en Stocks Are Crashing - Led By Banks <p>Contagion? </p> <p>Deutsche Bank crash -&gt; US Financials plunge -&gt; US Stocks tumble...</p> <p><a href=""><img src="" width="600" height="208" /></a></p> <p>&nbsp;</p> <p>And it's weighing on all indices...</p> <p><a href=""><img src="" width="600" height="402" /></a></p> <p>&nbsp;</p> <p>Bonds &amp; Bullion are bid as financials lead stocks lower...</p> <p><a href=""><img src="" width="600" height="287" /></a></p> <p><span>&nbsp;</span> </p> <p><span style="text-decoration: underline;"><strong><a href="">And for those believing that there is no contagion and this is all ring-fenced...</a></strong></span></p> <p><a href=""><img src="" width="600" height="444" /></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="600" height="100" alt="" src="" /> </div> </div> </div> Deutsche Bank Thu, 29 Sep 2016 16:57:14 +0000 Tyler Durden 573596 at Live Feed: NJ Transit Commuter Train Crashes Into Hoboken Station: 1 Dead, 2 Critical, Up To 100 Injured <p><strong>At least 1 person is confirmed dead and 2 remain in critical condition as </strong><strong><strong>"approximately 100" </strong>other passengers were injured </strong>after a New Jersey Transit commuter train derailed and crashed into the Hoboken Station this morning around 8:45AM.&nbsp; The train reportedly did not slow down as it approached the end of line in Hoboken causing it to jump tracks and crash into the station.</p> <p>The terminal reportedly sustained <strong>major structural damage </strong>as initial images from the station indicate that a section of the roof collpased leaving passengers trapped under debris.</p> <p>New Jersey Transit confirmed the incident involved <strong>train number 1614 on the Pascack Valley Line, which left Spring Valley, N.J. at 7:23 a.m. bound for Hoboken and apparently was running late.</strong></p> <p>The train had about five or six carriages and was not full because many passengers exit at Secaucus. </p> <p>The cause of the accident was not immediately clear but NTSB officials are on the scene conducting an investigation. </p> <p>Linda Albelli, 62, told <a href="">Reuters</a>, she was sitting in her seat in one of the rear cars when the train approached the station. She said she knew something was wrong a moment before the impact. Passengers helped each other off the train and onto the platform. They ultimately had to cross the tracks to get to safety, she said: "When we got on the platform there was nowhere to go. The ceiling had come down." The injured sat on benches in the station while they waited for first responders, said Albelli, who lives in Closter, New Jersey. She did not know how many had been hurt.</p> <p>Several people who were on the train tweeted they felt "lucky to be alive." </p> <p>All PATH service at the Hoboken station is suspended.</p> <p><span style="text-decoration: underline;"><strong>CBS Live Feed:</strong></span></p> <p><iframe src="" width="640" height="360" frameborder="0" scrolling="no"></iframe></p> <p>&nbsp;</p> <p>One passenger recounted the crash to <a href="">CNN</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>"<strong>It definitely didn't slow down. There was no brakes. All of a sudden, it just crashed</strong>. Something happened obviously. ... It's the same feeling as when you get in a car crash."</p> <p>&nbsp;</p> <p>He said the train's conductor "told everyone there was a crash, and said if you're hurt, stay in the train."</p> <p>&nbsp;</p> <p>"I<br /> got off and looked at the train and ... saw a man who had blood just<br /> running down his arm. He was wearing a suit and blood was just gushing."</p> </blockquote> <p>&nbsp;</p> <p><iframe src="" width="600" height="337" frameborder="0"></iframe></p> <p>&nbsp;</p> <p><iframe src="" width="600" height="337" frameborder="0" scrolling="no"></iframe></p> <p>&nbsp;</p> <blockquote class="twitter-video"><p dir="ltr" lang="en"><strong>UPDATE: Reports of as many as 100 injured in Hoboken, N.J. train crash; more details <a href=""></a> <a href=""></a></strong></p> <p><strong>— CBS News (@CBSNews) <a href="">September 29, 2016</a></strong></p></blockquote> <p><strong></strong></p> <script src="//"></script><p></p> <p><strong><br /></strong></p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en"><strong><a href="">#Hoboken</a> <a href="">#traincrash</a> train hit the station <a href=""></a></strong></p> <p><strong>— Leon O (@monduras) <a href="">September 29, 2016</a></strong></p></blockquote> <p><strong></strong></p> <script src="//"></script><p></p> <p><strong><br /></strong></p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en"><strong>Dozens of people are lined up to be, I assume, taken to the hospital, <a href="">@SteveCapus</a> says <a href=""></a> <a href=""></a></strong></p> <p><strong>— CBS News (@CBSNews) <a href="">September 29, 2016</a></strong></p></blockquote> <p><strong></strong></p> <script src="//"></script><p></p> <p><strong><span style="text-decoration: underline;"><strong>&nbsp;</strong></span></strong></p> <p><strong><br /><a href=""><img src="" alt="Hoboken" width="600" height="450" /></a></strong></p> <p><strong><br /></strong></p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en"><strong><strong>Massive train crash at <a href="">#Hoboken</a> Path Station. Injuries reported. Train apparently ran full force into station. <a href=""></a></strong></strong></p> <p><strong><strong>— Nicolette (@NewsNicolette) <a href="">September 29, 2016</a></strong></strong></p></blockquote> <p><strong><strong></strong></strong></p> <script src="//"></script><p></p> <p><strong><strong><br /></strong></strong></p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en"><strong><strong>Hoboken NJ transit terminal right now minutes after a train crashed into the station <a href=""></a></strong></strong></p> <p><strong><strong>— mike (@mikesiegs) <a href="">September 29, 2016</a></strong></strong></p></blockquote> <p><strong><strong></strong></strong></p> <script src="//"></script><p></p> <p><strong><strong><br /></strong></strong></p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en"><strong><strong>????Developing????</strong></strong></p> <p>Here's photos from a major train crash in Hoboken, New Jersey. The train crashed into a station. Multiple injuries reported. <a href=""></a></p> <p><strong><strong>— Hardys Closet® (@HardysCloset) <a href="">September 29, 2016</a></strong></strong></p></blockquote> <p><strong><strong></strong></strong></p> <script src="//"></script><p></p> <p><strong><strong><br /></strong></strong></p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en"><strong><strong>A commuter train ran right through Hoboken Station in NJ just now. <a href=""></a> <a href=""></a></strong></strong></p> <p><strong><strong>— Ninja Economics (@NinjaEconomics) <a href="">September 29, 2016</a></strong></strong></p></blockquote> <p><strong><strong></strong></strong></p> <script src="//"></script><p></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="3200" height="300" alt="" src="" /> </div> </div> </div> Reuters Twitter Twitter Thu, 29 Sep 2016 16:49:25 +0000 Tyler Durden 573579 at Major Dollar Shortage Exposed In Europe As Deutsche Bank Contagion Spreads <p><em><strong>&quot;Storm in a teacup&quot;</strong></em> this is not.</p> <p>While global markets remain calm(ish), distracted by OPEC headlines, US election &#39;entertainment&#39;, and Middle East proxy wars, the reality is, something very ugly is accelerating in Europe. With the collapse of the &quot;most systemically dangerous bank in the world&quot; we should hardly be surprised, but Deutsche Bank&#39;s crash is being shrugged off by average joes on mainstream media... and besides, the central banks will save us, right?</p> <p><strong>Well, Deutsche contagion is spreading... rapidly.</strong></p> <p>Since Deutsche&#39;s recent highs, the short-end of the EUR-USD basis swap curve has collapsed...</p> <p><a href=""><img height="317" src="" width="600" /></a></p> <p>Simplifying - this chart measures the degree of USD shortage (willingness to spend money just to get USD now) across time - the lower the level, the more desperate for USDs.</p> <p>And no, it&#39;s not a quarter-end issue...</p> <p><a href=""><img height="317" src="" width="600" /></a></p> <p>&nbsp;</p> <p>Still not sure... Then explain why European banks just increased their demand for USDs from The ECB&#39;s 7-day lending facility by over 2000%...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 321px;" /></a></p> <p>As @Landonthomasjr notes,<strong> since 2009: DB shareholders put up 13.5 billion euros in equity. DB has paid 19.3 billion euro in bonuses.</strong> Perhaps they should have saved some of that cash eh?</p> <p>Simply put - trust in the European Banking system is faltering, counterparty risk hedging is accelerating...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 306px;" /></a></p> <p>&nbsp;</p> <p>And liquidity concerns are exploding... ahead of Germany&#39;s bank holiday on Monday.</p> <p>Mint&#39;s Bill Blain - in his Morning Porridge note - had some more &#39;market realist&#39; thoughts...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em><strong>Meanwhile, Mario Draghi was in &ldquo;robust&rdquo; form yesterday telling Europe&rsquo;s languid political classes about the need to do more in terms of structural reform &ndash; yada, yada, heard that one before - but also the need for other policies to boost recovery in Europe. Optimal fiscal policy? That&rsquo;s an interesting call.</strong></em></p> <p>&nbsp;</p> <p>The likelihood of banking embarrassment in Germany means his comments about banks being able to operate successfully in zero interest rate environments were particularly elucidating.</p> <p>&nbsp;</p> <p>Let&rsquo;s see.. if interest rates are zero, then borrowers don&rsquo;t pay any interest and can extend their loans indefinitely? Then banks can&rsquo;t have any NPLs, and will therefore be absolutely default free?</p> <p>&nbsp;</p> <p>Suddenly I understand.</p> <p>&nbsp;</p> <p><strong>ECB NIRP is absolute genius. European banking is fixed and nothing to worry about. (US Readers &ndash; massive sarcasm alert!)</strong></p> <p>&nbsp;</p> <p>My day started in the Bloomberg studio where I was somewhat<u><strong> surprised to read a comment from Man&rsquo;s CEO that Deutsche Bank is &ldquo;healthy&rdquo;. Right&hellip;.</strong></u></p> <p>&nbsp;</p> <p>I&rsquo;m not sure I buy that.</p> <p>&nbsp;</p> <p><u><strong>Banks are enormously complex beasts. They are not simple businesses. To turn around a bank is complex. To reinvent a bank &ndash; which is what Deutsche Bank, UBS, CS, and others are desperately trying to do, is one level below impossible.</strong></u></p> <p>&nbsp;</p> <p>Earlier this year we had commodities firm Glencore teeter on the edge of disaster. Swift action, clear plan, and it&rsquo;s back from the brink. That is not going to happen with banks. In my 30 years of markets I can&rsquo;t think of a single bank that&rsquo;s got in trouble that has staged anything like a similar comeback. Once bank&rsquo;s catch a cold, it often develops into dangerous pneumonia.</p> <p>&nbsp;</p> <p><strong>Deutsche &ndash; and the others &ndash; are anything but healthy.</strong> The need to reinvent. The news flow yesterday was positive-ish. Rumours of a SWF capital injection, rumours of a domestic rescue plan, but the reality is more likely to be further deterioration. If that develops into a full crisis any rescue will come at the cost of contingent capital deals being triggered (which will send shock-waves around banking confidence) and the strong/inevitable bail-in of senior debt holders.</p> <p>&nbsp;</p> <p><strong>Others say the senior debt is safe. Delighted they think so. <em><u>Call me and tell me how much you want to buy?</u></em></strong></p> </blockquote> <p>Confirming there is a problem:</p> <ul> <li><strong>*DIJSSELBLOEM REPEATS DEUTSCHE BANK MEETS CAPITAL REQUIREMENTS</strong></li> </ul> <p>The denials continue... and so does the blame-mongery...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>The U.S. Department of Justice fine imposed on Deutsche Bank is very high and &ldquo;damaging for financial stability,&rdquo;</strong> Dutch Finance Minister Jeroen Dijsselbloem tells lawmakers in The Hague Thursday.</p> <p>&nbsp;</p> <p>U.S. fines against European banks are<em><u><strong> &ldquo;repeatedly so high that all the money European banks tap on the international markets, also from U.S. investors, is skimmed by the U.S. government. That&rsquo;s a risk for the financial stability and that worries me sincerely.&rdquo;</strong></u></em></p> <p>&nbsp;</p> <p>If Deutsche Bank has to pay the $14b fine, it will reduce capital, then <strong>it will have to raise new capital.</strong></p> <p>&nbsp;</p> <p>Deutsche Bank will have to bring things &quot;back in order.&quot;</p> </blockquote> <p>Add another to the list of &#39;elites&#39; distancing their actions from Deutsche&#39;s demise. <a href=";utm_content=57ed2d9e04d301504de3d8f5&amp;utm_medium=trueAnthem&amp;utm_source=twitter">And one more denial...</a></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>Deutsche Bank&#39;s troubles are not Europe&#39;s Lehman Brothers moment, Austria&#39;s finance minister said on Thursday, although he warned the region&#39;s lenders were facing a broader profitability crisis.</strong></p> <p>&nbsp;</p> <p><strong>&quot;After the financial crisis we haven&rsquo;t quite worked through the banking issues&hellip;.but <u>what I am very convinced of is that we don&rsquo;t have a banking crisis, we have a profitability crisis in our banks</u>,&quot;</strong></p> </blockquote> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="963" height="515" alt="" src="" /> </div> </div> </div> Central Banks default Department of Justice Deutsche Bank fixed Germany Glencore headlines Lehman Lehman Brothers Middle East OPEC Reality recovery SWIFT Thu, 29 Sep 2016 16:42:11 +0000 Tyler Durden 573584 at The Run Begins: Deutsche Bank Hedge Fund Clients Withdraw Excess Cash <p>Deutsche Bank concerns just went to '11' as Bloomberg reports<span><strong> a number of funds that clear derivatives trades with Deutsche Bank AG have withdrawn some excess cash and positions held at the lender</strong>, a sign of counterparties’ mounting concerns about doing business with Europe’s largest investment bank.</span></p> <p>While the vast majority of Deutsche Bank’s more than 200 derivatives-clearing clients have made no changes,<strong> some funds that use the bank’s prime brokerage service have moved part of their&nbsp;listed derivatives holdings to other firms this week, according to an internal bank document seen by Bloomberg News</strong>.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Millennium Partners, Capula Investment Management and Rokos Capital Management are among about 10 hedge funds that have cut their exposure, </strong>said a person familiar with the situation who declined to be identified talking about confidential client matters.</p> <p>&nbsp;</p> <p>The hedge funds use Deutsche Bank to clear their listed derivatives transactions because they are not members of clearinghouses.&nbsp;Millennium, Capula and Rokos declined to comment when contacted by phone or e-mail.</p> <p>&nbsp;</p> <p><em><strong>[which explains why short-dated CDS is soaring]</strong></em></p> <p>&nbsp;</p> <p>&nbsp;</p> <p><a href=""><img src="" style="width: 600px; height: 306px;" /></a></p> <p>&nbsp;</p> <p><strong>“Our trading clients are amongst the world’s most sophisticated investors,”</strong><span> Michael Golden</span>, a spokesman for Deutsche Bank, said in an e-mailed statement.</p> <p>&nbsp;</p> <p><strong>“We are confident that the vast majority of them have a full understanding of our stable financial position, the current macroeconomic environment, the litigation process in the U.S. and the progress we are making with our strategy.”</strong></p> </blockquote> <p><span>Clients review their exposure to counterparties to avoid situations like the 2008 collapse of Lehman Brothers Holdings Inc. and MF Global’s 2011 bankruptcy when hedge funds had billions of dollars of assets frozen until the resolution of lengthy legal proceedings.</span></p> <p><span>Deutsche Bank Stock in NY are sliding...</span></p> <p><a href=""><img src="" style="width: 600px; height: 434px;" /></a></p> <p>&nbsp;</p> <p><span>If the most sophisticated professionals in the world are withdrawing cash, why are German depositors leaving their life savings at risk... ahead of a long weekend in Germany (Monday is a bank holiday).</span></p> <p><span>*&nbsp; *&nbsp; *</span></p> <p><span style="text-decoration: underline;"><strong><a href="">And for those believing that there is no contagion and this is all ring-fenced...</a></strong></span></p> <p>&nbsp;</p> <p><a href=""><img src="" width="600" height="444" /></a></p> <p><span style="text-decoration: underline;"><strong>And US banks are sliding...<br /></strong></span></p> <p><a href=""><span><img src="" style="width: 600px; height: 378px;" /></span></a></p> <p>&nbsp;</p> <p><span>As a reminder, if the liquidity run forces DB to start unwinding or being forced to novate derivatives, it could get ugly.</span></p> <p><a href=""><img src="" width="601" height="429" /></a></p> <p>&nbsp;</p> <p>* * *</p> <p>Earlier this morning, we reported that Europe is experiencing a sudden and acute dollar shortage, which we attributed to Deutsche Bank. It now appears this was accurate.<strong> </strong>Since Deutsche's recent highs, the short-end of the EUR-USD basis swap curve has collapsed:</p> <p><a href=""><img src="" width="600" height="317" /></a></p> <p>Simplifying - this chart measures the degree of USD shortage<br /> (willingness to spend money just to get USD now) across time - the lower<br /> the level, the more desperate for USDs.</p> <p>And no, it's not a quarter-end issue:</p> <p><a href=""><img src="" width="600" height="317" /></a></p> <p>&nbsp;</p> <p>Still not sure... Then explain why European banks just increased<br /> their demand for USDs from The ECB's 7-day lending facility by over<br /> 2000%...</p> <p><a href=""><img src="" style="width: 600px; height: 321px;" /></a></p> <p>As @Landonthomasjr notes,<strong> since 2009: DB shareholders put up 13.5 billion euros in equity. DB has paid 19.3 billion euro in bonuses.</strong> Perhaps they should have saved some of that cash eh?</p> <p>Simply put - trust in the European Banking system is faltering, counterparty risk hedging is accelerating:</p> <p><a href=""><img src="" style="width: 600px; height: 306px;" /></a></p> <p>&nbsp;And liquidity concerns are exploding, ahead of Germany's bank holiday on Monday.</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="750" height="487" alt="" src="" /> </div> </div> </div> Bloomberg News CDS Counterparties Deutsche Bank Germany Lehman Lehman Brothers Millennium Partners Thu, 29 Sep 2016 16:34:08 +0000 Tyler Durden 573594 at US To Suspend Syria Diplomacy With Russia, Prepares "Military Options" <p>In the most dramatic diplomatic escalation involving the Syrian conflict in the past years, <a href="">yesterday John Kerry issued an ultimatum to Russia</a>, in which he warned his colleague Lavrov to stop bombing Aleppo or else the US would suspend all cooperation and diplomacy with Russia. </p> <p>24 hours later, this appears to be precisely what is about to take place, leading to an even greater geopolitical shock in Syria. <a href="">According to Retuers</a>, <strong>the United States is expected to tell Russia on Thursday it is suspending their diplomatic engagement on Syria following the Russian-backed Syrian government's intense attacks on Aleppo, U.S. officials said on condition of anonymity.</strong></p> <p>Why now and what happens next? According to US officials, the Obama administration is now considering tougher responses to the Russian-backed Syrian government assault on Aleppo, <strong>including military options. </strong>According to <a href="">Reuters</a>, the new discussions were being held at "staff level," and have yet to produce any recommendations to President Barack Obama, who has resisted ordering military action against Syrian President Bashar al-Assad in the country's multi-sided civil war. </p> <p>However, now that diplomacy with Russia is set to end, this will give the greenlight for Obama to send in US troops in Syria, with Putin certain to respond appropriately, in what will be the biggest military escalation in the Syrian proxy war in its five and a half year history. </p> <p></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="1460" height="913" alt="" src="" /> </div> </div> </div> Barack Obama Greenlight Obama Administration Reuters Thu, 29 Sep 2016 16:26:49 +0000 Tyler Durden 573593 at Quantitative easing has pernicious effects that favour the wealthy <p class="MsoNormal"><em><span lang="DE">By John Buttler, originally published in the <a href="">The Guardian</a>. John is vice president and head of wealth services for Goldmoney and a consultant to Cobden Partners, an economic consultancy.</span></em></p> <p>&nbsp;</p> <p><span style="font-size: 13.008px; line-height: 1.538em;">It is time to start calling QE what it is: a hidden tax on the wealth of middle-class savers and pensioners</span></p> <p><span style="font-size: 13.008px; line-height: 1.538em;">The prolonged unconventional, quantitative easing (QE) monetary policy of the Bank of England has effectively hijacked fiscal policy from the government, with disastrous effects on savers and pensioners and in a way that makes wealth inequality worse more generally.</span></p> <p><span style="font-size: 13.008px; line-height: 1.538em;">The reasons for this are subtle, which is why they are also insidious.</span></p> <p><span style="font-size: 13.008px; line-height: 1.538em;">As quoted by Steve Baker MP in a recent House of Commons debate on QE, John Maynard Keynes once explained how, via inflation, “governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens,” and, “while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth”.</span></p> <p><span style="font-size: 13.008px; line-height: 1.538em;">As arguably the single most influential economist of the 20th century, we should give Keynes’ thoughts on this matter due consideration.</span></p> <p><span style="font-size: 13.008px; line-height: 1.538em;">It may be true that consumer price inflation remains relatively low due to what economists call slack in the labour market, which tends to reduce or prevent wage growth. But because of the artificially low asset yields associated with QE, savers and pensioners now find they must outright liquidate assets in order to maintain a middle-class lifestyle or to enjoy a comfortable retirement. While that can work for a time, in the end it erodes the middle-class capital base and leaves households with less to pass down to their children and grandchildren.</span></p> <p><span style="font-size: 13.008px; line-height: 1.538em;">QE enriches those who have already accumulated enough assets such that they generate sufficient income without the need to liquidate their accumulated capital base. As the Bank itself determined in a 2012 paper analysing, among other things, the distributional effects of QE, “the top 5% of households own 40% of the assets,” and hence they have been the primary beneficiaries of the rampant asset price inflation following the financial crisis of 2008 and large devaluation in sterling.</span></p> <p><span style="font-size: 13.008px; line-height: 1.538em;">QE can also be an effective tool to weaken the currency, which makes imports and basic goods more expensive, squeezing the middle class further. While some argue that it is possible to “devalue your way to prosperity”, history has not been kind to the countries and empires that have followed this path. Countries that have pursued stable or outright strong currency policies have generally fared much better. Germany and Switzerland come to mind, as does the pre-1970s United States.</span></p> <p><span style="font-size: 13.008px; line-height: 1.538em;">Claudio Borio, the head of the monetary and economic department at the Bank for International Settlements, claimed in a recent speech that radical unconventional monetary policy “is just fiscal policy dressed up”.</span></p> <p><span style="font-size: 13.008px; line-height: 1.538em;">Indeed, it is time to start calling QE what it is: a hidden tax on the wealth of middle-class savers and pensioners which, on the one hand, the government can use to finance the deficits associated with a large, modern welfare state and, on the other, redistribute wealth to the top 5% of households. That is not only monetary policy. It is fiscal policy, which the Bank has de facto taken over.</span></p> <p><span style="font-size: 13.008px; line-height: 1.538em;">It remains to be seen whether it was a wise decision, but UK citizens recently exercised their democratic right by voting to leave the comparatively less democratic EU. The government has already set about considering what changes its newfound independence might enable it to make to fiscal policy, such as lowering the corporate tax rate to attract much-needed private investment.</span></p> <p><span style="font-size: 13.008px; line-height: 1.538em;">It would be even more refreshing to see it reassert its right to determine fiscal policy more generally by telling the Bank to end QE and with it the associated insidious, pernicious distributional effects in favour of the wealthy. The economic policy focus can then turn to where it truly belongs, on how best to generate increasing rates of savings, investment and productivity growth, and in a way that does not disproportionately benefit any one group – whether rich or poor – over another.</span></p> <p><span style="font-size: 13.008px; line-height: 1.538em;">The British public was recently allowed to vote on whether they wished to leave the EU. Shouldn’t they also be allowed to vote on whether they would like their accumulated private savings to be devalued?</span></p> Bank of England Germany John Maynard Keynes Maynard Keynes Monetary Policy Quantitative Easing Switzerland Thu, 29 Sep 2016 16:21:04 +0000 Gold Money 573592 at Iraq Revolts, Says "We Cannot Accept" OPEC Deal In This Form <p>While historically the major conflict within OPEC in recent years had been between Iran, whose oil production had been mothballed since 2013 as a result of the US embargo and which is now eager to regain its roughly 4mmbpd in production, and Saudi Arabia, which successfully picked up market share from Iran, a new source of contention within OPEC emerged last night when Iraq disagreed with OPEC's method of production estimates as <a href="">reported last night</a>. </p> <p>And now it appears that Iraq - which in August produced between 4.4mmbpd and 4.6mmbpd depending on whose estimates are used, will not be easily placated. As <a href=";feedName=businessNews&amp;utm_source=Twitter&amp;utm_medium=Social&amp;utm_campaign=Feed%3A+reuters%2FbusinessNews+%28Business+News%29">Reuters details</a>, Iraq, which overtook Iran as the group's second-largest producer several years ago but kept its OPEC agenda fairly low-profile, on Wednesday finally made its presence felt. "What it did, however, pleased neither Saudi Arabia nor Iran." </p> <p>Iraq's new oil minister Jabar Ali al-Luaibi told his Saudi and Iranian counterparts, Khalid al-Falih and Bijan Zanganeh, in a closed-door gathering in Algiers that "it was an OPEC meeting for all ministers", a source briefed on the talks said. Luaibi, it turns out, is also the key OPEC member who "didn't like the idea of re-establishing OPEC's output ceiling at 32.5 million barrels per day (bpd), according to OPEC sources."</p> <p>Continuing the <a href="">point made first yesterday</a>, Luaibi told the meeting that the new 32.5 mmbpd ceiling <strong>was no good for Baghdad as OPEC had underestimated Iraq's production, </strong>which has soared in recent years.</p> <p>Confusion followed, according to Reuters sources, and after a debate OPEC chose to impose a ceiling in the range of 32.5-33.0 million bpd - <strong>a decision dismissed by many analysts as weak and non-binding</strong>. OPEC's current output stands at 33.24 million bpd. </p> <p>As ministers including Falih and Zanganeh emerged smiling from the room and praised OPEC's first output-limiting deal since 2008, Luaibi called a separate briefing to complain about OPEC's estimates of Iraqi output. </p> <p><strong>"These figures do not represent our actual production," </strong>he told reporters. If by November estimates do not change, "<strong>then we say we cannot accept this, and we will ask for alternatives".</strong> Luaibi went even further and asked a reporter from Argus Media - whose data OPEC uses among other sources to compile estimates of countries' production - to disclose from where Argus' estimates were coming.</p> <p>"Your sources are not acceptable. And if there is deviation from the government, <strong>then Argus will not work in Iraq</strong>," Luaibi told the Argus reporter.</p> <p>What Luabi's was outraged by was <strong>the delta shown in the table below, which reveals a nearly 300 barrel difference between Iraq's self-reported oil production of 4.638mmbpd and that estiamted by OPEC which amounts to just 4.354mmbpd. </strong>As we said last night, just this one difference alone is enough to eliminate the lower end of the proposed OPEC production cut of 250kbpd. If one adds other member states such as Kuwait, UAE and Venezuela, the difference between the two sets of numbers rises to nearly 1 million barrels, or well above the proposed upper bound of the production "cut" agreed upon in Algiers. </p> <p><a href=""><img src="" width="500" height="563" /></a></p> <p>In other words, unless Iraq (and thus, Kuwait, UAE and Venezuela all relent) to using OPEC production estimates, there will be no production cut unless Saudi Arabia is willing to eat the difference.</p> <p>As Reuters puts it, "Luaibi's revolt shows the fragility of the OPEC deal." </p> <p>And while the market appears unbothered by the details, between now and November, when OPEC meets formally in Vienna, the group will have to overcome huge obstacles to agree a binding deal.</p> <p>Key among them will be to establish at least some semblance of country quotas to make sure members limit global oversupply, which has helped halve prices since 2014 to below $50 a barrel. Iran, which has been exempt from the production cut (explaining why it complied with the terms of the deal) insists it wants to raise output to around 4 million bpd as it emerges from European sanctions. The Saudis have proposed that Iran freeze production at 3.7 million bpd. </p> <p>Riyadh is offering to cut its own production to 10.2 million bpd from 10.7 million but most analysts argue it will fall to such a level anyway as the summer heat eases, reducing the need for cooling. It would have to cut much more if the "outlier" nations demand that their own production estimates are used. </p> <p>While for some yesterday's deal is confirmation that the Saudi strategy implemented in November 2014 has been a failure, such as Michael Wittner, head of oil research at Societe Generale, who said that the decision shows Saudi Arabia is turning its back on letting the market manage supply, it remains to be seen what if any actual production cut will actually be reached. For now, OPEC has achieved what it wanted: a spike in oil for the next two months. When the time comes to dealing with the consequences of another disappointed market reaction once OPEC reveals no final deal in Vienna in November, well at least OPEC will have sold a few billion barrels at far higher prices in the interim. </p> <p>To summarize, as <a href=";feedName=businessNews&amp;utm_source=Twitter&amp;utm_medium=Social&amp;utm_campaign=Feed%3A+reuters%2FbusinessNews+%28Business+News%29">Reuters quoted </a>one OPEC source, "<strong>The deal is a bit of a farce."</strong></p> <p></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="338" alt="" src="" /> </div> </div> </div> Iran Iraq Kuwait Market Share OPEC Reuters Saudi Arabia Thu, 29 Sep 2016 16:09:16 +0000 Tyler Durden 573591 at Panic In The Kingdom: Saudi Currency, Bonds, Banks Extend Collapse Despite OPEC 'Deal' <p>Following Obama&#39;s 9/11 bill veto defeat yesterday, and despite a surge in oil prices after a &#39;deal&#39; was struck by OPEC, Saudi Arabia&#39;s markets are signaling panic in The Kingdom. <strong>Currency forwards are collapsing, default risk is jumping, and bank stocks are hitting record lows</strong>...</p> <p>Mint&#39;s Bill Blain, in his Morning Porridge noted that <strong>last nights &ldquo;surprise&rdquo; OPEC agreement to agree to agree about talks on cutting oil production is fascinating.</strong> Not from the likelihood it may not ever happen, (the earliest we will know is the Vienna meeting in November), but what it tells us about how the sands are shifting around Saudi Arabia. Deliberate Saudi over-production caused the oil glut and was a policy designed to take out expensive US producers. <em><strong>Voodoo economics didn&rsquo;t work &ndash; US producers cut and adapted, and the rest of the world hasn&rsquo;t played along.</strong></em></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><span style="text-decoration: underline;"><strong>Last night&rsquo;s agreement represents a fundamental shift in Saudi &ndash; a wake up and smell the camel-waste moment.</strong></span> The result is the kingdom is suffering rising twin deficits amounting to over 20% of GDP. As global oil revenues have tumbled on the back of crashing prices, Saudi faces a cash and spending crisis for which it&rsquo;s largely unprepared. Social issues are mounting. The elites &ldquo;salaries&rdquo; have been slashed. It&rsquo;s being forced towards the international debt markets &ndash; a massive deal is on the new issue stocks. <em><strong>My colleague Martin Malone expects to see Debt/GDP rise from 15% to 50%.</strong></em></p> <p>&nbsp;</p> <p>This is a picture we&rsquo;ve seen before.</p> <p>&nbsp;</p> <p><strong>While Saudi won&rsquo;t become Venezuela overnight.. are there parallels? Perhaps. </strong>Meanwhile, last night&rsquo;s overturn of Obama&rsquo;s veto on US citizens suing Saudi over 9/11 is very interesting &ndash; and potentially further trouble.</p> <p>&nbsp;</p> <p>However, it does sound like Iran and Saudi are going to try to coordinate on oil supply. Despite the fact these two very different nations will disagree on absolutely everything, it&rsquo;s in their mutual interest to do so. Oil analysts expecting a $10 rise in prices are pinning their hopes on Sunni/Shia rapprochement.</p> <p>&nbsp;</p> <p>I&rsquo;ve been looking at some research suggesting a seismic shift in Middle East investment into the US as a safe-haven on regional fears it won&rsquo;t happen &ndash; meaning <strong>Saudi can&rsquo;t just assume the global investor base will blithely fund its coming debt binge.</strong> That adds pressures for them to play nice with other pariah states, including Russia and China. And even the Iranians..</p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>Or, other commentators suggest the big Middle East funds &ndash; the SWFs &ndash; could be obliged to channel funds to Saudi to preserve regional stability &ndash; therefore liquidating current US holdings..</strong></span></p> </blockquote> <p><strong>The Saudi riyal fell against the U.S. dollar in the forward foreign exchange market on Thursday after the U.S. Congress voted to allow relatives of victims of the Sept. 11 attacks to sue Saudi Arabia. </strong></p> <p><a href=""><img height="317" src="" width="600" /></a></p> <p>&nbsp;</p> <p><a href="">And as Reuters reports, </a>any legal action could take years to wind through the U.S. court system, and analysts said there might be little if any impact on the Saudi economy or state finances.<strong> But the decision by Congress was an unwelcome reminder of political and financial pressures on Riyadh as low oil prices strain its budget.</strong></p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Saudi Arabia has been <strong>preparing to make its first international issue of sovereign bonds next month to raise $10 billion or more, but some Gulf bankers said the issue might now be delayed to give investors time to digest the news.</strong></p> <p>&nbsp;</p> <p><strong>Similarly, the legal threat could make Riyadh less likely to choose New York for a listing of shares in national oil giant Saudi Aramco. </strong>An offer of Aramco shares is expected as soon as 2017, possibly raising tens of billions of dollars, and Saudi officials have said they are considering several foreign bourses.</p> <p>&nbsp;</p> <p>The Senate and House of Representatives voted overwhelmingly on Wednesday to override President Barack Obama&#39;s veto of legislation granting an exception to the legal principle of sovereign immunity in cases of terrorism on U.S. soil.</p> <p>&nbsp;</p> <p>This clears the way for attempts to seek damages from the Saudi government. Riyadh has denied longstanding suspicions that it backed the hijackers who attacked the United States in 2001. Fifteen of the 19 hijackers were Saudi nationals.</p> </blockquote> <p>One-year dollar/riyal forwards - bets on Saudi devaluation - have soared to near 2016 highs...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 315px;" /></a></p> <p>&nbsp;</p> <p>And long-term forward points (a proxy for borrowing costs and The Kingdom&#39;s stability) have exploded...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 312px;" /></a></p> <p>&nbsp;</p> <p><strong>Some analysts speculated that trade and investment ties between Saudi Arabia and the United States could be hurt. </strong>The kingdom owns $96.5 billion of U.S. Treasury bonds, according to the latest official U.S. data, and is believed to hold at least that sum in other U.S. assets and bank accounts.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&quot;From a Saudi foreign ministry perspective, there will be a review of investment policy and that could move the kingdom down a different path, which could include diversification away from U.S. Treasuries,&quot; the Gulf banker said.</p> <p>&nbsp;</p> <p><strong>In May, Saudi foreign minister Adel al-Jubeir said the proposed U.S. law &quot;would cause an erosion of investor confidence&quot; in the United States, though he added that Riyadh was not threatening to pull its money out of the country.</strong></p> </blockquote> <p>Certainly, the fact that the largest bank in Saudi Arabia is crashing to record lows (with brokers citing loss of faith in the 2030 reform plans, rising defaults, and on top of the 9/11 bill blowabck, concerns over a possible new income tax)</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 314px;" /></a></p> <p><em>h/t @Pierpont_Morgan</em><br />&nbsp;</p> <p>Probably nothing!!</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="952" height="503" alt="" src="" /> </div> </div> </div> Barack Obama Borrowing Costs China default Iran Middle East OPEC Reuters Saudi Arabia Thu, 29 Sep 2016 15:48:07 +0000 Tyler Durden 573590 at Outflows From Active Funds Surpass A Record $200 Billion <p>Following 7 years of underperformance, 2016 is the year where hedge funds and other active managers have been finally been hit with the long predicted mass withdrawals - leading to a spike in prominent hedge fund closures, most recently that of Perry Capital - which in recent months have spiked to the highest level since the financial crisis, paradoxically just as the market is on the verge of making new all time highs again.</p> <p><a href=""><img src="" width="500" height="244" /></a></p> <p>And with activist central banks doing everything in their power to prevent any substantial risk-asset declines in order to avoid failing on the "weath effect" mandate, it was only logical that as money flowed out of active funds it would enter passive: something which has not only been happening for the past several years, but which according to BofA has now hit a record level.</p> <p>As BofA's Savita Subramanian reports, over the last several years, we have observed an accelerating trend of flows out of active funds and into passive vehicles. Price sensitivity of investors to fees, coupled with poor performance trends, have conspired against active funds, and year-to-date flows out of active have reached a post-crisis high. </p> <p><a href=""><img src="" width="500" height="340" /></a></p> <p><a href=""><img src="" width="500" height="351" /></a></p> <p>As the chart below shows, the current year outflows from active funds have now surpassed a record $200 billion, with the bulk of cash outflows shifting to much cheaper (and better performing) passive funds, though as BofA notes, flows have slowed since last year suggesting that there may be a broader cash outflow from the equity asset class, as increasingly more Americans retire and pull out of the market entirely. </p> <p><img src="" width="500" height="355" /></p> <p>Indeed, as Reuters confirmed earlier, the outflows within the hedge fund world continue to accelerate: "The twice-annual Billion Dollar Club report, released on Thursday, showed a decline of nearly 7 percent, or $132 billion, to July 2016 from a year ago. Firms including Och-Ziff Capital Management, BTG Pactual Asset Management, York Capital Management, Pershing Square Capital Management and J.P. Morgan Asset Management lost the most assets over the first half of 2016, according to HFI. The survey attempts to tabulate all Americas-based firms that manage at least $1 billion in traditional hedge fund assets. Together, 302 firms ran $1.84 trillion as of July 1, nearly two-thirds of the entire hedge fund industry, often estimated to manage about $3 trillion."</p> <p>So what is the best way to trade this ongoing rotation? As we first <a href="">pointed out in 2013</a>, and subsequently <a href="">reaffirmed in June</a>, doing the opposite of what the few remaining active investors continues to be a winning strategy.&nbsp; BofA confirms:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Amid this trend, a strategy of <strong>buying the 10 most underweight stocks by active funds and selling the 10 most overweight stocks at the beginning of the year has generated 13ppt YTD </strong>(following 13ppt and 18ppt of alpha in ‘15 and ‘14, respectively). Admittedly, returns from positioning have been muted in recent months, but with two-thirds of US AUM still in actively-managed funds, <strong>we see more to go in the active to passive rotation. Positioning will likely continue to matter.</strong></p> </blockquote> <p>Here is the proof that year after year, going short the most loved and short the move popular stocks, generated incremental alpha.</p> <p><a href=""><img src="" width="500" height="349" /></a></p> <p>Finally, for those who wish to test out this strategy, here is the list of Top 10 most and least exposed stocks to active funds. Remember: go short the left column, and long the right one.</p> <p><img src="" width="500" height="207" /></p> <p>One last observation: this accelerating transition from active to passive management will end in tears, as passive management only works as long as the rising tide keeps lifting all boats. Once that ends, the party is over, and as <a href="">Julian Robertson warned yesterday</a>, there will be a need for someone who knows how to, gasp, short. By then, however, such anachronistic individuals may no longer exist. For those looking for the culprit for this uniform levitation across all asset classes, look no further than those who continue to inject some $200 billion in liquidity every month, making sure that everything goes up at the same time, and worse, keeps zombie companies alive and kicking, in the process crushing countless shorts. </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="588" height="418" alt="" src="" /> </div> </div> </div> Central Banks Julian Robertson Och-Ziff Pershing Square Reuters Thu, 29 Sep 2016 15:27:52 +0000 Tyler Durden 573588 at BaRRY WTF! <p><a href="" title="BARRY WTF"><img src="" alt="BARRY WTF" width="1024" height="775" style="display: block; margin-left: auto; margin-right: auto;" /></a></p> <script src="//"></script> Thu, 29 Sep 2016 15:23:19 +0000 williambanzai7 573587 at