http://www.zerohedge.com/fullrss2.xml/component/option%2Ccom_docman/itemid%2C200023/gid%2C397/boombustblog/boombustblog/boombustblog/boombustblog/2009/2009/07/2009/2009/2009/07/2009/07/2009/2009/07/2009/2009/07/2009/2009/07/2009/2009/07/2009/2009/2009/07/2009/0 en Ron Paul: Perhaps Obama's "Lack Of Strategy Is A Glimmer Of Hope" http://www.zerohedge.com/news/2014-09-01/ron-paul-perhaps-obamas-lack-strategy-glimmer-hope <p><em>Submitted by Ron Paul via <a href="http://ronpaulinstitute.org/archives/featured-articles/2014/august/31/obama-has-no-middle-east-strategy-good!.aspx">The Ron Paul Institute for Peace and Prosperity</a>,</em></p> <p><strong>Last week President Obama admitted that his administration has not worked out a strategy on how to deal with the emergence of the Islamic State in Iraq and Syria (ISIS) as a dominant force in the Middle East. </strong>However, as ISIS continues its march through Syria and Iraq, many in the US administration believe it is, in the words of Defense Secretary Chuck Hagel, a threat “beyond anything we have ever seen.”<br />&nbsp;<br /><strong>Predictably, the neocons attacked the president’s speech.</strong> They believe the solution to any problem is more bombs and troops on the ground, so they cannot understand the president’s hesitation.<br />&nbsp;<br />Chairman of the House Armed Services Committee Buck McKeon made it clear that fighting ISIS is going to cost a lot more money and will bring US forces back to Iraq for the third time. The post-Iraq, post-Afghanistan peace dividend disintegrates. </p> <p>Mr. McKeon said last week:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>ISIS is an urgent threat and a minimalist approach, that depends solely on FY15 funding or pinprick strikes that leave fragile forces in Iraq and Syria to do the hard fighting, is insufficient to protect our interests and guarantee our safety in time.</strong></p> </blockquote> <p><strong>What does this mean in practice? </strong>If the neocons have their way, the Federal Reserve will “print” more money to finance another massive US intervention in the Middle East. In reality this means further devaluation of the US dollar, which is a tax on all Americans that will hit the poorest hardest. </p> <p><span style="text-decoration: underline;"><strong>A new US military incursion will not end ISIS; it will provide them with the recruiting tool they most crave, while draining the US treasury. Just what Osama bin Laden wanted!</strong></span><br />&nbsp;<br />McKeon and the other hawks act as if they had only recently become aware of the ISIS. Or if they noticed it, they pretend US policy had nothing to do with its rise. <br />&nbsp;<br />McKeon also said last week, “ISIS threat was allowed to build and fester over a period of time.”<br />&nbsp;<br /><strong>In fact, US regime change policy in Syria was directly responsible for the rise of ISIS over these past three years. </strong>As journalist Eric Margolis observed recently, the emergence of ISIS is the “mother of all blowback.” The neocons who want us to get tougher on ISIS, including a US attack on Syria, are the same ones who not long ago demanded that we support groups like ISIS to overthrow the Assad government in Syria. US-trained and funded “moderates” from the Free Syrian Army joined the Islamist militias including ISIS, taking US weapons and training with them.<br />&nbsp;<br /><strong>Three years of supporting any force that might overthrow the secular government of President Assad has produced a new monster in the Middle East that neocons insist the US must slay.</strong><br />&nbsp;<br />Why can’t they just admit they were wrong? Why can’t the interventionists just admit that their support for regime change in Syria was a terrible and tragic mistake? <br />&nbsp;<br />If ISIS is as big a threat as they claim, why can’t they simply ask Assad to help out? Assad has never threatened the United States; ISIS has. Assad has been fighting ISIS and similar Islamist extremist groups for three years.<br />&nbsp;<br /><strong>Why does the US government insist on aligning with theocracies in the Middle East?</strong> If there is anything that contradicts the US Constitution and American values it is a theocratic government. I do not believe that a majority in the Middle East wants to live under such a system, so why do we keep pushing it on them? Is that what they call promoting democracy?<br />&nbsp;<br /><span style="text-decoration: underline;"><strong>A lack of strategy is a glimmer of hope. </strong></span>Perhaps the president will finally stop listening to the neocons and interventionists whose recommendations have gotten us into this mess in the first place!<span style="text-decoration: underline;"><strong> Here’s a strategy: just come home.</strong></span></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="343" height="300" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140901_hope.jpg?1409606830" /> </div> </div> </div> http://www.zerohedge.com/news/2014-09-01/ron-paul-perhaps-obamas-lack-strategy-glimmer-hope#comments Federal Reserve Iraq Middle East Neocons President Obama Reality Ron Paul Mon, 01 Sep 2014 22:16:04 +0000 Tyler Durden 493793 at http://www.zerohedge.com To Everyone Saying Russia Is "Isolated", Here's A Map http://www.zerohedge.com/news/2014-09-01/everyone-saying-russia-isolated-heres-map <p>While <a href="http://www.zerohedge.com/news/2014-08-27/nato-canada-has-message-russian-soldiers">NATO is happy to provide Russia with geographical advice</a>, we thought the following map of "the world" will help explain President Obama's increased use of the term "isolated" when it comes to Russia...</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140901_isolated.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140901_isolated_0.jpg" width="600" height="288" /></a></p> <p>&nbsp;</p> <p><em>h/t @PersonOfAwesome</em></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="1919" height="922" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140901_isolated.jpg?1409606970" /> </div> </div> </div> http://www.zerohedge.com/news/2014-09-01/everyone-saying-russia-isolated-heres-map#comments Mon, 01 Sep 2014 21:30:34 +0000 Tyler Durden 493792 at http://www.zerohedge.com Inflation Pressures in Core Food Components http://www.zerohedge.com/news/2014-09-01/inflation-pressures-core-food-components <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;">By&nbsp;<a href="http://www.econmatters.com/search/label/EconMatters">EconMatters</a></p> <p class="separator" style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal; clear: both; text-align: center;"><a href="http://2.bp.blogspot.com/-gBtpQloOByw/VATKuhxg0cI/AAAAAAAAENI/qSRk6Aa-P5M/s1600/inflation-road-sign.jpg" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img src="https://images-blogger-opensocial.googleusercontent.com/gadgets/proxy?url=http%3A%2F%2F2.bp.blogspot.com%2F-gBtpQloOByw%2FVATKuhxg0cI%2FAAAAAAAAENI%2FqSRk6Aa-P5M%2Fs1600%2Finflation-road-sign.jpg&amp;container=blogger&amp;gadget=a&amp;rewriteMime=image%2F*" width="200" height="160" border="0" style="cursor: move;" /></a></p> <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;">&nbsp;</p> <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;"><strong><span style="font-size: 12pt; line-height: 18.399999618530273px;">Inflation Isn`t Moderating, It is Consolidating before the Next Leg Up</span></strong></p> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><a href="http://www.econmatters.com/2014/06/no-inflation-thanks-to-obamacare.html">Inflation numbers of late</a>&nbsp;have been helped by the drop in fuel costs, the agricultural grains have been brought down in the futures market by the overplanting of corn, but eating out for the weekend where shrimp, steak, other seafood and vegetables are consumed at dinner brings home the idea that restaurant costs are only going up on the whole, and expect menu prices to continue to be raised at your favorite restaurant.</p> <p style="margin: 0px;">&nbsp;</p> </div> <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;">&nbsp;</p> <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;"><strong><span style="font-size: 12pt; line-height: 18.399999618530273px;">Lean Hogs</span></strong></p> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">Lean hogs are up 26% year over year even after a sizable pullback in the futures market, the pork industry really got hit by a killer pig virus, but the trend in other meats for the year indicates that costs for this segment are broader based than just the&nbsp;<a href="http://www.econmatters.com/2014/08/25-ebola-facts-you-need-to-know.html">disease specific</a>&nbsp;issues.</p> <p style="margin: 0px;">&nbsp;</p> <p style="margin: 0px;"><em><strong>Read More &gt;&gt;&gt;&nbsp;<a href="http://www.econmatters.com/2014/08/mixed-emotions-for-gold-market.html">Mixed Emotions for the Gold Market</a></strong></em></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <p class="separator" style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal; clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/-7mkRg-jj-UY/VATK3sxctqI/AAAAAAAAENQ/iMYPTpfJNDQ/s1600/indexhogs.png" style="margin-left: 1em; margin-right: 1em;"><img src="https://images-blogger-opensocial.googleusercontent.com/gadgets/proxy?url=http%3A%2F%2F3.bp.blogspot.com%2F-7mkRg-jj-UY%2FVATK3sxctqI%2FAAAAAAAAENQ%2FiMYPTpfJNDQ%2Fs1600%2Findexhogs.png&amp;container=blogger&amp;gadget=a&amp;rewriteMime=image%2F*" width="640" height="362" border="0" style="cursor: move;" /></a></p> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 18.399999618530273px;"><br /></span></strong></p> <div style="text-align: center;"> <p style="margin: 0px;">&nbsp;</p> </div> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 18.399999618530273px;">Cattle Herds</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">For example, Live Cattle futures are up 18% year over year due to a multi-decade low in cattle herds, it seems it is much harder, and the margins are much lower raising livestock compared with planting corn for farmers which makes sense when you factor in all the underlying costs from veterinary bills, feed and electricity, to transportation and regulatory related costs.</p> <p style="margin: 0px;">&nbsp;</p> <p style="margin: 0px;"><em><strong>Read More &gt;&gt;&nbsp;<a href="http://www.econmatters.com/2014/08/245000-to-raise-child-in-united-states.html">Inflation Watch: $245,000 to Raise a Child in United States</a></strong></em></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <p class="separator" style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal; clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/-QSxjnDFptmw/VATLC0tuV2I/AAAAAAAAENY/CVIeI3QfhaQ/s1600/indexcattle.png" style="margin-left: 1em; margin-right: 1em;"><img src="https://images-blogger-opensocial.googleusercontent.com/gadgets/proxy?url=http%3A%2F%2F3.bp.blogspot.com%2F-QSxjnDFptmw%2FVATLC0tuV2I%2FAAAAAAAAENY%2FCVIeI3QfhaQ%2Fs1600%2Findexcattle.png&amp;container=blogger&amp;gadget=a&amp;rewriteMime=image%2F*" width="640" height="362" border="0" style="cursor: move;" /></a></p> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 18.399999618530273px;">Milk Prices</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">The Dairy Industry hasn`t escaped the inflation pressures with a strong global demand for dairy and protein, producing cows are a robust asset these days. Milk prices have also been hurt by the drought for farmers on the West Coast to stronger demand for Greek Yogurt for alternative protein sources we see Class III Milk futures up a robust 40% year over year with no immediate pullback on the charts.</p> <p style="margin: 0px;">&nbsp;</p> <p style="margin: 0px;"><em style="line-height: 18.399999618530273px; text-align: center;"><strong>Read More &gt;&gt;&nbsp;<a href="http://www.econmatters.com/2014/08/inflation-adjusted-bond-prices-tell.html">Inflation Adjusted Bond Prices Tell Different Story on Relative Value</a></strong></em></p> <p style="margin: 0px;"><em style="line-height: 18.399999618530273px; text-align: center;"><br /></em></p> </div> <p class="separator" style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal; clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/-x7C1XkjTjo4/VATLUSkkmwI/AAAAAAAAENg/Ez-brHGN0SU/s1600/indexmilk.png" style="margin-left: 1em; margin-right: 1em;"><img src="https://images-blogger-opensocial.googleusercontent.com/gadgets/proxy?url=http%3A%2F%2F3.bp.blogspot.com%2F-x7C1XkjTjo4%2FVATLUSkkmwI%2FAAAAAAAAENg%2FEz-brHGN0SU%2Fs1600%2Findexmilk.png&amp;container=blogger&amp;gadget=a&amp;rewriteMime=image%2F*" width="640" height="362" border="0" style="cursor: move;" /></a></p> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 18.399999618530273px;">Oil &amp; Fuel Prices</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <p class="separator" style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal; clear: both; text-align: center;"><strong><a href="http://4.bp.blogspot.com/-5h9l5ck9bJ8/VATLtBEqvMI/AAAAAAAAENw/042GC-qIm8s/s1600/indexgas.png" style="margin-left: 1em; margin-right: 1em;"><img src="https://images-blogger-opensocial.googleusercontent.com/gadgets/proxy?url=http%3A%2F%2F4.bp.blogspot.com%2F-5h9l5ck9bJ8%2FVATLtBEqvMI%2FAAAAAAAAENw%2F042GC-qIm8s%2Fs1600%2Findexgas.png&amp;container=blogger&amp;gadget=a&amp;rewriteMime=image%2F*" width="640" height="362" border="0" style="cursor: move;" /></a></strong></p> <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;">&nbsp;</p> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">Oil and fuel prices have dropped but the costs associated with getting it out of the ground are still inflationary from the equipment costs to skilled labor and regulatory related costs so it will be interesting to see&nbsp;<a href="http://www.econmatters.com/2014/08/the-oil-markets-qe-premium-is-coming.html">how the price of oil shakes out&nbsp;</a>many crosscurrents from stronger demand on an improving economy,&nbsp;<a href="http://www.econmatters.com/2014/08/the-us-needs-to-stop-meddling-in-russia.html">geo-political concerns</a>, robust production output domestically, higher fuel efficiency in developed countries, more cars on the road in china, and global pollution and infrastructure constraints with a price that basically has moved between $80 and $120 for WTI/Brent since the financial crisis.</p> <p style="margin: 0px;">&nbsp;</p> <p style="margin: 0px;"><strong><em>Read More &gt;&gt;&gt;&nbsp;<a href="http://www.econmatters.com/2014/06/the-inflation-era-has-arrived.html">The Inflation Era Has Arrived!</a></em></strong></p> <p style="margin: 0px;">&nbsp;</p> </div> <p class="separator" style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal; clear: both; text-align: center;"><a href="http://1.bp.blogspot.com/-ylArANf7IGE/VATLe3Coe4I/AAAAAAAAENo/vv38VnWyK5g/s1600/index%2Boil.png" style="margin-left: 1em; margin-right: 1em;"><img src="https://images-blogger-opensocial.googleusercontent.com/gadgets/proxy?url=http%3A%2F%2F1.bp.blogspot.com%2F-ylArANf7IGE%2FVATLe3Coe4I%2FAAAAAAAAENo%2Fvv38VnWyK5g%2Fs1600%2Findex%252Boil.png&amp;container=blogger&amp;gadget=a&amp;rewriteMime=image%2F*" width="640" height="362" border="0" style="cursor: move;" /></a></p> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 18.399999618530273px;">Normal Trading Range</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">It is too early to read anything regarding the recent pullback in prices because as just some of the shorts covering caused a $4 a barrel spike in prices off the recent bottom, and the oil market goes on runs both up and down in price that can be anywhere from $10 to $30 and can happen in and out of season although they usually center around seasonal demand as a rule of thumb.</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 18.399999618530273px;">The Bull &amp; Bear Case for Oil Prices</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">I can make a case for the last 6 years being the pullback in oil prices, i.e., no real price breakouts. And similarly I can make an entire other case that oil will pull back even further on production increases globally, higher efficiency standards globally, alternative fuel technologies, and changing driving behaviors.&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 18.399999618530273px;">Oil Supply Chain Inflation Alive &amp; Well</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">But the costs associated with the industry should continue to rise from an inflation standpoint because component parts, equipment, labor, medical, regulatory, transportation logistics and other costs in general are rising at a steady clip for the last 5 years, and look to continue rising going forward for the next five years.</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 18.399999618530273px;">Wages Will Never Keep Up With Inflation on the Average</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">For some places in the economy inflation is red hot smack in the face of the consumer, in other places it slowly creeps up on the consumer without them realizing, but regardless of what the official inflation reports that the Fed follows indicates, real inflation pressures in the economy continue to rise every year, and a good steak is going to cost consumers a higher hourly wage rate.</p> </div> <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;">&nbsp;</p> <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;">©&nbsp;<a href="http://www.econmatters.com/">EconMatters</a>&nbsp;All Rights Reserved |&nbsp;<a href="http://www.facebook.com/EconMatters">Facebook</a>&nbsp;|&nbsp;<a href="http://twitter.com/#!/EconMatters">Twitter</a>&nbsp;|&nbsp;<a href="http://feedburner.google.com/fb/a/mailverify?uri=EconForecast">Email Subscribe</a>&nbsp;|&nbsp;<a href="http://astore.amazon.com/econforecast-20?_encoding=UTF8&amp;node=80">Kindle</a></p> http://www.zerohedge.com/news/2014-09-01/inflation-pressures-core-food-components#comments Bond China Futures market Twitter Twitter Mon, 01 Sep 2014 21:23:33 +0000 EconMatters 493791 at http://www.zerohedge.com Dispatches from Occupied Territory – Fear is the Mind Killer http://www.zerohedge.com/news/2014-09-01/dispatches-occupied-territory-%E2%80%93-fear-mind-killer <p style="text-align: center;">Dispatches from Occupied Territory &ndash; Fear is the Mind Killer</p> <p style="text-align: center;">By</p> <p style="text-align: center;">Cognitive Dissonance</p> <p>&nbsp;</p> <p>&nbsp;</p> <p><em>This is the third in a series of fictional explorations into an individual&rsquo;s awakening to the suddenly unfamiliar world around and within her while still engulfed by the day to day insanity. These short stories in letter form are intended for the more sensitive and inquisitive reader who wishes to look more deeply within and explore in depth their beliefs and perceptions as well as how to cope with a world gone frighteningly mad. It is the author&rsquo;s hope to accomplish this by way of an intimate and revealing first person correspondence between two long time friends as they discuss her ongoing awakening.</em> <strong><em><a href="http://twoicefloes.com/the-tif-catalog-of-works/series-of-cogs-articles-from-zh/series-by-cog-from-2011/orignial-dispatches/" target="_blank">The first two chapters may be found here.</a></em></strong></p> <p>&nbsp;</p> <p>&nbsp;</p> <p>Dear Marie,</p> <p>&nbsp;</p> <p>It was good to hear you are beginning to settle in after several months of personal turmoil and distress. The shock and awe that results from first light, that initial rush of awareness and revelation as our awakening begins to take hold, is unlike anything we have ever experienced and can at times be very frightening and quite frankly revolting. When I began my awakening I was never quite sure whom I was angrier with, the lies and liars I discovered all around me or the most egregious liar of them all, the formerly complacent and complicit liar I found lurking within.</p> <p>After the first wave of fear and nausea passes we tend to go numb as a sort of psychological defense mechanism to protect our psyche from an overload that could lead to severe psychosis. Underneath this unnatural calm there remain conflicting urges to flee the insanity, to pull the covers over our head and hide from the beast, and the growing wellspring of rage at the machine and the urge to strike back. This is a very dangerous time for us and it is important for us to seek guidance and balance or we can quite literally go off the deep end. Think of it as suddenly being shaken awake from an extremely frightening dream, only to realize the &lsquo;reality&rsquo; you have awaken too is in many respects several orders of magnitude worse than the dream you just left.</p> <p>This brings me to the thrust of your last few letters and the subject which presently disturbs you so deeply. I promised you I would get back to you on this, so without further delay here I am. You speak about the horrific realization that everything around us appears to be a bald faced lie with a macabre facade painted on the surface for the benefit of our denial. In particular you mention those private, public and governmental institutions you formerly trusted, even if only up to a certain point. Often what we describe as &lsquo;trust&rsquo; is in reality a debilitating dependency hidden by deep denial. None the less it still feels terrible when it has been violated, particularly when we enabled the violation.</p> <p>There is no way to adequately describe the shock one feels when a person first learns they are sleeping with the enemy and could easily become its next victim. In many respects by awakening you disturb the beast that lay beside you, thereby risking the potential to draw unwanted attention to yourself. We learn very early in life to keep our head down and to go about our business. So when we begin our awakening, in many respects we are doing just the opposite. To discover those we have blindly trusted have repeatedly violated us in a most personal and intimate way is so far beyond disturbing that at times it escapes accurate description.</p> <p>Suddenly we see very clearly how for decades there were dozens of warning signs we deliberately ignored or flat out denied. This ugly realization alone is the primary reason so many abandon their journey before they have even begun and rush headlong back into the warm embrace of blackout living and willful denial. Our personal revelation can bring on wave after wave of self revulsion and depression. However, nothing will be gained by loitering here for long. To pull out of this downward spiral we must make a deliberate conscious decision to abandon this self defeating paralysis and move towards healing and growth.</p> <p>The emotions you describe in your letter all revolve around the emotions of violation and the fear this realization generates. Or should I say the fear you are programmed to experience. Before I speak of specifics we need to pull back and find the proper perspective if we are to reach a higher understanding. It is one thing to be lied to once and done, another entirely to be lied to continuously and in many cases (in retrospect) obviously. While in the first instance you might rightly be declared a victim, in the second you cannot, at least not in the purest sense of the word because it is much more complicated than black and white, right and wrong, victim and perpetrator.</p> <p>In no way is what I am about to discuss to be construed as justifying or condoning their lies, cheating and theft. These people violated, and continue to violate, a public trust and their fiduciary duty, a much higher standard of conduct than simply holding up their hands and promising they will protect and serve. They should not, and will not, get a pass from me on this matter.</p> <p>But (and you knew there was a &lsquo;but&rsquo; coming Marie) we are discussing you and your reactions to these revelations and violations. Since you cannot personally make them do anything to reverse or rectify the wrongs they have perpetrated against you, this is all about <strong>you</strong> reaching a greater understanding of yourself and why you feel the way you do in order to begin the healing. I do not wish to discuss the specifics of who did what, when and where, or of the violations to you and me because as difficult as it may seem to understand, the specifics are immaterial at this point in the awakening process. &nbsp;</p> <p>Because we have been conditioned to do so, when we first discover the massive lies and conspiracies which are part and parcel of the world of the elite, the corporate and banking world and of course all levels of government, our first tendency is to dive into the minutia and details of the actual wrongdoing, along with the various cover stories and smoke screens. We want to believe if only the information about their heinous crimes were more widely known and disseminated the public would react in righteous indignation and throw the bums out, then burn them at the stake.</p> <p>This is a mistaken belief that is tragically and endlessly repeated over and over by every newcomer and sadly perpetuated by many veterans as well. It is just another hamster wheel created to distract and exhaust us, a part of the social control system to keep us endlessly chasing phantoms rather than health and healing. Logic dictates if these people are able to pull off the level of crime, corruption and traitorous actions they clearly are capable of, they are obviously receiving protection from each other as well as from higher, more powerful people and entities. In other words, the system at this level protects its own so it can protect itself.</p> <p>&nbsp;</p> <p style="text-align: center;"><img alt="Peek-a-boo" height="799" src="http://www.zerohedge.com/sites/default/files/images/user5464/imageroot/2014/08/Peek%20a%20Boo%20-%20Clean_0.jpg" title="Peek-a-boo" width="800" /></p> <p style="text-align: center;">&nbsp;</p> <p>That is not to say you should abandon your research into the who, what, when, where and why of these events, as well as the overall corrupt business dealings they are engaged in and which are shrouded under the cloak of misdirection and layers of deceit. No real harm can come from a greater understanding of how the sociopaths and their enablers ply their craft and why we always fall for the same stupid misdirection dog tricks.<strong> Knowing ourselves and those around us is never a waste of time if our intentions and motives are squarely aligned with our actions</strong>.</p> <p>And it is here, while searching for <strong>our</strong> real motives, that we find many of our own lies clouding our intentions and distorting our thinking. After overcoming the initial fear that comes from discovering our protector is in fact our tormentor and potentially our killer, a fear we must examine more closely, we then move on to the next stage, that of sounding the alarm. But first let us explore the fear, because as we awaken we will discover our fear, in all its forms and permutations, is behind nearly everything we do, and react to, on a daily basis.</p> <p>Of utmost importance here Marie is for you to recognize, and then accept, that the dangers you speak of and write about have <strong>always</strong> been there. It is you who have changed, not your surroundings and most certainly not the machine. The government has always been your enemy and not your friend; those multinational corporations have always pursued power and profit first at yours and my expense; the education system is designed to condition and indoctrinate, not liberate your mind, and your family is just as asleep as you were and maybe even more so. This was always the case with the danger partially hidden behind an obscuring lace veil. The only difference now is you have looked into the abyss and are shocked by what you have found. &nbsp;</p> <p>What is the central difference in our mind between walking down the center aisle of our local supermarket and walking down a dark downtown street at 2 AM? I would argue that seen from the point of view of personal danger there isn&rsquo;t much difference from moment to moment, though over longer periods of time there most certainly is. Yet in practice these two worlds are <strong>far</strong> removed from each other, with the supermarket perceived to be much safer than the darkened late night street.</p> <p>It stands to reason you will act more openly and freely in the supermarket then on the street, particularly if you always shop at the market and rarely if ever walk the late night street. So the level of danger you feel is more perceptional than actual with the familiarity of the market, along with many other people present who are just like you, greatly reducing one&rsquo;s perception of danger. It is not the actual danger that is alarming to us as it is our perceived proximity to danger that gets our blood racing. We use rationalization and subtle denial, in all its petty forms and functions, to distort our perception of many the dangers which in practice are always present and all around us.</p> <p>Thus while shopping in the supermarket you aren&rsquo;t overly concerned with who is behind you or walking past, who is standing next to you while you select a steak or reach for the frozen peas. Nor who is waiting in the checkout line directly behind you and within two feet of your purse. While this might all seem obvious, the point is you are not concerned to any great extent with your personal safety while in the supermarket, yet you would be on the late night street, even if statistically from moment to moment you might be equally as safe. People are robbed or assaulted in the supermarket and have their wallets and purses stolen while in the mall, retail store or parking lot.</p> <p>On a day to day basis we go about our business giving very little thought to our personal safety or even to those around us. While we know crime does exist and we may even know a friend or family member who has been &lsquo;victimized&rsquo;, it all takes place at a distance from us physically, mentally and emotionally. We take for granted, barring extraordinary circumstances, that we are not presently in danger. In many ways this is a naïve approach to life and it certainly sets us up for a real shock to the system when the inevitable violation occurs.</p> <p>But since we are not trained or conditioned to view the world much beyond the next few hours, maybe days at the most, we simply assume what happened last minute will happen this minute and again during the next. And make no mistake about it Marie, how we are trained to see and perceive reality makes all the difference when creating and interacting with reality.</p> <p>The odds are very high nothing will happen to us from moment to moment, which simply acts as real time confirmation of our conditioned bias. But it also breeds complacency within us and the emotional perception of safety we so desperately desire when we do not wish to assume responsibility for our own personal safety or sovereignty.</p> <p>This is why we often bemoan the lack of police or some other authority figure when the inevitable happens. While intellectually we know the police react to crime, not prevent crime, since we have sub contracted out the responsibility for our personal and emotional safety, clearly it must be the sub contractor&rsquo;s fault when we are harmed. It does not matter if the sub contractor was incapable of doing the job in the first place or even wanted to do so. Since we have abdicated our own personal responsibility we must now find emotional cover when things go wrong. And they always go wrong, thus proving the lie we can avoid accountability in the first place.</p> <p>&nbsp;</p> <p style="text-align: center;"><img alt="Fear Is The Mind Killer" height="466" src="http://www.zerohedge.com/sites/default/files/images/user5464/imageroot/2014/08/Fear2%20-%20Clean_0.jpg" title="Fear Is The Mind Killer" width="800" /></p> <p style="text-align: center;">&nbsp;</p> <p>Sitting there while reading this, you might be tempted to intellectualize this discussion and claim you don&rsquo;t engage in this behavior. And it is so easy to explain it all away because everyone else is doing the same thing at the same time. But Marie we have talked in the past about how in practice many of our decisions are emotional or impulse based and only afterwards do we rationalize them, thus validating our own &lsquo;intelligent&rsquo; choices. This in and of itself is the core function of denial, separating the emotional animal from the rational being as if they are two different entities, when in reality they are just two dissimilar faces of the same beast.</p> <p>Before moving on let me emphasize once again that all of us to some extent or another expect external authorities to protect and serve us. We have been conditioned to believe this is why we pay our taxes instead of those taxes being tribute to the state the payments really are. That is <strong>supposedly</strong> why we gather as large loosely connected tribes within clearly defined physical and cultural borders, for our collective and individual benefit and self defense.</p> <p>But this also leaves us particularly vulnerable to the collective as well as to individuals within the collective who do not abide by the rules and who, while doing so, are protected by the collective to further other people&rsquo;s individual or collective goals. This is the corrosive effect of systemic and wide ranging corruption, to turn nearly all &lsquo;law abiding&rsquo; members of the collective into a pool of captive victims waiting to be exploited. For those individuals who depend upon the collective for sustenance, protection and emotional support, thereby becoming dependents of the collective, they are seen as little more than fish in a crowded pond to the predators.</p> <p>I contend this love/hate relationship is responsible for much of the underlying fear we experience from day to day. While we rarely acknowledge our vulnerability to the collective, on a subconscious level it is blatantly obvious, thus we always live in a state of low level fear and apprehension. But our fear is hidden from view because it has been culturally assimilated by us within us. It is given different, more pleasant sounding names in order to be widely accepted as part of modern life, thus natural, normal and no big deal. &nbsp;</p> <p>For example, while we are conditioned to believe the local police are there &ldquo;<em>To Protect and To Serve</em>&rdquo; in reality they are the local armed enforcement division of the protection scam called government. They are the armed revenue generating agents of the local tax &lsquo;authority&rsquo; and the private security force for the financial elite. They protect the property of those who control their salaries while violently subduing peaceful protestors of the elite in response to their agent provocateurs inciting a riot.</p> <p>When we see flashing lights in our rearview mirror we can safely say our heart does not leap for joy with the prospect of another encounter with those who protect and serve, but rather a rush of fear flashes over us as we quickly assess what the damages will be during this latest bald faced extortion exercise. After the officer has pulled us over and run our plates for wants, warrants and outstanding protection payments, he doesn&rsquo;t walk to our car with a hand casually draped over his service weapon because he wants to give us a warm welcoming hug.</p> <p>When the IRS comes calling with a notice of extortion demanding payment, saying we owe more of our &lsquo;voluntary tax&rsquo; than we have declared, suddenly we realize the IRS has the legal right to assume we are guilty while the burden of proof of our innocence falls upon us. Worse, if we protest too much we are hauled into a special &lsquo;tax&rsquo; court where the rules of evidence and self incrimination are stacked against us. It is then we realize the smart move is just to pay the cost of defense (the penalties) plus the original levy rather than fight the rigged system. Chalk up another personal violation.</p> <p>But even these examples are obvious when given serious thought and a clear eyed assessment of what is really going on. What is chillingly frightening to you is the realization nearly everything you believed in, the basis by which you lived your life and pursued your interests, vocation and entertainment, is the polar opposite of what you thought was true and correct. Worse, not only is your government not your protector but it might just be your mortal enemy.</p> <p>Essentially you are discovering you live in a dream world Marie and most of what you believed real is not only false and fake, but deliberately conceived to deceive our perception of reality in order to control and exploit. This strikes to the very heart of what we are conditioned to believe &ldquo;<em>We the People</em>&rdquo; are as well as our small part in this promoted reality. Rather than the shining beacon of global truth, justice and the American Way, you are beginning to recognize those who run this country are true psychopaths and &lsquo;our&rsquo; country is closer to a banana republic than a representative republic. Worse, it appears we are the biggest rotten banana in the global bunch.</p> <p>Relatively early in life, say around mid to late teens, we have already created an internal world view which, while flexible enough to be changed slightly to accommodate the movable feast of world events, is still firmly anchored in cement by fundamental &lsquo;beliefs&rsquo; indoctrinated into us from birth by well meaning fellow &lsquo;believers&rsquo; and/or captive wage slaves dependent upon the machine to create their reality and feed their family.</p> <p style="text-align: center;"><img alt="Make the world go away" height="576" src="http://www.zerohedge.com/sites/default/files/images/user5464/imageroot/2014/08/Head%20in%20Sand%20-%20Clean_0.jpg" title="Make the world go away" width="800" /></p> <p>The propagandized illusion of national wholesomeness and moral certainty, while increasingly under assault by the growing mass awareness that something stinks in the wood pile, basically remains intact precisely because our semi flexible worldview accommodates selective reasoning, denial and narcissistic fantasies. But when viewing the full Monty of the police state and its control apparatus, combined with the clarity of a growing awakening, nearly all of us suffer some sort of breakdown on both a psychic and spiritual level, leaving us isolated and broken and desperate for fellow support and affirmation.</p> <p>For nearly all of us this is simply too much to bear and we rapidly retreat to the sweet bliss of feigned ignorance. Don&rsquo;t ask, don&rsquo;t tell works quite well for most individuals who have previously peaked into the abyss and are desperate to forget not only what they saw, but the social implications it has for them. Obviously an emotional and psychological transition must take place here if we are not only to recover our feet, but to move forward towards recovery and rejuvenation.</p> <p>And it is here dear Marie that I return to the subject of sounding the alarm. By this I mean any attempt by us to warn and/or rally those around us in order to facilitate systemic change and reform as well as to develop allies for personal protection and empowerment. Our instinct when leaving one tribe is to either join or create another one if for no other reason than to replace the collective affirmation we no longer receive from the tribe we abandoned.</p> <p>As in all things in life our intent is often more important that our actions. If we are sounding the alarm out of personal fear, then fear is precisely what we will project, consciously and subconsciously, when talking to others. Since the people we talk to also harbor an internal discomfort and disconnect which they do not acknowledge, thus they are on edge if only on a subconscious level, they will sense our projected fear and react with revulsion and rejection. Nobody wants to get too close to the crazy person, especially when that person is proclaiming &lsquo;truths&rsquo; contrary to their consensus belief.</p> <p>Because of this projected fear, along with the prevailing denial of those being &lsquo;warned&rsquo;, many newly awakened make almost no headway when sounding the alarm which in turn increases their sense of isolation and desperation and thereby their fear. It is a vicious positive feedback loop which usually ends in emotional exhaustion and possibly even a mental breakdown. At the very least many become depressed and despondent which, when combined with their inevitable social withdrawal, further encourages others to label them as malcontents or even mentally ill.&nbsp;</p> <p>Marie&hellip;&hellip;this is why we must suppress the instinct to fight or flight and immediately begin the work within. Only after we have come to grips with this terrible emotional trauma and are settled not only with our prior participation, but also the inevitable personal changes we must enact if we are to embody what must be done in order to facilitate our partial or full withdrawal from the insanity, can we move forward with our life. How much and to what extent only you can determine, but certainly no settled decision can be made until and unless you have begun the personal soul searching work of self discovery.</p> <p>Many of the newly awakened, as well as countless veterans, spend nearly all their time bargaining with their awakening instead of focusing on their healing. For far too many the awakening itself is the nightmare rather than what they are awakening to. While some will claim otherwise, often those who are awakening just want the system to be &lsquo;fixed&rsquo; so they can go back to sleep. I know many who feel it is an injustice they must be the ones who are awakening, thus the carrier of the burden of contrary information and knowledge, rather than recognizing the wonderful gift they have been bestowed.</p> <p>Once you arrive at a fork in the road you must make a decision. Make a choice, be settled with it and move on. If need be Marie you can always revisit that decision, though oftentimes if you attempt to do so you will find yourself so fundamentally changed from the journey itself, either you won&rsquo;t need to revisit or once back there the same choices will no longer be there. It is only when we continue to bargain with our &lsquo;self&rsquo;, either before, during or after our (in) decision, that the damage is done and reinforced. It is this constant state of tension, this unwillingness to seek centering and to be settled in our new role in life, that exaggerates and inflames our fear and isolation.</p> <p>Obviously this is easier said than done and ultimately no matter how much encouragement and support you receive along the way, your journey is a solo affair. As difficult as it may seem for you now, please recognize you have entered the beginning of the end of your mindless dependency upon the collective machine and external authority. From this point forward how well you handle yourself and your recovery depends entirely upon how willing you are to step away from the herd and explore the space within. I promise you this much; once you recognize the only thing you have to fear is fear itself the emotional release you experience will be life altering.</p> <p>Go ahead and take that first step. If you are committed and have faith that the process will be life changing and healing, it <strong>will</strong> be all that and so much more.</p> <p>Beside you always,</p> <p>&nbsp;</p> <p>Jonathan</p> <p>_______________</p> <p><!--[if gte mso 9]><xml> <w:WordDocument> <w:View>Normal</w:View> <w:Zoom>0</w:Zoom> <w:TrackMoves /> <w:TrackFormatting /> <w:PunctuationKerning /> <w:ValidateAgainstSchemas /> <w:SaveIfXMLInvalid>false</w:SaveIfXMLInvalid> <w:IgnoreMixedContent>false</w:IgnoreMixedContent> <w:AlwaysShowPlaceholderText>false</w:AlwaysShowPlaceholderText> <w:DoNotPromoteQF /> <w:LidThemeOther>EN-US</w:LidThemeOther> <w:LidThemeAsian>X-NONE</w:LidThemeAsian> <w:LidThemeComplexScript>X-NONE</w:LidThemeComplexScript> <w:Compatibility> <w:BreakWrappedTables /> <w:SnapToGridInCell /> <w:WrapTextWithPunct /> <w:UseAsianBreakRules /> <w:DontGrowAutofit /> <w:SplitPgBreakAndParaMark /> <w:DontVertAlignCellWithSp /> <w:DontBreakConstrainedForcedTables /> <w:DontVertAlignInTxbx /> <w:Word11KerningPairs /> <w:CachedColBalance /> </w:Compatibility> <w:BrowserLevel>MicrosoftInternetExplorer4</w:BrowserLevel> <m:mathPr> <m:mathFont m:val="Cambria Math" /> <m:brkBin m:val="before" /> <m:brkBinSub m:val="&#45;-" /> <m:smallFrac m:val="off" /> <m:dispDef /> <m:lMargin m:val="0" /> <m:rMargin m:val="0" /> <m:defJc m:val="centerGroup" /> <m:wrapIndent m:val="1440" /> <m:intLim m:val="subSup" /> <m:naryLim m:val="undOvr" /> </m:mathPr></w:WordDocument> </xml><![endif]--><!--[if gte mso 9]><xml> <w:WordDocument> <w:View>Normal</w:View> <w:Zoom>0</w:Zoom> <w:TrackMoves /> <w:TrackFormatting /> <w:PunctuationKerning /> <w:ValidateAgainstSchemas /> <w:SaveIfXMLInvalid>false</w:SaveIfXMLInvalid> <w:IgnoreMixedContent>false</w:IgnoreMixedContent> <w:AlwaysShowPlaceholderText>false</w:AlwaysShowPlaceholderText> <w:DoNotPromoteQF /> <w:LidThemeOther>EN-US</w:LidThemeOther> <w:LidThemeAsian>X-NONE</w:LidThemeAsian> <w:LidThemeComplexScript>X-NONE</w:LidThemeComplexScript> <w:Compatibility> <w:BreakWrappedTables /> <w:SnapToGridInCell /> <w:WrapTextWithPunct /> <w:UseAsianBreakRules /> <w:DontGrowAutofit /> <w:SplitPgBreakAndParaMark /> <w:DontVertAlignCellWithSp /> <w:DontBreakConstrainedForcedTables /> <w:DontVertAlignInTxbx /> <w:Word11KerningPairs /> <w:CachedColBalance /> </w:Compatibility> <w:BrowserLevel>MicrosoftInternetExplorer4</w:BrowserLevel> <m:mathPr> <m:mathFont m:val="Cambria Math" /> <m:brkBin m:val="before" /> <m:brkBinSub m:val="&#45;-" /> <m:smallFrac m:val="off" /> <m:dispDef /> <m:lMargin m:val="0" /> <m:rMargin m:val="0" /> <m:defJc m:val="centerGroup" /> <m:wrapIndent m:val="1440" /> <m:intLim m:val="subSup" /> <m:naryLim m:val="undOvr" /> </m:mathPr></w:WordDocument> </xml><![endif]--></p> <p>&nbsp;</p> <p>Cognitive Dissonance</p> <p>09-01-2014&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p> <p><em><span style="font-size: 11.0pt; line-height: 115%; font-family: &quot;Verdana&quot;,&quot;sans-serif&quot;; mso-fareast-font-family: Calibri; mso-bidi-font-family: &quot;Times New Roman&quot;; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;"><em>You will always find original articles by Cognitive Dissonance and other authors <strong>first</strong> on <a href="http://twoicefloes.com/" target="_blank">www.TwoIceFloes.com</a> before they are posted here on ZH. Come by and take a look.</em></span></em></p> <p><em>If you wish to subscribe to &lsquo;Dispatches&rsquo;, a periodic newsletter from Cognitive Dissonance and <a href="http://twoicefloes.com/" target="_blank">TwoIceFloes</a> Creations, please <a href="http://twoicefloes.com/membership/subscribe-to-dispatches/" target="_blank"><strong>click here</strong></a>.</em></p> <p>&nbsp;</p> <p style="text-align: center;"><img alt="Fearless" height="531" src="http://www.zerohedge.com/sites/default/files/images/user5464/imageroot/2014/08/Fearless%20-%20Clean_0.jpg" title="Fearless" width="800" /></p> http://www.zerohedge.com/news/2014-09-01/dispatches-occupied-territory-%E2%80%93-fear-mind-killer#comments Cognitive Dissonance Corruption fixed None Reality recovery Mon, 01 Sep 2014 21:02:41 +0000 Cognitive Dissonance 493790 at http://www.zerohedge.com Saudi King Warns ISIS "Will Reach Europe In One Month, US In Two" http://www.zerohedge.com/news/2014-09-01/saudi-king-warns-isis-will-reach-europe-one-month-us-two <p>As if the fearmongery and vitriol of UK, Europe and the US were not enough, the Middle-East's 'allied' leaders are now opining on the threat of ISIS. <a href="http://www.foxnews.com/world/2014/08/30/saudi-king-warns-isis-terror-threat-to-europe-us/">As FOX News reports</a>, The king of Saudi Arabia has warned that jihadists could target the United States and Europe if leaders across the globe do not react to growing terrorist threats as Islamic State militants make advances across Iraq and Syria. <strong>"If neglected, I am certain that after a month they will reach Europe and, after another month, America," blasted King Abdullah, adding Cameron-esquely, "they know no humanity."</strong> Of course, this is quote ironic given the Saudi's funding of various terror groups throughout the region.</p> <p>&nbsp;</p> <p><a href="http://www.foxnews.com/world/2014/08/30/saudi-king-warns-isis-terror-threat-to-europe-us/"><em>As FOX News reports, </em></a></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>The king of Saudi Arabia has warned that jihadists could target the United States and Europe if leaders across the globe do not react to growing terrorist threats as Islamic State militants make advances across Iraq and Syria.</strong></p> <p>&nbsp;</p> <p>While not mentioning any terrorist groups by name, King Abdullah's statement appeared aimed at drawing Washington and NATO forces into a wider fight against the Islamic State terror organization and its supporters in the region. Saudi Arabia openly backs rebels fighting Syrian President Bashar Assad, but is concerned that the breakaway Al Qaeda group could also turn those very same weapons on the kingdom.</p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>"If neglected, I am certain that after a month they will reach Europe and, after another month, America," he said at a reception for foreign ambassadors Friday.</strong></span></p> <p>&nbsp;</p> <p><strong><span style="text-decoration: underline;">"These terrorists do not know the name of humanity and you have witnessed them severing heads and giving them to children to walk with in the street," </span></strong>the king said, urging the ambassadors to relay his message directly to their heads of state.</p> <p>&nbsp;</p> <p>The Islamic State, formerly known as ISIS, has been fighting moderate rebels, other extremists and Assad's forces in Syria for nearly three years. Iraq has faced an onslaught by the Sunni extremists and their supporters since early this year, and the country continues to be roiled by instability.</p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>While providing arms and support to Sunni militants in Syria, Saudi Arabia has denied directly funding or backing the Islamic State group.</strong></span></p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><strong>Saudi Arabia, a major U.S. ally in the region, has taken an increasingly active role in criticizing the Islamic State group.</strong> Earlier this month, the country's top cleric described the Islamic State group and Al Qaeda as Islam's No. 1 enemy and said that Muslims have been their first victims. State-backed Saudi clerics who once openly called on citizens to fight in Syria can now face steep punishment and the kingdom has threatened to imprison its citizens who fight in Syria and Iraq.</p> <p>&nbsp;</p> <p><strong>A decade ago, Al Qaeda militants launched a string of attacks in the kingdom aimed at toppling the monarchy.</strong> Saudi officials responded with a massive crackdown that saw many flee to neighboring Yemen. In the time since, the kingdom has not seen any massive attacks, though it has imprisoned suspected militants and sentenced others to death.</p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>The question is - is this an explicit call for US to protect them more... or else... or just more posturing to stir the populist vote for more war...?</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="318" height="272" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140901_saudi.jpg?1409586653" /> </div> </div> </div> http://www.zerohedge.com/news/2014-09-01/saudi-king-warns-isis-will-reach-europe-one-month-us-two#comments Fox News Iraq Saudi Arabia Mon, 01 Sep 2014 20:44:44 +0000 Tyler Durden 493789 at http://www.zerohedge.com Gold Lock Down Despite Aggressive Plan To Ban Russia From SWIFT, Terrorism & War Risk; Palladium At Multi-Year High Over $900 http://www.zerohedge.com/news/2014-09-01/gold-lock-down-despite-aggressive-plan-ban-russia-swift-terrorism-war-risk-palladium <p style="line-height: 1.1500000000000001; margin-top: 0pt; margin-bottom: 0pt;" dir="ltr"><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="color: #0000ff;"><a href="https://www.goldcore.com/goldcore_blog/Palladium_Breaks_Multi_Year_High_Over_USD_900_Russian_SWIFT_Payment_Ban_Proposed_By_UK">Gold Lock Down Despite Aggressive Plan To Ban Russia From SWIFT, Terrorism &amp; War Risk; Palladium At Multi-Year High Over $900</a></span></span></p> <p>The palladium price made a new 13 year high today and reached $909/oz, its highest since February 2001. Markets fear that the global supply of palladium could be impacted by the threat of further sanctions against Russia. </p> <p><strong id="docs-internal-guid-7d6bf815-32c8-87b5-e9c2-66bb0b0b0842" style="font-weight: normal;"><br /></strong></p> <p style="line-height: 1.1500000000000001; margin-top: 0pt; margin-bottom: 0pt;" dir="ltr"><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><img src="https://lh5.googleusercontent.com/c2xbGbsyyE_z4qUqMVikz4ksHlTI4ICACRCIpRArRfOrYFsZxP6dqexORmZTZvszekJnH9tJrN032MY42GP5naqpKiRAQJVYPG51eWp934vpIRJTA-lRBEHvoJb8qrK3rQ" width="624px;" height="303px;" style="border: none; transform: rotate(0.00rad);" /></span><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: bold; font-style: italic; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Palladium in U.S. Dollars - 20 Years (Thomson Reuters)</span><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The Russian mining industry has not been the target of sanctions so far, but with the oil sector already affected and the gas sector possibly the target of upcoming sanctions by the EU, markets remain fearful.</span></p> <p><span style="color: #222222; font-family: Calibri; font-size: 15px; white-space: pre-wrap; line-height: 1.1500000000000001;"><br />Russia is the world’s largest palladium producer accounting for over 40% of global production. This is mainly through Norilsk Nickel, the world’s largest mining company which mines nickel, copper and palladium in the area of Norilsk in Siberia, the world’s most northerly city. Palladium is mined as a by-product of nickel and copper mining.</span></p> <p style="line-height: 1.1500000000000001; margin-top: 0pt; margin-bottom: 0pt;" dir="ltr"><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><img src="https://lh3.googleusercontent.com/3KBUMPFQsHfsLWORrzbsXHToue6nDGzhpu0TBERm4x2KeD_aBU03zUTmQ7hTgzcdgKdcTl79L_sk543MQ1qP3j1m1hpitAoFa5Q5epErCmf0W5Wt-cTWSew_c7NxDJJ7zw" width="624px;" height="377px;" style="border: none; transform: rotate(0.00rad);" /></span></p> <p><strong style="font-weight: normal;"><br /></strong></p> <p style="line-height: 1.1500000000000001; margin-top: 0pt; margin-bottom: 0pt;" dir="ltr"><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The majority of palladium produced is used in automobile catalytic converters and demand has been buoyant recently due to higher sales in the auto industry. Recent miner strikes in South Africa have also disrupted supply for the big South African palladium producers, Amplats, Impala and Lonmin.</span><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Investment demand for palladium has also been strong recently and as acted as a competing demand to industrial users. &nbsp;</span></p> <p><strong style="font-weight: normal;"><br /></strong></p> <p style="line-height: 1.1500000000000001; margin-top: 0pt; margin-bottom: 0pt;" dir="ltr"><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><img src="https://lh4.googleusercontent.com/V2VdBJ75Og8ebWkqIsHZDiFpNHXdXxKa9j0AhxSuBRNqPVNE21ZqlxGXEefSL8P421QxkZuteHlkIhdQ8SfDPHoWY0A746jyEyFb53p1PBYSMF_pika59SG3-ah3Wm8eVQ" width="356px;" height="356px;" style="border: none; transform: rotate(0.00rad);" /></span><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: bold; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">EU Draws Up Further Sanctions Against Russia</span></p> <p style="line-height: 1.1500000000000001; margin-top: 0pt; margin-bottom: 0pt;" dir="ltr"><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Diplomatic fallout from the conflict in Ukraine continues to intensify. Amid claims and counter-claims by the Russian and Ukrainian sides concerning the fighting and incursions in Eastern Ukraine, the war of words has stepped up.</span></p> <p><span style="color: #222222; font-family: Calibri; font-size: 15px; line-height: 1.1500000000000001; white-space: pre-wrap;">Russian President Vladimir Putin was quoted as saying last Friday that "I want to remind you that Russia is one of the most powerful nuclear nations. This is a reality, not just words." While visiting EU leaders in Brussels at the weekend, Ukrainian President Petro Poroshenko said “we are very close to the point of no return, which is full scale war.”</span></p> <p><span style="color: #222222; font-family: Calibri; font-size: 15px; line-height: 1.1500000000000001; white-space: pre-wrap;">As fighting continues, European Union leaders met in Brussels yesterday and recommend that the European Commission draw up further economic sanctions against Russia that would be imposed unless Russia demonstrates a de-escalation of its involvement in the conflict in Eastern Ukraine.</span></p> <p><strong style="font-weight: normal;"><br /></strong></p> <p style="line-height: 1.1500000000000001; margin-top: 0pt; margin-bottom: 0pt;" dir="ltr"><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The recommended proposal includes “a provision on the basis of which every person and institution dealing with the separatist groups in the Donbass will be listed.” &nbsp;Donbass is the region in eastern Ukraine that encompasses the Donetsk and Luhansk areas that are currently the scene of the heaviest fighting in the conflict.</span></p> <p><strong style="font-weight: normal;"><br /></strong></p> <p style="line-height: 1.1500000000000001; margin-top: 0pt; margin-bottom: 0pt;" dir="ltr"><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Up until now, the EU’s sanctions against Russia have targeted specific individuals, and a number of companies in strategic industries such as the Russian financial sector and high tech oil sector equipment sector.</span></p> <p><strong style="font-weight: normal;"><br /></strong></p> <p style="line-height: 1.1500000000000001; margin-top: 0pt; margin-bottom: 0pt;" dir="ltr"><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The next set of potential sanctions is believed to still focus on the energy and finance industries, but would extend to sectors such as Russia’s gas sector., and step up the financial sanctions.</span></p> <p><strong style="font-weight: normal;"><br /></strong></p> <p style="line-height: 1.1500000000000001; margin-top: 0pt; margin-bottom: 0pt;" dir="ltr"><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In the financial area, there appear to be plans by the EU to continue to limit access for Russian companies to the western financial markets. Further financial sanctions have also been discussed such as attempting to limit Russian access the sovereign bond markets and access to syndicated lending deals but, for now, these broader financial sanctions appear to be in reserve.</span></p> <p><strong style="font-weight: normal;"><br /></strong></p> <p style="line-height: 1.1500000000000001; margin-top: 0pt; margin-bottom: 0pt;" dir="ltr"><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Russia has already imposed a ban on EU food imports and the EU is still fearful of retaliatory economic sanctions from Russia, which could extend to the EU aerospace, shipbuilding and car manufacturing sectors. &nbsp;This could ignite a harmful trade war which is why some EU member states are hesitant on sanctions at this time.</span></p> <p><span id="docs-internal-guid-3fc50743-32d0-23d5-5752-c8aa2746c23a"><span style="font-size: 16px; font-weight: bold; vertical-align: baseline;">UK Moots Nuclear Financial Option Of Banning Russia From SWIFT<br /></span></span>&nbsp;</p> <p style="line-height: 1.1500000000000001; margin-top: 0pt; margin-bottom: 0pt;" dir="ltr"><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Last week, the UK was said to be proposing that Russia be blocked from the international SWIFT bank transfer network. If this occurred it would essentially shut Russian banks and other companies out of the international banking network</span><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: bold; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">.</span><span style="font-size: 15px; font-family: Arial; color: #222222; background-color: #ffffff; font-weight: bold; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> </span><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">SWIFT is a Brussels based organisation and so it is obliged to follow any sanctions that are imposed by the European Commission.</span></p> <p><span style="line-height: 1.1500000000000001; color: #222222; font-family: Calibri; font-size: 15px; white-space: pre-wrap;">However, the very fact that a proposal even exists to shut out Russia from the SWIFT network shows that the Ukrainian crisis is now taking on a more ominous tone, and that geopolitical risk is set to rise from here unless diplomatic intervention can somehow retrieve the situation. </span></p> <p><span style="color: #222222; font-family: Calibri;"><span style="font-size: 15px; line-height: 1.1500000000000001; white-space: pre-wrap;">With a heightened terror threat level being imposed in the UK, a potential ratcheting up of sanctions on Russia, and the threat of a larger trade and currency war on the horizon, September should be an interesting month for the precious metals markets.</span></span></p> <p><span style="color: #222222; font-family: Calibri;"><span style="font-size: 15px; line-height: 17.25px; white-space: pre-wrap;">The UK has raised the country's terror threat level from substantial to severe, its second highest level. MI5 and MI6 said there was no information to suggest an attack was imminent.</span></span></p> <p><span style="font-size: 15px; line-height: 1.1500000000000001; white-space: pre-wrap;">The 13 year anniversary of September 11 looms next week and given developments in recent days and weeks, one must be wary of new attacks in the UK , U.S. and other western nations.</span></p> <p style="line-height: 1.1500000000000001; margin-top: 0pt; margin-bottom: 0pt;" dir="ltr"><a href="mailto:info@goldcore.com" style="text-decoration: none;"><span style="font-size: 19px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: bold; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /><br class="kix-line-break" /></span></a><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: bold; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">MARKET UPDATE</span><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: bold; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Today’s AM fix was USD 1,287.25, EUR 979.34 and GBP 774.47 per ounce.</span></p> <p style="line-height: 1.1500000000000001; margin-top: 0pt; margin-bottom: 0pt;" dir="ltr"><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Friday’s AM fix was USD 1,285.75, EUR 975.83 and GBP 774.55 per ounce.</span></p> <p><span style="color: #222222; font-family: Calibri; font-size: 15px; white-space: pre-wrap; line-height: 1.1500000000000001;"><br />Gold fell $2.00 or 0.16% to $1,287.30 and silver slipped $0.05 or 0.26% to $19.48 per ounce Friday. For the week, gold was up 0.54% while silver remained unchanged. &nbsp;</span></p> <p style="line-height: 1.1500000000000001; margin-top: 0pt; margin-bottom: 0pt;" dir="ltr"><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br class="kix-line-break" /></span><span style="font-size: 15px; font-family: Calibri; color: #222222; background-color: #ffffff; font-weight: normal; font-style: normal; font-variant: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Today, the U.S. markets are observing a national holiday for Labor Day. </span></p> <p><span style="color: #222222; font-family: Calibri; font-size: 15px; line-height: 1.1500000000000001; white-space: pre-wrap;">Platinum is trading at $1,424, unchanged from Friday. Palladium is again up strongly at multi-year highs at $909, up 1.5% from Friday’s $895.</span></p> <p><span style="color: #222222; font-family: Calibri; font-size: 15px; line-height: 1.1500000000000001; white-space: pre-wrap;">With the Labor Day holiday today in the US, markets are expected to be quieter than usual, but given that it’s now September, the remainder of the week is set to see higher volumes and more market activity as traders return and refocus following what is traditionally considered the holiday month of August.</span></p> <p><span style="color: #222222; font-family: Calibri; font-size: 15px; font-style: italic; font-weight: bold; line-height: 17.25px; white-space: pre-wrap;">by Ronan Manly, GoldCore Consultant. Editor Mark O’Byrne of GoldCore<br /></span></p> <p><span id="docs-internal-guid-3fc50743-32d5-8252-4417-f07db9dd5870"><span style="font-size: 24px; font-family: Calibri; color: #222222; font-weight: bold; vertical-align: baseline; white-space: pre-wrap;">Receive our award winning research</span><a href="http://info.goldcore.com/goldcore_email_subscription_preferences"><span style="font-size: 24px; font-family: Calibri; color: #222222; font-weight: bold; vertical-align: baseline; white-space: pre-wrap;"> </span><span style="font-size: 24px; font-family: Calibri; color: #1155cc; font-weight: bold; text-decoration: underline; vertical-align: baseline; white-space: pre-wrap;">here</span></a></span></p> http://www.zerohedge.com/news/2014-09-01/gold-lock-down-despite-aggressive-plan-ban-russia-swift-terrorism-war-risk-palladium#comments Bond Copper European Union Precious Metals Reality Reuters SWIFT Trade War Ukraine Vladimir Putin Mon, 01 Sep 2014 20:14:29 +0000 GoldCore 493788 at http://www.zerohedge.com "Pakistan Spring" Escalates; 3 Dead, Over 470 Injured As "Soft Coup" Hardens http://www.zerohedge.com/news/2014-09-01/pakistan-spring-escalates-3-dead-over-470-injured-soft-coup-hardens <p>The <a href="http://www.zerohedge.com/news/2014-08-30/20000-pakistan-riot-police-unleash-tear-gas-rubber-bullets-protesters-breach-pms-res">violent protests that raged yesterday have turned deadly</a> as clashes between riot police and anti-government protesters left 3 dead and at least 470 injured according to <a href="http://online.wsj.com/articles/pakistani-protests-turn-deadly-1409479167">The WSJ</a>. The military, who are acting as mediators between PM Sharif and opposition leader Imran Khan have warned both sides that they neither support the others view or sanction further use of violence to suppress crowds. Mr. Khan exclaimed to the people, &quot;<strong>if you want to be free, if you want to have a real democracy, the time has come</strong>;&quot; as another protester noted &quot;the police were brutal, but that is good because <strong>whenever blood is shed in a movement, it turns into a revolution</strong>.&quot; Meanwhile, the so-called <strong>&quot;soft-coup&quot;</strong> as WaPo refers to it continues to harden (threatening $3bn of US aid) as Prime Minister Sharif is left with fewer and fewer options.</p> <p>&nbsp;</p> <p>&nbsp;</p> <blockquote class="twitter-tweet" lang="en"><p>Policemen run away from anti-government protesters <a href="https://twitter.com/hashtag/Islamabad?src=hash">#Islamabad</a> September 1, 2014 <a href="https://twitter.com/hashtag/Pakistan?src=hash">#Pakistan</a> <a href="http://t.co/mUY9XLZV0H">pic.twitter.com/mUY9XLZV0H</a></p> <p>&mdash; 1924 (@1924_AEK) <a href="https://twitter.com/1924_AEK/statuses/506506757376847872">September 1, 2014</a></p></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script><blockquote class="twitter-tweet" lang="en"><p><a href="https://twitter.com/hashtag/Crisis?src=hash">#Crisis</a> en <a href="https://twitter.com/hashtag/Pakist%C3%A1n?src=hash">#Pakistán</a>: Manifestantes irrumpen en la estación de <a href="https://twitter.com/hashtag/TVestatal?src=hash">#TVestatal</a> ? <a href="http://t.co/Z9r5CQ28n4">http://t.co/Z9r5CQ28n4</a> <a href="http://t.co/UV5J2OE0BS">pic.twitter.com/UV5J2OE0BS</a></p> <p>&mdash; Mundo El Comercio (@Mundo_ECpe) <a href="https://twitter.com/Mundo_ECpe/statuses/506507507150643200">September 1, 2014</a></p></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script><p>&nbsp;</p> <p><strong>Islamabad has been paralysed since an estimated 70,000 protesters arrived from Lahore on August 15 and marched on Constitutional Avenue</strong> &ndash; which houses the National Assembly and the Prime Minister&rsquo;s residence. Since then schools and offices have remained closed.</p> <p>&nbsp;</p> <blockquote class="twitter-tweet" lang="en"><p>Anti-government protesters beat a riot policeman <a href="https://twitter.com/hashtag/Islamabad?src=hash">#Islamabad</a> September 1, 2014 <a href="https://twitter.com/hashtag/Pakistan?src=hash">#Pakistan</a> <a href="http://t.co/yrFsldyf8T">pic.twitter.com/yrFsldyf8T</a></p> <p>&mdash; 1924 (@1924_AEK) <a href="https://twitter.com/1924_AEK/statuses/506506173718478848">September 1, 2014</a></p></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script><p>&nbsp;</p> <p>Protesters sezied State TV <a href="http://www.telegraph.co.uk/news/worldnews/asia/pakistan/11067322/Pakistan-protesters-storm-state-television-station.html">(then lost control again)</a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>Early on Monday, a group of between 400 and 600 protesters invaded Pakistan Television&rsquo;s English-language service in the heart of the capital and forced it off air.</strong> Shortly before ending transmission, its announcer said: &quot;They have stormed the PTV office. PTV staff performing their duties are being beaten up.&quot;</p> <p>&nbsp;</p> <p><strong>The brief occupation was ended by Pakistan Rangers paramilitary troops.</strong></p> </blockquote> <p><a href="http://www.telegraph.co.uk/news/worldnews/asia/pakistan/11067322/Pakistan-protesters-storm-state-television-station.html">As The Telgraph reports,</a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>PM Sharif&#39;s room for manoeuvre was severely restricted by Pakistan&rsquo;s army chief General Raheel Sharif on Sunday, when a conference of his corps commanders issued a statement <strong>voicing &ldquo;serious concern&rdquo; over the violence and &ldquo;large scale injuries and loss of lives&rdquo;. He warned that &ldquo;further use of force will only aggravate the problem&rdquo;.</strong></p> <p>&nbsp;</p> <p><strong>The army chief had publicly clashed with the prime minister on Friday</strong> after Mr Sharif denied he had asked him to mediate in talks with Imran Khan and Tahir-ul-Qadri earlier in the day. He told the National Assembly that the army &quot;did not ask to play the role of mediator, neither have we requested them to play such a role.&quot;</p> </blockquote> <p><strong>The &quot;soft-coup&quot; continues...</strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>For much of Pakistan&#39;s independent existence, the country&#39;s politics have been dominated by its powerful military. The generals have a long history of interrupting and meddling with civilian rule. The election last year of Prime Minister Nawaz Sharif marked the first time in almost seven decades that Pakistan was able to carry out a peaceful transfer of power between civilian governments.</p> <p>&nbsp;</p> <p><strong>But the specter of the army now looms large once more.</strong> In order to placate heated protests against his rule, Sharif agreed this week to mediation by the army, an institution that is respected by a vast cross-section of society.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><u><strong>&quot;If Nawaz Sharif survives, for the rest of his term, he will be a ceremonial prime minister&mdash;the world will not take him seriously,&quot; said Ayesha Siddiqa, an Islamabad-based analyst told the Wall Street Journal. &quot;A soft coup has already taken place. The question is whether it will harden.&quot;</strong></u></p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>Additionally,</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>A <strong><u>group of hackers in Pakistan hacked several government portals, including that of the Army, and leaked 23,000 bank records</u></strong> in a bid to support the ongoing anti-government protests in the country, the Dawn reported.</p> <p>&nbsp;</p> <p>&#39;Islamabad Administration has reported that <strong>police used 10,000 gas shells, 1000 chemical gas, 5000 rubber bullets</strong> on protesters demanding resignation of Nawaz Sharif&#39; said Imran Khan.</p> </blockquote> <p>&nbsp;</p> <blockquote class="twitter-tweet" lang="en"><p>Parliament &quot;tent&quot; house. Via <a href="https://twitter.com/faizanlakhani">@faizanlakhani</a> The real owners of Parliament House <a href="https://twitter.com/hashtag/Islamabad?src=hash">#Islamabad</a> <a href="https://twitter.com/hashtag/Pakistan?src=hash">#Pakistan</a> <a href="http://t.co/LI5GUkPu5r">pic.twitter.com/LI5GUkPu5r</a></p> <p>&mdash; Ahmed (@Shaforama) <a href="https://twitter.com/Shaforama/statuses/506504634471415808">September 1, 2014</a></p></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script><blockquote class="twitter-tweet" lang="en"><p>Bunlar da Pakistan Gezi&#39;cileri. <a href="http://t.co/3Nra3kyD7n">pic.twitter.com/3Nra3kyD7n</a></p> <p>&mdash; Nehir Nur (@NJakaranda) <a href="https://twitter.com/NJakaranda/statuses/506503601246982144">September 1, 2014</a></p></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script><p>&nbsp;</p> <p>*&nbsp; *&nbsp; *</p> <p><a href="http://www.ft.com/intl/cms/s/0/5e6dc726-31cf-11e4-a19b-00144feabdc0.html#axzz3C5fUf6gr"><strong>The FT provides a quick primer Q&amp;A on The Pakistan Protests</strong></a> (and <a href="http://www.zerohedge.com/news/2014-08-19/meanwhile-pakistan">more background can be found here</a>)</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><u><strong>Why the trouble now after last year&rsquo;s successful election?</strong></u><br />The real origins of the two big demonstrations that began in mid-August in Lahore, moved to the capital Islamabad and then erupted in violence &ndash; causing three deaths in an attempt to storm the official residence of Prime Minister Nawaz Sharif &ndash; are a little obscure. But the street supporters of Imran Khan, the former cricket star turned politician, complain about corruption and say the general election of May last year won by Mr Sharif was rigged. Those loyal to Tahirul Qadri, an Islamic scholar with a fiery turn of phrase, talk of the need for &ldquo;revolution&rdquo; and are angered by the police killings of up to 14 of their number in previous demonstrations in Lahore in June. The two protests have coalesced in an encampment in the so-called secure &ldquo;red zone&rdquo; in the heart of the capital, in front of Parliament and other official buildings.</p> <p>&nbsp;</p> <p><u><strong>What&rsquo;s in it for Imran Khan and Tahirul Qadri?</strong></u><br />This is perhaps the most puzzling aspect of the crisis. Although the 2013 election was marred by violence and doubtless by incidents of cheating, most observers say Mr Sharif &ndash; supported by the majority of voters in the populous Punjab &ndash; was the clear overall winner. The election was also hailed as an important step towards a sustainable democracy, because it marked the first time that one democratically elected government had taken over from another in Pakistan&rsquo;s history. Mr Khan&rsquo;s Pakistan Tehreek-e-Insaf (Pakistan Justice Movement) came third, but won control of the restive Khyber-Pakhtunkhwa province. His enemies accuse him of ambition and vanity because he failed to win the post of prime minister for himself, and some members of his party have rebelled against what they see as his undemocratic tactics. Mr Qadri, meanwhile, is normally based in Canada. He is a religious moderate by the standards of Islamic Pakistan, but politically radical &ndash; inveighing against corruption and nepotism among politicians.</p> <p>&nbsp;</p> <p><u><strong>Is the army behind all this?</strong></u><br />Yes, at least that is what many Pakistanis believe, including those with a military background. The army overthrew Mr Sharif once before, when General Pervez Musharraf staged a military coup d&rsquo;état in 1999. This time around, Mr Sharif is seen to have offended the generals in three ways. First, he is determined to pursue the case for treason against Mr Musharraf, instead of letting him fly back quietly into exile in the Gulf or in London. Second, Mr Sharif is eager to make peace with India, and the armed forces need India to remain the bogeyman so that they can justify their large numbers and hefty slice of the annual budget. Third, Mr Sharif has been trying to negotiate peace with Islamic extremists of the Pakistan Taliban, but the army has come round to the view that the militants must be crushed. The generals struggled for months before winning Mr Sharif&rsquo;s authorisation of their current offensive in North Waziristan along the Afghan border.</p> <p>&nbsp;</p> <p><u><strong>Why is Nawaz Sharif unable to cope?</strong></u><br />He has always been rather unfocused, but at the time of last year&rsquo;s election he seemed to have learnt from past mistakes (this is his third go as prime minister). Since taking office, he has launched various projects &ndash; including power stations &ndash; that should eventually help alleviate the country&rsquo;s electricity shortage and other problems. Yet political commentators say he now appears to have lost interest in governing. As the crisis brewed, he baffled his supporters by spending 10 days on a spiritual journey in Saudi Arabia.</p> <p>&nbsp;</p> <p><u><strong>Is there an economic impact on Pakistan?</strong></u><br />Yes, but it is hard to calculate. Transport and the functioning of the central government have been badly disrupted by more than two weeks of troubles, and the US might be forced to withhold some of its aid for Pakistan if the armed forces overtly took power. The real problem is the loss of what little international confidence there was in Pakistan&rsquo;s investment climate.</p> <p>&nbsp;</p> <p><u><strong>What next?</strong></u><br />Among the possible outcomes is the resignation of Mr Sharif and the installation of a technocratic government tacitly backed by the army, followed by fresh elections. Other options include an outright military takeover (the army has run the country for half of its existence since 1947). Or Pakistanis could endure a long period of instability as a weakened Mr Sharif hangs on to power.</p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>Senior government sources believe the army, or at least a section of it, is seeking to destabilise Mr Sharif&rsquo;s government and wants fresh elections to oust or weaken him.</p> <p><u><strong>&quot;There is a strong belief that they [the demonstrators] can&rsquo;t continue doing what they&rsquo;re doing without support from certain sections of the army.</strong></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="601" height="413" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140901_paki.jpg?1409598210" /> </div> </div> </div> http://www.zerohedge.com/news/2014-09-01/pakistan-spring-escalates-3-dead-over-470-injured-soft-coup-hardens#comments Corruption India Saudi Arabia Twitter Twitter Mon, 01 Sep 2014 19:54:17 +0000 Tyler Durden 493787 at http://www.zerohedge.com Goldman's Special Purpose Tentacle Revealed In Europe's Latest Bank Failure http://www.zerohedge.com/news/2014-09-01/goldmans-special-purpose-tentacle-revealed-europes-latest-bank-failure <p>The day that Banco Espirito Santo finally crashed and was <span style="text-decoration: line-through;">liquidated</span> nationalized under the weight of its countless criminal "inside the family" fund transfers, money losing loans, and off balance sheet activities, we pointed out to something amusing: <em><strong>the Goldman trail.</strong></em> Because not only was it revealed that in mid-July, two weeks before the Portuguese bank conglomerate failed, Goldman had invested several hundred million into the broken business, but that all through 2014, Goldman had done its best to drag the muppets down with it.</p> <p>Recall from January 14, 2014 <a href="http://www.zerohedge.com/news/2014-08-04/8-months-muppet-brutality-why-and-where-goldman-told-clients-buy-banco-espirito-sant">where Goldman said</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Buy BES: Winner at home, recovering abroad </strong></p> <p>&nbsp;</p> <p>In our view, BES is (1) optimally positioned to gain from Portugal’s banking market evolution and (2) likely to benefit from improving margins in Angola. <strong>With the stock trading at a 29% discount to peers’ 2015E P/TBV and with <span style="text-decoration: underline;">28% upside to our 12m target price of €1.55</span>, we upgrade BES to Buy</strong>.</p> <p>&nbsp;</p> <p>* * *</p> <p>&nbsp;</p> <p><strong>Positioning: Looking beyond the crisis – BES best placed </strong></p> <p>&nbsp;</p> <p>Resilience to asset quality deterioration determined banks’ ability to withstand the effects of the economic and financial crisis. Those effects, however, have their cause in macroeconomic imbalances that led Portugal to ask for financial assistance from the EU/IMF. Addressing those causes will determine the future shape of the Portuguese banking market and the relative positioning of the banks. In this context, we develop a theoretical (and severe) scenario to assess relative positioning in a deleveraging economy: under this scenario, we estimate that Portuguese banks would need to delever by a further €35 bn domestic loans (or 15%) by 2020 to partially reverse the imbalances that contributed to the crisis. This is a top-end assumption and depends heavily on the country’s future macroeconomic performance. In this negative scenario, we show that BES would be best positioned to gain from a “race to the bottom”. Our estimate is harsh, but we still believe that it is a good proxy for the underlying trends in the lending market. <strong>In this context, even under more benign scenarios, BES is best placed. </strong></p> </blockquote> <p>Goldman had BES at a Buy until, well, just before the default.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/08/BES%20Goldman%20rating%20history.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/08/BES%20Goldman%20rating%20history_0.jpg" width="504" height="286" /></a></p> <p>The crashing stock price rose briefly on July 23 after it was revealed that such "deep value investors" as Baupost and quant algos as D.E.Shaw, but most importantly, <em><strong>Goldman, </strong></em>had become substantial holders of the BES common, with Goldman controlling <a href="http://www.bloomberg.com/news/2014-07-23/bes-rises-as-goldman-sachs-and-d-e-shaw-buy-shares.html">just under 3% of the equity.</a> Surely if anyone would have done their due diligence it would be Seth Clarman, David Shaw and the Squid. Well, ten days later it became abundantly clear that not only had nobody done <strong><em>any </em></strong>homework, but that the investors were merely piggybacking on each other, hoping that the "other guy" had actually analyzed the situation.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140731_%2BBES.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/07/20140731_%2BBES_0.jpg" width="501" height="525" /></a></p> <p>But while Baupost and DE Shaw, hedge funds which have deep-distrssed investing pockets, are logical buyers of a pre-bankruptcy stock and can assess the risks of a full wipe-out, why did Goldman feel compelled to chase a falling knife?</p> <p>As Bloomberg <a href="http://www.bloomberg.com/news/2014-07-23/bes-rises-as-goldman-sachs-and-d-e-shaw-buy-shares.html">reported on July 23</a>, Goldman Sachs said today that it <em><strong>“entered into positions in Banco Espirito Santo by virtue of its facilitation of client transactions,”</strong></em> according to an e-mail sent to Bloomberg News. "<em>This purchase passes on some security to the market and can open the door for other institutional investors,</em>" said Juan Dieste, a trader at Orey iTrade in Lisbon.</p> <p>Turns out as usual there was much more to the story, and - not unexpectedly - the squid had its tentacles all over Europe's latest bank failure.</p> <p>As the <a href="http://online.wsj.com/articles/goldman-made-big-loan-to-banco-espirito-santo-shortly-before-collapse-1409574474?mod=djemalertMARKET">WSJ reported </a>this morning, in addition to all the previously documented tentacles, Goldman had one more money-sucking contingency when it comes to the heretofore Portuguese cookie jar: it turns out that "<strong>through a Luxembourg financing vehicle created by Goldman, Banco Espírito Santo received $835 million in July, according to a prospectus reviewed by The Wall Street Journal, a time when it was nearly impossible for the troubled lender to borrow directly in the capital markets</strong>... The transaction with Goldman is the latest instance of a Wall Street firm helping finance the Espírito Santo empire via off-balance-sheet vehicles before its demise. Portuguese regulators, for example, are investigating special-purpose vehicles, administered by Credit Suisse Group AG, that bought debt from Espírito Santo companies, the Journal reported last month."</p> <p>So what: just another insolvent Europen bank funding itself entirely <em>off the books </em>with the help of the world's most opportunistic banks (one wonders how many trillions in such SPVs are currently floating around Europe funding the banking sector's €1+ trillion non-performing loan deficiencies, but that is a topic for another day). But unlike the "plain vanilla" Spivs of the first credit bubble, the complexity of this one was truly impressive:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>At least some of that money was earmarked for an unusual destination: helping finance a refinery-construction project that a troubled Chinese company was running for Venezuela's state oil company. That oil company was a major creditor of companies in the Espírito Santo group. <strong>The previously unreported Goldman deal offered a fleeting respite for Portugal's second-largest bank, which was struggling with a cash crunch and a month later was bailed out and broken up by the Portuguese central bank.</strong></p> <p>&nbsp;</p> <p>The latest twist in the Espírito Santo saga started last September, <strong>when Venezuela's state oil company, PDVSA Petroleo SA, known as PDVSA, awarded an $834 million contract to a Chinese company named Wison Engineering Services Co.</strong></p> <p>&nbsp;</p> <p>The contract, awarded just days after Chinese police detained Wison's controlling shareholder in an oil-industry corruption crackdown, was to help build an oil refinery in Puerto la Cruz on Venezuela's coast. It marked the biggest such contract in Latin America for a Chinese company and a rare international foray for Wison.</p> <p>&nbsp;</p> <p><strong>Banco Espírito Santo at the time had a substantial presence in Venezuela. It had opened a Caracas branch in January 2012, part of an ambitious global growth strategy, and served as banker to the Venezuelan government and PdVSA on multiple projects</strong>. A Banco Espírito Santo marketing presentation this year touted Venezuela as "an important market," noting the large community of Portuguese expatriates there.</p> <p>&nbsp;</p> <p><strong>PDVSA, meanwhile, held significant sums of Espírito Santo debt, making it one of the family-owned conglomerate's largest creditors</strong>, according to a person familiar with the relationship.</p> </blockquote> <p>So a Chinese criminal entity investing in Venezuela, using money from a soon to be insolvent Portuguese bank that wouldn't be around in one year's time. And who ties it all together? Why the bank that was telling its clients to invest in the insolvent Portuguese bank all along.</p> <p>Then things accelerated: in May, Banco Espírito Santo approached Goldman to set up a special-purpose vehicle named Oak Finance Luxembourg SA. Banco Espírito Santo wanted to use the vehicle to raise dollar-denominated funding, which was growing scarce due to the bank's financial troubles, according to the person familiar with the relationship.</p> <p>On July 3, locked out of bond markets and bleeding cash, Banco Espírito Santo borrowed $835 million from Oak Finance, according to the prospectus. The borrowed funds were for purposes including trade financing for Wison Engineering on PDVSA's Deep Conversion Project, according to the loan agreement included in the Oak Finance prospectus.</p> <p>The problem is that at just about that time, a Chinese crackdown on Wison's controlling shareholder Hua Bangsong, about to be arrested on bribery charges, meant that the key player was about to drop out of the picture. Somewhat symmetrically, Wison announced on July 21 that the investigation casts doubt on its ability to stay in business, noting last week that it is in default on some of its bank obligations.</p> <p>By this time, however, Goldman was furiously spinning the damage control machine, seeking to offload as much risk as possible knowing that the end is insight.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The same day that Banco Espírito Santo tapped the Oak Finance loan, Oak Finance issued $785 million of debt <strong>with annual interest rates of up to 3.5%. Goldman</strong>, which served as arranger and dealer for the transaction, bought the debt and hoped to sell it at a profit to outside investors.</p> </blockquote> <p>What Goldman did not anticipate is how quickly the situation would spin out of control: "At first, the arrangement appeared lucrative for Goldman. It stood to collect fees from Oak Finance that "will be materially higher than the fees and/or commissions typically charged in vanilla bond transactions," according to the prospectus. <strong>But Banco Espírito Santo's financial difficulties made it hard for Goldman to attract buyers. </strong>During July, customers and creditors of the Portuguese lender yanked €3.35 billion ($4.4 billion) of funds, leaving the bank with "a severe liquidity shortfall," according to Portugal's central bank. The bank's shares plunged 80% before its Aug. 3 bailout.</p> <p>So what did Goldman do to make it seem it was in control? It invested a token amount in the BES equity for one simple reason:&nbsp; to offload as much of its SPV exposure to clueless invesotrs, as fast as possible. Because after all, why would Goldman be buying a chunk of the bank if it didn't expect it to survive.</p> <p>Well, it didn't, but the whole point was to give just this impression, and in the fog of confusion, to dump as much of the 3.5% yielding paper to yield starved managers experiencing career risk and "Fear Of Missing Out", and glutted with other people's money.</p> <p>Sadly it failed, and this time around Goldman's double down bluff blew up in its face, with the 200 West bank suffering losses on both its SPV exposure <em><strong>and </strong></em>its equity investment. To be sure, not total losses:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Goldman eventually sold a slug of the Oak Finance debt, at a loss, to hedge funds that specialize in distressed debt, according to a person familiar with the market activity. Goldman is still holding some of the debt, which has lost value, this person said.</p> <p>&nbsp;</p> <p>The fate of the Oak Finance debt is unclear<strong>. The sole collateral on the bonds is Oak Finance's $835 million loan to Banco Espírito Santo</strong>. Despite the bank's collapse, that loan is supposed to be repaid. It was among the liabilities transferred to Novo Banco, the "good bank" that Portugal carved out of Banco Espírito Santo when it was bailed out in August, according to Moody's Investors Service.</p> </blockquote> <p>Perhaps the take home message here is that in the New Normal, a truly distressed security yields a tiny 3.5%.</p> <p>Or maybe, the lessons is that if Goldman is involved, someone will always end up suffering massive losses.</p> <p>No matter what the lesson may be, if there even is one, here is what years of "<em>macroprudential policies" </em>have yielded:</p> <ul> <li>Off balance sheet vehicles?&nbsp; <em><strong>Check</strong></em></li> <li>Conflicted bank "research" recommending muppets buy stock while soliciting banking fees from same stock?&nbsp; <em><strong>Check</strong></em></li> <li>Hoping to sell debt on to muppets?&nbsp; <em><strong>Check</strong></em></li> <li>Chinese corruption? <em><strong>Check</strong></em></li> <li>State bailout of failed bank? <em><strong>Check</strong></em></li> </ul> <p>And that ladies and gentlemen, is precisely how the <em>New </em>differs from the <em>Old </em>Normal. Oh wait...</p> http://www.zerohedge.com/news/2014-09-01/goldmans-special-purpose-tentacle-revealed-europes-latest-bank-failure#comments Bloomberg News Bond Capital Markets Corruption Credit Suisse Creditors DE Shaw default Goldman Sachs goldman sachs Institutional Investors New Normal PDVSA Portugal Wall Street Journal Mon, 01 Sep 2014 19:25:03 +0000 Tyler Durden 493786 at http://www.zerohedge.com Leverage, Derivatives, And The Heresy Of Opposing The 'Status Quo Institutions' http://www.zerohedge.com/news/2014-09-01/leverage-derivatives-and-heresy-opposing-status-quo-institutions <p><a href="http://www.salientpartners.com/epsilontheory/notes/The_Name_of_the_Rose.html"><em>Submitted by Ben Hunt via Salient Partners&#39; Epsilon Theory blog,</em></a></p> <div style="margin-bottom:14px; border:dashed 1px #858585; padding:20px 20px 5px 20px; background-color:#fbfbfb;"> <p><strong>If names be not correct, language is not in accordance with the truth of things. </strong><br />&ndash; <em>Confucius, &ldquo;The Analects of Confucius&rdquo; (551 - 479 BC) </em></p> </div> <div style="margin-bottom:14px; border:dashed 1px #858585; padding:20px 20px 5px 20px; background-color:#fbfbfb; min-height:205px;"> <p><strong><img alt="" class="alignnone size-full wp-image-1101" height="201" src="http://www.salientpartners.com/epsilontheory/images/rose1.png" style="display:block; margin-left:20px; float:right;" width="147" />Give me a lever long enough and a fulcrum on which to place it, and I shall move the world. </strong><br />&ndash; <em>Archimedes (287 - 212 BC)</em></p> </div> <div style="margin-bottom:14px; border:dashed 1px #858585; padding:20px 20px 5px 20px; background-color:#fbfbfb; min-height:190px;"> <p><strong><img alt="" class="alignnone size-full wp-image-1101" height="173" src="http://www.salientpartners.com/epsilontheory/images/rose2.png" style="display:block; margin-right:20px; float:left;" width="173" />Call him Voldemort, Harry. Always use the proper name for things. Fear of a name increases fear of the thing itself. </strong><br />&ndash; <em>J.K. Rowling, &ldquo;Harry Potter and the Sorcerer&#39;s Stone&rdquo; (1997) </em></p> </div> <div style="margin-bottom:14px; border:dashed 1px #858585; padding:20px 20px 5px 20px; background-color:#fbfbfb; min-height:180px;"> <p><strong>Do you know why hurricanes have names instead of numbers? To keep the killing personal. No one cares about a bunch of people killed by a number. &#39;200 Dead as Number Three Slams Ashore&#39; is not nearly as interesting a headline as &#39;Charlie kills 200.&#39; Death is much more satisfying and entertaining if you personalize it.</strong></p> <p>Me, I&#39;m still waitin&#39; for Hurricane Ed. Old Ed wouldn&#39;t hurt ya, would he? Sounds kinda friendly. &#39;Hell no, we ain&#39;t evacuatin&#39;. Ed&#39;s comin&#39;! <br />&ndash; <em>George Carlin, &ldquo;Brain Droppings&rdquo; (1998)</em></p> </div> <div style="margin-bottom:14px; border:dashed 1px #858585; padding:20px 20px 5px 20px; background-color:#fbfbfb; min-height:205px;"> <p><strong><img alt="" class="alignnone size-full wp-image-1101" height="202" src="http://www.salientpartners.com/epsilontheory/images/rose3.png" style="display:block; margin-left:20px; float:right;" width="190" />I have been pronounced by the Holy Office to be vehemently suspected of heresy, that is to say, of having held and believed that the Sun is the center of the world and immovable, and that the earth is not the center and moves.</strong></p> <p>Therefore, desiring to remove from the minds of your Eminences, and of all faithful Christians, this vehement suspicion, justly conceived against me, with sincere heart and unfeigned faith I abjure, curse, and detest the aforesaid errors and heresies, &hellip; and I swear that in the future I will never again say or assert, verbally or in writing, anything that might furnish occasion for a similar suspicion regarding me.<br />&ndash; <em>Galileo Galilei (1564 &ndash; 1642)</em></p> </div> <div style="margin-bottom:14px; border:dashed 1px #858585; padding:20px 20px 5px 20px; background-color:#fbfbfb; min-height:205px;"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse:collapse;"> <tbody> <tr style="background-color:#e5e5e5;"> <td style="padding:10px;" width="166"> <p><strong>William of Baskerville:</strong></p> </td> <td style="padding:10px;" width="426"> <p style="padding:0; margin:0;"><img alt="" class="alignnone size-full wp-image-1101" height="202" src="http://www.salientpartners.com/epsilontheory/images/rose4.png" style="display:block; margin-left:20px; float:right;" width="190" />I, too, was an Inquisitor, but in the early days, when the Inquisition strove to guide, not to punish. And once I had to preside at a trial of a man whose only crime was to have translated a Greek book that conflicted with the Holy Scriptures. Bernardo Gui wanted him condemned as a heretic; I &hellip; acquitted the man. Then Bernardo Gui accused *me* of heresy, for having defended him. I appealed to the Pope. I &hellip; I was put in prison, tortured, and ... and I recanted.</p> </td> </tr> <tr> <td style="padding:10px;"> <p style="padding:0; margin:0;"><strong>Adso of Melk: </strong></p> </td> <td style="padding:10px;"> <p style="padding:0; margin:0;">What happened then?</p> </td> </tr> <tr style="background-color:#e5e5e5;"> <td style="padding:10px;"> <p><strong>William of Baskerville:</strong></p> </td> <td style="padding:10px;"> <p style="padding:0; margin:0;">The man was burned at the stake and I am still alive.</p> </td> </tr> </tbody> </table> <p>&ndash; <em>&ldquo;The Name of the Rose&rdquo; (1986)</em></p> </div> <div style="margin-bottom:14px; border:dashed 1px #858585; padding:20px 20px 5px 20px; background-color:#fbfbfb; min-height:205px;"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse:collapse;"> <tbody> <tr> <td style="padding:10px;"> <p style="padding:0; margin:0;"><strong>Adso of Melk: </strong></p> </td> <td style="padding:10px;"> <p style="padding:0; margin:0;">And what was the word you both kept mentioning?</p> </td> </tr> <tr style="background-color:#e5e5e5;"> <td style="padding:10px;" width="166"> <p><strong>William of Baskerville:</strong></p> </td> <td style="padding:10px;" width="426"> <p style="padding:0; margin:0;"><em>Penitenziagite.</em></p> </td> </tr> <tr> <td style="padding:10px;"> <p style="padding:0; margin:0;"><strong>Adso of Melk: </strong></p> </td> <td style="padding:10px;"> <p style="padding:0; margin:0;">What does it mean?</p> </td> </tr> <tr style="background-color:#e5e5e5;"> <td style="padding:10px;" width="166"> <p><strong>William of Baskerville:</strong></p> </td> <td style="padding:10px;" width="426"> <p style="padding:0; margin:0;">It means that the hunchback undoubtedly was once a heretic. <em>Penitenziagite</em> was a rallying cry of the Dolcinites.</p> </td> </tr> <tr> <td style="padding:10px;"> <p style="padding:0; margin:0;"><strong>Adso of Melk: </strong></p> </td> <td style="padding:10px;"> <p style="padding:0; margin:0;">Dolcinites? Who were they, master?</p> </td> </tr> <tr style="background-color:#e5e5e5;"> <td style="padding:10px;" width="166"> <p><strong>William of Baskerville:</strong></p> </td> <td style="padding:10px;" width="426"> <p style="padding:0; margin:0;">Those who believed in the poverty of Christ.</p> </td> </tr> <tr> <td style="padding:10px;"> <p style="padding:0; margin:0;"><strong>Adso of Melk: </strong></p> </td> <td style="padding:10px;"> <p style="padding:0; margin:0;">So do we Franciscans.</p> </td> </tr> <tr style="background-color:#e5e5e5;"> <td style="padding:10px;"> <p><strong>William of Baskerville:</strong></p> </td> <td style="padding:10px;"> <p style="padding:0; margin:0;">But they also declared that everyone must be poor, so they slaughtered the rich. Ha! You see, Adso, the step between ecstatic vision and sinful frenzy is all too brief.</p> </td> </tr> </tbody> </table> <p>&ndash; <em>&ldquo;The Name of the Rose&rdquo; (1986)</em></p> </div> <div style="margin-bottom:14px; border:dashed 1px #858585; padding:20px 20px 5px 20px; background-color:#fbfbfb; min-height:200px;"> <p><strong><img alt="" class="alignnone size-full wp-image-1101" height="194" src="http://www.salientpartners.com/epsilontheory/images/rose5.png" style="display:block; margin-right:20px; float:left;" width="130" />Every battle against heresy wants only this: to keep the leper as he is. </strong><br />&ndash; <em>Umberto Eco, &ldquo;The Name of the Rose&rdquo; (1980)</em></p> </div> <p>&ldquo;The Name of the Rose&rdquo; was an under-rated movie in the mid-1980&rsquo;s with an in-his-prime Sean Connery and a young Christian Slater (not to mention some great scene-stealing by Ron Perlman), based on an under-rated novel by one of my favorite authors, Umberto Eco. To be sure, Eco is prone to the occasional bout of overwrought ego-stoking prose (but aren&rsquo;t we all!), and my take on &ldquo;The Name of the Rose&rdquo; is that while Eco intended it as a work of great literature masquerading as a murder mystery, it&rsquo;s really a great murder mystery masquerading as literature. But as a highly entertaining yet wise examination of the power of ideas, the implacable opposition of status quo institutions to &ldquo;heresy&rdquo;, and the role of language in that struggle, &ldquo;The Name of the Rose&rdquo; has no equal in my library.</p> <p><strong>I thought of Eco&rsquo;s book last week when I read the </strong><a class="eplink" href="http://online.wsj.com/articles/san-diego-pension-dials-up-the-risk-to-combat-a-shortfall-1407974779?"><strong>WSJ&rsquo;s breathless article</strong></a><strong> about the San Diego County pension fund (SDCERA), Salient Partners, and the use of &hellip; gasp! &hellip; &ldquo;leverage&rdquo; and &ldquo;derivatives&rdquo; as part of Salient&rsquo;s recommended allocation strategy.</strong> In terms of public Narrative, the words &ldquo;leverage&rdquo; and &ldquo;derivative&rdquo; have become so mushy and ill-used that they have lost almost all meaning except as a weapon, as a tool to cast doubt on someone&rsquo;s motives, competency, and ethics. It&rsquo;s the modern equivalent of accusing someone of witchcraft or heresy, and it&rsquo;s what status quo institutions and their apologists have done for centuries with insurgent ideas. They use language &ndash; or rather, <em>they intentionally misuse language</em> &ndash; to paint the insurgent idea as heretical. It&rsquo;s like Dana Carvey&rsquo;s Church Lady interviewing someone on <em>Saturday Night Live</em>, only with the tagline shifted from &ldquo;Could it be &hellip; Satan?&rdquo; to &ldquo;Could it be &hellip; Leverage?&rdquo;.</p> <div style="display:block; margin-left:auto; margin-right:auto;"><img alt="" class="alignnone size-full wp-image-1101" src="http://www.salientpartners.com/epsilontheory/images/rose6.png" style="display:block; margin-left:auto; margin-right:auto;" /></div> <p>Anyone with public accountability or transparency bears the brunt of this linguistic warfare, particularly the investment board or staff of any public pension plan. In my experience these are almost always very smart people who are &ldquo;there for the right reasons&rdquo; to use the catch-phrase of &ldquo;The Bachelorette&rdquo;. But like William of Baskerville, they find themselves in an untenable position, where even considering an unorthodox idea, much less defending it, is cause for public attack, ridicule, and excommunication. At least being raked over the coals today is a figurative rather than literal punishment, but frankly I think I might prefer the latter.</p> <p>Modern torture-by-comment may be more psychological than physical, but it&rsquo;s no less vicious, and it&rsquo;s growing exponentially in power and scope. How many of you, like me, go straight to the comment area of an ESPN article? It&rsquo;s not that I care at all what any single commenter says about Johnny Manziel or Tim Tebow, but I am <em>fascinated</em> by the outpouring of effort, the tens of thousands of voices who apparently believe that others really do care about their opinion. It&rsquo;s entertainment for me. But imagine that you&rsquo;re the target of this outpouring of know-nothing vitriol, that you&rsquo;re a pension board member who hears a virtual mob saying that you&rsquo;re obviously either an idiot or a criminal to use &ldquo;leverage&rdquo; &ndash; <em>whatever that means</em> &ndash; in your investment strategy. <strong>It is very difficult to maintain the courage of your convictions or even an open mind to consider new ideas under the onslaught of this modern day Inquisition, and that&rsquo;s the real damage that&rsquo;s done here</strong>. William of Baskerville recanted. Galileo recanted. And we expect anything more from public pension officials than CYA?</p> <p>The unfortunate truth in all this is that, as Eco wrote, &ldquo;every battle against heresy wants only this: to keep the leper as he is.&rdquo; <strong>The</strong><strong>re are many status quo institutions &ndash; particularly political institutions like parties and media institutions like newspapers, but also more than a few large market institutions &ndash; who are <em>delighted</em> to keep public pension funds in this perpetual state of retributive fear and defensive under-performance.</strong> It has nothing to do with &ldquo;keeping them honest&rdquo; or whatever other bromide is trotted out for public consumption. It has everything to do with maintaining a mute whipping boy for political or economic gain.</p> <p>This is why newspaper hacks and political wannabes all over the country lick their chops whenever some new idea is proposed by a public agency, whether it&rsquo;s a local zoning board in a small town or a multi-billion dollar pension investment board. There is zero downside to making these attacks, no matter how simple-minded or misleading. The target is usually defenseless. The political upside is usually significant. And the economic beneficiaries, of course, other than the stalwart media defenders of orthodoxy, are the entrenched financial service providers.</p> <p>We&rsquo;re all familiar with the <em>Indiana Jones</em> knife fight, where a fierce turbaned warrior dressed all in black challenges Harrison Ford with his sword, only for Ford to pull out his gun and shoot the guy cold. <strong>Our current political and media system forces public pension funds into the turbaned warrior role. </strong>They are competing directly with the most advanced institutional investment firms in the world, firms that have an arsenal of weapons at their disposal. But God forbid that a public pension fund use &ldquo;leverage&rdquo; &ndash; again, <em>whatever that means</em> &ndash; in its investment strategy. Oh no, can&rsquo;t have that. Better to fail conventionally than to succeed unconventionally. Better to arm yourself with that simple sword and be gunned down before the fight even starts.</p> <div style="display:block; margin-left:auto; margin-right:auto;"><img alt="" class="alignnone size-full wp-image-1101" src="http://www.salientpartners.com/epsilontheory/images/rose7.png" style="display:block; margin-left:auto; margin-right:auto;" /></div> <p>&nbsp;</p> <p>Enough. Leverage and derivatives are not inherently demonic and aren&rsquo;t exclusively the purview of dark wizards. If you say the words out loud I promise you won&rsquo;t call forth a horde of Deatheaters.</p> <p>Can leverage, however defined, be used in Voldemort-ian fashion for evil rather than good? Of course. As Eco writes in one of my favorite quotes, &ldquo;the step between ecstatic vision and sinful frenzy is all too brief&rdquo;, and as a risk manager that&rsquo;s certainly something I watch for in any strategy or any investment manager. Can derivatives, however defined, be used as &ldquo;financial weapons of mass destruction&rdquo;, to quote Warren Buffett? You bet, although I find this quote mighty odd for <a class="eplink" href="http://www.bloomberg.com/apps/news?pid=newsarchive&amp;sid=ayC0l_Xh_rdc">a guy who wrote close to $15 <em>billion</em> of equity index puts and credit default swaps in 2006</a> to help fund Berkshire Hathaway. It all depends on what actual activity is being described by the words &ldquo;leverage&rdquo; and &ldquo;derivatives&rdquo;. <strong>It all depends on calling things by their proper names</strong>. To use the same word &ndash; &ldquo;derivative&rdquo; &ndash; for both exchange-traded futures in gigantically deep markets <em>and</em> a bespoke swap on some highly structured mortgage securitization is ludicrous, but that&rsquo;s exactly what the modern Inquisition does intentionally for its own political and economic interests. &nbsp;&nbsp;</p> <p>Properly understood &ndash; which means properly named &ndash; many common uses of leverage and derivatives aren&rsquo;t that scary. They&rsquo;re also not inherently instruments of risk creation. On the contrary &ndash; and this is the entire point of the risk-balancing &ldquo;heresy&rdquo; within the public pension world &ndash; <strong>using leverage and derivatives wisely can reduce the risk of an unlevered portfolio without reducing its long-term potential return or conversely may increase the long-term potential return of the portfolio without increasing its risk.</strong></p> <p>How? By using the age-old investment idea of <strong>balance</strong>, of not putting all of your eggs in one basket like the stock market. A risk-balancing strategy argues that you should put your money into multiple baskets &ndash; stocks, corporate bonds, commodities, and government bonds &ndash; and that you should balance between those baskets on the basis of historical risk, not simple dollar amounts. Also, most risk-balancing strategies have some mechanism to <em>adapt</em> to changing market conditions by letting the market tell you when something is working or not working. There, that&rsquo;s it. Pretty scary, huh?</p> <p>But you can&rsquo;t execute a risk-balancing strategy without using leverage (properly defined) and derivatives (properly defined). Three reasons. First, to be adaptive you need to be quick on your feet. Not millisecond fast, but one or two days fast. With the massive amounts of money that pension funds invest today, it&rsquo;s impossible to be sufficiently nimble if you&rsquo;re locked into individual stocks and bonds. Second, if you want to put some of your investment eggs into the commodity basket, you have to use leverage and derivatives because that&rsquo;s the only way to control them directly. Third, to balance out the risk between the baskets, as opposed to simply the dollars, you&rsquo;re going to need to control a lot more dollars in your bond baskets than in the stock basket. Why? Because the historical risk to bonds, particularly government bonds, is so much less than the historical risk to stocks. To get an equivalent amount of risk you either have to get rid of almost all of your stocks, which would be a mathematically correct but financially ill-advised solution, or you have to control a lot more bonds. I think it&rsquo;s wise to choose the latter &hellip; with limits, within reason, and constantly adapting to changing market conditions.</p> <p><strong>What a risk-balancing strategy means by &ldquo;leverage&rdquo; is the same as Archimedes meant the word 2,500 years ago, or that generals on the battlefield mean the word today: it&rsquo;s controlling a lot with a little by using a force multiplier</strong>. It&rsquo;s not borrowed money. It&rsquo;s not &ldquo;doubling down&rdquo; or &ldquo;turbo-charging&rdquo; or whatever other misleading phrase your local genius columnist or comment troll throws out there as Gospel. It&rsquo;s buying an exchange-traded, liquid contract that controls a lot of stocks or bonds or commodities for a little bit of money for a defined amount of time. These contracts are necessary because they are by far the most effective way of implementing what I think is an important new twist on an important old idea &ndash; balance your investments across several different asset baskets, but balance by risk (not dollars) and adapt to a changing market.</p> <p>Does the use of leverage (properly defined) and derivatives (properly defined) create trading risks that wouldn&rsquo;t be there if you just bought the Vanguard 60/40 fund and called it a day? Sure. <strong>But I believe risk-balancing strategies mitigate far more dangerous risks to a public pension portfolio &ndash; </strong><a class="eplink" href="http://www.salientpartners.com/research.html"><strong>particularly an over-reliance on equity markets</strong></a><strong>. </strong>Public pensions are complex entities whose liability structures are often many times greater than the size of their investment portfolios. The common practice to resolve this dilemma has been to pursue an equity-dominated asset structure that has greater chances of achieving the required return to make the entire structure work. <strong>The problem is that equities are themselves leveraged, but it&rsquo;s hidden leverage and thus hidden risk. </strong></p> <p>What does this mean, to say that equities embody hidden leverage? It means that the assets of S&amp;P 500 operating companies are nearly five times as large as the equity that finances them. It means that, by definition, the gulf between assets and equity can only be bridged by various forms of leverage. This is the alchemy that transformed a paltry 3.27% return-on-assets for S&amp;P 500 operating companies in 2013 to an impressive 15.01% return-on-equity. For all the equity enthusiasts out there who shake their heads and tut-tut the idea of a few turns of leverage on a liquid portfolio of government bonds, I&rsquo;d ask why you&rsquo;re so confident in a 5x equity leverage on the 3.27% unlevered ROA of the S&amp;P 500, but so fearful of, say, a 2x leverage on the 3.44% average interest paid on 30-year government bonds. That&rsquo;s not a slam on equities. I love equities. Nor is it to say that there&rsquo;s no risk in government bonds. My point is simply that as an investor you <em>must</em> take risk to achieve a return that is higher than the risk-free rate. There is no way around this, no free lunch, no way to get something for nothing. The question, at least for an investor like most public pensions, is not how to eliminate risk. <strong>The relevant questions are: do you know what risks exist in your portfolio, and which of these risks do you want to embrace?</strong></p> <p>Maybe you just don&rsquo;t like a risk-balancing allocation strategy, for whatever reason. That&rsquo;s fine. Or maybe you have a concern or an objection to the strategy or its implementation. That&rsquo;s fine, too, and believe me, there are plenty of reasonable concerns you could raise or I could raise about ANY investment strategy. But don&rsquo;t just shout out &ldquo;Leverage!&rdquo; as if it were a self-evident condemnation of the strategy or its adopters. It&rsquo;s like the scene in Steve Martin&rsquo;s wonderful movie <em>Roxanne</em>, where a heckler in a crowded bar shouts out &ldquo;Big nose!&rdquo;. Martin&rsquo;s response? He&rsquo;s insulted by the triviality of the insult, and proceeds to whip out 20 superior insults that the heckler could have made (my personal fave &ndash; &ldquo;Obscure: whoa! I&rsquo;d hate to see the grindstone.&rdquo;). In this case, I would suggest &ldquo;Looming: if you thought your leverage and derivative exposures were big, just wait till you see your liabilities.&rdquo; or &ldquo;Clairvoyant: if you&rsquo;re so smart, why use diversification at all?&rdquo;.</p> <div style="display:block; margin-left:auto; margin-right:auto;"><img alt="" class="alignnone size-full wp-image-1101" src="http://www.salientpartners.com/epsilontheory/images/rose8.png" style="display:block; margin-left:auto; margin-right:auto;" /></div> <p>&nbsp;</p> <p>I&rsquo;ll close with two quotes from Will Rogers, who not only never met a man he didn&rsquo;t like but also had an amazing knack for communicating advanced investment insights without resorting to three syllable words or mathematical equations.</p> <div style="margin-bottom:14px; border:dashed 1px #858585; padding:20px 20px 5px 20px; background-color:#fbfbfb; min-height:200px;"> <p><strong><img alt="" class="alignnone size-full wp-image-1101" height="195" src="http://www.salientpartners.com/epsilontheory/images/rose9.png" style="display:block; margin-right:20px; float:left;" width="152" />You&rsquo;ve got to go out on a limb sometimes because that&rsquo;s where the fruit is.</strong></p> <p>Don&#39;t gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don&#39;t go up, don&#39;t buy it. <br />&ndash; <em>Will Rogers (1879 &ndash; 1935)</em></p> </div> <p>I love these quotes because they encapsulate <strong>why</strong> Salient recommends a risk-balancing core allocation strategy. We want to embrace risk as an ally rather than treat it as the Great Satan. We do it for the same reason, as Will Rogers said, that you go out on a limb. Because that&rsquo;s where the fruit is. Risk and reward are entirely inseparable. They are two sides of an unsplittable coin, and you can&rsquo;t have one without the other. But you need to think about that relationship between risk and reward smartly. More importantly, you need to think about that relationship <em>wisely</em>. What&rsquo;s the difference? Smart thinks that he can model the future. Wise knows that she doesn&rsquo;t know what the future holds. Smart is intellectually sharp. Wise is intellectually honest.</p> <p>Being wise about risk and reward means you don&rsquo;t claim to own a magical crystal ball that predicts where risk will be low and reward will be high in the future. It means being intellectually honest enough to say that you don&rsquo;t know. That&rsquo;s the hardest thing in the investment world to admit, because there is no shortage of smart people who will tell you that they have just such a crystal ball. And maybe they&rsquo;re right. If you have that crystal ball or you know someone who does &hellip; if you are able, as Will Rogers advised, to avoid buying stocks that don&rsquo;t go up in the future &hellip; then you don&rsquo;t need a risk balancing strategy. Otherwise, <a class="eplink" href="http://www.salientpartners.com/epsilontheory/emails/The_Business_of_Epsilon_Theory.html">let&rsquo;s have a conversation</a>, or at least listen in <a class="eplink" href="http://www.salientpartners.com/epsilontheory/email-alerts.aspx">by reading Epsilon Theory</a>.</p> <p>I&rsquo;m not suggesting that we have a monopoly on new ideas for investing &ndash; we don&rsquo;t &ndash; or that our ideas are right for everyone &ndash; they&rsquo;re not. But we believe we are part of an insurgent movement to change the way investors think about asset allocation, and we are buoyed by a consistent lesson from history. The struggle between status quo and insurgent ideas can take a long time and it&rsquo;s never an easy road for the truth-seekers caught in the middle, but eventually<strong> &hellip; the Inquisition always loses. </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="231" height="215" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140901_sal.jpg?1409586093" /> </div> </div> </div> http://www.zerohedge.com/news/2014-09-01/leverage-derivatives-and-heresy-opposing-status-quo-institutions#comments Berkshire Hathaway Bond Credit Default Swaps default Epsilon Equity Markets Fail Ford Indiana Market Conditions Newspaper Transparency Warren Buffett Mon, 01 Sep 2014 18:51:55 +0000 Tyler Durden 493785 at http://www.zerohedge.com Where Do ISIS Fighters Come From? http://www.zerohedge.com/news/2014-09-01/where-do-isis-fighters-come <p><strong><span style="text-decoration: underline;"><em>Everywhere...</em></span></strong></p> <p>Welcome To The New Normal Crusades...</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140901_ISIS_0.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/09/20140901_ISIS_0.jpg" width="600" height="383" /></a></p> <p>&nbsp;</p> <p><a href="http://www.economist.com/news/middle-east-and-africa/21614226-why-and-how-westerners-go-fight-syria-and-iraq-it-aint-half-hot-here-mum?fsrc=scn/tw/te/pe/ed/itaintshalfhotheremum"><em>Source: The Economist</em></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1163" height="742" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20140901_ISIS.jpg?1409579090" /> </div> </div> </div> http://www.zerohedge.com/news/2014-09-01/where-do-isis-fighters-come#comments New Normal The Economist Mon, 01 Sep 2014 18:06:39 +0000 Tyler Durden 493784 at http://www.zerohedge.com