http://www.zerohedge.com/fullrss2.xml/fullrss2.xml/component/option%2Ccom_docman/Itemid%2C200023/gid%2C397/BoomBustBlog/BoomBustBlog/BoomBustBlog/Is-this-the-Breaking-of-the-Bear.html en US Now Admits Syrian "Rebels" Have Used Chemical Weapons http://www.zerohedge.com/news/2017-10-22/us-now-admits-syrian-rebels-have-used-chemical-weapons <p>From the first moment chemical weapons were used on the Syrian battlefield, the American public was led to believe that only one side could possibly be responsible. The constant refrain in the echo chamber of US government officials and the mainstream media was that only the Assad government possessed chemical stockpiles and the technological capability of deploying such heinous weapons, therefore blame for each and every chemical attack from Ghouta to Khan Sheikhoun was laid at the feet of Assad and the Syrian military.</p> <p>And yet last Wednesday, for the first time, the US State Department casually dropped an important admission into its official<a href="https://travel.state.gov/content/passports/en/alertswarnings/syria-travel-warning.html" target="_blank"> Syria travel warning for American citizens</a>: that the core rebel group currently operating in northwest Syria <strong>not only possesses but has used chemical weapons</strong> - to the point that the State Department considers it a major enough threat to publicly warn citizens about.</p> <p>The armed opposition group,&nbsp;Hayat Tahrir al-Sham (HTS), is referenced early in the document: &quot;Terrorist and other violent extremist groups including ISIS and Al-Qaeda linked Hayat Tahrir Al-Sham [dominated by Al-Qaeda affiliate Jabhat Al-Nusra, a designated Foreign Terrorist Organization], operate in Syria.&rdquo; HTS is the group now holding Idlib province, which it captured in 2015 as part of a coalition of armed groups given direct support from a <a href="https://www.al-monitor.com/pulse/politics/2015/05/have-us-and-turkey-found-a-middle-course-in-syria.html" target="_blank">US-led operations room in southern Turkey</a> - this according to prominent pro-opposition analyst Charles Lister.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/21/syr1.png"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/21/syr1_0.png" style="width: 500px; height: 243px;" /></a></p> <p>The new <a href="https://travel.state.gov/content/passports/en/alertswarnings/syria-travel-warning.html" target="_blank">State Department travel warning</a> has this to say about the tactics of HTS and other anti-Assad groups:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Tactics of ISIS, Hayat Tahrir al-Sham, and other violent extremist groups include the use of suicide bombers, kidnapping, small and heavy arms, improvised explosive devices, <strong>and chemical weapons. </strong></p> <p>&nbsp;</p> <p><strong>They have targeted major city centers, road checkpoints, border crossings, government buildings, shopping areas, and open spaces</strong>, in Damascus, Aleppo, Hamah, Dara, Homs, Idlib, and Dayr al-Zawr provinces.</p> </blockquote> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/21/syr2.png"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/21/syr2_0.png" style="width: 500px; height: 194px;" /></a></p> <p>Hayat Tahrir al-Sham along with other Salafi-Jihadi terror groups such as Ahrar al-Sham, were in control of the Idlib province town of&nbsp;Khan Sheikhoun when the group alleged that Syrian jets launched a massive Sarin gas attack on civilians last April. Relying chiefly on YouTube videos uploaded by &quot;activists&quot; associated with the al-Qaeda linked groups, media and government officials in the West immediately blamed Syria and Russia for the incident which possibly resulted in up to 74 civilian deaths. The White House&#39;s own&nbsp;<a href="https://www.nytimes.com/interactive/2017/04/11/world/middleeast/document-Syria-Chemical-Weapons-Report-White-House.html" target="_blank">four page assessment</a> released in the wake of the incident relied heavily on, in its words, &ldquo;a wide body of&nbsp;open-source&nbsp;material&rdquo; and &ldquo;social media accounts&rdquo; to find the Syrian government &quot;guilty&quot; - which means that essentially YouTube videos were used as justification for Trump&#39;s subsequent punitive strike on&nbsp;Shayrat military airfield in Syria (a strike which turned out to be largely symbolic for the sake of &quot;doing something&quot;).</p> <p>Meanwhile, HTS and their affiliates <strong>prevented any and all international monitoring groups from entering Idlib to access the site of the alleged attack - a reality which continues to this day.</strong>&nbsp;The OPCW Fact-Finding Mission (Organisation for the Prohibition of Chemical Weapons), for example, <a href="https://www.opcw.org/news/article/opcw-fact-finding-mission-confirms-use-of-chemical-weapons-in-khan-shaykhun-on-4-april-2017/" target="_blank">acknowledged</a> that,&nbsp;<strong>&quot;For security reasons, the FFM [Fact-Finding Mission] was unable to visit Khan Shaykhun.&quot;</strong></p> <p>For this reason, while Western media accused the Syrian government of attacking civilians with Sarin <strong>a mere hours after the attack was said to have taken place,</strong> OPCW officials urged caution. One prominent official who publicly insisted that Western media cease prematurely blaming Assad for Khan Sheikhoun because they couldn&#39;t possibly possess empirical data with objective chain of custody (as no observers had accessed the site) was Jerry Smith.</p> <p><strong>Smith was the&nbsp;lead field investigator for the UN-backed operation to remove Syria&rsquo;s chemical weapons in 2013</strong> after a US-Russia-Syria deal was struck to decommission Syria&#39;s declared Sarin stockpiles. In two major UK media interviews, the former OPCW deputy head of Syria field operations said that he considered it <strong>entirely plausible that Assad&nbsp;was not responsible,</strong> even after the visibly surprised anchors attempted to pressure him into saying Assad did it. &nbsp;</p> <p><iframe allowfullscreen="" frameborder="0" height="281" src="https://www.youtube.com/embed/TVU1SPu00Mk" width="500"></iframe></p> <p><strong>Former OPCW head field investigator Jerry Smith to Sky News&#39; Sophy Ridge in the week after the Khan Sheikhoun attack:&nbsp;</strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>Ridge: &quot;Is there any way that Assad might not have been responsible for those [chemical attacks]?&quot; </em></p> <p>&nbsp;</p> <p><em>Smith: &quot;The fact of the matter is that there is... We need to listen to every story and then start to pick it apart. Some of the stories that come out are not true. And the stakeholders that are saying them are having a line because of their own narrative. If we start to pick this apart effectively their stories will fall away.&quot;</em></p> </blockquote> <p>&nbsp;</p> <blockquote class="twitter-tweet" data-lang="en"><p dir="ltr" lang="en">.<a href="https://twitter.com/OPCW?ref_src=twsrc%5Etfw">@OPCW</a> official urges caution on chemical attack, says possible rebels had sarin gas &amp; Assad troops hit a storehouse <a href="https://t.co/ftSeaKr6KE">https://t.co/ftSeaKr6KE</a></p> <p>&mdash; Danielle Ryan (@DanielleRyanJ) <a href="https://twitter.com/DanielleRyanJ/status/850144087277793281?ref_src=twsrc%5Etfw">April 7, 2017</a></p></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script><p>A BBC article which initially quoted Smith&#39;s expert analysis from the TV interviews <a href="http://www.medialens.org/index.php/alerts/alert-archive/2017/844-trump-s-tomahawks-the-instant-certainty-of-the-mainstream-press.html" target="_blank">subsequently deleted his comments</a>&nbsp;as he expressed views which ran directly contrary to the mainstream media&#39;s consensus. The narrative of the Syrian government&#39;s guilt became entrenched so early, based so little &quot;evidence&quot; (primarily social media videos), that <strong>even contrary analysis by high level OPCW experts was censored.&nbsp;</strong></p> <p>Similarly, this is further what currently has Russia <a href="https://www.rt.com/op-edge/407107-syria-collective-humanitarian-efforts/" target="_blank">angrily calling foul</a> - the idea that the UN&#39;s Joint Investigative Mechanism (JIM) appears bias toward finding the Syrian government responsible from afar based on assumptions concerning guilt which became entrenched in the West from the beginning. A fresh and contentious<a href="http://www.latimes.com/sns-bc-un--united-nations-syria-chemical-weapons-20171021-story.html" target="_blank"> vote is expected at the UN</a> on Monday as to whether or note the JIM mandate will be extended for another year.</p> <p>And Russia is now pointing to the State Department&#39;s updated <a href="https://travel.state.gov/content/passports/en/alertswarnings/syria-travel-warning.html">Syria travel advisory</a> as constituting a US intelligence admission that it is not only entirely plausible that al-Qaeda (HTS) committed the Khan Sheikhoun attack but even likely, considering HTS&#39; chief area of operation for the past year has been in Idlib province (the travel document purports to be an update of the last six months). On Friday, Russian Defense Ministry Spokesman Major General Igor Konashenkov <a href="http://tass.com/defense/971699">issued a statement, saying</a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>I would like to point out that that the Department of State has for the first time officially acknowledged that terrorists from Jabhat al-Nusra not only have but also - I would like to stress that - use chemical weapons in this part of Syria in order to carry out terrorist attacks - <strong>a thing that we have many times many times warned against and talked about at various levels.</strong></p> </blockquote> <p>The State Department in a <a href="http://www.washingtonexaminer.com/state-department-mocks-absurd-russian-claims-about-chemical-weapons-in-syria/article/2638257" target="_blank">response given to the Washington Examiner</a> over the weekend, accused the Russians of &quot;cherry-picking language to suit their false narrative that they have been peddling for years about the use of chemical weapons in Syria and those responsible.&quot;</p> <p>However, the UN&#39;s own extensive 2013 investigation into the first reported uses of chemical weapons in Syria <strong>support the consistently stated Russian position that the armed opposition in Syria have long possessed and have repeatedly used chemical weapons.</strong> When the UN undertook its first on the ground inquiry in Syria, it admitted in its <a href="https://unoda-web.s3.amazonaws.com/wp-content/uploads/2013/12/report.pdf" target="_blank">82-page December 2013 report</a> (initiated after the August 2013 Ghouta attack), that it considered both sides of the war to be in possession of mass casualty producing chemical weapons. This is important, given that at the time the US position was that only the Syrian government could have possibly launched chemical attacks. According to&nbsp;<a href="https://unoda-web.s3.amazonaws.com/wp-content/uploads/2013/12/report.pdf" target="_blank">the UN report</a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>The United Nations Mission remains deeply concerned that <strong>chemical weapons were used in the ongoing conflict</strong><em><strong>&nbsp;between the parties</strong></em>&nbsp;in the Syrian Arabic Republic, which has added yet another dimension to the continued suffering of the Syrian people.</p> </blockquote> <p>The report stated that chemical weapons were &ldquo;probably used&rdquo;&nbsp;at five&nbsp;sites in Syria during the conflict up to that point (2013). Most significant is that <strong>among the five sites the UN could not find a single instance where members of the armed rebels opposition were victims</strong>, but instead found that at two sites, the victims were Syrian government soldiers, and at a third, the victims were <a href="http://www.bbc.com/news/world-middle-east-25360088" target="_blank">Syrian Army personnel and civilians</a>.</p> <p>While the purpose of the investigation was not to establish the culprit in each attack,<strong>&nbsp;the report identified the victims in three out of the five incidents as government soldiers. </strong>This was the first tacit UN admission that the rebels possess and have used chemical weapons - an admission made all the way back in 2013. And even the&nbsp;generally pro-rebel New York Times had to admit&nbsp;<a href="http://www.nytimes.com/2013/12/13/world/middleeast/un-confirms-repeated-chemical-arms-use-in-syria.html" target="_blank">the following when the 2013 report came out</a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Chemical weapons were used repeatedly in the Syria conflict this year, not only in a well-documented Aug. 21 attack near Damascus but also in four other instances, including two subsequent attacks <strong>that targeted soldiers</strong>, the United Nations said in a report released Thursday.</p> </blockquote> <p>And concerning the first reported usage of chemical weapons in the entirety of the Syrian conflict, the <a href="http://www.nytimes.com/2013/12/13/world/middleeast/un-confirms-repeated-chemical-arms-use-in-syria.html" target="_blank">NYT further admitted</a> at the time that Syrian soldiers had been on the receiving end (though the NYT buried the information far away from the front page):</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>The report said the panel had corroborated &ldquo;credible allegations&rdquo; that chemical weapons were used in the <strong>first reported attack &mdash; a March 19 episode involving soldiers and civilians [as victims] in Khan al-Assal</strong> in the country&rsquo;s north.</p> </blockquote> <p>But even prior to the UN&#39;s December 2013 findings, credible allegations of rebel chemical weapons were nothing new. In May of 2013,&nbsp;<a href="http://en.wikipedia.org/wiki/Carla_Del_Ponte" target="_blank">Carla Del Ponte</a>, a top UN human rights investigator and former UN Chief Prosecutor and veteran International Criminal Court attorney &ndash;&nbsp;was the first to accuse the rebels of using Sarin gas&nbsp;against government forces and civilians (also see&nbsp;<a href="http://www.bbc.co.uk/news/world-middle-east-22424188" target="_blank">here</a>,&nbsp;<a href="http://www.telegraph.co.uk/news/worldnews/middleeast/syria/10039672/UN-accuses-Syrian-rebels-of-chemical-weapons-use.html" target="_blank">here</a>, and&nbsp;<a href="http://www.france24.com/en/20130506-syria-un-del-ponte-chemical-weapons-gas-rebels-assad/" target="_blank">here</a>).</p> <p><iframe allowfullscreen="" frameborder="0" height="281" src="https://www.youtube.com/embed/fXmzBFyXvVI" width="500"></iframe></p> <p>Del Ponte&rsquo;s assertions, based&nbsp;upon her information gathering team on the ground,&nbsp;caused a row in Europe at the time, but the only major American outlet to cover the story when it happened was the&nbsp;<a href="http://articles.latimes.com/2013/may/06/world/la-fg-wn-un-syria-rebels-chemical-weapons-20130506" target="_blank">LA Times</a>. During&nbsp;a Swiss-Italian TV&nbsp;<a href="http://www.bbc.co.uk/news/world-middle-east-22424188" target="_blank">interview</a>, she was convinced enough to be very blunt in her assessment, saying, <strong>&ldquo;I was a little bit stupefied by the first indication of the use of nerve gas by the opposition.&rdquo;</strong></p> <p>So in reality, a number of top experts (as well as documentation) have come forward over the past few years to offer analysis contrary to the West&#39;s open and shut &quot;Assad did it&quot; narrative, yet the Western public has for the most part been carefully shielded from such voices (to say nothing of <a href="http://www.zerohedge.com/news/2017-06-26/seymour-hersh-us-lied-about-syrian-chemical-attack-then-bombed-them-anyway" target="_blank">Seymour Hersh&#39;s excellent investigative reporting</a>, or MIT rocket scientist <a href="https://www.yahoo.com/news/mit-expert-claims-latest-chemical-100819428.html" target="_blank">Theodore Postol&#39;s analysis</a>). With this latest US State Department admission that groups like HTS in Syria possess and have used chemical weapons, it appears that the US government could slowly and reluctantly be catching up to what other experts have long understood.</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="284" height="177" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/chemical%20weapons%20teaser.jpg?1508718463" /> </div> </div> </div> http://www.zerohedge.com/news/2017-10-22/us-now-admits-syrian-rebels-have-used-chemical-weapons#comments Ahrar al-Sham Al-Nusra Front al-Qaeda Anti-Shi'ism Assad government Department of State Fact-Finding Mission Foreign Terrorist Organization Ghouta chemical attack Hayat Tahrir al-Sham International Criminal Court Irregular military ISIS Islam Jabhat al-Nusra Khan al-Assal chemical attack Khan Shaykhun chemical attack MIT New York Times northwest Syria OPCW Fact-Finding Mission Organisation for the Prohibition Politics Reality Russian Defense Ministry southern Turkey Syrian army Syrian Civil War Syrian government Syrian military Tahrir al-Sham Turkey U.S. intelligence United Nations United Nations Mission US government US State Department Use of chemical weapons in the Syrian civil war War White House White House Mon, 23 Oct 2017 02:14:19 +0000 Tyler Durden 605789 at http://www.zerohedge.com The Global "Bubble Arms Race" Has Ushered In The Age Of Government Strongmen http://www.zerohedge.com/news/2017-10-22/global-bubble-arms-race-has-ushered-age-government-strongmen <p><a href="http://creditbubblebulletin.blogspot.com/2017/10/weekly-commentary-arms-race-in-bubbles.html"><em>Authored by Doug Noland via Credit Bubble Bulletin blog,</em></a></p> <p><strong>The week left me with an uneasy feeling. </strong>There were a number of articles noting the 30-year anniversary of the 1987 stock market crash. I spent &ldquo;Black Monday&rdquo; staring at a Telerate monitor as a treasury analyst at Toyota&rsquo;s US headquarters in Southern California. If I wasn&rsquo;t completely in love with the markets and macro analysis by that morning, there was no doubt about it by bedtime. Enthralling.</p> <p>As writers noted this week, there were post-&rsquo;87 crash economic depression worries. In hindsight, those fears were misplaced. Excesses had not progressed over years to the point of causing deep financial and economic structural maladjustment. Looking back today, 1987 was much more the beginning of a secular financial boom rather than the end. The crash offered a signal &ndash; a warning that went unheeded. <strong>Disregarding warnings has been in a stable trend now for three decades.</strong></p> <p>Alan Greenspan&rsquo;s assurances of ample liquidity &ndash; and the Fed and global central bankers&rsquo; crisis-prevention efforts for some time following the crash &ndash; ensured fledgling financial excesses bounced right back and various Bubbles hardly missed a beat. Importantly, financial innovation and speculation accelerated momentously. Wall Street had been emboldened &ndash; and would be repeatedly.</p> <p><strong>The crash also marked the genesis of government intervention in the markets that would evolve into the previously unimaginable</strong>: negative short-term rates, manipulated bond yields, central bank support throughout the securities markets, Trillions upon Trillions of central bank monetization and the perception of open-ended securities market liquidity backstops around the globe. Greenspan was the forefather of the powerful trifecta: Team Bernanke, Kuroda and Draghi. Ask the bond market back in 1987 to contemplate massive government deficit spending concurrent with near zero global sovereign yields &ndash; the response would have been &ldquo;inconceivable.&rdquo;</p> <p><strong>Articles this week posed the question, &ldquo;Could an &rsquo;87 Crash Happen Again.&rdquo; There should be no doubt &ndash; that is unless the nature of markets has been thoroughly transformed. </strong>Yes, there are now circuit breakers and other mechanisms meant to arrest panic selling. At the same time, there are so many more sources of potential self-reinforcing selling these days compared to portfolio insurance back in 1987. Today&rsquo;s derivatives markets &ndash; where various strains of writing market insurance (&ldquo;flood insurance during a drought&rdquo;) have become a consistent and popular money maker &ndash; make 1987&rsquo;s look itsy bitsy.</p> <p>The record $3.15 TN hedge fund industry barely existed in 1987. The $4.1 TN ETF complex didn&rsquo;t exist at all. To be sure, the amount of trend-following finance dominating present-day global markets is unprecedented. Moreover, the structure of contemporary finance has already (repeatedly) proven itself conducive to financial dislocation. Over the years &ndash; and especially post-2008 reflation &ndash; boom and bust dynamics have turned only more forceful. Central bank fixation on countering the bust has precariously propelled the latest boom.</p> <p><strong>The &rsquo;87 crisis response fatefully unleashed the &ldquo;Terminal Phase&rdquo; of Japanese Bubble excess &ndash; the consequences of which persist to this day.</strong> Decades of exceptional development flushed away with a few years of recklessness. In China, officials over the years claimed to have learned from the dismal Japanese Bubble experience. Clearly, they did not. The 2008 crisis was multiples of 1987. The recent post-crisis reflation, as well, has been at an incredibly grander and prolonged scale. This has ensured that China&rsquo;s Bubble and &ldquo;Terminal Phase&rdquo; have inflated so far beyond Japan&rsquo;s eighties fiasco.</p> <p><u><em><strong>Bubble mirage had Japan&rsquo;s economy and banking system poised to lead the world. Now it&rsquo;s China. In contrast to Japan&rsquo;s beleaguered post-Bubble political class, China&rsquo;s communist party won&rsquo;t have to agonize over elections.</strong></em></u></p> <p>China faces extremely serious issues &ndash; and I&rsquo;ll assume enlightened Chinese communist party officials are not oblivious. Beijing was the leading culprit behind my disquiet this week. Most focused elsewhere. The Trump administration&rsquo;s tax package made initial headway in the Senate. There was also market-friendly reporting that Federal Reserve governor &ldquo;Jay&rdquo; Powell may be Trump&rsquo;s leading candidate for Fed chairman. With securities markets rising ever higher into record territory, who cares about some communist party gathering? Heck, is communism even pertinent in today&rsquo;s tantalizing New Age? Did you see those cryptocurrencies this week?</p> <p><strong>Chinese President Xi Jinping has a plan. China will be the world&rsquo;s super power.</strong> The great communist party, with its progressive system of meritocracy, is the only mechanism to adroitly guide Chinese &ldquo;new era&rdquo; development. And President Xi is the master &ndash; the modern-day Emperor &ndash; with the depth of experience, the vision, the charisma, the power to ensure China&rsquo;s rightful place on the world stage. He embodies the benevolent dictator for the masses; the resolute commander for an increasingly hostile world; the deity to guide and protect an insecure society. Spooky stuff.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>October 20 &ndash; Financial Times (Tom Mitchel): &ldquo;&lsquo;Government, military, society and schools &mdash; north, south, east and west &mdash; the party is leader of all,&rsquo; Mr Xi proclaimed in a three-and-a-half hour speech&hellip; to the party congress. Next week the congress will appoint a new Politburo Standing Committee stacked with Xi loyalists. One person who advises senior officials attributes Mr Xi&rsquo;s now seemingly unassailable dominance of Chinese politics to a Machiavellian insight. &lsquo;Because of the economic prosperity of the reform era, almost everyone in officialdom was corrupted,&rsquo; he says. &lsquo;Xi used this fact as leverage to scare everyone. They have to follow him because everyone is vulnerable. All you have to do is investigate them.&rsquo; In his marathon address to the congress this week, Mr Xi positioned himself not just as modern China&rsquo;s third great leader after Mao and Deng, but also the heir to a glorious Communist tradition stretching back to Russia&rsquo;s Bolsheviks. &lsquo;A hundred years ago, the salvos of the October Revolution brought Marxism-Leninism to China,&rsquo; Mr Xi said, noting that the Chinese Communist party was founded just four years later. &lsquo;From that moment on, the Chinese people have had in the party a backbone for their pursuit of national independence and liberation, prosperity and happiness.&rsquo; According to Mr Xi&rsquo;s arc of history, China is only three decades away from resuming its traditional and rightful place as the world&rsquo;s dominant economic and cultural power, with the US caught in a downward spiral accelerated by Mr Trump&rsquo;s election.&rdquo;</p> </blockquote> <p>Xi&rsquo;s speech was said to have left young devotees sobbing (and previous leadership yawning and checking their watches). Xi is moving aggressively forward with a consolidation of power &ndash; assiduously crafting a cult of leadership. He has shrewdly perched his government&rsquo;s skill and competence up on a high pedestal, with its leader the unassailable &ldquo;man now regarded as China&rsquo;s great centraliser and most powerful ruler since Mao Zedong, the party&rsquo;s revolutionary hero.&rdquo;</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>October 17 &ndash; Bloomberg (Ting Shi): &ldquo;President Xi Jinping warned of &lsquo;severe&rsquo; challenges while laying out a road map to turn China into a leading global power by 2050, as he kicked off a twice-a-decade party gathering expected to cement his influence into the next decade. In a speech that ran for more than three hours on Wednesday, Xi declared victory over &lsquo;many difficult, long overdue problems&rsquo; since he took power in 2012. He said China would continue opening its doors to foreign businesses, defend against systemic risks, deepen state-run enterprise reform, strengthen financial sector regulation and better coordinate fiscal and monetary policy. &lsquo;Right now both China and the world are in the midst of profound and complex changes,&rsquo; Xi said. &lsquo;China is still in an important period of strategic opportunity for development. The prospects are very bright, but the challenges are very severe.&rsquo;&rdquo;</p> </blockquote> <p><strong>Xi and Chinese leadership are battening down the hatches. Recall that less than two years ago the Chinese Bubble was at the brink. It was Xi and his &ldquo;national team&rdquo; that took incredible measures to reverse a dynamic of collapsing markets and exodus from the Chinese currency. In short, confronting an inconveniently timed bust, they resorted to stoking their historic Bubble. Why not &ndash; everyone else has gotten away with it.</strong></p> <p><u><em><strong>The upshot has been two additional (fateful) years of rapidly inflating apartment prices and economic maladjustment. </strong></em></u>There has been as well a couple more years of historic compounding Credit growth. It was only fitting that Xi&rsquo;s overstated exultation elicited a shot of sobriety from China&rsquo;s respected central bank chief (from his catbird seat).</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>October 19 &ndash; Financial Times (Gabriel Wildau): &ldquo;China&rsquo;s central bank governor has warned in unusually stark language of the risks from excessive debt and speculative investment, as he used the Communist party congress to caution that the country&rsquo;s fast-growing economy faced a possible &lsquo;Minsky moment&rsquo;. &lsquo;When there are too many pro-cyclical factors in an economy, cyclical fluctuations will be amplified,&rsquo; Zhou Xiaochuan, governor of the People&rsquo;s Bank of China, said at a meeting on the sidelines of the Communist party gathering in Beijing. &lsquo;If we are too optimistic when things go smoothly, tensions build up, which could lead to a sharp correction, what we call a &lsquo;Minsky Moment&rsquo;. That&rsquo;s what we should particularly defend against.&rsquo;&rdquo;</p> </blockquote> <p><strong>Credit growth accelerated into the communist party congress. </strong>Chinese Total Social Financing (total non-governmental Credit) expanded a stronger-than-expected $277 billion during September. Year-to-date Total Social Financing growth of $2.375 TN is running 16.3% above last year&rsquo;s record pace. Lending was led by booming demand for household real estate purchases. Total Chinese Credit could surpass $4.0 TN in 2017, easily outdoing U.S. Credit growth at the height of our mortgage finance bubble. Despite all the talk about excessive debt levels and the need for deleveraging, Chinese officials have yet to get their arms around a historic credit bubble.</p> <p><strong>Xi spoke of a focus on financial stability.</strong> His comment, &ldquo;Houses are built to be inhabited, not for speculation,&rdquo; reiterates official concern for housing prices. Past efforts to counteract apartment inflation with added supply failed to dampen enthusiasm for speculating on ever higher prices. At this late stage of such a prolonged Bubble, only harsh medicine will suffice. Prices will need to fall and speculation punished for the spell to be broken.</p> <p><u><em><strong>Bubbles are always about a redistribution and destruction of wealth. Its unparalleled global scope makes the current Bubble is so concerning. Xi now owns the Chinese Bubble, and there would appear little prospect that he&rsquo;ll ever be willing to take responsibility for the damage wrought. Fingers will be pointed directly at foreigners, foremost the U.S. and Japan.</strong></em></u></p> <p>I believe the global government finance Bubble - history&rsquo;s greatest financial boom - will conclude this long Credit cycle going back to the conclusion of WWII. As the &ldquo;granddaddy of Bubbles,&rdquo; it is fitting that things turn really crazy during an exceptionally prolonged &ldquo;Terminal Phase.&rdquo; <strong>We&rsquo;re at the point where no one is willing to risk bursting the Bubble, certainly not timid central bankers.</strong></p> <p>There&rsquo;s so much at stake. Importantly, from the global Bubble perspective,<strong> a faltering Bubble would risk surrendering power on the global stage. </strong>Xi certainly doesn&rsquo;t seem willing to see a faltering China retreat from global ascendency. The same can be said for Shinzo Abe in Japan. Here at home, making America great again gets no easier with a bursting Bubble. And while there&rsquo;s no President of Europe, Mario Draghi has assumed the role of defender of European resurgence with an interminable windfall of free &ldquo;money.&rdquo;</p> <p><u><em><strong>It&rsquo;s all quite unsettling. Global finance has run completely amok. This has been unfolding for so long now that few are concerned. Most revel in asset inflation drunkenness. Instead of safeguarding sound finance and stable money &ndash; the bedrock of civil societies and peaceful global relationships - governments and central banks around the world are harboring Bubble excesses like never before. This ensures catastrophic consequences when Bubbles burst. It has reached the point where these Bubbles have become part and parcel to global power, with countries not willing to risk being left behind. It&rsquo;s as if it has become An Arms Race in Bubbles.</strong></em></u></p> <p><strong>Three decades of serial booms and busts begat An Age of Government Strongmen &ndash; and weak central bankers. </strong>It would only be fitting for President Trump to opt for the milquetoast Jerome Powell to shepherd Fed inflationist doctrine, perhaps even trying to placate his base with a slot on the FOMC for John Taylor. Apparently, there are more urgent fights these days than reform at the Federal Reserve. Everywhere, it seems, various fights are taking precedence over stable finance. <em><u><strong>It just makes one dread the kind of conflicts that could break out when this historic global financial boom buckles.</strong></u></em> But, then, who on earth cares? <strong>The Dow is mere days away from 24,000, and Bitcoin is surely poised to make a run to $10,000!</strong></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="282" height="165" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20171022_bubbles.gif?1508700732" /> </div> </div> </div> http://www.zerohedge.com/news/2017-10-22/global-bubble-arms-race-has-ushered-age-government-strongmen#comments 2015–16 Chinese stock market turbulence Alan Greenspan Bitcoin Bond Business Central Banks China China Chinese Communist Party Circuit Breakers Communist Party Deficit Spending Economic bubble Economic history of the People's Republic of China Economy Economy of Shanghai Federal Reserve Financial crises Financial crisis of 2007–2008 Housing Prices Japan Market Crash Monetary Policy Monetization Money People's Bank of China Politburo Standing Committee Real estate Senate Southern California Stock market crashes Subprime mortgage crisis Toyota Trump Administration US Federal Reserve Xi Jinping Mon, 23 Oct 2017 01:45:00 +0000 Tyler Durden 605778 at http://www.zerohedge.com Number Of Bitcoin Miners In Venezuela Swells To 100,000 http://www.zerohedge.com/news/2017-10-22/number-bitcoin-miners-venezuela-swells-100000 <p>Venezuela&rsquo;s worsening economic collapse <a href="http://www.zerohedge.com/news/2017-09-03/venezuelans-find-new-way-fight-back">has created something of a social experiment</a> in the use of a digital currency as a de facto currency - a phenomenon that&rsquo;s also playing out in troubled <a href="http://www.zerohedge.com/news/2017-10-20/zimbabwe-panic-sends-bitcoin-soaring-over-6000-now-bigger-goldman-sachs">Zimbabwe</a>.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><a href="https://www.thenational.ae/business/zimbabwe-s-embrace-of-bitcoin-poses-problems-1.668430">According to TheNational.ae,</a> <strong>bitcoin adoption in Zimbabwe is seemingly skyrocketing </strong>as the country&rsquo;s economic situation looks bleak. <strong>So much so, that one bitcoin is trading at nearly $10,000 on the Golix.io exchange, while the global average is, at press time, of $5,642.00.</strong></p> <p>&nbsp;</p> <p>According to a local trader, <strong>bitcoin isn&rsquo;t just being bought by individuals, but by businesses with bills to pay. </strong>The country adopted the U.S. dollar back in 2009 as its fiat currency, as the Zimbabwean dollar had lost nearly all its value.</p> <p>&nbsp;</p> <p>At press time, LocalBitcoins Zimbabwe has people buying bitcoin at the global average, and some buying the cryptocurrency for cash for well over $10,000 in the country&rsquo;s capital.<strong> Bitcoin, as every bitcoiner would expect, is helping people in the country survive times of economic uncertainty, as Zimbabwe has been embroiled in a crisis for years.</strong></p> </blockquote> <p>And as inflation in Venezuela has spiraled further out of control - by one estimated, it peaked above 2,400% in September - <strong>more Venezuelans are resorting to mining bitcoin, litecoin and other digital currencies as a means of coping with the country&#39;s out-of-control hyperinflation</strong> and surviving in a country where staples like food and medicine are scarce.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;Venezuela was one of the richest per-capita nations in the world... but now, <strong>hyperinflation is a very difficult thing to understand until you have to buy lunch...</strong>&quot;</p> <p>&nbsp;</p> <p>&quot;<strong>The country has not yet dollarized...&nbsp; </strong>but there&#39;s not enough dollars in Venezuela for that to have happened...&quot;</p> <p>&nbsp;</p> <p><strong>&quot;Venezuela is becoming a cashless society... we are starting to see in Venezuela, the first bitcoinization of a sovereign state.&quot;</strong></p> </blockquote> <p><a href="http://www.zerohedge.com/sites/default/files/images/user245717/imageroot/2017/10/18/2017.10.23bitcoin.JPG"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user245717/imageroot/2017/10/18/2017.10.23bitcoin_0.JPG" style="width: 500px; height: 278px;" /></a></p> <p>However, while cryptocurrency mining isn&rsquo;t explicitly illegal, the country&rsquo;s Sebin intelligence service has been known to raid establishments that show a suspicious spike in electricity usage. <strong>Electricity is heavily subsidized by the state in Venezuela, making mining a particularly lucrative prospect,</strong> despite the risks.</p> <p><strong>Bitcoin mining consultant Randy Brito estimates that about 100,000 Venezuelans are &quot;mining,&quot; although it is impossible to have an exact figure because many are protecting themselves by using servers in foreign countries,</strong> <a href="https://www.yahoo.com/news/venezuelans-bitcoin-mining-escape-inflation-020507653.html">AFP </a>reports.</p> <p>According to the LocalBitcoins portal,<strong> transactions in bitcoins amounted to $1.1 million in Venezuela in the last week of September. </strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user245717/imageroot/2017/10/18/2017.10.23mining.JPG"><strong><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user245717/imageroot/2017/10/18/2017.10.23mining_0.JPG" style="width: 500px; height: 245px;" /></strong></a></p> <p>One local who spoke with <a href="https://www.yahoo.com/news/venezuelans-bitcoin-mining-escape-inflation-020507653.html">AFP </a>said her mining rig is producing 20 to 25 litecoins per month.</p> <p><em><strong>&quot;Each litecoin is worth $46, that&#39;s $920 a month,&quot; </strong></em>said Veronica - a fortune in a country where the minimum monthly salary is 135,543 bolivars ($40), supplemented by a voucher of 189,000 bolivars ($56).</p> <p><a href="https://sg.news.yahoo.com/venezuelans-bitcoin-mining-escape-inflation-020507908.html">AFP </a>visited one office building in Caracas that has been converted into a clandestine mining operation, with more than 20 computers hard at work performing the cryptographic calculations necessary to unlock valuable blocks of digital currency.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Caracas (AFP) - Inside a locked room in an office building in Caracas, 20 humming computers use their data-crunching power to mine bitcoins, an increasingly popular tool in the fight against Venezuela&#39;s hyperinflation.</p> <p>&nbsp;</p> <p>In warehouses, offices and homes, miners are using modified computers to perform complex computations, essentially book-keeping for digital transactions worldwide, for which they earn a commission in bitcoins.</p> <p>&nbsp;</p> <p><strong>While practiced worldwide, Bitcoin mining is part of a growing, underground effort in Venezuela to escape the worst effects of a crippling economic and political crisis and runaway inflation that the IMF says could reach 720 percent this year. </strong></p> <p>&nbsp;</p> <p>Having no confidence in the bolivar and struggling to find dollars, many Venezuelans, who are neither computer geeks nor financial wizards, are relying on the bitcoin - currently valued around $6,050, or other virtual currencies.</p> </blockquote> <p>As international sanctions have left Venezuela starved for foreign currency, cryptocurrencies have provided one crucial means for the regular people of Venezuela - who arguably have been hardest hit by the sanctions despite marching in the streets and calling for the overthrow of the regime of President Nicolas Maduro - to avoid the consequences of the administration&rsquo;s economic mismanagement<strong>. Now, the question is will Venezuelans abandon the worthless bolivar in favor of relying solely on digital currencies.</strong></p> <p><a href="http://www.zerohedge.com/news/2017-08-13/could-bitcoin-help-venezuela-crisis-deepens">As we noted previously,</a> one trader, <a href="http://www.reuters.com/article/us-venezuela-bitcoin-idUSKCN0HX11O20141008">John Villar</a>, Caracas-based software developer, most eloquently stated<em> <strong>&quot;Bitcoin is a way of rebelling against the system.&quot; </strong></em>While the currency remained a niche form of payment in the country, many users purchased food and goods <a href="https://www.theguardian.com/technology/2016/dec/16/venezuela-bitcoin-economy-digital-currency-bolivars">online</a> through online marketplaces such as Amazon.com, albeit indirectly through gift cards purchased with the cryptocurrency.</p> <p><a href="https://www.cryptocoinsnews.com/venezuelans-keep-surviving-government-failures-thanks-bitcoin-cryptocurrencies/">Noel Alvarez</a>, former president of the Venezuelan Federation of Chambers of Commerce, stated that &ldquo;A maximum of one per cent of the population has access to it, but it is very useful in our situation.&rdquo;</p> <p><strong>Bitcoin&rsquo;s popularity in Venezuela continued to grow. It became the country&rsquo;s leading parallel currency. </strong>Some vendors even begun accepting Bitcoin exclusively. A popular online travel agency, <a href="https://www.cryptocoinsnews.com/destinia-exclusively-accepts-bitcoin-payments-venezuela-amid-financial-chaos/">Destinia</a>, cited that, due to the bolivar&rsquo;s instability and the trouble many Venezuelans experience when attempting to leave the country, &ldquo;Giving priority to Bitcoin as a payment method could be of help.&quot;</p> <p>While Destina admitted that Venezuela is not a primary focal point for their company, they chose to prioritize Bitcoin payments in the Venezuelan market to facilitate the travel needs of the people in light of the persisting economic downturn.</p> <p><strong>With infrastructure in place, trading and mining becoming more popular, and the crisis escalating, Maduro&rsquo;s government began to take notice.</strong></p> <h3><u><strong>Maduro</strong><strong>&rsquo;s War on Bitcoin</strong></u></h3> <p><strong>The Venezuelan government began to crack down on the Bitcoin community, with police extorting citizens for &ldquo;misusing electricity&rdquo; or undermining the country&rsquo;s economy. </strong>These grievances intensified over time, however, and the attack on miners became more apparent. In the largest raid, two miners were caught with <a href="http://reason.com/blog/2017/02/03/venezuela-surbitcoin-arrests-mining">11,000 mining computers</a> and were charged with cybercrime, electricity theft, exchange fraud, and even funding terrorism.</p> <p><strong>In Feb. 2017, following the incident, Surbitcoin, Venezuela&rsquo;s most popular exchange went offline. </strong>The company encouraged users to withdraw their money immediately as Banesco, the company&rsquo;s banking partner, was set to revoke the account associated with the exchange. <a href="http://www.econotimes.com/SurBitcoin-temporarily-suspends-services-amid-bitcoin-related-arrests-in-Venezuela-523633">Rodrigo Souza</a>, the founder and CEO of Surbitcoin, noted that &quot;When it was found that there were 11,000 mining computers consuming the energy to power a whole town at a time when there are severe electricity shortages, it triggered a reaction.&rdquo; Souza went on to say that the company was not contacted by the government, but Banesco revoked their account as it did not want to be associated with such an operation. Surbitcoin resumed operations two weeks following.</p> <p>We suspect it will not be long before Maduro takes further, tougher action against this &#39;subversive&#39; behavior.</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="571" height="280" alt="" src="http://www.zerohedge.com/sites/default/files/images/user245717/imageroot/2017.10.23mining.JPG?1508693203" /> </div> </div> </div> http://www.zerohedge.com/news/2017-10-22/number-bitcoin-miners-venezuela-swells-100000#comments Alternative currencies Bitcoin Bitcoin Cryptocurrencies Currency Digital currencies Digital currency Economics of bitcoin Finance Financial cryptography Hyperinflation International Monetary Fund Legality of bitcoin by country or territory Litecoin Maduro’s government Money Venezuela Venezuelan Federation of Chambers of Commerce Venezuelan government Mon, 23 Oct 2017 01:15:00 +0000 Tyler Durden 605770 at http://www.zerohedge.com Censorship In The Digital Age http://www.zerohedge.com/news/2017-10-22/censorship-digital-age <p><a href="https://www.counterpunch.org/2017/10/20/censorship-in-the-digital-age/"><em>Authord by Jason Hirthler via CounterPunch.org,</em></a></p> <p><strong>The grand experiment with western democracy, badly listing thanks to broadsides from profiteering oligarchs, may finally run ashore on the rocks of thought crime. </strong>In the uneven Steven Spielberg project <em>Minority Report</em>, starring excitable scientologist Tom Cruise, Cruise plays a futuristic policeman who investigates pre-crimes and stops them before they happen. The police owe their ability to see the criminal plots developing to characters called pre-cognitives, or pre-cogs, kind of autistic prophets who see the future and lie sleeping in sterile pools of water inside the police department. Of course, it turns out that precogs can pre-visualize different futures, a hastily hidden flaw that threatens to jeopardize the profits of the pre-crime project. Here is the crux of the story: thought control is driven by a profit motive at bottom. As it turns out, just like real life.</p> <p><strong>Now, the British government has decided to prosecute pre-crime</strong> but has done away with the clunky plot device of the pre-cogs, opting rather to rely on a hazy sense of higher probability to justify surveilling, nabbing, convicting, and imprisoning British citizens.<strong> The crime? Looking at radical content on the Internet.</strong> What is considered radical will naturally be defined by the state police who will doubtless be personally incentivized by pre-crime quotas, and institutionally shaped to criminalize trains of thought that threaten to destabilize a criminal status quo. You know, the unregulated monopoly capitalist regime that cuts wages, costs, and all other forms of overhead with psychopathic glee. Even a Grenfell Towers disaster is regarded more as a question of how to remove the story from public consciousness than rectify its wrongs.</p> <h3><u><em><strong>The Triple Evils </strong></em></u></h3> <p>Martin Luther King, Jr. famously, or infamously, depending on whether you are a penthouse mandarin or garden-variety prole, linked the triple evils of poverty, racism, and militarism. These evils are as yet unaddressed in our society, as we are daily shown on the media mouthpieces of imperial capitalism. Wars must be waged. Victims of social injustice must be incarcerated. Society itself must be made poor to ensure higher profits.</p> <p><strong>Yet there is another set of evils that are primarily used to mask the original trifecta outlined by King. In fact, the connection between propaganda, surveillance, and censorship is clear and inseparable. </strong>Take as your initial premise that imperial capitalists want to control the world. Not an unjustified claim. As an imperial capitalist, you are part of a privileged minority whose objective is to further <span style="color: #0563c1;"><span style="text-decoration: underline;"><a href="https://www.google.com/url?q=http://dissidentvoice.org/2014/11/energy-conflicts-and-differential-profits/&amp;usd=2&amp;usg=AFQjCNHTI2AnKCr-R7jk9QbZ6LU14GTRqg">exploit</a></span></span> the disenfranchised whose only recourse is the resources you are pillaging. War, be it with bombs or sanctions or special forces or proxies, is immensely profitable to the <span style="color: #0563c1;"><span style="text-decoration: underline;"><a href="https://www.amazon.com/War-Racket-Antiwar-Americas-Decorated/dp/1503081575/ref=pd_rhf_dp_3?_encoding=UTF8&amp;pd_rd_i=1503081575&amp;pd_rd_r=5AM0KSER0J6F98YZCS3E&amp;pd_rd_w=T9fsI&amp;pd_rd_wg=2dL5u&amp;psc=1&amp;refRID=5AM0KSER0J6F98YZCS3E">capitalists</a></span></span>. Arms makers make money. Chemical companies make money. Energy companies make money. Media companies make money. Presidents not only make money, they also make history. But the workers, the poor, and the downtrodden pay the price. That&rsquo;s why they won&rsquo;t be happy to hear of your plans. Therefore, they must be lied to, lied to so convincingly and comprehensively that they accept, without a second thought, the plans you have laid out before them.</p> <p><strong>This convincing requires three decisive actions: propaganda, surveillance, and censorship.</strong> The first is the official lie you craft to convince them to believe you. The second is the dragnet of digital observation by which you assess whether or not they do believe you. The third is the coercive methods by which you punish those that don&rsquo;t believe you (justified by the imperial tale you first wove).</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/10/22/20171022_censor1.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/10/22/20171022_censor1_0.jpg" style="width: 500px; height: 271px;" /></a></p> <p><strong>The official interpretation of reality is already in place: western civilization is beset on all sides by maniacs that want to take away our freedoms. </strong>The surveillance is already in place through programs like the Five Eyes alliance and ECHELON, PRISM, Boundless Informant, FISA, Stellar Wind, and many others. What remains is to tighten the noose of censorship around the neck of our open western societies.</p> <h3><u><em><strong>Idiots Abroad</strong></em></u></h3> <p><strong>To that end, British Home Secretary Amber Rudd recently announced that citizens that view too much extremist material online could face up to 15 years in jail. Rudd <a href="https://www.google.com/url?q=https://www.theguardian.com/uk-news/2017/oct/03/amber-rudd-viewers-of-online-terrorist-material-face-15-years-in-jail&amp;usd=2&amp;usg=AFQjCNFZj_QzdVILeKSwoHcPj-tZRyfOiA"><span style="color: #1155cc;"><span style="text-decoration: underline;">related</span></span></a>,</strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><span style="color: #333333;">&ldquo;I want to make sure those who view despicable terrorist content online, including jihadi websites, far-right propaganda and bomb-making instructions, face the full force of the law.&rdquo; </span></p> </blockquote> <p>This flaxen cipher of totalitarian control opened by tabulating some 67,000 tweets by ISIS, along with 44,000 links to ISIS propaganda, had been generated in the last year. Already, Section 58 of the Terrorist Act 2000 criminalized the possession of information that might be useful to a terrorist. But this is not enough for 10 Downing Street. Rudd is taking that law of possession and expanding it into a law of perception<strong>. It is now enough to simply watch extremist content. You needn&rsquo;t download it, distribute it, or otherwise act on it. </strong>You need only see it more than once. At that point, by Rudd&rsquo;s surely flawlessly calculated probabilities, you have become an existential threat to the state, or rather, to national security. You are more likely to commit acts of terror than those who have not seen the extremist content. Pre-crime without the pre-cogs.</p> <p><strong>But Rudd&rsquo;s was another step in a long line of encroachments peddled by fascist-minded western governments. </strong>Theresa May, the reviled Thatcherite epigone, <a href="https://www.google.com/url?q=https://www.independent.co.uk/life-style/gadgets-and-tech/news/theresa-may-internet-conservatives-government-a7744176.html&amp;usd=2&amp;usg=AFQjCNEUE0Mz08RR7isxi5Z_8YeA0yZwYg"><span style="color: #1155cc;"><span style="text-decoration: underline;">wants</span></span></a> to play a paternal role in preventing citizens from even having the chance to view extremist content. The Tory manifesto tells us, <span style="color: #281e1e;">&ldquo;Some people say that it is not for government to regulate when it comes to technology and the internet. We disagree.&rdquo; Britain plans, quite proudly it seems, to become the &ldquo;global leader&rdquo; in the regulation of the Internet. Just before these announcements were made, Britain had passed the Investigatory Powers Act, which lets the government sweep up user browsing histories. So the surveillance data authorities would use to implement Rudd&rsquo;s plan is already there. Want to read that eloquent jeremiad against the Tories? Sorry, that was just labeled hate speech. </span>Want to visit your favorite leftist forum? Apologies, mate, but that was deemed a &ldquo;safe space&rdquo; for extremist speech and shut down. <span style="color: #281e1e;">Want to watch some attractive young people copulate? No problem. Just submit a request to your local minister outlining your precise reasons for wanting access to such nominally proscribed content. Otherwise, forget it. </span></p> <p><strong>The Germans aren&rsquo;t far <a href="http://www.wsws.org/en/articles/2017/10/05/cens-o05.html"><span style="color: #1155cc;"><span style="text-decoration: underline;">behind</span></span></a>.</strong> The so-called Network Enforcement Act is said to create a framework for managing Internet activity, particularly in social media. The act is part of the country&rsquo;s fake fight against fake news and hate speech, or rather its quite real fight against progressive, leftist, or communist thought and expression. This law demands, on pain of a fifty million euro penalty, that companies with two million or more web visitors must, on receipt of complaint, remove &ldquo;unlawful content&rdquo; from their sites. Facebook has opened a new data center in Germany to deal with removal requests, sure to be flooding in from the Bundestag. As the <em>World Socialist Web Site</em> <a href="https://www.google.com/url?q=http://www.wsws.org/en/articles/2017/10/05/cens-o05.html&amp;usd=2&amp;usg=AFQjCNHqS0NdhPR6c6teL__1-EgQ9QBpAg"><span style="color: #1155cc;"><span style="text-decoration: underline;">makes</span></span></a> clear, if your fake news promotes war (Iraq 2003), mischaracterizes coup d&rsquo;états (Ukraine 2014), or spreads anti-immigrant hysteria (Cologne 2015), then you&rsquo;ve got nothing to fear. Of course, it falls to the government itself to decide what is and what isn&rsquo;t extremist content, no doubt a comforting thought for myriad <em>Der Spiegel</em> loyalists. And, of course, the erstwhile European Commission, destroyer of Greece and perpetrator of other ills, has published guidelines to help member states <a href="http://www.wsws.org/en/articles/2017/10/05/cens-o05.html"><span style="color: #1155cc;"><span style="text-decoration: underline;">remove</span></span></a> &ldquo;illegal&rdquo; content. Even the Russians have joined in, promoting legislation designed to curtail digital freedoms.</p> <h3><u><em><strong>Stateside Schlemiels </strong></em></u></h3> <p><strong>None of this would be news to Barack Obama, whose own legacy of crumpled writs of habeas corpus, worthless privacy platitudes, and high-altitude wetwork, sits like a canker on the body politic.</strong> On his way out the door, through the turnstile of public weal into private gain, he provided the deep state with millions of dollars when he <a href="https://blackagendareport.com/obama%27s_propaganda_gift_to_trump"><span style="color: #1155cc;"><span style="text-decoration: underline;">added</span></span></a> the Countering Disinformation and Propaganda Act to the annual National Defense Authorization Act (NDAA), which consecrates black budgets, cost overruns, price gouging, and all other manner of insecurity practiced by the Pentagon and its parasitic defense contractor community. The CDPA, if that&rsquo;s how it will eventually be known, will effectively pay people to generate officially sanctioned narratives. The U.S. government is fighting fact by calling it propaganda and then producing its own propaganda and calling it fact.</p> <p>Thanks in part to pressure from Congressional Senate Intelligence Committee that, and the indefatigable efforts of Democrats Adam Schiff and Mark Warner, major brands have been hopping on the clanging tumbrel of Russiagate, as it wheels unsteadily through the digital space, collecting the corpses of freethinkers. <strong>Facebook is now blocking &ldquo;fake news&rdquo; from its ads. YouTube has begun to fetter content producers with a <a href="https://www.upi.com/YouTube-cracks-down-on-fake-news-channels-with-ad-changes/9691491519947/"><span style="color: #1155cc;"><span style="text-decoration: underline;">more</span></span></a> restrictive ad network and murky review policies. Google has tweaked its algorithm to keep &ldquo;fake news&rdquo; from surfacing high in Search Engine Results Pages, or SERPS.</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/10/22/20171022_censor.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/10/22/20171022_censor.jpg" style="width: 499px; height: 276px;" /></a></p> <p><strong>What precisely constitutes fake news is evidently up to the Zuckerbergs and Schmidts of the world. </strong>For Google, it has decidedly meant suppressing progressive and left-wing content, as plummeting traffic numbers have <a href="https://www.wsws.org/en/articles/2017/07/27/goog-j27.html"><span style="color: #1155cc;"><span style="text-decoration: underline;">indicated</span></span></a>. Of course, it won&rsquo;t mean suppressing the fake news produced by the <a href="https://www.google.com/url?q=http://www.carlbernstein.com/magazine_cia_and_media.php&amp;usd=2&amp;usg=AFQjCNHON7jlQCMDwwjSFbBPcVSnSe_BOQ"><span style="color: #1155cc;"><span style="text-decoration: underline;">CIA</span></span></a> or <a href="http://www.newspublica.com/blog/systematic-fake-news-planted-britains-intelligence-services-mi5/"><span style="color: #1155cc;"><span style="text-decoration: underline;">Mi5</span></span></a> or the <a href="https://www.google.com/url?q=https://www.youtube.com/watch%3Fv%3DlsAwJMptq1Y%26t%3D88s&amp;usd=2&amp;usg=AFQjCNERpekdOnJr026zi_aEqyA3fY3Qaw"><span style="color: #1155cc;"><span style="text-decoration: underline;">standard</span></span></a> state-fluffing smorgasbord of lies, <a href="https://www.google.com/url?q=http://www.moonofalabama.org/2017/05/it-is-fakenews-day-on-north-korea-syria-and-the-us-president.html%23more&amp;usd=2&amp;usg=AFQjCNGjtcsKbCcPcdqjah3ynESwMn7vww"><span style="color: #1155cc;"><span style="text-decoration: underline;">deceits</span></span></a> and hit jobs offered up by the so-called mainstream media.</p> <p>The always sharp Glen Ford at <em>Black Agenda Report</em> <span style="color: #0563c1;"><span style="text-decoration: underline;"><a href="https://www.google.com/url?q=https://blackagendareport.com/fbi-targets-black-ideology&amp;usd=2&amp;usg=AFQjCNFd0KAYV3q0uEDcxbvFIu3z1-zx4g">writes</a></span></span> that the FBI has created a fresh construct to deal with African-American unrest, called, &ldquo;Black Identity Extremism,&rdquo; already truncated into another mind-murdering acronym, BIE. (As though an acronym adds just the note of tenability required to pass off a fatuity on a mal-educated populace.) <em>Foreign Policy</em>, in an otherwise surprisingly liberal-minded story, <span style="color: #0563c1;"><span style="text-decoration: underline;"><a href="https://www.google.com/url?q=http://foreignpolicy.com/2017/10/06/the-fbi-has-identified-a-new-domestic-terrorist-threat-and-its-black-identity-extremists/&amp;usd=2&amp;usg=AFQjCNHomyVyI0tkO2ASuxEgKyKHPcU1Zw">suggests</a></span></span> the construct risks reviving the racism the agency has worked so hard to overcome. Ford drily notes the overlooked matter of J. Edgar Hoover targeting blacks since the 1920s, not to mention COINTELPRO and attacks on the Black Panthers. Regardless, in the eyes of the FBI, blacks angry about police abuses, persistent economic inequalities, and the <span style="color: #0563c1;"><span style="text-decoration: underline;"><a href="https://www.amazon.com/New-Jim-Crow-Michelle-Alexander-ebook/dp/B0067NCQVU/ref=sr_1_1?ie=UTF8&amp;qid=1508177953&amp;sr=8-1&amp;keywords=the+new+jim+crow">New Jim Crow</a></span></span>, are little more than &ldquo;identity extremists,&rdquo; a danger to national security, notably the security of the white plutocracy which it serves.</p> <h3><u><em><strong>(Fore) Closing Thoughts</strong></em></u></h3> <p><strong>Remember that much of this apparatus of thought control has been applied beneath the banner of the fake Russia hacking story.</strong> That story, created by the Clinton camp to distract from the DNC email revelations provided by WikiLeaks, at first blamed Russia for hacking into &ldquo;our democracy&rdquo;, then suggested Donald Trump had colluded with Russia to swing the election, and then emphasized that Russia had launched an &ldquo;influence campaign&rdquo; designed to swing the election, with the focus subtly shifting from hacking to collusion to influence. At each turn, the evidence proves paltry, the claims absurd, and the virtue signaling nauseating. <strong><em>The bar is being progressively lowered until it meets a threshold of credibility by which the Senate Intel Committee can prosecute Donald Trump or justify some sort of punitive measures against Russia.</em></strong></p> <p><strong>The story is so transparently <a href="https://www.google.com/url?q=https://consortiumnews.com/2017/10/10/russia-gate-jumps-the-shark/&amp;usd=2&amp;usg=AFQjCNGrGw-c4Zm0qhGNRngw0C3buB56Yw"><span style="color: #1155cc;"><span style="text-decoration: underline;">false</span></span></a>, from the technical <a href="https://www.google.com/url?q=https://www.thenation.com/article/a-new-report-raises-big-questions-about-last-years-dnc-hack/&amp;usd=2&amp;usg=AFQjCNEXBvP5blhICAxViD4jtn9E0wYpGw"><span style="color: #1155cc;"><span style="text-decoration: underline;">detail</span></span></a> to the geopolitical motive, that it is only sustained by the permanent - or deep state - elements of the foreign policy community that need a means by which to control and direct the Trump administration.</strong> Russia collusion served as an ideal pretext to force Trump away from campaign-trail odes to conciliation and toward a continuation of the hostile foreign policies glibly enabled and advanced by Barack Obama. The comedy of it all is that Facebook found &lsquo;incriminating&rsquo; ads that amounted to less than one percent of the Facebook total ad buys. Congress would like to ban RT, which has ratings that are 0.3 percent of Judge Judy&rsquo;s. And the infamous hack has been shown to be a leak. What are we left with? A grandiose deceit based on a need to sustain a brutal ideology of oppression, austerity, and war.</p> <p><strong>But this is how the imperialists do it. They organize globally to oppress locally.</strong> That&rsquo;s why they&rsquo;ve been rightly rebranded as &lsquo;the globalists&rsquo;. The workers always trail behind, left to cope with recently discovered alliances of institutional powers collaborating to fence in the prospects for economic equality, social justice, and the fair distribution of a nation&rsquo;s wealth. We find ourselves beneath the a pregnant cloud of metastasizing repression, conceived and constructed beneath our own gaze. In his recent novel <a href="http://www.amazon.com/exec/obidos/ASIN/125009710X/counterpunchmaga"><em>Purity</em></a>, one of author Jonathan Franzen&rsquo;s characters, a famous East German exile and whistleblower extraordinaire (a more charismatic Assange), finds himself a global celebrity, the subject of countless interviews wherein,</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;&hellip;he&rsquo;d taken to dropping the word <em>totalitarian</em>. Younger interviewers, to whom the word meant total surveillance, total mind control, gray armies in parade with medium-range missiles, had understood him to be saying something unfair about the Internet. In fact, he simply meant a system that was impossible to opt out of.&rdquo;</p> </blockquote> <p><strong>Whether it is too late for a world of working class people and the ubiquitous poor to opt out of the globalized imperium dreamed up by our post-war planners, is hard to say</strong>. But if you think there&rsquo;s still time, be extremely careful, since the pre-crime police are nearly omnipresent, and they might overhear you quoting Marx or see you scrawling ideas about redistribution on the walls of some abandoned underpass. Just imagine some future advertisement for the pre-crime program, a glistening LCD ad floating between skyscrapers, a smiling family at play, a nation secure, and an omniscient narrator softly reminding you, <u><em><strong>&ldquo;Don&rsquo;t forget&mdash;it&rsquo;s the thought that counts.&rdquo;</strong></em></u></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="772" height="418" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20171022_censor1.jpg?1508705047" /> </div> </div> </div> http://www.zerohedge.com/news/2017-10-22/censorship-digital-age#comments Amber Rudd Barack Obama British government Censorship Central Intelligence Agency Congress Congressional Senate Intelligence Committee Crime Crime prevention Democrats Donald Trump European Commission Fake news FBI Federal Bureau of Investigation Ford Germany Google Greece Iraq Law enforcement Mandarin national security None Pentagon PrISM Privacy Propaganda Propaganda techniques ratings Reality search engine Security Senate Intel Committee state police Terrorism Tom Cruise Trump Administration Ukraine US government Violence Mon, 23 Oct 2017 00:45:00 +0000 Tyler Durden 605780 at http://www.zerohedge.com Air Force To Recall Up To 1,000 Retired Military Pilots After Trump Unexpectedly Revises Sept 11 Executive Order http://www.zerohedge.com/news/2017-10-22/trump-revises-sept-11-executive-order-recall-1000-retired-pilots <p>In an unexpected development, President Donald <strong>Trump has signed an executive order allowing the Air Force to recall up to 1,000 retired pilots to address what the Pentagon has decribed as &quot;an acute shortage of pilots,&quot;</strong> <a href="http://www.foxnews.com/politics/2017/10/21/air-force-could-recall-up-to-1000-retired-pilots-after-trump-order.html">Fox News </a>reported.</p> <p>The order, which Trump signed Friday, <strong>amends an emergency declaration signed by George W. Bush in the days after the Sept. 11, 2001 terror attacks.</strong> The Air Force is only allowed to recall up to 25 pilots under current law. The order signed by Trump temporarily removes that cap for all branches of the military.</p> <p>A Pentagon spokesman, Navy Cmdr. Gary Ross, said in a statement that<strong> the Air Force is currently &quot;short approximately 1,500 pilots of its requirements.&quot; </strong>That number includes approximately 1,200 fighter pilots.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;We anticipate that the Secretary of Defense will delegate the authority to the Secretary of the Air Force to recall up to 1,000 retired pilots for up to 3 years,&quot; Ross said.</p> <p>&nbsp;</p> <p>&quot;The pilot supply shortage is a national level challenge that could have adverse effects on all aspects of both the government and commercial aviation sectors for years to come.&quot;</p> </blockquote> <p><a href="http://www.zerohedge.com/sites/default/files/images/user245717/imageroot/2017/10/18/2017.10.23pilots.JPG"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user245717/imageroot/2017/10/18/2017.10.23pilots_0.JPG" style="width: 500px; height: 247px;" /></a></p> <p>Currently, the Air Force has no plans to take advantage of the recall.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>&ldquo;The Air Force does not currently intend to recall retired pilots to address the pilot shortage. We appreciate the authorities and flexibility delegated to us,&rdquo;</strong> Ann Stefanek, an Air Force spokeswoman, told Fox News.</p> </blockquote> <p>Now, the question is, will the order inspire some retired pilots to come out of retirement voluntarily, like this guy.</p> <p><iframe allowfullscreen="" frameborder="0" height="315" src="https://www.youtube.com/embed/OmhGrJJjI7E" width="560"></iframe></p> <p><u><strong>Read the full text of the order below:</strong></u></p> <p>By the authority vested in me as President by the Constitution and the laws of the United States of America, including the National Emergencies Act (50 U.S.C. 1601 et seq.), and in furtherance of the objectives of Proclamation 7463 of September 14, 2001 (Declaration of National Emergency by Reason of Certain Terrorist Attacks), which declared a national emergency by reason of the terrorist attacks of September 11, 2001, in New York and Pennsylvania and against the Pentagon, and the continuing and immediate threat of further attacks on the United States, and in order to provide the Secretary of Defense additional authority to manage personnel requirements in a manner consistent with the authorization provided in Executive Order 13223 of September 14, 2001 (Ordering the Ready Reserve of the Armed Forces to Active Duty and Delegating Certain Authorities to the Secretary of Defense and the Secretary of Transportation), it is hereby ordered as follows:</p> <p>Section 1. Amendment to Executive Order 13223. Section 1 of Executive Order 13223 is amended by adding at the end: &quot;The authorities available for use during a national emergency under sections 688 and 690 of title 10, United States Code, are also invoked and made available, according to their terms, to the Secretary concerned, subject in the case of the Secretaries of the Army, Navy, and Air Force, to the direction of the Secretary of Defense.&quot;</p> <p>Sec. 2. General Provisions. (a) Nothing in this order shall be construed to impair or otherwise affect:</p> <p>the authority granted by law to an executive department or agency, or the head thereof; or</p> <p>(ii) the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.</p> <p>(b) This order shall be implemented consistent with applicable law and subject to the availability of appropriations.</p> <p>(c) This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.</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="823" height="407" alt="" src="http://www.zerohedge.com/sites/default/files/images/user245717/imageroot/2017.10.23pilots.JPG?1508692029" /> </div> </div> </div> http://www.zerohedge.com/news/2017-10-22/trump-revises-sept-11-executive-order-recall-1000-retired-pilots#comments Air Force army B+ Donald Trump Fox News Islamic terrorism in the United States Law Law enforcement office of Management and Budget Pentagon Politics Presidency of George W. Bush September 11 attacks State of emergency The Pentagon U.S. Securities and Exchange Commission United States United States Secretary of Defense Virginia War Mon, 23 Oct 2017 00:41:32 +0000 Tyler Durden 605768 at http://www.zerohedge.com IceCap Asset Management: "We Are About To Witness The Financial Market Movement Of A Lifetime" http://www.zerohedge.com/news/2017-10-22/icecap-asset-management-we-are-about-witness-financial-market-movement-lifetime <p><em>IceCap Asset Management's Monthly outlook on global investment markets: October 2017, submitted by Keith Decker of IceCap Asset Management</em></p> <p><span style="text-decoration: underline;"><strong>“Should I Stay or Should I Go?”</strong></span></p> <p>Darlin’ you got to let me know</p> <p>During the 1970s, The Clash pushed rock and roll to the edge. Their hard charging, explosive, and anger-filled style, inspired spiked hair, rocked generations and forced people to question conventional thinking. </p> <p>Along the way, they rocked the casbah. They called London. They got lost in a super market and then they went straight to hell. </p> <p>For many – The Clash was the only band that mattered. </p> <p>For investors, they are more – much more. </p> <p>Today, as investors around the world become increasingly anxious, one of the greatest Clash songs of all time is making a comeback. In board rooms, on trade desks, in living rooms and around kitchen tables – investors everywhere are nervously singing “Should I Stay or Should I go.” Stock market investors are nervous. Housing market investors are nervous. Gold and oil investors are nervous. US Dollar and Euro investors are nervous too.</p> <p>After all, avoiding near-certain losses should be the most important goal for every investor. </p> <p>Yet, the confusion today is that practically every talking and writing head has declared everything to be at extreme risk levels. In reality, everything cannot decline at once – money and capital just doesn’t move that way. </p> <p>Yet, as chaos continues to engulf our world, traditional investment metrics seemingly make less and less sense. </p> <p>And once you understand this all important fact – then and only then, will you be able to ignore the hyperbole, tune out the 24-7 talking heads, and dismiss the irrelevant quarterly commentaries from the big bank mutual funds. </p> <p>For investors, these are exciting times. Markets are on the cusp of some of the most dramatic movements we’ve (n)ever seen. </p> <p>In this latest IceCap Global Outlook, we examine where and why you should be nervous, what to do, and along the way – sing and enjoy the show.</p> <p><strong>The Stock Market</strong></p> <p> What can we say – there’s an awful lot of people out there saying an awful lot of awful things about the stock market. The central theme or reason for these negative views is entirely based upon stock market valuation. This view is of course wrong. And to understand why, first you must understand the background supporting these awful claims. For starters, many who proclaim stock investors are living on the edge, have actually been living on the edge themselves. </p> <p>Many of these bearish investors have shockingly been out of the stock market since the 2008 crash, with others selling out just a few years later. Investors must know that despite the marketing machines, the Hollywood movies, and the internets – many investment managers are simple humans; full of emotion, full of pride, and perhaps worst of all – more stubborn than a goat. </p> <p>Yes, many managers today are not insensitive, objective androids possessing the gift, the ability, the process and the flexibility to change their investment mind.</p> <p><em>Instead – investment managers can be slotted into 3 groups: </em></p> <p><strong>Group 1 </strong>– this manager works for a mega-big investment firm, that is typically a part of an even bigger firm – a bank. These firms are devoid of dynamic thinking. All peripheral visions have been checked at the door. Client money comes in through the same door and then it is always invested the same way, with no consideration of any significant and obvious events on the horizon. </p> <p>These managers have no market view, and if for some strange reason they possessed a market view, the compliance and enterprise risk management departments would sniff it out and exterminate it faster than a speeding macchiato. These firms did not see the tech bubble breaking until it was too late. These same firms did not see the housing bubble breaking until it was too late. </p> <p>And, today these same firms continue to whistle, Disney-themed tunes as the world passes them bye. </p> <p><strong>Group 2 </strong>– these managers were burnt badly by the last crisis and therefore continue to fight the last war. In many ways - these managers are to be commended. They understand risk. They understand how the loss of capital can be devastating for their clients.</p> <p>These managers have really nice intentions. Yet their deepest concerns about another stock market crash has kept them out of stocks during one of the largest rallies in stock market history. </p> <p>These managers are so geared towards another market crash that they epitomize confirmation bias. Every single waking hour, day and week – which have turned into months and now years are spent agonizing over how markets are not correctly priced. </p> <p>The confirmation bias first begins with showing how stocks are more expensive today than they were immediately before the 2008 crash and immediately before the 2000 crash.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/21/ice1.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/21/ice1_0.jpg" width="500" height="286" /></a></p> <p>And since stocks are more expensive today than compared to immediately before the 2000 and 2008 bubbles, then stocks must therefore be on the verge of crashing yet again. </p> <p>But they haven’t. Another commonly trolled chart shows the VIX or market fear index:</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/21/ice2.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/21/ice2_0.jpg" width="500" height="262" /></a></p> <p>And since this data point shows current markets are also at the exact same level as they were prior to the 2000 and 2008 bubbles, then stocks therefore must also be on the verge of cracking again. </p> <p>But they haven’t. </p> <p>Next, the stock bears whip out charts showing the deterioration in Consumer Credit, the effect of Stock Buy Backs on Earnings per Share, record high profit margins, lower trending GDP, Donald Trump, Brexit, Marine Le Penn, North Korea, Russia, and the beat goes on. </p> <p>Yet, stocks continue to defy gravity. </p> <p>Then there’s the money printing, zero interest rates, negative interest rates, financial oppression, and the socialized bad debt. </p> <p>And yet, stock markets just won’t go down. In fact, not only will stocks not go down, but they continue to go up. </p> <p>Yes – it’s confusing. But it’s only confusing for those using linear thinking, one-dimensional perspectives, and the refusal to consider that maybe there’s something else a foot. Here at IceCap, we completely agree with this negative assessment of all the above factors. </p> <p><em>Yes, on a stand alone and consolidated basis, a stock market specific focus concludes nothing good is about to happen. Yet – this is the very point that is completely missed by managers in Group 2. They absolutely refuse to even consider for a moment that their analysis of risk is correct BUT maybe the risk will not be reflected in the stock market. </em></p> <p>Throughout all of these negative reports and analysis, one major point is missing – the consideration that all of the risk in the world today certainly does exist, yet this risk lies within a market completely different than the stock market. </p> <p>And since, none of these managers in Group 2 believe a major risk can ever occur outside of the stock market – then it is completely missed and dismissed. </p> <p>Whereas the managers in Group 2 are singularly focused on the stock market, other managers have assessed the exact same global macro dynamics but came to a different conclusion as to where the risk really lies. </p> <p>Which naturally brings us to investment managers in Group 3. </p> <p><strong>Group 3 </strong>– in many ways, these managers are similar to those in Group 2. They also have terrific intentions, possess a laser-like attention to avoiding capital losses, and a strongly held belief that markets can be pushed and pulled into extreme positions. </p> <p>Yet, the difference between the two groups lies in the ability to remain asset class agnostic. Whereas the managers in Group 2 are solely focused on the stock market as being the center of all evil. </p> <p>Managers in Group 3 believe that at different times, any market can be either good or evil. What we mean by this, is that these managers in Group 3 never fall in or out of love with any investment market. Just as there are times to embrace and avoid stocks, the same is true for bonds, gold, currencies and different commodities. When market conditions change, so too will the investment view of these managers. But the key point to understanding this seemingly obvious expectation – and is completely missed by those managers in Group 2; all markets are interconnected. </p> <p>In other words, stock markets cannot move in isolation without impacting other markets. And of the utmost importance – other markets cannot move in isolation without impacting the stock market. </p> <p><em>And, perhaps the single, biggest revelation of all and commonly missed by many – the financial world does not revolve around the stock market. </em></p> <p>Yes, the global stock market is big. But it is dwarfed by bond markets, interest rate markets and currency markets. Walk onto the trading floor of any major bank and you’ll see that over 75% of the floor is dedicated to bond, interest rate &amp; currency trading.</p> <p>The remaining sliver is for the stock market. </p> <p>Believing the stock market is the king of the hill, is akin to believing the tail wags the dog. Understanding this all important point, will help you see the why the conclusion of the managers in Group 2 has been wrong. Whether they realise it or not, all of their analysis has assumed that everything is fine in the bond, interest rate and currency world. </p> <p>The reason for this is quite obvious. For many, the stumbling block today is the fact that during the past 35 years – every market crisis has eventually manifested itself in the stock market. And since few in the industry today have worked beyond the last 35 years, then they inherently believe that every crisis is eventually reflected in the stock market. </p> <p>Here at IceCap, we clearly see that today’s global financial world contains risk unlike anything we’ve seen before in our lifetime. After all, 35 years of accumulated effects of central bank policies, bailouts, fiscal deficits, and excessive borrowings have culminated in today’s rather awkward financial position. Yet, the culmination of these awkward moments, lies in the fact that central banks and their craft have finally hit rock bottom. And in the confusing world of bonds, interest rates, debt and currencies – hitting rock bottom is really the opposite of what you’d expect. </p> <p>It is bad. </p> <p>The reason it is bad, is because when interest rates are falling – the bond market zooms higher and higher. </p> <p>Reality is also true. When interest rates begin to zoom higher – the bond market drops like a stone. And because this stone is multiple times bigger than the stock market, the ripples turn into waves that will gush investors out of the bond market seeking safety. And contrary to every manager in Group 2 – this safety zone will be the USD, gold and yes, the stock market. </p> <p>So, to answer the classic question from The Clash about the stock market – absolutely stay. The ride will be a bit rough, but it will be nothing compared to what is about to happen in the bond market.</p> <p><strong>The Bond Market: It’s coming. </strong></p> <p>And when it hits, it is going to be a doozy. The global bond market is on the verge of doing something never before seen in our lifetime. Of course, the trick to seeing and understanding this certain risk is simply acknowledging the length of your current investment experience. Just because something hasn’t occurred over the last 35 years, doesn’t mean it can never happen. </p> <p>The near-complete lack of acceptance of a bond bubble is partly due in course to the fact that over the past 35 years, the investing world has only ever seen crises in the stock market. To understand why investors see it this way, see Chart 1 below. </p> <p><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/21/ice3_1_0.jpg" width="500" height="264" /></p> <p>The chart shows the history of long-term interest rates in the United States from 1962 to 2017. <em>Note how from 1962 to 1982, long-term interest rates increased from 3% all the way up to 16%. </em>During this 20 year period of rising long-term rates, financial markets were a disaster. No one made money. Stock investors lost money. And bond investors lost a lot of money.</p> <p><span style="text-decoration: underline;"><strong>If I go, there will be trouble</strong></span></p> <p>Life was so bad – especially for bond investors, <strong>that by the time 1982 rolled around you couldn’t give a bond away. </strong>If you were an investor or working in the investment industry at the time – you were painfully aware of the bond market and you were schooled to never, ever buy a bond again. </p> <p>Of course, 1982 was actually the best time ever to buy a bond. With long-term rates dropping like a stone over the next 35 years, bond investors and bond managers became known as the smartest people in the room. But, that was then and this is now. There are 2 points to remember forever here:</p> <p>1) What goes down, must come up</p> <p>2) There’s no one around today to remind us of what life was like for bond investors when long-term rates marched relentlessly higher </p> <p>Interest rates are secular. And with interest rates today already hitting the theoretical 0% level – they have started to rise. And when long-term rates begin to rise, (unlike short-term rates) it happens in a snapping, violent manner. Neither of which is good for bond investors.</p> <p><em>Of course, there’s another important point to consider, the rise in long-rates from 1962 to 1982 occurred when there wasn’t a debt crisis in the developed world. </em></p> <p>And since 99% of the industry has only worked since 1982 to today, then 99% of the industry has never experienced, lived or even dreamt of a crisis in the bond market. </p> <p>This of course is the primary reason why all the negative stories about the stock market are alive and well played out in the media – they simply don’t know any better. </p> <p>And this is wrong. Very wrong. After all, the bond bubble dwarfs the tech bubble and the housing bubble. Think about it.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/21/ice4.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/21/ice4_0.jpg" width="500" height="293" /></a></p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>And if I stay it will be double</strong></span></p> <p>To grasp why the bond market is on the verge of crisis, and why trillions of Dollars, Euros, Yen and Pounds are about to panic and run away, we ask you to understand how free-markets really work. </p> <p>For starters, all free markets have two sides competing and participating. </p> <p>There are natural buyers and there are natural sellers. The point at which they meet in the middle is the selling/purchase price and the entire process is called price discovery. </p> <p>Price discovery is a wonderful thing. It always results in the determination of a true price for a product or service. However, a big problem arises when there is an imbalance between the buyers and sellers, and when one of the sides isn’t a natural buyer or seller. </p> <p>This is what has happened in the bond market. And this is why bond prices (or yields) have become so distorted; the true price of a bond hasn’t existed now for almost 9 years. When the 2008-09 housing crisis crippled the world, central banks decided they would help the world recover by providing stimulus. </p> <p>The stimulus to be provided was in the form of Quantitative Easing, or money printing.</p> <p>What happened next has long been forgotten by the majority of the market, and is the prime reason why so few today understand and appreciate the magnitude of the stress that has been created in the bond market. </p> <p>When the central banks printed money, they actually used this printed money to buy government bonds. </p> <p>And with central banks suddenly becoming “buyers” of government bonds, the number of “buyers” in the bond market had instantly increased. </p> <p>And with the number of buyers increasing, the price of bonds increased – which caused long-term interest rates to come down. [note that in the bond world, when prices go up, interest rates go down, and vice-versa]. </p> <p>In effect, the global adoption of Quantitative Easing/Money Printing meant the entire price discovery process would become suspended. </p> <p>And with a suspended price discovery process, the real or true price for bonds, has not been seen for 9 years. The big point here, and it’s especially big in Europe – the elimination of the price discovery process has resulted in all countries paying lower rates of interest when they borrow.</p> <p><span style="text-decoration: underline;"><strong>So come on and let me know</strong></span></p> <p>Which, to the average person may seem good. After all, paying lower rates of interest has to be a good thing. </p> <p>But it isn’t. </p> <p>Instead, the manipulation of the global yield curve has created an interest rate environment that has become so stretched, shredded and tattered – that even the slightest hint of an end to this financial nirvana is enough to send investors off the deep end. </p> <p>Case in point - over the last year, we’ve seen the most significant market reaction in the history of the bond world, not once but twice. Yet, the talking heads, the big banks and their mutual fund commentaries, and the stock market focused world have completely missed it. </p> <p>Almost a year ago in November immediately after the American Election, over a span of 54 hours – the bond market blew up. </p> <p>To put things into perspective, Chart 2 shows what happened during those fateful days. Ignoring the why’s, the how’s and the who’s – the fact remains that this tiny, miniscule increase in long-term interest rates caused the bond market to vomit over itself.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/21/ice%20chart%202.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/21/ice%20chart%202_0.jpg" width="500" height="313" /></a></p> <p>Yes, a +0.7% increase in the US 10-Year Treasury market yield created chaos, havoc and over $1.7 Trillion in losses around the world. </p> <p>We’ve spoken before how we had meetings the day after with the world’s largest bond manager and they described the previous few days as registering an 8 out of 10 on the holy smokes scale. Let that sink in. </p> <p><strong>This +0.7% increase in long-term rates caused this bond behemoth to go down for an 8-count. Folks – this is not reassuring.</strong></p> <p>* * * </p> <p><em>Much more in the full presentation below:</em></p> <p><iframe src="https://www.scribd.com/embeds/362309486/content?start_page=1&amp;view_mode=scroll&amp;access_key=key-tUg7nu3I9NjCZVp3tt8F&amp;show_recommendations=true" width="100%" height="600" frameborder="0" scrolling="no"></iframe></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="781" height="446" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/ice1.jpg?1508715105" /> </div> </div> </div> http://www.zerohedge.com/news/2017-10-22/icecap-asset-management-we-are-about-witness-financial-market-movement-lifetime#comments Bond Bond Business Central Banks Consumer Credit Corporate finance Donald Trump Economic bubble Economy Finance Financial markets Fixed income Futures contract Housing Bubble Housing Market laser Market Conditions Market Crash Money None North Korea Quantitative Easing Reality Risk Management Short Stock Stock market Yen Yield Curve Yield curve Mon, 23 Oct 2017 00:13:28 +0000 Tyler Durden 605787 at http://www.zerohedge.com For The First Time In 26 Years, US To Put Nuclear Bombers On 24 Hour Alert http://www.zerohedge.com/news/2017-10-22/us-put-nuclear-bombers-24-hour-alert-first-time-26-years <p>The unexpected decision by President Trump to <a href="http://www.zerohedge.com/news/2017-10-22/trump-revises-sept-11-executive-order-recall-1000-retired-pilots">amend an emergency Sept 11 order signed </a>by George W Bush, allowing the Air Force to recall up to 1,000 retired air force pilots to address what the Pentagon has decribed as "an acute shortage of pilots" caught us by surprise. After all, this was the first time we have heard of this particular labor shortage - perhaps there was more to this executive order than meets the eye. Indeed, a just released report may help explain the reasoning behind this presidential decision. </p> <p>According to <a href="http://www.defenseone.com/threats/2017/10/exclusive-us-preparing-put-nuclear-bombers-back-24-hour-alert/141957/">Defense One, </a><strong>the US Air Force is preparing to put nuclear-armed bombers back on 24-hour ready alert, a status not seen since the Cold War ended in 1991. </strong></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>&nbsp;</strong>That means the long-dormant concrete pads at the ends of Barksdale Air Force Base's 11,000-foot runway — dubbed the “Christmas tree” for their angular markings — could once again find several B-52s parked on them, laden with nuclear weapons and set to take off at a moment’s notice.</p> </blockquote> <p><strong>“This is yet one more step in ensuring that we’re prepared,” </strong>Gen. David Goldfein, Air Force chief of staff, told the publication in an interview during his six-day tour of Barksdale and other U.S. Air Force bases that support the nuclear mission. “<strong>I look at it more as not planning for any specific event, but more for the reality of the global situation we find ourselves in and how we ensure we’re prepared going forward.”</strong></p> <p>Quoted by Defense One, Goldfein and other senior defense officials stressed that the alert order had not been given, but that preparations were under way in anticipation that it might come. That decision would be made by Gen. John Hyten, the commander of U.S. Strategic Command, or Gen. Lori Robinson, the head of U.S. Northern Command. STRATCOM is in charge of the military’s nuclear forces and NORTHCOM is in charge of defending North America.</p> <p>Putting the B-52s back on alert is just one of many decisions facing the Air Force as the U.S. military responds to a changing geopolitical environment that includes North Korea’s rapidly advancing nuclear arsenal, President Trump’s confrontational approach to Pyongyang, and Russia’s increasingly potent and active armed forces.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/21/nuclear%20bombers.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/21/nuclear%20bombers_0.jpg" width="500" height="229" /></a></p> <p>Goldfein, who is the Air Force’s top officer and a member of the Joint Chiefs of Staff, <strong>is asking his force to think about new ways that nuclear weapons could be used for deterrence, or even combat. </strong></p> <p>Quoted by Def One, he said that “the world is a dangerous place and we’ve got folks that are talking openly about use of nuclear weapons. It’s no longer a bipolar world where it’s just us and the Soviet Union. <strong>We’ve got other players out there who have nuclear capability. It’s never been more important to make sure that we get this mission right.” </strong>During his trip across the country last week, Goldfein encouraged airmen to think beyond Cold War uses for ICBMs, bombers and nuclear cruise missiles.</p> <p>“I’ve challenged…Air Force Global Strike Command to help lead the dialog, help with this discussion about ‘What does conventional conflict look like with a nuclear element?’ and ‘Do we respond as a global force if that were to occur?’ and ‘What are the options?’” he said. “How do we think about it — how do we think about deterrence in that environment?”</p> <p>Asked if placing B-52s back on alert — as they were for decades — would help with deterrence, Goldfein said it’s hard to say.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>“Really it depends on who, what kind of behavior are we talking about, and whether they’re paying attention to our readiness status,” he said.</p> </blockquote> <p>Meanwhile, various improvements have already been made to prepare Barksdale — home to the 2d Bomb Wing and Air Force Global Strike Command, which oversees the service’s nuclear forces — <strong>to return B-52s to an alert posture.</strong> Near the alert pads, an old concrete building — where B-52 crews during the Cold War would sleep, ready to run to their aircraft and take off at a moment’s notice — is being renovated.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Inside, beds are being installed for more than 100 crew members, more than enough room for the crews that would man bombers positioned on the nine alert pads outside. There’s a recreation room, with a pool table, TVs and a shuffleboard table. Large paintings of the patches for each squadron at Barksdale adorn the walls of a large stairway. </p> <p>&nbsp;</p> <p>One painting — a symbol of the Cold War — depicts a silhouette of a B-52 with the words “Peace The Old Fashioned Way,” written underneath. At the bottom of the stairwell, there is a Strategic Air Command logo, yet another reminder of the Cold War days when American B-52s sat at the ready on the runway outside. </p> <p>&nbsp;</p> <p>Those long-empty B-52 parking spaces will soon get visits by two nuclear command planes, the E-4B Nightwatch and E-6B Mercury, both which will occasionally sit alert there. During a nuclear war, the planes would become the flying command posts of the defense secretary and STRATCOM commander, respectively. If a strike order is given by the president, the planes would be used to transmit launch codes to bombers, ICBMs and submarines. At least one of the four nuclear-hardened E-4Bs — formally called the National Airborne Operations Center, but commonly known as the Doomsday Plane — is always on 24-hour alert.</p> </blockquote> <p>Barksdale and other bases with nuclear bombers are preparing to build storage facilities for a new nuclear cruise missile that is under development. During his trip, Goldfein received updates on the preliminary work for a proposed replacement for the 400-plus Minuteman III intercontinental ballistic missiles, and the new long-range cruise missile.</p> <p>“Our job is options,” Goldfein told Defense One's Marcus Weisgerber. “We provide best military advice and options for the commander and chief and the secretary of defense. Should the STRATCOM commander require or the NORTHCOM commander require us to [be on] a higher state of readiness to defend the homeland, then we have to have a place to put those forces."</p> <p>And now that the US is preparing for immediate nuclear war readiness, all it needs is a provocation, one which a world which has never been more on edge over a stray tweet, may have little difficulty in finding... </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="710" height="325" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/nuclear%20bombers.jpg?1508715831" /> </div> </div> </div> http://www.zerohedge.com/news/2017-10-22/us-put-nuclear-bombers-24-hour-alert-first-time-26-years#comments Air Force Military Minuteman III Nuclear warfare Nuclear weapon Pentagon Politics Reality U.S. Northern Command U.S. Strategic Command United States Air Force United States Department of Defense United States Strategic Command US Air Force US military War Sun, 22 Oct 2017 23:49:00 +0000 Tyler Durden 605788 at http://www.zerohedge.com USDJPY Inches Higher As Japanese Stocks Set For Longest Winning Streak In History http://www.zerohedge.com/news/2017-10-22/usdjpy-inches-higher-japanese-stocks-set-longest-winning-streak-history <p><strong>Yen is weaker and Japanese equity futures notably higher </strong>following a landslide election victory for Japan Prime Minister Shinzo Abe which theoretically <strong>ushers in yet more easy monetary policy</strong>. USDJPY has jumped above 114.00 in early trading, sending NKY futures up almost 1% in the pre-market.</p> <p><img height="422" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/10/22/20171022_JPY1_0.jpg" width="600" /></p> <p>If this equity rise holds it <strong>will mark the 15th consecutive gain for the Japanese market</strong> - breaking the 1961 record of 14 straight days to <span style="text-decoration: underline;"><strong>become the longest winning streak in Japanese stock market history.</strong></span></p> <p>Nikkei 225 is at its highest since Dec 1996.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/10/22/20171022_JPY2.jpg"><img height="318" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/10/22/20171022_JPY2_0.jpg" width="600" /></a></p> <p>Meanwhile, much has been made recently of the decoupling between USDJPY and the Nikkei 225</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/10/22/20171022_JPY3.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/10/22/20171022_JPY3_0.jpg" style="width: 600px; height: 318px;" /></a></p> <p>However, this chart masks a closer relationship between USDJPY and the relative performance of Japanese and US equities.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/10/22/20171022_JPY4.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/10/22/20171022_JPY4_0.jpg" style="width: 600px; height: 311px;" /></a></p> <p>So there really is no regime shift.</p> <p><u><em><strong>What are the drivers of this persistent negative correlation between the yen and Japanese equities and which flows supported this negative correlation this year?</strong></em></u></p> <p>On Friday, JPMorgan presented three fundamental explanations to justify the link between Japanese equities and the yen.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>One typical explanation is that the yen, being a major funding currency for the world, should rise in a risk-off equity environment and vice versa. </strong>But this argument is not supported by the fact that there is much lower correlation between the yen and global equities. It is also not supported by the structural break in the correlation between Japanese equities and the yen shown in the chart above. The yen was the most prominent or sole funding currency before the financial crisisof 2007/08. After the financial crisis the yen was joined by the dollar and later by the euro as funding currencies. So if anything the negative correlation between equities and the yen should have been even more negative before the financial crisis. But the opposite happened. The negative correlation only intensified after the financial crisis.</p> <p>&nbsp;</p> <p>A second explanation, with causality running from yen to Japanese equities, is that <strong>a weaker yen has a positive impact on corporate profits inducing equity investors to buyJapanese equities and vice versa. </strong></p> <p>&nbsp;</p> <p>A third explanation is that <strong>Abenomics was always thought of as a combined trade for overseas investors: buy Japanese equities and sell the yen.</strong> And reverse, i.e. sell Japanese equities and buythe yen, when Abenomics wanes.</p> </blockquote> <p><em><strong>But JPM notes both of these last two explanations have a problem</strong>: why does the yen not go up as foreign investors buyJapanese equities? In principle when foreign investors buy or sell Japanese equities currency-hedged there should be no currency impact. And when foreign investors buy or sell Japanese equities currency unhedged there should be in fact a positive correlation between the yen and Japanese equities. What are the circumstances then under which we have a negative correlation between Japanese equities and the yen?</em></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>We previously presented three flow circumstances:</strong></p> <p>&nbsp;</p> <p>1) If a foreign investor (buyer) purchases Japanese equities currency-hedged from another foreign investor (seller) who was long yen already (i.e. the seller owned these Japanese equities currency unhedged before), the net market impact would be an up movein Japanese equities and a down move in yen.</p> <p>&nbsp;</p> <p>2) If a foreign investor (buyer) purchases Japanese equities currency-hedged from a Japanese investor (seller) and this Japanese investor uses the proceeds to purchase foreign equities currency-unhedged, the net impact would also be an up move in Japanese equities and a down move in yen.<strong> This flow appears to have taken place since mid-September. Foreign investors were buyers of Japanese equities, at the same time as Japanese investors sold domestic equities and as Japanese investors stepped up their purchases of foreign equities</strong>. But since September, the purchases of foreign equities by Japanese investors were smaller in magnitude relative to the purchases of Japanese equities by foreign investors. So the negative impact on theyen from the former flow was more muted relative to the positive impact on Japanese equities from the latter flow.</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/10/22/20171022_JPY6.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/10/22/20171022_JPY6_0.jpg" style="width: 600px; height: 491px;" /></a></p> <p>&nbsp;</p> <p>3) Another flow example is related to dynamic hedging by existing holders of Japanese equities, Existing foreign holders of Japanese equities could have unwound previous FX hedges in response to equity price declines in recent months, even if they did not sell any Japanese equities themselves. This is because equity investors tend to dynamically adjust their FX hedges to match the size of the hedges to the value of their equity holdings. So as the price of Japanese equities goes down in local currency terms, these foreign investors cut some of their previous FX hedges, pushing the yen up in the process. The opposite flow takes place in periods of Japanese equity appreciation: existing foreign holders of Japanese equities have to increase the size of their FX hedges to match the increased equity values, pushing the yen down in the process.</p> </blockquote> <p>This dynamic hedging flow suggests that there should be an even stronger correlation between the performance of the yen and the absolute performance of Japanese equities in local currency terms, relative to the correlation between the yen and the relative performance of Japanese vs. US or global equities. <strong>But the two charts above show that the opposite happened this year. The correlation between the yen and the relative performance of Japanese vs. US equities has been stronger than the correlation between the performance of the yen and the absolute performance of Japanese equities. </strong>This suggests the above flow stemming from dynamic hedging by foreign investors of existing Japanese equity holdings, has likely weakened this year.</p> <p><strong>So from the above three flow circumstances, it is the second one that appears to offer the best explanation of what happened since September in the Japanese equity/yen space.&nbsp; </strong></p> <p>So, following the recent buying, how overweight have foreign investors become in Japanese equities?</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/10/22/20171022_JPY5.jpg"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/10/22/20171022_JPY5_0.jpg" style="width: 600px; height: 560px;" /></a></p> <p>So in all,<u><strong> it appears that overweights in Japan have been focused mostly among leveraged overseas investors including CTAs, making Japanese equities vulnerable to an unwind</strong></u> of some of these positions in the near term. Non-leveraged institutional investors or retail investors are rather neutral.</p> <p><strong>To conclude, JPMorgan finds no reason to believe that the historical negative correlation between Japanese equities and the yen has broken down. </strong>The relationship between Japanese equities and the yen has been closely aligned this year if one looks at the relative rather than the absolute performance of Japanese equities.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>More recently, since September, the purchases of foreign equities by Japanese investors were smaller in magnitude relative to the purchases of Japanese equities by foreign investors. So the negative impact on the yen from the former flow was more muted relative to the positive impact on Japanese equities from the latter flow. <strong>Going forward, overseas leveraged investors present the main vulnerability for Japanese equities, in our view.</strong></p> </blockquote> <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="949" height="503" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20171022_JPY2.jpg?1508714382" /> </div> </div> </div> http://www.zerohedge.com/news/2017-10-22/usdjpy-inches-higher-japanese-stocks-set-longest-winning-streak-history#comments Abenomics Business Economy Finance Financial crisis of 2007–2008 Financial risk Hedge Institutional Investors Investor Japan Japanese yen Market risk Monetary Policy Money Nikkei Nikkei 225 Yen Sun, 22 Oct 2017 23:34:14 +0000 Tyler Durden 605786 at http://www.zerohedge.com What The ECB Will Announce This Week: A Summary Of All QE Tapering Scenarios http://www.zerohedge.com/news/2017-10-22/what-ecb-will-announce-week-summary-all-qe-tapering-scenarios <p>The main risk event in the coming week, in addition to a barrage of corporate earnings, will be the ECB's long-awaited announcement of what the central bank's QE tapering will look like. Conveniently, thanks to a trial balloon <a href="http://www.zerohedge.com/news/2017-10-12/ecb-reportedly-considering-slashing-qe-half-january-eurusd-shrugs">released on October 12</a>, we already know the general parameters of this phasing out of monetization: ECB officials are considering <strong>cutting their monthly bond buying by at least half, from €60BN to €30BN, starting in January and keeping their program active for at least nine months, with some potential reference to a lengthening of the maturity of purchases.</strong></p> <p>According to a Bloomberg survey, the ECB will likely keep buying for about nine months <strong>to take the program to just over €2.5 trillion, respondents said before the ECB’s Oct. 26 decision. </strong>That’s consistent with what some officials see as the limit in the market under current rules. ECB President Mario Draghi is predicted to announce his first interest-rate increase in early 2019.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/21/ECB%20buying%20space.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/21/ECB%20buying%20space_0.jpg" width="600" height="293" /></a></p> <p>According to <a href="https://www.bloomberg.com/news/articles/2017-10-22/draghi-seen-going-for-ecb-bond-buying-limit-in-qe-s-last-hurrah">Bloomberg</a>, "such an outcome for quantitative easing would soothe the concerns of policy makers who want a definite signal that the program will end, while giving succor to those who want to keep stimulus flowing as long as the inflation outlook remains lackluster. It doesn’t resolve the question of what happens in a year if consumer-price growth still isn’t on track to the ECB’s goal."</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>“There has been no dissenting voice at the ECB ahead of the meeting on the need to scale down net purchases,” said Maxime Sbaihi, an economist at Bloomberg in London. “So the question is less ‘if’ they will taper than the details of ‘how’ they will do it.”</p> </blockquote> <p>Why not taper more? Simple: Mario Draghi is terrified of starting another bond (or stock) tantrum, if investors are spooked that the ECB is withdrawing too much support: "<strong>The Governing Council seems concerned that a more aggressive tapering plan could harm financial conditions, especially by letting the euro appreciate even more,” </strong>said Kristian Toedtmann, an economist at DekaBank in Frankfurt.</p> <p>Meanwhile, the major sticking point among ECB governors appears to be whether to commit to an end-date for QE. Draghi has expressed confidence that the region’s economic recovery will eventually help him and his peers to deliver on their mandate. Yet inflation was 1.5% in September and ECB’s own forecast doesn’t see it returning to the goal of below but close to 2% before the end of 2019.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>“It seems that the hawks want a definitive end-date while the doves want it open-ended,” Alan McQuaid, an economist at an economist at Merrion Capital in Dublin. <strong>“I think we will get a compromise, with the ECB saying that it intends to end its QE scheme in September 2018, but if things take a dramatic turn for the worse on the economic or inflation front in the meantime, it will extend its scheme further until things have stabilized</strong>.”</p> </blockquote> <p>Which is why many model QE as lasting beyond the 9 month horizon, and running through the end of March 2019.</p> <p>In terms of market consensus, the following Barclays chart visualizes the most likely outcome, showing monthly QE declining by 50% in January through October, when it tapers by another 50% until March 2019, coupled with a modest increase in the ECB's deposit rate around the end of 2018.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/21/barclays%20qe.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/21/barclays%20qe_1.jpg" width="600" height="366" /></a></p> <p>But, as Bank of America asks,<strong> what if things don't turn out that way?</strong> In the table below, the bank's rates analyst Erjon Satko attempts to respond to the many questions the bank has gotten regarding possible market reactions to different decisions in terms of QE size/length but also to changes in the three technical aspects that matter in our view: the rates forward guidance, the maturity of QE purchases and the split between safe and risky assets (periphery, private assets).</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/21/BofA%20ECB%20projections%20ECB.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/21/BofA%20ECB%20projections%20ECB_0.jpg" width="600" height="278" /></a></p> <p>Here are BofA's observations on the various scenarios:</p> <ul> <li>In the €40bn/6m, we assume the ECB would leave the door open to a further extension, ruling out a cliff end (from €40bn to 0). That scenario, as well as the €30bn/12m would ultimately represent a large total QE amount. We thus assume that flexibility will be engineered with technical changes that should imply greater support for risky assets (this would be bullish the periphery and could also fuel a steepening in long-end swaps).</li> <li>In the €20bn/12m and even more so the €20bn/9m, the first market reaction should be bearish as the quantum of monthly Bund purchases is lower than expected. However, as previously discussed, we think the behavior of the periphery and risky assets in general will then guide term premium in Bunds. Hence the "then see periphery" in Table 1.</li> <li><strong>Purchases skewed towards risky assets: </strong>For example, if the ECB hints to more limited tapering of private asset purchases relative to PSPP, or if it increases the share of EU supras, implying greater potential for deviations from capital keys, in favor of Italy and France.</li> <li><strong>Extension of the maturity of purchases</strong>: the ECB could suggest that reinvestments will happen at a longer maturity than recent net purchases, or it could make more significant comments to signal longer overall purchases. As discussed last week, on way for the ECB to make this concrete could be that it drops the 30y maturity limit on eligible bonds</li> </ul> <p>Yet despite the ECB's tapering trial balloon, one surprising market reaction has been the recent decline in Bund yields together with the BTP spread tightening which according to BofA has "taken many by surprise, especially in light of the ever-decreasing expectations of QE support next year." In fact, while market expectations for 2018 ECB QE have been edging lower from €60bn/month to €40bn/month and now to €20-30bn/m, <strong>current valuations fail to give evidence of major concerns ahead of the tapering announcement</strong>. Of course, that may change once Draghi's media jawboning becomes fact; alternatively this may simply be more evidence of what Citi's Matt King provocative claimed this past summer, namely that the "market" has become so distorted by QE, it has <a href="http://www.zerohedge.com/news/2017-06-16/matt-king-back-and-reveals-biggest-threat-facing-market-two-charts">lost the ability to discount the future</a>.</p> <p>* * *</p> <p>In modeling market reaction scenarios to the ECB's October 26 announcement, nobody anticipates a major market shock. In fact, some - such as Citi - expect various permutations of the QE tapering to be actually seen as dovish for the market. As we <a href="http://www.zerohedge.com/news/2017-10-14/how-will-ecbs-qe-tapering-impact-market-here-are-possible-scenarios">discussed last Saturday</a>, Citi's EONIA-signaling driven model seeks to predict the near-term market impact (around one-week) across the euro swap and Bund curve for a range of QE scenarios.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/14/citi%20ECB%20QE%201.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/14/citi%20ECB%20QE%201_0.jpg" width="500" height="193" /></a></p> <p>Below are its key findings:</p> <ul> <li>For 10yr Bunds, <strong>yields fall around 25bp in the most dovish scenario (€40bn x 12mth) and rise around 24bp in the most hawkish scenario (€20bn x 6mth). </strong>Figure 1 above summarizes the full set of results for Bunds.</li> <li>The most market neutral scenarios, according to the model, <strong>are €20bn x 12mth, €30bn x 9mth and €40bn x 6mth.</strong></li> <li>This is broadly consistent with the Reuters poll (taken 11-14 September) which suggested the <strong>consensus amongst economists was for €40bn (range €30- 50bn) over 6mths (range 3-12mths).</strong></li> <li>Cross-checking the model output (based on policy signals) with the total size of APP extension shows a clear relationship (Figure 2). <strong>The model therefore assumes that there is less of a role for the ‘intensity’ of purchases.</strong></li> <li><strong>The market neutral size for APP upsizing appears to be around +€250bn</strong></li> <li>The Citi house view is for an extension in the form of an ‘envelope’ (without specifying a monthly purchase rate) of €150bn (with upside risk of €210bn). That could lead to a <strong>near-term sell-off of around 15-20bp. </strong></li> <li>The scenarios presented assume deliverability. But, the most dovish options undoubtedly would be more challenging to implement (see below) given scarcity constraints. In terms of likelihood, we would put less weight on these scenarios which skews the risk towards a bearish reaction on 26 October.</li> </ul> <p>Finally how should one trade the ECB announcement? Here Barclays' confusion reflects the (confused) trader's mindset best: "<em>we do not see compelling risk-reward in pre-positioning in EUR ahead of the ECB announcement, given shifting expectations and difficult in gauging how the market is pricing the parameter changes.</em>"</p> <p>Translation: stop trying to pretend you know how the market will react to the ECB, and just wait for the announcement. Here's hoping you are faster to react to the news than the HFTs.... and mind the direction of the initial kneejerk reaction, which is usually just the algos taking out all the stops.</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="1260" height="584" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/BofA%20ECB%20projections%20ECB.jpg?1508709569" /> </div> </div> </div> http://www.zerohedge.com/news/2017-10-22/what-ecb-will-announce-week-summary-all-qe-tapering-scenarios#comments Bank of America Bank of America Barclays Bond Business Central bank Economic policy Economy Eurogroup European Central Bank European Union Fail Finance France Governing Council Inflation Italy Mario Draghi Monetary policy Monetization Money Quantitative Easing Quantitative easing recovery Reuters Sun, 22 Oct 2017 23:14:41 +0000 Tyler Durden 605784 at http://www.zerohedge.com Bank Of Japan Is Buying Bonds From Scandal-Hit Kobe Steel http://www.zerohedge.com/news/2017-10-22/bank-japan-buying-bonds-scandal-hit-kobe-steel <p>Last week, the simmering scandal involving Japan's third largest steel producer exploded, when following reports that Kobe Steel had falsified data about the quality of its steel, aluminum, copper, iron powder and other products it sold to customers across virtually every single industry, Japan's <a href="http://www.zerohedge.com/news/2017-10-16/kobe-steel-scandal-goes-nuclear-company-faked-data-decades-had-fraud-manual">Nikkei also reported </a>that some Kobe Steel plants in Japan <strong>had been falsifying product quality data for decades, </strong>well beyond the roughly 10-year time frame given by the lying steelmaker. Worse, not only did the company, having already been caught, lie to shareholders and rule-abiding employees how long this illegal behavior had been going on, but - in a glaring example of corporate idiocy - had effectively enshrined and codified its fraudulent ways, as the cheating procedures eventually became institutionalized in what was a fraud manual, allowing the practice to continue as managers came and went. </p> <p>As all this was taking place, not only did the stock price of Kobe Steel plunge, but its bonds tumbled sending its default probability sharply higher. </p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/14/2017-10-16%20%288%29.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/14/2017-10-16%20%288%29_0.jpg" width="500" height="256" /></a></p> <p>It now turns out that the rout would have been far worse, had it not been a direct intervention by the BOJ itself, which appears to have stepped in and bought Kobe bonds to arrest the plunge. </p> <p>Posing a rhetorical question, "to buy or not to buy", the Nikkei reports that "<strong>the Bank of Japan appears to have chosen the former in considering whether to include debt issued by scandal-hit Kobe Steel in its bond-buying operations.</strong>" </p> <p>Here, it may come as a surprise to some that as part of its ultra-loose monetary easing policy, <strong>the Japanese central bank also holds roughly 3.2 trillion yen ($28.4 billion) in corporate debt</strong>, similar to the ECB's CSPP program. The BOJ maintains that balance through purchasing operations held roughly once a month. This past Thursday's operation was the bank's first since Kobe Steel's data tampering came to light earlier in October.</p> <p>While the BOJ has previously avoided bonds from companies rocked by scandal, according to an official at a Japanese asset management company, this seems to no longer be the case. Whereas such avoidance has occurred even if the security otherwise meets credit ratings and other requirements set by the bank, when it comes to Kobe bonds, Kuroda decided to make an explicit exception. </p> <p>And like the ECB, which provides only token transparency when it comes to its corporate bond purchases, the BOJ is likewise opaque about its open market operations. Investors who want to sell corporate bonds in a BOJ operation often do so via brokerages. These investors do not know whether the central bank bought the debt until results of the operation surface later that evening. And, as the Nikkei reports, it was learned later Thursday - to the relief of investors - <strong>that the bank purchased around 20 billion yen to 30 billion yen worth of corporate bonds, a major insurance provider estimated</strong>. About 170 billion yen worth of Kobe Steel bonds are circulating in the market, more than 40 billion yen of which fulfills BOJ requirements.</p> <p>Since the BOJ does not break down the purchases by issuer, whether the central bank bought Kobe Steel bonds can be inferred by the <strong>average interest rate of corporate bonds accepted. </strong>A clue that the BOJ had indeed purchased Kobe steel bonds - the metric jumped from the prior operation in September, <strong>suggesting the steelmaker's bonds likely were included in the purchases. </strong>Since only one company saw a dramatic spike in its bond yields - and default probability - it can be safely concluded that the BOJ did in fact purchase bonds from the distressed corporation.</p> <p>Of course, having purchased Kobe Steel bonds means that the central bank has once again greenlighted an unprecedented moral hazard, encouraging bond traders to buy bonds issued by a company which according to some may be facing bankruptcy in the not too distant future. Indeed, even the Nikkei writes that the Bank of Japan finds itself in an awkward position: </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>"If it did buy Kobe Steel bonds, investors who normally would steer clear of such a company may purchase the asset anyway in anticipation of selling it to the BOJ. But if the bank blacklists Kobe Steel, investors might see the bonds as an even bigger risk."</p> </blockquote> <p>An even better question: should Kobe Steel file for bankruptcy, and its debt be equitized in the form of post-reorg equity, just how will the BOJ act when, after buying billions in Kobe bonds, it finds itself a major equity stakeholder in the restructured company? While we don't know the answer, it will certainly be a closely followed case study in central bank "activism", because after the next downturn, all eyes will be on the ECB which over the past 16 months has purchased over €110 billion in European corporate bonds with increasingly lower credit ratings. After the next European recession, many of these issuers will be bankrupt, leaving the ECB as one of the major equity stakeholders in an unknown number of upcoming restructuring processes, where it will ultimately end up owning post-reorg equity. </p> <p>Or perhaps neither the BOJ nor ECB will allow any of the corporate names in its bond portfolio to default, bidding up bonds without relent, and resulting in the most bizarre zombie company world of all: one where bankrupt companies see their bonds trading at (or above) par, unable to file for bankruptcy - just like Greece - as the alternative would be the "new normal" financial equivalent of "crossing the streams." </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="533" height="301" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/kuroda%20ear_30.jpg?1508712357" /> </div> </div> </div> http://www.zerohedge.com/news/2017-10-22/bank-japan-buying-bonds-scandal-hit-kobe-steel#comments Bank of Japan Bank of Japan Bank of Japan Bond Bond Business Copper Corporate bond default Default Probability Economy European Central Bank Finance Financial markets Greece Japan Money Moral Hazard New Normal Nikkei Open Market Operations Quantitative easing ratings Recession Transparency Yen Sun, 22 Oct 2017 22:50:56 +0000 Tyler Durden 605785 at http://www.zerohedge.com