en First Chinese State-Owned Firm Defaults On Its Bonds <p>Just hours after Chinese property developer Kaisa <a href="">defaulted</a> on two dollar-denominated 2018 notes (the 30-day grace period on some $52 million in interest due March 18 expired), we learn that a third publicly-listed Chinese firm will now miss a coupon payment proving yet again that “you never know where the skeletons in the closet are or what company will be next.”&nbsp;</p> <p>This time it’s Baoding Tianwei Group Co.. which, as <a href="">Bloomberg reports</a>, has been struggling for quite some time:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>“Our company suffered huge losses in 2014 and the debt to asset ratio surged quickly,” Baoding Tianwei said in today’s statement. “Our company has lost financing ability and suffered from a capital shortage. We can’t raise enough money to repay interest, despite all the efforts we have made.”</em></p> <p>&nbsp;</p> <p><em>Baoding Tianwei had a loss of 10.14 billion yuan in 2014, according to today’s statement. A statement from the company on April 3 showed that by the end of last year, Tianwei had some 1.86 billion yuan of overdue borrowings. Its 22.96 percent stake in listed firm Baoding Tianwei Baobian Electric Co. has been frozen by local courts because of its dispute with creditors, according to China Credit Rating Co.</em></p> </blockquote> <p><strong>The interesting thing about Baoding Tianwei though, is that it’s a subsidiary of a state-owned firm</strong> and initially, some observers wondered whether the parent would step in to avert a default by the power transformer manufacturer which needed to make nearly $14 million in interest payments on April 2016 notes by the close of business Tuesday.&nbsp;</p> <p><strong>As it turns out, the government did not intervene and Baoding Tianwei has indeed defaulted marking the first default by a state-run enterprise. </strong></p> <p><strong>&nbsp;</strong>The implication is that Beijing may allow the market to play a greater role in determining companies’ financial future — even if those companies are state-run. This sets up an interesting dynamic considering that 1) it’s looking increasingly likely that the dreaded “hard landing” will materialize in China, and 2) at more than $14 trillion as of 2013, the country has the largest corporate debt burden on the planet. Here’s Bloomberg again:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>China’s economy expanded at the weakest pace since 2009 last quarter, with output, investment and retail data pointing to a deepening slowdown, data released by the statistics bureau in Beijing on April 15 showed. On Sunday, the central bank cut the reserve-requirement ratio for banks by 1 percentage point, stepping up stimulus policies.</em></p> <p>&nbsp;</p> <p><em><strong>China’s corporate debt is the highest in the world, former central bank adviser Yu Yongding wrote in the official China Daily last week. Companies had $14.2 trillion in debt at the end of 2013, </strong>exceeding every other country including the U.S., which had $13.1 trillion in company obligations, Standard &amp; Poor’s said in a June report…</em></p> <p>&nbsp;</p> <p><em>“We need to be aware the government won’t be able to protect all the state-owned companies,” Ivan Chung, an analyst at Moody’s Investors Service, said in a phone interview today. <strong>“For those that are not strategically important, they may receive less government support and encounter repayment difficulties when their fundamentals weaken.”</strong></em></p> <p>&nbsp;</p> </blockquote> <p>For its part, China South Industries Group (<span style="line-height: 20.7999992370605px;">Baoding Tianwei's</span>&nbsp;state-owned parent) had the following to say about the issue:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>"The affair has no connection with us."&nbsp;</em></p> </blockquote> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="212" height="128" alt="" src="" /> </div> </div> </div> China Creditors default Yuan Tue, 21 Apr 2015 11:50:36 +0000 Tyler Durden 505072 at Frontrunning: April 21 <ul> <li>The Fed Still Wants Easy Money (<a href="">BBG</a>) - you don't say</li> <li>ECB Is Studying Curbs on Greek Bank Support (<a href="">BBG</a>)</li> <li>Banks Paid to Borrow as Three-Month Euribor Drops Below Zero (<a href="">BBG</a>)</li> <li>Baoding Tianwei is first state-owned Chinese enterprise to default (<a href="">Reuters</a>)</li> <li>Major Chinese Developer Says It Can’t Pay Dollar Debts (<a href="">BBG</a>)</li> <li>Wall Street Has No Idea How Much Money Venezuela Has (<a href="">BBG</a>)</li> <li>Goldman Sachs, Morgan Stanley Find Different Paths to Profits (<a href="">WSJ</a>)</li> <li>Does the Collapse of a Chinese Developer Signal the Start of More Defaults? (<a href="">BBG</a>)</li> <li>Retail Traders Wield Social Media for Investing Fame (<a href="">WSJ</a>)</li> <li>Greece Makes It Expensive to Hedge European Stocks (<a href="">BBG</a>)</li> <li>Bird Flu Hits Iowa Chickens in Escalation of Virus Outbreakv (<a href="">WSJ</a>)</li> <li>Iran sees Yemen ceasefire in coming hours: Tasnim news agency (<a href="">Reuters</a>)</li> <li>Teva Said to Plan Public Mylan Approach as Soon as Today (<a href="">BBG</a>)</li> <li>With a prince's backing, James Murdoch may soon ascend at Fox (<a href="">Reuters</a>)</li> <li>Blue Bell Creameries Recalls All Products (<a href="">WSJ</a>)</li> </ul> <p>&nbsp;</p> <p><strong>Overnight Media Digest</strong></p> <p><em><span style="text-decoration: underline;">WSJ</span></em></p> <p>* KPMG LLP is poised to promote Lynne Doughtie, head of the accounting firm's fast-growing advisory business, to the role of chairman and chief executive, the latest move reflecting women's advancement to leadership roles in the accounting industry.(<a href="" title=""></a>)</p> <p>* An Iowa farm's flock of about 5.3 million chickens has been hit with avian influenza, the U.S. Department of Agriculture said Monday, marking a sharp escalation of the virus outbreak that has rattled the poultry industry since it began late last year. (<a href="" title=""></a>)</p> <p>* Blue Bell Creameries issued a voluntary recall Monday night for all of its products on the market after two samples of chocolate chip cookie dough ice cream tested positive for listeria, a potentially deadly bacteria. (<a href="" title=""></a>)</p> <p>* The European Union plans to file formal antitrust charges against the bloc's largest gas supplier, Russia's OAO Gazprom , said people familiar with the matter, a move set to escalate the standoff between Europe and Moscow.(<a href="" title=""></a>)</p> <p>* Giant money manager BlackRock Inc agreed to pay the Securities and Exchange Commission $12 million to settle claims that it failed to tell clients about a conflict between a fund manager's private holdings and portfolios he supervised for BlackRock clients. (<a href="" title=""></a>) </p> <p>&nbsp;</p> <p><em><span style="text-decoration: underline;">FT</span></em></p> <p>The European Union will on Wednesday accuse Russia's Gazprom of illegal abuse of its dominant position in Europe's gas market, unveiling antitrust charges that threaten to inflame already difficult relations with Moscow.</p> <p>The Bank of England has written to the U.S. Treasury asking why Berkshire's reinsurance operation - among the world's most powerful - was left off a provisional list of "too big to fail" institutions drawn up by the Financial Stability Board.</p> <p>Up to 1 million Syrians and sub-Saharan migrants are waiting in Libya to cross to Europe, an Italian official said on Monday as European ministers pledged to increase the funding and range of the EU's task force in the Mediterranean.</p> <p>The U.S. Department of Justice wants five banks, including JPMorgan Chase &amp; Co and Barclays Plc, to reach a joint "mega settlement" to allegations they manipulated foreign exchange markets. The settlement would see some institutions pay about $1 billion each.</p> <p>The UK ordered Russian billionaire Mikhail Fridman to sell his North Sea gas fields, giving him just three months to comply or lose operating rights.</p> <p>&nbsp;</p> <p><em><span style="text-decoration: underline;">NYT</span></em></p> <p>* Russia's Gazprom is expected to be accused of abusing its dominance in natural gas markets, and countries like Lithuania and the United States have been pushing for a crackdown. (<a href="" title=""></a>)</p> <p>* Private equity investors led by TPG agreed to buy Cirque du Soleil for 1.5 billion Canadian dollars ($1.22 billion), a purchase that will pave the way for the company to expand into China. (<a href="" title=""></a>)</p> <p>* The criminal case against Sergey Aleynikov, the former Goldman Sachs Inc programmer who was accused of stealing the investment bank's high-frequency trading code, will proceed to a jury after his last-ditch, midtrial effort to toss out the case came up short. (<a href="" title=""></a>)</p> <p>* Drugmaker Teva Pharmaceutical Industries Ltd said on Monday that it had agreed to pay $512 million to settle claims that a subsidiary, Cephalon, paid generic manufacturers to keep their own cheaper versions of a drug off the market, a practice that the Supreme Court ruled in 2013 could be illegal in some cases. (<a href="" title=""></a>)</p> <p>* The Agriculture Department announced on Monday that an outbreak of avian flu had been confirmed in what could potentially be millions of chickens at an Iowa egg producer, the largest outbreak yet in an epidemic that has also hit turkey farmers in Minnesota. (<a href="" title=""></a>)</p> <p>&nbsp;</p> <p><em><span style="text-decoration: underline;">Canada</span></em></p> <p>THE GLOBE AND MAIL</p> <p>** The Conservative government will announce tax cuts for small business in Tuesday's federal budget as part of an effort to shore up a key constituency ahead of the fall election. With an election scheduled for October, Ottawa is moving ahead with a tax-cut-heavy plan aimed at winning over key segments of the population, including small-business owners, seniors and families raising children. (<a href="" title=""></a>)</p> <p>** Defence lawyers for Sino-Forest Corp and some of the collapsed forestry firm's former directors and senior executives have billed C$41 million ($34 million) in legal costs over the past four years, an amount that lawyers for burned shareholders call "staggering" and "astonishing." The legal bills in the high-profile case came up in a Toronto courtroom on Monday. (<a href="" title=""></a>)</p> <p>** Jamie Brown has made the journey from the den of a dragon back to Canaccord Genuity Group Inc. Brown is rejoining Canaccord Genuity as vice-chairman and managing director of investment banking. Before January, he was managing partner and a key leader at Difference Capital Financial Inc. (<a href="" title=""></a>)</p> <p>NATIONAL POST</p> <p>** Crescent Point Energy Corp is overhauling its approach to executive compensation as a result of a less-than-desirable outcome of a "say on pay" vote, as the movement increasingly changes the way companies in the oilpatch reward their top managers. At the same time, the company revealed that it has already cut its CEO's 2014 pay package by 30 percent. (<a href="" title=""></a>)</p> <p>** Rogers Communications Inc missed analysts' estimates for first-quarter profit as Canada's biggest wireless carrier spent nearly one-third more year-over-year to retain and migrate subscribers to its higher-margin "Share Everything" monthly plan. (<a href="" title=""></a>)</p> <p>** The Conservative government is looking closely at dramatically extending compassionate leave for caregivers, from six weeks to six months, and the measure could come as early as Tuesday's federal budget, sources say. Caregivers who look after a sick family member are currently eligible for six weeks of Employment Insurance. (<a href="" title=""></a>)</p> <p>&nbsp;</p> <p><em><span style="text-decoration: underline;">Hong Kong<br /></span></em></p> <p>SOUTH CHINA MORNING POST</p> <p>- A senior University of Hong Kong don apologised for his "clumsy and inappropriate" comment that those opposed to a new programme requiring undergraduates to spend time on the mainland need not enrol. Pro-vice-chancellor Ian Holliday also made an about-turn as he stressed that the scheme would not be mandatory and no timetable for its roll-out had been set. (</p> <p>- A fully-loaded Cathay Pacific flight from London's Heathrow airport to Hong Kong was aborted just minutes before it was due to take off after a pilot was found to have kept knives in his hand luggage, a passenger on the plane revealed. (</p> <p>THE STANDARD</p> <p>- A controversial proposal to turn a 99-year-old home on The Peak into a boutique hotel is likely to be dropped. Developer Crown Empire said it could not accept the 11 criteria which the Town Planning Board set, as this would render its work ineffective. The 27, Lugard Road heritage site, which contains a two-story colonial home, was bought for HK$384 million in 2012. (</p> <p>- Beijing expects there to be universal suffrage for the 2017 chief executive election, which is also what most Hong Kong people want, Vice President Li Yuanchao said. (</p> <p>- Some of the city's movers and shakers including tycoons and business heavyweights have joined a major effort to stop the government from razing Hong Kong's only international golf course to make way for property development. They sent a joint petition to Chief Executive Leung Chun-ying urging him not to redevelop the historic Fan Ling golf course. (</p> <p>HONG KONG ECONOMIC JOURNAL</p> <p>- Hanergy Thin Film Power Group Ltd said it had signed a memorandum of understanding with Imperial Pacific International Holdings Ltd to set up a joint venture company to build thin-film photovoltaic power stations on the islands in the Pacific Ocean, including Saipan.</p> <p>&nbsp;</p> <p><em><span style="text-decoration: underline;">Britain</span></em></p> <p>The Times</p> <p>* Lloyds bosses caught on the hop by 4 bln pounds share offer</p> <p>Lloyds Banking Group was left scrambling at the weekend to respond to Conservative plans to offer the public the chance to buy up to 4 billion pounds ($5.96 billion) of the taxpayer-backed lender's shares should the Tories win the election. (<a href="" title=""></a>)</p> <p>* EU competition regulator set to accuse Gazprom</p> <p>Russia's state-owned energy giant is set to be accused of abusing its dominant position as a gas supplier. The European Union's competition regulator is expected to act tomorrow, days after filing anti-trust charges against Google Inc. (<a href="" title=""></a>)</p> <p>The Guardian</p> <p>* Athens demands cash reserves from public sector funds</p> <p>The Greek government has issued a decree forcing public sector bodies to transfer idle cash reserves to the central bank in a sign of how severe the country's cash crunch has become. The order came as the country's Finance Minister, Yanis Varoufakis, issued a stark warning to eurozone neighbours that they were playing with fire as Athens edges closer to a debt default. (<a href="" title=""></a>)</p> <p>* HSBC could move headquarters away from UK, hints bank's chairman</p> <p>HSBC Holdings Plc's bosses apologised on Monday to shareholders for activities in the bank's Swiss operations and signalled that the London-based business may consider whether it should remain headquartered in the United Kingdom. (<a href="" title=""></a>)</p> <p>The Telegraph</p> <p>* Vast majority of City would vote for UK to stay in EU</p> <p>The vast majority of finance workers would vote for the United Kingdom to remain part of the European Union even though more than 40 percent believe that Brussels is actively hostile toward their industry, according to a survey that lays bare the City of London's ambiguous relationship with Europe. (<a href="" title=""></a>)</p> <p>* Ed Davey orders Russians to sell North Sea petroleum licences</p> <p>The British government has ordered a group of Russian billionaire investors led by Mikhail Fridman to sell North Sea petroleum licences amid concerns over the UK's energy security. LetterOne - an investment vehicle controlled by Fridman - acquired the licences earlier this year as part of a 5 billion euros ($5.37 billion) deal to buy RWE Dea. (<a href="" title=""></a>)</p> <p>Sky News</p> <p>* Spotify to sell stakes to global fund giants</p> <p>An array of prominent global investors including London-based hedge fund Lansdowne Partners are in advanced talks to acquire multimillion pound stakes in digital music service Spotify. (<a href="" title=""></a>)</p> <p>* UK credit rating at risk, Henderson CEO warns</p> <p>Voters face a stark choice at the General Election, with a Labour victory jeopardising the UK's top-notch credit rating and a potential poll on EU membership causing global companies to slash investment in Britain, one of the City's leading figures has warned. (<a href="" title=""></a>)</p> <p>The Independent</p> <p>* The biggest U.S.-EU free trade agreement in history is advancing behind closed doors</p> <p>Secret negotiations between the United States and European Union for the biggest bilateral trade agreement ever negotiated resume on April 20 in New York. The talks are attracting increasing criticism as activists guess at the proposals while politicians keep the details behind closed doors. (<a href="" title=""></a>)</p> <p>* Tesco staff pensions under threat as bosses post warning</p> <p>Tesco Plc has written to its 300,000 staff outlining plans for the future of the supermarket's pension scheme as it looks for ways to plug the estimated 5 billion pounds black hole and official consultation starts. (<a href="" title=""></a>) </p> Bank of England Barclays Blackrock China default Department of Justice European Union Eurozone Fail Goldman Sachs goldman sachs Google Greece Henderson Hong Kong Iran JPMorgan Chase Lithuania Lloyds Morgan Stanley Natural Gas Private Equity Reuters Saipan Securities and Exchange Commission Sergey Aleynikov Too Big To Fail Turkey United Kingdom Tue, 21 Apr 2015 11:40:10 +0000 Tyler Durden 505071 at Futures Surge On First Chinese State Bankruptcy, Greek Capital Controls And Approaching Default <p>Explaining the catalysts that move the "market" overnight has become so farcical it is practically an exercise in futility and absurdism. </p> <p>We start in China where shortly following the default on <em><strong>off</strong></em>shore bonds by one of China's largest property developers, Kaisa, overnight <a href="">we learned</a> that Baoding Tianwei Baobian Electric Co Ltd would become the third listed Chinese firm to publicly default on an interest payment to bond investors on an <em><strong>on</strong></em>shore issue.&nbsp; Unlike the previous two defaults, the bond in question was traded on the interbank market, which is much larger and restricted to institutional investors.&nbsp; </p> <p>More importantly, the company is also a <em>subsidiary of a large central state-owned enterprise, </em>unlike China's first two defaulters. Which means that should the default proceed without a bailout, the Chinese bond issuing pipeline will likely once again get clogged up over fears of future defaults across the corporate spectrum, which would also suggest even further easing by the PBOC in the coming weeks, and an even more parabolic move by the Chinese equity bubble. </p> <p>Sure enough, the Shanghai Composite soared 1.8% on the news, and the Hang Seng closed 2.8% higher.</p> <p>But wait, there was more bad news. </p> <p><a href="">BBG reported </a>that shortly after Greece launched "soft" capital controls, the ECB is now studying measures to rein in Emergency Liquidity Assistance (ELA) to Greek banks, as resistance to further aiding the country’s stricken lenders grows in the Governing Council, people with knowledge of the discussions said. As a reminder, ELA is the only reason why Greek banks are still operating. Without this, and the Cyprus style pervasive capital controls would become a reality in Greece next. </p> <p>Not surprisingly, shortly thereafter Euro bonds of various Greek banks tumbled to fresh record lows:</p> <ul> <li> ETEGA 4.375% 04/30/19 down 0.6 pt to 55.74, record low</li> <li>EUROB 4.25% 06/26/18 down 0.6 pt to 55.34, record low</li> <li>ALPHA 3.375% 06/17/17 down 0.4 pt to 64.15, record low</li> <li>TPEIR 5% 03/27/17 down 0.2 pt to 62.23, record low</li> </ul> <p>Not helping matters was Lord Nigel Lawson, who was chancellor of the exchequer in the government led by Margaret Thatcher, who said "there is a game of chicken going on" between the Germans and the Greeks in an interview with the WSJ. He added that Greece should never have joined the euro and will most likely default, according to a former United Kingdom government finance chief.</p> <p>As a result of Greece getting ever closer to financial Armageddon, the Euro tumbled as low at 1.0660 overnight on fears that the ECB will be forced to buy plenty of other stuff (because it won't be bonds: the ECB has almost run out of those) to keep the situation in the Eurozone stable if only for popular consumption purposes. Keep an eye on the 10Y Bund: if the German benchmark slides to 0% or under in the coming days, that will likely be a sign that Greece is indeed finished. But as for stocks, it was up, up, up.</p> <p>Oh, and let's not forget that yesterday the US sent ships to the Yemen coast in what appears to be an escalation and one designed to engage the Iran mini flotilla which as we wrote last week was also sent to show support for the Houthi rebel forces.</p> <p>In short:<strong> a relentless barrage of negative news from around the globe, and US equity futures ramped as high as 14 point overnight before trimming their gains to just 7 points as of this writing: perhaps there was some good news that hit and we are unaware of? </strong></p> <p><em>EQUITIES/ FIXED INCOME</em></p> <p>European equities trade mixed after initially opening higher on strong earnings and strong performance from Chinese equities but the uptrend was reversed as German ZEW missed expectations (53.3 vs Exp. 55.3) falling for the first time since October 2014. This pushed equities lower alongside significant losses in Greek banks (National Bank of Greece -8.7%, Alpha Bank -4.3%) as the equity market refocused its attention back on to Greece after ECB sources suggested that the ECB may reduce their support for Greek banks (initially only FX markets reacted to the ECB sources, however Greek Banks then placed the squeeze on European equities). Nonetheless, the DAX (+0.5%) has outperformed the Eurostoxx50 (unchanged) helped by good earnings from SAP (+3.1%). Of note, look out for related stocks such as Oracle in the US session.</p> <p>Elsewhere, UST’s have traded flat alongside core fixed income markets with little fundamental news dictating much direction while the GR/GE spread is seen considerably wider compared to its Eurozone counterparts with the 3y +46.2 bps and 10y +10bps.</p> <p><em>FX</em></p> <p>EUR is weaker across on crosses on Greece which has boosted the USD (+0.5%). The strong USD has helped pare losses for AUD/USD which was weaker overnight after the RBA Minutes showed that further policy easing may be appropriate in the period going forward as markets expect more than 50% chance of a rate cut in May.</p> <p><em>COMMODITIES </em></p> <p>Strong USD (+0.5%) has extended on yesterdays’ gains which has weighed on WTI (-0.2%) and Brent (-0.3%) with spot gold (+0.1%) trading relatively flat, albeit below the USD 1,200 level.</p> <p><em>To summarize: </em>European shares mixed, off earlier highs, with the tech and financial services sectors outperforming and basic resources, banks underperforming. ECB said to study measures to rein in ELA to Greek banks. Euro weakens for second day against dollar, Greek 10-yr bonds drop for a seventh day. German ZEW below estimates. 3-month Euribor drops below zero for first time. The Swiss and German markets are the&nbsp; best-performing larger bourses, Italian the worst. German 10yr bond yields rise; Portuguese yields increase. Commodities decline, with corn, wheat underperforming and natural gas outperforming.</p> <p><strong>Market Wrap</strong></p> <ul> <li>S&amp;P 500 futures up 0.3% to 2098.1</li> <li>Stoxx 600 up 0.5% to 408.9</li> <li>US 10Yr yield down 2bps to 1.87%</li> <li> German 10Yr yield up 1bps to 0.08%</li> <li>MSCI Asia Pacific up 1.1% to 154</li> <li>Gold spot up 0.2% to $1198.8/oz</li> <li>Eurostoxx 50 -0%, FTSE 100 -0.1%, CAC 40 -0.1%, DAX +0.5%, IBEX +0.2%, FTSEMIB -1%, SMI +0.7%</li> <li>Asian stocks rise with the Hang Seng outperforming and the Sensex underperforming.</li> <li>MSCI Asia Pacific up 1.1% to 154; Nikkei 225 up 1.4%, Hang Seng up 2.8%, Kospi down 0.1%, Shanghai Composite up 1.8%, ASX up 0.7%, Sensex down 0.8%</li> <li>Euro down 0.5% to $1.0684 </li> <li>Dollar Index up 0.34% to 98.27</li> <li>Italian 10Yr yield up 1bps to 1.5%</li> <li>Spanish 10Yr yield up 2bps to 1.49%</li> <li>French 10Yr yield up 1bps to 0.36%</li> <li>S&amp;P GSCI Index down 0.3% to 429.3</li> <li>Brent Futures down 0.5% to $63.1/bbl, WTI Futures down 0.2% to $56.3/bbl</li> <li>LME 3m Copper down 0.2% to $5969/MT</li> <li>LME 3m Nickel down 0.7% to $12710/MT</li> <li>Wheat futures down 0.9% to 493.8 USd/bu</li> </ul> <p><strong>Bulletin Headline Summary From Bloomberg and RanSquawk</strong></p> <ul> <li>European equities were initially stronger on large cap pre-market earnings, however gains were erased following disappointing German ZEW survey and a focus back on Greece uncertainty</li> <li>ECB sources suggest concerns over Greece and that the ELA haircut may be raised has subsequently weighed on Greek asset classes</li> <li>Looking ahead, today sees a light economic calendar with API crude inventories and a raft of US large cap earnings from Verizon, United Technologies, Amgen, Lockheed Martin</li> <li>Treasuries higher with bunds as German investor sentiment falls, ECB said to study curbs on funds to Greek banks; focus remains on next week’s Fed meeting after stretch of weaker than forecast U.S. data.</li> <li>ECB is studying measures to rein in Emergency Liquidity Assistance to Greek banks, as resistance to further aiding the country’s stricken lenders grows in the Governing Council, people with knowledge of the discussions said</li> <li>ECB staff have produced a proposal to increase haircuts banks take on the collateral they post when borrowing from the Bank of Greece, the people said</li> <li>As Greece struggles to find cash to stay afloat, local authorities say they oppose a government decision to use their reserves for short-term financing</li> <li>Germany’s ZEW index of investor expectations fell to 53.3 in April, lower than expected, from 54.8 in March; Bundesbank yesterday said recent data suggest German growth momentum weaker than expected</li> <li>A Chinese power-transformer maker has become the country’s first state-owned company to default on an onshore bond, flagging the government’s rising tolerance for nonpayments as it allows market forces to play a bigger role</li> <li>Koichi Hamada, an adviser to Japanese Prime Minister Shinzo Abe, says that additional easing is needed if BOJ’s inflation goal can’t be met even on a core-core CPI basis, Nikkei reports, citing comments made by Hamada at seminar in Tokyo today</li> <li>Obama will oppose an effort by prominent Senate Democrats to amend a proposed fast-track trade bill with provisions punishing countries for manipulating their exchange rates</li> <li>Sovereign bond yields mostly higher. Asian stocks gain, European stocks and U.S. equity-index futures rise. Crude oil lower, copper little changed, gold higher</li> </ul> <p><strong>US Event Calendar</strong></p> <ul> <li>No Data</li> </ul> <p><strong>DB's Jim Reid concludes the overnight recap</strong></p> <p>We start in Asia this morning where equity markets have recovered somewhat falling yesterday’s large losses. The Hang Seng (+2.12%) is trading firmer following two successive down days, while China equities have also recovered with the Shanghai Comp (+0.86%) and CSI 300 (+1.38%) higher. Bloomberg has noted that the Shanghai Comp is stronger despite a 4% fall for a subsector of real estate names after the news that Kaisa has officially defaulted on its US Dollar debt. The developer confirmed that it missed two interest payments, meaning it now becomes the first Chinese developer to default on US Dollar debt (which stands at around $2.7bn). Elsewhere, the Nikkei (+1.03%), and ASX (+0.560%) are higher. </p> <p>Moving on, it was Greece who once again took up much of the attention yesterday. Towards the end of the European session, news emerged that PM Tsipras had signed a legal decree obliging state bodies (with the exception of pension funds) to transfer reserves to the Bank of Greece. The move highlights the desperate liquidity situation, with Greek press Ekathimerini reporting that the move is expected to tap around €1.2bn which should be enough to pay civil servants’ salaries and pensions this month. Critically however, with it looking less and less likely that any sort of agreement and subsequent release of funds will be made at this Friday’s Eurogroup, it’s not obvious if the reserves will be enough to cover the €770m IMF payment due on May 12th. Despite the decree meaning that no parliamentary vote is needed, this looks set to cause some political unrest for Greece with the Mayor of Glyfada (the third largest municipality) commenting that ‘the government’s decision to seize our reserves not only raises legal and constitutional issues, but also a moral one’. Patoulis, the Mayor of Marousi, also commented that ‘it is a politically and institutionally unacceptable decision’ and that ‘no government to date has dared to touch the money of municipalities’.</p> <p>In the meantime, the ECB’s Constancio yesterday said that the ECB is convinced that there will not be a Grexit and that in the event of a default, then Greece cannot be legally expelled from the Euro. Constancio also noted that capital controls will only be provided upon a request from the Greek government. Meanwhile, the ECB’s Nowotny reinforced the view that although a Grexit would be a huge problem for Greece itself, the contagion effect is likely limited compared to that of two years ago. </p> <p>Back to markets yesterday, despite relatively limited newsflow and data, equity markets rebounded somewhat as tech stocks bounced and led the gains. Indeed, the S&amp;P 500 (+0.92%) and Dow (+1.17%) recovered to close more or less at their highs for the day. As mentioned, despite all components closing up it was tech stocks (+1.79%) which provided the support as the likes of Apple (+2.3%), Microsoft (+3.1%) and Facebook (+2.9%) rallied with much of the sector due to report this week. On the subject of earnings, Morgan Stanley reported better than expected Q1 results during the session to help support the better tone. In the corporate space however, it was IBM, Royal Caribbean Cruises and Halliburton who caught our eye thematically. </p> <p>In the case of Halliburton, despite producing better than expected earnings, the energy services provider announced that it was to accelerate the pace of job cuts, taking total job cuts to more than 10% of headcount over the past two quarters. At the same time, the company also announced plans to cut capex by 15% this year, in a similar theme to what we’ve seen in the energy space thus far. IBM and Royal Caribbean also reported profit ahead of analyst expectations, however top line revenues for both companies were less than expected, with the stronger Dollar theme a feature in the management calls after. In the case of IBM, currency movement was said to have accounted for two-thirds of the drop in revenues while Royal Caribbean slashed its full year forecast having cited the stronger Dollar impacting margins significantly. We’ve seen plenty of evidence through this earnings period so far of the stronger Dollar theme playing out and having a negative impact on results. </p> <p>Away from yesterday’s earnings, it was largely quiet elsewhere in the US session. Data was thin on the ground with just a weaker than expected Chicago Fed National Activity Index to report of (-0.42 vs. +0.10 expected). Fedspeak was centered on the NY Fed’s Dudley who commented that he’s relatively optimistic that the growth prospects for the US economy will improve over the remainder of 2015, however that it’ll be important to determine whether the softness in the March employment report was temporary or, if it foreshadows a more substantial slowing in the labor market. Ultimately Dudley reiterated that timing of normalization remains uncertain because how the economy evolves in also uncertain. The Dollar yesterday climbed for the second consecutive session with the DXY finishing +0.43%. 10y Treasuries ended 2.4bps wider at 1.890%.</p> <p>10y Bunds extended their gains yesterday as they fell 0.3bps to 0.075%. Peripheral markets were more mixed however, reflecting the Greek headlines as yields in Spain (+1.2bps) and Italy (+0.9bps) widened while Portugal (-0.6bps) was a touch firmer. Much like the US, European equities clawed back some of Friday’s losses as the Stoxx 600 (+0.79%), DAX (+1.74%) and CAC (+0.86%) all finished strongly. Performance in Greek assets was unsurprisingly weaker however as Greek equities finished 0.1% lower and 3y yields widened 161bps to now yield 27.4%. </p> <p>Turning over now to today’s calendar, its particularly data light for the most part in both the European and US time zones with just the German ZEW survey expected. 35 S&amp;P 500 companies reporting in the US will likely provide much of the direction however. Amgen, Verizon and Yahoo being the highlights</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="1024" height="768" alt="" src="" /> </div> </div> </div> Apple Bond China Contagion Effect Copper CPI Crude Crude Oil default Economic Calendar Equity Markets Eurozone fixed Greece headlines Institutional Investors Investor Sentiment Iran Italy Jim Reid Morgan Stanley Natural Gas Nikkei Portugal Real estate Reality United Kingdom Verizon Tue, 21 Apr 2015 11:09:23 +0000 Tyler Durden 505070 at Stunned Greeks React To Initial Capital Controls And The "Decree To Confiscate Reserves", And They Are Not Happy <p>Earlier today, following weeks of speculation, Greece finally launched the first shot across the bow of capital controls, when it decreed that due to an "<strong><em>extremely urgent and unforeseen need</em></strong>" (ironically the need was quite <em>foreseen</em> since about 2010, but that is a different story), <a href="">it would be "obliged" to transfer - as in <em>confiscate</em> - "idle cash reserves" </a>located across the country's local governments (i.e., various cities and municipalities) to the Greek central bank. </p> <p>Several hours later the decree which was posted in the government gazette has finally percolated among the population, and the response to what even ordinary Greeks realize is now the endgame, is less than exuberant.</p> <p><a href="">Bloomberg reports</a>, that "as Greece struggles to find cash to stay afloat, <strong>local authorities say they oppose a government decision to use their reserves for short-term financing</strong>."</p> <p><strong>“The government’s decision to seize our reserves not only raises legal and constitutional issues, but also a moral one,” </strong>said George Papanikolaou, mayor of Glyfada, the third-largest municipality in the metropolitan region of Attica after Athens and Piraeus. “<strong>We have a responsibility to serve our citizens,” Papanikolaou said by phone on Monday. Glyfada has about 16 million euros in cash reserves, he said.</strong></p> <p>George is unhappy because as recently as tomorrow, he will find there is precisely zero euros in his public bank account, as all the money has now been forcibly sequestered by the government in order to repay future Troika, pardon, IMF obligations.</p> <p>Sadly for Greece, this is the only option left as the money has now fully run out: Greek Prime Minister Alexis Tsipras ordered local governments and central government entities to move their cash balances to the central bank for investment in short-term state debt.</p> <p>From Bloomberg:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>The <span style="text-decoration: underline;">decree to confiscate reserves</span> held in commercial banks and transfer them to the Bank of Greece could raise as much as 2 billion euros ($2.15 billion), according to two people familiar with the decision</strong>. The money is needed to pay salaries and pensions at the end of the month, the people said. </p> <p>&nbsp;</p> <p><strong>“It is a politically and institutionally unacceptable decision,” </strong>Giorgos Patoulis, mayor of the city of Marousi and president of the Central Union of Municipalities and Communities of Greece, said in a statement on Monday.“<strong>No government to date has dared to touch the money of municipalities.”</strong></p> </blockquote> <p>It took the radical leftist one all of 2 months since coming to power. </p> <p>And the punchline is that the use of confiscated proceeds is unclear: the government says it is to pay pensions and wages, but recall that the same government recently confiscated pensions to repay the IMF, so according to the chain of logic, the government first raided pensions, and now municipalities, just to repay the dreaded Troika. </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The Athens city council and the union of municipalities and communities in Greece will convene tomorrow to debate the order, a press officer of the mayor’s office said. </p> </blockquote> <p>And one everyone realizes what just happened, expect the riot cam and the Greek Pay-Per-Riot channel, which has been on hiatus since the summer of 2012, to be fully reactivated. </p> <p><a href=""><img src="" width="500" height="414" /></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="1350" height="1118" alt="" src="" /> </div> </div> </div> Attica Greece Tue, 21 Apr 2015 03:54:11 +0000 Tyler Durden 505049 at Ron Paul Tells Obama: "It's Time To Try Something New" <p><a href=""><em>Submitted by Ron Paul via The Ron Paul Institute for Peace &amp; Prosperity</em></a>,</p> <p><strong>Last week two prominent Ukrainian opposition figures were gunned down in broad daylight. </strong>They join as many as ten others who have been killed or committed suicide under suspicious circumstances just this year. These individuals have one important thing in common: they were either part of or friendly with the Yanukovych government, which a US-backed coup overthrew last year. They<strong> include members of the Ukrainian parliament and former chief editors of major opposition newspapers.</strong><br />&nbsp;<br />While<u><strong> some journalists here in the US have started to notice the strange series of opposition killings in Ukraine, the US government has yet to say a word.</strong></u><br />&nbsp;<br /><strong>Compare this to the US reaction when a single opposition figure was killed in Russia earlier this year. </strong>Boris Nemtsov was a member of a minor political party that was not even represented in the Russian parliament. Nevertheless the US government immediately demanded that Russia conduct a thorough investigation of his murder, suggesting the killers had a political motive.<br />&nbsp;<br />As news of the Russian killing broke, Chairman of the House Foreign Affairs Committee Ed Royce (R-CA) did not wait for evidence to blame the killing on Russian president Vladimir Putin. On the very day of Nemtsov&rsquo;s murder, Royce told the US media that, <strong><em>&ldquo;this shocking murder is the latest assault on those who dare to oppose the Putin regime.&rdquo;</em></strong><br />&nbsp;<br />Neither Royce, nor Secretary of State John Kerry, nor President Obama, nor any US government figure has said a word about the series of apparently political murders in Ukraine.<br />&nbsp;<br /><strong>On the contrary, instead of questioning the state of democracy in what looks like a lawless Ukraine, the Administration is sending in the US military to help train Ukrainian troops!</strong><br />&nbsp;<br />Last week,<strong> just as the two political murders were taking place, the US 173rd Airborne Brigade landed in Ukraine to begin training Ukrainian national guard forces</strong> &ndash; and to leave behind some useful military equipment. Though the civil unrest continues in Ukraine, the US military is assisting one side in the conflict &ndash; even as the US slaps sanctions on Russia over accusations it is helping out the other side!<br />&nbsp;<br />As the ceasefire continues to hold, though shakily, <strong>what kind of message does it send to the US-backed government in Kiev to have US troops arrive with training and equipment and an authorization to gift Kiev with some $350 million in weapons?</strong> Might they not take this as a green light to begin new hostilities against the breakaway regions in the east?<br />&nbsp;<br /><strong>The Obama administration is so inconsistent in its foreign policy.</strong> In some places, particularly Cuba and Iran, the administration is pursuing a policy that looks to diplomacy and compromise to help improve decades of bad relations. In these two cases the administration realizes that the path of confrontation has led nowhere. When the president announced his desire to see the end of Cuba sanctions, he stated very correctly that, &quot;&hellip;we are ending a policy that was long past its expiration date. When what you&rsquo;re doing doesn&rsquo;t work for fifty years, it&rsquo;s time to try something new.&rdquo;<br />&nbsp;<br />So while Obama is correctly talking about sanctions relief for Iran and Cuba, he is adding more sanctions on Russia, backing Saudi Arabia&rsquo;s brutal attack on Yemen, and pushing ever harder for regime change in Syria.<strong><em> Does he really believe the rest of the world does not see these double standards? </em></strong>A wise consistency of non-interventionism in all foreign affairs would be the correct course for this and future US administrations.<strong> Let us hope they will eventually follow Obama&rsquo;s observation that, &ldquo;it&rsquo;s time to try something new.&rdquo;</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="349" height="263" alt="" src="" /> </div> </div> </div> Iran Obama Administration President Obama Ron Paul Saudi Arabia Ukraine Vladimir Putin Tue, 21 Apr 2015 02:10:04 +0000 Tyler Durden 505066 at "Too Many Zeros": China's Stock Bubble Proves Too Much For Computers <p>With economic growth decelerating markedly and with capital flowing the wrong way for four consecutive quarters (to the tune of $300 billion), China needs its margin-fueled equity mania to continue in order to distract everyone from the fact that the fundamental picture is, to quote Bloomberg metals analyst Kenneth Hoffman who recently visited the country, “a lot <a href="">worse than you think</a>.” The PBoC looks set to step up their easing efforts in an attempt to keep the music playing as evidenced by last weekend’s RRR cut and indeed the rumor now seems to be that the central bank <a href="">will conduct ECB-style LTROs</a> to ensure a new plan to (essentially) bailout deeply indebted local governments doesn’t end up working at cross purposes with efforts to keep liquidity flowing.&nbsp;</p> <p>Meanwhile, southbound flows (i.e. money flowing from the mainland into Hong Kong shares on the back of new regulations in China that allow mutual funds to invest in Hong Kong-listed equities) hit $10 billion in Q1 while the pace of new stock trading account creation has continued to accelerate with data from the China Securities Depository and Clearing Co. showing more than 3 million new accounts were opened in the first two weeks of April alone. This helped shares of Hong Kong Exchanges &amp; Clearing to go “<a href="">interstellar</a>” last week as analysts and investors alike are betting that record turnover portends big gains ahead for the exchange operator with Citi looking for EPS gains of over 40% over the next two years.&nbsp;</p> <p>As we noted on Thursday, Citi also believes we may be only halfway to peak mania because even though daily turnover is at unprecedented levels in absolute terms, it rose 10 fold from 2006-2007 and has “only” managed a 5X move this time around.&nbsp;</p> <p><a href=""><img src="" width="408" height="234" /></a></p> <p><a href=""><img src="" width="545" height="414" /></a></p> <p><span style="font-size: 1em; line-height: 1.3em;">Meanwhile, on the mainland, turnover associated with the country’s self-driven stock frenzy has now propelled the Shanghai Exchange to the top spot worldwide in terms of volume and in fact, turnover was so high on Monday at 1 trillion yuan, that the exchange’s software was incapable of reporting it. Here’s <a href="">Reuters</a>:</span></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong><em>The exchange's trading turnover exceeded 1 trillion yuan ($161.28 billion) for the first time on Monday, but the data could not be properly displayed because its software was not designed to report numbers that high.</em></strong></p> <p>&nbsp;</p> <p><em>"This is a software configuration issue, not a technical glitch," the Shanghai Stock Exchange said in a statement, adding that trading and price quotes for individual stocks were not affected.</em></p> <p>&nbsp;</p> <p><em>The exchange said it would need to replace its current software files that handle volume reporting to resolve the issue.</em></p> <p>&nbsp;</p> <p><em>China's stock market has nearly doubled over the past six months on hopes of monetary easing, with the world-beating performance luring retail investors who have been opening accounts at a record pace.</em></p> <p>&nbsp;</p> <p><em>Trading turnover on the Shanghai and Shenzhen stock exchanges totalled $1.85 trillion and $1.56 trillion respectively in March, making the two bourses the world's biggest that month, according to the World Federation of Exchanges.</em></p> </blockquote> <p>* &nbsp;* &nbsp;*</p> <p><strong>So there you have it. China's day trading hordes — whose numbers are currently growing at a clip of around 1.6 million per week — have officially overwhelmed the software that tracks volume in Shanghai. </strong>It's worth repeating that if you believe statistics (and Jamie Dimon <a href="">doesn't think</a> you should), around one in three of the millions of new "investors" in China have an elementary school education or less and let's not forget this chart which is perhaps the scariest visual of them all:</p> <p><a href=""><img src="" width="600" height="405" /></a>&nbsp;</p> <p>On the bright side, it's not often in today's market that man overcomes software, so score one for human traders.</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="600" height="400" alt="" src="" /> </div> </div> </div> China Hong Kong Jamie Dimon Reuters Shenzhen Yuan Tue, 21 Apr 2015 01:45:00 +0000 Tyler Durden 505064 at Noam Chomsky: "The Idea Of A Media Which Does Not Repeat US Propaganda Is Intolerable To American Leaders" <p>Few individuals polarize the public with their opinions, statements and mere presence, like Noam Chomsky. The 86 year old linguist, philosopher, cognitive scientist, logician, political commentator, social justice activist, and anarcho-syndicalist advocate, has strong opinions (and in some cases, entire schools of thought) on everything from philosophy, to sociology, to linguistics, but he is perhaps best known in recent years for his political activism which has led to death threats due to his staunch and far-reaching criticism of US foreign policy (allegedly the <a href="">Anti-Defamation League "spied on" Chomsky's appearances</a>).</p> <p>His broader outlook is a peculiar version of libertarianism (he describes himself as an anacrho-syndicalist), in which he asserts that authority is inherently illegitimate, and that the burden of proof is on those in authority. If this burden can't be met, the authority in question should be dismantled. Authority for its own sake is inherently unjustified. He contends that there is little moral difference between chattel slavery and renting one's self to an owner or "wage slavery." He holds that workers should own and control their workplace.&nbsp;</p> <p>He is has also repeatedly stated his opposition to ruling elites, among them institutions like the IMF, World Bank, and GATT.</p> <p>In other words, the present, in which ruling elites (whether the BIS and "Troika) and ubiquitous US intervention in every possible foreign affair (courtesy of a State Department which, as it has <a href="">now been revealed</a>, had until recently worked on behalf of the highest foreign bidder) determine the fate of the entire world, should provide Chomsky with endless material for contemplation.</p> <p>Conveniently, overnight we got a glimpse into his current thought process, courtesy of the following extended interview conducted by RT with the famed linguist and anti-establishmentarian, in which topics such as the "weaponization" of media and information, America's paradoxical propaganda machine, the immunity of the US from the set of rules it creates for everyone else (but itself), and America's conversion from a democracy into a plutocracy, as well as many more, are touched upon.</p> <p>Whether one agrees or disagrees with Chomsky, he always provides a unique and interesting perspective on current (and future) events.</p> <p><em><a href="">From RT</a>:</em></p> <p><iframe src="" width="560" height="315" frameborder="0"></iframe></p> <p>While the International Criminal Court investigates and sentences African dictators, any of the crimes the US commits like the invasion of Iraq, which has destabilized an entire region, go unpunished, philosopher Noam Chomsky tells RT.</p> <p><strong style="background-color: initial;">RT:</strong><em style="background-color: initial;"> During a congressional <a href=""> hearing</a> [on April 15, officially titled ‘Confronting Russia’s Weaponization of Information’], House Foreign Affairs Committee chair Ed Royce said, “The Russian media is now dividing societies abroad and, in fact, weaponizing information.” Where is that coming from? Is it a genuine fear or fear of alternative opinions?</em></p> <p><strong>Noam Chomsky:</strong> He’s talking about the Russian media but if there were any imaginable possibility of honesty, he could be talking about the American media, for which that is correct. Take the New York Times -- the greatest newspaper in the world. Take one example, at the first article that appeared today, that the tentative [nuclear] agreement with Iran was reached. It’s a thinkpiece, by Peter Baker, one of their main analysts. He discusses in it the main reasons to distrust Iran, the crimes of Iran. It’s very interesting to look at. <strong>The most interesting one is the charge that Iran is destabilizing the Middle East because it’s supporting militias which have killed American soldiers in Iraq. That’s kind of as if, in 1943, the Nazi press had criticized England because it was destabilizing Europe for supporting partisans who were killing German soldiers. In other words, the assumption is, when the United States invades, it kills a couple hundred thousand people, destroys the country, elicits sectarian conflicts that are now tearing Iraq and the region apart, that’s stabilization. If someone resists that tact, that’s destabilization.</strong></p> <p>That’s characteristic. The Summit of the Americas is meeting now in Panama. Take a look at the commentary on it here [in the US]. The big question is how much credit Obama will get for his move towards helping Cuba escape from its isolation in the hemisphere. It’s exactly the opposite. The United States is isolated in the hemisphere. You look back at the last hemisphere meeting in Colombia, a US ally. The United States was totally isolated. There were two big issues. One was admitting Cuba into the hemisphere. Everyone wanted it. The US refused, along with Canada. The other was the drug war, which the US insists on, and the Latin American countries who are being seriously harmed by it, they want it significantly modified, decriminalized and so on. And, again, the US was totally isolated. Those were the two main issues.</p> <p>As for the steps towards Cuba, they’re described as noble gestures. The picture is that we’ve -- exactly as Obama said -- we’ve tried for 50 years to bring freedom, justice, and democracy to Cuba, but our methods have failed, so we might try some other methods to achieve these noble goals. The facts are very clear. This is a free and open society, so we have access to internal documents at an extraordinary level. You can’t claim you don’t know. It’s not like a totalitarian state where there are no records. We know what happened. <strong>The Kennedy administration launched a very serious terrorist war against Cuba. </strong>It was one of the factors that led to the missile crisis. It was a war that was planned to lead to an invasion in October 1962, which Cuba and Russia presumably knew about. It’s now assumed by scholarship that that’s one of the reasons for the placement of the missiles. That war went on for years. No mention of it is permissible. The only thing you can mention is that there were some attempts to assassinate [Fidel] Castro. And those can be written off as ridiculous CIA shenanigans. But the terrorist war itself was very serious. That was a footnote to it.</p> <p>The other, of course, was a crushing embargo. We also know the reasons, because they’re stated explicitly in the internal documents. Go back to the early ‘60s, as the State Department explained, the problem with Castro was his successful defiance of US policies that go back to the Monroe Doctrine -- 1823. The Doctrine asserted that the United States has the right to control the hemisphere. They couldn’t implement it at the time, but that’s the Doctrine. And Cuba was successfully defying that Doctrine. Therefore, we have to carry out a terrorist war and crushing embargo that have nothing to do with bringing freedom and justice to the Cubans. And there is no noble gesture, just Obama’s recognition that the United States is practically being thrown out of the hemisphere because of its isolation on this topic.</p> <p>But you can’t discuss that [in the US]. It’s all public information, nothing secret, all available in public documents, but undiscussable. <strong>Like the idea -- and you can’t contemplate the idea -- that when the US invades another country and the other resists, it’s not the resistors who are committing the crime, it’s the invaders. </strong>And we, of course, understand that very well when, say, Russia invaded Afghanistan. If somebody resisted it, we don’t say they’re criminals, they are destabilizing Afghanistan. Maybe Pravda said that, I doubt it. <strong>But here, it’s normal.</strong></p> <p>So if the House <strong>wants to study the weaponization of the media, they can look right at the front pages of the newspapers that they get every day</strong>.</p> <p><strong>RT:</strong> <em>Our network has come repeatedly under attack, even from State secretary John Kerry. Recently, he said, “RT’s influence is growing,” while his very own deputy, Victoria Nuland, said that nobody watches RT in America, which is probably not true. Do you think this is about money? Because we know that the BBG -- the Broadcasting Board of Governors -- has a budget of $750 million as opposed to RT’s $250 million, which has never been a secret. Or is it something else?</em></p> <p><strong>NC:</strong> I think it’s something else. I don’t think they care about the money. <strong>The idea that there should be a network reaching people which does not repeat the US propaganda system is intolerable.</strong></p> <p><strong>RT:</strong> <em>To them.</em></p> <p><strong>NC:</strong> Yes. That’s normal.</p> <p><strong>RT:</strong> <em>As for US-Russia relations, are we really in Cold War version 2.0?</em></p> <p><strong>NC:</strong> It’s dangerous. The Bulletin of Atomic Scientists has a famous doomsday clock. It goes back to the late 1940s. The clock is placed several minutes before “midnight.” Midnight means we’re done, finished. They just moved it two minutes closer to midnight -- three minutes from midnight. That’s the closest it’s been since the early 1980s when there was a major war scare. We now know how serious that war scare was. It wasn’t quite understood at the time, but it was very serious. Now it’s moved that close. One of the reasons is the deterioration in Russia-US relations, which is quite threatening. The other is environmental catastrophe, which we weren’t thinking about then. But, yes, that’s serious.</p> <p><strong>RT:</strong> <em>Is it all because of the Ukrainian crisis?</em></p> <p><strong>NC:</strong> Partly. It’s also because of other domains in which Russia and the United States don’t see eye to eye. Just as there is a US-Iranian crisis. Everyone in the United States -- every leading commentator, every presidential candidate and so on, recently Jeb Bush -- says Iran is the greatest threat to world peace. That’s repeated over and over.</p> <p>There’s also another opinion on the matter. <strong>Namely, the world’s opinion, and we know what that is because there are polls taken by the leading US polling agencies</strong>. The Gallup organization has international polls. <strong>And they ask the question, “Which country is the greatest threat to world peace?” The United States is way ahead of anyone else. No other country is even close. But Americans are protected from that</strong>. The US media simply refused to print it. This major poll, I think it was December 2013, it was reported by BBC. But not a single word in the major American media. So if the world thinks that, so much for the world. <strong>We say Iran is the greatest threat to world peace, therefore that is true. We can repeat it over and over.</strong></p> <p>The major newspapers in the United States -- the New York Times and the Washington Post -- have recently published op-eds by prominent figures calling for bombing Iran right now. <strong>How would we react if Kayhan, say, or Pravda, or any newspaper, published articles by leading figures saying ‘let’s bomb the United States right now’? </strong>I mean, there would be a reaction. There would. <strong>But if this happens here, it’s perfectly fine. It’s normal.</strong></p> <p>If we look closely at the conflicts, we can find plenty of problems with both sides. But the way they’re interpreted here is that we’re necessarily right about everything, and if anyone’s in the way, they are wrong about everything. I wouldn’t say there’s no disagreement on that, there’s some. Take for example Ukraine. The standard position here is that it’s all the fault of the Russians, it’s Russian aggression and so on. However, you can read -- not in the mainstream press, but in prominent journals -- different opinions. So in Foreign Affairs, the leading establishment journal, you can read a <a href=""> lead article</a> on the front, the West is responsible for the Ukraine crisis.</p> <p><strong>RT:</strong> <em>The West or particularly the United States?</em></p> <p><strong>NC:</strong> Well, the West means the United States and everyone else goes along. What’s called the international community in the United States is the United States and anyone who happens to be going along with it. Take, say, for example, the question of Iran’s right to carry out its current nuclear policies, whatever they are. The standard line is that the international community objects to this. Who is the international community? What the United States determines it to be. The latest meeting of non-aligned countries -- the large majority of the world’s population -- the last meeting happened to be in Tehran, where they once again -- they’d done it before -- vigorously endorsed Iran’s right to pursue its nuclear programs in accord with the provisions of the non-proliferation treaty, which allow that. But they’re not part of the international community [to the US]. They may be the majority of the world, but that’s not the international community. Any reader of [George] Orwell would be perfectly familiar with this. But it continues virtually without comment.</p> <p><strong>RT:</strong> <em>If we are to assume that the US is the root of the problem in Ukraine, what is the endgame? What would Washington want out of this? Destroying Russia-Europe ties?</em></p> <p><strong>NC:</strong> I wouldn’t say it’s just the US. I don’t agree with that. I think it’s more complex. But a large part of the problem is what [John] Mearsheimer [author of the Foreign Affairs <a href=""> piece</a> on Ukraine] described. It goes back to the breakup of the Soviet Union -- roughly 1990. At the time, there were many questions. One question was, what happens to NATO? If you had accepted the propaganda of the past -- since the late 1940s or 1950 -- you would’ve said ‘NATO should disappear.’ NATO was supposed to protect Western Europe from the Russian hordes. Okay, no more Russian hordes, now what happens to NATO? The question of its disappearance didn’t even arise. [Mikhail] Gorbachev made a pretty remarkable proposal. He offered to let Germany be unified and to join NATO, a hostile military alliance. You look at the history of the century, that’s a pretty astonishing move.</p> <p><strong>There was a quid pro quo, that NATO not expand one inch to the east</strong>. That was the phrase that was used in diplomatic interchanges. That meant East Germany. There was no thought of it expanding beyond. Of course, NATO, at once, moved to East Germany. Gorbachev was infuriated, he objected, but he was informed by the United States that this was only a verbal agreement, there was nothing on paper. So, too bad. [President Bill] Clinton came along and expanded NATO to the borders of Russia to, as Mearsheimer points out.</p> <p>To the current threat to incorporate Ukraine into NATO, it’s a various serious threat that no Russian leader, whoever it is, could easily tolerate. It’s as if Mexico in the 1980s had overthrown the government, and the new government called for joining the Warsaw Pact. It’s inconceivable. So it’s a real problem. Not the whole problem, but part of it.</p> <p>The Ukrainian parliament, as you know, recently overwhelmingly passed a resolution to move towards joining NATO. That’s pretty serious. Now there is -- I think, anyone who thinks about it, including the negotiators on all sides, knows what a resolution ought to be. Ukraine ought to be neutralized, with a recognition on all sides that it won’t join any hostile military alliance. That’s perfectly feasible, even good for Ukraine. And then steps have to be taken to some kind of devolution of power. You can discuss exactly how much should be done, but the basic outlines are clear. That could be a partial resolution to the crisis, but, unfortunately, there are other voices.</p> <p><strong>RT:</strong> <em>We saw, at the end of last year, without any consent of the United Nations, the US started operations in Syria on ISIS positions. Pretty much the same thing is happening right now in Yemen. Professor, would this mean that international law, as we’ve always known it, is pretty much dead, is pretty much gone, is not used and considered anymore ?</em></p> <p><strong>NC:</strong> To say that it’s dead implies it was ever alive. Has it ever been alive? Go back to, say, the 1980s. There were two resolutions brought to the UN security council calling on all states to observe international law. They both were vetoed by the United States with the support of Britain and France, its allies. Why? Because the hidden understanding, not expressed, was the intent was to call on the United States to accept the judgment of the world court, which condemned what <a href=";p1=3&amp;p2=3&amp;case=70&amp;p3=5"> it called</a> the unlawful use of force by the United States against Nicaragua. It called on the United States to terminate the attack and pay enormous reparations. The US refused. Then came these two UN security council resolutions, which the US vetoed. That tells you what international law is, but we can go much beyond.</p> <p><strong>International law cannot be enforced against great powers. There’s no enforcement mechanism</strong>. Take a look at the International Criminal Court, who has investigated and sentenced African leaders who the US doesn’t like. The major crime of this millennium, certainly, is the US invasion of Iraq. Could that be brought to the international court? I mean, it’s beyond inconceivable. In fact, as you may know, there’s a law in the United States, passed by Congress and accepted by the president, which, in Europe, it’s called the Netherlands Invasion Act. It’s a law that authorizes the president to use force to rescue any American that might be brought to The Hague for trial. Does international law have anything to say about this? Well, it does. Actually international law has something to say about a standard comment made over and over again by Western leaders, by Obama and others, with regard to Iran: ‘All options are open.’ That includes attack, the kind of attack which is called for in the major press. There happens to be a UN charter, which, in Article II, bans the threat or use of force on international affairs. Does anybody care? No. International law is kind of like the United Nations. It can work up to the point where the great powers permit it. Beyond that, unfortunately, it can’t.</p> <p><strong>RT:</strong> <em>Finally, the documentary about you which is about to premiere -- called Requiem for an American Dream. Do you think the American dream is gone?</em></p> <p><strong>NC:</strong> It’s certainly declined. So the US has close to the lowest social mobility in the OECD [Organisation for Economic Co-operation and Development] -- you know, rich countries. If you look at OECD measures of social justice -- accessibility to health care, obvious measures -- the United States ranks near the bottom, I think right next to Turkey. These are serious attacks on what’s called the American dream. It’s still the richest and most powerful country in world, there are extraordinary advantages. In many respects, it’s the most free country in the world, as I’ve already mentioned.</p> <p>So there’s plenty of positive aspects, but it’s a very serious decline. In fact, even American democracy -- which is presented as a model to the world -- is very remote from democracy. In fact, that’s one of the major topics of academic social-political science, the study of relation between public opinion and public policy, which is pretty easy to study. You see the policy, there’s extensive polling, you know what people’s opinions are. And basically most of the population is disenfranchised. Their representatives pay no attention to their opinion. That’s roughly the lowest three-quarters on the bottom of the income scale. Move up the scale, you get a little more influence. <strong>At the top, essentially policy is made. That’s plutocracy, not democracy.</strong></p> <p>Democracy functions formally: you’re free, I’m free, anyone’s free to express their opinions. I can vote any way I like in the coming election. If I feel like voting Green [Party], I can vote Green. There’s not going to be very much fraud, it’s mostly honest. So the formal trappings of democracy do exist, which is not a small point. <strong>But the functioning of democracy has very severely declined.</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="417" height="353" alt="" src="" /> </div> </div> </div> Afghanistan BIS France Gallup George Orwell Germany Iran Iraq Mexico Middle East Netherlands New York Times Newspaper Turkey Ukraine World Bank Tue, 21 Apr 2015 01:32:39 +0000 Tyler Durden 505069 at Steen Jakobsen: Get Ready For The Biggest Margin Call In History <p><a href=""><em>Submitted by Adam Taggart via</em></a>,</p> <div class="content clearfix"> <p>Economist Steen Jakobsen, Chief Investment Officer of Saxo Bank, believes <strong>2015 will be another &quot;lost year&quot; for the economy</strong>. And he predicts the Federal Reserve will indeed start to raise rates later this year, surprising the market and taking the wind of out asset prices.</p> <p>He recommends building cash and waiting to see how the coming storm -- which he calls the &quot;greatest margin call in history&quot; -- plays out:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>0% interest rates at $0 down has not created the additional momentum to the economy The Fed was hoping for. The trickle down effect, the wealth effect, has instead made for bigger inequality in society. So I think <strong>we&rsquo;re set for a rate hike in either in June or in September. I think this will be the biggest margin call in history </strong>on the asset inflation created by the Fed .</p> <p>&nbsp;</p> <p>That&rsquo;s where I differ from most Fed watchers. Everyone else is looking at employment, inflation targeting. I don&rsquo;t think Fed is at all looking at those. They are saying &ldquo;Listen, the 0% interest rate is getting us absolutely nowhere, we think it&rsquo;s very, very important for us to move to a more neutral place&rdquo;. At the same time we will communicate that we are open-minded to additional programs or whatever needs to be done to secure the long term growth of the economy. But that will be on the down side, not on the up side. And as year has progressed, and I&rsquo;ve said this publicly, I think<strong> 2015 is already lost in terms of recovery here.</strong> <strong>And that will take the market by surprise.</strong></p> <p>&nbsp;</p> <p>The market will ask in September when the Fed hikes: &ldquo;Why are you hiking interest rate when growth is below target, inflation below target&rdquo;? Well, the Fed&#39;s response will be &ldquo;Because <strong>this is the biggest asset inflation we&rsquo;ve seen in human history </strong>and we need to address it&rdquo;.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p>What the Fed is saying is that we have unintended consequences of low interest rates. Money is chasing yield: it&#39;s going to real estate making it over-valued, and flowing into the equity markets making them over-valued. And then the Fed says &ldquo;Well. we have two choices. We can allow the market to run into a bubble, or we can burst the bubble and start all over again&rdquo;. But they wrongly, in my opinion, believe they can actually micro manage that, even macro manage this. So what they would rather do is &quot;lean up against the market&quot;. To take some of the excess out of prices by going in and telling in the market &ldquo;We are concerned, we don&rsquo;t want you to have more leverage. We want you to have less. And we certainly would like to see that market become flat-lined for a while in terms of return.&quot; Which by all metrics of measurements is actually also the expected return of the stock market. <strong>Don&rsquo;t forget three, five and seven years expected return at the present multiples is exactly 0%.</strong></p> <p>&nbsp;</p> <p>Given this,&nbsp;at a bare minimum, <strong>I recommend taking the leverage out of your own portfolio so you sit with a nice pot of cash if the market does correct.</strong> If it doesn&rsquo;t, you&rsquo;re not really losing out much because again, they expect a return is 0% for the next couple of years.</p> <p>&nbsp;</p> <p>Some time the best advice to anybody is to do nothing. And of course being, part of an online bank I&rsquo;m not exactly popular with management for putting this advice out there. &nbsp;But I have to give the advice I believe in and share what I do myself; and I&rsquo;m certainly reducing whatever equity I have in my portfolio to a minimum. So I&rsquo;m scaling back to where I was in January last year.</p> <p>&nbsp;</p> <p>I&#39;ll put it another way. I&rsquo;m advising a hedge fund in London, analyzing 10,500 stocks from the bottom up. <strong>How many do you think of these 10,500 world stocks are cheap? Only 23.</strong>&nbsp;Which means 98% of all stocks are either fairly-priced or expensive.</p> </blockquote> <p>Click the play button below to listen to Chris&#39; interview with Steen Jakobsen (40m:27s)</p> </div> <p>&nbsp;</p> <p><iframe allowfullscreen="" frameborder="0" height="315" src="" width="560"></iframe></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="233" height="153" alt="" src="" /> </div> </div> </div> Equity Markets Federal Reserve Real estate recovery Saxo Bank Tue, 21 Apr 2015 01:10:20 +0000 Tyler Durden 505059 at Chinese Economic Outlook "Skewed Heavily To The Downside," BNP Says <p>Over the past several months we’ve built on several narratives out of China certainly not the least of which is the idea that economic growth in the country is decelerating quickly at a time when accelerating capital outflows make devaluation an unpalatable (if inevitable) proposition. Signs of a dramatic slowdown were on full display earlier this month when GDP growth <a href="">slipped to 7%</a>, the slowest pace in six years, while key indicators such as rail freight volume have fallen completely off a cliff:</p> <p><a href=""><img src="" width="600" height="406" /></a></p> <p>&nbsp;</p> <p>With the country’s tough transition to a service-based economy being made all the more difficult by the hit industrial production will likely take as Beijing ramps up efforts to fight a pollution problem that was thrust back into the spotlight early last month thanks to a viral documentary, it’s reasonable to suspect we’ll be seeing a lot more of the idle cranes, empty construction sites, and half-finished abandoned buildings that greeted Bloomberg metals analyst Kenneth Hoffman <a href="">who returned from a tour</a> of the country earlier this month. Ultimately, Hoffman’s assessment was that metals demand in China is collapsing and isn’t likely to pick back up for the foreseeable future.&nbsp;</p> <p>This is bad news for the Chinese economic machine and it’s also bad news for any iron ore miner out there whose marginal costs aren’t low enough to stay profitable in the face of a protracted downturn in prices because if you <a href="">can’t convince the big guys</a> that your price collusion idea will pass regulatory muster, well, they’ll likely take the opportunity to keep right on producing despite the slump and run you out of business. With the stage thus set, we bring you the following from BNP who explains why iron ore prices aren’t likely to rebound any time soon, and why the economic outlook for China is indeed “as bad as the data looks, if not worse” (to quote Mr. Hoffman).</p> <p>Via BNP:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>Global commodity prices have fallen sharply since last summer, dragged down by a cocktail of fading Chinese industrial demand, surging supply and a strong USD. Oil has inevitably garnered the majority of headlines but iron ore prices have fallen even further. Iron ore prices have collapsed by close to 50% since last July and over 65% since the beginning of 2014. Falls have accelerated in recent weeks, almost becoming a rout, with prices down over 30% year-to-date.&nbsp;</em></p> </blockquote> <p><a href=""><img src="" width="405" height="274" /></a></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em><span style="font-size: 1em; line-height: 1.3em;">The analogue of China’s unprecedented construction bonanza has been extraordinary levels of both cement and steel production and consumption. <strong>We have documented the epic nature of the former with China incredibly producing more than twice as much cement in the last five years than the United States managed in the previous century</strong> (China: Cementing The Bear Case).</span></em><span style="font-size: 1em; line-height: 1.3em; white-space: pre;"> </span></p> <p>&nbsp;</p> <p><em>The increases in China’s steel production and consumption post-GFC have been almost as, but inevitably not quite, so spectacular. Since the end of 2007, China’s steel production has leapt by over 300 million tonnes while production in the rest of the world has slightly slipped. As will be discussed below, China’s steel production has started to flatten out over the last 12-15 months but, at around 810 million tons over the last year, China’s steel production has now accounted for 50% of total global production..<span style="font-size: 1em; line-height: 1.3em; white-space: pre;"> </span></em></p> <p>&nbsp;</p> <p><em>The surge in Chinese steel production has inevitably required a counterpart in much higher rates of global iron ore production. China’s own, typically low grade iron ore production, has not been able to keep pace with demand growth, meaning huge increases in demand for iron ore from the rest of the world. <strong>This demand has been fed largely by huge increases in Australian supply and, to a lesser extent, Brazil...<span style="white-space: pre;"> </span></strong></em></p> <p><em><strong><span style="white-space: pre;"><br /></span></strong></em></p> <p><em>The collapse in iron ore prices over the last 15 months or so reflects the interplay of a levelling off in Chinese demand in 2014 for the first time since the GFC and, given the inevitably long lags between investment decision and output, continued strong gains in global supply. <strong>Our calculations suggest that China’s apparent steel use grew by less than 3% in 2014; slower than even 2008’s 4% growth</strong> (Chart 5). The latest industrial production data suggest that downward pressure has intensified in the final months of 2014 and early 2015 with crude steel production down -1.5% y/y on average in January and February.&nbsp;</em></p> </blockquote> <p><span style="font-size: 1em; line-height: 1.3em; white-space: pre;"><a href=""><img src="" width="600" height="403" /></a> </span></p> <p><span style="font-size: 1em; line-height: 1.3em; white-space: pre;"><a href=""><img src="" width="600" height="342" /></a><br /></span></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>On the supply side, optimistic assumptions over the potential for Chinese steel demand growth to continue strongly for the rest of the decade has led to steady increases in productive capacity which are forecast to come on line in the next few years. Australian iron ore production alone is expected to increase by a further 196 million tonnes between 2014 and 2018….<span style="white-space: pre;"> </span><span style="font-size: 1em; line-height: 1.3em; white-space: pre;"> </span></em></p> <p>&nbsp;</p> <p><em><strong>Even as the risks for global iron ore supply are strongly tilted to the upside for the time being, the outlook for Chinese demand, in contrast to optimistic forecasts of producers, is skewed heavily to the downside. The key downside risk is of course the prospect of a multi-year and deep correction in real estate investment. </strong>Given the epic nature of the ‘stock’ and ‘flow’ adjustment that China’s real estate market faces, the best case scenario is probably that real estate investment (c.151?2% of GDP), bolstered by considerable policy support, could achieve a soft landing with zero growth over the next 2-3 years…</em></p> <p>&nbsp;</p> <p><em><strong>The worst case is that increasingly entrenched deflationary dynamics and the unprecedented weight of excess supply (the value of unfinished real estate projects at market prices reached a mind-boggling 75% of GDP in 2014) mean the real estate sector is relatively impervious to stimulus and real estate investment likely to fall sharply for several years.</strong></em></p> <p>&nbsp;</p> <p><em>Another critical dimension is China’s increasingly unsustainable levels of air pollution which is generating mounting political pressure for sharp reductions in steel, cement and, of course, coal output. As with the real estate sector, the best that can be said is that China’s pollution problem has perhaps stopped getting worse over the last year. <strong>The tough decisions and the real economic pain continue to lie ahead, however, with some estimates finding that China’s industrial production might need to fall by as much as 40% to meet global pollution standards.&nbsp;</strong></em></p> </blockquote> <p>As a reminder, here’s the graphic on the relationship between industrial production and efforts to remedy the country’s pollution problem:</p> <p><span style="font-size: 1em; line-height: 1.3em; white-space: pre;"><a href=""><img src="" width="515" height="305" /></a> </span><span style="font-size: 1em; line-height: 1.3em; white-space: pre;"> </span></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em><span style="font-size: 1em; line-height: 1.3em;">China’s domestic steel prices have fallen to near record discount of c.25% vs. global prices. Meanwhile, China’s steel exports have soared by over 40 million tonnes over the last year; easily the biggest annual gain on record with growth of nearly 60%...</span></em></p> <p><em>Chinese producers have been able to slash steel export prices (which appear to follow domestic prices with a lag of about five months) as the collapse in iron ore prices is (temporarily) boosting margins…</em></p> <p>&nbsp;</p> <p><em><span style="font-size: 1em; line-height: 1.3em;"><strong>As already emphasized, there appears to be little to interrupt these strongly deflationary dynamics any time soon. With the large iron ore producers likely to keep increasing supply until prices fall to close to their estimated marginal cost of $35 per tonne, further falls in iron prices look inevitable. China’s continuing real estate correction and anti-pollution drive will continue to weigh on domestic demand although sharp reductions in domestic output ultimately required are likely to continue to be resisted in the short term by the authorities given their high cost in terms of output and employment.</strong> Domestic steel prices should fall sharply while China’s steel exports look set to continue soaring, procuring further strong downward pressure on global prices…</span></em></p> </blockquote> <p><span style="font-size: 1em; line-height: 1.3em;">And that, ladies and gentlemen, is the decisively precarious situation that Beijing finds itself in as China attempts to project its economic and military prowess to the rest of the world. Call it the growing pains of a rising superpower, but don't call it an enviable position and don't be surprised to discover that contrary to what the Ministry of Finance steadfastly proclaims, there may indeed be such a thing as Chinese QE.</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="405" height="274" alt="" src="" /> </div> </div> </div> Brazil China Crude headlines Real estate Tue, 21 Apr 2015 00:55:00 +0000 Tyler Durden 505065 at Another Reason To Move Away From California: "Conditions Are Like A Third-World Country" <p><a href=""><em>Submitted by Michael Snyder via The Economic Collapse blog</em></a>,</p> <p>As if anyone actually needed <strong>another</strong> reason to move out of the crazy state of California, now it is being reported that conditions in <strong>some areas of the state &ldquo;<a href="" target="_blank" title="are like a third-world country">are like a third-world country</a>&rdquo; due to the multi-year megadrought that has hit the state.&nbsp;</strong> In one California county alone, more than 1,000 wells have gone dry as the groundwater has disappeared.&nbsp; The state is turning <a href="" title="back into a desert">back into a desert</a>, and an increasing number of homes no longer have any water coming out of their taps or showerheads.&nbsp;</p> <p>So if you weren&rsquo;t scared away by the&nbsp;<a href="" target="_blank" title="wildfires">wildfires</a>, mudslides, high taxes, crime, gang violence, traffic, insane political correctness, the nightmarish business environment or the constant threat of &ldquo;the big one&rdquo; reducing your home to a pile of rubble, perhaps the fact that much of the state could soon be facing Dust Bowl conditions may finally convince you to pack up and leave.&nbsp; And if you do decide to go, you won&rsquo;t be alone.&nbsp; <strong>Millions of Californians have fled the state in recent years, and this water crisis could soon spark the greatest migration out of the state <a href="" title="that we have ever seen">that we have ever seen</a>.</strong></p> <p>Back in 1972, Albert Hammond released a song entitled &ldquo;<a href="" target="_blank" title="It Never Rains In Southern California">It Never Rains In Southern California</a>&ldquo;, and back then that was considered to be a good thing.</p> <p>But today, years of very little rain are really starting to take a toll.&nbsp; In fact, one government official says that conditions in Tulare Country&nbsp;<a href="" target="_blank" title="“are like a third-world country”">&ldquo;are like a third-world country&rdquo;</a>&hellip;</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Near California&rsquo;s Success Lake, more than 1,000 water wells have failed. Farmers are spending $750,000 to drill 1,800 feet down to keep fields from going fallow. Makeshift showers have sprouted near the church parking lot.</p> <p>&nbsp;</p> <p>&ldquo;<strong>The conditions are like a third-world country</strong>,&rdquo; said Andrew Lockman, a manager at the Office of Emergency Services in Tulare County, in the heart of the state&rsquo;s agricultural Central Valley about 175 miles (282 kilometers) north of Los Angeles.</p> <p>&nbsp;</p> <p>As California enters the fourth year of a record drought, its residents and $43 billion agriculture industry have drawn groundwater so low that it&rsquo;s beyond the reach of existing wells. That&rsquo;s left thousands with dry taps and pushed farmers to dig deeper as Governor Jerry Brown, a 77-year-old Democrat, orders the first mandatory water rationing in state history.</p> </blockquote> <p>The mandatory water restrictions that Governor Brown is imposing are going to be very painful for a lot of people.&nbsp; We have just learned that <strong>some California communities will be required to cut their water usage&nbsp;<a href="" target="_blank" title="by up to 36 percent">by up to 36 percent</a>&hellip;</strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Californians are going to have to start preparing for a dry summer as the dehydrated state prepares for a water crackdown.</p> <p>&nbsp;</p> <p>In a somewhat controversial move, California water officials drafted a set of <strong>mandatory conservation regulations</strong> outlining varying degrees to which communities will be required to cut back on water use, ranging from 8 to 36 percent, depending on their history of water consumption.</p> <p>&nbsp;</p> <p>The regulations &mdash; slated for approval in early May &mdash; are part of California&rsquo;s first-ever attempt at mandatory rationing. Earlier this month, Gov. Jerry Brown issued an executive order requiring a 25 percent reduction in urban water use, a historic step in a series of measures aimed at conservation ahead of the state&rsquo;s fourth consecutive year of drought.</p> </blockquote> <p>And of course it isn&rsquo;t just the state of California that is dealing with drought.</p> <p><strong>All over the southwest United States, we are seeing conditions that we have not witnessed since the days of the Dust Bowl in the 1930s.</strong></p> <p>In fact, the water level in Lake Mead is now the lowest that it has been since those days, and it is expected to drop even lower&nbsp;<a href="" target="_blank" title="in the months ahead">in the months ahead</a>&hellip;</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>One of the most stunning places to see its impact is at the nation&rsquo;s largest reservoir, Lake Mead, near Las Vegas. At about 40 percent of capacity, it&rsquo;s the lowest it&rsquo;s been since it was built in the 1930s.</p> <p>&nbsp;</p> <p>&ldquo;Just to see the rings around it, it&rsquo;s just &hellip; kind of scary, you know,&rdquo; says Darlene Paige, a visitor from New York. She&rsquo;s standing at a vista point above the Hoover Dam on the Arizona side of Lake Mead.</p> <p>&nbsp;</p> <p>That &ldquo;ring&rdquo; is the infamous bathtub ring around the rim of the reservoir. The levels have dropped 140 feet over the past 15 years, exposing a white stain on the gravelly brown mountains above the water. The level is forecast to fall an additional 10 feet by this summer.</p> </blockquote> <p>According to the Government Accountability Office, <strong>it is being projected that a total of <a href="" target="_blank" title="40 U.S. states">40 U.S. states</a> will be dealing with a shortage of water by the end of the next decade.</strong></p> <p><strong>It has been said that &ldquo;water is the new oil&rdquo;, and this is just the beginning.</strong>&nbsp; The truth is that as bad as things are here, we are actually in far better shape than almost everyone else in the world to deal with the emerging global <a href="" title="water crisis">water crisis</a>.&nbsp; All over the planet supplies of fresh water are disappearing, and the availability of water is going to increasingly become a major geopolitical issue in the years to come.</p> <p>And even now, the U.S. government is taking all of this very seriously.&nbsp; In fact, the EPA is already trying to train our kids&nbsp;<a href="" target="_blank" title="to take showers instead of baths">to take showers instead of baths</a>&hellip;</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Parents across America who struggle to keep their young rambunctious kids clean now have a new obstacle: the U.S. Environmental Protection Agency (EPA).</p> <p>&nbsp;</p> <p>As part of its effort to help save the planet from the dangers of taking too many baths, the EPA&rsquo;s WaterSense program is trying to convince kids they should avoid bathtubs in favor of showers, which it says is a far more efficient use of water.</p> <p>&nbsp;</p> <p>&ldquo;To save even more water, keep your shower under five minutes long&mdash;try timing yourself with a clock next time you hop in!&rdquo; the &ldquo;WaterSense for Kids&rdquo; website says.</p> </blockquote> <p>For most of our lives, most of us have been able to take water for granted.</p> <p><strong>But now things are changing, and we are going to have to adjust to these new realities.</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="308" height="216" alt="" src="" /> </div> </div> </div> Las Vegas Tue, 21 Apr 2015 00:30:10 +0000 Tyler Durden 505063 at