status/512345414972887041">September 17, 2014</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script> http://www.zerohedge.com/news/2014-09-17/house-begins-vote-funding-arms-moderate-now-syrian-rebels-and-ex-im-bank#comments President Obama Wed, 17 Sep 2014 20:51:45 +0000 Tyler Durden 494482 at http://www.zerohedge.com Scottish Independence: Politicians Love Democracy So Much They're Trying To Subvert It http://www.zerohedge.com/news/2014-09-17/scottish-independence-politicians-love-democracy-so-much-theyre-trying-subvert-it <p><em>Submitted by <a href="http://www.sovereignman.com/trends/scottish-independence-they-love-democracy-so-much-theyre-trying-to-subvert-it-15018/">Simon Black via Sovereign Man blog</a>,</em></p> <p><strong>The polls in Scotland will close this week on one of the more important elections in recent history&hellip; perhaps one of the only elections that actually matters.</strong></p> <p>Rather than a typical vote to see who the captain of the Titanic will be, Scots are deciding whether they want to be free and independent from the UK.</p> <p>Every eligible voter has a say, and a simple majority decides the outcome for everyone else.</p> <p><strong>By definition, this is the PUREST possible form of the democratic process.</strong></p> <p>What&rsquo;s ironic here is that &lsquo;democracy&rsquo; is typically held up as the hallmark of free society.</p> <p><strong>Western nations have spent years (and trillion of dollars) force-feeding representative &lsquo;democracy&rsquo; down the throats of developing countries at gunpoint.</strong></p> <p>Opening his second Presidential term in 2005, George W. Bush famously told the world that &ldquo;it is the policy of the United States to seek and support the growth of democratic movements and institutions in every nation and culture. . .&rdquo;</p> <p>Given the west&rsquo;s big love for democracy, you&rsquo;d think this instance in Scotland&ndash; the most fundamental example of the democratic process&ndash; would be able to take place free, unfettered, and uninfluenced by government.</p> <p>Government, in fact, is supposed to be the responsible steward to protect and champion democratic rights. At least, that&rsquo;s the BS they&rsquo;re constantly selling us.</p> <p><strong>But that&rsquo;s not what&rsquo;s happening.</strong></p> <p><strong>British politicians are scared to death that Scotland will file for divorce. So they&rsquo;re doing everything they can to influence the outcome of this supposedly impartial democratic process.</strong></p> <p><strong>They&rsquo;ve spent an incalculable amount of money trying to influence the outcome, effectively subverting a democratic election.</strong></p> <p>Their claim is that the government knows better than you do. They say they&rsquo;re doing this for your own good. If Scotland breaks away, your children and grandchildren will suffer immeasurably as a result.</p> <p><strong>In other words, you NEED US TO TAKE CARE OF YOU. You cannot function without us being in charge of you.</strong></p> <p>The British government is spreading untold fear, paranoia, and propaganda to drive this point home, all in an effort to influence the outcome of a supposedly free and fair election.</p> <p><strong><u>It&rsquo;s incredibly hypocritical. And the government&rsquo;s desperation drives home how fragile this system really is.</u></strong></p> <p>They know how much weaker and impotent they&rsquo;ll be if Scotland becomes independent. And they&rsquo;re terrified of it.</p> <p>But here&rsquo;s the thing&ndash; this isn&rsquo;t even the real story. <strong>The outcome of the election is irrelevant.</strong></p> <p><strong>The real issue here is that this election is even happening at all.</strong></p> <p>Bear in mind that human nature is highly resistant to change. This is the way of the universe.</p> <p>Sir Isaac Newton told us that an object at rest tends to stay at rest unless acted upon by an external force of sufficient enough to overcome the object&rsquo;s inertia.</p> <p>In chemistry, activation energy is defined as the minimum energy needed to be input in order to produce a chemical reaction.</p> <p>A wooden log in a fireplace doesn&rsquo;t spontaneously combust. You must first add sufficient energy (heat) to the system before the wood will burn.</p> <p>Until that activation energy is reached, no reaction will occur.</p> <p>Humans are the same. Our natural state is to remain at rest. Overcoming our inertia is incredibly difficult. Doing so requires tremendous energy. And motivation.</p> <p>The fact that millions of people in Scotland are even considering rocking the boat and radically change is very telling.</p> <p>It shows there is a deep, deep dissatisfaction with the status quo. People are sick and tired of the way things are. The system has completely failed them. And they want change.</p> <p>This is huge. And it&rsquo;s a sign of things to come.</p> <p>The dissatisfaction is growing worldwide. As I reported yesterday, <a href="http://www.sovereignman.com/expat/this-seems-to-be-going-well-chart-15008/">the latest Gallup numbers</a> show that only 23% of Americans are satisfied with the direction of the country.</p> <p><strong>Change is coming. And not just any change. Deep, radical change&ndash; a fundamental reset in the way we do business, the way we organize ourselves as societies, and the way we view money.</strong></p> <p>There&rsquo;s tremendous opportunity for people who understand this trend and stay in front of it. And frankly I think this makes it a very exciting time to be alive.</p> <p><a href="http://www.sovereignman.com/podcast/019-scottish-independence-they-love-democracy-so-much-theyre-trying-to-subvert-it-15014/"><em>I invite you to spend some time with me this afternoon exploring this incredibly important issue in our latest Podcast episode. (click&nbsp; image for link)</em></a></p> <p><a href="http://www.sovereignman.com/podcast/019-scottish-independence-they-love-democracy-so-much-theyre-trying-to-subvert-it-15014/"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140917_scot.jpg" style="width: 550px; height: 294px;" /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="550" height="294" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140917_scot.jpg?1410966134" /> </div> </div> </div> http://www.zerohedge.com/news/2014-09-17/scottish-independence-politicians-love-democracy-so-much-theyre-trying-subvert-it#comments Gallup Wed, 17 Sep 2014 20:32:55 +0000 Tyler Durden 494481 at http://www.zerohedge.com