en US Government "Finds" Americans Had $70 Billion More In Disposable Income <p>Just one week after the US Department of Commerce quietly slashed <a href="">historical US capex spending </a>by billions of dollars following a major data revision...</p> <p><a href=""><img src="" width="600" height="429" /></a></p> <p><a href=""><img src="" width="600" height="451" /></a></p> <p>&nbsp;</p> <p>... it was time for another major revision to a series that is nearer and dearer to most Americans' hearts, namely Disposable Personal Income.</p> <p>As we noted earlier, today's Personal Income and Spending report revealed that personal spending in April surged by 1%, or the most since August 2009 driven in part by a major jump on energy goods and services.</p> <p><a href=""><img src="" style="width: 600px; height: 299px;" /></a></p> <p>&nbsp;</p> <p>Also driving the rebound was increased spending on motor vehicles and parts (+5.1% v. -1.4%) which was the largest 1 month gain since March 2014 (+6.0%).</p> <p>However, what was far more notable, were the prior revisions to US personal saving which saw the March print, already the highest since 2012, spike from 5.4% to 5.9%. </p> <p><a href=""><img src="" style="width: 600px; height: 406px;" /></a></p> <p>&nbsp;</p> <p>It was only the April spending surge that pushed the savings rate back to what until last month was a three year high.</p> <p>But what prompted this major revision higher in savings? As it turns out, the US government decided to revise how much spending power Americans have (recall personal savings is simply personal income less personal spending) and as part of today's report it announced <a href="">the following revision</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Estimates have been revised for October through March.&nbsp; Changes in personal income, in current-dollar and chained (2009) dollar DPI, and in current-dollar and chained (2009) dollar PCE for February and for March -- revised and as published in last month's release -- are shown below. </p> <p>&nbsp;</p> <p>Estimates of wages and salaries have been revised for October through March.&nbsp; <strong>The revision to fourth-quarter wages and salaries reflected the incorporation of the most recently available Bureau of Labor Statistics tabulations of fourth-quarter wages and salaries from the Quarterly Census of Employment and Wages</strong>.&nbsp; Revised estimates for January, February, and March reflect extrapolations from the revised fourth-quarter level of wages.&nbsp; In addition, revisions to February and March reflect revised BLS employment, hours, and earnings data.</p> </blockquote> <p>And, as shown below, the revision occurred because according to the BEA Americans were notably richer over the past 6 months, specifically instead of a personal income of $13,719 billion as of March 31, Disposable Personal Income was revised to $13,792, a number which since jumped to $13,855 billion. <strong>In other words, according to the US government, Disposable Personal Income was just over $70 billion higher.</strong></p> <p><a href=""><img src="" width="600" height="439" /></a></p> <p>&nbsp;</p> <p>Which is odd, because despite the dramatic upward revision in persona income, personal spending remained unchanged, suggesting US consumers were even less willing to go out and part ways with their hard-earned money. </p> <p>Indeed, as shown in the chart below, the upward revision to personal income took place even as the spending series remained unchanged. The variance over the past 6 months between the original and revised series is shown below.</p> <p><a href=""><img src="" width="600" height="418" /></a></p> <p>&nbsp;</p> <p>We can only hope that Americans are "grateful" for this surprising discovery that US consumers as a whole had over $70 billion in "disposable income" hiding under the mattress, as a result of this revision. Then again considering the ongoing deplorable reports by retailers, which indicate that US consumers are spending the least in years, one wonders if the BEA did not accidentally also forgot to revise the cumulative change to diposable income with the wrong sign in front of it. </p> <p>Luckily, there is an easy way to confirm this latest BEA revision: if retail spending, as reported by the actual store CEOs and not the government's own seasonally adjusted number, does not pick up look for this latest upward revision to be promptly, and very quietly, revised far lower in the coming months. </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="997" height="695" alt="" src="" /> </div> </div> </div> BLS Bureau of Labor Statistics Department Of Commerce Personal Income Savings Rate Tue, 31 May 2016 15:02:01 +0000 Tyler Durden 562386 at Stocks, Cable Slide On Brexit Poll Surprise <p><a href="">Confirming the trend in bookies&#39; bets</a>, the latest polls (both telephonic and online) now point to <strong>&#39;Brexit&#39; being more likely than &#39;Bremain&#39;</strong>. This sparked a 100 pip plunge in Cable and sent US and European stocks lower...</p> <p>&nbsp;</p> <p><a href=""><img height="157" src="" width="600" /></a></p> <p>Which should not be a huge surprise, as we noted previously,<strong> while that has become the narrative for the mainstream, professionals have been hedging Sterling volatility at a record level...</strong></p> <p><a href=""><img src="" style="width: 600px; height: 312px;" /></a></p> <p><span style="text-decoration: underline;"><strong>As Bloomberg reports, investors are now paying a record premium to hedge against the pound&rsquo;s fluctuations over the next month as risks surrounding the U.K. referendum on European Union membership persist.</strong></span> Sterling&rsquo;s one-month implied volatility versus the dollar has surged to 7.83 percentage points relative to historical swings, from 2.56 yesterday.</p> <p>And today&#39;s Brexit-favoring polls...</p> <ul> <li>Phone poll on U.K. referendum on EU shows <strong>45% leave, 42% remain</strong> and 13% undecided, according to ICM poll released by Guardian on its website.</li> <li>Online survey shows <strong>47% leave, 44% remain,</strong> 9% undecided</li> </ul> <p><a href=""><img height="323" src="" width="600" /></a></p> <p>&nbsp;</p> <p>Confirm what bookies had signalled - <strong>Ladbrokes noted a huge increase in the proportion of money being bet on Brexit...</strong></p> <p><a href=""><img height="444" src="" width="600" /></a></p> <p>And are moving the odds...</p> <ul> <li><strong>*WILLIAM HILL LENGTHEN EU REFERENDUM REMAIN ODDS TO 1/5 FROM 1/6</strong></li> <li><strong>*WILLIAM HILL SHORTEN EU REFERENDUM LEAVE ODDS TO 10/3 FROM 7/2</strong></li> </ul> <p><strong><a href="">Perhaps the latest fraud </a></strong>was enough to push The Brits past the tipping point, as if the lying fearmongering propaganda was not enough...</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em><strong>&ldquo;The BOE is cynically exploiting its authority by claiming to detect Brexit-induced anxiety in the cloud of short-term data,&rdquo;</strong></em> Mody, who&rsquo;s now a visiting professor at Princeton University, wrote in an article published on the Independent News website. <u><em><strong>&ldquo;More outrageous is the bank&rsquo;s warning of mayhem if Britain votes to leave. The bank is, in effect, building a narrative of panic, which could become self-fulfilling. The central bank&rsquo;s proper role is to reassure and stand by to stem panic.&rdquo;</strong></em></u></p> </blockquote> <p>&nbsp;</p> <p><iframe src="" allowscriptaccess="always" width="600" height="330" frameborder="0"></iframe></p> BOE European Union Volatility Tue, 31 May 2016 14:50:30 +0000 Tyler Durden 562385 at Dallas Fed Tumbles (Again) - 17th Consecutive Month Of Contraction <p><strong>This is the 17th month in a row of contraction</strong> for Dallas Fed's manufacturing survey as the headline print plunged to -20.8 from -13.9 (missing expectations of a hopeful bounce to -8.0 by 6 standard deviations). Despite the unequivocally good rebound in oil prices, sentiment in Dallas remains dismal with new orders crashing as even 'hope' has now given way to realism as the <strong>6-month outlook tumbles back into negative territory</strong>.</p> <p>&nbsp;</p> <p><a href=""><img src="" width="600" height="317" /></a></p> <p>&nbsp;</p> <p>This is a 6 standard deviation miss...</p> <p><a href=""><img src="" width="600" height="224" /></a></p> <p>&nbsp;</p> <p>It appears higher oil prices are not helping...</p> <p><a href=""><img src="" width="600" height="317" /></a></p> <p>&nbsp;</p> <p><a href="">As The Dallas Fed reports,</a></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Texas factory activity declined in May after two months of increases, according to business executives responding to the Texas Manufacturing Outlook Survey. <strong>The production index, a key measure of state manufacturing conditions, fell from 5.8 to -13.1, hitting its lowest reading in a year.</strong></p> <p>&nbsp;</p> <p>Other measures of current manufacturing activity also reflected contraction this month. T<strong>he new orders index fell more than 20 points to -14.9 after pushing into positive territory last month.</strong> The growth rate of orders index has been negative since late 2014 and fell to -14.7 in May after climbing to near zero in April. The capacity utilization and shipments indexes returned to negative territory after two months of positive readings, coming in at yearlong lows of -11.0 and -11.5, respectively. </p> <p>&nbsp;</p> <p><strong>Perceptions of broader business conditions were more pessimistic this month.</strong> The general business activity index declined from -13.9 to -20.8, and the company outlook index fell 10 points to -16.1. </p> <p>&nbsp;</p> <p><strong>Latest readings on employment and workweek length indicated a fifth consecutive month of contraction in May.</strong> The employment index moved down three points to -6.7. Sixteen percent of firms noted net hiring, and 22 percent noted net layoffs in May. The hours worked index posted a double-digit decline from its April reading, coming in at -11.8.</p> </blockquote> <p>Charts: Bloomberg</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="962" height="508" alt="" src="" /> </div> </div> </div> Dallas Fed Tue, 31 May 2016 14:39:56 +0000 Tyler Durden 562384 at Oil Spikes Near $50 On Libya Turmoil Despite Highest OPEC Production Since 2008 <p>In its ubiquitous manner, crude futures decided to try and run the stops at the US equity open but were unable to get to $50 (49.984 in July WTI) before fading back a little. Ths driver - according to the narrative-du-jour - is <strong>turmoil in Libya and ongoing Nigeria and France disruptions</strong>, which are both offsetting a surge in <strong>OPEC production to its highest level since 2008 </strong>in the minds of the machines. &quot;The market is pretty much on hold until we get all this information,&quot; says Deutsche Bank&#39;s Jens Pedersen of the data dump and OPEC meetings this week. <strong><em>&quot;We need to get that out of the way to see if there is a reason for oil to go higher.&quot;</em></strong></p> <p>OPEC production rose to 32.575m bbl/day - its highest since 2008...</p> <p><a href=""><img height="484" src="" width="600" /></a></p> <p>&nbsp;</p> <p>And the result - a machine-driven meltup, which however failed to tag $50 stops for now...</p> <p><a href=""><img height="423" src="" width="600" /></a></p> <p>&nbsp;</p> <p>As Bloomberg reporets, key stories shaping mkt today:<em><strong> Libya guards take control of town linked to 2 oil ports from Islamic State militants. French refinery strikes continue; potential for strike action seen in Norway, Brazil </strong></em></p> <p><span style="text-decoration: underline;"><strong>Libya&rsquo;s Petroleum Facilities Guard captures town of Bin Jawad after clashes w/ Islamic State: spokesman</strong></span></p> <ul> <li>Bin Jawad is a crossing point to oil ports of Es Sider and Ras Lanuf, which have been closed since Dec. 2014</li> <li>Petroleum Guards seize Nofaliyeh town from IS</li> </ul> <p><span style="text-decoration: underline;"><strong>French Refinery Strike...</strong></span></p> <ul> <li>Exxon&rsquo;s Gravenchon, Fos Refineries in France operating normally: spokeswoman</li> <li>Total says 216 French gas stations completely out of stock, another 337 stations partially out of gasoline out of a total of 2,200</li> <li>La Mede refinery operating at 75% of capacity while 4 others are halted; Total operates 5 of France&rsquo;s 8 refineries</li> </ul> <p><span style="text-decoration: underline;"><strong>Potential Strike Action...</strong></span></p> <ul> <li>Norway oil industry faces risk of strikes after talks between oil cos., Industry Energy union broke down in less than a minute</li> <li>&ldquo;The differences were so obvious so early on that it was just as well to make an appointment with the National Mediator right away rather than sit here for two days,&rdquo; says union leader Leif Sande</li> <li>Brazil FUP oil union plans 1-day national strike on June 10 to protest against acting president Michel Temer</li> <li>Says workers will lose benefits under new administration, Petrobras could be privatized</li> </ul> <p><span style="text-decoration: underline;"><strong>Other Headlines...</strong></span></p> <ul> <li>Russia said to export 28 cargoes of ESPO crude for July, up from 23 in June: 4 people w/ knowledge</li> <li>Japan crude imports rise 3.4% y/y to 16.54m kls in April: METI</li> <li>Oman crude official price for July set at $44.31, highest this yr; up from $39.40 in June: DME<br />&nbsp;</li> </ul> <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="628" height="507" alt="" src="" /> </div> </div> </div> Brazil Crude Deutsche Bank Exxon France headlines Meltup Norway OPEC Tue, 31 May 2016 14:22:44 +0000 Tyler Durden 562383 at Consumer Confidence Plunges To 10-Month Lows As Job 'Hope' Fades <p>The Conference Board&#39;s consumer confidence measure has hovered around the 95 level for the last 6 months (as gas prices dipped and ripped, as stock prices dipped and ripped, and as political chaos reigned). This &#39;stability&#39; is in stark contrast to other surveys of confidence such as Bloomberg&#39;s and Gallup&#39;s which are both at multi-month lows... until today. <strong>Consumer Confidence plunged to 92.6 (missing expectations of 96.1 by the most since November)</strong>. May&#39;s dismal print (a 3 sigma miss) is below the lowest of 68 economist estimates as expectations slipped modestly but Present Situation tumbled with <strong>optimism on jobs sliding to 6-month lows.</strong></p> <p>Finally, government confidence data declines to other survey&#39;s realities...</p> <p><a href=""><img height="312" src="" width="600" /></a></p> <p>Consumers&rsquo; assessment of current conditions weakened in May. The percentage stating business conditions are &ldquo;good&rdquo; improved from 24.2 percent to 25.9 percent. <strong>However, those saying business conditions are &ldquo;bad&rdquo; also increased, from 18.2 percent to 21.6 percent.</strong> Consumers&rsquo; appraisal of the labor market was less favorable. The proportion claiming jobs are &ldquo;plentiful&rdquo; was virtually unchanged at 24.3 percent, however <strong>those claiming jobs are &ldquo;hard to get&rdquo; increased from 22.8 percent to 24.4 percent.</strong></p> <p><strong>Consumers were less optimistic about the short-term outlook than last month.</strong> Those expecting business conditions to improve over the next six months increased from 13.8 percent to 15.1 percent, but <strong>those expecting business conditions to worsen also rose, from 10.8 percent to 11.6 percent.</strong></p> <p><strong>Consumers&rsquo; outlook for the labor market was less favorable. </strong>Those anticipating more jobs in the months ahead was virtually unchanged at 12.8 percent, but <strong>those anticipating fewer jobs increased from 16.7 percent to 18.1 percent</strong>.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>&ldquo;Consumer confidence declined slightly in May, <strong>primarily due to consumers rating current conditions less favorably than in April,</strong>&rdquo; said Lynn Franco, Director of Economic Indicators at The Conference Board.</p> <p>&nbsp;</p> <p>&ldquo;<strong>Expectations declined further, as consumers remain cautious about the outlook for business and labor market conditions</strong>. Thus, they continue to expect little change in economic activity in the months ahead.&rdquo;</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="961" height="500" alt="" src="" /> </div> </div> </div> Conference Board Consumer Confidence Gallup Market Conditions Tue, 31 May 2016 14:09:09 +0000 Tyler Durden 562381 at Huffington Post Removes Article Claiming Hillary Will Be Indicted On Federal Racketeering Charges <p>The Huffington Post has removed an article on its website Sunday, claiming that the FBI plans to indict Hillary Clinton on federal racketeering charges. </p> <p>As <a href="">Breitbart first reported, </a>HuffPo freelance contributor Frank Huguenard, a scientist and public speaker, posted an article on the site’s blog entitled "<a href="">Hillary Clinton to be Indicted on Federal Racketeering Charges</a>." Huguenard wrote:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>The Racketeer Influenced and Corrupt Organizations Act (RICO) is a United States Federal Law passed in 1970 that was designed to provide a tool for law enforcement agencies to fight organized crime.&nbsp; RICO allows prosecution and punishment for alleged racketeering activity that has been executed as part of an ongoing criminal enterprise.</em></p> <p>&nbsp;</p> <p><em>Activity considered to be racketeering may include bribery, counterfeiting, money laundering, embezzlement, illegal gambling, kidnapping, murder, drug trafficking, slavery, and a host of other nefarious business practices.</em></p> <p>&nbsp;</p> <p><strong><em>James Comey and The FBI will present a recommendation to Loretta Lynch, Attorney General of the Department of Justice, that includes a cogent argument that the Clinton Foundation is an ongoing criminal enterprise engaged in money laundering and soliciting bribes in exchange for political, policy and legislative favors to individuals, corporations and even governments both foreign and domestic.</em></strong></p> </blockquote> <p>If accurate, this could be a terminal hit to Hillary's presidential chances, and it is obvious why a left-leaning medium, and audience, would be disturbed by its content. </p> <p>The piece was publicized on Twitter by conservatives including Clinton critic Jared Wyand:</p> <blockquote class="twitter-tweet"><p dir="ltr" lang="en">???? BREAKING: Hillary Clinton to be indicted on Federal Racketeering Charges <a href="">#RICO</a></p> <p>FEDS threaten to go public<a href=""></a></p> <p>— Jared Wyand (@JaredWyand) <a href="">May 29, 2016</a></p></blockquote> <script src="//"></script><p>It is unclear at this time whether the article was taken down due to editorial intervention happened to the article, or a technical glitch, although the article link now directs <a href="" target="_blank">to a page that says “404”</a> with a frownie face and the message “This is so embarrassing” after Huffington Post took the piece down Sunday. </p> <p><a href=""><img src="" width="500" height="295" /></a></p> <p>A note at the bottom of the original article explains that “This post<br /> is hosted on the Huffington Post’s Contributor platform. Contributors control their own work and post freely to our site. <strong>If you need to flag this entry as abusive, <a href="">send us an email</a></strong>."</p> <p>It appears that many HuffPo readers found the article precisely that.</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="1512" height="893" alt="" src="" /> </div> </div> </div> Department of Justice FBI Gambling Racketeering Twitter Twitter Tue, 31 May 2016 14:08:39 +0000 Tyler Durden 562382 at The Fascinating Story Of How The Petrodollar Was Born And Lived In Secrecy For Over 40 Years <p>For decades, the story of Saudi Arabia recycling petrodollars, i.e., funding the US deficit by buying US Treasuries with proceeds of its crude oil sales (mostly to the US), while the US sweetened the deal by providing the Saudis with military equipment and supplies, remained entirely in the conspiracy realm, with no confirmation or official statement from the US Treasury department. </p> <p>Now, that particular "theory" becomes the latest fact, thanks to a <a href="">fascinating story by Bloomberg </a>which gives the background and details of secret meeting between then-US Treasury secretary William Simon and his deputy, Gerry Parsky, and members of the Saudi ruling elite, and lays out the history of how the petrodollar was born.</p> <p>Here is the background: </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>It was July 1974. A steady predawn drizzle had given way to overcast skies when William Simon, newly appointed U.S. Treasury secretary, and his deputy, Gerry Parsky, stepped onto an 8 a.m. flight from Andrews Air Force Base. On board, the mood was tense. That year, the oil crisis had hit home. An embargo by OPEC’s Arab nations—payback for U.S. military aid to the Israelis during the Yom Kippur War—quadrupled oil prices. <strong>Inflation soared, the stock market crashed, and the U.S. economy was in a tailspin.</strong></p> <p>&nbsp;</p> <p>Officially, Simon’s two-week trip was billed as a tour of economic diplomacy across Europe and the Middle East, full of the customary meet-and-greets and evening banquets. <strong>But the real mission, kept in strict confidence within President Richard Nixon’s inner circle, would take place during a four-day layover in the coastal city of Jeddah, Saudi Arabia.</strong></p> <p>&nbsp;</p> <p><strong>The goal: neutralize crude oil as an economic weapon and find a way to persuade a hostile kingdom to finance America’s widening deficit with its newfound petrodollar wealth. </strong>And according to Parsky, Nixon made clear there was simply no coming back empty-handed. Failure would not only jeopardize America’s financial health but could also give the Soviet Union an opening to make further inroads into the Arab world.</p> <p>&nbsp;</p> <p>It “wasn’t a question of whether it could be done or it couldn’t be done,” said Parsky, 73, one of the few officials with Simon during the Saudi talks</p> </blockquote> <p>As noted above, the framework of the required deal was simple: <span style="text-decoration: underline;"><strong>the U.S. would buy oil from Saudi Arabia and provide the kingdom military aid and equipment. In return, the Saudis would plow billions of their petrodollar revenue back into Treasuries and finance America’s spending</strong></span>.</p> <p>The man leading the US negotiation, US Treasury Secretary William Simon, had just done a stint as Nixon’s energy czar, and "seemed ill-suited for such delicate diplomacy. Before being tapped by Nixon, the chain-smoking New Jersey native ran the vaunted Treasuries desk at Salomon Brothers. To career bureaucrats, the brash Wall Street bond trader—who once compared himself to Genghis Khan—had a temper and an outsize ego that was painfully out of step in Washington. Just a week before setting foot in Saudi Arabia, Simon publicly lambasted the Shah of Iran, a close regional ally at the time, calling him a “nut.”</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>But Simon, better than anyone else, understood the appeal of U.S. government debt and how to sell the Saudis on the idea that America was the safest place to park their petrodollars. With that knowledge, the administration hatched an unprecedented do-or-die plan that would come to influence just about every aspect of U.S.-Saudi relations over the next four decades (Simon died in 2000 at the age of 72).</p> </blockquote> <p>In the beginning it wasn't easy: "it took several discreet follow-up meetings to iron out all the details, Parsky said."</p> <p> But at the end of months of negotiations, Bloomberg writes, there remained one small, yet crucial, catch: <strong>King Faisal bin Abdulaziz Al Saud demanded the country’s Treasury purchases stay “strictly secret,” according to a diplomatic cable obtained by Bloomberg from the National Archives database.</strong>"</p> <p>The secret remains... until May 16 when the US Treasury for the first time ever revealed the full extent of Saudi TSY holdings.</p> <p><a href=""><img src="" width="600" height="413" /></a></p> <p>&nbsp;</p> <p>Bloomberg adds that with a handful of Treasury and Federal Reserve officials, the secret was kept for more than four decades—until now. "In response to a Freedom-of-Information-Act request submitted by Bloomberg News, the Treasury broke out Saudi Arabia’s holdings for the first time this month after “concluding that it was consistent with transparency and the law to disclose the data,” according to spokeswoman Whitney Smith. The $117 billion trove makes the kingdom one of America’s largest foreign creditors."</p> <p>The TIC data released later that day confirmed the FOIA response.</p> <p>To be sure, as we <a href="">commented in mid-May</a>, it is very likely that the Treasury report is incomplete, and that the Saudis also own hundreds of billions in Treasurys held in custody with offshore trading centers such as Euroclear. After all, the current tally represents just 20 percent of its $587 billion of foreign reserves, well below the two-thirds that central banks typically keep in dollar assets</p> <p>What’s more, the commitment to the decades-old policy of “interdependence” between the U.S. and Saudi Arabia, which arose from Simon’s debt deal and ultimately bound together two nations that share few common values, is showing signs of fraying. America has taken tentative steps toward a rapprochement with Iran, highlighted by President Barack Obama’s landmark nuclear deal last year. The U.S. shale boom has also made America far less reliant on Saudi oil.</p> <p>Needless to say, the real total notional amount of Saudi holdings will eventually become known, especially if the middle-eastern nation follows through with its threat of liquidating some or all of them.&nbsp; What is more notable, however, is that with the first disclosure of this data since the birth of the petrodollar, something appears to have changed:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>What’s more, the commitment to the decades-old policy of “interdependence” between the U.S. and Saudi Arabia, which arose from Simon’s debt deal and ultimately bound together two nations that share few common values, is showing signs of fraying. America has taken tentative steps toward a rapprochement with Iran, highlighted by President Barack Obama’s landmark nuclear deal last year. The U.S. shale boom has also made America far less reliant on Saudi oil. </p> <p>&nbsp;</p> <p>“Buying bonds and all that was a strategy to recycle petrodollars back into the U.S.,” said David Ottaway, a Middle East fellow at the Woodrow Wilson International Center in Washington. But politically, “it’s always been an ambiguous, constrained relationship.”</p> </blockquote> <p>One thing that certainly changed is that in a world where central banks are ravenously buying up each others' (and their own) debt, the need for Petrodollar recyclers such as Saudi Arabia is no longer there. <strong>But that was not always the case:</strong></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>[B]ack in 1974, forging that relationship (and the secrecy that it required) was a no-brainer, according to Parsky, who is now chairman of Aurora Capital Group, a private equity firm in Los Angeles. Many of America’s allies, including the U.K. and Japan, were also deeply dependent on Saudi oil and quietly vying to get the kingdom to reinvest money back into their own economies. </p> <p>&nbsp;</p> <p>"<strong>Everyone—in the U.S., France, Britain, Japan—was trying to get their fingers in the Saudis’ pockets,” </strong>said Gordon S. Brown, an economic officer with the State Department at the U.S. embassy in Riyadh from 1976 to 1978. For the Saudis, politics played a big role in their insistence that all Treasury investments remain anonymous.</p> </blockquote> <p>America's reliance on Saudi Arabia to fund its deficit - and obtain a cheap price for oil - meant that the kingdom would be granted Platinum status in every form of interaction with the US.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Tensions still flared 10 months after the Yom Kippur War, and throughout the Arab world, there was plenty of animosity toward the U.S. for its support of Israel. According to diplomatic cables, King Faisal’s biggest fear was the perception Saudi oil money would, “directly or indirectly,” end up in the hands of its biggest enemy in the form of additional U.S. assistance. </p> <p>&nbsp;</p> <p><strong>Treasury officials solved the dilemma by letting the Saudis in through the back door. In the first of many special arrangements, the U.S. allowed Saudi Arabia to bypass the normal competitive bidding process for buying Treasuries by creating “add-ons.” </strong>Those sales, which were excluded from the official auction totals, hid all traces of Saudi Arabia’s presence in the U.S. government debt market. </p> <p>&nbsp;</p> <p>“When I arrived at the embassy, I was told by people there that this is Treasury’s business,” Brown said. “It was all handled very privately.”</p> <p>&nbsp;</p> <p>* * * </p> <p>Another exception was carved out for Saudi Arabia when the Treasury started releasing monthly country-by-country breakdowns of U.S. debt ownership. Instead of disclosing Saudi Arabia’s holdings, the Treasury grouped them with 14 other nations, such as Kuwait, the United Arab Emirates and Nigeria, under the generic heading “oil exporters”—a practice that continued for 41 years.</p> </blockquote> <p>Meanwhile, Saudi Arabia continued buying: by 1977, Saudi Arabia had accumulated about 20 percent of all Treasuries held abroad, according to The Hidden Hand of American Hegemony: Petrodollar Recycling and International Markets by Columbia University’s David Spiro.</p> <p><a href=""><img src="" width="600" height="600" /></a></p> <p>The deal led to assorted headaches: "an internal memo, dated October 1976, detailed how the U.S. inadvertently raised far more than the $800 million it intended to borrow at auction. At the time, two unidentified central banks used add-ons to buy an additional $400 million of Treasuries each. In the end, one bank was awarded its portion a day late to keep the U.S. from exceeding the limit. </p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Most of these maneuvers and hiccups were swept under the rug, and top Treasury officials went to great lengths to preserve the status quo and protect their Middle East allies as scrutiny of America’s biggest creditors increased. </p> <p>&nbsp;</p> <p>Over the years, the Treasury repeatedly turned to the International Investment and Trade in Services Survey Act of 1976—which shields individuals in countries where Treasuries are narrowly held—as its first line of defense. </p> <p>&nbsp;</p> <p>The strategy continued even after the Government Accountability Office, in a 1979 investigation, found “no statistical or legal basis” for the blackout. The GAO didn’t have power to force the Treasury to turn over the data, but it concluded the U.S. “made special commitments of financial confidentiality to Saudi Arabia” and possibly other OPEC nations. </p> <p>&nbsp;</p> <p>Simon, who had by then returned to Wall Street, acknowledged in congressional testimony that “regional reporting was the only way in which Saudi Arabia would agree” to invest using the add-on system.</p> </blockquote> <p>Ultimately, Saudi dominance in the US Treasury market meant they were untouchable. "It was clear the Treasury people weren’t going to cooperate at all,” said Stephen McSpadden, a former counsel to the congressional subcommittee that pressed for the GAO inquiries. “I’d been at the subcommittee for 17 years, and I’d never seen anything like that."</p> <p>Today, Parsky says the secret arrangement with the Saudis should have been dismantled years ago and was surprised the Treasury kept it in place for so long. But even so, he has no regrets. Doing the deal “was a positive for America”, he says cited by Bloomberg.</p> <p>And with that the story of how the Petrodollar was born is now public information, something which Saudi Arabia may not be too happy with. For the sake of the US, it better have its ducks in order because the release of this story simply means that the US Treasury is confident it will no longer have a strategic need for its long-time Saudi partner. The Fed, which has implicitly stepped into the Saudi role, better not disappoint.</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="1000" height="839" alt="" src="" /> </div> </div> </div> B+ Bloomberg News Bond Central Banks Creditors Crude Crude Oil Federal Reserve FOIA France Iran Israel Japan Kuwait Middle East OPEC Private Equity Saudi Arabia Testimony Transparency Treasury Department Tue, 31 May 2016 14:02:41 +0000 Tyler Durden 562372 at Chicago PMI Slumps Back Into Contraction; Election Blamed <p>Having wavered around the magical &#39;50&#39; level for much of the last year, bouncing off December plunge lows, <strong>Chicago PMI printed below expectations of 50.5 at a contractionary 49.3 - the 6th month of contraction in the last 12 months</strong>. With weakness in new orders (lowest since Dec 2015) and production (both back into contraction), MNI notes that on the heels of April&#39;s decline, the<strong> latest results show activity stumbling in the second quarter,</strong> following only moderate growth in Q1.</p> <p>The 8th month of contraction in th elast 14..</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 316px;" /></a></p> <p><em>As MNI reports,<strong> b</strong></em><strong>arring a solid revival in June, Q2 could be the weakest outturn since the fourth quarter of 2015</strong> as the April-May Barometer average stood at just 49.9.</p> <p><strong>Stocks of finished goods fell deeper into contraction to the lowest since November 2009,</strong> and the seventh consecutive month in contraction. While a rebuilding over the coming months could support output, the underlying message appears to be that businesses are not confident about the outlook for growth, which makes some averse to stock building.</p> <p><strong>This lack of confidence</strong> was underlined by the answer to this month&#39;s special question which showed that <u><strong>68.7% of panellists did not plan to increase business investment over the next six months.</strong></u></p> <p><strong>The persistence of weak business conditions was blamed partly on efforts to keep businesses lean headed into the November US Presidential election. Others cited slowing in China and India and a reluctance to build inventories. <u>Moreover, a mismatch between sales and operational planning was reported at some companies.</u></strong></p> <p><em>Charts: Bloomberg</em></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="954" height="502" alt="" src="" /> </div> </div> </div> Chicago PMI China India Tue, 31 May 2016 13:51:54 +0000 Tyler Durden 562380 at Allergan Stock Surges After Carl Icahn Announces "Large Position" In The Company <p>Carl Icahn appears to be a big fan of Brent Saunders. After Icahn was instrumental in placing his favorite CEO at the top of Forest Labs before it was acquired by Actavis several years ago - a deal which made then Forest Labs investor Carl Icahn hundreds of millions in profit - the billionaire investor is now doubling down on Saunders, and moments ago the billionaire investor announced that he has acquired a "large position" in Allergan, and confirms he is "very supportive of CEO Brent Saunders."</p> <p>Does this mean that Allergan, whose stock recently tumbled after the Pfizer deal was terminated due to Congressional intervention, is once again back in play?</p> <p>From <a href="">the release</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>May 31, 2016 </p> <p>&nbsp;</p> <p>We have recently acquired a large position in Allergan and are very supportive of CEO Brent Saunders. We were instrumental in bringing Brent on board as the new CEO of Forest Labs a few years ago and worked cooperatively and constructively with him to help increase value for all Forest shareholders. Less than a year later Forest was acquired by Actavis (which subsequently merged with Allergan) resulting in massive gains for Forest shareholders. While we at that time disposed of our position in Forest, we still have always maintained great respect for Brent. We have every confidence in Brent’s ability to enhance value for all Allergan shareholders.</p> </blockquote> <p>AGN stock is loving it.</p> <p><a href=""><img src="" width="600" height="423" /></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="1299" height="915" alt="" src="" /> </div> </div> </div> Carl Icahn Tue, 31 May 2016 13:28:35 +0000 Tyler Durden 562379 at NATO Ally Erdogan Says "Contraception Is Treason, Women Not Equal To Men, Muslims Must Multiply Descendants" <p><a href=""><em>Submitted by Michael Shedlock via,</em></a></p> <p>In a <strong>stark warning </strong>as to what will happen if Chancellor Angela Merkel allows Turkish citizens visa-free travel throughout Europe, Turkish President Recep Tayyip Erdogan says &quot;Contraception is Treason, Women Not Equal to Men, Muslims Must Multiply Descendants .&quot;</p> <p>Please consider <a href="" target="_blank">Turkey&rsquo;s Erdogan Warns Muslims Against Birth Control</a>.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p>Turkish President Recep Tayyip Erdogan has called on Muslims to reject contraception and have more children.</p> <p>&nbsp;</p> <p>In a speech broadcast live on TV, he said <strong>&ldquo;no Muslim family&rdquo; should consider birth control or family planning.</strong></p> <p>&nbsp;</p> <p><strong>&ldquo;We will multiply our descendants,&rdquo; </strong>said Mr Erdogan, who became president in August 2014 after serving as prime minister for 12 years.</p> <p>&nbsp;</p> <p>In Monday&rsquo;s speech in Istanbul, the Turkish leader placed the onus on women, particularly on &ldquo;well-educated future mothers&rdquo;, to not use birth control and to ensure the continued growth of Turkey&rsquo;s population.</p> <p>&nbsp;</p> <p>Mr Erdogan himself is a father of four. He has previously spoken out against contraception, describing it as &ldquo;treason&rdquo; when speaking at a wedding ceremony in 2014.</p> <p>&nbsp;</p> <p><strong>He has also urged women to have at least three children, and has said <a class="story-body__link" href="">women cannot be treated as equal to men</a>.</strong></p> <p>&nbsp;</p> <p>Turkey&rsquo;s fertility rate is one of the highest in Europe and the country&rsquo;s relatively young population (compared with other European countries) is still growing. The population is just under 80 million.</p> </blockquote> <p><a href=""><img alt="turkish wedding" class="alignnone size-large wp-image-38150" height="339" src=";h=339" width="529" /></a></p> <p>&nbsp;</p> <p><strong>Not only is this a warning to Europe, it is fodder for the Donald Trump&rsquo;s presidential campaign.</strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="246" height="152" alt="" src="" /> </div> </div> </div> Donald Trump Turkey Tue, 31 May 2016 13:23:24 +0000 Tyler Durden 562373 at