"Dead Cat Bounce" Or "Pause That Refreshes"

Tyler Durden — Thu, 23 May 2013 20:06:41 +0000

While the off-the-lows mentality of today's market performance was heralded by most as a signal that the BTFD'rs are back, we gently remind them that the Nikkei (futures) did not bounce at all... In fact S&P futures bounced to a rather eerily perfect 38.2% Fibonacci retracement of the overnight plunge and then faded into the close. All the major indices managed to get back to unchanged on the day (but the S&P 500 was the last to make it and instantly turned around once it did). Credit markets opened gap wider and did not bounce back anything like stocks. Treasuries sold off modestly from their pre-opening levels then drifted lower in yield into the close (ending down 2-3bps on the day but up 6-7bps on the week). The USD weakened most of the day and commodities gained on the day with gold and silver now up over 2% on the week. VIX fell from the open to the close but ended the day higher as we suspect hedges were lifted and exposure reduced into the bounce.

Dead Cat Bounce? 38.2% retrace...

The S&P 500 managed to get back perfectly unchanged before fading away into the close...

Stocks played catch down to credit...

Still a way to go to catch down to the hedgers...

Good day for commodities in general...

helped by USD weakness (as EUR strength and JPY strength - repatriation? - held it down)...

Where's the bounce?

Charts: Bloomberg and Capital Context

A Culture Of Fear And Intimidation...

Tyler Durden — Thu, 23 May 2013 19:38:55 +0000

Submitted by Simon Black of Sovereign Man blog,

Last week when I arrived to Bangladesh, the immigration officials there were positively ecstatic to see a foreign tourist entering the country.

I’ve also been to places in Africa and the South Pacific where you’re greeted upon arrival by dancing tribespeople singing songs of welcome.

It’s not quite the same in the Land of the Free. In fact, before they even let people in the country, they program us to be afraid and intimidated.

For one thing, all the immigration officers are armed. There’s absolutely no reason for a government agent to carry a loaded pistol when all he does is stamp a passport. This is EXTREMELY uncommon in the rest of the world. Only in the Land of the Free.

Just like the airport security farce, which has millions of travelers assume the “I surrender” pose inside a radiation machine, US immigration checkpoints are there to train people to be afraid and submit to the state’s authority.

When you step back and look at the whole government apparatus, it’s apparent that this culture of fear and intimidation applies across the entire spectrum.

We’re programmed, for example, to be terrified of the IRS. It’s to the point that getting audited consistently ranks among people’s top fears in the Land of the Free, right up there with snakes and unexpected death. It’s quite sad, actually.

And whether this Soviet-style idea to target opposition political groups came from the top or from the lower ranks, it smacks of an entire organizational culture gone awry… one that thinks it has unlimited power and authority to squash anyone it wants.

We’re also programmed to fear the police… who are more commonly donning combat boots, assault rifles, and these hideous Urban Assault Vehicles as a show of force, as if they’re on patrol in Kandahar.

And we’re programmed to subordinate ourselves to the interests of the state… whether it’s “shared sacrifice”, i.e. everyone must universally suffer because politicians are incompetent, or ratting out our neighbors to Homeland Security (if you see something, say something) or the IRS.

There’s so much more. We’re told that we can be attacked by drones, held in military detention, or have our children taken away by the government. These are powerful tools in stoking a culture of fear to keep an entire civilization under control.

Yet these constant abuses of power are diametrically opposed to how a free society is supposed to conduct itself.

You’re probably aware of a particularly fitting quote, most frequently credited to Thomas Jefferson– “Where the people fear the government, you have tyranny. Where the government fears the people you have liberty.” It’s absolutely true.

(There is no evidence that Jefferson ever said this, nor is the phrase contained in his works. It was first seen in print in John Basil Barnhill’s article, ‘Indictment of Socialism No. 3? in 1914.)

Jefferson did write in a 1789 letter to Welsh philosopher Richard Price that “wherever the people are well informed they can be trusted with their own government; that whenever things get so far wrong as to attract their notice, they may be relied on to set them to rights.”

Unfortunately this isn’t happening; ‘the people’ aren’t rising up to set things right.

And this is an important reminder: we cannot rely on a government or society to provide us with freedom or the economic opportunity which stems from it. We can’t wait for tens of millions of people to ‘wake up’ and ‘vote the bums out’. Or take to the streets.

If history is any indicator, the fear and intimidation will likely get worse. This problem doesn’t just go away, and it doesn’t resolve itself.

The only viable strategy is to abandon the herd and focus on what we can all do as individuals to safeguard our wealth, preserve our liberties, and ensure the continued safety of our families.

Quote Of The Day

Tyler Durden — Thu, 23 May 2013 19:07:07 +0000

The only sane central banker in the world, the Bundesbank's Jens Weidmann, take the prize for today's quote of the day with the following:

ECB'S WEIDMANN WISHES JAPAN `GOOD LUCK IN THEIR EXPERIMENTS'

So do we. They will need it.

And some other pearls from his speech:

WEIDMANN: JAPAN SHOWS MONETARY POLICY CAN BE PUSHED INTO DIFFICULT SPOT
WEIDMANN: COUNTRIES MUST RESPECT THE RULES OF MONETARY UNION
WEIDMANN SAYS ASKING ECB TO CALM MARKETS CREATES A WEAK EUROPE
WEIDMANN SAYS STATE INSOLVENCIES MUST BE POSSIBLE IN EURO AREA

And now cue the Princetonians.

Full Text And Wordcloud Of Obama's "Don't Drone Me, Bro" Speech

Tyler Durden — Thu, 23 May 2013 18:39:12 +0000

One can read "The Lethal Presidency of Barack Obama" to get a true sense of Obama's "the best defense is a relentless drone everyone offense, ignore collateral damage and take out a few Americans in the process" policy. Or one can stare at rising stawks and enjoy their Obamaphones. Obe can't have both.

Word cloud:

And full speech (via WaPo):

President Obama’s May 23 speech on national security

President Obama delivered remarks on national security on May 23, 2013, at National Defense University in Washington, D.C. Here are his full remarks as prepared for delivery.

It’s an honor to return to the National Defense University. Here, at Fort McNair, Americans have served in uniform since 1791– standing guard in the early days of the Republic, and contemplating the future of warfare here in the 21st century.

For over two centuries, the United States has been bound together by founding documents that defined who we are as Americans, and served as our compass through every type of change. Matters of war and peace are no different. Americans are deeply ambivalent about war, but having fought for our independence, we know that a price must be paid for freedom. From the Civil War, to our struggle against fascism, and through the long, twilight struggle of the Cold War, battlefields have changed, and technology has evolved. But our commitment to Constitutional principles has weathered every war, and every war has come to an end.

With the collapse of the Berlin Wall, a new dawn of democracy took hold abroad, and a decade of peace and prosperity arrived at home. For a moment, it seemed the 21st century would be a tranquil time. Then, on September 11th 2001, we were shaken out of complacency. Thousands were taken from us, as clouds of fire, metal and ash descended upon a sun-filled morning. This was a different kind of war. No armies came to our shores, and our military was not the principal target. Instead, a group of terrorists came to kill as many civilians as they could.

And so our nation went to war. We have now been at war for well over a decade. I won’t review the full history. What’s clear is that we quickly drove al Qaeda out of Afghanistan, but then shifted our focus and began a new war in Iraq. This carried grave consequences for our fight against al Qaeda, our standing in the world, and – to this day – our interests in a vital region.

Meanwhile, we strengthened our defenses – hardening targets, tightening transportation security, and giving law enforcement new tools to prevent terror. Most of these changes were sound. Some caused inconvenience. But some, like expanded surveillance, raised difficult questions about the balance we strike between our interests in security and our values of privacy. And in some cases, I believe we compromised our basic values – by using torture to interrogate our enemies, and detaining individuals in a way that ran counter to the rule of law.

After I took office, we stepped up the war against al Qaeda, but also sought to change its course. We relentlessly targeted al Qaeda’s leadership. We ended the war in Iraq, and brought nearly 150,000 troops home. We pursued a new strategy in Afghanistan, and increased our training of Afghan forces. We unequivocally banned torture, affirmed our commitment to civilian courts, worked to align our policies with the rule of law, and expanded our consultations with Congress.

Today, Osama bin Laden is dead, and so are most of his top lieutenants. There have been no large-scale attacks on the United States, and our homeland is more secure. Fewer of our troops are in harm’s way, and over the next 19 months they will continue to come home. Our alliances are strong, and so is our standing in the world. In sum, we are safer because of our efforts.

Now make no mistake: our nation is still threatened by terrorists. From Benghazi to Boston, we have been tragically reminded of that truth. We must recognize, however, that the threat has shifted and evolved from the one that came to our shores on 9/11. With a decade of experience to draw from, now is the time to ask ourselves hard questions – about the nature of today’s threats, and how we should confront them.

These questions matter to every American. For over the last decade, our nation has spent well over a trillion dollars on war, exploding our deficits and constraining our ability to nation build here at home. Our service-members and their families have sacrificed far more on our behalf. Nearly 7,000 Americans have made the ultimate sacrifice. Many more have left a part of themselves on the battlefield, or brought the shadows of battle back home. From our use of drones to the detention of terrorist suspects, the decisions we are making will define the type of nation – and world – that we leave to our children.

So America is at a crossroads. We must define the nature and scope of this struggle, or else it will define us, mindful of James Madison’s warning that “No nation could preserve its freedom in the midst of continual warfare.” Neither I, nor any President, can promise the total defeat of terror. We will never erase the evil that lies in the hearts of some human beings, nor stamp out every danger to our open society. What we can do – what we must do – is dismantle networks that pose a direct danger, and make it less likely for new groups to gain a foothold, all while maintaining the freedoms and ideals that we defend. To define that strategy, we must make decisions based not on fear, but hard-earned wisdom. And that begins with understanding the threat we face.

Today, the core of al Qaeda in Afghanistan and Pakistan is on a path to defeat. Their remaining operatives spend more time thinking about their own safety than plotting against us. They did not direct the attacks in Benghazi or Boston. They have not carried out a successful attack on our homeland since 9/11. Instead, what we’ve seen is the emergence of various al Qaeda affiliates. From Yemen to Iraq, from Somalia to North Africa, the threat today is more diffuse, with Al Qaeda’s affiliate in the Arabian Peninsula – AQAP –the most active in plotting against our homeland. While none of AQAP’s efforts approach the scale of 9/11 they have continued to plot acts of terror, like the attempt to blow up an airplane on Christmas Day in 2009.

Unrest in the Arab World has also allowed extremists to gain a foothold in countries like Libya and Syria. Here, too, there are differences from 9/11. In some cases, we confront state-sponsored networks like Hizbollah that engage in acts of terror to achieve political goals. Others are simply collections of local militias or extremists interested in seizing territory. While we are vigilant for signs that these groups may pose a transnational threat, most are focused on operating in the countries and regions where they are based. That means we will face more localized threats like those we saw in Benghazi, or at the BP oil facility in Algeria, in which local operatives – in loose affiliation with regional networks – launch periodic attacks against Western diplomats, companies, and other soft targets, or resort to kidnapping and other criminal enterprises to fund their operations.

Finally, we face a real threat from radicalized individuals here in the United States. Whether it’s a shooter at a Sikh Temple in Wisconsin; a plane flying into a building in Texas; or the extremists who killed 168 people at the Federal Building in Oklahoma City – America has confronted many forms of violent extremism in our time. Deranged or alienated individuals – often U.S. citizens or legal residents – can do enormous damage, particularly when inspired by larger notions of violent jihad. That pull towards extremism appears to have led to the shooting at Fort Hood, and the bombing of the Boston Marathon.

Lethal yet less capable al Qaeda affiliates. Threats to diplomatic facilities and businesses abroad. Homegrown extremists. This is the future of terrorism. We must take these threats seriously, and do all that we can to confront them. But as we shape our response, we have to recognize that the scale of this threat closely resembles the types of attacks we faced before 9/11. In the 1980s, we lost Americans to terrorism at our Embassy in Beirut; at our Marine Barracks in Lebanon; on a cruise ship at sea; at a disco in Berlin; and on Pan Am Flight 103 over Lockerbie. In the 1990s, we lost Americans to terrorism at the World Trade Center; at our military facilities in Saudi Arabia; and at our Embassy in Kenya. These attacks were all deadly, and we learned that left unchecked, these threats can grow. But if dealt with smartly and proportionally, these threats need not rise to the level that we saw on the eve of 9/11.

Moreover, we must recognize that these threats don’t arise in a vacuum. Most, though not all, of the terrorism we face is fueled by a common ideology – a belief by some extremists that Islam is in conflict with the United States and the West, and that violence against Western targets, including civilians, is justified in pursuit of a larger cause. Of course, this ideology is based on a lie, for the United States is not at war with Islam; and this ideology is rejected by the vast majority of Muslims, who are the most frequent victims of terrorist acts.

Nevertheless, this ideology persists, and in an age in which ideas and images can travel the globe in an instant, our response to terrorism cannot depend on military or law enforcement alone. We need all elements of national power to win a battle of wills and ideas. So let me discuss the components of such a comprehensive counter-terrorism strategy.

First, we must finish the work of defeating al Qaeda and its associated forces.

In Afghanistan, we will complete our transition to Afghan responsibility for security. Our troops will come home. Our combat mission will come to an end. And we will work with the Afghan government to train security forces, and sustain a counter-terrorism force which ensures that al Qaeda can never again establish a safe-haven to launch attacks against us or our allies.

Beyond Afghanistan, we must define our effort not as a boundless ‘global war on terror’ – but rather as a series of persistent, targeted efforts to dismantle specific networks of violent extremists that threaten America. In many cases, this will involve partnerships with other countries. Thousands of Pakistani soldiers have lost their lives fighting extremists. In Yemen, we are supporting security forces that have reclaimed territory from AQAP. In Somalia, we helped a coalition of African nations push al Shabaab out of its strongholds. In Mali, we are providing military aid to a French-led intervention to push back al Qaeda in the Maghreb, and help the people of Mali reclaim their future.

Much of our best counter-terrorism cooperation results in the gathering and sharing of intelligence; the arrest and prosecution of terrorists. That’s how a Somali terrorist apprehended off the coast of Yemen is now in prison in New York. That’s how we worked with European allies to disrupt plots from Denmark to Germany to the United Kingdom. That’s how intelligence collected with Saudi Arabia helped us stop a cargo plane from being blown up over the Atlantic.

But despite our strong preference for the detention and prosecution of terrorists, sometimes this approach is foreclosed. Al Qaeda and its affiliates try to gain a foothold in some of the most distant and unforgiving places on Earth. They take refuge in remote tribal regions. They hide in caves and walled compounds. They train in empty deserts and rugged mountains.

In some of these places – such as parts of Somalia and Yemen – the state has only the most tenuous reach into the territory. In other cases, the state lacks the capacity or will to take action. It is also not possible for America to simply deploy a team of Special Forces to capture every terrorist. And even when such an approach may be possible, there are places where it would pose profound risks to our troops and local civilians– where a terrorist compound cannot be breached without triggering a firefight with surrounding tribal communities that pose no threat to us, or when putting U.S. boots on the ground may trigger a major international crisis.

To put it another way, our operation in Pakistan against Osama bin Laden cannot be the norm. The risks in that case were immense; the likelihood of capture, although our preference, was remote given the certainty of resistance; the fact that we did not find ourselves confronted with civilian casualties, or embroiled in an extended firefight, was a testament to the meticulous planning and professionalism of our Special Forces – but also depended on some luck. And even then, the cost to our relationship with Pakistan – and the backlash among the Pakistani public over encroachment on their territory – was so severe that we are just now beginning to rebuild this important partnership.

It is in this context that the United States has taken lethal, targeted action against al Qaeda and its associated forces, including with remotely piloted aircraft commonly referred to as drones. As was true in previous armed conflicts, this new technology raises profound questions – about who is targeted, and why; about civilian casualties, and the risk of creating new enemies; about the legality of such strikes under U.S. and international law; about accountability and morality.

Let me address these questions. To begin with, our actions are effective. Don’t take my word for it. In the intelligence gathered at bin Laden’s compound, we found that he wrote, “we could lose the reserves to the enemy’s air strikes. We cannot fight air strikes with explosives.” Other communications from al Qaeda operatives confirm this as well. Dozens of highly skilled al Qaeda commanders, trainers, bomb makers, and operatives have been taken off the battlefield. Plots have been disrupted that would have targeted international aviation, U.S. transit systems, European cities and our troops in Afghanistan. Simply put, these strikes have saved lives.

Moreover, America’s actions are legal. We were attacked on 9/11. Within a week, Congress overwhelmingly authorized the use of force. Under domestic law, and international law, the United States is at war with al Qaeda, the Taliban, and their associated forces. We are at war with an organization that right now would kill as many Americans as they could if we did not stop them first. So this is a just war – a war waged proportionally, in last resort, and in self-defense.

And yet as our fight enters a new phase, America’s legitimate claim of self-defense cannot be the end of the discussion. To say a military tactic is legal, or even effective, is not to say it is wise or moral in every instance. For the same human progress that gives us the technology to strike half a world away also demands the discipline to constrain that power – or risk abusing it. That’s why, over the last four years, my Administration has worked vigorously to establish a framework that governs our use of force against terrorists – insisting upon clear guidelines, oversight and accountability that is now codified in Presidential Policy Guidance that I signed yesterday.

In the Afghan war theater, we must support our troops until the transition is complete at the end of 2014. That means we will continue to take strikes against high value al Qaeda targets, but also against forces that are massing to support attacks on coalition forces. However, by the end of 2014, we will no longer have the same need for force protection, and the progress we have made against core al Qaeda will reduce the need for unmanned strikes.

Beyond the Afghan theater, we only target al Qaeda and its associated forces. Even then, the use of drones is heavily constrained. America does not take strikes when we have the ability to capture individual terrorists - our preference is always to detain, interrogate, and prosecute them. America cannot take strikes wherever we choose – our actions are bound by consultations with partners, and respect for state sovereignty. America does not take strikes to punish individuals – we act against terrorists who pose a continuing and imminent threat to the American people, and when there are no other governments capable of effectively addressing the threat. And before any strike is taken, there must be near-certainty that no civilians will be killed or injured – the highest standard we can set.

This last point is critical, because much of the criticism about drone strikes – at home and abroad – understandably centers on reports of civilian casualties. There is a wide gap between U.S. assessments of such casualties, and non-governmental reports. Nevertheless, it is a hard fact that U.S. strikes have resulted in civilian casualties, a risk that exists in all wars. For the families of those civilians, no words or legal construct can justify their loss. For me, and those in my chain of command, these deaths will haunt us as long as we live, just as we are haunted by the civilian casualties that have occurred through conventional fighting in Afghanistan and Iraq.

But as Commander-in-Chief, I must weigh these heartbreaking tragedies against the alternatives. To do nothing in the face of terrorist networks would invite far more civilian casualties – not just in our cities at home and facilities abroad, but also in the very places –like Sana’a and Kabul and Mogadishu – where terrorists seek a foothold. Let us remember that the terrorists we are after target civilians, and the death toll from their acts of terrorism against Muslims dwarfs any estimate of civilian casualties from drone strikes.

Where foreign governments cannot or will not effectively stop terrorism in their territory, the primary alternative to targeted, lethal action is the use of conventional military options. As I’ve said, even small Special Operations carry enormous risks. Conventional airpower or missiles are far less precise than drones, and likely to cause more civilian casualties and local outrage. And invasions of these territories lead us to be viewed as occupying armies; unleash a torrent of unintended consequences; are difficult to contain; and ultimately empower those who thrive on violent conflict. So it is false to assert that putting boots on the ground is less likely to result in civilian deaths, or to create enemies in the Muslim world. The result would be more U.S. deaths, more Blackhawks down, more confrontations with local populations, and an inevitable mission creep in support of such raids that could easily escalate into new wars.

So yes, the conflict with al Qaeda, like all armed conflict, invites tragedy. But by narrowly targeting our action against those who want to kill us, and not the people they hide among, we are choosing the course of action least likely to result in the loss of innocent life. Indeed, our efforts must also be measured against the history of putting American troops in distant lands among hostile populations. In Vietnam, hundreds of thousands of civilians died in a war where the boundaries of battle were blurred. In Iraq and Afghanistan, despite the courage and discipline of our troops, thousands of civilians have been killed. So neither conventional military action, nor waiting for attacks to occur, offers moral safe-harbor. Neither does a sole reliance on law enforcement in territories that have no functioning police or security services – and indeed, have no functioning law.

This is not to say that the risks are not real. Any U.S. military action in foreign lands risks creating more enemies, and impacts public opinion overseas. Our laws constrain the power of the President, even during wartime, and I have taken an oath to defend the Constitution of the United States. The very precision of drones strikes, and the necessary secrecy involved in such actions can end up shielding our government from the public scrutiny that a troop deployment invites. It can also lead a President and his team to view drone strikes as a cure-all for terrorism.

For this reason, I’ve insisted on strong oversight of all lethal action. After I took office, my Administration began briefing all strikes outside of Iraq and Afghanistan to the appropriate committees of Congress. Let me repeat that – not only did Congress authorize the use of force, it is briefed on every strike that America takes. That includes the one instance when we targeted an American citizen: Anwar Awlaki, the chief of external operations for AQAP.

This week, I authorized the declassification of this action, and the deaths of three other Americans in drone strikes, to facilitate transparency and debate on this issue, and to dismiss some of the more outlandish claims. For the record, I do not believe it would be constitutional for the government to target and kill any U.S. citizen – with a drone, or a shotgun – without due process. Nor should any President deploy armed drones over U.S. soil.

But when a U.S. citizen goes abroad to wage war against America – and is actively plotting to kill U.S. citizens; and when neither the United States, nor our partners are in a position to capture him before he carries out a plot – his citizenship should no more serve as a shield than a sniper shooting down on an innocent crowd should be protected from a swat team

That’s who Anwar Awlaki was – he was continuously trying to kill people. He helped oversee the 2010 plot to detonate explosive devices on two U.S. bound cargo planes. He was involved in planning to blow up an airliner in 2009. When Farouk Abdulmutallab – the Christmas Day bomber – went to Yemen in 2009, Awlaki hosted him, approved his suicide operation, and helped him tape a martyrdom video to be shown after the attack. His last instructions were to blow up the airplane when it was over American soil. I would have detained and prosecuted Awlaki if we captured him before he carried out a plot. But we couldn’t. And as President, I would have been derelict in my duty had I not authorized the strike that took out Awlaki.

Of course, the targeting of any Americans raises constitutional issues that are not present in other strikes – which is why my Administration submitted information about Awlaki to the Department of Justice months before Awlaki was killed, and briefed the Congress before this strike as well. But the high threshold that we have set for taking lethal action applies to all potential terrorist targets, regardless of whether or not they are American citizens. This threshold respects the inherent dignity of every human life. Alongside the decision to put our men and women in uniform in harm’s way, the decision to use force against individuals or groups – even against a sworn enemy of the United States – is the hardest thing I do as President. But these decisions must be made, given my responsibility to protect the American people.

Going forward, I have asked my Administration to review proposals to extend oversight of lethal actions outside of warzones that go beyond our reporting to Congress. Each option has virtues in theory, but poses difficulties in practice. For example, the establishment of a special court to evaluate and authorize lethal action has the benefit of bringing a third branch of government into the process, but raises serious constitutional issues about presidential and judicial authority. Another idea that’s been suggested – the establishment of an independent oversight board in the executive branch – avoids those problems, but may introduce a layer of bureaucracy into national-security decision-making, without inspiring additional public confidence in the process. Despite these challenges, I look forward to actively engaging Congress to explore these – and other – options for increased oversight.

I believe, however, that the use of force must be seen as part of a larger discussion about a comprehensive counter-terrorism strategy. Because for all the focus on the use of force, force alone cannot make us safe. We cannot use force everywhere that a radical ideology takes root; and in the absence of a strategy that reduces the well-spring of extremism, a perpetual war – through drones or Special Forces or troop deployments – will prove self-defeating, and alter our country in troubling ways.

So the next element of our strategy involves addressing the underlying grievances and conflicts that feed extremism, from North Africa to South Asia. As we’ve learned this past decade, this is a vast and complex undertaking. We must be humble in our expectation that we can quickly resolve deep rooted problems like poverty and sectarian hatred. Moreover, no two countries are alike, and some will undergo chaotic change before things get better. But our security and values demand that we make the effort.

This means patiently supporting transitions to democracy in places like Egypt, Tunisia and Libya – because the peaceful realization of individual aspirations will serve as a rebuke to violent extremists. We must strengthen the opposition in Syria, while isolating extremist elements – because the end of a tyrant must not give way to the tyranny of terrorism. We are working to promote peace between Israelis and Palestinians – because it is right, and because such a peace could help reshape attitudes in the region. And we must help countries modernize economies, upgrade education, and encourage entrepreneurship – because American leadership has always been elevated by our ability to connect with peoples’ hopes, and not simply their fears.

Success on these fronts requires sustained engagement, but it will also require resources. I know that foreign aid is one of the least popular expenditures – even though it amounts to less than one percent of the federal budget. But foreign assistance cannot be viewed as charity. It is fundamental to our national security, and any sensible long-term strategy to battle extremism. Moreover, foreign assistance is a tiny fraction of what we spend fighting wars that our assistance might ultimately prevent. For what we spent in a month in Iraq at the height of the war, we could be training security forces in Libya, maintaining peace agreements between Israel and its neighbors, feeding the hungry in Yemen, building schools in Pakistan, and creating reservoirs of goodwill that marginalize extremists.

America cannot carry out this work if we do not have diplomats serving in dangerous places. Over the past decade, we have strengthened security at our Embassies, and I am implementing every recommendation of the Accountability Review Board which found unacceptable failures in Benghazi. I have called on Congress to fully fund these efforts to bolster security, harden facilities, improve intelligence, and facilitate a quicker response time from our military if a crisis emerges.

But even after we take these steps, some irreducible risks to our diplomats will remain. This is the price of being the world’s most powerful nation, particularly as a wave of change washes over the Arab World. And in balancing the trade-offs between security and active diplomacy, I firmly believe that any retreat from challenging regions will only increase the dangers we face in the long run.

Targeted action against terrorists. Effective partnerships. Diplomatic engagement and assistance. Through such a comprehensive strategy we can significantly reduce the chances of large scale attacks on the homeland and mitigate threats to Americans overseas. As we guard against dangers from abroad, however, we cannot neglect the daunting challenge of terrorism from within our borders.

As I said earlier, this threat is not new. But technology and the Internet increase its frequency and lethality. Today, a person can consume hateful propaganda, commit themselves to a violent agenda, and learn how to kill without leaving their home. To address this threat, two years ago my Administration did a comprehensive review, and engaged with law enforcement. The best way to prevent violent extremism is to work with the Muslim American community – which has consistently rejected terrorism – to identify signs of radicalization, and partner with law enforcement when an individual is drifting towards violence. And these partnerships can only work when we recognize that Muslims are a fundamental part of the American family. Indeed, the success of American Muslims, and our determination to guard against any encroachments on their civil liberties, is the ultimate rebuke to those who say we are at war with Islam.

Indeed, thwarting homegrown plots presents particular challenges in part because of our proud commitment to civil liberties for all who call America home. That’s why, in the years to come, we will have to keep working hard to strike the appropriate balance between our need for security and preserving those freedoms that make us who we are. That means reviewing the authorities of law enforcement, so we can intercept new types of communication, and build in privacy protections to prevent abuse. That means that – even after Boston – we do not deport someone or throw someone in prison in the absence of evidence. That means putting careful constraints on the tools the government uses to protect sensitive information, such as the State Secrets doctrine. And that means finally having a strong Privacy and Civil Liberties Board to review those issues where our counter-terrorism efforts and our values may come into tension.

The Justice Department’s investigation of national security leaks offers a recent example of the challenges involved in striking the right balance between our security and our open society. As Commander-in Chief, I believe we must keep information secret that protects our operations and our people in the field. To do so, we must enforce consequences for those who break the law and breach their commitment to protect classified information. But a free press is also essential for our democracy. I am troubled by the possibility that leak investigations may chill the investigative journalism that holds government accountable.

Journalists should not be at legal risk for doing their jobs. Our focus must be on those who break the law. That is why I have called on Congress to pass a media shield law to guard against government over-reach. I have raised these issues with the Attorney General, who shares my concern. So he has agreed to review existing Department of Justice guidelines governing investigations that involve reporters, and will convene a group of media organizations to hear their concerns as part of that review. And I have directed the Attorney General to report back to me by July 12th.

All these issues remind us that the choices we make about war can impact – in sometimes unintended ways – the openness and freedom on which our way of life depends. And that is why I intend to engage Congress about the existing Authorization to Use Military Force, or AUMF, to determine how we can continue to fight terrorists without keeping America on a perpetual war-time footing.

The AUMF is now nearly twelve years old. The Afghan War is coming to an end. Core al Qaeda is a shell of its former self. Groups like AQAP must be dealt with, but in the years to come, not every collection of thugs that labels themselves al Qaeda will pose a credible threat to the United States. Unless we discipline our thinking and our actions, we may be drawn into more wars we don’t need to fight, or continue to grant Presidents unbound powers more suited for traditional armed conflicts between nation states. So I look forward to engaging Congress and the American people in efforts to refine, and ultimately repeal, the AUMF’s mandate. And I will not sign laws designed to expand this mandate further. Our systematic effort to dismantle terrorist organizations must continue. But this war, like all wars, must end. That’s what history advises. That’s what our democracy demands.

And that brings me to my final topic: the detention of terrorist suspects.

To repeat, as a matter of policy, the preference of the United States is to capture terrorist suspects. When we do detain a suspect, we interrogate them. And if the suspect can be prosecuted, we decide whether to try him in a civilian court or a Military Commission. During the past decade, the vast majority of those detained by our military were captured on the battlefield. In Iraq, we turned over thousands of prisoners as we ended the war. In Afghanistan, we have transitioned detention facilities to the Afghans, as part of the process of restoring Afghan sovereignty. So we bring law of war detention to an end, and we are committed to prosecuting terrorists whenever we can.

The glaring exception to this time-tested approach is the detention center at Guantanamo Bay. The original premise for opening GTMO – that detainees would not be able to challenge their detention – was found unconstitutional five years ago. In the meantime, GTMO has become a symbol around the world for an America that flouts the rule of law. Our allies won’t cooperate with us if they think a terrorist will end up at GTMO. During a time of budget cuts, we spend $150 million each year to imprison 166 people –almost $1 million per prisoner. And the Department of Defense estimates that we must spend another $200 million to keep GTMO open at a time when we are cutting investments in education and research here at home.

As President, I have tried to close GTMO. I transferred 67 detainees to other countries before Congress imposed restrictions to effectively prevent us from either transferring detainees to other countries, or imprisoning them in the United States. These restrictions make no sense. After all, under President Bush, some 530 detainees were transferred from GTMO with Congress’s support. When I ran for President the first time, John McCain supported closing GTMO. No person has ever escaped from one of our super-max or military prisons in the United States. Our courts have convicted hundreds of people for terrorism-related offenses, including some who are more dangerous than most GTMO detainees. Given my Administration’s relentless pursuit of al Qaeda’s leadership, there is no justification beyond politics for Congress to prevent us from closing a facility that should never have been opened.

Today, I once again call on Congress to lift the restrictions on detainee transfers from GTMO. I have asked the Department of Defense to designate a site in the United States where we can hold military commissions. I am appointing a new, senior envoy at the State Department and Defense Department whose sole responsibility will be to achieve the transfer of detainees to third countries. I am lifting the moratorium on detainee transfers to Yemen, so we can review them on a case by case basis. To the greatest extent possible, we will transfer detainees who have been cleared to go to other countries. Where appropriate, we will bring terrorists to justice in our courts and military justice system. And we will insist that judicial review be available for every detainee.

Even after we take these steps, one issue will remain: how to deal with those GTMO detainees who we know have participated in dangerous plots or attacks, but who cannot be prosecuted – for example because the evidence against them has been compromised or is inadmissible in a court of law. But once we commit to a process of closing GTMO, I am confident that this legacy problem can be resolved, consistent with our commitment to the rule of law.

I know the politics are hard. But history will cast a harsh judgment on this aspect of our fight against terrorism, and those of us who fail to end it. Imagine a future – ten years from now, or twenty years from now – when the United States of America is still holding people who have been charged with no crime on a piece of land that is not a part of our country. Look at the current situation, where we are force-feeding detainees who are holding a hunger strike. Is that who we are? Is that something that our Founders foresaw? Is that the America we want to leave to our children?

Our sense of justice is stronger than that. We have prosecuted scores of terrorists in our courts. That includes Umar Farouk Abdulmutallab, who tried to blow up an airplane over Detroit; and Faisal Shahzad, who put a car bomb in Times Square. It is in a court of law that we will try Dzhokhar Tsarnaev, who is accused of bombing the Boston Marathon. Richard Reid, the shoe bomber, is as we speak serving a life sentence in a maximum security prison here, in the United States. In sentencing Reid, Judge William Young told him, “the way we treat you…is the measure of our own liberties.” He went on to point to the American flag that flew in the courtroom – “That flag,” he said, “will fly there long after this is all forgotten. That flag still stands for freedom.”

America, we have faced down dangers far greater than al Qaeda. By staying true to the values of our founding, and by using our constitutional compass, we have overcome slavery and Civil War; fascism and communism. In just these last few years as President, I have watched the American people bounce back from painful recession, mass shootings, and natural disasters like the recent tornados that devastated Oklahoma. These events were heartbreaking; they shook our communities to the core. But because of the resilience of the American people, these events could not come close to breaking us.

I think of Lauren Manning, the 9/11 survivor who had severe burns over 80 percent of her body, who said, “That’s my reality. I put a Band-Aid on it, literally, and I move on.”

I think of the New Yorkers who filled Times Square the day after an attempted car bomb as if nothing had happened.

I think of the proud Pakistani parents who, after their daughter was invited to the White House, wrote to us, “we have raised an American Muslim daughter to dream big and never give up because it does pay off.”

I think of the wounded warriors rebuilding their lives, and helping other vets to find jobs.

I think of the runner planning to do the 2014 Boston Marathon, who said, “Next year, you are going to have more people than ever. Determination is not something to be messed with.”

That’s who the American people are. Determined, and not to be messed with.

Now, we need a strategy – and a politics –that reflects this resilient spirit. Our victory against terrorism won’t be measured in a surrender ceremony on a battleship, or a statue being pulled to the ground. Victory will be measured in parents taking their kids to school; immigrants coming to our shores; fans taking in a ballgame; a veteran starting a business; a bustling city street. The quiet determination; that strength of character and bond of fellowship; that refutation of fear – that is both our sword and our shield. And long after the current messengers of hate have faded from the world’s memory, alongside the brutal despots, deranged madmen, and ruthless demagogues who litter history – the flag of the United States will still wave from small-town cemeteries, to national monuments, to distant outposts abroad. And that flag will still stand for freedom.

Thank you. God Bless you. And may God bless the United States of America.

Richard Koo Warns Of "Beginning Of The End" For Japanese Economy

Tyler Durden — Thu, 23 May 2013 18:23:32 +0000

The surge in Japanese long-term interest rates is likely causing some lost sleep among bond market participants and policymakers (despite their ignorance of the moves in the BoJ minutes) as Nomura's Richard Koo notes, if this trend continues (now added to by the collapse in stock prices) it could well mark the “beginning of the end” for the Japanese economy.

Although the stock market has (until now) welcomed the yen’s continued slide against the dollar, Koo warns that this trend needs to be carefully monitored, as simultaneous declines in JGBs and the yen can be interpreted as a loss of faith in the Japanese government and the Bank of Japan. The biggest concerns are that the extreme volatility in Japanese stocks and bonds is occurring at a time when the BOJ was buying large quantities of government bonds.

Until the recent events there was an expectation in the JGB market that bond prices would not fall substantially even if the Bank’s aggressive easing program depressed the yen and lifted inflation expectations as long as the BOJ remained a major buyer. It is now clear that even large-scale BOJ purchases of JGBs cannot stop yields from rising.

Via Richard Koo, Nomura,

The lies are working (too well)...

Mr. Kuroda’s psychological tactic of repeating a lie often enough that it becomes the truth has succeeded brilliantly.

The problem is that it works on lenders as well as on borrowers. Moreover, borrowers are agents in the real economy and need time to react, whereas lenders are financial sector entities that can respond instantaneously, creating the possibility that lenders will react sooner than borrowers.

The fact that the BOJ has also reversed the traditional order of things and is trying to spark an economic recovery by generating inflation has increased the possibility that higher long-term rates driven by inflation concerns will emerge sooner than higher long term rates rooted in a recovery in the real economy.

But that is leading to a 'bad' (uncontrollable) rise in rates...

If we refer to higher interest rates driven by an economic recovery as a “good” increase and higher rates sparked by inflation concerns as a “bad” increase, I think there is a significant possibility that the latter will emerge first in this case.

That would not only weigh heavily on the first shoots of private loan demand to arise in a long time but could also focus attention on the banks’ and the government’s financial health, damping the positive momentum in the economy and markets seen over the last four months.

This kind of contradiction in timing is called the “time inconsistency problem,” and it will continue to hang over the policies of the Kuroda BOJ.

Simply out, Koo's perspective is that the BoJ needs to rein itself in...

BOJ needs to declare it will not tolerate overshooting of inflation

What can the BOJ do? To begin with, the Bank and the government could make it clear that they are targeting a 2% rate of inflation but at the same time, they will not under any condition tolerate a significant overshooting of that rate.

By stating that they will not accept an overshooting of the target, the Bank of Japan and the government could reassure the markets that there will be no plunge in the yen and no bouts of uncontrollable inflation.

The Winners And Losers In Today's NEE And AEP Flash Crashes

Tyler Durden — Thu, 23 May 2013 18:04:54 +0000

(Milli)seconds after today's market open, utilities NextEra Energy (NEE) and American Electric Power (AEP) did what most stocks in the New Normal do when there is an unexpected event (like a 4 sigma plunge in the Nikkei): they flash crashed.

What is different about AEP and NEE is that unlike most other daily stocks that implode in a matter of milliseconds, the collective market cap of the two companies was nearly $60 billion, which in turn sent the broader utilities index down over 10%. Of course, for a few milliseconds it was more like $30 billion: because that is how much in capitalization was lost in under one second, when today's flash crash du jour struck.

But fear not: anyone who got stopped out under $76.19 in NEE and under $46.03 in AEP are the "lucky" ones, and the trades were marked as "Aberrant." Alas since that simply means the trades are excluded from daily high and low charts, that is hardly comforting for anyone.

In other words, the "unlucky ones" are, well, everyone, because no trades were actually DKed. So to all those who lost electronic money due to what was an electronic trading algo gone wrong, can submit an electronic complaint to the NYSE, which will be promptly ignored by an electronic email filter. In other news, investor confidence in electronic markets has never been higher.

NEE

AES

Courtesy of Nanex

UBS On Japan - Are You 'Abe'liever?

Tyler Durden — Thu, 23 May 2013 17:42:52 +0000

Authored by Duncan Wooldridge via UBS,

We totally get why many are excited by the recent cyclical improvement in the Japanese economy. However, just because industrial production is turning up on the back of exports and 1Q GDP grew more than expected doesn’t mean Abeconomics is working. Our colleague, Paul Donovan, correctly pointed out these improvements occurred before the Bank of Japan aggressively started to ramp up base money and there’s been no structural reform to date. Hence, most of the improvement in Japan is probably best described as a standard cyclical improvement in the aftermath of very depressed growth that was also heavily influenced by last year’s downturn in global trade. Recent positive momentum in the economy will likely be sustained for a few more quarters and then of course later this year and early next year consumption should accelerate ahead of a consumption tax hike scheduled for April 2014. So for Abe-believers there will be fuel to support their optimism. However, once you move beyond that and think about what comes afterwards things look more challenging.

Can Japan sustainably lift aggregate demand above supply? If that cannot be done then it’s hard to see deflation resolved in a fundamentally positive way. Aggregate demand is heavily influenced by demographics and exports. We published chart 1 recently and it shows that historically the growth rate in Japan’s labour force is an excellent indicator for inflation. That’s because the growth in the labour force affects the level and growth of aggregate wages since total wages equal the number of workers multiplied by wages per worker. That has an affect on consumption and aggregate demand. We did some back of the envelope calculations that suggest even with wages per worker growing by 1% the aggregate wage level might not rise.

Meanwhile the consensus is busy writing report after report on what Japan means for Asia. In our view, the more interesting question is what does Asia mean for Japan? Exports will play a vital role in Japan’s efforts to raise aggregate demand above supply. So here’s the problem. We’ve argued consistently that Asia is 5 years into building a credit bubble in an effort to substitute credit-led domestic demand to offset trend weakness in external demand.

Our central thesis back in 2009 was that Asia’s willingness to increase leverage would be helpful to growth, asset prices and profits in the region, and by extension intra-Asian trade. But we also argued that with time and higher leverage Asia’s credit-led growth would suffer from diminishing marginal benefits of taking on more debt. That is arguably where much of the region is today and partly explains why Chinese growth is beginning to disappoint expectations.

It’s highly likely that Asian economic growth a few years from now will slow significantly as the region’s credit-led growth policies become progressively less effective and produce untoward headwinds for growth. After all, there is always a significant slowdown in growth waiting for you on the other side of any aggressive credit expansion. The problem for Japan is that over 50% of her exports go to Asia. Hence, improving exports are currently helping cyclically but a slowdown in exports – led by weakening Asian demand -- a year or so out is likely. A slowdown in exports to Asia along with a shrinking Japanese consumer base will make it more difficult for Japan to sustainably inflate aggregate demand relative to capacity or supply.

This is especially true since capacity is sticky and Japan arguably has too much capacity. A country’s capital stock, along with labour, allows it to provide goods and services to the population; i.e., to meet aggregate demand. Japan has the highest per capita capital stock in the world despite having a shrinking population that is expected to accelerate over the next few decades. The only country in our sample that presently looks similar to Japan is Germany.

However, that’s not an apple to apple comparison. First, it’s true that Germany’s capital stock is high, far higher than the US, and its population is shrinking. But in Germany’s case its internal demographics are far less important because it is part of the European Union and importantly labour can move freely between Germany and other EU members. Hence, even though Germany’s population is shrinking its labour force continues to grow unlike Japan, and as we mentioned earlier that affects aggregate demand. Secondly, Germany shares the same currency with its major trade partners, which gives it a competitive advantage in many respects.

So we sum it all up like this. There are definitely signs that Japan’s economy are improving cyclically. However, structurally demographics remain a major headwind to raising aggregate demand. We feel many investors have not yet considered what slower growth for Asia will mean for Japan in the medium term. This will make it more difficult to raise aggregate demand above supply since capacity is sticky and Japan already has excess capacity.

Oklahoma Tornado Devastation: Before And After Picture

Tyler Durden — Thu, 23 May 2013 17:12:51 +0000

The biggest story of the early part of the week was the massive 1+ mile-wide Tornado ploughing through a suburb of Oklahoma City leading to dozens of deaths and billions in damage. And while the story has already faded from the 15 minutes of collective random access memory, the following aerial picture showing just how devastating nature can be when it so chooses, is one to behold.

h/t @911buff

Revealed: Apple’s “Offshore” Cash Isn’t Even Offshore

testosteronepit — Thu, 23 May 2013 16:57:41 +0000

Wolf Richter www.testosteronepit.com www.amazon.com/author/wolfrichter

No one accused Apple of having violated US tax laws. The Senate subcommittee investigation and hearings merely exposed how Apple is dodging income taxes by doing what multinationals do: taking advantage of the handouts and loopholes that the US Congress and governments around the world are handing them. Tim Cook emerged smelling like a rose, the triumphant CEO of America’s most iconic welfare queen. Alas, much of the discussion was based on a fairytale.

Apple got into this pickle because it had decided to fund a juicy stock buy-back and dividend program by taking on a record $17 billion in debt rather than paying income taxes on “repatriating” part of its $102 billion in “offshore” cash.

The Senate investigation showed that Apple sheltered at least $74 billion from US income taxes between 2009 and 2012 by using a “complex web” of offshore mailbox companies. One such Irish subsidiary with no employees made $30 billion and didn’t pay a dime to a single government anywhere, not even Ireland. Another Irish mailbox company paid 0.05% in taxes on $22 billion in profit. Over the years, these untaxed “offshore” profits accumulated to $102 billion held by Irish subsidiaries – the moolah Apple refused to “repatriate.”

Turns out, Apple wouldn’t have to repatriate it. The money is already safely ensconced in TBTF banks in New York. The Irish mailbox subsidiaries, on whose books this money is for accounting purposes, transferred it to bank accounts in New York; it is managed by an Apple subsidiary in Reno, Nevada; and Apple’s accountants in Austin, Texas, keep the books, according to the Senate report that vivisected Apple’s tax dodge strategies.

“Apple does not use tax gimmicks,” Apple wrote lamely in response. It’s just that money doesn’t stop at borders or oceans; accounting does. So, in these crazy times of ours, where fairytales are reality, “offshore” actually means “onshore.” The difference between taxed income and untaxed income.

In this manner, US corporations have stashed away a $1.6 trillion of untaxed profits in “offshore” subsidiaries. And yet, as in Apple’s case, much of that is actually in the US. Just because the cash is nominally held by an offshore mailbox company doesn’t mean that it can’t be transferred to the US, where it can do the job money is supposed to do – beget more money.

That explains another corporate mystery. When Congress, after heavy lobbying by the largest US corporations, declared a “repatriation holiday” in 2004 to encourage the “return” of $300 billion to be invested in the US, nothing happened. The “repatriated” profits were taxed at the minuscule rate of 5.25% – less than the payroll taxes withheld from their US working stiffs. The companies made some adjustments on their books. But there were no investments and no hiring because the money had already been deployed in the US. The New York Times reported:

On the contrary, some of the companies that brought back the most money laid off thousands of workers, and a study by the National Bureau of Economic Research later concluded that 92 cents on every dollar was used for dividends, stock buybacks or executive bonuses. A study by the Congressional Joint Committee on Taxation estimated that a similar program would result in $79 billion in forgone tax revenue over a decade.

Apple is among the two dozen multinationals that are flailing their arms at Congress to obtain a new “repatriation holiday” that would allow them to “repatriate” hundreds of billions at a super-low tax rate. In return, they dangle in front of us the promise of investment and jobs. Yet much of that money is already in the US. It would not cause any additional hiring or investment. It would simply be a handout benefitting the largest behemoths, but not the hundreds of thousands of smaller companies that don’t have the resources to lobby Congress or make special deals with governments around the world. They don’t have the time and money to create that “complex web” of offshore mailbox companies but are instead struggling on a daily basis to stay alive in their dog-eat-dog world.

Beyond the unfair advantages that these loopholes bestow on a few large companies, but not on smaller ones that get raked over the coals by the tax code, there is a broader fairness problem, as Senator John McCain pointed out in his opening statement: “As the shadow of sequestration encroaches on hard-working American families, it is unacceptable that corporations like Apple are able to exploit tax loopholes to avoid paying billions in taxes.”

To identify the root cause of the problem, the Senator doesn’t have to look far. The only entity to blame is Congress. It’s addicted to the corporate money flow that keeps campaigns greased. It threatens or promises changes to the tax code to milk these companies. And it loves to succumb to lobbying. That’s how these loopholes ended up in the tax code. They didn’t get there on their own.

Last month, Senators Sherrod Brown, an Ohio Democrat, and David Vitter, a Louisiana Republican, introduced a resolution calling for the end of the implicit subsidies that TBTF banks enjoy and that put taxpayers at risk. The Senate voted 99-0 in support. Now they’re turning their ideas into actual legislation. Read.... Can Two Senators End “Too Big to Fail?”

The Biggest Market Sell-Offs in History

Pivotfarm — Thu, 23 May 2013 16:57:39 +0000

Originally posted http://www.tothetick.com/the-biggest-market-sell-offs-in-history

As stock markets are poised to open or close around the world and we see exactly what damage has been done to the major indexes due to the Chinese fake-data scandals that have come to light coupled with the Federal Reserve’s monetary policy meeting, we are waiting with baited breath: Buy! Buy! Buy! Or: Sell! Sell! Sell! Whichever way we turn, someone is bound to make money somewhere in the world out of all of this. Isn’t that why we are in this business?

The Nikkei dropped by 7.3% at the end of the day and Hong Kong’s Hang Seng dipped by 2.5%. Shanghai maintained a moderate fall at just 1.2% (if you believe that data now!). The Asian markets are down. How will the Europeans fare? They are already declining this morning. The CAC 40 is down already 2.32%. The FTSE 100 is down 1.94% so far this morning. The DAX is posting a 2.64%-decrease.

Plus, when the Bureau of Labor Statistics in the US will announce its unemployment figures this morning and tell us what the damage is. The Federal Reserve didn’t manage to allay fears as Ben Bernanke publicly stated that he wouldn’t be pulling the plugs on the stimulus program, but which was later contradicted by the minutes telling the full story that if the recovery shows through, then we will be pulling money out by June. That’s too soon for some. Are we in for another rocky ride? Maybe. You can never tell, really. But, if we look back in history, then we can see the worst stock market crashes that have taken place and why.

Here’s the ranking. Chronological order!

1. Black Tuesday October 29^th 1929

The Dow Jones industrial average plummeted by 11% and 16 million shares were traded on one day. That was a record in itself. It took until 1954 for the average to get back to the pre-crash figure. There was a knock-on effect even back then and Canada lost 50% of its value in shares.

2. Black Monday October 19^th 1987

Bad news issued on October 14^th in the US triggered the stock crash in 1987. The Dow lost 100 points on October 16^th and then a further 500 on the 19^th. By the time October came to a close, there was a drop in the US of 22.68%. The UK fared even worse with a drop of 26.45%. Hong Kong did worst of all with a loss of 45.5%

3. Mini Crash October 27 1997

This time it was in Asia and international-currency speculation trouble. The Dow declined and triggered a drop in Argentina, Mexico and Brazil (13-15%). European suffered from the knock-on effect and plunged too.

4. September11th 2001

No need to say why and what happened on this fateful day. People bought into traditional safe buys like gold and bonds and fled everything else as global markets took a battering. Oil prices shot through the roof. Tokyo dropped to a 17-year all-time low. European indexes dropped to pre-1998 levels, with the FTSE 100 losing 5.7% with a loss of $98 billion.

5. China February 27^th 2007

The Dow Jones lost 416 points in one day and fell 3.3%. Chinese stocks fell like a tonne of bricks and US manufacturing statistics aided and abetted that even more. The FTSE fell 1.85%. Chinese stock lost $140 billion in value.

6. September 29^th 2008

The House of Representatives’ failure to bail-out the toxic-mortgage assets of banks ($700 billion) sent markets into turmoil. The Dow lost 429 points (in just 5 minutes flat!).

7. Flash Crash May 6^th 2010

The Dow Jones plummeted by 1, 000 points in half an hour. The Nasdaq had to cancel all trade that day s the drop was too big to deal with.

Looking back, it seems like most crashes have taken place in September or October. But, the worst day of the year is officially called ‘Blue Monday’. It is calculated every year and the next one is on January 20^th 2014…so maybe! It was calculated by Dr. Cliff Arnall at Cardiff University, based upon weather conditions, lack of sunshine, debt level (after Christmas) and time elapsed because of failed New Year resolutions, amongst other things.

We can see that since 1929, there have been far worse stock market crashes and down-days in history. Some of them are closer than we would like for our own comfort. The world has become a smaller place and we are all living in each other’s pockets. The unemployment figures get published at 8.30 am ET. Then, they will be closely followed by the new home sales. Let’s see what that does to the markets. But, given the present world situation, I doubt if we can hold out for some good news. Just prove me wrong…for once!